UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

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

For the quarterly period ended ~~February 28, 2019.~~

November 30, 2019

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

For the transition period from
to

Commission file number

0-17988

Neogen Corporation

(Exact name of registrant as specified in its charter)


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

620 Lesher Place

Lansing

Michigan

48912

(Address of principal executive offices, including zip code)

~~(517)~~

(
517
)

372-9200

(Registrant’s telephone number, including area code)

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


Title of each Class	Trading Symbol(s)	Name of each exchange on which registered

N/A

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T (§

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES

☒

☐

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

non-accelerated

filer (see definition of “accelerated filer and large accelerated filer” in Rule

12b-2

of the Exchange Act):


Large accelerated filer	☒	Accelerated filer	☐

~~Non-accelerated~~ ~~filer~~	☐
Non-accelerated filer	☐	Smaller Reporting Company	☐

Emerging growth company	☐

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

☐

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

12b-2

of the Exchange Act): YES

☐

☒

As of ~~February 28,~~November 30, 2019 there were ~~52,120,422~~

52,710,633

shares of Common Stock outstanding.

NEOGEN CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS


		Page No.

PART I. FINANCIAL INFORMATION

~~Item 1.~~

Item 1.	Interim Consolidated Financial Statements (unaudited)		2


	Consolidated Balance Sheets – ~~February 28,~~November 30, 2019 and May 31, ~~2018~~2019		2


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


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


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


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


	Notes to Interim Consolidated Financial Statements – ~~February 28,~~November 30, 2019		7

~~Item 2.~~
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18

~~Item 3.~~
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25

~~Item 4.~~
Item 4.	Controls and Procedures		25

PART II. OTHER INFORMATION

~~Item 1.~~

Item 1.	Legal Proceedings		26

~~Item 2.~~
Item 6.	~~Unregistered Sales of Equity Securities and Use of Proceeds~~Exhibits		26

~~Item 6.~~	~~Exhibits~~		26

SIGNATURES			27

	CEO Certification

	CFO Certification

	Section 906 Certification

PART I – FINANCIAL INFORMATION

Item 1. Interim Consolidated Financial Statements

Neogen Corporation and Subsidiaries

Consolidated Balance ~~Sheet~~
Sheets

(in thousands, except share and

per share amounts)

   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


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


Total Assets
   $ 672,585 $ 618,009


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


Total Current Liabilities
   34,268 38,688
Deferred Income Taxes
   14,211 14,103
OtherNon-Current Liabilities
   4,190 5,043


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


Total Stockholders’ Equity
   619,916 560,175


Total Liabilities and Equity
   $ 672,585 $ 618,009

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
and
52,216,589
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

See notes to interim consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Statements of Income (unaudited)

(in thousands, except per share amounts)


Three Months Ended
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








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








Total Cost of Revenues
   53,072    50,302    163,034    152,037








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








Total Operating Expenses
   29,989    28,688    92,026    87,439








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








Total Other Income
   1,984    1,368    4,097    3,235








Income Before Taxes
   16,623    17,281    53,461    53,570
Provision for Income Taxes
   3,550    700    9,100    7,900








Net Income
   13,073    16,581    44,361    45,670
Net (Income) Loss Attributable toNon-Controlling Interest
   —      5    —      (70 )








Net Income Attributable to Neogen
   $ 13,073    $ 16,586    $ 44,361    $ 45,600








Net Income Attributable to Neogen Per Share

Basic
   $ 0.25    $ 0.32    $ 0.86    $ 0.89








Diluted
   $ 0.25    $ 0.32    $ 0.85    $ 0.88

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

See notes to interim consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)

(in thousands)


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:
currency translation adjustments
   3,105    1,163    617    1,900








Comprehensive income
   16,178    17,744    44,978    47,570
Comprehensive (income) loss attributable tonon-controlling interest
   —      5    —      (70 )








Comprehensive income attributable to Neogen Corporation
   $ 16,178    $ 17,749    $ 44,978    $ 47,500

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

See notes to interim consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated ~~Statement~~Statements of

Equity (unaudited)

(in thousands)

   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 )




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
   —   —   —   290 —      290




Balance at November 30, 2018
   52,082 $ 8,334 $ 215,615 $ (12,234 ) $ 390,359    $ 602,074




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




Balance at February 28, 2019
   52,120 $ 8,339 $ 217,274 $ (9,129 ) $ 403,432    $ 619,916

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

See notes to interim consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(in thousands)


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 )


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 )


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 ) —


Net Cash From Financing Activities
   10,617 18,916
Effect of Exchange Rate on Cash
   553 (207 )


Net Increase In Cash and Cash Equivalents
   10,502 4,499
Cash and Cash Equivalents, Beginning of Period
   83,074 77,567


Cash and Cash Equivalents, End of Period
   $ 93,576 $ 82,066

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

See notes to interim consolidated financial statements.
6

NEOGEN CORPORATION AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

The accompanying unaudited consolidated financial statements include the accounts of Neogen Corporation (“Neogen” or the “Company”) and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) for interim financial information and with the instructions to Form
10-Q
and Article 10 of Regulation
S-X.
Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included in the accompanying unaudited consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three and ~~nine~~six month
periods
ended ~~February 28,~~November 30, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending May 31, ~~2019.~~2020. For more complete financial information, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form
10-K
for the fiscal year ended May 31, ~~2018.~~
~~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.

Recently Adopted Accounting Standards
~~Revenue Recognition~~

Leases

On June 1, ~~2018, we~~2019, the Company adopted ASU No.~~2014-09—Revenue~~ ~~from Contracts with Customers (Topic 606).~~
2016-02—
Leases. Refer to ~~the Revenue Recognition~~Leases section of Note 1 for further information.
~~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 ASU~~2016-15~~ 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.

Recent Accounting Pronouncements Not Yet Adopted
~~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 a~~right-of-use~~ asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessor have not significantly changed from previous U.S. GAAP. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. 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.

Financial ~~Instruments-~~Instruments - Credit Losses

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 that the company expects to collect over the instrument’s contractual life. ASU

2016-13

is effective for fiscal periods beginning after December 15, 2019 and must be adopted as a cumulative effect adjustment to retained ~~earnings. Early~~earnings; early adoption is permitted. ~~We do~~The Company does not believe adoption of this guidance will have an impact on ~~our~~its consolidated financial statements.

Fair Value Measurements

In August 2018, the FASB issued ASU 2018-13—Fair Value

Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. ASU
2018-13
is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company does not believe adoption of this guidance will have an impact on its consolidated financial statements.

Cloud Computing Implementation Cost

In August 2018, the FASB issued ASU 2018-15—Intangible

-Goodwill and Other
Internal-Use
Software (Subtopic
350-40):
Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation costs in cloud computing arrangements. ASU
2018-15
is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company does not believe adoption of this guidance will have an impact on its consolidated financial statements.

Comprehensive Income
Comprehensive income represents net income and any revenues, expenses, gains and losses that, under U.S. generally accepted accounting principles, are excluded from net income and recognized directly as a component of equity. Accumulated other comprehensive income (loss) consists ~~solely~~ of foreign currency translation ~~adjustments.~~
adjustments and unrealized gains or losses on marketable securities.
Fair Value of Financial Instruments
The carrying amounts of ~~our~~the Company’s financial instruments other than cash equivalents and marketable securities, which include accounts receivable and accounts payable, approximate fair value based on either their short maturity or current terms for similar instruments.
Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. ~~We utilize~~The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Cash and Cash Equivalents
Cash and cash equivalents consist of bank demand accounts, savings deposits, certificates of deposit and commercial paper with original maturities of 90 days or less. The carrying value of these assets approximates fair value due to the short maturity of these instruments and meets the Level 1 criteria.
Marketable Securities
The Company has marketable securities held by banks or broker-dealers at ~~February 28,~~November 30, 2019, consisting of short-term domestic certificates of deposit, and commercial paper and U.S. treasuries rated at least ~~A1/P1~~
A-1/P-1
(short-term) and A/A2 (long-term) with maturities between 91 days and
two ~~years.~~years
. These securities are classified as available for sale. The primary objective of ~~our short-term~~the Company’s investment activity is to preserve capital for the purpose of funding operations, capital expenditures and business acquisitions; ~~short-term~~ investments are not entered into for trading or speculative purposes. These securities are recorded at fair value ~~(that approximates cost)~~ based on recent trades ~~of similar securities~~ or pricing models and therefore meet the Level 2 criteria. Interest income on these investments is recorded within ~~Other Income~~other income on the consolidated statements of income.
ESTIMATES AND ASSUMPTIONS
The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including, but not limited to, variable consideration related to revenue recognition, allowances for doubtful accounts, the market value of, and demand for, inventories, stock-based compensation, provision for income taxes and related balance sheet accounts, accruals, goodwill and other intangible assets. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to the critical accounting policies and estimates disclosed in ~~our~~the Company’s Annual Report on Form
10-K
for the fiscal year ended May 31, 2018, except for the new revenue recognition standard the Company adopted effective June 1, 2018. See the below sections Revenue Recognition and Recently Adopted Accounting Standards for further information on revenue recognition.
2019.
There were no significant changes to the contractual obligations or contingent liabilities and commitments disclosed in ~~our~~the Company’s Annual Report on Form
10-K
for the fiscal year ended May 31, ~~2018.~~
2019.
8

Accounts Receivable Allowance

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

Inventory

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

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets. Other intangible assets include customer relationships, trademarks, licenses, trade names, covenants
not-to-compete
and patents. Customer-based intangibles are amortized on either an accelerated or straight-line basis, reflecting the pattern in which the economic benefits are consumed, while all other amortizable intangibles are amortized on a straight-line basis; intangibles are generally amortized over
5
to
25 ~~years.~~
years
. We review the carrying amounts of goodwill and other
non-amortizable
intangible assets annually, or when indications of impairment exist, to determine if such assets may be impaired by performing a quantitative assessment. If the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis and comparison to comparable EBITDA multiples of peer companies, such assets are reduced to their estimated fair value and a charge is recorded to operations.
~~Long Lived~~

Long-Lived Assets

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

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

Equity Compensation Plans

Share options awarded to employees and shares of stock awarded to employees under certain stock purchase plans are recognized as compensation expense based on their fair value at grant date. The fair market value of options granted under the Company stock option plans was estimated on the date of grant using the Black-Scholes option-pricing model with assumptions for inputs such as interest rates, expected dividends, volatility measures and specific employee exercise behavior patterns based on statistical data. Some of the inputs used are not market-observable and have to be estimated or derived from available data. Use of different estimates would produce different option values, which in turn would result in higher or lower compensation expense recognized. To value options, several recognized valuation models exist. None of these models can be singled out as being the best or most ~~correct one.~~correct. The model applied by us can handle most of the specific features included in the options granted, which is the reason for its use. If a different model were used, the option values could differ despite using the same inputs. Accordingly, using different assumptions coupled with using a different valuation model could have a significant impact on the fair value of employee stock options. Fair value could be either higher or lower than the number provided by the model applied and the inputs used. Further information on our equity compensation plans, including inputs used to determine the fair value of options, is disclosed in Note ~~5 to the unaudited consolidated financial statements.~~
5.

Income Taxes
We account for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are
determined based on differences between the financial reporting and tax bases of assets and liabilities and for tax credit carryforwards and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax expense represents the change in net deferred income tax assets and liabilities during the ~~period.~~
year.
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 a~~one-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.
Leases
In the fourth quarter of fiscal 2018, we recorded an estimated net charge of $4.8 million related to the Tax Act, due to the impact of the reduction in the tax rate on deferred tax assets and liabilities of $6.0 million, partially offset by $1.2 million of~~one-time~~ transition tax on the deemed repatriation of foreign earnings. Due to the timing of the enactment and the complexity in applying the provisions of the Tax Act, these charges and benefits were recorded based on reasonable estimates and were subject to revisions as we completed our analysis of the Tax Act, collected and prepared necessary data, and interpreted any additional guidance issued by the Internal Revenue Service. Prior to December 22, 2018, immaterial adjustments to these provisions were recorded to income tax expense, within the measurement period under SAB 118.
~~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 entities~~liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use ~~in accounting~~the underlying asset for ~~revenue~~the 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 Update~~No. 2016-10—Revenue~~a 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 in~~previous U.S. GAAP. This ASU~~2014-09~~ ~~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 using~~ASU 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.
We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating leases. We evaluate our contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Currently, all our leases are classified as operating leases. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option.
Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease. With the adoption of ASC 842 on June 1, 2019
,
we recognized all leases with terms greater than 12 months in duration on our consolidated balance sheets as
right-of-use
assets and lease liabilities of approximately $2.0 million
each
as of June 1, 2019. We adopted the standard using the prospective approach and did not retrospectively apply to prior periods.
Right-of-use
assets are recorded in other assets on our consolidated balance sheets. Current and
non-current
lease liabilities are recorded in other accruals within current liabilities and other
non-current
liabilities, respectively, on our consolidated balance sheets.
We have made certain assumptions and judgments when applying ASC 842, the most significant of which are:
We elected the package of practical expedients available for transition that allow us to not reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.
We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.
For all asset classes, we elected to not recognize a
right-of-use
asset and lease liability for short-term leases.
For all asset classes, we elected to not separate
non-lease
components from lease components to which they relate and have accounted for the combined lease and
non-lease
components as a single lease component.
The determination of the discount rate used in a lease is our incremental borrowing rate that is based on what we would normally pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments.
Supplemental balance sheet information related ~~disclosures. In our review~~to operating leases was as follows:
November 30,
2019
(in thousands)
Right of use - assets
$
2,034
Lease liabilities - current
585
Lease liabilities -
non-current
1,456
1
0

The weighted average remaining lease term and weighted average discount rate were as follows:


	November 30, 2019
Weighted average remaining lease term		2.5 years
Weighted average discount rate		3.5	%

Operating lease expenses are classified as cost of ~~contracts in each revenue stream, we noted no material impact~~revenues or operating expenses on the
c
onsolidated
s
tatements of
i
ncome. The components of lease expense were as follows:

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

Cash paid for amounts included in the ~~implementation~~measurement of lease liabilities for operating leases included in cash flows from operations on the
s
tatement of
c
ash
f
lows were approximately $558,000 for the ~~standard. We determined~~six months ended November 30, 2019. There were
0
non-cash
additions to
right-of-use
assets obtained from new operating lease liabilities for the ~~impact~~six months ended November 30, 2019.

Undiscounted minimum

lease payments as of ~~adopting the standard on our control framework and noted minimal, insignificant changes to our system and other controls processes.~~
~~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
.

1
1

Revenue Recognition
The Company determines the amount of revenue to be recognized through application of the following steps:
Identification of the contract with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies the performance obligations.
Essentially all of our revenue is generated through contracts with our customers. A performance obligation is a promise in a contract to transfer a product or service to a customer. We generally recognize revenue at a point in time when all of our performance obligations under the terms of a contract are satisfied. ~~With the adoption of Topic 606, revenue~~Revenue is recognized upon transfer of control of promised products and services in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The collectability of consideration on the contract is reasonably assured before revenue is recognized. To the extent that customer payment has been received before all recognition criteria are met, these revenues are initially deferred in other accruals on the balance sheet and the revenue is recognized in the period that all recognition criteria have been met. In certain situations, we provide rebates, marketing support, credits or incentives to ~~select~~selected customers, which are accounted for as variable consideration when estimating the amount of revenue to recognize on a contract. Variable consideration reduces the amount of revenue that is recognized. These variable consideration estimates are updated at the end of each reporting period based on information currently available.
The performance obligations in our contracts are generally satisfied well within one year of the contract inception. In such cases, we have elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component. We have elected to utilize the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred because the amortization period for the prepaid costs that would otherwise have been deferred and amortized is one year or less. The Company accounts for shipping and handling for products as a fulfillment activity when goods are shipped. Revenue is recognized net of any tax collected from customers; the taxes are subsequently remitted to governmental authorities. The Company’s terms and conditions of sale generally do not provide for returns of product or reperformance of service except in the case of quality or warranty issues. These situations are infrequent; due to immateriality of the amount, warranty claims are recorded in the period incurred.
We derive revenue from two primary sources —- product revenue and service revenue.
Product revenue consists ~~primarily~~ of shipments of:
Diagnostic test kits, dehydrated culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation;
Consumable products marketed to veterinarians ~~retailers, livestock producers~~ and animal health product distributors; and
Rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.
Revenues for our products are recognized and invoiced when the product is shipped to the customer.
Service revenue consists primarily of:
Genomic identification and related interpretive bioinformatic services; and
Other commercial laboratory services.
Revenues for our genomics and commercial laboratory services are recognized and invoiced when the applicable laboratory service is performed and the results are conveyed to the customer.
Payment terms for products and services are generally 30 to 60 ~~days.~~
days; international terms may be longer.
12
The following
table presents disaggregated revenue by major product and service categories for the three and ~~nine months~~six month periods ended ~~February 28,~~November 30, 2019 and 2018:


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








   $ 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








   $ 46,587    $ 47,590    $ 147,378    $ 147,001








Total Revenues
   $ 97,700    $ 94,903    $ 304,424    $ 289,811








~~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








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








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 Form~~10-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








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








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

2. INVENTORIES
Inventories are stated at the lower of cost, determined by the
first-in,
first-out
method, or net realizable value. The components of inventories follow:

   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




   $ 84,870    $ 76,005




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

3. NET INCOME PER SHARE
The calculation of net income per share ~~attributable to Neogen Corporation~~ follows:

   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








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








Diluted
   $ 0.25    $ 0.32    $ 0.85    $ 0.88








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

1
3
4. SEGMENT INFORMATION AND GEOGRAPHIC DATA
We have ~~two~~
2
reportable segments: Food Safety and Animal Safety. The Food Safety segment is primarily engaged in the development, production and marketing of diagnostic test kits, dehydrated culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation. The Animal Safety segment is primarily engaged in the development, production and marketing of products dedicated to animal safety, including a complete line of consumable products marketed to veterinarians ~~retailer, livestock producers~~ and animal health product distributors; this segment also provides genomic identification and related interpretive bioinformatic services. Additionally, the Animal Safety segment produces and markets rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.
Our international operations in the United Kingdom, Mexico, Brazil, China and India originally focused on ~~selling~~ the Company’s ~~Food Safety~~food safety products, and each of these units reports through the Food Safety segment. In recent years, these operations have expanded to offer our complete line of products and services, including those usually associated with the Animal Safety segment such as cleaners, disinfectants, rodenticides, insecticides, veterinary instruments and genomics services. These additional products and services are managed and directed by existing management and are reported through the Food Safety segment.
The accounting policies of each of the segments are the same as those described in Note 1.
Segment information follows:

   Food
Safety    Animal
Safety    Corporate and
Eliminations
(1)    Total
   (in thousands)
As of and for the three months ended February 28, 2019


Product revenues to external customers
   $ 44,790    $ 32,585    $ —      $ 77,375
Service revenues to external customers
   6,323    14,002    —      20,325








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)


Product revenues to external customers
   $ 42,286    $ 34,898    $ —      $ 77,184
Service revenues to external customers
   5,027    12,692    —      17,719








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)
~~(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.
1
4

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)
~~(2)~~
Revenues for the three months ended February 28, 2018 have been revised as discussed in Note 1. For the three months ended February 28, 2018, product revenues were reduced by $332,000 in the Food Safety segment and $626,000 in the Animal Safety segment; service revenues were unchanged in the Food Safety segment and were reduced by $31,000 in the Animal Safety segment.

   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








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)


Product revenues to external customers
   $ 128,491    $ 112,709    $ —      $ 241,200
Service revenues to external customers
   14,319    34,292    —      48,611








Total revenues to external customers
   142,810    147,001    —      289,811
Operating income (loss)
   25,704    27,691    (3,060 )    50,335
~~(1)~~
Includes ~~the~~ elimination of intersegment ~~transactions.~~
transactions
.
~~(2)~~
Revenues for the nine months ended February 28, 2018 have been revised as discussed in Note 1. For the nine months ended February 28, 2018, product revenues were reduced by $1,130,000 in the Food Safety segment and $1,968,000 in the Animal Safety segment; service revenues were unchanged in the Food Safety segment and reduced by $56,000 in the Animal Safety segment.
The following table presents the Company’s revenue disaggregated by geographic location:

   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








Total revenue
   97,700    94,903    304,424    289,811








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

1
5
5. EQUITY COMPENSATION PLANS
Qualified and
non-qualified
options to purchase shares of common stock may be granted to directors, officers and employees of the
Company under the terms of our 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.~~years
. A summary of stock option activity during the ~~nine~~six months ended ~~February 28,~~November 30, 2019 follows:

   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



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

During the three and ~~nine~~six month periods ended ~~February 28,~~November 30, 2019 and 2018, the Company recorded ~~$1,306,000~~$1,612,000 and ~~$1,026,000~~$1,400,000 and ~~$4,137,000~~$3,155,000 and ~~$3,692,000,~~$2,831,000, respectively, of compensation expense related to its share-based awards.
The weighted-average fair value per share of stock options granted during
the first six months of
fiscal ~~years 2019 and fiscal 2018,~~year 20
20
, estimated on the date of grant using the Black-Scholes option pricing model, was ~~$14.91 and $14.44, respectively.~~$15.56. The fair value of stock options granted was estimated using the following weighted-average assumptions.

   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
The Company has an employee stock purchase plan that provides for employee stock purchases at a 5% discount to market price. The discount is recorded in administrative expense as of the date of purchase.
6. BUSINESS AND PRODUCT LINE ACQUISITIONS
The Consolidated Statements of Income reflect the results of operations for business acquisitions since the respective dates of purchase. All are accounted for using the acquisition method. Goodwill recognized in the acquisitions discussed below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings.
On 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.
On August 1, 2018, the Company acquired the stock of Clarus Labs, Inc., a manufacturer of water testing products. Neogen has distributed Clarus’ Colitag water test to the food and beverage industries since 2004 ~~and~~
;
this acquisition ~~gives~~
has given
the Company ~~access~~
the ability
to sell this product to new markets. Consideration for the purchase was $4,204,000 in cash and approximately ~~$1.3~~$1,256,000 million of contingent consideration, due semiannually for the first five years, based on an excess net sales formula. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $32,000, machinery and equipment of $120,000, accounts payable of $53,000, contingent consideration accrual of $1,256,000,
non-current
deferred tax liability of ~~$426,000,~~$544,000,
non-amortizable
intangible assets of $878,000, intangible assets of $1,487,000 (with an estimated life of~~5-15~~
5
-
15
years) and the remainder to goodwill
(non-deductible
for tax purposes). These values are Level 3 fair value measurements. InSince February 2019, ~~$90,000 was~~$180,000 has been paid to the former owners as contingent consideration from the accrual. Manufacturing of these products was moved to the Company’s Lansing, Michigan location in October 2018, reporting within the Food Safety segment.
1
6
On September 4, 2018, the Company acquired the assets of Livestock Genetic Services, LLC, a Virginia-based company that ~~specializes~~specialized in genetic evaluations and data management for cattle breeding organizations. Livestock Genetic Services ~~has~~had been a long-time strategic partner of Neogen and the acquisition ~~will enhance~~enhanced the Company’s
in-house
genetic evaluation capabilities. Consideration for the purchase was $1,100,000 in cash, with $700,000 paid at closing and $400,000 payable to the former owner on
September 1, 2019
, and ~~approximately $385,000~~up to $585,000 of contingent consideration, payable over the next three years. The ~~preliminary~~final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included office equipment of $15,000, contingent consideration accrual of $385,000, intangible assets of ~~$860,000~~$942,000 (with an estimated life of~~5-15~~
5
-
15
years) and the remainder to goodwill (deductible ~~for~~to tax purposes). These values are Level 3 fair value measurements. In September 2019, the former owner was paid the second installment of $400,000 and was also paid $107,000 in contingent consideration based on the achievement of sales targets in the first year. Services provided by this operation are now performed at the Company’s Lincoln, Nebraska location, reporting within the Animal Safety segment.
On January 1, 2019, the Company acquired the assets of Edmonton, ~~Alberta-based~~Alberta based Delta Genomics Centre, an animal genomics laboratory in Canada. Delta’s laboratory operations were renamed Neogen Canada and the acquisition iswas intended to accelerate growth of the Company’s animal genomics business in Canada. Consideration for the purchase was $1,485,000 in cash. The ~~preliminary~~final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $38,000, machinery and equipment of $371,000, unearned revenue liability of $125,000, intangible assets of ~~$186,000~~$532,000 (with an estimated life of 5 to 10 years) and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. Services provided by this operation continue to be performed in ~~its current location,~~Edmonton, reporting within the Animal Safety segment.
7. LONG TERM DEBT
We have a financing agreement with a bank providing for a $15,000,000 unsecured revolving line of credit, which was amended on November 30, 2018 to extend the maturity from
September 1, 2019
to
September 30, ~~2019 to September 30, 2021.~~2021
. There were no
0
advances against the line of credit during fiscal ~~2018~~2019 and there have been none thus far in fiscal ~~2019;~~2020; there was no
0
balance outstanding at ~~February 28,~~November 30, 2019. Interest on any borrowings is remained at
LIBOR plus 100 basis points ~~(rate~~
(rate under the terms of the agreement was ~~3.58%~~2.70% at ~~February 28,~~November 30, 2019). Financial covenants include maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA, each of which the Company was in compliance with at ~~February 28,~~November 30, 2019.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for related costs when such costs are determined to be probable and estimable. The Company currently utilizes a pump and treat remediation strategy, which includes semi-annual monitoring and reporting, consulting, and maintenance of monitoring wells. Neogen expenses these annual costs of remediation, which have ranged from $38,000 to ~~$74,000~~$131,000 per year over the past
five ~~years.~~years
. The Company’s estimated liability for these costs was $916,000 at ~~February 28,~~both November 30, 2019 and May 31, ~~2018,~~2019, measured on an undiscounted basis over an estimated period of 15 years; $100,000 of the liability is recorded within current liabilities and the remainder is recorded within other
non-current
liabilities on the consolidated balance sheets. ~~During the second quarter of~~In fiscal 2019, the ~~Company’s environmental consultant~~Company performed an updated Corrective Measures Study (CMS) on the ~~Randolph~~ site, per a request from the Wisconsin Department of Natural ~~Resources. Based on~~Resources (WDNR), and is currently in discussion with the ~~results~~WDNR regarding potential alternative remediation strategies going forward. The Company believes that the current pump and treat strategy is appropriate for the site. At this time, the outcome of the ~~study, the Company plans to continue~~review in terms of approach and future costs is unknown, but a change in the current remediation ~~and monitoring program,~~strategy, depending on the alternative selected, could require an increase in the currently recorded liability, with ~~no changes proposed.~~
an offsetting charge to operations in the period recorded.
The Company is subject to certain legal and other proceedings in the normal course of business that, in the opinion of management, should not have a material effect on its future results of operations or financial position.
9. STOCK PURCHASE
In October 2018, the Company’s Board of Directors passed a resolution canceling the Company’s prior stock buyback program, which had been approved in December 2008, and authorized a new program to purchase, subject to market conditions, up to 3,000,000 shares of the Company’s common stock. In December 2018, the Company purchased 50,000 shares under the ~~new~~ program in negotiated and open market transactions for a total price, including commissions, of $3,134,727. Shares ~~purchased~~acquired under the program have been retired.
1
7
PART I – FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations contains both historical financial information and forward-looking statements. Neogen does not provide forecasts of future financial performance. While management is optimistic about ~~our~~the Company’s long-term prospects, historical financial information may not be indicative of future financial results.
Safe Harbor and Forward-Looking Statements
Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, are made throughout this Quarterly Report on Form
10-Q.
For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be ~~forward looking~~forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. There are a number of important factors, including competition, recruitment and dependence on key employees, impact of weather on agriculture and food production, identification and integration of acquisitions, research and development risks, patent and trade secret protection, government regulation and other risks detailed from time to time in the Company’s reports on file at the Securities and Exchange Commission, that could cause Neogen Corporation’s results to differ materially from those indicated by such forward-looking statements, including those detailed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
In addition, any forward-looking statements represent management’s views only as of the day this Quarterly Report on Form
10-Q
was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. While management may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if its views change.

Executive Overview
Consolidated revenues were ~~$97.7~~$107.8 million in the ~~third~~second quarter of fiscal ~~2019,~~2020, an increase of 3%1% compared to ~~$94.9~~$107.1 million in the ~~third~~second quarter of fiscal ~~2018.~~2019. Organic sales growth in the ~~third~~second quarter ~~also increased 3%.~~of fiscal 2020 was flat. For the ~~nine~~six month period, consolidated revenues were ~~$304.4~~$209.2 million, an increase of 5%1% compared to ~~$289.8~~$206.7 million in the same period in the prior fiscal year. On a year to date basis, organic sales ~~increased 4%~~also rose 1%.
Food Safety segment sales were ~~$51.1~~$56.9 million in the ~~third~~second quarter of the current fiscal year, an increase of 8%6% compared to ~~$47.3~~$53.8 million in the same period of the prior year. ~~Organic sales~~There were no contributions from acquisitions in this segment ~~also increased 8%, with a minor contribution from~~in the ~~August 1, 2018 acquisition of Clarus Labs.~~second quarter. For the year to date, Food Safety segment sales were ~~$157.0~~$107.9 million, an increase of ~~10%~~2% compared to ~~$142.8~~$105.9 million in the same period of the prior fiscal year; the organic sales increase was also ~~10%.~~
2%, with a minor contribution in the first quarter from the August 1, 2018 acquisition of Clarus Labs.
Animal Safety segment sales were ~~$46.6~~$50.9 million in the ~~third~~second quarter of fiscal ~~2019,~~2020, a decrease of 2%4% compared to ~~$47.6~~$53.3 million in the ~~third~~second quarter of fiscal ~~2018.~~2019. Organic sales in this segment decreased 3%5% in the ~~third~~second quarter, with a minor ~~contributions~~contribution from ~~the September 1, 2018 acquisition of Livestock Genetic Services and~~ the January 1, 2019 acquisition of Delta Genomics. For the ~~nine~~six month period, Animal Safety segment sales were ~~$147.4~~$101.4 million, ~~flat~~an increase of 1% compared to ~~$147.0~~$100.8 million in the same period a year ago. Year to date organic sales ~~decreased 1%,~~were flat, after excluding three months ofrevenues from the September 1, ~~2017~~2018 acquisition of ~~Neogen Australasia, six months of the~~ Livestock Genetic Services ~~acquisition~~ and ~~two~~six months ofrevenues from the January 1, 2019 Delta Genomics acquisition.
International sales in the ~~third~~second quarter of fiscal ~~2019~~2020 were 41% of total sales compared to 39% of total sales in the ~~third~~second quarter of fiscal ~~2018.~~2019. For the year to date, fiscal ~~2019~~2020 international sales were ~~40%~~39% of total sales compared to ~~38%~~40% of total sales in the same period of the prior year.
Our effective tax rate in the ~~third~~second quarter was ~~21.4%~~15.3% compared to an effective tax rate of ~~4.1%~~18.5% in the prior year ~~third~~second quarter; the fiscal ~~2019~~2020 year to date effective tax rate was ~~17.0%~~16.1% compared to 15.1% for the same period a year to date effective tax rate of 14.7% in the prior fiscal year. The U.S. statutory rate is 21% in the current fiscal year and was 35% from June 1, 2017 until December 22, 2017, with the reminder of the prior fiscal year third quarter taxed at 21%. Differences from the statutory rate are primarily due to tax deductions resulting from stock option exercises, provisions included in the corporate tax reform, and state and local taxes. Additionally, the third quarter of the prior year included a favorable adjustment to income tax expense to adjust deferred tax balances due to the decrease in the U.S. statutory tax rate.
ago.
Net income for the quarter ended ~~February 28,~~November 30, 2019 was ~~$13.1~~$16.3 million, or ~~$0.25~~$0.31 per diluted share, ~~a decrease~~an increase of ~~21%~~1% compared to ~~$16.6~~$16.1 million, or ~~$0.32~~$0.31 per share in the same period in the prior year. For the year to date, net income was ~~$44.4~~$30.9 million, or ~~$0.85~~$0.59 per ~~diluted~~ share, a decrease of 6%1% compared to prior year to date net income of ~~$45.6~~$31.3 million, or ~~$0.88~~$0.60 per diluted share.
Cash provided from operating activities in the first ~~nine~~six months of fiscal ~~2019~~2020 was ~~$43.0~~$40.5 million, compared to ~~$46.6~~$32.6 million in the first ~~three quarters~~half of fiscal ~~2018.~~
2019.
Neogen’s results reflect an increase in international sales of 9%6% in the ~~third~~second quarter of fiscal ~~2019~~2020 and ~~12%~~1% for the year to date, each compared to the same respective ~~period~~periods in the prior year. ~~We continue to focus on increasing~~The rate of growth in our ~~presence~~international operations in the current fiscal year has been adversely impacted by currency devaluations in a number of the countries in which we operate and ~~market share throughout~~ the ~~world, while also integrating recent international acquisitions into our product portfolio. Sales fluctuations~~loss of forensics business in Brazil. Revenue changes, denominated in both the U.S. dollar and as reported in the local currency, for the three and ~~nine~~six month periods of fiscal ~~2019~~2020 compared to the same respective periods in the prior year are as follows for each of our international locations:


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
%

Currency translations reduced revenues by approximately ~~$2.5~~$1.0 million in the ~~third~~second quarter of fiscal ~~2019~~2020 compared to the same quarter a year ago, and $2.1 million for the year to date compared to the same period last year, primarily due to the increased strength of the U.S. dollar relative to the ~~Brazilian real, the~~ British pound, the ~~Australian dollar~~Brazilian real and the ~~Mexican peso. For~~Australian dollar.
The 7% increase in second quarter revenues at our Neogen Europe operations was led by a 15% increase in sales of Neogen Culture Media products, a 9% increase in sales of cleaners and disinfectants and a 48% increase in sales of aflatoxin test kits, due to increased
market share and an outbreak in Africa; revenues increased 1% for the year to date ~~currency translations reduced revenues by approximately $5.8 million~~period. Sales in Brazil increased 20% in the second quarter, as a large
non-recurring
sale of insecticides offset the loss of forensics test kit business, due to a large commercial laboratory converting their testing protocol to a higher throughput method. For the six month period, sales at our Brazilian operations were flat compared to the prior year.
~~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 $20.4 million in ~~revenues at Neogen Europe for~~ the ~~third~~second quarter of fiscal 2019 was led by an 18% increase in sales of genomics services, primarily in the porcine and bovine markets; genomics sales increased 24% for the year to date. Neogen Europe continues to have strong sales of test kits to detect deoxynivalenol (DON) in grain, due to increased testing after a DON outbreak in France’s wheat crops in the fall of 2018. At Neogen do Brasil, sales of natural toxins test kits increased 36% and 64% for the three and nine months, respectively, both compared to the same periods a year ago, as we gained significant new business testing for the presence of aflatoxin in corn. Sales of forensic test kits increased significantly in the third quarter and year to date over the prior year periods due to business that shifted from U.S. labs to labs in Brazil and increased demand from commercial laboratories located in Brazil. Neogen Latinoamerica’s third quarter sales increase of 19% was led by a 64% increase in sales of AccuPoint sanitation monitoring products, due to increased market share.
~~Service revenue was $20.3 million in the third quarter of fiscal 2019,~~2020, an increase of ~~15%~~16% over prior year ~~third~~second quarter revenues of ~~$17.7~~$17.5 million, including a minor ~~contributions~~contribution from the ~~acquisitions~~January 1, 2019 acquisition of ~~Livestock Genetics Services and~~ Delta Genomics. For the ~~nine~~six 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 ~~acquisitions~~acquisition and the September ~~2017~~2018 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 the~~our global beef ~~markets,~~ and ~~porcine and bovine markets in Europe.~~
dairy cattle markets.

Revenues

   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 %







   $ 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 %







   $ 46,587    $ 47,590    $ (1,003 )    (2 )%







Total Revenues
   $ 97,700    $ 94,903    $ 2,797    3 %







   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 %







   $ 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 %







   $ 147,378    $ 147,001    $ 377    0 %







Total Revenues
   $ 304,424    $ 289,811    $ 14,613    5 %








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
%

Food Safety
Natural Toxins, Allergens & Drug Residues –
Sales in this category increased ~~11%~~1% and 6%4% for the three and ~~nine~~six month periods ended ~~February 28,~~November 30, 2019, respectively, compared to the same periods in the prior year. ~~For~~In the ~~third~~second quarter, natural toxin test kit revenues increased 17%, due to new business for aflatoxin test kits in Brazil and DON test kits in the U.S. and France, the result of mild outbreaks. Sales of drug residue test kits, including dairy antibiotics, increased 8% and sales of our allergens product line increased ~~7%. For the year to date period,~~13% and natural toxin test kit ~~sales~~revenues increased ~~12%,~~3%. These increases were almost entirely offset by a 29% decline in drug residue test kits resulting from lower demand at our European distributor. We have modified our contract with this distributor; effective January 1, 2020 they will be designated a
non-exclusive
distributor of our dairy drug residue test kits. For the six month period, sales of our allergens product line increased 11% and natural toxins test kit revenues increased 6% ~~and~~, while sales of drug residue test kits ~~decreased 7%, the result of lower demand in Europe.~~
declined 18%.
Bacterial & General Sanitation –
Revenues in this category increased 6%7% in the ~~third~~second quarter and ~~12%~~3% for the year to date, both compared to the same periods in the prior year. In the ~~third~~second quarter, ~~sales of test kits to detect pathogens increased 16%, and rose 27% for the year to date, as we continued to gain new business with our~~~~Listeria~~~~Right Now test kit that launched in fiscal 2018, and~~ sales of our AccuPoint sanitation monitoring product line increased ~~11% for~~21% on higher sales of both ~~the quarter~~equipment and ~~year~~related samplers; sales of test kits to ~~date periods.~~detect pathogens increased 11%, as we continued to gain new business with our
Listeria
Right Now test kit that launched in fiscal 2018. Sales of products to detect spoilage organisms in processed foods decreased 9%, due primarily to backorders of readers from our primary supplier, which resulted in lower sales of equipment. For the year to date, sales of our AccuPoint product line increased 16% and pathogen test kit revenues increased 6%, while sales of products to detect spoilage organisms decreased 12%.
Culture Media & Other –
Sales in this category increased 5% in the ~~third~~ quarter ~~due~~ended November 30, 2019 compared to ~~higher equipment placements~~the second quarter in the prior year; for the ~~nine~~six month period, sales ~~of this product line increased 7%.~~
~~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, sales~~Sales of Neogen Culture Media ~~formerly marketed as~~increased 9% and 3% for the ~~Acumedia~~quarter 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 ~~increased~~decreased significantly in both the ~~third~~second quarter and for the year to date ~~periods due~~as 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.
Rodenticides, Insecticides & Disinfectants –
Revenues in this category ~~decreased 19%~~increased 25% in the ~~third~~second quarter of fiscal ~~2019~~2020 compared to the same period a year ago, due primarily to ~~a largeone-time~~ ~~sale~~three
non-recurring
sales of insecticide products to governmental agencies and the strength of disinfectant products in China, the result of increased demand in the ~~prior~~pork market caused by the African swine fever virus outbreak in that country. For the year ~~at Rogama in Brazil resulting from a government contract. Partially offsetting this were increases of disinfectant sales to customers in Europe, China and India. Year~~ to date, ~~revenues increased 2%.~~
~~Genomics Services –~~~~Sales~~sales in this category increased ~~29% and 23%~~3%, as the prior year first quarter included a large
non-recurring
insecticide sale.
Genomics Services –
Sales of genomics services sold through our international Food Safety operations increased 3% for the three ~~and nine~~ month period ended November 30, 2019; revenues decreased 1% for the six month period. Currency had a negative impact on sales in both comparative periods ~~ended February 28, 2019, respectively. The increase for~~in the current fiscal year as the U.S. dollar has strengthened against both the ~~third quarter~~British pound and ~~year to date periods was primarily from higher sales in the European porcine and bovine markets; additionally, the third quarter benefited from a large research project with~~ the Brazilian ~~government.~~
real; the Company has sizable genomics revenues in each of those currencies.
Animal Safety
Life Sciences –
Sales in this category decreased ~~34%~~5% in the ~~third~~second quarter, as compared to the same period in the prior year, as approximately $740,000 of forensic test kit sales shifted to our operations in Brazil, which are reported in the Food Safety Segment. The products were formerly served by our Animal Safety operation in Lexington, KY. Additionally, revenuesyear; for ~~two large customers in the forensics market were down in the third quarter due to order timing. For~~ the year to date, the decrease in this product line ~~was 24%~~is 11%.
The prior year included sales to a commercial laboratory customer that were transferred to our Brazilian operation during the second quarter of fiscal 2019.
Veterinary Instruments & Disposables –
Revenues in this category ~~were flat compared~~decreased 10% for the three month period ended November 30, 2019; for the year to ~~the prior year, for~~date, sales decreased 1%. For both the ~~three~~quarter and ~~nine month~~year to date periods, ~~ended February 28, 2019. Protective wear~~growth in disposable syringes and ~~consumables sales decreased 36% in the third quarter, resulting from continued poor economic conditions in the commercial dairy production market; this decline~~marking products due to market share gains was more than offset by ~~a 12% increase in veterinary instruments~~decreased sales ~~led by strength in needles and syringes.~~
of various types of needles.
Animal Care & Other –
Sales of these products decreased 6%13% in the ~~third~~second quarter and 2%8% for the year to date. ~~Promotional~~In the second quarter, animal care revenues decreased 14% due to lower sales to our larger U.S. distributors. For the year to date period, timing of adjustments to promotional programs with distributors, which are recorded as a contra revenue within this ~~category. In~~category, also contributed to the third quarter of the current fiscal year, several annual promotional programs ended and the final adjustments to estimates previously recorded resulted in a higher reduction of revenues than in the prior year. Partially offsetting these adjustments was a 13% increase in sales of vaccines.
decline.
Rodenticides, Insecticides & Disinfectants –
Revenues in this category decreased 7%14% and 1%8% for the three and ~~nine~~six month periods ended ~~February 28,~~November 30, 2019, respectively. InFor the ~~third~~ quarter, rodenticide sales ~~decreased 28%~~were down 8% and insecticide sales were down 30%, ~~the result of poor weather conditions causing lower~~as demand ~~and a weak U.S. animal protein market partially caused by tariff issues; the year to date decrease was 6%~~declined due to ~~the loss of toll manufacturing business from the first half~~weak rodent and insect pressure in certain areas of the ~~prior year. Also in the third quarter, cleaner and disinfectant~~U.S. Disinfectant sales ~~grew 18%~~were down 14% due to ~~increased~~reduced demand ~~from international customers. For the year~~by our larger U.S. distributors as they worked to ~~date, cleaner and disinfectant sales increased 4%.~~
lower their inventory levels.

Genomics Services –
Sales in this category increased ~~10%~~22% in the ~~third~~second quarter and 9%23% for the year to date period, both compared to the prior ~~year. The third quarter increase included minor contributions from~~year; the September 2018 acquisition of Livestock ~~Genetics~~Genetic Services and the January 2019 acquisition of Delta Genomics ~~acquisitions while~~contributed to a minor amount of the ~~year to date increase included those acquisitions and three months of sales from the September 2017 acquisition of Neogen Australasia. For~~growth in this category. The growth in both the three and ~~nine~~six month periods was led by significant increases of sales to the companion animal market due to product uptake at a large customer and, to a lesser extent, continued growth in the beef and dairy cattle, and ~~companion animal markets~~porcine markets. Growth in our Australian genomics business was ~~offset by revenue~~
~~decreases in U.S. poultry~~strong 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.~~
six month periods.
Gross Margin
Gross margin was ~~45.7%~~47.3% in the ~~third~~second quarter of fiscal ~~2019~~2020 compared to ~~47.0%~~46.7% in the same quarter a year ago. The ~~decline~~improvement in gross margin ~~for the three month period~~ is due to ~~stronger growth in our international markets, which were adversely impacted by currency fluctuations, and~~ a ~~shift in product mix within both~~greater proportion of sales from the Food Safety ~~and the Animal Safety segments, with~~segment, which have higher ~~revenue increases on product lines with lower~~ gross margins than the ~~historical averages~~Animal Safety segment; increased gross margins on the domestic genomics service business within ~~these segments.~~the Animal Safety segment also contributed to the improvement. Gross margin for the ~~nine~~six month period ended ~~February 28,~~November 30, 2019 was ~~46.4%~~47.4% compared to ~~47.5%~~46.8% in the same period of the prior year, for the same reasons.
Operating Expenses
Operating expenses were ~~$30.0~~$32.8 million in the ~~third~~second quarter, ~~of fiscal 2019,~~ compared to ~~$28.7~~$31.8 million in the same quarter of the prior year, an increase of ~~$1.3 million,~~$967,000, or 5%3%. Sales and marketing expenses ~~increased 1%~~decreased $511,000, or 3%, ~~as increases~~primarily due to decreases in commissions, shipping and ~~contracted services were almost entirely offset by lower promotional~~other variable expenses tied to revenues, and ~~advertising expenses. For~~a reduction in bad debt expense due to the ~~year to date, sales and marketing expenses have increased 6%.~~reversal of reserves for collected receivables. General and administrative expense increased ~~$738,000,~~$864,000, or 8%9%, ~~for the third quarter,~~ resulting from increases in ~~share-based~~stock-based compensation expense, legal and professional fees, and ~~training costs. For~~depreciation related to investments in information technology. Additionally, prior year expense in the ~~year to date, general and administrative expenses have risen~~second quarter was reduced by ~~4%.~~economic incentive credits received in Lincoln for an expansion project; these incentive credits were much lower in this year’s second quarter. Research and development expense ~~increased $413,000,~~was $3.8 million in the second quarter, an increase of $615,000, or ~~15%~~19%, compared to the same period in the prior year. The increase is primarily the result of ~~contracted services supporting~~development spending on a number of new ~~product development. For~~products, which are expected to be launched in late fiscal 2020 or early fiscal 2021.
Operating expenses for the ~~year~~six month period ended November 30, 2019 were $64.7 million, an increase of $2.6 million, or 4%, compared to ~~date,~~the prior year. Driving the increase were research and development ~~expense has increased 4%, and overall operating expenses for the Company increased $4.6~~spending increases of $1.5 million, or ~~5%.~~
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.
Operating Income
Operating income was ~~$14.6~~$18.3 million in the ~~third~~second quarter of fiscal ~~2019,~~2020, compared to ~~$15.9~~$18.2 million in the same period of the prior year; year to date operating income was ~~$49.4~~$34.5 million compared to ~~$50.3~~$34.7 million in the prior year. Expressed as a percentage of sales, operating income was ~~15.0%~~16.9% for the ~~third~~second quarter ~~of fiscal 2019 compared to 16.8% in last year’s third quarter;~~and 16.5% for the year to date, ~~operating income was 16.2%,~~ compared to ~~17.4%~~17.0% and 16.8%, respectively, in the prior ~~fiscal~~ year. The small decline in operating margin percentage for each period in the current fiscal year was the result of operating expenses that increased more than the gross margin improvement.
Other Income

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

The increase in interest income in both the three and six month periods of fiscal 2020 compared to the same periods a year ago was the result of higher cash and marketable securities balances. Other expense resulting from foreign currency transactions was primarily the result of changes in the ~~lower gross margin percentage, and to a lesser extent, operating expenses which rose at a rate greater than or equal~~value of foreign currencies relative to the ~~rate of revenue growth.~~
~~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








Total Other Income
   $ 1,984    $ 1,368    $ 4,097    $ 3,235








U.S. dollar in countries in which we operate.
Income Tax Expense
Income tax expense in the ~~third~~second quarter of fiscal ~~2019~~2020 was ~~$3.6~~$3.0 million, an effective tax rate of ~~21.4%~~15.3%, compared to ~~$0.7~~$3.7 million, an effective tax rate of 4%18.5%, in the same period of the prior year. InFor the ~~third~~year to date, income tax expense was $6.0 million, an effective rate of 16.1%, in fiscal 2020 and $5.6 million, an effective rate of 15.1%, in fiscal 2019. For each period, the primary difference between the statutory rate of 21% and the effective rates recorded is the benefit resulting from the exercise of stock options; this benefit was $1,204,000 in the second quarter of fiscal 2020 compared to $484,000 in the second quarter of the prior year, the Company recorded favorable tax adjustments totaling $2.9 million as the result of corporate tax reform enacted in December 2017, which reduced the U.S. statutory income tax rate from 35% to 21%. For the first nine months of fiscal 2019, income tax expense was $9.1 million compared to $7.9 million in the prior year; the year to date effective tax rate was 17.0%, compared to an effective tax rate of 14.7% in the prior fiscal year. For the year to date, the benefit was $1,973,000 in fiscal 2020 compared to $2,774,000 in fiscal 2019; the prior year first quarter had significant stock option exercise due to a higher stock price and the timing of the expiration of the 2013 grant in August 2018.
Net Income
Net income was $16.3 million in the second quarter of fiscal 2020, compared to $16.1 million in the same period in the ~~Company recorded a total credit~~prior year. The improvement in earnings for this year’s second quarter was the result of ~~$3.0 million to federal income~~the decrease in the effective tax ~~expense for~~rate, which was caused by increased tax benefits resulting from the exercise of stock options, ~~compared~~due to ~~$3.4 million~~higher option activity in the prior year. In the first half of fiscal 2018, the Company also reversed a total of $816,000 from its reserve for uncertain tax positions, which had been accrued in prior fiscal years, with a corresponding credit to federal income tax expense, due to the conclusion of an IRS audit for fiscal years 2014, 2015, and 2016.
~~Net Income~~
~~Net income was $13.1 million in the third~~second quarter of this fiscal ~~2019,~~year compared to ~~$16.6 million in~~ the same period ~~in the prior year. Earnings in the prior~~a 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 lower~~negatively impacted by a higher effective tax ~~expense in the prior year.~~
rate.
Financial Condition and Liquidity
The overall cash, cash equivalents and marketable securities position of Neogen was ~~$246.7~~$313.6 million at ~~February 28,~~November 30, 2019, compared to ~~$210.8~~$267.5 million at May 31, 2018. Approximately ~~$43.0~~$40.5 million was generated from operations during the first ~~nine~~six months of fiscal ~~2019.~~2020. Net cash proceeds of ~~$13.8~~$19.2 million were realized from the exercise of stock options and issuance of shares under our Employee Stock Purchase Plan during the first ~~nine~~six months of fiscal ~~2019.~~2020. We spent ~~$11.9~~$12.8 million for property, equipment and other
non-current
assets in the first ~~nine~~six months of fiscal ~~2019.~~
2020.
Net accounts receivable balances were ~~$80.0~~$85.4 million at ~~February 28,~~November 30, 2019, an increase of ~~$0.9~~$2.8 million, compared to ~~$79.1~~$82.6 million at May 31, ~~2018.~~2019. Days sales outstanding, a measurement of the time it takes to collect receivables, were 6865 days at ~~February 28,~~November 30, 2019, compared to 61 days at May 31, 2019 and 63 days at November 30, ~~2018, 64 days at August 31, 2018 and 60 days at May 31, 2018;~~2018. The increase in time to collection is primarily the result of the increase in ~~the current year is primarily attributable to the higher levels of sales at our~~ international ~~operations,~~revenues, which generally take ~~more time~~longer to collect. All customer accounts are actively managed and no losses in excess of amounts reserved are currently expected.
Net inventory balances were ~~$84.9~~$86.4 million at ~~February 28,~~November 30, 2019, an increase of ~~$8.9 million, or 12%,~~$414,000, compared to a May 31, ~~2018~~2019 balance of ~~$76.0 million; the increase is due to lower than forecasted sales at the end of the quarter, and to higher levels necessary to support the business.~~$86.0 million. We actively monitor our inventory levels and balance the need for adequate levels of product availability to minimize backorders with a desire to improve inventory turnover and efficiency levels. We have continued ~~with our~~ active programs to improve our turnover in fiscal ~~2019.~~
2020.
Inflation and changing prices are not expected to have a material effect on operations, as management believes it will continue to be successful in offsetting increased input costs with price increases and/or ~~efficiency improvements.~~
cost efficiencies.
Management believes that our existing cash and marketable securities balances at ~~February 28,~~November 30, 2019, along with available borrowings under our credit facility and cash expected to be generated from future operations, will be sufficient to fund activities for the foreseeable future. However, existing cash and borrowing capacity may not be sufficient to meet our cash requirements to commercialize products currently under development or its plans to acquire other organizations, technologies or products that fit within our mission statement. Accordingly, we may choose to issue equity securities or enter into other financing arrangements for a portion of our future financing needs.

PART I – FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have interest rate and foreign exchange rate risk exposure but no long-term fixed rate investments or borrowings. Our primary interest rate risk is due to potential fluctuations of interest rates for variable rate borrowings (no long-term borrowings at ~~February 28,~~November 30, 2019) and short-term investments.
Foreign exchange risk exposure arises because we market and sell our products throughout the world. Revenues in certain foreign countries as well as certain expenses related to those revenues are transacted in currencies other than the U.S. dollar. Our operating results are exposed to changes in exchange rates between the U.S. dollar and the British pound sterling, the euro, the Brazilian real, the Mexican peso, the Chinese yuan, the Australian dollar, and to a lesser extent, the Indian rupee and the Canadian dollar. When the U.S. dollar weakens against foreign currencies, the dollar value of revenues denominated in foreign currencies increases. When the U.S. dollar strengthens, the opposite situation occurs. Additionally, previously recognized revenues in the course of collection can be affected positively or negatively by changes in exchange rates. The Company enters into forward contracts to help mitigate the economic impact of fluctuations in certain currency exchange rates. These contracts are adjusted to fair value through earnings.
Neogen has assets, liabilities and operations outside of the United States, located in Scotland, England, Brazil, Mexico, China, India, Canada, and Australia where the functional currency is the British pound sterling, Brazilian real, Mexican peso, Chinese yuan, Indian rupee, Canadian dollar and the Australian dollar respectively, and transacts business throughout Europe in the euro. The Company’s investments in foreign subsidiaries are considered to be long-term.
PART I – FINANCIAL INFORMATION
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~February 28,~~November 30, 2019 was carried out under the supervision and with the participation of the Company’s management, including the President & Chief Executive Officer and the Vice President & Chief Financial Officer (“the Certifying Officers”). Based on the evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures are effective.
Changes in Internal ~~Control~~Controls over Financial Reporting
No changes in our ~~controls~~control over financial reporting were identified as having occurred during the quarter ended ~~February 28,~~November 30, 2019 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II – OTHER INFORMATION
Item 1. Legal Proceedings
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.
The Company is subject to ~~other~~ legal and other proceedings in the normal course of business. In the opinion of management, the outcomes of these matters are not expected to have a material effect on the Company’s future results of operations or financial position.
~~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
   —   —   —   —


Total
   50 $ 62.69 50 2,950


~~Item~~
I
tem 6. Exhibits
(a) Exhibit Index
3
Articles of Incorporation, as restated (incorporated by reference to Exhibit 3 to the registrant’s Form10-Q filed on December 28, 2018)
10
Amended and Restated Credit Agreement dated as of November 30, 2018 between Registrant and ~~JPMorgan~~JP Morgan Chase N.A. (incorporated by reference to Exhibit 10.A toof the registrant’s Form8-K filed on December 6, 2018).
31.1
Certification of Chief Executive Officer pursuant to Rule13a-14(a).
31.2
Certification of Chief Financial Officer pursuant to Rule13a-14(a).
32
Certification pursuant to 18 U.S.C. section 1350
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
EX-104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
Items 1A, 2, 3, 4, and 5 are not applicable or removed or reserved and have been omitted.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NEOGEN CORPORATION
              (Registrant)
Dated: December 27, 2019
~~NEOGEN CORPORATION~~
~~(Registrant)~~
~~Dated: March 29, 2019~~
/s/ John E. Adent
John E. Adent
President & Chief Executive Officer
(Principal Executive Officer)
~~Dated: March 29, 2019~~
Dated: December 27, 2019
/s/ Steven J. Quinlan
Steven J. Quinlan
Vice President & Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
27


	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

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

Total Assets	$	672,585		$	618,009

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

Total Current Liabilities		34,268			38,688
Deferred Income Taxes		14,211			14,103
OtherNon-Current Liabilities		4,190			5,043

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

Total Stockholders’ Equity		619,916			560,175

Total Liabilities and Equity	$	672,585		$	618,009


	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 and 52,216,589 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

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

Total Cost of Revenues		53,072		50,302		163,034		152,037

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

Total Operating Expenses		29,989		28,688		92,026		87,439

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

Total Other Income		1,984		1,368		4,097		3,235

Income Before Taxes		16,623		17,281		53,461		53,570
Provision for Income Taxes		3,550		700		9,100		7,900

Net Income		13,073		16,581		44,361		45,670
Net (Income) Loss Attributable toNon-Controlling Interest		—		5		—		(70	)

Net Income Attributable to Neogen	$	13,073	$	16,586	$	44,361	$	45,600

Net Income Attributable to Neogen Per Share
Basic	$	0.25	$	0.32	$	0.86	$	0.89

Diluted	$	0.25	$	0.32	$	0.85	$	0.88


	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


	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	)

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		—			—			—			290			—		290

Balance at November 30, 2018		52,082		$	8,334		$	215,615		$	(12,234	)	$	390,359	$	602,074

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

Balance at February 28, 2019		52,120		$	8,339		$	217,274		$	(9,129	)	$	403,432	$	619,916


							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


	November 30, 2019
	(in thousands)
Right of use - assets	$	2,034
Lease liabilities - current		585
Lease liabilities - non-current		1,456


	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


	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


	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

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

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


	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

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

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


	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

	$	84,870	$	76,005


	Food Safety		Animal Safety		Corporate and Eliminations (1)			Total
	(in thousands)
As of and for the three months ended February 28, 2019
Product revenues to external customers	$	44,790	$	32,585	$	—		$	77,375
Service revenues to external customers		6,323		14,002		—			20,325

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)
Product revenues to external customers	$	42,286	$	34,898	$	—		$	77,184
Service revenues to external customers		5,027		12,692		—			17,719

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


	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

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


	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 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	%

	$	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	%

	$	46,587	$	47,590	$	(1,003	)		(2	)%

Total Revenues	$	97,700	$	94,903	$	2,797			3	%


	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	%

	$	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	%

	$	147,378	$	147,001	$	377			0	%

Total Revenues	$	304,424	$	289,811	$	14,613			5	%


	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	%


	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

Total Other Income	$	1,984	$	1,368		$	4,097		$	3,235


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		—		—		—		—

Total		50	$	62.69		50		2,950


	3			Articles of Incorporation, as restated (incorporated by reference to Exhibit 3 to the registrant’s Form10-Q filed on December 28, 2018)

	10			Amended and Restated Credit Agreement dated as of November 30, 2018 between Registrant and ~~JPMorgan~~JP Morgan Chase N.A. (incorporated by reference to Exhibit 10.A toof the registrant’s Form8-K filed on December 6, 2018).

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

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

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

	101.INS			Inline XBRL Instance Document

	101.SCH			Inline XBRL Taxonomy Extension Schema Document

	101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

	101.DEF			Inline XBRL Taxonomy Extension Definition Document

	101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

	101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

NEOGEN CORPORATION

(Registrant)

Dated: December 27, 2019

~~NEOGEN CORPORATION~~

~~(Registrant)~~