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

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

(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 ☒ NO ☐

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 ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ☐ NO ☒

As of February ~~28, 2023~~29, 2024 there were ~~216,220,821~~216,607,746 shares of Common Stock outstanding.


	February 28, 2023			May 31, 2022			February 29, 2024			May 31, 2023
Assets
Current Assets
Cash and cash equivalents	$	67,134		$	44,473		$	161,437		$	163,240
Marketable securities		116,080			336,578			7,010			82,329
Accounts receivable, net of allowance of $2,200 and $1,650		146,393			99,674
Inventories		143,863			122,313
Accounts receivable, net of allowance of $4,099 and $2,827								173,592			153,253
Inventories, net								182,390			133,812
Prepaid expenses and other current assets		81,901			23,760			78,042			53,297
Total Current Assets		555,371			626,798			602,471			585,931
Net Property and Equipment		164,888			110,584			272,282			198,749
Other Assets
Right of use assets		5,062			3,184			15,301			11,933
Goodwill		2,135,118			142,704			2,136,338			2,137,496
Other non-amortizable intangible assets		14,252			15,397
Amortizable intangible and other assets, net of accumulated amortization		1,620,229			92,106
Intangible assets, net								1,539,744			1,605,103
Other non-current assets		13,844			2,156			16,356			15,220
Total Assets	$	4,508,764		$	992,929		$	4,582,492		$	4,554,432
Liabilities and Stockholders’ Equity
Current Liabilities
Current portion of finance lease							$	2,521		$	-
Accounts payable	$	60,494		$	34,614			89,748			76,669
Accrued compensation		17,387			11,123			20,305			25,153
Income tax payable		1,645			2,126			11,573			6,951
Accrued interest		3,438			—			3,438			11,149
Deferred revenue		6,765			5,460			5,486			4,616
Other accruals		17,426			24,521			24,773			20,934
Total Current Liabilities		107,155			77,844			157,844			145,472
Deferred Income Tax Liability		362,630			17,011			353,853			353,427
Non-current debt		884,701			—
Other non-current liabilities		28,723			10,700
Non-Current Debt								887,653			885,439
Other Non-Current Liabilities								36,968			35,877
Total Liabilities		1,383,209			105,555			1,436,318			1,420,215
Commitments and Contingencies (note 12)
Equity
Preferred stock, $1.00 par value, 100,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.16 par value, 315,000,000 shares authorized, 216,220,821 and 107,801,094 shares issued and outstanding at February 28, 2023 and May 31, 2022, respectively		34,595			17,248
Preferred stock, $1.00 par value, 100,000 shares authorized, none issued and outstanding								-			-
Common stock, $0.16 par value, 315,000,000 shares authorized, 216,607,746 and 216,245,501 shares issued and outstanding at February 29, 2024, and May 31, 2023, respectively								34,657			34,599
Additional paid-in capital		2,564,713			309,984			2,579,955			2,567,828
Accumulated other comprehensive loss		(33,222	)		(27,769	)		(29,473	)		(33,251	)
Retained earnings		559,469			587,911			561,035			565,041
Total Stockholders’ Equity		3,125,555			887,374			3,146,174			3,134,217
Total Liabilities and Stockholders’ Equity	$	4,508,764		$	992,929		$	4,582,492		$	4,554,432

The accompanying notes are an integral part of these condensed consolidated financial statements.


	Three Months Ended February 28,						Nine Months Ended February 28,						Three Months Ended February 29/28,						Nine Months Ended February 29/28,
	2023			2022			2023			2022			2024			2023			2024			2023
Revenues
Product revenues	$	190,688		$	101,566		$	500,797		$	311,701		$	202,178		$	190,688		$	610,448		$	500,797
Service revenues		27,567			26,678			79,840			75,365			26,634			27,567			76,980			79,840
Total Revenues		218,255			128,244			580,637			387,066			228,812			218,255			687,428			580,637
Cost of Revenues
Cost of product revenues		94,377			56,550			252,348			167,650			98,144			94,377			293,456			252,348
Cost of service revenues		15,914			14,282			45,516			41,402			13,785			15,914			43,554			45,516
Total Cost of Revenues		110,291			70,832			297,864			209,052			111,929			110,291			337,010			297,864
Gross Margin		107,964			57,412			282,773			178,014
Gross Profit														116,883			107,964			350,418			282,773
Operating Expenses
Sales and marketing		38,598			21,477			98,329			63,220			47,920			38,598			138,535			98,329
General and administrative		46,424			24,997			151,369			60,985			52,087			46,424			148,929			151,369
Research and development		7,258			4,561			18,985			13,218			4,853			7,258			17,331			18,985
Total Operating Expenses		92,280			51,035			268,683			137,423			104,860			92,280			304,795			268,683
Operating Income		15,684			6,377			14,090			40,591			12,023			15,684			45,623			14,090
Other (Expense) Income
Other Expense
Interest income		640			349			2,163			804			1,612			640			5,265			2,163
Interest expense		(17,460	)		(35	)		(38,007	)		(63	)		(18,285	)		(17,460	)		(54,773	)		(38,007	)
Other expense		(1,124	)		(48	)		(7,938	)		(34	)		(1,172	)		(1,124	)		(4,021	)		(7,938	)
Total Other (Expense) Income		(17,944	)		266			(43,782	)		707
(Loss) Income Before Taxes		(2,260	)		6,643			(29,692	)		41,298
Provision for Income Taxes		(10,450	)		1,200			(1,250	)		7,950
Net Income (Loss)	$	8,190		$	5,443		$	(28,442	)	$	33,348
Net Income (Loss) Per Share
Total Other Expense														(17,845	)		(17,944	)		(53,529	)		(43,782	)
Loss Before Taxes														(5,822	)		(2,260	)		(7,906	)		(29,692	)
Income Tax Benefit														(3,800	)		(10,450	)		(3,900	)		(1,250	)
Net (Loss) Income													$	(2,022	)	$	8,190		$	(4,006	)	$	(28,442	)
Net (Loss) Earnings Per Share
Basic	$	0.04		$	0.05		$	(0.16	)	$	0.31		$	(0.01	)	$	0.04		$	(0.02	)	$	(0.16	)
Diluted	$	0.04		$	0.05		$	(0.16	)	$	0.31		$	(0.01	)	$	0.04		$	(0.02	)	$	(0.16	)
Weighted Average Shares Outstanding
Basic		216,218			107,818			179,666			107,648			216,597,777			216,217,702			216,438,643			179,666,118
Diluted		216,399			108,133			179,666			108,130			216,597,777			216,399,003			216,438,643			179,666,118

The accompanying notes are an integral part of these condensed consolidated financial statements.

Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~ (unaudited)

(1)Amounts are net of tax of $24 and $282 during the three months ended February 29, 2024 and February 28, 2023 and $290 and $202 during the nine months ended February 29, 2024 and February 28, 2023, respectively.

(2) Amounts are net of tax of $44 and $928 during the three months ended February 29, 2024 and February 28, 2023 and $867 and $171 during the nine months ended February 29, 2024 and February 28, 2023, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

DESCRIPTION OF BUSINESS

Neogen Corporation and subsidiaries ("Neogen," "we," ~~"our,"~~"our" or the "Company") develop, manufacture and market a diverse line of products and services dedicated to food and animal safety. Our Food Safety segment consists primarily of diagnostic test kits and complementary products (e.g., culture media) sold to food producers and processors to detect dangerous and/or unintended substances in human food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, genetic modifications, ruminant by-products, meat speciation, drug residues, pesticide residues and general sanitation concerns. ~~Our diagnostic test kits are generally easier to use and provide quicker results than conventional diagnostic methods.~~ The majority of the test kits are disposable, single-use, immunoassay and DNA detection products that rely on proprietary antibodies and RNA and DNA testing methodologies to produce rapid and accurate test results. Our expanding line of food safety products also includes genomics-based diagnostic technology, and advanced software systems that help testers to objectively analyze and store, ~~their results and~~as well as perform analysis on, ~~the~~their results from multiple locations over extended periods.

Neogen’s Animal Safety segment is engaged in the development, manufacture, marketing and distribution of veterinary instruments, pharmaceuticals, vaccines, topicals, parasiticides, diagnostic products, ~~rodenticides,~~rodent control products, cleaners, disinfectants, ~~insecticides~~insect control products and genomics testing services for the worldwide animal safety market. The majority of these consumable products are marketed through veterinarians, retailers, livestock producers and animal health product distributors. Our line of drug detection products is sold worldwide for the detection of abused and therapeutic drugs in animals and animal products, and has expanded into the workplace and human forensic markets.

~~MERGER WITH THE FOOD SAFETY BUSINESS OF 3M~~

On September 1, 2022, the Company completed its merger (the “Merger”) with Garden SpinCo, a newly formed, wholly owned subsidiary of 3M created to carve out 3M’s Food Safety Division (“3M FSD”, “FSD”), in a Reverse Morris Trust transaction. The purchase price consideration was $~~3.2~~ ~~billion, net of customary purchase price adjustments and transaction costs, which consisted of~~ ~~108.3~~ ~~million shares of Neogen common stock issued on closing. Immediately following the transaction, Garden SpinCo stockholders owned, in the aggregate, approximately~~ ~~50.1% of the issued and outstanding shares of Neogen common stock and pre-merger Neogen shareholders owned, in the aggregate, approximately~~ ~~49.9% of the issued and outstanding shares of Neogen common stock.~~

~~Neogen was deemed to be the accounting acquiror of the 3M FSD for accounting purposes under U.S. generally accepted accounting principles.~~

BASIS OF PRESENTATION AND CONSOLIDATION

The accompanying unaudited condensed 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 of the results of the interim period have been included in the accompanying unaudited condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The results of operations during the three and nine months ended February ~~28, 2023~~29, 2024 are not necessarily indicative of the results to be expected for the full fiscal year ending May 31, ~~2023.~~2024. For more complete financial information, these condensed 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, ~~2022.~~2023.

Our functional currency is the U.S. dollar. We translate our non-U.S. operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in other comprehensive ~~income~~ (loss). income. Gains or losses from foreign currency transactions are included in other ~~income (expense)~~expense on our condensed consolidated statements of ~~income (loss).~~operations. Management has designated certain intercompany loans as long-term in nature and, therefore, the gains and losses on remeasurement of these loans are recorded within accumulated other comprehensive loss.

ACCOUNTING POLICIES

Comprehensive (Loss) Income ~~(Loss)~~

Comprehensive (loss) income ~~(loss)~~ represents net (loss) income and any revenues, expenses, gains and losses that, under U.S. generally accepted accounting principles, are excluded from net (loss) income and recognized directly as a component of equity. Accumulated other comprehensive (loss) income ~~(loss)~~ consists of foreign currency translation adjustments and unrealized gains or losses on our marketable securities and derivative instruments.

Fair Value of Financial Instruments

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

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

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

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

The carrying amounts of certain financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable, our revolving credit agreement, and long-term debt, approximate their fair value based on either their short maturity or current terms for similar instruments.

Leases

We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating leases. We evaluate our contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Currently, ~~all~~many of our leases are classified as operating leases. ~~The Company recognizes a lease liability~~Operating leases are included in other assets, other accruals and other non-current liabilities on the statement of financial position to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. Right-of-use assets are recorded in Other Assets on ourCompany’s condensed consolidated balance sheets. ~~Current~~Finance leases are included in net property and ~~non-current~~equipment and current portion of finance lease ~~liabilities are recorded in other accruals within current liabilities and other non-current liabilities, respectively,~~ on ~~our~~the Company’s condensed consolidated balance sheets.

Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease. Costs associated with finance leases are recognized on a straight-line basis within depreciation and interest expense over the term of the lease. The right-of-use operating lease assets were $~~5,062,000~~15,301 and $~~3,184,000~~11,933 as of February ~~28, 2023~~29, 2024 and May 31, ~~2022,~~2023, respectively. The total current and non-current operating lease liabilities were $~~5,112,080~~15,771 and $~~3,228,000~~12,089 as of February ~~28, 2023~~29, 2024 and May 31, ~~2022,~~2023, respectively. The finance lease assets were $2,496 as of February 29, 2024. There were no finance leases recorded as of May 31, 2023. See Note 10, "Debt", for detail on the finance lease liabilities.

Derivatives

~~We operate~~The Company operates on a global basis and ~~are~~is exposed to the risk that ~~our~~its financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates and changes in interest rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, ~~we enter~~the Company enters into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions and ~~have~~has also entered into interest rate swap contracts as a hedge against changes in interest rates. ~~All~~The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. On the date the derivative is established, the Company designates the derivative as either a fair value hedge, a cash flow hedge or a net investment hedge in accordance with its established policy. Each reporting period, derivatives are ~~recognized as~~recorded at fair value in other current assets, orother assets, accrued liabilities and ~~measured at fair value. For derivatives that are determined to be effective hedges, changes~~other long-term liabilities. The change in fair value ~~are recognized~~is recorded in accumulated other comprehensive loss, and amounts are reclassified into earnings on the condensed consolidated statement of income ~~(loss) until the underlying hedged item is recognized in earnings.~~when transactions are realized. Derivatives that are not determined to be effective hedges are adjusted to fair value with a corresponding adjustment to earnings. ~~We do~~The Company does not ~~use~~enter into derivative financial instruments for trading or speculative purposes.

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 and derivatives. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Accounts Receivable and Concentrations of Credit Risk

Financial instruments which potentially subject Neogen to concentrations of credit risk consist principally of accounts receivable. Management attempts to minimize credit risk by reviewing customers’ credit histories before extending credit and by monitoring credit exposure on a regular basis. Collateral or other security is generally not required for accounts receivable. We maintain an allowance for customer accounts that reduces receivables to amounts that are expected to be collected. In estimating the allowance for doubtful accounts, management considers relevant information about past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets. Once a receivable balance has been determined to be uncollectible, generally after all collection efforts have been exhausted, that amount is charged against the allowance for doubtful accounts. No customer accounted for more than 10% of accounts receivable at February ~~28, 2023~~29, 2024 or May 31, ~~2022,~~2023, respectively.

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 the 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. The Company's business is organized into two operating segments: Food Safety and Animal Safety. Under the goodwill guidance, management determined that each of its segments represents a reporting unit. Other intangible assets include customer relationships, trademarks, licenses, trade names, covenants not-to-compete and patents. ~~Customer-based~~Customer relationship 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 2to 25 ~~years. We review~~ years.

Management reviews the carrying amounts of goodwill ~~and other non-amortizable intangible assets~~ annually at the reporting unit level, or when indications of impairment exist, to determine if ~~such assets~~goodwill may be impaired. Goodwill is tested for impairment annually in the fourth quarter. During management's annual test or when there are indicators of impairment, if the carrying amount is deemed to be less than fair value based upon a discounted cash flow analysis and comparison to EBITDA multiples of peer companies, goodwill is reduced to the estimated fair value and a charge is recorded to operations.

Amortizable intangible assets are tested for impairment when indications of impairment exist. If the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis, ~~and comparison to comparable EBITDA multiples of peer companies,~~ such assets are reduced to their estimated fair value and a charge is recorded to operations.

Long-Lived Assets

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

Business Combinations

We utilize the acquisition method of accounting for business combinations. This method requires, among other things, that results of operations of acquired companies are included in Neogen’s results of operations beginning on the respective acquisition dates and that assets acquired and liabilities assumed are recognized at fair value as of the acquisition date. Any excess of the fair value of consideration transferred over the fair values of the net assets acquired is recognized as goodwill. ~~Contingent consideration liabilities are recognized at~~As part of our acquisition accounting, the estimated fair value on the acquisition date. These amounts are recorded in either other accruals within current liabilities (for expected payments to be made within the next 12 months) or other non-current liabilities (for expected payments to be made after the next 12 months), both on our condensed consolidated balance sheets. Subsequent changes toCompany will recognize intangible assets. Management determines the fair value of ~~contingent consideration liabilities are recognized in other income (expense) in~~ the ~~condensed consolidated statements~~intangible assets by applying certain valuation methodologies, including the multi-period excess earnings method, which involves the use of income (loss). Contingent consideration payments made soon after the acquisition date are classified as investing activities in the condensed consolidated statements of cash flows. Contingent consideration payments not made soon after the acquisition date that aresignificant estimates and assumptions related to forecasted revenue growth rate and customer attrition rate. Valuation specialists are often used to develop and evaluate the ~~acquisition date~~appropriateness of the multi-period excess earnings method, our discount rates, our attrition rate and our fair value ~~are reported as financing activities in the condensed consolidated statements of~~estimates using our cash ~~flows, and amounts paid in excess of the original acquisition date fair value are reported as operating activities in the condensed consolidated statements of cash flows.~~ flow projections.

The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed 12months from the acquisition date. Legal costs, due diligence costs, business valuation costs and all other business acquisition costs are expensed when incurred.

Our estimates of fair value are based on assumptions believed to be reasonable at that time. If we made different estimates or judgments, it could result in material differences in the fair values of the net assets acquired.

Equity Compensation Plans

Share options, ~~awarded to employees,~~ restricted stock units (RSUs) and shares of stock awarded to employees under certain stock purchase plans are recognized as compensation expense based on their fair value at grant date. The fair market value of options granted under the Company stock option plans was estimated on the date of grant using the Black-Scholes option-pricing model with assumptions for inputs such as interest rates, expected dividends, an estimate of award forfeitures, 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~~are estimated or derived from available data. Use of different estimates would produce different option values, which in turn would result in higher or lower compensation expense recognized. For RSUs, we use the intrinsic value method to value the units.

To value equity awards, several recognized valuation models exist; none of these models can be singled out as being the best or most correct. The model applied by us can accommodate most of the specific features included in the options granted, which ~~are~~is the reason for ~~their~~its use. If different models were used, the option values could differ despite using the same inputs. Accordingly, using different assumptions coupled with using a different valuation model could have a significant impact on the fair value of employee stock options. Fair value could be either higher or lower than the number provided by the model applied and the inputs used. Further information on our equity compensation plans, including inputs used to determine the fair value of options, is disclosed in Note 7.7, "Equity Compensation Plans."

Income Taxes

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

New Accounting Pronouncements ~~Recently~~Not Yet Adopted

~~Acquired contract assets and liabilities in a business combination~~Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In ~~October 2021,~~November 2023, the FASB issued ASU ~~2021-08, Business Combinations~~2023-07, Segment Reporting (Topic ~~805)~~280): ~~Accounting for Contract Assets~~Improvements to Reportable Segment Disclosures, which modifies the disclosure and ~~Contract Liabilities from Contracts with Customers, which amends ASC 805~~presentation requirements of reportable segments. The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit and loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an ~~acquirer~~explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to at the date of acquisition, recognize and measure contract assets and contract liabilities acquired in accordance with ASU 2014-9, Revenue from Contracts with Customers (Topic 606) as if the entity had originated the contracts. The guidanceallocate resources. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, ~~2022. We adopted~~2024. Early adoption is permitted. The Company is currently evaluating the impact that this ~~standard in~~guidance will have on the ~~third quarter~~presentation of ~~fiscal 2023 and applied the amendment retrospectively to all business combinations in fiscal year 2023. Adoption of this standard did not have a material impact on our condensed~~its consolidated financial statements and ~~related disclosures.~~accompanying notes.

~~Reference Rate Reform~~Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In ~~March 2020,~~December 2023, the FASB issued ~~Update 2020-04, Reference Rate Reform~~ASU 2023-09, Income Taxes (Topic ~~848)~~740): ~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides temporary optional expedients~~Improvements to ~~applying the reference~~Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reform guidance to contracts that reference LIBOR or another reference rate expected to be discontinued. Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract. We adopted this standardreconciliation table and disclosures regarding cash taxes paid both in the ~~second quarter~~U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that this guidance will have on the presentation of ~~fiscal 2023, and now use the Secured Overnight Financing Rate (SOFR). Adoption of this standard did not have a material impact on our condensed~~its consolidated financial statements and ~~related disclosures.~~accompanying notes.

2. CASH AND MARKETABLE SECURITIES

Cash and Cash Equivalents

Cash and cash equivalents consist of bank demand accounts, savings deposits, certificates of deposit and commercial paper with original maturities of 90 days or less. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced losses related to these balances and believes it is not exposed to significant credit risk regarding its cash and cash equivalents. Cash and cash equivalents were $~~67,134,000~~161,437 and $~~44,473,000~~163,240 as of February ~~28, 2023~~29, 2024 and May 31, ~~2022,~~2023, respectively. The carrying value of these assets approximates fair value due to the short maturity of these instruments and is classified as Level 1 in the fair value hierarchy.

Marketable Securities

The Company has marketable securities held by banks or broker-dealers consisting of commercial paper and corporate bonds rated at least A-1/P-1 (short-term) and A/A2 (long-term) with original maturities between 91 days and two years. These securities are classified as ~~of February 28, 2023.~~available for sale. Changes in ~~market~~fair value are monitored and recorded on a monthly ~~basis.~~basis and are recorded in other comprehensive (loss) income. In the event of a downgrade in credit quality subsequent to purchase, the marketable securities investment is evaluated to determine the appropriate action to take to minimize the overall risk to our marketable securities portfolio. ~~These securities are classified as available~~If fair value is less than its amortized cost basis, then the Company evaluates whether the decline is the result of a credit loss, in which case an impairment is recorded through an allowance for ~~sale.~~credit losses. Where there is an intention or a requirement to sell an impaired available-for-sale debt security, the entire impairment is recognized in earnings with a corresponding adjustment to the amortized cost basis of the security. The primary objective of management’s short-term investment activity is to preserve capital for the purpose of funding current operations, capital expenditures and business ~~acquisitions; short-term~~acquisitions. Short-term investments are not entered into for trading or speculative purposes. These securities are recorded at fair value based on recent trades or pricing models and therefore meet the Level 2 criteria. Interest income on these investments is recorded within other (expense) income on the ~~income statement. Adjustments in the fair value~~condensed consolidated statements of ~~these assets are recorded in other comprehensive income.~~operations.

Marketable Securities as of February ~~28, 2023~~29, 2024 and May 31, ~~2022~~2023 are listed below by classification and remaining maturities.


(in thousands)	Maturity	February 28, 2023		May 31, 2022
						Maturity	February 29, 2024		May 31, 2023
Commercial Paper & Corporate Bonds	0 - 90 days	$	34,443	$	106,497	0 - 90 days	$	6,687	$	22,552
	91 - 180 days		22,322		61,373	91 - 180 days		323		35,692
	181 days - 1 year		52,462		91,706	181 days - 1 year		—		23,768
	1 - 2 years		6,853		77,002	1 - 2 years		—		317
Total Marketable Securities		$	116,080	$	336,578		$	7,010	$	82,329

The components of marketable securities, consisting of commercial paper and corporate bonds, as of February ~~28, 2023~~29, 2024 are as follows:

(in thousands)

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Commercial Paper & Corporate Bonds

$
118,166

$
—

$
(2,086
)

$
116,080


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Commercial Paper & Corporate Bonds	$	7,023	$	—	$	(13	)	$	7,010

The components of marketable securities, consisting of commercial paper and corporate bonds, as of May 31, ~~2022~~2023 are as follows:

(in thousands)

Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair Value

Commercial Paper & Corporate Bonds

$
339,540

$
7

$
(2,969
)

$
336,578


	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Commercial Paper & Corporate Bonds	$	83,549	$	—	$	(1,220	)	$	82,329

3. 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:


(in thousands)	February 28, 2023		May 31, 2022
					February 29, 2024			May 31, 2023
Raw materials	$	73,514	$	58,667	$	70,143		$	66,617
Work-in-process		7,054		6,388		11,391			5,369
Finished and purchased goods		63,295		57,258		110,395			68,100
Inventory reserve						(9,539	)		(6,274	)
	$	143,863	$	122,313	$	182,390		$	133,812

4. 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 Neogen’s revenue is generated through contracts with its 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. Revenue is recognized upon transfer of control of promised products and services in an amount that reflects the consideration we expect 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.

Certain agreements with customers include discounts or rebates on the sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified purchase threshold of goods and services. We account for these discounts as variable consideration and estimate the likelihood of a customer meeting the threshold in order to determine the transaction price using the most predictive approach. We typically use the most-likely-amount method for incentives that are offered to individual customers, and the expected-value method for programs that are offered to a broad group of customers. Variable consideration reduces the amount of revenue that is recognized. Rebate obligations related to customer incentive programs are recorded in accrued liabilities; the rebate estimates are adjusted at the end of each applicable measurement period based on information currently available.

The performance obligations in Neogen’s contracts are generally satisfied well within one year of contract inception. In such cases, management has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component. Management has 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. We account for shipping and handling for products as a fulfillment activity when goods are shipped. Shipping and handling costs that are charged to and reimbursed by the customer are recognized as revenues, while the related expenses incurred by Neogen are recorded in sales and marketing expense. Revenue is recognized net of any tax collected from customers. The taxes are subsequently remitted to governmental authorities. Our 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, and due to immateriality of the amount, warranty claims are recorded in the period incurred.

The Company derives revenue from two primary sources—product revenue and service revenue.

Product revenue consists 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,~~Rodent control products, disinfectants and ~~insecticides~~insect control products 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 Neogen’s 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.

The Company has no contract assets. Contract liabilities represent deposits made by customers before the satisfaction of performance obligation(s) and recognition of revenue. Upon completion of the performance obligation(s) that the Company has with the customer, the liability for the customer deposit is relieved and revenue is recognized. These customer deposits are recorded within ~~Deferred~~deferred revenue on the condensed consolidated balance sheets. During the three and nine months ended February 29, 2024, the Company recorded additions of $5,116 and $11,094 to deferred revenue, respectively. During the three and nine months ended February 28, 2023, the Company recorded additions of $4,601 and $9,272 to deferred revenue, respectively. During the three and nine months ended February 29, 2024, the Company recognized $4,308 and $10,224, respectively, of deferred revenue amounts into revenue. During the three and nine months ended February 28, 2023, the Company recognized $~~2.9~~2,918 ~~million~~ and $~~8.0~~7,967 ~~million,~~, respectively, of deferred revenue amounts into revenue. Changes in the balances relate primarily to sales of the Company's genomics services.

On September 1, 2022, Neogen closed on a Reverse Morris Trust transaction to combine with ~~3M’s~~3M Company's ("3M") Food Safety ~~business.~~Division (“3M FSD”, “FSD”). Similar to Neogen, 3M’s former ~~Food Safety business~~FSD sells diagnostic test kits, ~~dehydrated~~ culture media and related products used by food producers and processors to detect foodborne bacteria, allergens and levels of general sanitation. ~~Revenue~~Revenues for these products are recognized and invoiced when the product is shipped to the customer. ~~These~~Subsequent to the 3M FSD transaction, many of these products ~~are currently~~were manufactured,

invoiced, and distributed by 3M on behalf of Neogen under a number of transition service contracts. In the third quarter of fiscal year 2024, the Company completed its exit of distribution-related service contracts. As a result, all product shipments and invoicing to customers is now done directly by Neogen.

The following table presents disaggregated revenue by major product and service categories during the three and nine months ended February 29, 2024 and February 28, ~~2023 and 2022:~~2023:


	Three Months Ended February 28,				Nine Months Ended February 28,				Three Months Ended February 29/28,				Nine Months Ended February 29/28,
(in thousands)	2023		2022		2023		2022
									2024		2023		2024		2023
Food Safety
Natural Toxins, Allergens & Drug Residues	$	19,198	$	17,965	$	61,236	$	59,397
Natural Toxins & Allergens										19,738	$	19,198	$	63,116	$	61,236
Bacterial & General Sanitation		39,444		11,288		91,293		34,709		40,395		39,444		128,393		91,293
Culture Media & Other		77,955		18,145		179,293		56,136
Indicator Testing, Culture Media & Other										81,168		77,955		246,812		179,293
Rodent Control, Insect Control & Disinfectants		9,550		9,577		29,502		25,459		10,136		9,550		32,180		29,502
Genomics Services		5,395		5,781		16,204		16,909		6,317		5,395		17,934		16,204
	$	151,542	$	62,756	$	377,528	$	192,610	$	157,754	$	151,542	$	488,435	$	377,528
Animal Safety
Life Sciences	$	1,440	$	1,339	$	4,456	$	4,011	$	1,372	$	1,440	$	4,710	$	4,456
Veterinary Instruments & Disposables		15,428		17,047		46,534		47,956		17,976		15,428		47,845		46,534
Animal Care & Other		8,735		9,449		29,830		29,517		10,066		8,735		27,226		29,830
Rodent Control, Insect Control & Disinfectants		20,242		18,359		63,121		58,777		23,055		20,242		65,694		63,121
Genomics Services		20,868		19,294		59,168		54,195		18,589		20,868		53,518		59,168
		66,713		65,488		203,109		194,456		71,058		66,713		198,993		203,109
Total Revenues	$	218,255	$	128,244	$	580,637	$	387,066	$	228,812	$	218,255	$	687,428	$	580,637

5. NET (LOSS) INCOME ~~(LOSS)~~ PER SHARE

Basic net (loss) income per share was computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the period. Diluted net (loss) income per share was computed using the treasury stock method by dividing net (loss) income by the weighted average number of shares of common stock outstanding.

The calculation of net (loss) income ~~(loss)~~ per share follows:

Three Months Ended February 28,

Nine Months Ended February 28,

(in thousands, except per share amounts)

2023

2022

2023

2022

Numerator for basic and diluted net income (loss) per share:

Net income (loss) attributable to Neogen

$
8,190

$
5,443

$
(28,442
)

$
33,348

Denominator for basic net income (loss) per share:

Weighted average shares

216,218

107,818

179,666

107,648

Effect of dilutive stock options and RSUs

181

315

—

482

Denominator for diluted net income (loss) per share

216,399

108,133

179,666

108,130

Net income (loss) per share:

Basic

$
0.04

$
0.05

$
(0.16
)

$
0.31

Diluted

$
0.04

$
0.05

$
(0.16
)

$
0.31


	Three Months Ended February 29/28,					Nine Months Ended February 29/28,
	2024			2023		2024			2023
Numerator for basic and diluted net (loss) income per share:
Net (loss) income attributable to Neogen	$	(2,022	)	$	8,190	$	(4,006	)	$	(28,442	)
Denominator for basic net (loss) income per share:
Weighted average shares		216,597,777			216,217,702		216,438,643			179,666,118
Effect of dilutive stock options and RSUs		—			181,301		—			—
Denominator for diluted net (loss) income per share		216,597,777			216,399,003		216,438,643			179,666,118
Net (loss) income per share:
Basic	$	(0.01	)	$	0.04	$	(0.02	)	$	(0.16	)
Diluted	$	(0.01	)	$	0.04	$	(0.02	)	$	(0.16	)

~~Note:~~ Due to the net loss ~~during~~reported for the three and nine months ended February 29, 2024 and the nine months ended February 28, 2023, the dilutive stock options and RSUs ~~are~~were anti-dilutive.

6. SEGMENT INFORMATION AND GEOGRAPHIC DATA

We have two reportable segments: Food Safety and Animal Safety. The Food Safety segment is primarily engaged in the development, production and marketing of diagnostic test kits, culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation. ~~All new product revenues from the merger of the 3M FSD, effective September 1, 2022, are reported through the Food Safety segment.~~ The Animal Safety segment is primarily engaged in the development, production and marketing of products dedicated to animal safety, including a complete line of consumable products marketed to veterinarians and animal health product distributors. This segment also provides genomic identification and related interpretive bioinformatic services. Additionally, the Animal Safety segment produces and markets ~~rodenticides,~~rodent control products, disinfectants and ~~insecticides~~insect control products to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.

~~Our~~Many of our international operations ~~in the United Kingdom, Mexico, Brazil, China and India~~ originally focused on the Company’s 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,~~rodent control products, insect control products, veterinary instruments and genomics services. These additional products and services are managed and directed by existing Food Safety management and are reported through the Food Safety segment.

Neogen’s operation in Australia originally focused on providing genomics services and sales of animal safety products and reports through the Animal Safety segment. With the acquisition of Cell BioSciences in February 2020, this operation expanded to offer our complete line of products and services, including those usually associated with the Food Safety segment. These additional products are managed and directed by existing management at Neogen Australasia and report through the Animal Safety segment. While Neogen was operating under a distribution services agreement with 3M, all sales of FSD products were reported through the Food Safety segment. Since the review of FSD sales occurs on a global scale, sales of these products occurring in Australia and New Zealand will continue to report through the Food Safety segment, despite now occurring at Neogen Australasia.

The accounting policies of each of the segments are the same as those described in Note 1.1, "Description of Business and Basis of Presentation."

Segment information follows:


(in thousands)	Food Safety		Animal Safety		Corporate and Eliminations (1)			Total
										Food Safety		Animal Safety		Corporate and Eliminations (1)			Total
As of and during the three months ended February 29, 2024
Product revenues to external customers										$	149,709	$	52,469	$	—		$	202,178
Service revenues to external customers											8,045		18,589		—			26,634
Total revenues to external customers										$	157,754	$	71,058	$	—		$	228,812
Operating income (loss)										$	15,915	$	14,781	$	(18,673	)	$	12,023
Total assets										$	4,071,831	$	344,205	$	166,456		$	4,582,492

As of and during the three months ended February 28, 2023
Product revenues to external customers	$	144,843	$	45,845	$	—		$	190,688	$	144,843	$	45,845	$	—		$	190,688
Service revenues to external customers		6,699		20,868		—			27,567		6,699		20,868		—			27,567
Total revenues to external customers	$	151,542	$	66,713	$	—		$	218,255	$	151,542	$	66,713	$	—		$	218,255
Operating income (loss)	$	11,011	$	10,752	$	(6,079	)	$	15,684	$	11,011	$	10,752	$	(6,079	)	$	15,684
Total assets	$	3,975,921	$	349,628	$	183,215		$	4,508,764	$	3,975,921	$	349,628	$	183,215		$	4,508,764

As of and during the three months ended February 28, 2022
Product revenues to external customers	$	55,372	$	46,194	$	—		$	101,566
Service revenues to external customers		7,384		19,294		—			26,678
Total revenues to external customers	$	62,756	$	65,488	$	—		$	128,244
Operating income (loss)	$	8,191	$	10,783	$	(12,597	)	$	6,377
Total assets	$	302,605	$	298,854	$	379,746		$	981,205

(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.

(in thousands)

Food
Safety

Animal
Safety

Corporate and
Eliminations (1)

Total

As of and during the nine months ended February 28, 2023

Product revenues to external customers

$
356,856

$
143,941

$
—

$
500,797

Service revenues to external customers

20,672

59,168

—

79,840

Total revenues to external customers

$
377,528

$
203,109

$
—

$
580,637

Operating income (loss)

$
41,053

$
35,439

$
(62,402
)

$
14,090

As of and during the nine months ended February 28, 2022

Product revenues to external customers

$
171,440

$
140,261

$
—

$
311,701

Service revenues to external customers

21,170

54,195

—

75,365

Total revenues to external customers

$
192,610

$
194,456

$
—

$
387,066

Operating income (loss)

$
29,216

$
36,246

$
(24,871
)

$
40,591


	Food Safety		Animal Safety		Corporate and Eliminations (1)			Total
As of and during the nine months ended February 29, 2024
Product revenues to external customers	$	464,973	$	145,475	$	—		$	610,448
Service revenues to external customers		23,462		53,518		—			76,980
Total revenues to external customers	$	488,435	$	198,993	$	—		$	687,428
Operating income (loss)	$	62,485	$	30,876	$	(47,738	)	$	45,623


As of and during the nine months ended February 28, 2023
Product revenues to external customers	$	356,856	$	143,941	$	—		$	500,797
Service revenues to external customers		20,672		59,168		—			79,840
Total revenues to external customers		377,528		203,109		-			580,637
Operating income (loss)		41,053		35,439		(62,402	)		14,090

(1)

Includes the elimination of intersegment transactions.

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


	Three Months Ended February 28,				Nine Months Ended February 28,				Three Months Ended February 29/28,				Nine Months Ended February 29/28,
(in thousands)	2023		2022		2023		2022
									2024		2023		2024		2023
Domestic	$	109,919	$	77,297	$	304,974	$	231,454	$	124,226	$	109,919	$	348,848	$	304,974
International		108,336		50,947		275,663		155,612		104,586		108,336		338,580		275,663
Total revenue	$	218,255	$	128,244	$	580,637	$	387,066	$	228,812	$	218,255	$	687,428	$	580,637

8. BUSINESS COMBINATIONS

The condensed consolidated statements of ~~income (loss)~~operations 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 17, 2021, the Company acquired all of the stock of CAPInnoVet, Inc., a companion animal health business that provides pet medications to the veterinary market. This acquisition provides entry into the retail parasiticide market and enhances the Company’s presence in companion animal markets. Consideration for the purchase was net cash of $~~17.9~~ ~~million paid at closing. There is also the potential for performance milestone payments to the former owners of up to $6.5~~ ~~million and the Company could incur up to $14.5~~ ~~million in future royalty payments. Upon revaluation of the contingent liability at February 28,~~Fiscal 2023 ~~the Company recognized a gain of $300,000~~ ~~on the performance milestone liability, recorded within other income. The business is operated from our location in Lexington, KY, reporting within the Animal Safety segment.~~

~~On November 30, 2021, the Company acquired all of the stock of Delf (U.K.)~~Thai-Neo Biotech Co., Ltd., a United Kingdom-based manufacturer and supplier of animal hygiene and industrial cleaning products, and Abbott Analytical Ltd., a related service provider. This acquisition expanded the Company’s line of dairy hygiene products and will enhance our cleaner and disinfectant product portfolio. Consideration for the purchase was net cash of $~~9.5~~ million paid at closing. The companies continue to operate from their current location in Liverpool, England, reporting within the Food Safety segment and are managed through Neogen’s Scotland operation.

On December 9, 2021, the Company acquired all of the stock of Genetic Veterinary Sciences, Inc., a companion animal genetic testing business providing genetic information for dogs, cats and birds to animal owners, breeders and veterinarians. This acquisition will further expand the Company’s presence in the companion animal market. Consideration for the purchase was $~~11.3~~ million in net cash. The business is operated from its current location in Spokane, Washington, reporting within the Animal Safety segment. Since completion of initial estimates in the second quarter of fiscal year 2022, the Company has recorded insignificant measurement period adjustments, which resulted in a decrease to the base purchase price. Acquisition

On July 1, 2022, Neogen acquired all of the stock of Thai-Neo Biotech Co., Ltd., a ~~longstanding~~long-standing distributor of Neogen’s food safety products to Thailand and Southeast Asia. ~~This acquisition gives Neogen a direct sales presence in Thailand.~~ Consideration for the purchase was $~~1,581,000~~1,581 in net cash, with $~~1,310,000~~1,310 paid at closing, $~~37,000~~37 paid onin November ~~29,~~ 2022 as a working capital adjustment and $~~234,000~~234 ~~payable on~~paid in October 1, 2023. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $~~177,000~~177, inventory of $~~232,000~~232, prepaids of $~~3,000~~3, net property, plant and equipment of $~~16,000~~16, other non-current assets of $~~6,000~~6, accounts payable of $~~98,000~~98, other payables of $~~6,000~~6, non-current tax liabilities of $~~124,000~~124, intangible assets of $~~620,000~~620 (with an estimated life of 10 years) and the remainder to goodwill (non-deductible for tax purposes). The business continues to operate in Bangkok, Thailand, reporting within the Food Safety segment.

17Corvium Acquisition

On February 10, 2023, ~~Neogen~~the Company acquired certain assets as part of an asset purchase agreement with Corvium, Inc., a partner and supplier within the Company's software analytics platform. This acquisition, which primarily includes the software technology, advances the Company's food safety data analytics strategy. The purchase price consideration was $~~24.1~~24,067 ~~million,~~, which included ~~certain amounts~~$9,004 held in escrow. In the first quarter of fiscal 2024, $8,000 of the escrow balance was released to Corvium, Inc. In the third quarter of fiscal 2024, the remaining escrow balance was released to Corvium, Inc. This transaction is a business combination and was accounted for ~~litigation and indemnity escrow.~~ using the acquisition method.

There also is ~~also~~ the potential for performance milestone payments of up to $8,500based on ~~the~~ successful implementation of the software service at customer sites and sale of licenses. As a result, the Company has recorded contingent liabilities of $930as part of the opening balance sheet within ~~Other accruals and Other~~other non-current liabilities, as shown below. As

In the first quarter of ~~February 28, 2023,~~fiscal 2024, the Company ~~has~~ recorded ~~a preliminary allocation~~an increase to intangible assets of ~~the purchase consideration to assets acquired and liabilities assumed~~$100, based on ~~initial~~finalization of a third-party advisor's valuation work and fair value ~~estimates and is subject to continuing management analysis, with assistance from third party valuation advisors.~~estimates. Goodwill, which is fully deductible for tax purposes, includes value associated with profits earned from data management solutions that can be offered to existing customers and the expertise and reputation of the assembled ~~workforce and developed software technology.~~workforce. These values are Level 3 fair value measurements. The preliminary fair values of net tangible assets and intangible assets acquired were based on preliminary valuations prior to receiving a third-party assessment, and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The final determination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to the preliminary amounts recognized.

~~Due to the Company's acquisition of Corvium, Inc., it recorded a loss of $1.5~~ ~~million in the third quarter on dissolution of its minority interest in that company.~~

The ~~following table summarizes~~final purchase price allocation, based upon the ~~preliminary~~ fair value of these assets acquired and liabilities assumed, ~~as of~~which was determined using the ~~date of acquisition:~~income approach, is summarized in the following table:


(in thousands)
Prepaids and other current assets	$	101		$	66
Property, plant and equipment		13			13
Intangible assets		14,000			10,280
Deferred revenue		(1,827	)		(1,827	)
Other accruals		(1,000	)
Adjustment of annual license prepaid		(419	)		(419	)
Other non-current liabilities		(1,000	)		(930	)
Total identifiable assets and liabilities acquired		9,868			7,183
Goodwill		14,199			16,884
Total purchase consideration	$	24,067		$	24,067

For each completed acquisition listed above, the revenues and net income were not considered material and were therefore not disclosed.

3M Food Safety ~~transaction~~Transaction

On September 1, 2022, Neogen, 3M, ~~Company~~and Neogen Food Safety Corporation (“~~3M”~~Neogen Food Safety Corporation”), ~~and~~formerly named Garden SpinCo, ~~Corporation (“Garden SpinCo”),~~ a ~~newly formed, wholly owned~~ subsidiary ~~of 3M~~ created to carve out 3M’s ~~Food Safety Division (“3M FSD”, “FSD”),~~FSD, closed on ~~the~~a transaction combining 3M’s FSD with Neogen in a Reverse Morris Trust transaction and ~~Garden SpinCo~~Neogen Food Safety Corporation became a wholly owned subsidiary of Neogen (“FSD transaction”). ~~Following~~Immediately following the FSD transaction, pre-merger ~~Garden SpinCo~~Neogen Food Safety Corporation stockholders ~~own,~~owned, in the aggregate, approximately 50.1% of the issued and outstanding shares of Neogen common stock and pre-merger Neogen shareholders ~~own,~~owned, in the aggregate, approximately 49.9% of the issued and outstanding shares of Neogen common stock. This transaction is a business combination and was accounted for using the acquisition method.

The acquired business is a leading provider of food safety testing solutions. It offers a broad range of food safety testing products that support multiple industries within food and beverage, helping producers to prevent and protect consumers from foodborne illnesses. The business has a broad global presence with products used in more than 60 countries and a diversified revenue base of more than 100,000 end-user customers. The combination of Neogen and the 3M FSD creates a leading innovator with an enhanced geographic footprint, innovative product offerings, digitization capabilities, and financial flexibility to capitalize on robust growth trends in sustainability, food safety, and supply chain integrity. The acquired Food Safety business continues to primarily operate in facilities in Minnesota and the United Kingdom, and is being managed overall in Michigan, reporting within the Food Safety segment.

The purchase price consideration for the 3M FSD was $3.2 billion, net of customary purchase price adjustments and transaction costs, which consisted of 108,269,946 shares of Neogen common stock issued on closing with a fair value of $2.2 billion and ~~cash~~non-cash consideration of $1 billion, funded by the additional financing ~~secured~~obtained by Garden SpinCo and assumed by the ~~Company.~~Company as part of the transaction. See Note 10, "Debt" for further detail on the debt incurred.

~~During~~In the ~~three months ended February 28, 2023,~~first quarter of fiscal 2024, the Company recorded adjustments to ~~its preliminary allocation of the purchase consideration to~~goodwill and intangible assets, ~~acquired and liabilities assumed~~ based on ~~initial~~third-party advisor's valuation work and fair value estimates, resulting in an increase to goodwill and ~~is subject to continuing management analysis, with assistance from third party valuation advisors. In the third quarter of fiscal 2023, net working capital adjustments resulted in changes~~a decrease to the ~~inventories acquired and valuations~~intangible assets balance. The company also recorded adjustments to deferred tax liabilities, which increased the balance, based on finalization of ~~property, plant and equipment resulted in recognizing the fair value of assets acquired.~~entity income tax provisions. The excess of the purchase price over the fair value of the net tangible assets and identifiable intangible assets of $~~1.98~~1.97 billion was recorded as goodwill, of which $1.92 billion is not deductible for tax purposes. Goodwill ~~which increased in the third quarter of fiscal 2023 based on an updated purchase consideration,~~ includes value associated with profits earned from market and expansion capabilities, expected synergies from integration and streamlining operational activities, the expertise and reputation of the assembled workforce and other intangible assets that do not qualify for separate recognition. These values are Level 3 fair value measurements.

The preliminary fair values of net tangible assets and intangible assets acquired were based on preliminary valuations, and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The primary areas of the preliminaryfinal purchase price allocation, ~~that are not yet finalized relate to~~based upon the fair value of ~~inventories and property, plant and equipment, as well as deferred income tax liabilities. The fair values of the~~these assets acquired and liabilities assumed, are based on our preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While we believe that these preliminary estimates provide a reasonable basis for estimatingwhich was determined using the ~~fair value of~~income approach, is summarized in the ~~assets acquired and liabilities assumed, we will continue to evaluate available information prior to finalization of the amounts.~~

~~The~~ following ~~table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:~~table:

(in thousands)

Cash and cash equivalents

$
319

Inventories

18,403

Other current assets

14,855

Property, plant and equipment

25,721

Intangible assets

1,560,000

Right of use asset

882

Lease liability

(885
)
Deferred tax liabilities

(355,347
)
Other liabilities

(3,585
)
Total identifiable assets and liabilities acquired

1,260,363

Goodwill

1,978,149

Total purchase consideration

$
3,238,512


Cash and cash equivalents	$	319
Inventories		18,403
Other current assets		14,855
Property, plant and equipment		25,832
Intangible assets		1,559,805
Right of use asset		882
Lease liability		(885	)
Deferred tax liabilities		(352,636	)
Other liabilities		(2,832	)
Total identifiable assets and liabilities acquired		1,263,743
Goodwill		1,974,870
Total purchase consideration	$	3,238,613

The following table summarizes the intangible assets acquired and the useful life of these assets.


(in thousands)	Fair Value		Useful Life in Years
					Fair Value		Useful Life in Years
Trade Names and Trademarks	$	110,000		25	$	108,434		25
Developed Technology		280,000		15		277,650		15
Customer Relationships		1,170,000		20		1,173,721		20
Total intangible assets acquired	$	1,560,000			$	1,559,805

~~During the three and nine months ended February 28, 2023, transaction fees and integration expenses of $~~

~~2.8~~18

~~million and $55.6~~ ~~million, respectively, were expensed. In the three and nine months ended February 28, 2022, acquisition related costs of $10.6~~ ~~million and $19.9~~ ~~million were expensed, respectively. These costs are included in general and administrative expenses in the Company’s condensed consolidated statements of income (loss).~~

The operating results of the FSD have been included in the Company’s condensed consolidated statements of income (loss) since the acquisition date. In the third quarter of fiscal 2023, the FSD’s total revenue was $~~87.0~~ ~~million and operating income was approximately $3.3~~ ~~million. The operating income includes $2.8~~ ~~million of transaction fees and integration expenses, $20.3~~ ~~million of amortization expense for acquired intangible assets and a $614,000~~ ~~credit to cost of goods sold related to an adjustment to the step up to fair value on acquired inventory.~~

The following table presents pro forma information as if the merger with the 3M FSD business had occurred on June 1, ~~2021~~2022 and had been combined with the results reported in our condensed consolidated statements of ~~income (loss)~~operations for all periods presented:

Three Months Ended February 28,

Nine Months Ended
February 28,

(in thousands, unaudited)

2023

2022

2023

2022

Net sales

$
218,300

$
219,900

$
675,600

$
668,100

Operating Income (loss)

$
15,700

$
(17,000
)

$
(5,400
)

$
(10,900
)


	Three Months Ended February 29/28,				Nine Months Ended February 29/28,
	2024		2023		2024		2023
Net sales	$	228,812	$	218,255	$	687,428	$	678,149
Operating Income	$	12,023	$	15,684	$	45,623	$	19,121

The unaudited pro forma information is presented for informational purposes only and is not indicative of the results that would have been achieved if the merger had taken place at such time. The unaudited pro forma information presented above includes adjustments primarily for amortization charges for acquired intangible assets and certain acquisition-related expenses for legal and professional fees.

In connection with the acquisition of the 3M FSD, the Company and 3M entered into several transition service agreements, including manufacturing, distribution and certain back-office support, that have been accounted for separately from the acquisition of assets and assumption of liabilities in the business combination. 3M periodically remits amounts charged to customers on our behalf and charges us for the associated cost of goods sold and transition service fees. As of February ~~28,~~29, 2024 and May 31, 2023, a net receivable from 3M of $5,461 and $~~42.9~~12,365 ~~million~~, respectively, was included in prepaid expenses and other current assets in the Company’s condensed consolidated balance sheets.

2019

9. GOODWILL AND INTANGIBLE ASSETS

The following table summarizes goodwill by reportable segment:

(in thousands)

Food Safety

Animal Safety

Total

May 31, 2022

$
67,558

$
75,146

$
142,704

Acquisitions(1)

1,989,270

6,754

1,996,024

Impairment (2)

(1,300
)

—

(1,300
)
Foreign currency translation and other

(1,984
)

(326
)

(2,310
)
February 28, 2023

$
2,053,544

$
81,574

$
2,135,118


	Food Safety			Animal Safety			Total
May 31, 2023	$	2,056,161		$	81,335		$	2,137,496
Acquisitions (1)		250			—			250
Foreign currency translation and other		(1,309	)		(99	)		(1,408	)
February 29, 2024	$	2,055,102		$	81,236		$	2,136,338

(1)

~~Animal Safety acquisitions represents portion of~~Represents measurement period adjustments relating to our 3M ~~Food Safety transaction recorded at Neogen Australasia.~~FSD and Corvium acquisitions.

~~(2)~~

Impairment during the nine months ended February 28, 2023 relates to discontinued product lines. The amount was determined based on a relative fair value basis of the product lines compared to the overall reporting unit.

As of ~~February 28,~~May 31, 2023, non-amortizable intangible assets included licenses of $~~569,000~~569, trademarks of $~~12,459,000~~12,522 and other intangibles of $~~1,224,000. During the three and nine months ended February 28, 2023, the Company recorded an impairment of $1.0~~ ~~million to its non-amortizable trademarks related to discontinued product lines.~~

~~As of May 31, 2022, non-amortizable intangible assets included licenses of $569,000, trademarks of $13,604,000~~ ~~and other intangibles of $1,224,000~~1,224.

Amortizable intangible assets consisted of the following and are included in customer-based intangibles and other non-current assets within the condensed consolidated balance sheets:


(in thousands)	Gross Carrying Amount		Less Accumulated Amortization		Net Carrying Amount
Licenses	$	17,401	$	6,952	$	10,449
Covenants not to compete		782		716		66
Patents		8,670		5,045		3,625
Customer relationships		1,245,875		65,764		1,180,111
Trade names and trademarks		111,167		2,453		108,714
Developed technology		311,350		13,198		298,152
Other product and service-related intangibles		27,530		8,418		19,112
February 28, 2023	$	1,722,775	$	102,546	$	1,620,229
							Gross Carrying Amount		Less Accumulated Amortization		Net Carrying Amount
Licenses	$	17,109	$	5,682	$	11,427	$	20,624	$	8,147	$	12,477
Covenants not to compete		846		671		175		486		429		57
Patents		8,347		4,583		3,764		7,988		4,244		3,744
Customer relationships		75,000		33,662		41,338		1,245,545		125,123		1,120,422
Trade names and trademarks		1,180		167		1,013		122,974		9,060		113,914
Developed technology		17,741		6,124		11,617		307,511		35,994		271,517
Other product and service-related intangibles		27,299		4,527		22,772		23,907		6,294		17,613
May 31, 2022	$	147,522	$	55,416	$	92,106
February 29, 2024							$	1,729,035	$	189,291	$	1,539,744

Licenses							$	16,010	$	6,763	$	9,247
Covenants not to compete								488		384		104
Patents								8,499		4,865		3,634
Customer relationships								1,244,635		81,577		1,163,058
Trade names and trademarks								111,172		3,583		107,589
Developed technology								309,609		20,175		289,434
Other product and service-related intangibles								23,628		5,907		17,721
May 31, 2023							$	1,714,041	$	123,254	$	1,590,787

Amortization expense relating to definite-lived intangible assets was $~~22.9~~23,704 ~~million~~ and $~~2.6~~71,101 ~~million~~ during the three and nine months ended February ~~28, 2023 and 2022, respectively,~~29, 2024, respectively. Amortization expense relating to definite-lived intangible assets was $22,926 and $~~48.0~~47,995 ~~million and $7.3~~ ~~million~~ during the three and nine months ended February 28, 2023, ~~and 2022,~~ respectively.

~~The estimated~~Estimated amortization expense for ~~each of the five succeeding~~ fiscal years 2024 through 2028 is ~~as follows:~~expected to be in the range of approximately $~~23.1~~95,000 ~~million remaining in 2023,~~to $~~91.8~~97,000 ~~million in 2024, $~~per year.

~~91.3~~20

~~million in 2025, $91.2~~ ~~million in 2026 and $90.7~~ ~~million in 2027 and $1.23~~ ~~billion thereafter.~~

The amortizable intangible ~~assets~~assets' useful lives are 2 to 20 years for licenses, 3 to 10 years for covenants not to compete, 5 to 25 years for patents, 9 to 20 years for customer relationships, 105 to 25 years for trade names and trademarks, 10 to 20 years for developed technology and 5 to 15 years for other product and service-related intangibles. All definite-lived intangibles are amortized on a straight-line basis with the exception of definite-lived customer-based intangibles and product and service-related intangibles, which are amortized on either a straight-line or an accelerated basis.

~~The weighted average remaining amortization period for intangibles was~~ ~~18 years~~ ~~as of February 28, 2023 and~~ ~~eight years~~ ~~as of May 31, 2022.~~

10. ~~LONG TERM~~ DEBT

The Company’s ~~long-term~~ debt and finance lease consists of the following:


(in thousands)	February 28, 2023
				February 29, 2024			May 31, 2023
Term Loan	$	550,000		$	550,000		$	550,000
Senior Notes		350,000			350,000			350,000
Total long-term debt		900,000
Finance Lease					2,521			—
Total debt and finance lease					902,521			900,000
Less: Current portion					(2,521	)		—
Total non-current debt					900,000			900,000
Less: Unamortized debt issuance costs		(15,299	)		(12,347	)		(14,561	)
Total non-current debt, net	$	884,701		$	887,653		$	885,439

The Company had a financing agreement with a bank providing for a $~~15.0~~15,000 ~~million~~ unsecured revolving line of credit, which originally expired on November 30, 2023, but was replaced by the five-year senior secured revolving facility as part of the Credit Facilities described below. There were no advances against the line of credit ~~during fiscal 2022 and there were no advances~~ in fiscal 2023 before ~~the line of credit~~it was extinguished. Interest on any borrowings under that agreement was at LIBOR plus 100 basis points. Financial covenants included maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA, each of which the Company was in compliance with during the period the line of credit was available.

~~As of May 31, 2022, the Company had~~ no ~~outstanding debt. In connection with the acquisition of 3M’s Food Safety business as described more fully in Note 8, Neogen incurred financing through Garden SpinCo as follows:~~

Credit Facilities

OnIn June ~~30,~~ 2022, ~~Garden SpinCo~~Neogen Food Safety Corporation entered into a credit agreement consisting of a five-year senior secured term loan facility (“term loan facility”) in the amount of $~~650~~650,000 ~~million~~ and a five-year senior secured revolving facility (“revolving facility”) in the amount of $~~150~~150,000 ~~million~~ (collectively, the “Credit Facilities”) to fund the 3M Food Safety transaction. The term loan facility was drawn on August 31, 2022, to fund the closing of the 3M Food Safety transaction on September 1, 2022 while the revolving facility remained undrawn and continues to be undrawn as of February ~~28, 2023.~~29, 2024.

The Credit Facilities bear interest based on the term SOFR plus an applicable margin between a range of 150 to 225 basis points determined for each interest period and paid monthly. During the ~~three and~~ nine months ended February ~~28, 2023,~~29, 2024, the interest rates ranged from ~~6.48~~7.42% to ~~6.66~~7.68% per ~~annum and~~ ~~4.80% to~~ ~~6.66% per annum, respectively.~~annum. The term loan facility matures on June 30, 2027 and the revolving facility matures at the earlier of June 30, 2027 and the termination of the revolving commitments. In November 2022, the Company entered into an interest rate swap agreement, whereby interest on $~~250~~250,000 ~~million~~ of the total $~~550~~550,000 ~~million~~ principal balance is paid at a fixed rate. See Note ~~13.~~13, "Derivatives" for further detail on the swap agreement.

The term loan facility contains an optional prepayment feature at the discretion of the Company. The Company determined that the prepayment feature did not meet the definition of an embedded derivative and does not require bifurcation from the host liability and, accordingly, has accounted for the entire instrument at amortized cost. In accordance with the prepayment feature, the Company paid $60100,000 ~~million~~ of the term loan facility’s principal in ~~September 2022 and an additional $~~fiscal year 2023.

4021

~~million of the term loan facility's principal in December 2022, in order to decrease the outstanding debt balance.~~

The Company can draw any amount under the revolving facility up to the $~~150~~150,000 ~~million~~ limit, with the amount to be repaid on the termination date of the revolving commitments. Debt issuance costs of $~~2.4~~2,361 ~~million~~ were incurred related to the revolving facility. These costs are being amortized as interest expense in the condensed consolidated statements of ~~income (loss)~~operations over the contractual life of the revolving facility using the ~~straight line~~straight-line method. Amortization of the deferred debt issuance costs for the revolving facility was $~~122,000~~122 and $~~244,000~~366, respectively, during the three and nine months ended February ~~28, 2023, respectively. Debt~~29, 2024. Amortization of the deferred debt issuance costs offor the revolving facility was $~~489,000~~122 ~~were recorded in Prepaid expenses and other current assets~~ and $~~1.6~~244 ~~million were recorded in Other non-current assets on~~, respectively, for the ~~condensed consolidated balance sheet as of~~three and nine months ended February 28, 2023. As of February 29, 2024 and May 31, 2023 the Company had $1,629 and $1,995, respectively, of unamortized debt issuance costs.

The Company must pay an annual commitment fee ranging from 0.20% and 0.35% on the unused portion of the Revolving Credit Facility, paid quarterly. As of February ~~28, 2023,~~29, 2024, the commitment fee was 0.35% ~~and~~, with $~~131,000~~122 and $~~356,000~~366 ~~was~~, respectively, recorded as interest expense in the condensed consolidated statements of ~~income (loss)~~operations during the three and nine months ended February 29, 2024. During the three and nine months ended February 28, 2023, ~~respectively.~~$133 and $356, respectively, relating to the commitment fee was recorded as interest expense in the consolidated statements of operations.

There was no accrued interest payable on the term loan as of February ~~28, 2023.~~29, 2024. The Company incurred $~~10.2~~10,232 ~~million~~ in total debt issuance costs on the term loan which is recorded as an offset to the term loan facility and amortized over the contractual life of the loan to interest expense using the ~~straight line~~straight-line method. The amortization of deferred debt issuance costs of $~~529,000~~529 and $~~1.1~~1,588 ~~million~~ and interest expense of $~~9.1~~10,497 ~~million~~ and $~~17.4~~31,365 ~~million~~ (excluding swap credit of $~~136,000~~778 and $2,230) for the term loan was included in the condensed consolidated statements of ~~income (loss)~~operations during the three and nine months ended February 29, 2024, respectively. The amortization of deferred debt issuance costs of $529 and $1,058 and interest expense of $9,056 and $17,383 (excluding swap credit of $136) was included in the consolidated statements of operations during the three and nine months ended February 28, 2023, respectively. As of February 29, 2024 and May 31, 2023, the Company had $7,056 and $8,644, respectively, of unamortized debt issuance costs.

Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. As of February ~~28, 2023,~~29, 2024, the Company was in compliance with its debt covenants.

Senior Notes

OnIn July ~~20,~~ 2022, ~~Garden SpinCo~~Neogen Food Safety Corporation closed on an offering of $~~350~~350,000 ~~million~~ aggregate principal amount of 8.625% senior notes due in 2030 (the “Notes”) in a private placement at par. The Notes were initially issued by ~~Garden SpinCo~~Neogen Food Safety Corporation to 3M and were transferred and delivered by 3M to the selling securityholder in the offering, in satisfaction of certain of 3M’s existing debt. Upon closing of the 3M Food Safety transaction on September 1, 2022, the Notes became guaranteed on a senior unsecured basis by the Company and certain wholly-owned domestic subsidiaries of the Company.

The Company determined that the redemption features of the Notes did not meet the definition of a derivative and thus does not require bifurcation from the host liability and accordingly has accounted for the entire instrument at amortized cost.

Total accrued interest on the Notes was $~~3.4~~3,438 ~~million~~ as of February ~~28,~~29, 2024 and May 31, 2023 based on the stated interest rate of 8.625% and included in current liabilities on the condensed consolidated balance sheets. The Company incurred total debt issuance costs of $~~6.7~~6,683 ~~million~~, which isare recorded as an offset to the Notes and amortized over the contractual life of the Notes to interest expense using the ~~straight line~~straight-line method. During the three and nine months ended February 29, 2024, the Company recorded $7,756 and $23,267 of interest expense for the Notes in the condensed consolidated statements of operations, of which $209 and $627 related to the amortization of deferred debt issuance costs, respectively. During the three and nine months ended February 28, 2023, the Company recorded $~~7.8~~7,756 ~~million~~ and $~~19.1~~19,089 ~~million~~ of interest expense ~~for the Notes~~ in the ~~condensed~~ consolidated statements of ~~income (loss),~~operations, of which $~~209,000~~209 and $~~557,000~~557 related to the amortization of deferred debt issuance ~~costs, respectively.~~costs. As of February 29, 2024 and May 31, 2023 the Company had $5,291 and $5,917, respectively, of unamortized debt issuance costs.

Finance Lease

The finance lease is a building lease that is classified within property and equipment and the current portion of debt on the condensed consolidated balance sheets as of February 29, 2024. The Company intends to elect the purchase option within the lease agreement prior to the end of the lease term.

23Maturity of Term Loan and Senior Notes

There are no required principal payments through fiscal year 2026, due to $~~100~~100,000 ~~million~~ in prepayments made in fiscal 2023.~~The expected maturities associated with the Company’s outstanding debt as of February 28, 2023, were as follows:~~

(in thousands)

Amount

Fiscal Year

Remainder of 2023

$
—

2024

—

2025

—

2026

—

2027

34,063

Thereafter

865,937

Total

$
900,000

11. INCOME TAXES

The estimated annual effective tax rate ("EAETR") is derived from full-year pre-tax book earnings, statutory tax rates, and permanent differences between book and tax accounting across jurisdictions. For interim financial reporting, except in specified cases, the quarterly income tax provision aligns with the EAETR, updated each quarter based on revised full-year pre-tax book earnings. When projected full-year pre-tax book earnings are at or near breakeven, the EAETR may distort the interim income tax provision due to significant permanent differences. In such cases, the interim income tax provision is based on the year-to-date effective tax rate, adjusting for permanent differences proportionally.

In the three and nine months ending February 29, 2024, income taxes were calculated based on the year-to-date effective tax rate. In the three and nine months ending February 28, 2023, income taxes were calculated based on the EAETR.

Income tax benefit was $~~10.5~~3,800 ~~million~~and $3,900 during the three and nine months ended February ~~28, 2023, and income tax expense was $1.2~~ ~~million during the three months ended February 28, 2022.~~29, 2024. Income tax benefit was $~~1.3~~10,450 ~~million~~and $1,250 during the three and nine months ended February 28, ~~2023 and income tax expense was $8.0~~ ~~million during the nine months ended February 28, 2022. Income~~2023. The net tax benefit ~~in the third quarter of fiscal 2023~~for all comparison periods is primarily related to ~~a decrease in~~ pre-tax ~~income used~~losses due to ~~calculate the annualized effective tax rate. The net income tax benefit amount also includes approximately $1.1~~ ~~million of~~amortization expense ~~related to non-deductible transaction costs associated with~~and interest expense from the 3M ~~Food Safety~~FSD transaction.

The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of February ~~28, 2023~~29, 2024 and May 31, ~~2022~~2023 are $~~1.5~~1,949 ~~million~~ and $~~808,000~~1,087, respectively. ~~The increase~~Increases in unrecognized tax benefits isare primarily associated with the acquired 3M FSD, including positions for transfer pricing and research and development credits.

12. 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. ~~We expense these~~These annual remediation costs ~~which~~are expensed and have ranged from $~~38,000~~38 to $~~131,000~~131 per year over the past five years. The Company’s estimated remaining liability for these costs ~~are~~is $~~916,000~~916 as of both February ~~28, 2023~~29, 2024 and May 31, ~~2022,~~2023, measured on an undiscounted basis over an estimated period of 15 years. In fiscal 2019, the Company performed an updated Corrective Measures Study on the site, per a request from the Wisconsin Department of Natural Resources (WDNR) and is currently in discussion with the WDNR regarding potential alternative remediation strategies going forward. The Company believes that the current pump and treat strategy is appropriate for the site. However, the Company has undertaken a pilot study in which chemical reagents were injected into the ground in an attempt to reduce on-site contamination. At this time, the outcome of the pilot study is unknown, but a change in the current remediation strategy, depending on the alternative selected, could result in an increase in future costs and ultimately, an increase in the currently recorded liability, with an offsetting charge to operations in the period recorded. The Company has recorded $~~100,000~~100 as a current liability as of February ~~28, 2023,~~29, 2024, and the remaining $~~816,000~~816 is recorded in other non-current liabilities in the condensed consolidated balance sheets.

~~On March 6, 2020,~~In the third quarter of fiscal year 2024, the Company received ~~an administrative subpoena from~~$1,265 of business interruption insurance proceeds relating to fire damage that occurred in the ~~U.S. Treasury Department’s Office~~fourth quarter of ~~Foreign Assets Control (OFAC) regarding activities or transactions involving parties located~~fiscal year 2023 at one of our Animal Safety lab facilities. The proceeds were recorded within Cost of Revenues in ~~Iran. The Company subsequently conducted an internal investigation under~~ the ~~direction~~condensed consolidated statements of outside legal counsel and disclosed information concerning certain genomic testing services provided to an unrelated U.S.-based party engaged in veterinary activities involving an Iranian party. The Company continues to cooperate with OFAC’s investigation and is currently examining whether certain of these activities may be eligible for OFAC General Licenses authorizing agricultural and veterinary activities.operations.

In addition to responding to the administrative subpoena, the Company has implemented additional compliance measures to prevent inadvertent dealings with restricted countries or parties. These measures will further enhance the Company’s international trade compliance program, which is designed to assure that the Company does not conduct business directly or indirectly with any countries or parties subject to U.S. economic sanctions and export control laws. Although it is too early to predict what action, if any, that OFAC will take, the Company does not currently have any reason to believe that OFAC’s pending investigation will have a material impact on its operations, the results of operations for any future period, or its overall financial condition. In fiscal 2020, the Company took a charge to Other expense and recorded a reserve of $23~~600,000~~

~~to provide for potential fines or penalties on this matter. At this time, the Company believes that it is adequately reserved for this issue.~~

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.

13. DERIVATIVES

We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates and changes in interest rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions and have also entered into interest rate swap contracts as a hedge against changes in interest rates. Derivatives are recorded at fair value in other current assets, other assets, accrued liabilities and other long-term liabilities. Derivatives that are not determined to be effective hedges are adjusted to fair value with a corresponding adjustment to earnings. We do not use financial instruments for trading or speculative purposes.

Derivatives Not Designated as Hedging Instruments

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and have entered into a number of foreign currency forward contracts each month to mitigate that exposure. These contracts are recorded net at fair value on our condensed consolidated balance sheets, classified as Level 2 in the fair value hierarchy. Gains and losses from these contracts are recognized in other income in our condensed consolidated statements of ~~income (loss).~~operations. The notional amount of forward contracts in place was $~~18.5~~65,088 ~~million~~ and $~~4.4~~15,500 ~~million~~ as of February ~~28, 2023~~29, 2024 and May 31, ~~2022,~~2023, respectively, and consisted of hedges of transactions up to ~~April 2023.~~January 2024.


(in thousands)

Fair Value of Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	February 28, 2023		May 31, 2022			Balance Sheet Location	February 29, 2024			May 31, 2023
Foreign currency forward contracts, net	Other accruals	$	162	$	(78	)	Other (payable) receivable	$	(160	)	$	140

The location and amount of gains (losses) from derivatives not designated as hedging instruments in our condensed consolidated statements of ~~income (loss)~~operations were as follows:


		Three months ended							Three Months Ended
(in thousands) Derivatives Not Designated as Hedging Instruments	Location in statements of income (loss)	February 28, 2023			February 28, 2022
Derivatives Not Designated as Hedging Instruments								Location in statements of operations	February 29, 2024		February 28, 2023
Foreign currency forward contracts	Other (expense) income	$	(1,564	)	$	(363	)	Other income (expense)	$	150	$	(1,564	)


		Nine months ended						Nine Months Ended
(in thousands) Derivatives Not Designated as Hedging Instruments	Location in statements of income (loss)	February 28, 2023			February 28, 2022
Derivatives Not Designated as Hedging Instruments							Location in statements of operations	February 29, 2024			February 28, 2023
Foreign currency forward contracts	Other (expense) income	$	(9,812	)	$	648	Other expense	$	(391	)	$	(9,812	)

Derivatives Designated as Hedging Instruments

In November 2022, we entered into a receive-variable, pay-fixed interest rate swap agreement with an initial $~~250~~250,000 ~~million~~ notional value, which is designated as a cash flow hedge. This agreement fixed a portion of the variable interest due on our term loan facility, with an effective date of December 2, 2022 and a maturity date of June 30, 2027. Under the terms of the agreement, we pay a fixed interest rate of ~~6.215% (~~4.215% ~~rate and~~, plus an applicable margin ranging between ~~2.00~~150~~% margin)~~ to 225 basis points and receive a variable rate of interest based on term SOFR from the counterparty, which is reset according to the duration of the SOFR term. The fair value of the interest rate swap as of February ~~28,~~29, 2024 and May 31, 2023 was a net asset (liability) of $~~714,000~~928. and ($2,683), respectively. The Company expects to reclassify a $2,091 gain of accumulated other comprehensive income into earnings in the next 12 months.

We record the fair value of our interest rate swaps on a recurring basis using Level 2 observable market inputs for similar assets or liabilities in active markets.

(in thousands)
Fair Value of Derivatives Designated as Hedging Instruments

Balance Sheet Location

February 28, 2023

May 31, 2022

Interest rate swaps – current

Other current assets

$
2,689

$
-

Interest rate swaps – non-current

Other non-current liabilities

(1,975
)

-


Fair Value of Derivatives Designated as Hedging Instruments	Balance Sheet Location	February 29, 2024			May 31, 2023
Interest rate swap – current	Other current assets	$	2,091		$	2,087
Interest rate swap – non-current	Other non-current liabilities		(1,163	)		(4,770	)

The following table summarizes the other comprehensive income ~~(loss)~~ before reclassifications of ~~pre-tax~~ derivative gains and losses:


(in thousands)	Other Comprehensive Income Before Reclassifications During
									Other Comprehensive Income Before Reclassifications During
	Three months ended				Nine months ended				Three Months Ended				Nine Months Ended
Derivatives Designated as Hedging Instruments	February 28, 2023		February 28, 2022		February 28, 2023		February 28, 2022		February 29, 2024		February 28, 2023		February 29, 2024		February 28, 2023
Interest rate swaps	$	3,083	$	—	$	655	$	—	$	731	$	3,083	$	4,439	$	655

The following table summarizes the reclassification of ~~pre-tax~~ derivative gains and losses into net (loss) income from accumulated other comprehensive income (loss):


(in thousands)		Gain (Loss) Reclassified During
											Gain Reclassified During
		Three months ended				Nine months ended					Three Months Ended				Nine Months Ended
Derivatives Designated as Hedging Instruments	Location of Gain (Loss) Reclassified	February 28, 2023		February 28, 2022		February 28, 2023		February 28, 2022		Location of Gain Reclassified	February 29, 2024		February 28, 2023		February 29, 2024		February 28, 2023
Interest rate swaps	Interest expense	$	105	$	—	$	105	$	—	Interest expense	$	592	$	105	$	1,695	$	105

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

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

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.~~10-Q, including statements relating to management’s expectations regarding new product introductions; the adequacy of our sources for certain components, raw materials and finished products; and our ability to utilize certain inventory. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be 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. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. There are a number of important factors, ~~including competition, recruitment~~ including circumstances beyond our control at our transition manufacturing partner, competition, recruitment, retention, ~~and~~ dependence on key employees, impact of weather on agriculture and food production, ~~effects of the ongoing COVID-19 pandemic on our business,~~ global business disruption caused by the Russia invasion in Ukraine and related sanctions and the conflict between Israel and Hamas, identification and integration of acquisitions, research and development risks, ~~patent and trade secret~~intellectual property 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.

~~During fiscal 2022~~In prior years, production was negatively impacted by broad supply chain challenges, labor market disruptions and ~~throughout~~other related impacts of the ~~nine months ended February 28, 2023, we experienced higher than normal~~COVID-19 pandemic. Additionally, input cost inflation, including increases in ~~transportation, supply chain and labor costs, that have~~certain raw materials, negatively impacted operating results. ~~International freight costs, particularly for containers originating in Asia with an ultimate destination in the United States, have eased during~~In fiscal 2023, these negative impacts steadily improved throughout the fiscal year. In fiscal 2024, despite a slowing of inflation rates, there remains economic headwinds of softening consumer demand and higher interest rates, coupled with ongoing geopolitical tension in ~~some instances returning~~certain regions.

Interest rates have risen sharply, particularly in fiscal 2023, as a way to ~~pre-pandemic levels. Pricing~~combat inflation. This, subsequently, increased our borrowing costs and raised the overall cost of capital. While the frequent increases have largely subsided, the overall rate is significantly higher than in recent years, which increases interest expense on the unhedged portion of our Term Loan. In response to the historically high inflationary environment, we have taken pricing actions ~~taken during fiscal 2022 and~~to mitigate the ~~nine months ended February 28, 2023 mitigated some, but not all~~impacts on the business. We anticipate that the impact of ~~the inflationary pressures. Ongoing inflation may also have an impact on our customer’s purchasing decisions and order patterns. We estimate~~ inflation will continue to affect us infor the remainder of fiscal ~~2023,~~year 2024, although at a continually decreasing rate compared to the prior two fiscal years. Beginning in the second quarter of the fiscal year, we implemented a new enterprise resource planning system and began the exit of our transition distribution agreements, which led to certain shipment delays and an elevated backlog of open orders, specifically in the Food Safety segment. Through our continued integration process, we expect our order fulfillment rates to improve to meet the needs of our customers in this ~~time, it is impracticable to quantify the impact.~~improving end-market environment.

Although we have no operations in or direct exposure to Russia, Belarus and Ukraine, we have experienced intermittent shortages in materials and increased costs for transportation, energy and raw materials due, in part, to the negative impact of the Russia-Ukraine military conflict, which began in February 2022, on the global economy. Our European operations and customer base have been ~~adversely~~negatively impacted by the conflict. ~~However, as~~Similarly, the military conflict ~~continues~~between Israel and Hamas has increased overall geopolitical tensions. As the respective conflicts continue or ~~worsens, it~~worsen, they may further impact our business, financial condition or results of operations ~~during~~throughout the remainder of fiscal ~~2023.~~year 2024.

As we continue to monitor the ongoing COVID-19 pandemic, our top priority remains protecting the health and safety of our employees, their families and those in our communities. Safety guidelines and procedures are in place for on-site employees and these policies are regularly monitored and updated by our internal Emergency Response Team.

COVID-19 continues to impact our business operations and financial results. A number of our product lines have been negatively impacted due to decreased demand in our customers’ businesses around the world. Many of our markets have recovered or are recovering, but the pandemic has continued to adversely impact our customers and ultimately, our revenues. We have also experienced supply chain difficulties directly related to COVID, including vendor disruptions, border closures, shipping issues and significantly increased shipping costs, labor shortages and higher labor costs, as we have had to use staffing agencies and increase our base pay in a number of areas of the Company to fill open positions and to cover for COVID-related absences.

~~Overall, the impact of COVID-19 remains uncertain and ultimately depends on the continued duration and severity of the pandemic.~~ We continue to evaluate the nature and extent to which ~~COVID-19 has impacted~~these issues impact our business, including ~~supply chain, labor availability and attrition,~~ consolidated results of operations, financial condition and liquidity. We expect itthese issues to continue to impact us ~~through at least~~for the ~~end~~remainder of ~~our~~ fiscal year ~~ending May 31, 2023.~~2024 and into fiscal year 2025.

International sales increased 113% and 77% during the three and nine months ended February 28, 2023 compared to the same respective periods in the prior year. Revenues from FSD drove the international sales increase. During the three and nine months ended February 28, 2023, 69% and 67% of FSD revenues, respectively, were international sales, compared to Neogen’s historical average of 40%.

International core growth, which excludes revenues from FSD, Delf, Genetic Veterinary Sciences and Thai-Neo, and considers a neutral currency impact, was 9% and 7% during the three and nine months ended February 28, 2023, respectively. The negative impact of currency, primarily from the stronger U.S. dollar against the pound, Chinese yuan and Australian dollar for each comparative period, was $2.4 million in the third quarter and $11.2 million year to date.Service Revenue changes, expressed in percentages, during the three and nine months ended February 28, 2023 compared to the same period in the prior year are as follows for the legacy business at each of our international locations:

In local currency, combined revenues at our U.K. operations increased 7% and 12% during the three and nine months ended February 28, 2023, respectively, compared to the same periods in the prior year. Excluding the December 2021 acquisition of Delf (UK), sales at our U.K. operations in local currency increased 7% during the nine months ended February 28, 2023. In local currency, sales of food quality products at Megazyme, located in Ireland, were flat for the three months ended February 28, 2023 and increased 3% during the nine months ended February 28, 2023.

Brazil revenues increased 7% and 13% in local currency during the three and nine months ended February 28, 2023, respectively. These increases were driven by strong sales of the company’s natural toxin test kits, including tests to detect aflatoxin in corn, as well as increases in veterinary instruments, insect and rodent controls products, and genomics testing.

In local currency, Neogen Latinoamerica revenues were flat for the three months ended February 28, 2023 and increased 6% for the nine months ended February 28, 2023. Increases in the company’s diagnostic testing portfolio and culture media, were offset by lower cleaner and disinfectant sales, due to order timing from a large distributor.

Neogen China revenues decreased 23% and 13% in local currency during the three and nine months ended February 28, 2023, respectively. The first and second quarters in fiscal 2023 were negatively impacted by COVID-19 lockdowns. As the Chinese government lifted COVID restrictions early in our third fiscal quarter, business was adversely impacted by staffing shortages throughout the country as a high percentage of individuals contracted COVID.

~~Revenues at Neogen’s Australasia operations increased 17% and 7% during the three and nine months ended February 28, 2023, respectively, led by increased sales of bovine genomic services.~~

Service revenue, which includes genomics testing and other laboratory services, was ~~$27.6~~$26.6 million inand $77.0 million, respectively, during the ~~third quarter of fiscal 2023, an increase of 3% over the prior year third quarter revenues of $26.7 million.~~

~~During the~~three and nine months ended February ~~28, 2023, service~~29, 2024. Service revenue was $27.6 million and $79.8 million, an increase of 6% over prior year revenues of $75.4 million. The increase was primarily driven by growth in the beef markets in the U.S. and Brazil for genomics testing our and strong sales of Neogen Analytics software as a service (SaaS) product. These were partially offset by ongoing COVID-related shutdowns in China, lower genomics sales to the porcine market, as a significant customer shifted to a lower-cost competitor, and a difficult comparison due to a large domestic research project recorded in the prior year which did not repeat.

3M’s former Food Safety business (“FSD”), which combined with Neogen on September 1, 2022, consists of five major product lines: indicator organisms (Petrifilm), general sanitation, sample handling, pathogen detection test kits and allergen test kits. All of the global FSD business is reported in Neogen’s Food Safety segment.

~~Natural Toxins, Allergens & Drug Residues –~~ ~~Sales in this category increased 7% and 3%~~respectively, during the three and nine months ended February 28, ~~2023, respectively,~~2023. The decrease in the third quarter was primarily driven by customer attrition in the poultry market, partially offset by strength in genomics testing in the U.K. and China, and new business gained with our Neogen Analytics software as a service.

International sales were $104.6 million and $338.6 million during the three and nine months ended February 29, 2024, compared to $108.3 million and $275.7 million during the three and nine months ended February 28, 2023. The increase during the nine months ended February 29, 2024 was primarily due to $63.8 million in international sales related to the 3M FSD transaction during the first quarter of fiscal 2024. The decrease in sales in the third quarter as compared to the same ~~periods~~period in the prior year was primarily due to lower sales of food safety products in Asia and Latin America due largely to product availability challenges.

Natural Toxins & Allergens – Revenuesin this category increased 3% during the three months ended February 29, 2024 compared to the same period in the prior year. Excluding ~~sales~~

~~of the acquired allergen product line from 3M, sales in this category decreased 3% in both the third quarter~~currency impact and ~~year to date, primarily due to a significant decline in~~ sales of drug residue test kits ~~to international dairy markets as~~that were largely discontinued in fiscal 2023, core revenue in this ~~product line was discontinued. Sales~~category increased 5% primarily driven by sales of natural toxin detection kits increased 10% during the quarter and increased 6% year to date. The increases for both periods were due to strength in aflatoxin test kits resulting from outbreaks in international grain harvests. Sales of our legacytree nut allergen test kits, ~~declined~~as prior quarter domestic backlog was fulfilled, partially offset by lower natural toxin volumes due to shipping constraints. During the nine months ended February 29, 2024, revenues in ~~both~~this category

increased 3% compared to the ~~third quarter and year to date periods, caused by softening market conditions and supply disruptions for certain manufactured products.~~same period in the prior year. On a core growth basis, revenues increased 2% in the year-to-date period.

Bacterial & General Sanitation – Revenues in this category increased ~~249%~~2% and ~~163%~~41% during the three and nine months ended February ~~28, 2023,~~29, 2024, respectively, compared to the same periods in the prior year. ~~Excluding the contribution of the Cleantrace line of general sanitation products~~On a core growth basis, revenues increased 3% and the pathogen test kit product line, both acquired from 3M, organic sales in this category increased 1% in the third quarter and decreased 1% in the year to date periods. In the third quarter, a strong increase in sales of our Soleris line of spoilage detection products was partially offset by a decrease in sales of our AccuPoint line of general sanitation products, primarily caused by supply disruptions.

~~Culture Media & Other –~~ ~~Sales in this category increased 330% and 219%~~5%, during the three and nine months ended February ~~28, 2023,~~29, 2024, respectively. The increase during both periods was driven primarily by strength in our general sanitation product lines and strong placements of Soleris® microbiological diagnostic equipment.

Indicator Testing, Culture Media & Other – Revenues in this category increased 4% and 38% during the three and nine months ended February 29, 2024, respectively, compared to the same periods in the prior year. ~~Excluding sales of~~Core growth was 7% during the ~~Petrifilm indicator organism and sample handling product lines acquired from 3M, sales rose 14% in the third~~ quarter and ~~increased 7% year to date.~~2% during the year-to-date period. The increase in the third quarter was ~~primarily~~due to higher volumes of indicators, partially offset by lower sales of culture media due to a large non-recurring sale of custom product in the prior year. For the nine months, higher volumes of indicators were partially offset by the non-recurring culture ~~media. Additionally,~~media sale and a first-quarter decline in sales of ~~our Neogen Analytics software as a service platform increased significantly, with approximately 200 sites now on contract. Decreased sales of~~Megazyme food quality ~~test kits that were negatively impacted by lower volumes~~ and ~~currency partially offset the growth in this category.~~nutritional analysis products, due to distributor ordering patterns.

Rodent Control, Insect Control & Disinfectants – Revenues in this category ~~were flat for~~increased 6% and 9% during the three ~~months ended February 28, 2023~~ and ~~increased 16% during the~~ nine months ended February ~~28, 2023~~29, 2024, respectively, compared to the same periods in the prior year. ~~The increase for~~During the ~~year to date~~quarter, core growth was ~~due to~~2%, driven by a large tender sale of insect control ~~order to~~products in Brazil, as well as higher cleaner and disinfectant sales in China. On a ~~government agency~~year-to-date basis, core revenue increased 4%, driven primarily by insect control product sales in Brazil and ~~ongoing strength in~~strong cleaner and disinfectant ~~revenues~~sales in ~~China.~~Europe in the first half of the fiscal year.

Genomics Services – ~~Sales~~ Revenuesof genomics services sold through our international Food Safety operations ~~decreased 7%~~increased 17% and 4%11% during the three and nine months ended February ~~28, 2023,~~29, 2024, respectively, compared to the same periods in the prior year. ~~For each comparative period, unfavorable currency comparisons~~Core growth in this category was 17% in the ~~U.K.~~third quarter, driven by increased sales in Europe and ~~COVID-related lab closures in China offset increased beef genomics testing~~new business in ~~Brazil.~~China. On a year-to-date basis, core growth was 9% for the same reasons.

Life Sciences – ~~Sales~~Revenues in this category decreased 5% and increased ~~8% and 11%~~6% during the three and nine months ended February ~~28, 2023,~~29, 2024, respectively, compared to the same periods in the prior ~~year. The increase~~year; core revenue was the same for both ~~comparative periods~~periods. During the quarter, lower sample volumes from forensic customers contributed to the decrease, while, for the year-to-date period, the increase was ~~due to higher demand from customers purchasing substrates and reagents used in clinical diagnostic test kits, and~~primarily driven by increased demand for substrates from ~~forensic toxicology lab customers due to their higher testing volumes.~~manufacturers of diagnostic tests.

Veterinary Instruments & Disposables – Revenues in this category ~~decreased 9%~~increased 17% and 3% during the three and nine months ended February ~~28, 2023,~~29, 2024 compared to the same periods in the prior year; core revenue increases were the same for both periods. The increase in the third quarter was driven by higher sales of detectable needles and syringes to our large veterinary distributors. For the year-to-date period, third quarter revenue increases were partially offset by inventory de-stocking with the same distributors in the first and second quarters.

Animal Care & Other – Revenues of these products increased 15% and decreased 9% the three and nine months ended February 29, 2024, respectively, compared to the same periods in the prior year. ~~In the third quarter of the prior fiscal year, sales~~Core growth in this category, ~~rose 38% due to new business earned with a large retail customer. Year to date, veterinary instrument sales were down slightly, due to a difficult prior year comparison.~~

~~Animal Care & Other –~~ ~~Sales of these products~~which excludes currency impact and the discontinued Thyrokare product line, increased 17% and decreased 8%7% during the three ~~months ended February 28, 2023~~ and ~~increased 1% during the~~ nine months ended February ~~28, 2023 compared to~~29, 2024, respectively. The increase within the ~~same periods in~~quarter was primarily driven by relief of vitamin injectable backorders as well as distributor sales recovery. The decrease during the ~~prior year. Within this category, sales of animal care products declined 8% in the third quarter, as~~year-to-date period was driven by lower sales of ~~antibiotics and vitamin injectables were only partially offset by increases in~~ small animal supplements and wound care ~~products.~~products caused primarily by distributor ordering patterns.

Rodent Control, Insect Control & Disinfectants – Revenues increased ~~10%~~14% and ~~7% for~~4% during the three and nine months ended February ~~28, 2023,~~29, 2024, respectively, compared to the same periods in the prior year; core revenue increases were the same for both periods. The revenue increase for the quarter was driven by success of marketing programs within insect control products and higher sales of domestic cleaners and disinfectants to combat avian influenza.

Genomics Services – Revenues in this category decreased 11% and 10% during the three and nine months ended February 29, 2024, respectively, compared to the same periods in the prior year. InCore growth declined 10% during the ~~third~~ quarter ~~sales of insecticides increased 37%,~~and 9% for the year-to-date. Core revenue in both periods was negatively impacted by customer attrition associated with ~~new business earned~~a strategic shift in the ~~animal protein market. Rodenticide sales increased 4% and cleaner and disinfectant sales declined 3%. Year~~business to ~~date, increases in cleaners and disinfectants and insect control product lines were partially offset by a 2% decline in sales of rodent control products in the first half of fiscal 2023.~~focus primarily on large production animals.

~~Sales in this category increased 8%~~Gross margin was 51.1% and 9%51.0% during the three and nine months ended February 29, 2024, respectively, compared to 49.5% and 48.7% during the three and nine months ended February 28, 2023, respectively, compared to the same periods in the prior year. For both comparative periods, testing increases in the beef market were partially offset by lower sample volumes from a large customer in the porcine market and unfavorable currency comparisons in Australia.

~~Gross margin, expressed as a percentage of sales, was 49.5%~~respectively. The increase in the third quarter ~~of fiscal 2023 compared to 44.8% in the prior year comparable period. The increase~~ was primarily due to increased sales of higher-margin products in our Food Safety segment. The increase in the year-to-date period was primarily due to incremental revenues from the FSD ~~merger,~~transaction, which generated gross margin higher than the legacy company average ~~margin. The legacy Neogen Food Safety business recorded a~~ gross margin improvement of 20 basis points compared to the same quarter a year ago, while Animal Safety gross margins increased 220 basis points. These increases were driven primarily by pricing actions executed within the past 12 months.margin. Within each reporting segment, increased raw material costs ~~continued~~continue to pressure gross margins in certain product lines. However, while inflation continues to impact the business, the rate of raw material price and freight costs changes have significantly declined ~~significantly during~~throughout both the comparative period particularly benefitting the Animal Safety segment, although they remained higher in some areas than pre-pandemic levels. Year to date, gross margin was 48.7% compared to 46.0% in thecurrent and prior year ~~driven primarily by higher gross margins from the acquired FSD product lines, and~~comparative periods. Finally, pricing actions ~~executed in~~taken during these periods also mitigated the ~~prior 12 to 18 months in the legacy Neogen Food and Animal Safety product lines.~~impact of cost increases.

Operating expenses were ~~$92.3~~$104.9 million inand $304.8 million during the ~~third quarter of fiscal 2023, compared to $51.0 million in the same quarter of the prior year. During the~~three and nine months ended February ~~28, 2023, operating expenses were~~29, 2024, respectively, compared to $92.3 million and $268.7 million ~~compared to $137.4 million in~~for the same ~~period~~periods in the prior year. ~~For each comparative period,~~The increase during the ~~increase~~three and nine months ended February 29, 2024 was primarily the result of ~~legal, consulting~~costs added to accommodate the increased size and ~~other expenses related to~~complexity of the Company following the FSD transaction, ~~and ongoing expenses resulting from the conveying employees and the amortization of intangible assets acquired~~which were not in the ~~transaction.~~prior year comparable period.

Sales and marketing expenses were $47.9 million and $138.5 million during the three and nine months ended February 29, 2024, respectively, compared to $38.6 million inand $98.3 million during the ~~third quarter of fiscal~~three and nine months ended February 28, 2023, ~~compared to $21.5 million in the same quarter of the prior year.~~respectively. The increase ~~in expense~~ was ~~due~~ primarily ~~to $14.8 million in~~driven by incremental costs ~~incurred for~~resulting from the FSD ~~business, primarily consisting of~~transaction, including compensation and related expenses for ~~conveying FSD~~the acquired sales and marketing ~~team,~~teams and ~~the charges for transition services provided by~~higher costs related to inefficiencies as we took over distribution from 3M. These invoicing and distribution services will be provided under contract for a period of up to 18 months, concluding on March 1, 2024. The remainder of the increase during the quarter was due primarily to higher personnel related spending in the legacy business, the result of headcount additions and compensation increases. In addition, travel, trade shows and other customer facing activities have continued to increase with the easing of COVID-19 restrictions and greater willingness by customers to interact. Year to date, sales and marketing expenses were $98.3 million, compared to $63.2 million in the same period in the prior year. The increase was driven by $27.7 million in absorbed expenses from personnel conveying in the FSD transaction, higher personnel related expenses in the legacy business, and increased travel, trade shows and other customer facing activities.

General and administrative expenses were $52.1 million and $148.9 million during the three and nine months ended February 29, 2024, respectively, compared to $46.4 million inand $151.4 million during the ~~third quarter of fiscal~~three and nine months ended February 28, 2023, ~~compared to $25.0 million in~~respectively. Increases during the same quarter of the prior year. The current quarter included $2.3 million of goodwill and intangible asset impairment related to certain discontinued product lines and $20.3 million in amortization for intangible assets acquired in our combination with the 3M FSD, which closed on September 1, 2022. Remaining increases for the quarterthree months ended February 29, 2024 were primarily the result of additional personnel hired to accommodate the increased size and complexity of the organization, compensation increases, ~~across the organization,~~ the issuance of ~~share based~~share-based compensation grants, software license fees and other information technology infrastructure investments. These increases were partially offset by a $9.6 million decrease in legal, professional, and consulting fees. Year to date, general and administrative expenses were $151.4 million in fiscal 2023, compared to $61.0 million inThe year-to-date decline was primarily the ~~comparable prior period. Fiscal year 2023 included $55.8 million in~~result of lower transaction fees and integration expenses ~~resulting from~~compared to the ~~combination with~~prior year comparable period. These decreases were partially offset by the ~~3M FSD and other acquisitions and $40.6 million in amortization of intangibles acquired in the FSD merger. For the comparative period in fiscal year 2022, transaction~~additional costs ~~were $19.9 million.~~previously identified.

Research and development expense was $4.9 million and $17.3 million during the three and nine months ended February 29, 2024, respectively, compared to $7.3 million ~~in the third quarter of fiscal 2023, compared to $4.6~~and $19.0 million in the same ~~quarter~~periods of the prior year. The ~~increase was~~decrease during the three and nine months ended February 29, 2024 is primarily the result of ~~$3.2 million of cost associated with~~lower contracted services and employee costs, as we continue to integrate the ~~conveying~~ FSD ~~employees. Year to date, research~~business and ~~development expenses were $19.0 million, compared to $13.2 million~~realize synergies in the same period in the prior year. The year to date increase is primarily driven by $5.2 million of expense for conveying FSD personnel and testing and validation costs for new commercial products in the Animal Safety segment.certain areas.

Operating income was ~~$15.7~~$12.0 million inand $45.6 million during the ~~third quarter of fiscal 2023,~~three and nine months ended February 29, 2024 respectively, compared to an operating income of ~~$6.4~~$15.7 million inand $14.1 million during the ~~prior year comparable period. Year to date,~~three and nine months

ended February 28, 2023, respectively. Decreases in operating income ~~was $14.1 million compared to operating income of $40.6 million in the prior year. Expressed as a percentage of sales, operating income was 7.2%~~ during the third quarter and 2.4% year to date, compared to operating income of 5.0% and 10.5%, respectively, for the same periods in the prior year. Year to date operating income, both in dollars and expressed as a percentage of sales, declinedthree months ended February 29, 2024 compared to the prior year ~~comparative period~~quarter reflect increased operating expenses to accommodate the increased size and complexity of the Company. Operating income increased during the nine months ended February 29, 2024 compared to the prior year primarily due to ~~transaction costs resulting~~incremental revenues and higher gross profits from the FSD ~~merger, amortization~~transaction. The prior year also included transaction and integration costs of $55.8 million during the ~~intangible assets acquired, and impairment costs related~~nine months ended February 28, 2023 compared to ~~discontinued product lines.~~$12.1 million during the nine months ended February 29, 2024.

~~The net interest~~Interest expense recorded during the three and nine months ended February ~~28, 2023~~29, 2024 was the result of debt incurred to fund the 3M ~~FSD~~ transaction. In the first quarter of fiscal ~~2022,~~2023, the Company had no debt ~~outstanding, and interest~~outstanding. Interest income relates to earnings on our marketable securities and money market account portfolio. Higher balances in money market portfolios with higher yields ondrove the ~~portfolio were partially offset by lower balances.~~increase in interest income for the three and nine months ended February 29, 2024. Other ~~expense~~(expense) income resulting from foreign currency transactions was the result of changes in the value of foreign currencies relative to the U.S. dollar in countries in which we operate. ~~The increase in expense~~

Income tax benefit was $3.8 million and $3.9 million during the three and nine months ended February 29, 2024, respectively, compared to $10.5 million and $1.3 million during the three and nine months ended February 28, 2023, ~~was~~respectively. The net tax benefit for all comparison periods is primarily related to pre-tax losses due to ~~U.S. dollar denominated intercompany loans incurred in our international subsidiaries as the result of~~amortization expense and interest expense from the FSD ~~transaction on September 1, 2022. Due to our acquisition of Corvium, Inc., we recorded a loss of $1.5 million in the third quarter on dissolution of our minority interest in that company.~~

Income tax benefit in the third quarter of fiscal 2023 was $10.5 million, compared to $1.2 million of income tax expense in the prior year comparable period. Year to date, income tax benefit was $1.3 million, compared to $8.0 million of income tax expense in fiscal 2022. Income tax benefit in the third quarter of fiscal 2023 includes approximately $1.1 million of expense related to non-deductible transaction costs associated with the 3M FSD transaction.

The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of February ~~28, 2023~~29, 2024 and May 31, ~~2022~~2023 are ~~$1.5~~$1.9 million and ~~$808,000,~~$1.1 million, respectively. ~~The increase~~Increases in unrecognized tax benefits isare primarily associated with the ~~combined 3M~~ FSD transaction, including positions for transfer pricing and research and development credits.

~~Net income~~loss was ~~$8.2~~$2.0 million inand $4.0 million during the ~~third quarter of fiscal 2023,~~three and nine months ended February 29, 2024, respectively, compared to net income of ~~$5.4~~$8.2 million ~~in the same period in the prior year. The increase in earnings~~and net loss of $28.4 million during the ~~quarter~~three and nine months ended February 28, 2023, respectively. The net loss during the three months ended February 29, 2024 compared to net income during the three months ended February 28, 2023 reflects additional expenses to accommodate the integration of the FSD business. The decrease in net loss during the nine months ended February 29, 2024 was primarily the result of ~~incremental revenues from the FSD merger, which generated margins~~ higher than the legacy company average margin. This increase was partially offset by $1.3 million of goodwill impairment related to discontinued product lines, $17.5 million of interest expense from the $1 billion in debt incurredtransaction fees and integration costs in the ~~merger, and $20.3~~prior year, which were $55.8 million ~~in incremental amortization expenses associated with the intangible assets acquired in the merger. During~~during the nine months ended February 28, 2023, the Company incurred a net loss of $28.4 million, compared to net income of $33.3 million in the prior year. The decline in earnings during the year was primarily the result of $1.3 million of goodwill impairment related to discontinued product lines, $38.0 million of interest expense from the $1 billion in debt incurred in the merger, $55.8 million of transaction fees and integration expenses, and $40.6 million in incremental amortization expenses.2023.

This report includes certain financial information for the Company that differs from what is reported in accordance with GAAP. These non-GAAP financial measures consist of core revenue growth, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Earnings per Share. These non-GAAP financial measures are included in this report because management believes that they provide investors with additional useful information to measure the performance of the Company, and because these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties as common performance measures to compare results or estimate valuations across companies in industries the Company operates in.

We define core revenue growth as net sales for the period excluding the impacts of foreign currency translation rates, ~~and~~ the ~~first year~~first-year impacts of acquisitions and divestitures, where ~~applicable.~~applicable, and net sales from discontinued product lines. We present core revenue growth because it allows for a meaningful comparison of results across periods without the volatility caused by foreign currency gains or losses, or the incomparability that would be caused by the impact of an acquisition or divestiture.

We define EBITDA as net income before interest, income taxes, and depreciation and amortization. We present EBITDA as a performance measure because it may allow for a comparison of results across periods and results across companies in the industries in which Neogen operates on a consistent basis, by removing the effects on operating performance of (a) capital structure (such as the varying levels of interest expense and interest income), (b) asset base and capital investment cycle (such as depreciation and amortization) and (c) items largely outside the control of management (such as income taxes). EBITDA also forms the basis for the measurement of Adjusted EBITDA (discussed below).

We define Adjusted EBITDA as EBITDA, adjusted for share-based compensation and certain transaction fees and expenses. We present Adjusted EBITDA because it provides an understanding of underlying business performance by excluding the following:

We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of total revenues. We present Adjusted EBITDA margin as a performance measure to analyze the level of Adjusted EBITDA generated from total revenue.

We define Adjusted Net Income as Net Income, adjusted for share-based compensation, FX translation gain/(loss) on loan revaluation, certain transaction fees and expenses, and other one-time adjustments, all of which are tax effected.

We define Adjusted Earnings per Share as Adjusted Net Income divided by diluted average shares outstanding.

These non-GAAP financial measures are presented for informational purposes only. Core Revenue Growth, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Earnings per Share are not recognized terms under GAAP and should not be considered in isolation or as a substitute for, or superior to, net income (loss), operating income, cash flow from operating activities or other measures of financial performance. This information does not purport to represent the results Neogen would have achieved had any of the transactions for which an adjustment is made occurred at the beginning of the periods presented or as of the dates indicated. This information is inherently subject to risks and uncertainties. It may not give an accurate or complete picture of Neogen’s financial condition or results of operations for the periods presented and should not be relied upon when making an investment decision.

The use of the terms EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Earnings per Share may not be comparable to similarly titled measures used by other companies or persons due to potential differences in the method of calculation.

These non-GAAP financial measures have limitations as analytical tools. For example, for EBITDA-based metrics:

A reader should compensate for these limitations by relying primarily on the financial statements of Neogen and using these non-GAAP financial measures only as a supplement to evaluate Neogen’s performance.

For each of these non-GAAP financial measures below, we are providing a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure.

Reconciliation between net (loss) income and EBITDA and Adjusted EBITDA and between net (loss) income margin % and Adjusted EBITDA margin % are as follows:


	Three Months Ended February 28,						Nine Months Ended February 28,						Three Months Ended February 29/28,						Nine Months Ended February 29/28,
(dollars in thousands)	2023			2022			2023			2022
Net Income (Loss)	$	8,190		$	5,443		$	(28,442	)	$	33,348
Net income margin %		3.8	%		4.2	%		-4.9	%		8.6	%
Provision for income taxes		(10,450	)		1,200			(1,250	)		7,950
(in thousands, except for percentages)													2024			2023			2024			2023
Net (loss) income													$	(2,022	)	$	8,190		$	(4,006	)	$	(28,442	)
Net (loss) income margin %														-0.9	%		3.8	%		-0.6	%		-4.9	%
Income tax benefit														(3,800	)		(10,450	)		(3,900	)		(1,250	)
Depreciation and amortization		27,471			6,322			59,938			17,833			29,650			27,471			87,853			59,938
Interest expense (income), net		16,820			(314	)		35,844			(741	)
Interest expense, net														16,673			16,820			49,508			35,844
EBITDA	$	42,031		$	12,651		$	66,090		$	58,390		$	40,501		$	42,031		$	129,455		$	66,090
Share-based compensation		2,812			1,607			7,311			5,045			3,679			2,812			9,829			7,311
FX transaction loss (gain) on loan revaluation(1)		(697	)		—			5,092			—
FX transaction loss (gain) on loan and other revaluation (1)														638			(697	)		1,350			5,092
Certain transaction fees and integration costs		2,890			10,595			55,754			19,908			5,451			2,890			12,090			55,754
Restructuring (2)														938			—			3,353			—
Contingent consideration adjustments		(300	)		—			(300	)		—			(200	)		(300	)		250			(300	)
Loss on sale of minority interest		1,516			—			1,516			—
Impairment and scrap of discontinued product lines(2)		3,633			—			3,633			—
ERP expense (3)														1,701			—			3,904			—
Discontinued product line expense														33			3,633			53			3,633
Loss (recovery) on sale of minority interest														—			1,516			(74	)		1,516
Inventory step-up charge		(614	)		—			3,245			—			—			(614	)		—			3,245
Adjusted EBITDA	$	51,271		$	24,853		$	142,341		$	83,343		$	52,741		$	51,271		$	160,210		$	142,341
Adjusted EBITDA margin %		23.5	%		19.4	%		24.5	%		21.5	%		23.0	%		23.5	%		23.3	%		24.5	%

Adjusted EBITDA increased ~~$26.4~~$1.5 million during the three months ended February 29, 2024 and ~~$59.0~~increased $17.9 million during the nine months ended February 29, 2024. Expressed as a percentage of revenue, adjusted EBITDA was 23.0% and 23.3% during the three and nine months ended February 29, 2024, respectively, compared to 23.5% and 24.5% during the three and nine months ended February 28, 2023, ~~respectively, due~~respectively. The lower Adjusted EBITDA margin was driven primarily by higher operating expenses compared to ~~earnings generated from~~the prior-year periods, reflecting additions to accommodate the integration of the 3M FSD business, which merged with Neogen on September 1, 2022. Expressed as a percentage of revenue, adjusted EBITDA was 23.5% during the third quarter of fiscal 2023 compared to 19.4% during the same period last year, and was 24.5% during the nine months ended February 28, 2023 compared to 21.5% during the same period last year. The 3M FSD business was not part of the Company during the nine months ended February 28, 2022. Thus, the adjusted EBITDA amount for that period is not directly comparable.FSD.

Reconciliation between net (loss) income and Adjusted Net Income and earnings per share and Adjusted Earnings per Share are as follows:

Adjusted Net Income ~~increased $10.3~~decreased $0.1 million and ~~$18.6~~$0.5 million, respectively, during the three and nine months ended February ~~28, 2023, respectively, due to the~~29, 2024. The decreases are driven primarily by higher depreciation expense, partially offset by increases in Adjusted EBITDA.

The overall cash, cash equivalents and marketable securities position of Neogen was ~~$183.2~~$168.4 million as of February ~~28, 2023,~~29, 2024, compared to ~~$381.1~~$245.6 million as of May 31, ~~2022.~~2023. Cash ~~flow~~from operating activities was $8.5 million during the nine months ended February 29, 2024 compared to cash for operating activities ~~was~~of $49.9 million during the nine months ended February 28, ~~2023,~~2023. The net inflow during the nine months ended February 29, 2024 was primarily the result of fewer transaction fees and lower net loss. Cash for investing activities was $11.8 million during the nine months ended February 29, 2024, which was primarily the result of ~~3M FSD deal-related expenses~~purchases of property and ~~recording FSD accounts receivable.~~equipment of $87.2 million, partially offset by proceeds from the sale of marketable securities of $75.3 million. Cash ~~flow~~ from investing activities was $194.2 million during the nine months ended February 28, ~~2023, which~~2023. Cash from financing activities was ~~primarily~~$2.0 million during the ~~result of proceeds from the sale of marketable securities of $233.0 million. This was partially offset by purchases of property, equipment and non-current intangible assets of $40.3 million. Cash flow~~nine months ended February 29, 2024 compared to cash for financing activities ~~was~~of $118.3 million during the nine months ended February 28, 2023. ~~The Company paid down an additional $40 million in principal on the term loan during the third quarter, resulting in a total repayment of $100 million throughout fiscal year 2023.~~

Net accounts receivable balances were ~~$146.4~~$173.6 million as of February ~~28, 2023~~29, 2024 compared to ~~$99.7~~$153.3 million as of May 31, ~~2022. Days’~~2023. Days' sales outstanding, a measurement of the time it takes to collect receivables, was 6265 days ~~for the legacy Neogen business~~ as of February ~~28, 2023,~~29, 2024, compared to 6257 days as of May 31, ~~2022~~2023 and 6462 days as of February 28, ~~2022. The increase in receivables is primarily attributable to the recording of FSD customer balances, currently managed by 3M as a transition service.~~2023.

As part of transition services agreements between the Company and 3M, related to the merger of the Food Safety business, 3M ~~is invoicing~~invoiced our customers for products that 3M ~~is manufacturing~~manufactured and ~~shipping~~shipped on our ~~behalf.~~behalf through

December 2023. We have completed the exit of distribution and back office-related service contracts and currently only have a contract manufacturing agreement in place with 3M for certain products. As of February ~~28, 2023,~~29, 2024, there were ~~$52.2~~$5.5 million in customer receivables billed by 3M on our behalf. The Company is working collaboratively with 3M on managing the credit risk associated with the former FSD customers during the period when 3M is providing transition invoicing and distribution servicesbehalf, compared to ~~the Company.~~$57.3 million as of May 31, 2023.

Net inventory was ~~$143.9~~$182.4 million as of February ~~28, 2023,~~29, 2024, an increase of ~~$21.6~~$48.6 million, compared to a May 31, ~~2022~~2023 balance of ~~$122.3~~$133.8 million. The higher inventory levels are primarily the result of ~~raw material inventories purchased~~the Company now stocking FSD products manufactured by 3M.

We expect to ~~support~~spend approximately $130 million in capital expenditures in fiscal year 2024; $100 million of the total is related to our new building, systems implementation and related FSD and ongoing inflationary pressures on raw materials at our legacy businesses. Supply chain issues have moderated throughout fiscal 2023. We continue to monitor our key raw materials to ensure adequate stock on hand.integration projects.

On September 1, 2022, Neogen, 3M, and ~~Garden SpinCo,~~Neogen Food Safety Corporation, a ~~newly formed~~ subsidiary of 3M created to carve out 3M’s Food Safety business, closed on the FSD transaction ~~which had~~that previously ~~been~~was announced in December 2021, combining 3M’s Food Safety business with Neogen in a Reverse Morris Trust transaction.

OnIn June ~~30,~~ 2022, ~~Garden SpinCo~~Neogen Food Safety Corporation entered into a credit agreement consisting of a five-year senior secured term loan facility in the amount of $650 million and a five-year senior secured revolving facility in the amount of $150 million (collectively, the “Credit Facilities”), which became available in connection with the merger and related transactions. The loan facility was funded to ~~Garden SpinCo~~Neogen Food Safety Corporation on August 31, 2022, and upon the effectiveness of the merger on September 1, 2022, became Neogen’s ~~obligation.~~obligation through a non-cash transaction. Financial covenants include maintaining specified levels of funded debt to EBITDA and debt service coverage. ~~Pricing for the term loan is term SOFR plus 235 basis points.~~ The Credit Facilities, together with the Notes described below, represent the financing incurred in connection with the merger of the 3M FSD with Neogen. In ~~September 2022, we~~accordance with the prepayment feature, the Company paid ~~down $60~~$100 million ~~in principal on~~of the term loan ~~and paid an additional $40 million~~facility’s principal in ~~principal on the term loan in December 2022,~~fiscal year 2023, in order to decrease the outstanding debt balance.

OnIn July ~~20,~~ 2022, ~~Garden SpinCo~~Neogen Food Safety Corporation closed on an offering of $350 million aggregate principal amount of 8.625% senior notes due 2030 (the “Notes”) in a private placement at par. The Notes were initially issued by ~~Garden SpinCo~~Neogen Food Safety Corporation to 3M and were transferred and delivered by 3M to the selling securityholder in the offering, in satisfaction of certain of 3M’s existing debt. ~~Garden SpinCo~~Neogen Food Safety Corporation did not receive any proceeds from the sale of the Notes by the selling securityholder. Prior to the distribution of the shares of ~~Garden SpinCo’s~~Neogen Food Safety Corporation’s common stock to 3M stockholders, the Notes were guaranteed on a senior unsecured basis by 3M. Upon consummation of such distribution, 3M was released from all obligations under its guarantee. Upon the effectiveness of the merger on September 1, 2022, the Notes became guaranteed on a senior unsecured basis by Neogen and certain wholly-owned domestic subsidiaries of ~~Neogen.~~Neogen through a non-cash transaction.

In addition to the 3M transaction described above, our future cash generation and borrowing capacity may not be sufficient to meet cash requirements to fund the operating business, repay debt obligations, construct new manufacturing facilities, commercialize products currently under development or execute our future plans to acquire additional businesses, technology and products that fit within our strategic plan. Accordingly, we may be required, or may choose, to issue additional equity securities or enter into other financing arrangements for a portion of our future capital needs. ~~There is no guarantee~~However, we continuously monitor and forecast our liquidity situation in light of industry, customer and economic factors, and take the necessary actions to preserve our liquidity and evaluate other financial alternatives that may be available to us should the need arise. As a result, we believe that our cash flows from operations, cash on hand, and borrowing capacity will ~~be successful~~enable us to fund the operating business, repay debt obligations, construct new manufacturing facilities, commercialize products currently under development, and execute our strategic plans.

We are subject to certain legal and other proceedings in ~~issuing additional equity securities~~the normal course of business that have not had, and, in the opinion of management, are not expected to have, a material effect on our results of operations or ~~entering into other financing arrangements.~~financial position.

We have interest rate and foreign exchange rate risk exposure but no long-term fixed rate ~~investments or borrowings.~~investments. Our primary interest rate risk is due to potential fluctuations of interest rates for ~~short-term investments.~~our variable rate borrowings.

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~~As such, our operating results are exposed to changes in exchange rates between the U.S. dollar and the British pound sterling, euro, Mexican peso, Brazilian real, Chinese yuan, Australian dollar, Thai baht, Japanese yen, South Korean won and to a lesser extent, the Indian rupee, Canadian dollar, Guatemalan quetzal, Argentine peso, Uruguayan peso and Chilean peso. There is also exposure to a change in exchange rate between the British pound sterling and the euro.rates. 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 invoiced amounts can be positively or negatively affected by changes in exchange rates in the course of collection. We use derivative financial instruments to help manage 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 U.S., located in Scotland, England, Ireland, Italy, Switzerland, Poland, Brazil, Mexico, Guatemala, Argentina, Uruguay, Chile, Colombia, China, Thailand, Japan, Korea, India, Canada and Australia where the functional currency is the British pound sterling, euro, Brazilian real, Mexican peso, Guatemalan quetzal, Argentine peso, Uruguayan peso, Chilean peso, Colombian peso, Chinese yuan, Thai baht, Japanese yen, South Korean won, Indian rupee, Canadian dollar and Australian dollar, respectively. Our investments in foreign subsidiaries are considered long-term. As discussed in ITEM 1A. RISK FACTORS of our Annual Report on Form 10-K for the year ended May 31, ~~2022,~~2023, our financial condition and results of operations could be adversely affected by currency fluctuations.

The following table sets forth the potential loss in future earnings or fair values, resulting from hypothetical changes in relevant market rates or prices:

The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of February ~~28, 2023~~29, 2024 was carried out under the supervision and with the participation of the Company’s management, including the President & Chief Executive Officer and Chief Financial Officer (“the Certifying Officers”). Based on the evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were not effective because of previously reported material weaknesses in our internal control over financial reporting, which we describe in Part II, Item 9A of our Annual Report on Form 10-K for the year ended May 31, 2023.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

As disclosed in Item 9A of our Annual Report on Form 10-K for the year ended May 31, 2023, management identified the following material weaknesses in internal controls over financial reporting during the year ended May 31, 2023: (1) information technology general controls ("ITGCs") in the areas of user access and change management over certain information technology systems that support the Company’s financial reporting process and the manual business process controls dependent on the affected ITGCs, (2) ineffective period-end invoice accrual controls, and (3) ineffective operation of management review controls related to the accounting, valuation and purchase price allocation of the Company’s acquisitions and associated goodwill.

Ongoing Remediation Efforts to Address the Previously Identified Material Weaknesses

As previously disclosed in our Annual Report on Form 10-K for the year ended May 31, 2023, management concluded that our internal controls over financial reporting were not effective as of May 31, 2023. Management is in the process of enhancing, and will continue to enhance, the risk assessment process and design and implementation of internal controls over financial reporting. The remediation measures to correct the previously identified material weaknesses include enhancing the design and implementation of existing controls and creating new controls as needed to address identified risks and providing additional training to personnel including the appropriate level of documentation to be maintained to support internal controls over financial reporting.

As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to strengthen controls or to modify the remediation plan described above. When fully implemented and operational, we believe the controls we have designed or plan to design will remediate the control deficiency that has led to the material weaknesses that we have identified. The previously identified material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are ~~effective.~~operating effectively.

NoOther than with respect to the remediation efforts described above in connection with the previously identified material weaknesses, no changes in our control over financial reporting were identified as having occurred during the quarter ended February ~~28, 2023~~29, 2024 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

For a description of our material pending legal proceedings, see Note 1212. “Commitments and Contingencies” of the Notes to interim condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated by reference.

This Form 10-Q should be read in conjunction with Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended May 31, ~~2022.~~2023. There have been no material changes in the risk factors described in our Annual Report on Form 10-K for the year ended May 31, ~~2022.~~2023.

Items 2, 3, 4, and 54 are not applicable or removed or reserved and have been omitted.

40During the quarterly period ended February 29, 2024, no director or officer (as defined in SEC Rule 16a-1(f)) of the Company adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K).

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.


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Interim Condensed Consolidated Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets – February ~~28, 2023~~29, 2024 and May 31, ~~2022~~2023	2
	Condensed Consolidated Statements of ~~Income (Loss)~~Operations – Three and nine months ended February 29, 2024 and February 28, 2023 ~~and 2022~~	3
	Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~ – Three and nine months ended February 29, 2024 and February 28, 2023 ~~and 2022~~	4
	Condensed Consolidated Statements of Equity – Three and nine months ended February 29, 2024 and February 28, 2023 ~~and 2022~~	5
	Condensed Consolidated Statements of Cash Flows – Nine months ended February 29, 2024 and February 28, 2023 ~~and 2022~~	6
	Notes to Interim Condensed Consolidated Financial Statements – February ~~28, 2023~~29, 2024	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2726
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3937
Item 4.	Controls and Procedures	4038

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4039
Item 1A.	Risk Factors	4039
Item 6.	Exhibits	4140

SIGNATURES		4241

	CEO Certification

	CFO Certification

	Section 906 Certification


	Three Months Ended February 29/28,					Nine Months Ended February 29/28,
	2024			2023		2024			2023
Net (loss) income	$	(2,022	)	$	8,190	$	(4,006	)	$	(28,442	)
Foreign currency translation (loss) gain		(4,561	)		3,354		117			(6,677	)
Unrealized gain on marketable securities (1)		77			944		917			674
Unrealized gain on derivative instruments (2)		139			2,978		2,744			550
Other comprehensive (loss) income, net of tax:		(4,345	)		7,276		3,778			(5,453	)
Total comprehensive (loss) income	$	(6,367	)	$	15,466	$	(228	)	$	(33,895	)


	Nine Months Ended February 28,
	2023			2022
Cash Flows (For) From Operating Activities
Net (Loss) Income	$	(28,442	)	$	33,348
Adjustments to reconcile net (loss) income to net cash (for) from operating activities:
Depreciation and amortization		59,938			17,833
Impairment of discontinued product lines		2,300			—
Loss on sale of minority interest		1,516			—
Deferred income taxes		(5,299	)		(720	)
Share-based compensation		7,311			5,045
Disposal of property and equipment		(472	)		—
Financing fee amortization		1,860			—
Change in operating assets and liabilities, net of business acquisitions:
Accounts receivable		(47,535	)		(883	)
Inventories		(656	)		(11,956	)
Prepaid expenses and other current assets		(31,896	)		(3,824	)
Accounts payable, accruals and other changes		(8,422	)		(5,652	)
Change in other non-current assets and non-current liabilities		(3,579	)		14,457
Interest expense accrual		3,438			—
Net Cash (For) From Operating Activities		(49,938	)		47,648
Cash Flows From (For) Investing Activities
Purchases of property, equipment and other non-current intangible assets		(40,253	)		(11,891	)
Proceeds from the sale of marketable securities		233,020			284,367
Purchases of marketable securities		(12,523	)		(314,442	)
Proceeds from the sale of property and equipment		682			—
Business acquisitions, net of working capital adjustments and cash acquired		13,237			(38,164	)
Net Cash From (For) Investing Activities		194,163			(80,130	)
Cash Flows (For) From Financing Activities
Exercise of stock options and issuance of employee stock purchase plan shares		943			7,842
Financing fees paid		(19,276	)		—
Repayment of debt		(100,000	)		—
Net Cash (For) From Financing Activities		(118,333	)		7,842
Effect of Foreign Exchange Rates on Cash		(3,231	)		(8,083	)
Net Increase (Decrease) In Cash and Cash Equivalents		22,661			(32,723	)
Cash and Cash Equivalents, Beginning of Period		44,473			75,602
Cash and Cash Equivalents, End of Period	$	67,134		$	42,879


	Nine Months Ended February 29/28,
	2024			2023
Cash Flows From (For) Operating Activities
Net loss	$	(4,006	)	$	(28,442	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization		87,853			59,938
Deferred income taxes		98			(5,299	)
Share-based compensation		9,829			7,311
Loss (gain) on disposal of property and equipment		762			(472	)
Amortization of debt issuance costs		2,581			1,860
Impairment of discontinued product lines		—			2,300
(Gain) loss on sale of minority interest		(74	)		1,516
Change in operating assets and liabilities, net of business acquisitions:
Accounts receivable, net		(16,136	)		(47,535	)
Inventories, net		(48,663	)		(656	)
Prepaid expenses and other current assets		(25,170	)		(31,896	)
Accounts payable and accrued liabilities		21,386			(8,422	)
Interest expense accrual		(7,711	)		3,438
Change in other assets and liabilities		(12,232	)		(3,579	)
Net Cash From (For) Operating Activities		8,517			(49,938	)
Cash Flows (For) From Investing Activities
Purchases of property, equipment and other non-current intangible assets		(87,167	)		(40,253	)
Proceeds from the maturities of marketable securities		75,319			233,020
Purchases of marketable securities		—			(12,523	)
Business acquisitions, net of working capital adjustments and cash acquired		—			13,237
Proceeds from the sale of property and equipment and other		62			682
Net Cash (For) From Investing Activities		(11,786	)		194,163
Cash Flows From (For) Financing Activities
Exercise of stock options and issuance of employee stock purchase plan shares		2,443			943
Repayment of long-term debt		—			(100,000	)
Debt issuance costs paid and other		(444	)		(19,276	)
Net Cash From (For) Financing Activities		1,999			(118,333	)
Effect of Foreign Exchange Rates on Cash		(533	)		(3,231	)
Net (Decrease) Increase In Cash and Cash Equivalents		(1,803	)		22,661
Cash and Cash Equivalents, Beginning of Period		163,240			44,473
Cash and Cash Equivalents, End of Period	$	161,437		$	67,134


	Three Months Ended February 28, 2023						Nine Months Ended February 28, 2023
	Revenue % Inc (Dec) USD			Revenue % Inc (Dec) Local Currency			Revenue % Inc (Dec) USD			Revenue % Inc (Dec) Local Currency
U.K. Operations (including Neogen Italia)		(4	)%		7	%		(3	)%		12	%
Megazyme		(6	)%		0	%		(9	)%		3	%
Brazil Operations		12	%		7	%		16	%		13	%
Neogen Latinoamerica		8	%		0	%		10	%		6	%
Neogen Argentina		(32	)%		18	%		9	%		61	%
Neogen Uruguay		(15	)%		(24	)%		(9	)%		(16	)%
Neogen Chile		19	%		20	%		6	%		19	%
Neogen China		(29	)%		(23	)%		(19	)%		(13	)%
Neogen India		(25	)%		(17	)%		(1	)%		7	%
Neogen Canada		(2	)%		4	%		(2	)%		4	%
Neogen Australasia		12	%		17	%		(1	)%		7	%


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller Reporting Company	☐
Emerging growth company	☐


					Additional		Accumulated Other
	Common Stock				Paid-in		Comprehensive			Retained
	Shares		Amount		Capital		Loss			Earnings			Total
Balance, June 1, 2022		107,801	$	17,248	$	309,984	$	(27,769	)	$	587,911		$	887,374
Exercise of options and share-based compensation expense		4		1		1,904		—			—			1,905
Issuance of shares under employee stock purchase plan		33		5		862		—			—			867
Net income		—		—		—		—			5,209			5,209
Other comprehensive loss		—		—		—		(11,557	)		—			(11,557	)
Balance, August 31, 2022		107,838	$	17,254	$	312,750	$	(39,326	)	$	593,120		$	883,798
Exercise of options and share-based compensation expense		46		7		2,630		—			—			2,637
Issuance of shares for 3M transaction		108,270		17,323		2,245,518								2,262,841
Net loss		—		—		—		—			(41,841	)		(41,841	)
Other comprehensive loss		—		—		—		(1,172	)		—			(1,172	)
Balance, November 30, 2022		216,154	$	34,584	$	2,560,898	$	(40,498	)	$	551,279		$	3,106,263
Exercise of options and share-based compensation expense		5		1		2,834		—			—			2,835
Issuance of shares under employee stock purchase plan		62		10		981		—			—			991
Net income		—		—		—		—			8,190			8,190
Other comprehensive income		—		—		—		7,276			—			7,276
Balance, February 28, 2023		216,221	$	34,595	$	2,564,713	$	(33,222	)	$	559,469		$	3,125,555


							Accumulated
					Additional		Other
	Common Stock				Paid-in		Comprehensive			Retained
	Shares		Amount		Capital		Loss			Earnings		Total
Balance, June 1, 2021		107,468	$	17,195	$	294,953	$	(11,375	)	$	539,604	$	840,377
Exercise of options and share-based compensation expense		6		1		1,838		—			—		1,839
Issuance of shares under employee stock purchase plan		19		3		896		—			—		899
Net income		—		—		—		—			17,077		17,077
Other comprehensive loss		—		—		—		(4,829	)		—		(4,829	)
Balance, August 31, 2021		107,493	$	17,199	$	297,687	$	(16,204	)	$	556,681	$	855,363
Exercise of options and share-based compensation expense		275		44		7,272		—			—		7,316
Net income		—		—		—		—			10,828		10,828
Other comprehensive loss		—		—		—		(8,031	)		—		(8,031	)
Balance, November 30, 2021		107,768	$	17,243	$	304,959	$	(24,235	)	$	567,509	$	865,476
Exercise of options and share-based compensation expense		26		4		1,848		—			—		1,852
Issuance of shares under employee stock purchase plan		24		4		973		—			—		977
Net income		—		—		—		—			5,443		5,443
Other comprehensive income		—		—		—		1,796			—		1,796
Balance, February 28, 2022		107,818	$	17,251	$	307,780	$	(22,439	)	$	572,952	$	875,544


(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Commercial Paper & Corporate Bonds	$	118,166	$	—	$	(2,086	)	$	116,080


	Three Months Ended February 28,				Nine Months Ended February 28,
(in thousands, except per share amounts)	2023		2022		2023			2022
Numerator for basic and diluted net income (loss) per share:
Net income (loss) attributable to Neogen	$	8,190	$	5,443	$	(28,442	)	$	33,348
Denominator for basic net income (loss) per share:
Weighted average shares		216,218		107,818		179,666			107,648
Effect of dilutive stock options and RSUs		181		315		—			482
Denominator for diluted net income (loss) per share		216,399		108,133		179,666			108,130
Net income (loss) per share:
Basic	$	0.04	$	0.05	$	(0.16	)	$	0.31
Diluted	$	0.04	$	0.05	$	(0.16	)	$	0.31


	Three Months Ended February 28,					Nine Months Ended February 28,
(in thousands, unaudited)	2023		2022			2023			2022
Net sales	$	218,300	$	219,900		$	675,600		$	668,100
Operating Income (loss)	$	15,700	$	(17,000	)	$	(5,400	)	$	(10,900	)


(in thousands)	Amount
Fiscal Year
Remainder of 2023	$	—
2024		—
2025		—
2026		—
2027		34,063
Thereafter		865,937
Total	$	900,000




31.1	Certification of Principal Executive Officer


31.2	Certification of Principal Financial Officer

32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL 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 Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

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