☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR |
August 31, 2019.
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Michigan 38-2367843
Title of each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller Reporting Company | ☐ | |||
Emerging growth company | ☐ |
PART I. FINANCIAL INFORMATION | Page No. | |||||||
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Item 3. | 25 | |||||||
Item 4. | 25 | |||||||
Item 1. | 26 | |||||||
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Item 6. | 26 | |||||||
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CEO Certification | ||||||||
CFO Certification | ||||||||
Section 906 Certification |
Sheets
November 30, 2018 | May 31, 2018 | |||||||
(Unaudited) | (Unaudited) | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 101,585 | $ | 83,074 | ||||
Marketable securities (at fair value, which approximates cost) | 139,385 | 127,736 | ||||||
Accounts receivable, less allowance of $1,700 and $1,550 | 82,282 | 79,086 | ||||||
Inventories | 79,473 | 76,005 | ||||||
Prepaid expenses and other current assets | 11,569 | 9,888 | ||||||
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Total Current Assets | 414,294 | 375,789 | ||||||
Net Property and Equipment | 73,910 | 73,069 | ||||||
Other Assets | ||||||||
Goodwill | 103,309 | 99,558 | ||||||
Othernon-amortizable intangible assets | 15,423 | 14,783 | ||||||
Amortizable customer-based intangibles, net of accumulated amortization of $26,292 and $24,579 at November 30, 2018 and May 31, 2018, respectively | 30,022 | 31,841 | ||||||
Othernon-current assets, net of accumulated amortization of $11,440 and $12,470 at November 30, 2018 and May 31, 2018, respectively | 23,534 | 22,969 | ||||||
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Total Assets | $ | 660,492 | $ | 618,009 | ||||
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Liabilities and Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 20,555 | $ | 20,750 | ||||
Accrued compensation | 5,216 | 6,065 | ||||||
Income taxes | 1,533 | 165 | ||||||
Other accruals | 11,456 | 11,708 | ||||||
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Total Current Liabilities | 38,760 | 38,688 | ||||||
Deferred Income Taxes | 14,144 | 14,103 | ||||||
OtherNon-Current Liabilities | 5,514 | 5,043 | ||||||
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Total Liabilities | 58,418 | 57,834 | ||||||
Commitments and Contingencies (Note 8) | ||||||||
Equity | ||||||||
Preferred stock, $1.00 par value, 100,000 shares authorized, none issued and outstanding | — | — | ||||||
Common stock, $0.16 par value, 60,000,000 shares authorized, 52,081,876 and 51,735,732 shares issued and outstanding at November 30, 2018 and May 31, 2018, respectively | 8,334 | 8,278 | ||||||
Additionalpaid-in capital | 215,615 | 202,572 | ||||||
Accumulated other comprehensive loss | (12,234 | ) | (9,746 | ) | ||||
Retained earnings | 390,359 | 359,071 | ||||||
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Total Stockholders’ Equity | 602,074 | 560,175 | ||||||
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Total Liabilities and Equity | $ | 660,492 | $ | 618,009 | ||||
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August 31, 2019 | May 31, 2019 | |||||||
Assets | Unaudited | Audited | ||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 56,289 | $ | 41,688 | ||||
Marketable securities | 234,727 | 225,836 | ||||||
Accounts receivable, less allowance of $1,700 and $1,700 at August 31, 2019 and May 31, 2019, respectively | 79,112 | 82,582 | ||||||
Inventories | 87,682 | 85,992 | ||||||
Prepaid expenses and other current assets | 15,738 | 13,431 | ||||||
Total Current Assets | 473,548 | 449,529 | ||||||
Net Property and Equipment | 75,154 | 74,847 | ||||||
Other Assets | ||||||||
Goodwill | 102,883 | 103,619 | ||||||
Other non-amortizable intangible assets | 15,397 | 15,649 | ||||||
Amortizable intangible and other assets, net of accumulated amortization of $40,127 and $40,835 at August 31, 2019 and May 31, 2019, respectively | 54,162 | 52,096 | ||||||
Total Assets | $ | 721,144 | $ | 695,740 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 18,345 | $ | 19,063 | ||||
Accrued compensation | 4,796 | 7,085 | ||||||
Income taxes | 4,142 | 601 | ||||||
Other accruals | 13,144 | 11,502 | ||||||
Total Current Liabilities | 40,427 | 38,251 | ||||||
Deferred Income Taxes | 15,501 | 15,618 | ||||||
Other Non-Current Liabilities | 4,910 | 3,972 | ||||||
Total Liabilities | 60,838 | 57,841 | ||||||
Commitments and Contingencies (note 8) | ||||||||
Equity | ||||||||
Preferred stock, $1.00 par value, 100,000 shares authorized, NaN issued and outstanding | — | — | ||||||
Common stock, $0.16 par value, 120,000,000 shares authorized, 52,422,942 and 52,216,589 shares issued and outstanding at August 31, 2019 and May 31, 2019, respectively | 8,387 | 8,355 | ||||||
Additional paid-in capital | 232,156 | 221,937 | ||||||
Accumulated other comprehensive loss | (14,136 | ) | (11,640 | ) | ||||
Retained earnings | 433,899 | 419,247 | ||||||
Total Stockholders’ Equity | 660,306 | 637,899 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 721,144 | $ | 695,740 | ||||
Three Months Ended November 30, | Six Months Ended November 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues | ||||||||||||||||
Product revenues | $ | 89,562 | $ | 84,471 | $ | 172,522 | $ | 164,016 | ||||||||
Service revenues | 17,536 | 16,227 | 34,202 | 30,891 | ||||||||||||
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Total Revenues | 107,098 | 100,698 | 206,724 | 194,907 | ||||||||||||
Cost of Revenues | ||||||||||||||||
Cost of product revenues | 47,305 | 43,252 | 90,255 | 84,236 | ||||||||||||
Cost of service revenues | 9,760 | 9,197 | 19,707 | 17,498 | ||||||||||||
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Total Cost of Revenues | 57,065 | 52,449 | 109,962 | 101,734 | ||||||||||||
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Gross Margin | 50,033 | 48,249 | 96,762 | 93,173 | ||||||||||||
Operating Expenses | ||||||||||||||||
Sales and marketing | 18,499 | 16,793 | 35,732 | 32,869 | ||||||||||||
General and administrative | 10,121 | 10,491 | 20,319 | 19,817 | ||||||||||||
Research and development | 3,167 | 2,967 | 5,986 | 6,065 | ||||||||||||
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Total Operating Expenses | 31,787 | 30,251 | 62,037 | 58,751 | ||||||||||||
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Operating Income | 18,246 | 17,998 | 34,725 | 34,422 | ||||||||||||
Other Income | ||||||||||||||||
Interest income | 1,028 | 429 | 1,955 | 798 | ||||||||||||
Other income | 427 | 626 | 158 | 1,069 | ||||||||||||
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Total Other Income | 1,455 | 1,055 | 2,113 | 1,867 | ||||||||||||
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Income Before Taxes | 19,701 | 19,053 | 36,838 | 36,289 | ||||||||||||
Provision for Income Taxes | 3,650 | 1,900 | 5,550 | 7,200 | ||||||||||||
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Net Income | 16,051 | 17,153 | 31,288 | 29,089 | ||||||||||||
Net (Income) Attributable toNon-Controlling Interest | — | (53 | ) | — | (75 | ) | ||||||||||
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Net Income Attributable to Neogen | $ | 16,051 | $ | 17,100 | $ | 31,288 | $ | 29,014 | ||||||||
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Net Income Attributable to Neogen Per Share | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.33 | $ | 0.60 | $ | 0.57 | ||||||||
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Diluted | $ | 0.31 | $ | 0.33 | $ | 0.60 | $ | 0.56 | ||||||||
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Three Months Ended August 31, | ||||||||
2019 | 2018 | |||||||
Revenues | ||||||||
Product revenues | $ | 81,948 | $ | 82,960 | ||||
Service revenues | 19,476 | 16,666 | ||||||
Total Revenues | 101,424 | 99,626 | ||||||
Cost of Revenues | ||||||||
Cost of product revenues | 42,031 | 42,950 | ||||||
Cost of service revenues | 11,199 | 9,947 | ||||||
Total Cost of Revenues | 53,230 | 52,897 | ||||||
Gross Margin | 48,194 | 46,729 | ||||||
Operating Expenses | ||||||||
Sales and marketing | 17,543 | 17,233 | ||||||
General and administrative | 10,699 | 10,198 | ||||||
Research and development | 3,688 | 2,819 | ||||||
Total Operating Expenses | 31,930 | 30,250 | ||||||
Operating Income | 16,264 | 16,479 | ||||||
Other Income (Expense) | ||||||||
Interest income | 1,510 | 927 | ||||||
Other expense | (122 | ) | (269 | ) | ||||
Total Other Income | 1,388 | 658 | ||||||
Income Before Taxes | 17,652 | 17,137 | ||||||
Provision for Income Taxes | 3,000 | 1,900 | ||||||
Net Income | $ | 14,652 | $ | 15,237 | ||||
Net Income Per Share | ||||||||
Basic | $ | 0.28 | $ | 0.29 | ||||
Diluted | $ | 0.28 | $ | 0.29 | ||||
Three Months Ended November 30, | Six Months Ended November 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | 16,051 | $ | 17,153 | $ | 31,288 | $ | 29,089 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
currency translation adjustments | 290 | 534 | (2,488 | ) | 737 | |||||||||||
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Comprehensive income | 16,341 | 17,687 | 28,800 | 29,826 | ||||||||||||
Comprehensive (income) attributable tonon-controlling interest | — | (53 | ) | — | (75 | ) | ||||||||||
Comprehensive income attributable to | ||||||||||||||||
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Neogen Corporation | $ | 16,341 | $ | 17,634 | $ | 28,800 | $ | 29,751 | ||||||||
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Three Months Ended | ||||||||
August 31, | ||||||||
2019 | 2018 | |||||||
Net income | $ | 14,652 | $ | 15,237 | ||||
Other comprehensive loss, net of tax: currency translation adjustments | (3,058 | ) | (2,778 | ) | ||||
Other comprehensive income, net of tax: unrealized gain on marketable securities | 562 | — | ||||||
Total comprehensive income | $ | 12,156 | $ | 12,459 | ||||
Accumulated | ||||||||||||||||||||||||
Additional Paid-in Capital | Other Comprehensive (Loss) | |||||||||||||||||||||||
Common Stock | Retained | |||||||||||||||||||||||
Shares | Amount | Earnings | Total | |||||||||||||||||||||
Balance at May 31, 2018 | 51,736 | $ | 8,278 | $ | 202,572 | $ | (9,746 | ) | $ | 359,071 | 560,175 | |||||||||||||
Issuance of shares under share-based compensation plan | 338 | 54 | 12,526 | 12,580 | ||||||||||||||||||||
Issuance of shares under employee stock purchase plan | 8 | 2 | 517 | 519 | ||||||||||||||||||||
Net income for the six months ended November 30, 2018 | 31,288 | 31,288 | ||||||||||||||||||||||
Other comprehensive (loss) | (2,488 | ) | (2,488 | ) | ||||||||||||||||||||
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Balance at November 30, 2018 | 52,082 | $ | 8,334 | $ | 215,615 | $ | (12,234 | ) | $ | 390,359 | $ | 602,074 | ||||||||||||
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Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid-in | Comprehensive | Retained | |||||||||||||||||||||
Shares | Amount | Capital | (Loss) | Earnings | Total | |||||||||||||||||||
Balance at May 31, 2019 | 52,217 | $ | 8,355 | $ | 221,937 | $ | (11,640 | ) | $ | 419,247 | $ | 637,899 | ||||||||||||
Issuance of shares under share-based compensation plan | 196 | 30 | 9,683 | 9,713 | ||||||||||||||||||||
Issuance of shares under employee stock purchase plan | 10 | 2 | 536 | 538 | ||||||||||||||||||||
Net income for the three months ended August 31, 2019 | 14,652 | 14,652 | ||||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2019 | (2,496 | ) | (2,496 | ) | ||||||||||||||||||||
Balance at August 31, 2019 | 52,423 | $ | 8,387 | $ | 232,156 | $ | (14,136 | ) | $ | 433,899 | $ | 660,306 | ||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid-in | Comprehensive | Retained | |||||||||||||||||||||
Shares | Amount | Capital | (Loss) | Earnings | Total | |||||||||||||||||||
Balance at May 31, 2018 | 51,736 | $ | 8,278 | $ | 202,572 | $ | (9,746 | ) | $ | 359,071 | $ | 560,175 | ||||||||||||
Issuance of shares under share-based compensation plan | 251 | 40 | 8,433 | 8,473 | ||||||||||||||||||||
Issuance of shares under employee stock purchase plan | 8 | 2 | 517 | 519 | ||||||||||||||||||||
Net income for the three months ended August 31, 2018 | 15,237 | 15,237 | ||||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2018 | (2,778 | ) | (2,778 | ) | ||||||||||||||||||||
Balance at August 31, 2018 | 51,995 | $ | 8,320 | $ | 211,522 | $ | (12,524 | ) | $ | 374,308 | $ | 581,626 | ||||||||||||
Six Months Ended November 30, | ||||||||
2018 | 2017 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Income | $ | 31,288 | $ | 29,089 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 8,597 | 8,268 | ||||||
Share-based compensation | 2,831 | 2,666 | ||||||
Change in operating assets and liabilities, net of business acquisitions: | ||||||||
Accounts receivable | (3,615 | ) | (5,859 | ) | ||||
Inventories | (3,787 | ) | (218 | ) | ||||
Prepaid expenses and other current assets | (2,025 | ) | (7,916 | ) | ||||
Accounts payable, accruals and other changes | (706 | ) | 1,377 | |||||
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Net Cash From Operating Activities | 32,583 | 27,407 | ||||||
Cash Flows From Investing Activities | ||||||||
Purchases of property, equipment and othernon-current intangible assets | (6,720 | ) | (10,409 | ) | ||||
Proceeds from the sale of marketable securities | 179,839 | 123,601 | ||||||
Purchases of marketable securities | (191,488 | ) | (168,943 | ) | ||||
Business acquisitions, net of cash acquired | (4,903 | ) | (468 | ) | ||||
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Net From Investing Activities | (23,272 | ) | (56,219 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Exercise of stock options and issuance of employee stock purchase plan shares | 10,268 | 16,395 | ||||||
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Net Cash From Financing Activities | 10,268 | 16,395 | ||||||
Effect of Exchange Rate on Cash | (1,068 | ) | (725 | ) | ||||
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Net Increase (decrease) In Cash and Cash Equivalents | 18,511 | (13,142 | ) | |||||
Cash and Cash Equivalents, Beginning of Period | 83,074 | 77,567 | ||||||
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Cash and Cash Equivalents, End of Period | $ | 101,585 | $ | 64,425 | ||||
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Three Months Ended | ||||||||
August 31, | ||||||||
2019 | 2018 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Income | $ | 14,652 | $ | 15,237 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 4,435 | 4,271 | ||||||
Share-based compensation | 1,543 | 1,431 | ||||||
Change in operating assets and liabilities, net of business acquisitions: | ||||||||
Accounts receivable | 3,390 | 755 | ||||||
Inventories | (2,132 | ) | (2,940 | ) | ||||
Prepaid expenses and other current assets | (1,929 | ) | (3,236 | ) | ||||
Accounts payable, accruals and other changes | 3,760 | 564 | ||||||
Net Cash From Operating Activities | 23,719 | 16,082 | ||||||
Cash Flows For Investing Activities | ||||||||
Purchases of property, equipment and other assets | (6,469 | ) | (1,918 | ) | ||||
Proceeds from the sale of marketable securities | 94,540 | 73,096 | ||||||
Purchases of marketable securities | (103,432 | ) | (74,549 | ) | ||||
Business acquisitions, net of cash acquired | — | (4,203 | ) | |||||
Net Cash For Investing Activities | (15,361 | ) | (7,574 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Exercise of stock options and issuance of employee stock purchase plan shares | 8,708 | 8,992 | ||||||
Net Cash From Financing Activities | 8,708 | 8,992 | ||||||
Effect of Exchange Rates on Cash | (2,465 | ) | (3,349 | ) | ||||
Net Increase In Cash and Cash Equivalents | 14,601 | 14,151 | ||||||
Cash and Cash Equivalents, Beginning of Period | 41,688 | 83,074 | ||||||
Cash and Cash Equivalents, End of Period | $ | 56,289 | $ | 97,225 | ||||
Share and per share amounts reflect the December 29, 20174-for-3 stock split as if it took place at the beginning of the period presented.
2019.
Revenue Recognition
Classification of Cash Receipts and Payments
In August 2016, the FASB issued ASU No.2016-15—Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The amendments in ASU2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows. The amendments in ASU2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted this ASU on June 1, 2018; the impact on our consolidated financial statements was immaterial.
Leases
In February 2016, the FASB issued ASU No.2016-02—Leases to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and aright-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessor have not significantly changed from previous U.S. GAAP. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018; early adoption is permitted. Modified retrospective application is required with certain practical expedients. We will adopt this ASU on June 1, 2019 and are currently in the process of evaluating our lessee and lessor arrangements to determine the impact of this pronouncement on our consolidated financial condition and results of operations. This evaluation includes a review of revenue through leasing arrangements as well as lease expenses, which are primarily through operating lease arrangements at most of our facilities.
amortized cost that the company expects to collect over the instrument’s contractual life. ASU2016-13 is effective for fiscal periods beginning after December 15, 2019 and must be adopted as a cumulative effect adjustment to retained earnings. Earlyearnings; early adoption is permitted. We doThe Company does not believe adoption of this guidance will have an impact on ourits consolidated financial statements.
adjustments and unrealized gains or losses on marketable securities.
income
2019.
Long Lived
5.
On December 22, 2017, the Tax Cuts and Jobs Act
Revenue Recognition
In May 2014,February 2016, the FASB issued ASU No.2014-09—Revenue from Contracts with Customers (Topic 606). The new standard outlines 2016-02—Leases, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a single comprehensive model for entitiesliability to make lease payments (the lease liability) and a right-of-use asset representing its right to use in accountingthe underlying asset for revenuethe lease term. The recognition, measurement and presentation of expenses and cash flows arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue modela lease by a lessor have not significantly changed from previous U.S. GAAP. This ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. In April 2016, the FASB issued Accounting Standards UpdateNo. 2016-10— Revenue from Contracts with Customers (Topic 606), which amends and adds clarity to certain aspects of the guidance set forth in ASU2014-09 related to identifying performance obligations and licensing. The guidance became effective for the Companyannual periods, including interim periods within those annual periods, beginning after December 15, 2018; early adoption is permitted. We adopted this ASU on June 1, 2018. The guidance permits two methods of adoption: a full retrospective method to each prior reporting period presented or a modified retrospective approach with2019; the cumulative effect of initially applying the guidance recognized at the date of initial application. We adopted this standard using the full retrospective approach. This approach was chosen to provide appropriate comparisons against our prior year financial statements; accordingly, historical information for the year ended May 31, 2018, including interim periods therein, has been adjusted to conform to the new standard.
Prior to the adoption, we identified all revenue streams at each significant subsidiary and reviewed contracts to evaluate the impact of adopting the new standard on our revenue recognition policies, procedures and control framework and ultimately on our consolidated financial statements was immaterial.
August 31, | ||||
2019 | ||||
(in thousands) | ||||
Right of use - assets | $ | 1,726 | ||
Lease liabilities - current | 755 | |||
Lease liabilities - non-current | 982 |
August 31, | ||||
2019 | ||||
Weighted average remaining lease term | 2.1 years | |||
Weighted average discount rate | 3.5 | % |
Three Months Ended | ||||
August 31, | ||||
2019 | ||||
(in thousands) | ||||
Operating leases | $ | 240 | ||
Short term leases | 48 | |||
Total lease expense | $ | 288 | ||
Years ending May 31, | ||||
2020 (1) | $ | 757 | ||
2021 | 730 | |||
2022 | 230 | |||
2023 | 61 | |||
2024 | 3 | |||
2025 and thereafter | — | |||
Total lease payments | 1,781 | |||
Less: imputed interest | 44 | |||
Total lease liabilities | $ | 1,737 | ||
(1) | Excluding the three months ended August 31, 2019 |
We derive revenue from two primary sources — product revenue and service revenue.
Product revenue consists primarily of shipments 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;
Years ending May 31, | ||||
2020 | $ | 1,169 | ||
2021 | 818 | |||
2022 | 260 | |||
2023 | 73 | |||
2024 | — | |||
2025 and thereafter | — | |||
Total lease payments | $ | 2,320 |
Consumable products marketed to veterinarians and animal health product distributors; and
Rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.
Service revenue consists primarily of:
Genomic identification and related interpretive bioinformatic services; and
Other commercial laboratory services.
Revenues for our genomics and commercial laboratory services are recognized and invoiced when the applicable laboratory service is performed and the results are conveyed to the customer.
Under Topic 606, the
Three Months Ended November 30, | Six Months Ended November 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 20,571 | $ | 18,989 | $ | 39,409 | $ | 38,153 | ||||||||
Bacterial & General Sanitation | 10,822 | 9,324 | 21,288 | 18,443 | ||||||||||||
Culture Media & Other | 12,191 | 11,041 | 24,408 | 21,173 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 5,943 | 6,126 | 12,569 | 10,817 | ||||||||||||
Genomics Services | 4,223 | 3,726 | 8,259 | 6,911 | ||||||||||||
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|
| |||||||||
Animal Safety | $ | 53,750 | $ | 49,206 | $ | 105,933 | $ | 95,497 | ||||||||
Life Sciences | $ | 1,891 | $ | 2,394 | $ | 3,971 | $ | 4,820 | ||||||||
Veterinary Instruments & Disposables | 11,683 | 11,687 | 22,087 | 22,174 | ||||||||||||
Animal Care & Other | 9,064 | 8,237 | 15,617 | 15,649 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 18,673 | 17,786 | 35,664 | 35,167 | ||||||||||||
Genomics Services | 12,037 | 11,388 | 23,452 | 21,600 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 53,348 | $ | 51,492 | $ | 100,791 | $ | 99,410 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Revenues | $ | 107,098 | $ | 100,698 | $ | 206,724 | $ | 194,907 | ||||||||
|
|
|
|
|
|
|
|
Restatement of Previously Issued Financial Statements
The Company has historically classified certain variable consideration components resulting from volume rebates, distributor support, and other marketing discounts as cost of product revenues or sales and marketing expense in our consolidated financial statements of income. These amounts should have been classified as contra revenue in product or service revenues. The Company had determined in priormonth periods that the misstatements were clearly immaterial, individually and in the aggregate, to each of the reporting periods affected. The Company began properly classifying these items as contra revenues beginning in the three-month period ended August 31, 2018, the first quarter2019 and 2018:
Three Months ended August 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Food Safety | ||||||||
Natural Toxins, Allergens & Drug Residues | $ | 20,115 | $ | 18,838 | ||||
Bacterial & General Sanitation | 10,316 | 10,467 | ||||||
Dehydrated Culture Media & Other | 11,279 | 12,217 | ||||||
Rodenticides, Insecticides & Disinfectants | 5,449 | 6,625 | ||||||
Genomics Services | 3,862 | 4,036 | ||||||
$ | 51,021 | $ | 52,183 | |||||
Animal Safety | ||||||||
Life Sciences | $ | 1,723 | $ | 2,080 | ||||
Veterinary Instruments & Disposables | 11,336 | 10,404 | ||||||
Animal Care & Other | 6,405 | 6,398 | ||||||
Rodenticides, Insecticides & Disinfectants | 16,718 | 17,146 | ||||||
Genomics Services | 14,221 | 11,415 | ||||||
$ | 50,403 | $ | 47,443 | |||||
Total Revenues | $ | 101,424 | $ | 99,626 | ||||
The effects of the revisions on the line items within our unaudited consolidated statements of income for the three and six months ended November 30, 2017 are as follows:
Three Months Ended November 30, 2017 | Six Months Ended November 30, 2017 | |||||||||||||||||||||||
As Previously Reported | Adjustments | As Revised | As Previously Reported | Adjustments | As Revised | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Product revenues | $ | 85,590 | $ | (1,119 | ) | $ | 84,471 | $ | 166,157 | $ | (2,141 | ) | $ | 164,016 | ||||||||||
Service revenues | 16,227 | — | 16,227 | 30,916 | (25 | ) | 30,891 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total revenues | 101,817 | (1,119 | ) | 100,698 | 197,073 | (2,166 | ) | 194,907 | ||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||
Cost of product revenues | 43,349 | (97 | ) | 43,252 | 84,433 | (197 | ) | 84,236 | ||||||||||||||||
Cost of service revenues | 9,197 | — | 9,197 | 17,498 | — | 17,498 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total cost of revenues | 52,546 | (97 | ) | 52,449 | 101,931 | (197 | ) | 101,734 | ||||||||||||||||
Gross margin | 49,271 | (1,022 | ) | 48,249 | 95,142 | (1,969 | ) | 93,173 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Sales and marketing | 17,815 | (1,022 | ) | 16,793 | 34,838 | (1,969 | ) | 32,869 | ||||||||||||||||
Total operating expenses | 31,273 | (1,022 | ) | 30,251 | 60,720 | (1,969 | ) | 58,751 | ||||||||||||||||
Operating income | 17,998 | — | 17,998 | 34,422 | — | 34,422 |
Presented below are the effects of the revisions on the line items within the previously issued unaudited consolidated statements of income for the three and nine months ended February 28, 2018 and the consolidated statements of income for the years ended May 31, 2018 and 2017. Revised consolidated statements of income related to these periods will be presented in the Forms10-Q and Form10-K to be filed in the succeeding periods of this fiscal year.
Three Months Ended February 28, 2018 | Nine Months Ended February 28, 2018 | |||||||||||||||||||||||
As Previously Reported | Adjustments | As Revised | As Previously Reported | Adjustments | As Revised | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Product revenues | $ | 78,142 | $ | (958 | ) | $ | 77,184 | $ | 244,298 | $ | (3,098 | ) | $ | 241,200 | ||||||||||
Service revenues | 17,750 | (31 | ) | 17,719 | 48,667 | (56 | ) | 48,611 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total revenues | 95,892 | (989 | ) | 94,903 | 292,965 | (3,154 | ) | 289,811 | ||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||
Cost of product revenues | 40,352 | (69 | ) | 40,283 | 124,785 | (265 | ) | 124,520 | ||||||||||||||||
Cost of service revenues | 10,019 | — | 10,019 | 27,517 | — | 27,517 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total cost of revenues | 50,371 | (69 | ) | 50,302 | 152,302 | (265 | ) | 152,037 | ||||||||||||||||
Gross margin | 45,521 | (920 | ) | 44,601 | 140,663 | (2,889 | ) | 137,774 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Sales and marketing | 17,492 | (920 | ) | 16,572 | 52,331 | (2,889 | ) | 49,442 | ||||||||||||||||
Total operating expenses | 29,608 | (920 | ) | 28,688 | 90,328 | (2,889 | ) | 87,439 | ||||||||||||||||
Operating income | 15,913 | — | 15,913 | 50,335 | — | 50,335 |
Year Ended | Year Ended | |||||||||||||||||||||||
May 31, 2018 | May 31, 2017 | |||||||||||||||||||||||
As Previously Reported | Adjustments | As Revised | As Previously Reported | Adjustments | As Revised | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Product revenues | $ | 335,554 | $ | (4,266 | ) | $ | 331,288 | $ | 306,512 | $ | (3,390 | ) | $ | 303,122 | ||||||||||
Service revenues | 66,698 | (56 | ) | 66,642 | 55,082 | 73 | 55,155 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total revenues | 402,252 | (4,322 | ) | 397,930 | 361,594 | (3,317 | ) | 358,277 | ||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||
Cost of product revenues | 174,067 | (342 | ) | 173,725 | 156,568 | (273 | ) | 156,295 | ||||||||||||||||
Cost of service revenues | 37,933 | — | 37,933 | 33,058 | — | 33,058 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total cost of revenues | 212,000 | (342 | ) | 211,658 | 189,626 | (273 | ) | 189,353 | ||||||||||||||||
Gross margin | 190,252 | (3,980 | ) | 186,272 | 171,968 | (3,044 | ) | 168,924 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Sales and marketing | 70,909 | (3,980 | ) | 66,929 | 62,424 | (3,044 | ) | 59,380 | ||||||||||||||||
Total operating expenses | 120,058 | (3,980 | ) | 116,078 | 107,023 | (3,044 | ) | 103,979 | ||||||||||||||||
Operating income | 70,194 | — | 70,194 | 64,945 | — | 64,945 |
The revisions had no impact on our audited consolidated balance sheets as of May 31, 2018 and 2017 and no impact on our unaudited consolidated statements of equity or unaudited consolidated statements of cash flows for the three and six months ended November 30, 2017 and the three and nine months ended February 28, 2018.
November 30, 2018 | May 31, 2018 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 36,563 | $ | 36,702 | ||||
Work-in-process | 7,601 | 5,993 | ||||||
Finished and purchased goods | 35,309 | 33,310 | ||||||
|
|
|
| |||||
$ | 79,473 | $ | 76,005 | |||||
|
|
|
|
August 31, | May 31, | |||||||
2019 | 2019 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 42,964 | $ | 41,594 | ||||
Work-in-process | 5,901 | 5,581 | ||||||
Finished and purchased goods | 38,817 | 38,817 | ||||||
$ | 87,682 | $ | 85,992 | |||||
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Numerator for basic and diluted net income per share: | ||||||||||||||||
Net income attributable to Neogen | $ | 16,051 | $ | 17,100 | $ | 31,288 | $ | 29,014 | ||||||||
Denominator for basic net income per share: | ||||||||||||||||
Weighted average shares | 52,019 | 51,264 | 51,820 | 51,109 | ||||||||||||
Effect of dilutive stock options | 572 | 697 | 721 | 669 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Denominator for diluted net income per share | 52,591 | 51,961 | 52,541 | 51,778 | ||||||||||||
Net income attributable to Neogen per share: | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.33 | $ | 0.60 | $ | 0.57 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted | $ | 0.31 | $ | 0.33 | $ | 0.60 | $ | 0.56 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended | ||||||||
August 31, | ||||||||
2019 | 2018 | |||||||
(in thousands, except per share amounts) | ||||||||
Numerator for basic and diluted net income per share: | ||||||||
Net income | $ | 14,652 | $ | 15,237 | ||||
Denominator for basic net income per share: | ||||||||
Weighted average shares | 52,292 | 51,806 | ||||||
Effect of dilutive stock options | 392 | 974 | ||||||
Denominator for diluted net income per share | 52,684 | 52,780 | ||||||
Net income per share: | ||||||||
Basic | $ | 0.28 | $ | 0.29 | ||||
Diluted | $ | 0.28 | $ | 0.29 | ||||
Food Safety | Animal Safety | Corporate and Eliminations (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
As of and for the three months ended November 30, 2018 |
| |||||||||||||||
Product revenues to external customers | $ | 48,256 | $ | 41,306 | $ | — | $ | 89,562 | ||||||||
Service revenues to external customers | 5,494 | 12,042 | — | 17,536 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues to external customers | 53,750 | 53,348 | — | 107,098 | ||||||||||||
Operating income (loss) | 10,342 | 9,057 | (1,153 | ) | 18,246 | |||||||||||
Total assets | 201,291 | 218,231 | 240,970 | 660,492 | ||||||||||||
As of and for the three months ended November 30, 2017—Revised (2) |
| |||||||||||||||
Product revenues to external customers | $ | 44,367 | $ | 40,104 | $ | — | $ | 84,471 | ||||||||
Service revenues to external customers | 4,839 | 11,388 | — | 16,227 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues to external customers | 49,206 | 51,492 | — | 100,698 | ||||||||||||
Operating income (loss) | 8,668 | 10,529 | (1,199 | ) | 17,998 | |||||||||||
Total assets | 175,836 | 215,099 | 190,093 | 581,028 |
Corporate and | ||||||||||||||||
Food | Animal | Eliminations | ||||||||||||||
Safety | Safety | (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
As of and for the three months ended August 31, 2019 | ||||||||||||||||
Product revenues to external customers | $ | 45,877 | $ | 36,071 | $ | — | $ | 81,948 | ||||||||
Service revenues to external customers | 5,144 | 14,332 | — | 19,476 | ||||||||||||
Total revenues to external customers | 51,021 | 50,403 | — | 101,424 | ||||||||||||
Operating income (loss) | 9,134 | 8,300 | (1,170 | ) | 16,264 | |||||||||||
Total assets | 207,725 | 222,403 | 291,016 | 721,144 | ||||||||||||
As of and for the three months ended August 31, 2018 | ||||||||||||||||
Product revenues to external customers | $ | 46,933 | $ | 36,027 | $ | — | $ | 82,960 | ||||||||
Service revenues to external customers | 5,250 | 11,416 | — | 16,666 | ||||||||||||
Total revenues to external customers | 52,183 | 47,443 | — | 99,626 | ||||||||||||
Operating income (loss) | 10,873 | 6,706 | (1,100 | ) | 16,479 | |||||||||||
Total assets | 201,727 | 212,786 | 226,413 | 640,926 |
(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. |
|
Food Safety | Animal Safety | Corporate and Eliminations (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
For the six months ended November 30, 2018 | ||||||||||||||||
Product revenues to external customers | $ | 95,189 | $ | 77,333 | $ | — | $ | 172,522 | ||||||||
Service revenues to external customers | 10,744 | 23,458 | — | 34,202 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues to external customers | 105,933 | 100,791 | — | 206,724 | ||||||||||||
Operating income (loss) | 21,215 | 15,763 | (2,253 | ) | 34,725 | |||||||||||
For the six months ended November 30, 2017—Revised (2) |
| |||||||||||||||
Product revenues to external customers | $ | 86,206 | $ | 77,810 | $ | — | $ | 164,016 | ||||||||
Service revenues to external customers | 9,291 | 21,600 | — | 30,891 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues to external customers | 95,497 | 99,410 | — | 194,907 | ||||||||||||
Operating income (loss) | 17,446 | 19,198 | (2,222 | ) | 34,422 |
|
|
Three Months ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Revenues by Geographic Location | ||||||||||||||||
Domestic | $ | 65,033 | $ | 62,452 | $ | 124,879 | $ | 122,588 | ||||||||
International | 42,065 | 38,246 | 81,845 | 72,319 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenue | 107,098 | 100,698 | 206,724 | 194,907 | ||||||||||||
|
|
|
|
|
|
|
|
Three months ended August 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Revenues by Geographic Location | ||||||||
Domestic | $ | 63,340 | $ | 59,846 | ||||
International | 38,084 | 39,780 | ||||||
Total revenue | 101,424 | 99,626 |
Shares | Weighted- Average Exercise Price | |||||||
Options outstanding June 1, 2018 | 2,497,124 | $ | 42.63 | |||||
Granted | 525,750 | 62.93 | ||||||
Exercised | (340,023 | ) | 29.49 | |||||
Forfeited | (91,620 | ) | 45.87 | |||||
|
| |||||||
Options outstanding November 30, 2018 | 2,591,231 | 48.40 |
Weighted- | ||||||||
Average | ||||||||
(Options in thousands) | Shares | Exercise Price | ||||||
Options outstanding June 1, 2019 | 2,385 | $ | 49.37 | |||||
Granted | — | — | ||||||
Exercised | (196 | ) | 41.51 | |||||
Forfeited | (6 | ) | 62.70 | |||||
Options outstanding August 31, 2019 | 2,183 | $ | 50.04 |
FY 2019 | FY 2018 | |||||||
Risk-free interest rate | 2.6 | % | 1.6 | % | ||||
Expected dividend yield | 0.0 | % | 0.0 | % | ||||
Expected stock price volatility | 27.0 | % | 27.2 | % | ||||
Expected option life | 3.5 years | 4.0 years |
NaN options were granted in the first quarter of fiscal year 2020.
FY 2019 | ||||
Risk-free interest rate | 2.6 | % | ||
Expected dividend yield | 0.0 | % | ||
Expected stock price volatility | 27.0 | % | ||
Expected option life | 3.5 years |
On September 1, 2017, the Company acquired the assets of The University of Queensland Animal Genetics Laboratory, an animal genomics laboratory located near Brisbane, Australia. This acquisition is intended to accelerate the growth of the Company’s animal genomics business in Australia and New Zealand. Consideration for the purchase was $2,063,000; $468,000 was paid in cash on the acquisition date with the remainder due in annual installments over the next five years. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $19,000, equipment of $419,000,non-current liabilities of $1,629,000, intangible assets of $902,000 (with an estimated life of5-15 years) and the remainder to goodwill(non-deductible for tax purposes). These values are Level 3 fair value measurements. The new business, renamed Neogen Australasia, continues to operate in its current location, reporting within the Animal Safety segment.
measurements. Since February 2019, $180,000 has been paid to the former owners as contingent consideration from the accrual. Manufacturing of these products was moved to the Company’s Lansing, Michigan location in October 2018, reporting within the Food Safety segment.
August 31, 2019.
an offsetting charge to operations in the period recorded.
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, 2018 | November 30, 2018 | |||||||||||||||
Revenue % Increase/(Decrease) USD | Revenue % Increase/(Decrease) Local Currency | Revenue % Increase USD | Revenue % Increase Local Currency | |||||||||||||
Neogen Europe (including Lab M & Quat-Chem) | 8 | % | 10 | % | 13 | % | 13 | % | ||||||||
Neogen do Brasil (including Deoxi & Rogama) | 6 | % | 29 | % | 23 | % | 48 | % | ||||||||
Neogen Latinoamerica | (7 | )% | (2 | )% | 9 | % | 15 | % | ||||||||
Neogen China | 1 | % | 6 | % | 4 | % | 6 | % | ||||||||
Neogen India | 83 | % | 105 | % | 81 | % | 99 | % |
Revenue | Revenue | |||||||
% Inc (Dec) | % Inc (Dec) | |||||||
USD | Local Currency | |||||||
Neogen Europe (including Lab M & Quat-Chem) | (4 | )% | 1 | % | ||||
Neogen do Brasil (including Deoxi & Rogama) | (16 | )% | (15 | )% | ||||
Neogen Latinoamerica | 5 | % | 5 | % | ||||
Neogen China | (18 | )% | (14 | )% | ||||
Neogen India | 22 | % | 24 | % | ||||
Neogen Canada | 98 | % | 99 | % | ||||
Neogen Australasia | 21 | % | 30 | % |
The increaseAustralian dollar. Neogen Europe’s 4% decline in revenues at Neogen Europe was led by a 30% increase in sales of genomics services, primarilyrevenue in the porcine and bovine markets; genomics sales increased 28% for the year to date. Neogen Europe also had strong sales of our products to detect spoilage organisms in processed foods,first quarter was primarily due to equipment placements, andListeria Right Now. At Neogen do Brasil,a 2% decrease in sales of natural toxins test kits increased 62% and 73% for the three and six months, respectively, both compared to the same periods a year ago, as we continued to gain significant new business testing for the presence of aflatoxin in corn. Sales of forensic test kits increased 166% in the second quarter and year to date sales more than tripled over thekits; prior year sales in this category were enhanced due to a mild deoxynivalenol (DON) outbreak in France that contributed to increased demand from commercial laboratories locatedtesting in Brazil and business that shifted from U.S. labs to labs in Brazil.
Service revenue was $17.5 million inperiod. Additionally, the secondfirst quarter of fiscal 2019 an increase of 8% over prior year second quarter revenues of $16.2 million, including a minor contribution from the September 2018 acquisition of Livestock Genetics Services. For the six month period, service revenue was $34.2 million, an increase of 11% over prior year revenues of $30.9 million. Year to date revenues were aided by the Livestock Genetics Services acquisition and the September 2017 acquisition of Neogen Australasia. The growth was led by increases in sales of genomic services to the global beef markets, and porcine markets in Europe.
Revenues
Three Months Ended November 30, | ||||||||||||||||
2018 | 2017 | Increase/ (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 20,571 | $ | 18,989 | $ | 1,582 | 8 | % | ||||||||
Bacterial & General Sanitation | 10,822 | 9,324 | 1,498 | 16 | % | |||||||||||
Culture Media & Other | 12,191 | 11,041 | 1,150 | 10 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 5,943 | 6,126 | (183 | ) | (3 | )% | ||||||||||
Genomics Services | 4,223 | 3,726 | 497 | 13 | % | |||||||||||
|
|
|
|
|
| |||||||||||
$ | 53,750 | $ | 49,206 | $ | 4,544 | 9 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,891 | $ | 2,394 | $ | (503 | ) | (21 | )% | |||||||
Veterinary Instruments & Disposables | 11,683 | 11,687 | (4 | ) | 0 | % | ||||||||||
Animal Care & Other | 9,064 | 8,237 | 827 | 10 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 18,673 | 17,786 | 887 | 5 | % | |||||||||||
Genomics Services | 12,037 | 11,388 | 649 | 6 | % | |||||||||||
|
|
|
|
|
| |||||||||||
$ | 53,348 | $ | 51,492 | $ | 1,856 | 4 | % | |||||||||
|
|
|
|
|
| |||||||||||
Total Revenues | $ | 107,098 | $ | 100,698 | $ | 6,400 | 6 | % | ||||||||
|
|
|
|
|
|
Six Months Ended November 30, | ||||||||||||||||
2018 | 2017 | Increase/ (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 39,409 | $ | 38,153 | $ | 1,256 | 3 | % | ||||||||
Bacterial & General Sanitation | 21,288 | 18,443 | 2,845 | 15 | % | |||||||||||
Culture Media & Other | 24,408 | 21,173 | 3,235 | 15 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 12,569 | 10,817 | 1,752 | 16 | % | |||||||||||
Genomics Services | 8,259 | 6,911 | 1,348 | 20 | % | |||||||||||
|
|
|
|
|
| |||||||||||
$ | 105,933 | $ | 95,497 | $ | 10,436 | 11 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 3,971 | $ | 4,820 | $ | (849 | ) | (18 | )% | |||||||
Veterinary Instruments & Disposables | 22,087 | 22,174 | (87 | ) | 0 | % | ||||||||||
Animal Care & Other | 15,617 | 15,649 | (32 | ) | 0 | % | ||||||||||
Rodenticides, Insecticides & Disinfectants | 35,664 | 35,167 | 497 | 1 | % | |||||||||||
Genomics Services | 23,452 | 21,600 | 1,852 | 9 | % | |||||||||||
|
|
|
|
|
| |||||||||||
$ | 100,791 | $ | 99,410 | $ | 1,381 | 1 | % | |||||||||
|
|
|
|
|
| |||||||||||
Total Revenues | $ | 206,724 | $ | 194,907 | $ | 11,817 | 6 | % | ||||||||
|
|
|
|
|
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Food Safety
Natural Toxins, Allergens & Drug Residues –Sales in this category increased 8% and 3% for the three and six month periods ended November 30, 2018, respectively, compared to the same periods in the prior year. For the second quarter, natural toxin test kit revenues increased 17%, due to strong sales of aflatoxin test kits in Brazil and DON test kits and readers in Canada, and sales of our allergens product line increased 6%. This was partially offset by a 6% decrease in dairy drug residue test kits caused by lower demand in Europe and timing of distributor orders.
Bacterial & General Sanitation –Revenues in this category increased 16% in the second quarter and 15% for the year to date, both compared to the same periods in the prior year. In the second quarter, sales of test kits to detect pathogens increased 24%, as we continued to gain new business with ourListeriaRight Now test kit that launched in fiscal 2018. Sales of products to detect spoilage organisms in processed foods increased 24%, due to equipment placements and related consumables, and sales of our AccuPoint sanitation monitoring product line increased 6%.
Culture Media & Other – Sales in this category increased 10% in the quarter ended November 30, 2018 compared to the second quarter in the prior year; the year to date increase is 15%. In the second quarter, sales of Neogen Culture Media, formerly marketed as the Acumedia and Lab M brands, increased 8%, aided in part by the August 2018 acquisition of Clarus Labs, which consists of the Colitag product and reports in the culture media product line. This category also includes forensic test kits sold within Brazil, which increased significantly in both the second quarter and for the year to date due to increased demand from commercial laboratories in that country and a shift in business from labs in the U.S. to labs in Brazil.
Rodenticides, Insecticides & Disinfectants –Revenues in this category decreased 3% in the second quarter of fiscal 2019 compared to the same period a year ago, due to order timing of rodenticides from customers in Mexico, as those sales were strong in the first quarter. Partially offsetting this were increases of disinfectant sales to customers in Europe, China and India. Year to date revenues increased 16% due to the strength of rodenticide sales in Mexico. The year to date increase also included the final shipment of a large insecticide order in the first quarter to a government health organization in Brazil; we do not believe this business, which was part of a bid won in fiscal 2018, will recur in fiscal 2019.
Genomics Services –Sales in this category increased 13% and 20% for the three and six month periods ended November 30, 2018, respectively. The increase came primarily from higher sales in the European porcine and bovine markets; lower sales in Mexico partially offset this increase due to a large research project completed in the second quarter of fiscal 2018equipment sale that did not recur in the current year.
Animal Partially offsetting these declines were strong sales of cleaners and disinfectants.
Three Months ended August 31, | ||||||||||||||||
Increase/ | ||||||||||||||||
2019 | 2018 | (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 20,115 | $ | 18,838 | $ | 1,277 | 7 | % | ||||||||
Bacterial & General Sanitation | 10,316 | 10,467 | (151 | ) | (1 | )% | ||||||||||
Culture Media & Other | 11,279 | 12,217 | (938 | ) | (8 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 5,449 | 6,625 | (1,176 | ) | (18 | )% | ||||||||||
Genomics Services | 3,862 | 4,036 | (174 | ) | (4 | )% | ||||||||||
$ | 51,021 | $ | 52,183 | $ | (1,162 | ) | (2 | )% | ||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,723 | $ | 2,080 | $ | (357 | ) | (17 | )% | |||||||
Veterinary Instruments & Disposables | 11,336 | 10,404 | 932 | 9 | % | |||||||||||
Animal Care & Other | 6,405 | 6,398 | 7 | 0 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 16,718 | 17,146 | (428 | ) | (2 | )% | ||||||||||
Genomics Services | 14,221 | 11,415 | 2,806 | 25 | % | |||||||||||
$ | 50,403 | $ | 47,443 | $ | 2,960 | 6 | % | |||||||||
Total Revenues | $ | 101,424 | $ | 99,626 | $ | 1,798 | 2 | % | ||||||||
Life Sciences
Veterinary Instruments & Disposables –Revenues in this category were flat comparedsold through our Food Safety operations decreased 18% in the first quarter of fiscal 2020. The decrease was due primarily to the prior year, for both the three and six month periods ended November 30, 2018. Protective wear sales decreased 25%final shipment of a large
Animal Care & Other –Sales of these products increased 10% in the second quarter but were flat for the year to date. For the second quarter, the growth was led by small animal supplements, which rose 49%, and antibiotics, up 24%Mexico, both due to order timing from distributors, also contributed to the decrease in this category in the first quarter. Partially offsetting this was a large distributor.6% increase in sales at U.K.-based Quat-Chem and an increase in sales of disinfectant products in China, the result of increased demand in the pork market caused by the African swine fever virus outbreak in that country.
Rodenticides, Insecticides & Disinfectants –Revenuesincreased legal and professional fees, depreciation related to investments in this category increased 5%information technology, and 1% for the threehigher stock-based compensation expense. Research and six month periods ended November 30, 2018, respectively. In the second quarter, insecticides sales increased 22% due to new private label business and increased demanddevelopment expense was $3.7 million in the U.S. Cleaners and disinfectants increased 7%, due to market share gains in the U.S., while rodenticide sales were flat, with new business earned offset by the lossfirst quarter, an increase of toll manufacturing business from the prior year.
Genomics Services –Sales in this category increased 6% in the second quarter and 9% for the year to date period, both$869,000 compared to the prior year; the year to date increase was aided by three months of sales from the September 2017 acquisition of Neogen Australasia. For both the three and six month periods, growth in the beef cattle markets was offset by revenue decreases in U.S. poultry and porcine markets, resulting from a shift to lower priced chips and services.
Gross Margin
Gross margin was 46.7% in the second quarter of fiscal 2019 compared to 47.9% in the same quarter a year ago. The decline in gross margin is due to product mix within the Animal Safety segment, with higher revenue increases on product lines with lower gross margins than the historical average within this segment. Gross margin for the six month period ended November 30, 2018 was 46.8% compared to 47.8% in the same period of the prior year, for the same reasons.
Operating Expenses
Operating expenses were $31.8 million in the second quarter, compared to $30.3 million in the same quarter of the prior year, an increase of $1.5 million, or 5%. Sales and marketing expenses increased $1.7 million, or 10%, primarily due to increases in salaries and related personnel costs, shipping expense, and bad debt expense due to the prior year reversal of reserves for collected receivables. General and administrative expense decreased $370,000, or 4%, which includes recognition of $240,000 of state economic incentive credits in the current quarter; no credits were recognized in the second quarter of the prior year. The largest increasesincrease is primarily the result of development spending on a number of new products, which are expected to be launched in generallate fiscal 2020 and administrative were salaries, stock option expense, and recruiting fees, offset by a decrease in outside contracted services related to IT projects, and lower amortization expense due toone-time adjustments related to acquisition valuations recorded in the second quarter of the prior year. Research and development expense increased $200,000, or 7%, led by increases in salaries and personnel related costs. For the year to date, operating expenses increased $3.3 million, or 6%.
early fiscal 2021.
increase in research and development spending in the current quarter.
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
(dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Interest income (net of expense) | $ | 1,028 | $ | 429 | $ | 1,955 | $ | 798 | ||||||||
Foreign currency transactions | (72 | ) | 497 | (458 | ) | 962 | ||||||||||
Royalty income | 37 | 75 | 59 | 75 | ||||||||||||
Deoxi contingent consideration | — | (50 | ) | (9 | ) | (99 | ) | |||||||||
Quat-Chem contingent consideration | 422 | — | 422 | — | ||||||||||||
Other | 40 | 104 | 144 | 131 | ||||||||||||
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Total Other Income | $ | 1,455 | $ | 1,055 | $ | 2,113 | $ | 1,867 | ||||||||
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Three Months ended August 31, | ||||||||
(dollars in thousands) | 2019 | 2018 | ||||||
Interest income (net of expense) | $ | 1,510 | $ | 927 | ||||
Foreign currency transactions | (117 | ) | (386 | ) | ||||
Royalty income | 1 | 22 | ||||||
Deoxi contingent consideration | — | (9 | ) | |||||
Other | (7 | ) | 104 | |||||
Total Other Income | $ | 1,387 | $ | 658 | ||||
operate; all of the currencies in those countries depreciated against the dollar during the comparative quarters.
Net Income
Net income was $16.1 million in the second quarter of fiscal 2019, compared to $17.1 million in the same period in the prior year. Earnings in the prior year quarter included $4.2 million in tax benefitsbenefit resulting from the exercise of stock options; this benefit was $484,000$769,000 in the current year quarter. Forfirst quarter of fiscal 2020 compared to $2.3 million in the year to date, net income increased 8% from $29.0 million to $31.3 million; six month netfirst quarter of the prior year.
options, due to lower option exercise activity in the first quarter of this fiscal year compared to the same period a year ago.
Accounts2020.
2020.
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31.1 | ||||
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101.INS | Inline XBRL Instance Document | |||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF | Inline XBRL Taxonomy Extension Definition Document | |||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
EX-104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101 |
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NEOGEN CORPORATION | ||||||
(Registrant) | ||||||
Dated: September 26, 2019 | ||||||
/s/ John E. Adent | ||||||
John E. Adent | ||||||
President & Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
Dated: September 26, 2019 | ||||||
/s/ Steven J. Quinlan | ||||||
Steven J. Quinlan | ||||||
Vice President & Chief Financial Officer | ||||||
(Principal Financial Officer and Principal Accounting Officer) |
28