☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR |
2019
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Michigan 38-2367843
(517)
Title of each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller Reporting Company | ☐ | |||
Emerging growth company | ☐ |
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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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November 30, | May 31, | |||||||
2019 | 2019 | |||||||
Unaudited | Audited | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 66,414 | $ | 41,688 | ||||
Marketable securities | 247,191 | 225,836 | ||||||
Accounts receivable, less allowance of $ 1,700 and $1,700 at November 30, 2019 and May 31, 2019, respectively | 85,377 | 82,582 | ||||||
Inventories | 86,406 | 85,992 | ||||||
Prepaid expenses and other current assets | 14,795 | 13,431 | ||||||
Total Current Assets | 500,183 | 449,529 | ||||||
Net Property and Equipment | 77,150 | 74,847 | ||||||
Other Assets | ||||||||
Goodwill | 103,610 | 103,619 | ||||||
Other non-amortizable intangible assets | 15,495 | 15,649 | ||||||
Amortizable intangible and other assets, net of accumulated amortization of $ 41,923 and $40,835 at November 30, 2019 and May 31, 2019, respectively | 54,153 | 52,096 | ||||||
Total Assets | $ | 750,591 | $ | 695,740 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 19,567 | $ | 19,063 | ||||
Accrued compensation | 5,689 | 7,085 | ||||||
Income taxes | 756 | 601 | ||||||
Other accruals | 12,779 | 11,502 | ||||||
Total Current Liabilities | 38,791 | 38,251 | ||||||
Deferred Income Taxes | 15,591 | 15,618 | ||||||
Other Non-Current Liabilities | 5,292 | 3,972 | ||||||
Total Liabilities | 59,674 | 57,841 | ||||||
Commitments and Contingencies (note 8) | ||||||||
Equity | ||||||||
Preferred stock, $ 1.00 par value,100,000 shares authorized,NaN issued and outstanding | — | — | ||||||
Common stock, $ 0.16 par value,120,000,000 shares authorized,52,710,633 and52,216,589 shares issued and outstanding at November 30, 2019 and May 31, 2019, respectively | 8,434 | 8,355 | ||||||
Additional paid-in capital | 244,226 | 221,937 | ||||||
Accumulated other comprehensive loss | (11,918 | ) | (11,640 | ) | ||||
Retained earnings | 450,175 | 419,247 | ||||||
Total Stockholders’ Equity | 690,917 | 637,899 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 750,591 | $ | 695,740 | ||||
Three Months Ended 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 | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | ||||||||||||||||
Product revenues | $ | 87,387 | $ | 89,562 | $ | 169,335 | $ | 172,522 | ||||||||
Service revenues | 20,416 | 17,536 | 39,892 | 34,202 | ||||||||||||
Total Revenues | 107,803 | 107,098 | 209,227 | 206,724 | ||||||||||||
Cost of Revenues | ||||||||||||||||
Cost of product revenues | 45,559 | 47,305 | 87,590 | 90,255 | ||||||||||||
Cost of service revenues | 11,218 | 9,760 | 22,417 | 19,707 | ||||||||||||
Total Cost of Revenues | 56,777 | 57,065 | 110,007 | 109,962 | ||||||||||||
Gross Margin | 51,026 | 50,033 | 99,220 | 96,762 | ||||||||||||
Operating Expenses | ||||||||||||||||
Sales and marketing | 17,988 | 18,499 | 35,531 | 35,732 | ||||||||||||
General and administrative | 10,985 | 10,121 | 21,684 | 20,319 | ||||||||||||
Research and development | 3,781 | 3,167 | 7,469 | 5,986 | ||||||||||||
Total Operating Expenses | 32,754 | 31,787 | 64,684 | 62,037 | ||||||||||||
Operating Income | 18,272 | 18,246 | 34,536 | 34,725 | ||||||||||||
Other Income (Expense) | ||||||||||||||||
Interest income | 1,271 | 1,028 | 2,781 | 1,955 | ||||||||||||
Other income (expense) | (317 | ) | 427 | (439 | ) | 158 | ||||||||||
Total Other Income | 954 | 1,455 | 2,342 | 2,113 | ||||||||||||
Income Before Taxes | 19,226 | 19,701 | 36,878 | 36,838 | ||||||||||||
Provision for Income Taxes | 2,950 | 3,650 | 5,950 | 5,550 | ||||||||||||
Net Income | $ | 16,276 | $ | 16,051 | $ | 30,928 | $ | 31,288 | ||||||||
Net Income Per Share | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.31 | $ | 0.59 | $ | 0.60 | ||||||||
Diluted | $ | 0.31 | $ | 0.31 | $ | 0.59 | $ | 0.60 | ||||||||
Three Months Ended 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 | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income | $ | 16,276 | $ | 16,051 | $ | 30,928 | $ | 31,288 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
currency translation adjustments | 2,367 | 290 | (691 | ) | (2,488 | ) | ||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
unrealized gain (loss) on marketable securities | (149 | ) | — | 413 | — | |||||||||||
Total comprehensive income | $ | 18,494 | $ | 16,341 | $ | 30,650 | $ | 28,800 | ||||||||
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 | Income (Loss) | Earnings | Total | |||||||||||||||||||
Balance at May 31, 2019 | 52,217 | $ | 8,355 | $ | 221,937 | $ | (11,640 | ) | $ | 419,247 | $ | 637,899 | ||||||||||||
Issuance of shares under share-based compensation plan | 196 | 30 | 9,683 | 9,713 | ||||||||||||||||||||
Issuance of shares under employee stock purchase plan | 10 | 2 | 536 | 538 | ||||||||||||||||||||
Net income for the three months ended August 31, 2019 | 14,652 | 14,652 | ||||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2019 | (2,496 | ) | (2,496 | ) | ||||||||||||||||||||
Balance at August 31, 2019 | 52,423 | $ | 8,387 | $ | 232,156 | $ | (14,136 | ) | $ | 433,899 | $ | 660,306 | ||||||||||||
Issuance of shares under share-based compensation plan | 288 | 47 | 12,070 | 12,117 | ||||||||||||||||||||
Net income for the three months ended November 30, 2019 | 16,276 | 16,276 | ||||||||||||||||||||||
Other comprehensive income for the three months ended November 30, 2019 | 2,218 | 2,218 | ||||||||||||||||||||||
Balance at November 30, 2019 | 52,711 | $ | 8,434 | $ | 244,226 | $ | (11,918 | ) | $ | 450,175 | $ | 690,917 | ||||||||||||
Balance at May 31, 2018 | 51,736 | $ | 8,278 | $ | 202,572 | $ | (9,746 | ) | $ | 359,071 | $ | 560,175 | ||||||||||||
Issuance of shares under share-based compensation plan | 251 | 40 | 8,433 | 8,473 | ||||||||||||||||||||
Issuance of shares under employee stock purchase plan | 8 | 2 | 517 | 519 | ||||||||||||||||||||
Net income for the three months ended August 31, 2018 | 15,237 | 15,237 | ||||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2018 | (2,778 | ) | (2,778 | ) | ||||||||||||||||||||
Balance at August 31, 2018 | 51,995 | $ | 8,320 | $ | 211,522 | $ | (12,524 | ) | $ | 374,308 | $ | 581,626 | ||||||||||||
Issuance of shares under share-based compensation plan | 87 | 14 | 4,093 | 4,107 | ||||||||||||||||||||
Net income for the three months ended November 30, 2018 | 16,051 | 16,051 | ||||||||||||||||||||||
Other comprehensive income for the three months ended November 30, 2018 | 290 | 290 | ||||||||||||||||||||||
Balance at November 30, 2018 | 52,082 | $ | 8,334 | $ | 215,615 | $ | (12,234 | ) | $ | 390,359 | $ | 602,074 | ||||||||||||
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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Six Months Ended | ||||||||
November 30, | ||||||||
2019 | 2018 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Income | $ | 30,928 | $ | 31,288 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 8,985 | 8,597 | ||||||
Share-based compensation | 3,155 | 2,831 | ||||||
Change in operating assets and liabilities, net of business acquisitions: | ||||||||
Accounts receivable | (2,483 | ) | (3,615 | ) | ||||
Inventories | (103 | ) | (3,787 | ) | ||||
Prepaid expenses and other current assets | (1,323 | ) | (2,025 | ) | ||||
Accounts payable, accruals and other changes | 1,313 | (706 | ) | |||||
Net Cash From Operating Activities | 40,472 | 32,583 | ||||||
Cash Flows For Investing Activities | ||||||||
Purchases of property, equipment and other assets | (12,806 | ) | (6,720 | ) | ||||
Proceeds from the sale of marketable securities | 199,708 | 179,839 | ||||||
Purchases of marketable securities | (220,528 | ) | (191,488 | ) | ||||
Business acquisitions, net of cash acquired | — | (4,903 | ) | |||||
Net Cash For Investing Activities | (33,626 | ) | (23,272 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Exercise of stock options and issuance of employee stock purchase plan shares | 19,213 | 10,268 | ||||||
Net Cash From Financing Activities | 19,213 | 10,268 | ||||||
Effect of Exchange Rates on Cash | (1,333 | ) | (1,068 | ) | ||||
Net Increase In Cash and Cash Equivalents | 24,726 | 18,511 | ||||||
Cash and Cash Equivalents, Beginning of Period | 41,688 | 83,074 | ||||||
Cash and Cash Equivalents, End of Period | $ | 66,414 | $ | 101,585 | ||||
Share and per share amounts reflect the December 29, 20174-for-3 stock split as if it took place at the beginning of the period presented.
2019.
Revenue Recognition
Classification of Cash Receipts and Payments
In August 2016, the FASB issued ASU No.2016-15—Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The amendments in ASU2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows. The amendments in ASU2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted this ASU on June 1, 2018; the impact on our consolidated financial statements was immaterial.
Leases
In February 2016, the FASB issued ASU No.2016-02—Leases to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and aright-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessor have not significantly changed from previous U.S. GAAP. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018; 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. ASUearnings. Earlyearnings; early adoption is permitted. We doThe Company does not believe adoption of this guidance will have an impact on ourits consolidated financial statements.
adjustments and unrealized gains or losses on marketable securities.
2019.
accounts
Long Lived
5.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law making significant changes to the Internal Revenue Code. Changes include a federal corporate tax rate reduction from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and aone-time transition tax on the mandatory deemed repatriation of foreign earnings. The Tax Act also includes a provision to tax global intangible low taxed income (“GILTI”) of foreign subsidiaries, which became effective for us beginning June 1, 2018.
Revenue Recognition
In May 2014,February 2016, the FASB issued ASU No.2014-09—Revenue from Contracts with Customers (Topic 606). The new standard outlines 2016-02—Leases, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a single comprehensive model for entitiesliability to make lease payments (the lease liability) and a right-of-use asset representing its right to use in accountingthe underlying asset for revenuethe lease term. The recognition, measurement and presentation of expenses and cash flows arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. In April 2016, the FASB issued Accounting Standards UpdateNo. 2016-10— Revenuea lease by a lessor have not significantly changed from Contracts with Customers (Topic 606), which amends and adds clarity to certain aspects of the guidance set forth inprevious U.S. GAAP. This ASU2014-09 related to identifying performance obligations and licensing. The guidance became was effective for the Companyannualperiods, including interim periods within those annual periods, beginning after December 15, 2018. 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.
November 30, 2019 | ||||
(in thousands) | ||||
Right of use - assets | $ | 2,034 | ||
Lease liabilities - current | 585 | |||
Lease liabilities - non-current | 1,456 |
November 30, 2019 | ||||
Weighted average remaining lease term | 2.5 years | |||
Weighted average discount rate | 3.5 | % |
Three Months Ended November 30, 2019 | Six Months Ended November 30, 2019 | |||||||
(in thousands) | (in thousands) | |||||||
Operating leases | $ | 333 | $ | 573 | ||||
Short term leases | 34 | 81 | ||||||
Total lease expense | $ | 367 | $ | 654 | ||||
We derive revenue from two primary sources — product revenue and service revenue.
Product revenue consists primarily of shipments of:
Amount | ||||
(in thousands) | ||||
Years ending May 31, | ||||
2020 (1) | $ | 589 | ||
2021 | 917 | |||
2022 | 358 | |||
2023 | 169 | |||
2024 | 95 | |||
2025 and thereafter | 26 | |||
Total lease payments | 2,154 | |||
Less: imputed interest | 114 | |||
Total lease liabilities | $ | 2,040 | ||
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;
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,
(1) | Excluding the six months ended November 30, 2019 . |
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 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
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 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
$ | 53,348 | $ | 51,492 | $ | 100,791 | $ | 99,410 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total Revenues | $ | 107,098 | $ | 100,698 | $ | 206,724 | $ | 194,907 | ||||||||
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|
|
|
|
|
|
Restatement of Previously Issued Financial Statements
The Company has historically classified certain variable consideration components resulting from volume rebates, distributor support, and other marketing discounts as cost of 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 prior periods that the misstatements were clearly immaterial, individually and in the aggregate, to each of the reporting periods affected. The Company began properly classifying these items as contra revenues beginning in the three-month period ended August 31, 2018, the first quarter of the Company’s current fiscal year, and has revised the prior year’s quarter andyear-to-date periods to conform to the current period presentation. These immaterial adjustments had no impact on our operating income, income before taxes, net income or reported earnings per share, and no change to stockholders’ equity.
The effects of the revisions on the line items within our unaudited consolidated statements of income for the three and 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 |
Three Months ended November 30, | Six Months ended November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 20,681 | $ | 20,571 | $ | 40,796 | $ | 39,409 | ||||||||
Bacterial & General Sanitation | 11,615 | 10,822 | 21,931 | 21,288 | ||||||||||||
Culture Media & Other | 12,757 | 12,191 | 24,037 | 24,408 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 7,447 | 5,943 | 12,896 | 12,569 | ||||||||||||
Genomics Services | 4,354 | 4,223 | 8,216 | 8,259 | ||||||||||||
$ | 56,854 | $ | 53,750 | $ | 107,876 | $ | 105,933 | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,803 | $ | 1,891 | $ | 3,525 | $ | 3,971 | ||||||||
Veterinary Instruments & Disposables | 10,486 | 11,683 | 21,822 | 22,087 | ||||||||||||
Animal Care & Other | 7,787 | 8,948 | 14,193 | 15,346 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 16,186 | 18,789 | 32,904 | 35,935 | ||||||||||||
Genomics Services | 14,687 | 12,037 | 28,907 | 23,452 | ||||||||||||
$ | 50,949 | $ | 53,348 | $ | 101,351 | $ | 100,791 | |||||||||
Total Revenues | $ | 107,803 | $ | 107,098 | $ | 209,227 | $ | 206,724 | ||||||||
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 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total cost of revenues | 212,000 | (342 | ) | 211,658 | 189,626 | (273 | ) | 189,353 | ||||||||||||||||
Gross margin | 190,252 | (3,980 | ) | 186,272 | 171,968 | (3,044 | ) | 168,924 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Sales and marketing | 70,909 | (3,980 | ) | 66,929 | 62,424 | (3,044 | ) | 59,380 | ||||||||||||||||
Total operating expenses | 120,058 | (3,980 | ) | 116,078 | 107,023 | (3,044 | ) | 103,979 | ||||||||||||||||
Operating income | 70,194 | — | 70,194 | 64,945 | — | 64,945 |
The revisions had no impact on our audited consolidated balance sheets as of May 31, 2018 and 2017 and no impact on our unaudited consolidated statements of equity or unaudited consolidated statements of cash flows for the three and 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 | |||||
|
|
|
|
November 30, | May 31, | |||||||
2019 | 2019 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 43,316 | $ | 41,594 | ||||
Work-in-process | 6,077 | 5,581 | ||||||
Finished and purchased goods | 37,013 | 38,817 | ||||||
$ | 86,406 | $ | 85,992 | |||||
Three Months Ended | 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 | ||||||||||||
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|
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|
|
| |||||||||
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 | ||||||||
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|
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|
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| |||||||||
Diluted | $ | 0.31 | $ | 0.33 | $ | 0.60 | $ | 0.56 | ||||||||
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|
|
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Numerator for basic and diluted net income per share: | ||||||||||||||||
Net income attributable to Neogen | $ | 16,276 | $ | 16,051 | $ | 30,928 | $ | 31,288 | ||||||||
Denominator for basic net income per share: | ||||||||||||||||
Weighted average shares | 52,557 | 52,019 | 52,355 | 51,820 | ||||||||||||
Effect of dilutive stock options | 319 | 572 | 357 | 721 | ||||||||||||
Denominator for diluted net income per share | 52,876 | 52,591 | 52,712 | 52,541 | ||||||||||||
Net income attributable to Neogen per share: | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.31 | $ | 0.59 | $ | 0.60 | ||||||||
Diluted | $ | 0.31 | $ | 0.31 | $ | 0.59 | $ | 0.60 | ||||||||
Food Safety | Animal Safety | Corporate and Eliminations (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
As of and for the three months ended 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 November 30, 2019 | ||||||||||||||||
Product revenues to external customers | $ | 51,188 | $ | 36,199 | $ | — | $ | 87,387 | ||||||||
Service revenues to external customers | 5,666 | 14,750 | — | 20,416 | ||||||||||||
Total revenues to external customers | 56,854 | 50,949 | — | 107,803 | ||||||||||||
Operating income (loss) | 9,556 | 9,729 | (1,013 | ) | 18,272 | |||||||||||
Total assets | 212,928 | 224,058 | 313,605 | 750,591 | ||||||||||||
As of and for the three months ended November 30, 2018 | ||||||||||||||||
Product revenues to external customers | $ | 48,256 | $ | 41,306 | $ | — | $ | 89,562 | ||||||||
Service revenues to external customers | 5,494 | 12,042 | — | 17,536 | ||||||||||||
Total revenues to external customers | 53,750 | 53,348 | — | 107,098 | ||||||||||||
Operating income (loss) | 10,342 | 9,057 | (1,153 | ) | 18,246 | |||||||||||
Total assets | 201,291 | 218,231 | 240,970 | 660,492 |
(1) | Includes corporate assets, consisting principally of cash and cash equivalents, marketable securities, current and deferred tax accounts and overhead expenses not allocated to specific business segments. Also includes the elimination of intersegment transactions. |
Corporate and | ||||||||||||||||
Food | Animal | Eliminations | ||||||||||||||
Safety | Safety | (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
As of and for the six months ended November 30, 2019 | ||||||||||||||||
Product revenues to external customers | $ | 97,065 | $ | 72,270 | $ | — | $ | 169,335 | ||||||||
Service revenues to external customers | 10,810 | 29,082 | — | 39,892 | ||||||||||||
Total revenues to external customers | 107,875 | 101,352 | — | 209,227 | ||||||||||||
Operating income (loss) | 18,690 | 18,029 | (2,183 | ) | 34,536 | |||||||||||
As of and for the six months ended November 30, 2018 | ||||||||||||||||
Product revenues to external customers | $ | 95,189 | $ | 77,333 | $ | — | $ | 172,522 | ||||||||
Service revenues to external customers | 10,744 | 23,458 | — | 34,202 | ||||||||||||
Total revenues to external customers | 105,933 | 100,791 | — | 206,724 | ||||||||||||
Operating income (loss) | 21,215 | 15,763 | (2,253 | ) | 34,725 |
(1) |
|
Food Safety | Animal Safety | Corporate and Eliminations (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
For the 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 |
Includes . |
|
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 | Six months ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Revenues by Geographic Location | ||||||||||||||||
Domestic | $ | 63,317 | $ | 65,033 | $ | 126,657 | $ | 124,879 | ||||||||
International | 44,486 | 42,065 | 82,570 | 81,845 | ||||||||||||
Total revenue | 107,803 | 107,098 | 209,227 | 206,724 | ||||||||||||
Shares | Weighted- Average Exercise Price | |||||||
Options outstanding June 1, 2018 | 2,497,124 | $ | 42.63 | |||||
Granted | 525,750 | 62.93 | ||||||
Exercised | (340,023 | ) | 29.49 | |||||
Forfeited | (91,620 | ) | 45.87 | |||||
|
| |||||||
Options outstanding November 30, 2018 | 2,591,231 | 48.40 |
(Options in thousands) | Shares | Weighted- Average Exercise Price | ||||||
Options outstanding June 1, 2019 | 2,385 | $ | 49.37 | |||||
Granted | 561 | 63.91 | ||||||
Exercised | (493 | ) | 39.01 | |||||
Forfeited | (51 | ) | 56.26 | |||||
Options outstanding November 30, 2019 | 2,402 | $ | 54.76 |
FY 2019 | FY 2018 | |||||||
Risk-free interest rate | 2.6 | % | 1.6 | % | ||||
Expected dividend yield | 0.0 | % | 0.0 | % | ||||
Expected stock price volatility | 27.0 | % | 27.2 | % | ||||
Expected option life | 3.5 years | 4.0 years |
FY 20 20 | ||||
Risk-free interest rate | 1.9% | |||
Expected dividend yield | 0.0% | |||
Expected stock price volatility | 29.4% | |||
Expected option life | 3.5 years |
On September 1, 2017, the Company acquired the assets of The University of Queensland Animal Genetics Laboratory, an animal genomics laboratory located near Brisbane, Australia. This acquisition is intended to accelerate the growth of the Company’s animal genomics business in Australia and New Zealand. Consideration for the purchase was $2,063,000; $468,000 was paid in cash on the acquisition date with the remainder due in annual installments over the next five years. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $19,000, equipment of $419,000,non-current liabilities of $1,629,000, intangible assets of $902,000 (with an estimated life of5-15 years) and the remainder to goodwill(non-deductible for tax purposes). These values are Level 3 fair value measurements. The new business, renamed Neogen Australasia, continues to operate in its current location, reporting within the Animal Safety segment.
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.
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 | % |
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, 2019 | November 30, 2019 | |||||||||||||||
Revenue | Revenue | Revenue | Revenue | |||||||||||||
% Increase/(Decrease) | % Increase/(Decrease) | % Increase | % Increase | |||||||||||||
USD | Local Currency | USD | Local Currency | |||||||||||||
Neogen Europe (including Lab M & Quat-Chem) | 7 | % | 10 | % | 1 | % | 5 | % | ||||||||
Neogen do Brasil (including Deoxi & Rogama) | 20 | % | 27 | % | 0 | % | 4 | % | ||||||||
Neogen Latinoamerica | 5 | % | 5 | % | 5 | % | 5 | % | ||||||||
Neogen China | 40 | % | 43 | % | 10 | % | 14 | % | ||||||||
Neogen India | (1 | )% | (3 | )% | 8 | % | 7 | % | ||||||||
Neogen Canada | 329 | % | 334 | % | 181 | % | 184 | % | ||||||||
Neogen Australasia | 18 | % | 25 | % | 20 | % | 27 | % |
The increase in revenues at At Neogen Europe was led by a 30% increase in sales of genomics services, primarily in the porcine and bovine markets; genomicsLatinoamerica, sales increased 28%5% for the year to date. Neogen Europe also had strong sales of our products to detect spoilage organisms in processed foods, due to equipment placements, andListeria Right Now. At Neogen do Brasil, sales of natural toxins test kits increased 62% and 73% forboth the three and six months,month periods, respectively, bothas 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 the prior year, due to increased demand from commercial laboratories located in Brazilwith broad based strength across the diagnostics business somewhat offset by lower sales of cleaners and business that shifted from U.S. labs to labs in Brazil.
disinfectants throughout the distribution channel.
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 | % | |||||||||||
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|
|
|
|
| |||||||||||
$ | 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 | % | ||||||||
|
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|
|
|
|
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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|
|
|
Three Months Ended November 30, | ||||||||||||||||
Increase/ | ||||||||||||||||
2019 | 2018 | (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 20,681 | $ | 20,571 | $ | 110 | 1 | % | ||||||||
Bacterial & General Sanitation | 11,615 | 10,822 | 793 | 7 | % | |||||||||||
Culture Media & Other | 12,757 | 12,191 | 566 | 5 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 7,447 | 5,943 | 1,504 | 25 | % | |||||||||||
Genomics Services | 4,354 | 4,223 | 131 | 3 | % | |||||||||||
$ | 56,854 | $ | 53,750 | $ | 3,104 | 6 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,803 | $ | 1,891 | $ | (88 | ) | (5 | )% | |||||||
Veterinary Instruments & Disposables | 10,486 | 11,683 | (1,197 | ) | (10 | )% | ||||||||||
Animal Care & Other | 7,787 | 8,948 | (1,161 | ) | (13 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 16,186 | 18,789 | (2,603 | ) | (14 | )% | ||||||||||
Genomics Services | 14,687 | 12,037 | 2,650 | 22 | % | |||||||||||
$ | 50,949 | $ | 53,348 | $ | (2,399 | ) | (4 | )% | ||||||||
Total Revenues | $ | 107,803 | $ | 107,098 | $ | 705 | 1 | % | ||||||||
Six Months Ended November 30, | ||||||||||||||||
Increase/ | ||||||||||||||||
2019 | 2018 | (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 40,796 | $ | 39,409 | $ | 1,387 | 4 | % | ||||||||
Bacterial & General Sanitation | 21,931 | 21,288 | 643 | 3 | % | |||||||||||
Culture Media & Other | 24,037 | 24,408 | (371 | ) | (2 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 12,896 | 12,569 | 327 | 3 | % | |||||||||||
Genomics Services | 8,216 | 8,259 | (43 | ) | (1 | )% | ||||||||||
$ | 107,876 | $ | 105,933 | $ | 1,943 | 2 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 3,525 | $ | 3,971 | $ | (446 | ) | (11 | )% | |||||||
Veterinary Instruments & Disposables | 21,822 | 22,087 | (265 | ) | (1 | )% | ||||||||||
Animal Care & Other | 14,193 | 15,346 | (1,153 | ) | (8 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 32,904 | 35,935 | (3,031 | ) | (8 | )% | ||||||||||
Genomics Services | 28,907 | 23,452 | 5,455 | 23 | % | |||||||||||
$ | 101,351 | $ | 100,791 | $ | 560 | 1 | % | |||||||||
Total Revenues | $ | 209,227 | $ | 206,724 | $ | 2,503 | 1 | % | ||||||||
declined 18%.
higher throughput testing method.
Genomics Services –Salessales in this category increased 13% and 20%3%, as the prior year first quarter included a large
fiscal year as the U.S. dollar has strengthened against both the British pound and the Brazilian real; the Company has sizable genomics revenues in each of those currencies.
The prior year included sales to a commercial laboratory customer that were transferred to our Brazilian operation during the second quarter of fiscal 2019.
Animal Care & Other –Sales of these products increased 10% in the second quarter but were flat8% for the year to date. ForIn the second quarter, the growth was led by small animal supplements, which rose 49%, and antibiotics, up 24%care revenues decreased 14% due to orderlower sales to our larger U.S. distributors. For the year to date period, timing fromof adjustments to promotional programs with distributors, which are recorded as a large distributor. The increase incontra revenue within this category, also contributed to the second quarter was offset by an overall decrease in the first quarter, primarily due to order timing from large distributors.
decline.
our larger U.S. distributors as they worked to lower their inventory levels.
depreciation expense.
improvement.
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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|
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| |||||||||
Total Other Income | $ | 1,455 | $ | 1,055 | $ | 2,113 | $ | 1,867 | ||||||||
|
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|
|
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
(dollars in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Interest income (net of expense) | $ | 1,271 | $ | 1,028 | $ | 2,781 | $ | 1,955 | ||||||||
Foreign currency transactions | (352 | ) | (72 | ) | (469 | ) | (458 | ) | ||||||||
Royalty income | — | 37 | 1 | 59 | ||||||||||||
Deoxi contingent consideration | — | — | — | (9 | ) | |||||||||||
Quat-Chem contingent consideration | — | 422 | — | 422 | ||||||||||||
Other | 35 | 40 | 29 | 144 | ||||||||||||
Total Other Income | $ | 954 | $ | 1,455 | $ | 2,342 | $ | 2,113 | ||||||||
Net Income
Net income was $16.1 million ineffective rates recorded is 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 $1,204,000 in the second quarter of fiscal 2020 compared to $484,000 in the currentsecond quarter of the prior year. For the year quarter.to date, the benefit was $1,973,000 in fiscal 2020 compared to $2,774,000 in fiscal 2019; the prior year first quarter had significant stock option exercise due to a higher stock price and the timing of the expiration of the 2013 grant in August 2018.
rate.
Accounts2020.
2020.
3 | ||||
10 | ||||
31.1 | ||||
31.2 | ||||
32 | ||||
101.INS | Inline XBRL Instance Document | |||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF | Inline XBRL Taxonomy Extension Definition Document | |||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
EX-104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
| ||||||
NEOGEN CORPORATION | ||||||
(Registrant) | ||||||
Dated: December 27, 2019 | ||||||
/s/ John E. Adent | ||||||
John E. Adent | ||||||
President & Chief Executive |
Officer | ||||||
(Principal Executive Officer) | ||||||
Dated: December 27, 2019 | ||||||
/s/ Steven J. Quinlan | ||||||
Steven J. Quinlan | ||||||
Vice President & Chief Financial Officer | ||||||
(Principal Financial Officer and Principal Accounting Officer) |
28