Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2020.28, 2021.
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
    
    
    
    
For the transition period from
to
    
to
    
Commission file number
0-17988
 
Neogen Corporation
(Exact name of registrant as specified in its charter)
 
Michigan
 
38-2367843
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification Number)
620 Lesher Place
Lansing, Michigan 48912
(Address of principal executive offices, including zip code)
(517)
372-9200
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each Class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, $0.16 par value per share
 
NEOG
 
NASDAQ Global Select Market
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.    YES ☒    NO 
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES 
☒
    NO 
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated
filer, (see definitiona smaller reporting company, or an emerging growth company. See the definitions of “accelerated filer and large“large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act):Act.
Large accelerated filer ☒  
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated
 filer
☐
Smaller Reporting Company
 ☐
Non-accelerated
filer		 ☐  Smaller Reporting Company ☐
Emerging growth company ☐   
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act):    YES 
☐
    NO 
☒
As of February 29, 202028, 2021 there were 52,910,83253,511,262 shares of Common Stock outstanding.
 
Table of Contents
NEOGEN CORPORATION AND SUBSIDIARIES
Table of Contents
PART I – FINANCIAL INFORMATION
Item 1. Interim Consolidated Financial Statements
Neogen Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and
per share amounts)
         
 
February 29,
2020
  
 
 
 
 
May 31,
 
 
 
 

2019
 
 
Unaudited
  
Un
a
udited
 
Assets
      
Current Assets
      
Cash and cash equivalents
 $
  50,774
  $
41,688
 
Marketable securities
  
277,149
   
225,836
 
Accounts receivable, less allowance of $1,400 and $1,700 at February 29, 2020 and May 31, 2019, respectively
  
80,692
   
82,582
 
Inventories
  
89,244
   
85,992
 
Prepaid expenses and other current assets
  
17,016
   
13,431
 
         
Total Current Assets
  
514,875
   
449,529
 
Net Property and Equipment
  
78,394
   
74,847
 
Other Assets
      
Goodwill
  
109,761
   
103,619
 
Other
non-amortizable
intangible assets
  
15,425
   
15,649
 
Amortizable intangible and other assets, net of accumulated amortization of $43,397 and $40,835 at February 29,
2020
and May 31, 2019, respectively
  
55,046
   
52,096
 
         
Total Assets
 $
773,501
  $
695,740
 
         
Liabilities and Stockholders’ Equity
      
Current Liabilities
      
Accounts payable
 $
18,994
  $
19,063
 
Accrued compensation
  
5,596
   
7,085
 
Income taxes
  
1,479
   
601
 
Other accruals
  
13,066
   
11,502
 
         
Total Current Liabilities
  
39,135
   
38,251
 
Deferred Income Taxes
  
16,343
   
15,618
 
Other
Non-Current
Liabilities
  
6,152
   
3,972
 
         
Total Liabilities
  
61,630
   
57,841
 
Commitments and Contingencies (note 8)
      
Equity
      
Preferred stock, $1.00 par value, 100,000 shares authorized, 0ne issued and outstanding
  
—  
   
—  
 
Common stock, $0.16 par value, 120,000,000 shares authorized, 52,910,832 and 52,216,589 shares issued and outstanding at February 29, 2020 and May 31, 2019, respectively
  
8,466
   
8,355
 
Additional
paid-in
capital
  
254,537
   
221,937
 
Accumulated other comprehensive loss
  
(13,507
)   
(11,640
)
Retained earnings
  
462,375
   
419,247
 
         
Total Stockholders’ Equity
  
711,871
   
637,899
 
         
Total Liabilities and Stockholders’ Equity
 $
773,501
  $
695,740
 
         
 
   
February 28,
  
May 31,
 
   
2021
  
2020
 
   
Unaudited
    
Assets
         
Current Assets
         
Cash and cash equivalents
  $73,482  $66,269 
Marketable securities
   279,865   277,404 
Accounts receivable,
net of
 allowance of $1,400 and $1,350 at February 28, 2021 and May 31, 2020, respectively
   87,241   84,681 
Inventories
   99,267   95,053 
Prepaid expenses and other current assets
   15,449   13,999 
          
Total Current Assets
   555,304   537,406 
Net Property and Equipment
   97,981   78,671 
Other Assets
         
Right of use assets
   1,269   1,952 
Goodwill
   133,029   110,340 
Other
non-amortizable
intangible assets
   15,441   15,217 
Amortizable intangible and other assets, net of accumulated amortization of $50,998 and $44,690 at February 28, 2021 and May 31, 2020, respectively
   77,192   53,596 
          
Total Assets
  $880,216  $ 797,182 
          
Liabilities and Stockholders’ Equity
         
Current Liabilities
         
Accounts payable
  $23,257  $25,650 
Accrued compensation
   7,928   7,735 
Income taxes
   0     1,456 
Other accruals
   14,757   13,648 
          
Total Current Liabilities
   45,942   48,489 
Deferred Income Taxes
   21,276   18,125 
Other
Non-Current
Liabilities
   5,315   5,391 
          
Total Liabilities
   72,533   72,005 
Commitments and Contingencies (note 11)
   0    0  
Equity
         
Preferred stock, $1.00 par value, 100,000 shares authorized, 0ne issued and outstanding
   0     0   
Common stock, $0.16 par value, 120,000,000 shares authorized, 53,511,262 and 52,945,841 shares issued and outstanding at February 28, 2021 and May 31, 2020, respectively
   8,562   8,471 
Additional
paid-in
capital
   290,118   257,693 
Accumulated other comprehensive loss
   (14,841)   (19,709) 
Retained earnings
   523,844   478,722 
          
Total Stockholders’ Equity
   807,683   725,177 
          
Total Liabilities and Stockholders’ Equity
  $ 880,216  $797,182 
          
See notes to interim consolidated financial statements.
2
Table of Contents
Neogen Corporation and Subsidiaries
Consolidated Statements of Income (unaudited)
(in thousands, except per share amounts)
                 
 
Three 
Months
Ended
  
Nine Months Ended
 
 
February 29/28,
  
February 29/28,
 
 
2020
  
2019
  
2020
  
2019
 
Revenues
            
Product revenues
 $
77,736
  $
77,375
  $
247,071
  $
249,897
 
Service revenues
  
22,133
   
20,325
   
62,025
   
54,527
 
                 
Total Revenues
  
99,869
   
97,700
   
309,096
   
304,424
 
Cost of Revenues
            
Cost of product revenues
  
41,068
   
41,902
   
128,658
   
132,157
 
Cost of service revenues
  
13,471
   
11,170
   
35,888
   
30,877
 
                 
Total Cost of Revenues
  
54,539
   
53,072
   
164,546
   
163,034
 
                 
Gross Margin
  
45,330
   
44,628
   
144,550
   
141,390
 
                 
Operating Expenses
            
Sales and marketing
  
17,675
   
16,722
   
53,206
   
52,454
 
General and administrative
  
10,789
   
10,018
   
32,473
   
30,337
 
Research and development
  
3,823
   
3,249
   
11,292
   
9,235
 
                 
Total Operating Expenses
  
32,287
   
29,989
   
96,971
   
92,026
 
                 
Operating Income
  
13,043
   
14,639
   
47,579
   
49,364
 
                 
Other Income (Expense)
            
Interest income
  
1,600
   
1,335
   
4,381
   
3,290
 
Other income (expense)
  
(393
)  
649
   
(832
)  
807
 
                 
Total Other Income
  
1,207
   
1,984
   
3,549
   
4,097
 
                 
Income Before Taxes
  
14,250
   
16,623
   
51,128
   
53,461
 
Provision for Income Taxes
  
2,050
   
3,550
   
8,000
   
9,100
 
                 
Net Income
 $
12,200
  $
13,073
  $
43,128
  $
44,361
 
                 
Net Income Per Share
            
Basic
 $
0.23
  $
0.25
  $
0.82
  $
0.86
 
                 
Diluted
 $
0.23
  $
0.25
  $
0.82
  $
0.85
 
                 
 
                 
   
Three Months Ended
  
Nine Months Ended
 
   
February 28/29,
  
February 28/29,
 
   
2021
  
2020
  
2021
  
2020
 
Revenues
                 
Product revenues
  $92,816  $ 77,736  $ 273,288  $ 247,071 
Service revenues
   23,893   22,133   67,746   62,025 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total Revenues
   116,709   99,869   341,034   309,096 
Cost of Revenues
                 
Cost of product revenues
   49,466   41,068   145,336   128,658 
Cost of service revenues
   13,394   13,471   38,333   35,888 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total Cost of Revenues
   62,860   54,539   183,669   164,546 
   
 
 
  
 
 
  
 
 
  
 
 
 
Gross Margin
   53,849   45,330   157,365   144,550 
Operating Expenses
                 
Sales and marketing
   18,693   17,675   52,938   53,206 
General and administrative
   15,146   10,789   38,343   32,473 
Research and development
   4,236   3,823   12,170   11,292 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total Operating Expenses
   38,075   32,287   103,451   96,971 
   
 
 
  
 
 
  
 
 
  
 
 
 
Operating Income
   15,774   13,043   53,914   47,579 
Other Income (Expense)
                 
Interest income
   294   1,600   1,571   4,381 
Other expense
   (91)   (393)   (363)   (832) 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total Other Income
   203   1,207   1,208   3,549 
   
 
 
  
 
 
  
 
 
  
 
 
 
Income Before Taxes
   15,977   14,250   55,122   51,128 
Provision for Income Taxes
   2,600   2,050   10,000   8,000 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net Income
  $13,377  $12,200  $45,122  $43,128 
   
 
 
  
 
 
  
 
 
  
 
 
 
Net Income Per Share
                 
Basic
  $0.25  $0.23  $0.85  $0.82 
   
 
 
  
 
 
  
 
 
  
 
 
 
Diluted
  $0.25  $0.23  $0.85  $0.82 
   
 
 
  
 
 
  
 
 
  
 
 
 
Weighted Average Shares Outstanding
 
            
Basic
   53,413   52,795   53,132   52,463 
Diluted
   53,695   53,048   53,384   52,783 
See notes to interim consolidated financial statements.
3
Table of Contents
Neogen Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (unaudited)
(in thousands)
                 
 
Three Months Ended
  
Nine Months Ended
 
 
February 29/28,
  
February 29/28,
 
 
2020
  
2019
  
2020
  
2019
 
Net income
 $
12,200
  $
13,073
  $
43,128
  $
44,361
 
Other comprehensive income (loss), net of tax:
            
currency translation adjustments
  
(1,761
)  
3,105
   
(2,452
)  
617
 
Other comprehensive income, net of tax:
            
unrealized gain on marketable securities
  
172
   
—  
   
585
   
—  
 
                 
Total comprehensive income
 $
10,611
  $
16,178
  $
41,261
  $
44,978
 
                 
 
                 
   
Three Months Ended
  
Nine Months Ended
 
   
February 28/29,
  
February 28/29,
 
   
2021
  
2020
  
2021
  
2020
 
Net income
  $ 13,377  $ 12,200  $ 45,122  $ 43,128 
Other comprehensive income (loss), net of tax: foreign currency translations
   360   (1,761)   5,419   (2,452) 
Other comprehensive income (loss), net of tax: unrealized gain (loss) on marketable securities
   (115)   172   (552)   585 
   
 
 
  
 
 
  
 
 
  
 
 
 
Total comprehensive income
  $13,622  $10,611  $49,989  $41,261 
   
 
 
  
 
 
  
 
 
  
 
 
 
See notes to interim consolidated financial statements.
4
Table of Contents
Neogen Corporation and Subsidiaries
Consolidated Statements of
Equity (unaudited)
(in thousands)
                         
       
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
 
Issuance of shares under share-based compensation plan
  
188
   
31
   
9,705
   
—
   
—
   
9,736
 
Issuance of shares under employee stock purchase plan
  
12
   
1
   
606
   
—
   
—
   
607
 
Net income for the three months ended February 29, 2020
  —   
—
   
—
   
—
   
12,200
   
12,200
 
Other comprehensive loss for the three months ended February 29
, 2020
 
 
—
 
 
 
—
 
 
 
—
 
 
 
(1,589
)
 
 
—
 
 
 
(1,589
)
                         
Balance at February 29, 2020
  
52,911
  
$
8,466
  $
254,537
  $
(13,507
) $
462,375
  $
711,871
 
                         
 
                         
       
Accumulated
     
     
Additional
  
Other
     
 
Common Stock
  
Paid-in
  
Comprehensive
  
Retained
   
 
Shares
  
Amount
  
Capital
  
Income (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
 
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
 
Issuance of shares under share-based compensation plan
  
78
   
12
   
4,146
   
—  
   
—  
   
4,158
 
Issuance of shares under employee stock purchase plan
  
10
   
1
   
640
   
—  
   
—  
   
641
 
Shares repurchased
  
(50
)  
(8
)  
(3,127
)  
—  
   
—  
   
(3,135
)
Net income for the three months ended February 28, 2019
  
—  
   
—  
   
—  
   
—  
   
13,073
   
13,073
 
Other comprehensive loss for the three months ended February 28, 2019
  
—  
   
—  
   
—  
   
3,105
   
—  
   
3,105
 
                         
Balance at February 28, 2019
  
52,120
  
$
8,339
  $
217,274
  $
(9,129
) $
403,432
  
$
619,916
 
                         
               
Accumulated
        
           
Additional
   
Other
        
   
Common Stock
   
Paid-in
   
Comprehensive
  
Retained
     
   
Shares
   
Amount
   
Capital
   
Income (Loss)
  
Earnings
   
Total
 
Balance at June 1, 2020
  
 
52,946
 
  
$
 8,471
 
  
$
 257,693
 
  
$
(19,709
) 
 
$
 478,722
 
  
$
 725,177
 
Exercise of options and share-based compensation plan
   86    14    5,825    —     —      5,839 
Issuance of shares under employee stock purchase plan
   9    2    666    —     —      668 
Net income for the three months ended August 31, 2020
   —      —      —      —     15,860    15,860 
Other comprehensive income for the three months ended August 31, 2020
   —      —      —      4,002   —      4,002 
                              
Balance at August 31, 2020
  
 
53,041
 
  
$
8,487
 
  
$
264,184
 
  
$
(15,707
) 
 
$
494,582
 
  
$
751,546
 
Exercise of options and share-based compensation plan
   203    32    9,311    —     —      9,343 
Net income for the three months ended November 30, 2020
   —      —      —      —     15,885    15,885 
Other comprehensive income for the three months ended November 30, 2020
   —      —      —      621   —      621 
                              
Balance at November 30, 2020
  
 
53,244
 
  
$
8,519
 
  
$
273,495
 
  
$
(15,086
) 
 
$
510,467
 
  
$
777,395
 
Exercise of options and share-based compensation plan
   193    31    10,999    0     0      11,030 
Issuance of shares under employee stock purchase plan
   10    2    718    0     0      720 
Issuance of shares for Megazyme acquisition
   64    10    4,906    —     —      4,916 
Net income for the three months ended February 28, 2021
   —      0      0      0     13,377    13,377 
Other comprehensive income for the three months ended February 28, 2021
   —      0      0      245   0      245 
                              
Balance at February 28, 2021
  
 
53,511
 
  
$
8,562
 
  
$
290,118
 
  
$
(14,841
) 
 
$
523,844
 
  
$
807,683
 
                              
               
Accumulated
        
           
Additional
   
Other
        
   
Common Stock
   
Paid-in
   
Comprehensive
  
Retained
     
   
Shares
   
Amount
   
Capital
   
Income (Loss)
  
Earnings
   
Total
 
Balance at June 1, 2019
  
 
52,217
 
  
$
 8,355
 
  
$
 221,937
 
  
$
(11,640
) 
 
$
 419,247
 
  
$
 637,899
 
Exercise of options and 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
 
Exercise of options and 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
 
Exercise of options and share-based compensation plan
   188    31    9,705    —     —      9,736 
Issuance of shares under employee stock purchase plan
   12    1    606    —     —      607 
Net income for the three months ended February 29, 2020
   —      —      —      —     12,200    12,200 
Other comprehensive loss for the three months ended February 29, 2020
   —      —      —      (1,589)   —      (1,589) 
                              
Balance at February 29, 2020
  
 
52,911
 
  
$
8,466
 
  
$
254,537
 
  
$
(13,507
) 
 
$
462,375
 
  
$
711,871
 
                              
See notes to interim consolidated financial statements.
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Neogen Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
         
 
Nine Months Ended
February 29/28,
 
 
2020
  
2019
 
Cash Flows From Operating Activities
      
Net Income
 $
  43,128
  $
44,361
 
Adjustments to reconcile net income to net cash from operating activities:
      
Depreciation and amortization
  
13,542
   
13,028
 
Share-based compensation
  
4,795
   
4,137
 
Change in operating assets and liabilities, net of business acquisitions:
      
Accounts receivable
  
3,841
   
(898
)
Inventories
  
(2,238
)  
(8,745
)
Prepaid expenses and other current assets
  
(3,119
)  
(1,463
)
Accounts payable, accruals and other changes
  
301
   
(7,455
)
         
Net Cash From Operating Activities
  
60,250
   
42,965
 
         
Cash Flows For Investing Activities
      
Purchases of property, equipment and other assets
  
(16,322
)  
(11,877
)
Proceeds from the sale of marketable securities
  
300,448
   
290,827
 
Purchases of marketable securities
  
(351,002
)  
(316,195
)
Business acquisitions, net of cash acquired
  
(9,701
)  
(6,388
)
         
Net Cash For Investing Activities
  
(76,577
)  
(43,633
)
         
Cash Flows From Financing Activities
      
Exercise of stock options and issuance of employee stock purchase plan shares
  
27,915
   
13,752
 
Repurchase of common stock
  
—
   
(3,135
)
         
Net Cash From Financing Activities
  
27,915
   
10,617
 
         
Effect of Exchange Rates on Cash
  
(2,502
)  
553
 
         
Net Increase In Cash and Cash Equivalents
  
9,086
   
10,502
 
Cash and Cash Equivalents, Beginning of Period
  
41,688
   
83,074
 
         
Cash and Cash Equivalents, End of Period
 $
50,774
  $
93,576
 
         
 
   
Nine Months Ended
 
   
February 28/29,
 
   
2021
  
2020
 
Cash Flows From Operating Activities
         
Net Income
  $45,122  $43,128 
Adjustments to reconcile net income to net cash from operating activities:
         
Depreciation and amortization
   15,107   13,542 
Share-based compensation
   4,773   4,795 
Change in operating assets and liabilities, net of business acquisitions:
         
Accounts receivable
   1,019   3,841 
Inventories
   3,328   (2,238) 
Prepaid expenses and other current assets
   (1,908)   (3,119) 
Accounts payable, accruals and other changes
   (8,321)   301 
          
Net Cash From Operating Activities
   59,120   60,250 
Cash Flows For Investing Activities
         
Purchases of property, equipment and other
non-current
intangible assets
   (19,393)   (16,322) 
Proceeds from the sale of marketable securities
   602,233   300,448 
Purchases of marketable securities
   (604,694)   (351,002) 
Business acquisitions, net of cash acquired
   (52,000)   (9,701) 
          
Net Cash For Investing Activities
   (73,854)   (76,577) 
Cash Flows From Financing Activities
         
Exercise of stock options and issuance of employee stock purchase plan shares
   22,801   27,915 
          
Net Cash From Financing Activities
   22,801   27,915 
Effect of Foreign Exchange Rates on Cash
   (854)   (2,502) 
          
Net Increase In Cash and Cash Equivalents
   7,213   9,086 
Cash and Cash Equivalents, Beginning of Period
   66,269   41,688 
          
Cash and Cash Equivalents, End of Period
  $73,482  $50,774 
          
See notes to interim consolidated financial statements.
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NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION
The accompanying unaudited consolidated financial statements include the accounts of Neogen Corporation (“Neogen” or the “Company”) and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) for interim financial information and with the instructions to Form
10-Q
and Article 10 of Regulation
S-X.
Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included in the accompanying unaudited consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three and nine month periods ended February 29, 202028, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending May 31, 2020.2021. For more complete financial information, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form
10-K
for the fiscal year ended May 31, 2019.2020.
Our functional currency is the U.S. dollar. We translate our
non-U.S.
operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in other comprehensive income (loss). Gains or losses from foreign currency transactions are included in other income (expense) on our consolidated statement of income.
Recently Adopted Accounting Standards
Leases
On June 1, 2019, the Company adopted ASU No.
 2016-02—
Leases. Refer to Leases section of Note 1 for further information.
Recent Accounting Pronouncements Not Yet Adopted
Financial Instruments - Credit Losses
InOn June 2016,1, 2020, the FASB issuedCompany adopted ASU No.
2016-13—Measurement
of Credit Losses on Financial Instruments, which changes how companies measurethe Company measures credit losses on most financial instruments measured at amortized cost and certain other instruments, such as loans, receivables and
held-to-maturity
debt securities. Rather than generally recognizing credit losses when it is probable that the loss has been incurred, the revised guidance requires companiesthe Company to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the companyCompany expects to collect over the instrument’s contractual life. ASU
2016-13
is effective for fiscal periods beginning after December 15, 2019 and must be adopted as a cumulative effect adjustment to retained earnings. The Company does not believe adoption of this guidance willdid not have a
material
impact on itsour consolidated financial statements.statements due to the Company’s short-term contractual life of receivables and minimal expected losses.
Fair Value Measurements
In August 2018,On June 1, 2020, the FASB issuedCompany adopted ASU
2018-13—2018-13,
Fair
Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. ASU
2018-13
is effective for fiscal years beginning after December 15, 2019. The Company does not believe adoption of this guidance willdid not have an impact on itsour consolidated financial statements.
Cloud Computing Implementation Cost
In August 2018,On June 1, 2020, the FASB issuedCompany adopted ASU
2018-15—2018-15,
Intangible-Goodwill
and Other
Internal-Use
Software (Subtopic
350-40):
Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation costs in cloud computing arrangements. ASU
2018-15
is effective for fiscal years beginning after December 15, 2019. The Company does not believe adoption of this guidance willdid not have an impact on itsour consolidated financial statements.
 
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Comprehensive Income
Comprehensive income represents net income and any revenues, expenses, gains and losses that, under U.S. generally accepted
accounting principles, are excluded from net income and recognized directly as a component of equity. Accumulated other
comprehensive income (loss) consists of foreign currency translation adjustments and unrealized gains or losses on marketable securities.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments other than cash equivalents and marketable securities, which include accounts receivable and accounts payable, approximate fair value based on either their short maturity or current terms for similar instruments.
Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Cash and Cash Equivalentsassumptions.
Cash and cash equivalents consist of bank demand accounts, savings deposits, certificates of deposit and commercial paper with original maturities of 90 days or less. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances and believes it is not exposed to significant credit risk regarding its cash and cash equivalents.
Marketable Securities
The Company has marketable securities held by banks or broker-dealers at February 29, 2020, consisting of short-term domestic certificates of deposit, and commercial paper and U.S. treasuries rated at least
A-1/P-1
(short-term) and A/A2 (long-term) with maturities between 91 days and two years. These securities are classified as available for sale. The primary objective of the Company’s investment activity is to preserve capital for the purpose of funding operations, capital expenditures and business acquisitions; investments are not entered into for trading or speculative purposes. These securities are recorded at fair value based on recent trades or pricing models and therefore meet the Level 2 criteria. Interest income on these investments is recorded within other income on the consolidated statements of income.
ESTIMATES AND ASSUMPTIONS
The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including, but not limited to, variable consideration related to revenue recognition, allowances for doubtful accounts, the market value of, and demand for, inventories, stock-based compensation, provision for income taxes and related balance sheet accounts, accruals, goodwill and other intangible assets. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to the critical accounting policies and estimates disclosed in the Company’s Annual Report on Form
10-K
for the fiscal year ended May 31, 2019.
There were no significant changes to the contractual obligations or contingent liabilities and commitments disclosed in the Company’s Annual Report on Form
10-K
for the fiscal year ended May 31, 2019.
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Accounts Receivable Allowance
Management attempts to minimize credit risk by reviewing customers’ credit history before extending credit and by monitoring credit exposure on a regular basis. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific customers, historical trends, current conditions and other information. Collateral or other security is generally not required for accounts receivable. Once a receivable balance has been determined to be uncollectible, generally after all collection efforts have been exhausted, that amount is charged against the allowance for doubtful accounts.
Inventory
The reserve for obsolete and slow-moving inventory is reviewed at least quarterly based on an analysis of the inventory, considering the current condition of the asset as well as other known facts and future plans. The reserve required to record inventory at lower of cost or net realizable value is adjusted as conditions change. Product obsolescence may be caused by shelf-life expiration, discontinuance of a product line, replacement products in the marketplace or other competitive situations.
Goodwill and Other Intangible Assets
Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets. Other intangible assets include customer relationships, trademarks, licenses, trade names, covenants
not-to-compete
and patents. Customer-based intangibles are amortized on either an accelerated or straight-line basis, reflecting the pattern in which the economic benefits are consumed, while all other amortizable intangibles are amortized on a straight-line basis; intangibles are generally amortized over 5 to 25 years. We review the carrying amounts of goodwill and other
non-amortizable
non- amortizable intangible assets annually, or when indications of impairment exist, to determine if such assets may be impaired by performing a quantitative assessment.impaired. If the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis and comparison to comparable EBITDA multiples of peer companies, such assets are reduced to their estimated fair value and a charge is recorded to operations.
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Long-Lived Assets
Management reviews the carrying values of its long-lived assets to be held and used, including definite-lived intangible assets, for possible impairment whenever events or changes in business conditions warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows over the remaining useful life of the asset indicate that the carrying amount of the asset may not be recoverable. In such an event, fair value is determined using discounted cash flows and, if lower than the carrying value, impairment is recognized through a charge to operations.
Equity Compensation Plans
Share options awarded to employees, restricted stock units (RSUs) and shares of stock awarded to employees under certain stock purchase plans are recognized as compensation expense based on their fair value at grant date. The fair market value of options granted under the Company stock option plans was estimated on the date of grant using the Black-Scholes option-pricing model with assumptions for inputs such as interest rates, expected dividends, an estimate of award forfeitures, volatility measures and specific employee exercise behavior patterns based on statistical data. Some of the inputs used are not market-observable and have to be estimated or derived from available data. Use of different estimates would produce different option values, which in turn would result in higher or lower compensation expense recognized. For RSUs, we use the intrinsic value method to value the units. To value options,other equity awards, several recognized valuation models exist. Noneexist; none of these models can be singled out as being the best or most correct. The model applied by us can handle most of the specific features included in the options granted, which isare the reason for itstheir use. If a different modelmodels were used, the option values could differ despite using the same inputs. Accordingly, using different assumptions coupled with using a different valuation model could have a significant impact on the fair value of employee stock options. Fair value could be either higher or lower than the number provided by the model applied and the inputs used. Further information on our equity compensation plans, including inputs used to determine the fair value of options, is disclosed in Note 5.8.
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Income Taxes
We account for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and for tax credit carryforwards and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax expense represents the change in net deferred income tax assets and liabilities during the year.
Leases2. CASH AND MARKETABLE SECURITIES
In
Cash and Cash Equivalents
Cash and cash equivalents consist of bank demand accounts, savings deposits, certificates of deposit and commercial paper with original maturities of 90 days or less. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced losses related to these balances and believes it is not exposed to significant credit risk regarding its cash and cash equivalents. Cash and cash equivalents were $73,482,000 and $66,269,000 at February 2016,28, 2021 and May 31, 2020, respectively. The carrying value of these assets approximates fair value due to the FASB issued ASU No.short maturity of these instruments and is classified as Level 1 in the fair value hierarchy.
2016-02—Leases,
Marketable Securities
The Company has marketable securities held by banks or broker-dealers at February 28, 2021. Changes in market value are monitored and recorded on a monthly basis; in the event of a downgrade in credit quality subsequent to increase transparencypurchase, the marketable securities investment is evaluated to determine the appropriate action to take to minimize the overall risk to our marketable securities portfolio. These securities are classified as available for sale. The primary objective of management’s short-term investment activity is to preserve capital for the purpose of funding current operations, capital expenditures and comparability among organizations by recognizing lease assetsbusiness acquisitions; short-term investments are not entered into for trading or speculative purposes. These securities are recorded at fair value based on recent trades or pricing models and lease liabilitiestherefore meet the Level 2 criteria. Interest income on these investments is recorded within other income on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognizeincome statement. Adjustments in the statementfair value of financial position a liability to make lease payments (the lease liability)these assets are recorded in other comprehensive income.
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Table of Contents
Marketable Securities as of February 28, 2021 and aMay 31, 2020 are listed below by classification and remaining maturities.
right-of-use
asset representing its right to use
(in thousands)
  
Maturity
  
February 28,
2021
   
May 31,
2020
 
US Treasuries
  0 - 90 days  $0     $0   
   91 - 180 days   0      0   
   181 days - 1 year   0      2,532 
   1 - 2 years   0      0   
Commercial Paper & Corporate Bonds
  0 - 90 days   158,183    133,130 
   91 - 180 days   81,850    73,824 
   181 days - 1 year   30,189    43,231 
   1 - 2 years   1,310    7,839 
Certificates of Deposit
  0 - 90 days   1,253    1,003 
   91 - 180 days   3,550    5,184 
   181 days -1 year     3,277    6,069 
   1 - 2 years   253    4,592 
              
Total Marketable Securities
     $ 279,865   $ 277,404 
              
The components of marketable securities at February 28, 2021 are as follows:
                                                                             
(in thousands)
  
Amortized
Cost
   
Unrealized
Gains
   
Unrealized
Losses
   
Fair Value
 
US Treasuries
  $0     $ 0     $0     $0   
Commercial Paper & Corporate Bonds
   271,600    185    (253)    271,532 
Certificates of Deposit
   8,284    49    0      8,333 
                     
Total Marketable Securities
  $279,884   $234   $(253)   $279,865 
                     
The components of marketable securities at May 31, 2020 are as follows:
                                                                             
(in thousands)
  
Amortized
Cost
   
Unrealized
Gains
   
Unrealized
Losses
   
Fair Value
 
US Treasuries
  $2,502   $30   $ —     $2,532 
Commercial Paper & Corporate Bonds
   257,700    347    (23)    258,024 
Certificates of Deposit
   16,648    200    —      16,848 
                     
Total Marketable Securities
  $276,850   $ 577   $(23)   $277,404 
                     
3. INVENTORIES
Inventories are stated at the underlying asset forlower of cost, determined by the lease term.
first-in,
first-out
method, or net realizable value. The recognition, measurement and presentationcomponents of expenses and cash flows arising from a lease by a lessor have not significantly changed from previous U.S. GAAP. This ASU was effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. We adopted this ASU on June 1, 2019; the impact on our consolidated financial statements was immaterial.inventories follow:​​​​​​​​​​​​​​
(in thousands)
  
February 28,
2021
   
May 31,
2020
 
Raw materials
  $46,423   $45,058 
Work-in-process
   7,408    6,887 
Finished and purchased goods
   45,436    43,108 
           
   
$
 99,267
 
  
$
 95,053
 
           
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4. LEASES
We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating leases. We evaluate our contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Currently, all of our leases are classified as operating leases. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option.
Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease. With the adoption ofTopic ASC 842 on June 1, 2019, we recognized all leases with terms greater than 12 monthsrequires the Company to recognize in duration on our consolidated balance sheets asthe statement of financial position a liability to make lease payments (the lease liability) and a
right-of-use
assets and
asset representing its right to use the underlying asset for the lease liabilities of approximately $2.0 million each as of June 1, 2019. We adopted the standard using the prospective approach and did not retrospectively apply to prior periods.term.
Right-of-use
assets are recorded in other assets on our consolidated balance sheets. Current and
non-current
lease liabilities are recorded in other accruals within current liabilities and other
non-current
liabilities, respectively, on our consolidated balance sheets. Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease.
We have made certain assumptions and judgments when applying ASC 842, the most significant of which are:
We elected the package of practical expedients available for transition that allow us to not reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.
We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.
For all asset classes, we elected to not recognize a
right-of-use
asset and lease liability for short-term leases.leases (i.e. leases with a term of 12 months or less).
For all asset classes, we elected to not separate
non-lease
components from lease components to which they relate and have accounted for the combined lease and
non-lease
components as a single lease component.
The determination of the discount rate used in a lease is our incremental borrowing rate that is based on what we would normally pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments.
Supplemental balance sheet information related to operating leases was as follows:
     
 
February 29,
2020
 
 
(in thousands)
 
Right of use - assets
 $
1,755
 
Lease liabilities - current
  
325
 
Lease liabilities -
non-current
  
1,467
 
 
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(in thousands)
  
February 28,
2021
   
May 31,
2020
 
Right of use - assets
  $ 1,269   $ 1,952 
Lease liabilities - current
   131    1,054 
Lease liabilities -
non-current
   1,089    913 
The weighted average remaining lease term and weighted average discount rate were as follows:
February 29,

2020
Weighted average remaining lease term
2.4 years
Weighted average discount rate
3.5%
 
   
February 28,
2021
  
May 31,
2020
 
Weighted average remaining lease term
   2.4 years   2.5 years 
Weighted average discount rate
   3.0%   3.2% 
 
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Operating lease expenses are classified as cost of revenues or operating expenses on the consolidated statements of income. The components of lease expense were as follows:​​​​​​​
         
 
Three 
Months Ended 
February 29,
2020
  
Nine
Months Ended
February 29,
2020
 
 
(in thousands)
  
(in thousands)
 
Operating leases
 $
316
  $
889
 
Short term leases
  
25
   
106
 
         
Total lease expense
 $
341
  $
995
 
         
 
   
Three Months Ended February 28/29,
   
Nine Months Ended February 28/29,
 
(in thousands)
  
2021
   
2020
   
2021
   
2020
 
Operating leases
  $ 372   $ 316   $ 1,017   $ 889 
Short term leases
   17    25    76    106 
                     
Total lease expense
  $389   $341   $1,093   $995 
                     
Cash paid for amounts included in the measurement of lease liabilities for operating leases included in cash flows from operations on the statement of cash flows were approximately $946,000 and $868,000 for the nine months ended February 28, 2021 and February 29, 2020.2020, respectively. There were 0no
non-cash
additions to
right-of-use
assets obtained from new operating lease liabilities for the nine months ended February 29, 2020.28, 2021.
Undiscounted minimum lease payments as of February 29, 202028, 2021 were as follows:
     
 
Amount
 
 
(in thousands)
 
Years ending May 31,
   
2020 (1)
 $
289
 
2021
  
915
 
2022
  
358
 
2023
  
168
 
2024
  
94
 
2025 and thereafter
  
26
 
     
Total lease payments
  
1,850
 
Less: imputed interest
  
58
 
     
Total lease liabilities
 $
  1,792
 
     
 
                    
   
Amount
 
Years ending May 31, 2021 (1)
  $133 
2022
   601 
2023
   347 
2024
   176 
2025
   47 
2026 and thereafter
   0   
      
Total lease payments
   1,304 
Less: imputed interest
   84 
      
Total lease liabilities
  $ 1,220 
      
 
(1)
Excluding the nine months ended February 29, 2020.28, 2021.
The aggregate amount of future minimum annual rental payments applicable to noncancelable leases as of May 31, 2019 were as follows:
     
 
Future Minimum
Lease Payments
 
 
(in thousands)
 
Years ending May 31,
   
2020
 $
1,112
 
2021
  
810
 
2022
  
297
 
2023
  
101
 
Thereafter
  
0
 
     
 $
2,320
 
     
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Revenue Recognition5. REVENUE RECOGNITION
The Company determines the amount of revenue to be recognized through
application
of the following steps:
Identification of the contract with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, the Company satisfies the performance obligations.
Essentially all ourof Neogen’s revenue is generated through contracts with ourits customers. A performance obligation is a promise in a contract to transfer a product or service to a customer. We generally recognizerecognized revenue at a point in time when all of our performance obligations under the terms of a contract are satisfied. Revenue is recognized upon transfer of control of promised products and services in an amount that reflects the consideration the Company expectswe expect to receive in exchange for those products or services. The collectability of consideration on the contract is reasonably assured before revenue is recognized. To the extent that customer payment has been received before all recognition criteria are met, these revenues are initially deferred in other accruals on the balance sheet and the revenue is recognized in the period that all recognition criteria have been met. In certain situations, we provide
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Certain agreements with customers include discounts or rebates marketing support, credits or incentives to selected customers, which are accountedon the sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified purchase threshold of goods and services. We account for these discounts as variable consideration when estimatingand estimate the amountlikelihood of revenuea customer meeting the threshold in order to recognize ondetermine the transaction price using the most predictive approach. We typically use the most-likely-amount method, for incentives that are offered to individual customers, and the expected-value method, for programs that are offered to a contract.broad group of customers. Variable consideration reduces the amount of revenue that is recognized. These variable considerationRebate obligations related to customer incentive programs are recorded in accrued liabilities; the rebate estimates are updatedadjusted at the end of each reportingapplicable measurement period based on information currently available.
The performance obligations in ourNeogen’s contracts are generally satisfied well within one year of the contract inception. In such cases, we havemanagement has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component. We haveManagement has elected to utilize the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred because the amortization period for the prepaid costs that would otherwise have been deferred and amortized is one year or less. The Company accountsWe account for shipping and handling for products as a fulfillment activity when goods are shipped. Shipping and handling costs that are charged to and reimbursed by the customer are recognized as revenues, while the related expenses incurred by Neogen are recorded in sales and marketing expense. Revenue is recognized net of any tax collected from customers; the taxes are subsequently remitted to governmental authorities. The Company’sOur terms and conditions of sale generally do not provide for returns of product or reperformance of service except in the case of quality or warranty issues. These situations are infrequent; due to immateriality of the amount, warranty claims are recorded in the period incurred.
We deriveThe Company derives revenue from two primary sources - sources—product revenue and service revenue.
Product revenue consists of shipments of:
Diagnostic test kits, dehydrated culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation;
Consumable products marketed to veterinarians, retailers, livestock producers and animal health product distributors; and
Rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.
Revenues for our products are recognized and invoiced when the product is shipped to the customer.
Service revenue consists primarily of:
Genomic identification and related interpretive bioinformatic services; and
Other commercial laboratory services.
Revenues for ourNeogen’s genomics and commercial laboratory services are recognized and invoiced when the applicable laboratory service is performed and the results are conveyed to the customer.
Payment terms for products and services are generally
30 to 60 days; international terms may be longer.
days.
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The following table presents disaggregated revenue by major product and service categories for the three and nine month periods ended February 29, 202028, 2021 and February 28, 2019:
                 
 
Three Months ended February 2
9
/2
8
,
  
Nine Months ended February 2
9
/2
8
,
 
 
2020
  
2019
  
2020
  
2019
 
 
(in thousands)
 
Food Safety
            
Natural Toxins, Allergens & Drug Residues
 $
 17,154
  $
 18,612
  $
 57,950
  $
58,021
 
Bacterial & General Sanitation
  
9,413
   
9,519
   
31,345
   
30,807
 
Culture Media & Other
  
11,222
   
11,893
   
35,259
   
36,302
 
Rodenticides, Insecticides & Disinfectants
  
7,964
   
5,953
   
20,859
   
18,521
 
Genomics Services
  
4,745
   
5,136
   
12,961
   
13,395
 
                 
 $
50,498
  $
51,113
  $
158,374
  $
157,046
 
Animal Safety
            
Life Sciences
 $
 1,376
  $
1,823
  $
 4,901
  $
5,794
 
Veterinary Instruments & Disposables
  
10,799
   
10,682
   
32,621
   
32,769
 
Animal Care & Other
  
6,667
   
6,554
   
20,859
   
21,900
 
Rodenticides, Insecticides & Disinfectants
  
14,558
   
13,525
   
47,462
   
49,460
 
Genomics Services
  
15,971
   
14,003
   
44,879
   
37,455
 
                 
 $
49,371
  $
46,587
  $
150,722
  $
147,378
 
                 
Total Revenues
 $
 99,869
  $
 97,700
  $
 309,096
  $
 304,424
 
                 
29, 2020:
                                                                                                                                     
   
Three Months ended
February 28/29,
   
Nine Months ended
February 28/29,
 
(in thousands)
  
2021
   
2020
   
2021
   
2020
 
Food Safety
                    
Natural Toxins, Allergens & Drug Residues
  $18,255   $17,154   $57,271   $57,950 
Bacterial & General Sanitation
   10,333    9,413    31,499    31,345 
Culture Media & Other
   14,888    11,222    39,577    35,259 
Rodenticides, Insecticides & Disinfectants
   9,644    7,964    27,230    20,859 
Genomics Services
   5,304    4,745    14,566    12,961 
                     
   $58,424   $50,498   $170,143   $158,374 
Animal Safety
                    
Life Sciences
  $1,399   $1,376   $4,122   $4,901 
Veterinary Instruments & Disposables
   12,494    10,799    34,843    32,621 
Animal Care & Other
   8,873    6,667    25,902    20,859 
Rodenticides, Insecticides & Disinfectants
   18,085    14,558    56,470    47,462 
Genomics Services
   17,434    15,971    49,554    44,879 
                     
   $58,285   $49,371   $170,891   $150,722 
                     
Total Revenues
  $ 116,709   $ 99,869   $ 341,034   $ 309,096 
                     
2. INVENTORIES
Inventories are stated at the lower of cost, determined by the
first-in,
first-out
method, or net realizable value. The components of inventories follow:
         
 
February 29,
  
May 31,
 
 
2020
  
2019
 
 
(in thousands)
 
Raw materials
 $
42,243
  $
 41,594
 
Work-in-process
  
5,402
   
5,581
 
Finished and purchased goods
  
41,599
   
38,817
 
         
 $
89,244
  $
85,992
 
         
3.6. NET INCOME PER SHARE
The calculation of net income per share follows:
                 
 
Three Months Ended
  
Nine Months Ended
 
 
February 29/28,
  
February 29/28,
 
 
2020
  
2019
  
2020
  
2019
 
 
(in thousands, except per share amounts)
 
Numerator for basic and diluted net income per share:
            
Net income attributable to Neogen
 $
12,200
  $
 13,073
  $
 
43,128
  $
 44,361
 
Denominator for basic net income per share:
            
Weighted average shares
  
52,795
   
52,071
   
52,463
   
51,849
 
Effect of dilutive stock options
  
253
   
401
   
320
   
599
 
                 
Denominator for diluted net income per share
  
53,048
   
52,472
   
52,783
   
52,448
 
Net income attributable to Neogen per share:
            
Basic
 $
0.23
  $
0.25
  $
0.82
  $
0.86
 
                 
Diluted
 $
0.23
  $
0.25
  $
0.82
  $
0.85
 
                 
 
                                                                                                                                     
   
Three Months Ended
February 28/29,
   
Nine Months Ended
February 28/29,
 
(in thousands, except per share amounts)
  
2021
   
2020
   
2021
   
2020
 
Numerator for basic and diluted net income per share:
                    
Net income attributable to Neogen
  $ 13,377   $ 12,200   $ 45,122   $ 43,128 
Denominator for basic net income per share:
                    
Weighted average shares
   53,413    52,795    53,132    52,463 
Effect of dilutive stock options and RSUs
   282    253    252    320 
                     
Denominator for diluted net income per share
   53,695    53,048    53,384    52,783 
Net income attributable to Neogen per share:
                    
Basic
  $0.25   $0.23   $0.85   $0.82 
                     
Diluted
  $0.25   $0.23   $0.85   $0.82 
                     
 
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4.
7. SEGMENT INFORMATION AND GEOGRAPHIC DATA
We have 2
reportable segments: Food Safety and Animal Safety. The Food Safety segment is primarily engaged in the development, production and marketing of diagnostic test kits, dehydrated culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation. The Animal Safety segment is primarily engaged in the development, production and marketing of products dedicated to animal safety, including a complete line of consumable products marketed to veterinarians and animal health product distributors; this segment also provides genomic identification and related interpretive bioinformatic services. Additionally, the Animal Safety segment produces and markets rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.
Our international operations in the United Kingdom, Mexico, Brazil, China and India originally focused on the Company’s food safety products, and each of these units reports through the Food Safety segment. In recent years, these operations have expanded to offer our complete line of products and services, including those usually associated with the Animal Safety segment such as cleaners, disinfectants, rodenticides, insecticides, veterinary instruments and genomics services. These additional products and services are managed and directed by existing management and are reported through the Food Safety segment.
Neogen’s operation in Australia originally focused on providing genomics services and sales of animal safety products and reports through the Animal Safety segment. With the acquisition of Cell BioSciences on February 28, 2020, this operation has expanded to offer our complete line of products and services, including those usually associated with the Food Safety segment. These additional products are managed and directed by existing management at Neogen Australasia and report through the Animal Safety segment.
The accounting policies of each of the segments are the same as those described in Note 1.
Segment information follows:
                 
 
 
Food
Safety
  
Animal
Safety
  
Corporate and
Eliminations
(1)
  
Total
 
 
(in thousands)
 
As of and for the three months ended February 29, 2020
            
Product revenues to external customers
 $
44,450
  $
33,286
  $
—
  $
77,736
 
Service revenues to external customers
  
6,048
   
16,085
   
—
   
22,133
 
                 
Total revenues to external customers
  
50,498
   
49,371
   
—
   
99,869
 
Operating income (loss)
  
5,881
   
8,492
   
(1,330
)   
13,043
 
Total assets
  
226,077
   
219,501
   
327,923
   
773,501
 
                 
As of and for the three months ended February 28, 2019
            
Product revenues to external customers
 $
44,790
  $
32,585
  $
—  
  $
77,375
 
Service revenues to external customers
  
6,323
   
14,002
   
—  
   
20,325
 
                 
Total revenues to external customers
  
51,113
   
46,587
   
—  
   
97,700
 
Operating income (loss)
  
8,339
   
7,338
   
(1,038
)  
14,639
 
Total assets
  
204,570
   
221,335
   
246,680
   
672,585
 
 
(in thousands)
  
Food
Safety
   
Animal
Safety
   
Corporate and
Eliminations
(1)
   
Total
 
As of and for the three months ended February 28, 2021
                
Product revenues to external customers
  $51,965   $40,851   $0     $92,816 
Service revenues to external customers
   6,459    17,434    0      23,893 
                     
Total revenues to external customers
   58,424    58,285    0      116,709 
Operating income (loss)
   7,911    11,657    (3,794)    15,774 
Total assets
   287,690    239,179    353,347    880,216 
As of and for the three months ended February 29, 2020
                
Product revenues to external customers
  $44,450   $33,286   $—     $77,736 
Service revenues to external customers
   6,048    16,085    —      22,133 
                     
Total revenues to external customers
   50,498    49,371    —      99,869 
Operating income (loss)
   5,881    8,492    (1,330)    13,043 
Total assets
   226,077    219,501    327,923    773,501 
 
(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.
 
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Table of Contents
        
(in thousands)
  
Food
Safety
   
Animal
Safety
   
Corporate and
Eliminations
(1)
   
Total
 
As of and for the nine months ended February 28, 2021
            
Product revenues to external customers
  $ 151,951   $ 121,337   $0     $ 273,288 
Service revenues to external customers
   18,192    49,554    0      67,746 
 
Food
Safety
  
Animal
Safety
  
Corporate and
Eliminations
(1)
  
Total
                 
 
(in thousands)
 
Total revenues to external customers
   170,143    170,891    0      341,034 
Operating income (loss)
   24,834    36,068    (6,988)    53,914 
As of and for the nine months ended February 29, 2020
                        
Product revenues to external customers
 $
141,516
  $
105,555
  $
—
  $
247,071
   $141,516   $105,555   $—     $247,071 
Service revenues to external customers
  
16,858
   
45,167
   
—
   
62,025
    16,858    45,167    —      62,025 
                             
Total revenues to external customers
  
158,374
   
150,722
   
—
   
309,096
    158,374    150,722    —      309,096 
Operating income (loss)
  
24,571
   
26,521
   
(3,513
)   
47,579
    24,571    26,521    (3,513)    47,579 
 
As of and for the nine months ended February 28, 2019
            
Product revenues to external customers
 $
 139,979
  $
 109,918
  $
—  
  $
 249,897
 
Service revenues to external customers
  
17,067
   
37,460
   
—  
   
54,527
 
            
Total revenues to external customers
  
157,046
   
147,378
   
—  
   
304,424
 
Operating income (loss)
  
29,554
   
23,101
   
(3,291
)  
49,364
 
 
(1)
Includes elimination of intersegment transactions.
The following table presents the Company’s revenue disaggregated by geographic location:
                 
 
Three months ended
  
Nine months ended
 
 
February 29/28,
  
February 29/28,
 
 
2020
  
2019
  
2020
  
2019
 
 
(in thousands)
  
(in thousands)
 
Revenues by Geographic Location
            
Domestic
 $
 59,762
  $
57,422
  $
 186,887
  $
 182,298
 
International
  
40,107
   
40,278
   
122,209
   
122,126
 
                 
Total revenue
  
99,869
   
97,700
   
309,096
   
304,424
 
                 
 
   
Three months ended
February 28/29,
   
Nine months ended
February 28/29,
 
(in thousands)
  
2021
   
2020
   
2021
   
2020
 
Domestic
  $70,387   $ 59,762   $ 207,544   $ 186,887 
International
   46,322    40,107    133,490    122,209 
                     
Total revenue
   116,709    99,869    341,034    309,096 
                     
 
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5.
8. EQUITY COMPENSATION PLANS
QualifiedIncentive and
non-qualified
options to purchase shares of common stock may behave been granted to directors, officers and employees of the CompanyNeogen under the terms of ourthe Company’s stock option plans. These options are granted at an exercise price of not less than the fair market value of the stock on the date of grant. Options vest ratably overthree and five year periods and the contractual terms are generally five or ten years. A summary of stock option activity during the nine months ended February 29, 202028, 2021 follows:​​​​​​​
         
   
Weighted-
 
   
Average
 
(Options in thousands)
 
Shares
  
Exercise Price
 
Options outstanding June 1, 2019
  
2,385
  $
49.37
 
Granted
  
561
   
63.91
 
Exercised
  
(686
)   
40.07
 
Forfeited
  
(56
)   
56.67
 
         
Options outstanding February 29, 2020
  
2,204
  $
55.77
 
 
During the three and nine month periods ended February 29, 2020 and February 28, 2019, the Company recorded $1,640,000 and $1,306,000 and $4,795,000 and $4,137,000, respectively, of compensation expense related to its share-based awards.
(Options in thousands)
  
Shares
   
Weighted-
Average
Exercise Price
 
Options outstanding June 1, 2020
   2,162   $ 55.96 
Granted
   261    68.47 
Exercised
   (491)    44.91 
Forfeited
   (179)    57.58 
           
Options outstanding February 28, 2021
   1,753   $58.41 
The weighted-average fair value per share of stock options granted during the first nine months of fiscal years 2021 and 2020, estimated on the date of grant using the Black-Scholes option pricing model, was $15.56. $15.41 and $15.56, respectively.
The fair value of stock options granted was estimated using the following weighted-average assumptions.​​​​​​​
   
FY 2020
FY2021
 
Risk-free interest rate
   
1.9%
0.2		% 
Expected dividend yield
   
0.0%
0.0		% 
Expected stock price volatility
   
29.4%
31.3		% 
Expected option life
   
3.53.25 years
 
The Company granted 59,125 restricted stock units (RSUs) to directors, officers and employees under the terms of the 2018 Omnibus Incentive Plan in October 2020, which vest ratably over three and
 
five year periods.
R
SU
s have a weighted average value of $68.43 per share and will be expensed straight-line over the remaining weighted-average period of 4.49 years. On February 28, 2021 there was $3,144,000 in unamortized compensation cost related to
non-vested
RSUs.
During the three and nine month periods ended February 28, 2021 and February 29, 2020, the Company recorded $1,581,000 and $1,640,000 and $4,773,000 and $4,795,000, respectively, of compensation expense related to its share-based awards.
The Company has an employeeoffers eligible employees the option to purchase common stock purchase plan that provides for employee stock purchases at a 5% discount to the lower of the market price. Thevalue of the stock at the beginning or end of each participation period under the terms of the 2011 Employee Stock Purchase Plan; the discount is recorded in general and administrative expense asexpense. Total individual purchases in any year are limited to 10% of the date of purchase.
compensation.
6.9. BUSINESS AND PRODUCT LINE ACQUISITIONS
The Consolidated Statements of Income reflect the results of operations for business acquisitions since the respective dates of purchase. All are accounted for using the acquisition method. Goodwill recognized in the acquisitions discussed below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings.
On August 1, 2018, the Company acquired the stock of Clarus Labs, Inc., a manufacturer of water testing products. Neogen has distributed Clarus’ Colitag water test to the food and beverage industries since 2004; this acquisition has given the Company the ability to sell this product to new markets. Consideration for the purchase was $4,204,000 in cash and approximately $1,256,000 of contingent consideration, due semiannually for the first five years, based on an excess net sales formula. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $32,000, machinery and equipment of $120,000, accounts payable of $53,000, contingent consideration accrual of $1,256,000,
non-current
deferred tax liability of $544,000,
non-amortizable
intangible assets of $878,000, intangible assets of $1,487,000 (with an estimated life of
5-15
years) and the remainder to goodwill
(non-deductible
for tax purposes). These values are Level 3 fair value measurements. Since February 2019, $270,000 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.
On September 4, 2018, the Company acquired the assets of Livestock Genetic Services, LLC, a Virginia-based company that specialized in genetic evaluations and data management for cattle breeding organizations. Livestock Genetic Services had been a long-time strategic partner of Neogen and the acquisition enhanced the Company’s
in-house
genetic evaluation capabilities. Consideration for the purchase was $1,100,000 in cash, with $700,000 paid at closing and $400,000 payable to the former owner on September 1, 2019, and up to $585,000 of contingent consideration, payable over the next three years. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included office equipment of $15,000, contingent consideration accrual of $385,000, intangible assets of $942,000 (with an estimated life of
5-15
years) and the remainder to goodwill (deductible to tax purposes). These values are Level 3 fair value measurements. In September 2019, the former owner was paid the
$400,000
installment of 
the purchase
 price owed
and was also paid $107,000 in contingent consideration based on the achievement of sales targets in the first year. Services provided by this operation are now performed at the Company’s Lincoln, Nebraska location, reporting within the Animal Safety segment.
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Table of Contents
On January 1, 2019, the Company acquired the assets of Edmonton, Alberta based Delta Genomics Centre, an animal genomics laboratory in Canada. Delta’s laboratory operations were renamed Neogen Canada and the acquisition was intended to accelerate growth of the Company’s animal genomics business in Canada. Consideration for the purchase was $1,485,000 in cash. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $38,000, machinery and equipment of $371,000, unearned revenue liability of $125,000, intangible assets of $532,000 (with an estimated life of 5 to 10 years) and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. Services provided by this operation continue to be performed in Edmonton, reporting within the Animal Safety segment.
On January 1, 2020, the Company acquired all of the stock of Productos Quimicos Magiar, a distributor of Neogen’s Food Safety products for the past 20 years, located in Argentina. This acquisition gives Neogen a direct sales presence in Argentina. Consideration for the purchase was $4,286,000$3,776,000 in net cash,
,
with $3,786,000$3,237,000 paid at closing and $540,000 payable to the former owner on January 1, 2022, and up to $979,000 of contingent consideration, payable in one year, based upon an excess net sales formula.
The preliminaryfinal purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $603,000, inventory of $446,000, machinery and equipment of $36,000,
other current assets of
$221,000, $221,000, accounts payable of $383,000, other current liabilities of $312,000,
, contingent consideration accrual of $640,000,
,
non-current
deferred tax
liabilities of $
384,000
,$441,000, intangible assets of $
1,282,000
(with$1,471,000 (with an estimated life of
5-105-
10
years) and the remainder to goodwill
(non-deductible
for tax purposes). These values are Level 3 fair value measurements. In February 2021, the former owner was paid $530,000 of contingent consideration based on the achievement of sales targets; the remaining $110,000 accrued
but not earned
was
recorded
as a gain in Other Income in the third quarter of fiscal 2021. This operation continue
s
continues to operate from its current location in Buenos A
i
res,Aires, Argentina, reporting within the Food Safety segment. It
is
managed through
Neogen
’s Neogen’s Latin America
operation.
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Table of Contents
On January 1, 2020, the Company acquired all of the stock of Productos Quimicos Magiar, a
distributor
of Neogen’s Food Safety products for the past 20 years, located in Uruguay. This acquisition gives Neogen a direct sales presence in Uruguay. Consideration for the purchase was $1,596,000$1,488,000 in net cash,
,
with $1,386,000$1,278,000 paid at closing and $210,000 payable to the former owner on January 1, 2022, and up to $241,000 in contingent consideration, payable in one year, based upon an excess net sales formula.
The preliminaryfinal purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $
280,000
,$280,000, inventory of $
174,000
,$174,000, machinery and equipment of $
16,000
,
$16,000, other current assets
of $
68,000
,$68,000, accounts payable of $
204,000
,$204,000, other current liabilities of $
11,000
,
$11,000, contingent consideration accrual of $159,000,
 
non-current
deferred tax liabilities of $
125,000
,$99,000, intangible assets of $
498,000
(with$398,000 (with an estimated life of
5-10
years) and the remainder to goodwill
(non-deductible
for tax purposes). These values are Level 3 fair value measurements. In February 2021, the former owner was paid $158,000 of contingent consideration based on the achievement of sales targets; the remaining $1,000 accrued
but no
t earned
was recorded as a gain in Other Income in the third quarter of fiscal 2021. This operation continue
s
continues to operate from its current location in Montevideo, Uruguay, reporting within the Food Safety segment. It
is
managed through
Neogen
’s Neogen’s Latin America operation.
On January 9, 2020, the Company acquired
all
of the stock of Diessechem Srl, a distributor of food and feed diagnostics for the past 27 years, located in Italy. This acquisition gives Neogen a direct sales presence in Italy. Consideration for the purchase was $3,455,000 in net cash. The preliminaryfinal purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $780,000, inventory of $5,000,
other curre
nt
current assets
of $189,000,$160,000, accounts payable of $140,000, other current liabilities of $334,000,$305,000,
non-current
deferred tax liabilities of $203,000,$294,000, intangible assets of $780,000$1,225,000 (with an estimated life of
5-10
years) and the remainder to goodwill
(non-deductible
for tax purposes). These values are Level 3 fair value measurements. This operation continue
s
continues to operate from its current location in Milan, Italy, reporting within the Food Safety segment. It
is
managed through Neogen’s
Scotland
operation.
On January 31, 2020, the Company acquired all of the stock of Abtek Biologicals Limited, a
manufacturer
and supplier of culture media supplements and microbiology technologies. This acquisition enhances the Company’s culture media product line offering for the worldwide industrial microbiology markets. Consideration for the purchase was $1,339,000 
$1,401,000 in net cash, with $1,220,000$1,282,000 paid at closing and $119,000 payable to the former owner on January 31, 2021.
The preliminaryfinal purchase price allocation, based upon
the fair
value of these assets and liabilities determined using the income approach, included accounts receivable of $
135,000
,$135,000, inventory of $
207,000
,$207,000, machinery and equipment of $
105,000
,$105,000, prepayments of $
6,000
,$6,000, accounts payable of $
118,000
,$118,000, other current liabilities of $
34,000$34,000,
,
non-current
deferred tax liabilities of $
101,000
,$92,000, intangible assets of $
435,000
(with$484,000 (with an estimated life of
5-10
years) and the remainder to goodwill
(non-deductible
for tax purposes). These values are Level 3 fair value measurements. The final $119,000 owed was paid to the former owner in January 2021. This manufacturing operation will continuecontinues to operate from its current location in Liverpool, England, reporting within the Food Safety segment. It
is
managed through
Neogen
’s Neogen’s Scotland operation.
On February 28, 2020, the Company acquired the assets of Cell BioSciences, an Australian distributor of food safety and industrial microbiology products. This acquisition gives Neogen a direct sales presence across Australasia for its entire product portfolio. Consideration for the purchase was $3,443,000$3,768,000 in cash. Due to the timing of the transaction, the preliminarycash, with $3,596,000 paid at closing and $172,000 payable in one year. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $420,000, unearned revenue liability of $13,000, intangible assets of $1,338,000 (with an estimated life of 3 to 10 years) and the remainder to goodwill
(non-deductible
for tax purposes). These values are Level 3 fair value measurements. The final $172,000 owed was not complete atpaid t
o
 the time of filing.former owner in March 2021. The business
is
operated under Neogen’s name operates in Melbourne,Gatton, Australia, reporting within the Australian operations in the Animal Safety segment.
Subsequent to the end of the quarter, onOn March 26, 2020, the Company acquired the assets of Chile-based Magiar Chilena, a distributor of
food
,
animal
and plant diagnostics, including Neogen products. This acquisition gives Neogen a direct sales presence in Chile. Consideration for the purchase was $400,000 in cash, with $350,000 paid at closing and $50,000 payable to the former owner on March 26, 2021. Due to the timing of the transaction, theThe preliminary purchase price allocation, was not complete atbased upon the timefair value of filing.these assets and liabilities determined using the income approach, included inventory of $164,000, machinery and equipment of $53,000, and intangible assets of $183,000 (with an estimated life of
5-10
years). The business will beis operated from its current location in Santiago, Chile, reporting within the Food Safety segment. It will beis managed through Neogen’s Latin America operation.
17
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Table of Contents
On July 31, 2020, the Company acquired the U.S. (including territories) rights to Elanco’s StandGuard
7.Pour-on
for horn fly and lice control in beef cattle, and related assets. This product line fits in well with Neogen’s existing agricultural insecticide portfolio and organizational capabilities. Consideration for the purchase was $2,351,000 in cash, all paid at closing. The preliminary purchase price allocation, based upon the fair value of these assets determined using the income approach, included inventory of $51,000 and intangible assets of $2,300,000 (with an estimated life of 15 years). This product line is currently being toll manufactured for the Company but is eventually expected to be manufactured at Neogen’s operation in Iowa; the sales are reported within the Animal Safety segment.
On December 30, 2020, the Company acquired all of the stock of Megazyme, Ltd, an Ireland-based company, and its wholly owned U.S. subsidiary, Megazyme, Inc. Megazyme is a manufacturer and supplier of diagnostic assay kits and enzymes to measure dietary fiber, complex carbohydrates and enzymes in food and beverages as well as animal feeds. This acquisition will allow Neogen to expand its commercial relationships across food, feed and beverage companies, and provide additional food quality diagnostic products to commercial labs and food science research institutions. Consideration for the purchase was net cash of $39.8 million paid at closing, $8.6 million of cash payable in two installments in two and four years, $4.9 million of stock issued at closing, and up to $2.5 million of contingent consideration, payable in two installments over the next year, based upon an excess net sales formula. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $1,339,000, inventory of $5,619,000, net property, plant and equipment of $12,141,000, prepayments of $69,000, accounts payable of $4,000, other current liabilities of $2,405,000, contingent consideration accrual of $2,458,000,
non-current
deferred tax liabilities of $2,389,000, intangible assets of $19,461,000 (with an estimated life of
5-10
years) and the remainder to goodwill
(non-deductible
for tax purposes). These values are Level 3 fair value measurements. In February 2021, the former owner was paid $1,229,000 for the first installment of contingent consideration, based upon the achievement of sales targets. The Irish company continues to operate from its current location in Bray, Ireland, reporting within the Food Safety segment and is managed through Neogen’s Scotland operation. The U.S. company’s business is managed by our Lansing-based Food Safety team.
For each acquisition listed above, the revenues and net income were not considered material and were therefore not disclosed.
10. LONG TERM DEBT
We have a financing agreement with a bank providing for a $15,000,000 unsecured revolving line of credit, which was amended on November 30, 2018in the second quarter to extend the maturity from September 1, 2019expiration to SeptemberNovember 30, 2021.2023. There were 0
advances against the line of credit during fiscal 20192020 and there have been 0nenone thus far in fiscal 2020;2021; there was 0
balance outstanding at February 29, 2020.28, 2021. Interest on any borrowings
w
ill be charged
is calculated at LIBOR plus 100 basis points (rate under the terms of the agreement was 2.51%1.12% at February 29, 2020)28, 2021). Financial covenants include maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA, each of which the Company was in compliance with at February 29, 2020.
28, 2021.
8.11. COMMITMENTS AND CONTINGENCIES
The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for related costs when such costs are determined to be probable and estimable. The Company currently utilizes a pump and treat remediation strategy, which includes semi-annual monitoring and reporting, consulting, and maintenance of monitoring wells. Neogen expenses these annual costs of remediation, which have ranged from $38,000 to $131,000 per year over the past five years. The Company’s estimated liability for these costs was $916,000 at both February 29, 202028, 2021 and May 31, 2019,2020, measured on an undiscounted basis over an estimated period of 15 years; $100,000 of the liability is recorded within current liabilities and the remainder is recorded within other
non-current
liabilities on the consolidated balance sheets. In fiscal 2019, the Company performed an updated Corrective Measures Study (CMS) on the site, per a request from the Wisconsin Department of Natural Resources (WDNR), and is currently in discussion with the WDNR regarding potential alternative remediation strategies going forward. The Company believes that the current pump and treat strategy is appropriate for the site. At this time, the outcome of the review in terms of approach and future costs is unknown, but a change in the current remediation strategy, depending on the alternative selected, could require an increase in the currently recorded liability, with an offsetting charge to operations in the period recorded.
The Company is subject to certain legal and other proceedings in the normal course of business that, in the opinion of management, should not have a material effect on its future results of operations or financial position.
9. STOCK PURCHASE
In October 2018, the Company’s Board of Directors passed a resolution canceling the Company’s prior stock buyback program, which had been approved in December 2008, and authorized a new program to purchase, subject to market conditions, up to 3,000,000 shares of the Company’s common stock. In December 2018, the Company purchased 50,000 shares under the program in negotiated and open market transactions for a total price, including commissions, of $3,134,727. Shares acquired under the program have been retired.
 
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Table of Contents
PART I – FINANCIAL INFORMATION
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations contains both historical financial information and forward-looking statements. Neogen does not provide forecasts of future financial performance. While management is optimistic about the Company’s long-term prospects, historical financial information may not be indicative of future financial results.
Safe Harbor and Forward-Looking Statements
Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, are made throughout this Quarterly Report on Form
10-Q.
For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. There are a number of important factors, including competition, recruitment and dependence on key employees, impact of weather on agriculture and food production, identification and integration of acquisitions, research and development risks, patent and trade secret protection, government regulation, widespread outbreak of an illness, including the
COVID-19
pandemic, and other risks detailed from time to time in the Company’s reports on file at the Securities and Exchange Commission, that could cause Neogen Corporation’s results to differ materially from those indicated by such forward-looking statements, including those detailed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
In addition, any forward-looking statements represent management’s views only as of the day this Quarterly Report on Form
10-Q
was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. While management may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if its views change.
COVID-19
As we closely monitor the
COVID-19
pandemic, our top priority remains protecting the health and safety of our employees. While essential operations continue in our locations around the world, the majority of our
non-manufacturing
employees continue to work remotely and travel remains restricted. Safety guidelines and procedures, including social distancing and enhanced cleaning, have been developed for
on-site
employees and these policies are regularly monitored and updated by our internal Emergency Response Team.
In the third quarter of fiscal 2021, the
COVID-19
pandemic continued to impact our business operations and financial results. There has been a positive impact in sales of our biosecurity product lines, as the pandemic has created increased demand for these products, and sales into companion animal markets have benefitted, as remote work and stay at home orders have driven increased pet ownership. A number of our food safety diagnostic product lines have been negatively impacted due to decreased demand in many of our customers’ businesses, particularly those serving restaurants, bars and other institutional food service markets; supply chain difficulties including vendor disruptions, border closures and shipping issues; and restricted travel, which hinders our ability to connect with customers. During the current fiscal year, we have incurred less expense for travel, meals, trade shows and some other customer-facing marketing activities; higher spend on shipping and personal protective equipment has somewhat offset these savings. We expect the
COVID-19
pandemic will continue to impact our business operations and financial results through
 at least
the end of our current fiscal year.
19
20
Table of Contents
Executive Overview
Consolidated revenues were $116.7 million in the third quarter of fiscal 2021, an increase of 17% compared to $99.9 million in the third quarter of fiscal 2020, an increase of 2% compared to $97.7 million in the third quarter of fiscal 2019.2020. Organic sales growth in the third quarter of fiscal 20202021 was 1%13%. For the year to datenine month period, consolidated revenues were $309.1$341.0 million, an increase of 2%10% compared to $304.4$309.1 million in the same period in the prior fiscal year. OrganicOn a year to date basis, organic sales rose 1% for the nine month period.
8%.
 
Food Safety segment sales were $50.5$58.4 million in the third quarter of the current fiscal year, a decline2021, an increase of 1%16% compared to $51.1$50.5 million in the same period a year ago. Organic sales in this segment increased 11% for the comparative period, with revenues from the acquisitions of Neogen Italia (January 2020), Neogen Argentina (January 2020), Neogen Uruguay (January 2020), Abtek (January 2020), Neogen Chile (March 2020) and Megazyme (December 2020) providing the remainder of the prior year. Organic sales declined 3% duringincrease in revenues for the quarter; contributions from four acquisitions executed during the quarter totaled $990,000.segment. For the year to date, Food Safety segment sales were $158.4$170.1 million, an increase of 1%7% compared to $157.0$158.4 million in the same period of the prior fiscal year; excludingthe organic sales increase was 4% for the comparative period, with the acquisitions sales were flat.
listed above providing the additional contributions to revenue.
 
Animal Safety segment sales were $58.3 million in the third quarter of fiscal 2021, an increase of 18% compared to $49.4 million in the third quarter of fiscal 2020, an increase of 6% compared to $46.6 million in the third quarter of fiscal 2019.2020. Organic sales in this segment also rose 6%16% in the third quarter, with only a minoradditional contribution from the January 1, 2019August 2020 acquisition of Delta Genomics.the StandGuard product line. For the year to date,nine month period, Animal Safety segment sales were $150.7$170.9 million, an increase of 2%13% compared to $147.4$150.7 million in the same period a year ago. Year to date organic sales also increased 2%.
rose 12%, with revenues from the StandGuard acquisition contributing the difference.
 
International sales in the third quarter of fiscal 20202021 were 40% of total sales compared to 41%40% of total sales in the third quarter of fiscal 2019.2020. For eachthe year to date, period presented,fiscal 2021 international sales were 39% of total sales compared to 40% of total sales.
sales in the same period of the prior year.
 
Our effective tax rate in the third quarter was 14.4%16.3% compared to 21.4%an effective tax rate of 14.4% in the prior year third quarter; the fiscal 20202021 year to date effective tax rate was 15.6%18.1% compared to 17.0%15.6% for the same period a year ago.
Net income for the quarter ended February 29, 202028, 2021 was $13.4 million, or $0.25 per diluted share, compared to $12.2 million, or $0.23 per diluted share, a decrease of 7% compared to $13.1 million, or $0.25 per share in the same period in the prior year. For the year to date, net income was $43.1$45.1 million, or $0.82 per share, a decreasean increase of 3%5% compared to prior year to date net income of $44.4 million, or$43.1 million. Earnings per fully diluted share for the year to date was $0.85 compared to $0.82 per diluted share.share for the same period in the prior year.
Cash provided from operating activities in the first nine months of fiscal 20202021 was $60.3$57.9 million, compared to $43.0$60.3 million in the same period of fiscal 2019.2020.
20
21
Table of Contents
International sales were flat$46.3 million in both the third quarter of fiscal 2020 and2021, an increase of 15% compared to the same period a year ago; for the year to date, eachinternational sales were $133.5 million, an increase of 9% compared to the same respective periodsperiod in the prior year. For the current quarter, strength in genomics services and biosecurity products in China and genomics services in Australia drove the increase, slightly offset by a net negative currency impact of approximately $150,000. The rate of growth in our international revenues in the current fiscal year to date has been adversely impacted by currency devaluations in a number of the countries in which we operate and lower sales of our drug residue test kits by our largest European distributor, and the loss of forensics business in Brazil.distributor. Revenue changes, denominated in both the U.S. dollar and as reported in the local currency, for the three and nine month periods of fiscal 20202021 compared to the same respective periods in the prior year are as follows for each of our international locations:
                 
 
Three Months Ended
February 29, 2020
  
Nine Months Ended
February 29, 2020
 
 
Revenue
  
Revenue
  
Revenue
  
Revenue
 
 
% Increase/(Decrease)
USD
  
% Increase/(Decrease)
Local Currency
  
% Increase
USD
  
% Increase
Local Currency
 
UK Companies
  
5
%  
4
%  
3
%  
5
%
Brazilian Companies
  
(16
)%  
(6
)%  
(5
)%  
1
%
Neogen Latinoamerica
  
15
%  
11
%  
8
%  
7
%
Neogen China
  
37
%  
41
%  
20
%  
24
%
Neogen India
  
18
%  
19
%  
11
%  
11
%
Neogen Canada
  
75
%  
73
%  
135
%  
135
%
Neogen Australasia
  
7
%  
12
%  
15
%  
22
%
 
   
Three Months Ended
  
Nine Months Ended
 
   
February 28, 2021,
  
February 28, 2021,
 
   
Revenue
  
Revenue
  
Revenue
  
Revenue
 
   
% Inc (Dec)
  
% Inc (Dec)
  
% Inc (Dec)
  
% Inc (Dec)
 
   
USD
  
Local Currency
  
USD
  
Local Currency
 
UK Companies
   9%   4%   13%   9% 
Brazil Operations
   (11)%   12%   (11)%   17% 
Neogen Latinoamerica
   7%   14%   6%   17% 
Neogen China
   125%   109%   97%   88% 
Neogen India
   (6)%   (3)%   2%   7% 
Neogen Canada
   38%   33%   2%   1% 
Neogen Australasia
   95%   73%   81%   69% 
Currency translations reduced comparative revenues by approximately $357,000$150,000 in the third quarter of fiscal 2020 compared to the same quarter a year ago, and by $2.5 million for the year to date2021 compared to the same period last year, primarilyas continued weakness in the Brazilian real and the Mexican peso relative to the U.S. dollar were almost entirely offset by recovery of the euro and pound. For the year to date, comparative revenues were $3.4 million lower due to currency translations, due entirely to the devaluation of the Brazilian real and the Mexican peso relative to the U.S. dollar, somewhat offset by the strengthening of the euro and pound, and to a lesser extent, the Chinese yuan and the Australian dollar. Combined revenues at our U.K. operations increased 4% in local currency in the third quarter, as lower economic activity caused by the
COVID-19
pandemic resulted in sluggish sales performance across the organization; after adjusting for the increased strength of the euro and pound, revenues rose 9% in U.S. dollar relative to the British pound, the Brazilian real and the Australian dollar for each period. The Mexican peso and the British pound strengthened relative to the U.S. dollar during the third quarter of 2020.
The 5% increase in third quarter revenues at our Neogen Europe operations included a 24% increase in sales of cleaners, disinfectants and veterinary instruments, offset somewhat by a 9% decline in culture media products, due to orders delayed into the fourth quarter and lower demand; sales of our allergen test kits increased 7%.dollars. For the year to date, period, overall sales increased 3%the 9% revenue increase in local currency was primarily from biosecurity products, the result of a large sale of hand sanitizer to the U.K. government’s health organization in the first quarter of this fiscal year; in U.S. dollars, the increase was 13%.
Sales in Brazil declined 16%increased 12% in thelocal currency in this year’s third quarter, primarily from the lossresult of forensics10% growth in food safety diagnostic test kit business,kits and genomics revenues, and a 17% increase in insecticides due to delivery on a large commercial laboratory converting their testing protocol to a higher throughput method, and lower sales of genomics services due to a large sale in the prior year period which did not recur. Partially offsetting these declines was a large
non-recurring
sale of insecticides to a government agency.tender order. For the nine month period, sales at our Brazilian operations decreased 5% compared to the prior year. At Neogen Latinoamerica, sales increased 15% for the third quarter17% compared to the prior year with strongon the strength of a 29% increase in sales of rodenticidesinsecticides; after adjusting for the currency devaluation, revenues declined 11% in MexicoU.S. dollars. Neogen Latinoamerica sales rose 14% for the third quarter in local currency, primarily due to increases in biosecurity products and broad based strength acrossfood safety diagnostic kit sales; after adjusting for devaluation of the diagnostics business duringpeso, the period;revenue increase was 7% in U.S. dollars. Neogen China’s revenues approximately doubled for both the three and nine month periods, due to increased demand of biosecurity products and genomics services. The Neogen Australasia location benefited in both the comparative quarter and year to date periods from the February 2020 acquisition of a food safety distributor; the organic revenue increase at this location was 64% in the third quarter and 55% for the year to date period as this operation also recorded strong diagnostics test kit sales were somewhat offset by lower salesgrowth of cleaners and disinfectants. Robust sales of cleaners and disinfectants in Chinagenomics services in the third quarter of fiscal 2020, due in part to the
COVID-19
pandemic, drove the 38% increase in revenuebovine, companion animal and offset lower sales of diagnostic test kit sales in the period; for the year to date, revenues increased 20% over the prior year.sheep markets.
Service revenue was $22.1$23.9 million in the third quarter of fiscal 2020,2021, an increase of 9%8% over prior year third quarter revenues of $20.3 million, including a minor contribution from the January 1, 2019 acquisition of Delta Genomics.$22.1 million. For the nine month period, service revenue was $62.0$67.7 million, an increase of 14%9% over prior year revenues of $54.5$62.0 million. Year to date service revenues were aided by the Delta Genomics acquisition and the September 2018 acquisition of Livestock Genetic Services. The growth in botheach comparative period was led by increases of genomics revenues in the quarterbovine, companion animal and sheep markets in Australia and strong growth in genomics revenues in the Chinese porcine and bovine markets as the country recovers from the
COVID-19
and African swine fever outbreaks. Additionally, for the year to date periods was led by strong increases of genomicperiod, genomics testing revenuesin the domestic bovine and companion animal veterinary markets contributed to the domestic companion animal market, and to a lesser extent, increases in our global beef and dairy cattle markets.
growth.
21
22
Table of Contents
Revenues
                 
 
Three Months Ended
February 29/28,
     
 
2020
  
2019
  
Increase/
(Decrease)
  
%
 
   
(in thousands)
     
Food Safety
            
Natural Toxins, Allergens & Drug Residues
 $
17,154
  $
18,612
  $
(1,458
)  
(8
)%
Bacterial & General Sanitation
  
9,413
   
9,519
   
(106
)  
(1
)%
Culture Media & Other
  
11,222
   
11,893
   
(671
)  
(6
)%
Rodenticides, Insecticides & Disinfectants
  
7,964
   
5,953
   
2,011
   
34
%
Genomics Services
  
4,745
   
5,136
   
(391
)  
(8
)%
                 
 $
50,498
  $
51,113
  $
(615
)  
(1
)%
                 
Animal Safety
            
Life Sciences
 $
1,376
  $
1,823
  $
(447
)  
(25
)%
Veterinary Instruments & Disposables
  
10,799
   
10,682
   
117
   
1
%
Animal Care & Other
  
6,667
   
6,554
   
113
   
2
%
Rodenticides, Insecticides & Disinfectants
  
14,558
   
13,525
   
1,033
   
8
%
Genomics Services
  
15,971
   
14,003
   
1,968
   
14
%
                 
 $
49,371
  $
46,587
  $
2,784
   
6
%
                 
Total Revenues
 $
99,869
  $
97,700
  $
2,169
   
2
%
                 
                 
 
Nine Months Ended
February 29/28,
     
 
2020
  
2019
  
Increase/
(Decrease)
  
%
 
   
(in thousands)
     
Food Safety
            
Natural Toxins, Allergens & Drug Residues
 $
57,950
  $
58,021
  $
(71
)  
0
%
Bacterial & General Sanitation
  
31,345
   
30,807
   
538
   
2
%
Culture Media & Other
  
35,259
   
36,302
   
(1,043
)  
(3
)%
Rodenticides, Insecticides & Disinfectants
  
20,859
   
18,521
   
2,338
   
13
%
Genomics Services
  
12,961
   
13,395
   
(434
)  
(3
)%
                 
 $
158,374
  $
157,046
  $
1,328
   
1
%
                 
Animal Safety
            
Life Sciences
 $
4,901
  $
5,794
  $
(893
)  
(15
)%
Veterinary Instruments & Disposables
  
32,621
   
32,769
   
(148
)  
0
%
Animal Care & Other
  
20,859
   
21,900
   
(1,041
)  
(5
)%
Rodenticides, Insecticides & Disinfectants
  
47,462
   
49,460
   
(1,998
)  
(4
)%
Genomics Services
  
44,879
   
37,455
   
7,424
   
20
%
                 
 $
150,722
  $
147,378
  $
3,344
   
2
%
                 
Total Revenues
 $
309,096
  $
304,424
  $
4,672
   
2
%
                 
   
Three Months Ended
February 28/29,
         
           
Increase/
     
(in thousands)
  
2021
   
2020
   
(Decrease)
   
%
 
Food Safety
        
Natural Toxins, Allergens & Drug Residues
  $18,255   $17,154   $1,101    6% 
Bacterial & General Sanitation
   10,333    9,413    920    10% 
Culture Media & Other
   14,888    11,222    3,666    33% 
Rodenticides, Insecticides & Disinfectants
   9,644    7,964    1,680    21% 
Genomics Services
   5,304    4,745    559    12% 
                 
  $58,424   $50,498   $7,926    16% 
Animal Safety
        
Life Sciences
  $1,399   $1,376   $23    2% 
Veterinary Instruments & Disposables
   12,494    10,799    1,695    16% 
Animal Care & Other
   8,873    6,667    2,206    33% 
Rodenticides, Insecticides & Disinfectants
   18,085    14,558    3,527    24% 
Genomics Services
   17,434    15,971    1,463    9% 
                 
  $58,285   $49,371   $8,914    18% 
                 
Total Revenues
  $116,709   $99,869   $16,840    17% 
                 
22
   
Nine Months Ended
February 28/29,
         
       
Increase/
     
(in thousands)
  
2021
   
2020
   
(Decrease)
   
%
 
Food Safety
        
Natural Toxins, Allergens & Drug Residues
  $57,271   $57,950   $(679)    (1)% 
Bacterial & General Sanitation
   31,499    31,345    154    0% 
Culture Media & Other
   39,577    35,259    4,318    12% 
Rodenticides, Insecticides & Disinfectants
   27,230    20,859    6,371    31% 
Genomics Services
   14,566    12,961    1,605    12% 
                 
  $170,143   $158,374   $11,769    7% 
Animal Safety
        
Life Sciences
  $4,122   $4,901   $(779)    (16)% 
Veterinary Instruments & Disposables
   34,843    32,621    2,222    7% 
Animal Care & Other
   25,902    20,859    5,043    24% 
Rodenticides, Insecticides & Disinfectants
   56,470    47,462    9,008    19% 
Genomics Services
   49,554    44,879    4,675    10% 
                 
  $170,891   $150,722   $20,169    13% 
                 
Total Revenues
  $341,034   $309,096   $31,938    10% 
                 
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Food Safety
Natural Toxins, Allergens
 & Drug Residues –
Sales in this category decreased 8% and were flatincreased 6% for the ninethree month period ended February 29, 2020, respectively,28, 2021 and decreased 1% for the year to date, each compared to the same periods in the prior year. In the third quarter, sales of drug residue test kits were down 47%, resulting from lowernatural toxins increased 14% as recent pet food recalls in the U.S. have driven demand at our European distributor. Effective January 1, 2020, we have modified our contract with this distributor to eliminate their exclusive distribution of our dairy drug residue test kits and we have begun selling this product line directly to end customers through Neogen Europe. Partially offsetting this decrease, sales of our allergens product line and natural toxin test kit revenues bothfor increased 4%. For the nine month period, sales of ourtesting. The allergens product line increased 8% and natural toxins test kit revenues increased 5%3% while drug residues sales decreased 10%, whileas we work to recover lost business with our
in-house
sales team, which replaced an exclusive European distributor approximately a year ago. The 1% decline on a year to date basis is due to lower sales of drug residue test kits declined 29%.in the first half of our fiscal year; additionally, natural toxins sales were flat in the first six months of the year due to relatively clean crops during harvest season.
Bacterial
 & General Sanitation –
Revenues in this category decreased 1%increased 10% in the third quarter and increased 2%were flat for the year to date, both compared to the same periods in the prior year. In the third quarter, sales of our AccuPoint sanitation monitoring product line increased 5% on higher sales of both equipment and related samplers; sales of test kits to detect pathogens decreased 7%, in part due to higher equipment sales in the prior year third quarter. Sales of products to detect spoilage organisms in processed foods decreased 3%increased 19%, dueresulting from sales of our new instrument (Soleris NG), which launched in the first quarter, and increased consumables sales from new instrument placements. Sales of our AccuPoint sanitation monitoring product line increased 5%; we plan to lacklaunch a next generation of availabilityreader for this product line in the fourth quarter at which time there will be significant sales and marketing focus on these products. Sales of certain consumable vials becauseproducts to detect pathogens increased 8%, as we continue to gain new business with sales of manufacturing issues, which have since been resolved.our
Listeria
Right Now test kit. For the year to date, strong sales of our Soleris NG instrument and the associated consumables were offset by a small decline in sales of our AccuPoint product line increased 13% and a 7% decrease in pathogen test kit revenues increased 2%, while sales, primarily due to high equipment sales in the second quarter of products to detect spoilage organisms decreased 10%.the prior fiscal year.
Culture Media
 & Other –
Sales in this category decreased 6%increased 33% in the quarter ended February 29, 202028, 2021 compared to the third quarter in the prior year; for the nine month period, sales decreased 3%increased 12%. Excluding sales from the December acquisition of Megazyme, sales in this category increased 16% and 7% for the three and nine month periods, respectively. This category includes sales of personal protective equipment, primarily gloves, as well as hand sanitizers and sanitizing wipes; these products experienced short-term increased demand in new markets due to shortages caused by the
COVID-19
pandemic which is not expected to recur. This category also includes sales of acquired inventory of
non-Neogen
manufactured products from our new businesses in Italy and the South American southern cone countries; these sales are not expected to continue long-term. Sales of Neogen Culture Media decreased 7% and were flat for the quarter and year to date periods, respectively. The decreaseincreased 11% in the third quarter is primarily due to order timing and lower end market demand. This category also includes forensic test kits sold within Brazil, which decreased significantly in both the third quarter andas we gained new business from a
COVID-19
vaccine manufacturer; for the year to date as a large customer moved to a higher throughput testing method. For both periods, this category also benefitted from lower rebate payments to a European distributor in the current fiscal year.period, culture media sales were flat.
Rodenticides, Insecticides
 & Disinfectants –
Revenues in this category increased 34%21% in the third quarter of fiscal 20202021 compared to the same period a year ago, due primarily fromto continued strength ofin cleaners and disinfectant productssales in China resulting from increased demand due to the African swine fever outbreak in that country and the
COVID-19
outbreak. The quarter was also aided by a large sale of rodenticides in Mexico and the final shipment of a
non-recurring
sale of insecticide products to a governmental agency in Nicaragua.pandemic. For the year to date, sales in this category increased 8%.31%, as the first quarter also included strong sales of hand and skin sanitizing products at our U.K. based Quat-Chem operation.
Genomics Services –
Sales of genomics services sold through our international Food Safety operations decreased 8%increased 12% for both the three and nine month periodperiods ended February 29, 2020; revenues decreased 3%28, 2021. The increase for the nine month period. For each comparative period, the decreaseboth periods was caused primarily by lower sample volumesfrom sales increases in our Brazilian genomics operations, resulting from a large government orderChina, due to increased testing in the prior year which has not recurredpork industry, gains in the current year. Currency also negatively impacted revenuesbeef and dairy cattle testing and project work in the current fiscal year as both the British pound and the Brazilian real have weakened relative to the U.S. dollar. The Company has sizable genomics revenues in the U.K. and in Brazil, where the pound and real, respectively, are the functional currencies.aquaculture.
Animal Safety
Life Sciences –
Sales in this category decreased 25%increased 2% in the third quarter, compared to the same period in the prior year;year, but was down 16% for the year to date. The increase for the third quarter is due to increased sales of reagents and substrates; for the year to date, the decrease in this product line is 15%. The prior year included sales to a commercial laboratory customer which did not recur in fiscal 2020. Additionally, sales of substrates and reagentsforensic kits to commercial laboratories declined significantly inas the third quarter,labs processed fewer samples due to slowdowns resulting from the result of order timing from a large customer.
COVID-19
pandemic.
Veterinary Instruments
 & Disposables –
Revenues in this category increased 1%16% and 7% for the three and nine month periodperiods ended February 29, 2020; for28, 2021, respectively, led by large increases in detectable needles and syringes, as we gained new customers and benefitted from increased demand resulting from higher numbers of production animals in existing markets. In the year to date, sales were flat. For both thethird quarter, and year to date periods, growth in marking and other disposable products was essentially offset by decreased sales of various types of needles, due to high inventory levels at our largest distributors.disposable gloves increased significantly, as these products had previously been on backorder.
Animal Care
 & Other –
Sales of these products increased 2%33% in the third quarter and decreased 5%24% for the year to date. Indate, respectively. For both periods, sales of our small animal supplements, vitamin injectables, and joint pain products benefitted from growth in veterinary markets, as the third quarter, animal care revenues decreased 4%
COVID-19
pandemic has led to an increase in pet ownership, particularly dogs and cats. Additionally, sales rose for our equine supplements and antibiotics, due to lower sales to our larger U.S. distributors whilestrong demand in these markets. Partially offsetting these gains were declines in sales of disposable dairy supplies rose 5%. Forof 64% and 49% for the quarter and year to date period, animal care revenues were 4% lower than the prior year, while dairy supplies were 2% lower. Timing of adjustments to promotional programs with distributors, which are recorded as contra revenues within this category, also contributedperiods, respectively, due to the year to date decline.
June 2020 termination of an agreement in which we distributed these types of products for a large manufacturer of dairy equipment.
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Rodenticides, Insecticides
 & Disinfectants –
Revenues in this category increased 8%24% and 19% for the three and nine month periodperiods ended February 29, 2020, but28, 2021, respectively. The growth in the quarter was led by a 79% increase in rodenticide sales as rodent pressure in certain areas of the U.S. increased significantly; year to date, rodenticide sales have increased 45%. Insecticide sales rose 14% in the quarter, due in large part to our acquisition of the StandGuard product line for fly control on July 31, 2020. For the year to date, the increase was 10%. Cleaners and disinfectants sales decreased 4%9% resulting from lower sales of water treatment products and the transfer of a product line to our U.K. operation. Sales of these products for the year to date period. For the quarter, rodenticide sales rose 26% on the success of retail marketing programs and insecticide sales were up 5%. These gains for the three month period were partially offset byflat compared to a 1%year ago, with increased sales of hand sanitizer products in the first half of our fiscal year offsetting the decline in sales of cleaners and disinfectants. For the year to date, rodenticides were down 2%, insecticides were down 6%, and cleaners and disinfectants declined 5%.water treatment products.
Genomics Services –
Sales in this category increased 14%9% in the third quarter and 20%10% for the year to date period, bothperiods, each compared to the prior year; the September 2018 acquisition of Livestock Genetic Services and the January 2019 acquisition of Delta Genomics contributed a minor amount of the growth in this category.year. The growth in both the three month period was led by gains in beef and nine month periods wascompanion animal testing in Australia, and commercial beef and beef associations in the result of significant volumeU.S. and Canada. For the year to date, we also benefitted from strong increases in sales to the U.S. companion animal veterinary market, due to product uptake atdriven by increased pet adoptions and higher consumer spending on pets during the
COVID-19
pandemic, as well as the recent launch of a large customer and, to a lesser extent, continued growth in the beef and dairy cattle, and porcine markets.new high density chip for whiteleg shrimp.
Gross Margin
Gross margin was 45.4%46.1% in the third quarter of fiscal 20202021 compared to 45.7%45.4% in the same quarter a year ago. The changeimprovement in gross margin is due primarily the result of increased rodenticide sales within the Animal Safety segment; these products have higher gross margins within this segment. Gross margins for the Food Safety segment were flat for the third quarter compared to last year’s third quarter. For the year to date, gross margin was also 46.1% compared to 46.8% in the same period of the prior year. The lower gross margin percentage for the year to date is the result of a changeshift in product mix resulting from a higherthe proportion of overall sales fromto the Animal Safety segment, which have lower average gross margins than products sold through the Food Safety segment. Gross margin for the nine month period ended February 29, 2020 was 46.8% compared to 46.4% in the same period of the prior year, primarily the result of higher gross marginssegment; additionally, sales increases within the AnimalFood Safety segment resultingwere from a 250 basis point margin improvement in the domesticproduct lines, such as genomics service business, due to a significant increase in revenues in the companion animal testing business,and biosecurity products, which have higherlower gross margins than other services within this business.the diagnostic test kits sold in that segment.
Operating Expenses
Operating expenses were $32.3$38.1 million in the third quarter, compared to $30.0$32.3 million in the same quarter of the prior year, an increase of 8%$5.8 million, or 18%. For the nine month period ended February 28, 2021, operating expenses were $103.5 million, an increase of $6.5 million, or 7%, compared to the prior year. Sales and marketing expenses rose $953,000,increased $1.0 million, or 6%, in the third quarter, primarily due to personnel related expenses,increased compensation and higher shipping regulatorycosts, offset somewhat by continued lower spending on travel, meetings, trade shows and product registration costs. other customer facing activities as a result of the
COVID-19
pandemic. For the year to date, sales and marketing expenses were $270,000 lower than the same period last year, also due to
COVID-19
pandemic restrictions.
General and administrative expense rose $771,000,was $15.1 million, an increase of $4.4 million, or 8%40%, in the third quarter, resulting primarily from increases$2.1 million in stock based compensation expense, personnel costs,spending on strategic consulting, legal and other professional fees resulting from acquisitions completedrelated to acquisition activity for businesses which we were ultimately not successful in acquiring. Other increases in the quarter were for incremental amortization expenses
(non-cash)
primarily for recent acquisitions,
non-deal
related legal fees for a number of corporate matters, and depreciationreduced economic incentives recognized from state and local governments. Year to date, general and administrative expenses were $38.3 million, an increase of 18% compared to the same period last year, with $3.1 million incurred in unsuccessful acquisition activities the largest component of the increase. Other year-over-year increases were higher performance-based compensation expenses due to higher revenue and improved operating results compared to the prior year, amortization expense primarily related to investments in information technology. recent acquisitions and
non-deal
legal expenses.    
Research and development expense was $3.8$4.2 million in the third quarter, an increase of $574,000,$413,000, or 18%11%, compared to the same period in the prior year. The increase is primarily the result of development spending andon outside services relating to a numberfor the continued development of several new products, which have either been recently launched or are expected to be launched in late fiscal 2020 or earlythe fourth quarter of fiscal 2021.
Operating expenses forFor the nine month period ended February 29, 2020 were $97.0 million, an increase of $4.9 million, or 5%, comparedyear to the prior year. Driving the increase weredate, research and development spending increasesexpenses increased 8% over the same period last year, for the same reasons.
25
Table of $2.1 million, or 22%, due primarily to new product development, and a $2.1 million, or 7%, increase in general and administrative expense. The increase in general and administrative expense was led by increased stock based compensation expense, higher legal and professional fees, and an increase in depreciation expense.Contents
Operating Income
Operating income was $13.0$15.8 million in the third quarter of fiscal 2020,2021, compared to $14.6$13.0 million in the same period of the prior year; year to date operating income was $47.6$53.9 million compared to $49.4$47.6 million in the prior year. Expressed as a percentage of sales, operating income was 13.1%13.5% for the third quarter and 15.4%15.8% for the year to date, compared to 15.0%13.1% and 16.2%15.4%, respectively, for the same periods in the prior year. The declineimprovement in operating margin percentage for each period in the current fiscal year was primarily the result of operating expenses that increased more than the rate of revenue growth. Additionally, in the third quarter of fiscal 2020,was due primarily to the increased revenues and 70 basis point improvement in gross margin percentage, declinedoffset somewhat by 30 basis points; forincreased operating expenses, caused in part by the year to date, the gross margin percentage has increased by 40 basis points.$2.1 million in acquisition related expenses.
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Other Income
                 
 
Three Months Ended
  
Nine Months Ended
 
 
February 29/28
  
February 29/28
 
(dollars in thousands)
 
2020
  
2019
  
2020
  
2019
 
Interest income (net of expense)
 $
1,600
  $
1,335
  $
4,381
  $
3,290
 
Foreign currency transactions
  
(420
)  
104
   
(889
)  
(354
)
Royalty income
  
—  
   
—  
   
1
   
60
 
Deoxi contingent consideration
  
—  
   
—  
   
—  
   
(9
)
Quat-Chem contingent consideration
  
—  
   
—  
   
—  
   
422
 
Other
  
28
   
545
   
56
   
688
 
                 
Total Other Income
 $
1,208
  $
1,984
  $
3,549
  $
4,097
 
                 
   
Three Months Ended
   
Nine Months Ended
 
   
February 28/29,
   
February 28/29,
 
(in thousands)
  
2021
   
2020
   
2021
   
2020
 
Interest income (net of expense)
  $294   $1,600   $1,571   $4,381 
Foreign currency transactions
   (118)    (420)    (374)    (889) 
Insurance settlement
   —      —      309    1 
Legal settlement
   —      —      (300)    —   
Contingent consideration
   111    —      111    —   
Other
   (84)    27    (109)    56 
                    
Total Other Income
  $203   $1,207   $1,208   $3,549 
                    
The increasedecrease in interest income in both the three and nine month periods of fiscal 20202021 compared to the same periods a year ago was the result of higher cash anda significant reduction in rates earned on marketable securities balances. Other expense resulting from foreign currency transactions was primarily the result of changes in the value of foreign currencies relative to the U.S. dollar in countries in which we operate.
Income Tax Expense
Income tax expense in the third quarter of fiscal 20202021 was $2.6 million, an effective tax rate of 16.3%, compared to $2.1 million, an effective tax rate of 14.4%, compared to $3.6 million, an effective tax rate of 21.4%, in the same period of the prior year. For the year to date, income tax expense was $10.0 million, an effective rate of 18.1%, in fiscal 2021 and $8.0 million, an effective rate of 15.6%, in fiscal 2020 and $9.1 million, an effective rate of 17.0%, in fiscal 2019.2020. For each period, the primary difference between the U.S. statutory rate of 21% and the effective rates recorded is the benefit resulting from the exercise of stock options; this benefit was $781,000$1,083,000 in the third quarter of fiscal 20202021 compared to $291,000$781,000 in the third quarter of the prior year. For the year to date, the benefit was $2,564,000 in fiscal 2021 compared to $2,754,000 in fiscal 20202020. The increase in the effective tax rate for both the third quarter and year to date periods, each compared to $3,065,000the same period in the prior year, is the result of increased taxes at international operations, higher state tax provisions and a lower projected U.S. deduction in fiscal 2019. For both periods in the current fiscal year, adjustments2021 relating to research and development credits and other deductions related to the Tax Reform Act of 2017 resulted in lower effective income tax rates.
foreign derived income.
Net Income
Net income was $12.2$13.4 million in the third quarter of fiscal 2020, a 7% decrease2021, compared to $13.1$12.2 million in the same period in the prior year. The change in earnings for this year’s third quarter was the resultyear, an increase of lower pretax income, offset somewhat by the decrease in the effective tax rate.10%. For the year to date, net income decreased 3%of $45.1 million was an increase of 5% from $44.4$43.1 million to $43.1 million; forearned in the nine monthsame period currenta year net income was also negatively impacted by lower pretax income, offset somewhat by a lower effective tax rate.ago.
Financial Condition and Liquidity
The overall cash, cash equivalents and marketable securities position of Neogen was $327.9$353.3 million at February 29, 2020,28, 2021, compared to $267.5$343.7 million at May 31, 2019.2020. Approximately $60.3$59.1 million was generated from operations during the first nine months of fiscal 2020.2021. Net cash proceeds of $27.9$22.8 million were realized from the exercise of stock options and issuance of shares under our Employee Stock Purchase Plan during the first nine months of fiscal 2020.2021. We spent $16.3$19.4 million for property, equipment and other
non-current
assets in the first nine months of fiscal 2020,2021, and approximately $9.7a total of $52.0 million on acquisitions during the same period.acquisitions.
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Table of Contents
Net accounts receivable balances were $80.7$87.2 million at February 29, 2020, a decrease28, 2021, an increase of $1.9$2.6 million, compared to $82.6$84.7 million at May 31, 2019.2020. Days sales outstanding, a measurement of the time it takes to collect receivables, were 65 days at February 28, 2021, compared to 68 days at May 31, 2020 and 66 days at February 29, 2020, compared2020. We have been carefully monitoring our customer receivables as the
COVID-19
pandemic has spread across our global markets; to 61 daysdate, we have not experienced an appreciable increase in bad debt write offs. We did provide an additional $100,000 at May 31, 20192020 in our allowance for bad debts to account for potential write offs related to
COVID-19;
we will continue to actively manage our customer accounts and 68 daysadjust the allowance account as circumstances change.
Net inventory was $99.3 million at February 28, 2019. All customer accounts are actively managed and no losses in excess of amounts reserved are currently expected; attention is being paid to the potential negative impact of COVID-19 on our customers’ ability to pay their bills.
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Table of Contents
Net inventory balances were $89.2 million at February 29, 2020,2021, an increase of $3.2$4.2 million, compared to a May 31, 20192020 balance of $86.0$95.1 million; excluding the amount recorded from the December 2020 acquisition of Megazyme, inventory is down $1.4 million. We actively monitor ourincreased inventory levels in fiscal 2020 to ensure we had adequate supplies of critical raw and balancefinished products in the need for adequate levels of product availability to minimize backorders with a desire to improve inventory turnoverevent our supply chain was adversely impacted by the
COVID-19
pandemic and efficiency levels. WeBrexit, however we have now put programs in place to improve our turnover in fiscal 2020; however, during the year we have increasedlower inventory levels, at our European operations to mitigate potential supply chain disruptions from a disorderly Brexit. Also, during the third quarter, in anticipation of possible supply disruptions due to the
COVID-19
pandemic, we reviewed our inventories of key raw materials and adjusted levels upward in some instances to ensure product availability.while not adversely impacting customers.
Inflation and changing prices are not expected to have a material effect on operations, as management believes it will continue to be successful in offsetting increased input costs with price increases and/or cost efficiencies.
Management believes that our existing cash and marketable securities balances at February 29, 2020,28, 2021, along with available borrowings under our credit facility and cash expected to be generated from future operations, will be sufficient to fund activities for the foreseeable future. However, existing cash and borrowing capacity may not be sufficient to meet our cash requirements to commercialize products that are currently under development or execute our plans to acquire other organizations, technologies or products that fit within our mission statement. Accordingly, we may choose to issue equity securities or enter into other financing arrangements or issue equity securities for all, or a portion, of our future financing needs.
The
COVID-19
pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition.
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Table of Contents
PART I – FINANCIAL INFORMATION
Item 3.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have interest rate and foreign exchange rate risk exposure but no long-term fixed rate investments or borrowings. Our primary interest rate risk is due to potential fluctuations of interest rates for variable rate borrowings (no long-term borrowings at February 29, 2020) and short-term investments.
Foreign exchange risk exposure arises because we market and sell our products throughout the world. Revenues in certain foreign countries as well as certain expenses related to those revenues are transacted in currencies other than the U.S. dollar. Our operating results are exposed to changes in exchange rates between the U.S. dollar and the British pound sterling, the euro, theMexican peso, Brazilian real, the Mexican peso, the Chinese yuan, the Australian dollar, and to a lesser extent, the Indian rupee, the Canadian dollar, the Argentine peso, Uruguayan peso and Chilean peso; there is also exposure to a change in exchange rate between the British pound sterling and the Uruguayan peso.euro. When the U.S. dollar weakens against foreign currencies, the dollar value of revenues denominated in foreign currencies increases. When the U.S. dollar strengthens, the opposite situation occurs. Additionally, previously recognized revenuesinvoiced amounts can be positively or negatively affected by changes in exchange rates in the course of collection can be affected positively or negatively by changes in exchange rates. The Company enters into forward contracts to help mitigate the economic impact of fluctuations in certain currency exchange rates. These contracts are adjusted to fair value through earnings.collection.
Neogen has assets, liabilities and operations outside of the United States,U.S., located in Scotland, England, Ireland, Italy, Brazil, Mexico, Argentina, Uruguay, Chile, China, India, Canada, and Australia where the functional currency is the British pound sterling, euro, Brazilian real, Mexican peso, Argentine peso, Uruguay peso, Chilean peso, Chinese yuan, Indian rupee, Canadian dollar and the Australian dollar respectively, and also transacts business throughout Europe in the euro. The Company’srespectively. Our investments in foreign subsidiaries are considered to be long-term. As discussed in ITEM 1A. RISK FACTORS of the Form
10-K
annual filing, our financial condition and results of operations could be adversely affected by currency fluctuations.
PART I – FINANCIAL INFORMATION
Item 4.
Item 4. Controls and Procedures
Evaluation
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of February 29, 202028, 2021 was carried out under the supervision and with the participation of the Company’s management, including the President & Chief Executive Officer and the Vice President & Chief Financial Officer (“the Certifying Officers”). Based on the evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures are effective.
Changes in Internal Controls over Financial Reporting
No changes in our control over financial reporting were identified as having occurred during the quarter ended February 29, 202028, 2021 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
27
28
Table of Contents
PART II – OTHER INFORMATION
Item 1.
Item 1. Legal Proceedings
The Company is subject to legal and other proceedings in the normal course of business. In the opinion of management, the outcomes of these matters are not expected to have a material effect on the Company’s future results of operations or financial position.
Item 1A.
Risk Factors
Other than the risk factors set forth below, there have been no material changes from the risk factors disclosed in our Annual Report on Form
10-K
for the fiscal year ended May 31, 2019.
The widespread outbreak of an illness or any other communicable disease, or any other public health crisis, could adversely affect our business, results of operations and financial condition.
We could be negatively impacted by the widespread outbreak of an illness or any other communicable disease, or any other public health crisis that results in economic and trade disruptions, including the disruption of global supply chains. In December 2019, an outbreak of a new strain of coronavirus
(“COVID-19”)
began in Wuhan, Hubei Province, China. In March 2020, the World Health Organization declared
COVID-19
a pandemic. The
COVID-19
pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. The extent of the impact of the
COVID-19
pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel and transports, all of which are uncertain and cannot be predicted. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of liquidity and financial condition.
Item 6.
Item 6. Exhibits
(a) Exhibit Index
3  
    3
Articles of Incorporation, as restated (incorporated by reference to Exhibit 3 to the registrant’sRegistrant’s Form 10-Q filed on December 28, 2018)
10.1  Amended and Restated Credit Agreement dated as of November 30, 2016 between Registrant and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.A of the Registrant’s Form 8-K filed on December 7, 2016)
10.2  
  10
First Amendment to Amended and Restated Credit Agreement dated as of November 30, 2018 between Registrant and JP Morgan Chase N.A. (incorporated by reference to Exhibit 10.A of the registrant’sRegistrant’s Form 8-K filed on December 6, 2018)
10.3  Second Amendment to Amended and Restated Credit Agreement dated as of November 30, 2020 between Registrant and JP Morgan Chase N.A. (incorporated by reference to Exhibit 10.A of the Registrant’s Form 8-K filed on December 17, 2020)
31.1  
  31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2  
  31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32  
  32
Certification pursuant to 18 U.S.C. section 1350
101.INS  
101.INS
Inline XBRL Instance Document
101.SCH  
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL  
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF  
101.DEF
Inline XBRL Taxonomy Extension Definition Document
101.LAB  
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE  
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
EX-104  
EX-104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
Items 1A, 2, 3, 4, and 5 are not applicable or removed or reserved and have been omitted.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NEOGEN CORPORATION
(Registrant)
Dated: March 31, 2021
Dated: April 3, 2020
/s/ John E. Adent
John E. Adent
President & Chief Executive Officer
(Principal Executive Officer)
Dated: March 31, 2021
Dated: April 3, 2020
/s/ Steven J. Quinlan
Steven J. Quinlan
Vice President & Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
29
30