Neogen reports 16% increase in revenues

July 21, 2009

Press Release
CONTACT: Richard R. Current, Vice President & CFO, 517-372-9200

LANSING, Mich., July 21, 2009 – Neogen Corporation (NASDAQ: NEOG) today announced a 16% increase in revenues for its 2009 fiscal year, which ended May 31, and a continuation of the company’s outstanding record of profitability.

Neogen’s revenues for FY 2009 were $118,721,000, up from $102,418,000 in the company’s previous fiscal year. The 2009 results reflect changes in currency exchange rates that had an unfavorable impact of $2.7 million on Neogen’s international net sales. Net income per share was $0.92 in FY 2009, compared to $0.81 in the prior year. Both revenues and net income for the 2009 fiscal year established new all-time highs for the 27-year-old company.

Neogen’s fourth quarter revenues increased 14% on a year-to-year comparison to $30,890,000. Quarterly net income per share was $0.23 for the final FY 2009 three-month period. In the prior year, the company’s fourth quarter revenues were $27,119,000 and net income was $0.21 per share. Neogen’s fourth quarter was the 65th consecutive profitable quarter from operations for the company, and the 69th quarter of the past 74 quarters to show increased revenues as compared with the previous year.

“We are very pleased to announce these exceptional results in this difficult business environment,” said James Herbert, Neogen’s chief executive officer and chairman. “Neogen’s mission to provide food and animal safety solutions to diverse domestic and international markets has shown some resilience to the economic downturn. We continue to see a world of opportunity ahead for us, and we will continue to execute the growth strategies necessary to seize the opportunities.”

For the first time in any fiscal year, Neogen’s percentage of sales from international markets exceeded 40% of total revenues. Comparing the FY 2009 financial performance of Neogen’s Scotland-based subsidiary to the prior year using British pounds, Neogen Europe recorded an exceptional 26% year-over-year revenue gain. However, when Neogen Europe’s current-year revenues are translated into U.S. dollars for purposes of consolidation, its revenue gain is reduced to 3%, reflecting the significant impact on year-over-year comparisons as a result of currency translation.

“Despite the economic challenges that many of our customers encountered during the last quarter of our fiscal year, and the resulting uncertainty for some of our operating divisions, we made significant progress on a number of key objectives,” said Lon Bohannon, Neogen’s president and chief operating officer. “Our inventories came down $1.5 million during the three-month period that ended May 31, and gross margins improved from 46.8% in our third quarter to 50.1% in our fourth quarter. In addition, we were pleased to see our percentage growth in operating income exceed our percentage growth in revenue for the fourth quarter as we continue to emphasize cost reduction and productivity improvements.”

“Cash flow from operations for FY 2009 improved $3.1 million when compared to FY 2008 with much of the improvement coming in the May quarter as a result of improvements in accounts receivable days outstanding and inventory turn,” said Richard Current, Neogen’s chief financial officer. “We are implementing systems and procedures to make the fourth quarter cash flows a model for FY 2010.”

Revenues from the company’s Animal Safety segment grew 29% in 2009 compared to the prior year. While the successful integration of the acquired DuPont line of disinfectants and cleaners, and IDS drug residue diagnostics, contributed the majority of Animal Safety’s revenue growth for the year, sales of existing product lines achieved organic growth of 6% in the fourth quarter, and 4% for the year. Animal Safety was able to capitalize on the acquisition of the DuPont products as Neogen’s previously owned agricultural disinfectants and cleaners experienced near double-digit growth for the year. Sales of the DuPont products themselves exceeded expectations in their first year by more than 10%. Domestic sales of Neogen’s line of rodenticides also experienced strong growth of 11% for the year led by market share gains in agronomic markets.

Neogen’s Kare line of small animal supplements experienced a record year, with sales up more than 40%. A number of well-publicized outbreaks of equine botulism in the past year and a focused marketing response contributed to a double-digit increase in sales of the company’s equine botulism vaccine for the year. Animal Safety also saw a double-digit increase in sales of its proprietary D3 detectable needles, and an exceptional 12% growth in sales of its proprietary K-Blue® substrate sold primarily to diagnostic test kit manufacturers.

Neogen’s Food Safety segment recorded a completely organic, broad-based FY 2009 revenue increase of 6% to $61,025,000. Adjusting for the impact of currency translation, Food Safety’s organic growth was 11%. Neogen’s food allergen product line had another outstanding year of growth, with sales increasing by more than 40% over the prior year. The dramatic increase in sales of each of Neogen’s allergen tests is attributable to food producers increasing efforts to ensure that inadvertent allergenic ingredients do not contaminate non-allergenic foods.

Sales of Food Safety’s oldest product line, its rapid tests to detect natural toxins in grain, also saw significant improvement for the year, as tests for aflatoxin and deoxynivalenol (DON) improved by 10% compared to the prior year. Sales of Neogen products that require a capital investment, including AccuPoint® readers and Soleris™ microbial detection instruments, slowed in 2009 due to the impact of the economic downturn. However, sales of associated disposable AccuPoint samplers and Soleris vials increased sharply—providing proof of the continued use and acceptance of these unique Food Safety products.

Neogen’s financial performance continued to gain increased notice in the investment community in the past year, as the company was selected for the Russell 2000 and Standard & Poor’s SmallCap 600 indexes, and was named to Fortune Magazine’s annual list of America’s 100 Fastest Growing Small Public Companies, and to Forbes Magazine’s annual list of the 200 Best Small Companies in America for the fourth consecutive year and seventh time in the last nine years.

Neogen Corporation develops and markets products dedicated to food and animal safety. The company’s Food Safety Division markets dehydrated culture media, and diagnostic test kits to detect foodborne bacteria, natural toxins, genetic modifications, food allergens, drug residues, plant diseases and sanitation concerns. Neogen’s Animal Safety Division markets a complete line of diagnostics, veterinary instruments, veterinary pharmaceuticals, nutritional supplements, disinfectants, and rodenticides.

(In thousands, except for per share and percentages)
 Quarter ended  May 30Year ended May 31
 Food Safety$15,924$15,596$61,025$57,664
 Animal Safety14,96611,52357,69644,754
Total revenue30,89027,119118,721102,418
Cost of sales15,41313,01759,28849,185
Gross margin15,47714,10259,43353,233
Operating expenses
 Sales & Marketing10,0749,40938,94535,214
 Research & Development1,1198244,5553,639
Total operating expenses10,0749,40938,94535,214
Operating income5,4034,69320,48818,019
Other income (expense)8971,136479
Income before tax5,4924,70021,62418,498
Income tax2,0751,5257,7506,400
Net income$3,417$3,175$7,750$12,098
Net income per diluted share$0.23$0.21$0.92$0.81
Other information
 Shares to calculate per share15,02014,83715,05814,999
 Deprecation & amortization$999$933$3,891$3,516
 Interest income5285247442
 Gross margin (% of sales)50.1%52.0%50.1%52.0%
 Operating income (% of sales)17.5%17.3%17.3%17.6%
 Revenue increase vs. FY 200913.9% 15.9% 
 Net income increase vs. FY 20097.6% 14.7% 
(In thousands)
 May 31
May 31
Current Assets
 Cash & investments$13,842$14,270
 Accounts receivable23,36319,384
 Other current assets3,1984,178
Total current assets71,76665,631
Property & equipment17,05816,889
Goodwill & other assets53,35243,837
Total assets$142,176$126,357
Liabilities & Equity
Current liabilities$9,246$11,136
Other long-term liabilities4,2513,973
Equity: Shares outstanding
 14,737 in 2009 & 14,518 in 2008128,679111,248
Total liabilities & equity$142,176$126,357

Certain portions of this news release that do not relate to historical financial information constitute forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties. Actual future results and trends may differ materially from historical results or those expected depending on a variety of factors listed in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's most recently filed Form 10-K.


Category: Earnings