Neogen reports 30% increase in net income

July 26, 2011

CONTACT: Steve Quinlan, Vice President & CFO, 517.372.9200

LANSING, Mich., July 26, 2011 – Neogen Corporation (NASDAQ: NEOG) announced today that net income for its 2011 fiscal year, which ended May 31, increased 30% from the previous year to $22,839,000. Net income in the fiscal year increased to $0.96 per share, compared to the prior year’s $0.76 per share.

Neogen’s revenues for its FY 2011 increased 23% to $172,683,000, up from $140,509,000 in the company’s previous fiscal year. Both revenues and net income for the 2011 fiscal year established new all-time highs for the 29-year-old company. Neogen’s fourth quarter revenues increased 12% on a year-to-year comparison to $43,594,000. Net income in the fourth quarter increased 29% to $5,962,000 from $4,635,000 in FY 2010, or to $0.25 per share compared to $0.20 per share in FY 2010.

“The results we are reporting today clearly indicate Neogen is capturing a piece of the growing global demand for food and animal safety products,” said James Herbert, Neogen’s chief executive officer and chairman. “Neogen is uniquely positioned to continue to seize food and animal safety opportunities wherever in the world they may exist — from farms, ranches and aquaculture operations, through food processing and food service.”

For the first time, Neogen’s percentage of sales from international markets exceeded 42% of total revenues. Neogen’s FY 2011 operating income increased 33% compared to the prior year to $35,835,000, or to 20.8% of revenues, compared with $26,879,000, or 19.1% of revenues in FY 2010.

“Our 2011 fiscal year marked the first time we have been able to record an operating margin in excess of 20% for a full year — a long-standing benchmark goal of ours,” said Lon Bohannon, Neogen’s president and chief operating officer. “The achievement is a strong indication that as revenues increase, our ongoing cost-saving measures are also contributing to the positive operating results. We’re also pleased to report that our revenue increase was the result of broad-based sales growth in both the animal safety and food safety divisions. As planned, immediately accretive acquisitions did significantly bolster revenues and earnings, but we were also able to achieve organic sales growth in excess of 10%.”

The fourth quarter was the 73rd consecutive profitable quarter from operations for the company, and the 77th quarter of the past 82 quarters to show increased revenues as compared with the previous year—including the last 25 quarters.

“As our consolidated balance sheet data shows, Neogen is now very well positioned to pursue a wide variety of growth strategies,” said Steve Quinlan, Neogen’s vice president and chief financial officer. “Our cash generation for the year was excellent. We also improved accounts receivable days outstanding and decreased our inventory as a percentage of sales.”

Revenues from the company’s Animal Safety segment grew 36% in FY 2011 compared to the prior year to $87,169,000. While the successful integration of the GeneSeek agricultural genetics business contributed to Animal Safety’s revenue growth for the year, sales of existing product lines achieved solid organic growth of 12% when compared to the prior year.

Sales of Neogen’s leading line of veterinary instruments again showed exceptional growth, increasing 21% for the year, and were led by large increases in sales of needles and syringes. The line also benefitted from the continuing success of retail sales of the products in farm and ranch stores. Neogen’s line of BioSentry agricultural cleaners and disinfectants and its line of rodenticides also experienced significant sales increases, evidence that the company’s efforts to market its disinfectants and rodenticides as synergistic biosecurity solutions are gaining increasing traction.

GeneSeek exceeded internal revenue expectations in its first year, expanding the use of its DNA genotyping technology for animal applications under Neogen ownership. GeneSeek’s technology allows the acceleration of natural selection through selective breeding for traits, such as disease resistance and meat quality. Neogen recently announced its new NeoSeek™ pathogen DNA detection method for E. coli strains — the first food safety laboratory technology developed through the close collaboration of Neogen’s food safety research group and GeneSeek research team.

Despite a difficult comparison with the exceptional performance of FY 2010, when the division recorded a revenue increase of 25%, sales of Neogen’s Lansing, Mich.-based Food Safety Division increased 12% from $76,454,000 in FY 2010 to $85,514,000 in the current year. While the acquisition of Gen-Probe’s BioKits food safety business contributed to the division’s fiscal year revenue gain, organic sales growth in Food Safety was broad-based across multiple market segments and product lines. Diagnostic products used in the detection of specific pathogens, general spoilage organisms, food allergens and for general sanitation all achieved solid double-digit sales growth for the year.

In FY 2011, Neogen recorded sharp increases in sales of its test kits to detect dairy antibiotic residues. In March, Neogen received the regulatory approvals necessary to allow milk producers and processors in the U.S. to use Neogen’s new BetaStar® Plus to comply with FDA regulations that require the mandatory testing of raw milk tankers for dairy antibiotic residues.

Neogen’s Scotland-based Neogen Europe subsidiary recorded a revenue increase of 27% in the current year compared to the prior year. Neogen Europe’s revenue increase was broad-based, including increases in sales of Neogen’s food safety diagnostics and Acumedia® dehydrated culture media. The company’s Mexican subsidiary recorded a 38% sales increase compared to the prior year, and Neogen is beginning to see significant revenue growth from its new subsidiary in Brazil.

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, 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. 30 Year ended May 31
  2011 2010 2011 2010
 Food Safety $21,287 $20,815 $85,514 $76,454
 Animal Safety 22,307 18,263 87,169 64,055
Total revenue 43,594 39,078 172,683 140,509
Cost of sales 21,645 19,356 84,891 67,534
Gross margin 31,949 19,722 87,792 72,975
Operating expenses
 Sales & Marketing 7,960 7,178 30,020 26,350
 Administrative 3,859 4,016 15,112 13,488
 Research & Development 1,585 1,570 6,825 6,258
Total operating expenses 13,404 12,764 51,957 46,096
Operating income 8,545 6,958 35,835 26,879
Other income (expense) 117 377 (596) 442
Income before tax 8,662 7,335 35,239 27,321
Income tax 2,700 2,700 12,400 9,800
Net income $5,962 $4,635 $22,839 $17,521
Net income per diluted share $0.25 $0.20 $0.96 $0.76
Other information
 Shares to calculate per share 23,993 23,331 23,791 23,091
 Deprecation & amortization $1,388 $1,288 %5,329 %4,435
 Interest income 25 13 95 81
 Gross margin (% of sales) 50.3% 50.5% 50.8% 51.9%
 Operating income (% of sales) 19.6% 17.8% 20.8% 19.1%
 Revenue increase vs. FY 2010 11.6%   22.9%  
 Net income increase vs. FY 2010 28.6%   30.4%  
(In thousands)
  May 31
May 31
Current Assets
 Cash & investments $56,083 $22,806
 Accounts receivable 28,634 27,433
 Inventory 31,994 31,316
 Other current assets 5,791 4,465
Total current assets 122,502 86,020
Property & equipment 22,340 19,180
Goodwill & other assets 75,820 75,033
Total assets $219,662 $180,233
Liabilities & Equity
Current liabilities $17,797 $17,033
Other long-term liabilities 12,887 10,147
Equity: Shares outstanding
 23,291 in 2011 & 22,625 in 2010 188,978 153,053
Total liabilities & equity $219,662 $180,233

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