Neogen reports best quarter in its 26-year history

January 06, 2009

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

LANSING, Mich., Jan. 6, 2009 – Neogen Corporation (Nasdaq: NEOG) announced today that its net income for the second quarter of FY 2009, which ended Nov. 30, increased 20% from the previous year’s second quarter. On a per-share basis, net income in the quarter rose to $0.26, compared to the prior year’s $0.22. Neogen’s second quarter net income of $3,901,000 set another quarterly record for the 26-year-old company.

Year-to-date net income for the first six months of Neogen’s 2009 fiscal year increased 22% to $7,634,000 from $6,265,000 in FY 2008, or to $0.51 per share in the current year from the prior year’s $0.42. Second quarter revenues increased 15% to $31,187,000, also a quarterly record, compared to the prior year’s $27,210,000. Year-to-date revenues rose 20% during the fiscal year’s first half to $59,992,000 from FY 2008’s $50,118,000.

The second quarter was the 63rd consecutive profitable quarter from operations for the company, and the 67th quarter of the past 72 quarters to show increased revenues as compared with the previous year—a span of 18 years.

“Despite the difficult economic climate, we are once again proud to report that the operational strength throughout Neogen delivered yet another strong quarterly performance,” said James Herbert, Neogen’s chief executive officer and chairman. “The second quarter was a healthy combination of growth in a number of our core products, and a great start for the product lines that we acquired within the past year. While economic difficulties are impacting every company, our strategy continues to provide opportunity for growth.”

The second quarter saw a continuation of Neogen’s tradition of successfully integrating acquisitions to provide incremental top line and, more importantly, bottom line growth. Recent acquisitions helped Neogen achieve an increase of 22% in its operating income—from $4,798,000 in FY 2008 to $5,861,000 in the current year.

“We’re very pleased with the second quarter results considering unique challenges we faced in the quarter-to-quarter comparisons to the prior year,” said Lon Bohannon, Neogen’s president and chief operating officer. “In particular, the world-wide economic turmoil resulted in some significant currency exchange adjustments that negatively impacted reported second quarter sales. Our increase in unit volume was substantially better than the reported increase in sales for our Food Safety Division.”

Neogen’s Animal Safety Division led the company’s second quarter revenue increase, with sales up 24% from $12,736,000 in FY 2008 to $15,808,000 in FY 2009. Year-to-date, the division’s revenues increased 33% from the prior year to $29,064,000. While the July 2008 acquisition of a line of agricultural and veterinary disinfectants from DuPont Animal Health Solutions contributed significantly to the year-over-year revenue gain, same-store sales also improved, and a number of core product lines experienced significant revenue increases compared to the previous year. Sales of Neogen’s veterinary biologics increased more than 60% in the quarter, as the company responded to suspected equine botulism outbreaks in at least four U.S. states. Neogen is the exclusive provider of a vaccine against the most prevalent type of equine botulism and expanded its domestic distribution of this proprietary vaccine during the second quarter.

Neogen’s Animal Safety division continued to grow sales of the Kane products acquired in August 2007. Sales of the Kane products, including veterinary obstetrical gloves, bovine hoofcare, and surgical supplies, increased approximately 20% in the FY 2008 quarter compared to the prior year. Continuing market acceptance of Neogen’s line of veterinary supplements primarily for dogs and cats led to a 26% increase in sales of the company’s Kare product line.

Neogen’s Food Safety Division second quarter revenues, which were exclusively same-store sales, increased 6% to $15,379,000 in FY 2009. Year-to-date, the Food Safety Division’s revenues were up 10% to $30,928,000 for FY 2009 from $28,232,000 in FY 2008. Excluding the impact of currency translation that significantly reduced reported second quarter dollar-denominated sales of dairy antibiotic tests and sales for the company’s Neogen Europe subsidiary, sales growth for food safety would have been over 12% for the quarter and on a year-to-date basis.

This division’s second quarter revenue increases were led by the continuing strong performance of its Lansing, Mich.-based diagnostics group, which reported sales growth of approximately 16%. Sales of Neogen rapid tests for food allergens increased more than 50% as food processors increase efforts to protect consumers from the consequences of the presence of unintended allergens in their products. An increased use of test kits to detect dairy milk allergens in soy milk contributed significantly to the overall growth in sales of food allergen test kits.

Sales of Neogen’s Soleris™ general microbial detection system, including single-use disposable vials used in conjunction with Neogen’s proprietary optical reader, also increased by more than 50% on a year-to-year comparison for the quarter. The Soleris system allows for the accurate detection of spoilage organisms, such as yeast and mold, in a fraction of the time of traditional microbial detection methods. Similarly, sales of the disposable samplers used with Neogen’s innovative AccuPoint® ATP sanitation monitoring system experienced a strong double-digit sales increase in the second quarter of FY 2009 compared to the previous year.

Neogen’s second quarter also saw Forbes Magazine name Neogen to its annual list of the 200 Best Small Companies in America for the fourth consecutive year and seventh time in the last nine years. The Forbes list is based on growth in sales, earnings, and return on equity for the past five years, and the latest 12 months.

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 Nov. 30 Six months ended Nov. 28
  2008 2007 2008 2007
 Food Safety $15,379 $14,474 $30,928 $28,232
 Animal Safety 15,808 12,736 29,064 21,886
Total revenue 31,187 27,210 59,992 50,118
Cost of sales 15,062 13,039 29,063 23,650
Gross margin 16,125 14,171 30,929 26,468
Operating expenses
 Sales & Marketing 6,013 5,456 11,632 10,134
 Administrative 3,032 2,862 5,612 5,192
 Research & Development 1,219 1,055 2,171 1,797
Total operating expenses 10,264 9,373 19,415 17,123
Operating income 5,861 4,798 11,514 9,345
Other income (expense) 240 306 445 470
Income before tax 6,101 5,104 11,959 9,815
Income tax 2,200 1,850 4,325 3,550
Net income $3,901 $3,254 $7,634 $6,265
Net income per diluted share $0.26 $0.22 $0.51 $0.42
Other information
 Shares to calculate per share 15,122 14,846 15,075 14,816
 Deprecation & amortization $994 $821 $1,950 $1,639
 Interest income        
 Gross margin (% of sales) 51.7% 52.1% 51.6% 52.8%
 Operating income (% of sales) 18.8% 17.6% 19.2% 18.6%
 Revenue increase vs. FY 2008 16.6%   19.7%  
 Net income increase vs. FY 2008 19.9%   21.9%  
(In thousands)
  Nov. 28
May 31
Current Assets
 Cash & investments $12,721 $14,270
 Accounts receivable 21,581 19,384
 Inventory 31,262 27,799
 Other current assets 3,898 4,178
Total current assets 69,462 65,631
Property & equipment 16,772 16,889
Goodwill & other assets 50,703 43,837
Total assets $136,937 $126,357
Liabilities & Equity
Current liabilities $11,937 $11,136
Other long-term liabilities 4,148 3,973
Equity: Shares outstanding
 14,726 in Nov. & 14,518 in May 120,852 111,248
Total liabilities & equity $136,937 $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