Neogen reports record revenues and earnings

July 18, 2017

Press Release
CONTACT: Steve Quinlan, Vice President & CFO, 517.372.9200

LANSING, Mich., July 18, 2017 — Neogen Corporation (NASDAQ: NEOG) announced today that its net income for the fourth quarter of its 2017 fiscal year, which ended May 31, was $12,474,000, or $0.32 per fully diluted share, an increase of 27% from $9,857,000, or $0.26 per share, in fiscal 2016. Net income for the 2017 fiscal year increased 20% to $43,793,000, or $1.14 per share, compared to the prior year’s $36,564,000, or $0.97 per share.

Revenues for the fourth quarter of its 2017 fiscal year were $98,847,000, an increase of 10% compared to $90,080,000 the prior year quarter. Revenues for the entire fiscal 2017 increased 13% to $361,594,000 from the prior year’s $321,275,000. This increase was aided by recent acquisitions completed by the company, and was achieved despite adverse top line currency adjustments of approximately $7.2 million for the full year resulting from strength of the U.S. dollar in Neogen’s international markets. Revenues and net income for the fourth quarter, and the 2017 fiscal year, established new all-time highs for the 35-year-old company.

“We are pleased to report a solid 2017 fiscal year performance and an even stronger position to continue to expand in the future,” said James Herbert, Neogen’s executive chairman. “We believe that our broad portfolio of innovative products and services sets us apart globally. We have a shared vision with the world’s food and animal producers that seek to produce food products that are safe and of high quality.”

The fourth quarter was the 101st of the past 106 quarters that Neogen reported revenue increases as compared with the previous year — including all consecutive quarters in the last 12 years.

“Our fiscal 2017 was yet another year where we were able to deliver solid operational results and launch new products and services to drive future growth,” said Richard Calk, Jr., Neogen’s president and chief operating officer. “Our fiscal 2017 acquisitions of England-based Quat-Chem and Brazil-based Rogama expanded our biosecurity product portfolio and production capabilities. We can now produce and sell cleaners, disinfectants and rodenticides competitively in worldwide markets critical to the global food supply.”

Gross margins for the company were 47.6% in both fiscal 2017 and fiscal 2016. Operating income was $64.9 million, or 18.0% of sales, in the current fiscal year, compared to $56.4 million, or 17.6%, in the company’s 2016 fiscal year.

“Although currency pressures continued to negatively impact us in fiscal 2017, the U.S. dollar did weaken somewhat in the fourth quarter,” said Steve Quinlan, Neogen’s chief financial officer. “In spite of the adverse currency impact in fiscal 2017, the company had another strong year of cash generation, and our cash position gives us great flexibility in pursuing our growth strategy going forward.”

After currency translations, revenues from Neogen’s Scotland-based subsidiary increased 13% for the 2017 fiscal year on strong sales of mycotoxin test kits and genomics services; Mexico-based Neogen Latinoamerica’s sales decreased 7%, but rose 6% in local currency; and Neogen do Brasil’s revenues increased 65% on higher sales of drug detection and drug residue test kits. Neogen recorded a 24% increase in sales into China as the company continues to expand its markets.

Revenues for the company’s Food Safety segment increased 17% during the current fiscal year compared to the prior year. The Food Safety segment’s revenue performance for fiscal 2017 was adversely affected by the negative currency translations, as Neogen’s international operations report through that segment. The segment’s 2017 increase was also aided by the company’s acquisitions of Quat-Chem and Rogama during the fiscal year, which report through Neogen’s operations in Scotland and Brazil, respectively. Organic growth for the Food Safety segment was 9% for the year; excluding the adverse currency effect, the increase was 14%.

The current fiscal year Food Safety sales performance was led by a 19% increase in sales of Neogen’s rapid tests for natural toxins. Increased testing for the toxins was driven by elevated DON levels in corn crops in the U.S., Canada and Europe. Sales of Neogen’s test kits to detect food allergens, such as gluten, milk and peanuts, increased 16% in the current fiscal year. This increase was aided by increasing global food allergen regulatory efforts, and strong sales of Neogen’s product to simultaneously detect six tree nuts with one test. Neogen’s Animal Safety segment achieved a revenue increase of 9% in the 2017 fiscal year when compared to 2016, aided by the May 2016 acquisition of Preserve International’s cleaner and disinfectant business.

The company’s sales of rapid tests to detect drug residues in forensic samples rose 34% compared to the prior year, due to a significant increase in sales of drug detection kits to commercial labs. The Animal Safety segment also recorded an 11% increase in sales of its patented D3™ Detectable Needles, which are engineered to be more resistant to breakage and detectable in standard metal detectors should they ever break.

Revenues from Neogen’s animal genomics business increased 19% worldwide in fiscal 2017 compared to the prior year, led by additional poultry, cattle and canine testing.

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 is a leader in the development of animal genomics along with the manufacturing and distribution of a variety of animal healthcare products, including diagnostics, pharmaceuticals, veterinary instruments, wound care and disinfectants.

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.

(In thousands, except for per share and percentages)
 Quarter ended May 31Year ended May 31
 Food Safety$48,258$39,716$171,325$146,421
 Animal Safety50,58950,364190,269174,854
Total revenue98,84790,080361,594321,275
Cost of sales51,82948,228189,626168,211
Gross margin47,01841,852171,968153,064
Operating expenses
 Sales & Marketing16,60015,87262,42457,599
 Research & Development2,2982,24810,3859,890
Total operating expenses28,01826,227107,02396,678
Operating income19,00015,62564,94556,386
Other income (expense)(59)(382)1,728(873)
Income before tax18,94115,24366,67355,513
Income tax6,4505,42522,70018,975
Net income$12,491$9,818$43,973$36,538
Net loss (income) attributable to non-controlling interest($17)$39($180)$26
Net income attributable to Neogen Corp$12,474$9,857$43,793$36,564
Net income attributable to Neogen Corp per diluted share$0.32$0.26$1.14$0.97
Other information
 Shares to calculate per share38,62937,93338,37437,875
 Depreciation & amortization$4,000$3,353$14,691$12,181
 Interest income14884838322
 Gross margin (% of sales)47.6%46.5%47.6%47.6%
 Operating income (% of sales)19.2%17.3%18.0%17.6%
 Revenue increase vs. FY 20169.7% 12.5% 
 Net income increase vs. FY 201626.5% 19.8% 
(In thousands)
 May 31 2017May 31 2016
Current Assets
 Cash & investments$143,635$107,796
 Accounts receivable68,57667,652
 Other current assets7,6068,407
Total current assets292,961248,226
Property & equipment, net61,74854,683
Goodwill & other assets173,700147,031
Total assets$528,409$449,940
Liabilities & Equity
Current liabilities$36,002$28,598
Long-term liabilities20,65017,181
Equity: Shares outstanding
 38,199 in 2017 & 37,568 in 2016471,757404,161
Total liabilities & equity$528,409$449,940

Category: Earnings