Neogen reports fiscal 2019 results

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Jul 23, 2019, 08:45 ET

LANSING, Mich., July 23, 2019 /PRNewswire/ -- Neogen Corporation (NASDAQ: NEOG) announced today that revenues for the fourth quarter of its 2019 fiscal year, which ended May 31, were $109,762,000, compared to $108,120,000 the prior year quarter. Revenues for the company for the full fiscal year were $414,186,000, compared to the prior year's $397,930,000.

Fourth quarter net income was $15,815,000, or $0.30 per share, compared to the prior year's $17,545,000, or $0.33 per share. Net income for the full 2019 fiscal year was $60,176,000, or $1.15 per share, compared to the prior year's $63,145,000, or $1.21 per share.

"During the year, we made a number of changes that position us well for the future, and we had strong performances in certain areas of the business. Our core domestic food safety diagnostic business had a solid year, increasing revenues 12% compared to the prior year, as we seized existing opportunities by increasing market share and responding to regional outbreaks, and created new opportunities by developing innovative products for the marketplace," said John Adent, Neogen's president and chief executive officer. "Of special note in our 2019 fiscal year was an 11% increase in international sales, despite currency issues, with widespread gains in most geographies. Although it was a difficult year for our Animal Safety segment due to ongoing challenges in the animal protein markets we serve, we produced significant new sales within our veterinary needle and syringe business, and of products for the companion animal market. Our overall genomics business also continued its steady growth, with revenues up 12%, with strong performances throughout our global operations."

The fourth quarter was the 109th of the past 114 quarters that Neogen reported revenue increases as compared to the same period in the previous year — a record spanning over 28 years.

Gross margins for the company were 46.3% in fiscal 2019, compared to 46.8% in fiscal 2018. The change in margin percentage was the result of product mix shifts within each segment towards products which have lower margins. Operating income was $68.1 million, or 16.4% of sales, in the current fiscal year, compared to $70.2 million, or 17.6%, in the company's 2018 fiscal year. The decline in operating income was due to the lower gross margin percentage and increased operating expenses, with significant spending on new product development.

"If currency rates had been the same as the prior year, revenues for the fourth quarter would have been $2.3 million higher, and revenues for the full year would have been $8.0 million higher. In a neutral currency environment, earnings per share would have been approximately 1.5 cents higher in the fourth quarter, and approximately 5.5 cents higher for the entire year," said Steve Quinlan, Neogen's chief financial officer. "Despite this, fiscal 2019 was another solid year of cash generation; our balance sheet remains strong, and we are well-positioned to pursue our various growth strategies."

Revenues for the company's Food Safety segment increased 10% during the 2019 fiscal year compared to the prior year. The segment's current year results included a 15% increase in sales of test kits to detect natural toxins in grains, including significant increases in sales to detect aflatoxin in corn in Brazil, and deoxynivalenol (DON) in Canada and France. The sales increase in the mycotoxin product line was also aided by the introduction of Neogen's new Raptor^® testing platform, which can be used to simplify and quicken the natural toxin testing and results process.

Compared to the prior year, global sales of Neogen's foodborne pathogen detection tests increased 24% — including a 45% increase in sales of tests to detect Listeria. This growth was largely the result of a nearly five-fold increase in sales of the company's innovative Listeria Right Now^™test system, which detects Listeria in environmental samples in under 60 minutes — without the need to enrich samples. Sales of the company's general sanitation products, including its AccuPoint^® Advanced ATP test system, increased 11% in the 2019 fiscal year, and sales of Neogen's rapid diagnostic test kits to detect food allergens, including gluten, milk, soy and peanuts, rose 7% in the current year.

Revenues from international sources increased to 40.1% of total revenues in the current year, compared to 37.6% last year. After adjusting for adverse currency translations, revenues from outside of the United States increased 11% for fiscal 2019. Revenues for our combined European operations increased 8% in U.S. dollars (12% in pounds), Mexico-based Neogen Latinoamerica's sales increased 13% (17% in pesos), and our Brazilian revenues increased 16% (36% in reals) for the year. Neogen's sales performance in Brazil in fiscal 2019 was led by significant increases in forensic kits to test commercial drivers, sales of test kits to detect aflatoxin in corn, and sales of genomic testing services specifically for cattle breeds popular in Brazil (e.g., Nellore). For the current year, Neogen China increased 13% (17% in yuan) and Neogen India increased 71% (86% in rupees) compared to the prior year, albeit from a small base. Revenues from our Australian operation, acquired in September 2017, outperformed expectations in its first full fiscal year.

Neogen's Animal Safety segment reported a 1% revenue decrease for the current year. The segment had good sales growth compared to the prior year in biologics, which was up 12%, and Neogen gained market share in sales of various needles and syringes. These increases were offset by lower sales of animal care products, other veterinary instruments, and rodenticides, due to lost toll manufacturing business.

Neogen's worldwide animal genomics business recorded a broad-based increase of 12% in fiscal 2019 compared to the prior year. The solid performance in this business was due to strong increases in beef sales in key global markets such as the United States, Europe, Brazil and Australia, due to new products and increased market penetration. Other major factors positively impacting the business were significant increases in companion animal 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 worldwide biosecurity products, animal genomics testing, and the manufacturing and distribution of a variety of animal healthcare products, including diagnostics, pharmaceuticals and veterinary instruments.

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.

CONTACT: Steve Quinlan, Vice President & CFO
Neogen Corporation, 517/372-9200

NEOGEN CORPORATION UNAUDITED SUMMARIZED CONSOLIDATED OPERATING DATA (In thousands, except for per share and percentages)
		Quarter ended May 31			Year ended May 31
		2019		2018		2019		2018
Revenue
Food Safety	$	56,428	$	51,667	$	213,474	$	194,477
Animal Safety		53,334		56,453		200,712		203,453
Total revenue		109,762		108,120		414,186		397,930
Cost of sales		59,232		59,622		222,266		211,659
Gross margin		50,530		48,498		191,920		186,271
Operating expenses
Sales & marketing		17,776		17,488		70,230		66,929
Administrative		10,454		9,197		40,791		38,294
Research & development		3,570		1,954		12,805		10,855
Total operating expenses		31,800		28,639		123,826		116,078
Operating income		18,730		19,859		68,094		70,194
Other income		768		36		4,865		3,271
Income before tax		19,498		19,895		72,959		73,465
Income tax		3,683		2,350		12,783		10,250
Net income	$	15,815	$	17,545	$	60,176	$	63,215
Net (income) attributable to non-controlling interest		0		0		0		(70)
Net income attributable to Neogen Corp	$	15,815	$	17,545	$	60,176	$	63,145
Net income attributable to Neogen Corp
per diluted share	$	0.30	$	0.33	$	1.15	$	1.21

Other information:
Shares to calculate per share		52,526		52,449		52,425		52,149
Depreciation & amortization	$	4,596	$	4,377	$	17,624	$	17,058
Interest income		1,395		757		4,705		2,101
Gross margin (% of sales)		46.0%		44.9%		46.3%		46.8%
Operating income (% of sales)		17.1%		18.4%		16.4%		17.6%
Revenue increase vs. FY 2018		1.5%				4.1%
Net income vs. FY 2018		-9.9%				-4.7%

NEOGEN CORPORATION UNAUDITED SUMMARIZED CONSOLIDATED BALANCE SHEET DATA (In thousands)
		May 31		May 31
		2019		2018

Assets
Current assets
Cash & investments	$	267,524	$	210,810
Accounts receivable		82,582		79,086
Inventory		85,992		76,005
Other current assets		13,431		9,888
Total current assets		449,529		375,789
Property & equipment, net		74,847		73,069
Goodwill & other assets		171,364		169,151
Total assets	$	695,740	$	618,009

Liabilities & Equity
Current liabilities	$	38,251	$	38,688
Non-current liabilities		19,590		19,146
Equity: Shares outstanding 52,217 in 2019 & 51,736 in 2018		637,899		560,175
Total liabilities & equity	$	695,740	$	618,009