QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
Title of each Class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
|
|
|
|
☒ |
Accelerated filer |
☐ | |||
Non-accelerated filer |
☐ |
Smaller Reporting Company |
| |||
Emerging growth company |
|
PART I. FINANCIAL INFORMATION |
Page No. |
|||||
Item 1. |
2 |
|||||
2 |
||||||
3 |
||||||
4 |
||||||
5 |
||||||
6 |
||||||
7 |
||||||
Item 2. |
18 |
|||||
Item 3. |
25 |
|||||
Item 4. |
25 |
|||||
|
||||||
Item 1. |
26 |
|||||
Item 6. |
26 |
|||||
27 |
||||||
CEO Certification |
||||||
CFO Certification |
||||||
Section 906 Certification |
August 31, 2019 |
May 31, 2019 |
|||||||
Assets |
Unaudited |
Audited |
||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Marketable securities |
||||||||
Accounts receivable, less allowance of $ at August 31, 2019 and May 31, 2019, respectively |
||||||||
Inventories |
||||||||
Prepaid expenses and other current assets |
||||||||
Total Current Assets |
||||||||
Net Property and Equipment |
||||||||
Other Assets |
||||||||
Goodwill |
||||||||
Other non-amortizable intangible assets |
||||||||
Amortizable intangible and other assets, net of accumulated amortization of $ |
||||||||
Total Assets |
$ | $ | ||||||
Liabilities and Stockholders’ Equity |
||||||||
Current Liabilities |
||||||||
Accounts payable |
$ | $ | ||||||
Accrued compensation |
||||||||
Income taxes |
||||||||
Other accruals |
||||||||
Total Current Liabilities |
||||||||
Deferred Income Taxes |
||||||||
Other Non-Current Liabilities |
||||||||
Total Liabilities |
||||||||
Commitments and Contingencies (note 8) |
||||||||
Equity |
||||||||
Preferred stock, $ |
||||||||
Common stock, $ |
||||||||
Additional paid-in capital |
||||||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Retained earnings |
||||||||
Total Stockholders’ Equity |
||||||||
Total Liabilities and Stockholders’ Equity |
$ | $ | ||||||
Three Months Ended August 31, |
||||||||
2019 |
2018 |
|||||||
Revenues |
||||||||
Product revenues |
$ | |
$ | |
||||
Service revenues |
|
|
||||||
Total Revenues |
|
|
||||||
Cost of Revenues |
||||||||
Cost of product revenues |
|
|
||||||
Cost of service revenues |
|
|
||||||
Total Cost of Revenues |
|
|
||||||
Gross Margin |
|
|
||||||
Operating Expenses |
||||||||
Sales and marketing |
|
|
||||||
General and administrative |
|
|
||||||
Research and development |
|
|
||||||
Total Operating Expenses |
|
|
||||||
Operating Income |
|
|
||||||
Other Income (Expense) |
||||||||
Interest income |
|
|
||||||
Other expense |
( |
) | ( |
) | ||||
Total Other Income |
|
|
||||||
Income Before Taxes |
|
|
||||||
Provision for Income Taxes |
|
|
||||||
Net Income |
$ | |
$ | |
||||
Net Income Per Share |
||||||||
Basic |
$ | |
$ | |
||||
Diluted |
$ | |
$ | |
||||
|
Three Months Ended |
| ||||||
|
August 31, |
| ||||||
2019 |
2018 |
|||||||
Net income |
$ | |
$ | |
||||
Other comprehensive loss, net of tax: currency translation adjustments |
( |
) | ( |
) | ||||
Other comprehensive income, net of tax: unrealized gain on marketable securities |
|
|
|
|
|
— |
| |
Total comprehensive income |
$ | |
$ | |
||||
Accumulated |
||||||||||||||||||||||||
Additional |
Other |
|||||||||||||||||||||||
Common Stock |
Paid-in |
Comprehensive |
Retained |
|||||||||||||||||||||
Shares |
Amount |
Capital |
(Loss) |
Earnings |
Total |
|||||||||||||||||||
Balance at May 31, 2019 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Issuance of shares under share-based compensation plan |
||||||||||||||||||||||||
Issuance of shares under employee stock purchase plan |
||||||||||||||||||||||||
Net income for the three months ended August 31, 2019 |
||||||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2019 |
( |
) | ( |
) | ||||||||||||||||||||
Balance at August 31, 2019 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Accumulated |
||||||||||||||||||||||||
Additional |
Other |
|||||||||||||||||||||||
Common Stock |
Paid-in |
Comprehensive |
Retained |
|||||||||||||||||||||
Shares |
Amount |
Capital |
(Loss) |
Earnings |
Total |
|||||||||||||||||||
Balance at May 31, 2018 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Issuance of shares under share-based compensation plan |
||||||||||||||||||||||||
Issuance of shares under employee stock purchase plan |
||||||||||||||||||||||||
Net income for the three months ended August 31, 2018 |
||||||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2018 |
( |
) | ( |
) | ||||||||||||||||||||
Balance at August 31, 2018 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Three Months Ended |
||||||||
August 31, |
||||||||
2019 |
2018 |
|||||||
Cash Flows From Operating Activities |
||||||||
Net Income |
$ | |
$ | |
||||
Adjustments to reconcile net income to net cash from operating activities: |
||||||||
Depreciation and amortization |
|
|
||||||
Share-based compensation |
|
|
||||||
Change in operating assets and liabilities, net of business acquisitions: |
||||||||
Accounts receivable |
|
|
||||||
Inventories |
( |
) | ( |
) | ||||
Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
Accounts payable, accruals and other changes |
|
|
||||||
Net Cash From Operating Activities |
|
|
||||||
Cash Flows For Investing Activities |
||||||||
Purchases of property, equipment and other assets |
( |
) | ( |
) | ||||
Proceeds from the sale of marketable securities |
|
|
||||||
Purchases of marketable securities |
( |
) | ( |
) | ||||
Business acquisitions, net of cash acquired |
|
( |
) | |||||
Net Cash For Investing Activities |
( |
) | ( |
) | ||||
Cash Flows From Financing Activities |
||||||||
Exercise of stock options and issuance of employee stock purchase plan shares |
|
|
||||||
Net Cash From Financing Activities |
|
|
||||||
Effect of Exchange Rates on Cash |
( |
) | ( |
) | ||||
Net Increase In Cash and Cash Equivalents |
|
|
||||||
Cash and Cash Equivalents, Beginning of Period |
|
|
||||||
Cash and Cash Equivalents, End of Period |
$ | |
$ | |
||||
• | We elected the package of practical expedients available for transition that allow us to not reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. |
• | We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset. |
• | For all asset classes, we elected to not recognize a right-of-use asset and lease liability for short-term leases. |
• | For all asset classes, we elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component. |
• | The determination of the discount rate used in a lease is our incremental borrowing rate that is based on what we would normally pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments. |
August 31, |
||||
2019 |
||||
|
(in thousands) |
| ||
Right of use - assets |
$ | |
||
Lease liabilities - current |
|
|||
Lease liabilities - non-current |
|
August 31, |
||||
2019 |
||||
Weighted average remaining lease term |
||||
Weighted average discount rate |
% |
Three Months Ended |
||||
August 31, |
||||
2019 |
||||
(in thousands) |
||||
Operating leases |
$ | |||
Short term leases |
||||
Total lease expense |
$ | |||
Years ending May 31, |
||||
2020 (1) |
$ | |||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
||||
2025 and thereafter |
— |
|||
Total lease payments |
||||
Less: imputed interest |
||||
Total lease liabilities |
$ | |||
(1) | Excluding the three months ended August 31, 2019 |
Years ending May 31, |
||||
2020 |
$ | |||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
— |
|||
2025 and thereafter |
— |
|||
Total lease payments |
$ |
• | Identification of the contract with a customer; |
• | Identification of the performance obligations in the contract; |
• | Determination of the transaction price; |
• | Allocation of the transaction price to the performance obligations in the contract; and |
• | Recognition of revenue when, or as, the Company satisfies the performance obligations. |
• | Diagnostic test kits, dehydrated culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation; |
• | Consumable products marketed to veterinarians and animal health product distributors; and |
• | Rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities. |
• | Genomic identification and related interpretive bioinformatic services; and |
• | Other commercial laboratory services. |
Three Months ended August 31, |
||||||||
2019 |
2018 |
|||||||
(in thousands) |
||||||||
Food Safety |
||||||||
Natural Toxins, Allergens & Drug Residues |
$ | $ | ||||||
Bacterial & General Sanitation |
||||||||
Dehydrated Culture Media & Other |
||||||||
Rodenticides, Insecticides & Disinfectants |
||||||||
Genomics Services |
||||||||
$ | $ | |||||||
Animal Safety |
||||||||
Life Sciences |
$ | $ | ||||||
Veterinary Instruments & Disposables |
||||||||
Animal Care & Other |
||||||||
Rodenticides, Insecticides & Disinfectants |
||||||||
Genomics Services |
||||||||
$ | $ | |||||||
Total Revenues |
$ | $ | ||||||
August 31, |
May 31, |
|||||||
2019 |
2019 |
|||||||
(in thousands) |
||||||||
Raw materials |
$ | $ | ||||||
Work-in-process |
||||||||
Finished and purchased goods |
||||||||
$ | $ | |||||||
Three Months Ended |
||||||||
August 31, |
||||||||
2019 |
2018 |
|||||||
(in thousands, except per share amounts) |
||||||||
Numerator for basic and diluted net income per share: |
||||||||
Net income |
$ | $ | ||||||
Denominator for basic net income per share: |
||||||||
Weighted average shares |
||||||||
Effect of dilutive stock options |
||||||||
Denominator for diluted net income per share |
||||||||
Net income per share: |
||||||||
Basic |
$ | $ | ||||||
Diluted |
$ | $ | ||||||
Corporate and |
||||||||||||||||
Food |
Animal |
Eliminations |
||||||||||||||
Safety |
Safety |
(1) |
Total |
|||||||||||||
(in thousands) |
||||||||||||||||
As of and for the three months ended August 31, 2019 |
||||||||||||||||
Product revenues to external customers |
$ | |
$ | |
$ | — |
$ | |
||||||||
Service revenues to external customers |
|
|
— |
|
||||||||||||
Total revenues to external customers |
|
|
— |
|
||||||||||||
Operating income (loss) |
|
|
( |
) | |
|||||||||||
Total assets |
|
|
|
|
||||||||||||
As of and for the three months ended August 31, 2018 |
||||||||||||||||
Product revenues to external customers |
$ | |
$ | |
$ | — |
$ | |
||||||||
Service revenues to external customers |
|
|
— |
|
||||||||||||
Total revenues to external customers |
|
|
— |
|
||||||||||||
Operating income (loss) |
|
|
( |
) | |
|||||||||||
Total assets |
|
|
|
|
(1) | Includes corporate assets, consisting principally of cash and cash equivalents, marketable securities, current and deferred tax accounts and overhead expenses not allocated to specific business segments. Also includes the elimination of intersegment transactions. |
Three months ended August 31, |
||||||||
2019 |
2018 |
|||||||
(in thousands) |
||||||||
Revenues by Geographic Location |
||||||||
Domestic |
$ | |
$ | |
||||
International |
|
|
||||||
Total revenue |
|
|
Weighted- |
||||||||
Average |
||||||||
(Options in thousands) |
Shares |
Exercise Price |
||||||
Options outstanding June 1, 2019 |
|
$ | |
|||||
Granted |
— |
— |
||||||
Exercised |
( |
) | |
|||||
Forfeited |
( |
) | |
|||||
Options outstanding August 31, 2019 |
|
$ | |
FY 2019 |
||||
Risk-free interest rate |
|
% | ||
Expected dividend yield |
|
% | ||
Expected stock price volatility |
|
% | ||
Expected option life |
|
• | Consolidated revenues were $101.4 million in the first quarter of fiscal 2020, an increase of 2% compared to $99.6 million in the first quarter of fiscal 2019. Organic sales increased 1%. |
• | Food Safety segment sales were $51.0 million in the first quarter of the current fiscal year, a decrease of 2% compared to $52.2 million in the same period of the prior year. Organic sales in this segment also decreased 2%, after excluding a minor contribution from the August 1, 2018 acquisition of Clarus Labs. |
• | Animal Safety segment sales were $50.4 million in the first quarter, an increase of 6% compared to prior year first quarter sales of $47.4 million. Organic sales in this segment increased 5%, with the acquisitions of Livestock Genetics (September 2018) and Delta Genomics (January 2019) providing the remainder of the increase. |
• | International sales in the first quarter of fiscal 2020 were 37.5% of total sales compared to 39.9% of total sales in the first quarter of fiscal 2019. |
• | Our effective tax rate in the first quarter of fiscal 2020 was 17.0% compared to an effective tax rate of 11.1% in the prior year first quarter. The prior year’s first quarter effective tax rate was lower primarily due to tax benefits from stock options. |
• | Net income for the quarter ended August 31, 2019 was $14.7 million, or $0.28 per diluted share, a decrease of 4% compared to $15.2 million, or $0.29 per share, for the same period in the prior year. |
• | Cash generated from operating activities in the first quarter of fiscal 2020 was $23.7 million, compared to $16.1 million in the first quarter of fiscal 2019. |
Revenue |
Revenue |
|||||||
% Inc (Dec) |
% Inc (Dec) |
|||||||
USD |
Local Currency |
|||||||
Neogen Europe (including Lab M & Quat-Chem) |
(4 |
)% | 1 |
% | ||||
Neogen do Brasil (including Deoxi & Rogama) |
(16 |
)% | (15 |
)% | ||||
Neogen Latinoamerica |
5 |
% | 5 |
% | ||||
Neogen China |
(18 |
)% | (14 |
)% | ||||
Neogen India |
22 |
% | 24 |
% | ||||
Neogen Canada |
98 |
% | 99 |
% | ||||
Neogen Australasia |
21 |
% | 30 |
% |
Three Months ended August 31, |
||||||||||||||||
Increase/ |
||||||||||||||||
2019 |
2018 |
(Decrease) |
% |
|||||||||||||
(in thousands) |
||||||||||||||||
Food Safety |
||||||||||||||||
Natural Toxins, Allergens & Drug Residues |
$ | 20,115 |
$ | 18,838 |
$ | 1,277 |
7 |
% | ||||||||
Bacterial & General Sanitation |
10,316 |
10,467 |
(151 |
) | (1 |
)% | ||||||||||
Culture Media & Other |
11,279 |
12,217 |
(938 |
) | (8 |
)% | ||||||||||
Rodenticides, Insecticides & Disinfectants |
5,449 |
6,625 |
(1,176 |
) | (18 |
)% | ||||||||||
Genomics Services |
3,862 |
4,036 |
(174 |
) | (4 |
)% | ||||||||||
$ | 51,021 |
$ | 52,183 |
$ | (1,162 |
) | (2 |
)% | ||||||||
Animal Safety |
||||||||||||||||
Life Sciences |
$ | 1,723 |
$ | 2,080 |
$ | (357 |
) | (17 |
)% | |||||||
Veterinary Instruments & Disposables |
11,336 |
10,404 |
932 |
9 |
% | |||||||||||
Animal Care & Other |
6,405 |
6,398 |
7 |
0 |
% | |||||||||||
Rodenticides, Insecticides & Disinfectants |
16,718 |
17,146 |
(428 |
) | (2 |
)% | ||||||||||
Genomics Services |
14,221 |
11,415 |
2,806 |
25 |
% | |||||||||||
$ | 50,403 |
$ | 47,443 |
$ | 2,960 |
6 |
% | |||||||||
Total Revenues |
$ | 101,424 |
$ | 99,626 |
$ | 1,798 |
2 |
% | ||||||||
Three Months ended August 31, |
||||||||
(dollars in thousands) |
2019 |
2018 |
||||||
Interest income (net of expense) |
$ | 1,510 |
$ | 927 |
||||
Foreign currency transactions |
(117 |
) | (386 |
) | ||||
Royalty income |
1 |
22 |
||||||
Deoxi contingent consideration |
— |
(9 |
) | |||||
Other |
(7 |
) | 104 |
|||||
Total Other Income |
$ | 1,387 |
$ | 658 |
||||
3 |
||||
10 |
||||
31.1 |
||||
31.2 |
||||
32 |
||||
101.INS |
Inline XBRL Instance Document | |||
101.SCH |
Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF |
Inline XBRL Taxonomy Extension Definition Document | |||
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
EX-104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101 |
NEOGEN CORPORATION | ||||||
(Registrant) | ||||||
Dated: September 26, 2019 |
|
|||||
/s/ John E. Adent | ||||||
John E. Adent | ||||||
President & Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
Dated: September 26, 2019 |
||||||
/s/ Steven J. Quinlan | ||||||
Steven J. Quinlan | ||||||
Vice President & Chief Financial Officer | ||||||
(Principal Financial Officer and Principal Accounting Officer) |