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 |
August 31, |
May 31, |
|||||||
2021 |
2021 |
|||||||
Assets |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Marketable securities |
||||||||
Accounts receivable, less allowance of $ |
||||||||
Inventories |
||||||||
Prepaid expenses and other current assets |
||||||||
Total Current Assets |
||||||||
Net Property and Equipment |
||||||||
Other Assets |
||||||||
Right of use assets |
||||||||
Goodwill |
||||||||
Other non-amortizable intangible assets |
||||||||
Amortizable intangible and other assets, net of accumulated amortization of $ |
||||||||
Other non-current assets |
||||||||
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 10) |
||||||||
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, |
||||||||
2021 |
2020 |
|||||||
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 income (expense) |
( |
) | ||||||
Total Other Income (Expense) |
( |
) | ||||||
Income Before Taxes |
||||||||
Provision for Income Taxes |
||||||||
Net Income |
$ | $ | ||||||
Net Income Per Share |
||||||||
Basic |
$ | $ | ||||||
Diluted |
$ | $ | ||||||
Weighted Average Shares Outstanding |
||||||||
Basic |
||||||||
Diluted |
Three Months Ended |
||||||||
August 31, |
||||||||
2021 |
2020 |
|||||||
Net income |
$ | $ | ||||||
Other comprehensive income (loss), net of tax: foreign currency translations |
( |
) | ||||||
Other comprehensive loss, net of tax: unrealized loss on marketable securities |
( |
) | ( |
) | ||||
Total comprehensive income |
$ | $ | ||||||
Accumulated |
||||||||||||||||||||||||
Additional |
Other |
|||||||||||||||||||||||
Common Stock |
Paid-in |
Comprehensive |
Retained |
|||||||||||||||||||||
Shares |
Amount |
Capital |
(Loss) |
Earnings |
Total |
|||||||||||||||||||
Balance, June 1, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Exercise of options and share-based compensation expense |
— | — | ||||||||||||||||||||||
Issuance of shares under employee stock purchase plan |
— | — | ||||||||||||||||||||||
Net income for the three months ended August 31, 2021 |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2021 |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||
Balance, August 31, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Accumulated |
||||||||||||||||||||||||
Additional |
Other |
|||||||||||||||||||||||
Common Stock |
Paid-in |
Comprehensive |
Retained |
|||||||||||||||||||||
Shares |
Amount |
Capital |
Income (Loss) |
Earnings |
Total |
|||||||||||||||||||
Balance, June 1, 2020 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Exercise of options and share-based compensation expense |
— | — | ||||||||||||||||||||||
Issuance of shares under employee stock purchase plan |
— | — | ||||||||||||||||||||||
Net income for the three months ended August 31, 2020 |
— | — | — | — | ||||||||||||||||||||
Other comprehensive income for the three months ended August 31, 2020 |
— | — | — | — | ||||||||||||||||||||
Balance, August 31, 2020 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Three Months Ended |
||||||||
August 31, |
||||||||
2021 |
2020 |
|||||||
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 Used for Investing Activities |
||||||||
Purchases of property, equipment and other non-current intangible assets |
( |
) | ( |
) | ||||
Proceeds from the maturities of marketable securities |
||||||||
Purchases of marketable securities |
( |
) | ( |
) | ||||
Business acquisitions, net of cash acquired |
— | ( |
) | |||||
Net Cash Used for Investing Activities |
( |
) | ( |
) | ||||
Cash Flows From Financing Activities |
||||||||
Exercise of stock options and other |
||||||||
Net Cash From Financing Activities |
||||||||
Effects of Foreign Exchange Rates on Cash |
( |
) | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents |
( |
) | ( |
) | ||||
Cash and Cash Equivalents, Beginning of Period |
||||||||
Cash and Cash Equivalents, End of Period |
$ | $ | ||||||
(in thousands) |
Maturity |
August 31, 2021 |
May 31, 2021 |
|||||||
Commercial Paper & Corporate Bonds |
0 - 90 days | |||||||||
91 - 180 |
||||||||||
181 days - 1 year | ||||||||||
1 - 2 years | ||||||||||
Certificates of Deposit |
0 - 90 days | |||||||||
91 - 180 |
||||||||||
181 days - 1 year | ||||||||||
1 - 2 years | ||||||||||
|
|
|
|
|||||||
Total Marketable Securities |
$ | |
$ | |
||||||
|
|
|
|
(in thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
||||||||||||
Commercial Paper & Corporate Bonds |
$ | $ | $ | ( |
) | $ | ||||||||||
Certificates of Deposit |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Marketable Securities |
$ | |
$ | $ | ( |
) | $ | |
||||||||
|
|
|
|
|
|
|
|
(in thousands) |
Amortized Cost |
Unrealized Gains |
Unrealized Losses |
Fair Value |
||||||||||||
Commercial Paper & Corporate Bonds |
$ | $ | $ | ( |
) | $ | ||||||||||
Certificates of Deposit |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Marketable Securities |
$ | |
$ | $ | ( |
) | $ | |
||||||||
|
|
|
|
|
|
|
|
(in thousands) |
August 31, 2021 |
May 31, 2021 |
||||||
Raw materials |
$ | |
$ | |
||||
Work-in-process |
||||||||
Finished and purchased goods |
||||||||
$ | |
$ | |
|||||
• | 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, 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, retailers, livestock producers 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, |
||||||||
(in thousands) |
2021 |
2020 |
||||||
Food Safety |
||||||||
Natural Toxins, Allergens & Drug Residues |
$ | $ | ||||||
Bacterial & General Sanitation |
||||||||
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 |
$ | |
$ | |
||||
Three Months Ended |
||||||||
August 31, |
||||||||
(in thousands, except per share amounts) |
2021 |
2020 |
||||||
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 |
||||||||||||||
(in thousands) |
Safety |
Safety |
(1) |
Total |
||||||||||||
As of and for the three months ended August 31, 2021 |
||||||||||||||||
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, 2020 |
||||||||||||||||
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, |
||||||||
(in thousands) |
2021 |
2020 |
||||||
Domestic |
$ | $ | ||||||
International |
||||||||
|
|
|
|
|||||
Total revenue |
||||||||
|
|
|
|
Weighted- |
||||||||
Average |
||||||||
(Options in thousands) |
Options |
Exercise Price |
||||||
Options outstanding June 1, 2021 |
$ | |
||||||
Granted |
||||||||
Exercised |
( |
) | ||||||
Forfeited |
( |
) | ||||||
|
|
|||||||
Options outstanding August 31, 2021 |
$ |
FY 2021 |
||||
Risk-free interest rate |
% | |||
Expected dividend yield |
% | |||
Expected stock price volatility |
% | |||
Expected option life |
• | Consolidated revenues were $128.3 million in the first quarter of fiscal 2022, an increase of 17% compared to $109.3 million in the first quarter of fiscal 2020. Organic sales increased 14%. |
• | Food Safety segment sales were $62.7 million in the first quarter of the current fiscal year, an increase of 16% compared to $54.2 million in the same period of the prior year. Organic sales in this segment rose 10% for the comparative period, with revenues from the acquisition of Megazyme (December 2020) providing the remainder of the increase. |
• | Animal Safety segment sales were $65.6 million in the first quarter of fiscal 2022, an increase of 19% compared to prior year first quarter sales of $55.1 million. Organic sales in this segment also rose 19%. |
• | International sales in the first quarter of fiscal 2022 were 39.4% of total sales compared to 38.4% of total sales in the first quarter of fiscal 2021. |
• | The effective tax rate in the first quarter of fiscal 2022 was 21.4% compared to 19.9% in the prior year first quarter. |
• | Net income for the quarter ended August 31, 2021 was $17.1 million, or $0.16 per diluted share, an increase of 8% compared to $15.9 million, or $0.15 per share, for the same period in the prior year. |
• | Cash generated from operating activities in the first quarter of fiscal 2022 was $23.2 million, compared to $25.1 million in the first quarter of fiscal 2021. |
Revenue Change USD |
Revenue Change Local Currency |
|||||||
U.K. Operations (including Neogen Italia) |
9 | % | (2 | )% | ||||
Neogen Italia |
228 | % | 217 | % | ||||
Brazil Operations |
(15 | )% | (17 | )% | ||||
Neogen Latinoamerica |
16 | % | 4 | % | ||||
Neogen Argentina |
15 | % | 54 | % | ||||
Neogen Uruguay |
15 | % | 17 | % | ||||
Neogen Chile |
71 | % | 63 | % | ||||
Neogen China |
59 | % | 47 | % | ||||
Neogen India |
15 | % | 14 | % | ||||
Neogen Canada |
89 | % | 75 | % | ||||
Neogen Australasia |
49 | % | 41 | % |
Three Months ended August 31, |
||||||||||||||||
(in thousands) |
2021 |
2020 |
Increase/ (Decrease) |
% |
||||||||||||
Food Safety |
||||||||||||||||
Natural Toxins, Allergens & Drug Residues |
$ | 20,408 | $ | 19,015 | $ | 1,393 | 7 | % | ||||||||
Bacterial & General Sanitation |
11,165 | 9,931 | 1,234 | 12 | % | |||||||||||
Culture Media & Other |
18,046 | 12,171 | 5,875 | 48 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants |
7,649 | 8,830 | (1,181 | ) | (13 | )% | ||||||||||
Genomics Services |
5,454 | 4,238 | 1,216 | 29 | % | |||||||||||
|
|
|
|
|
|
|||||||||||
$ | 62,722 | $ | 54,185 | $ | 8,537 | 16 | % | |||||||||
Animal Safety |
||||||||||||||||
Life Sciences |
$ | 1,363 | $ | 1,325 | $ | 38 | 3 | % | ||||||||
Veterinary Instruments & Disposables |
15,337 | 10,375 | 4,962 | 48 | % | |||||||||||
Animal Care & Other |
9,219 | 7,658 | 1,561 | 20 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants |
22,149 | 19,914 | 2,235 | 11 | % | |||||||||||
Genomics Services |
17,515 | 15,868 | 1,647 | 10 | % | |||||||||||
|
|
|
|
|
|
|||||||||||
$ | 65,583 | $ | 55,140 | $ | 10,443 | 19 | % | |||||||||
|
|
|
|
|
|
|||||||||||
Total Revenues |
$ | 128,305 | $ | 109,325 | $ | 18,980 | 17 | % | ||||||||
|
|
|
|
|
|
Three Months ended August 31, |
||||||||
(dollars in thousands) |
2021 |
2020 |
||||||
Interest income (net of expense) |
$ | 203 | $ | 722 | ||||
Foreign currency transactions |
(151 | ) | 175 | |||||
Other |
(70 | ) | 18 | |||||
|
|
|
|
|||||
Total Other Income |
$ | (18 | ) | $ | 915 | |||
|
|
|
|
Risk Category |
Hypothetical Change |
August 31, 2021 |
Impact |
|||||||
(dollars in thousands) |
||||||||||
Foreign Currency - Revenue |
10% Decrease in exchange rates | $ | 5,053 | Earnings | ||||||
Foreign Currency - Hedges |
10% Decrease in exchange rates | 1,990 | Earnings |
31.1 | Certification of Principal Executive Officer | |
31.2 | Certification of Principal Financial Officer | |
32 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
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 | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
NEOGEN CORPORATION |
(Registrant) |
/s/ John E. Adent |
John E. Adent |
President & Chief Executive Officer |
(Principal Executive Officer) |
/s/ Steven J. Quinlan |
Steven J. Quinlan |
Vice President & Chief Financial Officer |
(Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT 31.1
13a. CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
NEOGEN CORPORATION AND SUBSIDIARIES
CEO CERTIFICATION
I, John E. Adent, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended August 31, 2021 of Neogen Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and |
c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrants auditors and the audit committee of registrants board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Dated: September 30, 2021
/s/ John E. Adent |
John E. Adent |
President & Chief Executive Officer |
(Principal Executive Officer) |
EXHIBIT 31.2
13a. CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
NEOGEN CORPORATION AND SUBSIDIARIES
CFO CERTIFICATION
I, Steven J. Quinlan, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q for the period ended August 31, 2021 of Neogen Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and |
c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrants auditors and the audit committee of registrants board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Dated: September 30, 2021
/s/ Steven J. Quinlan |
Steven J. Quinlan |
Vice President & Chief Financial Officer |
(Principal Financial Officer and Principal Accounting Officer) |
EXHIBIT 32
18 U.S.C. SECTION 1350 CERTIFICATION
NEOGEN CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Quarterly Report on Form 10-Q of Neogen Corporation (the Company) for the period ended August 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, John E. Adent, as Chief Executive Officer of the Company and I, Steven J. Quinlan, as Chief Financial Officer, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | This Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | Information contained in this Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Dated: September 30, 2021
/s/ John E. Adent |
John E. Adent |
President & Chief Executive Officer |
(Principal Executive Officer) |
/s/ Steven J. Quinlan |
Steven J. Quinlan |
Vice President & Chief Financial Officer |
(Principal Financial Officer and Principal Accounting Officer) |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Aug. 31, 2021 |
May 31, 2021 |
---|---|---|
Accounts receivable, allowance | $ 1,500 | $ 1,400 |
Accumulated Amortization | $ 49,086 | $ 53,462 |
Preferred stock, par value | $ 1.00 | $ 1.00 |
Preferred stock, shares authorized | 100,000 | 100,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.16 | $ 0.16 |
Common stock, shares authorized | 120,000,000 | 120,000,000 |
Common stock, shares issued | 107,493,015 | 107,468,304 |
Common stock, shares outstanding | 107,493,015 | 107,468,304 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
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Aug. 31, 2020 |
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Net income | $ 17,077 | $ 15,860 |
Other comprehensive income (loss), net of tax: foreign currency translations | (4,623) | 4,121 |
Other comprehensive loss, net of tax: unrealized loss on marketable securities | (206) | (119) |
Total Comprehensive income | $ 12,248 | $ 19,862 |
Accounting Policies |
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Aug. 31, 2021 | |
Summary of Significant Accounting Policies | 1. ACCOUNTING POLICIES BASIS OF PRESENTATION AND CONSOLIDATION The accompanying unaudited consolidated financial statements include the accounts of Neogen Corporation (“Neogen” or the “Company”) and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included in the accompanying unaudited consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three-month period ended August 31, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending May 31, 2022. For more complete financial information, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021. Our functional currency is the U.S. dollar. We translate our non-U.S. operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in other comprehensive income (loss). Gains or losses from foreign currency transactions are included in other income (expense) on our consolidated statement of income. Share and per share amounts reflect the June 4, 2021 2-for-1 Recently Adopted Accounting Standards Income Tax Simplification On June 1, 2021, the Company adopted ASU 740 Update 2019-12, Income Taxes (Topic 740). This guidance provides amendments to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of this guidance did not have a material impact on our consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted Reference Rate Reform In March 2020, the FASB issued Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference LIBOR or another reference rate expected to be discontinued. Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract. This guidance is effective upon issuance of the update and applies to contract modifications made through December 31, 2022. We will adopt this standard when LIBOR is discontinued and our lender begins using the new reference rate. We are evaluating the impact the new standard will have on our consolidated financial statements and related disclosures, but do not anticipate a material impact. Comprehensive Income Comprehensive income represents net income and any revenues, expenses, gains and losses that, under U.S. generally accepted accounting principles, are excluded from net income and recognized directly as a component of equity. Accumulated other comprehensive income (loss) consists of foreign currency translation adjustments and unrealized gains and losses on our marketable securities. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments other than cash equivalents and marketable securities, which include accounts receivable and accounts payable, approximate fair value based on either their short maturity or current terms for similar instruments. Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its ownassumptions. Leases We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating leases. We evaluate our contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Currently, all our leases are classified as operating leases. Topic 842 requires the Company to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use Right-of-use non-current lease liabilities are recorded in other accruals within current liabilities and other non-current liabilities, respectively, on our consolidated balance sheets. Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease. The right-of-use non-current lease liabilities were $2,408,000 and $2,492,000 at August 31, 2021 and May 31, 2021, respectively. ESTIMATES AND ASSUMPTIONS The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including, but not limited to, variable consideration related to revenue recognition, allowances for doubtful accounts, the market value of, and demand for, inventories, stock-based compensation, provision for income taxes and related balance sheet accounts, accruals, goodwill and other intangible assets. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Accounts Receivable Allowance Management attempts to minimize credit risk by reviewing customers’ credit history before extending credit and by monitoring credit exposure on a regular basis. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific customers, historical trends, current economic conditions and other information. Collateral or other security is generally not required for accounts receivable. Once a receivable balance has been determined to be uncollectible, generally after all collection efforts have been exhausted, that amount is charged against the allowance for doubtful accounts. Inventory The reserve for obsolete and slow-moving inventory is reviewed at least quarterly based on an analysis of the inventory, considering the current condition of the asset as well as other known facts and future plans. The reserve required to record inventory at lower of cost or net realizable value is adjusted as conditions change. Product obsolescence may be caused by shelf-life expiration, discontinuance of a product line, replacement products in the marketplace or other competitive situations. Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets. Other intangible assets include customer relationships, trademarks, licenses, trade names, covenants not-to-compete non-amortizable intangible assets annually, or when indications of impairment exist, to determine if such assets may be impaired. If the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis and comparison to comparable EBITDA multiples of peer companies, such assets are reduced to their estimated fair value and a charge is recorded to operations. Long-Lived Assets Management reviews the carrying values of its long-lived assets to be held and used, including definite-lived intangible assets, for possible impairment whenever events or changes in business conditions warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows over the remaining useful life of the asset indicate that the carrying amount of the asset may not be recoverable. In such an event, fair value is determined using discounted cash flows and, if lower than the carrying value, impairment is recognized through a charge to operations. Equity Compensation Plans Share options awarded to employees, restricted stock units (RSUs) and shares of stock awarded to employees under certain stock purchase plans are recognized as compensation expense based on their fair value at grant date. The fair market value of options granted under the Company stock option plans was estimated on the date of grant using the Black-Scholes option-pricing model with assumptions for inputs such as interest rates, expected dividends, an estimate of award forfeitures, volatility measures and specific employee exercise behavior patterns based on statistical data. Some of the inputs used are not market-observable and have to be estimated or derived from available data. Use of different estimates would produce different option values, which in turn would result in higher or lower compensation expense recognized. For RSUs, we use the intrinsic value method to value the units. To value other equity awards, several recognized valuation models exist; none of these models can be singled out as being the best or most correct. The model applied by us can handle most of the specific features included in the options granted, which are the reason for their use. If different models were used, the option values could differ despite using the same inputs. Accordingly, using different assumptions coupled with using a different valuation model could have a significant impact on the fair value of employee stock options. Fair value could be either higher or lower than the number provided by the model applied and the inputs used. Further information on our equity compensation plans, including inputs used to determine the fair value of options, is disclosed in Note 8. Income Taxes We account for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and for tax credit carryforwards and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax expense represents the change in net deferred income tax assets and liabilities during the year. |
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Cash and Cash Equivalents [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Marketable Securities | 2. CASH AND MARKETABLE SECURITIES Cash and Cash Equivalents Cash and cash equivalents consist of bank demand accounts, savings deposits, certificates of deposit and commercial paper with original maturities of 90 days or less. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced losses related to these balances and believes it is not exposed to significant credit risk regarding its cash and cash equivalents. Cash and cash equivalents were $71,283,000 and $75,602,000 at August 31, 2021 and May 31, 2021, respectively. The carrying value of these assets approximates fair value due to the short maturity of these instruments and is classified as Level 1 in the fair value hierarchy. Marketable Securities The Company has marketable securities held by banks or broker-dealers at August 31, 2021. Changes in market value are monitored and recorded on a monthly basis; in the event of a downgrade in credit quality subsequent to purchase, the marketable security investment is evaluated to determine the appropriate action to take to minimize the overall risk to our marketable security portfolio. These securities are classified as available for sale. The primary objective of management’s short-term investment activity is to preserve capital for the purpose of funding current operations, capital expenditures and business acquisitions; short-term investments are not entered into for trading or speculative purposes. These securities are recorded at fair value based on recent trades or pricing models and therefore meet the Level 2 criteria. Interest income on these investments is recorded within other income on the income statement. Adjustments in the fair value of these assets are recorded in other comprehensive income. Marketable Securities as of August 31, 2021 and May 31, 2021 are listed below by classification and remaining maturities.
The components of marketable securities at August 31, 2021 are as follows:
The components of marketable securities at May 31, 2021 are as follows:
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Inventories |
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Inventories | 3. INVENTORIES Inventories are stated at the lower of cost, determined by the first-in, first-out method, or net realizable value. The components of inventories follow:
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Revenue Recognition |
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Revenue Recognition | 4. REVENUE RECOGNITION We determine the amount of revenue to be recognized through application of the following steps:
Essentially all of Neogen’s revenue is generated through contracts with its customers. A performance obligation is a promise in a contract to transfer a product or service to a customer. We generally recognize revenue at a point in time when all of our performance obligations under the terms of a contract are satisfied. Revenue is recognized upon transfer of control of promised products and services in an amount that reflects the consideration we expect to receive in exchange for those products or services. The collectability of consideration on the contract is reasonably assured before revenue is recognized. To the extent that customer payment has been received before all recognition criteria are met, these revenues are initially deferred in other accruals on the balance sheet and the revenue is recognized in the period that all recognition criteria have been met. Certain agreements with customers include discounts or rebates on the sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified purchase threshold of goods and services. We account for these discounts as variable consideration and estimate the likelihood of a customer meeting the threshold in order to determine the transaction price using the most predictive approach. We typically use the most-likely-amount method, for incentives that are offered to individual customers, and the expected-value method, for programs that are offered to a broad group of customers. Variable consideration reduces the amount of revenue that is recognized. Rebate obligations related to customer incentive programs are recorded in accrued liabilities; the rebate estimates are adjusted at the end of each applicable measurement period based on information currently available. The performance obligations in Neogen’s contracts are generally satisfied well within one year of contract inception. In such cases, management has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component. Management has elected to utilize the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred because the amortization period for the prepaid costs that would otherwise have been deferred and amortized is one year or less. We account for shipping and handling for products as a fulfillment activity when goods are shipped. Shipping and handling costs that are charged to and reimbursed by the customer are recognized as revenues, while the related expenses incurred by Neogen are recorded in sales and marketing expense. Revenue is recognized net of any tax collected from customers; the taxes are subsequently remitted to governmental authorities. Our terms and conditions of sale generally do not provide for returns of product or reperformance of service except in the case of quality or warranty issues. These situations are infrequent; due to immateriality of the amount, warranty claims are recorded in the period incurred. The Company derives revenue from two primary sources—product revenue and service revenue. Product revenue consists of shipments of:
Revenues for our products are recognized and invoiced when the product is shipped to the customer. Service revenue consists primarily of:
Revenues for Neogen’s genomics and commercial laboratory services are recognized and invoiced when the applicable laboratory service is performed and the results are conveyed to the customer. Payment terms for products and services are generally 30 to 60 days. The following table presents disaggregated revenue by major product and service categories for the three month periods ended August 31, 2021 and 2020:
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Net Income per Share |
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Net Income per Share | 5. NET INCOME PER SHARE The calculation of net income per share follows:
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Segment Information and Geographic Data |
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Segment Information and Geographic Data | 6. SEGMENT INFORMATION AND GEOGRAPHIC DATA We have two reportable segments: Food Safety and Animal Safety. The Food Safety segment is primarily engaged in the development, production and marketing of diagnostic test kits, culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation. The Animal Safety segment is primarily engaged in the development, production and marketing of products dedicated to animal safety, including a complete line of consumable products marketed to veterinarians and animal health product distributors; this segment also provides genomic identification and related interpretive bioinformatic services. Additionally, the Animal Safety segment produces and markets rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities. Our international operations in the United Kingdom, Mexico, Brazil, China and India originally focused on the Company’s food safety products, and each of these units reports through the Food Safety segment. In recent years, these operations have expanded to offer our complete line of products and services, including those usually associated with the Animal Safety segment such as cleaners, disinfectants, rodenticides, insecticides, veterinary instruments and genomics services. These additional products and services are managed and directed by existing management and are reported through the Food Safety segment. Neogen’s operation in Australia originally focused on providing genomics services and sales of animal safety products and reports through the Animal Safety segment. With the acquisition of Cell BioSciences in February 2020, this operation has expanded to offer our complete line of products and services, including those usually associated with the Food Safety segment. These additional products are managed and directed by existing management at Neogen Australasia and report through the Animal Safety segment. The accounting policies of each of the segments are the same as those described in Note 1. Segment information follows:
The following table presents the Company’s revenue disaggregated by geographic location:
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Equity Compensation Plans |
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Equity Compensation Plans | 7. EQUITY COMPENSATION PLANS Incentive and non-qualified options to purchase shares of common stock have been granted to directors, officers and employees of Neogen under the terms of the Company’s stock option plans. These options are granted at an exercise price of not less than the fair market value of the stock on the date of grant. Options vest ratably over and five year periods and the contractual terms are generally or ten years. A summary of stock option activity during the three months ended August 31, 2021 follows:
During the three-month periods ended August 31, 2021 and 2020, the Company recorded $1,690,000 and $1,681,000, respectively, of compensation expense related to its share-based awards. The weighted-average fair value per share of stock options granted during fiscal year 2021, estimated on the date of grant using the Black-Scholes option pricing model, was $7.71. The fair value of stock options granted was estimated using the following weighted-average assumptions. No options were granted in the first quarter of fiscal year 2022.
The Company granted 118,250 restricted stock units (RSUs) to directors, officers and employees under the terms of the 2018 Omnibus Incentive Plan in fiscal year 2021, which vest ratably over and five year periods. No RSUs were gran ted in the first quarter of fiscal year 2022. RSUs have a weighted average value of $34.21 per share and will be expensed on a straight-line basis over the remaining weighted-average period of 4.0 years. On August 31, 2021 there was $2,908,000 in unamortized compensation cost related to non-vested RSUs. The Company offers eligible employees the option to purchase common stock at a 5% discount to the lower of the market value of the stock at the beginning or end of each participation period under the terms of the 2011 Employee Stock Purchase Plan; the discount is recorded in general and administrative expense. Total individual purchases in any year are limited to 10% of compensation. |
Business Combinations |
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Business Combinations | 8. BUSINESS COMBINATIONS The Consolidated Statements of Income reflect the results of operations for business acquisitions since the respective dates of purchase. All are accounted for using the acquisition method. Goodwill recognized in the acquisitions discussed below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings. On July 31, 2020, the Company acquired the U.S. (including territories) rights to Elanco’s StandGuard Pour-on for horn fly and lice control in beef cattle, and related assets. This product line fits in well with Neogen’s existing agricultural insecticide portfolio and organizational capabilities. Consideration for the purchase was $2,351,000 in cash, all paid at closing. The final purchase price allocation, based upon the fair value of these assets determined using the income approach, included inventory of $51,000 and intangible assets of $2,300,000 (with an estimated life of 15 years). This product line is currently being toll manufactured for the Company but is eventually expected to be manufactured at Neogen’s operation in Iowa; the sales are reported within the Animal Safety segment. On December 30, 2020, the Company acquired all of the stock of Megazyme, Ltd, an Ireland-based company, and its wholly-owned subsidiaries, U.S.-based Megazyme, Inc. and Ireland-based Megazyme IP. Megazyme is a manufacturer and supplier of diagnostic assay kits and enzymes to measure dietary fiber, complex carbohydrates and enzymes in food and beverages as well as animal feeds. This acquisition will allow Neogen to expand its commercial relationships across food, feed and beverage companies, and provide additional food quality diagnostic products to commercial labs and food science research institutions. Consideration for the purchase was net cash of $39.8 million paid at closing, $8.6 million of cash placed in escrow payable to the former owner in two installments in two and four years, $4.9 million of stock issued at closing, and up to $2.5 million of contingent consideration, payable in two installments over the next year, based upon an excess net sales formula. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $1,376,000, inventory of $5,595,000, net property, plant and equipment of $12,599,000, prepayments of $69,000, accounts payable of $4,000, other current liabilities of $1,815,000, contingent consideration accrual of $2,458,000, non-current liabilities of $319,000, non-current deferred tax liabilities of $3,306,000, intangible assets of $22,945,000 (with an estimated life of 15-20 years) and the remainder to goodwill (non-deductible for tax purposes). These values are Level 3 fair value measurements. In February 2021, the former owner was paid $1,229,000 for the first installment of contingent consideration, based upon the achievement of sales targets. The Irish companies continue to operate from their current locations in Bray, Ireland, reporting within the Food Safety segment and are managed through Neogen’s Scotland operation. The U.S. company’s business is managed by our Lansing-based Food Safety team. Subsequent to the end of the quarter, on September 17, 2021, the Company acquired the stock of CAPInnoVet, Inc., a companion animal health business that provides pet medications to the veterinary market. Due to the timing of the transaction, the preliminary purchase price allocation was not complete at the time of filing. The business will be operated from our location in Lexington, KY, reporting within the Animal Safety segment. For each acquisition listed above, the revenues and net income were not considered material and were therefore not disclosed. |
Long Term Debt |
3 Months Ended |
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Aug. 31, 2021 | |
Long Term Debt | 9. LONG TERM DEBT We have a financing agreement with a bank providing for a $15,000,000 unsecured revolving line of credit, which expires on November 30, 2023. There were no advances against the line of credit during fiscal 2021 and there have been none thus far in fiscal 2022; there was no balance outstanding at August 31, 2021. Interest on any borrowings is at LIBOR plus 100 basis points (rate under the terms of the agreement was 1.08% at August 31, 2021). Financial covenants include maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA, each of which the Company was in compliance with at August 31, 2021. |
Commitments and Contingencies |
3 Months Ended |
---|---|
Aug. 31, 2021 | |
Commitments and Contingencies | 10. COMMITMENTS AND CONTINGENCIES The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for related costs when such costs are determined to be probable and estimable. The Company currently utilizes a pump and treat remediation strategy, which includes semi-annual monitoring and reporting, consulting, and maintenance of monitoring wells. We expense these annual costs of remediation, which have ranged from $38,000 to $131,000 per year over the past five years. The Company’s estimated remaining liability for these costs was $916,000 at both August 31, 2021 and May 31, 2021, measured on an undiscounted basis over an estimated period of 15 years. In fiscal 2019, the Company performed an updated Corrective Measures Study on the site, per a request from the Wisconsin Department of Natural Resources (WDNR) and is currently in discussion with the WDNR regarding potential alternative remediation strategies going forward. The Company believes that the current pump and treat strategy is appropriate for the site. However, the Company has agreed to a pilot study in which chemical reagents are injected into the ground in an attempt to reduce on-site contamination and is currently working with its consultant to design the system. At this time, the outcome of the pilot study is unknown, but a change in the current remediation strategy, depending on the alternative selected, could result in an increase in future costs and ultimately, an increase in the currently recorded liability, with an offsetting charge to operations in the period recorded. The Company has recorded $300,000 as a current liability, and the remaining $616,000 is recorded in other non-current liabilities in the consolidated balance sheet. On March 6, 2020, the Company received an administrative subpoena from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) regarding activities or transactions involving parties located in Iran. The Company subsequently conducted an internal investigation under the direction of outside legal counsel and disclosed information concerning certain genomic testing services provided to an unrelated U.S.-based party engaged in veterinary activities involving an Iranian party. The Company continues to cooperate with OFAC’s investigation and is currently examining whether certain of these activities may be eligible for OFAC General Licenses authorizing agricultural and veterinary activities. In addition to responding to the administrative subpoena, the Company is implementing additional compliance measures to prevent inadvertent dealings with restricted countries or parties. These measures will further enhance the Company’s international trade compliance program, which is designed to assure that the Company does not conduct business directly or indirectly with any countries or parties subject to U.S. economic sanctions and export control laws. Although it is too early to predict what action, if any, that OFAC will take, the Company does not currently have any reason to believe that OFAC’s pending investigation will have a material impact on its operations, the results of operations for any future period, or its overall financial condition. In fiscal 2020, the Company took a charge to expense and recorded a reserve of $600,000 to provide for potential fines or penalties on this matter. At this time, the Company believes that it is adequately reserved for this issue. The Company is subject to certain other legal and other proceedings in the normal course of business that, in the opinion of management, should not have a material effect on its future results of operations or financial position. |
Accounting Policies (Policies) |
3 Months Ended |
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Aug. 31, 2021 | |
Basis of Presentetion and Consolidation | BASIS OF PRESENTATION AND CONSOLIDATION The accompanying unaudited consolidated financial statements include the accounts of Neogen Corporation (“Neogen” or the “Company”) and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included in the accompanying unaudited consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three-month period ended August 31, 2021 are not necessarily indicative of the results to be expected for the fiscal year ending May 31, 2022. For more complete financial information, these consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2021. Our functional currency is the U.S. dollar. We translate our non-U.S. operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in other comprehensive income (loss). Gains or losses from foreign currency transactions are included in other income (expense) on our consolidated statement of income. Share and per share amounts reflect the June 4, 2021
2-for-1 |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards Income Tax Simplification On June 1, 2021, the Company adopted ASU 740 Update
2019-12, Income Taxes (Topic 740). This guidance provides amendments to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of this guidance did not have a material impact on our consolidated financial statements. |
Recent Accounting Pronouncements Not Yet Adopted | Recent Accounting Pronouncements Not Yet Adopted Reference Rate Reform In March 2020, the FASB issued Update
2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference LIBOR or another reference rate expected to be discontinued. Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract. This guidance is effective upon issuance of the update and applies to contract modifications made through December 31, 2022. We will adopt this standard when LIBOR is discontinued and our lender begins using the new reference rate. We are evaluating the impact the new standard will have on our consolidated financial statements and related disclosures, but do not anticipate a material impact. |
Comprehensive Income | Comprehensive Income Comprehensive income represents net income and any revenues, expenses, gains and losses that, under U.S. generally accepted accounting principles, are excluded from net income and recognized directly as a component of equity. Accumulated other comprehensive income (loss) consists of foreign currency translation adjustments and unrealized gains and losses on our marketable securities. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments other than cash equivalents and marketable securities, which include accounts receivable and accounts payable, approximate fair value based on either their short maturity or current terms for similar instruments. Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its ownassumptions. |
Leases | Leases We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating leases. We evaluate our contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Currently, all our leases are classified as operating leases. Topic 842 requires the Company to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a
right-of-use Right-of-use non-current lease liabilities are recorded in other accruals within current liabilities and other non-current liabilities, respectively, on our consolidated balance sheets. Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease. The right-of-use non-current lease liabilities were $2,408,000 and $2,492,000 at August 31, 2021 and May 31, 2021, respectively. |
Estimates And Assumption | ESTIMATES AND ASSUMPTIONS The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including, but not limited to, variable consideration related to revenue recognition, allowances for doubtful accounts, the market value of, and demand for, inventories, stock-based compensation, provision for income taxes and related balance sheet accounts, accruals, goodwill and other intangible assets. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. |
Accounts Receivable Allowance | Accounts Receivable Allowance Management attempts to minimize credit risk by reviewing customers’ credit history before extending credit and by monitoring credit exposure on a regular basis. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific customers, historical trends, current economic conditions and other information. Collateral or other security is generally not required for accounts receivable. Once a receivable balance has been determined to be uncollectible, generally after all collection efforts have been exhausted, that amount is charged against the allowance for doubtful accounts. |
Inventory | Inventory The reserve for obsolete and slow-moving inventory is reviewed at least quarterly based on an analysis of the inventory, considering the current condition of the asset as well as other known facts and future plans. The reserve required to record inventory at lower of cost or net realizable value is adjusted as conditions change. Product obsolescence may be caused by shelf-life expiration, discontinuance of a product line, replacement products in the marketplace or other competitive situations. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets. Other intangible assets include customer relationships, trademarks, licenses, trade names, covenants
not-to-compete non-amortizable intangible assets annually, or when indications of impairment exist, to determine if such assets may be impaired. If the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis and comparison to comparable EBITDA multiples of peer companies, such assets are reduced to their estimated fair value and a charge is recorded to operations. |
Long-lived Assets | Long-Lived Assets Management reviews the carrying values of its long-lived assets to be held and used, including definite-lived intangible assets, for possible impairment whenever events or changes in business conditions warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows over the remaining useful life of the asset indicate that the carrying amount of the asset may not be recoverable. In such an event, fair value is determined using discounted cash flows and, if lower than the carrying value, impairment is recognized through a charge to operations. |
Equity Compensation Plans | Equity Compensation Plans Share options awarded to employees, restricted stock units (RSUs) and shares of stock awarded to employees under certain stock purchase plans are recognized as compensation expense based on their fair value at grant date. The fair market value of options granted under the Company stock option plans was estimated on the date of grant using the Black-Scholes option-pricing model with assumptions for inputs such as interest rates, expected dividends, an estimate of award forfeitures, volatility measures and specific employee exercise behavior patterns based on statistical data. Some of the inputs used are not market-observable and have to be estimated or derived from available data. Use of different estimates would produce different option values, which in turn would result in higher or lower compensation expense recognized. For RSUs, we use the intrinsic value method to value the units. To value other equity awards, several recognized valuation models exist; none of these models can be singled out as being the best or most correct. The model applied by us can handle most of the specific features included in the options granted, which are the reason for their use. If different models were used, the option values could differ despite using the same inputs. Accordingly, using different assumptions coupled with using a different valuation model could have a significant impact on the fair value of employee stock options. Fair value could be either higher or lower than the number provided by the model applied and the inputs used. Further information on our equity compensation plans, including inputs used to determine the fair value of options, is disclosed in Note 8. |
Income Taxes | Income Taxes We account for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and for tax credit carryforwards and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax expense represents the change in net deferred income tax assets and liabilities during the year. |
Cash and Marketable Securities (Tables) |
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Schedule Of Classification And Maturities Of Marketable Securities | Marketable Securities as of August 31, 2021 and May 31, 2021 are listed below by classification and remaining maturities.
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Summary of components of marketable securities | The components of marketable securities at August 31, 2021 are as follows:
The components of marketable securities at May 31, 2021 are as follows:
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Inventories (Tables) |
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Inventories | The components of inventories follow:
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Revenue Recognition (Tables) |
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Disaggregated Revenue | The following table presents the Company’s revenue disaggregated by geographic location:
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Disaggregated Revenue | The following table presents disaggregated revenue by major product and service categories for the three month periods ended August 31, 2021 and 2020:
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Net Income per Share (Tables) |
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Calculation of Net Income Per Share | The calculation of net income per share follows:
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Segment Information and Geographic Data (Tables) |
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Segment Information | Segment information follows:
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Disaggregated Revenue | The following table presents the Company’s revenue disaggregated by geographic location:
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Equity Compensation Plans (Tables) |
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Stock Option Activity | A summary of stock option activity during the three months ended August 31, 2021 follows:
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Fair Value of Stock Options Granted Estimated Weighted-Average Assumptions | The fair value of stock options granted was estimated using the following weighted-average assumptions. No options were granted in the first quarter of fiscal year 2022.
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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) |
3 Months Ended | ||
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Jun. 04, 2021 |
Aug. 31, 2021 |
May 31, 2021 |
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Significant Accounting Policies [Line Items] | |||
Right of use assets | $ 2,407,000 | $ 2,477,000 | |
Lease liabilities | $ 2,408,000 | $ 2,492,000 | |
Stockholders equity note stock split | 2-for-1 | ||
Minimum | |||
Significant Accounting Policies [Line Items] | |||
Finite lived intangible assets, useful life | 5 years | ||
Maximum | |||
Significant Accounting Policies [Line Items] | |||
Finite lived intangible assets, useful life | 25 years |
Cash and Marketable Securities - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | |||
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Aug. 31, 2021 |
May 31, 2021 |
Aug. 31, 2020 |
May 31, 2020 |
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Cash and Cash Equivalents [Abstract] | ||||
Cash and cash equivalents | $ 71,283 | $ 75,602 | $ 60,947 | $ 66,269 |
Marketable securities, maturity period | 90 days |
Cash And Marketable Securities - Marketable Securities (Detail) - USD ($) $ in Thousands |
Aug. 31, 2021 |
May 31, 2021 |
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Marketable Securities, Current | $ 329,597 | $ 305,485 |
Commercial Paper | Maturing in 0 - 90 days | ||
Marketable Securities, Current | 82,115 | 106,631 |
Commercial Paper | Maturing in 91 - 180 days | ||
Marketable Securities, Current | 78,299 | 78,727 |
Commercial Paper | Maturing in 181 days - 1 year | ||
Marketable Securities, Current | 90,026 | 87,590 |
Commercial Paper | Maturing in 1 - 2 years | ||
Marketable Securities, Current | 76,647 | 26,752 |
Certificates of Deposit | Maturing in 0 - 90 days | ||
Marketable Securities, Current | 1,253 | 3,262 |
Certificates of Deposit | Maturing in 91 - 180 days | ||
Marketable Securities, Current | 1,006 | 1,260 |
Certificates of Deposit | Maturing in 181 days - 1 year | ||
Marketable Securities, Current | 251 | 1,263 |
Certificates of Deposit | Maturing in 1 - 2 years | ||
Marketable Securities, Current |
Cash and Marketable Securities - Components of marketable securities (Detail) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
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Aug. 31, 2021 |
May 31, 2021 |
|
Marketable Securities [Line Items] | ||
Amortized Cost | $ 329,660 | $ 305,279 |
Unrealized gains | 60 | 239 |
Unrealized Losses | (123) | (33) |
Fair Value | 329,597 | 305,485 |
Commercial Paper And Corporate Bonds [Member] | ||
Marketable Securities [Line Items] | ||
Amortized Cost | 327,157 | 299,524 |
Unrealized gains | 53 | 209 |
Unrealized Losses | (123) | (33) |
Fair Value | 327,087 | 299,700 |
Certificates of Deposit [Member] | ||
Marketable Securities [Line Items] | ||
Amortized Cost | 2,503 | 5,755 |
Unrealized gains | 7 | 30 |
Unrealized Losses | ||
Fair Value | $ 2,510 | $ 5,785 |
Inventories (Detail) - USD ($) $ in Thousands |
Aug. 31, 2021 |
May 31, 2021 |
---|---|---|
Inventory [Line Items] | ||
Raw Materials | $ 50,244 | $ 47,588 |
Work-in-process | 6,704 | 6,412 |
Finished and purchased goods | 45,161 | 46,701 |
Inventories | $ 102,109 | $ 100,701 |
Revenue Recognition - Additional Information (Detail) |
3 Months Ended |
---|---|
Aug. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Products and Services, Payment Terms | 30 to 60 days |
Calculation of Net Income Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Aug. 31, 2021 |
Aug. 31, 2020 |
|
Earnings Per Share [Line Items] | ||
Numerator for basic and diluted net income per share - Net income | $ 17,077 | $ 15,860 |
Denominator for basic net income per share - Weighted average shares | 107,490 | 105,984 |
Effect of dilutive stock options | 619 | 586 |
Denominator for diluted net income per share | 108,109 | 106,570 |
Net income per share: | ||
Basic | $ 0.16 | $ 0.15 |
Diluted | $ 0.16 | $ 0.15 |
Disaggregated Revenue by Geographic Location (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Aug. 31, 2021 |
Aug. 31, 2020 |
|
Revenues by Geographic Location [Line Items] | ||
Total revenue | $ 128,305 | $ 109,325 |
Domestic | ||
Revenues by Geographic Location [Line Items] | ||
Total revenue | 77,779 | 67,324 |
International | ||
Revenues by Geographic Location [Line Items] | ||
Total revenue | $ 50,526 | $ 42,001 |
Segment Information and Geographic Data - Additional Information (Detail) |
3 Months Ended |
---|---|
Aug. 31, 2021
Segment
| |
Segment Reporting Information [Line Items] | |
Number of reportable segments | Segment | 2 |
Stock Option Activity (Detail) |
3 Months Ended |
---|---|
Aug. 31, 2021
$ / shares
shares
| |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | |
Options Outstanding, Beginning Balance | shares | 2,957,000 |
Options, Granted | shares | 0 |
Options, Exercised | shares | (5,000) |
Options, Forfeited | shares | (11,000) |
Options Outstanding, Ending Balance | shares | 2,941,000 |
Weighted-Average Exercise Price, Beginning Balance | $ / shares | $ 30.38 |
Weighted-Average Exercise Price, Granted | $ / shares | 0 |
Weighted-Average Exercise Price, Exercised | $ / shares | 27.71 |
Weighted-Average Exercise Price, Forfeited | $ / shares | 30.79 |
Weighted-Average Exercise Price, Ending Balance | $ / shares | $ 30.38 |
Fair Value of Stock Options Granted, Estimated using Weighted-Average Assumptions (Detail) |
12 Months Ended |
---|---|
May 31, 2021 | |
Schedule of Weighted Average Assumptions for Fair Values of Stock Options [Line Items] | |
Risk-free interest rate | 0.20% |
Expected dividend yield | 0.00% |
Expected stock price volatility | 31.30% |
Expected option life (in years) | 3 years 3 months |
Equity Compensation Plans - Additional Information (Detail) - USD ($) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Aug. 31, 2022 |
Aug. 31, 2021 |
Aug. 31, 2020 |
May 31, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted-average fair value per share of stock options granted | $ 7.71 | |||
Compensation expense related to share based awards | $ 1,690,000 | $ 1,681,000 | ||
Subsequent Event [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share options granted | 0 | |||
2018 Omnibus Incentive Plan | Restricted Stock Units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 118,250 | |||
Weighted-average fair value per share of RSUs | $ 34.21 | |||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 4 years | |||
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount | $ 2,908,000 | |||
2018 Omnibus Incentive Plan | Restricted Stock Units (RSUs) | Subsequent Event [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 0 | |||
Employee Stock Purchase Plan | 2011 Employee Stock Purchase Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Annual maximum limit percentage of compensation to purchase shares | 5.00% | |||
Employee stock purchase plan stock price percentage | 10.00% | |||
Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock option vesting period | 3 years | |||
Stock option contractual terms | 5 years | |||
Minimum | 2018 Omnibus Incentive Plan | Restricted Stock Units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock option vesting period | 3 years | |||
Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock option vesting period | 5 years | |||
Stock option contractual terms | 10 years | |||
Maximum | 2018 Omnibus Incentive Plan | Restricted Stock Units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock option vesting period | 5 years |
Business Combinations - Additional Information (Detail) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Feb. 01, 2021 |
Dec. 30, 2020 |
Jul. 31, 2020 |
Aug. 31, 2021 |
|
Business Acquisition [Line Items] | ||||
Cash payable to former owner for purchase of business | $ 8,600,000 | |||
Beef Cattle And Related Assets [Member] | ||||
Business Acquisition [Line Items] | ||||
Cash consideration for purchase of business | $ 2,351,000 | |||
Purchase price allocation for inventory | 51,000 | |||
Purchase price allocation for intangible assets | $ 2,300,000 | |||
Finite lived intangible assets, useful life | 15 years | |||
Megazyme Ltd And Subsidiary Megazyme Inc [Member] | ||||
Business Acquisition [Line Items] | ||||
Cash consideration for purchase of business | $ 1,229,000 | 39,800,000 | ||
Contingent consideration potential payment | 2,500,000 | |||
Purchase price allocation for accounts receivable | 1,376,000 | |||
Purchase price allocation for inventory | 5,595,000 | |||
Purchase price allocation for land, property and equipment | 12,599,000 | |||
Allocation of purchase price for contingent consideration potential payment | 2,458,000 | |||
Purchase price allocation for intangible assets | 22,945,000 | |||
Purchase price allocation for accounts payable | 4,000 | |||
Purchase price allocation for deferred tax liability | 3,306,000 | |||
Purchase price allocation for other current liabilities | 1,815,000 | |||
Purchase price allocation for long-term liabilities | 319,000 | |||
Purchase price allocation for Prepaid Expenses | 69,000 | |||
Business acquisition Value of equity interest issued | $ 4,900,000 | |||
Minimum | ||||
Business Acquisition [Line Items] | ||||
Finite lived intangible assets, useful life | 5 years | |||
Minimum | Megazyme Ltd And Subsidiary Megazyme Inc [Member] | ||||
Business Acquisition [Line Items] | ||||
Finite lived intangible assets, useful life | 15 years | |||
Maximum | ||||
Business Acquisition [Line Items] | ||||
Finite lived intangible assets, useful life | 25 years | |||
Maximum | Megazyme Ltd And Subsidiary Megazyme Inc [Member] | ||||
Business Acquisition [Line Items] | ||||
Finite lived intangible assets, useful life | 20 years |
Long Term Debt - Additional Information (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Aug. 31, 2021 |
May 31, 2021 |
|
Debt Instrument [Line Items] | ||
Unsecured revolving line of credit, total amount available | $ 15,000,000 | |
Unsecured revolving line of credit, maturity date | Nov. 30, 2023 | |
Unsecured revolving line of credit, interest terms | LIBOR plus 100 basis points | |
Unsecured revolving line of credit, interest rate | 1.08% | |
Unsecured revolving line of credit, balance outstanding | $ 0 | |
Unsecured revolving line of credit, advances | $ 0 |
Commitments and Contingencies - Additional Information (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Aug. 31, 2021 |
May 31, 2021 |
|
Commitments and Contingencies Disclosure [Line Items] | ||
Estimated liability costs of remediation | $ 916,000 | $ 916,000 |
Estimated liability, measurement period, years | 15 years | |
Estimated liability costs of remediation, current | $ 300,000 | |
Estimated liability costs of remediation, non current | 616,000 | |
Environmental loss contingencies, charges to expense for potential fines or penalties | 600,000 | |
Minimum | ||
Commitments and Contingencies Disclosure [Line Items] | ||
Environmental remediation expense | 38,000 | |
Maximum | ||
Commitments and Contingencies Disclosure [Line Items] | ||
Environmental remediation expense | $ 131,000 |
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