LANSING — Neogen Corp. (Nasdaq: NEOG) announced net income of $6.7 million or 28 cents a share in the first fiscal quarter, which ended Aug. 31, up 11.8 percent from $6 million or 25 cents a share in the same quarter of the prior fiscal year.
First quarter revenue hit $49.7 million, up 8.8 percent from $45.7 million a year earlier.
Excluding revenues from the Igenity animal genomics business acquired in the fourth quarter of the prior fiscal year the company’s revenues rose 8.1 percent, led by a 12.5 percent increase in the company’s food safety business. Revenues were hurt by $1.2 million due to foreign currency translation.
The first quarter revenues and net income represent quarterly records for the 30-year-old company.
“The encouraging start to our new fiscal year was largely the result of increasing market acceptance for the innovative food and animal safety diagnostics developed by our research groups,” said James Herbert, Neogen chairman and CEO. “I’m proud of our management and employee teams, who continue to introduce well-received products to our assorted markets. An example of this is our new line of tests to detect natural toxins in grains. These hit the market just as grain producers and processors worldwide seek testing solutions to ensure the safety and quality of their products in a very challenging growing season.”
Neogen’s gross margin increased to 53.3 percent of sales in its first quarter of the current year, compared to 50.3 percent of sales a year earlier. This increase was largely the result of a shift in sales toward diagnostic products in the food safety segment, which have higher margins. Additionally, margins within the animal safety segment improved due to a shift in product mix to increased sales of rodenticides and small animal supplements. Largely as a result of the increased gross margins, Neogen reported operating income, expressed as a percentage of sales, of 20.8 percent for the quarter, compared to 20.5 percent in the year ago quarter.
Said Lon Bohannon, Neogen’s president and COO: “While we are still leading sales to some extent, the investments we made in fiscal year 2012 to strengthen our sales and marketing organization are starting to pay dividends, as evidenced by the strong first quarter revenue performance in our food safety group. Neogen’s operations teams also achieved a terrific first quarter producing and shipping record numbers of orders in a cost-efficient manner, which contributed to excellent gross margins for the quarter.”
The quarter marked the 74th consecutive profitable quarter from operations for the company, and was the 82nd of the past 87 quarters when Neogen reported revenue increases from the previous year — including the last 30 consecutive quarters.
“As our consolidated balance sheet data shows, we had a solid quarter generating cash from operating activities, and continue to be in a very strong financial position,” said Steve Quinlan, Neogen’s CFO. “Our inventories are down as a percentage of sales compared to our prior quarter, as we continue our progress in controlling inventory levels without adversely impacting sales.”
Sales of Neogen’s natural toxin diagnostics increased 21 percent in the current quarter, as grain producers and processors began escalating the testing of their products to address safety and quality concerns due to difficult growing conditions, especially in the United States and Europe. The sales increase was also due to increasing acceptance of Neogen’s expanding line of simple and quick Reveal Q+ quantitative tests for mycotoxins, including aflatoxin and deoxynivalenol. Aflatoxin is a mold toxin of special concern in corn grown in hot and dry conditions — the conditions experienced in most of the largest corn production areas of the United States. The unusually wet growing season for grains in regions of Europe led to an increased susceptibility to the production of the mold toxin DON.
In early August, Neogen introduced ANSR for Listeria, the second test available for Neogen’s unique ANSR pathogen detection system, which provides results after only 18 minutes of reaction time. Other commercially available molecular amplification tests require up to 3 hours of reaction time. ANSR for Salmonella, which was introduced in April, recently received performance validation from the AOAC Research Institute, and the Listeria test’s approval is pending.
Additions to Neogen’s line of test kits for food allergens led to an 18 percent increase in sales of the products in the first quarter compared to the prior year. Early in June, Neogen introduced Reveal 3-D food allergen tests for total milk (i.e., detects both whey and casein protein residues) and mustard. Neogen is a recognized leader in the development and marketing of diagnostic tests to detect the inadvertent contamination of food with allergens that are not listed on the ingredient label.
Sales of Neogen’s rodenticides rebounded strongly in the first quarter, rising 30 percent over the prior year’s comparable quarter. The company’s GeneSeek subsidiary continued its recent quarterly growth with a revenue increase of 20 percent in the first quarter compared to the prior year. GeneSeek remains focused on developing new genomic-based bioinformatic solutions to address the growing worldwide demand for animal proteins.
In the current first quarter, Neogen also recorded significant sales of its AccuPoint sanitation monitoring product line into China. The company’s Brazilian subsidiary recorded a 54 percent sales increase compared to the prior year’s first quarter as it continued to expand its market presence. For the first quarter of its 2013 fiscal year, Neogen’s percentage of revenues from international sources represented 41.7 percent of its total revenues, compared to 41.4 percent\ in the prior year first quarter.
Neogen develops and markets products dedicated to food and animal safety. The company’s Food Safety Division markets dehydrated culture media, and diagnostic test kits to detect foodborne bacteria, natural toxins, food allergens, drug residues, plant diseases and sanitation concerns. Neogen’s Animal Safety Division is a leader in the development of animal genomics along with the manufacturing and distribution of a variety of animal healthcare products, including diagnostics, pharmaceuticals, veterinary instruments, wound care and disinfectants.
More at www.neogen.com.