Neogen Revenue, Net Income Rise Again
LANSING (WWJ) -- Neogen Corp. (Nasdaq: NEOG) Tuesday reported net income of $7.8 million or 32 cents a share in its first fiscal quarter, which ended Aug. 31, up 16 percent from $6.7 million or 28 cents a share, in the same quarter a year earlier. Revenue was $58.5 million, up 18 percent from $49.7 million in the same quarter a year earlier.
Both the net income and revenue figures were records for the 31-year-old company.
"The first quarter was a great start for our new fiscal year, as Neogen continues to seize opportunities throughout our worldwide markets," said James Herbert, Neogen's chairman and CEO. "The strong growth we are reporting today is the result of the efficient assimilation of our recent acquisitions, and significant growth in core product lines -- especially in markets outside of the United States."
Neogen reported operating income of $12.4 million, up 20 percent from the prior year's first quarter. Expressed as a percentage of sales, operating income was 21.2 percent for the quarter, up from 20.8 percent a year earlier. Neogen's gross margin was 51.9 percent of sales in its first quarter, down from 53.3 percent in the same quarter a year earlier. The company said the decrease was due primarily to a mix shift toward lower margin products and services.
"We are obviously pleased to report our outstanding first quarter results, and growth in operating income that exceeded our rate of growth in revenues. These results provide evidence of general operational strength throughout Neogen," said Steve Quinlan, Neogen's CFO. "Although we were able to report strong first quarter results, our performance this quarter was adversely affected by a foreign currency translation loss primarily due to weakening of several currencies. This resulted in a negative pre-tax impact to the company of approximately $600,000."
The first quarter was the 86th of the past 91 quarters that Neogen reported revenue increases as compared with the previous year -- including all consecutive quarters in the last eight years.
Sales of Neogen's Scotland-based Neogen Europe subsidiary increased 54 percent compared to the prior year's first quarter as a result of broad-based increases in sales of Neogen's food safety diagnostics, including test kits for mycotoxins, food allergens and meat speciation. The subsidiary's results were also due to increased success in sales of animal genomic testing services.
Sales of Neogen's Brazil- and Mexico-based subsidiaries also increased significantly on a quarter-to-quarter comparison, albeit from relatively smaller bases, as did sales of the company's food and animal safety products through distributors into international markets. For the quarter, Neogen's revenues from international sources represented 42.3 percent of its total revenues.
Sales of Neogen's line of test kits for food allergens and meat speciation continued to grow, increasing more than 30 percent in the quarter when compared to the previous year's first quarter. While food manufacturers have continued to increase testing to protect consumers, food allergens remain the single biggest reason for food recalls. The first quarter also saw a continuation of increased revenues from sales of test kits to verify meat speciation. Preventing the adulteration or substitution of meat or fish products with non-desirable or cheaper options is important for economic, regulatory, health and ethical reasons, especially where particular species of meat are prohibited by cultural or religious beliefs.
Sales of Neogen's natural toxin diagnostics increased 12 percent in the current quarter, as grain producers and processors continued to address safety and quality concerns. These concerns resulted in increased testing of last year's contaminated crops, much of which were still being stored in the first quarter. The sales increase was also due to increasing demand for Neogen's expanding line of simple and quick Reveal Q+ quantitative tests for mycotoxins, including aflatoxin and deoxynivalenol.
Neogen's Animal Safety segment recorded revenue increases of 21 percent in the first quarter, aided by sales from the recently acquired SyrVet veterinary instruments and supplies business, and the October 2012 acquisition of the popular Uniprim veterinary antibiotic. Sales of Neogen's line of animal care products, which consists primarily of veterinary supplements, wound care products and antibiotics, increased 33 percent on a quarter-to-quarter comparison. For the quarter, sales of the company's line of durable and disposable veterinary instruments increased 35 percent compared to a year earlier. Organic growth for the Animal Safety segment was 10 percent.
Neogen's GeneSeek subsidiary reported a 28 percent increase in revenues compared to the prior year's quarter. The subsidiary's performance was aided by strong market acceptance of a new genomic test for the beef and dairy cattle markets. The recently released test for beef heifer replacements enables ranchers to quickly decide if animals have the genetic merit to go into the breeding herd. A similar program was recently introduced to help dairymen select heifers that will become high milk production cows.
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.
