Neogen Sales, Profits Both Jump 33 Percent

The Lansing life sciences products company Neogen Corp. (Nasdaq: NEOG) said Thursday that its revenue and net income both jumped 33 percent form a year earlier for the first quarter of its fiscal year, ended Aug. 31.

Revenue reached $49.9 million from $32.3 million a year earlier. Net income was $5.8 million or 25 cents a share, up from $4.4 million or 19 cents a share a year earlier, adjusted for a 3-for-2 stock split that was effective Dec. 15, 2009. 

"We are very pleased with the results of the quarter and especially the dedication of our 600 employees who have kept our strong quarter-to-quarter growth going for almost 20 years," said James Herbert, Neogen's chairman and CEO. "Since the U.S. is experiencing about four food safety recalls per week, it's clear we need to continue developing solutions for our customers."

The quarter marked the 70th consecutive profitable quarter from operations for the company, and was the 74th of the past 79 quarters when Neogen reported revenue increases as compared with the previous year --- including the last 22 consecutive quarters.

"These results provide further evidence of improving efficiencies and general operational strength throughout Neogen," said Lon Bohannon, Neogen president and COO. "It is noteworthy that the revenue growth was broad based with increases in sales across many product lines and market segments, and also worth noting that both of our divisions had solid increases in operating margin."

Neogen's operating income for the first quarter increased to 22.4 percent of the company's quarterly revenues, compared to the prior year's first quarter of 21.5 percent.

"We had another exceptional quarter generating cash, and have cash and investments to provide for pursuit of a wide variety of growth strategies," said Richard Current, Neogen's CFO. "Our inventories are down in comparison to our prior quarter, as we continue our progress in controlling the level of inventories without impacting sales. Although we are able to report exceptional first quarter net income, our performance this quarter was adversely affected by an unfavorable translation from European and British currencies to U.S. dollars. The growth we are reporting for our Scotland-based operations is in spite of the currency translation, not because of it."

The company's Scotland-based Neogen Europe subsidiary posted a 39 percent increase in revenues in the current quarter compared to the prior year's first quarter, despite the adverse currency translation. The subsidiary's sales represent a combination of sales of Neogen food safety products produced in the U.S. for the European market, and diagnostics manufactured in Scotland for worldwide distribution.

Overall, Neogen's Food Safety Division first quarter revenues increased 27 percent to $22.3 million. The division's organic sales increased 21 percent in the quarter as sales of most of Neogen's broad range of food safety products showed strength. The company's diagnostics for mycotoxins in grains, food allergens, foodborne pathogens, spoilage organisms and sanitation concerns all increased sharply in the quarter. The division also recorded a significant increase in sales of Acumedia dehydrated culture media that it offers to the cell culture market. Instead of being used to grow bacteria, cell culture media is used to grow specific plant and animal cells used in the production of vaccines, and other uses. Sales of the company's test for histamine also increased substantially in the quarter compared to the prior year's first quarter. Histamine is a toxin produced in certain types of harvested fish, especially tuna, if they are improperly stored and transported.

Neogen's Animal Safety Division led the company's first quarter revenue increase, with sales up 39 percent from $14.9 million in the first quarter last year to $20.7 million this year. While the April 2010 acquisition of the GeneSeek agricultural genetics laboratory service business contributed significantly to the quarter-over-quarter revenue gain, a number of core product lines experienced significant revenue increases compared to the previous year.

Sales of Neogen's Ideal veterinary instruments, which include needles and syringes and Neogen's unique detectable veterinary needles, continue to be strong, increasing by 35 percent over the prior year's first quarter. Sales of Neogen's veterinary surgical supply products increased approximately 10 percent in the FY 2011 quarter compared to the prior year. Continuing market acceptance of Neogen's line of veterinary supplements led to a 57 percent sales increase in the first quarter.

Neogen develops and markets products dedicated to food and animal safety. The company's Food Safety Division markets diagnostic test kits to detect foodborne bacteria, natural toxins, genetic modifications, food allergens, drug residues, plant diseases, and sanitation concerns, and dehydrated culture media. Neogen's Animal Safety Division markets a complete line of diagnostics, veterinary instruments, veterinary pharmaceuticals, nutritional supplements, disinfectants, and rodenticides.

More at www.neogen.com.

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