Neogen Corp 10-K for FY2020

Neogen Corp (NEOG)

10-K 2020-07-30 For: 2020-05-31

Added on April 11, 2026

About this 10-K

Neogen Corp filed this 10-K on July 30, 2020, covering the fiscal year ended May 31, 2020 (FY2020).

Headline figures

Fiscal year ended May 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $418.17M; up 1.0% from $414.19M a year earlier
Net income: $59.48M; down 1.2% from net income of $60.18M a year earlier
Diluted EPS: $1.13; down 1.7% from $1.15 a year earlier

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MICHIGAN		38-2367843
(State of other jurisdiction of incorporation organization)		(I.R.S. Employer Identification No.)


Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐


PART I
ITEM 1.	BUSINESS	3

ITEM 1A.	RISK FACTORS	14

ITEM 1B.	UNRESOLVED STAFF COMMENTS	19

ITEM 2.	PROPERTIES	19

ITEM 3.	LEGAL PROCEEDINGS	20

ITEM 4.	MINE SAFETY DISCLOSURES	20

PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	20

ITEM 6.	SELECTED FINANCIAL DATA	22

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS	34

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA	34

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	34

ITEM 9A.	CONTROLS AND PROCEDURES	34

ITEM 9B.	OTHER INFORMATION	36

PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	36

ITEM 11.	EXECUTIVE COMPENSATION	38

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND RELATED STOCKHOLDER MATTERS	38

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	38

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	38

PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	38

ITEM 16.	FORM 10-K SUMMARY	38

SIGNATURES		40

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES		F-1
Subsidiaries
Consent of independent registered public accounting firm — BDO USA, LLP
Section 302 Certification of Principal Executive Officer
Section 302 Certification of Principal Financial Officer
Section 1350 Certification pursuant to Section 906


	USA		International		Expiration
Natural Toxins, Allergens, & Drug Residues		21		33		2021-2026
Bacterial & General Sanitation		5		0		2021-2022
Life Sciences		0		4		2024
Vaccine		1		0		2028
Veterinary Instruments & Other		13		44		2020-2042
Genomics Services		18		4		2021-2029


Location	Square Feet		Operations	Ownership
Lansing, Michigan		300,000	Corporate, Food Safety, Animal Safety	Owned

Lexington, Kentucky		210,000	Animal Safety	Owned

Kenansville, North Carolina		33,500	Animal Safety	Leased, expires 3/2021

St Joseph, Michigan		7,000	Animal Safety	Leased, expires 5/2021

Randolph, Wisconsin		137,000	Animal Safety	Owned

Pleasantville, Iowa		59,000	Animal Safety	Leased, expires 12/2020

Lincoln, Nebraska		41,000	Animal Safety	Owned

Memphis, Tennessee		66,100	Animal Safety	Owned

Turlock, California		29,500	Animal Safety	Leased, expires 9/2022

Edmonton, Alberta, Canada		4,800	Animal Safety	Owned

Ayr, Scotland, United Kingdom		74,000	Food Safety	Owned

Heywood, England, United Kingdom		26,800	Food Safety	Owned

Rochdale, England, United Kingdom		60,000	Food Safety	Owned

Liverpool, England, United Kingdom		4,000	Food Safety	Leased, expires 12/2025

Milan, Italy		1,000	Food Safety	Leased, expires 12/2020

Indaiatuba, Brazil		6,800	Food Safety	Leased, expires 5/2021

Pindamonhangaba, Brazil		76,000	Food Safety	Owned

Naucalpan, Mexico		27,000	Food Safety	Leased, expires 10/2021

Buenos Aires, Argentina		2,200	Food Safety	Leased, expires 8/2020

Ciudad de la Costa, Uruguay		900	Food Safety	Leased, expires 10/2020

Santiago, Chile		2,700	Food Safety	Leased, expires 3/2022

Shanghai, China		7,900	Food Safety	Leased, expires 10/2021

Kochi, India		5,500	Food Safety	Leased, expires 4/2021

Gatton, Australia		4,600	Animal Safety	Leased, expires 1/2023


Title of each Class	Trading Symbol(s)	Name of each exchange on which registered


	5/15		5/16		5/17		5/18		5/19		5/20
Neogen Corporation		100.00		105.63		135.41		215.97		160.75		203.17
NASDAQ Composite		100.00		98.82		125.26		152.00		153.87		197.98
NASDAQ Medical Equipment		100.00		105.80		140.72		197.84		194.22		235.57


	Year Ended May 31
	2020		2019		2018			2017			2016
(in thousands, except per share data)
Income Statement Data:
Food Safety Revenues	$	212,691	$	213,474	$	194,477		$	170,034		$	145,057
Animal Safety Revenues		205,479		200,712		203,453			188,243			172,172

Total Revenues		418,170		414,186		397,930			358,277			317,229
Total Cost of Revenues		221,891		222,266		211,658			189,353			167,898

Gross Margin		196,279		191,920		186,272			168,924			149,331
Sales and Marketing		69,675		70,230		66,929			59,380			53,866
General and Administrative		44,331		40,791		38,294			34,214			29,189
Research and Development		14,750		12,805		10,855			10,385			9,890

Operating Income		67,523		68,094		70,194			64,945			56,386
Other Income (Expense)		4,782		4,865		3,271			1,728			(873	)

Income Before Income Taxes		72,305		72,959		73,465			66,673			55,513
Provision for Income Taxes		12,830		12,783		10,250			22,700			18,975

Net Income		59,475		60,176		63,215			43,973			36,538
Net (Income) Loss Attributable to Non-controlling Interest		—		—		(70	)		(180	)		26

Net Income Attributable to Neogen	$	59,475	$	60,176	$	63,145		$	43,793		$	36,564

Net Income per Share (basic) (1)	$	1.13	$	1.16	$	1.23		$	0.87		$	0.73
Net Income per Share (diluted) (1)	$	1.13	$	1.15	$	1.21		$	0.86		$	0.72
Weighted Average Shares Outstanding (diluted) (1)		52,860		52,425		52,149			51,165			50,500

	Year Ended May 31
	2020		2019		2018			2017			2016
Balance Sheet Data:
Cash and Cash Equivalents and Marketable Securities	$	343,673	$	267,524	$	210,810		$	143,635		$	107,796
Working Capital (2)		488,917		411,278		337,101			256,959			219,628
Total Assets		797,182		695,740		618,009			528,409			449,940
Long-Term Debt		—		—		—			—			—
Total Equity		725,177		637,899		560,175			471,757			404,161


	Revenue		Revenue
	% Increase		% Increase
	USD		Local Currency
Neogen Europe (including Lab M, Quat-Chem & Abtek)		5%		8%
Neogen do Brasil (including Rogama)		(10)%		0%
Neogen Latinoamerica		6%		11%
Neogen China		22%		26%
Neogen India		3%		5%
Neogen Australasia		18%		26%
Neogen Canada		70%		72%


	Year Ended
			Increase/				Increase/
(dollars in thousands)	May 31, 2020		(Decrease)		May 31, 2019		(Decrease)		May 31, 2018
Food Safety:
Natural Toxins, Allergens & Drug Residues	$	76,207		(3)%	$	78,373		7%	$	72,962
Bacterial & General Sanitation		41,780		(0)%		41,966		10%		38,156
Culture Media & Other		47,847		(4)%		49,857		13%		44,271
Rodenticides, Insecticides & Disinfectants		28,890		13%		25,584		7%		23,821
Genomics Services		17,967		2%		17,694		16%		15,267

		212,691		(0)%		213,474		10%		194,477

Animal Safety:

Life Sciences		6,322		(20)%		7,858		(25)%		10,411
Veterinary Instruments & Disposables		42,941		(4)%		44,582		(7)%		47,749
Animal Care & Other		28,389		(5)%		29,941		(3)%		30,930
Rodenticides, Insecticides & Disinfectants		68,815		4%		66,389		(2)%		67,646
Genomics Services		59,012		14%		51,942		11%		46,717

		205,479		2%		200,712		(1)%		203,453

Total Revenue	$	418,170		1%	$	414,186		4%	$	397,930


(dollars in thousands)	2020		Increase			2019		Increase			2018
Cost of Revenues	$	221,891		0	%	$	222,266		5	%	$	211,658


(dollars in thousands, except per share data)	2020		Increase		2019		Increase		2018
Net Income Attributable to Neogen	$	59,475		-1%	$	60,176		-5%	$	63,145
Net Income Per Share-Basic	$	1.13			$	1.16			$	1.23
Net Income Per Share-Diluted	$	1.13			$	1.15			$	1.21


			Less than						More than
(dollars in thousands)	Total		1 year		1-3 years		3-5 years		5 years
Long-Term Debt	$	—	$	—	$	—	$	—	$	—
Operating Leases		2,094		1,080		973		41		—
Unconditional Purchase Obligations (1)		55,180		48,681		6,499		—		—

	$	57,283	$	49,763	$	7,478	$	42	$	—


Name	Position with the Company	Year Joined the Company
John E. Adent	President & Chief Executive Officer		2017
Stewart W. Bauck, D.V.M., Ph.D.	Vice President, Agrigenomics		2012
Joseph A. Corbett	Vice President, Animal Safety Sales		1993
Robert S. Donofrio, Ph.D.	Vice President, Food Safety Research & Development		2016
Shane M. Fitzwater	Vice President, Animal Safety Operations		2018
Jerome L. Hagedorn	Vice President, Food Safety Operations		2018
Jason W. Lilly, Ph.D.	Vice President, International Business		2005
Julie A. Mann*	Vice President & Chief Human Resources Officer		2017
Terri A. Morrical	Vice President, Animal Safety		1992
Marylinn Munson	Vice President, Agrigenomics		2020
Steven J. Quinlan	Vice President & Chief Financial Officer		2011


EXHIBIT NO.		DESCRIPTION

3.1		Restated Articles of Incorporation, as amended on November 23, 2011 (incorporated by reference to the exhibit 3.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed December 30, 2011).

3.2		Certificate of Amendment to Articles of Incorporation filed on October 11, 2010.

3.3		Certificate of Amendment to Articles of Incorporation filed on November 20, 2018 (incorporated by reference to the exhibit filed with the Registrant’s Quarterly Report on Form 10-Q filed December 28, 2018).

3.4		By-Laws, as amended (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed April 14, 2000).

10.1		Neogen Corporation 2007 Stock Option Plan as amended and restated (incorporated by reference to Exhibit A to the Registrant’s 2011 Proxy Statement August 31, 2011 filed September 1, 2011).

10.2		Neogen Corporation 2015 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Registrant’s 2015 Proxy Statement dated and filed August 25, 2015).

10.3		Neogen Corporation 2018 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Registrant’s 2018 Proxy Statement dated and filed August 28, 2018).

10.4		Amended and Restated Credit Agreement dated as of November 30, 2018 between Registrant and JPMorgan Chase N.A. (incorporated by reference to Exhibit 10.A to the registrant’s Form 8-K filed on December 6, 2018).

21		Listing of Subsidiaries

23		Consent of Independent Registered Public Accounting Firm BDO USA, LLP

24		Power of Attorney

31.1		Section 302 Certification of Principal Executive Officer

31.2		Section 302 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
By:	/s/ John E. Adent	By:	/s/ Steven J. Quinlan
	John E. Adent, President & Chief		Steven J. Quinlan, Vice President &
	Executive Officer		Chief Financial Officer
	(Principal Executive Officer)		(Principal Financial & Accounting Officer)


Signature	Title	Date

/s/ John E. Adent John E. Adent	President & Chief Executive Officer (Principal Executive Officer)	July 30, 2020

/s/ Steven J. Quinlan Steven J. Quinlan	Vice President & Chief Financial Officer (Principal Financial & Accounting Officer)	July 30, 2020

* James C. Borel	Chairman of the Board	July 30, 2020

*	Director	July 30, 2020
William T. Boehm, Ph.D.

*	Director	July 30, 2020
Ronald D. Green, Ph.D.

*	Director	July 30, 2020
James L. Herbert

*	Director	July 30, 2020
G. Bruce Papesh

*	Director	July 30, 2020
James P. Tobin

*	Director	July 30, 2020
Darci L. Vetter



*By:	/s/ John E. Adent
	John E. Adent, Attorney-in-fact	July 30, 2020


	May 31
	2020		2019
Assets

Current Assets
Cash and cash equivalents	$	66,269	$	41,688
Marketable securities		277,404		225,836
Accounts receivable, net of allowance of $1,350 and $1,700 at May 31, 2020 and 2019, respectively		84,681		82,582
Inventories		95,053		85,992
Prepaid expenses and other current assets		13,999		13,431

Total Current Assets		537,406		449,529

Property and Equipment
Land and improvements		5,456		5,324
Building and improvements		48,881		46,205
Machinery and equipment		90,351		82,752
Furniture and fixtures		4,324		3,895
Construction in progress		4,968		2,294

		153,980		140,470
Less accumulated depreciation		75,309		65,623

Net Property and Equipment		78,671		74,847

Other Assets
Right of use assets		1,952		—
Goodwill		110,340		103,619
Other non-amortizable intangible assets		15,217		15,510
Amortizable intangible assets, net of accumulated amortization of $44,690 and $40,835 at May 31, 2020 and 2019, respectively		51,364		52,096

Other non-current assets		2,232		139

Total Other Assets		181,105		171,364


Total Assets	$	797,182	$	695,740


										Accumulated
	Common Stock						Additional Paid-in			Other Comprehensive			Retained		Non- Controlling			Total
	Shares			Amount			Capital			Income (Loss)			Earnings		Interest			Equity
Balance, June 1, 2017		50,932,489		$	8,149		$	174,742		$	(7,203	)	$	295,926	$	143		$	471,757
Exercise of options and share-based compensation expense		781,116			125			26,992			—			—		—			27,117
Issuance of shares under employee stock purchase plan		22,127			4			1,048			—			—		—			1,052
Purchase of minority interest		—			—			(210	)		—			—		(213	)		(423	)
Net income for 2018		—			—			—			—			63,145		70			63,215
Other comprehensive loss		—			—			—			(2,543	)		—		—			(2,543	)

Balance, May 31, 2018		51,735,732			8,278			202,572			(9,746	)		359,071		—			560,175
Exercise of options and share-based compensation expense		512,527			82			21,335			—			—		—			21,417
Issuance of shares under employee stock purchase plan		18,330			3			1,157			—			—		—			1,160
Shares repurchased		(50,000	)		(8	)		(3,127	)		—			—		—			(3,135	)
Net income for 2019		—			—			—			—			60,176		—			60,176
Other comprehensive loss		—			—			—			(1,894	)		—		—			(1,894	)

Balance, May 31, 2019		52,216,589			8,355			221,937			(11,640	)		419,247		—			637,899
Exercise of options and share-based compensation expense		707,674			113			34,566			—			—		—			34,679
Issuance of shares under employee stock purchase plan		21,578			3			1,190			—			—		—			1,193
Net income for 2020		—			—			—			—			59,475		—			59,475
Other comprehensive loss		—			—			—			(8,069	)		—		—			(8,069	)

Balance, May 31, 2020		52,945,841		$	8,471		$	257,693		$	(19,709	)	$	478,722	$	—		$	725,177


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 own assumptions.


		Year ended May 31
(in thousands)	Maturity	2020		2019
US Treasuries	0 – 90 days	$	—	$	2,470
	91 –180 days		—		—
	181 days –1 year		2,532		2,435
	1 – 2 years		—		2,505

Commercial Paper & Corporate Bonds	0 – 90 days		133,130		84,338
	91 – 180 days		73,824		47,960
	181 days –1 year		43,231		34,369
	1 – 2 years		7,839		34,078

Certificates of Deposit	0 – 90 days		1,003		7,732
	91 – 180 days		5,184		5,000
	181 days –1 year		6,069		750
	1 – 2 years		4,592		4,199

Total Marketable Securities		$	277,404	$	225,836


	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
US Treasuries	$	2,502	$	30	$	—		$	2,532
Commercial Paper & Corporate Bonds		257,700		347		(23	)		258,024
Certificates of Deposit		16,648		200		—			16,848

Total Marketable Securities	$	276,850	$	577	$	(23	)	$	277,404


	Year ended May 31
(in thousands, except per share)	2020		2019		2018
Numerator for basic and diluted net income per share - Net Income attributable to Neogen	$	59,475	$	60,176	$	63,145
Denominator for basic net income per share - Weighted average shares		52,550		51,888		51,358
Effect of dilutive stock options		310		537		791

Denominator for diluted net income per share		52,860		52,425		52,149
Net income attributable to Neogen per share
Basic	$	1.13	$	1.16	$	1.23
Diluted	$	1.13	$	1.15	$	1.21


(in thousands)	May 31, 2020
Right of use – assets	$	1,952
Lease liabilities – current		1,054
Lease liabilities – non-current		913


	May 31, 2020
Weighted average remaining lease term		2.5 years
Weighted average discount rate		3.2	%


(in thousands)	Year Ended May 31, 2020
Operating leases	$	1,207
Short term leases		166

Total lease expense	$	1,373


(in thousands)	Amount
Years ending May 31, 2021	$	1,080
2022		546
2023		286
2024		141
2025 and thereafter		41

Total lease payments		2,094
Less: imputed interest		(112	)

Total lease liabilities	$	1,982


	Year Ended May 31, 2018
	As Previously Reported		Adjustments			As Revised
(in thousands)
Revenues
Product revenues	$	335,554	$	(4,266	)	$	331,288
Service revenues		66,698		(56	)		66,642

Total revenues		402,252		(4,322	)		397,930
Cost of revenues
Cost of product revenues		174,067		(342	)		173,725
Cost of service revenues		37,933		—			37,933

Total cost of revenues		212,000		(342	)		211,658

Gross margin		190,252		(3,980	)		186,272
Operating expenses
Sales and marketing		70,909		(3,980	)		66,929

Total operating expenses		120,058		(3,980	)		116,078

Operating income		70,194		—			70,194


(in thousands)	Gross Carrying Amount		Less Accumulated Amortization		Net Carrying Amount
Licenses	$	10,346	$	3,330	$	7,016
Covenants not to compete		706		407		299
Patents		8,509		4,118		4,391
Customer-based intangibles		59,847		29,898		29,949
Other products and service-related intangibles		16,646		6,937		9,709

Balance, May 31, 2020	$	96,054	$	44,690	$	51,364

Licenses	$	9,813	$	3,182	$	6,631
Covenants not to compete		862		542		320
Patents		8,158		3,570		4,588
Customer-based intangibles		57,634		28,017		29,617
Other products and service-related intangibles		16,464		5,524		10,940

Balance, May 31, 2019	$	92,931	$	40,835	$	52,096


(options in thousands)	Options			Weighted-Average Exercise Price		Weighted-Average Grant Date Fair Value
Outstanding at May 31, 2017 (661 exercisable)		2,699		$	32.88	$	9.51
Granted		829			59.37		14.47
Exercised		(821	)		28.18		8.20
Forfeited		(208	)		39.57		11.12

Outstanding at May 31, 2018 (508 exercisable)		2,499			42.63		11.44
Granted		527			62.92		14.91
Exercised		(513	)		31.28		8.92
Forfeited		(128	)		47.08		12.42

Outstanding at May 31, 2019 (617 exercisable)		2,385			49.37		12.70
Granted		562			63.91		15.56
Exercised		(719	)		40.24		11.05
Forfeited		(66	)		57.44		14.20

Outstanding at May 31, 2020 (486 exercisable)		2,162			55.96		13.95


(options in thousands)	Options Outstanding						Options Exercisable
			Average
			Contractual Life		Weighted-Average				Weighted-Average
Range of Exercise Price	Number		(in years)		Exercise Price		Number		Exercise Price
$16.82 - $40.91		507		1.4	$	37.26		208	$	34.94
$40.92 - $61.56		605		2.6		58.59		183		57.43
$61.57 - $62.88		465		3.5		62.70		85		62.70
$62.89 - $64.05		539		4.4		63.90		—		—
$64.06 - $68.96		46		3.6		66.48		10		67.98

		2,162		3.0		55.96		486		48.94


	Year Ended
(in thousands)	May 31 , 2020		May 31 , 2019		May 31 , 2018
Aggregate intrinsic value of options outstanding	$	32,988	$	22,798	$	82,649
Aggregate intrinsic value of options exercisable		10,814		10,222		22,572
Aggregate intrinsic value of options exercised		19,597		21,382		25,844


	As of
Jurisdiction	May 31, 2020		Expiry
U.S.	$	408		2037 to indefinite
Foreign		1,354		2024 to 2039

	$	1,762


	Quarter Ended
(in thousands, except per share)	August 2019		November 2019		February 2020		May 2020
Total Revenue	$	101,424	$	107,803	$	99,869	$	109,074
Gross Margin		48,194		51,026		45,330		51,729
Net income		14,652		16,276		12,200		16,347
Basic net income per share	$	0.28	$	0.31	$	0.23	$	0.31
Diluted net income per share	$	0.28	$	0.31	$	0.23	$	0.31

	Quarter Ended
(in thousands, except per share)	August 2018		November 2018		February 2019		May 2019
Total Revenue	$	99,626	$	107,098	$	97,700	$	109,762
Gross Margin		46,729		50,033		44,628		50,530
Net income		15,237		16,051		13,073		15,815
Basic net income per share	$	0.29	$	0.31	$	0.25	$	0.31
Diluted net income per share	$	0.29	$	0.31	$	0.25	$	0.30