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Neogen Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: December 28, 2012 09:05PM
Neogen Corp. (NEOG) filed Quarterly Report for the period ended 2012-11-30. Neogen Corporation has a market cap of $1.09 billion; its shares were traded at around $44.67 with a P/E ratio of 47.1 and P/S ratio of 5.9. Neogen Corporation had an annual average earning growth of 17.2% over the past 10 years.
Highlight of Business Operations:Neogen Corporation revenues for the second quarter ended November 30, 2012 were $50.7 million, an increase of $5.8 million, or 13.0%, compared to the same period in the prior year. For the year to date ended November 30, 2012 revenues were $100.5 million, an increase of $9.9 million, or 10.9%, compared to the prior year. Food Safety revenues increased by 18.1% and 15.2% for the comparative quarter and six-month period ended November 30, 2012, respectively. Animal Safety revenues increased by 8.1% and 6.6%, respectively, for the same comparative periods. Overall organic sales growth was 9.4% and 8.8% for the second quarter and six-month period ended November 30, 2012, respectively. The remainder of growth consisted of revenues from the Igenity acquisition, completed in May 2012, and the Macleod Pharmaceuticals acquisition, completed in October 2012.
Food Safety revenues increased 18.1% in the second quarter and 15.2% in the first six months of FY-13, compared to the prior year periods. Sales of Natural Toxins, Allergens and Drug Residue products increased by 21.5% in the quarter and 18.1% for the year-to-date, each compared with FY-12. The increase was led by sales of aflatoxin test kits, readers, and accessories, due to an aflatoxin outbreak in the United States. Sales of DON tests were also up significantly, due primarily to an outbreak in the European wheat crop. Combined, these products were up 76.4% in the second quarter, with the majority of the crops harvested for the year. These increases were partially offset by an 18.5% decrease in Drug Residue sales in the quarter, mainly the result of lower sales of tests used to detect the presence of antibiotics in dairy animals caused by timing of orders from a large international distributor. For the six months, aflatoxin, DON and related equipment and accessories sales were up 49.9% over the prior year. Sales of Drug Residue products were down 4.8% for the year-to-date. The Allergens product line continued its consistent growth with sales up 16.1% and 16.8% for the quarter and year-to-date periods, respectively. This product line has grown as the customer base has become more aware of the dangers of inadvertent allergen contamination in finished food product.
Dehydrated Culture Media and Other sales were up 31.1% in the second quarter and 25.7% in the first six months of FY-13, compared to the prior year periods, primarily due to the contributions from certain genomics revenues to a number of European customers. Also within this category, tests for histamine contamination in harvested fish were up 29.0% for the second quarter, due to increased testing; additionally, customers affected by the aflatoxin outbreak significantly increased purchases of miscellaneous lab supplies necessary for processing samples. Bacteria and General Sanitation had increases of 0.9% and 1.5% for the quarter and year-to-date respectively. Soleris sales were down 5.9% for the quarter and 9.8% for the year. Soleris consumables products were up 3.8% in the second quarter and 9.5% on a year-to-date basis; however, the related equipment sales declined compared to the prior year, primarily due to sales in China a year ago which were not repeated this year. The Companys new ANSR pathogen detection system is being evaluated by a number of potential customers and is expected to positively impact revenues in this product line in the second half of the year.
Rodenticide and Disinfectant revenues increased by 13.3% in the second quarter and 11.9% on a year-to-date basis, each compared to the prior year. Rodenticide sales are up 23.0% for the quarter and 25.5% for the year-to-date, indicative of a recovery in this line, which lagged in the prior year due to an inventory stocking by customers in late FY-11 ahead of a packaging law change. Veterinary Instruments and Other sales had an increase of 18.2% in the second quarter of FY-13 compared to FY-12. Within this category, the Company benefitted from sales of newly-acquired Uniprim and a 140.6% increase in the small animal supplements line due to a supply disruption caused by a competitors shutdown. While Neogen successfully converted some customers to our comparable product in the first half of the year, the competitor has resumed operations and it is not yet known how much business will be retained. Offsetting the gains in this category was a 54.2% decrease in vitamin injectables, due to product coming off a lengthy backorder from FY-11, which caused sales spikes in the first half of FY-12. Sales for the first half of FY-13 more accurately reflect ongoing demand. On a year-to-date basis, Veterinary Instruments and Other revenues are up 8.3%. The year-to-date increase was led by the small animal supplements line, but was offset by decreases in vitamin injectables and the loss of the needle and syringe business of a large customer in the second quarter of FY-12, which negatively affected the prior year comparison.
The overall cash and marketable securities position of the Company was $70,838,000 at November 30, 2012, compared to $68,645,000 at May 31, 2012. Approximately $11,334,000 in cash was generated from operations during the first six months of 2013. Net cash proceeds of $2,586,000 were realized with the exercise of stock options and issuance of shares under the Companys Employee Stock Purchase Plan during the first six months of FY-13. In October 2012, the Company purchased the stock of MacLeod Pharmaceuticals for $9,918,000 net cash (see Note 7). The Company spent $3,370,000 for equipment and other non-current assets in the first six months of 2012. Accounts receivable increased by $1,297,000 due to the increase in revenues; inventory levels increased by $2,076,000 compared to May 31, 2012. Each of these items increased, on a percentage basis, by less than the percentage increase in sales.
Stocks Discussed: NEOG,