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Neogen reports 26% increase in net income

Staff writer ▼ | December 19, 2014
Neogen Corporation announced that its net income for the second quarter of fiscal 2015, which ended November 30, increased 26% to $7,806,000, when compared to the prior year's $6,207,000.
Neogen Corporation
Good quarter   Neogen net income $7,806,000
Earnings per share in the current quarter were $0.21, compared to $0.17 a year ago.

Current year-to-date net income was $16,689,000, or $0.45 per share, compared to $14,045,000, or $0.38 per share, for the same period a year ago.

Revenues for the second quarter of fiscal 2015 increased 15% to $68,455,000, from the previous year's second quarter revenues of $59,599,000. This increase was aided in part by recent acquisitions completed by the company.

The quarterly revenue and net income results represent second quarter records for the 32-year-old company. Year to date, FY 2015 revenues increased 15% to $136,054,000 from FY 2014's $118,147,000.

The second quarter was the 91st of the past 96 quarters that Neogen reported revenue increases as compared with the previous year — including all consecutive quarters in the last nine years.

Neogen's gross margin was 50% in its current second quarter, compared to 49.5% for FY 2014's second quarter. This increase was largely the result of favorable product mix shifts and improved efficiencies within the company's Animal Safety segment.

Operating income increased 33% in the quarter compared to the prior year, primarily driven by the increased revenues and improved gross margins. Additionally, operating expense growth was less than the rate of revenue growth. Administrative expense declined during the quarter due in part to lower legal expenses.

Operating income as a percentage of sales increased to 18.8% in the current quarter, as compared to 16.3% in the second quarter of the company's 2014 fiscal year.

Revenues for the company's Food Safety segment rose 16% during the second quarter, compared to the prior year, aided in part by the October 1, 2014 BioLumix acquisition. Sales from the company's Scotland-based European subsidiary increased 20% in the current quarter, as it continued to show strong results in a number of food safety diagnostic product lines, such as allergens and mycotoxins, and genomic testing services in Europe.

Sales of Neogen's innovative rapid tests for food allergens continued their strong advance, improving approximately 11% in the current quarter compared to the prior year's second quarter. This performance was in part the result of rapidly accelerating consumer demand for gluten-free products, combined with Neogen's industry-leading simple and accurate testing products to detect gluten in food and environmental samples.

Sales of the company's gluten detection products have also been augmented by the recent setting of global food industry standards by which a company is entitled to declare its products as gluten-free.

Sales of Neogen's general microbiology products increased 36% in current quarter compared to the prior year, in part due to the BioLumix acquisition. Neogen will integrate the similar BioLumix and Soleris test systems, building upon the strengths of each. The systems offer significant advantages over traditional culture methods to detect the presence of spoilage organisms, such as yeast and mold.

Current year second quarter revenue increases of 14% for the company's Animal Safety segment were aided by the November 2013 acquisition of Prima Tech (veterinary instruments) and January 2014 acquisition of Chem-Tech (agricultural insecticides).

The sales performance of the Prima Tech product line in its first year of Neogen ownership led to an additional earn-out payment to Prima Tech's former owners, which is reflected as "Other" expense in the following summarized operating data. The Prima Tech product line is used by farmers, ranchers, and veterinarians to inject animals, provide topical applications, and to use for oral administration.

Second quarter growth included a strong revenue increase from GeneSeek, the company's Nebraska-based genomics service laboratory. This increase was due in large part to the increased operational capacity gained by a move into larger and upgraded facilities in May 2014.

In the second quarter of the current fiscal year, GeneSeek processed over 25% more genomic samples than the second quarter of the prior year, and is on pace to well exceed the 1 million samples processed in Neogen's 2014 fiscal year.

GeneSeek's revenue increase in the current quarter is also due to increasing acceptance and use of its new genomic profiling products, particularly in bovine testing, a steady increase in the companion animal business, and growth in international markets, especially Europe and Brazil.