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What changed in NEOGEN CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NEOGEN CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+264 added−291 removedSource: 10-K (2024-07-30) vs 10-K (2023-08-15)

Top changes in NEOGEN CORP's 2024 10-K

264 paragraphs added · 291 removed · 198 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

80 edited+9 added−15 removed53 unchanged
Biggest changeFrank’s®, Dy-Fly®, DX3™, Dyne-O-Might®, ElectroJac®, ELISA Technologies (design)®, EqStim®, EquiSleeve™, E-Z Catch®, Farm-Foam™, Final-Fly-T®, Fly-Die Defense™, Fly-Die Ultra™, Fura-Zone®, Gene-Trak®, Horse Sense®, Ideal®, ImmunoRegulin®, Iodis®, Jolt®, LD-44T™, LD-44Z™, MACLEOD®, Maxi Sleeve®, MegaShot™, Viroxide Super™, Neogen® Viroxide Super and flask (design)®, NFZ™, Nu Dyne®, PanaKare™, Paradefense®, Parvosol®, Peraside™, Place Pack®, PolyPetite™, PolyShield™, PolySleeve®, Preserve®, Preserve International®, Preserve International(design)®, Prima®, Prima Marc™, Prima-Shot™, Prima Tech®, Pro-Fix®, Pro-Flex®,Pro-Shot™, Protectus™, Provecta®, Provecta Advanced®, Prozap®, Prozap (stylized mark w/fancy Z)™, PY-75™, Ramik®, RenaKare™, Rodex™, Safe-T-Flex™, Siloxycide®, Squire®, Standguard®, Stress-Dex®, SureBond®, SureKill®, Swine-O-Dyne®, Synergize®, Tetrabase®, Tetracid®, Tetradyne®, ThyroKare™,Tri-Hist®, Triplox™, Paradefense®, Turbocide®, Turbocide Gold®, Uniprim®, VAP-5™, VAP-20™, Vet-Tie™, Vita-15™, War Paint®, X-185™ GENOMICS: Aviandx and Design®, Canine HealthCheck®, Canine HealthCheck and Design®, CatScan and Design®, EarlyBird Sex Identification®, Envigor™, GeneSeek®, Genomic Profiler™, Genomic Insight for Personalized Care™, Igenity®, Infiniseek™, Paw Print Genetics®, Paw Print Pedigrees®, SeekGain™, SeekSire™, Skimseek®, Early Warning™ LOGOTYPES: BioSentry barn logo®, BioSentry chicken logo®, BioSentry pig logo®, Circular design®, TurboCide® (stylized), D3 color mark – red® Neogen operates in two business areas: the Food Safety and Animal Safety segments.
Biggest changeFrank’s®, D3™ Needles, D3 color mark – red®, D3X™, ElectroJac®, EquiSleeve™, E-Z Catch®, Ideal®, Jolt®, Maxi Sleeve®, MegaShot™, PolySleeve®, Prima®, Prima Marc™, Prima-Shot™, Prima Tech®, Pro-Shot™, Safe-T-Flex™, SyrFlex™ Animal Care & Others AluShield™, AquaPrime®, BotVax®, EqStim®, Fura-Zone®, Horse Sense®, ImmunoRegulin®, MACLEOD®, NFZ™, Nu Dyne®, PanaKare™, Paradefense®, Peraside™, Pro-Fix®, Pro-Flex®, RenaKare™, Squire®, Stress-Dex®, SureBond®, Swine-O-Dyne®, Tetrabase®, Tetracid®, ThyroKare™, Tri-Hist®, Uniprim®, Vet-Tie™, Vita-15™ Rodent Control, Insect Control & Disinfectants Acid-A-Foam™, Assault®, Barnstorm®, BioCres™, BioPhene™, BioQuat™, Chem-Tech, Ltd.™, Chem-Tech’s CT logo (with circle)™, Chlor-A-Foam™, COMPANION™, CT-511®, Cykill™, DC&R®, DeciMax®, Di-Kill®, Dy-Fly®, Dyne-O-Might®, Farm-Foam™, Final-Fly-T®, Fly-Die Defense™, Fly-Die Ultra™, Iodis®, LD-44T™, LD-44Z™, Parvosol®, Place Pack®, PolyPetite™, PolyShield™, Preserve®, Preserve International®, Preserve International(design)®, Protectus™, Provecta®, Provecta Advanced®, Prozap®, Prozap (stylized mark w/fancy Z)™, PY-75™, Ramik®, Rodex™, Siloxycide®, Standguard®, SureKill®, Synergize®, Triplox™, Turbocide®, TurboCide® (stylized), Turbocide Gold®, Viroxide Super™, Neogen® Viroxide Super and flask (design)®, VAP-5™, VAP-20™, War Paint®, X-185™ Genomic Services Aviandx and Design®, Canine HealthCheck®, Canine HealthCheck and Design®, CatScan and Design®, EarlyBird Sex Identification®, Early Warning™, Envigor™, GeneSeek®, Genomic Profiler™, Genomic Insight for Personalized Care™, Igenity®, Infiniseek®, NeoSeek™, Paw Print Genetics®, Paw Print Pedigrees®, SeekGain™, SeekSire™, Skimseek®, Thirty9™, 9Teen™ We manage our organization through our Food Safety and Animal Safety segments.
This includes Neogen’s filter tests, which are a combination of Neogen Filter membrane filtration and Neogen Culture Media ampouled media, and an easy-to-use Colitag product. With Colitag, after an incubation period, the sample changes color in the presence of coliforms and fluoresces in the presence of E. coli . 5 Culture media.
This includes Neogen’s filter tests, which are a 5 combination of Neogen Filter membrane filtration and Neogen Culture Media ampouled media, and the easy-to-use Colitag product. With Colitag, after an incubation period, the sample changes color in the presence of coliforms and fluoresces in the presence of E. coli . Culture media.
Customers in the U.K., France, Germany, Italy, the Netherlands, United Arab Emirates (U.A.E.) and India are served by our employees. In other regions, customers generally are served by distributors managed by Neogen Europe personnel.
Customers in the U.K., France, Germany, Italy, the Netherlands, United Arab Emirates (U.A.E.) and India are served by our employees. In other regions, customers are generally served by distributors managed by Neogen Europe personnel.
Neogen’s food safety markets are primarily comprised of: • Milling and grain , including grain elevators, feed mills, pet food manufacturers and grain inspection companies; • Meat and poultry , including meat and poultry processors, producers of ready-to-eat meat and poultry products, and the USDA’s Food Safety Inspection Service (FSIS); • Prepared foods and ingredients , including flour millers, malters, bakeries, candy and confection manufacturers, manufacturers of prepared meals, nuts, spices, cookies, crackers and other snack foods; • Fruits and vegetables , including growers and processors of juice and packaged fresh cut grocery items; • Seafood , including harvesters and processors of a wide variety of seafood products; • Dairy , including milk and yogurt processors; • Beverage , including soft drink bottlers and beer and wine producers; • Water, including food producers, water bottlers and municipal water departments; • Healthcare , including hospitals and distributors to the healthcare industry; • Traditional culture media markets , including commercial and research laboratories and producers of pharmaceuticals, cosmetics and veterinary vaccines; • Food service , including fast food service establishments and retail grocery market chains; and • Dietary supplements , including producers and marketers of a wide variety of nutritional and holistic consumer products.
Neogen’s food safety markets are primarily comprised of: • Milling and grain , including grain elevators, feed mills, pet food manufacturers and grain inspection companies; • Meat and poultry , including meat and poultry processors, producers of ready-to-eat meat and poultry products, and the USDA’s Food Safety Inspection Service (FSIS); 8 • Prepared foods and ingredients , including flour millers, malters, bakeries, candy and confection manufacturers, manufacturers of prepared meals, nuts, spices, cookies, crackers and other snack foods; • Fruits and vegetables , including growers and processors of juice and packaged fresh cut grocery items; • Seafood , including harvesters and processors of a wide variety of seafood products; • Dairy , including milk and yogurt processors; • Beverage , including soft drink bottlers and beer and wine producers; • Water, including food producers, water bottlers and municipal water departments; • Healthcare , including hospitals and distributors to the healthcare industry; • Traditional culture media markets , including commercial and research laboratories and producers of pharmaceuticals, cosmetics and veterinary vaccines; • Food service , including fast food service establishments and retail grocery market chains; and • Dietary supplements , including producers and marketers of a wide variety of nutritional and holistic consumer products.
The Heywood location produces prepared media plates, sterile liquid media, and other related products in ready-to-use format for food testing laboratories across the U.K. and Western Europe. Enzyme substrates are manufactured at Megazyme in Bray, Ireland. Our Clean-Trace product line is manufactured in Wales. Other FSD products are currently manufactured within 3M plants in the U.S. and Poland.
The Heywood location produces prepared media plates, sterile liquid media, and other related products in ready-to-use format for food testing laboratories across the U.K. and Western Europe. Enzyme substrates are manufactured at Megazyme in Bray, Ireland. Our Clean-Trace product line is manufactured in Wales. Other former 3M FSD products are currently manufactured within 3M plants in the U.S. and Poland.
Neogen offers several active ingredients, including diphacinone, bromethalin, brodifacoum and zinc phosphide, formulated with food-grade ingredients to generate the highest acceptance and most palatable bait possible. Cleaners and disinfectants. Used in animal and food production facilities, Neogen’s cleaners and disinfectants, including Synergize, 904 Disinfectant, Acid-A-Foam, BioPhene, Neogen Viroxide Super, and Companion, can prevent disease outbreaks.
Neogen offers several active ingredients, including diphacinone, bromethalin, brodifacoum and zinc phosphide, formulated with food-grade ingredients to generate the highest acceptance and most palatable bait possible. Cleaners and disinfectants. Used in animal and food production facilities, Neogen’s cleaners and disinfectants, including Synergize, BioSentry 904 Disinfectant, Acid-A-Foam, BioPhene, Viroxide Super, and Companion can prevent disease outbreaks.
While the technical 13 materials used by competing companies are similar, Neogen uses manufacturing and bait formula techniques, which we believe may better attract rodents to the product and thereby improves overall product performance. Within the insect control market, Chem-Tech products specifically focus on the area of insect control for food and animal safety applications.
While the technical materials used by competing companies are similar, Neogen uses manufacturing and bait formula techniques, which we believe may better attract rodents to the product and thereby improves overall product performance. Within the insect control market, Chem-Tech products specifically focus on the area of insect control for food and animal safety applications.
The majority of these consumable products are marketed through veterinarians, retailers, livestock producers, and animal health product distributors. Our line of drug detection products is sold worldwide for the detection of abused and therapeutic drugs in animals and animal products, and has expanded into the workplace and human forensic markets.
The majority of these consumable products are marketed through veterinarians, retailers, livestock producers and animal health product distributors. Our line of drug detection products is sold worldwide for the detection of abused and therapeutic drugs in animals and animal products, and has expanded into the workplace testing and human forensic markets.
Generally, the final assembly and shipment of diagnostic test kits to customers in Europe is performed in our Ayr, Scotland facility. Many of the Company’s food safety diagnostic instruments and readers are produced by third-party vendors to our specifications, quality tested in Lansing, and then shipped to customers.
Generally, the final assembly and shipment of diagnostic test kits to customers in Europe is performed in our Ayr, Scotland facility. Many of the Company’s food safety diagnostic instruments and readers are produced by third-party vendors to our specifications, quality tested in Lansing or by our vendors, and then shipped to customers.
We have no warning letters based on any review of these products or facility inspections and are not aware of any reason why we could not manufacture and market such products in the future. 14 Other animal safety and food safety products generally do not require additional registrations or approvals.
We have no warning letters based on any review of these products or facility inspections and are not aware of any reason why we could not manufacture and market such products in the future. Other animal safety and food safety products generally do not require additional registrations or approvals.
Neogen’s Life Science/Toxicology line of products include reagents and test kits for immunoassay production, life science research, and forensic and animal toxicology. Product offering includes a wide range of tests to provide solutions for drugs of abuse, including designer drugs and emerging drugs.
Neogen’s Life Science/Toxicology line of products include reagents and test kits for immunoassay production, life science research, and forensic and animal toxicology. Our product offering includes a wide range of tests to provide solutions for drugs of abuse, including designer and emerging drugs.
The drug detection assays include over 100 test kits used to screen more than 300 drugs and their metabolites in various forensic matrices, including oral fluid, whole blood, urine, serum, plasma, meconium, and others. Our portfolio for life science research includes assays for detecting levels of hormones, steroids, lipoxins, and histamine in a wide range of samples and species types.
The drug detection assays include over 125 test kits used to screen more than 300 drugs and their metabolites in various forensic matrices, including oral fluid, whole blood, urine, serum, plasma, meconium and others. Our portfolio for life science research includes assays for detecting levels of hormones, steroids, lipoxins, and histamine in a wide range of samples and species types.
Food allergens. The world’s largest producers of cookies, crackers, candy, ice cream and many other betaprocessed foods use our Veratox, Alert, Reveal, Reveal 3-D and BioKits testing products to help protect their food-allergic customers from the inadvertent contamination of products with food allergens, including but not limited to peanut, milk, egg, almond, gliadin (gluten), soy, hazelnut and coconut residues.
The world’s largest producers of cookies, crackers, candy, ice cream and many other processed foods use our Veratox, Alert, Reveal, Reveal 3-D and BioKits testing products to help protect their food-allergic customers from the inadvertent contamination of products with food allergens, including but not limited to peanut, milk, egg, almond, gliadin (gluten), soy, hazelnut and coconut residues.
Neogen’s highly effective insect control products utilize environmentally friendly technical formulas, and several are approved for use in food establishments and by pest control professionals in a wide range of environments. The Company’s Prozap insect control brand is used in the large animal production industry, particularly with dairy and equine producers.
Neogen’s highly effective insect control products utilize environmentally friendly technical formulas, and several are approved for use in food establishments and by pest control professionals in a wide range of environments. The Company’s Prozap insect control brand is used in the large animal production industry, particularly with cattle and equine producers.
However, Neogen’s regulatory staff routinely monitors amendments to current regulatory requirements to ensure compliance. HUMAN CAPITAL MANAGEMENT Our people are a critical component in our continued success. As a team, they put Neogen’s core values into action, while executing on key growth initiatives to maintain long-term sustainable growth.
However, Neogen’s regulatory staff routinely monitors amendments to current regulatory requirements to ensure compliance. 14 HUMAN CAPITAL MANAGEMENT Our people are a critical component in our continued success. As a team, they put Neogen’s core values into action, while executing key initiatives to maintain long-term sustainable growth.
Following the FSD transaction, pre-merger Neogen Food Safety Corporation stockholders own, in the aggregate, approximately 50.1% of the issued and outstanding shares of Neogen common stock, and pre-merger Neogen shareholders own, in the aggregate, approximately 49.9% of the issued and outstanding shares of Neogen common stock. See Note 3 "Business Combinations" to the consolidated financial statements for further discussion.
Following the FSD transaction, pre-merger Neogen Food Safety Corporation stockholders own, in the aggregate, approximately 50.1% of the issued and outstanding shares of Neogen common stock, and pre-merger Neogen shareholders own, in the aggregate, approximately 49.9% of the issued and outstanding shares of Neogen common stock. See Note 6. "Business Combinations" to the consolidated financial statements for further discussion.
Neogen Europe management also is responsible for various other manufacturing operations and service providers, including Quat-Chem, Ltd., Neogen Italia, Megazyme, Ltd., Delf, Ltd., and Abbott Analytical, Ltd. Neogen Europe has two additional manufacturing locations in Heywood and Liverpool, England, which manufacture culture media supplements and microbiology technologies.
Neogen Europe management is also responsible for various other manufacturing operations and service providers, including Neogen Ireland, Quat-Chem, Ltd., Neogen Italia, Megazyme, Ltd., Delf, Ltd., and Abbott Analytical, Ltd. 9 Neogen Europe has two additional manufacturing locations in Heywood and Liverpool, England, which manufacture culture media supplements and microbiology technologies.
Digital services. Our food safety and risk management software-as-a-service, Neogen Analytics, delivers a comprehensive Environmental Monitoring Program (EMP) automation solution for food companies. The software reduces risk by increasing the visibility of food safety testing results, elevating the ability to comply with and improve food safety standards.
Our food safety and risk management software-as-a-service, Neogen Analytics, delivers a comprehensive Environmental Monitoring Program (EMP) automation solution for food companies. The software reduces risk by increasing the visibility of food safety testing results, elevating the ability to comply with and improve food safety standards.
Competition comes mainly from a number of service providers, some significantly larger than us as well as several smaller companies offering genomics services. Neogen Genomics is not involved in cloning or the development of transgenic animals.
Competition comes mainly from a number of general laboratory service providers, some significantly larger than us as well as several smaller companies offering genomics services. Neogen Genomics is not involved in cloning or the development of transgenic animals.
Neogen Genomics provides value-added services to leading agricultural genetics providers, large national cattle associations, companion animal breed registries and direct-to-consumer canine genetic test providers, university researchers, and numerous commercial beef and dairy cattle, swine, sheep and poultry producers. With state-of-the-art genomics laboratories and comprehensive bioinformatics to interpret genomics test results, Neogen Genomics offers identity and trait determination and analysis.
Neogen provides value-added services to leading agricultural genetics providers, national cattle associations, companion animal breed registries and direct-to-consumer canine genetic test providers, university researchers, and numerous commercial beef and dairy cattle, swine, sheep and poultry producers. With six global state-of-the-art genomics laboratories and comprehensive bioinformatics to interpret genomics test results, Neogen offers identity and trait determination and analysis.
We have been historically successful at increasing product sales organically, including international growth, and maintain an active acquisition program to identify and capitalize on opportunities to acquire new products, businesses or technology. Neogen Corporation was formed as a Michigan corporation in June 1981 and operations began in 1982.
We have been historically successful at increasing product sales organically, including international growth, and maintain an active business development program to identify and capitalize on opportunities to acquire new products, businesses or technology. Neogen Corporation was formed as a Michigan corporation in June 1981 and operations began in 1982.
P.acnes seed cultures are added to media and then subjected to several stages of further processing resulting in a finished product that is filled and packaged within the facility. Our BotVax B vaccine also is produced in the Lansing facility using Type B botulism seed cultures and a traditional fermentation process.
P.acnes seed cultures are added to media and then subjected to several stages of further processing resulting in a finished product that is filled and packaged within the facility. Our BotVax B vaccine also is produced in the Lansing facility using Type B botulism seed cultures and a traditional fermentation process. Agricultural genomics services.
Neogen also markets Uniprim, a veterinary antibiotic, and several companion animal parasiticides. Veterinary biologics. Neogen’s BotVax B vaccine has successfully protected thousands of horses and foals against Type B botulism, commonly known as Shaker Foal Syndrome. Our product is the only USDA-approved vaccine for the prevention of Type B botulism in horses.
Neogen also markets Uniprim, a veterinary antibiotic. Veterinary biologics. Neogen’s BotVax B vaccine has successfully protected thousands of horses and foals against Type B botulism, commonly known as Shaker Foal Syndrome. Our product is the only USDA-approved vaccine for the prevention of Type B botulism in horses.
Our expanding line of food safety products also includes genomics-based diagnostic technology and advanced software systems that help testers to objectively analyze and store their results and perform analysis on the results from multiple locations over extended periods.
Our expanding line of food safety products also includes genomics-based diagnostic technology, and advanced software systems that help testers objectively analyze and store, as well as perform analysis on, their results from multiple locations over extended periods.
Our Food Safety segment consists primarily of diagnostic test kits and complementary products (e.g., culture media) sold to food producers and processors to detect dangerous and/or unintended substances in human food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, genetic modifications, ruminant by-products, meat speciation, drug residues, pesticide residues and general sanitation concerns.
Our Food Safety segment consists primarily of diagnostic test kits and complementary products (e.g., culture media) sold to food producers and processors to detect dangerous and/or unintended substances in human food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, ruminant by-products, meat speciation, drug residues, pesticide residues and general sanitation concerns; as well as food quality and nutritional components.
Top NeogenVet products include PanaKare, a digestive aid that serves as a replacement therapy where digestion of protein, carbohydrate and fat is inadequate due to exocrine pancreatic insufficiency; Natural Vitamin E-AD, which aids in the prevention and treatment of vitamin deficiencies in swine, cattle and sheep; RenaKare, a supplement for potassium deficiency in cats and dogs; and ThyroKare, a supplement used as replacement therapy for dogs with diminished thyroid function.
Top NeogenVet products include PanaKare, a digestive aid that serves as a replacement therapy where digestion of protein, carbohydrate and fat is inadequate due to exocrine pancreatic insufficiency; Natural Vitamin E-AD, which aids in the prevention and treatment of vitamin deficiencies in swine, cattle and sheep; and RenaKare, a supplement for potassium deficiency in cats and dogs.
To expand the reach of its animal safety OTC and veterinary products, Neogen has a dedicated sales team that sells the Company’s products to animal health product distributors; • Other manufacturers and government agencies. 9 INTERNATIONAL SALES AND MARKETING Neogen maintains Company-owned locations outside of the United States in 23 countries to provide a direct sales presence.
To expand the reach of its animal safety OTC and veterinary products, Neogen has a dedicated sales team that sells the Company’s products to animal health product distributors; • Other manufacturers and government agencies. INTERNATIONAL SALES AND MARKETING Neogen maintains locations outside of the United States in 24 countries to provide a direct sales presence.
Neogen maintains offices and distribution facilities in Mexico, Guatemala, Brazil, Argentina, Chile, Uruguay and Colombia. Combined, the businesses distribute Neogen’s products and offer genomics services throughout Mexico, Central and South America to distributors and end customers. Neogen do Brasil, headquartered near São Paulo, is also responsible for manufacturing, marketing and sales for Rogama, located in Pindamonhangaba, Brazil.
Neogen maintains offices and distribution facilities in Mexico, Guatemala, Brazil, Argentina, Chile, Uruguay and Colombia. Combined, the businesses distribute Neogen’s products and offer genomics services throughout Latin America to distributors and end customers. Neogen do Brasil, headquartered near São Paulo, is also responsible for Rogama, located in Pindamonhangaba, Brazil.
The Microbial Luminescence System (MLS II), acquired in the September 2022 FSD transaction, is designed for the rapid detection of microbial contamination in dairy and dairy-related products, utilizing adenosine triphosphate ("ATP") bioluminescence technology. Sanitation monitoring. Neogen manufactures and markets our AccuPoint Advanced rapid sanitation test to detect the presence of ATP, a chemical found in all living cells.
The Microbial Luminescence System (MLS II) is designed for the rapid detection of microbial contamination in beverages, dairy and dairy-related products, utilizing adenosine triphosphate ("ATP") bioluminescence technology. Sanitation monitoring. Neogen manufactures and markets our AccuPoint Advanced rapid sanitation test to detect the presence of ATP, a chemical found in all living cells.
Neogen’s trademark estate includes 119 trademark registrations within the U.S., and 548 trademark registrations in countries outside of the U.S, and 24 trademark registration applications globally. We do not expect the near-term expiration of any single patent to have a significant effect on future results of operations. Our offerings also are protected by trade secrets and proprietary know-how when appropriate.
Neogen’s trademark estate includes approximately 117 trademark registrations within the U.S., 550 trademark registrations in countries outside of the U.S, and 18 trademark registration applications globally. We do not expect the near-term expiration of any single patent to have a significant effect on future results of operations. Our offerings are also protected by trade secrets and proprietary know-how when appropriate.
On September 1, 2022, Neogen, 3M Company (“3M”) and Neogen Food Safety Corporation (“Neogen Food Safety Corporation”), a subsidiary created to carve out 3M’s Food Safety Division (“3M FSD”, “FSD”), closed on a transaction combining 3M’s FSD with Neogen in a Reverse Morris Trust transaction and Neogen Food Safety Corporation became a wholly owned subsidiary of Neogen (“FSD transaction”, the "Transaction").
On September 1, 2022, Neogen, 3M Company (“3M”) and Neogen Food Safety Corporation, formerly named Garden SpinCo, a subsidiary created to carve out 3M’s Food Safety Division (“3M FSD”, “FSD”), closed on a transaction combining 3M’s FSD with Neogen in a Reverse Morris Trust transaction and Neogen Food Safety Corporation became a wholly owned subsidiary of Neogen (“FSD transaction”, the "Transaction").
This information has helped livestock producers increase the speed of genetic improvement in their herds and the overall performance and quality of their animals. Neogen’s December 2021 acquisition of Genetic Veterinary Sciences, Inc. expanded the Company’s portfolio through the addition of a number of genetic tests for companion animals, including dogs, cats and birds. Life sciences.
This information has helped livestock producers increase the speed of genetic improvement in their herds and the overall performance and quality of their animals. Neogen’s December 2021 acquisition of Genetic Veterinary Sciences, Inc. expanded the Company’s portfolio through the addition of more than 350 genetic tests for companion animals, including dogs and cats. Life sciences.
Additionally, by aggressively maintaining Neogen’s ability to produce at low cost, we believe that we can be competitive with new market entrants that may choose a low pricing strategy in an attempt to gain market share. ANIMAL SAFETY: Neogen’s Animal Safety segment faces no single competitor across the products and markets we serve.
Additionally, by aggressively maintaining Neogen’s ability to produce at low cost, we believe that we can be competitive with new market entrants that may choose a low pricing strategy in an attempt to gain market share. ANIMAL SAFETY: Neogen’s Animal Safety segment does not encounter any single competitor across the various products and markets we serve.
We strive to create a workplace of choice to attract, retain, and develop top talent to achieve our vision and deliver shareholder results. As of May 31, 2023, we employed 2,640 people worldwide, with 1,444 located in the U.S. and 1,196 international. We maintain good relations with both our union and non-union employees and have not experienced any work stoppages.
We strive to create a workplace of choice to attract, retain, and develop top talent to achieve our vision and deliver shareholder results. As of May 31, 2024, we employed 2,917 people worldwide, with 1,603 located in the U.S. and 1,314 international. We maintain good relations with both our union and non-union employees and have not experienced any work stoppages.
Veterinary instruments. Neogen markets a broad line of veterinary instruments and animal health delivery systems primarily under the Ideal brand name. Approximately 250 different products are offered, many of which are used to deliver animal health products, such as antibiotics and vaccines.
Veterinary instruments. Neogen markets a broad line of veterinary instruments and animal health delivery systems primarily under the Ideal and Prima Tech brand names. Approximately 600 different products are offered, many of which are used to deliver animal health products, such as antibiotics and vaccines.
Revenues from Neogen’s Food Safety segment accounted for 66.5%, 49.3%, and 50.0% of our total revenues for fiscal years ended May 31, 2023, 2022 and 2021, respectively. 6 ANIMAL SAFETY SEGMENT Neogen’s Animal Safety segment is primarily engaged in the development, manufacture, marketing, and distribution of veterinary instruments, pharmaceuticals, vaccines, topicals, parasiticides, diagnostic products, a full suite of agricultural biosecurity products such as rodent control, cleaners, disinfectants and insect control, and genomics services.
Revenues from Neogen’s Food Safety segment accounted for 70.9%, 66.5%, and 49.3% of our total revenues for fiscal years ended May 31, 2024, 2023 and 2022, respectively. 6 ANIMAL SAFETY SEGMENT Neogen’s Animal Safety segment is primarily engaged in the development, manufacture, marketing and distribution of veterinary instruments, pharmaceuticals, vaccines, topicals, parasiticides, diagnostic products, a full suite of agricultural biosecurity products such as rodent control, cleaners, disinfectants and insect control, and genetic evaluation and genomic testing services.
Neogen Culture Media, formerly Neogen’s Acumedia and Lab M products, offers culture media and prepared media for varied purposes, including traditional bacterial testing and the growth of beneficial bacteria, such as cultures for sausages and beer. Also included under Neogen Culture Media is the Petrifilm solution, acquired as part of the FSD transaction in September 2022.
Neogen Culture Media, formerly Neogen’s Acumedia and Lab M products, offers culture media and prepared media for varied purposes, including traditional bacterial testing and the growth of beneficial bacteria, such as cultures for sausages and beer. Also included under Neogen Culture Media is the Petrifilm solution.
Neogen’s SureKill line of products is used by professionals to control a variety of insects, and the Company’s StandGuard Pour-on solution is used for horn fly and lice control in beef cattle. Animal genomics services.
Neogen’s SureKill line of products is used by professional pest management entities to control a variety of insects, and the Company’s StandGuard Pour-on solution and Protectus are used for horn fly and lice control in beef cattle. Animal genomics services.
Neogen’s products include tests for: 4 Mycotoxins. Grain producers and processors of all types and sizes use our Veratox, Agri-Screen, Reveal, Reveal Q+ and Reveal Q+ MAX tests to detect the presence of mycotoxins, including aflatoxin, aflatoxin M1, deoxynivalenol, fumonisin, ochratoxin, zearalenone, T-2/HT-2 toxin and ergot alkaloid, to help ensure product safety and quality in food and animal feed.
Grain producers and processors of all types and sizes use our Veratox, Reveal, Reveal Q+ and Reveal Q+ MAX tests to detect the presence of mycotoxins, including aflatoxin, aflatoxin M1, deoxynivalenol, fumonisin, ochratoxin, zearalenone and T-2/HT-2 toxin, to help ensure product safety and quality in food and animal feed. Food allergens.
Management believes we could increase the current output of our primary product lines by using the current space available. However, to do so would require investment in additional equipment. Food safety diagnostics.
Future demand increases could be accommodated by adding shifts. Management believes we could increase the current output of our primary product lines by using the current space available. However, to do so would require investment in additional equipment. 11 Food safety diagnostics.
The Molecular Detection System, an isothermal DNA detection and bioluminescence device, and unique Molecular Detection Assays provide a total solution for fast and accurate pathogen detection, acquired as part of the FSD transaction in September 2022. Our Listeria Right Now test detects the pathogen in less than 60 minutes without sample enrichment.
The Molecular Detection System ("MDS"), an isothermal DNA detection and bioluminescence device, and unique Molecular Detection Assays provide a total solution for fast and accurate pathogen and serotype detection. Our Listeria Right Now test detects the pathogen in less than 60 minutes without sample enrichment.
Our sites have injury prevention programs, and we strive to build on our safety culture. Our procedures emphasize the need for the cause of injuries to be investigated and for action plans to be implemented to mitigate potential recurrence. Our safety programs have resulted in strong safety performance.
Our procedures emphasize the need for the cause of injuries to be investigated and for action plans to be implemented to mitigate potential recurrence. Our safety programs have resulted in strong safety performance.
Numerous companies, including a number of large multinationals, compete for sales in the cleaner and disinfectant product segment. Neogen’s broad line of products is sold around the world, primarily to assist in the cleaning and disinfecting of animal production facilities.
These products are currently only sold in the U.S. through a combination of direct sales and distributors. 13 Numerous companies, including a number of large multinationals, compete for sales in the cleaner and disinfectant product segment. Neogen’s broad line of products is sold around the world, primarily to assist in the cleaning and disinfecting of animal production facilities.
Additionally, we offer reagents and unique colorimetric and chemiluminescent substrates for immunoassay production and research applications. Many of the products and services in the Animal Safety segment use licensed technology. In fiscal 2023, the Animal Safety segment incurred expense totaling $274 for royalties for licensed technology used in our products and services, including expense of $152 related to genomics services.
Additionally, we offer reagents and unique colorimetric and chemiluminescent substrates for immunoassay production and research applications. Many of the products and services in the Animal Safety segment use licensed technology. As a result, the Animal Safety segment incurs expense for royalties for licensed technology used in our products and services, primarily related to genomics services.
One of the major areas affecting the success of biotechnology and pharmaceutical development involves the time, cost and uncertainty surrounding regulatory approvals. Neogen products requiring regulatory approval, which we currently have in place, include BotVax B, EqStim, ImmunoRegulin and Uniprim.
One of the major areas affecting the success of biotechnology and pharmaceutical development involves the time, cost and uncertainty surrounding regulatory approvals. Neogen products requiring regulatory approval, which we currently have in place, include BotVax B, EqStim, ImmunoRegulin and Uniprim. Neogen’s rodent control, disinfectant, parasiticide and insect control products are subject to registration in the United States and internationally.
Sample handling. Neogen offers a range of sample handling products, acquired through the September 2022 FSD transaction. These innovative solutions are designed to make environmental and carcass sample collection and preparation more reliable and convenient than traditional methods. These products are manufactured to meet the highest quality standards and government regulations, maximizing accuracy, consistency and efficiency, while remaining cost efficient.
These innovative solutions are designed to make environmental and carcass sample collection and preparation more reliable and convenient than traditional methods. These products are manufactured to meet the highest quality standards and government regulations, maximizing accuracy, consistency and efficiency, while remaining cost-efficient. Digital services.
Our worldwide customer base for ATP sanitation testing products includes food and beverage processors, the food service and healthcare industries, as well as many other users. Seafood contaminants.
More light is indicative of higher levels of ATP and a need for more thorough sanitation. Our worldwide customer base for ATP sanitation testing products includes food and beverage processors, the food service and healthcare industries, as well as many other users. Seafood contaminants.
Meat and poultry processors, seafood processors, fruit and vegetable producers and many other market segments are the primary users of Neogen’s ANSR and Reveal tests for foodborne bacteria, including E. coli O157:H7, Salmonella , Listeria and Campylobacter .
Also included in our food allergen testing portfolio are Allergen Protein Rapid Kits and Allergen Protein ELISA Kits. Foodborne pathogens. Meat and poultry processors, seafood processors, fruit and vegetable producers and many other market segments are the primary users of Neogen’s ANSR and Reveal tests for foodborne bacteria, including E. coli O157:H7, Salmonella , Listeria and Campylobacter .
Our test kits are used to detect potential hazards or unintended substances in food and animal feed by testers ranging from small local grain elevators to the largest, best-known food and feed processors in the world, and numerous regulatory agencies. Along with detection of contaminants in foods, we also detect beneficial components in foods such as dietary fiber and carbohydrates.
Our test kits are used to detect potential hazards or unintended substances in food and animal feed by testers ranging from small local grain elevators to the largest, best-known food and feed processors in the world, and numerous regulatory agencies.
There are several competitors offering similar products, however, we have a proprietary formulation chemistry that optimizes the delivery and safe application of insect control products at the customer’s location. These products currently are only sold in the U.S. through a combination of direct sales and distributors.
There are several competitors offering similar products, however, we have a proprietary formulation chemistry that optimizes the delivery and safe application of insect control products at the customer’s location.
We strive to support our colleagues’ well-being and enable them to achieve their best at work and at home. Our compensation and benefits programs are designed to be competitive and support colleague well-being, including physical and mental health, financial wellness, and family resources. Employee Health and Safety . We are committed to ensuring a safe working environment for our colleagues.
Our compensation and benefits programs are designed to be competitive and support colleague well-being, including physical and mental health, financial wellness, and family resources. Employee Health and Safety . We are committed to ensuring a safe working environment for our colleagues. Our sites have injury prevention programs, and we strive to build on our safety culture.
Food Safety Segment Neogen’s Food Safety segment primarily is engaged in the production and marketing of diagnostic test kits and complementary products marketed to food and feed producers and processors to detect dangerous and/or unintended substances in food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, genetic modifications and general sanitation concerns.
See the “Notes to Consolidated Financial Statements” section of this Form 10-K for financial information about our business segments and international operations. 4 Food Safety Segment Neogen’s Food Safety segment is primarily engaged in the production and marketing of diagnostic test kits and complementary products marketed to food and feed producers and processors to detect dangerous and/or unintended substances in food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens and general sanitation concerns.
From its inception, Neogen has acquired and been granted numerous patents and trademark registrations and has numerous pending patents and trademark applications. Neogen’s patent portfolio includes at least 48 U.S. patents, 404 patents in countries outside of the U.S., and 209 pending patent applications globally.
Patent and trademark registration applications are submitted whenever appropriate. From its inception, Neogen has acquired and been granted numerous patents and trademark registrations and has numerous pending patents and trademark applications. Neogen’s patent portfolio includes approximately 170 U.S. patents, 457 patents in countries outside of the U.S., and 228 pending patent applications globally.
The content of our website or the website of any third party that may be noted herein is not incorporated by reference in this Form 10-K. 3 PRODUCTS Product trademarks and registered trademarks owned by Neogen include: CORPORATE: Neogen®, Neogen flask (logo)®, Neogen and flask (logo)®, NeoCenter™ FOOD SAFETY: AccuClean®, AccuPoint®, AccuScan®, Acumedia®, Agri-Screen®, Alert®, ANSR® , Betastar®, BioLumix®, Ceralpha®, Clean-Trace®, Colitag™, F.A.S.T.®, Freeze Watch®, GeneQuence®, Harlequin®, Iso-Grid®, Lab M®, Listeria Right Now™, Megazyme®, Megazyme (design) ®, MonitorMark®, MPNTray™, NeoColumn™, NeoNet®, NeoSeek™, NEO-GRID®, Penzyme®, Petrifilm®, Raptor®, Reveal®, Soleris®, µPREP®, Veratox® LIFE SCIENCES: Alert®, K-Blue®, K-Gold®, NeoSal® ANIMAL SAFETY: Acid-A-Foam™, Ag-Tek®, AluShield™, AquaPrime®, Assault®, Barnstorm®, BioCres™ 50, BioPhene™, BioQuat™, BotVax®, Breeder-Sleeve®, Calf Eze™, Chem-Tech, Ltd.™, Chem-Tech’s CT logo (with circle)™, Chlor-A-Foam™, COMPANION™, CT-511®, Cykill™, D3™ Needles, D3X™, DC&R®, DeciMax®, Di-Kill®, Dr.
The content of our website or the website of any third party that may be noted herein is not incorporated by reference in this Form 10-K. 3 PRODUCTS Product trademarks and registered trademarks owned by Neogen include: CORPORATE: Megazyme®, Megazyme (design)®, Megazyme device (logo)®, NeoCenter™, Neogen®, Neogen flask (logo)®, Neogen and flask (logo)® FOOD SAFETY: Natural Toxins & Allergens Alert®, Agri-Screen®, Betastar®, NeoColumn™, Raptor®, Reveal®, Soleris® Bacterial & General Sanitation AccuClean®, AccuPoint®, AccuScan®, ANSR®, BioLumix®, Clean-Trace®, Colitag™, F.A.S.T.®, Gene-Trak®, GeneQuence®, Listeria Right Now™, MDS™, MonitorMark®, MPNTray™, Veratox® Indicator Testing, Culture Media & Others Acumedia®, Ceralpha®, Freeze Watch®, Harlequin®, Iso-Grid®, K-Blue®, K-Gold®, Lab M®, NeoNet®, NEO-GRID®, NeoSal®, Penzyme®, Petrifilm®, µPREP® ANIMAL SAFETY: Veterinary Instruments & Disposables Ag-Tek®, Breeder-Sleeve®, Calf Eze™, Dr.
Through our laboratory services and bioinformatics (primarily in beef and dairy cattle, pigs, sheep, poultry, horses and dogs), Neogen Genomics allows our customers to speed genetic improvement efforts, as well as identify economically important diseases. Cleaners, disinfectants and rodent control products.
Neogen offers agricultural genomics laboratory services and bioinformatics at our locations in the U.S., Scotland, Brazil, Australia, China and Canada. Through our laboratory services and bioinformatics (primarily in beef and dairy cattle, pigs, sheep, poultry, horses and dogs), Neogen Genomics allows our customers to speed genetic improvement efforts, as well as identify economically important diseases.
Our diagnostic test kits are generally easier to use and provide greater accuracy and speed than conventional diagnostic methods. The majority of these test kits are disposable, single-use, immunoassay and DNA detection products that rely on proprietary antibodies and RNA and DNA testing methodologies to produce rapid and accurate test results.
The majority of the test kits are consumables, single-use, culture, immunoassay and DNA detection products that rely on proprietary antibodies and RNA and DNA testing methodologies to produce rapid and accurate test results.
COMPETITION Although competitors vary in individual markets, management knows of no single competitor that is pursuing Neogen’s fundamental strategy of developing and marketing a broad line of products, ranging from disposable tests and culture media to veterinary pharmaceuticals and instruments for a large number of food safety and animal safety concerns.
Shipments of higher volume products are generally accomplished within a 48-hour turnaround time. 12 COMPETITION While competitors differ across individual markets, we are not aware of any single competitor that is pursuing Neogen’s fundamental strategy of developing and marketing a broad line of products, ranging from disposable tests and culture media to veterinary pharmaceuticals and instruments for a large number of food safety and animal safety concerns.
Also included in our ATP sanitation monitoring portfolio is the Clean-Trace™ hygiene monitoring system, acquired as part of the FSD transaction in September 2022. These easy-to-use and inexpensive tests use bioluminescence to quickly determine if a contact surface has been completely sanitized.
Also included in our ATP sanitation monitoring portfolio is the Clean-Trace™ hygiene monitoring system. These easy-to-use and inexpensive tests use bioluminescence to quickly determine if a contact surface has been completely sanitized. When ATP comes into contact with reagents contained in the test device, a reaction takes place that produces light.
Hoof care, disposables and artificial insemination supplies are marketed to the dairy and veterinary industries. Rodent control products. Neogen’s comprehensive line of proven rodent control products, sold under brand names such as Ramik, CyKill and Havoc, effectively address rodent problems of any size and serve as a critical component of an overall biosecurity plan for animal protein production operations.
Neogen also offers several companion animal parasiticides, marketed under the Provecta brand name, through this channel. Rodent control products. Neogen’s comprehensive line of proven rodent control products, sold under brand names such as Ramik, CyKill and Havoc, effectively address rodent control and serve as a critical component of an overall biosecurity plan for animal protein production operations.
Generally, royalty rates are in the range of 2% to 10% of revenues on products containing the licensed technology. Some licenses involve technology that is exclusive to Neogen’s use, while others are non-exclusive and involve technology licensed to multiple licensees.
Some licenses involve technology that is exclusive to Neogen’s use, while others are non-exclusive and involve technology licensed to multiple licensees.
We strive to create an environment where colleagues feel valued and understand the important role we play in embracing diversity to improve the quality of our innovation, collaboration and relationships. We are dedicated to executing on our equity, diversity, inclusion and belonging initiatives. Talent Attraction, Development and Retention.
We value responsibility, consistency, and integrity. Our Code of Conduct codifies our commitment to conducting business ethically. Equity, Diversity, Inclusion, and Belonging (EDIB). We strive to create an environment where colleagues feel valued and understand the important role we play in embracing diversity to improve the quality of our innovation, collaboration and relationships.
With the Corvium acquisition in February 2023, Neogen's capabilities expanded with additional services and modules to include data aggregation and digitalized workflow services for product testing and sanitation programs. Laboratory services. Neogen offers food safety analysis services in the United States ("U.S."), United Kingdom ("U.K.") and India.
Neogen's capabilities expanded with additional services to include data aggregation and digitalized workflow services for product testing and sanitation programs. Neogen Analytics is now integrated with Clean-Trace™ and Petrifilm Plate Reader Advanced, which enhances customer experiences with Neogen software and devices. Laboratory services. Neogen offers food safety analysis services in the United States ("U.S.") and India.
Our test kits are generally based on internally developed technology, licensed technology, or technology that is acquired as a result of acquisitions. In fiscal 2023, the Food Safety segment incurred expense totaling $3,118 for royalties for licensed technology used in our products, including expense of $838 for allergen products and $489 for the pathogen product line.
Our test kits are generally based on internally developed technology, licensed technology, or technology that is acquired. The Food Safety segment incurs expense for royalties for licensed technology used in our products, primarily for our allergen products and the pathogen product line. Generally, royalty rates are in the range of 2% to 10% of revenues on products containing licensed technology.
Certain cleaners and disinfectants are manufactured in Neogen facilities, while others are purchased from other manufacturers for resale or toll manufactured by third parties. Insect control products. Neogen manufactures insect control products at its facilities in Iowa and Brazil. 12 Neogen purchases component parts and raw materials from more than 1,000 suppliers.
Neogen manufactures insect control products at its facilities in Iowa and Brazil. Neogen purchases component parts and raw materials from more than 1,000 suppliers.
As of May 31, 2023, there were approximately 1,168 full-time employees assigned to manufacturing operations and providing services in these locations, operating on multiple shift schedules, with occasional 24/7 production during high-demand periods. Future demand increases could be accommodated by adding shifts.
PRODUCTION AND SUPPLY Neogen manufactures products in the U.S., the U.K., Ireland and Brazil and provides genomics services in the U.S., Scotland, Brazil, Australia, China and Canada. As of May 31, 2024, there were approximately 1,315 full-time employees assigned to manufacturing operations and providing services in these locations, operating on multiple shift schedules, with occasional 24/7 production during high-demand periods.
Through the Ireland-based Megazyme, Ltd., Neogen supplies diagnostic kits and specialty enzymes used worldwide by quality control laboratories in the food, animal feed and beverage industries. Megazyme’s validated assays and reagents are used across various food industries such as the grain, wine and dairy markets, to measure dietary fibers, complex carbohydrates, simple sugars and organic acids, such as lactose.
Megazyme’s validated assays and reagents are used across various food industries such as the grain, wine, biofuel and dairy markets, to measure dietary fibers, complex carbohydrates, simple sugars and organic acids, such as lactose. Sample handling. Neogen offers a range of sample handling products.
This business operates a genomics testing laboratory in Edmonton, Alberta. Other distributor partners. Outside of our physical locations, Neogen uses our own sales managers in both the Food Safety and Animal Safety segments to work closely with and coordinate the efforts of a network of approximately 800 distributors in more than 100 countries.
Outside of our physical locations, Neogen uses our own sales managers in both the Food Safety and Animal Safety segments to work closely with and coordinate the efforts of a network of distributors in more than 100 countries. The distributors provide local training and technical support, perform market research and promote Company products within designated countries around the world.
Animal Safety products offered by Neogen to the retail over-the-counter (OTC) market include Ideal brand veterinary instruments packaged for the retail market. OTC products also include Stress-Dex, an oral electrolyte replacer for performance horses, and Fura-Zone, for the prevention and treatment of surface bacterial infections in wounds, burns and cutaneous ulcers.
Animal Safety products offered by Neogen to the retail over-the-counter (OTC) market include Ideal brand veterinary instruments packaged for the retail market. OTC products also include Stress-Dex, an oral electrolyte replacer for performance horses, and SyrFlex Cohesive Flexible Bandages for wound care. Hoof care, disposables and artificial insemination supplies are marketed to the dairy and veterinary industries.
PROPRIETARY PROTECTION AND APPROVALS Neogen uses a variety of intellectual property approaches to protect the competitive position of its offerings, including the use of patents, trademarks, trade secrets, proprietary and confidential know-how, as well as branding and trademarks. Patent and trademark registration applications are submitted whenever appropriate.
Royalties, expensed to sales and marketing, under these agreements amounted to $3,250, $3,392, and $1,999 in fiscal years 2024, 2023, and 2022, respectively. 10 PROPRIETARY PROTECTION AND APPROVALS Neogen uses a variety of intellectual property approaches to protect the competitive position of its offerings, including the use of patents, trademarks, trade secrets, proprietary and confidential know-how, as well as branding and trademarks.
During the fiscal years ended May 31, 2023, 2022 and 2021, no single customer or distributor accounted for 10% or more of our revenues. 8 DOMESTIC SALES AND MARKETING FOOD SAFETY To reach each customer and prospect with expertise and experience, Neogen has a staff of specialized food safety sales and technical service representatives assigned to specific markets or geographies.
As of May 31, 2024, a total of 997 employees were assigned to sales and marketing functions. During the fiscal years ended May 31, 2024, 2023 and 2022, no single customer or distributor accounted for 10% or more of our revenues.
Management expects that a number of these products will be commercially available at various times during fiscal years 2024 and 2025. Certain technologies used in some products manufactured and marketed by Neogen were acquired from or developed in collaboration with partners, independent scientists, governmental agencies, universities and other third parties.
Certain technologies used in some products manufactured and marketed by Neogen were acquired from or developed in collaboration with partners, independent scientists, governmental agencies, universities and other third parties. We have entered into agreements with these parties that provide for the payment of royalties based on sales of products that use the pertinent licensed technology.
Petrifilm standard and rapid plates are all-in-one plating systems that serve as an efficient method for the detection and enumeration of various microorganisms. Our customers for culture media also include commercial and research laboratories and producers of pharmaceuticals, cosmetics and veterinary vaccines. Food quality diagnostics.
Petrifilm standard and rapid plates are all-in-one plating systems that serve as an efficient method for the detection and enumeration of various microorganisms. Also included in the Petrifilm product line are the Petrifilm Plate Reader Advanced and Petrifilm Automated Feeder, which increase laboratory efficiency and productivity.
Management currently expects our future research and development expenditures to approximate 3% to 4% of total revenues annually. Neogen has ongoing development projects for several new and improved diagnostic tests and other complementary products for both the Food Safety and Animal Safety markets.
Neogen has ongoing development projects for several new and improved diagnostic tests and other complementary products for both the Food Safety and Animal Safety markets. Management expects that a number of these products will be commercially available at various times during fiscal years 2025 and 2026.
We employ a variety of career development, employee benefits, policies and compensation programs designed to attract, develop and retain our colleagues. Employee benefits and policies are designed for diverse needs. We have internal programs designed to develop and retain talent, including career planning, leadership development programs, performance management and training programs. Compensation and Benefits .
We employ a variety of programs and platforms designed to attract, develop and retain our colleagues. Employee benefits and policies are designed for diverse needs. Neogen is committed to training and developing our employees so that they can deliver exceptional results to our customers and shareholders.
These additional products are managed and directed by existing management at Neogen Australasia and report through the Animal Safety segment. Revenues from Neogen’s Animal Safety segment accounted for 33.5%, 50.7%, and 50.0% of our total revenues for fiscal years ended May 31, 2023, 2022 and 2021, respectively.
Revenues from Neogen’s Animal Safety segment accounted for 29.1%, 33.5%, and 50.7% of our total revenues for fiscal years ended May 31, 2024, 2023 and 2022, respectively. GENERAL SALES AND MARKETING Within our food safety and animal safety segments, our sales efforts are generally organized by specific markets, and/or geography.
There can be no assurance that we would avoid a disruption of supply in the event a supplier discontinues shipment of product. Shipments of higher volume products are generally accomplished within a 48-hour turnaround time. Our backlog of unshipped orders at any given time has historically not been significant.
There can be no assurance that we would avoid a disruption of supply in the event a supplier discontinues shipment of product.
This staff sells our products directly to end users and also handles technical support issues that arise with customers.
DOMESTIC SALES AND MARKETING FOOD SAFETY To reach each customer and prospect with expertise and experience, Neogen has a staff of specialized food safety sales and technical service representatives assigned to specific markets or geographies. This staff sells our products directly to end users and also handles technical support issues that arise with customers.
No individual foreign country contributed 10% or more of our revenues for those same periods. 10 RESEARCH AND DEVELOPMENT Neogen has a strong commitment to its research and development activities. Our product development efforts are focused on the enhancement of existing products and on the development of new products that advance our business strategy.
Sales to customers outside the United States accounted for 49.7%, 48.4%, and 39.7% of our total revenues for fiscal years ended May 31, 2024, 2023 and 2022, respectively. No individual foreign country contributed 10% or more of our revenues for those same periods. RESEARCH AND DEVELOPMENT Neogen has a strong commitment to its research and development activities.
These include validation by, among others, the AOAC International, independently administered third-party, multi-laboratory collaborative studies, and approvals by the USDA Food Safety Inspection Service. PRODUCTION AND SUPPLY Neogen manufactures products in the U.S., the U.K., Ireland and Brazil and provides genomics services in the U.S., Scotland, Brazil, Australia, China and Canada.
Neogen utilizes third-party validations and certifications on many of our products and associated methods to provide our customers with confidence that our products perform to specified levels. These include validation by, among others, the AOAC International, independently administered third-party, multi-laboratory collaborative studies, and approvals by the USDA Food Safety Inspection Service.
Manufacturing of rodent control products and/or cleaners and disinfectants takes place in the following locations: Wisconsin, Tennessee, California, England and Brazil. Manufacturing of rodent control products consists of blending technical material (active ingredient) with bait consisting principally of various grains.
Cleaners, disinfectants and rodent control products. Manufacturing of rodent control products and/or cleaners and disinfectants takes place in the following locations: Wisconsin, Tennessee, California, England and Brazil. Certain cleaners and disinfectants are manufactured in Neogen facilities, while others are purchased from other manufacturers for resale or toll manufactured by third parties. Insect control products.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur international operations are subject to general risks related to such operations, including: • political, social and economic instability and disruptions, including social unrest, geopolitical tensions, currency, inflation and interest rate uncertainties; • government export controls, economic sanctions, embargoes or trade restrictions; • the imposition of duties and tariffs and other trade barriers; • limitations on ownership and on repatriation or dividend of earnings; • transportation delays and interruptions; • labor unrest and current and changing regulatory environments; • increased compliance costs, including costs associated with disclosure requirements and related due diligence; • difficulties in staffing and managing multi-national operations; • limitations on our ability to enforce legal rights and remedies; • current products may not comply with product standards established by foreign regulatory bodies; • differing labor regulations; • diminished protection of intellectual property in some countries; • access to or control of networks and confidential information due to local government controls and vulnerability of local networks to cyber risks; and • fluctuations in foreign currency exchange rates. 18 If we are unable to successfully manage the risks associated with expanding our global business or adequately manage operational risks of our existing international operations, these risks could have a material adverse effect on our growth strategy into new geographical markets, our reputation, our business, results of operations, financial condition and cash flows.
Biggest changeOur international operations are subject to general risks related to such operations, including: • political, social and economic instability and disruptions, including social unrest, geopolitical tensions, inflation and interest rate uncertainties; • government export controls, economic sanctions, embargoes or trade restrictions; • the imposition of duties and tariffs and other trade barriers; • limitations on ownership and on repatriation or dividend of earnings; • transportation delays and interruptions; • labor unrest and current and changing employment and labor regulatory environments; • increased compliance costs, including costs associated with disclosure requirements and related due diligence; • difficulties in staffing and managing multi-national operations; • limitations on our ability to enforce legal rights and remedies; • the ability of our current products to comply with product standards established by foreign regulatory bodies; • differing regulatory and legal systems and environments; • diminished protection of intellectual property in some countries; • access to or control of networks and confidential information due to local government controls and vulnerability of local networks to cyber risks; and • fluctuations in foreign currency exchange rates.
In the event that we are found to infringe any valid claim in a patent held by a third party, we could, among other things, be required to: • Pay damages, including up to treble damages and the other party’s attorneys’ fees, which may be substantial; 27 • Cease the development, manufacture, importation, use and sale of products that infringe the patent rights of others, through a court-imposed injunction; • Expend significant resources to redesign our technology so that it does not infringe others’ patent rights, or develop or acquire non-infringing intellectual property, which may not be possible; • Discontinue manufacturing or other processes incorporating infringing technology; and/or • Obtain licenses to the infringed intellectual property, which may not be available to us on acceptable terms, or at all.
In the event that we are found to infringe any valid claim in a patent held by a third party, we could, among other things, be required to: • Pay damages, including up to treble damages and the other party’s attorneys’ fees, which may be substantial; • Cease the development, manufacture, importation, use and sale of products that infringe the patent rights of others, through a court-imposed injunction; • Expend significant resources to redesign our technology so that it does not infringe others’ patent rights, or develop or acquire non-infringing intellectual property, which may not be possible; • Discontinue manufacturing or other processes incorporating infringing technology; and/or • Obtain licenses to the infringed intellectual property, which may not be available to us on acceptable terms, or at all.
Factors that could impact the market price of our common stock include the factors described in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, as well as: • Public announcements (including the timing of these announcements) regarding our business, financial performance, acquisitions and prospects or new products or services, product enhancements or technological advances by our competitors or us; • Trading activity in our stock, including transactions by us, our executive officers and directors, and significant shareholders; trading activity that results from the ordinary course rebalancing of stock indices in which we may be included, such as the S&P Mid-Cap 400 Index; trading activity related to our inclusion in, or removal from, any stock indices; and short-interest in our common stock, which could be significant from time to time; • Investor perception of us and the industry and markets in which we operate, including changes in earnings estimates or buy/sell recommendations by securities analysts; and whether or not we meet earnings estimates of securities analysts who follow us; and • General financial, domestic, international, economic and market conditions, including overall fluctuations in the U.S. equity markets, which may experience extreme volatility that, in some cases, is unrelated or disproportionate to the operating performance of particular companies.
Factors that could impact the market price of our common stock include the factors described in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, as well as: • Public announcements (including the timing of these announcements) regarding our business, financial performance, acquisitions and prospects or new products or services, product enhancements or technological advances by our competitors or us; • Trading activity in our stock, including transactions by us, our executive officers and directors, and significant shareholders; trading activity that results from the ordinary course rebalancing of stock indices in which we may be included, such as the S&P Mid-Cap 400 Index; trading activity related to our inclusion in, or removal from, any stock indices; and short-interest in our common stock, which could be significant from time to time; • Investor perception of us and the industry and markets in which we operate; changes in earnings estimates or buy/sell recommendations by securities analysts; and whether or not we meet earnings estimates of securities analysts who follow us; and • General financial, domestic, international, economic and market conditions, including overall fluctuations in the U.S. equity markets, which may experience extreme volatility that, in some cases, is unrelated or disproportionate to our operating performance.
In addition, results of elections, referendums or other political processes in certain markets in which our products are manufactured, sold, or 28 distributed could create uncertainty regarding how existing governmental policies, laws and regulations may change, including with respect to sanctions, taxes, the movement of goods, services, capital and people between countries and other matters.
In addition, results of elections, referendums or other political processes in certain markets in which our products are manufactured, sold, or distributed could create uncertainty regarding how existing governmental policies, laws and regulations may change, including with respect to sanctions, taxes, the movement of goods, services, capital and people between countries and other matters.
We have experienced, and may experience in the future, significant fluctuations in our quarterly or annual operating results. The mix of products sold and the acceptance of new products, in addition to other factors such as cost increases, could contribute to this variability. We have few long-term customer contracts and operate primarily with purchase orders.
We have experienced, and may experience in the future, significant fluctuations in our quarterly and annual operating results. The mix of products sold and the acceptance of new products, in addition to other factors such as cost increases, could contribute to this variability. We have few long-term customer contracts and operate primarily with purchase orders.
These restrictions could have a material adverse effect on Neogen’s liquidity and financial condition, and otherwise could impair Neogen’s and Neogen Food Safety Corporation’s ability to implement strategic initiatives and Neogen Food Safety Corporation’s and Neogen’s indemnity obligation to 3M might discourage, delay or prevent a change of control that shareholders of Neogen may consider favorable.
These restrictions could have a material adverse effect on Neogen’s liquidity and financial condition, and otherwise could impair Neogen’s and Neogen Food Safety Corporation’s ability to implement strategic initiatives, Neogen 17 Food Safety Corporation’s and Neogen’s indemnity obligation to 3M might discourage, delay or prevent a change of control that shareholders of Neogen may consider favorable.
An increase in the applicable leverage ratio, as a result of decreased earnings or otherwise, could result in reduced access to capital under our Revolving Facility, which is a significant component of our total available liquidity. 25 Our quarterly or annual operating results are subject to significant fluctuations.
An increase in the applicable leverage ratio, as a result of decreased earnings or otherwise, could result in reduced access to capital under our Revolving Facility, which is a significant component of our total available liquidity. 25 Our quarterly and annual operating results are subject to significant fluctuations.
Pursuant to the terms of the Transaction, Neogen and formerly Neogen Food Safety Corporation will be restricted from taking certain actions that could adversely affect the intended tax treatment of the Transaction, and such restrictions could significantly impair Neogen’s and Neogen Food Safety Corporation’s ability to implement strategic initiatives that otherwise would be beneficial.
Pursuant to the terms of the Transaction, Neogen and Neogen Food Safety Corporation will be restricted from taking certain actions that could adversely affect the intended tax treatment of the Transaction, and such restrictions could significantly impair Neogen’s and Neogen Food Safety Corporation’s ability to implement strategic initiatives that otherwise would be beneficial.
The impacts of climate change on global water resources may result in water scarcity, which could in the future impact our ability to access sufficient quantities of water in certain locations and result in increased costs. Concern over climate change could result in new legal or regulatory requirements designed to mitigate the effects of climate change on the environment.
The impacts of climate change on global water resources may result in water scarcity, which could impact our ability to access sufficient quantities of water in certain locations and result in increased costs. Concern over climate change could result in new legal or regulatory requirements designed to mitigate the effects of climate change on the environment.
The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, trade barriers and market contraction, could adversely affect our business and financial results. Climate change, or legal, regulatory or market measures to address climate change could materially adversely affect our financial condition and business operations.
The potential implications of such uncertainty, which include, among others, exchange rate fluctuations, trade barriers and market contraction, could adversely affect our business and financial results. 28 Climate change, or legal, regulatory or market measures to address climate change could materially adversely affect our financial condition and business operations.
If any of our products are subject to recall or are proven to be, or are claimed to be, ineffective or inaccurate for their stated purpose, then this could have a material adverse effect on our business, financial condition or results of operations.
If any of our products are subject to recall or are proven to be, or are claimed to be, ineffective or inaccurate for their stated purpose, then this could have a material adverse effect on our business, financial condition and results of operations.
Our international operations subject us to discriminatory or conflicting tariffs and trade policies. Tariffs have and may continue to increase our material input costs, and any further trade restrictions, retaliatory trade measures and additional tariffs could result in higher input costs to our products.
Our international operations subject us to discriminatory or conflicting tariffs and trade policies. Tariffs have increased and may continue to increase our material input costs, and any further trade restrictions, retaliatory trade measures and additional tariffs could result in higher input costs to our products.
In addition, the impact of such risks could be outside of our control and could decrease our ability to sell products internationally, which could adversely affect our business, financial condition, results of operations or cash flows.
In addition, the impact of such risks could be outside of our control and could decrease our ability to sell products internationally, which could adversely affect our business, financial condition, results of operations and cash flows.
The integration of the 3M Food Safety business with Neogen presents challenges, and the failure to successfully integrate the 3M Food Safety business could have a material adverse effect on our business, financial condition or results of operations.
The integration of the 3M Food Safety business with Neogen presents challenges, and the failure to successfully integrate the 3M Food Safety business could have a material adverse effect on our business, financial condition and results of operations.
RISKS RELATED TO LIQUIDITY, INDEBTEDNESS AND THE CAPITAL MARKETS We have incurred substantial indebtedness and our financial condition and operations may be adversely affected by a violation of financial and other covenants.
RISKS RELATED TO LIQUIDITY, INDEBTEDNESS AND THE CAPITAL MARKETS We have incurred substantial indebtedness and our financial condition and operations may be adversely affected by a violation of financial or other covenants.
Any such violations of law or improper actions could subject us to civil or criminal investigations in the U.S. or other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related shareholder lawsuits, could lead to increased costs of compliance and could damage the our reputation, business, results of operations, financial condition and cash flows. 23 Tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows.
Any such violations of law or improper actions could subject us to civil or criminal investigations in the U.S. or other jurisdictions, result in substantial monetary and non-monetary penalties and shareholder lawsuits, lead to increased costs of compliance and damage our reputation, business, results of operations, financial condition and cash flows. 23 Tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows.
While we have implemented network security and internal control measures, including for the purpose of protecting our connected products and services from cyberattacks, and invested in our data and information technology infrastructure, there can be no assurance that these efforts will prevent a system disruption, attack, or security breach and, as such, the risk of system disruptions and security breaches from a cyberattack remains.
While we have implemented network security and internal control measures, including for the purpose of protecting our connected products and services from cyberattacks, and invested in our data and IT infrastructure, there can be no assurance that these efforts will prevent a system disruption, attack, or security breach and, as such, the risk of system disruptions and security breaches from a cyberattack remains.
The difficulties include: • the integration of the 3M Food Safety business with Neogen’s current businesses while carrying on the ongoing operations of all businesses; • managing a significantly larger company than before the consummation of the Transaction; • integrating the business cultures of the 3M Food Safety business and Neogen, which could prove to be incompatible; • creating uniform standards, controls, procedures, policies and information systems and controlling the costs associated with such matters; • the ability to ensure the effectiveness of internal control over financial reporting across the combined company; • integrating certain manufacturing, information technology, purchasing, accounting, finance, sales, billing, human resources, payroll and regulatory compliance systems; and • the potential difficulty in retaining key officers and personnel of Neogen and the 3M Food Safety business. 16 The continued successful integration of the 3M Food Safety business cannot be assured.
The difficulties include: • the integration of the 3M Food Safety business with Neogen’s current businesses while carrying on the ongoing operations of all businesses; • managing a significantly larger company than before the consummation of the Transaction; • integrating the business cultures of the 3M Food Safety business and Neogen, which could prove to be incompatible; • creating uniform standards, controls, procedures, policies and information systems and controlling the costs associated with such matters; • the ability to ensure the effectiveness of internal control over financial reporting across the combined company; • integrating certain manufacturing, information technology, purchasing, accounting, finance, sales, billing, human resources, payroll and regulatory compliance systems; and • the potential difficulty in retaining key officers and personnel of Neogen and the 3M Food Safety business.
Our customers may not consider our proposed products and services to be of value to them or may not view them as superior to our competitors’ products and services. In addition, our competitors or customers could develop new technologies or products which address similar or improved solutions to our existing technologies.
Our customers may not consider our proposed products and services to be of value to them or may not view them as superior to our competitors’ products and services. In addition, our competitors or customers could develop new technologies or products which reflect similar or improved solutions to our existing technologies.
We have incurred substantial indebtedness and related debt service obligations, which could have important consequences, including: • reduced flexibility in responding to changing business and economic conditions, and increased vulnerability to general adverse economic and industry conditions; • reduced flexibility in planning for, or reacting to, changes in our business, the competitive environment and the markets in which we operate, and to technological and other changes; • reduced access to capital and increasing borrowing costs generally or for any additional indebtedness to finance future operating and capital expenditures and for general corporate purposes; • lowered credit ratings; • reduced funds available for operations, capital expenditures and other activities; • increased vulnerability to increases in interest rates in general because a substantial portion of our indebtedness is expected to bear interest at floating rates; and • competitive disadvantages relative to other companies with lower debt levels.
We have incurred substantial indebtedness and related debt service obligations, which could have important consequences, including: • reduced flexibility in responding to changing business and economic conditions, and increased vulnerability to adverse economic and industry conditions; • reduced flexibility in planning for, or reacting to, changes in our business, the competitive environment and the markets in which we operate, and to technological and other changes; • reduced access to capital and increased borrowing costs generally or for any additional indebtedness to finance future operating and capital expenditures and for general corporate purposes; • lowered credit ratings; • reduced funds available for operations, capital expenditures and other activities; • increased vulnerability to increases in interest rates because a substantial portion of our indebtedness bears interest at floating rates; and • competitive disadvantages relative to other companies with lower debt levels.
Our operations require us to comply with a number of U.S. and international laws and regulations, including those governing payments to government officials, bribery, fraud, anti-kickback and false claims, competition, export and import compliance, money laundering and data privacy, as well as the improper use of proprietary information or social media.
Our operations require us to comply with a number of U.S. and international laws and regulations, including those governing payments to government officials, bribery, fraud, anti-kickbacks, false claims, unfair competition, export and import compliance, money laundering and data privacy, as well as the improper use of proprietary information or social media.
As disclosed in Item 9A, “Controls and Procedures,” we identified material weaknesses in our internal control over financial reporting related to ineffective information technology general controls, our period-end invoice accrual procedures, and ineffective operation of management review controls related to the accounting, valuation and purchase price allocation of the Company’s acquisition and associated goodwill.
As disclosed in Item 9A, “Controls and Procedures,” in fiscal year 2023, we identified material weaknesses in our internal control over financial reporting related to ineffective information technology general controls, our period-end invoice accrual procedures, and ineffective operation of management review controls related to the accounting, valuation and purchase price allocation of the Company’s acquisition and associated goodwill.
In particular: For a two-year period following the distribution date, except as described below: • Neogen Food Safety Corporation will continue the active conduct of its trade or business and the trade or business of certain Neogen Food Safety Corporation subsidiaries; • Neogen Food Safety Corporation will not voluntarily dissolve or liquidate or permit certain Neogen Food Safety Corporation subsidiaries to voluntarily dissolve or liquidate; • Neogen and Neogen Food Safety Corporation will not enter into any transaction or series of transactions (or any agreement, understanding or arrangement) as a result of which one or more persons would acquire (directly or indirectly) stock comprising 50% or more of the vote or value of Neogen Food Safety Corporation or Neogen (taking into account the stock acquired pursuant to the merger); • Neogen and Neogen Food Safety Corporation will not engage in certain mergers or consolidations; • Neogen Food Safety Corporation will not, and will not permit certain Neogen Food Safety Corporation subsidiaries to, sell, transfer or otherwise dispose of 30% or more of the gross assets of Neogen Food Safety Corporation such subsidiaries, the Neogen Food Safety Corporation group or the active trade or business of Neogen Food Safety Corporation or certain Neogen Food Safety Corporation subsidiaries, subject to certain exceptions; • Neogen and Neogen Food Safety Corporation will not, and will not permit certain Neogen Food Safety Corporation subsidiaries to, redeem or repurchase stock or rights to acquire stock, unless certain requirements are met; • Neogen and Neogen Food Safety Corporation will not, and will not permit certain Neogen Food Safety Corporation subsidiaries to, amend their certificates of incorporation (or certain other organizational documents) or take any other action affecting the voting rights of any stock or stock rights of Neogen or Neogen Food Safety Corporation; and • Neogen and Neogen Food Safety Corporation will not, and will not permit any member of the Neogen Food Safety Corporation group or Neogen to, take any other action that would, when combined with any other direct or indirect changes in ownership of Neogen Food Safety Corporation and Neogen stock (including pursuant to the merger), have the effect of causing one or more persons to acquire stock representing 50% or more of the vote or value of Neogen Food Safety Corporation or Neogen, or otherwise jeopardize the tax-free status of the Transaction; • during the time period ending three years after the date of the distribution, Neogen Food Safety Corporation and Neogen also will be subject to certain restrictions relating to the SpinCo Business in Switzerland; and • Additionally, none of Neogen Food Safety Corporation, Neogen or any member of Neogen Food Safety Corporation group or Neogen may: o take, or permit to be taken, any action that could reasonably be expected to jeopardize the qualification of certain Neogen Food Safety Corporation debt as a security under Section 361(a) of the Code (other than making any payment permitted or required by the terms of the Neogen Food Safety Corporation debt); o permit any portion of certain nonqualified preferred stock to cease to be outstanding or modify the terms of such stock; 17 unless, in each case, prior to taking any such action, Neogen and Neogen Food Safety Corporation shall have requested that 3M obtain, or request and receive 3M’s prior written consent to obtain, an IRS ruling satisfactory to 3M in its reasonable discretion or provide 3M with an unqualified tax opinion satisfactory to 3M in its sole and absolute discretion to the effect that such action would not jeopardize the intended tax treatment of the Transaction, unless 3M waives such requirement.
In particular: For a two-year period following the distribution date, except as described below: 16 • Neogen Food Safety Corporation will continue the active conduct of its trade or business and the trade or business of certain Neogen Food Safety Corporation subsidiaries; • Neogen Food Safety Corporation will not voluntarily dissolve or liquidate or permit certain Neogen Food Safety Corporation subsidiaries to voluntarily dissolve or liquidate; • Neogen and Neogen Food Safety Corporation will not enter into any transaction or series of transactions (or any agreement, understanding or arrangement) as a result of which one or more persons would acquire (directly or indirectly) stock comprising 50% or more of the vote or value of Neogen Food Safety Corporation or Neogen (taking into account the stock acquired pursuant to the merger); • Neogen and Neogen Food Safety Corporation will not engage in certain mergers or consolidations; • Neogen Food Safety Corporation will not, and will not permit certain Neogen Food Safety Corporation subsidiaries to, sell, transfer or otherwise dispose of 30% or more of the gross assets of Neogen Food Safety Corporation such subsidiaries, the Neogen Food Safety Corporation group or the active trade or business of Neogen Food Safety Corporation or certain Neogen Food Safety Corporation subsidiaries, subject to certain exceptions; • Neogen and Neogen Food Safety Corporation will not, and will not permit certain Neogen Food Safety Corporation subsidiaries to, redeem or repurchase stock or rights to acquire stock, unless certain requirements are met; • Neogen and Neogen Food Safety Corporation will not, and will not permit certain Neogen Food Safety Corporation subsidiaries to, amend their certificates of incorporation (or certain other organizational documents) or take any other action affecting the voting rights of any stock or stock rights of Neogen or Neogen Food Safety Corporation; and • Neogen and Neogen Food Safety Corporation will not, and will not permit any member of the Neogen Food Safety Corporation group or Neogen to, take any other action that would, when combined with any other direct or indirect changes in ownership of Neogen Food Safety Corporation and Neogen stock (including pursuant to the merger), have the effect of causing one or more persons to acquire stock representing 50% or more of the vote or value of Neogen Food Safety Corporation or Neogen, or otherwise jeopardize the tax-free status of the Transaction; and • Additionally, none of Neogen Food Safety Corporation, Neogen or any member of Neogen Food Safety Corporation group may: o take, or permit to be taken, any action that could reasonably be expected to jeopardize the qualification of certain Neogen Food Safety Corporation debt as a security under Section 361(a) of the Code (other than making any payment permitted or required by the terms of the Neogen Food Safety Corporation debt); or o permit any portion of certain nonqualified preferred stock to cease to be outstanding or modify the terms of such stock; unless, in each case, prior to taking any such action, Neogen and Neogen Food Safety Corporation shall have requested that 3M obtain, or request and receive 3M’s prior written consent to obtain, an IRS ruling satisfactory to 3M in its reasonable discretion or provide 3M with an unqualified tax opinion satisfactory to 3M in its sole and absolute discretion to the effect that such action would not jeopardize the intended tax treatment of the Transaction, unless 3M waives such requirement.
Problems with suppliers and the supply chain could negatively impact our ability to supply the market, substantially decrease sales, lead to higher costs or damage our reputation with our customers. 21 Our business sells many products through distributors, which present risks that could negatively affect our operating results.
Problems with suppliers and the supply chain could negatively impact our ability to supply the market, substantially decrease sales, lead to higher costs and damage our reputation with our customers. 21 Our business sells many products through distributors, which presents risks that could negatively affect our operating results.
Additionally, we may be unable to increase the prices of products due to a competitor’s pricing pressure or other factors, or may be unable to raise the price of our products in a manner that is proportional to the level of inflation, which would materially adversely affect our results of operations.
Additionally, we may be unable to increase the prices of products due to a competitor’s pricing pressure or other factors, or may be unable to raise the price of our products in a manner that is proportional to the level of inflation in our input costs, which would materially and adversely affect our results of operations.
Changes in the political conditions in markets in which we manufacture, sell or distribute our products could be difficult to predict and could affect our business and financial results adversely.
Changes in the political conditions in markets in which we manufacture, sell or distribute our products are difficult to predict and could affect our business and financial results adversely.
The trading price of our common stock could be volatile. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as other general economic, market or political conditions, could reduce the market price of our common stock rapidly and unexpectedly, despite our operating performance.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as other general economic, market or political conditions, could reduce the market price of our common stock rapidly and unexpectedly, despite our operating performance.
The Tax Matters Agreement executed in connection with the Transaction generally restricts Neogen and its affiliates from taking certain actions after the distribution of Neogen shares that could adversely affect the intended tax treatment of the Transaction.
The Tax Matters Agreement executed in connection with the Transaction generally restricts Neogen and its affiliates from taking certain actions that could adversely affect the intended tax treatment of the Transaction.
The markets in which we operate are characterized by changing technologies and the introduction of new products.
The markets in which we operate are characterized by rapidly changing technologies and the frequent introduction of new products.
The costs of compliance or failure to comply with any obligations related to these laws or regulations could adversely impact our business, including suspension or cessation of our operations, restrictions on our ability to expand at our present locations or require us to make significant capital expenditures or incur other significant expenses.
The costs of compliance or failure to comply with any obligations related to these laws or regulations could adversely impact our business, including suspension or cessation of our operations, restrictions on our ability to expand at our present locations or requirements that we make significant capital expenditures or incur other significant expenses.
If we are required to, but cannot, obtain a license to valid patent rights held by a third party, we would likely be prevented from commercializing the relevant product, or from further manufacture, sale or use of the relevant product. We are subject to substantial governmental regulation.
If we are required to, but cannot, obtain a license to valid patent rights held by a third party, we would likely be prevented from commercializing the relevant product, or from further manufacture, sale or use of the relevant product. 27 The industries in which we operate are subject to substantial governmental regulation.
If one or more of these third-party package delivery providers were to experience a major work stoppage, preventing our products from being delivered in a timely fashion or causing us to incur additional shipping costs we could not pass on to our customers, our costs could increase and our relationships with some of our customers could be adversely affected.
If one or more of these third-party package delivery providers were to experience a major work stoppage or other event that prevented our products from being delivered in a timely fashion or caused us to incur additional shipping costs we could not pass on to our customers, our costs could increase and our relationships with some of our customers could be adversely affected.
Certain of our food safety product lines depend on a sole or single source suppliers and vendors. The ability of these third parties to deliver raw materials and products may also be affected by events beyond our control.
Certain of our food safety product lines depend on a sole or single source supplier or vendor. The ability of these third parties to deliver raw materials and products may be affected by events beyond our control.
Failure to comply with any of the foregoing laws, regulations and policies could result in civil and criminal, monetary and non-monetary penalties, as well as damage to our reputation.
Failure to comply with any of these laws, regulations and policies could result in civil and criminal as well was monetary and non-monetary penalties, and damage to our reputation.
Should the remaining systems not be implemented successfully, or if the systems do not perform in a satisfactory manner once implementation is complete, our business and operations could be disrupted and our results of operations could be adversely affected, including our ability to report accurate and timely financial results.
Should the subsequent phases of implementation not occur successfully, or if the systems do not perform in a satisfactory manner, our business and operations could be disrupted and our results of operations could be adversely affected, including our ability to report accurate and timely financial results.
Our business strategy is dependent on successfully promoting internal growth and identifying and integrating acquisitions. Our business has grown significantly over the past several years as a result of both internal growth and acquisitions of existing businesses and their products.
Our business has grown significantly over the past several years as a result of both internal growth and acquisitions of existing businesses and their products.
In addition, if one or more of our third-party package delivery providers were to increase prices, and we were not able to find comparable alternatives or make adjustments within our delivery network, our profitability could be adversely affected. Our dependence on suppliers could limit our ability to sell certain products or negatively affect our operating results.
In addition, if one or more of our third-party package delivery providers were to increase prices, and we were not able to find comparable alternatives or make adjustments within our delivery network, our profitability could be adversely affected.
Our domestic and international sales and operations are subject to risks associated with changes in laws, regulations and policies (including environmental and employment regulations, export/import laws, tax policies and other similar programs).
Changes in domestic and foreign laws, regulations, policies, and enforcement initiatives increase our costs of compliance and subject us to increased risk. Our domestic and international sales and operations are subject to risks associated with changes in laws, regulations and policies (including environmental and employment regulations, export/import laws, tax policies and other similar programs).
While we will generally attempt to mitigate the impact of increased raw materials prices by endeavoring to make strategic purchasing decisions, broadening our supplier base and passing along increased costs to customers, there may be a time delay between the increased raw material prices, the ability to increase the prices of products, and dependence on a sole or single source for certain materials and products.
While we will generally attempt to mitigate the impact of increased raw material prices by endeavoring to make strategic purchasing decisions, broadening our supplier base and passing along increased costs to customers, there may be a time delay between the increased raw material prices, and our mitigation efforts.
Litigation also could impair our ability to retain product liability insurance or make our insurance more expensive. Although we currently maintain liability insurance, we cannot assure that we will be able to continue to obtain such insurance on acceptable terms, or that such insurance will provide adequate coverage against all potential claims.
Although we currently maintain liability insurance, we cannot assure that we will be able to continue to obtain such insurance on acceptable terms, or that such insurance will provide adequate coverage against all potential claims.
Whether the manufacture, sale, or use of current products, or whether any products under development would, upon commercialization, infringe any patent claim cannot be known with certainty unless and until a court interprets a patent claim and its validity in the context of litigation.
From time to time, we have received notices alleging that our products infringe third-party proprietary rights. Whether the manufacture, sale, or use of current products, or whether any products under development would, upon commercialization, infringe any patent claim cannot be known with certainty unless and until a court interprets a patent claim and its validity in the context of litigation.
While it is difficult to anticipate the effect the sanctions announced to date could have on us, any further sanctions imposed or actions taken by the U.S. or other countries, including any expansion of sanctions beyond Russia and Belarus, could affect the global price and availability of raw materials, reduce our sales and earnings or otherwise have an adverse effect on our business and results of operations.
While it is difficult to anticipate the effect the sanctions announced to date could have on us, any further sanctions imposed or actions taken by the U.S. or other countries, including any expansion of sanctions beyond Russia and Belarus, could affect the global price and availability of raw materials, reduce our sales and earnings or otherwise have an adverse effect on our business and results of operations. 18 We have identified material weaknesses in our internal control over financial reporting, and if we are unable to improve our internal controls, our financial results may not be accurately reported.
Substantially all our product revenue in each period results from orders received in that period. In addition, our expense levels are based, in part, on our expectation of future revenue levels. Therefore, a shortfall in expected revenue could result in a disproportionate decrease in our net income. The market price of our common stock could be highly volatile.
In addition, our expense levels are based, in part, on our expectation of future revenue levels. Therefore, a shortfall in expected revenue could result in a disproportionate reduction in our net income. The market price of our common stock could be highly volatile. The trading price of our common stock could be volatile.
Therefore, our sales and marketing force, whether in-house sales representatives or third-party commercial partners, must possess an up-to-date understanding of industry trends and products, as well as promotion and communication skills.
Therefore, our sales and marketing force, whether in-house sales representatives or third-party commercial partners, must possess an up-to-date understanding of industry trends and products, as well as promotion and communication skills. 22 While we will continue to promote our brands to remain competitive, we may not be successful in doing so.
In fiscal year 2022, we began the implementation of our global SAP enterprise resource planning (ERP) system at our U.S. locations, which includes upgrades to many of our existing operating and financial systems. Such an implementation is a major undertaking, both financially and from a management and personnel perspective.
In fiscal year 2024, we implemented our SAP enterprise resource planning (ERP) system for our U.S. food safety business and at a manufacturing facility in Wales. The first phase of this implementation also included upgrades to many of our existing operating and financial systems. Such an implementation is a major undertaking, both financially and from a management and personnel perspective.
Some or, with respect to certain covenants, all of these agreements include financial covenants based on leverage and cash interest expense coverage ratios and limitations to make certain investments, declare or pay dividends or distributions on capital stock, redeem or repurchase capital stock and certain debt obligations, incur liens, incur indebtedness, or merge, make certain acquisitions or sales of assets.
Our Term Loan, comprised of our Revolving Facility and Term Loan Facility, contains customary affirmative and negative covenants, including financial covenants based on leverage and cash interest expense coverage ratios and limitations on our ability to make certain investments, declare or pay dividends or distributions on capital stock, redeem or repurchase capital stock and certain debt obligations, incur liens, incur indebtedness, or merge, make certain acquisitions or sales of assets.
In fiscal 2023, sales to customers outside of the U.S. accounted for 48.4% of our total revenue.
In fiscal year 2024, sales to customers outside of the U.S. accounted for 49.7% of our total revenue, compared to 48.4% and 39.7% of our total revenues in fiscal year 2023 and 2022, respectively.
The Senior Notes governing our senior unsecured indebtedness also include customary events of default.
Our outstanding Senior Notes also include customary events of default.
If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights domestically or in foreign jurisdictions, we could incur substantial costs and our business, including our business prospects, could be substantially harmed. From time to time, we have received notices alleging that our products infringe third-party proprietary rights.
If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights domestically or in foreign jurisdictions, we could incur substantial costs and our business, including our business prospects, could be substantially harmed. Certain of our products could be the subject of patent infringement challenges.
The failure to do so could have a material adverse effect on our business, financial condition or results of operations.
The continued successful integration of the 3M Food Safety business cannot be assured. The failure to do so could have a material adverse effect on our business, financial condition and results of operations.
A violation of any of these covenants or agreements could result in a default under these contracts, which could permit the lenders or note holders, as applicable, to accelerate repayment of any borrowings or notes outstanding at that time and levy on the collateral granted in connection with the Senior Notes.
A violation of any of these credit-related covenants or agreements could result in a default under one or more of these agreements, which could permit the lenders or note holders, as applicable, to accelerate repayment of any borrowings or notes outstanding at that time, levy on any collateral securing such indebtedness, and/or taking other actions designed to protect our ability to repay our indebtedness.
Failure to respond timely to these fluctuations, or failure to effectively hedge these risks when possible, could lead to a material adverse impact on our results of operations and financial condition. We cannot assure investors that we will make dividend payments in the future.
Failure to respond timely to these fluctuations, or failure to effectively hedge these risks when possible, could lead to a material adverse impact on our results of operations and financial condition. We have no current plans to start paying dividends in the near-term.
While these risks or the impact of these risks are difficult to predict, any one or more of them could adversely affect our business, results of operations and reputation. We are subject to taxation in a number of jurisdictions. Accordingly, our effective tax rate is impacted by changes in the mix among earnings in countries with differing statutory tax rates.
We are subject to taxation in a number of jurisdictions. Accordingly, our effective tax rate is impacted by changes in the mix among earnings in countries with differing statutory tax rates.
We cannot assure that we will be able to retain our existing personnel or attract additional qualified persons when required and on acceptable terms. Our business may be subject to product or service liability claims. The manufacturing and distribution of our products or performance of our services involves an inherent risk of liability claims being asserted against us.
Additionally, we could miss opportunities for growth and efficiencies. We cannot assure that we will be able to retain our existing personnel or attract additional qualified persons when required and on acceptable terms. Our business may be subject to product or service liability claims.
If we are unsuccessful in our efforts to attract and retain qualified personnel, our business, results of operations, financial condition, cash flows and competitive position could be adversely affected. Additionally, we could miss opportunities for growth and efficiencies.
We compete with employers in various industries for sales, manufacturing, technical services and other personnel, and this competition to hire may increase and the availability of qualified personnel may be reduced. If we are unsuccessful in our efforts to attract and retain qualified personnel, our business, results of operations, financial condition, cash flows and competitive position could be adversely affected.
Regardless of whether we are ultimately determined to be liable or our products are determined to be defective, we could incur significant legal expenses not covered by insurance. In addition, product or service liability litigation could damage our reputation and impair our ability to market our products and services, regardless of the outcome.
The manufacturing and distribution of our products and the performance of our services involves an inherent risk of liability claims being asserted against us. Regardless of whether we are ultimately determined to be liable or our products are determined to be defective, we could incur significant legal expenses not covered by insurance.
Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, financial condition and results of operations. Our success is highly dependent on our ability to obtain protection for the intellectual property used in our products; these products could be the subject of patent infringement challenges.
Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, financial condition and results of operations. Our business strategy is dependent on successfully promoting internal growth and identifying and integrating acquisitions.
We have not historically paid dividends to our shareholders, and there is no assurance that we will declare and pay, or have the ability to declare and pay, any dividends on our common stock in the future. 26 Certain shareholders could attempt to influence changes within Neogen, which could adversely affect our operations, financial condition and the value of our common stock.
We have not historically paid dividends to our shareholders, and there is no assurance that we will declare and pay, or have the ability to declare and pay, any dividends on our common stock in the future. 26 OTHER RISK FACTORS RELATING TO OUR BUSINESS Our success is highly dependent on our ability to obtain protection for the intellectual property used in our products.
The available capacity under our Revolving Facility could be limited by our covenant ratios under certain conditions.
Any such event would materially and adversely affect our ability to operate our business and our results of operations and financial condition. The available capacity under our Revolving Facility could be limited by our covenant ratios under certain conditions.
The material weaknesses did not result in any material identified misstatements to the consolidated financial statements, and there were no changes to previously issued financial results. We are actively developing a remediation plan designed to address these material weaknesses, however, we cannot guarantee that these steps will be sufficient or that we will not have material weaknesses in the future.
For the remaining material weaknesses related to ineffective information technology general controls and our period-end invoice accrual procedures, we continue to execute a remediation plan designed to address the material weaknesses, however, we cannot guarantee that these steps will be sufficient or that we will not have material weaknesses in the future.
Changes in domestic and foreign governmental laws, regulations and policies, changes in statutory tax rates and laws, and unanticipated outcomes with respect to tax audits could adversely affect our business, profitability and reputation.
While these risks and the impact of these risks are difficult to predict, any one or more of them could adversely affect our business, results of operations and reputation. Differences in and changes to tax rates in the jurisdictions in which we operate and unanticipated outcomes with respect to tax audits could adversely affect our business, profitability and reputation.
Removed
On September 1, 2022, Neogen, 3M, and Neogen Food Safety Corporation, a wholly-owned subsidiary of 3M created to carve out 3M’s FSD, closed on the Transaction combining 3M’s FSD with Neogen in a Reverse Morris Trust transaction and Neogen Food Safety Corporation became a wholly owned subsidiary of Neogen.
Added
During the time period ending three years after the date of the distribution, Neogen Food Safety Corporation and Neogen also will be subject to certain restrictions relating to the SpinCo Business in Switzerland.
Removed
Following the Transaction, pre-merger Neogen Food Safety Corporation stockholders owned, in the aggregate, approximately 50.1% of the issued and outstanding shares of Neogen common stock, and pre-merger Neogen shareholders owned, in the aggregate, approximately 49.9% of the issued and outstanding shares of Neogen common stock.
Added
If we are unable to successfully manage the risks associated with expanding our global business or adequately manage operational risks of our existing international operations, these risks could have a material adverse effect on our growth strategy into new geographical markets, reputation, business, results of operations, financial condition and cash flows.
Removed
In addition, we have a network of third-party commercial partners that we use to sell or distribute our products. 22 While we will continue to promote our brands to remain competitive, we may not be successful in doing so.
Added
The material weaknesses did not result in any material identified misstatements to the consolidated financial statements, and there were no changes to previously issued financial results. As of May 31, 2024, management believes our remediation efforts have been effective and that one of our previous material weaknesses in our internal control over financial reporting has been remediated.
Removed
Our Term Loan, comprised of our Revolving Facility and Term Loan Facility, contain customary affirmative and negative covenants.
Added
Specifically, management believes the operation of management review controls related to the accounting, valuation and purchase price allocation of the Company’s acquisitions and associated goodwill is effective.
Removed
A default or acceleration under the Senior Notes governing the senior unsecured indebtedness could result in defaults under our other debt agreements and could adversely affect our ability to operate our business, our subsidiaries' ability to operate their respective businesses and our results of operations and financial condition.
Added
Even if we are able to pass through increased shipping costs to our customers through increased pricing, it may impact the demand for many of our products, which could adversely affect our profitability. Our dependence on suppliers could limit our ability to sell certain products or negatively affect our operating results.
Removed
Our shareholders may from time-to-time seek to acquire a controlling stake in Neogen, engage in proxy solicitations, advance shareholder proposals or otherwise attempt to effect changes.
Added
In addition, product or service liability litigation could damage our reputation and impair our ability to market our products and services, regardless of the outcome. Litigation also could impair our ability to retain product liability insurance or make our insurance more expensive.
Removed
Campaigns by shareholders to effect changes at publicly-traded companies are sometimes led by investors seeking to increase short-term shareholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company.
Removed
Responding to proxy contests and other actions by activist shareholders can be costly and time-consuming, and could disrupt our operations and divert the attention of our Board of Directors and senior management from the pursuit of our business strategies. These actions could adversely affect our operations, financial condition and the value of our common stock.
Removed
GENERAL RISK FACTORS We have identified a material weakness in our internal control over financial reporting, and if we are unable to improve our internal controls, our financial results may not be accurately reported.
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We have not executed long-term employment agreements with any of these employees and do not expect to do so in the foreseeable future. We compete with employers in various industries for sales, manufacturing, technical services or other personnel, and this competition to hire may increase and the availability of qualified personnel may be reduced.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES Principal Manufacturing, Distribution and Administrative locations: Location Owned Leased Segment U.S. 7 7 Corporate, Food Safety, Animal Safety Canada 1 0 Animal Safety U.K. 4 3 Food Safety Ireland 1 0 Food Safety Italy 0 1 Food Safety UAE 0 1 Food Safety Brazil 2 0 Food Safety Mexico 0 2 Food Safety Guatemala 0 1 Food Safety Argentina 0 1 Food Safety Uruguay 0 1 Food Safety Chile 0 1 Food Safety Colombia 0 1 Food Safety China 0 1 Food Safety India 1 1 Food Safety Korea 0 1 Food Safety Thailand 0 1 Food Safety Australia 2 0 Animal Safety Total 18 23 Our corporate headquarters are located in Lansing, Michigan, with administrative, sales, manufacturing, and warehousing in other locations domestically and globally.
Biggest changePROPERTIES Principal Manufacturing, Distribution and Administrative locations: Segment Owned Leased Location Food Safety 21 24 Corporate, United States, and Other International Locations (1) Animal Safety 8 6 United States, Canada, and Australia Total 29 30 (1) International locations include properties in Canada, Europe, Central and South America, Asia and the Middle East Our corporate headquarters are located in Lansing, Michigan, with administrative, sales, manufacturing, and warehousing in other locations domestically and globally.
These properties are in good condition, well-maintained, and generally suitable and adequate to support our business. For leased properties, we do not anticipate difficulty in renewing existing leases or in finding alternative facilities.
These properties are in good condition, well-maintained, 31 and generally suitable and adequate to support our business. For leased properties, we do not anticipate difficulty in renewing existing leases or in finding alternative facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. See Note 7. “Commitments and Contingencies” to the consolidated financial statements included in Item 15. “Exhibits and Financial Statement Schedules” of this Report for discussion of loss contingencies. ITEM 4.
Biggest changeHowever, the litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. See “Risk Factors” in Item 1A above for a description of certain related risks. See Note 10. “Commitments and Contingencies” to the consolidated financial statements included in Item 15.
Removed
MINE SAFETY DISCLOSURES — NOT APPLICABLE 30 PART II
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ITEM 3. LEGAL PROCEEDINGS We are routinely involved in legal proceedings and litigation arising in the ordinary course of our business. In the opinion of our management, the outcome of such proceedings and litigation currently pending will not materially affect our consolidated operations, cash flows, or financial condition.
Added
“Exhibits and Financial Statement Schedules” of this Report for discussion of loss contingencies. ITEM 4. MINE SAFETY DISCLOSURES — NOT APPLICABLE 32 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Neogen Common Stock is traded on the NASDAQ Global Select Market under the symbol NEOG. Holders As of June 30, 2023, there were 580 stockholders of record of our common stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Neogen Common Stock is traded on the NASDAQ Global Select Market under the symbol NEOG. Holders As of June 30, 2024, there were 532 stockholders of record of our common stock.
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Securities Authorized for Issuance under Equity Compensation Plans The information regarding our securities authorized for issuance under equity compensation plans is incorporated by reference from our Proxy Statement. ITEM 6. RESERVED 31
Added
Issuer Purchases of Equity Securities The following is a summary of share repurchase activity during the fiscal quarter ended May 31, 2024: Period (a) Shares Purchased (b) Average Price Paid per Share (c) Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs March 2024 — — — 5,900,000 April 2024 — — — 5,900,000 May 2024 — — — 5,900,000 Total — — — 5,900,000 In October 2018, the Company’s Board of Directors authorized a program to purchase, subject to market conditions, up to 6,000,000 shares of the Company’s common stock.
Added
The program does not have any scheduled expiration date. The Company did not repurchase any shares pursuant to this repurchase program during the fourth quarter of fiscal 2024. As of May 31, 2024, a total of 5,900,000 shares of common stock remained available for repurchase under this program. ITEM 6. RESERVED 33

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeReconciliation between net income and EBITDA and Adjusted EBITDA is as follows: Year ended May 31 (in thousands) 2023 2022 2021 Net (Loss) Income $ (22,870 ) $ 48,307 $ 60,882 Net income margin % (2.8 )% 9.2 % 13.0 % Provision for income taxes 828 11,900 14,386 Depreciation and amortization 88,377 23,694 21,041 Interest expense (income), net 52,795 (1,267 ) (1,614 ) EBITDA $ 119,130 $ 82,634 $ 94,695 Share-based compensation 10,177 7,154 6,437 FX transaction loss (gain) on loan revaluation (1) 5,226 — — Certain transaction fees and integration costs 59,812 25,581 3,085 Contingent consideration adjustments (300 ) — — Restructuring 475 — — Loss on sale of minority interest 1,516 — — Loss on investment 500 — — Impairment and scrap of discontinued product lines (2) 5,639 — — Inventory step-up charge 3,245 — — Adjusted EBITDA $ 205,420 $ 115,369 $ 104,217 Adjusted EBITDA margin % 25.0 % 21.9 % 22.2 % (1) Net foreign currency transaction loss (gain) associated with the revaluation of non-functional currency intercompany loans established in connection with FSD transaction. 41 (2) Expenses associated with intangible asset impairments and inventory scrap amounts related to certain discontinued product lines.
Biggest changeFor each of these non-GAAP financial measures below, we are providing a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure. 40 Reconciliation between net (loss) income and EBITDA and Adjusted EBITDA is as follows: Year Ended May 31, (in thousands) 2024 2023 2022 Net (Loss) Income $ (9,421 ) $ (22,870 ) $ 48,307 Net (loss) income margin % (1.0 )% (2.8 )% 9.2 % Income tax (benefit) expense (4,884 ) 828 11,900 Depreciation and amortization 116,717 88,377 23,694 Interest expense (income), net 67,032 52,795 (1,267 ) EBITDA 169,444 119,130 82,634 Share-based compensation 13,768 10,177 7,154 FX transaction loss on loan revaluation (1) 2,082 5,226 — Certain transaction fees and integration costs (2) 15,521 59,812 25,581 Restructuring (3) 3,513 475 — Contingent consideration adjustments 300 (300 ) — ERP Expense (4) 7,467 — — Discontinued product line expense (5) 994 5,639 — (Recovery) loss on sale of minority interest (103 ) 1,516 — Loss on investment — 500 — Inventory step-up charge — 3,245 — Other 178 — — Adjusted EBITDA $ 213,164 $ 205,420 $ 115,369 Adjusted EBITDA margin % 23.1 % 25.0 % 21.9 % (1) Net foreign currency transaction loss associated with the revaluation of non-functional currency intercompany loans established in connection with the 3M Food Safety transaction and other non-hedged foreign currency revaluation resulting from 3M agreements.
Although we have no operations in or direct exposure to Russia, Belarus and Ukraine, we have experienced intermittent shortages in materials and increased costs for transportation, energy and raw materials due, in part, to the negative impact of the Russia-Ukraine military conflict, which began in February 2022, on the global economy.
Although we have no operations in or direct exposure to Russia, Belarus or Ukraine, we have experienced intermittent shortages in materials and increased costs for transportation, energy and raw materials due, in part, to the negative impact of the Russia-Ukraine military conflict, which began in February 2022, on the global economy.
Management’s ability to grow the business in the future depends upon our ability to successfully implement various strategies, including: • developing, manufacturing and marketing new products with new features and capabilities, and having those new products successfully accepted in the marketplace; • expanding our markets by fostering increased use of our products by customers; • maintaining or increasing gross and net operating margins in changing cost environments; • strengthening operations and sales and marketing activities in geographies outside of the U.S.; • developing and implementing new technology development strategies; and • identifying and completing acquisitions that enhance existing product categories or create new products or services, and successfully integrating completed acquisitions, including the FSD transaction.
Management’s ability to grow the business and its profitability in the future depends upon our ability to successfully implement various strategies, including: • developing, manufacturing and marketing new products with new features and capabilities, and having those new products successfully accepted in the marketplace; • expanding our markets by fostering increased use of our products by customers; • maintaining or increasing gross and net operating margins in changing cost environments; • strengthening operations and sales and marketing activities in geographies outside of the U.S.; • developing and implementing new technology development strategies; and • identifying and completing acquisitions that enhance existing product categories or creating new products or services, and successfully integrating completed acquisitions, including the FSD transaction.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended May 31, 2022 for discussion of the Results of Operations, Segment Results of Operations, and Financial Condition and Liquidity for the year ended May 31, 2022 compared to the year ended May 31, 2021, which is incorporated by reference herein.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended May 31, 2023 for discussion of the Results of Operations, Segment Results of Operations, and Financial Condition and Liquidity for the year ended May 31, 2023 compared to the year ended May 31, 2022, which is incorporated by reference herein.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Earnings per Share are not recognized terms under GAAP and should not be considered in isolation or as a substitute for, or superior to, net income (loss), operating income, cash flow from operating activities or other measures of financial performance.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under GAAP and should not be considered in isolation or as a substitute for, or superior to, net (loss) income, operating income, cash flow from operating activities or other measures of financial performance.
These non-GAAP financial measures are included in this report because management believes that they provide investors with additional useful information to measure the performance of Neogen, and because these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties as common performance measures to compare results or estimate valuations across companies in Neogen’s industries.
These non-GAAP financial measures are included in this report because management believes that they provide investors with additional useful information to measure the performance of the Company, and because these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties as common performance measures to compare results or estimate valuations across companies in industries the Company operates in.
The use of the terms EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income and Adjusted Earnings per Share may not be comparable to similarly titled measures used by other companies or persons due to potential differences in the method of calculation. These non-GAAP financial measures have limitations as analytical tools.
The use of the terms EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin may not be comparable to similarly titled measures used by other companies or persons due to potential differences in the method of calculation. These non-GAAP financial measures have limitations as analytical tools.
In addition to the 3M transaction described above, our future cash generation and borrowing capacity may not be sufficient to meet cash requirements to fund the operating business, repay debt obligations, construct new manufacturing facilities, commercialize products currently under development or execute our future plans to acquire additional businesses, technology and products that fit within our strategic plan.
Our future cash generation and borrowing capacity may not be sufficient to meet cash requirements to fund the operating business, repay debt obligations, construct new manufacturing facilities, commercialize products currently under development or execute our future plans to acquire additional businesses, technology and products that fit within our strategic plan.
Fair value of each reporting unit is estimated based on a combination of discounted cash flows and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of each reporting unit.
Fair value of the reporting unit is estimated based on a combination of an income-based approach consisting of a discounted cash flows analysis and the use of a market-based approach consisting of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of the reporting unit.
These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Adjusted EBITDA increased $90.1 million in fiscal year 2023 compared to fiscal year 2022, primarily due to earnings generated from the 3M FSD business, which combined with Neogen on September 1, 2022. Expressed as a percentage of revenue, adjusted EBITDA was 25.0% in fiscal year 2023 compared to 21.9% in fiscal year 2022.
Adjusted EBITDA increased $7.7 million in fiscal year 2024 compared to fiscal year 2023, primarily due to earnings generated from the 3M FSD business, which combined with Neogen on September 1, 2022. Expressed as a percentage of revenue, adjusted EBITDA was 23.1% in fiscal year 2024 compared to 25.0% in fiscal year 2023.
Net accounts receivable balances were $153.3 million as of May 31, 2023 compared to $99.7 million as of May 31, 2022. Days’ sales outstanding, a measurement of the time it takes to collect receivables, for the legacy business was 57 days as of May 31, 2023, compared to 62 days as of May 31, 2022.
Net accounts receivable balances were $173.0 million as of May 31, 2024 compared to $153.3 million as of May 31, 2023. Days’ sales outstanding, a measurement of the time it takes to collect receivables, for the business was 61 days as of May 31, 2024, compared to 57 days for the legacy business as of May 31, 2023.
Sales and Marketing: Sales and marketing expenses were $141.2 million during fiscal year 2023, compared to $84.6 million during the prior fiscal year.
Sales and Marketing: Sales and marketing expenses were $182.9 million during fiscal year 2024, compared to $141.2 million during the prior fiscal year.
Accordingly, we may be required, or may choose, to issue additional equity securities or enter into other financing arrangements for a portion of our future capital needs. There is no guarantee that we will be successful in issuing additional equity securities or entering into other financing arrangements.
Accordingly, we may be required, or may choose, to issue additional equity securities or enter into other financing arrangements for a portion of our future capital needs.
A reader should compensate for these limitations by relying primarily on the financial statements of Neogen and using these non-GAAP financial measures only as a supplement to evaluate Neogen’s performance. For each of these non-GAAP financial measures below, we are providing a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure.
A reader should compensate for these limitations by relying primarily on the financial statements of Neogen and using these non-GAAP financial measures only as a supplement to evaluate Neogen’s performance.
The following critical accounting estimates reflect management’s more significant judgments used in the preparation of the consolidated financial statements. 32 Income Taxes We account for income taxes using the asset and liability method.
Actual results may differ from these estimates under different assumptions or conditions. 43 The following critical accounting estimates reflect management’s more significant judgments used in the preparation of the consolidated financial statements. Income Taxes We account for income taxes using the asset and liability method.
We continue to make investments in our business and operating facilities. Our preliminary estimate for capital expenditures related to our legacy operations in fiscal 2024 is $30 to $40 million.
We continue to make investments in our business and operating facilities. Our estimate for capital expenditures in fiscal 2025 is $85 million.
EBITDA also forms the basis for the measurement of Adjusted EBITDA (discussed below). Adjusted EBITDA We define Adjusted EBITDA as EBITDA, adjusted for share-based compensation and certain transaction fees and expenses. We present Adjusted EBITDA because it provides an understanding of underlying business performance by excluding the following: • Share-based compensation .
EBITDA also forms the basis for the measurement of Adjusted EBITDA (discussed below). 39 Adjusted EBITDA We define Adjusted EBITDA as EBITDA, adjusted for share-based compensation and certain transaction fees and expenses.
We present Adjusted EBITDA margin as a performance measure to analyze the level of Adjusted EBITDA generated from total revenue.
We present Adjusted EBITDA margin as a performance measure to analyze the level of Adjusted EBITDA generated from total revenue. These non-GAAP financial measures are presented for informational purposes only.
The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of May 31, 2023 and May 31, 2022 are $1.1 million and $0.8 million, respectively. The increase in unrecognized tax benefits is primarily associated with the combined 3M FSD, including positions for transfer pricing and research and development credits.
The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of May 31, 2024 and May 31, 2023 are $2.7 million and $1.1 million, respectively. Increases in unrecognized tax benefits are primarily associated with transfer pricing, IRC Section 861 expense apportionment, and research and development credits.
Other expense resulting from foreign currency transactions was the result of changes in the value of foreign currencies relative to the U.S. dollar in countries in which we operate.
Other expense resulting from foreign currency transactions was the result of changes in the value of foreign currencies relative to the U.S. dollar in countries in which we operate. PROVISION FOR INCOME TAXES Income tax benefit during fiscal year 2024 was $4.9 million, compared to income tax expense of $0.8 million in the prior fiscal year.
Excluding the contribution of the Clean-Trace® line of general sanitation products and the pathogen test kit product line, both acquired from 3M FSD, organic sales in this category were flat for the full year.
Bacterial & General Sanitation – Revenue in this category increased 27% in fiscal 2024 compared to the prior fiscal year. Excluding the first quarter contribution of the Clean-Trace line of general sanitation products and the pathogen test kit product line, both acquired in the FSD transaction, revenue in this category increased 2% for the full year.
Culture Media & Other – Sales in this category increased 255% in fiscal 2023 compared to the prior fiscal year, driven primarily from revenues resulting from 3M FSD. Excluding sales of the Petrifilm indicator organism and sample handling product lines acquired in the Transaction, sales rose 7% for the year.
This increase was driven by growth of the acquired product lines for the remainder of the year. Indicator Testing, Culture Media & Other – Revenue in this category increased 25% in fiscal 2024 compared to the prior fiscal year, driven primarily from revenues resulting from FSD transaction.
In fiscal 2022, the Company had no debt outstanding. Interest income relates to earnings on our marketable securities portfolio. Higher yields on the portfolio were partially offset by lower balances in fiscal year 2023.
In the first quarter of fiscal 2023, the Company had no debt outstanding. Interest income relates to earnings on our marketable securities and money market account portfolio. Higher balances in money market portfolios with higher yields drove the increase in interest income during fiscal year 2024.
International Revenue Neogen’s international revenues were $398.4 million in fiscal year 2023, compared to $209.3 million in fiscal 2022, an increase of 90%. Revenues from 3M FSD drove the international sales increase.
International Revenue Neogen’s international revenues were $459.0 million in fiscal year 2024, compared to $398.4 million in fiscal 2023, an increase of 15%. The increase was primarily due to $63.8 million of international revenue from 3M FSD during the first quarter of fiscal 2024.
In local currency, revenue at Neogen Australasia increased 11% in fiscal 2023, led by increased sales of bovine genomic services. Service Revenue Service revenue, which consists primarily of genomics services to animal protein and companion animal markets, was $107.4 million in fiscal 2023, an increase of 5% over prior fiscal year sales of $102.5 million.
Service Revenue Service revenue, which consists primarily of genomics services provided to animal production and companion animal markets, was $102.4 million in fiscal 2024, a decrease of 5% over prior fiscal year revenue of $107.4 million.
CRITICAL ACCOUNTING ESTIMATES The discussion and analysis of our financial condition and results of operations are based on the consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States.
This includes approximately $55 million in capital expenditures related to the integration of the acquired 3M FSD products, the most significant portion of which is related to the construction of and equipment for our new manufacturing facility in Lansing, Michigan CRITICAL ACCOUNTING ESTIMATES The discussion and analysis of our financial condition and results of operations are based on the consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States.
Goodwill We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired. We periodically evaluate goodwill for impairment in accordance with the accounting guidance for goodwill and other indefinite-lived intangibles that are not amortized. We review our goodwill for impairment annually during the fourth quarter.
Goodwill We record goodwill when the purchase price of acquired businesses exceeds the value of their identifiable net tangible and intangible assets acquired. We review our goodwill for impairment annually during the fourth quarter of our fiscal year. In addition, we review goodwill for impairment whenever adverse events or changes in circumstances indicate a possible impairment.
Animal Care & Other – Sales of these products decreased 2% in fiscal 2023 compared to the prior fiscal year. Lower sales of vitamin injectables and veterinary antibiotics, primarily due to supply constraints, more than offset a 7% increase in sales of vaccines and biologics products and a 4% increase in sales of small animal supplements.
Animal Care & Other – Revenue of these products decreased 5% in fiscal 2024 compared to the prior fiscal year driven primarily by lower sales of small animal supplements and wound care products, due to supply constraints, and the discontinued Thyrokare product line. Higher sales of vitamin injectables products partially offset the decline.
Overall, the impact of inflation, the Russia-Ukraine military conflict and COVID-19 remains uncertain. We continue to evaluate the nature and extent to which these issues impact our business, including supply chain, labor availability and attrition, consolidated results of operations, financial condition and liquidity. We expect these issues to continue to impact us throughout fiscal year 2024.
We continue to evaluate the nature and extent to which these issues impact our business, including consolidated results of operations, financial condition and liquidity. We expect these issues to continue to impact us into fiscal year 2025. RESULTS OF OPERATIONS Historical Periods Refer to Part II - Item 7.
Excluding sales of the acquired allergen product line from 3M FSD, sales in this category decreased 3% due to a large decline in sales of drug residue test kits that were largely discontinued in fiscal 2023. Bacterial & General Sanitation – Sales in this category increased 185% in fiscal 2023 compared to the prior fiscal year.
Excluding first quarter revenue of the acquired allergen product line from 3M FSD, revenue in this category decreased 3% due to a decline in sales of natural toxin test kits, caused by product availability issues and prior year sales of discontinued dairy drug residue test kits. These declines were partially offset by growth in our line of allergen test kits.
The increase in receivables is primarily attributable to the recording of FSD customer balances, currently managed by 3M as a transition service. As part of transition services agreements between the Company and 3M, related to the merger of the Food Safety business, 3M is invoicing our customers for products that 3M is manufacturing and shipping on our behalf.
As part of transition services agreements between the Company and 3M, related to the merger of the Food Safety business, 3M invoiced our customers for products that 3M manufactured and shipped on our behalf through December 2023.
Our European operations and customer base have been adversely impacted by the conflict. As the conflict continues or worsens, it may further impact our business, financial condition or results of operations during fiscal year 2024.
Our European operations and customer base have been negatively impacted by the conflict. Similarly, the military 34 conflict between Israel and Hamas has increased overall geopolitical tensions. As the respective conflicts continue or worsen, they may further impact our business, financial condition or results of operations in fiscal year 2025.
Adjusted Net Income increased $26.4 million during the twelve months ended May 31, 2023 due to the higher Adjusted EBITDA. 42 FUTURE OPERATING RESULTS Neogen Corporation’s future operating results involve a number of risks and uncertainties. Actual events or results may differ materially from those discussed in this report.
The lower Adjusted EBITDA margin was driven primarily by higher operating expenses compared to the prior-year periods, reflecting additions to accommodate the integration of the 3M FSD. 41 FUTURE OPERATING RESULTS Neogen Corporation’s future operating results involve a number of risks and uncertainties. Actual events or results may differ materially from those discussed in this report.
If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to the excess carrying value over fair value.
If the estimated fair value of the reporting unit exceeds its carrying value, the goodwill is not impaired and no analysis is required.
Rodent Control, Insect Control & Disinfectants – Sales of products in this category sold through our Food Safety operations increased 11% in fiscal 2023 compared to the prior fiscal year. Excluding the November 2021 acquisition of Delf, the increase was 4%, led by higher sales of cleaners and disinfectants in China.
Rodent Control, Insect Control & Disinfectants – Revenue of products in this category sold through our Food Safety operations increased 8% in fiscal 2024 compared to the prior fiscal year. Increased Cleaner & Disinfectants sales in Europe and a government tender for insect control products in Brazil contributed to the overall growth.
This was partially offset by purchases of property, equipment and non-current intangible assets of $65.8 million. Cash flow for financing activities was $118.1 million during the fiscal year ended 2023, which was primarily the result of the Company paying down $100 million of the $1 billion in debt taken on to enact the FSD transaction.
Comparing fiscal year 2024 to fiscal 2023, the net inflow in cash from financing activities was primarily the result of the Company paying down $100 million of the $1 billion in debt incurred in connection with the FSD transaction in fiscal year 2023.
Additionally, we expect to spend approximately $30 million over the next two fiscal years to implement a new enterprise resource planning solution. NEW ACCOUNTING PRONOUNCEMENTS See discussion of any New Accounting Pronouncements in Note 1 to consolidated financial statements. 44
NEW ACCOUNTING PRONOUNCEMENTS See discussion of any New Accounting Pronouncements in Note 1 to consolidated financial statements.
The determination of our reporting units and impairment indicators also require us to make significant judgments. As a result of our test in the fourth quarter of fiscal year 2023, we determined that the fair value of our reporting units exceeded their respective carrying values.
We conducted the impairment analysis in the fourth quarter of fiscal year 2024 and concluded that the fair value of our reporting units exceeded their respective carrying values, resulting in no impairment in fiscal year 2024. Certain assumptions used by us in our impairment assessment for the food safety reporting unit are sensitive in nature.
PROVISION FOR INCOME TAXES Income tax expense during fiscal year 2023 was $0.8 million, compared to $11.9 million in the prior fiscal year, primarily resulting from the additional pre-tax loss due to the 3M FSD acquisition, share-based compensation, and foreign rate differential. This was offset primarily by an increase in GILTI income and nondeductible transaction costs.
The net tax benefit in the current fiscal year was primarily related to pre-tax losses due to amortization expense and interest expense resulting from the FSD transaction. In the prior fiscal year, pre-tax loss due to the FSD transaction was offset primarily by nondeductible transaction costs.
Rodent Control, Insect Control & Disinfectants – Sales in this category increased 5% in fiscal 2023, compared to the prior fiscal year. Cleaner and disinfectants sales rose 11% on new business earned, insect control product sales increased 6%, and rodenticide revenues increased 1%, each compared to the prior year.
Rodent Control, Insect Control & Disinfectants – Revenue in this category increased 1% in fiscal 2024, compared to the prior fiscal year, driven with higher sales of insect control products, partially offset by flat sales of rodent control products and cleaners and disinfectants.
Contractual Obligations As of May 31, 2023, we have the following contractual obligations due by period: Less than More than (dollars in thousands) Total 1 year 1-3 years 4-5 years 5 years Long-Term Debt $ 900,000 $ — $ — $ 550,000 $ 350,000 Interest obligations 351,649 69,162 125,956 92,047 64,484 Operating Leases 13,895 3,542 5,739 2,729 1,885 Purchase Obligations (1) 100,148 95,620 4,411 117 — $ 1,365,692 $ 168,324 $ 136,106 $ 644,893 $ 416,369 (1) Purchase obligations are primarily purchase orders for future inventory and capital equipment purchases.
Contractual Obligations As of May 31, 2024, we have the following contractual obligations due by period: Less than More than (dollars in thousands) Total 1 year 1-3 years 4-5 years 5 years Debt $ 902,350 $ 2,350 $ 34,063 $ 515,937 $ 350,000 Interest obligations 302,941 72,233 133,321 63,091 34,296 Operating Leases 18,022 5,263 8,238 3,515 1,006 Purchase Obligations (1) 112,641 110,341 2,300 — — $ 1,335,954 $ 190,187 $ 177,922 $ 582,543 $ 385,302 (1) Purchase obligations are primarily purchase orders for future inventory and capital equipment purchases.
While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. TRENDS AND UNCERTAINTIES During fiscal 2023, we experienced higher than normal input cost inflation, including increases in certain raw materials, labor costs and supply chain pressure that negatively impacted operating results.
While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. COMPANY OVERVIEW Neogen Corporation and subsidiaries develop, manufacture and market a diverse line of products and services dedicated to food and animal safety.
Research and Development: Research and development expense was $26.0 million in fiscal year 2023, compared to $17.0 million during the prior fiscal year. The increase was primarily the result of $8.4 million of ongoing costs associated with the conveying 3M FSD employees.
For the Animal Safety segment, the decrease was driven by lower impairment expenses associated with discontinued product lines. Research and Development: Research and development expense was $22.5 million in fiscal year 2024, compared to $26.0 million during the prior fiscal year.
Pricing actions taken during fiscal 2022 and 2023 mitigated some, but not all, of the inflationary pressures on the business. Ongoing inflation also could have an impact on our customer’s purchasing decisions and order patterns. We estimate inflation will continue to affect us in fiscal year 2024, although at a decreasing rate compared to the prior two fiscal years.
The impact of inflation continued to affect us throughout fiscal year 2024, although at a continually decreasing rate compared to fiscal years 2022 and 2023.
The increase was primarily driven by growth in the U.S. beef and companion animal markets for genomics testing and higher sales of our Neogen Analytics software as a service (SaaS) product.
The decrease was primarily driven by customer attrition in the poultry market and a decrease in revenue in domestic porcine genomics testing, partially offset by strength in genomics testing in the U.K. and Australia, and new business gained with our Neogen Analytics software as a service.
(2) Expenses associated with intangible asset impairments and inventory scrap amounts related to certain discontinued product lines. (3) Income tax benefit associated with non-deductible transaction costs that were recognized as expense in prior periods. (4) Tax effect of adjustments is calculated using projected effective tax rates for each applicable item.
(2) Includes costs associated with the 3M transaction, including various transition agreements. (3) Includes costs associated with consolidation of U.S. genomics labs. (4) Expenses related to ERP implementation. (5) Expenses associated with intangible asset impairments and inventory scrap amounts related to certain discontinued product lines.
Genomics Services – Sales of genomics services sold through our Food Safety operations increased 1% in fiscal 2023 compared to the prior fiscal year, with increases in beef business in Brazil and the U.K. partially offset by a decline in sample volumes in China, as the first half of the fiscal year was negatively impacted by COVID-19 shutdowns.
Genomics Services – Revenue of genomics services sold through our Food Safety operations increased 8% in fiscal 2024 compared to the prior fiscal year.
Veterinary Instruments & Disposables – Sales in this category were flat in fiscal 2023 compared to the prior fiscal year, as significant increases in cohesive wrap business won in the second half of the year were offset by lower sales of veterinary instruments, reflecting difficult comparisons to large stocking orders of needles and syringes in the prior year from new business earned in that period.
Veterinary Instruments & Disposables – Revenue in this category increased 3% in fiscal 2024 compared to the prior fiscal year driven by higher sales of detectable needles and disposable syringes.
Removed
While the impact of the COVID-19 global pandemic was more modest in fiscal 2023, it continued to impact our business operations and financial results, particularly in the first half of the fiscal year in Asia. A number of our product lines were negatively impacted due to vendor disruptions, border closures, shipping issues and labor shortages.
Added
Our Food Safety segment consists primarily of diagnostic test kits and complementary products (e.g., culture media) sold to food producers and processors to detect dangerous and/or unintended substances in human food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, ruminant by-products, meat speciation, drug residues, pesticide residues and general sanitation concerns.
Removed
Broadly speaking, many of our markets have recovered or are recovering from the pandemic, as supply chain difficulties and shipping costs have decreased. A renewed outbreak of COVID-19 could result in further uncertainty and business disruptions. However, the current trend is positive and negative impacts appear to be moderating.
Added
The majority of the diagnostic test kits are disposable, single-use, immunoassay and DNA detection products that rely on proprietary antibodies and RNA and DNA testing methodologies to produce rapid and accurate test results.
Removed
As of May 31, 2023, the Company has approximately $153 million of undistributed earnings in its foreign subsidiaries. Approximately $41 million of these earnings are no longer considered permanently reinvested. The incremental tax cost to repatriate these earnings to the U.S. is immaterial.
Added
Our expanding line of food safety products also includes genomics-based diagnostic technology, and advanced software systems that help testers to objectively analyze and store their results and perform analysis on the results from multiple locations over extended periods.
Removed
The Company has not provided deferred taxes on approximately $112 million of undistributed earnings from non-U.S. subsidiaries as of May 31, 2023 which are indefinitely reinvested in operations. Based on historical experience, as well as management’s future plans, earnings from these subsidiaries will continue to be re-invested indefinitely for future expansion and working capital needs.
Added
Neogen’s Animal Safety segment is engaged in the development, manufacture, marketing and distribution of veterinary instruments, pharmaceuticals, vaccines, topicals, parasiticides, diagnostic products, rodent control products, cleaners, disinfectants, insect control products and genomics testing services for the worldwide animal safety market. The majority of these consumable products are marketed through veterinarians, retailers, livestock producers and animal health product distributors.
Removed
On an annual basis, we evaluate the current business environment and whether any new events or other external changes might require future evaluation of the decision to indefinitely re-invest these foreign earnings. It is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.
Added
TRENDS AND UNCERTAINTIES In prior years, production was negatively impacted by broad supply chain challenges and labor market disruptions. Additionally, input cost inflation, including increases in certain raw materials, negatively impacted operating results. In fiscal 2023, these negative impacts steadily improved throughout the year.
Removed
Additionally, the company has elected to treat Global Intangible Low Tax Income (“GILTI”), as a period cost, and therefore, has not recognized deferred taxes for basis differences that may reverse as GILTI tax in future years. Business Combinations and Customer Relationships Intangibles We utilize the acquisition method of accounting for business combinations.
Added
In fiscal 2024, despite a slowing of inflation rates, there remains economic headwinds of softening consumer demand and higher interest rates, coupled with ongoing geopolitical tension in certain regions. Interest rates have risen sharply, particularly in fiscal 2023, as a way to combat inflation. This, subsequently, increased our borrowing costs and raised the overall cost of capital.
Removed
This method requires, among other things, that results of operations of acquired companies are included in Neogen’s results of operations beginning on the respective acquisition dates and that assets acquired and liabilities assumed are recognized at fair value as of the acquisition date.
Added
While the frequent increases have largely subsided, the overall interest rate is significantly higher than in recent years, which increases interest expense on the unhedged portion of our Term Loan. In response to the historically high inflationary environment, we took pricing actions to mitigate the impacts on the business in the prior two fiscal years.
Removed
Any excess of the fair value of consideration transferred over the fair values of the net assets acquired is recognized as goodwill.
Added
Beginning in the second quarter of fiscal year 2024, we implemented a new enterprise resource planning system and began the exit of our transition distribution agreements with 3M, which led to certain shipment delays and an elevated backlog of open orders, specifically in the Food Safety segment.
Removed
As described in Note 3 "Business Combinations" to the consolidated financial statements, on September 1, 2022, we completed a transaction combining 3M’s food safety division with Neogen in a Reverse Morris Trust transaction for consideration of approximately $3.2 billion, which resulted in recording of a customer relationships intangible assets valued at $1.17 billion.
Added
As of the end of fiscal year 2024, order fulfillment issues have largely been resolved, and order fulfillment rates have improved to meet the needs of our customers in this improving end-market environment.
Removed
We determined the fair value of the acquired customer relationships intangible assets by applying the multi-period excess earnings method, which involved the use of significant estimates and assumptions related to forecasted revenue growth rate and customer attrition rate.
Added
Executive Overview Year Ended May 31, (in thousands) 2024 2023 Increase / (Decrease) Total Revenues $ 924,222 $ 822,447 $ 101,775 Cost of Revenues 460,322 416,492 43,830 Gross Profit 463,900 405,955 57,945 Operating Expenses Sales and marketing 182,872 141,222 41,650 General and administrative 199,889 201,179 (1,290 ) Research and development 22,476 26,039 (3,563 ) Total Operating Expenses 405,237 368,440 36,797 Operating Income 58,663 37,515 21,148 Other (Expense) Income Interest income 6,362 3,166 3,196 Interest expense (73,394 ) (55,961 ) (17,433 ) Other, net (5,936 ) (6,762 ) 826 Total Other Expense (72,968 ) (59,557 ) (13,411 ) Loss Before Taxes (14,305 ) (22,042 ) 7,737 Income Tax (Benefit) Expense (4,884 ) 828 (5,712 ) Net Loss $ (9,421 ) $ (22,870 ) $ 13,449 35 REVENUE Year Ended May 31, (in thousands) 2024 2023 Increase / (Decrease) % Change Food Safety: Natural Toxins & Allergens $ 82,240 $ 82,567 $ (327 ) (0 )% Bacterial & General Sanitation 171,217 134,934 36,283 27 % Indicator Testing, Culture Media & Other 334,636 267,178 67,458 25 % Rodent Control, Insect Control & Disinfectants 42,965 39,655 3,310 8 % Genomics Services 24,283 22,463 1,820 8 % 655,341 546,797 108,544 20 % Animal Safety: Life Sciences 6,515 6,254 261 4 % Veterinary Instruments & Disposables 65,848 63,843 2,005 3 % Animal Care & Other 36,978 39,068 (2,090 ) (5 )% Rodent Control, Insect Control & Disinfectants 88,732 87,423 1,309 1 % Genomics Services 70,808 79,062 (8,254 ) (10 )% 268,881 275,650 (6,769 ) (2 )% Total Revenue, net $ 924,222 $ 822,447 $ 101,775 12 % Year Ended May 31, 2024 Compared to Year Ended May 31, 2023 Food Safety: Revenue for the Food Safety segment increased $108.5 million in fiscal year 2024 compared to fiscal year 2023.
Removed
Valuation specialists were used to develop and evaluate the appropriateness of the multi-period excess earnings method, our discount rates, our attrition rate and our fair value estimates using our cash flow projections.
Added
The increase included a $98.6 million benefit from acquisitions, a $10.1 million adverse impact due to currency, and $20.0 million of growth in the business. Natural Toxins & Allergens – Revenues in this category were relatively unchanged in fiscal 2024.
Removed
The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed 12 months from the acquisition date.
Added
Excluding first quarter revenue of acquired Petrifilm ® and sample handling product lines, revenue rose 2% for the year. Continued growth of the acquired product lines for the remainder of the year combined with higher sales of the Neogen Analytics software product more than offset a large non-recurring sale of culture media in fiscal year 2023.
Removed
Legal costs, due diligence costs, business valuation costs and all other business acquisition costs are expensed when incurred. 33 Our estimates of fair value are based on assumptions believed to be reasonable at that time. If we made different estimates or judgments, it could result in material differences in the fair values of the net assets acquired.
Added
Increased revenue to existing customers in Europe as well as new business in Brazil and China added to the overall growth during the year. 36 Animal Safety: Revenue for the Animal Safety segment decreased $6.8 million in fiscal year 2024 compared to fiscal year 2023.
Removed
In addition, we review goodwill for impairment whenever adverse events or changes in circumstances indicate a possible impairment. This review is performed at the reporting unit level, and involves a comparison of the fair value of the reporting unit with its carrying amount, including goodwill.
Added
The decrease included $0.7 million due to discontinued product lines, a $0.6 million adverse impact due to currency, and a $5.5 million decline in the business. Life Sciences – Revenue in this category increased 4% in fiscal 2024 compared to the prior fiscal year, driven by higher demand of substrate products from manufacturers of diagnostic tests.
Removed
These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting units, and appropriate discount and long-term growth rates. During fiscal year 2023, our business was organized into two reporting units: Food Safety and Animal Safety.
Added
Genomics Services – Revenue in this category decreased 10% in fiscal 2024 compared to the prior fiscal year. The decrease in this category was attributed to customer attrition in the poultry and porcine markets associated with a strategic shift in the business to focus primarily on large production animals.
Removed
As such, the annual impairment analysis resulted in no impairment in fiscal year 2023. 34 RESULTS OF OPERATIONS Historical Periods Refer to Part II - Item 7.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+2 added−0 removed2 unchanged
Biggest changeThe following table sets forth the potential loss in future earnings or fair values, resulting from hypothetical changes in relevant market rates or prices: Risk Category Hypothetical Change May 31, 2023 Impact (dollars in thousands) Foreign Currency — Revenue 10% Decrease in exchange rates $ 39,844 Earnings Foreign Currency — Hedges 10% Decrease in exchange rates 1,550 Fair Value Interest Income 10% Decrease in interest rates 434 Earnings Interest Expense 10% Increase in interest rates 2,125 Earnings ITEM 8.
Biggest changeAs of May 31, 2024 and when including our interest rate swap, approximately 33.3% of our total debt was at variable interest rates. 45 The following table sets forth the potential loss in future earnings or fair values, resulting from hypothetical changes in relevant market rates or prices: Risk Category Hypothetical Change May 31, 2024 Impact (dollars in thousands) Foreign Currency — Revenue 10% depreciation in exchange rates relative to USD $ (45,898 ) Revenue Foreign Currency — Hedges 10% depreciation in exchange rates relative to USD 5,076 Earnings Interest Income 75 basis point decrease in interest rates (728 ) Earnings Interest Expense 75 basis point increase in interest rates (2,250 ) Earnings These estimates assume a parallel shift in all currency exchange rates and, as a result, may overstate the potential impact to earnings because currency exchange rates do not typically move all in the same direction.
Neogen has assets, liabilities, and operations outside of the U.S. Our investments in foreign subsidiaries are considered long-term. As discussed in ITEM 1A. RISK FACTORS, our financial condition and results of operations could be adversely affected by currency fluctuations.
Neogen has assets, liabilities and operations outside of the U.S. Our investments in foreign subsidiaries are considered long-term. As discussed in ITEM 1A. RISK FACTORS, our financial condition and results of operations could be adversely affected by currency fluctuations. Foreign Currency Exchange Rate Risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS We have interest rate and foreign exchange rate risk exposure but no long-term fixed rate investments. Our primary interest rate risk is due to potential fluctuations of interest rates for our variable rate borrowings. Foreign exchange risk exposure arises because we market and sell our products throughout the world.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS We have interest rate and foreign exchange rate risk exposure. Our primary interest rate risk is due to potential fluctuations of interest rates for our variable rate borrowings. Foreign exchange risk exposure arises because we market and sell our products throughout the world.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted in a separate section of this report starting on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE—NONE
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE—NONE
Added
We use forward foreign exchange contracts to reduce the effect of fluctuations in foreign exchange rates on the remeasurement of foreign currency denominated receivables and payables. Interest Rate Risk. The Company utilizes an interest rate swap contract to create fixed interest payments on portions of its variable rate debt instrument in order to manage exposure to fluctuations in interest rates.
Added
In addition to transactional exposures, our operating results are impacted by the translation of our foreign operating income into U.S. dollars. In fiscal year 2024, international revenues accounted for 49.7% of our consolidated net revenues. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted in a separate section of this report starting on page F-1.

Other NEOG 10-K year-over-year comparisons