Neogen Corporation announced Sept. 19 that net income for the first quarter of its 2018 fiscal year, which ended Aug. 31, increased 21% to $11,914,000, or $0.31 per share, from the previous year's first quarter net income of $9,881,000, or $0.26 a share.
First quarter revenues increased 14% to $95,256,000, compared to the previous year's first quarter revenues of $83,645,000. The revenues and net income represent first quarter records for the 35-year-old company.
"The first quarter was a solid start for our 2018 fiscal year, and reflects the positive impact of growth in many of our core product lines," said James Herbert, Neogen's executive chairman. "In the first quarter, we named an experienced new CEO to help us maintain Neogen's growth trajectory going forward. We are also pleased with the rate of integration of recent acquisitions as that contributed to financial results."
The first quarter was the 102nd of the past 107 quarters that Neogen reported revenue increases compared with the previous year — including all consecutive quarters in the last 12 years.
"A key goal of ours during this transition of leadership is to identify and ensure continuity with what Neogen has done very well for many years," said John Adent, who was named Neogen's chief executive officer on July 17. "Sales of our core food safety products, including tests for mycotoxins, food allergens and sanitation all increased nicely in the quarter. On the animal safety side, the quarter was led by significant increases in revenues from our animal genomics services, as well as growth in sales of our veterinary instruments and insect control products."
Neogen's gross margin was 48.2% of sales in the first quarter of the current fiscal year, compared to the 48.4% recorded in the same period a year ago. Operating income for the quarter was $16,424,000, or 17.2% of sales, compared to $14,742,000, or 17.6%, a year ago.
"We saw a moderation of the negative currency translation effects seen in recent quarters, as the currencies we do business in steadied against the dollar. Overall, currency translations had an immaterial impact on the company's revenues and earnings for the quarter," said Steve Quinlan, Neogen's chief financial officer. "Our net income increase was aided somewhat by new accounting guidance regarding stock option exercises, which resulted in a $396,000 reduction in federal income tax expense for the quarter."
Revenues for the company's Food Safety segment increased 19% during the first quarter compared to the prior year's first three months, aided by the acquisitions of Quat-Chem and Rogama within the past year, which report through Neogen's operations in Scotland and Brazil, respectively. Sales of Neogen's rapid tests for food allergens, such as gluten and peanuts, increased 17% in the quarter compared to the prior year. This growth continues to be aided by increased global regulatory efforts and consumer demand to ensure products represented as being free of food allergens are correctly labeled.
Sales of Neogen's AccuPoint Advanced ATP Sanitation Verification System increased 14% in the current quarter when compared to the prior year. In the current quarter, sales of the company's mycotoxin test kits increased 9%, and included a 23% increase in the sales of test kits to detect aflatoxin. This increase was the result of hot and dry weather in global corn-growing regions, which is conducive to the growth of molds that produce aflatoxin. The increase was also aided by the introduction of Neogen's new test for aflatoxin that replaces methanol with water in the testing process.
Revenues from Neogen do Brasil increased 39%, in U.S. dollars, in the current quarter, the result of increases in sales of mycotoxin and drug residue test kits. Mexico-based Neogen Latinoamerica's sales decreased 2%, due to lower sales of cleaners and disinfectants, the result of the termination of a distribution agreement earlier in the calendar year. Neogen Europe revenues rose 1% in the quarter; strong genomics growth of 19% was offset by lower mycotoxin test sales, as last year's DON outbreak did not repeat in the current year. Sales of Neogen's England-based Lab M culture media products increased 34% in the first quarter, as the subsidiary continued its integration into Neogen's global sales and marketing organization. In the first quarter, Neogen recorded sales into 127 countries and territories outside the U.S. — an all-time high.
Neogen's Animal Safety segment reported a revenue increase for the first quarter of 9%, led by significant growth in its genomics business, an 11% increase in sales of its insect control product line, and an 11% increase in sales of veterinary instruments, primarily in its needle and syringe product lines.
Revenues from Neogen's worldwide animal genomics business increased 29% in the first quarter of fiscal 2018 compared to the prior year. This growth was primarily the result of increased market share in the global cattle and poultry markets. The company's Sept. 1 acquisition of The University of Queensland Animal Genetics Laboratory, the leading animal genomics laboratory in Australia, will help accelerate the growth of Neogen's animal genomics business inAustralia, New Zealand and throughout Oceania. AGL is Neogen's fourth animal genomics laboratory — joining locations in the U.S., Scotland, and Brazil.
