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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended February 29, 2004

 

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to             

 

Commission file number 0-17988

 

 

Neogen Corporation

(Exact name of registrant as specified in its charter)

 

 

Michigan   38-2364843
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification Number)

 

620 Lesher Place

Lansing, Michigan 48912

(Address of principal executive offices including zip code)

 

(517) 372-9200

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12B – 2 of the Exchange Act).    YES  x    NO  ¨

 

As of April 1, 2004, there were 8,009,000 outstanding shares of Common Stock.

 

Table of Contents

NEOGEN CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

 

     Page No.
PART I. Financial Information     
Item 1.    Interim Consolidated Financial Statements (unaudited)     
    

Consolidated Balance Sheets -
February 29, 2004 and May 31, 2003

    1
    

Consolidated Statements of Income –
Three months and nine months ended February 29, 2004 and February 28, 2003

    2
    

Consolidated Statements of Stockholders’ Equity –
Nine months ended February 29, 2004

    3
    

Consolidated Statements of Cash Flows –
Nine months ended February 29, 2004 and February 28, 2003

    4
     Notes to Interim Consolidated Financial Statements – February 29, 2004    5
Item 2.   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    8
Item 3.    Quantitative and Qualitative Disclosures About Market Risk    12
Item 4.    Controls and Procedures    12
PART II. Other Information     
Item 1.    Legal Proceedings    13
Item 2.    Changes in Securities and Use of Proceeds    13
Item 3.    Defaults Upon Senior Securities    13
Item 4.    Submission of Matters to a Vote of Security Holders    13
Item 5.    Other Information    13
Item 6.    Exhibits and Reports on Forms 8-K    13
Signatures    14
CEO Certification     
CFO Certification     
Section 906 Certification     

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. Interim Consolidated Financial Statements (Unaudited)

 

NEOGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

     February 29,
2004
    May 31,
2003
     (In thousands, except share
and per share amounts)

ASSETS

              

CURRENT ASSETS

              

Cash

    $ 1,597    $ 1,061

Marketable securities

      —        7,836

Accounts receivable, less allowance of $ 572 and $ 611

      9,533      7,499

Inventories

      12,445      9,840

Deferred income taxes

      694      694

Prepaid expenses and other current assets

      1,375      1,041
    
  

TOTAL CURRENT ASSETS

      25,644      27,971

NET PROPERTY AND EQUIPMENT

      10,375      4,640

OTHER ASSETS

              

Goodwill and other non-amortizable intangible assets

      20,812      13,665

Other non-current assets, net of accumulated amortization of $ 767 and $ 860

      1,496      1,760
    
  
     $ 58,327    $ 48,036
    
  

LIABILITIES AND STOCKHOLDERS’ EQUITY

              

CURRENT LIABILITIES

              

Accounts payable

    $ 2,776    $ 3,273

Accruals

      3,557      2,490
    
  

TOTAL CURRENT LIABILITIES

      6,333      5,763

LONG-TERM DEBT

      4,600      —  

DEFERRED INCOME TAXES

      405      405

OTHER LONG-TERM LIABILITIES

      454      466

STOCKHOLDERS’ EQUITY

              

Preferred stock, $1.00 par value, 100,000 shares authorized, none issued and outstanding

      —        —  

Common stock, $.16 par value, 20,000,000 shares authorized, 8,008,472 shares issued and outstanding at February 29, 2004; 7,750,608 shares issued and outstanding at May 31, 2003

      1,281      992

Additional paid-in capital

      25,524      24,830

Accumulated other comprehensive income

      125      3

Retained earnings

      19,605      15,577
    
  

TOTAL STOCKHOLDERS’ EQUITY

      46,535      41,402
    
  
     $ 58,327    $ 48,036
    
  

 

See notes to interim unaudited consolidated financial statements

 

1

Table of Contents

NEOGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

     Three Months Ended
February 29/28,
   

Nine Months Ended
February 29/28,

Note 1

     2004
     2003
    2004
     2003
     (In thousands, except per share amounts)

Sales

    $ 14,717     $ 11,403    $ 40,196     $ 35,158

Cost of goods sold

      7,791       5,361      20,007       16,006
    
 
  
 

GROSS MARGIN

      6,926       6,042      20,189       19,152
    
 
  
 

OPERATING EXPENSES

                              

Sales and marketing

      3,001       2,957      8,727       8,903

General and administrative

      1,368       1,049      3,423       3,141

Research and development

      792       621      2,120       2,118
    
 
  
 
       5,161       4,627      14,270       14,162
    
 
  
 

OPERATING INCOME

      1,765       1,415      5,919       4,990

OTHER INCOME

                              

Interest income

      2       24      45       70

Interest expense

      (32 )     —        (32 )     —  

Other

      7       91      136       294
    
 
  
 
       (23 )     115      149       364
    
 
  
 

INCOME BEFORE INCOME TAXES

      1,742       1,530      6,068       5,354

INCOME TAXES

      559       500      2,040       1,848
    
 
  
 

NET INCOME

    $ 1,183     $ 1,030    $ 4,028     $ 3,506
    
 
  
 

NET INCOME PER SHARE – Note 3:

                              

Basic

    $ .15     $ .14    $ .51       .46
    
 
  
 

Diluted

    $ .14     $ .13    $ .48     $ .44
    
 
  
 

 

See notes to interim unaudited consolidated financial statements

 

2

Table of Contents

NEOGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

 

     Common Stock
   

Additional

Paid-in

Capital

    

Accumulated

Other

Comprehensive

Income

   

Retained

Earnings

   

Total

     Shares
    Amount
           
     (In thousands)

Balance, June 1, 2003

    6,200    $ 992    $ 24,830     $ 3    $ 15,577    $ 41,402

5 for 4 stock split – Note 3

    1,591      255      (255 )                    

Exercise of options and warrants

    217      34      949                     983

Comprehensive income:

                                         

Net income for the nine months ended February 29, 2004

                                 4,028      4,028

Foreign currency translation adjustments

                          122             122
                                      

Total comprehensive income

                                        4,150
    
  
  
 
  
  

Balance, February 29, 2004

    8,008    $ 1,281    $ 25,524     $ 125    $ 19,605    $ 46,535
    
  
  
 
  
  

 

See notes to interim unaudited consolidated financial statements

 

3

Table of Contents

NEOGEN CORPORATION SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

    

Nine Months Ended

February 29/28,

  
     2004
     2003
  
     (In thousands)  

OPERATING ACTIVITIES:

                 

Net income

    $ 4,028     $ 3,506  

Adjustments to reconcile net income to net cash provided by operating activities:

                 

Depreciation and amortization

      907       945  

Changes in operating assets and liabilities, net of acquisitions:

                 

Accounts receivable

      (1,912 )     (800 )

Inventories

      (1,152 )     (84 )

Prepaid expenses and other current assets

      (278 )     37  

Accounts payable

      (497 )     (641 )

Accruals

      (171 )     909  
    
 

NET CASH PROVIDED BY OPERATING ACTIVITIES

      925       3,872  

CASH FLOWS FROM INVESTING ACTIVITIES:

                 

Sales of marketable securities

      39,378       30,022  

Purchases of marketable securities

      (31,542 )     (31,078 )

Purchases of property and equipment and other assets

      (3,774 )     (2,148 )

Acquisitions

      (10,034 )     —    
    
 

NET CASH USED IN INVESTING ACTIVITIES

      (5,972 )     (3,204 )

CASH FLOWS FROM FINANCING ACTIVITIES:

                 

Proceeds from borrowing on line of credit

      4,600       —    

Net payments for repurchase of common stock

      —         (485 )

Net proceeds from issuance of common stock

      983       687  
    
 

NET CASH PROVIDED BY FINANCING ACTIVITIES

      5,583       202  
    
 

INCREASE IN CASH

      536       870  

CASH AT BEGINNING OF PERIOD

      1,061       2,012  
    
 

CASH AT END OF PERIOD

    $ 1,597     $ 2,882  
    
 

 

See notes to interim unaudited consolidated financial statements

 

4

Table of Contents

NEOGEN CORPORATION AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENT (UNAUDITED)

 

1. BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) for interim financial information and with the instructions to Form 10-Q and Article 10 Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the three month and nine month periods ended February 29, 2004 are not necessarily indicative of the results to be expected for the fiscal year ending May 31, 2004. For more complete financial information, these consolidated financial statements should be read in conjunction with the May 31, 2003 audited consolidated financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the year ended May 31, 2003.

 

The Company previously classified shipping revenue as an offset to the related expense in sales and marketing in the consolidated statements of income. Beginning June 1, 2003, these amounts have been classified as revenue. Previously reported fiscal year 2003 revenue and sales and marketing expense balances have been reclassified to conform with fiscal year 2004 presentation.