[10-K] Neogen Corp Files Annual Report
Neogen Corp. (NEOG) filed its FY-2025 Form 10-K covering the year ended 31 May 2025. The Lansing-based food & animal safety company reports a two-segment structure: Food Safety contributed 71.3 % of FY-25 revenue (vs. 70.9 % FY-24) while Animal Safety supplied 28.7 %. International sales grew to 50.2 % of total. The group employs 2,974 people across 28 countries.
Strategic actions include the April 2025 agreement to divest the global Cleaners & Disinfectants unit and ongoing integration of the 3 M Food Safety Division acquired in Sept 2022 (Reverse Morris Trust). Management still targets cost and revenue synergies but acknowledges impairment charges on the Food Safety reporting unit recorded in Q2 and Q4 FY-25.
Key risk disclosures: (1) Material weaknesses in internal control over financial reporting, mainly ineffective review controls for goodwill valuation; (2) continued challenges merging 3 M’s manufacturing footprint; (3) exposure to tariffs, supply-chain disruption, cybersecurity threats and geopolitical instability; (4) dependence on third-party logistics and single-source suppliers. R&D spend remains at 2-3 % of revenue; no customer represents ≥10 % of sales. Common stock outstanding: 217.2 m shares (30 Jun 2025); public float valued at $2.72 bn (30 Nov 2024).
Neogen Corp. (NEOG) ha presentato il modulo 10-K per l’anno fiscale 2025, relativo all’esercizio chiuso al 31 maggio 2025. L’azienda con sede a Lansing, specializzata in sicurezza alimentare e animale, riporta una struttura a due segmenti: la divisione Sicurezza Alimentare ha contribuito con il 71,3% dei ricavi FY-25 (rispetto al 70,9% di FY-24), mentre la Sicurezza Animale ha fornito il 28,7%. Le vendite internazionali sono cresciute fino a rappresentare il 50,2% del totale. Il gruppo impiega 2.974 persone in 28 paesi.
Le azioni strategiche includono l’accordo di aprile 2025 per la cessione dell’unità globale Cleaners & Disinfectants e l’integrazione in corso della divisione Food Safety di 3M acquisita a settembre 2022 (Reverse Morris Trust). La direzione punta ancora a sinergie di costo e ricavo, ma riconosce oneri di svalutazione nel segmento Sicurezza Alimentare registrati nel secondo e quarto trimestre FY-25.
Principali rischi segnalati: (1) criticità significative nel controllo interno sulla rendicontazione finanziaria, principalmente dovute a controlli di revisione inefficaci nella valutazione del goodwill; (2) difficoltà persistenti nell’integrazione degli stabilimenti produttivi di 3M; (3) esposizione a dazi, interruzioni nella catena di approvvigionamento, minacce informatiche e instabilità geopolitica; (4) dipendenza da servizi logistici terzi e fornitori unici. La spesa in R&S rimane al 2-3% dei ricavi; nessun cliente rappresenta ≥10% delle vendite. Azioni ordinarie in circolazione: 217,2 milioni (30 giugno 2025); flottante pubblico valutato 2,72 miliardi di dollari (30 novembre 2024).
Neogen Corp. (NEOG) presentó su Formulario 10-K para el año fiscal 2025, correspondiente al ejercicio finalizado el 31 de mayo de 2025. La compañía con sede en Lansing, dedicada a la seguridad alimentaria y animal, reporta una estructura de dos segmentos: Seguridad Alimentaria aportó el 71,3 % de los ingresos del FY-25 (frente al 70,9 % del FY-24), mientras que Seguridad Animal contribuyó con el 28,7 %. Las ventas internacionales crecieron hasta representar el 50,2 % del total. El grupo emplea a 2,974 personas en 28 países.
Las acciones estratégicas incluyen el acuerdo de abril de 2025 para la venta de la unidad global de Limpiadores y Desinfectantes y la integración en curso de la división de Seguridad Alimentaria de 3M adquirida en septiembre de 2022 (Reverse Morris Trust). La dirección aún busca sinergias de costos e ingresos, pero reconoce cargos por deterioro en la unidad de Seguridad Alimentaria registrados en el segundo y cuarto trimestre del FY-25.
Principales riesgos divulgados: (1) debilidades materiales en el control interno sobre la información financiera, principalmente controles de revisión ineficaces en la valoración del goodwill; (2) desafíos continuos para integrar la planta de fabricación de 3M; (3) exposición a aranceles, interrupciones en la cadena de suministro, amenazas cibernéticas e inestabilidad geopolítica; (4) dependencia de logística de terceros y proveedores únicos. El gasto en I+D se mantiene entre el 2-3 % de los ingresos; ningún cliente representa ≥10 % de las ventas. Acciones comunes en circulación: 217,2 millones (30 de junio de 2025); flotante público valorado en 2,72 mil millones de dólares (30 de noviembre de 2024).
Neogen Corp. (NEOG)는 2025년 5월 31일 종료된 회계를 포함하는 2025 회계연도 10-K 보고서를 제출했습니다. 미시간 주 랜싱에 본사를 둔 식품 및 동물 안전 회사는 두 개의 사업 부문 구조를 보고합니다: 식품 안전 부문은 2025 회계연도 매출의 71.3%를 기여했으며(2024 회계연도 70.9% 대비), 동물 안전 부문은 28.7%를 차지했습니다. 국제 매출은 전체의 50.2%로 증가했습니다. 그룹은 28개국에서 2,974명을 고용하고 있습니다.
전략적 조치로는 2025년 4월 글로벌 클리너 및 소독제 사업부 매각 계약과 2022년 9월 인수한 3M 식품 안전 부문의 지속적인 통합이 포함됩니다(Reverse Morris Trust). 경영진은 비용 및 수익 시너지를 목표로 하지만, 2025 회계연도 2분기와 4분기에 식품 안전 부문에서 손상차손을 인식한 점을 인정합니다.
주요 위험 공시 사항: (1) 재무 보고에 대한 내부 통제에서 중대한 약점, 특히 영업권 평가에 대한 검토 통제의 비효율성; (2) 3M 제조 시설 통합의 지속적인 어려움; (3) 관세, 공급망 중단, 사이버 보안 위협 및 지정학적 불안정성 노출; (4) 제3자 물류 및 단일 공급업체 의존. 연구개발 비용은 매출의 2-3% 수준이며, 단일 고객이 매출의 ≥10%를 차지하지 않습니다. 보통주 발행 주식 수: 2억 1,720만 주(2025년 6월 30일 기준); 공개 유통 주식 가치는 27억 2천만 달러(2024년 11월 30일 기준)입니다.
Neogen Corp. (NEOG) a déposé son formulaire 10-K pour l’exercice fiscal 2025, couvrant l’année close au 31 mai 2025. La société basée à Lansing, spécialisée dans la sécurité alimentaire et animale, rapporte une structure en deux segments : la sécurité alimentaire a contribué à hauteur de 71,3 % des revenus FY-25 (contre 70,9 % en FY-24), tandis que la sécurité animale a fourni 28,7 %. Les ventes internationales ont augmenté pour représenter 50,2 % du total. Le groupe emploie 2 974 personnes dans 28 pays.
Les actions stratégiques comprennent l’accord d’avril 2025 pour céder l’unité mondiale Cleaners & Disinfectants et l’intégration en cours de la division Food Safety de 3M acquise en septembre 2022 (Reverse Morris Trust). La direction vise toujours des synergies de coûts et de revenus, mais reconnaît des charges de dépréciation sur l’unité Food Safety enregistrées au T2 et T4 FY-25.
Principaux risques divulgués : (1) faiblesses significatives dans le contrôle interne sur le reporting financier, principalement des contrôles de revue inefficaces pour l’évaluation du goodwill ; (2) défis persistants dans l’intégration des sites de production de 3M ; (3) exposition aux tarifs douaniers, perturbations de la chaîne d’approvisionnement, menaces cybernétiques et instabilité géopolitique ; (4) dépendance à la logistique tierce et aux fournisseurs uniques. Les dépenses de R&D restent entre 2 et 3 % du chiffre d’affaires ; aucun client ne représente ≥10 % des ventes. Actions ordinaires en circulation : 217,2 millions (30 juin 2025) ; flottant public évalué à 2,72 milliards de dollars (30 novembre 2024).
Neogen Corp. (NEOG) hat den Jahresbericht 10-K für das Geschäftsjahr 2025 eingereicht, das am 31. Mai 2025 endete. Das in Lansing ansässige Unternehmen für Lebensmittel- und Tiersicherheit berichtet eine zweigeteilte Segmentstruktur: Der Bereich Lebensmittelsicherheit trug 71,3 % zum Umsatz im Geschäftsjahr 2025 bei (gegenüber 70,9 % im Geschäftsjahr 2024), während der Bereich Tiersicherheit 28,7 % lieferte. Der internationale Umsatz stieg auf 50,2 % des Gesamtumsatzes. Die Gruppe beschäftigt 2.974 Mitarbeiter in 28 Ländern.
Strategische Maßnahmen umfassen die Vereinbarung im April 2025 zum Verkauf der globalen Einheit Cleaners & Disinfectants sowie die laufende Integration der 3M Food Safety Division, die im September 2022 erworben wurde (Reverse Morris Trust). Das Management strebt weiterhin Kosten- und Umsatzeffizienzen an, erkennt jedoch Wertminderungsaufwendungen im Bereich Lebensmittelsicherheit an, die im zweiten und vierten Quartal des Geschäftsjahres 2025 verbucht wurden.
Zentrale Risikohinweise: (1) Erhebliche Schwächen in der internen Kontrolle über die Finanzberichterstattung, hauptsächlich ineffektive Prüfungssteuerungen bei der Bewertung des Firmenwerts; (2) anhaltende Herausforderungen bei der Integration der Produktionsstätten von 3M; (3) Risiken durch Zölle, Lieferkettenunterbrechungen, Cyber-Bedrohungen und geopolitische Instabilität; (4) Abhängigkeit von Drittanbieter-Logistik und Einzellieferanten. Die F&E-Ausgaben bleiben bei 2-3 % des Umsatzes; kein Kunde macht ≥10 % des Umsatzes aus. Ausstehende Stammaktien: 217,2 Mio. (30. Juni 2025); Streubesitz bewertet mit 2,72 Mrd. USD (30. November 2024).
- Divestiture announced: Sale of global Cleaners & Disinfectants business should sharpen focus and may unlock cash.
- International diversification: Overseas revenue now 50.2 %, reducing dependence on U.S. market.
- Food Safety leadership: Segment generates 71.3 % of sales, underpinning core growth thesis.
- Material weaknesses in internal control over financial reporting identified for FY-25.
- Goodwill impairments tied to 3 M Food Safety integration recorded in Q2 & Q4 FY-25.
- Integration risk: Manufacturing consolidation and ERP migration still in progress.
- Supply-chain & tariff exposure could squeeze margins; single-source suppliers noted.
Insights
TL;DR: Stable topline mix, but control weaknesses and goodwill impairments temper outlook.
The filing adds colour to NEOG’s post-merger profile: Food Safety dominance and 50 % overseas exposure imply diversified demand drivers. The planned Cleaners & Disinfectants sale should streamline the Animal Safety segment and free capital. However, recurring impairment charges suggest the 3 M integration is lagging original synergy estimates, potentially pressuring ROIC. Material control weaknesses elevate audit and compliance risk until remediation—investors should monitor remediation milestones and any further write-downs. Leverage metrics are not provided here, but no going-concern flags appear. Overall impact: neutral with mild downside bias.
TL;DR: Control gaps, supply-chain exposure and tariff risks raise governance red flags.
Management discloses COSO-level deficiencies that could hinder timely, accurate reporting—critical ahead of SAP roll-out phases. Extensive global footprint—28 countries, 50 % revenue abroad—amplifies geopolitical and FX volatility. Reliance on single-source suppliers and third-party logistics adds operational fragility, while planned divestiture may divert resources. Until controls are remediated and integration stabilises, I view disclosure as modestly negative for risk-adjusted valuation.
Neogen Corp. (NEOG) ha presentato il modulo 10-K per l’anno fiscale 2025, relativo all’esercizio chiuso al 31 maggio 2025. L’azienda con sede a Lansing, specializzata in sicurezza alimentare e animale, riporta una struttura a due segmenti: la divisione Sicurezza Alimentare ha contribuito con il 71,3% dei ricavi FY-25 (rispetto al 70,9% di FY-24), mentre la Sicurezza Animale ha fornito il 28,7%. Le vendite internazionali sono cresciute fino a rappresentare il 50,2% del totale. Il gruppo impiega 2.974 persone in 28 paesi.
Le azioni strategiche includono l’accordo di aprile 2025 per la cessione dell’unità globale Cleaners & Disinfectants e l’integrazione in corso della divisione Food Safety di 3M acquisita a settembre 2022 (Reverse Morris Trust). La direzione punta ancora a sinergie di costo e ricavo, ma riconosce oneri di svalutazione nel segmento Sicurezza Alimentare registrati nel secondo e quarto trimestre FY-25.
Principali rischi segnalati: (1) criticità significative nel controllo interno sulla rendicontazione finanziaria, principalmente dovute a controlli di revisione inefficaci nella valutazione del goodwill; (2) difficoltà persistenti nell’integrazione degli stabilimenti produttivi di 3M; (3) esposizione a dazi, interruzioni nella catena di approvvigionamento, minacce informatiche e instabilità geopolitica; (4) dipendenza da servizi logistici terzi e fornitori unici. La spesa in R&S rimane al 2-3% dei ricavi; nessun cliente rappresenta ≥10% delle vendite. Azioni ordinarie in circolazione: 217,2 milioni (30 giugno 2025); flottante pubblico valutato 2,72 miliardi di dollari (30 novembre 2024).
Neogen Corp. (NEOG) presentó su Formulario 10-K para el año fiscal 2025, correspondiente al ejercicio finalizado el 31 de mayo de 2025. La compañía con sede en Lansing, dedicada a la seguridad alimentaria y animal, reporta una estructura de dos segmentos: Seguridad Alimentaria aportó el 71,3 % de los ingresos del FY-25 (frente al 70,9 % del FY-24), mientras que Seguridad Animal contribuyó con el 28,7 %. Las ventas internacionales crecieron hasta representar el 50,2 % del total. El grupo emplea a 2,974 personas en 28 países.
Las acciones estratégicas incluyen el acuerdo de abril de 2025 para la venta de la unidad global de Limpiadores y Desinfectantes y la integración en curso de la división de Seguridad Alimentaria de 3M adquirida en septiembre de 2022 (Reverse Morris Trust). La dirección aún busca sinergias de costos e ingresos, pero reconoce cargos por deterioro en la unidad de Seguridad Alimentaria registrados en el segundo y cuarto trimestre del FY-25.
Principales riesgos divulgados: (1) debilidades materiales en el control interno sobre la información financiera, principalmente controles de revisión ineficaces en la valoración del goodwill; (2) desafíos continuos para integrar la planta de fabricación de 3M; (3) exposición a aranceles, interrupciones en la cadena de suministro, amenazas cibernéticas e inestabilidad geopolítica; (4) dependencia de logística de terceros y proveedores únicos. El gasto en I+D se mantiene entre el 2-3 % de los ingresos; ningún cliente representa ≥10 % de las ventas. Acciones comunes en circulación: 217,2 millones (30 de junio de 2025); flotante público valorado en 2,72 mil millones de dólares (30 de noviembre de 2024).
Neogen Corp. (NEOG)는 2025년 5월 31일 종료된 회계를 포함하는 2025 회계연도 10-K 보고서를 제출했습니다. 미시간 주 랜싱에 본사를 둔 식품 및 동물 안전 회사는 두 개의 사업 부문 구조를 보고합니다: 식품 안전 부문은 2025 회계연도 매출의 71.3%를 기여했으며(2024 회계연도 70.9% 대비), 동물 안전 부문은 28.7%를 차지했습니다. 국제 매출은 전체의 50.2%로 증가했습니다. 그룹은 28개국에서 2,974명을 고용하고 있습니다.
전략적 조치로는 2025년 4월 글로벌 클리너 및 소독제 사업부 매각 계약과 2022년 9월 인수한 3M 식품 안전 부문의 지속적인 통합이 포함됩니다(Reverse Morris Trust). 경영진은 비용 및 수익 시너지를 목표로 하지만, 2025 회계연도 2분기와 4분기에 식품 안전 부문에서 손상차손을 인식한 점을 인정합니다.
주요 위험 공시 사항: (1) 재무 보고에 대한 내부 통제에서 중대한 약점, 특히 영업권 평가에 대한 검토 통제의 비효율성; (2) 3M 제조 시설 통합의 지속적인 어려움; (3) 관세, 공급망 중단, 사이버 보안 위협 및 지정학적 불안정성 노출; (4) 제3자 물류 및 단일 공급업체 의존. 연구개발 비용은 매출의 2-3% 수준이며, 단일 고객이 매출의 ≥10%를 차지하지 않습니다. 보통주 발행 주식 수: 2억 1,720만 주(2025년 6월 30일 기준); 공개 유통 주식 가치는 27억 2천만 달러(2024년 11월 30일 기준)입니다.
Neogen Corp. (NEOG) a déposé son formulaire 10-K pour l’exercice fiscal 2025, couvrant l’année close au 31 mai 2025. La société basée à Lansing, spécialisée dans la sécurité alimentaire et animale, rapporte une structure en deux segments : la sécurité alimentaire a contribué à hauteur de 71,3 % des revenus FY-25 (contre 70,9 % en FY-24), tandis que la sécurité animale a fourni 28,7 %. Les ventes internationales ont augmenté pour représenter 50,2 % du total. Le groupe emploie 2 974 personnes dans 28 pays.
Les actions stratégiques comprennent l’accord d’avril 2025 pour céder l’unité mondiale Cleaners & Disinfectants et l’intégration en cours de la division Food Safety de 3M acquise en septembre 2022 (Reverse Morris Trust). La direction vise toujours des synergies de coûts et de revenus, mais reconnaît des charges de dépréciation sur l’unité Food Safety enregistrées au T2 et T4 FY-25.
Principaux risques divulgués : (1) faiblesses significatives dans le contrôle interne sur le reporting financier, principalement des contrôles de revue inefficaces pour l’évaluation du goodwill ; (2) défis persistants dans l’intégration des sites de production de 3M ; (3) exposition aux tarifs douaniers, perturbations de la chaîne d’approvisionnement, menaces cybernétiques et instabilité géopolitique ; (4) dépendance à la logistique tierce et aux fournisseurs uniques. Les dépenses de R&D restent entre 2 et 3 % du chiffre d’affaires ; aucun client ne représente ≥10 % des ventes. Actions ordinaires en circulation : 217,2 millions (30 juin 2025) ; flottant public évalué à 2,72 milliards de dollars (30 novembre 2024).
Neogen Corp. (NEOG) hat den Jahresbericht 10-K für das Geschäftsjahr 2025 eingereicht, das am 31. Mai 2025 endete. Das in Lansing ansässige Unternehmen für Lebensmittel- und Tiersicherheit berichtet eine zweigeteilte Segmentstruktur: Der Bereich Lebensmittelsicherheit trug 71,3 % zum Umsatz im Geschäftsjahr 2025 bei (gegenüber 70,9 % im Geschäftsjahr 2024), während der Bereich Tiersicherheit 28,7 % lieferte. Der internationale Umsatz stieg auf 50,2 % des Gesamtumsatzes. Die Gruppe beschäftigt 2.974 Mitarbeiter in 28 Ländern.
Strategische Maßnahmen umfassen die Vereinbarung im April 2025 zum Verkauf der globalen Einheit Cleaners & Disinfectants sowie die laufende Integration der 3M Food Safety Division, die im September 2022 erworben wurde (Reverse Morris Trust). Das Management strebt weiterhin Kosten- und Umsatzeffizienzen an, erkennt jedoch Wertminderungsaufwendungen im Bereich Lebensmittelsicherheit an, die im zweiten und vierten Quartal des Geschäftsjahres 2025 verbucht wurden.
Zentrale Risikohinweise: (1) Erhebliche Schwächen in der internen Kontrolle über die Finanzberichterstattung, hauptsächlich ineffektive Prüfungssteuerungen bei der Bewertung des Firmenwerts; (2) anhaltende Herausforderungen bei der Integration der Produktionsstätten von 3M; (3) Risiken durch Zölle, Lieferkettenunterbrechungen, Cyber-Bedrohungen und geopolitische Instabilität; (4) Abhängigkeit von Drittanbieter-Logistik und Einzellieferanten. Die F&E-Ausgaben bleiben bei 2-3 % des Umsatzes; kein Kunde macht ≥10 % des Umsatzes aus. Ausstehende Stammaktien: 217,2 Mio. (30. Juni 2025); Streubesitz bewertet mit 2,72 Mrd. USD (30. November 2024).
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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TABLE OF CONTENTS
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BUSINESS |
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RISK FACTORS |
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UNRESOLVED STAFF COMMENTS |
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CYBERSECURITY |
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PROPERTIES |
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ITEM 3. |
LEGAL PROCEEDINGS |
29 |
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ITEM 4. |
MINE SAFETY DISCLOSURES |
29 |
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PART II |
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ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
30 |
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ITEM 6. |
[RESERVED] |
30 |
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ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
31 |
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ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS |
41 |
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ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
42 |
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ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
42 |
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ITEM 9A. |
CONTROLS AND PROCEDURES |
42 |
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ITEM 9B. |
OTHER INFORMATION |
48 |
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ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
48 |
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PART III |
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ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
49 |
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ITEM 11. |
EXECUTIVE COMPENSATION |
49 |
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ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS |
49 |
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ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
49 |
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ITEM 14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
49 |
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PART IV |
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ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
50 |
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ITEM 16. |
FORM 10-K SUMMARY |
50 |
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SIGNATURES |
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LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES |
55 |
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1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, are made throughout this Annual Report on Form 10-K, including statements relating to management’s expectations regarding new product introductions; the adequacy of our sources for certain components, raw materials and finished products; and our ability to utilize certain inventory. For this purpose, any statements contained herein that are not statements of historical fact may deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. There are a number of important factors that could cause Neogen’s results to differ materially from those indicated by such forward-looking statements, including many factors beyond our control. Factors that could cause actual results to differ from those contained within forward-looking statements include (without limitation) the continued integration of the 3M food safety business and the realization of the expected benefits from that acquisition; the relationship with and performance of our transition manufacturing partner; our ability to adequately and timely remediate certain identified material weaknesses in our internal control over financial reporting; competition; recruitment and retention of key employees; impact of weather on agriculture and food production; global business disruption caused by the Russia invasion in Ukraine and related sanctions and the conflict in the Middle East; identification and integration of acquisitions; research and development risks; intellectual property protection; increasing and developing government regulation; and other risks detailed in item 1A. RISK FACTORS in this Form 10-K and from time to time in the Company’s reports on file at the Securities and Exchange Commission (SEC), that could cause Neogen Corporation’s results to differ materially from those indicated by such forward-looking statements.
In addition, any forward-looking statements represent management’s views only as of the day this Annual Report on Form 10-K was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. While management may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if its views change.
As used in this Annual Report on Form 10-K, the terms “Neogen,” “the Company,” “we,” “us,” and “our” refer to Neogen Corporation and, where appropriate, its consolidated subsidiaries, unless the context indicates otherwise.
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PART I
(Dollar amounts in thousands)
ITEM 1. BUSINESS
Neogen Corporation and its subsidiaries develop, manufacture and market a diverse line of products and services dedicated to food and animal safety. Our Food Safety segment consists primarily of diagnostic test kits and complementary products (e.g., culture media) sold to food and animal feed producers and processors to preserve the safety and quality of food to prevent contamination and foodborne illnesses such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, and ruminant by-products. These products also ensure the general hygiene of the food manufacturing environment. We also have products to determine food quality and nutritional components. The majority of the test kits are consumables, single-use, culture, immunoassay and nucleic acid detection products that rely on proprietary antibodies and RNA and DNA testing methodologies to produce rapid and accurate test results. Our line of food safety services also includes advanced software systems that help testers objectively analyze, store and identify emerging issues from their results from multiple locations over extended periods.
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"). Following the FSD 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. See Note 8. "Business Combinations" to the consolidated financial statements for further discussion. FSD products are reported in the Food Safety segment.
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. 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. In April 2025, the Company announced that it has entered into an agreement to sell its global Cleaners and Disinfectants business. See Note 4. "Assets Held for Sale" to the consolidated financial statements for further discussion.
Neogen’s products are marketed by our sales personnel and distributors throughout the world. Our mission is to be the leading company in fueling a brighter future for global food security. To meet this mission, a growth strategy consisting of the following elements has been developed: (i) increasing sales of existing products; (ii) introducing innovative products and services; (iii) growing international sales; and (iv) acquiring businesses and forming strategic alliances. 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. Our principal executive offices are located at 620 Lesher Place, Lansing, Michigan 48912-1595, and our telephone number is (517) 372-9200.
Neogen’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports are available free of charge via our website (www.neogen.com) as soon as reasonably practicable after such information is filed with, or furnished to, the United States Securities and Exchange Commission. 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.
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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®, Betastar®, Raptor®, Reveal®, Veratox®
Bacterial & General Sanitation
AccuClean®, AccuPoint®, ANSR®, Clean-Trace®, Colitag™, Listeria Right Now™, MDS™, MPNTray™, Soleris®
Indicator Testing, Culture Media & Others
Acumedia®, Harlequin®, Iso-Grid®, K-Blue®, K-Gold®, Lab M®, NEO-GRID®, NeoSal®, Petrifilm®, µPREP®,
ANIMAL SAFETY:
Veterinary Instruments & Disposables
Ag-Tek®, Breeder-Sleeve®, Calf Eze™, Dr. Frank’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™, BotVax®, EqStim®, Fura-Zone®, Horse Sense®, ImmunoRegulin®, MACLEOD®, NFZ™, PanaKare™, Paradefense®, Peraside™, Pro-Fix®, Pro-Flex®, RenaKare™, Squire®, Stress-Dex®, SureBond®, ThyroKare™, Tri-Hist®, Uniprim®, Vet-Tie™, Vita-15™
Rodent & Control
Assault®, Chem-Tech, Ltd.™, Chem-Tech’s CT logo (with circle)™, CT-511®, Cykill™, DeciMax®, Di-Kill®, Dy-Fly®, Final-Fly-T®, Fly-Die Defense™, Fly-Die Ultra™, LD-44T™, LD-44Z™, Place Pack®, PolyPetite™, PolyShield™, Protectus™, Provecta®, Provecta Advanced®, Prozap®, Prozap (stylized mark w/fancy Z)™, PY-75™, Ramik®, Rodex™, Standguard®, Turbocide®, TurboCide® (stylized), Turbocide Gold®, VAP-5™, VAP-20™, War Paint®, X-185™
Genomic Services
Canine HealthCheck®, Canine HealthCheck and Design®, CatScan and Design®, GeneSeek®, Genomic Profiler™, Igenity®, Infiniseek®, NeoSeek™, Paw Print Genetics®, Paw Print Pedigrees®, SeekGain™, SeekSire™, Skimseek®
We manage our organization through our Food Safety and Animal Safety segments. See the “Notes to Consolidated Financial Statements” section of this Form 10-K for financial information about our business segments and international operations.
Food Safety Segment
Neogen’s Food Safety segment is primarily engaged in the manufacturing and marketing of diagnostic test kits and complementary products (e.g., culture media) sold to food and feed producers and processors to preserve the quality of food to prevent contamination and food-borne illnesses such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, ruminant by-products, and manufacturing environmental general sanitations; as well as food quality and nutritional components. Neogen’s food safety test kits are used 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 the detection of contaminants in foods, Neogen’s food
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safety test kits also detect beneficial components in foods such as dietary fiber and carbohydrates. Neogen’s food safety products include tests for:
Natural Toxins & Allergens. Grain producers and processors of all types and sizes use Neogen’s Natural Toxins tests, such as Veratox, Reveal, Reveal Q+ and Reveal Q+ MAX to detect the presence of mycotoxins in order to ensure product safety and quality in food and animal feed. This line also includes tests to detect histamine, a natural toxin that occurs when certain species of fish begin to decay, and sulfite, an effective but potentially allergenic shrimp preservative. Neogen’s Allergen test kits are used by the world’s largest producers of cookies, crackers, candy, ice cream and many other processed foods. Food Allergen tests kits sold under the Veratox, Alert, Reveal, Reveal 3-D and BioKits brands 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.
Bacterial and General Sanitation. Meat and poultry processors, ready to eat food companies, fruit and vegetable producers and many other market segments are the primary users of Neogen’s ANSR, MDS (“Molecular Detection System”) and Reveal tests to detect foodborne bacteria, including E. coli O157:H7, Salmonella, Listeria, Listeria monocytogenes, cronobacter, and Campylobacter. Neogen’s ANSR and MDS pathogen detection systems are isothermal amplification reaction test methods that exponentially amplifies the DNA of any bacteria present in food and environmental samples to provide DNA-definitive results in a fraction of the time of other molecular detection methods. Reveal’s lateral flow device combines an immunoassay with chromatography for a rapid and accurate one-step result. Neogen manufactures various rapid testing tools to determine general sanitation and hygiene. Neogen markets both AccuPoint Advanced and Clean-TraceTM rapid sanitation tests to detect the presence of ATP, a chemical found in all living cells. These are easy-to-use and inexpensive tests that use bioluminescence to quickly determine if a contact surface has been properly cleaned. Neogen’s 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.
Indicator Testing, Culture Media & Other. 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. 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. Neogen’s customers for these product lines include food manufacturers and processors, commercial and research laboratories and producers of pharmaceuticals, cosmetics and veterinary vaccines.
Neogen offers several products, including filter tests and Colitag, for performing microbial analysis of water for the food and beverage industries, including water companies. Neogen’s Soleris products are used by food processors to identify the presence of spoilage organisms (e.g., yeasts and molds) and other microbiological contamination in food. To complement our microbiological offerings, Neogen also offers a wide range of sample collection products. These solutions are designed to make environmental and carcass sample collection and preparation more reliable and convenient than traditional methods.
Through the Ireland-based Megazyme, Ltd., Neogen supplies diagnostic kits and specialty enzymes to worldwide quality control laboratories in the food, animal feed and beverage industries. Megazyme’s validated assays and reagents are used across various food industries to measure dietary fibers, complex carbohydrates, simple sugars and organic acids, such as lactose. Neogen’s 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. Neogen's capabilities also provide 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.
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Lastly, Neogen’s laboratory services offers food safety analysis services in the U.S. Our ISO-accredited lab offers a variety of fee-for-service tests for the food and feed industries.
Neogen’s bacterial test kits and systems are built upon the company's culture media business where culture media is the basis of many of the indicator and pathogen diagnostic workflow. Many of Neogen's diagnostic test systems can be read on automated or semi-automated readers allowing faster customer workflow, less hands-on time and provide definitive results.
Neogen’s 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. Some licenses involve technology that is exclusive to Neogen’s use, while others are non-exclusive and involve technology licensed to multiple licensees.
Revenues from Neogen’s Food Safety segment accounted for 71.3%, 70.9%, and 66.5% of our total revenues for fiscal years ended May 31, 2025, 2024 and 2023, respectively.
ANIMAL SAFETY SEGMENT
Neogen’s Animal Safety segment encompasses a broad portfolio of products and services aimed at enhancing animal health, agricultural biosecurity, and genetic progress. These offerings span life sciences, veterinary instruments and disposables, animal care solutions, rodent and insect control, disinfectants, and advanced genomic services. The segment supports livestock producers, veterinarians, researchers, and companion animal owners globally.
Life Sciences. Neogen’s Life Science/Toxicology division offers reagents and test kits used in immunoassay production, forensic and animal toxicology, and life science research. Their drug detection assays—over 125 kits—screen more than 300 drugs and metabolites across a range of biological matrices. Research assays detect hormones, steroids, lipoxins, and histamine in varied species. Neogen also provides unique colorimetric and chemiluminescent substrates for research use.
Veterinary Instruments & Disposables. Through its Ideal and Prima Tech brands, Neogen offers an extensive range of approximately 600 veterinary instruments and delivery systems used for administering antibiotics and vaccines. Among these, the Ideal D3 and D3X needles stand out for their enhanced strength and ability to be detected by metal detectors in meat processing facilities, which provides a distinct safety advantage in the beef and swine industries. The Prima Tech line features precision instruments designed for injections, topical and oral administration, artificial insemination, and animal identification, catering to the needs of farmers, ranchers, and veterinarians.
Animal Care & Other. Neogen’s NeogenVet product line delivers a comprehensive range of innovative and high-quality solutions for the veterinary market. Among its offerings are digestive aids and nutritional supplements such as PanaKare, which serves as a pancreatic enzyme replacement therapy; Natural Vitamin E-AD, designed to address vitamin deficiencies in swine, cattle, and sheep; and RenaKare, which supports potassium levels in cats and dogs. The company also markets Uniprim, a broad-spectrum veterinary antibiotic, and offers companion animal parasiticides under the Provecta brand. In equine health, Neogen provides BotVax B, the only USDA-approved vaccine for the prevention of Type B botulism, commonly known as Shaker Foal Syndrome. To support immune function, EqStim has proven to be a safe and effective immunostimulant for treating bacterial and viral respiratory infections in horses, while ImmunoRegulin is used in dogs to assist in managing pyoderma, a type of bacterial skin inflammation.
Rodent Control, Insect Control, & Disinfectants. Neogen offers a comprehensive line of rodent and insect control products, along with cleaners and disinfectants, that play a critical role in biosecurity and disease prevention across animal production operations. Its rodent control solutions, sold under brand names such as Ramik, CyKill, and Havoc, incorporate a variety of active ingredients including diphacinone, bromethalin, brodifacoum, and zinc phosphide. These ingredients are blended with food-grade components to ensure high
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palatability and effectiveness. Neogen’s cleaners and disinfectants, such as Synergize, BioSentry 904, and Peraside, are widely used in food production and veterinary environments to maintain hygiene and minimize the risk of disease outbreaks. The company also addresses insect control with its Prozap brand, designed for large animal production including cattle and equine facilities. For professional pest control, the SureKill line offers broad-spectrum insecticide solutions, while StandGuard is specifically used in beef cattle for the control of horn flies and lice.
Genomics Services. Neogen operates six global genomics labs offering DNA genotyping, sequencing, and trait analysis for livestock and companion animals. Their bioinformatics database supports genetic improvement in animal performance. The 2021 acquisition of Genetic Veterinary Sciences, Inc. expanded their companion animal offerings by over 350 genetic tests for dogs and cats. Clients include breed registries, researchers, and producers across multiple species.
Neogen’s Animal Safety segment delivers integrated solutions across animal health, productivity, and safety through innovation in diagnostics, care, and genetics. Their science-driven products and services continue to support the evolving needs of global animal industries while maintaining a strong focus on biosecurity and genetic progress.
Revenues from Neogen’s Animal Safety segment accounted for 28.7%, 29.1%, and 33.5% of our total revenues for fiscal years ended May 31, 2025, 2024 and 2023, 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. As of May 31, 2025, a total of 975 employees were assigned to sales and marketing functions. During the fiscal years ended May 31, 2025, 2024 and 2023, no single customer or distributor accounted for 10% or more of our revenues.
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 distributors and end users and also handles technical support issues that arise with customers.
Neogen’s food safety markets are primarily comprised of:
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ANIMAL SAFETY
Neogen’s staff of specialized animal safety sales, marketing, customer and technical service representatives sell our products and services directly to consumers, dealers, veterinarians, distributors and other manufacturers and also handle technical support issues. Neogen further supports its distribution channels through product training, field support, various promotions and advertising.
Neogen’s animal safety markets are primarily comprised of:
INTERNATIONAL SALES AND MARKETING
Neogen maintains locations outside of the United States in 28 other countries to provide a direct sales presence. We also maintain a network of distributors to reach countries where we do not have a direct presence.
UK, Europe, Middle East, Africa and India. Neogen Europe, Ltd., headquartered in Ayr, Scotland, sells products and services to our network of customers and distributors throughout the U.K., Europe, the Middle East and Africa. 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 countries, customers are generally served by distributors managed by Neogen Europe personnel.
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. Neogen Europe has an additional manufacturing locations in Heywood, England, which manufactures culture media supplements and microbiology technologies.
Mexico, Central and South America. 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. This company operates a genomics testing laboratory (formerly named Deoxi) and develops, manufactures and markets rodent and insect control products. Rogama offers registered pest control products to Brazil’s agronomic, professional and retail markets.
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Asia Pacific. Neogen maintains offices in Japan, Korea, Thailand, China, Australia and New Zealand. Combined, the businesses distribute Neogen’s products throughout the Asia Pacific region to distributors and end customers.
Our Chinese subsidiary, located in Shanghai, also operates a genomics testing laboratory, focusing on swine, dairy and beef cattle markets. Neogen’s Australasia subsidiary also operates a genomics testing laboratory, focusing on sheep and cattle markets in Australia and New Zealand.
Neogen Canada. This business operates a genomics testing laboratory in Edmonton, Alberta. Neogen also has a food safety-focused training laboratory, instrument service center and commercial office in London, Ontario.
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 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.
Sales to customers outside the U.S. accounted for 50.2%, 49.7%, and 48.4% of our total revenues for fiscal years ended May 31, 2025, 2024 and 2023, respectively. No individual foreign country contributed 10% or more of our revenues for those same periods.
RESEARCH AND DEVELOPMENT
Neogen has a commitment to its research and development activities. Our product development efforts are focused on the development and commercialization of innovative new products that advance our business strategy and on the enhancement of existing products. As of May 31, 2025, we employed 78 scientists and support staff in our worldwide research and development group, including immunologists, chemists, geneticists, engineers and microbiologists. Management currently expects our future research and development expenditures to approximate 2% to 3% of total revenues annually. The research and development team continues to align with subject matter experts in academia, industry and regulatory agencies for advancing innovative scientific solutions to benefit the Food Safety and Animal Safety sectors.
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 2026 and 2027.
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. Royalties under these agreements, , expensed to sales and marketing, amounted to $1,605, $3,250, and $3,392 in fiscal years 2025, 2024, and 2023, respectively.
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. 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 169 U.S. patents, 611 patents in countries outside of the U.S., and 177 pending patent applications globally. Neogen’s trademark estate includes approximately 100 trademark registrations within the U.S., 370 trademark registrations in countries outside of the U.S, and 5 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. For example, many of our products employ unique antibodies capable of detecting microorganisms and other substances at minute levels. In some instances, we have chosen to keep confidential the methods and
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techniques used to manufacture and use those antibodies when trade secret and/or proprietary know-how protections are more appropriate.
Management believes that Neogen has adequate rights to commercialize our products. However, we are aware that substantial research is conducted at universities, governmental agencies and other companies throughout the world, and that it always is possible that patents have been applied for and could be granted that are relevant to technologies that may be used in our products. To the extent some of our products may now, or in the future, embody technologies protected by patents of others, we may need to obtain licenses to use such technologies to continue to sell the products. These licenses may not be available on commercially reasonable terms. Failure to obtain any such licenses could delay or prevent the sale of certain new or existing products. In addition, patent litigation is not uncommon. Accordingly, there can be no assurance that we will continue to have adequate rights to commercialize our new products or that we will avoid litigation.
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 include BotVax B, EqStim, ImmunoRegulin and Uniprim, and regulatory approvals for those products have been received. Neogen’s rodent control, parasiticide and insect control products are subject to registration in the U.S and internationally.
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.
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, 2025, there were approximately 1,456 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. 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. Manufacturing of diagnostic tests for the detection of natural toxins, pathogens, food allergens and spoilage organisms, final kit assembly, quality assurance and shipping takes place at our facilities in Michigan and Kentucky. Proprietary monoclonal and polyclonal antibodies for Neogen’s diagnostic kits are produced on a regular schedule in our immunology laboratories in Lansing, Michigan. Generally, the shipment of diagnostic test kits to customers in Europe is performed from a third-party facility in the Netherlands. Many of the Company’s food safety diagnostic instruments and readers are produced by third-party vendors to our specifications and then shipped to customers. Culture media products are manufactured in an ISO-approved facility in Lansing and in Heywood, England. Products are blended following strict formulations or custom blended to customer specifications and shipped to customers from the U.S. and the Netherlands. 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.
Animal health products. Manufacturing of animal health products, pharmacological diagnostic test kits, and test kits for drug residues takes place in our FDA-registered facilities in Lexington, Kentucky. In general, manufacturing operations including reagent manufacturing, quality assurance, final kit assembly and packaging are performed by Neogen personnel. Certain animal health products and veterinary instruments that are purchased finished or that are toll manufactured by third-party vendors are warehoused and shipped from our Kentucky facilities. Some veterinary instruments are produced in our facilities in Lansing and are then shipped to Kentucky for distribution to customers. Manufacturing of devices used for animal injections, topical applications and oral administration occurs in Kenansville, North Carolina.
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Veterinary biologics. Neogen maintains a Lansing-based USDA-approved manufacturing facility devoted to the production of the biologic products EqStim and ImmunoRegulin. 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 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.
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. Neogen manufactures insect control products at its facilities in Iowa and Brazil. Neogen purchases component parts and raw materials from many suppliers. Though many of these items are purchased from a single source to achieve the greatest volume discounts, we believe we have identified acceptable alternative suppliers for most of our key components and raw materials where it is economically feasible to do so. 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.
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. For each of our individual products or product lines, we face intense competition from companies ranging from small businesses to divisions of large multinational companies. Some of these organizations have substantially greater financial resources than Neogen. We compete primarily on the basis of ease of use, speed, accuracy and other performance characteristics of our products. The breadth of our product line, the effectiveness of our sales and customer service organizations, and pricing also are components in management’s competitive strategy.
Future competition may become even more intense and could result from the development of new technologies, which could affect the marketability and profitability of Neogen’s products. Our competitive position also depends on our ability to continue to develop proprietary products, attract and retain qualified scientific and other personnel, develop and implement production and marketing plans and protect the intellectual property for new products. Additionally, we must continue to generate or have access to adequate capital resources to execute our strategy.
FOOD SAFETY:
With a large professional sales organization offering a comprehensive catalog of food safety solutions, management believes we maintain a general advantage over competitors offering only limited product lines. In most cases, Neogen sales and technical service personnel can offer unique insight into a customer’s numerous safety and quality challenges, and offer testing and other solutions to help the customer overcome those challenges.
Competition for pathogen detection products includes traditional methods and antibody and genetic-based platforms; competition for natural toxins and allergen detection products includes instrumentation and antibody-based tests. While our offerings will not always compete on all platforms in all markets, the products we offer provide tests that can be utilized by most customers to meet their testing needs.
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In addition to our extensive product offerings and robust distribution network, we focus our competitive advantage in the areas of customer service, product performance, speed, and ease of use of our products. 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. In the life sciences and toxicology markets, we compete against several other diagnostic and reagent companies with similar product offerings.
In the veterinary market, Neogen markets BotVax B, the only USDA-approved vaccine for the prevention of botulism Type B in horses. We compete on other key products through differentiated product performance and superior customer and technical support. With some of our products, we provide solutions as a lower cost alternative and also offer a private label option for our customers.
Competition in the rodent control market includes several companies of comparable size that offer products into similar market segments. The retail rodent control market is not dominated by a single brand. 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, our products specifically focus on the area of insect control for food and animal safety applications. 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 are currently only sold in the U.S. through a combination of direct sales and distributors.
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.
In addition to our extensive portfolio of animal safety products, Neogen also competes in the retail market by providing solutions to common retail problems, such as stock outs, wasted floor space, and inconsistent brand identity. We differentiate ourselves by offering planograms and convenient reordering systems to maximize turns and profitability for our retail customers.
Neogen Genomics, a leading worldwide commercial animal genomics laboratory, employs cutting-edge technology in the area of genomics. The result of this technology allows the acceleration of natural selection through parentage testing and selective breeding of traits such as disease resistance, yield improvement and meat quality. 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.
GOVERNMENT REGULATION
A significant portion of Neogen’s products and revenues are affected by the regulations of various domestic and foreign government agencies, including the U.S. Department of Agriculture (USDA), the Environmental Protection Agency (EPA), and the U.S. Food and Drug Administration (FDA). Changes in these regulations could affect revenues and/or costs of production and distribution.
Neogen’s development and manufacturing processes involve the use of certain hazardous materials, chemicals and compounds. Management believes that our safety procedures for handling and disposing of such commodities comply with the standards prescribed by federal, state and local regulations. However, changes in such regulations or rules could involve significant costs to us and could be materially adverse to our business.
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The rodent control products, insect control products, cleaners, disinfectants and sanitizers manufactured and distributed by Neogen are subject to EPA and various U.S. state regulations as well as other analogous agencies in the markets where we sell such products. In general, any international sale of our products also must comply with similar regulatory requirements in the country of destination. Each country has its own individual regulatory construct with specific requirements. To the best of our knowledge, Neogen products are compliant with applicable regulations in the countries where such products are sold.
Many food safety diagnostic products do not require direct government approval. However, we have pursued voluntary approvals and certifications for a number of these products to enhance their marketability.
Neogen’s veterinary vaccine products and some pharmaceutical products require government approval to allow for lawful sales. The vaccine products are approved by the U.S. Department of Agriculture, Center for Veterinary Biologics (USDA-CVB) and analogous agencies in jurisdictions where sold. The pharmaceutical products are approved by the FDA and analogous agencies in jurisdictions where sold. The products, and the facilities in which they are manufactured, are in a position of good standing with all agencies. 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. 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 key initiatives to maintain long-term sustainable growth. 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, 2025, we employed 2,974 people worldwide, with 1,676 located in the U.S. and 1,298 international. We maintain good relations with both our union and non-union employees and have not experienced any work stoppages.
The Company is committed to fostering a diverse and inclusive workplace that attracts and retains exceptional talent. Through ongoing employee development, comprehensive compensation and benefits, and a focus on health, safety and employee wellbeing, the Company strives to help its employees in all aspects of their lives so they can do their best work.
Workplace Culture and Employee Engagement. We have established our Neogen DNA, which guides us in acting with the utmost integrity as we pursue our mission and goals. Our Neogen DNA is made up of three parts: Our Purpose & Promise, Our Principles, and Our Values. Our Purpose & Promise, and the impact we can have on the world and each other, is our reason for coming to work. Our Principles represent our commitment to our clients and industry, and Our Values represent our commitment to each other. We value responsibility, consistency, and integrity. Our Code of Conduct codifies our commitment to conducting business ethically.
Talent Attraction, Development and Retention. We employ a variety of programs and platforms designed to attract, develop and retain our colleagues. Employee benefits and policies are designed to support employees at all life’s moments. Neogen is committed to training and developing our employees so that they can deliver exceptional results to our customers and shareholders. We have internal programs designed to develop and retain talent, including career planning, leadership development, performance management and learning programs.
Compensation and Benefits. 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. We recognize the diverse needs of our colleagues around the world and have developed compensation and rewards programs that vary by country and region to address them.
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Employee Health and Safety. We are committed to ensuring a safe working environment for our colleagues and promote a zero-incident safety culture. 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.
ITEM 1A. RISK FACTORS
Investing in our securities involves a variety of risks and uncertainties, known and unknown, including, among others, those discussed below. Each of the following risks should be considered carefully, together with all the other information included in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and in our other filings with the SEC. Furthermore, additional risks and uncertainty not presently known to us or that we currently believe to be immaterial also could adversely affect our business. Our business, results of operations, financial condition and cash flow could be materially and adversely affected by any of these risks or uncertainties.
RISKS RELATING TO THE TRANSACTION WITH 3M CORPORATION
We may not realize the anticipated financial and other benefits, including growth opportunities, expected from the 3M Food Safety merger transaction.
We have realized and expect that we will continue to realize synergies, growth opportunities and other financial and operating benefits as a result of the Transaction. Our success in realizing these benefits, and the timing of their realization, depends, among other things, on the continued successful integration of the business operations of the 3M Food Safety business with Neogen. Even if we are able to integrate the 3M Food Safety business successfully, we cannot predict with certainty if or when the balance of these synergies, growth opportunities and other benefits will be realized, or the extent to which they will actually be achieved. For example, the benefits from the Transaction could be offset by costs incurred in integrating the 3M Food Safety business. Realization of any synergies, growth opportunities or other benefits could be affected by the factors described in other risk factors and a number of factors beyond our control, including, without limitation, general economic conditions, increased operating costs and regulatory developments.
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.
Although significant progress has been made to date in the integration of the 3M Food Safety business with Neogen, there is much that remains to be accomplished, particularly in the integration of the manufacturing operations of the 3M Food Safety business with Neogen. There is a significant degree of difficulty inherent in the process of integrating the 3M Food Safety business with Neogen. The difficulties include:
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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. Challenges with integrating the business contributed to impairment charges to the carrying value of our Food Safety reporting unit in the second and fourth quarters of fiscal 2025, and it is possible we may be required to record future impairment charges that relate, in whole or in part, to the successful integration of this business.
Pursuant to the terms of the Transaction, Neogen Food Safety Switzerland will be restricted from taking certain actions that could adversely affect the intended tax treatment of the Transaction, and such restrictions could impair Neogen’s ability to implement strategic initiatives that otherwise would be beneficial.
The Tax Matters Agreement executed in connection with the Transaction generally restricts Neogen Food Safety Switzerland from taking certain actions that could adversely affect the intended tax treatment of the Transaction. In particular, until September 1, 2025,:
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
Tariffs and other trade measures could adversely affect our results of operations, financial position and cash flows.
Our international operations subject us to a multitude of different tariffs and trade policies, some of which may be discriminatory or conflicting. As a result of the new administration's trade policy, tariffs have increased and may continue to increase our material input costs. We do not expect to be able to fully mitigate the impact of these increased costs or pass price increases on to our customers. In addition, new and increased tariffs as well as uncertainty regarding global trade policies generally have also contributed to softened demand for certain of our products. These factors are expected to continue to negatively impact our results of operations and financial condition in the near term, and continued and/or increasing trade restrictions, retaliatory trade measures and additional tariffs could further exacerbate the problem.
While tariffs and other trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows.
We are subject to risks relating to existing international operations and expansion into new geographical markets.
Expanding sales globally is part of our overall growth strategy, and we expect sales from outside the U.S. to continue to represent a significant portion of our revenue. In fiscal year 2025, sales to customers outside of the U.S. accounted for 50.2% of our total revenue, compared to 49.7% and 48.4% of our total revenues in fiscal
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year 2024 and 2023, respectively. Our international operations are subject to general risks related to such operations, including:
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. 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. We continue to monitor the impact of the conflict between Russia and Ukraine, and conflict in the Middle East. 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, 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
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We have 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.
As disclosed in Item 9A, “Controls and Procedures,” we have identified additional material weaknesses in our internal control over financial reporting. Specifically, we determined that we did not design, implement, and/or operate effective control activities across substantially all of the Company’s business and financial reporting processes to adequately achieve and complete accurate financial accounting, reporting, and disclosures based on the criteria established in the COSO Framework, and we identified deficiencies in the principles associated with the control activities component of the COSO Framework. This contributed to a material weakness in control activities, either individually or in aggregate related to management not maintaining effective management review controls to adequately support certain assumptions applied in its goodwill valuation analysis. 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.
These material weaknesses, potential new and additional material weaknesses that we conclude exist, and difficulties we may encounter in implementing new or improved controls or remediation efforts could prevent us from accurately reporting our financial results, result in material misstatements in our financial statements or cause us to fail to meet our reporting obligations. These deficiencies 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.
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. Management initiatives may be attempted to augment internal growth, such as strengthening our presence in select markets, reallocating research and development funds to products with higher growth potential, development of new applications for our technologies, enhancing our service offerings, continuing key customer efforts, and finding new markets for our products. Failure of these management initiatives may have a material adverse effect on our operating results and financial condition.
Identifying and pursuing acquisition opportunities, integrating these acquisitions into our business and managing their growth requires a significant amount of management’s time and skill. We cannot assure that we will be effective in identifying, integrating or managing future acquisition targets. Our failure to successfully integrate and manage a future acquisition could have a material adverse effect on our operating results and financial condition.
We may not be able to effectively manage our future growth, and if we fail to do so, our business, financial condition and results of operations could be adversely affected.
We rely significantly on our information systems’ infrastructure to support our operations and a failure of these systems and infrastructure and/or a security breach of our information systems could damage our reputation and have an adverse effect on operations and results.
We rely on our information systems’ infrastructure to integrate departments and functions, enhance our ability to service customers, improve our control environment, and manage our cost reduction initiatives. If a security breach or cyberattack of our information technology ("IT") networks and systems occurs, our operations could be interrupted. Any issues involving our critical business applications and infrastructure could adversely impact our ability to manage our operations and the customers we serve. Although we have controls and security measures in place to prevent such attacks, experienced computer hackers are increasingly organized and sophisticated. Malicious attack efforts operate on a large scale and sometimes offer targeted attacks as a paid-for service. In addition, the techniques used to access or sabotage networks change frequently and generally are not recognized until launched against a target.
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We rely on several information systems throughout our company, as well as those of our third-party business partners, to provide access to our web-based products and services, keep financial records, analyze results of operations, process customer orders, manage inventory, process shipments to customers, store confidential or proprietary information and operate other critical functions. Although we employ system backup measures and engage in information system redundancy planning and processes, such measures, as well as our current disaster recovery plan, may be ineffective or inadequate to address all vulnerabilities. Further, our information systems and our business partners’ and suppliers’ information systems may be vulnerable to attacks by hackers and other security breaches, including computer viruses and malware, through the internet (including via devices and applications connected to the internet), email attachments and persons with access to these information systems, such as our employees or third parties with whom we do business. As information systems and the use of software and related applications by us, our business partners, suppliers and customers become more cloud-based, there has been an increase in global cybersecurity vulnerabilities and threats, including more sophisticated and targeted cyber-related attacks that pose a risk to the security of our information systems and networks and the confidentiality, availability and integrity of data and information.
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.
If our security and information systems are compromised, interrupted or destroyed, or employees fail to comply with the applicable laws and regulations, or the information we maintain is obtained by unauthorized persons or used inappropriately, it could adversely affect our business and reputation, as well as our results of operations, and could result in litigation, the imposition of regulatory sanctions or penalties, or significant expenditures to remediate any damage to persons whose personal information has been compromised.
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. 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.
Disruption of our manufacturing and service operations could have an adverse effect on our financial condition and results of operations.
Our facilities and our distribution systems are subject to catastrophic loss due to fire, flood, terrorism or other natural or man-made disasters. If any of our facilities were to experience a catastrophic loss, it could disrupt our operations, delay production, shipments and revenue and result in significant expenses to repair or replace the facility and/or distribution system. If such a disruption were to occur, we could breach agreements, our reputation could be harmed, and our business and operating results could be adversely affected. Although we carry insurance for property damage and business interruption, we do not carry insurance or financial reserves for interruptions or potential losses arising from terrorism. Economic conditions and uncertainties in global markets could adversely affect the cost and other terms upon which we are able to obtain third party insurance. If we are unable to obtain sufficient and cost-effective third-party insurance coverage, or to the extent we have elected to self-insure, we could be at greater risk that our operations will be harmed by a catastrophic loss.
We rely heavily on third-party package delivery services, and a significant disruption in these services or significant increases in prices could disrupt our ability to ship products, increase our costs and lower our profitability.
We ship a significant portion of our products to customers through independent package delivery companies, such as UPS, Federal Express and DHL. We also ship our products through other carriers, including national and regional trucking firms, overnight carrier services and the U.S. Postal Service. 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
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be adversely affected. 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. 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.
We rely on third-party suppliers to provide raw materials and other components in our products, manufacture products that we do not manufacture ourselves and perform services that we do not provide ourselves. Because these suppliers are independent third parties with their own financial objectives, actions taken by them could have a negative effect on our results of operations. The risks of relying on suppliers include our inability to enter into contracts with third party suppliers on reasonable terms, inconsistent or inadequate quality control, relocation of supplier facilities, supplier work stoppages and suppliers’ failure to comply with their contractual obligations. In addition, we currently purchase some raw materials and products from sole or single sources. Some of the products that we purchase from these sources are proprietary and, therefore, cannot be readily or easily replaced by alternative sources. 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.
Our business sells many products through distributors, which presents risks that could negatively affect our operating results.
We sell many of our products, both within and outside of the U.S., through independent distributors. As a result, we are dependent on distributors to sell our products and assist us in promoting and creating demand for our products. Our distributors sometimes offer products from several different companies, and those distributors may carry our competitors’ products and promote our competitors’ products over our own. We have limited ability, if any, to cause our distributors to devote adequate resources to promoting, marketing, selling and supporting our products. We cannot assure that we will be successful in maintaining and strengthening our relationships with our distributors or establishing relationships with new distributors who have the ability to market, sell, and support our products effectively. We may rely on one or more key distributors for a product or region, and the loss of one or more of these distributors could reduce our revenue. Distributors could face financial difficulties, including bankruptcy, which could impact our ability to collect our accounts receivable and negatively impact our financial results. In addition, violations of anti-bribery and anti-corruption or similar laws by our distributors could have a material impact on our business. Further, termination of a distributor relationship could result in increased competition in the applicable jurisdiction. Failing to manage the risks associated with our use of distributors could reduce sales, increase expenses and weaken our competitive position, which could have a negative impact on our operating results.
If we are unable to develop new products and technologies, our competitive position could be impaired, which could materially and adversely affect our sales and market share.
The markets in which we operate are characterized by rapidly changing technologies and the frequent introduction of new products. As a result, our success is dependent upon our ability to develop or acquire new products and services on a cost-effective basis, to introduce them into the marketplace in a timely manner and to protect and maintain critical intellectual property assets related to these developments. Difficulties or delays in research, development or production of new products and technologies, or failure to gain market acceptance of new products and technologies, could significantly reduce future revenue and materially and adversely affect our competitive position. While we intend to continue to commit financial resources and effort to the development of new products and services, we may not be able to successfully differentiate our products and services from those of our competitors. 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. Further, we may not be able to adapt to evolving markets and technologies, develop new products, achieve and maintain technological advantages or protect technological advantages through intellectual property rights. If we do not successfully compete through the development and introduction of new products and technologies, our business, results of operations, financial condition and cash flows could be materially adversely affected.
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If we fail to maintain a positive reputation or are unable to conduct effective sales and marketing, our prospects and financial condition could be adversely affected.
We believe that market awareness and recognition of our brands have contributed significantly to the success of our business. We also believe that maintaining and enhancing these brands, especially market perceptions of the quality of our products, is critical to maintaining our competitive advantage. 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. Also, because we are dependent on market perceptions, negative publicity associated with product quality or other adverse effects resulting from, or perceived to be resulting from, our products could have a material adverse impact on our business, financial condition and results of operations.
Our sales and marketing efforts are anchored by promoting our products to potential customers. 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.
While we will continue to promote our brands to remain competitive, we may not be successful in doing so. If we are unable to increase or maintain the effectiveness and efficiency of our sales and marketing activities, or if we incur excessive sales expenses to do so, our business, financial condition and results of operations may be materially and adversely affected.
We could lose customers or generate lower revenue, operating profits and cash flows if there are significant increases in the cost of raw materials or if we are unable to obtain such raw materials or other components of our products.
We purchase raw materials and components for use in our products, which exposes us to volatility in prices for certain raw materials and products. Prices and availability of these raw materials are subject to substantial fluctuations that are beyond our control due to factors such as changing economic conditions, inflation, currency and commodity price fluctuations, tariffs, resource availability, transportation costs, weather conditions and natural disasters, political unrest and instability, and other factors impacting supply and demand pressures. Significant price increases for these supplies could adversely affect our operating profits. Current and future inflationary effects may be driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies. The COVID-19 pandemic, for example, resulted in raw material price inflation as well as supply chain constraints and disruptions. 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. 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.
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. In addition, public health threats, such as COVID-19, severe influenza and other highly communicable viruses or diseases could affect our supply of raw materials, by limiting our ability to transport raw materials from our vendors or increasing demand and competition for supplies, which could adversely affect our ability to obtain necessary raw materials for certain of our products. Any sustained interruption in our receipt of adequate raw materials, supply chain disruptions impacting the receipt or distribution of products, or disruption to key manufacturing sites’ operations due to natural and other disasters or events or other legal or regulatory requirements, could result in a significant price increase in raw materials, or their unavailability, which could result in a loss of customers or otherwise adversely impact our business, results of operations, financial condition and cash flows.
Our reputation, ability to do business and results of operations could be impaired by improper conduct by or disputes with any of our employees, agents or business partners and we have a compliance burden with respect to, and risk of violations of, anti-bribery, trade control, trade sanctions, anti-corruption and similar laws.
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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. In particular, our international operations are subject to the regulations imposed by the Foreign Corrupt Practices Act and the United Kingdom Bribery Act 2010 as well as anti-bribery and anti-corruption laws of various jurisdictions in which we operate. While we strive to maintain high standards, we cannot provide assurance that our internal controls and compliance systems always will protect us from acts committed by our employees, agents or business partners that would violate such U.S. or international laws or regulations or fail to protect our confidential information. 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.
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). 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. In addition, we cannot provide assurance that our costs of complying with new and evolving regulatory reporting requirements and current or future laws, including environmental protection, employment, data security, data privacy and health and safety laws, will not exceed our estimates. 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.
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. A material change in the statutory tax rate or interpretation of local law in a jurisdiction in which we have significant operations could adversely impact our effective tax rate and impact our financial results.
Our tax returns are subject to audit, and taxing authorities could challenge our operating structure, taxable presence, application of treaty benefits or transfer pricing policies. If changes in statutory tax rates or laws or audits result in assessments different from amounts estimated, our business, results of operations, financial condition and cash flows could be adversely affected. In addition, changes in tax laws could have an adverse effect on our customers, resulting in lower demand for our products and services.
A deterioration in our future expected profitability or cash flows could result in an impairment of our recorded goodwill and intangible assets.
We have significant goodwill and intangible assets recorded on our consolidated balance sheet. The valuation and classification of these assets and the assignment of useful lives to intangible assets involve significant judgments and the use of estimates. Impairment testing of goodwill and intangible assets requires significant use of judgment and assumptions, particularly as it relates to the determination of fair market value. A decrease in the long-term economic outlook and future cash flows of our business could significantly impact asset values and potentially result in the impairment of intangible assets, including goodwill.
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The markets for our products are extremely competitive, and our competitors could use existing resource advantages to our detriment.
The food and animal safety industries are subject to rapid and substantial changes in technology and are characterized by extensive research and development and intense competition. Our competitors and potential competitors may have greater financial, technical, manufacturing, marketing, research and development and management resources than us. These competitors could use their resources, reputations and ability to leverage existing customer relationships to provide a competitive advantage over us that could impact our results of operations. They might also succeed in developing products that are more reliable and effective than our products, are less costly than our products or provide alternatives to our products. If the products of a competitor are better able to meet our customers' requirements, then our operating results could be adversely affected.
We are dependent on the agricultural marketplace, which is affected by factors beyond our control.
Our primary customers are in the agricultural and food production industries. Economic conditions affecting agricultural industries are cyclical and are dependent upon many factors outside of our control, including weather conditions, changes in consumption patterns or commodity prices. Any of these factors in the agricultural marketplace could affect our sales and overall financial performance.
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.
We have incurred substantial indebtedness and related debt service obligations, which could have important consequences, including:
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.
Our outstanding Senior Notes also include customary events of default. 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. 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. 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.
22
The outcome of litigation and other legal proceedings in which we are involved is subject to significant uncertainty, and we may incur losses in excess of what we currently anticipate, which could be material.
The Company is subject to certain legal and other proceedings, most of which are ordinary routine litigation matters incidental to our business. We do not currently believe any pending litigation matter is reasonably likely to have a material adverse effect on our future results of operations or financial position. However, because of the inherent uncertainty of outcomes from any litigation matter and because of the fact that certain of these litigation matters are in their early stages, it is possible we will incur losses relating to these litigation matters in excess of our current expectations, and it is possible such losses could have a material adverse effect on our future results of operations or financial condition.
Our quarterly and annual operating results are subject to significant fluctuations.
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. 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. 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. 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:
Our business could be adversely affected by fluctuations in the global capital markets.
Our business and financial results are affected by fluctuations in the global financial markets, including interest rates and currency exchange rates. The exposure to fluctuations in currency exchange rates takes on different forms. International revenues and costs are subject to the risk that fluctuations in exchange rates could adversely affect our reported revenues and profitability when translated into U.S. dollars for financial reporting purposes. These fluctuations could also adversely affect the demand for products and services provided by us. 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.
Dividend payments to our shareholders depend upon a number of factors, including our results of operations, cash flows and financial position, contractual restrictions and other factors considered relevant by our Board of Directors. 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.
23
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.
Our success and ability to compete depends, in part, on our ability to protect, in the U.S. and other countries, our products by establishing and maintaining intellectual property rights capable of protecting our technology and products. Patent applications filed by us may not result in the issuance of patents or, if granted, may not be granted in a form that will be commercially advantageous to us. Even if granted, patents can be challenged, narrowed, invalidated, or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of time we have patent protection for our products. We also cannot assure that our nondisclosure agreements, together with trade secrets and other common law rights, will provide meaningful protection for our trade secrets and other proprietary information. Moreover, the laws of some foreign jurisdictions may not protect intellectual property rights to the same extent as in the U.S., and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. 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.
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. The outcome of infringement litigation is subject to substantial uncertainties, and also the testimony of experts as to technical facts upon which experts may reasonably disagree. Our defense of an infringement litigation lawsuit could result in significant expense. Regardless of the outcome, infringement litigation could significantly disrupt our marketing, development and commercialization efforts, divert management’s attention and consume our financial resources. 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:
Any development or acquisition of non-infringing products, technology or licenses could require the expenditure of substantial time and other resources and could have a material adverse effect on our business and financial results. 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.
24
The industries in which we operate are subject to substantial governmental regulation.
A portion of our products and facilities are regulated by various domestic and foreign government agencies including the U.S. Department of Agriculture, the U.S. Food and Drug Administration and the Environmental Protection Agency. A significant portion of our revenue is derived from products used to monitor and detect the presence of substances that are regulated by various government agencies. Furthermore, our growth could result in substantial liability to us and be adversely affected by the implementation of new regulations. 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.
Failure to attract, retain and develop personnel, including for key management positions, could have an adverse impact on our results of operations, financial condition and cash flows.
Our growth, profitability and effectiveness in conducting our operations and executing our strategic plans depend in part on our ability to attract, retain and develop qualified personnel and align them with appropriate opportunities for key management positions and support for strategic initiatives. Our loss of any of our key employees could have a material adverse effect on us. 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. 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.
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. 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. 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. If we are subject to an uninsured or inadequately insured product or services liability claim, our business, financial condition and results of operations could be adversely affected.
Changing political conditions could adversely impact our business and financial results.
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. 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. 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.
25
Climate change, or legal, regulatory or market measures to address climate change could materially adversely affect our financial condition and business operations.
Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our future operations from natural disasters and extreme weather conditions, such as hurricanes, tropical storms, blizzards, tornadoes, earthquakes, wildfires or flooding. Such extreme weather conditions could pose physical risks to our facilities and disrupt our operations and impair our critical systems, and may impact raw material sourcing, manufacturing operations, the distribution of our products and our operational costs. Damage or destruction of our facilities may result in losses that exceed our insurance coverage. 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. If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet the regulatory obligations.
Our business could be adversely impacted by an inability to meet the expectations of our stakeholders related to environmental, social and governance (ESG) objectives.
Various stakeholders, including customers, suppliers, providers of debt and equity capital, regulators, and those in the workforce, are increasing their expectations of companies to do their part to combat global climate change and its impact and to conduct their operations in an environmentally sustainable and socially responsible manner with appropriate oversight by senior leadership. We have made certain public commitments to reduce emissions, conserve resources at our various facilities and further develop a diverse, equitable and inclusive culture. A failure to respond to the expectations and initiatives of our stakeholders or to achieve the commitments we have made, could result in damage to our reputation and relationships with various stakeholders, as well as adversely impact our financial condition due to volatility in the cost or availability of capital, difficultly obtaining new business, or entering into new supplier relationships, a possible loss of market share on our current product portfolio, or difficulty attracting and retaining a skilled workforce.
Tax legislation could materially adversely affect our financial results and tax liabilities.
Our business is subject to tax-related external conditions, such as tax rates, tax laws, and regulations, changing political environments in the U.S. and foreign jurisdictions that impact tax examination, assessment and enforcement approaches. In addition, changes in tax laws including further regulatory developments arising from U.S. tax reform legislation and/or regulations around the world could result in a tax expense or benefit recorded to our consolidated statement of earnings. In connection with guidance such as the Base Erosion and Profit Shifting (BEPS) Integrated Framework provided by Organization for Economic Cooperation and Development (OECD), determination of multi-jurisdictional taxation rights and the rate of tax applicable to certain types of income may be subject to potential change. Due to uncertainty of the regulation changes and other tax-related factors stated above, it is currently not possible to assess the ultimate impact of these actions on our financial statements.
Additionally, U.S Congress enacted the One Big Beautiful Bill Act (“OBBBA”) which includes significant provisions, including tax cut extensions and modifications to the international tax framework. While we continue to evaluate the impact of these legislative changes as additional guidance becomes available, uncertainty remains regarding the timing and interpretation by tax authorities in affected jurisdictions. These legislative changes could have an adverse impact on our future effective tax rate, tax liabilities, and cash tax.
Although we believe that our historical tax positions are sound and consistent with applicable laws, regulations and existing precedent, there can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge. Income tax audits associated with the allocation of income and other complex issues could result in significant income tax adjustments that could negatively impact our future operating results.
26
ITEM 1B. UNRESOLVED STAFF COMMENTS – NONE
ITEM 1C. CYBERSECURITY
We rely on several information systems throughout our company, as well as those of our third-party business partners, to provide access to our web-based products and services, keep financial records, analyze results of operations, process customer orders, manage inventory, process shipments to customers, store confidential or proprietary information, and operate other critical functions. Our information systems and our business partners’ and suppliers’ information systems may be vulnerable to attacks by hackers and other security breaches, including computer viruses and malware, through the internet, email attachments, and persons with access to these information systems, such as our employees or third parties with whom we do business. These risks have increased as information systems and the use of software and related applications become more cloud-based. We have implemented various programs, processes, and systems designed to mitigate these risks.
Risk Management and Strategy
We have a comprehensive cybersecurity risk assessment program designed to assess, identify, and manage material risks associated with cybersecurity threats and vulnerabilities and to mitigate the potential impact of any cybersecurity incidents on our operations and financial condition. We routinely review, modify, and update this program as necessary to address emerging risks. Our process for addressing risk is based on industry best practices outlined in CIS Critical Security Controls.
In addition to these prevention measures, we work proactively to detect and minimize the impact of cybersecurity incidents. We have a written incident response plan designed to ensure the appropriate internal and, if necessary, external resources are employed to promptly and effectively respond to potential breaches, minimize any related damage, and avoid disruption to our operations. We routinely test our incident response process through simulated incidents. No risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have
Governance
Board of Directors Oversight
27
The Governance Committee is required by its Charter to consist of not fewer than three independent directors, and the committee currently consists of five independent directors. The Governance Committee typically meets on a quarterly basis. At each meeting, a written cybersecurity brief from IT leadership is provided. These reports include a review of emerging cybersecurity risks and developments and updates to our cybersecurity risk assessment program.
Management's Role
Our management team is primarily responsible for assessing and managing material risks to the Company from cybersecurity threats.
Our cybersecurity manager is designated as the senior executive responsible for cybersecurity and reports directly to the head of IT. Our cybersecurity manager has a comprehensive information technology background and over ten years of service in managing or assisting in managing cybersecurity risks.
These processes are regularly reviewed and updated to adapt to evolving cybersecurity threats and any changes in our systems or business operations.
28
ITEM 2. PROPERTIES
Principal Manufacturing, Distribution and Administrative locations:
Segment |
|
Owned |
|
|
Leased |
|
|
Location |
||
Food Safety |
|
|
17 |
|
|
|
31 |
|
|
Corporate, United States, and Other International Locations (1) |
Animal Safety |
|
|
10 |
|
|
|
6 |
|
|
United States, Canada, and Australia |
Total |
|
|
27 |
|
|
|
37 |
|
|
|
(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.
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 other litigation currently pending will not materially affect our consolidated operations, cash flows, or financial condition. However, 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 12. “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. MINE SAFETY DISCLOSURES — NOT APPLICABLE
29
PART II
ITEM 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, 2025, there were 510 stockholders of record of our common stock. The actual number of holders is significantly greater than this number of holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Dividends
Neogen has never paid cash dividends on its Common Stock and does not expect to pay dividends in the foreseeable future.
Issuer Purchases of Equity Securities
The following is a summary of share repurchase activity during the fiscal quarter ended May 31, 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,900,000 |
|
April 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,900,000 |
|
May 2025 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
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. 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 2025. As of May 31, 2025, a total of 5,900,000 shares of common stock remained available for repurchase under this program.
ITEM 6. RESERVED
30
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
In addition, any forward-looking statements represent management’s views only as of the day this Form 10-K was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. 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. 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. 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. Our line of food safety products also includes 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.
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.
TRENDS AND UNCERTAINTIES
In recent years, input cost inflation, including increases in certain raw materials, negatively impacted operating results. In fiscal year 2024, despite a slowing rate of inflation, there were 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 year 2023, as a way to combat inflation. This increased our borrowing costs and raised the overall cost of capital. Although the federal funds rate was reduced in 2024 and we have refinanced our Term Loan and revolving line of credit, the overall interest rate we pay on our Credit Facilities remains higher than when the debt was incurred in 2022, 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 prior fiscal years. The impact of inflation continues to affect us in fiscal year 2025, although at a lower rate compared to prior fiscal years.
Beginning in the first half of fiscal year 2024, we implemented a new enterprise resource planning system and exited our transition service agreements with 3M, which led to certain shipment delays and an elevated backlog of open orders, specifically in the Food Safety segment. At the conclusion of fiscal year 2024, order fulfillment issues were largely resolved, however, the impact of lost market share stemming from these fulfillment issues continued in fiscal year 2025. Also in fiscal year 2025, we experienced an elevated amount of inventory write-offs, particularly in the fourth quarter, due, in part, to the large amount of build-up inventory that was shipped exiting fiscal year 2024 as the previous shipment delays were resolved. Further, in fiscal year 2025, we have experienced negative impacts from delays in restarting full production of our sample collection product line, which we relocated from 3M into a Neogen facility. However, in the second half of this fiscal year, we resolved most of these delays, with production having returned to the prior normal levels, but with significant production inefficiencies. With a change in administration in fiscal year 2025, there has been an economic policy shift towards increasing tariffs, which in turn has led and could lead to further retaliatory tariffs. These have and may continue to increase our costs on materials imported into the U.S. and also increase costs and negatively impact sales from our international locations, which primarily sell U.S. manufactured products.
31
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. Our European operations and customer base have been negatively impacted by the conflict. Similarly, the military conflicts in the Middle East have increased overall geopolitical tensions. As the respective conflicts continue or worsen, they may further impact our business, financial condition or results of operations throughout fiscal year 2026.
Within the Food Safety industry, the end market generally continues to experience a lower level of food production, largely due to the cumulative effect of the significant recent inflation, particularly in food prices. Within Animal Safety, the end market is at or near cyclical lows. As a result, we are optimistic about potential future revenue growth in the segment, particularly if the distribution channel begins to meaningfully restock inventory.
The restructuring actions undertaken in our genomics business have resulted in the voluntary attrition of revenue, following the shift in focus already made away from smaller production animals. A portion of our genomics business also serves the companion animal market, which has been experiencing weakness recently, primarily due to the impact of continued inflation, a lower number of pet adoptions, and a higher level of customer in-sourcing.
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 in fiscal year 2026.
32
RESULTS OF OPERATIONS
Historical Periods
Refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended May 31, 2024 for discussion of the Results of Operations, Segment Results of Operations, and Financial Condition and Liquidity for the year ended May 31, 2024 compared to the year ended May 31, 2023, which is incorporated by reference herein.
Executive Overview
|
|
Year Ended May 31, |
|
|||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
Increase / (Decrease) |
|
|||
Total Revenues |
|
$ |
894,661 |
|
|
$ |
924,222 |
|
|
$ |
(29,561 |
) |
Cost of Revenues |
|
|
473,285 |
|
|
|
460,322 |
|
|
|
12,963 |
|
Gross Profit |
|
|
421,376 |
|
|
|
463,900 |
|
|
|
(42,524 |
) |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|||
Sales and marketing |
|
|
183,798 |
|
|
|
182,872 |
|
|
|
926 |
|
General and administrative |
|
|
218,167 |
|
|
|
199,889 |
|
|
|
18,278 |
|
Goodwill impairment |
|
|
1,059,321 |
|
|
|
— |
|
|
|
1,059,321 |
|
Research and development |
|
|
21,087 |
|
|
|
22,476 |
|
|
|
(1,389 |
) |
Total Operating Expenses |
|
|
1,482,373 |
|
|
|
405,237 |
|
|
|
1,077,136 |
|
Operating Loss (Income) |
|
|
(1,060,997 |
) |
|
|
58,663 |
|
|
|
(1,119,660 |
) |
Other Expense |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
3,110 |
|
|
|
6,362 |
|
|
|
(3,252 |
) |
Interest expense |
|
|
(71,622 |
) |
|
|
(73,394 |
) |
|
|
1,772 |
|
Other, net |
|
|
(3,601 |
) |
|
|
(5,936 |
) |
|
|
2,335 |
|
Total Other Expense |
|
|
(72,113 |
) |
|
|
(72,968 |
) |
|
|
855 |
|
Loss Before Taxes |
|
|
(1,133,110 |
) |
|
|
(14,305 |
) |
|
|
(1,118,805 |
) |
Income Tax Benefit |
|
|
(41,066 |
) |
|
|
(4,884 |
) |
|
|
(36,182 |
) |
Net Loss |
|
$ |
(1,092,044 |
) |
|
$ |
(9,421 |
) |
|
$ |
(1,082,623 |
) |
33
Results of Operations
Revenues
Revenue decreased $29.6 million for the fiscal year 2025 compared to prior year 2024. The decrease included a $24.3 million unfavorable foreign exchange rate impact and a $3.9 million unfavorable impact due to discontinued product lines with a nominal decline of $1.4 million in the business. Sales of new products in the food quality and nutritional analysis product line paired with growth in indicator testing, pathogens, and biosecurity product lines were offset primarily by reduced sales of sample collection products due to production constraints, lower sales of veterinary instruments due, in part, to a customer sourcing move based on geographical preference, and lower genomics volume due to a combination of voluntary attrition of certain business in connection with restructuring actions, weakness in the companion animal market and a higher level of customer insourcing that offset growth in the bovine market.
Service Revenue
Service revenue, which consists primarily of genomics services provided to animal production and companion animal markets, was $97.3 million in fiscal 2025, a decrease of 5% over prior fiscal year revenue of $102.4 million. The decline was primarily due to a combination of voluntary attrition of certain business in connection with restructuring actions, weakness in the companion animal market and a higher level of customer insourcing that offset growth in the bovine market.
International Revenue
Neogen’s international revenues were $448.7 million in fiscal year 2025, compared to $459.0 million in fiscal 2024, a decrease of 2%. The decline was due to a $24.3 million currency headwind, partially offset by increased sales in the Latin America and European regions.
GROSS MARGIN
Gross margin, expressed as a percentage of revenue, was 47.1% during fiscal year 2025 compared to 50.2% during the prior fiscal year. The decrease in margin during the year was primarily due to lower volume, higher manufacturing costs related to our sample collection product line, and an elevated level of inventory write-offs, as well as some impact from tariffs. The elevated level of write-offs were due, in part, to the large amount of built-up inventory that was shipped exiting fiscal year 2024 as the previous shipment delays stemming from our ERP implementation were resolved. Finally, the decreased gross margin was also negatively impacted by $4.4 million of restructuring charges related primarily to the genomics business. These decreases were partially offset by the positive impact of price increases and mix of products sold, as there was a proportional increase in sales of higher margin products.
OPERATING EXPENSES
Sales and Marketing:
Sales and marketing expenses were $183.8 million during fiscal year 2025, compared to $182.9 million during the prior fiscal year. The increase was primarily due to higher shipping costs and costs associated with commercial support activities, partially offset by a decrease in fees paid to 3M for distribution services and lower royalty expense.
General and Administrative:
General and administrative expenses were $218.2 million during fiscal year 2025, compared to $199.9 million during the prior fiscal year. For the Food Safety segment, expenses were relatively consistent compared to the prior year. For the Animal Safety segment, the increases were due to $7.4 million of restructuring charges incurred in the current fiscal year. These charges were primarily incurred in the second quarter of the current fiscal year, offset by lower salary expenses.
Corporate expense has increased primarily due to additional headcount, contracted services, and higher costs associated with our prior year enterprise resource planning system implementation. We have also incurred
34
additional expense in the current fiscal year for retention related costs, as we executed on certain strategic and transformation actions. These increases were partially offset by decreased bonus accrual charges.
Goodwill:
For the year ended May 31, 2025, goodwill impairment charges were $1,059.3 million . There were no goodwill impairment charges recorded during the prior year comparable period.
Research and Development:
Research and development expense was $21.1 million in fiscal year 2025, compared to $22.5 million during the prior fiscal year. The decrease during the year is primarily the result of lower contracted services and employee costs in the Food Safety segment, as we continue to realize synergies in certain areas from the 3M FSD business.
OTHER (EXPENSE) INCOME
Other expense was $72.1 million for the year ended May 31, 2025 and $73.0 million for the ended May 31, 2024, respectively. The lower expense was due to a gain related to a settlement regarding the Company's prior acquisition of certain fixed assets and lower interest expense. The lower interest expense was a result of our interest rate swap instrument and our loan refinancing in April 2025. These favorable impacts were partially offset by a reduction in interest income associated with our money market portfolio.
PROVISION FOR INCOME TAXES
Income tax benefit during fiscal year 2025 was $41.1 million, compared to income tax benefit of $4.9 million in the prior fiscal year. The net tax benefit in the current fiscal year was primarily related to pre-tax losses due to goodwill impairment expense that is deductible in certain jurisdictions, in addition to amortization expense and interest expense resulting from the FSD transaction. In addition, goodwill impairment expense that is not deductible in certain jurisdictions reduced the income tax benefit by $203 million. In the prior fiscal year, goodwill was not impaired.
The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of May 31, 2025 and May 31, 2024 are $3.8 million and $2.7 million, respectively. Increases in unrecognized tax benefits are primarily associated with transfer pricing, IRC Section 861 expense apportionment, and research and development credits.
Tax legislation continues to evolve globally with new laws and regulations that create uncertainty in the global economy. The Organization for Economic Cooperation and Development reached agreement among over 140 countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two. Many countries continue to announce changes in their tax laws and regulations based on the Pillar Two framework. Additionally, U.S Congress enacted the One Big Beautiful Bill Act (“OBBBA”) which includes significant provisions, including tax cut extensions and modifications to the international tax framework. While we continue to evaluate the impact of these legislative changes as additional guidance becomes available, uncertainty remains regarding the timing and interpretation by tax authorities in affected jurisdictions. These legislative changes could have an adverse impact on our future effective tax rate, tax liabilities, and cash tax.
35
SEGMENT RESULTS OF OPERATIONS
|
|
Year Ended May 31 |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Increase / (Decrease) |
|
|
% Change |
|
||||
Food Safety Revenues |
|
$ |
638,140 |
|
|
$ |
655,341 |
|
|
$ |
(17,201 |
) |
|
|
(3 |
)% |
Animal Safety Revenues |
|
|
256,521 |
|
|
|
268,881 |
|
|
|
(12,360 |
) |
|
|
(5 |
)% |
Total Revenues |
|
$ |
894,661 |
|
|
$ |
924,222 |
|
|
$ |
(29,561 |
) |
|
|
(3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Food Safety |
|
$ |
(985,670 |
) |
|
$ |
82,446 |
|
|
$ |
(1,068,116 |
) |
|
|
(1296 |
)% |
Animal Safety |
|
|
7,247 |
|
|
|
39,320 |
|
|
|
(32,073 |
) |
|
|
(82 |
)% |
Segment Operating (Loss) Income |
|
$ |
(978,423 |
) |
|
$ |
121,766 |
|
|
$ |
(1,100,189 |
) |
|
|
(904 |
)% |
Corporate Expenses |
|
|
(82,574 |
) |
|
|
(63,103 |
) |
|
|
(19,471 |
) |
|
|
31 |
% |
Total Operating (Loss) Income |
|
$ |
(1,060,997 |
) |
|
$ |
58,663 |
|
|
$ |
(1,119,660 |
) |
|
|
(1909 |
)% |
Revenues
Revenue for the Food Safety segment decreased $17.2 million during fiscal year 2025 compared to the prior year. The decrease was primarily due to $24.0 million of currency headwinds and $1.2 million from discontinued product lines, with $8.0 million of growth in the business. Growth was driven by continued strength in indicator and pathogen testing, sales of new products in the food quality and nutritional analysis product line in the US and Canada, and higher sales of biosecurity products in the Europe and Latin America regions. These increases were partially offset by production constraints impacting the sample collection product line and lower sales in the general sanitization product line.
Revenue for the Animal Safety segment decreased $12.4 million during fiscal year 2025 compared to the prior year. The decrease was primarily due to a $9.4 million decline in the business, $2.7 million impact from discontinued product lines and $0.3 million unfavorable currency impact. The decline in the business was driven by lower genomics volume due to voluntary attrition of certain business in connection with restructuring actions, weakness in the companion animal market, and a higher level of customer insourcing that offset growth in the bovine market, paired with lower sales of insect control and veterinary instruments products lines which offset strength in sale of rodent control products.
Operating Income
Operating income for the Food Safety segment decreased $1,068.1 million during fiscal year 2025 compared to the prior year. The decline was primarily due to the goodwill impairment charge of $1,059.3 million incurred in fiscal year 2025.
Operating income for the Animal Safety segment decreased $32.1 million during fiscal year 2025 compared to the prior year. The decline was due to lower sales, a goodwill impairment charge and restructuring charges incurred primarily in the second quarter of the current fiscal year, which impacted both gross profit and operating expenses.
The increased corporate expense during each comparable period was related to headcount increases, increases in equity-based compensation and costs associated with our new enterprise resource planning system.
36
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. Factors that could cause or contribute to such differences include, but are not limited to, the factors discussed below as well as those discussed elsewhere in this report. Management’s ability to grow the business and its profitability in the future depends upon our ability to successfully implement various strategies, including:
FINANCIAL CONDITION AND LIQUIDITY
Overview
Our primary sources of liquidity are cash and cash equivalents, cash flows from the operations of our business, and available borrowing capacity under our Credit Facilities. Our principal uses of cash include working capital-related items, capital expenditures, debt service, and strategic investments.
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. 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. However, we continuously monitor and forecast our liquidity situation in light of industry, customer and economic factors, and take the necessary actions to preserve our liquidity and evaluate other financial alternatives that may be available to us should the need arise. As a result, we believe that our cash flows from operations, cash on hand, and borrowing capacity will enable us to fund the operating business, repay debt obligations, construct new manufacturing facilities, commercialize products currently under development, and execute our strategic plans.
We are subject to certain legal and other proceedings that have not had, and, in the opinion of management, are not expected to have, a material effect on our results of operations or financial position.
As of May 31, 2025, we had cash and cash equivalents of $129.0 million, and borrowings available under our revolving line of credit of $150.0 million.
On July 18, 2025, we completed the divestiture of our global Cleaners & Disinfectants business to Kersia Group for $130.0 million in cash at closing, plus contingent consideration tied to future performance of the business. Net proceeds from the transaction will be used primarily to repay debt in the first quarter of fiscal year 2026.
In June 2022, Neogen Food Safety Corporation entered into a credit agreement consisting of a five-year senior secured term loan facility (“term loan facility”) in the amount of $650 million and a five-year senior secured revolving facility (“revolving facility”) in the amount of $150 million (collectively, the “Credit Facilities”).
On April 4, 2025, Neogen Food Safety Corporation entered into the Amendment No. 1 and Refinancing Amendment to Credit Agreement (the “Refinancing Amendment”), which amended the existing credit agreement, dated June 30, 2022. The Refinancing Amendment, among other things, provides for (i) a new tranche of senior secured term loans in an aggregate principal amount of $450 million (the “2025 Term
37
Loans”) and (ii) a revolving credit facility in an aggregate principal amount of $250 million, against which $100 million has been drawn (the “2025 Revolving Facility”). The 2025 Term Loans will mature on April 4, 2030. The 2025 Revolving Facility will terminate on the earlier of April 4, 2030, or the date on which the revolving commitments under the 2025 Revolving Facility are terminated. The Refinancing Amendment lowered the spread on the term loan and revolver facility borrowings from 2.35% to 1.75% based on a net leverage ratio being greater than 3.0 to 1.0.
In July 2022, Neogen Food Safety Corporation closed on an offering of $350 million aggregate principal amount of 8.625% senior notes due in 2030.
The Company has a single finance lease that is a building lease classified within property and equipment and the current portion of debt on the consolidated balance sheets as of May 31, 2025 and May 31, 2024. The Company intends to elect the purchase option within the lease agreement prior to the end of the lease term.
Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. As of May 31, 2025, the Company was in compliance with all financial covenants under the Credit Facilities.
Cash Flows
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
Increase / (Decrease) |
|
|||
Net Cash provided by Operating Activities |
|
$ |
58,244 |
|
|
$ |
35,264 |
|
|
$ |
22,980 |
|
Net Cash (used for) provided by Investing Activities |
|
$ |
(99,195 |
) |
|
$ |
(29,309 |
) |
|
$ |
(69,886 |
) |
Net Cash (used for) provided by Financing Activities |
|
$ |
(1,598 |
) |
|
$ |
1,918 |
|
|
$ |
(3,516 |
) |
Net Cash provided by Operating Activities
Net cash provided by operating activities increased $23.0 million during the twelve months ended May 31, 2025 compared to the twelve months ended May 31, 2024. The increase was primarily the result of working capital items, partially offset by a decrease in income from operations. Prior year net working capital reflected large net cash outflows due to inventory purchases, as we exited transition service agreements and stocked FSD inventory.
Net Cash used for Investing Activities
Net cash used for investing activities increased $69.9 million during the twelve months ended May 31, 2025 compared to the twelve months ended May 31, 2024. The increase was primarily the result of lower proceeds from sales of marketable securities in the current year period, partially offset by a decrease in capital expenditures and higher proceeds from the sale of a building in the current year. Capital expenditures were $104.6 million and $111.4 million during the twelve months ended May 31, 2025 and 2024, respectively.
Net Cash (used for) provided by Financing Activities
Net cash (used for) provided by financing activities was a net $3.5 million outflow during the twelve months ended May 31, 2025 compared to the twelve months ended May 31, 2024. The net outflow was primarily due to taxes paid on employees' share-based compensation and debt issuance costs paid.
We continue to make investments in our business and operating facilities. Our estimate for capital expenditures in fiscal 2026 is approximately $50 million. This includes approximately $35 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.
38
Contractual Obligations As of May 31, 2025, 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 |
|
|
$ |
19,225 |
|
|
$ |
67,500 |
|
|
$ |
465,625 |
|
|
$ |
350,000 |
|
Interest obligations |
|
|
287,586 |
|
|
|
62,786 |
|
|
|
170,462 |
|
|
|
50,229 |
|
|
|
4,109 |
|
Operating Leases |
|
|
23,821 |
|
|
|
6,257 |
|
|
|
7,875 |
|
|
|
2,916 |
|
|
|
6,773 |
|
Purchase Obligations (1) |
|
|
101,436 |
|
|
|
97,340 |
|
|
|
4,096 |
|
|
|
— |
|
|
|
— |
|
|
|
$ |
1,315,193 |
|
|
$ |
185,608 |
|
|
$ |
249,933 |
|
|
$ |
518,770 |
|
|
$ |
360,882 |
|
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. The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including but not limited to, those related to receivable allowances, inventories and intangible assets. 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.
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. Under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and for tax credit carryforwards and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax expense represents the change in net deferred income tax assets and liabilities during the year. The determination of income subject to income tax in each tax paying jurisdiction requires us to apply transfer pricing guidelines for certain intercompany transactions.
Our tax rate is subject to adjustment over the balance of the year due to, among other things, income tax rate changes by governments; the jurisdictions in which our profits are determined to be earned and taxed; changes in the valuation of our deferred tax assets and liabilities; adjustments to our interpretation of transfer pricing standards; changes in available tax credits or other incentives; changes in stock-based compensation expense; changes in tax laws or the interpretation of such tax laws; and changes in U.S. generally accepted accounting principles.
Although we believe our tax estimates are reasonable and we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any audit, and any related litigation, could be materially different from our estimates or from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments.
39
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. We may elect to assess qualitative factors as a basis for determining whether it is necessary to perform quantitative impairment testing. If management’s assessment and conclusion of these qualitative factors indicates that it is more likely than not that the fair value of the reporting unit is more than its carrying value, then no further testing is required. Otherwise, the reporting unit is quantitatively tested for impairment.
Our business is organized into two reporting units: Food Safety and Animal Safety. The determination of our reporting units and impairment indicators also require us to make significant judgments.
In performing goodwill impairment testing, we utilize a third-party valuation specialist to assist management in determining the fair value of our reporting units. 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. The discounted cash flows approach is based on the reporting unit’s forecasted future cash flows, including forecasted revenue growth rates and gross margin assumptions, that are discounted to present value using the reporting unit’s weighted average cost of capital (WACC) as the discount rate. For the market-based approach, management uses the guideline public company method. The guideline public company method analyzes market multiples of revenues and earnings before interest, taxes, depreciation and amortization (“EBITDA”) for a group of comparable public companies. Valuation multiples are calculated utilizing actual transaction prices and revenue/EBITDA data from target companies deemed similar to the reporting unit. Management typically assigns more weight to the income-based valuation method. Management also evaluates the fair value estimates of the reporting units in the context of the Company’s total enterprise market value.
Based on the estimated fair value developed from the income and market-based methods, we determine the estimated fair value of the reporting unit. If the estimated fair value of the reporting unit exceeds its carrying value, the goodwill is not impaired and no analysis is required. However, if the estimated fair value of the reporting unit is less than its carrying value, the impairment loss is calculated as the difference between the carrying value of the reporting unit and the estimated fair value, limited to the amount of the goodwill assigned to the reporting unit.
We develop our estimates based on information available as of the date of our assessment, using assumptions we believe market participants would use in performing an independent valuation of the business. Although we believe the estimates and assumptions used in the impairment assessment are reasonable and appropriate, it is possible that the assumptions and conclusions regarding the impairment of goodwill of the reporting unit could change in future periods. There can be no assurance the estimates and assumptions, in particular our long-term financial projections, that are based on information that are known or knowable by us at the time of our goodwill impairment assessment will prove to be accurate predictions of the future, if, for example, (i) the reporting unit does not perform as projected, (ii) overall economic conditions in future years vary from current assumptions (including a change in the discount rate), (iii) business conditions or strategies change from current assumptions, including loss of major customers or channels, (iv) investors require higher rates of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA.
See Note 6 "Goodwill and Other Intangible Assets" for further detail on the results of our goodwill impairment tests conducted in fiscal year 2025.
NEW ACCOUNTING PRONOUNCEMENTS
See discussion of any New Accounting Pronouncements in Note 1 to consolidated financial statements.
40
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. Revenues in certain foreign countries as well as certain expenses related to those revenues are transacted in currencies other than the U.S. dollar. As such, our operating results are exposed to changes in exchange rates. When the U.S. dollar weakens against foreign currencies, the dollar value of revenues denominated in foreign currencies increases. When the U.S. dollar strengthens, the opposite situation occurs. Additionally, previously invoiced amounts can be positively or negatively affected by changes in exchange rates in the course of collection. We use derivative financial instruments to help manage the economic impact of fluctuations in certain currency exchange rates. These contracts are adjusted to fair value through earnings.
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. 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. As of May 31, 2025 and when including our interest rate swap, approximately 38.9% of our total debt was at variable interest rates.
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, 2025 |
|
|
Impact |
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
Foreign Currency — Revenue |
|
10% depreciation in exchange rates relative to USD |
|
$ |
(44,873 |
) |
|
Revenue |
Foreign Currency — Hedges |
|
10% depreciation in exchange rates relative to USD |
|
$ |
612 |
|
|
Earnings |
Interest Income |
|
75 basis point decrease in interest rates |
|
$ |
(468 |
) |
|
Earnings |
Interest Expense |
|
75 basis point increase in interest rates |
|
$ |
(2,625 |
) |
|
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.
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 2025, international revenues accounted for 50.2% of our consolidated net revenues.
41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this report starting on page 58.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE—NONE
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d[1]15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of May 31, 2025, was carried out under the supervision and with the participation of the Company’s management, including the President & Chief Executive Officer and Chief Financial Officer (“the Certifying Officers”), using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on the evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were not effective as of such date due to material weaknesses in internal control over financial reporting, referenced below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13-a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision of and with the participation of our management, including the Chief Executive Officer, Chief Financial Officer and the Chief Accounting Officer, we assessed the effectiveness of our internal control over financial reporting as of May 31, 2025, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). The objective of this assessment was to determine whether our internal control over financial reporting was effective as of May 31, 2025. Based on management’s assessment, we have concluded that our internal control over financial reporting was ineffective as of May 31, 2025, due to the material weaknesses relating to our control activities as well as the related information and communication processes described below.
42
Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
Remediation of Previously Identified Material Weaknesses
Management's assessment of the Company’s internal control over financial reporting identified the following material weaknesses that existed as of May 31, 2023 and 2024. As of May 31, 2025, management believes our remediation efforts have been effective with respect to these material weaknesses and that the associated controls are now effective as of May 31, 2025:
In fiscal year 2025, we implemented measures designed to improve internal control over financial reporting to remediate the controls that led to the material weaknesses described above. Such remediation measures included:
Identified Material Weaknesses
As a result of management’s assessment of the Company’s internal control over financial reporting, we have concluded that as of May 31, 2025, the Company had deficiencies in the control activities and information and communication components of the COSO Framework that constitute material weaknesses, either individually or in aggregate.
Control Activities
We did not design, implement, and/or operate effective control activities, across substantially all of the Company’s business and financial reporting processes to adequately achieve complete and accurate financial accounting, reporting, and disclosures based on the criteria established in the COSO Framework and we identified deficiencies in the principles associated with the control activities component of the COSO
43
Framework. The following items contributed to the material weakness in control activities, either individually or in aggregate:
Information and Communication
We did not consistently generate or provide adequate quality supporting information and communication based on the criteria established in the COSO Framework and we identified deficiencies in the principles associated with the information and communication component of the COSO Framework. The following were contributing factors to the material weakness in information and communication:
These control deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis, and therefore, we concluded that the deficiencies represent material weaknesses. As a result of these material weaknesses, management has concluded that our internal control over financial reporting was not effective as of May 31, 2025.
However, after giving full consideration to these material weaknesses, and the additional analyses and other procedures that we performed to ensure that our consolidated financial statements were prepared in accordance with US GAAP, we have concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with US GAAP.
The Company’s independent registered public accounting firm, BDO USA, P.C., which has audited and reported on our consolidated financial statements, issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of May 31, 2025, which is included in this annual report below.
Ongoing Remediation Efforts
Management continues to implement and evaluate measures designed to remediate control deficiencies and enhance the overall internal control environment. These actions are intended to ensure that internal controls are properly designed, effectively implemented, and reliably operated. Our ongoing and prospective initiatives include:
44
Changes in Internal Control over Financial Reporting
Other than with respect to the remediation efforts in connection with the material weaknesses described above, no changes in our internal control over financial reporting were identified as having occurred during the fourth quarter of fiscal year 2025 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
45
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Neogen Corporation
Lansing, Michigan
Opinion on Internal Control over Financial Reporting
We have audited Neogen Corporation’s (the “Company’s”) internal control over financial reporting as of May 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of May 31, 2025, based on the COSO criteria. We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of May 31, 2025 and 2024, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended May 31, 2025, and the related notes (collectively referred to as “the financial statements”) and our report dated July 30, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses were identified regarding management’s failure to design and maintain controls (i) to adequately achieve complete and accurate financial accounting, reporting and disclosures and (ii) to consistently retain information and documentation to adequately support functions of internal control or communicate information internally to personnel. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 consolidated financial statements, and this report does not affect our report dated July 30, 2025 on those consolidated financial statements.
46
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, P.C.
Grand Rapids, Michigan
July 30, 2025
47
ITEM 9B. OTHER INFORMATION
The Company’s Board of Directors appointed Mikhael Nassif to the Board of Directors, effective August 11, 2025. Mr. Nassif was appointed as the President and CEO of the Company, also effective August 11, 2025. As a non-independent director, it is not expected that Mr. Nassif will serve on any Board committees. Mr. Nassif will not receive any additional compensation for his service as a director of the Company.
During the quarterly period ended May 31, 2025, no director or officer (as defined in SEC Rule 16a-1(f)) of the Company
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS—NOT APPLICABLE
48
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding the Company, certain corporate governance matters and information about our executive officers appearing under the captions “Proposal 1 — Election of Directors,” “Information About the Board and Corporate Governance Matters,” “Information about our Executive Officers,” and “Additional Information-Delinquent Section 16(a) Reports” is incorporated by reference to Neogen’s 2025 proxy statement to be filed within 120 days of May 31, 2025.
We have adopted a Code of Conduct that applies to our directors, officers, and employees. This Code of Conduct is available on our website at https://www.Neogen.com/globalassets/pdfs/corporate-governance-sec-and-investor-information/codeofconduct.pdf. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of the code of conduct for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website.
We have
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the sections entitled “Compensation Discussion and Analysis”, “Compensation Committee Report”, “Executive Compensation”, "Compensation Committee Interlocks and Insider Participation”, “CEO Pay Ratio”, “Pay Versus Performance,” and “Compensation of Directors” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2025.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference from the section entitled “Security Ownership of Certain Beneficial Owners, Directors and Management” and “Equity Compensation Plan Information” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2025.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference from the section entitled “Information about the Board and Corporate Governance Matters-Independent Directors,” “Board Committees” and “Certain Relationships and Related Party Transactions” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2025.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference from the section entitled “Proposal 3 — Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2025.
49
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) and (2) and (c). The response to this portion of ITEM 15 is submitted as a separate section of this report starting on page 58.
(a) (3) and (b). The Exhibits, listed in the Exhibit Index below, are incorporated herein by reference.
ITEM 16. FORM 10-K SUMMARY — NONE
Neogen Corporation
Annual Report on Form 10-K
Year Ended May 31, 2025
EXHIBIT INDEX
EXHIBIT NO. |
|
DESCRIPTION |
|
|
|
|
|
|
|
|
|
3 |
|
Article of Incorporation and Bylaws |
3.1 |
|
Restated Articles of Incorporation filed February 14, 2000, as amended on November 23, 2011 (incorporated by reference to Exhibit 3.1 to the Quarterly Report filed December 30, 2011). |
3.2 |
|
Certificate of Amendment to Articles of Incorporation filed on October 11, 2010 (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed July 30, 2020). |
3.3 |
|
Certificate of Amendment to Articles of Incorporation filed on November 20, 2018 (incorporated by reference to Exhibit 3 filed with the Registrant’s Quarterly Report on Form 10-Q filed December 28, 2018). |
3.4 |
|
Certificate of Amendment to Articles of Incorporation of Neogen Corporation filed on March 14, 2022 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by Neogen Corporation on March 17, 2022). |
3.5 |
|
Certificate of Amendment to Articles of Incorporation of Neogen Corporation filed on September 1, 2022 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
3.6 |
|
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed October 31, 2023). |
|
|
|
4 |
|
Instruments Defining the Rights of Security Holders, Including Indentures |
4.1 |
|
Senior Notes Indenture for 8.625% Senior Notes due 2030, dated as of July 20, 2022, among Neogen Food Safety Corporation, as issuer, the guarantors party thereto from time to time, and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-4 (No. 333-263667), filed July 27, 2022). |
4.2 |
|
Supplemental Indenture, dated as of September 1, 2022, among Neogen Food Safety Corporation, as issuer, U.S. Bank Trust Company, National Association, as trustee, Neogen Corporation and certain of its subsidiaries (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed September 1, 2022). |
4.3 |
|
Description of the Common Stock of Neogen Corporation (incorporated by reference to Exhibit 4.3 to the Annual Report on Form 10-K filed July 30, 2024). |
|
|
|
10 |
|
Material Contracts |
10.1 |
|
Agreement and Plan of Merger, dated as of December 13, 2021, by and among 3M Company, Garden SpinCo Corporation, Neogen Corporation, and Nova RMT Sub, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed December 15, 2021). * |
10.2 |
|
Separation and Distribution Agreement, dated as of December 13, 2021, by and among 3M Company, Garden SpinCo Corporation, and Neogen Corporation (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed December 15, 2021). * |
50
EXHIBIT NO. |
|
DESCRIPTION |
10.3 |
|
Amendment No. 1 to the Separation and Distribution Agreement, dated as of August 31, 2022, by and among 3M Company, Garden SpinCo Corporation, and Neogen Corporation (incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K filed September 1, 2022). * |
10.4 |
|
Asset Purchase Agreement, dated as of December 13, 2021, by and between 3M Company and Neogen Corporation (incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K filed December 15, 2021). * |
10.5 |
|
Tax Matters Agreement, dated as of September 1, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
10.6 |
|
Intellectual Property Cross-License Agreement, dated as of September 1, 2022, by and between 3M Company and Neogen Food Safety Corporation (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
10.7 |
|
Trademark Transitional License Agreement, dated as of September 1, 2022, by and among 3M Company, 3M Innovative Properties Company, Neogen Corporation and Neogen Food Safety Corporation (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
10.8 |
|
Transition Services Agreement, dated as of September 1, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
10.9 |
|
Transition Distribution Services Agreement, dated as of September 1, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
10.10 |
|
Transition Contract Manufacturing Agreement, dated as of September 1, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
10.11 |
|
Clean-Trace(TM) Distribution Agreement, dated as of September 1, 2022, by and between 3M Company and Neogen Food Safety Corporation (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
10.12 |
|
Real Estate License Agreement, dated as of September 1, 2022, by and among certain subsidiaries of Neogen Corporation, 3M Company and certain of its subsidiaries (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022). |
10.13 |
|
Credit Agreement, dated as of June 30, 2022, among Neogen Food Safety Corporation, as borrower, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, and joined thereto as of September 1, 2022 by Neogen Corporation, as a borrower (incorporated by reference to Exhibit 10.9 to Neogen’s Registration Statement on Form S-4 (Registration No. 333-263667), filed with the SEC on July 27, 2022). |
10.14 |
|
Amendment No.1 and Refinancing Amendment to Credit Agreement, dated as of April 4, 2025, among Neogen Corporation, Neogen Food Safety Corporation, as borrowers, and certain subsidiaries, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on April 7, 2025). |
10.15 |
|
Neogen Corporation 2018 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed August 28, 2018).(1) |
10.16 |
|
Neogen Corporation 2023 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed September 18, 2023). (1) |
10.17 |
|
Form of Management Stock Option Award Agreement (incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K filed July 30, 2024). (1). |
10.18 |
|
Form of Management Restricted Share Unit Award Agreement (incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K filed July 30,2024). (1) |
51
EXHIBIT NO. |
|
DESCRIPTION |
10.19 |
|
Form of Severance Letter Agreement entered into with executive officers (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed October 31, 2023). (1) |
10.20 |
|
Option Agreement between Neogen Corporation and David H. Naemura, dated October 26, 2023 (incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K filed July 30,2024). (1) |
10.21 |
|
Transition Agreement between Neogen Corporation and John Adent dated April 8, 2025 (incorporated by reference to Exhibit 10.1 to the Current report on Form 8-K filed April 9, 2025.) |
|
|
|
19 |
|
Neogen Corporation Insider Trading Policy (incorporated by reference to Exhibit 19 to the Annual Report on Form 10-K filed July 30, 2024). |
21 |
|
Listing of Subsidiaries |
|
|
|
23 |
|
Consent of Independent Registered Public Accounting Firm BDO USA, P.C. |
|
|
|
24 |
|
Power of Attorney |
|
|
|
31.1 |
|
Section 302 Certification of Principal Executive Officer |
|
|
|
31.2 |
|
Section 302 Certification of Principal Financial Officer |
|
|
|
32 |
|
Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
97 |
|
Clawback Policy (incorporated by reference to Exhibit 97 to the Annual Report on Form 10-K filed July 30, 2024) |
101.INS |
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Exhibits, schedules, and annexes have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be supplementally provided to the SEC upon request.
(1) Denotes compensatory plan or arrangement
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEOGEN CORPORATION |
||||
|
|
|
|
|
/s/ John E. Adent
|
|
/s/ David H. Naemura
|
|
/s/ John P. Moylan |
John E. Adent, President & Chief |
|
David H. Naemura, |
|
John P. Moylan, |
Executive Officer |
|
Chief Financial & Operating Officer |
|
Chief Accounting Officer |
(Principal Executive Officer) |
|
(Chief Financial Officer) |
|
(Principal Accounting Officer) |
|
|
|
|
|
Dated: July 30, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
53
Signature
|
Title
|
Date
|
|
|
|
/s/ John E. Adent
|
President & Chief Executive Officer |
July 30, 2025 |
John E. Adent |
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ David H. Naemura |
Chief Financial & Operating Officer |
July 30, 2025 |
David H. Naemura |
(Chief Financial Officer) |
|
|
|
|
|
|
|
/s/ John P. Moylan |
Chief Accounting Officer |
July 30, 2025 |
John P. Moylan |
(Principal Accounting Officer) |
|
|
|
|
*
|
Chairman of the Board of Directors |
July 30, 2025 |
James C. Borel |
|
|
|
|
|
* |
Director |
July 30, 2025 |
Thierry Bernard |
|
|
|
|
|
*
|
Director |
July 30, 2025 |
William T. Boehm, Ph.D. |
|
|
|
|
|
*
|
Director |
July 30, 2025 |
Jeffrey D. Capello |
|
|
|
|
|
*
|
Director |
July 30, 2025 |
Ronald D. Green, Ph.D. |
|
|
|
|
|
*
|
Director |
July 30, 2025 |
Aashima Gupta |
|
|
|
|
|
*
|
Director |
July 30, 2025 |
Raphael A. Rodriguez |
|
|
|
|
|
*
|
Director |
July 30, 2025 |
Andrea F. Wainer |
|
|
|
|
|
*
|
Director |
July 30, 2025 |
Catherine E. Woteki, Ph.D. |
|
|
54
ANNUAL REPORT ON FORM 10-K
ITEM 15 (a)(1)(a)(2) and (c)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED MAY 31, 2025
NEOGEN CORPORATION
LANSING, MICHIGAN
FORM 10-K—ITEM 15(a)(1) AND (2) AND 15(c)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Neogen Corporation and subsidiaries are included below and incorporated in ITEM 8:
Report of Independent Registered Public Accounting Firm, |
56 |
|
|
Consolidated Balance Sheets |
58 |
|
|
Consolidated Statements of Operations |
59 |
|
|
Consolidated Statements of Comprehensive (Loss) Income |
60 |
|
|
Consolidated Statements of Stockholders’ Equity |
61 |
|
|
Consolidated Statements of Cash Flows |
62 |
|
|
Notes to Consolidated Financial Statements |
63 |
55
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Neogen Corporation
Lansing, Michigan
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Neogen Corporation (the “Company”) as of May 31, 2025 and 2024, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended May 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated July 30, 2025 expressed an adverse opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment – Food Safety & Animal Safety Reporting Units
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s goodwill balance was $1.065 billion at May 31, 2025, of which $0.997 billion is allocated to the Company’s Food Safety reporting unit and $0.068 billion to the Animal Safety reporting unit. Management reviews the carrying amounts of goodwill annually at the reporting unit level, or when indications of impairment exist, to determine if goodwill
56
may be impaired. Goodwill is tested for impairment annually in the fourth quarter of the Company’s fiscal year. The Company estimates the fair value of its reporting units using a combination of discounted cash flows and market-based approaches. As disclosed by management, the discounted cash flows approach is based on the reporting unit’s forecasted cash flows, including forecasted revenue growth rates and gross margins assumptions, that are discounted to present value using the reporting unit’s weighted average cost of capital (“WACC”) as the discount rate. The Company recognized $1.059 billion of impairment during the year ended May 31, 2025.
We identified the Goodwill Impairment Assessment related to the Food Safety and Animal Safety reporting units as a critical audit matter. The determination of fair value of each reporting unit requires management to make assumptions used in the discounted cash flows approach, including the assumptions of forecasted revenue growth rates, gross margins, and the discount rate. Auditing management’s assumptions used in the calculation of the fair value of reporting units involved especially challenging and subjective auditor judgment, including the extent of specialized knowledge or skill needed.
The primary procedures we performed to address this critical audit matter included:
/s/ BDO USA, P.C.
We have served as the Company’s auditor since 2014.
Grand Rapids, Michigan
July 30, 2025
57
Neogen Corporation
Consolidated Balance Sheets
(in thousands, except shares)
|
|
May 31 |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Assets |
|
|
|
|
|
|
||
Current Assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Marketable securities |
|
|
— |
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
||
Inventory, net |
|
|
|
|
|
|
||
Assets held for sale |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total Current Assets |
|
|
|
|
|
|
||
Property and Equipment |
|
|
|
|
|
|
||
Land and improvements |
|
|
|
|
|
|
||
Building and improvements |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Total Property and Equipment |
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and Equipment, net |
|
|
|
|
|
|
||
Other Assets |
|
|
|
|
|
|
||
Right of use assets (note 5) |
|
|
|
|
|
|
||
Goodwill (note 6) |
|
|
|
|
|
|
||
Amortizable intangible assets, net (note 6) |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Total Other Assets |
|
|
|
|
|
|
||
Total Assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
|
||
Current portion of debt |
|
$ |
|
|
$ |
|
||
Accounts payable |
|
|
|
|
|
|
||
Accrued compensation |
|
|
|
|
|
|
||
Income tax payable (note 11) |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Liabilities held for sale |
|
|
|
|
|
— |
|
|
Other current liabilities |
|
|
|
|
|
|
||
Total Current Liabilities |
|
|
|
|
|
|
||
Deferred Income Tax Liability (note 11) |
|
|
|
|
|
|
||
Non-Current Debt (note 9) |
|
|
|
|
|
|
||
Other Non-Current Liabilities |
|
|
|
|
|
|
||
Total Liabilities |
|
|
|
|
|
|
||
(note 12) |
|
|
|
|
|
|
||
Stockholders’ Equity |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Retained earnings (accumulated deficit) |
|
|
( |
) |
|
|
|
|
Total Stockholders’ Equity |
|
|
|
|
|
|
||
Total Liabilities and Stockholders’ Equity |
|
$ |
|
|
$ |
|
||
See accompanying notes to consolidated financial statements.
58
Neogen Corporation
Consolidated Statements of Operations
(in thousands, except shares)
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Revenues |
|
|
|
|
|
|
|
|
|
|||
Product revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Service revenues |
|
|
|
|
|
|
|
|
|
|||
Total Revenues |
|
|
|
|
|
|
|
|
|
|||
Cost of Revenues |
|
|
|
|
|
|
|
|
|
|||
Cost of product revenues |
|
|
|
|
|
|
|
|
|
|||
Cost of service revenues |
|
|
|
|
|
|
|
|
|
|||
Cost of Revenues |
|
|
|
|
|
|
|
|
|
|||
Gross Profit |
|
|
|
|
|
|
|
|
|
|||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|||
Goodwill impairment |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
Total Operating Expenses |
|
|
|
|
|
|
|
|
|
|||
Operating Loss (Income) |
|
|
( |
) |
|
|
|
|
|
|
||
Other Expense |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total Other Expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss Before Taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income Tax (Benefit) Expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net Loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net Loss Per Share |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
|
|
|
|
|
|
|
|||
Diluted |
|
|
|
|
|
|
|
|
|
|||
See accompanying notes to consolidated financial statements.
59
Neogen Corporation
Consolidated Statements of Comprehensive (Loss) Income
(in thousands)
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Net Loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|||
Foreign currency translations gain (loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Unrealized gain on marketable securities(1) |
|
|
|
|
|
|
|
|
|
|||
Unrealized (loss) gain on derivative instruments(2) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
( |
) |
||
Total Comprehensive Loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1)
(2)
See accompanying notes to consolidated financial statements.
60
Neogen Corporation
Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Retained Earnings |
|
|
|
|
||||||
|
|
Common Stock |
|
|
Paid-in |
|
|
|
|
|
(Accumulated |
|
|
Total |
|
||||||||
|
|
Shares |
|
Amount |
|
|
Capital |
|
|
AOCI |
|
|
Deficit) |
|
|
Equity |
|
||||||
May 31, 2022 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Exercise of options and RSUs |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Issuance of shares under employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Issuance of shares for 3M transaction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other comprehensive loss |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
May 31, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Exercise of options and RSUs |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Issuance of shares under employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Net loss |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
May 31, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Exercise of options and RSUs |
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Issuance of shares under employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Net loss |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
May 31, 2025 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
See accompanying notes to consolidated financial statements.
61
Neogen Corporation
Consolidated Statements of Cash Flows
(in thousands)
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Cash Flows provided by Operating Activities |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Impairment of discontinued product lines |
|
|
|
|
|
|
|
|
|
|||
(Gain) loss on sale of minority interest |
|
|
|
|
|
( |
) |
|
|
|
||
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
|
|||
(Gain) loss on disposal of property and equipment |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|||
Goodwill and other long-lived asset impairment |
|
|
|
|
|
|
|
|
|
|||
Loss on refinancing and extinguishment of debt |
|
|
|
|
|
|
|
|
|
|||
Right of use asset amortization |
|
|
|
|
|
|
|
|
|
|||
Other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Changes in operating assets and liabilities, net of business acquisitions: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable, net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Inventories, net |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Accounts payable and accrued liabilities |
|
|
( |
) |
|
|
|
|
|
|
||
Interest expense accrual |
|
|
|
|
|
( |
) |
|
|
|
||
Changes in other non-current assets and non-current liabilities |
|
|
|
|
|
( |
) |
|
|
|
||
Net Cash provided by Operating Activities |
|
|
|
|
|
|
|
|
|
|||
Cash Flows (used for) provided by Investing Activities |
|
|
|
|
|
|
|
|
|
|||
Purchase of property, equipment and other non-current intangible assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from the maturities of marketable securities |
|
|
|
|
|
|
|
|
|
|||
Purchase of marketable securities |
|
|
|
|
|
|
|
|
( |
) |
||
Business acquisitions, net of cash acquired |
|
|
|
|
|
|
|
|
|
|||
Proceeds from the sale of property and equipment and other |
|
|
|
|
|
|
|
|
|
|||
Net Cash (used for) provided by Investing Activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Cash Flows (used for) provided by Financing Activities |
|
|
|
|
|
|
|
|
|
|||
Exercise of stock options and issuance of employee stock purchase plan shares |
|
|
|
|
|
|
|
|
|
|||
Tax payments related to share-based awards |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
|
|
|
|||
Repayment of long-term debt |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Proceeds from issuance of revolving credit facility |
|
|
|
|
|
|
|
|
|
|||
Debt issuance costs paid |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Repayment of finance lease and other |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net Cash (used for) provided by Financing Activities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Effects of Foreign Exchange Rate on Cash |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net (Decrease) Increase in Cash and Cash Equivalents |
|
|
( |
) |
|
|
|
|
|
|
||
Cash and Cash Equivalents, Beginning of Year |
|
|
|
|
|
|
|
|
|
|||
Cash and Cash Equivalents, End of Year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplementary Cash Flow Information |
|
|
|
|
|
|
|
|
|
|||
Cash paid for interest |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Property and equipment obtained for noncash consideration |
|
$ |
|
|
|
|
|
|
|
|||
Income taxes paid, net of refunds |
|
$ |
|
|
$ |
|
|
$ |
|
|||
See accompanying notes to consolidated financial statements.
62
NEOGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands)
Organization
Neogen Corporation and subsidiaries ("Neogen," "we," "our," or the "Company") develop, manufacture and market a diverse line of products and services dedicated to food and animal safety. 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. Our 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.
Basis of Consolidation
The consolidated financial statements include the accounts of Neogen Corporation and its subsidiaries, all of which are wholly-owned as of May 31, 2025.
All intercompany accounts and transactions have been eliminated in consolidation.
Functional Currency
Our functional currency is the U.S. dollar. We translate our non-U.S. operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in other comprehensive (loss) income. Gains or losses from foreign currency transactions are included in other (expense) income on our consolidated statements of operations. During fiscal years 2025, 2024 and 2023, the Company incurred $
New Accounting Pronouncements Adopted
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which modifies the disclosure and presentation requirements of reportable segments. The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit and loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The Company adopted this pronouncement and provided required disclosures in Note 15 "Segment Information" to the consolidated financial statements. The Company will adopt the interim requirements on June 1, 2025.
63
New Accounting Pronouncements Not Yet Adopted
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and in foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
Income Statement (Topic 220): Expense Disaggregation Disclosures
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires a public business entity to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact that the new guidance will have on the presentation of its consolidated financial statements and accompanying notes.
Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents consist of bank demand accounts, savings deposits, certificates of deposit and commercial paper with original maturities of 90 days or less. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced losses related to these balances and believes it is not exposed to significant credit risk regarding its cash and cash equivalents. The carrying value of these assets approximates fair value due to the short maturity of these instruments and is classified as Level 1 in the fair value hierarchy. Cash held by foreign subsidiaries was $
Marketable Securities
The Company had marketable securities held by banks or broker-dealers consisting of commercial paper and corporate bonds rated at least A-1/P-1 (short-term) and A/A2 (long-term) with original maturities between
64
Marketable Securities as of May 31, 2025 and 2024 are listed below by classification and remaining maturities.
|
|
|
|
Year Ended May 31, |
|
|||||
|
|
Maturity |
|
2025 |
|
|
2024 |
|
||
Commercial Paper & Corporate Bonds |
|
|
$ |
|
|
$ |
|
|||
Total Marketable Securities |
|
|
|
$ |
|
|
$ |
|
||
The components of marketable securities as of May 31, 2024 are as follows:
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair Value |
|
||||
Commercial Paper & Corporate Bonds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Derivative Financial Instruments
The Company operates on a global basis and is exposed to the risk that its financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates and changes in interest rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, the Company enters into derivative financial instruments in the form of foreign currency exchange forward contracts with a major financial institution and has also entered into interest rate swap contracts as a hedge against changes in interest rates. Management settles its foreign currency forward contracts monthly with its one counterparty. There are no collateral or margin requirements as part of these forward contracts. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. For the Company's interest rate swap derivative, the Company designated it as a cash flow hedge in accordance with its established policy. The interest rate swap derivative is a bilateral agreement with no margin requirements. Each reporting period, derivatives are recorded at fair value in other current assets, other assets, accrued liabilities and other long-term liabilities. The change in fair value is recorded in accumulated other comprehensive loss, and amounts are reclassified into interest expense on the consolidated statements of operations when transactions are realized. Derivatives that are not designated as hedges are adjusted to fair value with a corresponding adjustment to earnings. The Company does not enter into derivative financial instruments for trading or speculative purposes.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect amounts reflected in the consolidated financial statements. Considerable judgment is often involved in making such estimates, and the use of different assumptions could result in different conclusions. The most significant estimates include our evaluation of goodwill impairment, deferred taxes, intangible assets acquired, and fair value measurements. Management believes its assumptions and estimates are reasonable and appropriate. However, actual results could differ from those estimates.
Accounts Receivable and Concentrations of Credit Risk
Financial instruments which potentially subject Neogen to concentrations of credit risk consist principally of accounts receivable. Management attempts to minimize credit risk by reviewing customers’ credit histories before extending credit and by monitoring credit exposure on a regular basis. Collateral or other security is generally not required for accounts receivable. As of May 31, 2025, 2024, and 2023 accounts receivable, net was $
65
receivable as of May 31, 2025 or 2024, respectively.
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Beginning Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Provision |
|
|
|
|
|
|
|
|
|
|||
Recoveries |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Write-offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reclass to held for sale (1) |
|
|
( |
) |
|
|
|
|
|
|
||
Ending Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
(1)
Inventories
Inventories are stated at the lower of cost or net realizable value, determined on the first-in, first-out method. The components of inventories were as follows:
|
|
Year Ended May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Raw Materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Inventory reserve |
|
|
( |
) |
|
|
( |
) |
Inventory, net |
|
$ |
|
|
$ |
|
||
The Company’s inventories are analyzed for slow moving, expired and obsolete items on a quarterly basis and the inventory reserve is adjusted as required within cost of revenues. See Note 6 "Goodwill and Other Intangible Assets"
Property and Equipment
Property and equipment is stated at cost. Expenditures for major improvements are capitalized while repairs and maintenance are charged to expense as incurred. Depreciation is provided on the straight line method over the estimated useful lives of the respective assets, which are generally to
During the quarter ended May 31, 2024, the Company reclassified $
Goodwill and Other Intangible Assets
Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets. The Company's business is organized into
66
pattern in which the economic benefits are consumed, while all other amortizable intangibles are amortized on a straight line basis. Intangibles are amortized over
Management reviews the carrying amounts of goodwill annually at the reporting unit level, or when indications of impairment exist, to determine if goodwill may be impaired. Goodwill and indefinite-lived intangibles are tested for impairment annually in the fourth quarter of our fiscal year. During management's annual test or when there are indicators of impairment, if the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis and comparison to comparable EBITDA multiples of peer companies, such assets are reduced to their estimated fair value and a charge is recorded to operations.
Amortizable other intangible assets are tested for impairment when indications of impairment exist. If the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis, such assets are reduced to their estimated fair value and a charge is recorded to operations.
Management reviews the carrying values of its long-lived assets to be held and used, including definite-lived intangible assets, for possible impairment whenever events or changes in business conditions warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows over the remaining useful life of the asset are less than the carrying value of the asset. In such an event, fair value is determined using undiscounted cash flows, and if lower than the carrying value, impairment is recognized through a charge to operations.
Equity Compensation Plans
At May 31, 2025, the Company had stock award plans which are described more fully in Note 10 to the consolidated financial statements.
Research and Development Costs
Research and development costs, which consist primarily of compensation costs, administrative expenses and new product development, among other items, are expensed as incurred.
Advertising Costs
Advertising costs are expensed within sales and marketing as incurred and totaled $
Leases
The Company recognizes, in the consolidated balance sheets, a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. We recognized all leases with terms greater than 12 months in duration on our consolidated balance sheets as right-of-use assets and lease liabilities. Right-of-use assets are recorded in other assets on our consolidated balance sheets. Current and non-current lease liabilities are recorded in other accruals within current liabilities and other non-current liabilities, respectively, on our consolidated balance sheets.
67
We evaluate our contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option.
We have made certain assumptions and judgments when accounting for leases, the most significant of which are:
Revenue Recognition
We determine the amount of revenue to be recognized through application of the following steps:
Neogen’s revenue is generated through contracts with its customers. A performance obligation is a promise in a contract to transfer a product or service to a customer. We generally recognize revenue at a point in time when all of our performance obligations under the terms of a contract are satisfied. Revenue is recognized upon transfer of control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services. The collectability of consideration on the contract is reasonably assured before revenue is recognized. To the extent that customer payment has been received before all recognition criteria are met, these revenues are initially deferred in current liabilities on the consolidated balance sheets and the revenue is recognized in the period that all recognition criteria have been met.
Certain agreements with customers include discounts or rebates on the sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified threshold of goods and services. We account for these discounts as variable consideration and estimate the likelihood of a customer meeting the threshold in order to determine the transaction price using the most predictive approach. We typically use the most-likely-amount method, for incentives that are offered to individual customers, and the expected-value method, for programs that are offered to a broad group of customers. Variable consideration reduces the amount of revenue that is recognized. Rebate obligations related to customer incentive programs are recorded in other current liabilities on the consolidated balance sheets. The rebate estimates are adjusted at the end of each applicable measurement period based on information currently available.
The performance obligations in Neogen’s contracts are generally satisfied well within one year of contract inception. In such cases, management has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component. Management has elected to utilize the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred because the amortization period for the prepaid costs that would otherwise have been deferred and amortized is
68
one year or less. We account for shipping and handling for products as a fulfillment activity when goods are shipped. Shipping and handling costs that are charged to and reimbursed by the customer are recognized as revenues, while the related expenses incurred by Neogen are recorded in sales and marketing expense. These expenses totaled $
Business Combinations
The Company utilizes the acquisition method of accounting for business combinations. This method requires, among other things, that results of operations of acquired companies are included in the Company'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. Valuation specialists are used to develop and evaluate the appropriateness of the fair value estimates, often utilizing cash flow projections and other related valuation techniques. 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
Held for Sale
In accordance with ASC 360-10-45-9, the Company classifies long-lived assets or disposal groups as held for sale when all of the following criteria are met:
When an asset (or disposal group) is classified as held for sale, the Company ceases to depreciate the asset and reports it at the lower of its carrying amount or fair value less costs to sell. Any losses arising from initial classification or subsequent measurement are recognized in the consolidated statements of operations. Gains are not recognized on the sale of a long-lived asset until the date of sale.
Loss Contingencies
Various legal actions, proceedings, and claims (generally, “matters”) are pending or may be instituted or asserted against the Company. The Company accrues for matters when losses are deemed probable and reasonably estimable. However, the ultimate resolutions of these matters are inherently unpredictable and could require payment substantially in excess of the amounts that have been accrued or disclosed. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified.
2. Revenue Recognition
The Company derives revenue from two primary sources — product revenue and service revenue.
Product revenue consists primarily of shipments of:
69
Revenues for Neogen’s products are recognized and invoiced when the product is shipped to the customer.
Service revenue consists primarily of:
Revenues for Neogen’s genomics and commercial laboratory services are recognized and invoiced when the applicable laboratory service is performed and the results are conveyed to the customer.
Payment terms for products and services are generally
Contract liabilities represent deposits made by customers before the satisfaction of performance obligation(s) and recognition of revenue. Upon completion of the performance obligation(s) that the Company has with the customer, the liability for the customer deposit is relieved and revenue is recognized. These customer deposits are recorded within deferred revenue on the consolidated balance sheets. Changes in the balances relate primarily to sales of the Company's genomics services and Neogen Analytics.
The following table summarizes contract liabilities by period:
|
|
Year Ended May 31 , |
|
|
|||||
|
|
2025 |
|
|
2024 |
|
|
||
Beginning balance |
|
$ |
|
|
$ |
|
|
||
Additions |
|
|
|
|
|
|
|
||
Recognized into revenue |
|
|
( |
) |
|
|
( |
) |
|
Ending balance |
|
$ |
|
|
$ |
|
|
||
The following table presents disaggregated revenue by major product and service categories for the years ended May 31, 2025, 2024 and 2023:
|
Year Ended May 31, |
|
|||||||
|
2025 |
|
2024 |
|
2023 |
|
|||
Food Safety: |
|
|
|
|
|
|
|||
Natural Toxins & Allergens |
$ |
|
$ |
|
$ |
|
|||
Bacterial & General Sanitation |
|
|
|
|
|
|
|||
Indicator Testing, Culture Media & Other |
|
|
|
|
|
|
|||
Rodent Control, Insect Control & Disinfectants |
|
|
|
|
|
|
|||
Genomics Services |
|
|
|
|
|
|
|||
|
$ |
|
$ |
|
$ |
|
|||
Animal Safety: |
|
|
|
|
|
|
|||
Life Sciences |
|
|
|
|
|
|
|||
Veterinary Instruments & Disposables |
|
|
|
|
|
|
|||
Animal Care & Other |
|
|
|
|
|
|
|||
Rodent Control, Insect Control & Disinfectants |
|
|
|
|
|
|
|||
Genomics Services |
|
|
|
|
|
|
|||
|
$ |
|
$ |
|
$ |
|
|||
Total Revenue |
$ |
|
$ |
|
$ |
|
|||
70
3. Net Loss Per Share
Basic net loss per share is based on the weighted average number of common shares outstanding during each year. Diluted losses per share is based on the weighted average number of common shares and dilutive potential common shares outstanding. Our dilutive potential common shares outstanding during the years result from dilutive stock options and restricted stock units ("RSUs").
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Numerator for basic and diluted net loss per share — Net Loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator for basic net loss per share — Weighted average shares |
|
|
|
|
|
|
|
|
|
|||
Effect of dilutive stock options and restricted stock units |
|
|
— |
|
|
|
— |
|
|
|
|
|
Denominator for diluted net loss per share |
|
|
|
|
|
|
|
|
|
|||
Net loss attributable per share |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Due to the net loss in fiscal years 2025, 2024, and 2023, the stock options and RSUs are anti-dilutive. At May 31, 2025, May 31, 2024, and May 31, 2023 approximately
4. Assets Held for Sale
In April 2025, the Company announced that it has entered into a definitive agreement to sell its global Cleaners and Disinfectants ("C&D") business to Kersia Group. The transaction is expected to close in the first quarter of the Company's 2026 fiscal year, subject to regulatory approval and customary conditions. The C&D business and the associated assets and liabilities met the criteria for presentation as held for sale as of May 31, 2025. The Company determined that the fair value less cost to sell exceeded the carrying value. Therefore,
The major classes of assets and liabilities held for sale of the C&D business were as followed:
|
Year Ended May 31, 2025 |
|
|
Accounts receivable, net |
$ |
|
|
Inventory, net |
|
|
|
Prepaid expenses and other current assets |
|
|
|
Property and equipment, net |
|
|
|
Right of use assets |
|
|
|
Goodwill |
|
|
|
Amortizable intangible assets, net |
|
|
|
Total assets held for sale |
$ |
|
|
|
|
|
|
Accounts payable |
$ |
|
|
Accrued compensation |
|
|
|
Other current liabilities |
|
|
|
Deferred income tax liability |
|
|
|
Other non-current liabilities |
|
|
|
Total liabilities held for sale |
$ |
|
|
Subsequent Event
71
On July 18, 2025, the Company completed the divestiture of its global C&D business to Kersia Group for $
5. Leases
We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating and finance leases.
Supplemental balance sheet information related to operating and finance leases was as follows:
|
|
Year Ended May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Rights of use - non-current assets |
|
$ |
|
|
$ |
|
||
|
$ |
|
|
$ |
|
|||
|
$ |
|
|
$ |
|
|||
Property and equipment |
|
$ |
|
|
$ |
|
||
|
$ |
|
|
$ |
|
|||
The weighted average remaining lease term and weighted average discount rate were as follows:
|
|
Year Ended May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Operating Leases |
|
|
|
|
|
|
||
Weighted average remaining lease term |
|
|
|
|
||||
Weighted average discount rate |
|
|
% |
|
|
% |
||
|
|
|
|
|
|
|
||
Financing Lease |
|
|
|
|
|
|
||
Weighted average remaining lease term |
|
|
|
|
||||
Weighted average discount rate |
|
|
% |
|
|
% |
||
Operating lease expenses are classified as cost of revenues or operating expenses on the consolidated statements of operations.
|
|
Year Ended May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Operating leases |
|
$ |
|
|
$ |
|
||
Short term leases |
|
|
|
|
|
|
||
Financing lease expense: |
|
|
|
|
|
|
||
Amortization of asset |
|
|
|
|
|
|
||
Interest on lease liability |
|
|
|
|
|
|
||
Total lease expense |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information is as follows:
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|||
Operating cash flows for operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Operating cash flows for finance leases |
|
$ |
|
|
$ |
|
|
|
— |
|
||
Financing cash flows for finance leases |
|
$ |
|
|
$ |
|
|
|
— |
|
||
Non-cash assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
|
|
|
|||
Operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Finance leases |
|
|
— |
|
|
$ |
|
|
|
— |
|
|
72
Future lease payments as of May 31, 2025 are as follows:
|
|
Operating |
|
|
Finance |
|
||
Years ending May 31, |
|
Leases |
|
|
Lease |
|
||
2026 |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
||
2031 and thereafter |
|
|
|
|
|
|
||
Total lease payments |
|
$ |
|
|
$ |
|
||
Less: imputed interest |
|
|
( |
) |
|
|
( |
) |
|
$ |
|
|
$ |
|
|||
As of May 31, 2025, the Company had additional leases, primarily for real estate that have not yet commenced with undiscounted lease payments of approximately $
6. Goodwill and Other Intangible Assets
Goodwill
In the second quarter of fiscal year 2025, the Company identified that the impact of integration challenges and end market conditions on the recent overall financial performance of the Food Safety reporting unit represented a triggering event to test goodwill within that reporting unit for impairment as of the first day of the second quarter of fiscal year 2025. Management utilized a third-party to quantitatively assess its Food Safety reporting unit. Based on the results of the analysis, the carrying value of the Food Safety reporting unit exceeded its fair value. Accordingly, an impairment charge of $
Management also completed the annual impairment analysis of goodwill using a third-party quantitative assessment as of the first day of the fourth quarter of fiscal year 2025. Management utilized a third-party to quantitatively assess its Food Safety and Animal Safety reporting units. Based on the results of the analysis, the carrying value of the Food Safety and Animal Safety reporting units exceeded its fair value as of March 1, 2025. Accordingly, impairment charges of $
Fair value of the reporting unit was estimated based on a combination of an income-based approach, consisting of a discounted cash flows analysis, and 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. The inputs to the fair value are defined in the fair value hierarchy as Level 3 inputs.
The following table summarizes goodwill by reportable segment:
|
|
Food Safety |
|
|
Animal Safety |
|
|
Total |
|
|||
Balance, May 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Acquisitions |
|
|
|
|
|
— |
|
|
|
|
||
Foreign currency translation and other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance, May 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Impairment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency translation and other (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, May 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
73
(1)
Intangible Assets
Definite-lived intangible assets consisted of the following and are included in amortizable intangible assets within the consolidated balance sheets:
|
|
Gross |
|
|
Less |
|
|
Net |
|
|||
Licenses |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Covenants not to compete |
|
|
|
|
|
|
|
|
|
|||
Patents |
|
|
|
|
|
|
|
|
|
|||
Customer relationships intangibles |
|
|
|
|
|
|
|
|
|
|||
Trade names and trademarks |
|
|
|
|
|
|
|
|
|
|||
Developed technology |
|
|
|
|
|
|
|
|
|
|||
Other product and service-related intangibles |
|
|
|
|
|
|
|
|
|
|||
Balance, May 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Licenses |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Covenants not to compete |
|
|
|
|
|
|
|
|
|
|||
Patents |
|
|
|
|
|
|
|
|
|
|||
Customer relationships intangibles |
|
|
|
|
|
|
|
|
|
|||
Trade names and trademarks |
|
|
|
|
|
|
|
|
|
|||
Developed technology |
|
|
|
|
|
|
|
|
|
|||
Other product and service-related intangibles |
|
|
|
|
|
|
|
|
|
|||
Balance, May 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Amortization expense for intangibles totaled $
Estimated amortization expense for fiscal years: 2026—$
If actual market conditions or the Company’s performance are less favorable than those projected by management, or if events occur or circumstances change that would reduce the fair value of the Company’s goodwill or intangible assets below the amount reflected in the balance sheet, the Company may be required to conduct an interim test and possibly recognize impairment charges on its goodwill or intangible assets, which could be material, in future periods.
The amortizable intangible assets' useful lives are as follows:
|
Useful Lives Range |
Licenses |
|
Covenants not to compete |
|
Patents |
|
Customer relationships intangibles |
|
Trade names and trademarks |
|
Developed technology |
|
Other product and service-related intangibles |
All definite-lived intangibles are amortized on a straight line basis with the exception of definite-lived customer relationships intangibles and product and service-related intangibles, which are amortized on either a straight line or an accelerated basis.
During the fourth quarter of fiscal year 2025, the Company identified that recent overall financial performance of its asset groups represented a triggering event to test long-lived assets for impairment as of March 1, 2025.
74
Management utilized a third-party to quantitatively assess its asset groups with an undiscounted cash flow analysis. Based on the results of the analysis, the undiscounted cash flows of the asset groups exceeded their carrying value. Accordingly, a further impairment assessment was not required.
During fiscal year 2023, the Company recorded an impairment of $
Management completed the annual impairment analysis of intangible assets with indefinite lives using a qualitative assessment for fiscal year 2023. Other than the impairment in fiscal year 2023 related to the discrete trademarks discussed above, management determined that other recorded amounts were not impaired and that no additional impairment charges were necessary. In fiscal year 2024, the non-amortizable intangible assets were reclassified to definite-lived intangible assets. In conjunction with the reclassification, management completed an impairment analysis of the intangible assets using a qualitative assessment and determined that recorded amounts were not impaired.
7. Restructuring
The Company regularly evaluates its business and objectives to ensure that it is properly configured and sized based on changing market conditions. Accordingly, the Company has implemented certain restructuring initiatives, including consolidation of certain facilities throughout the world and rationalization of its operations. In fiscal year 2024, management initiated a restructuring plan to begin streamlining the Company's global genomics business. Management continued and primarily finalized the restructuring plan to streamline operations of the Company's global genomics business. This restructuring plan was complete by May 31, 2025.
The Company’s restructuring charges consist of severance payments, costs for outplacement services, and post-employment benefits (collectively, “employee separation costs”), other related exit costs and asset impairment charges related to restructuring activities. These amounts are partially recorded within cost of service revenues and partially recorded within general and administrative expense on the consolidated statements of operations.
Restructuring charges by segment were as follows:
|
|
Year ended May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Food Safety |
|
$ |
|
|
$ |
|
||
Animal Safety |
|
|
|
|
|
|
||
Corporate |
|
|
|
|
|
|
||
|
$ |
|
|
$ |
|
|||
Restructuring activity for the twelve months ended May 31, 2025 was as follows:
|
|
Employee Separation Costs |
|
|
Other Exit Costs |
|
|
Total |
|
|||
Balance as of May 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Expense |
|
|
|
|
|
|
|
|
|
|||
Cash Payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Asset impairments and other (1) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of May 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
(1)
75
8. Business Combinations
The consolidated statements of operations reflect the results of operations for business acquisitions since the respective dates of purchase. All are accounted for using the acquisition method. Goodwill recognized in the acquisitions described below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings.
Fiscal 2023
Thai-Neo Biotech Co., Ltd. Acquisition
In July 2022, the Company acquired all of the stock of Thai-Neo Biotech Co., Ltd., a longstanding distributor of Neogen’s food safety products to Thailand and Southeast Asia. This acquisition gives Neogen a direct sales presence in Thailand. Consideration for the purchase was $
Corvium Acquisition
In February 2023, the Company acquired certain assets as part of an asset purchase agreement with Corvium, Inc., a partner and supplier within the Company's software analytics platform. This acquisition, which primarily includes the software technology, advances the Company's food safety data analytics strategy. The purchase price consideration was $
There was also the potential for performance milestone payments of up to $
In the first quarter of fiscal 2024, the Company recorded an increase to intangible assets of $
In the third quarter of the fiscal 2025, the company reversed the contingent liabilities of $
3M Food Safety Transaction
In September 2022, Neogen, 3M and Neogen Food Safety Corporation, formerly named Garden SpinCo, a subsidiary created to carve out 3M’s 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”). Immediately following the FSD transaction, pre-merger Neogen Food Safety Corporation stockholders owned, in the aggregate, approximately
The purchase price consideration for the 3M FSD was $
76
In the first quarter of fiscal 2024, the Company recorded adjustments to goodwill and intangible assets, based on third-party advisor's valuation work and fair value estimates, resulting in an increase to goodwill and a decrease to the intangible assets balance. The Company also recorded adjustments to deferred tax liabilities, which increased the balance, based on finalization of entity income tax provisions.
The following table presents unaudited pro forma information as if the merger with the 3M FSD business had occurred on June 1, 2021 and had been combined with the results reported in our consolidated statements of operations for all periods presented:
|
|
Year Ended May 31, 2023 |
|||
Net revenue |
|
$ |
|
|
|
Operating income |
|
$ |
|
|
|
The unaudited pro forma information is presented for informational purposes only and is not indicative of the results that would have been achieved if the merger had taken place at such time. The unaudited pro forma information presented above includes adjustments primarily for amortization charges for acquired intangible assets and certain acquisition-related expenses for legal and professional fees.
9. Long-Term Debt
The Company’s long-term debt consists of the following:
|
|
May 31, 2025 |
|
|
May 31, 2024 |
|
||
Term Loan |
|
$ |
|
|
$ |
|
||
Senior Notes |
|
|
|
|
|
|
||
Revolver Facility |
|
|
|
|
|
— |
|
|
Finance Lease |
|
|
|
|
|
— |
|
|
Total debt and finance lease |
|
|
|
|
|
|
||
Less: Current portion |
|
|
( |
) |
|
|
— |
|
Total non-current debt |
|
|
|
|
|
|
||
Less: Unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total non-current debt, net |
|
$ |
|
|
$ |
|
||
Credit Facilities
On June 30, 2022, Neogen Food Safety Corporation entered into a credit agreement consisting of a five-year senior secured term loan facility (“term loan facility”) in the amount of $
On April 4, 2025, Neogen Food Safety Corporation entered into the Amendment No. 1 and Refinancing Amendment to Credit Agreement (the “Refinancing Amendment”), which amended the existing credit agreement, dated June 30, 2022. The Refinancing Amendment, among other things, provides for (i) a new tranche of senior secured term loans in an aggregate principal amount of $
77
The Refinancing Amendment reduced the syndicate of lenders for the 2025 Term Loans, which resulted in an accounting for debt extinguishment for seven lenders and resulted in an extinguishment loss of $
The Credit Facilities bear interest based on term SOFR plus an applicable margin which ranges between
The Company has a $
The Company must pay an annual commitment fee ranging from
There was $
Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. As of May 31, 2025, the Company was in compliance with its debt covenants.
Senior Notes
On July 20, 2022, Neogen Food Safety Corporation closed on an offering of $
The Company determined that the redemption features of the Notes did not meet the definition of a derivative and thus does not require bifurcation from the host liability and accordingly has accounted for the entire instrument at amortized cost.
78
Total accrued interest on the Notes was $
There are required quarterly principal payments on the term loan facility of $
Fiscal Year |
|
Amount |
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
Finance Lease
The finance lease is a building lease that is classified within property and equipment and the current portion of debt on the consolidated balance sheets as of May 31, 2025 and 2024. The Company intends to elect the purchase option within the lease agreement prior to the end of the lease term.
10. Equity Compensation Plans and Other Incentive Compensation
The Company’s long-term incentive plans allow for the grant of various types of share-based awards to officers, directors and other key employees of the Company. Incentive and non-qualified options to purchase shares of common stock have been granted under the terms of the 2018 and 2023 Omnibus Incentive Plans. These options are granted at an exercise price equal to the closing price of the common stock on the date of grant. Options vest ratably over and
79
Remaining shares available for grant under share-based compensation plans were
Options
|
|
|
|
|
|
|
|
|
|
|||
(option amounts in thousands) |
|
Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Grant Date Fair Value |
|
|||
Outstanding at May 31, 2022 ( |
|
|
|
|
$ |
|
|
$ |
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding at May 31, 2023 ( |
|
|
|
|
|
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding at May 31, 2024 ( |
|
|
|
|
|
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding at May 31, 2025 ( |
|
|
|
|
$ |
|
|
$ |
|
|||
The following is a summary of stock options outstanding at May 31, 2025:
|
|
Options Outstanding |
|
|
Options Exercisable |
|
||||||||||||||
|
|
|
|
|
Average Contractual |
|
|
Weighted-Average |
|
|
|
|
|
Weighted-Average |
|
|||||
(option amounts in thousands) |
|
|
|
|
Life |
|
|
Exercise |
|
|
|
|
|
Exercise |
|
|||||
Range of Exercise Price |
|
Number |
|
|
(in years) |
|
|
Price |
|
|
Number |
|
|
Price |
|
|||||
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
The weighted average exercise price of shares subject to options that were exercisable at May 31, 2024 and 2023 was $
Remaining compensation cost to be expensed in future periods for non-vested options was $
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Aggregate intrinsic value of options outstanding |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Aggregate intrinsic value of options exercisable |
|
|
|
|
$ |
|
|
$ |
|
|||
Aggregate intrinsic value of options exercised |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Risk-free interest rate |
|
|
% |
|
|
% |
|
|
% |
|||
Expected dividend yield |
|
|
% |
|
|
% |
|
|
% |
|||
Expected stock volatility |
|
|
% |
|
|
% |
|
|
% |
|||
Expected option life |
|
|
|
|
|
|
||||||
80
The risk-free interest rate for periods within the expected life of options granted is based on the U.S. Treasury yield curve in effect at the time of grant. Expected stock price volatility is based on historical volatility of the Company’s stock. The expected option life, representing the period of time that options granted are expected to be outstanding, is based on historical option exercise and employee termination data. We include recent historical experience in estimating our forfeitures. As employees terminate, grant tranches expire or as forfeitures are known, estimated expense is adjusted to actual. For options granted in fiscal years 2025, 2024 and 2023, the Company recorded charges in general and administrative expense based on the fair value of stock options using the straight line method over the vesting period of to
Restricted Stock Units
The remaining weighted-average period for the Company's outstanding RSUs is
(RSU amounts in thousands) |
|
RSUs |
|
|
Weighted Average Grant Date Fair Value |
|
||
Outstanding at May 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at May 31, 2024 |
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
|
||
Released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at May 31, 2025 |
|
|
|
|
$ |
|
||
The weighted average grant date fair value of the fiscal year 2023 awards was $
Employee Stock Purchase Plan
The Company offers eligible employees the option to purchase common stock at a
81
Defined Contribution Benefit Plan and Bonus Compensation
The Company maintains a defined contribution 401(k) benefit plan covering substantially all domestic employees. Employees are permitted to defer compensation up to IRS limits, with Neogen matching
The Company also offers an annual bonus opportunity to certain employees, as an additional component of their compensation. Amounts are determined based on company performance and employee performance. The bonus amounts earned during fiscal year 2025 will be paid to employees in the first quarter of fiscal 2025. As of May 31, 2025 and 2024, the Company had an accrued bonus of $
11. Income Taxes
Income before income taxes by source consists of the following amounts:
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
U.S. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Foreign |
|
|
( |
) |
|
|
|
|
|
|
||
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The provision for income taxes consists of the following:
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current |
|
|
|
|
|
|
|
|
|
|||
Domestic |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
Change in tax-related uncertainties |
|
|
|
|
|
|
|
|
|
|||
State |
|
|
|
|
|
|
|
|
|
|||
Foreign |
|
|
|
|
|
|
|
|
|
|||
Total Current |
|
|
|
|
|
|
|
|
|
|||
Deferred |
|
|
|
|
|
|
|
|
|
|||
Domestic |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
State |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Total Deferred |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax (benefit) expense |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
82
The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense is as follows:
|
|
Year Ended May 31 , |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Tax at U.S. statutory rate |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Permanent differences |
|
|
( |
) |
|
|
|
|
|
|
||
Global intangible low-taxed income (GILTI) |
|
|
|
|
|
|
|
|
|
|||
Foreign derived intangible income deduction (FDII) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign rate differential |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Goodwill impairment |
|
|
|
|
|
— |
|
|
|
— |
|
|
Subpart F income |
|
|
|
|
|
|
|
|
|
|||
Tax-effect from stock-based compensation |
|
|
|
|
|
|
|
|
|
|||
Provision for state income taxes, net of federal benefit |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Non-deductible acquisition expenses |
|
|
— |
|
|
|
— |
|
|
|
|
|
Tax credits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Impact of tax rate changes |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Change in tax-related uncertainties |
|
|
|
|
|
|
|
|
|
|||
Changes in valuation allowances |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Research expenditures deduction |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
( |
) |
|
|
|
|
|
|
||
Income tax (benefit) expense |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Foreign tax credits, primarily offsetting taxes associated with Subpart F and GILTI income, were $
Income tax expense was impacted significantly by the goodwill impairments discussed in Note 6 "Goodwill and Other Intangible Assets", which are primarily not deductible for tax purposes.
83
Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
|
|
Year Ended May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred income tax liabilities |
|
|
|
|
|
|
||
Indefinite and long-lived assets |
|
$ |
( |
) |
|
$ |
( |
) |
Right of use asset |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
Deferred income tax assets |
|
|
|
|
|
|
||
Interest expense not currently deductible |
|
|
|
|
|
|
||
Research and experimentation capitalization |
|
|
|
|
|
|
||
Stock options |
|
|
|
|
|
|
||
Inventories and accounts receivable |
|
|
|
|
|
|
||
Tax loss carryforwards |
|
|
|
|
|
|
||
Lease liability |
|
|
|
|
|
|
||
Accrued expenses and other |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Valuation allowance |
|
|
( |
) |
|
|
( |
) |
Net deferred income tax liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Net deferred income tax assets (jurisdictional) - other non-current assets |
|
$ |
|
|
$ |
|
||
Net deferred income tax liabilities (jurisdictional) |
|
|
( |
) |
|
|
( |
) |
Net deferred income tax liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
The Company has the following net operating loss carryforwards:
|
|
As of May 31, 2025 |
|
|
Expiry |
|
U.S. |
|
$ |
|
|
||
Foreign |
|
|
|
|
||
Total net operating loss carryforwards |
|
$ |
|
|
|
|
Valuation allowances against certain deferred tax assets are established based on management’s determination of a more likely than not standard that the tax benefits will not be realized. Management evaluates all available evidence, both positive and negative, when determining the need for a valuation allowance. Valuation allowances related to net operating losses are primarily evaluated based on evidence (or lack thereof) of historical and future earnings. Valuation allowances related to long-lived assets primarily are evaluated based on Management’s tax planning and intentions for underlying assets.
The balance of deferred tax liabilities for indefinite and long-live assets was affected by the goodwill impairments discussed in Note 6, related to the portion of the impairments on goodwill carrying value that is deductible in some jurisdictions. These impairments resulted in a reduction of $
We are subject to income taxes in the U.S. (federal and state) and in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for
84
income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. The Company’s policy is to recognize both accrued interest expense and penalties related to unrecognized tax benefits in income tax expense. The amount of interest and penalties included in the unrecognized tax benefits reserve was $
The reconciliation of our unrecognized tax benefits is as follows:
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Increase/(decrease) related to prior periods |
|
|
|
|
|
( |
) |
|
|
|
||
Increase related to current period |
|
|
|
|
|
|
|
|
|
|||
Lapses of applicable statute of limitations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The Company is no longer subject to examination by the Internal Revenue Service for fiscal year 2021 and preceding years.
As of May 31, 2025, the Company has approximately $
The Organization for Economic Cooperation and Development (“OECD”) Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of
Subsequent Event
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the United States. OBBBA includes significant provisions, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for depreciation and interest expenses. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is currently assessing its impact on its consolidated financial statements.
12. Commitments and Contingencies
The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for related costs, including legal costs, when such costs are determined to be probable and estimable. The Company currently utilizes a pump and treat remediation strategy, which includes semi-annual monitoring and reporting, consulting, and maintenance of monitoring wells. We expense these annual costs of remediation, which have ranged from approximately $
85
2024, measured on an undiscounted basis over an estimated period of
In the third quarter of fiscal year 2025, the Company recorded a gain related to a settlement regarding the Company's prior acquisition of certain fixed assets. The amount of $
Related to the Company's other contingent liabilities, a loss of $
In the third quarter of fiscal year 2024, the Company received $
The Company previously disclosed an ongoing investigation by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) regarding activities or transactions involving parties located in Iran. In fiscal year 2020, the Company recorded a charge to other (expense) income and recorded a reserve of $
86
The Company has agreements with unrelated third parties that provide for the payment of royalties on the sale of certain products. Royalty expense, recorded in sales and marketing, under the terms of these agreements was $
13. Fair Value and Derivatives
Fair Value of Financial Instruments
Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:
Level 1: |
Observable inputs such as quoted prices in active markets; |
|
|
Level 2: |
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and |
|
|
Level 3: |
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The carrying amounts of the Company’s financial instruments other than cash equivalents and marketable securities, which include accounts receivable and accounts payable, approximate fair value based on either their short maturity or current terms for similar instruments.
The Company had marketable securities held by banks or broker-dealers consisting of commercial paper and corporate bonds. These securities were recorded at fair value based on recent trades or pricing models and therefore meet the Level 2 criteria. The company does
Derivatives Not Designed as Hedging Instruments
The Company forecasts its net exposure in various receivables and payables to fluctuations in the value of various currencies, and has entered into a number of foreign currency forward contracts each month to mitigate that exposure. These contracts are recorded net at fair value on our consolidated balance sheets, classified as Level 2 in the fair value hierarchy. Gains and losses from these foreign currency forward contracts are recognized in Other, net in our consolidated statements of operations. The notional amount of forward contracts in place was $
|
|
|
|
|
|
|
|
|
||
Fair Value of Derivatives Not Designated as Hedging Instruments |
|
Balance Sheet Location |
|
May 31, 2025 |
|
|
May 31, 2024 |
|
||
Foreign currency forward contracts, net |
|
Other current liabilities |
|
$ |
|
|
$ |
|
||
The location and amount of gains (loss) from derivatives not designated as hedging instruments in our consolidated statements of operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Derivatives Not Designated as Hedging Instruments |
|
Location in statements of operations |
|
May 31, 2025 |
|
|
May 31, 2024 |
|
|
May 31, 2023 |
|
|||
Foreign currency forward contracts |
|
Other, net |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||
87
Derivatives Designed as Hedging Instruments
In November 2022, the Company entered into a receive-variable, pay-fixed interest rate swap agreement with a $
We record the fair value of our interest rate swaps on a recurring basis using Level 2 observable market inputs for similar assets or liabilities in active markets.
|
|
|
|
|
|
|
|
|
||
Fair Value of Derivatives Designated as Hedging Instruments |
|
Balance Sheet Location |
|
May 31, 2025 |
|
|
May 31, 2024 |
|
||
Interest rate swaps – current |
|
Other current (liabilities) assets |
|
$ |
( |
) |
|
$ |
|
|
Interest rate swaps – non-current |
|
Other non-current (liabilities) assets |
|
|
( |
) |
|
|
|
|
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a nonrecurring basis, which are not included in the table above. As these nonrecurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy. For further information see Note 6 "Goodwill and Other Intangible Assets" and Note 8 “Business Combinations”.
Items Not Carried at Fair Value
Fair values of the Company’s Term Loan and Senior Notes were as follows:
|
|
Year Ended May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Aggregate fair value |
|
|
|
|
|
|
||
Aggregate carrying value (1) |
|
|
|
|
|
|
||
(1)
Fair values were based on available market information and other observable data and are classified within Level 2 of the fair value hierarchy.
14. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss changes by component, net of related tax, were as follows:
88
|
|
May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
|
||
Accumulated other comprehensive loss, beginning balance |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Foreign currency translation adjustment |
|
|
|
|
|
|
||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive gain (loss) before reclassifications |
|
|
|
|
|
( |
) |
|
Balance at end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Marketable securities |
|
|
|
|
|
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive loss before reclassifications |
|
|
|
|
|
|
||
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
|
|
|
||
Balance at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Fair value of derivatives change |
|
|
|
|
|
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive (loss) gain before reclassifications |
|
|
( |
) |
|
|
|
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
||
Accumulated other comprehensive loss, ending balance |
|
$ |
( |
) |
|
$ |
( |
) |
15. Segment Information
The Company has
Many of our international operations originally focused on the Company’s food safety products, and each of these units reports through the Food Safety segment. In recent years, these operations have expanded to offer the Company’s complete line of products and services, including those usually associated with the Animal Safety segment such as biosecurity products, veterinary instruments and genomics services. These additional products and services are managed and directed by existing management and are reported through the Food Safety segment.
89
Segment information is as follows:
|
|
Year Ended May 31, 2025 |
|
|||||||||||||
|
|
Food Safety |
|
|
Animal Safety |
|
|
Corporate and |
|
|
Total |
|
||||
Total Revenues |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
Total Cost of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income (Loss) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|||||||||||||||
Depreciation and Amortization |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
Interest Expense |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expenditures for long-lived assets |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Year Ended May 31, 2024 |
|
|||||||||||||
|
|
Food Safety |
|
|
Animal Safety |
|
|
Corporate and |
|
|
Total |
|
||||
Total Revenues |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
Total Cost of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income (Loss) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|||||||||||||||
Depreciation and Amortization |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
Interest Expense |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expenditures for long-lived assets |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Year Ended May 31, 2023 |
|
|||||||||||||
|
|
Food Safety |
|
|
Animal Safety |
|
|
Corporate and |
|
|
Total |
|
||||
Total Revenues |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
Total Cost of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Income (Loss) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
|||||||||||||||
Depreciation and Amortization |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
Interest Expense |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expenditures for long-lived assets |
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
||||
The following table presents the Company’s revenue disaggregated by geographical location. Country information has not been disclosed as it is impracticable to do so.
|
|
Year Ended May 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Domestic |
|
$ |
|
|
$ |
|
|
$ |
|
|||
International |
|
|
|
|
|
|
|
|
|
|||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|||
90
The following table presents the Company's net property and equipment amounts disaggregated by country.
|
|
Year Ended May 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
United States |
|
$ |
|
|
$ |
|
||
United Kingdom |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total Property, Plant, and Equipment |
|
$ |
|
|
$ |
|
||
91
FAQ
What percentage of Neogen (NEOG) revenue came from the Food Safety segment in FY-2025?
How much of NEOG’s sales were generated outside the United States?
What strategic divestiture did Neogen announce in April 2025?
What internal control issue did Neogen disclose?
How many shares of NEOG common stock were outstanding as of 30 June 2025?
