Neogen Corporation (Nasdaq: NEOG) announced today that its revenue for the first quarter of FY 2014, which ended Aug. 31, was $58,548,000, an 18% increase compared to revenue of $49,729,000 in the first quarter of last year.
First quarter net income increased 17% to $7,839,000, or $0.32 per share, from the previous year's first quarter income of $6,714,000, or $0.28 per share. The first quarter revenues and net income represent quarterly records for the 31-year-old company.
"The first quarter was a great start for our new fiscal year, as Neogen continues to seize opportunities throughout our worldwide markets," said James Herbert, Neogen's chief executive officer and chairman. "The strong growth we are reporting today is the result of the efficient assimilation of our recent acquisitions, and significant growth in core product lines — especially in markets outside of the United States."
Neogen reported operating income of $12,418,000, an increase of 20% compared to the prior year's first quarter. Expressed as a percentage of sales, operating income was 21.2% for the quarter, compared to 20.8% in the year ago quarter. Neogen's gross margin was 51.9% of sales in its first quarter of the current year, compared to 53.3% of sales for FY 2013's first quarter. The decrease was due primarily to a mix shift toward lower margin products and services.
"We are obviously pleased to report our outstanding first quarter results, and growth in operating income that exceeded our rate of growth in revenues. These results provide evidence of general operational strength throughout Neogen," said Steve Quinlan, Neogen's chief financial officer. "Although we were able to report strong first quarter results, our performance this quarter was adversely affected by a foreign currency translation loss primarily due to weakening of several currencies. This resulted in a negative pre-tax impact to the company of approximately $600,000."
The first quarter was the 86th of the past 91 quarters that Neogen reported revenue increases as compared with the previous year — including all consecutive quarters in the last eight years.
Sales of Neogen's Scotland-based Neogen Europe subsidiary increased 54% compared to the prior year's first quarter as a result of broad-based increases in sales of Neogen's food safety diagnostics, including test kits for mycotoxins, food allergens and meat speciation. The subsidiary's results were also due to increased success in sales of animal genomic testing services.
Sales of Neogen's Brazil- and Mexico-based subsidiaries also increased significantly on a quarter-to-quarter comparison, albeit from relatively smaller bases, as did sales of the company's food and animal safety products through distributors into international markets. For the quarter, Neogen's revenues from international sources represented 42.3% of its total revenues.
Sales of Neogen's line of test kits for food allergens and meat speciation continued to grow, increasing more than 30% in the quarter when compared to the previous year's first quarter. While food manufacturers have continued to increase testing to protect consumers, food allergens remain the single biggest reason for food recalls. The first quarter also saw a continuation of increased revenues from sales of test kits to verify meat speciation. Preventing the adulteration or substitution of meat or fish products with non-desirable or cheaper options is important for economic, regulatory, health and ethical reasons, especially where particular species of meat are prohibited by cultural or religious beliefs.
Sales of Neogen's natural toxin diagnostics increased 12% in the current quarter, as grain producers and processors continued to address safety and quality concerns. These concerns resulted in increased testing of last year's contaminated crops, much of which were still being stored in the first quarter. The sales increase was also due to increasing demand for Neogen's expanding line of simple and quick Reveal® Q+ quantitative tests for mycotoxins, including aflatoxin and deoxynivalenol (DON).