<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended: AUGUST 31, 1995
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________
Commission File Number: 0-17988
NEOGEN CORPORATION
(Exact name of small business issuer as specified in its charter)
MICHIGAN 38-2367843
(State of other jurisdiction of (IRS employer
incorporation or organization) Identification No.)
620 LESHER PLACE, LANSING, MICHIGAN 48912
(Address of principal executive offices)
(517)372-9200
(Issuer's telephone number)
NONE
(Former name, former address and former
fiscal year, if changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes_x_ No___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 after
distribution of securities under a plan confirmed by a court.
Yes___ No___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date.
4,479,027 WERE OUTSTANDING ON OCTOBER 1, 1995
<PAGE> 2
INDEX
NEOGEN CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements (unaudited)
Consolidated balance sheets--August 31, 1995 and May 31, 1995.
Consolidated statements of operations--Three months ended August 31,
1995 and 1994.
Consolidated statements of stockholders' equity--Three months ended
August 31, 1995 and 1994.
Consolidated statements of cash flows--Three months ended August 31,
1995 and 1994.
Notes to consolidated financial statements--August 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
<PAGE> 4
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
August 31 May 31
1995 1995
-----------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 1,181,228 $ 2,237,979
Net accounts receivable 1,910,373 1,681,200
Inventories 3,968,925 3,806,872
Other current assets 387,737 355,027
------------ ------------
TOTAL CURRENT ASSETS 7,448,263 8,081,078
NET PROPERTY AND EQUIPMENT 1,413,486 1,312,670
INTANGIBLE AND OTHER ASSETS
Goodwill, net of accumulated amortization 2,110,127 1,513,032
Other assets, net of accumulated
amortization 639,719 631,826
------------ ------------
$ 11,611,595 $ 11,538,606
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current maturities
of long-term notes payable-(note D) $ 1,142,984 $ 1,146,082
Accounts payable 784,842 742,652
Accrued compensation and benefits 258,896 338,407
Other accrued liabilities 60,168 65,129
------------ ------------
TOTAL CURRENT LIABILITIES 2,246,890 2,292,270
LONG-TERM NOTES PAYABLE-(NOTE D) 332,279 351,233
OTHER LONG-TERM LIABILITIES 58,671 58,671
STOCKHOLDERS' EQUITY
Common stock:
Par value $.16 per share, 10,000,000
shares authorized, 4,464,027 shares
issued at August 31, 1995; 4,460,027
shares issued at May 31, 1995 714,244 713,604
Additional paid in capital 13,598,329 13,592,684
Retained-earnings deficit (5,338,818) (5,469,856)
------------ ------------
8,973,755 8,836,432
------------ ------------
$ 11,611,595 $ 11,538,606
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended August 31
1995 1994
---------------------------------
<S> <C> <C>
REVENUES
Sales $ 2,847,579 $ 2,568,824
Contract revenues 78,065 55,845
----------- -----------
2,925,644 2,624,669
EXPENSES
Cost of goods sold 1,182,238 1,055,695
Sales and marketing 858,554 772,172
General and administrative 431,297 334,978
Research and development 321,335 283,834
----------- -----------
2,793,424 2,446,679
----------- -----------
INCOME FROM OPERATIONS 132,220 177,990
OTHER INCOME (EXPENSE)
Interest income 18,391 23,900
Interest expense (36,376) (6,277)
Other 24,003
----------- -----------
6,018 17,623
----------- -----------
INCOME BEFORE INCOME TAXES 138,238 195,613
INCOME TAXES 7,200 7,200
----------- -----------
NET INCOME $ 131,038 $ 188,413
=========== ===========
NET INCOME PER SHARE (NOTE B) $ 0.03 $ 0.04
=========== ===========
</TABLE>
<PAGE> 6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock
-------------------- Additional Retained-
Number Paid-In Earnings
of Shares Amount Capital Deficit
--------- ------ ------- -------
<S> <C> <C> <C> <C>
Balance at June
1, 1995 4,460,027 $ 713,604 $ 13,592,684 $ (5,469,856)
Exercise of options 4,000 640 5,645
Net income for the
three months ended 131,038
August 31, 1995
--------- --------- ------------ ------------
Balance at August 31,
1995 4,464,027 $ 714,244 $ 13,598,329 $ (5,338,818)
========= ========= ============ ============
Balance at June 1,
1994 4,329,729 $ 692,757 $ 13,108,815 $ (6,148,563)
Common shares issued
in connection with
acquisitions 55,753 8,920 316,080
Exercise of warrants 40,020 6,403 123,976
Exercise of options 17,325 2,772 16,526
Net income for the
three months ended
August 31, 1994 188,413
--------- --------- ------------ ------------
Balance at August
31, 1994 4,442,827 $ 710,852 $ 13,565,397 $ (5,960,150)
========= ========= ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended August 31
1995 1994
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 131,038 $ 188,413
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 131,213 109,091
Changes in operating assets and
liabilities:
Accounts receivable (229,173) (151,208)
Inventories (129,517) (438,139)
Other current assets (32,710) 736
Accounts payable 42,190 119,870
Other accrued expenses (84,472) (187,591)
---------- ----------
NET CASH USED IN
OPERATING ACTIVITIES (171,431) (358,828)
INVESTING ACTIVITIES:
Purchases of property and equipment
and other assets (189,497) (20,114)
Acquisition of business (note C) (680,056) (817,957)
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES (869,553) (838,071)
FINANCING ACTIVITIES:
Proceeds on short-term borrowings 153,730
Payments on long-term borrowings (22,052) (39,330)
Proceeds from issuance
of common stock 6,285 149,677
---------- ----------
NET CASH PROVIDED FROM
(USED IN) FINANCING ACTIVITIES (15,767) 264,077
---------- ----------
DECREASE IN CASH (1,056,751) (932,822)
Cash at beginning of period 2,237,979 3,006,941
---------- ----------
CASH AT END OF PERIOD $1,181,228 $2,074,119
========== ==========
</TABLE>
See notes to consolidated financial statements
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310 of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. Certain amounts in the 1994 Unaudited
Consolidated Financial Statements have been reclassified to conform to the 1995
presentation. The results of operations for the three months ended August 31,
1995 are not necessarily indicative of the results to be expected for the
fiscal year ending May 31, 1996. For more complete financial information,
these consolidated financial statements should be read in conjunction with the
May 31, 1995 audited consolidated financial statements and the notes thereto
included in the Company's annual report on Form 10-KSB for the year ended May
31, 1995.
NOTE B - NET INCOME PER SHARE
The net income per share amounts for 1995 and 1994 are based on the weighted
average number of common shares outstanding adjusted to reflect the assumed
exercise of outstanding stock options and warrants, to the extent these items
had a dilutive effect on the computations.
NOTE C - ACQUISITIONS
Effective June 15, 1995, Neogen acquired certain assets of International
Diagnostic Systems Corp. (IDS) of St. Joseph, Michigan. The acquisition was
accounted for by the purchase method and all acquired assets, consisting of
inventory and related research and technology for 35 different diagnostic tests
used to detect drugs of abuse in animals, were moved to the Company's ELISA
Technologies division in Lexington, Kentucky.
The purchase price consisted of initial consideration of approximately $680,000
paid in cash at closing. Additional consideration may be paid, contingent upon
sales performance for the twelve month period ending June 14, 1996.
NOTE D - NOTES PAYABLE
On August 29, 1995, Neogen and its wholly-owned subsidiary, AMPCOR Diagnostics,
Inc. (AMPCOR), signed a new master revolving note payable to Comerica Bank
which increased AMPCOR's line of credit facility to $1,000,000 from $600,000.
The note bears interest at .75% over the prime rate (9.50% at August 31, 1995)
and is collateralized by substantially all assets of Neogen and AMPCOR.
Borrowings against AMPCOR's line of credit were $508,946 at August 31, 1995 and
May 31, 1995.
<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
THREE MONTHS ENDED AUGUST 31, 1995 COMPARED TO THREE MONTHS ENDED AUGUST 31,
1994.
Total revenues for the quarter ended August 31, 1995 were $301,000 or 11%
higher than the same quarter in 1994. All of the increase was due to a
$358,000 increase in sales of predictive and diagnostic products. Research
revenues also increased by $22,000 in the first quarter compared to last year.
Revenue gains in these two areas were partially offset by a decline in first
quarter sales of veterinary instruments which amounted to $79,000.
Of the $358,000 or 20% increase in sales of predictive and diagnostic products,
$193,000 was the result of including a full three months of sales for AMPCOR
Diagnostics, Inc. (ADI) in 1995 whereas the first quarter of 1994 included only
one month of sales for ADI. The remaining increase of $165,000 is principally
due to a 35% increase in sales of diagnostic test kits for the horse racing and
pharmacologics markets manufactured and distributed by the Company's ELISA
Technologies division.
The 11% decrease in veterinary instrument sales was primarily the result of a
general decline in demand for durable syringes, obstetrical products, and
balling guns in the first quarter of 1995 compared to 1994. Management
believes that the Company can recover the shortfall in first quarter veterinary
instrument sales during the remaining three quarters of the current fiscal
year, partially through targeted promotions for specific instruments, and
partially through introduction of new products scheduled for the second and
third fiscal quarters.
The increase in research revenues was due to two new research contracts with
the United States Department of Agriculture (USDA) entered into during the
second quarter of last year. It is common for contract revenues to fluctuate
from quarter to quarter and year to year depending on timing and terms of the
contracts. In addition, contract revenues continue to represent a smaller
portion of overall revenues as the Company expands its level of products sales.
Cost of goods sold increased 12% as a direct result of the overall increase in
product sales. Expressed as a percentage of revenues, cost of goods sold was
40% in 1995 and 1994.
Sales and marketing expenses increased $86,000 or 11% in the three months ended
August 31, 1995 compared to the same period in 1994. Most of the increase in
sales and marketing expenses in the first quarter occurred at ADI. Expenses
were up approximately $30,000 due to inclusion of three months of expense in
1995 versus one month in 1994. Selling costs at ADI also increased
approximately $50,000 for salary, fringe, travel, training, printing,
advertising, promotion, and trade show expenses associated with the Company's
introduction of
<PAGE> 10
new diagnostic kits for the meat and poultry market. Neogen intends to expand
its sales and marketing activities for predictive and diagnostic products,
particularly in the meat and poultry and seafood markets, during the current
fiscal year.
General and administrative expenses were $96,000 higher in 1995 than in 1994.
A total of $60,000 of the increase was the result of higher costs at ADI
primarily due to including three months of expense in the first quarter of 1995
and only one month in the first quarter of 1994. G & A expenses at ELISA
Technologies were $28,000 higher in 1995 than 1994 due to higher amortization
expense ($10,000) as a result of the acquisition of certain assets of
International Diagnostic Systems Corp. (see Note C to Unaudited Consolidated
Financial Statements), and higher salaries and fringe cost ($10,000) for
secretarial and clerical accounting personnel. The remaining G & A increase at
ELISA Technologies occurred in several categories including travel, office
supplies, telephone, and copier rent as a result of increased staff and overall
business volume.
The increase in research expense in the first quarter of 1995 compared to last
year is mostly due to three months of expense this year for ADI compared to
only one month in the first quarter of 1994. In addition, the Company had two
USDA research projects in place during the first quarter that were not being
worked on in the first quarter last year. Management believes research and
development is critical to the Company's future and expects to increase the
investment in research during the remaining three quarters of the current
fiscal year.
Interest income declined in the first quarter due to lower cash balances
available for investment. Interest expense increased as a result of higher
rates and increased borrowings compared to the first quarter in 1994. The
Company also recognized $24,000 in the first quarter as its share of earned
royalties paid to an affiliated partnership.
Net income declined to $.03 per share in the first quarter of 1995 compared to
$.04 in 1994. The decline is primarily the result of ongoing losses at ADI
which were $115,000 or $.0245 per share higher in 1995 than 1994. Part of
ADI's higher loss was due to reporting three months of operations in 1995 and
just one month in 1994 and part was due to the Company's commitment to
increased investment in research projects and marketing programs at ADI.
Management believes that diagnostic products recently introduced and under
development at ADI offer significant long-term sales growth potential for the
Company.
FINANCIAL CONDITION AND LIQUIDITY
At August 31, 1995, the Company had $1,181,000 in cash and equivalents, working
capital of $5,201,000, and stockholders' equity of $8,974,000. In addition,
the Company has bank lines of credit totaling $2,500,000 with $1,059,000
borrowed against these lines as of August 31, 1995. Cash and equivalents
declined $1,057,000 during the first quarter primarily as a result of the
purchase of property,
<PAGE> 11
equipment, and other assets including the acquisition of assets of
International Diagnostic Systems Corp. (See Note C to Unaudited Consolidated
Financial Statements.)
Effective June 15, 1995, Neogen acquired certain assets of International
Diagnostic Systems Corp. of St. Joseph, Michigan. The purchase price paid in
the fist quarter was approximately $680,000 in cash.
During the first quarter, accounts receivable increased $229,000 exclusively
due to strong sales of diagnostic test kit products during the month of August.
Inventories at August 31, 1995 were $162,000 higher than May 31, 1995. Of this
amount, $105,000 is the result of increased production volume for veterinary
instruments in preparation for greater sales volume which traditionally occurs
in the Company's second and third fiscal quarters. The remaining increase is
due to higher inventory levels at ADI principally for new diagnostic products
introduced during the first quarter and for certain inventory items related to
serological products. The increase in goodwill at August 31 compared to May 31
is the direct result of the acquisition of certain assets of International
Diagnostic Systems Corp.
Accounts payable increased less than 6% during the first quarter due mostly to
higher inventory production and normal fluctuations in the timing of due dates
for trade payables. The decrease in accrued compensation and benefits and
other accrued liabilities at August 31 compared to May 31 is due to payment in
the first quarter of bonuses, commissions, and royalties earned and accrued
prior to May 31, 1995.
The Company did not borrow any additional funds during the first quarter and
made scheduled payments on long-term debt totaling $22,000. Neogen expended
approximately $190,000 in the first quarter for additions to property,
equipment, and other assets. At August 31, the Company has no material
commitments for capital expenditures. Inflation and changing prices are not
expected to have a material effect on the Company's operations.
Neogen has been profitable for ten consecutive quarters and has generated
positive cash flows from operations during this period. Management believes
that the Company's existing cash and equivalents at August 31, 1995, along with
its available bank lines of credit and expected future increases in product
sales, will be sufficient to fund activities for 1996 and 1997. However, cash
and equivalents have declined in the last two years as a result of acquisitions
made by the Company. In addition, existing cash and equivalents may not be
sufficient to meet the Company's longer term cash requirements to commercialize
products currently under development or its plans to acquire additional
technology and products that fit within the Company's mission statement.
Accordingly, the Company may be required to issue equity securities or enter
into other financing arrangements for a portion of the Company's future capital
needs.
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
Exhibit 4 - Instruments defining the rights of security
holders - incorporated by reference from Exhibit 3(a) (2) of
the Second Amendment to the Form S-18 Registration Statement
filed on August 22, 1989.
Exhibit 11 - Statement regarding computation of earnings per share.
Exhibit 27 - Financial Data Schedule
(b) Reports On Form 8-K Filed In Quarterly Period Ended August 31, 1995.
The Company did not file any reports on Form 8-K in the quarterly
period ended August 31, 1995.
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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
October 11, 1995 /s/ James L. Herbert
_________________________ ________________________________
Date James L. Herbert
President
October 11, 1995 /s/ Lon M. Bohannon
_________________________ ________________________________
Date Lon M. Bohannon
Vice President-Chief Financial
Officer
<PAGE> 14
EXHIBIT INDEX
Exhibits filed herewith.
Exhibit No. Description
11 Statement regarding computation of earnings per share
27 Financial Data Schedule
<PAGE> 1
(11)--STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
NEOGEN CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended August 31
1995 1994
----------- -----------
<S> <C> <C>
Weighted average common and common
equivalent shares outstanding:
Average shares outstanding 4,460,399 4,365,740
Net effect of dilutive stock
warrants--based on the treasury
stock method using quarter-end
market price which is greater
average market price 60,768 64,489
Net effect of dilutive stock
options--based on the treasury
stock method using quarter-end
market price which is greater
average market price 174,104 200,148
--------- ---------
TOTALS 4,695,271 4,630,377
========= =========
Net income $ 131,038 $ 188,413
========= =========
Net income per share $ 0.03 $ 0.04
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
NEOGEN CORPORATION FORM 10-QSB FOR THE QUARTER ENDED AUGUST 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-QSB
</LEGEND>
<CIK> 0000711377
<NAME> NEOGEN CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 1,181,228
<SECURITIES> 0
<RECEIVABLES> 2,068,841
<ALLOWANCES> 158,468
<INVENTORY> 3,968,925
<CURRENT-ASSETS> 7,448,263
<PP&E> 3,865,790
<DEPRECIATION> 2,452,304
<TOTAL-ASSETS> 11,611,595
<CURRENT-LIABILITIES> 2,246,890
<BONDS> 0
<COMMON> 714,244
0
0
<OTHER-SE> 8,259,511
<TOTAL-LIABILITY-AND-EQUITY> 11,611,595
<SALES> 2,847,579
<TOTAL-REVENUES> 2,925,644
<CGS> 1,182,238
<TOTAL-COSTS> 2,793,424
<OTHER-EXPENSES> (42,394)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,376
<INCOME-PRETAX> 138,238
<INCOME-TAX> 7,200
<INCOME-CONTINUING> 131,038
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,038
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
