Neogen Management Discusses Q4 2012 Results - Earnings Call Transcript

Neogen (NEOG)

Q4 2012 Earnings Call

July 24, 2012 11:00 am ET

Executives

James L. Herbert - Chairman and Chief Executive Officer

Lon M. Bohannon - President, Chief Operating Officer and Director

Steven J. Quinlan - Chief Financial Officer, Principal Accounting Officer and Vice President

Analysts

Steven F. Crowley - Craig-Hallum Capital Group LLC, Research Division

Scott Gleason - Stephens Inc., Research Division

Anton Brenner - Roth Capital Partners, LLC, Research Division

Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division

Stephen A. O'Neil - Hilliard Lyons, Research Division

Gregory W. Halter - LJR Great Lakes Review

Jason Rogers

Michael Castor

Presentation

Operator

Welcome to Neogen's Fourth Quarter Fiscal Year 2012 Year End Earnings Results Conference Call. My name is Christine, and I'll be your operator for today's conference. [Operator Instructions] Please note, today's conference is being recorded. I will now turn the call over to Jim Herbert, Chief Executive Officer. You may begin.

James L. Herbert

Thank you, Christine, and good morning and welcome to our regular quarterly conference call for investors and analysts. As Christine said, today we'll be reporting to you the results of our fourth quarter, which ended on May 31 and also the full 2012 fiscal year. To start, I'd remind you that some of the statements that are made here today could be termed as forward-looking statements and these forward-looking statements, of course, are subject to certain risks and uncertainties. The actual results, it may differ from those that we discuss here today. The risks that are associated with our business are covered in part in the company's Form 10-K that's filed with the Securities and Exchange Commission, and our new Form 10-K for the 2012 fiscal year will be filed with the SEC and available approximately on July 30. In addition to those of you joining us today by live telephone conference, I'd also welcome those who may be joining by simulcast on the Worldwide Web. These comments, along with some exhibits, will be available on the web for approximately 90 days. Following our prepared comments this morning, we'll entertain questions from participants who are joined via this live telephone conference. And I'm joined today by Lon Bohannon, Neogen's President; and Steve Quinlan, our Chief Financial Officer.

Earlier today, Neogen issued a press release announcing the results of the fourth quarter of our 2012 fiscal year. Once again, we reported record numbers. Revenues for the company's fourth quarter were approximately $48.5 million. That's an increase of 11.4% from the previous year's fourth quarter. This brings the total revenues for the company's 2012 fiscal year to approximately $184 million, up from last year's $172.7 million. Net income for the fourth quarter was slightly over $6 million, which is about 1% ahead of last year but the rounding still equals $0.25 a share as compared to the $0.25 last year for the fourth quarter. For the full year, net income was $22.5 million compared to last year's $22.8 million. This equates out to $0.94 per share this year compared to $0.96 last year, when the extra 228,000 outstanding shares are taken into consideration in this year's report.

Though the fourth quarter doesn't reflect the full recovery to our normal high-performance model, I think it does show the progress that we told you that would happen, that we told you we expected. We started off in the 2012 fiscal year with a 6% increase in that first quarter that compared to a tremendous first quarter in 2011 that had been up 33%. Revenue generation got a bit tougher when we were only able to show a 2% increase in the second quarter. And at that time, we told you that we understood the problems and were on a program to get the situation righted. At the end of the third quarter, we were back to a 6% increase. At that time, we advised you that we believed that we'd be back to double-digit growth in the quarter ahead, and that's the one that we just finished at over 11%.

A bit over a year ago, it became obvious to our management group that all the indicators were positive for strong growth in Food Safety and Animal Safety markets. Even though our compounded growth rate for the previous 5 years had been 19%, we realized that our existing infrastructure would not likely sustain those levels of growth that we've been reporting. The results that we are reporting to you today for the full 2012 fiscal year reflects, I think, the emphasis that we've been placing on creating an operational infrastructure that would allow for the sustainable growth levels that we believe lie ahead.

Back in 2008, when our revenues crossed over the $100 million mark, we immediately set our plans to reach the $200 million mark in 5 years. That would be our 2013 fiscal year. We are now in a position to reach that $200 million mark in this year that we've now begun and continue those growth levels on beyond. Though we didn't show the kind of growth this year that we did last year, nevertheless, the growth was solid and the quarter that we just finished marks the 81st quarter out of the past 86 that Neogen has shown revenue increases as compared to the previous year. That growth record now spans 21.5 years. We got a lot accomplished this year that should be putting us in a good position for this year ahead of us.

From a fixed asset standpoint, we completed the new warehouse in Wisconsin for our Hacco operations that will allow us to get out of 2 warehouse leases that we had in Wisconsin that were pretty ineffective for our rodenticides and disinfectant business. We acquired a new 128,000 square-foot building in Lexington, Kentucky that has replaced a leased facility for our manufacturing operations there, that had gotten a bit ineffective. We bought a beautiful old 36,000 square-foot manor house in Ayr, Scotland, to give us room for expansion of our Neogen Europe Limited business that handles all of our food safety distributions to -- for our 40 European countries.

We already have significant manufacturing warehousing in sales, marketing activities there, so this is just a natural extension. By the way, that business only had about a dozen people when we acquired it 9 years ago and there are over 100 employees this quarter. We bought several pieces of manufacturing equipment last year that are just now beginning to have an impact on cost savings and increasing our manufacturing capacity.

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