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Neogen(NEOG) - 2025 Q4 - Annual Report

PART I ITEM 1. BUSINESS Neogen's business focuses on food and animal safety products and services, with a growth strategy centered on product innovation, international expansion, and strategic acquisitions - Neogen's mission is to be the leading company in fueling a brighter future for global food security, pursuing a growth strategy that includes increasing sales, introducing innovative products, growing international sales, and acquiring businesses20 - Sales to customers outside the U.S. accounted for 50.2% of total revenues in fiscal year 2025, indicating a significant international presence59 Revenue Contribution by Segment (FY2023-FY2025) | Segment | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Food Safety | 71.3% | 70.9% | 66.5% | | Animal Safety | 28.7% | 29.1% | 33.5% | 1.1 Business Overview and Segments - The Food Safety segment primarily offers diagnostic test kits and complementary products to food and animal feed producers and processors for safety and quality, including detection of pathogens, toxins, and allergens17 - On September 1, 2022, Neogen combined with 3M's Food Safety Division (3M FSD) in a Reverse Morris Trust transaction, making Neogen Food Safety Corporation a wholly owned subsidiary18 - The Animal Safety segment develops, manufactures, and distributes veterinary instruments, pharmaceuticals, vaccines, diagnostic products, and genomics testing services; in April 2025, the Company announced an agreement to sell its global Cleaners and Disinfectants business19 1.2 Products and Trademarks - Neogen owns numerous product trademarks and registered trademarks across its corporate, Food Safety, and Animal Safety segments, including Megazyme®, Neogen®, Alert®, ANSR®, Ideal®, Ramik®, and GeneSeek®242526 - Food Safety products include tests for Natural Toxins & Allergens (e.g., Veratox, Reveal), Bacterial & General Sanitation (e.g., AccuPoint, ANSR), and Indicator Testing, Culture Media & Others (e.g., Acumedia, Petrifilm)24 - Animal Safety products encompass Veterinary Instruments & Disposables (e.g., Ideal, Prima Tech), Animal Care & Others (e.g., BotVax, Uniprim), Rodent & Control (e.g., Ramik, Prozap), and Genomic Services (e.g., GeneSeek, Igenity)242526 1.3 Food Safety Segment Details - The Food Safety segment's diagnostic test kits detect mycotoxins, histamine, sulfite, and food allergens (e.g., peanut, milk, egg), as well as foodborne bacteria like E. coli O157:H7, Salmonella, and Listeria2829 - Key technologies include immunoassay and nucleic acid detection products, with systems like ANSR and MDS providing rapid, DNA-definitive results for pathogen detection1729 - Neogen Analytics, a software-as-a-service, provides comprehensive Environmental Monitoring Program (EMP) automation, integrating with devices like Clean-Trace™ and Petrifilm Plate Reader Advanced32 1.4 Animal Safety Segment Details - The Animal Safety segment includes Life Science/Toxicology products (reagents, drug detection assays), Veterinary Instruments & Disposables (e.g., Ideal D3 needles, Prima Tech systems), and Animal Care & Other solutions (e.g., PanaKare, Uniprim, BotVax B vaccine)383940 - Rodent Control, Insect Control, & Disinfectants (e.g., Ramik, Prozap, Synergize) are critical for biosecurity in animal production, while Genomics Services offer DNA genotyping, sequencing, and trait analysis for livestock and companion animals414243 - The 2021 acquisition of Genetic Veterinary Sciences, Inc. expanded companion animal genetic testing offerings by over 350 tests43 1.5 Sales and Marketing - As of May 31, 2025, Neogen employed 975 individuals in sales and marketing functions globally45 - Domestic food safety markets include milling and grain, meat and poultry, ready-to-eat foods, fruits and vegetables, seafood, dairy, beverage, water, and healthcare47 - International sales are supported by direct presence in 28 countries and a network of distributors in over 100 countries, with key operations in the UK, Europe, Middle East, Africa, India, Mexico, Central and South America, Asia Pacific, and Canada495052565758 1.6 Research and Development - Neogen's R&D group comprises 78 scientists and support staff, focusing on developing and commercializing innovative new products and enhancing existing ones for both Food Safety and Animal Safety markets60 - Future R&D expenditures are expected to approximate 2% to 3% of total revenues annually60 Royalty Expenses for Licensed Technology (FY2023-FY2025) | Fiscal Year | Amount (in thousands) | | :--- | :--- | | 2025 | $1,605 | | 2024 | $3,250 | | 2023 | $3,392 | 1.7 Proprietary Protection and Approvals - Neogen's intellectual property portfolio includes approximately 169 U.S. patents, 611 international patents, and 177 pending patent applications globally, alongside 100 U.S. and 370 international trademark registrations63 - Products requiring regulatory approval, such as veterinary biologics (BotVax B, EqStim, ImmunoRegulin) and pharmaceuticals (Uniprim), have received necessary approvals from agencies like the USDA and FDA67 - Many products also undergo third-party validations and certifications (e.g., AOAC International, USDA Food Safety Inspection Service) to ensure performance and enhance marketability68 1.8 Production and Supply - Neogen manufactures products in the U.S., U.K., Ireland, and Brazil, and provides genomics services in the U.S., Scotland, Brazil, Australia, China, and Canada, employing approximately 1,456 full-time staff in manufacturing69 - Food safety diagnostics are produced in Michigan and Kentucky, with culture media in Lansing and Heywood, England, and former 3M FSD products manufactured in 3M plants in the U.S. and Poland70 - The company purchases raw materials and components from many suppliers, often single-source, but aims to identify acceptable alternative suppliers to mitigate supply disruption risks75 1.9 Competition - Neogen faces intense competition across its diverse product lines from companies ranging from small businesses to large multinational corporations, some with substantially greater financial resources76 - The company competes primarily on ease of use, speed, accuracy, product performance, breadth of product line, effectiveness of sales and customer service, and pricing7680 - In the veterinary market, Neogen differentiates with products like BotVax B (the only USDA-approved Type B botulism vaccine) and through superior customer/technical support and lower-cost alternatives82 1.10 Government Regulation - Neogen's products and revenues are significantly affected by regulations from various domestic and foreign government agencies, including the U.S. Department of Agriculture (USDA), Environmental Protection Agency (EPA), and U.S. Food and Drug Administration (FDA)88 - The company's safety procedures for handling and disposing of hazardous materials comply with federal, state, and local regulations, and products sold internationally comply with similar regulatory requirements in destination countries8990 - Veterinary vaccine and some pharmaceutical products require government approval for lawful sales, which Neogen has obtained, maintaining good standing with all agencies92 1.11 Human Capital Management - As of May 31, 2025, Neogen employed 2,974 people worldwide (1,676 in the U.S., 1,298 internationally) and maintains good relations with employees, experiencing no work stoppages94 - The company fosters a diverse and inclusive workplace, guided by its 'Neogen DNA' (Purpose & Promise, Principles, Values), and a Code of Conduct emphasizing ethical business practices9596 - Neogen supports employee well-being through competitive compensation and benefits, internal programs for career planning, leadership development, and a commitment to a zero-incident safety culture979899 ITEM 1A. RISK FACTORS Neogen faces risks from the 3M merger integration, international operations, internal control weaknesses, supply chain disruptions, competition, and regulatory compliance - The continued successful integration of the 3M Food Safety business is not assured and could materially adversely affect business, financial condition, and results of operations, as evidenced by goodwill impairment charges in fiscal 2025101102104 - International operations, which account for over 50% of revenue, are subject to risks including political instability, tariffs, trade barriers, and foreign currency exchange rate fluctuations108109 - Material weaknesses in internal control over financial reporting could prevent accurate financial reporting and lead to material misstatements111112 1A.1 Risks Relating to the 3M Food Safety Transaction - Realizing anticipated financial and other benefits from the 3M Food Safety merger depends on successful integration, particularly of manufacturing operations, which presents significant difficulty101102 - Challenges with integration contributed to goodwill impairment charges in the Food Safety reporting unit in the second and fourth quarters of fiscal 2025104 - Restrictions on Neogen Food Safety Switzerland's actions until September 1, 2025, could impair Neogen's ability to implement beneficial strategic initiatives due to tax treatment considerations105 1A.2 Risks Relating to Business and Industry - International operations (50.2% of FY2025 revenue) are subject to risks including political/economic instability, tariffs, trade barriers, and fluctuations in foreign currency exchange rates108109 - Identified material weaknesses in internal control over financial reporting, particularly in control activities and information/communication, could lead to inaccurate financial reporting111112 - Reliance on information systems and third-party package delivery services exposes the company to risks of security breaches, system disruptions, and increased costs116117122123 1A.3 Risks Related to Liquidity, Indebtedness and Capital Markets - Substantial indebtedness could reduce financial flexibility, increase vulnerability to adverse economic conditions, and lead to competitive disadvantages141144 - Violation of financial or other covenants in credit agreements could result in accelerated debt repayment and materially adverse effects on business operations142143 - The market price of common stock could be highly volatile due to company performance, market conditions, and investor perceptions, and the company has no current plans to pay dividends147149150 1A.4 Other Risk Factors - Success is highly dependent on the ability to obtain and protect intellectual property, with risks of patent infringement challenges and substantial legal expenses151152155 - The company is subject to substantial governmental regulation, and failure to comply or changes in regulations could adversely impact business and financial results156 - Inability to attract, retain, and develop qualified personnel, including key management, could adversely impact operations and strategic plans157 - Climate change, legal/regulatory measures to address it, and failure to meet ESG objectives could materially adversely affect financial condition and business operations160161 ITEM 1B. UNRESOLVED STAFF COMMENTS Neogen Corporation reported no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments165 ITEM 1C. CYBERSECURITY Neogen manages cybersecurity threats through a comprehensive risk assessment program, third-party consulting, an incident response plan, and Board-level oversight - Neogen's information systems are vulnerable to attacks by hackers and other security breaches, a risk that has increased with the shift to cloud-based systems165 - No risks from cybersecurity threats or incidents have materially affected or are reasonably likely to materially affect the Company's business strategy, results of operations, or financial condition168 1C.1 Risk Management and Strategy - Neogen has a comprehensive cybersecurity risk assessment program, based on CIS Critical Security Controls, to identify, manage, and mitigate threats166 - The company regularly engages consultants for penetration testing, quarterly cybersecurity briefings, and annual program assessments, and monitors third-party service providers for cybersecurity risks167 - A written incident response plan is in place and routinely tested through simulated incidents to ensure prompt and effective response to potential breaches168 1C.2 Governance - The Governance and Sustainability Committee of the Board of Directors is responsible for oversight and policy direction on cybersecurity risk management, receiving quarterly cybersecurity briefs from IT leadership169170 - Management's cybersecurity team, led by a cybersecurity manager with over ten years of experience, is responsible for day-to-day implementation of the program171172173 - Processes include continuous monitoring, regular vulnerability assessments, implementation of cybersecurity measures (firewalls, encryption), and employee training174 ITEM 2. PROPERTIES Neogen Corporation operates 27 owned and 37 leased properties globally, which are considered adequate to support current business operations - Corporate headquarters are located in Lansing, Michigan, with other administrative, sales, manufacturing, and warehousing facilities domestically and globally178 - The properties are in good condition, well-maintained, and generally suitable and adequate to support the business178 Principal Manufacturing, Distribution and Administrative Locations (May 31, 2025) | Segment | Owned | Leased | | :--- | :--- | :--- | | Food Safety | 17 | 31 | | Animal Safety| 10 | 6 | | Total | 27| 37 | ITEM 3. LEGAL PROCEEDINGS Management believes that the outcome of currently pending legal proceedings will not materially affect the company's financial condition or operations - The Company is routinely involved in legal proceedings and litigation incidental to its business179 - Management does not believe any pending litigation matter is reasonably likely to have a material adverse effect on future results of operations or financial position179 ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to Neogen Corporation - The disclosure item regarding mine safety is not applicable to the registrant180 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Neogen's common stock (NEOG) trades on NASDAQ, with 510 stockholders of record as of June 30, 2025, and no dividends are expected - Neogen Common Stock is traded on the NASDAQ Global Select Market under the symbol NEOG182 - As of June 30, 2025, there were 510 stockholders of record183 - Neogen has never paid cash dividends on its Common Stock and does not expect to pay dividends in the foreseeable future184 - No shares were repurchased during the fiscal quarter ended May 31, 2025, and 5,900,000 shares remained available for repurchase under the authorized program185 ITEM 6. [RESERVED] This item is reserved and contains no information - This item is reserved186 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Fiscal year 2025 saw a revenue decrease and a significant net loss driven by a $1.06 billion goodwill impairment, with declining gross margins - Revenue decreased by $29.6 million in FY2025, primarily due to a $24.3 million unfavorable foreign exchange rate impact, $3.9 million from discontinued product lines, and production constraints in sample collection products201 - Gross margin decreased to 47.1% in FY2025 from 50.2% in FY2024, driven by lower volume, higher manufacturing costs for sample collection products, elevated inventory write-offs, and restructuring charges204 - A goodwill impairment charge of $1,059.3 million was recorded in FY2025, significantly impacting operating loss and net loss209 Key Financial Highlights (FY2025 vs. FY2024, in thousands) | Metric | FY2025 | FY2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $894,661 | $924,222 | $(29,561) | | Gross Profit | $421,376 | $463,900 | $(42,524) | | Operating Loss (Income)| $(1,060,997) | $58,663 | $(1,119,660) | | Net Loss | $(1,092,044) | $(9,421) | $(1,082,623) | 7.1 Company Overview - Neogen's Food Safety segment provides diagnostic test kits and software systems to detect dangerous substances in human food and animal feed, including pathogens, toxins, and allergens189 - The Animal Safety segment develops and distributes veterinary instruments, pharmaceuticals, vaccines, diagnostic products, and genomics testing services for the worldwide animal safety market190 7.2 Trends and Uncertainties - Ongoing economic headwinds include input cost inflation, higher interest rates (increasing borrowing costs), and geopolitical tensions (Russia-Ukraine, Middle East conflicts) impacting global supply chains and raw material costs191192194 - Implementation of a new ERP system and exit from 3M transition service agreements in early FY2024 led to shipment delays and elevated backlog, with lost market share continuing into FY2025193 - The Food Safety industry is experiencing lower food production, and the Animal Safety end market is at or near cyclical lows, while the companion animal market shows weakness due to inflation and customer in-sourcing195196 7.3 Results of Operations - Service revenue, primarily from genomics, decreased by 5% to $97.3 million in FY2025, due to voluntary attrition, weakness in the companion animal market, and customer in-sourcing, partially offset by bovine market growth202 - International revenues decreased by 2% to $448.7 million in FY2025, primarily due to a $24.3 million currency headwind, partially offset by increased sales in Latin America and Europe203 - Income tax benefit increased to $41.1 million in FY2025, primarily related to pre-tax losses from goodwill impairment deductible in certain jurisdictions, and amortization/interest expense from the FSD transaction212 Consolidated Statements of Operations (FY2025 vs. FY2024, in thousands) | Metric | FY2025 | FY2024 | 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) | | 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) | | Net Loss | $(1,092,044) | $(9,421) | $(1,082,623) | 7.4 Segment Results of Operations - Food Safety revenue decrease was primarily due to $24.0 million in currency headwinds and $1.2 million from discontinued products, partially offset by $8.0 million growth in indicator/pathogen testing and new food quality products216 - Animal Safety revenue decline was driven by a $9.4 million business decline (lower genomics volume, companion animal weakness, customer in-sourcing) and $2.7 million from discontinued products217 Segment Revenues (FY2025 vs. FY2024, in thousands) | Segment | FY2025 | FY2024 | 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)% | Segment Operating (Loss) Income (FY2025 vs. FY2024, in thousands) | Segment | FY2025 | FY2024 | Increase / (Decrease) | % Change | | :--- | :--- | :--- | :--- | :--- | | 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)% | 7.5 Future Operating Results - Future operating results depend on successfully implementing strategies such as developing new products, expanding markets, maintaining margins, strengthening international operations, and completing strategic acquisitions222 7.6 Financial Condition and Liquidity - Primary liquidity sources are cash and cash equivalents, cash flows from operations, and available borrowing capacity under Credit Facilities223 - As of May 31, 2025, cash and cash equivalents were $129.0 million, with $150.0 million available under the revolving line of credit225 - The company completed the divestiture of its global Cleaners & Disinfectants business on July 18, 2025, for $130.0 million in cash, with proceeds primarily used to repay debt226384 - A refinancing amendment to the credit agreement on April 4, 2025, provided a new $450.0 million term loan and a $250.0 million revolving credit facility, lowering the interest spread228229 - Capital expenditures for fiscal 2026 are estimated at approximately $50 million, including $35 million for integrating acquired 3M FSD products and constructing a new manufacturing facility236 Net Cash Flows (FY2023-FY2025, in thousands) | Cash Flow Category | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Net Cash provided by Operating Activities| $58,244 | $35,264 | $41,028 | | Net Cash (used for) provided by Investing Activities| $(99,195) | $(29,309) | $201,039 | | Net Cash (used for) provided by Financing Activities| $(1,598) | $1,918 | $(118,081) | 7.7 Contractual Obligations Contractual Obligations as of May 31, 2025 (in thousands) | Obligation Type | Total | Less than 1 year | 1-3 years | 4-5 years | More than 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| $101,436 | $97,340 | $4,096 | $— | $— | | Total | $1,315,193| $185,608 | $249,933 | $518,770 | $360,882 | 7.8 Critical Accounting Estimates - Critical accounting estimates involve significant judgments and assumptions, particularly for income taxes, goodwill impairment, deferred taxes, and intangible assets acquired238239347 - Goodwill impairment testing involves estimating fair value using discounted cash flows and market-based approaches, requiring significant judgment on forecasted revenue growth, gross margins, and discount rates244246 - Inaccurate estimates or changes in economic conditions could lead to future material impairment charges on goodwill or intangible assets248 7.9 New Accounting Pronouncements - Refer to Note 1 to the consolidated financial statements for a discussion of new accounting pronouncements250 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Neogen is exposed to market risks from interest rate and foreign exchange rate fluctuations, which it manages using derivative financial instruments - Primary interest rate risk is due to potential fluctuations of interest rates for variable rate borrowings; approximately 38.9% of total debt was at variable interest rates as of May 31, 2025 (including interest rate swap)252255 - Foreign exchange risk arises from international revenues and costs transacted in currencies other than the U.S. dollar, exposing operating results to exchange rate changes253256 - Derivative financial instruments, such as forward foreign exchange contracts and interest rate swap contracts, are used to manage the economic impact of currency and interest rate fluctuations254255 Potential Impact of Market Rate Changes (May 31, 2025, in thousands) | Risk Category | Hypothetical Change | Impact Type | Impact | | :--- | :--- | :--- | :--- | | Foreign Currency — Revenue| 10% depreciation in exchange rates relative to USD| Revenue | $(44,873) | | Foreign Currency — Hedges| 10% depreciation in exchange rates relative to USD| Earnings | $612 | | Interest Income | 75 basis point decrease in interest rates | Earnings | $(468) | | Interest Expense | 75 basis point increase in interest rates | Earnings | $(2,625) | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This item refers to the consolidated financial statements and supplementary data, which are submitted in a separate section of this report starting on page 58 - The response to this item is submitted in a separate section of this report starting on page 58257 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Neogen Corporation reported no changes in or disagreements with its accountants on accounting and financial disclosure matters - There were no changes in and disagreements with accountants on accounting and financial disclosure258 ITEM 9A. CONTROLS AND PROCEDURES Disclosure controls were deemed ineffective as of May 31, 2025, due to material weaknesses in internal control over financial reporting - The Company's disclosure controls and procedures were not effective as of May 31, 2025, due to material weaknesses in internal control over financial reporting259 - Management concluded that internal control over financial reporting was ineffective as of May 31, 2025, due to material weaknesses related to control activities and information and communication processes262 - Despite the material weaknesses, management concluded that the consolidated financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with US GAAP269 9A.1 Evaluation of Disclosure Controls and Procedures - An evaluation of disclosure controls and procedures as of May 31, 2025, concluded they were not effective due to material weaknesses in internal control over financial reporting259 9A.2 Management's Report on Internal Control over Financial Reporting - Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding reliability of financial reporting260 - Internal control over financial reporting was assessed as ineffective as of May 31, 2025, due to material weaknesses in control activities and related information and communication processes262 9A.3 Material Weakness - A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting that creates a reasonable possibility of a material misstatement not being prevented or detected timely263 9A.4 Remediation of Previously Identified Material Weaknesses - Previously identified material weaknesses related to ineffective information technology general controls (ITGCs) and controls over period-end invoice accruals were remediated as of May 31, 2025264266 - Remediation measures included hiring additional accounting and IT resources, enhancing invoice accrual processes, improving user access and change management controls, and conducting additional training264266 9A.5 Identified Material Weaknesses (Current) - Current material weaknesses as of May 31, 2025, include deficiencies in control activities, specifically management's failure to maintain effective review controls for goodwill valuation analysis266267 - Deficiencies in information and communication include inconsistent retention of supporting documentation for internal controls and inadequate internal communication of control responsibilities268 9A.6 Ongoing Remediation Efforts - Ongoing remediation efforts include enhancing the design and execution of control activities, improving internal controls documentation, expanding entity-level controls, and developing document retention protocols272 - The company is also providing training to control owners and hiring qualified personnel, including a dedicated Director of Internal Controls, to support enhanced control ownership272273 9A.7 Changes in Internal Control over Financial Reporting - No changes in internal control over financial reporting were identified during the fourth quarter of fiscal year 2025 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting, other than remediation efforts for identified material weaknesses274 ITEM 9B. OTHER INFORMATION Mikhael Nassif was appointed President and CEO effective August 11, 2025, and no insider trading arrangements were adopted or terminated by officers - Mikhael Nassif was appointed President and CEO of the Company, effective August 11, 2025, and joined the Board of Directors283 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarterly period ended May 31, 2025284 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This item is not applicable to Neogen Corporation - The disclosure item regarding foreign jurisdictions that prevent inspections is not applicable to the registrant285 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information regarding directors, officers, and corporate governance is incorporated by reference from the 2025 definitive proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from Neogen's 2025 definitive proxy statement287 - Neogen has adopted a Code of Conduct applicable to directors, officers, and employees, available on its website288 - An insider trading policy governs the purchase, sale, and disposition of securities by covered persons, designed to promote compliance with insider trading laws289 ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation is incorporated by reference from the Company's definitive Proxy Statement - 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 Statement290 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS Information regarding security ownership and related stockholder matters is incorporated by reference from the Company's definitive Proxy Statement - 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 Statement291 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information regarding related transactions and director independence is incorporated by reference from the Company's definitive Proxy Statement - 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 Statement292 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Information regarding principal accountant fees and services is incorporated by reference from the Company's definitive Proxy Statement - 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 Statement293 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES This section details the exhibits and financial statement schedules filed as part of the Form 10-K - The response to this portion of ITEM 15 is submitted as a separate section of this report starting on page 58295 - Exhibits include Restated Articles of Incorporation, Senior Notes Indenture, Credit Agreement, and various agreements related to the 3M Food Safety transaction (e.g., Separation and Distribution Agreement, Transition Services Agreement)298299 - Other exhibits cover equity compensation plans (2018 and 2023 Omnibus Incentive Plans), executive severance agreements, and the Insider Trading Policy299300 ITEM 16. FORM 10-K SUMMARY This item is not applicable to Neogen Corporation - This item is not applicable297 SIGNATURES The Form 10-K report is duly signed on behalf of Neogen Corporation by its executive officers and Board of Directors on July 30, 2025 - The report is signed by John E. Adent (President & CEO), David H. Naemura (CFO & COO), and John P. Moylan (Chief Accounting Officer)305 - The report is also signed by the Chairman of the Board of Directors and other Directors307 - All signatures are dated July 30, 2025305307 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm BDO USA, P.C. issued an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting - BDO USA, P.C. issued an unqualified opinion on the consolidated financial statements of Neogen Corporation as of May 31, 2025 and 2024, and for the three years ended May 31, 2025312 - An adverse opinion was expressed on the effectiveness of the Company's internal control over financial reporting as of May 31, 2025, due to material weaknesses313 - The Goodwill Impairment Assessment for the Food Safety and Animal Safety reporting units was identified as a critical audit matter, involving challenging and subjective auditor judgment regarding management's assumptions318320 Consolidated Balance Sheets Total assets decreased to $3.44 billion in 2025 from $4.55 billion in 2024, primarily due to a significant reduction in goodwill - Goodwill decreased significantly from $2,135,632 thousand in 2024 to $1,064,902 thousand in 2025, reflecting impairment charges323 - Total Stockholders' Equity decreased by approximately $1.07 billion from May 31, 2024, to May 31, 2025323 Consolidated Balance Sheets (in thousands) | Asset/Liability/Equity | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Total Current Assets | $576,937 | $589,233 | | Property and Equipment, net | $339,131 | $277,104 | | Goodwill | $1,064,902 | $2,135,632 | | Amortizable intangible assets, net | $1,410,485 | $1,511,653 | | Total Assets | $3,443,836| $4,548,833| | Liabilities | | | | Total Current Liabilities | $174,011 | $154,323 | | Non-Current Debt | $874,810 | $888,391 | | Total Liabilities | $1,372,582| $1,404,691| | Stockholders' Equity | | | | Total Stockholders' Equity | $2,071,254 | $3,144,142 | Consolidated Statements of Operations Neogen reported a net loss of $1,092.0 million in fiscal year 2025, primarily due to a $1,059.3 million goodwill impairment charge - Goodwill impairment of $1,059,321 thousand was recorded in FY2025, significantly contributing to the net loss326 - Total revenues decreased by $29,561 thousand (3%) from FY2024 to FY2025326 Consolidated Statements of Operations (in thousands, except shares) | Metric | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Total Revenues | $894,661 | $924,222 | $822,447 | | Gross Profit | $421,376 | $463,900 | $405,955 | | Total Operating Expenses | $1,482,373 | $405,237 | $368,440 | | Operating Loss (Income) | $(1,060,997) | $58,663 | $37,515 | | Loss Before Taxes | $(1,133,110) | $(14,305) | $(22,042) | | Income Tax (Benefit) Expense| $(41,066) | $(4,884) | $828 | | Net Loss | $(1,092,044) | $(9,421) | $(22,870) | | Basic Net Loss Per Share | $(5.03) | $(0.04) | $(0.12) | | Diluted Net Loss Per Share | $(5.03) | $(0.04) | $(0.12) | Consolidated Statements of Comprehensive (Loss) Income Neogen reported a total comprehensive loss of $1,090.9 million in fiscal year 2025, driven by the substantial net loss - Foreign currency translations resulted in a gain of $4,248 thousand in FY2025, compared to a loss of $1,599 thousand in FY2024328 - Unrealized loss on derivative instruments was $3,125 thousand in FY2025, compared to a gain of $3,902 thousand in FY2024328 Consolidated Statements of Comprehensive (Loss) Income (in thousands) | Metric | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Net Loss | $(1,092,044) | $(9,421) | $(22,870) | | Other comprehensive income (loss), net of tax| $1,123 | $3,230 | $(5,482) | | Total Comprehensive Loss | $(1,090,921)| $(6,191)| $(28,352)| Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $2.07 billion at May 31, 2025, primarily driven by the substantial net loss of $1,092.0 million - The net loss of $1,092,044 thousand in FY2025 significantly reduced retained earnings, leading to an accumulated deficit332 - Share-based compensation expense contributed $17,291 thousand to additional paid-in capital in FY2025332 Consolidated Statements of Stockholders' Equity (in thousands, except share amounts) | Metric | May 31, 2025 | May 31, 2024 | May 31, 2023 | | :--- | :--- | :--- | :--- | | Common Stock (Shares) | 217,044,498 | 216,614,407 | 216,245,501 | | Common Stock (Amount) | $34,728 | $34,658 | $34,599 | | Additional Paid-in Capital | $2,601,848 | $2,583,885 | $2,567,828 | | Accumulated Other Comprehensive Loss | $(28,898) | $(30,021) | $(33,251) | | Retained Earnings (Accumulated Deficit) | $(536,424) | $555,620 | $565,041 | | Total Stockholders' Equity | $2,071,254| $3,144,142| $3,134,217| Consolidated Statements of Cash Flows Net cash from operating activities increased to $58.2 million in FY2025, but a net decrease in cash of $41.6 million occurred for the year - The increase in net cash from operating activities was primarily due to working capital items, partially offset by a decrease in income from operations233 - Net cash used for investing activities increased by $69.9 million, mainly due to lower proceeds from marketable securities sales, partially offset by decreased capital expenditures and higher proceeds from a building sale234 - Financing activities resulted in a net outflow of $1.6 million, primarily due to taxes paid on share-based compensation and debt issuance costs235 Consolidated Statements of Cash Flows (in thousands) | Cash Flow Category | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Net Cash provided by Operating Activities| $58,244 | $35,264 | $41,028 | | Net Cash (used for) provided by Investing Activities| $(99,195) | $(29,309) | $201,039 | | Net Cash (used for) provided by Financing Activities| $(1,598) | $1,918 | $(118,081) | | Net (Decrease) Increase in Cash and Cash Equivalents| $(41,607) | $7,371 | $118,767 | | Cash and Cash Equivalents, End of Year | $129,004 | $170,611 | $163,240 | Notes to Consolidated Financial Statements The notes provide detailed information on accounting policies, critical estimates, revenue recognition, debt, and other financial statement components - The notes detail the company's significant accounting policies, including revenue recognition, business combinations, and critical accounting estimates like goodwill impairment and deferred taxes335347364369 - Key financial data, such as disaggregated revenue, net loss per share calculations, and details on assets held for sale, are provided378380382 - Extensive information is given on long-term debt, equity compensation plans, income tax provisions, and various commitments and contingencies, including environmental remediation and royalty payments412426438449456 Note 1. Summary of Significant Accounting Policies - Neogen's functional currency is the U.S. dollar, with foreign operations' assets and liabilities translated at current exchange rates and income/expense at average rates; translation adjustments are recorded in other comprehensive (loss) income338 - The company adopted ASU 2023-07 (Segment Reporting) in November 2023 and is evaluating ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) for future impact339340341 - Critical accounting estimates include goodwill impairment, deferred taxes, intangible assets acquired, and fair value measurements, requiring significant management judgment347 Note 2. Revenue Recognition - Revenue is derived from product sales (diagnostic test kits, consumable animal products, rodent/insect control) and service revenues (genomics and commercial laboratory services)373374375379 - Product revenues are recognized upon shipment, and service revenues are recognized when the laboratory service is performed and results are conveyed375 Disaggregated Revenue by Major Product and Service Categories (in thousands) | Category | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Food Safety: | | | | | Natural Toxins & Allergens | $77,058 | $82,240 | $82,567 | | Bacterial & General Sanitation | $164,777 | $171,217 | $134,934 | | Indicator Testing, Culture Media & Other| $325,915 | $334,636 | $267,178 | | Rodent Control, Insect Control & Disinfectants| $46,971 | $42,965 | $39,655 | | Genomics Services | $23,419 | $24,283 | $22,463 | | Total Food Safety | $638,140| $655,341| $546,797| | Animal Safety: | | | | | Life Sciences | $6,500 | $6,515 | $6,254 | | Veterinary Instruments & Disposables | $61,468 | $65,848 | $63,843 | | Animal Care & Other | $34,654 | $36,978 | $39,068 | | Rodent Control, Insect Control & Disinfectants| $88,063 | $88,732 | $87,423 | | Genomics Services | $65,836 | $70,808 | $79,062 | | Total Animal Safety | $256,521| $268,881| $275,650| | Total Revenue | $894,661| $924,222| $822,447| Note 3. Net Loss Per Share - Due to net losses in fiscal years 2025, 2024, and 2023, stock options and restricted stock units (RSUs) were anti-dilutive and excluded from diluted net loss per share calculations380 Net Loss Per Share Calculations (in thousands, except shares) | Metric | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Numerator for basic and diluted net loss per share — Net Loss| $(1,092,044) | $(9,421) | $(22,870) | | Denominator for basic net loss per share — Weighted average shares| 216,894,861 | 216,481,878 | 188,880,836 | | Denominator for diluted net loss per share | 216,894,861 | 216,481,878 | 188,880,836 | | Basic Net Loss Per Share | $(5.03) | $(0.04) | $(0.12) | | Diluted Net Loss Per Share | $(5.03) | $(0.04) | $(0.12) | Note 4. Assets Held for Sale - In April 2025, Neogen announced an agreement to sell its global Cleaners and Disinfectants (C&D) business to Kersia Group, with the transaction expected to close in Q1 FY2026381 - The C&D business assets and liabilities met the criteria for presentation as held for sale as of May 31, 2025, with no impairment charge recognized as fair value less cost to sell exceeded carrying value381 - On July 18, 2025, the divestiture of the C&D business was completed for $130.0 million in cash, plus contingent consideration, with net proceeds primarily for debt repayment384 Major Classes of Assets and Liabilities Held for Sale (May 31, 2025, in thousands) | Category | Amount | | :--- | :--- | | Assets Held for Sale | | | Accounts receivable, net | $7,229 | | Inventory, net | $8,707 | | Property and equipment, net | $7,081 | | Goodwill | $12,977 | | Amortizable intangible assets, net | $13,261 | | Total Assets Held for Sale | $50,402| | Liabilities Held for Sale | | | Accounts payable | $2,287 | | Deferred income tax liability | $2,151 | | Total Liabilities Held for Sale | $6,556| Note 5. Leases - Neogen leases various manufacturing, laboratory, warehousing, distribution facilities, administrative offices, equipment, and vehicles under operating and finance leases385 Supplemental Balance Sheet Information Related to Leases (in thousands) | Metric | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Rights of use - non-current assets | $17,152 | $14,785 | | Lease liabilities - other current liabilities| $5,641 | $5,101 | | Lease liabilities - non-current liabilities| $12,860 | $10,300 | | Property and equipment (finance lease) | $2,425 | $2,423 | | Current portion of finance lease | $2,426 | $2,447 | Components of Lease Expense (in thousands) | Expense Type | FY2025 | FY2024 | | :--- | :--- | :--- | | Operating leases | $6,189 | $4,510 | | Short term leases | $722 | $625 | | Financing lease expense: Amortization of asset| $299 | $219 | | Financing lease expense: Interest on lease liability| $18 | $12 | | Total lease expense | $7,228| $5,366| Future Lease Payments as of May 31, 2025 (in thousands) | Years ending May 31, | Operating Leases | Finance Lease | | :--- | :--- | :--- | | 2026 | $6,257 | $2,431 | | 2027 | $4,638 | $— | | 2028 | $3,237 | $— | | 2029 | $1,763 | $— | | 2030 | $1,153 | $— | | 2031 and thereafter | $6,773 | $— | | Total lease payments| $23,821 | $2,431 | Note 6. Goodwill and Other Intangible Assets - In fiscal year 2025, Neogen recorded goodwill impairment charges totaling $1,059.3 million ($461.4 million in Q2 and $584.8 million in Q4 for Food Safety, plus $13.1 million for Animal Safety in Q4)388389 - The impairment was triggered by integration challenges, end market conditions, and recent overall financial performance, leading to the carrying value of reporting units exceeding their fair value388389 - Amortization expense for intangibles totaled $93,917 thousand in FY2025, with estimated future amortization of $96,000 thousand for FY2026391392 Goodwill by Reportable Segment (in thousands) | Segment | May 31, 2025 | May 31, 2024 | May 31, 2023 | | :--- | :--- | :--- | :--- | | Food Safety | $996,883 | $2,054,205 | $2,056,161 | | Animal Safety | $68,019 | $81,427 | $81,335 | | Total | $1,064,902| $2,135,632| $2,137,496| Net Definite-lived Intangible Assets (May 31, 2025, in thousands) | Category | Net Carrying Amount | | :--- | :--- | | Licenses | $7,784 | | Patents | $4,535 | | Customer relationships intangibles | $1,035,148 | | Trade names and trademarks | $102,829 | | Developed technology | $245,630 | | Other product and service-related intangibles| $14,486 | | Total | $1,410,485 | Note 7. Restructuring - Neogen implemented restructuring initiatives, primarily streamlining its global genomics business, which was finalized by May 31, 2025399 - Restructuring charges in FY2025 included $3,041 thousand for employee separation costs and $8,055 thousand for other exit costs, with $7,574 thousand in asset impairments400 Restructuring Charges by Segment (in thousands) | Segment | FY2025 | FY2024 | | :--- | :--- | :--- | | Food Safety | $2,146 | $402 | | Animal Safety | $7,430 | $1,385 | | Corporate | $1,520 | $1,726 | | Total | $11,096| $3,513| Note 8. Business Combinations - In July 2022, Neogen acquired Thai-Neo Biotech Co., Ltd. for $1,581 thousand in net cash, establishing a direct sales presence in Thailand403 - In February 2023, the company acquired certain assets from Corvium, Inc. for $24,067 thousand, advancing its food safety data analytics strategy; a contingent liability of $930 thousand was reversed in FY2025 as the final milestone was not achieved404405407 - The 3M Food Safety Division (FSD) transaction closed in September 2022, with a purchase price of $3.2 billion, consisting of 108,269,946 shares of Neogen common stock ($2.2 billion fair value) and $1 billion in non-cash consideration408409 Note 9. Long-Term Debt - On April 4, 2025, Neogen refinanced its credit agreement, providing a new $450.0 million senior secured term loan and a $250.0 million revolving credit facility, lowering the interest spread414 - The company has $350.0 million aggregate principal amount of 8.625% senior notes due in 2030, with no required principal payments until maturity421424 Long-Term Debt (in thousands) | Debt Type | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Term Loan | $450,000 | $550,000 | | Senior Notes | $350,000 | $350,000 | | Revolver Facility | $100,000 | $— | | Finance Lease | $2,426 | $— | | Total debt and finance lease| $902,426| $900,000| | Less: Current portion | $(19,301) | $— | | Total non-current debt, net| $874,810| $888,391| Expected Debt Maturities as of May 31, 2025 (in thousands) | Fiscal Year | Amount | | :--- | :--- | | 2026 | $19,225 | | 2027 | $22,500 | | 2028 | $22,500 | | 2029 | $22,500 | | 2030 | $465,625 | | Thereafter | $350,000 | | Total | $902,350| Note 10. Equity Compensation Plans and Other Incentive Compensation - Neogen's long-term incentive plans allow for grants of stock options and restricted stock units (RSUs) to officers, directors, and key employees, vesting over three to five years426 - Remaining compensation cost for non-vested options was $13,488 thousand at May 31, 2025, with a weighted average expense recognition period of 1.8 years429 - The Employee Stock Purchase Plan allows eligible employees to buy common stock at a 5% discount, with 157,648 shares purchased in FY2025434 - Neogen maintains a 401(k) benefit plan with matching contributions and offers an annual bonus opportunity to certain employees based on company and individual performance436437 Stock Options Summary (in thousands, except price) | Metric | May 31, 2025 | May 31, 2024 | May 31, 2023 | | :--- | :--- | :--- | :--- | | Options Outstanding | 5,927 | 4,936 | 4,222 | | Weighted Average Exercise Price | $17.51 | $20.41 | $25.56 | | Weighted Average Grant Date Fair Value| $5.56 | $6.12 | $6.51 | | Options Exercisable | 2,142 | 1,518 | 1,401 | Note 11. Income Taxes - Income tax expense was significantly impacted by goodwill impairments in FY2025, which are primarily not deductible for tax purposes440 - The company has $18,913 thousand in net operating loss carryforwards, with foreign losses expiring from 2026 to indefinitely441 - Unrecognized tax benefits that would affect the effective tax rate were $3,849 thousand at May 31, 2025, primarily related to transfer pricing, IRC Section 861 expense apportionment, and R&D credits213444 - The company is assessing the impact of the OECD Pillar 2 global minimum tax rules and the U.S. One Big Beautiful Bill Act (OBBBA) on its future tax rate and liabilities447448 Income Before Income Taxes by Source (in thousands) | Source | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | U.S. | $(1,026,641) | $(92,161) | $(85,681) | | Foreign| $(106,469) | $77,856 | $63,639 | | Total| $(1,133,110)| $(14,305)| $(22,042)| Provision for Income Taxes (in thousands) | Category | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Total Current | $15,698 | $24,604 | $20,058 | | Total Deferred | $(56,764) | $(29,488) | $(19,230) | | Income tax (benefit) expense| $(41,066)| $(4,884)| $828 | Net Deferred Income Tax Liabilities (in thousands) | Category | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Deferred income tax liabilities | $(322,438) | $(362,045) | | Deferred income tax assets | $60,753 | $40,641 | | Valuation allowance | $(1,440) | $(1,526) | | Net deferred income tax liabilities| $(263,125)| $(322,930)| Note 12. Commitments and Contingencies - Neogen accrues for environmental remediation costs at its Randolph, Wisconsin facility, with an estimated remaining liability of $916 thousand as of May 31, 2025, measured on an undiscounted basis over 15 years449450 - In Q3 FY2025, the company recorded a $2,700 thousand gain from a settlement related to a prior fixed asset acquisition, partially offset by a $2,055 thousand fixed asset impairment451 - A $930 thousand contingent liability related to the Corvium, Inc. transaction was reversed in Q3 FY2025 as the final milestone payment was not achieved452 - Royalty expense for licensed technologies totaled $1,605 thousand in FY2025, with future minimum royalty payments of $329 thousand for FY2026456 Note 13. Fair Value and Derivatives - Neogen uses foreign currency forward contracts to mitigate exposure to exchange rate fluctuations, with a notional amount of $65,023 thousand as of May 31, 2025[460](index=460&typ