Neogen(NEOG) - 2026 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Interim Condensed Consolidated Financial Statements (unaudited) This section presents Neogen Corporation's unaudited condensed consolidated financial statements for the three months ended August 31, 2025, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes explaining business operations, accounting policies, segment information, and other financial disclosures Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity, at specific reporting dates Condensed Consolidated Balance Sheets (August 31, 2025 vs. May 31, 2025) | Metric (in thousands) | August 31, 2025 | May 31, 2025 | Change | % Change | | :-------------------- | :-------------- | :----------- | :----- | :------- | | Total Current Assets | $524,060 | $576,937 | $(52,877) | -9.16% | | Total Assets | $3,378,156 | $3,443,836 | $(65,680) | -1.91% | | Total Current Liabilities | $146,205 | $174,011 | $(27,806) | -15.98% | | Total Liabilities | $1,259,507 | $1,372,582 | $(113,075) | -8.24% | | Total Stockholders' Equity | $2,118,649 | $2,071,254 | $47,395 | 2.29% | - Assets held for sale decreased from $50,402 thousand to $0, indicating the completion of the divestiture[11] - Current portion of debt decreased from $19,301 thousand to $0, reflecting debt repayments[11] Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net income or loss over specific reporting periods Condensed Consolidated Statements of Operations (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands, except EPS) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------------------- | :-------------- | :-------------- | :----- | :------- | | Total Revenues | $209,189 | $216,964 | $(7,775) | -3.58% | | Gross Profit | $94,970 | $104,926 | $(9,956) | -9.49% | | Operating (Loss) Income | $(16,091) | $2,257 | $(18,348) | -812.94% | | Gain on sale of business | $76,390 | $0 | $76,390 | N/A | | Net Income (Loss) | $36,338 | $(12,609) | $48,947 | 388.20% | | Basic Net Income (Loss) Per Share | $0.17 | $(0.06) | $0.23 | 383.33% | | Diluted Net Income (Loss) Per Share | $0.17 | $(0.06) | $0.23 | 383.33% | - Net Income significantly improved from a loss of $12.6 million in Q1 2024 to a gain of $36.3 million in Q1 2025, primarily driven by a $76.4 million gain on the sale of a business[14] Condensed Consolidated Statements of Comprehensive (Loss) Income Reports net income and other comprehensive income or loss components, reflecting total changes in equity from non-owner sources Condensed Consolidated Statements of Comprehensive (Loss) Income (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Net income (loss) | $36,338 | $(12,609) | $48,947 | 388.20% | | Foreign currency translation gain | $5,817 | $2,459 | $3,358 | 136.56% | | Unrealized loss on derivative instruments | $(404) | $(3,859) | $3,455 | -89.53% | | Total comprehensive income (loss) | $41,751 | $(14,009) | $55,760 | 398.03% | Condensed Consolidated Statements of Equity Outlines changes in stockholders' equity, including common stock, retained earnings, and other comprehensive income, over time Condensed Consolidated Statements of Equity (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands, except shares) | August 31, 2025 | May 31, 2025 | August 31, 2024 | May 31, 2024 | | :----------------------------------- | :-------------- | :----------- | :-------------- | :----------- | | Common Stock Shares | 217,298,626 | 217,044,498 | 216,698,138 | 216,614,407 | | Common Stock Amount | $34,768 | $34,728 | $34,672 | $34,658 | | Additional Paid-in Capital | $2,607,452 | $2,601,848 | $2,588,930 | $2,583,885 | | Accumulated Other Comprehensive Loss | $(23,485) | $(28,898) | $(31,421) | $(30,021) | | Accumulated Deficit (Retained Earnings) | $(500,086) | $(536,424) | $543,011 | $555,620 | | Total Stockholders' Equity | $2,118,649 | $2,071,254 | $3,135,192 | $3,144,142 | - Total Stockholders' Equity increased by $47.4 million from May 31, 2025, to August 31, 2025, primarily due to net income and other comprehensive income[22] - Accumulated deficit improved by $36.3 million, moving from $(536,424) thousand to $(500,086) thousand, reflecting the net income for the period[22] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the reporting period Condensed Consolidated Statements of Cash Flows (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Net Cash from Operating Activities | $10,853 | $(17,914) | $28,767 | 160.58% | | Net Cash from Investing Activities | $97,725 | $(33,662) | $131,387 | 390.33% | | Net Cash from Financing Activities | $(99,393) | $979 | $(100,372) | -10252.50% | | Net Increase (Decrease) in Cash | $9,879 | $(50,134) | $60,013 | 119.70% | | Cash and Cash Equivalents, End of Year | $138,883 | $120,477 | $18,406 | 15.28% | - Net cash provided by investing activities significantly increased to $97.7 million in Q1 2025, primarily due to $121.7 million in proceeds from the sale of the Cleaners & Disinfectants business[25][38] - Cash used for financing activities increased substantially to $(99.4) million in Q1 2025, driven by debt repayments using divestiture proceeds[25][110] Notes to Interim Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the interim condensed consolidated financial statements 1. Description of Business and Basis of Presentation Describes Neogen's business segments and the accounting principles used in financial statement preparation - Neogen operates in two segments: Food Safety (diagnostic test kits, genomics-based tech, software for food/animal feed safety) and Animal Safety (veterinary instruments, pharmaceuticals, vaccines, diagnostics, biosecurity, genomics testing for animal health)[27][28] - The company adopted new accounting pronouncements for Segment Reporting (ASU 2023-07) and Income Taxes (ASU 2023-09) effective June 1, 2025, modifying disclosure requirements[31][32] 2. Revenue Recognition Explains the company's policies and disaggregated data for recognizing revenue from contracts with customers Disaggregated Revenue by Major Product and Service Categories (Three months ended August 31, 2025 vs. 2024) | Category (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :---------------------- | :-------------- | :-------------- | :----- | :------- | | Food Safety | | | | | | Natural Toxins & Allergens | $19,962 | $20,376 | $(414) | -2.03% | | Bacterial & General Sanitation | $41,649 | $39,899 | $1,750 | 4.39% | | Indicator Testing, Culture Media & Other | $79,085 | $81,703 | $(2,618) | -3.20% | | Biosecurity Products | $5,799 | $11,779 | $(5,980) | -50.77% | | Genomics Services | $5,555 | $5,588 | $(33) | -0.59% | | Total Food Safety | $152,050 | $159,345 | $(7,295) | -4.58% | | Animal Safety | | | | | | Life Sciences | $1,859 | $1,733 | $126 | 7.27% | | Veterinary Instruments & Disposables | $11,908 | $12,523 | $(615) | -4.91% | | Animal Care & Other | $7,578 | $6,679 | $899 | 13.46% | | Biosecurity Products | $19,229 | $20,806 | $(1,577) | -7.58% | | Genomics Services | $16,565 | $15,878 | $687 | 4.33% | | Total Animal Safety | $57,139 | $57,619 | $(480) | -0.83% | | Total Revenues | $209,189 | $216,964 | $(7,775) | -3.58% | Contract Liabilities (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | | :-------------------- | :-------------- | :-------------- | | Beginning balance | $5,558 | $4,632 | | Additions | $3,206 | $3,078 | | Amounts recognized into revenue | $(2,940) | $(2,075) | | Ending balance | $5,824 | $5,635 | 3. Divestiture Details the sale of a business segment, including proceeds, gain recognized, and classification impact - Neogen completed the sale of its Cleaners and Disinfectants (C&D) business to Kersia Group on July 17, 2025, receiving $121.7 million in cash at closing, plus contingent consideration up to $3.5 million[38] - A gain of $76.39 million on the sale of the C&D business was recognized during the three months ended August 31, 2025[38] - The divestiture did not meet the criteria for classification as a discontinued operation[37] 4. Net Income (Loss) Per Share Presents the calculation of basic and diluted earnings per share, including adjustments for anti-dilutive securities Net Income (Loss) Per Share Calculation (Three months ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 | August 31, 2024 | | :----- | :-------------- | :-------------- | | Net income (loss) attributable to Neogen | $36,338 | $(12,609) | | Weighted average shares (Basic) | 217,217,836 | 216,695,348 | | Weighted average shares (Diluted) | 217,334,926 | 216,695,348 | | Basic EPS | $0.17 | $(0.06) | | Diluted EPS | $0.17 | $(0.06) | - For Q1 2025, 661,000 shares were excluded from diluted EPS calculation as they were anti-dilutive. For Q1 2024, all stock options and RSUs were anti-dilutive due to the net loss[41] 5. Segment Information and Geographic Data Provides financial data broken down by operating segments and geographic regions Segment Performance (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | Food Safety 2025 | Animal Safety 2025 | Corporate 2025 | Total 2025 | Food Safety 2024 | Animal Safety 2024 | Corporate 2024 | Total 2024 | | :-------------------- | :--------------- | :----------------- | :------------- | :--------- | :--------------- | :----------------- | :------------- | :--------- | | Net Revenue | $152,050 | $57,139 | — | $209,189 | $159,345 | $57,619 | — | $216,964 | | Operating Income (Loss) | $7,091 | $4,472 | $(27,654) | $(16,091) | $17,905 | $2,589 | $(18,237) | $2,257 | | Total Assets | $2,947,343 | $291,929 | $138,884 | $3,378,156 | $4,056,444 | $342,077 | $104,652 | $4,503,173 | Revenue by Geographic Location (Three months ended August 31, 2025 vs. 2024) | Geographic Location (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :--------------------------------- | :-------------- | :-------------- | :----- | :------- | | Domestic | $102,074 | $104,383 | $(2,309) | -2.21% | | International | $107,115 | $112,581 | $(5,466) | -4.86% | | Total revenue | $209,189 | $216,964 | $(7,775) | -3.58% | - Food Safety segment operating income decreased by 60% YoY, while Animal Safety operating income increased by 73% YoY[43] 6. Restructuring Outlines charges and activities related to the company's restructuring initiatives by segment Restructuring Charges by Segment (Three months ended August 31, 2025 vs. 2024) | Segment (in thousands) | August 31, 2025 | August 31, 2024 | | :--------------------- | :-------------- | :-------------- | | Food Safety | $407 | $132 | | Animal Safety | $52 | — | | Corporate | $(127) | $238 | | Total | $332 | $370 | - Total restructuring charges decreased slightly to $332 thousand in Q1 2025 from $370 thousand in Q1 2024, primarily related to employee separation costs and other exit costs[46] 7. Long-Term Debt Details the composition of the company's long-term debt, including changes and related transactions Long-Term Debt Composition (August 31, 2025 vs. May 31, 2025) | Debt Type (in thousands) | August 31, 2025 | May 31, 2025 | Change | % Change | | :----------------------- | :-------------- | :----------- | :----- | :------- | | Term Loan | $405,000 | $450,000 | $(45,000) | -10.00% | | Senior Notes | $346,500 | $350,000 | $(3,500) | -1.00% | | Revolver Facility | $48,500 | $100,000 | $(51,500) | -51.50% | | Finance Lease | — | $2,426 | $(2,426) | -100.00% | | Total debt and finance lease | $800,000 | $902,426 | $(102,426) | -11.35% | - Neogen repaid $100 million of outstanding debt in Q1 2026 using proceeds from the C&D divestiture, including $51.5 million on the Revolving Facility, $45 million on the Term Loan, and $3.5 million of Senior Notes[48][103] - Debt prepayments resulted in extinguishment losses of $393 thousand for the Term Loan and $41 thousand for Senior Notes[48] 8. Income Taxes Explains the company's income tax expense or benefit, effective tax rate, and unrecognized tax benefits Income Tax Expense (Benefit) (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Income Tax Expense (Benefit) | $7,470 | $(3,000) | $10,470 | - The shift from an income tax benefit to an expense is primarily due to pre-tax income from the gain on the sale of the Cleaners and Disinfectants business[49] - Unrecognized tax benefits increased from $3,849 thousand to $4,732 thousand, mainly associated with the acquired 3M Food Safety Division (FSD) for transfer pricing and R&D credits[51] 9. Commitments and Contingencies Discloses potential future obligations and legal matters that could impact the company's financial position - Neogen has an estimated environmental remediation liability of $916 thousand as of August 31, 2025, for its Randolph, Wisconsin facility, with $100 thousand as current liability[53] - The company is facing two putative class action lawsuits filed in July and August 2025, alleging false and misleading statements related to the integration of the 3M business and the 2022 acquisition offering materials[54][55] - Stockholder litigation demands were received in August 2025, leading the Board to establish a litigation committee to investigate[56] 10. Derivatives and Fair Value Describes the company's use of derivative instruments and their fair value measurements - Neogen uses non-designated foreign currency forward contracts to manage balance sheet risk, with a net fair value of $123 thousand as of August 31, 2025 (compared to $(407) thousand on May 31, 2025)[60][61] - A cash flow hedge interest rate swap with a notional value of $200 million (decreased from $250 million) fixes a portion of variable interest on the term loan at 4.215% plus margin[62] Fair Value of Derivatives Designated as Hedging Instruments (August 31, 2025 vs. May 31, 2025) | Instrument (in thousands) | August 31, 2025 | May 31, 2025 | | :------------------------ | :-------------- | :----------- | | Interest rate swap – current | $(764) | $(369) | | Interest rate swap – non-current | $(1,426) | $(1,290) | 11. Accumulated Other Comprehensive Loss Details changes in components of accumulated other comprehensive loss, such as foreign currency translation adjustments Changes in Accumulated Other Comprehensive Loss (Three months ended August 31, 2025 vs. 2024) | Component (in thousands) | August 31, 2025 | August 31, 2024 | | :----------------------- | :-------------- | :-------------- | | Beginning balance | $(28,898) | $(30,021) | | Foreign currency translation adjustment (end balance) | $(21,820) | $(29,426) | | Fair value of derivatives change (end balance) | $(1,665) | $(1,995) | | Ending balance | $(23,485) | $(31,421) | - Accumulated other comprehensive loss improved from $(28.9) million at May 31, 2025, to $(23.5) million at August 31, 2025, driven by foreign currency translation gains and a smaller unrealized loss on derivative instruments[67] 12. Subsequent Events Reports significant events that occurred after the balance sheet date but before the financial statements were issued - In September 2025, management approved a plan to reduce headcount by approximately 10% as part of an organizational restructuring, with expected employee separation benefits of $6.75 million - $7.25 million[68][106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Neogen's financial performance and condition for the three months ended August 31, 2025, discussing key trends, operational results, segment performance, liquidity, and cash flows, highlighting the impact of divestitures, economic headwinds, and strategic initiatives Safe Harbor and Forward-Looking Statements Provides cautionary statements regarding forward-looking information and associated risks and uncertainties - The report contains forward-looking statements, which are subject to risks and uncertainties, including the integration of the 3M food safety business, competition, and regulatory changes[70] - Neogen disclaims any obligation to update forward-looking statements beyond the filing date, except as legally required[71] Trends and Uncertainties Discusses key economic, operational, and market factors influencing the company's financial performance and outlook - Neogen continues to face economic headwinds including softening consumer demand, elevated interest rates, and geopolitical tensions, despite easing inflation[72] - Order fulfillment issues from a new ERP system implementation and 3M transition service agreement exit in fiscal year 2024 led to lost market share in Food Safety, continuing into fiscal year 2025[74] - The company experienced elevated inventory write-offs and production inefficiencies in its sample collection product line, which are expected to continue impacting fiscal year 2026[74][75] - Economic policy shifts towards increasing tariffs could raise costs on imported materials and negatively impact international sales[76] Executive Overview Summarizes the company's overall financial performance and key highlights for the reporting period Executive Overview of Financial Performance (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Increase/ (Decrease) | | :-------------------- | :-------------- | :-------------- | :------------------- | | Total Revenues | $209,189 | $216,964 | $(7,775) | | Gross Profit | $94,970 | $104,926 | $(9,956) | | Operating (Loss) Income | $(16,091) | $2,257 | $(18,348) | | Net Income (Loss) | $36,338 | $(12,609) | $48,947 | - Net income significantly improved due to a $76.4 million gain on the sale of a business, despite a decline in total revenues and operating income[80] Results of Operations This section covers results of operations Revenues Analyzes the drivers of changes in total revenue, including impacts from divestitures and foreign exchange - Total revenue decreased by $7.8 million (3.6%) YoY, primarily due to a $9.6 million unfavorable impact from divestitures (Cleaners & Disinfectants business) and discontinued product lines[81] - The decrease was partially offset by a $1.1 million favorable foreign exchange rate impact and $0.7 million growth in the business, driven by insect control, genomics services, pathogen detection, and sample collection products[81] - Lower Petrifilm sales were attributed to channel inventory rebalancing in Asia and normalization of buying patterns in the U.S[82] Service Revenue Focuses on revenue generated from services, primarily genomics, and its year-over-year changes Service Revenue (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Service revenues | $25,051 | $24,446 | $605 | 2.47% | - Service revenue, primarily from genomics services, increased by $0.6 million (2.5%) YoY[83] International Revenue Examines revenue generated from international sales, including currency and divestiture impacts International Revenue (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :--------------------------------- | :-------------- | :-------------- | :----- | :------- | | International sales | $107,115 | $112,581 | $(5,466) | -4.86% | - International sales decreased by $5.5 million (4.9%) YoY, mainly due to the divestiture of the Cleaners & Disinfectants business, partially offset by a $1.1 million favorable foreign exchange rate impact[84] Gross Margin Analyzes the company's gross profit margin and factors influencing its changes Gross Margin (Three months ended August 31, 2025 vs. 2024) | Metric | August 31, 2025 | August 31, 2024 | Change (bps) | | :----- | :-------------- | :-------------- | :----------- | | Gross Margin | 45.4% | 48.4% | -300 | - Gross margin decreased by 300 basis points YoY, primarily due to lower sales volume, higher tariff costs, increased manufacturing costs for sample collection products, inventory write-offs, and duplicative costs for internal Petrifilm manufacturing[85] Operating Expenses Discusses trends and changes in the company's sales and marketing, general and administrative, and research and development expenses Sales and Marketing Details changes in sales and marketing expenditures and their underlying causes Sales and Marketing Expenses (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Sales and marketing | $45,048 | $45,799 | $(751) | -1.64% | - Sales and marketing expenses decreased by $0.8 million (1.6%) YoY, mainly due to lower outbound shipping costs and reduced costs from the divested C&D business, partially offset by headcount costs[86] General and Administrative Explains fluctuations in general and administrative expenses, including corporate and transaction costs General and Administrative Expenses (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | General and administrative | $60,888 | $51,671 | $9,217 | 17.84% | - General and administrative expenses increased by $9.2 million (17.8%) YoY, driven by higher corporate expenses related to transformation initiatives and transaction costs[87] - Amortization expense for definite-lived intangible assets was $23.0 million in Q1 2025, with estimated annual expenses of $89 million to $94 million for fiscal years 2026-2030[88] Research and Development Analyzes research and development spending and its impact on product innovation Research and Development Expenses (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | % Change | | :-------------------- | :-------------- | :-------------- | :----- | :------- | | Research and development | $5,125 | $5,199 | $(74) | -1.42% | - Research and development expense slightly decreased by $0.07 million (1.4%) YoY, primarily due to lower contracted services and employee costs[89] Other Income/Expense Reports non-operating income and expenses, such as gains on asset sales and interest expenses Other Income (Expense) (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Total Other Income (Expense) | $59,899 | $(17,866) | $77,765 | - Other income significantly increased to $59.9 million in Q1 2025 from an expense of $17.9 million in Q1 2024, primarily driven by a $76.4 million gain on the sale of the Cleaners & Disinfectants business[90] - Interest expense decreased by $2.2 million YoY due to lower interest costs resulting from the Term Loan refinancing in April 2025[91] Provision for Income Taxes Discusses the company's income tax provision or benefit and factors affecting the effective tax rate Income Tax Expense (Benefit) (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Change | | :-------------------- | :-------------- | :-------------- | :----- | | Income Tax Expense (Benefit) | $7,470 | $(3,000) | $10,470 | - Income tax expense of $7.5 million in Q1 2025 (compared to a $3.0 million benefit in Q1 2024) is primarily related to pre-tax income from the gain on the C&D business sale[92] - The One Big Beautiful Bill Act (OBBBA) enacted in July 2025 did not have a significant impact on income tax expense or effective tax rate for Q1 2025[93] Segment Results of Operations Provides a detailed breakdown of financial performance by the company's operating segments Revenues Analyzes revenue performance for each operating segment, highlighting key drivers and impacts Segment Revenues (Three months ended August 31, 2025 vs. 2024) | Segment (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | % Change | | :--------------------- | :-------------- | :-------------- | :-------------------- | :------- | | Food Safety Revenue | $152,050 | $159,345 | $(7,295) | (5)% | | Animal Safety Revenue | $57,139 | $57,619 | $(480) | (1)% | | Total Revenues | $209,189 | $216,964 | $(7,775) | (4)% | - Food Safety revenue decreased by $7.3 million (5%) YoY, primarily due to $5.9 million from discontinued products and the C&D divestiture, and a $2.7 million business decline, partially offset by favorable currency impact[95] - Animal Safety revenue decreased by $0.5 million (1%) YoY, impacted by $3.7 million from discontinued products/divestiture and negative FX, but offset by $3.3 million growth in insect control, genomics, and animal care products[96] Operating Income Examines operating income for each segment, explaining changes due to sales, costs, and strategic actions Segment Operating Income (Three months ended August 31, 2025 vs. 2024) | Segment (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | % Change | | :--------------------- | :-------------- | :-------------- | :-------------------- | :------- | | Food Safety Operating Income | $7,091 | $17,905 | $(10,814) | (60)% | | Animal Safety Operating Income | $4,472 | $2,589 | $1,883 | 73% | | Segment Operating Income | $11,563 | $20,494 | $(8,931) | (44)% | | Corporate | $(27,654) | $(18,237) | $(9,417) | 52% | - Food Safety operating income declined by $10.8 million (60%) YoY due to the C&D divestiture and increased expenses from production inefficiencies and duplicative costs for Petrifilm manufacturing[97] - Animal Safety operating income increased by $1.9 million (73%) YoY, driven by favorable product mix and lower costs from fiscal year 2025 restructuring actions in the genomics business[98] - Corporate expenses increased due to headcount, equity-based compensation, one-time transaction costs, and corporate development initiatives[99] Financial Condition and Liquidity Assesses the company's financial health, including cash position, debt, and ability to meet short-term obligations - Primary liquidity sources are cash, operating cash flows, and available borrowing capacity under the Revolving Facility[100] - As of August 31, 2025, Neogen had $138.9 million in cash and cash equivalents and $201.5 million available under its revolving line of credit[102] - Net proceeds from the C&D divestiture ($121.7 million) were primarily used to repay $100 million of debt in Q1 2026[103] - The company is in compliance with all financial covenants under its Credit Facilities and estimates $50 million in capital expenditures for fiscal 2026, including $35 million for 3M FSD integration and a new manufacturing facility[104][105] Cash Flows Summarizes the sources and uses of cash across operating, investing, and financing activities Net Cash provided by (used for) Operating Activities Analyzes cash generated or used by core business operations, excluding non-cash items Net Cash from Operating Activities (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | | :-------------------- | :-------------- | :-------------- | :-------------------- | | Net Cash from Operating Activities | $10,853 | $(17,914) | $28,767 | - Net cash provided by operating activities increased by $28.8 million YoY, driven by improvements in working capital (accounts receivable and accounts payable), despite a decline in operating income[108] Net Cash provided by (used for) Investing Activities Examines cash flows related to asset acquisitions, sales, and other investment activities Net Cash from Investing Activities (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | | :-------------------- | :-------------- | :-------------- | :-------------------- | | Net Cash from Investing Activities | $97,725 | $(33,662) | $131,387 | - Cash provided by investing activities increased by $131.4 million YoY, primarily due to cash proceeds from the sale of the Cleaners & Disinfectants business and decreased capital expenditures as the new Lansing production facility nears completion[109] Net Cash (used for) provided by Financing Activities Details cash flows from debt, equity, and dividend transactions, reflecting capital structure changes Net Cash from Financing Activities (Three months ended August 31, 2025 vs. 2024) | Metric (in thousands) | August 31, 2025 | August 31, 2024 | Increase / (Decrease) | | :-------------------- | :-------------- | :-------------- | :-------------------- | | Net Cash from Financing Activities | $(99,393) | $979 | $(100,372) | - Cash used for financing activities increased by $100.4 million YoY, primarily due to debt repayment made with proceeds from the sale of the Cleaners and Disinfectants business[110] Item 3. Quantitative and Qualitative Disclosures About Market Risk Neogen Corporation continuously evaluates its exposure to currency exchange and interest rate risk, reporting no meaningful changes in these exposures compared to its previous Form 10-K filing - There have been no meaningful changes in the company's exposure to foreign currency exchange rates and interest rates related to variable-rate borrowings since the last Form 10-K[112] Item 4. Controls and Procedures This section details Neogen's disclosure controls and procedures, acknowledging material weaknesses in internal control over financial reporting as of August 31, 2025, and outlining ongoing remediation efforts to address these deficiencies - Neogen's disclosure controls and procedures were not effective as of August 31, 2025, due to material weaknesses in internal control over financial reporting[116] - Material weaknesses were identified in control activities and information and communication components, as discussed in the 2025 Annual Report on Form 10-K[115] - Remediation efforts include enhancing existing controls, developing new controls, improving documentation, expanding entity-level controls, providing training, and hiring qualified personnel[118][120] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 9, 'Commitments and Contingencies,' for a detailed description of Neogen's material pending legal proceedings, including shareholder litigation - Material pending legal proceedings are described in Note 9, 'Commitments and Contingencies,' of the interim condensed consolidated financial statements[122] Item 1A. Risk Factors Neogen states that there have been no material changes to the risk factors previously described in its Annual Report on Form 10-K for the year ended May 31, 2025 - No material changes in risk factors have occurred since the Annual Report on Form 10-K for the year ended May 31, 2025[123] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details equity grants made to the new CEO, Mikhael Nassif, as inducement awards and long-term incentives, and confirms no share repurchase activity during the quarter - On August 15, 2025, Mikhael Nassif, the new CEO, received equity grants including options to purchase 473,352 shares, 184,162 restricted stock units, options to purchase 1,065,042 shares, and 414,365 performance share units[124] - These equity awards were inducement grants for his appointment as CEO and fiscal year 2026 long-term incentive awards, granted under Section 4(2) of the Securities Act of 1933[124] - No shares were repurchased under the authorized program during the quarter ended August 31, 2025, with 5,900,000 shares remaining available for repurchase[125] Item 5. Other Information This section states that no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarterly period ended August 31, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[126] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various equity award agreements, certifications, and Inline XBRL documents - The exhibits include various equity award agreements for the CEO, certifications from the Principal Executive Officer and Chief Financial Officer, and Inline XBRL documents[127] SIGNATURES Formal declaration by authorized officers confirming the accuracy and completeness of the financial report - The report is signed by Mikhael Nassif, President & Chief Executive Officer, and David H. Naemura, Chief Financial & Operating Officer, on October 9, 2025[129]