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Q1 2013 Earnings Call
September 25, 2012 11:00 am ET
James L. Herbert - Chairman and Chief Executive Officer
Lon M. Bohannon - President, Chief Operating Officer and Director
Matthew Hewitt - Craig-Hallum Capital Group LLC, Research Division
Anton Brenner - Roth Capital Partners, LLC, Research Division
Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division
Gregory W. Halter - LJR Great Lakes Review
Stephen A. O'Neil - Hilliard Lyons, Research Division
Previous Statements by NEOG
» Neogen Management Discusses Q4 2012 Results - Earnings Call Transcript
» Neogen's CEO Discusses Q3 2012 Results - Earnings Call Transcript
» Neogen's CEO Discusses Q2 2012 Results - Earnings Call Transcript
I will now turn the call over to Neogen's Chief Executive Officer, Jim Herbert. Sir, you may begin.
James L. Herbert
Thanks, Christine, and good morning and welcome to our regular quarterly conference call for investors and analysts. As we stated today, we will be reporting to you on the results of our first quarter, which ended on August 31.
To start with, I'd remind you that 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 may differ from those that we discussed today. These risks that are associated with our business are covered in part in the company's Form 10-K as filed with the Securities and Exchange Commission. And our new Form 10-K for the 2012 fiscal year was filed with the SEC at the end of July and is now available.
In addition, to those of you who are joining us today by live telephone conference, I'll also welcome those who may be joined by way of simulcast on the world wide web. These comments, along with some exhibits, will be available on the web for about 90 days. And following our prepared comments this morning, we'll entertain questions from participants who are joined on this live call. 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 our first quarter of the 2013 fiscal year. And once again, we were able to report record numbers.
Revenues for the company's first quarter were approximately $49.7 million or about 9% ahead of the first quarter last year. Though regarded as good growth, currency translation compared to prior year actually reduced that number by almost $1.2 million. Had it been absent, that negative impact to the currency translation, our revenues would have been approximately 12% ahead of the prior year.
As many of you know, in addition to the U.S. dollar, Neogen does business in pound sterling, in euro and the Mexican peso and the Brazilian real. And since about 42% of our total revenues come from outside the U.S., these translations have been difficult to predict in recent quarters and can be large.
Shifting then to net income. For the first quarter, the net income for the company increased almost 12% compared to the prior year of approximately $6.7 million or $0.28 per share, and this compares to net income last year of about $6 million or $0.25 per share.
We continue to be proud of the consistent growth that the company has enjoyed to this quarter. I'd like to always keep that count going. This quarter has marked 82nd quarter in the past 87 that Neogen reported revenue increases as compared to the previous year. That's a span now of almost 22 years. And by the way, the last time we missed the quarter was 30 quarters ago or a little over 7 years.
So I think we should be able to step up the rate of revenue growth a bit as we move for -- throughout the rest of this year. I am pleased with the basic fundamentals that were now -- that are all now coming in line. Many of you know that a significant part of our operating strategy has been to hold operating profits at about 20% of revenue. We're cautious if they start to dip below that mark, and we're also cautious if they rise much above that mark. As a barometer, we feel that when the number gets much above 20%, it's an indication that we should be investing more for the company's future growth. In the quarter that we just finished, the number came in at just under 21%.
You'll note a small change. If you've seen the copies of the operating statement, you have noticed a small change in the way net income is disclosed in the operating statements having to do with the dealing with minority shareholders. It seems that as regulators strive more to protect shareholders, the report seems to get more complicated. Steve can answer any questions that you might have later on the call on that.
We'll continue to build our infrastructure going forward to keep pace with our great growth opportunities. During the last fiscal year, you might remember that we hired about 100 new people to allow us to better take advantage of these future growth opportunities. And increasing the management team, along with that total employee count is clearly helping with growth and we believe that it will enable us to step up the rate of that growth.
Our Food Safety group led growth this quarter with approximately a 12.5% increase in sales as compared to a year earlier. A part of this is due to new diagnostic products that are coming through the pipeline. An example is our new line of diagnostic tests that are used to detect natural toxins in grain. This is an area where Neogen has been a leader now for over 2 decades. These new products though hit the market just as grain producers and processors worldwide were faced with the new testing needs as a result of challenging growth seasons that we've just encountered.