Neogen Corporation (NEOG) Q4 2012 Earnings Report, Transcript and Summary

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.

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…

Thank you, Jim, and I, too, would like to welcome everyone listening on the conference call, as well as those joining us via the Internet. Jim's already reported on the overall sales and profit performance for our fourth quarter and 2012 fiscal year. Our press release issued earlier today provided additional details related to Neogen's FY '12 results. I intend to cover a few additional highlights for the year, but more importantly, discuss our fourth quarter in more detail since I believe Q4 is more reflective of the future opportunities for the year ahead. Neogen's overall 6.6% sales growth in FY '12 was below management's expectations and it's not reflective of the growth opportunities that exist for our company. There were a number of challenges in FY '12 that impacted sales growth, including negative currency translation, depressed market conditions in the EU, as well as some tough comparisons on a couple of quarters due to unique events that benefited sales in the prior year. With the exception of currency translation, these challenges were most evident during the first 6 months of the fiscal year and particularly in our second quarter, when as Jim indicated, overall revenue growth slowed 2%. However, Neogen experienced a strong recovery in the last 2 quarters of the year, closing out Q4 with organic sales growth of more than 11%. Were it not for the negative currency adjustment Jim described in his comments, our fourth quarter organic revenue growth would have been over 12%. I also think that sales growth improvement over the last 3 quarters of the fiscal year, going from 2% to 6% to more than 11%, is a good indication that the investment we are making in sales and marketing, which Jim also touched upon in his comments, is starting to pay dividends.…

Well, thanks, Lon, and I think you can see that there's certainly no lack of optimism in our future when you hear Lon lay out the plans. In my opening comments, I did not make any mention of acquisitions during the prior year since they had very little impact. However, during the year, we've made a nice small acquisition in Scotland to add to our laboratory services group there in Ayr. Our big -- The big contribution of that acquisition are really coming in the years ahead. One concern worldwide and today in the food industry is being able to provide ample seafood from both wild harvest, as well as aquaculture. The laboratory business that we purchased in Scotland was solely devoted to testing seafood. This is providing us a good base as we develop rapid diagnostic tests to detect the most important shellfish toxins. I expect us to have at least 3 good rapid diagnostic tests coming from the Scotland research unit sometime during this coming year. I also didn't talk much about or talk at all, in fact, about the acquisition Igenity. Lon mentioned that. This is acquired -- an animal genomics business that we acquired from Merial in May, right at the end of the year. This business is a great bolt-on to our GeneSeek genomic business located in Lincoln, Nebraska. I believe that Igenity is likely the world's leader in supplying genetic information for breeding improvement of beef cattle. This now puts Neogen with what we already had in the place of being the undisputed world leader in beef cattle genomics. In addition to providing important selection traits to commercial cattle producers and feed lot operators, we also are doing work with more than a dozen of the different beef cattle breed organizations, including the largest…

[Operator Instructions] The first question comes from Steven Crowley from Craig-Hallum Capital.

One of the things you mentioned, maybe I'll start with a numbers question and ask a couple on new products and then hop on the queue, but the FX numbers that you just shared with us in the prepared commentary, the $680,000, just to be clear, was the revenue impact in Q4 and the $413,000 that you referenced as a currency loss in the press release was the operating income impact? So my question is, is that the case? And what were those respective numbers for the year?

For the year, Steve, the operating income number was $531,000 loss. The revenue number was $58,000 reduction in revenue for the full year. So you see, we really got hit in the fourth quarter.

And then there was the $680,000 hit in the fourth quarter to the revenue line?

Correct.

Okay, that's helpful. I just want to get a clearer picture of what was happening under the hood. And then on the new product front. In your prepared commentary, you mentioned both Q+ and Answer in a constructive light. Can you give us a sense for the customer acceptance of those products and the prospects as we move forward here?

Steve, Q+, we actually released the first quantitative lateral flow for aflatoxin going back to last fall and then follow that up with DONs, zearalenone and I think we've got humas [ph] and out now and the acceptance of those tests have been very, very good. I don't even know how many customers we've totally have sold since releasing that first product. But I know we've got significant amounts of dollars in the FY '13 budget and we had good growth in sales of those products actually in fiscal year '12. I mentioned, if you recall, that we're now in both the third quarter and the fourth quarter, we had double-digit organic growth in the area of mycotoxins. And I certainly attribute a good deal of that to the fact that we had these new quantitative Q+ products out there and they are gaining market share for us, in both the EU, as well as domestically. In terms of Answer, that's really -- we have -- we're very excited about that product line. That's -- it's a platform. We're looking forward to the Listeria test. The Answer platform and the Salmonella test that already has AOAC approval has been well received. We've already got 6 placements of that instrument. We've got 50 active accounts in the pipeline right now that are looking at it. And so it's going every bit as well as we expected in terms of the initial launch. It's still very new and when you're talking about running the kinds of companies who are looking at this, they're all going to do in-house validations over a period of months to determine the quality of that product. So -- but it's meeting all of our expectations at this point.

And with Q+, the kind of peak usage period for those naturally occurring toxins and grain would be what, starting maybe a month from now or 6 weeks? Or what's kind of the peak customary timeframe for utilization?

Those, Steve, would generally be in the second quarter when we start to see crop come from the field. That's -- the OND time period is when we seeing most of the grain begin to come out. The extreme south in Texas, we'll start to see a little bit of stuff coming out next month, but that's not going to be -- it's probably all that -- it's never in the past been all that big. So it's a -- but the cue for that, that's sort of the beginning of the season. But remember, when grain comes out of the field, it changes, moves several times before it's finally consumed. So its first point of recede is it leaves a field and goes to an elevator somewhere in the country. And then the next time, when it comes out of that elevator and goes to either another elevator or goes to on a barge to go down the river to go up to be exported or it goes into actual consumption, could be tested -- the same grain could be tested 3 or 4 times in its life. Most of that, however, does occur in our second and third quarters.

The next question comes from Scott Gleason from Stephens Incorporated.

I guess, Jim, if we could just dwell a bit more on your comments like kind on the drought and looking at the upcoming harvest season for the mycotoxin test kits. And certainly, those have been pretty important products for you guys. When we think about I guess the second half of this calendar year, how do we kind of balance that aspect with some of the new quantifiable test kit sales? Can you give us a little bit more sense for how you guys are thinking about that trajectory?

Yes, it's a -- I think I really don't know what the situation is going to be in Europe. I was over there 2 weeks ago and it rained every day and was 10 degrees cooler than normal. It's going to impact and is impacting, I think, their small grains over there, their barley and their wheat crop, which is likely going to continue to be problems with DON and some others. The yields probably look okay over there. I think the problem that we're facing here, Scott, is what we're going to do as far as yield are concerned. July, having been around this business for more years than I care to remember, July is always a rumor month. The first rumor is it's going to be a great crop because it rained yesterday and then the next rumor is going to be a terrible crop because it didn't rain for all Friday and those rumors abound. I do think that it's probably a little more concern than we might normally think of. We've had 4 times in the last 20 years when I look back that we had sharply declining crop conditions at this time of the year. At the last time, as we look back with men and back in 2005, I think they suggest that first of all, in order to be able to test for mycotoxin, we're going to have an ear of corn. And some of those places, it looks so bad that there may not be any ears formed. But It's a little early to tell. Yes, I think it's going to get to be a disaster if we don't get some rain here in the next couple of weeks. But I don't think that it's though the commodities market is talking about…

Okay, great. And I guess when we look at the Igenity deal in the quarter, it says it closed in May. Is the right way to think about that -- that, that was about a $300,000 contribution or more like about the $6 million or so that you guys did through the DNA testing segment? And I guess when we think about FY '13, it's the right way to think about that, kind of $4 million to $5 million in total revenue contribution?

Yes, I think I don't remember what our exact budget number is. I think we've got it in the budget now. Remember that a part of that business is add on. We were doing all of the genomic testing for Merial. The samples were coming to us. We were doing the lab testing, providing the raw data back to Merial and then they were running it through their bioinformatics models and then telling those results back to their customer. We've kind of got both ends of the rope now. So we'll continue to have the testing revenue that we had before but we'll also be able to capture the additional gross margins by being able to have our own -- have the bioinformatics that we can carry through to the customers. So I think you have to look at it in 2 ways. What's the total expected revenue from Igenity and then what's the expected revenue and earnings over and above what we had in the prior year. I ought to have those numbers in my head because I've looked at them but we could give it to you at a later point. But I'm afraid to quote them now.

Okay, great. And then just last question for Jim and Lon. When we look at the growth for FY '13, obviously it seems like this year, you guys are expecting a larger contributions from new products. Can you maybe give us a sense of maybe what's the magnitude of total growth for next year could it be from a new product contribution? And then also, I guess, obviously people are always wondering about acquisitions. Can you maybe give us a sense for kind of what the current pipeline looks like in terms of potential candidates that are out there and maybe how to think about that a little bit in terms of our models for FY '13?

I think, Lon, you're correct me if your memory's better than mine. We looked at those new products that were going to be introduced this year and sort of did a Ouija board on them, predicting which ones. I think we talked about 20, in my conservatism, I've said I think 17 of them will make it. We may not get there with all the 20 by the end of the year, but -- and the Ouija board, we've tried to pick out how many of those would be $1 million plus in contribution and on down to less than $1 million, put them in about 4 different buckets. As I remember, that number was somewhere in the range of $7 million coming out of those. But again, I'm working from memory. And if that's important to you, Steve can give you a better information when he's got some as some old boys say, "with aid of paper and pencil," he can tell you more. But that's about what I remember.

Scott, this is Lon. Jim's correct. In terms of as is usually is, in terms of his memory. As far as what we're looking at, we have been saying that we think starting really in that May period that we thought we could get like 20 products out in the next 12 months, the opportunity is to even get more than that in the year when you include everything in Animal Safety and Food Safety combined. But I think the opportunity to get another 15 out this year or so based, compared to what we've already gotten out is reasonable. And we do have a number of those products that we'd certainly expect to be $1 million plus kinds of opportunities. It will kind of depend on when they get released. Obviously, things like Answer Salmonella and Listeria, they're going to be released earlier in the year, are going to have an opportunity to generate those kinds of numbers. Whereas some of the products that maybe $1 million opportunities but don't get released until March, of -- in the fourth quarter of fiscal year 2013, won't generate as much in this fiscal year but certainly on a go-forward basis, will be above that $1 million opportunity on a full year kind of basis. So we can look -- we don't really budget just specifically at that way for new products because we sum -- we're market-oriented. And so we're looking at customers and markets. But we can certainly add that up for you and get that if you want to see that.

Okay, great. And then do you guys have any commentary on the acquisition pipeline?

Yes. Yes, there's a -- we've got 3 in the pipeline at this point, no letters of intent on any of the 3. None of them really big, none of them that would unfortunately strap Mr. Quinlan's cash account this morning. But we are looking at some things that do look interesting. And I think, particularly where you have tight ownership, a very controlled ownership, the comments I've made in my prepared remarks, is I think we don't -- I don't think any of us know what the tax situation is going to be next year but I think we probably all agree it's going to be higher than what it is this year. And if we can see a change in whatever capital gains is going to be -- and whatever add on we're going to get from Medicare, it's going to mean that if you plan to sell your business, you ought to do it before December 31. And I think there are some people who are beginning to look around. We've got one that's on our target right now that would fit into that category. But nothing if we've a letter of intent on. We're active there. We've got a new member of our corporate development group who's a bright young guy, who's much like Jason Lily He's a PhD, in his case, Chemist, who also is a MBA from Maize and Blue kind of a school down the road from us, who's pretty bright, and we've got him at work on looking at some things, not just domestically but also internationally.

The next question comes from Tony Brenner from Roth Capital Partners.

I have 3 questions, if I could. Jim, you mentioned that Neogen has 4 new product platforms developed this year. Could you identify those and maybe comment on whether those are a significant piece of that projected $7 million or so in revenue contribution?

Well, one of those is the isothermic platform that Lon talked about with Answer. We'll put several products on that platform. The first one out is our product for Salmonella. It's no secret that the next one coming is our product for Listeria that looks equally good. It's -- of those of you who are familiar with that side of the science, it's even faster because it detects RNA rather than DNA. So you can get there with a lot more copies, so you get there a lot faster. That one is in beta sites this week. I would expect, with any luck, we'll have that one out by the end of the month. I hoped I'd get it on my birthday, which was the 3rd of July but they didn't quite make that. Right behind that is what we're doing with STECs. That's the whole issue on hemorrhagic E. Coli. That's a big development that everybody, including the major meat packers and our close friends are all trying to wait for the next you to follow there. This is, if you remember, the FSIS USDA came out and said that it is not just E. coli 157:H7, it's a problem but we're also going to declare her 6 ugly sisters as adulterants if they're in food and nobody knew exactly how many of those there were going to be. There are some results back now that are showing that may be as much as 5% are going to be contaminated with one of those. So that will be also on that, Tony, on that isothermic program, both to detect the hemorrhagic portion, as well as to be able to detect the 6 servars that are of biggest importance. Campylobacter is another one that will get added to that because…

Okay. Second question, regarding Europe, which earlier in the year had been a real problem for you. I know you addressed many of the credit issues earlier but certainly, the economy remains depressed in most European markets, yet in the fourth quarter, you reported I think you said a 24% revenue increase. So I'm wondering if that's just the debt cap bounce in that market or it's against easy comparisons we can see 20% plus gains in fiscal 2013 in Europe?

If you can tell me what the bond rate's going to be in Greece and/or whether Italy is going to be able to honor its debt and what's going to happen in Portugal, I can give you the answer to your 2013 question. Seriously, I think we've obviously gained some strength in the United Kingdom. Our U.K. business where -- has been not hit by the bigger T's of the financial situation near so bad. As we've grown that market, and that's helped cover up some of the problems in some of those other 40 countries that we talked about. Our French business is where we've got our own people on the ground, is strong and growing. Our German business is strong and growing, so I just picked off the 3 top economies over there. We're still having a bit of difficulty in Greece, just because we are concerned about being paid. We know that there are still problems in Spain, Portugal, Italy. They seem to be improving a little bit. Maybe the economy's not improving so much as the apprehension within the marketplace, within the customer base. They've decided that life is not going to come to an end and they got to keep moving forward. I think that's helped us a little bit. I don't -- I can't, as I said, I don't know what to tell you, but I don't know what to tell myself about what that situation may look like 3 months, 6 months from now. Of course, the dollar's gotten stronger, which is not particularly in our favor, and a stronger dollar growing into a weaker economy is not particularly helpful. But I think we're doing some things to help our distributors in some of those other countries. We started doing that back in January and it's paid dividends as we moved into that fourth quarter that Lon talked about.

Is that point accounted for the big increase?

I missed the question.

Is -- that's a major factor in that big fourth quarter sales increase in Europe?

Yes, it's probably -- there were several things that went in that add up to it. But, yes, I think some of the things that we had established for our distributors back in January in those countries, I talked about 2 countries being strong where we have our own sales people. And the rest of those countries, we work through independent distributors to establish some programs to help them regain some business. And I think that probably showed up. It was a strong cause for the fourth quarter increase.

Yes, Tony, this is Lon. To add to that, that was one of the areas where we did make an investment in sales and marketing this year and I think what we saw is similar, and to a greater extent, we saw even domestically. In that operation, we saw them pick up strength as we went through the year, and particularly in those countries where we had a direct presence and had our own people and added to the staff and got better trained personnel on the ground. I think that what did contribute and drive up the revenues percentage-wise in the fourth quarter was an improvement in that portion of the business that runs through distributors, and I think for all the reasons that Jim commented on. And that's still the area that we have to work with very closely going forward to continue to see overall growth double-digit growth in Neogen Europe in the next year.

Well, certainly, that business was especially weak in the first half of last year, so you've still got some easy comparisons I would think?

Yes, yes, you're right.

Okay, last question. What's going on with FDA regulations on imported products?

Very little. It's -- they are beginning to tighten up on certain products. I say I guess I got the word last week that I'd forgotten which of the seafood species they're now testing 100% of what's coming in through the FSMA Act. They -- well, I guess I'd say that there's still very little happening. It's -- the regulations are there. The money is budgeted, and yet the procedures are not all still -- we're still waiting for the procedures to be written up. So it's a political year and I guess that's the best explanation I have.

The next question comes from Brian Kip [ph] from CLSA. Paul R. Knight - Credit Agricole Securities (USA) Inc., Research Division: It's Paul Knight. My question was regarding the DNA's business, though. Can you talk about, I know you made an acquisition there or changed your partnership. Can you talk about what's happening in the sequencing service business?

Yes, that I guess I can address that from 3 avenues. One is though it's probably the youngest and easiest, is it I made mention in the prepared comments that we've now done the sequencing or now done the genomics work based on the sequencing. The harmful pathogens, that's an area that was not involved at all in genomics at the time -- in our genomics base at the time we acquired that business. It's helped us help some of our most important customers, the major beef packers is an example. I'm trying to figure out how to deal with some of the pathogens that they've got. That's providing us some Service business. But probably more importantly is providing An avenue for the better development of rapid tests. And we see that is important going forward. We had all that group together last Friday and it was really encouraging to see the new things that when you looked at the microbiologists and the genetics guys sitting together as to how much stuff that they could dream up, they could get started right away. The second piece of that is our traditional GeneSeek business in which when we acquired that business, it was the strongest laboratory in doing actual laboratory genomics work for the animal industry. They, in almost all cases, where they're simply running the genomics and providing the raw data back to a customer, who was in turn, making interpretations of that. We'll continue to do that. It's a strong part of our business and we'll continue to do that. And it's covering all species. We just got a contract this past week for catfish to do work on catfish genomics through our group and as you expect in the southern U.S., we also got a nice contract from a Chinese publicly owned, state-owned industry to do genomics on the Asian carp. So a little bit outside of the pig and cattle business but we continue to do those kind of genomic businesses in which we'll do the hard and the heavy lifting and supply that data back over to somebody else, who will do the final interpretation. However, the third piece and the one that gets me most excited is where we are with the genomics, where we can in the bioinformatics to match up to that. We said when we bought the business that, that was one of the things that we wanted to do. And we're off to a good start in doing that. We said we wanted to get a lot of that accomplished by the end of the third year and we're in the third year. So what we're doing there with our Igenity program in beef cattle, we'll be doing in other commercial programs that I just assume not talk about today since I suspect that the one strongest competitor we have probably listens to this call.

The next question comes from Steve O'Neil from Hilliard Lyons.

I think you've covered just about everything. About the only thing that gets kind of lost on all of the other new products is the, I guess, I'd say has got the dairy antibiotics to see if anything was happening there or if there was anything of note in that business?

Well, it's -- it continues to be a very important product line for Neogen in total and stuff. We had a nice growth in the quarter as it relates to dairy antibiotic business, which was overall growth of 10%. I think -- I mean frankly, I mean our penetration of the U.S. market with the beta start test has been disappointing up to this point. And we're taking a look. One of the reasons we put in and developed, started a marketing group this year was to help us understand a better way to position that product for this important market. Now having said that, we are having good success with that product in Brazil, so it's not like we're not having success with a new BetaStar Plus product. In fact, I just got an e-mail last night or night before last from one of our principals in Brazil who was -- had pictures of the trade show they're at right now where we have had success in converting customers over and capturing market share with that product. So we've got to take some of the stuff running down there actually and apply it to what we've got here in the U.S. and maybe reposition that product in a way to capture more business here. But overall, the product line is doing well and some of those new products that we're talking about releasing are going to be to help supplement that line in terms of testing for that important dairy market.

The next question comes from Greg Halter from Great Lakes Review.

A couple of numbers questions. I wondered if you could provide the capital spending for the year fiscal '12 and what your expectations are for '13?

CapEx for the year is about $12.4 million. And remember that, that included the purchase of our Lexington facility, which was about a $5 million spend. So fiscal '13 will go down probably in the $7 million range, $2 million to $7 million range, I'm sorry.

Okay. And also regarding the depreciation and amortization, what's that figure was for '12 and what you expect for '13?

It was $6.2 million for the full year '12 and it will probably ratchet up to about $6.4 million in '13.

And I don't know if I -- if this was provided or not, or maybe I missed it, but the annual figure for cash flow from operations?

It was $22.3 million, which included a strong $9.1 million on the fourth quarter.

Okay, great. And finally, I know you provide this in the Q, or I guess it will be the K, but do you have any operating and income figures by segment, by the 2 segments?

Let's see. Okay, for Animal Safety, it's $12 million basically, $12,039,000 and for Food Safety, it's about $23.4 million. I'm sorry, $23.9 million.

The next question comes from Joseph Faddin [ph] from Wells Fargo.

Just a quick one, cash flow per share?

Cash flow from operations per share was about $0.93.

$0.93? Okay. I came up with $1.19.

I was giving you from pure -- purely from operations. So if you want the cash increase year-over-year, your $1.19 is going to be much closer.

Okay. Yes, that's what I care about. You pay bills in cash, right Jim?

That's right.

Your next question comes from Michael Castor from Sio Capital.

A couple of small ones. First, I didn't catch it earlier. There was a question about how much you expect the Igenity acquisition to add in 2013. Could you repeat that?

I think again, I'd have to go back because it's kind of a convoluted question because of business that was already there, but somewhere in the range of $4 million.

Second one is, actually looking at this question that was just asked on cash flow per share, I'm looking at the balance sheet. You got $69 million in cash roughly at the end of the year now versus $56 million at the end of fiscal year from last year. So the increase of about $13 million is roughly $0.50 a share. Am I missing something?

Well, what I was trying to give was the cash flow from operations. And then from that, we're spending -- we spend about $12 million in property, plant and equipment. So it kind of depends on exactly how you want to measure that number.

Okay. I can understand the logic. I just wanted to clarify just because it came up in the last question. Then the other one I had was, what's your expectation, Jim, for the operating margins for next year?

Well, we don't normally give advice. But our goal is always to run at 20%. We -- and I'm not sure how close to that 20% we'll get. We should get in there pretty close to it based on what I'm looking at right now. It's just sort of been a guide for us. We violated that a little bit a couple of years ago and we let that run up to 22.5% or so and we should have been taking some of that money and putting it back into expansion opportunities. So we watch it pretty close. 20% is our bogey.

So this year, coming in at 18.4%, 18.5% roughly with the gross margins being a little bit under pressure, you think that will reverse next year?

Yes, yes, yes. But I don't know how much a reversal but I think we'll put a greater percent to the operating plan than we did.

And finally on that topic, R&D as percentage of sales, it was running last 3 years for 4.4, then 4.0, then 3.6, although in absolute terms, it's about stable. Is the current level of 3.6 or so enough to keep growing the business?

No, and we'll spend more next year. And it's not always -- it's where you spend the dollars and the quality of the dollars. I think the quality that we were able to produce from the dollars this year speaks very well for the scientists in the professional group. They got a lot more done with less money than they have in some years in the past. And there's a lot there that is unpredictable. How fast we can make breakthroughs or what areas where we're building on platforms that aren't in existence, new product development becomes cheaper than if you're trying to invent a new platform. And occasionally, we'll get one that we'll just work on forever and finally abandon it and that money just gets lost. So -- but we'll spend more dollars in actual dollars this year.

Okay. Also, what's your expectation for tax rate for next year? This year came in around 33.6%, which was about 150, 200 basis points less than prior years?

Yes, I think it's probably fair to look at about a 35% to 35.5% effective rate. The 33.7% for this year is actually lower than what we would normally expect because we were under audit this year with the IRS for the 2010 and 2009 fiscal year. That came back, was clean, no adjustment and we took -- we reversed some reserves that we had set up in prior years because we're now clean. So we reversed some of those reserves in the fourth quarter, resulting in an effective rate for the fourth quarter of about 28% and for the year, a 33.7%.

The next question is a follow-up from Steven Crowley from Craig-Hallum Capital.

The reward is I'll keep it short and sweet and just ask one since we've gone on a while here. You mentioned roughly 20 new products over this 12-month period we're in. Could you just give us some perspective, historical perspective on what you've typically done in a fiscal year or in prior 12-month periods just so we have a reference point?

Well, Lon and I'd say this is probably the threefold what we would do in the normal -- in the last 3 or 4 years?

Yes, I would say, and that's key point I think. In the last couple of years, I think we've been in that 6 to 8 range a year. And so this does represent a -- that pipeline getting filled up and now starting to result in new products being launched that can help drive that organic growth going forward. So it is a definite improvement, particularly over the last 2 or 3 years in terms of new product releases we've had.

And some of the new products that we've put out tend to cannibalize older products as we're coming out with newer, better, faster ways of doing things, too.

That concludes the question-and-answer session for today. Please go ahead with any final remarks.

Well, thanks again for your interest in following the company over the past fiscal year. And we're excited, we're starting the new year now and almost 2 months into it, those of you who are in a position to be -- to join us on Thursday for the open house and picnic, we'd love to have you. And otherwise, we look forward to talking to you again on this call at the end of the first quarter. Have a good day.

Thank you for participating in Neogen's fourth quarter fiscal year 2012 year end earnings results conference call. This concludes the conference for today. You may all disconnect at this time.