Welcome to the Neogen Corporation Third Quarter Fiscal Year 2014 Earnings Result Conference Call. My name is Sherrie and I will be your operator on today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. I would now like to turn the call over Jim Herbert. Jim, you may begin.

Thanks, Sherrie and good morning and welcome again to our regular quarterly conference call for investors and analysts. Today, as you know, we'll be reporting to you the results of our third quarter that ended on February the 28th. And I'll 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 may differ from those that we discuss today. These 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. In addition, to those of you who are joined by a live telephone conference this morning, I would also welcome those who may be joined by way of the simulcast on the World Wide Web. Following comments this morning, we'll entertain questions from participants who are joined in this live conference. And I'm joined today by Steve Quinlan, our Chief Financial Officer; and Steve Snyder, Neogen's President and Chief Operating Officer. Earlier today, Neogen issued a press release announcing the results of our third quarter that ended on February 28. And again those revenues broke all records for the Company's third quarter at almost $62 million or a 21.4% increase compared to last year's $51 million. On a year-to-date basis revenues through the first three quarters have approximately 19% as compared to a year earlier to a bit over $180 million this compares with last year’s three quarters of $151.5 million. Third quarter net income was approximately $6.6 million and about even with the same number of 2013. Adjusted for the 3-for-2 stock split that was effective back in November, our earnings per share in the current quarter were $0.18 a share…

Thanks Jim, appreciate that. On the call today I want to focus my comments on our results in both food, animal safety as it relates to selected markets. I’ll also provide some more specific examples of product lines within segments where we see particular strength going forward where we’re still working to improve. In our food safety business we saw solid organic revenue growth of 10.7%, with most market segments showing significant quarter-to-quarter growth. The major exception being our milling and grain market segment, and that segment it was another difficult competitive quarter to the last year’s outbreak which generated unusually high margins for mycotoxin test kits. Bottom line for milling and grain was that we had the write new product for the market which were Reveal Q+ in a year with significant mycotoxin outbreaks in both U.S. and European crops; otherwise there were no big surprises across the food safety business. In terms of product and marketing highlights for the quarter, our grocery product segment showed healthy gains of 10% compared to same quarter last year, driven largely by our industry leading food allergen test kit product line. These products allow our customers to detect knowledge and contamination of full range of consumer proved products. Some of the more popular test kits were for milk proteins, eggs and soy. Market demand is really growing - driving the growth for fast and easy detection of these allergens. Example of this is the plant based dairy alternative beverage market which includes product based on soy, almond, rice and other substitutes designed to address lactose intolerants, milk allergies and generally provide non-dairy options. This segment is reported to be growing at 15% annually, reaching a value of $14 billion in consumer sales by 2018. Neogen is well positioned to address these opportunities.…

Well, thanks Steve and it’s pretty easy to call on Steves around here now. We used to get we used to have lot of Jims, now we are outnumbered by Steve so that was Steve Snyder and I’d now like to call on Steve Quinlan, Chief Financial Officer, to give you a bit of the numbers caller and these general comments. Steve.

Thank you, Jim. Jim’s reported on the overall sales and profit performance for the third quarter of our fiscal year and Steve is taking you through some highlights of our revenues and markets. I’d like to give you some color on our earnings for the quarter and year to date and talk as well about some of our significant balance sheet changes. Gross margins on our $62 million in revenues for the quarter were 49.5% compared to 53.5% on the $51.1 million in revenues in the February 2013 quarter. This decrease was due in large part to the shift in overall company revenues toward animal safety products a result of the three acquisitions the company has completed this fiscal year. These acquisitions SyrVet Prima Tech Chem-Tech were all on the animal safety side of the business and added $7.8 million of revenue to that segment for the quarter. As we discussed on the second quarter earnings call these businesses are bolt-ons and although they are gross margins fall somewhere in the middle of the animal safety average they generally require less operating support and should provide nice contributions to operating income once fully integrated into the company. The SyrVet and Prima Tech acquisitions also significantly improve our market leading position in the animal protein veterinary instruments business while the Chem-Tech purchase broadens our product portfolio for our biosecurity offerings for the same animal protein market. I think it’s important before we go on to note that the 53 plus percent gross margins last year were the highest the company had ever achieved primarily due to the aflatoxin outbreak we’ve previously mentioned and the capture of high margin small animal supplement business. If we analyze Neogen’s gross margins for the past four years before fiscal ’13 we find gross margin averages…

Thanks Steve. As we continue to build the organization and product line to take advantage of both food and animal safety opportunities that drivers for our business continue to even be stronger. For instance of even though we generally got the U.S. food is been safe compared to at least the other parts of the world. The nationwide recalls in the last three months of 2013 by the Food and Drug administrative to over the 134 in that same three months period the U.S. department of agriculture reported 19 recalls for meat, poultry and processed egg products. All this regulatory activity is taking place even though the infamous food safety modernization act is still not been implement. Though regulatory recalls are certainly a driver job business and even bigger driver is increased activity by major food producers and processors who are working harder to make certain that their food is safe. As Steve reported, we’re seeing healthy growth in a number of our products back inside the farm gate that have significant impact on animal proteins safety even though acquisitions have aided growth as you would expect. The organic growth or same-store sales continues to be persuasive with our Food Safety group increasing same-store sales somewhere approaching 12% and animal safety of same-store sales over 8%. Some of the strategic opportunities that I have spoken up earlier involved our international business. I expected two-thirds of our total market opportunities actually lie outside of the U.S. And then emphasis on international growth as some of you will remember has always been one of our drivers and one of our objectives, revenues from international sources in this third quarter were 12% higher than in the prior year. And these revenues come from over 100 different countries around the world; however, we give…

Thank you. We will now take questions. (Operator Instructions) Our first question comes from Paul Knight of Janney Capitals.

Congratulations. You I think touched on a little bit and that is this food safety market seems to be such a consistent grower, until my question is twofold. One, more color on why you continue to see that double-digit growth? And two, I guess phase I of the food safety regs are having to be rewritten here this year, what’s your forecast on the food safety regulations? Is it another year before we see it or does it even matter?

Paul, I am beginning to think may be it doesn’t even matter. I was continually with people in the food industry yesterday with; in fact have opportunity to read a couple of issues in with major, significant food production in this country. We spent some time discussing yesterday afternoon, they are kind of to the point of saying, if the regulation was in effect, and we think we would be compliant but we don’t always going to be an effect. I think the first one, there was I believe seven major areas in which FDA wanted to establish stronger compliance and stronger regulations. And the first one I think was fruits and vegetables. And it’s been - they’ve published that for comment well over a year ago and at the end of the comment period they decided they didn’t have enough comment, so they reopened it for additional comments and it was scheduled to be a regulation several months ago. And FDA came back a couple of weeks ago and said, well, we are not sure we got enough comment yet, we are going to reopen it for comment. So, it’s hard to explain, I don’t know how much of that we lie at the doorstep of the administration or how much we lie at the doorstep of just general confusion. But I think sooner or later, we are going to see these regs come in. In the meantime it’s maybe good for us and good for the industry that they are leaking out slowly rather than having an abrupt impact and that people are beginning to - producers and maybe exporters or importers for us are beginning to look at those regs and see what they have to do in order to be compliant and they come, they are…

And then last the growth point you brought up 11% food safety, about 8% animal I think that translates what into a roughly 9% to 10% total organic growth rate in the quarter.

I refer to Mr. Quinlan on that one.

Those numbers given were year-to-date numbers, so that would be 9 or 10 year-to-date, yes.

And how about year-over-year organic?

Quarter. Food safety was about 10.7, all of their growth was organic and animal safety was about 1%, 1.1% so blend it around 5%.

Thank you. Our next question comes from Tony Brenner of Roth Capital Partners.

Steve Q I guess, mentioned that natural toxin revenues were down I think $500,000 in the quarter. What percentage decline is that for these products?

Give me a second Tony. Yeah if we’re talking specifically we just have so many natural toxins Tony but we’re trying to do - the aflatoxin one, that’s probably about somewhere in the 30% range.

Decline Tony quarter-over-quarter.

And then that comparison should begin to improve significantly this quarter, is that correct?

I should know the answer because I knew you’d ask a question like that. I think the comparables are going to be less tough. Remember, though, that a crop that was harvested in October, November is to be tested for a better part of the year, because it goes into storage and is tested as it comes out of the storage. But I was taking my neck out and say it’s going to be less this quarter this fourth quarter than they were last year. I think that’s right, Steve.

I think so, yes.

Fair enough. And I believe you also said that GeneSeek sales were up 6% in the quarter year over year. Last quarter, the increase was 56%, I believe. And you attributed that to some new tests and products resulting in incremental market share. So I'm wondering, if that's the case, why so much volatility?

Its quarter-to-quarter variation is hard to predict, we’ve got some of that as we’re working with some of the major animal breeders in the world and they’ll pull animal samples for grandparent, great grandparent use and breeding and those samples will build up, and we’ll get them a slug at a time. We’ve got our GeneSeek people in here, we spent some time yesterday trying to figure out to better predict where that’s coming from. That was a strong third quarter this past year so it was one of those divine intervention quarters in Q3 of ‘13. So we were up against the tough comparables, so I don’t think that 5% probably may not be indicative of anything going forward.

How large a customer base is there for GeneSeek? Is it still very small, or is it a broad sampling?

Yeah I am looking, it so happens that controller of our GeneSeek group is in the room this morning, and I turned to him and he said if we look at all the individual writers out there probably up to 4,000 to 5,000. If we look how many customers we know that make up the top 50%, 100 customers make up the top 50% Tony.

Thank you. And our next question comes from Charles Haff of Craig-Hallum.

Thanks for taking my questions this morning. I had a question for you on the acquisition environment. In terms of available targets out there, do you see more targets on the animal safety side or the food safety side right now? Thank you.

Well we’ve seen more targets on the animal safety side, we made three. The food safety side it’s kind of I think the difference premature and immature business is food safety is still pretty immature so consolidation hasn’t began, we’ve picked up a few along the way but there is not real consolidation that’s began yet, so the offerings in that. Animal safety if you look a back there is part of the animal health business is much more maturing, so consolidation is easier to do and continuing. I think we might have a couple of three food safety candidates on our radar screen but nothing eminent.

So on the animal safety side, you probably have a few more than the food side on your target list right now?

I’m just turn think I don’t know I don’t think there is probably much difference in it.

Okay. And then my second question is on the international side, you did a really good job of kind of breaking out your growth rates by your divisions there. Just wondering in terms of kind of where the most materiality is - I realize they're all kind of in different stages with India being real early, and obviously EU, you've been there for quite a while with your Scottish efforts there. In terms of kind of where the biggest bang for your buck is right now, is it Neogen LA, or is it Neogen Brazil, or Neogen China? How should we kind of think about where the biggest return on invested capital may come from over the next couple of years? Thanks.

Yes, couple of years I guess I could look at where are we with currently and as we look out over the next few quarters we’re in budget and under year begins in June so we’re beginning to start formulating our plans for next year and I don’t see any slowdown in the growth of Neogen LA it’s working in material markets where food safety gets to be a bigger and bigger issue as we look at the European Union, Europe Union is putting out more regulations than any place else in the world today and forcing compliance. And I think the economy is going to be okay over there we suffered a little bit with Italy and Spain but not now it looks like we’re okay and we’ve got independent distributors in those markets. So I think we’re going to continue to see probably some more investment we’re looking at some additional investments perhaps in Europe and we’ll see that piece continue, that company group continue to be the center piece. As you look at dollars, percents are great but it’s - a friend of mine once said did you ever write a check for a percent. And so some of these big percent gross are nice but if you know what the base you’re working from Neogen LA the Mexico side it was the reach they potentially have into Central America and what we’re doing in Mexico I feel real good about that organization has grown and we’ve come off age. The China operations could be big in a hurry like it’d be just lackadaisical just depends on how fast we can get some things done we’re going through some reorganization and building of a new group there and I think we’re welcomed by the China government and welcomed by the producers particularly the western companies that are producing protein in China. It could be big right now it’s not but it’s pretty respectable on both the food safety and the animal safety side we’re going in there with some cleaners and disinfectants particularly disinfectants into that China market where that it was already we already had kind of a base with difficultly and getting product in there to reasonable price sets opening up for us. India is clearly the last place, it’s going to develop slowly I think we’ve probably be able to make an acquisition or two that will serve as the base for us to move out there. But it’s not going to develop real rapidly I think however is the right this now is the time to be there so we can be a part of that growth as it starts to mature. That’s kind of where we’re looking and world every place else in those 100 plus countries we’ve got pretty good distributors. There is a spot or two where we might the year out look at foot now boots on the ground but not in the next 12 months.

Yes, I like the way that you're looking at it in terms of dollars instead of the percentages. So if you had to kind of rank-order those opportunities in terms of dollars of incremental growth or profit over the next couple of years, could you kind of rank-order those for me?

Yes, I think it’s, Europe is first -- Neogen Europe is first and then may be a horse race between Neogen LA and Neogen Brazil, Brazil might be running faster than the Mexican operations but those will be good and I guess I have to put China in reluctantly in next slot because it could be bigger and then of course is it’s yet unknown.

Sure. Okay, great. Thanks for taking my questions.

I’d like to get a $1 million out of India in the next 12 months, if that helps you at all.

Thank you. Our next question comes from Steve O'Neil of Hilliard Lyons.

Just wondered if you could provide us some information on how much food allergen testing increased in the quarter and how much dairy testing increased?

I think that’s a Steven Quinlan question.

Yes, dairy was up about 5% in the quarter.

Okay.

Allergens were up about -- we got one piece, you know that’s, we’re kind of split our products up just to keep our safety piece. One piece which is strictly focused on diary antibiotics sales, antibiotic residues, and then another piece that is our more full aligned area products like those both the Steves were talking about, where we’re going with allergens and pathogens and spoilage organisms. So you kind of have to add the two together (multiple speakers) talked to you long enough for you to come up with the answer. Steve

The dairy antibiotics one Steve I think is the one you normally are looking for and the other one is kind of its varied inside of our Lansing diagnostics group. That dairy market is up 9%. Our overall dairy in antibiotic line is up about 5%, 5.5%.

Okay.

Than the allergens line for the quarter was up about 17% and that’s pretty much in line with I think it’s year-to-date around 24%, so, consisting growth.

And then said that $7.8 million from acquisitions was that year-to-date figure or quarterly figure.

That was for the quarter.

Right, that’s what I need. Thank you.

Welcome.

Thank you. (Operator Instructions) Our next question is from Jason Rogers of Great Lakes Review.

Looking at the animal safety segment, the organic growth of 1%, how much of the impact did weather have on that figure?

It heads some, stops moving off the shells per slow, you know you think of tractor supplies one of our big customers that fit there on the retail side with some over 1,000 stores out there now. Those things probably didn’t - bad weather being such there is lot of that stuff didn’t move up, it’s kind of hard question to answer. You know we’re early for the last season yet so there is nothing really developing there, it’s hard to clean and disinfect when you use in water base to production increases before you can get it out of the end sprayer. So, I’m sure it had some impact it is pretty hard for me to have other than this kind of imagine, I know exactly what it did, I know that slowed us up it at our eco group which is cleaners and disinfects and rodenticides this kind of - its kind of between quarter in a way and we’re getting ready for start to filling this fourth quarter where we’re shifting from - as the rats and mice start to leave their winter quarters and head for the vacation camp branch where we don’t have probably put out list rodenticides but we don’t put lot more insecticides as we get insects build up and cleaners and disinfectants I think we’ll see probably a kick here in this quarter as people start trying to catch up.

And you talked about Europe strength you mentioned genomics testing. What were some of the other areas that drove results in Europe for the quarter?

Well, they were up all over. We got a good bit of speciation testing over there more there than as percentage of sales and other places, you know there are horse what they refer to; there is horsemeat, when they found the horsemeat like early in the year. You know that drove a lot of interest in testing particularly meats for contamination, for economic adulteration or somebody slip in 10% pork into a beef product and getting beef prices for it or chicken or lamb or whatever, and there is - that continues to be strong. So I guess speciation is certainly part of it, allergens is a big part of it. We do pretty good internal efforts lab business to help our customers in addition - and over there in addition to the test kit that we sell. So, both from the standpoint of the reference lab business and test kit sales are allergen sales are particularly strong over there. So that’s - we’re seeing them be the leader on the allergen side. The allergen sales in the U.S. have been awfully good too; they’re not quite there yet in Mexico and Brazil and of course non-existing right now in India maybe China too.

And then finally, could you give an update on the answer products and traction you’re getting there?

Not enough. We’re still -- we've got such a good full land of products out there for solutions to microbiological contamination and pathogens all the way from the new products that Steve Snyder talked about, our NeoFilm, which is a quick way to be able to get a quick test for Salmonella or E. coli not quite as precise as some of the other methods but that went all away through our lateral flow devices are what we call our Reveal product lines it also quick - they’re lateral flow device that can be used on the land and can be read visually, you don’t have to have a machine. Those all kind of compete with what we’re doing with that ANSR product line and we probably aren’t given as much attention as we need to. We are reupping our emphasis both from the standpoint of additional development. We don’t have their complete product line developed there yet. For instance, we shot Listeria monocytogenes which is one of the products that like of people like to have. And so they’re going to us out test for Salmonella that also like to have the same format for another one. So we’re working on that but it’s a coming it’s not what I’d hope it would be this time a year ago.

Thank you. And then our next question comes from Bryan Kipp.

Just a follow-up for Paul and I. You highlighted two-thirds of the market ex-US; there's a two-thirds of the market kind of existing ex-US opportunity going forward. Just want to get an idea, just future margins kind of story. Is that more food safety - levered to food safety, or is it more animal safety side, those opportunities?

For more food safety simply because the animal safety markets are going to be bigger but there is more competition. And we do awfully well for instance in veterinary instruments which are important, because that is what you’ve got to have to have delivery devices for anything is going to make animal product safer when they leave the farm gate. And we do much better in more developed markets that we will - we won’t ever sell many veterinary instruments as an example in China though they use a lot, but they’re going to buy some cheapest China made and we get some of the same issues as we deal with South America where we’ve got cheaper competitors down there. They’re putting products out there. They’re not what the rest of the world look for, so those are that’s just an example. I think we will by the same - on the other hand we’re clearly a leader in with much less competition as we look at the full line of food safety products. Again emphasizing the fact that we’re the only one out there with that full line going all the way from pathogens to natural toxins to allergens to speciation to unique protein, right now we’re the only one that can offer a full line of potential solutions. And I think that’s continuing to work more and more for us.

Okay, so it's safe to assume as well that Latin America, Brazil, China and India, those kind of more emerging-market stories you're going to see even more weighted toward food safety because of those dynamics?

Yes, that’s right. But it’s hard to say cleaner and disinfectants and rodenticides are going to be a big player, we think in Brazil. And those numbers pile up pretty quick when you start talking about instead of test kits you start talking about trailer loads of 50 gallon drums. So I think Brazil is going to be and Mexico just some degree. We are going to rodenticides and disinfectants business in those markets and insecticide business is there. So they’re going to be okay.

Appreciate it. And just, I guess, a follow-up on the acquisition revenues that you guys had. Are those companies tracking towards profitability for you, or is it still kind of dilutive? And what's your expectations for those going forward?

No, no, I don’t know. Every acquisition that we’ve done is accretive at both the top line and bottom line. So no every one of those, those three that we’ve brought in this year the first month they’re on Board, I think at least the first quarter they were on Board. They were putting profit to the bottom line.

Is that in regards to the animal safety business or overall corporate averages?

I am not sure I understood the question.

The profitability that you're citing, I was just thinking is it, because it's in animal safety, are you using that as the metric? Or is it overall business, which is a little bit higher?

Okay, I can’t tell you. I can’t from memory tell you exactly what the operating profit was for which is close where we look. What the operating profit was for each of those. I would say they’re profitable. I want to make sure that you knew that there was not - they were unprofitable at all because they’ve all been profitable first month that we brought them on Broad. Are they less or more profitable than the overall that’s they start with, they’re less profitable because we’ve still got integration cost involved there. We work to achieve. We are on some budget yesterday and we’re looking at it about 19% operating profit. And we were saying, let’s work on those budgets and see if we can get that one to 20%. So that 20% operating profit total corporate as well as within group is part of our objective.

Okay, yes, I guess I was just referring more to dilution. Appreciate the color. And I guess finally, cash flow from operations; can we get a number there, just so we can work through? What was your number (Ph) in the quarter?

Sure. So the quarter was $6.5 million.

$6.5 million. Thank you.

Thank you. And then our final question comes from Steve O’Neil from Hilliard Lyons. Steve O’Neil: Sorry, I had a couple of follow-ups. Can you discuss the performances of the rodenticides and the disinfectants separately? You talked about some weather impact. I was just kind of wanting a little additional detail.

I can’t but maybe Steve you can.

Yes, rodenticides were down about 12.5% and that was more driven by weather particularly one of our bigger market is Puerto Rico and that really they had some real wet weather that didn’t lend itself to rodenticide sales for the quarter. Cleaners and disinfectants were down about 7%. And that’s more international. No significant weakness there except that one of our larger countries is Venezuela and that market has been down all year because of currency, getting cash out of the country to pay for the product.

I don’t know that we had any - we suspended sales into Venezuela, reluctantly. We’ve got good distributor, good customer base down there. He’s got money into bank, he could pay us. Government just won’t let him ship it out . Now that did get corrected. I think, Steve, within the last two to three weeks and we’re getting some money to flow to come out. The government is releasing some cash. So with that we should be able, in this fourth quarter, to resume, I hope, down there. Steve O’Neil: And just finally, I had a note I meant to ask you about ractopamine, about a test you had developed for that. And that's something that's cropped up with some of the animal health companies. Can you talk about that product a little bit?

Yes, it’s actually the diagnostic test for the detection of ractopamine. They’re two beta agonistics that are being used to - ractopamine was used mostly in the hog business, some in the beef cattle business. Merck had a product that was used mostly in the feedlot business. Both of them have come under fire. Merck pulled their product or I think they pulled it from the market everyplace. Eli Lilly is still selling ractopamine. It’s an approved product in the U.S. but in big part of the rest of the world it’s unapproved. Steve O’Neil: I think (multiple speakers) sells it, too.

Yes, they’ve got a similar product to the Merck product, I think. But at any I don’t have the numbers right on the tip of my tongue, but they haven’t been anything overwhelming this quarter. We know two or three of the major swine producers or pork producers that have said we’re just going to take this group of farm and we’re going to take them all for not go let them have that go let any ractopamine get there. So therefore we don’t have to worry. That’s the product that we’re going to kill and ship to Russia or whatever. So, there’s probably less testing as they begin to get more that in hand. This is still there and I guess the next time somebody finds something and turns down shipload of pork, it will pick up heavy again, but nothing to write home about this quarter.

Thank you. And then at this time I would like to turn the call back to Jim Herbert for follow-up or closing remark.

Well, thank you. And thank you all. We appreciate your continued support and it continues to be fun. We’re off to a good start in the fourth quarter and we’re looking forward to it. I guess we don’t get to talk you officially until, gosh now. We have to wait after we get the all of the filings done, so it’s all going to be July before we get to officially talk again. So in the meantime, thank you for your support.

Thank you ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.