Welcome to the Neogen's Fourth Quarter and Fiscal Year 2014 Earnings Result Conference Call. My name is Daniel and I will be your operator for 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 will now turn the call over to Jim Herbert. Jim, you may begin.

Thanks, Danny. Good morning and welcome to our regular quarterly conference call. Today, we'll be reporting to you the results of that fourth quarter as well as of course our fiscal yearend that ended on May 31. I'll remind you that some of the statements 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. And those 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 joining us today by live telephone conference, 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 those who you are participating in this live conference. And I'm joined today by Steve Quinlan, our Chief Financial Officer. Earlier today, Neogen issued a press release announcing results of our fourth quarter ended the yearend 2014 fiscal year. Looking first to that fourth quarter, revenues were $67.3 million or 20% increase over revenues for the same period last year. Income for the fourth quarter was approximately $7.5 million as compared to approximate $7 million in the fiscal year 2013. This equates to $0.20 a share compared to $0.19 a share year ago when all adjustments were made for the stock split and the increase in average number of shares outstanding. For 2014 fiscal year for the whole year, revenues increased by 19% from the previous year to approximate $247.4 million. Net income for the year was $28.2 million and that was compared to the prior year $27.2 million. Again, adjusting for changes ensures…

Well, thanks, Jim. And welcome to everyone listening on the conference call as well as those joining us via the internet. Jim is giving you the overall sales and profit performance for the 2014 fourth quarter and full fiscal year. I would like to add echo his comments that overall we were pleased but not satisfied with the result. We were able to integrate three acquisitions during the year and achieved 19% revenue growth. We fell short of our double digit bottom line increase goal. In the next few minutes I'll address some of the significant highlights for the quarter and the year. As Jim mentioned the Food Safety segment delivered a solid year with overall revenue growth of $10 million or 10% and all of that growth was organic. Food Safety struggle all year with comparison to unusually strong 2013 when there was significant mycotoxin outbreak in the U.S. corn crop and European commodity grain crops which resulted in sales of our aflatoxin test kits increasing 43% over 2014. In last year's harvest which was our 2014 fiscal year, the U.S. crops were relatively clean, and this resulted in 29% decline in sales of our aflatoxin test kits in the U.S. In spite of this decline, our Lansing based diagnostics group was able to grow overall revenues for the year. And did so across almost of all our market segments and product lines excluding the natural toxins. Revenues for our industry leading product lines to detect inadvertent allergen contaminations such as milk process, soy, peanuts and gluten were up 24% in the U.S. and 18% worldwide for the year. This product line continues to grow rapidly due to increasing regulations regarding product labeling, loss in brand equity resulting from product recalls and heightened awareness of the adverse effects of…

Thanks, Steve. Let's take remainder of the time to look about -- to look at where that future growth opportunities might be and I think I would like to sort of divide those growth opportunities into three segments. I would like talk a little bit about the trends that are occurring, talks about some of our products that fit into that growth area and then take a quick look at geography. Maybe first take a look at the trends that are occurring. I think as we look out things are happening in the market out there is going to be advantageous to us. I think for one we will be looking at the detection of genetically modified plant material more in next couple of years than we have been. So at this time they won't be whether genetic modification the plant is going to be permitted. But instead to identify on a labels if approved product has GMO content. I think there will be more concern about if animal protein production can satisfy demand. There is no doubt that as this middle place develops worldwide, there is going to be a bigger demand for animal proteins. However, some may begin to question where that is going to be produced. The U.S. now has the smallest beef cattle herd it has since the 1940s. And in many places we are seeing almost doubling in the price of hamburger. There is some pressure worldwide to improve dairy production numbers where it's going to be a growing demand for per capita consumption of milk in places like China. At the same time, there is some downward pressure on whole milk consumption in the U.S. as soy and almond based milk is beginning to pick away cow's milk market. Both of these trends are…

(Operator Instructions) All right. And our very first question comes from Paul Knight from Janney Capitals. Paul, please go ahead.

No hearing anything, Danny.

Can you hear me?

I can hear you, we don't hear the caller.

Can you hear me now?

Yes.

Okay. The question I have is what was organic growth in food safety in Q4 organic and the animal side on Q4 as well?

Organic for food safety was 4.4% in the quarter and food safety was basically flat in the quarter -- I am sorry animal safety was flat in the quarter.

And then food 4.4%

Yes. Food was 4.4, animal flat

And were you saying the demand for same testing in the quarter and could you talk to the fewer growth in animal or I guess goes back to the horse contamination a year ago, right?

Yes. That affected the horse -- our friends in Scotland call it horse gate that affected the first big quarter that was the fourth quarter previous year. So they were up against pretty tough comparable and the fourth quarter which that those numbers get forwarded into food safety, so that was a part of that reason. Animal safety -- there was two three things. And one of the -- probably one of the big one was the prior year, three manufactures of T4 tablets for thyroid treatments in dogs and we one of those -- we've been substantially own this part all the time with a new player in that market place. And from time-to-time, vulnerable to the other players have been moved -- been pushed out of the market by FDA under some compliance problems they might have. So I think we had unusually strong fourth quarter last year on the animal safety side as a result of some of that. We are also in the fourth quarter, last year had bigger sales of our vaccine for equine and botulism that number was considerably ahead of where it did finished up this year. We are the only player in that market to -- for equine and botulism so win them, it was just matter what might have been some based inventories or what might have been or it wouldn't, certainly wasn't that the market is dissipated any or that the competition had taken any of the -- brought away from us.

And then horsing testing, you were saying some of that in the 4Q.

That's still I think maybe you think about --we do support these testing for a couple of different porcine disease as a part of our GeneSeek operations. That would have been for [purse] and short tradition I think that was there. I think you may be thinking about may be pig virus, may be pig diarrhea problem. That -- we are not a major player there as far as testing is concerned. It is a difficult thing to send samples around to test for and it is pretty easily found at the production operation. There is not much guessing is what's your problem is when it shows up. Where we have been a bigger player there is that we got two products that are approved is disinfectants to control that. And all of these populations typically when they clean them out, as they have enough break like this, they are going and clean and disinfect. And fortunately we've got two -- I am not sure how many products are approved. But not very many that are approved as been able to take care of killing that virus. So that said, it will continue to help us going forward on maybe pig virus. The report out this month I read last night, it continues to be there. I think there is fewer outbreaks in number of cases but population of pigs involved is everybody have, we thought that we could immunize by self immunization that once the SAA has contracted the disease is passed from the south as a baby big. Once the SAA has contracted the disease she develops her own immunity. And so there have been programs out there -- once these things broke out, I think we have 29 states now where there is problem. And once it broke out they have been immunizing SAA so they can -- has develop her immunity. But now there is some question as to whether that immunity is holding so there is still some uncertainty. We should be in a good place to be a player in health industry though regardless of what that outcome is.

Our next question comes from Tony Brenner from ROTH Capital Partners. Tony, please go ahead.

Thank you, good morning. You breakout for the fourth quarter the change for natural toxins and allergens.

Would you repeat that Tony? I am not sure I got you.

Yes. The fourth quarter change in natural toxin sales and allergen sales. I know you gave allergen for the full year but not for the quarter, could you say with natural toxins?

Steve is going through his numbers. The mycotoxin is going to be down obviously compared to the prior year. And allergens are going to be up. Now, Steve, all you got to do is fill in the blanks.

Okay. Natural toxins for the year are down 3%

And for the quarter? He won't know the quarter I think so he is looking for it. Right, Tony?

Yes.

He don't know about fourth quarter

Okay

Okay. Natural toxins for the fourth quarter were down 3%. And Allergens for the four quarter were up 3%.

Okay. Mycotoxin scaled off sharply I think to get into second quarter. If that's right, any read on the crop conditions for the New Year and what that turn might look like, Jim?

In fact, I am not reading this week I think but I think we were seeing some DON vomitoxin available in the wheat crop in the northern grain built, that's still true, spotty coming in and probably sitting with his table and own this everyday and we are seeing some pretty high levels and some places coming so I am going to guess it's our sales of that mycotoxin test kits, there is a couple of that problem will be up in this first quarter and probably up at this point. So that would pick up I don't know probably Southern Illinois going Central Illinois may be going away all up to the Canadian border, there is going to be some spotted problems there. Weather was cool and wet at a time that crop is flowering which is where the offset and onset of the fungal infection takes place. That said, the crop is obviously good, the current crop it's in the ground now. We got late, there was late plannings, there is all kinds of reasons to be concerned early in the season but as I rode around some across part of the country in the last week or two, it is come out pretty strong in central northern corn belt, is got the corn now that's already begun to tassel which is-- we are not yet end of July, some of that I am sure is probably has to do with the plant projects that are planned. I think we are going to have plenty of moisture in most of the major producing corn belts. So there is not likely -- of course it is early to make prediction. It could get hot and dry in August and we could have a problem. The western side was fortunately there is not a lot grain produced there but the western part of the U.S. is still hit pretty hard with drought and that crop is going to be concerned, I think right now I have to say we color the normal year.

Okay. Steve, you said allergens were up 24% of a year why only 3% in the fourth quarter?

That was -- Tony, there are meat speciation test kits are in allergens. So the fall of at Neogen Europe really impacted that number.

Got it. One other question. DNA testing which I think includes GeneSeek, up double digit to the year down 11.5% in the fourth quarter. It looks like was -- I think it was earlier mentioned that there was special large products at GeneSeek in the fourth quarter last year. Was that the reason for that metric or something else?

Yes. That was true, Tony. Last year if you remember our fourth quarter GeneSeek was an absolute -- that was blowout and so the fact that they moved in May of this year as well as the comparison to last year's fourth quarter really are reflective of that decline in revenue. Business there is very, very strong.

Yes, that's not just U.S., Tony but probably I would say dozen at least 10 countries feeding that supply. Our growth in genomic testing where animals coming out of the Europe is good, that stuff goes through Neogen European and funnels its way into Lincoln to those labs, most of it does. Same thing is true in Brazil where we have major program down there with [reboot type novaric] cattle. These are the guys for sure Brazil is gone, you want those -- go and help produce beef meat protein for the middle class going forward so and we are getting some samples out of China, where the Chinese are concerned about -- they have replacement programs which ample to say is a feel there opportunity there so GeneSeek, we tend to think about sometime as U.S. and think about it has been located in Nebraska. It is really worldwide.

When you are saying you are looking for acquisitions in China or you might make some acquisitions in China, would these be distributors or testing companies or something --

Improved distribution, Tony.

Our following question comes from Brian Weinstein from William Blair. Brian, please go ahead.

Hi, guys. Thanks for taking our question. This is actually Matt, asking the question for Brian. Just want to quickly follow up on the previous question about the GeneSeek opportunity. I see you have been very positive about it and with the new addition facility in Lincoln certainly can be positive moving forward. When might we see the actual revenue start escalating, start ramping sort of see some return on these investments you've made?

I am not sure I answer the question. Let me answer the first part of it. We are already -- beginning next quarter we will see an improvement. Our depreciation on the facility is less than our cost-- our cost of occupancy in our building is less than what our least cost would have been in the facility we moved out of. So we've reduced our cost. And we've certainly streamlined operations as part of that new facility. I am still excited about it. It's one that we built for something to be twice or three time that size. So we got lot of capacity, lot of straight flow through. Nobody really ever had the opportunity to build on animal genomics laboratory before because this is such new technology but our guys did the engineering on it, worked our way through and just did a super job. So we are going to reduce cost as a result of being in new facility. If so -- if you are wondering about what the payout is going to be, when do we are going to see return. We are already seeing good return there. This is just going to enhance it. So maybe there is something Matt I missed part of that question, Steve.

Matt, were you looking for revenue growth? Is that--?

Yes. So that's specific what I was looking for, when we might start seeing ramp on the revenue side? Sorry, I was supposed to not play there.

18% I think it is pretty good ramp. We were up 18% this year compared to last year. Our sample numbers were up. Steve, what was in your figures, 37%? We ran 37% more samples through that facility. So I am not sure that -- I think 20% growth-- I am kind of thing it might be all right. I am not sure we can handle a lot more that from year-to-year.

Okay, thanks. And then just a follow up thinking about operating margin share. I would say Jim you barb again that 20% and sort of that watermark where you have targeted over the years, opposite bit below that now. When do we start seeing that? I think you said pretty quickly here but what is that ramps look like back up to 20%. Is that four quarter, is that eight quarter? How should we think about things kind of get back up to that level? Thanks for taking my questions, guys. I'll jump back in.

We are in the final flows of budget right now. I can't exactly remember where -- when we see that breaking out. It begins to breakout certainly this quarter. There was some cost related to those acquisitions that --where acquisitions cost related -- we expense them now and used to we could -- and drive them over time, so I am sure some of those things impacted us in the prior year that we won't feel that impact coming on this year. We still got some customer based intangible to get figured in and those are cost of - that are non cash cost or that be related it's--we got to try figure out how that can mistakes of getting good wheel off the balance sheet and knows we have to begin to deal with. We will see in the year that we are in now, in the current fiscal year. I don't remember exactly what the increase goes from quarter-to-quarter since I am just now beginning to-- not deliver this new budget so. Steve, you got better memory?

We are going to see operating margins move up probably a percent each quarter or so next year. So we will be back knocking on the 20% door by the end of the year, Matt.

Our following question comes from Charles Haff from Craig-Hallum. Charles, please go ahead.

Hi, thanks for taking my question. I have a question about your ContraPest and SenesTech press release that you put out June 16, I am wondering if you could give us some idea of market sizes for ContraPest? Maybe if you could share any estimated royalty rate and if there are any manufacturing capacity issues at your facilities for producing ContraPest? Thank you.

You are pretty perceptive, Charles. I got the call yesterday, he wanted to know who is this guy from -- wanted to know about Neogen and the ContraPest. And I said Ryan he is okay, you can talk to him. So as I know you have been nosing around and found our partner and they are alone down there, she said that you have been asking a lot of probing questions. I think it's a little bit premature to do all those. And we felt like we needed to analysis, it's a technology that's been getting a good bit of attention over the course of past year. There were number of people who wanted to do something with the technology. He wanted to license it from the SenesTech people, they own it now. We have been working with them all along. And we felt like it was time to announce that it was out there and we want to do something. It is a product that will control population as a contraception device to be fed through as a bait to essentially sterilize males and put females into menopause, premature menopause. If you can think about female rats and menopause, they don't live but a couple of years anyway, that's not getting the wrong fight but we think it's going to be a good contributor to help hold down populous, it won't replace our current rodenticides but it will take care of that portion of the population that becomes big shot. We think it's going to be helpfully -- it is -- and only -- it's only technology like it is available today. It is all patented and we've been working with that group all along for at least past year. It is I think final application to go into EPA for approval and sometime probably in next 60 days. I think it will be on the fast track when it gets to EPA. You never know, I think we can see that part approved and ready for sale, sometime -- probably sometime early next calendar year before it gets on the street. In the meantime, we are doing a lot of work with bedside; we got some going right now in some of the strongest rat production areas in -- around East Coast, Southeast Coast. I talked to the guys yesterdays, they said, they thought that there was lot of rats in New York subways but they were nothing to compared to what they saw in out farm. So we think it's going to be helpful. We will manufacture the product. We are in the process of putting together the additional materials that we are going to need for manufacturing. We do have facilities space at our end up; we got some plan to do that. So we are gearing up to be ready to go. It's just a little premature to predict exactly when.

Okay. And when you guys were doing the work on this, did you or Greg Hastings kind of estimate the market size?

Yes, we estimated the market size. But I am not sure I want to talk about that.

Okay, fair enough. And how about Australia? Can you talk just for a second about your operations in Australia that you currently have? What do you have on the food and safety, food and animal side in Australia?

Really I am not sure where the question came from. We've got a couple of good distributors down there that are handling product for us. But I would say we are not real strong in Australia, I mean we are there, we are player, but we don't have any of own feet on the ground down there.

(Operator Instructions) And our following question comes from Jason Rogers from Great Lakes Review. Jason, please go ahead.

Hello, good morning. Would you provide the year-over-year growth in the quarter for the international operations in total as well as Europe, Latin America, and Brazil?

You want year-over-year revenues, that's what you are looking for Jason?

Correct.

I now Steve got it.

I do have it because I was just handed it. So international growth year-over-year is about 16%. And so that put aside a total about 38.8% of our overall sales-- our international. Then you had asked about Europe.

Right. Europe, Latin America and Brazil

Did you want that in terms of the company? You know what I'll give you the -- Europe is about $46 million with all of our --

I think he want to know what the percent were, we got the percent in there. Europe was up 24% I think, I got year and quarter mixed up but you got those --

Europe was 24% increase, Brazil 38% and Latin America is up 18%.

Yes, thank you. And what are your projections for the CapEx for fiscal 2015 as well as the tax rate?

We are still putting a budget together but I think CapEx is going to be somewhere in the $9 million and $9.5 million range. And I think our effective tax rate is going to be somewhere around 35.5%.

And we have no further questions at this time. Mr. Herbert, please go ahead.

Yes, well, thank you for joining us this morning. I want to make sure and mention to you if you haven't already got the word that our invitation for our Investors summer picnic takes place this week on Thursday afternoon. If you haven't already made arrangements, well please contact immediately to our shareholder relations manager. Here is the company are in fact Steve or I any one of us would -- it's our time for big fun under the tent and dark while we were doing and get chance to busy with everybody, we will have number of scientists and sales people and so -- as well as number of customers and so we would certainly make sure to invite you to be there. And thank you for your continued support throughout Neogen's 2014 fiscal year and we look forward to continue to share the good news with you as we finish up of course now the first quarter of 2015. So we don't have any other comments from here. Have a good day.

Thank you, everyone. And thank you ladies and gentlemen. That's concludes today's conference. Thank you for participating. You may now disconnect.