What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-08-15 compared with 2022-07-27 · 712 added, 631 removed, 521 unchanged (72% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15

(e) under the Securities Exchange Act of 1934) as of May 31, 2022.

Based on and as of the time of such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports that are filed or submitted under the Securities and Exchange Act of 1934 is appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure the information required to be disclosed in the reports that are filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13-a-15(f)

and 15d-15(f).

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation was conducted as to the effectiveness of internal control over financial reporting as of May 31, 2022, based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on that evaluation, management concluded that internal control over financial reporting was effective as of May 31, 2022.

The effectiveness of internal control over financial reporting as of May 31, 2022 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in its attestation report, which is included on the following page and is incorporated into this Item 9A by reference.

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure the information required to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on management’s evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of May 31, 2023, because of the material weaknesses described below.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13-a-15(f) and 15d-15(f).

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

GAAP and includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets;

(2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

On September 1, 2022, we completed our merger with Neogen Food Safety Corporation, a wholly owned subsidiary of 3M that was created to carve out 3M’s Food Safety Division.

We are in the process of evaluating the existing controls and procedures of 3M's Food Safety Division and integrating it into our internal control over financial reporting.

In accordance with SEC Staff guidance permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, management has excluded the business that we acquired from our assessment of the effectiveness of internal control over financial reporting as of May 31, 2023.

The business that we acquired in 3M's Food Safety Division represented approximately 82% of the Company’s total assets as of May 31, 2023, 34% of the Company’s revenues and 29% of the Company’s operating income for the year ended May 31, 2023.

Under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of May 31, 2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Management’s assessment of the Company’s internal control over financial reporting identified the following material weaknesses that existed as of May 31, 2023:

We identified a material weakness in internal control related to ineffective information technology general controls (ITGCs) in the areas of user access and change management over certain information technology (IT) systems that support the Company’s financial reporting processes.

Specifically, we did not design and maintain:

(i) sufficient logical access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs and data to appropriate Company personnel;

(ii) program change management controls to ensure that information technology program and data changes affecting financial information technology applications and underlying accounting records are identified, tested, authorized and implemented appropriately.

As a result, manual business process controls that are dependent on the affected ITGCs were also deemed ineffective, because they could have been adversely impacted to the extent that they rely upon information and configurations from the affected IT systems.

We identified a material weakness in internal control related to ineffective period-end invoice accrual controls that are designed to ensure the completeness and accuracy of accrued expenses and accrued capital assets.

We identified a material weakness in internal control related to ineffective operation of management review controls related to the accounting, valuation and purchase price allocation of the Company’s acquisitions and associated goodwill.

Specifically, we did not maintain adequate documentation supporting the precision of the operating effectiveness of certain associated management review controls.

These control deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis, and therefore, we concluded that the deficiencies represent material weaknesses.

As a result of these material weaknesses, management has concluded that our internal control over financial reporting was not effective as of May 31, 2023.

Following identification of these material weaknesses and prior to filing this Annual Report on Form 10-K, we completed additional procedures and concluded that our consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S.

GAAP and fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Form 10-K.

The Company’s independent registered public accounting firm, BDO USA, P.A., which has audited and reported on our consolidated financial statements, issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of May 31, 2023, which is included in this annual report below.

Plan of Remediation

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively.

The Company continues to provide additional training to personnel and put in place additional quality control measures around its processes and the retention and documentation of evidence of control activities.

When fully implemented and operational, we believe that these actions will remediate the underlying causes of the material weaknesses and strengthen our internal control over financial reporting.

The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

As we implement these remediation efforts, we may determine that additional steps may be necessary to remediate the material weaknesses.

We cannot provide assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time.

We will continue to assess the effectiveness of our remediation efforts in connection with our evaluations of internal control over financial reporting.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting were identified as having occurred during the quarter ended May 31, 2022 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Other than the material weaknesses and related remediation efforts described above, and any changes resulting from the business combination described above, no changes in our internal control over financial reporting were identified as having occurred during the quarter ended May 31, 2023 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

Opinion on Internal Control over Financial Reporting

We have audited Neogen Corporation’s (the “Company’s”) internal control over financial reporting as of May 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of May 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended May 31, 2022, and the related notes and schedules and our report dated July 27, 2022 expressed an unqualified opinion thereon.

We have audited Neogen Corporation’s (the “Company’s”) internal control over financial reporting as of May 31, 2023, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of May 31, 2023, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

equity, and cash flows for each of the three years in the period ended May 31, 2023, and the related notes and our report dated August 15, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

5 unchanged sentences

We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material weaknesses have been identified and described in management’s assessment.

These material weaknesses related to management’s failure to design and maintain effective controls over financial reporting, specifically related to the following:

(1) information technology general controls in the areas of user access and change management over certain information technology systems that support the Company’s financial reporting processes, (2) period-end invoice accrual controls and (3) management review controls related to the accounting, valuation and purchase price allocation of the Company’s acquisitions and associated goodwill.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated August 15, 2023 on those consolidated financial statements.

As indicated in the accompanying “Item 9A, Changes in Internal Control over Financial Reporting”, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of 3M’s Food Safety Division, which was acquired on September 1, 2022, and which is included in the consolidated balance sheet of the Company as of May 31, 2023, and the related consolidated statements of income (loss), comprehensive income, stockholders’

equity, and cash flows for the year then ended.

3M’s Food Safety Division constituted 82% of total assets as of May 31, 2023, and 34% and 29% of revenues and operating

income, respectively, for the year then ended.

Management did not assess the effectiveness of internal control over financial reporting of 3M’s Food Safety Division because of the timing of the acquisition which was completed on September 1, 2022.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of 3M’s Food Safety Division.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

/s/ BDO USA, P.A.

Grand Rapids, Michigan

July 27, 2022

OTHER INFORMATION—NONE

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS—NOT APPLICABLE

August 15, 2023

OTHER INFORMATION—NONE

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS—NOT APPLICABLE

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding the Company and certain corporate governance matters appearing under the captions “Proposal 1 — Election of Directors,” “Information About the Board and Corporate Governance Matters,” and “Additional Information-Delinquent Section 16(a) Reports” is incorporated by reference to Neogen’s 2022 proxy statement to be filed within 120 days of May 31, 2022.

We have adopted a Code of Conduct that applies to our directors, executive officers and employees.

Information regarding the Company and certain corporate governance matters appearing under the captions “Proposal 1 —

Election of Directors,”

“Information About the Board and Corporate Governance Matters,”

and “Additional Information-Delinquent Section 16(a) Reports”

is incorporated by reference to Neogen’s 2023 proxy statement to be filed within 120 days of May 31, 2023.

We have adopted a Code of Conduct that applies to our directors, officers, and employees.

This Code of Conduct is available on our website at https://www.Neogen.com/globalassets/pdfs/corporate-governance-sec-and-investor-information/codeofconduct.pdf .

We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of the code of conduct for our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website.

Information About Our Executive Officers

Information About Our Officers and Executive Officers

The officers of Neogen serve at the discretion of the Board of Directors.

3 unchanged sentences

Donofrio, Ph.D.

Vice President, Research & Development

Vice President, North American Operations

Vice President & Chief Operating Officer

Vice President, International Business

Vice President & Chief Human Resources Officer

Vice President & Chief Financial Officer

Chief Scientific Officer

Chief Operating Officer

Vice President, Americas & Australia/New Zealand

Chief Human Resources Officer

Chief Financial Officer

Vice President, Finance

Rocklin, Ph.D.

Vice President, General Counsel & Corporate Secretary

Chief Legal & Compliance Officer

Information concerning the officers of Neogen follows:

11 unchanged sentences

Donofrio was named Vice President, Food Safety Research and Development and then named Vice President, Research and Development in September 2018.

Donofrio was named Chief Scientific Officer.

Prior to joining Neogen, he worked for 15 years at NSF International in various positions of increasing responsibility, including Director of Microbiology and Molecular Biology and Director of Applied Research, where he led efforts in grant research and method development with partners in academia, industry and government.

At Neogen, Dr.

Donofrio is responsible for our worldwide food safety and animal safety research activities.

Hagedorn, age 56, joined Neogen in April 2018 as Vice President, Food Safety Operations;

in 2020, he was named Vice President, North American Operations.

In the role, Mr.

Hagedorn is responsible for the manufacturing, supply chain, shipping and warehousing, production engineering and quality systems for Neogen’s North American operations.

Prior to joining Neogen, Mr.

Hagedorn spent the past eight years as Vice President of Operations at Siemens Healthcare Diagnostics.

At Siemens, he was responsible for multiple plant operations, including diagnostic instrument manufacturing and new product introduction.

Prior to joining Siemens, Mr.

Hagedorn held a variety of senior level positions over a 20 year career, including Director of Manufacturing at Bayer Healthcare in Indiana, Director of Lean Manufacturing at Invensys in Ohio, and Manager of Automated Manufacturing at Siemens Electronic Components in Mexico.

Jones, age 52, joined Neogen as Vice President & Chief Commercial Officer on August 17, 2020;

in 2022, he was named Vice President & Chief Operating Officer.

Donofrio is responsible for our worldwide research activities.

Jones, age 53, joined Neogen as Chief Commercial Officer on August 17, 2020;

in 2022, he was named Chief Operating Officer.

Prior to joining Neogen, Mr.

7 unchanged sentences

In January 2019, Dr.

Lilly was named Vice President, International Business, responsible for Neogen’s operations outside of the U.S.

in April 2022, Dr.

Lilly also assumed responsibility on an interim basis for the North American genomics business.

Lilly was named Vice President, International Business, responsible for Neogen’s operations outside of the U.S.

In May 2023, Dr.

Lilly was named Vice President, Americas & Australia/New Zealand, with responsibility for all commercial business in those regions.

He also has strategic and operational oversight of our global genomics business.

Prior to joining Neogen, he served in various technical sales and marketing roles at Invitrogen Corporation.

Mann, age 58, joined Neogen in 2017 as Director of Human Resources and was promoted to Senior Director of Human Resources in June 2019.

Mann was named Vice President & Chief Human Resources Officer, with responsibilities for people-focused programs and initiatives for Neogen’s worldwide employees.

Mann was named Chief Human Resources Officer, with responsibilities for people-focused programs and initiatives for Neogen’s worldwide employees.

Mann has more than 30 years of experience focused on all aspects of strategic human resources including talent acquisition, compensation and benefits, employee development and employee relations.

1 unchanged sentence

Mann held the positions of Director, Talent Acquisition at Holland, a logistics company, and Director, People Services Consulting at Herman Miller.

Naemura, age 54, joined Neogen in November 2022 as Chief Financial Officer.

Previously, Mr.

Naemura served as the Senior Vice President and Chief Financial Officer of Vontier Corporation from February 2020 until November 2022.

Naemura served as Chief Financial Officer of Gates Industrial Corporation from March 2015 to January 2020.

Prior to his time at Gates Industrial Corporation, Mr.

Naemura served as Vice President of Finance and Group Chief Financial Officer at Danaher Corporation from April 2012 to March 2015, and previously served as Danaher Corporation’s Test & Measurement Communications Platform Chief Financial Officer from January 2009 to April 2012.

Prior to 2009, Mr.

Naemura was employed by Tektronix Corporation from August 2000 to January 2009, including during its acquisition by Danaher Corporation in 2007.

Quinlan, age 60, joined Neogen in January 2011 as Vice President & Chief Financial Officer and was also Corporate Secretary until March 2021.

He is responsible for all internal and external financial reporting for Neogen, and manages the accounting, information technology, corporate purchasing, treasury and investor relations functions.

Quinlan announced his retirement in September 2022 and Mr.

Naemura was subsequently appointed as Chief Financial Officer, beginning in November 2022.

For the remainder of fiscal year 2023, Mr.

Quinlan continued to serve the Company as Vice President of Finance and is continuing to work on special projects through the end of the 2023 calendar year.

Prior to his retirement announcement, Mr.

Quinlan was responsible for all internal and external financial reporting for Neogen, and managed the accounting, information technology, corporate purchasing, treasury and investor relations functions.

Quinlan came to Neogen following 19 years at Detrex Corporation (1992-2010), the last eight years serving as Vice President-Finance, CFO and Treasurer.

1 unchanged sentence

Rocklin, Ph.D., age 51, joined Neogen in March 2021 as Vice President, General Counsel & Corporate Secretary.

In this role, she is responsible for all legal and compliance matters and serves as the Corporate Secretary.

Rocklin was named Chief Legal & Compliance Officer.

In this role, she is responsible for all legal and compliance matters and also leads the regulatory, quality and ESG functions.

Rocklin also serves as the Corporate Secretary.

Prior to joining Neogen, Dr.

Rocklin was the Division Vice President, Corporate Law at Corning Incorporated, one of the world’s leading innovators in materials science.

In her nearly ten years at Corning, she held multiple leadership positions within Corning’s Law Department, including Director of Law, M&A and Emerging Innovations.

Rocklin was Division Vice President, Corporate Law at Corning Incorporated.

In her nearly ten years at Corning, she held multiple leadership positions within Corning’s Law Department, including Director of Law, M&A and Emerging Innovations.

Before Corning, Dr.

Rocklin held positions at Smiths Group plc and was in private practice at the law firm of Foley & Lardner LLP.

Rocklin held leadership positions at Smiths Group plc and was in private practice at the law firm of Foley & Lardner LLP.

EXECUTIVE COMPENSATION

The information required by this Item, and pursuant to Regulation 14A of the Exchange Act, is incorporated by reference from the sections entitled “Compensation Discussion and Analysis”, “Compensation Committee Report”, “Executive Compensation”, “Information About the Board and Corporate Governance Matters-Compensation Committee Interlocks and Insider Participation”, “CEO Pay Ratio”, and “Compensation of Directors” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2022.

in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2023.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS

The information required by this Item, and pursuant to Regulation 14A of the Exchange Act, is incorporated by reference from the section entitled “Security Ownership of Certain Beneficial Owners, Directors and Management” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2022.

in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2023.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item, and pursuant to Regulation 14A of the Exchange Act, is incorporated by reference from the section entitled “Information about the Board and Corporate Governance Matters-Independent Directors,” “-Board Committees” and “-Certain Relationships and Related Party Transactions” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2022.

“Board Committees”

and “Certain Relationships and Related Party Transactions”

in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2023.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item, and pursuant to Regulation 14A of the Exchange Act, is incorporated by reference from the section entitled “Proposal 3 —

Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2022.

The information required by this Item, and pursuant to Regulation 14A of the Exchange Act, is incorporated by reference from the section entitled “Proposal 3 —

Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm”

in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2023.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

3 unchanged sentences

The Exhibits, listed on the accompanying Exhibit Index on page 40, are incorporated herein by reference.

SUMMARY — NONE

FORM 10-K SUMMARY —

Neogen Corporation

2 unchanged sentences

EXHIBIT INDEX

Agreement and Plan of Merger, dated as of December 13, 2021, by and among 3M Company, Garden SpinCo Corporation, Neogen Corporation and Nova RMT Sub, Inc.

Agreement and Plan of Merger, dated as of December 13, 2021, by and among 3M Company, Neogen Food Safety Corporation, Neogen Corporation and Nova RMT Sub, Inc.

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Neogen Corporation on December 15, 2021).

Separation and Distribution Agreement, dated as of December 13, 2021, by and among 3M Company, Garden SpinCo Corporation and Neogen Corporation (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by Neogen Corporation on December 15, 2021).

Asset Purchase Agreement, by and between 3M Company and Neogen Corporation, dated as of December 13, 2021 (incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K filed by Neogen Corporation on December 15, 2021).

Restated Articles of Incorporation, as amended on November 23, 2011 (incorporated by reference to Exhibit 3.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed December 30, 2011).

Certificate of Amendment to Articles of Incorporation filed on October 11, 2010 (incorporated by reference to Exhibit 3.2 filed with the Registrant’s Annual Report on Form 10-K filed on July 30, 2020) .

Certificate of Amendment to Articles of Incorporation filed on November 20, 2018 (incorporated by reference to Exhibit 3 filed with the Registrant’s Quarterly Report on Form 10-Q filed December 28, 2018).

By-Laws, as amended (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed April 14, 2000).

Separation and Distribution Agreement, dated as of December 13, 2021, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by Neogen Corporation on December 15, 2021).

Amendment No.

1 to the Separation and Distribution Agreement, dated as of August 31, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Asset Purchase Agreement, dated as of December 13, 2021, by and between 3M Company and Neogen Corporation (incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K filed by Neogen Corporation on December 15, 2021).

Restated Articles of Incorporation, as amended on November 23, 2011 (incorporated by reference to Exhibit 3.1 filed with the Registrant’s Quarterly Report on Form 10-Q filed December 30, 2011).

Certificate of Amendment to Articles of Incorporation of Neogen Corporation filed on March 14, 2022 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by Neogen Corporation on March 17, 2022).

Neogen Corporation 2015 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Registrant’s 2015 Proxy Statement dated and filed August 25, 2015).

Neogen Corporation 2018 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Registrant’s 2018 Proxy Statement dated and filed August 28, 2018).

Amended and Restated Credit Agreement dated as of November 30, 2016 between Registrant and JPMorgan Chase N.A.

(incorporated by reference to Exhibit 10.A to the Registrant’s Form 8-K filed on December 6, 2016).

First Amendment to Amended and Restated Credit Agreement dated as of November 30, 2018 between Registrant and JPMorgan Chase N.A.

(incorporated by reference to Exhibit 10.A to the Registrant’s Form 8-K filed on December 6, 2018).

Second Amendment to Amended and Restated Credit Agreement dated as of November 30, 2020 between Registrant and JPMorgan Chase N.A.

(incorporated by reference to Exhibit 10.A to the Registrant’s Form 8-K filed on December 17, 2020).

Employee Matters Agreement, dated as of December 13, 2021, by and among Neogen Corporation, Garden SpinCo Corporation and 3M Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Neogen Corporation on December 15, 2021).

Certificate of Amendment to Articles of Incorporation of Neogen Corporation filed on September 1, 2022 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

By-Laws, as amended (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed April 14, 2000).

Amendment to the By-Laws, as amended (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Senior Notes Indenture for 8.625% Senior Notes due 2030, dated as of July 20, 2022, among Neogen Food Safety Corporation, as issuer, the guarantors party thereto from time to time, and U.S.

Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 10.10 to Neogen’s Registration Statement on Form S-4 (Registration No.

333-263667), filed with the SEC on July 27, 2022).

Supplemental Indenture, dated as of September 1, 2022, among Neogen Food Safety Corporation (f/k/a Neogen Food Safety Corporation), as issuer, U.S.

Bank Trust Company, National Association, as trustee, Neogen Corporation and certain of its subsidiaries (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Tax Matters Agreement, dated as of September 1, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Intellectual Property Cross-License Agreement, dated as of September 1, 2022, by and between 3M Company and Neogen Food Safety Corporation (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Trademark Transitional License Agreement, dated as of September 1, 2022, by and among 3M Company, 3M Innovative Properties Company, Neogen Corporation and Neogen Food Safety Corporation (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Transition Services Agreement, dated as of September 1, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Transition Distribution Services Agreement, dated as of September 1, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Transition Contract Manufacturing Agreement, dated as of September 1, 2022, by and among 3M Company, Neogen Food Safety Corporation and Neogen Corporation (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Clean-Trace(TM) Distribution Agreement, dated as of September 1, 2022, by and between 3M Company and Neogen Food Safety Corporation (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Real Estate License Agreement, dated as of September 1, 2022, by and among certain subsidiaries of Neogen Corporation, 3M Company and certain of its subsidiaries (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed by Neogen Corporation on September 1, 2022).

Credit Agreement, dated as of June 30, 2022, among Neogen Food Safety Corporation, as borrower, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, and joined thereto as of September 1, 2022 by Neogen Corporation, as a borrower (incorporated by reference to Exhibit 10.9 to Neogen’s Registration Statement on Form S-4 (Registration No.

333-263667), filed with the SEC on July 27, 2022).

Listing of Subsidiaries

Consent of Independent Registered Public Accounting Firm BDO USA, LLP

Consent of Independent Registered Public Accounting Firm BDO USA, P.A.

Power of Attorney

11 unchanged sentences

NEOGEN CORPORATION

/s/ Steven J.

Adent, President & Chief

Quinlan, Vice President &

Executive Officer

2 unchanged sentences

(Principal Financial & Accounting Officer)

July 27, 2022

August 15, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

1 unchanged sentence

(Principal Executive Officer)

July 27, 2022

Vice President & Chief Financial Officer

/s/ Steven J.

August 15, 2023

Chief Financial Officer

(Principal Financial & Accounting Officer)

July 27, 2022

August 15, 2023

Chairman of the Board of Directors

July 27, 2022

August 15, 2023

Aashima Gupta

August 15, 2023

Woteki, Ph.D.

Adent, Attorney-in-fact

July 27, 2022

August 15, 2023

ANNUAL REPORT ON FORM 10-K

4 unchanged sentences

LANSING, MICHIGAN

FORM 10-K—ITEM

15(a)(1) AND (2) AND 15(c)

FORM 10-K—ITEM 15(a)(1) AND (2) AND 15(c)

LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statements of Neogen Corporation and subsidiaries are included below and incorporated in ITEM 8:

Report of Independent Registered Public Accounting Firm , BDO USA, LLP , Grand Rapids, MI PCAOB ID# 243

Consolidated Balance Sheets—May 31, 2022 and 2021

Consolidated Statements of Income—Years ended May 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income—Years ended May 31, 2022, 2021 and 2020

Consolidated Statements of Stockholders’ Equity— Years ended May 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows— Years ended May 31, 2022, 2021 and 2020

Report of Independent Registered Public Accounting Firm, BDO USA, P.A.

, Grand Rapids, MI PCAOB ID# 243

Consolidated Balance Sheets

Consolidated Statements of Income (Loss)

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Schedules for which provision is made in the applicable accounting regulation of the United States Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

Report of Independent Registered Public Accounting Firm

Report of Indepen dent Registered Public Accounting Firm

Shareholders and Board of Directors

2 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Neogen Corporation (the “Company”) as of May 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended May 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Neogen Corporation (the “Company”) as of May 31, 2023 and 2022, the related consolidated statements of income (loss), comprehensive income, stockholders’

equity, and cash flows for each of the three years in the period ended May 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of May 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated July 2 7

, 2022 expressed an unqualified opinion thereon.

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated August 15, 2023 expressed an adverse opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

10 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Contingent Consideration

As described in Note 3 to the Company’s consolidated financial statements, the Company has recorded a contingent consideration liability of approximately $6.5 million related to the acquisition of CAPInnoVet, Inc.

A contingent consideration liability is recorded based on its estimated fair value as of the date of the acquisition and remeasured as of each balance sheet date.

We have identified the valuation of the contingent consideration liability as of the acquisition date as a critical audit matter.

The contingent consideration liability is measured using a Monte-Carlo simulation utilizing significant unobservable inputs that considers the probability of achieving each of the potential milestones, including revenue volatility and an estimated discount rate associated with the risks of the expected cash flows.

Due to the inherent uncertainty involved in estimating long-range revenue forecasts and the complexity of the Monte-Carlo simulation utilized by management, auditing the contingent consideration liability required increased auditor effort including the use of personnel with specialized knowledge and skills in valuation.

Valuation of the customer relationships intangible asset –

3M Food Safety Division transaction

As described in Note 3 to the consolidated financial statements, on September 1, 2022, the Company completed a transaction combining 3M’s Food Safety Division with Neogen in a Reverse Morris Trust transaction for consideration of approximately $3.2 billion, which resulted in recording of a customer relationships intangible asset valued at $1.17 billion.

Management determined the fair value of the acquired customer relationships intangible asset by applying the multi-period excess earnings method, which involved the use of significant estimates and assumptions related to forecasted revenue growth rate and customer attrition rate.

We identified the valuation of the customer relationship intangible asset from the 3M Food Safety Division transaction as a critical audit matter.

The principal considerations for this determination are the significant judgments and assumptions made by management when determining the fair value of the customer relationships intangible asset, specifically the forecasted revenue growth rate and customer attrition rate.

Auditing these elements involved especially subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skills or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of certain controls over the development of the significant assumptions used in the valuation model selected, including controls over assumptions related to:

(i) long-range revenue forecasts and (ii) discount rates applied to the forecasts.

Assessing management’s estimated timing of milestone achievement and probabilities of success by corroborating with personnel knowledgeable of the current progression of the product candidates and reviewed filings with the applicable regulatory agencies.

Assessing management’s ability to forecast long-range revenue by

analyzing historical accuracy of management’s forecasts related to business combinations and comparing to industry data to validate the reasonableness of the growth assumption.

Utilizing professionals with specialized knowledge and skills in valuation to assist in evaluating the valuation methodology selected by management as well as assessing the reasonableness of key inputs including the discount rate and revenue volatility.

/s/ BDO USA, LLP

We have served as the Company’s auditor since 2014.

Utilizing personnel with specialized knowledge and skills in valuation to assist in (i) evaluating management’s process for estimating the fair value of the customer relationship intangible asset, and (ii) evaluating the methodology used and the reasonableness of the attrition rate.

Evaluating the reliability of the underlying data provided by management.

Evaluating the reasonableness of the significant assumptions related to the forecasted revenue growth rate by (i) analyzing the current and past performance of the former 3M Food Safety Division, (ii) evaluating the consistency with external market and industry data, and (iii) comparing the consistency with evidence obtained in other areas of the audit.

/s/ BDO USA, P.A.

We have served as the Company’s auditor since 2014.

Grand Rapids, Michigan

Neogen Corporation and Subsidiaries

Consolidated Balance Sheets – Assets

August 15, 2023

Neogen Corporation

Consolidated Bala nce Sheets –

(in thousands)

2 unchanged sentences

Marketable securities

Accounts receivable, net of allowance of $ 1,650

and $ 1,400 at May 31, 2022 and 2021, respectively

Accounts receivable, net

Prepaid expenses and other current assets

9 unchanged sentences

Right of use assets

Other non-amortizable

intangible assets

Amortizable intangible assets, net of accumulated amortization of $ 55,416

and $ 53,462 at May 31, 2022 and 2021, respectively

Other non-current

Other non-amortizable intangible assets

Amortizable intangible assets, net

Other non-current assets

Total Other Assets

See accompanying notes to consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Balance Sheets – Liabilities and Stockholders’ Equity

Neogen Corporation

Consolidated Balance Sheets –

Liabilities and Stockholders’

(in thousands, except shares and per share)

Liabilities and Stockholders’ Equity

Liabilities and Stockholders’

Current Liabilities

2 unchanged sentences

Income tax payable

Accrued interest

Deferred revenue

2 unchanged sentences

Deferred Income Tax Liability

Other Non-Current

Non-Current Debt

Other Non-Current Liabilities

Total Liabilities

Commitments and Contingencies (note 7)

Stockholders’ Equity

Preferred stock, $ 1.00 par value — shares authorized 100,000 ;

none issued and outstanding

Common stock, $ 0.16 par value — shares authorized 120,000,000 ;

107,801,094 a

nd 107,468,304 shares issued and outstanding at May 31, 2022 and 2021, respectively

Additional paid-in

Stockholders’

Preferred stock, $ 1.00 par value —

shares authorized 100,000 ;

and outstanding

Common stock, $ 0.16 par value —

shares authorized 315,000,000 ;

216,245,501 and 107,801,094 shares issued and outstanding at May 31, 2023 and 2022, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

Total Neogen Corporation and Subsidiaries Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Total Stockholders’

Total Liabilities and Stockholders’

See accompanying notes to consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Statements of Income

Neogen Corporation

Consolidated S tatements of Income (Loss)

(in thousands, except per share)

Year Ended May 31

Product revenues

Service revenues

Total Revenues

Product revenues, net

Service revenues, net

Total Revenues, net

Cost of Revenues

8 unchanged sentences

Operating Income

Interest income, net

Royalty income

Total Other Income

Income Before Income Taxes

Other (Expense) Income

Interest income

Interest expense

Total Other (Expense) Income

(Loss) Income Before Taxes

Provision for Income Taxes

Net Income per Share

Net (Loss) Income

Net (Loss) Income Per Share

Weighted Average Shares Outstanding

See accompanying notes to consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

Neogen Corporation

Consolidated St atements of Comprehensive Income (Loss)

(in thousands)

Year Ended May 31

Other comprehensive income (loss):

Net (Loss) Income

Other comprehensive (loss) income:

Foreign currency translations

Unrealized (loss) gain on marketable securities, net of tax

of $( 728 ), $( 80 ) and $ 127

Comprehensive income

Unrealized gain (loss) on marketable securities, net of tax of $ 389 , $( 728 ), and $( 80 )

Unrealized loss on derivative instruments, net of tax of $( 644 )

Other comprehensive (loss) income, net of tax:

Comprehensive (loss) income

See accompanying notes to consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Statements of Stockholders’ Equity

Neogen Corporation

Consolidated Stat ements of Stockholders’

(in thousands, except shares)

4 unchanged sentences

Issuance of shares under employee stock purchase plan

Issuance of shares for Megazyme acquisition

Net income for 2021

Other comprehensive loss

Other comprehensive income

Balance, May 31, 2021

1 unchanged sentence

Issuance of shares under employee stock purchase plan

Issuance of shares for Megazyme acquisition

Net income for 2022

Other comprehensive income

Other comprehensive loss

Balance, May 31, 2022

1 unchanged sentence

Issuance of shares under employee stock purchase plan

Net income for 2022

Issuance of shares for 3M transaction

Net loss for 2023

Other comprehensive loss

1 unchanged sentence

See accompanying notes to consolidated financial statements.

Neogen Corporation and Subsidiaries

Neogen Corporation

Consolidated Statements of Cash Flows

2 unchanged sentences

Cash Flows From Operating Activities

Adjustments to reconcile net income to net cash from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash from operating activities:

Depreciation and amortization

Impairment of discontinued product lines

Loss on sale of minority interest and investment

Deferred income taxes

Share-based compensation

Gain on disposal of property and equipment

Amortization of debt issuance costs

Changes in operating assets and liabilities, net of business acquisitions:

1 unchanged sentence

Prepaid expenses and other assets

Accounts payable

Accruals and other changes

Accounts payable, accruals and changes

Interest expense accrual

Changes in other non-current assets and non-current liabilities

Net Cash From Operating Activities

Cash Flows for Investing Activities

Purchase of property, equipment and other non-current

intangible assets

Cash Flows From (For) Investing Activities

Purchase of property, equipment and other non-current intangible assets

Proceeds from the maturities of marketable securities

Purchase of marketable securities

Business acquisitions, net of cash acquired

Net Cash for Investing Activities

Cash Flows From Financing Activities

Exercise of stock options and other

Proceeds from the sale of property and equipment

Business acquisitions, net of working capital adjustments and cash acquired

Net Cash From (For) Investing Activities

Cash Flows (For) From Financing Activities

Exercise of stock options and issuance of employee stock purchase plan shares

Debt issuance costs paid

Repayment of debt

Payment of contingent consideration

Net Cash From Financing Activities

Net Cash (For) From Financing Activities

Effects of Foreign Exchange Rate on Cash

Net (Decrease) Increase in Cash and Cash Equivalents

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Year

1 unchanged sentence

Supplementary Cash Flow Information

Cash paid for interest

Income taxes paid, net of refunds

See accompanying notes to consolidated financial statements.

Neogen Corporation and Subsidiaries

Notes to Consolidated Financial Statements

NEOGEN CORPORATION

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share and share amounts)

Summary of Significant Accounting Policies

Nature of Operations

Neogen Corporation develops, manufactures and markets a diverse line of products and services dedicated to food and animal safety.

Description of Business

Neogen Corporation and subsidiaries ("Neogen," "we," "our," or the "Company") develop, manufacture and market a diverse line of products and services dedicated to food and animal safety.

Our Food Safety segment consists primarily of diagnostic test kits and complementary products (e.g., culture media) sold to food producers and processors to detect dangerous and/or unintended substances in human food and animal feed, such as foodborne pathogens, spoilage organisms, natural toxins, food allergens, genetic modifications, ruminant by-products, meat speciation, drug residues, pesticide residues and general sanitation concerns.

The majority of the diagnostic test kits are disposable, single-use, immunoassay and DNA detection products that rely on proprietary antibodies and RNA and DNA testing methodologies to produce rapid and accurate test results.

Our expanding line of food safety products also includes genomics-based diagnostic technology, and advanced software systems that help testers to objectively analyze and store their results and perform analysis on the results from multiple locations over extended periods.

Neogen’s Animal Safety segment is engaged in the development, manufacture, marketing and distribution of veterinary instruments, pharmaceuticals, vaccines, topicals, parasiticides, diagnostic products, rodent control products, cleaners, disinfectants, insect control products and genomics testing services for the worldwide animal safety market.

The majority of these consumable products are marketed through veterinarians, retailers, livestock producers and animal health product distributors.

Our line of drug detection products is sold worldwide for the detection of abused and therapeutic drugs in animals and animal products, and has expanded into the workplace and human forensic markets.

Basis of Consolidation

5 unchanged sentences

We translate our non-U.S.

operations’ assets and liabilities denominated in foreign currencies into U.S.

operations’

assets and liabilities denominated in foreign currencies into U.S.

dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period.

2 unchanged sentences

Recently Adopted Accounting Standards

Income Tax Simplification

On June 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740).

This guidance provides amendments to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

Acquired contract assets and liabilities in a business combination

On June 1, 2023, the Company adopted ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amended ASC 805 to require an acquirer to, at the date of acquisition, recognize and measure contract assets and contract liabilities acquired in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) as if the entity had originated the contracts.

Adoption of this standard did not have a material impact on its consolidated financial statements and related disclosures.

Reference Rate Reform

In March 2020, FASB issued Update 2020-04,

Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This update provides temporary optional expedients to applying the reference rate reform guidance to contracts that reference LIBOR or another reference rate expected to be discontinued.

Under this update, contract modifications resulting in a new reference rate may be accounted for as a continuation of the existing contract.

This guidance is effective upon issuance of the update and applies to contract modifications made through December 31, 2022.

We will adopt this standard when our new credit agreement goes into effect on the date of the 3M Food Safety business merger, currently expected to close in the third quarter of calendar year 2022.

We are evaluating the impact the new standard will have on our consolidated financial statements and related disclosures, but do not anticipate a material impact.

Comprehensive Income

Comprehensive income represents net income and any revenues, expenses, gains and losses that, under U.S.

generally accepted accounting principles, are excluded from net income and recognized directly as a component of stockholders’ equity.

Accumulated other comprehensive income (loss) consists of foreign currency translation adjustments and unrealized gains and losses on our marketable securities.

Changes in our Accumulated Other Comprehensive Income (Loss) (“AOCI”) balances, net of tax, were as follows:

(in thousands)

Foreign Currency

Translation Adjustments

Unrealized Gain (Loss) on

Marketable Securities

Balance, May 31, 2020

Other comprehensive income (loss)

Balance, May 31, 2021

Other comprehensive loss

Balance, May 31, 2022

Fair Value of Financial Instruments

Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs.

The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:

Observable inputs such as quoted prices in active markets;

Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of the Company’s financial instruments other than cash equivalents and marketable securities, which include accounts receivable and accounts payable, approximate fair value based on either their short maturity or current terms for similar instruments.

On September 1, 2022, the Company adopted Accounting Standards Codification Topic 848, Reference Rate Reform (Topic 848), which provided temporary optional expedients to applying the reference rate reform guidance to contracts that reference LIBOR or another reference rate expected to be discontinued.

Under Topic 848, contract modifications resulting from the transition to a new reference rate may be accounted for as a continuation of the existing contract.

The Company now uses the Secured Overnight Financing Rate (SOFR).

Adoption of this standard did not have a material impact on its consolidated financial statements and related disclosures.

Accounting Policies

Cash and Cash Equivalents

5 unchanged sentences

Marketable Securities

The Company has marketable securities held by banks or broker-dealers at May 31, 2022, consisting of commercial paper and corporate bonds rated at least A-1/P-1 (short-term) and A/A2 (long-term) with original maturities between 91 days and two years

Changes in market value are monitored and recorded on a monthly basis;

in the event of a downgrade in credit quality subsequent to purchase, the marketable security investment is evaluated to determine the appropriate action to take to minimize the overall risk to our marketable security portfolio.

As these securities are highly rated and short-term in nature, they have very little credit risk;

therefore, the Company does not believe a reserve for expected credit losses on marketable securities is material.

The Company has marketable securities held by banks or broker-dealers consisting of commercial paper and corporate bonds rated at least A-1/P-1 (short-term) and A/A2 (long-term) with original maturities between 91 days and two years .

These securities are classified as available for sale.

The primary objective of management’s short-term investment activity is to preserve capital for the purpose of funding operations, capital expenditures and business acquisitions;

Changes in fair value are monitored and recorded on a monthly basis and are recorded in other comprehensive income (loss).

In the event of a downgrade in credit quality subsequent to purchase, the marketable securities investment is evaluated to determine the appropriate action to take to minimize the overall risk to our marketable securities portfolio.

If fair value is less than its amortized cost basis, then the Company evaluates whether the decline is the result of a credit loss, in which case an impairment is recorded through an allowance for credit losses.

Where there is an intention or a requirement to sell an impaired available-for-sale debt security, the entire impairment is recognized in earnings with a corresponding adjustment to the amortized cost basis of the security.

The primary objective of management’s short-term investment activity is to preserve capital for the purpose of funding current operations, capital expenditures and business acquisitions.

Short-term investments are not entered into for trading or speculative purposes.

These securities are recorded at fair value based on recent trades or pricing models and therefore meet the Level 2 criteria.

Interest income on these investments is recorded within other income on our consolidated statements of income.

Adjustments in the fair value of these assets are recorded in other comprehensive income (loss).

Interest income on these investments is recorded within other (expense) income on the consolidated statements of income (loss).

Marketable Securities as of May 31, 2023 and 2022 are listed below by classification and remaining maturities.

Year ended May 31

(in thousands)

Commercial Paper & Corporate Bonds

181 days -1 year

Certificates of Deposit

91 - 180 days

181 days -1 year

Total Marketable Securities

The components of marketable securities as of May 31, 2023 are as follows:

(in thousands)

Commercial Paper & Corporate Bonds

Certificates of Deposit

Total Marketable Securities

The components of marketable securities as of May 31, 2022 are as follows:

(in thousands)

Commercial Paper & Corporate Bonds

Certificates of Deposit

Total Marketable Securities

Derivative Financial Instruments

The Company operates on a global basis and is exposed to the risk that its financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates and changes in interest rates.

To reduce the potential effects of foreign currency exchange rate movements on net earnings, the Company enters into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions and have also entered into interest rate swap contracts as a hedge against changes in interest rates.

The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities.

On the date the derivative is established, the Company designates the derivative as either a fair value hedge, a cash flow hedge or a net investment hedge in accordance with its established policy.

Each reporting period, derivatives are recorded at fair value in other current assets, other assets, accrued liabilities and other long-term liabilities.

The change in fair value is recorded in accumulated other comprehensive income (loss), and amounts are reclassified into earnings on the consolidated statement of income (loss) when transactions are realized.

Derivatives that are not determined to be effective hedges are adjusted to fair value with a corresponding adjustment to earnings.

The Company does not enter into derivative financial instruments for trading or speculative purposes.

Use of Estimates

The preparation of these consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

On an ongoing basis, management evaluates the estimates, including, but not limited to, variable consideration related to revenue recognition, allowances for doubtful accounts, the market value of, and demand for, inventories, stock-based compensation, provision for income taxes and related balance sheet accounts, accruals, goodwill and other intangible assets.

We believe that these estimates have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates.

These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Though the impact of the COVID-19

pandemic to our business and operating results presents additional uncertainty, we continue to use the best information available to inform our critical accounting estimates.

Actual results may differ from these estimates under different assumptions or conditions.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and judgments that affect amounts reflected in the consolidated financial statements.

Considerable judgment is often involved in making such estimates, and the use of different assumptions could result in different conclusions.

Management believes its assumptions and estimates are reasonable and appropriate.

However, actual results could differ from those estimates.

Accounts Receivable and Concentrations of Credit Risk

Financial instruments which potentially subject Neogen to concentrations of credit risk consist principally of accounts receivable.

Management attempts to minimize credit risk by reviewing customers’ credit histories before extending credit and by monitoring credit exposure on a regular basis.

Management attempts to minimize credit risk by reviewing customers’

credit histories before extending credit and by monitoring credit exposure on a regular basis.

Collateral or other security is generally not required for accounts receivable.

We maintain an allowance for customer accounts that reduces receivables to amounts that are expected to be collected.

In estimating the allowance for doubtful accounts, management considers relevant information about past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets.

Once a receivable balance has been determined to be uncollectible, generally after all collection efforts have been exhausted, that amount is charged against the allowance for doubtful accounts.

In estimating the allowance for credit losses, management considers relevant information about past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets.

Once a receivable balance has been determined to be uncollectible, generally after all collection efforts have been exhausted, that

amount is charged against the allowance for credit losses.

No customer accounted for more than 10 % of accounts receivable May 31, 2023 or 2022 , respectively.

The activity in the allowance for doubtful accounts was as follows:

The activity in the allowance for credit losses was as follows:

Year ended May 31

(in thousands)

Beginning Balance

3 unchanged sentences

Year ended May 31

(in thousands)

Raw Materials

1 unchanged sentence

Finished goods

The Company’s inventories are analyzed for slow moving, expired and obsolete items on a quarterly basis and the valuation allowance is adjusted as required within cost of revenues

The Company’s inventories are analyzed for slow moving, expired and obsolete items on a quarterly basis and the valuation allowance is adjusted as required within cost of revenues expense.

The valuation allowance for inventory was $ 6,270 and $ 4,050 at May 31, 2023 and 2022 , respectively.

2 unchanged sentences

Expenditures for major improvements are capitalized while repairs and maintenance are charged to expense as incurred.

Depreciation is provided on the straight-line method over the estimated useful lives of the respective assets, which are generally seven to 39 years for buildings and improvements and three to 10 years for furniture, fixtures, machinery and equipment.

Depreciation is provided on the straight-line method over the estimated useful lives of the respective assets, which are generally seven to 39 years for buildings and improvements, and three to 10 years for furniture, fixtures, computers, leasehold improvements, and machinery and equipment.

Depreciation expense was $ 17,292 , $ 14,094 , and $ 13,288 in fiscal years 2023, 2022, and 2021 , respectively.

1 unchanged sentence

Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets.

Other intangible assets include customer relationships, trademarks, licenses, trade names, covenants not-to-compete

Amortizable intangible assets are amortized on either an accelerated or a straight-line basis, generally over two to 25 years.

The remaining weighted average amortization period for intangibles was eight years and 10 years at May 31, 2022 and 2021, respectively.

Management reviews the carrying amounts of goodwill and other non-amortizable

intangible assets annually, or when indications of

impairment exist, to determine if such

assets may be impaired.

Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in the Company’s market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business.

In evaluating goodwill for impairment, we have the option to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis.

If the qualitative assessment leads to a determination that the reporting unit’s fair value is less than its carrying value, or if we elect to bypass the qualitative assessment altogether, we are required to perform a quantitative impairment test by calculating the fair value of the reporting unit and comparing the fair value with its associated carrying value.

In the fourth quarter of fiscal 2022

, management performed our annual goodwill impairment analysis qualitatively.

In connection with our annual goodwill impairment assessment for 2022, 2021, and 2020, we determined that no impairment adjustments were necessary.

The Company's business is organized into two operating segments:

Food Safety and Animal Safety.

Under the goodwill guidance, management determined that each of its segments represents a reporting unit.

Other intangible assets include customer relationships, trademarks, licenses, trade names, covenants not-to-compete and patents.

Customer relationships intangibles are amortized on either an accelerated or straight-line basis, reflecting the pattern in which the economic benefits are consumed, while all other amortizable intangibles are amortized on a straight-line basis.

Intangibles are amortized over 2 to 25 years.

Management reviews the carrying amounts of goodwill annually at the reporting unit level, or when indications of impairment exist, to determine if goodwill may be impaired.

Goodwill is tested for impairment annually in the fourth quarter.

Management also reviews the carrying amounts of non-amortizable intangible assets annually, or when indications of impairment exist, to determine if such assets may be impaired.

These are tested for impairment annually in the fourth quarter.

During management's annual test or when there are indicators of impairment, if the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis and comparison to comparable

EBITDA multiples of peer companies, such assets are reduced to their estimated fair value and a charge is recorded to operations.

Amortizable intangible assets are tested for impairment when indications of impairment exist.

If the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis, such assets are reduced to their estimated fair value and a charge is recorded to operations.

Long-lived Assets

3 unchanged sentences

No impairments of long-lived assets were identified during the years ended May 31, 2023, 2022 and 2021 , respectively.

Business Combinations

We utilize the purchase method of accounting for business combinations.

This method requires, among other things, that results of operations of acquired companies are included in Neogen’s results of operations beginning on the respective acquisition dates and that assets acquired and liabilities assumed are recognized at fair value as of the acquisition date.

Any excess of the fair value of consideration transferred over the fair values of the net assets acquired is recognized as goodwill.

Contingent consideration liabilities are recognized at the estimated fair value on the acquisition date;

these are recorded in either other accruals within current liabilities (for expected payments in less than a year) or other non-current liabilities (for expected payments in greater than a year), both on our consolidated balance sheets.

Subsequent changes to the fair value of contingent consideration liabilities are recognized in other income (expense) in the consolidated statements of income.

Contingent consideration payments made soon after the acquisition date are classified as investing activities in the consolidated statements of cash flows.

Contingent consideration payments not made soon after the acquisition date that are related to the acquisition date fair value are reported as financing activities in the consolidated statements of cash flows, and amounts paid in excess of the original acquisition date fair value are reported as operating activities in the consolidated statements of cash flows.

The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed

12 months from the acquisition date.

Legal costs, due diligence costs, business valuation costs and all other business acquisition costs are expensed when incurred.

Reclassifications

Certain immaterial amounts in the fiscal 2021 and 2020 consolidated financial statements have been reclassified to conform with the fiscal 2022 presentation.

Equity Compensation Plans

E quity Compensation Plans

At May 31, 2023, the Company had stock option plans which are described more fully in Note 5 to the consolidated financial statements.

We measure stock-based compensation at the grant date, based on the estimated fair value of the award, and recognize the cost (net of estimated forfeitures) as compensation expense on a straight-line basis over the requisite service period.

Our stock-based compensation expense is reflected in general and administrative expense in our consolidated statements of income.

The weighted-average fair value per share of stock options granted during fiscal years 2022, 2021 and 2020, estimated on the date of grant using the Black-Scholes option pricing model, was $ 8.49 , $ 7.71 and $ 7.78 , respectively.

The fair value of stock options granted was estimated using the following weighted-average assumptions:

Year ended May 31

Risk-free interest rate

Expected dividend yield

Expected stock volatility

Expected option life

The risk-free interest rate for periods within the expected life of options granted is based on the United States Treasury yield curve in effect at the time of grant.

Expected stock price volatility is based on historical volatility of the Company’s stock.

The expected option life, representing the period of time that options granted are expected to be outstanding, is based on historical option exercise and employee termination data.

We include recent historical experience in estimating our forfeitures.

As employees terminate, grant tranches expire or as forfeitures are known, estimated expense is adjusted to actual.

For options granted in fiscal years 2022, 2021 and 2020, the Company recorded charges in general and administrative expense based on the fair value of stock options using the straight-line method over the vesting period of three to five years.

The Company also issues restricted stock units (RSUs), which are described more fully in Note 5 to the consolidated financial statements.

The RSUs generally vest over three to five years and have a weighted average value of $ 37.28 in fiscal 2022 and $ 34.21 in fiscal 2021.

We account for income taxes using the asset and liability method.

Under this method, deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and for tax credit carryforwards and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse.

Deferred income tax expense represents the change in net deferred income tax assets and liabilities during the year.

The Company’s policy is to recognize both accrued interest expense and penalties related to unrecognized tax benefits in income tax expense.

Our wholly-owned foreign subsidiaries are comprised of Neogen Europe, Quat-Chem Ltd, Abbott Analytical Limited, Delf (UK) Limited, Delf-Chem Solutions Limited, Megazyme Ltd, Megazyme IP, Neogen Italia S.r.l., Neogen do Brasil, Rogama Industria e Comercio Ltda, Neogen Latinoamérica, Neogen Guatemala, Neogen Argentina, Neogen Uruguay, Neogen Chile SpA, Neogen Bio-Scientific

Technology Co (Shanghai), Neogen Food and Animal Security (India), Neogen Canada and Neogen Australasia Pty Limited.

Based on historical experience, as well as management’s future plans, earnings from these subsidiaries are expected to be re-invested

indefinitely for future expansion and working capital needs.

Furthermore, our domestic operations have historically produced sufficient operating cash flow to mitigate the need to remit foreign earnings.

On an annual basis, we evaluate the current business environment and whether any new events or other external changes might require a re-evaluation

of the decision to indefinitely re-invest

foreign earnings.

It is not practicable to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

Our stock-based compensation expense is reflected in general and administrative expense in our consolidated statements of income (loss).

Research and Development Costs

2 unchanged sentences

Advertising costs are expensed within sales and marketing as incurred and totaled $ 2,548 , $ 2,018 , and $ 1,687 in fiscal years 2023, 2022, and 2021 , respectively.

Net Income per Share

Basic net income per share is based on the weighted average number of common shares outstanding during each year.

Diluted earnings per share is based on the weighted average number of common shares and dilutive potential common shares outstanding.

Net (Loss) Income per Share

Basic net (loss) income per share is based on the weighted average number of common shares outstanding during each year.

Diluted (loss) earnings per share is based on the weighted average number of common shares and dilutive potential common shares outstanding.

Our dilutive potential common shares outstanding during the years result from dilutive stock options and restricted stock units.

The following table presents the net income per share calculations:

The following table presents the net (loss) income per share calculations:

Year ended May 31

(in thousands, except per share)

Numerator for basic and diluted net income per share — Net Income

Denominator for basic net income per share — Weighted average shares

Numerator for basic and diluted net (loss) income per share —

Net (Loss) Income

Denominator for basic net (loss) income per share —

Weighted average shares

Effect of dilutive stock options and restricted stock units

Denominator for diluted net income per share

Net income attributable per share

At May 31, 2022, 383,000 shares from option exercises were excluded from the computation of diluted net income per share, as the option exercise prices exceeded the average market price of the common shares.

Denominator for diluted net (loss) income per share

Net (loss) income attributable per share

Due to the net loss in fiscal 2023, the dilutive stock options and RSUs are anti-dilutive.

At May 31, 2023 and May 31, 2022 , 148,000 and 383,000 shares, respectively, were excluded from the calculation of diluted net (loss) income per share, because the inclusion of such securities in the calculation would have been anti-dilutive.

At May 31, 2021, no potential shares were excluded from the computation.

May 31, 2020, 56,000 potential shares were excluded from the computation.

The Company recognizes in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use

asset representing its right to use the underlying asset for the lease term.

We recognized all leases with terms greater than 12 months in duration on our consolidated balance sheets as

lease liabilities

assets are recorded in other assets on our consolidated balance sheets.

Current and non-current

lease liabilities are recorded in other accruals within current liabilities and other non-current

liabilities, respectively, on our consolidated balance sheets.

The Company recognizes in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.

We recognized all leases with terms greater than 12 months in duration on our consolidated balance sheets as right-of-use assets and lease liabilities .

Right-of-use assets are recorded in other assets on our consolidated balance sheets.

Current and non-current lease liabilities are recorded in other accruals within current liabilities and other non-current liabilities, respectively, on our consolidated balance sheets.

We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating leases.

8 unchanged sentences

For all asset classes, we elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.

The determination of the discount rate used in a lease is our incremental borrowing rate that is based on our estimate of what we would normally pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments.

The determination of the discount rate used in a lease is our incremental borrowing rate that is based on our estimate of what we would normally pay to borrow on a fully collateralized and amortized basis over a similar term an amount equal to the lease payments.

Supplemental balance sheet information related to operating leases was as follows:

Year ended May 31

(in thousands)

Rights of use - assets

5 unchanged sentences

Weighted average discount rate

Operating lease expenses are classified as cost of revenues or operating expenses on the consolidated statements of income.

Operating lease expenses are classified as cost of revenues or operating expenses on the consolidated statements of income (loss).

The components of lease expense were as follows:

Year ended May 31

(in thousands)

Operating leases

2 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities for operating leases included in cash flows from operations on the statement of cash flows was approximately $ 2,139 , $ 1,407 , and $ 1,397 for the years ended May 31, 2023, 2022 and 2021 , respectively.

There were no non-cash additions to right-of-use assets obtained from new operating lease liabilities for the year ended May 31, 2022.

Non-cash additions to right-of-use assets obtained from new operating lease liabilities were $ 11,192 for the year ended May 31, 2023.

Maturities of operating lease liabilities as of May 31, 2023 are as follows:

(in thousands)

Years ending May 31,

10 unchanged sentences

Recognition of revenue when or as the Company satisfies the performance obligations.

Essentially all of Neogen’s revenue is generated through contracts with its customers.

A performance obligation is a promise in a contract to transfer a product or service to a customer.

9 unchanged sentences

The rebate estimates are adjusted at the end of each applicable measurement period based on information currently available.

The performance obligations in Neogen’s contracts are generally satisfied well within one year of contract inception.

In such cases, management has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing component.

1 unchanged sentence

We account for shipping and handling for products as a fulfillment activity when goods are shipped.

Shipping and handling costs that are charged to and reimbursed by the customer are recognized as revenues, while the related expenses incurred by Neogen are recorded in sales and marketing expense;

Shipping and handling costs that are charged to and reimbursed

by the customer are recognized as revenues, while the related expenses incurred by Neogen are recorded in sales and marketing expense.

These expenses totaled $ 18,513 , $ 17,482 , and $ 15,180 in fiscal years 2023, 2022, and 2021, respectively.

2 unchanged sentences

Our terms and conditions of sale generally do not provide for returns of product or reperformance of service except in the case of quality or warranty issues.

These situations are infrequent;

due to immateriality of the amount, warranty claims are recorded in the period incurred.

The Company derives revenue from two primary sources — product revenue and service revenue.

While these situations are infrequent, due to immateriality of the amount, warranty claims are recorded in the period incurred.

The Company derives revenue from two primary sources —

product revenue and service revenue.

Product revenue consists primarily of shipments of:

1 unchanged sentence

Consumable products marketed to veterinarians, retailers, livestock producers and animal health product distributors;

Rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.

Revenue for Neogen’s products are recognized and invoiced when the product is shipped to the customer.

Rodent control products, disinfectants and insect control products to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.

Revenue for Neogen’s products are recognized and invoiced when the product is shipped to the customer.

Service revenue consists primarily of:

1 unchanged sentence

Other commercial laboratory services.

Revenues for Neogen’s genomics and commercial laboratory services are recognized and invoiced when the applicable laboratory service is performed and the results are conveyed to the customer.

Payment terms for products and services are generally 30 to 60 days .

The Company has no

contract assets ;

The Company has no contract assets.

Contract liabilities represent deposits made by customers before the satisfaction of performance obligation(s) and recognition of revenue.

Upon completion of the performance obligation(s) that the Company has with the customer, the liability for the customer deposit is relieved and revenue is recognized.

These customer deposits are listed as Deferred revenue o

n the consolidated balance sheets.

These customer deposits are listed as Deferred revenue on the consolidated balance sheets.

During fiscal year 2023 and 2022 , the Company recorded additions of $ 11,046 and $ 10,229 to deferred revenue, respectively.

During fiscal year 2023 and 2022 , the Company recognized $ 11,890 and $ 8,173 , respectively, of deferred revenue amounts into revenue.

Changes in the balances relate primarily to sales of the Company's genomics services.

On September 1, 2022, Neogen closed on a Reverse Morris Trust transaction to combine with 3M’s Food Safety business.

Similar to Neogen, 3M’s former Food Safety business sells diagnostic test kits, dehydrated culture media, and related products used by food producers and processors to detect foodborne bacteria, allergens and levels of general sanitation.

Revenue for these products are recognized and invoiced when the product is shipped to the customer.

These products are currently manufactured, invoiced and distributed by 3M on behalf of, and as directed by Neogen to its customers under a number of transition service contracts.

The following table presents disaggregated revenue by major product and service categories for the years ended May 31, 2023, 2022 and 2021:

(dollars in thousands)

Natural Toxins, Allergens & Drug Residues

1 unchanged sentence

Culture Media & Other

Rodenticides, Insecticides & Disinfectants

Rodent Control, Insect Control & Disinfectants

Genomics Services

3 unchanged sentences

Animal Care & Other

Rodenticides, Insecticides & Disinfectants

Rodent Control, Insect Control & Disinfectants

Genomics Services

Total Revenue

to the consolidated financial statements for disaggregated revenues by geographical location.

Goodwill and Other Intangible Assets

Management completed the annual impairment analysis of goodwill and intangible assets with indefinite lives using a

assessment as of the first day of the fourth quarter of fiscal years 2022, 2021 and 2020, respectively, and determined that recorded amounts were not impaired and that no write-down was necessary.

Management completed the annual impairment analysis of goodwill using a third-party quantitative assessment as of the first day of the fourth quarter of fiscal year 2023.

The fair value of each reporting unit was determined and compared to the carrying value.

The inputs to the fair value are defined in the fair value hierarchy as Level 3 inputs.

If the carrying value had exceeded the fair value, an impairment charge would have been recorded based on that difference.

The annual impairment analysis resulted in no impairment for 2023.

Management completed the annual impairment analysis of goodwill using a qualitative approach during fiscal year 2022, which resulted in no impairment charges.

The following table summarizes goodwill by reportable segment:

(in thousands)

Animal Safety

Balance, May 31, 2021

Goodwill acquired

Goodwill and/or currency adjustments (1)

Foreign currency translation and other

Balance, May 31, 2022

Goodwill acquired

Goodwill and/or currency adjustments (1)

Acquisitions (1)

Foreign currency translation and other

Balance, May 31, 2023

Includes final purchase price allocation adjustments and currency adjustments for goodwill recorded at international locations.

At May 31, 2022, non-amortizable intangible assets included licenses of $ 569,000 , trademarks of $ 13,604,000 and other intangibles of $ 1,224,000 .

At May 31, 2021, non-amortizable intangible assets included licenses of $ 569,000 , trademarks of $ 13,752,000 and other intangibles of $ 1,224,000 .

Amortizable intangible assets consisted of the following and are included in customer-based intangibles and other non-current assets within the consolidated balance sheets:

(in thousands)

(1) Animal Safety acquisitions represents portion of FSD transaction recorded at Neogen Australasia .

Other Intangible Assets

As of May 31, 2023 , non-amortizable intangible assets included licenses of $ 569 , trademarks of $ 12,522 and other intangibles of $ 1,224 .

During fiscal year 2023, the Company recorded an impairment of $ 1,000 to its non-amortizable trademarks related to discontinued product lines.

As of May 31, 2022 , non-amortizable intangible assets included licenses of $ 569 , trademarks of $ 13,604 and other intangibles of $ 1,224 .

Management completed the annual impairment analysis of intangible assets with indefinite lives using a qualitative assessment for fiscal year 2023 and a quantitative assessment for fiscal year 2022.

Other than the impairment in fiscal year 2023 related to the discrete trademarks discussed above, management determined that recorded amounts were not impaired and that no impairment charges were necessary.

Amortizable intangible assets consisted of the following and are included in amortizable intangible assets within the consolidated balance sheets:

Covenants not to compete

Customer-based intangibles

Customer relationships intangibles

Trade names and trademarks

Developed technology

Other product and service-related intangibles

1 unchanged sentence

Covenants not to compete

Customer-based intangibles

Customer relationships intangibles

Trade names and trademarks

Developed technology

Other product and service-related intangibles

Balance, May 31, 2022

During fiscal year 2023, the Company recorded an impairment of $ 2,109 to its amortizable licenses related to discontinued product lines.

Amortization expense for intangibles totaled $ 71,085 , $ 9,600 , and $ 7,753 in fiscal years 2023, 2022, and 2021 , respectively.

The estimated amortization expense for each of the five succeeding fiscal years is as follows:

$ 9,634,000 in 2023, $ 9,189,000 in 2024, $ 8,686,000 in 2025, $ 8,585,000 in 2026 and $ 8,097,000 in 2027

and $ 47,915,000 thereafter.

The amortizable intangible assets useful lives are 2 to 20 years for licenses, 3 to 10 years for covenants not to compete, 5 to 25 years for patents, 9 to 20 years for customer-based intangibles and 5 to 20 years for other product and service-related intangibles, which primarily consist of product formulations.

All definite-lived intangibles are amortized on a straight-line basis with the exception of definite-lived customer-based intangibles and product and service-related intangibles, which are amortized on either a straight-line or an accelerated basis

$ 93,200 in 2024, $ 92,900 in 2025, $ 92,300 in 2026, $ 91,700 in 2027, $ 90,900 in 2028 and $ 1,129,987 thereafter.

The amortizable intangible assets' useful lives are 2 to 20 years for licenses, 3 to 10 years for covenants not to compete, 5 to 25 years for patents, 9 to 20 years for customer relationships, 10 to 25 years for trade names and trademarks, 10 to 20 years for developed technology and 5 to 15 years for other product and service-related intangibles.

All definite-lived intangibles are amortized on a straight-line basis with the exception of definite-lived customer relationships intangibles and product and service-related intangibles, which are amortized on either a straight-line or an accelerated basis.

The weighted average remaining amortization period for intangibles was 18 years as of May 31, 2023 and eight years as of May 31, 2022.

Business Combinations

The Consolidated Statements of Income reflect the results of operations for business acquisitions since the respective dates of purchase.

The Consolidated Statements of Income (Loss) reflect the results of operations for business acquisitions since the respective dates of purchase.

All are accounted for using the acquisition method.

Goodwill recognized in the acquisitions described below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings.

On January 1, 2020, the Company acquired all of the stock of Productos Quimicos Magiar, a distributor of Neogen’s Food Safety products for the past 20 years, located in Argentina.

This acquisition gives Neogen a direct sales presence in Argentina.

Consideration for the purchase was $ 3,776,000 in net cash, with $ 3,237,000 paid at closing and $ 540,000 payable to the former owner on January 1, 2022 , and up to $ 979,000 of contingent consideration, payable in one year, based upon an excess net sales formula.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 603,000 , inventory of $ 446,000 , machinery and equipment of $ 36,000 , other current assets of $ 221,000 , accounts payable of $ 383,000 , other current liabilities of $ 312,000 , contingent consideration accrual of $ 640,000 ,

non-current deferred tax liabilities of $ 441,000 , intangible assets of $ 1,471,000 (with an estimated life of 5 - 10 years) and the remainder to goodwill

(non-deductible for tax purposes).

These values are Level 3 fair value measurements.

In February 2021, the former owner was paid $530,000 of

contingent consideration based on the achievement of sales targets;

the remaining $110,000 accrued but not earned was recorded as a gain in Other Income in the third quarter of fiscal 2021.

In January 2022 ,

the former owner was paid the remaining $ 540,000 of the purchase price.

This operation continues to operate in Buenos Aires, Argentina, reporting within the Food Safety segment.

It is managed through Neogen’s Latin America operation.

On January 1, 2020, the Company acquired all of the stock of Productos Quimicos Magiar, a distributor of Neogen’s Food Safety products for the past 20 years, located in Uruguay.

This acquisition gives Neogen a direct sales presence in Uruguay.

Consideration for the purchase was $ 1,488,000 in net cash, with $ 1,278,000 paid at closing and $ 210,000 payable to the former owner on January 1, 2022 , and up to $ 241,000 in contingent consideration, payable in one year, based upon an excess net sales formula.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 280,000 , inventory of $ 174,000 , machinery and equipment of $ 16,000 , other current assets of $ 68,000 , accounts payable of $ 204,000 , other current liabilities of $ 11,000 , contingent consideration accrual of $ 159,000 , non-current deferred tax liabilities of $ 99,000 , intangible assets of $ 398,000 (with an estimated life of 5 - 10 years) and the remainder to goodwill (non-deductible for tax purposes).

These values are Level 3 fair value measurements.

In February 2021, the former owner was paid $158,000 of contingent consideration based on the achievement of sales targets;

the remaining $1,000 accrued but not earned was recorded as a gain in Other Income in the third quarter of fiscal 2021.

In January 2022,

the former owner was paid $ 184,000 , after deducting $ 26,000 from the final payment for uncollectable accounts receivable balances.

This operation continues to operate in Montevideo, Uruguay, reporting within the Food Safety segment.

It is managed through Neogen’s Latin America operation.

On January 9, 2020, the Company acquired all of the stock of Diessechem Srl, a distributor of food and feed diagnostics for the past 27 years, located in Italy.

This acquisition gives Neogen a direct sales presence in Italy.

Consideration for the purchase was $ 3,455,000 in net cash.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 780,000 , inventory of $ 5,000 , other current assets of $ 160,000 , accounts payable of $ 140,000 , other current liabilities of $ 305,000 , non-current deferred tax liabilities of $ 294,000 , intangible assets of $ 1,225,000 (with an estimated life of 5 - 10 years) and the remainder to goodwill (non-deductible for tax purposes).

These values are Level 3 fair value measurements.

This operation continues to operate in Milan, Italy, reporting within the Food Safety segment.

It is managed through Neogen’s Scotland operation.

On January 31, 2020, the Company acquired all of the stock of Abtek Biologicals Limited, a manufacturer and supplier of culture media supplements and microbiology technologies.

This acquisition enhances the Company’s culture media product line offering for the worldwide industrial microbiology markets.

Consideration for the purchase was $ 1,401,000 in net cash, with $ 1,282,000 paid at closing and $ 119,000 payable to the former owner on January 31, 2021.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 135,000 , inventory of $ 207,000 , machinery and equipment of $ 105,000 , prepayments of $ 6,000 , accounts payable of $ 118,000 , other current liabilities of $ 34,000 , non-current deferred tax liabilities of $ 92,000 , intangible assets of $ 484,000 (with an estimated life of 5 - 10 years) and the remainder to goodwill (non-deductible for tax purposes).

These values are Level 3 fair value measurements.

The final $ 119,000 owed was paid to the former owner in January 2021.

This manufacturing operation continues to operate in Liverpool, England, reporting within the Food Safety segment.

It is managed through Neogen’s Scotland operation.

On February 28, 2020, the Company acquired the assets of Cell BioSciences, an Australian distributor of food safety and industrial microbiology products.

This acquisition gives Neogen a direct sales presence across Australasia for its entire product portfolio.

Consideration for the purchase was $ 3,768,000 in cash, with $ 3,596,000 paid at closing and $ 172,000 payable in one year.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $ 420,000 , unearned revenue liability of $ 13,000 , intangible assets of $ 1,338,000 (with an estimated life of 3 to 10 years) and the remainder to goodwill (non-deductible for tax purposes).

These values are Level 3 fair value measurements.

The final $ 172,000 owed was paid to the former owner in March 2021.

The business operates in Gatton, Australia, reporting within the Australian operations in the Animal Safety segment.

On March 26, 2020, the Company acquired the assets of Chile-based Magiar Chilena, a distributor of food, animal and plant diagnostics, including Neogen products.

This acquisition gives Neogen a direct sales presence in Chile.

Consideration for the purchase was $ 400,000 in cash, with $ 350,000 paid at closing and $ 50,000 payable to the former owner on March 26, 2021.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $ 164,000 , machinery and equipment of $ 53,000 , and intangible assets of $ 183,000 (with an estimated life of 5 - 10 years).

In April 2021, the former owner was paid $ 33,000 , after deducting $ 17,000 from the final payment for inventory adjustments.

The business continues to operate in Santiago, Chile, reporting within the Food Safety segment.

It is managed through Neogen’s Latin America operation.

On July 31, 2020, the Company acquired the U.S.

(including territories) rights to Elanco’s StandGuard Pour-on for horn fly and lice control in beef cattle, and related assets.

This product line fits in well with Neogen’s existing agricultural insecticide portfolio and organizational capabilities.

Goodwill recognized in the acquisitions described below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings.

In July 2020, the Company acquired the U.S.

(including territories) rights to Elanco’s StandGuard Pour-on for horn fly and lice control in beef cattle, and related assets.

Consideration for the purchase was $ 2,351 in cash, all paid at closing.

The final purchase price allocation, based upon the fair value of these assets determined using the income approach, included inventory of $ 51,000 and intangible assets of $ 2,300,000 (with an estimated life of 15 years).

This product line is currently being toll manufactured for the Company but is eventually expected to be manufactured at Neogen’s operation in Iowa;

the sales are reported within the Animal Safety segment.

On December 30, 2020, the Company acquired all of the stock of Megazyme, Ltd, an Ireland-based company, and its wholly-owned subsidiaries, U.S.-based Megazyme, Inc.

The final purchase price allocation, based upon the fair value of these assets determined using the income approach, included inventory of $ 51 and intangible assets of $ 2,300 .

Sales are reported within the Animal Safety segment.

In December 2020, the Company acquired all of the stock of Megazyme, Ltd, an Ireland-based company, and its wholly-owned subsidiaries, U.S.-based Megazyme, Inc.

and Ireland-based Megazyme IP.

Megazyme is a manufacturer and supplier of diagnostic assay kits and enzymes to measure dietary fiber, complex carbohydrates and enzymes in food and beverages as well as animal feeds.

This acquisition will allow Neogen to expand its commercial relationships across food, feed and beverage companies, and provide additional food quality diagnostic products to commercial labs and food science research institutions.

Consideration for the purchase was net cash of $39.8 million paid at closing, $ 8.6 million of cash placed in escrow payable to the former owner in two installments in two and four years, $4.9 million of stock issued at closing, and up to $ 2.5 million of contingent consideration, payable in two installments over the next year, based upon an excess net sales formula.

purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 1,376,000 , inventory of $ 5,595,000 , net property, plant and equipment of $ 12,599,000 , prepayments of $ 69,000 , accounts payable of $ 4,000 , other current liabilities of $ 1,815,000 , contingent consideration accrual of $ 2,458,000 , non-current liabilities of $ 319,000 , non-current deferred tax liabilities of $ 3,306,000 , intangible assets of $ 22,945,000 (with an estimated life of 15 - 20 years) and the remainder to goodwill (non-deductible for tax purposes).

These values are Level 3 fair value measurements.

In February 2021, the former owner was paid $ 1,229,000 for the first installment of contingent consideration, based upon the achievement of sales

In January 2022, the former owner was paid $ 1,120,000 for the second installment of contingent consideration, also based upon the achievement of sales targets, less a deduction of $ 120,000 related to a prior period tax adjustment.

The Irish companies continue to operate in Bray, Ireland, reporting within the Food Safety segment and are managed through Neogen’s Scotland operation.

The Company’s U.S.

business is managed by our Lansing-based Food Safety team.

On September 17, 2021, the Company acquired all of

the stock of CAPInnoVet, Inc., a companion animal health business that provides pet medications to the veterinary market.

This acquisition provides entry into the retail parasiticide market and enhances the Company’s presence in companion animal markets.

Consideration for the purchase was net cash of $ 17.9 million paid at closing, including $ 150,000 of cash placed in escrow payable to the former owners in twelve months.

There is also the potential for performance milestone payments to the former owners of up to $ 6.5 million and the Company could incur up to $ 14.5 million in future royalty payments.

The preliminary purchase allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 308,000 , inventory of $ 531,000 , prepayments of $ 296,000 , accounts payable of $ 120,000 , other current liabilities of $ 84,000 , non-current liabilities of $ 6.5 million (contingent consideration accrual calculated using a Monte Carlo simulation utilizing inputs

such as probability and timing of milestone achievements, revenue forecasts

and volatility, and estimated discount rates relating to estimated future cash flows of the business),

intangible assets of $ 19.2 million (with an estimated life of 15 - 20 years) and the remainder to goodwill (deductible for tax purposes).

These values are Level 3 fair value measurements.

Consideration for the purchase was net cash of $ 39,800 paid at closing, $ 8,600 of cash placed in escrow payable to the former owner in two installments in two and four years, $ 4,900 of stock issued at closing, and up to $ 2,500 of contingent consideration, payable in two installments over the next year, based upon an excess net sales formula.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 1,376 , inventory of $ 5,595 , net property, plant and equipment of $ 12,599 , prepayments of $ 69 , other current liabilities of $ 1,815 , contingent consideration accrual of $ 2,458 , non-current liabilities of $ 319 , non-current deferred tax liabilities of $ 3,306 , intangible assets of $ 22,945 and the remainder to goodwill (non-deductible for tax purposes).

In the year subsequent to the acquisition, payments of $ 2,349 were made to the former owner.

In the second year after the acquisition, the first escrow installment payment was also made.

The Irish companies continue to operate in Bray, Ireland, reporting within the Food Safety segment and are managed through Neogen’s Scotland operation.

The Company’s U.S.

business is now managed by our Lansing-based Food Safety team.

In September 2021, the Company acquired all of the stock of CAPInnoVet, Inc., a companion animal health business that provides pet medications to the veterinary market.

This acquisition provided entry into the retail parasiticide market and enhanced the Company’s presence in companion animal markets.

Consideration for the purchase was net cash of $ 17,900 paid at closing.

There also is the potential for performance milestone payments to the former owners of up to $ 6,500 and the Company could incur up to $ 14,500 in future royalty payments.

The final purchase allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 308 , inventory of $ 531 , prepayments of $ 296 , accounts payable of $ 120 , other current liabilities of $ 84 , non-current liabilities of $ 6,500 , intangible assets of $ 19,200 and the remainder to goodwill (deductible for tax purposes).

Upon revaluation of the contingent liability during the third quarter of fiscal year 2023, the Company recognized a gain of $ 300 on the performance milestone liability, recorded within other income.

The business is operated from our location in Lexington, KY, reporting within the Animal Safety segment.

On November 30, 2021, the Company acquired all of the stock of Delf (U.K.) Ltd., a United Kingdom-based manufacturer and supplier of animal hygiene and industrial cleaning products, and Abbott Analytical Ltd., a related service provider.

This acquisition will expand the Company’s line of dairy hygiene products and will enhance our cleaner and disinfectant product portfolio.

Consideration for the purchase was net cash o

f $ 9.5 million

at closing, including $ 722,000 of cash placed in escrow payable to the former owner in one year.

The preliminary purchase price allocation, based upon

the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 1,059,000 ,

inventory of $ 972,000 ,

net property, plant and equipment of $ 152,000 , prepayments of $ 31,000 , accounts payable of $ 497,000 , other

current liabilities of $ 378,000 , non-current

deferred tax liabilities of $ 780,000 , intangible assets of $ 3.1 million (with an estimated life of 10 - 15

years) and the remainder to goodwill

(non-deductible for tax purposes).

These values are Level 3 fair value measurements.

The companies continue

to operate in Liverpool, England,

reporting within the Food Safety segment and are managed through Neogen’s Scotland operation.

On December 9, 2021, the Company acquired all of

the stock of Genetic Veterinary Sciences, Inc., a companion animal genetic testing business providing genetic information for dogs, cats and birds to animal owners, breeders and veterinarians.

This acquisition will further expand the Company’s presence in the companion animal market.

Consideration for the purchase was $ 11.4 million in net cash.

The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 38,000 , net inventory of $ 292,000 , net property, plant and equipment of $ 399,000 , prepayments of $ 54,000 , accounts payable of $ 325,000 , unearned revenue of $ 1.9 million, other current liabilities of $ 321,000 , intangible assets of $ 5.5 million (with an estimated life of 5 - 15 years) and the remainder to goodwill (deductible for tax purposes).

These values are Level 3 fair value measurements.

The business continues to operate in Spokane, Washington, reporting within the Animal Safety segment.

Subsequent to the end of the fiscal year, on July 1, 2022, Neogen acquired all of the stock of Thai-Neo

Biotech Co., Ltd., a longstanding distributor of Neogen’s food safety products to Thailand and Southeast Asia.

In November 2021, the Company acquired all of the stock of Delf (U.K.) Ltd., a United Kingdom-based manufacturer and supplier of animal hygiene and industrial cleaning products, and Abbott Analytical Ltd., a related service provider.

This acquisition expanded the Company’s line of dairy hygiene products and enhances our cleaner and disinfectant product portfolio.

Consideration for the purchase was net cash of $ 9,500 paid at closing.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 1,059 , inventory of $ 972 , net property, plant and equipment of $ 152 , prepayments of $ 31 , accounts payable of $ 497 , other current liabilities of $ 378 , non-current deferred tax liabilities of $ 780 , intangible assets of $ 3,100 and the remainder to goodwill (non-deductible for tax purposes).

The companies continue to operate from their current location in Liverpool, England, reporting within the Food Safety segment and are managed through Neogen’s Scotland operation.

In December 2021, the Company acquired all of the stock of Genetic Veterinary Sciences, Inc., a companion animal genetic testing business providing genetic information for dogs, cats and birds to animal owners, breeders and veterinarians.

This acquisition further will expand the Company’s presence in the companion animal market.

Consideration for the purchase was $ 11,300 in net cash.

T he final purchase price allocation, based upon the fair value of these assets and liabilities

determined using the income approach, included accounts receivable of $ 38 , net inventory of $ 292 , net property, plant and equipment of $ 399 , prepayments of $ 54 , accounts payable of $ 325 , unearned revenue of $ 1,900 , other current liabilities of $ 321 , intangible assets of $ 5,500 and the remainder to goodwill (deductible for tax purposes).

The business is operated from its current location in Spokane, Washington, reporting within the Animal Safety segment.

Since completion of initial estimates in the second quarter of fiscal year 2022, the Company has recorded insignificant measurement period adjustments, which resulted in a decrease to the base purchase price.

Thai-Neo Biotech Co., Ltd.

On July 1, 2022, the Company acquired all of the stock of Thai-Neo Biotech Co., Ltd., a longstanding distributor of Neogen’s food safety products to Thailand and Southeast Asia.

This acquisition gives Neogen a direct sales presence in Thailand.

Consideration for the purchase was

$ 1,558,000 , with $ 1,324,000 paid at closing and $ 234,000 payable on October 1, 2023 .

Due to the timing of the transaction, the details of the preliminary purchase price allocation are not available.

Consideration for the purchase was $ 1,581 in net cash, with $ 1,310 paid at closing, $ 37 paid on November 29, 2022 as a working capital adjustment and $ 234 payable on October 1, 2023.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included intangible assets of $ 620 (with an estimated life of 10 years).

The business continues to operate in Bangkok, Thailand, reporting within the Food Safety segment.

For the acquisitions listed above, revenues in the aggregate were $ 38.0 million, $ 27.0 million a nd $

million in fiscal years 2022, 2021 and 2020, respectively.

Earnings in the aggregate were

$ 5.4 million, $ 4.2 million and $ 520,000 in fiscal years 2022, 2021 and 2020, respectively.

Corvium Acquisition

On February 10, 2023, the Company acquired certain assets as part of an asset purchase agreement with Corvium, Inc., a partner and supplier within the Company's software analytics platform.

This acquisition, which primarily includes the software technology, advances the Company's food safety data analytics strategy.

The purchase price consideration was $ 24,067 , which included $ 9,004 held in escrow.

Subsequent to May 31, 2023, $ 8,000 of the escrow balance was released to Corvium, Inc.

in July 2023.

This transaction is a business combination and was accounted for using the acquisition method.

There also is the potential for performance milestone payments of up to $ 8,500 based on successful implementation of the software service at customer sites and sale of licenses.

As a result, the Company has recorded contingent liabilities of $ 930 as part of the opening balance sheet within Other non-current liabilities, as shown below.

In the fourth quarter of fiscal 2023, the Company recorded adjustments to intangible assets of $ 3,820 and contingent liability of $ 1,070 , which decreased the balances, based on a third-party advisor's valuation work and fair value estimates.

Goodwill, which is fully deductible for tax purposes, includes value associated with profits earned from data management solutions that can be offered to existing custom ers and the expertise and reputation of the assembled workforce.

These values are Level 3 fair value measurements.

Our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date).

While we believe that these preliminary estimates provide a reasonable basis for estimating the fair value of the assets acquired and liabilities assumed, we will continue to evaluate available information prior to finalization of the amounts.

The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of intangible assets.

Due to the Company's acquisition of Corvium, Inc., it recorded a loss of $ 1,500 during fiscal year 2023 on dissolution of its minority interest in that company.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:

Prepaids and other current assets

Property, plant and equipment

Intangible assets

Deferred revenue

Adjustment of annual license prepaid

Other non-current liabilities

Total identifiable assets and liabilities acquired

Total purchase consideration

For each completed acquisition listed above, the revenues and net income were not considered material and were therefore not disclosed.

3M Food Safety transaction

On December 13, 2021, Neogen, 3M, and Garden Spinco, a newly formed subsidiary of 3M created to carve out 3M’s Food Safety business, entered into a number of agreements , including the merger agreement,

pursuant to which, among other things, 3M’s Food Safety business will combine with Neogen in a Reverse Morris Trust transaction, intended to be tax-efficient to

3M and its shareholders for U.S.

federal income tax purposes.

Immediately following the transaction, Garden SpinCo stockholders will own, in the aggregate, approximately 50.1 % of the issued and outstanding shares of Neogen common stock and pre-Merger

Neogen shareholders will own, in the aggregate, approximately 49.9 % of the issued and outstanding shares of Neogen common stock.

The transaction implies an enterprise value for 3M’s Food Safety business of approximately $ 3.4 billion based on Neogen’s stock price at July 22, 2022 ,

including $ 1 billion in new debt to be incurred by 3M’s Food Safety business.

3M’s Food Safety business will fund to 3M consideration valued at approximately $ 1 billion, subject to closing and other adjustments.

On June 30, 2022, Garden Spinco entered into a credit agreement consisting of a five-year senior secured term loan facility in the amount of $ 650.0 million and a five-year senior secured revolving facility in the amount of $ 150.0 million (collectively, the “Credit Facilities”), which, subject to customary closing conditions, will be available in connection with the merger and related transactions.

The Credit Facilities, together with the Notes below, when incurred, represent the financing contemplated in connection with the Merger.

In July 2022 Garden SpinCo closed on an offering of $ 350.0 million aggregate principal amount of 8.625 % senior notes due 2030 (the “Notes”) in a private placement at par.

The Notes will initially be issued by Garden

SpinCo to 3M and are expected to be transferred and delivered by 3M to the selling securityholder in the offering, in satisfaction of certain of 3M’s existing debt.

SpinCo will not receive any proceeds from the sale of the Notes by the selling securityholder.

Prior to the distribution of the shares of SpinCo’s common stock to 3M stockholders, the Notes will be guaranteed on a senior unsecured basis by 3M.

Upon consummation of such distribution, 3M will be released from all obligations under its guarantee.

Upon the effectiveness of the Merger, the Notes will be guaranteed on a senior unsecured basis by Neogen and certain wholly-owned domestic subsidiaries of Neogen.

The transaction is expected to close by the end of the third calendar quarter in 2022, subject to approval by Neogen shareholders, receipt of required regulatory approvals and the satisfaction of other customary closing conditions.

On September 1, 2022, Neogen, 3M Company (“3M”), and Neogen Food Safety Corporation (“Neogen Food Safety Corporation”), a subsidiary created to carve out 3M’s Food Safety Division (“3M FSD”, “FSD”), closed on the transaction combining 3M’s FSD with Neogen in a Reverse Morris Trust transaction and Neogen Food Safety Corporation became a wholly owned subsidiary of Neogen (“FSD transaction”).

Immediately following the FSD transaction, pre-merger Neogen Food Safety Corporation stockholders owned, in the aggregate, approximately 50.1 % of the issued and outstanding shares of Neogen common stock and pre-merger Neogen shareholders owned, in the aggregate, approximately 49.9 % of the issued and outstanding shares of Neogen common stock.

This transaction is a business combination and was accounted for using the acquisition method.

The acquired business is a leading provider of food safety testing solutions.

It offers a broad range of food safety testing products that support multiple industries within food and beverage, helping producers to prevent and protect consumers from foodborne illnesses.

The business has a broad global presence with products used in more than 60 countries and a diversified revenue base of more than 100,000 end-user customers.

The combination of Neogen and the 3M FSD creates a leading innovator with an enhanced geographic footprint, innovative product offerings, digitization capabilities, and financial flexibility to capitalize on robust growth trends in sustainability, food safety, and supply chain integrity.

The acquired Food Safety business continues to primarily operate in facilities in Minnesota and the United Kingdom ("U.K."), and is being managed overall in Michigan, reporting within the Food Safety segment.

The purchase price consideration for the 3M FSD was $ 3.2 billion, net of customary purchase price adjustments and transaction costs, which consisted of 108,269,946 shares of Neogen common stock issued on closing with a fair value of $ 2.2 billion and cash consideration of $ 1 billion, funded by the additional financing secured by the Company.

See Note 4 "Long-Term Debt" for further detail on the debt incurred.

During the fiscal year ended May 31, 2023 , the Company recorded adjustments to its preliminary allocation of the purchase consideration to assets acquired and liabilities assumed based on initial fair value estimates and is subject to continuing management analysis, with assistance from third-party valuation advisors.

In the fourth quarter of fiscal 2023, Inventory and Property, plant and equipment amounts were finalized.

The excess of the purchase price over the fair value of the net tangible assets and identifiable intangible assets of $ 1.97 billion was recorded as goodwill, of which $ 1.92 billion is non-deductible for tax purposes.

Goodwill includes value associated with profits earned from market and expansion capabilities, expected synergies from integration and streamlining operational activities, the expertise and reputation of the assembled workforce and other intangible assets that do not qualify for separate recognition.

These values are Level 3 fair value measurements.

The preliminary fair values of net tangible assets and intangible assets acquired were based on preliminary valuations, and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date).

The primary areas of the preliminary purchase price allocation that are not yet finalized relate to deferred income tax liabilities.

The fair values of the assets acquired and liabilities assumed are based on our preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

While we believe that these preliminary estimates provide a reasonable basis for estimating the

fair value of the assets acquired and liabilities assumed, we will continue to evaluate available information prior to finalization of the amounts.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:

Cash and cash equivalents

Other current assets

Property, plant and equipment

Intangible assets

Right of use asset

Lease liability

Deferred tax liabilities

Other liabilities

Total identifiable assets and liabilities acquired

Total purchase consideration

The following table summarizes the intangible assets acquired and the useful life of these assets.

Useful Life in Years

Trade Names and Trademarks

Developed Technology

Customer Relationships

Total intangible assets acquired

The Company determined the fair value of the acquired customer relationships intangible assets by applying the multi-period excess earnings method, which involved the use of significant estimates and assumptions related to forecasted revenue growth rate and customer attrition rate.

Valuation specialists were used to develop and evaluate the appropriateness of the multi-period excess earnings method, the Company's discount rates, attrition rate and fair value estimates using its cash flow projections.

During the twelve months ended May 31, 2023, transaction fees and integration costs of $ 58,175 were expensed.

In the twelve months ended May 31, 2022, acquisition related costs of $ 25,581 were expensed.

These costs are included in general and administrative expenses in the Company’s consolidated statements of income (loss).

The operating results of the FSD have been included in the Company’s consolidated statements of income (loss) since the acquisition date.

In fiscal year 2023, the FSD’s total revenue was $ 279,541 and operating loss was approximately $ 28,200 .

The operating loss includes $ 58,175 of transaction fees and integration expenses, $ 60,872 of amortization expense for acquired intangible assets and a $ 3,245 charge to cost of goods sold related to the step up to fair value on acquired inventory.

The following table presents unaudited pro forma information as if the merger with the 3M FSD business had occurred on June 1, 2021 and had been combined with the results reported in our consolidated statements of income (loss) for all periods presented:

Year Ended May 31

Operating income

The unaudited pro forma information is presented for informational purposes only and is not indicative of the results that would have been achieved if the merger had taken place at such time.

The unaudited pro forma information presented

above includes adjustments primarily for amortization charges for acquired intangible assets and certain acquisition-related expenses for legal and professional fees.

In connection with the acquisition of the 3M FSD, the Company and 3M entered into several transition service agreements, including manufacturing, distribution and certain back-office support, that have been accounted for separately from the acquisition of assets and assumption of liabilities in the business combination.

3M periodically remits amounts charged to customers on our behalf and charges us for the associated cost of goods sold and transition service fees.

Additionally, 3M is reimbursing the Company for a portion of its SAP implementation costs.

As of May 31, 2023 , a receivable from 3M of $ 12,365 was included in prepaid expenses and other current assets in the Company’s consolidated balance sheets.

Long-Term Debt

The Company has a financing agreement with a bank providing for a $ 15,000,000 unsecured revolving line of credit, which was amended in the second quarter to extend the expiration to November 30, 2023 .

There were no advances against the line of credit during fiscal years 2022 and 2021;

there was no balance outstanding at May 31, 2022.

Interest on any borrowings is LIBOR plus 100 basis points (rate under the

terms of the agreement was 2.06 %

May 31, 2022).

See Note 1, Recent Accounting Pronouncements Not Yet Adopted, for information on reference rate reform.

Financial covenants include maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA;

the Company believes it was in compliance with these covenants at May 31, 2022.

The Company’s long-term debt consists of the following:

Total long-term debt

Unamortized debt issuance costs

Total non-current debt, net

The Company had a financing agreement with a bank providing for a $ 15,000 unsecured revolving line of credit, which originally expired on November 30, 2023 , but was replaced by the five-year senior secured revolving facility as part of the Credit Facilities described below.

There were no advances against the line of credit during fiscal 2022 and there were no advances in fiscal 2023 before the line of credit was extinguished.

Interest on any borrowings under that agreement was at LIBOR plus 100 basis points .

Financial covenants included maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA, each of which the Company was in compliance with during the period the line of credit was available.

As of May 31, 2022, the Company had no outstanding debt.

In connection with the acquisition of 3M’s Food Safety business as described more fully in Note 8, Neogen incurred financing through Neogen Food Safety Corporation as follows:

Credit Facilities

On June 30, 2022, Neogen Food Safety Corporation entered into a credit agreement consisting of a five-year senior secured term loan facility (“term loan facility”) in the amount of $ 650,000 and a five-year senior secured revolving facility (“revolving facility”) in the amount of $ 150,000 (collectively, the “Credit Facilities”) to fund the FSD transaction.

The term loan facility was drawn on August 31, 2022, to fund the closing of the FSD transaction on September 1, 2022 while the revolving facility was undrawn and continues to be undrawn as of May 31, 2023.

The Credit Facilities bear interest based on term SOFR plus an applicable margin which ranges between 150 to 225 basis points, determined for each interest period and paid monthly.

During the twelve months ended May 31, 2023 , the interest rates ranged from 4.81 % to 7.33 % per annum.

The term loan facility matures on June 30, 2027 and the revolving facility matures at the earlier of June 30, 2027 and the termination of the revolving commitments.

The Company paid $ 60,000 of the term loan facility’s principal in September 2022 and an additional $ 40,000 of the term loan facility's principal in December 2022, in order to decrease the outstanding debt balance.

The term loan facility contains an optional prepayment feature at the discretion of the Company.

The Company determined that the prepayment feature did not meet the definition of an embedded derivative and does not require bifurcation from the host liability and, accordingly, has accounted for the entire instrument at amortized cost.

In November 2022, the Company entered into an interest rate swap agreement, whereby interest on $ 250,000 of the total $ 550,000 principal balance is paid at a fixed rate.

"Fair Value and Derivatives" for further detail on the interest rate swap agreement.

The Company can draw any amount under the revolving facility up to the $ 150,000 limit, with the amount to be repaid on the termination date of the revolving commitments.

Debt issuance costs of $ 2,361 were incurred related to the revolving facility.

These costs are being amortized as interest expense in the consolidated statements of (loss) income over the contractual life of the revolving facility using the straight line method.

Amortization of the deferred debt issuance costs for the revolving facility was $ 366 during the twelve months ended May 31, 2023 .

Debt issuance costs of $ 489 were recorded in Prepaid expenses and other current assets and $ 1,506 were recorded in Other non-current assets on the consolidated balance sheet as of May 31, 2023 .

The Company must pay an annual commitment fee ranging from 0.20 % and 0.35 % on the unused portion of the Revolving Credit Facility, paid quarterly.

As of May 31, 2023 , the commitment fee was 0.35 % and $ 473 was recorded as interest expense in the consolidated statements of income (loss) during the twelve months ended May 31, 2023.

Accrued interest payable on the term loan as of May 31, 2023 was $ 164 .

The Company incurred $ 10,232 in total debt issuance costs on the term loan which is recorded as an offset to the term loan facility and amortized over the contractual life of the loan to interest expense using the straight line method.

The amortization of deferred debt issuance costs of $ 1,588 and interest expense of $ 27,254 (excluding swap credit of $ 577 ) for the term loan was included in the consolidated statements of income (loss) during the twelve months ended May 31, 2023.

Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage.

As of May 31, 2023, the Company was in compliance with its debt covenants.

On July 20, 2022, Neogen Food Safety Corporation closed on an offering of $ 350,000 aggregate principal amount of 8.625 % senior notes due 2030 (the “Notes”) in a private placement at par.

The Notes were initially issued by Neogen Food Safety Corporation to 3M and were transferred and delivered by 3M to the selling securityholder in the offering, in satisfaction of certain of 3M’s existing debt.

Upon closing of the FSD transaction on September 1, 2022, the Notes became guaranteed on a senior unsecured basis by the Company and certain wholly-owned domestic subsidiaries of the Company.

The Company determined that the redemption features of the Notes did not meet the definition of a derivative and thus does not require bifurcation from the host liability and accordingly has accounted for the entire instrument at amortized cost.

Total accrued interest on the Notes was $ 10,985 as of May 31, 2023 based on the stated interest rate of 8.625 %.

This amount was included in current liabilities on the consolidated balance sheets.

The Company incurred total debt issuance costs of $ 6,683 , which is recorded as an offset to the Notes and amortized over the contractual life of the Notes to interest expense using the straight line method.

The amortization of deferred debt issuance costs of $ 766 and interest expense of $ 26,079 for the Notes was included in the consolidated statements of income (loss) during the twelve months ended May 31, 2023.

There are no required principal payments on the Term Loan or the Senior Notes through fiscal year 2026, due to $ 100,000 in prepayments made on the Term Loan in fiscal 2023.

The expected maturities associated with the Company’s outstanding debt as of May 31, 2023, were as follows:

Equity Compensation Plans

Incentive and non-qualified options to purchase shares of common stock have been granted to directors, officers and employees of Neogen under the terms of the Company’s stock option plans.

These options were granted at an exercise price of not less than the fair market value of the stock on the date of grant.

Remaining shares available for grant under share-based compensation

plans were 5,386,000 , 6,355,000 and 7,002,000 at May 31, 2022, 2021 and 2020, respectively.

Options vest ratably over thre e

and five-year periods and the contractual terms are generally fiv e

or ten years .

Weighted-Average

The Company’s long-term incentive plans allow for the grant of various types of share-based awards to officers, directors and other key employees of the Company.

Incentive and non-qualified options to purchase shares of common stock have been granted under the terms of the 2018 Omnibus Incentive Plan.

These options are granted at an exercise price of the closing price of the common stock on the date of grant.

Options vest ratably over three and five year periods and the contractual terms are generally five , seven or ten years .

The Company grants restricted stock units (RSUs) under the terms of the 2018 Omnibus Incentive Plan, which vest ratably over three and five year periods.

The fair value of the options was estimated at the date of the grant using the Black-Scholes option pricing model.

The fair value of the RSUs is determined based on the closing price of the common stock on the date of grant.

Remaining shares available for grant under share-based compensation plans were 2,871,000 , 5,386,000 , and 6,355,000 at May 31, 2023, 2022, and 2021, respectively.

Compensation expense related to share-based awards was $ 10,177 , $ 7,154 , and $ 6,437 in fiscal years 2023, 2022, and 2021, respectively.

(options in thousands)

Exercise Price

Grant Date Fair Value

Weighted-Average Exercise Price

Weighted-Average Grant Date Fair Value

Outstanding at May 31, 2020 ( 972 exercisable)

16 unchanged sentences

$ 36.01 - $ 42.15

$ 32.00 - $ 42.45

The weighted average exercise price of shares subject to options that were exercisable at May 31, 2022 and 2021 was $ 30.24 and $ 28.10 , respectively.

Compensation expense related to share-based awards was $

7,154,000 , $

6,437,000 and $

6,468,000 in fiscal years

2020 , respectively.

Remaining compensation cost to be expensed in future periods for non-vested options was $

10,927,000 at May

2022 , with a weighted average expense recognition period of

Remaining compensation cost to be expensed in future periods for non-vested options was $ 11,729 at May 31, 2023 , with a weighted average expense recognition period of 2.4 years.

Year ended May 31

(in thousands)

Aggregate intrinsic value of options outstanding

Aggregate intrinsic value of options exercisable

Aggregate intrinsic value of options exerised

The Company grants restricted stock units (RSUs) to directors, officers and employees under the terms of the 2018 Omnibus Incentive Plan, which vest ratably over three and five year periods.

expensed straight-line over the remaining weighted-average period of 4.0

there was $ 6,866,000 in unamortized compensation cost related to non-vested RSUs.

Aggregate intrinsic value of options exercised

The fair value of stock options granted was estimated using the following weighted-average assumptions:

Year ended May 31

Risk-free interest rate

Expected dividend yield

Expected stock volatility

Expected option life

The risk-free interest rate for periods within the expected life of options granted is based on the United States Treasury yield curve in effect at the time of grant.

Expected stock price volatility is based on historical volatility of the Company’s stock.

The expected option life, representing the period of time that options granted are expected to be outstanding, is based on historical option exercise and employee termination data.

We include recent historical experience in estimating our forfeitures.

As employees terminate, grant tranches expire or as forfeitures are known, estimated expense is adjusted to actual.

For options granted in fiscal years 2023, 2022, and 2021 , the Company recorded charges in general and administrative expense based on the fair value of stock options using the straight-line method over the vesting period of three to five years .

Restricted Stock Units

The RSUs are expensed straight-line over the remaining weighted-average period of 2.7 years.

On May 31, 2023 , there was $ 10,839 in unamortized compensation cost related to non-vested RSUs.

The fair value of restricted stock units vested during fiscal years 2023 and 2022 was $ 820 and $ 1,032 , respectively.

There were no RSUs that vested during fiscal year 2021.

(RSU Grants in thousands)

Weighted Average

Grant Date Fair

Weighted Average Grant Date Fair Value

Outstanding at May 31, 2021

1 unchanged sentence

Outstanding at May 31, 2023

The weighted average grant date fair value of the fiscal year 2021 awards was $ 34.21 .

Employee Stock Purchase Plan

The Company offers eligible employees the option to purchase common stock at a 5 % discount to the lower of the market value of the stock at the beginning or end of each participation period under the terms of the 2021 Employee Stock Purchase Plan.

5 unchanged sentences

Year ended May 31

(in thousands)

The provision for income taxes consists of the following:

Year ended May 31

(in thousands)

Change in tax-related uncertainties

5 unchanged sentences

Year ended May 31

(in thousands)

statutory rate

4 unchanged sentences

Subpart F income

Tax benefits on stock-based compensation

Tax-effect from stock-based compensation

Provision for state income taxes, net of federal benefit

Non-deductible acquisition expenses

Impact of tax rate changes

Change in tax-related uncertainties

Changes in valuation allowances

Research expenditures deduction

Income Tax Expense

Foreign tax credits, primarily offsetting taxes associated with Subpart F and GILTI income, were $ 5,324 , $ 1,747 , and $ 2,753 in fiscal years 2023, 2022, and 2021 , respectively.

The Company’s research and development credits were $ 780,000 , $ 545,000 and $ 472,000 in fiscal years 2022, 2021 and 2020, respectively.

The Company’s research and development credits were $ 1,385 , $ 780 , and $ 545 in fiscal years 2023, 2022, and 2021, respectively.

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

6 unchanged sentences

Deferred income tax assets

Interest expense not currently deductible

Research and experimentation capitalization

Stock options

5 unchanged sentences

Net deferred income tax liabilities

Net deferred income tax assets (jurisdictional)

Net deferred income tax liabilities (jurisdictional)

Net deferred income tax liabilities

The Company has the following net operating loss carryforwards:

Valuation allowances against certain deferred tax assets are established based on management’s determination of a more likely than not standard that the tax benefits will not be realized.

As of May 31, 2023

2024 to Indefinite

Valuation allowances against certain deferred tax assets are established based on management’s determination of a more likely than not standard that the tax benefits will not be realized.

We are subject to income taxes in the U.S.

6 unchanged sentences

The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.

policy is to recognize both accrued interest expense and penalties related to unrecognized tax benefits in income tax expense.

The amount of interest and penalties included in the unrecognized tax benefits reserve was $ 69,321 at May 31, 2022 and $ 64,518 at May 31, 2021.

Of the total unrecognized tax benefits at May 31, 2022 and May 31, 2021, $ 808,186 and $ 805,316 respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate.

The Company’s policy is to recognize both accrued interest expense and penalties related to unrecognized tax benefits in income tax expense.

The amount of interest and penalties included in the unrecognized tax benefits reserve was $ 145 at May 31, 2023 , $ 69 at May 31, 2022 , and $ 65 at May 31, 2021.

Of the total unrecognized tax benefits at May 31, 2023 and 2022 , $ 1,087 and $ 808 , respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate.

The reconciliation of our unrecognized tax benefits is as follows:

Year ended May 31

(in thousands)

Beginning balance

3 unchanged sentences

Ending balance

The Company is no longer subject to examination by the Internal Revenue Service for fiscal year 201 8

and preceding years.

The Company is no longer subject to examination by the Internal Revenue Service for fiscal year 2019 and preceding years.

As of May 31, 2023, the Company has approximately $ 153 million of undistributed earnings in its foreign subsidiaries.

Approximately $ 41 million of these earnings are no longer considered permanently reinvested.

The incremental tax cost to repatriate these earnings to the US is immaterial.

The Company has not provided deferred taxes on approximately $ 112 million of undistributed earnings from non-U.S.

subsidiaries as of May 31, 2023 which are indefinitely reinvested in operations.

Based on historical experience, as well as management’s future plans, earnings from these subsidiaries will continue to be re-invested indefinitely for future expansion and working capital needs.

On an annual basis, we evaluate the current business environment and whether any new events or other external changes might require future evaluation of the decision to indefinitely re-invest these foreign earnings.

It is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

Commitments and Contingencies

The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for

related costs when such costs are determined to be probable and estimable.

The Company currently utilizes a pump and treat remediation strategy,

which includes semi-annual monitoring and reporting, consulting, and maintenance of monitoring wells.

We expense these annual costs of remediation,

which have ranged from $ 63,000 to $ 131,000

per year from fiscal 2018 to fiscal 2021.

The Company’s estimated remaining liability for these costs was $ 916,000 at both May 31, 2022 and 2021, measured on an undiscounted basis over an estimated period of 15

In fiscal 2019, the Company performed an updated Corrective Measures Study on the site, per a request from the Wisconsin Department of Natural Resources (WDNR), and is currently in discussion with the WDNR regarding potential alternative remediation strategies going forward.

The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for related costs when such costs are determined to be probable and estimable.

The Company currently utilizes a pump and treat remediation strategy, which includes semi-annual monitoring and reporting, consulting, and maintenance of monitoring wells.

We expense these annual costs of remediation, which have ranged from $ 63 to $ 131 per year over the past five years.

The Company’s estimated remaining liability for these costs was $ 916 at both May 31, 2023 and 2022 , measured on an undiscounted basis over an estimated period of 15 years.

In fiscal 2019, the Company performed an updated Corrective Measures Study on the site, per a request from the Wisconsin Department of Natural Resources (WDNR), and is currently working with the WDNR regarding potential alternative remediation strategies going forward.

The Company believes that the current pump and treat strategy is appropriate for the site.

However, the Company has agreed to a pilot study in which chemical reagents are injected into the ground in an attempt to reduce on-site

contamination;

costs incurred in fiscal 2022 totaled $ 305,000 , which included the cost of this study .

However, the Company initiated a pilot study in fiscal 2022 which chemical reagents were injected into the ground in an attempt to reduce on-site contamination.

The study will run over a two year period, with a majority of expenses incurred in fiscal 2022.

Testing and treatment costs of $ 85 were incurred in fiscal 2023.

At this time, the outcome of the pilot study is unknown, but a change in the current remediation strategy, depending on the alternative selected, could result in an increase in future costs and ultimately, an increase in the currently recorded liability, with an offsetting charge to operations in the period recorded.

The Company has recorded

$ 100,000 as a current liability, and the remaining $ 816,000 is recorded in other non-current liabilities in the consolidated balance sheet as of May 31

On March 6, 2020, the Company received an administrative subpoena from the U.S.

Treasury Department’s Office of Foreign Assets Control (OFAC) regarding activities or transactions involving parties located in Iran.

The Company subsequently conducted an internal

investigation under the direction of outside legal counsel and disclosed information concerning certain genomic testing services provided to an unrelated U.S.-based party engaged in veterinary activities involving an Iranian party.

The Company continues to cooperate with OFAC’s investigation and is currently examining whether certain of these activities may be eligible for OFAC General Licenses authorizing agricultural and veterinary activities.

In addition to responding to the administrative subpoena, the Company has implemented additional compliance measures to prevent inadvertent dealings with restricted countries or parties.

These measures further enhance the Company’s international trade compliance program, which is designed to assure that the Company does not conduct business directly or indirectly with any countries or parties subject to economic sanctions and export control laws of the U.S.

and other applicable jurisdictions.

Although it is too early to predict what action, if any, that OFAC will take, the Company does not currently have any reason to believe that OFAC’s pending investigation will have a material impact on its operations, the results of operations for any future period, or its overall financial condition.

In fiscal 2020, the Company took a charge to expense and recorded a reserve of

$ 600,000 to provide for potential fines or penalties on this matter.

At this time, the Company believes that it is adequately reserved for this issue.

The Company has recorded $ 100 as a current liability , and the remaining $ 816 is recorded in other non-current liabilities in the consolidated balance sheet as of May 31, 2023.

The Company previously disclosed an ongoing investigation by the U.S.

Treasury Department’s Office of Foreign Assets Control (OFAC) regarding activities or transactions involving parties located in Iran.

In fiscal year 2020, the Company recorded a charge to Other (expense) income and recorded a reserve of $ 600 to provide for potential fines or penalties on this matter.

On March 28, 2023, the Company received a Cautionary Letter from OFAC concluding its investigation without civil monetary penalty or other enforcement action.

As the investigation is effectively resolved, the Company reversed a $ 600 accrual in the fourth quarter of 2023.

The Company has agreements with unrelated third parties that provide for the payment of royalties on the sale of certain products.

2 unchanged sentences

Future minimum royalty payments are as follows:

2023—$ 100,000 , 2024—$ 100,000 , 2025—$ 100,000 , 2026—$ 75,000 and 2027—$ 75,000 .

The Company has unconditional purchase obligations consisting primarily of purchase orders for future inventory and capital equipment purchases, totaling $ 85.8 million, of which $ 83.1 million is scheduled to be spent within the next 12 months, and $ 2.7 million is scheduled to be spent between

years in the future.

In conjunction with the 3M Food Safety transaction announced on December 13, 2021, Neogen has entered into a credit agreement with JPMorgan

Chase for $ 650 million in term loans, and has incurred $ 9.8 million in debt issuance costs, which will be paid at close, and amortized over the five-year

term of the loans.

The loans are expected to be funded in the third calendar quarter of 2022.

Interest on the loans will be at the Secured Overnight

Financing Rate (SOFR) plus 225 basis points .

2024—$ 112 , 2025—$ 109 , 2026—$ 84 , 2027—$ 84 , and 2028—$ 67 .

The Company is subject to certain legal and other proceedings in the normal course of business that, in the opinion of management, are not expected to have a material effect on its future results of operations or financial position.

2 unchanged sentences

Employees are permitted to defer compensation up to IRS limits, with Neogen matching 100 % of the first 3% of deferred compensation and 50 % of the next 2% of deferred compensation.

In the first quarter of fiscal 2021, the Company suspended the 401(k) match, while we assessed the potential financial impact of

COVID-19 on the Company.

The match was restored in September 2020.

Neogen’s expense under this plan was $ 1,834,000 , $ 1,204,000 , and

$ 1,535,000 in fiscal years 2022, 2021 and 2020, respectively.

We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates.

To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions.

Derivatives Not Designated as Hedging Instruments

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into approximately 11 foreign currency forward contracts each month to mitigate that exposure.

These contracts are recorded net at fair value on our consolidated balance sheets ,

classified as Level 2 in the fair value hierarchy;

gains and losses from these contracts were recognized in other income in our consolidated statements of income.

The notional amount of foreign currency forward contracts was $ 4,424,000 and $ 19,984,000 as of May 31, 2022 and 2021, respectively.

Neogen’s expense under this plan was $ 2,439 , $ 1,834 , and $ 1,204 in fiscal years 2023, 2022, and 2021 , respectively.

Fair Value and Derivatives

Fair Value of Financial Instruments

The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:

Observable inputs such as quoted prices in active markets;

Inputs, other than quoted prices in active markets, that are observable either directly or indirectly;

Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Items Measured at Fair Value on a Recurring Basis

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and have entered into a number of foreign currency forward contracts each month to mitigate that exposure.

These contracts are recorded net at fair value on our consolidated balance sheets, classified as Level 2 in the fair value hierarchy.

Gains and losses from these foreign currency forward contracts are recognized in other income in our consolidated statements of income (loss).

The notional amount of forward contracts in place was $ 15,500 and $ 4,424 as of May 31, 2023 and 2022, respectively, and consisted of hedges of transactions up to June 2023.

Fair Value of Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

Foreign currency forward contracts, net

Prepaid and Other

The location and amount of gains from derivatives not designated as hedging instruments in our consolidated statements of income were as follows:

Other receivable (Other accruals)

We record the fair value of our interest rate swaps on a recurring basis using Level 2 observable market inputs for similar assets or liabilities in active markets.

Fair Value of Derivatives Designated as Hedging Instruments

Balance Sheet Location

Interest rate swaps –

Other current assets

Interest rate swaps –

Other non-current liabilities

Items Measured at Fair Value on a Nonrecurring Basis

In addition to items that are measured at fair value on a recurring basis, the Company measures certain assets and liabilities at fair value on a nonrecurring basis, which are not included in the table above.

As these nonrecurring fair value measurements are generally determined using unobservable inputs, these fair value measurements are classified within Level 3 of the fair value hierarchy.

For further information see Note 2 "Goodwill and Other Intangible Assets" and Note 3 “Business Combinations”.

Items Not Carried at Fair Value

Fair values of the Company’s Term Loan and Senior Notes were as follows:

Aggregate fair value

Aggregate carrying value (1)

(1) Excludes unamortized debt issuance costs.

Fair values were based on available market information and other observable data and are classified within Level 2 of the fair value hierarchy.

Derivatives Not Designated as Hedging Instruments

The location and amount of gains from derivatives not designated as hedging instruments in our consolidated statements of income (loss) were as follows:

Location in statements

Year Ended May 31

Derivatives Not Designated as Hedging Instruments

Location in statements of income

of (loss) income

Foreign currency forward contracts

Other income (expense)

Related Party Transactions

The Company has partnered with Corvium to develop a software-as-a-service

offering for use in conjunction with several food safety product lines.

Ralph Rodriguez is a member of Neogen’s Board of Directors and also serves on the Board of Directors at Corvium.

Neogen made payments to Corvium of $ 1,573,000 , $ 788,000 and $ 1,833,000 in fiscal years 2022, 2021 and 2020, respectively.

Other (expense) income

Derivatives Designated as Hedging Instruments

In November 2022, we entered into a receive-variable, pay-fixed interest rate swap agreement with an initial $ 250,000 notional value, which is designated as a cash flow hedge.

This agreement fixed a portion of the variable interest due on our term loan facility, with an effective date of December 2, 2022 and a maturity date of June 30, 2027 .

Under the terms of the agreement, we pay a fixed interest rate of 4.215 % plus an applicable margin ranging between 150 to 225 basis points and receive a variable rate of interest based on term SOFR from the counterparty, which is reset according to the duration of the SOFR term.

The fair value of the interest rate swap as of May 31, 2023 was a net liability of $ 2,683 .

The Company expects to reclassify a $ 2,087 gain of accumulated other comprehensive income into earnings in the next 12 months.

The following table summarizes the other comprehensive income (loss) before reclassifications of derivative gains and losses:

Other Comprehensive Income (Loss) Before Reclassifications During

Year Ended May 31

Derivatives Designated as Hedging Instruments

Interest rate swaps

The following table summarizes the reclassification of derivative gains and losses into net income from accumulated other comprehensive income (loss):

Gain (Loss) Reclassified During

Location of Gain (Loss)

Year Ended May 31

Derivatives Designated as Hedging Instruments

Interest rate swaps

Interest expense

Segment Information

The Company has

two reportable segments:

The Company has two reportable segments:

Food Safety and Animal Safety.

2 unchanged sentences

This segment also provides genomic identification and related interpretive bioinformatic services.

Additionally, the Animal Safety segment produces and markets rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.

Neogen’s international operations in the United Kingdom, Mexico, Guatemala, Brazil, Argentina, Uruguay, Chile, China and India originally focused on the sales and marketing of our food safety products, and each of these units reports through the Food Safety segment.

In recent years, these operations have expanded to offer the Company’s complete line of products and services, including those usually associated with the Animal Safety segment such as cleaners, disinfectants, rodenticides, insecticides, veterinary instruments and genomics services.

Additionally, the Animal Safety segment produces and markets rodent control products, disinfectants and insect control products to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.

In recent years, these operations have expanded to offer the Company’s complete line of products and services, including those usually associated with the Animal Safety segment such as cleaners, disinfectants, rodent control products, insect control products, veterinary instruments and genomics services.

These additional products and services are managed and directed by existing management and are reported through the Food Safety segment.

Neogen’s operation in Australia originally focused on providing genomics services and sales of animal safety products and reports through the Animal Safety segment.

With the acquisition of Cell BioSciences in February 2020, this operation has expanded to offer our complete line of products and services, including those usually associated with the Food Safety segment.

Neogen’s operation in Australia originally focused on providing genomics services and sales of animal safety products and reports through the Animal Safety segment.

This operation has expanded to offer our complete line of products and services, including those usually associated with the Food Safety segment.

These additional products are managed and directed by existing management at Neogen Australasia and report through the Animal Safety segment.

The accounting policies of each of the segments are the same as those described in Note 1.

"Summary of Significant Accounting Policies".

Segment information is as follows:

(in thousands)

Animal Safety

1 unchanged sentence

Eliminations (1)

Product revenues to external customers

Service revenues to external customers

Product revenues, net to external customers

Service revenues, net to external customers

Total revenues to external customers

1 unchanged sentence

Depreciation and amortization

Interest expense

Expenditures for long-lived assets

Product revenues to external customers

Service revenues to external customers

Product revenues, net to external customers

Service revenues, net to external customers

Total revenues to external customers

1 unchanged sentence

Depreciation and amortization

Interest expense

Expenditures for long-lived assets

Product revenues to external customers

Service revenues to external customers

Product revenues, net to external customers

Service revenues, net to external customers

Total revenues to external customers

1 unchanged sentence

Depreciation and amortization

Interest expense

Expenditures for long-lived assets

(1) Includes corporate assets, including cash and cash equivalents, marketable securities, current and deferred tax accounts, and overhead expenses not allocated to specific business segments.

Also includes the elimination of intersegment transactions and non-controlling interests.

The following table presents the Company’s revenue disaggregated by geographical location:

Also includes the elimination of intersegment transactions.

Revenue is determined by location of the end customer.

The following table presents the Company’s revenue disaggregated by geographical location.

Year ended May 31

(in thousands)

International

Total revenue

Stock Repurchases

In October 2018, the Company’s Board of Directors authorized a program to purchase, subject to market conditions, up to

6,000,000 shares of the Company’s common stock.

In December 2018, the Company purchased 100,000 shares under the new program in open market transactions for a total price, including commissions, of $ 3,134,727 .

Shares acquired under the program were retired.

A total of 5,900,000 shares of common stock remained available for repurchase under this program as of May 31, 2022.

The following table presents the Company's net property and equipment amounts disaggregated by country.

Year ended May 31

United States

United Kingdom

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures