NEOGEN CORP 10-K

ITEM 9A. CONTROLS AND PROCEDURES 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, 2024. 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, 2024, 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. 46 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. 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, 2024, 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 weakness that existed as of May 31, 2023. As of May 31, 2024, management believes our remediation efforts have been effective with respect to this material weakness and that the associated control is now effective as of May 31, 2024: • 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. Management’s assessment of the Company’s internal control over financial reporting identified the following material weaknesses that existed as of May 31, 2024. These material weaknesses also 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. 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, 2024. 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.C., 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, 2024, which is included in this annual report below. 47 Plan of Remediation Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to these material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. 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 Other than the material weaknesses and related remediation efforts described above, no changes in our internal control over financial reporting were identified as having occurred during the quarter ended May 31, 2024 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting. 48 Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Neogen Corporation Lansing, Michigan 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, 2024, 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, 2024, 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. 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, 2024 and 2023, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended May 31, 2024, and the related notes (collectively referred to as “the financial statements”) and our report dated July 30, 2024 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. 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 were identified regarding management’s failure to design and maintain controls (i) over 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 and (ii) period-end invoice accrual controls as described in management’s assessment. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 financial statements, and this report does not affect our report dated July 30, 2024 on those financial statements. 49 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, P.C. Grand Rapids, Michigan July 30, 2024 50 ITEM 9B. OTHER INFORMATION During the quarterly period ended May 31, 2024 , no director or officer (as defined in SEC Rule 16a-1(f)) of the Company adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K). ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS—NOT APPLICABLE 51 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information regarding the Company, certain corporate governance matters and information about our executive officers appearing under the captions “Proposal 1 — Election of Directors,” “Information About the Board and Corporate Governance Matters,” “Information about our Executive Officers,” and “Additional Information-Delinquent Section 16(a) Reports” is incorporated by reference to Neogen’s 2024 proxy statement to be filed within 120 days of May 31, 2024. 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. We have adopted an insider trading policy governing the purchase, sale, and/or other disposition of our securities by our directors, officers, employees, and other covered persons. We believe this policy is reasonably designed to promote compliance with insider trading laws, rules, and regulations, and the exchange listing standards applicable to us. A copy of this policy is filed as Exhibit 19 to this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from the sections entitled “Compensation Discussion and Analysis”, “Compensation Committee Report”, “Executive Compensation”, "Compensation Committee Interlocks and Insider Participation”, “CEO Pay Ratio”, “Pay Versus Performance,” and “Compensation of Directors” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2024. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference from the section entitled “Security Ownership of Certain Beneficial Owners, Directors and Management” and “Equity Compensation Plan Information” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2024. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item 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, 2024. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item 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, 2024. 52 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) (1) and (2) and (c). The response to this portion of ITEM 15 is submitted as a separate section of this report starting on page F-1. (a) (3) and (b). The Exhibits, listed in the Exhibit Index below, are incorporated herein by reference. ITEM 16. FORM 10-K SUMMARY — NONE Neogen Corporation Annual Report on Form 10-K Year Ended May 31, 2024 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 3 Article of Incorporation and Bylaws 3.1 Restated Articles of Incorporation filed February 14, 2000, as amended on November 23, 2011 (incorporated by reference to Exhibit 3.1 to the Quarterly Report filed December 30, 2011). 3.2 Certificate of Amendment to Articles of Incorporation filed on October 11, 2010 (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed July 30, 2020). 3.3 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). 3.4 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). 3.5 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). 3.6 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed October 31, 2023). 4 Instruments Defining the Rights of Security Holders, Including Indentures 4.1 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 the Registration Statement on Form S-4 (No. 333-263667), filed July 27, 2022). 4.2 Supplemental Indenture, dated as of September 1, 2022, among 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 September 1, 2022). 4.3 Description of the Common Stock of Neogen Corporation. 10 Material Contracts 10.1 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. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed December 15, 2021). * 10.2 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 December 15, 2021). * 10.3 Amendment No. 1 to the Separation and Distribution Agreement, dated as of August 31, 2022, by and among 3M Company, Garden SpinCo Corporation, and Neogen Corporation (incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K filed September 1, 2022). * 53 EXHIBIT NO. DESCRIPTION 10.4 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 December 15, 2021). * 10.5 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). 10.6 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). 10.7 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). 10.8 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). 10.9 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). 10.10 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). 10.11 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). 10.12 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). 10.13 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). 10.14 Neogen Corporation 2018 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed August 28, 2018). (1) 10.15 Neogen Corporation 2023 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed September 18, 2023). (1) 10.16 Form of Management Stock Option Award Agreement. (1) 10.17 Form of Management Restricted Share Unit Award Agreement. (1) 10.18 Form of Severance Letter Agreement entered into with executive officers (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed October 31, 2023). (1) 10.19 Option Agreement between Neogen Corporation and David H. Naemura, dated October 26, 2023. (1) 19 Neogen Corporation Insider Trading Policy 21 Listing of Subsidiaries 23 Consent of Independent Registered Public Accounting Firm BDO USA, P.C. 24 Power of Attorney 31.1 Section 302 Certification of Principal Executive Officer 31.2 Section 302 Certification of Principal Financial Officer 32 Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97 Clawback Policy 54 EXHIBIT NO. DESCRIPTION 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * Exhibits, schedules, and annexes have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be supplementally provided to the SEC upon request. (1) Denotes compensatory plan or arrangement 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. NEOGEN CORPORATION /s/ John E. Adent /s/ David H. Naemura /s/ John P. Moylan John E. Adent, President & Chief David H. Naemura, John P. Moylan, Executive Officer Chief Financial Officer Chief Accounting Officer (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) Dated: July 30, 2024 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. Signature Title Date President & Chief Executive Officer /s/ John E. Adent (Principal Executive Officer) July 30, 2024 John E. Adent Chief Financial Officer /s/ David H. Naemura (Principal Financial Officer) July 30, 2024 David H. Naemura /s/ John P. Moylan Chief Accounting Officer John P. Moylan (Principal Accounting Officer) July 30, 2024 * Chairman of the Board of Directors July 30, 2024 James C. Borel * Director July 30, 2024 William T. Boehm, Ph.D. * Director July 30, 2024 Jeffrey D. Capello * Director July 30, 2024 Ronald D. Green, Ph.D. * Director July 30, 2024 Aashima Gupta * Director July 30, 2024 Raphael A. Rodriguez * Director July 30, 2024 James P. Tobin * Director July 30, 2024 Catherine E. Woteki, Ph.D. *By: /s/ John E. Adent John E. Adent, Attorney-in-fact July 30, 2024 56 ANNUAL REPORT ON FORM 10-K ITEM 15 (a)(1)(a)(2) and (c) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES YEAR ENDED MAY 31, 2024 NEOGEN CORPORATION LANSING, MICHIGAN 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, P.C. , Grand Rapids, MI PCAOB ID# 243 F- 2 Consolidated Balance Sheets F- 4 Consolidated Statements of Operations F- 5 Consolidated Statements of Comprehensive (Loss) Income F- 6 Consolidated Statements of Stockholders’ Equity F- 7 Consolidated Statements of Cash Flows F- 8 Notes to Consolidated Financial Statements F- 9 F- 1 Report of Indepen dent Registered Public Accounting Firm Shareholders and Board of Directors Neogen Corporation Lansing, Michigan Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Neogen Corporation (the “Company”) as of May 31, 2024 and 2023, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended May 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2024, 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, 2024, 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 30, 2024 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. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill Impairment Assessment – Food Safety Reporting Unit As described in Notes 1 and 5 to the consolidated financial statements, the Company’s goodwill balance was $2.135 billion at May 31, 2024, of which $2.054 billion is allocated to the Company’s Food Safety reporting unit and $0.081 billion to the Animal Safety reporting unit. 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 of the Company’s fiscal year. The Company estimates the fair value of its reporting units using a combination of discounted cash flows and market-based approaches. As disclosed by management, the discounted cash flows approach is based on the reporting unit’s forecasted cash flows, including forecasted revenue growth rates and gross margins assumptions, that are discounted to present value using the reporting unit’s weighted average cost of capital (“WACC”) as the discount rate. The Company recognized no impairment during the year ended May 31, 2024. We identified the Goodwill Impairment Assessment related to the Food Safety reporting unit as a critical audit matter. Specifically, the determination of fair value of goodwill requires management to make assumptions used in the discounted cash flows approach including the assumptions of forecasted revenue growth rates, gross margins, and the discount rate. Auditing management’s assumptions used in calculation of the fair value of goodwill involved especially challenging and subjective auditor judgment, including the extent of specialized knowledge or skill needed. F- 2 The primary procedures we performed to address this critical audit matter included: • Evaluating the reasonableness of the forecasted revenue growth rates used by management by: (i) obtaining an understanding of the estimation process and data used by management, (ii) comparing the forecasted revenue growth rates to historical operating performance and (iii) evaluating the forecasted revenue growth rates for consistency with external peer company financial data and other industry information. • Evaluating the reasonableness of the gross margins by comparing to historical operating performance. • Utilizing personnel with specialized knowledge and skill in valuation to assist in evaluating the reasonableness of the discount rate. /s/ BDO USA, P.C. We have served as the Company’s auditor since 2014. Grand Rapids, Michigan July 30, 2024 F- 3 Neogen Corporation Consolidated Bala nce Sheets (in thousands, except shares) See accompanying notes to consolidated financial statements. May 31 2024 2023 Assets Current Assets Cash and cash equivalents $ 170,611 $ 163,240 Marketable securities, amortized cost of $ 325 and $ 83,549 325 82,329 Accounts receivable, net 173,005 153,253 Inventory, net 189,267 133,812 Prepaid expenses and other current assets 56,025 53,297 Total Current Assets 589,233 585,931 Property and Equipment Land and improvements 10,497 10,209 Building and improvements 108,298 96,794 Machinery and equipment 176,369 152,547 Furniture and fixtures 8,260 7,080 Construction in progress 113,968 52,237 417,392 318,867 Less accumulated depreciation ( 140,288 ) ( 120,118 ) Property and Equipment, net 277,104 198,749 Other Assets Right of use assets (note 4) 14,785 11,933 Goodwill (note 5) 2,135,632 2,137,496 Other non-amortizable intangible assets (note 5) — 14,316 Amortizable intangible assets, net (note 5) 1,511,653 1,590,787 Other non-current assets 20,426 15,220 Total Other Assets 3,682,496 3,769,752 Total Assets $ 4,548,833 $ 4,554,432 Liabilities and Stockholders’ Equity Current Liabilities Current portion of finance lease $ 2,447 $ — Accounts payable 83,061 76,669 Accrued compensation 19,949 25,153 Income tax payable (note 9) 10,449 6,951 Accrued interest 10,985 11,149 Deferred revenue 4,632 4,616 Other current liabilities 22,800 20,934 Total Current Liabilities 154,323 145,472 Deferred Income Tax Liability (note 9) 326,718 353,427 Non-Current Debt (note 7) 888,391 885,439 Other Non-Current Liabilities 35,259 35,877 Total Liabilities 1,404,691 1,420,215 Commitments and Contingencies (note 10) Stockholders’ Equity Preferred stock, $ 1.00 par value — shares authorized 100,000 ; no ne issued and outstanding — — Common stock, $ 0.16 par value — shares authorized 315,000,000 ; 216,614,407 and 216,245,501 shares issued and outstanding at May 31, 2024 and 2023, respectively 34,658 34,599 Additional paid-in capital 2,583,885 2,567,828 Accumulated other comprehensive loss ( 30,021 ) ( 33,251 ) Retained earnings 555,620 565,041 Total Stockholders’ Equity 3,144,142 3,134,217 Total Liabilities and Stockholders’ Equity $ 4,548,833 $ 4,554,432 F- 4 Neogen Corporation Consolidated S tatements of Operations (in thousands, except shares) Year Ended May 31, 2024 2023 2022 Revenues Product revenues $ 821,821 $ 715,076 $ 424,664 Service revenues 102,401 107,371 102,495 Total Revenues 924,222 822,447 527,159 Cost of Revenues Cost of product revenues 401,079 354,707 228,017 Cost of service revenues 59,243 61,785 56,129 Cost of Revenues 460,322 416,492 284,146 Gross Profit 463,900 405,955 243,013 Operating Expenses Sales and marketing 182,872 141,222 84,604 General and administrative 199,889 201,179 82,742 Research and development 22,476 26,039 17,049 Total Operating Expenses 405,237 368,440 184,395 Operating Income 58,663 37,515 58,618 Other (Expense) Income Interest income 6,362 3,166 1,339 Interest expense ( 73,394 ) ( 55,961 ) ( 72 ) Other, net ( 5,936 ) ( 6,762 ) 322 Total Other (Expense) Income ( 72,968 ) ( 59,557 ) 1,589 (Loss) Income Before Taxes ( 14,305 ) ( 22,042 ) 60,207 Income Tax (Benefit) Expense ( 4,884 ) 828 11,900 Net (Loss) Income $ ( 9,421 ) $ ( 22,870 ) $ 48,307 Net (Loss) Income Per Share Basic $ ( 0.04 ) $ ( 0.12 ) $ 0.45 Diluted $ ( 0.04 ) $ ( 0.12 ) $ 0.45 Weighted Average Shares Outstanding Basic 216,481,878 188,880,836 107,684,000 Diluted 216,481,878 188,880,836 108,020,000 See accompanying notes to consolidated financial statements. F- 5 Neogen Corporation Consolidated St atements of Comprehensive (Loss) Income (in thousands) Year Ended May 31, 2024 2023 2022 Net (Loss) Income $ ( 9,421 ) $ ( 22,870 ) $ 48,307 Other comprehensive income (loss): Foreign currency translations ( 1,599 ) ( 4,796 ) ( 13,955 ) Unrealized gain (loss) on marketable securities, net of tax of $ 293 , $ 389 , and ($ 728 ) 927 1,353 ( 2,439 ) Unrealized gain (loss) on derivative instruments, net of tax of $ 1,232 and ($ 644 ) 3,902 ( 2,039 ) — Other comprehensive income (loss), net of tax: 3,230 ( 5,482 ) ( 16,394 ) Total comprehensive (loss) income $ ( 6,191 ) $ ( 28,352 ) $ 31,913 See accompanying notes to consolidated financial statements. F- 6 Neogen Corporation Consolidated Stat ements of Stockholders’ Equity (in thousands, except share amounts) Accumulated Additional Other Common Stock Paid-in Comp. Retained Total Shares Amount Capital Loss Earnings Equity Balance, June 1, 2021 107,468,304 $ 17,195 $ 294,953 $ ( 11,375 ) $ 539,604 $ 840,377 Exercise of options, RSUs and share-based compensation expense 289,334 46 13,162 — — 13,208 Issuance of shares under employee stock purchase plan 43,456 7 1,869 — — 1,876 Net income — — — — 48,307 48,307 Other comprehensive loss — — — ( 16,394 ) — ( 16,394 ) Balance, May 31, 2022 107,801,094 $ 17,248 $ 309,984 $ ( 27,769 ) $ 587,911 $ 887,374 Exercise of options, RSUs and share-based compensation expense 79,857 13 10,483 — — 10,496 Issuance of shares under employee stock purchase plan 94,604 15 1,843 — — 1,858 Issuance of shares for 3M transaction 108,269,946 17,323 2,245,518 2,262,841 Net loss — — — — ( 22,870 ) ( 22,870 ) Other comprehensive loss — — — ( 5,482 ) — ( 5,482 ) Balance, May 31, 2023 216,245,501 $ 34,599 $ 2,567,828 $ ( 33,251 ) 565,041 $ 3,134,217 Exercise of options, RSUs and share-based compensation expense 234,096 37 13,817 — — 13,854 Issuance of shares under employee stock purchase plan 134,810 22 2,240 — — 2,262 Net loss — — — — ( 9,421 ) ( 9,421 ) Other comprehensive income — — — 3,230 — 3,230 Balance, May 31, 2024 216,614,407 $ 34,658 $ 2,583,885 $ ( 30,021 ) $ 555,620 $ 3,144,142 See accompanying notes to consolidated financial statements. F- 7 Neogen Corporation Consolidated Statements of Cash Flows (in thousands) Year Ended May 31, 2024 2023 2022 Cash Flows provided by Operating Activities Net (loss) income $ ( 9,421 ) $ ( 22,870 ) $ 48,307 Adjustments to reconcile net (loss) income to net cash from operating activities: Depreciation and amortization 116,717 88,377 23,694 Impairment of discontinued product lines 556 3,109 — (Gain) loss on sale of minority interest ( 103 ) 2,016 — Deferred income taxes ( 27,423 ) ( 19,230 ) ( 4,695 ) Share-based compensation 13,768 10,177 7,154 Loss (gain) on disposal of property and equipment 1,073 ( 486 ) — Amortization of debt issuance costs 3,441 2,720 — Right of use asset amortization 4,510 2,097 438 Other 4,829 ( 685 ) ( 2,439 ) Changes in operating assets and liabilities, net of business acquisitions: Accounts receivable, net ( 20,101 ) ( 53,879 ) ( 7,798 ) Inventories ( 55,949 ) 9,955 ( 21,072 ) Prepaid expenses and other assets 11,113 ( 3,121 ) ( 4,054 ) Accounts payable, accruals and changes 13,751 18,642 20,238 Interest expense accrual ( 164 ) 4,052 — Changes in other non-current assets and non-current liabilities ( 21,333 ) 154 8,265 Net Cash provided by Operating Activities 35,264 41,028 68,038 Cash Flows (used for) provided by Investing Activities Purchase of property, equipment and other non-current intangible assets ( 111,421 ) ( 65,757 ) ( 24,429 ) Proceeds from the maturities of marketable securities 82,004 266,772 381,839 Purchase of marketable securities — ( 12,523 ) ( 415,894 ) Business acquisitions, net of cash acquired — 11,721 ( 38,745 ) Proceeds from the sale of property and equipment and other 108 826 — Net Cash (used for) provided by Investing Activities ( 29,309 ) 201,039 ( 97,229 ) Cash Flows provided by (used for) Financing Activities Exercise of stock options and issuance of employee stock purchase plan shares 2,456 1,195 7,933 Repayment of debt — ( 100,000 ) — Payment of contingent consideration — — ( 1,120 ) Debt issuance costs paid and other ( 538 ) ( 19,276 ) — Net Cash provided by (used for) Financing Activities 1,918 ( 118,081 ) 6,813 Effects of Foreign Exchange Rate on Cash ( 502 ) ( 5,219 ) ( 8,751 ) Net Increase (Decrease) in Cash and Cash Equivalents 7,371 118,767 ( 31,129 ) Cash and Cash Equivalents, Beginning of Year 163,240 44,473 75,602 Cash and Cash Equivalents, End of Year $ 170,611 $ 163,240 $ 44,473 Supplementary Cash Flow Information Cash paid for interest $ 73,168 $ 42,616 $ 72 Income taxes paid, net of refunds $ 22,303 $ 15,473 $ 17,242 See accompanying notes to consolidated financial statements. F- 8 NEOGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollar amounts in thousands) 1. Summary of Significant Accounting Policies Organization 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. Our 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. Basis of Consolidation The consolidated financial statements include the accounts of Neogen Corporation and its subsidiaries, all of which are wholly-owned as of May 31, 2024. All intercompany accounts and transactions have been eliminated in consolidation. Share and per share amounts reflect the June 4, 2021 2-for-1 stock split as if it took place at the beginning of the periods presented. Functional Currency Our functional currency is the U.S. dollar. We translate our non-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. Translation adjustments resulting from exchange rate fluctuations are recorded in other comprehensive (loss) income. As of May 31, 2024 and 2023 , the amounts recorded within accumulated other comprehensive loss were foreign currency translation adjustment losses of $ 31,885 and $ 30,285 , respectively. Gains or losses from foreign currency transactions are included in other (expense) income on our consolidated statements of operations. During fiscal year 2024, 2023 and 2022 , the Company incurred $ 5,184, $ 5,322 and $ 40 of foreign currency losses. F- 9 New Accounting Pronouncements Not Yet Adopted Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which modifies the disclosure and presentation requirements of reportable segments. The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit and loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes. Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and in foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes. Accounting Policies Cash and Cash Equivalents Cash and cash equivalents consist of bank demand accounts, savings deposits, certificates of deposit and commercial paper with original maturities of 90 days or less. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced losses related to these balances and believes it is not exposed to significant credit risk regarding its cash and cash equivalents. The carrying value of these assets approximates fair value due to the short maturity of these instruments and is classified as Level 1 in the fair value hierarchy. Cash held by foreign subsidiaries was $ 68,276 and $ 36,288 at May 31, 2024 and 2023 , respectively. Marketable Securities 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. Changes in fair value are monitored and recorded on a monthly basis and are recorded in other comprehensive (loss) income. 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. As of May 31, 2024 and 2023 , there were no recorded allowance for credit losses related to the marketable securities. This evaluation included a review of the credit quality of the issuers, the financial health of the underlying securities, and the economic environment. The unrealized losses on our marketable securities are primarily related to market fluctuations in the interest rates. As of May 31, 2023, the expected duration of all unrealized losses was less than 12 months. 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. 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 (expense) income on the consolidated statements of operations. F- 10 Marketable Securities as of May 31, 2024 and 2023 are listed below by classification and remaining maturities. Year Ended May 31, Maturity 2024 2023 Commercial Paper & Corporate Bonds 0 - 90 days $ 325 $ 22,552 91 -180 days — 35,692 181 days -1 year — 23,768 1 - 2 years — 317 Total Marketable Securities $ 325 $ 82,329 The components of marketable securities as of May 31, 2024 are as follows: Amortized Cost Unrealized Gains Unrealized Losses Fair Value Commercial Paper & Corporate Bonds $ 325 $ — $ — $ 325 The components of marketable securities as of May 31, 2023 are as follows: Amortized Cost Unrealized Gains Unrealized Losses Fair Value Commercial Paper & Corporate Bonds $ 83,549 $ — $ ( 1,220 ) $ 82,329 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 a major financial institution and has also entered into interest rate swap contracts as a hedge against increases in interest rates. Management settles its foreign currency forward contracts monthly with its one counterparty. There are no collateral or margin requirements as part of these forward contracts. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. For the Company's interest rate swap derivative, the Company designated it as a cash flow 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 (loss) income, and amounts are reclassified into interest expense on the consolidated statements of operations when transactions are realized. Derivatives that are not designated as hedges are adjusted to fair value with a corresponding adjustment to other (expense) income. The Company does not enter into derivative financial instruments for trading or speculative purposes. Use of Estimates 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. The most significant estimates include our evaluation of goodwill impairment, deferred taxes, intangible assets acquired, and fair value measurements. 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. Collateral or other security is generally not required for accounts receivable. As of May 31, 2024, 2023 and 2022, accounts receivable, net was $ 173,005, $ 153,253 and $ 99,674 , respectively, on the consolidated balance sheets. We maintain an allowance for customer accounts that reduces receivables to amounts that are expected to be collected. 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. The provision is recorded within F- 11 operating expenses on the consolidated statements of operations. No customer accounted for more than 10 % of accounts receivable as of May 31, 2024 or 2023 , respectively. The activity in the allowance for credit losses was as follows: Year Ended May 31, 2024 2023 2022 Beginning Balance $ 2,827 $ 1,650 $ 1,400 Provision 1,720 1,460 332 Recoveries ( 191 ) 46 98 Write-offs ( 216 ) ( 329 ) ( 180 ) Ending Balance $ 4,140 $ 2,827 $ 1,650 Inventories Inventories are stated at the lower of cost or net realizable value, determined on the first-in, first-out method. The components of inventories were as follows: Year Ended May 31, 2024 2023 Raw Materials $ 78,799 $ 66,617 Work-in-process 10,990 5,366 Finished goods 111,839 68,099 Inventory reserve ( 12,361 ) ( 6,270 ) Inventory, net $ 189,267 $ 133,812 The Company’s inventories are analyzed for slow moving, expired and obsolete items on a quarterly basis and the inventory reserve is adjusted as required within cost of revenues. Property and Equipment Property and equipment is stated at cost. 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, computers and machinery and equipment. Leasehold improvements are amortized over the expected life of the asset or term of the lease, whichever is shorter. Depreciation expense was $ 21,771 , $ 17,292 and $ 14,094 in fiscal years 2024, 2023, and 2022, respectively. During the quarter ended May 31, 2024, the Company reclassified $ 13,684 of capitalized cloud computing software costs from property and equipment. $ 13,140 of this total was reclassified to prepaid expenses and other current assets, with the remaining $ 544 recognized as incremental amortization within general and administrative expense in the consolidated statements of operations. Goodwill and Other Intangible Assets 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. 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, developed technology, 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 and indefinite-lived intangibles are tested for impairment annually in the fourth quarter of our fiscal year. 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. F- 12 Amortizable other 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 Management reviews the carrying values of its long-lived assets to be held and used, including definite-lived intangible assets, for possible impairment whenever events or changes in business conditions warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows over the remaining useful life of the asset are less than the carrying value of the asset. In such an event, fair value is determined using undiscounted cash flows, and if lower than the carrying value, impairment is recognized through a charge to operations. Equity Compensation Plans At May 31, 2024, the Company had stock award plans which are described more fully in Note 8 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 as compensation expense on a straight line basis over the requisite service period and reverse compensation expense due to forfeitures as they occur. Our stock-based compensation expense is reflected in general and administrative expense in our consolidated statements of operations. Research and Development Costs Research and development costs, which consist primarily of compensation costs, administrative expenses and new product development, among other items, are expensed as incurred. Advertising Costs Advertising costs are expensed within sales and marketing as incurred and totaled $ 3,301 , $ 2,548 and $ 2,018 in fiscal years 2024, 2023 and 2022 , respectively. Leases The Company recognizes, in the consolidated balance sheets, 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 evaluate our contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option. We have made certain assumptions and judgments when accounting for leases, the most significant of which are: • We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset. • For all asset classes, we elected to not recognize a right-of-use asset and lease liability for short-term leases (i.e. leases with a term of 12 months or less). • 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 fully collateralized and amortized basis over a similar term an amount equal to the lease payments. F- 13 Revenue Recognition We determine the amount of revenue to be recognized through application of the following steps: • Identification of the contract with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenue when or as the Company satisfies the performance obligations. 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. We generally recognize revenue at a point in time when all of our performance obligations under the terms of a contract are satisfied. Revenue is recognized upon transfer of control of promised products or services in an amount that reflects the consideration we expect to receive in exchange for those products or services. The collectability of consideration on the contract is reasonably assured before revenue is recognized. To the extent that customer payment has been received before all recognition criteria are met, these revenues are initially deferred in current liabilities on the consolidated balance sheets and the revenue is recognized in the period that all recognition criteria have been met. Certain agreements with customers include discounts or rebates on the sale of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified threshold of goods and services. We account for these discounts as variable consideration and estimate the likelihood of a customer meeting the threshold in order to determine the transaction price using the most predictive approach. We typically use the most-likely-amount method, for incentives that are offered to individual customers, and the expected-value method, for programs that are offered to a broad group of customers. Variable consideration reduces the amount of revenue that is recognized. Rebate obligations related to customer incentive programs are recorded in other current liabilities on the consolidated balance sheets. 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. Management has elected to utilize the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred because the amortization period for the prepaid costs that would otherwise have been deferred and amortized is one year or less. 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. These expenses totaled $ 25,290 , $ 18,513 , and $ 17,482 in fiscal years 2024, 2023 and 2022 , respectively. Revenue is recognized net of any tax collected from customers. The taxes are subsequently remitted to governmental authorities. 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. While these situations are infrequent, due to immateriality of the amount, warranty claims are recorded in the period incurred. Business Combinations The Company utilizes the acquisition method of accounting for business combinations. This method requires, among other things, that results of operations of acquired companies are included in the Company'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. Valuation specialists are used to develop and evaluate the appropriateness of the fair value estimates, often utilizing cash flow projections and other related valuation techniques. 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. Loss Contingencies Various legal actions, proceedings, and claims (generally, “matters”) are pending or may be instituted or asserted against the Company. The Company accrues for matters when losses are deemed probable and reasonably estimable. However, the ultimate resolutions of these matters are inherently unpredictable and could require payment substantially in excess of the amounts that have been accrued or disclosed. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified. F- 14 2. Revenue Recognition The Company derives revenue from two primary sources — product revenue and service revenue. Product revenue consists primarily of shipments of: • Diagnostic test kits, culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation; • Consumable products marketed to veterinarians, retailers, livestock producers and animal health product distributors; and • 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. Revenues for Neogen’s products are recognized and invoiced when the product is shipped to the customer. Service revenue consists primarily of: • Genomic identification and related interpretive bioinformatic services; and • 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 . 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 on the consolidated balance sheets. As of May 31, 2022 , deferred revenue was $ 5,460 within the consolidated balance sheets. During fiscal year 2024 and 2023 , the Company recorded additions of $ 13,267 and $ 11,046 to deferred revenue, respectively. During fiscal year 2024 and 2023 , the Company recognized $ 13,251 and $ 11,890 , 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. Revenues for these products are recognized and invoiced when the product is shipped to the customer. These products were 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 Company has completed the exit of distribution and back office-related service contracts and currently only has a contract manufacturing agreement in place with 3M for certain products. F- 15 The following table presents disaggregated revenue by major product and service categories for the years ended May 31, 2024, 2023 and 2022: Year Ended May 31, 2024 2023 2022 Food Safety: Natural Toxins & Allergens $ 82,240 $ 82,567 $ 79,395 Bacterial & General Sanitation 171,217 134,934 47,282 Indicator Testing, Culture Media & Other 334,636 267,178 75,278 Rodent Control, Insect Control & Disinfectants 42,965 39,655 35,691 Genomics Services 24,283 22,463 22,333 $ 655,341 $ 546,797 $ 259,979 Animal Safety: Life Sciences 6,515 6,254 5,685 Veterinary Instruments & Disposables 65,848 63,843 63,938 Animal Care & Other 36,978 39,068 39,805 Rodent Control, Insect Control & Disinfectants 88,732 87,423 83,610 Genomics Services 70,808 79,062 74,142 $ 268,881 $ 275,650 $ 267,180 Total Revenue $ 924,222 $ 822,447 $ 527,159 3. 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 ("RSUs"). The following table presents the net (loss) income per share calculations: Year Ended May 31, 2024 2023 2022 Numerator for basic and diluted net (loss) income per share — Net (Loss) Income $ ( 9,421 ) $ ( 22,870 ) $ 48,307 Denominator for basic net (loss) income per share — Weighted average shares 216,481,878 188,880,836 107,684,000 Effect of dilutive stock options and restricted stock units - - 336,000 Denominator for diluted net (loss) income per share 216,481,878 188,880,836 108,020,000 Net (loss) income attributable per share Basic $ ( 0.04 ) $ ( 0.12 ) $ 0.45 Diluted $ ( 0.04 ) $ ( 0.12 ) $ 0.45 Due to the net loss in fiscal 2024 and 2023, the stock options and RSUs are anti-dilutive. At May 31, 2024 and May 31, 2023 , approximately 332,025 and 147,671 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. 4. Leases We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating and finance leases. Supplemental balance sheet information related to operating and finance leases was as follows: Year Ended May 31, 2024 2023 Rights of use - non-current assets $ 14,785 $ 11,933 Lease liabilities - other current liabilities $ 5,101 $ 3,277 Lease liabilities - non-current liabilities $ 10,300 $ 8,812 Property and equipment $ 2,423 — Current portion of finance lease $ 2,447 — F- 16 The weighted average remaining lease term and weighted average discount rate were as follows: Year Ended May 31, 2024 2023 Operating Leases Weighted average remaining lease term 3.9 years 4.7 years Weighted average discount rate 5.6 % 4.7 % Financing Lease Weighted average remaining lease term 0.3 years — Weighted average discount rate 6.1 % — Operating lease expenses are classified as cost of revenues or operating expenses on the consolidated statements of operations. The components of lease expense were as follows: Year ended May 31, 2024 2023 Operating leases $ 4,510 $ 2,097 Short term leases 625 460 Financing lease expense: Amortization of asset 219 — Interest on lease liability 12 — Total lease expense $ 5,366 $ 2,557 Supplemental cash flow information is as follows: Year Ended May 31, 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 4,714 $ 2,139 $ 1,407 Operating cash flows for finance leases $ 12 — — Financing cash flows for finance leases $ 192 — — Non-cash assets obtained in exchange for lease obligations: Operating leases $ 5,562 $ 11,192 — Finance leases $ 2,642 — — Future lease payments as of May 31, 2024 are as follows: Operating Finance Years ending May 31, Leases Lease 2025 $ 5,263 $ 2,454 2026 4,788 — 2027 3,450 — 2028 2,282 — 2029 1,233 — 2030 and thereafter 1,006 — Total lease payments $ 18,022 $ 2,454 Less: imputed interest ( 2,621 ) ( 7 ) Total lease liabilities $ 15,401 $ 2,447 F- 17 5. Goodwill and Other Intangible Assets Goodwill Management completed the annual impairment analysis of goodwill using a third-party quantitative and qualitative assessment as of the first day of the fourth quarter of fiscal year 2024. The Animal Safety reporting unit was tested by utilizing a qualitative assessment. The fair value of the Food Safety 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 2024 and 2023. Under the quantitative approach, fair value of the reporting unit is estimated based on a combination of an income-based approach consisting of a discounted cash flows analysis and the use of a market-based approach consisting of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of the reporting unit. Management develops its discounted cash flows analysis based on information available as of the date of our assessment, using assumptions such as forecasted revenue growth rates and gross margin assumptions that are discounted to present value. Management typically assigns more weight to the income-based valuation method. Management also evaluates the fair value estimates of the reporting units in the context of the Company’s total enterprise market value. The following table summarizes goodwill by reportable segment: Food Safety Animal Safety Total Balance, May 31, 2022 $ 67,558 $ 75,146 $ 142,704 Acquisitions 1,985,476 6,783 1,992,259 Foreign currency translation and other 3,127 ( 594 ) 2,533 Balance, May 31, 2023 $ 2,056,161 $ 81,335 $ 2,137,496 Acquisitions 250 — 250 Foreign currency translation and other ( 2,206 ) 92 ( 2,114 ) Balance, May 31, 2024 $ 2,054,205 $ 81,427 $ 2,135,632 Intangible Assets Definite-lived intangible assets consisted of the following and are included in amortizable intangible assets within the consolidated balance sheets: Gross Carrying Amount Less Accumulated Amortization Net Carrying Amount Licenses $ 14,407 $ 7,214 $ 7,193 Covenants not to compete 487 425 62 Patents 7,692 3,770 3,922 Customer relationships intangibles 1,244,790 140,963 1,103,827 Trade names and trademarks 124,328 11,407 112,921 Developed technology 307,560 41,150 266,410 Other product and service-related intangibles 23,947 6,629 17,318 Balance, May 31, 2024 $ 1,723,211 $ 211,558 $ 1,511,653 Licenses $ 16,010 $ 6,763 $ 9,247 Covenants not to compete 488 384 104 Patents 8,499 4,865 3,634 Customer relationships intangibles 1,244,635 81,577 1,163,058 Trade names and trademarks 111,172 3,583 107,589 Developed technology 309,609 20,175 289,434 Other product and service-related intangibles 23,628 5,907 17,721 Balance, May 31, 2023 $ 1,714,041 $ 123,254 $ 1,590,787 F- 18 Amortization expense for intangibles totaled $ 94,946 , $ 71,085 , and $ 9,600 in fiscal years 2024, 2023, and 2022 , respectively. During fiscal year 2024 and 2023, the Company recorded an impairment of $ 556 and $ 2,109 , respectively, to its amortizable licenses related to discontinued product lines. Estimated approximate amortization expense for the next five fiscal years and thereafter is as follows: 2025—$ 96,000 , 2026—$ 96,000 , 2027—$ 95,000 , 2028—$ 95,000 , 2029—$ 91,000 and thereafter—$ 1,039,000 . If actual market conditions or the Company’s performance are less favorable than those projected by management, or if events occur or circumstances change that would reduce the fair value of the Company’s goodwill or intangible assets below the amount reflected in the balance sheet, the Company may be required to conduct an interim test and possibly recognize impairment charges on its goodwill or intangible assets, which could be material, in future periods. The amortizable intangible assets' useful lives are as follows: Useful Lives Range Licenses 2 - 20 years Covenants not to compete 3 - 10 years Patents 5 - 25 years Customer relationships intangibles 9 - 20 years Trade names and trademarks 10 - 25 years Developed technology 10 - 20 years Other product and service-related intangibles 5 - 15 years 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. 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. This impairment was recorded in the Company's Food Safety segment within operating expenses. Management completed the annual impairment analysis of intangible assets with indefinite lives using a qualitative assessment for fiscal year 2023 . Other than the impairment in fiscal year 2023 related to the discrete trademarks discussed above, management determined that other recorded amounts were not impaired and that no additional impairment charges were necessary. In fiscal year 2024, the non-amortizable intangible assets were reclassified to definite-lived intangible assets. In conjunction with the reclassification, management completed an impairment analysis of the intangible assets using a qualitative assessment and determined that recorded amounts were not impaired. 6. Business Combinations The consolidated statements of operations 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. Fiscal 2022 CAPInnoVet, Inc. 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 throughout fiscal year 2024 and 2023, the Company recognized a loss of $ 300 and a gain of $ 300 , respectively, on the performance milestone liability, recorded within other expense. The business is operated from our location in Lexington, KY, reporting within the Animal Safety segment. F- 19 Delf Ltd. 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. 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. Genetic Veterinary Sciences, Inc. 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 expanded 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 the Company's location in Lincoln, Nebraska, 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. Fiscal 2023 Thai-Neo Biotech Co., Ltd. Acquisition 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 $ 1,581 in net cash, with $ 1,310 paid at closing, $ 37 paid on November 29, 2022 as a working capital adjustment and $ 234 paid 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. 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. In the first quarter of fiscal 2024, $ 8,000 of the escrow balance was released to Corvium, Inc. In the third quarter of fiscal 2024, the remaining escrow balance was released to Corvium, Inc. 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 fiscal year 2024, the first milestone period occurred, resulting in no performance milestone payment. In the first quarter of fiscal 2024, the Company recorded an increase to intangible assets of $ 100 , based on finalization of 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 customers and the expertise and reputation of the assembled workforce. These values are Level 3 fair value measurements. The final purchase price allocation, based upon the fair value of these assets acquired and liabilities assumed, which was determined using the income approach, is summarized in the following table: F- 20 Prepaids and other current assets $ 66 Property, plant and equipment 13 Intangible assets 10,280 Deferred revenue ( 1,827 ) Adjustment of annual license prepaid ( 419 ) Other non-current liabilities ( 930 ) Total identifiable assets and liabilities acquired 7,183 Goodwill 16,884 Total purchase consideration $ 24,067 For each completed acquisition listed above, the revenues and net income were not considered material and were therefore not disclosed. F- 21 3M Food Safety Transaction On September 1, 2022, Neogen, 3M and Neogen Food Safety Corporation, formerly named Garden SpinCo, a subsidiary created to carve out 3M’s FSD, closed on a 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 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 non-cash consideration of $ 1 billion, funded by the additional financing obtained by Garden SpinCo and assumed by the Company as part of the transaction. See Note 7. "Long-Term Debt" for further detail on the debt incurred. In the first quarter of fiscal 2024, the Company recorded adjustments to goodwill and intangible assets, based on third-party advisor's valuation work and fair value estimates, resulting in an increase to goodwill and a decrease to the intangible assets balance. The Company also recorded adjustments to deferred tax liabilities, which increased the balance, based on finalization of entity income tax provisions. 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 not 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 final purchase price allocation, based upon the fair value of these assets acquired and liabilities assumed, which was determined using the income approach, is summarized in the following table: Cash and cash equivalents $ 319 Inventories 18,403 Other current assets 14,855 Property, plant and equipment 25,832 Intangible assets 1,559,805 Right of use asset 882 Lease liability ( 885 ) Deferred tax liabilities ( 352,636 ) Other liabilities ( 2,832 ) Total identifiable assets and liabilities acquired 1,263,743 Goodwill 1,974,870 Total purchase consideration $ 3,238,613 The following table summarizes the intangible assets acquired and the useful life of these assets. Fair Value Useful Life in Years Trade Names and Trademarks $ 108,434 25 Developed Technology 277,650 15 Customer Relationships 1,173,721 20 Total intangible assets acquired $ 1,559,805 F- 22 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. 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 operations for all periods presented: Year Ended May 31, 2023 2022 Net revenue $ 919,959 $ 910,978 Operating income $ 44,373 $ 42,258 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. The Company has completed the exit of distribution and back office-related service contracts and currently only has a contract manufacturing agreement in place for Petrifilm ® products; the initial term of which expires in September 2026. 7. Long-Term Debt The Company’s long-term debt consists of the following: May 31, 2024 May 31, 2023 Term Loan $ 550,000 $ 550,000 Senior Notes 350,000 350,000 Finance Lease 2,447 — Total debt and finance lease 902,447 900,000 Less: Current portion ( 2,447 ) — Total non-current debt 900,000 900,000 Less: Unamortized debt issuance costs ( 11,609 ) ( 14,561 ) Total non-current debt, net $ 888,391 $ 885,439 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 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. 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, 2024. 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, 2024 , the interest rates ranged from 7.42 % to 7.68 % per annum. The term loan facility matures on June 30, 2027 and the revolving facility F- 23 matures at the earlier of June 30, 2027 or the termination of the revolving commitments. In accordance with the prepayment feature, the Company paid $ 100,000 of the term loan facility’s principal in fiscal year 2023. 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. The Company has a $ 150,000 revolving credit facility with any amount outstanding to be repaid on or before the termination date of the revolving commitments. In fiscal year 2023, 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 operations 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 $ 489 and $ 366 during the twelve months ended May 31, 2024 and 2023, respectively. As of May 31, 2024 and May 31, 2023 , the Company had $ 1,506 and $ 1,995 , respectively, of unamortized debt issuance costs. The Company must pay an annual commitment fee ranging from 0.20 % and 0.35 % on the unused portion of the revolving facility, paid quarterly. As of May 31, 2024 , the commitment fee was 0.35 %. During the twelve months ended May 31, 2024 and 2023 , $ 501 and $ 473 was recorded as interest expense in the consolidated statements of operations. There was no accrued interest payable on the term loan as of May 31, 2024 . In fiscal year 2023, 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 $ 2,117 and interest expense of $ 42,152 (excluding swap credit of $ 3,002 ) for the term loan was included in the consolidated statements of operations during the twelve months ended May 31, 2024 . 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 operations during the twelve months ended May 31, 2023. As of May 31, 2024 and May 31, 2023 , the Company had $ 6,527 and $ 8,644 , respectively, of unamortized debt issuance costs. Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. As of May 31, 2024, the Company was in compliance with its debt covenants. Senior Notes 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, 2024 based on the stated interest rate of 8.625 %. This amount was included in current liabilities on the consolidated balance sheets. In fiscal year 2023, 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 $ 835 and interest expense of $ 30,188 for the Notes was included in the consolidated statements of operations during the twelve months ended May 31, 2024 . 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 operations during the twelve months ended May 31, 2023. As of May 31, 2024 and May 31, 2023 , the Company had $ 5,082 and $ 5,917 , respectively, of unamortized debt issuance costs. There are no required principal payments on the term loan facility or the Notes through fiscal year 2026, due to $ 100,000 in prepayments made on the term loan facility in fiscal 2023. The weighted average interest rate on the Company's long-term F- 24 debt was 7.71 % as of May 31, 2024 . The expected maturities associated with the Company’s outstanding debt as of May 31, 2024, were as follows: Amount Fiscal Year 2025 $ 2,350 2026 — 2027 34,063 2028 515,937 2029 — Thereafter 350,000 Total $ 902,350 Finance Lease The finance lease is a building lease that is classified within property and equipment and the current portion of debt on the consolidated balance sheets as of May 31, 2024 . The Company intends to elect the purchase option within the lease agreement prior to the end of the lease term. 8. Equity Compensation Plans and Other Incentive Compensation 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 and 2023 Omnibus Incentive Plans. These options are granted at an exercise price equal to 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 fair value of the options was estimated at the date of the grant using the Black-Scholes option pricing model. The Company granted restricted stock units (RSUs) under the terms of the 2018 and 2023 Omnibus Incentive Plans, which vest ratably over three and five year periods. 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 16,778,458 at May 31, 2024 , 2,871,000 at May 31, 2023 , and 5,386,000 at May 31, 2022. Compensation expense related to share-based awards was $ 13,768 , $ 10,177 , and $ 7,154 in fiscal years 2024, 2023 and 2022, respectively. Options (option amounts in thousands) Options Weighted-Average Exercise Price Weighted-Average Grant Date Fair Value Outstanding at May 31, 2021 ( 643 exercisable) 2,957 $ 27.98 $ 6.98 Granted 615 36.42 8.49 Exercised ( 281 ) 22.79 6.29 Forfeited ( 47 ) 33.93 8.02 Outstanding at May 31, 2022 ( 1,191 exercisable) 3,244 32.13 7.66 Granted 1,704 14.68 4.61 Exercised ( 22 ) 14.78 4.23 Forfeited ( 704 ) 29.81 7.26 Outstanding at May 31, 2023 ( 1,401 exercisable) 4,222 25.56 6.51 Granted 1,949 15.43 5.98 Exercised ( 11 ) 13.61 4.44 Forfeited ( 1,224 ) 30.27 7.26 Outstanding at May 31, 2024 ( 1,518 exercisable) 4,936 20.41 6.12 F- 25 The following is a summary of stock options outstanding at May 31, 2024: Options Outstanding Options Exercisable Average (option amounts in thousands) Contractual Life Weighted-Average Weighted-Average Range of Exercise Price Number (in years) Exercise Price Number Exercise Price $ 12.20 - $ 20.00 3,399 5.9 $ 14.64 515 $ 13.73 $ 20.01 - $ 28.00 96 5.0 24.23 83 23.74 $ 28.01 - $ 36.00 1,140 1.3 31.89 795 32.03 $ 36.01 - $ 42.15 301 2.4 40.94 125 41.00 4,936 4.6 $ 20.41 1,518 $ 26.11 The weighted average exercise price of shares subject to options that were exercisable at May 31, 2023 and 2022 was $ 31.54 and $ 30.24 , respectively. Remaining compensation cost to be expensed in future periods for non-vested options was $ 14,427 at May 31, 2024 , with a weighted average expense recognition period of 2.0 years. Year Ended May 31, 2024 2023 2022 Aggregate intrinsic value of options outstanding $ 55 $ 6,154 $ 850 Aggregate intrinsic value of options exercisable $ 5 $ 42 $ 817 Aggregate intrinsic value of options exercised $ 37 $ 73 $ 5,507 The fair value of stock options granted was estimated using the following weighted-average assumptions: Year Ended May 31, 2024 2023 2022 Risk-free interest rate 4.7 % 3.3 % 0.4 % Expected dividend yield 0.0 % 0.0 % 0.0 % Expected stock volatility 37.3 % 34.0 % 32.8 % Expected option life 4.5 years 4.5 years 3.12 years 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 2024, 2023 and 2022 , 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 . F- 26 Restricted Stock Units The remaining weighted-average period for the Company's outstanding RSUs is 2.1 years. On May 31, 2024 , there was $ 12,292 in unamortized compensation cost related to non-vested RSUs. The fair value of restricted stock units vested during fiscal years 2024, 2023 and 2022 was $ 3,835 , $ 820 and $ 1,032 , respectively. (RSU amounts in thousands) RSUs Weighted Average Grant Date Fair Value Outstanding at May 31, 2022 257 $ 36.14 Granted 596 13.83 Released ( 60 ) 35.14 Forfeited ( 27 ) 22.81 Outstanding at May 31, 2023 766 19.30 Granted 574 15.55 Released ( 230 ) 18.53 Forfeited ( 149 ) 19.98 Outstanding at May 31, 2024 961 17.17 The weighted average grant date fair value of the fiscal year 2022 awards was $ 37.28 . 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. The discount is recorded in general and administrative expense. Total individual purchases in any year are limited to 10 % of compensation. Shares purchased by employees through this program were 134,810 in fiscal 2024 , 94,604 in fiscal 2023 , and 43,456 in fiscal 2022. As of May 31, 2024 , common stock totaling 746,513 of the 1,000,000 authorized shares remained reserved for issuance under the plan. Defined Contribution Benefit Plan and Bonus Compensation The Company maintains a defined contribution 401(k) benefit plan covering substantially all domestic employees. 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. Neogen’s expense under this plan was $ 3,368 , $ 2,439 , and $ 1,834 in fiscal years 2024, 2023 and 2022, respectively. The Company also offers an annual bonus opportunity to certain employees, as an additional component of their compensation. Amounts are determined based on company performance and employee performance. The bonus amounts earned during fiscal year 2024 will be paid to employees in the first quarter of fiscal 2025. As of May 31, 2024 and 2023 , the Company had an accrued bonus of $ 8,056 and $ 8,734 , respectively, recorded within accrued compensation on the consolidated balance sheets. 9. Income Taxes Income before income taxes by source consists of the following amounts: Year Ended May 31, 2024 2023 2022 U.S. $ ( 92,161 ) $ ( 85,681 ) $ 38,554 Foreign 77,856 63,639 21,653 $ ( 14,305 ) $ ( 22,042 ) $ 60,207 F- 27 The provision for income taxes consists of the following: Year Ended May 31, 2024 2023 2022 Current Domestic Federal $ 6,800 $ 8,674 $ 8,579 Change in tax-related uncertainties 1,896 278 3 State 1,495 1,616 2,406 Foreign 14,413 9,490 5,140 Total Current 24,604 20,058 16,128 Deferred Domestic Federal ( 22,457 ) ( 17,406 ) ( 3,721 ) State ( 4,881 ) ( 1,865 ) ( 356 ) Foreign ( 2,150 ) 41 ( 151 ) Total Deferred ( 29,488 ) ( 19,230 ) ( 4,228 ) Income tax (benefit) expense $ ( 4,884 ) $ 828 $ 11,900 The reconciliation of income taxes computed at the U.S. federal statutory tax rate to income tax expense is as follows: Year Ended May 31 , 2024 2023 2022 Tax at U.S. statutory rate $ ( 3,004 ) $ ( 4,629 ) $ 12,643 Permanent differences 273 325 179 Global intangible low-taxed income (GILTI) 7,082 6,482 1,501 Foreign derived intangible income deduction (FDII) ( 376 ) ( 643 ) ( 1,308 ) Foreign rate differential ( 3,951 ) ( 3,742 ) 215 Subpart F income 1,178 152 397 Tax-effect from stock-based compensation 2,256 1,946 ( 462 ) Provision for state income taxes, net of federal benefit ( 2,693 ) 18 1,517 Non-deductible acquisition expenses — 7,187 — Tax credits ( 7,739 ) ( 6,709 ) ( 2,527 ) Impact of tax rate changes — — 583 Change in tax-related uncertainties 1,896 278 3 Changes in valuation allowances ( 534 ) 355 85 Research expenditures deduction ( 293 ) ( 365 ) ( 112 ) Other 1,021 173 ( 814 ) Income tax (benefit) expense $ ( 4,884 ) $ 828 $ 11,900 Foreign tax credits, primarily offsetting taxes associated with Subpart F and GILTI income, were $ 7,124 , $ 5,324 , and $ 1,747 in fiscal years 2024, 2023, and 2022 , respectively. The Company’s research and development credits were $ 615 , $ 1,385 , and $ 780 in fiscal years 2024, 2023, and 2022, respectively. F- 28 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. Significant components of our deferred income tax liabilities and assets are as follows: Year Ended May 31, 2024 2023 Deferred income tax liabilities Indefinite and long-lived assets $ ( 356,971 ) $ ( 369,500 ) Right of use asset ( 3,673 ) ( 1,834 ) Prepaid expenses ( 1,401 ) ( 1,480 ) ( 362,045 ) ( 372,814 ) Deferred income tax assets Interest expense not currently deductible 13,994 5,782 Research and experimentation capitalization 7,230 5,868 Stock options 2,228 2,192 Inventories and accounts receivable 5,597 3,219 Tax loss carryforwards 5,580 3,909 Lease liability 3,841 1,899 Accrued expenses and other 2,171 1,981 40,641 24,850 Valuation allowance ( 1,526 ) ( 2,110 ) Net deferred income tax liabilities $ ( 322,930 ) $ ( 350,074 ) Net deferred income tax assets (jurisdictional) - other non-current assets $ 3,788 $ 3,353 Net deferred income tax liabilities (jurisdictional) ( 326,718 ) ( 353,427 ) Net deferred income tax liabilities $ ( 322,930 ) $ ( 350,074 ) The Company has the following net operating loss carryforwards: As of May 31, 2024 Expiry U.S. $ 155 2038 Foreign 18,068 2025 to Indefinite $ 18,223 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. Management evaluates all available evidence, both positive and negative, when determining the need for a valuation allowance. Valuation allowances related to net operating losses are primarily evaluated based on evidence (or lack thereof) of historical and future earnings. Valuation allowances related to long-lived assets primarily are evaluated based on management’s tax planning and intentions for underlying assets. We are subject to income taxes in the U.S. (federal and state) and in numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. 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 $ 246 at May 31, 2024 , $ 145 at May 31, 2023 , and $ 69 at May 31, 2022. Of the total unrecognized tax benefits at May 31, 2024 and 2023 , $ 2,739 and $ 1,087 , respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate. F- 29 The reconciliation of our unrecognized tax benefits is as follows: Year Ended May 31, 2024 2023 2022 Beginning balance $ 946 $ 741 $ 764 Increase/(decrease) related to prior periods ( 47 ) 2 ( 75 ) Increase related to current period 2,004 479 147 Lapses of applicable statute of limitations ( 164 ) ( 276 ) ( 95 ) Ending balance $ 2,739 $ 946 $ 741 The Company is no longer subject to examination by the Internal Revenue Service for fiscal year 2020 and preceding years. As of May 31, 2024, the Company has approximately $ 221,707 of undistributed earnings in its foreign subsidiaries. Approximately $ 88,746 of these earnings are no longer considered permanently reinvested. The incremental tax cost to repatriate these earnings to the US is insignificant. The Company has not provided deferred taxes on approximately $ 132,961 of undistributed earnings from non-U.S. subsidiaries as of May 31, 2024 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. 10. Commitments and Contingencies The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for related costs, including legal 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 approximately $ 60 to $ 130 per year over the past five years. The Company’s estimated remaining liability for these costs was $ 916 at both May 31, 2024 and 2023 , 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. In fiscal 2022, in collaboration with the WDNR, the Company initiated an in-situ chemical remediation pilot study, which ran over a two-year period. The results of this study were submitted to the WDNR as part of our standard annual report. If the WDNR were to require a change from the current pump and treat remediation strategy, this change 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 in other current liabilities , and the remaining $ 816 is recorded in other non-current liabilities in the consolidated balance sheet as of May 31, 2024 and 2023. In the third quarter of fiscal year 2024, the Company received $ 1,265 of business interruption insurance proceeds relating to fire damage that occurred in the fourth quarter of fiscal year 2023 at one of our Animal Safety lab facilities. The proceeds were recorded within Cost of Revenues in the consolidated statements of operations. 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. In the fourth quarter of fiscal year 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. F- 30 The Company has agreements with unrelated third parties that provide for the payment of royalties on the sale of certain products. Royalty expense, recorded in sales and marketing, under the terms of these agreements was $ 3,250 , $ 3,392 and $ 1,999 for fiscal years 2024, 2023 and 2022 , respectively. Some of these agreements provide for guaranteed minimum royalty payments to be paid each fiscal year by the Company for certain technologies. Future minimum royalty payments are as follows: 2025—$ 294 , 2026—$ 329 , 2027—$ 354 , 2028—$ 562 , and 2029—$ 60 . 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. 11. Fair Value and Derivatives 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: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: 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. Items Measured at Fair Value on a Recurring Basis The Company has marketable securities held by banks or broker-dealers consisting of commercial paper and corporate bonds. These securities are recorded at fair value based on recent trades or pricing models and therefore meet the Level 2 criteria. For further information, refer to Note 1. "Summary of Significant Accounting Policies". The Company forecasts its net exposure in various receivables and payables to fluctuations in the value of various currencies, and has 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 (expense) income in our consolidated statements of operations. The notional amount of forward contracts in place was $ 70,315 and $ 15,500 as of May 31, 2024 and 2023, respectively, and consisted of foreign currency hedges of transactions up to July 2024. Fair Value of Derivatives Not Designated as Hedging Instruments Balance Sheet Location May 31, 2024 May 31, 2023 Foreign currency forward contracts, net Prepaid expenses and other current assets (Other current liabilities) $ ( 265 ) $ 140 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 May 31, 2024 May 31, 2023 Interest rate swaps – current Other current assets $ 2,222 $ 2,087 Interest rate swaps – non-current Other non-current assets (liabilities) 229 ( 4,770 ) F- 31 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 5. "Goodwill and Other Intangible Assets" and Note 6 “Business Combinations”. Items Not Carried at Fair Value Fair values of the Company’s Term Loan and Senior Notes were as follows: May 31, 2024 Aggregate fair value 923,170 Aggregate carrying value (1) 900,000 (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 Derivatives Not Designated as Hedging Instruments The location and amount of gains from derivatives not designated as hedging instruments in our consolidated statements of operations were as follows: Location in statements Year Ended May 31, Derivatives Not Designated as Hedging Instruments of (loss) income May 31, 2024 May 31, 2023 May 31, 2022 Foreign currency forward contracts Other (expense) income $ 88 $ ( 10,092 ) $ 1,218 Derivatives Designated as Hedging Instruments In November 2022, we entered into a receive-variable, pay-fixed interest rate swap agreement with a $ 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, 2024 was a net asset of $ 2,452 . The Company expects to reclassify a $ 1,689 gain of accumulated other comprehensive (loss) income into earnings in the next 12 months. As of May 31, 2024 and 2023 , the amounts recorded in accumulated other comprehensive (loss) income were $ 1,864 and ($ 2,039 ), respectively. The following table summarizes the other comprehensive (loss) income before reclassifications of derivative gains and losses: Other Comprehensive Income (Loss) Before Reclassifications Year Ended May 31, Derivatives Designated as Hedging Instruments 2024 2023 2022 Interest rate swaps $ 6,184 $ ( 1,599 ) $ — The following table summarizes the reclassification of derivative gains and losses into net (loss) income from accumulated other comprehensive (loss) income: Gain (Loss) Reclassified Location of Gain Year Ended May 31, Derivatives Designated as Hedging Instruments Reclassified 2024 2023 2022 Interest rate swaps Interest expense $ 2,281 $ 440 $ — F- 32 12. Segment Information The Company has two reportable segments: Food Safety and Animal Safety. The Food Safety segment is primarily engaged in the development, production and marketing of diagnostic test kits and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation. The Animal Safety segment is primarily engaged in the development, production and marketing of products dedicated to animal safety, including a complete line of consumable products marketed to veterinarians and animal health product distributors. This segment also provides genomic identification and related interpretive bioinformatic 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. Many of our international operations originally focused on the Company’s 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, 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 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 reports through the Animal Safety segment. While Neogen was operating under a distribution services agreement with 3M, all revenue of 3M FSD products were reported through the Food Safety segment. Since the review of 3M FSD revenue occurs on a global scale, revenue of these products occurring in Australia and New Zealand will continue to report through the Food Safety segment, despite now occurring at Neogen Australasia. The accounting policies of each of the segments are the same as those described in Note 1. "Summary of Significant Accounting Policies". F- 33 Segment information is as follows: Food Safety Animal Safety Corporate and Eliminations (1) Total Fiscal 2024 Total revenues to external customers $ 655,341 $ 268,881 — $ 924,222 Operating income (loss) 82,446 39,320 ( 63,103 ) 58,663 Depreciation and amortization 102,328 14,389 — 116,717 Interest expense — — 73,394 73,394 Total assets 4,035,257 342,640 170,936 4,548,833 Expenditures for long-lived assets 93,036 18,385 — 111,421 Fiscal 2023 Total revenues to external customers $ 546,797 $ 275,650 — $ 822,447 Operating income (loss) 60,414 43,332 ( 66,231 ) 37,515 Depreciation and amortization 76,841 11,536 — 88,377 Interest expense — — 55,961 55,961 Total assets 3,970,356 338,507 245,569 4,554,432 Expenditures for long-lived assets 52,169 13,588 — 65,757 Fiscal 2022 Total revenues to external customers $ 259,979 $ 267,180 — $ 527,159 Operating income (loss) 38,581 52,546 ( 32,509 ) 58,618 Depreciation and amortization 13,386 10,308 — 23,694 Interest expense — — 72 72 Total assets 304,461 307,417 381,051 992,929 Expenditures for long-lived assets 7,842 16,939 — 24,781 (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. The following table presents the Company’s revenue disaggregated by geographical location. Year Ended May 31, 2024 2023 2022 Domestic $ 465,242 $ 424,005 $ 317,820 International 458,980 398,442 209,339 Total Revenue $ 924,222 $ 822,447 $ 527,159 The following table presents the Company's net property and equipment amounts disaggregated by country. Year Ended May 31, 2024 2023 United States $ 209,778 $ 130,967 United Kingdom 19,231 20,123 Other 48,095 47,659 Total Property, Plant, and Equipment $ 277,104 $ 198,749 F- 34