What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-07-27 compared with 2021-07-30 · 359 added, 343 removed, 793 unchanged (47% of the section changed)

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

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

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

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

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

OTHER INFORMATION—NONE

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS—NOT APPLICABLE

Report of Independent Registered Public Accounting Firm

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Neogen Corporation

Grand Rapids, Michigan

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, 2021, based on criteria established in Internal Control — Integrated Framework (2013)

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

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

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of May 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended May 31, 2021, and the related notes and our report dated July 30, 2021 expressed an unqualified opinion thereon.

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

Basis for Opinion

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July 27, 2022

OTHER INFORMATION—NONE

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS—NOT APPLICABLE

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding the Company and certain corporate governance matters appearing under the captions “Proposal 1—Election of Directors,” “Information About the Board and Corporate Governance Matters,” and “Miscellaneous-Delinquent Section 16(a) Reports” is incorporated by reference to Neogen’s 2021 proxy statement to be filed within 120 days of May 31, 2021.

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

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

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

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

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

Information About Our Executive Officers

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President & Chief Executive Officer

Vice President, Animal Safety Sales

Donofrio, Ph.D.

Vice President, Research & Development

Vice President, Animal Safety Operations

Vice President, North American Operations

Vice President & Chief Commercial Officer

Vice President & Chief Operating Officer

Vice President, International Business

Vice President & Chief Human Resources Officer

Marylinn Munson

Vice President, Agrigenomics

Vice President & Chief Financial Officer

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He left Ralston Purina in 2004.

Corbett, age 52, joined Neogen in December 1993 as a sales representative in the Animal Safety operation based in Lexington, Kentucky.

Prior to joining Neogen, he worked for the Marriott Corporation in sales and operations.

He has served in various sales, marketing and operational roles in the Neogen Animal Safety segment.

He was named Vice President, Animal Safety Sales in October 2014, responsible for all Animal Safety revenues, excluding Genomics and Life Sciences.

Donofrio, age 49, joined Neogen in February 2016 as Director of Microbiology Research and Development, and was promoted to Director of Food Safety Research and Development in December 2016.

In April 2018, Dr.

Donofrio was named Vice President, Food Safety Research and Development.

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

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

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

Fitzwater, age 48, joined Neogen in April 2018 as Vice President, Animal Safety Operations.

In his role, Mr.

Fitzwater is responsible for manufacturing, quality systems, supply chain, shipping and warehousing for our Animal Safety operations, excluding Genomics.

Prior to joining Neogen, he spent 18 years in positions of increasing responsibility at Ecolab, Inc., including five years as Ecolab’s Vice President of Supply Chain, Global Specialty Sector.

Fitzwater managed Ecolab’s global supply chain for a $750 million business unit with worldwide manufacturing and logistics operations.

Before being named a vice president, he spent four years as a director of operations at Ecolab, managing a group of 450 employees and an annual operating budget of $40 million.

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

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

Jones, age 51, joined Neogen as Chief Commercial Officer on August 17, 2020.

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

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

Prior to joining Neogen, Mr.

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

in April 2022, Dr.

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

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

Mann, age 57, joined Neogen in 2017 as Director of Human Resources and was promoted to Senior Director of Human Resources in June 2019.

On June 1, 2020, Ms.

Mann was named Vice President & Chief Human Resources Officer, with responsibilities for people-focused programs and initiatives for Neogen’s more than 1,800 global employees.

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

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

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

Marylinn Munson, age 57, joined Neogen in May 2020 as Vice President, Agrigenomics.

Munson has held positions with increasing responsibility in sales and operations in the life science, biotechnology and agriculture industries for more than 20 years, with an additional seven years of experience in clinical and research labs.

In the five years prior to joining Neogen, Ms.

Munson was Board Chair at NorthShore Bio, Sr Partner at TNK Associates, LLC (dba Devil Doc Distributors) and provided consulting services at MPower Network.

Her previous positions included VP of Global NGS Informatics at Qiagen, VP of Global Business Development and Sales at Biomatrica, Director of Global Sales Operations and America Sales at Illumina, and Global Market/Business Development Manager at Agilent Technologies.

Quinlan, age 59, joined Neogen in January 2011 as Vice President & Chief Financial Officer and was also Corporate Secretary until March 2021.

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

He was on the audit staff at the public accounting firm Price Waterhouse (now PWC) from 1985-1989.

He was on the audit staff at the public accounting firm Price Waterhouse (now PricewaterhouseCoopers) from 1985-1989.

Rocklin, Ph.D., age 50, joined Neogen in March 2021 as Vice President, General Counsel & Corporate Secretary.

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

In her nearly ten years at

Corning, she held multiple leadership positions within Corning’s Law Department, including Director of Law, M&A and Emerging Innovations.

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

Before Corning, Dr.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item, and pursuant to Regulation 14A of the Exchange Act, is incorporated by reference from the section entitled “Information about the Board and Corporate Governance Matters-Independent Directors” and “-Certain Relationships and Related Party Transactions” in the Company’s definitive Proxy Statement to be filed within 120 days of May 31, 2021.

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

PRINCIPAL ACCOUNTANT FEES AND SERVICES

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EXHIBIT INDEX

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

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

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

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

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

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

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

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

Neogen Corporation 2007 Stock Option Plan as amended and restated (incorporated by reference to Exhibit A to the Registrant’s 2011 Proxy Statement August 31, 2011 filed September 1, 2011).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Listing of Subsidiaries

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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.

President & Chief Executive Officer (Principal Executive Officer)

President & Chief Executive Officer

(Principal Executive Officer)

July 27, 2022

/s/ Steven J.

Vice President & Chief Financial Officer

/s/ Steven J.

(Principal Financial & Accounting Officer)

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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

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

Consolidated Balance Sheets—May 31, 2022 and 2021

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2021 ,

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, 2021, 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, 2021 expressed an unqualified opinion thereon.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at May 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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

, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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

Evaluation of the Accounting for Income Taxes

As described in Notes 1 and 6 to the consolidated financial statements, the Company recorded income tax expense related to U.S.

and Foreign tax paying jurisdictions totaling $14.39 million for the year ended May 31, 2021.

International components of U.S.

income taxes have a significant impact on total income tax expense including global intangible low-taxed

income and Subpart F income representing $2.69 million of expense and foreign derived intangible income deduction and foreign tax credits which provide income tax benefit of $3.96 million.

The Company’s accounting for income taxes involves the application of tax regulations in each of the tax paying jurisdictions in which it operates.

The determination of income subject to income tax in each tax paying jurisdiction requires management to apply transfer pricing guidelines for certain intercompany transactions.

Additionally, the Company is entitled to claim foreign tax credits for taxes paid in international tax paying jurisdictions.

Management’s assumptions and allocations used in the determination of the foreign tax credits are based on current interpretations of complex income tax regulations and can have a material effect on the calculation of U.S.

income taxes.

We identified the assumptions and allocations used to calculate international components of U.S.

income taxes to be a critical audit matter.

These assumptions and allocations include:

(i) technical merit of tax positions including considerations related to transfer pricing guidelines for certain intercompany transactions, and (ii) allocation methodologies that are subjective in nature.

Auditing these assumptions and allocations involved subjective auditor judgment due to the complexity and the extent of specialized knowledge needed.

Valuation of Contingent Consideration

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

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

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

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

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

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

Assessing the design and testing operating effectiveness of certain controls over the Company’s income tax provision process, including controls over the identification and application of tax laws over earnings from multiple tax jurisdictions and the process to assess the technical merits of tax positions taken.

Evaluating the reasonableness and appropriateness of the data used to develop the assumptions and allocations made by management against relevant evidence obtained in other areas of the audit.

Utilizing professionals with specialized skills and knowledge in taxation to evaluate the Company’s application of the applicable tax laws, the technical merit of tax positions taken, and the reasonableness of the Company’s apportionment methodologies used.

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

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

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

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

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

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

/s/ BDO USA, LLP

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

July 30, 2021

Grand Rapids, Michigan

Neogen Corporation and Subsidiaries

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Marketable securities

Accounts receivable, net of allowance of $ 1,400 and $ 1,350 at May 31, 2021 and 2020, respectively

Accounts receivable, net of allowance of $ 1,650

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

Prepaid expenses and other current assets

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intangible assets

Amortizable intangible assets, net of accumulated amortization of $ 53,462 and $ 44,690

at May 31, 2021 and 2020, respectivel y

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

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

Other non-current

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Consolidated Balance Sheets – Liabilities and Stockholders’ Equity

(in thousands, except share and per share)

(in thousands, except shares and per share)

Liabilities and Stockholders’ Equity

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Accrued compensation

Income tax payable

Deferred revenue

Other accruals

Total Current Liabilities

Deferred Income Taxes

Deferred Income Tax Liability

Other Non-Current

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

107,468,304 and 105,891,682 shares issued and outstanding at May 31, 2021 and 2020, respectively

107,801,094 a

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

Additional paid-in

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Year Ended May 31

Other comprehensive income (loss), net of tax:

Other comprehensive income (loss):

Foreign currency translations

Other comprehensive income (loss), net of tax:

unrealized gain on marketable securities

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

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

Comprehensive income

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Balance, June 1, 2019

Exercise of options and share-based compensation expense

Exercise of options, RSUs and share-based compensation expense

Issuance of shares under employee stock purchase plan

Shares repurchased

Net income for 2020

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Balance, May 31, 2020

Exercise of options and share-based compensation expense

Exercise of options, RSUs and share-based compensation expense

Issuance of shares under employee stock purchase plan

Issuance of shares for Megazyme acquisition

Net income for 2021

Other comprehensive loss

Other comprehensive income

Balance, May 31, 2021

Exercise of options and share-based compensation expense

Exercise of options, RSUs and share-based compensation expense

Issuance of shares under employee stock purchase plan

Issuance of shares for Megazyme acquisition

Net income for 2022

Other comprehensive gain

Other comprehensive loss

Balance, May 31, 2022

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Neogen Corporation and Subsidiaries

Consolidated Statements of Cash Flo w

Consolidated Statements of Cash Flows

(in thousands)

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Cash Flows From Operating Activities

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

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

Depreciation and amortization

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Net Cash From Operating Activities

Cash Flows Used for Investing Activities

Cash Flows for Investing Activities

Purchase of property, equipment and other non-current

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Business acquisitions, net of cash acquired

Net Cash Used for Investing Activitie s

Net Cash for Investing Activities

Cash Flows From Financing Activities

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Payment of contingent consideration

Repurchase of common stock

Net Cash From Financing Activities

Effects of Foreign Exchange Rate on Cash

Net Increase (Decrease) in Cash and Cash Equivalents

Net (Decrease) Increase in Cash and Cash Equivalents

Cash and Cash Equivalents, Beginning of Year

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All intercompany accounts and transactions have been eliminated in consolidation.

Share and per share amounts reflect the June

, 2021 2-for-1 stock split as if it took place at the beginning of the periods presented.

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

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Recently Adopted Accounting Standards

Financial Instruments—Credit Losses

On June 1, 2020, the Company adopted ASU No.

2016-13—Measurement

of Credit Losses on Financial Instruments, which changes how the Company measures credit losses on most financial instruments measured at amortized cost and certain other instruments, such as loans, receivables and held-to-maturity

debt securities.

Rather than generally recognizing credit losses when it is probable that the loss has been incurred, the revised guidance requires the Company to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the Company expects to collect over the instrument’s contractual life.

The adoption of this guidance did not have a material impact on our consolidated financial statements due to the Company’s short-term contractual life of receivables and minimal expected losses.

Fair Value Measurements

On June 1, 2020, the Company adopted ASU 2018-13,

Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements.

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

Cloud Computing Implementation Cost

On June 1, 2020, the Company adopted ASU 2018-15,

Intangible-Goodwill and Other Internal-Use

Software (Subtopic 350-40):

Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation costs in cloud computing arrangements.

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

Income Tax Simplification

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

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

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

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

Recent Accounting Pronouncements Not Yet Adopted

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

We will adopt this standard when LIBOR is discontinued.

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

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

Income Tax Simplification

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Update 2019-12,

Income Taxes (“Topic 740”) as part of its Simplification Initiative.

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

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

This guidance is effective for annual and interim reporting periods beginning after December 15, 2020, and early adoption is permitted.

We plan to adopt during the first quarter of 2021, and we expect an immaterial impact to our consolidated financial statements.

Comprehensive Income

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Translation Adjustments

Unrealized Gain on

Unrealized Gain (Loss) on

Marketable Securities

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Balance, May 31, 2021

Other comprehensive income (loss)

Other comprehensive loss

Balance, May 31, 2022

Fair Value of Financial Instruments

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.

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.

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

Cash and Cash Equivalents

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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.

Cash and cash equivalents were $ 75,602 ,000 and $ 66,269 ,000 at May 31, 2021 and 2020, respectively.

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.

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Marketable Securities

The Company has marketable securities held by banks or broker-dealers at May 31, 2021, consisting of short-term domestic certificates of deposit of $ 5,785,000 and 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 of $ 299,700,000 .

Total outstanding marketable securities at May 31, 2021 were $ 305,485 ,000;

there were $ 277,404 ,000 in marketable securities outstanding at May 31, 2020.

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

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

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

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

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

Marketable Securities as of May 31, 2022 and 2021 are listed below by classification and remaining maturities.

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(in thousands)

US Treasuries

181 days - 1 year

Commercial Paper & Corporate Bonds

91 - 180 days

181 days -1 year

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Total Marketable Securities

The components of marketable securities as of

May 31, 2021 are as follows:

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

(in thousands)

US Treasuries

Commercial Paper & Corporate Bonds

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(in thousands)

US Treasuries

Commercial Paper & Corporate Bonds

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

No customer accounted for more than

10 % of accounts receivable at May 31, 2021 or 2020, respectively.

No customer accounted for more than 10 % of accounts receivable May 31, 2022 or 2021, respectively.

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

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Ending Balance

Inventories are stated at the lower of cost or net realizable value, determined on the first-in,

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:

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Finished goods

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

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

The valuation allowance for inventory was $ 4,050,000 and $ 3,100,000 at May 31, 2022 and 2021, respectively.

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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 ten years for furniture, fixtures, machinery and equipment.

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

Depreciation expense was $ 14,094,000 , $ 13,288,000 and $ 11,907,000 in fiscal years 2022, 2021 and 2020, respectively.

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

Amortizable intangible assets are amortized on either an accelerated or a straight-line basis, generally over 5 to 25 years.

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

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

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

intangible assets annually, or when indications of impairment exist, to determine if such assets may be impaired.

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

In contrast, we can opt to bypass the qualitative assessment for any reporting unit in any period and proceed directly to assessing the fair value of all of our reporting units and compare the fair value of the reporting unit to carrying value to determine if any impairment is necessary.

Doing so does not preclude us from performing the qualitative assessment in any subsequent period.

intangible assets annually, or when indications of

impairment exist, to determine if such

assets may be impaired.

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

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

In the fourth quarter of fiscal 2022

, we elected to bypass the qualitative approach that allows the assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount and instead proceeded directly to assessing the fair value of all of our reporting units and comparing the fair values of the reporting units to the carrying values to determine if any impairment is necessary.

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

No goodwill impairments were identified during the years ended May 31, 2021, 2020 and 2019, respectively.

The remaining weighted-average amortization period for intangibles was 10 years and 9 years at May 31, 2021 and May 31, 2020, respectively.

, management performed our annual goodwill impairment analysis qualitatively.

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

Long-lived Assets

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No impairments of long-lived assets were identified during the years ended May 31, 2022, 2021 and 2020, respectively.

Business Combinations

We utilize the purchase method of accounting for business combinations.

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

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

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

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

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

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

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

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

12 months from the acquisition date.

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

Reclassifications

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

For options granted in fiscal years 2021, 2020 and 2019, 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, generally five years.

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

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

The RSUs generally vest over three to five years and have a weighted average value of $ 34.21 in fiscal 2021, which was the first year this type of award was issued.

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

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

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

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

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

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

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

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Diluted 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 entirely from dilutive stock options.

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

The following table presents the net income per share calculations:

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Denominator for basic net income per share — Weighted average shares

Effect of dilutive stock options

Effect of dilutive stock options and restricted stock units

Denominator for diluted net income per share

Net income attributable to Neogen per share

At May 31, 2021, no potential shares from option exercises were excluded from the computation of diluted net income per share, as the option exercise prices did not exceed the average market price of the common shares.

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

At May 31, 2019, 10,000 potential shares were excluded from the computation.

On June 1, 2019, we adopted Topic 842 using the prospective approach and did not retrospectively apply to prior periods.

Topic 842 requires the Company to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use

Net income attributable per share

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

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

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

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

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

Upon adoption of Topic 842, 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 of approximately $ 2.0 million.

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

lease liabilities

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

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liabilities, respectively, on our consolidated balance sheets.

The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessor have not significantly changed from previous U.S.

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

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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 applying ASC 842, the most significant of which are:

We elected the package of practical expedients available for transition that allow us to not reassess :

whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases ,

and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.

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.

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.

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

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

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Total lease expense

Cash paid for amounts included in the measurement of lease liabilities for operating leases included in cash flows from operations on the statement of cash flows was approximately $ 1,397,000 ,

$ 1,178,000 and $ 1,633,000 for the years ended May 31, 2021, 2020 and 2019, respectively.

additions to right-of-use

assets obtained from new operating lease liabilities for the year ended May 31, 2021.

Cash paid for amounts included in the measurement of lease liabilities for operating leases included in cash flows from operations on the statement of cash flows was approximately $ 1,407,000 , $ 1,397,000 and $ 1,178,000 for the years ended May 31, 2022, 2021 and 2020, respectively.

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

Maturities of operating lease liabilities as of May 31, 2022 are as follows:

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

The Company has no

contract assets ;

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

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

These customer deposits are listed as Deferred revenue o

n the consolidated balance sheets.

The following table presents disaggregated revenue by major product and service categories for the years ended May 31, 2022, 2021 and 2020:

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Total Revenue

See Note 9 to the consolidated financial statements for disaggregated revenues by geographical location.

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

Goodwill and Other Intangible Assets

Management completed the annual impairment analysis of goodwill and intangible assets with indefinite lives using a quantitative assessment as of the first day of the fourth quarter of fiscal years 2021, 2020 and 2019, respectively, and determined that recorded amounts were not impaired and that no write-down was necessary.

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

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

The following table summarizes goodwill by reportable segment:

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

At May 31, 2021, non-amortizable

intangible assets included licenses of $ 569,000 , trademarks of $ 13,752,000 and other intangibles of $ 1,224,000 .

At May 31, 2020, non-amortizable

intangible assets included licenses of $ 569,000 , trademarks of $ 13,424,000 and other intangibles of $ 1,224,000 .

Amortizable intangible assets consisted of the following and are included in customer-based intangibles and other non-current

assets within the consolidated balance sheets:

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

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

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

(in thousands)

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Customer-based intangibles

Other products and service-related intangibles

Other product and service-related intangibles

Balance, May 31, 2022

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Customer-based intangibles

Other products and service-related intangibles

Other product and service-related intangibles

Balance, May 31, 2021

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

and $ 47,915,000 thereafter.

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

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

On August 1, 2018, the Company acquired all of the stock of Clarus Labs, Inc., a manufacturer of water testing products.

Neogen has distributed Clarus’ Colitag water test to the food and beverage industries since 2004;

this acquisition has given the Company the ability to sell this product to new markets.

Consideration for the purchase was $ 4,204,000 in cash and $ 1,256,000 of contingent consideration, due semiannually for the first five years, based on an excess net sales formula.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $ 32,000 , machinery and equipment of $ 120,000 , accounts payable of $ 53,000 , contingent consideration accrual of $ 1,256,000 , non-current

deferred tax liability of $ 544,000 , non-amortizable

intangible assets of $ 878,000 , intangible assets of $ 1,487,000 (with an estimated life of 5 - 15

years) and the remainder to goodwill (non-deductible

for tax purposes).

These values are Level 3 fair value measurements.

Since February 2019, $ 450,000 has been paid to the former owners as contingent consideration from the accrual.

Manufacturing of these products was moved to the Company’s Lansing, Michigan location in October 2018, reporting within the Food Safety segment .

On September 4, 2018, the Company acquired the assets of Livestock Genetic Services, LLC, a Virginia-based company that specializes in genetic evaluations and data management for cattle breeding organizations.

Livestock Genetic Services had been a long-time strategic partner of Neogen and the acquisition enhanced the Company’s in-house

genetic evaluation capabilities.

Consideration for the purchase was $ 1,100,000 in cash, with $ 700,000 paid at closing and $ 400,000 payable to the former owner on September 1, 2019, and up to $ 585,000 of contingent consideration, payable over the next three years.

The final purchase price allocation, based upon the fair value of these assets and

liabilities determined using the income approach, included office equipment of $ 15,000 , contingent consideration accrual of $ 385,000 , intangible assets of $ 942,000 (with an estimated life of 5 - 15

years) and the remainder to goodwill (deductible for tax purposes).

These values are Level 3 fair value measurements.

In September 2019, the former owner was paid the $ 400,000 installment of the purchase price owed and was also paid $ 107,000 in contingent consideration based on the achievement of sales targets in the first year.

In November 2020, the former owner was paid $ 100,000 in contingent consideration based on the achievement of sales targets in the second year;

the accrual was adjusted to the expected payment for the final year and, as a result, $ 37,000 was recorded as a gain in Other Income.

Services provided by this operation are now performed at the Company’s Lincoln, Nebraska location, reporting within the Animal Safety segment.

On January 1, 2019, the Company acquired the assets of Edmonton, Alberta based Delta Genomics Centre, an animal genomics laboratory in Canada.

Delta’s laboratory operations were renamed Neogen Canada and the acquisition was intended to accelerate growth of the Company’s animal genomics business in Canada.

Consideration for the purchase was $ 1,485,000 in cash.

The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $ 38,000 , machinery and equipment of $ 371,000 , unearned revenue liability of $ 125,000 , intangible assets of $ 532,000 (with an estimated life of 5 to 10 years) and the remainder to goodwill (deductible for tax purposes).

These values are Level 3 fair value measurements.

Services provided by this operation continue to be performed in Edmonton, reporting within the Animal Safety segment.

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

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

The final purchase

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

deferred tax liabilities of $ 441,000 , intangible assets of $ 1,471,000 (with an estimated life of 5 - 10

and the remainder to goodwill (non-deductible

for tax purposes).

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

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

(non-deductible for tax purposes).

These values are Level 3 fair value measurements.

In February 2021, the former owner was paid $530,000 of contingent consideration based on the achievement of sales targets;

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

contingent consideration based on the achievement of sales targets;

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

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

In January 2022 ,

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

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

It is managed through Neogen’s Latin America operation.

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

The final purchase

price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 280,000 , inventory of $ 174,000 , machinery and equipment of $ 16,000 , other current assets of $ 68,000 , accounts payable of $ 204,000 , other current liabilities of $ 11,000 , contingent consideration accrual of $ 159,000 , non-current

deferred tax liabilities of $ 99,000 , intangible assets of $ 398,000 (with an estimated life of 5 - 10

years) and the remainder to goodwill

(non-deductible for tax purposes).

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

These values are Level 3 fair value measurements.

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

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

In January 2022,

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

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

It is managed through Neogen’s Latin America operation.

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

The final purchase

price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 780,000 , inventory of $ 5,000 , other current assets of $ 160,000 , accounts payable of $ 140,000 , other current liabilities of $ 305,000 , non-current

deferred tax liabilities of $ 294,000 , intangible assets of $ 1,225,000 (with an estimated life of 5 - 10

years) and the remainder to goodwill (non-deductible

for tax purposes).

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

These values are Level 3 fair value measurements.

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

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

It is managed through Neogen’s Scotland operation.

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

The final purchase

price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 135,000 , inventory of $ 207,000 , machinery and equipment of $ 105,000 , prepayments of $ 6,000 , accounts payable of $ 118,000 , other current liabilities of $ 34,000 , non-current

deferred tax liabilities of $ 92,000 , intangible assets of $ 484,000 (with an estimated life of 5 - 10

years) and the remainder to goodwill (non-deductible

for tax purposes).

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

These values are Level 3 fair value measurements.

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

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

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

It is managed through Neogen’s Scotland operation.

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

This acquisition gives

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

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

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

The final purchase

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

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

These values are Level 3 fair value measurements.

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

The final purchase

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

The business is operated from its current location in Santiago, Chile, reporting within the Food Safety segment.

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

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

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

It is managed through Neogen’s Latin America operation.

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

(including territories) rights to Elanco’s StandGuard Pour-on

for horn fly and lice control in beef cattle, and related assets.

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

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

Consideration for the purchase was $ 2,351,000 in cash, all paid at closing.

The final purchase

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

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

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

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

Consideration for the purchase was net cash of

$ 39.8 million paid at closing, $ 8.6 million of cash placed in escrow payable to the former owner in two installments in two and four years,

$ 4.9 million of stock issued at closing, and up to $ 2.5 million of contingent consideration, payable in two installments over the next year, based upon an excess net sales formula.

The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $ 1,376,000 , inventory of $ 5,595,000 , net property, plant and equipment of $ 12,599,000 , prepayments of $ 69,000 , accounts payable of $ 4,000 , other current liabilities of $ 1,815,000 , contingent consideration accrual of $ 2,458,000 , non-current liabilities of $ 319,000 , non-current

deferred tax liabilities of $ 3,306,000 , intangible assets of $ 22,945,000 (with an estimated life of 15 - 20

years) and the remainder to goodwill (non-deductible

for tax purposes).

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

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

These values are Level 3 fair value measurements.

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

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

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

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

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

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

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

The Company’s U.S.

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

On September 17, 2021, the Company acquired all of

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

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

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

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

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

such as probability and timing of milestone achievements, revenue forecasts

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

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

These values are Level 3 fair value measurements.

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

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

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

Consideration for the purchase was net cash o

f $ 9.5 million

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

The preliminary purchase price allocation, based upon

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

inventory of $ 972,000 ,

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

current liabilities of $ 378,000 , non-current

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

years) and the remainder to goodwill

(non-deductible for tax purposes).

These values are Level 3 fair value measurements.

The companies continue

to operate in Liverpool, England,

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

On December 9, 2021, the Company acquired all of

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

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

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

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

These values are Level 3 fair value measurements.

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

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

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

This acquisition gives Neogen a direct sales presence in Thailand.

Consideration for the purchase was

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

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

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

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

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

Earnings in the aggregate were

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

3M Food Safety transaction

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

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

3M and its shareholders for U.S.

federal income tax purposes.

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

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

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

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

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

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

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

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

The Notes will initially be issued by Garden

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

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

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

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

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

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

Long-Term Debt

The Company has a financing agreement with a bank providing for a

$ 15,000,000 unsecured revolving line of credit, which was amended in the second quarter to extend the expiration to

November 30, 2023 .

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

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

there was no balance outstanding at May 31, 2022.

Interest on any borrowings is

LIBOR plus 100 basis points (rate under the terms of the agreement was 1.06 % at May 31, 2021).

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

terms of the agreement was 2.06 %

May 31, 2022).

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

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Equity Compensation Plans

Incentive and non-qualified

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

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

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

Remaining shares available for grant under stock option plans were 6,355,000 , 7,002,000

and 7,994,000 at May 31, 2021, 2020 and 2019, respectively.

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

(options in thousands)

Remaining shares available for grant under share-based compensation

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

Options vest ratably over thre e

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

or ten years .

Weighted-Average

Exercise Price

Weighted-Average

(options in thousands)

Exercise Price

Grant Date Fair Value

Outstanding at May 31, 2019 ( 1,234 exercisable)

Outstanding at May 31, 2019 ( 1,234

Outstanding at May 31, 2020 ( 972

Outstanding at May 31, 2021 ( 643

Outstanding at May 31, 2020 ( 972 exercisable)

Outstanding at May 31, 2021 ( 643 exercisable)

Outstanding at May 31, 2022 ( 1,191 exercisable)

The following is a summary of stock options outstanding at May 31, 2022:

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$ 32.00 - $ 42.45

The weighted average exercise price of shares subject to options that were exercisable at May 31, 2020 and 2019 was

$ 24.47 and $ 20.34 , respectively.

Compensation expense related to share-based awards was $ 6,437,000 , $ 6,468,000 and $ 5,543,000 in fiscal years 2021, 2020 and 2019, respectively.

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

options was $ 15,131,000 at May 31, 2021, with a weighted average expense recognition period of 3.1 years.

The weighted average exercise price of shares subject to options that were exercisable at May 31, 2021 and 2020 was $ 28.10 and $ 24.47 , respectively.

Compensation expense related to share-based awards was $

7,154,000 , $

6,437,000 and $

6,468,000 in fiscal years

2020 , respectively.

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

10,927,000 at May

2022 , with a weighted average expense recognition period of

Year ended May 31

(in thousands)

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Aggregate intrinsic value of options exerised

The Company granted 118,250 restricted stock units (RSUs) to directors, officers and employees under the terms of the 2018 Omnibus Incentive Plan in October 2020, which vest ratably over three and five year periods.

RSUs have a weighted average value of $ 34.21 per share and will be expensed straight-line over the remaining weighted-average period of 4.24 years.

On May 31, 2021 there was $ 3,064,000 in unamortized compensation cost related to non-vested

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

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

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

(RSU Grants in thousands)

Weighted Average

Grant Date Fair

Outstanding at May 31, 2020

Outstanding at May 31, 2021

Outstanding at May 31, 2022

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 2011 Employee Stock Purchase Plan;

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Total individual purchases in any year are limited to 10 % of compensation.

Shares purchased by employees through this program were 38,406

in fiscal 2021

, 43,156 in fiscal 2020 and

36,660 in fiscal 2019.

As of May 31, 2021, common stock totaling

649,228 of the 1,425,000 authorized shares remained reserved for issuance under the plan.

Shares purchased by employees through this program were 43,456 in fiscal 2022, 38,406 in fiscal 2021 and 43,156 in fiscal 2020.

As of May 31, 2022, common stock totaling 605,774 of the 1,425,000 authorized shares remained reserved for issuance under the plan.

Income before income taxes by source consists of the following amounts:

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Change in tax-related uncertainties

Total Current

Total Deferred

Provision for Income Taxes

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Permanent differences

Global intangible low-taxed

income (GILTI)

Global intangible low-taxed income (GILTI)

Foreign derived intangible income deduction (FDII)

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Tax benefits on stock-based compensation

Changes in tax contingencies—Increase/(Release)

Provision for state income taxes, net of federal benefit

Impact of tax rate changes

Income Tax Expense

Foreign tax credits, primarily offsetting taxes associated with Subpart F and GILTI income, were $ 1,747,000 , $ 2,753,000 and $ 945,000 in fiscal years 2022, 2021 and 2020, respectively.

3 unchanged sentences

Year ended May 31

(in thousands)

Deferred income tax liabilities

Indefinite and long-lived assets

Prepaid expense s

Right of use asset

Prepaid expenses

Deferred income tax assets

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Tax loss carryforwards

Lease liability

Accrued expenses and other

valuation allowances

Valuation allowance

Net deferred income tax liabilities

The Company has the following net operating loss carryforwards:

(in thousands)

2037 to indefinite

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

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

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During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain.

We establish reserves for t a

uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.

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 circumsta n

ces, such as the outcome of tax audits.

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 reconciliation of our tax-related uncertainties is as follows:

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

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

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

The reconciliation of our unrecognized tax benefits is as follows:

Year ended May 31

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Increase/(decrease) related to prior periods

Increase related

to current perio d

Increase related to current period

Lapses of applicable statute of limitations

Ending balance

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Commitments and Contingencies

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

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

We expense these annual costs of remediation, which have ranged from $ 38,000 to $ 131,000 per year over the past five years .

The Company’s estimated remaining

liability for these costs was $ 916,000 at both May 31, 2021 and 2020, measured on an undiscounted basis over an estimated period of 15 years .

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

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

The Company currently utilizes a pump and treat remediation strategy,

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

We expense these annual costs of remediation,

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

per year from fiscal 2018 to fiscal 2021.

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

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

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

However, the Company has agreed to a pilot study in which chemical reagents are injected into the ground in an attempt to reduce on-site contamination, and is currently working with its consultant to design the system.

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

contamination;

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

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

The Company has recorded $ 300,000 as a current liability, and the remaining $ 616,000 is recorded in other non-current liabilities in the consolidated balance sheet.

The Company has recorded

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

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

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

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

The Company subsequently conducted an internal

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

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

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

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

economic sanctions and export control laws.

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

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

and other applicable jurisdictions.

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

In fiscal 2020, the Company took a charge to expense and recorded a reserve of $ 600,000 to provide for potential fines or penalties on this matter.

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

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

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

The Company has 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 $ 2,129,000 ,

$ 2,524,000 and $ 2,795,000 for fiscal years 2021, 2020 and 2019, respectively.

Royalty expense, recorded in sales and marketing, under the terms of these agreements was $ 1,999,000 , $ 2,129,000 and $ 2,524,000 for fiscal years 2022, 2021 and 2020, 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:

2022—$ 115,000 , 2023—$ 110,000 , 202 4

—$ 110,000 , 202 5

2023—$ 100,000 , 2024—$ 100,000 , 2025—$ 100,000 , 2026—$ 75,000 and 2027—$ 75,000 .

The Company has unconditional purchase obligations consisting primarily of purchase orders for future inventory and capital equipment purchases, totaling $ 85.8 million, of which $ 83.1 million is scheduled to be spent within the next 12 months, and $ 2.7 million is scheduled to be spent between

years in the future.

In conjunction with the 3M Food Safety transaction announced on December 13, 2021, Neogen has entered into a credit agreement with JPMorgan

Chase for $ 650 million in term loans, and has incurred $ 9.8 million in debt issuance costs, which will be paid at close, and amortized over the five-year

term of the loans.

The loans are expected to be funded in the third calendar quarter of 2022.

Interest on the loans will be at the Secured Overnight

Financing Rate (SOFR) plus 225 basis points .

The Company is subject to certain legal and other proceedings in the normal course of business that, in the opinion of management, are not expected to have a material effect on its future results of operations or financial position.

2 unchanged sentences

Employees are permitted to defer compensation up to IRS limits, with Neogen matching 100 % of the first 3% of deferred compensation and 50 % of the next 2% of deferred compensation.

In the first quarter of fiscal 2021, the Company suspended the 401(k) match, while we assessed the potential financial impact of COVID-19 on the Company.

In the first quarter of fiscal 2021, the Company suspended the 401(k) match, while we assessed the potential financial impact of

COVID-19 on the Company.

The match was restored in September 2020.

Neogen’s expense under this plan was $ 1,204,000 , $ 1,535,000 , and $ 1,361,000 in fiscal years 2021, 2020 and 2019, respectively.

Neogen’s expense under this plan was $ 1,834,000 , $ 1,204,000 , and

$ 1,535,000 in fiscal years 2022, 2021 and 2020, respectively.

We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates.

To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions.

Derivatives Not Designated as Hedging Instruments

We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into approximately 11 foreign currency forward contracts each month to mitigate that exposure.

These contracts are recorded net at fair value on our consolidated balance sheets ,

classified as Level 2 in the fair value hierarchy;

gains and losses from these contracts were recognized in other income in our consolidated statements of income.

The notional amount of foreign currency forward contracts was $ 4,424,000 and $ 19,984,000 as of May 31, 2022 and 2021, respectively.

Fair Value of Derivatives Not Designated as Hedging Instruments

Balance Sheet Location

Foreign currency forward contracts, net

Prepaid and Other

The location and amount of gains from derivatives not designated as hedging instruments in our consolidated statements of income were as follows:

Year ended May 31,

Derivatives Not Designated as Hedging Instruments

Location in statements of income

Foreign currency forward contracts

Other income (expense)

Related Party Transactions

The Company has partnered with Corvium to develop a software-as-a-service

offering for use in conjunction with several food safety product lines.

Ralph Rodriguez is a member of Neogen’s Board of Directors and also serves on the Board of Directors at Corvium.

Neogen made payments to Corvium of $ 1,573,000 , $ 788,000 and $ 1,833,000 in fiscal years 2022, 2021 and 2020, respectively.

Segment Information

The Company has two reportable segments:

The Company has

two reportable segments:

Food Safety and Animal Safety.

3 unchanged sentences

Additionally, the Animal Safety segment produces and markets rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.

Neogen’s international operations in the United Kingdom, Mexico, Brazil, China and India originally focused on the sales and marketing of our food safety products, and each of these units reports through the Food Safety segment.

Neogen’s international operations in the United Kingdom, Mexico, Guatemala, Brazil, Argentina, Uruguay, Chile, China and India originally focused on the sales and marketing of our food safety products, and each of these units reports through the Food Safety segment.

In recent years, these operations have expanded to offer the Company’s complete line of products and services, including those usually associated with the Animal Safety segment such as cleaners, disinfectants, rodenticides, insecticides, veterinary instruments and genomics services.

28 unchanged sentences

Includes corporate assets, including cash and cash equivalents, marketable securities, current and deferred tax accounts, and overhead expenses not allocated to specific business segments.

Also includes the elimination of intersegment transactions and non-controlling

Also includes the elimination of intersegment transactions and non-controlling interests.

The following table presents the Company’s revenue disaggregated by geographical location:

4 unchanged sentences

Stock Repurchases

In October 2018, the Company’s Board of Directors passed a resolution terminating the Company’s prior stock buyback program, which had been approved in December 2008, and authorized a new program to purchase, subject to market conditions, up to 6,000,000 shares of the Company’s common stock.

In October 2018, the Company’s Board of Directors authorized a program to purchase, subject to market conditions, up to

6,000,000 shares of the Company’s common stock.

In December 2018, the Company purchased 100,000 shares under the new program in open market transactions for a total price, including commissions, of $ 3,134,727 .

1 unchanged sentence

A total of 5,900,000 shares of common stock remained available for repurchase under this program as of May 31, 2022.

Summary of Quarterly Data (Unaudited)

Quarter Ended

(in thousands, except per share)

Total Revenue

Basic net income per share

Diluted net income per share

Quarter Ended

(in thousands, except per share)

Total Revenue

Basic net income per share

Diluted net income per share

Quarterly net income per share is based on weighted-average shares outstanding and potentially dilutive stock options for the specific period and as a result, will not necessarily aggregate to total net income per share as computed for the year as disclosed in the consolidated statements of income.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures