Jim Herbert - Chief Executive Officer Rick Calk - President and Chief Operating Officer Steve Quinlan - Vice President and Chief Financial Officer.

Brian Weinstein - William Blair & Company LLC Tony Brenner - Roth Capital Partners LLC Paul Knight - Janney Montgomery Scott LLC Charles Huff - Craig-Hallum Capital Group LLC.

Welcome to the Fourth Quarter and Year-End Fiscal Year 2015 Earnings Results Conference Call. My name is Chris and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Jim Herbert, CEO. Mr. Herbert, you may begin..

Thanks Chris and good morning and welcome to our regular quarterly conference call for investors and analysts. As Chris said today we'll be reporting to you on the results of our Fourth quarter and of course also the fiscal year that ended both on May 31.

I'll remind you that some of the statements that are made here today could be termed as forward-looking statements, and these forward-looking statements of course, are subject to certain risk and uncertainties and the actual results might differ from those that we discuss here today.

These risks that are associated with our business are covered in part in the Company's Form 10-K that’s filed with the Securities and Exchange Commission. In addition, to those of you who are joining us by live telephone conference this morning, I would also welcome those who may be joined by simulcast on the World Wide Web.

Following comments this morning, we'll entertain questions from participants who are joined by the live call and I’m joined today by Rick Calk, Neogen’s Chief Operating Officer, and Steve Quinlan, Neogen’s Chief Financial Officer. Earlier today, Neogen issued a press release announcing the results of its fourth quarter and year end.

Looking first at that fourth quarter revenues $78.6 million that’s a 17% increase over revenues for the same period last year. Income for the fourth quarter was approximately $9.4 million that’s up a nice 25% over the same quarter in fiscal 2014.

This equates on per share basis to $0.25 a share comparing to $7.5 million last year or $0.20 a share so up a full nickel per share for the fourth quarter. Revenues for the full 2015 fiscal year increased 14% to $283 million that’s up over the $247 million for last year’s FY 2014.

Net income for the year was up 19% from the previous year to $0.90 per share, this compares with $0.76 a share last year. As you would expect, revenues and income for this 2015 year established a new all-time high for our 33-year-old company.

On the same note, this fourth quarter was the 93rd of the past 98 quarters that Neogen reported revenue increases as compared with the previous year. This record now spans 24.5 years. Sometimes I feel like our now over 1,000 employees are saying, the record won’t gets bored on my watch and of course, our gratitude goes to them continually.

Neogen has analysts from eight different firms that research on the company and frankly it’s gotten to be pretty good through years especially since Neogen doesn’t give advice.

When we pull the final numbers together, I was curious to see how we came back compared to the analyst estimates for the year and frankly it was a surprise to see how well it had really become, how good they have really become. No analyst estimated that either our earnings or our revenues would be higher than those that we’re reporting.

Interestingly, the consensus of earnings was 2% below where we actually finished and the revenues were 2% higher than the revenue forecasted of the eight firms. I’m sad to report to you today that Steve O’Neil of Hilliard Lyons firm who wrote research on Neogen for almost 25 years, passed away this quarter.

We all miss Steven as an analyst, trusted advisor and a friend. I thought about describing this morning our 2015 year, started to think back of something really spectacularly good or spectacularly bad that I might point out. There hasn’t been any real changes in the way ran the business and I concluded that it was just another one of those good years.

Our compounded growth rate, if you looked in the past our compounded growth rate in revenue over the past five years, previous five years, was 16% and as I reported earlier the revenue growth for the quarter was 14%.

So pretty much in keeping the compound growth rate of net income over the past five years had been 15%, and this year’s net income growth was 19%. So over the past number of years, many of you know that we were to keep operating income as a percentage of sales at about to 20% range. We think that’s a healthy place to be.

This year we got close again at 18.8% and that’s not much difference than the average of 19.1% in the past five years.

So another just really good solid year, it’s a little bit more difficult to keep that steady phase this year, because of the wins of currency translations that we are right in our pace, but that’s especially in the last half of the year, however, Steve will talk more about that here shortly.

Strategy for growth has been the same for the numbers we use and continues to serve us well, fortunately we’re in markets that have grown and in many cases we increased our share in those growing markets. We’ve done that by increasing our sales and marketing groups worldwide and we did the same thing as past year.

The second leg of our growth has been the development of new products and again this year we increased revenues and bottom line results with new products that were developing internally. Our worldwide research team of over 75 people will - whether they will continue to be doing research and making investments as opportunities do present themselves.

Our third leg of the stool has been acquisitions, we’ve now done 29 acquisitions since the year 2000 and all have been accretive at both the top and the bottom line. 15 years later the products from the first acquisitions are still a part of our portfolio.

This year we acquired the BioLumix Company that was a competitor using much of the same technology as our Soleris product line. We’re still in the process of integrating those two businesses and the revenues continue to grow nicely.

We furthered our Asian strategy this year in both China and India, we had a nice but small food safety distribution business in China, but still lack the traction to really propel that business.

In December, we acquired our largest food and safety distributor in China and join that base to our own, we've now sharpened up our strategy, customer base and our product offering, we're think off to a new and better start in China as we look at FY 2016.

You’ve heard us talk in the past about food security and the need to work in those markets where the middle-class will have the most rapid growth; you know obviously the two countries with most rapid growth include both China and India. In June we acquired Sterling Laboratories and bolted it on to an Indian [shale] (Ph) company that we already own.

This one is going to be fun, but is likely to take a little bit of time until we can get traction there.

We’re situated I think in the right place on the Southwest Coast where spices, foods and vegetables and some sea food items are shipped to export markets, Sterling Labs had a good service lab business and we will use that as a launching pad for our diagnostic test kits also.

We didn’t do quite so well on that fourth leg of the expansion growth that being the expansion of international sales. Well our international businesses were good, we weren’t able to grow them as fast as the U.S. businesses.

We finished the year with international revenues accounting for about 36.7% of total revenues and that’s 2% less than where we were last year. Of course monetary translations in six different countries handicapped a part of that growth, I’m sure.

Expansion - investments in our existing business units got good returns this year also revenues from our GeneSeek worldwide and our genomic products and services increased this year almost by 27% as compared to 2014.

You may remember from some of the quarterly conference calls that we talked about having built on a new state-of-the-art 26,000 square foot genomic laboratory in Lincoln, Nebraska that we took occupancy on there at the beginning of the fiscal year.

This increased capacity along with the company’s reputation has allowed us to continue that growth and it’s also spilled over and expanded our genomics business in Europe quite nicely also.

Neogen was the first company to begin developing and marketing diagnostic test for the detection of food allergens though we now have competition of course, we've managed to maintain a nice market share in this area. Our growth of revenues in food allergens this year was approximately 18%.

There was a food fraud case or two that likely also helped with that growth, someone found that ground peanut also look very much like the spice cumin and of course ground peanut also may enhanced the profits in the cumin sales.

Fortunately or unfortunately the fraud was detected because people with peanut allergies began going to have allergenic reaction to food where cumin was used as a spice. Fortunately, Neogen has a test to detect a presence of peanuts and our test became popular as people were trying to screen the [indiscernible] spices out of the market place.

So, all-in-all I was right proud of the year. I’m sure you could guess that it wasn’t quite as smooth a ride, I just made it sound, but we got cross those few rough spots without any permanent damage. One of the real highlights for the year was the addition of Rick Calk to the Neogen team as president and Chief Operating Office.

Rick joined us in December and in that last of half of the year not only got up to speed on a lot of the things that we do, but also undertook some important projects. Rick is good at isolating opportunities and applying the right repair and maintenance program.

Let me turn the program over to Rick and let him tell you a little bit about his highlights here in the last half of the year, Rick..

Well, thank you Jim and welcome to everyone listening on the conference call as well as those joining via the internet. Jim has already reported on the overall sales and profit performance for our 2015 fiscal year and our press release issued earlier today provided additional details related to Neogen’s 2015 results.

This morning I’ll provide a bit more detail on the year’s performance from an operational and a product perspective. In many cases our 2015 fiscal year was a continuation of the success of certain products and services from previous years as Jim has mentioned.

For example, last year at this time we reported a 21% of increase in sales of our food allergen test kits over the prior year and building on that growth this year we’re reporting an 18% increase in sales of food allergen test kits.

We were very excited to launch of a new test kits for multi-tree nuts in March, but this significant increase of 18% came in large part from the greater use of our complete line of allergen testing products.

The growing demand of our products is a result of more educated, global consumer purchasing food and beverage products verified to be free of allergens such as gluten, peanuts and soy.

This consumer demand is led the government and regulatory agencies in the U.S., Europe and elsewhere to increasingly create and revise regulations, labeling laws that might be present for the food and beverage industry that dedicate maximum allowable allergen residues in food products.

This in turn continues to help drive increased usage of our testing products. It’s unfortunate that each year one in six people in the United Sates is sickened by food borne illness. Food borne pathogens impose over a $15.5 billion economic burden on the U.S. public each year according to a recent report from the U.S. Department of Agriculture.

Just five pathogens cause 90% this burden of food borne illness hospitalization and deaths where specific pathogen can be identified. The single largest to these pathogens is salmonella.

Next week Neogen will introduce the NeoPC, no serotype and service to seamlessly identify salmonella serotypes types from DNA sequencing data which is generated by Neogen’s GeneSeek genomics laboratory in Lincoln, Nebraska.

In as little as 72 hours new seek will allow and identification of all top 30 salmonella serotypes from salmonella positive isolates as well as additional 1500 serotypes that may grow in importance over time. This will all add do our existing NeoSeek’s Estech confirmation service which detects and identifies seven sugar toxin producing E.

coli strains including H7. As the nation’s largest animal genomic lab GeneSeeks also continues to play a major role in traditional food safety. Another continuing success in the 2015 fiscal year was our deep D3 line of detectable veterinary needles.

Neogen first introduce the D3 needles in 2002 and yet we were able to increase sales nearly 30% in the year continuing our leadership position after 30 years in this business. Most consumers don’t even know the broken veterinary needles are a problem, but they would if they ever discovered a broken needle in Grandma’s pork on a Sunday afternoon.

The D3 needles greatly reduce the chance of that ever happening by being uniquely detectable in the standard metal detectors that are currently being used in the meat industry.

The team is very excited by a new approval of our ancillary line of molecular microbiology testing for Listeria monocytogens which adds to our previous approvals for ancillary salmonella and Listeria species test kits.

This combined with the recent GIPSA approval for the reveal Q+ aflotoxin kit on all three of our AccuScan readers has Neogen ready to respond to the key issues facing today’s food and beverage processor.

Our ability to rapidly respond to changing market conditions has been demonstrated by this year’s DON mycotoxin outbreak or we were able to rapidly build inventory based on solid forecasting and strong market knowledge.

The markets come to rely on Neogen, not just for high quality tests supplied in full and on time, but for the market information we supply to our customers on a regular basis. From these relationships we expect a strong impact on quarter one fiscal 2016 results.

Other examples of being in front of the market and striking while the iron is hot include Neogen’s effective response to the wide spread contamination of the spice cumin and the spice blends containing cumin such as chill powder mixes with peanut and peanut byproduct as Jim has discussed earlier and we discovered this in early 2015.

I feel as I’m kind of skimming rapidly through our performance highlights, but if any one who follows Neogen to know us well, we’re a diverse company with many moving parts. Two topics that I want to make sure I touch on before I go are the BioLumix acquisition integration and our new AccuPoint Advanced hygiene or sanitation monitoring system.

As many of you on the call are already aware Neogen offers the widest available variety of rapid and traditional methods for general microbiology testing, we offer rapid and traditional testing products for call of forms, generic E.coli, lactix, total plate count, yeast, mold and many other micro organisms, all in a variety of sample types.

When we acquired BioLumix last October, we bought a competitor with an automated testing system for spoilage micro-organisms to compliment our already successful Soleris system.

This system consists ready to use vials containing growth media and a detection system looking for subtle changes that indicate contamination of a sample by up to 60% faster than the traditional methods.

The integration of these once [spears] (Ph) competitors has gone very well and sales of our BioLumix products have far exceeded, what we thought at the time were optimistic budget projections. We look forward to what we’ll be able to accomplish with the combined technologies and the R&D efforts going forward.

Operationally, the June launch of our AccuPoint Advanced system which is used to detect the amount of food residue and other organic matter such as bacteria, yeast and mold, which remain after cleaning was much more than what it may have appeared to be in the press release we issued at the time.

My visit to last week’s major food convention, the IFT in Chicago, showed me through the long lines outside our booth and the interest generated by participants, the immediate need for this state of the art technology to be incorporated into an organization’s cleaning program to monitor its effectiveness.

With a worldwide customer base made up of the world’s largest food and beverage manufactures, the introduction of this technology demonstrates how Neogen has incorporated the voice of the customer to bring improvements such as sensitivity, ambient storage, faster results in this case less than 20 seconds, an advanced data manager software to create test plants and easy to read dashboards while keeping a permanent record of hygiene results.

The addition of RFID technology has helped us enter the fast food, especially the daily markets as well as the healthcare markets by pinpointing test locations, simplifying test procedures, and increasing plan accuracy.

The demand for the disposable sample is used in our previous AccuPoint system tested our manufacturing capabilities to meet the growing demand to the AccuPoint sampler. That’s the kind of problem you want in business, but it was a significant problem nonetheless.

With the launch of our improved system, we also [christened] (Ph) our new automated sampler manufacturing equipment which is greatly increased our production capacity and ease the pressure on our manufacturing team. With that I would like to thank you all for allowing me to share just some of the highlights for the year that was.

Jim?.

Thanks, Rick. As you could tell, Rick had more accomplishments and he had time to present this morning. We’ll share a little bit of that with Steve Quinlan, his staff.

It’s interesting staff for our staff, accounting, finance and administrative side of the business had few more challenges this year than normal particularly from the outside is we have looked at what was happening to the markets around the world as we become bigger.

So Steve I want you to talk a bit about around currencies, so talk a bit about that and some of the financial outlay to the year we just finished?.

All right, thanks Jim. I think clearly tell them listening to Rick’s comments they were excited to talk about some of the operational teams we made in 2015 which helped to make the year a solid one and which bode well for the future.

As Jim indicated, the company gained momentum all year finishing with the 17% increase in revenues in the fourth quarter were up overall 14% for the year overall.

Now we were able to achieve these results despite the considerable currency headwinds we encountered during the year, which accelerated into the fourth quarter, all the currencies the company operates and declined against the dollar, the Euro was down 21% compared to last year’s fourth quarter and 9% on average for the year.

The Real was down 27% for the comparative quarter and 11% on average for the full year and the Peso was 14% in the fourth quarter than the same period last year and down 8% for the full year. The Pound Sterling was relatively flat for the year but was 10% lower in the fourth quarter of 2015 than it was for the fourth quarter of 2014.

The negative impact of the stronger dollar on our comparative revenues for the full year was $3.6 million and currency translation losses included in our other income and expense from balance sheet translations was a $1.1 million in 2015 making our 2015 results that much more impressive.

On the last quarterly call, we talked about increasing our hedging program to help mitigate some of the currency risk and we have taken steps to do just that. Although it is important to understand that we are lessening the currency impact not eliminating it.

The Food Safety segment had a solid year with overall revenues of $131.5 million representing growth of $15.2 million or 13% for the year.

Jim and Rick both mentioned the continued strength of our allergen product line, another highlight within the diagnostics product line was the 28% increase in sales in our DON test kits aided by outbreaks of that naturally occurring impacts in Canada and Eastern Europe, partially offsetting that increase was a decline in revenues for our aflotoxin test due to a relatively clean corn crop in the U.S.

in last fall harvest. Our line of optical microbial test systems which are used in the detection of spoilage organisms like yeast and molds had gains of 52% for the year aided by our purchase of Biolumix in October of 2014, which provided $4 million of incremental revenue.

Sales of the existing Soleris vials rose 10% while equipment sales were off 43% due to prior year international placements which did not repeat this year. Sales of our distributive test kits to detect the presence of antibiotics in milk declined 10% on volume and 21% overall in dollars and we are impacted negatively by currency translation.

We will be introducing a number of new and improved products in this line in 2016 which should restore our growth. Revenues from our isothermal amplified pathogen detection system which are designed to detect dangerous pathogens such as Salmonella and Listeria rose 16% for the year.

As Rick mentioned we received a number of AOAC approvals for the product this year and are looking for continuing growth in fiscal 2016. Our international operations which are primarily focused on food safety and report under the Food Safety segment were negatively impacted by the strong U.S. dollar during the year.

Neogen Europe revenues rose by 11% in local currency but only increased 9% when converted to the U.S. dollar increases in Europe were driven by strong sales of genomics up 43% as we continue to grow our share internationally and allergens which rose 14%.

Our subsidiary in Brazil, Neogen do Brazil reported revenue increases of 12% in the Real for the year with strong momentum in the second half of the year, but revenues were down overall 3% when converted to U.S. dollars and revenues at Neogen Latino America our Mexican subsidiary were strongly for the year in spite peso weakness.

Our animal safety group recorded overall revenue increases of 15% for the quarter and 16% for the full year partly aided by three acquisitions the company completed during fiscal 2014 which provided the segment with a 13 million incremental revenue in fiscal 2015.

Organic growth for the animal safety segment for the year were 6% strength in our existing Lexington based business can form our line of patented detectable needles up 29%. Forensics kits which is sold into commercial laboratories up 41% and a nice 23% increase in small animal supplements led by a higher sales of canine thyroid replacement products.

Our lines of rodenticides and cleaners and disinfectants had mix results. Rodenticides were strong the entire year and revenues ended 21% higher than 2014 and sales of cleansers and disinfectants struggle with comparisons against of prior year a strong prior year and declined 12% for the current year.

As Jim is already commented about the ongoing strength of the average genomic testing business which was up 27% for the year. For 2015, our gross margins were 49.4% compare to 49.6% last year.

Within the animal safety segment gross margins rose to 40.4% compare to 38.1% in fiscal 2014 primarily as a result of a favorable product mixture toward higher gross margin products such as Rodenticides and the small animal supplements and efficiencies gained across a number of our operations.

In the food safety segments gross margins declines from 62.5% in fiscal 2014 to 59.7% this year primarily the result of currency weakness as we discussed earlier in our international markets which reduce comparative revenues and negatively impacted margins.

Our operating expenses were up 10% in the fourth quarter and 9% for the full year less than 14% annual rate of growth in revenue.

Sales and marketing expenses increased by 10% for the quarter were up 11% overall for the year, the largest components of this increase our personal related expenditures reflect increased headcount for the user as well as the full year impact hires made in the prior year.

Our general and administrative expenses rose 5% percent for the quarter and were up 3% for the year again reflecting increased salary and stock base compensation and fringe costs, higher amortization expense from our recent business acquisition and depreciation on investments in made in the company’s infrastructure in the past couple of years.

Offsetting increases was about $0.5 million reduction in legal expense following the successful resolution of legal dispute earlier in the year. Research and development expenses were 15% higher than fiscal 2014 as the company continues to make investments in new product development and improvement in our existing product.

Moving over to balance sheet our inventory at $51.6 million was virtually flat compared to last year end.

We worked hard throughout the year on programs which resulted in improvements in our inventory turns and we are going to continue those programs in fiscal 2016 along with the rationalization of our product lines on both sides of the business balance.

Our receivables balance grew in line with the growth in revenues for the year and we improve our days sales outstanding slightly. We actively monitor our receivables and are paying particular attention to those in our international markets given the uncertainty in some geographies.

We generated almost $44 million in cash from operations during the year and that’s double that of a year ago and used portion of the cash generated to make investments of $9.6 million in property and equipments in another $6.5 million dollars in our acquisition.

And we are now up to a 1062 employees worldwide and we would like to thank them publicly further efforts in making these results possible. We continue to feel good about where the company is headed as we move into 2016, the year ended with strong momentum and 2016 has also started off well.

Each side of the business has double-digit organic growth goals in fiscal 2016 believe and we continue to believe that we are positioned in our growing markets with the right products and strong people, and the future is bright for Neogen. I thank you for your continued support and at this point, I’ll turn it back to Jim..

Thanks, Steve. Let me wrap up here in just the next few minutes and talk briefly about some of things that, other things that make fiscal year 2016 look pretty exciting. There would be lot of continued strong activity on the Animal Safety side.

It’d be primarily aimed at foods safety back inside the pharm gate and raised without antibiotics is a term that you will continue to hear more and more.

The significant portion of our population that believes that antibiotic resistant bacteria on the human medicine side as a result of heavy antibiotic feeding to food animals and the dead residue has entered in the food chain, the human food chain. Through or not, it’s going to get more attention. First will come chicken.

I think all of the major broiler producers except perhaps one or two have already committed to their customers that they will be moving toward production of a substantial portion of their chicken meat without the use of antibiotics.

This means that we’d like to do a better job of management on the poultry side, throughout the hatcheries, the feed mills, that grow-out houses and the processing plants. If they are going to be able to protect these animals from disease, Neogen’s strong program of biosecurity is clear answer.

Our cleaners, disinfectants, rodenticides, and insecticides are the strong support tools, it prevent the spread of disease and replace that once clutch of antibiotics.

Our diagnostic test that effect the presence of antibiotics will also help to make sure that a wrong truck didn’t go to the wrong farm and deliver medicated feeds and antibiotics in it or that a flock chicken has actually can actually be tested before processing to make certain antibiotics didn’t inadvertently get introduced or maybe even to prove to the supports of the world that the product that they are receiving didn’t contain any antibiotic residues.

I’m sure you’ve all heard the dreadful story of avian influenza and that wiped out over 10% of the nation’s laying flock and played havoc with turkey production. Almost miraculously the broiler people kept it out of the major chicken meat production areas somehow.

Most poultry veterinarians believe that this bias was introduced by migratory birds as they move from south to north for summer nesting. It’s further believed that perhaps geese may have been, they want a real condoit for the spread of the disease. Well, guess what, those geese that went north in the spring will be heading back south again this fall.

The same above security measures that will be so critical and raised without antibiotics will also be the ones that will help protect the poultry industry from re-infection we hope. Neogen will be there with more cleaners, disinfectants, insecticides, and rodenticides.

Problems like baby pig diarrhea that swept through many of the pork production areas a year ago still haven’t been completely brought under control. They’ve been brought under better control because above security measures but products to continue that program of security are going to continue to be necessary.

We believe that the same thing that drove our animal genomic business up 27% this year, will still be around next year. More and more beef cattle and diary producers are realizing the importance of genomic selection of females that are going back into those herds as replacements.

As dairymen are now able to select just the top 60% or 70% of their annual calf crop for replacements, it’s become more important to make sure to pick in the best animals. The same is true for the handful of primary poultry breeders in the world, reversely control the breading stocks that will produce the meat that you and I will be eating next year.

Ability to withstand stress and disease will of course be more important to those poultry breeding companies as their eventual customers are the ones we’re talking about, they will be trying to grow chickens without the use of antibiotics.

The Food Safety market demands will continue to grow in several areas, it long last with Food Safety Modernization Act will in fact see regulations come to market.

The first will actually go into effect in August and then a couple of more around Halloween time all of these will increase the need for more food safety diagnostic test like those that Neogen produces.

The opportunity for synergistic acquisitions are continuing to be present at the moment we have four good acquisition candidates on the radar screen it appears that all could be synergistic to both our top line and our bottom line obviously we may not get any of these completed but it is nice to be looking at these kinds of opportunities with the strong balance sheet.

Let me stop at this point and open up for any questions that you might have for Steve, or Rick or myself. Chris..

[Operator Instructions] And our first question comes from Brian Weinstein from William Blair. Your line is open. Please go ahead..

Hi good morning, thanks for taking the questions, starting quickly on gross margin what do you see as kind of the primary puts and takes in FY 2016 is it reasonable to think that gross margins can be 50% next year and what we really have to kind of push them one way or the other significantly?.

Well I will let Steve give you the financial answer, but let me give you the hardest, as you know Brian we continue to say don’t judge based on what gross margins do, gross margin is just one of the contributors to operating profit and we will still be pushing towards that 20% of sales and operating profit, some of the gross margins stuff for instance that I have talked about in my comments may not be - may be a detractor from that 50%, but there is nothing below on this in a way of operating expenses it is going to be very important.

So that is important when we get to the bottom line, so I look at gross margins and they vary from month-to-month, it always depend on which growth, which products are in there, how they might be skewed one way or another but I just kind of look at gross margins is one of the indicators of what we’re doing with operating profits.

Steve do you think to add to that?.

No I would agree with everything you said and I think it’s important to know that our animal safety gross margins expanded nicely in 2015, 2015 food safety margins were hit by currency and to the extent that the currency comparative ease we should see some expansion possibly there and then it is all about product mix.

The Lansing diagnostics products in 2015 ended the year with strong momentum and if that continues into 2016 you should see a growth there on that side of the business. So I think gross margins of 50% are reasonable to expect..

Yes, Brian I can’t remember how you guys are looking at currency futures for the year earlier next 10 to 12 months but frankly we think that the dollar is still going to be strong compared to the currencies that we work in and as Steve said costs us the same amount of dollars to produce a product and if we end up selling it because of discounting currencies that has an impact, it is difficult to control..

Yes I appreciate that second question on the GeneSeek business had very strong growth obviously are there anything that you are seeing either from competitive standpoint or anything else that would kind of slowdown what we see in this sort of 25% to 30% kind of growth profile for the business going forward, anything on the horizon there?.

Well I wouldn’t encourage you to use 27% to 30% as part of your growth model for next year, those are pretty difficult to maintain obviously.

We do have a couple of competitors out there not in the board we are working in all areas of animal genomics, some of the major poultry breeders on a worldwide basis are customers or partners of ours, we do a lot of business in New Zealand and Australia and some of that goes to the sheep market where we do a lot of business on canine parentage a big piece of our business.

All of those are strong and don’t suffer a lot of competition at just - you don’t want to be, you not ever gone get stay in the business very long and its good unless attracts some competitors, but we do have a one or two competitors that are in the mainline dairy and beef business that to be record with they make us think every morning when we get up, but I think we’re still are - not to say DON but I think we’re still in a leading position as it relates to is that side of our business, but please don’t build a model on 30%..

Understood, okay. Thanks so much..

Thank you Brian.

And our next question comes from the Tony Brenner from Roth Capital Partners. Your line is open. Please go ahead..

Thank you. I have two questions regarding Neogen Europe which in the past typically has grown faster than your domestic business and last quarter its growth slowed somewhat.

I wonder if you could elaborate on that and discuss may be what the outlook is and ex-currency?.

As the question, Europe is - Neogen Europe is confounded by two sets of currency conversions. Neogen Europe are covers our domestic sales force in the countries as the UK, France and Germany and Holland and then they take care of distributors that are in the rest of the EU over there, independent distributors so we sell, they sell product in U.S.

dollars some in Euro and some in Pound sterling. And they bring it all back in Tony as you may remember in consolidate it all into found sterling and they bring it over here and then - land takes it and converts it the U.S.

and somewhere along the way sometimes I get kind of lost in that transaction, but we at the some portion of that percentage is gobbled up with some currency transactions.

We've continued to grow well there, we’ve got good opportunities in all of those countries, I think we’ve got acquisition opportunities that will brining some new products and the acquisition opportunities for Europe, we’ve got just a great management team that - they wanted the management teams within the company but we probably don’t have them fully stretched out every day.

So they’ve got an opportunity probably to pick some more management responsibilities with some additional road there.

So its I think its looks good for the year ahead, it was confused on what by the currency confinement, but it has slowed up from that two years ago when we were up 25% over there, I think sometimes we get that’s what they call horse gate year that’s when we had lot of product that was contaminated with horse meat and we got some extra revenue result, but I needed to be very proud of that group and I think that make a good strong solid contribution going forward..

Okay.

My second question regards the FSMA where you said the first week regulations will be published in the second half of the calendar year, want to discuss what those regulations pertained to when what product lines of your stay would most affect?.

No, good question. Thanks.

Yes the first ones is I call it one, as they may call it two, the final deadline, final rule printed on August 30th and one of those concerns what we would call around the USDA side has a program for human food and for animal food and this is first time the FDA has stepped quite so far back inside the farm gate on animal food.

That’s going to require better record keeping, it’s going to require that a lot of these food processors recognizing in advance where they might have risk problem in the document, what they are going to do in case they do have a risk problem, those in turn then will be subject to investigation.

Now or verification I should say by the FDA, but having said that, this will be final rule that will be out, but they will still have a year to go to get into compliance, so you know nothing moves fast seemingly in this part and then the small companies will even have more than a year.

So it’s going to impact our business, but there won’t be a land slide which I guess maybe is good, we would be able to absorb it as fast as it grows.

The ones that I think probably are going to be more important are the ones that come in at the end of October, one of those has to do with ports, a lot of imports have come in to the US, it’s owned and the people are responsible and the shippers after this rule goes into effect, it will be the receivers which will get rid of what we call port shopping, you could bring priority ownership in New Jersey and get turned down and they put it back on the ship and carry it down to Charleston and bring it in that will stop that kind of a problem.

But it’s also going to step up the amount of testing is required and it will be one look back so if ’m an importer of seafood product, let us say for I’m bringing in lobster tails as an importer, I’m going to be the one as the importer, I’m going to be the one responsible if [indiscernible] product is in compliant.

So I’m going to make sure that out there, there’s some testing done at the home port where it left. That’s the reason we think things like our India system is going to be helpful, we think that people are going to require as part of a certificate, U.S. importers are going to require more certification than they have in the past.

And then the other piece is that one I call the Halloween gift is going to deal with fruits and vegetables and that’s probably the one of the biggest places we’ve got now is where we've got potential for human safety.

Rick talked about what a large amount of problems we have in this country, how many people get sick, what it cost us and a lot of that is coming out of things like, spinach, fresh-cuts spinach and fresh vegetables that are lot of its produced, California, Florida, Mexico, where ever and it’s not under as tight as scrutiny as it might be.

We think that this regulation that’s coming is going to tighten that up.

On top of that what’s happening from the criminal side is making a believer out of some of us that some people have the problem with cantaloupe, because the wash water they were using to wash cantaloupe because the water were using will spend some time in a great broiler hotel and.

We’ve got several of those people who really didn’t mean to do bad but they are going to learn a lesson then.

So we think that, that will get more attention and I don’t certainly don’t want to say that we got people are trying to get by, take shortcuts but I think we do need to tighten up on the security measures we’d used in both first and it’s a diagnostic tests, you’ve gotten no words or before you knows what’s next.

So those are the two that are coming, there is another one it has to do with the transportation. I think it comes out March of next year and then even another one maybe as late as this time next year that is aimed at through defense and over concerned.

Always I’ve been concerned that haven’t been hit by somebody who puts bioterrorism agent in a milk tank but we’re going to see a tightened up rules there from FDA. So it’s taken a long time in coming, it will take even longer to get it fully implemented, we think by and large - and it will help us..

Thank you, Jim..

Thank you..

And our next question comes from Paul Knight from Janney. Your line is open. Please, go ahead..

Hi, maybe this is a question for Steve and that is regarding the organic growth rate, I guess we know understand DNA testing, the rodenticides seem to have that rodent outbreak but what were the other big parts of the organic growth in the quarter, was it bacterial, was it dry culture? What were the other popular areas we should know?.

Well, we talked about allergens, we’re up very strongly that’s a nice product line for us that was up 18%, we talked about genomics being strong.

The rodenticides as you mentioned and pathogens were up very nicely in the quarter in the year, it’s almost across the board on the food safety side, on the animal safety side there were pockets of real strength and then underlying basic solid business on the pockets of strength there we what we kind of tried to highlight were the rodenticides the needles, the forensic test kits and the genomics on that side of the business..

The dry culture medium portion was up 32% with what’s within that?.

Yes that in the fourth quarter in particular there was a very large sales of media internationally that drove kind of the fourth quarter numbers and but then contained within there are the genomics revenues that we are serving the Brazilian and Chinese markets internationally and those report under food safety, I’m sorry I forgot to mention Europe as well, so genomics in Europe, Brazil and China report in other under food safety because how we have to report but that’s the other driver for the big increase there..

Okay.

And then lastly could you talk about the China’s strategy, I know Anapure has been acquired but what are next steps in that large market?.

Yes. A part of that is a focus well first of all let’s look at China, China is working hard to get the quality of food for that population that they know they need is that middle-class is growing and the big part of that is animal proteins and the big part of the animal protein production is outstripping what China herself can do without some help.

They bought the largest pork producer in the world when they bought Smithfield Foods. So we’ve got companies like that that are operating in China, we’ve got other major companies that have Tyson Foods is a major producer of poultry in China.

[indiscernible] is a major producer over there, so you’ve got a number of companies that are producing animal proteins in China at the behest of the Chinese government but they have got their own brand to protect of course whereas Chinese company that’s operating in and out of a backyard and throwing dead hogs in the river is a different story.

Our focus is on those big major operations, there will always be somebody over there who can produce a diagnostic test, it is little cheaper than ours may not be as good but we see that the major producer be they non-Asian companies or even Asian companies and China are demanding higher quality, they want really.

We are doing business with three of the top five - I started to say maybe the top three, three of the top five dairy production companies in China. They’re getting very, very big, we’ve got operations in Mongolia now where they run in over 10,000 cows per farm to produce milk.

So that’s a way to get away from the melamine problem where you had guys that were milking five cows and in a wheelbarrow. You’ve got now these major companies that are going in, these are Chinese companies with major installations to provide the quantity and quality of foods.

So that is where our focus is, we probably pulled back a little bit and trying to be competitors with everybody but we look more and more into what we can do both food safety and animal safety, we are introducing some new - we will be introducing some new animal safety products, some of that will be a tie-in with what we are doing in India.

So that is what I mentioned, we sharpened our strategy, that is a part of that of whole statement..

Okay.

And then lastly Rick could you talk to the Biolumix contribution to revenue?.

Yes I would be happy to I think Steve highlighted in what he said was that we had the addition of about $4 million in sales overall from the Biolumix acquisition over the nine months that we had that business.

Thank you very much Jim and I think has some important fact we’ve been able to take that and by putting it into our supply chain and utilizing our very talented sales force been able to grow that business over the period as well..

Thank you..

[Operator Instructions] And our next question comes from Charles Huff from Craig Hallum. Your line is open. Please go ahead..

Hi, thanks for taking my questions and congratulations on a great fiscal year. I had a question for you about the Illumina distribution arrangement that you discussed in the press release for the GeneSeek genomic profiler for snips.

Wondering if you can help us understand that arrangement little bit more is it international, domestic or any details you can provide will be very helpful. Thank you..

Sure.

It’s basically international overtime we’ve got bio informatics, there is the testing in the test results in one gets from using a instrument platforms like Illumina to give you raw data but then that raw data is in needs to be converted through some bio informatics is says that’s good or bad or what degree of good or bad we know what all the sinps are for instance, they’re pretty much going to dictate much beefcake we would gain per day but once we get all of those factors then we have to put that some kind of a model.

Over time our guys have developed what they called the GGGP and which its own bio informatics program its being used to help producers, use the right bull, say the right replacement efforts whether its own beef or whether its own dairy side.

And obviously we’d like to do as much of that business through own lab as we could, but it’s a bigger world out there and we can’t quite cover everybody and everybody doesn’t want to seem product to air Scotland or to Lincoln, Nebraska.

So in conversations with Illumina they said if we could, if you would allow us take license as to use your bio informatics on hard chip we could sell that as a part of a program it will help us increase our revenues that is Illumina for us, it gives people more reason to use the big Illumina machines in platform and at same time then it reaches the part of the market the Neogen GeneSeek people can’t reach for whatever reason.

So we get obviously we get up some profit every time Illumina cells of chip is got bio informatics on it we get a little piece of that but probably more important is are located is where to take this tool is we continue to develop and make it stronger and stronger to the benefit of particularly beef and dairy production around the world it we can’t be everywhere all the time but it’s nice to see that, will be nice to see the more and more people are using genomics and to extent, as Rick currently used to say, raising tide raises all the ships and I think it’s in this program we’ve taken about here..

Okay, that’s very helpful. Thanks Jim.

Wondering about penetration rate, that you think about these bio informatics products in snip arrays and internationally in the market where Illumina is in versus domestically, do you think the penetration rates are dramatically much lower internationally versus domestically or how should we kind of think about that in terms of the opportunity that Illumina and I guess you guys have internationally relative to what you think have domestically?.

Yes, I think for Neogen GeneSeek program the international markets will be more lucrative than the domestic markets and that’s we’re getting the big piece of that now.

We’ve got for instance of the breed associations on the beef side, you’ve got [indiscernible] Angus and all of those I think all but perhaps two we do exclusively their work so all of the presence the work for practice in determining on the pure bred side for Alfred we do that genomics for them and then it goes back to them and to their association.

We don’t have a 100% of Angus business but I think that’s probably the - maybe that in American Braemar, we don’t want to have all of that one. But we are ready there domestically that’s just as an indication of we’ve already got a big piece of the domestic market. So international market is ___ end, it will help us develop better models.

We’ve got models that are developed mostly today for Bos taurus that’s the English breed cattle versus Bos indicus which is the indicus [indiscernible] Zebu type cattle and we’ve got some good models particularly for Brazil but we don’t have a model that’s really developed for some of those other areas.

So a feedback or some of that will eventually help us develop more models in those countries were maybe our bio informatics is not as precise as we would like for it to be..

It’s great.

Another question I have is on Brazil, so you mentioned in the prepared remarks that in the second half of this fiscal year Brazil started to get some traction and I know the first half was a little bit challenged and you guys were building some infrastructure down there and just wondered if you could kind of characterize Brazil now, you kind of out of the words I mean excluding the currency of course, are you kind of out of the words and you think you expect progress going forward or are there still some road blocks that you see?.

Well, we expect progress going forward and I think there are still some road blocks out there. Brazil has done a great job of protecting, continue to protect their own industries. So depending on what we are shipping into Brazil, the Terrace, I guess Steve up towards 17% on some stuff.

So we produced a dealership down there, we pay 17% more on our cost than a local guy would is producing it domestically. We understand that , the part of our challenge is to produce more product in country and that’s particularly through cleaners and disinfectants not bigger products that we’re working on now.

We’re making some progress, we are not there yet, we think we knew how to get there.

And but I think them Brazil just gets to be a bigger factor in the entire food supplier to the world already the largest are being producer fighting for the number ones lot of spots producing most chicken meat not only they are doing it in Brazil but JPS comes to the U.S. and buys up companies here.

So there the - I don’t know where they ranked now, third or fourth largest broiler producer in the United States is owned by the Brazilians. So making sure that we have good solid footing in Brazil is important to us.

But don’t know that anybody is ahead of us but we are still working on a daily basis to make sure we are structured right which could [indiscernible] conditions grow I guess it’s harder to predict the right growth..

Okay. Great.

I know this has been a long call, so I just have one more Sanostec and ContraPest, wondered if you could give us an update there I know there’s been a leadership change at Sanostec just wondering what the status is maybe with the EPA as far as you understand it and where your expectations are in terms of being able to commercialize ContraPest..

Yes. Thank you. To refresh the audience, it might not be familiar. We have a license to a technology that was developed by some scientists of the University of Arizona that will sterilize rats and mice particular rats. So that they can continue to reproduce.

We don’t own the technology, we’ve got a license to the technology should it - when it gets approved by the EPA I think that they were filed an EPA application, I think at the end of last week whether that got hold on filed, I don’t have any confirmation so. But that’s just an application, which could be a long ways from application to approval.

It is a different kind of product that EPA hasn’t had all of much experience with, most of what they have experienced with is something kills something, not something that alters its ability to reproduce, that’s where it’s cleaners and disinfectants or rodenticide or insecticides, those are all aimed at killing something which is most of what they look at.

I really can’t tell you I mean we hope that they are successful, we don’t really have anything other than being a cheering section for them to get further to where they are.

So in the mean time, we’ve got a great program going of our own, you maybe remember that we’ve got rodenticide laboratory special research facilities that’s located in our Randolph, Wisconsin facility and we're continually working on new rodenticides there, we’ve got I think two or three before EPA now for approval, I suspect that we are getting approval on a new liquid bait hopefully here within the next month or so that will have we think a breed application, be competitive over other things that are available in controlling rodents particularly in feed mills.

Most of the places remember where we try to kill rodents is already a clinical supply of food, so they’ve got all kinds of choices to what they're going to eat so we have got to convinced them to eat our poison instead of eating that corn. So a lot of work is done in that regard. So Sanostec that is new report I think..

And in terms of the bait forms I think you guys have been working on those for the past year, so do you feel like your group has kind of figured out the bait forms for ContraPest now?.

Well the bait forms really that is ContraPest is they are working to my knowledge it is all liquid bait, which can be good but we haven’t done any work on our side as far as testing any bait forms or anything to - no active input it all there..

Okay. Thanks for taking my questions..

You bet. End of Q&A.

We have no further questions. And at this time, I would like to turn the call over to Mr. Herbert for closing remarks..

Well thank you so much. Thank you so much not just for the day but you could tell I think most people the caliber of questions there are a lot of people who have been awful close to what we’ve done for the last year and we appreciate your support, we appreciate the advice that you’ve given us along the way.

I would make sure to invite you, if you got the invitation remember to come, if you didn't you can come anyway to our summer picnic that starts on Thursday afternoon here at company headquarters beginning about 4’O clock.

The weather has promised to be sunny, the beer cold and the barbecue good and we'll get an opportunity to talk with you first throughout the evening with some exhibits, we will have County fair time. We will have exhibits up of a lot of a different products and the people that are out there with them everybody and we always enjoyed doing that.

So if you can get here please do, if you need instructions call Terry Maynard but consider yourself invited. So thank you again and a good day..

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