My conference call notes:
.....sorry I missed the first ten minutes
The new year opportunities we think are even greater.
The markets we serve have made great strides in improving animal and food safety, but the demands have grown even bigger. In the past several months as most of you can remember bacterial contamination has lead to the recall of 65 million pounds of meat and poultry, bankruptcy of some large corporations, and both government and consumer legal actions.
On another front we can look at the fact that there were 556 recalls of food that were ordered during the past year for all reasons. 117 of these were related to failure to properly label foods for allergens. They were for foods that inadvertently contained eggs, peanuts or milk and it wasn't on the label. I think as some of you know we have began to make a move with diagnostic test kits to support that market.
Questions:
1. Roney - Can you comment on the new office space in Lansing? I would also like to see the numbers on the animal safety division? What has caused the dramatic turnaround in that area?
Answer: We have in fact expanded space in both Lansing and Lexington. We have acquired a new facility that is right in the block, sort a part of our campus here at Lansing, that is about 15,000 square feet. Which allowed us to loosen up space in our primary facility. That new facility is being used primarily for diagnostic manufacturing. It now housing the manufacturing and the laboratory(s) that were in New Jersey. It does give us growth opportunities in both our buildings here.
The growth in our animal safety, you may remember back at the beginning of the year we said in order to more effectively market our products and address the market area, that we were dividing are activities in to what we call food safety and animal safety. Those two are synergistic in that we believe, in fact we have already seen that one of the emphasis in improving food safety is that we see food safety is moving back inside the farm gates to become animal safety. We think that trend will continue. The Ideal instruments group because of the way they market their products is folded into be a part of the overall animal safety group. That group is primarily headquartered out of Lexington. Was part of an acquisition we made down there and has grown quite nicely ever since then acquisition. We have consolidated all of the marketing activities for our animal safety group in Lexington. As part of the growth down there we just added office space to accommodate a dozen or so new people.
2. Paine Webber - Relationship with BioPort?
Answer: Our relationship with that company sole was in regards to that the State of Michigan lab (that is now BioPort) produced our botulism vaccine that we now own. We joined with BioPort in the transaction, but to become solely the owner of the botulism vaccine. That is what we moved to Tampa, where we already had a vaccine production facility. We have no current ties to BioPort.
3. U.S. Banc Corp. - Growth? Acquisitions? Growth from internal developed products?
Answer: We really see growth opportunities in three distinct theaters. First of all is the internal generated growth and that would come from products from our R&D activities as well the expansion of sales to our existing products to an expanded customer base. In terms of acquisitions we are look for acquisitions that fit where we want to be. Currently in the food safety area is where we see the best opportunities today for acquisitions to add to that market. Since we believe that market is growing at a more rapid pace and apt to continue at a more rapid pace. On our animal safety side we look for niches; we look for opportunities where there is not only good growth where we can slip products in, but we also look for areas where there is some high margin opportunities. We believe our animal safety group will over the next year continue to have respectable growth rates, but we look for the growth on the food safety side to be faster and we think has the most exciting possibilities for acquisition.
4. <sorry I missed this question and answer - it had something to do with seafood regulation and testing, (I was off the speaker phone requesting to ask my question)>
5. Is this the last of the accounting charges for consolidation?
Answer: Yes.
6. My question about the production of the Bot Tox in Tampa and its cost structure.
Answer: (paraphrased because I couldn't record the answer because I had an open line) There are getting close to production in Tampa. They product has been so popular that they have been afraid of running out of their inventory. Of course their cost of producing this product is going to be significantly less once product is being produced in Tampa.
7. Presence of the Internet? The person asking the question offered to get with the company to make sure they where properly indexed in the popular search engines.
Answer: neogen is reluctant to do e-commerce on the web for some of their food safety products, like an E.coli test, because these products, not that they are that difficult to use, are not of the type for household use and if improperly used could produce a liability from false results.
There was some reference to them just starting to do e-commerce for some of their products for their customers in research labs, institutions and pharmaceutical companies.
Something in concert with another company.
On the animal safety side we see opportunities with E-commerce. We are currently working with two of the largest animal health distributors in the U.S. Both companies have done a lot of E-commerce. We hope in the next year to expand that side of the business.
8. International sales? Are Food allergy products meeting expectations?
Answer: International sales is up to about 22% up from around 15 to 16% last year. We think that is good considering international economics. Significant portion of are base is in South and Central America and Asia. We have grown our business there and we are coming on strong there. That is not to say that we don't have a lot of future opportunities to growth there; we think the opportunity there is at least as good as in the U.S. 50% of our sales could come from there in the future.
I sit on a board of directors of a consortium of fifteen of the major food manufacturers throughout the world that began year and half ago to look at this whole area of inadvertent allergen of food. We had a meeting last week. We are beginning to see sales for our test for peanuts to increase. Our egg test is beginning to pick up steam. We are going to introduce a product for <something?> in August.
GMO, mention of that they think there is opportunity with the detection of genetically modified products. <though, no specific reference to how they plan to participate in this area>
9. Insecticide dumping opportunity?
Answer: we have spent a lot of time earlier in our career on agricultural chemicals. We have one specific product that has done quite well as an overall screening product to detect the presence of insecticide. That test we recently used in Japan when someone intentional poisoned a large quantity of rice - the Japanese government ended up buying a fair number of diagnostic test kits from neogen. Although in this area we think a lab might be the best answer in most of this cases. |
