NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) for interim financial information and with the instructions
to Form
10-Q
and Article 10 of Regulation
S-X.
Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the nine-month period
ended February 28, 2017 are not necessarily indicative of the results to be expected for the fiscal year ending May 31, 2017. For more complete financial information, these consolidated financial statements should be read in conjunction
with the May 31, 2016 audited consolidated financial statements and the notes thereto included in the Companys annual report on Form
10-K
for the year ended May 31, 2016.
2. INVENTORIES
Inventories are stated at the lower of
cost, determined on the
first-in,
first-out
method, or market. The components of inventories follow:
|
|
|
|
|
|
|
|
|
|
|
February 28,
2017
|
|
|
May 31,
2016
|
|
|
|
(in thousands)
|
|
Raw materials
|
|
$
|
33,375
|
|
|
$
|
29,501
|
|
Work-in-process
|
|
|
5,588
|
|
|
|
4,498
|
|
Finished and purchased goods
|
|
|
36,433
|
|
|
|
30,372
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75,396
|
|
|
$
|
64,371
|
|
|
|
|
|
|
|
|
|
|
3. NET INCOME PER SHARE
The calculation of net income per share attributable to Neogen Corporation follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
February 28/29,
|
|
|
Nine Months Ended
February 28/29,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands, except per share amounts)
|
|
Numerator for basic and diluted net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Neogen
|
|
$
|
10,287
|
|
|
$
|
8,311
|
|
|
$
|
31,320
|
|
|
$
|
26,707
|
|
|
|
|
|
|
Denominator for basic net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
|
|
|
38,059
|
|
|
|
37,473
|
|
|
|
37,829
|
|
|
|
37,358
|
|
Effect of dilutive stock options
|
|
|
475
|
|
|
|
485
|
|
|
|
542
|
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net income per share
|
|
|
38,534
|
|
|
|
37,958
|
|
|
|
38,371
|
|
|
|
37,858
|
|
|
|
|
|
|
Net income attributable to Neogen per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.27
|
|
|
$
|
0.22
|
|
|
$
|
0.83
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.27
|
|
|
$
|
0.22
|
|
|
$
|
0.82
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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7
4. SEGMENT INFORMATION
The Company has two reportable segments: Food Safety and Animal Safety. The Food Safety segment is primarily engaged in the development, production and
marketing of diagnostic test kits, dehydrated culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation. The Animal Safety segment is
primarily engaged in the development, production and marketing of products dedicated to animal safety, including a complete line of consumable products marketed to veterinarians and animal health product distributors; this segment also provides
genomic identification and related interpretive bioinformatic services. Additionally, the Animal Safety segment produces and markets rodenticides, disinfectants and insecticides to assist in the control of rodents, insects and disease in and around
agricultural, food production and other facilities.
These segments are managed separately because they represent strategic business units that offer
different products and require different marketing strategies. The Company evaluates performance based on total sales and operating income of the respective segments.
Segment information follows:
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|
|
|
|
|
|
|
|
Food
Safety
|
|
|
Animal
Safety
|
|
|
Corporate and
Eliminations
(1)
|
|
|
Total
|
|
|
|
(in thousands)
|
|
As of and for the three months ended February 28, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues to external customers
|
|
$
|
39,318
|
|
|
$
|
34,646
|
|
|
$
|
|
|
|
$
|
73,964
|
|
Service revenues to external customers
|
|
|
3,631
|
|
|
|
10,790
|
|
|
|
|
|
|
|
14,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues to external customers
|
|
|
42,949
|
|
|
|
45,436
|
|
|
|
|
|
|
|
88,385
|
|
Operating income (loss)
|
|
|
7,403
|
|
|
|
7,743
|
|
|
|
(795
|
)
|
|
|
14,351
|
|
Total assets
|
|
|
183,419
|
|
|
|
215,243
|
|
|
|
108,636
|
|
|
|
507,298
|
|
|
|
|
|
As of and for the three months ended February 29, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues to external customers
|
|
$
|
31,975
|
|
|
$
|
32,402
|
|
|
$
|
|
|
|
$
|
64,377
|
|
Service revenues to external customers
|
|
|
2,735
|
|
|
|
9,613
|
|
|
|
|
|
|
|
12,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues to external customers
|
|
|
34,710
|
|
|
|
42,015
|
|
|
|
|
|
|
|
76,725
|
|
Operating income (loss)
|
|
|
6,091
|
|
|
|
6,172
|
|
|
|
(1,009
|
)
|
|
|
11,254
|
|
Total assets
|
|
|
130,077
|
|
|
|
189,191
|
|
|
|
112,973
|
|
|
|
432,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food
Safety
|
|
|
Animal
Safety
|
|
|
Corporate and
Eliminations
(1)
|
|
|
Total
|
|
|
|
(in thousands)
|
|
For the nine months ended February 28, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues to external customers
|
|
$
|
112,592
|
|
|
$
|
110,578
|
|
|
$
|
|
|
|
$
|
223,170
|
|
Service revenues to external customers
|
|
|
10,475
|
|
|
|
29,102
|
|
|
|
|
|
|
|
39,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues to external customers
|
|
|
123,067
|
|
|
|
139,680
|
|
|
|
|
|
|
|
262,747
|
|
Operating income (loss)
|
|
|
24,286
|
|
|
|
24,616
|
|
|
|
(2,957
|
)
|
|
|
45,945
|
|
|
|
|
|
|
For the nine months ended February 29, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues to external customers
|
|
$
|
98,708
|
|
|
$
|
99,423
|
|
|
$
|
|
|
|
$
|
198,131
|
|
Service revenues to external customers
|
|
|
7,998
|
|
|
|
25,067
|
|
|
|
|
|
|
|
33,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues to external customers
|
|
|
106,706
|
|
|
|
124,490
|
|
|
|
|
|
|
|
231,196
|
|
Operating income (loss)
|
|
|
22,216
|
|
|
|
21,328
|
|
|
|
(2,783
|
)
|
|
|
40,761
|
|
(1)
|
Includes corporate assets, consisting principally of 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.
|
8
5. EQUITY COMPENSATION PLANS
Qualified and
non-qualified
options to purchase shares of common stock may be granted to directors, officers and
employees of the
Company under the terms of the Companys stock option plans. These options are granted at an exercise price of not less than the
fair market value of the stock on the date of grant. Options vest ratably over three and five year periods and the contractual terms are generally five or ten years. A summary of stock option activity during the nine months ended February 28,
2017 follows:
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|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-
Average
Exercise Price
|
|
Options outstanding June 1, 2016
|
|
|
2,081,000
|
|
|
$
|
36.71
|
|
Granted
|
|
|
618,000
|
|
|
|
54.19
|
|
Exercised
|
|
|
(542,000
|
)
|
|
|
29.04
|
|
Forfeited
|
|
|
(49,000
|
)
|
|
|
42.72
|
|
|
|
|
|
|
|
|
|
|
Options outstanding February 28, 2017
|
|
|
2,108,000
|
|
|
|
43.66
|
|
During the three and nine month periods ended February 28/29, 2017 and 2016, the Company recorded $1,198,000 and $1,462,000
and $3,932,000 and $4,007,000, respectively, of compensation expense related to its share-based awards.
The weighted-average fair value per share of
stock options granted during fiscal 2017 and fiscal 2016, estimated on the date of grant using the Black-Scholes option pricing model was $15.79 and $13.11, respectively. The fair value of stock options granted was estimated using the following
weighted-average assumptions.
|
|
|
|
|
|
|
|
|
|
|
FY2017
|
|
|
FY2016
|
|
Risk-free interest rate
|
|
|
1.2
|
%
|
|
|
1.2
|
%
|
Expected dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Expected stock price volatility
|
|
|
35.2
|
%
|
|
|
33.3
|
%
|
Expected option life
|
|
|
4.0 years
|
|
|
|
4.0 years
|
|
The Company has an employee stock purchase plan that provides for employee stock purchases at a 5% discount to market price.
The discount is recorded in administrative expense as of the date of purchase.
6. NEW ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued ASU No.
2014-09Revenue
from Contracts with Customers. The new standard outlines a
single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is
that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard
is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. In April 2016, the FASB issued Accounting Standards Update
No. 2016-10
Revenue from Contracts with Customers (Topic 606), which amends and adds clarity to certain aspects of the guidance set forth in ASU
2014-09
related to identifying performance obligations and licensing. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is not permitted. The guidance permits two
methods of adoption; a full retrospective method to each prior reporting period presented or a modified retrospective approach with the cumulative effect of initially applying the guidance recognized at the date of initial application. The Company
is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.
In July 2015, the FASB issued ASU No.
2015-11Inventory:
Simplifying the Measurement of Inventory. The update requires inventory not measured using either the last in, first out (LIFO) or the retail inventory methods to be measured at the lower of
cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The update is effective for fiscal years beginning
after December 15, 2016. Early adoption is permitted for financial statements that have not been previously issued. The Company will adopt this standard at the start of its next fiscal year beginning on June 1, 2017 and does not expect the
adoption will have a material impact on its consolidated financial condition and results of operations.
9
In September 2015, the FASB issued ASU
2015-16Simplifying
the
Accounting for MeasurementPeriod Adjustments. Changes to the accounting for measurement-period adjustments relate to business combinations. Currently, an acquiring entity is required to retrospectively adjust the balance sheet amounts of the
acquiree recognized at the acquisition date with a corresponding adjustment to goodwill as a result of changes made to the balance sheet amounts of the acquiree. The measurement period is the period after the acquisition date during which the
acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). The changes eliminate the requirement to make such retrospective adjustments, and instead require the
acquiring entity to record these adjustments in the reporting period they are determined. The new standard is effective for public companies for fiscal years beginning after December 15, 2015. The Company has adopted this standard; the adoption
has not had a material impact on its consolidated financial condition and results of operations.
The FASB recently issued ASU No.
2015-17Income
Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes as part of its Simplification Initiative. The amendments eliminate the guidance in Topic 740,
Income Taxes
, that required
an entity to separate deferred tax assets and liabilities between current and non-current amounts in a classified balance sheet. Rather, deferred taxes will be presented as non-current under the new standard. This ASU is effective for annual
periods, including interim periods within those annual periods, beginning after December 15, 2017 for public companies. Early adoption is permitted. As of February 28, 2017, the Company had $1.7 million of current deferred tax assets
that would be reclassified to net against
non-current
deferred tax liabilities according to the new standard. The Company currently expects to adopt this standard as of May 31, 2017.
In February 2016, the FASB issued ASU No.
2016-02Leases
to increase transparency and comparability among
organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize 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. The recognition, measurement and presentation of
expenses and cash flows arising from a lease by a lessee have not significantly changed from previous U.S. GAAP. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018.
Modified retrospective application is permitted with certain practical expedients. Early adoption is permitted. The Company is in the process of evaluating its lessee and lessor arrangements to determine the impact of this amendment on its
consolidated financial condition and results of operations. This evaluation includes a review of revenue through leasing arrangements as well as lease expenses, which are primarily through operating lease arrangements at most of the Companys
facilities.
In March 2016, the FASB issued ASU
No. 2016-09
Compensation-Stock Compensation (Topic
718): Improvements to Employee
Share-Based Payment Accounting to provide guidance that changes the accounting for certain aspects of share-based payments
to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional
paid-in
capital pools. The
guidance also allows for the employer to repurchase more of an employees shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they
occur rather than on an estimated basis. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2016 with early adoption permitted. The Company expects to adopt this
standard effective June 1, 2017 and currently believes that tax benefits related to share-based payments will result in a lower effective tax rate in fiscal 2018.
In August 2016, the FASB issued ASU
No. 2016-15
Classification of Certain Cash Receipts and Cash Payments
(a consensus of the Emerging Issues Task Force). The amendments in ASU
2016-15
address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under
FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows. The amendments in ASU
2016-15
are effective for public business entities for fiscal years beginning after December 15, 2017,
and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet adopted this update and is currently evaluating the impact of ASU
No. 2016-15
on its consolidated financial statements.
In January 2017, the FASB issued ASU
2017-04
Intangibles - Goodwill and Other (Topic 350). ASU
2017-04
simplifies the subsequent measurement of goodwill by removing the second step of the
two-step
impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge
should be recognized for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the
option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU
2017-04
is effective
for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The
Company does not believe that adoption of this amendment will have a material impact on its consolidated financial statements.
10
7. BUSINESS AND PRODUCT LINE ACQUISITIONS
The Consolidated Statements of Income reflect the results of operations for business acquisitions since the respective dates of purchase. All are accounted for
using the acquisition method. Goodwill recognized in the acquisitions discussed below relates primarily to enhancing the Companys strategic platform for the expansion of available product offerings.
On June 1, 2015, the Company acquired the assets of Sterling Test House, a commercial food testing laboratory based in India. Consideration for the
purchase was $1,118,000 in cash and approximately $102,000 of a contingent consideration liability, due in installments on the first two anniversary dates, based on an excess 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 $43,000, inventory of
$14,000, property and
equipment of $141,000, contingent consideration accrual of $102,000, intangible assets of $345,000 (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. This business continues to operate in its current location and reports within the Food Safety segment. In July 2016, the Company paid the former owner $70,000 for contingent consideration based on the
achievement of sales targets, and reduced the recorded liability by a corresponding amount.
On August 26, 2015, the Company acquired all of the
stock of Lab M Holdings, a developer, manufacturer and supplier of microbiological culture media and diagnostic systems located in the United Kingdom. Consideration for the purchase was $12,436,000 in cash. The final purchase price allocation, based
upon the fair value of these assets and liabilities determined using the income approach, included cash of $285,000, accounts receivable of $975,000, inventory of $1,169,000, property and equipment of $3,337,000, other current assets of $309,000,
current liabilities of $948,000, long-term deferred tax liability of $784,000, intangible assets of $3,611,000 (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. This business continues to operate in its current location and reports within the Food Safety segment.
On December 22, 2015, the Company acquired the rodenticide assets of Virbac Corporation, the North American affiliate of the France-based Virbac group, a
global animal health company. The acquired assets include a rodenticide active ingredient that complements Neogens existing active ingredients, and more than 40 regulatory approvals for a variety of formulations in the United States, Canada
and Mexico. The acquired assets also include a large retail and OEM customer base. Consideration for the purchase was $3,525,000 in cash and up to $300,000 of contingent consideration. The final purchase price allocation, based upon the fair value
of these assets and liabilities determined using the income approach, included inventory of $317,000, property and equipment of $60,000, current liabilities of $300,000, intangible assets of $1,759,000 (with an estimated life of
5-15
years),
non-amortizable
trademarks of $200,000 and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. The
products are manufactured at the Companys production facility in Randolph, Wisconsin, and report within the Animal Safety segment. In fiscal 2016, the Company paid the former owner $300,000 of contingent consideration based on the achievement
of specific objectives, and reduced the recorded liability by a corresponding amount.
On April 26, 2016, the Company acquired the stock of Deoxi
Biotecnologia Ltda., an animal genomics laboratory located in
Aracatuba, Brazil. This acquisition is intended to help accelerate the growth of
Neogens animal genomics services in Brazil. Consideration for the purchase was $1,549,000 in cash and up to $2,552,000 of contingent consideration, due at the end of each of the first two 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 accounts receivable of $132,000, inventory of $89,000, other current assets of $9,000, property and equipment of
$232,000, current liabilities of $266,000, contingent consideration accrual of $453,000,
non-amortizable
trademarks of $193,000, intangible assets of $350,000 (with an estimated life of
5-10
years) and the remainder to goodwill (deductible for tax purposes). These values are Level 3 fair value measurements. This business continues to operate in its current location and is managed by Neogen do
Brasil, reporting within the Food Safety segment.
On May 1, 2016, the Company acquired the stock of Preserve International and its sister company,
Tetradyne LLC, manufacturers and marketers of cleaners, disinfectants and associated products to the swine, poultry, food processing and dairy markets. Preserve and Tetradyne have manufacturing locations in Memphis, Tennessee, and Turlock,
California. Consideration for the purchase was $24,086,000 in cash. The preliminary purchase price allocation included accounts receivable of $1,629,000, inventory of $1,964,000, other current assets of $269,000, land, property and equipment of
$1,625,000, current liabilities of $868,000, long-term liabilities of $660,000, intangible assets of $10,590,000 (with an estimated life of
5-15
years) and the remainder to goodwill (partially deductible for
tax purposes). These values are Level 3 fair value measurements. This business continues to operate in its current locations and reports within the Animal Safety segment.
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On December 1, 2016, the Company acquired the stock of Quat-Chem Ltd., a chemical company that manufactures
biosecurity products, based in Rochdale, England. Consideration for the purchase was $21,606,000 in cash and up to $3,778,000 of contingent consideration, due at the end of each of the first two years, based on an excess net sales formula. The
preliminary purchase price allocation included accounts receivable of $4,684,000, inventory of $1,243,000, land, property and equipment of $2,715,000, accounts payable of $2,197,000, deferred tax liability of $1,133,000, contingent consideration
accrual of $1,105,000, other current liabilities of $604,000,
non-amortizable
intangible assets of $1,637,000, intangible assets of $5,682,000 (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. This business continues to operate in
its current location and is managed by Neogen Europe, reporting within the Food Safety segment.
On December 27, 2016, the Company acquired the stock
of Rogama Industria e Comercio, Ltda., a company that develops and manufactures rodenticides and insecticides, based near Sao Paulo, Brazil. Consideration for the purchase was $12,423,000 in cash and up to $2,069,000 of contingent consideration, due
at the end of each of the first two years, based on an excess net sales formula. The preliminary purchase price allocation included accounts receivable of $1,863,000, inventory of $1,026,000, property and equipment of $1,840,000, current liabilities
of $177,000, contingent consideration accrual of $430,000,
non-amortizable
intangible assets of $591,000, intangible assets of $3,252,000 (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. This business continues to operate in its current location and is managed by Neogen do Brasil, reporting within the Food
Safety segment.
8. LONG TERM DEBT
The Company has a
financing agreement with a bank providing for an unsecured revolving line of credit, which was amended on November 30, 2016 to increase the line from $12,000,000 to $15,000,000, and extend the maturity from September 1, 2017 to
September 30, 2019. There were no advances against the line of credit during fiscal 2016 and there have been none thus far in fiscal 2017; there was no balance outstanding at February 28, 2017. Interest on any borrowings remained at LIBOR
plus 100 basis points (rate under the terms of the agreement was 1.92% at February 28, 2017). Financial covenants include maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA, each of which the
Company was in compliance with at February 28, 2017.
9. 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 expenses annual costs of remediation, which have ranged from $47,000 to $57,000 per year over the past five years. The Companys estimated liability for these costs was
$916,000 at February 28, 2017 and May 31, 2016, measured on an undiscounted basis over an estimated period of 15 years; $60,000 of the liability is recorded within current liabilities and the remainder is recorded within other long-term
liabilities in the consolidated balance sheet.
The Company is subject to certain legal and other proceedings in the normal course of business that, in
the opinion of management, should not have a material effect on its future results of operations or financial position.
10. STOCK PURCHASE
The Company has a stock repurchase program, authorized by the Board of Directors in calendar year 2008, to purchase, subject to market conditions, up to
1,125,000 shares of the Companys common stock. As of February 28, 2017, 1,012,974 shares were available to be repurchased under the program. There were no purchases in fiscal year 2016 and there have been none thus far in fiscal 2017.
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PART I FINANCIAL INFORMATION