James L. Herbert - Chairman of the Board, Chief ExecutiveOfficer Richard R. Current - Chief Financial Officer, VicePresident, Secretary Lon M. Bohannon - President, Chief Operating Officer,Director

Tony Brenner - Roth Capital Partners Steven O’Neil - Hilliard Lyons Stanford Rothchild - Rothchild Capital Management Vito Menza - Sandler Capital Joseph Potvin - Wachovia Securities

Good day, everyone, and welcome to the Neogen Corporationthird quarter earnings results conference call. Today’s call is being recorded.For opening remarks and introductions, I would like to turn the call over toMr. James L. Herbert, Neogen's Chairman and CEO. Please go ahead, sir. James L. Herbert: Good morning and welcome to our regular quarterly conferencecall for investors and analysts. Today we’ll be reporting on Neogen's secondquarter that ended on November 30th of 2007. I’ll remind you that some of the statements that we makehere today could be termed as forward-looking statements and theseforward-looking statements of course are subject to certain risk and uncertainties.The actual results may differ from those that we discuss today. These risksthat are associated with our business are covered in part in the company’s Form10-K as filed with the Securities and Exchange Commission. In addition, to those of you who are joining us today bylive telephone conference, I’d also welcome those who may be joined by way ofsimulcast on the world wide web. That number seems to grow more and more eachquarter. These comments, along with some exhibits, will be availableon the web for approximately 90 days. Following our comments this morning,we’ll entertain questions from participants who are joined by this liveconference and I’m joined today by Lon Bohannon, Neogen's President; and RickCurrent, our CFO. Earlier today, Neogen issued a press release that detailedthe results of the second quarter of the company’s 2008 fiscal year which endedon November 30th. I believe that it is reasonable to characterize this asanother great quarter for the company in terms of both revenues and income.Neogen's net income for the quarter, for the second quarter increased 34% fromthe previous year’s second quarter to over $3.2 million. Adjusted for thatthree-for-two stock split that was effective earlier in the year, net incomefor the quarter rose to $0.22 per share compared to last year’s $0.17. Neogen's second quarter revenues increased 23% from theprior year to $27.2 million. This was also a record quarter. On a year-to-date basis for the first six months, Neogen'snet income increased 30% to over $6.2 million compared to $4.8 million infiscal ’07. This brings our earnings per share for the first half of the yearto $0.42 and that compares with $0.34 for the same period last year. Revenues for the first two quarters were up 18% compared tolast year’s first half and now total approximately $50.1 million. Though wedon’t normally give guidance to the marketplace, we did say at the beginning ofthis year that we thought 2008 would be the year that the company would moveover the $100 million mark in total revenues and as you can see, we’re on trackto get that done because of what we’ve gotten done here in this first sixmonths. All of us at Neogen continue to take pride in the company’sconsistent revenue and profit growth. This quarter marks the 59th consecutiveprofitable quarter for the company and the 63rd quarter in the last 68 in whichwe showed revenue increases compared to the previous year. This record nowspans 17 years. For some time, it’s been the company’s goal to grow revenuesat the rate of 20% annually and Rick Current’s update shows that we’re almostachieving that goal with a compound annual growth of 19% for the past 15 years. Our achievements in both the food safety and the animalsafety areas in the past quarter were gratifying. Lon Bohannon will report moreon those specifics in a few moments. However, I’d like to cover a few of thehighlights of the second quarter. Gross margins for the quarter continue to be solid at over52% and on a year-to-date basis for the first six months, these margins haveincreased to 52.8% as compared to 51.9% a year ago. Of course, we’ve alwaystold investors that our company is best judged by its operating profits, sincegross margins are only a portion of that story. Those operating margins were upsolidly for the quarter and for the first six months, they now stand at 18.6%as compared to 17.2% for the first six months last year. Sales and marketing expense as a percent of revenuedecreased in both the quarter and on a year-to-date basis and for the firsthalf of the year are almost a full percent below where they were in the prioryear at approximately 20.2%. That’s of total revenues. Now, having said that, I should also point out that we’veinvested approximately $1.2 million more in sales and marketing this six monthsthan a year earlier and we’ll continue to make sound investments in this area.We believe that our strong sales and marketing program has given us acompetitive edge in a number of our activities. G&A expenses were still a bit higher than I like to seethem, totaling about 10.4% of revenues for the first half of the year. Thatcompares with 9.8% last year. Part of this increase is due to staffing, somehigher costs attributable to stock options, and legal expenses. We should beginto see some significant decreases in legal expenses as we move through the lasthalf of the year, since we settled some legal challenges recently. Sales in our international area continue their steadygrowth. For the first half of the year, revenues from international sourceswere up 22%, compared to the prior year. This past quarter, they accounted for38% of the company’s total revenue. This international growth continues to be led by our NeogenEurope Limited operations in Scotland that serves as our strategic doorway tothe European Union. Their sales for the six months are up about 38% compared tolast year and I think it’s even more important to note that their net incomefor the first half of the year has already exceeded last year’s full year. I can also give you a quick update on acquisitions that haveoccurred during this first six months. You’ll remember that at the very tailend of the first quarter, we acquired the assets of Kane Enterprises, a SouthDakota based manufacturer and marketer of animal safety products. During thefour months since that acquisition, we’ve relocated those assets to our alreadyexisting facilities in Kentucky and I believe have the business pretty wellintegrated. At the beginning of December, we announced that we hadacquired the assets of Rivard Instruments, a Canadian company that was involvedin the manufacturing and marketing of detectable hypodermic needles. Thisacquisition brought to an end a long and hard fought and expensive series oflitigation in both Canada and the U.S. regarding conflicting patents. Thoselegal expenses should now be essentially behind us. Furthermore, this collection of patents that are held by thetwo companies put us in a very strong position not only in the U.S. and Canadabut in several other important international markets, such as France andDenmark. I spent a week in Europe in mid-December to get our armsaround those European opportunities and I can tell you that I came away veryencouraged. This acquisition won’t give us any substantial revenue increases inthe next couple of quarters but it will help us solidify our position as Ibelieve the dominant manufacturer of detectable hypodermic needles. Just as other portions of food safety has grown, there’sbeen more and more concern about the possibilities of broken hypodermic needlesremaining in an animal and finding its way to a consumer’s table in a cut ofmeat. Our progress has not gone unnoticed in the financial marketsduring this six months. During this past quarter, Forbes magazine named Neogenfor the third year in a row to its annual list of the 200 best small publiccompanies in America. And this, by the way, is the sixth time that we’vereceived that recognition in the past eight years. Our progress has been at least partially reflected in thecompany’s stock price. Taking into account the stock dividend, the December 312007 stock price was 79% ahead of the prior December. Since our last conference call, we held an annual meeting ofshareholders in early October and I can report to you that all of the proposalsfrom the Board of Directors were adopted by shareholders, including thereelection of Jack Parnell and Bob Book as directors for another three yearsand officially bringing on board Dr. Clayton [Yider] as a new director. I thinkour shareholders should certainly take confidence in directors such as thesewho have tremendous experience in food and agriculture and also understandNeogen's business. In concluding my comments, I’ll have to admit that we arefortunate I believe in operating in a business climate such as the food andanimal safety area. A recent independent study indicates that markets for ourproducts are increasing about 6% annually and are expected to do so over thenext few years. You know, obviously we’re proud that we’re in a growingmarket but we’re also proud that we can grow revenues at over 20% when theoverall market is growing at 6%. It’s nice to be producing products that have agood demand. Our growth and our strength also bode well for ouropportunities on the acquisition front. Though we don’t currently have anyletters of intent in place, there are several interesting possibilities thatcould be synergistic to our business, and it’s also helpful to be sitting onover $10 million in cash, be generating cash on a monthly basis, and have verysignificant unused lines of credit. I need to quit basking in all of these accomplishments andlet Lon Bohannon, Neogen's President and Chief Operating Officer, tell you moreof the details about how he and his team succeeded in these accomplishments andmore importantly, how he’s looking at the last half of the year. Lon. Lon M. Bohannon: Thank you, Jim and let me take a moment to wish all of ourlisteners a very happy and prosperous new year. As Jim commented earlier, forthose of you who bought Neogen stock at any time during the past 12 months orwere fortunate enough to own Neogen stock for all of the last 12 months, 2007was indeed a very prosperous year. You can be assured that management willcertainly endeavor to do everything in our power to continue our consistent andstrong growth record as we finish out our 2008 fiscal year. Let me take a few moments to expand somewhat on our secondquarter performance for each of the two operating divisions before turning myattention to ongoing cost control initiatives and future opportunities. Looking first at our animal safety division, the secondquarter was filled with a lot of success as we expanded sales to many of thelargest animal health distributors and as we continued to work on implementingprograms to improve overall gross margins on key product lines. As Jim said, overall the animal safety group had a terrificquarter as sales surged 21% over the same quarter last year. This strong secondquarter performance brought our sales on a year-to-date basis and the increasefor this division to a very respectable 13%. The Kane Enterprises acquisition did contributesignificantly to the outstanding second quarter sales growth and sales for thisnew group of products actually exceeded our second quarter pro forma budget. In addition, our Lexington division, which is the largest ofour animal safety profit centers, achieved 10% organic growth in the secondquarter, led by strong sales of veterinary instruments, including the launch ofnew hard pack syringes and needles and strong growth in specialty products soldto large animal health firms. I think it was also very satisfying to see a 23% increase insales of what we call ethical products, including particularly strong salesgrowth of products servicing the companion animal market. I think as we lookahead, we plan to develop more products for this important and growing segmentof the animal safety industry. Looking at Hacco for a moment, sales of rodenticides anddisinfectants were sluggish for the second consecutive quarter, with salesfalling approximately 4% below the prior year. Now, as I commented in the firstquarter, I do not believe we’ve lost any significant market share tocompetition. I continue to believe that this year’s mild fall weatherthroughout much of the country resulted in far fewer rodent infestationproblems that have negatively affected our rodenticide sales for the first sixmonths. I think the fact that our international business forrodenticide increased significantly in the quarter and is now ahead of lastyear for our first six months does give some comfort that our overall salesactivity in this area are still effective. But we are keeping a close eye on this area. We will beintroducing new bait stations and we have entered into a new distributionagreement aimed at the large western agronomics market. We recently introduceda new packaging design. We have added two dedicated sales managers and wecontinue to expand our portfolio of international rodenticide registrations tosupport and expand future sales of this important rodenticide and disinfectantproduct line. Switching to the food safety, the performance of our foodsafety division in the second quarter was nothing short of outstanding. Thisdivision completed the quarter with growth of 24%, which becomes even moreimpressive considering that all of this increase is same-store sales growth.Those of you who have followed Neogen for some years know that we have set agoal for ourselves of trying to achieve somewhere around 10% organic salesgrowth and the food safety division has been far exceeding that objective forour last four quarters. On a year-to-date basis now, organic sales growth for thisdivision stands at 22%. Once again, this growth was very broad-based in thesecond quarter with sales increases coming from many segments and many productlines. We had increases in 12 of 15 market segments ranging from 4% to 44%. Intwo of those segments where we experienced shortfalls compared to the prioryear, we really don’t have any dedicated sales personnel, which is something wemay need to look at in the quarters ahead. Likewise, increase in food safety product sales for thequarter were very encouraging, with sales more than doubling for a specificproduct like our Reveal DON test due to particularly strong demand in Europe. Our broad product lines, including tests formicro-organisms, general sanitation, dairy antibiotic residues, food allergens,natural toxins, and dehydrated culture media all achieved increases compared tolast year’s second quarter ranging from 5% to over 40%. So with all this good news, what’s keeping me awake atnight? Well, we do have some challenges to keep life interesting, and I guessin some cases, provide job security for some of us here at Neogen. First andforemost is what is happening to petroleum and commodity grain prices thatskyrocketed in 2007. Of course, increases in petroleum ultimately results in increasesin plastics, packaging, film, and other components for many of our products anda significant increase in grain prices has been largely the result of so muchcorn being diverted to ethanol production. These increases in petroleum-based products and commoditygrain prices definitely have an impact on our costs but they do sometimesrepresent somewhat of a double-edged sword, as I will elaborate on a little bitlater. The higher grain prices definitely increase the cost of ourrodenticides, since grains represent the single largest ingredient cost inthose products. Higher grain prices also put a lot of pressure on manyimportant customers in the food animal production markets that purchase a greatmany veterinary instruments from Neogen. Of course, price increases inpetroleum-based components impact many of our products and occasionally placeus in the unenviable position of having to raise prices to maintainsatisfactory operating margins. Now obviously as more suppliers attempt to pass along costincreases, greater pressure is placed on our buyers to find alternative sourcesand better prices without sacrificing quality. More recently, we areexperiencing a worldwide shortage in casing and several other [peptones] thatare important in the manufacturing of dehydrated culture media. In some cases,prices have risen as much as 25% to 50% and some of these ingredients are justdifficult to obtain at any cost. Now, the danger of pointing out challenges like these in aconference call with investors and analysts is that in doing so, I raise undueconcerns among our best and most important supporters. Let me assure you thatthat is the last thing I want to do and I certainly don’t want to appearpessimistic at all. In fact, exactly the opposite is true and I am veryencouraged about the remainder of our 2008 fiscal year and in general, Neogen'sfuture. For example, I mentioned earlier that the ethanol issue wasa double-edge sword. On the positive side, we have now sold more microtoxindiagnostic test kits to the ethanol producers in our first six months this yearthan we did in all of fiscal year 2007. I believe we have also identifiedadditional new prospects as more of these ethanol plants come online and we canfurther expand our sales to this industry in the quarters and the years aheadwith some new products and some new formats of existing products. And although prices have increased in several areasaffecting our cost of goods sold, we believe we will be able to selectivelypass along price increases to our customers to help maintain the strongoperating margins we currently enjoy. We also believe the risk of losingbusiness is minimized in many cases because of our quality products and thesuperior customer service we provide our customers compared to our competition. And we continue to move full speed ahead with new costcontrol initiatives to help offset higher costs and expand operating marginsfaster than we grow sales. During the second quarter, we made our first oceancontainer shipments of inventory to our Neogen Europe operations. This changein logistics could result in annual savings of as much as $200,000 whencompared to our shipping costs prior to this change. The second quarter also saw success in getting our newbiologics production facility in Lansing, Michigan added to our U.S.D.A.license. Now, we still plan to run the new facility in parallel with our Tampaoperations for the rest of fiscal year 2008 but that means that full consolidationcost savings are expected to take place beginning in our 2009 fiscal year thatwill start on June 1st. Another cost-saving project that made significant progresslast quarter involved the installation of automated equipment to one of ourmany disposable diagnostic products. This change should save us somewhere inthe neighborhood of $150,000 on an annual basis when it’s fully validated andoperational. We expect this project to be completed late in the third or earlyin the fourth quarter of this fiscal year. We also installed a new custom piece of machinery in lateDecember that will provide Neogen a completely new product to be initiallymarketed to the beverage industry beginning as early as next quarter. So obviously I am very encouraged about the rest of fiscalyear 2008 and overall about the future of Neogen. I am encouraged about thesignificant sales opportunities that exist in many of our markets and that’sboth domestically and internationally. In fact, some of our markets appear tobe growing faster than originally thought, as evidenced by an almostunprecedented number of recent food recalls. In the last six months, there havebeen 10 highly publicized recalls involving harmful pathogens likeEcoli-0157:H7, Listeria and Salmonella. In addition, there have been 104recalls in the last year involving food allergens with inadvertentcontamination of milk and egg being the leading culprits. I am also encouraged with the cost-saving initiatives that Italked about that we continued to -- and others that we continued to identifyand the commitment of our operations personnel to make those cost-savingopportunities reality as we strive to improve operating margins. I guess I’m going to close my remarks with something that --some people make light of some of the comments that I make and motivationalsayings, but I want to say just as it pertains to personnel, I continue to beamazed at both the intelligence and the extremely positive attitude of Neogen'semployees. If one believes in the saying it’s your attitude and not youraptitude that determines your altitude, then Neogen's future is very brightindeed because I believe we are blessed with many employees who possess both apositive attitude and also have an outstanding aptitude. That concludes our prepared comments for today and we’ll nowentertain questions from our listeners.

(Operator Instructions) We’ll take our first question from TonyBrenner with Roth Capital Partners. Please go ahead. Tony Brenner - RothCapital Partners: Thank you. A couple of questions; first of all, can youbring us up to date on the approval of the Beta Star dairy test kit? James L. Herbert: I don’t know why I’m not surprised that that wasn’t thefirst question. I guess we’ve been guilty of underestimating how long it takesto get through government bureaucracy sometimes. That project continues to Ithink move along well. We’ve as far as I know have completed all of the testwork that the FDA required. It’s a matter of getting some paperwork finished upnow. I believe that we should have the FDA paperwork out of the way andapproval done sometime -- I’m going to venture a guess and say the next monthand then we’ll need to get some approvals through the interstate milk shippers,which will take, depending upon how fast they move, it could take I guess,Tony, it could take another month on top of that. Something it looks like to mewe ought to be able to do in a couple of weeks but nothing ever moves at thespeed that I think it should. In the meantime, the product continues to do very well andoutside of the U.S. and international markets, as I think Lon reported in hiscomments, sales of our dairy antibiotic business along with several of our drugdetection products continue to progress very well. Lon M. Bohannon: The dairy antibiotics have had two outstanding quarters andI am just amazed at how long it takes to get through this process. I heard acomment that we were talking to one of our competitors who was talking aboutwhat we were doing here and asked us how long we thought it would take to getthis done. And of course, we were saying like we thought we’d get this done insix to nine months and they just started laughing. We continue to have conference calls. We provide them theinformation. They look at the information and then there is some statisticianor somebody else who wants to see one more thing. And so that’s kind of in themode we’re in right now but we’re -- I think we are getting close and we thinkwe’ve got a very good test there and we are looking forward to having thatavailable for the U.S. market. James L. Herbert: It shouldn’t be any indication that there is something wrongwith the product. It’s a very good product, we think very competitive and Ithink that’s borne out, as I said earlier, by the fact that we’re able tocontinue to get increases in our international sales. Tony Brenner - RothCapital Partners: Second question was regarding the Rivard acquisition. Couldyou indicate what the cost of that was and what the potential corporate savingsmight be, if any, from that acquisition? James L. Herbert: Well, it was a settlement of a lawsuit, Tony, so there’scertain -- and it was -- the settlement was done with a confidentialityagreement, so there’s a lot of things I can’t talk about. I can say that Ithought we came out of it very, very well. We had strong patent positions andparticularly in the U.S. Rivard had some good patent positions outside of theU.S. and we think combining those two put us, I think as I said in my openingcomments, in a position of being dominant as a producer of detectablehypodermic needles. I think we are going to continue to see that market fordetectable needles grow and as it grows, we should be, given our patentposition and our marketing structure and our cost structure there, I think weshould be really kind of in the catch [inaudible] seat as what we’re doing. I was in Denmark and in France a couple of weeks ago and Iwas I think I said came away very encouraged as I see the Danish market perhapsmoving 100% it looks like to detectable needles, so they are a major producerof hogs, a major exporter of -- we’ve all seen the Danish canned hams. As theymove towards 100% detectable needles, that gives us a huge opportunity there. A similar situation is occurring in France. It’s not movingquite as fast but it looks like there may be a mandate there that would requirethat approximately 80% of the hogs produced annually in France would need to beinjected with a detectable needle. Those are just two of the countries in the EU. Those peopleall tend to fall together or follow together and having seen that in two of themajor pork producing countries, one then has to look at what’s going to happenparticularly in countries like Germany, which is the largest of those. So I think it looks good. I’m sorry I can’t tell you how weended up as far as the final cost but I guess I could say if I could tell you,you’d be proud of me. Tony Brenner - RothCapital Partners: Our last question, Jim, you and Lon outlined a whole bunchof opportunities for growth in the food safety area. You mentioned that theorganic revenue growth for the first six months was 22% and you’ve got, youclaim, an objective of 10% organic growth. That sounds like an awfully low barand if you actually came in at 10%, I can’t believe you’d be very happy aboutit. What’s a more reasonable objective? James L. Herbert: Well, we’ve looked at -- saying we want to run at 20% totaland I think I reported our compound growth over the last 15 years has beenabout 19%, so we are near that mark. We’ve said that as we look at how we growrevenues, we think we can grow at a 9% to 11% rate on the pure organic growthand the reciprocal of that in new products that we -- new revenues that webring on through acquisition. Now, obviously when we bring in a new company, after thefirst year its revenues become organic, so when Lon’s talking about a 10%growth looking at some of our older businesses, those businesses have tocontinue to grow at that same kind of rate. I think we still stick with the 20%and we’ll get some of that organically and we’ll get some of that when we’vegot new products and we can grow those pretty fast. You know, when you startoff with a pretty low base, it’s not hard to get to 20% or 30%. So it depends on how you define what is organic growth andhow you define what growth came from acquisitions. Lon M. Bohannon: I can tell you when we’re doing our budgeting and when weestablish our goals and objectives for our sales and marketing staff, we arecertainly looking at higher numbers that are in the 13% to 15% range in termsof growth opportunities. We just don’t ever want to get caught in the positionof over-promising and under-delivering and -- but overall, we’ve -- to grow at20% a year and that’s our challenge and in some quarters, we’re fortunateenough we can do all of that organically and in other quarters, we’re going toneed an acquisition here or there to help us get there. Tony Brenner - RothCapital Partners: Thank you very much.

We’ll take our next question from Steve O’Neil with HilliardLyons. Please go ahead. Steven O’Neil -Hilliard Lyons: Good morning, gentlemen. Very good quarter. Just a fewquestions and I know as you get, your company gets bigger and more complex, youcan’t give quite as much details on the individual product lines, so I alwayswind up asking you some of these things, but let me just run down a few. Itsounds like micro-toxins did well, or at least they did in sales to the ethanolindustry. Can I infer from that that overall, micro-toxin is doing well thisyear? Lon M. Bohannon: Overall, micro-toxins are doing very well. They are up 18%.I actually have been a little bit surprised at how well they did in the quarterbecause in the U.S., I would say that overall in general, our crop was a littlecleaner this year than it was last year. I think that’s certainly true in theupper Midwest and in some cases, the Red River Valley. We still have pocketswhere there’s been outbreaks and of course, our addition of new formats likethe lateral flow format have helped. We have seen a significant increase in sales of micro-toxinsin our Neogen Europe operations and they have certainly helped drive thosesales this year and in conjunction with that, it’s not -- I don’t think it’sincluded in the natural toxins, although it could be, is also a new instrumentthat we use to measure those lateral flow devices where they absolutely have tohave an objective kind of answer. So it has been a very solid year and I think with a few moreformat changes, I think we can see it grow even further. Steven O’Neil -Hilliard Lyons: Is the 18% a year-to-date or a quarter figure, Lon? Lon M. Bohannon: The 18% is the quarter. Rick might have the year-to-datenumber, I don’t know. Steven O’Neil -Hilliard Lyons: If you don’t have it handy, that’s fine. I can move on. Richard R. Current: No, year-to-date was 13%. Steven O’Neil -Hilliard Lyons: Okay, and of course you mentioned the number of allergenrelated recalls and I’m just wondering, I guess that would mean the allergenbusiness also performed very well, although that business has gotten a lotbigger. Lon M. Bohannon: That business has gotten a lot bigger. It continues to grow.This year year-to-date, it has dropped down into the single digit area. It isone of the focus areas that we want to take a look at and see whether we oughtto do some more seminars. I think it also is one of those where competition hasstarted to nibble at some of our areas, some of our customers, particularlywith pricing and in some cases with some lateral flow formats, so it is one ofthe areas of focus where I think we’ve got to take a look now at where we go.We’ve got quite a few allergens that are out there but we’ve got to look andsee what else we can add to the mix now to get a little revitalization in thatparticular product line. James L. Herbert: We’ll begin to see a little bit of that too, Steve, inwhat’s coming out of Europe. The EU made an announcement I believe it was lastweek that they’ve added three more products to their allergen list. I thinkthey added mustard seed and sesame seed and there was still a third one thatwas in there. We don’t have tests for those. The market is probably not verybig for them now but it’s an indication that there may be a market developing,particularly in Europe as they begin to look at more of those. Lon M. Bohannon: Just to give you an idea, Ed Bradley made this presentationat the board meeting so I’ve plagiarized some of the information in my reportfrom the thing that he did, of those 104 recalls, 38 were milk, 24 were eggs,and then it drops down to peanut, which was 7, which was the very first onethat we came out with. And then you have soy, walnuts, almonds, and of coursewe have tests in all of those areas. Steven O’Neil -Hilliard Lyons: Okay. You didn’t mention AccuPoint, which I think was up 40%or 50% last year and once again, this may be just that the product grew so muchthe previous year, it slowed but I thought I would ask you about that as well. James L. Herbert: Well, it is continuing to grow. Do you remember what thenumbers were up in the first -- Lon M. Bohannon: Yeah, it’s doing terrific. It’s almost at 20% again thisyear through the first six months and frankly, we had anticipated someadditional sales of instruments internationally that are still out there on thetable that haven’t come to fruition that would have driven that even higher.It’s clearly one of the top performing product lines. It’s very large in termsof its sales and it continues to do very well. We just signed on a major new account and I know we don’t --we typically don’t like to use the names of those companies in these conferencecalls. We have trained those, a lot of those plants but the single largestportion of those plants do a particular type of product that have yet to bebrought on board that we expect to get done sometime during the remainder ofthis fiscal year. So there remain a lot of good opportunities out there forACP, both domestically and internationally and we expect it to be one of thoseproducts that will continue to drive sales as we move through 2008 and into2009. Steven O’Neil -Hilliard Lyons: And with AccuPoint and with the Soleris systems and allthat, all of the micro-organism and bacterial testing is kind of getting buriedin there, so I don’t know if I can even ask you about micro-organism testingfor things like Listeria and E-coli and Salmonella. Does that even -- is thatsomething that can be mentioned here or is it just blended in so much with theothers? James L. Herbert: It tends to get blended in. We’re doing okay. We have anopportunity to do better in all those principal pathogens are ones that wecontinue to focus on, Steve, as to producing better products at less expensivecosts and that’s a competitive area that several of our competitors haveattached to and are offering some pretty cheap prices in the marketplace outthere. But we’ve still got some work to do there. We’ve still gotsome opportunities there. Steven O’Neil -Hilliard Lyons: Switching real quickly to animal safety, you mentioned inthe press release I guess the diagnostic products are up 11% year-to-date,didn’t talk about the second quarter. I didn’t know if that was a signal maybethe second quarter wasn’t quite as good or how I should read that. Lon M. Bohannon: The sales there slowed in the second quarter. Some of thatis, I mean, we’ve got products there that go both internationally throughdistributors and also into the forensic market and some of those are based ontenders and bids and stuff, so that’s a particular area that you cannot look aton a quarter to quarter basis. You need to look at that on a year-to-date basisto see how they are doing and so far, it’s been a very solid year. The nice thing about that is the growth this year so far hasbeen led by sales of what we call our racing diagnostic test kits, particularlyto a large international customer where in the past several years, most of thatgrowth has come out of the substrates and in the forensic market. So it’s niceto see those racing kits gain some momentum and start to get some sales thisyear. James L. Herbert: And I think most all of that is probably competitive gains,because those markets are not growing that much. Steven O’Neil -Hilliard Lyons: Yeah, we know about those in Kentucky, so that is somethingthat we’re aware of. One thing, you didn’t -- I don’t know if I’m reading thisright -- you didn’t mention the veterinary instruments sold at retail that youhad been making, although you did talk about OTC veterinarian products. I don’tknow if that’s all together or if you are talking about two different things. Lon M. Bohannon: It is all together. The OTC includes what we sell throughthose retail farm store markets, like Tractor Supply and [Orchelin’s]. We didgain some business in Tractor Supply’s. I forget what they call the name of it.They bought a number of stores out on the West Coast that they are continuing-- Dell’s is the name of the store line that’s out there. They are going tocontinue to maintain that and I don’t want to call it a boutique. These guys inTractor Supply know what they are doing from a retail. And we have made some inroads in getting in some productsthere. I also happen to know, in fact, I’ve got in front of me something totalk about with Jim and Rick after this meeting is over, a product line reviewfor some liquid products to go into Tractor Supply. So we do continue to buildon that presence there. They continue to open stores and it has beencontributing to that overall growth in the OTC area. Steven O’Neil -Hilliard Lyons: The last thing I’ll ask you and I’ll let somebody else asksome questions, the gross margin was good, down slightly from last year and Iwonder if that was just mix or if there is anything else worth mentioning. Lon M. Bohannon: It is mix and in fact, Rick and I had spent a little timeanalyzing that and I can tell you that what you don’t -- you don’t see this inthe press release. I mean, all you see is the gross percentage -- all of thatdecline in percentage is in the raw material area. Our cost for both labor andoverhead as a percent of sales declined compared to last year and in absolutedollars, they’re not up very much at all. So we’re making some good progress there. That gets at someof those things that I talked about that we’re seeing where we’ve had somesignificant increases in grains and petroleum based products and we are in theprocess of instituting some price increases that will help offset those. Now, the other thing in terms of the gross margin line thatwould have affected particularly the second quarter is the acquisition of theKane products are mostly buy-and-sell products, so they carry proportionately alittle bit higher cost of sales and lower gross margins but we didn’t have toadd sales personnel and so you did notice that the operating profit continuesto go up. So that’s the two primary areas, the increased raw materialcosts and the Kane things are the two things, the Kane being the mix. And thenthe other thing that I am aware of in the second quarter, now that I thinkabout it, is last year we opened up our biologics product through anotherdistributor but they took a large stocking order and we also had a largeshipment to our largest customer, which is an international customer based inSweden, and that would have affected the mix in this quarter this year comparedto last year. Steven O’Neil -Hilliard Lyons: Great. And I’ll -- Lon M. Bohannon: Those kinds of things are just timing. Steven O’Neil -Hilliard Lyons: I’ll let someone else ask some questions. Thank you verymuch.

We’ll take our next question from Stanford Rothchild withRothchild Capital Management. Please go ahead. Stanford Rothchild -Rothchild Capital Management: One question; I’ve noticed some publicity about these small,possibly portable ozone generators as a means of avoiding contamination offruit and other food products and I wondered whether that indirectly might haveany impact on the market for the food safety market. James L. Herbert: I think it does. I don’t know how much impact they are goingto have. If successful, I think it certainly does. But I believe it’s apositive impact. We spent some time I guess at the very beginning of the monthwith the fruit and vegetable people. I spent some time in Washington with theregulators as well as some of the trade people and they are really up against atough deal in trying to make sure that they are controlling pathogens in theirfresh cut, particularly the vegetable side. So they are looking for whateverthey can to reduce that. We’re doing pretty well there, as they try to find a magicformula to reduce the amount of contamination. They are doing a lot of cleaningof field harvesting equipment and checking the field harvesting equipment andthey are concerned as they should be about the irrigation water that’s cominginto those fields and how that irrigation water might be carrying pathogens, itgets uptake into the plants and the cleaning water, how often do they need toclean it and do certain things like that, which is where probably the ozonebest fits, Stan, is if you could -- that’s probably the easy way to disinfectcleaning water as they go through the rinse cycles, et cetera, either on boardthose field harvesters or in the produce sheds, to be able to continue to makecertain that the water that comes in contact is not carrying any pathogens withit. Ozone is -- you know, it’s been around for a while. There’sbeen some large units that have been tried. I guess a few of them are stilloperating in the poultry processing plants where they can pump ozone into thechill tanks when they are cooling carcasses down and it helps control -- itdoes something similar to what chlorine would do but without leaving behind theconcerns of chlorine residue. But the whole fruit and vegetable area is a big opportunityand that industry still has some substantial problems as they try to figure outwhat to do. They are scurrying to try to do that. Regulatory is trying to do itin Washington. They are trying to decide now should the U.S.D.A. have authorityor should it be FDA. So I think we’ll continue to see more activity there andthe more activity we see, I think it in fact increases our opportunity intesting because one of the things that you hear people say is why test if Ican’t do anything about it? So I think it could be helpful to us. Stanford Rothchild -Rothchild Capital Management: Is there any opportunity for you to be a link between thepeople who are making these small ozone generators that probably don’t reachout into the producing farm area and the fact that you’ve got some distributionout there, might that be an add-on product line from a marketing standpoint? James L. Herbert: It could be. We’ve always shied away from businesses whereyou had to own pick-up trucks with toolboxes hung on the side of them. They arejust kind of difficult when a guy’s got an operation running and his machine isdown. You know, it’s -- if it’s here in Michigan, it’s 12 degrees outside rightnow and the trucks don’t run very well. We like being in the disposable business. I don’t rule outthat, Stan, at all but it’s not been one of the -- the large capital equipmentareas has not been one of the areas that’s been, that’s attracted us. We likethose businesses in which you can build a relationship with the customer andsell them something every day or every week, rather than once every year ortwo. Stanford Rothchild -Rothchild Capital Management: We agree with that. I just noticed that they were modifyingthe size of these to be small and portable instead of big generators. James L. Herbert: Well, and that’s something that we certainly need to bekeeping track of and I appreciate your calling it out. Stanford Rothchild -Rothchild Capital Management: Okay, thanks.

(Operator Instructions) We’ll take our next question from VitoMenza with Sandler Capital. Please go ahead. Vito Menza - SandlerCapital: Nice quarter. A couple of these are answered, I just haveone or two more; could you disclose the amount of actual legal costs in thequarter? Richard R. Current: Legal costs were $390,000 for the six months and $183,000for the quarter. Vito Menza - SandlerCapital: Got it. And on the -- I guess a little more just on thegross margin. How much of these price increases have you already started toimplement and how many are future price increases? Is there any way to breakthat out? Lon M. Bohannon: Have you been talking to any of our board members? Thisquestion came up at the board and when they saw the percentage growth that wehad in sales, how much of this was price increases. And we really -- I’d sayless than 1% of that overall growth in the quarter is a result of any priceincreases. We are just now -- I mentioned Ed Bradley before and I know thathe’s just had meetings this week on price increases in that dehydrated culturemedia area, where we need to get these things into effect. I know that we justrecently have looked at putting price increases in a couple of different areason the animal safety side with a number of the product lines there. So we’ve had up to this point, very little impact of priceincreases in any of the statements and certainly on the statements through thefirst six months. So it will be between now and as we go through this thirdquarter that we’ll start to do that and start to get back some of thosemargins. Vito Menza - SandlerCapital: Great, great. Next question would be how much of the salesby each division was currency related? James L. Herbert: There would have been about just over $100,000 in thequarter that’s related to currency. Vito Menza - SandlerCapital: Okay, so small. Great. And diluted share count, it lookslike it creeped up on us a little bit this quarter. Any plans -- I guessfirstly, Rick, what are you -- is there a target number that you are looking atfor year-end? And then secondly, any plans to institute maybe a stock buy-backjust to offset some of that share creep? Richard R. Current: Well, I’ll let Jim answer the question on the stockbuy-back. As far as the stock’s concerned, the biggest effect that we have isthe price of the share that will cause that dilution number to go up. That’s Iguess -- I’d just as soon have the price go up and have a little more dilution. Vito Menza - SandlerCapital: I understand. It’s not a bad problem. And just I guess onthe share buy-back, any plans there at all? Richard R. Current: Not at this point. We think the market is getting close tofairly valuing the stock and we like to look at those times in which we thinkthe market is not giving us fair value as an opportunity to buy back, so at thisrate, we think that we’re not that far apart on what we believe the value isand where the market is, particularly on what we’ve reported to this point. Vito Menza - SandlerCapital: Okay, great, guys. Thank you very much.

(Operator Instructions) We’ll take our next question from JosephPotvin with Wachovia Securities. Please go ahead. Joseph Potvin -Wachovia Securities: Great quarter, guys. The only question I have is related toAsia. What’s happening over there and with their presence in the news, theymust be willing to do something. James L. Herbert: Well, are you talking about China or the rest of Asia? Joseph Potvin -Wachovia Securities: Well, let’s start with China. I mean, god knows they get alot of bad publicity. Lon M. Bohannon: I made a trip to China in September, another trip inDecember, and I will be making one in January. Obviously part of the reasonthat we are going over there and doing that -- we have more than one reason togo over there because we do source some product over there, but in addition tothat, we do think we’re getting close on some sales, I think particularly itwould be in that general sanitation area and the ACP area where we can sellthem both some disposable samplers to go along with the instruments. I will tell you as it relates to the rest of Asia, we had agood start to this year and we’ve got some opportunities that we are seeing inJapan and the Philippines on several products that could add some significantsales as we move through the rest of the year. The Soleris technology, when we started out, we took thatover and selectively have introduced that and that’s another product linethat’s got some opportunities in the Asia-Pacific rim. So we’ve always approached, and particularly getting back toChina, and we’ve been very careful about protecting our intellectual propertywhen it comes to that country and we’ve also been very careful about trying toget too far ahead of leading sales over there because of the way they do thingsand the way that infrastructure works. So it does look like there’s some opportunities there. Sofar, they are on budget, even though they did not take in the first twoquarters a large number of units, we actually did have some in the firstquarter. They missed their order in the second quarter. I have been assuredthat they are going to catch up on that before we get through -- I think intheir case, they look at calendar years -- before we get through calendar year2008, so we continue to believe there’s some good opportunities on the generalsanitation side in China. Joseph Potvin -Wachovia Securities: What do you think is the most significant problem they haveover there? James L. Herbert: I think that they want to produce good product. It’s not --by and large. I mean, I think it’s a responsible area. They are just notaccustomed to the kind of scale-up that you are seeing. As an example, 70% ofthe seafood that is produced in aquaculture is produced in China today. Andthat’s -- I don’t remember what the exact total is but it’s billions of poundsand that is probably going to grow. The problems they are having over there isthey got pollution in the waters in which they are growing that and they aretrying to offset the pollution in the water by adding more drugs and otherthings to the water to keep the creatures healthy, be they shrimp or [tilopi]or whatever. And then they get into a drug residue problem. We spent some time in Washington with the National FisheriesInstitute and the guys on that side earlier in the month and we said what doyou need? And they said we need the following three tests because we’ve got totest all this product that’s coming into the U.S. from Asia. So though Asia may not be stepping up as fast as we’d liketo see them, there’s also the other side of checking on product as it comesonshore here. Of course, there’s been a tremendous amount of -- I don’t knowthat we can identify this [inaudible] activity, but the president’s specialcommission on protecting imported products, as a result, a lot of it came fromChina, is now in place and begin to get going, which should call for more andmore testing of anything that we bring in from offshore, and most especiallythe food products. But that problem and need is not going to go away. They needto produce product. We need to buy product and somehow we need to make surethat it’s safe. Joseph Potvin -Wachovia Securities: -- southeast Asia countries like Thailand? James L. Herbert: Thailand continues to grow but we also see places that Inever expected to get this big, like Vietnam is producing a lot of shrimpthat’s coming into this country now, so we are seeing all that SoutheasternAsia area I think will grow. Joseph Potvin -Wachovia Securities: Thank you.

Thank you. It appears there are no further questions at thistime. Mr. Herbert, I’d like to turn the conference back over to you for anyadditional closing remarks. James L. Herbert: Well, thank you very much for your participation thismorning and most especially for your continued support of the company and wewish you a happy new year and we look forward to talking with you on a formalbasis in about another three months. Good day.

Thank you. That concludes today’s conference. We appreciateyour participation. You may now disconnect.