James L. Herbert - Chairman and Chief Executive Officer Lon M. Bohannon - President and Chief Operating Officer Richard R. Current - Chief Financial Officer, Principal Accounting Officer, Vice President and Secretary

Steven Crowley - Craig-Hallum Capital Management Anton Brenner - Roth Capital Partners Marco Rodriguez - Stonegate Securities

Good day everyone and welcome to the Neogen Corporation Fourth Quarter and Year-end Fiscal Year 2009 Earnings Announcement Conference Call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Jim Herbert. Please go ahead sir. James L. Herbert: Good morning and welcome to our regular quarterly conference call for investors and analysts. Today we will be reporting on Neogen's fourth quarter that ended on May 31 of 2009 and the results of our full fiscal year. I'll remind you that some of the statements that we make here today could be termed as forward-looking statements. These forward-looking statements of course are subject to certain risks and uncertainties. The actual results may differ from those that we discuss 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 and we'll be filing another new 10-K for the new fiscal year coming up in about another month. In addition to those of you that are joining us today by live telephone conference, I'd also welcome those who may be joining by way of simulcast on the World Wide Web. These comments, along with some exhibits will be available on the web for approximately 90 days. Following comments this morning, we will entertain questions from participants, who are joined by this live conference. And I am joined today by Lon Bohannon, Neogen's President, and Rick Current, our Chief Financial Officer. Earlier today, Neogen issued a press release announcing the results of our fourth quarter and the combined results of the company's 2009 fiscal year. Given the challenging year for a large number of our customers I was pleased with both of those results. Revenues for our fourth quarter were approximately 30.9 million or 14% increase as compared to the same quarter a year ago. Income per share equated to $0.23, as compared to $0.21 in the prior year. And this fourth quarter also marked a continuation of our consistency of performance as it was the 69th quarter in the prior 74 to show revenue increases, compared to the previous year. I look back to see that the last time that we missed this consistency mark was four years ago, that was in the third quarter of 2005. And this quarter also marked an extension of our profitability record, as the company has now recorded a profit every quarter now for the past -- for over 16 years. With the quarter completed, we can now of course discuss the fiscal year, our revenues for Neogen's 2009 fiscal year were approximately 118.7 million or 16% greater than year earlier. Net income for the year came in at almost 13.9 million, that's 15% higher than last year. This income was in the face of an overall provision for income taxes that went to 36% as compared to 35% last year. Net income per share was $0.92 for FY09 as compared to $0.81, another all time record high for our 27 year old company. I believe that the results of the quarter and the year met or exceeded the expectations from the six analysts who have published research on the company. Credit certainly goes to our 500 dedicated employees. As we started to move into our third quarter back in calendar 2008, it became apparent to us that it wasn't going to be business as usual. We knew that a number of our customers were going to be facing challenges that could impact our business. We called upon employees to improve our sales efficiency and at same time to start looking even harder for places where we could save expense. We challenged them with the old saying that when the going gets tough the tough get going, and certainly at this point that toughness has shown through. Neogen does business in pound sterling and euro and peso and the Canadian dollar and as the dollar showed strength throughout most of this past fiscal year, it meant that Neogen products cost our international customers more then they previously paid. Furthermore, when we translated these currencies into our dollar based consolidated statement, the translations all had a negative impact. In fact, the unfavorable impact of currency translations equated to $2.7 million in revenue for the year. Our good performance during the year didn't go unheeded by the investment community as the price of the company's shares maintained their respectable level. In addition to being selected to the Russell 2000 list, Neogen is now part of the Standard & Poor 600 index. In July, Fortune Magazine once again named Neogen to its list of the 100 fastest growing small public companies in America, this time at spot number 21. The previous month Fortune had named Neogen as one of the forty stocks to retire on. We were on a list with many of the world's largest blue chip corporations. And I think we perhaps had the smallest market capitalization of anybody that was on that list. Again this year Forbes Magazine named Neogen to its list of the 200 best small companies in America. And this was the seventh time in the last nine years. So I'm proud of the year just behind us, is just that. Now how do we view the year that's ahead of us? We started the year on June 1 and despite continued challenges being faced by many of our customers, we are off to a decent start. Despite the economy, I believe that we've continued to see the market for Food Safety and Animal Safety products grow in the year ahead. Customers will continue to make tougher buying decisions. And we'll have to continue to watch closely -- watch our accounts receivable. Despite pressures from bankruptcies and reduced buying capacity for many of our customers, we've managed to keep those receivables in good shape with 60 days outstanding at the end of the year as compared to 58 days a year earlier. There will undoubtedly be more pricing pressure in the marketplace as competitors strive to replace lost business. However as we continue our quest to be a lower cost producer, we should be able to weather those storms. At the same time we have to be sympathetic to industry price problems. Compared to year ago, milk price is 40% lower; hog prices 23% lower; beef prices are 17% behind last July; and the egg and poultry producers are facing similar challenges. In addition to pricing, however we think that food producers will more than ever before look to their suppliers to provide them with the service that they need to stay out of trouble. Our technical service groups, along with our sales organizations were pretty much balanced and I believe we should be able to fill that role for them. We'll continue our emphasis to gain market share both inside and outside the farm gate. Recent activities in Washington again proved that our strategy of combining food and animal safety is appropriate. At a meeting in Washington earlier this month the administration unveiled a broad food safety agenda that focuses on preventing, rather than just reacting to food borne illness outbreaks. I thought you might be interested that since the January 1, we have had 80 recorded recalls that earned the auspices of either U.S. Department of Agriculture or the Food and Drug Administration. Many of those 80 spawned a multiple of other recalls. As an example we got the Peanut Corporation of America and seeking pistachio recall as only two on our list. However both of these probably resulted in another 10 or 20 recalls from companies that use those recalled products in the manufacturing of their food products. Regulatory changes for the commercial egg industry are an example of this push back inside the farm gate. For sometime I think we've recognized that Salmonella contamination posed by shelled eggs was significant and I think they estimate that there is about 80,000 illnesses and perhaps as many as 50 deaths that occur each year because of shelled egg contamination. A new regulation financed or finalized by the FDA this month will required additional on-farms controls for the nation's egg industry in the testing of hens at the farm level that's not now part of the current farm practices. This regulation not only calls more testing but also places emphasis on increased use of both rodenticides and disinfectants at the farm level. We will see continued pressure, I believe to reduce antibiotic feeding to the food animals because of such issues as antibiotic resistant bacteria. Many believe that this was brought about by feeding the same antibiotic products to animals that are used for humans and the resulting residue in food has now made them ineffective. We will continue our efforts to provide new products for our customers. When asked about a year ago that we were almost doubling the size of our research spend, that effort is already paying off. Our research teams in Lancing, Lexington, Scotland and Wisconsin have 66 research projects in this year's plans. Many of these are expected to bring new or improved products to market during this current fiscal year. Our research budgets are over 50% greater then they were a year ago, but they're still only about 5% of sales. The third piece of our ongoing growth strategy has been to increase revenues from international expansion. As a percent of total revenues attributable to international sales, we've grown from 25% five years ago to 41% in the year that we just completed. Though the worldwide financial situation is similar to ours here in the U.S., we expect that there will be some continued food safety pressure in many countries. Our revenues have already grown rapidly in Europe but we think we still have some good gains ahead of us. A similar situation is true for Latin America. The fourth growth strategy has been to continue to add synergistic acquisitions. Though we don't currently have any letters of intent there in place, we think that there will be acquisition opportunities over the next year and likely at reasonable valuations. With the strong balance sheet and experience in this area, we'll continue to look for those opportunities. We now have cash in the range of $17 million and a significant unused bank line of credit that can certainly support this plan. I don't believe that Neogen management is blind to the challenges, that are both known and unknown as we look out over the next 10 months. As an example, the first quarter currency translation will still be wind in our brace. We were translating the pound sterling to dollars at about a $1.90 in the first quarter of last year. And that number is likely to be more in the range of a $1.60 for the current first quarter. However having said all this we believe it's a time to invest in expansion as competition either can't afford the investment or chooses not to make those investments. We believe that our fiscal 2010 affords us the opportunity to consistently build on the growth record that we have to this point. Let me stop at this point and turn the call over to Lon Bohannon, Neogen's President and Chief Operating Officer to give you a bit more color on the year that we just finished and some of his views on the year ahead. Lon? Lon M. Bohannon: Thank you, Jim and I too want to welcome everyone listening on the conference call as well as those joining us by way of the internet. Jim has already stated Neogen issued a press release earlier today describing our fiscal year 2009 fourth quarter and fiscal year-end operating results. I want to echo Jim comments that management was pleased with our 2009 fiscal year and particularly pleased with our fourth quarter financial results. Our total fourth quarter revenues of almost 31 million represented a respectable 14% growth over the same period of last year. And I think it is noteworthy to again point out that this growth was achieved in the face of some very turbulent and difficult economic conditions for many of our customers. In addition, our fourth quarter growth was an even more remarkable 19% over the prior year when you remove the impact of currency fluctuation. Neogen's Animal Safety Division led the fourth quarter revenue increase with an overall sales growth of 30%. In addition to the strong contributions of acquisition it was especially gratifying to see same-store sales for this division grow by a solid 6% in the fourth quarter after suffering a decline in the third quarter. Sales of diagnostic products, domestic rodenticides and product sold to veterinarians through ethical distribution channels, all achieved strong double-digit growth, ranging from 11 to 45% compared to the fourth quarter of last year. On a unit volume basis, food safety also experienced solid same-store sales growth in the fourth quarter with a 10% increase compared to the prior year. A 24% increase in sales of food allergen kits and double-digit growth in sales to Latin America and the Asia Pacific RIM territories helped fuel food safety's overall fourth quarter growth. Perhaps even more satisfying in terms of the fourth quarter performance was Neogen's strong growth in operating profit. Profit from operations of 5.4 million for the quarter represented a 15% improvement and enabled Neogen to report net income of 3.4 million or $0.23 per share compared to $0.21 per share for the fourth quarter last year. This outstanding profit performance is attributed to the efforts of virtually all Neogen employees who dedicated themselves to achieving operating efficiencies that resulted in more operating profit growth and sales growth for the quarter. Expenses for direct labor, overhead, sales and marketing and administration all declined as a percent of sales compared to the fourth quarter last year. So considering the overall poor economic climate that existed for the three-month period ended May 31, combined with the realization that for comparison purposes, last year's fourth quarter was exceptionally strong, Neogen's 2009 fiscal fourth quarter was, in my opinion, one of our best performances ever. And as you would expect, the strong fourth quarter helped us finish off another record year for Neogen. Total 2009 fiscal revenues were just under 119 million, representing a 16% increase over our 2008 record setting sales of 102 million. In terms of unit volume I estimate Neogen's growth for the year to be approximately 19%, the same-store unit growth showing an overall increase of approximately 8%. Neogen Europe experienced another exceptional year with overall organic revenue growth of 26% on the basis of British pound sterling. This outstanding sales growth in 2009 was lead by strong increases in sales of dehydrated culture media, diagnostic tests for histamine and plant diseases, along with continued growth in sales of the AccuPoint general sanitation test systems, all of which achieve percentage increases of between 11 and 40% in 2009, compared to 2008. Other food safety product lines which experienced exceptional organic growth in fiscal year 2009, including food allergen test kits, which were up 42% for the year. Sales of Soleris disposable vials that increased 33% and which are used to detect spoilage organisms like yeast and molds, and sales of dehydrated culture media used for detection of specific pathogens like Salmonella, Listeria and E coli which experienced growth of 26% in 2009. Sales of disposable samplers used for general sanitation monitoring also experienced another year of exceptional grown, with an increase of 15% compared to the prior year. Now one food safety product line that experienced a decrease in sales in 2009 compared to 2008 was the sale of tests to detect dairy antibiotic residues which declined about 10% for the year. This decrease was partially due to the impact of currency translation and partially due to a reduction in inventory levels by a major international distributor in the second and third quarters. Sales of dairy antibiotic tests actually showed a significant improvement in our fourth quarter compared to our third quarter sales performance, and for that quarter ended up virtually equally to last year's strong fourth quarter numbers. We remain optimistic regarding future growth for this product line in fiscal year 2010. Animal safety also had its share of strong contributors to Neogen's record breaking 2009 fiscal year performance. Our care line of small animal supplements exceeded budget and increased 44% compared to 2008 sales of our proprietary D3 detectable needles were up more than 30% helping veterinary instruments to another year of strong organic growth. Lead by strong market share gains in the agronomics market, domestic rodenticide sales grew by 11% in fiscal year 2009 and our proprietary K-Blue substrate sold to manufactures of diagnostic test systems achieved an increase of 12% for the year. Helped along by our strong fourth quarter, profits from operations for 2009 exceeded 20 million for the first time in our history and ended the year at 17.3% of revenues. And only two expense categories that increased as the percent sales in 2009. First is material cost, which increased primarily as a result of the change in product mix for 2009 compared to 2008. The other category that increased as a percent sale is in the area of research and development, which went up due to our announced plan to increase staffing and which represents an important investment in the future of Neogen. All other expense categories declined as a percent of sales, including direct labor, overhead, sales, marketing, administrative and accounting. The strong cost control in these areas reflects our ongoing commitment to improve productivity and also reflects the success of a number of operations test team projects that were initiated during the year. We now have an excess of 25 employee teams working on productivity, customer service and cost improvement projects. One of these teams took on task of reducing inventory levels for our dehydrated culture media product line. Over the last six months of fiscal year 2009 this team was successful in reducing media inventories by $1.4 million representing a 22% reduction in inventory investment for Accumedia products. We will continue to encourage and support the use of these cross functional teams to reduce costs and improve productivity and operating efficiencies of Neogen. As Jim mentioned earlier, Neogen's solid revenue growth and the strong operating margins resulted in net income of almost 13.9 million or $0.92 per share in fiscal year 09 compared to 12.1 million or $0.81 per share in fiscal year 08. Obviously management is pleased to be able to report this kind of growth given the tough economic environment that existed for much of our 2009 fiscal year. We have now taken a significant and successful first step toward our goal of reaching 200 million in sales by the end of our 2013 fiscal year. And look forward to fiscal year 2010 with the high level of excitement and enthusiasm, while taking into account that many of our customers are still facing significant challenges as a result of what is still a poor overall economy. We realize that fiscal year 2010 will require better planning and even greater effort to achieve the satisfactory growth we have come to expect at Neogen. In spite of these challenges we believe that Neogen has a world of opportunity to continue our track record of consistent and sustained top and bottom line growth. Our sales personnel have already identified their top targets for growth and are implementing plans to gain market share with these prospects. Our expanded team of R&D scientists is fully engaged in numerous new product development programs as well as product enhancement projects. Our operations groups are committed to making further productivity and efficiency improvements in addition to qualifying alternative raw material vendors and service suppliers that will provide cost savings without sacrificing the exceptional quality of our products and customer service. In closing I would say that FY 09 though challenging because of the unique economic environment that existed, was another very successful year for Neogen. And since we have already begun a new fiscal year, I would reinforce Jim's comments that management believes the growth drivers for Neogen remain in place. We continued to believe that our markets are growing, both domestically and internationally as attention given to issues involving food and animal safety continues to escalate. We believe we can gain market share with our existing product lines and with new products currently under development. We will continue to grow our international business and expand our direct sales efforts in countries where it make sense to do so. We also believe our strong balance sheet and positive cash flow places us in an enviable position to continue to supplement our organic growth with strategic acquisitions. And all the management team and all employees of Neogen are excited about the future and we look forward to taking another big step forward during fiscal year 2010 toward our new goal of 200 million in annual revenue. That concludes our prepared comments for today's conference call. At this time, Michele; Jim, Rick and I will be happy to answer questions from our listeners.

Great. (Operator Instructions). We will take our first question from Steven Crowley with Craig-Hallum Capital Management. Steven Crowley - Craig-Hallum Capital Management: Good morning gentlemen.

Good morning Steve. Steven Crowley - Craig-Hallum Capital Management: Congratulations on another very good performance.

Thank you. Steven Crowley - Craig-Hallum Capital Management: I've some questions for you. In terms of the recently acquired products that made a nice contribution this last fiscal year, can you give us a feel for what DuPont and IDS contributed in the quarter, I mean we can back in to the total, but maybe those pieces specifically?

Yeah, I think, Rick, you have that number, I believe.

Definitely. Steve, for DuPont it was 2,600,000 and for IDS, a 175,000. Steven Crowley - Craig-Hallum Capital Management: Okay, so for the year DuPont came in, at what number?

9 million, just under SEK 9 million. Steven Crowley - Craig-Hallum Capital Management: Okay, thanks. So the balance of that category is more than just a domestic rodenticide business. I will turn it back into that 11%. So there are other components to that category versus just domestic rodenticide, the one disinfectants?

Steve the growth related to domestic rodenticide, that category of domestic rodenticide sales was up 11% for the year. Steven Crowley - Craig-Hallum Capital Management: Okay. But it wasn't the entire balance of that category from what I can gather otherwise the numbers don't add up.

No, we separate -- we keep the rodenticides and disinfectants separate, Ron was just reporting on rodenticides. Steven Crowley - Craig-Hallum Capital Management: Okay, well I can deal with this offline to make sure my numbers are adding up now. In terms of the bacterial and general sanitation products, it seems like you're getting nice utilization, given your comments on disposables plus consumables utilization, but there have been some challenges given the economy on selling or placing additional hard work. Is that the right inference for us to have and how tricky is that equation moving forward. Do you see things getting better there?

It's a very good question Steve and you are exactly right. As we moved through the 2009 fiscal year, we did see a slowdown in terms of purchases of the capital equipment. We saw very steady growth and we continue to add more systems out there. And so we are seeing increases in sales of the disposables. But the number of instruments that replaced, both slowed down and was approximately equal to what it was last year. So it's not like it stopped, but and we still have a lot of opportunities in the queue, a lot of opportunities identified and our challenge is to find right reasons to get those customers to make the move to pull the trigger as we move into fiscal year 2010. I don't think it would be surprising to anyone that a lot of companies and a lot of our customers have gotten very tight controls on capital expenditures but we can usually work through most of that. Maybe it’s just taking longer. The sales cycle for those kinds of things are taking a little bit longer, we might have to sell higher up the ladder in terms of -- at some of those organizations. Steven Crowley - Craig-Hallum Capital Management: So if we look at that category as a whole, you have more maturity in terms of utilization of the equipment, you are still placing or selling additional equipment. If we total those things up, should we think about that category that's coming off in almost 10% growth here as being high single digits to 10% growth until things on the capital equipment side get measurably better?

One of the things I think you have to look at here is that we've got some instruments that are -- get up there a little bit, add to justify for in bad times. But reader for the AccuPoint product which is a sanitation reader is really not that difficult for most people to handle. I think our average selling price for that product is about $1,500 a reader. So we're not talking about those. On the Soleris those readers are running, depending on what size they are buying but they are in a range of 40,000. That gets to be a little bit more difficult for some people to handle, but the readers for AccuPoint, the sanitation program are really not that difficult. Steven Crowley - Craig-Hallum Capital Management: And as consumables get to be a bigger portion of the mix, taking caring more (ph) of a day, I am thinking that kind of high single digits 10% kind of growth rate for that business is a reasonable number, I guess that's my question.

No I think it is. We're continuing to look at new market opportunities for the product out there. Steven Crowley - Craig-Hallum Capital Management: My final question and I'll jump back in the queue, the significant expansion of research and development resources seems to be a pretty meaningful story at the company and a source of some good things coming down the pipe. When are we going to see the first wave of products come out of this expanded effort or are we already started to see it or is that a 2010 story and thanks for taking my questions.

The answer is yes to all of the above. You're already beginning to see some of those come out of the projects that I've mentioned. Some of this are product improvements of existing products that we either expanded to make them work and where we may have something that now works in detection of drugs in milk, we're expanding in programs to expand that to be able to detect the presence of those drug residues in meat tissues which is one of the projects that's one or two of the projects that's in there. There are some brand new products in there. They will be coming to market, most of that flow starts in the second quarter. There's one or two that will still hit the first quarter. Nothing that's a big brand new product, however until we start to look at third and fourth quarter. And nearly our R&D goes is a few of those products at those projects that are really built in background for what will come in 2011. But the big piece of what we are working on now should have some impact sometime during FY10. Steven Crowley - Craig-Hallum Capital Management: Excellent, thanks again.

We will take our next question from Tony Brenner with Roth Capital Partners. Anton Brenner - Roth Capital Partners: Thank you. I think you provided a growth rate for the year from Europe. What would that be for the fourth quarter both organically and in reported revenues?

27% in sterling, Tony. Anton Brenner - Roth Capital Partners: Excellent. And then organic rate would be roughly--

The organic growth rate in British pound sterling is about 27% for the fourth quarter and it just reduces way down in the low single digits again when you do the conversion to the dollars. Anton Brenner - Roth Capital Partners: Okay, and the DuPont product that you acquired, has that production been brought in house yet?

No, we are in the process of starting to bring it in and we're still working our way through a lot of international registrations, our own target is to where we expected to be. We didn't expect to start production of those products at our Hacco operations in Wisconsin until, actually until October. So we are still little bit ahead, the facility is pretty much ready to go. Raw materials are pretty much in place. In order to make sure, which -- that we didn't leave customers in back order situations, we did the same program, that we did when we brought dairy antibiotics in, when we brought a number of other products in. We built up some inventory, sometime at not the most attractive prices, but to make certain that we didn't have any back orders and that we didn't have a slip between what we were doing in the former manufacturing and what we did, when we got it moved. If you remember, Tony when we moved the dairy antibiotics business we had to move it from Barcelona, Spain to Lansing, Michigan. Anton Brenner - Roth Capital Partners: Right.

And we did, our guys did a wonderful job there. A big portion of what we are moving or a portion of what we are moving of the DuPont product line is coming from Antech operations in the UK. So in this case, we had to move operations from England to Wisconsin and as stocks went we built up some inventory, inventory that we needed to make sure that we had on hand, so as not to leave customers back order in places like China as part of that, some of Central America is part of that. So we are on schedule as to where we expected to be. And like we did with other products you'll see a significant change in gross margins once we get that integrated and get it moved in. Anton Brenner - Roth Capital Partners: Right, that was my next question actually. You referred to an adverse product mix and this was one of the contributors in fiscal 09 to that adverse product mix. So with that being sorted out during the year, is it reasonable to think that your gross margins might improve for the full year in 2010?

Tony, that would be right, although its going to be a ramp from as we bring that in house in the second half of the year. So, go easy on us in the first half. Anton Brenner - Roth Capital Partners: We always do. Thank you.

Thanks Tony.

Our next question comes from Marco Rodriguez with Stonegate Securities. Marco Rodriguez - Stonegate Securities: Good morning, guys. Thanks for taking my questions here. Real quick, I wondering if you might be able to provide a little bit more color in regard to your prepared remarks and also your press release comments in regard to the systems and procedures that you implemented during Q4 to help, I guess, stimulate your cash flows?

I think that one is mine, Marco. What I'm referring to there, our MRP systems that in Lansing were installed earlier in the year and refined to get themselves there working to a maximum in the fourth quarter and then we have been installing MRP systems to turn them on in Lexington and they will be going through that same process as we move through the year. So we expect to see good results from those specific moves in the upcoming year. The inventory was up 3.5 million for the year, but it was up 5 million for the first nine months and we brought it down a 1.5 million for the fourth quarter so that was a positive move. Marco Rodriguez - Stonegate Securities: So do you expect more or rather improvements in your working capital areas or you are expecting more just raw expense reductions to these MRP systems?

No, I think what it should do is allow us to at worst hold our inventories at current levels, where we -- as our sales rise we'll grow into them and at very best we'll actually get reductions of inventories that will both help our cash flows.

Our cash flow generation, I'm not sure we talked about, but our cash flow generation continues to be good and considerable ahead of where we were last year.

We're about 3 million ahead on cash flow from operations, 11 million in total.

I would like to find a good place to use part of that 17 million if banks giving us 1% return on that.

Sure, we certainly got enough cash to do whatever we want to do so long as it bits our plan of course. Marco Rodriguez - Stonegate Securities: Right of course. Again, just of a quick follow-up, you did mention I mean expectations for pricing pressure going forward. I'm assuming that's mostly coming from your commentary on the few producers seeing their prices come down year-over-year. Do you expect that pressure to kind of equal out when you look at this overall expense reduction that you're also taking or do you see it impacting more?

Well if I knew the answer of that question I'd probably try to advice somebody in Washington today. But that might be appropriate but nevertheless I don't think we know what's ahead. I like to point out to try to make it easy. We are prepared to make adjustments. As we look at -- we think we can predict some of the things that we are facing. We know where we have got some customers that we now have to start singling out now customers that are slow play and have a little difficulty. And they have got loan problems with the banks. But they are going to make it, just stay with those guys. They don't ever forget it. Then you got those on the other side just to make that hard decision about when they're going to make it. So we can continue to extend them credit. So we don't know how those go. We know that we have some competitors out there that are that apparently are down in total revenues and are willing to do some price cutting. And some of that price in order to start either gain back or keep business they have and we'll meet some of those, in some case we won't meet it. But if we continue to my point, I think we continue to keep the pressure on being the low cost producer, then we're better able to stand off any of that competitive price pressures that are out there. Marco Rodriguez - Stonegate Securities: Okay, Thanks guys for your answers.

We will now take a question from Brian Geep with Sidoti & Company. Brian – Sidoti & Company: Good morning, gentlemen. Congratulations on the quarter.

Hey, thank you.

Thanks, Brian. Brian – Sidoti & Company: First, I was hoping you could talk a little bit about the recently announced partnership with China, just about what you're expecting there?

Well let me answer that one, and I'll start off answering like I have for the last several year and that's when we first began to move into China and there was news of our activities, I said that nobody should buy Neogen's stock based on avalanche of earnings of revenues coming from China and I continue to make that statement. Our situation in China continues to be good both from the supply and both in the sourcing of product as well as selling the product. I like to look at it as we're importing a low tech and exporting a high tech as we go to China. The latest announcement I think that perhaps you are talking about is when it was done actually, the initial press release came out from the Scottish Government announcing the First Minister of Scotland along with another dignitary to accompany our people in one of the trips to China. That was our Scotland based group where we do have a laboratory setup now over there in cooperation with the Chinese government in which we're doing additional work and validation on our diagnostic test kits that are used to detect plant diseases. And that looks like it's getting some traction, looks like we may have some diagnostic tests ahead that will be used throughout China in that regard. The first minister, Solomon was perhaps a bit aggressive and he said, he thought this would bring $10 million of additional income, he wasn't talking about $10 million coming in Europe out of that, he was talking about overall Scottish influence I think. Very interesting to note that Scotland is the major supplier of sweet potatoes to China. And making sure that there is a good diagnostic test, it will be able to detect diseases in potatoes and for potato production in China as they began to shift away from a 100% rice to a lot of potatoes in their diet. That did well in their overall China program. So it's been a good program but I'll go back to our first statement, don't go by Neogen stock-based in a huge avalanche of earnings that are going to come from China. Brian – Sidoti & Company: Okay. And on the tractor supply store expansion, have you guys seen any moves there from them or any increase in volume for their stores?

That relationship that we have with tractor supply has been wonderful for a number of years now. Not only do we see increases in our businesses, they continue to open new stores. But over the years, we have also been able to expand our presence in terms of shelf space that we have for our products in those stores. We started out initially as just being the primary supplier of veterinary instruments. And we have been able to leverage that relationship to expand it into other product lines; we will continue to do so. So, we benefit in the couple of ways there, they are a very good business partner. And we continue to benefit from their success in expanding in that retail marketplace in the pharma store area and continue to open up new stores in their system. Brian – Sidoti & Company: All right. And one last one on growth, the International Diagnostic Systems acquisition, they are little over 2 million in annual sales before the acquisition. Can you talk about your growth expectations in all that year-end?

Well, it did fit our strategy in a number of places, very synergistic, almost a complete bolt-on, a big part or what of the activities in St. Joseph, Michigan which is about an hour down the road from Lansing. Big part of that is almost shifted, there will be another month to our production operations in Lexington. Their products and their customer base in many ways looked a lot like our Lexington customer base. They are along with Lexington, I believe two of the world's authorities in development of diagnostic tests for the detection of drugs whether those drugs be in human forensics or whether they be in VO CHOPS (ph). So that is a good fit, it was a good fit from a research standpoint. We'll continue to keep a small group in St. Joe to do ongoing research, it makes their pretty easy contact to run backend forth for the Lansing Group to keep that coordinated. They're doing some very interesting things with the couple of the major animal health companies and developing diagnostic tests to be able to detect some of those drugs that major animal health companies are marketing today to make sure that the animal health companies are concerned to make sure that they can keep their customers and their producers out of trouble. So, it's a good fit overall, will we be keeping track of the $2 million and be able to tell you year from now that $2 million that have grown to $2.5. I doubt it because we're going to integrate it, so we won't be keeping track of what the overall growth is. We'll be able to tell you on the customers that are specifically there -- but there is such a hybrid mix of customers that it'll be difficult to keep that one totally separate. Brian – Sidoti & Company: Okay. And then, just one last one, this is on the inventory levels. I know you took some discounted raw material products throughout 2009 and took on so much inventory with the disinfectant move, but your decrease in inventory came from the internal project, I wondered if you could talk a little bit where you think inventory will go for 2010. Do we expect to see some more decreases on branches, some of those raw materials?

Well, I'll take a shot at it. Where we have opportunities to buy inventory at discounted prices, where can we have the cash to do it. I think, we'd be foolish not to take those opportunities. And as long as we have inventory that we can use over a reasonable period of time and take advantage of cheaper prices, even if that was to set us back on projects to reduce overall inventory. I know that's responsive to your question but --

Let me provide a little more clarification in terms of where that reduction and inventory came from. The dehydrated culture media reduction and inventory that I referred to in my comments occurred over a period that started in November and went through the end of the year. In the fourth quarter alone, we had a $ 1.5 million reduction in inventory and part of that was a reduction and some of those inventory levels for some of that inventory that you were talking about, including inventories related to disinfectants that we had acquired and built ahead. We do have some of those improvement teams that I talked are focused on continuing reduction of inventory using some of the tools that Rick referred to earlier and will continue to focus on finding areas where we can increase our turns in inventory and I think that fiscal year 10, our operations understands that's an important priority and we will look at continuing to find ways to do exactly that. Brian – Sidoti & Company: All right. Perfect. I think thanks, gentlemen.

Thank you.

Our next question comes from Joseph Butson with Wells Fargo Advisors. Joseph Butson – Wells Fargo Advisors: Good quarter, guys.

Thanks Joe.

Thanks Joe. Joseph Butson – Wells Fargo Advisors: One quick question, the increase in gross margin on the quarter what is it attributed to?

In comparison to sequential quarter or a year ago, Joe? Joseph Butson – Wells Fargo Advisors: The sequential quarter, I think it’s more a dip in the prior quarter than it is a real dramaic increase in this quarter.

No I think it would be good that is a good way to look at it. With $3 million more in volume and really I think you had a negative mix in the prior quarter and a positive mix in this quarter really accounts for all of it. I think in my mind. Joseph Butson – Wells Fargo Advisors: Okay. Now the inevitable question, because my client ask me, thoughts on a dividend.

I thought about that last night, I was watching the Education TV and Warren Buffet was on and, there were telling a Warren Buffet story and as that all of a sudden remember that, I guess, I got couple of things in common, neither one of us still agree to paying cash dividend if you got use for the money somewhere else. I'd try to answer on that Joe. You look at the amount of cash receipt and you wonder why we're not paying dividends, I guess. I still think there is some opportunities to invest at as long as we can invest money and make more out of it and we can it, replace it back to your shareholders. I think we still look at that. I'm probably less dogmatic in my statement than I've been I prior years. But at this point, the board has not entertained any discussion of a cash dividend. Joseph Butson – Wells Fargo Advisors: Okay.

(Operator Instructions). Our next question comes from Steven Crowley with Craig-Hallum Capital Group. Steven Crowley - Craig-Hallum Capital Management: Hello, again just a couple of follow ups. You mentioned that diary because of FX and some inventory adjustments had a relatively challenging fiscal year. Can you give us a feel for what the bad dairy business came in last fiscal year relative to the prior year? And I guess paint us a little bit of a picture of what's a reasonable expectation or range of expectations for that business but at least the historical stuff would be great.

We've got the numbers in hand but I guess one thing that skewed that a little bit is that our largest distributor of those products for Europe did do some what we'd call destocking back into second quarter and part of the third quarter and brought their total inventories down, they figured it a more efficient way to handle their business. So that was kind of I believe launched a little bit closer but I believe that was kind of a one time occurrence based on what we saw then a rebound back in the fourth quarter, but Rick's got the number.

The revenues on dairy antibiotics decreased from just over 13 million to 11 million, that's got currency translations.

There you got two things there...

Big currency translation.

About half of that adjustment was currency translation that changed and approximately half of that was just the reduction of inventory. We stay very close to our major distributor there in terms of regular, periodic, meetings, talk to them virtually every week. That's not more often. As near as we can tell, they've reported some slight decline in businesses as we went through the year. I'd say probably in the 4% or slightly less range and actually given the overall market in the industries that they are selling product to, we didn't think that was too bad. I already reported that we did see a significant improvement in our fourth quarter relative to our third quarter which is why I think Jim’s comments are appropriate why we do believe that there's a change in the second and third quarter, part of that inventory adjustment in de-stocking was a one time thing. And I guess I would say that you never know exactly how these things are going to work out, but we are after a good start in this quarter. And we feel pretty good about the overall first quarter which is about as far as we can see. We continue to work on development of our own products for some other markets. We think there are a couple of opportunities in countries where we are going to work with that distributor. See if we can expand business and we are going to continue to work on that product. We got the U.S. to expand markets. So we do feel good about overall dairy antibiotic testing as we go forward. Steven Crowley - Craig-Hallum Capital Management: Great and I guess I can let us escape without talking a little bit about the domestic market place for your dairy antibiotic test. Have you gotten out of the starting gate there or are we still looking forward to that happening.

We have gotten out of the starting gate, but we're not running very fast yet. The customers have no problem in evaluating the product, they like the taste, they like the simplicity of it, they like the robustness of it. All other things that make the better storyline of success what it's been. We have one antibiotic Safetuer [ph] that we do detect but we do not detect it at the level that we need to be a successful in the market place as we want to be. So, we got an ongoing research project to improve that. And once we do that, I think we'll really see that take traction and start to move on. One thing that did surprise me is that evaluation process is lot longer than I anticipated. And I guess that's not surprising during these economic times that people take a little longer to go through the validation process and stuff. But we've got the targets identified; we know what we need to do and it’s another one of those reasons why I think as we move through fiscal year ‘10. We still feel very good about the potential and the opportunities for that Beta Star U.S product. Steven Crowley - Craig-Hallum Capital Management: Do you have to go through that regulatory process again, when you change your cutoff levels for that antibiotic?

We will have to go back through that process, although we've actually already initiated the steps to do so. There were some unique situations associated with that process, including serious health problems with the principle individual that was responsible for, I guess I’m going to call championing that effort and we don't think that we will incur those kinds of things this time and fully expect to get that through that process in a much faster timeframe. Steven Crowley - Craig-Hallum Capital Management: Great, and in terms of just of couple of financial questions, Jim you mentioned, cash being north of 17 million that given your press release that shows cash and securities are 13.8. That means that some is in the long-term category. Could you share the total cash and investment number with us?

Jim has given you our recent number.

I see the bank statements every day, and update the cash position everyday. So, I'm a little bit ahead of where the year end was. Steven Crowley - Craig-Hallum Capital Management: So, we’ll strike that from the record, and then in terms of the capital expenditures last year and your thoughts about the current year?

We generally budget for capital expenditures to be equal to the depreciation. This year we'll be buying a facility in Scotland, so the budget will be a little higher, another million and a half or so. But it's not hardly capital intensive business so that doesn't choke up a lot of our cash. Steven Crowley - Craig-Hallum Capital Management: And last your CapEx, Rick was roughly the 3.9 million of those depreciation and amortization or was it a little bit lower than that?

A lower than that, it was really around 3 million because it would be just the depreciation not the amortization portion. Steven Crowley - Craig-Hallum Capital Management: Thanks. And then international, you gave us the number for the year a new high water mark for the year. For the quarter, what was international as a percentage of sales? And we may not have that at your finger tips so I can back into or come back after...

Actually, I do, international or for the quarter, was 39.1%. Steven Crowley - Craig-Hallum Capital Management: In last year in the fourth quarter did you have that number?

I did not have that one. But I will get it for you. Steven Crowley - Craig-Hallum Capital Management: All right. Well now that I've stumped you well, thank you again for taking my questions and move along.

Thank you.

We will take a follow up question from Joseph Butson with Wells Fargo Advisors. Joseph Butson – Wells Fargo Advisors: Yeah guys just real quick, can you address what goodwill and other assets is composed off and how you amortize it off the balance sheet?

Well the goodwill portion of it is not amortized at all. Joseph Butson – Wells Fargo Advisors: Okay.

That's a -- they changed those rules several years ago, you support your goodwill on a yearly basis and if you can't support it, you have to write it off. And our profit levels, we don't have much trouble supporting our goodwill numbers. The other pieces of that, there are some amortizable kinds of things like customer base intangibles which is a portion of acquisition cost or a sign of the customer base intangibles and those are amortized over 12 to 15 years. And they'll be in their patents -- have amortization over the rest of the patent life. And then there are some other non-amortizable things such as trade marks. Joseph Butson – Wells Fargo Advisors: Jump this year is from an acquisition?

Yes it was from the -- rather two acquisitions actually. Put some goodwill onto the books both the one end ideas and also DuPont Joseph Butson – Wells Fargo Advisors: Okay. Thank you.

At this point there are no further questions. I'd like to turn the call back over to Mr. Herbert.

Well thank you, thanks to all of you for your participation in the conference call this morning and your continued support in Neogen. I'd also like to remind you that about the company's annual open house and barbeque that will be held here in Lancing on Thursday of this week. If for some reason we miss giving you an invitation or if you have received one and didn't get a chance to send us an RSBP, we certainly like to invite you to join us for an opportunity to see many of the products that we manufacture in the market and here more about our plans for the future. Again thank you and we look forward to talking you officially I guess. Again it's the end of our first quarter and have good day.

That's does concludes our presentation. Thank you for your participation.