Commitments and Contingencies

12 Months Ended

May 31, 2019

7.	Commitments and Contingencies

The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for related costs when such costs are determined to be probable and estimable. The Company currently utilizes a pump and treat remediation strategy, which includes semi-annual monitoring and reporting, consulting, and maintenance of monitoring wells. Neogen expenses these annual costs of remediation, which have ranged from

$38,000 to $131,000 per year over the past

five

years.

The Company’s estimated liability for these costs was

$916,000

at both May 31, 2019 and 2018, measured on an undiscounted basis over an estimated period of

15 years; $100,000

of the liability is recorded within current liabilities and the remainder is recorded within other non-current liabilities in the consolidated balance sheet. In fiscal 2019, the Company performed an updated Corrective Measures Study (CMS) on the site, per a request from the Wisconsin Department of Natural Resources (WDNR), and is currently in discussion with the WDNR regarding potential alternative remediation strategies going forward. The Company believes that the current pump and treat strategy is appropriate for the site. At this time, the outcome of the review in terms of approach and future costs is unknown, but a change in the current remediation strategy, depending on the alternative selected, could require an increase in the currently recorded liability, with an offsetting charge to operations in the period recorded.

The Company has agreements with unrelated third parties that provide for the payment of license fees and royalties on the sale of certain products. Royalty expense, recorded in sales and marketing, under the terms of these agreements was

$2,795,000, $2,876,000 and $2,659,000 for fiscal years 2019, 2018 and 2017, respectively. Some of these agreements provide for guaranteed minimum royalty payments to be paid each fiscal year by the Company for certain technologies. Future minimum royalty payments are as follows: 2020—$183,000, 2021—$191,000, 2022—$114,000, 2023—$109,000 and 2024—$109,000.

Neogen leases office and manufacturing facilities under non-cancelable operating leases. Rent expense for fiscal years 2019, 2018 and 2017 was

$871,000, $799,000 and $729,000, respectively. Future fiscal year minimum rental payments for these leases over their remaining terms are as follows: 2020—$1,112,000, 2021—$810,000, 2022—$297,000, 2023—$101,000, and 2024 and later—$0.

The Company is subject to certain legal and other proceedings in the normal course of business that, in the opinion of management, should not have a material effect on its future results of operations or financial position.