UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities _____ Exchange Act of 1934 For the quarterly period ended January 31, 1996 _____ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to _____________ Commission file number 0-5286 KEWAUNEE SCIENTIFIC CORPORATION ------------------------------- (Exact name of registrant as specified in its charter) Delaware 38-0715562 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2700 West Front Street Statesville, North Carolina 28677 - ------------------------------- ------------------- (Address of principal executive offices) (Zip Code) (704) 873-7202 ---------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- As of February 29, 1996, the Registrant had outstanding 2,366,717 shares of Common Stock. Pages: This report, including exhibits, contains 13 pages numbered sequentially from this cover page.
KEWAUNEE SCIENTIFIC CORPORATION INDEX TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED January 31, 1996 Page Number ------ PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Condensed Statements of Operations - Three and nine months ended January 31, 1996 and 1995 3 Condensed Balance Sheets - January 31, 1996 and April 30, 1995 4 Condensed Statements of Cash Flows - Nine months ended January 31, 1996 and 1995 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Review by Independent Accountants 10 Independent Accountants' Review Report 11 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURE 13 - ---------
Part 1. Financial Information Item 1. Financial Statements Kewaunee Scientific Corporation Condensed Statements of Operations (Unaudited) <TABLE> <CAPTION> Three months ended Nine months ended January 31 January 31 ------------------- ------------------ 1996 1995 1996 1995 ------- ------- ------- ------- ($ in thousands, except per share data) <S> <C> <C> <C> <C> Net sales $12,719 $15,877 $43,652 $47,303 Cost of products sold 10,291 13,177 35,555 39,737 ------- ------- ------- ------- Gross profit 2,428 2,700 8,097 7,566 Operating expenses 2,377 2,447 7,472 8,661 ------- ------- ------- ------- Operating earnings (loss) 51 253 625 (1,095) Interest expense (155) (168) (550) (350) Other income, net 191 13 230 203 ------- ------- ------- ------- Earnings (loss) before income taxes 87 98 305 1,242 Income tax expense -- 28 -- -- Net earnings (loss) $ 87 $ 70 $ 305 $(1,242) ======= ======= ======= ======= Per share data: Earnings (loss) per common share $0.04 $0.03 $0.13 ($0.52) Average number of common shares outstanding (in thousands) 2,367 2,367 2,367 2,367 </TABLE> See accompanying notes to condensed financial statements.
Kewaunee Scientific Corporation Condensed Balance Sheets (Unaudited) <TABLE> <CAPTION> January 31, April 30, 1996 1995 ----------- --------- ($ in thousands) <S> <C> <C> ASSETS - ------ Current assets: Cash $ 25 $ 58 Short-term investments 0 350 Receivables 13,215 15,571 Inventories 2,155 1,336 Prepaid expenses and other current assets 1,316 1,115 -------- -------- Total current assets 16,711 18,430 -------- -------- Property, plant and equipment, at cost 26,046 25,233 Accumulated depreciation (15,323) (14,113) -------- -------- Net property, plant and equipment 10,723 11,120 -------- -------- Other assets 501 524 -------- -------- $ 27,935 $ 30,074 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Short-term borrowings $ 1,243 $ 2,239 Current portion of long-term debt 178 111 Accounts payable 4,356 5,494 Other current liabilities 3,320 3,858 -------- -------- Total current liabilities 9,097 11,702 -------- -------- Long-term debt 3,372 3,206 -------- -------- Deferred income taxes and other non-current liabilities 1,007 1,012 -------- -------- Stockholders' equity: Common stock 6,550 6,550 Additional paid-in-capital 116 116 Retained earnings 9,305 9,000 Common stock in treasury, at cost (1,512) (1,512) -------- -------- Total stockholders' equity 14,459 14,154 -------- -------- $ 27,935 $ 30,074 ======== ======== </TABLE> See accompanying notes to condensed financial statements.
Kewaunee Scientific Corporation Condensed Statements of Cash Flows (Unaudited) <TABLE> <CAPTION> Nine months ended January 31 ------------------ 1996 1995 ------- ------- ($ in thousands) <S> <C> <C> Cash flows from operating activities Net earnings (loss) $ 305 $(1,242) Adjustments to reconcile net earnings (loss to net cash provided by (used in) operating activities: Depreciation and amortization 1,213 1,433 Provision for bad debts 45 125 Decrease (increase) in receivables 2,311 (839) Increase in inventories (819) (227) Decrease in accounts payable and other current liabilities (1,676) (57) Other, net (183) (47) ------- ------- Net cash provided by (used in) operating activities (1,196) (854) ------- ------- Cash flows from investing activities Capital expenditures (478) (517) Decrease (increase) in short-term investments 350 (394) ------- ------- Net cash used in investing activities (128) (911) ------- ------- Cash flows from financing activities Net (decrease) increase in short-term borrowings (996) 2,137 Repayment of long-term debt including current maturities (105) (3,401) Proceeds from revolving credit facility classified as long-term -- 3,000 ------- ------- Net cash (used in) provided by financing activities (1,101) 1,736 ------- ------- Decrease in cash (33) (29) Cash at beginning of period 58 162 Cash at end of period $ 25 $ 133 ======= ======= Supplemental disclosure of cash flow information Interest paid $ 471 $ 292 Income taxes paid, net $ 4 $ 29 Supplemental disclosure of non-cash financing activities Equipment acquired under financing arrangements $ 338 -- </TABLE> See accompanying notes to condensed financial statements.
Kewaunee Scientific Corporation Notes to Condensed Financial Statements (unaudited) A. Financial Information - ------------------------- The unaudited interim condensed financial statements of Kewaunee Scientific Corporation (the "Company" or "Kewaunee") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Company's 1995 Annual Report to Stockholders. In the opinion of management, the interim condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the interim periods. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. B. Inventories - --------------- Inventories consisted of the following (in thousands): January 31, 1996 April 30, 1995 ---------------- -------------- Finished products $ 660 $ 280 Work-in-process 430 345 Raw materials 1,065 711 ------ ------ $2,155 $1,336 ====== ====== C. Balance Sheet - ----------------- The Company's April 30, 1995 condensed balance sheet as presented herein is derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company's 1995 Annual Report to Stockholders contains management's discussion and analysis of financial condition and results of operations at and for the year ended April 30, 1995. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 1995. The analysis of results of operations compares the three months and nine months ended January 31, 1996 with the comparable periods of the prior fiscal year. Results of Operations - --------------------- The Company recorded sales of $12.7 million for the three months ended January 31, 1996, down 19.9% from sales of $15.9 million for the comparable period of the prior year. Sales for the nine months ended January 31, 1996 were $43.7 million, down 7.7% from sales of $47.3 million in the comparable period of the prior year. As compared to the prior fiscal year, the majority of the sales declines for the current year occurred in the low-margin contract-bid business. These declines were in line with the Company's projections, based on current market demand for laboratory furniture and the Company's marketing strategies to improve profits through lower sales volumes of contract-bid laboratory furniture. The Company's gross profit margins for the three months and nine months ended January 31, 1996 were 19.1% and 18.5%, respectively, compared with 17.0% and 16.0% for the comparable periods of the prior fiscal year. Current year gross profit margins were favorably affected by several factors, including a more favorable product sales mix, cost improvements, and changes in the Company's pricing strategies. Operating expenses for the three months and nine months ended January 31, 1996 were $2.4 million and $7.5 million, or 18.7% and 17.1% of sales, respectively. This compares to operating expenses of $2.4 million and $8.7 million, or 15.4% and 18.3% of sales, respectively, for the comparable periods of the prior fiscal year. The reduction in operating expenses for the nine months of the year as compared to the prior fiscal year resulted from a variety of cost improvement actions including, in particular, the full impact of reductions in management and administrative personnel which occurred late in the second quarter of the prior fiscal year. Operating earnings of $51,000 and $625,000 were recorded for the three months and nine months ended January 31, 1996. This compares to operating earnings of $253,000 and operating losses of $1.1 million, respectively, for the comparable periods of the prior fiscal year. Other income was $191,000 and $230,000 for the three months and nine months ended January 31, 1996, respectively, compared to other income of $13,000 and $203,000 for the comparable periods of the prior fiscal year. Other income for the current year included $180,000 of life insurance proceeds received in connection with one of the Company's employee benefit plans. Prior year other income included a cash settlement received in the first quarter of the prior year related to an investment that had been written down. Interest expense was $155,000 and $550,000 for the three months and nine months ended January 31, 1996, respectively, compared to interest expense of $168,000 and $350,000 for the comparable periods of the prior fiscal year. The decrease in interest expense for the three months ended January 31, 1996 is a result of
reduced levels of average debt during the quarter. The increase in interest expense for the nine months ended January 31, 1996 resulted from higher levels of average debt and higher interest rates during the first and second quarters of the current year. No income tax expense or benefit was recorded for the three months and nine months ended January 31, 1996. Income tax expense of $28,000 was recorded for the three months ended January 31, 1995, and no tax benefit or expense was recorded for the nine-month period then ended. The effective tax rate for each of these periods differs from the related statutory rates due to adjustments to the deferred tax valuation allowance. The deferred tax amounts at January 31, 1996 have been substantially reduced by the valuation allowance to reflect the uncertainty of their ultimate full recoverability. Net earnings of $87,000 and $305,000, or 4 cents per share, and 13 cents per share, were recorded for the three months and nine months ended January 31, 1996, respectively. This compares to net earnings of $70,000 and net losses of $1,242,000, or 3 cents per share and 52 cents per share, respectively, for the comparable periods of the prior fiscal year. Liquidity and Capital Resources - ------------------------------- Historically, the Company's principal sources of liquidity have been funds generated from operations, supplemented as needed by short-term borrowings. The Company believes that these sources will be sufficient to support ongoing business levels. The Company had working capital of $7.6 million at January 31, 1996, as compared to $6.7 million at April 30, 1995. The ratio of current assets to current liabilities was 1.8-to-1 at January 31, 1996 as compared to 1.6-to-1 at April 30, 1995. The debt-to-equity ratio was .33-to-1 at January 31, 1996, as compared to .39-to-1 at April 30, 1995. The Company had unused credit available under a revolving credit facility of $2.3 million at January 31, 1996, as compared to unused credit available under this facility of $2.1 million at April 30, 1995. The Company's operations generated cash of $1.2 million during the nine months ended January 31, 1996. This increase was primarily attributable to operating earnings and a decrease in customer receivables, offset by decreases in accounts payable and other accrued liabilities. The Company's operations used cash of $854,000 during the nine months ended January 31, 1995, primarily due to an increase in customer receivables. The Company used cash of $478,000 for capital expenditures during the nine months ended January 31, 1996, and used cash of $517,000 for such expenditures during the comparable period of the prior fiscal year, in both instances primarily for the purchase of production machinery. The Company does not anticipate an abnormal level of capital expenditures for the remainder of the current fiscal year. The Company decreased its short-term borrowings by $1.0 million during the nine months ended January 31, 1996, using cash provided by operating activities. The Company increased its short-term borrowings by $2.1 million during the nine months ended January 31, 1995, primarily to fund operating and investing activities. The Company used cash of $105,000 for scheduled principal payments on long-term debt during the nine months ended January 31, 1996. The Company used cash of $3.4 million for principal payments on long-term debt during the nine months ended January 31, 1995, including the retirement of the Company's
obligations under its Industrial Development Revenue Bonds. No cash dividends were paid on the Company's common stock during the nine months ended January 31, 1996 or the nine months ended January 31, 1995. The payment of such dividends in the future will be evaluated by the Company's Board of Directors on a periodic basis giving consideration to the Company's actual and anticipated future operating results.
REVIEW BY INDEPENDENT ACCOUNTANTS A review of the interim financial information included in this Quarterly Report on Form 10-Q for the three months and nine months ended January 31, 1996 has been performed by Deloitte & Touche LLP, the Company's independent accountants. Their report on the interim financial information follows. There have been no adjustments or disclosures proposed by Deloitte & Touche LLP which have not been reflected in the interim financial information.
INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Stockholders of Kewaunee Scientific Corporation Statesville, North Carolina We have reviewed the accompanying condensed balance sheet of Kewaunee Scientific Corporation as of January 31, 1996, and the related condensed statements of operations for the three-month and nine-month periods ended January 31, 1996 and 1995, and the condensed statements of cash flows for the nine months ended January 31, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of Kewaunee Scientific Corporation as of April 30, 1995, and the related statements of operations and retained earnings and cash flows for the year then ended (not presented herein); and in our report dated June 2, 1995, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of April 30, 1995 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. DELOITTE & TOUCHE LLP Charlotte, North Carolina February 14, 1996
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Sequential Exhibit Page Number Description Number ------- ----------- ---------- 27 Financial Data Schedule 14 (b) Reports on Form 8-K No reports on Form 8-K were filed with the Commission during the three months ended January 31, 1996.
SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KEWAUNEE SCIENTIFIC CORPORATION ------------------------------- (Registrant) Date: March 8, 1996 By /s/ D. Michael Parker --------------------------- D. Michael Parker Vice President of Finance Chief Financial Officer