-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OGQM6lBJwu2GWOqexYk6uG0EO5r7mmUy9Q3xL/SWMc1x5gnYno3tc1BX58pyxIIS lTvUr79Plg8I5CxRcfm6Bw== 0000950131-98-001654.txt : 19980313 0000950131-98-001654.hdr.sgml : 19980313 ACCESSION NUMBER: 0000950131-98-001654 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980312 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEWAUNEE SCIENTIFIC CORP /DE/ CENTRAL INDEX KEY: 0000055529 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY APPARATUS & FURNITURE [3821] IRS NUMBER: 380715562 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05286 FILM NUMBER: 98564607 BUSINESS ADDRESS: STREET 1: 2700 W FRONT ST CITY: STATESVILLE STATE: NC ZIP: 28677 BUSINESS PHONE: 7048737202 MAIL ADDRESS: STREET 2: P O BOX 1842 CITY: STATESVILLE STATE: NC ZIP: 28687-1842 FORMER COMPANY: FORMER CONFORMED NAME: KEWAUNEE SCIENTIFIC EQUIPMENT CORP /DE/ DATE OF NAME CHANGE: 19861216 FORMER COMPANY: FORMER CONFORMED NAME: KEWAUNEE MANUFACTURING CO DATE OF NAME CHANGE: 19680108 10-Q 1 FORM 10-Q 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, 1998 _____ |_____| 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 27, 1998, the Registrant had outstanding 2,407,046 shares of Common Stock. Pages: This report, including exhibits, contains 14 pages numbered sequentially from this cover page. KEWAUNEE SCIENTIFIC CORPORATION INDEX TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED January 31, 1998
Page Number ------ PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Condensed Statements of Operations - Three and nine months ended January 31, 1998 and 1997 3 Condensed Balance Sheets - January 31, 1998 and April 30, 1997 4 Condensed Statements of Cash Flows - Nine months ended January 31, 1998 and 1997 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 11 Independent Accountants' Report 12 PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURE 14 - ---------
2 Part 1. Financial Information Item 1. Financial Statements Kewaunee Scientific Corporation Condensed Statements of Operations (Unaudited)
Three months ended Nine months ended January 31 January 31 -------------------- ----------------- 1998 1997 1998 1997 ----------- -------- -------- -------- ($ in thousands, except per share data) Net sales $17,333 $14,837 $53,437 $47,045 Cost of products sold 12,990 11,353 41,003 36,532 ----------- -------- -------- -------- Gross profit 4,343 3,484 12,434 10,513 Operating expenses 3,345 2,918 9,525 8,756 ----------- -------- -------- -------- Operating earnings 998 566 2,909 1,757 Interest expense (37) (68) (136) (311) Other income, net 10 12 32 31 ----------- -------- -------- -------- Earnings before income taxes 971 510 2,805 1,477 Income tax expense (benefit) 388 (35) 1,122 (365) ----------- -------- -------- -------- Net earnings $ 583 $ 545 $ 1,683 $ 1,842 =========== ======== ======== ======== Net earnings per share Basic $ 0.24 $ 0.23 $ 0.71 $ 0.78 Diluted $ 0.23 $ 0.22 $ 0.68 $ 0.77 Average number of common shares outstanding (in thousands) Basic 2,395 2,366 2,378 2,366 Diluted 2,483 2,424 2,457 2,401
See accompanying notes to condensed financial statements. 3 Kewaunee Scientific Corporation Condensed Balance Sheets ($ in thousands)
January 31 April 30 1998 1997 ---------- -------- ASSETS (Unaudited) - ------ Current assets: Cash $ 7 $ 6 Receivables 15,127 12,864 Inventories 4,283 1,946 Prepaid expenses and other current assets 1,420 1,649 ---------- -------- Total current assets 20,837 16,465 ---------- -------- Property, plant and equipment, at cost 27,142 26,431 Accumulated depreciation (17,615) (16,605) ---------- -------- Net property, plant and equipment 9,527 9,826 ---------- -------- Other assets 687 700 ---------- -------- $31,051 $26,991 ========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - --------------------------------------- Current liabilities: Short-term borrowings $ 572 $ - Accounts payable 5,928 5,136 Other current liabilities 5,541 4,324 ---------- -------- Total current liabilities 12,041 9,460 ---------- -------- Deferred income taxes and other non-current liabilities 936 945 ---------- -------- Stockholders' equity: Common stock 6,550 6,550 Additional paid-in-capital 59 116 Retained earnings 12,809 11,435 Common stock in treasury, at cost (1,344) (1,515) ---------- -------- Total stockholders' equity 18,074 16,586 ---------- -------- $31,051 $26,991 ========== ========
See accompanying notes to condensed financial statements. 4 Kewaunee Scientific Corporation Condensed Statements of Cash Flows ($ in thousands)
Nine months ended January 31 ------------------ 1998 1997 -------- -------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $1,683 $1,842 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 1,115 1,269 Provision for bad debts 81 194 (Increase) decrease in receivables (2,344) 719 Increase in inventories (2,337) (1,485) Increase in accounts payable and other current liabilities 2,009 417 Other, net 233 (365) ------- ------- Net cash provided by operating activities 440 2,591 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (816) (1,292) ------- ------- Net cash used in investing activities (816) (1,292) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in short-term borrowings 572 (1,173) Dividends paid (309) (95) Proceeds from exercised stock options 114 - Repayment of long-term debt - (41) ------- ------- Net cash provided by (used in) financing activities 377 (1,309) ------- ------- INCREASE (DECREASE) IN CASH 1 (10) CASH, BEGINNING OF PERIOD 6 16 ------- ------- CASH, END OF PERIOD $7 $6 ======= ======= SUPPLEMENTAL DISCLOSURE: Interest paid $128 $275 Income taxes paid $1,145 $12
See accompanying notes to condensed financial statements. 5 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 1997 Annual Report to Stockholders. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. 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, 1998 April 30, 1997 ---------------- -------------- Finished products $1,054 $ 366 Work-in-process 1,190 638 Raw materials 2,039 942 ------ ------ $4,283 $1,946 ====== ======
C. Balance Sheet - ----------------- The Company's April 30, 1997 condensed balance sheet as presented herein is derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company's 1997 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, 1997. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 1997. The analysis of results of operations compares the three months and nine months ended January 31, 1998 with the comparable periods of the prior fiscal year. Results of Operations - --------------------- The Company recorded sales of $17.3 million for the three months ended January 31, 1998, up 16.8% from sales of $14.8 million for the comparable period of the prior year. Sales for the nine months ended January 31, 1998 were $53.4 million, up 13.6% from sales of $47.0 million in the comparable period of the prior year. The increases in sales for the quarter and nine months ended January 31, 1998 resulted primarily from sales of furniture in the Company's Research Collection introduced late in the previous fiscal year, increased sales of epoxy resin worksurfaces, and selling price increases. Sales for the quarter also benefited from the timing of shipments under several contract orders. The gross profit margin for the quarter ended January 31, 1998 was 25.1% of sales, as compared to 23.5% of sales in the comparable quarter of the prior year. The improvement in the gross profit margin for the quarter resulted primarily from an improved product sales mix, improved profit margins on contract-bid laboratory furniture sales, and manufacturing efficiencies realized from increased production volumes. The gross profit margin for the nine months ended January 31, 1998 was 23.3%, up from 22.3% in the comparable period of the prior year. The improvement in the gross profit margin for the nine months ended January 31, 1998 resulted primarily from an improved product sales mix and improved profit margins on contract-bid laboratory furniture sales as discussed above. However, the favorable impact of these items was partially offset by increased costs in the second quarter of the current year. In 7 that quarter, the Company experienced increased labor costs resulting from the expansion of production capacity and incurred higher costs when certain component parts normally manufactured by the Company were purchased until production capacity could be expanded to handle the increased demand. Operating expenses for the quarter ended January 31, 1998 were $3.3 million, or 19.3% of sales, as compared to $2.9 million, or 19.7% of sales, in the comparable quarter of the prior year. Operating expenses for the nine months ended January 31, 1998 were $9.5 million, or 17.8% of sales, as compared to $8.8 million, or 18.6% of sales, in the comparable period of the prior year. The increases in operating expenses for the quarter and nine months of the current year were primarily attributable to increased sales and marketing costs, including sales commissions associated with the increases in sales. The increases in these costs for the nine months of the current year were partially offset by decreases in depreciation expense and bad debt expense. As a percent of sales, operating expenses for the quarter and nine months of the current year benefited from the current year increases in sales volumes and the reduced depreciation and bad debt expenses. Operating earnings of $998,000 and $2.9 million were recorded for the three months and nine months ended January 31, 1998, respectively. This compares to operating earnings of $566,000 and $1.8 million for the comparable periods of the prior year. Interest expense was $37,000 and $136,000 for the three months and nine months ended January 31, 1998, respectively, compared to $68,000 and $311,000 for the comparable periods of the prior year. The decreases in interest expense for the current quarter and nine months of the current year resulted from lower levels of borrowings under the Company's revolving credit facility. Other income, consisting principally of royalty income, was $10,000 and $32,000 for the three months and nine months ended January 31, 1998, respectively, compared to $12,000 and $31,000 for the comparable periods of the prior year. Income tax expense of $388,000 and $1.1 million was recorded for the three months and nine months ended January 31, 1998, respectively, as contrasted with income tax benefits of $35,000 and $365,000 recorded for the comparable periods of the prior year. The income tax benefits reported for the comparable periods of the prior year resulted from the reductions in the Company's valuation allowance on deferred tax assets. These 8 reductions occurred as continued profitability and an improved earnings outlook for the Company provided further positive evidence to support a reduction in the valuation allowance. Net earnings of $583,000 and $1.7 million, or 23 cents per diluted share and 68 cents per diluted share, were recorded for the three months and nine months ended January 31, 1998, respectively. This compares to net earnings of $545,000 and $1.8 million, or 23 cents per diluted share and 77 cents per diluted share, respectively, for the comparable periods of the prior 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, including capital expenditures. The Company had working capital of $8.8 million at January 31, 1998, as compared to $7.0 million at April 30, 1997. The ratio of current assets to current liabilities was 1.7-to-1 at January 31, 1998, unchanged from April 30, 1997. The debt-to-equity ratio was .03-to-1 at January 31, 1998; the Company had no debt at April 30, 1997. The Company had unused credit available under its revolving credit facility of $7.7 million at January 31, 1998, as compared to unused credit available under this facility of $8.0 million at April 30, 1997. The Company's operations provided cash of $440,000 during the nine months ended January 31, 1998, primarily from operating earnings and an increase in accounts payable and other current liabilities, offset by increases in customer receivables and inventories. The Company's operations provided cash of $2.6 million during the nine months ended January 31, 1997, primarily from operating earnings and a decrease in customer receivables, partially offset by an increase in inventories. An increase in short-term borrowings during the nine months ended January 31, 1998 provided cash of $572,000, while a reduction in these borrowings in the comparable period of the prior year used cash of $1.2 million. Cash dividends in the amount of $309,000 were paid during the nine months ended January 31, 1998, as compared to dividends paid of $95,000 for the comparable period of the prior year. 9 The Company used cash of $816,000 for capital expenditures during the nine months ended January 31, 1998 and used cash of $1.3 million for such expenditures during the comparable period of the prior year, in both instances primarily for the purchase of production machinery. In addition, the Company entered into operating lease arrangements for production equipment with an aggregate original asset cost of $549,000 and $80,000 during the nine months ended January 31, 1998 and 1997, respectively. These leases provide the Company with certain early cancellation rights, as well as renewal, and purchase options. The Company does not anticipate an abnormal level of cash requirements resulting from capital expenditures for the remainder of the current year. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 - -------------------------------------------------------------------------------- Certain statements included in this report are forward looking and involve risk and uncertainties that could significantly impact results. These factors include, but are not limited to, economic, competitive, governmental, and technological factors affecting the Company's operations, markets, products, services, and prices. Recent Accounting Standards - --------------------------- In February 1997, the FASB issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share" ("Statement 128"). Statement 128 is effective for financial statements issued for periods ending after December 15, 1997. Statement 128 establishes standards for computing and presenting earnings per share ("EPS"), simplifies the standards previously found in APB No. 15, "Earnings Per Share," and makes them comparable to International EPS Standards. In January 1998, the Company adopted the provisions of Statement 128. Earnings per share for all prior periods included in this report have been restated to reflect the provisions of this Statement. 10 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, 1998 has been performed by Price Waterhouse LLP, the Company's independent accountants. Their report on the interim financial information follows. There have been no adjustments or disclosures proposed by Price Waterhouse LLP which have not been reflected in the interim financial information. 11 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, 1998, and the related condensed statements of operations for the three-month and nine-month periods ended January 31, 1998, and the condensed statement of cash flows for the nine-month period ended January 31, 1998. 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 of 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 the accompanying condensed financial information for it to be in conformity with generally accepted accounting principles. The accompanying condensed statements of operations and cash flows for the three-month and nine-month periods ended January 31, 1997 were reviewed by other independent accountants whose report dated February 13, 1997 stated that, based upon their review, they were not aware of any material modifications that should be made to the financial statements for them to be in conformity with generally accepted accounting principles. The financial statements for the year ended April 30, 1997 were audited by the same independent accountants whose report dated June 4, 1997 expressed an unqualified opinion on those statements. Price Waterhouse LLP Charlotte, North Carolina February 13, 1998 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed with the Commission during the three months ended January 31, 1998. 13 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 11, 1998 By /s/ D. Michael Parker -------------------------------- D. Michael Parker Vice President of Finance Chief Financial Officer 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS APR-30-1998 MAY-01-1997 JAN-31-1998 7 0 15,127 0 4,283 20,837 27,142 17,615 31,051 12,041 0 0 0 6,550 11,524 31,051 53,437 53,437 41,003 41,003 9,525 0 136 2,805 1,122 1,683 0 0 0 1,683 .71 .68
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