-----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, O1glZCbIBWbnSVrq982+ZDjYaMNtxiOk+NWalFsdiqv1mUsoNIjwkwv5XKUeYcK4 EF532fZlSatGU61fkoRitg== 0000950131-99-005301.txt : 19990914 0000950131-99-005301.hdr.sgml : 19990914 ACCESSION NUMBER: 0000950131-99-005301 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990913 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: 99710406 BUSINESS ADDRESS: STREET 1: 2700 W FRONT ST CITY: STATESVILLE STATE: NC ZIP: 28677 BUSINESS PHONE: 7048737202 MAIL ADDRESS: STREET 1: P O BOX 1842 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 July 31, 1999 ----- | | 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 August 27, 1999, the Registrant had outstanding 2,447,046 shares of Common Stock. Pages: This report, excluding exhibits, contains 15 pages numbered sequentially from this cover page. KEWAUNEE SCIENTIFIC CORPORATION INDEX TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999 Number Page - ------ ---- PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Condensed Statements of Operations - Three months ended July 31, 1999 and 1998 3 Condensed Balance Sheets - July 31, 1999 and April 30, 1999 4 Condensed Statements of Cash Flows - Three months ended July 31, 1999 and 1998 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Review by Independent Accountants 12 Report by Independent Accountants 13 PART II. OTHER INFORMATION - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURE 15 - --------- 2 Part 1. Financial Information Item 1. Financial Statements Kewaunee Scientific Corporation Condensed Statements of Operations (Unaudited) (in thousands, except per share data)
Three months ended July 31 ------------------- 1999 1998 ------------------- Net sales $20,065 $19,624 Costs of products sold 15,435 15,202 ------- ------- Gross profit 4,630 4,422 Operating expenses 3,269 3,123 ------- ------- Operating earnings 1,361 1,299 Interest expense (39) (12) Other income (expense), net 148 (10) ------- ------- Earnings before income taxes 1,470 1,277 Income tax expense 566 511 ------- ------- Net earnings $904 $766 ======= ======= Net earnings per share Basic $0.37 $0.32 Diluted $0.37 $0.31 Average number of common shares outstanding (in thousands) Basic 2,444 2,423 Diluted 2,469 2,458
See accompanying notes to condensed financial statements. 3 Kewaunee Scientific Corporation Condensed Balance Sheets ($ in thousands)
July 31 April 30 1999 1999 -------- --------- Assets (Unaudited) - ------ Current assets: Cash and cash equivalents $8 $8 Receivables 18,247 17,231 Inventories 3,504 2,940 Deferred income taxes 1,026 1,026 Prepaid expenses and other current assets 646 626 --------- --------- Total current assets 23,431 21,831 --------- --------- Property, plant and equipment, at cost 30,795 30,302 Accumulated depreciation (18,647) (18,177) --------- --------- Net property, plant and equipment 12,148 12,125 --------- --------- Other assets 2,143 2,079 --------- --------- Total Assets $37,722 $36,035 ========= ========= Liabilities and Stockholders' Equity - --------------------------------------- Current liabilities: Short-term borrowings 2,249 939 Accounts payable 6,331 6,566 Employee compensation and amounts withheld 1,594 1,973 Other accrued expenses 2,394 2,194 --------- --------- Total current liabilities 12,568 11,672 --------- --------- Deferred income taxes 1,074 1,074 Accrued employee benefit plan costs 1,257 1,257 --------- --------- Total Liabilities 14,899 14,003 --------- --------- Stockholders' equity: Common stock 6,550 6,550 Additional paid-in-capital 117 148 Retained earnings 17,187 16,429 Common stock in treasury, at cost (1,031) (1,095) --------- --------- Total stockholders' equity 22,823 22,032 --------- --------- Total Liabilities and Stockholders' Equity $37,722 $36,035 ========= =========
See accompanying notes to condensed financial statements. 4 Kewaunee Scientific Corporation Condensed Statements of Cash Flows (Unaudited) ($ in thousands )
Three months ended July 31 ---------- ---------- 1999 1998 ---------- --------- Cash flows from operating activities: Net earnings $904 $766 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation 502 456 Provision for bad debts 32 49 Increase in receivables (1,048) (710) (Increase) decrease in inventories (564) 550 Decrease in accounts payable and other current liabilities (414) (894) Other, net (84) (358) ---------- --------- Net cash used in operating activities (672) (141) ---------- --------- Cash flows from investing activities: Capital expenditures (525) (1,118) --------- --------- Net cash used in investing activities (525) (1,118) ---------- --------- Cash flows from financing activities: Net increase in short-term borrowings 1,310 0 Dividends paid (146) (121) Proceeds from exercise of stock options 33 42 ---------- --------- Net cash (used in) provided by financing activities 1,197 (79) ---------- --------- Increase (decrease) in cash and cash equivalents 0 (1,338) Cash and cash equivalents, beginning of period 8 1,809 ---------- --------- Cash and cash equivalents, end of period $8 $471 ========== ========= Supplemental disclosure: Interest paid $33 $10 Income taxes paid $40 $840 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 1999 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): July 31, 1999 April 30,1999 ------------- ------------- Finished products $ 716 $ 594 Work in process 977 911 Raw materials 1,811 1,435 ------ ------ $3,504 $2,940 ====== ====== C. Balance Sheet - ----------------- The Company's April 30, 1999 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 D. Segment Information - ---------------------- The following table shows net sales and profits by business segment for three months ended July 31, 1999 and 1998. Laboratory Technical Products Products Corporate Total ---------- -------- ---------- ------- Three months ended July 31, 1999 - ------------------------ Revenues from external customers $16,384 $3,681 -- $20,065 Intersegment revenues -- 63 (63) -- Segment profit 1,103 337 30 1,470 Three months ended July 31, 1998 - ------------------ Revenues from external customers $17,306 $2,318 -- $19,624 Intersegment revenues -- 106 (106) -- Segment profit 1,281 201 (205) 1,277 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company's 1999 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, 1999. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 1999. The analysis of results of operations compares the three months ended July 31, 1999 with the comparable period of the prior fiscal year. Results of Operations - --------------------- The Company recorded sales of $20.1 million for the three months ended July 31, 1999, up 2.2% from sales of $19.6 million for the comparable period of the prior year. The sales increase for the current quarter resulted primarily from increased sales of technical products, partially offset by lower sales of laboratory products. The Company's gross profit margin for the three months ended July 31, 1999 was 23.1%, compared to 22.5% for the comparable period of the prior fiscal year. The increase in the gross profit margin for the quarter resulted primarily from differences in the product sales mix for the two periods. Operating expenses for the three months ended July 31, 1999 were $3.3 million, up from operating expenses of $3.1 million for the comparable period of the prior fiscal year. As a percent of sales, operating expenses for the three months ended July 31, 1999 were 16.3% of sales as compared to 15.9% of sales for the comparable period of the prior fiscal year. The increase in operating expenses for the quarter was primarily attributable to increased sales commissions resulting from the change in the product sales mix. Operating earnings of $1.4 million were recorded for the three months ended July 31, 1999, as compared to $1.3 million recorded in the comparable period of the prior fiscal year. 8 Interest expense was $39,000 for the three months ended July 31, 1999, compared to $12,000 for the comparable period of the prior fiscal year. The increase in interest expense for the current quarter resulted primarily from higher levels of debt under the Company's revolving credit facility. Other income was $148,000 for the three months ended July 31, 1999, compared to other expense of $10,000 for the comparable period of the prior fiscal year. Other income of $140,000 was recorded in the current quarter resulting from a litigation settlement with certain suppliers for overcharges in earlier years. Income tax expense of $566,000 was recorded for the three months ended July 31, 1999, as compared to an income tax expense of $511,000 recorded for the comparable period of the prior fiscal year. The effective tax rate was 38.5% for the period ended July 31, 1999 and 40% for the period ended July 31, 1998. Net earnings of $904,000, or $.37 per diluted share, was recorded for the three months ended July 31, 1999, compared to net earnings of $766,000, or $.31 per diluted share, for the comparable period of the prior fiscal year, as a result of the factors discussed above. 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 through the current fiscal year. The Company had working capital of $10.9 million at July 31, 1999, as compared to $10.2 million at April 30, 1999. The ratio of current assets to current liabilities was 1.86-to-1 at July 31, 1999, as compared to 1.87-to-1 at April 30, 1999. At July 31, 1999, advances of $2,249,000 were outstanding under the revolving credit loan. No advances were outstanding under the equipment loan component of the credit facility. 9 The Company's operations used cash of $672,000 during the three months ended July 31, 1999. This usage was primarily attributable to increases in customer receivables and inventory and a decrease in accounts payable, partially offset by operating earnings. The Company's operations used cash of $141,000 during the three months ended July 31, 1998, primarily to support an increase in customer receivables. During the three months ended July 31, 1999, the Company used cash of $525,000 for capital expenditures, primarily production equipment, compared to the use of $1.1 million for such expenditures in the comparable period of the prior fiscal year. Year 2000 - --------- The scope of the Company's Y2K readiness effort has included: (1) evaluating information technology such as hardware and software; (2) investigating other systems or embedded technology contained in various manufacturing, environmental and safety systems, and facilities; (3) assessing the readiness of key third parties, including suppliers and utility vendors; and (4) determining the need for contingency plans, and developing such plans if considered appropriate. The Company established project teams to address the Y2K issue. Through the efforts of the individuals on these teams, key components in both information technology systems and in non-IT systems were inventoried and assessed for compliance, and plans were implemented for any required system modifications or replacements. The Company's major business systems were Y2K compliant as of April 30, 1999. Remediation and testing activities are substantially completed and are scheduled to be fully completed by September 30, 1999. The Company is in contact with suppliers and other third parties to assure no interruption occurs concerning Y2K compliance issues. Inquiries were made to all suppliers, with the highest priority placed on suppliers that are critical to the business. For those suppliers that were either determined to be critical to the business or those that were not considered to be making sufficient progress in becoming Y2K compliant in a timely manner, the Company is currently assessing various potential risks and whether contingency plans are appropriate. 10 While the Company does not anticipate a major interruption of its business activities because of the Y2K issue, the greatest exposure to risk will most likely be associated with a supplier rather than due to an internal failure. Although actions described above have been performed to address third party issues, the Company is not able to require compliance actions by such parties, and the Company is not in a position to identify or avoid all possible scenarios. The Company's assessment of whether contingency plans are necessary will continue through calendar year 1999 as the Company learns more about the preparation and vulnerabilities of third parties. If considered necessary, such plans will be put in place prior to December 30, 1999. Due to the large number of variables involved, the Company cannot provide an estimate of potential damages related to possible Y2K failures. The Company's expenditures related to Y2K compliance are expected to be less than $100,000, and substantially all of the expenditures were made in fiscal year 1999 and reflected in the financial statements for that year. Safe Harbor Statement under the Private Securities - -------------------------------------------------- Litigation Reform Act of 1995 - ----------------------------- Certain statements in this report constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to, economic, competitive, governmental, and technological factors affecting the Company's operations, markets, products, including Year 2000 compliance activities of the Company and third parties, services, and prices. The cautionary statements made pursuant to the Reform Act herein and elsewhere by the Company should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Company prior to the effective date of the Reform Act. The Company cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. In addition, readers are urged to consider statements that include the terms "believes", "belief", "expects", "plans", "objectives", "anticipates", "intends" or the like to be uncertain and forward- looking. 11 REVIEW BY INDEPENDENT ACCOUNTANTS A review of the interim financial information included in this Quarterly Report on Form 10-Q for the three months ended July 31, 1999 has been performed by PricewaterhouseCoopers LLP, the Company's independent accountants. Their report on the interim financial information follows. 12 REPORT OF INDEPENDENT ACCOUNTANTS 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 July 31, 1999, and the related condensed statements of operations and of cash flows for the three-month period then ended. 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 the accompanying financial information for it to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the balance sheet as of April 30, 1999 and the related statements of operations, of stockholders' equity, and of cash flows for the year then ended (not presented herein), and in our report dated June 3, 1999 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, 1999, is fairly stated in all material respects in relation to the balance sheet from which it has been derived. PricewaterhouseCoopers LLP Charlotte, North Carolina August 13, 1999 13 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on August 25, 1999. Each of the nominees for Class I directors was re-elected. The votes cast for and withheld from each such director were as follows: Director For Withheld ------- --------- -------- Margaret Barr Bruemmer 2,192,887 11,065 Wiley N. Caldwell 2,190,837 13,115 Thomas F. Pyle 2,188,887 15,065 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 July 31, 1999. 14 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: September 10, 1999 By /s/ D. Michael Parker -------------------------------- D. Michael Parker Vice President of Finance Chief Financial Officer 15 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS APR-30-2000 MAY-01-1999 JUL-31-1999 8 0 18,247 0 3,504 23,431 30,795 18,647 37,722 12,568 0 0 0 6,550 16,273 37,722 20,065 20,065 15,435 15,435 3,269 0 39 1,470 566 904 0 0 0 904 0.37 0.37
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