-----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, KA+jZr8BGPWN4N8/kT7I3lqA6cGTqJvL27QhPy/xj30QHnxsk08eRN4yJDqA05tD l6WxZut3zHpkH765obHX3A== 0000950131-99-006669.txt : 19991215 0000950131-99-006669.hdr.sgml : 19991215 ACCESSION NUMBER: 0000950131-99-006669 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991214 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: 99774258 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 October 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 December 13, 1999, the Registrant had outstanding 2,466,171 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 OCTOBER 31, 1999
Page Number ----------- PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Condensed Statements of Operations - Three months and six months ended October 31, 1999 and 1998 3 Condensed Balance Sheets - October 31, 1999 and April 30, 1999 4 Condensed Statements of Cash Flows - Six months ended October 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 - ---------
Part 1. Financial Information Item 1. Financial Statements Kewaunee Scientific Corporation Condensed Statements of Operations (Unaudited)
Three months ended Six months ended October 31 October 31 ---------- ---------- 1999 1998 1999 1998 ---- ---- ---- ---- ($ in thousands; except per share data) Net sales $19,551 $19,253 $39,616 $38,877 Cost of products sold 15,206 15,229 30,641 30,431 ------- ------- ------- ------- Gross profit 4,345 4,024 8,975 8,446 Operating expenses 3,183 2,985 6,452 6,108 ------- ------- ------- ------- Operating earnings 1,162 1,039 2,523 2,338 Interest expense (52) (14) (91) (26) Other income (expense), net 94 (18) 242 (28) ------- ------- ------- ------- Earnings before income taxes 1,204 1,007 2,674 2,284 Income tax expense (benefit) 464 402 1,030 913 ------- ------- ------- ------- Net earnings $ 740 $ 605 $ 1,644 $ 1,371 ======= ======= ======= ======= Net earnings per share- Basic $0.30 $0.25 $0.67 $0.56 Diluted $0.30 $0.25 $0.66 $0.56 Average number of common shares outstanding (in thousands)- Basic 2,450 2,434 2,447 2,429 Diluted 2,473 2,466 2,471 2,462
See accompanying notes to condensed financial statements. 3 Kewaunee Scientific Corporation Condensed Balance Sheets ($ in thousands)
October 31 April 30 1999 1999 ---- ---- (Unaudited) Assets - ------ Currents assets: Cash and cash equivalents $ 11 $ 8 Receivables 17,001 17,231 Inventories 3,274 2,940 Deferred income taxes 1,026 1,026 Prepaid expenses and other current assets 584 626 -------- -------- Total current assets 21,896 21,831 -------- -------- Property, plant and equipment, at cost 32,090 30,302 Accumulated depreciation (19,149) (18,177) -------- -------- Net property, plant and equipment 12,941 12,125 -------- -------- Other assets 2,331 2,079 -------- -------- Total Assets $ 37,168 $ 36,035 ======== ======== Liabilities and Stockholders' Equity - ------------------------------------ Current liabilities: Short-term borrowings $ 2,121 $ 939 Accounts payable 5,271 6,566 Employee compensation and amounts withheld 1,349 1,973 Other current liabilities 2,643 2,194 -------- -------- Total current liabilities 11,384 11,672 -------- -------- Deferred income taxes 1,074 1,074 Accrued employee benefit plan costs 1,257 1,257 -------- -------- Total Liabilities 13,715 14,003 -------- -------- Stockholders' equity: Common stock 6,550 6,550 Additional paid-in-capital 92 148 Retained earnings 17,779 16,429 Common stock in treasury, at cost (968) (1,095) -------- -------- Total stockholders' equity 23,453 22,032 -------- -------- Total Liabilities and Stockholders' Equity $ 37,168 $ 36,035 ======== ========
See accompanying notes to condensed financial statements. 4 Kewaunee Scientific Corporation Condensed Statements of Cash Flows (Unaudited) ($ in thousands)
Six months ended October 31 ---------- 1999 1998 ------- ------- Cash flows from operating activities: Net earnings $ 1,644 $ 1,371 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,005 926 Provision for bad debts 64 96 (Increase) decrease in receivables 166 (1,672) (Increase) decrease in inventories (334) 126 Increase (decrease) in accounts payable and other current liabilities (1,471) (145) Other, net (210) (280) ------- ------- Net cash provided by operating activities 864 422 ------- ------- Cash flows from investing activities: Capital expenditures (1,822) (1,938) ------- ------- Net cash used in investing activities (1,822) (1,938) ------- ------- Cash flows from financing activities: Net increase in short-term borrowings 1,182 0 Dividends paid (293) (243) Proceeds from exercise of stock options 72 (70) ------- ------- Net cash (used in) provided by financing activities 961 (173) ------- ------- Increase (decrease) in cash and cash equivalents 3 (1,689) Cash and cash equivalents, beginning of period 8 1,809 ------- ------- Cash and cash equivalents, end of period $ 11 $ 120 ======= ======= Supplemental disclosure: Interest paid $ 85 $ 25 Income taxes paid $ 538 $ 1,356
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):
Oct. 31, 1999 April 30, 1999 ------------- -------------- Finished products $ 668 $ 594 Work in process 919 911 Raw materials 1,687 1,435 ------ ------ $3,274 $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 and six months ended October 31, 1999 and 1998.
Laboratory Technical Products Products Corporate Total -------- -------- --------- ----- Three months ended October 31, 1999 - ---------------- Revenues from external customers $16,038 $3,513 -- $19,551 Intersegment revenues -- 113 (113) -- Segment profit 978 279 (53) 1,204 Three months ended October 31, 1998 - ---------------- Revenues from external customers $17,036 $2,217 -- $19,253 Intersegment revenues -- 170 (170) -- Segment profit 801 109 97 1,007 Six months ended October 31, 1999 - ---------------- Revenues from external customers $32,422 $7,194 -- $39,616 Intersegment revenues -- 176 (176) -- Segment profit 2,081 616 (23) 2,674 Six months ended October 31, 1998 - ---------------- Revenues from external customers $34,342 $4,535 -- $38,877 Intersegment revenues -- 276 (276) -- Segment profit 2,082 310 (108) 2,284
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 and six months ended October 31, 1999 with the comparable periods of the prior fiscal year. Results of Operations - --------------------- The Company recorded sales of $19.6 million for the three months ended October 31, 1999, up 1.5% from sales of $19.3 million for the comparable period of the prior year. Sales for the six months ended October 31, 1999 were $39.6 million, up 1.9% from sales of $38.9 million in the comparable period of the prior year. The increase in sales for the quarter and six months ended October 31, 1999 resulted primarily from increased unit sales of wood laboratory furniture and technical products, partially offset by lower sales of steel laboratory furniture. The gross profit margin for the quarter ended October 31, 1999 was 22.2% of sales, as compared to 20.9% of sales in the comparable quarter of the prior year. The gross profit margin for the six months ended October 31, 1999 was 22.7%, as compared to 21.7% in the comparable period of the prior year. The increase in the gross profit margins for the quarter and six months resulted primarily from differences in the product sales mix for the two periods. Operating expenses for the quarter ended October 31, 1999 were $3.2 million, or 16.3% of sales, as compared to $3.0 million, or 15.5% of sales, in the comparable quarter of the prior year. Operating expenses for the six months ended October 31, 1999 were $6.5 million, or 16.3% of sales, as compared to $6.1 million, or 15.7% of sales, in the comparable period of the prior year. The increase in operating expenses for the quarter and six months was primarily attributable to increased sales commissions resulting from the change in the product sales mix. Operating earnings of $1.2 million and $2.5 million were recorded for the three months and six months ended October 31, 1999, respectively. This compares to operating earnings of $1.0 million and $2.3 million for the comparable periods of the prior year. Interest expense was $52,000 and $91,000 for the three months and six months ended October 31, 1999, respectively, compared to $14,000 and $26,000 for the comparable periods of the prior year. The increase in interest expense in the current year resulted primarily from higher levels of debt under the Company's revolving credit facility. Other income was $94,000 and $242,000 for the three months and six months ended October 31, 1999, respectively, compared to other expenses of $18,000 and $28,000 for the comparable 8 periods of the prior year. Other income of $85,000 and $225,000 for the three months and six months of the current year, respectively, was recorded resulting from collections associated with litigation settlements with certain suppliers for overcharges in earlier years. No significant additional collections are expected in this matter. Income tax expense of $464,000 and $1,030,000 was recorded for the three months and six months ended October 31, 1999, respectively, as compared to income tax expense of $402,000 and $913,000 recorded for the comparable periods of the prior year. The effective tax rate was approximately 38.5% for the three and six months ended October 31, 1999 and 40% for the three and six months period ended October 31, 1998. Net earnings of $740,000 and $1.6 million, or $.30 per diluted share and $.66 per diluted share, were recorded for the three months and six months ended October 31, 1999, respectively. This compares to net earnings of $605,000 and $1.4 million, or $.25 per diluted share and $.56 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 through the current fiscal year. The Company had working capital of $10.5 million at October 31, 1999, as compared to $10.2 million at April 30, 1999. The ratio of current assets to current liabilities was 1.92-to-1 at October 31, 1999, as compared to 1.87-to-1 at April 30, 1999. At October 31, 1999, advances of $2,121,000 were outstanding under the Company's revolving credit facility. No advances were outstanding under the Company's equipment loan component of the credit facility. The Company's operations provided cash of $864,000 during the six months ended October 31, 1999, primarily from operating earnings, partially offset by a decrease in accounts payable and other current liabilities. The Company's operations provided cash of $422,000 during the six months ended October 31, 1998, primarily from operating earnings, partially offset by an increase in customer receivables. During the six months ended October 31, 1999, the Company used cash of $1,822,000 for capital expenditures, primarily production equipment, compared to the use of $1,938,000 for capital expenditures in the comparable period of the prior fiscal year. 9 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. Testing and required modifications for all other business systems were complete as of November 15, 1999. The Company has been 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 has developed a contingency plan involving alternative suppliers that have stated that they are Y2K compliant. 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. 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 have been 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 10 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 and six months ended October 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 October 31, 1999, and the related statements of operations for each of the three-month and six-month periods ended October 31, 1999 and 1998 and the statements of cash flows for the six-month periods ended October 31, 1999 and 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 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 interim 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 November 10, 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. Information regarding the results of this meeting are incorporated by reference from the Company's Report on Form 10-Q for the three months ended July 31, 1999. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Amendment dated August 26, 1999 to the Bylaws of Kewaunee Scientific Corporation. 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 October 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: December 13, 1999 By /s/ D. Michael Parker ------------------------- D. Michael Parker Vice President of Finance Chief Financial Officer 15 EX-3.1 2 AMENDMENT 08/26.99 BYLAWS-KEWAUNEE SCIENTIFIC Exhibit 3.1 AMENDMENT TO BYLAWS RESOLVED, that the Bylaws of Kewaunee Scientific Corporation are hereby amended, effective August 26, 1999, in the following respects: Section 3.02 is amended to insert the words "Chairman of the Board, the," immediately preceding the word President in the first sentence. Section 4.03 is amended to insert the words "Chairman of the Board, the," immediately prior to the word "President." Section 4.09 is amended by changing the first sentence to begin: "The Chairman of the Board or, in his absence, the President shall call to order . . . " Section 5.03 is amended to insert the words, "Chairman of the Board, the" immediately prior to the word "President." Section 5.08 is amended to insert the words, "Chairman of the Board, the" immediately prior to the word "President." Section 5.10 is amended by changing the first sentence to read: "At each meeting of the Board, the Chairman of the Board or, in his absence, the President, shall preside." Section 7.01 is amended to insert the words "Chairman of the Board, a" immediately prior to the word "President." Section 7.05 is amended by changing the word "President" to read "Chairman of the Board." A new Section 7.06 is added, reading as follows: Section 7.06. The President shall be the chief operating officer of the corporation and shall be in charge of its day-to-day business operations, subject to the Chairman of the Board and the Board. The President shall have such duties and responsibilities as are incident to the position of Chief Operating Officer or as are assigned to him by the Chairman of the Board or the Board. In the event of the absence or disability of the Chairman of the Board, the President shall perform the duties and exercise the powers of the Chairman of the Board. Sections 7.07, 7.08, 7.09 and 7.10 are amended to change the word "President" wherever it appears to read "Chairman of the Board." Sections 7.06, 7.07, 7.08, 7.09, 7.10 and 7.11 (as numbered prior to this amendment) are renumbered as Sections 7.07, 7.08, 7.09, 7.10, 7.11, 7.12. EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS APR-30-2000 MAY-01-1999 OCT-31-1999 11 0 17,001 0 3,274 21,896 32,090 19,149 37,168 11,384 0 0 0 6,550 16,903 37,168 39,616 39,616 30,641 30,641 6,452 0 91 2,674 1,030 1,644 0 0 0 1,644 0.67 0.66
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