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, 1995
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission file number 0-5286
KEWAUNEE SCIENTIFIC CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 38-0715562
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 West Front Street
Statesville, North Carolina 28677
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(Address of principal executive offices) (Zip Code)
(704) 873-7202
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(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
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As of August 31, 1995, the Registrant had outstanding 2,366,717 shares of
Common Stock.
Pages: This report, including exhibits, contains 12 pages numbered
sequentially from this cover page.
<PAGE>
KEWAUNEE SCIENTIFIC CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1995
Page Number
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Statements of Operations -
Three months ended July 31, 1995 and 1994 3
Condensed Balance Sheets - July 31, 1995
and April 30, 1995 4
Condensed Statements of Cash Flows -
Three months ended July 31, 1995 and 1994 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 9
Independent Accountants' Review Report 10
PART II. OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Kewaunee Scientific Corporation
Condensed Statements of Operations
($ in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
July 31
------------------
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Net Sales $15,548 $16,383
Costs of products sold 12,875 13,558
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Gross profit 2,673 2,825
Operating expenses 2,415 3,040
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Operating earnings (loss) 258 (215)
Interest expense (204) (85)
Other income, net 16 161
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Earnings (loss) before income taxes 70 (139)
Income tax expense (benefit) -- (28)
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Net earnings (loss) $70 ($111)
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Per share data:
Earnings (loss) per common share $0.03 ($0.05)
Average number of common shares
outstanding (in thousands) 2,367 2,367
</TABLE>
See accompanying notes to condensed financial statments.
<PAGE>
Kewaunee Scientific Corporation
Condensed Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
July 31 April 30
1995 1995
--------- ----------
(Unaudited)
<S> <C> <C>
Assets
------
Current assets:
Cash $31 $58
Short-term investments 350 350
Receivables 15,538 15,571
Inventories 1,785 1,336
Prepaid expenses and
other current assets 1,454 1,115
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Total current assets 19,158 18,430
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Property, plant and equipment, at cost 25,400 25,233
Accumulated depreciation (14,508) (14,113)
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Net property, plant and equipment 10,892 11,120
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Other assets 514 524
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$30,564 $30,074
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Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Short-term borrowings $2,976 $2,239
Current portion of long-term debt 111 111
Accounts payable 5,724 5,494
Other current liabilities 3,002 3,858
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Total current liabilities 11,813 11,702
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Long-term debt 3,179 3,206
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Deferred incomes taxes and other
non-current liabilities 1,348 1,012
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Stockholders' equity:
Common stock 6,550 6,550
Additional paid-in-capital 116 116
Retained earnings 9,070 9,000
Common stock in treasury, at cost (1,512) (1,512)
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Total stockholders' equity 14,224 14,154
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$30,564 $30,074
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</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
Kewaunee Scientific Corporation
Condensed Statements of Cash Flows
($ in thousands)
<TABLE>
<CAPTION>
Three months ended
July 31
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1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from 0perating activities:
Net earnings (loss) $70 ($111)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 394 474
Provision for bad debts 9 14
(Increase) decrease in receivables 24 (325)
Increase in inventories (449) (449)
Decrease in accounts payable and
other current liabilities (626) (54)
Other, net 7 (176)
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Net cash used in operating activities (571) (627)
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Cash flows from investing activities:
Capital expenditures (166) (180)
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Net cash used in investing activities (166) (180)
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Cash flows from financing activities:
Net increase in short-term borrowings 737 1,000
Repayment of long-term debt (27) (151)
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Net cash provided by financing activities 710 849
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Increase (decrease) in cash (27) 42
Cash, beginning of period 58 162
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Cash, end of period $31 $204
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Supplemental disclosure:
Interest paid $166 $64
Income taxes paid $27 $16
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
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
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Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
July 31, 1995 April 30, 1995
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<S> <C> <C>
Finished products $ 829 $ 280
Work in process 317 345
Raw materials 639 711
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$1,785 $1,336
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</TABLE>
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.
<PAGE>
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 ended July 31, 1995 with the comparable period of the prior
fiscal year.
Results of Operations
---------------------
The Company recorded sales of $15.5 million for the three months ended July
31, 1995, down 5.1% from sales of $16.4 million for the comparable period
of the prior year. This lower sales volume was in line with the Company's
projections, based on the lower market demand for laboratory furniture and
the Company's marketing strategies.
The Company's gross profit margin for the three months ended July 31, 1995
was 17.2%, unchanged from the comparable period of the prior fiscal year.
Operating expenses for the three months ended July 31, 1995 were $2.4
million, down 20.6% from operating expenses of $3.0 million for the
comparable period of the prior fiscal year. As a percent of sales,
operating expenses for the three months ended July 31, 1995 were 15.5% of
sales as compared to 18.6% of sales for the comparable period of the prior
fiscal year. The reduction in operating expenses for the current quarter
resulted from a variety of actions including, in particular, reductions in
management and administrative personnel.
An operating profit of $258,000 was recorded for the three months ended
July 31, 1995, as compared to an operating loss of $215,000 recorded in the
comparable period of the prior fiscal year.
Interest expense was $204,000 for the three months ended July 31, 1995,
compared to $85,000 for the comparable period of the prior fiscal year.
The increase in interest expense for the current quarter resulted from
higher levels of debt and higher interest rates.
Other income was $16,000 for the three months ended July 31, 1995, compared
to $161,000 for the comparable period of the prior fiscal year. Prior year
other income exceeded the current year amount primarily due to a cash
settlement that was received in the prior year related to an investment
that had been previously written-down.
<PAGE>
No income tax expense or benefit was recorded for the three months ended
July 31, 1995. An income tax benefit of $28,000 was recorded for the three
months ended July 31, 1994. The effective tax rate for each of these
periods differs from the related statutory rates due to adjustments to the
deferred tax valuation allowance.
A net profit of $70,000, or $.03 per share, was reported for the three
months ended July 31, 1995, compared to a net loss of $111,000, or $.05 per
share, for the comparable period of the prior fiscal year. The reduction
in operating expenses during the current quarter more than offset the
unfavorable effect of the lower sales volume during the quarter.
Liquidity and Capital Resources
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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 and debt service
requirements.
The Company had working capital of $7.3 million at July 31, 1995, as
compared to $6.7 million at April 30, 1995. The ratio of current assets to
current liabilities was 1.6-to-1 at July 31, 1995, unchanged from April 30,
1995. The debt-to-equity ratio was .44-to-1 at July 31, 1995, as compared
to .39-to-1 at April 30, 1995. The Company had unused credit available in
the amount of $1.6 million under a revolving credit facility at July 31,
1995, as compared to unused credit in the amount of $2.1 million at April
30, 1995. The Company had unused credit available under a revolving credit
facility in the amount of $1.6 million at July 31, 1995, as compared to
unused credit available under this facility of $2.1 million at April 30,
1995.
The Company's operations used cash of $571,000 during the three months
ended July 31, 1995, primarily due to payments decreasing accounts payable
and accrued expenses and the funding of an increase in inventories. The
Company's operations used cash of $627,000 during the three months ended
July 31, 1994.
The Company used cash of $166,000 for capital expenditures during the three
months ended July 31, 1995, and used cash of $180,000 for such expenditures
for 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.
<PAGE>
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, 1995 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.
<PAGE>
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 July 31, 1995, and the related condensed
statements of operations and cash flows for the three-month periods ended
July 31, 1995 and 1994. 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 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
August 16, 1995
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant held its Annual Meeting of Stockholders on
August 30, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
There were no exhibits required by Item 601 of Regulation S-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed with the Commission during
the three months ended July 31, 1995.
<PAGE>
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
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(Registrant)
Date: September 13, 1995 By /s/ D. Michael Parker
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D. Michael Parker
Vice President of Finance
Chief Financial Officer
