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, 1995
/ / 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 November 30, 1995, 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.
<PAGE>
KEWAUNEE SCIENTIFIC CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED October 31, 1995
Page
Number
------
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Condensed Statements of Operations -
Three and six months ended October 31, 1995 and 1994 3
Condensed Balance Sheets - October 31, 1995
and April 30, 1995 4
Condensed Statements of Cash Flows -
Six months ended October 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 10
Independent Accountants' Review Report 11
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
- ---------
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
Kewaunee Scientific Corporation
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended Six months ended
October 31 October 31
---------- ----------
1995 1994 1995 1994
---- ---- ---- ----
($ in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $15,385 $15,043 $30,933 $31,426
Cost of products 12,389 13,002 25,264 26,560
sold ------- ------- ------- -------
Gross profit 2,996 2,041 5,669 4,866
Operating expenses 2,680 3,174 5,095 6,214
------ ------ ------ ------
Operating earnings 316 (1,133) 574 (1,348)
(loss)
Interest expense (191) (97) (395) (182)
Other income, net 23 29 39 190
------ ------ ------ ------
Earnings (loss) 148 (1,201) 218 (1,340)
before income taxes
Income tax benefit - - - (28)
------ ------ ------ -------
Net earnings (loss) $148 ($1,201) $218 ($1,312)
======= ======== ====== ========
Per share data: $0.06 ($0.51) $0.09 ($0.55)
Earnings (loss) per
common share
Average number of 2,367 2,367 2,367 2,367
common shares
outstanding (in
thousands)
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
Kewaunee Scientific Corporation
Condensed Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
October 31 April 30
1995 1995
--------- ----------
(Unaudited)
<S> <C> <C>
Assets
- ------
Current assets:
Cash $5 $58
Short-term investments - 350
Receivables 14,362 15,571
Inventories 1,701 1,336
Prepaid expenses and
other current assets 1,326 1,115
------ ------
Total current assets 17,394 18,430
------ ------
Property, plant and equipment, at cost 26,011 25,233
Accumulated depreciation (14,922) (14,113)
------ ------
Net property, plant and equipment 11,089 11,120
------ ------
Other assets 507 524
------ ------
$28,990 $30,074
------ ------
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings $1,268 $2,239
Current portion of long-term debt 178 111
Accounts payable 5,129 5,494
Other current liabilities 3,277 3,858
------ ------
Total current liabilities 9,852 11,702
------ ------
Long-term debt 3,413 3,206
------ ------
Deferred incomes taxes and other
non-current liabilities 1,353 1,012
------ ------
Stockholders' equity:
Common stock 6,550 6,550
Additional paid-in-capital 116 116
Retained earnings 9,218 9,000
Common stock in treasury, at cost (1,512) (1,512)
------ ------
Total stockholders' equity 14,372 14,154
------ ------
$28,990 $30,074
------ ------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
Kewaunee Scientific Corporation
Condensed Statements of Cash Flows
($ in thousands)
<TABLE>
<CAPTION>
Six months ended
October 31
------------------
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $218 ($1,312)
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 808 972
Provision for bad debts 18 26
Decrease in receivables 1,191 169
Increase in inventories (365) (1,110)
(Decrease) increase in accounts payable and
other current liabilities (946) 1,020
Other, net 147 (45)
----- -----
Net cash provided by (used in) 1,071 (280)
operating activities
----- -----
Cash flows from investing activities:
Capital expenditures (439) (316)
Decrease (increase) in short-term investments 350 (44)
----- -----
Net cash used in investing activities (89) (360)
----- -----
Cash flows from financing activities:
Net (decrease) increase in short-term borrowings (971) 1,100
Repayment of long-term debt (64) (311)
----- -----
Net cash (used in) provided by financing activities (1,035) 789
----- -----
(Decrease) increase in cash and cash equivalents (53) 149
Cash and cash equivalents, beginning of period 58 162
----- -----
Cash and cash equivalents, end of period $5 $311
----- -----
Supplemental disclosure of cash flow information
Interest paid $326 $151
Income taxes (refunded) paid, net ($36) $26
Supplemental disclosure of non-cash financing
activities
Equipment acquired under financing arrangements $338 -
</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
- ---------------
Inventories consisted of the following (in thousands):
October 31, 1995 April 30, 1995
---------------- --------------
Finished products $ 438 $ 280
Work-in-process 348 345
Raw materials 915 711
------ ------
$1,701 $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.
<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 and
six months ended October 31, 1995 with the comparable periods of
the prior fiscal year.
Results of Operations
- ---------------------
The Company recorded sales of $15.4 million for the three months
ended October 31, 1995, up 2.3% from sales of $15.0 million for
the comparable period of the prior year. Sales for the six
months ended October 31, 1995 were $30.9 million, down 1.6% from
sales of $31.4 million in the comparable period of the prior
year. The sales volumes for the three months and six months
ended October 31, 1995 were in line with the Company's
projections, based on current market demand for laboratory
furniture and the Company's marketing strategies.
The Company's gross profit margins for the three months and six
months ended October 31, 1995 were 19.5 percent and 18.3 percent,
respectively, compared with 13.6 percent and 15.5 percent 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
implemented since the prior year and changes in the Company's
pricing strategies.
Operating expenses for the three months and six months ended
October 31, 1995 were $2.7 million and $5.1 million,
respectively, compared to $3.2 million and $6.2 million for the
comparable periods of the prior fiscal year. As a percent of
sales, operating expenses for the three months and six months
ended October 31, 1995 were 17.4 percent and 16.5 percent of
sales, respectively, compared to 21.1 percent and 19.8 percent of
sales for the comparable periods of the prior fiscal year. The
reduction in operating expenses for the three months and six
months ended October 31, 1995 resulted from a variety of cost
improvement actions including, in particular, reductions in
management and administrative personnel.
<PAGE>
Operating earnings of $316,000 and $574,000 were recorded for the
three months and six months ended October 31, 1995, respectively.
This compares to operating losses of $1.1 million and $1.3
million for the comparable periods of the prior fiscal year.
Other income was $23,000 and $39,000 for the three months and six
months ended October 31, 1995, respectively, compared to $29,000
and $190,000 for the comparable periods of the prior fiscal year.
Prior year other income exceeded the current year amount
primarily due to a cash settlement received in the first quarter
of the prior year related to an investment that had been written-
down.
Interest expense was $191,000 and $395,000 for the three months
and six months ended October 31, 1995, respectively, compared to
$97,000 and $182,000 for the comparable periods of the prior
fiscal year. The increase in interest expense for the current
year resulted from higher levels of average debt and higher
interest rates.
No income tax expense or benefit was recorded for the three
months and six months ended October 31, 1995. An income tax
benefit of $28,000 was recorded for the six months ended October
31, 1994, and no tax benefit or expense was recorded for the
three-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 the end of the quarter have been
substantially reduced by the valuation allowance to reflect the
uncertainty to their ultimate recoverability.
Net earnings of $148,000 and $218,000, or 6 cents per share and 9
cents per share, were recorded for the three months and six
months ended October 31, 1995, respectively. This compares to
net losses of $1.2 million and $1.3 million, or 51 cents per
share and 55 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, including
capital expenditures and debt service requirements.
The Company had working capital of $7.5 million at October 31,
1995, as compared to $6.7 million at April 30, 1995. The ratio
of current assets to current liabilities was 1.8-to-1 at October
31, 1995, as compared to 1.6-to-1 at April 30, 1995. The debt-
to-equity ratio was .34-to-1 at October 31, 1995, as compared to
.39-to-1 at April 30, 1995. The Company had unused credit
available under a revolving credit facility of $2.7 million at
October 31, 1995, as compared to unused credit available under
this facility of $2.1 million at April 30, 1995.
<PAGE>
The Company's operations generated cash of $1.1 million during
the six months ended October 31, 1995, primarily from a decrease
in accounts receivable. The Company's operations used cash of
$280,000 during the six months ended October 31, 1994, primarily
to fund the operating losses for the period and an increase in
inventories.
The Company used cash of $439,000 for capital expenditures during
the six months ended October 31, 1995, and used cash of $316,000
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 during the six
months ended October 31, 1995 by $971,000. The Company used cash
of $64,000 for scheduled principal payments on long-term debt
during the six months ended October 31, 1995, as compared to
scheduled principal payments of $311,000 during the comparable
period of the prior fiscal year.
No common stock dividends were paid during the six months ended
October 31, 1995 or the six months ended October 31, 1994.
<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 and six months
ended October 31, 1995 has been performed by Deloitte & Touche,
the Company's independent accountants. Their report on the
interim financial information follows. There have been no
adjustments or disclosures proposed by Deloitte & Touche 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 October 31, 1995, and the related condensed
statements of operations for the three-month and six-month periods ended
October 31, 1995 and 1994 and the condensed statements of cash flows for
the six-month and three-month periods ended October 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 of cash flows for the year then ended (not presented herein); 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
November 15, 1995
<PAGE>
PART II. OTHER INFORMATION
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 October 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
-------------------------------
(Registrant)
Date: December 5, 1995 By /s/ D. Michael Parker
---------------------
D. Michael Parker
Vice President of Finance
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED OCTOBER 31, 1995, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> APR-30-1995 APR-30-1995
<PERIOD-END> OCT-31-1995 OCT-31-1995
<CASH> 5,000 5,000
<SECURITIES> 0 0
<RECEIVABLES> 14,362,000 14,362,000
<ALLOWANCES> 0 0
<INVENTORY> 1,701,000 1,701,000
<CURRENT-ASSETS> 17,394,000 17,394,000
<PP&E> 26,011,000 26,011,000
<DEPRECIATION> 14,922,000 14,922,000
<TOTAL-ASSETS> 28,990,000 28,990,000
<CURRENT-LIABILITIES> 9,852,000 9,852,000
<BONDS> 0 0
<COMMON> 6,550,000 6,550,000
0 0
0 0
<OTHER-SE> 7,822,000 7,822,000
<TOTAL-LIABILITY-AND-EQUITY> 28,990,000 28,990,000
<SALES> 15,385,000 30,933,000
<TOTAL-REVENUES> 15,385,000 30,933,000
<CGS> 12,389,000 25,264,000
<TOTAL-COSTS> 12,389,000 25,264,000
<OTHER-EXPENSES> 2,680,000 5,095,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 191,000 395,000
<INCOME-PRETAX> 148,000 218,000
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 148,000 218,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 148,000 218,000
<EPS-PRIMARY> .06 .09
<EPS-DILUTED> .06 .09
</TABLE>
