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, 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 February 28, 1995, the Registrant had outstanding 2,366,717 shares of
Common Stock.
Pages: This report, including exhibits, contains 14 pages numbered sequentially
from this cover page.
<PAGE>
<PAGE>
KEWAUNEEE SCIENTIFIC CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED January 31, 1995
Page
Number
------
PART I. FINANCIAL INFORMATION
- -------------------------------
Item 1. Financial Statements
Condensed Statements of Operations -
Three and nine months ended January 31, 1995 and 1994 3
Condensed Balance Sheets - January 31, 1995
and April 30, 1994 4
Condensed Statements of Cash Flows -
Nine months ended January 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 8
Review by Independent Accountants 11
Independent Accountants' Review Report 12
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
- ---------
2
<PAGE>
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
Kewaunee Scientific Corporation
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
January 31, January 31,
------------------ -----------------
1995 1994 1995 1994
-------- ------- ------- -------
($ in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $15,877 $13,843 $47,303 $50,463
Costs of products sold 13,177 11,632 39,737 40,704
------- ------- ------- -------
Gross profit 2,700 2,211 7,566 9,759
Operating expenses 2,447 2,958 8,661 9,790
------- ------- ------- -------
Operating earnings (loss) 253 (747) (1,095) (31)
Interest expense (168) (40) (350) (229)
Other income, net 13 21 203 76
------- ------- ------- -------
Earnings (loss) before income taxes 98 (766) (1,242) (184)
Income tax expense (benefit) 28 (153) - (37)
------- ------- ------- -------
Net earnings (loss) $70 ($613) ($1,242) ($147)
------- -------- ------- -------
Per share data:
Earnings (loss) per common share $0.03 ($0.26) ($0.52) ($0.06)
Average number of common shares
outstanding (in thousands) 2,367 2,368 2,367 2,368
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
<PAGE>
Kewaunee Scientific Corporation
Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
January 31, April 30,
1995 1994
----------- -----------
($ in thousands)
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 133 $ 162
Short-term investments-restricted 1,199 805
Receivables 15,841 15,127
Inventories 1,773 1,546
Prepaid expenses and
other current assets 1,462 1,369
------- -------
Total current assets 20,408 19,009
------- -------
Property, plant and equipment, at cost 25,346 24,887
Accumulated depreciation (14,189) (12,814)
------- -------
Net property, plan and equipment 11,157 12,073
------- -------
Other assets 425 484
------- --------
$31,990 $31,566
------- -------
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings (Note D) $ 3,337 $ 1,200
Current portion of long-term debt (Note D) 102 635
Accounts and notes payable 6,237 5,144
Other current liabilities 3,785 4,935
-------- --------
Total current liabilities 13,461 11,914
-------- --------
Long-term debt (Note D) 3,243 3,111
-------- --------
Deferred income taxes and other
non-current liabilities 1,274 1,304
-------- --------
Stockholders' equity:
Common Stock 6,550 6,550
Additional paid-in-capital 116 116
Retained earnings 8,855 10,097
Common stock in treasury, at cost (1,509) (1,526)
-------- --------
Total stockholders' equity 14,012 15,237
-------- --------
$31,990 $31,566
-------- --------
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
<PAGE>
Kewaunee Scientific Corporation
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
January 31,
-----------------
1995 1994
----------- -----------
($ in thousands)
<S> <C> <C>
Assets
- ------
Cash flows from operating activities
Net loss ($1,242) ($147)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,433 1,402
Provision for bad debts 125 46
(Increase) decrease in receivables (839) 1,632
Increase in inventories (227) (5)
Decrease in accounts payable and other
current liabilities (57) (704)
Other, net (47) (180)
-------- --------
Net cash provided by (used in)
operating activities (854) 2,404
-------- --------
Cash flows from investing activities
Capital expenditures (517) (520)
Increase in short-term investments (394) (300)
-------- --------
Net cash used in investing activities (911) (820)
-------- --------
Cash flows from financing activities
Net increase (decrease) in short-term
borrowings 2,137 (500)
Repayment of long-term debt (including
current maturities) (3,401) (915)
Proceeds from revolving credit facility
classified as long-term 3,000 -
-------- --------
Net cash provided by (used in) financing
activities 1,736 (1,415)
-------- ---------
Increase (decrease) in cash and cash
equivalents (29) 169
Cash and cash equivalents, beginning of period 162 167
-------- --------
Cash and cash equivalents, end of period $133 $336
-------- --------
Supplemental disclosure of cash
flow information
Interest paid $292 $205
Income taxes paid $29 $33
Supplemental disclosure of non-cash investing
and financing activities
Assets acquired under capital lease - $162
</TABLE>
See accompanying notes to condensed financial statements.
5
<PAGE>
<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 1994 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):
January 31, 1995 April 30, 1994
---------------- --------------
Finished products $ 771 $ 558
Work-in-process 363 498
Raw materials 639 490
------ ------
$1,773 $1,546
------ ------
------ ------
C. Balance Sheet
- -----------------
The Company's April 30, 1994 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
<PAGE>
<PAGE>
D. Financing Arrangements
- --------------------------
In January 1995, the Company entered into a credit arrangement with a new lender
which allows the Company to borrow the lesser of $8,500,000, or that available
under certain eligibility formulas, under a revolving credit facility (the
facility). The amount eligible under such formulas was approximately $7.6
million at January 31, 1995, and borrowings outstanding under the facility were
$6.3 million at that date. Borrowings under the facility were used to retire
the Company's obligations under its Industrial Development Revenue Bonds and
repay all amounts outstanding under its bank line of credit.
Under the facility, the Company provides monthly interest payments at a rate of
the greater of 8%, or 1% over the lender's prime rate, calculated on the greater
of the minimum required loan of $3,000,000 under the facility, or the average of
the actual daily loan balance outstanding during each month. The Company's
inventories, accounts receivable and plants and equipment are pledged to the
lender as collateral securing borrowings under the facility. The facility has a
maturity date of January 6, 1997. Due to this maturity date and forecasted cash
needs of the Company, $3,000,000 of borrowings outstanding under the facility at
January 31, 1995 were classified as long-term debt in the condensed financial
statements.
7
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company's 1994 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, 1994. The following discussion and analysis
describes material changes in the Company's financial condition since April 30,
1994. The analysis of results of operations compares the three months and nine
months ended January 31, 1995 with the comparable periods of the prior fiscal
year.
Results of Operations
- ---------------------
The Company recorded sales of $15.9 million for the three months ended January
31, 1995, up 14.7% from sales of $13.8 million for the comparable period of the
prior year. Sales for the current quarter were favorably affected by increased
shipments of end-user products and contract-bid laboratory furniture, partially
offset by lower selling prices of contract-bid laboratory furniture. Sales for
the nine months ended January 31, 1995 were $47.3 million, down 6.3% from sales
of $50.5 million in the comparable period of the prior year. Sales for the
current year were unfavorably affected by reduced shipments and lower selling
prices of contract-bid laboratory furniture.
The Company's gross profit margins for the three months and nine months ended
January 31, 1995 were 17.0 percent and 16.0 percent, respectively, compared with
16.0 percent and 19.3 percent for the comparable periods of the prior fiscal
year. The current quarter gross profit margin was favorably affected by
increased sales volume, partially offset by lower selling prices of contract-bid
laboratory furniture. The gross profit margin for the current year was
unfavorably affected by reduced sales volume and lower selling prices of
contract-bid laboratory furniture.
Operating expenses for the three months and nine months ended January 31, 1995
were $2.4 million and $8.7 million, or 15.4% and 18.3% of sales, respectively.
This compares to operating expenses of $3.0 million and $9.8 million, or 21.4%
and 19.4% of sales, respectively, for the comparable periods of the prior fiscal
year. The reduction in operating expenses for the current quarter and year are
a reflection of cost reduction activities, especially reductions of management
and administrative personnel announced in November 1994.
An operating profit of $253,000 was recorded for the three months ended January
31, 1995, and an operating loss of $1.1 million was recorded for the nine months
then ended. These compare to operating losses of $747,000 and $31,000,
respectively, for the comparable periods of the prior fiscal year.
8
<PAGE>
<PAGE>
Other income was $13,000 and $203,000 for the three months and nine months ended
January 31, 1995, respectively, compared to other income of $21,000 and $76,000
for the comparable periods of the prior fiscal year. The current year increase
in other income was primarily due to cash payments received related to an
investment that was written-down in a prior year.
Interest expense was $168,000 and $350,000 for the three months and nine months
ended January 31, 1995, respectively, compared to interest expense of $40,000
and $229,000 for the comparable periods of the prior fiscal year. The increase
in interest expense for the current quarter and the year resulted from higher
levels of debt, higher interest rates, and costs associated with the debt
restructuring in the current quarter.
Income tax expense of $28,000 was recorded for the three months ended January
31, 1995, and no tax benefit or expense was recorded for the nine-month period
then ended. Income tax benefits of $153,000 and $37,000 were recorded for the
three and nine months ended January 31, 1994, respectively. The effective tax
rate for each of these periods differs from the related statutory rates due to
adjustments to the deferred tax valuation allowance.
Net earnings of $70,000, or 3 cents per share, and net losses of $1,242,000, or
52 cents per share, were recorded for the three months and nine months ended
January 31, 1995, respectively. This compares to net losses of $613,000 and
$147,000, or 26 cents per share and 6 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.
At January 31, 1995, the Company had working capital of $6.9 million and
available borrowings of $1.2 million under the Company's revolving credit
facility. At April 30, 1994, the Company had working capital of $7.1 million
and available borrowings of $1,950,000 under a bank line of credit. The
Company's operations used cash of $854,000 during the nine months ended January
31, 1995, primarily due to an increase in customer receivables. The Company's
operations generated cash of $2.4 million during the nine months ended January
31, 1994, primarily due to a decrease in customer receivables.
9
<PAGE>
<PAGE>
As discussed in Note D to the condensed financial statements, in January 1995,
the Company entered into a credit arrangement with a new lender which allows the
Company to borrow the lesser of $8,500,000, or that available under certain
eligibility formulas, under a revolving crerdit facility (the facility). The
amount eligible under such formulas was approximately $7.6 million at January
31, 1995, and borrowings outstanding under the facility were $6.3 million at
that date. Borrowings under the facility were used to retire the Company's
obligations under its Industrial Development Revenue Bonds and repay all amounts
outstanding under its bank line of credit. The Company's inventories, accounts
receivable and plant and equipment are pledged to the lender as collateral
securing borrowings under the facility.
The Company used cash of $517,000 for capital expenditures during the nine
months ended January 31, 1995, and used cash of $520,000 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 increased its short-term investments by $394,000 during the nine
months ended January 31, 1995. Short-term investments are pledged as collateral
for letters of credit.
The Company increased its short-term borrowings during the nine months ended
January 31, 1995 by $2.1 million. The Company used cash of $3.4 million for
principal payments on long-term debt during the nine months ended January 31,
1995, including the retirement of the Company's obligations under its Industrial
Development Revenue Bonds. Principal payments of $915,000 were made during the
comparable period of the prior fiscal year. Due to the maturity date of the new
revolving credit facility and forecasted cash needs of the Company, $3.0 million
of the proceeds from the facility were classified as long-term debt in the
condensed financial statements at January 31, 1995.
No common stock dividends were paid during the nine months ended January 31,
1995 or the nine months ended January 31, 1994.
10
<PAGE>
<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 nine months ended January 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.
11
<PAGE>
<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 January 31, 1995, and the related condensed statements of
operations for the three-month and nine-month periods ended January 31, 1995 and
1994, and the condensed statements of cash flows for the nine months ended
January 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 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,
1994, 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 3, 1994, 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, 1994 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
February 20, 1995
12
<PAGE>
<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 January 31,
1995.
13
<PAGE>
<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: March 10, 1995 By /s/ Robert M. Cecchini
----------------------------
Robert M. Cecchini
Vice President of Finance
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED 01/31/95 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> JAN-31-1995
<CASH> 133
<SECURITIES> 1,199
<RECEIVABLES> 15,841
<ALLOWANCES> 0
<INVENTORY> 1,773
<CURRENT-ASSETS> 20,408
<PP&E> 25,346
<DEPRECIATION> 14,189
<TOTAL-ASSETS> 31,990
<CURRENT-LIABILITIES> 13,461
<BONDS> 0
<COMMON> 6,550
0
0
<OTHER-SE> 7,462
<TOTAL-LIABILITY-AND-EQUITY> 31,990
<SALES> 47,303
<TOTAL-REVENUES> 47,303
<CGS> 39,737
<TOTAL-COSTS> 8,661
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 350
<INCOME-PRETAX> (1,242)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,242)
<EPS-PRIMARY> (.52)
<EPS-DILUTED> (.52)
</TABLE>
