<PAGE>
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, 1996
[ ] 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 30, 1996, the Registrant had outstanding 2,365,796 shares of Common
Stock.
Pages: This report, including exhibits, contains 13 pages numbered sequentially
from this cover page.
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KEWAUNEE SCIENTIFIC CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1996
Page Number
-----------
PART I. FINANCIAL INFORMATION
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<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C>
Condensed Statements of Operations -
Three months ended July 31, 1996 and 1995 3
Condensed Balance Sheets - July 31, 1996
and April 30, 1996 4
Condensed Statements of Cash Flows -
Three months ended July 31, 1996 and 1995 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' Report 11
</TABLE>
PART II. OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
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2
<PAGE>
Part 1. 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
-------- --------
1996 1995
-------- --------
<S> <C> <C>
(Unaudited)
Net sales $16,280 $15,548
Costs of products sold 12,989 12,875
-------- --------
Gross profit 3,291 2,673
Operating expenses 2,748 2,415
-------- --------
Operating earnings 543 258
Interest expense (134) (204)
Other income, net 4 16
-------- --------
Earnings before income taxes 413 70
Income tax benefit (125) -
-------- --------
Net earnings $538 $70
======== ========
Per share data:
Earnings per common share $0.23 $0.03
Average number of common shares
outstanding (in thousands) 2,366 2,367
</TABLE>
See accompanying notes to condensed financial statements.
3
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Kewaunee Scientific Corporation
Condensed Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
July 31 April 30
1996 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
- ------
Current assets:
Cash $ 15 $ 16
Receivables 14,275 13,212
Inventories 2,120 1,213
Prepaid expenses and
other current assets 1,473 1,205
------------ ------------
Total current assets 17,883 15,646
------------ ------------
Property, plant and equipment, at cost 26,245 25,840
Accumulated depreciation (15,963) (15,532)
------------ ------------
Net property, plant and equipment 10,282 10,308
------------ ------------
Other assets 542 550
------------ ------------
$28,707 $26,504
============ ============
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings $ 2,609 $ 2,320
Current portion of long-term debt 180 180
Accounts payable 6,217 4,505
Other current liabilities 3,430 3,594
------------ ------------
Total current liabilities 12,436 10,599
------------ ------------
Long-term debt 285 328
------------ ------------
Deferred income taxes and other
non-current liabilities 937 1,062
------------ ------------
Stockholders' equity:
Common stock 6,550 6,550
Additional paid-in-capital 116 116
Retained earnings 9,899 9,361
Common stock in treasury, at cost (1,516) (1,512)
------------ ------------
Total stockholders' equity 15,049 14,515
------------ ------------
$28,707 $26,504
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
Kewaunee Scientific Corporation
Condensed Statements of Cash Flows
($ in thousands)
<TABLE>
<CAPTION>
Three months ended
July 31
------------------
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $538 $70
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 432 394
Provision for bad debts 26 9
(Increase) decrease in receivables (1,089) 24
Increase in inventories (907) (449)
Increase (decrease) in accounts payable
and other current liabilities 1,548 (626)
Other, net (389) 7
-------- --------
Net cash provided by (used in) operating activitie 159 (571)
-------- --------
Cash flows from investing activities:
Capital expenditures (406) (166)
-------- --------
Net cash used in investing activities (406) (166)
-------- --------
Cash flows from financing activities:
Net increase in short-term borrowings 289 737
Repayment of long-term debt (43) (27)
-------- --------
Net cash provided by financing activities 246 710
-------- --------
Decrease in cash (1) (27)
Cash, beginning of period 16 58
-------- --------
Cash, end of period $15 $31
======== ========
Supplemental disclosure:
Interest paid $117 $166
Income taxes paid $31 $27
</TABLE>
See accompanying notes to condensed financial statements.
5
<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 1996 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):
<TABLE>
<CAPTION>
July 31, 1996 April 30, 1996
------------- --------------
<S> <C> <C>
Finished products $ 503 $ 253
Work in process 343 280
Raw materials 1,274 680
------ ------
$2,120 $1,213
====== ======
</TABLE>
C. Balance Sheet
- -----------------
The Company's April 30, 1996 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>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The Company's 1996 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, 1996. The following discussion and analysis
describes material changes in the Company's financial condition since April 30,
1996. The analysis of results of operations compares the three months ended July
31, 1996 with the comparable period of the prior fiscal year.
Results of Operations
- ---------------------
The Company recorded sales of $16.3 million for the three months ended July 31,
1996, up 4.7% from sales of $15.5 million for the comparable period of the prior
year. This increase was attributable to increased sales of end-user products
during the quarter, partially offset by decreased sales of contract-bid
laboratory furniture.
The Company's gross profit margin for the three months ended July 31, 1996 was
20.2%, compared to 17.2% for the comparable period of the prior fiscal year. As
compared to the first quarter of fiscal year 1996, the gross profit margin was
favorably affected by an improved product sales mix and higher selling prices
for contract-bid laboratory furniture.
Operating expenses for the three months ended July 31, 1996 were $2.7 million,
up 13.8% from operating expenses of $2.4 million for the comparable period of
the prior fiscal year. As a percent of sales, operating expenses for the three
months ended July 31, 1996 were 16.9% of sales as compared to 15.5% of sales for
the comparable period of the prior fiscal year. The increase in operating
expenses for the current quarter was primarily attributable to increased sales
and marketing expenses, mainly sales commissions associated with the improved
product sales mix.
An operating profit of $543,000 was recorded for the three months ended July 31,
1996, as compared to $258,000 recorded in the comparable period of the prior
fiscal year.
7
<PAGE>
Interest expense was $134,000 for the three months ended July 31, 1996, compared
to $204,000 for the comparable period of the prior fiscal year. The decrease in
interest expense for the current quarter resulted from lower levels of average
debt, assisted by lower interest rates.
Other income was $4,000 for the three months ended July 31, 1996, compared to
$16,000 for the comparable period of the prior fiscal year.
An income tax benefit of $125,000 resulting from an adjustment of the Company's
valuation allowance on deferred tax assets was recorded for the three months
ended July 31, 1996. No income tax expense or benefit was recorded for the three
months ended July 31, 1995. 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 $538,000, or $.23 per share, was reported for the three months
ended July 31, 1996, compared to a net profit of $70,000, or $.03 per share, for
the comparable period 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 $5.4 million at July 31, 1996, as compared
to $5.0 million at April 30, 1996. The ratio of current assets to current
liabilities was 1.4-to-1 at July 31, 1996, slightly below the April 30, 1996
ratio of 1.5-to-1. The debt-to-equity ratio was .20-to-1 at July 31, 1996, as
compared to .19-to-1 at April 30, 1996. The Company had unused credit available
under a revolving credit facility in the amount of $4.4 million at July 31,
1996, as compared to unused credit available under this facility of $4.0 million
at April 30, 1996.
8
<PAGE>
The Company's operations provided cash of $159,000 during the three months ended
July 31, 1996. This increase was primarily attributable to operating earnings
and an increase in accounts payable, partially offset by an increase in customer
receivables and inventory. The Company's operations used cash of $571,000
during the three months ended July 31, 1995, primarily to reduce accounts
payable and accrued expenses and fund an increase in inventories.
The Company used cash of $406,000 for capital expenditures during the three
months ended July 31, 1996, and used cash of $166,000 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.
Recent Accounting Standards
- ---------------------------
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which will be effective for the Company beginning May 1, 1996.
SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25, which
recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to
its stock based compensation awards to employees and will disclose the required
pro forma effect on net income and earnings per share in its year-end financial
statements.
9
<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, 1996 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.
10
<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, 1996, and the related condensed statements of
operations and cash flows for the three-month periods ended July 31, 1996 and
1995. 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,
1996, and the related statements of operations and retained earnings and of cash
flows for the year then ended (not presented herein); and in our report dated
May 31, 1996, 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, 1996 is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
Deloitte & Touche LLP
August 15, 1996
11
<PAGE>
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 28,
1996. Each of the nominees for director was re-elected. The votes cast
for and withheld from each such director were as follows:
<TABLE>
<CAPTION>
Director For Withheld
-------- --------- --------
<S> <C> <C>
Margaret Barr Bruemmer 1,925,031 19,319
Wiley N. Caldwell 1,924,881 19,469
Thomas F. Pyle 1,924,881 19,469
</TABLE>
Also at the Annual Meeting of Stockholders, the stockholders approved a
proposal to amend the 1991 Key Employee Stock Option Plan to increase
the number of shares of Common Stock authorized for issuance over the
term of the plan from 130,000 to 230,000 shares. The proposal received
1,827,183 affirmative votes, 103,030 negative votes and 13,507
abstentions.
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, 1996.
12
<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: September 5, 1996 By /s/ D. Michael Parker
---------------------------
D. Michael Parker
Vice President of Finance
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS OF KEWAUNEE SCIENTIFIC CORPORATION AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 14,275
<ALLOWANCES> 0
<INVENTORY> 2,120
<CURRENT-ASSETS> 17,883
<PP&E> 26,245
<DEPRECIATION> (15,963)
<TOTAL-ASSETS> 28,707
<CURRENT-LIABILITIES> 12,436
<BONDS> 285
<COMMON> 6,550
0
0
<OTHER-SE> 8,499
<TOTAL-LIABILITY-AND-EQUITY> 15,049
<SALES> 16,280
<TOTAL-REVENUES> 16,280
<CGS> 12,989
<TOTAL-COSTS> 2,748
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134
<INCOME-PRETAX> 413
<INCOME-TAX> (125)
<INCOME-CONTINUING> 538
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 538
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
