<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, 1997
[_] 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 29, 1997, the Registrant had outstanding 2,372,921 shares of Common
Stock.
Pages: This report, excluding 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, 1997
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, 1997 and 1996 3
Condensed Balance Sheets - July 31, 1997
and April 30, 1997 4
Condensed Statements of Cash Flows -
Three months ended July 31, 1997 and 1996 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
PART II. OTHER INFORMATION
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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
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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
-------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Net sales $17,662 $16,280
Costs of products sold 13,524 12,989
------- -------
Gross profit 4,138 3,291
Operating expenses 3,166 2,748
------- -------
Operating earnings 972 543
Interest expense (52) (134)
Other income, net 11 4
------- -------
Earnings before income taxes 931 413
Income tax expense (benefit) 372 (125)
------- -------
Net earnings $ 559 $ 538
======= =======
Per share data:
Earnings per common share $ 0.24 $ 0.23
Average number of common shares
outstanding 2,366 2,366
</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
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Assets
- ------
Current assets:
Cash $30 $6
Receivables 14,517 12,864
Inventories 2,988 1,946
Prepaid expenses and
other current assets 1,843 1,649
-------- --------
Total current assets 19,378 16,465
-------- --------
Property, plant and equipment,
at cost 26,476 26,431
Accumulated depreciation (16,999) (16,605)
-------- --------
Net property, plant and equipment 9,477 9,826
-------- --------
Other assets 689 700
-------- --------
$ 29,544 $ 26,991
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings $ 1,180 -
Accounts payable 6,479 5,136
Other current liabilities 3,889 4,324
-------- --------
Total current liabilities 11,548 9,460
-------- --------
Deferred income taxes and other
non-current liabilities 946 945
-------- --------
Stockholders' equity:
Common stock 6,550 6,550
Additional paid-in-capital 116 116
Retained earnings 11,899 11,435
Common stock in treasury, at cost (1,515) (1,515)
-------- --------
Total stockholders' equity 17,050 16,586
-------- --------
$ 29,544 $ 26,991
======== ========
</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
-------
1997 1996
---- ----
(Unaudited)
Cash flows from operating activities:
- ------------------------------------
<S> <C> <C>
Net earnings $ 559 $ 538
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 394 432
Provision for bad debts 40 26
Increase in receivables (1,693) (1,089)
Increase in inventories (1,042) (907)
Increase in accounts payable and
other current liabilities 908 1,548
Other, net (182) (389)
------- -------
Net cash provided by (used in)
operating activities (1,016) 159
------- -------
Cash flows from investing activities:
- ------------------------------------
Capital expenditures (45) (406)
------- -------
Net cash used in investing activities (45) (406)
------- -------
Cash flows from financing activities:
- ------------------------------------
Net increase in short-term borrowings 1,180 289
Dividends paid (95) -
Repayment of long-term debt - (43)
------- -------
Net cash provided by financing
activities 1,085 246
------- -------
Increase (decrease) in cash 24 (1)
- ---------------------------
Cash, beginning of period 6 16
- ------------------------- ------- -------
Cash, end of period $ 30 $ 15
- ------------------- ======= =======
Supplemental disclosure:
- -----------------------
Interest paid $ 34 $ 117
Income taxes paid $ 466 $ 31
</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 1997 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):
<TABLE>
<CAPTION>
July 31, 1997 April 30, 1997
------------- --------------
<S> <C> <C>
Finished products $ 679 $ 366
Work in process 627 638
Raw materials 1,682 942
------ ------
$2,988 $1,946
====== ======
</TABLE>
C. Balance Sheet
- -----------------
The Company's April 30, 1997 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 1997 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, 1997. The following discussion and analysis
describes material changes in the Company's financial condition since April 30,
1997. The analysis of results of operations compares the three months ended
July 31, 1997 with the comparable period of the prior fiscal year.
Results of Operations
- ---------------------
The Company recorded sales of $17.7 million for the three months ended July 31,
1997, up 8.5% from sales of $16.3 million for the comparable period of the prior
year. This increase was primarily attributable to an improved marketplace for
the Company's products.
The Company's gross profit margin for the three months ended July 31, 1997 was
23.4%, compared to 20.2% for the comparable period of the prior fiscal year. As
compared to the first quarter of fiscal year 1997, the gross profit margin was
favorably affected by an improved product sales mix and improved operating
efficiencies.
Operating expenses for the three months ended July 31, 1997 were $3.2 million,
up 15.2% from operating expenses of $2.7 million for the comparable period of
the prior fiscal year. As a percent of sales, operating expenses for the three
months ended July 31, 1997 were 17.9% of sales as compared to 16.9% 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.
Operating earnings of $972,000 were recorded for the three months ended July 31,
1997, as compared to $543,000 recorded in the comparable period of the prior
fiscal year.
7
<PAGE>
Interest expense was $52,000 for the three months ended July 31, 1997, compared
to $134,000 for the comparable period of the prior fiscal year. The decrease in
interest expense for the current quarter resulted primarily from lower levels of
debt under the Company's revolving credit facility.
Other income was $11,000 for the three months ended July 31, 1997, compared to
$4,000 for the comparable period of the prior fiscal year.
Income tax expense of $372,000 was recorded for the three months ended July 31,
1997, as compared to an income tax benefit of $125,000 recorded for the
comparable period of the prior fiscal year. The income tax benefit for the
comparable period of the prior year was a result of an adjustment of the
Company's valuation allowance on deferred tax assets.
A net profit of $559,000, or $.24 per share, was reported for the three months
ended July 31, 1997, compared to a net profit of $538,000, or $.23 per share,
for the comparable period of the prior fiscal year, as a result of the factors
discussed above.
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.
The Company had working capital of $7.8 million at July 31, 1997, as compared to
$7.0 million at April 30, 1997. The ratio of current assets to current
liabilities was 1.7-to-1 at July 31, 1997, unchanged from April 30, 1997. The
debt-to-equity ratio was .07-to-1 at July 31, 1997. The Company had unused
credit available under a revolving credit facility in the amount of $7.1 million
at July 31, 1997, as compared to unused credit available under this facility of
$8.0 million at April 30, 1997.
8
<PAGE>
The Company's operations used cash of $1.0 million during the three months ended
July 31, 1997. This increase was primarily attributable to an increase in
customer receivables and inventory, partially offset by operating earnings and a
net increase in accounts payable and other current liabilities. The Company's
operations provided cash of $159,000 during the three months ended July 31,
1996, primarily from net earnings and an increase in accounts payable and other
current liabilities, partially offset by an increase in customer receivables.
During the three months ended July 31, 1997, the Company used cash of $45,000
for the purchase of production equipment, compared to the use of $406,000 for
such purchases in the comparable period of the prior fiscal year. In addition,
in the three months ended July 31, 1997, the Company entered into operating
lease arrangements for production equipment with an aggregate original asset
cost of $422,000. The Company does not anticipate an abnormal level of capital
expenditures for the remainder of the current fiscal year.
Recent Accounting Standards
- ---------------------------
The Financial Accounting Standards Board has issued Statement No. 128, "Earnings
Per Share," which will be effective during the Company's 1998 fiscal year. SFAS
No. 128 will change the method for calculating earnings per share. Had the
Company applied SFAS No. 128 for the quarter ended July 31, 1997 and the 1997
fiscal year, the effect on reported earnings per share would not be significant.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
Certain statements included in this report are forward looking and involve risk
and uncertainties that could significantly impact results. These factors
include, but are not limited to, economic, competitive, governmental, and
technological factors affecting the Company's operations, markets, products,
services, and prices.
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, 1997 has been performed by
Price Waterhouse LLP, the Company's independent accountants. Their report on
the interim financial information follows. There have been no adjustments or
disclosures proposed by Price Waterhouse 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, 1997, and the related condensed statements of
operations and cash flows for the three-month period then ended. 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 financial statements for it to be in conformity with
generally accepted accounting principles.
The accompanying condensed statements of operations and cash flows for the
three-month period ended July 31, 1996 were reviewed by other independent
accountants whose report dated August 15, 1996 stated that, based upon their
review, they were not aware of any material modifications that should be made to
the financial statements for them to be in conformity with generally accepted
accounting principles. The financial statements for the year ended April 30,
1997 were audited by other independent accountants whose report dated June 4,
1997 expressed an unqualified opinion on those statements.
Price Waterhouse LLP
Charlotte, North Carolina
September 9, 1997
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 27,
1997. 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>
John C. Campbell, Jr. 1,906,181 11,243
James T. Rhind 1,867,981 49,443
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated August 27, 1997
to reflect (i) the dismissal of Deloitte & Touche LLP as the
Company's independent accountants and (ii) the engagement of Price
Waterhouse LLP to serve as the Company's independent accountants,
all pursuant to Item 4 of Form 8-K.
In connection with the audits of the two fiscal years ended April
30, 1996 and 1997 and the subsequent interim period, there were no
disagreements with Deloitte & Touche LLP on any matter of accounting
principles or practices, financial statement disclosure, or audit
scope or procedures, which disagreements, if not resolved to their
satisfaction, would have caused them to make reference in connection
with their opinion to the subject matter of the disagreement.
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, 1997 By /s/ D. Michael Parker
-----------------------------
D. Michael Parker
Vice President of Finance
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 30
<SECURITIES> 0
<RECEIVABLES> 14,517
<ALLOWANCES> 0
<INVENTORY> 2,988
<CURRENT-ASSETS> 19,378
<PP&E> 26,476
<DEPRECIATION> 16,999
<TOTAL-ASSETS> 29,544
<CURRENT-LIABILITIES> 11,548
<BONDS> 0
0
0
<COMMON> 6,550
<OTHER-SE> 10,500
<TOTAL-LIABILITY-AND-EQUITY> 29,544
<SALES> 17,662
<TOTAL-REVENUES> 17,662
<CGS> 13,524
<TOTAL-COSTS> 3,166
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> 931
<INCOME-TAX> 372
<INCOME-CONTINUING> 559
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 559
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
