UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

__________________________
FORM10-K

__________________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2018

2019

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to

__________

Commission file number0-5286

__________________________

klogocolor256x256k.jpg
KEWAUNEE SCIENTIFIC CORPORATION

(Exact name of registrant as specified in its charter)

__________________________
Delaware 38-0715562

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

2700 West Front Street

Statesville, North Carolina

 28677-2927
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:(704) 873-7202

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Exchange on which  registered

Common Stock $2.50 par valueKEQUNASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: None

__________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to thisForm 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act: (Check one):

Large accelerated filerAccelerated filer
Non-accelerated filer☐  (Do not check if a smaller reporting company)Smaller reporting company
 Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule12b-2 of the Act).    Yes  ☐    No  ☒

The aggregate market value of shares of voting stock held bynon-affiliates of the registrant was approximately $63,721,753$71,664,159 based on the last reported sale price of the registrant’s Common Stock on October 31, 2017,2018, the last business day of the registrant’s most recently completed second fiscal quarter. Only shares beneficially owned by directors of the registrant (excluding shares subject to options) and each person owning more than 10% of the outstanding Common Stock of the registrant were excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of July 11, 2018,8, 2019, the registrant had outstanding 2,741,1792,750,009 shares of Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE: Those portions of the Company’s proxy statement for use in connection with Kewaunee Scientific Corporation’s annual meeting of stockholders to be held on August 29, 2018,28, 2019, indicated in this report are incorporated by reference into Part III hereof.


Table of Contents

Page or
Reference
 


PART I

Item 1.

Business3

Item 1A.

Risk Factors5

Item 2.

Properties8

Item 3.

Legal Proceedings8

Item 4.

Mine Safety Disclosures8

Table of Contents

Page or
Reference
 

8

9

10

18

18

  46

Item 9A.

46

Item 9B.

Other Information47

PART III

Item 10.

47

49

49

50

  50

Item 15.

51

52

56


PART I

Item 1. Business

GENERAL

Kewaunee Scientific Corporation was founded in 1906, incorporated in Michigan in 1941, became publicly-held in 1968, and was reincorporated in Delaware in 1970. Our principal business is the design, manufacture, and installation of laboratory, healthcare, and technical furniture and infrastructure products. Our products include steel, wood, and laminate furniture, fume hoods, biological safety cabinets, laminar flow and ductless hoods, adaptable modular and column systems, moveable workstations and carts, epoxy resin worksurfaces, sinks, and accessories and related design services.

Our products are sold primarily through purchase orders and contracts submitted by customers through our dealers and commissioned agents and a national distributor, as well as through competitive bids submitted by us and our subsidiaries in Singapore, India and China. Products are sold principally to pharmaceutical, biotechnology, industrial, chemical and commercial research laboratories, educational institutions, healthcare institutions, governmental entities, and manufacturing facilities. We consider the markets in which we compete to be highly competitive, with a significant amount of the business involving competitive public bidding.

It is common in the laboratory and healthcare furniture industries for customer orders to require delivery at extended future dates, as products are frequently to be installed in buildings yet to be constructed. Changes or delays in building construction may cause delays in delivery of the orders and our recognition of the sale. Since prices are normally quoted on a firm basis in the industry, we bear the burden of possible increases in labor and material costs between quotation of an order and delivery of the product. The impact of such possible increases is considered when determining the sales price. The principal raw materials and products manufactured by others and used by us in our products are cold-rolled carbon and stainless steel, hardwood lumber and plywood, paint, chemicals, resins, hardware, plumbing and electrical fittings. Such materials and products are purchased from multiple suppliers and are typically readily available.

Our need for working capital and our credit practices are comparable to those of other companies manufacturing, selling and installing similar products in similar markets. Since our products are used in building construction projects, in many cases payments for our products are received over longer periods of time than payments for many other types of manufactured products, thus requiring increased working capital. In addition, payment terms associated with certain projects provide for a retention amount until final completion of the project, thus also increasing required working capital. On average, payments for our products are received during the quarter following shipment, with the exception of the retention amounts which are collected at the final completion of the project.

We hold various patents and patent rights, but do not consider that our success or growth is dependent upon our patents or patent rights. Our business is not dependent upon licenses, franchises, concessions, trademarks, royalty agreements, or labor contracts.

Our business is not generally cyclical, although domestic sales are sometimes lower during our third quarter because of slower construction activity in certain areas of the country during the winter months. Sales for three of the Company’s domestic dealers represented in the aggregate approximately 34% and 33%, 38%, and 40% of the Company’s sales in fiscal years 2018, 2017,2019 and 2016,2018, respectively. Loss of all or part of our sales to a large customer would have a material effect on our revenues and profits.

Our order backlog at April 30, 20182019 was $116.3$100.8 million, as compared to $113.5$116.3 million at April 30, 2017 and $100.5 million at April 30, 2016.2018. Based on scheduled shipment dates and past experience, we estimate that morenot less than 90% of our order backlog at April 30, 20182019 will be shipped during fiscal year 2019.2020. However, it may reasonably be expected that delays in shipments will occur because of customer rescheduling or delay in completion of projects which involve the installation of our products.

SEGMENT INFORMATION

See Note 910 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report onForm 10-K for information concerning our Domestic and International business segments.

COMPETITION

We consider the industries in which we competeparticipate to be highly competitive and believe that the principal competitivedeciding factors are price, product performance, and customer service. A significant portion of our business is based upon competitive public bidding.


RESEARCH AND DEVELOPMENT

The amount spent and expensed by us during the fiscal year ended April 30, 20182019 on research and development activities related to new or redesigned products was $1,537,000.$1,550,000. The amounts spent for similar purposes in the fiscal yearsyear ended April 30, 2017 and 2016 were $1,163,000 and $1,167,000, respectively.

2018 was $1,537,000.

ENVIRONMENTAL COMPLIANCE

In the last threetwo fiscal years, compliance with federal, state, or local provisions enacted or adopted regulating the discharge of materials into the environment has had no material effect on us. There is no material capital expenditure anticipated for such purposes, and accordingly, such regulation is not expected to have a material effect on our earnings or competitive position.

EMPLOYEES

At April 30, 2018,2019, the Company had the following number of full-time employees:

588

593 (Domestic); 232263 (International).

OTHER INFORMATION

Our Internet address iswww.kewaunee.com. We make available, free of charge through this web site,website, our annual report to stockholders. OurForm 10-K and10-Q financial reports may be obtained by stockholders by writing the Secretary of the Company, Kewaunee Scientific Corporation, P.O. Box 1842, Statesville, NC 28687-1842. The public may also obtain information on our reports, proxy, and information statements at the SEC Internet sitewww.sec.gov. The reference to our website does not constitute incorporation by reference of any information contained at that site.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements included and referenced in this report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services and prices, as well as prices for certain raw materials and energy. The cautionary statements made by us pursuant to the Reform Act herein and elsewhere should not be construed as exhaustive. We cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. In addition, readers are urged to consider statements that include the terms “believes,” “belief,” “expects,” “plans,” “objectives,” “anticipates,” “intends” or the like to be uncertain and forward-looking.

EXECUTIVE OFFICERS OF THE REGISTRANT

Included in Part III, Item 10(b) of this Annual Report on Form10-K.

Item 1A. Risk Factors

You should carefully consider the following risks before you decide to buy shares of our common stock. If any of the following risks actually occur, our business, results of operations, or financial condition would likely suffer. In such case, the trading price of our common stock would decline, and you may lose all or part of the money you paid to buy our stock.

This and other public reports may contain forward-looking statements based on current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those forward-looking statements as a result of many factors, including those more fully described below and elsewhere in our public reports. We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Disruptions in the financial markets have historically created, and may continue to create, uncertainty in economic conditions that may adversely affect our customers and our business.

The financial markets in the United States, Europe and Asia have in the past been, and may in the future be, volatile. The tightening of credit in financial markets, worsening of economic conditions, a prolonged global, national or regional economic recession or other similar events could have a material adverse effect on the demand for our products and on our sales, pricing and profitability. We are unable to predict the likely occurrence or duration of these adverse economic conditions and the impact these events may have on our operations and the laboratory furniture industry in general.


If we fail to compete effectively, our revenue and profit margins could decline.

We face a variety of competition in all of the markets in which we participate. Competitive pricing, including price competition or the introduction of new products, could have material adverse effects on our revenues and profit margins.

Our ability to compete effectively depends to a significant extent on the specification or approval of our products by architects, engineers, and customers. If a significant segment of those communities were to decide that the design, materials, manufacturing, testing, or quality control of our products is inferior to that of any of our competitors, our sales and profits would be materially and adversely affected.

If we lose a large customer, our sales and profits would decline.

We have substantial sales to three of our domestic dealers. The combined sales to these three dealers accounted for approximately 33%34% of our sales in fiscal year 2018.2019. Loss of all or a part of our sales to a large customer would have a material effect on our revenues and profits.

An increase in the price of raw materials and energy could negatively affect our sales and profits.

It is common in the laboratory and healthcare furniture industries for customers to require delivery at extended future dates, as products are frequently to be installed in buildings yet to be constructed. Since prices are normally quoted on a firm basis in the industry, we bear the burden of possible increases in labor, material and energy costs between the quotation of an order and the delivery of the products. Our principal raw materials are steel, including stainless steel, wood and epoxy resin. Numerous factors beyond our control, such as general

economic conditions, competition, worldwide demand, labor costs, energy costs, and import duties and other trade restrictions, influence prices for our raw materials. We have not always been able, and in the future we might not be able, to increase our product prices in amounts that correspond to increases in costs of raw materials, without materially and adversely affecting our sales and profits. Where we are not able to increase our prices, increases in our raw material costs will adversely affect our profitability.

Our future growth may depend on our ability to penetrate new international markets.

International laws and regulations, construction customs, standards, techniques and methods differ from those in the United States. Significant challenges of conducting business in foreign countries include, among other factors, geopolitical tensions, local acceptance of our products, political instability, currency controls, changes in import and export regulations, changes in tariff and freight rates and fluctuations in foreign exchange rates.

Events outside our control may affect our operating results.

We have little control over the timing of shipping customer orders, as customers’ required delivery dates are subject to change by the customer. Construction delays and customer changes to product designs are among the factors that may delay the start of manufacturing and shipments of orders. Shipments that we anticipate in one quarter may occur in another quarter, affecting both quarters’ results. Weather conditions, such as unseasonably warm, cold, or wet weather, can also affect and sometimes delay projects. Political and economic events can also affect our revenues. When sales do not meet our expectations, our operating results will be reduced for the relevant quarters.

Our principal markets are in the laboratory building construction industry. This industry is subject to significant volatility due to various factors, none of which is within our control. Declines in construction activity or demand for our products could materially and adversely affect our business and financial condition.

We depend on key management and technical personnel, the loss of whom could harm our business.

We depend on certain key management and technical personnel. The loss of one or more key employees may materially and adversely affect us. Our success also depends on our ability to attract and retain additional highly qualified technical, marketing, and management personnel necessary for the maintenance and expansion of our activities. We might not be able to attract or retain such personnel.

Our stock price is likely to be volatile and could drop.

The trading price of our Common Stock could be subject to wide fluctuations in response toquarter-to-quarter variation in operating results, announcement of technological innovations or new products by us or our competitors, general conditions in the construction and construction materials industries, relatively low trading volume in our common stock and other events or factors. In addition, in recent years, the stock market has experienced extreme price fluctuations. This volatility has had a substantial effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of those companies. Securities market fluctuations may adversely affect the market price of our common stock.


The Patient Protection and Affordable Care Act may increase the cost of providing medical benefits to employees, which could have a significant adverse impact on our results of operations.

We maintain a self-insured healthcare plan for our employees. We have insurance coverage in place for aggregate claims above a specified amount in any year. The Patient Protection and Affordable Care Act, and state legislation in the states in which we operate, may cause the cost of providing medical insurance to our employees to increase. We have experienced increased costs related to the health care reform legislation.

We are subject to other risks that might also cause our actual results to vary materially from our forecasts, targets, or projections, including:

Failing to anticipate the need for, appropriately invest in and effectively manage the human, information technology and logistical resources necessary to support our business, including managing the costs associated with such resources;

Increased costs, and the need to devote additional resources to comply with more stringent SEC reporting requirements if we become an “accelerated filer” under applicable SEC rules;

Failing to generate sufficient future positive operating cash flows and, if necessary, secure adequate external financing to fund our growth; and

Interruptions in service by common carriers that ship goods within our distribution channels.

Cybersecurity incidents could expose us to liability and damage our reputation and our business.

We collect, process, store, and transmit large amounts of data, and it is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure. Our information technology systems are essential to our efforts to manufacture our products, process customer sales transactions, manage inventory levels, conduct business with our suppliers and other business partners, and record, summarize and analyze the results of our operations. These systems contain, among other things, material operational, financial and administrative information related to our business. As with most companies there will always be some risk of physical or electronicbreak-ins, computer viruses, or similar disruptions.

In addition, we, like all entities, are the target of cybercriminals who attempt to compromise our systems. From time to time, we experience threats and intrusions that may require remediation to protect sensitive information, including our intellectual property and personal information, and our overall business. Any physical or electronicbreak-in, computer virus, cybersecurity attack or other security breach or compromise of the information handled by us or our service providers may jeopardize the security or integrity of information in our computer systems and networks or those of our customers and cause significant interruptions in our and our customers’ operations.

Any systems and processes that we have developed that are designed to protect customer, associate and vendor information, and intellectual property, and to prevent data loss and other security attacks, cannot provide absolute security. In addition, we may not successfully implement remediation plans to address all potential exposures. It is possible that we may have to expend additional financial and other resources to address these problems. Failure to prevent or mitigate data loss or other security incidents could expose us or our customers, associates and vendors to a risk of loss or misuse of such information, cause customers to lose confidence in our data protection measures, damage our reputation, adversely affect our operating results or result in litigation or potential liability for us. While we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, this insurance coverage is subject to a retention amount and may not be applicable to a particular incident or otherwise may be insufficient to cover all our losses beyond any retention. Similarly, we expect to continue to make continued investments in our information technology infrastructure. The implementation of these investments may be more costly or take longer than we anticipate, or could otherwise adversely affect our business operations, which could negatively impact our financial position, results of operations or cash flows.

We recently experienced a network cyber-attack that disrupted our domestic operations.

As disclosed in our Form10-Q for the period ended October 31, 2017, on December 7, 2017, the Company experienced a criminal network cyber-attack that led to a disruption of its domestic operations, including manufacturing, engineering, administration, and sales operations. As of December 12, 2017 the Company had restored its domestic operations.

Internal Controls Over Financial Reporting.

Because of its inherent limitations, internal controlcontrols over financial reporting may not prevent or detect misstatements.material misstatements in the Company's financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations.
The U.S. government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements, such as the North American Free Trade

Agreement (“NAFTA”). It has also initiated tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other types of goods. In response, certain foreign governments have imposed retaliatory tariffs on goods that their countries import from the U.S. Changes in U.S. trade policy could result in one or more foreign governments adopting responsive trade policies making it more difficult or costly for us to import our products or raw materials from those countries. This, together with tariffs already imposed, or that may be imposed in the future, by the U.S., could require us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold.
We cannot predict the extent to which the U.S. or other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products or raw materials in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Item 2. Properties

We own and operate three adjacent manufacturing facilities in Statesville, North Carolina. These facilities also house our corporate offices, as well as sales and marketing, administration, engineering and drafting personnel. These facilities together comprise 413,000 square feet and are located on 20 acres of land. In addition, we lease our primary distribution facility and other warehouse facilities totaling 376,000 square feet in Statesville, North Carolina. We lease sales offices in Naperville, Illinois; Branchburg, New Jersey; Shanghai, China; and Singapore. In Bangalore, India we lease and operate a manufacturing facility comprising 83,000 square feet and a facility comprising 16,00017,000 square feet that houses sales and administrative offices. We believe our facilities are suitable for their respective uses and are adequate for our current needs.

Item 3. Legal Proceedings

From time to time, we are involved in disputes and litigation relating to claims arising out of our operations in the ordinary course of business. Further, we are periodically subject to government audits and inspections. We believe that any such matters presently pending will not, individually or in the aggregate, have a material adverse effect on our results of operations or financial condition.

Item 4. Mine Safety Disclosures

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the NASDAQ Global Market, under the symbol KEQU. The following table sets forth the quarterly high and low prices reported on the NASDAQ Global Market for our stock over the last two fiscal years.

   First
Quarter
   Second
Quarter
   Third
Quarter
   Fourth
Quarter
 

2018

        

High

  $25.75   $31.20   $30.67   $34.95 

Low

  $22.75   $25.10   $24.56   $25.15 

Close

  $25.37   $28.50   $28.80   $34.95 

2017

        

High

  $20.89   $26.83   $27.60   $25.50 

Low

  $16.20   $20.68   $21.20   $20.95 

Close

  $20.25   $22.36   $25.20   $22.90 

 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
2019       
High$38.80 $35.05 $34.84 $32.70
Low$30.50 $25.97 $22.00 $20.21
Close$31.60 $29.21 $32.16 $22.63
        
2018       
High$25.75 $31.20 $30.67 $34.95
Low$22.75 $25.10 $24.56 $25.15
Close$25.37 $28.50 $28.80 $34.95
As of July 11, 2018,8, 2019, we estimate there were approximately 1,4702,000 holders of our common shares, of which 139128 were stockholders of record. We paid cash dividends per share of $0.66, $0.58,$0.74 and $0.51$0.66 for fiscal years 2018, 2017,2019 and 2016,2018, respectively. We expect to pay dividendsa dividend in the future in line with our actual and anticipated future operating results.

The declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the Board of Directors and will depend upon


many factors, including the Company’s earnings, capital requirements, financial conditions, the terms of the Company’s indebtedness and other factors that the Board of Directors may deem to be relevant.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

See Item 12 in thisForm 10-K for a discussion of securities authorized for issuance under our equity compensation plans.


Item 6. Selected Financial Data

The following tables set forth selected historical consolidated financial and other data for the periods indicated. The consolidated financial data should be read in conjunction with Item 8, Financial Statements and Supplementary Data, and with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

   Years Ended April 30 

$ and shares in thousands, except per share amounts

  2018   2017   2016 

OPERATING STATEMENT DATA:

      

Net sales

  $158,050  $138,558  $128,626

Costs of products sold

   126,030   111,951   104,918
  

 

 

   

 

 

   

 

 

 

Gross profit

   32,020   26,607   23,708

Operating expenses

   22,934   20,065   18,010
  

 

 

   

 

 

   

 

 

 

Operating earnings

   9,086   6,542   5,698

Other income, net

   693   496   347

Interest expense

   (299   (292   (306
  

 

 

   

 

 

   

 

 

 

Earnings before income taxes

   9,480   6,746   5,739

Income tax expense

   4,115   2,126   1,862
  

 

 

   

 

 

   

 

 

 

Net earnings

   5,365   4,620   3,877

Less: net earnings attributable to noncontrolling interest

   177   105   75
  

 

 

   

 

 

   

 

 

 

Net earnings attributable to Kewaunee Scientific Corporation

  $5,188  $4,515  $3,802
  

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

      

Basic

   2,720   2,705   2,667

Diluted

   2,777   2,726   2,687

PER SHARE DATA:

      

Net earnings attributable to Kewaunee Scientific Corporation Stockholders

      

Basic

  $1.91  $1.67  $1.43

Diluted

  $1.87  $1.66  $1.42

Cash dividends

  $0.66  $0.58  $0.51

Year-end book value

  $17.22  $16.14  $14.24
   As of April 30 

$ in thousands

  2018   2017   2016 

BALANCE SHEET DATA:

  

Current assets

  $63,504  $59,812  $50,957

Current liabilities

   27,562   26,927   20,950

Net working capital

   35,942   32,885   30,007

Net property, plant and equipment

   14,661   14,027   14,118

Total assets

   84,358   80,916   72,405

Total borrowings/long-term debt

   6,316   6,940   7,588

Kewaunee Scientific Corporation Stockholders’ equity

  $47,059  $42,883  $38,242

OTHER DATA:

      

Capital expenditures

  $3,395  $2,611  $2,187

Year-end stockholders of record

   139   154   153

Year-end full-time employees (Domestic)

   588   549   487

Year-end full-time employees (International)

   232   196   195
Information for 2018 has been adjusted, as explained in Note 1 of the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

  
$ and shares in thousands, except per share amounts2019 
2018 As Adjusted
  
OPERATING STATEMENT DATA:     
Net sales$146,550
 $158,050
  
Cost of products sold121,231
 125,891
  
Gross profit25,319
 32,159
  
Operating expenses23,207
 22,240
  
Operating earnings2,112
 9,919
  
Other income (expense), net389
 (1)  
Interest expense(367) (299)  
Earnings before income taxes2,134
 9,619
  
Income tax expense446
 4,161
  
Net earnings1,688
 5,458
  
Less: net earnings attributable to noncontrolling interest159
 177
  
Net earnings attributable to Kewaunee Scientific Corporation$1,529
 $5,281
  
Weighted average shares outstanding:     
Basic2,742
 2,720
  
Diluted2,794
 2,777
  
PER SHARE DATA:     
Net earnings attributable to Kewaunee Scientific Corporation stockholders     
Basic$0.56
 $1.94
  
Diluted$0.55
 $1.90
  
Cash dividends$0.74
 $0.66
  
Year-end book value$17.15
 $17.46
  

 As of April 30
$ in thousands2019 
2018  As Adjusted 
 
BALANCE SHEET DATA:    
Current assets$65,357
 $64,391
 
Current liabilities32,733
 27,616
 
Net working capital32,624
 36,775
 
Net property, plant and equipment16,462
 14,661
 
Total assets87,223
 85,083
 
Total borrowings/long-term debt10,926
 6,316
 
Kewaunee Scientific Corporation stockholders’ equity$47,100
 $47,730
 
OTHER DATA:    
Capital expenditures$4,213
 $3,395
 
Year-end stockholders of record128
 139
 
Year-end full-time employees (Domestic)593
 588
 
Year-end full-time employees (International)263
 232
 



Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this document constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). All statements other than statements of historical fact included in this Annual Report, including statements regarding the Company’s future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe” and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions, and other important factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, competitive and general economic conditions, both domestically and internationally; changes in customer demands; technological changes in our operations or in our industry; dependence on customers’ required delivery schedules; risks related to fluctuations in the Company’s operating results from quarter to quarter; risks related to international operations, including foreign currency fluctuations; changes in the legal and regulatory environment; changes in raw materials and commodity costs; and acts of terrorism, war, governmental action, natural disasters and other Force Majeure events. The cautionary statements made pursuant to the Reform Act herein and elsewhere by us should not be construed as exhaustive. We cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. Over time, our actual results, performance, or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and harmful to our stockholders’ interest. Many important factors that could cause such a difference are described under the caption “Risk Factors,” in Item 1A of this Annual Report, which you should review carefully.

MANAGEMENT’S DISCUSSION AND ANALYSIS

INTRODUCTION

Kewaunee Scientific Corporation is a recognized leader in the design, manufacture and installation of laboratory, healthcare and technical furniture products. The Company’s corporate headquarters are located in Statesville, North Carolina. Direct sales offices are located in the United States, India, Singapore, and China. Three manufacturing facilities are located in Statesville serving the domestic and international markets, and one manufacturing facility is located in Bangalore, India serving the local,Indian, Middle East and Asian markets. Kewaunee Scientific Corporation’s website is located atwww.kewaunee.com.

Our products are primarily sold through purchase orders and contracts submitted by customers through our dealers and commissioned agents, a national distributor, and through competitive bids submitted by us and our subsidiaries. Products are sold

principally to pharmaceutical, biotechnology, industrial, chemical and commercial research laboratories, educational institutions, healthcare institutions, governmental entities, manufacturing facilities and users of networking furniture. We consider the markets in which we compete to be highly competitive, with a significant amount of the business involving competitive public bidding.

It is common in the laboratory and healthcare furniture industries for customer orders to require delivery at extended future dates, as products are frequently to be installed in buildings yet to be constructed. Changes or delays in building construction may cause delays in delivery of the orders and our recognition of the sale. Since prices are normally quoted on a firm basis in the industry, we bear the burden of possible increases in labor and material costs between quotation of an order and delivery of the product. The impact of such possible increases is considered when determining the sales price. The principal raw materials and products manufactured by others

used in our products are cold-rolled carbon and stainless steel, hardwood lumbers and plywood, paint, chemicals, resins, hardware, plumbing and electrical fittings. Such materials and products are purchased from multiple suppliers and are typically readily available.

CRITICAL ACCOUNTING POLICIES

In the ordinary course of business, we have made estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the United States of America. Actual results could differ significantly from those estimates. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations, and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Revenue Recognition

A portion of our product sales result from fixed-price construction contracts. In these instances, we are usually in the role

The Company recognizes revenue when control of a subcontractor, butgood or service promised in some cases may enter into a contract directly with(i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has theend-user ability to direct the use of and obtain substantially all of the products. Our contract arrangements normally do not contain a general rightremaining benefits from that good or service. The majority of return relative to the delivered items. The Company utilizes either the percentage of completion or completed contract method based on facts and circumstances of individual contracts. Sales resulting from fixed-price construction contractsCompany’s revenues are generated under multiple-element arrangements that require separate units of accounting and estimates regarding the fair value of individual elements. The Company has determined that its multiple-element arrangements that qualify as separate units of accounting are (1) product sales and (2) installation services. There is objective and reliable evidence of fair value for both the product sales and installation services, and allocation of arrangement consideration for each of these units is based on their relative fair values. Each of these elements represents individual units of accounting,recognized over time as the delivered item has value tocustomer receives control as the Company performs work under a customer oncontract. However, a stand-alone basis. The Company’s products are regularly sold on a stand-alone basis to customers which provides objective evidence of the fair value of the product portion of the multi-element contract and thus represents the Company’s best estimate of selling price. The fair value of installation services is separately calculated using expected costs of installation services. Many times the value of installation services is calculated using price quotations from subcontractors to the Company, who perform installation services on a stand-alone basis. Assuming all other criteria for revenue recognition have been met, we recognize revenue for product sales at the date of shipment. Product sales resulting from purchase orders involve a purchase order received by us from our dealers or our stocking distributor. This category includes product sales for standard products, as well as products which require some customization. These salesrevenues are recognized underat a point-in-time as control is transferred at a distinct point in time per the terms of the purchase order which generally are freight on board (“FOB”) shipping point and do not include rights of return. Accordingly, these sales are recognized at the time of shipment.

a contract.

Allowance for Doubtful Accounts

Evaluation of the allowance for doubtful accounts involves management judgments and estimates. We evaluate the collectability of our trade accounts receivable based on a number of factors. In circumstances where management is aware of a customer’s inability to meet its financial obligations to us, or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected, a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount we believe will ultimately be collected. In addition to specific customer identification of potential bad debts, a general reserve for bad debts is estimated and recorded based on our recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding.

Inventories

The majority ofCompany’s inventories are valued at the lower of cost or marketnet realizable value. Prior to August 1, 2018, the Company’s Domestic segment’s inventories were valued under thelast-in,first-out (“LIFO”) valuation method. On August 1, 2018, the Company changed its method of valuing inventory for the Domestic segment from LIFO to first-in, first-out (“FIFO”). The LIFOCompany believes that this method allocateschange to FIFO will improve financial reporting by better reflecting the most recent costs to costcurrent value of products sold,inventory on the consolidated balance sheet, more closely aligning the flow of physical inventory with the accounting for the inventory, and therefore, recognizes into

operating results fluctuations in raw materialsproviding better matching of revenues and other inventory costs more quickly than other methods.expenses. Inventories at our internationalInternational subsidiaries are, and remain, measured on thefirst-in,first-out (“FIFO”) FIFO method.

Pension Benefits

We sponsor pension plans covering all employees who met eligibility requirements as of April 30, 2005. These pension plans were amended as of April 30, 2005, no further benefits have been, or will be, earned under the plans subsequent to the amendment date, and no additional participants have been, or will be, added to the plans. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the pension plans. These factors include assumptions about the discount rate used to calculate and determine benefit obligations and the expected return on plan assets within certain guidelines. The actuarial assumptions used by us may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. These differences may significantly affect the amount of pension income or expense recorded by us in future periods.

Self-Insurance Reserves


The Company’s domestic operations are self-insured for employee health-care.health care. The Company has purchased specific stop-loss insurance to limit claims above a certain amount. Estimated medical costs were accrued for claims incurred but not reported (“IBNR”) using assumptions based upon historical loss experiences. The Company’s exposure reflected in the self-insurance reserves varies depending upon market conditions in the insurance industry, availability of cost-effective insurance coverage, and actual claims versus estimated future claims.

RESULTS OF OPERATIONS

Sales for fiscal year 20182019 were $158.1$146.6 million, an increasea decrease of 14%7.3% from fiscal year 20172018 sales of $138.6$158.1 million. Domestic sales for fiscal year 20182019 were $114.6$116.6 million, relatively flatan increase of 1.7% compared to fiscal year 20172018 sales of $113.1$114.6 million. International sales for fiscal year 20182019 were $43.5$30.0 million, an increasea decrease of 71%31.0% from fiscal year 20172018 sales of $25.5$43.5 million. The increasedecrease in International sales for fiscal year 20182019 is primarily due to the continued strengthyear-over-year decline in sales in the Middle East Indian and Asian Markets for our laboratory, healthcare, and technical furniture products.

Sales forregion. In fiscal year 2017 were $138.6 million, an increase2018, Kewaunee’s International segment delivered the single largest order ever awarded to Kewaunee for the College of 8% fromScience complex for Kuwait University's Sabah Al Salem University City, which continues to affect the comparison of operating performance of the International segment in the current fiscal year 2016 sales of $128.7 million. Domestic sales for fiscal year 2017 were $113.1 million, an increase of 10.0% from fiscal year 2016 sales of $103.0 million. The increase in domestic sales was attributable to increased activity across our dealer and distribution networks as well as withend-users. International sales for fiscal year 2017 were $25.5 million, relatively unchanged from fiscal year 2016 sales of $25.6 million.

year.

Our order backlog was $100.8 million at April 30, 2019, as compared to $116.3 million at April 30, 2018, as compared to $113.5 million at April 30, 2017 and $100.5 million at April 30, 2016.

2018.

Gross profit represented 20.3%, 19.2%17.3% and 18.4%20.4% of sales in fiscal years 2018, 20172019 and 2016,2018, respectively. The increasedecrease in gross profit for fiscal year 2018margin percentage was primarily due to an unfavorable shift in product mix, and year-over-year decline in sales, as well as continued increases in raw material and freight costs which negatively affected margins compared to the benefits of increased manufacturing activity on fixed cost absorption and improvements in plant productivity combined with continued focus on cost savings initiatives.prior period. The increase in gross profit for fiscal year 2017 was primarilyunfavorable impact due to favorable operating leverage from higher volumes being producedyear-over-year increases in steel and manufacturing productivity improvements.

resin material costs was approximately $2.1 million dollars.

Operating expenses were $22.9 million, $20.1$23.2 million and $18.0$22.2 million in fiscal years 2018, 20172019 and 2016,2018, respectively, and 14.5%, 14.5%15.8% and 14.0%14.1% of sales, respectively. The increase in operating expense dollars in fiscal year 20182019 as compared to fiscal year 20172018 is related primarily to increases in wagesmanagement separation expenses of $502,000, audit and benefits of $359,000, bad debt expense of $307,000, professionaltax services of $167,000, incentive compensation of $606,000,

corporate governance expense of $383,000$637,000, and an increase of $359,000$893,000 in operating expense for the Company’s International operations, partially offset by a decrease in pension expense of $246,000. The increase in operating expense dollars in fiscal year 2017 as compared to fiscal year 2016 is related primarily to increases in wages and benefits of $539,000, incentive compensation of $362,000, pension expense of $168,000, professional services of $261,000, sales and marketing of $297,000 and an increase of $667,000 in operating expense for the Company’s International operations, partially offset by decreases of bad debt expense of $37,000 and $678,000 ofnon-recurring expenses incurred in the prior fiscal year.

$1.2 million.

Other income (expense) was $693,000, $496,000$389,000 and $347,000($1,000) in fiscal years 2018, 20172019 and 2016,2018, respectively. The increase in other income in fiscal year 20182019 was primarily due to an increasethe decrease in interest income from cash on hand atpension plan expense as discussed in Note 9 of the international subsidiaries. The increaseNotes to the Consolidated Financial Statements included in other income in fiscal year 2017 was primarily due to an increase in interest income from cash on hand at the international subsidiaries.

Item 8.

Interest expense was $299,000, $292,000$367,000 and $306,000$299,000 in fiscal years 2018, 20172019 and 2016,2018, respectively. The increase in interest expense for fiscal year 20182019 was primarily due to increases in interest rate, partially offset by lowerthe levels of bank borrowings. The decrease
Domestic pre-tax earnings were impacted by a significant decline in interest expense forthe Company’s operating volumes during the second half of the fiscal year 2017which resulted in the Company operating at levels below the rate we believe is necessary to generate favorable financial results. The Company's financial results were unfavorably impacted by shifts in the manufacturing demand which occurred more rapidly than the Company's ability to reduce its fixed cost structure. Profitability was primarily duealso impacted by higher raw material costs in steel and resin that we were not able to lower levelspass along to customers.  International pre-tax earnings were impacted by the year-over-year decline in sales as well as the year-over-year decline in the exchange rate of bank borrowings.

the Indian rupee versus the US dollar.  Finally, profitability was impacted by one-time non-operating costs related to management changes.

Income tax expense was $4,115,000, $2,126,000$446,000 and $1,862,000$4,161,000 in fiscal years 2018, 20172019 and 2016,2018, respectively, or 43.4%, 31.5%20.9% and 32.4%43.3% of pretax earnings, respectively. OurThe effective tax rate increaseddecreased in fiscal year 2018,2019, primarily due to the effect of the enactment of the Tax Cuts and Jobs Act which was signed into law on December 22, 2017. Two provisions of the new law had an immediate impact. First, the U.S. corporate tax("2017 Tax Act"). The effective rate was reduced from 35% to 21%. This rate reduction required the Company tore-measure our net deferred tax assets assuming a future tax benefit at the new lower 21% rate. The impact of this re-measurement of our net deferred tax assets recorded forincreased in fiscal year 2018 was $680,000. Second, as partprimarily due to the enactment of the transition to2017 Tax Act which imposed a modified territorial system, the new law imposes aone-time transition tax on the unrepatriated earnings of our foreign subsidiaries. The impact of thisone-time transition tax recorded for fiscal year 2018 was $649,000. The Company intends to elect to pay this tax over an8-year period. The effective tax rate for fiscal years 2017 and 2016 is lower than the statutory rate due to the favorable impact of tax rates for the Company’s international subsidiaries and the impact of state and federal tax credits.

Net earnings attributable to the noncontrolling interest related to our subsidiaries that are not 100% owned by the Company were $177,000, $105,000$159,000 and $75,000$177,000 for fiscal years 2018, 20172019 and 2016,2018, respectively. The changes in the net earnings attributable to the noncontrolling interest for each year were due to changes in the levels of net income of the subsidiaries.

Net earnings in fiscal year 20182019 were $5,188,000,$1,529,000, or $1.87$0.55 per diluted share. Net earnings in fiscal year 20172018 were $4,515,000,$5,281,000, or $1.66$1.90 per diluted share, and netshare. The decrease in earnings in fiscal year 2016 were $3,802,000, or $1.42 per diluted share.

was attributable to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity have historically been funds generated from operating activities, supplemented as needed by borrowings under our revolving credit facility. Additionally, certain machinery and equipment are financed bynon-cancelable operating leases. We believe that these sources of funds will be sufficient to support ongoing business requirements, including capital expenditures, through fiscal year 2019.

2020.


At April 30, 2018,2019, we had advances of $3.8$9.5 million and standby letters of credit aggregating $5.2 million outstanding under our unsecured $20 million revolving credit facility. On June 19, 2019 we entered into a Security Agreement pursuant to which we granted a security interest in substantially all of our assets to secure our obligations under the credit facility. See Note 34 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for additional information concerning our credit facility. We did not have any off balance sheet arrangements at April 30, 2018.

2019.

The following table summarizes the cash payment obligations for our lease arrangements and long-term debt as of April 30, 2018:

2019:

PAYMENTS DUE BY PERIOD

($ in thousands)

Contractual Obligations

  Total   1 Year   2-3 Years   4-5 Years   After 5 years 

Operating Leases

  $3,826  $1,190  $1,782  $854  $—   

Long-term Debt

   2,431   1,167   1,264   —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Contractual Cash Obligations

  $6,257  $2,357  $3,046  $854  $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Contractual Cash ObligationsTotal 1 Year 2-3 Years 4-5 Years After 5 years
Operating Leases$5,565
 $1,246
 $1,602
 $981
 $1,736
Long-term Debt and Capital Lease Obligations1,413
 1,185
 138
 50
 40
Total Contractual Cash Obligations$6,978
 $2,431
 $1,740
 $1,031
 $1,776
Operating activities provided cash of $3.2 million$2,490,000 in fiscal year 2019, primarily from operating earnings, and a decrease in inventories, partially offset by increases in receivables, and decreases in deferred revenue. Operating activities provided cash of $3,183,000 in fiscal year 2018, primarily from operating earnings, and an increase in accounts payable and other accrued expenses, partially offset by increases in receivables, inventories, and deferred revenue. Operating
The Company’s financing activities provided cash of $11.7 million in$2,334,000 during fiscal year 2017 primarily from operating earnings,2019 as a decrease in inventories, and increases in deferred revenue and accounts payable and other accrued expenses, partially offset by increases in receivables. Theresult of an increase in short-term borrowings of $5,628,000, which was partially utilized for cash dividends of $2,030,000 paid to stockholders, cash dividends of $51,000 paid to minority interest holders and deferred revenue in fiscal year 2017 included a $4.4 million customer advance received at the endrepayment of the fiscal year in regard to a large international order.

long-term debt of $1,177,000. The Company’s financing activities used cash of $2,484,000 during fiscal year 2018 for cash dividends of $1,794,000 paid to stockholders, and cash dividends of $74,000 paid to minority interest holders, and repayment of long-term debt of $918,000, partially offset by an increase in short-term borrowings of $294,000. The Company’s financing activities used cash of $2,084,000 during fiscal year 2017 for repayment of short-term borrowings of $227,000, cash dividends of $1,570,000 paid to stockholders, and cash dividends of $56,000 paid to minority interest holders and repayment of long-term debt of $421,000. See Note 34 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report for additional information concerning our credit facility.

The majority of the April 30, 20182019 accounts receivable balances are expected to be collected during the first quarter of fiscal year 2019,2020, with the exception of retention amounts on fixed-price contracts which are collected when the entire construction project is completed and all retention funds are paid by the owner.

As discussed above, no further benefits have been, or will be, earned under our pension plans after April 30, 2005, and no additional participants have been, or will be, added to the plans. We estimate thatdo not expect to make any contributions of $1,000,000 will be made to the plans in fiscal year 2019.2020. We made contributions of $600,000$1,000,000 and $555,000$600,000 to the plans in fiscal years 2019 and 2018, and 2017, respectively.

Capital expenditures were $3.4 million, $2.6$4.2 million and $2.2$3.4 million in fiscal years 2018, 20172019 and 2016,2018, respectively. Capital expenditures in fiscal year 20182019 were funded primarily from operations. Fiscal year 20192020 capital expenditures are anticipated to be approximately $6$2.5 million, with the majority of these expenditures for manufacturing equipment and facilities improvements. The planned increase in fiscal year 2019 expenditures relates to strategic investments in manufacturing equipment to support the Company’s continued sales growth. The fiscal year 20192020 expenditures are expected to be funded primarily by operating activities, supplemented as needed by borrowings under our revolving credit facility.

Working capital was $35.9$32.6 million at April 30, 2018, up2019, down from $32.9$36.8 million at April 30, 2017,2018, and the ratio of current assets to current liabilities was2.3-to-1.0 2.0-to-1.0 at April 30, 20182019 and2.2-to-1.0 2.3-to-1.0 at April 30, 2017.2018. The increasedecrease in working capital for fiscal year 20182019 was primarily due to anthe increase in receivables andcurrent liabilities related to the outstanding line of credit at year end along with the decrease in inventories, partially offset by a decrease in cash. The increase in working capital for fiscal year 2017 was primarily due to an increase in cash and receivables, partially offset by a decreasereceivables.
We paid cash dividends of $0.74 per share in inventories.

fiscal year 2019. We paid cash dividends of $0.66 per share in fiscal year 2018. We paid cash dividends of $0.58 and $0.51 per share in fiscal years 2017 and 2016, respectively. We expect to pay dividendsa dividend in the future in line with our actual and anticipated future operating results.

The declaration and payment of future dividends under the quarterly dividend policy will be at the discretion of the Board of Directors and will depend upon many factors, including the Company’s earnings, capital requirements, financial conditions, the terms of the Company’s indebtedness and other factors that the Board of Directors may deem to be relevant.

RECENT ACCOUNTING STANDARDS

New Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update2014-09, “Revenue from Contracts with Customers” (“ASU2014-09”). This update outlinesoutlined a new comprehensive revenue recognition model that

supersedes most currentprior revenue recognition guidance and requiresrequired companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflectsreflected the consideration to which the entity expectsexpected to be entitled in exchange for those goods or services. ASU2014-09 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The FASB has issued several updates and/or practical expedients to ASU2014-09.

ASU2014-09 and the subsequent updates and/or practical expedients to the standard will be effective for the Company during the first quarter of our fiscal year 2019. ASU2014-09 provides two methods of adopting the standard: using either a full retrospective approach or modified retrospective approach. We have elected the modified retrospective approach of adopting the standard.

We have conducted an assessment of how ASU2014-09 is likely to affect us, identifying the Company’s revenue streams and performance obligations. Our contracts with customers may be for single performance obligations or for multiple performance obligations. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or service which will either be at apoint-in-time or over-time. A large majority of products that the Company manufactures for customers have no alternative use as they are designed, engineered and manufactured to a customer specification and are expected to follow an over-time revenue recognition model. Under current guidance, the Company generally recognizes revenue upon shipment or delivery. Under the new guidance, revenue for products that follow an over-time revenue recognition model may be recognized prior to shipment or delivery dependent upon contract-specific terms based on when the customer is deemed to have obtained control. Based on the evaluation of our existing customer contracts and revenue streams, the majority of the Company’s revenue will be recorded consistently under both the current and new revenue standards. However, the new revenue standard will accelerate the timing of revenue recognition for certain customer contracts as it requires emphasis on transfer of control rather than risks and rewards. The adjustment primarily relates to revenue recognized historically underbill-and-hold arrangements that will transition to an over-time revenue recognition methodology under the new standard. The cumulative impact of our accelerated revenue recognition under the new revenue standard is expected to result in an after tax net increase less than $500,000 to opening retained earnings as of May 1, 2018.

The adoption of the new revenue recognition guidance is not expected to materially impact our Consolidated Statement of Operations, Consolidated Balance Sheet, or Consolidated Statement of Cash Flows. We are still evaluating the degree to which expanded disclosures would be required in the Company’s first quarter of fiscal year 2019.

In August 2014, the FASB issued ASU2014-15, “Presentation of Financial Statements-Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, and requires related footnote disclosures. This guidance was effective for fiscal years, and interim periods within those years, ending after December 15, 2016. The Company adopted this standard effective May 1, 2016. The2019. See Note 2 of the Notes to Consolidated Financial Statements included in Item 8 for a discussion of the impact of the adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In April 2015, the FASB issued ASU2015-03, “Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” This guidance requires that debt issuance costs related to a recognized liability be

standard.

presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. This guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company adopted this standard effective May 1, 2016. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In July 2015, the FASB issued ASU2015-11, “Inventory—Simplifying the Measurement of Inventory.” This guidance changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company adopted this standard effective May 1, 2017. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In November 2015, the FASB issued ASU2015-17, “Income Taxes—Balance Sheet Classification of Deferred Taxes.” This guidance eliminates the requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Instead, the update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted prospectively or retrospectively. The Company early adopted this standard prospectively beginning with the Consolidated Balance Sheet at April 30, 2016. Prior periods were not retrospectively adjusted.

In February 2016, the FASB issued ASU2016-2, 2016-02, “Leases.” This guidance establishes aright-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company will adopt this standard in fiscal year 2020. TheBased on the Company's assessment to date, the Company has not yet determined the effect, if any,expects that the adoption of this standardASU 2016-02 will haveresult in the recognition of right-to-use assets and corresponding lease liabilities with a material impact on the Company’sCompany's consolidated financial position orand an immaterial impact on the Company's consolidated results of operations.

operations and cash flows.

In March 2016, the FASB issued ASU2016-9, 2016-09, “Stock Compensation—Improvements to Employee Share-Based Payment Accounting.” This guidance simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company adopted this standard effective May 1, 2017. Prior periods were not retrospectively adjusted. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In June 2016, the FASB issued ASU2016-13, “Measurement of Credit Losses on Financial Instruments,” which replaces the current incurred loss method used for determining credit losses on financial assets, including trade receivables, with an expected credit loss method. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company will adopt this standard in fiscal year 2021. The Company does not expect the adoption of this standard to have a significant impact on the Company’s consolidated financial position or results of operations.

In August 2016, the FASB issued ASU2016-15, “Cash Flow Classification of Certain Cash Receipts and Cash Payments,” which clarifies guidance on classification of certain transactions in the statement of cash flows, including classification of debt prepayments, debt extinguishment costs and contingent consideration payments after a business combination. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted this standard effective May 1, 2018. The Company does not expect the adoption of this standard todid not have a significant impact on the Company’s consolidated financial position or results of operations.

In November 2016, the FASB issued ASU2016-18, “Statement of Cash Flows—Restricted Cash,” which requires that the statement of cash flows reconcile the change during the period in total cash, cash equivalents and restricted cash. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted this standard effective May 1, 2018. The Company does not expect the adoption of this standard todid not have a significant impact on the Company’s consolidated financial position or results of operations

operations.

In January 2017, the FASB issued ASU2017-04, “Simplifying the Test for Goodwill Impairment,” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company will adopt this standard in fiscal year 2021. The Company does not expect the adoption of this standard to have a significantany impact on the Company’s consolidated financial position or results of operations.

In March 2017, the FASB issued ASU2017-07, “Compensation—Retirement Benefits—Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires that the service cost component of net periodic pension cost is presented in the same line as other compensation costs arising from services rendered by the respective employees during the year. The other components of net periodic pension cost are required to be presented in the income statement separately from the service cost component and outside of earnings from operations. This guidance allows for the service cost component to be eligible for capitalization when applicable. This guidance is effective for fiscal years, and interim

periods within those years, beginning after December 15, 2017. The Company adopted this standard effective May 1, 2018.2018 using the full retrospective approach. The Company does not expect the adoptionreclassified $694,000 of this standardnon-service components of net benefits cost to have a significant impactother (income)/expense, net from operating expenses on the Company’s consolidated financial position or resultsConsolidated Statements of operations.

Operations. During 2019, the Company recorded $295,000 of non-service components of net benefits cost to other (income)/expense, net.

In May 2017, the FASB issued ASU2017-09, “Compensation—Stock Compensation—Scope of Modification Accounting.” This guidance was issued in an effort to reduce diversity in practice as it relates to applying modification accounting for changes to the terms and conditions of share-based payment awards. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective May 1, 2018. The Company does not expect the adoption of this standard todid not have a significant impact on the Company’s consolidated financial position or results of operations.

In February 2018, the FASB issued ASU2018-2, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance provides the Company with an option to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company will adopt this standard in fiscal year 2020. The Company hasdoes not yet determined the effect, if any, thatexpect the adoption of this standard willto have a significant impact on the Company’s consolidated financial position or results of operations, if it should elect to make this reclassification.

operations.

OUTLOOK

Financial Outlook

The Company’s ability to predict future demand for its products continues to be limited given its role as subcontractor or supplier to dealers for subcontractors. Demand for the Company’s products is also dependent upon the number of laboratory construction projects planned and/or current progress in projects already under construction. The Company’s earnings are also impacted by fluctuations in prevailing pricing for projects in the laboratory construction marketplace and increased costs of raw materials, including stainless steel, wood, and epoxy resin, and whether the Company is able to increase product prices to customers in amounts that correspond to such increases without materially and adversely affecting sales. Additionally, since prices are normally quoted

on a firm basis in the industry, the Company bears the burden of possible increases in labor and material costs between the quotation of an order and delivery of a product. Looking forward, the Company is optimistic in its ability to secure the volumes necessary to return to profitability, and that fiscal year 20192020 will result in sales and earnings growth as our order backlog and opportunities in the marketplace remain strong.

growth.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rates
We are exposed to market risk in the area of interest rates. This exposure is associated with advances outstanding under our bank line of credit and certain lease obligations for production machinery, all of which are priced on a floating rate basis. Advances outstanding under the bank line of credit were $3.8$9.5 million at April 30, 2018.2019. In May 2013, the Company entered into an interest rate swap agreement whereby the interest rate payable by the Company on $3,450,000 of outstanding long-term debt was effectively converted to a fixed interest rate of 4.875% for the period beginning May 1, 2013 and ending August 1, 2017. In May 2013, the Company entered into an interest rate swap agreement whereby the interest rate payable by the Company on $2,600,000 of outstanding long-term debt was effectively converted to a fixed interest rate of 4.37% for the period beginning August 1, 2017 and ending May 1, 2020. In May 2013, the Company entered into an interest rate swap agreement whereby the interest rate payable by the Company on $1,218,000 of outstanding long-term debt was effectively converted to a fixed interest rate of 3.07% for the period beginning November 3, 2014 and ending May 1, 2020. We believe that our current exposure to interest rate market risk is not material.

As a result of the swaps described above, at April 30, 2019 we had a total of $9.5 million of outstanding debt bearing interest at floating rates.
Foreign Currency Exchange Rates
Our results of operations could be affected by factors such as changes in foreign currency rates or weak economic conditions in foreign markets. We derive net sales in U.S. dollars and other currencies including Indian rupees, Chinese renminbi, Singapore dollars, or other currencies. For fiscal 2019, 20% of net sales were derived in currencies other than U.S. dollars. We incur expenses in currencies other than U.S. dollars relating to specific contracts with customers and for our operations outside the U.S.
Over the long term, net sales to international markets are expected to increase as a percentage of total net sales and, consequently, a greater portion of our business could be denominated in foreign currencies. As a result, operating results may become more subject to fluctuations based upon changes in the exchange rates of certain currencies in relation to the U.S. dollar. To the extent we engage in international sales denominated in U.S. dollars, an increase in the value of the U.S. dollar relative to foreign currencies could make

our products less competitive in international markets. This effect is also impacted by sources of raw materials from international sources and costs of our sales, service, and manufacturing locations outside the U.S.
We have foreign currency cash accounts to operate our global business. These accounts are impacted by changes in foreign currency rates. Cash balances at April 30, 2019 of $11.1 million were held by our foreign subsidiaries and denominated in currencies other than U.S. dollars.


Item 8. Financial Statements and Supplementary Data

 Page
PageConsolidated Financial Statements 

Consolidated Financial Statements

19

Report of Independent Registered Public Accounting Firm Cherry Bekaert  LLP

20

21

21

22

23

24

25

46


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS

OF KEWAUNEE SCIENTIFIC CORPORATION

STATESVILLE, NORTH CAROLINA


To the Stockholders and the Board of Directors of Kewaunee Scientific Corporation
Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Kewaunee Scientific Corporation and subsidiaries (the “Company”)Company) as of April 30, 20182019 and 20172018, the related consolidated statements of operations,income, comprehensive income, stockholders’stockholders' equity and cash flows for each of the two years in the period ended April 30, 2018 and 2017,2019, and the related notes (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at April 30, 20182019 and 2017,2018, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2018 and 2017,2019, in conformity with U.S. generally accepted accounting principles.

Change in Accounting Principle
As discussed in Notes 1 and 3 to the consolidated financial statements, effective August 1, 2018, the Company elected to change its method of accounting for its domestic inventory from the last-in, first-out method, to the first-in, first out method. 
Basis for Opinion

These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’sits internal control over financial reporting (and accordingly, that we express no opinion).reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’sCompany's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includeincluded examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2016.

Charlotte, North Carolina

July 20, 2018

11, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS

OF KEWAUNEE SCIENTIFIC CORPORATION

STATESVILLE, NORTH CAROLINA

We have audited the accompanying consolidated statements of operations, comprehensive income, and stockholders’ equity of Kewaunee Scientific Corporation and subsidiaries (the “Company”) as of and for the year ended April 30, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of their operations, comprehensive income, and stockholders’ equity of the Company as of and for the year ended April 30, 2016, in conformity with accounting principles generally accepted in the United States of America.

/s/ CHERRY BEKAERT LLP

Charlotte, North Carolina

July 21, 2016



CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended April 30

Kewaunee Scientific Corporation

$ and shares in thousands, except per share amounts

  2018  2017  2016 

Net sales

  $158,050  $138,558  $128,626 

Costs of products sold

   126,030   111,951   104,918 
  

 

 

  

 

 

  

 

 

 

Gross profit

   32,020   26,607   23,708 

Operating expenses

   22,934   20,065   18,010 
  

 

 

  

 

 

  

 

 

 

Operating earnings

   9,086   6,542   5,698 

Other income, net

   693   496   347 

Interest expense

   (299  (292  (306
  

 

 

  

 

 

  

 

 

 

Earnings before income taxes

   9,480   6,746   5,739 

Income tax expense

   4,115   2,126   1,862 
  

 

 

  

 

 

  

 

 

 

Net earnings

   5,365   4,620   3,877 

Less: net earnings attributable to the noncontrolling interest

   177   105   75 
  

 

 

  

 

 

  

 

 

 

Net earnings attributable to Kewaunee Scientific Corporation

  $5,188  $4,515  $3,802 
  

 

 

  

 

 

  

 

 

 

Net earnings per share attributable to Kewaunee Scientific Corporation stockholders

    

Basic

  $1.91  $1.67  $1.43 

Diluted

  $1.87  $1.66  $1.42 
  

 

 

  

 

 

  

 

 

 

Weighted average number of common shares outstanding

    

Basic

   2,720   2,705   2,667 

Diluted

   2,777   2,726   2,687 
  

 

 

  

 

 

  

 

 

 

Years Ended April 30 Kewaunee Scientific Corporation
       
$ and shares in thousands, except per share amounts 2019 
2018 As Adjusted 
  
Net sales $146,550
 $158,050
  
Cost of products sold 121,231
 125,891
  
Gross profit 25,319
 32,159
  
Operating expenses 23,207
 22,240
  
Operating earnings 2,112
 9,919
  
Other income (expenses), net 389
 (1)  
Interest expense (367) (299)  
Earnings before income taxes 2,134
 9,619
  
Income tax expense 446
 4,161
  
Net earnings 1,688
 5,458
  
Less: net earnings attributable to the noncontrolling interest 159
 177
  
Net earnings attributable to Kewaunee Scientific Corporation $1,529
 $5,281
  
Net earnings per share attributable to Kewaunee Scientific Corporation stockholders      
Basic $0.56
 $1.94
  
Diluted $0.55
 $1.90
  
Weighted average number of common shares outstanding      
Basic 2,742
 2,720
  
Diluted 2,794
 2,777
  













The accompanying Notes are an integral part of these Consolidated Financial Statements.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended April 30

Kewaunee Scientific Corporation

$ in thousands

  2018   2017     2016 

Net earnings

  $5,365   $4,620     $3,877 

Other comprehensive income (loss), net of tax

        

Foreign currency translation adjustments

   (430   231      (217

Change in unrecognized actuarial loss on pension obligations

   812    1,012      448 

Change in fair value of cash flow hedges

   37    64      23 
  

 

 

   

 

 

     

 

 

 

Comprehensive income, net of tax

   5,784    5,927      4,131 

Less comprehensive income attributable to the noncontrolling interest

   177    105      75 
  

 

 

   

 

 

     

 

 

 

Total comprehensive income attributable to Kewaunee Scientific Corporation

  $5,607   $5,822     $4,056 
  

 

 

   

 

 

     

 

 

 

Years Ended April 30 Kewaunee Scientific Corporation
       
$ in thousands 2019 
2018 As Adjusted 
  
Net earnings $1,688
 $5,458
  
Other comprehensive income (loss), net of tax      
Foreign currency translation adjustments (464) (430)  
Change in unrecognized actuarial loss on pension obligations (46) 812
  
Change in fair value of cash flow hedges 3
 37
  
Comprehensive income, net of tax 1,181
 5,877
  
Less comprehensive income attributable to the noncontrolling interest 159
 177
  
Total comprehensive income attributable to Kewaunee Scientific Corporation $1,022
 $5,700
  



















The accompanying Notes are an integral part of these Consolidated Financial Statements.


CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Kewaunee Scientific Corporation

$ in thousands,

except shares and per share amounts

  Common
Stock
   Additional
Paid-in
Capital
  Treasury
Stock
  Retained
Earnings
  Accumulated
Other
Comprehensive
Income (Loss)
  Total
Stockholders’
Equity
 

Balance at April 30, 2015

  $6,583   $1,841  $(53 $34,385  $(7,880 $34,876 

Net earnings attributable to Kewaunee Scientific Corporation

   —      —     —     3,802   —     3,802 

Other comprehensive loss

   —      —     —     —     254   254 

Cash dividends paid, $0.51 per share

   —      —     —     (1,361  —     (1,361

Stock options exercised, 84,000 shares

   137    342   —     —     —     479 

Stock based compensation

   —      192   —     —     —     192 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at April 30, 2016

   6,720    2,375   (53  36,826   (7,626  38,242 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net earnings attributable to Kewaunee Scientific Corporation

   —      —     —     4,515   —     4,515 

Other comprehensive income

   —      —     —     —     1,307   1,307 

Cash dividends paid, $0.58 per share

   —      —     —     (1,570  —     (1,570

Stock options exercised, 50,075 shares

   69    121   —     —     —     190 

Stock based compensation

   —      199   —     —     —     199 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at April 30, 2017

   6,789    2,695   (53  39,771   (6,319  42,883 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net earnings attributable to Kewaunee Scientific Corporation

   —      —     —     5,188   —     5,188 

Other comprehensive income

   —      —     —     —     419   419 

Cash dividends paid, $0.66 per share

   —      —     —     (1,794  —     (1,794

Stock options exercised, 36,800 shares

   52    (40  —     —     —     12 

Stock based compensation

   —      351   —     —     —     351 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at April 30, 2018

  $6,841   $3,006  $(53 $43,165  $(5,900 $47,059 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Kewaunee Scientific Corporation 
             
$ in thousands, except shares and per share amounts 
Common
Stock
 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Retained
Earnings As Adjusted
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Stockholders’
Equity
Balance at April 30, 2017 6,789
 2,695
 (53) 40,349
 (6,319) 43,461
Net earnings attributable to Kewaunee Scientific Corporation 
 
 
 5,281
 
 5,281
Other comprehensive income 
 
 
 
 419
 419
Cash dividends paid, $0.66 per share 
 
 
 (1,794) 
 (1,794)
Stock options exercised, 36,800 shares 52
 (40) 
 
 
 12
Stock based compensation 
 351
 
 
 
 351
Balance at April 30, 2018 6,841
 3,006
 (53) 43,836
 (5,900) 47,730
Net earnings attributable to Kewaunee Scientific Corporation 
 
 
 1,529
 
 1,529
Other comprehensive income (expense) 
 
 
 
 (507) (507)
Cash dividends paid, $0.74 per share 
 
 
 (2,030) 
 (2,030)
Stock options exercised, 19,800 shares 27
 (27) 
 
 
 
Stock based compensation 7
 154
 
 
 
 161
Cumulative adjustment for adoption of ASC 606, net of tax 
 
 
 217
 
 217
Balance at April 30, 2019 $6,875
 $3,133
 $(53) $43,552
 $(6,407) $47,100














The accompanying Notes are an integral part of these Consolidated Financial Statements.


CONSOLIDATED BALANCE SHEETS

April 30

Kewaunee Scientific Corporation

$ and shares in thousands, except per share amounts

  2018   2017 

ASSETS

    

Current Assets

    

Cash and cash equivalents

  $9,716   $12,506 

Restricted cash

   1,242    1,435 

Receivables, less allowance: $384 (2018); $191 (2017)

   32,660    29,889 

Inventories

   17,662    14,935 

Prepaid expenses and other current assets

   2,224    1,047 
  

 

 

   

 

 

 

Total Current Assets

   63,504    59,812 
  

 

 

   

 

 

 

Property, Plant and Equipment, Net

   14,661    14,027 
  

 

 

   

 

 

 

Other Assets

    

Deferred income taxes

   2,031    3,158 

Other

   4,162    3,919 
  

 

 

   

 

 

 

Total Other Assets

   6,193    7,077 
  

 

 

   

 

 

 

Total Assets

  $84,358   $80,916 
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current Liabilities

    

Short-term borrowings and interest rate swaps

  $3,885   $3,591 

Current portion of long-term debt

   1,167    918 

Accounts payable

   14,754    11,995 

Employee compensation and amounts withheld

   3,810    2,765 

Deferred revenue

   1,884    5,806 

Other accrued expenses

   2,062    1,852 
  

 

 

   

 

 

 

Total Current Liabilities

   27,562    26,927 

Long-term debt

   1,264    2,431 

Accrued pension and deferred compensation costs

   7,465    8,301 

Income taxes payable

   546    —   
  

 

 

   

 

 

 

Total Liabilities

   36,837    37,659 
  

 

 

   

 

 

 

Commitments and Contingencies (Note 7)

    

Stockholders’ Equity

    

Common stock, $2.50 par value, Authorized—5,000 shares;

    

Issued—2,736 shares (2018); 2,715 shares; (2017);

    

Outstanding—2,733 shares (2018); 2,712 shares (2017);

   6,841    6,789 

Additionalpaid-in-capital

   3,006    2,695 

Retained earnings

   43,165    39,771 

Accumulated other comprehensive loss

   (5,900   (6,319

Common stock in treasury, at cost: 3 shares

   (53   (53
  

 

 

   

 

 

 

Total Kewaunee Scientific Corporation Stockholders’ Equity

   47,059    42,883 

Noncontrolling Interest

   462    374 
  

 

 

   

 

 

 

Total Equity

   47,521    43,257 
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

  $84,358   $80,916 
  

 

 

   

 

 

 

April 30 Kewaunee Scientific Corporation 
$ and shares in thousands, except per share amounts 2019 
2018 As Adjusted 
ASSETS    
Current Assets    
Cash and cash equivalents $10,647
 $9,716
Restricted cash 509
 1,242
Receivables, less allowance: $361 (2019); $384 (2018) 33,259
 32,660
Inventories 17,206
 18,549
Prepaid expenses and other current assets 3,736
 2,224
Total Current Assets 65,357
 64,391
Property, Plant and Equipment, Net 16,462
 14,661
Other Assets    
Deferred income taxes 1,829
 1,869
Other 3,575
 4,162
Total Other Assets 5,404
 6,031
Total Assets $87,223
 $85,083
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current Liabilities    
Short-term borrowings and interest rate swaps $9,513
 $3,885
Current portion of long-term debt and lease obligations 1,184
 1,167
Accounts payable 15,190
 14,754
Employee compensation and amounts withheld 3,737
 3,810
Deferred revenue 1,599
 1,884
Other accrued expenses 1,510
 2,116
Total Current Liabilities 32,733
 27,616
Long-term debt and lease obligations 229
 1,264
Accrued pension and deferred compensation costs 5,878
 7,465
Other non-current liabilities 680
 546
Total Liabilities 39,520
 36,891
Commitments and Contingencies (Note 8) 
 
Stockholders’ Equity    
Common stock, $2.50 par value, Authorized—5,000 shares;    
Issued—2,750 shares (2019); 2,736 shares; (2018);    
Outstanding—2,747 shares (2019); 2,733 shares (2018); 6,875
 6,841
Additional paid-in-capital 3,133
 3,006
Retained earnings 43,552
 43,836
Accumulated other comprehensive loss (6,407) (5,900)
Common stock in treasury, at cost: 3 shares (53) (53)
Total Kewaunee Scientific Corporation Stockholders’ Equity 47,100
 47,730
Noncontrolling Interest 603
 462
Total Stockholders' Equity 47,703
 48,192
Total Liabilities and Stockholders’ Equity $87,223
 $85,083

The accompanying Notes are an integral part of these Consolidated Financial Statements.


CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended April 30  Kewaunee Scientific Corporation 

$ in thousands

  2018  2017  2016 

Cash Flows from Operating Activities

    

Net earnings

  $5,365  $4,620  $3,877 

Adjustments to reconcile net earnings to net cash provided by operating activities:

    

Depreciation

   2,761   2,702   2,592 

Bad debt provision

   344   37   74 

Stock based compensation expense

   355   199   192 

Provision (benefit) for deferred income tax expense

   1,127   234   (335

Change in assets and liabilities:

    

(Increase) decrease in receivables

   (3,115  (2,091  1,197 

(Increase) decrease in inventories

   (2,727  691   (2,881

Increase in accounts payable and other accrued expenses

   4,560   686   1,351 

(Decrease) increase in deferred revenue

   (3,922  5,021   569 

Other, net

   (1,565  (437  635 
  

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

   3,183   11,662   7,271 
  

 

 

  

 

 

  

 

 

 

Cash Flows from Investing Activities

    

Capital expenditures

   (3,395  (2,611  (2,187

Decrease in restricted cash

   193   132   709 
  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

   (3,202  (2,479  (1,478
  

 

 

  

 

 

  

 

 

 

Cash Flows from Financing Activities

    

Dividends paid

   (1,794  (1,570  (1,361

Dividends paid to noncontrolling interest in subsidiaries

   (74  (56  (75

Proceeds from short-term borrowings

   59,069   51,407   48,706 

Repayments on short-term borrowings

   (58,775  (51,634  (49,843

Payment toward purchase of noncontrolling interest in subsidiary

   —     —     (888

Payments on long-term debt

   (918  (421  (422

Net proceeds from exercise of stock options (including tax benefit)

   8   190   479 
  

 

 

  

 

 

  

 

 

 

Net cash used in financing activities

   (2,484  (2,084  (3,404
  

 

 

  

 

 

  

 

 

 

Effect of exchange rate changes on cash, net

   (287  185   (211
  

 

 

  

 

 

  

 

 

 

(Decrease) Increase in Cash and Cash Equivalents

   (2,790  7,284   2,178 

Cash and Cash Equivalents at Beginning of Year

   12,506   5,222   3,044 
  

 

 

  

 

 

  

 

 

 

Cash and Cash Equivalents at End of Year

  $9,716  $12,506  $5,222 
  

 

 

  

 

 

  

 

 

 

Supplemental Disclosure of Cash Flow Information

    

Interest paid

  $295  $292  $306 

Income taxes paid

  $2,872  $2,618  $2,387 
  

 

 

  

 

 

  

 

 

 

Years Ended April 30 Kewaunee Scientific Corporation
$ in thousands 2019 
2018                                       As adjusted
  
Cash Flows from Operating Activities      
Net earnings $1,688
 $5,458
  
Adjustments to reconcile net earnings to net cash provided by operating activities:      
Depreciation 2,571
 2,761
  
Bad debt provision 65
 344
  
Stock based compensation expense 197
 355
  
Provision for deferred income tax expense 202
 1,127
  
Change in assets and liabilities:      
Receivables (664) (3,115)  
Inventories 456
 (2,866)  
Accounts payable and other accrued expenses (55) 4,606
  
Deferred revenue (285) (3,922)  
Other, net (1,685) (1,565)  
Net cash provided by operating activities 2,490
 3,183
  
Cash Flows from Investing Activities      
Capital expenditures (4,213) (3,395)  
Net cash used in investing activities (4,213) (3,395)  
Cash Flows from Financing Activities      
Dividends paid (2,030) (1,794)  
Dividends paid to noncontrolling interest in subsidiaries (51) (74)  
Proceeds from short-term borrowings 62,646
 59,069
  
Repayments on short-term borrowings (57,018) (58,775)  
Payments on long-term debt and lease obligations (1,177) (918)  
Net proceeds from exercise of stock options (including tax benefit) (36) 8
  
Net cash provided by (used in) financing activities 2,334
 (2,484)  
Effect of exchange rate changes on cash, net (413) (287)  
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 198
 (2,983)  
Cash, Cash Equivalents and Restricted Cash at Beginning of Year 10,958
 13,941
  
Cash, Cash Equivalents and Restricted Cash at End of Year $11,156
 $10,958
  
Supplemental Disclosure of Cash Flow Information      
Interest paid $352
 $295
  
Income taxes paid $2,460
 $2,872
  




The accompanying Notes are an integral part of these Consolidated Financial Statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Summary of Significant Accounting Policies

Kewaunee Scientific Corporation and subsidiaries (collectively the “Company”) design, manufacture, and install laboratory, healthcare, and technical furniture products. The Company’s products include steel, wood, and laminate furniture, fume hoods, biological safety cabinets, laminare flow and ductless fume hoods, adaptable modular and column systems, movable workstations and carts, epoxy resin worksurfaces, sinks and accessories and related design services. The Company’s sales are made through purchase orders and contracts submitted by customers, dealers and agents, a national stocking distributor, and competitive bids submitted by the Company and its subsidiaries located in Singapore, India, and China. The majority of the Company’s products are sold to customers located in North America, primarily within the United States. The Company’s laboratory products are used in chemistry, physics, biology and other general science laboratories in the pharmaceutical, biotechnology, industrial, chemical, commercial, educational, government and health care markets. Technical products are used in facilities manufacturing computers and light electronics and by users of computer and networking furniture. Laminate casework is used in educational, healthcare and industrial applications.

Principles of Consolidation The Company’s consolidated financial statements include the accounts of Kewaunee Scientific Corporation and its six international subsidiaries. A brief description of each subsidiary, along with the amount of the Company’s controlling financial interests, as of April 30, 2019 is as follows: (1) Kewaunee Labway Asia Pte. Ltd., a commercial salesales organization for the Company’s products in Singapore, is 100% owned by the Company; (2) Kewaunee Scientific Corporation Singapore Pte. Ltd., a holding company in Singapore, is 100% owned by the Company;(3) Kewaunee Labway India Pvt. Ltd., a manufacturing, assembly and commercial sale organizationsales operation for the Company’s products in Bangalore, India, is 90%95% owned by the Company; (4) Kewaunee Scientific Corporation India Pvt. Ltd. in Bangalore, India, a manufacturing and assembly operation, is 100% owned by the Company; (5) Koncepo Scientech International Pvt. Ltd., a laboratory design and strategic advisory and construction management services firm, located in Bangalore, India, is 100%80% owned by the Company; and (6)(5) Kewaunee Scientific (Suzhou) Co., Ltd., a commercial salesales organization for the Company’s products in China, is 100% owned by the Company. In fiscal year 2019, Kewaunee Scientific Corporation India Pvt. Ltd. merged into Kewaunee Labway India, Pvt. Ltd. resulting in a single subsidiary. There was no impact to the Company's weighted ownership of both subsidiaries. All intercompany balances, transactions, and profits have been eliminated. Included in the consolidated financial statements are net assets of $15,762,000$17,887,000 and $12,268,000$15,762,000 at April 30, 20182019 and 2017,2018, respectively, of the Company’s subsidiaries. Net sales by the Company’s subsidiaries in the amounts of $43,456,000, $25,477,000$29,964,000 and $25,579,000$43,456,000 were included in the consolidated statements of operations for fiscal years 2019 and 2018, 2017, and 2016, respectively.

Change in Accounting Principle During the second quarter of 2019, the Company changed its method of accounting for its Domestic segment’s inventory from the last-in, first-out (LIFO) method to the first-in, first out (FIFO) method. All prior periods presented have been retrospectively adjusted to apply the new method of accounting. See Note 3 for more information on the change in inventory accounting method.
Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. During the years ended April 30, 20182019 and 2017,2018, the Company had cash deposits in excess of FDIC insured limits. The Company has not experienced any losses from such deposits.

Restricted Cash Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders.

Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are stated at the amount owed by the customer, net of allowances for estimated doubtful accounts. The Company evaluates the collectability of its trade accounts receivablesreceivable based on a number of factors. In circumstances where management is aware of a customer’s inability to meet its financial obligations to the Company, or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected, a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, a general reserve for bad debts is estimated and recorded based on past loss history and an overall assessment of past due trade accounts receivable amounts outstanding. Accounts are written off when it is clearly established that the

receivable is a bad debt. Recoveries of receivables previously written off are recorded when received. The activity in the allowance for doubtful accounts for each of the three years ended April 30 was:

$ in thousands

  2018   2017   2016 

Balance at beginning of year

  $191   $202   $171 

Bad debt provision

   344    37    74 

Doubtful accounts written off (net)

   (151   (48   (43
  

 

 

   

 

 

   

 

 

 

Balance at end of year

  $384   $191   $202 
  

 

 

   

 

 

   

 

 

 

$ in thousands 2019 2018
Balance at beginning of year $384
 $191
Bad debt provision 65
 344
Doubtful accounts written off (net) (88) (151)
Balance at end of year $361
 $384

Unbilled Receivables Accounts receivable included unbilled receivables that represent amounts earned which have not yet been billed in accordance with contractually stated billing terms. The amount of unbilled receivables at April 30, 2019 and 2018 was $4,589,000 and 2017 was $1,007,000, and $450,000, respectively.

InventoriesThe majorityCompany elected to change the method of inventories are valuedaccounting for the inventory of its Domestic segment from the last-in, first-out ("LIFO") method to the first-in, first out ("FIFO") method. Inventories at the lower of cost or market under thelast-in,first-out (“LIFO”) double extension method. The LIFO method allocates the most recent costs to cost of products sold; and, therefore, recognizes into operating results fluctuations in costs of raw materials more quickly than other methods. Inventories at ourCompany's international subsidiaries arehad previously been and continue to be measured on the FIFO method. See Note 3 for additional information.
first-in,first-out (“FIFO”) method.

Property, Plant and EquipmentProperty, plant and equipment are stated at cost less accumulated depreciation. Depreciation is determined for financial reporting purposes principally on the straight-line method over the estimated useful lives of the individual assets or, for leaseholds, over the terms of the related leases, if shorter. Property, plant and equipment consisted of the following at April 30:

$ in thousands

  2018   2017   Useful Life 

Land

  $41   $41    N/A 

Building and improvements

   16,489    15,892    10-40 years

Machinery and equipment

   38,118    35,635    5-10 years
  

 

 

   

 

 

   

 

 

 

Total

   54,648    51,568   

Less accumulated depreciation

   (39,987   (37,541  
  

 

 

   

 

 

   

Net property, plant and equipment

  $14,661   $14,027   
  

 

 

   

 

 

   

$ in thousands 2019 2018 Useful Life
Land $41
 $41
 N/A
Building and improvements 16,594
 16,489
 10-40 years
Machinery and equipment 40,041
 38,118
 5-10 years
Total 56,676
 54,648
  
Less accumulated depreciation (40,214) (39,987)  
Net property, plant and equipment $16,462
 $14,661
  
Management reviews the carrying value of property, plant and equipment for impairment whenever changes in circumstances or events indicate that such carrying value may not be recoverable. If projected undiscounted cash flows are not sufficient to recover the carrying value of the potentially impaired asset, the carrying value is reduced to estimated fair value. There were no impairments in fiscal years 2018, 2017,2019 or 2016.

2018.

Other Assets Other assets at April 30, 2019 and 2018 included $3,057,000 and 2017 included $4,050,000, and $3,748,000, respectively, of assets held in a trust account fornon-qualified benefit plans and $65,000$76,000 and $75,000,$65,000, respectively, of cash surrender values of life insurance policies. Life insurance policies are recorded at the amount that could be realized under the insurance contract as of the date of the Company’s consolidated balance sheetsheets with the change in cash surrender or contract value being recorded as income or expense during each period.

On December 7, 2017, the Company experienced a criminal network cyber-attack that led to a disruption of its domestic operations, including manufacturing, engineering, administration, and sales operations. As of December 12, 2017 the Company had restored its domestic operations. Included in other current assets is a $255,000 claim against the Company’s insurance carrier for expenses incurred in regards to this cyber-attack.

Use of Estimates The presentation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results

could differ from these estimates. Significant estimates impacting the accompanying consolidated financial statements include the allowance for uncollectible accounts receivable, inventory valuation, self-insurance reserves, and pension liabilities.

Fair Value of Financial Instruments A financial instrument is defined as cash equivalents, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from another party. The Company’s financial instruments consist primarily of cash and equivalents, mutual funds, cash surrender value of life insurance policies, term loans and short-term borrowings. The carrying value of these assets and liabilities approximate their fair value.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Expanded disclosures about instruments measured at fair value require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1Quoted prices in active markets for identical assets or liabilities as of the reporting date.

Level 2Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities as of the reporting date.

Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.


The following tables summarize the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring and nonrecurring basis as of April 30, 20182019 and 20172018 (in thousands):

   2018 
   Level 1   Level 2   Level 3   Total 

Financial Assets

        

Trading securities held innon-qualified compensation plans (1)

  $4,050   $—     $—     $4,050 

Cash surrender value of life insurance policies (1)

   —      65    —      65 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $4,050   $65   $—     $4,115 
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Liabilities

        

Non-qualified compensation plans (2)

  $—     $4,462   $—     $4,462 

Interest rate swap derivatives

   —      5    —      5 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $4,467   $—     $4,467 
  

 

 

   

 

 

   

 

 

   

 

 

 

   2017 
   Level 1   Level 2   Level 3   Total 

Financial Assets

        

Trading securities held innon-qualified compensation plans (1)

  $3,748   $—     $—     $3,748 

Cash surrender value of life insurance policies (1)

   —      75    —      75 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $3,748   $75   $—     $3,823 
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial Liabilities

        

Non-qualified compensation plans (2)

  $—     $4,186   $—     $4,186 

Interest rate swap derivatives

   —      62    —      62 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $4,248   $—     $4,248 
  

 

 

   

 

 

   

 

 

   

 

 

 

 2019
 Level 1 Level 2 Level 3 Total
Financial Assets       
Trading securities held in non-qualified compensation plans (1)
$3,057
 $
 $
 $3,057
Cash surrender value of life insurance policies (1)

 76
 
 76
Total$3,057
 $76
 $
 $3,133
Financial Liabilities       
Non-qualified compensation plans (2)
$
 $3,519
 $
 $3,519
Interest rate swap derivatives
 1
 
 1
Total$
 $3,520
 $
 $3,520
 2018
 Level 1 Level 2 Level 3 Total
Financial Assets       
Trading securities held in non-qualified compensation plans (1)
$4,050
 $
 $
 $4,050
Cash surrender value of life insurance policies (1)

 65
 
 65
Total$4,050
 $65
 $
 $4,115
Financial Liabilities       
Non-qualified compensation plans (2)
$
 $4,462
 $
 $4,462
Interest rate swap derivatives
 5
 
 5
Total$
 $4,467
 $
 $4,467

(1)The Company maintains twonon-qualified compensation plans which include investment assets in a rabbi trust. These assets consist of marketable securities, which are valued using quoted market prices multiplied by the number of shares owned, and life insurance policies, which are valued at their cash surrender value.
(2)Plan liabilities are equal to the individual participants’ account balances and other earned retirement benefits.

Revenue Recognition Product sales Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. The Company recognizes revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and installation revenue are recognized whenobtain substantially all of the following criteria have been met: (1) products have been shipped,remaining benefits from that good or customers have purchased and accepted title toservice. The majority of the goods, but because of construction delays, have requested thatCompany’s revenues are recognized over time as the customer receives control as the Company temporarily storeperforms work under a contract. However, a portion of the finished goodsCompany’s revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract. Sales taxes that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Certain customers' cash discounts and volume rebates are offered as sales incentives. The discounts and volume rebates are recorded as a reduction in sales at the customer’s behalf; servicetime revenue for installation of products sold is recognized as the installation services are performed, (2) persuasive evidence ofin an arrangement exists, (3) the price to the customer is fixed, and (4) collectability is reasonably assured. The Company utilizes either the percentage of completion or completed contract methodamount estimated based on factshistorical experience and circumstances of individual contracts.

contractual obligations.

Deferred revenue consists of customer deposits and advance billings of the Company’s products where sales have not yet been recognized. Accounts receivable includes retainage in the amounts of $2,724,000$1,810,000 and $2,839,000$2,724,000 at April 30, 20182019 and 2017,2018, respectively. Shipping and handling costs are included in cost of product sales. Because of the nature and quality of the Company’s products, any warranty issues are determined in a relatively short period after the sale and are infrequent in nature, and as such, warranty costs are immaterial to the Company’s consolidated financial position and results of operations and are expensed as incurred.

Product sales resulting from fixed-price construction contracts involve a signed contract for a fixed price to provide the Company’s laboratory furniture and fume hoods for a construction project. In these instances, the Company is usually in the role of a subcontractor, but in some cases may enter into a contract directly with the

end-user of the products. Contract arrangements normally do not contain a general right of return relative to the delivered items. Product sales resulting from fixed-price construction contracts are generated from multiple-element arrangements that require separate units of accounting and estimates regarding the fair value of individual elements. The Company has determined that its multiple-element arrangements that qualify as separate units of accounting are (1) product sales and (2) installation services. There is objective and reliable evidence of fair value for both the product sales and installation services and allocation of arrangement consideration for each of these units is based on their relative fair values. Each of these elements represent individual units of accounting, as the delivered item has value to a customer on a stand-alone basis. The Company’s products are regularly sold on a stand-alone basis to customers which provides objective evidence of the fair value of the product portion of the multi-element contract and thus represents the Company’s best estimate of selling price.

The fair value of installation services is separately calculated using expected costs of installation services. Many times the value of installation services is calculated using price quotations from subcontractors to the Company who perform installation services on a stand-alone basis.

Product sales resulting from purchase orders involve a purchase order received by the Company from its dealers or stocking distributor. This category includes product sales for standard products, as well as products which require some customization. Any customization requirements are approved by the customer prior to manufacture of the customized product. Sales from purchase orders are recognized under the terms of the purchase order which generally are freight on board (“FOB”) shipping point and do not include rights of return. Accordingly, these sales are recognized at the time of shipment.

Credit Concentration Credit risk is generally not concentrated with any one customer or industry, although the Company does enter into large contracts with individual customers from time to time. The Company performs credit evaluations of its customers. Revenues from three of the Company’s domestic dealers represented in the aggregate approximately 33%, 38%,34% and 40%,33% of the Company’s sales in fiscal years 2018, 2017,2019 and 2016,2018, respectively. Accounts receivable for two domestic customers represented approximately 31%30% and 25%31% of the Company’s total accounts receivable as of April 30, 2019 and 2018, and 2017, respectively.

InsuranceEffective January 1, 2016, the The Company moved from a fully-insured health care program tomaintains a self-insured health-care program. The Company accrues estimated losses for claims incurred but not reported (“IBNR”) using actuarial models and assumptions based on historical loss experience. The Company has also purchased specific stop-loss insurance to limit claims above a certain amount. The Company adjusts insurance reserves, as needed, in the event that future loss experience differs from historical loss patterns.


Income Taxes In accordance with ASC 740, “Income Taxes,” the Company uses the liability method in measuring the provision for income taxes and recognizing deferred tax assets and liabilities on the consolidated balance sheet.sheets. Provision has not been made for income taxes on unremitted earnings of foreign subsidiaries as these earnings are deemed to be permanently reinvested. ASC 740 clarifies the financial statement recognition threshold and measurement attribute of a tax position taken or expected to be taken in a tax return. Under ASC 740, the Company applies amore-likely-than-not recognition threshold for all tax uncertainties. ASC 740 only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the taxing authorities. The Company did not have any significant uncertain tax positions at April 30, 20182019 and 2017. The Company early adopted ASU2018.
2015-17, “Balance Sheet Classification of Deferred Taxes” in fiscal year 2016 and applied prospective treatment of the standard. Prior periods were not retrospectively adjusted. (See Note 4)

Research and Development Costs Research and development costs are charged to cost of products sold in the periods incurred. Expenditures for research and development costs were $1,537,000, $1,163,000$1,550,000 and $1,167,000$1,537,000 for the fiscal years ended April 30, 2019 and 2018, 2017 and 2016, respectively.

Advertising Costs Advertising costs are expensed as incurred, and include trade shows, training materials, sales, samples, and other related expenses. Advertising costs for the years ended April 30, 2019 and 2018 2017were $268,000 and 2016 were $395,000, $352,000 and $311,000, respectively.

Derivative Financial Instruments The Company records derivatives on the consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of hedging relationships. The nature of the Company’s business activities involves the management of various financial and market risks, including those related to changes in interest rates. The Company does not enter into derivative instruments for speculative purposes. In May 2013, the Company entered into an interest rate swap agreement whereby the interest rate payable by the Company on $3,450,000 of outstanding long-term debt was effectively converted to a fixed interest rate of 4.875% for the period beginning May 1, 2013 and ending August 1, 2017. In May 2013, the Company entered into an interest rate swap agreement whereby the interest rate payable by the Company on $2,600,000 of outstanding long-term debt was effectively converted to a fixed interest rate of 4.37% for the period beginning August 1, 2017 and ending May 1, 2020. In May 2013, the Company entered into an interest rate swap agreement whereby the interest rate payable by the Company on $1,218,000 of outstanding long-term debt was effectively converted to a fixed interest rate of 3.07% for the period beginning November 3, 2014 and

ending May 1, 2020. The Company entered into these interest rate swap arrangements to mitigate future interest rate risk associated with its long-term debt and has designated these as cash flow hedges. (See Note 3)

4)

Foreign Currency Translation The financial statements of subsidiaries located in India and China, and of Kewaunee Scientific Corporation Singapore Pte. Ltd., are measured using the local currency as the functional currency. Kewaunee Labway Asia Pte. Ltd. is measured using the U.S. dollar as its functional currency. Assets and liabilities of the Company’s foreign subsidiaries using local currencies are translated into United States dollars at fiscalyear-end exchange rates. Sales, expenses, and cash flows are translated at weighted average exchange rates for each period. Net translation gains or losses are included in other comprehensive income, a separate component of stockholders’ equity. The Company does not provide for U.S. income taxes on foreign currency translation adjustments, since it does not provide for taxes on undistributed earnings of foreign subsidiaries. Gains and losses from foreign currency transactions of these subsidiaries are included in operating expenses.


Earnings Per ShareBasic earnings per share is based on the weighted average number of common shares outstanding during the year. Diluted earnings per share reflects the assumed exercise of outstanding options and the conversion of restricted stock units (“RSUs”) and assumed exercise of outstanding options under the Company’s Omnibus Incentive Plan,various stock compensation plans, except when RSUs and options have an antidilutive effect. There were 31,015 antidilutive RSUs and options outstanding at April 30, 2019. There were no antidilutive RSUs or options outstanding at April 30, 2018. Options to purchase 39,200 and 110,100 shares at April 30, 2017 and 2016, respectively were not included in the computation of diluted earnings per share, because the option exercise prices were greater than the average market price of the common shares at that date, and accordingly such options would have an antidilutive effect.


The following is a reconciliation of basic to diluted weighted average common shares outstanding:

Shares in thousands

  2018   2017   2016 

Weighted average common shares outstanding

      

Basic

   2,720    2,705    2,667 

Dilutive effect of stock options

   57    21    20 
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding—diluted

   2,777    2,726    2,687 
  

 

 

   

 

 

   

 

 

 

Shares in thousands 2019 2018 
Weighted average common shares outstanding     
Basic 2,742
 2,720
 
Dilutive effect of stock options and RSUs 52
 57
 
Weighted average common shares outstanding—diluted 2,794
 2,777
 
Accounting for Stock Options and Other Equity Awards Compensation costs related to stock options and other stock awards granted by the Company are charged against operating expenses during their vesting period, under ASC 718, “Compensation—Stock Compensation”. The Company issued 23,907 restricted stock units (“RSUs”)granted 19,738 RSUs under the 2017 Omnibus Incentive Plan in fiscal year 2019 and 23,907 RSUs in fiscal 2018. The Company grantedThere were no stock options for 45,200 and 40,200 sharesgranted during fiscal years 20172019 and 2016, respectively.2018. (See Note 5)

6)

Reclassifications Certain 2017 and 2016 amounts have been In connection with the Company's adoption of ASU 2016-18, “Statement of Cash Flows-Restricted Cash,” the Company reclassified to conform to thecertain 2018 presentationamounts in the consolidated statements of cash flows.flows to include restricted cash when

reconciling the beginning-of-period and end-of-period cash amounts shown on the statement of cash flows to conform to the current period presentation. Such reclassifications had no impact on net earnings.

New Accounting StandardsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update2014-09, 2014-9, “Revenue from Contracts with Customers” (“ASU2014-09”). This update outlinesoutlined a new comprehensive revenue recognition model that supersedes most currentprior revenue recognition guidance and requiresrequired companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflectsreflected the consideration to which the entity expectsexpected to be entitled in exchange for those goods or services. ASU2014-09 also requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The FASB has issued several updates and/or practical expedients to ASU2014-09.

ASU2014-09 and the subsequent updates and/or practical expedients to the standard will be effective for the Company during the first quarter of our fiscal year 2019. ASU2014-09 provides two methods of adopting the standard: using either a full retrospective approach or modified retrospective approach. We have elected the modified retrospective approach of adopting the standard.

We have conducted an assessment of how ASU2014-09 is likely to affect us, identifying the Company’s revenue streams and performance obligations. Our contracts with customers may be for single performance obligations or for multiple performance obligations. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or service which will either be at apoint-in-time or over-time. A large majority of products that the Company manufactures for customers have no alternative use as they are designed, engineered and manufactured to a customer specification and are expected to follow an over-time revenue recognition model. Under current guidance, the Company generally recognizes revenue upon shipment or delivery. Under the new guidance, revenue for products that follow an over-time revenue recognition model may be recognized prior to shipment or delivery dependent upon contract-specific terms based on when the customer is deemed to have obtained control. Based on the evaluation of our existing customer contracts and revenue streams, the majority of the Company’s revenue will be recorded consistently under both the current and new revenue standards. However, the new revenue standard will accelerate the timing of revenue recognition for certain customer contracts as it requires emphasis on transfer of control rather than risks and rewards. The adjustment primarily relates to revenue recognized historically underbill-and-hold arrangements that will transition to an over-time revenue recognition methodology under the new standard. The cumulative impact of our accelerated revenue recognition under the new revenue standard is expected to result in an after tax net increase less than $500,000 to opening retained earnings as of May 1, 2018.

The adoption of the new revenue recognition guidance is not expected to materially impact our Consolidated Statement of Operations, Consolidated Balance Sheet, or Consolidated Statement of Cash Flows. We are still evaluating the degree to which expanded disclosures would be required in the Company’s first quarter of fiscal year 2019.

In August 2014, the FASB issued ASU2014-15, “Presentation of Financial Statements-Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, and requires related footnote disclosures. This guidance was effective for fiscal years, and interim periods within those years, ending after December 15, 2016. The Company adopted this standard effective May 1, 2016. The2018. See Note 2 for a discussion of the impact of the adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In April 2015, the FASB issued ASU2015-03,standard. “Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs.” This guidance requires that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. This guidance was effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company adopted this standard effective May 1, 2016. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In July 2015, the FASB issued ASU2015-11, “Inventory—Simplifying the Measurement of Inventory.” This guidance changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company adopted this standard effective May 1, 2017. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In November 2015, the FASB issued ASU2015-17, “Income Taxes—Balance Sheet Classification of Deferred Taxes.” This guidance eliminates the requirement to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Instead, the update requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption permitted prospectively or retrospectively. The Company early adopted this standard

prospectively beginning with the Consolidated Balance Sheet at April 30, 2016. Prior periods were not retrospectively adjusted.

In February 2016, the FASB issued ASU2016-2, “Leases.” This guidance establishes aright-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company will adopt this standard in fiscal year 2020. TheBased on the Company's assessment to date, the Company has not yet determined the effect, if any,expects that the adoption of this standardASU 2016-02 will haveresult in the recognition of right-to-use assets and corresponding lease liabilities with a material impact on the Company’sCompany's consolidated financial position orand an immaterial impact on the Company's consolidated results of operations.

operations and cash flows.

In March 2016, the FASB issued ASU2016-9, “Stock Compensation—Improvements to Employee Share-Based Payment Accounting.” This guidance simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company adopted this standard effective May 1, 2017. Prior periods were not retrospectively adjusted. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In June 2016, the FASB issued ASU2016-13, “Measurement of Credit Losses on Financial Instruments,” which replaces the current incurred loss method used for determining credit losses on financial assets, including trade receivables, with an expected credit loss method. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company will adopt this standard in fiscal year 2021. The Company does not expect the adoption of this standard to have a significant impact on the Company’s consolidated financial position or results of operations.

In August 2016, the FASB issued ASU2016-15, “Cash Flow Classification of Certain Cash Receipts and Cash Payments,” which clarifies guidance on classification of certain transactions in the statement of cash flows, including classification of debt prepayments, debt extinguishment costs and contingent consideration payments after a business combination. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted this standard effective May 1, 2018. The Company does not expect the adoption of this standard todid not have a significant impact on the Company’s consolidated financial position or results of operations.

In November 2016, the FASB issued ASU2016-18, “Statement of Cash Flows—Restricted Cash,” which requires that the statement of cash flows reconcile the change during the period in total cash, cash equivalents and restricted cash. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted this standard effective May 1, 2018. The Company does not expect the adoption of this standard todid not have a significant impact on the Company’s consolidated financial position or results of operations

operations.

In January 2017, the FASB issued ASU2017-04, 2017-4, “Simplifying the Test for Goodwill Impairment,” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company will adopt this standard in fiscal year 2021. The Company does not expect the adoption of this standard to have a significantany impact on the Company’s consolidated financial position or results of operations.


In March 2017, the FASB issued ASU2017-07, 2017-7, “Compensation—Retirement Benefits—Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires that the service cost component of net periodic pension cost is presented in the same line as other compensation costs

arising from services rendered by the respective employees during the year. The other components of net periodic pension cost are required to be presented in the income statement separately from the service cost component and outside of earnings from operations. This guidance allows for the service cost component to be eligible for capitalization when applicable. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted this standard effective May 1, 2018.2018 using the full retrospective approach. The Company does not expect the adoptionreclassified $694,000 of this standardnon-service components of net benefits cost to have a significant impactOther (Income)/expense, net from operating expenses on the Company’s consolidated financial position or resultsConsolidated Statements of operations.

Operations. During 2019, the Company recorded $295,000 of non-service components of net benefits cost to other (income)/expense, net.

In May 2017, the FASB issued ASU2017-09, 2017-9, “Compensation—Stock Compensation—Scope of Modification Accounting.” This guidance was issued in an effort to reduce diversity in practice as it relates to applying modification accounting for changes to the terms and conditions of share-based payment awards. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective May 1, 2018. The Company does not expect the adoption of this standard todid not have a significant impact on the Company’s financial position or results of operations.

In February 2018, the FASB issued ASU2018-2, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance provides the Company with an option to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act of 2017 from accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company will adopt this standard in fiscal year 2020. The Company hasdoes not yet determined the effect, if any, thatexpect the adoption of this standard willto have a significant impact on the Company’s consolidated financial position or results of operations.

Note 2 - Revenue Recognition
The Company recognizes revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. The majority of the Company’s revenues are recognized over time as the customer receives control as the Company performs work under a contract. However, a portion of the Company’s revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract.
Performance Obligations
A performance obligation is a distinct good or service or bundle of goods and services that is distinct or a series of distinct goods or services that are substantially the same and have the same pattern of transfer. The Company identifies performance obligations at the inception of a contract and allocates the transaction price to individual performance obligations to reasonably reflect the Company’s performance in transferring control of the promised goods or services to the customer. The Company has elected to treat shipping and handling as a fulfillment activity instead of a separate performance obligation.
The following are the primary performance obligations identified by the Company:
Laboratory Furniture
The Company principally generates revenue from the manufacture of custom laboratory, healthcare, and technical furniture and infrastructure products (herein referred to as “laboratory furniture”). The Company’s products include steel, wood, and laminate furniture, fume hoods, biological safety cabinets, laminar flow and ductless hoods, adaptable modular and column systems, moveable workstations and carts, epoxy resin worksurfaces, sinks, and accessories and related design services. Customers can benefit from each piece of laboratory furniture on its own or with resources readily available in the market place such as separately purchased installation services. Each piece of laboratory furniture does not significantly modify or customize other laboratory furniture, and the pieces of laboratory furniture are not highly interdependent or interrelated with each other. The Company can, and frequently does, break portions of contracts into separate “runs” to meet manufacturing and construction schedules. As such, each piece of laboratory furniture is considered a separate and distinct performance obligation. The majority of the Company’s products are customized to meet the specific architectural design and performance requirements of laboratory planners and end users. The finished laboratory furniture has no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. As such, revenue from the sales of customized laboratory furniture is recognized over time once the customization process has begun, using the units-of-production output method to measure progress towards completion. There is not a material amount of work-in-process for which the customization process

has begun at the end of a reporting period. The Company believes this output method most reasonably reflects the Company’s performance because it directly measures the value of the goods transferred to the customer. For standardized products sold by the Company, revenue is recognized when control transfers, which is typically freight on board (“FOB”) shipping point.
Warranties
All orders contain a standard warranty that warrants that the product is free from defects in workmanship and materials under normal use and conditions for a limited period of time. Due to the nature and quality of the Company’s products, any warranty issues have historically been determined in a relatively short period after the sale, have been infrequent in nature, and have been immaterial to the Company’s financial position and results of operations. The Company’s standard warranties are not considered a separate and distinct performance obligation as the Company does not provide a service to customers beyond assurance that the covered product is free of initial defects. Costs of providing these short term assurance warranties are immaterial and, accordingly, are expensed as incurred. Extended separately priced warranties are available which can last up to five years. Extended warranties are considered separate performance obligations as they are individually priced options providing assurances that the products are free of defects.
Installation Services
The Company sometimes performs installation services for customers. The scope of installation services primarily relates to setting up and ensuring the proper functioning of the laboratory furniture. In certain markets, the Company may provide a broader range of installation services involving the design and installation of the laboratory’s mechanical services. Installation services can be, and often are, performed by third parties and thus may be distinct from the Company’s products. Installation services create or enhance assets that the customer controls as the installation services are provided. As such, revenue from installation services is recognized over time, as the installation services are performed using the cost input method, as there is a direct relationship between the Company’s inputs and the transfer of control by means of the performance of installation services to the customer.
Custodial Services
It is common in the laboratory and healthcare furniture industries for customers to request delivery at specific future dates, as products are often to be installed in buildings yet to be constructed. Frequently, customers will request the manufacture of these products prior to the customer’s ability or readiness to receive the product due to various reasons such as changes to or delays in the construction of the building. As such, from time to time our customers require us to provide custodial services for their laboratory furniture. Custodial services are frequently provided by third parties and do not significantly alter the other goods or services covered by the contract and as such are considered a separate and distinct performance obligation. Custodial services are simultaneously received and consumed by the customer and as such revenue from custodial services is recognized over time using a straight-line time-based measure of progress towards completion, because the Company’s services are provided evenly throughout the performance period.
Payment Terms and Transaction Prices
The Company's contracts with customers are fixed-price and do not contain variable consideration or a general right of return or refund. The Company's contracts with customers contain terms typical for our industry, including withholding a portion of the transaction price until after the goods or services have been transferred to the customer (i.e. “retainage”). The Company does not recognize this as a significant financing component because the primary purpose of retainage is to provide the customer with assurance that the Company will perform its obligations under the contract, rather than to provide financing to the customer.
Allocation of Transaction Price
The Company's contracts with customers may cover multiple goods and services, such as differing types of laboratory furniture and installation services. For these arrangements, each good or service is evaluated to determine whether it represents a distinct performance obligation. The total transaction price is then allocated to the distinct performance obligations based on their relative standalone selling price at the inception of the arrangement. If available, the Company utilizes observable prices for goods or services sold separately to similar customers in similar circumstances to determine its relative standalone selling price. Otherwise, list prices are used if they are determined to be representative of standalone selling prices. If neither of these methods are available at contract inception, such as when the Company does not sell the product or service separately, judgment may be required and the Company determines the standalone selling price using one, or a combination of, the adjusted market assessment or expected cost-plus margin approaches.
Practical Expedients Used

Accounting Standards Codification 606 - Revenue from Contracts with Customers ("ASC 606") permits the use of practical expedients under certain conditions. The Company has elected the following practical expedients allowed under ASC 606:
Under the modified retrospective approach, the Company elected to reassess revenue recognition under ASC 606 for only those contracts open as of the adoption date.
The portfolio approach was applied in evaluating the accounting for the cost of obtaining a contract.
Payment terms with the Company's customers which are one year or less are not considered a significant financing component.
The Company excludes from revenues taxes it collects from customers that are assessed by a government authority. This is primarily relevant to domestic sales but also includes taxes on some international sales which are also excluded from the transaction price.
The Company's incremental cost to obtain a contract is limited to sales commissions. The Company applies the practical expedient to expense commissions as incurred for contracts having a duration of one year or less. Sales commissions related to contracts with a duration of greater than one year are immaterial to the Company’s consolidated financial position and results of operations if it should electand are also expensed as incurred.
Disaggregated Revenue
A summary of net sales transferred to make this reclassification.

customers at a point in time and over time for the twelve months ended April 30, 2019 is as follows (in thousands):

 Twelve Months Ended April 30, 2019
 DomesticInternational Total
Over Time$110,338
 $29,964
 $140,302
 
Point in Time
6,248
 

 
6,248
 
    Total Revenue$116,586
 $29,964
 $146,550
 
Contract Balances
The closing and opening balances of contract assets arising from contracts with customers were $4,589,000 at April 30, 2019 and $1,007,000 at April 30, 2018. The closing and opening balances of contract liabilities arising from contracts with customers were $1,599,000 at April 30, 2019 and $1,884,000 at April 30, 2018. The timing of revenue recognition, billings and cash collections results in accounts receivable, unbilled receivables, and deferred revenue which is disclosed on the consolidated balance sheets and in the notes to the consolidated financial statements. In general, the Company receives payments from customers based on a billing schedule established in its contracts. Unbilled receivables represent amounts earned which have not yet been billed in accordance with contractually stated billing terms. Accounts receivable are recorded when the right to consideration becomes unconditional and the Company has a right to invoice the customer. Deferred revenue relates to payments received in advance of performance under the contract. Deferred revenue is recognized as revenue as (or when) the Company performs under the contract.
During the twelve months ended April 30, 2019, changes in contract assets and liabilities were not materially impacted by any other factors. Approximately 100% of the contract liability balance at April 30, 2019 is expected to be recognized as revenue during fiscal year 2020.
ASC 606 adoption impact
Under ASC 606, sales consisting of customized products sold to customers for which revenue was previously recognized at a point in time now meet the criteria of a performance obligation satisfied over time. These contracts consist of customized laboratory furniture engineered or tailored to meet the customer’s requirements. In the event the customer cancels the contract, the Company will have no alternative use for and cannot economically repurpose the laboratory furniture, and the Company has the right to payment for performance completed to date. This change results in accelerated recognition of revenue and increases the balance of contract assets compared to the previous revenue recognition standard.
The Company adopted ASC 606 on May 1, 2018 using the modified retrospective approach and elected to reassess revenue recognition under ASC 606 for only those contracts open as of the adoption date, which resulted in a cumulative effect adjustment to increase retained earnings, net of tax, of $217,000. Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods presented. The Company elected to reflect the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented in determining the transaction price, identifying the satisfied and unsatisfied performance obligations and allocating the transaction

price to the satisfied and unsatisfied performance obligations for the modified contract at transition. The effects of these elections were immaterial.
The following table summarizes the impact of adopting ASC 606 on the Company's consolidated statement of operations:
 Twelve Months Ended April 30, 2019
 ($ in thousands, except per share amounts)
 As Reported Adjustments 
Balance Without
Adoption of
ASC 606
Net sales$146,550
 $(1,226) $145,324
Cost of products sold121,231   (403)  120,828
Gross profit25,319   (823)  24,496
Operating expenses23,207   (35)  23,172
Operating earnings2,112   (788)  1,324
Other income389   
  389
Interest expense(367)  
  (367)
Earnings before income taxes2,134   (788)  1,346
Income tax expense446   (182)  264
Net earnings1,688   (606)  1,082
Net earnings attributable to the noncontrolling interest159   
  159
Net earnings attributable to Kewaunee Scientific Corporation$1,529
 $(606) $923
Basic Earnings Per Share$0.56
 $(0.22) $0.34
Diluted Earnings Per Share$0.55
 $(0.22) $0.33
The following table summarizes the impact of adopting ASC 606 on the Company’s consolidated balance sheet:
 April 30, 2019
 ($ in thousands)
 As Reported Adjustments 
Balance Without
Adoption of
ASC 606
Assets     
Receivables, less allowances
33,259
 
(3,354)  29,905
Inventories
17,206
 
2,331
  19,537
Total Current Assets
65,357


(1,023)  64,334
Total Assets$87,223
 $(1,023) $86,200
Liabilities and Stockholders’ Equity     
Accounts payable 15,190
 
(59)  15,131
Deferred revenue 1,599
 
117
  1,716
Other accrued expenses 1,510
 
(258)  1,252
Total Current Liabilities 32,733
 
(200)
 32,533
Total Liabilities 39,520
 
(200)  39,320
Total Kewaunee Scientific Corporation Stockholders’ Equity 47,100
 
(823)  46,277
Total Stockholders’ Equity 47,703
 
(823)  46,880
Total Liabilities and Stockholders’ Equity$87,223
 $(1,023) $86,200

Note 2—3—Inventories


Inventories consisted of the following at April 30:

$ in thousands

  2018   2017 

Finished goods

  $4,751  $3,179

Work-in-process

   2,278   1,950

Materials and components

   10,633   9,806
  

 

 

   

 

 

 

Total inventories

  $17,662  $14,935
  

 

 

   

 

 

 

30 :

(in thousands)20192018
Finished goods$4,139
$4,987
Work-in-process2,179
2,393
Materials and components10,888
11,169
Total inventories$17,206
$18,549
At April 30, 20182019 and 2017,2018, the Company’s international subsidiaries’ inventories were $1,908,000$1,863,000 and $2,205,000,$1,908,000, respectively, measured using thefirst-in,first-out (“FIFO”) method. If all of the Company’s inventories had been determined using the FIFO method at the lower of cost and net realizable value and are included in the above tables.
The following table summarizes the effect of the change in method of accounting on the Company's prior consolidated statement of operations:
 Twelve Months Ended April 30, 2018 Effect of Accounting Change Twelve Months Ended April 30, 2018
(in thousands, except per share data) As Previously Reported LIFO/FIFO As Adjusted
Cost of products sold 126,030
 (139) 125,891
Gross profit 32,020
 139
 32,159
Earnings from continuing operations before income taxes 9,480
 139
 9,619
Income tax expense 4,115
 46
 4,161
Net earnings 5,365
 93
 5,458
Net earnings attributable to Kewaunee Scientific Corporation$5,188
$93
$5,281
Net earnings per share attributable to Kewaunee Scientific Corporation stockholders    
Basic$1.91
$0.03
$1.94
Diluted$1.87
$0.03
$1.90

The following table summarizes the effect of the change in method of accounting on the Company's prior consolidated balance sheet:
 April 30, 2018  Effect of Accounting Change  April 30, 2018
(in thousands) As Previously Reported  LIFO/FIFO  As Adjusted
         
Inventory$17,662
 $887
 $18,549
Total Current Assets 63,504
  887
  64,391
Deferred income taxes 2,031
  (162)  1,869
Total Other Assets 6,193
  (162)  6,031
Total Assets$84,358
 $725
 $85,083
         
Liabilities and Stockholders' Equity       
Other accrued expenses$2,062
 $54
 $2,116
Total Current Liabilities 27,562
  54
  27,616
Total Liabilities 36,837
  54
  36,891
Retained earnings 43,165
  671
  43,836
Total Kewaunee Scientific Corporation Stockholders' Equity 47,059
  671
  47,730
Total Equity 47,521
  671
  48,192
Total Liabilities and Stockholders' Equity$84,358
 $725
 $85,083


The following table summarizes the effect of the change in method of accounting on the Company's prior consolidated cash flow:
  Twelve Months Ended April 30, Effect of Accounting Change Twelve Months Ended April 30,
  2018  2018
 (in thousands) As Previously Reported LIFO/FIFO As Adjusted
 
 Net earnings$5,365
 $93
 $5,458
  Change in assets and liabilities:        
   Inventories (2,727)  (139)  (2,866)
   Accounts payable and other accrued expenses 4,560
  46
  4,606
 Net cash provided by operating activities$3,183
 $
 $3,183
Certain amounts in the Company’s consolidated statement of operations for the twelve months ended April 30, 2018 and 2017, reported inventories2019 under the former LIFO method would have been $887,000 and $748,000 greater, respectively. During fiscal year 2018, the LIFO index was higher than 100% due to higher prices for certain raw materials. This increase resultedas follows :
 Twelve Months Ended April 30, 2019
(in thousands, except per share amounts)
As Reported
Under FIFO
 Adjustments 
As Computed
Under LIFO
Cost of products sold$121,231
 $444
 $121,675
Income tax expense446
 (104) 342
Net earnings1,688
 (340) 1,348
Net earnings attributable to Kewaunee Scientific Corporation$1,529
 $(340) $1,189
Net earnings per share attributable to Kewaunee Scientific Corporation stockholders     
Basic$0.56
 $(0.12) $0.44
Diluted$0.55
 $(0.12) $0.43

Certain amounts in the additionCompany’s consolidated statement of cash flows for the twelve months ended April 30, 2019 would have been as follows under the former LIFO inventory quantities carried at lower costs prevailing in prior years as compared to the cost of purchases in fiscal year 2017, the effect of which increased the costs of product sales by $139,000. During fiscal year 2017, the LIFO index was higher than 100% due to higher prices for certain raw materials. This increase resultedmethod:
 Twelve Months Ended April 30, 2019
(in thousands)
As Reported
Under FIFO
 Adjustments 
As Computed
Under LIFO
Net earnings$1,688
 $(340) $1,348
Change in assets and liabilities:     
Inventories456
 444
 900
Other, net(1,685) (104) (1,789)
Net cash provided by operating activities$2,490
 $
 $2,490


Certain amounts in the additionCompany’s consolidated balance sheet as of April 30, 2019 would have been as follows under the former LIFO inventory quantities carried at lower costs prevailing in prior years as compared to the cost of purchases in fiscal year 2016, the effect of which increased the costs of product sales by $14,000.

method:

 April 30, 2019
(in thousands)
As Reported
Under FIFO
 Adjustments 
As Computed
Under LIFO
Inventories$17,206
 $(1,331) $15,875
Total Current Assets65,357
 (1,331) 64,026
Deferred Income Taxes1,829
 156
 1,985
Prepaid Expenses and Other Assets3,736
 164
 3,900
Total Assets87,223
 (1,011) 86,212
Retained Earnings43,552
 (1,011) 42,541
Total Kewaunee Scientific Corporation Stockholders’ Equity47,100
 (1,011) 46,089
Total Stockholders’ Equity47,703
 (1,011) 46,692
Total Liabilities and Stockholders’ Equity$87,223
 $(1,011) $86,212


Note 3—4—Long-term Debt and Other Credit Arrangements

On May 6, 2013, the Company entered into a credit and security agreement (the “Loan Agreement”) with a new lender consisting of (1) a $20 million revolving credit facility (“Line of Credit”) which matured on May 1, 2018 and was extended to March 1, 2021 on March 12, 2018, (2) a term loan in the amount of $3,450,000 which matures on May 1, 2020 (“Term Loan A”) and (3) a term loan in the amount of $1,550,000 which matures on May 1, 2020 (Term Loan B and together with Term Loan A, the “Term Loans”). The Loan Agreement provided funds to refinance all existing indebtedness to the Company’s previous lender and for working capital and other general corporate purposes. In addition, the credit facility provided asub-line for the issuance of up to $6.5 million of letters of credit at April 30, 20182019 and April 30, 2017.

2018.

At April 30, 2018,2019, there were advances of $3.8$9.5 million and $5.2 million in letters of credit outstanding, leaving $11.0$5.3 million available under the Line of Credit. The borrowing rate under the Line of Credit at that date was 3.50%4.00%. Monthly interest payments under the Line of Credit were payable at the Daily One Month LIBOR interest rate plus 1.50% per annum. Payments are due under Term Loan A in consecutive equal monthly principal payments in the amount of $79,000 until May 1, 2020, and at that time, all principal, accrued unpaid interest and other charges outstanding under Term Loan A shall be due and payable in full. The interest rate on Term Loan A, after consideration of related interest rate swap agreements, is a fixed rate per annum equal to 4.37%. Payments are due under Term Loan B in consecutive equal monthly principal payments in the amount of $18,000 until May 1, 2020, and at that time, all principal, accrued unpaid interest and other charges outstanding under Term Loan B shall be due and payable in full. The interest rate on Term Loan B, after consideration of the related interest rate swap agreement, effective November 3, 2014, converted to a fixed rate per annum of 3.07%. The fair value of the interest rate swap derivatives were $5,000$1,000 and $62,000$5,000 at April 30, 20182019 and 2017,2018, respectively. Scheduled annual principal payments for the term loans are $1,167,000 $1,167,000 and $97,000 for fiscal years 2019, 2020 and 2021, respectively. Term Loan A and Term Loan B are secured by liens against certain machinery and equipment.

At April 30, 2018,2019, there were bank guarantees issued by foreign banks outstanding to customers in the amount of $1,625,000, $21,000, $1,000,$2,337,000, $49,000, $75,000, and $63,000$60,000 with expiration dates in fiscal years 2019, 2020, 2021, 2022 and 2023, respectively, collateralized by a $5.0 million letter of credit under the Line of Credit and certain assets of the Company’s subsidiaries in India. The Loan Agreement includes financial covenants with respect to certain ratios, including (a) senior funded debt to EBITDA, (b) fixed charge coverage, and (c) asset coverage. At April 30, 2018,2019, the Company was not in compliance with all of the financial covenants.

The Company received a waiver from its lender for this noncompliance pursuant to a waiver letter executed on June 19, 2019 ("the Waiver Letter"). In connection with the Waiver Letter, the Company entered into a Security Agreement pursuant to which the Company granted a security interest in substantially all of its assets to secure its obligations under the Loan Agreement. On July 9, 2019, the Company entered into an agreement to amend the Loan Agreement and the Line of Credit to effect a change in the financial covenants set forth in the Loan Agreement.  The amendment does not change the amount of availability provided by Company’s Line of Credit.

At April 30, 2017,2018, there were advances of $3.5$3.8 million and $4.2$5.2 million in letters of credit outstanding under the Line of Credit. The borrowing rate at that date was 2.50%3.50%. At April 30, 2017,2018, there were foreign bank guarantees outstanding to customers in the

amount of $1,403,000, $112,000$1,625,000, $21,000, $1,000 and $117,000$63,000 with expiration dates in fiscal years 2018, 2019, 2020, 2021 and 2020,2023, respectively. At April 30, 2017,2018, the Company was in compliance with all of the financial covenants.

covenants in the Loan Agreement.

Amounts outstanding under the term loans were as follows as of April 30:

$ in thousands

  2018   2017 

Term Loan A payable

  $1,970  $2,667

Term Loan B payable

   461   682

Less: current portion

   (1,167   (918
  

 

 

   

 

 

 

Long-term debt

  $1,264  $2,431
  

 

 

   

 

 

 

$ in thousands 2019 2018
Term Loan A payable $1,024
 $1,970
Term Loan B payable 240
 461
Less: current portion (1,167) (1,167)
Long-term debt $97
 $1,264


Note 4—5—Income Taxes

On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) was signed into law. The 2017 Tax Act includes a broad range of tax reform provisions affecting businesses, including lower corporate tax rates, changes in business deductions, and international tax provisions. In response to the 2017 Tax Act, the U.S. Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. SAB 118 provides that the measurement period is complete when a company’s accounting is complete and that the measurement period shall not extend beyond one year from the enactment date. SAB 118 provides guidance for registrants under three scenarios: (i) measurement of certain income tax effects is complete, (ii) measurement of certain income tax effects can be reasonably estimated, and (iii) measurement of certain income tax effects cannot be reasonably estimated.

The 2017 Tax Act lowered the federal statutory tax rate from 35% to 21%.

As of April 30, 2019, the Company has a fiscal year ending April 30, it is subject to a blended tax rateconsiders the accounting under SAB 118 for the 2018 fiscal year. Therefore, a blended rate of 29.73% was computed as the federal statutory rate for fiscal year 2018.

The Company has analyzed the income tax effects of the 2017 Tax Act and determined that measurement of the income tax effects can be reasonably estimated, and, as such, provisional amounts have been recorded. The Company believes that all provisional amounts reflected in its financial statements are based on the best estimates that can be made at this time. The Company will continue to analyze all impacts of the 2017 Tax Act to be complete. We have recorded adjustments to income tax expense to account for the one-time transition tax on deferred foreign income, change in valuation of deferred tax assets associated with tax law changes, and will update provisional amounts as required.

foreign tax credits related to the transition tax.

In accordance with ASC 740, ”Income Taxes”, which requires deferred taxes to bere-measured in the year of an income tax rate change, the Company recorded a deferred income tax expense of $680,000$75,000 for the year ended April 30, 20182019 as a result of applying a lower U.S. federalweighted average state income tax rate to the Company’s net deferred tax assets.
The Company revaluedfinalized the U.S.accounting policy decision with respect to the new Global Intangible Low-Taxed Income (“GILTI”) tax rules and has concluded that GILTI will be treated as a periodic charge in the year in which it arises. Therefore, the Company will not record deferred tax balances based on the tax rates effectivetaxes for the following fiscal year at the new federal ratebasis differential attributable to GILTI inclusions in U.S. taxable income. The Company has included $265,000 of 21%tax expense related to GILTI for amounts that did not reverse during the 2018 fiscal year and revalued the deferred tax balances that reversed in the 2018 fiscal year at the Company’s 2018 fiscal year statutory rate of 33.33%.

The 2017 Tax Act also includes aone-time transition tax on accumulated unrepatriated foreign earnings. For the year ended April 30, 2018, the Company recorded a provisional income tax expense of $649,000 on accumulated unrepatriated foreign earnings, including foreign earnings through December 31, 2017. In addition, the Company has not yet completed the calculation of the related income tax pools for all of its foreign subsidiaries. The Company anticipates additional future impacts at a U.S., state and local tax level related to the 2017 Tax Act as statutory and interpretive guidance continues to become available from applicable tax authorities needed to record the complete tax expense. For the year ended April 30, 2018, the Company included federal and state provisional income tax expense based on available statutory and interpretive guidance on the provisions of the tax laws that were in effect at April 30, 2018.

The Company is entitled to elect to pay theone-time transition tax over a period of eight years. The Company intends to make this election and has recorded $546,000 of the provisional expense as othernon-current liabilities in the Company’s Consolidated Balance Sheet for April 30, 2018. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.

The Company is currently in the process of evaluating the new Global IntangibleLow-Taxed Income (“GILTI”) provisions and has not yet elected an accounting policy with respect to whether to reflect GILTI in its deferred tax calculations or not. Therefore, the Company has not made any adjustments related to the GILTI tax in its consolidated financial statements. Under the SEC guidance noted above, the Company will continue to analyze and assess the effects of the GILTI provisions of the Act.

2019.

Income tax expense consisted of the following:

$ in thousands

  2018   2017   2016 

Current tax expense:

      

Federal

  $1,719  $891  $974

State and local

   311   120   117

Foreign

   1,414   1,467   1,122
  

 

 

   

 

 

   

 

 

 

Total current tax expense

   3,444   2,478   2,213
  

 

 

   

 

 

   

 

 

 

Deferred tax expense (benefit):

      

Federal

   401    (108   (431

State and local

   28   24   98

Foreign

   242   (268   (18
  

 

 

   

 

 

   

 

 

 

Total deferred tax expense (benefit)

   671   (352   (351
  

 

 

   

 

 

   

 

 

 

Net income tax expense

  $4,115  $2,126  $1,862
  

 

 

   

 

 

   

 

 

 

$ in thousands 2019 2018 
Current tax expense (benefit):     
Federal $(571) $1,719
 
State and local (75) 311
 
Foreign 1,065
 1,414
 
Total current tax expense 419
 3,444
 
Deferred tax expense (benefit):     
Federal 30
 442
 
State and local 59
 33
 
Foreign (62) 242
 
Total deferred tax expense (benefit) 27
 717
 
Net income tax expense $446
 $4,161
 
The reasons for the differences between the above net income tax expense and the amounts computed by applying the statutory federal income tax rate to earnings before income taxes are as follows:

$ in thousands

  2018   2017   2016 

Income tax expense at statutory rate

  $2,818  $2,294  $1,952

State and local taxes, net of federal income tax benefit (expense)

   162   100   102

Tax credits (state, net of federal benefit)

   (370   (110   (407

Effects of differing US and foreign tax rates

   (97   (7   173

Rate reduction impact on deferred tax assets

   680    —      —   

Federal and state transition tax on unrepatriated foreign earnings

   649    —      —   

Increase (decrease) in valuation allowance

   175   82   (10

Other items, net

   98    (233   52
  

 

 

   

 

 

   

 

 

 

Net income tax expense

  $4,115  $2,126  $1,862
  

 

 

   

 

 

   

 

 

 


$ in thousands 2019 2018  
Income tax expense at statutory rate $547
 $2,864
  
State and local taxes, net of federal income tax benefit (expense) (29) 162
  
Tax credits (state, net of federal benefit) (546) (370)  
Effects of differing US and foreign tax rates 190
 (97)  
Rate reduction impact on deferred tax assets 75
 680
  
Federal and state transition tax on unrepatriated foreign earnings 
 649
  
Effects of stock options exercised (49) 
  
Effect of prior year true ups (105) 
  
Impact of foreign subsidiary income to parent 317
 
  
Increase (decrease) in valuation allowance 7
 175
  
Other items, net 39
 98
  
Net income tax expense $446
 $4,161
  
Significant items comprising deferred tax assets and liabilities as of April 30 were as follows:

$ in thousands

  2018   2017 

Deferred tax assets:

    

Accrued employee benefit expenses

  $418  $549

Allowance for doubtful accounts

   41   67

Deferred compensation

   1,205   1,792

Tax credits

   221   208

Unrecognized actuarial loss, defined benefit plans

   1,825   3,223

Inventory Reserves

   378   360

Net operating loss carryforwards

   261   224

Other

   79   113
  

 

 

   

 

 

 

Total deferred tax assets

   4,428   6,536
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Book basis in excess of tax basis of property, plant and equipment

   (1,043   (1,600

Prepaid pension

   (1,093   (1,696
  

 

 

   

 

 

 

Total deferred tax liabilities

   (2,136   (3,296
  

 

 

   

 

 

 

Less: valuation allowance

   (261   (82
  

 

 

   

 

 

 

Net deferred tax assets

  $2,031  $3,158
  

 

 

   

 

 

 

Deferred tax assets classified in the balance sheet:

    

Non-current

   2,031   3,158 
  

 

 

   

 

 

 

Net deferred tax assets

  $2,031  $3,158
  

 

 

   

 

 

 

$ in thousands 2019 2018
Deferred tax assets:    
Accrued employee benefit expenses $466
 $418
Allowance for doubtful accounts 28
 41
Deferred compensation 922
 1,205
Tax credits (state, net of federal benefits) 434
 221
Foreign tax credit carryforwards 638
 
Unrecognized actuarial loss, defined benefit plans 1,772
 1,825
Inventory reserves 290
 378
Net operating loss carryforwards 257
 261
Revenue recognition change (See Note 2) (31) 
LIFO change (See Note 3) (156) (162)
Other 183
 79
Total deferred tax assets 4,803
 4,266
Deferred tax liabilities:    
Book basis in excess of tax basis of property, plant and equipment (850) (1,043)
Prepaid pension (1,218) (1,093)
Total deferred tax liabilities (2,068) (2,136)
Less: valuation allowance (906) (261)
Net deferred tax assets $1,829
 $1,869
Deferred tax assets classified in the balance sheet:    
Non-current 1,829
 1,869
Net deferred tax assets $1,829
 $1,869
Unremitted earnings of subsidiaries outside the United States are considered to be reinvested indefinitely at April 30, 2018.2019. It is not practicable to determine the deferred tax liability for temporary differences related to those unremitted earnings. At April 30, 2018,2019, the Company had deferred tax assets related to the state net operating loss carryforwards in the amount of $26,000 expiring at various times and state tax credit carryforwards in the amount of $221,000,$207,000, net of federal benefit, expiring beginning in 2018.2020. Due to the current expiration schedule of the state credits, a valuation allowance in the amount of $37,000 has been recorded to reflect the potential expiration of these credits in future years. At April 30, 2018,2019, the Company had $1,240,000federal research and development tax credit carryforwards in the amount of $228,000 expiring beginning in 2039. At April 30, 2019, the Company had foreign tax credit carryforwards in the amount of $638,321 that are subject to a full valuation allowance. At April 30, 2019, the Company had $1,126,000 gross net operating losses in jurisdictions outside of the United States, of which $624,000$501,000 is set to expire in years 2020 to 2023. After a review of the expiration schedule of the net operating loss carryforwards and future taxable income required to utilize such carryforwards before their expiration, the Company recorded an additional valuation allowance of $175,000

$7,000 at April 30, 2018.2019. The Company files federal, state and local tax returns with statutes of limitation generally ranging from 3 to 4 years. The Company is generally no longer subject to federal tax examinations for years prior to fiscal year 20142015 or state and local tax examinations for years prior to fiscal year 2013.2014. Tax returns filed by the Company’s significant foreign subsidiaries are generally subject to statutes of limitations of 3 to 7 years and are generally no longer subject to examination for years prior to fiscal year 2012.

2013. The Company has no unrecognized tax benefits.

Note 5—6—Stock Options and Share-Based Compensation

The Company adopted ASU2016-9, “Stock Compensation – Improvements to Employee Share-Based Payment Accounting” standard prospectively effective May 1, 2017. Prior periods were not retrospectively adjusted. The Company elected prospectively to account for forfeitures as they occur rather than apply an estimated rate to share-based compensation expense.

The stockholders approved the 2017 Omnibus Incentive Plan (“2017 Plan”) on August 30, 2017, which enables the Company to grant a broad range of equity, equity-related, andnon-equity types of awards, with potential recipients including directors, consultants and employees. This plan replacesreplaced the 2010 Stock Option Plan for Directors and the 2008 Key Employee Stock Option Plan. No new awards will be granted under the prior plans.

All outstanding options granted under the prior plans will remain subject to the prior plans. At the date of approval of the 2017 Plan there were 280,100 shares available for issuance under the prior plans. These shares and any outstanding awards that subsequently cease to be subject to such awards are available under the 2017 Plan. The 2017 Plan did not increase the total number of shares available for issuance under the Company’s equity compensation plans. At April 30, 20182019 there were 263,942272,178 shares available for future issuance.

The Company issued restricted stock units (“RSUs”) under

Under the 2017 Plan, andthe Company recorded stock-based compensation expense of $141,000 during fiscal year 2018 in accordance with ASC 718 “Compensation—Stock Compensation.”of $34,000 and $141,000, and deferred income tax benefit of $8,000 and $34,000, in fiscal years 2019 and 2018, respectively. The RSUs include both a service and performance component vesting over a three year period. The recognized expense is based upon the vesting period for service criteria and estimated attainment of the performance criteria at the end of the three year period based on the ratio of cumulative days incurred to total days over the three year period. The remaining estimated compensation expense of $394,000$158,000 will be recorded over the remaining twovesting periods.
The fair value of each RSU granted to employees was estimated on the day of grant based on the weighted average price of the Company's stock reduced by the present value of the expected dividend stream during the vesting period using the risk-free interest rate. The Company issued new shares of common stock to satisfy RSUs vested during fiscal year period.

2019. The following table summarizes the RSUs activities and weighed averages.

  2019 2018
  Number of RSUs Weighted Average Grant Date Fair Value Number of RSUs Weighted Average Grant Date Fair Value
Outstanding at beginning of year 23,907
 $23.74
 
  
Granted 19,738
 $32.58
 23,907
 $23.74
Vested (2,390) $34.16
 
 
Forfeited (17,947) $27.07
 
  
Outstanding at end of year 23,308
 $28.66
 23,907
 $23.74
The stockholders approved the 2010 Stock Option Plan for Directors (“2010 Plan”) in fiscal year 2011 which allowed the Company to grant options on an aggregate of 100,000 shares of the Company’s common stock. Under this plan, each eligible director was granted options to purchase 10,000 shares at the fair market value at the date of grant for a term of five years. These options are exercisable in four equal installments,one-fourth becoming exercisable on the next August 1 following the date of grant, andone-fourth becoming exercisable on August 1 of each of the next three years. At April 30, 2018,2019, there were no shares available for future grants under the 2010 Plan.

The stockholders approved the 2008 Key Employee Stock Option Plan (“2008 Plan”) in fiscal year 2009 which allowed the Company to grant options on an aggregate of 300,000 shares of the Company’s common stock. On August 26, 2015, the stockholders approved an amendment to this plan to increase the number of shares available under the 2008 Plan by 300,000. Under the plan, options were granted at not less than the fair market value at the date of grant and options are exercisable in such installments, for such terms (up to 10 years), and at such times, as the Board of Directors may determine at the time of the grant. At April 30, 2018,2019, there were no shares available for future grants under the 2008 Plan.

The Company recorded stock-based compensation expense in accordance with ASC 718. In order to determine the fair value of stock options on the date of grant, the Company applied the Black-Scholes option pricing model. Inherent in the model are assumptions related to expected stock-price volatility, option life, risk-free interest rate, and dividend yield. The Company did not

grant any stock options during fiscal yearyears 2019 and 2018. For stock options granted during the fiscal years 2017 and 2016, the Company believes that its historical share option experience does not provide a reasonable basis upon which to estimate expected term. The stock options grantedoutstanding have the “plain-vanilla” characteristics as defined in SEC Staff Accounting Bulletin No. 107 (SAB 107). The Company utilized the Safe Harbor option “Simplified Method” to determine the expected term of these options in accordance with the guidance of SAB 107 for options granted. The Company intends to continue to utilize the “Simplified Method” for future grants in accordance with the guidance of SAB 110 until such time that the Company believes that its historical share option experience will provide a reasonable basis to estimate expected term. The fair value of the options granted as shown below was estimated using the Black-Scholes model with the following assumptions:

   2017  2016 
   2008 Plan  2008 Plan 

Options granted

   45,200   40,200 

Weighted average expected stock price volatility

   29.17  30.45

Expected option life

   6.25 years   6.25 years 

Average risk-free interest rate

   2.10  1.97

Average dividend yield

   3.00  2.78

Estimated fair value of each option

  $5.04  $3.97 
outstanding.

The stock-based compensation expense is recorded over the vesting period (4 years) for the options granted, net of tax. TheUnder the 2010 and 2008 Plans, the Company recorded $172,000, $199,000$115,000 and $192,000$172,000 of compensation expense and $27,000 and $42,000 $74,000 and $72,000of deferred income tax benefit in fiscal years 2018, 20172019 and 2016,2018, respectively. The remaining compensation expense of $209,000$76,000 and deferred income tax benefit of $51,000$18,000 will be recorded over the remaining vesting periods.

The Company issued new shares of common stock and treasury stock to satisfy options exercised during fiscal years 2018, 20172019 and 2016.2018. Stock option activity and weighted average exercise price are summarized as follows:

   2018   2017   2016 
   Number
of Shares
  Weighted
Average
Exercise
Price
   Number
of Shares
  Weighted
Average
Exercise
Price
   Number
of Shares
  Weighted
Average
Exercise
Price
 

Outstanding at beginning of year

   180,350 $17.29   185,375 $14.68   239,575 $13.24

Granted

   —     —      45,200  22.92   40,200  16.92

Canceled

   (6,300  19.09   (150  10.64   (10,400  16.37

Exercised

   (36,800  14.31   (50,075  12.72   (84,000  11.44
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Outstanding at end of year

   137,250 $18.01   180,350 $17.29   185,375 $14.68
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Exercisable at end of year

   79,100 $16.28   78,650 $14.22   92,075 $12.83
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

 2019 2018 
 
Number
of Shares
 Weighted Average Exercise Price 
Number
of Shares
 Weighted Average Exercise Price 
Outstanding at beginning of year137,250
 $18.01
 180,350
 $17.29
 
Canceled(13,100) 21.03
 (6,300) 19.09
 
Exercised(19,800) 14.54
 (36,800) 14.31
 
Outstanding at end of year104,350
 $18.28
 137,250
 $18.01
 
         
Exercisable at end of year84,550
 $17.63
 79,100
 $16.28
 
The number of options outstanding, exercisable, and their weighted average exercise prices were within the following ranges at April 30, 2018:

   Exercise Price Range 
   $8.59-$11.78   $15.85-$23.62 

Options outstanding

   17,550   119,700

Weighted average exercise price

  $11.35  $18.98

Weighted average remaining contractual life

   4.03 years   6.68 years

Aggregate intrinsic value

  $414,000  $1,911,000

Options exercisable

   17,550   61,550

Weighted average exercise price

  $11.35  $17.69

Aggregate intrinsic value

  $414,000  $1,062,000
2019:

 Exercise Price Range
 $8.59-$11.78 $15.85-$23.62
Options outstanding7,450
 96,900
Weighted average exercise price$10.76
 $18.86
Weighted average remaining contractual life2.63 years
 5.68 years
Aggregate intrinsic value$88,000
 $392,000
Options exercisable7,450
 77,100
Weighted average exercise price$10.76
 $18.29
Aggregate intrinsic value$88,000
 $350,000

Note 6—7—Accumulated Other Comprehensive Income (Loss)

The Company’s other comprehensive income (loss) consists of unrealized gains and losses on the translation of the assets, liabilities, and equity of its foreign subsidiaries, changes in the fair value of its cash flow hedges, and additional minimum pension liability adjustments, net of income taxes. The before tax income (loss), related income tax effect, and accumulated balances are as follows:

$ in thousands

  Cash Flow
Hedges
  Foreign
Currency
Translation
Adjustment
  Minimum
Pension
Liability
Adjustment
  Total
Accumulated
Other
Comprehensive
Income (Loss)
 

Balance at April 30, 2015

   (127  (1,011  (6,742  (7,880

Effect of changes in tax rates

   1  —     88  89

Foreign currency translation adjustment

   —     (217  —     (217

Change in fair value of cash flow hedges

   37  —     —     37

Change in unrecognized actuarial loss on pension obligations

   —     —     716  716

Income tax effect

   (15  —     (356  (371
  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at April 30, 2016

   (104  (1,228  (6,294  (7,626

Effect of changes in tax rates

   1  —     30  31

Foreign currency translation adjustment

   —     231  —     231

Change in fair value of cash flow hedges

   104  —     —     104

Change in unrecognized actuarial loss on pension obligations

   —     —     1,609  1,609

Income tax effect

   (41  —     (627  (668
  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at April 30, 2017

   (40  (997  (5,282  (6,319

Effect of changes in tax rates

   3  —     996  999

Foreign currency translation adjustment

   —     (430  —     (430

Change in fair value of cash flow hedges

   57  —     —     57

Change in unrecognized actuarial loss on pension obligations

   —     —     (586  (586

Income tax effect

   (23  —     402   379
  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at April 30, 2018

  $(3 $(1,427 $(4,470 $(5,900
  

 

 

  

 

 

  

 

 

  

 

 

 


$ in thousands 
Cash Flow
Hedges
 
Foreign
Currency
Translation
Adjustment
 
Minimum
Pension
Liability
Adjustment
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
Balance at April 30, 2017 (40) (997) (5,282) (6,319)
Effect of changes in tax rates 3
 
 996
 999
Foreign currency translation adjustment 
 (430) 
 (430)
Change in fair value of cash flow hedges 57
 
 
 57
Change in unrecognized actuarial loss on pension obligations 
 
 (586) (586)
Income tax effect (23) 
 402
 379
Balance at April 30, 2018 (3) (1,427) (4,470) (5,900)
Effect of changes in tax rates   
 67
 67
Foreign currency translation adjustment 
 (464) 
 (464)
Change in fair value of cash flow hedges 4
 
 
 4
Change in unrecognized actuarial loss on pension obligations 
 
 (99) (99)
Income tax effect (1) 
 (14) (15)
Balance at April 30, 2019 $
 $(1,891) $(4,516) $(6,407)
Note 7—8—Commitments and Contingencies

The Company leases both its primary distribution facility and warehouse facility undernon-cancelable operating leases. The Company also leases some of its machinery and equipment undernon-cancelable operating leases. Most of these leases provide the Company with renewal and purchase options, and most leases of machinery and equipment have certain early cancellation rights. Rent expense for these operating leases was $2,340,000, $2,225,000 and $2,283,000$2,340,000 in fiscal years 2018, 2017,2019 and 2016,2018, respectively. Future minimum payments under the abovenon-cancelable lease arrangements for the years ending April 30 are as follows:

$ in thousands

  Operating 

2019

  $1,190 

2020

   995 

2021

   787 

2022

   538 

2023

   316 
  

 

 

 

Total minimum lease payments

  $3,826 
  

 

 

 

$ in thousands Operating
2020 $1,246
2021 855
2022 747
2023 618
2024 363
2025 and thereafter 1,736
Total minimum lease payments $5,565
The Company is involved in certain claims and legal proceedings in the normal course of business which management believes will not have a material adverse effect on the Company’s consolidated financial condition or results of operations.

Note 8—9—Retirement Benefits

Defined Benefit Plans

The Company hasnon-contributory defined benefit pension plans covering some of its domestic employees. These plans were amended as of April 30, 2005, no further benefits have been, or will be, earned under the plans subsequent to the amendment date, and no additional participants will be added to the plans. The defined benefit plan for salaried employees provides pension benefits that are based on each employee’s years of service and average annual compensation during the last 10ten consecutive calendar years of employment as of April 30, 2005. The benefit plan for hourly employees provides benefits at stated amounts based on years of service as of April 30, 2005. The Company uses an April 30 measurement date for its defined benefit plans. The change in projected benefit obligations and the change in fair value of plan assets for thenon-contributory defined benefit pension plans for each of the years ended April 30 are summarized as follows:

$ in thousands

  2018  2017 

Accumulated Benefit Obligation, April 30

  $21,544 $21,313
  

 

 

  

 

 

 

Change in Projected Benefit Obligations

   

Projected benefit obligations, beginning of year

  $21,313 $21,156

Interest cost

   875  927

Actuarial loss

   480  299

Actual benefits paid

   (1,124  (1,069
  

 

 

  

 

 

 

Projected benefit obligations, end of year

   21,544  21,313
  

 

 

  

 

 

 

Change in Plan Assets

   

Fair value of plan assets, beginning of year

   17,198  15,817

Actual return on plan assets

   1,866  1,895

Employer contributions

   600  555

Actual benefits paid

   (1,124  (1,069
  

 

 

  

 

 

 

Fair value of plan assets, end of year

   18,540  17,198
  

 

 

  

 

 

 

Funded status—under

  $(3,004 $(4,115
  

 

 

  

 

 

 

Amounts Recognized in the Consolidated Balance Sheets consist of:

   
  

 

 

  

 

 

 

Noncurrent liabilities

  $(3,004 $(4,115
  

 

 

  

 

 

 

Amounts recognized in accumulated other comprehensive income (loss) consist of:

   

Net actual loss

  $7,481 $8,686

Deferred tax benefit

   (1,825  (3,223
  

 

 

  

 

 

 

After-tax actuarial loss

  $5,656 $5,463
  

 

 

  

 

 

 

Weighted-Average Assumptions Used to Determine Benefit Obligations at April 30

   

Discount rate

   4.10  4.10

Rate of compensation increase

   N/A  N/A

Mortality table

   RP-2014  RP-2014

Projection scale

   MP-2017  MP-2016

$ in thousands

  2018  2017 

Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended April 30

   

Discount rate

   4.10  4.50

Expected long-term return on plan assets

   7.75  8.00

Rate of compensation increase

   N/A  N/A


$ in thousands 2019 2018
Accumulated Benefit Obligation, April 30 $21,394
 $21,544
Change in Projected Benefit Obligations    
Projected benefit obligations, beginning of year $21,544
 $21,313
Interest cost 859
 875
Actuarial loss 412
 480
Actual benefits paid (1,421) (1,124)
Projected benefit obligations, end of year 21,394
 21,544
Change in Plan Assets    
Fair value of plan assets, beginning of year 18,540
 17,198
Actual return on plan assets 916
 1,866
Employer contributions 1,000
 600
Actual benefits paid (1,421) (1,124)
Fair value of plan assets, end of year 19,035
 18,540
Funded status—under $(2,359) $(3,004)
Amounts Recognized in the Consolidated Balance Sheets consist of:    
Noncurrent liabilities $(2,359) $(3,004)
Amounts Recognized in Accumulated Other Comprehensive Income (Loss) Consist of:    
Net actual loss $7,541
 $7,481
Deferred tax benefit (1,772) (1,825)
After-tax actuarial loss $5,769
 $5,656
Weighted-Average Assumptions Used to Determine Benefit Obligations at April 30    
Discount rate 3.90% 4.10%
Rate of compensation increase N/A
 N/A
Mortality table RP-2014
 RP-2014
Projection scale MP-2018
 MP-2017
$ in thousands    
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended April 30 2019 2018
Discount rate 3.90% 4.10%
Expected long-term return on plan assets 7.75% 7.75%
Rate of compensation increase N/A
 N/A
The components of the net periodic pension cost for each of the fiscal years ended April 30 are as follows:

$ in thousands

  2018   2017   2016 

Interest cost

  $875  $927  $912

Expected return on plan assets

   (1,314   (1,244   (1,363

Recognition of net loss

   1,133   1,257   1,223
  

 

 

   

 

 

   

 

 

 

Net periodic pension cost

  $694  $940  $772
  

 

 

   

 

 

   

 

 

 

$ in thousands 2019 2018 
Interest cost $859
 $875
 
Expected return on plan assets (1,448) (1,314) 
Recognition of net loss 884
 1,133
 
Net periodic pension cost $295
 $694
 
The estimated net actuarial loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during fiscal year 20192020 is $910,000.

$970,000.

The Company’s funding policy is to contribute to the plans when pension laws and economics either require or encourage funding. ContributionsThe Company does not expect to make any contributions for fiscal year 2019 are anticipated to be $1,000,000.2020. Contributions of $600,000$1,000,000 and $555,000$600,000 were made to the plan in fiscal years 2019 and 2018, and 2017, respectively.


The following benefit payments are expected to be paid from the benefit plans in the fiscal years ending April 30:

$ in thousands

  Amount 

2019

  $1,330

2020

   1,360

2021

   1,410

2022

   1,430

2023

   1,450

2024 & Beyond

   7,250


$ in thousands Amount
2020 $1,380
2021 1,440
2022 1,460
2023 1,480
2024 1,520
2025 & Beyond 7,210
The expected long-term portfolio return is established via a building block approach with proper consideration of diversification and rebalancing. Historical markets are studied and long-term historical relationships between equities and fixed-income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long-term.long term. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Peer data and historical returns are also reviewed to check for reasonableness and appropriateness.

The Company uses a Yield Curve methodology to determine its GAAP discount rate. Under this approach, future benefit payment cash flows are projected from the pension plan on a projected benefit obligation basis. The payment stream is discounted to a present value using an interest rate applicable to the timing of each respective cash flow. The graph of these time-dependent interest rates is known as a yield curve. The interest rates comprising the Yield Curve are determined through a statistical analysis performed by the IRS and issued each month in the form of a pension discount curve. For this purpose, the universe of possible bonds consists of a set of bonds which are designated as corporate, have high quality ratings (AAA or AA) from nationally recognized statistical rating organizations, and have at least $250 million in par amount outstanding on at least one day during the reporting period. A 1% increase/decrease in the discount rate for fiscal years 20182019 and 20172018 would decrease/increase pension expense by approximately $234,000 and $243,000, and $240,000, respectively.

The Company uses a total return investment approach, whereby a mix of equities and fixed-income investments are used to attempt to maximize the long-term return on plan assets for a prudent level of risk. Risk tolerance is

established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across U.S. andnon-U.S. stocks, as well as growth, value, and small and large capitalizations. The target allocations based on the Company’s investment policy were 75% in equity securities and 25% in fixed-income securities at April 30, 20182019 and April 30, 2017.2018. A 1% increase/decrease in the expected return on assets for fiscal years 20182019 and 20172018 would decrease/increase pension expense by approximately $187,000 and $170,000, and $152,000, respectively.

Plan assets by asset categories as of April 30 were as follows:

$ in thousands

  2018   2017 

Asset Category

  Amount   %   Amount   % 

Equity Securities

  $9,643    52   $10,611    62 

Fixed Income Securities

   4,599    25    6,466    37 

Cash and Cash Equivalents

   4,298    23    121    1 
  

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $18,540    100   $17,198    100 
  

 

 

   

 

 

   

 

 

   

 

 

 

$ in thousands 2019 2018
Asset Category Amount % Amount %
Equity Securities $14,085
 74 $9,643
 52
Fixed Income Securities 4,754
 25 4,599
 25
Cash and Cash Equivalents 196
 1 4,298
 23
Totals $19,035
 100 $18,540
 100
The following tables present the fair value of the assets in our defined benefit pension plans at April 30:

  2019
Asset Category Level 1 Level 2 Level 3
Large Cap $7,783
 $
 $
Small/Mid Cap 3,160
 
 
International 2,054
 
 
Emerging Markets 580
    
Fixed Income 4,754
 
 
Liquid Alternatives 508
 
 
Cash and Cash Equivalents 196
 
 
Totals $19,035
 $
 $

  2018
Asset Category Level 1 Level 2 Level 3
Large Cap $4,929
 $
 $
Small/Mid Cap 2,405
 
 
International 1,889
 
 
Fixed Income 4,599
 
 
Liquid Alternatives 420
 
 
Cash and Cash Equivalents 4,298
 
 
Totals $18,540
 $
 $

   2017 

Asset Category

  Level 1   Level 2   Level 3 

Large Cap

  $8,060   $—     $—   

Small/Mid Cap

   1,728    —      —   

International

   823    —      —   

Fixed Income

   6,466    —      —   

Cash and Cash Equivalents

   121    —      —   
  

 

 

   

 

 

   

 

 

 

Totals

  $17,198   $—     $—   
  

 

 

   

 

 

   

 

 

 

Level 1 retirement plan assets include United States currency held by a designated trustee and equity funds of common and preferred securities issued by domestic and foreign corporations. These equity funds are traded actively on exchanges and price quotes for these shares are readily available.

Defined Contribution Plan

The Company has a defined contribution plan covering substantially all domestic salaried and hourly employees. The plan provides benefits to all employees who have attained age 21, completed three months of service, and who elect to participate. The plan provides that the Company make matching contributions equal to 100% of the employee’s qualifying contribution up to 3% of the employee’s compensation, and make matching contributions equal to 50% of the employee’s contributions between 3% and 5% of the employee’s compensation, resulting in

a maximum employer contribution equal to 4% of the employee’s compensation. Additionally, the plan provides that the Company may elect to make anon-matching contribution for participants employed by the Company on December 31 of each year. The Company included 1% of the participant’s qualifying compensation in the annual contributions to the plan in fiscal years 2019 and 2018 2017of $1,291,000 and 2016 of $1,159,000, $1,118,000 and $1,057,000, respectively.

Note 9—10—Segment Information

The Company’s operations are classified into two business segments: Domestic and International. The Domestic business segment principally designs, manufactures, and installs scientific and technical furniture, including steel and wood laboratory cabinetry, fume hoods, laminate casework, flexible systems, worksurfaces, workstations, workbenches, and computer enclosures. The International business segment, which consists of sixthe foreign subsidiaries as identified in Note 1, provides the Company’s products and services, including facility design, detailed engineering, construction, and project management from the planning stage through testing and commissioning of laboratories.

Intersegment transactions are recorded at normal profit margins. All intercompany balances and transactions have been eliminated. Certain corporate expenses shown below have not been allocated to the business segments.

The following table shows revenues, earnings, and other financial information by business segment for each of the three years ended April 30:

$ in thousands

  Domestic   International   Corporate  Total 

Fiscal Year 2018

       

Revenues from external customers

  $114,594   $43,456   $—    $158,050 

Intersegment revenues

   11,333    4,104    (15,437  —   

Depreciation

   2,532    229    —     2,761 

Earnings (loss) before income taxes

   10,732    4,986    (6,238  9,480 

Income tax expense (benefit)

   5,892    1,656    (3,433  4,115 

Net earnings attributable to noncontrolling interest

   —      177    —     177 

Net earnings (loss) attributable to Kewaunee Scientific Corporation

   4,840    3,153    (2,805  5,188 

Segment assets

   60,879    23,479    —     84,358 

Expenditures for segment assets

   2,826    569    —     3,395 

Revenues (excluding intersegment) from customers in foreign countries

   1,468    43,456    —     44,924 

Fiscal Year 2017

       

Revenues from external customers

  $113,081   $25,477   $—    $138,558 

Intersegment revenues

   4,463    3,691    (8,154  —   

Depreciation

   2,478    224    —     2,702 

Earnings (loss) before income taxes

   8,221    3,507    (4,982  6,746 

Income tax expense (benefit)

   2,522    1,199    (1,595  2,126 

Net earnings attributable to noncontrolling interest

   —      105    —     105 

Net earnings (loss) attributable to Kewaunee Scientific Corporation

   5,699    2,203    (3,387  4,515 

Segment assets

   57,246    23,670    —     80,916 

Expenditures for segment assets

   2,572    39    —     2,611 

Revenues (excluding intersegment) from customers in foreign countries

   1,568    25,477    —     27,045 

$ in thousands

  Domestic   International   Corporate  Total 

Fiscal Year 2016

       

Revenues from external customers

  $103,047   $25,579   $—    $128,626 

Intersegment revenues

   3,612    3,309    (6,921  —   

Depreciation

   2,375    217    —     2,592 

Earnings (loss) before income taxes

   7,471    2,738    (4,470  5,739 

Income tax expense (benefit)

   1,834    1,104    (1,076  1,862 

Net earnings attributable to noncontrolling interest

   —      75    —     75 

Net earnings (loss) attributable to Kewaunee Scientific Corporation

   5,637    1,559    (3,394  3,802 

Segment assets

   54,030    18,375    —     72,405 

Expenditures for segment assets

   1,995    192    —     2,187 

Revenues (excluding intersegment) from customers in foreign countries

   1,794    25,579    —     27,373 

Note 10—Purchase of Noncontrolling Interest

On June 24, 2013, the Company entered into an Agreement (the “Agreement”) whereby it purchased the 49% minority ownership of its subsidiary, Kewaunee Labway Asia Pte. Ltd. (the “Subsidiary”) for a total purchase price of $3,555,000. The purchase was recorded in the consolidated balance sheet as a $1,874,000 reduction in retained earnings, a $1,681,000 reduction in noncontrolling interest, an increase of other current accrued expenses of $887,500, and an increase of other

$ in thousands Domestic International Corporate Total
Fiscal Year 2019        
Revenues from external customers $116,586
 $29,964
 $
 $146,550
Intersegment revenues 2,511
 3,329
 (5,840) 
Depreciation 2,299
 272
 
 2,571
Earnings (loss) before income taxes 4,971
 3,374
 (6,211) 2,134
Income tax expense (benefit) 935
 1,003
 (1,492) 446
Net earnings attributable to noncontrolling interest 
 159
 
 159
Net earnings (loss) attributable to Kewaunee Scientific Corporation 4,036
 2,212
 (4,719) 1,529
Segment assets 59,840
 27,383
 
 87,223
Expenditures for segment assets 4,015
 198
 
 4,213
Revenues (excluding intersegment) from customers in foreign countries 3,618
 29,964
 
 33,582
         
Fiscal Year 2018 (as adjusted)        
Revenues from external customers $114,594
 $43,456
 $
 $158,050
Intersegment revenues 11,333
 4,104
 (15,437) 
Depreciation 2,532
 229
 
 2,761
Earnings (loss) before income taxes 10,871
 4,986
 (6,238) 9,619
Income tax expense (benefit) 5,938
 1,656
 (3,433) 4,161
Net earnings attributable to noncontrolling interest 
 177
 
 177
Net earnings (loss) attributable to Kewaunee Scientific Corporation 4,933
 3,153
 (2,805) 5,281
Segment assets 61,604
 23,479
 
 85,083
Expenditures for segment assets 2,826
 569
 
 3,395
Revenues (excluding intersegment) from customers in foreign countries 1,468
 43,456
 
 44,924
non-current liabilities of $887,500. On the date of the Agreement, the Company paid cash of $1,780,000 to the minority stockholder. In June 2014, the Company paid the second installment of $887,500. The final installment of $887,500 was paid in June 2015. The Subsidiary and its subsidiary in India, Kewanee Labway India Pvt. Ltd., serve as the Company’s principal sales and distribution organization for sales to international customers.

Note 11—Consolidated Quarterly Data (Unaudited)

Selected quarterly financial data for fiscal years 20182019 and 20172018 were as follows:

$ in thousands, except per share amounts

  First
Quarter
   Second
Quarter
   Third
Quarter
   Fourth
Quarter
 

Fiscal Year 2018

        

Net sales

  $33,881   $41,471   $38,190   $44,508 

Gross profit

   6,821    7,911    8,354    8,934 

Net earnings

   1,192    1,765    918    1,490 

Less: net earnings attributable to the noncontrolling interest

   44    41    35    57 

Net earnings attributable to Kewaunee Scientific Corporation

   1,148    1,724    883    1,433 

Net earnings per share attributable to Kewaunee Scientific Corporation

        

Basic

   0.42    0.64    0.32    0.53 

Diluted

   0.42    0.62    0.31    0.52 

Cash dividends paid per share

   0.15    0.17    0.17    0.17 

Fiscal Year 2017

        

Net sales

  $37,279   $36,329   $30,371   $34,579 

Gross profit

   7,139    7,104    5,032    7,332 

Net earnings

   1,330    1,537    358    1,395 

Less: net earnings attributable to the noncontrolling interest

   30    51    17    7 

Net earnings attributable to Kewaunee Scientific Corporation

   1,300    1,486    341    1,388 

Net earnings per share attributable to Kewaunee Scientific Corporation

        

Basic

   0.48    0.55    0.13    0.51 

Diluted

   0.48    0.54    0.13    0.51 

Cash dividends paid per share

   0.13    0.15    0.15    0.15 


$ in thousands, except per share amounts 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
Fiscal Year 2019        
Net sales $42,152
 $37,278
 $32,372
 $34,748
Gross profit 7,474
 7,773
 5,230
 4,842
Net earnings (loss) 1,416
 1,454
 15
 (1,197)
Less: net earnings attributable to the noncontrolling interest 9
 40
 37
 73
Net earnings (loss) attributable to Kewaunee Scientific Corporation 1,407
 1,414
 (22) (1,270)
Net earnings (loss) per share attributable to Kewaunee Scientific Corporation        
Basic 0.51
 0.52
 (0.01) (0.46)
Diluted 0.50
 0.51
 (0.01) (0.46)
Cash dividends paid per share 0.17
 0.19
 0.19
 0.19
         
Fiscal Year 2018 (as adjusted)        
Net sales $33,881
 $41,471
 $38,190
 $44,508
Gross profit 6,821
 7,911
 8,309
 9,118
Net earnings 1,192
 1,765
 888
 1,613
Less: net earnings attributable to the noncontrolling interest 44
 41
 35
 57
Net earnings attributable to Kewaunee Scientific Corporation 1,148
 1,724
 853
 1,556
Net earnings per share attributable to Kewaunee Scientific Corporation        
Basic 0.42
 0.64
 0.31
 0.58
Diluted 0.42
 0.62
 0.30
 0.56
Cash dividends paid per share 0.15
 0.17
 0.17
 0.17
The sum of the quarterly net earnings per share amounts does not necessarily equal net earnings per share for the year due to rounding.


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on FormS-8(No. 333-98963,No. 333-160276,No. 333-176447,No. 333-213413, andNo. 333-220389) of Kewaunee Scientific Corporation of our report dated July 21, 2016 relating to the consolidated financial statements which report appears in this Form10-K.

/s/ CHERRY BEKAERT LLP

Charlotte, North Carolina

July 20, 2018

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (FormS-8No. S-8 No. 333-98963,No. 333-160276,No. 333-176447,No. 333-213413, andNo. 333-220389), of our report dated July 20, 201811, 2019 with respect to the consolidated financial statements of Kewaunee Scientific Corporation, included in this Annual Report (Form10-K) for the year ended April 30, 2018.

2019.

/s/ ERNST & YOUNG LLP

Charlotte, North Carolina

July 20, 2018

11, 2019

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are intended to ensure that the information required to be disclosed in our filings under the Securities Exchange Act of 1934 (the “Exchange Act”) is properly and timely recorded, processed, summarized, and reported. Our management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures as of April 30, 20182019 pursuant to Exchange ActRule 13a-14. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effectiveeffective; however, due to provide reasonable assurance thatan administrative error, we are ablewere late in filing a Current Report on Form 8K related to collect, process, record,the entry into a separation agreement between the Company and disclose, withinour former Chief Executive Officer. We have since taken appropriate steps to remediate the required time periods, the information we are required to disclosedeficiency in the reports filed with the Securitiesour disclosure procedures and Exchange Commission.controls. In designing disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving desired control objectives, and that management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Nevertheless, we believe that our disclosure controls and procedures are effective.

As disclosed under Item 9A. Controls and Procedures in our Annual Report on Form10-K for the year ended April 30, 2017, management identified a material weakness in internal control over financial reporting relating to the misapplication of certain aspects of the Company’s multi-element and percentage of completion revenue recognition policies.

The Company has implemented changes to the design of its controls and procedures surrounding the execution of the Company’s multi-element and percentage of completion revenue recognition policies, which included, but were not limited to, drafting additional policy guidance, training key personnel and developing additional detective and monitoring controls. As of April 30, 2018, management has concluded, through testing, that these controls are operating effectively and the material weakness remediated.

In addition, as disclosed in the Company’s Form10-Q for the period ended October 31, 2017, on December 7, 2017, the Company experienced a criminal network cyber-attack that led to a disruption of its domestic operations, including manufacturing, engineering, administration, and sales operations. The Company engaged a leading cybersecurity firm to perform a forensic investigation of this attack and as a result of the investigation has identified a material weakness in its logical access control over its IT systems. As of April 30, 2018, management has concluded, through testing, that these controls are operating effectively and the material weakness remediated.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework inInternal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, Management concluded the Company maintained effective internal control over financial reporting as of April 30, 2018.

2019.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in our internal controls over financial reporting other than those implemented to remediate the aforementioned material weakness in the Company’s logical access control over its IT systems, that occurred during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information

None.

PART III


Item 10. Directors, Executive Officers and Corporate Governance

(a)

The information appearing in the sections entitled “Election of Directors” and “Meetings and Committees of the Board” included in our Proxy Statement for use in connection with our annual

meeting of stockholders to be held on August 29, 201828, 2019 (the “Proxy Statement”) is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days of our most recently completed fiscal year.

(b)The names and ages of our executive officers as of June 30, 20182019 and their business experience during the past five years are set forth below:

Executive Officers

Name

 Age 

Position

David M. Rausch

Thomas D. Hull III
 5943 

President and Chief Executive Officer

ThomasDonald T. Gardner III

40Vice President, Finance, Chief Financial Officer, Treasurer and Secretary
Ryan S. Noble41Vice President, Sales and Marketing—Americas
Elizabeth D. Hull III

Phillips 42 

Vice President, Finance,

Chief Financial Officer,

Treasurer and Secretary

Dana L. Dahlgren

62

Vice President, Sales and Marketing—Americas

Elizabeth D. Phillips

41

Vice President, Human Resources

Kurt P. Rindoks

 6061 

Vice President, Product Development and International Sourcing

Michael G. Rok

 5253 

Vice President, Manufacturing Operations

Boopathy Sathyamurthy

Lisa L. Ryan
 4941 Vice President of Construction and Customer Operations
Boopathy Sathyamurthy

50Vice President, Kewaunee Scientific Corporation Singapore Pte. Ltd. Managing Director, International Operations

David M. Rausch has served as President and Chief Executive Officer since July 1, 2013. He joined the Company in March 1994 as Manager of Estimating and was promoted to Southeast Regional Sales Manager in December 1996, then to Director of Sales for Network Storage Systems products in May 2000. In August 2001, he was promoted to Project Sales Manager, and in this position, he also had direct management responsibility for the Estimating Department. Mr. Rausch was elected Director of Contract Management in June 2004 and elected Vice President of Construction Services in June 2007. In June 2011, he was elected Senior Vice President of Construction Services and General Manager of the Laminate Furniture Division, and in March 2012, he was elected President and Chief Operating Officer.

Thomas D. Hull IIIjoined the Company in November 2015 as Vice President, Finance, Chief Financial Officer, Treasurer and Secretary. Mr Hull was elected President and Chief Executive Officer and appointed as a member of the Board of Directors in March 2019. Mr. Hull earned a Bachelor of Science degree in Accounting from LaRoche College and an MBA from the University of Pittsburgh, Joseph M. Katz School of Business. He is a certified public accountant and a member of the American Institute of Certified Public Accountants and the Pennsylvania Institute of Certified Public Accountants. Prior to joining the Company, Mr. Hull held several management positions with Ernst & Young, LLP in Pittsburgh, Pennsylvania from 1998 through 2011. From 2011, he served as the Vice President of Finance, Accounting, and Information Technology with ATI Specialty Materials in Charlotte, North Carolina.

Dana L. Dahlgren

Donald T. Gardner III joined the Company in November 1989April 2019 as a Regional Sales Manager and was promoted to Director of Sales and Marketing of the Laboratory Products Group in September 1998. Mr. Dahlgren was elected Vice President of SalesFinance and Marketing of the Laboratory Products Group in June 2004Chief Financial Officer and was also elected by the Board of Directors to the positions of Secretary and Treasurer. Mr. Gardner has a Bachelor of Science degree in Accounting from the Indiana University of Pennsylvania and a Master of Business Administration from the University of Pittsburgh, Joseph M. Katz School of Business. Before joining the Company, from 2017 to 2019, he served as Vice President, Financial Planning & Analysis of SalesVictra, a retailer of wireless products and Marketing – Americasservices, and a portfolio company of private equity firm Lone Star Funds. During 2017 he served as the Chief Financial Officer of Component Sourcing International, a provider of global sourcing supply chain solutions, and a portfolio company of Argosy private equity. From February 2016 to June 2017, Mr. Gardner worked for Dollar Express Stores, LLC, an operator of discount retail stores, serving in April 2014.

various financial leadership roles, most recently as Vice President and Treasurer. From 2012 to February 2016, he worked at ATI Specialty Materials, a manufacturer of technically advanced specialty materials and complex components, serving in various financial leadership roles.

Elizabeth D. Phillips joined the Company in August 2006 as Human Resources and Training Manager. She was promoted to Director of Human Resources in June 2007 and was elected Vice President of Human Resources in June 2009. Ms. Phillips has a Bachelor of Science degree in Psychology from Western Carolina University. Prior to joining the Company, she held Human Resources leadership positions at Thomasville Furniture and Hickory Chair and immediately prior to joining Kewaunee was Director of Human Resources for Vanguard Furniture Co., Inc., a manufacturer of household furniture, from April 2004 until August 2006.

Kurt P. Rindoks joined the Company in January 1985 as ana product engineer. He was promoted to Director of Product Development in August 1991 and assumed the additional responsibilities of Director of Engineering in July 1995. He has served as Vice President of Engineering and Product Development since September 1996. Since 2004 he has headed the Company’s international sourcing efforts and in October 2016 wasthen named Vice President Engineering and International Sourcing. Additionally, from Mayin 1996. From 1998 through Octoberto 2001, he served as General Manager of the Company’s Resin Materials Division.

Since 2004, he has headed the Company’s international parts sourcing efforts. Mr. Rindoks has a Bachelor of Science degree in Mechanical Engineering Technology from Purdue University and a Master of Business Administration from the University of North Carolina at Charlotte. As a member of ASHRAE (American Society for Heating Refrigeration and Air Conditioning Engineers) and SEFA (Scientific Equipment Furniture Association), he played a key role in the writing of national industry standards. Rindoks was elected as Secretary/Treasurer of the SEFA Board of Directors in January


2017. He is also a contributing author for ASHRAE’s Laboratory Design Guide, Second Edition, 2015. Rindoks has garnered twenty patents and is referenced in 168 United States patents.
Michael G. Rok joined the Company in May 2016 as Vice President of Manufacturing Operations. Mr. Rok has a Bachelor Science Degree in Mechanical Engineering from the University of Pittsburgh. Prior to joining the Company, Mr. Rok worked for Danaher Corporation from March 2002 to April 2016, serving in various Manufacturing/Operations leadership roles for the KaVo Kerr Group and Veeder-Root Company. Mr. Rok most recently served as the Vice President of Operations, North AmericanAmerica for KaVo Kerr Group.

Boopathy Sathyamurthywas elected

Ryan S. Noble joined the Company in July 2018 as Vice President of Sales and Marketing - Americas. He has a Bachelor of Science degree in Human Ecology from the University of Tennessee.  Prior to joining the Company, from 2018 to 2019, he was Director of Sales, at Dodge Data & Analytics, a provider of analytics and software based solutions for the construction industry. From 2014 to 2018, he was a Regional Sales Director at Wausau Window and Wall Systems, a manufacturer of metal and glass solutions for commercial buildings. From 2008 to 2014 he held several sales management positions at AGC Glass Company, a glass and high performance coatings manufacturer for architectural, residential, interior, and industrial applications.
Lisa L. Ryan joined the Company in 2006 as a project manager. She was promoted to Director of Construction and Customer Operations in July 2015. In August of 2018, she was promoted to Vice President of Construction and Customer Operations. She holds a Bachelor of Science degree in Civil Engineering from Manhattan College and has her Masters of Business Administration from Queens University. Prior to joining the Company, Ms. Ryan held multiple project management positions for Turner Construction and Rogers Builders, both of which offer construction services.
Boopathy Sathyamurthy joined the Company in 2000 as General Manager of India Operations and Kewaunee Labway India Pvt. Ltd. He was subsequently promoted to Managing Director of Kewaunee Labway India Pvt. Ltd. and Kewaunee Scientific Corporation Singapore Pte.India Pvt. Ltd., the holding company for Kewaunee’s subsidiaries in India, Singapore, and China, in September 2014. He has served as Managing Director of International Operations, which includes responsibilities for all sales and operations in Asia, as well as sales efforts in the Middle East, since September 2013. Mr. Sathyamurthy joined the Kewaunee organization in 2000 as General Managerwas elected Vice President of India Operations and Kewaunee Labway India Pvt. Ltd. He was subsequently promoted to Managing Director of Kewaunee Labway India Pvt. Ltd. and Kewaunee Scientific Corporation Singapore Pte. Ltd., the holding company for Kewaunee’s subsidiaries in India, Pvt. Ltd.

Section 16(a) Beneficial Ownership Reporting Compliance

The information appearingSingapore, and China, in the section entitled “Securities OwnershipSeptember 2014. He holds a Bachelor Degree in Mechanical Engineering from University of Certain Beneficial Owners—Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement is incorporated herein by reference.

Madras and a Masters of Business Administration from University of Madras.

Code of Ethics

A copy of our code of ethics that applies to our Chief Executive Officer and Chief Financial Officer, entitled “Ethics Obligations for Chief Executive Officer and Employees with Financial Reporting Responsibilities,” is available free of charge through our website atwww.kewaunee.com.

Audit Committee

The information appearing in the section entitled “Election of Directors – Meetings and Committees of the Board” in our Proxy Statement is incorporated herein by reference.

Item 11. Executive Compensation

The information appearing in the sections entitled “Compensation Discussion and Analysis,” “Compensation Tables,” “Agreements with Certain Executives,” and “Election of Directors – Compensation Committee Interlocks and Insider Participation” in the Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information appearing in the sections entitled “Security Ownership of Directors and Executive Officers” and “Security Ownership of Certain Beneficial Owners” in the Proxy Statement is incorporated herein by reference.

The following table sets forth certain information as of April 30, 20182019 with respect to compensation plans under which our equity securities are authorized for issuance:

Plan Category

  Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
   Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
   Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
 

Equity Compensation Plans approved by Security Holders:

      

2008 Key Employee Stock Option Plan

   127,250   $18.13    —   

2010 Stock Option Plan for Directors

   10,000   $16.48    —   

2017 Omnibus Incentive Plan

   23,907    —      263,942 

Equity Compensation Plans not approved by Security Holders:

   —      —      —   


Plan Category 
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
 
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
 
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
Equity Compensation Plans approved by Security Holders:      
2008 Key Employee Stock Option Plan 94,350
 $18.47
 
2010 Stock Option Plan for Directors 10,000
 $16.48
 
2017 Omnibus Incentive Plan 23,308
 
 272,178
Equity Compensation Plans not approved by Security Holders: 
 
 
Refer to Note 56 of the Company’s consolidated financial statements included in Item 8 for additional information.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information appearing in the sections entitled “Election of Directors” and “Agreements with Certain Executives” in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information appearing in the section entitled “Ratification of Appointment of Independent Registered Public Accounting Firm—Audit Fees andNon-Audit Fees” in the Proxy Statement is incorporated herein by reference.


PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed or incorporated by reference as part of this Annual Report:

  Page
(a)(1)PageConsolidated Financial Statements 

(a)(1)

Consolidated Financial Statements
 19
Report of Independent Registered Public Accounting Firm Cherry Bekaert LLP20
 21
 21
 22
 23
 24
 25
46
(a)(2)

(a)(2)

Consolidated Financial Statement Schedules 
 Financial statement schedules have been omitted because the information required has been separately disclosed in the consolidated financial statements or related notes. 
(a)(3)

(a)(3)

Exhibits
 Exhibits
 Exhibits required by Item 601 ofRegulation S-K are listed in the Exhibit Index, which is attached hereto at pages 5249 through 5451 and which is incorporated herein by reference. 



KEWAUNEE SCIENTIFIC CORPORATION

Exhibit Index

         Page Number
(or Reference)
 
3  Articles of incorporation and bylaws 
      3.1  Conformed copy of Restated Certificate of Incorporation (reflecting all amendments to date)   (1
      3.3  By-Laws (as amended as of December 9, 2015)   (16
10  Material Contracts 
    10.1*  Re-Established Retirement Plan for Salaried Employees of Kewaunee Scientific Corporation (as amended and restated effective as of May 1, 2012)   (5
    10.1A*  First Amendment to theRe-Established Retirement Plan for Salaried Employees of Kewaunee Scientific Corporation   (9
    10.1B*  Second Amendment to theRe-Established Retirement Plan for Salaried Employees of Kewaunee Scientific Corporation   (19
    10.1C*  Third Amendment to theRe-Established Retirement Plan for Salaried Employees of Kewaunee Scientific Corporation   (20
    10.1D*  Fourth Amendment to theRe-Established Retirement Plan for Salaried Employees of Kewaunee Scientific Corporation   (1
    10.2*  Re-Established Retirement Plan for Hourly Employees of Kewaunee Scientific Corporation (as amended and restated effective as of May 1, 2012)   (5
    10.2A*  First Amendment to theRe-Established Retirement Plan for Hourly Employees of Kewaunee Scientific Corporation   (9
    10.2B*  Second Amendment to theRe-Established Retirement Plan for Hourly Employees of Kewaunee Scientific Corporation   (19
    10.2C*  Third Amendment to theRe-Established Retirement Plan for Hourly Employees of Kewaunee Scientific Corporation   (20
    10.2D*  Fourth Amendment to theRe-Established Retirement Plan for Hourly Employees of Kewaunee Scientific Corporation   (1
    10.30*  Kewaunee Scientific Corporation Executive Severance Pay Policy   (2
    10.34*  401(k) Incentive Savings Plan for Salaried and Hourly Employees of Kewaunee Scientific Corporation (as amended and restated effective June 29, 2015)   (14
    10.40*  Change of Control Employment Agreement restated as of December 4, 2008 between Dana L. Dahlgren and the Company   (3
    10.40B*  Extension Agreement, dated August 27, 2014, with respect to the Change of Control Employment Agreement of Dana L. Dahlgren   (9
    10.40C*  Extension Agreement, dated December 7, 2017, with respect to the Change of Control Employment Agreement of Dana L. Dahlgren   (1
    10.41*  Change of Control Employment Agreement restated as of December 4, 2008 between Kurt P. Rindoks and the Company   (3

         Page Number
(or Reference)
 
    10.41B*  Extension Agreement, dated August 27, 2014, with respect to the Change of Control Employment Agreement of Kurt P. Rindoks   (9
    10.41C*  Extension Agreement, dated December 7, 2017, with respect to the Change of Control Employment Agreement of Kurt P. Rindoks   (1
    10.51*  Amended and Restated 2008 Key Employee Stock Option Plan effective August 26, 2015   (13
    10.53*  Change of Control Employment Agreement restated as of December 4, 2008 between Elizabeth D. Phillips and the Company   (3
    10.53B*  Extension Agreement, dated August 27, 2014, with respect to the Change of Control Employment Agreement of Elizabeth D. Phillips   (9
    10.53C*  Extension Agreement, dated December 7, 2017, with respect to the Change of Control Employment Agreement of Elizabeth D. Phillips   (1
    10.54*  Offer Letter to Thomas D. Hull dated October 14, 2015   (15
    10.55*  Change of Control Employment Agreement dated as of November 2, 2015 between Kewaunee Scientific Corporation and Thomas D. Hull   (15
    10.56*  Offer Letter to Michael G. Rok dated March 16, 2016   (19
    10.57*  Change of Control Employment Agreement dated as of May 2, 2016 between Kewaunee Scientific Corporation and Michael G. Rok   (19
    10.58*  Kewaunee Scientific Corporation 2010 Stock Option Plan for Directors   (4
    10.61  Credit and Security Agreement dated as of May  6, 2013 between Wells Fargo Bank, National Association and Kewaunee Scientific Corporation including the forms of notes executed thereunder   (6
    10.61A  First Amendment to Credit and Security Agreement dated July 9, 2013   (7
    10.61B  Second Amendment to Credit and Security Agreement dated June 10, 2014   (8
    10.61C  Third Amendment to Credit and Security Agreement and First Amendment to Revolving Line of Credit Note dated as of June 3, 2015   (10
    10.61D  Fourth Amendment to Credit and Security Agreement and First Amendment to Revolving Line of Credit Note dated as of March 12, 2018   (23
    10.66*  Restated and Amended Change of Control Employment Agreement, dated August 27, 2014, between the Company and David M. Rausch   (9
    10.66A*  Extension Agreement, dated December 7, 2017, with respect to the Change of Control Employment Agreement of David M. Rausch   (1
    10.67*  Fiscal Year 2016 Incentive Bonus Plan   (11
    10.68*  401Plus Executive Deferred Compensation Plan (as amended and restated January 1, 2009)   (12
    10.68A*  Amendment No. One to the Kewaunee Scientific Corporation 401Plus Executive Deferred Compensation Plan   (12
    10.68B*  Amendment No. Two to the Kewaunee Scientific Corporation 401Plus Executive Deferred Compensation Plan   (22
    10.69*  Pension Equalization Plan (as amended and restated January 1, 2009)   (12

         Page Number
(or Reference)
 
    10.69A*  Amendment No. One to the Kewaunee Scientific Corporation Pension Equalization Plan   (12
    10.71*  Fiscal Year 2017 Incentive Bonus Plan   (17
    10.72*  Kewaunee Scientific Corporation 2017 Omnibus Incentive Plan   (21
    16.1  Letter of Cherry Bekaert LLP dated June 28, 2016   (18
    21.1  Subsidiaries of the Company   (1
    23.1  Consent dated July 20, 2018 of Cherry Bekaert LLP, Independent Registered Public Accounting Firm (incorporated by reference to page  46 of this Report on Form10-K)   (1
    23.2  Consent dated July 20, 2018 of Ernst & Young LLP, Independent Registered Public Accounting Firm (incorporated by reference to page  46 of this Report on Form10-K)   (1
    31.1  Certification of Principal Executive Officer of the Company pursuant to Exchange Act Rule13a-14(a) or Rule15d-14(a)   (1
    31.2  Certification of Principal Financial Officer of the Company pursuant to Exchange Act Rule13a-14(a) or Rule15d-14(a)   (1
    32.1  Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   (1
    32.2  Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   (1
  101.INS  XBRL Instance Document   (1
  101.SCH  XBRL Taxonomy Extension Schema Document   (1
  101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document   (1
  101.DEF  XBRL Taxonomy Extension Definition Linkbase Document   (1
  101.LAB  XBRL Taxonomy Extension Label Linkbase Document   (1
  101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document   (1

*The referenced exhibit is a management contract or compensatory plan or arrangement.

      
Page Number
(or Reference)
3Articles of incorporation and bylaws  
  3.1  (18)
  3.3  (19)
4Description of Registrant's Securities  
  4.1  (1)
10Material Contracts  
  10.1*  (4)
  10.1A*  (8)
  10.1B*  (13)
  10.1C*  (14)
  10.1D*  (18)
  10.2*  (4)
  10.2A*  (8)
  10.2B*  (13)
  10.2C*  (14)
  10.2D*  (18)
  10.30*  (2)
  10.34*  (12)
  10.51*  (11)
  10.58*  (3)
  10.61  (5)
  10.61A  (6)
  10.61B  (7)
  10.61C  (9)
  10.61D  (17)
  10.61E  (1)
  10.61F  (1)
  10.61G  (1)
  10.61H  (1)
  10.61I  (1)
  10.68*  (10)


      
Page Number
(or Reference)
  10.68A*  (10)
  10.68B*  (16)
  10.69*  (10)
  10.69A*  (10)
  10.72*  (15)
  10.73*  (20)
  10.74*  (21)
  10.75*  (22)
  10.76*  (22)
  10.77*  (22)
  10.78*  (22)
  10.79*  (22)
  10.80*  (22)
  10.81*  (22)
  10.82*  (1)
  21.1  (1)
  23.1  (1)
  31.1  (1)
  31.2  (1)
  32.1  (1)
  32.2  (1)
  101.INS XBRL Instance Document (1)
  101.SCH XBRL Taxonomy Extension Schema Document (1)
  101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1)
  101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1)
  101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)
  101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)
_____________
*    The referenced exhibit is a management contract or compensatory plan or arrangement.
(All other exhibits are either inapplicable or not required.)

Footnotes

(1)Filed with this Form10-K with the Securities and Exchange Commission.

(2)Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form10-Q (Commission FileNo. 0-5286) for the quarterly period ended October 31, 2005 and incorporated herein by reference.
(3)Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form10-K (Commission FileNo. 0-5286) for the fiscal year ended April 30, 2009, and incorporated herein by reference.
(4)(3)Filed as Appendix A to the Kewaunee Scientific Corporation Proxy Statement for its Annual Meeting of Stockholders on August 25, 2010 (Commission FileNo. 0-5286) filed on July 23, 2010, and incorporated herein by reference.

(5)
(4)Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form10-Q (Commission FileNo. 0-5286) for the quarterly period ended October 31, 2012, and incorporated herein by reference.
(5)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form 8-K (Commission File No. 0-5286) filed on May 9, 2013, and incorporated herein by reference.
(6)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form8-K (Commission FileNo. 0-5286) filed on May 9, 2013, and incorporated herein by reference.
(7)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form8-K (Commission FileNo. 0-5286) filed on July 11, 2013, and incorporated herein by reference.
(8)
(7)Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form10-K (Commission FileNo. 0-5286) for the fiscal year ended April 30, 2014, and incorporated herein by reference.
(8)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form 8-K (Commission File No. 0-5286) filed on September 2, 2014, and incorporated herein by reference.
(9)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form8-K (Commission FileNo. 0-5286) filed on September 2, 2014, and incorporated herein by reference.
(10)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form8-K (Commission FileNo. 0-5286) filed on June 3, 2015, and incorporated herein by reference.
(11)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form8-K (Commission FileNo. 0-5286) filed on June 29, 2015 and incorporated herein by reference.
(12)(10)Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form10-K (Commission FileNo. 0-5286) for the fiscal year ended April 30, 2015, and incorporated herein by reference.
(13)
(11)Filed as Appendix A to the Kewaunee Scientific Corporation Proxy Statement for its Annual Meeting of Stockholders on August 28, 2015 (Commission FileNo. 0-5286) filed on July 24, 2015, and incorporated herein by reference.
(12)Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10-Q (Commission File No. 0-5286) for the quarterly period ended October 31, 2015 and incorporated herein by reference.
(13)Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 2016, and incorporated herein by reference.
(14)Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form10-Q (Commission FileNo. 0-5286) for the quarterly period ended October 31, 2015 and incorporated herein by reference.
(15)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on form8-K (Commission FileNo. 0-5286) filed on November 3, 2015 and incorporated herein by reference.
(16)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on form8-K (Commission FileNo. 0-5286) filed on December 10, 2015 and incorporated herein by reference.
(17)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form8-K (Commission FileNo. 0-5286) filed on June 24, 2016, and incorporated herein by reference.
(18)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form8-K (Commission FileNo. 0-5286) filed on June 28, 2016, and incorporated herein by reference.
(19)Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form10-K (Commission FileNo. 0-5286) for the fiscal year ended April 30, 2016, and incorporated herein by reference.
(20)Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form10-Q (Commission FileNo. 0-5286) for the quarterly period ended January 31, 2017 and incorporated herein by reference.
(21)
(15)Filed as Appendix A to the Kewaunee Scientific Corporation Proxy Statement for its Annual Meeting of Stockholders on August 30, 2017 (Commission FileNo. 0-5286) filed on July 21, 2017 and incorporated herein by reference.
(22)
(16)Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form10-Q (Commission FileNo. 0-5286) for the quarterly period ended January 31, 2018 and incorporated herein by reference.
(23)
(17)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on form8-K (Commission FileNo. 0-5286) filed on March 16, 2018 and incorporated herein by reference.
(18)Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 2018, and incorporated herein by reference.
(19)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on form 8-K (Commission File No. 0-5286) filed on February 1, 2019 and incorporated herein by reference.
(20)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on form 8-K (Commission File No. 0-5286) filed on April 30, 2019 and incorporated herein by reference.
(21)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on form 8-K (Commission File No. 0-5286) filed on June 21, 2019 and incorporated herein by reference.
(22)Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on form 8-K (Commission File No. 0-5286) filed on June 21, 2019 and incorporated herein by reference.






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 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

By: 

/s/ David M. Rausch

By:/s/ Thomas D. Hull III
 

David M. Rausch

Thomas D. Hull III
 

President and Chief Executive Officer

Date: July 20, 2018

11, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated have signed this report below.

indicated.

(i)

Principal Executive Officer)
  ) 
 
/s/ Thomas D. Hull III ) 
 

/s/ David M. Rausch

Thomas D. Hull III ) 
David M. Rausch)
 President and Chief Executive Officer ) 
 
  ) 

(ii)

Principal Financial and Accounting Officer ) 
 
  ) 
 

/s/ Thomas D. HullDonald T. Gardner III

 ) 
 
Thomas D. HullDonald T. Gardner III ) 
 Vice President, Finance ) 
 Chief Financial Officer, ) 
 Treasurer and Secretary ) 
 
  ) 

(iii)

A majority of the Board of Directors: ))July 11, 2019
  July 20, 2018
  ) 
 
  ) 

/s/ Keith M. Gehl

 

/s/ John D. Russell

 ) 

Keith M. Gehl

 John D. Russell ) 
 
  ) 
 
  ) 

/s/ Margaret B. Pyle

 

/s/ Donald F. Shaw

 ) 

Margaret B. Pyle

 Donald F. Shaw ) 
 
  ) 
 
  ) 

/s/ David M. Rausch

Thomas D. Hull, III
 

/s/ William A. Shumaker

  ) 

David M. Rausch

Thomas D. Hull, III
 William A. Shumaker  ) 
 
  ) 
 
  ) 

/s/ David S. Rhind

   ) 

David S. Rhind

   ) 
  )
  
  )

56


53