UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

_________________________


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

For the quarterly period ended ~~October~~January 31, ~~2021~~2022


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

For the transition period from __________ to __________

Commission file number 0-5286

_________________________

KEWAUNEE SCIENTIFIC CORPORATION

(Exact name of registrant as specified in its charter)

_________________________


Delaware						38-0715562
(State or other jurisdiction of 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 value KEQU NASDAQ Global Market

_________________________

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-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 Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

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 in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~December 13, 2021,~~March 8, 2022, the registrant had outstanding 2,789,873 shares of Common Stock.

KEWAUNEE SCIENTIFIC CORPORATION

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~OCTOBER~~JANUARY 31, ~~2021~~2022


		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Statements of Operations (unaudited) – Three and ~~and~~Nine ~~Six~~ Months Ended ~~October~~January 31, 202 2 ~~31, 2021~~ and ~~2020~~20 21	1
	Condensed Consolidated Statements of Comprehensive Loss (unaudited) – Three and ~~and~~ ~~Six~~ Nine Months Ended ~~October~~January 31, ~~2021~~2022 and ~~2020~~2021	2
	Condensed Consolidated Statements of Stockholders' Equity (unaudited) – Three and ~~and~~ ~~Six~~ Nine Months Ended ~~October~~January 31, ~~2021~~2022 and ~~2020~~2021	3
	Condensed Consolidated Balance Sheets – ~~October~~January 31, 2022 ~~31, 2021~~ (unaudited) and April 30, 2021	4
	Condensed Consolidated Statements of Cash Flows (unaudited) –~~Six~~Nine Months Ended ~~October~~January 31, ~~2021~~2022 and ~~2020~~2021	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14

PART II. OTHER INFORMATION
Item 1A.	Risk Factors	16
Item 6.	Exhibits	16
SIGNATURES		17

Part 1. Financial Information

Item 1. Condensed Consolidated Financial Statements

~~-Kewaunee~~Kewaunee Scientific Corporation

Condensed Consolidated Statements of Operations

(Unaudited)

($ and shares in thousands, except per share amounts)


		Three Months Ended October 31,				Six Months Ended October 31,					Three Months Ended January 31,				Nine Months Ended January 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Net sales	Net sales	$	39,031	$	39,000	$	78,524	$	75,423	Net sales	$	40,633	$	33,339	$	119,157	$	108,762
Cost of products sold	Cost of products sold	35,434		32,605		69,253		63,147		Cost of products sold	35,011		27,685		104,264		90,832
Gross profit	Gross profit	3,597		6,395		9,271		12,276		Gross profit	5,622		5,654		14,893		17,930
Operating expenses	Operating expenses	6,487		6,406		13,252		12,563		Operating expenses	6,490		6,030		19,742		18,593
Operating loss	Operating loss	(2,890)		(11)		(3,981)		(287)		Operating loss	(868)		(376)		(4,849)		(663)
Pension income (expense)	Pension income (expense)	89		(289)		178		(577)		Pension income (expense)	88		(288)		266		(865)
Other income, net	Other income, net	46		66		98		120		Other income, net	51		51		149		171
Interest expense	Interest expense	(132)		(128)		(238)		(205)		Interest expense	(158)		(105)		(396)		(310)
Loss before income taxes	Loss before income taxes	(2,887)		(362)		(3,943)		(949)		Loss before income taxes	(887)		(718)		(4,830)		(1,667)
Income tax expense (benefit)	Income tax expense (benefit)	195		(197)		446		(176)		Income tax expense (benefit)	399		(813)		845		(989)
Net loss		(3,082)		(165)		(4,389)		(773)
Net (loss) earnings										Net (loss) earnings	(1,286)		95		(5,675)		(678)
Less: Net earnings attributable to the non-controlling interest	Less: Net earnings attributable to the non-controlling interest	18		15		56		5		Less: Net earnings attributable to the non-controlling interest	33		14		89		19
Net loss attributable to Kewaunee Scientific Corporation		$	(3,100)	$	(180)	$	(4,445)	$	(778)
Net (loss) earnings attributable to Kewaunee Scientific Corporation										Net (loss) earnings attributable to Kewaunee Scientific Corporation	$	(1,319)	$	81	$	(5,764)	$	(697)

Net loss per share attributable to Kewaunee Scientific Corporation stockholders
Net (loss) earnings per share attributable to Kewaunee Scientific Corporation stockholders										Net (loss) earnings per share attributable to Kewaunee Scientific Corporation stockholders
Basic	Basic	$	(1.11)	$	(0.07)	$	(1.60)	$	(0.28)	Basic	$	(0.47)	$	0.03	$	(2.07)	$	(0.25)
Diluted	Diluted	$	(1.11)	$	(0.07)	$	(1.60)	$	(0.28)	Diluted	$	(0.47)	$	0.03	$	(2.07)	$	(0.25)
Weighted average number of common shares outstanding	Weighted average number of common shares outstanding									Weighted average number of common shares outstanding
Basic	Basic	2,789		2,759		2,783		2,757		Basic	2,790		2,762		2,785		2,759
Diluted	Diluted	2,789		2,759		2,783		2,757		Diluted	2,790		2,789		2,785		2,759

See accompanying notes to Condensed Consolidated Financial Statements.

Kewaunee Scientific Corporation

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

($ in thousands)

Three Months Ended
October 31, Six Months Ended October 31,
2021 2020 2021 2020
Net loss $ (3,082) $ (165) $ (4,389) $ (773)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (83) (35) (159) (48)
Other comprehensive loss (83) (35) (159) (48)
Comprehensive loss, net of tax (3,165) (200) (4,548) (821)
Less: Comprehensive income attributable to the non-controlling interest 18 15 56 5
Comprehensive loss attributable to Kewaunee Scientific Corporation $ (3,183) $ (215) $ (4,604) $ (826)


	Three Months Ended January 31,				Nine Months Ended January 31,
	2022		2021		2022		2021
Net (loss) earnings	$	(1,286)	$	95	$	(5,675)	$	(678)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	52		31		(107)		(17)
Other comprehensive (loss) income	52		31		(107)		(17)
Comprehensive (loss) income, net of tax	(1,234)		126		(5,782)		(695)
Less: Comprehensive income attributable to the non-controlling interest	33		14		89		19
Comprehensive (loss) income attributable to Kewaunee Scientific Corporation	$	(1,267)	$	112	$	(5,871)	$	(714)

See accompanying notes to Condensed Consolidated Financial Statements.

Kewaunee Scientific Corporation

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

($ in thousands, except per share amounts)


		Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Kewaunee Scientific Corporation Stockholders' Equity			Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Kewaunee Scientific Corporation Stockholders' Equity
Balance at April 30, 2021	Balance at April 30, 2021	$	6,915	$	3,807	$	(53)	$	34,149	$	(3,577)	$	41,241	Balance at April 30, 2021	$	6,915	$	3,807	$	(53)	$	34,149	$	(3,577)	$	41,241
Net loss attributable to Kewaunee Scientific Corporation	Net loss attributable to Kewaunee Scientific Corporation	—		—		—		(1,345)		—		(1,345)		Net loss attributable to Kewaunee Scientific Corporation	—		—		—		(1,345)		—		(1,345)
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(76)		(76)		Other comprehensive loss	—		—		—		—		(76)		(76)
Stock-based compensation	Stock-based compensation	67		171		—		—		—		238		Stock-based compensation	67		171		—		—		—		238
Balance at July 31, 2021	Balance at July 31, 2021	$	6,982	$	3,978	$	(53)	$	32,804	$	(3,653)	$	40,058	Balance at July 31, 2021	$	6,982	$	3,978	$	(53)	$	32,804	$	(3,653)	$	40,058
Net loss attributable to Kewaunee Scientific Corporation	Net loss attributable to Kewaunee Scientific Corporation	—		—		—		(3,100)		—		(3,100)		Net loss attributable to Kewaunee Scientific Corporation	—		—		—		(3,100)		—		(3,100)
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(83)		(83)		Other comprehensive loss	—		—		—		—		(83)		(83)
Stock-based compensation	Stock-based compensation	1		129		—		—		—		130		Stock-based compensation	1		129		—		—		—		130
Balance at October 31, 2021	Balance at October 31, 2021	$	6,983	$	4,107	$	(53)	$	29,704	$	(3,736)	$	37,005	Balance at October 31, 2021	$	6,983	$	4,107	$	(53)	$	29,704	$	(3,736)	$	37,005
Net loss attributable to Kewaunee Scientific Corporation														Net loss attributable to Kewaunee Scientific Corporation	—		—		—		(1,319)		—		(1,319)
Other comprehensive loss														Other comprehensive loss	—		—		—		—		52		52
Stock-based compensation														Stock-based compensation	—		109		—		—		—		109
Balance at January 31, 2022														Balance at January 31, 2022	$	6,983	$	4,216	$	(53)	$	28,385	$	(3,684)	$	35,847

Common
Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Total Kewaunee Scientific Corporation Stockholders' Equity
Balance at April 30, 2020 $ 6,885 $ 3,360 $ (53) $ 37,821 $ (9,598) $ 38,415
Net loss attributable to Kewaunee Scientific Corporation — — — (598) — (598)
Other comprehensive loss — — — — (13) (13)
Stock-based compensation 20 78 — — — 98
Balance at July 31, 2020 $ 6,905 $ 3,438 $ (53) $ 37,223 $ (9,611) $ 37,902
Net loss attributable to Kewaunee Scientific Corporation — — — (180) — (180)
Other comprehensive loss — — — — (35) (35)
Stock-based compensation — 143 — — — 143
Balance at October 31, 2020 $ 6,905 $ 3,581 $ (53) $ 37,043 $ (9,646) $ 37,830


	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Kewaunee Scientific Corporation Stockholders' Equity
Balance at April 30, 2020	$	6,885	$	3,360	$	(53)	$	37,821	$	(9,598)	$	38,415
Net loss attributable to Kewaunee Scientific Corporation	—		—		—		(598)		—		(598)
Other comprehensive loss	—		—		—		—		(13)		(13)
Stock-based compensation	20		78		—		—		—		98
Balance at July 31, 2020	$	6,905	$	3,438	$	(53)	$	37,223	$	(9,611)	$	37,902
Net loss attributable to Kewaunee Scientific Corporation	—		—		—		(180)		—		(180)
Other comprehensive loss	—		—		—		—		(35)		(35)
Stock-based compensation	—		143		—		—		—		143
Balance at October 31, 2020	$	6,905	$	3,581	$	(53)	$	37,043	$	(9,646)	$	37,830
Net earnings attributable to Kewaunee Scientific Corporation	—		—		—		81		—		81
Other comprehensive income	—		—		—		—		31		31
Stock-based compensation	10		103		—		—		—		113
Balance at January 31, 2021	$	6,915	$	3,684	$	(53)	$	37,124	$	(9,615)	$	38,055

See accompanying notes to Condensed Consolidated Financial Statements.

Kewaunee Scientific Corporation

Condensed Consolidated Balance Sheets

($ and shares in thousands, except per share amounts)


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current Assets:	Current Assets:					Current Assets:
Cash and cash equivalents	Cash and cash equivalents	$	4,715	$	5,206	Cash and cash equivalents	$	4,697	$	5,206
Restricted cash	Restricted cash	817		525		Restricted cash	805		525
Receivables, less allowance; $404; $636, on each respective date		37,069		32,882
Receivables, less allowance; $426; $636, on each respective date						Receivables, less allowance; $426; $636, on each respective date	35,053		32,882
Inventories	Inventories	18,120		16,517		Inventories	19,947		16,517
Income tax receivable	Income tax receivable	774		955		Income tax receivable	638		955
Prepaid expenses and other current assets	Prepaid expenses and other current assets	5,325		4,372		Prepaid expenses and other current assets	7,780		4,372
Total Current Assets	Total Current Assets	66,820		60,457		Total Current Assets	68,920		60,457
Property, plant and equipment, at cost	Property, plant and equipment, at cost	59,744		58,804		Property, plant and equipment, at cost	60,269		58,804
Accumulated depreciation	Accumulated depreciation	(44,229)		(42,822)		Accumulated depreciation	(44,924)		(42,822)
Net Property, Plant and Equipment	Net Property, Plant and Equipment	15,515		15,982		Net Property, Plant and Equipment	15,345		15,982
Right of use assets	Right of use assets	8,454		9,279		Right of use assets	8,006		9,279

Other assets	Other assets	3,504		3,666		Other assets	3,415		3,666
Total Assets	Total Assets	$	94,293	$	89,384	Total Assets	$	95,686	$	89,384

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current Liabilities:	Current Liabilities:					Current Liabilities:
Short-term borrowings	Short-term borrowings	$	13,695	$	6,828	Short-term borrowings	$	8,962	$	6,828
Current portion of financing lease liability	Current portion of financing lease liability	22		21		Current portion of financing lease liability	131		21
Current portion of operating lease liabilities	Current portion of operating lease liabilities	1,356		1,348		Current portion of operating lease liabilities	1,355		1,348
Accounts payable	Accounts payable	20,228		16,780		Accounts payable	27,415		16,780
Employee compensation and amounts withheld	Employee compensation and amounts withheld	4,084		4,726		Employee compensation and amounts withheld	4,930		4,726
Deferred revenue	Deferred revenue	3,052		3,123		Deferred revenue	3,104		3,123
Other accrued expenses	Other accrued expenses	1,334		1,355		Other accrued expenses	1,611		1,355
Total Current Liabilities	Total Current Liabilities	43,771		34,181		Total Current Liabilities	47,508		34,181
Long-term portion of financing lease liability	Long-term portion of financing lease liability	80		91		Long-term portion of financing lease liability	198		91
Long-term portion of operating lease liabilities	Long-term portion of operating lease liabilities	7,031		7,860		Long-term portion of operating lease liabilities	6,605		7,860
Accrued pension and deferred compensation costs	Accrued pension and deferred compensation costs	4,563		4,652		Accrued pension and deferred compensation costs	4,381		4,652
Deferred income taxes	Deferred income taxes	380		307		Deferred income taxes	411		307
Other non-current liabilities	Other non-current liabilities	1,165		806		Other non-current liabilities	403		806
Total Liabilities	Total Liabilities	56,990		47,897		Total Liabilities	59,506		47,897
Commitments and Contingencies	Commitments and Contingencies	0		0		Commitments and Contingencies	0		0
Stockholders' Equity:	Stockholders' Equity:					Stockholders' Equity:
Common stock, $2.50 par value, Authorized – 5,000 shares; Issued – 2,793 shares; 2,766 shares; – Outstanding – 2,790 shares; 2,763 shares, on each respective date	Common stock, $2.50 par value, Authorized – 5,000 shares; Issued – 2,793 shares; 2,766 shares; – Outstanding – 2,790 shares; 2,763 shares, on each respective date	6,983		6,915		Common stock, $2.50 par value, Authorized – 5,000 shares; Issued – 2,793 shares; 2,766 shares; – Outstanding – 2,790 shares; 2,763 shares, on each respective date	6,983		6,915
Additional paid-in-capital	Additional paid-in-capital	4,107		3,807		Additional paid-in-capital	4,216		3,807
Retained earnings	Retained earnings	29,704		34,149		Retained earnings	28,385		34,149
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,736)		(3,577)		Accumulated other comprehensive loss	(3,684)		(3,577)
Common stock in treasury, at cost, 3 shares, on each respective date	Common stock in treasury, at cost, 3 shares, on each respective date	(53)		(53)		Common stock in treasury, at cost, 3 shares, on each respective date	(53)		(53)
Total Kewaunee Scientific Corporation Stockholders' Equity	Total Kewaunee Scientific Corporation Stockholders' Equity	37,005		41,241		Total Kewaunee Scientific Corporation Stockholders' Equity	35,847		41,241
Non-controlling interest	Non-controlling interest	298		246		Non-controlling interest	333		246
Total Stockholders' Equity	Total Stockholders' Equity	37,303		41,487		Total Stockholders' Equity	36,180		41,487
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	94,293	$	89,384	Total Liabilities and Stockholders' Equity	$	95,686	$	89,384

See accompanying notes to Condensed Consolidated Financial Statements.

Kewaunee Scientific Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

($ in thousands)


		Six Months Ended October 31,					Nine Months Ended January 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(4,389)	$	(773)	Net loss	$	(5,675)	$	(678)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:						Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation	Depreciation	1,396		1,346		Depreciation	2,092		2,005
Bad debt provision	Bad debt provision	(2)		93		Bad debt provision	27		60
Stock-based compensation expense	Stock-based compensation expense	366		256		Stock-based compensation expense	502		385
Deferred income taxes	Deferred income taxes	72		257		Deferred income taxes	104		159
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Receivables	Receivables	(2,971)		(4,243)		Receivables	(2,199)		(2,318)
Inventories	Inventories	(1,603)		(794)		Inventories	(3,430)		(285)
Income tax receivable	Income tax receivable	180		(503)		Income tax receivable	316		(1,488)
Accounts payable and other accrued expenses	Accounts payable and other accrued expenses	3,145		4,379		Accounts payable and other accrued expenses	10,692		3,843
Deferred revenue	Deferred revenue	(72)		260		Deferred revenue	(19)		1,134
Other, net	Other, net	(2,193)		(794)		Other, net	(3,497)		290
Net cash used in operating activities		(6,071)		(516)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(1,087)		3,107
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(930)		(1,292)		Capital expenditures	(1,222)		(1,944)
Net cash used in investing activities	Net cash used in investing activities	(930)		(1,292)		Net cash used in investing activities	(1,222)		(1,944)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Dividends paid to non-controlling interest in subsidiaries	Dividends paid to non-controlling interest in subsidiaries	—		(57)		Dividends paid to non-controlling interest in subsidiaries	—		(108)
Proceeds from short-term borrowings	Proceeds from short-term borrowings	28,641		37,599		Proceeds from short-term borrowings	42,975		49,298
Repayments on short-term borrowings	Repayments on short-term borrowings	(21,774)		(34,726)		Repayments on short-term borrowings	(40,840)		(49,524)
Payments on long-term lease obligations	Payments on long-term lease obligations	(10)		(9)		Payments on long-term lease obligations	(16)		(14)
Net proceeds from exercise of stock options	Net proceeds from exercise of stock options	—		(15)		Net proceeds from exercise of stock options	—		(31)
Net cash provided by financing activities		6,857		2,792
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	2,119		(379)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(55)		41		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(39)		104
(Decrease) increase in cash, cash equivalents and restricted cash	(Decrease) increase in cash, cash equivalents and restricted cash	(199)		1,025		(Decrease) increase in cash, cash equivalents and restricted cash	(229)		888
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	5,731		5,215		Cash, cash equivalents and restricted cash, beginning of period	5,731		5,215
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	5,532	$	6,240	Cash, cash equivalents and restricted cash, end of period	$	5,502	$	6,103

See accompanying notes to Condensed Consolidated Financial Statements.

Kewaunee Scientific Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

A. Financial Information

The unaudited interim Condensed Consolidated Financial Statements of Kewaunee Scientific Corporation (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These interim Condensed Consolidated Financial Statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of these financial statements and should be read in conjunction with the Consolidated Financial Statements and Notes included in the Company's 2021 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. The Condensed Consolidated Balance Sheet as of April 30, 2021 included in this interim period filing has been derived from the audited consolidated financial statements at that date, but does not include all of the information and related notes required by GAAP for complete financial statements.

The preparation of the interim Condensed Consolidated Financial Statements requires management to make certain estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

B. Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. During the periods ended ~~October~~January 31, ~~2021~~2022 and April 30, 2021, the Company had cash deposits in excess of FDIC insured limits. The Company has not experienced any losses from such deposits. Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders.

The Company includes restricted cash along with the cash balance for presentation in the Condensed Consolidated Statements of Cash Flows. The reconciliation between the Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of Cash Flows is as follows:


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
Cash and cash equivalents	Cash and cash equivalents	$	4,715	$	5,206	Cash and cash equivalents	$	4,697	$	5,206
Restricted cash	Restricted cash	817		525		Restricted cash	805		525
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	5,532	$	5,731	Total cash, cash equivalents and restricted cash	$	5,502	$	5,731

C. 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.

Disaggregated Revenue

A summary of net sales transferred to customers over time and at a point in time for the periods ended ~~October~~January 31, ~~2021~~2022 and ~~October~~January 31, ~~2020~~2021 is as follows (in thousands):


		Three Months Ended													Three Months Ended
		October 31, 2021						October 31, 2020							January 31, 2022						January 31, 2021
		Domestic		International		Total		Domestic		International		Total			Domestic		International		Total		Domestic		International		Total
Over Time	Over Time	$	28,450	$	9,097	$	37,547	$	26,950	$	10,228	$	37,178	Over Time	$	28,240	$	11,102	$	39,342	$	24,198	$	8,273	$	32,471
Point in Time	Point in Time	1,484		—		1,484		1,822		—		1,822		Point in Time	1,291		—		1,291		868		—		868
Total	Total	$	29,934	$	9,097	$	39,031	$	28,772	$	10,228	$	39,000	Total	$	29,531	$	11,102	$	40,633	$	25,066	$	8,273	$	33,339


		Six Months Ended													Nine Months Ended
		October 31, 2021						October 31, 2020							January 31, 2022						January 31, 2021
		Domestic		International		Total		Domestic		International		Total			Domestic		International		Total		Domestic		International		Total
Over Time	Over Time	$	57,102	$	18,927	$	76,029	$	56,030	$	16,593	$	72,623	Over Time	$	85,342	$	30,029	$	115,371	$	81,206	$	24,866	$	106,072
Point in Time	Point in Time	2,495		—		2,495		2,800		—		2,800		Point in Time	3,786		—		3,786		2,690		—		2,690
Total	Total	$	59,597	$	18,927	$	78,524��	$	58,830	$	16,593	$	75,423	Total	$	89,128	$	30,029	$	119,157	$	83,896	$	24,866	$	108,762

Contract Balances

The closing and opening balances of contract assets included ~~$8,102,000~~$8,450,000 in accounts receivable and ~~$1,568,000~~$1,305,000 in other assets at ~~October~~January 31, ~~2021.~~2022. The opening balance of contract assets arising from contracts with customers included $5,716,000 in accounts receivable and $1,213,000 in other assets at April 30, 2021. The closing and opening balances of contract liabilities included in deferred revenue arising from contracts with customers were ~~$3,052,000~~$3,104,000 at ~~October~~January 31, ~~2021~~2022 and $3,123,000 at April 30, 2021. The timing of revenue recognition, billings and cash collections results in accounts receivable, unbilled receivables, and deferred revenue which are disclosed in the Condensed Consolidated Balance Sheets and in the Notes to the Condensed 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 and are included in receivables on the Condensed Consolidated Balance Sheets. Receivables 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. Approximately 100% of the contract liability balances at April 30, 2021 and ~~October~~January 31, ~~2021~~2022 are expected to be recognized as revenue during the respective succeeding 12 months.

D. Inventories

The Company measures inventory using the first-in, first-out ("FIFO") method at the lower of cost or net realizable value. Inventories consisted of the following (in thousands):


		October 31, 2021		April 30, 2021			January 31, 2022		April 30, 2021
Finished products	Finished products	$	4,541	$	2,988	Finished products	$	4,997	$	2,988
Work in process	Work in process	2,322		1,832		Work in process	2,837		1,832
Raw materials	Raw materials	11,257		11,697		Raw materials	12,113		11,697
Total	Total	$	18,120	$	16,517	Total	$	19,947	$	16,517

The Company's International subsidiaries' inventories were ~~$2,214,000~~$2,238,000 at ~~October~~January 31, ~~2021~~2022 and $2,560,000 at April 30, 2021 and are included in the above tables.

E. Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash and equivalents, mutual funds, cash surrender value of life insurance policies, and short-term borrowings. The carrying value of these assets and liabilities approximates their fair value. The following tables summarize the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of ~~October~~January 31, ~~2021~~2022 and April 30, 2021 (in thousands):


		October 31, 2021							January 31, 2022
Financial Assets	Financial Assets	Level 1		Level 2		Total		Financial Assets	Level 1		Level 2		Total
Trading securities held in non-qualified compensation plans (1)	Trading securities held in non-qualified compensation plans (1)	$	1,323	$	—	$	1,323	Trading securities held in non-qualified compensation plans (1)	$	1,274	$	—	$	1,274
Cash surrender value of life insurance policies (1)	Cash surrender value of life insurance policies (1)	—		1,487		1,487		Cash surrender value of life insurance policies (1)	—		1,441		1,441
Total	Total	$	1,323	$	1,487	$	2,810	Total	$	1,274	$	1,441	$	2,715
Financial Liabilities	Financial Liabilities							Financial Liabilities
Non-qualified compensation plans (2)	Non-qualified compensation plans (2)	$	—	$	3,258	$	3,258	Non-qualified compensation plans (2)	$	—	$	3,164	$	3,164
Total	Total	$	—	$	3,258	$	3,258	Total	$	—	$	3,164	$	3,164


	April 30, 2021
Financial Assets	Level 1		Level 2		Total
Trading securities held in non-qualified compensation plans (1)	$	1,299	$	—	$	1,299
Cash surrender value of life insurance policies (1)	—		1,458		1,458
Total	$	1,299	$	1,458	$	2,757
Financial Liabilities
Non-qualified compensation plans (2)	$	—	$	3,169	$	3,169
Total	$	—	$	3,169	$	3,169

(1)The Company maintains 2 non-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.

F. Long-term Debt and Other Credit Arrangements

At ~~October~~January 31, ~~2021,~~2022, advances of ~~$12.5~~$8.4 million were outstanding under the Company's revolving credit facility, compared to advances of $6.8 million outstanding as of April 30, 2021. The Company had standby letters of credit outstanding of $704,000 at ~~October~~January 31, ~~2021,~~2022, unchanged from April 30, 2021. Amounts available under the revolving credit facility were ~~$2.5~~$4.1 million and $7.5 million at ~~October~~January 31, ~~2021~~2022 and April 30, 2021, respectively.

On July 30, 2021, the Company entered into a Twelfth Amendment to Credit and Security Agreement (the “Amendment”) with Wells Fargo Bank, National Association (the “Bank”). The Amendment made certain changes to the Credit and Security Agreement, dated as of May 6, 2013, as amended (the “Credit Agreement”), between the Company and the Bank, and to the Revolving Line of Credit Note, dated May 6, 2013, made by the Company and payable to the order of the Bank, as amended (the “Revolving Note”). The changes included (i) extending the maturity date under the Credit Agreement and Revolving Note from July 30, 2021 to April 30, 2022; (ii) removing the minimum EBITDA covenant; (iii) in addition to the existing Minimum Monthly Liquidity requirement as of the end of each calendar month of not less than $2,000,000, adding an additional covenant that the Company will maintain Supplemental Liquidity (as defined in the amended Credit Agreement) as of the first day of each calendar month not less than (a) during the period from August 1, 2021 through December 31, 2021, $1,000,000 and (b) thereafter $1,500,000; and (iv) restating the amended Credit Agreement to reflect all amendments to date.

At ~~October~~January 31, ~~2021~~2022 and April 30, 2021, the Company was in compliance with all the financial covenants under its revolving credit facility.

During the three months ended January 31, 2022, the supplemental liquidity threshold for the Company, as defined in the Credit Agreement, fell below $3,000,000 for one reporting period. The Company has obtained a waiver of the debt covenant violation that occurred on that date and returned to full compliance for the subsequent months during the period ended January 31, 2022.

G. Leases

In accordance with ASC 842, "Leases," the Company recognizes lease assets and lease liabilities reflecting the rights and obligations created by operating type leases for real estate and equipment in both the U.S. and internationally and a financing ~~lease~~leases for a truck and IT equipment in the U.S. At ~~October~~January 31, ~~2021~~2022 and April 30, 2021, right-of-use assets totaled ~~$8,454,000~~$8,006,000 and $9,279,000, respectively. Operating cash paid to settle lease liabilities was ~~$1,006,000~~$1,515,000 and ~~$848,000~~$1,299,000 for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~October~~January 31, ~~2020,~~2021, respectively. The Company's leases have remaining lease terms of up to 8 years. In addition, some of the leases may include options to extend the leases for up to 5 years or options to terminate the leases within 1 year. Operating lease expenses were ~~$707,000~~$754,000 and ~~$1,555,000~~$2,309,000 for the three and ~~six~~nine months ended ~~October~~January 31, 2022, respectively, inclusive of period cost for short-term leases, not included in lease liabilities, of $245,000 and $794,000, respectively. Operating lease expenses were $718,000 and $2,032,000 for the three and nine months ended January 31, 2021, respectively, inclusive of period cost for short-term leases, not included in lease liabilities, of ~~$201,000~~$267,000 and $549,000, respectively. Operating lease expenses were $683,000 and $1,315,000 for the three and six months ended October 31, 2020, respectively, inclusive of period cost for short-term leases, not included in lease liabilities, of $245,000 and $467,000,$733,000, respectively.

At ~~October~~January 31, ~~2021,~~2022, the weighted average remaining lease term for the capitalized operating leases was ~~5.7~~5.6 years and the weighted average discount rate was 4.1%. For the financing ~~lease,~~leases, the weighted average remaining lease term was ~~3.8~~4.6 years and the weighted average discount rate was ~~10.0%~~6.8%. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of those lease payments. The Company uses the implicit rate when readily determinable.

Future minimum lease payments under non-cancelable leases as of ~~October~~January 31, ~~2021,~~2022, excluding the future minimum lease payments for those leases that have not yet commenced as of ~~October~~January 31, ~~2021,~~2022, were as follows:

Operating Financing
Remainder of fiscal 2022 $ 1,005 $ 16
2023 1,840 32
2024 1,484 32
2025 1,440 32
2026 1,230 12
Thereafter 2,858 —
Total Minimum Lease Payments 9,857 124
Imputed Interest (1,470) (22)
Total $ 8,387 $ 102

As of October 31, 2021, the Company has entered into a new lease that has not yet commenced with future minimum lease payments of $219,000 that are not yet reflected on the Condensed Consolidated Balance Sheets. This lease is expected to commence in the second half of fiscal year 2022 with a lease term of 5 years.


	Operating		Financing

Remainder of fiscal 2022	$	497	$	62
2023	1,842		86
2024	1,485		86
2025	1,441		86
2026	1,231		67
Thereafter	2,861		—
Total Minimum Lease Payments	9,357		387
Imputed Interest	(1,397)		(44)
Total	$	7,960	$	343

H. Earnings Per Share

Basic 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") under the Company's various stock compensation plans, except when RSUs and options have an antidilutive effect. There were ~~128,704~~135,435 and ~~116,575~~83,910 antidilutive RSUs and options outstanding at ~~October~~January 31, ~~2021~~2022 and ~~October~~January 31, ~~2020,~~2021, respectively. The following is a reconciliation of basic to diluted weighted average common shares outstanding (in thousands):


		Three Months Ended		Six Months Ended			Three Months Ended		Nine Months Ended
		October 31, 2021	October 31, 2020	October 31, 2021	October 31, 2020		January 31, 2022	January 31, 2021	January 31, 2022	January 31, 2021
Basic	Basic	2,789	2,759	2,783	2,757	Basic	2,790	2,762	2,785	2,759
Dilutive effect of stock options and RSUs	Dilutive effect of stock options and RSUs	—	—	—	—	Dilutive effect of stock options and RSUs	—	27	—	—
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	2,789	2,759	2,783	2,757	Weighted average common shares outstanding - diluted	2,790	2,789	2,785	2,759

I. Stock Options and Stock-based Compensation

Under ASC 718, "Compensation-Stock Compensation," compensation costs related to stock options and other stock awards granted by the Company are charged against operating expenses during their vesting period.

In June 2021, the Company granted 5,500 RSUs under the 2017 Omnibus Incentive Plan ("2017 Plan"). These RSUs include a service component that vests over a two-year period. The Company also granted 51,471 RSUs under the 2017 Omnibus Incentive Plan in June 2021 that include a service component that vests over a three-year period. The recognized expense is

based upon the vesting period for service criteria. The Company recorded stock-based compensation expense during the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 of ~~$131,000~~$109,000 and ~~$325,000,~~$433,000, respectively, with the remaining estimated stock-based compensation expense of ~~$1,148,000~~$907,000 to be recorded over the remaining vesting periods. The Company recorded stock-based compensation expense during the three and ~~six~~nine months ended ~~October~~January 31, ~~2020~~2021 of ~~$141,000~~$129,000 and ~~$200,000,~~$344,000, respectively. Directors' fees paid with shares of common stock in lieu of cash in accordance with Director compensation guidelines were $41,000 for each of the ~~six~~nine month periods ended ~~October~~January 31, ~~2021~~2022 and ~~October~~January 31, ~~2020~~2021 and were also included in the stock-based compensation on the Condensed Consolidated Statements of Cash Flows.

J. Income Taxes

Income tax expense of ~~$195,000~~$399,000 and ~~$446,000~~$845,000 was recorded for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, respectively. Income tax benefit of ~~$197,000~~$813,000 and ~~$176,000~~$989,000 was recorded for the three and ~~six~~nine months ended ~~October 31, 2020, respectively. The effective tax rates were (6.8)% and (11.3)% for the three and six months ended October~~January 31, 2021, respectively. The effective tax rates were ~~54.4%~~(45.0)% and ~~18.5%~~(17.5)% for the three and ~~six~~nine months ended ~~October~~January 31, ~~2020,~~2022, respectively. The effective tax rates were 113.2% and 59.3% for the three and nine months ended January 31, 2021, respectively. The change in the effective tax rate for the three- and ~~six-month~~nine-month periods is primarily due to the impact of foreign operations which are taxed at different rates than the U.S. tax rate of 21% and the recording of a valuation allowance against the deferred tax asset which resulted in the elimination of any U.S. income tax benefit.

In August 2019, the Company revoked its indefinite reinvestment of foreign unremitted earnings position in compliance with ASC 740 "Income Taxes" and terminated its indefinite reinvestment of unremitted earnings assertion for the Singapore, China, and Kewaunee Labway India Pvt. Ltd. international subsidiaries. The Company has a deferred tax liability of ~~$860,000~~$895,000 and $776,000 for the withholding tax related to Kewaunee Labway India Pvt. Ltd. as of ~~October~~January 31, ~~2021~~2022 and April 30, 2021, respectively. The Company recorded all deferred tax assets and liabilities related to its outside basis differences in its foreign subsidiaries consistent with ASC 740.

K. Defined Benefit Pension Plans

The Company has non-contributory defined benefit pension plans covering substantially all domestic salaried and hourly 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. There were no Company contributions paid to the plans for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~October~~January 31, ~~2020.~~2021. The Company assumed an expected long-term rate of return of 7.75% for the periods ended ~~October~~January 31, ~~2021~~2022 and ~~October~~January 31, ~~2020.~~2021.

Pension (income) / expense consisted of the following (in thousands):


		Three Months Ended					Three Months Ended
		October 31, 2021		October 31, 2020			January 31, 2022		January 31, 2021
Service cost	Service cost	$	0	$	0	Service cost	$	0	$	0
Interest cost	Interest cost	177		181		Interest cost	177		181
Expected return on plan assets	Expected return on plan assets	(401)		(321)		Expected return on plan assets	(401)		(321)
Recognition of net loss	Recognition of net loss	135		429		Recognition of net loss	136		428
Net periodic pension (income) expense	Net periodic pension (income) expense	$	(89)	$	289	Net periodic pension (income) expense	$	(88)	$	288


		Six Months Ended					Nine Months Ended
		October 31, 2021		October 31, 2020			January 31, 2022		January 31, 2021
Service cost	Service cost	$	0	$	0	Service cost	$	0	$	0
Interest cost	Interest cost	354		362		Interest cost	531		543
Expected return on plan assets	Expected return on plan assets	(802)		(642)		Expected return on plan assets	(1,203)		(963)
Recognition of net loss	Recognition of net loss	270		857		Recognition of net loss	406		1,285
Net periodic pension (income) expense	Net periodic pension (income) expense	$	(178)	$	577	Net periodic pension (income) expense	$	(266)	$	865

L. Segment Information

The Company's operations are classified into 2 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 the Company's foreign subsidiaries, provides 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 tables provide financial information by business segments for the periods ended ~~October~~January 31, ~~2021~~2022 and ~~2020~~2021 (in thousands):


		Domestic Operations		International Operations		Corporate / Eliminations		Total			Domestic Operations		International Operations		Corporate / Eliminations		Total
Three months ended October 31, 2021
Three months ended January 31, 2022										Three months ended January 31, 2022
Revenues from external customers	Revenues from external customers	$	29,934	$	9,097	$	—	$	39,031	Revenues from external customers	$	29,531	$	11,102	$	—	$	40,633
Intersegment revenues	Intersegment revenues	170		571		(741)		—		Intersegment revenues	194		1,136		(1,330)		—
Earnings (loss) before income taxes	Earnings (loss) before income taxes	(2,095)		578		(1,370)		(2,887)		Earnings (loss) before income taxes	(255)		869		(1,501)		(887)

Three months ended October 31, 2020
Three months ended January 31, 2021										Three months ended January 31, 2021
Revenues from external customers	Revenues from external customers	$	28,772	$	10,228	$	—	$	39,000	Revenues from external customers	$	25,066	$	8,273	$	—	$	33,339
Intersegment revenues	Intersegment revenues	601		1,099		(1,700)		—		Intersegment revenues	463		550		(1,013)		—
Earnings (loss) before income taxes	Earnings (loss) before income taxes	595		786		(1,743)		(362)		Earnings (loss) before income taxes	206		689		(1,613)		(718)


		Domestic Operations		International Operations		Corporate / Eliminations		Total			Domestic Operations		International Operations		Corporate / Eliminations		Total
Six Months Ended October 31, 2021
Nine Months Ended January 31, 2022										Nine Months Ended January 31, 2022
Revenues from external customers	Revenues from external customers	$	59,597	$	18,927	$	—	$	78,524	Revenues from external customers	$	89,128	$	30,029	$	—	$	119,157
Intersegment revenues	Intersegment revenues	345		1,136		(1,481)		—		Intersegment revenues	539		2,272		(2,811)		—
Earnings (loss) before income taxes	Earnings (loss) before income taxes	(2,304)		1,242		(2,881)		(3,943)		Earnings (loss) before income taxes	(2,559)		2,111		(4,382)		(4,830)

Six Months Ended October 31, 2020
Nine Months Ended January 31, 2021										Nine Months Ended January 31, 2021
Revenues from external customers	Revenues from external customers	$	58,830	$	16,593	$	—	$	75,423	Revenues from external customers	$	83,896	$	24,866	$	—	$	108,762
Intersegment revenues	Intersegment revenues	1,252		1,910		(3,162)		—		Intersegment revenues	1,715		2,460		(4,175)		—
Earnings (loss) before income taxes	Earnings (loss) before income taxes	1,588		921		(3,458)		(949)		Earnings (loss) before income taxes	1,794		1,610		(5,071)		(1,667)

M. New Accounting Standards

In June 2016, the FASB issued ASU 2016-13, "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, 2022. The Company will adopt this standard in fiscal year 2024. 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 December 2019, the FASB issued ASU No. 2019-12, "Income Taxes ("Topic 740"): Simplifying the Accounting for Income Taxes." This update simplifies the accounting for income taxes through certain targeted improvements to various subtopics within Topic 740. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. The Company adopted this standard effective May 1, 2021. The adoption of this standard did not have a significant impact on the Company's consolidated financial position or results of operations.

N. Reclassifications

The Company reclassified certain amounts in the Condensed Consolidated Balance Sheet for the period ended April 30, 2021 and the Condensed Consolidated Statements of Cash Flows for the ~~six-month~~nine-month period ended ~~October~~January 31, 2021 to conform to the current period presentation. There was no impact to the Condensed Consolidated Statements of Operations or Condensed Consolidated Statement of Stockholders' Equity.

O. ~~Subsequent Events~~

On November 5, 2021, 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 November 15, 2021 the Company had substantially restored its operations. The Company engaged third party experts, including a cybersecurity firm, to perform a fulsome forensic investigation of the attack; among other things, the cybersecurity firm assessed whether any confidential or sensitive data had been compromised. Based on the results of the investigation to date, the Company does not believe any confidential or sensitive data has been downloaded, stolen from the Company's systems, or otherwise exfiltrated. The Company will continue to evaluate the incident and determine the appropriate actions to take, if any, in light of what is discovered. The investigation is on-going. The Company has insurance coverage against recovery costs and business interruption resulting from cyber-attacks. However, the Company may have incurred, and may incur in the future, expenses and losses related to this attack that are not covered by insurance. The total amount of such expenses or losses cannot be estimated at this time; however, it is likely that the costs related to this event will exhaust the Company's existing insurance coverage related to cyber attacks. While the Company will seek to obtain insurance for losses related to any similar future events, there can be no assurance that such insurance will be available to the Company.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company's 2021 Annual Report to Stockholders on Form 10-K contains management's discussion and analysis of the Company's financial condition and results of operations as of and for the year ended April 30, 2021. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2021. The analysis of results of operations compares the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 with the comparable periods of the prior year.

Results of Operations

Sales for the quarter were ~~$39,031,000, relatively flat~~$40,633,000, an increase from sales of ~~$39,000,000~~$33,339,000 in the comparable period of the prior year. Domestic sales for the quarter were ~~$29,934,000,~~$29,531,000, up ~~4.0%~~17.8% from sales of ~~$28,772,000~~$25,066,000 in the comparable period of the prior year. Domestic sales were favorably impacted by ~~$1,213,000~~$2,956,000 of raw material surcharges implemented during the most recent quarter. International sales for the quarter were ~~$9,097,000, down 11.1%~~$11,102,000, up 34.2% from sales of ~~$10,228,000~~$8,273,000 in the comparable period of the prior year. International sales ~~decreased~~increased when compared to the prior year period due to strong demand in the most recent period coupled with billings being delayed from the prior quarter due to non-availability of site clearances and billings being delayed until the next quarter coupled with a strong prior year period that benefited from higher billings as reduced COVID-19 related restrictions in markets allowed access to project sites.clearances.

Sales for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 were ~~$78,524,000,~~$119,157,000, a ~~4.1%~~9.6% increase from sales of ~~$75,423,000~~$108,762,000 in the comparable period of the prior year. Domestic sales for the ~~six~~nine month period were ~~$59,597,000,~~$89,128,000, up ~~1.3%~~6.2% from sales of ~~$58,830,000~~$83,896,000 in the comparable period of the prior year. Domestic sales were favorably impacted by ~~$1,613,000~~$4,569,000 of raw materials surcharges implemented ~~during the most recent quarter.~~year to date. International sales for the period were ~~$18,927,000,~~$30,029,000, up ~~14.1%~~20.8% from sales of ~~$16,593,000~~$24,866,000 in the comparable period of the prior year. International sales increased when compared to the prior year due to strong demand in the ~~current year~~most recent period coupled with COVID-19 related restrictions and government mandated ~~shut-downs~~shutdowns in India that limited access to project sites that significantly impacted the first quarter of the prior year.

The Company's order backlog was ~~$139.7~~$138.1 million at ~~October~~January 31, ~~2021,~~2022, as compared to ~~$96.0~~$103.0 million at ~~October~~January 31, ~~2020,~~2021, and $114.5 million at April 30, 2021. ~~This is the highest order backlog in the Company's history. The Company's backlog increased significantly due to a large greenfield project located in India awarded to our international subsidiaries.~~

The gross profit margin for the three months ended ~~October~~January 31, ~~2021~~2022 was ~~9.2%~~13.8% of sales, as compared to ~~16.4%~~17.0% of sales in the comparable quarter of the prior year. The gross profit margin for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 was ~~11.8%~~12.5%, as compared to ~~16.3%~~16.5% of sales in the comparable ~~quarter~~period of the prior year. The decrease in gross profit margin percentage for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 is a result of supplier constraints resulting from COVID-19, as well as other supply chain disruptions, that led to increases in steel, wood, and epoxy resin raw material costs when compared to the prior year of approximately ~~$2,112,000~~$424,000 and ~~$3,763,000,~~$4,186,000, respectively, ~~net~~in excess of surcharges ~~implemented.~~implemented and recorded as sales. The gross profit margin percentage was also impacted by the cyber attack that occurred during the third quarter, which resulted in $1,131,000 of margin loss due to the disruption of production, loss of sales, and absorption of fixed overhead costs which were not covered by our cyber insurance policy.

Operating expenses for the three months ended ~~October~~January 31, ~~2021~~2022 were ~~$6,487,000,~~$6,490,000, or ~~16.6%~~16.0% of sales, as compared to ~~$6,406,000,~~$6,030,000, or ~~16.4%~~18.1% of sales, in the comparable period of the prior year. Operating expenses for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 were ~~$13,252,000,~~$19,742,000, or ~~16.9%~~16.6% of sales, as compared to ~~$12,563,000,~~$18,593,000, or ~~16.7%~~17.1% of sales, in the comparable period of the prior year. The increase in operating expenses for the three months ended ~~October~~January 31, ~~2021~~2022 was primarily for one-time costs in the amount of $325,000, related to the Company's previously announced decision to exit certain markets where the Company had historically sold products directly and professional services related to ongoing financing related activities. Operating expenses for the current period also included increases related to wages, benefits, and incentive and stock-based compensation of $25,000, $78,000 in consulting and professional fees, and $74,000 of international expenses, partially offset by a decrease of $100,000 in marketing expenses. The increase in operating expenses for the nine months ended January 31, 2022 was primarily for increases related to wages, benefits, and incentive and stock-based compensation of ~~$681,000~~$888,000, increases in international expenses of $183,000, and one-time costs of $325,000, as described above, partially offset by decreases of $179,000 in marketing expenses, $142,000 in consulting and professional fees, and $288,000 of international expenses. The increase in operating expenses for the six months ended October 31, 2021 was primarily for increases related to wages, benefits,

~~incentive and stock-based compensation of $863,000 and increases in international expenses of $109,000, partially offset by decreases of $254,000~~$355,000 in marketing expenses and ~~$149,000~~$71,000 in consulting and professional fees.

Interest expense, net was ~~$132,000~~$158,000 and ~~$238,000~~$396,000 for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, respectively, as compared to ~~$128,000~~$105,000 and ~~$205,000~~$310,000 for the comparable periods of the prior year. The changes in interest expense were primarily attributable to changes in borrowing levels.

The effective income tax rates for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 were ~~(6.8)~~(45.0)% and ~~(11.3)~~(17.5)% as compared to ~~54.4%~~113.2% and ~~18.5%~~59.3% for the three and ~~six~~nine months ended ~~October~~January 31, ~~2020.~~2021. Income tax expense of ~~$195,000~~$399,000 and an income tax benefit of ~~$197,000~~$813,000 was recorded for the three months ended ~~October~~January 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Income tax expense of ~~$446,000~~$845,000 and an income tax benefit of ~~$176,000~~$989,000 was recorded for the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 and ~~2020,~~2021, respectively. The change in the effective tax rate for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022 reflects the impact of international operations which are taxed at different rates, combined with no U.S. tax benefit being recorded for the most recent

quarter due to the Company's full valuation allowance position. See Note J, Income Taxes, of the Notes to Condensed Consolidated Financial Statements for additional information.

Non-controlling interests related to the Company's subsidiaries not 100% owned by the Company increased net loss by ~~$18,000~~$33,000 and ~~$56,000~~$89,000 for the three and ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, respectively, as compared to ~~$15,000~~$14,000 and ~~$5,000~~$19,000 for the comparable periods of the prior year. The change in the net earnings attributable to the non-controlling interest in the current period was due to changes in earnings of the subsidiaries in the related period.

Net loss was ~~$3,100,000,~~$1,319,000, or ~~$(1.11)~~$(0.47) per diluted share, for the three months ended ~~October~~January 31, ~~2021,~~2022, compared to ~~$180,000,~~net earnings of $81,000, or ~~$(0.07)~~$0.03 per diluted share, in the prior year period. A net loss of ~~$4,445,000,~~$5,764,000, or ~~$(1.60)~~$(2.07) per diluted share, was reported for the ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, compared to a net loss of ~~$778,000,~~$697,000, or ~~$(0.28)~~$(0.25) per diluted share, in the prior year period.

Liquidity and Capital Resources

Historically, the Company's principal sources of liquidity have been funds generated from operations, supplemented as needed by short-term borrowings under the Company's revolving credit facility. Additionally, certain machinery and equipment are financed by non-cancellable operating leases. The Company believes that these sources will be sufficient to support ongoing business requirements in the current fiscal year, including capital expenditures. As disclosed in the Form 8-K filed with the SEC on December 22, 2021, the Company has signed an Agreement for Purchase and Sale of Real Property providing for the sale and leaseback of the Company's facilities in Statesville, North Carolina. Closing of that agreement is subject to satisfactory completion of due diligence by the purchaser; that due diligence is ongoing.

The Company had working capital of ~~$23,049,000~~$21,412,000 at ~~October~~January 31, ~~2021,~~2022, compared to $26,276,000 at April 30, 2021. The ratio of current assets to current liabilities was 1.5-to-1.0 at ~~October~~January 31, ~~2021,~~2022, compared to 1.8-to-1.0 at April 30, 2021. The Company's short-term debt and working capital were significantly impacted by the ~~$3,763,000~~$4,186,000 of increased raw material costs that the Company was not able to pass along to customers due to the fixed price nature of our contracts. At ~~October~~January 31, ~~2021,~~2022, advances of ~~$12.5~~$8.4 million were outstanding under the Company's credit facilities, compared to advances of $6.8 million outstanding as of April 30, 2021. The Company had standby letters of credit outstanding of $704,000 at ~~October~~January 31, ~~2021,~~2022, unchanged from April 30, 2021. Amounts available under the $15.0 million revolving credit facility were ~~$2.5~~$4.1 million and $7.5 million at ~~October~~January 31, ~~2021~~2022 and April 30, 2021, respectively. For additional information concerning our credit facility, see Note F, Long-Term Debt and Other Credit Arrangements.

As previously reported in the Company's 2021 Annual Report on Form 10-K, the Company was compliant at April 30, 2021 with all of the financial covenants under the revolving credit facility. At ~~October~~January 31, ~~2021,~~2022, the Company was in compliance with all the financial covenants under its revolving credit facility. During the three months ended January 31, 2022, the supplemental liquidity threshold for the Company, as defined in the Credit Agreement, fell below $3,000,000 for one reporting period. The Company has obtained a waiver of the debt covenant violation that occurred on that date and returned to full compliance for the subsequent months during the period ended January 31, 2022.

The Company used cash of ~~$6,071,000~~$1,087,000 during the ~~six~~nine months ended ~~October~~January 31, ~~2021~~2022. Cash was used primarily for operations and increases in receivables of ~~$3.0~~$2.2 million, inventory of ~~$1.6~~$3.4 million and other, net of ~~$2.2~~$3.5 million, partially offset by an increase in accounts payable and other accrued expenses of ~~$3.1~~$10.7 million. During the ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, the Company used net cash of ~~$930,000~~$1,222,000 in investing activities, all of which was used for capital expenditures. The Company's financing activities provided cash of ~~$6,857,000~~$2,119,000 during the ~~six~~nine months ended ~~October~~January 31, ~~2021,~~2022, primarily from net increases in short-term borrowings as a result of increased raw material costs, as discussed above.

Outlook

The Company continues to actively monitor the COVID-19 pandemic and its impact. Any future developments and effects will be highly uncertain and cannot be predicted, including: the scope and duration of the pandemic; further adverse revenue and net income effects; disruptions to our operations; closure of project sites; ability of suppliers to support our operations; the effectiveness of our work from home arrangements; employee impacts from illness, school closures and other community response measures; and any actions taken by governmental authorities and other third parties in response to the pandemic. The uncertain future development of this crisis could materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels. The Company will continue to work to ensure the safety of our people and our ability to serve our customers worldwide.

As ~~previously~~ discussed ~~(See~~in our ~~Note O~~Form 10-Q, ~~Subsequent Events~~), for the period ended October 31, 2021, on November 5, 2021, 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 November 15, 2021,~~The temporary production disruption had a material impact on sales and earnings for the period ended January 31, 2022, however, the Company ~~had substantially restored its operations.~~believes it will have an immaterial impact for the remainder of the fiscal year. While the Company has insurance coverage against recovery costs and business interruption resulting from ~~cyber-attacks,~~cyber attacks, the Company ~~may have~~has incurred ~~and may incur in the future,~~ expenses and losses related to this attack that ~~are not covered by insurance.~~have exhausted its existing cyber insurance coverage. The total amount of such expenses or losses cannot be estimated at this time; however, it is likely that the costs related to this event will exhaust the Company's existing insurance coverage related to cyber attacks. While the Company will seek to obtain insurance for losses related to any similar future events, but there can be no assurance that such insurance will be available to the Company.

In addition, 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 about opportunities for growth within existing end-markets. As the economy continues to re-open, the Company anticipates that project awards will accelerate and the pace of construction will increase. The Company has been focused on restoring and expanding manufacturing capacity that had been previously reduced due to COVID-19. The Company has also been implementing surcharges on new orders with the goal of aligning revenue to offset the broad based price increases for materials including steel, aluminum, hard woods, and resin products that ~~has~~have impacted the Company's financial performance for the first ~~half~~nine months of the fiscal year. The Company expects improved financial performance inthrough the ~~second half~~remainder of this fiscal year and into fiscal year 2023.

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. Many important factors that could cause such differences are described under the caption "Risk Factors" in Item 1A in the Company's 2021 Annual Report on Form ~~10-K.~~10-K and in our subsequent quarterly reports on Form 10-Q. 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. These forward-looking statements speak only as of the date of this document. The Company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There are no material changes to the disclosures made on this matter in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2021.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of ~~October~~January 31, ~~2021.~~2022. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that, as of ~~October~~January 31, ~~2021,~~2022, the Company's disclosure controls and procedures were adequate and effective and designed to ensure that all material information required to be filed in this quarterly report is made known to them by others within the Company and its subsidiaries.

As disclosed in the Company's Form 10-Q for the period ended October 31, 2021, on November 5, 2021, the Company experienced a criminal network ~~cyber-attack~~cyber attack that led to a disruption of its domestic operations. ~~This attack is described in more detail in~~ ~~Note O~~, ~~Subsequent Events~~ ~~and elsewhere in this quarterly report. Management is reviewing the matter, including conducting the~~The Company engaged a leading cybersecurity firm to perform a forensic investigation ~~described elsewhere~~of this attack and, as a result of the investigation, has identified a deficiency in ~~this report,~~its logical access control over its IT systems. Remediation steps have already begun and ~~has not yet determined whether there is a related issue with its internal controls.~~are ongoing.

(b) Changes in internal controls

There was no significant change in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in Part I, Item 1A of the Company's 2021 Annual Report on Form 10-K under the heading "Risk Factors," any one or more of which could, directly or indirectly, cause the Company's actual financial condition and operating results to vary materially from its past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company's business, financial condition, operating results and stock price. Other than as set forth below, there have been no material changes to the Company's risk factors from those set forth in the Company's Annual Report on Form 10-K for the year ended April 30, 2021 as filed with the SEC on July 15, 2021.

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

OnAs disclosed in our Form 10-Q for the period ended October 31, 2021, on November 5, 2021, the Company experienced a criminal network ~~cyber-attack~~cyber attack that led to a disruption of its domestic operations, including manufacturing, engineering, administration, and sales operations. As of November 15, 2021, the Company had substantially restored its operations. The Company has engaged third party experts, including a cybersecurity firm, to perform a fulsome forensic investigation of this attack; among other things, the cybersecurity firm assessed whether any confidential or sensitive data had been compromised. Based on the results of the investigation to date, the Company does not believe any confidential or sensitive data has been downloaded, stolen from the Company's systems, or otherwise exfiltrated. The Company ~~will continue to evaluate the incident and determine the appropriate actions to take, if any, in light of what is discovered. The investigation is ongoing. The Company has~~had insurance coverage against recovery costs and business interruption resulting from ~~cyber-attacks.~~cyber attacks. However, the Company ~~may have~~ incurred ~~and may incur in the future,~~ expenses and losses ~~related to this attack that are not covered by insurance. The total amount~~in excess of ~~such expenses or losses cannot be estimated at this time; however, it is likely that the costs related to this event will exhaust the Company's~~its existing insurance ~~coverage related to cyber attacks.~~coverage. While the Company will seek to obtain insurance for losses related to any similar future events, there can be no assurance that such insurance will be available to the Company. Any future such events, particularly if not covered by insurance, could have material adverse effects on the Company's business and/or results of operations.

Item 6. Exhibits


10.1*						Separation Agreement dated as of December 22, 2021 between Kewaunee Scientific Corporation and Lisa Ryan
10.2						Agreement for Purchase and Sale of Real Property, dated as of December 22, 2021 between CAI Investments Sub Series 100, LLC and Kewaunee Scientific Corporation
10.3						Amendment 1 to the Agreement for Purchase and Sale of Real Property, dated January 21, 2022
10.4						Amendment 2 to the Agreement for Purchase and Sale of Real Property, dated January 24, 2022
10.5						Amendment 3 to the Agreement for Purchase and Sale of Real Property, dated January 26, 2022
31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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

SIGNATURE

Pursuant to the requirements 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 (Registrant)

Date: ~~December 17, 2021~~March 11, 2022	By	/s/ Donald T. Gardner III
		Donald T. Gardner III
		(As duly authorized officer and Vice President, Finance and Chief Financial Officer)