UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________
FORM10-Q

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

For the quarterly period ended January 31, 2018

2021

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

_________________________
KEWAUNEE SCIENTIFIC CORPORATION

(Exact name of registrant as specified in its charter)

_________________________
Delaware38-0715562

(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 ClassTrading 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 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 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 filer☐Accelerated 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 byin Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of March 5, 2018,8, 2021, the registrant had outstanding 2,724,9322,762,797 shares of Common Stock.




KEWAUNEE SCIENTIFIC CORPORATION

INDEX TO FORM10-Q

FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2018

2021
Page Number

Item 1.

Condensed Consolidated Statements of Operations (unaudited)

1

2

3

4
5

5
6

6
7

12
13

16
15
16

Item 4.

Controls and Procedures

15

17

Item 1A.

Risk Factors18

16

Item 6.

Exhibits

17

SIGNATURE

18


i


Part 1. Financial Information

Item 1.Financial Statements

Item 1.    Financial Statements

Kewaunee Scientific Corporation

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

   Three months ended
January 31		  Nine months ended
January 31		 
   2018  2017  2018  2017 

Net sales

  $38,190  $30,371  $113,542  $103,979 

Costs of products sold

   29,836   25,339   90,456   84,704 
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

   8,354   5,032   23,086   19,275 

Operating expenses

   5,971   4,590   16,360   14,484 
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating earnings

   2,383   442   6,726   4,791 

Other income

   179   120   524   358 

Interest expense

   (78)   (71)   (226)   (229) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Earnings before income taxes

   2,484   491   7,024   4,920 

Income tax expense

   1,566   133   3,149   1,695 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net earnings

   918   358   3,875   3,225 

Less: net earnings attributable to the noncontrolling interest

   35   17   120   98 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net earnings attributable to Kewaunee Scientific Corporation

  $883  $341  $3,755  $3,127 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net earnings per share attributable to Kewaunee Scientific Corporation stockholders

     

Basic

  $0.32  $0.13  $1.38  $1.16 

Diluted

  $0.31  $0.13  $1.35  $1.15 

Weighted average number of common shares outstanding

     

Basic

   2,722   2,711   2,717   2,703 

Diluted

   2,784   2,734   2,772   2,724 

See accompanying notes to consolidated financial statements.

Kewaunee Scientific Corporation

Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands)

   Three months ended
January 31		  Nine months ended
January 31		 
   2018   2017  2018   2017 

Net earnings

  $918   $358  $3,875   $3,225 
  

 

 

   

 

 

  

 

 

   

 

 

 

Other comprehensive income (loss), net of tax:

       

Foreign currency translation adjustments

   203    (63)   49    (232) 

Change in fair value of cash flow hedge

   12    35   30    53 
  

 

 

   

 

 

  

 

 

   

 

 

 

Other comprehensive income (loss)

   215    (28)   79    (179) 
  

 

 

   

 

 

  

 

 

   

 

 

 

Comprehensive income, net of tax

   1,133    330   3,954    3,046 

Less: comprehensive income attributable to the noncontrolling interest

   35    17   120    98 
  

 

 

   

 

 

  

 

 

   

 

 

 

Comprehensive income attributable to Kewaunee Scientific Corporation

  $1,098   $313  $3,834   $2,948 
  

 

 

   

 

 

  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

Kewaunee Scientific Corporation

Consolidated Statement of Stockholders’ Equity

(Unaudited)

(in thousands, except share$ 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, 2017

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

Net earnings attributable to Kewaunee Scientific Corporation

   —      —     —     3,755   —     3,755 

Other comprehensive income

   —      —     —     —     79   79 

Cash dividends paid, $0.49 per share

   —      —     —     (1,331)   —     (1,331) 

Stock options exercised, 22,600 shares

   28    (20)   —     —     —     8 

Stock based compensation

   4    272   —     —     —     276 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at January 31, 2018

  $6,821   $2,947  $(53)  $42,195  $(6,240)  $45,670 
  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See accompanying notes to consolidated financial statements.

Kewaunee Scientific Corporation

Consolidated Balance Sheets

(shares in thousands, except per share amounts)

   January 31,
2018		  April 30,
2017		 
   (Unaudited)    

Assets

   

Current Assets:

   

Cash and cash equivalents

  $9,178  $12,506 

Restricted cash

   1,493   1,435 

Receivables, less allowance; $224; $191, on each respective date

   30,843   29,889 

Inventories

   17,680   14,935 

Prepaid expenses and other current assets

   3,083   1,047 
  

 

 

  

 

 

 

Total Current Assets

   62,277   59,812 

Property, plant and equipment, at cost

   53,418   51,568 

Accumulated depreciation

   (39,588)   (37,541) 
  

 

 

  

 

 

 

Net Property, Plant and Equipment

   13,830   14,027 

Deferred income taxes

   2,519   3,158 

Other

   4,068   3,919 
  

 

 

  

 

 

 

Total Other Assets

   6,587   7,077 
  

 

 

  

 

 

 

Total Assets

  $82,694  $80,916 
  

 

 

  

 

 

 

Liabilities and Equity

   

Current Liabilities:

   

Short-term borrowings and interest rate swaps

  $4,778  $3,591 

Current portion of long-term debt

   1,167   918 

Accounts payable

   12,631   11,995 

Employee compensation and amounts withheld

   2,848   2,765 

Deferred revenue

   1,959   5,806 

Other accrued expenses

   2,667   1,852 
  

 

 

  

 

 

 

Total Current Liabilities

   26,050   26,927 

Long-term debt

   1,556   2,431 

Accrued pension and deferred compensation costs

   8,509   8,301 

OtherNon-Current Liabilities

   486   —   
  

 

 

  

 

 

 

Total Liabilities

   36,601   37,659 

Commitments and Contingencies

   

Stockholders’ Equity:

   

Common Stock, $2.50 par value, Authorized – 5,000 shares; Issued – 2,728 shares; 2,715 shares; – Outstanding – 2,725 shares; 2,712 shares, on each respective date

   6,821   6,789 

Additionalpaid-in-capital

   2,947   2,695 

Retained earnings

   42,195   39,771 

Accumulated other comprehensive loss

   (6,240)   (6,319) 

Common stock in treasury, at cost, 3 shares, on each date

   (53)   (53) 
  

 

 

  

 

 

 

Total Kewaunee Scientific Corporation Stockholders’ Equity

   45,670   42,883 

Noncontrolling interest

   423   374 
  

 

 

  

 

 

 

Total Equity

   46,093   43,257 
  

 

 

  

 

 

 

Total Liabilities and Equity

  $82,694  $80,916 
  

 

 

  

 

 

 

 Three Months Ended
January 31,		Nine Months Ended
January 31,
 2021202020212020
Net sales$33,339 $34,225 $108,762 $113,283 
Cost of products sold27,685 28,947 90,832 94,743 
Gross profit5,654 5,278 17,930 18,540 
Operating expenses6,030 7,350 18,593 19,875 
Operating loss(376)(2,072)(663)(1,335)
Pension expense(288)(113)(865)(339)
Other income51 84 171 382 
Interest expense(105)(150)(310)(452)
Loss before income taxes(718)(2,251)(1,667)(1,744)
Income tax expense (benefit)(813)(350)(989)1,822 
Net earnings (loss)95 (1,901)(678)(3,566)
Less: Net earnings attributable to the noncontrolling interest14 17 19 59 
Net earnings (loss) attributable to Kewaunee Scientific Corporation$81 $(1,918)$(697)$(3,625)
Net earnings (loss) per share attributable to Kewaunee Scientific Corporation stockholders
Basic$0.03 $(0.70)$(0.25)$(1.32)
Diluted$0.03 $(0.70)$(0.25)$(1.32)
Weighted average number of common shares outstanding
Basic2,762 2,750 2,759 2,750 
Diluted2,789 2,750 2,759 2,750 










See accompanying notes to condensed consolidated financial statements.

1

Kewaunee Scientific Corporation

Condensed Consolidated Statements of Comprehensive Income and (Loss)
(Unaudited)
($ in thousands)
 Three Months Ended
January 31,		Nine Months Ended January 31,
 2021202020212020
Net earnings (loss)$95 $(1,901)$(678)$(3,566)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments31 (26)(17)(9)
Change in fair value of cash flow hedge0 0 0 1 
Other comprehensive income (loss)31 (26)(17)(8)
Comprehensive income (loss), net of tax126 (1,927)(695)(3,574)
Less: Comprehensive income attributable to the noncontrolling interest14 17 19 59 
Comprehensive income (loss) attributable to Kewaunee Scientific Corporation$112 $(1,944)$(714)$(3,633)





















See accompanying notes to condensed consolidated financial statements.
2

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
Income (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 compensation20 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 compensation10 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.
3

 Common
Stock		Additional
Paid-in
Capital		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total Kewaunee Scientific Corporation Stockholders’ Equity
Balance at April 30, 2019$6,875 $3,133 $(53)$43,552 $(6,407)$47,100 
Net earnings attributable to Kewaunee Scientific Corporation— — — 471 — 471 
Other comprehensive income— — — — 195 195 
Cash dividends paid, $0.19 per share— — — (522)— (522)
Stock based compensation9 51 — — — 60 
Balance at July 31, 2019$6,884 $3,184 $(53)$43,501 $(6,212)$47,304 
Net loss attributable to Kewaunee Scientific Corporation$— $— $— $(2,178)$— $(2,178)
Other comprehensive loss— — — — $(177)(177)
Cash dividends paid, $0.19 per share— — — (523)— (523)
Stock based compensation— 42 — — — 42 
Balance at October 31, 2019$6,884 $3,226 $(53)$40,800 $(6,389)$44,468 
Net loss attributable to Kewaunee Scientific Corporation$— $— $— $(1,918)$— $(1,918)
Other comprehensive income (loss)— — — — $(26)(26)
Stock options exercised, 2,300 shares1 (1)— — — 0 
Stock based compensation— 125 — — — 125 
Balance at January 31, 2020$6,885 $3,350 $(53)$38,882 $(6,415)$42,649 




























See accompanying notes to condensed consolidated financial statements.
4

Kewaunee Scientific Corporation
Condensed Consolidated Balance Sheets
($ and shares in thousands, except per share amounts)
January 31, 2021April 30, 2020
 (Unaudited) 
Assets
Current Assets:
Cash and cash equivalents$5,563 $4,365 
Restricted cash540 850 
Receivables, less allowance; $669; $606, on each respective date30,091 28,062 
Inventories15,615 15,330 
Income tax receivable4,205 2,717 
Prepaid expenses and other current assets4,109 2,907 
Total Current Assets60,123 54,231 
Property, plant and equipment, at cost59,640 57,859 
Accumulated depreciation(43,429)(41,587)
Net Property, Plant and Equipment16,211 16,272 
Right of use assets9,715 9,312 
Deferred income taxes0 336 
Other assets3,560 3,778 
Total Assets$89,609 $83,929 
Liabilities and Stockholders’ Equity
Current Liabilities:
Short-term borrowings$4,493 $4,719 
Current portion of capital lease liability21 19 
Current portion of operating lease liabilities1,352 1,282 
Accounts payable15,996 13,114 
Employee compensation and amounts withheld4,546 4,159 
Deferred revenue3,642 2,508 
Other accrued expenses1,563 1,259 
Total Current Liabilities31,613 27,060 
Long-term portion of capital lease liability97 113 
Long-term portion of operating lease liabilities8,276 7,780 
Accrued pension and deferred compensation costs10,298 9,303 
Deferred income taxes225 401 
Other non-current liabilities838 569 
Total Liabilities51,347 45,226 
Commitments and Contingencies00
Stockholders’ Equity:
Common stock, $2.50 par value, Authorized – 5,000 shares; Issued – 2,766 shares; 2,754 shares; – Outstanding – 2,763 shares; 2,751 shares, on each respective date6,915 6,885 
        Additional paid-in-capital3,684 3,360 
Retained earnings37,124 37,821 
Accumulated other comprehensive loss(9,615)(9,598)
Common stock in treasury, at cost, 3 shares, on each date(53)(53)
Total Kewaunee Scientific Corporation Stockholders’ Equity38,055 38,415 
Noncontrolling interest207 288 
Total Stockholders’ Equity38,262 38,703 
Total Liabilities and Stockholders’ Equity$89,609 $83,929 

See accompanying notes to condensed consolidated financial statements.
5

Kewaunee Scientific Corporation
Condensed Consolidated Statements of Cash Flows

(Unaudited)

($ in thousands)

   Nine months ended
January 31		 
   2018  2017 

Cash flows from operating activities:

   

Net earnings

  $3,875  $3,225 

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

   

Depreciation

   2,104   1,960 

Bad debt provision

   71   (42) 

Stock based compensation expense

   276   150 

Expense (benefit) for deferred income taxes

   639   (12) 

Change in assets and liabilities:

   

Increase (decrease) in receivables

   (1,025)   2,090 

Increase in inventories

   (2,745)   (105) 

Increase (decrease) in accounts payable and other accrued expenses

   2,020   (1,189) 

Decrease in deferred revenue

   (3,847)   (237) 

Other, net

   (2,013)   11 
  

 

 

  

 

 

 

Net cash (used in) provided by operating activities

   (645)   5,851 

Cash flows from investing activities:

   

Capital expenditures

   (1,907)   (2,190) 

Decrease (increase) in restricted cash

   (58)   129 
  

 

 

  

 

 

 

Net cash used in investing activities

   (1,965)   (2,061) 

Cash flows from financing activities:

   

Dividends paid

   (1,331)   (1,163) 

Dividends paid to holders of noncontrolling interest in subsidiaries

   (74)   —   

Proceeds from short-term borrowings

   44,639   39,804 

Repayments on short-term borrowings

   (43,452)   (38,943) 

Payments on long-term debt

   (626)   (316) 

Net proceeds from exercise of stock options

   8   141 
  

 

 

  

 

 

 

Net cash used in financing activities

   (836)   (477) 

Effect of exchange rate changes on cash and cash equivalents

   118   (281) 
  

 

 

  

 

 

 

(Decrease) increase in cash and cash equivalents

   (3,328)   3,032 

Cash and cash equivalents, beginning of period

   12,506   5,222 
  

 

 

  

 

 

 

Cash and cash equivalents, end of period

  $9,178  $8,254 
  

 

 

  

 

 

 

 Nine Months Ended
January 31,
 20212020
Cash flows from operating activities:
Net loss$(678)$(3,566)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation2,005 1,927 
Bad debt provision60 321 
Stock based compensation expense385 241 
Deferred income taxes159 1,056 
Change in assets and liabilities:
Receivables(2,089)5,530 
Inventories(285)1,959 
Income tax receivable(1,488)0 
Accounts payable and other accrued expenses3,843 (2,512)
Deferred revenue1,134 201 
Other, net61 (546)
Net cash provided by operating activities3,107 4,611 
Cash flows from investing activities:
Capital expenditures(1,944)(1,371)
Net cash used in investing activities(1,944)(1,371)
Cash flows from financing activities:
Dividends paid0 (1,045)
Dividends paid to noncontrolling interest in subsidiaries(108)(324)
Proceeds from short-term borrowings49,298 44,958 
Repayments on short-term borrowings(49,524)(50,454)
Payments on long-term debt and lease obligations(14)(1,277)
Net proceeds from exercise of stock options(31)(14)
Net cash used in financing activities(379)(8,156)
Effect of exchange rate changes on cash, cash equivalents and restricted cash104 (177)
Increase (decrease) in cash, cash equivalents and restricted cash888 (5,093)
Cash, cash equivalents and restricted cash, beginning of period5,215 11,156 
Cash, cash equivalents and restricted cash, end of period$6,103 $6,063 










See accompanying notes to condensed consolidated financial statements.

6

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 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 20172020 Annual Report to Stockholders.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, 20172020 included in this interim period filing has been derived from the audited financial statements at that date, but does not include all of the information and related notes required by generally accepted accounting principles (GAAP)("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 January 31, 2021 and April 30, 2020, 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:
January 31, 2021April 30, 2020
Cash and cash equivalents$5,563 $4,365 
Restricted cash540 850 
Total cash, cash equivalents and restricted cash$6,103 $5,215 

C. Revenue Recognition

Product sales

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 to the goods, but because of construction delays, have requested that the Company temporarily store the finished goods on the customer’s behalf; service revenue for installation of products sold is recognized as the installation services are performed, (2) persuasive evidence of an arrangement exists, (3) the price to the customer is fixed, and (4) collectability is reasonably assured.service. The Company utilizes either the percentage of completion or completed contract method based on facts and circumstances of individual contracts.

Deferred revenue consists of customer deposits and advance billingsmajority of the Company’s products whererevenues 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 January 31, 2021 and January 31, 2020 is as follows (in thousands):
 Three Months Ended January 31, 2021Three Months Ended January 31, 2020
 DomesticInternationalTotalDomesticInternationalTotal
Over Time$24,198 $8,273 $32,471 $25,107 $7,526 $32,633 
Point in Time868 0 868 1,592 0 1,592 
$25,066 $8,273 $33,339 $26,699 $7,526 $34,225 
7

 Nine Months Ended January 31, 2021Nine Months Ended January 31, 2020
 DomesticInternationalTotalDomesticInternationalTotal
Over Time$81,206 $24,866 $106,072 $83,292 $25,713 $109,005 
Point in Time2,690 0 2,690 4,278 0 4,278 
$83,896 $24,866 $108,762 $87,570 $25,713 $113,283 
Contract Balances
The closing and opening balances of contract assets arising from contracts with customers which were recorded as unbilled receivables were $8,539,000 at January 31, 2021 and $6,131,000 at April 30, 2020. The closing and opening balances of contract liabilities arising from contracts with customers were $3,642,000 at January 31, 2021 and $2,508,000 at April 30, 2020. 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 recognized. Shippingbilled in accordance with contractually stated billing terms and handling costs are included in costsreceivables 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 product sales. Becauseperformance under the contract. Deferred revenue is recognized as revenue as (or when) the Company performs under the contract. Approximately 100% of the naturecontract liability balances at April 30, 2020 and qualityJanuary 31, 2021 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):
January 31, 2021April 30, 2020
Finished products$2,712 $2,455 
Work in process1,826 1,921 
Raw materials11,077 10,954 
$15,615 $15,330 
The Company’s products, any warranty issues are determined in a relatively short period after the saleInternational subsidiaries’ inventories were $1,915,000 at January 31, 2021 and $2,136,000 at April 30, 2020 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 usuallyincluded in the roleabove tables.

E. Fair Value of a subcontractor, but in some cases may enter into a contract directly with theend-userFinancial Instruments
The Company’s financial instruments consist primarily 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 accountingcash and estimates regarding the fairequivalents, mutual funds, cash surrender value of individual elements.life insurance policies, term loans and short-term borrowings. 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 faircarrying value for both the product sales and installation services and allocation of arrangement consideration for each of these units is based onassets and liabilities approximates 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 either best estimate of selling prices or vendor-specific objective evidence of 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 installation services is separately calculatedJanuary 31, 2021 and April 30, 2020 (in thousands):
 January 31, 2021
Financial AssetsLevel 1Level 2Total
Trading securities held in non-qualified compensation plans (1)
$2,547 $0 $2,547 
Cash surrender value of life insurance policies (1)
0 87 87 
Total$2,547 $87 $2,634 
Financial Liabilities
Non-qualified compensation plans (2)
$0 $3,059 $3,059 
Total$0 $3,059 $3,059 
8

 April 30, 2020
Financial AssetsLevel 1Level 2Total
Trading securities held in non-qualified compensation plans (1)
$2,485 $0 $2,485 
Cash surrender value of life insurance policies (1)
0 87 87 
Total$2,485 $87 $2,572 
Financial Liabilities
Non-qualified compensation plans (2)
$0 $2,899 $2,899 
Total$0 $2,899 $2,899 
(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 expected costsquoted market prices multiplied by the number of installation services. Many times the value of installation services is calculated using price quotations from subcontractorsshares owned, and life insurance policies, which are valued at their cash surrender value.
(2)Plan liabilities are equal 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 pointindividual participants’ account balances and do not include rights of return. Accordingly, these sales are recognized at the time of shipment.

C.other earned retirement benefits.

F. Derivative Financial Instruments

The Company records derivatives on the condensed consolidated balance sheetsheets 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 thesecertain interest rate swap arrangements to mitigate future interest rate risk associated with its long-term debt and has designated these as cash flow hedges.

D. These interest rates swaps were terminated in conjunction with the payoff of the outstanding long-term debt in September 2019.


G. Long-term Debt and Other Credit Arrangements
At January 31, 2021, advances of $4.5 million were outstanding under the Company’s revolving credit facility, compared to advances of $4.7 million outstanding as of April 30, 2020. The Company had standby letters of credit outstanding of $512,000 at January 31, 2021, unchanged from April 30, 2020. Amounts available under the revolving credit facility were $8.6 million and $8.7 million at January 31, 2021 and April 30, 2020, respectively.
At April 30, 2020, the Company was not in compliance with all of the financial covenants under the revolving credit facility. On July 20, 2020, the Company entered into an amendment which effected changes in certain financial covenants and included a waiver of the non-compliance. On January 28, 2021, the Company entered into another amendment which effected changes (i) extending the maturity date under the Credit Agreement and Revolving Note from February 1, 2021 to May 3, 2021; (ii) establishing a minimum EBITDA covenant for the fiscal quarter ending April 30, 2021 of $1,000,000, determined for the four-quarter period then ending; and (iii) revising the covenant regarding delivery of financial projections to the Bank to, among other things, provide projections for the next succeeding fiscal year. These amendments did not change the amount of availability under the revolving credit facility. At January 31, 2021, the Company was in compliance with all the financial covenants under its revolving credit facility.

H. Leases

In accordance with ASC 842, "ASU No. 2016-02 Leases," the Company is required to recognize lease assets and lease liabilities reflecting the rights and obligations created by leased assets previously classified as operating leases. The Company has operating type leases for real estate and equipment in both the U.S. and internationally and a financing lease for a truck in the U.S. At January 31, 2021 and April 30, 2020, right-of-use assets totaled $9,715,000 and $9,312,000, respectively. Operating cash paid to settle lease liabilities was $1,299,000 and $1,154,000 for the nine months ended January 31, 2021 and January 31, 2020, respectively. The Company’s leases have remaining lease terms of up to 10 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 $718,000 and $645,000 for the three months ended January 31, 2021 and 2020, respectively, inclusive of period cost for short-term leases, not included in lease liabilities, of $267,000 and $215,000, respectively. Operating lease expenses were $2,032,000 and $1,770,000 for the nine months ended January 31, 2021 and 2020, respectively, inclusive of period cost for short-term leases, not included in lease liabilities, of $733,000 and $673,000, respectively.

9

At January 31, 2021, the weighted average remaining lease term for the capitalized operating leases was 6.1 years and the weighted average discount rate was 4.1%. For the financing lease, the remaining lease term was 4.6 years and the discount rate was 10.0%. 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 January 31, 2021 were as follows:
OperatingFinancing
Remainder of fiscal 2021$492 $8 
20222,023 32 
20231,839 32 
20241,480 32 
20251,436 32 
Thereafter4,101 12 
Total Minimum Lease Payments$11,371 $148 
Imputed Interest(1,742)(30)
Total$9,629 $118 
I. Earnings Per Share

Basic earnings per share is based on the weighted average number of common shares outstanding during the three and nine month periods.year. Diluted earnings per share reflects the assumed exercise of outstanding options and the conversion of restricted stock units and outstanding stock options(“RSUs”) under the Company’s Omnibus Incentive Plan,various stock compensation plans, except when such awardsRSUs and options have an anti-dilutiveantidilutive effect. There were no83,910 and 95,906 antidilutive awardsRSUs and options outstanding at January 31, 2018. 2021 and January 31, 2020, respectively. The following is a reconciliation of basic to diluted weighted average common shares outstanding (in thousands):
Three Months Ended January 31,Nine Months Ended January 31,
2021202020212020
Basic2,762 2,750 2,759 2,750 
Dilutive effect of stock options and RSUs27 0 0 0 
Weighted average common shares outstanding - diluted2,789 2,750 2,759 2,750 
J. Stock Options and Share-based Compensation
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."
In May 2020, the Company granted 12,045 RSUs under the 2017 Omnibus Incentive Plan ("2017 Plan"). These RSUs include a
service component that vests over a one-year period. The Company granted 83,816 RSUs under the 2017 Omnibus Incentive Plan in June 2020. These RSUs include both a service and a 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 of service to purchase 39,200 shares were not included intotal days over the computation of diluted earnings per share forthree-year period. The Company recorded share-based compensation expense during the three and nine months ended January 31, 2021 of $129,000 and $344,000, respectively, with the remaining estimated share-based compensation expense of $805,000 to be recorded over the remaining vesting periods. The Company recorded share-based compensation expense during the three and nine
months ended January 31, 2020 of $126,000 and $208,000, 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 nine month periods ended January 31, 2017, because2021 and January 31, 2020 and were included in the option exercise pricesshare-based compensation on the condensed consolidated statements of cash flows.
K. Income Taxes
Income tax benefits of $813,000 and $350,000 were greaterrecorded for the three months ended January 31, 2021 and 2020, respectively. An income tax benefit of $989,000 and an income tax expense of $1,822,000 were recorded for the nine months ended January 31, 2021 and 2020, respectively. The effective tax rates were 113.2% and 15.5% for the three months ended
10

January 31, 2021 and 2020, respectively. The effective tax rates were 59.3% and 104.5% for the nine months ended January 31, 2021 and 2020, respectively. The change in the effective tax rate for the three and nine-month periods is primarily due to the revocation of the Company's indefinite reinvestment of foreign unremitted earnings position (discussed below) and the impact of foreign operations which are taxed at different rates than the average market priceU.S. tax rate of 21%. In addition, the change in the effective tax rates for the three and nine months ended January 31, 2021 was impacted by the recording of a Domestic income tax benefit as a result of the common sharesCompany's current Domestic net loss position.This loss is permitted to be carried back and used to offset Domestic taxable income incurred in previous tax filing periods as allowed by the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). The Company recorded income tax receivables of $4,205,000 and $2,717,000 as of January 31, 2021 and April 30, 2020, respectively, which includes Domestic income tax benefits attributable to the carryback claims for the applied Research and Development tax credit for the year ended April 30, 2018, the taxable losses generated during the quarter,year ended April 30, 2020 and accordingly, such stock options wouldthe nine months ended January 31, 2021.
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 recognized a tax withholding expense, for the dividends paid to the US and Singapore shareholders, imposed by the India Income Tax Department in accordance with international tax treaties between India and the U.S. and Singapore governments, at a rate of 10.0% and 15.0%, respectively. The Company recognized a withholding tax expense of $18,000 and $99,000 for the three and nine months ended January 31, 2021, respectively, related to the unremitted earnings of the subsidiaries listed above. The Company recognized a withholding tax expense of $50,000 and $2,214,000 for the three and nine months ended January 31, 2020 related to the unremitted earnings position of the subsidiaries listed above. The Company has a deferred tax liability of $647,000 and $785,000 for the withholding tax related to Kewaunee Labway India Pvt. Ltd. as of January 31, 2021 and April 30, 2020, respectively. The Company recorded all deferred tax assets and liabilities related to its outside basis differences in its foreign subsidiaries consistent with ASC 740.
In July 2020, the U.S. Department of the Treasury issued final tax regulations (proposed regulations were originally published in 2019) with respect to global intangible low-taxed income (''GILTI''.) Among other changes, these regulations now permit an election to exclude, from the GILTI calculation, items of income which are subject to a high effective foreign tax rate. The Company excluded certain items, as permitted by these final regulations, in the current fiscal year and reflected the benefit in the estimated annual effective tax rate.
L. 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. The Company contributed $30,000 to the plans during the three and nine months ended January 31, 2021. There were 0 Company contributions paid to the plans during the three and nine months ended January 31, 2020. The Company assumed an antidilutive effect.

E.Inventories

Inventoriesexpected long-term rate of return of 7.75% for the periods ended January 31, 2021 and January 31, 2020. Pension expense consisted of the following (in thousands):

   January 31, 2018   April 30, 2017 

Finished products

  $3,778   $3,179 

Work in process

   2,133    1,950 

Raw materials

   11,769    9,806 
  

 

 

   

 

 

 
  $17,680   $14,935 
  

 

 

   

 

 

 

The Company uses thelast-in,first-out (LIFO) method of valuing inventory for its domestic operations, which represents $15,833,000 of inventory at January 31, 2018 and $12,730,000 at April 30, 2017. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimates of expectedyear-end inventory levels and costs, and are subject to the finalyear-end LIFO inventory valuation. The Company’s international subsidiaries’ inventories were $1,847,000 at January 31, 2018 and $2,205,000, at April 30, 2017, measured using thefirst-in,first-out (“FIFO”) method at the lower of cost and net realizable value.

F.
Three Months Ended January 31, 2021Three Months Ended January 31, 2020
Service cost$0 $0 
Interest cost181 208 
Expected return on plan assets(321)(355)
Recognition of net loss428 260 
Net periodic pension expense$288 $113 

Nine Months Ended January 31, 2021Nine Months Ended January 31, 2020
Service cost$0 $0 
Interest cost543 624 
Expected return on plan assets(963)(1,065)
Recognition of net loss1,285 780 
Net periodic pension expense$865 $339 

11

M. Segment Information

The Company’s operations are classified into two2 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 table providestables provide financial information by business segments for the three and nine monthsperiods ended January 31, 20182021 and 20172020 (in thousands):

   Domestic
Operations		   International
Operations		   Corporate /
Eliminations		   Total 

Three months ended January 31, 2018

        

Revenues from external customers

  $29,734   $8,456   $—     $38,190 

Intersegment revenues

   1,145    1,361    (2,506)    —   

Earnings (loss) before income taxes

   2,959    1,363    (1,838)    2,484 

Three months ended January 31, 2017

        

Revenues from external customers

  $25,313   $5,058   $—     $30,371 

Intersegment revenues

   344    538    (882)    —   

Earnings (loss) before income taxes

   563    943    (1,015)    491 
   Domestic
Operations		   International
Operations		   Corporate/
Eliminations		   Total 

Nine months ended January 31, 2018

        

Revenues from external customers

  $80,420   $33,122   $—     $113,542 

Intersegment revenues

   10,298    3,291    (13,589)    —   

Earnings (loss) before income taxes

   7,720    4,019    (4,715)    7,024 

Nine months ended January 31, 2017

        

Revenues from external customers

  $83,161   $20,818   $—     $103,979 

Intersegment revenues

   3,781    2,936    (6,717)    —   

Earnings (loss) before income taxes

   5,580    3,010    (3,670)    4,920 

G.Defined Benefit Pension Plans

Domestic
Operations		International
Operations		Corporate /
Eliminations		Total
Three months ended January 31, 2021
Revenues from external customers$25,066 $8,273 $0 $33,339 
Intersegment revenues463 550 (1,013)0 
Earnings (loss) before income taxes$206 $689 $(1,613)$(718)
Three months ended January 31, 2020
Revenues from external customers$26,699 $7,526 $0 $34,225 
Intersegment revenues302 659 (961)0 
Earnings (loss) before income taxes$(867)$513 $(1,897)$(2,251)
Domestic
Operations		International
Operations		Corporate /
Eliminations		Total
Nine months ended January 31, 2021
Revenues from external customers$83,896 $24,866 $0 $108,762 
Intersegment revenues1,715 2,460 (4,175)0 
Earnings (loss) before income taxes$1,794 $1,610 $(5,071)$(1,667)
Nine months ended January 31, 2020
Revenues from external customers$87,570 $25,713 $0 $113,283 
Intersegment revenues3,388 2,142 (5,530)0 
Earnings (loss) before income taxes$1,439 $1,622 $(4,805)$(1,744)


N. Reclassifications

The Company hasnon-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 underreclassified certain amounts in the plans, subsequent to the amendment date, and no additional participants will be added to the plans. Company contributions of $600,000 were paid to the plans during the nine months ended January 31, 2018, and the Company does not expect any contributions to be paid to the plans during the remainder of the fiscal year. Contributions of $555,000 were paid to the plans during the nine months ended January 31, 2017. The Company assumed an expected long-term rate of return of 7.75%condensed consolidated balance sheet for the period ended January 31, 2018 as compared to 8.0%April 30, 2020 and the condensed consolidated statements of cash flows for the nine-month period ended January 31, 2017. Pension expense consisted of the following (in thousands):

   Three months ended
January 31, 2018		   Three months ended
January 31, 2017		 

Service cost

  $-0-   $-0- 

Interest cost

   219    232 

Expected return on plan assets

   (328)    (311) 

Recognition of net loss

   283    314 
  

 

 

   

 

 

 

Net periodic pension expense

  $174   $235 
  

 

 

   

 

 

 

   Nine months ended
January 31, 2018		   Nine months ended
January 31, 2017		 

Service cost

  $-0-   $-0- 

Interest cost

   687    695 

Expected return on plan assets

   (984)    (932) 

Recognition of net loss

   849    942 
  

 

 

   

 

 

 

Net periodic pension expense

  $522   $705 

H.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, term loans and short-term borrowings. The carrying value of these assets and liabilities approximate 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 January 31, 2018 and April 30, 2017 (in thousands):

   January 31, 2018 
   Level 1   Level 2   Total 

Financial Assets

      

Trading securities held innon-qualified compensation plans (1)

  $3,994   $—     $3,994 

Cash surrender value of life insurance policies (1)

   —      75    75 
  

 

 

   

 

 

   

 

 

 

Total

  $3,994   $75   $4,069 
  

 

 

   

 

 

   

 

 

 

Financial Liabilities

      

Non-qualified compensation plans (2)

  $—     $4,472   $4,472 

Interest rate swap derivatives

   —      14    14 
  

 

 

   

 

 

   

 

 

 

Total

  $—     $4,486   $4,486 
  

 

 

   

 

 

   

 

 

 
   April 30, 2017 
   Level 1   Level 2   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 
  

 

 

   

 

 

   

 

 

 

(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.

I.Share-based Compensation

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 replaces 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.

The Company issued restricted stock units (“RSUs”) under the 2017 Plan and recorded stock-based compensation expense of $60,000 and $100,000 during the three and nine months ended January 31, 2018 in accordance with ASC 718, “Compensation—Stock Compensation.” 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 cumulative days incurred and remaining over the three year period. The remaining estimated compensation expense of $510,000 will be recorded over the remaining three year period.

J.Income Taxes

On December 22, 2017, the 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 the Company has a fiscal year ending April 30, it is subject to a blended tax rate for the current fiscal year. Therefore, a blended rate of 29.73% was computed as the federal statutory rate for this year.

The Company has analyzed the income tax effects of the 2017 Tax Act and determined that (ii) 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 and will update provisional amounts as required. The Company recognized income tax expense of $1,566,000 and $3,149,000 for the three and nine months ended January 31, 2018. The effective tax rate was 63.0% and 44.8% for the three and nine months ended January 31, 2018.

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 provisional discrete deferred income tax expense of $587,000 in the three months ended January 31, 2018 as a result of applying a lower U.S. federal income tax rate to the Company’s net deferred tax assets.

The Company revalued the U.S. deferred tax balances based on the tax rates effective for the following fiscal year at the new federal rate of 21% for amounts that are not expected to reverse during the current fiscal year and revalued the deferred tax balances expected to reverse in the current fiscal year at the Company’s current fiscal year blended rate of 29.73%. The Company has not yet completed the revaluation of the deferred tax balances due to estimates which are being used during interim periods until finalization of the balances can occur at the Company’s fiscal year end.

The 2017 Tax Act also includes aone-time transition tax on accumulated unrepatriated foreign earnings. In the three months ended January 31, 2018, the Company recorded a provisional discrete current income tax expense of $528,000 on accumulated unrepatriated foreign earnings, including estimates for foreign earnings through April 30, 2018. In addition, the Company has not yet completed the calculation of the related income tax pools for its foreign subsidiaries. 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 $486,000 of the provisional expense as othernon-current liabilities in the Company’s Consolidated Balance Sheet for January 31, 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 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.

The Company anticipates future impacts at a U.S., state and local tax level related to the 2017 Tax Act as statutory and interpretive guidance is not available from applicable tax authorities needed to reasonably estimate the impact. Consequently, the Company has not recorded provisional amounts for this statutory and interpretive guidance and has continued to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the 2017 Tax Act enactment.

K.Reclassifications

Certain 2017 amounts have been reclassified2021 to conform to the 2018 presentation in the consolidated statements of cash flows. Such reclassifications had no impact on net earnings.

L.current period presentation.

O. 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 outlines a new comprehensive revenue recognition model that supersedes most current revenue recognition guidance and requires companies to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects 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 and we do not plan to early adopt. ASU2014-09 provides two methods of adopting the standard: using either a full retrospective approach or modified retrospective approach. We expect to elect 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 currently may be for single performance obligations or for multiple performance obligations. Based on our assessment, we do not believe the new standard significantly changes our accounting policy for these types of performance obligations. We have also evaluated the impact the new standard will have on our existing policies, contracts, accounting processes, internal controls, reporting systems and disclosure processes. We have begun implementing improvements and or enhancements to our business processes to support the implementation of the standard. We currently have not identified an improvement or enhancement that we would conclude would be a significant change to our internal control environment. Based on the evaluation and implementation efforts completed to date, we believe the adoption of ASU2014-09 will not have a significant impact on the Company’s consolidated financial position, results of operations, equity or cash flows.

In July 2015,June 2016, the FASB issued ASU2015-11, “Inventory – Simplifying 2016-13, "Measurement of Credit Losses on Financial Instruments," which replaces the Measurement of Inventory.” This guidance changes the measurement principlecurrent incurred loss method used 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.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, 2016.2022. 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 January 2017, the FASB issued ASU 2017-04, "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 adopted this standard effective May 1, 2017.2020. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

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In March 2016,August 2018, the FASB issued ASU2016-9, “Stock Compensation – Improvements 2018-13, "Disclosure Framework - Changes to Employee Share-Based Payment Accounting.” This guidance simplifies various aspectsthe Disclosure Requirements for Fair Value Measurement," which removes, modifies, and adds certain disclosure requirements related to how share-based payments are accounted for and presentedfair value measurements in the financial statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.ASC Topic 820. The Company adopted this standard prospectively effective May 1, 2017. Prior periods were not retrospectively adjusted.2020. The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.


In August 2018, the FASB issued ASU 2018-14, "Compensation -Retirement Benefits -Defined Benefit Plans -General (Subtopic 715-20) - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans" ("ASU 2018-14"). The amendments in this update remove defined benefit plan disclosures that are no longer considered cost-beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company adopted this standard effective May 1, 2020. The adoption of this standard did not 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 expects to adopt this guidance when effective and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). This guidance provides practical expedients for contract modifications and certain hedging relationships associated with the expected market transition from London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The ASU can be adopted after its issuance date through December 31, 2022. The Company is evaluating the optional expedients and exceptions in the guidance but does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company’s 20172020 Annual Report to Stockholders 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, 2017.2020. The following discussion and analysis describes material changes in the Company’s financial condition since April 30, 2017.2020. The analysis of results of operations compares the three and nine months ended January 31, 20182021 with the comparable periods of the prior year.

Results of Operations

Sales for the three months ended January 31, 2018quarter were $38,190,000, an increase of 25.7%$33,339,000, a 2.6% decrease from sales of $30,371,000$34,225,000 in the comparable period of the prior year. Domestic sales for the quarter were $29,734,000, an increase of 17.5%$25,066,000, down 6.1% from sales of $25,313,000$26,699,000 in the comparable period of the prior year. International sales for the quarter were $8,456,000, an increase of 67.2%$8,273,000, up 9.9% from sales of $5,058,000 in the comparable period of the prior year. The increase in sales was due to strength in the laboratory, healthcare, and technical furniture products in the US, Middle East, Indian and Asian markets with sales in each of these markets exceeding the prior period third quarter.

Sales for the nine months ended January 31, 2018 were $113,542,000, an increase of 9.2% from sales of $103,979,000$7,526,000 in the comparable period of the prior year. Domestic sales decreased for the most recent quarter compared to the prior year period due to continued delays in construction projects due to the coronavirus pandemic. International sales increased for the most recent quarter compared to the prior year period due to strong international demand coupled with reduced coronavirus related restrictions in certain markets that allowed access to project sites.

Sales for the nine months ended January 31, 2021 were $80,420,000, down$108,762,000, a 4.0% decrease from $83,161,000sales of $113,283,000 in the comparable period of the prior year, as domestic orders from dealersyear. Domestic sales for the nine-month period were lower than the prior year period. International sales were $33,122,000, up$83,896,000, down 4.2% from sales of $20,818,000$87,570,000 in the comparable period of the prior year due toyear.  International sales for the impactperiod were $24,866,000, down 3.3% from sales of a large order being delivered to a customer$25,713,000 in the Middle East.

comparable period of the prior year. 

The Company’s order backlog was $116.1$103 million at January 31, 2018,2021, as compared to $113.5$93 million at January 31, 2020, and $101 million at April 30, 20172020. The Company continues to have a strong volume of outstanding quotations globally and $106.9 million at January 31, 2017. Incoming orders continued to be strong in all of the Company’s key markets, increasing the order backlog year-over-year.

is aggressively pursuing these projects.

The gross profit margin for the three months ended January 31, 20182021 was 21.9%17.0% of sales, as compared to 16.6%15.4% of sales in the comparable quarter of the prior year. The increase in the gross profit margin percent was primarily due to improved operating leverage from the increased sales volume as well as more profitable product mix than in the prior third quarter.

The gross profit margin for the nine months ended January 31, 20182021 was 14.4%16.5% of sales, asrelatively flat compared to 13.9%16.4% of sales in the comparable period of the prior year. The increase in the gross profit margin percentpercentage for the three months ended January 31, 2021 was primarily duerelated to continued executionimproved operating performance of the Company’s cost reductionCompany's Domestic operations with lower unfavorable manufacturing and productivity improvement programs, and a favorable shift in product mix.

material variances when compared to the prior year period.

Operating expenses for the three months ended January 31, 20182021 were $5,971,000,$6,030,000, or 15.6%18.1% of sales, as compared to $4,590,000,$7,350,000, or 15.1%21.5% of sales, in the comparable period of the prior year. Operating expenses for the nine months ended January 31, 2020 were $18,593,000, or 17.1% of sales, as compared to $19,875,000, or 17.5% of sales, in the comparable
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period of the prior year. The increasedecrease in operating expenses for the three months ended January 31, 2018 related2021 was primarily due to increasesreductions in marketing expensesalaries and fringe benefits of $89,000,$441,000, incentive and stock compensation expense of $483,000,$143,000, bad debt expense of $91,000, International operating expenses$283,000, travel and entertainment expense of $267,000, corporate governance expenses of $81,000$134,000 and consulting and professional services $194,000, partially offset by afees of $196,000.
The decrease in pension expense of $61,000.

Operating expenses for the nine months ended January 31, 2018 were $16,360,000, or 14.4% of sales, as compared to $14,484,000, or 13.9% of sales, in the comparable period of the prior year. The increase in operating expenses for the nine months ended January 31, 2018 related2021 was primarily due to increasesreductions in marketing expensesalaries and fringe benefits of $144,000,$196,000, incentive and stock compensation expense of $676,000,$173,000, bad debt expense of $113,000,$261,000, travel and entertainment expense of $453,000 and consulting and professional fees of $35,000 and reduced International operating expenses of $432,000, corporate governance expenses of $319,000 and professional services of $78,000, partially offset by a decrease in pension expense $183,000.

$91,000.

Interest expense was $78,000$105,000 and $226,000$310,000 for the three and nine months ended January 31, 2018,2021, as compared to $71,000$150,000 and $229,000$452,000 for the comparable periods of the prior year.year, respectively. The changes in interest expense in the current three and nine month periods were primarily attributable to changes in the borrowing levels.

The effective income tax rates for the three and nine months ended January 31, 2021 were 113.2.4% and 59.3% compared to 15.5% and 104.5% for the three and nine months ended January 31, 2020. Income tax expensebenefits of $1,566,000$813,000 and $133,000 was$350,000 were recorded for the three months ended January 31, 20182021 and 2017,2020, respectively. The effective tax rates were 63.0% and 27.1% for the three months ended January 31, 2018 and 2017, respectively. Our effective tax rate increased in the third quarter of fiscal year 2018, compared to the prior year period, 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 rate was reduced from 35% to 21%. This rate reduction required the Company tore-measure our net deferred tax assets assuming a futureAn income tax benefit at the new lower 21% rate. The estimated discrete impact of this re-measurement of our net deferred tax assets recorded for the three months ended January 31, 2018 was $587,000. Second, as part of the transition to a modified territorial system, the new law imposes aone-time transition tax on the unremitted earnings of our foreign subsidiaries. The estimated discrete impact of thisone-time transition tax recorded for the three months ended January 31, 2018 was $528,000. The Company intends to elect to pay this tax over$989,000 and an8-year period.

Income income tax expense of $3,149,000 and $1,695,000 was$1,822,000 were recorded for the nine months ended January 31, 20182021 and 2017,2020, respectively. The change in the effective tax rates were 44.8% and 34.5% for the three and nine months ended January 31, 20182021 reflects the impact of international operations which are taxed at different rates, combined with a U.S. tax benefit recorded for the most recent quarter. The change in the effective tax rates from the same periods in the previous fiscal year is due to the Company’s revocation of its indefinite reinvestment of foreign unremitted earnings position, effective August 2019, for the Singapore and 2017, respectively.

China subsidiaries, and Kewaunee Labway India Pvt. Ltd.

The Company included a tax withholding expense, for dividends paid to the US and Singapore shareholders, imposed by the India Income Tax Department in accordance with international tax treaties between India and the U.S. and Singapore governments at a rate of 10% and 15%, respectively, for the three and nine months ended January 31, 2021. The Company recognized a withholding tax expense of $18,000 and $99,000 for the three and nine months ended January 31, 2021, respectively, related to the unremitted earnings position of the subsidiaries listed above. The Company recognized a withholding tax expense of $50,000 and $2,214,000 for the three and nine months ended January 31, 2020, respectively, related to the unremitted earnings position of the subsidiaries listed above. The Company will record the tax withholding on all future Kewaunee Labway India Pvt. Ltd. earnings at an estimated rate of 10% and 15% for the U.S. and Singapore shareholders, respectively, in addition to the corporate income taxes. See Note K of the Notes to Condensed Consolidated Financial Statements for additional information.
Noncontrolling interests related to the Company’s subsidiarysubsidiaries not 100% owned by the Company reduced net earnings by $35,000$14,000 and $120,000$19,000 for the three and nine months ended January 31, 2018,2021, respectively, as compared to $17,000 and $98,000$59,000 for the comparable periods of the prior year. The change in the net earnings attributable to the noncontrolling interest in the current period was due to changes in earnings of the subsidiarysubsidiaries in the related period.

Net earnings of $883,000,were $81,000, or $0.31$0.03 per diluted share, were reported for the three months ended January 31, 2018,2021, compared to a net earningsloss of $341,000,$1,918,000, or $0.13$0.70 per diluted share, in the prior year period. Net earningsA net loss of $3,755,000,$697,000, or $1.35$0.25 per diluted share, werewas reported for the nine months ended January 31, 2018,2021, compared to a net earningsloss of $3,127,000,$3,625,000, or $1.15$1.32 per diluted share, in the prior year period.

Liquidity and Capital Resources

Historically, the Company’sCompany's principal sources of liquidity have been funds generated from operations, supplemented as needed by short-term borrowings under the Company’sCompany's revolving credit facility. Additionally, certain machinery and equipment are financed bynon-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.

The Company had working capital of $36.2 million$28,510,000 at January 31, 2018,2021, compared to $32.9 million$27,171,000 at April 30, 2017.2020. The ratio of current assets to current liabilities was2.4-to-1.0 1.9-to-1.0 at January 31, 2018,2021, compared to2.2-to-1.0 2.0-to-1.0 at April 30, 2017.2020. At January 31, 2018,2021, advances of $4.5 million were outstanding under the Company’s bank revolvingCompany's credit facility,facilities, compared to advances of $3.5$4.7 million outstanding as of April 30, 2017.2020. The Company had standby letters of credit outstanding of $4.2 million$512,000 at January 31, 2018 and2021, unchanged from April 30, 2017.2020. Amounts available under the $20$15 million revolving credit facility were $11.3$8.6 million and $12.3$8.7 million at January 31, 20182021 and April 30, 2017,2020, respectively. Total bank borrowings and interest rate swaps were $7.5 million at January 31, 2018, compared to $6.9 millionAs previously reported in the Company's 2020 Annual Report on Form 10-K, the Company was not compliant at April 30, 2017.

2020 with all of the financial covenants under the revolving credit facility.

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On July 20, 2020, the Company entered into an amendment which effected changes in certain financial covenants and included a waiver of the non-compliance. On January 28, 2021, the Company entered into another amendment to the Loan Agreement and Line of Credit which effected changes (i) extending the maturity date under the Credit Agreement and Revolving Note from February 1, 2021 to May 3, 2021; (ii) establishing a minimum EBITDA covenant for the fiscal quarter ending April 30, 2021 of $1,000,000, determined for the four-quarter period then ending; and (iii) revising the covenant regarding delivery of financial projections to the Bank to, among other things, provide projections for the next succeeding fiscal year. These amendments did not change the amount of availability under the revolving credit facility. At January 31, 2021, the Company was in compliance with all the financial covenants under its revolving credit facility.
The Company’s operations usedprovided cash of $645,000$3,107,000 during the nine months ended January 31, 2018.2021. Cash was used primarily used to support an increaseby increases in receivables of $1,025,000$2,089,000, inventory of $285,000, and inventoriesincome tax receivable of $2,745,000, and a decrease in deferred revenue of $3,847,000, partially offset by cash provided by earnings and an increase in accounts payable and other accrued expenses of $2,020,000. The Company’s operations provided cash of $5,851,000 during the nine months ended January 31, 2017. Cash was primarily provided from earnings, and a decrease in receivables of $2,090,000,$1,488,000, partially offset by an increase in accounts payable and other accrued expenses of $1,189,000.

$3,843,000. During the nine months ended January 31, 2018,2021, the Company used net cash of $1,965,000$1,944,000 in investing activities, all of which included $1,907,000was used for capital expenditures, and a $58,000 increase in restricted cash. During the nine months ended January 31, 2017, net cash of $2,061,000 was used in investing activities, which included $2,190,000 for capital expenditures, offset by a $129,000 decrease in restricted cash.

expenditures. The Company’s financing activities used cash of $836,000$379,000 during the nine months ended January 31, 2018,2021, primarily for repayments on short-term borrowings of $226,000 and cash dividends of $1,331,000 paid to stockholders, cash dividends of $74,000 paid to minority interest holders of $108,000.

Outlook    
The Company continues to actively monitor the COVID-19 pandemic and payments of $626,000 on long-term debt, partially offset by an increase in net short-term borrowings of $1,187,000. The Company’s financing activities used cash of $477,000 duringits impact. Any future developments and effects will be highly uncertain and cannot be predicted, including: the nine months ended January 31, 2017, primarily for cash dividends of $1,163,000scope and payments on long-term debt of $316,000, partially offset by an increase in short-term borrowings of $861,000.

Financial Outlook

As disclosed in the Company’s Report on 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 temporary production disruption had an immaterial impact on sales and earnings for the period ended January 31, 2018, and the Company believes it will have an immaterial impact for the remainderduration of the fiscal year.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.


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 fiscal year 2018project awards will resultaccelerate and the pace of construction will increase. The Company expects its performance to continue to improve based upon its reduced cost structure and investments in sales andmodernizing its operations. In the near-term, industry earnings growth as our order backlog and opportunities in the marketplace remain strong.

are expected to be negatively impacted by rapidly escalating raw material costs.


Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This report contains statements that the Company believes to be “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this 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,
“plan,” “predict,” “believe” and similar words, expressions and variations of these words and expressions are intended to
identify forward-looking statements. All forward-looking statements are subject to important factors, risks, uncertainties and
assumptions, including industry and economic conditions

that could cause actual results to differ materially from those

described in the forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, to:
competitive and general economic conditions and the rapidly evolving COVID-19 pandemic, including disruptions from government mandates, 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. The Company cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. Over time, our
15

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 differencedifferences are described under the caption “Risk Factors” in Item 1A in the Company’s 20172020 Annual Report on Form10-K and underin Quarterly Reports on Form 10-Q subsequently filed by the caption “Risk Factors” in Part II, Item 1A of both this report and the Company’s Report on Form10-Q for the period ended October 31, 2017.Company. 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

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 Form10-K for the fiscal year ended April 30, 2017.

2020.
Item 4.Controls and Procedures

Evaluation of Disclosure

Item 4.Controls and Procedures

As

(a) Evaluation of the end of the period covered by this Quarterly Report on Form10-Q, we carried out andisclosure controls and procedures
An evaluation was performed under the supervision and with the participation of ourthe Company’s management, including ourthe Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of ourthe Company’s disclosure controls and procedures as(as defined in RuleRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.1934, as amended) as of January 31, 2021. Based on that evaluation, the evaluation, our Chief Executive OfficerCompany’s management, including the CEO and our Chief Financial Officer haveCFO, concluded that, as of January 31, 2021, the end of the period covered by this Quarterly Report on Form10-Q, ourCompany’s disclosure controls and procedures were notadequate and effective and designed to ensure that theall material information required to be disclosedfiled in this quarterly report is made known to them by usothers within the Company and its subsidiaries.
(b) Changes in internal controls
There was no significant change in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.

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 inCompany’s internal control over financial reporting relatingthat occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to the misapplication of certain aspects ofmaterially affect, 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. The material weakness cannot be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We currently expect to complete remediation of the material weakness by April 30, 2018.

In addition, as disclosed in the Company’sForm 10-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. We currently expect to complete remediation of this material weakness by April 30, 2018.

PART II. OTHER INFORMATION

Item 1A.Risk Factors

Other than as set forth below, as of January 31, 2018 there have been no material changes to the risk factors faced by the Company from those previously disclosed in our Annual Report on Form10-K for the year ended April 30, 2017, and in our Quarterly Report on Form10-Q for the period ended October 31, 2017.

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, intellectual property, and 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 significant 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 ourForm 10-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. The Company engaged third party experts, including 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 internal control over financial reporting relating to its logical access control over its IT systems. While the Company currently expects to complete remediation of this weakness by April 30, 2018, there can be no assurance that such remediation will be completed by such date. 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.

reporting.

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PART II. OTHER INFORMATION

Item 6.    Exhibits
Item 6.Exhibits

10.68B*Amendment No. Two to the Kewaunee Scientific Corporation 401Plus Executive Deferred Compensation Plan.
31.110.1
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document

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



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SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

KEWAUNEE SCIENTIFIC CORPORATION


                             (Registrant)

Date: March 9, 201812, 2021ByBy

/s/ Thomas D. HullDonald T. Gardner III

Donald T. Gardner III

Thomas D. Hull III

(As duly authorized officer and Vice President, Finance and Chief Financial Officer)


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