UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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| X | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
For the quarterly period ended July 31, 2001
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| | Transition Report Pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
For the transition period from ____________ to _____________
Commission file number 0-5286
KEWAUNEE SCIENTIFIC CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 38-0715562
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 West Front Street
Statesville, North Carolina 28677
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(Address of principal executive offices) (Zip Code)
(704) 873-7202
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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As of August 31, 2001, the Registrant had outstanding 2,470,246 shares of Common
Stock.
Pages: This report, excluding exhibits, contains 14 pages numbered sequentially
from this cover page.
KEWAUNEE SCIENTIFIC CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 31, 2001
Page
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Statements of Operations -
Three months ended July 31, 2001 and 2000 3
Condensed Balance Sheets - July 31, 2001
and April 30, 2001 4
Condensed Statements of Cash Flows -
Three months ended July 31, 2001 and 2000 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Review by Independent Accountants 11
Report of Independent Accountants 12
PART II. OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
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2
Part 1. Financial Information
Item 1. Financial Statements
Kewaunee Scientific Corporation
Condensed Statements of Operations
(Unaudited)
(in thousands, except per share data)
Three months ended
July 31
----------------------
2001 2000
---------- ----------
Net sales $19,740 $19,370
Costs of products sold 16,533 15,692
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Gross profit 3,207 3,678
Operating expenses 2,752 3,281
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Operating earnings 455 397
Interest expense (60) (47)
Other income (expense) 63 (15)
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Earnings before income taxes 458 335
Income tax expense 165 121
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Net earnings $293 $214
========= =========
Net earnings per share
Basic $0.12 $0.09
Diluted $0.12 $0.09
Average number of common shares
outstanding (in thousands)
Basic 2,472 2,466
Diluted 2,486 2,491
See accompanying notes to condensed financial statements.
3
Kewaunee Scientific Corporation
Condensed Balance Sheets
(in thousands)
July 31 April 30
2001 2001
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Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 349 $ 488
Receivables, less allowance 17,585 17,629
Inventories 5,330 4,370
Deferred income taxes 915 915
Prepaid income taxes 215 758
Prepaid expenses and other current assets 857 498
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Total current assets 25,251 24,658
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Property, plant and equipment, at cost 35,066 34,744
Accumulated depreciation (22,349) (21,825)
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Net property, plant and equipment 12,717 12,919
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Other assets 2,977 3,292
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Total Assets $ 40,945 $ 40,869
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Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 200 $ -
Current portion of long-term debt 620 620
Accounts payable 5,245 5,334
Employee compensation and amounts withheld 1,373 1,446
Deferred Revenue 639 1,024
Other accrued expenses 1,848 1,549
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Total current liabilities 9,925 9,973
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Long-term debt 2,222 2,377
Deferred income taxes 1,063 1,063
Accrued employee benefit plan costs 1,696 1,695
Other long-term liabilities 187 -
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Total Liabilities 15,093 15,108
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Stockholders' equity:
Common stock 6,550 6,550
Additional paid-in-capital 150 150
Retained earnings 20,058 19,938
Common stock in treasury, at cost (906) (877)
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Total stockholders' equity 25,852 25,761
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Total Liabilities and Stockholders' Equity $ 40,945 $ 40,869
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See accompanying notes to condensed financial statements.
4
Kewaunee Scientific Corporation
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
Three months ended
July 31
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2001 2000
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Cash flows from operating activities:
Net earnings $ 293 $ 214
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation 524 562
Provision for bad debts 33 33
Decrease in prepaid income taxes 543 -
Decrease in receivables 11 1,356
Increase in inventories (960) (1,428)
Increase in accounts payable and
other current liabilities 137 127
Other, net (241) (212)
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Net cash provided by operating activities 340 652
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Cash flows from investing activities:
Capital expenditures (322) (907)
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Net cash used in investing activities (322) (907)
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Cash flows from financing activities:
Payments on long-term debt (155) -
Increase in short-term borrowings 200 426
Dividends paid (173) (172)
Purchase of treasury stock (29) -
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Net cash (used in) provided by financing activities (157) 254
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Decrease in cash and cash equivalents (139) (1)
Cash and cash equivalents, beginning of period 488 9
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Cash and cash equivalents, end of period $ 349 $ 8
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See accompanying notes to condensed financial statements.
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Kewaunee Scientific Corporation
Notes to Condensed Financial Statements
(unaudited)
A. Financial Information
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The unaudited interim condensed financial statements of Kewaunee Scientific
Corporation (the "Company" or "Kewaunee") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (the
"Commission"). Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. These interim condensed financial statements should be
read in conjunction with the financial statements and notes included in the
Company's 2001 Annual Report to Stockholders.
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions that affect reported
amounts and disclosures. Actual results could differ from those estimates.
In the opinion of management, the interim condensed financial statements reflect
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the interim periods. The results of operations for the
interim periods are not necessarily indicative of the results of operations to
be expected for the full year.
B. Inventories
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Inventories consisted of the following (in thousands):
July 31, 2001 April 30, 2001
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Finished products $1,459 $1,023
Work in process 1,532 1,455
Raw materials 2,339 1,892
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$5,330 $4,370
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C. Balance Sheet
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The Company's April 30, 2001 condensed balance sheet as presented herein is
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
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D. Segment Information
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The following table shows net sales and profits by business segment for three
months ended July 31, 2001 and 2000.
Laboratory Technical
Products Products Corporate Total
---------- -------- --------- -----
Three months ended
July 31, 2001
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Revenues from
external customers $17,844 $1,896 -- $19,740
Intersegment revenues -- -- -- --
Segment profit 825 (184) (183) 458
Three months ended
July 31, 2000
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Revenues from
external customers $14,259 $5,111 -- $19,370
Intersegment revenues -- 114 (114) --
Segment profit (loss) (193) 684 (156) 335
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Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The Company's 2001 Annual Report to Stockholders contains management's
discussion and analysis of financial condition and results of operations at and
for the year ended April 30, 2001. The following discussion and analysis
describes material changes in the Company's financial condition since April 30,
2001. The analysis of results of operations compares the three months ended July
31, 2001 with the comparable period of the prior fiscal year.
Results of Operations
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The Company recorded sales of $19.7 million for the three months ended July 31,
2001, up 1.9% from sales of $19.4 million for the comparable period of the prior
year. Sales of laboratory products increased 25.1% during the quarter over the
same period last year, as the industrial research market for these products
continued to improve. Sales of technical products, which are sold primarily to
customers in the high-tech industry, declined 62.9% during the quarter from the
same period last year, as the slowdown in high-tech capital spending reduced
demand for these products.
The Company's gross profit margin for the three months ended July 31, 2001 was
16.2%, compared to 19.0% for the comparable period of the prior year. The
decrease in the gross profit margin for the quarter resulted primarily from
differences in the product sales mix, as sales of laboratory products increased
during the quarter, while sales of technical products, which typically have
higher profit margins, declined.
Operating expenses for the three months ended July 31, 2001 were $2.8 million,
compared to $3.3 million for the comparable period of the prior year. As a
percent of sales, operating expenses for the three months ended July 31, 2001
were 13.9% of sales, as compared to 16.9% of sales for the comparable period of
the prior year. The decrease in operating expenses resulted primarily from lower
sales commissions attributable to a change in product sales mix and lower
marketing and administrative expenses.
Operating earnings of $455,000 were recorded for the three months ended July 31,
2001, as compared to $397,000 recorded in the comparable period of the prior
year.
8
Interest expense was $60,000 for the three months ended July 31, 2001, compared
to $47,000 for the comparable period of the prior year. The increase in interest
expense for the current quarter resulted primarily from increased bank
borrowings during the quarter, partially offset by lower interest rates.
Other income was $63,000 for the three months ended July 31, 2001, compared to
other expense of $15,000 for the comparable period of the prior year.
Income tax expense of $165,000 was recorded for the three months ended July 31,
2001, as compared to an income tax expense of $121,000 recorded for the
comparable period of the prior year. The effective tax rate was 36.0% for each
of these periods.
Net earnings of $293,000, or $.12 per diluted share, was recorded for the three
months ended July 31, 2001, compared to net earnings of $214,000, or $.09 per
diluted share, for the comparable period of the prior year, as a result of the
factors discussed above.
Liquidity and Capital Resources
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Historically, the Company's principal sources of liquidity have been funds
generated from operations, supplemented as needed by the Company's credit
facility. The Company believes that these sources will be sufficient to support
ongoing business levels, including capital expenditures through the current
fiscal year.
The Company had working capital of $15.3 million at July 31, 2001, as compared
to $14.7 million at April 30, 2001. The ratio of current assets to current
liabilities was 2.5-to-1 at July 31, 2001, unchanged from April 30, 2001. At
July 31, 2001, advances of $200,000 were outstanding under the Company's $6.0
million revolving credit loan.
9
The Company's operations provided cash of $340,000 during the three months ended
July 31, 2001. The cash provided was primarily attributable to operating
earnings before depreciation and a reduction in prepaid income taxes, reduced by
cash requirements associated with increased inventory levels. The Company's
operations provided cash of $652,000 during the three months ended July 31,
2000, primarily attributable to operating earnings before depreciation, reduced
by the net impact of cash requirements associated with reduced customer
receivable balances and increased inventory levels.
During the three months ended July 31, 2001, the Company used cash of $322,000
for capital expenditures, primarily production equipment, compared to the use of
$907,000 for such expenditures in the comparable period of the prior year.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
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Certain statements in this report constitute "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that could significantly impact results or
achievements expressed or implied by such forward-looking statements. These
factors include, but are not limited to, economic, competitive, governmental,
and technological factors affecting the Company's operations, markets, products,
services, and prices. The cautionary statements made pursuant to the Reform Act
herein and elsewhere by the Company 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. In addition,
readers are urged to consider statements that include the terms "believes",
"belief", "expects", "plans", "objectives", "anticipates", "intends" or the like
to be uncertain and forward-looking.
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REVIEW BY INDEPENDENT ACCOUNTANTS
A review of the interim financial information included in this Quarterly Report
on Form 10-Q for the three months ended July 31, 2001 has been performed by
PricewaterhouseCoopers LLP, the Company's independent accountants. Their report
on the interim financial information follows.
11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Kewaunee Scientific Corporation
Statesville, North Carolina
We have reviewed the accompanying condensed balance sheet of Kewaunee Scientific
Corporation as of July 31, 2001, and the related statements of operations for
the three-month period ended July 31, 2001 and the condensed statement of cash
flows for the three-month period ended July 31, 2001. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed interim financial information for it to be
in conformity with accounting principles generally accepted in the United States
of America.
We previously audited in accordance with auditing standards generally accepted
in the United States of America, the balance sheet as of April 30, 2001, and the
related statements of operations, of stockholder's equity, and of cash flows for
the year then ended (not presented herein), and in our report dated June 1,
2001, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed balance sheet
as of April 30, 2001 is fairly stated in all material respects in relation to
the balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
Charlotte, North Carolina
August 15, 2001
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on August 22,
2001. Each of the nominees for Class III directors was re-elected. The
votes cast for and withheld from each such director were as follows:
Director For Withheld
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Kingman Douglass 2,025,840 120,094
Eli Manchester, Jr. 2,081,826 64,108
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
No reports on Form 8-K were filed with the Commission during the three
months ended July 31, 2001.
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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
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(Registrant)
Date: September 13, 2001 By /s/ D. Michael Parker
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D. Michael Parker
Senior Vice President, Finance
Chief Financial Officer
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