UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended October 31, 2001
[_] 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 December 10, 2001, the Registrant had outstanding 2,463,996 shares of
Common Stock.
Pages: This report, excluding exhibits, contains 14 pages numbered sequentially
from this cover page.
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KEWAUNEE SCIENTIFIC CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2001
Page Number
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Statements of Operations -
Three months and six months
ended October 31, 2001 and 2000 3
Condensed Balance Sheets - October 31, 2001
and April 30, 2001 4
Condensed Statements of Cash Flows -
Six months ended October 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 by Independent Accountants 12
PART II. OTHER INFORMATION
- --------------------------
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)
Three months ended Six months ended
October 31 October 31
--------------------------- --------------------------
2001 2000 2001 2000
--------- ----------- ---------- ----------
($ in thousands, except per share data)
Net sales $ 22,525 $ 21,416 $ 42,265 $ 40,786
Cost of products sold 18,591 17,100 35,124 32,792
--------- --------- --------- ---------
Gross profit 3,934 4,316 7,141 7,994
Operating expenses 2,858 3,018 5,610 6,299
--------- --------- --------- ---------
Operating earnings 1,076 1,298 1,531 1,695
Interest expense (59) (85) (119) (132)
Other (expense) income (25) 8 38 (7)
--------- --------- --------- ---------
Earnings before income taxes 992 1,221 1,450 1,556
Income tax expense 354 439 519 560
--------- --------- --------- ---------
Net earnings $ 638 $ 782 $ 931 $ 996
========= ========= ========= =========
Net earnings per share-
Basic $ 0.26 $ 0.32 $ 0.38 $ 0.40
Diluted $ 0.26 $ 0.31 $ 0.38 $ 0.40
Weighted average number of common shares
outstanding (in thousands)-
Basic 2,470 2,466 2,471 2,466
Diluted 2,481 2,491 2,483 2,491
See accompanying notes to condensed financial statements.
3
Kewaunee Scientific Corporation
Condensed Balance Sheets
(in thousands)
October 31 April 30
2001 2001
----------- --------
Assets (Unaudited)
- ------
Current assets:
Cash and cash equivalents $ 409 $ 488
Receivables, less allowance 21,065 17,629
Inventories 5,042 4,370
Deferred income taxes 915 915
Prepaid income taxes - 758
Prepaid expenses and other current assets 835 498
-------- --------
Total current assets 28,266 24,658
-------- --------
Property, plant and equipment, at cost 35,773 34,744
Accumulated depreciation (22,867) (21,825)
-------- --------
Net property, plant and equipment 12,906 12,919
-------- --------
Other assets 2,955 3,292
-------- --------
Total Assets $ 44,127 $ 40,869
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings $ 1,714 $ -
Current portion of long-term debt 620 620
Accounts payable 6,145 5,334
Employee compensation and amounts withheld 1,357 1,446
Deferred Revenue 1,019 1,024
Other accrued expenses 2,016 1,549
-------- --------
Total current liabilities 12,871 9,973
-------- --------
Long-term debt 2,067 2,377
Deferred income taxes 1,070 1,063
Accrued employee benefit plan costs 1,696 1,695
Other long-term liabilities 175 -
-------- --------
Total Liabilities 17,879 15,108
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Stockholders' equity:
Common stock 6,550 6,550
Additional paid-in-capital 137 150
Retained earnings 20,522 19,938
Common stock in treasury, at cost (961) (877)
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Total stockholders' equity 26,248 25,761
-------- --------
Total Liabilities and Stockholders' Equity $ 44,127 $ 40,869
======== ========
See accompanying notes to condensed financial statements.
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Kewaunee Scientific Corporation
Condensed Statements of Cash Flows
(Unaudited)
($ in thousands )
Six months ended
October 31
---------------------
2001 2000
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Cash flows from operating activities:
Net earnings $ 931 $ 996
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 1,042 944
Provision for bad debts 63 42
Decrease in prepaid income taxes 758 -
Increase in receivables (3,499) (230)
Increase in inventories (672) (1,033)
Increase in accounts payable and
other current liabilities 1,189 313
Other, net 177 (286)
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Net cash (used) provided by operating activities (11) 746
------- --------
Cash flows from investing activities:
Capital expenditures (1,029) (1,513)
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Net cash used in investing activities (1,029) (1,513)
------- --------
Cash flows from financing activities:
Payments on long-term debt (310) -
Net increase in short-term borrowings 1,714 1,104
Dividends paid (346) (345)
Proceeds from exercise of stock options 9 -
Purchase of Treasury Stock (106) -
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Net cash provided by financing activities 961 759
------- --------
(Decrease) increase in cash and cash equivalents (79) (8)
Cash and cash equivalents, beginning of period 488 9
------- --------
Cash and cash equivalents, end of period $ 409 $ 1
======= ========
See accompanying notes to condensed financial statements.
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Kewaunee Scientific Corporation
Notes to Condensed Financial Statements
(unaudited)
A. Financial Information
- --------------------------
The unaudited interim condensed financial statements of Kewaunee Scientific
Corporation (the "Company" or "Kewaunee") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission (the
"Commission"). Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with 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):
Oct. 31, 2001 April 30,2001
------------- -------------
Finished products $1,465 $1,023
Work in process 1,282 1,455
Raw materials 2,295 1,892
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$5,042 $4,370
====== ======
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 accounting principles generally accepted in the United States of
America.
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D. Segment Information
- -----------------------
The following table shows net sales and profits by business segment for three
months and six months ended October 31, 2001 and 2000.
Laboratory Technical
Products Products Corporate Total
-------- -------- --------- -----
Three months ended
October 31, 2001
- ----------------
Revenues from
external customers $20,951 $1,574 -- $22,525
Intersegment revenue 347 -- (347) --
Segment profit 1,260 (90) (178) 992
Three months ended
October 31, 2000
- ----------------
Revenues from
external customers $17,532 $3,884 -- $21,416
Intersegment revenues -- 70 (70) --
Segment profit 1,052 345 (176) 1,221
Six months ended
October 31, 2001
- ----------------
Revenues from
external customers $38,795 $3,470 -- $42,265
Intersegment revenues 451 -- (451) --
Segment profit 2,085 (274) (361) 1,450
Six months ended
October 31, 2000
- ----------------
Revenues from
external customers $31,791 $8,995 -- $40,786
Intersegment revenues -- 184 (184) --
Segment profit 859 1,029 (332) 1,556
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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 and six
months ended October 31, 2001 with the comparable periods of the prior fiscal
year.
Results of Operations
- ---------------------
The Company recorded sales of $22.5 million for the three months ended October
31, 2001, up 5.2% from sales of $21.4 million for the comparable period of the
prior year. Sales for the six months ended October 31, 2001 were $42.3 million,
up 3.6% from sales of $40.8 million in the comparable period of the prior year.
Sales of laboratory products increased 19.5% and 22.0% during the three months
and six months ended October 31, 2001, respectively over the same periods last
year, reflecting the continuing improvement in the industrial research market
and a healthy education market. Sales of technical products declined 59.5% and
61.4% during the three months and six months ended October 21, 2001,
respectively, from the same periods last year, as the slowdown in high-tech
capital spending reduced demand for these products.
The gross profit margin for the three months ended October 31, 2001 was 17.5% of
sales, as compared to 20.2% of sales in the comparable quarter of the prior
year. The gross profit margin for the six months ended October 31, 2001 was
16.9%, as compared to 19.6% in the comparable period of the prior year. The
decrease in the gross profit margins for the three months and six months
resulted primarily from differences in product sales mix, as sales of laboratory
products increased, while sales of technical products, which typically have
higher profit margins, declined. Additionally, gross profit margins were
adversely affected by an unfavorable product sales mix within the laboratory
products segment.
Operating expenses for the three months ended October 31, 2001 were $2.9
million, or 12.7% of sales, as compared to $3.0 million, or 14.1% of sales, in
the comparable period of the prior year. Operating expenses for the six months
ended October 31, 2001 were $5.6 million, or 13.3% of sales, as compared to $6.3
million, or 15.4% of sales, in the comparable period of the prior
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year. The decrease in operating expenses for the three months and six months was
primarily attributable to lower marketing expenses, as well as lower general and
administrative expenses.
Operating earnings of $1.0 million and $1.5 million were recorded for the three
months and six months ended October 31, 2001, respectively. This compares to
operating earnings of $1.3 million and $1.7 million for the comparable periods
of the prior year.
Interest expense was $59,000 and $119,000 for the three months and six months
ended October 31, 2001, respectively, compared to $85,000 and $132,000 for the
comparable periods of the prior year. The decrease in interest expense for the
current quarter and year resulted from lower interest rates in the current year,
partially offset by increased bank borrowings during the current year.
Other expenses were $25,000 in the three months ended October 31, 2001 and other
income of $38,000 for the six months ended October 31, 2001, compared to other
income of $8,000 and other expense of $7,000 for the comparable periods of the
prior year.
Income tax expense of $354,000 and $519,000 was recorded for the three months
and six months ended October 31, 2001, respectively, as compared to income tax
expense of $439,000 and $560,000 recorded for the comparable periods of the
prior year. The effective tax rate was approximately 35.7% and 35.8% for the
three and six months ended October 31, 2001 and 36.0% for the three and six
months period ended October 31, 2000.
Net earnings of $638,000 and $931,000, or $.26 per diluted share and $.38 per
diluted share, were recorded for the three months and six months ended October
31, 2001, respectively. This compares to net earnings of $782,000 and $996,000,
or $.31 per diluted share and $.40 per diluted share, respectively, for the
comparable periods of the prior year.
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 short-term borrowings. 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 $15.4 million at October 31, 2001, as
compared to $14.7 million at April 30, 2001. The ratio
of current assets to current liabilities was 2.2-to-1 at October
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31, 2001, as compared to 2.5-to-1 at April 30, 2001. At October 31, 2001,
advances of $1,714,000 were outstanding under the Company's $6.0 million
revolving credit loan.
The Company's operations used cash of $11,000 during the six months ended
October 31, 2001. The net cash used was required to support increases in
customer receivables and inventories, offset by funds provided through operating
earnings and an increase in accounts payable. The Company's operations provided
cash of $746,000 during six months ended October 31, 2000, primarily from
operating earnings, partially offset by funds required to support increases in
customer receivables and inventories.
During the six months ended October 31, 2001, the Company used cash of
$1,029,000 for capital expenditures, primarily production equipment, compared to
the use of $1,513,000 for such expenditures in the comparable period of the
prior fiscal 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 or as
any admission regarding the adequacy of disclosures made by the Company prior to
the effective date of the Reform Act. 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 and six months ended October 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 October 31, 2001 and April 30, 2001, and the related condensed
statements of operations for each of the three and six-month periods ended
October 31, 2001 and October 31, 2000 and the condensed statement of cash flows
for the six-month periods ended October 31, 2001 and October 31, 2000. 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 them 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
November 19, 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. Information regarding the results of this meeting are
incorporated by reference from the Company's Report on Form 10-Q for
the three months ended July 31, 2001.
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 October 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: December 12, 2001 By /s/ D. Michael Parker
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D. Michael Parker
Senior Vice President,Finance
Chief Financial Officer
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