-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VrY9X2WdIR/wyNbOxGdOpuDJvE9l4TF8dxdvwvA2EzSQfs4Hxiu6aA3ZYcQ/yKE9 XwC6yroY7srAIO76po7pYw== 0000950131-98-006487.txt : 19981215 0000950131-98-006487.hdr.sgml : 19981215 ACCESSION NUMBER: 0000950131-98-006487 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEWAUNEE SCIENTIFIC CORP /DE/ CENTRAL INDEX KEY: 0000055529 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY APPARATUS & FURNITURE [3821] IRS NUMBER: 380715562 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05286 FILM NUMBER: 98769028 BUSINESS ADDRESS: STREET 1: 2700 W FRONT ST CITY: STATESVILLE STATE: NC ZIP: 28677 BUSINESS PHONE: 7048737202 MAIL ADDRESS: STREET 1: P O BOX 1842 STREET 2: P O BOX 1842 CITY: STATESVILLE STATE: NC ZIP: 28687-1842 FORMER COMPANY: FORMER CONFORMED NAME: KEWAUNEE SCIENTIFIC EQUIPMENT CORP /DE/ DATE OF NAME CHANGE: 19861216 FORMER COMPANY: FORMER CONFORMED NAME: KEWAUNEE MANUFACTURING CO DATE OF NAME CHANGE: 19680108 10-Q 1 FORM 10-Q 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, 1998 [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ----------------- ----------------- Commission file number 0-5286 KEWAUNEE SCIENTIFIC CORPORATION ------------------------------- (Exact name of registrant as specified in its charter) Delaware 38-0715562 - ------------------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2700 West Front Street Statesville, North Carolina 28677 - --------------------------- ----- (Address of principal executive offices) (Zip Code) (704) 873-7202 -------------- (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 --- --- As of December 04, 1998, the Registrant had outstanding 2,436,296 shares of Common Stock. Pages: This report, including exhibits, contains 14 pages numbered sequentially from this cover page. KEWAUNEE SCIENTIFIC CORPORATION INDEX TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED October 31, 1998
Page Number ------ PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Condensed Statements of Operations - Three and six months ended October 31, 1998 and 1997 3 Condensed Balance Sheets - October 31, 1998 and April 30, 1998 4 Condensed Statements of Cash Flows - Six months ended October 31, 1998 and 1997 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Review by Independent Accountants 11 Independent Accountants' Report 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 - ---------
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 ---------- ---------- 1998 1997 1998 1997 ---- ---- ---- ---- ($ in thousands; except per share data) Net sales $19,253 $18,442 $38,877 $36,104 Cost of products sold 15,229 14,489 30,431 28,013 ------- ------- ------- ------- Gross profit 4,024 3,953 8,446 8,091 Operating expenses 2,985 3,014 6,108 6,180 ------- ------- ------- ------- Operating earnings 1,039 939 2,338 1,911 Interest expense (14) (47) (26) (99) Other income (expense), net (18) 11 (28) 22 ------- ------- ------- ------- Earnings before income taxes 1,007 903 2,284 1,834 Income tax expense (benefit) 402 362 913 734 ------- ------- ------- ------- Net earnings $ 605 $ 541 $ 1,371 $ 1,100 ======= ======= ======= ======= Net earnings per share- Basic $0.25 $0.23 $0.56 $0.46 Diluted $0.25 $0.22 $0.56 $0.45 Average number of common shares outstanding (in thousands)- Basic 2,434 2,376 2,429 2,371 Diluted 2,466 2,436 2,462 2,421
See accompanying notes to condensed financial statements. 3 Kewaunee Scientific Corporation Condensed Balance Sheets ($ in thousands)
October 31 April 30 1998 1998 ---- ---- (Unaudited) Assets - ------ Currents assets: Cash and cash equivalents $ 120 $ 1,809 Receivables 15,395 13,819 Inventories 3,584 3,710 Deferred income taxes 1,240 1,240 Prepaid expenses and other current assets 470 275 -------- -------- Total current assets 20,809 20,853 -------- -------- Property, plant and equipment, at cost 28,992 27,063 Accumulated depreciation (17,944) (17,029) -------- -------- Net property, plant and equipment 11,048 10,034 -------- -------- Other assets 1,067 979 -------- -------- Total Assets $ 32,924 $ 31,866 ======== ======== Liabilities and Stockholders' Equity - ------------------------------------ Current liabilities: Accounts payable 7,201 6,209 Employee compensation and amounts withheld 1,469 2,439 Other current liabilities 2,472 2,639 -------- -------- Total current liabilities 11,142 11,287 -------- -------- Deferred income taxes 809 809 Accured employee benefit plan costs 736 731 -------- -------- Total Liabilities 12,687 12,827 -------- -------- Stockholders' equity: Common stock 6,550 6,550 Additional paid-in-capital 86 144 Retained earnings 14,696 13,568 Common stock in treasury, at cost (1,095) (1,223) -------- -------- Total stockholders' equity 20,237 19,039 -------- -------- Total Liabilities and Stockholders' Equity $ 32,924 $ 31,866 ======== ========
See accompanying notes to condensed financial statements. 4 Kewaunee Scientific Corporation Condensed Statements of Cash Flows (Unaudited) ($ in thousands)
Six months ended October 31 ---------- 1998 1997 ---- ---- Cash flows from operating activities: Net earnings $ 1,371 $ 1,100 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 926 779 Provision for bad debts 96 41 Increase in receivables (1,672) (3,887) (Increase) decrease in inventories 126 (1,354) Increase (decrease) in accounts payable and other current liabilities (145) 2,157 Other, net (280) 67 ------- ------- Net cash provided by (used in) operating activities 422 (1,097) ------- ------- Cash flows from investing activities: Capital expenditures (1,938) (429) ------- ------- Net cash used in investing activities (1,938) (429) ------- ------- Cash flows from financing activities: Net increase in short-term borrowings -- 1,663 Dividends paid (243) (190) Proceeds from exercise of stock options (70) 55 ------- ------- Net cash (used in) provided by financing activities (173) 1,528 ------- ------- Increase (decrease) in cash and cash equivalents (1,689) 2 ------- ------- Cash and cash equivalents, beginning of period 1,809 6 ------- ------- Cash and cash equivalents, end of period $ 120 $ 8 ======= ======= Supplemental disclosure: Interest paid $ 25 $ 88 Income taxes paid $ 1,356 $ 833
See accompanying notes to condensed financial statements. 5 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 generally accepted accounting principles 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 1998 Annual Report to Stockholders. The preparation of the financial statements in conformity with generally accepted accounting principles 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 - --------------- Inventories consisted of the following (in thousands):
October 31, 1998 April 30, 1998 ---------------- -------------- Finished products $ 598 $1,020 Work-in-process 1,035 1,016 Raw materials 1,951 1,674 ------ ------ $3,584 $3,710 ====== ======
C. Balance Sheet - ----------------- The Company's April 30, 1998 condensed balance sheet as presented herein is derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company's 1998 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, 1998. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 1998. The analysis of results of operations compares the three months and six months ended October 31, 1998 with the comparable periods of the prior fiscal year. Results of Operations - --------------------- The Company recorded sales of $19.3 million for the three months ended October 31, 1998, up 4.4% from sales of $18.4 million for the comparable period of the prior year. Sales for the six months ended October 31, 1998 were $38.9 million, up 7.7% from sales of $36.1 million in the comparable period of the prior year. The increases in sales for the quarter and six months ended October 31, 1998 resulted primarily from increased unit sales of steel and wood laboratory furniture, partially offset by lower sales of technical products. The gross profit margin for the quarter ended October 31, 1998 was 20.9% of sales, as compared to 21.4% of sales in the comparable quarter of the prior year. The gross profit margin for the six months ended October 31, 1998 was 21.7% as compared to 22.4% in the comparable period of the prior year. The decreases in the gross profit margins in the current year resulted primarily from start-up and other costs associated with the Company's new product lines. Operating expenses for the quarter ended October 31, 1998 were $3.0 million, or 15.5% of sales, as compared to $3.0 million, or 16.3% of sales, in the comparable quarter of the prior year. Operating expenses for the six months ended October 31, 1998 were $6.1 million, or 15.7% of sales, as compared to $6.2 million, or 17.1% of sales, in the comparable period of the prior year. The decreases in operating expenses as a percent of sales in the current year were primarily attributable to a lower mix of commissionable sales, and to a lesser extent, relatively flat levels of general and administrative expenses. Operating earnings of $1.0 million and $2.3 million were recorded for the three months and six months ended October 31, 1998, respectively. This compares to operating earnings of $939,000 and $1.9 million for the comparable periods of the prior year. Interest expense was $14,000 and $26,000 for the three months and six months ended October 31, 1998, respectively, compared to $47,000 and $99,000 for the comparable periods of the prior year. The decreases in interest expense in the current year resulted primarily from lower levels of debt under the Company's revolving credit facility. 7 Other expenses were $18,000 and $28,000 for the three months and six months ended October 31, 1998, respectively, compared to other income of $11,000 and $22,000 for the comparable periods of the prior year. Income tax expense of $402,000 and $913,000 was recorded for the three months and six months ended October 31, 1998, respectively, as compared to income tax expense of $362,000 and $734,000 recorded for the comparable periods of the prior year. The effective tax rate was approximately 40% for each of the periods in the current year and the prior year. Net earnings of $605,000 and $1.4 million, or $.25 per diluted share and $.56 per diluted share, were recorded for the three months and six months ended October 31, 1998, respectively. This compares to net earnings of $541,000 and $1.1 million, or $.22 per diluted share and $.45 per diluted share, respectively, for the comparable periods of the prior year. Liquidity and Capital Resources - ------------------------------- Historically, the Company's principal sources of liquidity have been funds generated from operations, supplemented as needed by short-term borrowings. The Company believes that these sources will be sufficient to support ongoing business levels, including capital expenditures. The Company had working capital of $9.7 million at October 31, 1998, as compared to $9.6 million at April 30, 1998. The ratio of current assets to current liabilities was 1.9-to-1 at October 31, 1998 as compared to 1.8-to-1 at April 30, 1998. Although the Company has borrowings outstanding from time-to-time based on its working capital needs, the Company did not have any outstanding borrowings under its revolving credit facility at October 31, 1998 or at April 30, 1998. The Company's operations provided cash of $422,000 during the six months ended October 31, 1998, primarily from operating earnings, partially offset by an increase in customer receivables. The Company's operations used cash of $1.1 million during the six months ended October 31, 1997, primarily to support increases in customer receivables and inventory, partially offset by cash provided by operating earnings and a net increase in accounts payable and other current liabilities. The Company used cash of $1.9 million for capital expenditures during the six months ended October 31, 1998 and used cash of $429,000 for such expenditures during the comparable period of the prior year, in both instances primarily for the purchase of production machinery. The Company entered into operating lease arrangements for production equipment with an aggregate original asset cost of $549,000 during the six months ended October 31, 1997. These leases provide the Company with certain early cancellation rights, as well as renewal, and purchase options. 8 Year 2000 - --------- The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. In the event that the Company's internal systems or one or more significant suppliers or customers fail to achieve Year 2000 compliance, the Company's business and profitability could be adversely affected. The Company has completed an inventory and preliminary assessment of its computer systems and application software and has determined that its main business applications are Year 2000 compliant. Teams have been established to implement plans to address Year 2000 issues for all other aspects of the Company's business, including upgrading or replacing non-compliant software and investigating the Year 2000 compliance of suppliers, customers and other external entities. The Company does not yet have a formal contingency plan with respect to suppliers, customers and other external entities, but will develop a plan if determined necessary. A target date of April 30, 1999 has been set for establishing compliance and developing any necessary contingency plans. Accordingly, the Company has not yet determined the extent of the consequences, if any, to the Company should a major supplier or customer fail to become Year 2000 compliant and if contingency procedures should need to be employed. The Company has not incurred, nor does it expect to incur, significant costs in addressing Year 2000 issues, as the Company's main business applications are Year 2000 compliant. Any such costs, including internal staff costs and costs to write-off unamortized hardware and software that may need to be replaced, will generally be expensed as incurred. Although the Company is presently not aware of any material exposures or contingencies related to the Year 2000 compliance efforts of its significant vendors and business partners, if a significant vendor or business partner should be non-compliant there can be no assurance such an event will not have a material adverse effect on the Company's consolidated financial position, results of operations and cash flows. Recent Accounting Standards - --------------------------- The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement will be adopted as required during the Company's 1999 fiscal year. SFAS No. 131 redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. The Company has not completed its evaluation of the effects that SFAS No. 131 will have on its financial reporting and disclosures. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 - -------------------------------------------------------------------------------- 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 9 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. 10 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, 1998 has been performed by PricewaterhouseCoopers LLP, the Company's independent accountants. Their report on the interim financial information follows. There have been no adjustments or disclosures proposed by PricewaterhouseCoopers LLP which have not been reflected in the interim financial information. 11 INDEPENDENT ACCOUNTANTS' REPORT 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, 1998, and the related condensed statements of operations for the three month and six month periods ended October 31, 1998, and the condensed statement of cash flows for the six-month period ended October 31, 1998. 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 of 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 financial information for it to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards, the balance sheets as of April 30, 1998 and the related statements of income, of retained earnings, and of cash flows for the year then ended (not presented herein), and in our report dated June 1, 1998 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, 1998, is fairly stated in all material respects in relation to the balance sheet from which it was derived. PricewaterhouseCoopers LLP Charlotte, North Carolina November 12, 1998 12 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 26, 1998. 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, 1998. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed with the Commission during the three months ended October 31, 1998. 13 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: December 11, 1998 By /s/ D. Michael Parker ------------------------- D. Michael Parker Vice President of Finance Chief Financial Officer 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS APR-30-1999 MAY-01-1998 OCT-31-1998 120 0 15,395 0 3,584 20,809 28,992 17,944 32,924 11,142 0 0 0 6,550 13,687 32,924 38,877 38,877 30,431 30,431 6,108 0 26 2,284 913 1,371 0 0 0 1,371 0.56 0.56
-----END PRIVACY-ENHANCED MESSAGE-----