-----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, Nrf/th54gxhJ14tGp0KsbcBtNOLqSfuUe1KLxwdp43PhgOLQAvqCMKwKTUr+AKxd IfSfjrEmhG4z/H3VOrEYnA== 0000950131-97-007224.txt : 19971212 0000950131-97-007224.hdr.sgml : 19971212 ACCESSION NUMBER: 0000950131-97-007224 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971211 SROS: NASD 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: 97736278 BUSINESS ADDRESS: STREET 1: 2700 W FRONT ST CITY: STATESVILLE STATE: NC ZIP: 28677 BUSINESS PHONE: 7048737202 MAIL ADDRESS: 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, 1997 _____ |_____| 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 November 30, 1997, the Registrant had outstanding 2,394,546 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, 1997
Page Number ------ PART I. FINANCIAL INFORMATION - ------------------------------ Item 1. Financial Statements Condensed Statements of Operations - Three and six months ended October 31, 1997 and 1996 3 Condensed Balance Sheets - October 31, 1997 and April 30, 1997 4 Condensed Statements of Cash Flows - Six months ended October 31, 1997 and 1996 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 Income (Unaudited)
Three months ended Six months ended October 31 October 31 ------------------ ------------------ 1997 1996 1997 1996 -------- -------- -------- -------- ($ in thousands, except per share data) Net sales $18,442 $15,928 $36,104 $32,208 Cost of products sold 14,489 12,190 28,013 25,179 ------- ------- ------- ------- Gross profit 3,953 3,738 8,091 7,029 Operating expenses 3,014 3,090 6,180 5,838 ------- ------- ------- ------- Operating earnings 939 648 1,911 1,191 Interest expense (47) (108) (99) (243) Other income, net 11 14 22 19 ------- ------- ------- ------- Earnings before income taxes 903 554 1,834 967 Income tax expense (benefit) 362 (205) 734 (330) ------- ------- ------- ------- Net earnings $541 $759 $1,100 $1,297 ======= ======= ======= ======= Per share data: Earnings per common share $0.23 $0.32 $0.46 $0.55 Average number of common shares outstanding 2,376 2,366 2,371 2,366
See accompanying notes to condensed financial statements. 3 Kewaunee Scientific Corporation Condensed Balance Sheets ($ in thousands)
October 31 April 30 1997 1997 ---------- -------- Assets (Unaudited) Current assets: Cash $8 $6 Receivables 16,710 12,864 Inventories 3,300 1,946 Prepaid expenses and other current assets 1,584 1,649 ------- ------- Total current assets 21,602 16,465 ------- ------- Property, plant and equipment, at cost 26,755 26,431 Accumulated depreciation (17,279) (16,605) ------- ------- Net property, plant and equipment 9,476 9,826 ------- ------- Other assets 689 700 ------- ------- $31,767 $26,991 ======= ======= Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings $1,663 - Accounts payable 6,777 5,136 Other current liabilities 4,840 4,324 ------- ------- Total current liabilities 13,280 9,460 ------- ------- Deferred income taxes and other non-current liabilities 936 945 ------- ------- Stockholders' equity: Common stock 6,550 6,550 Additional paid-in-capital 99 116 Retained earnings 12,345 11,435 Common stock in treasury, at cost (1,443) (1,515) ------- ------- Total stockholders' equity 17,551 16,586 ------- ------- $31,767 $26,991 ======= =======
See accompanying notes to condensed financial statements. 4 Kewaunee Scientific Corporation Condensed Statements of Cash Flows ($ in thousands)
Six months ended October 31 ---------------- 1997 1996 ------ ------ (Unaudited) Cash flows from operating activities: Net earnings $1,100 $1,297 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 779 941 Provision for bad debts 41 145 Increase in receivables (3,887) (831) Increase in inventories (1,354) (1,436) Increase in accounts payable and other current liabilities 2,157 1,418 Other, net 67 (493) ------- -------- Net cash provided by (used in) operating activities (1,097) 1,041 ------- -------- Cash flows from investing activities: Capital expenditures (429) (864) ------- -------- Net cash used in investing activities (429) (864) ------- -------- Cash flows from financing activities: Net increase in short-term borrowings 1,663 (74) Dividends paid (190) - Proceeds from exercised stock options 55 - Repayment of long-term debt - (87) ------- -------- Net cash provided by financing activities 1,528 (161) ------- -------- Increase (decrease) in cash 2 16 Cash, beginning of period 6 16 ------- -------- Cash, end of period $8 $32 ======= ======== Supplemental disclosure: Interest paid $88 $214 Income taxes paid $833 $33 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 1997 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, 1997 April 30, 1997 ---------------- -------------- Finished products $ 604 $ 366 Work-in-process 797 638 Raw materials 1,899 942 ------ ------ $3,300 $1,946 ====== ======
C. Balance Sheet - ----------------- The Company's April 30, 1997 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 1997 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, 1997. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 1997. The analysis of results of operations compares the three months and six months ended October 31, 1997 with the comparable periods of the prior fiscal year. Results of Operations - --------------------- The Company recorded sales of $18.4 million for the three months ended October 31, 1997, up 15.8% from sales of $15.9 million for the comparable period of the prior year. Sales of laboratory furniture in The Research Collection recently introduced by the Company contributed significantly to the sales increase for the quarter. Increased sales of epoxy resin worksurfaces, and to a lesser extent, selling price increases, also contributed to the sales improvement. Sales for the six months ended October 31, 1997 were $36.1 million, up 12.1% from sales of $32.2 million in the comparable period of the prior year. Sales of laboratory furniture in The Research Collection, together with increased sales of technical products and epoxy resin worksurfaces, and to a lesser extent, selling price increases, were the primary contributors to this sales improvement. The gross profit margin for the quarter ended October 31, 1997 was 21.4 percent of sales, as compared to 23.5 percent of sales in the comparable quarter of the prior year. The gross profit margin in the current quarter was adversely affected by increased labor costs, including overtime costs, associated with expanding production capacity in the quarter. Also, outside purchases of certain component parts normally manufactured by the Company resulted in increased costs. These purchases were necessary due to the significant increase in sales in the current quarter. The gross profit margin for the six months ended October 31, 1997 was 22.4 percent, up from 21.8 percent in the comparable period of the prior year. The increase in the profit margin for the six-month period of the current year was primarily attributable to a more favorable product sales mix and improved operating efficiencies in the first quarter of the current year, partially offset by the increased costs discussed above. 7 Operating expenses for the quarter ended October 31, 1997 were $3.0 million, or 16.3 percent of sales, as compared to $3.1 million, or 19.4% of sales, in the comparable quarter of the prior year. Operating expenses for the six months ended October 31, 1997 were $6.2 million, or 17.1 percent of sales, as compared to $5.8 million, or 18.1 percent of sales, in the comparable period of the prior year. Operating expenses for the quarter and the six-month period of the current year were favorably impacted by lower depreciation expense in each period of the current year and lower bad debt expense in the current quarter. When compared as a percent of sales, these expenses also benefited from the significant sales growth in the current year, particularly in the current quarter. Operating profits of $939,000 and $1.9 million were recorded for the three months and six months ended October 31, 1997, respectively. This compares to operating profits of $648,000 and $1.2 million for the comparable periods of the prior year. Interest expense was $47,000 and $99,000 for the three months and six months ended October 31, 1997, respectively, compared to $108,000 and $243,000 for the comparable periods of the prior year. The decreases in interest expense for the current quarter and year resulted from lower levels of borrowings under the Company's revolving credit facility. Other income, consisting principally of royalty income, was $11,000 and $22,000 for the three months and six months ended October 31, 1997, respectively, compared to $14,000 and $19,000 for the comparable periods of the prior year. Income tax expense of $362,000 and $734,000 was recorded for the three months and six months ended October 31, 1997, respectively, as contrasted with income tax benefits of $205,000 and $330,000 recorded for the comparable periods of the prior year. The income tax benefits reported for the comparable periods of the prior year resulted from the reductions in the Company's valuation allowance on deferred tax assets. These reductions occurred as continued profitability and an improved earnings outlook for the Company provided further positive evidence to support a reduction in the valuation allowance. Net earnings of $541,000 and $1.1 million, or 23 cents per share and 46 cents per share, were recorded for the three months and six months ended October 31, 1997, respectively. This compares to net earnings of $759,000 and $1.3 million, or 32 cents per share and 55 cents per share, respectively, for the comparable periods of the prior year. 8 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 $8.3 million at October 31, 1997, as compared to $7.0 million at April 30, 1997. The ratio of current assets to current liabilities was 1.6-to-1 at October 31, 1997, as compared to 1.7-to-1 at April 30, 1997. The debt-to-equity ratio was .09-to-1 at October 31, 1997; the Company had no debt at April 30, 1997. The Company had unused credit available under its revolving credit facility of $6.6 million at October 31, 1997, as compared to unused credit available under this facility of $8.0 million at April 30, 1997. 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's operations provided cash of $1.0 million during the six months ended October 31, 1996 primarily from operating earnings and an increase in accounts payable, partially offset by an increase in customer receivables and inventory. An increase in short-term borrowings during the six months ended October 31, 1997 provided cash of $1.7 million, while a reduction in these borrowings in the comparable period of the prior year used cash of $74,000. Cash dividends in the amount of $190,000 were paid during the six months ended October 31, 1997. No cash dividends were paid in the comparable period of the prior year. The Company used cash of $429,000 for capital expenditures during the six months ended October 31, 1997 and used cash of $864,000 for such expenditures during the comparable period of the prior year, in both instances primarily for the purchase of production machinery. In addition, the Company entered into operating lease arrangements for production equipment with an aggregate original asset cost of $549,000 and $80,000 during the six months ended October 31, 1997 and 1996, respectively. These leases provide the Company with certain early cancellation rights, as well as renewal, and purchase options. The Company does not anticipate an abnormal level of cash requirements resulting from capital expenditures for the remainder of the current year. 9 Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 - -------------------------------------------------------------------------------- Certain statements included in this report are forward looking and involve risk and uncertainties that could significantly impact results. These factors include, but are not limited to, economic, competitive, governmental, and technological factors affecting the Company's operations, markets, products, services, and prices. Recent Accounting Standards - --------------------------- The Financial Accounting Standards Board has issued Statement No. 128, "Earnings Per Share." SFAS No. 128 will change the method for calculating earnings per share. Had the Company applied SFAS No. 128 for the three months and six months ended October 31, 1997 and the 1997 year, the effect on reported earnings per share would not be significant. The Company will be required to adopt SFAS 128 beginning in the quarter ending January 31, 1998. 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, 1997 has been performed by Price Waterhouse LLP, the Company's independent accountants. Their report on the interim financial information follows. There have been no adjustments or disclosures proposed by Price Waterhouse 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, 1997, and the related condensed statements of operations for the three-month and six-month periods ended October 31, 1997, and the condensed statement of cash flows for the six-month period ended October 31, 1997. 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. The accompanying condensed statements of operations and cash flows for the three-month and six-month periods ended October 31, 1996 were reviewed by other independent accountants whose report dated December 11, 1996 stated that, based upon their review, they were not aware of any material modifications that should be made to the financial statements for them to be in conformity with generally accepted accounting principles. The financial statements for the year ended April 30, 1997 were audited by the same independent accountants whose report dated June 4, 1997 expressed an unqualified opinion on those statements. Price Waterhouse LLP November 13, 1997 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 27, 1997. 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, 1997. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K The Company filed a Current Report on Form 8-K pursuant to Item 4 thereof dated August 27, 1997 to reflect (i) the dismissal of Deloitte & Touche LLP as the Company's independent accountants and (ii) the engagement of Price Waterhouse LLP to serve as the Company's independent accountants. 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, 1997 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-30-1998 MAY-01-1997 OCT-31-1997 8 0 16,710 0 3,300 21,602 26,755 17,279 31,767 13,280 0 0 0 6,550 11,001 31,767 36,104 36,104 28,013 28,013 6,180 0 99 1,834 734 1,100 0 0 0 1,100 0.46 0.46
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