8-K
KEWAUNEE SCIENTIFIC CORP /DE/ (KEQU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 24, 2022
Kewaunee Scientific Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 0-5286 | 38-0715562 |
|---|---|---|
| (State or other jurisdiction<br> <br>of incorporation) | (Commission<br> <br>File Number) | (I.R.S. Employer<br> <br>Identification No.) |
| 2700 West Front Street<br> <br>Statesville, North Carolina | 28677 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 704-873-7202
N/A
(Former name or former address, if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, $2.50 par value | KEQU | NASDAQ Global Market |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
| Item 7.01 | Regulation FD Disclosure |
|---|
Kewaunee Scientific Corporation (the “Company”) has posted an investor presentation and related script to the “Investor Information” section of the Company’s website at http://www.kewaunee.com/about/investor-information/. The presentation and related script are attached hereto as Exhibits 99.1 and 99.2. The information included in Exhibits 99.1 and 99.2 is incorporated by reference in this Item 7.01, and is deemed to be furnished, not filed, pursuant to Item 7.01 of Form 8-K. The presentation will be delivered during the Company’s Annual Meeting of Stockholders, which is being conducted virtually at 11:00 a.m. Eastern time on August 24, 2022 via a live webcast which can be accessed at www.virtualshareholdermeeting.com/KEQU2022. A replay of the audio webcast of the Annual Meeting will be made available on the Company’s website for approximately one year.
The Company is making reference to non-GAAP financial information in both the presentation and the Annual Meeting. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached presentation, and will be included in the “Investor Information” section of the Company’s website at http://www.kewaunee.com/about/investor-information/.
Certain statements made in the attached presentation and related script constitute “forward-looking statements” within the meaning of the federal securities laws, including statements regarding the Company’s future performance, as well as management’s expectations, beliefs, intentions, plans, estimates or projections relating to the future. Management believes that these forward-looking statements are reasonable. However, the Company cannot guarantee that its actual results will be consistent with the forward-looking statements and you should not place undue reliance on them. These statements are based on current expectations and speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. Important factors regarding the Company that may cause results to differ from expectations are included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2022, under Item 1A. “Risk Factors,” and in the Company’s other filings with the SEC.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits |
| --- | --- |
| Exhibit<br>Number | Description |
| --- | --- |
| 99.1 | Kewaunee Scientific Corporation Investor Presentation |
| 99.2 | Kewaunee Scientific Corporation Investor Presentation Script |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| (Registrant)<br> <br>Kewaunee Scientific Corporation | |
|---|---|
| Date: August 24, 2022 | /s/ Donald T. Gardner III |
| Donald T. Gardner III | |
| Vice President, Finance and Chief Financial Officer |
EX-99.1
Kewaunee Scientific Corporation NASDAQ: KEQU encouraging new discovery…Worldwide Exhibit 99.1
Certain statements in this document constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). All statements other than statements of historical fact included in this document, 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,” “predict,” “believe” and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions, and other important factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to, competitive and general economic conditions, 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, the ongoing COVID-19 pandemic, 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. We cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. Over time, our 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 difference are described under the caption “Risk Factors,” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2022, which you should review carefully, and in our subsequent quarterly reports on Form 10-Q. These reports are available on our investor relations website at www.kewaunee.com and on the SEC website at www.sec.gov. Kewaunee Scientific Corporation | NASDAQ: KEQU Special Note Regarding Forward Looking Statements
Kewaunee Scientific Corporation |
NASDAQ: KEQU Agenda Kewaunee Scientific Overview Fiscal Year 2022 Review Strategic Direction and Outlook Q&A
Kewaunee Scientific Corporation |
NASDAQ: KEQU Kewaunee Scientific Corporation Overview
Kewaunee Scientific Corporation |
NASDAQ: KEQU Kewaunee is a leading global designer, manufacturer, and installer of specialized equipment and technical furniture products for laboratories across an array of industries, including life sciences, education, government, healthcare, and general research end-markets. Key Facts Statesville, NC Headquarters $168.9M 2022 Revenue Global Footprint 1906 Year Founded Vertically Integrated NASDAQ KEQU Public Corporation Product Offerings Illustrative End-Users Kewaunee Scientific Overview
Kewaunee Scientific Corporation |
NASDAQ: KEQU The industries served by Kewaunee continue to receive prioritization for investment dollars as companies, governments, and institutions look to encourage discovery that is dependent on investment in research and development. Kewaunee Scientific Overview R P R R R R R R R R R Source: The Scientific and Equipment Furniture Association (“SEFA”) TDA 2020 Laboratory Enclosures and Furniture Market Report
Kewaunee Scientific Corporation |
NASDAQ: KEQU Kewaunee Scientific Overview “According to The World Bank, in the US, 3.5% of GDP was spent on research and development in 2020 (the latest year of data), which is an increase of one full percentage point relative to 1996. Since 1996, US GDP has risen at a compounded rate of 4.0%, resulting in a total increase of 158.8%. In the same time period, the compound annual growth rate of R&D spend has been 5.5%, resulting in a total rise of 264.5%. In all likelihood, research and development spending will continue to increase as the velocity of technological development continues to rise.” (Bespoke Investments LLC). World Bank Research and Development % Data set https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS
Kewaunee Scientific Corporation |
NASDAQ: KEQU Kewaunee is active in multiple sectors, providing geographical and industry diversification. The diversity of end-use segments for the Company’s products supports a narrative of growth and end-market expansion for Kewaunee. Kewaunee Scientific Overview HEALTHCARE Market includes hospitals, surgery centers, testing centers, elderly care communities, etc. Macro population and aging trends support continued investment in health-related initiatives requiring laboratories LIFE SCIENCES Market includes life sciences, pharmaceutical, bio-technology and other manufacturers Continued global investment in research and development Expanding spend on infrastructure EDUCATION Market includes K-12 and colleges and universities Increasing investments being made in STEM requiring new or upgraded facilities State and local governments beginning to fund education infrastructure improvements
Kewaunee Scientific Corporation |
NASDAQ: KEQU Kewanee is a North American leader in manufactured laboratory, healthcare, and technical furniture. Kewaunee’s Domestic Segment primarily relies on its dealer and distribution network to sell its products to end users. Kewaunee Scientific Overview Designs and manufactures laboratory, healthcare, and technical furniture products Products sold through exclusive dealers and national stocking distributor Products manufactured in Statesville, North Carolina
Kewaunee Scientific Corporation |
NASDAQ: KEQU Kewaunee’s International segment participates more broadly across the laboratory construction value chain, from pre-construction through providing facility maintenance services for customers with market leading positions in India and the Middle East. Kewaunee Scientific Overview Turn-key provider of total laboratory solution – design, construction, manufacture, installation and maintenance Sold principally direct to end-users Products for international markets manufactured in Statesville, NC and in Bangalore, India Current International Footprint Market leader in India and Middle East geographies
Kewaunee Scientific Corporation |
NASDAQ: KEQU FY 2022 Review
Kewaunee Scientific Corporation |
NASDAQ: KEQU FY 2022 Review – Consolidated Results *EBITDA is a non-GAAP measure; please see the Appendix for a reconciliation to net earnings.
Kewaunee Scientific Corporation |
NASDAQ: KEQU FY 2022 Review – Domestic Segment FY 2022 Impacts: Inflation impacts that could not be passed along to customers due to the fixed nature of contracts approximated $4.6M. Volumes returned, however, labor shortages prevented ramping workforce to pre-Covid-19 levels. Supply chain challenges impacted material availability, deliveries and access to materials. The Domestic segment was significantly impacted by input cost inflation, labor shortages, supply chain disruptions and the ongoing impact of Covid-19. FY 2022 Accomplishments: Backlog at FY22 year-end was $93M, flat when compared to prior year. However, current backlog mix is more heavily weighted toward manufactured product as a result of decision to exit direct markets. Sale leaseback transaction closed providing liquidity to pay-off Domestic line of credit and operate the business. $4M of tax expense recorded in Q4 from gain on transaction. Multi-year capital plan focused on continued modernization of metal operations and IT infrastructure. *EBITDA is a non-GAAP measure; please see the Appendix for a reconciliation to net earnings.
Kewaunee Scientific Corporation |
NASDAQ: KEQU FY 2022 Review – International Segment FY 2022 Impacts: Strength in the Indian market driven by strong investments across the life sciences, petroleum and technology markets. Raw material inflation impacts approximate $0.6M The Middle East and ASEAN markets remained soft with continued Covid-19 related constraints in place. International segment delivered strong performance, capitalizing on strong international investment in laboratories. FY 2022 Accomplishments: Strong revenue, net earnings and EBITDA growth driven by the Indian market. Record backlog with multiple significant awards in India, ASEAN and Africa markets. Continued investment in talent and capability in a competitive labor market. Quoting pipeline remains strong in all markets. *EBITDA is a non-GAAP measure; please see the Appendix for a reconciliation to net earnings.
Kewaunee Scientific Corporation |
NASDAQ: KEQU FY 2022 Review – Corporate Segment Corporate Segment: CEO and CFO compensation Corporate finance and global treasury Stock based incentive compensation Public company costs Pension administration Expenses related to the amortization of the underfunded pension liability Other expenses
Kewaunee Scientific Corporation |
NASDAQ: KEQU Strategic Direction and Outlook
“To be the global supplier of choice with customers in the laboratory furniture and infrastructure markets.” Kewaunee Scientific Corporation | NASDAQ: KEQU Strategic Direction and Outlook
Kewaunee Scientific Corporation |
NASDAQ: KEQU We will be easy to do business with. We will get closer to our customer(s). We will lead and not follow (we are innovators). Our Guiding Principles We will do everything with excellence. Strategic Direction and Outlook
Kewaunee Scientific Corporation |
NASDAQ: KEQU Thank You and Questions
Kewaunee Scientific Corporation NASDAQ: KEQU encouraging new discovery…Worldwide
Kewaunee Scientific Corporation |
NASDAQ: KEQU Appendix
Kewaunee Scientific Corporation |
NASDAQ: KEQU Non-GAAP Reconciliations Kewaunee Scientific Corporation Kewaunee Scientific Corporation Annual Shareholder Meeting | August 24, 2022 Appendix: Non-GAAP Measures (Dollars in Thousands) The following unaudited tables reconcile Net Earnings to EBITDA, by Segment and Consolidated EBITDA and Segment EBITDA We calculate EBITDA and Segment EBITDA as net earnings, less interest expense and income, income taxes, depreciation, and amortization. We believe EBITDA and Segment EBITDA allow management and our investors to compare our performance to other companies on a consistent basis without regard to depreciation and amortization, which can vary significantly between companies depending upon many factors. EBITDA and Segment EBITDA are not calculations based upon generally accepted accounting principles and our method for calculating EBITDA and Segment EBITDA can vary as compared to other companies. The amounts included in the EBITDA and Segment EBITDA calculations, however, are derived from amounts included in the historical statements of earnings. EBITDA and Segment EBITDA should not be considered an alternative to net earnings or operating earnings as an indicator of the Company’s operating performance, or as an alternative to operating cash flows as a measure of liquidity.
EX-99.2
Exhibit 99.2
Annual Shareholder Meeting Speech
August 24, 2022
Good morning. I would like to extend a warm welcome to our shareholders who have set aside time to join us today at Kewaunee’s 2022 annual shareholder meeting. This year’s meeting is again being conducted virtually, providing our shareholders a more accessible format in which to participate.
Before proceeding, the standard message from our attorneys regarding forward looking statements.
Today I will share with you highlights from our recently completed fiscal year ended April 30, 2022, as well as an update on our outlook and strategic direction. There will be time for questions at the end of the presentation and we will take as many as time affords. If you do have questions, you may submit them online through the chat function during the presentation. Finally, all materials will be posted to the investor relations section of our website for future reference.
To begin, we will kick things off with a brief overview of the Company.
Kewaunee is a leading global designer, manufacturer, and installer of laboratory furniture and technical products which our customers use to perform an array of research and development related activities. Our products are utilized to furnish laboratories across a variety of industries, including life sciences, education, petroleum, government, and healthcare end - markets. Kewaunee’s end-users are some of the largest, most prestigious companies in the world.
The industries served by Kewaunee continue to receive prioritization for investment as companies, governments, and institutions look to encourage discovery that require specialized environments. The data presented are from the 2020 SEFA Laboratory Enclosures and Furniture Market Report which was published pre-COVID-19. This remains the most reliable data- set available to assess the size and growth trajectory for the markets we serve. As an industry leader for technical furniture solutions, I believe Kewaunee is uniquely positioned to capitalize on what continues to be favorable industry growth trends.
Further, there have been several industry reports published over the past year that point to investment increases in sectors that require Kewaunee’s products. An increase in funding for research and development will likely lead to the investment in new laboratories and the renovation of existing laboratory space, both of which should benefit Kewaunee.
Kewaunee is active in multiple sectors, providing geographical and industry diversification. The diversity of end-use segments for the Company’s products supports a narrative of growth and end-market expansion for Kewaunee. We continue to invest in increasing our penetration of the healthcare and industrial markets through the launch of new products and establishment of new distribution channels. An example of this strategy was the launching of the EverHutch storage product line for healthcare customers which continues to gain traction.
Kewaunee’s Domestic operating segment designs and manufactures laboratory, healthcare, and technical furniture that is sold principally within the US marketplace. While we are active in the Canadian and South American markets, the United States represents a large majority of Domestic segment sales on an annual basis. We sell our manufactured products to end -users through our exclusive dealer network and a national stocking distributor. We made the decision during the y ear to transition territories in which we have historically sold directly to either general contractors or end-users to two of our dealers who will service them going forward. I will provide more details on the strategic significance of this decision and the impact of the transition on the business later in the presentation.
Our International operating segment participates more comprehensively across the laboratory construction value chain based on a broader set of capabilities. Our ability to provide “turn-key” solutions, through the design, construction, manufacture, installation, and maintenance of the laboratory is a competitive advantage that has resulted in our international team continuing to lead in the markets we serve. Currently, our international segment serves customers within the Indian, Middle East, Africa, and the Pan-Asian markets.
Now a discussion on fiscal year 2022:
Sales during fiscal year 2022 were $168.9M, an increase of 14.5% compared to sales of $147.5M from the prior year. Fiscal year 2022 was another challenging year for Kewaunee as the economy re-opened from COVID-19 shutdowns and the pace of activity began to accelerate. During the year, we experienced rapid inflation across most of our cost categories which had to be absorbed by the Company due to the fixed nature of the contracts with our customers. As discussed in our press releases throughout the year, we absorbed close to $5,000,000 in higher input costs during the year which could not be passed along to customers. At the same time, we faced a surge in demand and an inability to rapidly ramp production to pre -COVID-19 levels due to staffing shortages and supply chain disruptions. Each of these factors negatively impacted our earnings during the year.
Domestic sales for the fiscal year were $126.8M, an increase of 14.2% from sales of $111.0M in the prior year. This increase was driven by year-over-year volume growth as well as the implementation of price increases on new orders in response to higher raw material input costs. Domestic segment net loss was $229,000 compared to net income of $921,000 in the prior fiscal year. Domestic segment EBITDA was $2.2M compared to $3.6M for the prior year. Profitability was negatively impacted during the year by increased COVID-19 related disruptions, a previously disclosed cyber-attack, ongoing supply chain issues, labor shortages, and significantly elevated input costs due to inflation.
From a strategy perspective, we announced the decision to stop selling direct in a number of markets where the Company historically had done so due to a lack of sufficient dealer coverage. Through updated and expanded dealer agreements, Kewaunee has solidified its coverage in these territories, with our two largest dealers, Nycom and ISEC, agreeing to represent Kewaunee in these territories. This change will enable us to focus on our core manufacturing operations, ultimately reducing the complexity of our domestic operations. Note that a number of direct projects remain in our backlog that we will be delivering over the course of fiscal year 2023. The majority of these projects were priced prior to or during the beginning of the COVID-19 pandemic and due to cost inflation do not have a favorable margin profile. This will result in a drag on earnings for our domestic segment during the first half of fiscal year 2023. Once these projects complete, Kewaunee’s domestic segment will be principally a manufacturer of laboratory and technical furniture products, with our channel partners handling product installation, buy-outs, and freight.
Also, during the year, we completed a re-capitalization of the Company through a sale-leaseback transaction of the Company’s three manufacturing facilities and corporate headquarters located in Statesville, North Carolina. This transaction closed during the fourth quarter of the fiscal year, enabling us to pay off our line of credit and it provides liquidity for the Domestic segment to manage day-to-day operations. The transaction did result in a tax expense of $4.2M stemming from the sale-leaseback transaction which was recorded during the fourth quarter.
Finally, our Domestic segment order backlog ended the year at $93M, flat to the prior year. As mentioned previously, our domestic backlog does have several direct projects that will be delivered during fiscal year 2023. What is important to note is that our decision to exit direct sales will result in our backlog being principally manufactured product, while in the past it included installation, buy-outs, and freight.
International sales for the fiscal year were $42.0M, an increase of 15.3% from sales of $36.4M in the prior year with strong activity in India being the principal driver of growth during the fiscal year. International segment net income was $2.3M compared to $2.0M in the prior fiscal year. International segment EBITDA was $3.6M compared to $3.2M for the prior fiscal year. A very strong performance.
We realized the benefits of the investments we have made in our international team over the past few years, and were awarded several significant projects across the India, Middle East, Africa, and ASEAN regions. This resulted in the Company posting a record high backlog for the third time in the past four quarters, demonstrating the confidence customers have in our ability to meet their requirements in a dynamic operating environment. The strength in our backlog positions the Company well for the next fiscal year as most of these orders will deliver over the next twelve to eighteen months. Our International backlog at FY22 year-end was $81.0M versus FY21 year-end backlog of $22M.
2
Kewaunee’s corporate segment contains expenses related to managing the Company’s global operations, including certain executive compensation, corporate accounting and treasury functions, public company costs, pension administration costs and other expenses related to the amortization of the underfunded pension liability for the Company’s pension that was frozen in 2005. During the fiscal year, corporate segment costs were favorably impacted year over year because of the favorable impact of pension accounting because of the recovery of the plan assets at previous fiscal year-end.
Now, on to our strategic direction and outlook.
Kewaunee is a global family with over 800 associates who wake up every day focused on serving our customers. These customers are doing work that is meaningful, impacting progress across the globe, making what we do very exciting. Founded in 1906, Kewaunee remains focused on being an employer of choice in our communities and we are committed to continuing to provide opportunities for personal and professional growth. Kewaunee has always been a company focused on the long term, weathering the ups and downs of economic and business cycles due to, in many cases, the strength of our dedicated Associates.
Our vision is “to be the global supplier of choice with customers in the laboratory furniture and infrastructure markets.” Over the past few years, we have charted a course to transform Kewaunee into the most competitive company serving this space. While there have certainly been headwinds that we have had to overcome, we have made progress on our journey and remain well positioned. These efforts are resulting in multiple, multi-year capital investments within our operations to improve our operating effectiveness.
Guiding our actions and investments continue to be the following four principles:
| • | We will be easy to do business with, |
|---|---|
| • | We will get closer to our customer(s), |
| --- | --- |
| • | We will do everything with excellence, and |
| --- | --- |
| • | We will lead and not follow (we are innovators). |
| --- | --- |
These principles have not changed from last year, but rather serve as the guiderails for the actions we take.
While economic uncertainty exists, from continued broad-based inflation to concern about a possible pending recession, I am optimistic about the future based on the progress we continue to make. I am proud of how our Associates have responded to the challenges presented, recognizing the importance of Kewaunee’s role in ‘encouraging new discovery… Worldwide.’
As I close, please note that Kewaunee will be releasing earnings for the first quarter of the Company’s fiscal year 2023 after
the close of business on September 8, 2022.
I want to again thank our many loyal customers, our global dealer base, and our national stocking distributor for their support. Further, I want to recognize all our Associates worldwide for their hard work, dedication, and valuable contributions. I would also like to thank our many shareholders for your continuing support and our Board of Directors for their ever -present wise counsel.
Our priorities remain to provide our shareholders with an excellent return on their investment, our customers with the best quality service and products, and our Associates with rewarding jobs and opportunities for advancement.
Thank you
Thomas D. Hull III
August 24, 2022
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