Kewaunee Scientific Corp 10-Q for FY2020 Q3

About this 10-Q

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Kewaunee Scientific Corp (KEQU)

10-Q 2020-03-13 For: 2020-01-31

Added on April 06, 2026

Kewaunee Scientific Corp filed this 10-Q on March 13, 2020, covering the quarter ended January 31, 2020 (FY2020 Q3).

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Quarter ended January 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $34.23M; up 5.7% from $32.37M a year earlier
Net loss: $1.92M; compared with a net loss of $22K a year earlier
Diluted EPS: -$0.70; compared with -$0.01 a year earlier

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Delaware		38-0715562
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

2700 West Front Street Statesville, North Carolina		28677-2927
(Address of principal executive offices)		(Zip Code)



		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations (unaudited) – Three and Nine Months Ended January 31, 2020 and 2019	1
	Condensed Consolidated Statements of Comprehensive Income (unaudited) – Three and Nine Months Ended January 31, 2020 and 2019	2
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) – Three and Nine Months Ended January 31, 2020 and 2019	3
	Condensed Consolidated Balance Sheets – January 31, 2020 (unaudited) and April 30, 2019	5
	Condensed Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended January 31, 2020 and 2019	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item 4.	Controls and Procedures	17
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	19
Item 6.	Exhibits	19
SIGNATURES		20



	Three Months Ended January 31,						Nine Months Ended January 31,
	2020			2019			2020			2019
Net sales	$	34,225		$	32,372		$	113,283		$	111,802
Cost of products sold	28,947			27,142			94,743			91,325
Gross profit	5,278			5,230			18,540			20,477
Operating expenses	7,350			5,232			19,875			16,810
Operating earnings (loss)	(2,072		)	(2		)	(1,335		)	3,667
Other income (loss)	(29		)	113			43			279
Interest expense, net	(150		)	(76		)	(452		)	(258		)
Earnings (loss) before income taxes	(2,251		)	35			(1,744		)	3,688
Income tax expense (benefit)	(350		)	20			1,822			803
Net earnings (loss)	(1,901		)	15			(3,566		)	2,885
Less: net earnings attributable to the noncontrolling interest	17			37			59			86
Net earnings (loss) attributable to Kewaunee Scientific Corporation	$	(1,918	)	$	(22	)	$	(3,625	)	$	2,799
Net earnings (loss) per share attributable to Kewaunee Scientific Corporation stockholders
Basic	$	(0.70	)	$	(0.01	)	$	(1.32	)	$	1.02
Diluted	$	(0.70	)	$	(0.01	)	$	(1.32	)	$	1.00
Weighted average number of common shares outstanding
Basic	2,750			2,744			2,750			2,741
Diluted	2,750			2,794			2,750			2,799



	Three Months Ended January 31,						Nine Months Ended January 31,
	2020			2019			2020			2019
Net earnings (loss)	$	(1,901	)	$	15		$	(3,566	)	$	2,885
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(26		)	496			(9		)	(617		)
Change in fair value of cash flow hedge	—			(1		)	1			4
Other comprehensive income (loss)	(26		)	495			(8		)	(613		)
Comprehensive income (loss), net of tax	(1,927		)	510			(3,574		)	2,272
Less: comprehensive income attributable to the noncontrolling interest	17			37			59			86
Comprehensive income (loss) attributable to Kewaunee Scientific Corporation	$	(1,944	)	$	473		$	(3,633	)	$	2,186



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Common Stock		Additional Paid-in Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at April 30, 2019	$	6,875	$	3,133		$	(53	)	$	43,552		$	(6,407	)	$	47,100
Net earnings attributable to Kewaunee Scientific Corporation	—		—			—			471			—			471
Other comprehensive income	—		—			—			—			195			195
Cash dividends paid, $0.19 per share	—		—			—			(522		)	—			(522		)
Stock based compensation	9		51			—			—			—			60
Balance at July 31, 2019	$	6,884	$	3,184		$	(53	)	$	43,501		$	(6,212	)	$	47,304
Net earnings (loss) attributable to Kewaunee Scientific Corporation	—		—			—			(2,178		)	—			(2,178		)
Other comprehensive income	—		—			—			—			(177		)	(177		)
Cash dividends paid, $0.19 per share	—		—			—			(523		)	—			(523		)
Stock based compensation	—		42			—			—			—			42
Balance at October 31, 2019	$	6,884	$	3,226		$	(53	)	$	40,800		$	(6,389	)	$	44,468
Net earnings (loss) attributable to Kewaunee Scientific Corporation	—		—			—			(1,918		)	—			(1,918		)
Other comprehensive income	—		—			—			—			(26		)	(26		)
Stock options exercised 2,300 shares	1		(1		)	—			—			—			—
Stock based compensation	—		125			—			—			—			125
Balance at January 31, 2020	$	6,885	$	3,350		$	(53	)	$	38,882		$	(6,415	)	$	42,649



	January 31, 2020			April 30, 2019
	(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	3,554		$	10,647
Restricted cash	2,509			509
Receivables, less allowance; $647; $361, on each respective date	27,409			33,259
Inventories	15,246			17,206
Prepaid expenses and other current assets	4,503			3,736
Total Current Assets	53,221			65,357
Property, plant and equipment, at cost	58,007			56,676
Accumulated depreciation	(42,102		)	(40,214		)
Net Property, Plant and Equipment	15,905			16,462
Right of use assets	11,130			—
Deferred income taxes	773			1,829
Other assets	3,332			3,575
Total Other Assets	15,235			5,404
Total Assets	$	84,361		$	87,223
Liabilities and Stockholders’ Equity
Current Liabilities:
Short-term borrowings and interest rate swaps	$	4,017		$	9,513
Current portion of long-term debt	—			1,167
Current portion of capital lease liability	19			17
Current portion of operating lease liabilities	2,088			—
Accounts payable	11,661			15,190
Employee compensation and amounts withheld	3,511			3,737
Deferred revenue	1,800			1,599
Other accrued expenses	2,400			1,510
Total Current Liabilities	25,496			32,733
Long-term debt	—			97
Long-term portion of capital lease liability	118			132
Long-term portion of operating lease liabilities	8,887			—
Accrued pension and deferred compensation costs	5,880			5,878
Other non-current liabilities	1,031			680
Total Liabilities	41,412			39,520
Commitments and Contingencies
Stockholders’ Equity:
Common stock, $2.50 par value, Authorized – 5,000 shares; Issued – 2,754 shares; 2,750 shares; – Outstanding – 2,751 shares; 2,747 shares, on each respective date	6,885			6,875
Additional paid-in-capital	3,350			3,133
Retained earnings	38,882			43,552
Accumulated other comprehensive loss	(6,415		)	(6,407		)
Common stock in treasury, at cost, 3 shares, on each date	(53		)	(53		)
Total Kewaunee Scientific Corporation Stockholders’ Equity	42,649			47,100
Noncontrolling interest	300			603
Total Stockholders’ Equity	42,949			47,703
Total Liabilities and Stockholders’ Equity	$	84,361		$	87,223



	January 31, 2020		April 30, 2019
Cash and cash equivalents	$	3,554	$	10,647
Restricted cash	2,509		509
Total cash, cash equivalents and restricted cash	$	6,063	$	11,156



	Three Months Ended January 31, 2020						Three months ended January 31, 2019
	Domestic		International		Total		Domestic		International		Total
Over Time	$	25,107	$	7,526	$	32,633	$	24,414	$	7,155	$	31,569
Point in Time	1,592		—		1,592		803		—		803
	$	26,699	$	7,526	$	34,225	$	25,217	$	7,155	$	32,372



	Nine Months Ended January 31, 2020						Nine Months Ended January 31, 2019
	Domestic		International		Total		Domestic		International		Total
Over Time	$	83,292	$	25,713	$	109,005	$	86,973	$	19,893	$	106,866
Point in Time	4,278		—		4,278		4,936		—		4,936
	$	87,570	$	25,713	$	113,283	$	91,909	$	19,893	$	111,802



	January 31, 2020		April 30, 2019
Finished products	$	3,135	$	4,139
Work in process	1,796		2,179
Raw materials	10,315		10,888
	$	15,246	$	17,206



	January 31, 2020
Financial Assets	Level 1		Level 2		Total
Trading securities held in non-qualified compensation plans (1)	$	2,749	$	—	$	2,749
Cash surrender value of life insurance policies (1)	—		76		76
Total	$	2,749	$	76	$	2,825
Financial Liabilities
Non-qualified compensation plans (2)	$	—	$	3,182	$	3,182
Total	$	—	$	3,182	$	3,182


(1)	The Company maintains two non-qualified compensation plans which include investment assets in a rabbi trust. These assets consist of marketable securities, which are valued using quoted market prices multiplied by the number of shares owned, and life insurance policies, which are valued at their cash surrender value.


(2)	Plan liabilities are equal to the individual participants’ account balances and other earned retirement benefits.



	Operating			Financing
Remainder of fiscal 2020	$	628		$	8
2021	2,351			32
2022	2,051			32
2023	1,516			32
2024	1,234			31
Thereafter	5,141			42
Total Minimum Lease Payments	$	12,921		$	177
Imputed Interest	(1,946		)	(42		)
Total	$	10,975		$	135



	KEWAUNEE SCIENTIFIC CORPORATION (Registrant)

Date: March 13, 2020	By	/s/ Donald T. Gardner III
		Donald T. Gardner III
		(As duly authorized officer and Vice President, Finance and Chief Financial Officer)


1.	I have reviewed this Quarterly Report on Form 10-Q of Kewaunee Scientific Corporation;



	Three Months Ended January 31,		Nine Months Ended January 31,
	2020	2019	2020	2019

Basic	2,750	2,744	2,750	2,741
Dilutive effect of stock options and RSUs	—	50	—	58
Weighted average common shares outstanding - diluted	2,750	2,794	2,750	2,799



	Three Months Ended January 31, 2020			Three Months Ended January 31, 2019
Service cost	$	0		$	0
Interest cost	208			214
Expected return on plan assets	(355		)	(362		)
Recognition of net loss	260			221
Net periodic pension expense	$	113		$	73



	Domestic Operations			International Operations		Corporate / Eliminations			Total
Three months ended January 31, 2020
Revenues from external customers	$	26,699		$	7,526	$	—		$	34,225
Intersegment revenues	302			659		(961		)	—
Earnings (loss) before income taxes	$	(867	)	$	513	$	(1,897	)	$	(2,251	)
Three months ended January 31, 2019
Revenues from external customers	$	25,217		$	7,155	$	—		$	32,372
Intersegment revenues	612			2,135		(2,747		)	—
Earnings (loss) before income taxes	$	60		$	1,020	$	(1,045	)	$	35




10.1		Eighth Amendment to Credit and Security Agreement and Fourth Amendment to Revolving Line of Credit Note dated as of December 13, 2019 (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on December 16, 2019).
10.84*		Change of Control Employment Agreement dated as of December 2, 2019 between Kewaunee Scientific Corporation and Mandar Ranade
10.85*		First Amendment to the 401(k) Incentive Savings Plan for Salaried and Hourly Employees of Kewaunee Scientific Corporation (as amended and restated effective January 1, 2020)
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


(1)	such Form 10-Q of the Company for the period ended January 31, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	the information contained in such Form 10-Q of the Company for the period ended January 31, 2020, fairly presents, in all material respects, the financial condition and results of operations of the Company.