UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 July 31, 2015
or
¨ |
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
incorporation or organization) |
|
(IRS Employer
Identification No.) |
|
|
2700 West Front Street
Statesville, North Carolina |
|
28677-2927 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrants telephone number, including area code: (704) 873-7202
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 ¨
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated filer |
|
¨ |
|
Accelerated filer |
|
¨ |
|
|
|
|
Non-accelerated filer |
|
¨ (Do not check if a smaller reporting company) |
|
Smaller reporting company |
|
x |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange
Act). Yes ¨ No x
As of September 7, 2015, the registrant had outstanding 2,678,305 shares of Common Stock.
KEWAUNEE SCIENTIFIC CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 31, 2015
i
Part 1. Financial Information
Item 1. |
Financial Statements |
Kewaunee Scientific Corporation
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31 |
|
|
|
2015 |
|
|
2014 |
|
Net Sales |
|
$ |
31,089 |
|
|
$ |
30,534 |
|
Costs of products sold |
|
|
25,246 |
|
|
|
24,386 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
5,843 |
|
|
|
6,148 |
|
Operating expenses |
|
|
4,319 |
|
|
|
4,348 |
|
|
|
|
|
|
|
|
|
|
Operating earnings |
|
|
1,524 |
|
|
|
1,800 |
|
Other income |
|
|
102 |
|
|
|
126 |
|
Interest expense |
|
|
(92 |
) |
|
|
(81 |
) |
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
1,534 |
|
|
|
1,845 |
|
Income tax expense |
|
|
571 |
|
|
|
585 |
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
963 |
|
|
|
1,260 |
|
Less: net earnings attributable to the noncontrolling interest |
|
|
23 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Kewaunee Scientific Corporation |
|
$ |
940 |
|
|
$ |
1,234 |
|
|
|
|
|
|
|
|
|
|
Net earnings per share attributable to Kewaunee Scientific Corporation stockholders |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.36 |
|
|
$ |
0.47 |
|
Diluted |
|
$ |
0.35 |
|
|
$ |
0.47 |
|
Weighted average number of common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
2,630 |
|
|
|
2,620 |
|
Diluted |
|
|
2,659 |
|
|
|
2,651 |
|
See accompanying notes to consolidated financial statements.
1
Kewaunee Scientific Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
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|
Three months ended July 31 |
|
|
|
2015 |
|
|
2014 |
|
Net earnings |
|
$ |
963 |
|
|
$ |
1,260 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
(19 |
) |
|
|
10 |
|
Change in fair value of cash flow hedge |
|
|
12 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
(7 |
) |
|
|
23 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income, net of tax |
|
|
956 |
|
|
|
1,283 |
|
Less: comprehensive income attributable to the noncontrolling interest |
|
|
23 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Kewaunee Scientific Corporation |
|
$ |
933 |
|
|
$ |
1,257 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
2
Kewaunee Scientific Corporation
Consolidated Statement of Stockholders Equity
(Unaudited)
(in thousands)
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|
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|
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|
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|
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|
|
|
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|
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|
$ in thousands, except per share amounts |
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Treasury Stock |
|
|
Retained Earnings |
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
Total Stockholders Equity |
|
Balance at April 30, 2015 |
|
$ |
6,583 |
|
|
$ |
1,841 |
|
|
$ |
(53 |
) |
|
$ |
34,385 |
|
|
$ |
(7,880 |
) |
|
$ |
34,876 |
|
Net earnings attributable to Kewaunee Scientific Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
940 |
|
|
|
|
|
|
|
940 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7 |
) |
|
|
(7 |
) |
Cash dividends paid, $0.12 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(316 |
) |
|
|
|
|
|
|
(316 |
) |
Stock based compensation |
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Balance at July 31, 2015 |
|
$ |
6,583 |
|
|
$ |
1,888 |
|
|
$ |
(53 |
) |
|
$ |
35,009 |
|
|
$ |
(7,887 |
) |
|
$ |
35,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
3
Kewaunee Scientific Corporation
Consolidated Balance Sheets
($ and shares in thousands, except share amounts)
|
|
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|
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|
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|
|
|
July 31, 2015 |
|
|
April 30, 2015 |
|
|
|
(Unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,899 |
|
|
$ |
3,044 |
|
Restricted cash |
|
|
1,964 |
|
|
|
2,276 |
|
Receivables, less allowance: $180; $171, on each respective date |
|
|
28,117 |
|
|
|
29,106 |
|
Inventories |
|
|
13,970 |
|
|
|
12,745 |
|
Deferred income taxes |
|
|
845 |
|
|
|
856 |
|
Prepaid expenses and other current assets |
|
|
1,676 |
|
|
|
735 |
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
49,471 |
|
|
|
48,762 |
|
Property, plant and equipment, at cost |
|
|
48,639 |
|
|
|
48,167 |
|
Accumulated depreciation |
|
|
(34,265 |
) |
|
|
(33,644 |
) |
|
|
|
|
|
|
|
|
|
Net Property, Plant and Equipment |
|
|
14,374 |
|
|
|
14,523 |
|
Deferred income taxes |
|
|
2,489 |
|
|
|
2,468 |
|
Other |
|
|
3,742 |
|
|
|
3,737 |
|
|
|
|
|
|
|
|
|
|
Total Other Assets |
|
|
6,231 |
|
|
|
6,205 |
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
70,076 |
|
|
$ |
69,490 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Short-term borrowings and interest rate swaps |
|
$ |
4,901 |
|
|
$ |
4,955 |
|
Current portion of long-term debt |
|
|
421 |
|
|
|
421 |
|
Accounts payable |
|
|
11,760 |
|
|
|
11,232 |
|
Employee compensation and amounts withheld |
|
|
1,557 |
|
|
|
1,882 |
|
Deferred revenue |
|
|
602 |
|
|
|
216 |
|
Other accrued expenses |
|
|
1,707 |
|
|
|
2,349 |
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
20,948 |
|
|
|
21,055 |
|
Long-term debt |
|
|
3,665 |
|
|
|
3,771 |
|
Accrued pension and deferred compensation costs |
|
|
9,655 |
|
|
|
9,465 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
34,268 |
|
|
|
34,291 |
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Common Stock, $2.50 par value, Authorized 5,000 shares; Issued 2,633 shares; Outstanding 2,630 shares, on each
date |
|
|
6,583 |
|
|
|
6,583 |
|
Additional paid-in-capital |
|
|
1,888 |
|
|
|
1,841 |
|
Retained earnings |
|
|
35,009 |
|
|
|
34,385 |
|
Accumulated other comprehensive loss |
|
|
(7,887 |
) |
|
|
(7,880 |
) |
Common stock in treasury, at cost, 3 shares, on each date |
|
|
(53 |
) |
|
|
(53 |
) |
|
|
|
|
|
|
|
|
|
Total Kewaunee Scientific Corporation Stockholders Equity |
|
|
35,540 |
|
|
|
34,876 |
|
Noncontrolling interest |
|
|
268 |
|
|
|
323 |
|
|
|
|
|
|
|
|
|
|
Total Equity |
|
|
35,808 |
|
|
|
35,199 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
70,076 |
|
|
$ |
69,490 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
4
Kewaunee Scientific Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31 |
|
|
|
2015 |
|
|
2014 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
963 |
|
|
$ |
1,260 |
|
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
621 |
|
|
|
628 |
|
Bad debt provision |
|
|
|
|
|
|
26 |
|
Stock based compensation expense |
|
|
47 |
|
|
|
58 |
|
Provision for deferred income tax expense |
|
|
(10 |
) |
|
|
(15 |
) |
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease (increase) in receivables |
|
|
989 |
|
|
|
(2,262 |
) |
Increase in inventories |
|
|
(1,225 |
) |
|
|
(275 |
) |
Increase in accounts payable and other accrued expenses |
|
|
449 |
|
|
|
877 |
|
Increase in deferred revenue |
|
|
386 |
|
|
|
146 |
|
Other, net |
|
|
(699 |
) |
|
|
(638 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
1,521 |
|
|
|
(195 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(472 |
) |
|
|
(541 |
) |
Decrease (increase) in restricted cash |
|
|
312 |
|
|
|
(1,968 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(160 |
) |
|
|
(2,509 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(316 |
) |
|
|
(288 |
) |
Dividends paid to noncontrolling interest in subsidiaries |
|
|
(75 |
) |
|
|
|
|
(Decrease) increase in short-term borrowings and interest rate swaps |
|
|
(54 |
) |
|
|
2,064 |
|
Payments on long-term debt |
|
|
(106 |
) |
|
|
(105 |
) |
Payment toward purchase of noncontrolling interest in subsidiary |
|
|
(888 |
) |
|
|
(888 |
) |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(1,439 |
) |
|
|
783 |
|
Effect of exchange rate changes on cash |
|
|
(67 |
) |
|
|
41 |
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
|
(145 |
) |
|
|
(1,880 |
) |
Cash and cash equivalents, beginning of period |
|
|
3,044 |
|
|
|
6,248 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
2,899 |
|
|
$ |
4,368 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
5
Kewaunee Scientific Corporation
Notes to Consolidated Financial Statements
(unaudited)
A. Financial Information
The unaudited interim consolidated financial statements of Kewaunee Scientific Corporation (the Company) 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, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These interim consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of
these financial statements and should be read in conjunction with the consolidated financial statements and notes included in the Companys 2015 Annual Report to Stockholders. The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected for the full year. The consolidated balance sheet as of April 30, 2015 included in this interim period filing has been derived from the audited financial statements at that
date, but does not include all of the information and related notes required by generally accepted accounting principles (GAAP) for complete financial statements.
The preparation of the interim consolidated financial statements requires management to make certain estimates and assumptions that affect reported amounts
and disclosures. Actual results could differ from those estimates.
B. Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding during the three month period. Diluted
earnings per share reflects the assumed exercise and conversion of outstanding options under the Companys stock option plans, except when options have an anti-dilutive effect. Options to purchase 29,276 shares were not included in the
computation of diluted earnings per share for the three month period ended July 31, 2015, because the option exercise prices were greater than the average market price of the common shares during the quarter, and accordingly, such options would
have an antidilutive effect. Options to purchase 36,200 shares were not included in the computation of diluted earnings per share for the three month period ended July 31, 2014, because the effect would be anti-dilutive.
C. Inventories
Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
July 31, 2015 |
|
|
April 30, 2015 |
|
Finished products |
|
$ |
3,611 |
|
|
$ |
2,936 |
|
Work in process |
|
|
1,634 |
|
|
|
1,422 |
|
Raw materials |
|
|
8,725 |
|
|
|
8,387 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13,970 |
|
|
$ |
12,745 |
|
|
|
|
|
|
|
|
|
|
For interim reporting, LIFO inventories are computed based on year-to-date quantities and interim changes in price levels.
Changes in quantities and price levels are reflected in the interim consolidated financial statements in the period in which they occur.
D. Segment Information
The following table provides financial information by business segments for the three months ended July 31, 2015 and 2014 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
International |
|
|
Corporate |
|
|
Total |
|
Three months ended July 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
24,315 |
|
|
$ |
6,774 |
|
|
$ |
|
|
|
$ |
31,089 |
|
Intersegment revenues |
|
|
286 |
|
|
|
521 |
|
|
|
(807 |
) |
|
|
|
|
Earnings (loss) before income taxes |
|
|
1,833 |
|
|
|
765 |
|
|
|
(1,064 |
) |
|
|
1,534 |
|
Three months ended July 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
24,248 |
|
|
$ |
6,286 |
|
|
$ |
|
|
|
$ |
30,534 |
|
Intersegment revenues |
|
|
124 |
|
|
|
532 |
|
|
|
(656 |
) |
|
|
|
|
Earnings (loss) before income taxes |
|
|
2,203 |
|
|
|
704 |
|
|
|
(1,062 |
) |
|
|
1,845 |
|
6
E. Defined Benefit Pension Plans
The Company has non-contributory defined benefit pension plans. These plans were amended as of April 30, 2005, no further benefits have
been, or will be, earned under the plans, subsequent to the amendment date, and no additional participants will be added to the plans. The Company did not make any contributions to the plans during the three months ended July 31, 2015 and 2014.
The Company expects to make contributions of $60,000 to the plans during fiscal year 2016.
Pension expense consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended July 31, 2015 |
|
|
Three months ended July 31, 2014 |
|
Service cost |
|
$ |
-0- |
|
|
$ |
-0- |
|
Interest cost |
|
|
230 |
|
|
|
222 |
|
Expected return on plan assets |
|
|
(344 |
) |
|
|
(325 |
) |
Recognition of net loss |
|
|
294 |
|
|
|
234 |
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense |
|
$ |
180 |
|
|
$ |
131 |
|
|
|
|
|
|
|
|
|
|
7
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
The
Companys 2015 Annual Report to Stockholders contains managements discussion and analysis of financial condition and results of operations as of and for the year ended April 30, 2015. The following discussion and analysis describes
material changes in the Companys financial condition since April 30, 2015. The analysis of results of operations compares the three months ended July 31, 2015 with the comparable period of the prior year.
Results of Operations
Sales for the three months ended
July 31, 2015 were $31,089,000, an increase of 1.8% from sales of $30,534,000 in the comparable period of the prior year. Americas sales were $24,315,000, up from $24,248,000 in the comparable period of the prior year, as opportunities
increased from the improving marketplace for laboratory furniture and scientific equipment in the United States. International sales were $6,774,000, up from sales of $6,286,000 in the comparable period of the prior year, as sales were favorably
impacted by shipments of several large orders during the quarter.
The order backlog was $86.7 million at July 31, 2015, as compared to $90.1 million
at April 30, 2015 and $82.7 million at July 31, 2014.
The gross profit margin for the three months ended July 31, 2015 was 18.8% of sales,
as compared to 20.1% of sales in the comparable quarter of the prior year. The decrease in the gross profit margin percentage for the three months of the current period was primarily due to the impact of shipments of the remaining orders in the
backlog that were bid in the prior year at extremely competitive pricing.
Operating expenses for the three months ended July 31, 2015 were
$4,319,000, or 13.9% of sales, as compared to $4,348,000, or 14.2% of sales, in the comparable period of the prior year. Operating expenses for the three months ended July 31, 2015 reflect a decrease of $202,000 in Americas sales and marketing
expense and a $121,000 decrease in incentive compensation expense, partially offset by a $55,000 increase in employee separation costs, a $49,000 increase in pension expense, and a $194,000 increase in the operating expenses of the Companys
International Operations primarily related to increased International sales.
Interest expense was $92,000 for the three months ended July 31, 2015,
as compared to $81,000 for the comparable period of the prior year. The higher interest expense resulted from higher borrowing levels in the first three months of the current year.
Income tax expense of $571,000 was recorded for the three months ended July 31, 2015, as compared to income tax expense of $585,000 recorded for the
comparable period of the prior year. The effective tax rates were 37.2% and 31.7% for the three months ended July 31, 2015 and 2014, respectively. The higher effective tax rate for the current period resulted from a higher ratio of pretax
earnings attributable to subsidiaries located in geographic locations with higher income tax rates as compared to the comparable period of the prior year. Also, the effective tax rate in the prior period was reduced from statutory rates by the
favorable impact of state and federal tax credits.
Noncontrolling interests related to the Companys subsidiary not 100% owned by the Company
reduced net earnings by $23,000 for the three months ended July 31, 2015, as compared to $26,000 for the comparable period of the prior year. The change in the net earnings attributable to the noncontrolling interest in the current period was
due to change of earnings of the subsidiary in the related periods.
Net earnings of $940,000, or $0.35 per diluted share, were reported for the three
months ended July 31, 2015, compared to net earnings of $1,234,000, or $0.47 per diluted share, in the prior year period.
Liquidity and Capital
Resources
Historically, the Companys principal sources of liquidity have been funds generated from operations, supplemented as needed by
short-term borrowings under the Companys revolving credit facility. Additionally, certain machinery and equipment are financed by non-cancellable operating leases or capital leases. The Company believes that these sources will be sufficient to
support ongoing business requirements in the current year, including capital expenditures.
The Company had working capital of $28,523,000 at
July 31, 2015, compared to $27,707,000 at April 30, 2015. The ratio of current assets to current liabilities was 2.4-to-1.0 at July 31, 2015, compared to 2.3-to-1.0 at April 30, 2015. At July 31, 2015, advances of $4,292,000
were outstanding under the Companys bank revolving credit facility, compared to advances of $4,583,000 outstanding as of April 30, 2015. The Company had standby letters of credit outstanding of $4,210,000 at July 31, 2015 and
April 30, 2015. Amounts available under the $20 million revolving credit facility were $11.5 million and $11.2 million at July 31, 2015 and April 30, 2015, respectively. Outstanding short-term debt under credit arrangements with
foreign banks at July 31, 2015 was $426,000, compared to $169,000 at April 30, 2015. Total bank borrowings and interest rate swaps were $8,987,000 at July 31, 2015, compared to $9,147,000 at April 30, 2015.
The Companys operations provided cash of $1,521,000 during the three months ended July 31, 2015, with cash primarily provided from earnings and a
decrease of $989,000 in receivables and an increase of $449,000 in accounts payable and other accrued expenses,
8
offset by an increase in inventories of $1,225,000. The Companys operations used cash of $195,000 during the three months ended July 31, 2014, with cash primarily provided from
earnings and an increase of $877,000 in accounts payable and other accrued expenses, offset by an increase in accounts receivable of $2,262,000.
During
the three months ended July 31, 2015, net cash of $160,000 was used in investing activities, which included $472,000 for capital expenditures, offset by a $312,000 decrease in restricted cash. This compares to net cash used of $2,509,000, which
included $541,000 for capital expenditures and an increase of $1,968,000 in restricted cash, in the comparable period of the prior year. The increase in restricted cash in the prior year period was related to an increase in the amount of fixed
deposits of the Companys international subsidiaries pledged to support bank guarantees required under customer contracts.
The Companys
financing activities used cash of $1,439,000 during the three months ended July 31, 2015, primarily for the final payment of $888,000 toward the purchase of the noncontrolling interest in a subsidiary, cash dividends of $316,000 paid to
stockholders, cash dividends of $75,000 paid to minority interest holders and repayment of long-term debt of $106,000. The Companys financing activities provided cash of $783,000 during the three months ended July 31, 2014 with cash
provided by an increase in short-term borrowings of $2,064,000, offset by payment of $888,000 for the second installment toward the purchase of the noncontrolling interest in a subsidiary, cash dividends of $288,000 paid to stockholders, and
payments of $105,000 on long-term debt.
Outlook
The
Companys ability to predict future demand for its products continues to be limited given its role as subcontractor or supplier to dealers for subcontractors. Demand for the Companys products is also dependent upon the number of
laboratory construction projects planned and/or current progress in projects already under construction. The Companys earnings are also impacted by fluctuations in prevailing pricing for projects in the laboratory construction marketplace and
increased costs of raw materials, including stainless steel, wood, and epoxy resin, and whether the Company is able to increase product prices to customers in amounts that correspond to such increases without materially and adversely affecting
sales. Additionally, since prices are normally quoted on a firm basis in the industry, the Company bears the burden of possible increases in labor and material costs between the quotation of an order and delivery of a product. Looking forward, the
Company expects fiscal year 2016 to be a profitable year for the Company.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995
This report contains statements that the Company believes to be forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this report, including statements regarding the Companys 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. All forward-looking statements are subject to important factors, risks, uncertainties and assumptions, including industry and
economic conditions that could cause actual results to differ materially from those described in the 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; dependence on customers required delivery schedules; risks related to fluctuations in the Companys 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 and other Force
Majeure events. Many important factors that could cause such a difference are described under the caption Risk Factors in Item 1A in the Companys 2015 Annual Report on Form 10-K. These forward-looking statements speak only as
of the date of this document. The Company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.
9
REVIEW BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
A review of the interim consolidated financial information included in this Quarterly Report on Form 10-Q for each of the three month periods ended
July 31, 2015 and July 31, 2014 has been performed by Cherry Bekaert LLP, the Companys independent registered public accounting firm. Their report on the interim consolidated financial information follows.
10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have reviewed the accompanying consolidated balance sheet of Kewaunee Scientific Corporation and its subsidiaries (the Company) as of
July 31, 2015, the related consolidated statements of operations, comprehensive income, and cash flows for the three-month periods ended July 31, 2015 and 2014, and the related consolidated statement of stockholders equity for the
three-month period ended July 31, 2015. These interim consolidated financial statements are the responsibility of the Companys management.
We
conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), 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 reviews, we are not aware
of any material modifications that should be made to the interim consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of
April 30, 2015, and the related consolidated statements of operations, comprehensive income and stockholders equity, and cash flows for the year then ended (not presented herein) and in our report dated July 20, 2015, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of April 30, 2015 is fairly stated in all material respects in relation to the
consolidated financial statement from which it has been derived.
|
/s/ Cherry Bekaert LLP |
Charlotte, North Carolina |
September 11, 2015
11
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
There are no material
changes to the disclosures made on this matter in the Companys Annual Report on Form 10-K for the fiscal year ended April 30, 2015.
Item 4. |
Controls and Procedures |
(a) Evaluation of disclosure controls and procedures
An evaluation was performed under the supervision and with the participation of the Companys management, including the Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of July 31, 2015. Based on that evaluation, the Companys management, including the CEO and CFO, concluded that, as of July 31, 2015, the Companys disclosure controls and procedures were
adequate and effective and designed to ensure that all material information required to be filed in this quarterly report is made known to them by others within the Company and its subsidiaries.
(b) Changes in internal controls
There was no significant change in the Companys internal control over financial reporting that occurred during the most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
12
PART II. OTHER INFORMATION
|
|
|
3.3 |
|
Bylaws (As amended as of June 2, 2015) 1 |
|
|
10.61C
|
|
Third Amendment to Credit and Security Agreement and First amendment to Revolving Credit Note dated as of June 3, 2015 1 |
|
|
10.67* |
|
Fiscal Year 2016 Incentive Bonus Plan 2 |
|
|
10.70* |
|
Separation Agreement dated as of July 15, 2015 between Kewaunee Scientific Corporation and D. Michael Parker.3 |
|
|
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 |
* |
The referenced exhibit is a management contract or compensatory plan or arrangement. |
1 |
Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form 8-K (Commission File No. 0-5286) filed on June 3, 2015 and incorporated herein by reference. |
2 |
Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form 8-K (Commission File No. 0-5286) filed on June 29, 2015 and incorporated herein by reference. |
3 |
Filed as an exhibit to the Kewaunee Scientific Corporation Current Report on Form 8-K (Commission File No. 0-5286) filed on July 20, 2015 and incorporated herein by reference. |
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: September 11, 2015 |
|
By |
|
/s/ D. Michael Parker |
|
|
|
|
D. Michael Parker (As duly authorized
officer and Senior Vice President, Finance and Chief Financial Officer) |
14
Exhibit 31.1
CERTIFICATIONS
I, David
M. Rausch, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Kewaunee Scientific Corporation;
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 registrants 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 registrants 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 registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
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 registrants 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 registrants internal control over financial reporting.
Date: September 11, 2015
|
/s/ David M. Rausch |
David M. Rausch Chief Executive
Officer |
Exhibit 31.2
CERTIFICATIONS
I, D.
Michael Parker, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Kewaunee Scientific Corporation;
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 registrants 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 registrants 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 registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
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 registrants 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 registrants internal control over financial reporting.
Date: September 11, 2015
|
/s/ D. Michael Parker |
D. Michael Parker Senior Vice President,
Finance and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Kewaunee Scientific Corporation (the Company) for
the period ended July 31, 2015, I, David M. Rausch, President and Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to
my knowledge:
|
(1) |
such Form 10-Q of the Company for the period ended July 31, 2015, 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 July 31, 2015, fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: September 11, 2015
|
/s/ David M. Rausch |
David M. Rausch |
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Kewaunee Scientific Corporation (the Company) for
the period ended July 31, 2015, I, D. Michael Parker, Senior Vice President, Finance and Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
|
(1) |
such Form 10-Q of the Company for the period ended July 31, 2015, 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 July 31, 2015, fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: September 11, 2015
|
/s/ D. Michael Parker |
D. Michael Parker |
Senior Vice President, Finance and Chief Financial Officer |
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