KEWAUNEE SCIENTIFIC CORP DE

Previous wording

The Company's 2024 Annual Report to Stockholders on Form 10-K contains management's discussion and analysis of the Company's financial condition and results of operations as of and for the fiscal year ended April 30, 2024. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2024. The analysis of results of operations compares the three months ended July 31, 2024 with the comparable periods of the prior year.

Current wording

The Company's 2024 Annual Report to Stockholders on Form 10-K contains management's discussion and analysis of the Company's financial condition and results of operations as of and for the fiscal year ended April 30, 2024. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2024. The analysis of results of operations compares the three and six months ended October 31, 2024 with the comparable periods of the prior year.

Previous wording

Sales for the quarter were $48,393,000, a decrease from sales of $49,839,000 in the comparable period of the prior year. Domestic sales for the quarter were $35,523,000, relatively flat when compared to sales of $35,420,000 in the comparable period of the prior year. International sales for the quarter were $12,870,000, down 10.7% when compared to sales of $14,419,000 in the comparable period of the prior year. International sales decreased when compared to the prior year period due to customer construction site delays in India which pushed out the timing of deliveries.

Current wording

Sales for the quarter were $47,764,000, a decrease from sales of $50,436,000 in the comparable period of the prior year. Domestic sales for the quarter were $36,409,000, up 6.5% when compared to sales of $34,185,000 in the comparable period of the prior year. Domestic sales increased when compared to the prior year primarily due to higher product demand. International sales for the quarter were $11,355,000, down 30.1% when compared to sales of $16,251,000 in the comparable period of the prior year. International sales decreased when compared to the prior year period due to customer construction site delays in India which pushed out the timing of deliveries.

Previous wording

The Company's order backlog was $159.4 million at July 31, 2024, as compared to $140.8 million at July 31, 2023, and $155.6 million at April 30, 2024.

Current wording

The Company's order backlog was $184.4 million at October 31, 2024, as compared to $146.3 million at October 31, 2023, and $155.6 million at April 30, 2024.

Previous wording

Operating expenses for the three months ended July 31, 2024 were $9,913,000, or 20.5% of sales, as compared to $8,106,000, or 16.3% of sales, in the comparable period of the prior year. The increase in operating expenses for the three months ended July 31, 2024 was primarily due to increases in SG&A wages, benefits, incentive and stock-based compensation of $713,000, consulting and professional fees of $836,000, international operating expenses of $295,000, corporate governance expenses of $33,000, and depreciation expense of $23,000, partially offset by decreases in bad debt expense of $114,000.

Current wording

Operating expenses for the three months ended October 31, 2024 were $9,518,000, or 19.9% of sales, as compared to $8,359,000, or 16.6% of sales, in the comparable period of the prior year. Operating expenses for the six months ended October 31, 2024 were $19,431,000, or 20.2% of sales, as compared to $16,465,000 or 16.4% of sales, in the comparable period of the prior year. The increase in operating expenses for the three months ended October 31, 2024 was primarily due to increases in consulting and professional fees of $1,241,000, and corporate governance expenses of $335,000 partially offset by decreases in international operating expenses of $434,000, SG&A wages, benefit, incentive and stock-based compensation of $168,000, and bad debt expense of $48,000. The increase in operating expenses for the six months ended October 31, 2024 was primarily due to increases in consulting and professional fees of $1,853,000, SG&A wages, benefits, incentive and stock-based compensation of $563,000, corporate governance expenses of $368,000, and depreciation expense of $28,000, partially offset by decreases in bad debt expense of $162,000 and international operating expenses of $138,000. The increases in consulting and professional fees for both the three- and six-month periods were primarily attributed to one-time costs associated with the acquisition of Nu Aire and costs incurred related to Sarbanes-Oxley 404(b) compliance readiness.

Previous wording

Interest expense, net was $472,000 for the three months ended July 31, 2024, respectively, as compared to $430,000 and respectively, for the comparable periods of the prior year. The changes in interest expense were due to changes in the levels of bank borrowings and interest rates.

Current wording

Interest expense was $442,000 and $914,000 for the three and six months ended October 31, 2024, respectively, as compared to $372,000 and $802,000, respectively, for the comparable periods of the prior year. The changes in interest expense were due to changes in the levels of bank borrowings and interest rates.

Previous wording

Income tax expense of $192,000 and $897,000 was recorded for the three months ended July 31, 2024 and 2023, respectively. The effective income tax rate for the three months ended July 31, 2024 was 7.9%, as compared to 26.3% for the three months ended July 31, 2023. The effective tax rate for the current three-month periods reflects the impact of foreign operations which are taxed at different rates than the U.S. tax rate of 21%, combined with expected current year tax expense for the Company's domestic operations. In addition, the income tax expense recorded for the three months ended July 31, 2024 was favorably impacted by a discrete tax benefit of $421,000 resulting from the issuance of stock through the vesting of restricted stock units and the exercise of stock options during the quarter. See Note L, Income Taxes, of the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

Income tax expense of $916,000 and $2,015,000 was recorded for the three months ended October 31, 2024 and 2023, respectively. Income tax expense of $1,108,000 and $2,912,000 was recorded for the six months ended October 31, 2024 and 2023, respectively. The effective income tax rate for the three and six months ended October 31, 2024 was 23.3% and 17.4%, as compared to 41.6% and 35.3% for the three and six months ended October 31, 2023, respectively. The effective tax rate for the current three and six months periods reflects the impact of foreign operations which are taxed at different rates than the U.S. tax rate of 21%, combined with expected current year tax expense for the Company's domestic operations. In addition, the income tax expense recorded for the six months ended October 31, 2024 was favorably impacted by a discrete tax benefit of $421,000 resulting from the issuance of stock through the vesting of restricted stock units and the exercise of stock options during the first quarter. See Note L, Income Taxes, of the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

Non-controlling interests related to the Company's subsidiaries not 100% owned by the Company decreased net earnings by $45,000 for the three months ended July 31, 2024, as compared to $41,000, for the comparable periods of the prior year. The change in the net earnings attributable to the non-controlling interest in the current period was due to changes in earnings (losses) of the subsidiaries in the related period.

Current wording

Non-controlling interests related to the Company's subsidiaries not 100% owned by the Company decreased net earnings by $7,000 and $52,000 for the three and six months ended October 31, 2024, respectively, as compared to $98,000 and $139,000, respectively, for the comparable periods of the prior year. The change in the net earnings attributable to the non-controlling interest in the current period was due to changes in earnings (losses) of the subsidiaries in the related period.

Previous wording

Net earnings was $2,193,000, or $0.74 per diluted share, for the three months ended July 31, 2024, compared to net earnings of $2,474,000, or $0.86 per diluted share, in the prior year period.

Current wording

Net earnings was $3,008,000, or $1.01 per diluted share, for the three months ended October 31, 2024, compared to net earnings of $2,732,000, or $0.93 per diluted share, in the prior year period. Net earnings was $5,201,000, or $1.75 per diluted share, for the six months ended October 31, 2024, compared to net earnings of $5,206,000, or $1.79 per diluted share, in the prior year period.

Previous wording

The Company had working capital of $56,012,000 at July 31, 2024, compared to $56,037,000 at April 30, 2024. The ratio of current assets to current liabilities was 2.5-to-1.0 at July 31, 2024, compared to 2.4-to-1.0 at April 30, 2024.

Current wording

The Company had working capital of $59,965,000 at October 31, 2024, compared to $56,037,000 at April 30, 2024. The ratio of current assets to current liabilities was 2.6-to-1.0 at October 31, 2024, compared to 2.4-to-1.0 at April 30, 2024.

Previous wording

The Company used cash of $794,000 during the three months ended July 31, 2024, primarily from decreases in accounts payable and other accrued expenses of $5.1 million, and the change in other, net of $1.9 million, of which $1.7 million related to an increase in other non-current assets, partially offset by operations, decreases in receivables of $1.5 million and decreases in inventories of $1.4 million. During the three months ended July 31, 2024, the Company used net cash of $278,000 in investing activities, all of which was used for capital expenditures. The Company's financing activities provided cash of $343,000 during the three months ended July 31, 2024, primarily from a net increase in short-term borrowings by the Company's International subsidiaries. See Note F, Long-term Debt and Other Credit Arrangements, for more details.

Current wording

The Company's operating activities provided cash of $7,642,000 during the six months ended October 31, 2024, primarily from operations, decreases in receivables of $3.2 million, decreases in inventories of $2.0 million, and increases in deferred revenue of $1.9 million, partially offset by decreases in accounts payable and other accrued expenses of $3.9 million and the change in other, net of $2.0 million, of which $1.1 million related to an increase in prepaid expenses and other current assets. During the six months ended October 31, 2024, the Company used net cash of $961,000 in investing activities, all of which was used for capital expenditures. The Company's financing activities used cash of $2,886,000 during the six months ended October 31, 2024, primarily related to the termination of the Company's Revolving Credit Facility on September 30, 2024. See Note F, Long-term Debt and Other Credit Arrangements, for more details. On November 1, 2024, the Company entered into a new Loan Agreement and issued Seller Notes as part of the acquisition of Nu Aire. See Note P, Subsequent Events, for more details.

Previous wording

The Company continues to focus on supporting its dealers and distribution channel partners domestically while continuing to provide turnkey solutions in the international markets it serves. The improved focus of the organization, combined with a strong global management team, a healthy backlog, improved manufacturing capabilities, and end-use markets that continue to prioritize investment in projects that require the products Kewaunee designs and manufactures, positions the Company well.

Current wording

The Company continues to focus on supporting its dealers and distribution channel partners domestically while continuing to provide turnkey solutions in the international markets it serves. The acquisition of Nu Aire further presents a unique opportunity for Kewaunee to expand its capabilities and presence domestically. The improved focus of the organization, combined with the acquisition of Nu Aire, a strong global management team, a healthy backlog, improved manufacturing capabilities, and end-use markets that continue to prioritize investment in projects that require the products Kewaunee designs and manufactures, positions the Company well.

Previous wording

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 Annual Report, 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, including disruptions from government mandates, both domestically and internationally, as well as supplier constraints and other supply disruptions; 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; acts of terrorism, war, governmental action, natural disasters 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 differences are described under the caption "Risk Factors" in Item 1A in the Company's 2024 Annual Report on Form 10-K and in Item 1A of Part II in this Quarterly Report on Form 10-Q, which you should review carefully. 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.

Current wording

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 Annual Report, 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: our ability to realize the benefits anticipated as a result of the Nu Aire acquisition; competitive and general economic conditions, including disruptions from government mandates, both domestically and internationally, as well as supplier constraints and other supply disruptions; 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; acts of terrorism, war, governmental action, natural disasters 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 differences are described under the caption "Risk Factors" in Item 1A in the Company's 2024 Annual Report on Form 10-K and in Item 1A of Part II in this Quarterly Report on Form 10-Q, which you should review carefully. 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.