KEWAUNEE SCIENTIFIC CORP /DE/

Previous wording

The Company's 2025 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, 2025. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2025. The analysis of results of operations compares the three months ended July 31, 2025 with the comparable period of the prior year.

Current wording

The Company's 2025 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, 2025. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2025. The analysis of results of operations compares the three and six months ended October 31, 2025 with the comparable period of the prior year.

Previous wording

Sales for the quarter were $71,104,000, an increase from sales of $48,393,000 in the comparable period of the prior year. Domestic sales for the quarter were $54,352,000, up 53.0% when compared to sales of $35,523,000 in the comparable period of the prior year. Domestic sales increased when compared to the prior year primarily due to the acquisition of Nu Aire, as discussed above, which closed on November 1, 2024 and was not part of the prior year comparable results. International sales for the quarter were $16,752,000, up 30.2% when compared to sales of $12,870,000 in the comparable period of the prior year. International sales increased when compared to the prior year period due to the commencement of delivery of large projects booked in the prior fiscal year.

Current wording

Sales for the quarter were $70,096,000, an increase from sales of $47,764,000 in the comparable period of the prior year. Domestic sales for the quarter were $55,224,000, up 51.7% when compared to sales of $36,409,000 in the comparable period of the prior year. Domestic sales increased when compared to the prior year primarily due to the acquisition of Nu Aire, as discussed above, which closed on November 1, 2024 and was not part of the prior year comparable results. International sales for the quarter were $14,872,000, up 31.0% when compared to sales of $11,355,000 in the comparable period of the prior year. International sales increased when compared to the prior year period due to the continued delivery of large projects booked in prior periods, a trend that continues from the Company's first quarter fiscal year 2026 results.

Previous wording

The Company's order backlog was $205.0 million at July 31, 2025, as compared to $159.4 million at July 31, 2024, and $214.6 million at April 30, 2025.

Current wording

The Company's order backlog was $192.9 million at October 31, 2025, as compared to $184.4 million at October 31, 2024, and $214.6 million at April 30, 2025.

Previous wording

The gross profit margin for the three months ended July 31, 2025 was 29.4% of sales, as compared to 25.8% of sales in the comparable quarter of the prior year. The increase in gross profit margin percentage for the three months ended July 31, 2025 was primarily driven by the acquisition of Nu Aire on November 1, 2024, along with improved manufacturing productivity and ongoing cost-containment initiatives.

Current wording

The gross profit margin for the three months ended October 31, 2025 was 28.1% of sales, as compared to 29.2% of sales in the comparable quarter of the prior year. The gross profit margin for the six months ended October 31, 2025 was 28.8% of sales, as compared to 27.5% of sales in the comparable period of the prior year. The change in gross profit margin percentage for the three and six months ended October 31, 2025 was primarily driven by the acquisition of Nu Aire on November 1, 2024. Additionally, domestic segment profitability in the three months ended October 31, 2025 was also impacted by lower manufacturing volumes and reduced productivity across the laboratory construction portion of the business, offset by strength in the end-user containment portion of the business.

Previous wording

Operating expenses for the three months ended July 31, 2025 were $16,120,000, or 22.7% of sales, as compared to $9,913,000, or 20.5% of sales, in the comparable period of the prior year. The increase in operating expenses for the three months ended July 31, 2025 was largely related to the acquisition of Nu Aire. The increase in operating expenses from the comparable period was also impacted by increases in international operating expenses of $392,000 and SG&A wages, benefits, incentive and stock-based compensation of $182,000.

Current wording

Operating expenses for the three months ended October 31, 2025 were $15,613,000, or 22.3% of sales, as compared to $9,518,000, or 19.9% of sales, in the comparable period of the prior year. Operating expenses for the six months ended October 31, 2025 were $31,733,000, or 22.5% of sales, as compared to $19,431,000, or 20.2% of sales, in the comparable period of the prior year. The increase in operating expenses for the three months ended October 31, 2025 was primarily due to the acquisition of Nu Aire. The increase in operating expenses was also impacted by increases in SG&A wages, benefits, incentive and stock-based compensation of $699,000 and international operating expenses of $397,000, partially offset by decreases in consulting and professional fees of $624,000. The increase in operating expenses for the six months ended October 31, 2025 was primarily due to the acquisition of Nu Aire. The increase in operating expenses was also impacted by increases in SG&A wages, benefits, incentive and stock-based compensation of $881,000 and international operating expenses of $789,000, partially offset by decreases in consulting and professional fees of $655,000.

Previous wording

Interest expense was $1,058,000 for the three months ended July 31, 2025, as compared to $472,000 for the comparable period of the prior year. The changes in interest expense were due to changes in the levels of bank and other borrowings and interest rates.

Current wording

Interest expense was $1,061,000 and $2,119,000 for the three and six months ended October 31, 2025, respectively, as compared to $442,000 and $914,000 for the comparable periods of the prior year. The changes in interest expense were due to changes in the levels of bank and other borrowings and interest rates.

Previous wording

Income tax expense of $761,000 and $192,000 were recorded for the three months ended July 31, 2025 and 2024, respectively. The effective income tax rate for the three months ended July 31, 2025 was 19.4%, as compared to 7.9% for the three months ended July 31, 2024. The effective tax rate for the current three month period 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, 2025 was favorably impacted by a discrete tax benefit of $303,000 resulting from the issuance of stock through the vesting of restricted stock units during the first quarter. On July 4, 2025, the U.S. government enacted Public Law No. 119-21, commonly known as the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax reform provisions affecting businesses. Since OBBBA was enacted on July 4, 2025, its full impact is not reflected in the Company's Condensed Consolidated Financial Statements for the three months ended July 31, 2025. The Company is evaluating the provisions to assess potential effects on its effective tax rate, deferred tax assets and liabilities, and future cash tax obligations. See Note N, Income Taxes, of the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

Income tax expense of $915,000 and $916,000 were recorded for the three months ended October 31, 2025 and 2024, respectively. Income tax expense of $1,676,000 and $1,108,000 were recorded for the six months ended October 31, 2025 and 2024, respectively. The effective income tax rate for the three and six months ended October 31, 2025 was 26.5% and 22.7%, respectively, as compared to 23.3% and 17.4% for the three and six months ended October 31, 2024, respectively. The effective tax rate for the current three and six 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, 2025 was favorably impacted by a discrete tax benefit of $303,000 resulting from the issuance of stock through the vesting of restricted stock units during the first quarter. On July 4, 2025, the U.S. government enacted Public Law No. 119-21, commonly known as the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax reform provisions affecting businesses. Since OBBBA was enacted on July 4, 2025, its full impact is not reflected in the Company's Condensed Consolidated Financial Statements for the three months ended July 31, 2025. The Company is evaluating the provisions to assess potential effects on its effective tax rate, deferred tax assets and liabilities, and future cash tax obligations. See Note N, 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 $66,000 for the three months ended July 31, 2025, as compared to $45,000, for the comparable period 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 $93,000 and $159,000 for the three and six months ended October 31, 2025, respectively, as compared to $7,000 and $52,000, respectively, for the comparable period 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 $3,093,000, or $1.04 per diluted share, for the three months ended July 31, 2025, compared to net earnings of $2,193,000, or $0.74 per diluted share, in the prior year period.

Current wording

Net earnings was $2,445,000, or $0.82 per diluted share, for the three months ended October 31, 2025, compared to net earnings of $3,008,000, or $1.01 per diluted share, in the prior year period. Net earnings was $5,538,000, or $1.86 per diluted share, for the six months ended October 31, 2025, compared to net earnings of $5,201,000, or $1.75 per diluted share, in the prior year period.

Previous wording

The Company had working capital of $66,662,000 at July 31, 2025, compared to $64,651,000 at April 30, 2025. The ratio of current assets to current liabilities was 2.3-to-1.0 at July 31, 2025, compared to 2.2-to-1.0 at April 30, 2025.

Current wording

The Company had working capital of $67,830,000 at October 31, 2025, compared to $64,651,000 at April 30, 2025. The ratio of current assets to current liabilities was 2.5-to-1.0 at October 31, 2025, compared to 2.2-to-1.0 at April 30, 2025.

Previous wording

The Company's operating activities provided cash of $5,791,000 during the three months ended July 31, 2025. Net cash provided by operating activities was primarily driven by operations and decreases in receivables of $5.5 million, partially offset by increases in inventories of $2.1 million, decreases in accounts payable and other accrued expenses of $1.5 million, and decreases in deferred revenue of $1.1 million. During the three months ended July 31, 2025, the Company used net cash of $771,000 in investing activities related to capital expenditures. The Company's financing activities used net cash of $1,463,000 during the three months ended July 31, 2025, primarily related to the servicing of the Company's long-term debt arrangements and a net decrease in the short-term borrowings of its International subsidiaries. See Note H, Long-term Debt and Other Credit Arrangements, for more details.

Current wording

The Company's operating activities provided cash of $1,526,000 during the six months ended October 31, 2025. Net cash provided by operating activities was primarily driven by operations and decreases in receivables of $3.4 million, partially offset by increases in inventories of $2.7 million, decreases in accounts payable and other accrued expenses of $6.4 million, and decreases in deferred revenue of $1.7 million. During the six months ended October 31, 2025, the Company used net cash of $2,341,000 in investing activities related to capital expenditures. The Company's financing activities used net cash of $2,316,000 during the six months ended October 31, 2025, primarily related to the servicing of the Company's long-term debt arrangements and the payment of employee taxes withheld for stock-based compensation. See Note H, Long-term Debt and Other Credit Arrangements, for more details. On December 4, 2025, the Company entered into a First Amendment to Loan Agreement with PNC and completed the Seller Note Repayment. See Note Q, Subsequent Events, for more details.