KEWAUNEE SCIENTIFIC CORP /DE/

Notes to Condensed Consolidated Financial Statements

A. Financial Information

The unaudited interim Condensed Consolidated Financial Statements of Kewaunee Scientific Corporation (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These interim Condensed 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 Company's 2026 Annual Report on Form 10-K. 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 Condensed Consolidated Balance Sheet as of April 30, 2026 included in this interim period filing has been derived from the audited consolidated financial statements at that date, but does not include all of the information and related notes required by GAAP for complete financial statements.

The preparation of the interim Condensed 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. Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. During the three months ended July 31, 2026 and twelve months ended April 30, 2026, the Company had cash deposits in excess of FDIC insured limits. The Company has not experienced any losses from such deposits. Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders.

The Company includes restricted cash along with the cash balance for presentation in the Condensed Consolidated Statements of Cash Flows. The reconciliation between the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Cash Flows is as follows (in thousands):

C. Revenue Recognition

The Company recognizes revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. The majority of the Company's revenues are recognized over time as the customer receives control as the Company performs work under a contract. However, a portion of the Company's revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract.

Disaggregated Revenue

During fiscal year 2026, the Company renamed its Domestic reportable segment to Lab Products Group ("LPG") to better align with the segment's expanded business activities, organizational structure, and strategic direction. This segment name change had no impact on the composition of the Company's reportable segments or on previously reported financial position, results of operations, cash flows, or segment operating results.

A summary of net sales transferred to customers over time and at a point in time for the periods ended July 31, 2026 and July 31, 2025 is as follows (in thousands):

Contract Balances

The closing balances of contract assets included $12,435,000 in accounts receivable at July 31, 2026. The opening balance of contract assets arising from contracts with customers included $14,163,000 in accounts receivable at April 30, 2026. The closing and opening balances of contract liabilities included in deferred revenue arising from contracts with customers were $5,185,000 at July 31, 2026 and $4,152,000 at April 30, 2026. The timing of revenue recognition, billings and cash collections results in accounts receivable, unbilled receivables, and deferred revenue which are disclosed in the Condensed Consolidated Balance Sheets and in the Notes to the Condensed Consolidated Financial Statements. In general, the Company receives payments from customers based on a billing schedule established in its contracts. Unbilled receivables represent amounts earned which have not yet been billed in accordance with contractually stated billing terms and are included in receivables on the Condensed Consolidated Balance Sheets. Receivables are recorded when the right to consideration becomes unconditional and the Company has a right to invoice the customer. Deferred revenue relates to payments received in advance of performance under the contract. Deferred revenue is recognized as revenue as (or when) the Company performs under the contract. Approximately 97% and 92% of the contract liability balances at April 30, 2026 and July 31, 2026, respectively, are expected to be recognized as revenue during the respective succeeding 12 months, with the remaining balance primarily related to international operations, which generally have longer delivery and collection cycles.

D. Inventories

The Company measures inventories using the first-in, first-out method at the lower of cost or net realizable value. Inventories consisted of the following (in thousands):

The Company's International subsidiaries' inventories were $2,758,000 at July 31, 2026 and $2,848,000 at April 30, 2026 and are included in the above table.

E. Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash and equivalents, mutual funds, a sale-leaseback financing liability, term loans, and short-term borrowings. The carrying value of these assets and liabilities approximates their fair value. The following tables summarize the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of July 31, 2026 and April 30, 2026 (in thousands):

(1)The Company maintainstwo 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.

F. Goodwill and Other Intangible Assets

On November 1, 2024, the Company recorded goodwill of $14.2 million on its Condensed Consolidated Balance Sheet in connection with its acquisition (the "Nu Aire Acquisition") of Nu Aire, Inc. ("Nu Aire"). During the year ended April 30, 2025, the Company recorded a $1.8 million measurement period adjustment to increase inventory as a result of revised capitalized variances related to work-in-progress as of the acquisition date, with a corresponding decrease to Goodwill, net of the tax impact. See Note 4, Nu Aire Acquisition included in the Company's 2026 Annual Report on Form 10-K for additional information. No impairment losses on goodwill were recorded during the three months ended July 31, 2026. The ending balance of goodwill at July 31, 2026 and April 30, 2026 was approximately $12.5 million.

Also in connection with the Nu Aire Acquisition, the Company recorded other intangible assets on November 1, 2024 of $18.6 million on its Condensed Consolidated Balance Sheet. See Note 4, Nu Aire Acquisition included in the Company's 2026 Annual Report on Form 10-K for additional information. The gross carrying amount and accumulated amortization of the Company's intangible assets other than goodwill as of July 31, 2026 and April 30, 2026 were as follows:

Expected future amortization expense related to intangible assets, net as of July 31, 2026, excluding trade names and trademarks, are as follows:

G. Long-term Debt and Other Credit Arrangements

The components of the Company's long-term debt at July 31, 2026 and April 30, 2026, excluding lease, deferred financing costs of $0.4 million and $0.4 million related to the debt at each respective date, and sale-leaseback-related activity, as presented on the Condensed Consolidated Balance Sheet were as follows:

See Note I, Leases, for more information on any long-term debt related to the Company's lease portfolio and Note H, Sale-Leaseback Financing Transaction, for more information on any long-term debt related to the Company's sale-leaseback financing transaction.

PNC Loan Agreement

The Company entered into a Loan Agreement (the “Loan Agreement”) with PNC on November 1, 2024. The loans governed by the Loan Agreement include (i) a $20.0 million committed senior secured revolving line of credit facility (the “Revolving Credit Facility”), which contains an option to increase the facility upon request by the Company and approval by PNC, in its discretion, by an additional $10.0 million; and (ii) a $15.0 million term loan (the “Term Loan”). The Revolving Credit Facility and Term Loan mature on November 1, 2029.

On December 4, 2025, the Company entered into a First Amendment to Loan Agreement ("First Amendment") with PNC. The First Amendment amends the Loan Agreement (together with the "First Amendment," the "Amended Loan Agreement") between the Company and PNC to, among other things, (i) permit the Company to repay in full the outstanding principal balances of the subordinated seller notes issued by the Company in connection with its acquisition of Nu Aire in November 2024, together with all accrued but unpaid interest thereon (the "Seller Note Repayment"), (ii) provide for an additional $10.0 million term loan the proceeds of which are to be used by the Company to partially fund the Seller Note Repayment (the "First Amendment Term Loan" and together with the Term Loan, the "Term Loans"), and (iii) permit the Company to draw and use available funds under the revolving line of credit established by the Loan Agreement to partially fund the Seller Note Repayment. The First Amendment Term Loan matures on December 4, 2030.

The Revolving Credit Facility and the Term Loans can be paid at any time without penalty.

There wereno advances outstanding under the Revolving Credit Facility at July 31, 2026 and April 30, 2026. Amounts available under the Revolving Credit Facility were $20.0 million at July 31, 2026 and April 30, 2026.

For the Revolving Credit Facility, the interest rate will be selected by the Company at each advance from one of two options. Option 1 is a base rate option. Option 2 is a daily secured overnight financing rate. There is an unused fee of 0.15% to 0.25%, determined by the ratio of senior debt to the Company’s EBITDA, of the unused daily balance of the Revolving Credit Facility. For the Term Loan, the principal will be paid in 60 substantially equal monthly installments over the term of the Loan Agreement. For the First Amendment, the principal will be paid in 59 substantially equal monthly installments over the term of the agreement. Interest will be paid at the same time and calculated on the outstanding principal balance at an interest rate equal to the rate under Option 2 of the Revolving Credit Facility. The borrowing rate on the Term Loans was 5.19% as of July 31, 2026, as compared to 5.27% as of April 30, 2026. The Company recorded interest expense of $261,000 related to the Term Loans for the three months ended July 31, 2026. The Company recorded interest expense of $225,000 related to the Term Loan for the three months ended July 31, 2025.

The Amended Loan Agreement has customary reporting covenants. The principal financial covenants require that (1) the Company maintain on a consolidated basis a ratio of senior funded indebtedness to EBITDA of not more than 2.50 to 1.00 and (2) a fixed charge coverage ratio of at least 1.20 to 1.00. The Loan Agreement also contains covenants prohibiting under certain circumstances (1) the incurrence of certain indebtedness, (2) the granting of security interests by the Company to persons other than PNC, (3) the delivery of guaranties for debts of third parties, and (4) certain transactions not in the ordinary course of business. At July 31, 2026 and April 30, 2026, the Company was in compliance with all of the financial covenants under the Amended Loan Agreement.

Seller Notes

As discussed in Note 4, Nu Aire Acquisition included in the Company's 2026 Annual Report on Form 10-K, $23.0 million of the aggregate purchase price paid in the Nu Aire Acquisition was paid by the issuance of subordinated seller notes (the "Seller Notes") entered into by the Company on November 1, 2024. The Seller Notes accrued interest at 8% per annum and were scheduled to mature on November 1, 2027, at which time the outstanding principal amount and all unpaid accrued interest were to become due and payable by the Company.

On December 4, 2025, the Company completed the Seller Note Repayment. Pursuant to the terms of the Seller Notes, the Seller Notes could be prepaid, in full or in part, at any time without prepayment penalty, premium, or other fee. Upon completion of the Seller Note Repayment, all obligations, covenants, debts and liabilities of the Company under the Seller Notes were satisfied and discharged in full, and the Seller Notes and all other documents entered into in connection with the Seller Notes were terminated.

Prior to the Seller Note Repayment, the Company accrued $905,000 in PIK interest for the six month period ended October 31, 2025 and $935,000 for the fiscal year ended April 30, 2025. The Company made a payment of $1,840,000 during the three month period ended October 31, 2025 for its accrued PIK interest, resulting in a PIK interest balance ofzero as of October 31, 2025. As part of the Seller Note Repayment, the Company repaid the outstanding Seller Notes balance of $23.0 million and accrued but unpaid interest balance of $173,000. The Company incurred $0.3 million in related expenses as a result of the Seller Note Repayment.

International Subsidiaries Short-Term Borrowings

The Company's International subsidiaries had a balance outstanding of $627,000 in short-term borrowings related to overdraft protection and short-term loan arrangements at July 31, 2026. The Company's International subsidiaries had a balance outstanding at April 30, 2026 of $74,000 in short-term borrowings related to overdraft protection and short-term loan arrangements.

H. Sale-Leaseback Financing Transaction

On December 22, 2021, the Company entered into an Agreement for Purchase and Sale of Real Property with CAI Investments Sub-Series 100 LLC, a Nevada limited liability company (the "Buyer"), for the Company’s headquarters and manufacturing facilities located at 2700 West Front Street in Statesville, North Carolina (the "Sale Agreement").

The Sale Agreement was finalized on March 24, 2022 and coincided with the Company and CAI Investments Medical Products I Master Lessee LLC ("Lessor") entering into a lease agreement. The lease arrangement is for a 20-year term, with four renewal options offive years each. Under the terms of the lease agreement, the Company’s initial basic rent is approximately $158,000 per month, with annual increases of approximately 2% each year of the initial term.

The Company accounted for the Sale-Leaseback Arrangement as a financing transaction as the lease agreement was determined to be a finance lease due to the significance of the present value of the lease payments, using a discount rate of 4.75% to reflect the Company’s incremental borrowing rate, compared to the fair value of the leased property as of the lease commencement date. In measuring the lease payments for the present value analysis, the Company elected the practical expedient to combine the lease component (the leased facilities) with the non-lease component (property management provided by the Buyer/Lessor) into a single lease component.

The presence of a finance lease indicates that control of the property has not transferred to the Buyer/Lessor and, as such, the transaction was deemed a failed sale-leaseback and accounted for as a financing arrangement. As a result of this determination, the Company is viewed as having received the sale proceeds from the Buyer/Lessor in the form of a hypothetical loan collateralized by its leased facilities. The hypothetical loan is payable as principal and interest in the form of “lease payments” to the Buyer/Lessor. As such, the Company will not derecognize the property from its books for accounting purposes until the lease ends. No gain or loss was recognized under GAAP related to the Sale-Leaseback Arrangement.

As of July 31, 2026, the carrying value of the financing liability was $26,420,000, net of $519,000 in debt issuance costs, of which $887,000 was classified as current on the Condensed Consolidated Balance Sheet with $25,533,000 classified as long-term. As of April 30, 2026, the carrying value of the financing liability was $26,632,000, net of $533,000 in debt issuance costs, of which $867,000 was classified as current on the Consolidated Balance Sheet with $25,765,000 classified as long-term. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method. Interest expense associated with the financing arrangement was $299,000 and $308,000 for the three months ended July 31, 2026 and July 31, 2025, respectively.

The Company will continue to depreciate the building down to zero over the 20-year assumed economic life of the property so that at the end of the lease term, the remaining carrying amount of the financing liability will equal the carrying amount of the land of $41,000.

Remaining future cash payments related to the financing liability as of July 31, 2026 are as follows:

I. Leases

The Company recognizes lease assets and lease liabilities reflecting the rights and obligations created by operating type leases for real estate and equipment in both the U.S. and internationally and financing leases for vehicles and IT equipment in the U.S. At July 31, 2026 and April 30, 2026, right-of-use assets totaled $10,277,000 and $10,791,000, respectively. Operating cash paid to settle lease liabilities was $1,208,000 and $1,040,000 for the three months ended July 31, 2026 and July 31, 2025, respectively. The Company's leases have remaining lease terms of up tosix years. In addition, some of the leases may include options to extend the leases for up tofive years or options to terminate the leases withinone year. Operating lease expense was $1,619,000 for the three months ended July 31, 2026, inclusive of period cost for short-term leases, not included in lease liabilities, of $411,000. Operating lease expense was $1,458,000 for the three months ended July 31, 2025, inclusive of period cost for short-term leases, not included in lease liabilities, of $418,000.

At July 31, 2026, the weighted average remaining lease term for the capitalized operating leases was 2.9 years and the weighted average discount rate was 6.1%. For the financing leases, the weighted average remaining lease term was 4.2 years and the weighted average discount rate was 7.6%. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of those lease payments. The Company uses the implicit rate when readily determinable.

Future minimum lease payments under non-cancelable leases as of July 31, 2026 were as follows:

In August 2026, the Company entered into a new lease that has not yet commenced as of July 31, 2026 with future minimum lease payments in aggregate of approximately $8.3 million that are not yet reflected on the Condensed Consolidated Balance Sheet. This lease is expected to commence in the fourth quarter of fiscal year 2027 with a lease term of 128 months.

J. Stockholders' Equity

Common Stock

The Company is authorized to issue 5,000,000 shares of Common Stock, par value of $2.50 per share. Holders of the Company's Common Stock are entitled toone vote per share. As of July 31, 2026 and April 30, 2026, there were approximately 2,895,000 and 2,866,000 shares, respectively, of Common Stock outstanding. The Company has not declared or paid any dividends with respect to its Common Stock during the three months ended July 31, 2026. The declaration and payment of any future dividends is at the discretion of the Board of Directors and will depend upon many factors, including the Company's earnings, capital requirements, investment and growth strategies, financial conditions, the terms of the Company's indebtedness, which contains provisions that could limit the payment of dividends in certain circumstances, and other factors that the Board of Directors may deem to be relevant.

Share Repurchase Program

On August 31, 2023, the Board of Directors of the Company adopted a share repurchase program with authorization to repurchase up to 100,000 shares. There is no expiration date and currently, management has no plans to terminate this program.

On March 12, 2025, the Board of Directors amended the existing share repurchase program to authorize the repurchase of up to an additional 100,000 shares of the Company's common stock (as amended, the "Program"). The Program does not have a specified expiration date and the timing and amount of any repurchase under this Program will be determined by the Company's management at its discretion based upon its ongoing assessment of the capital needs of the business, the market price of the Company's common stock, and general market conditions. The Company repurchased 14,290 shares of the Company's common stock during the three months ended July 31, 2026 for approximately $528,000, excluding other costs such as broker commissions and fees. As of July 31, 2026, the total remaining purchase authorization was 86,313 shares.

K. Earnings Per Share

Basic earnings per share is based on the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the assumed exercise of outstanding options and the conversion of restricted stock units ("RSUs") under the Company's various stock compensation plans, except when RSUs and options have an antidilutive effect. There wereno antidilutive RSUs and options outstanding at July 31, 2026. There wereno antidilutive RSUs and options outstanding at July 31, 2025. The following is a reconciliation of basic to diluted weighted average common shares outstanding (in thousands):

L. Stock-based Compensation

The Company recognizes compensation costs related to stock options and other stock awards granted by the Company as operating expenses over their vesting period.

In August 2023, the stockholders approved the 2023 Omnibus Incentive Plan ("2023 Plan"), which enables the Company to grant equity-based awards, with potential recipients including directors, consultants, and employees. This plan replaced the 2017 Omnibus Incentive Plan ("2017 Plan"). At the date of approval of the 2023 Plan, there were 64,633 shares available for new awards under the 2017 Plan, and 168,791 shares available for issuance under equity awards outstanding under the 2017 Plan. These shares that were available for new awards and any shares subject to outstanding awards under the 2017 Plan that subsequently cease to be subject to such awards are available under the 2023 Plan. The 2023 Plan also increased the total number of shares reserved for issuance under the Company's equity compensation plans by 310,000, for a total of 374,633 shares initially reserved for issuance under the 2023 Plan. At July 31, 2026, there were 266,240 shares available for future issuance under the 2023 Plan.

In June 2026, the Company granted 97,152 RSUs under the 2023 Plan. These RSUs include both a service and a performance component, vesting over athree-year period. The recognized expense is based upon the vesting period for service criteria and estimated attainment of the performance criteria at the end of thethree-year period, based on the ratio of cumulative days of service to total days over thethree-year period. The Company recorded stock-based compensation expense of $1,749,000 during the three months ended July 31, 2026, with the remaining estimated stock-based compensation expense of $4,610,000 to be recorded over the remaining vesting periods. The Company recorded stock-based compensation expense of $431,000 during the three months ended July 31, 2025. Director's fees paid with shares of common stock in lieu of cash in accordance with Director compensation guidelines were $150,000 for the three months ended July 31, 2026, all of which was included in stock-based compensation.

M. Income Taxes

Income tax expense of $717,000 and $761,000 was recorded for the three months ended July 31, 2026 and 2025, respectively. The effective tax rate was 28.0% for the three months ended July 31, 2026 compared to 19.4% for the three months ended July 31, 2025. The effective tax rate for the current three month period reflects the mix of domestic and foreign earnings, which are subject to different tax rates, a discrete benefit resulting from the vesting of restricted stock units, and additional expense associated with the Company's indefinite reinvestment assertion for Kewaunee Labway India Pvt. Ltd.

In August 2019, the Company revoked its indefinite reinvestment assertion with respect to the unremitted earnings of its Singapore and Kewaunee Labway India Pvt. Ltd. subsidiaries in accordance with ASC 740 Income Taxes. As a result, the Company has a deferred tax liability of $1,449,000 and $1,376,000 as of July 31, 2026 and April 30, 2026, respectively, related to withholding taxes on the unremitted earnings of Kewaunee Labway India Pvt. Ltd.

N. Segment Information

In accordance with ASC 280, Segment Reporting, the Company's operations are classified intotwo business segments: Lab Products Group ("LPG") and International. During fiscal year 2026, the Company renamed its Domestic reportable segment to Lab Products Group to better align with the segment's expanded business activities, organizational structure, and strategic direction. This segment name change had no impact on the composition of the Company's reportable segments or on previously reported financial position, results of operations, cash flows, or segment operating results.

The LPG business segment principally designs, manufactures, and installs scientific and technical furniture, including steel and wood laboratory cabinetry, fume hoods, flexible systems, worksurfaces, workstations, workbenches, and computer enclosures. On November 1, 2024, the Company completed its acquisition of Nu Aire, whose operating results are reflected in the LPG segment, expanding the Company's LPG capabilities through its manufacturing of biological safety cabinets, CO2 incubators, ultralow freezers, and other essential laboratory products. See Note 4, Nu Aire Acquisition included in the Company's 2026 Annual Report on Form 10-K for additional information. The International business segment, which consists of the Company's foreign subsidiaries, provides products and services, including facility design, detailed engineering, construction, and project management from the planning stage through testing and commissioning of laboratories.

The Company's Chief Operating Decision Maker is its CEO, who evaluates the performance of each segment and measures its segment profitability based on earnings before income taxes. Some Corporate expenses, such as those related to executive management, finance, etc., are allocated to the segments. Certain corporate expenses shown below are net of expenses that have been allocated to the business segments. We periodically review these allocations and adjust them based upon changes in business circumstance. Intersegment transactions are recorded at normal profit margins. All intercompany balances and transactions have been eliminated.

The following tables provide financial information by business segment and unallocated corporate expenses for the periods ended July 31, 2026 and 2025 (in thousands):

O. New Accounting Standards

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)," which requires public business entities to provide disclosure of additional information about certain identified costs and expenses on both an interim and annual basis. In January 2025, the FASB issued ASU 2025-01, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40); Clarifying the Effective Date," which provided clarification regarding the effective dates of annual and interim disclosure requirements presented in ASU 2024-03. Upon consideration of the clarification in 2025-01, the guidance in ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning within annual reporting periods beginning after December 15, 2027. The Company will adopt this standard in fiscal year 2028 for annual disclosures and fiscal year 2029 for interim disclosures. The Company is evaluating the full extent of the potential impact of the adoption of this standard but does not expect the adoption of this standard to have a significant impact on the Company's consolidated financial position or results of operations.