FinanceLooker

Excrept from filing document 2024-04-30

s assessment of the effectiveness of its internal control over financial reporting under Section 404 b of the Sarbanes Oxley Act 15 U S C 7262 b by the registered public accounting firm that prepared or issued its audit report
The aggregate market value of shares of voting stock held by non affiliates of the registrant was approximately 26 982 424 based on the last reported sale price of the registrant s Common Stock on October 31 2023 the last business day of the registrant s most recently completed second fiscal quarter Only shares beneficially owned by directors and executive officers of the registrant excluding shares subject to options and each person owning more than 5 of the outstanding Common Stock of the registrant were excluded in that such persons may be deemed to be affiliates This determination of affiliate status is not necessarily a conclusive determination for other purposes As of June 24 2024 the registrant had outstanding 2 840 143 shares of Common Stock
DOCUMENTS INCORPORATED BY REFERENCE Those portions of the Company s proxy statement for use in connection with Kewaunee Scientific Corporation s annual meeting of stockholders to be held on August 28 2024 indicated in this report are incorporated by reference into Part III hereof
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 risks associated with our ability to identify and complete strategic acquisitions or to successfully integrate any businesses that we may acquire 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 a difference are described under the caption Risk Factors in
of this Annual Report 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
Kewaunee Scientific Corporation the Company was founded in 1906 incorporated in Michigan in 1941 became publicly held in 1968 and was reincorporated in Delaware in 1970 Our principal business is the design manufacture and installation of laboratory healthcare and technical furniture and infrastructure products Our products include steel and wood casework fume hoods adaptable modular systems moveable workstations stand alone benches biological safety cabinets and epoxy resin work surfaces and sinks
Our products are sold primarily through purchase orders and contracts submitted by customers through our dealers our subsidiaries in Singapore and India and a national distributor Products are sold principally to pharmaceutical biotechnology industrial chemical and commercial research laboratories educational institutions healthcare institutions governmental entities and manufacturing facilities We consider the markets in which we compete to be highly competitive with a significant amount of the business involving competitive public bidding
It is common in the laboratory and healthcare furniture industries for customer orders to require delivery at extended future dates as products are frequently installed in buildings yet to be constructed Changes or delays in building construction may cause delays in delivery of the orders and our recognition of the sale Since prices are normally quoted on a firm basis in the industry we bear the burden of possible increases in labor and material costs between quotation of an order and delivery of the product The impact of such possible increases is considered when determining the sales price The primary raw materials and products manufactured by others and used by us in our products are cold rolled carbon and stainless steel hardwood lumber and plywood paint chemicals resins hardware plumbing and electrical fittings Such materials and products are purchased from multiple suppliers and are typically readily available
Our need for working capital and our credit practices are comparable to those of other companies manufacturing selling and installing similar products in similar markets Since our products are used in building construction projects in many cases payments for our products are received over longer periods of time than payments for many other types of manufactured products thus requiring increased working capital In addition payment terms associated with certain projects provide for a retention amount until final completion of the project thus also increasing required working capital On average payments for our products are received during the quarter following shipment with the exception of the retention amounts which are collected at the final completion of the project
We hold various patents and patent rights but do not consider that our success or growth is dependent upon our patents or patent rights Our business is not dependent upon licenses franchises concessions trademarks royalty agreements or labor contracts
Our business is not generally cyclical although domestic sales are sometimes lower during our third quarter because of slower construction activity in certain areas of the country during the winter months Sales for two of the Company s domestic dealers and our national stocking distributor represented in the aggregate approximately 42 and 35 of the Company s sales in fiscal years 2024 and 2023 respectively Loss of all or part of our sales to a large customer would have a material effect on our financial operations
Our order backlog at April 30 2024 was 155 6 million as compared to 147 9 million at April 30 2023 Based on scheduled shipment dates and past experience we estimate that not less than 88 of our order backlog at April 30 2024 will be shipped during fiscal year 2025 However it may be expected that delays in shipments will occur because of customer rescheduling or delay in completion of projects which involve the installation of our products
We consider the industries in which we participate to be highly competitive and believe that the principal deciding factors are price product performance and customer service A significant portion of our business is based upon competitive public bidding
The amount spent and expensed by us during the fiscal year ended April 30 2024 on research and experimentation expenditures activities related to new or redesigned products was 920 000 The amount spent for similar purposes in the fiscal year ended April 30 2023 was 1 012 000
In the last two fiscal years compliance with federal state or local provisions enacted or adopted regulating the discharge of materials into the environment has had no material effect on us and such regulation is not expected to have a material effect on our earnings or competitive position in the future
At April 30 2024 the Company had 556 Domestic employees and 450 International employees Our people are critical for our continued success so we work hard to create an environment where employees can have fulfilling careers and be happy healthy and productive We offer competitive benefits and programs to take care of the diverse needs of our employees and their families including opportunities for career growth and development resources to support their financial health and access to excellent healthcare choices and resources including access to an onsite medical clinic and separate gym facility and regular access to onsite specialists Our competitive compensation programs help us to attract and retain top candidates and we will continue to invest in recruiting talented people to technical and non technical roles and rewarding them well
The Company believes that open and honest communication among team members managers and leaders helps create a collaborative work environment where everyone can contribute grow and succeed Team members are encouraged to come to their managers with questions feedback or concerns and the Company conducts surveys that gauge employee engagement
When necessary we contract with businesses around the world to provide specialized services where we do not have appropriate in house expertise or resources We also contract with temporary staffing agencies when we need to cover short term leaves when we have spikes in business needs or when we need to quickly incubate special projects We choose our partners and staffing agencies carefully and continually make improvements to promote a respectful and positive working environment for everyone employees vendors and temporary staff alike
Company Kewaunee Scientific Corporation P O Box 1842 Statesville NC 28687 1842 The public may also obtain information on our reports proxy and information statements at the Securities and Exchange Commission SEC Internet site
You should carefully consider the following risks before you decide to buy shares of our common stock If any of the following risks actually occur our business results of operations or financial condition would likely suffer In such case the trading price of our common stock would decline and you may lose all or part of the money you paid to buy our stock
This and other public reports may contain forward looking statements based on current expectations assumptions estimates and projections about us and our industry These forward looking statements involve risks and uncertainties Our actual results could differ materially from those forward looking statements as a result of many factors including those more fully described below and elsewhere in our public reports We do not undertake to update publicly any forward looking statements for any reason even if new information becomes available or other events occur in the future
We have substantial sales to three of our domestic channel partners The combined sales to two dealers and our national stocking distributor accounted for approximately 42 of our sales in fiscal year 2024 Loss of all or a part of our sales to a large channel partner would have a material effect on our revenues and profits until an alternative channel partner could be developed
We rely on the talents and efforts of key management and our Associates If we are unable to retain or motivate key personnel hire qualified personnel or maintain and continue to adapt our corporate culture we may not be able to grow or operate effectively
Our performance largely depends on the talents and efforts of our Associates Our ability to compete effectively and our future success depends on our continuing to identify hire develop motivate and retain key management and highly skilled personnel for all areas of our organization In addition our total compensation program may not always be successful in attracting new employees and retaining and motivating our existing employees Restrictive immigration policy and regulatory changes may also affect our ability to hire mobilize or retain some of our global talent
In addition we believe that our corporate culture fosters innovation creativity and teamwork As our organization grows and evolves we may need to implement more complex organizational management structures or adapt our corporate culture and work environments to ever changing circumstances such as during times of a natural disaster or pandemic and these changes could affect our ability to compete effectively or have an adverse effect on our corporate culture With the constant evolution of workforce dynamics if we do not manage these changes effectively it could materially adversely affect our culture reputation and operational flexibility
Failing to anticipate the need for and appropriately invest in information technology and logistical resources necessary to support our business including managing the costs associated with such resources
We and our global supply chain are exposed to information technology system failures or network disruptions caused by natural disasters accidents power disruptions telecommunications failures acts of terrorism or war computer viruses physical or electronic break ins ransomware or other cybersecurity incidents or other events or disruptions System redundancy and other continuity measures may be ineffective or inadequate and our or our vendors business continuity and disaster recovery planning may not be sufficient for all eventualities Such failures or disruptions can adversely impact our business by among other things
preventing access to our cloud based systems interfering with customer transactions or impeding the manufacturing and shipping of our products These events could materially adversely affect our business reputation results of operations and financial condition
We collect process store and transmit large amounts of data and it is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure Our information technology systems are essential to our efforts to manufacture our products process customer sales transactions manage inventory levels conduct business with our suppliers and other business partners and record summarize and analyze the results of our operations These systems contain among other things material operational financial and administrative information related to our business As with most companies there will always be some risk of physical or electronic break ins computer viruses or similar disruptions
In addition we like all entities are the target of cybercriminals who attempt to compromise our systems From time to time we experience threats and intrusions that may require remediation to protect sensitive information including our intellectual property and personal information and our overall business Any physical or electronic break in computer virus cybersecurity attack or other security breach or compromise of the information handled by us or our service providers may jeopardize the security or integrity of information in our computer systems and networks or those of our customers and cause significant interruptions in our and our customers operations
Any systems and processes that we have developed that are designed to protect customer associate and vendor information and intellectual property and to prevent data loss and other security attacks cannot provide absolute security In addition we may not successfully implement remediation plans to address all potential exposures It is possible that we may have to expend additional financial and other resources to address these problems Failure to prevent or mitigate data loss or other security incidents could expose us or our customers associates and vendors to a risk of loss or misuse of such information cause customers to lose confidence in our data protection measures damage our reputation adversely affect our operating results or result in litigation or potential liability for us
Additionally we expect to continue to make investments in our information technology infrastructure The implementation of these investments may be more costly or take longer than we anticipate or could otherwise adversely affect our business operations which could negatively impact our financial position results of operations or cash flows
Because of its inherent limitations internal controls over financial reporting may not prevent or detect material misstatements in the Company s consolidated financial statements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
While our Board of Directors authorized a share repurchase program that does not have an expiration date the program does not obligate us to acquire any particular amount of Common Stock and it may be terminated at any time We cannot guarantee that the program will be fully consummated that it will enhance long term stockholder value or that it will successfully mitigate the dilutive effect of employee equity awards Any repurchases will reduce the amount of cash we have available to fund working capital capital expenditures strategic acquisitions or business opportunities and other general corporate requirements In addition the program could affect the trading price of our Common Stock and increase volatility and any announcement of a termination of this program may result in a decrease in the trading price of our Common Stock
During fiscal year 2024 33 of our revenues were derived from sales outside of the United States A key element of our growth strategy is to expand our worldwide customer base and our international operations Operating in international markets requires significant resources and management attention and subjects us to regulatory economic and political risks that are different from those in the United States We cannot assure you that our expansion efforts into other international markets will be successful Our experience in the United States and other international markets in which we already have a presence may not be relevant to our ability to expand in other emerging markets Our international expansion efforts may not be successful in creating further demand for our products outside of the United States or in effectively selling our products in the international markets we enter
We face a variety of competition in all of the markets in which we participate Competitive pricing including price competition or the introduction of new products could have material adverse effects on our revenues and profit margins
Our ability to compete effectively depends to a significant extent on the specification or approval of our products by architects engineers and customers If a significant segment of those communities were to decide that the design materials manufacturing testing or quality control of our products is inferior to that of any of our competitors our sales and profits would be materially and adversely affected
It is common in the laboratory and healthcare furniture industries for customers to require delivery at extended future dates as products are frequently installed in buildings yet to be constructed Since prices are normally quoted on a firm basis in the industry we bear the burden of possible increases in labor and material costs between the quotation of an order and the delivery of the products Our principal raw materials are steel including stainless steel wood and epoxy resin Numerous factors beyond our control such as general economic conditions competition worldwide demand labor costs energy costs and import duties and other trade restrictions influence prices for our raw materials We have not always been able and in the future we might not be able to increase our product prices in amounts that correspond to increases in costs of raw materials Where we are not able to increase our prices increases in our raw material costs will adversely affect our profitability
We have little control over the timing of shipping customer orders as customers required delivery dates are subject to change by the customer Construction delays and customer changes to product designs are among the factors that may delay the start of manufacturing Weather conditions such as unseasonably warm cold or wet weather can also affect and sometimes delay projects Political and economic events can also affect our revenues When sales do not meet our expectations our operating results will be reduced for the relevant quarters
Our principal markets are in the laboratory and healthcare building construction industry This industry is subject to significant volatility due to various factors none of which is within our control Declines in construction activity or demand for our products could materially and adversely affect our business and financial condition
We face numerous manufacturing and supply chain risks In addition our reliance upon sole or limited sources of supply for certain materials components and services could cause production interruptions delays and inefficiencies
We purchase materials components and equipment from third parties for use in our manufacturing operations Our results of operations could be adversely impacted if we are unable to adjust our purchases to reflect changes in customer demand and market fluctuations Suppliers may extend lead times limit supplies or increase prices If we cannot purchase sufficient products at competitive prices and of sufficient quality on a timely enough basis to meet increasing demand we may not be able to satisfy market demand product shipments may be delayed our costs may increase or we may breach out contractual commitments and incur liabilities
In addition some of our businesses purchase certain required products from sole or limited source suppliers for reasons of quality assurance regulatory requirements cost effectiveness availability or uniqueness of design If these or other suppliers encounter financial operating or other difficulties or if our relationship with them changes we might not be able to quickly establish or qualify replacement sources of supply The supply chains for our businesses have been impacted in the past by factors outside our control and could be disrupted in the future for such reasons as supplier capacity constraints supplier bankruptcy or exiting of the business for other reasons decreased availability of key raw materials or commodities and external events such as natural disasters pandemics or other public health problems war terrorist actions governmental actions and legislative or regulatory changes Any of these factors could result in production interruptions delays extended lead times and inefficiencies
Our revenues and other operating results depend in large part on our ability to manufacture our products in sufficient quantities and in a timely manner Any interruptions we experience in the manufacture of our products or changes to the way we manufacture products could delay our ability to recognize revenues in a particular period In addition we must maintain sufficient production capacity in order to meet anticipated customer demand which carries fixed costs that we may not be able to offset because we cannot always immediately adapt our production capacity and related cost structures to changing market conditions which would adversely affect our operating margins If we are unable to manufacture our products consistently in sufficient quantities and on a timely basis our revenues gross margins and our other operating results will be materially and adversely affected
The financial markets in the United States Europe and Asia have in the past been and may in the future be volatile The tightening of credit in financial markets worsening of economic conditions a prolonged global national or regional economic recession or other similar events could have a material adverse effect on the demand for our products and on our sales pricing and profitability We are unable to predict the likely occurrence or duration of these adverse economic conditions and the impact these events may have on our operations and the end users who purchase our products
International laws and regulations construction customs standards techniques and methods differ from those in the United States Significant challenges of conducting business in foreign countries include among other factors geopolitical tensions local acceptance of our products political instability currency controls changes in import and export regulations changes in tariff and freight rates and fluctuations in foreign exchange rates
The effects of geopolitical instability including as a result of Russia s invasion of Ukraine may adversely affect us and heighten significant risks and uncertainties for our business with the ultimate impact dependent on future developments which are highly uncertain and unpredictable
Ongoing geopolitical instability could negatively impact the global and U S economies in the future including by causing supply chain disruptions rising energy costs volatility in capital markets and foreign currency exchange rates rising interest rates and heightened cybersecurity risks The extent to which such geopolitical instability adversely affects our business financial condition and results of operations as well as our liquidity and capital profile is highly uncertain and unpredictable If geopolitical instability adversely affects us it may also have the effect of heightening other risks related to our business
In response to the military conflict between Russia and Ukraine that began in February 2022 the United States and other North Atlantic Treaty Organization member states as well as non member states announced targeted economic sanctions on Russia The long term impact on our business resulting from the disruption of trade in the region caused by the conflict and associated sanctions and boycotts is uncertain at this time due to the fluid nature of the ongoing military conflict and response The potential impacts include supply chain and logistics disruptions financial impacts including volatility in foreign exchange and interest rates increased inflationary pressure on raw materials and energy and other risks including an elevated risk of cybersecurity threats and the potential for further sanctions
We cannot predict the extent to which the U S or other countries will impose quotas duties tariffs taxes or other similar restrictions upon the import or export of our products or raw materials in the future nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business Changes in U S trade policy could result in one or more foreign governments adopting responsive trade policies making it more difficult or costly for us to import our products or raw materials from those countries This together with tariffs already imposed or that may be imposed in the future by the U S could require us to increase prices to our customers which may reduce demand or if we are unable to increase prices result in lowering our margin on products sold The adoption and expansion of trade restrictions the occurrence of a trade war or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products our costs our customers our suppliers and the U S economy which in turn could have a material adverse effect on our business financial condition and results of operations
We are subject to laws regulations and other measures that govern a wide range of topics including those related to matters beyond our core products and services For instance new laws regulations policies and international accords relating to ESG matters including sustainability climate change human capital and diversity are being developed and formalized in Europe the U S and elsewhere which may entail specific target driven frameworks and or disclosure requirements The implementation of these may require considerable investments Any failure or perceived failure by us to adhere to any public statements or initiatives comply with federal state or international environmental social and governance laws and regulations or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and could materially adversely affect the Company s business reputation results of operations financial condition and stock price
The trading price of our Common Stock could be subject to wide fluctuations in response to quarter to quarter variation in operating results announcement of technological innovations or new products by us or our competitors general conditions in the construction and construction materials industries relatively low trading volume in our common stock and other events or factors In addition in recent years the stock market has experienced extreme price fluctuations This volatility has had a substantial effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of those companies Securities market fluctuations may adversely affect the market price of our common stock
In order to raise additional capital we may in the future without stockholder approval issue additional shares of our common stock or securities convertible into or exchangeable for our common stock for various considerations including in connection with acquisitions financing or refinancing transactions or otherwise The consideration that we receive for any such additional shares of our common stock may represent per share amounts that are greater or lesser than the price per share paid by you Any such issuances of additional shares of our common stock or securities convertible into shares of common stock will dilute our stockholders overall existing ownership in us and could make our stock less attractive to investors which may result in a material adverse effect on the trading price of our common stock
We currently and may in the future have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation FDIC the loss of which would have a severe negative effect on our operations and liquidity
We may maintain our cash assets at financial institutions in the U S in amounts that may be in excess of the FDIC insurance limit of 250 000 Actual events involving limited liquidity defaults non performance or other adverse developments that affect financial institutions transactional counterparties or other companies in the financial services industry of the financial services industry generally or concerns or rumors about any events of these kinds or other similar risks have in the past and may in the future lead to market wide liquidity problems In the event of a failure or liquidity issues of or at any of the financial institutions where we maintain our deposits or other assets we may incur a loss to the extent such loss exceeds the FDIC insurance limitation which could have a material adverse effect upon our liquidity financial condition and our results of operations
Similarly if our customers or partners experience liquidity issues as a result of financial institution defaults or non performance where they hold cash assets their ability to pay us may become impaired and could have a material adverse effect on our results of operations including the collection of accounts receivable and cash flows
Investor concerns regarding the U S or international financial systems could result in less favorable commercial financing terms including higher interest rates or costs and tighter financial and operating covenants or systemic limitations on access to credit and liquidity sources thereby making it more difficult for us to acquire financing on terms favorable to us or at all and could have material adverse impacts on our liquidity our business financial condition or results of operations and our prospects
While we believe we successfully navigated the risks associated with the COVID 19 pandemic and were able to successfully maintain our business operations the extent of the impact of future COVID 19 variations or other pandemics on our business and financial results is by nature of this type of event highly uncertain The sweeping nature of pandemics makes it extremely difficult to predict how and to what extent our business and operations could be affected in the long run Our workforce and the workforce of our vendors service providers and counterparties could be affected by a pandemic which could result in an adverse impact on our ability to conduct business No assurance can be given that the actions we take to protect our Associates and our operations will be sufficient nor can we predict the level of disruption that could occur to our employees ability to provide customer support and service New processes procedures and controls may be required to respond to any changes in our business environment Further should any key employees become ill during the course of a future health event and be unable to work our ability to operate our internal controls may be adversely impacted
Severe disruptions to and instability in the global financial markets and deterioration in credit and financing conditions which could affect our access to capital necessary to fund business operations or current investment and growth strategies
From time to time we consider and in the future may pursue strategic acquisitions of businesses in support of our growth strategy If we are unable to complete acquisitions or successfully integrate and develop acquired businesses we could experience material adverse impacts to our financial results as a result of any of the following
The Company s cybersecurity risk management program is integrated into the overall risk management framework including risk identification assessment and mitigation across all business areas We have collaborated with external consultants and built a cybersecurity program designed to protect and safeguard the integrity of our information systems which aligns with industry best practices and regulatory requirements Our cybersecurity program includes systems and processes for assessing identifying and managing material risks from cybersecurity threats and include maintenance and monitoring of information security policies aligned with information technology controls information systems configuration management and infrastructure security systems We also have implemented processes to oversee and identify such risks from cybersecurity threats associated with the use of third party service providers We conduct periodic testing of these controls and systems including vulnerability scanning and penetration testing We strive to foster a shared responsibility for the Company s cybersecurity with all of our employees conducting periodic phishing simulation campaigns and providing regular mandatory cybersecurity training Additionally we maintain cyber insurance coverage including protection against social engineering fraud to further mitigate potential financial losses from cybersecurity incidents
We currently do not believe that any risks from cybersecurity threats including as a result of any previous cybersecurity incidents have materially affected or are reasonably likely to materially affect the Company including its business strategy results of operations or financial conditions While we do not believe that any such risks have yet to materially affect the Company the Company cannot guarantee that its ongoing and robust approach towards cybersecurity will be able to prevent all cybersecurity incidents that could have a material effect on the Company in the future See
On behalf of the Board of Directors the Audit Committee provides oversight of the Company s management of cybersecurity risk They periodically review and discuss with management including the Company s Vice President of Information Technology and Engineering the Company s significant financial risk exposures for matters related to cybersecurity risk including the steps management has taken to monitor and manage such exposures The Board of Directors also receives prompt and timely information regarding any cybersecurity incident that meets established reporting thresholds as well as ongoing updates regarding any such incident until it has been addressed
The Company s Vice President of Information Technology and Engineering leads the overall cybersecurity strategy and risk management program This includes overseeing risk assessments developing security policies and procedures and managing the IT security team See
We lease and operate three adjacent manufacturing facilities in Statesville North Carolina These facilities also house our corporate offices as well as sales and marketing administration engineering and drafting personnel These facilities together comprise 414 000 square feet and are located on 20 acres of land On March 24 2022 we entered into a Sale Leaseback Arrangement defined below pursuant to which we sold and now lease our manufacturing and office facilities in Statesville North Carolina See
of this Annual Report on Form 10 K for information concerning the Sale Leaseback Arrangement In addition we lease our primary distribution facility and other warehouse facilities totaling 366 000 square feet in Statesville North Carolina We also lease an office facility in Charlotte North Carolina In Bangalore India we lease and operate a manufacturing facility comprising 119 000 square feet Our international sales and administrative offices are located in Singapore India and Saudi Arabia We believe our facilities are suitable for their respective uses and are adequate for our current needs
From time to time we are involved in disputes and litigation relating to claims arising out of our operations in the ordinary course of business Further we are periodically subject to government audits and inspections We believe that any such matters presently pending will not individually or in the aggregate have a material adverse effect on our results of operations or financial condition
As of June 24 2024 there were 90 stockholders of record 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
Kewaunee Scientific Corporation is a recognized leader in the design manufacture and installation of laboratory healthcare and technical furniture products The Company s corporate headquarters are located in Statesville North Carolina Sales offices are located in the United States India Saudi Arabia and Singapore Three manufacturing facilities are located in Statesville serving the domestic and international markets and one manufacturing facility is located in Bangalore India serving the local Asian and African markets Kewaunee Scientific Corporation s website is located at
Our products are sold primarily through purchase orders and contracts submitted by customers through our dealers our subsidiaries in Singapore and India and a national distributor Products are sold principally to pharmaceutical biotechnology industrial chemical and commercial research laboratories educational institutions healthcare institutions governmental entities manufacturing facilities and users of networking furniture We consider the markets in which we compete to be highly competitive with a significant amount of the market requiring competitive public bidding
It is common in the laboratory and healthcare furniture industries for customer orders to require delivery at extended future dates as products are frequently to be installed in buildings yet to be constructed Changes or delays in building construction may cause delays in delivery of the orders and our recognition of the sale Since prices are normally quoted on a firm basis in the industry we bear the burden of possible increases in labor and material costs between quotation of an order and delivery of the product The impact of such possible increases is considered when determining the sales price The principal raw materials and products manufactured by others used in our products are cold rolled carbon and stainless steel hardwood lumbers and plywood paint chemicals resins hardware plumbing and electrical fittings Such materials and products are purchased from multiple suppliers and are typically readily available
In the ordinary course of business we have made estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the United States of America Actual results could differ significantly from those estimates We believe that the following discussion addresses our most critical accounting estimates which are those that are most important to the portrayal of our financial condition and results of operations and require management s most difficult subjective and complex judgments often as a result of the need to make estimates about the effect of matters that are inherently uncertain
Evaluation of the allowance for credit losses involves management judgments and estimates We evaluate the collectability of our trade accounts receivable based on a number of factors In circumstances where management is aware of a customer s inability to meet its financial obligations to us or a project dispute makes it unlikely that the outstanding amount owed by a customer will be collected a specific reserve for bad debts is estimated and recorded to reduce the recognized receivable to the estimated amount we believe will ultimately be collected In addition to specific customer identification of potential bad debts a reserve for credit losses is estimated and recorded based on our recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding
The Company s domestic operations are self insured for employee health care costs The Company has purchased specific stop loss insurance policies to limit claims above a certain amount Estimated medical costs were accrued for claims incurred but not reported using assumptions based upon historical loss experiences The Company s exposure reflected in the self insurance reserves varies depending upon market conditions in the insurance industry availability of cost effective insurance coverage and actual claims versus estimated future claims
We are subject to income taxes in the U S federal and state and foreign jurisdictions Tax laws regulations administrative practices and interpretations in various jurisdictions may be subject to significant change with or without notice due to economic political and other conditions and significant judgment is required in evaluating and estimating our provision and accruals for these taxes In addition our actual and forecasted earnings are subject to change due to economic political and other conditions
Our effective tax rates could be affected by numerous factors such as changes in our business operations acquisitions investments entry into new businesses and geographies intercompany transactions the relative amount of our foreign earnings including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in
jurisdictions where we have higher statutory rates losses incurred in jurisdictions for which we are not able to realize related tax benefits the applicability of special tax regimes changes in foreign currency exchange rates changes to our forecasts of income and loss and the mix of jurisdictions to which they relate changes in our deferred tax assets and liabilities their valuation and the assumptions around their realization in connection with any associated valuation and interpretations related to tax laws and accounting rules in various jurisdictions
Sales for fiscal year 2024 were 203 8 million a decrease compared to fiscal year 2023 sales of 219 5 million Domestic Segment sales for fiscal year 2024 were 137 2 million a decrease of 6 5 compared to fiscal year 2023 sales of 146 7 million The decrease in Domestic sales was predominantly related to the reduction in non product revenue related to the Company s decision to stop selling directly to end users This revenue typically includes freight installation services and buyouts International Segment sales for fiscal year 2024 were 66 5 million a decrease of 8 6 from fiscal year 2023 sales of 72 8 million International sales decreased when compared to the prior year period due to the delivery of several large projects in the comparable prior year period that were booked in earlier fiscal years
Gross profit represented 25 5 and 16 2 of sales in fiscal years 2024 and 2023 respectively The increase in gross profit margin percentage is primarily being generated from Domestic operations Specifically the increase is primarily driven by improved manufacturing productivity cost containment actions and the pricing of new orders in response to higher raw material input costs when compared to the prior year
Operating expenses were 33 8 million and 30 2 million in fiscal years 2024 and 2023 respectively and 16 6 and 13 8 of sales respectively The increase in operating expenses in fiscal year 2024 as compared to fiscal year 2023 was primarily due to increases in SG A wages benefits incentive and stock based compensation of 2 572 000 corporate governance expenses of 170 000 depreciation expense of 164 000 bad debt expense of 156 000 and increases in international operating expenses of 616 000 partially offset by decreases in consulting and professional services of 557 000
Pension expense was 4 177 000 and 71 000 in fiscal years 2024 and 2023 respectively The increase in pension expense was due to the Company successfully annuitizing its pension obligation which had been in a frozen state since 2005 Terminating the pension resulted in a one time expense of 4 019 000 for accounting losses that were being amortized from the Balance Sheet based on an annual evaluation of the pension plan By annuitizing the pension obligation the Company has eliminated all future responsibility for the plan and future administrative costs associated with maintaining and managing the pension plan
Other income net was 814 000 and 939 000 in fiscal years 2024 and 2023 respectively The decrease in other income in fiscal year 2024 was primarily due to the elimination of interest income earned from the Note Receivable related to the Sale Leaseback financing transaction that was settled in the prior year partially offset by interest earned on the increased Domestic cash balances and increased interest on International cash balances when compared to the prior fiscal year See
Income tax benefit was 5 9 million for fiscal year 2024 or 45 3 of pretax earnings as compared to income tax expense of 3 1 million for fiscal year 2023 or 69 8 of pretax earnings The income tax benefit for fiscal year 2024 is primarily due to the favorable impact of the reduction of the Domestic valuation allowance of 6 6 million that was required to be established in fiscal year 2020 per ASC 740 and 3 9 million related to prior years unrecognized tax benefits related to the settlement of the Company s domestic pension plans Income tax expense for fiscal year 2024 excluding these one time benefits is 4 5 million or 34 4 of pretax earnings At April 30 2024 the Company has a Domestic valuation allowance of 808 000 for specific federal and state tax credits as compared to 8 5 million for the Company s Domestic net deferred tax assets at April 30 2023 See
The effective tax rate for fiscal year 2023 was unfavorably impacted by the increase in the valuation allowance attributable to changes to Internal Revenue Code Section 174 Research and Experimental Expenditures which became effective during the fiscal year The primary impact of this change was the amortization of current year expenditures over a five year period as compared to prior fiscal years where research expenditures were deductible in the year incurred
Net earnings attributable to the non controlling interest related to our subsidiaries that are not 100 owned by the Company were 304 000 and 621 000 for fiscal years 2024 and 2023 respectively The changes in the net earnings attributable to the non controlling interest for each year were due to changes in the levels of net income of the subsidiaries
Net earnings were 18 753 000 or 6 38 per diluted share as compared to 738 000 or 0 25 per diluted share for fiscal years ended April 30 2024 and April 30 2023 respectively The increase in net earnings was attributable to the factors discussed above
Our principal sources of liquidity have historically been funds generated from operating activities supplemented as needed by borrowings under our revolving credit facility Additionally certain machinery and equipment are financed by non cancelable operating and financing leases We believe that these sources of funds will be sufficient to support ongoing business requirements including capital expenditures through fiscal year 2025
of this Annual Report for additional information concerning our credit facility In fiscal year 2022 we executed a Sale Leaseback financing transaction with respect to our manufacturing and corporate facilities in Statesville North Carolina to provide additional liquidity See
The Company s operating activities provided cash of 19 564 000 in fiscal year 2024 primarily from operations and decreases in receivables of 741 000 decreases in inventories of 1 210 000 increases in accounts payable and accrued expenses of 691 000 and increases in deferred revenue of 277 000 Operating activities used cash of 3 790 000 in fiscal year 2023 primarily for increases in receivables of 4 947 000 and decreases in accounts payable and accrued expenses of 5 558 000 partially offset by cash from operations decreases in inventories of 1 907 000 and increases in deferred revenue of 568 000
The Company s financing activities used cash of 3 014 000 during fiscal year 2024 as a result of the net decrease in short term borrowings of 488 000 repayments on our financing liability of 642 000 and the repurchase of outstanding shares as part of our announced share repurchase program for 1 998 000 partially offset by net proceeds from long term debt of 114 000 The Company s financing activities provided cash of 14 931 000 during fiscal year 2023 from proceeds of 13 629 000 from the Sale Leaseback transaction and proceeds from the net increase in short term borrowings of 1 998 000 partially offset by repayment of long term debt of 121 000
The majority of the April 30 2024 accounts receivable balances are expected to be collected during the first quarter of fiscal year 2025 with the exception of retention amounts on fixed price contracts which are collected when the entire construction project is completed and all retention funds are paid by the owner
Capital expenditures were 4 373 000 and 4 148 000 in fiscal years 2024 and 2023 respectively Capital expenditures in fiscal year 2024 were funded primarily from financing activities Fiscal year 2025 capital expenditures are anticipated to be approximately 4 0 million The fiscal year 2025 expenditures are expected to be funded primarily by operating activities supplemented as needed by borrowings under our revolving credit facility
Working capital was 56 0 million at April 30 2024 up from 47 9 million at April 30 2023 and the ratio of current assets to current liabilities was 2 4 to 1 0 at April 30 2024 up from a ratio of 2 2 to 1 0 at April 30 2023
No dividends were declared or paid on the Company s common stock during the last two fiscal years 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 condition 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
The Company s 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 Company s products is also dependent upon the number of laboratory and healthcare construction projects planned and or current progress in projects already under construction The Company s earnings are also impacted by fluctuations in prevailing pricing for projects in the laboratory construction marketplace and costs of raw materials including steel wood and epoxy resin
The Company is operating more efficiently than in the past due to its ability to focus solely 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
We are exposed to market risk in the area of interest rates This exposure is associated with balances outstanding under our revolving credit facility and certain lease obligations for production machinery all of which are priced on a floating rate basis We had 3 million outstanding under our revolving credit facility at April 30 2024 bearing interest at floating rates We believe that our current exposure to interest rate market risk is not material
Our results of operations could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets We derive net sales in U S dollars and other currencies including Indian rupees Singapore dollars and other currencies For fiscal year 2024 29 of net sales were derived in currencies other than U S dollars We incur expenses in currencies other than U S dollars relating to specific contracts with customers and for our operations outside the U S
Over the long term net sales to international markets may increase as a percentage of total net sales and consequently a greater portion of our business could be denominated in foreign currencies As a result operating results may become more subject to fluctuations based upon changes in the exchange rates of certain currencies in relation to the U S dollar To the extent we engage in international sales denominated in U S dollars an increase in the value of the U S dollar relative to foreign currencies could make our products less competitive in international markets This effect is also impacted by costs of raw materials from international sources and costs of our sales service and manufacturing locations outside the U S
We have foreign currency cash accounts to operate our global business These accounts are impacted by changes in foreign currency rates Cash balances at April 30 2024 of 11 2 million were held by our foreign subsidiaries and denominated in currencies other than U S dollars
We have audited the accompanying consolidated balance sheets of Kewaunee Scientific Corporation the Company as of April 30 2024 and 2023 the related consolidated statements of operations comprehensive income stockholders equity and cash flows for each of the years in the two year period ended April 30 2024 and the related notes collectively referred to as the financial statements In our opinion the financial statements referred to above present fairly in all material respects the financial position of the Company as of April 30 2024 and 2023 and the results of its operations and its cash flows for each of the years in the two year period ended April 30 2024 in conformity with accounting principles generally accepted in the United States of America
We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud The Company is not required to have nor were we engaged to perform an audit of its internal control over financial reporting As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control over financial reporting Accordingly we express no such opinion
Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures include examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that 1 relate to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments We determined that there are no critical audit matters
Kewaunee Scientific Corporation and subsidiaries collectively the Company design manufacture and install laboratory healthcare and technical furniture products The Company s products include steel and wood casework fume hoods adaptable modular systems moveable workstations stand alone benches biological safety cabinets and epoxy resin work surfaces and sinks The Company s sales are made through purchase orders and contracts submitted by customers through its dealers its subsidiaries in Singapore and India and a national stocking distributor The majority of the Company s products are sold to customers located in North America primarily within the United States The Company s laboratory products are used in chemistry physics biology and other general science laboratories in the pharmaceutical biotechnology industrial chemical commercial educational government and health care markets Technical products are used in facilities manufacturing computers and light electronics and by users of computer and networking furniture
The Company s consolidated financial statements include the accounts of Kewaunee Scientific Corporation and its international subsidiaries A brief description of each subsidiary along with the amount of the Company s controlling financial interests as of April 30 2024 is as follows 1 Kewaunee Labway Asia Pte Ltd a commercial sales organization for the Company s products in Singapore is 100 owned by the Company 2 Kewaunee Scientific Corporation Singapore Pte Ltd a holding company in Singapore is 100 owned by the Company 3 Kewaunee Labway India Pvt Ltd a design installation manufacturing assembly and commercial sales operation for the Company s products in Bangalore India is 94 owned by the Company 4 Koncepo Scientech International Pvt Ltd a laboratory design and strategic advisory and construction management services firm located in Bangalore India is 80 owned by the Company 5 Kequip Global Lab Solutions Pvt Ltd is 70 owned by Kewaunee Scientific Corporation Singapore Pte Ltd All intercompany balances transactions and profits have been eliminated Included in the consolidated financial statements are net assets of 18 547 000 and 16 786 000 at April 30 2024 and 2023 respectively of the Company s subsidiaries Net sales by the Company s subsidiaries in the amounts of 66 517 000 and 72 778 000 were included in the consolidated statements of operations for fiscal years 2024 and 2023 respectively
Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less During the years ended April 30 2024 and 2023 the Company had cash deposits in excess of FDIC insured limits The Company has not experienced any losses from such deposits
The Company includes restricted cash along with the cash balance for presentation in the consolidated statements of cash flows The reconciliation between the consolidated balance sheet and the consolidated statement of cash flows at April 30 is as follows
Receivables are stated at the amount owed by the customer net of allowances for estimated credit losses The Company evaluates the collectability of its trade accounts receivable based on a number of factors In circumstances where management is aware of a customer s inability to meet its financial obligations to the Company or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected a specific reserve for credit losses is estimated and recorded to reduce the recognized receivable to the estimated amount the Company believes will ultimately be collected In addition to specific customer identification of potential credit losses a reserve for credit losses is estimated and recorded based on past loss history and an overall assessment of past due trade accounts receivable amounts outstanding Accounts are written off when it is clearly established that the receivable is a bad debt Recoveries of receivables previously written off are recorded when received
Accounts receivable include unbilled receivables that represent amounts earned which have not yet been billed in accordance with contractually stated billing terms excluding retention which is included in other assets The amount of unbilled receivables net of unbilled retention at April 30 2024 and 2023 was 11 840 000 and 13 459 000 respectively
Property plant and equipment are stated at cost less accumulated depreciation Depreciation is determined for financial reporting purposes principally on the straight line method over the estimated useful lives of the individual assets or for leaseholds over the terms of the related leases if shorter Property plant and equipment consisted of the following at April 30
The Company reviews the carrying value of property plant and equipment for impairment annually or whenever changes in circumstances or events indicate that such carrying value may not be recoverable If projected undiscounted cash flows are not sufficient to recover the carrying value of the potentially impaired asset the carrying value is reduced to estimated fair value There were no impairments in fiscal years 2024 or 2023
Other assets at April 30 2024 and 2023 included 312 000 and 1 191 000 respectively of unbilled retainage 2 611 000 and 2 352 000 respectively of assets held in a trust account for non qualified benefit plan and 31 000 and 111 000 respectively of cash surrender values of life insurance policies Life insurance policies are recorded at the amount that could be realized under the insurance contract as of the date of the Company s consolidated balance sheets with the change in cash surrender or contract value being recorded as income or expense during each period
The presentation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes Actual results could differ from these estimates Significant estimates impacting the accompanying consolidated financial statements include the allowance for credit losses self insurance reserves and income taxes
On December 22 2021 the Company entered into an Agreement for Purchase and Sale of Real Property with CAI Investments Sub Series 100 LLC the Buyer for the Company s headquarters and manufacturing facilities the Property located in Statesville North Carolina the Sale Agreement in exchange for 30 275 000 in sales proceeds
The Sale Agreement was finalized on March 24 2022 and coincided with the Company and CAI Investments Medical Products I Master Lessee LLC Lessor an affiliate of the Buyer entering into a lease agreement The lease arrangement is for a 20 year term At the same time the Buyer and its affiliates formed a new debt financed affiliate CAI Investments Medical Products I DST Trust and contributed the Property to the Trust According to the terms of the lease the Trust leased the Property to its affiliated Lessor which in turn sub leased the Property to the Company together with the Sale Agreement the Sale Leaseback Arrangement The Company concluded that Parent and its direct affiliates including the Trust are designed primarily to acquire and manage the Property and constitute a variable interest entity because the Trust lacks sufficient equity on its own to finance its operations The Company concluded it should not consolidate Parent or its affiliates under the variable interest model or the voting interest model of ASC 810
A financial instrument is defined as cash equivalents evidence of an ownership interest in an entity or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from another party The Company s financial instruments consist primarily of cash and equivalents mutual funds cash surrender value of life insurance policies a sale leaseback financing liability term loans and short term borrowings The carrying value of these assets and liabilities approximate their fair value
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability an exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date Expanded disclosures about instruments measured at fair value require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value
Level 2 Inputs other than Level 1 that are observable either directly or indirectly such as quoted prices for similar assets or liabilities quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities as of the reporting date
The following tables summarize the Company s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring and nonrecurring basis as of April 30 2024 and 2023 in thousands
The Company maintains two non qualified compensation plans which include investment assets in a rabbi trust These assets consist of marketable securities which are valued using quoted market prices multiplied by the number of shares owned and life insurance policies which are valued at their cash surrender value
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products 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 Sales taxes that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales Certain customers cash discounts and volume rebates are offered as sales incentives The discounts and volume rebates are recorded as a reduction in sales at the time revenue is recognized in an amount estimated based on historical experience and contractual obligations
Deferred revenue consists of customer deposits and advance billings of the Company s products where sales have not yet been recognized Accounts receivable includes retainage in the amounts of 294 000 and 235 000 at April 30 2024 and 2023 respectively Shipping and handling costs are included in cost of product sales Because of the nature and quality of the
Company s products any warranty issues are determined in a relatively short period after the sale and are infrequent in nature and as such warranty costs are immaterial to the Company s consolidated financial position and results of operations and are expensed as incurred
The Company performs credit evaluations of its customers Revenues from three of the Company s domestic dealers represented in the aggregate approximately 45 and 36 of the Company s sales in fiscal years 2024 and 2023 respectively Accounts receivable for two domestic customers represented approximately 21 and 23 of the Company s total accounts receivable as of April 30 2024 and 2023 respectively
The Company maintains a self insured health care program The Company accrues estimated losses for claims incurred but not reported using assumptions based on historical loss experience The Company has also purchased specific stop loss insurance to limit claims above a certain amount The Company adjusts insurance reserves as needed in the event that future loss experience differs from historical loss patterns
In accordance with ASC 740 Income Taxes ASC 740 the Company uses the liability method in measuring the provision for income taxes and recognizing deferred income tax assets and liabilities on the consolidated balance sheets ASC 740 clarifies the financial statement recognition threshold and measurement attribute of a tax position taken or expected to be taken in a tax return Under AC 740 the Company evaluates the realization of all deferred income tax assets and determines if a valuation allowance is required on an annual basis Under ASC 740 the Company applies a more likely than not recognition threshold for all tax uncertainties ASC 740 only allows the recognition of those tax benefits that have a greater than 50 likelihood of being sustained upon examination by the taxing authorities The Company did not have any significant uncertain tax positions at April 30 2024 or 2023
Research and experimentation expenditures are charged to cost of products sold in the periods incurred Expenditures for research and experimentation expenditures were 920 000 and 1 012 000 for the fiscal years ended April 30 2024 and 2023 respectively
Advertising costs are expensed as incurred and include trade shows training materials sales samples and other related expenses and are included in operating expenses Advertising costs for the years ended April 30 2024 and 2023 were 336 000 and 226 000 respectively
The financial statements of subsidiaries located in India are measured using the local currency as the functional currency Effective May 1 2022 Kewaunee Scientific Corporation Singapore Pte Ltd transitioned to using the U S dollar as its functional currency The financial position and operating results of Kewaunee Labway Asia Pte Ltd are also measured using the U S dollar as its functional currency Assets and liabilities of the Company s foreign subsidiaries using local currencies are translated into United States dollars at fiscal year end exchange rates Sales expenses and cash flows are translated at weighted average exchange rates for each period Net translation gains or losses are included in other comprehensive income a separate component of stockholders equity Gains and losses from foreign currency transactions of these subsidiaries are included in operating expenses
Basic earnings per share is based on the weighted average number of common shares outstanding during the year Diluted earnings per share reflects the assumed exercise of outstanding stock options and the conversion of restricted stock units RSUs under the Company s various stock compensation plans except when RSUs and stock options have an antidilutive effect There were no antidilutive RSUs and stock options outstanding at April 30 2024 There were 33 900 antidilutive RSUs and stock options outstanding at April 30 2023
Compensation costs related to stock options and other stock awards granted by the Company are charged against operating expenses during their vesting period under ASC 718 Compensation Stock Compensation Forfeitures are accounted for in the period in which the awards are forfeited The Company granted 117 747 RSUs under the 2017 Omnibus Incentive Plan in fiscal year 2024 and 87 969 RSUs in fiscal year 2023 There were no stock options granted during fiscal years 2024 and 2023 See
In June 2016 the FASB issued ASU 2016 13 Measurement of Credit Losses on Financial Instruments which replaces the current incurred loss method used for determining credit losses on financial assets including trade receivables with an expected credit loss method This guidance is effective for fiscal years and interim periods within those years beginning after December 15 2022 The Company adopted this standard effective May 1 2023 The adoption of this standard did not have a significant impact on the Company s consolidated financial position or results of operations
In November 2023 the FASB issued ASU 2023 07 Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures which improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses This guidance is effective for fiscal years beginning after December 15 2023 and interim periods within fiscal years beginning after December 15 2024 The Company will adopt this standard in fiscal year 2025 The Company does not expect the adoption of this standard to have a significant impact on the Company s consolidated financial position or results of operations
In December 2023 the FASB issued ASU 2023 09 Income Taxes Topic 740 Improvements for Income Tax Disclosures which requires public business entities to on an annual basis 1 disclose specific categories in the rate reconciliation and 2 provide additional information for reconciling items that meet a quantitative threshold This ASU also provides for additional disclosure requirements to provide clarity for investors related to income tax disclosures This guidance is effective for annual periods beginning after December 15 2024 The Company will adopt this standard in fiscal year 2026 The Company does not expect the adoption of this standard to have a significant impact on the Company s consolidated financial position or results of operations
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
A performance obligation is a distinct good or service or bundle of goods and services that is distinct or a series of distinct goods or services that are substantially the same and have the same pattern of transfer The Company identifies performance obligations at the inception of a contract and allocates the transaction price to individual performance obligations to reasonably reflect the Company s performance in transferring control of the promised goods or services to the customer The Company has elected to treat shipping and handling as a fulfillment activity instead of a separate performance obligation
The Company principally generates revenue from the manufacture of custom laboratory healthcare and technical furniture and infrastructure products herein referred to as laboratory furniture The Company s products include steel and wood casework fume hoods adaptable modular systems moveable workstations stand alone benches biological safety cabinets and epoxy resin work surfaces and sinks Customers can benefit from each piece of laboratory furniture on its own or with resources readily available in the marketplace such as separately purchased installation services Each piece of laboratory furniture does not significantly modify or customize other laboratory furniture and the pieces of laboratory furniture are not highly interdependent or interrelated with each other The Company can and frequently does break portions of contracts into separate runs to meet manufacturing and construction schedules As such each piece of laboratory furniture is considered a separate and distinct performance obligation The majority of the Company s products are customized to meet the specific architectural design and performance requirements of laboratory planners and end users The finished laboratory furniture has no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date As such revenue from the sales of customized laboratory furniture is recognized over time once the customization process has begun using the units of production output method to measure progress towards completion There is not a material amount of work in process for which the customization process has begun at the end of a reporting period The Company believes this output method most reasonably reflects the Company s performance because it directly measures the value of the goods transferred to the customer For standardized products sold by the Company revenue is recognized when control transfers which is typically freight on board FOB shipping point
All orders contain a standard warranty that warrants that the product is free from defects in workmanship and materials under normal use and conditions for a limited period of time Due to the nature and quality of the Company s products any warranty issues have historically been determined in a relatively short period after the sale have been infrequent in nature and have been immaterial to the Company s financial position and results of operations The Company s standard warranties are not considered a separate and distinct performance obligation as the Company does not provide a service to customers beyond assurance that the covered product is free of initial defects Costs of providing these short term assurance warranties are immaterial and accordingly are expensed as incurred Extended separately priced warranties are available which can last up to ten years Extended warranties are considered separate performance obligations as they are individually priced options providing assurances that the products are free of defects
The Company sometimes performs installation services for customers The scope of installation services primarily relates to setting up and ensuring the proper functioning of the laboratory furniture In certain markets the Company may provide a broader range of installation services involving the design and installation of the laboratory s mechanical services Installation services can be and often are performed by third parties and thus may be distinct from the Company s products Installation services create or enhance assets that the customer controls as the installation services are provided As such revenue from installation services is recognized over time as the installation services are performed using the cost input method as there is a direct relationship between the Company s inputs and the transfer of control by means of the performance of installation services to the customer
It is common in the laboratory and healthcare furniture industries for customers to request delivery at specific future dates as products are often to be installed in buildings yet to be constructed Frequently customers will request the manufacture of these products prior to the customer s ability or readiness to receive the product due to various reasons such as changes to or delays in the construction of the building As such from time to time Kewaunee s customers require us to provide custodial services for their laboratory furniture Custodial services are frequently provided by third parties and do not significantly alter the other goods or services covered by the contract and as such are considered a separate and distinct performance obligation Custodial services are simultaneously received and consumed by the customer and as such revenue from custodial services is recognized over time using a straight line time based measure of progress towards completion because the Company s services are provided evenly throughout the performance period
The Company s contracts with customers are generally fixed price and do not contain variable consideration or a general right of return or refund The Company s contracts with customers contain terms typical for Kewaunee s industry including withholding a portion of the transaction price until after the goods or services have been transferred to the customer i e retainage The Company does not recognize this as a significant financing component because the primary purpose of retainage is to provide the customer with assurance that the Company will perform its obligations under the contract rather than to provide financing to the customer
The Company s contracts with customers may cover multiple goods and services such as differing types of laboratory furniture and installation services For these arrangements each good or service is evaluated to determine whether it represents a distinct performance obligation The total transaction price is then allocated to the distinct performance obligations based on their relative standalone selling price at the inception of the arrangement If available the Company utilizes observable prices for goods or services sold separately to similar customers in similar circumstances to determine its relative standalone selling price Otherwise list prices are used if they are determined to be representative of standalone selling prices If neither of these methods are available at contract inception such as when the Company does not sell the product or service separately judgment may be required and the Company determines the standalone selling price using one or a combination of the adjusted market assessment or expected cost plus margin approaches
The Company excludes from revenues taxes it collects from customers that are assessed by a government authority This is primarily relevant to domestic sales but also includes taxes on some international sales which are also excluded from the transaction price
The Company s incremental cost to obtain a contract is limited to sales commissions The Company applies the practical expedient to expense commissions as incurred for contracts having a duration of one year or less Sales commissions related to contracts with a duration of greater than one year are immaterial to the Company s consolidated financial position and results of operations and are also expensed as incurred
The closing balances of contract assets included 11 840 000 in accounts receivable and 312 000 in other current assets at April 30 2024 The opening balance of contract assets arising from contracts with customers included 13 459 000 in accounts receivable and 1 191 000 in other assets at April 30 2023 The closing and opening balances of contract liabilities included in deferred revenue arising from contracts with customers were 4 374 000 at April 30 2024 and 4 097 000 at April 30 2023 The timing of revenue recognition billings and cash collections results in accounts receivable unbilled receivables and deferred revenue which is disclosed on the consolidated balance sheets and in the notes to the 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 Accounts receivable 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 the Company performs under the contract
During the fiscal year ended April 30 2024 changes in contract assets and liabilities were not materially impacted by any other factors Approximately 100 of the contract liability balance at April 30 2024 is expected to be recognized as revenue during fiscal year 2025
At April 30 2024 and 2023 the Company s international subsidiaries inventories were 3 239 000 and 2 740 000 respectively measured using the lower of cost or net realizable value under the FIFO method and are included in the above tables
On December 19 2022 the Company entered into a Credit and Security Agreement the Credit Agreement with Mid Cap Funding IV Trust as agent the Agent and the lenders from time to time party thereto collectively the Lenders The Credit Agreement provides for a secured revolving line of credit initially up to 15 0 million the Revolving Credit Facility Availability under the Revolving Credit Facility is subject to a borrowing base calculated in accordance with the terms of the Credit Agreement and on the basis of eligible accounts and inventory and certain other reserves and adjustments Pursuant to the Credit Agreement the Company granted to the Agent for itself and the Lenders a first priority security interest in all existing and future acquired assets owned by the Company Subject to the terms of the Credit Agreement from time to time the Company may request that the initial revolving loan amount available under the Revolving Credit Facility be increased with additional tranches in minimum amounts of 1 000 000 up to a maximum borrowing availability of 30 0 million The Agent and Lenders must consent to any such increase in their sole discretion The Revolving Credit Facility matures on December 19 2025
Except as set forth in the Credit Agreement borrowings under the Revolving Credit Facility bear interest at a rate equal to Term SOFR Secured Overnight Financing Rate plus 4 10 The Company is required to make monthly interest payments on the Revolving Credit Facility with the entire principal payment due at maturity
At April 30 2024 there was 3 000 000 outstanding under the Revolving Credit Facility with remaining borrowing capacity under the Revolving Credit Facility of 11 587 000 At April 30 2023 there was 3 548 000 outstanding under the Revolving Credit Facility with remaining borrowing capacity under the Revolving Credit Facility of 10 286 000 The borrowing rate under the Revolving Credit Facility was 9 54 and 9 02 as of April 30 2024 and 2023 respectively The Company was in compliance with all financial covenants under its revolving credit facility at April 30 2024 and 2023 In addition the Company s International subsidiaries had a balance outstanding of 99 000 and 39 000 in short term borrowings related to overdraft protection and short term loan arrangements at April 30 2024 and 2023 respectively
At April 30 2024 there were foreign bank guarantees outstanding to customers in the amounts of 7 1 million 435 000 and 226 000 with expiration dates in fiscal years 2025 2026 and 2027 respectively collateralized by certain assets of the Company s subsidiaries in India At April 30 2023 there were bank guarantees issued by foreign banks outstanding to customers in the amounts of 5 2 million 142 000 3 000 and 233 000 with expiration dates in fiscal years 2024 2025 2026 and 2027 respectively collateralized by certain assets of the Company s subsidiaries in India
On December 22 2021 the Company entered into the Sale Agreement with the Buyer for the Company s headquarters and manufacturing facilities located at 2700 West Front Street in Statesville North Carolina
The Sale Agreement was finalized on March 24 2022 and coincided with the Company and the Buyer entering into the Lease Agreement The Sale Leaseback Arrangement is repayable over a 20 year term with four renewal options of five 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
as the Lease Agreement was determined to be a finance lease The Company concluded the Lease Agreement met the qualifications to be classified as 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 sales 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 related to the Sale Leaseback Arrangement under U S GAAP
As of April 30 2024 the carrying value of the financing liability was 28 133 000 net of 648 000 in debt issuance costs of which 713 000 was classified as current on the Consolidated Balance Sheet with 27 420 000 classified as long term As of April 30 2023 the carrying value of the financing liability was 28 774 000 net of 708 000 in debt issuance costs of which 642 000 was classified as current on the Consolidated Balance Sheet with 28 132 000 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
The Company will 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
Effective August 1 2019 the Company elected to revoke the indefinite reinvestment of foreign unremitted earnings position set forth by ASC 740 30 25 17 for multiple foreign subsidiaries As a result of this election the Company recorded a tax withholding expense imposed by the India Income Tax Department of 371 000 and 406 000 for the years ended April 30 2024 and 2023 respectively
The reasons for the differences between the above net income tax benefit expense and the amounts computed by applying the statutory federal income tax rate to earnings before income taxes are as follows
The Company is required to evaluate the realization of the deferred tax asset and any requirement for a valuation allowance in accordance with ASC 740 10 30 2 b This guidance provides that the future realization of the tax benefit of an existing
deductible temporary difference or carryforward ultimately depends on sufficient taxable income of the appropriate character within the carryback or carryforward period available under the tax law The Company evaluates all available evidence both positive and negative to determine the amount of any required valuation allowance As of April 30 2024 our deferred tax assets primarily related to proceeds on a prior sale leaseback and Section 174 research and expenditures addbacks A valuation allowance of 926 000 and 8 568 000 was recorded against our net deferred tax asset balance as of April 30 2024 and 2023 respectively For the year ended April 30 2024 we recorded a net decrease in valuation allowance of 6 579 000 as compared to a net increase of 1 667 000 for the year ended April 30 2023 based on management s reassessment of the amount of its deferred tax assets that are more likely than not to be realized
The Company files federal state and local tax returns with statutes of limitation generally ranging from 3 to 4 years The Company is generally no longer subject to federal tax examinations for years prior to fiscal year 2020 or state and local tax examinations for years prior to fiscal year 2019 Tax returns filed by the Company s significant foreign subsidiaries are generally subject to statutes of limitations of 3 to 7 years and are generally no longer subject to examination for years prior to fiscal year 2018 The Company has no unrecognized tax benefits
The Company s stockholders approved the 2023 Omnibus Incentive Plan 2023 Plan in August 2023 which enables the Company to grant a broad range of equity based awards with potential recipients including directors consultants and employees The 2023 Plan replaced the 2017 Omnibus Incentive Plan the 2017 Plan All outstanding equity granted under the 2017 Plan remain subject to and will be settled under the 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 April 30 2024 there were 383 572 shares available for future issuance under the 2023 Plan
Under the 2023 Plan and the 2017 Plan in the aggregate the Company recorded stock based compensation expense for employees of 1 018 000 and 845 000 and deferred income tax benefit of 223 000 and 199 000 in fiscal years 2024 and 2023 respectively The RSUs granted under the 2023 Plan and the 2017 Plan include grants with both a service and performance component vesting over a 3 year period and grants with only service components vesting over a 3 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 the performance period based on the ratio of cumulative days incurred to total days over the performance period The remaining estimated compensation expense of 1 656 000 will be recorded over the remaining vesting periods
The fair value of each RSU granted to employees was estimated on the date of grant based on the weighted average price of the Company s stock reduced by the present value of the expected dividend stream during the vesting period using the risk free interest rate The Company issued new shares of common stock to satisfy RSUs that vested during fiscal year 2024 The following table summarizes the RSU activity and weighted averages
The stockholders approved the 2008 Key Employee Stock Option Plan in fiscal year 2009 which allowed the Company to grant options on an aggregate of 300 000 shares of the Company s common stock and an amendment to the plan in August 2015 authorizing an additional 300 000 shares Under the plan options were granted at not less than the fair market value at the date of grant with options exercisable in such installments for such terms up to 10 years This plan was replaced by the 2017 Omnibus Plan with all outstanding options granted under the prior plan to remain subject to the prior plan The last grant of options issued on August 31 2016 under the prior plan will expire August 31 2026 The Company did not record any compensation expense related to outstanding stock options in fiscal years 2024 or 2023
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 to 1 vote per share At April 30 2024 and April 30 2023 there were approximately 2 839 000 and 2 830 000 shares respectively of Common Stock issued and outstanding The Company has not declared or paid any dividends with respect to its Common Stock during the fiscal year ended April 30 2024 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
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 During the fiscal year ended April 30 2024 the Company repurchased 66 191 shares of the Company s common stock for approximately 1 992 000 excluding other costs such as broker commissions and fees
On August 31 2023 the Board of Directors of Kewaunee Scientific Corporation the Company adopted a share repurchase program with authorization to repurchase up to 100 000 shares of our Company s common stock which commenced on September 1 2023 and has no expiration date The share repurchase program is designed to help offset the impact of future share dilution from employee stock issuances The timing and amount of any repurchases under this program will be determined by the Company s management at its discretion based upon its ongoing assessments of the capital needs of the business the market price of the Company s common stock and general market conditions Share repurchases under this program may be made through a variety of methods including open market purchases block trades exchange transactions or any combination thereof The program does not obligate the Company to acquire any particular amount of its common stock and the share repurchase program may be suspended or discontinued at any time at the Company s discretion
Transactions that occurred under the share repurchase program prior to the fourth quarter of fiscal year 2024 are presented in Item 2 Unregistered Sales of Equity Securities and Use of Proceeds in the corresponding interim report on Form 10 Q for the periods ended
The Company s other comprehensive income loss consists of unrealized gains and losses on the translation of the assets liabilities and equity of its foreign subsidiaries and additional minimum pension liability adjustments net of income taxes The before tax income loss related income tax effect and accumulated balances are as follows
Record the impact of adoption using a modified retrospective method with any cumulative effect as an adjustment to retained earnings accumulated deficit as opposed to restating comparative periods to reflect the effects of applying the new standard
Elect the package of three transition practical expedients which alleviate the requirements to reassess embedded leases lease classification and initial direct costs for leases that commenced prior to the adoption date
Elected to use the short term lease recognition exemption for all asset classes This means for those leases that qualify the Company will not recognize right of use ROU assets or lease liabilities and this includes not recognizing ROU assets or lease liabilities for existing short term leases of those assets
The Company has operating type leases for real estate and equipment in both the U S and internationally and financing leases for equipment in the United States ROU assets totaled 7 454 000 and 9 170 000 at April 30 2024 and 2023 respectively Operating cash paid to settle lease liabilities was 2 594 000 and 2 278 640 for the fiscal year ended April 30 2024 and 2023 respectively The Company s leases have remaining lease terms of up to 8 years In addition some of the leases may include options to extend the leases for up to 5 years or options to terminate the leases within 1 year Operating lease expense was 3 458 000 for the twelve months ended April 30 2024 inclusive of period cost for short term leases not included in lease liabilities of 864 000 Operating lease expense was 3 344 000 for the fiscal year ended April 30 2023 inclusive of period cost for short term leases not included in lease liabilities of 1 065 000
At April 30 2024 the weighted average remaining lease term for the capitalized operating leases was 4 2 years and the weighted average discount rate was 5 1 At April 30 2023 the weighted average remaining lease term for the capitalized operating leases was 5 1 years and the weighted average discount rate was 5 0 For the financing leases the weighted average remaining lease term was 4 5 years and the weighted average discount rate was 8 3 at April 30 2024 as compared to 3 1 years and 6 8 at April 30 2023 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 lease payments The Company uses the implicit rate when readily determinable
In November 2023 the Company entered into a new lease that has not yet commenced as of April 30 2024 with future minimum lease payments in aggregate of 681 000 that are not yet reflected on the Condensed Consolidated Balance Sheet This lease is expected to commence in the second quarter of fiscal year 2025 with a lease term of 3 years
The Company is involved in certain claims and legal proceedings in the normal course of business which management believes will not have a material adverse effect on the Company s consolidated financial condition or results of operations
During the year ended April 30 2024 the Company settled its non contributory defined benefit plans by transferring approximately 17 8 million of pension obligations through the purchase of group annuity contracts for all remaining liabilities under the pension plan In connection with the transfer the Company contributed 287 000 in cash to the pension plan which was intended to fully fund the Company s remaining defined benefit pension liabilities These non contributory defined benefit pension plans which covered some domestic employees were amended as of April 30 2005 Following this amendment no further benefits have been earned under the plans and no additional participants have been added The defined benefit plan for salaried employees provides pension benefits that are based on each employee s years of service and average annual compensation during the last ten consecutive calendar years of employment as of April 30 2005 The benefit plan for hourly employees provides benefits at stated amounts based on years of service as of April 30 2005
The change in projected benefit obligations and the change in fair value of plan assets for the non contributory defined benefit pension plans for each of the years ended April 30 are summarized as follows
Level 1 retirement plan assets include United States currency held by a designated trustee and equity funds of common and preferred securities issued by domestic and foreign corporations These equity funds are traded actively on exchanges and price quotes for these shares are readily available
The Company has a defined contribution plan covering substantially all domestic salaried and hourly employees The plan provides benefits to all employees who have attained age 21 completed three months of service and who elect to participate The plan provides that the Company make matching contributions equal to 100 of the employee s qualifying contribution up to 3 of the employee s compensation and make matching contributions equal to 50 of the employee s contributions between 3 and 5 of the employee s compensation resulting in a maximum employer contribution equal to 4 of the employee s compensation The Company s matching contributions were 957 000 and 932 000 for years ending April 30 2024 and 2023 Additionally the plan provides that the Company may elect to make a non matching contribution for participants employed by the Company on December 31 of each year The Company did not elect to make a non matching contribution in fiscal years 2024 and 2023
The Company s operations are classified into two business segments Domestic and International The Domestic business segment principally designs manufactures and installs scientific and technical furniture including steel and wood laboratory cabinetry fume hoods casework flexible systems worksurfaces workstations workbenches and computer enclosures The International business segment which consists of the foreign subsidiaries identified in
provides the Company s products and services including facility design detailed engineering construction and project management from the planning stage through testing and commissioning of laboratories
Intersegment transactions are recorded at normal profit margins All intercompany balances and transactions have been eliminated Certain corporate expenses shown below are net of expenses that have been allocated to the business segments
We consent to the incorporation by reference in the Registration Statements on Forms S 8 Nos 333 274371 333 160276 333 176447 333 213413 and 333 220389 of Kewaunee Scientific Corporation of our reports dated June 28 2024 with respect to the consolidated financial statements of Kewaunee Scientific Corporation included in this Annual Report on Form 10 K for the year ended April 30 2024
We maintain disclosure controls and procedures that are intended to ensure that the information required to be disclosed in our filings under the Securities Exchange Act of 1934 the Exchange Act is properly and timely recorded processed summarized and reported Our management including the Chief Executive Officer and Chief Financial Officer have conducted an evaluation of the effectiveness of disclosure controls and procedures as of April 30 2024 pursuant to Exchange Act Rule 13a 14 Based on that evaluation the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective In designing disclosure controls and procedures we recognize that any controls and procedures no matter how well designed and operated can provide only reasonable assurance of achieving desired control objectives and that management necessarily is required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in
issued by the Committee of Sponsoring Organizations of the Treadway Commission Based on this evaluation management concluded the Company maintained effective internal control over financial reporting as of April 30 2024
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements In addition projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting Management s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management s report in this Annual Report
There have been no significant changes in our internal controls over financial reporting that occurred during our fourth fiscal quarter that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting
On June 26 2024 the Effective Date Kewaunee Scientific Corporation the Company and Donald T Gardner III the Company s Vice President Finance and Chief Financial Officer entered into a Retention Bonus Agreement the Agreement Pursuant to the terms of the Agreement Mr Gardner will be paid a cash retention bonus in the amount of 150 000 the Bonus If Mr Gardner voluntarily resigns from employment with the Company other than for Good Reason or if the Company terminates Mr Gardner s employment for Cause in each case before the date that is 36 months from the Effective Date Mr Gardner will reimburse the Company 100 of the gross amount of the Bonus For purposes of the Agreement Cause and Good Reason have the definitions ascribed to those terms in the Change of Control Employment Agreement dated as of June 18 2019 by and between the Company and Mr Gardner a copy of which was filed as
to the Company s Current Report on Form 8 K filed on June 21 2019 This summary of the material terms of the Agreement is qualified in its entirety by reference to the full text of the Agreement which is filed as Exhibit 10 22 to this Annual Report on Form 10 K
Transactions in the Company s securities by its directors or executive officers are required to be made in accordance with its Insider Trading Policy which among other things requires that the transaction be in accordance with applicable U S federal securities laws that prohibit trading while in the possession of material nonpublic information Rule 10b5 1 under the Securities Exchange Act of 1934 provides an affirmative defense that enables prearranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information
During the three months ended April 30 2024 none of our directors or officers as defined in Rule 16a 1 f of the Exchange Act informed the Company of the adoption or termination of a Rule 10b5 1 trading arrangement or non Rule 10b5 1 trading arrangement as defined in Item 408 of Regulation S K
The information appearing in the sections entitled Election of Directors and Meetings and Committees of the Board included in our Proxy Statement for use in connection with our annual meeting of stockholders to be held on August 28 2024 the Proxy Statement is incorporated herein by reference The Proxy Statement will be filed with the SEC within 120 days of our most recently completed fiscal year
joined the Company in November 2015 as Vice President Finance Chief Financial Officer Treasurer and Secretary Mr Hull was elected President and Chief Executive Officer and appointed as a member of the Board of Directors in March 2019 Mr Hull earned a Bachelor of Science degree in Accounting from LaRoche College and an MBA from the University of Pittsburgh Joseph M Katz School of Business He is a certified public accountant inactive status and a member of the American Institute of Certified Public Accountants and the Pennsylvania Institute of Certified Public Accountants Prior to joining the Company Mr Hull held several management positions with Ernst Young LLP in Pittsburgh Pennsylvania from 1998 through 2011 From 2011 until joining the Company in 2015 he served as the Vice President of Finance Accounting and Information Technology with ATI Specialty Materials in Charlotte North Carolina
joined the Company in April 2019 as Vice President of Finance and Chief Financial Officer and was also elected by the Board of Directors to the positions of Secretary and Treasurer Mr Gardner has a Bachelor of Science degree in Accounting from the Indiana University of Pennsylvania and a Master of Business Administration from the University of Pittsburgh Joseph M Katz School of Business Prior to joining the Company from 2017 to 2019 he served as Vice President Financial Planning Analysis of Victra a privately held retailer of wireless products and services During 2017 he served as the Chief Financial Officer of Component Sourcing International a privately held provider of global sourcing supply chain solutions From February 2016 to June 2017 Mr Gardner served in various leadership roles for Dollar Express Stores LLC most recently as Vice President and Treasurer Dollar Express was an operator of discount retail stores that was sold to a strategic buyer in 2017 Mr Gardner was a key member of the leadership team that completed the transaction and full wind down of the Company From 2012 to February 2016 he worked at ATI Specialty Materials a manufacturer of technically advanced specialty materials and complex components serving in various financial leadership roles
joined the Company in July 2018 as Vice President of Sales and Marketing Americas He has a Bachelor of Science degree from the University of Tennessee Prior to joining the Company he was a Regional Sales Director at Wausau Window and Wall Systems a manufacturer of metal and glass solutions for commercial buildings from 2014 to 2018 From 2008 to 2014 he held several sales management positions at AGC Glass Company a glass and high performance coatings manufacturer for architectural residential interior and industrial applications
joined the Company in August 2006 as Human Resources and Training Manager She was promoted to Director of Human Resources in June 2007 and was elected Vice President of Human Resources in June 2009 Ms Phillips has a Bachelor of Science degree in Psychology and a Minor in Management from Western Carolina University and holds HR certifications to include SPHR and SHRM SCP Prior to joining the Company she held Human Resources leadership positions at Thomasville Furniture and Hickory Chair and lastly prior to joining Kewaunee was Director of Human Resources for Vanguard Furniture Co Inc a manufacturer of household furniture from April 2004 until August 2006
joined the Company in December 2019 as Vice President of Information Technology In February 2020 Mr Ranade s responsibilities were expanded to include Engineering and Standards oversight and he now holds the position of Vice President of Information Technology and Engineering He has a Master of Business Administration Finance from the University of Leeds Leeds United Kingdom and a Bachelor of Engineering Polymers from University of Pune Pune India He also has certifications as a Project Management Professional Certified Scrum Master ITIL Foundation Certification and a Master of Oracle Applications Prior to joining the Company Mr Ranade most recently held the position of Division IT Leader for EnPro Industries Fairbanks Morse Wisconsin from 2018 to November 2019 From 2015 to 2018 he held several Director positions the most recent being Director of Technical Services with Aurora Health Care ACL Laboratories Milwaukee Wisconsin Prior to these positions he was Senior Manager of IT with IMS Health Milwaukee Wisconsin from 2010 to 2015 and ThermoFisher Scientific in Two Rivers Wisconsin from 2005 to 2010 From 1995 to 2005 he held various IT positions with GE Healthcare Milwaukee Wisconsin and Mumbai India idm Limited in Doncaster UK and GREAVES Limited Mumbai India
joined the Company in June 2020 as Vice President of Manufacturing Operations He has significant experience in directing and guiding manufacturing operations focusing on improvement of business performance maximizing growth and profitability Mr Batdorff has a Bachelor of Science Degree in Mechanical Engineering from Michigan State University and a Masters in Manufacturing Operations from Kettering University Prior to joining the Company Mr Batdorff was the Chief Operations Officer for Legacy Cabinets Inc in Eastaboga Alabama from 2018 to 2019 From 2005 to 2018 he held various management positions with Steelcase the most recent as Director of Manufacturing US Operations from 2014 to 2018 He was with General Motors Lansing Michigan from 1998 to 2004 in many management roles the most recent being Manufacturing Coordinator General Assembly Final Process
joined the Company in 2000 as General Manager of India Operations and Kewaunee Labway India Pvt Ltd He was subsequently promoted to Managing Director of Kewaunee Labway India Pvt Ltd He has served as Managing Director of International Operations which includes responsibilities for all sales and operations in Asia as well as sales efforts in the Middle East since September 2013 Mr Sathyamurthy was elected Vice President of Kewaunee Scientific Corporation Singapore Pte Ltd the holding company for Kewaunee s subsidiaries in India and Singapore in September 2014 He holds a Bachelor Degree in Mechanical Engineering from University of Madras and a Masters of Business Administration from University of Madras
A copy of our code of ethics that applies to our Chief Executive Officer and Chief Financial Officer entitled Ethics Obligations for Chief Executive Officer and Employees with Financial Reporting Responsibilities is available free of charge through our website at
The reference to our website does not constitute incorporation by reference of any information contained at that site We intend to satisfy any disclosure requirements under Item 5 05 of Form 8 K regarding an amendment to or waiver from a provision of the Code of Ethics by posting such information on our website
The information appearing in the sections entitled Compensation Discussion and Analysis Compensation Tables Agreements with Certain Executives and Election of Directors Compensation Committee Interlocks and Insider Participation in the Proxy Statement is incorporated herein by reference
The information appearing in the sections entitled Security Ownership of Directors and Executive Officers and Security Ownership of Certain Beneficial Owners in the Proxy Statement is incorporated herein by reference
The information appearing in the section entitled Ratification of Appointment of Independent Registered Public Accounting Firm Audit Fees and Non Audit Fees in the Proxy Statement is incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10 Q Commission File No 0 5286 for the quarterly period ended October 31 2005 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10 K Commission File No 0 5286 for the fiscal year ended April 30 2023 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10 Q Commission File No 0 5286 for the quarterly period ended January 31 2024 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10 K Commission File No 0 5286 for the fiscal year ended April 30 2015 and incorporated herein by reference
Filed as Appendix A to the Kewaunee Scientific Corporation Proxy Statement for its Annual Meeting of Stockholders on August 26 2015 Commission File No 0 5286 filed on July 23 2015 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10 Q Commission File No 0 5286 for the quarterly period ended October 31 2015 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10 Q Commission File No 0 5286 for the quarterly period ended July 31 2023 and incorporated herein by reference
Filed as Appendix A to the Kewaunee Scientific Corporation Proxy Statement for its Annual Meeting of Stockholders on August 30 2017 Commission File No 0 5286 filed on July 21 2017 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10 Q Commission File No 0 5286 for the quarterly period ended January 31 2018 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10 K Commission File No 0 5286 for the fiscal year ended April 30 2019 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10 Q Commission File No 0 5286 for the quarterly period ended October 31 2019 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10 Q Commission File No 0 5286 for the quarterly period ended January 31 2020 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10 K Commission File No 0 5286 for the fiscal year ended April 30 2020 and incorporated herein by reference
Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10 Q Commission File 0 5286 for the quarterly period ended January 31 2022 and incorporated herein by reference
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized

Company Name	KEWAUNEE SCIENTIFIC CORP /DE/ Vist SEC web-site
Category	LABORATORY APPARATUS & FURNITURE
Trading Symbol	KEQU