STATESVILLE, N.C., Dec. 16, 2019 /PRNewswire/ -- Kewaunee Scientific
Corporation (NASDAQ: KEQU) today reported results for its second
quarter of fiscal year 2020, ended October 31, 2019.
Sales for the quarter were $39,722,000, a 6.6% increase from sales of
$37,278,000 in the prior year second
quarter. Domestic sales for the quarter were $31,584,000, up 3.1% from sales of $30,622,000 in the second quarter of last
year. International sales for the quarter were $8,138,000, up 22.3% from sales of $6,656,000 in the second quarter last year.
The increase in Domestic sales was a result of increased
activity in the Company's direct sales markets offsetting weakness
in dealer activity. International sales increased
year-over-year as a result of continued deliveries of a large,
strategic order in the Middle East
market.
Pre-tax loss for the quarter was $158,000 compared to a pre-tax profit of
$1,760,000 for the prior year
period. Profitability was negatively impacted during the
quarter by increased operating costs within the Company's Domestic
segment and a number of low margin orders the Company aggressively
pursued and secured over the past year. Profitability was
also negatively impacted by a strategic order in the Middle East that the Company aggressively
secured over two years ago at lower than normal margins.
Operating costs were also higher in India as we made investments in our
capabilities that have already strengthened our position in the
Indian market.
Net earnings decreased 263.5% for the quarter to a loss of
$2,178,000, or ($0.79) per diluted share, as compared to net
earnings of $1,332,000, or
$0.48 per diluted share, for the
quarter ended October 31, 2018.
In addition to the factors mentioned above, this loss also reflects
$353,000, or $0.13 per diluted share, for additional Indian
withholding tax expense reported in the period on cash repatriated
in the second quarter to extinguish the Company's long-term debt
obligation. The reported loss also includes $1,730,000, or $0.63 per diluted share, of non-cash expense for
foreign withholding tax on previously reported historical
earnings. As part of a revised global treasury management
strategy, the Company has made a one-time election to revoke its
indefinite reinvestment accounting election that permitted the
deferral of recognition of foreign withholding tax on net earnings
as incurred. Revoking this accounting election provides the
Company more flexibility in its global treasury management as well
as cash to invest in projects intended to improve the Company's
operating performance.
The Company's order backlog was $92
million at October 31, 2019,
as compared to $101 million at
April 30, 2019 and $101 million at October
31, 2018.
Total cash on hand was $9.6
million at the end of the quarter, as compared to
$10.2 million at the end of the
second quarter last year. Working capital was $30.8 million, as compared to $36.3 million at the end of the second quarter
last year. Short-term debt and interest rate swaps were
$6.9 million at the end of the
quarter, as compared to $4.7 million
at the end of the second quarter last year. There was no long-term
debt at October 31, 2019 compared to
$1,848,000 at the end of the second
quarter last year. The debt-to-equity ratio at October 31, 2019 was .38-to-1, as compared to
.14-to-1 at October 31,
2018.
"Overall, the market for laboratory furniture and related
technical products remains healthy," said Thomas D. Hull III, Kewaunee's President and
Chief Executive Officer. "We are seeing a consistent volume
of bid activity in most of our key markets as investment in
infrastructure requiring Kewaunee's expertise and broad product
offering continues. While our sales were strong in our second
quarter, the sales mix did not translate into the earnings we
expected. A competitive marketplace as well as operating
inefficiencies with resulting higher costs resulted in the Company
not generating the earnings typical at these levels of
activity. We are not satisfied with this outcome and
are focused on taking the steps necessary to improve
profitability. Accordingly, we are taking a number of actions
to better position the Company in the future:
- The Company has initiated a restructuring, which includes a
reduction in force to reduce operating expenses on an ongoing
basis. As a result the Company expects to take a charge in
the third quarter of fiscal year 2020, ending January 31, 2020. The Company will provide more
specifics on the restructuring when it releases its third quarter
earnings report.
- As previously discussed, the Company elected to revoke its
indefinite reinvestment accounting election providing the Company
more flexibility in its global treasury management as well as cash
to invest in projects intended to improve the Company's operating
performance.
- The Company's Board of Directors has elected to suspend the
Company's dividend as the Company believes that, at this time,
investing in projects intended to improve the Company's operating
performance will provide a better long-term return to the Company's
shareholders. These investments include upgrading and
replacement of the underlying information technology supporting all
aspects of the business as well as capital investments intended to
improve the Company's manufacturing productivity and cost
structure."
Outlook
Mr. Hull commented, "The third quarter is typically the
Company's most challenging quarter as there are fewer manufacturing
days than other quarters due to the holidays in the United States and construction projects
generally slow down at the end of the calendar year. Our goal
is to ensure that the Company's fourth quarter production load is
full in order to operate our manufacturing facilities efficiently,
which in turn should drive recovery in profitability."
About Kewaunee Scientific
Founded in 1906, Kewaunee
Scientific Corporation is a recognized global leader in the design,
manufacture, and installation of laboratory, healthcare, and
technical furniture products. The Company's products include steel,
wood, and laminate casework, fume hoods, adaptable modular systems,
moveable workstations, stand-alone benches, biological safety
cabinets, and epoxy resin worksurfaces and sinks.
The Company's corporate headquarters are located in Statesville, North Carolina. Direct sales
offices are located in the United
States, India, Singapore, and China. 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 and Asian markets. The Company's China headquarters and sales office are
located in Shanghai, China.
Kewaunee Scientific's website is located at
http://www.kewaunee.com.
This press release contains statements that the Company
believes to be "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact included in
this press release, 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. All
forward-looking statements are subject to important factors, risks,
uncertainties and assumptions, including industry and economic
conditions that could cause actual results to differ materially
from those described in the forward-looking statements. Additional
information concerning these factors is contained in the Company's
filings with the Securities and Exchange Commission. 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
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited)
|
|
|
($ and shares in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
October
31,
|
|
October
31,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net sales
|
|
$
39,722
|
|
$
37,278
|
|
$
79,058
|
|
$
79,430
|
Cost of products
sold
|
|
33,406
|
|
29,614
|
|
65,796
|
|
64,183
|
Gross
profit
|
|
6,316
|
|
7,664
|
|
13,262
|
|
15,247
|
Operating
expenses
|
|
6,355
|
|
5,963
|
|
12,525
|
|
11,726
|
Operating earnings
(loss)
|
|
(39)
|
|
1,701
|
|
737
|
|
3,521
|
Other
income
|
|
16
|
|
150
|
|
72
|
|
314
|
Interest expense,
net
|
|
(135)
|
|
(91)
|
|
(302)
|
|
(182)
|
Earnings (loss)
before income taxes
|
|
(158)
|
|
1,760
|
|
507
|
|
3,653
|
Income tax
expense
|
|
2,003
|
|
388
|
|
2,172
|
|
783
|
Net earnings
(loss)
|
|
(2,161)
|
|
1,372
|
|
(1,665)
|
|
2,870
|
Less: net earnings
attributable to the noncontrolling interest
|
|
17
|
|
40
|
|
42
|
|
49
|
Net earnings (loss)
attributable to Kewaunee Scientific Corporation
|
$
(2,178)
|
|
$
1,332
|
|
$
(1,707)
|
|
$
2,821
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
per share attributable to
|
|
|
|
|
|
|
|
|
Kewaunee Scientific Corporation stockholders
|
|
|
|
|
|
|
|
|
Basic
|
|
($0.79)
|
|
$0.49
|
|
$
(0.62)
|
|
$
1.03
|
Diluted
|
|
($0.79)
|
|
$0.48
|
|
$
(0.62)
|
|
$
1.01
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
2,750
|
|
2,743
|
|
2,750
|
|
2,740
|
Diluted
|
|
2,750
|
|
2,800
|
|
2,750
|
|
2,802
|
Kewaunee
Scientific Corporation
|
Condensed
Consolidated Balance Sheets
|
($ in
thousands)
|
|
|
|
|
|
|
|
October
31,
|
|
April
30,
|
|
|
2019
|
|
2019
|
Assets
|
|
(Unaudited)
|
|
|
Cash and cash
equivalents
|
|
$
7,647
|
|
$
10,647
|
Restricted
cash
|
|
1,951
|
|
509
|
Receivables, less
allowances
|
|
32,017
|
|
33,259
|
Inventories
|
|
14,778
|
|
17,206
|
Prepaid expenses and
other current assets
|
|
4,674
|
|
3,736
|
Total Current Assets
|
|
61,067
|
|
65,357
|
Net property, plant
and equipment
|
|
15,884
|
|
16,462
|
Right of use
assets
|
|
10,082
|
|
-
|
Other
assets
|
|
3,289
|
|
5,404
|
Total
Assets
|
|
$
90,322
|
|
$
87,223
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Short-term borrowings
and interest rate swaps
|
|
$
6,760
|
|
$
9,513
|
Current portion of
long-term operating lease obligations
|
|
1,401
|
|
-
|
Current portion of
long-term debt and financing lease obligations
|
|
18
|
|
1,184
|
Accounts
payable
|
|
13,836
|
|
15,190
|
Other current
liabilities
|
|
8,211
|
|
6,846
|
Total Current Liabilities
|
|
30,226
|
|
32,733
|
Long-term portion of
operating lease obligations
|
|
8,513
|
|
-
|
Other non-current
liabilities
|
|
6,593
|
|
6,787
|
Total Liabilities
|
|
45,332
|
|
39,520
|
Kewaunee Scientific
Corporation equity
|
|
44,468
|
|
47,100
|
Noncontrolling
interest
|
|
522
|
|
603
|
Total Stockholders' Equity
|
|
44,990
|
|
47,703
|
Total Liabilities and
Stockholders' Equity
|
|
$
90,322
|
|
$
87,223
|
Contact:
|
Donald T. Gardner
III
|
|
(704)
871-3274
|
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SOURCE Kewaunee Scientific Corporation