Kewaunee Scientific Corp: Form 10-Q for the period ended Jul 31, 2026

The Company's 2026 Annual Report on Form 10-K contains management's discussion and analysis of the Company's financial condition and results of operations as of and for the fiscal year ended April 30, 2026. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2026. The analysis of results of operations compares the three months ended July 31, 2026 with the comparable period of the prior year.

Critical Accounting Estimates

In the ordinary course of business, the Company may make 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. There have been no material changes to the Company's determination of its 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, from those described in Part II, Item 7 of the Company's 2026 Annual Report on Form 10-K under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" beyond those set forth below.

Results of Operations

Sales for the quarter were $66,320,000, a decrease from sales of $71,104,000 in the comparable period of the prior year. LPG sales for the quarter were $50,868,000, down 6.4% when compared to sales of $54,352,000 in the comparable period of the prior year. The decrease in LPG sales primarily reflected lower demand in the domestic laboratory construction market, most notably in the life sciences market. International sales for the quarter were $15,452,000, down 7.8% when compared to sales of $16,752,000 in the comparable period of the prior year. International sales decreased when compared to the prior year period due to softer market conditions in India, partially offset by increased activity across the broader Asia-Pacific region.

The Company's order backlog was $169.0 million at July 31, 2026, as compared to $205.0 million at July 31, 2025, and $165.9 million at April 30, 2026.

The gross profit margin for the three months ended July 31, 2026 was 29.6% of sales, as compared to 29.4% of sales in the comparable quarter of the prior year. The change in gross profit margin percentage for the three months ended July 31, 2026 was primarily driven by improved margin performance within the International segment.

Operating expenses for the three months ended July 31, 2026 were $16,481,000, or 24.9% of sales, as compared to $16,120,000, or 22.7% of sales, in the comparable period of the prior year. Operating expenses for the three months ended July 31, 2026 remained relatively flat.

Interest expense was $626,000 for the three months ended July 31, 2026, as compared to $1,058,000 for the comparable period of the prior year. The change in interest expense was due to changes in the levels of bank and other borrowings and interest rates.

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

Non-controlling interests related to the Company's subsidiaries not 100% owned by the Company decreased net earnings by $137,000 for the three months ended July 31, 2026, as compared to $66,000 for the comparable period of the prior year. The change in the net earnings attributable to the non-controlling interest in the current period was due to changes in earnings (losses) of the subsidiaries in the related period.

Net earnings was $1,706,000, or $0.58 per diluted share, for the three months ended July 31, 2026, compared to net earnings of $3,093,000, or $1.04 per diluted share, in the prior year period.

Liquidity and Capital Resources

Our principal sources of liquidity have historically been funds generated from operating activities, supplemented as needed by borrowings under our active revolving credit facility, currently the Revolving Credit Facility with PNC. Additionally, certain machinery and equipment are financed by non-cancellable operating and financing leases. The Company believes that these sources will be sufficient to support ongoing business requirements in the current fiscal year, including capital expenditures.

The Company had working capital of $56,716,000 at July 31, 2026, compared to $57,046,000 at April 30, 2026. The ratio of current assets to current liabilities was 2.2-to-1.0 at July 31, 2026, compared to 2.2-to-1.0 at April 30, 2026.

The Company's operating activities provided cash of $1,976,000 during the three months ended July 31, 2026. Net cash provided by operating activities was primarily driven by operations and decreases in receivables of $0.5 million, decreases in inventories of $0.7 million, and increases in deferred revenue of $1.0 million, partially offset by decreases in accounts payable and other accrued expenses of $3.0 million, and a change in other, net of $1.2 million. During the three months ended July 31, 2026, the Company used net cash of $772,000 in investing activities related to capital expenditures. The Company's financing activities used net cash of $2,499,000 during the three months ended July 31, 2026, primarily related to the servicing of the Company's long-term debt arrangements, the repurchase of shares of the Company's common stock, and the payment of employee taxes withheld for stock-based compensation.

Outlook

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 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.

Kewaunee's first quarter results for fiscal year 2027 align with the expectations previously communicated regarding the ongoing impact of broad geopolitical and economic uncertainty on project award and release timelines. While these conditions may continue to influence the timing of project activity, the Company continues to experience healthy customer engagement and opportunity levels, and quoting activity remains strong across its markets.

Kewaunee continues to execute its strategy in these challenging market conditions, strengthening the Company’s competitive position through the strength of its brands, the breadth of its capabilities, and its commitment to delivering exceptional value and service to its customers.

While remaining attentive to near-term market conditions, the Company continues to focus on the long term through operational improvement initiatives, enhancement of its commercial capabilities, and disciplined execution of its customer-focused strategy. Management believes these efforts position the Company well as quoting activity converts into project awards and releases.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

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 Quarterly Report, including statements regarding the Company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions, and other important factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to: competitive and general economic conditions, including disruptions from government mandates, both domestically and internationally, as well as supplier constraints and other supply disruptions; changes in customer demands; technological changes in our operations or in our industry; dependence on customers’ required delivery schedules; risks related to fluctuations in the Company’s operating results from quarter to quarter; risks related to international operations, including foreign currency fluctuations; changes in the legal and regulatory environment; changes in raw materials and commodity costs; acts of terrorism, war, governmental action, natural disasters and other Force Majeure events. The cautionary statements made pursuant to the Reform Act herein and elsewhere by us should not be construed as exhaustive. We cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. Over time, our actual results, performance, or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and harmful to our stockholders' interest. Many important factors that could cause such differences are described under the caption "Risk Factors" in Item 1A in the Company's 2026 Annual Report on Form 10-K and in Item 1A of Part II in this Quarterly Report on Form 10-Q, which you should review carefully. These forward-looking statements speak only as of the date of this document. The Company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

There are no material changes to the disclosures made on this matter in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2026.

(a) Evaluation of disclosure controls and procedures

An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of July 31, 2026. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that, as of July 31, 2026, the Company's disclosure controls and procedures were adequate and effective and designed to ensure that all material information required to be filed in this quarterly report is made known to them by others within the Company and its subsidiaries.

(b) Changes in internal controls

There were no significant changes in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in Part I, Item 1A of the Company's 2026 Annual Report on Form 10-K under the heading "Risk Factors," any one or more of which could, directly or indirectly, cause the Company's actual financial condition and operating results to vary materially from its past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company's business, financial condition, operating results, and stock price. There have been no material changes to the Company's risk factors from those set forth in the Company's Annual Report on Form 10-K for the year ended April 30, 2026 as filed with the SEC on June 26, 2026 beyond those set forth below.