Sales Performance - Sales for the quarter were $39,031,000, relatively flat from $39,000,000 in the comparable period of the prior year[57] - Domestic sales for the quarter were $29,934,000, up 4.0% from $28,772,000 in the comparable period of the prior year[57] - International sales for the quarter were $9,097,000, down 11.1% from $10,228,000 in the comparable period of the prior year[57] Financial Position - The Company's order backlog was $139.7 million at October 31, 2021, the highest in its history, compared to $96.0 million at October 31, 2020[59] - The Company had working capital of $23,049,000 at October 31, 2021, down from $26,276,000 at April 30, 2021[67] Profitability - The gross profit margin for the three months ended October 31, 2021 was 9.2%, down from 16.4% in the comparable quarter of the prior year[60] - Net loss was $3,100,000, or $(1.11) per diluted share, for the three months ended October 31, 2021, compared to a net loss of $180,000, or $(0.07) per diluted share, in the prior year period[65] Future Outlook - The Company expects improved financial performance in the second half of the fiscal year and into fiscal year 2023[73] Tax Information - The effective income tax rates for the three and six months ended October 31, 2021 were (6.8)% and (11.3)%, compared to 54.4% and 18.5% for the comparable periods of the prior year[63] Cash Flow - The Company used cash of $6,071,000 during the six months ended October 31, 2021 primarily for operations and increases in receivables[69]

Financial Performance - Net sales for the three months ended July 31, 2021, were $39,493,000, an increase of 8.5% compared to $36,423,000 for the same period in 2020[10] - Gross profit for the same period was $5,674,000, a decrease of 3.5% from $5,881,000 in 2020[10] - The net loss attributable to Kewaunee Scientific Corporation for the three months ended July 31, 2021, was $1,345,000, compared to a net loss of $598,000 in 2020, representing a 125% increase in loss[10] - Basic and diluted net loss per share attributable to Kewaunee Scientific Corporation stockholders was $(0.48) for the three months ended July 31, 2021, compared to $(0.22) in 2020[10] - The company reported a comprehensive loss attributable to Kewaunee Scientific Corporation of $1,421,000 for the three months ended July 31, 2021, compared to a comprehensive loss of $611,000 in 2020[14] - Operating loss for the three months ended July 31, 2021, was $(1,091,000), compared to $(276,000) in the same period of 2020, reflecting a significant increase in operating losses[10] - Total revenues for the quarter were $39,493,000, an 8.4% increase from $36,423,000 in the prior year[58] - Net loss for the quarter was $1,345,000, or $(0.48) per diluted share, compared to a net loss of $598,000, or $(0.22) per diluted share in the prior year[65] Assets and Liabilities - Total current assets increased to $61,969,000 as of July 31, 2021, from $60,457,000 as of April 30, 2021, reflecting a growth of 2.5%[20] - Total assets as of July 31, 2021, were $90,299,000, up from $89,384,000 as of April 30, 2021, indicating a 1% increase[20] - Total liabilities increased to $49,959,000 as of July 31, 2021, compared to $47,897,000 as of April 30, 2021, marking a 4.3% rise[20] - Cash, cash equivalents, and restricted cash at the end of the period were $5,467,000, a decrease from $5,731,000 at the beginning of the period[22] - The company had outstanding advances of $8.9 million under its revolving credit facility as of July 31, 2021, an increase from $6.8 million at April 30, 2021[38] Revenue Breakdown - Domestic revenue for the three months ended July 31, 2021, was $29,663,000, compared to $30,058,000 in 2020, indicating a decline of about 1.3%[33] - International revenue for the three months ended July 31, 2021, was $9,830,000, up from $6,365,000 in 2020, reflecting a significant increase of approximately 54.5%[33] - Domestic sales decreased by 1.3% to $29,663,000, while international sales increased by 54.4% to $9,830,000[58] Inventory and Contract Assets - Total inventory as of July 31, 2021, was $17,852,000, an increase from $16,517,000 at April 30, 2021, representing a growth of approximately 8.1%[35] - Contract assets increased to $8,677,000 at July 31, 2021, from $6,929,000 at April 30, 2021, while contract liabilities decreased to $2,555,000 from $3,123,000 in the same period[34] - The company expects to recognize approximately 100% of the contract liability balances as revenue during the succeeding 12 months from both April 30, 2021, and July 31, 2021[34] Operating Expenses and Tax - Operating expenses increased to $6,765,000, or 17.1% of sales, compared to $6,157,000, or 16.9% of sales in the prior year[61] - Income tax expense for the three months ended July 31, 2021, was $251,000, significantly higher than $21,000 for the same period in 2020, resulting in an effective tax rate of (23.8)% compared to (3.6)%[48] - The effective income tax rate for the quarter was (23.8)%, compared to (3.6)% in the prior year, reflecting increased international operations[63] Future Outlook - The company anticipates project awards will accelerate as the economy reopens, despite short-term impacts from rising raw material prices[73] - The company plans to implement surcharges on new orders to offset broad-based price increases for materials[73] Stock-Based Compensation - The company recorded stock-based compensation expense of $194,000 for the three months ended July 31, 2021, compared to $59,000 for the same period in 2020, indicating an increase of approximately 228.8%[46] Order Backlog - The order backlog was $120.6 million at July 31, 2021, up from $101.2 million at July 31, 2020[59] Gross Profit Margin - Gross profit margin for the quarter was 14.4%, down from 16.1% in the prior year, due to increased raw material costs[60] Cash Flow - The company used cash of $1,776,000 in operations during the quarter, primarily due to increases in receivables and inventory[69]

PART I [Business](index=4&type=section&id=Item%201.%20Business) Kewaunee Scientific Corporation designs, manufactures, and installs laboratory, healthcare, and technical furniture products for diverse markets, managing risks from cost increases and customer concentration - The company's principal business is the design, manufacture, and installation of laboratory, healthcare, and technical furniture products, including steel, wood, and laminate furniture, fume hoods, and biological safety cabinets[10](index=10&type=chunk) - Sales to two domestic dealers and a national distributor accounted for approximately **40%** of total sales in fiscal year 2021, indicating significant customer concentration[15](index=15&type=chunk) Order Backlog Comparison | Date | Order Backlog (in millions) | | :--- | :--- | | April 30, 2021 | $114.5 | | April 30, 2020 | $100.9 | Research and Development Expenses | Fiscal Year | R&D Expense (in thousands) | | :--- | :--- | | 2021 | $1,406 | | 2020 | $1,816 | [Risk Factors](index=5&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including financial market disruptions, intense competition, customer concentration, volatile raw material costs, international expansion challenges, cybersecurity threats, and ongoing impacts from the COVID-19 pandemic - The company faces significant risk from customer concentration, as combined sales to two dealers and a national stocking distributor accounted for approximately **40%** of sales in fiscal year 2021[30](index=30&type=chunk) - Profitability is at risk from increases in raw material (steel, wood, epoxy resin) and energy costs, as prices are normally quoted on a firm basis for future delivery, placing the burden of cost increases on the company[31](index=31&type=chunk) - The COVID-19 pandemic poses a continuing risk, potentially causing declines in business activity, supply chain disruptions, and negative impacts on the health of personnel, which could adversely affect business operations and financial results[45](index=45&type=chunk)[48](index=48&type=chunk) - Cybersecurity incidents are a significant risk, as a breach could compromise sensitive data, damage the company's reputation, and lead to operational interruptions, litigation, or potential liability[38](index=38&type=chunk)[39](index=39&type=chunk) - International operations, which accounted for **26%** of revenues in fiscal year 2021, expose the company to risks such as political instability, currency fluctuations, and changes in trade regulations[51](index=51&type=chunk) [Properties](index=11&type=section&id=Item%202.%20Properties) The company operates through owned manufacturing facilities and corporate offices in Statesville, North Carolina, totaling **413,000 square feet**, and leased distribution, manufacturing, and sales offices globally - The company owns and operates three adjacent manufacturing facilities in Statesville, North Carolina, comprising **413,000 square feet**, which also house its corporate offices[52](index=52&type=chunk) - Key leased properties include **365,000 square feet** of distribution and warehouse space in Statesville, NC, and an **83,000 square foot** manufacturing facility in Bangalore, India[52](index=52&type=chunk) [Legal Proceedings](index=11&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal disputes, which management believes will not materially adversely affect its financial condition or operations - The company believes that any currently pending legal proceedings, which arise in the ordinary course of business, will not have a material adverse effect on its financial results or condition[53](index=53&type=chunk) [Mine Safety Disclosures](index=11&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[54](index=54&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=12&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NASDAQ Global Market under the symbol KEQU, with no dividends paid in fiscal year 2021 following a suspension in December 2019 - The company's common stock is traded on the NASDAQ Global Market under the symbol KEQU[57](index=57&type=chunk) Quarterly Stock Price (KEQU) | Fiscal Year | Quarter | High | Low | | :--- | :--- | :--- | :--- | | **2021** | Q1 | $11.10 | $8.50 | | | Q2 | $11.35 | $8.20 | | | Q3 | $13.45 | $8.08 | | | Q4 | $13.43 | $11.99 | | **2020** | Q1 | $23.00 | $16.18 | | | Q2 | $18.20 | $15.06 | | | Q3 | $19.57 | $12.30 | | | Q4 | $12.80 | $6.96 | - On December 16, 2019, the Board of Directors suspended the company's dividend. No cash dividends were paid in fiscal year 2021, whereas **$0.38 per share** was paid in fiscal year 2020[58](index=58&type=chunk) [Selected Financial Data](index=13&type=section&id=Item%206.%20Selected%20Financial%20Data) This section summarizes key historical consolidated financial data, showing **$147.5 million** in net sales for fiscal year 2021, a net loss of **$3.7 million**, and total assets increasing to **$89.4 million** Selected Operating Statement Data (in thousands, except per share amounts) | Metric | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Net sales | $147,469 | $147,540 | | Gross profit | $23,993 | $23,427 | | Operating loss | $(1,316) | $(2,345) | | Net loss attributable to Kewaunee | $(3,672) | $(4,687) | | Basic Net loss per share | $(1.33) | $(1.70) | | Diluted Net loss per share | $(1.33) | $(1.70) | | Cash dividends per share | $— | $0.38 | Selected Balance Sheet Data (as of April 30, in thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total assets | $89,384 | $83,929 | | Total borrowings/long-term debt | $16,148 | $13,913 | | Kewaunee Stockholders' equity | $41,241 | $38,415 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales remained flat at **$147.5 million** in fiscal year 2021, with domestic sales decreasing and international sales growing, leading to a narrowed net loss of **$3.7 million** despite higher raw material costs, while liquidity is expected to be sufficient Fiscal Year Sales Performance (in millions) | Segment | FY 2021 | FY 2020 | Change | | :--- | :--- | :--- | :--- | | Domestic Sales | $111.0 | $115.1 | -3.5% | | International Sales | $36.4 | $32.4 | +12.3% | | **Total Sales** | **$147.5** | **$147.5** | **~0%** | - Gross profit margin increased to **16.3%** in FY2021 from **15.9%** in FY2020, driven by improved domestic operating performance and a favorable product mix, which offset higher raw material costs[78](index=78&type=chunk) - Operating expenses decreased to **$25.3 million** in FY2021 from **$25.8 million** in FY2020, primarily due to reductions in salaries, bad debt expense, and travel, partially offset by increased incentive compensation[79](index=79&type=chunk) - Net loss for FY2021 was **$3.7 million** (**$1.33 per diluted share**), an improvement from a net loss of **$4.7 million** (**$1.70 per diluted share**) in FY2020[84](index=84&type=chunk) - Operating activities provided **$0.9 million** in cash in FY2021, a decrease from **$4.2 million** in FY2020. The company's working capital decreased to **$26.3 million** from **$27.2 million** year-over-year[87](index=87&type=chunk)[92](index=92&type=chunk) - The company anticipates that project awards and construction pace will accelerate as the economy re-opens, but escalating raw material pricing will unfavorably impact near-term earnings on fixed-price contracts[98](index=98&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=18&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks primarily from interest rates on its floating-rate debt and foreign currency exchange rates due to international operations, with **25%** of fiscal year 2021 net sales in non-U.S. dollar currencies - The company has exposure to interest rate risk on its floating-rate bank line of credit, which had **$6.8 million** in advances outstanding at April 30, 2021[99](index=99&type=chunk) - Foreign currency exchange rate risk is present as **25%** of net sales in fiscal year 2021 were derived in currencies other than the U.S. dollar[100](index=100&type=chunk) - Cash balances held by foreign subsidiaries and denominated in foreign currencies totaled **$5.4 million** at April 30, 2021[102](index=102&type=chunk) [Financial Statements and Supplementary Data](index=19&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal years 2021 and 2020, including statements of operations, comprehensive income, stockholders' equity, balance sheets, and cash flows, along with detailed notes on accounting policies and financial details Consolidated Statement of Operations Highlights (in thousands) | Line Item | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Net sales | $147,469 | $147,540 | | Gross profit | $23,993 | $23,427 | | Operating loss | $(1,316) | $(2,345) | | Net loss attributable to Kewaunee | $(3,672) | $(4,687) | Consolidated Balance Sheet Highlights (in thousands) | Line Item | April 30, 2021 | April 30, 2020 | | :--- | :--- | :--- | | Total Current Assets | $60,457 | $54,231 | | Total Assets | $89,384 | $83,929 | | Total Current Liabilities | $34,181 | $27,060 | | Total Stockholders' Equity | $41,487 | $38,703 | Consolidated Cash Flow Highlights (in thousands) | Line Item | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $912 | $4,161 | | Net cash used in investing activities | $(2,397) | $(2,465) | | Net cash provided by (used in) financing activities | $1,982 | $(7,458) | Disaggregated Revenue (in thousands) | Revenue Recognition | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Over Time | $144,009 | $142,419 | | Point in Time | $3,460 | $5,121 | | **Total Revenue** | **$147,469** | **$147,540** | Segment Revenues from External Customers (in thousands) | Segment | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Domestic | $111,035 | $115,103 | | International | $36,434 | $32,437 | | **Total** | **$147,469** | **$147,540** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=47&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants regarding accounting and financial disclosure - None reported[220](index=220&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of April 30, 2021 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of April 30, 2021[221](index=221&type=chunk) - Management concluded that the company maintained effective internal control over financial reporting as of April 30, 2021, based on the COSO framework[222](index=222&type=chunk) [Other Information](index=48&type=section&id=Item%209B.%20Other%20Information) No other information was reported - None[227](index=227&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=49&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's executive officers as of June 30, 2021, with additional information on directors and corporate governance incorporated by reference from the Proxy Statement Executive Officers (as of June 30, 2021) | Name | Age | Position | | :--- | :--- | :--- | | Thomas D. Hull III | 45 | President and Chief Executive Officer | | Donald T. Gardner III | 42 | Vice President, Finance, Chief Financial Officer, Treasurer and Secretary | | Ryan S. Noble | 43 | Vice President, Sales and Marketing—Americas | | Elizabeth D. Phillips | 44 | Vice President, Human Resources | | Kurt P. Rindoks | 63 | Vice President, Global Product Development and Strategic Alliances | | Lisa L. Ryan | 43 | Vice President of Construction Operations | | Mandar Ranade | 47 | Vice President of Information Technology and Engineering | | Douglas J. Batdorff | 48 | Vice President of Manufacturing Operations | | Boopathy Sathyamurthy | 52 | Vice President, Kewaunee Scientific Corporation Singapore Pte. Ltd., Managing Director, International Operations | [Executive Compensation](index=51&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation, including compensation tables and agreements, is incorporated by reference from the company's Proxy Statement - All information related to executive compensation is incorporated by reference from the company's Proxy Statement[242](index=242&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=51&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details equity compensation plans as of April 30, 2021, showing **209,517** securities to be issued upon exercise and **167,136** available for future issuance, with other ownership information incorporated by reference Equity Compensation Plan Information (as of April 30, 2021) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity Compensation Plans approved by Security Holders | 209,517 | - | 167,136 | | Equity Compensation Plans not approved by Security Holders | — | — | — | | **Total** | **209,517** | **-** | **167,136** | [Certain Relationships and Related Transactions, and Director Independence](index=51&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's Proxy Statement - All information related to this item is incorporated by reference from the company's Proxy Statement[244](index=244&type=chunk) [Principal Accountant Fees and Services](index=51&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's Proxy Statement - All information related to principal accountant fees and services is incorporated by reference from the company's Proxy Statement[245](index=245&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=52&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements and various exhibits filed as part of the Annual Report, with financial statement schedules omitted due to information being disclosed elsewhere - This section lists the consolidated financial statements and exhibits filed with the Form 10-K[247](index=247&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ FORM 10-Q _________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-5286 _________________________ KEWAUNEE SCIENTIFIC CORPORATION (E ...

Sales Performance - Sales for the quarter were $39 million, a 1.8% decrease from $39.722 million in the comparable period of the prior year[63] - Domestic sales for the quarter were $28.772 million, down 8.9% from $31.584 million in the comparable period of the prior year[63] - International sales for the quarter were $10.228 million, up 25.7% from $8.138 million in the comparable period of the prior year[63] Financial Metrics - The gross profit margin for the three months ended October 31, 2020 was 16.4% of sales, compared to 15.9% in the prior year[66] - Operating expenses for the three months ended October 31, 2020 were $6.406 million, or 16.4% of sales, compared to $6.355 million, or 16.0% in the prior year[67] - Net loss was $180,000, or $0.07 per diluted share, for the three months ended October 31, 2020, compared to a net loss of $2.178 million, or $0.79 per diluted share, in the prior year[73] Order Backlog and Working Capital - The Company's order backlog was $96 million at October 31, 2020, compared to $92 million at October 31, 2019[65] - The Company had working capital of $28.53 million at October 31, 2020, compared to $27.171 million at April 30, 2020[75] Cash Flow - Cash used in operations was $516,000 during the six months ended October 31, 2020, primarily due to increases in receivables and inventory[76] COVID-19 Impact - The Company continues to monitor the impact of the COVID-19 pandemic, which remains uncertain and could materially affect business operations[77]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ FORM 10-Q _________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-5286 _________________________ KEWAUNEE SCIENTIFIC CORPORATION (Exact name of registrant as specified in its char ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Kewaunee Scientific designs, manufactures, and installs laboratory and technical furniture for diverse sectors, facing competition and customer concentration with stable order backlog - The company's principal business involves the design, manufacture, and installation of laboratory, healthcare, and technical furniture products, including steel, wood, laminate furniture, fume hoods, and epoxy resin worksurfaces[11](index=11&type=chunk) - Key markets served include pharmaceutical, biotechnology, industrial, chemical research labs, educational institutions, healthcare facilities, and governmental entities[12](index=12&type=chunk) - Sales from two domestic dealers and a national stocking distributor constituted approximately **37% of total sales** in fiscal year 2020, highlighting significant customer concentration[16](index=16&type=chunk) - The order backlog stood at **$100.9 million** as of April 30, 2020, a slight increase from **$100.8 million** at April 30, 2019[17](index=17&type=chunk) Research & Development and Employee Count | Metric | FY 2020 | FY 2019 | | :--- | :--- | :--- | | R&D Expenditure | $1,816,000 | $1,550,000 | | Full-time Employees (Domestic) | 623 | N/A | | Full-time Employees (International) | 289 | N/A | [Risk Factors](index=5&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from intense competition, customer concentration, volatile raw material costs, international geopolitical and currency exposures, cybersecurity threats, trade policy changes, and the COVID-19 pandemic - Substantial sales to two dealers and a national stocking distributor, representing approximately **37% of fiscal year 2020 sales**, pose a material revenue risk if any are lost[31](index=31&type=chunk) - Increases in raw material costs (steel, wood, epoxy resin) and energy prices on fixed-price contracts could negatively impact profitability[32](index=32&type=chunk) - Changes in U.S. trade policy, including tariffs, could increase costs, reduce demand, and adversely affect business operations[43](index=43&type=chunk)[44](index=44&type=chunk) - The COVID-19 pandemic presents significant risks, including business shutdowns, supply chain disruptions, destabilized financial markets, and increased operating expenses from safety measures[46](index=46&type=chunk)[47](index=47&type=chunk)[49](index=49&type=chunk) - Cybersecurity incidents pose a critical risk, potentially resulting in data loss, reputational damage, and financial liability[39](index=39&type=chunk)[40](index=40&type=chunk) [Properties](index=9&type=section&id=Item%202.%20Properties) Kewaunee owns three manufacturing facilities in Statesville, NC, totaling **413,000 square feet**, and leases additional domestic and international warehouse, distribution, and office spaces - The company owns three adjacent manufacturing facilities in Statesville, NC, totaling **413,000 square feet** on 20 acres[52](index=52&type=chunk) - Leased properties include **391,000 square feet** of distribution and warehouse facilities in Statesville, NC, along with sales offices in Illinois and New Jersey[52](index=52&type=chunk) - Internationally, the company leases an **83,000 square foot** manufacturing facility and a **17,000 square foot** office in Bangalore, India, in addition to a sales office in Singapore[52](index=52&type=chunk) [Legal Proceedings](index=9&type=section&id=Item%203.%20Legal%20Proceedings) The company is engaged in routine legal disputes and audits, which management anticipates will not materially impact its financial condition or operations - The company states that pending legal matters and disputes are not expected to have a material adverse effect on its results of operations or financial condition[53](index=53&type=chunk) [Mine Safety Disclosures](index=9&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not Applicable[54](index=54&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=9&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock, KEQU, saw a significant price decline in fiscal year 2020, with cash dividends reduced to **$0.38 per share** and subsequently suspended in December 2019 - The company's common stock is traded on the NASDAQ Global Market under the symbol **KEQU**[56](index=56&type=chunk) Quarterly Stock Prices (High/Low) | Fiscal Year | Quarter | High | Low | | :--- | :--- | :--- | :--- | | **2020** | Q1 | $23.00 | $16.18 | | | Q2 | $18.20 | $15.06 | | | Q3 | $19.57 | $12.30 | | | Q4 | $12.80 | $6.96 | | **2019** | Q1 | $38.80 | $30.50 | | | Q2 | $35.05 | $25.97 | | | Q3 | $34.84 | $22.00 | | | Q4 | $32.70 | $20.21 | - Cash dividends paid per share were **$0.38** in fiscal year 2020, a decrease from **$0.74** in 2019, with the Board of Directors suspending the dividend on December 16, 2019[58](index=58&type=chunk) [Selected Financial Data](index=10&type=section&id=Item%206.%20Selected%20Financial%20Data) In fiscal year 2020, Kewaunee reported **$147.5 million** in net sales, but reversed to an operating loss of **$2.3 million** and a net loss of **$4.7 million**, with declines in total assets and stockholders' equity Selected Operating Statement Data (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net sales | $147,540 | $146,550 | | Gross profit | $23,427 | $25,319 | | Operating earnings (loss) | $(2,345) | $2,112 | | Net earnings (loss) attributable to Kewaunee | $(4,687) | $1,529 | | Diluted EPS | $(1.70) | $0.55 | Selected Balance Sheet & Other Data (in thousands) | Metric | As of April 30, 2020 | As of April 30, 2019 | | :--- | :--- | :--- | | Net working capital | $27,171 | $32,624 | | Total assets | $83,929 | $87,223 | | Total borrowings/long-term debt | $13,913 | $10,926 | | Kewaunee Stockholders' equity | $38,415 | $47,100 | | Capital expenditures | $2,465 | $4,213 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=11&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **0.7% sales increase** in FY2020 to international growth offsetting domestic decline, while a shift to net loss resulted from lower gross profit margins and increased operating expenses due to strategic orders, pandemic impacts, and restructuring, leading to reduced working capital and dividend suspension Sales Performance by Segment (FY2020 vs FY2019) | Segment | FY2020 Sales | FY2019 Sales | Change | | :--- | :--- | :--- | :--- | | Domestic | $115.1 million | $116.6 million | -1.3% | | International | $32.4 million | $30.0 million | +8.3% | | **Total** | **$147.5 million** | **$146.6 million** | **+0.7%** | - Gross profit margin decreased from **17.3%** in FY2019 to **15.9%** in FY2020, primarily due to low-margin strategic orders, including a large Middle East order, and profitability impacts from the coronavirus pandemic[78](index=78&type=chunk) - Operating expenses increased to **$25.8 million** from **$23.2 million**, driven by higher personnel expenses (**$798,000**), incentive compensation (**$385,000**), restructuring expenses (**$312,000**), and bad debt expense (**$299,000**) from the China subsidiary closure[79](index=79&type=chunk) - The company reported a net loss of **$4.7 million** (**$1.70 per share**) in FY2020, a reversal from net earnings of **$1.5 million** (**$0.55 per share**) in FY2019[84](index=84&type=chunk) - Working capital decreased to **$27.2 million** as of April 30, 2020, from **$32.6 million** a year prior, primarily due to lower cash and accounts receivable[94](index=94&type=chunk) - Capital expenditures for FY2021 are anticipated to be approximately **$2.0 million**, primarily focused on modernizing manufacturing capabilities and IT platforms[93](index=93&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=16&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include interest rate fluctuations on its **$4.7 million** floating-rate debt and foreign currency exchange rate volatility, as **23% of fiscal year 2020 net sales** were in non-U.S. dollar currencies - The company is exposed to interest rate risk on its floating-rate bank line of credit, with **$4.7 million** in advances outstanding as of April 30, 2020[108](index=108&type=chunk) - Foreign currency exchange rate risk is significant, as **23% of net sales** in fiscal year 2020 were in non-U.S. dollar currencies, and the company held **$5.2 million** in foreign currency cash at year-end[109](index=109&type=chunk)[111](index=111&type=chunk) [Financial Statements and Supplementary Data](index=17&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for fiscal years 2020 and 2019, highlighting a **$4.7 million net loss** in 2020, the adoption of ASC 842, the China subsidiary restructuring, and CARES Act tax impacts Consolidated Statement of Operations Highlights (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net sales | $147,540 | $146,550 | | Gross profit | $23,427 | $25,319 | | Operating loss | $(2,345) | $2,112 | | Net loss attributable to Kewaunee | $(4,687) | $1,529 | Consolidated Balance Sheet Highlights (in thousands) | Metric | April 30, 2020 | April 30, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $4,365 | $10,647 | | Total Current Assets | $54,231 | $65,357 | | Total Assets | $83,929 | $87,223 | | Total Liabilities | $45,226 | $39,520 | | Total Stockholders' Equity | $38,703 | $47,703 | - In December 2019, the company initiated a restructuring, including closing its China subsidiary, incurring total FY2020 restructuring expenses of **$668,000**, comprising **$380,000** in domestic severance and hiring costs and **$288,000** in international costs, primarily bad debt[230](index=230&type=chunk)[231](index=231&type=chunk) - The company adopted the new lease accounting standard ASU 2016-02 (ASC 842) on May 1, 2019, leading to the recognition of **$9.3 million** in Right-of-Use (ROU) assets on the balance sheet[211](index=211&type=chunk)[212](index=212&type=chunk) - The CARES Act, enacted in March 2020, enables the company to carry back its fiscal year 2020 net operating loss (NOL) to prior years with higher tax rates, generating a tax benefit[191](index=191&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=45&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope - None reported[236](index=236&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of April 30, 2020, despite a noted administrative error in Form 8-K filing that has been remediated - Management concluded that disclosure controls and procedures are effective, despite an administrative error causing a late Form 8-K filing, for which remediation has occurred[236](index=236&type=chunk) - Based on an evaluation using the COSO framework, management concluded the company maintained effective internal control over financial reporting as of April 30, 2020[237](index=237&type=chunk) [Other Information](index=45&type=section&id=Item%209B.%20Other%20Information) No other information was reported for this period - None[241](index=241&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=46&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section provides biographical information for executive officers and incorporates director and audit committee details by reference from the proxy statement, with the code of ethics available online - This section lists the names, ages, positions, and business experience of nine executive officers, including **Thomas D. Hull III** (President and CEO) and **Donald T. Gardner III** (CFO)[244](index=244&type=chunk)[245](index=245&type=chunk) - Information concerning the Board of Directors and the Audit Committee is incorporated by reference from the company's proxy statement[243](index=243&type=chunk)[255](index=255&type=chunk) [Executive Compensation](index=47&type=section&id=Item%2011.%20Executive%20Compensation) All executive compensation information, including discussion, tables, and agreements, is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the Proxy Statement[257](index=257&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=48&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section incorporates security ownership information by reference from the proxy statement and details securities authorized for issuance under equity compensation plans as of April 30, 2020 Equity Compensation Plan Information (as of April 30, 2020) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities available for future issuance | | :--- | :--- | :--- | :--- | | **Approved by Security Holders** | | | | | 2008 Key Employee Stock Option Plan | 88,000 | $18.45 | — | | 2017 Omnibus Incentive Plan | 52,850 | — | 251,288 | | **Not Approved by Security Holders** | — | — | — | | **Total** | **140,850** | | **251,288** | [Certain Relationships and Related Transactions, and Director Independence](index=48&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related party transactions, and director independence is incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the Proxy Statement[259](index=259&type=chunk) [Principal Accountant Fees and Services](index=48&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Details regarding fees paid to Ernst & Young LLP for audit and non-audit services are incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the Proxy Statement[260](index=260&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=49&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Form 10-K, including consolidated financial statements and a detailed exhibit index of contracts, governance documents, and certifications - This section lists the consolidated financial statements and the consent of the independent registered public accounting firm, **Ernst & Young LLP**, filed with the report[263](index=263&type=chunk) - A detailed Exhibit Index is provided, listing material contracts, articles of incorporation, bylaws, credit agreements, employee compensation plans, and certifications by the CEO and CFO[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Kewaunee Scientific Corporation reported a **$3.6 million net loss** for the nine months ended January 31, 2020, due to declining gross margins and rising operating expenses [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales increased to **$34.2 million** (Q3) and **$113.3 million** (9M), but rising operating expenses led to net losses of **$1.9 million** and **$3.6 million** respectively Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Jan 31, 2020 | Three Months Ended Jan 31, 2019 | Nine Months Ended Jan 31, 2020 | Nine Months Ended Jan 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $34,225 | $32,372 | $113,283 | $111,802 | | **Gross Profit** | $5,278 | $5,230 | $18,540 | $20,477 | | **Operating Earnings (Loss)** | $(2,072) | $(2) | $(1,335) | $3,667 | | **Net Earnings (Loss) Attributable to Kewaunee** | $(1,918) | $(22) | $(3,625) | $2,799 | | **Diluted EPS** | $(0.70) | $(0.01) | $(1.32) | $1.00 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive loss was **$1.9 million** for Q3 and **$3.6 million** for the nine-month period, reversing prior year comprehensive income Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended Jan 31, 2020 | Three Months Ended Jan 31, 2019 | Nine Months Ended Jan 31, 2020 | Nine Months Ended Jan 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | **Net Earnings (Loss)** | $(1,901) | $15 | $(3,566) | $2,885 | | **Other Comprehensive Income (Loss)** | $(26) | $495 | $(8) | $(613) | | **Comprehensive Income (Loss) Attributable to Kewaunee** | $(1,944) | $473 | $(3,633) | $2,186 | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$84.4 million**, liabilities increased to **$41.4 million**, and stockholders' equity declined to **$42.9 million** Balance Sheet Comparison (in thousands) | Account | Jan 31, 2020 (Unaudited) | April 30, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $53,221 | $65,357 | | **Total Assets** | $84,361 | $87,223 | | **Total Current Liabilities** | $25,496 | $32,733 | | **Total Liabilities** | $41,412 | $39,520 | | **Total Stockholders' Equity** | $42,949 | $47,703 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities provided **$4.6 million** cash, while financing activities used **$8.2 million**, leading to a **$5.1 million** decrease in cash Cash Flow Summary (Nine Months Ended Jan 31, in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $4,611 | $4,534 | | **Net cash used in investing activities** | $(1,371) | $(2,290) | | **Net cash used in financing activities** | $(8,156) | $(1,234) | | **Increase (decrease) in cash** | $(5,093) | $419 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail lease standard adoption, credit facility amendment, foreign earnings reinvestment change, and a **$628,000** restructuring cost - The company adopted the new lease standard (ASU 2016-02) on May 1, 2019, recognizing Right-of-Use (ROU) assets of **$11.1 million** as of January 31, 2020[45](index=45&type=chunk)[46](index=46&type=chunk) - In December 2019, the company amended its loan agreement to an asset-based lending arrangement with new financial covenants, including minimum liquidity and EBITDA requirements[44](index=44&type=chunk)[81](index=81&type=chunk) - Effective August 1, 2019, the company amended its assertion on the indefinite reinvestment of foreign unremitted earnings for its Singapore, China, and India subsidiaries[52](index=52&type=chunk) - A restructuring initiated in December 2019 incurred expenses of **$628,000** for the quarter, consisting of domestic severance and costs related to the closure of the China subsidiary[64](index=64&type=chunk)[65](index=65&type=chunk) Disaggregated Revenue (Nine Months Ended Jan 31, 2020, in thousands) | Revenue Type | Domestic | International | Total | | :--- | :--- | :--- | :--- | | Over Time | $83,292 | $25,713 | $109,005 | | Point in Time | $4,278 | $— | $4,278 | | **Total** | **$87,570** | **$25,713** | **$113,283** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses sales growth, declining gross margins, surging operating expenses from restructuring, and plans for profitability improvement [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Q3 sales rose to **$34.2 million**, 9-month sales to **$113.3 million**, but gross margin declined and operating expenses increased due to restructuring Sales Performance (in thousands) | Period | Total Sales | YoY Change | Domestic Sales | International Sales | | :--- | :--- | :--- | :--- | :--- | | **Q3 FY20** | $34,225 | +5.7% | $26,699 | $7,526 | | **9M FY20** | $113,283 | +1.3% | $87,570 | $25,713 | - Gross profit margin decreased in Q3 to **15.4%** from **16.2%** YoY, and for the nine-month period to **16.4%** from **18.3%** YoY, due to aggressively priced low-margin orders[70](index=70&type=chunk) - Q3 operating expenses rose to **$7.4 million** (**21.5%** of sales) from **$5.2 million** (**16.2%** of sales) YoY, primarily due to **$559,000** in restructuring costs, increased marketing, and higher administrative wages[71](index=71&type=chunk) - The company initiated a restructuring plan in December 2019, which is expected to generate annual cost savings between **$1.0 million** and **$1.3 million**[73](index=73&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital decreased to **$27.7 million**, credit facility availability was **$10.2 million**, and financing activities used **$8.2 million** for debt reduction Liquidity Position (in thousands) | Metric | Jan 31, 2020 | April 30, 2019 | | :--- | :--- | :--- | | **Working Capital** | $27,725 | $32,624 | | **Current Ratio** | 2.1-to-1.0 | 2.0-to-1.0 | | **Credit Facility Availability** | $10,200 | $5,300 | | **Outstanding Advances** | $4,000 | $9,500 | - In December 2019, the company amended its credit facility to an asset-based lending arrangement, which replaced prior financial covenants with new ones, including minimum monthly liquidity and EBITDA requirements[81](index=81&type=chunk) - For the nine months ended Jan 31, 2020, financing activities used **$8.2 million**, mainly for a **$5.5 million** reduction in short-term borrowings, **$1.0 million** in dividends to stockholders, and **$1.3 million** in long-term debt repayments[82](index=82&type=chunk) [Outlook](index=21&type=section&id=Outlook) Outlook emphasizes improving profitability via restructuring and investments, acknowledging challenges like demand visibility and rising raw material costs - The company is focused on improving profitability through short-term restructuring and a multi-year plan to invest in manufacturing and IT to improve competitiveness[83](index=83&type=chunk) - Key challenges include limited demand visibility, fluctuations in project pricing, and managing increases in raw material costs[83](index=83&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=21&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures have occurred since the Annual Report on Form 10-K for fiscal year ended April 30, 2019 - There are no material changes to the disclosures on market risk from the Annual Report on Form 10-K for the fiscal year ended April 30, 2019[85](index=85&type=chunk) [Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no significant changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that as of January 31, 2020, the Company's disclosure controls and procedures were adequate and effective[87](index=87&type=chunk) - No significant changes occurred in the Company's internal control over financial reporting during the most recent fiscal quarter[88](index=88&type=chunk) [PART II. OTHER INFORMATION](index=23&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors, except for new risks related to the coronavirus outbreak impacting manufacturing, project schedules, and supply chain - A new risk factor has been identified concerning the coronavirus outbreak, which could disrupt manufacturing, project schedules, and labor availability[91](index=91&type=chunk) - The company sources key supplies from China, and the coronavirus outbreak could lead to shortages and production delays if alternative sources are not found[92](index=92&type=chunk) [Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists key exhibits filed with the Form 10-Q, including credit agreement amendments and CEO/CFO certifications - Key exhibits filed include the Eighth Amendment to the Credit and Security Agreement, CEO/CFO certifications, and XBRL data files[93](index=93&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ FORM 10-Q _________________________ 2700 West Front Street Statesville, North Carolina 28677-2927 (Address of principal executive offices) (Zip Code) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _ ...

PART I. FINANCIAL INFORMATION This section presents financial statements, management's analysis of operations and liquidity, market risk, and internal controls [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Q1 FY20 financial statements reflect decreased sales and earnings, asset/liability growth from new lease accounting, and negative operating cash flow [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net sales decreased 6.7% to **$39.3 million**, leading to a significant drop in operating and net earnings Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended July 31, 2019 (USD) | Three Months Ended July 31, 2018 (USD) | | :--- | :--- | :--- | | Net sales | $39,336,000 | $42,152,000 | | Gross profit | $6,946,000 | $7,583,000 | | Operating earnings | $776,000 | $1,820,000 | | Net earnings attributable to Kewaunee | $471,000 | $1,489,000 | | Diluted EPS | $0.17 | $0.53 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income decreased to **$666 thousand** due to lower net earnings, partially offset by positive foreign currency translation Comprehensive Income (Unaudited, in thousands) | Metric | Three Months Ended July 31, 2019 | Three Months Ended July 31, 2018 | | :--- | :--- | :--- | | Net earnings | $496 | $1,498 | | Other comprehensive income (loss) | $195 | $(384) | | Comprehensive income attributable to Kewaunee | $666 | $1,105 | [Condensed Consolidated Statement of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Stockholders%27%20Equity) Stockholders' equity slightly increased to **$47.3 million** due to net earnings and other comprehensive income, partially offset by cash dividends - Cash dividends of **$0.19 per share**, totaling **$522 thousand**, were paid during the three months ended July 31, 2019[15](index=15&type=chunk) Change in Stockholders' Equity (in thousands) | Description | Amount | | :--- | :--- | | Balance at April 30, 2019 | $47,100 | | Net earnings | $471 | | Other comprehensive income | $195 | | Cash dividends paid | $(522) | | Stock based compensation | $60 | | **Balance at July 31, 2019** | **$47,304** | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$98.5 million** and liabilities to **$50.6 million**, driven by new lease accounting standard adoption Balance Sheet Comparison (in thousands) | Metric | July 31, 2019 (Unaudited) | April 30, 2019 | | :--- | :--- | :--- | | Total Current Assets | $69,002 | $65,357 | | Total Assets | $98,541 | $87,223 | | Total Current Liabilities | $38,032 | $32,733 | | Total Liabilities | $50,604 | $39,520 | | Total Stockholders' Equity | $47,937 | $47,703 | - The company adopted a new lease standard, resulting in the recognition of **$6.8 million** in Right of Use assets and corresponding operating lease liabilities on the balance sheet as of July 31, 2019[18](index=18&type=chunk)[35](index=35&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities used **$407 thousand** in cash, offset by **$2.9 million** provided by financing activities from increased borrowings Cash Flow Summary (Unaudited, in thousands) | Cash Flow Activity | Three Months Ended July 31, 2019 | Three Months Ended July 31, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(407) | $(2,829) | | Net cash used in investing activities | $(1,183) | $(610) | | Net cash provided by financing activities | $2,934 | $2,856 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation, new lease standard adoption, credit facility waiver, segment performance, and increased tax rate - The company adopted the new lease standard ASU 2016-02 on May 1, 2019, recognizing Right-of-Use (ROU) assets of **$6.8 million** and corresponding lease liabilities[35](index=35&type=chunk)[36](index=36&type=chunk) - The company received a waiver for noncompliance with financial covenants on its credit facility on June 19, 2019, and subsequently amended the covenants[34](index=34&type=chunk) - The effective tax rate increased to **25.4%** from **20.9%** in the prior year, primarily due to increased foreign operations and GILTI tax[43](index=43&type=chunk) Disaggregated Revenue by Segment (Q1 FY20, in thousands) | Revenue Type | Domestic | International | Total | | :--- | :--- | :--- | :--- | | Over Time | $28,235 | $10,049 | $38,284 | | Point in Time | $1,052 | $— | $1,052 | | **Total** | **$29,287** | **$10,049** | **$39,336** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **6.7%** sales decline, stable backlog, and liquidity management, with a cautious outlook focused on India expansion [Results of Operations](index=15&type=section&id=Results%20of%20Operations) Quarterly sales fell **6.7%** to **$39.3 million** due to **18.8%** Domestic sales decline, offset by **65.2%** International surge, with slight gross profit margin decrease Sales Performance by Segment (Q1 FY20 vs Q1 FY19) | Segment | Q1 FY20 Sales (USD) | Q1 FY19 Sales (USD) | % Change | | :--- | :--- | :--- | :--- | | Domestic | $29,287,000 | $36,070,000 | -18.8% | | International | $10,049,000 | $6,082,000 | +65.2% | | **Total** | **$39,336,000** | **$42,152,000** | **-6.7%** | - The company's order backlog was **$102 million** at July 31, 2019, consistent with the prior year and slightly up from **$101 million** at April 30, 2019[56](index=56&type=chunk) - Gross profit margin decreased from **18.0%** to **17.7%** year-over-year, primarily due to lower sales volume, unfavorable product mix, and competitive international pricing[57](index=57&type=chunk) [Liquidity and Capital Resources](index=16&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital decreased to **$31.0 million**, with **$407 thousand** cash used in operations, while liquidity was maintained by increasing revolving credit facility borrowings to **$13.3 million** Liquidity Metrics (in thousands) | Metric | July 31, 2019 | April 30, 2019 | | :--- | :--- | :--- | | Working Capital | $30,970,000 | $32,624,000 | | Current Ratio | 1.8-to-1.0 | 2.0-to-1.0 | | Revolver Advances Outstanding | $13,300,000 | $9,500,000 | - Operations used **$407 thousand** in cash, while financing activities provided **$2.9 million**, primarily from a net increase in short-term borrowings of **$3.8 million**[65](index=65&type=chunk)[66](index=66&type=chunk) [Outlook](index=16&type=section&id=Outlook) Management's outlook is cautious due to demand unpredictability and earnings risks, but the company is investing in leadership and India capabilities for market opportunities - The company is recovering from a decline in Domestic volume and is investing in its leadership team and commercial focus[67](index=67&type=chunk) - Strategic initiatives include increasing capabilities in India to better serve customers in a market perceived as healthy[67](index=67&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=17&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures have occurred since the Annual Report on Form 10-K for the fiscal year ended April 30, 2019 - There are no material changes to the disclosures regarding market risk from the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2019[70](index=70&type=chunk) [Controls and Procedures](index=17&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of July 31, 2019, with no significant changes to internal controls over financial reporting - The CEO and CFO concluded that as of July 31, 2019, the company's disclosure controls and procedures were adequate and effective[71](index=71&type=chunk) - No significant changes occurred in the company's internal control over financial reporting during the most recent fiscal quarter[72](index=72&type=chunk) PART II. OTHER INFORMATION This section lists all exhibits filed with the Form 10-Q, including credit agreement amendments and required certifications [Exhibits](index=18&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including credit agreement amendments, a default waiver, and CEO/CFO certifications - Exhibits filed include amendments to the Credit and Security Agreement, a Default Waiver Letter, and a new Security Agreement with Wells Fargo Bank[74](index=74&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 were filed[74](index=74&type=chunk) Signatures The report was signed on September 6, 2019, by Donald T. Gardner III, Vice President, Finance and Chief Financial Officer - The report was signed on September 6, 2019, by Donald T. Gardner III, in his capacity as Vice President, Finance and Chief Financial Officer[77](index=77&type=chunk)