Kewaunee Scientific Announces Results for Third Quarter

Mar 02, 2011, 08:42 ET from Kewaunee Scientific Corporation

STATESVILLE, N.C., March 2, 2011 /PRNewswire/ -- Kewaunee Scientific Corporation (Nasdaq: KEQU) today announced results for its third quarter ended January 31, 2011.

Sales for the quarter were $22,568,000, up 3.5% from sales of $21,814,000 in the same period last year. Net earnings were $86,000, or $0.03 per diluted share, down from $621,000, or $0.24 per diluted share, in the same period last year.

Sales for the quarter were unfavorably affected when customers made changes to product designs and delivery dates for several significant orders, including one large international order, that delayed the start of manufacturing and shipments until late in the quarter and into the fourth quarter. Sales also reflect a continuing softness in the domestic marketplace for small and mid-sized laboratory projects.

The customer changes in product requirements and delivery dates had a two-fold impact on earnings for the quarter, as delays in shipments reduced sales revenue, and changes in factory production schedules increased manufacturing costs. Earnings were also impacted by continued aggressive pricing in all of the Company's markets, an unfavorable product mix, and higher prices paid for epoxy resin raw materials, which are petroleum-based products.

Sales from domestic operations were $19,108,000, relatively flat from sales of $19,081,000 in the same period last year.  Sales from international operations increased to $3,460,000, from sales of $2,733,000 in the same period last year. The order backlog increased to $68.2 million at January 31, 2011, up from $66.0 million at October 31, 2010 and $65.5 million at January 31, 2010.  

"The third quarter was more difficult than expected," said William A. Shumaker, President and Chief Executive Officer.  "The manufacturing and shipment delays resulting from customer changes and the unfavorable product mix brought unexpected operational challenges. We have adjusted our manufacturing schedules, and the orders that were delayed are now being manufactured and are scheduled for shipment in the fourth quarter.

"In the domestic marketplace, larger laboratory furniture projects have continued to hold up relatively well during the economic slowdown, and bidding activity for these projects continues to remain at a high level. On the other hand, a sustained improvement in the number of smaller laboratory projects has not materialized. Opportunities in the international marketplace have continued to improve for some time now, and the Company is very active in quoting these projects.

"We have begun to see benefits from our recently expanded epoxy resin facility in Statesville, as production of these products increased significantly during the quarter. Other initiatives continued to make good progress, as we successfully closed several orders in the quarter for our new product lines of biological safety cabinets, casework and millwork for the healthcare industry, and specialty safety cabinets.

"Regarding the fourth quarter, with the delayed orders now shipping and the product mix improved, we expect sales and earnings will be much improved over the third quarter and more in line with the first two quarters of the current fiscal year."

Sales for the nine months ended January 31, 2011 were $73,051,000, down 2.8% from sales of $75,151,000 in the same period last year. Domestic sales for the nine months were $62,324,000, down from sales of $67,152,000 in the same period last year.  Sales from international operations were $10,727,000 for the nine months, up from sales of $7,999,000 in the same period last year. Net earnings for the nine months ended January 31, 2011 were $1,598,000, or $0.62 per diluted share, down from net earnings of $3,044,000, or $1.18 per diluted share, in the same period last year.

The Company's financial condition continues to be strong. Cash on hand was $2,704,000 at January 31, 2011, as compared to $2,443,000 at January 31, 2010. Working capital was $21,341,000, up slightly from $21,327,000 at January 31, 2010. Short term borrowings under the bank line of credit were $696,000, down from $2,909,000 at January 31, 2010. Total bank borrowings and capital lease obligations were $4,752,000, up from $3,144,000 at January 31, 2010.

Kewaunee Scientific Corporation is a recognized leader in the design, manufacture, and installation of scientific and technical furniture. The Company's corporate headquarters are located in Statesville, North Carolina. The Company's manufacturing facilities are located in Statesville and Bangalore, India. The Company has subsidiaries in Singapore and Bangalore that serve the Asian and Middle East markets. Kewaunee Scientific's website is located at http://www.kewaunee.com.

Certain statements in this release constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to, economic, competitive, governmental, and technological factors affecting the Company's operations, markets, products, services, and prices.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

Three Months Ended

January 31

Nine Months Ended

January 31

2011

2010

2011

2010

Net sales

$22,568

$21,814

$73,051

$75,151

Cost of products sold

18,405

17,129

58,472

58,492

Gross profit

4,163

4,685

14,579

16,659

Operating expenses

4,007

3,663

11,953

11,605

Operating earnings

156

1,022

2,626

5,054

Other expense

1

--

--

--

Interest income (expense)

17

(35)

(105)

(115)

Earnings before income taxes

174

987

2,521

4,939

Income tax expense

49

333

792

1,673

Net earnings

125

654

1,729

3,266

Less: net earnings attributable to

    the noncontrolling interest

39

33

131

222

Net earnings attributable to

    Kewaunee Scientific Corporation

$86

$621

$1,598

$3,044

Net earnings per share attributable to

    Kewaunee Scientific Corporation stockholders

          Basic

$0.03

$0.24

$0.62

$1.19

          Diluted

$0.03

$0.24

$0.62

$1.18

Weighted average number of common

    shares outstanding (in thousands)

          Basic

2,576

2,569

2,574

2,562

          Diluted

2,592

2,581

2,583

2,570

Condensed Consolidated Balance Sheets

(in thousands)

January 31

April 30

2011

2010

(unaudited)

Assets

Cash and cash equivalents

$2,160

$1,722

Restricted cash

544

544

Receivables, less allowances

21,056

26,169

Inventories

10,521

8,350

Prepaid expenses and other current assets

1,831

1,797

  Total current assets

36,112

38,582

Net property, plant and equipment

16,697

13,815

Other assets

4,383

4,224

Total Assets

$57,192

$56,621

Liabilities and Equity

Short-term borrowings

$696

$4,872

Current obligations under capital leases

81

82

Current portion of long-term debt

200

--

Accounts payable

8,415

9,540

Other current liabilities

5,379

4,003

  Total current liabilities

14,771

18,497

Other non-current liabilities

9,879

6,452

  Total liabilities

24,650

24,949

Noncontrolling interest

1,349

1,239

Kewaunee Scientific Corporation equity

31,193

30,433

  Total equity

32,542

31,672

Total Liabilities and Equity

$57,192

$56,621

Contact:

D. Michael Parker

704/871-3290

SOURCE Kewaunee Scientific Corporation



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