Item 1. Business - ------------------
General
The principal business of the Registrant is the design, manufacture and installation of scientific and technical furniture. These products are primarily sold through purchase orders and contracts submitted by customers, through the Registrant's dealers and commissioned agents, a national distributor, and through competitive bids submitted by the Registrant.
The Company's operations are classified into two business segments: laboratory products and technical products. The laboratory products segment principally designs, manufactures, and installs steel and wood laboratory furniture, worksurfaces, and fume hoods. Laboratory products are sold principally to pharmaceutical, biotechnology, industrial, chemical and commercial research laboratories, educational institutions, health care institutions, and governmental entities. The technical products segment principally manufactures and sells technical furniture including network storage systems, workstations, workbenches, computer enclosures, and related accessories. Technical products are sold principally to manufacturing facilities and users of computer and networking furniture.
It is common in the laboratory furniture industry for customer orders to require delivery at extended future dates, because the products are frequently to be installed in buildings yet to be constructed. Changes or delays in building construction may cause delays in delivery of the orders. Since prices are normally quoted on a firm basis in the industry, the Registrant bears the burden of possible increases in labor and material costs between receipt of an order and delivery of the product.
The need for working capital and the credit practices of the Registrant are comparable to those of other companies selling similar products in similar markets. Payments for the Registrant's laboratory products are received over longer periods of time than payments for many other types of manufactured products, thus requiring increased working capital. In addition, payment terms associated with certain projects provide for a retention amount until completion of the project, thus also increasing required working capital.
The principal raw materials and products manufactured by others used by the Registrant in its products are cold-rolled carbon and stainless steel, hardwood lumber and plywood, paint, chemicals, resins, hardware, plumbing and electrical fittings. Such materials and products are purchased from multiple suppliers and are readily available.
The Registrant holds various patents and patent rights but does not consider that its success or growth is dependent upon its patents or patent rights. The Registrant's business is not dependent upon licenses, franchises or concessions.
The Registrant's business is not cyclical, although sales are sometimes lower during the Registrant's third quarter because of slower construction activity in certain areas of the country during the winter months. The Registrant's business is not dependent on any one or a few customers; however, sales to VWR Scientific Products represented 11 percent, 12 percent, and 13 percent of the Registrant's total sales in fiscal years 2000, 1999 and 1998, respectively.
The Registrant's sales order backlog at April 30, 2000 was $31.5 million, up from $27.0 million and $24.9 million at April 30, 1999 and 1998, respectively. All but $1.6 million of the backlog at April 30, 2000 was scheduled for shipment during fiscal year 2001; however, it may reasonably be expected that delays in shipments will occur because of customer rescheduling or delay in completion of projects which involve the installation of the Registrant's products. Based on past experience, the Registrant expects that more than 90 percent of its backlog scheduled for shipment in fiscal year 2001 will be shipped during that year.
Competition
The Registrant considers the industries in which it competes to be highly competitive and believes that the principal competitive factors are price, product performance, and customer service. A significant portion of the business of the Registrant is based upon competitive public bidding.
Research and Development
The amount spent during the fiscal year ended April 30, 2000 on company-sponsored research and development activities related to new products or services or improvement of existing products or services was $783,046. The amounts spent for similar purposes in the fiscal years ended April 30, 1999 and 1998 were $773,816 and $822,132, respectively.
Environmental Compliance
In the last three fiscal years, compliance with federal, state or local provisions enacted or adopted regulating the discharge of materials into the environment has had no material effect on the Registrant. There is no material capital expenditures anticipated for such purposes, and no material effect therefrom is anticipated on the earnings or competitive position of the Registrant.
Employees
The number of persons employed by the Registrant at April 30, 2000 was 606.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain statements included and referenced in this report, including the Letter to Stockholders, narrative text, captions and Management's Discussion and Analysis of Financial Condition and Results of Operations, constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). 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. The cautionary statements made pursuant to the Reform Act herein and elsewhere by the Company should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Company prior to the effective date of the Reform Act. The Company cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. In addition, readers are urged to consider statements that include the terms "believes," "belief," "expects," "plans," "objectives," "anticipates," "intends" or the like to be uncertain and forward-looking.
Item 2.
Item 2. Properties - --------------------
The Registrant owns and operates three plants in Statesville, North Carolina and one in Lockhart, Texas. The plants are involved in the production of the Registrant's products.
The plants in Statesville, North Carolina are located in three separate adjacent buildings, which contain manufacturing facilities. Sales and marketing, administration, engineering and drafting personnel and facilities are also located in each of the three buildings. The Registrant's corporate offices are located in the largest building. The plant buildings together comprise approximately 382,000 square feet and are located on approximately 20 acres of land. In addition, the Registrant leases warehouse space of 71,000 square feet in Statesville, North Carolina.
The plant in Lockhart, Texas is housed in a building of approximately 129,000 square feet located on approximately 30 acres. In addition, a separate 10,000 square foot office building on this site houses certain administrative personnel.
All of the facilities, which the Registrant owns, are held free and clear of any encumbrances. The Registrant believes its facilities are suitable for their respective uses and are adequate for its current needs.
Item 3.
Item 3. Legal Proceedings - ---------------------------
Form time to time, the Registrant is involved in certain disputes and litigation relating to claims arising out of its operations in the ordinary course of business. Further, the Registrant periodically is subject to government audits and inspections. The Registrant believes that any such matters presently pending will not, individually or in the aggregate, have a material adverse effect on the Registrant's results of operations or financial condition.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders - -------------------------------------------------------------
Not Applicable.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters - -------------------------------------------------------------------------------
Incorporated by reference from the Registrant's annual report to stockholders for the fiscal year ended April 30, 2000, page 22, sections entitled "Range of Market Prices" and "Quarterly Financial Data". As of July 7, 2000, the Registrant estimates there were approximately 1,300 stockholders of Kewaunee common shares, of which 334 were stockholders of record.
Item 6.
Item 6. Selected Financial Data - ---------------------------------
Incorporated by reference from the Registrant's annual report to stockholders for the fiscal year ended April 30, 2000, page 21, section entitled "Summary of Selected Financial Data."
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------- Results of Operations ---------------------
Incorporated by reference from the Registrant's annual report to stockholders for the fiscal year ended April 30, 2000, pages 8-9, section entitled "Management's Discussion and Analysis".
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk - --------------------------------------------------------------------
The Registrant is exposed to market risk in the area of interest rates. This exposure is directly related to the Registrant's credit facility, which is priced on a floating rate basis. At April 30, 2000, advances of $2,555,000 were outstanding under the revolving credit portion of the credit facility. Based on this balance and the Registrant's expected use of the credit facility, the Registrant believes that its exposure to market risk is not material. The Registrant has not historically used interest rate swaps or other derivative financial instruments for the purpose of hedging fluctuations in interest rates on its floating rate debt.
Item 8.
Item 8. Financial Statements and Supplementary Data - -----------------------------------------------------
Incorporated by reference from the Registrant's annual report to stockholders for the fiscal year ended April 30, 2000, pages 10-20.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and - ------------------------------------------------------------------------- Financial Disclosure --------------------
Not Applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant - ------------------------------------------------------------
(a) Incorporated by reference from the Registrant's proxy statement for use in connection with its annual meeting of stockholders to be held on August 23, 2000, pages 1-4, section entitled "Election of Directors".
(b) The names and ages of the Registrant's executive officers and their business experience during the past five years are set forth below:
Executive Officers of the Registrant ------------------------------------
Name Age Position ---- --- --------
Eli Manchester, Jr. 69 Chairman and Chief Executive Officer
William A. Shumaker 52 President and Chief Operating Officer
D. Michael Parker 48 Vice President-Finance, Chief Financial Officer, Treasurer and Secretary
James J. Rossi 58 Vice President-Human Resources
Kurt P. Rindoks 42 Vice President of Engineering and General Manager of the Resin Materials Division - Laboratory Products Group
Eli Manchester, Jr. was elected a director of the Registrant in November 1990. He was elected President and Chief Executive Officer of the Registrant on July 11, 1990. In August 1999 he was elected Chairman, retaining the position of Chief Executive Officer.
William A. Shumaker was elected a director of the Registrant February 2000 and President of the Registrant in August 1999. He has served as the Chief Operating Officer since August 1998 when he was also elected as Executive Vice President. Mr. Shumaker served as Vice President and General Manager of the Laboratory Products Group from February 1998 to August 1998. He joined the Registrant in December 1993 as Vice President of Sales and Marketing.
D. Michael Parker joined the Registrant in November 1990 as Director of Financial Reporting and Accounting and was promoted to Corporate Controller in November 1991. Mr. Parker has served as Vice President of Finance, Chief Financial Officer, Treasurer and Secretary since August 1995.
James J. Rossi joined the Registrant in March 1984 as Corporate Director of Human Resources and has served as Vice President of Human Resources since January 1996.
Kurt P. Rindoks joined the Registrant in July 1985 as an engineer and was promoted to Director of Engineering in July 1999 and to Director of Product Development in May 1992. He served as Vice President of Engineering and New Product Development for the Laboratory Products Group from September 1996 through April 1998 and has served as Vice President of Engineering and General Manager of the Resin Materials Division for the Laboratory Products Group since May 1998.
Item 11.
Item 11. Executive Compensation - --------------------------------
Incorporated by reference from the Registrant's proxy statement for use in connection with its annual meeting of stockholders to be held on August 23, 2000, pages 5-7, section entitled "Executive Compensation," pages 8-9, section entitled "Compensation Committee Report on Executive Compensation," and page 11, section entitled "Agreements with Certain Executives."
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------
Incorporated by reference from the Registrant's proxy statement for use in connection with its annual meeting of stockholders to be held on August 23, 2000, pages 12-13, sections entitled "Security Ownership of Directors and Executive Officers" and "Security Ownership of Certain Beneficial Owners."
Item 13.
Item 13. Certain Relationships and Related Transactions - --------------------------------------------------------
Incorporated by reference from the Registrant's proxy statement for use in connection with its annual meeting of stockholders to be held on August 23, 2000, pages 1-4, section entitled "Election of Directors" and page 11, section entitled "Agreements with Certain Executives."
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - -------------------------------------------------------------------------
The following documents are filed or incorporated by reference as part of this report:
Page or (a)(1) Financial Statements Reference -------------------- ---------
Statements of Operations Years ended April 30, 2000, 1999 and 1998 10*
Statements of Stockholders' Equity Years ended April 30, 2000, 1999 and 1998 10*
Balance Sheets - April 30, 2000 and 1999 11*
Statements of Cash Flows - Years ended April 30, 2000, 1999 and 1998 12*
Notes to Financial Statements 13-19*
Report of Independent Accountants 20*
(a)(2) Financial Statement Schedule ----------------------------
Report of Independent Accountants on Financial Statement Schedules 10
Schedule II - Valuation and Qualifying Accounts 11
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.
(a)(3) Exhibits --------
Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index, which is attached hereto at pages S-2 through S-6 and which is incorporated herein by reference.
(b) Reports on Form 8-K -------------------
No reports on Form 8-K were filed during the Registrant's fiscal year ended April 30, 2000.
______________
* Matters incorporated by reference to the page numbers shown in the Registrant's annual report to stockholders for the year ended April 30, 2000.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Stockholders and Board of Directors of Kewaunee Scientific Corporation
Our audits of the financial statements referred to in our report dated May 31, 2000 appearing in the 2000 Annual Report to Shareholders of Kewaunee Scientific Corporation (which report and financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of Page 1 of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, Page 1 of this Financial Statement Schedule related to fiscal years ended April 30, 2000, 1999 and 1998 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements.
PRICEWATERHOUSECOOPERS LLP Charlotte, North Carolina May 31, 2000
Schedule II, Page 1
Kewaunee Scientific Corporation Valuation and Qualifying Accounts ($ in thousands)
* Uncollectible accounts written off, net of recoveries.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KEWAUNEE SCIENTIFIC CORPORATION
By: /s/ Eli Manchester, Jr. ------------------------- Eli Manchester, Jr. Chairman and Chief Executive Officer
Date: July 20, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of the Registrant and in the capacities and on the dates indicated have signed this report below.
S-1
KEWAUNEE SCIENTIFIC CORPORATION
Exhibit Index -------------
Page Number (or Reference) --------------
3 Articles of incorporation and by-laws
3.1 Restated Certificate of incorporation (as amended) (3)
3.2 By-Laws (as amended as of August 28, 1991) (6)
3.3 Amendment dated August 26, 1999 to the Bylaws of Kewaunee Scientific Corporation (14)
10 Material Contracts
10.9 Kewaunee Scientific Corporation Supplemental Retirement Plan (4)
10.13 Kewaunee Scientific Corporation 1985 Re-Established Retirement Plan for Salaried Employees (2)
10.13A First Amendment dated June 4, 1996 to the Kewaunee Scientific Corporation 1985 Re-Established Retirement Plan for Salaried Employees (11)
10.13B Second Amendment dated November 19, 1996 to the Kewaunee Scientific Corporation 1985 Re-Established Retirement Plan for Salaried Employees (11)
10.14 Kewaunee Scientific Corporation 1985 Re-Established Retirement Plan for Hourly Employees (2)
10.14A First Amendment dated August 27, 1996 to the Kewaunee Scientific Corporation 1985 Re-Established Retirement Plan for Hourly Employees (11)
10.14B Second Amendment dated November 19, 1996 to the Kewaunee Scientific Corporation 1985 Re-Established Retirement Plan for Hourly Employees (11)
S-2
Page Number (or Reference) --------------
10.19 Kewaunee Scientific Corporation 1991 Key Employee Stock Option Plan (5)
10.19A First Amendment dated August 28, 1996 to the Kewaunee Scientific Corporation Key Employee Stock Option Plan (10)
10.19B Second Amendment dated August 26, 1998 to the Kewaunee Scientific Corporation Key Employee Stock Option Plan (13)
10.21 Kewaunee Scientific Corporation Executive Deferred Compensation Plan (6)
10.21A Second Amendment dated June 17, 1997 to the Kewaunee Scientific Corporation Executive Deferred Compensation Plan (12)
10.21B Third Amendment dated June 17, 1997 to the Kewaunee Scientific Corporation Executive Deferred Compensation Plan (12)
10.21C Fourth Amendment dated December 1, 1998 to the Kewaunee Scientific Corporation Executive Deferred Compensation Plan (13)
10.25 Employment Agreement dated as of December 7, 1993 between William A. Shumaker and the Registrant (8)
10.26 Kewaunee Scientific Corporation Stock Option Plan for Directors (7)
10.34 401(K) Incentive Savings Plan for Salaried and Hourly Employees of Kewaunee Scientific Corporation (9)
10.34A Amendments (2) dated June 17, 1997 to the 401(K) Incentive Savings plan for Salaried and Hourly Employees of Kewaunee Scientific Corporation (12)
S-3
(All other exhibits are either inapplicable or not required.)
S-4
Footnotes
(1) Filed with this Form 10-K with the Securities and Exchange Commission.
(2) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1987, and incorporated herein by reference.
(3) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1985, and incorporated herein by reference.
(4) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1985, and incorporated herein by reference.
(5) Filed as an exhibit to the Kewaunee Scientific Corporation Proxy Statement dated July 26, 1991, and incorporated herein by reference.
(6) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1992, and incorporated herein by reference.
(7) Filed as an exhibit to the Kewaunee Scientific Corporation Proxy Statement dated July 23, 1993, and incorporated herein by reference.
(8) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1994, and incorporated herein by reference.
(9) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1996, and incorporated herein by reference.
(10) Filed as an exhibit to the Kewaunee Scientific Corporation Proxy Statement dated July 31, 1996, and incorporated herein by reference.
(11) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1997, and incorporated herein by reference.
(12) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1998, and incorporated herein by reference.
(13) Filed as an exhibit to the Kewaunee Scientific Corporation Annual Report to the Securities and Exchange Commission on Form 10-K (Commission File No. 0-5286) for the fiscal year ended April 30, 1999, and incorporated herein by reference.
(14) Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10-Q (Commission File No. 0-5286) for the quarterly period ended October 31, 1999, and incorporated herein by reference.
(15) Filed as an exhibit to the Kewaunee Scientific Corporation Quarterly Report to the Securities and Exchange Commission on Form 10-Q (Commission File No. 0-5286) for the quarterly period ended January 31, 2000, and incorporated herein by reference.
S-5