What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-07-27 compared with 2019-07-11 · 182 added, 250 removed, 658 unchanged (40% of the section changed)

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generally accepted accounting principles.

Change in Accounting Principle

As discussed in Notes 1 and 3 to the consolidated financial statements, effective August 1, 2018, the Company elected to change its method of accounting for its domestic inventory from the last-in, first-out method, to the first-in, first out method.

Adoption of ASC 842, Leases

As discussed in Note 8 to the consolidated financial statements, the Company changed its method of accounting for leases in 2020 due to the adoption of ASC 842, Leases.

Basis for Opinion

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$ and shares in thousands, except per share amounts

2018 As Adjusted

Cost of products sold

Operating expenses

Operating earnings

Other income (expenses), net

Operating earnings (loss)

Pension expense

Other income (expense), net

Interest expense

Earnings before income taxes

Earnings (loss) before income taxes

Income tax expense

Net earnings (loss)

net earnings attributable to the noncontrolling interest

Net earnings attributable to Kewaunee Scientific Corporation

Net earnings per share attributable to Kewaunee Scientific Corporation stockholders

Net earnings (loss) attributable to Kewaunee Scientific Corporation

Net earnings (loss) per share attributable to Kewaunee Scientific Corporation stockholders

Weighted average number of common shares outstanding

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$ in thousands

2018 As Adjusted

Net earnings (loss)

Other comprehensive income (loss), net of tax

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Change in fair value of cash flow hedges

Comprehensive income, net of tax

Less comprehensive income attributable to the noncontrolling interest

Total comprehensive income attributable to Kewaunee Scientific Corporation

Comprehensive income (loss), net of tax

Less comprehensive income (loss) attributable to the noncontrolling interest

Total comprehensive income (loss) attributable to Kewaunee Scientific Corporation

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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Stock based compensation

Cumulative adjustment for adoption of ASC 606, net of tax

Balance at April 30, 2019

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Stock based compensation

Cumulative adjustment for adoption of ASC 606, net of tax

Balance at April 30, 2020

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$ and shares in thousands, except per share amounts

2018 As Adjusted

Current Assets

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Property, Plant and Equipment, Net

Right of use assets

Deferred income taxes

Total Other Assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Short-term borrowings and interest rate swaps

Current portion of long-term debt and lease obligations

Current portion of long-term debt

Current portion of capital lease liability

Current portion of operating lease liabilities

Accounts payable

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Total Current Liabilities

Long-term debt and lease obligations

Long-term debt

Long-term portion of capital lease liability

Long-term portion of operating lease liabilities

Accrued pension and deferred compensation costs

Deferred income taxes

Other non-current liabilities

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$ in thousands

2018 As adjusted

Cash Flows from Operating Activities

Net earnings (loss)

Adjustments to reconcile net earnings to net cash provided by operating activities:

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Net proceeds from exercise of stock options (including tax benefit)

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash, net

Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash

(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash at Beginning of Year

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Kewaunee Scientific Corporation and subsidiaries (collectively the “Company”) design, manufacture, and install laboratory, healthcare, and technical furniture products.

The Company’s products include steel, wood, and laminate furniture, fume hoods, biological safety cabinets, laminare flow and ductless fume hoods, adaptable modular and column systems, movable workstations and carts, epoxy resin worksurfaces, sinks and accessories and related design services.

The Company’s products include steel, wood, and laminate furniture, fume hoods, biological safety cabinets, laminar flow and ductless fume hoods, adaptable modular and column systems, movable workstations and carts, epoxy resin worksurfaces, sinks and accessories and related design services.

The Company’s sales are made through purchase orders and contracts submitted by customers, dealers and agents, a national stocking distributor, and competitive bids submitted by the Company and its subsidiaries located in Singapore, India, and China.

See Note 11 for details on the closure of the Company's China operations in fiscal year 2020.

The majority of the Company’s products are sold to customers located in North America, primarily within the United States.

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Ltd., a laboratory design and strategic advisory and construction management services firm, located in Bangalore, India, is 80% owned by the Company;

and (5) Kewaunee Scientific (Suzhou) Co., Ltd., a commercial sales organization for the Company’s products in China, is 100% owned by the Company.

In fiscal year 2019, Kewaunee Scientific Corporation India Pvt.

merged into Kewaunee Labway India, Pvt.

resulting in a single subsidiary.

There was no impact to the Company's weighted ownership of both subsidiaries.

(5) Kewaunee Scientific (Suzhou) Co., Ltd., a commercial sales organization for the Company’s products in China, is 100% owned by the Company;

(6) Kequip Global Lab Solutions Pvt.

is 70% owned by Kewaunee Scientific Corporation Singapore Pte.

All intercompany balances, transactions, and profits have been eliminated.

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Net sales by the Company’s subsidiaries in the amounts of $32,437,000 and $29,964,000 were included in the consolidated statements of operations for fiscal years 2020 and 2019 , respectively.

Change in Accounting Principle During the second quarter of 2019, the Company changed its method of accounting for its Domestic segment’s inventory from the last-in, first-out (LIFO) method to the first-in, first out (FIFO) method.

All prior periods presented have been retrospectively adjusted to apply the new method of accounting.

See Note 3 for more information on the change in inventory accounting method.

Change in Accounting Principle During the second quarter of fiscal year 2019, the Company changed its method of accounting for its Domestic segment’s inventory from the last-in, first-out ("LIFO") method to the first-in, first out ("FIFO") method.

Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less.

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The Company has not experienced any losses from such deposits.

In accordance with ASU 2016-18, Statement of Cash Flows:

Restricted Cash, the Company includes restricted cash along with the cash balance for presentation in the condensed consolidated statements of cash flows.

The reconciliation between the condensed consolidated balance sheet and the condensed consolidated statement of cash flows at April 30 is as follows:

$ in thousands

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

Restricted Cash Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders.

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Balance at end of year

Unbilled Receivables Accounts receivable included unbilled receivables that represent amounts earned which have not yet been billed in accordance with contractually stated billing terms.

Unbilled Receivables Accounts receivable include unbilled receivables that represent amounts earned which have not yet been billed in accordance with contractually stated billing terms.

The amount of unbilled receivables at April 30, 2020 and 2019 was $6,131,000 and $4,589,000 , respectively.

Inventories The Company elected to change the method of accounting for the inventory of its Domestic segment from the last-in, first-out ("LIFO") method to the first-in, first out ("FIFO") method.

Inventories During fiscal year 2019, the Company elected to change the method of accounting for the inventory of its Domestic segment from the LIFO method to the FIFO method.

Inventories at the Company's international subsidiaries had previously been and continue to be measured on the FIFO method.

See Note 3 for additional information.

Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation.

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Insurance The Company maintains a self-insured health-care program.

The Company accrues estimated losses for claims incurred but not reported (“IBNR”) using actuarial models and assumptions based on historical loss experience.

The Company accrues estimated losses for claims incurred but not reported using actuarial models and assumptions based on historical loss experience.

The Company has also purchased specific stop-loss insurance to limit claims above a certain amount.

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Income Taxes In accordance with ASC 740, “Income Taxes,” the Company uses the liability method in measuring the provision for income taxes and recognizing deferred tax assets and liabilities on the consolidated balance sheets.

Provision has not been made for income taxes on unremitted earnings of foreign subsidiaries as these earnings are deemed to be permanently reinvested.

ASC 740 clarifies the financial statement recognition threshold and measurement attribute of a tax position taken or expected to be taken in a tax return.

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Expenditures for research and development costs were $1,816,000 and $1,550,000 for the fiscal years ended April 30, 2020 and 2019 , respectively.

Advertising Costs Advertising costs are expensed as incurred, and include trade shows, training materials, sales, samples, and other related expenses.

Advertising Costs Advertising costs are expensed as incurred, and include trade shows, training materials, sales, samples, and other related expenses and are included in operating expenses.

Advertising costs for the years ended April 30, 2020 and 2019 were $332,000 and $268,000 , respectively.

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The Company does not enter into derivative instruments for speculative purposes.

In May 2013, the Company entered into an interest rate swap agreement whereby the interest rate payable by the Company on $3,450,000 of outstanding long-term debt was effectively converted to a fixed interest rate of 4.875% for the period beginning May 1, 2013 and ending August 1, 2017 .

In May 2013, the Company entered into an interest rate swap agreement whereby the interest rate payable by the Company on $2,600,000 of outstanding long-term debt was effectively converted to a fixed interest rate of 4.37% for the period beginning August 1, 2017 and ending May 1, 2020 .

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The Company entered into these interest rate swap arrangements to mitigate future interest rate risk associated with its long-term debt and has designated these as cash flow hedges.

The Company terminated the interest rate swap arrangements in conjunction with the payoff of the outstanding long-term debt in September 2019.

Foreign Currency Translation The financial statements of subsidiaries located in India and China, and of Kewaunee Scientific Corporation Singapore Pte.

Ltd., are measured using the local currency as the functional currency.

Kewaunee Labway Asia Pte.

is measured using the U.S.

The financial position and operating results of Kewaunee Labway Asia Pte.

are measured using the U.S.

dollar as its functional currency.

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Net translation gains or losses are included in other comprehensive income, a separate component of stockholders’ equity.

The Company does not provide for U.S.

income taxes on foreign currency translation adjustments, since it does not provide for taxes on undistributed earnings of foreign subsidiaries.

Gains and losses from foreign currency transactions of these subsidiaries are included in operating expenses.

Earnings Per Share Basic earnings per share is based on the weighted average number of common shares outstanding during the year.

Diluted earnings per share reflects the assumed exercise of outstanding options and the conversion of restricted stock units (“RSUs”) under the Company’s various stock compensation plans, except when RSUs and options have an antidilutive effect.

There were 31,015 antidilutive RSUs and options outstanding at April 30, 2019 .

There were no antidilutive RSUs or options outstanding at April 30, 2018.

Diluted earnings per share reflects the assumed exercise of outstanding stock options and the conversion of restricted stock units (“RSUs”) under the Company’s various stock compensation plans, except when RSUs and stock options have an antidilutive effect.

There were 121,311 antidilutive RSUs and stock options outstanding at April 30, 2020 .

There were 31,015 antidilutive RSUs and stock options outstanding at April 30, 2019.

The following is a reconciliation of basic to diluted weighted average common shares outstanding:

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There were no stock options granted during fiscal years 2020 and 2019 .

Reclassifications In connection with the Company's adoption of ASU 2016-18, “Statement of Cash Flows-Restricted Cash,” the Company reclassified certain 2018 amounts in the consolidated statements of cash flows to include restricted cash when

reconciling the beginning-of-period and end-of-period cash amounts shown on the statement of cash flows to conform to the current period presentation.

Such reclassifications had no impact on net earnings.

New Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-9, “Revenue from Contracts with Customers” (“ASU 2014-09”).

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The Company adopted this standard effective May 1, 2018.

See Note 2 for a discussion of the impact of the adoption of this standard.

In July 2015, the FASB issued ASU 2015-11, “Inventory—Simplifying the Measurement of Inventory.” This guidance changes the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value.

Net realizable value is defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.

The Company adopted this standard effective May 1, 2017.

The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In February 2016, the FASB issued ASU 2016-2, “Leases.” This guidance establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

In February 2016, the FASB issued ASU 2016-02, “Leases.” This guidance establishes a right-of-use ("ROU") model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.

The Company will adopt this standard in fiscal year 2020.

Based on the Company's assessment to date, the Company expects that the adoption of ASU 2016-02 will result in the recognition of right-to-use assets and corresponding lease liabilities with a material impact on the Company's consolidated financial position and an immaterial impact on the Company's consolidated results of operations and cash flows.

In March 2016, the FASB issued ASU 2016-9, “Stock Compensation—Improvements to Employee Share-Based Payment Accounting.” This guidance simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements.

This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016.

This guidance became effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.

The Company adopted this standard effective May 1, 2019.

Prior periods were not retrospectively adjusted.

The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

The adoption of ASU 2016-02 resulted in the recognition of ROU assets and corresponding lease liabilities on the Company's consolidated financial position.

See Note 8 for additional information on the adoption of this standard.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” which replaces the current incurred loss method used for determining credit losses on financial assets, including trade receivables, with an expected credit loss method.

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The Company does not expect the adoption of this standard to have a significant impact on the Company’s consolidated financial position or results of operations.

In August 2016, the FASB issued ASU 2016-15, “Cash Flow Classification of Certain Cash Receipts and Cash Payments,” which clarifies guidance on classification of certain transactions in the statement of cash flows, including classification of debt prepayments, debt extinguishment costs and contingent consideration payments after a business combination.

This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.

The Company adopted this standard effective May 1, 2018.

The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows—Restricted Cash,” which requires that the statement of cash flows reconcile the change during the period in total cash, cash equivalents and restricted cash.

This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.

The Company adopted this standard effective May 1, 2018.

The adoption of this standard did not have a significant impact on the Company’s consolidated financial position or results of operations.

In January 2017, the FASB issued ASU 2017-4, “Simplifying the Test for Goodwill Impairment,” which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge.

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The Company will adopt this standard in fiscal year 2021.

The Company does not expect the adoption of this standard to have any impact on the Company’s consolidated financial position or results of operations.

The Company does not expect the adoption of this standard to have a significant impact on the Company’s consolidated financial position or results of operations.

In March 2017, the FASB issued ASU 2017-7, “Compensation—Retirement Benefits—Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which requires that the service cost component of net periodic pension cost is presented in the same line as other compensation costs arising from services rendered by the respective employees during the year.

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This guidance allows for the service cost component to be eligible for capitalization when applicable.

This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.

This guidance became effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.

The Company adopted this standard effective May 1, 2018 using the full retrospective approach.

The Company reclassified $694,000 of non-service components of net benefits cost to Other (Income)/expense, net from operating expenses on the Consolidated Statements of Operations.

During 2019, the Company recorded $295,000 of non-service components of net benefits cost to other (income)/expense, net.

In May 2017, the FASB issued ASU 2017-9, “Compensation—Stock Compensation—Scope of Modification Accounting.” This guidance was issued in an effort to reduce diversity in practice as it relates to applying modification accounting for changes to the terms and conditions of share-based payment awards.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted.

In February 2018, the FASB issued ASU 2018-2, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance provides the Company with an option to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act ("2017 Tax Act") from accumulated other comprehensive income to retained earnings.

This guidance became effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted.

The Company adopted this standard effective May 1, 2019 and did not elect to reclassify tax effects as a result of tax reform;

therefore, the adoption did not have a significant impact on the Company's consolidated financial position or results of operations.

In March 2018, the FASB issued ASU 2018-09, “Compensation - Stock Compensation ("Topic 718"):

Improvements to Employee Share-Based Payment Accounting” (”ASU 2018-09”).

This ASU makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation, and the financial statement presentation of excess tax benefits or deficiencies.

ASU 2018-09 also clarifies the statement of cash flows presentation for certain components of share-based awards.

The standard is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted.

The Company adopted this standard effective May 1, 2019.

The adoption of this standard did not have a significant impact on the Company’s financial position or results of operations.

In February 2018, the FASB issued ASU 2018-2, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This guidance provides the Company with an option to reclassify stranded tax effects resulting from the 2017 Tax Act from accumulated other comprehensive income to retained earnings.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted.

The adoption of this standard did not have a significant impact on the Company's consolidated financial position or results of operations.

In August 2018, the FASB issued ASU 2018-14, "Compensation -Retirement Benefits -Defined Benefit Plans -General (Subtopic 715-20) - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans" ("ASU 2018-14").

The amendments in this update remove defined benefit plan disclosures that are no longer considered cost-beneficial, clarify the

specific requirements of disclosures, and add disclosure requirements identified as relevant.

ASU 2018-14 is effective for fiscal years ending after December 15, 2020.

Early adoption is permitted.

The Company will adopt this standard in fiscal year 2021.

The Company does not expect the adoption of this standard to have a significant impact on the Company’s consolidated financial position or results of operations.

In December 2019, the FASB issued ASU No.

2019-12 , "Income Taxes ("Topic 740"):

Simplifying the Accounting for Income Taxes." This update simplifies the accounting for income taxes through certain targeted improvements to various subtopics within Topic 740.

The amendments in this update are effective for fiscal years and interim periods beginning after December 15, 2020.

The Company expects to adopt this guidance when effective and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

Note 2 - Revenue Recognition

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As such, revenue from the sales of customized laboratory furniture is recognized over time once the customization process has begun, using the units-of-production output method to measure progress towards completion.

There is not a material amount of work-in-process for which the customization process

has begun at the end of a reporting period.

There is not a material amount of work-in-process for which the customization process has begun at the end of a reporting period.

The Company believes this output method most reasonably reflects the Company’s performance because it directly measures the value of the goods transferred to the customer.

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Total Revenue

Twelve months ended April 30, 2019

International

Point in Time

Total Revenue

Contract Balances

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The Company adopted ASC 606 on May 1, 2018 using the modified retrospective approach and elected to reassess revenue recognition under ASC 606 for only those contracts open as of the adoption date, which resulted in a cumulative effect adjustment to increase retained earnings, net of tax, of $ 217,000 .

Comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods presented.

The Company elected to reflect the aggregate effect of all contract modifications that occurred before the beginning of the earliest period presented in determining the transaction price, identifying the satisfied and unsatisfied performance obligations and allocating the transaction

price to the satisfied and unsatisfied performance obligations for the modified contract at transition.

The effects of these elections were immaterial.

The following table summarizes the impact of adopting ASC 606 on the Company's consolidated statement of operations:

Twelve Months Ended April 30, 2019

($ in thousands, except per share amounts)

Balance Without

Cost of products sold

Operating expenses

Operating earnings

Interest expense

Earnings before income taxes

Income tax expense

Net earnings attributable to the noncontrolling interest

Net earnings attributable to Kewaunee Scientific Corporation

Basic Earnings Per Share

Diluted Earnings Per Share

The following table summarizes the impact of adopting ASC 606 on the Company’s consolidated balance sheet:

April 30, 2019

($ in thousands)

Balance Without

Receivables, less allowances

Total Current Assets

Liabilities and Stockholders’ Equity

Accounts payable

Deferred revenue

Other accrued expenses

Total Current Liabilities

Total Liabilities

Total Kewaunee Scientific Corporation Stockholders’ Equity

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Note 3—Inventories

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At April 30, 2020 and 2019 , the Company’s international subsidiaries’ inventories were $2,136,000 and $1,863,000 , respectively, measured using the FIFO method at the lower of cost and net realizable value and are included in the above tables.

The following table summarizes the effect of the change in method of accounting on the Company's prior consolidated statement of operations:

Twelve Months Ended April 30, 2018

Effect of Accounting Change

Twelve Months Ended April 30, 2018

(in thousands, except per share data)

As Previously Reported

Cost of products sold

Earnings from continuing operations before income taxes

Income tax expense

Net earnings attributable to Kewaunee Scientific Corporation

Net earnings per share attributable to Kewaunee Scientific Corporation stockholders

The following table summarizes the effect of the change in method of accounting on the Company's prior consolidated balance sheet:

April 30, 2018

Effect of Accounting Change

April 30, 2018

(in thousands)

As Previously Reported

Total Current Assets

Deferred income taxes

Total Other Assets

Liabilities and Stockholders' Equity

Other accrued expenses

Total Current Liabilities

Total Liabilities

Retained earnings

Total Kewaunee Scientific Corporation Stockholders' Equity

Total Liabilities and Stockholders' Equity

The following table summarizes the effect of the change in method of accounting on the Company's prior consolidated cash flow:

Twelve Months Ended April 30,

Effect of Accounting Change

Twelve Months Ended April 30,

(in thousands)

As Previously Reported

Change in assets and liabilities:

Accounts payable and other accrued expenses

Net cash provided by operating activities

Certain amounts in the Company’s consolidated statement of operations for the twelve months ended April 30, 2019 under the former LIFO method would have been as follows :

Twelve Months Ended April 30, 2019

(in thousands, except per share amounts)

Cost of products sold

Income tax expense

Net earnings attributable to Kewaunee Scientific Corporation

Net earnings per share attributable to Kewaunee Scientific Corporation stockholders

Certain amounts in the Company’s consolidated statement of cash flows for the twelve months ended April 30, 2019 would h ave been as follows under the former LIFO method:

Twelve Months Ended April 30, 2019

(in thousands)

Change in assets and liabilities:

Net cash provided by operating activities

Certain amounts in the Company’s consolidated balance sheet as of April 30, 2019 would have been as follows under the former LIFO method:

April 30, 2019

(in thousands)

Total Current Assets

Deferred Income Taxes

Prepaid Expenses and Other Assets

Retained Earnings

Total Kewaunee Scientific Corporation Stockholders’ Equity

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Note 4—Long-term Debt and Other Credit Arrangements

On May 6, 2013, the Company entered into a credit and security agreement (the “Loan Agreement”) with a new lender consisting of (1) a $20 million revolving credit facility (“Line of Credit”) which matured on May 1, 2018 and was extended to March 1, 2021 on March 12, 2018, (2) a term loan in the amount of $3,450,000 which matures on May 1, 2020 (“Term Loan A”) and (3) a term loan in the amount of $1,550,000 which matures on May 1, 2020 (Term Loan B and together with Term Loan A, the “Term Loans”).

The Loan Agreement provided funds to refinance all existing indebtedness to the Company’s previous lender and for working capital and other general corporate purposes.

In addition, the credit facility provided a sub-line for the issuance of up to $6.5 million of letters of credit at April 30, 2019 and April 30, 2018 .

At April 30, 2019 , there were advances of $9.5 million and $5.2 million in letters of credit outstanding, leaving $5.3 million available under the Line of Credit.

The borrowing rate under the Line of Credit at that date was 4.00% .

Monthly interest payments under the Line of Credit were payable at the Daily One Month LIBOR interest rate plus 1.50% per annum.

Payments are due under Term Loan A in consecutive equal monthly principal payments in the amount of $79,000 until May 1, 2020, and at that time, all principal, accrued unpaid interest and other charges outstanding under Term Loan A shall be due and payable in full.

The interest rate on Term Loan A, after consideration of related interest rate swap agreements, is a fixed rate per annum equal to 4.37% .

Payments are due under Term Loan B in consecutive equal monthly principal payments in the amount of $18,000 until May 1, 2020, and at that time, all principal, accrued unpaid interest and other charges outstanding under Term Loan B shall be due and payable in full.

The interest rate on Term Loan B, after consideration of the related interest rate swap agreement, effective November 3, 2014, converted to a fixed rate per annum of 3.07% .

The fair value of the interest rate swap derivatives were $1,000 and $5,000 at April 30, 2019 and 2018 , respectively.

Scheduled annual principal payments for the term loans are $1,167,000 and $97,000 for fiscal years 2020 and 2021, respectively.

Term Loan A and Term Loan B are secured by liens against certain machinery and equipment.

At April 30, 2019 , there were bank guarantees issued by foreign banks outstanding to customers in the amount of $2,337,000 , $49,000 , $75,000 , and $60,000 with expiration dates in fiscal years 2020 , 2021 , 2022 and 2023 , respectively, collateralized by a $5.0 million letter of credit under the Line of Credit and certain assets of the Company’s subsidiaries in India.

The Loan Agreement includes financial covenants with respect to certain ratios, including (a) senior funded debt to EBITDA, (b) fixed charge coverage, and (c) asset coverage.

At April 30, 2019 , the Company was not in compliance with all of the financial covenants.

The Company received a waiver from its lender for this noncompliance pursuant to a waiver letter executed on June 19, 2019 ("the Waiver Letter").

On May 6, 2013, the Company entered into a credit and security agreement (the “Loan Agreement”) consisting of a $ 20 million revolving credit facility (“Line of Credit”) which matured on May 1, 2018 and was extended to March 1, 2021 on March 12, 2018, a term loan in the amount of $ 3,450,000 which matured on May 1, 2020 (“Term Loan A”) and a term loan in the amount of $ 1,550,000 which matured on May 1, 2020 (Term Loan B and together with Term Loan A, the “Term Loans”).

At April 30, 2019, the Company was not in compliance with all of the financial covenants under the revolving credit facility.

The Company received a waiver from its lender with respect to this noncompliance pursuant to a waiver letter executed on June 19, 2019 ("the Waiver Letter").

In connection with the Waiver Letter, the Company entered into a Security Agreement pursuant to which the Company granted a security interest in substantially all of its assets to secure its obligations under the Loan Agreement.

On July 9, 2019, the Company entered into an agreement to amend the Loan Agreement and the Line of Credit to effect a change in the financial covenants set forth in the Loan Agreement.

The amendment does not change the amount of availability provided by Company’s Line of Credit.

On July 9, 2019, the Company entered into an amendment to the Loan Agreement and the Line of Credit to effect a change in the financial covenants set forth in the Loan Agreement.

This amendment did not change the amount of availability provided by the Company’s Line of Credit.

In September 2019, the Company paid off Term Loan A and Term Loan B and terminated the related interest rate swap agreements.

On December 13, 2019, the Company entered into an amendment to the Loan Agreement and the Line of Credit to effect a change to an asset based lending arrangement based on eligible accounts receivable and inventory, with the available amount not to exceed $ 20 million through January 31, 2020, and with such maximum amount reduced to $ 15 million thereafter.

This amendment replaced the prior financial covenants with new financial covenants, including minimum monthly liquidity and EBITDA requirements.

Additionally, a requirement for the repatriation of foreign cash and restrictions on the payment of dividends were added.

At April 30, 2020 , there were advances of $4.7 million and $512,000 in letters of credit outstanding, leaving $8.7 million available under the Line of Credit.

The borrowing rate under the Line of Credit at that date was 4.125% .

Monthly interest payments under the Line of Credit were payable at the Daily One Month LIBOR interest rate plus 1.5% to 3.75% based upon the ratio of senior funded debt to EBITDA calculated quarterly.

At April 30, 2020 , the interest rate margin was 3.75% .

At April 30, 2020, the Company was not in compliance with all of the financial covenants under the revolving credit facility.

On July 20, 2020, the Company entered into an amendment to the Loan Agreement and Line of Credit which effected changes in certain financial covenants set forth in the Loan Agreement and included a waiver of the non-compliance described above.

This amendment did not change the amount of availability provided by the Company's Line of Credit.

At April 30, 2020 , there were bank guarantees issued by foreign banks outstanding to customers in the amount of $ 1.6 million, $ 297,000 , and $ 74,000 , and with expiration dates in fiscal years 2021 , 2022 , and 2023 , respectively, collateralized by a $ 6.0 million corporate guarantee and certain assets of the Company’s subsidiaries in India.

At April 30, 2019 , there were advances of $9.5 million and $5.2 million in letters of credit outstanding under the Line of Credit.

The borrowing rate at that date was 4.00% .

At April 30, 2018 , there were foreign bank guarantees outstanding to customers in the

amount of $1,625,000 , $21,000 , $1,000 and $63,000 with expiration dates in fiscal years 2019, 2020, 2021 and 2023, respectively.

At April 30, 2018 , the Company was in compliance with all of the financial covenants in the Loan Agreement.

At April 30, 2019 , there were foreign bank guarantees outstanding to customers in the amount of $2.3 million, $49,000 , $ $75,000 and $ 60,000 with expiration dates in fiscal years 2020 , 2021 , 2022 and 2023 , respectively, collateralized by a $ 5.0 million corporate guarantee and certain assets of the Company’s subsidiaries in India.

Amounts outstanding under the term loans were as follows as of April 30 :

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Note 5—Income Taxes

On December 22, 2017, the 2017 Tax Act was signed into law.

The 2017 Tax Act includes a broad range of tax reform provisions affecting businesses, including lower corporate tax rates, changes in business deductions, and international tax provisions.

In response to the 2017 Tax Act, the U.S.

Securities and Exchange Commission staff issued Staff Accounting Bulletin No.

118 (“SAB 118”) to address the application of U.S.

GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act.

SAB 118 provides that the measurement period is complete when a company’s accounting is complete and that the measurement period shall not extend beyond one year from the enactment date.

SAB 118 provides guidance for registrants under three scenarios:

(i) measurement of certain income tax effects is complete, (ii) measurement of certain income tax effects can be reasonably estimated, and (iii) measurement of certain income tax effects cannot be reasonably estimated.

As of April 30, 2019, the Company considers the accounting under SAB 118 for the impacts of the 2017 Tax Act to be complete.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law, which contains several income tax provisions, as well as other measures, aimed at assisting businesses impacted by the economic effects of the COVID-19 pandemic.

The CARES Act includes a broad range of tax reform provisions affecting businesses, including permissible net operating losses ("NOLs") carrybacks up to five years , changes in business deductions limitations, and deferral of Social Security withholdings.

The Company expects that it will apply the NOL carryback provision of the CARES Act with respect to its estimated NOL for fiscal year 2020 to years that had higher enacted tax rates, resulting in a tax benefit.

This resulted in a reclassification of a $ 2,456,000 NOL deferred income tax asset to refundable income taxes for fiscal year 2020.

Effective August 1, 2019, as previously stated, the Company elected to revoke the indefinite reinvestment of foreign unremitted earnings position set forth by ASC 740-30-25-17 for multiple foreign subsidiaries.

The Company recorded a tax withholding expense imposed by the India Income Tax Department of $ 1,964,000 for the year ended April 30, 2020.

As of April 30, 2019, the Company considers the accounting defined in SEC Staff Accounting Bulletin No.

118 for the impacts of the 2017 Tax Act to be complete.

We have recorded adjustments to income tax expense to account for the one-time transition tax on deferred foreign income, change in valuation of deferred tax assets associated with tax law changes, and foreign tax credits related to the transition tax.

In accordance with ASC 740, ”Income Taxes”, which requires deferred taxes to be re-measured in the year of an income tax rate change, the Company recorded a deferred income tax expense of $75,000 for the year ended April 30, 2019 as a result of applying a lower weighted average state income tax rate to the Company’s net deferred tax assets.

The Company finalized the accounting policy decision with respect to the new Global Intangible Low-Taxed Income (“GILTI”) tax rules and has concluded that GILTI will be treated as a periodic charge in the year in which it arises.

Therefore, the Company will not record deferred taxes for the basis differential attributable to GILTI inclusions in U.S.

taxable income.

The Company has included $265,000 of tax expense related to GILTI for the year ended April 30, 2019.

In accordance with ASC 740, "Income Taxes," which requires deferred taxes to be re-measured in the year of an income tax rate change, the Company concluded there was no material impact related to this change and did no t record a deferred income tax expense for the year ended April 30, 2020.

The Company's accounting policy with respect to the Global Intangible Low-Taxed Income (“GILTI”) tax rules is that GILTI will be treated as a periodic charge in the year in which it arises.

The Company had no tax expense related to GILTI for the year ended April 30, 2020 .

Income tax expense consisted of the following:

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$ in thousands

Income tax expense at statutory rate

State and local taxes, net of federal income tax benefit (expense)

Income tax expense (benefit) at statutory rate

State and local taxes, net of federal income tax benefit

Tax credits (state, net of federal benefit)

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Rate reduction impact on deferred tax assets

Federal and state transition tax on unrepatriated foreign earnings

Tax on unrepatriated and repatriated foreign earnings

Net operating loss carryback

Effects of stock options exercised

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valuation allowance

Net deferred tax assets

Net deferred tax assets (liabilities)

Deferred tax assets classified in the balance sheet:

Net deferred tax assets

Unremitted earnings of subsidiaries outside the United States are considered to be reinvested indefinitely at April 30, 2019 .

It is not practicable to determine the deferred tax liability for temporary differences related to those unremitted earnings.

At April 30, 2019 , the Company had deferred tax assets related to the state net operating loss carryforwards in the amount of $ 26,000 expiring at various times and state tax credit carryforwards in the amount of $207,000 , net of federal benefit, expiring beginning in 2020 .

Due to the current expiration schedule of the state credits, a valuation allowance in the amount of $ 37,000 has been recorded to reflect the potential expiration of these credits in future years.

Net deferred tax assets (liabilities)

At April 30, 2020 , the Company had deferred tax assets related to various federal, state and foreign deferred tax items, net operating loss carryforwards, and tax credit carryforwards in the amount of $ 6,293,000 The Company is required to evaluate the realization of the deferred tax asset and any requirement for a valuation allowance in accordance with ASC 740-10-30-2(b).

The Company evaluates all available evidence, both positive and negative, to determine the amount of any required valuation allowance.

A deferred tax asset valuation allowance of $ 1,707,000 was recorded in the period ended April 30, 2020 based on ASC 740-10-30-18.

This guidance provides that the future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on sufficient taxable income of the appropriate character within the carryback or carryforward period available under the tax law.

At April 30, 2020, the Company had federal research and development tax credit carryforwards in the amount of $ 694,000 expiring beginning in 2040 .

The Company expects to carryback $ 332,000 of research and development tax credit to prior periods reducing the Company’s carryforward amount to $ 362,000 .

At April 30, 2020 , the Company had foreign tax credit carryforwards in the amount of $ 638,000 that are subject to a full valuation allowance.

At April 30, 2020 , the Company had $1,241,000 gross net operating losses in jurisdictions outside of the United States, of which $641,000 is set to expire in years 2021 to 2024 .

After a review of the expiration schedule of the net operating loss carryforwards and future taxable income required to utilize such carryforwards before their expiration, the Company recorded an additional valuation allowance of

$7,000 at April 30, 2019 .

The Company files federal, state and local tax returns with statutes of limitation generally ranging from 3 to 4 years .

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The Company adopted ASU 2016-9, “Stock Compensation – Improvements to Employee Share-Based Payment Accounting” prospectively effective May 1, 2017.

Prior periods were not retrospectively adjusted.

The Company elected prospectively to account for forfeitures as they occur rather than apply an estimated rate to share-based compensation expense.

The stockholders approved the 2017 Omnibus Incentive Plan (“2017 Plan”) on August 30, 2017, which enables the Company to grant a broad range of equity, equity-related, and non-equity types of awards, with potential recipients including directors, consultants and employees.

The Company's stockholders approved the 2017 Omnibus Incentive Plan (“2017 Plan”) on August 30, 2017, which enables the Company to grant a broad range of equity, equity-related, and non-equity types of awards, with potential recipients including directors, consultants and employees.

This plan replaced the 2010 Stock Option Plan for Directors and the 2008 Key Employee Stock Option Plan.

No new awards will be granted under the prior plans.

All outstanding options granted under the prior plans will remain subject to the prior plans.

No new awards will be granted under the prior plans and all outstanding options granted under the prior plans will remain subject to the prior plans.

At the date of approval of the 2017 Plan there were 280,100 shares available for issuance under the prior plans.

These shares and any outstanding awards that subsequently cease to be subject to such awards are available under the 2017 Plan.

These shares and any shares subject to outstanding awards that subsequently cease to be subject to such awards are available under the 2017 Plan.

The 2017 Plan did not increase the total number of shares available for issuance under the Company’s equity compensation plans.

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Under the 2017 Plan, the Company recorded stock-based compensation expense in accordance with ASC 718 of $ 152,000 and $ 34,000 and deferred income tax benefit of $ 36,000 and $ 8,000 in fiscal years 2020 and 2019, respectively.

The RSUs include both a service and performance component vesting over a three year period.

The recognized expense is based upon the vesting period for service criteria and estimated attainment of the performance criteria at the end of the three year period based on the ratio of cumulative days incurred to total days over the three year period.

The RSUs include both a service and performance component vesting over a 3 year period.

The recognized expense is based upon the vesting period for service criteria and estimated attainment of the performance criteria at the end of the 3 year period based on the ratio of cumulative days incurred to total days over the 3 year period.

The remaining estimated compensation expense of $ 406,000 will be recorded over the remaining vesting periods.

The fair value of each RSU granted to employees was estimated on the day of grant based on the weighted average price of the Company's stock reduced by the present value of the expected dividend stream during the vesting period using the risk-free interest rate.

The Company issued new shares of common stock to satisfy RSUs vested during fiscal year 2019 .

The following table summarizes the RSUs activities and weighed averages.

The Company issued new shares of common stock to satisfy RSUs that vested during fiscal year 2020 .

The following table summarizes the RSU activity and weighted averages.

Number of RSUs

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Under this plan, each eligible director was granted options to purchase 10,000 shares at the fair market value at the date of grant for a term of five years .

These options are exercisable in four equal installments, one-fourth becoming exercisable on the next August 1 following the date of grant, and one-fourth becoming exercisable on August 1 of each of the next three years.

These stock options were exercisable in four equal installments, one-fourth becoming exercisable on the next August 1 following the date of grant, and one-fourth becoming exercisable on August 1 of each of the next three years.

At April 30, 2020 , there were no shares available for future grants under the 2010 Plan.

At April 30, 2020 there were no stock options outstanding under the 2010 Plan.

The stockholders approved the 2008 Key Employee Stock Option Plan (“2008 Plan”) in fiscal year 2009 which allowed the Company to grant options on an aggregate of 300,000 shares of the Company’s common stock.

On August 26, 2015, the stockholders approved an amendment to this plan to increase the number of shares available under the 2008 Plan by 300,000 .

Under the plan, options were granted at not less than the fair market value at the date of grant and options are exercisable in such installments, for such terms (up to 10 years ), and at such times, as the Board of Directors may determine at the time of the grant.

On August 26, 2015, the

stockholders approved an amendment to this plan to increase the number of shares available under the 2008 Plan by 300,000 shares.

At April 30, 2020 , there were no shares available for future grants under the 2008 Plan.

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Inherent in the model are assumptions related to expected stock-price volatility, option life, risk-free interest rate, and dividend yield.

The Company did not

grant any stock options during fiscal years 2019 and 2018.

The stock options outstanding have the “plain-vanilla” characteristics as defined in SEC Staff Accounting Bulletin No.

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Balance at April 30, 2020

Note 8—Commitments and Contingencies

The Company leases both its primary distribution facility and warehouse facility under non-cancelable operating leases.

The Company also leases some of its machinery and equipment under non-cancelable operating leases.

Most of these leases provide the Company with renewal and purchase options, and most leases of machinery and equipment have certain early cancellation rights.

Rent expense for these operating leases was $2,225,000 and $2,340,000 in fiscal years 2019 and 2018 , respectively.

Future minimum payments under the above non-cancelable lease arrangements for the years ending April 30 are as follows:

$ in thousands

2025 and thereafter

Note 8—Leases, Commitments and Contingencies

On May 1, 2019, the Company adopted Accounting Standards Update ("ASU") No.

2016-02, Leases, and all subsequently issued clarifying guidance.

Under the new guidance, lessees are required to recognize lease assets and lease liabilities with respect to the rights and obligations created by leased assets previously classified as operating leases.

In July 2018, the Financial Accounting Standards Board ("FASB") issued ASU No.

2018-11, which permitted entities to record the impact of adoption using a modified retrospective method with any cumulative effect as an adjustment to retained earnings (accumulated deficit) as opposed to restating comparative periods to reflect the effects of applying the new standard.

The Company elected this transition approach;

therefore, the Company’s prior period reported results are not restated to include the impact of this adoption.

In addition, the Company elected the package of three transition practical expedients which alleviate the requirements to reassess embedded leases, lease classification and initial direct costs for leases that commenced prior to the adoption date.

The Company has elected to use the short-term lease recognition exemption for all asset classes.

This means, for those leases that qualify, the Company will not recognize right-of-use ("ROU") assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets.

The adoption of this standard did not affect the Condensed Consolidated Statements of Operations and therefore, no cumulative effect adjustment was recorded.

The adoption of this standard also did not materially affect the Condensed Consolidated Statements of Cash Flows.

The Company has operating type leases for real estate and equipment in both the U.S.

and internationally and a financing lease for a truck in the U.S.

At April 30, 2020 , ROU assets totaled $ 9,312,000 .

Included in the ROU assets was a finance lease with a net value of $ 123,000 with accumulated amortization totaling $ 36,000 .

Operating cash paid to settle lease liabilities was $ 1,526,000 for the twelve months ended April 30, 2020 .

The Company’s leases have remaining lease terms of up to 10 years.

In addition, some of the leases may include options to extend the leases for up to 5 years or options to terminate the leases within 1 year.

Operating lease expense was $ 2,441,000 for the twelve months ended April 30, 2020 , inclusive of period cost for short-term leases, not included in lease liabilities, of $ 915,000 .

Rent expense for these operating leases was $2,225,000 in fiscal year 2019 .

At April 30, 2020 , the weighted average remaining lease term for the capitalized operating leases was 7.6 years and the weighted average discount rate was 4.1% .

For the finance lease, the remaining lease term was 5.4 years and the discount rate was 10.0% .

As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The Company uses the implicit rate when readily determinable.

Future minimum payments under the non-cancelable lease arrangements for the years ending April 30 are as follows:

Total Minimum Lease Payments

Imputed Interest

The Company is involved in certain claims and legal proceedings in the normal course of business which management believes will not have a material adverse effect on the Company’s consolidated financial condition or results of operations.

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Rate of compensation increase

The components of the net periodic pension cost for each of the fiscal years ended April 30 are as follows:

The components of the net periodic pension expense for each of the fiscal years ended April 30 are as follows:

$ in thousands

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Recognition of net loss

Net periodic pension cost

Net periodic pension expense

The estimated net actuarial loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during fiscal year 2021 is $1,680,000 .

The Company’s funding policy is to contribute to the plans when pension laws and economics either require or encourage funding.

The Company does not expect to make any contributions for fiscal year 2020.

Contributions of $1,000,000 and $600,000 were made to the plan in fiscal years 2019 and 2018 , respectively.

The Company expects to make contributions in the amount of $ 30,000 during fiscal year 2021 .

There were no contributions made to the plan in fiscal year 2020 .

The Company made contributions of $ 1,000,000 in fiscal year 2019.

The following benefit payments are expected to be paid from the benefit plans in the fiscal years ending April 30 :

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International

Emerging Markets

Liquid Alternatives

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The plan provides that the Company make matching contributions equal to 100% of the employee’s qualifying contribution up to 3% of the employee’s compensation, and make matching contributions equal to 50% of the employee’s contributions between 3% and 5% of the employee’s compensation, resulting in a maximum employer contribution equal to 4% of the employee’s compensation.

The Company's matching contributions were $ 974,000 and $ 953,000 for years ending April 30, 2020 and 2019 .

Additionally, the plan provides that the Company may elect to make a non-matching contribution for participants employed by the Company on December 31 of each year.

The Company included 1% of the participant’s qualifying compensation in the annual contributions to the plan in fiscal years 2019 and 2018 of $1,291,000 and $1,159,000 , respectively.

The Company included 1% of the participant’s qualifying compensation in the annual contributions to the plan in fiscal year 2019 of $338,000 .

The Company did not elect to make a non-matching contribution in fiscal year 2020.

Note 10—Segment Information

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The Domestic business segment principally designs, manufactures, and installs scientific and technical furniture, including steel and wood laboratory cabinetry, fume hoods, laminate casework, flexible systems, worksurfaces, workstations, workbenches, and computer enclosures.

The International business segment, which consists of the foreign subsidiaries as identified in Note 1, provides the Company’s products and services, including facility design, detailed engineering, construction, and project management from the planning stage through testing and commissioning of laboratories.

The International business segment, which consists of the foreign subsidiaries identified in Note 1, provides the Company’s products and services, including facility design, detailed engineering, construction, and project management from the planning stage through testing and commissioning of laboratories.

Intersegment transactions are recorded at normal profit margins.

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Revenues (excluding intersegment) from customers in foreign countries

Fiscal Year 2018 (as adjusted)

Fiscal Year 2019

Revenues from external customers

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Revenues (excluding intersegment) from customers in foreign countries

Note 11—Restructuring Costs

In December 2019, the Company initiated a restructuring, which included the addition of a new Vice President of Information Technology to lead the transformation and modernization of the Company's information systems, and a reduction in workforce primarily in its domestic operations to reduce operating expenses on an ongoing basis.

This restructuring plan, which included the closure of the Company’s subsidiary in China, a commercial sales organization for the Company’s products in China, was substantially completed as of April 30, 2020.

The Company expects the remaining administrative requirements for closure of the China subsidiary to be completed by the end of fiscal year 2021.

In fiscal year 2020 , the Company incurred expenses in its domestic operations of $ 380,000 , consisting primarily of severance costs for terminated positions and expenses related to hiring and relocation of the new Vice President of Information Technology.

In addition, the Company incurred expenses in its international operations related to the closure of the China subsidiary of $ 288,000 , consisting primarily of bad debt expenses of $ 240,000 .

The Company reflected all the expenses as operating expenses in the condensed statement of operations.

Note 12—Consolidated Quarterly Data ( Unaudited )

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Cash dividends paid per share

Fiscal Year 2018 (as adjusted)

Fiscal Year 2019

Net earnings (loss)

net earnings attributable to the noncontrolling interest

Net earnings attributable to Kewaunee Scientific Corporation

Net earnings per share attributable to Kewaunee Scientific Corporation

Net earnings (loss) attributable to Kewaunee Scientific Corporation

Net earnings (loss) per share attributable to Kewaunee Scientific Corporation

Cash dividends paid per share

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333-176447, No.

333-213413, and No.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data