What changed in this filing

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Item 1. Financial Statements

2020-12-11 compared with 2020-09-11 · 190 added, 83 removed, 231 unchanged (54% of the section changed)

4 unchanged sentences

Three Months Ended

October 31, Six Months Ended

2020 2019 2020 2019

Net sales $ 39,000 $ 39,722 $ 75,423 $ 79,058

Cost of products sold 32,605 33,406 63,147 65,796

Gross profit 6,395 6,316 12,276 13,262

Operating expenses 6,406 6,355 12,563 12,525

1 unchanged sentence

Pension expense ( 289 ) ( 113 ) ( 577 ) ( 226 )

Other income 66 129 120 298

Interest expense ( 128 ) ( 135 ) ( 205 ) ( 302 )

Earnings (loss) before income taxes ( 362 ) ( 158 ) ( 949 ) 507

Income tax expense

Net earnings (loss)

net earnings (loss) attributable to the noncontrolling interest

Net earnings (loss) attributable to Kewaunee Scientific Corporation

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

Income tax expense (benefit) ( 197 ) 2,003 ( 176 ) 2,172

Net loss ( 165 ) ( 2,161 ) ( 773 ) ( 1,665 )

net earnings attributable to the noncontrolling interest 15 17 5 42

Net loss attributable to Kewaunee Scientific Corporation $ ( 180 ) $ ( 2,178 ) $ ( 778 ) $ ( 1,707 )

Net loss per share attributable to Kewaunee Scientific Corporation stockholders

Basic $ ( 0.07 ) $ ( 0.79 ) $ ( 0.28 ) $ ( 0.62 )

Diluted $ ( 0.07 ) $ ( 0.79 ) $ ( 0.28 ) $ ( 0.62 )

Weighted average number of common shares outstanding

Basic 2,759 2,750 2,757 2,750

Diluted 2,759 2,750 2,757 2,750

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

Three Months Ended

Net earnings (loss)

October 31, Six Months Ended October 31,

2020 2019 2020 2019

Net loss $ ( 165 ) $ ( 2,161 ) $ ( 773 ) $ ( 1,665 )

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Other comprehensive income (loss) ( 35 ) ( 177 ) ( 48 ) 18

Comprehensive income (loss), net of tax

comprehensive income (loss) attributable to the noncontrolling interest

Comprehensive income (loss) attributable to Kewaunee Scientific Corporation

Comprehensive loss, net of tax ( 200 ) ( 2,338 ) ( 821 ) ( 1,647 )

comprehensive income attributable to the noncontrolling interest 15 17 5 42

Comprehensive loss attributable to Kewaunee Scientific Corporation $ ( 215 ) $ ( 2,355 ) $ ( 826 ) $ ( 1,689 )

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

($ in thousands, except per share amounts)

Stock Additional

Capital Treasury

Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss)

Total Kewaunee Scientific Corporation

Income (Loss) Total Kewaunee

Stockholders’

1 unchanged sentence

Net loss attributable to Kewaunee Scientific Corporation — — — ( 598 ) — ( 598 )

Other comprehensive loss

Other comprehensive income — — — — ( 13 ) ( 13 )

Stock based compensation 20 78 — — — 98

Balance at July 31, 2020 $ 6,905 $ 3,438 $ ( 53 ) $ 37,223 $ ( 9,611 ) $ 37,902

Net loss attributable to Kewaunee Scientific Corporation — — — $ ( 180 ) — $ ( 180 )

Other comprehensive income — — — — ( 35 ) ( 35 )

Stock based compensation — 143 — — — 143

Balance at October 31, 2020 $ 6,905 $ 3,581 $ ( 53 ) $ 37,043 $ ( 9,646 ) $ 37,830

Stock Additional

Capital Treasury

Stock Retained

Earnings Accumulated

Comprehensive

Income (Loss)

Total Kewaunee Scientific Corporation

Stockholders’

Income (Loss) Total Kewaunee Scientific Corporation Stockholders’ Equity

Balance at April 30, 2019 $ 6,875 $ 3,133 $ ( 53 ) $ 43,552 $ ( 6,407 ) $ 47,100

2 unchanged sentences

Cash dividends paid, $ 0.19 per share

— — — ( 522 ) — ( 522 )

Stock based compensation 9 51 — — — 60

Balance at July 31, 2019 $ 6,884 $ 3,184 $ ( 53 ) $ 43,501 $ ( 6,212 ) $ 47,304

Net loss attributable to Kewaunee Scientific Corporation $ — $ — $ — $ ( 2,178 ) $ — $ ( 2,178 )

Other comprehensive loss — — — — $ ( 177 ) ( 177 )

Cash dividends paid, $ 0.19 per share

— — — ( 523 ) — ( 523 )

Stock based compensation — 42 — — — 42

Balance at October 31, 2019 $ 6,884 $ 3,226 $ ( 53 ) $ 40,800 $ ( 6,389 ) $ 44,468

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

($ and shares in thousands, except per share amounts)

July 31, 2020

April 30, 2020

October 31, 2020 April 30, 2020

Current Assets:

3 unchanged sentences

$ 606 , on each respective date

33,753 28,062

Inventories 16,124 15,330

Income tax receivable 3,220 2,717

Prepaid expenses and other current assets 3,053 2,907

5 unchanged sentences

Deferred income taxes — 336

Other assets 3,597 3,778

Total Assets $ 91,362 $ 83,929

Liabilities and Stockholders’ Equity

25 unchanged sentences

Common stock in treasury, at cost, 3 shares, on each date

( 53 ) ( 53 )

Total Kewaunee Scientific Corporation Stockholders’ Equity 37,830 38,415

6 unchanged sentences

($ in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net earnings (loss)

Adjustments to reconcile net earnings (loss) to net cash used in operating activities:

Depreciation and amortization

Net loss $ ( 773 ) $ ( 1,665 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation 1,346 1,292

Bad debt provision 93 72

2 unchanged sentences

Change in assets and liabilities:

Receivables ( 5,784 ) 1,171

Inventories ( 794 ) 2,428

Income tax receivable ( 503 ) —

Accounts payable and other accrued expenses 4,379 ( 223 )

Deferred revenue 260 433

Net cash used in operating activities

Other, net 747 ( 854 )

Net cash (used in) provided by operating activities ( 516 ) 4,496

Cash flows from investing activities:

3 unchanged sentences

Dividends paid — ( 1,045 )

Dividends paid to noncontrolling interest in subsidiaries ( 57 ) ( 89 )

Proceeds from short-term borrowings 37,599 31,456

2 unchanged sentences

Net proceeds from exercise of stock options ( 15 ) ( 14 )

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net cash provided by (used in) financing activities 2,792 ( 5,174 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash 41 ( 165 )

Increase (decrease) in cash, cash equivalents and restricted cash 1,025 ( 1,558 )

6 unchanged sentences

The unaudited interim condensed consolidated financial statements of Kewaunee Scientific Corporation (the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”).

GAAP") have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These interim condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of these consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2020 Annual Report on Form 10-K.

Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These interim condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of these financial statements and should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2020 Annual Report on Form 10-K.

The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

The condensed consolidated balance sheet as of April 30, 2020 included in this interim period filing has been derived from the audited consolidated financial statements at that date, but does not include all of the information and related notes required by U.S.

GAAP for complete financial statements.

The condensed consolidated balance sheet as of April 30, 2020 included in this interim period filing has been derived from the audited financial statements at that date, but does not include all of the information and related notes required by generally accepted accounting principles ("GAAP") for complete financial statements.

The preparation of the interim condensed consolidated financial statements requires management to make certain estimates and assumptions that affect reported amounts and disclosures.

2 unchanged sentences

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

During the periods ended July 31, 2020 and April 30, 2020, the Company had cash deposits in excess of FDIC insured limits.

During the periods ended October 31, 2020 and April 30, 2020, the Company had cash deposits in excess of FDIC insured limits.

The Company has not experienced any losses from such deposits.

2 unchanged sentences

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

July 31, 2020

April 30, 2020

October 31, 2020 April 30, 2020

Cash and cash equivalents $ 5,759 $ 4,365

7 unchanged sentences

Disaggregated Revenue

A summary of net sales transferred to customers at a point in time and over time for the periods ended July 31, 2020 and July 31, 2019 is as follows (in thousands):

Three Months Ended July 31, 2020

International

A summary of net sales transferred to customers over time and at a point in time for the periods ended October 31, 2020 and October 31, 2019 is as follows (in thousands):

Three Months Ended October 31, 2020 Three Months Ended October 31, 2019

Domestic International Total Domestic International Total

Over Time $ 26,950 $ 10,228 $ 37,178 $ 29,950 $ 8,138 $ 38,088

Point in Time 1,822 — 1,822 1,634 — 1,634

Three Months Ended July 31, 2019

International

$ 28,772 $ 10,228 $ 39,000 $ 31,584 $ 8,138 $ 39,722

Six Months Ended October 31, 2020 Six Months Ended October 31, 2019

Domestic International Total Domestic International Total

Over Time $ 56,030 $ 16,593 $ 72,623 $ 58,185 $ 18,187 $ 76,372

Point in Time 2,800 — 2,800 2,686 — 2,686

$ 58,830 $ 16,593 $ 75,423 $ 60,871 $ 18,187 $ 79,058

Contract Balances

The closing and opening balances of contract assets arising from contracts with customers which were recorded as unbilled receivables were $ 6,996,000 at July 31, 2020 and $ 6,131,000 at April 30, 2020 .

The closing and opening balances of contract liabilities arising from contracts with customers were $ 1,432,000 at July 31, 2020 and $2,508,000 at April 30, 2020 .

The timing of revenue recognition, billings and cash collections results in accounts receivable, unbilled receivables, and deferred revenue which are disclosed on the condensed consolidated balance sheets and in the notes to the condensed consolidated financial statements.

The closing and opening balances of contract assets arising from contracts with customers which were recorded as unbilled receivables were $ 8,650,000 at October 31, 2020 and $ 6,131,000 at April 30, 2020.

The closing and opening balances of contract liabilities arising from contracts with customers were $ 2,768,000 at October 31, 2020 and $ 2,508,000 at April 30, 2020.

The timing of revenue recognition, billings and cash collections results in accounts receivable, unbilled receivables, and deferred revenue which are disclosed in the condensed consolidated balance sheets and in the notes to the condensed consolidated financial statements.

In general, the Company receives payments from customers based on a billing schedule established in its contracts.

Unbilled receivables represent amounts earned which have not yet been billed in accordance with contractually stated billing terms.

Accounts receivable are recorded when the right to consideration becomes unconditional and the Company has a right to invoice the customer.

Receivables are recorded when the right to consideration becomes unconditional and the Company has a right to invoice the customer.

Deferred revenue relates to payments received in advance of performance under the contract.

Deferred revenue is recognized as revenue as (or when) the Company performs under the contract.

Approximately 100% of the contract liability balances at April 30, 2020 and July 31, 2020 are expected to be recognized as revenue during the respective succeeding 12 months.

The Company measures inventory using the first-in, first-out ("FIFO") method at the lower of cost and net realizable value.

Approximately 100 % of the contract liability balances at April 30, 2020 and October 31, 2020 are expected to be recognized as revenue during the respective succeeding 12 months.

The Company measures inventory using the first-in, first-out ("FIFO") method at the lower of cost or net realizable value.

Inventories consisted of the following (in thousands):

July 31, 2020

April 30, 2020

October 31, 2020 April 30, 2020

Finished products $ 2,890 $ 2,455

1 unchanged sentence

Raw materials 11,478 10,954

The Company’s International subsidiaries’ inventories were $2,012,000 at July 31, 2020 and $2,136,000 at April 30, 2020 and are included in the above tables.

$ 16,124 $ 15,330

The Company’s International subsidiaries’ inventories were $ 1,925,000 at October 31, 2020 and $ 2,136,000 at April 30, 2020 and are included in the above tables.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and equivalents, mutual funds, cash surrender value of life insurance policies, term loans and short-term borrowings.

The carrying value of these assets and liabilities approximate their fair value.

The following tables summarize the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of July 31, 2020 and April 30, 2020 (in thousands):

July 31, 2020

Financial Assets

The carrying value of these assets and liabilities approximates their fair value.

The following tables summarize the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of October 31, 2020 and April 30, 2020 (in thousands):

October 31, 2020

Financial Assets Level 1 Level 2 Total

Trading securities held in non-qualified compensation plans (1)

$ 2,484 $ — $ 2,484

Cash surrender value of life insurance policies (1)

Total $ 2,484 $ 87 $ 2,571

Financial Liabilities

Non-qualified compensation plans (2)

$ — $ 2,951 $ 2,951

Total $ — $ 2,951 $ 2,951

April 30, 2020

Financial Assets

Financial Assets Level 1 Level 2 Total

Trading securities held in non-qualified compensation plans (1)

$ 2,485 $ — $ 2,485

Cash surrender value of life insurance policies (1)

Total $ 2,485 $ 87 $ 2,572

Financial Liabilities

Non-qualified compensation plans (2)

$ — $ 2,899 $ 2,899

Total $ — $ 2,899 $ 2,899

(1) The Company maintains two non-qualified compensation plans which include investment assets in a rabbi trust.

8 unchanged sentences

Long-term Debt and Other Credit Arrangements

At July 31, 2020 , advances of $ 8.5 million were outstanding under the Company’s bank revolving credit facility, compared to advances of $ 4.7 million outstanding as of April 30, 2020 .

The Company had standby letters of credit outstanding of $ 512,000 at July 31, 2020 , unchanged from April 30, 2020 .

Amounts available under the revolving credit facility were $ 6.0 million and $ 8.7 million at July 31, 2020 and April 30, 2020 , respectively.

At October 31, 2020, advances of $ 7.6 million were outstanding under the Company’s revolving credit facility, compared to advances of $ 4.7 million outstanding as of April 30, 2020.

The Company had standby letters of credit outstanding of $ 512,000 at October 31, 2020, unchanged from April 30, 2020.

Amounts available under the revolving credit facility were $ 8.3 million and $ 8.7 million at October 31, 2020 and April 30, 2020, respectively.

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

1 unchanged sentence

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

At July 31, 2020, the Company was in compliance with all the financial covenants under its revolving credit facility.

At October 31, 2020, the Company was in compliance with all the financial covenants under its revolving credit facility.

In accordance with ASC 842, "ASU No.

2 unchanged sentences

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

At July 31, 2020 and April 30, 2020 , right-of-use assets totaled $ 8,828,000 and $ 9,312,000 , respectively.

Operating cash paid to settle lease liabilities was $ 410,000 and $ 314,000 for the periods ended July 31, 2020 and July 31, 2019, respectively.

The Company’s leases have remaining lease terms of up to 10 years, some of which 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 $ 632,000 and $ 549,000 for the three months ended July 31, 2020 and July 31, 2019, respectively, inclusive of period cost for short-term leases, not included in lease liabilities, of $ 222,000 and $ 235,000 for the three months ended July 31, 2020 and July 31, 2019 , respectively.

At July 31, 2020 , the weighted average remaining lease term for the capitalized operating leases was 7.7 years and the weighted average discount rate was 4.0% .

For the financing lease, the weighted average remaining lease term was 5.2 years and the weighted average discount rate was 10.0% .

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

Future minimum lease payments under non-cancelable leases as of July 31, 2020 :

At October 31, 2020 and April 30, 2020, right-of-use assets totaled $ 9,157,000 and $ 9,312,000 , respectively.

Operating cash paid to settle lease liabilities was $ 848,000 and $ 668,000 for the six months ended October 31, 2020 and October 31, 2019, respectively .

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 $ 683,000 for the three months ended October 31, 2020, inclusive of period cost for short-term leases, not included in lease liabilities, of $ 245,000 .

Operating lease expense was $ 1,315,000 for the six months ended October 31, 2020, inclusive of period cost for short-term leases, not included in lease liabilities, of $ 467,000 .

Operating lease expense was $ 576,000 for the three months ended October 31, 2019, inclusive of period cost for short-term leases, not included in lease liabilities of $ 222,000 , and $ 1,125,000 for the six months ended October 31, 2019, inclusive of period cost for short-term leases, not included in lease liabilities, of $ 457,000 .

At October 31, 2020, the weighted average remaining lease term for the capitalized operating leases was 6.9 years and the weighted average discount rate was 4.1 %.

For the finance lease, the remaining lease term was 4.8 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 those lease payments.

The Company uses the implicit rate when readily determinable.

Future minimum lease payments under non-cancelable leases as of October 31, 2020 were as follows:

Operating Financing

Remainder of fiscal 2021 $ 889 $ 16

2022 1,818 32

2023 1,634 32

2024 1,276 32

2025 1,232 32

Thereafter 3,927 12

Total Minimum Lease Payments 1

$ 10,776 $ 156

Imputed Interest ( 1,700 ) ( 33 )

Total $ 9,076 $ 123

1 Excludes future minimum payments for leases which have not yet commenced as of October 31, 2020.

As of October 31, 2020, the Company has entered into leases that have not yet commenced with future minimum lease payments of $ 981,000 that are not yet reflected on the condensed consolidated balance sheets.

These operating leases will commence in fiscal year 2021 with lease terms of 5 years.

Earnings Per Share

1 unchanged sentence

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 118,696 and 30,360 antidilutive RSUs and options outstanding at July 31, 2020 and July 31, 2019 , respectively.

The following is a reconciliation of basic to diluted weighted average common shares outstanding at July 31 (in thousands):

There were 116,575 and 85,205 antidilutive RSUs and options outstanding at October 31, 2020 and October 31, 2019, respectively.

The following is a reconciliation of basic to diluted weighted average common shares outstanding (in thousands):

Three Months Ended October 31, Six Months Ended October 31,

2020 2019 2020 2019

Basic 2,759 2,750 2,757 2,750

Dilutive effect of stock options and RSUs — — — —

3 unchanged sentences

In May 2020, the Company granted 12,045 RSUs under the 2017 Omnibus Incentive Plan ("2017 Plan").

These RSUs include a service component that vests over a one -year period.

The Company granted 83,816 RSUs under the 2017 Plan in June 2020.

These RSUs include a

service component that vests over a one-year period.

The Company granted 83,816 RSUs under the 2017 Omnibus Incentive Plan in June 2020.

These RSUs include both a service and a 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 of service to total days over the three-year period.

The Company recorded

share-based compensation expense during the three months ended July 31, 2020 and 2019 of $59,000 and $ 21,000 , respectively.

The remaining estimated share-based compensation expense of $ 1,131,000 and $696,000 , respectively, will be recorded over the remaining vesting periods.

Income tax expense of $ 21,000 and $ 169,000 was recorded for the three months ended July 31, 2020 and 2019 , respectively.

The effective tax rates were (3.6)% and 25.4% for the three months ended July 31, 2020 and 2019 , respectively.

The change in the effective tax rate for the three-month period is primarily due to the impact of foreign operations which are taxed at different rates than the U.S.

The Company recorded share-based compensation expense during the three and six months ended October 31, 2020 of $ 141,000 and $ 200,000 , respectively, with the remaining estimated share-based compensation expense of $ 990,000 to be recorded over the remaining vesting periods.

The Company recorded share-based compensation expense during the three and six months ended October 31, 2019 of $ 41,000 and $ 82,000 , respectively.

An income tax benefit of $ 197,000 and an income tax expense of $ 2,003,000 were recorded for the three months ended October 31, 2020 and 2019, respectively.

An income tax benefit of $ 176,000 and an income tax expense of $ 2,172,000 were recorded for the six months ended October 31, 2020 and 2019, respectively.

The effective tax rates were 54.4 % and 1,267.7 % for the three months ended October 31, 2020 and 2019, respectively.

The effective tax rates were 18.5 % and 428.4 % for the six months ended October 31, 2020 and 2019, respectively.

The change in the effective tax rate for the three and six-month periods is primarily due to the revocation of the Company's indefinite reinvestment of foreign unremitted earnings position (discussed below) and the impact of foreign operations which are taxed at different rates than the U.S.

tax rate of 21%.

In addition, the change in the U.S.

effective tax rate for the three months ended July 31, 2020 was unfavorably impacted by the recording of a valuation allowance against the deferred tax asset which resulted in the elimination of any income tax benefit.

In addition, the change in the effective tax rates for the three and six months ended October 31, 2020 was impacted by the recording of a Domestic income tax benefit as a result of the Company's current Domestic net loss position.

This loss is permitted to be carried back and used to offset Domestic taxable income incurred in previous tax filing periods as allowed by the Coronavirus Aid, Relief and Economic Security Act ("CARES Act").

The Company’s income tax receivable increased due to the Domestic income tax benefits afforded by the CARES Act to carryback the current Domestic loss and generate an income tax refund.

The income tax receivable also includes Domestic income tax benefits attributable to a carryback claim for an applied Research and Development tax credit for the year ended April 30, 2018, as well as the taxable loss generated during the year ended April 30, 2020.

In August 2019, the Company revoked its indefinite reinvestment of foreign unremitted earnings position in compliance with ASC 740 "Income Taxes" and terminated its indefinite reinvestment of unremitted earnings assertion for the Singapore, China, and Kewaunee Labway India Pvt.

international subsidiaries.

The Company recognized a tax withholding expense, imposed by the India Income Tax Department in accordance with international tax treaties between the U.S.

and Singapore governments, at a rate of 10.0 % and 15.0 %, respectively.

The Company recognized a withholding tax expense of $ 92,000 and $ 80,000 for the three and six months ended October 31, 2020, respectively, related to the unremitted earnings of the subsidiaries listed above.

The Company recognized a withholding tax expense of $ 2,083,000 for the three and six months ended October 31, 2019 related to the unremitted earnings of the subsidiaries listed above.

The Company has a deferred tax liability of $ 735,000 and $ 785,000 for the withholding tax related to Kewaunee Labway India Pvt.

as of October 31, 2020 and April 30, 2020, respectively.

The Company recorded all deferred tax assets and liabilities related to its outside basis differences in its foreign subsidiaries consistent with ASC 740.

In July 2020, the U.S.

Department of the Treasury issued final tax regulations (proposed regulations were originally published in 2019) with respect to global intangible low-taxed income (''GILTI''.) Among other changes, these regulations now permit an election to exclude, from the GILTI calculation, items of income which are subject to a high effective foreign tax rate.

The Company excluded certain items, as permitted by these final regulations, in the current fiscal year and reflected the benefit in the estimated annual effective tax rate.

Defined Benefit Pension Plans

2 unchanged sentences

no further benefits have been, or will be, earned under the plans, subsequent to the amendment date, and no additional participants will be added to the plans.

There were no Company contributions paid to the plans during the three months ended July 31, 2020 , and July 31, 2019 .

There were no Company contributions paid to the plans during the three and six months ended October 31, 2020 and 2019.

The Company currently expects to contribute $ 30,000 to the plans during the remainder of the fiscal year.

The Company assumed an expected long-term rate of return of 7.75% for the periods ended July 31, 2020 and July 31, 2019 .

The Company assumed an expected long-term rate of return of 7.75 % for the periods ended October 31, 2020 and October 31, 2019.

Pension expense consisted of the following (in thousands):

Three Months Ended July 31, 2020

Three Months Ended July 31, 2019

Three Months Ended October 31, 2020 Three Months Ended October 31, 2019

Service cost $ 0 $ 0

Interest cost 181 208

2 unchanged sentences

Net periodic pension expense $ 289 $ 113

Six Months Ended October 31, 2020 Six Months Ended October 31, 2019

Service cost $ 0 $ 0

Interest cost 362 416

Expected return on plan assets ( 642 ) ( 710 )

Recognition of net loss 857 520

Net periodic pension expense $ 577 $ 226

Segment Information

6 unchanged sentences

Certain corporate expenses shown below have not been allocated to the business segments.

The following tables provide financial information by business segments for the three months ended July 31, 2020 and 2019 (in thousands):

International

Three months ended July 31, 2020

The following tables provide financial information by business segments for the periods ended October 31, 2020 and 2019 (in thousands):

Operations International

Operations Corporate /

Eliminations Total

Three months ended October 31, 2020

Revenues from external customers $ 28,772 $ 10,228 $ — $ 39,000

1 unchanged sentence

Earnings (loss) before income taxes $ 595 $ 786 $ ( 1,743 ) $ ( 362 )

Three months ended July 31, 2019

Three months ended October 31, 2019

Revenues from external customers $ 31,584 $ 8,138 $ — $ 39,722

1 unchanged sentence

Earnings (loss) before income taxes $ 746 $ 501 $ ( 1,405 ) $ ( 158 )

Operations International

Operations Corporate /

Eliminations Total

Six months ended October 31, 2020

Revenues from external customers $ 58,830 $ 16,593 $ — $ 75,423

Intersegment revenues 1,252 1,910 ( 3,162 ) —

Earnings (loss) before income taxes $ 1,588 $ 921 $ ( 3,458 ) $ ( 949 )

Six months ended October 31, 2019

Revenues from external customers $ 60,871 $ 18,187 $ — $ 79,058

Intersegment revenues 3,086 1,483 ( 4,569 ) —

Earnings (loss) before income taxes $ 2,306 $ 1,109 $ ( 2,908 ) $ 507

Reclassifications

The Company reclassified certain amounts in the condensed consolidated balance sheet for the period ended April 30, 2020 and the condensed consolidated statements of cash flows for the six-month period ended October 31, 2019 to conform to the current period presentation.

New Accounting Standards

21 unchanged sentences

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.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04").

This guidance provides practical expedients for contract modifications and certain hedging relationships associated with the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates.

The ASU can be adopted after its issuance date through December 31, 2022.

The Company is evaluating the optional expedients and exceptions in the guidance but does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

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-Q

Item 1. Financial Statements