KEWAUNEE SCIENTIFIC CORP /DE/ 10-K

Item 8. Financial Statements and Supplementary Data Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm ( Forvis Mazars, LLP , Atlanta, GA , PCAOB Firm No. 686 ) 19 Consolidated Statements of Operations—Years ended April 30, 202 4 and 202 3 20 Consolidated Statements of Comprehensive Income—Years ended April 30, 202 4 and 202 3 21 Consolidated Statements of Stockholders' Equity—Years ended April 30, 202 4 and 202 3 22 Consolidated Balance Sheets—April 30, 202 4 and 202 3 23 Consolidated Statements of Cash Flows—Years ended April 30, 202 4 and 202 3 24 Notes to Consolidated Financial Statements 25 Consent of Independent Registered Public Accounting Firm 43 18 Table of Contents Report Of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Kewaunee Scientific Corporation Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Kewaunee Scientific Corporation (the "Company") as of April 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the years in the two-year period ended April 30, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 30, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended April 30, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Forvis Mazars, LLP We have served as the Company's auditor since 2020. Atlanta, Georgia June 28, 2024 19 Table of Contents CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended April 30 Kewaunee Scientific Corporation $ and shares in thousands, except per share amounts 2024 2023 Net sales $ 203,755 $ 219,494 Cost of products sold 151,704 183,906 Gross profit 52,051 35,588 Operating expenses 33,770 30,224 Operating earnings 18,281 5,364 Pension expense ( 4,177 ) ( 71 ) Other income, net 814 939 Interest expense ( 1,799 ) ( 1,734 ) Earnings before income taxes 13,119 4,498 Income tax (benefit) expense ( 5,938 ) 3,139 Net earnings 19,057 1,359 Less: net earnings attributable to the non-controlling interest 304 621 Net earnings attributable to Kewaunee Scientific Corporation $ 18,753 $ 738 Net earnings per share attributable to Kewaunee Scientific Corporation stockholders Basic $ 6.51 $ 0.26 Diluted $ 6.38 $ 0.25 Weighted average number of common shares outstanding Basic 2,879 2,824 Diluted 2,938 2,902 The accompanying Notes are an integral part of these Consolidated Financial Statements. 20 Table of Contents CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended April 30 Kewaunee Scientific Corporation $ in thousands 2024 2023 Net earnings $ 19,057 $ 1,359 Other comprehensive income (loss), net of tax Foreign currency translation adjustments ( 598 ) ( 290 ) Postretirement benefit plans Settlement loss included in net income 4,019 — Income taxes on postretirement benefit plans ( 3,870 ) — Change in unrecognized actuarial loss on pension obligations 509 590 Total postretirement benefit plans 658 590 Comprehensive income, net of tax $ 19,117 $ 1,659 Less comprehensive income attributable to the non-controlling interest 304 621 Total comprehensive income attributable to Kewaunee Scientific Corporation $ 18,813 $ 1,038 The accompanying Notes are an integral part of these Consolidated Financial Statements. 21 Table of Contents CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Kewaunee Scientific Corporation $ in thousands, except shares and per share amounts Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Balance at April 30, 2022 $ 6,983 $ 4,483 $ ( 53 ) $ 28,023 $ ( 3,742 ) $ 35,694 Net earnings attributable to Kewaunee Scientific Corporation — — — 738 — 738 Other comprehensive income — — — — 300 300 Stock based compensation 101 576 — — — 677 Balance at April 30, 2023 $ 7,084 $ 5,059 $ ( 53 ) $ 28,761 $ ( 3,442 ) $ 37,409 Net earnings attributable to Kewaunee Scientific Corporation — — — 18,753 — 18,753 Other comprehensive income — — — — 60 60 Stock based compensation 189 347 — — — 536 Purchase of Treasury Stock, 66,191 shares — — ( 1,998 ) — — ( 1,998 ) Balance at April 30, 2024 $ 7,273 $ 5,406 $ ( 2,051 ) $ 47,514 $ ( 3,382 ) $ 54,760 The accompanying Notes are an integral part of these Consolidated Financial Statements. 22 Table of Contents CONSOLIDATED BALANCE SHEETS April 30 Kewaunee Scientific Corporation $ and shares in thousands, except per share amounts 2024 2023 ASSETS Current Assets Cash and cash equivalents $ 23,267 $ 8,078 Restricted cash 2,671 5,737 Receivables, less allowance: $ 588 (2024); $ 476 (2023) 45,064 46,081 Inventories 20,679 21,889 Prepaid expenses and other current assets 5,136 6,135 Total Current Assets 96,817 87,920 Property, plant and equipment, net 17,649 16,402 Right of use assets 7,454 9,170 Deferred income taxes 7,401 — Other assets 5,445 5,406 Total Assets $ 134,766 $ 118,898 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Short-term borrowings $ 3,099 $ 3,587 Current portion of financing liability 713 642 Current portion of financing lease liabilities 111 85 Current portion of operating lease liabilities 2,123 1,967 Accounts payable 23,262 23,599 Employee compensation and amounts withheld 6,041 4,304 Deferred revenue 4,374 4,097 Other accrued expenses 1,057 1,772 Total Current Liabilities 40,780 40,053 Long-term portion of financing liability 27,420 28,132 Long-term portion of financing lease liabilities 235 148 Long-term portion of operating lease liabilities 5,434 7,136 Accrued pension and deferred compensation costs 3,008 3,546 Deferred income taxes 1,218 943 Other non-current liabilities 462 455 Total Liabilities 78,557 80,413 Commitments and Contingencies ( Note 10 ) Stockholders' Equity Common stock, $ 2.50 par value, Authorized— 5,000 shares; Issued— 2,909 shares (2024); 2,833 shares (2023) Outstanding— 2,839 shares (2024); 2,830 shares (2023) 7,273 7,084 Additional paid-in capital 5,406 5,059 Retained earnings 47,514 28,761 Accumulated other comprehensive loss ( 3,382 ) ( 3,442 ) Common stock in treasury, at cost: 70 shares (2024); 3 shares (2023) ( 2,051 ) ( 53 ) Total Kewaunee Scientific Corporation Stockholders' Equity 54,760 37,409 Non-controlling interest 1,449 1,076 Total Stockholders' Equity 56,209 38,485 Total Liabilities and Stockholders' Equity $ 134,766 $ 118,898 The accompanying Notes are an integral part of these Consolidated Financial Statements. 23 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended April 30 Kewaunee Scientific Corporation $ in thousands 2024 2023 Cash Flows from Operating Activities Net earnings $ 19,057 $ 1,359 Adjustments to reconcile net earnings to net cash used by operating activities: Depreciation 3,125 2,867 Provision for credit losses 276 120 Stock based compensation expense 1,028 886 Provision for deferred income taxes ( 7,127 ) 516 Change in assets and liabilities: Receivables 741 ( 4,947 ) Inventories 1,210 1,907 Accounts payable and other accrued expenses 691 ( 5,558 ) Deferred revenue 277 568 Other, net 286 ( 1,508 ) Net cash provided by (used in) operating activities 19,564 ( 3,790 ) Cash Flows from Investing Activities Capital expenditures ( 4,373 ) ( 4,148 ) Net cash used in investing activities ( 4,373 ) ( 4,148 ) Cash Flows from Financing Activities Proceeds from short-term borrowings 148,061 60,599 Repayments on short-term borrowings ( 148,549 ) ( 58,601 ) Proceeds from sale-leaseback transaction — 13,629 Repayments on financing liability ( 642 ) ( 575 ) Proceeds from long-term debt 202 — Repayments on long-term debt ( 88 ) ( 121 ) Purchase of Treasury Stock ( 1,998 ) — Net cash (used in) provided by financing activities ( 3,014 ) 14,931 Effect of exchange rate changes on cash, net ( 54 ) ( 72 ) Increase in Cash, Cash Equivalents and Restricted Cash 12,123 6,921 Cash, Cash Equivalents and Restricted Cash at Beginning of Year 13,815 6,894 Cash, Cash Equivalents and Restricted Cash at End of Year $ 25,938 $ 13,815 Supplemental Disclosure of Cash Flow Information Interest paid $ 1,799 $ 1,862 Income taxes paid $ 6,240 $ 3,158 Assets obtained under new operating leases $ 200 $ 3,902 Assets obtained under new finance leases $ 204 $ — The accompanying Notes are an integral part of these Consolidated Financial Statements. 24 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1— Summary of Significant Accounting Policies Kewaunee Scientific Corporation and subsidiaries (collectively the "Company") design, manufacture, and install laboratory, healthcare, and technical furniture products. The Company's products include steel and wood casework, fume hoods, adaptable modular systems, moveable workstations, stand-alone benches, biological safety cabinets, and epoxy resin work surfaces and sinks. The Company's sales are made through purchase orders and contracts submitted by customers through its dealers, its subsidiaries in Singapore and India, and a national stocking distributor. The majority of the Company's products are sold to customers located in North America, primarily within the United States. The Company's laboratory products are used in chemistry, physics, biology and other general science laboratories in the pharmaceutical, biotechnology, industrial, chemical, commercial, educational, government and health care markets. Technical products are used in facilities manufacturing computers and light electronics and by users of computer and networking furniture. Principles of Consolidation The Company's consolidated financial statements include the accounts of Kewaunee Scientific Corporation and its international subsidiaries. A brief description of each subsidiary, along with the amount of the Company's controlling financial interests, as of April 30, 2024 is as follows: (1) Kewaunee Labway Asia Pte. Ltd., a commercial sales organization for the Company's products in Singapore, is 100 % owned by the Company; (2) Kewaunee Scientific Corporation Singapore Pte. Ltd., a holding company in Singapore, is 100 % owned by the Company; (3) Kewaunee Labway India Pvt. Ltd., a design, installation, manufacturing, assembly and commercial sales operation for the Company's products in Bangalore, India, is 94 % owned by the Company; (4) Koncepo Scientech International Pvt. Ltd., a laboratory design and strategic advisory and construction management services firm, located in Bangalore, India, is 80 % owned by the Company; (5) Kequip Global Lab Solutions Pvt. Ltd. is 70 % owned by Kewaunee Scientific Corporation Singapore Pte. Ltd. All intercompany balances, transactions, and profits have been eliminated. Included in the consolidated financial statements are net assets of $ 18,547,000 and $ 16,786,000 at April 30, 2024 and 2023, respectively, of the Company's subsidiaries. Net sales by the Company's subsidiaries in the amounts of $ 66,517,000 and $ 72,778,000 were included in the consolidated statements of operations for fiscal years 2024 and 2023, respectively. 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. During the years ended April 30, 2024 and 2023, the Company had cash deposits in excess of FDIC insured limits. The Company has not experienced any losses from such deposits. The Company includes restricted cash along with the cash balance for presentation in the consolidated statements of cash flows. The reconciliation between the consolidated balance sheet and the consolidated statement of cash flows at April 30 is as follows: $ in thousands 2024 2023 Cash and cash equivalents $ 23,267 $ 8,078 Restricted cash 2,671 5,737 Total cash, cash equivalents and restricted cash $ 25,938 $ 13,815 Restricted Cash Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders. Accounts Receivable and Allowance for Credit Losses Receivables are stated at the amount owed by the customer, net of allowances for estimated credit losses. The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where management is aware of a customer's inability to meet its financial obligations to the Company, or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected, a specific reserve for credit losses is estimated and recorded to reduce the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential credit losses, a reserve for credit losses is estimated and recorded based on past loss history and an overall assessment of past due trade accounts receivable amounts outstanding. Accounts are written off when it is clearly established that the receivable is a bad debt. Recoveries of receivables previously written off are recorded when received. The activity in the allowance for credit losses for each of the years ended April 30 was: $ in thousands 2024 2023 Balance at beginning of year $ 476 $ 357 Provision for credit losses 276 120 Write-offs, net ( 164 ) ( 1 ) Balance at end of year $ 588 $ 476 25 Table of Contents Unbilled Receivables Accounts receivable include unbilled receivables that represent amounts earned which have not yet been billed in accordance with contractually stated billing terms, excluding retention, which is included in other assets. The amount of unbilled receivables, net of unbilled retention, at April 30, 2024 and 2023 was $ 11,840,000 and $ 13,459,000 , respectively. Inventories The Company's inventories are valued at the lower of cost or net realizable value under the first-in, first-out ("FIFO") method. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is determined for financial reporting purposes principally on the straight-line method over the estimated useful lives of the individual assets or, for leaseholds, over the terms of the related leases, if shorter. Property, plant and equipment consisted of the following at April 30: $ in thousands 2024 2023 Useful Life Land $ 41 $ 41 N/A Building and improvements 17,280 17,147 5 - 40 years Machinery and equipment 46,913 44,180 3 - 10 years Total 64,234 61,368 Less accumulated depreciation ( 46,585 ) ( 44,966 ) Net property, plant and equipment $ 17,649 $ 16,402 The Company reviews the carrying value of property, plant and equipment for impairment annually or whenever changes in circumstances or events indicate that such carrying value may not be recoverable. If projected undiscounted cash flows are not sufficient to recover the carrying value of the potentially impaired asset, the carrying value is reduced to estimated fair value. There were no impairments in fiscal years 2024 or 2023. Other Assets Other assets at April 30, 2024 and 2023 included $ 312,000 and $ 1,191,000 , respectively, of unbilled retainage, $ 2,611,000 and $ 2,352,000 , respectively, of assets held in a trust account for non-qualified benefit plan, and $ 31,000 and $ 111,000 , respectively, of cash surrender values of life insurance policies. Life insurance policies are recorded at the amount that could be realized under the insurance contract as of the date of the Company's consolidated balance sheets with the change in cash surrender or contract value being recorded as income or expense during each period. Use of Estimates The presentation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Significant estimates impacting the accompanying consolidated financial statements include the allowance for credit losses, self-insurance reserves, and income taxes. Variable Interest Entity On December 22, 2021, the Company entered into an Agreement for Purchase and Sale of Real Property with CAI Investments Sub-Series 100 LLC (the "Buyer"), for the Company’s headquarters and manufacturing facilities (the "Property") located in Statesville, North Carolina (the "Sale Agreement") in exchange for $ 30,275,000 in sales proceeds. The Sale Agreement was finalized on March 24, 2022 and coincided with the Company and CAI Investments Medical Products I Master Lessee LLC ("Lessor"), an affiliate of the Buyer, entering into a lease agreement. The lease arrangement is for a 20-year term. At the same time, the Buyer and its affiliates formed a new, debt-financed affiliate CAI Investments Medical Products I, DST ("Trust") and contributed the Property to the Trust. According to the terms of the lease, the Trust leased the Property to its affiliated Lessor, which in turn sub-leased the Property to the Company (together with the Sale Agreement, the "Sale-Leaseback Arrangement"). The Company concluded that Parent and its direct affiliates, including the Trust, are designed primarily to acquire and manage the Property and constitute a variable interest entity because the Trust lacks sufficient equity on its own to finance its operations. The Company concluded it should not consolidate Parent or its affiliates under the variable interest model or the voting interest model of ASC 810, Consolidation . For additional information on the accounting for the Sale-Leaseback Arrangement, refer to Note 5 , Sale-Leaseback Financing Transaction . Fair Value of Financial Instruments A financial instrument is defined as cash equivalents, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from another party. The Company's financial instruments consist primarily of cash and equivalents, mutual funds, cash surrender value of life insurance policies, a sale-leaseback financing liability, term loans and short-term borrowings. The carrying value of these assets and liabilities approximate their fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the 26 Table of Contents measurement date. Expanded disclosures about instruments measured at fair value require the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows: Level 1 Quoted prices in active markets for identical assets or liabilities as of the reporting date. Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities as of the reporting date. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following tables summarize the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring and nonrecurring basis as of April 30, 2024 and 2023 (in thousands): 2024 Level 1 Level 2 Level 3 Total Financial Assets Trading securities held in non-qualified compensation plans (1) $ 1,565 $ — $ — $ 1,565 Cash surrender value of life insurance policies (1) — 1,077 — 1,077 Total $ 1,565 $ 1,077 $ — $ 2,642 Financial Liabilities Non-qualified compensation plans (2) $ — $ 3,009 $ — $ 3,009 Total $ — $ 3,009 $ — $ 3,009 2023 Level 1 Level 2 Level 3 Total Financial Assets Trading securities held in non-qualified compensation plans (1) $ 1,105 $ — $ — $ 1,105 Cash surrender value of life insurance policies (1) — 1,358 — 1,358 Total $ 1,105 $ 1,358 $ — $ 2,463 Financial Liabilities Non-qualified compensation plans (2) $ — $ 2,910 $ — $ 2,910 Total $ — $ 2,910 $ — $ 2,910 (1) The Company maintains two non-qualified compensation plans which include investment assets in a rabbi trust. These assets consist of marketable securities, which are valued using quoted market prices multiplied by the number of shares owned, and life insurance policies, which are valued at their cash surrender value. (2) Plan liabilities are equal to the individual participants' account balances and other earned retirement benefits. Revenue Recognition Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. The Company recognizes revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. The majority of the Company's revenues are recognized over time as the customer receives control as the Company performs work under a contract. However, a portion of the Company's revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract. Sales taxes that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales. Certain customers' cash discounts and volume rebates are offered as sales incentives. The discounts and volume rebates are recorded as a reduction in sales at the time revenue is recognized in an amount estimated based on historical experience and contractual obligations. Deferred revenue consists of customer deposits and advance billings of the Company's products where sales have not yet been recognized. Accounts receivable includes retainage in the amounts of $ 294,000 and $ 235,000 at April 30, 2024 and 2023, respectively. Shipping and handling costs are included in cost of product sales. Because of the nature and quality of the 27 Table of Contents Company's products, any warranty issues are determined in a relatively short period after the sale and are infrequent in nature, and as such, warranty costs are immaterial to the Company's consolidated financial position and results of operations and are expensed as incurred. Credit Concentration The Company performs credit evaluations of its customers. Revenues from three of the Company's domestic dealers represented in the aggregate approximately 45 % and 36 % of the Company's sales in fiscal years 2024 and 2023, respectively. Accounts receivable for two domestic customers represented approximately 21 % and 23 % of the Company's total accounts receivable as of April 30, 2024 and 2023, respectively. Insurance The Company maintains a self-insured health-care program. The Company accrues estimated losses for claims incurred but not reported using assumptions based on historical loss experience. The Company has also purchased specific stop-loss insurance to limit claims above a certain amount. The Company adjusts insurance reserves, as needed, in the event that future loss experience differs from historical loss patterns. Income Taxes In accordance with ASC 740, "Income Taxes" ("ASC 740"), the Company uses the liability method in measuring the provision for income taxes and recognizing deferred income tax assets and liabilities on the consolidated balance sheets. 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. Under AC 740, the Company evaluates the realization of all deferred income tax assets and determines if a valuation allowance is required on an annual basis. Under ASC 740, the Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC 740 only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the taxing authorities. The Company did not have any significant uncertain tax positions at April 30, 2024 or 2023. Research and Experimentation Expenditures Research and experimentation expenditures are charged to cost of products sold in the periods incurred. Expenditures for research and experimentation expenditures were $ 920,000 and $ 1,012,000 for the fiscal years ended April 30, 2024 and 2023, respectively. 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, 2024 and 2023 were $ 336,000 and $ 226,000 , respectively. Foreign Currency Translation The financial statements of subsidiaries located in India are measured using the local currency as the functional currency. Effective May 1, 2022, Kewaunee Scientific Corporation Singapore Pte. Ltd. transitioned to using the U.S. dollar as its functional currency. The financial position and operating results of Kewaunee Labway Asia Pte. Ltd. are also measured using the U.S. dollar as its functional currency. Assets and liabilities of the Company's foreign subsidiaries using local currencies are translated into United States dollars at fiscal year-end exchange rates. Sales, expenses, and cash flows are translated at weighted average exchange rates for each period. Net translation gains or losses are included in other comprehensive income, a separate component of stockholders' equity. 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 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 no antidilutive RSUs and stock options outstanding at April 30, 2024. There were 33,900 antidilutive RSUs and stock options outstanding at April 30, 2023. The following is a reconciliation of basic to diluted weighted average common shares outstanding: Shares in thousands 2024 2023 Weighted average common shares outstanding Basic 2,879 2,824 Dilutive effect of stock options and RSUs 59 78 Weighted average common shares outstanding—diluted 2,938 2,902 Accounting for Stock Options and Other Equity Awards Compensation costs related to stock options and other stock awards granted by the Company are charged against operating expenses during their vesting period, under ASC 718, "Compensation—Stock Compensation." Forfeitures are accounted for in the period in which the awards are forfeited. The Company granted 117,747 RSUs under the 2017 Omnibus Incentive Plan in fiscal year 2024 and 87,969 RSUs in fiscal year 2023. There were no stock options granted during fiscal years 2024 and 2023. (See Note 7 , Stock Options and Share-Based Compensation ) 28 Table of Contents New Accounting Standards 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. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022. The Company adopted this standard effective May 1, 2023. The adoption of this standard did not have a significant impact on the Company's consolidated financial position or results of operations. In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures," which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company will adopt this standard in fiscal year 2025. 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 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740) - Improvements for Income Tax Disclosures," which requires public business entities to, on an annual basis, (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. This ASU also provides for additional disclosure requirements to provide clarity for investors related to income tax disclosures. This guidance is effective for annual periods beginning after December 15, 2024. The Company will adopt this standard in fiscal year 2026. 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. Note 2 - Revenue Recognition The Company recognizes revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. The majority of the Company's revenues are recognized over time as the customer receives control as the Company performs work under a contract. However, a portion of the Company's revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract. Performance Obligations A performance obligation is a distinct good or service or bundle of goods and services that is distinct or a series of distinct goods or services that are substantially the same and have the same pattern of transfer. The Company identifies performance obligations at the inception of a contract and allocates the transaction price to individual performance obligations to reasonably reflect the Company's performance in transferring control of the promised goods or services to the customer. The Company has elected to treat shipping and handling as a fulfillment activity instead of a separate performance obligation. The following are the primary performance obligations identified by the Company: Laboratory Furniture The Company principally generates revenue from the manufacture of custom laboratory, healthcare, and technical furniture and infrastructure products (herein referred to as "laboratory furniture"). The Company's products include steel and wood casework, fume hoods, adaptable modular systems, moveable workstations, stand-alone benches, biological safety cabinets, and epoxy resin work surfaces and sinks. Customers can benefit from each piece of laboratory furniture on its own or with resources readily available in the marketplace such as separately purchased installation services. Each piece of laboratory furniture does not significantly modify or customize other laboratory furniture, and the pieces of laboratory furniture are not highly interdependent or interrelated with each other. The Company can, and frequently does, break portions of contracts into separate "runs" to meet manufacturing and construction schedules. As such, each piece of laboratory furniture is considered a separate and distinct performance obligation. The majority of the Company's products are customized to meet the specific architectural design and performance requirements of laboratory planners and end users. The finished laboratory furniture has no alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. 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. 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. For standardized products sold by the Company, revenue is recognized when control transfers, which is typically freight on board ("FOB") shipping point. 29 Table of Contents Warranties All orders contain a standard warranty that warrants that the product is free from defects in workmanship and materials under normal use and conditions for a limited period of time. Due to the nature and quality of the Company's products, any warranty issues have historically been determined in a relatively short period after the sale, have been infrequent in nature, and have been immaterial to the Company's financial position and results of operations. The Company's standard warranties are not considered a separate and distinct performance obligation as the Company does not provide a service to customers beyond assurance that the covered product is free of initial defects. Costs of providing these short term assurance warranties are immaterial and, accordingly, are expensed as incurred. Extended separately priced warranties are available which can last up to ten years. Extended warranties are considered separate performance obligations as they are individually priced options providing assurances that the products are free of defects. Installation Services The Company sometimes performs installation services for customers. The scope of installation services primarily relates to setting up and ensuring the proper functioning of the laboratory furniture. In certain markets, the Company may provide a broader range of installation services involving the design and installation of the laboratory's mechanical services. Installation services can be, and often are, performed by third parties and thus may be distinct from the Company's products. Installation services create or enhance assets that the customer controls as the installation services are provided. As such, revenue from installation services is recognized over time, as the installation services are performed using the cost input method, as there is a direct relationship between the Company's inputs and the transfer of control by means of the performance of installation services to the customer. Custodial Services It is common in the laboratory and healthcare furniture industries for customers to request delivery at specific future dates, as products are often to be installed in buildings yet to be constructed. Frequently, customers will request the manufacture of these products prior to the customer's ability or readiness to receive the product due to various reasons such as changes to or delays in the construction of the building. As such, from time to time Kewaunee's customers require us to provide custodial services for their laboratory furniture. Custodial services are frequently provided by third parties and do not significantly alter the other goods or services covered by the contract and as such are considered a separate and distinct performance obligation. Custodial services are simultaneously received and consumed by the customer and as such revenue from custodial services is recognized over time using a straight-line time-based measure of progress towards completion, because the Company's services are provided evenly throughout the performance period. Payment Terms and Transaction Prices The Company's contracts with customers are generally fixed-price and do not contain variable consideration or a general right of return or refund. The Company's contracts with customers contain terms typical for Kewaunee's industry, including withholding a portion of the transaction price until after the goods or services have been transferred to the customer (i.e. "retainage"). The Company does not recognize this as a significant financing component because the primary purpose of retainage is to provide the customer with assurance that the Company will perform its obligations under the contract, rather than to provide financing to the customer. Allocation of Transaction Price The Company's contracts with customers may cover multiple goods and services, such as differing types of laboratory furniture and installation services. For these arrangements, each good or service is evaluated to determine whether it represents a distinct performance obligation. The total transaction price is then allocated to the distinct performance obligations based on their relative standalone selling price at the inception of the arrangement. If available, the Company utilizes observable prices for goods or services sold separately to similar customers in similar circumstances to determine its relative standalone selling price. Otherwise, list prices are used if they are determined to be representative of standalone selling prices. If neither of these methods are available at contract inception, such as when the Company does not sell the product or service separately, judgment may be required and the Company determines the standalone selling price using one, or a combination of, the adjusted market assessment or expected cost-plus margin approaches. Practical Expedients Used The Company has elected the following practical expedients: • The portfolio approach was applied in evaluating the accounting for the cost of obtaining a contract. • Payment terms with the Company's customers which are one year or less are not considered a significant financing component. 30 Table of Contents • The Company excludes from revenues taxes it collects from customers that are assessed by a government authority. This is primarily relevant to domestic sales but also includes taxes on some international sales which are also excluded from the transaction price. • The Company's incremental cost to obtain a contract is limited to sales commissions. The Company applies the practical expedient to expense commissions as incurred for contracts having a duration of one year or less. Sales commissions related to contracts with a duration of greater than one year are immaterial to the Company's consolidated financial position and results of operations and are also expensed as incurred. Disaggregated Revenue A summary of net sales transferred to customers at a point in time and over time for the twelve months ended April 30 is as follows (in thousands): 2024 Domestic International Total Over Time $ 131,798 $ 66,517 $ 198,315 Point in Time 5,440 — 5,440 Total Revenue $ 137,238 $ 66,517 $ 203,755 2023 Domestic International Total Over Time $ 141,994 $ 72,778 $ 214,772 Point in Time 4,722 — 4,722 Total Revenue $ 146,716 $ 72,778 $ 219,494 Contract Balances The closing balances of contract assets included $ 11,840,000 in accounts receivable and $ 312,000 in other current assets at April 30, 2024. The opening balance of contract assets arising from contracts with customers included $ 13,459,000 in accounts receivable and $ 1,191,000 in other assets at April 30, 2023. The closing and opening balances of contract liabilities included in deferred revenue arising from contracts with customers were $ 4,374,000 at April 30, 2024 and $ 4,097,000 at April 30, 2023. The timing of revenue recognition, billings and cash collections results in accounts receivable, unbilled receivables, and deferred revenue which is disclosed on the consolidated balance sheets and in the notes to the 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. Deferred revenue relates to payments received in advance of performance under the contract. Deferred revenue is recognized as revenue as the Company performs under the contract. During the fiscal year ended April 30, 2024, changes in contract assets and liabilities were not materially impacted by any other factors. Approximately 100 % of the contract liability balance at April 30, 2024 is expected to be recognized as revenue during fiscal year 2025. Note 3— Inventories Inventories consisted of the following at April 30: (in thousands) 2024 2023 Finished goods $ 3,042 $ 3,412 Work-in-process 1,931 2,380 Materials and components 15,706 16,097 Total inventories $ 20,679 $ 21,889 At April 30, 2024 and 2023, the Company's international subsidiaries' inventories were $ 3,239,000 and $ 2,740,000 , respectively, measured using the lower of cost or net realizable value under the FIFO method and are included in the above tables. 31 Table of Contents Note 4— Long-term Debt and Other Credit Arrangements On December 19, 2022, the Company entered into a Credit and Security Agreement (the "Credit Agreement") with Mid Cap Funding IV Trust, as agent (the "Agent"), and the lenders from time to time party thereto (collectively, the "Lenders"). The Credit Agreement provides for a secured revolving line of credit initially up to $ 15.0 million (the "Revolving Credit Facility"). Availability under the Revolving Credit Facility is subject to a borrowing base calculated in accordance with the terms of the Credit Agreement and on the basis of eligible accounts and inventory and certain other reserves and adjustments. Pursuant to the Credit Agreement, the Company granted to the Agent, for itself and the Lenders, a first priority security interest in all existing and future acquired assets owned by the Company. Subject to the terms of the Credit Agreement, from time to time the Company may request that the initial revolving loan amount available under the Revolving Credit Facility be increased with additional tranches in minimum amounts of $ 1,000,000 , up to a maximum borrowing availability of $ 30.0 million. The Agent and Lenders must consent to any such increase in their sole discretion. The Revolving Credit Facility matures on December 19, 2025. Except as set forth in the Credit Agreement, borrowings under the Revolving Credit Facility bear interest at a rate equal to Term SOFR (Secured Overnight Financing Rate) plus 4.10 %. The Company is required to make monthly interest payments on the Revolving Credit Facility, with the entire principal payment due at maturity. At April 30, 2024, there was $ 3,000,000 outstanding under the Revolving Credit Facility, with remaining borrowing capacity under the Revolving Credit Facility of $ 11,587,000 . At April 30, 2023, there was $ 3,548,000 outstanding under the Revolving Credit Facility, with remaining borrowing capacity under the Revolving Credit Facility of $ 10,286,000 . The borrowing rate under the Revolving Credit Facility was 9.54 % and 9.02 % as of April 30, 2024 and 2023, respectively. The Company was in compliance with all financial covenants under its revolving credit facility at April 30, 2024 and 2023. In addition, the Company's International subsidiaries had a balance outstanding of $ 99,000 and $ 39,000 in short-term borrowings related to overdraft protection and short-term loan arrangements at April 30, 2024 and 2023, respectively. At April 30, 2024, there were foreign bank guarantees outstanding to customers in the amounts of $ 7.1 million, $ 435,000 , and $ 226,000 with expiration dates in fiscal years 2025, 2026, and 2027, respectively, collateralized by certain assets of the Company's subsidiaries in India. At April 30, 2023, there were bank guarantees issued by foreign banks outstanding to customers in the amounts of $ 5.2 million, $ 142,000 , $ 3,000 , and $ 233,000 with expiration dates in fiscal years 2024, 2025, 2026, and 2027, respectively, collateralized by certain assets of the Company's subsidiaries in India. Note 5— Sale-Leaseback Financing Transaction On December 22, 2021, the Company entered into the Sale Agreement with the Buyer for the Company’s headquarters and manufacturing facilities located at 2700 West Front Street in Statesville, North Carolina. The Sale Agreement was finalized on March 24, 2022 and coincided with the Company and the Buyer entering into the Lease Agreement. The Sale-Leaseback Arrangement is repayable over a 20-year term, with four renewal options of five years each. Under the terms of the Lease Agreement, the Company’s initial basic rent is approximately $ 158,000 per month, with annual increases of approximately 2 % each year of the initial term. The Company accounted for the Sale-Leaseback Arrangement as a financing transaction with the Buyer in accordance with ASC 842, Leases , as the Lease Agreement was determined to be a finance lease. The Company concluded the Lease Agreement met the qualifications to be classified as a finance lease due to the significance of the present value of the lease payments, using a discount rate of 4.75 % to reflect the Company’s incremental borrowing rate, compared to the fair value of the leased property as of the lease commencement date. In measuring the lease payments for the present value analysis, the Company elected the practical expedient to combine the lease component (the leased facilities) with the non-lease component (property management provided by the Buyer/Lessor) into a single lease component. The presence of a finance lease indicates that control of the Property has not transferred to the Buyer/Lessor and, as such, the transaction was deemed a failed sale-leaseback and accounted for as a financing arrangement. As a result of this determination, the Company is viewed as having received the sales proceeds from the Buyer/Lessor in the form of a hypothetical loan collateralized by its leased facilities. The hypothetical loan is payable as principal and interest in the form of “lease payments” to the Buyer/Lessor. As such, the Company will not derecognize the Property from its books for accounting purposes until the lease ends. No gain or loss was recognized related to the Sale-Leaseback Arrangement under U.S. GAAP. As of April 30, 2024, the carrying value of the financing liability was $ 28,133,000 , net of $ 648,000 in debt issuance costs, of which $ 713,000 was classified as current on the Consolidated Balance Sheet with $ 27,420,000 classified as long-term. As of April 30, 2023, the carrying value of the financing liability was $ 28,774,000 , net of $ 708,000 in debt issuance costs, of which $ 642,000 was classified as current on the Consolidated Balance Sheet with $ 28,132,000 classified as long-term. The monthly lease payments are split between a reduction of principal and interest expense using the effective interest rate method. Interest 32 Table of Contents expense associated with the financing arrangement was $ 1,287,000 and $ 1,316,000 for the years ended April 30, 2024 and 2023, respectively. The Company will depreciate the building down to zero over the 20-year assumed economic life of the Property so that at the end of the lease term, the remaining carrying amount of the financing liability will equal the carrying amount of the land of $ 41,000 . Remaining future cash payments related to the financing liability for the fiscal years ending April 30 are as follows: ($ in thousands) 2025 $ 1,970 2026 2,009 2027 2,049 2028 2,090 2029 2,132 Thereafter 31,736 Total Minimum Liability Payments 41,986 Imputed Interest ( 13,853 ) Total $ 28,133 Note 6— Income Taxes Effective August 1, 2019, 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. As a result of this election, the Company recorded a tax withholding expense imposed by the India Income Tax Department of $ 371,000 and $ 406,000 for the years ended April 30, 2024 and 2023, respectively. 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. Income tax (benefit) expense consisted of the following: $ in thousands 2024 2023 Current tax (benefit) expense: Federal $ 2,332 $ 691 State and local 65 197 Foreign 2,661 1,736 Total current tax expense 5,058 2,624 Deferred tax (benefit) expense: Federal ( 10,378 ) — State and local ( 893 ) — Foreign 275 515 Total deferred tax (benefit) expense ( 10,996 ) 515 Net income tax (benefit) expense $ ( 5,938 ) $ 3,139 33 Table of Contents The reasons for the differences between the above net income tax (benefit) expense and the amounts computed by applying the statutory federal income tax rate to earnings before income taxes are as follows: $ in thousands 2024 2023 Income tax expense at statutory rate $ 2,755 $ 945 State and local taxes, net of federal income tax benefit 575 ( 119 ) Tax credits ( 355 ) ( 433 ) Effects of differing US and foreign tax rates 243 260 Effect of pension settlement ( 3,870 ) — Return to provision adjustment 743 413 Impact of foreign subsidiary income to parent 96 99 Increase (decrease) in valuation allowance ( 6,579 ) 1,667 Deferred taxes on unremitted earnings 371 406 Other items, net 83 ( 99 ) Net income tax (benefit) expense $ ( 5,938 ) $ 3,139 Significant items comprising deferred tax assets and liabilities as of April 30 were as follows: $ in thousands 2024 2023 Deferred tax assets: Accrued employee benefit expenses $ 152 $ 153 Allowance for credit losses 151 114 Deferred compensation 950 1,156 Tax credits (state, net of federal benefits) 170 170 Foreign tax credit carryforwards 638 638 Section 174 R&E Addback 2,303 1,558 Unrecognized actuarial loss, defined benefit plans — 1,064 Inventory reserves and capitalized costs 296 201 Net operating loss carryforwards 152 249 Proceeds on Sale Leaseback 6,316 6,963 Operating lease liabilities 1,211 1,558 Other 332 254 Total deferred tax assets 12,671 14,078 Deferred tax liabilities: Book basis in excess of tax basis of property, plant and equipment ( 1,678 ) ( 1,417 ) Book basis in excess of tax basis of Sale Leaseback property ( 1,028 ) ( 1,106 ) Prepaid pension — ( 919 ) APB 23 Assertion ( 1,572 ) ( 1,318 ) Right of use assets ( 1,142 ) ( 1,526 ) Debt Issuance Cost on Sale Leaseback ( 142 ) ( 167 ) Total deferred tax liabilities ( 5,562 ) ( 6,453 ) Valuation allowance ( 926 ) ( 8,568 ) Net deferred tax liabilities $ 6,183 $ ( 943 ) Deferred tax assets (liabilities) classified in the balance sheet: Deferred tax assets, non-current $ 7,401 $ — Deferred tax liabilities, non-current ( 1,218 ) ( 943 ) Net deferred tax assets (liabilities) $ 6,183 $ ( 943 ) 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). This guidance provides that the future realization of the tax benefit of an existing 34 Table of Contents 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. The Company evaluates all available evidence, both positive and negative, to determine the amount of any required valuation allowance. As of April 30, 2024, our deferred tax assets primarily related to proceeds on a prior sale leaseback and Section 174 research and expenditures addbacks. A valuation allowance of $ 926,000 and $ 8,568,000 was recorded against our net deferred tax asset balance as of April 30, 2024 and 2023, respectively. For the year ended April 30, 2024, we recorded a net decrease in valuation allowance of $ 6,579,000 , as compared to a net increase of $ 1,667,000 for the year ended April 30, 2023, based on management's reassessment of the amount of its deferred tax assets that are more likely than not to be realized. The Company files federal, state and local tax returns with statutes of limitation generally ranging from 3 to 4 years. The Company is generally no longer subject to federal tax examinations for years prior to fiscal year 2020 or state and local tax examinations for years prior to fiscal year 2019. Tax returns filed by the Company's significant foreign subsidiaries are generally subject to statutes of limitations of 3 to 7 years and are generally no longer subject to examination for years prior to fiscal year 2018. The Company has no unrecognized tax benefits. Note 7 - Stock Options and Share-Based Compensation The Company's stockholders approved the 2023 Omnibus Incentive Plan ("2023 Plan") in August, 2023, which enables the Company to grant a broad range of equity based awards, with potential recipients including directors, consultants and employees. The 2023 Plan replaced the 2017 Omnibus Incentive Plan (the "2017 Plan"). All outstanding equity granted under the 2017 Plan remain subject to, and will be settled under, the 2017 Plan. At the date of approval of the 2023 Plan, there were  64,633  shares available for new awards under the 2017 Plan, and 168,791 shares available for issuance under equity awards outstanding under the 2017 Plan. These shares that were available for new awards and any shares subject to outstanding awards under the 2017 Plan that subsequently cease to be subject to such awards are available under the 2023 Plan. The 2023 Plan also increased the total number of shares reserved for issuance under the Company's equity compensation plans by 310,000 , for a total of 374,633 shares initially reserved for issuance under the 2023 Plan. At April 30, 2024, there were 383,572 shares available for future issuance under the 2023 Plan. Under the 2023 Plan and the 2017 Plan, in the aggregate, the Company recorded stock-based compensation expense for employees of $ 1,018,000 and $ 845,000 and deferred income tax benefit of $ 223,000 and $ 199,000 in fiscal years 2024 and 2023, respectively. The RSUs granted under the 2023 Plan and the 2017 Plan include grants with both a service and performance component vesting over a 3 year period and grants with only service components 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 performance period based on the ratio of cumulative days incurred to total days over the performance period. The remaining estimated compensation expense of $ 1,656,000 will be recorded over the remaining vesting periods. The fair value of each RSU granted to employees was estimated on the date 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 that vested during fiscal year 2024. The following table summarizes the RSU activity and weighted averages. 2024 2023 Number of RSUs Weighted Average Grant Date Fair Value Number of RSUs Weighted Average Grant Date Fair Value Outstanding at beginning of year 159,640 $ 11.94 144,827 $ 12.24 Granted 117,747 $ 15.97 87,969 $ 13.43 Vested ( 103,519 ) $ 11.03 ( 50,315 ) $ 13.86 Forfeited ( 5,077 ) $ 10.54 ( 22,841 ) $ 15.37 Outstanding at end of year 168,791 $ 15.35 159,640 $ 11.94 The stockholders approved the 2008 Key Employee Stock Option 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 and an amendment to the plan in August 2015, authorizing an additional 300,000 shares. Under the plan, options were granted at not less than the fair market value at the date of grant with options exercisable in such installments, for such terms (up to 10 years). This plan was replaced by the 2017 Omnibus Plan with all outstanding options granted under the prior plan to remain subject to the prior plan. The last grant of options, issued on August 31, 2016, under the prior plan will expire August 31, 2026. The Company did not record any compensation expense related to outstanding stock options in fiscal years 2024 or 2023. 35 Table of Contents The Company issued new shares of common stock to satisfy options exercised during fiscal years 2024 and 2023. Stock option activity and weighted average exercise price are summarized as follows: 2024 2023 Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Outstanding at beginning of year 33,900 $ 19.97 47,400 $ 19.34 Canceled ( 3,700 ) $ 16.09 ( 7,850 ) $ 20.08 Exercised ( 5,500 ) $ 22.21 ( 5,650 ) $ 14.54 Outstanding at end of year 24,700 $ 20.05 33,900 $ 19.97 Exercisable at end of year 24,700 $ 20.05 33,900 $ 19.97 The number of options outstanding, exercisable, and their weighted average exercise prices were within the following ranges at April 30, 2024: $ 15.85 -$ 23.62 Options outstanding 24,700 Weighted average exercise price $ 20.05 Weighted average remaining contractual life 1.68 years Aggregate intrinsic value $ 386,584 Options exercisable 24,700 Weighted average exercise price $ 20.05 Aggregate intrinsic value 386,584 36 Table of Contents Note 8 - Stockholder's Equity Common Stock The Company is authorized to issue 5,000,000 shares of Common Stock, par value of $ 2.50 per share. Holders of the Company's Common Stock are entitled to 1 vote per share. At April 30, 2024, and April 30, 2023, there were approximately 2,839,000 and 2,830,000 shares, respectively, of Common Stock issued and outstanding. The Company has not declared or paid any dividends with respect to its Common Stock during the fiscal year ended April 30, 2024. The declaration and payment of any future dividends is at the discretion of the Board of Directors and will depend upon many factors, including the Company's earnings, capital requirements, investment and growth strategies, financial conditions, the terms of the Company's indebtedness, which contains provisions that could limit the payment of dividends in certain circumstances, and other factors that the Board of Directors may deem to be relevant. Share Repurchase Program On August 31, 2023, the Board of Directors of the Company adopted a share repurchase program with authorization to repurchase up to 100,000 shares. There is no expiration date and currently, management has no plans to terminate this program. During the fiscal year ended April 30, 2024, the Company repurchased 66,191 shares of the Company's common stock for approximately $ 1,992,000 , excluding other costs such as broker commissions and fees. The following table summarizes share repurchase activity for the three months ended April 30, 2024: Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) February 1 - 29 6,932 $ 29.18 6,932 63,612 March 1 - 31 12,758 $ 31.63 12,758 50,854 April 1 - 30 17,045 $ 35.11 17,045 33,809 36,735 36,735 (1) On August 31, 2023, the Board of Directors of Kewaunee Scientific Corporation (the "Company") adopted a share repurchase program with authorization to repurchase up to 100,000 shares of our Company's common stock, which commenced on September 1, 2023 and has no expiration date. The share repurchase program is designed to help offset the impact of future share dilution from employee stock issuances. The timing and amount of any repurchases under this program will be determined by the Company's management at its discretion based upon its ongoing assessments of the capital needs of the business, the market price of the Company's common stock and general market conditions. Share repurchases under this program may be made through a variety of methods including open-market purchases, block trades, exchange transactions or any combination thereof. The program does not obligate the Company to acquire any particular amount of its common stock, and the share repurchase program may be suspended or discontinued at any time at the Company's discretion. (2) Excludes other costs such as broker commissions and fees. Transactions that occurred under the share repurchase program prior to the fourth quarter of fiscal year 2024 are presented in Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, in the corresponding interim report on Form 10-Q for the periods ended October 31, 2023 and January 31, 2024 , respectively. 37 Table of Contents Note 9 - Accumulated Other Comprehensive Income (Loss) The Company's other comprehensive income (loss) consists of unrealized gains and losses on the translation of the assets, liabilities, and equity of its foreign subsidiaries, and additional minimum pension liability adjustments, net of income taxes. The before tax income (loss), related income tax effect, and accumulated balances are as follows: $ in thousands Foreign Currency Translation Adjustment Minimum Pension Liability Adjustment Total Accumulated Other Comprehensive Income (Loss) Balance at April 30, 2022 $ ( 2,543 ) $ ( 1,199 ) $ ( 3,742 ) Foreign currency translation adjustment ( 290 ) — ( 290 ) Change in unrecognized actuarial loss on pension obligations — 590 590 Balance at April 30, 2023 ( 2,833 ) ( 609 ) ( 3,442 ) Foreign currency translation adjustment ( 549 ) ( 49 ) ( 598 ) Change in unrecognized actuarial loss on pension obligations — 509 509 Settlement loss included in net income — 4,019 4,019 Income taxes on postretirement benefit plans — ( 3,870 ) ( 3,870 ) Balance at April 30, 2024 $ ( 3,382 ) $ — $ ( 3,382 ) Note 10 - Leases, Commitments and Contingencies The Company recognizes lease assets and lease liabilities with respect to the rights and obligations created by leased assets previously classified as operating leases. The Company elected 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. • Elect 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. • 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 Company has operating type leases for real estate and equipment in both the U.S. and internationally and financing leases for equipment in the United States. ROU assets totaled $ 7,454,000 and $ 9,170,000 at April 30, 2024 and 2023, respectively. Operating cash paid to settle lease liabilities was $ 2,594,000 and $ 2,278,640 for the fiscal year ended April 30, 2024 and 2023, respectively. The Company's leases have remaining lease terms of up to 8 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 $ 3,458,000 for the twelve months ended April 30, 2024, inclusive of period cost for short-term leases, not included in lease liabilities, of $ 864,000 . Operating lease expense was $ 3,344,000 for the fiscal year ended April 30, 2023, inclusive of period cost for short-term leases, not included in lease liabilities, of $ 1,065,000 . At April 30, 2024, the weighted average remaining lease term for the capitalized operating leases was 4.2 years and the weighted average discount rate was 5.1 %. At April 30, 2023, the weighted average remaining lease term for the capitalized operating leases was 5.1 years and the weighted average discount rate was 5.0 %. For the financing leases, the weighted average remaining lease term was 4.5 years and the weighted average discount rate was 8.3 % at April 30, 2024 as compared to 3.1 years and 6.8 % at April 30, 2023. 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. 38 Table of Contents Future minimum payments under the non-cancelable lease arrangements for the fiscal years ending April 30 are as follows: ($ in thousands) Operating Financing 2025 $ 2,437 $ 131 2026 1,956 112 2027 1,656 40 2028 1,059 40 2029 800 40 Thereafter 1,894 56 Total Minimum Lease Payments 9,802 419 Imputed Interest ( 2,245 ) ( 73 ) Total $ 7,557 $ 346 In November 2023, the Company entered into a new lease that has not yet commenced as of April 30, 2024 with future minimum lease payments in aggregate of $ 681,000 that are not yet reflected on the Condensed Consolidated Balance Sheet. This lease is expected to commence in the second quarter of fiscal year 2025 with a lease term of 3 years. 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. Note 11 - Retirement Benefits Defined Benefit Plans During the year ended April 30 ,2024, the Company settled its non-contributory defined benefit plans by transferring approximately $ 17.8 million of pension obligations through the purchase of group annuity contracts for all remaining liabilities under the pension plan. In connection with the transfer, the Company contributed $ 287,000 in cash to the pension plan, which was intended to fully fund the Company’s remaining defined benefit pension liabilities. These non-contributory defined benefit pension plans, which covered some domestic employees, were amended as of April 30, 2005. Following this amendment, no further benefits have been earned under the plans, and no additional participants have been added. The defined benefit plan for salaried employees provides pension benefits that are based on each employee's years of service and average annual compensation during the last ten consecutive calendar years of employment as of April 30, 2005. The benefit plan for hourly employees provides benefits at stated amounts based on years of service as of April 30, 2005. 39 Table of Contents The change in projected benefit obligations and the change in fair value of plan assets for the non-contributory defined benefit pension plans for each of the years ended April 30 are summarized as follows: $ in thousands 2024 2023 Accumulated Benefit Obligation, April 30 $ — $ 18,368 Change in Projected Benefit Obligations Projected benefit obligations, beginning of year $ 18,368 $ 20,022 Interest cost 890 845 Actuarial gain (loss) 53 ( 1,113 ) Actual benefits paid ( 1,558 ) ( 1,386 ) Transfer to insurer ( 17,753 ) — Projected benefit obligations, end of year $ — $ 18,368 Change in Plan Assets Fair value of plan assets, beginning of year $ 17,732 $ 18,867 Actual return on plan assets 1,292 251 Employer contributions 287 — Actual benefits paid ( 1,558 ) ( 1,386 ) Transfer to insurer ( 17,753 ) — Fair value of plan assets, end of year $ — $ 17,732 Funded status—under $ — $ ( 636 ) Amounts Recognized in the Consolidated Balance Sheets consist of: Non-current liabilities $ — $ ( 636 ) Amounts Recognized in Accumulated Other Comprehensive Income (Loss) Consist of: Net actual loss $ — $ 4,526 Deferred tax benefit — ( 1,064 ) After-tax actuarial loss $ — $ 3,462 Weighted-Average Assumptions Used to Determine Benefit Obligations at April 30 Discount rate N/A 5.10 % Rate of compensation increase N/A N/A Mortality table N/A Pri-2012 Projection scale N/A MP-2021 Year Ended April 30, Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost 2024 2023 Discount rate N/A 5.10 % Expected long-term return on plan assets N/A 7.75 % Rate of compensation increase N/A N/A The components of the net periodic pension (income) expense for each of the fiscal years ended April 30 are as follows: $ in thousands 2024 2023 Interest cost $ 890 $ 845 Expected return on plan assets ( 1,312 ) ( 1,402 ) Recognition of net loss 580 628 Net periodic pension expense $ 158 $ 71 Effect of settlement 4,019 — Total net periodic pension expense plus special events $ 4,177 $ 71 40 Table of Contents Plan assets by asset categories as of April 30, 2023 were as follows: $ in thousands 2023 Asset Category Amount % Equity Securities $ 12,724 72 Fixed Income Securities 4,845 27 Cash and Cash Equivalents 163 1 Totals $ 17,732 100 The following tables present the fair value of the assets in the Company's defined benefit pension plans at April 30, 2023: 2023 Asset Category Level 1 Level 2 Level 3 Large Cap $ 7,326 $ — $ — Small/Mid Cap 2,326 — — International 1,743 — — Emerging Markets 702 — — Fixed Income 4,845 — — Liquid Alternatives 627 — — Cash and Cash Equivalents 163 — — Totals $ 17,732 $ — $ — Level 1 retirement plan assets include United States currency held by a designated trustee and equity funds of common and preferred securities issued by domestic and foreign corporations. These equity funds are traded actively on exchanges and price quotes for these shares are readily available. Defined Contribution Plan The Company has a defined contribution plan covering substantially all domestic salaried and hourly employees. The plan provides benefits to all employees who have attained age 21 , completed three months of service, and who elect to participate. 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 $ 957,000 and $ 932,000 for years ending April 30, 2024 and 2023. 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 did not elect to make a non-matching contribution in fiscal years 2024 and 2023. Note 12 - Segment Information The Company's operations are classified into two business segments: Domestic and International. The Domestic business segment principally designs, manufactures, and installs scientific and technical furniture, including steel and wood laboratory cabinetry, fume hoods, casework, flexible systems, worksurfaces, workstations, workbenches, and computer enclosures. The International business segment, which consists of the foreign subsidiaries identified in Note 1 , Summary of Significant Accounting Policies , 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. All intercompany balances and transactions have been eliminated. Certain corporate expenses shown below are net of expenses that have been allocated to the business segments. 41 Table of Contents The following table shows revenues, earnings, and other financial information by business segment and unallocated corporate expenses for each of the years ended April 30: $ in thousands Domestic International Corporate Total Fiscal Year 2024 Revenues from external customers $ 137,238 $ 66,517 $ — $ 203,755 Intersegment revenues 636 4,062 ( 4,698 ) — Depreciation 2,524 408 193 3,125 Earnings (loss) before income taxes 15,048 6,295 ( 8,224 ) 13,119 Income tax expense (benefit) 3,240 2,935 ( 12,113 ) ( 5,938 ) Net earnings attributable to non-controlling interest — 304 — 304 Net earnings (loss) attributable to Kewaunee Scientific Corporation 11,808 3,055 3,890 18,753 Segment assets 91,656 43,110 — 134,766 Expenditures for segment assets 3,759 614 — 4,373 Revenues (excluding intersegment) from customers in foreign countries 1,175 66,517 — 67,692 Fiscal Year 2023 Revenues from external customers $ 146,716 $ 72,778 $ — $ 219,494 Intersegment revenues 1,604 9,822 ( 11,426 ) — Depreciation 2,394 282 191 2,867 Earnings (loss) before income taxes 3,408 7,382 ( 6,292 ) 4,498 Income tax expense — 2,250 889 3,139 Net earnings attributable to non-controlling interest — 621 — 621 Net earnings (loss) attributable to Kewaunee Scientific Corporation 3,408 4,511 ( 7,181 ) 738 Segment assets 80,000 38,898 — 118,898 Expenditures for segment assets 2,856 1,292 — 4,148 Revenues (excluding intersegment) from customers in foreign countries 2,559 72,778 — 75,337 42 Table of Contents Consent Of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statements on Forms S‑8 (Nos. 333-274371, 333‑160276, 333‑176447, 333‑213413, and 333‑220389) of Kewaunee Scientific Corporation of our reports dated June 28, 2024, with respect to the consolidated financial statements of Kewaunee Scientific Corporation, included in this Annual Report on Form 10‑K for the year ended April 30, 2024. /s/ Forvis Mazars, LLP Atlanta, Georgia June 28, 2024 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.