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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-Q
_________________________

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2023
or

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________
Commission file number 0-5286
_________________________
KEWAUNEE SCIENTIFIC CORPORATION
(Exact name of registrant as specified in its charter)
_________________________

Delaware |  | 38-0715562
(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
2700 West Front Street Statesville, North Carolina |  | 28677-2927
(Address of principal executive offices) |  | (Zip Code)

Registrant's telephone number, including area code: (704) 873-7202
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Exchange on which registered
Common Stock, $2.50 par value KEQU NASDAQ Global Market
_________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer |  | ☐ |  | Accelerated filer |  | ☐
Non-accelerated filer |  | ☒ |  | Smaller reporting company |  | ☒
|  |  |  | Emerging growth company |  | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of March 7, 2023, the registrant had outstanding 2,830,200 shares of Common Stock.

KEWAUNEE SCIENTIFIC CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2023

|  | Page Number
PART I. FINANCIAL INFORMATION |
Item 1. | Condensed Consolidated Financial Statements |
| Condensed Consolidated Statements of Operations (unaudited) – Three and Nine Months Ended January 31, 202 3 and 202 2 | 1
| Condensed Consolidated Statements of Comprehensive Loss (unaudited) – Three and Nine Months Ended January 31, 2023 and 2022 | 2
| Condensed Consolidated Statements of Stockholders' Equity (unaudited) – Three and Nine Months Ended January 31, 2023 and 2022 | 3
| Condensed Consolidated Balance Sheets – January 31, 202 3 (unaudited) and April 30, 2022 | 4
| Condensed Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended January 31, 202 3 and 202 2 | 5
| Notes to Condensed Consolidated Financial Statements (unaudited) | 6
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 13
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 15
Item 4. | Controls and Procedures | 15
PART II. OTHER INFORMATION |
Item 1A. | Risk Factors | 16
Item 6. | Exhibits | 16
SIGNATURES | 17

i

Part 1. Financial Information
Item 1. Condensed Consolidated Financial Statements
Kewaunee Scientific Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
($ and shares in thousands, except per share amounts)

| Three Months Ended January 31, |  | Nine Months Ended January 31,
| 2023 |  | 2022 |  | 2023 |  | 2022
Net sales | $ | 60,821 |  |  | $ | 40,633 |  |  | $ | 165,508 |  |  | $ | 119,157 |
Cost of products sold | 50,491 |  |  | 35,011 |  |  | 140,281 |  |  | 104,264 |
Gross profit | 10,330 |  |  | 5,622 |  |  | 25,227 |  |  | 14,893 |
Operating expenses | 8,026 |  |  | 6,490 |  |  | 22,564 |  |  | 19,742 |
Operating profit (loss) | 2,304 |  |  | (868) |  |  | 2,663 |  |  | (4,849) |
Pension (expense) income | (18) |  |  | 88 |  |  | (53) |  |  | 266 |
Other income, net | 210 |  |  | 51 |  |  | 756 |  |  | 149 |
Interest expense | (436) |  |  | (158) |  |  | (1,190) |  |  | (396) |
Profit (loss) before income taxes | 2,060 |  |  | (887) |  |  | 2,176 |  |  | (4,830) |
Income tax expense | 962 |  |  | 399 |  |  | 1,911 |  |  | 845 |
Net earnings (loss) | 1,098 |  |  | (1,286) |  |  | 265 |  |  | (5,675) |
Less: Net earnings attributable to the non-controlling interest | 375 |  |  | 33 |  |  | 532 |  |  | 89 |
Net earnings (loss) attributable to Kewaunee Scientific Corporation | $ | 723 |  |  | $ | (1,319) |  |  | $ | (267) |  |  | $ | (5,764) |
Net earnings (loss) per share attributable to Kewaunee Scientific Corporation stockholders |  |  |  |  |  |  |
Basic | $ | 0.26 |  |  | $ | (0.47) |  |  | $ | (0.09) |  |  | $ | (2.07) |
Diluted | $ | 0.25 |  |  | $ | (0.47) |  |  | $ | (0.09) |  |  | $ | (2.07) |
Weighted average number of common shares outstanding |  |  |  |  |  |  |
Basic | 2,830 |  |  | 2,790 |  |  | 2,822 |  |  | 2,785 |
Diluted | 2,911 |  |  | 2,790 |  |  | 2,822 |  |  | 2,785 |

See accompanying notes to Condensed Consolidated Financial Statements.
1

Kewaunee Scientific Corporation
Condensed Consolidated Statements of Comprehensive Earnings (Loss)
(Unaudited)
($ in thousands)

| Three Months Ended January 31, |  | Nine Months Ended January 31,
| 2023 |  | 2022 |  | 2023 |  | 2022
Net earnings (loss) | $ | 1,098 |  |  | $ | (1,286) |  |  | $ | 265 |  |  | $ | (5,675) |
Other comprehensive (loss) earnings, net of tax: |  |  |  |  |  |  |
Foreign currency translation adjustments | (106) |  |  | 52 |  |  | (567) |  |  | (107) |
Other comprehensive (loss) earnings | (106) |  |  | 52 |  |  | (567) |  |  | (107) |
Comprehensive earnings (loss), net of tax | 992 |  |  | (1,234) |  |  | (302) |  |  | (5,782) |
Less: Comprehensive income attributable to the non-controlling interest | 375 |  |  | 33 |  |  | 532 |  |  | 89 |
Comprehensive earnings (loss) attributable to Kewaunee Scientific Corporation | $ | 617 |  |  | $ | (1,267) |  |  | $ | (834) |  |  | $ | (5,871) |

See accompanying notes to Condensed Consolidated Financial Statements.
2

Kewaunee Scientific Corporation
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
($ in thousands, except per share amounts)

| Common Stock |  | Additional Paid-in Capital |  | Treasury Stock |  | Retained Earnings |  | Accumulated Other Comprehensive Loss |  | Total Kewaunee Scientific Corporation Stockholders' Equity
Balance at April 30, 2022 | $ | 6,983 |  |  | $ | 4,483 |  |  | $ | (53) |  |  | $ | 28,023 |  |  | $ | (3,742) |  |  | $ | 35,694 |
Net loss attributable to Kewaunee Scientific Corporation | — |  |  | — |  |  | — |  |  | (747) |  |  | — |  |  | (747) |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | (224) |  |  | (224) |
Stock-based compensation | 97 |  |  | (134) |  |  | — |  |  | — |  |  | — |  |  | (37) |
Balance at July 31, 2022 | $ | 7,080 |  |  | $ | 4,349 |  |  | $ | (53) |  |  | $ | 27,276 |  |  | $ | (3,966) |  |  | $ | 34,686 |
Net loss attributable to Kewaunee Scientific Corporation | — |  |  | — |  |  | — |  |  | (243) |  |  | — |  |  | (243) |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | (237) |  |  | (237) |
Stock-based compensation | 4 |  |  | 192 |  |  | — |  |  | — |  |  | — |  |  | 196 |
Balance at October 31, 2022 | $ | 7,084 |  |  | $ | 4,541 |  |  | $ | (53) |  |  | $ | 27,033 |  |  | $ | (4,203) |  |  | $ | 34,402 |
Net earnings attributable to Kewaunee Scientific Corporation | — |  |  | — |  |  | — |  |  | 723 |  |  | — |  |  | 723 |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | (106) |  |  | (106) |
Stock-based compensation | — |  |  | 332 |  |  | — |  |  | — |  |  | — |  |  | 332 |
Balance at January 31, 2023 | $ | 7,084 |  |  | $ | 4,873 |  |  | $ | (53) |  |  | $ | 27,756 |  |  | $ | (4,309) |  |  | $ | 35,351 |

| Common Stock |  | Additional Paid-in Capital |  | Treasury Stock |  | Retained Earnings |  | Accumulated Other Comprehensive Loss |  | Total Kewaunee Scientific Corporation Stockholders' Equity
Balance at April 30, 2021 | $ | 6,915 |  |  | $ | 3,807 |  |  | $ | (53) |  |  | $ | 34,149 |  |  | $ | (3,577) |  |  | $ | 41,241 |
Net loss attributable to Kewaunee Scientific Corporation | — |  |  | — |  |  | — |  |  | (1,345) |  |  | — |  |  | (1,345) |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | (76) |  |  | (76) |
Stock-based compensation | 67 |  |  | 171 |  |  | — |  |  | — |  |  | — |  |  | 238 |
Balance at July 31, 2021 | $ | 6,982 |  |  | $ | 3,978 |  |  | $ | (53) |  |  | $ | 32,804 |  |  | $ | (3,653) |  |  | $ | 40,058 |
Net loss attributable to Kewaunee Scientific Corporation | — |  |  | — |  |  | — |  |  | (3,100) |  |  | — |  |  | (3,100) |
Other comprehensive loss | — |  |  | — |  |  | — |  |  | — |  |  | (83) |  |  | (83) |
Stock-based compensation | 1 |  |  | 129 |  |  | — |  |  | — |  |  | — |  |  | 130 |
Balance at October 31, 2021 | $ | 6,983 |  |  | $ | 4,107 |  |  | $ | (53) |  |  | $ | 29,704 |  |  | $ | (3,736) |  |  | $ | 37,005 |
Net loss attributable to Kewaunee Scientific Corporation | — |  |  | — |  |  | — |  |  | (1,319) |  |  | — |  |  | (1,319) |
Other comprehensive income | — |  |  | — |  |  | — |  |  | — |  |  | 52 |  |  | 52 |
Stock-based compensation | — |  |  | 109 |  |  | — |  |  | — |  |  | — |  |  | 109 |
Balance at January 31, 2022 | $ | 6,983 |  |  | $ | 4,216 |  |  | $ | (53) |  |  | $ | 28,385 |  |  | $ | (3,684) |  |  | $ | 35,847 |

See accompanying notes to Condensed Consolidated Financial Statements.
3

Kewaunee Scientific Corporation
Condensed Consolidated Balance Sheets
($ and shares in thousands, except per share amounts)

| January 31, 2023 |  | April 30, 2022
| (Unaudited) |  |
Assets |  |  |
Current Assets: |  |  |
Cash and cash equivalents | $ | 13,047 |  |  | $ | 4,433 |
Restricted cash | 5,369 |  |  | 2,461 |
Receivables, less allowance; $459; $357, on each respective date | 43,988 |  |  | 41,254 |
Inventories | 21,412 |  |  | 23,796 |
Note receivable | — |  |  | 13,457 |
Prepaid expenses and other current assets | 7,745 |  |  | 6,164 |
Total Current Assets | 91,561 |  |  | 91,565 |
Property, plant and equipment, at cost | 61,810 |  |  | 60,326 |
Accumulated depreciation | (47,269) |  |  | (45,205) |
Net Property, Plant and Equipment | 14,541 |  |  | 15,121 |
Right of use assets | 9,563 |  |  | 7,573 |
Other assets | 6,121 |  |  | 4,514 |
Total Assets | $ | 121,786 |  |  | $ | 118,773 |
Liabilities and Stockholders' Equity |  |  |
Current Liabilities: |  |  |
Short-term borrowings | $ | 5,753 |  |  | $ | 1,588 |
Current portion of financing liability | 625 |  |  | 575 |
Current portion of financing lease liability | 75 |  |  | 126 |
Current portion of operating lease liabilities | 2,045 |  |  | 1,319 |
Accounts payable | 24,914 |  |  | 27,316 |
Employee compensation and amounts withheld | 4,228 |  |  | 4,504 |
Deferred revenue | 5,062 |  |  | 3,529 |
Other accrued expenses | 1,511 |  |  | 3,336 |
Total Current Liabilities | 44,213 |  |  | 42,293 |
Long-term portion of financing liability | 28,298 |  |  | 28,775 |
Long-term portion of financing lease liability | 156 |  |  | 228 |
Long-term portion of operating lease liabilities | 7,422 |  |  | 6,179 |
Accrued pension and deferred compensation costs | 4,061 |  |  | 4,159 |
Deferred income taxes | 796 |  |  | 428 |
Other non-current liabilities | 502 |  |  | 531 |
Total Liabilities | 85,448 |  |  | 82,593 |
Commitments and Contingencies |  |  |
Stockholders' Equity: |  |  |
Common stock, $2.50 par value, Authorized – 5,000 shares; Issued – 2,833 shares; 2,793 shares; – Outstanding – 2,830 shares; 2,790 shares, on each respective date | 7,084 |  |  | 6,983 |
Additional paid-in-capital | 4,873 |  |  | 4,483 |
Retained earnings | 27,756 |  |  | 28,023 |
Accumulated other comprehensive loss | (4,309) |  |  | (3,742) |
Common stock in treasury, at cost, 3 shares, on each respective date | (53) |  |  | (53) |
Total Kewaunee Scientific Corporation Stockholders' Equity | 35,351 |  |  | 35,694 |
Non-controlling interest | 987 |  |  | 486 |
Total Stockholders' Equity | 36,338 |  |  | 36,180 |
Total Liabilities and Stockholders' Equity | $ | 121,786 |  |  | $ | 118,773 |

See accompanying notes to Condensed Consolidated Financial Statements.
4

Kewaunee Scientific Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
($ in thousands)

| Nine Months Ended January 31,
| 2023 |  | 2022
Cash flows from operating activities: |  |  |
Net earnings (loss) | $ | 265 |  |  | $ | (5,675) |
Adjustments to reconcile net earnings (loss) to net cash used in operating activities: |  |  |
Depreciation | 2,142 |  |  | 2,092 |
Bad debt provision | 79 |  |  | 27 |
Stock-based compensation expense | 699 |  |  | 502 |
Deferred income taxes | 368 |  |  | 104 |
Change in assets and liabilities: |  |  |
Receivables | (2,813) |  |  | (2,199) |
Inventories | 2,384 |  |  | (3,430) |
Income tax receivable | — |  |  | 316 |
Accounts payable and other accrued expenses | (4,534) |  |  | 10,692 |
Deferred revenue | 1,533 |  |  | (19) |
Other, net | (3,670) |  |  | (3,497) |
Net cash used in operating activities | (3,547) |  |  | (1,087) |
Cash flows from investing activities: |  |  |
Capital expenditures | (1,562) |  |  | (1,222) |
Net cash used in investing activities | (1,562) |  |  | (1,222) |
Cash flows from financing activities: |  |  |
Proceeds from short-term borrowings | 27,742 |  |  | 42,975 |
Repayments on short-term borrowings | (23,577) |  |  | (40,840) |
Proceeds from sale-leaseback financing transaction | 13,473 |  |  | — |
Payments on sale-leaseback financing transaction | (426) |  |  | — |
Payments on long-term lease obligations | (123) |  |  | (16) |
Net cash provided by financing activities | 17,089 |  |  | 2,119 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (458) |  |  | (39) |
Increase (decrease) in cash, cash equivalents and restricted cash | 11,522 |  |  | (229) |
Cash, cash equivalents and restricted cash, beginning of period | 6,894 |  |  | 5,731 |
Cash, cash equivalents and restricted cash, end of period | $ | 18,416 |  |  | $ | 5,502 |

See accompanying notes to Condensed Consolidated Financial Statements.
5

Kewaunee Scientific Corporation
Notes to Condensed Consolidated Financial Statements
(unaudited)
A. Financial Information
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. 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 ("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 financial statements and should be read in conjunction with the Consolidated Financial Statements and Notes included in the Company's 2022 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, 2022 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 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. Actual results could differ from those estimates.
B. Cash, Cash Equivalents and Restricted Cash
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 January 31, 2023 and April 30, 2022, the Company had cash deposits in excess of FDIC insured limits. The Company has not experienced any losses from such deposits. Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders.
The Company includes restricted cash along with the cash balance for presentation in the Condensed Consolidated Statements of Cash Flows. The reconciliation between the Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of Cash Flows is as follows:

|  | January 31, 2023 |  | April 30, 2022
Cash and cash equivalents |  | $ | 13,047 |  |  | $ | 4,433 |
Restricted cash |  | 5,369 |  |  | 2,461 |
Total cash, cash equivalents and restricted cash |  | $ | 18,416 |  |  | $ | 6,894 |

C. 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.
6

Disaggregated Revenue
A summary of net sales transferred to customers over time and at a point in time for the periods ended January 31, 2023 and January 31, 2022 is as follows (in thousands):

| Three Months Ended
| January 31, 2023 |  | January 31, 2022
| Domestic |  | International |  | Total |  | Domestic |  | International |  | Total
Over Time | $ | 35,373 |  |  | $ | 24,687 |  |  | $ | 60,060 |  |  | $ | 28,240 |  |  | $ | 11,102 |  |  | $ | 39,342 |
Point in Time | 761 |  |  | — |  |  | 761 |  |  | 1,291 |  |  | — |  |  | 1,291 |
Total | $ | 36,134 |  |  | $ | 24,687 |  |  | $ | 60,821 |  |  | $ | 29,531 |  |  | $ | 11,102 |  |  | $ | 40,633 |

| Nine Months Ended
| January 31, 2023 |  | January 31, 2022
| Domestic |  | International |  | Total |  | Domestic |  | International |  | Total
Over Time | $ | 107,100 |  |  | $ | 53,915 |  |  | $ | 161,015 |  |  | $ | 85,342 |  |  | $ | 30,029 |  |  | $ | 115,371 |
Point in Time | 4,493 |  |  | — |  |  | 4,493 |  |  | 3,786 |  |  | — |  |  | 3,786 |
Total | $ | 111,593 |  |  | $ | 53,915 |  |  | $ | 165,508 |  |  | $ | 89,128 |  |  | $ | 30,029 |  |  | $ | 119,157 |

Contract Balances
The closing balances of contract assets included $13,018,000 in accounts receivable and $1,374,000 in other assets at January 31, 2023. The opening balance of contract assets arising from contracts with customers included $9,287,000 in accounts receivable and $1,293,000 in other assets at April 30, 2022. The closing and opening balances of contract liabilities included in deferred revenue arising from contracts with customers were $5,062,000 at January 31, 2023 and $3,529,000 at April 30, 2022. 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 and are included in receivables on the Condensed Consolidated Balance Sheets. 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, 2022 and January 31, 2023 are expected to be recognized as revenue during the respective succeeding 12 months.
D. Inventories
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):

| January 31, 2023 |  | April 30, 2022
Finished products | $ | 3,800 |  |  | $ | 4,555 |
Work in process | 2,725 |  |  | 2,893 |
Raw materials | 14,887 |  |  | 16,348 |
Total | $ | 21,412 |  |  | $ | 23,796 |

The Company's International subsidiaries' inventories were $2,589,000 at January 31, 2023 and $2,811,000 at April 30, 2022 and are included in the above tables.
7

E. Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and equivalents, mutual funds, short-term borrowings, and the cash surrender value of life insurance policies. 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 January 31, 2023 and April 30, 2022 (in thousands):

|  | January 31, 2023
Financial Assets |  | Level 1 |  | Level 2 |  | Total
Trading securities held in non-qualified compensation plans (1) |  | $ | 1,017 |  |  | $ | — |  |  | $ | 1,017 |
Cash surrender value of life insurance policies (1) |  | — |  |  | 1,359 |  |  | 1,359 |
Total |  | $ | 1,017 |  |  | $ | 1,359 |  |  | $ | 2,376 |
Financial Liabilities |  |  |  |  |  |
Non-qualified compensation plans (2) |  | $ | — |  |  | $ | 2,852 |  |  | $ | 2,852 |
Total |  | $ | — |  |  | $ | 2,852 |  |  | $ | 2,852 |

|  | April 30, 2022
Financial Assets |  | Level 1 |  | Level 2 |  | Total
Trading securities held in non-qualified compensation plans (1) |  | $ | 1,219 |  |  | $ | — |  |  | $ | 1,219 |
Cash surrender value of life insurance policies (1) |  | — |  |  | 1,371 |  |  | 1,371 |
Total |  | $ | 1,219 |  |  | $ | 1,371 |  |  | $ | 2,590 |
Financial Liabilities |  |  |  |  |  |
Non-qualified compensation plans (2) |  | $ | — |  |  | $ | 3,003 |  |  | $ | 3,003 |
Total |  | $ | — |  |  | $ | 3,003 |  |  | $ | 3,003 |

(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.
F. Long-term Debt and Other Credit Arrangements
At April 30, 2022, advances of $1.6 million were outstanding under the Company's revolving credit facility. The Company had standby letters of credit outstanding of $716,000 at April 30, 2022. Amounts available under the revolving credit facility were $2.4 million at April 30, 2022. At April 30, 2022, the Company was in compliance with all the financial covenants under its revolving credit facility.
On June 27, 2022, the Company terminated its prior credit agreement with Wells Fargo, National Bank (the "Prior Credit Agreement"). At the time of termination, there were no borrowings under the Prior Credit Agreement, and the Company did not incur any material termination penalties as a result of the termination.
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 of 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. 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 limit 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 January 31, 2023, there were $3.0 million outstanding under the Revolving Credit Facility, with remaining borrowing capacity under the Revolving Credit Facility of $11.3 million. In addition, the Company's International subsidiaries have a balance outstanding of $2.8 million in short-term borrowings related to overdraft protection and short-term loan arrangements.
8

The Credit Agreement and Revolving Credit Facility contain financial covenants with respect to a fixed charge coverage ratio and a minimum loan availability amount. The Credit Agreement also contains certain customary covenants that, subject to certain exceptions, limit the Company's ability to, among other things, (i) create, incur, assume or permit to exist any additional indebtedness or additional liens; and (ii) enter into any amendment or other modification of certain material agreements that would reasonably be expected to be materially adverse to the Lenders' rights. The Credit Agreement also contains certain restrictions on the Company's ability to pay cash dividends, repurchase shares of the Company's capital stock, make certain investments, and enter into certain transactions with the Company's affiliates.
As of January 31, 2023, the Company was in compliance with all of the covenants under its Credit Agreement and Revolving Credit Facility.
G. Sale-Leaseback Financing Transaction
On December 22, 2021, the Company entered into an Agreement for Purchase and Sale of Real Property with CAI Investments Sub-Series 100 LLC, a Nevada limited liability company (the "Buyer"), for the Company’s headquarters and manufacturing facilities (the "Property") located at 2700 West Front Street in Statesville, North Carolina (the "Sale Agreement").
The Sale Agreement was finalized on March 24, 2022 and coincided with the Company and the Buyer entering into a 20-year lease, effective on such date, between the Company and CAI Investments Medical Products I Master Lessee LLC ("Lessor"), an affiliate of Buyer (the "Lease Agreement"). 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 contemporaneous 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 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 must be accounted for as a financing arrangement. As a result of this determination, the Company is viewed as having received the sale 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 under GAAP related to the Sale-Leaseback Arrangement.
As of January 31, 2023, the carrying value of the financing liability was $28,923,000, net of $723,000 in debt issuance costs, of which $625,000 was classified as current on the Consolidated Balance Sheet with $28,298,000 classified as long-term. As of April 30, 2022, the carrying value of the financing liability was $29,350,000, net of $768,000 in debt issuance costs, of which $575,000 was classified as current on the Consolidated Balance Sheet with $28,775,000 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 expense associated with the financing arrangement was $329,000 and $990,000 for the three and nine months ended January 31, 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.
9

Remaining future cash payments related to the financing liability as of January 31, 2023 are as follows:

($ in thousands) |  |
Remainder of 2023 |  | $ | 476 |
2024 |  | 1,931 |
2025 |  | 1,970 |
2026 |  | 2,009 |
2027 |  | 2,050 |
Thereafter |  | 35,957 |
Total Minimum Liability Payments |  | 44,393 |
Imputed Interest |  | (15,470) |
Total |  | $ | 28,923 |

H. Leases
The Company recognizes lease assets and lease liabilities reflecting the rights and obligations created by operating type leases for real estate and equipment in both the U.S. and internationally and financing leases for a truck and IT equipment in the U.S. At January 31, 2023 and April 30, 2022, right-of-use assets totaled $9,563,000 and $7,573,000, respectively. Operating cash paid to settle lease liabilities was $1,652,000 and $1,515,000 for the nine months ended January 31, 2023 and January 31, 2022, respectively. The Company's leases have remaining lease terms of up to 9 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 expenses were $825,000 and $2,528,000 for the three and nine months ended January 31, 2023, inclusive of period cost for short-term leases, not included in lease liabilities, of $199,000 and $876,000. Operating lease expenses were $754,000 and $2,309,000 for the three and nine months ended January 31, 2022, inclusive of period cost for short-term leases, not included in lease liabilities, of $245,000 and $794,000.
At January 31, 2023, the weighted average remaining lease term for the capitalized operating leases was 5.2 years and the weighted average discount rate was 5.0%. For the financing leases, the weighted average remaining lease term was 3.3 years and the weighted average discount rate was 6.9%. 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 January 31, 2023 were as follows:

|  | Operating |  | Financing
Remainder of fiscal 2023 |  | $ | 631 |  |  | $ | 8 |
2024 |  | 2,377 |  |  | 90 |
2025 |  | 2,186 |  |  | 90 |
2026 |  | 1,921 |  |  | 71 |
2027 |  | 1,657 |  |  | — |
Thereafter |  | 2,510 |  |  | — |
Total Minimum Lease Payments |  | 11,282 |  |  | 259 |
Imputed Interest |  | (1,815) |  |  | (27) |
Total |  | $ | 9,467 |  |  | $ | 232 |

10

I. Earnings Per Share
Basic earnings per share is based on the weighted average number of common shares outstanding during the year. Diluted earnings per share reflects the assumed exercise of outstanding options and the conversion of restricted stock units ("RSUs") under the Company's various stock compensation plans, except when RSUs and options have an antidilutive effect. There were 31,500 and 135,435 antidilutive RSUs and options outstanding at January 31, 2023 and January 31, 2022, respectively. The following is a reconciliation of basic to diluted weighted average common shares outstanding (in thousands):

| Three Months Ended |  | Nine Months Ended
| January 31, 2023 |  | January 31, 2022 |  | January 31, 2023 |  | January 31, 2022
Basic | 2,830 |  |  | 2,790 |  |  | 2,822 |  |  | 2,785 |
Dilutive effect of stock options and RSUs | 81 |  |  | — |  |  | — |  |  | — |
Weighted average common shares outstanding - diluted | 2,911 |  |  | 2,790 |  |  | 2,822 |  |  | 2,785 |

J. Stock Options and Stock-based Compensation
The Company recognizes compensation costs related to stock options and other stock awards granted by the Company as operating expenses over their vesting period.
In June 2022, the Company granted 54,279 RSUs under the 2017 Omnibus Incentive Plan ("2017 Plan"). These RSUs include a service component that vests over a three-year period. The recognized expense is based upon the vesting period for service criteria. The Company recorded stock-based compensation expense during the three and nine months ended January 31, 2023 of $332,000 and $658,000, respectively, with the remaining estimated stock-based compensation expense of $1,006,000 to be recorded over the remaining vesting periods. The Company recorded stock-based compensation expense during the three and nine months ended January 31, 2022 of $109,000 and $433,000, respectively. Directors' fees paid with shares of common stock in lieu of cash in accordance with Director compensation guidelines were $41,000 for each of the nine month periods ended January 31, 2023 and January 31, 2022 and were also included in the stock-based compensation on the Condensed Consolidated Statements of Cash Flows.
K. Income Taxes
Income tax expense of $962,000 and $1,911,000 was recorded for the three and nine months ended January 31, 2023, respectively. Income tax expense of $399,000 and $845,000 was recorded for the three and nine months ended January 31, 2022, respectively. The effective tax rate was 46.7% and 87.8% for the three and nine months ended January 31, 2023, respectively. The effective tax rate was (45.0)% and (17.5)% for the three and nine months ended January 31, 2022, respectively. The change in the effective tax rate for the period is primarily due to the impact of foreign operations which are taxed at different rates than the U.S. tax rate of 21% and the recording of a valuation allowance against the deferred tax asset which resulted in the elimination of any U.S. income tax benefit.
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. Ltd. international subsidiaries. The Company has a deferred tax liability of $1,236,000 and $976,000 for the withholding tax related to Kewaunee Labway India Pvt. Ltd. as of January 31, 2023 and April 30, 2022, respectively. The Company recorded all deferred tax assets and liabilities related to its outside basis differences in its foreign subsidiaries consistent with ASC 740.
L. Defined Benefit Pension Plans
The Company has non-contributory defined benefit pension plans covering substantially all domestic salaried and hourly employees. These plans were amended as of April 30, 2005; 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 for the three and nine months ended January 31, 2023 and January 31, 2022. The Company assumed an expected long-term rate of return of 7.75% for the periods ended January 31, 2023 and January 31, 2022.
11

Pension expense / (income) consisted of the following (in thousands):

| Three Months Ended
| January 31, 2023 |  | January 31, 2022
Service cost | $ | — |  |  | $ | — |
Interest cost | 211 |  |  | 177 |
Expected return on plan assets | (350) |  |  | (401) |
Recognition of net loss | 157 |  |  | 136 |
Net periodic pension expense (income) | $ | 18 |  |  | $ | (88) |

| Nine Months Ended
| January 31, 2023 |  | January 31, 2022
Service cost | $ | — |  |  | $ | — |
Interest cost | 633 |  |  | 531 |
Expected return on plan assets | (1,051) |  |  | (1,203) |
Recognition of net loss | 471 |  |  | 406 |
Net periodic pension expense (income) | $ | 53 |  |  | $ | (266) |

M. 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, flexible systems, worksurfaces, workstations, workbenches, and computer enclosures. The International business segment, which consists of the Company's foreign subsidiaries, provides 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 have not been allocated to the business segments.
The following tables provide financial information by business segments for the periods ended January 31, 2023 and 2022 (in thousands):

| Domestic Operations |  | International Operations |  | Corporate / Eliminations |  | Total
Three months ended January 31, 2023 |  |  |  |  |  |  |
Revenues from external customers | $ | 36,134 |  |  | $ | 24,687 |  |  | $ | — |  |  | $ | 60,821 |
Intersegment revenues | 52 |  |  | 3,458 |  |  | (3,510) |  |  | — |
Earnings (loss) before income taxes | 417 |  |  | 2,787 |  |  | (1,144) |  |  | 2,060 |
Three months ended January 31, 2022 |  |  |  |  |  |  |
Revenues from external customers | $ | 29,531 |  |  | $ | 11,102 |  |  | $ | — |  |  | $ | 40,633 |
Intersegment revenues | 194 |  |  | 1,136 |  |  | (1,330) |  |  | — |
Earnings (loss) before income taxes | (255) |  |  | 869 |  |  | (1,501) |  |  | (887) |

| Domestic Operations |  | International Operations |  | Corporate / Eliminations |  | Total
Nine months ended January 31, 2023 |  |  |  |  |  |  |
Revenues from external customers | $ | 111,593 |  |  | $ | 53,915 |  |  | $ | — |  |  | $ | 165,508 |
Intersegment revenues | 1,498 |  |  | 8,414 |  |  | (9,912) |  |  | — |
Earnings (loss) before income taxes | 1,006 |  |  | 5,737 |  |  | (4,567) |  |  | 2,176 |
Nine months ended January 31, 2022 |  |  |  |  |  |  |
Revenues from external customers | $ | 89,128 |  |  | $ | 30,029 |  |  | $ | — |  |  | $ | 119,157 |
Intersegment revenues | 539 |  |  | 2,272 |  |  | (2,811) |  |  | — |
Earnings (loss) before income taxes | (2,559) |  |  | 2,111 |  |  | (4,382) |  |  | (4,830) |

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N. 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 will adopt this standard in fiscal year 2024. 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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The Company's 2022 Annual Report to Stockholders on Form 10-K contains management's discussion and analysis of the Company's financial condition and results of operations as of and for the year ended April 30, 2022. The following discussion and analysis describes material changes in the Company's financial condition since April 30, 2022. The analysis of results of operations compares the three and nine months ended January 31, 2023 with the comparable periods of the prior year.
Results of Operations
Sales for the quarter were $60,821,000, an increase from sales of $40,633,000 in the comparable period of the prior year. Domestic sales for the quarter were $36,134,000, up 22.4% from sales of $29,531,000 in the comparable period of the prior year. The increase in Domestic sales was predominantly from higher input costs being rolled into product pricing. International sales for the quarter were $24,687,000, up 122.4% from sales of $11,102,000 in the comparable period of the prior year. International sales increased when compared to the prior year period due to the delivery of large projects booked in the prior fiscal year.
Sales for the nine months ended January 31, 2023 were $165,508,000, an increase from sales of $119,157,000 in the comparable period of the prior year. Domestic sales for the quarter were $111,593,000, up 25.2% from sales of $89,128,000 in the comparable period of the prior year. The increase in Domestic sales was predominantly from higher input costs being rolled into product pricing. International sales for the quarter were $53,915,000, up 79.5% from sales of $30,029,000 in the comparable period of the prior year. International sales increased when compared to the prior year period due to the delivery of large projects booked in the prior fiscal year.
The Company's order backlog was $153.2 million at January 31, 2023, as compared to $138.1 million at January 31, 2022, and $173.9 million at April 30, 2022.
The gross profit margin for the three months ended January 31, 2023 was 17.0% of sales, as compared to 13.8% of sales in the comparable quarter of the prior year. The gross profit margin for the nine months ended January 31, 2023 was 15.2% of sales, as compared to 12.5% of sales in the comparable quarter of the prior year. The increase in gross profit margin percentage for the three and nine months ended January 31, 2023 is primarily due to higher input costs being rolled into domestic pricing for the current fiscal year as compared to the prior year comparable periods. During the three and nine months ended January 31, 2022, the Company's gross profit margin percentage was unfavorably impacted by increases in steel, wood, and epoxy resin raw material costs that could not be added to existing fixed-price contracts of $424,000 and $4,186,000, respectively.
Operating expenses for the three months ended January 31, 2023 were $8,026,000, or 13.2% of sales, as compared to $6,490,000, or 16.0% of sales, in the comparable period of the prior year. Operating expenses for the nine months ended January 31, 2023 were $22,564,000, or 13.6% of sales, as compared to $19,742,000, or 16.6% of sales, in the comparable period of the prior year. The increase in operating expenses for the three months ended January 31, 2023 was primarily due to increases in administrative wages, benefits, inventive and stock-based compensation of $122,000, consulting and professional fees of $195,000, marketing expenses of $53,000, bad debt expense of $58,000, corporate governance expenses of $30,000, and increases in international operating expenses of $730,000. The increase in operating expenses for the nine months ended January 31, 2023 was primarily due to increases in consulting and professional fees of $671,000, bad debt expense of $51,000, corporate governance expenses of $18,000, and increases in international operating expenses of $2,037,000, partially offset by reductions in administrative wages, benefits, and stock-based compensation of $579,000, and marketing expense of $137,000. The increase in operating expenses for the nine months ended January 31, 2023 also included a one-time charge related to the write-down of a prior year insurance claim in the amount of $260,000. The increase in international operating expenses for the three and nine months ended January 31, 2023 is related to the continued sales growth in the International operating segment.
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Interest expense, net was $436,000 and $1,190,000 for the three and nine months ended January 31, 2023, as compared to $158,000 and $396,000 for the comparable periods of the prior year. The changes in interest expense were primarily due to changes in the levels of bank borrowings and the Sale-Leaseback financing transaction.
The effective income tax rate for the three and nine months ended January 31, 2023 was 46.7% and 87.8%, respectively, as compared to (45.0)% and (17.5)% for the three and nine months ended January 31, 2022, respectively. Income tax expense of $962,000 and $399,000 was recorded for the three months ended January 31, 2023 and 2022, respectively. Income tax expense of $1,911,000 and $845,000 was recorded for the nine months ended January 31, 2023 and 2022, respectively. The change in the effective tax rate for the three and nine months ended January 31, 2023 reflects the impact of international operations which are taxed at different rates, combined with no U.S. tax benefit being recorded for the most recent quarter due to the Company's full valuation allowance position. See Note K, Income Taxes, of the Notes to Condensed Consolidated Financial Statements for additional information.
Non-controlling interests related to the Company's subsidiaries not 100% owned by the Company increased net loss by $375,000 and $532,000 for the three and nine months ended January 31, 2023, respectively, compared to $33,000 and $89,000, respectively, for the comparable periods of the prior year. The change in the net earnings attributable to the non-controlling interest in the current period was due to changes in earnings of the subsidiaries in the related period.
Net earnings was $723,000, or $0.25 per diluted share, for the three months ended January 31, 2023, compared to a net loss of $1,319,000, or $(0.47) per diluted share, in the prior year period. Net loss was $267,000, or $(0.09) per diluted share, for the nine months ended January 31, 2023, compared to $5,764,000, or $(2.07) per diluted share, in the prior year period.
Liquidity and Capital Resources
Our principal sources of liquidity have historically been funds generated from operating activities. In addition, on March 24, 2022, we executed a Sale-Leaseback financing transaction with respect to our manufacturing and corporate facilities in Statesville, North Carolina to provide additional liquidity. See Note G, Sale-Leaseback Financing Transaction for more information. Additionally, certain machinery and equipment are financed by non-cancellable operating leases. The Company believes that these sources will be sufficient to support ongoing business requirements in the current fiscal year, including capital expenditures.
The Company had working capital of $47,348,000 at January 31, 2023, compared to $49,272,000 at April 30, 2022. The ratio of current assets to current liabilities was 2.1-to-1.0 at January 31, 2023, compared to 2.2-to-1.0 at April 30, 2022.
As previously reported in the Company's 2022 Annual Report on Form 10-K, the Company was compliant at April 30, 2022 with all of the financial covenants under its prior revolving credit facility. On June 27, 2022, the Company terminated its prior credit agreement with Wells Fargo, National Bank (the "Prior Credit Agreement"). At the time of termination, there were no borrowings under the Prior Credit Agreement, and the Company did not incur any material termination penalties as a result of the termination. On December 19, 2022, the Company entered into a Credit and Security Agreement with Mid Cap Funding IV Trust and the lenders from time to time party thereto (the "Credit Agreement"). The Credit Agreement provides for a secured revolving line of credit initially of up to $15.0 million. At January 31, 2023, there were $3.0 million outstanding under the revolving credit facility governed by the Credit Agreement. For additional information concerning the credit agreement, see Note F, Long-Term Debt and Other Credit Arrangements.
The Company used cash of $3,547,000 during the nine months ended January 31, 2023, primarily for decreases in accounts payable and other accrued expenses of $4.5 million and receivables of $2.8 million and increases in prepaid expenses and other assets of $1.6 million, partially offset by an increase in deferred revenue of $1.5 million and a decrease in inventory of $2.4 million. During the nine months ended January 31, 2023, the Company used net cash of $1,562,000 in investing activities, all of which was used for capital expenditures. The Company's financing activities provided cash of $17,089,000 during the nine months ended January 31, 2023, primarily from proceeds of the sale-leaseback financing transaction that was previously recorded as a note receivable at April 30, 2022, proceeds from a small balance being drawn on the new credit facility, and short-term borrowings by our International subsidiaries.
Outlook
The Company's ability to predict future demand for its products continues to be limited given its role as subcontractor or supplier to dealers for subcontractors. Demand for the Company's products is also dependent upon the number of laboratory construction projects planned and/or current progress in projects already under construction. The Company's earnings are also impacted by fluctuations in prevailing pricing for projects in the laboratory construction marketplace and increased costs of raw materials, including steel, wood, and epoxy resin, and whether the Company can increase product prices to customers in
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amounts that correspond to such increases without materially and adversely affecting sales. Additionally, since prices are normally quoted on a firm basis in the industry, the Company bears the burden of possible increases in labor and material costs between the quotation of an order and delivery of a product.
The Company continues to improve the quality of the order backlog by delivering a portion of the lower margin direct sales orders and replacing those orders in the backlog with higher margin product orders. This dynamic, as well as the Company’s ability to focus solely on supporting its dealers and distribution channel partners domestically and the continued growth of its International business, positions Kewaunee well as the Company moves through the balance of the fiscal year.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain statements in this document constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). All statements other than statements of historical fact included in this Quarterly Report, including statements regarding the Company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions, and other important factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to: competitive and general economic conditions, including disruptions from government mandates, both domestically and internationally, as well as supplier constraints and other supply disruptions; changes in customer demands; technological changes in our operations or in our industry; dependence on customers’ required delivery schedules; risks related to fluctuations in the Company’s operating results from quarter to quarter; risks related to international operations, including foreign currency fluctuations; changes in the legal and regulatory environment; changes in raw materials and commodity costs; acts of terrorism, war, governmental action, and natural disasters and other Force Majeure events. The cautionary statements made pursuant to the Reform Act herein and elsewhere by us should not be construed as exhaustive. We cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. Over time, our actual results, performance, or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and harmful to our stockholders' interest. Many important factors that could cause such differences are described under the caption "Risk Factors" in Item 1A in the Company's 2022 Annual Report on Form 10-K, which you should review carefully. These forward-looking statements speak only as of the date of this document. The Company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There are no material changes to the disclosures made on this matter in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2022.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures
An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of January 31, 2023. Based on that evaluation, the Company's management, including the CEO and CFO, concluded that, as of January 31, 2023, the Company's disclosure controls and procedures were adequate and effective and designed to ensure that all material information required to be filed in this quarterly report is made known to them by others within the Company and its subsidiaries.
(b) Changes in internal controls
There was no significant change in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1A. Risk Factors
The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in Part I, Item 1A of the Company's 2022 Annual Report on Form 10-K under the heading "Risk Factors," any one or more of which could, directly or indirectly, cause the Company's actual financial condition and operating results to vary materially from its past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company's business, financial condition, operating results and stock price. There have been no material changes to the Company's risk factors from those set forth in the Company's Annual Report on Form 10-K for the year ended April 30, 2022 as filed with the SEC on July 1, 2022.
Item 6. Exhibits

10.1 |  | Credit and Security Agreement, dated as of December 19, 2022, by and among Kewaunee Scientific Corporation, Mid Cap Funding IV Trust, as agent, and the lenders from time to time party thereto. |
31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |  | XBRL Instance Document |
101.SCH |  | XBRL Taxonomy Extension Schema Document |
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document |
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | KEWAUNEE SCIENTIFIC CORPORATION (Registrant)
Date: March 10, 2023 |  | By | /s/ Donald T. Gardner III
|  |  | Donald T. Gardner III
|  |  | (As duly authorized officer and Vice President, Finance and Chief Financial Officer)

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