Kewaunee Scientific Corporation (Nasdaq: KEQU) today reported sales and earnings for its first quarter ended July 31, 2011.
Sales for the quarter were $26,321,000, up 5.9% from sales of $24,858,000 in the first quarter last year. Net earnings for the quarter were $22,000, or $0.01 per diluted share, down from net earnings of $657,000, or $0.25 per diluted share, in the first quarter of the prior year. Earnings for the quarter were unfavorably impacted by lower selling prices and higher costs paid for raw materials, particularly steel and epoxy resin. Additionally, costs associated with the startup of manufacturing for the Company's new laminate furniture product line reduced after-tax earnings by approximately $188,000, or $0.07 per diluted share.
Domestic sales for the quarter were $23,396,000, up from sales of $20,948,000 in the first quarter last year. The domestic marketplace for laboratory projects was generally unchanged from recent quarters, as demand for larger projects continued to hold up relatively well, while demand for small and mid-sized laboratory projects remained well below pre-recession levels. International sales for the quarter were $2,925,000, down from $3,910,000 in the first quarter last year. Although not reflected in the sales figure, the recovery in the international laboratory marketplace appears to be well underway, as the Company is seeing and bidding increasing numbers of opportunities in Asia and the Middle East. The Company's expanded and strengthened international sales representation is helping the Company take early advantage of the recovery.
The order backlog grew to a record $69.7 million at July 31, 2011, up from $65.7 million at April 30, 2011 and $66.9 million at July 31, 2010.
"Dramatic increases in raw material prices, particularly steel and epoxy resin, which is petroleum-based, severely pressured profit margins during the quarter," said Mr. Shumaker, President and Chief Executive Officer. "Facing these higher costs, we accelerated and expanded our cost reduction efforts throughout the Company. We now have identified and put in place new initiatives that are projected to reduce our annual costs by over $3 million. Savings related to many of these initiatives will begin in the second quarter and are expected to continue throughout the remainder of the fiscal year.
"Looking forward for the remainder of this fiscal year, we expect earnings for the second quarter to be much improved over the first quarter, although below last year's strong second quarter results," Mr. Shumaker continued. "We also expect the second half of the fiscal year to be much better than the first. Our projections are based on an analysis of orders in the order backlog, cost savings initiatives underway, increased sales opportunities in the international marketplace, and sales and earnings benefits from new products."
The Company continues to have a strong balance sheet. Working capital was $22.1 million at July 31, 2011, as compared to $18.9 million at the end of the first quarter last year. Cash on hand was $3.6 million at the end of the quarter, as compared to $2.3 million at the end of the first quarter last year. Short-term borrowings under the Company's $14 million bank line of credit were $8.7 million at the end of the quarter, as compared to $7.5 million at the end of the first quarter last year, and total bank borrowings and capital lease obligations were $12.6 million, as compared to $7.7 million at the end of the first quarter last year. The debt-to-equity ratio was .40-to-1 at the end of the quarter, as compared to .25-to-1 at the end of the first quarter last year.
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