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What changed in KEWAUNEE SCIENTIFIC CORP /DE/'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KEWAUNEE SCIENTIFIC CORP /DE/'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+79 added−74 removedSource: 10-K (2024-06-28) vs 10-K (2023-06-30)

Top changes in KEWAUNEE SCIENTIFIC CORP /DE/'s 2024 10-K

79 paragraphs added · 74 removed · 56 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur order backlog at April 30, 2023 was $147.9 million, as compared to $173.9 million at April 30, 2022. Based on scheduled shipment dates and past experience, we estimate that not less than 91% of our order backlog at April 30, 2023 will be shipped during fiscal year 2024.
Biggest changeOur order backlog at April 30, 2024 was $155.6 million, as compared to $147.9 million at April 30, 2023. Based on scheduled shipment dates and past experience, we estimate that not less than 88% of our order backlog at April 30, 2024 will be shipped during fiscal year 2025.
SEGMENT INFORMATION See Note 11 , Segment Information , of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information concerning our Domestic and International business segments.
SEGMENT INFORMATION See Note 12 , Segment Information , of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information concerning our Domestic and International business segments.
Sales for two of the Company's domestic dealers and our national stocking distributor represented, in the aggregate, approximately 35% and 38% of the Company's sales in fiscal years 2023 and 2022, respectively. Loss of all or part of our sales to a large customer would have a material effect on our financial operations.
Sales for two of the Company's domestic dealers and our national stocking distributor represented, in the aggregate, approximately 42% and 35% of the Company's sales in fiscal years 2024 and 2023, respectively. Loss of all or part of our sales to a large customer would have a material effect on our financial operations.
RESEARCH AND EXPERIMENTATION EXPENDITURES The amount spent and expensed by us during the fiscal year ended April 30, 2023 on research and experimentation expenditures activities related to new or redesigned products was $1,012,000. The amount spent for similar purposes in the fiscal year ended April 30, 2022 was $990,000.
RESEARCH AND EXPERIMENTATION EXPENDITURES The amount spent and expensed by us during the fiscal year ended April 30, 2024 on research and experimentation expenditures activities related to new or redesigned products was $920,000. The amount spent for similar purposes in the fiscal year ended April 30, 2023 was $1,012,000.
CULTURE AND WORKFORCE We are a company of passionate, talented, and motivated people. We embrace collaboration and creativity, and encourage the iteration of ideas to address complex challenges in technology and society. At April 30, 2023, the Company had 603 Domestic employees and 379 International employees.
CULTURE AND WORKFORCE We are a company of passionate, talented, and motivated people. We embrace collaboration and creativity, and encourage the iteration of ideas to address complex challenges in technology and society. At April 30, 2024, the Company had 556 Domestic employees and 450 International employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAdditional factors related to major public health issues that could have material and adverse effects on our ability to successfully operate include, but are not limited to, the following: • The effectiveness of any governmental and non-governmental organizations in combating the spread and severity, including any legal and regulatory responses; • A general decline in business activity, especially as it relates to our customers' expansion or consolidation activities; • The destabilization of the financial markets, which could negatively impact our customer growth and access to capital, along with our customers' ability to make payments for their purchase orders; and • Severe disruptions to and instability in the global financial markets, and deterioration in credit and financing conditions, which could affect our access to capital necessary to fund business operations or current investment and growth strategies.
Biggest changeFurther, should any key employees become ill during the course of a future health event and be unable to work, our ability to operate our internal controls may be adversely impacted. 9 Table of Contents Additional factors related to major public health issues that could have material and adverse effects on our ability to successfully operate include, but are not limited to, the following: • The effectiveness of any governmental and non-governmental organizations in combating the spread and severity, including any legal and regulatory responses; • A general decline in business activity, especially as it relates to our customers' expansion or consolidation activities; • The destabilization of the financial markets, which could negatively impact our customer growth and access to capital, along with our customers' ability to make payments for their purchase orders; and • Severe disruptions to and instability in the global financial markets, and deterioration in credit and financing conditions, which could affect our access to capital necessary to fund business operations or current investment and growth strategies.
While we believe we successfully navigated the risks associated with the recent COVID-19 pandemic and were able to successfully maintain our business operations, the extent of the impact of future COVID-19 variations or other pandemics on our business and financial results is, by nature of this type of event, highly uncertain.
While we believe we successfully navigated the risks associated with the COVID-19 pandemic and were able to successfully maintain our business operations, the extent of the impact of future COVID-19 variations or other pandemics on our business and financial results is, by nature of this type of event, highly uncertain.
If we are unable to manufacture our products consistently, in sufficient quantities, and on a timely basis, our revenues, gross margins, and our other operating results will be materially and adversely affected. Disruptions in the financial markets have historically created, and may continue to create, uncertainty in economic conditions that may adversely affect our customers and our business.
If we are unable to manufacture our products consistently, in sufficient quantities, and on a timely basis, our revenues, gross margins, and our other operating results will be materially and adversely affected. 7 Table of Contents Disruptions in the financial markets have historically created, and may continue to create, uncertainty in economic conditions that may adversely affect our customers and our business.
Risks Related to Operations Sales to customers outside the United States or with international operations expose us to risks inherent in international sales. During fiscal year 2023, 34% of our revenues were derived from sales outside of the United States. A key element of our growth strategy is to expand our worldwide customer base and our international operations.
Risks Related to Operations Sales to customers outside the United States or with international operations expose us to risks inherent in international sales. During fiscal year 2024, 33% of our revenues were derived from sales outside of the United States. A key element of our growth strategy is to expand our worldwide customer base and our international operations.
Risks Specific to our Company If we lose a large customer, our sales and profits would decline. We have substantial sales to three of our domestic channel partners. The combined sales to two dealers and our national stocking distributor accounted for approximately 35% of our sales in fiscal year 2023.
Risks Specific to our Company If we lose a large customer, our sales and profits would decline. We have substantial sales to three of our domestic channel partners. The combined sales to two dealers and our national stocking distributor accounted for approximately 42% of our sales in fiscal year 2024.
The supply chains for our businesses were impacted in fiscal year 2023 from factors outside our control and could also be disrupted in the future for such reasons as supplier capacity constraints, supplier bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities and external events such as natural disasters, pandemics or other public health problems, war, terrorist actions, governmental actions and legislative or regulatory changes.
The supply chains for our businesses have been impacted in the past by factors outside our control and could be disrupted in the future for such reasons as supplier capacity constraints, supplier bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities and external events such as natural disasters, pandemics or other public health problems, war, terrorist actions, governmental actions and legislative or regulatory changes.
Competitive pricing, including price competition or the introduction of new products, could have material adverse effects on our revenues and profit margins. Our ability to compete effectively depends to a significant extent on the specification or approval of our products by architects, engineers, and customers.
We face a variety of competition in all of the markets in which we participate. Competitive pricing, including price competition or the introduction of new products, could have material adverse effects on our revenues and profit margins. Our ability to compete effectively depends to a significant extent on the specification or approval of our products by architects, engineers, and customers.
Any failure, or perceived failure, by us to adhere to any public statements or initiatives, comply with federal, state or international environmental social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and could materially adversely affect the Company's business reputation, results of operations, financial condition, and stock price.
Any failure, or perceived failure, by us to adhere to any public statements or initiatives, comply with federal, state or international environmental social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and could materially adversely affect the Company's business reputation, results of operations, financial condition, and stock price. 8 Table of Contents General Risks Our stock price is likely to be volatile and could drop.
If a significant segment of those communities were to decide that the design, materials, manufacturing, testing, or quality control of our products is inferior to that of any of our competitors, our sales and profits would be materially and adversely affected.
If a significant segment of those communities were to decide that the design, materials, manufacturing, testing, or quality control of our products is inferior to that of any of our competitors, our sales and profits would be materially and adversely affected. An increase in the price of raw materials could negatively affect our sales and profits.
Our international expansion efforts may not be successful in creating further demand for our products outside of the United States or in effectively selling our products in the international markets we enter. If we fail to compete effectively, our revenue and profit margins could decline. We face a variety of competition in all of the markets in which we participate.
Our international expansion efforts may not be successful in creating further demand for our products outside of the United States or in effectively selling our products in the international markets we enter. 6 Table of Contents If we fail to compete effectively, our revenue and profit margins could decline.
We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation ("FDIC"), the loss of which would have a severe negative effect on our operations and liquidity. 8 Table of Contents We may maintain our cash assets at financial institutions in the U.S. in amounts that may be in excess of the FDIC insurance limit of $250,000.
We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation ("FDIC"), the loss of which would have a severe negative effect on our operations and liquidity.
Significant challenges of conducting business in foreign countries include, among other factors, geopolitical tensions, local 7 Table of Contents acceptance of our products, political instability, currency controls, changes in import and export regulations, changes in tariff and freight rates and fluctuations in foreign exchange rates.
International laws and regulations, construction customs, standards, techniques and methods differ from those in the United States. Significant challenges of conducting business in foreign countries include, among other factors, geopolitical tensions, local acceptance of our products, political instability, currency controls, changes in import and export regulations, changes in tariff and freight rates and fluctuations in foreign exchange rates.
An increase in the price of raw materials could negatively affect our sales and profits. 6 Table of Contents It is common in the laboratory and healthcare furniture industries for customers to require delivery at extended future dates, as products are frequently installed in buildings yet to be constructed.
It is common in the laboratory and healthcare furniture industries for customers to require delivery at extended future dates, as products are frequently installed in buildings yet to be constructed.
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International laws and regulations, construction customs, standards, techniques and methods differ from those in the United States.
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We cannot guarantee that our share repurchase program will enhance long-term stockholder value, or that it will successfully mitigate the dilutive effect of employee equity awards.
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General Risks Our stock price is likely to be volatile and could drop.
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While our Board of Directors authorized a share repurchase program that does not have an expiration date, the program does not obligate us to acquire any particular amount of Common Stock and it may be terminated at any time.
Removed
Further, should any key employees become ill during the course of a future health event and be unable to work, our ability to operate our internal controls may be adversely impacted.
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We cannot guarantee that the program will be fully consummated, that it will enhance long-term stockholder value, or that it will successfully mitigate the dilutive effect of employee equity awards. Any repurchases will reduce the amount of cash we have available to fund working capital, capital expenditures, strategic acquisitions or business opportunities, and other general corporate requirements.
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In addition, the program could affect the trading price of our Common Stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our Common Stock.
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Our stockholders may experience future dilution as a result of future issuances of our shares of common stock.
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In order to raise additional capital, we may in the future, without stockholder approval, issue additional shares of our common stock or securities convertible into or exchangeable for our common stock for various considerations, including in connection with acquisitions, financing or refinancing transactions or otherwise.
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The consideration that we receive for any such additional shares of our common stock may represent per share amounts that are greater or lesser than the price per share paid by you.
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Any such issuances of additional shares of our common stock or securities convertible into shares of common stock will dilute our stockholders’ overall existing ownership in us and could make our stock less attractive to investors, which may result in a material adverse effect on the trading price of our common stock.
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We may maintain our cash assets at financial institutions in the U.S. in amounts that may be in excess of the FDIC insurance limit of $250,000.
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We may pursue strategic acquisitions from time to time, in which case we would be subject to the general risks associated with acquisitions. From time to time, we consider, and in the future may pursue, strategic acquisitions of businesses in support of our growth strategy.
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If we are unable to complete acquisitions or successfully integrate and develop acquired businesses, we could experience material adverse impacts to our financial results as a result of any of the following: • the diversion of management’s attention to integration matters; • difficulties in achieving anticipated cost savings, synergies, business opportunities, and growth prospects; • difficulties in the integration of operations and systems, inclusive of internal controls; • difficulties in managing the expanded operations of a larger and more complex company; • challenges in keeping existing customers and obtaining new customers; • challenges in attracting and retaining key personnel; • unanticipated expenses resulting from integration activities and disputes with third parties; and • unanticipated liabilities of acquired third parties.
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Item 1B. Unresolved Staff Comments Not Applicable. 10 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease an office facility in Charlotte, North Carolina. In Bangalore, India, we lease and operate a manufacturing facility comprising 9 Table of Contents 119,000 square feet. Our international sales and administrative offices are located in Singapore, India, and Saudi Arabia. We believe our facilities are suitable for their respective uses and are adequate for our current needs.
Biggest changeWe also lease an office facility in Charlotte, North Carolina. In Bangalore, India, we lease and operate a manufacturing facility comprising 119,000 square feet. Our international sales and administrative offices are located in Singapore, India, and Saudi Arabia. We believe our facilities are suitable for their respective uses and are adequate for our current needs.
See Note 5 , Sale-Leaseback Financing Transaction , of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information concerning the Sale-Leaseback Arrangement. In addition, we lease our primary distribution facility and other warehouse facilities totaling 365,000 square feet in Statesville, North Carolina.
See Note 5 , Sale-Leaseback Financing Transaction , of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information concerning the Sale-Leaseback Arrangement. In addition, we lease our primary distribution facility and other warehouse facilities totaling 366,000 square feet in Statesville, North Carolina.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe believe that any such matters presently pending will not, individually or in the aggregate, have a material adverse effect on our results of operations or financial condition. Item 4. Mine Safety Disclosures Not Applicable. 10 Table of Contents PART II
Biggest changeWe believe that any such matters presently pending will not, individually or in the aggregate, have a material adverse effect on our results of operations or financial condition. Item 4. Mine Safety Disclosures Not Applicable. 12 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS See Item 12 , Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , in this Form 10-K for a discussion of securities authorized for issuance under our equity compensation plans. Item 6. Reserved 11 Table of Contents
Biggest changeSECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS See Item 12 , Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , in this Form 10-K for a discussion of securities authorized for issuance under our equity compensation plans.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Market, under the symbol KEQU. As of June 26, 2023 , there were 111 stockholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Market, under the symbol KEQU. As of June 24, 2024, there were 90 stockholders of record.
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SHARE REPURCHASE PLAN See Note 8 , Stockholders' Equity , in Part II, Item 8 in this Form 10-K for a discussion of activity related to the share repurchase plan that was adopted on August 31, 2023. Item 6. Reserved 13 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet earnings were $738,000, or $0.25 per diluted share, as compared to net loss of $6,126,000, or $2.20 per diluted share, for fiscal years ended April 30, 2023 and April 30, 2022, respectively. The increase in net earnings was attributable to the factors discussed above.
Biggest changeThe changes in the net earnings attributable to the non-controlling interest for each year were due to changes in the levels of net income of the subsidiaries. 15 Table of Contents Net earnings were $18,753,000, or $6.38 per diluted share, as compared to $738,000, or $0.25 per diluted share, for fiscal years ended April 30, 2024 and April 30, 2023, respectively.
CRITICAL ACCOUNTING ESTIMATES In the ordinary course of business, we have made estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the United States of America. Actual results could differ significantly from those estimates.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES In the ordinary course of business, we have made estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our consolidated financial statements in conformity with generally accepted accounting principles in the United States of America. Actual results could differ significantly from those estimates.
The majority of the April 30, 2023 accounts receivable balances are expected to be collected during the first quarter of fiscal year 2024, with the exception of retention amounts on fixed-price contracts which are collected when the entire construction project is completed and all retention funds are paid by the owner.
The majority of the April 30, 2024 accounts receivable balances are expected to be collected during the first quarter of fiscal year 2025, with the exception of retention amounts on fixed-price contracts which are collected when the entire construction project is completed and all retention funds are paid by the owner.
The primary impact of this change is the amortization of current year expenditures over a five year period, as compared to prior fiscal years where research expenditures were deductible in the year incurred.
The primary impact of this change was the amortization of current year expenditures over a five year period, as compared to prior fiscal years where research expenditures were deductible in the year incurred.
We believe that these sources of funds will be sufficient to support ongoing business requirements, including capital expenditures, through fiscal year 2024. At April 30, 2023, we had $3,548,000 outstanding under our $15.0 million revolving credit facility.
We believe that these sources of funds will be sufficient to support ongoing business requirements, including capital expenditures, through fiscal year 2025. At April 30, 2024, we had $3,000,000 outstanding under our $15.0 million revolving credit facility.
See Note 5 , Sale-Leaseback Financing Transaction for more information. We did not have any off balance sheet arrangements at April 30, 2023 or 2022.
See Note 5 , Sale-Leaseback Financing Transaction for more information. We did not have any off balance sheet arrangements at April 30, 2024 or 2023.
The fiscal year 2024 expenditures are expected to be funded primarily by operating activities, supplemented as needed by borrowings under our revolving credit facility.
The fiscal year 2025 expenditures are expected to be funded primarily by operating activities, supplemented as needed by borrowings under our revolving credit facility.
The Company's exposure reflected in the self-insurance reserves varies depending upon market conditions in the insurance industry, availability of cost-effective insurance coverage, and actual claims versus estimated future claims. 12 Table of Contents Income Taxes We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions.
The Company's exposure reflected in the self-insurance reserves varies depending upon market conditions in the insurance industry, availability of cost-effective insurance coverage, and actual claims versus estimated future claims. Income Taxes We are subject to income taxes in the U.S. (federal and state) and foreign jurisdictions.
Our effective tax rates could be affected by numerous factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize related tax benefits, the applicability of special tax regimes, changes in foreign currency exchange rates, changes to our forecasts of income and loss and the mix of jurisdictions to which they relate, changes in our deferred tax assets and liabilities and their valuation, and interpretations related to tax laws and accounting rules in various jurisdictions.
Our effective tax rates could be affected by numerous factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in 14 Table of Contents jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize related tax benefits, the applicability of special tax regimes, changes in foreign currency exchange rates, changes to our forecasts of income and loss and the mix of jurisdictions to which they relate, changes in our deferred tax assets and liabilities, their valuation, and the assumptions around their realization in connection with any associated valuation, and interpretations related to tax laws and accounting rules in various jurisdictions.
Allowance for Doubtful Accounts Evaluation of the allowance for doubtful accounts involves management judgments and estimates. We evaluate the collectability of our trade accounts receivable based on a number of factors.
Allowance for Credit Losses Evaluation of the allowance for credit losses involves management judgments and estimates. We evaluate the collectability of our trade accounts receivable based on a number of factors.
The Company's financing activities provided cash of $14,931,000 during fiscal year 2023 as a result of the collection of $13,629,000 in final proceeds from the Sale-Leaseback transaction executed in the prior fiscal year and proceeds from the net increase in short-term borrowings of $1,998,000, partially offset by repayment of long-term debt of $121,000.
The Company's financing activities provided cash of $14,931,000 during fiscal year 2023 from proceeds of $13,629,000 from the Sale-Leaseback transaction and proceeds from the net increase in short-term borrowings of $1,998,000, partially offset by repayment of long-term debt of $121,000.
Working capital was $47.9 million at April 30, 2023, down from $49.3 million at April 30, 2022, and the ratio of current assets to current liabilities was 2.2-to-1.0 at April 30, 2023 unchanged from April 30, 2022. No dividends were declared or paid on the Company's common stock during the last two fiscal years.
Working capital was $56.0 million at April 30, 2024, up from $47.9 million at April 30, 2023, and the ratio of current assets to current liabilities was 2.4-to-1.0 at April 30, 2024, up from a ratio of 2.2-to-1.0 at April 30, 2023. No dividends were declared or paid on the Company's common stock during the last two fiscal years.
Self-Insurance Reserves The Company's domestic operations are self-insured for employee health care costs. The Company has purchased specific stop-loss insurance policies to limit claims above a certain amount. Estimated medical costs were accrued for claims incurred but not reported using assumptions based upon historical loss experiences.
The Company has purchased specific stop-loss insurance policies to limit claims above a certain amount. Estimated medical costs were accrued for claims incurred but not reported using assumptions based upon historical loss experiences.
LIQUIDITY AND CAPITAL RESOURCES Our principal sources of liquidity have historically been funds generated from operating activities, supplemented as needed by borrowings under our revolving credit facility. Additionally, certain machinery and equipment are financed by non-cancelable operating and financing leases.
The increase in net earnings was attributable to the factors discussed above. LIQUIDITY AND CAPITAL RESOURCES Our principal sources of liquidity have historically been funds generated from operating activities, supplemented as needed by borrowings under our revolving credit facility. Additionally, certain machinery and equipment are financed by non-cancelable operating and financing leases.
The effective rate for fiscal year 2023 was unfavorably impacted by the increase in the valuation allowance attributable to changes to Internal Revenue Code Section 174 Research and Experimental Expenditures, which became effective in the current fiscal year.
See Note 6 , Income Taxes for additional information. The effective tax rate for fiscal year 2023 was unfavorably impacted by the increase in the valuation allowance attributable to changes to Internal Revenue Code Section 174 Research and Experimental Expenditures, which became effective during the fiscal year.
Capital expenditures were $4,148,000 and $1,908,000 in fiscal years 2023 and 2022, respectively. Capital expenditures in fiscal year 2023 were funded primarily from financing activities. Fiscal year 2024 capital expenditures are anticipated to be 14 Table of Contents approximately $4.4 million.
Capital expenditures were $4,373,000 and $4,148,000 in fiscal years 2024 and 2023, respectively. Capital expenditures in fiscal year 2024 were funded primarily from financing activities. Fiscal year 2025 capital expenditures are anticipated to be approximately $4.0 million.
Net earnings attributable to the non-controlling interest related to our subsidiaries that are not 100% owned by the Company were $621,000 and $123,000 for fiscal years 2023 and 2022, respectively. The changes in the net earnings attributable to the non-controlling interest for each year were due to changes in the levels of net income of the subsidiaries.
Net earnings attributable to the non-controlling interest related to our subsidiaries that are not 100% owned by the Company were $304,000 and $621,000 for fiscal years 2024 and 2023, respectively.
The increase in other income in fiscal year 2023 was primarily due to interest income earned on the cash balances held by the Company's international subsidiaries and the increased interest earned on the Note Receivable related to the Sale-Leaseback financing transaction when compared to the prior fiscal year.
The decrease in other income in fiscal year 2024 was primarily due to the elimination of interest income earned from the Note Receivable related to the Sale-Leaseback financing transaction that was settled in the prior year, partially offset by interest earned on the increased Domestic cash balances and increased interest on International cash balances when compared to the prior fiscal year.
The Company believes it is well-positioned for the next fiscal year due to its strong global management team, a healthy backlog, improved manufacturing capabilities, and end-use markets that will continue to prioritize investment in projects that require the products Kewaunee designs and manufactures.
The improved focus of the organization, combined with a strong global management team, a healthy backlog, improved manufacturing capabilities, and end-use markets that continue to prioritize investment in projects that require the products Kewaunee designs and manufactures, positions the Company well.
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 condition, 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.
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 condition, 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. 16 Table of Contents RECENT ACCOUNTING STANDARDS See Note 1 , Summary of Significant Accounting Policies , to our Consolidated Financial Statements in this Form 10-K for a discussion of new accounting pronouncements, which is incorporated herein by reference.
RESULTS OF OPERATIONS Sales for fiscal year 2023 were $219.5 million, an increase compared to fiscal year 2022 sales of $168.9 million. Domestic Segment sales for fiscal year 2023 were $146.7 million, an increase of 15.7% compared to fiscal year 2022 sales of $126.8 million.
RESULTS OF OPERATIONS Sales for fiscal year 2024 were $203.8 million, a decrease compared to fiscal year 2023 sales of $219.5 million. Domestic Segment sales for fiscal year 2024 were $137.2 million, a decrease of 6.5% compared to fiscal year 2023 sales of $146.7 million.
Income tax expense was $3.1 million and $3.5 million for fiscal years 2023 and 2022, respectively, or 69.8% and 141.6% of pretax earnings (loss), respectively.
Income tax benefit was $5.9 million for fiscal year 2024, or 45.3% of pretax earnings, as compared to income tax expense of $3.1 million for fiscal year 2023, or 69.8% of pretax earnings.
See Note 5 , Sale-Leaseback Financing Transaction for additional information on this transaction. Interest expense was $1,734,000 and $632,000 in fiscal years 2023 and 2022, respectively. The increase in interest expense for fiscal year 2023 was primarily due to the Sale-Leaseback financing transaction noted above, partially offset by a decrease in interest expense related to the Company's revolving credit facility.
See Note 5 , Sale-Leaseback Financing Transaction for additional information on this transaction. Interest expense was $1,799,000 and $1,734,000 in fiscal years 2024 and 2023, respectively. The interest expense for fiscal year 2024 was relatively unchanged from the prior fiscal year.
The increase in International Segment sales in fiscal year 2023 is due to the delivery of several large projects in India, Asia, and Africa that were awarded over the course of the past eighteen months. Our order backlog was $147.9 million at April 30, 2023, as compared to $173.9 million at April 30, 2022.
International sales decreased when compared to the prior year period due to the delivery of several large projects in the comparable prior year period that were booked in earlier fiscal years. Our order backlog was $155.6 million at April 30, 2024, as compared to $147.9 million at April 30, 2023.
In addition to specific customer identification of potential bad debts, a reserve for bad debts is estimated and recorded based on our recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding. Pension Benefits We sponsor pension plans covering all employees who met eligibility requirements as of April 30, 2005.
In addition to specific customer identification of potential bad debts, a reserve for credit losses is estimated and recorded based on our recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding. Self-Insurance Reserves The Company's domestic operations are self-insured for employee health care costs.
There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. In addition, our actual and forecasted earnings are subject to change due to economic, political, and other conditions.
In addition, our actual and forecasted earnings are subject to change due to economic, political, and other conditions.
The following table summarizes the cash payment obligations for our lease and financing arrangements as of April 30, 2023: PAYMENTS DUE BY PERIOD ($ in thousands) Contractual Cash Obligations Total 1 Year 2-3 Years 4-5 Years After 5 years Operating Leases $ 10,636 $ 2,373 $ 4,095 $ 2,788 $ 1,380 Financing Lease Obligations 254 91 163 — — Sale-Leaseback Financing Transaction 43,917 1,931 3,979 4,140 33,867 Total Contractual Cash Obligations $ 54,807 $ 4,395 $ 8,237 $ 6,928 $ 35,247 The Company's operating activities used cash of $3,790,000 in fiscal year 2023, primarily for increases in receivables of $4,947,000 and decreases in accounts payable and accrued expenses of $5,558,000, partially offset by cash from operations, decreases in inventories of $1,907,000, and increases in deferred revenue of $568,000.
The following table summarizes the cash payment obligations for our lease and financing arrangements as of April 30, 2024: PAYMENTS DUE BY PERIOD ($ in thousands) Contractual Cash Obligations Total 1 Year 2-3 Years 4-5 Years After 5 years Operating Leases $ 9,802 $ 2,437 $ 3,612 $ 1,859 $ 1,894 Financing Lease Obligations 419 131 152 80 56 Sale-Leaseback Financing Transaction 41,986 1,970 4,058 4,222 31,736 Total Contractual Cash Obligations $ 52,207 $ 4,538 $ 7,822 $ 6,161 $ 33,686 The Company's operating activities provided cash of $19,564,000 in fiscal year 2024, primarily from operations and decreases in receivables of $741,000, decreases in inventories of $1,210,000, increases in accounts payable and accrued expenses of $691,000, and increases in deferred revenue of $277,000.
Operating activities used cash of $7,885,000 in fiscal year 2022, primarily for operations, increases in inventories of $7,279,000 and receivables of $8,464,000, partially offset by increases in accounts payable and accrued expenses of $11,886,000 and a decrease in income tax receivable of $955,000.
Operating activities used cash of $3,790,000 in fiscal year 2023, primarily for increases in receivables of $4,947,000 and decreases in accounts payable and accrued expenses of $5,558,000, partially offset by cash from operations, decreases in inventories of $1,907,000, and increases in deferred revenue of $568,000.
The increase in Domestic Segment sales is primarily driven by the pricing of new orders in response to higher raw material input costs. International Segment sales for fiscal year 2023 were $72.8 million, an increase of 73.2% from fiscal year 2022 sales of $42.0 million.
Specifically, the increase is primarily driven by improved manufacturing productivity, cost containment actions, and the pricing of new orders in response to higher raw material input costs when compared to the prior year. Operating expenses were $33.8 million and $30.2 million in fiscal years 2024 and 2023, respectively, and 16.6% and 13.8% of sales, respectively.
The increase in operating expense in fiscal year 2023 as compared to fiscal year 2022 was primarily due to increases in consulting and professional fees of $552,000, corporate governance expenses of $113,000, and increases in International Segment operating expenses of $2,286,000 as a result of the significant sales growth experienced.
The increase in operating expenses in fiscal year 2024 as compared to fiscal year 2023 was primarily due to increases in SG&A wages, benefits, incentive and stock-based compensation of $2,572,000, corporate governance expenses of $170,000, depreciation expense of $164,000, bad debt expense of $156,000, and increases in international operating expenses of $616,000, partially offset by decreases in consulting and professional services of $557,000.
Removed
These pension 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 have been, or will be, added to the plans.
Added
The decrease in Domestic sales was predominantly related to the reduction in non-product revenue related to the Company's decision to stop selling directly to end users. This revenue typically includes freight, installation services and buyouts. International Segment sales for fiscal year 2024 were $66.5 million, a decrease of 8.6% from fiscal year 2023 sales of $72.8 million.
Removed
Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the pension plans. These factors include actuarial assumptions about the discount rate used to calculate and determine benefit obligations and the expected return on plan assets within certain guidelines.
Added
Gross profit represented 25.5% and 16.2% of sales in fiscal years 2024 and 2023, respectively. The increase in gross profit margin percentage is primarily being generated from Domestic operations.
Removed
The actuarial assumptions used by us may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. These differences may significantly affect the amount of pension income or expense recorded by us in future periods.
Added
Pension expense was $4,177,000 and $71,000 in fiscal years 2024 and 2023, respectively. The increase in pension expense was due to the Company successfully annuitizing its pension obligation, which had been in a frozen state since 2005.
Removed
The decrease in backlog is primarily attributable to the substantial completion of the previously announced Dangote Oil project in Nigeria during the fiscal year and a reduction in new orders within the ASEAN marketplace.
Added
Terminating the pension resulted in a one-time expense of $4,019,000 for accounting losses that were being amortized from the Balance Sheet based on an annual evaluation of the pension plan. By annuitizing the pension obligation, the Company has eliminated all future responsibility for the plan and future administrative costs associated with maintaining and managing the pension plan.
Removed
The Company's backlog for the United States and Indian markets on April 30, 2023 is similar to prior fiscal year levels as order rates in these markets remain strong. Gross profit represented 16.2% and 14.3% of sales in fiscal years 2023 and 2022, respectively.
Added
Other income, net was $814,000 and $939,000 in fiscal years 2024 and 2023, respectively.
Removed
The increase in gross profit margin percentage for fiscal year 2023 is driven by the significant increase in International Segment sales, which has a higher gross profit rate than the Domestic Segment, coupled with an increase in Domestic Segment sales that had improved pricing as noted above.
Added
The income tax benefit for fiscal year 2024 is primarily due to the favorable impact of the reduction of the Domestic valuation allowance of $6.6 million that was required to be established in fiscal year 2020 per ASC 740 and $3.9 million related to prior years' unrecognized tax benefits related to the settlement of the Company's domestic pension plans.
Removed
Operating expenses were $30.2 million and $26.8 million in fiscal years 2023 and 2022, respectively, and 13.8% and 15.9% of sales, respectively.
Added
Income tax expense for fiscal year 2024 excluding these one-time benefits is $4.5 million or 34.4% of pretax earnings. At April 30, 2024, the Company has a Domestic valuation allowance of $808,000 for specific federal and state tax credits as compared to $8.5 million for the Company's Domestic net deferred tax assets at April 30, 2023.
Removed
These increases were partially offset by reductions in administrative wages, benefits, and stock-based compensation of $142,000, and marketing expense of $223,000. The increase in operating expenses for fiscal year 2023 also included a one-time charge related to the write-down of a prior year insurance claim in the amount of $260,000.
Added
The Company's financing activities used cash of $3,014,000 during fiscal year 2024 as a result of the net decrease in short-term borrowings of $488,000, repayments on our financing liability of $642,000, and the repurchase of outstanding shares as part of our announced share repurchase program for $1,998,000, partially offset by net proceeds from long-term debt of $114,000.
Removed
The increase in international operating expenses for fiscal year 2023 is related to the continued sales growth in the International operating segment. Pension expense was $71,000 in fiscal year 2023, compared to pension income of $355,000 in fiscal year 2022.
Added
The Company's earnings are also impacted by fluctuations in prevailing pricing for projects in the laboratory construction marketplace and costs of raw materials, including steel, wood, and epoxy resin.
Removed
The increase in pension expense was primarily due to the lower expected return on plan assets driven by a decrease in plan assets in the prior fiscal year. Other income, net was $939,000 and $400,000 in fiscal years 2023 and 2022, respectively.
Added
The Company is operating more efficiently than in the past due to its ability to focus solely on supporting its dealers and distribution channel partners domestically while continuing to provide turnkey solutions in the international markets it serves.
Removed
The effective rate change for fiscal year 2022 was also unfavorably impacted due to changes in the valuation allowance 13 Table of Contents attributable to the net increase in deferred tax assets of $4,170,000 before valuation allowance as a result of the book to tax differences primarily related to the Company's execution of a Sale-Leaseback transaction for owned real property, which was treated as a taxable sale transaction for tax purposes and a financing transaction for financial statement reporting purposes.
Removed
The Company's financing activities provided cash of $11,031,000 during fiscal year 2022 from proceeds of $15,893,000 from the Sale-Leaseback transaction, including redemption of preferred shares from the buyer, net of debt issuance costs, partially offset by payments of $5,239,000 for short-term borrowings.
Removed
As discussed above, no further benefits have been, or will be, earned under our pension plans after April 30, 2005, and no additional participants have been, or will be, added to the plans. In fiscal years 2023 and 2022, we made no contributions to the plans. We expect to make no contributions to the plans for fiscal year 2024.
Removed
RECENT ACCOUNTING STANDARDS See Note 1 , Summary of Significant Accounting Policies , to our Consolidated Financial Statements in this Form 10-K for a discussion of new accounting pronouncements, which is incorporated herein by reference.
Removed
Fiscal year 2023 was a transition year for the Company as it emerged from a generally disruptive three-year period that included a global pandemic, rapid broad-based inflation, labor shortages, and supply chain disruptions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed4 unchanged
Biggest changeWe have foreign currency cash accounts to operate our global business. These accounts are impacted by changes in foreign currency rates. Cash balances at April 30, 2023 of $9.4 million were held by our foreign subsidiaries and denominated in currencies other than U.S. dollars. 15 Table of Contents
Biggest changeWe have foreign currency cash accounts to operate our global business. These accounts are impacted by changes in foreign currency rates. Cash balances at April 30, 2024 of $11.2 million were held by our foreign subsidiaries and denominated in currencies other than U.S. dollars. 17 Table of Contents
We had $3.5 million outstanding under our revolving credit facility at April 30, 2023, bearing interest at floating rates. We believe that our current exposure to interest rate market risk is not material.
We had $3 million outstanding under our revolving credit facility at April 30, 2024, bearing interest at floating rates. We believe that our current exposure to interest rate market risk is not material.
For fiscal year 2023, 27% of net sales were derived in currencies other than U.S. dollars. We incur expenses in currencies other than U.S. dollars relating to specific contracts with customers and for our operations outside the U.S.
For fiscal year 2024, 29% of net sales were derived in currencies other than U.S. dollars. We incur expenses in currencies other than U.S. dollars relating to specific contracts with customers and for our operations outside the U.S.

Other KEQU 10-K year-over-year comparisons