Company: KEQU
Filing Date: 2025-12-12
Form Type: 10-Q
Source: 0000055529-25-000054
Chunk: 53

Company: KEWAUNEE SCIENTIFIC CORP /DE/
Filing Date: 2025-12-12
Form: 10-Q
Item: Part I, Item 8
Chunk 53
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 $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 as the lease agreement was determined to be a finance lease due to the significance of the present value of the lease payments, using a discount rate of 4.75% to reflect the Company’s incremental borrowing rate, compared to the fair value of the leased property as of the lease commencement date. In measuring the lease payments for the present value analysis, the Company elected the practical expedient to combine the lease component (the leased facilities) with the non-lease component (property management provided by the Buyer/Lessor) into a single lease component. The presence of a finance lease indicates that control of the property has not transferred to the Buyer/Lessor and, as such, the transaction was deemed a failed sale-leaseback and accounted for as a financing arrangement. As a result of this determination, the Company is viewed as having received the 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 October 31, 2025, the carrying value of the financing liability was $27,032,000, net of $561,000 in debt issuance costs, of which $827,000 was classified as current on the Condensed Consolidated Balance Sheet with $26,205,000 classified as long-term. As of April 30, 2025, the carrying value of the financing liability was $27,420,000, net of $589,000 in debt issuance costs, of which $788,000 was classified as current on the Consolidated Balance Sheet with $26,632,000 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 $306,000 and $315,000 for the three months ended October 31, 2025 and October 31, 2024, respectively. Interest expense associated with the financing arrangement was $614,000 and $632,000 for the six months ended October 31, 2025 and October