LOGO



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CORPORATE PROFILE



Kewaunee Scientific Corporation is a recognized leader in the design, manufacture, and installation of laboratory and technical furniture products. Laboratory furniture
products include both steel and wood cabinetry, fume hoods, flexible systems, and worksurfaces. Technical furniture products include workstations, workbenches, computer enclosures, and network storage systems.



The Companys corporate headquarters and manufacturing facilities are located in
Statesville, North Carolina. The Company also has subsidiaries in Singapore and Bangalore, India that serve the Asian markets.





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TABLE OF CONTENTS



|   |  |                                                                    
|-- |  | -------------------------------------------------------------------
|   | 
|2  |  | Letter to Stockholders                                             
|   | 
|4  |  | Products                                                           
|   | 
|6  |  | Forward-Looking Statement Disclosure                               
|   | 
|6  |  | Managements Discussion and Analysis                               
|   | 
|11 |  | Consolidated Financial Statements and Notes                        
|   | 
|24 |  | Reports of Independent Registered Public Accountants
and Management
|   | 
|26 |  | Summary of Selected Financial Data                                 
|   | 
|27 |  | Quarterly Financial Data                                           
|   | 
|28 |  | Corporate Information                                              



FINANCIAL HIGHLIGHTS



KEWAUNEE SCIENTIFIC CORPORATION



|                                         |  |      |        |      |   |        |   
|---------------------------------------- |  | ---- | ------ | ---- | - | ------ | --
|$ in thousands, except per share amounts |  | 2004 |        | 2003 |  
|OPERATING DATA:                          |  |      |        |      |   |        |   
|Net sales                                |  | $    | 94,700 |      | $ | 71,163 |   
|Earnings (loss) before income taxes      |  | $    | 2,083  |      | $ | (891   | ) 
|Net earnings (loss)                      |  | $    | 1,462  |      | $ | (342   | )*
|Net earnings (loss) per diluted share    |  | $    | 0.59   |      | $ | (0.14  | )*
|                                         |  |      |        |      |   |        |   
|Cash dividends per share                 |  | $    | 0.28   |      | $ | 0.28   |   
|                                         |  |      |        |      |   |        |   
|YEAR-END DATA:                           |  |      |        |      |   |        |   
|Cash and cash equivalents                |  | $    | 1,167  |      | $ | 520    |   
|Net working capital                      |  | $    | 12,617 |      | $ | 11,658 |   
|Total borrowings/long-term debt          |  | $    | 9,045  |      | $ | 3,346  |   
|Stockholders equity                     |  | $    | 26,791 |      | $ | 25,938 |   
|Book value per share                     |  | $    | 10.77  |      | $ | 10.46  |   
|Closing market price per share           |  | $    | 10.66  |      | $ | 8.37   |   



|* | Fiscal year 2003 includes after tax non-recurring charges of $909,000, or $0.37 per diluted share. See Managements Discussion and Analysis in this Annual Report for a further
discussion of the financial results of the Company, including information regarding non-recurring costs.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



1



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LETTER TO STOCKHOLDERS



Fiscal year 2004 was a very good sales year for Kewaunee. Sales increased to a record $94.7 million, up 33% over the prior year. Significant sales increases occurred
in all of our major markets. Spending for laboratory construction for higher education science buildings was particularly strong during the year. Sales also benefited from increased spending for pharmaceutical and other industrial research,
continued growth of our international business, and a modest rebound in sales of our technical furniture products. We ended the year with an order backlog of $43.1 million. Although this was lower than the $51.5 million order backlog at the end of
last year, it was healthy as compared to our order backlogs of previous years.



Net earnings for the year were $1,462,000, or $0.59 per diluted share. This compares to a net loss of $342,000, or $0.14 per diluted share, reported for the prior year. The prior years results were reduced by after-tax non-recurring
charges of $909,000, primarily costs associated with the relocation of our Lockhart, Texas operation to Statesville, North Carolina.



Our operating costs were significantly reduced during the year. As expected, our state-of-the art powder coat system installed late last year provided us with both
reduced manufacturing costs and improved paint quality. Reduced expenses were also realized from the consolidation of our Texas operation in Statesville completed late last year, a number of on-going cost reduction activities, and strict controls on
spending throughout the organization. These actions allowed us to hold operating expenses for the year flat with the prior year at $13.5 million, while sales increased 33%. As a percent of sales, operating expenses declined to 14.2%, from 18.9% in
the prior year.



Despite our success in reducing costs, much more needs to be
done. We experienced very aggressive pricing in the laboratory furniture marketplace during the year, which many times required us to lower selling prices. The resulting lower prices, plus substantial increases in energy costs and increases in costs
of our two principal raw materials, steel and wood, more than offset the favorable impact of our lower manufacturing costs during the year.



Our major emphasis for fiscal year 2005 is to improve significantly our gross profit margins. We recognize this is integral to achieving the profitability and the return
on investment our stockholders deserve. We are encouraged that this goal is being pursued with vigor throughout the entire organization. Our progress to-date has been excellent, and this is adding to managements enthusiasm and determination to
reach our goal.



A bright spot for the Company continues to be our expansion
into the Asian markets through our subsidiaries in India and Singapore. Sales to customers in these areas increased to $6.4 million, nearly doubling from the prior year. We are excited about this opportunity and the need for our products in the
rapidly growing international laboratory research market.



We are proud of
several awards received in fiscal year 2004. The Statesville City Council presented Kewaunee its Industry of the Year award, as well as their PACE (Positive Action in Contributing to Environmental Excellence) award.
Kewaunees workers compensation insurance carrier also presented the Company with their Zero Accident Culture award, which recognized our employees for working over two million hours without incurring a day of work lost due to
an on-the-job accident.



2



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LOGO



The development and customer acceptance of our
new products allows Kewaunee to remain a leader in product solutions for the laboratory. During the year, a number of our recently-introduced products were selected by several prestigious customers and installed in new major research facilities. We
continued our commitment to new products during the year, including the introduction of our Supreme Air LV fume hood at our annual industry show in Chicago in March 2004. This new generation fume hood, saves energy and is environmentally friendly.
We are now aggressively marketing this unique and important additional product line in all of our domestic and international laboratory research markets.



We remain optimistic about the long-term markets for Kewaunees products. Laboratory construction spending for higher education science buildings is expected to
remain strong for many years. We are cautiously optimistic that research and development spending by our important industrial research customers will continue to improve toward historical levels. We remain excited about future opportunities in the
international marketplace, particularly in light of the early success of our Asian subsidiaries. In addition to our current markets, several redesigned products are expected to provide opportunities to penetrate new markets.



We greatly appreciate the on-going support and contributions of our associates; our network
of agencies and representatives; our national stocking distributor, VWR International; our customers; and our loyal stockholders.



|                      |  |  |  |                                   
|--------------------- |  |  |  | ----------------------------------
|Sincerely,            |  |  |  |                                   
|                      |  | 
|LOGO                  |  |  |  | LOGO                              
|Eli Manchester, Jr.   |  |  |  | William A. Shumaker               
|Chairman of the Board |  |  |  | President, Chief Executive Officer



July 2004



See page 6 of this Annual Report for a discussion of factors that could significantly
impact results or achievements expressed or implied by forward-looking statements made in this letter.



3



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QUALITY PRODUCTS FOR CUSTOMERS WORLDWIDE



LOGO



4



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QUALITY



Kewaunee Scientific Corporation continues a tradition of excellence in the manufacture of innovative laboratory and technical furniture products for customers in
industrial, government, educational, high-tech, and healthcare markets around the world. In addition to maintaining full-service sales networks throughout the United States, we continue to expand our international sales organization through
subsidiaries in India and Singapore. These organizations allow us to take advantage of opportunities in the fast-growing markets of India, Southeast Asia, China, and the Middle East, providing the Company with deeper market penetration and
opportunities for increased sales as the operations mature.



Kewaunees
laboratory products include a wide selection of steel and wood cabinet designs and systems, fume hoods, and worksurfaces. The steel Research Collection offers eight styles, including both inset and full overlay versions, with a variety of hardware
options. Four wood Signature Series styles allow the customer to select from traditional or contemporary appearances. The Alpha System mobile workstations provide unlimited configuration options, and can incorporate our Modular Service Carriers.
Kewaunees Kemresin epoxy worksurfaces complement our casework with superior chemical resistance. Our comprehensive fume hood line consists of the Supreme Air Series, offering a variety of models that can be tailored to any application; the
TruView teaching hoods, providing multi-sided visibility of the interior work chamber; and our Supreme Air LV low constant volume fume hoods, a new standard in fume hood design with several patents issued. The LV hood, which is unique in the
industry, employs user-friendly ergonomic features to provide a safe flow of clean air.



Kewaunees technical furniture provides intelligent solutions for a diverse and rapidly changing high-tech industry. Our flexibility for rapid product development is a core competency that allows customization of our Sturdilite,
Basikbench, and Evolution modular workstations and enclosures to meet exact customer specifications. Sturdilite pedestal-based furniture answers the requirement for a variety of storage options, and includes electro-static discharge control
capabilities. The Evolution product line satisfies customer needs for rapid mobilization and reconfiguration. These workstations feature flexible approaches to worksurface height requirements, outlet arrangement, cable raceways, storage provisions,
and overhead lighting. The power of ingenuity is inherent in our ability to design and manufacture customized products to meet the demands of this competitive marketplace.



In summary, the Company continues to build on our comprehensive product offerings through research and development of new and improved
designs. Our overseas presence is well established, and we are solidifying and expanding on the products and services that these organizations can provide. All Kewaunee associates are committed to a standard of excellence that delights and satisfies
our diverse customer base, and contributes to our ongoing sales and profit goals.



PRODUCTS



5



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS



Certain statements in this Annual Report, including the Letter to Stockholders, narrative text, captions, and Managements Discussion
and Analysis of Financial Condition and Results of Operations, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the Reform Act). Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to, economic, competitive,
governmental, and technological factors affecting the Companys operations, markets, products, services, and prices. The cautionary statements made pursuant to the Reform Act herein and elsewhere by the Company should not be construed as
exhaustive. The Company cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. In addition, readers are urged to consider statements that include the terms
believes, belief, expects, plans, objectives, anticipates, intends, or the like to be uncertain and forward-looking.



MANAGEMENTS DISCUSSION AND ANALYSIS



INTRODUCTION



The Company is a recognized leader in the design, manufacture, and installation of laboratory and technical furniture products. Laboratory
furniture products include both steel and wood cabinetry, fume hoods, flexible systems, and worksurfaces. Technical furniture products include workstations, workbenches, computer enclosures, and network storage systems.



The Companys products are primarily sold through purchase orders and contracts
submitted by customers through the Companys dealers and commissioned agents, a national distributor, and through competitive bids submitted by the Company and its subsidiaries. Products are sold principally to pharmaceutical, biotechnology,
industrial, chemical and commercial research laboratories, educational institutions, healthcare institutions, governmental entities, manufacturing facilities, and users of networking furniture. The Company considers the markets in which it competes
to be highly-competitive, with a significant amount of the business involving competitive public bidding.



It is common in the laboratory furniture industry for customer orders to require delivery at extended future dates, as products are frequently to be installed in buildings yet to be constructed. Changes or delays in
building construction may cause delays in delivery of the orders and recognition of the sale by the Company.



The Companys headquarters and manufacturing facilities are located in Statesville, North Carolina. The Company also has subsidiaries in Singapore and Bangalore, India that serve the Asian markets. Although only
approximately 6.8% of the Companys sales were to customers outside the United States in fiscal year 2004, these sales are considered an important part of the Companys long-term growth strategy.



CRITICAL ACCOUNTING POLICIES



In the ordinary course of business, the Company has made a number of estimates and
assumptions relating to the reporting of results of operations and financial position in the preparation of its financial statements in conformity with generally accepted accounting principles. Actual results could differ significantly from those
estimates. The Company believes that the following discussion addresses the Companys most critical accounting policies, which are those that are most important to the portrayal of the Companys financial condition and results of
operations, and require managements most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.



6



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PRINCIPLES OF CONSOLIDATION



The Companys consolidated financial statements include the accounts of Kewaunee Scientific Corporation and its subsidiaries. The
subsidiaries include Kewaunee Labway Asia Pte. Ltd., a dealer for the Companys products in Singapore; Labway Scientific India Pvt. Ltd., a dealer for the Companys products in Bangalore, India; and Kewaunee Scientific Corporation India
Pvt. Ltd. in Bangalore, India, an assembly operation. All intercompany balances, transactions, and profits have been eliminated.



REVENUE RECOGNITION



The Company generally recognizes product sales at the date of the shipment of its products, or when customers have purchased and accepted title of the goods, but because of construction delays, requested the Company
to temporarily store the finished goods on the customers behalf. Product sales for fixed-price construction contracts are recognized under the percentage-of-completion method of accounting, with product sales revenue allocated based on costs
incurred for products completed and shipped to the customer. Deferred revenue consists of customer deposits and advanced billings on the Companys products where sales have not yet been recognized. A provision for losses expected to be incurred
on a fixed-price contract is made in the period such loss becomes known. Service revenue for installation of product sold is recognized as the work is performed. A high degree of management judgment is required with respect to periodic estimates of
profit and product costs on these contracts. Warranty costs are expensed as incurred. Shipping and handling costs are included in cost of sales.



ALLOWANCE FOR DOUBTFUL ACCOUNTS



The Company evaluates the collectibility of its trade accounts receivable based on a number of factors. In circumstances where management is aware of a customers
inability to meet its financial obligations to the Company, or a project dispute makes it unlikely that all of the receivable owed by a customer will be collected, a specific reserve for bad debts is estimated and recorded, which reduces the
recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, a general reserve for bad debts is estimated and recorded based on the
Companys recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding.



PENSION BENEFITS



The Company sponsors pension plans covering all employees who meet eligibility requirements. Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and
liability related to these plans. These factors include assumptions about the discount rate, expected return on plan assets, and rate of future compensation increases as determined by the Company, within certain guidelines. The actuarial assumptions
used by the Company 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 expense recorded by the Company in future periods.



RESULTS OF
OPERATIONS



Sales for fiscal year 2004 were $94.7 million, an increase of
33.1% from fiscal year 2003 sales of $71.2 million. Sales during the year benefited from an improved marketplace for the Companys products and the strong order backlog at the end of the prior year.



Sales for fiscal year 2003 were $71.2 million, a decline of 16.1% from fiscal year 2002 sales
of $84.8 million. Sales during the year were significantly impacted by a decline in the number of traditional mid-sized laboratory projects in the marketplace with products which could be shipped in the 2003 fiscal year. Sales were further affected
by a continuing decline in demand for technical products.



The Companys
order backlog was $43.1 million at April 30, 2004, as compared to $51.5 million at April 30, 2003, and $34.2 million at April 30, 2002. The decrease in the order backlog at April 30, 2004 was primarily due to the absence of one unusually large order
that was received in the prior year and shipped in the current year.



7



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During fiscal year 2003, the Company incurred certain non-recurring costs described below and discussed in the Letter to
Stockholders. For comparative purposes, following the disclosure of certain financial measures, which include the applicable non-recurring costs, the Company has reported the same financial measures which exclude the applicable non-recurring costs.
The Company has included this additional information because it believes that the disclosures which exclude the non-recurring costs are a better measure of the Companys performance during the period reported and are more useful for comparing
the Companys results of operations to prior and succeeding periods.



Pretax non-recurring costs of $1,490,000 were recorded in fiscal year 2003. These costs included $1,140,000 associated with the relocation of the Companys operation in Lockhart, Texas, to Statesville, North Carolina, and $350,000
associated with the replacement of the Companys paint system in Statesville. On an after-tax basis, these costs were $909,000, or $0.37 per diluted share.



Gross profit represented 16.6%, 17.9%, and 17.3% of sales in fiscal years 2004, 2003, and 2002, respectively. The decline in gross profit margin in fiscal year 2004
from fiscal year 2003 was due to a number of factors, including highly-aggressive pricing in the marketplace, substantial increases in energy costs, and significant increases in costs of steel and wood raw materials. Excluding non-recurring costs
discussed above affecting the gross profit margin, the gross profit margin in fiscal year 2003 was 18.6%. This improvement over the gross profit margin in fiscal year 2002 was primarily the result of cost improvement projects implemented during the
year.



Operating expenses were $13.5 million, $13.5 million, and $11.8 million
in fiscal years 2004, 2003, and 2002, respectively, and 14.2%, 18.9%, and 13.9% of sales. Strict controls on spending in fiscal year 2004 maintained operating expenses at a relatively flat dollar level compared to the prior year, despite the
significant increase in sales for the year. Excluding non-recurring costs discussed above, operating expenses in fiscal year 2003 were $12.5 million, or 17.6% of sales. The increase in fiscal year 2003 over fiscal year 2002 resulted primarily from
higher administrative expenses.



The net of other income and expense was income
of $186,000 and $28,000, respectively, in fiscal years 2004 and 2003, as compared to expense of $6,000 in fiscal year 2002. Other income of $186,000 includes $295,000 received during the year from the resolution of a disputed claim for laboratory
furniture sold by the Company several years earlier.



Interest expense was
$301,000, $155,000, and $206,000 in fiscal years 2004, 2003, and 2002, respectively. The increase in interest expense for fiscal year 2004 resulted from higher levels of borrowings during the year as discussed below. The decline in interest expense
for fiscal year 2003 resulted primarily from lower interest rates.



The Company
recorded an income tax expense of $621,000, or 29.8% of pretax earnings, in fiscal year 2004. The Company recorded an income tax benefit of $549,000, or 61.6% of pretax loss, in fiscal year 2003. This compares to income tax expense of $793,000, or
29.4% of pretax earnings, in fiscal year 2002. The effective rate for each of these years differs from the statutory rate due to state income tax credits available from investments in certain qualifying machinery and from research and development
expenditures, while the effective rate for fiscal year 2003 was also impacted by the pretax loss for the year.



Net earnings in fiscal year 2004 were $1.5 million, or $0.59 per diluted share. A net loss of $342,000, or $0.14 per diluted share, was reported for fiscal year 2003. The net loss for the fiscal year 2003 included
after-tax non-recurring costs of $909,000 discussed above, or $0.37 per diluted share. Net earnings in fiscal year 2002 were $1.9 million, or $0.77 per diluted share.



LIQUIDITY AND CAPITAL RESOURCES



The Companys principal sources of liquidity have historically been funds generated from operating activities, supplemented as needed by borrowings under the
Companys revolving credit facility. Additionally, certain machinery and equipment are financed by non-cancelable operating leases.



Primarily due to the large increase in receivables outstanding resulting from the significant increase in sales, the Companys operating activities in fiscal year
2004 used cash of $2.8 million. Additionally, cash was used during the year for capital expenditures of $1.6 million and cash dividends paid of $696,000.



8



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As a result of these cash requirements, advances under the Companys unsecured credit facility increased to
$6,996,000 at April 30, 2004, from $1,416,000 at April 30, 2003. Because of the increased requirements, in June 2003, the Company increased its borrowing capacity under its unsecured revolving credit facility to $9.0 million from $7.0 million. The
current credit facility matures in December 2004, and the Company intends to replace it with a new facility prior to the maturity date.



The Company believes that funds generated from operations, supplemented as needed by borrowings under the credit facility or new borrowings, will be sufficient to support
ongoing business requirements, including capital expenditures.



The Company has
entered into a bank note collateralized by certain machinery and equipment. The loan is repayable in equal monthly installments plus interest. The unpaid balance was $2.0 million at April 30, 2004. The note includes certain financial covenants as to
tangible net worth, funds flow coverage, current ratio, and ratio of liabilities to tangible net worth. The Company has entered into an interest rate swap agreement, whereby a substantial portion of the outstanding principal amount of the bank note
effectively converted to a fixed rate on May 1, 2002. The notional amount of this cash flow hedge is reduced in the same proportion as the principal balance of the bank note over the remaining term of the bank note.



The Company leases some of its machinery and equipment under non-cancelable operating leases.
During fiscal year 2003, the Company entered into a 10-year operating lease for a new distribution center in Statesville, North Carolina, replacing several facilities that were leased on a month-to-month basis. Most of these leases provide the
Company with renewal and purchase options, and most leases of machinery and equipment have certain early cancellation rights. The following table summarizes the obligated cash payments for these commitments as of April 30, 2004:



PAYMENTS DUE BY PERIOD



|                                   |  |       |           |        |   |           |  |           |           |               |   |           |  |   |          
|---------------------------------- |  | ----- | --------- | ------ | - | --------- |  | --------- | --------- | ------------- | - | --------- |  | - | ---------
|                                   |  |       |           |        |  
|Contractual Obligations            |  | Total |           | 1 Year |   | 2-3 Years |  | 4-5 Years |           | After 5 Years
|Long-term Debt (principal only)    |  | $     | 2,049,000 |        | $ | 1,118,000 |  | $         | 931,000   |               | $ |          |  | $ |         
|Operating Leases                   |  |       | 5,738,000 |        |   | 1,102,000 |  |           | 1,972,000 |               |   | 1,316,000 |  |   | 1,348,000
|                                   |  |       |           |        |   |           |  |           |           |               |   |           |  |   |          
|Total Contractual Cash Obligations |  | $     | 7,787,000 |        | $ | 2,220,000 |  | $         | 2,903,000 |               | $ | 1,316,000 |  | $ | 1,348,000
|                                   |  |       |           |        |   |           |  |           |           |               |   |           |  |   |          



Operating activities used cash of $2.8
million in fiscal year 2004 and provided cash of $1.3 million and $4.5 million in fiscal years 2003 and 2002, respectively. The primary use of cash in fiscal year 2004 was to fund the significant increase in receivables, which was partially offset
by funds provided from operating earnings and a decline in inventory levels. In fiscal year 2003, cash was provided primarily from operating earnings before depreciation, a decrease in receivables, and an increase in accounts payable and accrued
expenses. The impact of these items in fiscal year 2003 was partially offset by cash used to support higher inventory levels, cash contributions of $2.2 million to the Companys defined pension plans, and prepaid income taxes. The cash provided
by operating activities in fiscal year 2002 was primarily from earnings before depreciation.



Capital expenditures were $1.6 million, $3.1 million, and $2.1 million in fiscal years 2004, 2003, and 2002, respectively. Capital expenditures in fiscal year 2004 were funded primarily from borrowings under the
Companys credit facility. Capital expenditures in fiscal year 2003 were funded primarily from cash generated from operating activities, borrowings under the Companys credit facility, and proceeds from sales of property, plant and
equipment. Capital expenditures in fiscal year 2002 were funded primarily by cash from operating activities. Fiscal year 2005 capital expenditures are anticipated to be in the range of $1 million to $1.5 million and are expected to be funded
primarily by operating activities.



9



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Working capital increased to $12.6 million at April 30, 2004, from $11.7 million at April 30, 2003, and the ratio of
current assets to current liabilities decreased to 1.7-to-1 at April 30, 2004, from 1.9-to-1 at April 30, 2003. The increase in working capital in fiscal year 2004 resulted primarily from operating earnings.



The Company paid cash dividends of $0.28 per share for each of the fiscal years 2004, 2003,
and 2002. The Company expects to pay dividends in the future in line with the Companys actual and anticipated future operating results.



RECENT ACCOUNTING STANDARDS



In December 2003, the FASB revised Statement of Financial Accounting Standards (SFAS) No. 132, Employers Disclosures about Pensions and other
Post-retirement Benefits, an amendment of FASB Statements No. 87, 88, and 106. This new SFAS 132 retains all of the disclosure requirements of SFAS No. 132; and requires additional annual disclosures describing types of plan assets, investment
strategy, measurement date(s), expected employer contributions, plan obligations, and expected benefit payments of defined benefit pension plans and other defined benefit postretirement plans. The disclosure requirements have been adopted in the
Companys fiscal year 2004 financial statements.



In May 2003, the FASB
issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS 150 establishes classification and measurement standards for three types of freestanding financial instruments
that have characteristics of both liabilities and equity. Instruments within the scope of SFAS 150 must be classified as liabilities within the Consolidated Financial Statements and be reported at settlement date value. In November 2003, through the
issuance of FASB Staff Position (FSP) 150-3, the FASB indefinitely deferred the effective date of certain provisions of SFAS 150. In fiscal year 2004, the Company adopted SFAS 150, as modified by FSP 150-3 and determined that it did not
have a material effect on its financial condition or results of operations.



In
April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS 149 specifies when a derivative contains a financial component that requires special reporting in the
Consolidated Statement of Cash Flows. SFAS 149 also amends certain other existing pronouncements in order to improve consistency in reporting these types of transactions. The new guidance is effective for contracts entered into or modified after
June 30, 2003, and for hedging relationships designated after June 30, 2003. In fiscal year 2004, the Company adopted SFAS 149 and determined that it did not have a material effect on its financial condition or results of operations.



In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. FIN 46 provides guidance on the identification of variable interest entities, entities for which control is achieved through means other than through voting rights, and how to determine
whether a variable interest holder should consolidate the variable interest entities. In fiscal year 2003, the Company adopted FIN 46 and determined that it did not have a material effect on its financial condition or results of operations.



In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure, which amends SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 148 provides alternate methods of transition for a voluntary change to the fair-value-based method of
accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent and frequent disclosures in financial statements about the effects of stock-based compensation. The
Company adopted SFAS 148 disclosure requirements for the Companys 2003 fiscal year financial statements.



In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which is effective for exit or disposal activities initiated after December 31, 2002, with
early adoption permitted. This statement requires that liabilities associated with exit or disposal activities initiated after adoption be recognized and measured at fair value when incurred, as opposed to at the date an entity commits to the exit
or disposal plans. In fiscal year 2003, the Company adopted SFAS 146 and determined that it did not have a material effect on its financial condition or results of operations.



10



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CONSOLIDATED STATEMENTS OF OPERATIONS



|                     |  |                                
|-------------------- |  | -------------------------------
|YEARS ENDED APRIL 30 |  | KEWAUNEE SCIENTIFIC CORPORATION



|                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|---------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|$ and shares in thousands, except per share amounts  |  | 2004 |        |   | 2003 |   |        | 2002 | 
|Net sales                                            |  | $    | 94,700 |   |      | $ | 71,163 |      |  | $ | 84,849 |  
|Costs of products sold                               |  |      | 79,011 |   |      |   | 58,451 |      |  |   | 70,143 |  
|                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|Gross profit                                         |  |      | 15,689 |   |      |   | 12,712 |      |  |   | 14,706 |  
|Operating expenses                                   |  |      | 13,491 |   |      |   | 13,476 |      |  |   | 11,801 |  
|                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|Operating earnings (loss)                            |  |      | 2,198  |   |      |   | (764   | )    |  |   | 2,905  |  
|Other income (expense)                               |  |      | 186    |   |      |   | 28     |      |  |   | (6     | )
|Interest expense                                     |  |      | (301   | ) |      |   | (155   | )    |  |   | (206   | )
|                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|Earnings (loss) before income taxes                  |  |      | 2,083  |   |      |   | (891   | )    |  |   | 2,693  |  
|Income tax expense (benefit)                         |  |      | 621    |   |      |   | (549   | )    |  |   | 793    |  
|                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|Net earnings (loss)                                  |  | $    | 1,462  |   |      | $ | (342   | )    |  | $ | 1,900  |  
|                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|Net earnings (loss) per share                        |  |      |        |   |      |   |        |      |  |   |        |  
|Basic                                                |  | $    | 0.59   |   |      | $ | (0.14  | )    |  | $ | 0.77   |  
|Diluted                                              |  | $    | 0.59   |   |      | $ | (0.14  | )    |  | $ | 0.77   |  
|                                                     |  |      |        |   |      |   |        |      |  |   |        |  
|Weighted average number of common shares outstanding |  |      |        |   |      |   |        |      |  |   |        |  
|Basic                                                |  |      | 2,486  |   |      |   | 2,478  |      |  |   | 2,468  |  
|Diluted                                              |  |      | 2,497  |   |      |   | 2,485  |      |  |   | 2,481  |  
|                                                     |  |      |        |   |      |   |        |      |  |   |        |  



CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY



|                     |  |                                
|-------------------- |  | -------------------------------
|YEARS ENDED APRIL 30 |  | KEWAUNEE SCIENTIFIC CORPORATION



|                                                    |  |             |       |                            |   |     |                   |  |   |                                               |   |  |                |     |   |                            |   |      |   |  |   |        |  
|--------------------------------------------------- |  | ----------- | ----- | -------------------------- | - | --- | ----------------- |  | - | --------------------------------------------- | - |  | -------------- | --- | - | -------------------------- | - | ---- | - |  | - | ------ | -
|$ in thousands, except per share amounts            |  | CommonStock |       | Additional Paid-in Capital |   |     | Retained Earnings |  |   | Accumulated Other Comprehensive Income (Loss) |   |  | Treasury Stock |     |   | Total Stockholders' Equity |  
|Balance at April 30, 2001                           |  | $           | 6,550 |                            | $ | 150 |                   |  | $ | 19,938                                        |   |  | $              |    |   |                            | $ | (877 | ) |  | $ | 25,761 |  
|Net earnings                                        |  |             |      |                            |   |    |                   |  |   | 1,900                                         |   |  |                |    |   |                            |   |     |   |  |   | 1,900  |  
|Cash dividends declared, $0.28 per share            |  |             |      |                            |   |    |                   |  |   | (692                                          | ) |  |                |    |   |                            |   |     |   |  |   | (692   | )
|Stock options exercised, 8,750 shares               |  |             |      |                            |   | (4  | )                 |  |   |                                              |   |  |                |    |   |                            |   | 54   |   |  |   | 50     |  
|Purchase of treasury stock, 12,966 shares           |  |             |      |                            |   |    |                   |  |   |                                              |   |  |                |    |   |                            |   | (107 | ) |  |   | (107   | )
|                                                    |  |             |       |                            |   |     |                   |  |   |                                               |   |  |                |     |   |                            |   |      |   |  |   |        |  
|Balance at April 30, 2002                           |  |             | 6,550 |                            |   | 146 |                   |  |   | 21,146                                        |   |  |                |    |   |                            |   | (930 | ) |  |   | 26,912 |  
|                                                    |  |             |       |                            |   |     |                   |  |   |                                               |   |  |                |     |   |                            |   |      |   |  |   |        |  
|Net (loss)                                          |  |             |      |                            |   |    |                   |  |   | (342                                          | ) |  |                |    |   |                            |   |     |   |  |   | (342   | )
|Cash dividends declared, $0.28 per share            |  |             |      |                            |   |    |                   |  |   | (694                                          | ) |  |                |    |   |                            |   |     |   |  |   | (694   | )
|Stock options exercised, 11,749 shares              |  |             |      |                            |   | (1  | )                 |  |   |                                              |   |  |                |    |   |                            |   | 72   |   |  |   | 71     |  
|Foreign currency translation adjustments            |  |             |      |                            |   |    |                   |  |   |                                              |   |  |                | 22  |   |                            |   |     |   |  |   | 22     |  
|Change in fair value of cash flow hedge, net of tax |  |             |      |                            |   |    |                   |  |   |                                              |   |  |                | (31 | ) |                            |   |     |   |  |   | (31    | )
|                                                    |  |             |       |                            |   |     |                   |  |   |                                               |   |  |                |     |   |                            |   |      |   |  |   |        |  
|Balance at April 30, 2003                           |  |             | 6,550 |                            |   | 145 |                   |  |   | 20,110                                        |   |  |                | (9  | ) |                            |   | (858 | ) |  |   | 25,938 |  
|                                                    |  |             |       |                            |   |     |                   |  |   |                                               |   |  |                |     |   |                            |   |      |   |  |   |        |  
|Net earnings                                        |  |             |      |                            |   |    |                   |  |   | 1,462                                         |   |  |                |    |   |                            |   |     |   |  |   | 1,462  |  
|Cash dividends declared, $0.28 per share            |  |             |      |                            |   |    |                   |  |   | (696                                          | ) |  |                |    |   |                            |   |     |   |  |   | (696   | )
|Stock options exercised, 7,525 shares               |  |             |      |                            |   | (4  | )                 |  |   |                                              |   |  |                |    |   |                            |   | 46   |   |  |   | 42     |  
|Foreign currency translation adjustments            |  |             |      |                            |   |    |                   |  |   |                                              |   |  |                | 27  |   |                            |   |     |   |  |   | 27     |  
|Change in fair value of cash flow hedge, net of tax |  |             |      |                            |   |    |                   |  |   |                                              |   |  |                | 18  |   |                            |   |     |   |  |   | 18     |  
|                                                    |  |             |       |                            |   |     |                   |  |   |                                               |   |  |                |     |   |                            |   |      |   |  |   |        |  
|Balance at April 30, 2004                           |  | $           | 6,550 |                            | $ | 141 |                   |  | $ | 20,876                                        |   |  | $              | 36  |   |                            | $ | (812 | ) |  | $ | 26,791 |  
|                                                    |  |             |       |                            |   |     |                   |  |   |                                               |   |  |                |     |   |                            |   |      |   |  |   |        |  



The accompanying
Notes are an integral part of these Consolidated Financial Statements



11



---

CONSOLIDATED BALANCE SHEETS



|         |  |                                
|-------- |  | -------------------------------
|APRIL 30 |  | KEWAUNEE SCIENTIFIC CORPORATION



|                                                                            |  |      |         |   |      |   |         |  
|--------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|$ and shares in thousands, except per share amounts                         |  | 2004 |         |   | 2003 |  
|ASSETS                                                                      |  |      |         |   |      |   |         |  
|Current Assets                                                              |  |      |         |   |      |   |         |  
|Cash and cash equivalents                                                   |  | $    | 1,167   |   |      | $ | 520     |  
|Receivables, less allowance: $858 (2004); $494 (2003)                       |  |      | 24,987  |   |      |   | 16,138  |  
|Inventories                                                                 |  |      | 4,285   |   |      |   | 5,958   |  
|Deferred income taxes                                                       |  |      | 517     |   |      |   | 89      |  
|Prepaid income taxes                                                        |  |      | 165     |   |      |   | 1,499   |  
|Prepaid expenses and other current assets                                   |  |      | 415     |   |      |   | 782     |  
|                                                                            |  |      |         |   |      |   |         |  
|Total Current Assets                                                        |  |      | 31,536  |   |      |   | 24,986  |  
|                                                                            |  |      |         |   |      |   |         |  
|Property, Plant and Equipment                                               |  |      |         |   |      |   |         |  
|Land                                                                        |  |      | 41      |   |      |   | 41      |  
|Buildings and improvements                                                  |  |      | 9,521   |   |      |   | 9,475   |  
|Machinery and equipment                                                     |  |      | 23,684  |   |      |   | 22,410  |  
|                                                                            |  |      |         |   |      |   |         |  
|Property, plant and equipment                                               |  |      | 33,246  |   |      |   | 31,926  |  
|Accumulated depreciation                                                    |  |      | (21,884 | ) |      |   | (20,135 | )
|                                                                            |  |      |         |   |      |   |         |  
|Net Property, Plant and Equipment                                           |  |      | 11,362  |   |      |   | 11,791  |  
|                                                                            |  |      |         |   |      |   |         |  
|Prepaid pension cost                                                        |  |      | 2,870   |   |      |   | 2,906   |  
|Property held for sale                                                      |  |      | 1,450   |   |      |   | 1,450   |  
|Other                                                                       |  |      | 3,243   |   |      |   | 2,521   |  
|                                                                            |  |      |         |   |      |   |         |  
|Other Assets                                                                |  |      | 7,563   |   |      |   | 6,877   |  
|                                                                            |  |      |         |   |      |   |         |  
|Total Assets                                                                |  | $    | 50,461  |   |      | $ | 43,654  |  
|                                                                            |  |      |         |   |      |   |         |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                        |  |      |         |   |      |   |         |  
|Current Liabilities                                                         |  |      |         |   |      |   |         |  
|Short-term borrowings                                                       |  | $    | 6,996   |   |      | $ | 1,416   |  
|Current portion of long-term debt                                           |  |      | 1,118   |   |      |   | 681     |  
|Accounts payable                                                            |  |      | 6,924   |   |      |   | 8,338   |  
|Employee compensation and amounts withheld                                  |  |      | 1,507   |   |      |   | 1,203   |  
|Deferred revenue                                                            |  |      | 1,152   |   |      |   | 856     |  
|Other accrued expenses                                                      |  |      | 1,222   |   |      |   | 834     |  
|                                                                            |  |      |         |   |      |   |         |  
|Total Current Liabilities                                                   |  |      | 18,919  |   |      |   | 13,328  |  
|                                                                            |  |      |         |   |      |   |         |  
|Long-term Debt                                                              |  |      | 931     |   |      |   | 1,249   |  
|Deferred Income Taxes                                                       |  |      | 1,013   |   |      |   | 1,150   |  
|Accrued Employee Benefit Plan Costs                                         |  |      | 2,325   |   |      |   | 1,634   |  
|Other Long-term Liabilities                                                 |  |      | 482     |   |      |   | 355     |  
|                                                                            |  |      |         |   |      |   |         |  
|Total Liabilities                                                           |  |      | 23,670  |   |      |   | 17,716  |  
|                                                                            |  |      |         |   |      |   |         |  
|Commitments and Contingencies (Note 7)                                      |  |      |         |   |      |   |         |  
|Stockholders' Equity                                                        |  |      |         |   |      |   |         |  
|Common stock, $2.50 par value: Authorized5,000 shares; Issued2,620 shares |  |      | 6,550   |   |      |   | 6,550   |  
|Additional paid-in-capital                                                  |  |      | 141     |   |      |   | 145     |  
|Retained earnings                                                           |  |      | 20,876  |   |      |   | 20,110  |  
|Accumulated other comprehensive loss                                        |  |      | 36      |   |      |   | (9      | )
|Common stock in treasury, at cost: 132 shares (2004); 139 (2003)            |  |      | (812    | ) |      |   | (858    | )
|                                                                            |  |      |         |   |      |   |         |  
|Total Stockholders' Equity                                                  |  |      | 26,791  |   |      |   | 25,938  |  
|                                                                            |  |      |         |   |      |   |         |  
|Total Liabilities and Stockholders' Equity                                  |  | $    | 50,461  |   |      | $ | 43,654  |  
|                                                                            |  |      |         |   |      |   |         |  



The accompanying
Notes are an integral part of these Consolidated Financial Statements



12



---

|                     |  |                                
|-------------------- |  | -------------------------------
|YEARS ENDED APRIL 30 |  | KEWAUNEE SCIENTIFIC CORPORATION



|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|$ in thousands                                                                             |  | 2004 |        |   | 2003 |   |        | 2002 | 
|Cash Flows from Operating Activities                                                       |  |      |        |   |      |   |        |      |  |   |        |  
|Net earnings (loss)                                                                        |  | $    | 1,462  |   |      | $ | (342   | )    |  | $ | 1,900  |  
|Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: |  |      |        |   |      |   |        |      |  |   |        |  
|Depreciation                                                                               |  |      | 2,048  |   |      |   | 2,307  |      |  |   | 2,173  |  
|Bad debt provision                                                                         |  |      | 454    |   |      |   | 258    |      |  |   | 155    |  
|(Increase) decrease in deferred income tax expense                                         |  |      | (565   | ) |      |   | 717    |      |  |   | 196    |  
|Gain on disposal of property, plant and equipment                                          |  |      |       |   |      |   | (99    | )    |  |   |       |  
|Decrease (increase) in prepaid income taxes                                                |  |      | 1,334  |   |      |   | (1,203 | )    |  |   | 462    |  
|(Increase) decrease in receivables                                                         |  |      | (9,303 | ) |      |   | 2,583  |      |  |   | (1,505 | )
|Decrease (increase) in inventories                                                         |  |      | 1,673  |   |      |   | (2,649 | )    |  |   | 1,061  |  
|Decrease (increase) in prepaid pension cost                                                |  |      | 36     |   |      |   | (1,573 | )    |  |   | (896   | )
|(Decrease) increase in accounts payables and accrued expenses                              |  |      | (722   | ) |      |   | 928    |      |  |   | 1,118  |  
|Increase (decrease) in deferred revenue                                                    |  |      | 296    |   |      |   | 375    |      |  |   | (543   | )
|Other, net                                                                                 |  |      | 508    |   |      |   | (3     | )    |  |   | 338    |  
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash (used in) provided by operating activities                                        |  |      | (2,779 | ) |      |   | 1,299  |      |  |   | 4,459  |  
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Cash Flows from Investing Activities                                                       |  |      |        |   |      |   |        |      |  |   |        |  
|Capital expenditures                                                                       |  |      | (1,619 | ) |      |   | (3,143 | )    |  |   | (2,065 | )
|Proceeds from sale of property, plant and equipment                                        |  |      |       |   |      |   | 505    |      |  |   |       |  
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash used in investing activities                                                      |  |      | (1,619 | ) |      |   | (2,638 | )    |  |   | (2,065 | )
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Cash Flows from Financing Activities                                                       |  |      |        |   |      |   |        |      |  |   |        |  
|Dividends paid                                                                             |  |      | (696   | ) |      |   | (694   | )    |  |   | (692   | )
|Net increase in short-term borrowings                                                      |  |      | 5,580  |   |      |   | 1,416  |      |  |   |       |  
|Proceeds from long-term debt                                                               |  |      | 1,200  |   |      |   |       |      |  |   | 250    |  
|Payments on long-term debt                                                                 |  |      | (1,081 | ) |      |   | (681   | )    |  |   | (636   | )
|Proceeds from exercise of stock options (including tax benefit)                            |  |      | 42     |   |      |   | 71     |      |  |   | 50     |  
|Purchase of treasury stock                                                                 |  |      |       |   |      |   |       |      |  |   | (107   | )
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash provided by (used in) financing activities                                        |  |      | 5,045  |   |      |   | 112    |      |  |   | (1,135 | )
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Increase (Decrease) in Cash and Cash Equivalents                                           |  |      | 647    |   |      |   | (1,227 | )    |  |   | 1,259  |  
|Cash and Cash Equivalents at Beginning of Year                                             |  |      | 520    |   |      |   | 1,747  |      |  |   | 488    |  
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Cash and Cash Equivalents at End of Year                                                   |  | $    | 1,167  |   |      | $ | 520    |      |  | $ | 1,747  |  
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Supplemental Disclosure of Cash Flow Information                                           |  |      |        |   |      |   |        |      |  |   |        |  
|Interest paid                                                                              |  | $    | 289    |   |      | $ | 150    |      |  | $ | 205    |  
|Income taxes (refunded) paid                                                               |  | $    | (506   | ) |      | $ | 4      |      |  | $ | 115    |  
|                                                                                           |  |      |        |   |      |   |        |      |  |   |        |  



The accompanying
Notes are an integral part of these Consolidated Financial Statements



13



---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Kewaunee Scientific Corporation (the Company) is a manufacturer of laboratory and technical furniture, including steel and wood
laboratory cabinetry, fume hoods, network storage systems, worksurfaces, workstations, workbenches, and computer enclosures. Sales are made through purchase orders and contracts submitted by customers, the Companys dealers and agents, a
national stocking distributor, competitive bids submitted by the Company, and subsidiaries located in Singapore and Bangalore, India. The majority of the Companys products are sold to customers located in North America, primarily within the
United States. The Companys laboratory products are used in chemistry, physics, biology, and other general science laboratories in the pharmaceutical, biotechnology, industrial, chemical, commercial, educational, government, and health care
markets. Technical products are used in manufacturing facilities of computers and light electronics, and by users of computer and networking furniture.



Principles of Consolidation The consolidated financial statements include the accounts of Kewaunee Scientific Corporation and its subsidiaries. The subsidiaries
include Kewaunee Labway Asia Pte. Ltd., a dealer for the Companys products in Singapore; Labway Scientific India Pvt. Ltd., a dealer for the Companys products in Bangalore, India; and Kewaunee Scientific Corporation India Pvt. Ltd., an
assembly operation in Bangalore, India. All significant intercompany balances, transactions, and profits have been eliminated.



Cash and Cash EquivalentsCash and cash equivalents consist of cash on hand and highly liquid investments with original maturities of three months or less. At
April 30, 2004 and April 30, 2003, approximately $362,000 and $176,000, respectively, of bank deposits of a subsidiary were pledged under a credit arrangement. At April 30, 2003, there were approximately $1.8 million of outstanding checks included
in accounts payable in the accompanying consolidated balance sheet.



InventoriesInventories are valued at the lower of cost or market. Cost has been determined using the last-in, first-out (LIFO) method for all inventories.



Property, Plant and EquipmentProperty, plant and equipment are stated at cost less accumulated depreciation. Depreciation is
determined for financial reporting purposes principally on the straight-line method over the estimated useful lives of the individual assets or, for leaseholds, over the terms of the related leases, if shorter. The lives, by category, generally are
as follows: buildings and improvements, 10-40 years; leasehold improvements, 10 years; furniture, fixtures, and office equipment, 3-5 years; computer equipment, 3-5 years; factory machinery and vehicles, 5-10 years. Management reviews the carrying
value of property, plant and equipment for impairment whenever changes in circumstances or events indicate that such carrying value may not be recoverable. If projected undiscounted cash flows are not sufficient to recover the carrying value of the
potentially impaired asset the carrying value is reduced to fair value.



Use
of EstimatesThe presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates. Significant estimates impacting the accompanying financial statements include the allowance for uncollectible accounts receivable, inventory valuation, and pension liabilities.



Fair Value of Financial InstrumentsThe Companys financial instruments include
cash and cash equivalents, cash surrender value of life insurance policies, long-term debt, and short-term borrowings. Management believes the carrying value of these assets and liabilities approximate fair value.



14



---

Sales RecognitionProduct sales are generally recognized at the date of shipment, or when customers have purchased
and accepted title of the goods, but because of construction delays, requested the Company to temporarily store the finished goods on the customers behalf. Product sales for fixed-price construction contracts are recognized under the
percentage-of-completion method of accounting, with product sales revenue allocated based on costs incurred for products completed and shipped to the customer. Deferred revenue consists of customer deposits and advanced billings on the
Companys products where sales have not yet been recognized. A provision for losses expected to be incurred on a fixed-price contract is made in the period such loss becomes known. Service revenue for installation of product sold is recognized
as the work is performed. Accounts receivable includes retainage in the amounts of $3,479,000 and $2,019,000 at April 30, 2004 and April 30, 2003, respectively, on certain sales made under contractual agreements. Warranty costs are expensed as
incurred. Shipping and handling costs are included in cost of sales.



Credit
ConcentrationThe Companys credit risk is generally not concentrated with any one customer or industry, although the Company does enter into large contracts with individual customers from time-to-time. The Company performs credit
evaluations of its customers. Revenues from one customer represented 11%, 14%, and 12% of the Companys total sales in fiscal years 2004, 2003, and 2002, respectively.



Income TaxesDeferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes.



Advertising CostsThe Company expenses advertising costs as incurred, including trade shows, training materials, sales samples, catalogs, and other related expenses. Advertising costs for the years ended April
30, 2004, 2003, and 2002 were $219,000, $338,000, and $410,000, respectively.



Earnings Per ShareBasic 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 and conversion of outstanding options under
the Companys stock option plans, except when options have an antidilutive effect.



Accounting for Stock OptionsThe Company accounts for stock options granted to employees and directors using the intrinsic value method. Under this method, no compensation expense is recorded since the exercise price of the stock
options is equal to the market price of the underlying stock on the grant date. Had compensation expense for the stock options issued been determined consistent with FASB Statement No. 123, Accounting for Stock-Based Compensation, net
earnings (loss) and net earnings (loss) per share would have been reduced to the following pro forma amounts:



|                                        |  |      |       |   |      |   |       |      |  |   |       |  
|--------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                        |  | 2004 |       |   | 2003 |   |       | 2002 | 
|Net earnings (loss) as reported         |  | $    | 1,462 |   |      | $ | (342  | )    |  | $ | 1,900 |  
|Pro forma compensation cost             |  |      | (62   | ) |      |   | (110  | )    |  |   | (111  | )
|                                        |  |      |       |   |      |   |       |      |  |   |       |  
|Net earnings (loss) pro forma           |  |      | 1,400 |   |      |   | (452  | )    |  |   | 1,789 |  
|                                        |  |      |       |   |      |   |       |      |  |   |       |  
|Net earnings (loss) per share  Basic   |  |      |       |   |      |   |       |      |  |   |       |  
|As reported                             |  | $    | 0.59  |   |      | $ | (0.14 | )    |  | $ | 0.77  |  
|Pro forma                               |  |      | 0.56  |   |      |   | (0.18 | )    |  |   | 0.72  |  
|                                        |  |      |       |   |      |   |       |      |  |   |       |  
|Net earnings (loss) per share  Diluted |  |      |       |   |      |   |       |      |  |   |       |  
|As reported                             |  | $    | 0.59  |   |      | $ | (0.14 | )    |  | $ | 0.77  |  
|Pro forma                               |  |      | 0.56  |   |      |   | (0.18 | )    |  |   | 0.72  |  
|                                        |  |      |       |   |      |   |       |      |  |   |       |  



The Company did not grant any stock
options during fiscal year 2004. The estimated weighted average fair value of options granted under the Companys stock option plans was $3.59 in 2003 and $3.91 in 2002. The options were valued using the Black-Scholes option-pricing model with
the following assumptions used for 2003 and 2002, respectively: dividend yield of 3.0%; expected volatility of 46% and 48%; risk-free interest of 4.24% and 4.95%; and an expected life of 7.25 years.



15



---

Segment ReportingFinancial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) 131, Disclosure about Segments of an Enterprise and Related Information, establishes standards for the way that public companies report information about products and services, geographic areas, and major
customers. Management has reviewed SFAS 131 and determined that the Company has a single reportable segment.



Property Held for SaleProperty held for sale at April 30, 2004 and April 30, 2003 consisted primarily of land and buildings owned by the Company in Lockhart, Texas. This property was the site of the
Companys Texas operation that was relocated to Statesville, North Carolina in the fourth quarter of fiscal year 2003. Management believes the fair value of these assets exceed their book value.



Derivative Financial InstrumentsThe Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, effective January 1, 2001. SFAS No. 133 requires that the Company record derivatives on the balance sheet at fair value and establishes
criteria for designation and effectiveness of hedging relationships. The nature of the Companys business activities involves the management of various financial and market risks, including those related to changes in interest rates. The
Company employs derivative financial instruments, such as interest rate swap contracts, to mitigate certain of those risks. The Company does not enter into derivative instruments for speculative purposes.



New Accounting StandardsIn December 2003, the FASB revised SFAS No. 132,
Employers Disclosures about Pensions and other Post-retirement Benefits, an amendment of FASB Statements No. 87, 88, and 106. This new SFAS 132 retains all of the disclosure requirements of SFAS No. 132; and requires additional
annual disclosures describing types of plan assets, investment strategy, measurement date(s), expected employer contributions, plan obligations, and expected benefit payments of defined benefit pension plans and other defined benefit postretirement
plans. The disclosure requirements have been adopted in the Companys fiscal year 2004 financial statements.



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS 150
establishes classification and measurement standards for three types of freestanding financial instruments that have characteristics of both liabilities and equity. Instruments within the scope of SFAS 150 must be classified as liabilities within
the Consolidated Financial Statements and be reported at settlement date value. In November 2003, through the issuance of FASB Staff Position (FSP) 150-3, the FASB indefinitely deferred the effective date of certain provisions of SFAS
150. In fiscal year 2004, the Company adopted SFAS 150, as modified by FSP 150-3 and determined that it did not have a material effect on its financial condition or results of operations.



In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. SFAS
149 specifies when a derivative contains a financial component that requires special reporting in the Consolidated Statement of Cash Flows. SFAS 149 also amends certain other existing pronouncements in order to improve consistency in reporting these
types of transactions. The new guidance is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. In fiscal year 2004, the Company adopted SFAS 149 and determined that it
did not have a material effect on its financial condition or results of operations.



In January 2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN 46 provides guidance on the identification of variable interest entities, entities for which control
is achieved through means other than through voting rights, and how to determine whether a variable interest holder should consolidate the variable interest entities. In fiscal year 2003, the Company adopted FIN 46 and determined that it did not
have a material effect on its financial condition or results of operations.



16



---

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure, which amends SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 148 provides alternate methods of transition for a voluntary change to the fair-value-based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require more prominent and frequent disclosures in financial statements about the effects of stock-based compensation. The Company adopted SFAS 148 disclosure
requirements for the Companys 2003 fiscal year financial statements.



In
July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which is effective for exit or disposal activities initiated after December 31, 2002, with early adoption permitted. This
statement requires that liabilities associated with exit or disposal activities initiated after adoption be recognized and measured at fair value when incurred, as opposed to at the date an entity commits to the exit or disposal plans. In fiscal
year 2003, the Company adopted SFAS 146 and determined that it did not have a material effect on its financial condition or results of operations.



NOTE 2INVENTORIES



Inventories consisted of the following at April 30:



|                         |  |      |       |      |   |      
|------------------------ |  | ---- | ----- | ---- | - | -----
|$ in thousands           |  | 2004 |       | 2003
|Finished goods           |  | $    | 1,364 |      | $ | 2,402
|Work-in-process          |  |      | 1,373 |      |   | 1,812
|Materials and components |  |      | 1,548 |      |   | 1,744
|                         |  |      |       |      |   |      
|Total inventories        |  | $    | 4,285 |      | $ | 5,958
|                         |  |      |       |      |   |      



If inventories had been determined
using the first-in, first-out (FIFO) method at April 30, 2004 and 2003, reported inventories for both periods would have been $2.3 million greater.



17



---

NOTE 3LONG-TERM DEBT AND OTHER CREDIT ARRANGEMENTS



Long-term debt consisted of the following at April 30:



|                             |  |      |       |      |   |      
|---------------------------- |  | ---- | ----- | ---- | - | -----
|$ in thousands               |  | 2004 |       | 2003
|Note payable, bank           |  | $    | 2,049 |      | $ | 1,930
|Less  payable within 1 year |  |      | 1,118 |      |   | 681  
|                             |  |      |       |      |   |      
|Long-term portion            |  | $    | 931   |      | $ | 1,249
|                             |  |      |       |      |   |      



In February 2001, the Company borrowed
$3.1 million under a bank loan collateralized by certain machinery and equipment, with the loan repayable in 60 equal monthly installments plus interest. In February 2002, and June 2003, the Company borrowed an additional $250,000 and $1,200,000,
respectively, under the loan, and the monthly payments were recalculated to amortize the loan balance over the remaining term of the original loan. Scheduled payments under the loan are $1,118,000 and $931,000 in fiscal years 2005 and 2006,
respectively.



Monthly interest payments are payable under the rate calculated
at the lower of (1) the LIBOR Market Index Rate plus 1.75%, or (2) the lenders Prime Rate minus 0.75%. The borrowing rate was 2.85% at April 30, 2004. The loan includes certain financial covenants as to tangible net worth, funds flow coverage,
current ratio, and ratio of liabilities to tangible net worth.



The Company
entered into an interest rate swap agreement in fiscal year 2002 to mitigate future fluctuations in interest rates. Under the agreement, $1.5 million of the outstanding principal amount of the bank loan effectively converted to a fixed rate of 6.37%
on May 1, 2002. The notional amount of this interest rate hedge is reduced in the same proportion as the principal balance of the bank loan over the remaining term of the bank loan. The fair value of this cash flow hedge (net of tax) was a loss of
$13,000 at April 30, 2004, which is reflected as an adjustment to stockholders equity in the consolidated financial statements.



The Company has an unsecured revolving credit facility for borrowings of up to $9 million that expires in December 2004. There were advances of $6,996,000 outstanding
under this facility as of April 30, 2004. Monthly interest payments are payable under the facility calculated at the lower of (1) the LIBOR Market Index Rate plus 1.75%, or (2) the lenders Prime Rate minus 1.00%. The borrowing rate was 2.85%
at April 30, 2004. The Company intends to replace the revolving credit facility with a new facility prior to its maturity date in December 2004.



18



---

NOTE 4INCOME TAXES



Income tax expense (benefit) consisted of the following:



|                                     |  |      |       |   |      |   |        |      |  |   |    
|------------------------------------ |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ---
|$ in thousands                       |  | 2004 |       |   | 2003 |   |        | 2002
|Current tax expense (benefit):       |  |      |       |   |      |   |        |      |  |   |    
|Federal                              |  | $    | 993   |   |      | $ | (1,286 | )    |  | $ | 501
|State and local                      |  |      |      |   |      |   |       |      |  |   | 54 
|Foreign tax                          |  |      | 160   |   |      |   | 20     |      |  |   | 42 
|                                     |  |      |       |   |      |   |        |      |  |   |    
|Total current tax expense (benefit)  |  |      | 1,153 |   |      |   | (1,266 | )    |  |   | 597
|                                     |  |      |       |   |      |   |        |      |  |   |    
|Deferred tax expense (benefit):      |  |      |       |   |      |   |        |      |  |   |    
|Federal                              |  |      | (142  | ) |      |   | 936    |      |  |   | 173
|State and local                      |  |      | (390  | ) |      |   | (219   | )    |  |   | 23 
|                                     |  |      |       |   |      |   |        |      |  |   |    
|Total deferred tax expense (benefit) |  |      | (532  | ) |      |   | 717    |      |  |   | 196
|                                     |  |      |       |   |      |   |        |      |  |   |    
|Net income tax expense (benefit)     |  | $    | 621   |   |      | $ | (549   | )    |  | $ | 793
|                                     |  |      |       |   |      |   |        |      |  |   |    



The reasons for the differences
between the above net income tax expense and the amounts computed by applying the statutory federal income tax rates to earnings before income taxes are as follows:



|                                                         |  |      |      |   |      |   |      |      |  |   |      |  
|-------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|$ in thousands                                           |  | 2004 |      |   | 2003 |   |      | 2002 | 
|Income tax expense (benefit) at statutory rate           |  | $    | 708  |   |      | $ | (302 | )    |  | $ | 923  |  
|State and local taxes, net of federal income tax benefit |  |      | 96   |   |      |   | (40  | )    |  |   | 125  |  
|Tax credits                                              |  |      | (139 | ) |      |   | (218 | )    |  |   | (301 | )
|Other items, net                                         |  |      | (44  | ) |      |   | 11   |      |  |   | 46   |  
|                                                         |  |      |      |   |      |   |      |      |  |   |      |  
|Net income tax expense (benefit)                         |  | $    | 621  |   |      | $ | (549 | )    |  | $ | 793  |  
|                                                         |  |      |      |   |      |   |      |      |  |   |      |  



Significant items comprising deferred
tax assets and liabilities as of April 30 were as follows:



|                                                                   |  |      |        |   |      |   |        |  
|------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | -
|$ in thousands                                                     |  | 2004 |        |   | 2003 |  
|Deferred tax assets:                                               |  |      |        |   |      |   |        |  
|Accrued (prepaid) employee benefit expenses                        |  | $    | (117   | ) |      | $ | (425   | )
|Allowance for doubtful accounts                                    |  |      | 255    |   |      |   | 213    |  
|Inventory reserves and capitalized costs                           |  |      | 66     |   |      |   | 149    |  
|Other                                                              |  |      | 313    |   |      |   | 152    |  
|                                                                   |  |      |        |   |      |   |        |  
|Total deferred tax assets                                          |  |      | 517    |   |      |   | 89     |  
|                                                                   |  |      |        |   |      |   |        |  
|Deferred tax liabilities:                                          |  |      |        |   |      |   |        |  
|Book basis in excess of tax basis of property, plant and equipment |  |      | (1,953 | ) |      |   | (1,263 | )
|Other                                                              |  |      | 940    |   |      |   | 113    |  
|                                                                   |  |      |        |   |      |   |        |  
|Total deferred tax liabilities                                     |  |      | (1,013 | ) |      |   | (1,150 | )
|                                                                   |  |      |        |   |      |   |        |  
|Net deferred tax liabilities                                       |  | $    | (496   | ) |      | $ | (1,061 | )
|                                                                   |  |      |        |   |      |   |        |  



19



---

NOTE 5STOCK OPTIONS



During fiscal year 1992, the stockholders approved the 1991 Key Employee Stock Option Plan, and the plan was subsequently amended to
increase the number of shares available for options under the plan to 230,000. During fiscal year 2001, the stockholders approved the 2000 Key Employee Stock Option Plan, which allowed the Company to grant options on 100,000 shares of the
Companys common stock. Under both plans, options are granted at not less than the fair market value at the date of grant and options are exercisable in such installments, for such terms (up to 10 years), and at such times, as the Board of
Directors may determine at the time of the grant. At April 30, 2004, there were no shares available for future grants under the 1991 plan and 27,450 shares available for future grants under the 2000 plan. No options were granted in fiscal year 2004.



During fiscal year 1994, the stockholders approved the 1993 Stock Option Plan
for Directors, which allowed the Company to grant options on 40,000 shares of the Companys common stock. Each non-employee director of the Company received an option to purchase 5,000 shares of the Companys common stock on the effective
date of the plan or on the date of commencement of service as a director. Options are exercisable in four equal, annual installments and expire five years from the date of grant. Options were granted at the fair market value at the date of grant. At
April 30, 2004, no shares were available for future grants under the plan.



The
Company utilized treasury stock to satisfy the stock options exercised during fiscal years 2004, 2003, and 2002. Stock option activity and weighted average exercise price is summarized as follows:



|                                 |  |         |   |      |       |       |         |         |   |       |   |         |  |         |       |  |   |      
|-------------------------------- |  | ------- | - | ---- | ----- | ----- | ------- | ------- | - | ----- | - | ------- |  | ------- | ----- |  | - | -----
|                                 |  | 2004    |   | 2003 |       | 2002 
|                                 |  | Options |   |      | Price |       | Options |         |   | Price |   | Options |  |         | Price
|Outstanding at beginning of year |  | 213,853 |   |      | $     | 9.65  |         | 186,824 |   |       | $ | 9.43    |  | 152,024 |       |  | $ | 9.04 
|Granted                          |  |        |   |      |       |      |         | 40,650  |   |       |   | 9.10    |  | 45,750  |       |  |   | 9.59 
|Canceled                         |  | (15,228 | ) |      |       | 10.12 |         | (1,872  | ) |       |   | 9.57    |  | (2,200  | )     |  |   | 10.16
|Exercised                        |  | (7,525  | ) |      |       | 4.52  |         | (11,749 | ) |       |   | 4.23    |  | (8,750  | )     |  |   | 3.48 
|                                 |  |         |   |      |       |       |         |         |   |       |   |         |  |         |       |  |   |      
|Outstanding at end of year       |  | 191,100 |   |      | $     | 9.81  |         | 213,853 |   |       | $ | 9.65    |  | 186,824 |       |  | $ | 9.43 
|                                 |  |         |   |      |       |       |         |         |   |       |   |         |  |         |       |  |   |      
|Exercisable at end of year       |  | 134,384 |   |      | $     | 9.97  |         | 113,561 |   |       | $ | 9.73    |  | 88,385  |       |  | $ | 8.71 
|                                 |  |         |   |      |       |       |         |         |   |       |   |         |  |         |       |  |   |      



The options outstanding and weighted
average exercise price within the following price ranges at April 30, 2004 are as follows:



|                                                    |  |   |              |  |   |              
|--------------------------------------------------- |  | - | ------------ |  | - | -------------
|Exercise price range                                |  | $ | 2.75  $3.87 |  | $ | 8.13  $12.00
|Options outstanding                                 |  |   | 4,500        |  |   | 186,600      
|Weighted average exercise price                     |  | $ | 3.56         |  | $ | 9.96         
|Weighted average remaining contractual life (years) |  |   | 1.8          |  |   | 6.1          
|                                                    |  |   |              |  |   |              



The options exercisable and weighted
average exercise price within the following price ranges at April 30, 2004 are as follows:



|                                |  |   |              |  |   |              
|------------------------------- |  | - | ------------ |  | - | -------------
|Exercise price range            |  | $ | 2.75  $3.87 |  | $ | 8.13  $12.00
|Options exercisable             |  |   | 4,500        |  |   | 129,884      
|Weighted average exercise price |  | $ | 3.56         |  | $ | 10.19        
|                                |  |   |              |  |   |              



20



---

NOTE 6COMPREHENSIVE INCOME



The Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, effective January 1, 2001. SFAS
No. 133 requires that the Company record derivatives on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships. The nature of the Companys business activities involves the management
of various financial and market risks, including those related to changes in interest rates. The Company may from time-to-time employ derivative financial instruments, such as interest rate swap contracts, to mitigate or eliminate certain of those
risks. The Company does not enter into derivative instruments for speculative purposes.



The Company entered into one interest rate swap agreement effective May 1, 2002 related to the Companys long-term debt.



For the Companys foreign subsidiaries, assets and liabilities are translated at exchange rates prevailing on the balance sheet date. Revenues and expenses are
translated at weighted average exchange rates prevailing during the period, and any resulting translation adjustments are reported separately in shareholders equity. Changes in exchange rates resulted in no impact on comprehensive income in
fiscal year 2002.



A reconciliation of net loss and total comprehensive loss
for fiscal years 2004 and 2003 is summarized as follows:



|                                                             |  |      |       |   |      |   |      |  
|------------------------------------------------------------ |  | ---- | ----- | - | ---- | - | ---- | -
|$ in thousands                                               |  | 2004 |       |   | 2003 |  
|Net earnings (loss)                                          |  | $    | 1,462 |   |      | $ | (342 | )
|Change in fair value of cash flow hedge, net of income tax   |  |      | (13   | ) |      |   | (31  | )
|Change in cumulative foreign currency translation adjustment |  |      | 49    |   |      |   | 22   |  
|                                                             |  |      |       |   |      |   |      |  
|Total comprehensive income (loss)                            |  | $    | 1,498 |   |      | $ | (351 | )
|                                                             |  |      |       |   |      |   |      |  



NOTE 7COMMITMENTS AND
CONTINGENCIES



The Company leases some of its machinery and equipment
under non-cancelable operating leases. During fiscal year 2003, the Company entered into a 10-year operating lease for a new distribution center, replacing several facilities that were leased on a month-to-month basis. Most of these leases provide
the Company with renewal and purchase options, and most leases of machinery and equipment have certain early cancellation rights. Rent expense for these leases was $1,219,000, $738,000, and $459,000 in fiscal years 2004, 2003, and 2002,
respectively.



Future minimum payments under non-cancelable operating leases
for the years ended April 30 are as follows:



|                             |  |        |      
|---------------------------- |  | ------ | -----
|$ in thousands               |  | Amount
|2005                         |  | $      | 1,102
|2006                         |  |        | 1,040
|2007                         |  |        | 932  
|2008                         |  |        | 717  
|2009                         |  |        | 599  
|Thereafter                   |  |        | 1,348
|                             |  |        |      
|Total minimum lease payments |  | $      | 5,738
|                             |  |        |      



The Company is involved in certain
claims and legal proceedings in the normal course of business which management believes will not have a material adverse effect on the financial condition or results of operations of the Company.



21



---

NOTE 8RETIREMENT BENEFITS



Defined Benefit Plans



The Company has non-contributory defined benefit pension plans covering substantially all salaried and hourly employees. The defined benefit plan for salaried employees
provide pension benefits that are based on each employees years of service and average annual compensation during the last 10 consecutive calendar years of employment. The benefit plan for hourly employees provides benefits at stated amounts
based on years of service. The Company uses an April 30 measurement date for its defined benefit plans.



The change in projected benefit obligations and the change in fair value of plan assets for the non-contributory defined benefit pension plans for each of the years ended April 30 are summarized as follows:



|                                                   |  |      |          |   |      |   |        |  
|-------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------ | -
|$ in thousands                                     |  | 2004 |          |   | 2003 |  
|Accumulated Benefit Obligation, April 30           |  | $    | 11,236   |   |      | $ | 9,269  |  
|                                                   |  |      |          |   |      |   |        |  
|Change in Projected Benefit Obligations            |  |      |          |   |      |   |        |  
|Projected benefit obligations, beginning of year   |  | $    | 11,599   |   |      | $ | 9,715  |  
|Service cost                                       |  |      | 483      |   |      |   | 423    |  
|Interest cost                                      |  |      | 799      |   |      |   | 713    |  
|Actuarial loss                                     |  |      | 453      |   |      |   | 1,139  |  
|Actual benefits paid                               |  |      | (438     | ) |      |   | (391   | )
|                                                   |  |      |          |   |      |   |        |  
|Projected Benefit obligations, end of year         |  | $    | 12,896   |   |      | $ | 11,599 |  
|                                                   |  |      |          |   |      |   |        |  
|Change in Plan Assets                              |  |      |          |   |      |   |        |  
|Fair value of plan assets, beginning of year       |  | $    | 9,426    |   |      | $ | 8,031  |  
|Actual return (loss) on plan assets                |  |      | 1,635    |   |      |   | (384   | )
|Actual company contributions                       |  |      | 750      |   |      |   | 2,170  |  
|Actual benefits paid                               |  |      | (438     | ) |      |   | (391   | )
|                                                   |  |      |          |   |      |   |        |  
|Fair value of plan assets, end of year             |  | $    | 11,373   |   |      | $ | 9,426  |  
|                                                   |  |      |          |   |      |   |        |  
|Funded Status and Prepaid (Accrued)                |  |      |          |   |      |   |        |  
|Funded status of plans                             |  | $    | (1,523   | ) |      | $ | (2,173 | )
|Unrecognized prior service cost                    |  |      | 39       |   |      |   | 50     |  
|Unrecognized net loss                              |  |      | 4,354    |   |      |   | 5,029  |  
|                                                   |  |      |          |   |      |   |        |  
|Prepaid pension cost                               |  | $    | 2,870    |   |      | $ | 2,906  |  
|                                                   |  |      |          |   |      |   |        |  
|Amounts Recognized in the Consolidated             |  |      |          |   |      |   |        |  
|Statement of Financial Position                    |  |      |          |   |      |   |        |  
|Prepaid pension cost                               |  | $    | 2,870    |   |      | $ | 2,906  |  
|                                                   |  |      |          |   |      |   |        |  
|Weighted-Average Assumptions Used to Determine     |  |      |          |   |      |   |        |  
|Benefit Obligations at April 30                    |  |      |          |   |      |   |        |  
|Discount rate                                      |  |      | 6.75     | % |      |   | 6.75   | %
|Rate of compensation increase                      |  |      | 3.5 6.5 | % |      |   | 5.0    | %
|                                                   |  |      |          |   |      |   |        |  
|WeightedAverage Assumptions Used to Determine Net |  |      |          |   |      |   |        |  
|Periodic Benefit Cost for Years Ended April 30     |  |      |          |   |      |   |        |  
|Discount rate                                      |  |      | 6.75     | % |      |   | 7.25   | %
|Expected long-term return on plan assets           |  |      | 9.00     | % |      |   | 9.00   | %
|Rate of compensation increase                      |  |      | 3.5 6.5 | % |      |   | 5.00   | %
|                                                   |  |      |          |   |      |   |        |  



22



---

As permitted under Paragraph 26 of FASB No. 87, the amortization of any prior service cost is determined using a
straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the plan.



The components of the net periodic pension costs for each of the three years ended April 30 are as follows:



|                                   |  |      |      |   |      |   |      |      |  |   |      |  
|---------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|$ in thousands                     |  | 2004 |      |   | 2003 |   |      | 2002 | 
|Service cost                       |  | $    | 483  |   |      | $ | 423  |      |  | $ | 378  |  
|Interest cost                      |  |      | 799  |   |      |   | 713  |      |  |   | 641  |  
|Expected return on plan assets     |  |      | (828 | ) |      |   | (709 | )    |  |   | (642 | )
|Amortization of prior service cost |  |      | 11   |   |      |   | 11   |      |  |   | 11   |  
|Recognition of net loss            |  |      | 321  |   |      |   | 159  |      |  |   | 69   |  
|                                   |  |      |      |   |      |   |      |      |  |   |      |  
|Net periodic pension cost          |  | $    | 786  |   |      | $ | 597  |      |  | $ | 457  |  
|                                   |  |      |      |   |      |   |      |      |  |   |      |  



The Companys funding policy is
to contribute to the plans when pension laws and economics either require or encourage funding. Contributions of $750,000, $2,170,000, and $1,353,000 were made to the plans in fiscal years 2004, 2003, and 2002, respectively.



The Company employs a building block approach in determining the long-term rate of return for
plan assets. Historical markets are studied and long-term historical relationships between equities and fixed-income securities are preserved consistent with the widely accepted capital market principle that assets with a higher volatility generate
a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The expected long-term portfolio return is established via a building block
approach with proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed to check for reasonability and appropriateness.



The Company employs a total return investment approach, whereby a mix of equities and fixed-income investments are used to maximize the
long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified
blend of equity and fixed-income investments. The target allocation was 70% in equity securities and 30% in fixed-income securities as of April 30, 2004. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as
growth, value, and small and large capitalizations.



The Companys plan
assets by asset categories as of April 30 are as follows:



|                          |  |      |   |  |      |  
|------------------------- |  | ---- | - |  | ---- | -
|Asset Category            |  | 2004 |   |  | 2003 |  
|Equity securities         |  | 69   | % |  | 70   | %
|Fixed income              |  | 16   | % |  | 29   | %
|Cash and cash equivalents |  | 15   | % |  | 1    | %



Defined Contribution Plan



The Company has a defined contribution plan covering substantially all
salaried and hourly employees. The plan provides benefits to all employees who have attained age 21, completed six months of service, and who elect to participate. The Company makes matching contributions equal to 50% of the qualifying employee
contribution, up to a maximum employer contribution of 2% of the participants compensation. Contributions by the Company in fiscal years 2004, 2003, and 2002 were $270,000, $280,000, and $277,000, respectively.



23



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF KEWAUNEE SCIENTIFIC CORPORATION



In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders equity and of cash flows present fairly, in all material respects, the financial position of Kewaunee Scientific Corporation and its subsidiaries (the Company) at April
30, 2004 and 2003 and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2004, in conformity with accounting principles generally accepted in the United States of America. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



PRICEWATERHOUSECOOPERS LLP

Charlotte, North Carolina

June 4, 2004



24



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MANAGEMENTS REPORT OF CONSOLIDATED FINANCIAL STATEMENTS



TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF KEWAUNEE SCIENTIFIC CORPORATION



The consolidated financial statements and accompanying notes were
prepared by management, which is responsible for their integrity and objectivity. Management believes the financial statements, which include amounts based on judgments and estimates, fairly reflect the Companys financial position and
operating results, in accordance with generally accepted accounting principles. All financial information in this annual report is consistent with the financial statements.



Management maintains internal accounting control systems and related policies and procedures designed to provide reasonable assurance that
assets are safeguarded, that transactions are properly recorded and executed in accordance with managements authorization, and that accounting records may be relied upon for the preparation of financial statements and other financial
information. The design, monitoring, and revision of internal accounting control systems involve, among other things, managements judgment with respect to the relative cost and expected benefits of specific control measures.



The Companys consolidated financial statements have been audited by independent
auditors who have expressed their opinion with respect to the fairness of those statements. Their audits included consideration of the Companys internal accounting control systems and related policies and procedures. They advise management and
the Audit Committee of significant matters resulting from their audits.



The
Audit Committee of the Board of Directors, which is composed solely of directors who are not officers or employees of the Company, selects the independent auditors for the annual audit of the consolidated financial statements and meets with
management and the independent auditors to discuss the scope and findings of audits and financial reporting and internal control matters.



D. Michael Parker

Senior Vice President, Finance

Chief Financial Officer



25



---

SUMMARY OF SELECTED FINANCIAL DATA



KEWAUNEE SCIENTIFIC CORPORATION



|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|--------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|$ and shares in thousands, except per share amounts |  | 2004 |        |   | 2003 |   |        | 2002 |  |   | 2001   |   |  | 2000 |       
|OPERATING STATEMENT DATA:                           |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net sales                                           |  | $    | 94,700 |   |      | $ | 71,163 |      |  | $ | 84,849 |   |  | $    | 77,059 |   |  | $ | 74,798 |  
|Costs of products sold                              |  |      | 79,011 |   |      |   | 58,451 |      |  |   | 70,143 |   |  |      | 62,543 |   |  |   | 57,715 |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Gross profit                                        |  |      | 15,689 |   |      |   | 12,712 |      |  |   | 14,706 |   |  |      | 14,516 |   |  |   | 17,083 |  
|Operating expenses                                  |  |      | 13,491 |   |      |   | 13,476 |      |  |   | 11,801 |   |  |      | 12,156 |   |  |   | 12,429 |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Operating earnings (loss)                           |  |      | 2,198  |   |      |   | (764   | )    |  |   | 2,905  |   |  |      | 2,360  |   |  |   | 4,654  |  
|Other (expense) income                              |  |      | 186    |   |      |   | 28     |      |  |   | (6     | ) |  |      | (276   | ) |  |   | 326    |  
|Interest expense                                    |  |      | (301   | ) |      |   | (155   | )    |  |   | (206   | ) |  |      | (246   | ) |  |   | (169   | )
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Earnings (loss) before income taxes                 |  |      | 2,083  |   |      |   | (891   | )    |  |   | 2,693  |   |  |      | 1,838  |   |  |   | 4,811  |  
|Income tax expense (benefit)                        |  |      | 621    |   |      |   | (549   | )    |  |   | 793    |   |  |      | 561    |   |  |   | 1,250  |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net earnings (loss)                                 |  | $    | 1,462  |   |      | $ | (342   | )    |  | $ | 1,900  |   |  | $    | 1,277  |   |  | $ | 3,561  |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Weighted average shares outstanding:                |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Basic                                               |  |      | 2,486  |   |      |   | 2,478  |      |  |   | 2,468  |   |  |      | 2,467  |   |  |   | 2,456  |  
|Diluted                                             |  |      | 2,497  |   |      |   | 2,485  |      |  |   | 2,481  |   |  |      | 2,490  |   |  |   | 2,478  |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|PER SHARE DATA:                                     |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net earnings (loss):                                |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Basic                                               |  | $    | 0.59   |   |      | $ | (0.14  | )    |  | $ | 0.77   |   |  | $    | 0.52   |   |  | $ | 1.45   |  
|Diluted                                             |  |      | 0.59   |   |      |   | (0.14  | )    |  |   | 0.77   |   |  |      | 0.51   |   |  |   | 1.44   |  
|Cash dividends                                      |  |      | 0.28   |   |      |   | 0.28   |      |  |   | 0.28   |   |  |      | 0.28   |   |  |   | 0.26   |  
|Year-end book value                                 |  |      | 10.77  |   |      |   | 10.46  |      |  |   | 10.90  |   |  |      | 10.42  |   |  |   | 10.19  |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|BALANCE SHEET DATA:                                 |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Current assets                                      |  | $    | 31,536 |   |      | $ | 24,986 |      |  | $ | 25,426 |   |  | $    | 24,658 |   |  | $ | 23,032 |  
|Current liabilities                                 |  |      | 18,919 |   |      |   | 13,328 |      |  |   | 10,609 |   |  |      | 9,973  |   |  |   | 11,560 |  
|Net working capital                                 |  |      | 12,617 |   |      |   | 11,658 |      |  |   | 14,817 |   |  |      | 14,685 |   |  |   | 11,472 |  
|Net property, plant and equipment                   |  |      | 11,362 |   |      |   | 11,791 |      |  |   | 12,811 |   |  |      | 12,919 |   |  |   | 13,506 |  
|Total assets                                        |  |      | 50,461 |   |      |   | 43,654 |      |  |   | 42,190 |   |  |      | 40,869 |   |  |   | 39,316 |  
|Total borrowings/long-term debt                     |  |      | 9,045  |   |      |   | 3,346  |      |  |   | 2,611  |   |  |      | 2,997  |   |  |   | 2,555  |  
|Stockholders' equity                                |  |      | 26,791 |   |      |   | 25,938 |      |  |   | 26,912 |   |  |      | 25,761 |   |  |   | 25,135 |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|OTHER DATA:                                         |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Capital expenditures                                |  | $    | 1,619  |   |      | $ | 3,143  |      |  | $ | 2,065  |   |  | $    | 1,678  |   |  | $ | 3,352  |  
|Year-end stockholders of record                     |  |      | 265    |   |      |   | 273    |      |  |   | 289    |   |  |      | 322    |   |  |   | 334    |  
|Year-end employees                                  |  |      | 533    |   |      |   | 543    |      |  |   | 535    |   |  |      | 556    |   |  |   | 577    |  
|                                                    |  |      |        |   |      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  



26



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QUARTERLY FINANCIAL DATA (UNAUDITED)



Selected quarterly financial data for fiscal years 2004 and 2003 were as follows:



|                                         |  |              |        |               |   |        |              |  |               |        |  |   |        |  
|---------------------------------------- |  | ------------ | ------ | ------------- | - | ------ | ------------ |  | ------------- | ------ |  | - | ------ | -
|$ in thousands, except per share
amounts |  | FirstQuarter |        | SecondQuarter |   |        | ThirdQuarter |  | FourthQuarter |       
|2004                                     |  |              |        |               |   |        |              |  |               |        |  |   |        |  
|Net sales                                |  | $            | 24,213 |               | $ | 24,384 |              |  | $             | 21,454 |  | $ | 24,649 |  
|Gross profit                             |  |              | 3,603  |               |   | 4,104  |              |  |               | 3,718  |  |   | 4,264  |  
|Net earnings                             |  |              | 461    |               |   | 418    |              |  |               | 291    |  |   | 292    |  
|Net earnings per share                   |  |              |        |               |   |        |              |  |               |        |  |   |        |  
|Basic                                    |  |              | 0.19   |               |   | 0.17   |              |  |               | 0.12   |  |   | 0.11   |  
|Diluted                                  |  |              | 0.19   |               |   | 0.17   |              |  |               | 0.12   |  |   | 0.11   |  
|Cash dividends per share                 |  |              | 0.07   |               |   | 0.07   |              |  |               | 0.07   |  |   | 0.07   |  
|                                         |  |              |        |               |   |        |              |  |               |        |  |   |        |  
|2003                                     |  |              |        |               |   |        |              |  |               |        |  |   |        |  
|Net sales                                |  | $            | 19,405 |               | $ | 19,905 |              |  | $             | 16,381 |  | $ | 15,472 |  
|Gross profit                             |  |              | 3,441  |               |   | 3,143  |              |  |               | 3,462  |  |   | 2,666  |  
|Net earnings (loss)                      |  |              | 324    |               |   | (124   | )            |  |               | 42     |  |   | (584   | )
|Net earnings (loss) per share            |  |              |        |               |   |        |              |  |               |        |  |   |        |  
|Basic                                    |  |              | 0.13   |               |   | (0.05  | )            |  |               | 0.02   |  |   | (0.24  | )
|Diluted                                  |  |              | 0.13   |               |   | (0.05  | )            |  |               | 0.02   |  |   | (0.24  | )
|Cash dividends per share                 |  |              | 0.07   |               |   | 0.07   |              |  |               | 0.07   |  |   | 0.07   |  
|                                         |  |              |        |               |   |        |              |  |               |        |  |   |        |  



RANGE OF MARKET PRICES



Kewaunee's common stock is traded in the NASDAQ National Market System,
under the symbol KEQU.

The following table sets forth the quarterly high and low prices reported on the NASDAQ National Market System.



|      |  |              |       |               |   |              |  |               |       |  |   |      
|----- |  | ------------ | ----- | ------------- | - | ------------ |  | ------------- | ----- |  | - | -----
|      |  | FirstQuarter |       | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|2004  |  |              |       |               |   |              |  |               |       |  |   |      
|High  |  | $            | 10.68 |               | $ | 10.26        |  | $             | 11.93 |  | $ | 14.14
|Low   |  | $            | 7.91  |               | $ | 9.51         |  | $             | 9.75  |  | $ | 10.18
|Close |  | $            | 10.03 |               | $ | 10.01        |  | $             | 11.88 |  | $ | 10.66
|      |  |              |       |               |   |              |  |               |       |  |   |      
|2003  |  |              |       |               |   |              |  |               |       |  |   |      
|High  |  | $            | 11.05 |               | $ | 9.72         |  | $             | 10.75 |  | $ | 9.89 
|Low   |  | $            | 8.50  |               | $ | 7.90         |  | $             | 8.70  |  | $ | 7.36 
|Close |  | $            | 8.98  |               | $ | 9.12         |  | $             | 9.71  |  | $ | 8.37 
|      |  |              |       |               |   |              |  |               |       |  |   |      



27



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CORPORATE INFORMATION



BOARD OF DIRECTORS



Margaret Barr Bruemmer(1)(3)(4)(5)

Attorney

Westport, WI



Wiley N. Caldwell(3)(4)

Retired President

W. W. Grainger, Inc.

Kenilworth, IL



John C. Campbell, Jr.(1)(2)(5)

Private Consultant

Arlington, TX



Silas Keehn(2)(3)(4)

Retired President

Federal Reserve Bank of
Chicago

Winnetka, IL



Eli Manchester, Jr.(1)(3)

Chairman of
the Board

Kewaunee Scientific Corporation

Statesville, NC



James T. Rhind(1)(2)(4)(5)

Counsel to Bell, Boyd & Lloyd LLC

Attorneys

Chicago, IL



William A. Shumaker(1)(3)

President/CEO

Kewaunee Scientific
Corporation

Statesville, NC



|(1) | Executive Committee
|--- | -------------------



|(2) | Audit Committee
|--- | ---------------



|(3) | Financial/Planning Committee
|--- | ----------------------------



|(4) | Compensation Committee
|--- | ----------------------



|(5) | Nominating Committee
|--- | --------------------



EXECUTIVE OFFICERS



William A.
Shumaker

President,

Chief
Executive Officer



D. Michael Parker

Senior Vice President, Finance,

Chief
Financial Officer,

Treasurer, Secretary



Dana L. Dahlgren

Vice President, Sales and Marketing

Laboratory Products Group



Kurt P. Rindoks

Vice President, Engineering

and Product Development



James J. Rossi

Vice President, Human Resources



Sudhir K. Vadehra

Vice President, International Operations



CORPORATE OFFICES



2700 West Front Street

Statesville, NC 28677-2927

P.O. Box 1842, Statesville, NC 28687-1842

Telephone: 704-873-7202

Facsimile: 704-873-1275



EMPLOYMENT OPPORTUNITIES



Individuals
interested in employment with Kewaunee Scientific Corporation should contact the Vice President of Human Resources, Kewaunee Scientific Corporation, P.O. Box 1842, Statesville, NC 28687-1842. Employment opportunities are also listed on the Internet
at http://www.kewaunee.com. Kewaunee Scientific Corporation is an equal opportunity employer.



28



---

STOCKHOLDER INFORMATION



Financial Information



The Companys Form 10-K financial report, filed annually with the Securities and Exchange Commission, may be obtained by stockholders without charge by writing the
Secretary of the Company, Kewaunee Scientific Corporation, P.O. Box 1842, Statesville, NC 28687-1842.



The Companys common stock is listed on the NASDAQ National Market System.



Trading symbol: KEQU



Recent financial information is available on the Internet at http://www.kewaunee.com.



Independent Registered Public Accounting Firm



PricewaterhouseCoopers LLP

Charlotte, NC



Notice of Annual Meeting



The Annual Meeting of Stockholders of Kewaunee Scientific Corporation will be held in the
37th floor Annual Meeting Room at Harris Trust & Savings Bank, Chicago, IL on August 25, 2004 at 10:00 a.m. Central Daylight Time.



Transfer Agent and Registrar



All stockholder inquiries, including transfer-related matters, should be directed to:

Mellon Investor Services, LLC

Overpeck Centre

85
Challenger Road

Ridgefield Park, NJ 07660

Telephone:
800-288-9541

Internet at http://www.melloninvestor.com



PRODUCT INFORMATION



Kewaunee Scientific Corporation products are available through a network of sales representatives, a national stocking distributor, and international subsidiaries.



For more information on the Companys laboratory furniture products, contact the
LPG-Marketing Services Department in Statesville, NC; telephone: 704-873-7202; on the Internet at http://www.kewaunee.com; e-mail: marketing@kewaunee.com.



For more information on the Companys technical furniture products, contact the TFG-Customer Service Department in Statesville, NC; telephone: 704-873-7202; on the
Internet at http://www.kewaunee.com; e-mail: marketing-tfg@kewaunee.com.



TRADEMARKS



ADJUSTAbench, Advantage, Alpha, BasikBench, CFHS,
Discovery, Evolution, Explorer, Kemresin, Kemrock, Kemshield, Kewaunee, Research Collection, Signature, Silhouette, Sturdilite, SturdiKwik, Supreme Air,



TechStat, Trademark, TruView, Versalab, and Visionaire are registered trademarks of Kewaunee Scientific Corporation.





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