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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended January 31, 2004



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 0-5286



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KEWAUNEE SCIENTIFIC CORPORATION

(Exact name of registrant as specified in its charter)



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



(704) 873-7202

(Registrants telephone number, including area code)



---



Indicate by
check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



As of
March 12, 2004, the Registrant had outstanding 2,488,270 shares of Common Stock.



Pages: This report, excluding exhibits, contains 18 pages numbered sequentially from this cover page.



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##### Table of Contents

KEWAUNEE SCIENTIFIC CORPORATION



INDEX TO
FORM 10-Q



FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2004



|                               |  |                                                                                                               |  |                                                                                       |  |            
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | -----------
|                               |  |                                                                                                               |  |                                                                                       |  | Page Number
|                               |  |                                                                                                               | 
|PART I.                        |  |                                                                                                               |  | FINANCIAL INFORMATION                                                                 |  |            
|                               |  |                                                                                                               | 
|Item 1.                        |  |                                                                                                               |  | Financial Statements                                                                  |  |            
|                               |  |                                                                                                              
|                               |  | Condensed Consolidated Statements of Operations  Three months and nine monthsended January 31, 2004 and 2003 |  | 3                                                                                    
|                               |  |                                                                                                              
|                               |  | Condensed Consolidated Balance Sheets January 31, 2004 and April 30, 2003                                     |  | 4                                                                                    
|                               |  |                                                                                                              
|                               |  | Condensed Consolidated Statements of Cash Flows  Nine months ended January 31,2004 and 2003                  |  | 5                                                                                    
|                               |  |                                                                                                              
|                               |  | Notes to Condensed Consolidated Financial Statements                                                          |  | 6                                                                                    
|                               |  |                                                                                                               | 
|Item 2.                        |  |                                                                                                               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 10         
|                               | 
|Review by Independent Auditors |  | 14                                                                                                           
|                               | 
|Report by Independent Auditors |  | 15                                                                                                           
|                               |  |                                                                                                               | 
|Item 3.                        |  |                                                                                                               |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 16         
|                               |  |                                                                                                               | 
|Item 4.                        |  |                                                                                                               |  | Controls and Procedures                                                               |  | 16         
|                               |  |                                                                                                               | 
|PART II.                       |  |                                                                                                               |  | OTHER INFORMATION                                                                     |  |            
|                               |  |                                                                                                               | 
|Item 1.                        |  |                                                                                                               |  | Legal Proceedings                                                                     |  | 17         
|                               |  |                                                                                                               | 
|Item 6.                        |  |                                                                                                               |  | Exhibits and Reports on Form 8-K                                                      |  | 17         
|                               | 
|SIGNATURE                      |  | 18                                                                                                           



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##### Table of Contents

Part 1. Financial Information



Item 1. Financial Statements



Kewaunee Scientific Corporation

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                                     |  |                                         |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------- |  | --------------------------------------- | ------ | - | ---------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                     |  | Three months ended January 31           |        |   | Nine months ended January 31 |  
|                                                                     |  | 2004                                    |        |   | 2003                         |   |        | 2004 |  |   | 2003   |  
|                                                                     |  | ($ in thousands, except per share data) |       
|                                                                     |  |                                         |        |  
|Net sales                                                            |  | $                                       | 21,454 |   |                              | $ | 16,381 |      |  | $ | 70,051 |   |  | $ | 55,691 |  
|Cost of products sold                                                |  |                                         | 17,736 |   |                              |   | 12,919 |      |  |   | 58,626 |   |  |   | 45,645 |  
|                                                                     |  |                                         |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Gross profit                                                         |  |                                         | 3,718  |   |                              |   | 3,462  |      |  |   | 11,425 |   |  |   | 10,046 |  
|Operating expenses                                                   |  |                                         | 3,206  |   |                              |   | 3,361  |      |  |   | 9,528  |   |  |   | 9,621  |  
|                                                                     |  |                                         |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Operating earnings                                                   |  |                                         | 512    |   |                              |   | 101    |      |  |   | 1,897  |   |  |   | 425    |  
|Interest expense                                                     |  |                                         | (71    | ) |                              |   | (35    | )    |  |   | (232   | ) |  |   | (117   | )
|Other income (expense)                                               |  |                                         | 14     |   |                              |   | (24    | )    |  |   | 163    |   |  |   | 44     |  
|                                                                     |  |                                         |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Earnings before income taxes                                         |  |                                         | 455    |   |                              |   | 42     |      |  |   | 1,828  |   |  |   | 352    |  
|Income tax expense                                                   |  |                                         | 164    |   |                              |   |       |      |  |   | 658    |   |  |   | 110    |  
|                                                                     |  |                                         |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Net earnings                                                         |  | $                                       | 291    |   |                              | $ | 42     |      |  | $ | 1,170  |   |  | $ | 242    |  
|                                                                     |  |                                         |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Net earnings per share-                                              |  |                                         |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                                |  | $                                       | 0.12   |   |                              | $ | 0.02   |      |  | $ | 0.47   |   |  | $ | 0.10   |  
|Diluted                                                              |  | $                                       | 0.12   |   |                              | $ | 0.02   |      |  | $ | 0.47   |   |  | $ | 0.10   |  
|Weighted average number of common shares outstanding (in thousands)- |  |                                         |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                                |  |                                         | 2,486  |   |                              |   | 2,480  |      |  |   | 2,485  |   |  |   | 2,477  |  
|Diluted                                                              |  |                                         | 2,499  |   |                              |   | 2,487  |      |  |   | 2,493  |   |  |   | 2,486  |  



See accompanying notes to condensed
consolidated financial statements.



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##### Table of Contents

Kewaunee Scientific Corporation

Condensed Consolidated Balance Sheets

(in thousands)



|                                              |  |                 |         |   |               |   |         |  
|--------------------------------------------- |  | --------------- | ------- | - | ------------- | - | ------- | -
|                                              |  | January 31 2004 |         |   | April 30 2003 |  
|                                              |  | (Unaudited)     |         |   |               |  
|Assets                                        |  |                 |         |   |               |   |         |  
|Current assets:                               |  |                 |         |   |               |   |         |  
|Cash and cash equivalents                     |  | $               | 1,063   |   |               | $ | 520     |  
|Receivables, less allowance                   |  |                 | 22,657  |   |               |   | 16,138  |  
|Inventories                                   |  |                 | 4,585   |   |               |   | 5,958   |  
|Deferred income taxes                         |  |                 | 103     |   |               |   | 89      |  
|Prepaid income taxes                          |  |                 | 366     |   |               |   | 1,499   |  
|Prepaid expenses and other current assets     |  |                 | 749     |   |               |   | 782     |  
|                                              |  |                 |         |   |               |   |         |  
|Total current assets                          |  |                 | 29,523  |   |               |   | 24,986  |  
|                                              |  |                
|Property, plant and equipment, at cost        |  |                 | 33,236  |   |               |   | 31,926  |  
|Accumulated depreciation                      |  |                 | (21,678 | ) |               |   | (20,135 | )
|                                              |  |                 |         |   |               |   |         |  
|Net property, plant and equipment             |  |                 | 11,558  |   |               |   | 11,791  |  
|                                              |  |                 |         |   |               |   |         |  
|Other assets                                  |  |                 | 6,285   |   |               |   | 6,877   |  
|                                              |  |                 |         |   |               |   |         |  
|Total Assets                                  |  | $               | 47,366  |   |               | $ | 43,654  |  
|                                              |  |                 |         |   |               |   |         |  
|Liabilities and Stockholders Equity          |  |                 |         |   |               |   |         |  
|Current liabilities:                          |  |                 |         |   |               |   |         |  
|Short-term borrowings                         |  | $               | 6,084   |   |               | $ | 1,416   |  
|Current portion of long-term debt             |  |                 | 1,118   |   |               |   | 681     |  
|Accounts payable                              |  |                 | 5,477   |   |               |   | 8,338   |  
|Employee compensation and amounts withheld    |  |                 | 1,007   |   |               |   | 1,203   |  
|Deferred Revenue                              |  |                 | 1,738   |   |               |   | 856     |  
|Other accrued expenses                        |  |                 | 741     |   |               |   | 834     |  
|                                              |  |                 |         |   |               |   |         |  
|Total current liabilities                     |  |                 | 16,165  |   |               |   | 13,328  |  
|                                              |  |                
|Long-term debt                                |  |                 | 1,211   |   |               |   | 1,249   |  
|Deferred income taxes                         |  |                 | 1,151   |   |               |   | 1,150   |  
|Accrued employee benefit plan costs           |  |                 | 1,650   |   |               |   | 1,634   |  
|Other long-term liabilities                   |  |                 | 538     |   |               |   | 355     |  
|                                              |  |                 |         |   |               |   |         |  
|Total Liabilities                             |  |                 | 20,715  |   |               |   | 17,716  |  
|                                              |  |                
|Stockholders equity:                         |  |                 |         |   |               |   |         |  
|Common stock                                  |  |                 | 6,550   |   |               |   | 6,550   |  
|Additional paid-in-capital                    |  |                 | 134     |   |               |   | 145     |  
|Retained earnings                             |  |                 | 20,758  |   |               |   | 20,110  |  
|Accumulated other comprehensive income (loss) |  |                 | 33      |   |               |   | (9      | )
|Common stock in treasury, at cost             |  |                 | (824    | ) |               |   | (858    | )
|                                              |  |                 |         |   |               |   |         |  
|Total stockholders equity                    |  |                 | 26,651  |   |               |   | 25,938  |  
|                                              |  |                 |         |   |               |   |         |  
|Total Liabilities and Stockholders Equity    |  | $               | 47,366  |   |               | $ | 43,654  |  
|                                              |  |                 |         |   |               |   |         |  



See accompanying notes to condensed
consolidated financial statements.



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Kewaunee Scientific Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands )



|                                                                                |  |                             |        |   |      |   |        |  
|------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                |  | Nine months endedJanuary 31 |       
|                                                                                |  | 2004                        |        |   | 2003 |  
|Cash flows from operating activities:                                           |  |                             |        |   |      |   |        |  
|Net earnings                                                                    |  | $                           | 1,170  |   |      | $ | 242    |  
|Adjustments to reconcile net earnings to net cash used in operating activities: |  |                             |        |   |      |   |        |  
|Depreciation                                                                    |  |                             | 1,543  |   |      |   | 1,898  |  
|Provision for bad debts                                                         |  |                             | 62     |   |      |   | 223    |  
|Decrease in prepaid income taxes                                                |  |                             | 1,133  |   |      |   | 180    |  
|Increase in receivables                                                         |  |                             | (6,581 | ) |      |   | (275   | )
|Decrease in inventories                                                         |  |                             | 1,373  |   |      |   | 194    |  
|Decrease in accounts payable and other current liabilities                      |  |                             | (3,150 | ) |      |   | (2,491 | )
|Increase in deferred revenue                                                    |  |                             | 882    |   |      |   | 211    |  
|Other, net                                                                      |  |                             | 853    |   |      |   | 234    |  
|                                                                                |  |                             |        |   |      |   |        |  
|Net cash (used in) provided by operating activities                             |  |                             | (2,715 | ) |      |   | 416    |  
|                                                                                |  |                             |        |   |      |   |        |  
|Cash flows from investing activities:                                           |  |                             |        |   |      |   |        |  
|Capital expenditures                                                            |  |                             | (1,310 | ) |      |   | (3,212 | )
|Proceeds from sale of fixed assets                                              |  |                             |       |   |      |   | 366    |  
|                                                                                |  |                             |        |   |      |   |        |  
|Net cash used in investing activities                                           |  |                             | (1,310 | ) |      |   | (2,846 | )
|                                                                                |  |                             |        |   |      |   |        |  
|Cash flows from financing activities:                                           |  |                             |        |   |      |   |        |  
|Increase in short-term borrowings                                               |  |                             | 4,668  |   |      |   | 2,275  |  
|Proceeds from long-term debt                                                    |  |                             | 1,200  |   |      |   |       |  
|Payments on long-term debt                                                      |  |                             | (801   | ) |      |   | (511   | )
|Dividends paid                                                                  |  |                             | (522   | ) |      |   | (520   | )
|Proceeds from exercise of stock options (including tax benefit)                 |  |                             | 23     |   |      |   | 50     |  
|Purchase of treasury stock                                                      |  |                             |       |   |      |   |       |  
|                                                                                |  |                             |        |   |      |   |        |  
|Net cash provided by financing activities                                       |  |                             | 4,568  |   |      |   | 1,294  |  
|                                                                                |  |                             |        |   |      |   |        |  
|Increase (decrease) in cash and cash equivalents                                |  |                             | 543    |   |      |   | (1,136 | )
|                                                                                |  |                            
|Cash and cash equivalents, beginning of period                                  |  |                             | 520    |   |      |   | 1,747  |  
|                                                                                |  |                             |        |   |      |   |        |  
|Cash and cash equivalents, end of period                                        |  | $                           | 1,063  |   |      | $ | 611    |  
|                                                                                |  |                             |        |   |      |   |        |  



See accompanying notes to condensed
consolidated financial statements.



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##### Table of Contents

Kewaunee Scientific Corporation

Notes to Condensed Financial Statements

(unaudited)



A. Financial Information



The unaudited interim condensed consolidated financial statements of Kewaunee Scientific Corporation (the Company or Kewaunee) have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission (the Commission). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted. These interim condensed financial statements should be read in conjunction with the financial statements and notes included in the Companys 2003
Annual Report to Stockholders.



The preparation of the financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.



In the opinion of management, the interim condensed consolidated financial
statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the interim periods. The results of operations for the interim periods are not necessarily indicative of the results of
operations to be expected for the full year.



B. Inventories



Inventories consisted of the following (in
thousands):



|                  |  |               |       |                |   |      
|----------------- |  | ------------- | ----- | -------------- | - | -----
|                  |  | Jan. 31, 2004 |       | April 30, 2003
|Finished products |  | $             | 1,906 |                | $ | 2,402
|Work in process   |  |               | 1,178 |                |   | 1,812
|Raw materials     |  |               | 1,501 |                |   | 1,744
|                  |  |               |       |                |   |      
|                  |  | $             | 4,585 |                | $ | 5,958
|                  |  |               |       |                |   |      



C.
Balance Sheet



The Companys April 30, 2003 condensed consolidated
balance sheet as presented herein is derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles.



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D. Segment Information



The following table shows net sales and earnings (loss) before income taxes by business
segment for three months and nine months ended January 31, 2004 and 2003 (in thousands):



|                                    |  |                     |        |                    |   |       |           |  |   |        |   |  |   |       
|----------------------------------- |  | ------------------- | ------ | ------------------ | - | ----- | --------- |  | - | ------ | - |  | - | ------
|                                    |  | Laboratory Products |        | Technical Products |   |       | Corporate |  |   | Total 
|Three months ended January 31, 2004 |  |                     |        |                    |   |       |           |  |   |        |   |  |   |       
|Revenues from external customers    |  | $                   | 20,508 |                    | $ | 946   |           |  | $ |       |   |  | $ | 21,454
|Intersegment revenues               |  |                     | 542    |                    |   |      |           |  |   | (542   | ) |  |   |      
|Segment profit (loss)               |  |                     | 773    |                    |   | (36   | )         |  |   | (282   | ) |  |   | 455   
|Segment Assets                      |  |                     | 42,530 |                    |   |      |           |  |   | 4,836  |   |  |   | 47,366
|                                    |  |                     |        |                   
|Three months ended January 31, 2003 |  |                     |        |                    |   |       |           |  |   |        |   |  |   |       
|Revenues from external customers    |  | $                   | 15,370 |                    | $ | 1,011 |           |  | $ |       |   |  | $ | 16,381
|Intersegment revenues               |  |                     | 173    |                    |   |      |           |  |   | (173   | ) |  |   |      
|Segment profit (loss)               |  |                     | 852    |                    |   | (251  | )         |  |   | (559   | ) |  |   | 42    
|Segment Assets                      |  |                     | 39,548 |                    |   |      |           |  |   | 1,977  |   |  |   | 41,525
|                                    |  |                     |        |                   
|Nine months ended January 31, 2004  |  |                     |        |                    |   |       |           |  |   |        |   |  |   |       
|Revenues from external customers    |  | $                   | 65,850 |                    | $ | 4,201 |           |  | $ |       |   |  | $ | 70,051
|Intersegment revenues               |  |                     | 1,961  |                    |   |      |           |  |   | (1,961 | ) |  |   |      
|Segment profit (loss)               |  |                     | 2,380  |                    |   | 87    |           |  |   | (639   | ) |  |   | 1,828 
|Segment Assets                      |  |                     | 42,530 |                    |   |      |           |  |   | 4,836  |   |  |   | 47,366
|                                    |  |                     |        |                   
|Nine months ended January 31, 2003  |  |                     |        |                    |   |       |           |  |   |        |   |  |   |       
|Revenues from external customers    |  | $                   | 51,649 |                    | $ | 4,042 |           |  | $ |       |   |  | $ | 55,691
|Intersegment revenues               |  |                     | 518    |                    |   |      |           |  |   | (518   | ) |  |   |      
|Segment profit (loss)               |  |                     | 1,975  |                    |   | (295  | )         |  |   | (1,328 | ) |  |   | 352   
|Segment Assets                      |  |                     | 39,548 |                    |   |      |           |  |   | 1,977  |   |  |   | 41,525



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E. Comprehensive Income



A reconciliation of net earnings and total comprehensive income for the three months and
nine months ended January 31, 2004 and 2003 is as follows (in thousands):



|                                                              |  |                                    |       |   |                                    |   |     |  
|------------------------------------------------------------- |  | ---------------------------------- | ----- | - | ---------------------------------- | - | --- | -
|                                                              |  | Three months endedJanuary 31, 2004 |       |   | Three months endedJanuary 31, 2003 |  
|Net earnings                                                  |  | $                                  | 291   |   |                                    | $ | 42  |  
|Change in fair value of cash flow hedge, net of income tax    |  |                                    | (12   | ) |                                    |   | 2   |  
|Change in cumulative foreign currency translation adjustments |  |                                    | 12    |   |                                    |   | 12  |  
|                                                              |  |                                    |       |   |                                    |   |     |  
|Total comprehensive income                                    |  | $                                  | 291   |   |                                    | $ | 56  |  
|                                                              |  |                                   
|                                                              |  | Nine months endedJanuary 31, 2004  |       |   | Nine months endedJanuary 31, 2003  |  
|Net earnings                                                  |  | $                                  | 1,170 |   |                                    | $ | 242 |  
|Change in fair value of cash flow hedge, net of income tax    |  |                                    | (3    | ) |                                    |   | (35 | )
|Change in cumulative foreign currency translation adjustments |  |                                    | 45    |   |                                    |   | 30  |  
|                                                              |  |                                    |       |   |                                    |   |     |  
|Total comprehensive income                                    |  | $                                  | 1,212 |   |                                    | $ | 237 |  



SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, 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 had one interest rate swap agreement outstanding at January 31, 2004. The Company pays a
fixed rate of interest of 6.37% and receives payment based on a variable rate of interest (currently 2.893%) based on a notional amount of $815,000.



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.



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F. Commitments and Contingencies



The Company is involved in a legal dispute with Bernards Bros. Inc., a former customer of
the Company. The dispute was the subject of lengthy arbitration proceedings completed in December 2000. In June 2003, a judgment was entered in the case against the Company and two other defendants identifying the responsibility for the payment of
the Arbitrators award. The Company believes that its ultimate liability regarding this matter ranges from $100,000 to $250,000. At January 31, 2004, the Company had an accrual of $134,000 for final settlement of this matter, unchanged from
April 30, 2003.



G. Stock Options



The 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 Financial Accounting Standards Board (FASB) Statement No. 123, Accounting for Stock-Based Compensation, net earnings and net earnings per share would have been reduced to the
following pro forma amounts (in thousands, except per share data):



|                                 |  |                                     |       |   |                                     |   |      |  
|-------------------------------- |  | ----------------------------------- | ----- | - | ----------------------------------- | - | ---- | -
|                                 |  | Three months ended January 31, 2004 |       |   | Three months ended January 31, 2003 |  
|Net earnings as reported         |  | $                                   | 291   |   |                                     | $ | 42   |  
|Pro forma compensation cost      |  |                                     | (20   | ) |                                     |   | (27  | )
|Net earnings pro forma           |  |                                     | 271   |   |                                     |   | 15   |  
|                                 |  |                                    
|Net earnings per share  Basic   |  |                                     |       |   |                                     |   |      |  
|As reported                      |  | $                                   | 0.12  |   |                                     | $ | 0.02 |  
|Pro forma                        |  |                                     | 0.11  |   |                                     |   | 0.01 |  
|                                 |  |                                    
|Net earnings per share  Diluted |  |                                     |       |   |                                     |   |      |  
|As reported                      |  | $                                   | 0.12  |   |                                     | $ | 0.02 |  
|Pro forma                        |  |                                     | 0.11  |   |                                     |   | 0.01 |  
|                                 |  |                                    
|                                 |  | Nine months ended January 31, 2004  |       |   | Nine months ended January 31, 2003  |  
|Net earnings as reported         |  | $                                   | 1,170 |   |                                     | $ | 242  |  
|Pro forma compensation cost      |  |                                     | (60   | ) |                                     |   | (81  | )
|Net earnings pro forma           |  |                                     | 1,110 |   |                                     |   | 161  |  
|                                 |  |                                    
|Net earnings per share  Basic   |  |                                     |       |   |                                     |   |      |  
|As reported                      |  | $                                   | 0.47  |   |                                     | $ | 0.10 |  
|Pro forma                        |  |                                     | 0.45  |   |                                     |   | 0.06 |  
|                                 |  |                                    
|Net earnings per share  Diluted |  |                                     |       |   |                                     |   |      |  
|As reported                      |  | $                                   | 0.47  |   |                                     | $ | 0.10 |  
|Pro forma                        |  |                                     | 0.45  |   |                                     |   | 0.06 |  



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



The Companys 2003 Annual Report to Stockholders contains managements discussion and analysis of financial condition and results of operations at and for the
year ended April 30, 2003. The following discussion and analysis describes material changes in the Companys financial condition since April 30, 2003. The analysis of results of operations compares the three months and nine months ended January
31, 2004 with the comparable periods of the prior fiscal year.



Results of Operations



The Company
recorded sales of $21.5 million for the three months ended January 31, 2004, up 31.0% from sales of $16.4 million for the comparable period of the prior year. Sales for the nine months ended January 31, 2004 were $70.1 million, up 25.8% from sales
of $55.7 million in the comparable period of the prior year. Sales for the three months and nine months of the current year benefited from a strong order backlog and increased activity in the marketplace for laboratory products. The order backlog
was $42.5 million at January 31, 2004, as compared to $46.3 million at October 31, 2003 and $51.5 million at April 30, 2003.



Sales of laboratory products increased 33.4% and 27.5% during the three months and nine months ended January 31, 2004, respectively, over the same periods last year.
Sales of technical products declined 6.4% and increased 3.9% during the three months and nine months ended January 31, 2004, respectively, as compared to the same periods last year.



The gross profit margin for the quarter ended January 31, 2004 was 17.3% of sales, as compared to 21.1% of sales in the same quarter of the
prior year. The gross profit margin for the nine months ended January 31, 2004 was 16.3% of sales, as compared to 18.0% of sales in the same period of the prior year. The gross profit margin for the current quarter and nine months of the current
year were adversely affected by continued aggressive pricing in the marketplace. The product sales mix for the fourth quarter of the current year is expected to be improved as compared to the third quarter, but remain unfavorable compared to the
sales mix in the same period last year. The gross profit margin for the current quarter was also adversely affected by an unfavorable product sales mix. The gross profit margin for the nine months ended January 31, 2003 was adversely affected by
$550,000 in charges associated with the relocation of the Companys technical products business and write-down of related inventories.



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Operating expenses for the three months ended January 31, 2004 were $3.2 million, or 14.9% of sales, as compared to $3.4
million, or 20.5% of sales, in the same period of the prior year. Operating expenses for the nine months ended January 31, 2004 were $9.5 million, or 13.6% of sales, as compared to $9.6 million, or 17.3% of sales, in the same period of the prior
year. Operating expenses for the three and nine month periods ended January 31, 2003 included charges of $262,000 and $441,000, respectively, associated with the relocation of the Companys technical products business. The improved ratio of
expenses to sales in the current year, after excluding the non-recurring charges in the prior year periods, occurred as the dollar levels of operating expenses remained relatively flat, while sales increased.



Operating earnings of $512,000 and $1.9 million were recorded for the three months and nine
months ended January 31, 2004, respectively. This compares to operating earnings of $101,000 and $425,000 for the comparable periods of the prior year.



Interest expense was $71,000 and $232,000 for the three months and nine months ended January 31, 2004, respectively, compared to $35,000 and $117,000 for the same periods
of the prior year. The increase in interest expense for the current quarter and year resulted from higher levels of borrowings.



Other income was $14,000 and $163,000, in the three months and nine months ended January 31, 2004, respectively, compared to other expense of $24,000 and other income of
$44,000 for the comparable periods of the prior year. Other income for the nine months ended January 31, 2004 included $295,000 resulting from the resolution of a disputed claim for laboratory furniture sold by the Company several years ago.



Income tax expenses of $164,000 and $658,000 were recorded for the three
months and nine months ended January 31, 2004. This compares to income tax expense of $-0- and $110,000 recorded for the three and nine months ended January 31, 2003, respectively. The effective tax rate was approximately 36.0% for quarter and nine
months ended January 31, 2004 and was 31.3% for the nine months ended January 31, 2003.



Net earnings of $291,000 and $1,170,000, or $.12 per diluted share and $.47 per diluted share, were recorded for the three months and nine months ended January 31, 2004, respectively. This compares to net earnings of $42,000 and $242,000,
or $.02 per diluted share and $.10 per diluted share, respectively, for the comparable periods of the prior year.



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New Accounting Pronouncements



In December 2003, the FASB issued a revised SFAS No. 132, Employers Disclosures
about Pensions and Other Postretirement Benefits. The revised SFAS No. 132 revised employers disclosures about pension plans and other postretirement benefit plans. It did not change the measurement or recognition of those plans required
by SFAS No. 87, Employers Accounting for Pensions, SFAS No. 88, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination on Benefits, and SFAS No. 106,
Employers Accounting for Postretirement Benefits Other than Pensions. The revised SFAS No. 132 retains the disclosure requirements contained in the original SFAS No. 132. It requires additional disclosures to those in the original
SFAS No. 132 about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. The adoption of this new standard did not have an impact on the Companys
financial position, results of operations or cash flows.



Liquidity and Capital Resources



Historically, the Companys principal sources of liquidity have been funds generated from operations, supplemented as needed by short-term borrowings.



The Company believes that these sources, will be sufficient to support ongoing business levels, including capital expenditures through the
current fiscal year.



The Company had working capital of $13.4 million at
January 31, 2004, as compared to $11.7 million at April 30, 2003. The ratio of current assets to current liabilities was 1.8to1 at January 31, 2004, as compared to 1.9to1 at April 30, 2003. At January 31, 2004, advances of
$6,084,000 were outstanding under the Companys revolving credit loan.



The Companys operations used cash of $2,715,000 during the nine months ended January 31, 2004, primarily attributable to an increase in accounts receivable and a decrease in accounts payable, partially offset by the impact of
decreases in prepaid income taxes and inventories. The Companys operations provided cash of $416,000 during nine months ended January 31, 2003, primarily attributable to operating earnings before depreciation, partially offset by decreases in
accounts payable and other current liabilities.



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During the nine months ended January 31, 2004, the Company used cash of $1,310,000 in investing activities, primarily for
purchases of production equipment. This compares to the use of $2,846,000 for similar investing activities in the same period of the prior year.



Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995



Certain statements in this report 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 or as any admission regarding the adequacy of disclosures made by the Company prior to the effective date
of the Reform Act. 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.



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REVIEW BY INDEPENDENT AUDITORS



A review of the
interim financial information included in this Quarterly Report on Form 10-Q for the three months and nine months ended January 31, 2004 has been performed by PricewaterhouseCoopers LLP, the Companys independent auditors. Their report on the
interim financial information follows.



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##### Table of Contents

REPORT OF INDEPENDENT AUDITORS



To the Board of
Directors and Stockholders of

Kewaunee Scientific Corporation

Statesville, North Carolina



We have reviewed the accompanying
condensed consolidated balance sheet of Kewaunee Scientific Corporation as of January 31, 2004 and April 30, 2003, and the related condensed consolidated statements of operations for each of the three and nine-month periods ended January 31, 2004
and January 31, 2003 and the condensed consolidated statement of cash flows for the nine-month periods ended January 31, 2004 and January 31, 2003. These financial statements are the responsibility of the Companys management.



We conducted our review in accordance with standards established by the American Institute of
Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an
opinion.



Based on our review, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated interim financial information for them to be in conformity with accounting principles generally accepted in the United States of America.



We previously audited in accordance with auditing standards generally accepted in the United
States of America, the consolidated balance sheet as of April 30, 2003, and the related consolidated statements of operations, of stockholders equity, and of cash flows for the year then ended (not presented herein), and in our report dated
June 4, 2003 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of April 30, 2003 is fairly stated in all material
respects in relation to the consolidated balance sheet from which it has been derived.



PricewaterhouseCoopers LLP

Charlotte, North Carolina

February 23, 2004



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##### Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk



There are no material changes to the disclosures made on this matter in the Companys Annual Report on Form 10-K for the fiscal year ended April 30, 2003.



Item 4. Controls and Procedures



(a)
Evaluation of disclosure controls and procedures



An evaluation
was performed under the supervision and the participation of the companys management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of
the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of January 31, 2004. Based on that evaluation, the Companys management, including the
CEO and CFO, concluded that, as of January 31, 2004, the Companys disclosure controls and procedures were adequate and effective and designed to ensure that all material information required to be filed in this quarterly report is made known
to them by others within the Company and its subsidiaries.



(b)
Changes in internal controls



There were no significant changes
in the Companys internal controls or in other factors that could significantly affect these controls subsequent to January 31, 2004. As no significant deficiencies or material weaknesses were found, no corrective actions were taken.



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##### Table of Contents

PART II. OTHER INFORMATION



Item 1. Legal Proceedings



The
Company is involved in a legal dispute with Bernards Bros. Inc., a former customer of the Company. The dispute was the subject of lengthy arbitration proceedings completed in December 2000. In June 2003, a judgment was entered in the case against
the Company and two other defendants identifying the responsibility for the payment of the Arbitrators award. The Company believes that its ultimate liability regarding this matter ranges from $100,000 to $250,000. At January 31, 2004, the
Company had an accrual of $134,000 for final settlement of this matter, unchanged from April 30, 2003.



Item 6. Exhibits and Reports on Form 8-K



(a) Exhibits



| | 31.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------



(b) Reports on Form 8-K



A Form 8-K was filed on November 21, 2003, with the Commission which
included as an exhibit the Companys Press Release announcing the financial results for the three months and six months ended October 31, 2003.



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SIGNATURE



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



KEWAUNEE SCIENTIFIC CORPORATION(Registrant)




|                     |  |    |  |                                   
|-------------------- |  | -- |  | ----------------------------------
|Date: March 16, 2004 |  | By |  | /s/ D. Michael Parker             
|                     |  |    |  | D. Michael Parker                 
|                     |  |    |  | Senior Vice President, Finance and
|                     |  |    |  | Chief Financial Officer           



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