KEWAUNEE SCIENTIFIC CORP /DE/KEQU

KEWAUNEE SCIENTIFIC CORP /DE/ Income Taxes Disclosure

10-KFiled Jun 26, 20265 min read
Income Taxes
Effective August 1, 2019, the Company elected to revoke the indefinite reinvestment of foreign unremitted earnings position set forth by ASC 740-30-25-17 for multiple foreign subsidiaries. As a result of this election, the Company recorded a tax withholding
expense imposed by the India Income Tax Department of $437,000 and $416,000 for the years ended April 30, 2026 and 2025, respectively.
The Company's accounting policy with respect to the Global Intangible Low-Taxed Income ("GILTI") tax rules is that GILTI will be treated as a periodic charge in the year in which it arises.
The domestic and foreign components of earnings before income taxes for the years ended April 30, 2026 and 2025, respectively, consisted of the following:
$ in thousands20262025
Earnings before income taxes
United States$6,812 $10,073 
Foreign6,921 4,712 
Total earnings before income tax expense$13,733 $14,785 
Income tax (benefit) expense for the years ended April 30, 2026 and 2025, respectively, consisted of the following:
$ in thousands20262025
Current tax (benefit) expense:
Federal$581 $3,042 
State and local471 610 
Foreign2,236 1,752 
Total current tax expense3,288 5,404 
Deferred tax (benefit) expense:
Federal77 (1,432)
State and local88 (650)
Foreign(185)(120)
Total deferred tax (benefit) expense
(20)(2,202)
Net income tax (benefit) expense
$3,268 $3,202 
The domestic and foreign components of the Company's income taxes paid, net of refunds received, for the years ended April 30, 2026 and 2025, respectively, consisted of the following:
$ in thousands20262025
United States federal$1,265 $1,849 
United States state457 556 
Foreign - India1,754 1,506 
Foreign - Other jurisdictions84 $61 
Total income taxes paid, net of refunds received3,560 $3,972 
The reasons for the differences between the net income tax (benefit) expense presented above and the amounts computed by applying the statutory federal income tax rate to earnings before income taxes for the years ended April 30, 2026 and 2025, respectively, are as follows:
$ in thousands20262025
Income tax expense at U.S. federal statutory rate$2,884 21.0 %$3,105 21.0 %
State and local taxes, net of federal income tax benefit(1)
460 3.3 %(168)(1.1)%
Foreign Tax Effects
India285 2.1 %190 1.3 %
Deferred taxes on unremitted foreign earnings ("APB 23")437 3.2 %416 2.8 %
Other foreign jurisdictions(95)(0.7)%(7)— %
Cross-border tax laws21 0.2 %6 — %
Tax credits(635)(4.6)%(515)(3.5)%
Increase (decrease) in valuation allowance5 — %7 — %
Nontaxable or nondeductible items
Non-deductible transaction costs— — %348 2.4 %
Other70 0.5 %61 0.4 %
Return to provision adjustment(130)(0.9)%(72)(0.5)%
Other items, net(34)(0.2)%(169)(1.1)%
Net income tax (benefit) expense
$3,268 23.8 %$3,202 21.7 %
(1)     In fiscal year 2026, state taxes in California, Minnesota, Texas, Michigan, and North Carolina made up the majority (greater than 50%) of the tax effect in this category.
Significant items comprising deferred tax assets and liabilities as of April 30 were as follows:
$ in thousands20262025
Deferred tax assets:
Accrued employee benefit expenses$449 $417 
Allowance for credit losses
160 151 
Deferred compensation1,925 1,345 
Tax credits (state, net of federal benefits)256 170 
Foreign tax credit carryforwards638 638 
Section 174 R&E
1,892 3,269 
Warranty Accrual
210 193 
Inventory reserves and capitalized costs593 478 
Net operating loss carryforwards169 147 
Proceeds on sale leaseback
6,431 6,550 
Operating lease liabilities2,076 2,372 
Other451 457 
Total deferred tax assets15,250 16,187 
Deferred tax liabilities:
Book basis in excess of tax basis of property, plant and equipment(2,969)(3,024)
Book basis in excess of tax basis of sale leaseback property
(1,108)(1,095)
Book basis in excess of tax basis of intangibles assets
(3,758)(4,005)
APB 23 Assertion(1,376)(1,507)
Right of use assets(2,229)(2,589)
Debt Issuance Cost on sale leaseback
(126)(138)
Total deferred tax liabilities(11,566)(12,358)
Valuation allowance(768)(933)
Net deferred tax assets$2,916 $2,896 
Deferred tax assets (liabilities) classified in the balance sheet:
Deferred tax assets, non-current
$3,829 $3,994 
Deferred tax liabilities, non-current
(913)(1,098)
Net deferred tax assets (liabilities)
$2,916 $2,896 
The Company is required to evaluate the realization of the deferred tax asset and any requirement for a valuation allowance in accordance with ASC 740-10-30-2(b). This guidance provides that the future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on sufficient taxable income of the appropriate character within the carryback or carryforward period available under the tax law. The Company evaluates all available evidence, both positive and negative, to determine the amount of any required valuation allowance. As of April 30, 2026, our deferred tax assets primarily related to proceeds on a prior sale leaseback, Section 174 research and expenditures, capitalization, deferred compensation, and operating lease liabilities. A valuation allowance of $768,000 and $933,000 was recorded against our net deferred tax asset balance as of April 30, 2026 and 2025, respectively. For the year ended April 30, 2026, the valuation allowance decreased by approximately $165,000, as compared to a net increase of $7,000 for the year ended April 30, 2025. The decrease was primarily attributable to the removal of the valuation allowance recorded for certain deferred tax assets related to state tax credits that were written off during the fiscal year, partially offset by approximately $5,000 of additional valuation allowance recorded during the year.
The Company files federal, state and local tax returns with statutes of limitation generally ranging from 3 to 4 years. The Company is generally no longer subject to federal tax examinations for years prior to fiscal year 2022 or state and local tax examinations for years prior to fiscal year 2021. Tax returns filed by the Company's significant foreign subsidiaries are generally subject to statutes of limitations of 3 to 7 years and are generally no longer subject to examination for years prior to fiscal year 2020. The Company has no unrecognized tax benefits.
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Historical Timeline

Fiscal YearFiled
2026Jun 26, 2026Showing above
2025Jul 2, 2025
2024Jun 28, 2024
2023Jun 30, 2023
2022Jul 1, 2022
2021Jul 15, 2021
2020Jul 27, 2020
2019Jul 11, 2019
2018Jul 20, 2018
2017Jul 21, 2017
2016Jul 21, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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