KII LIQUIDATING INC 
By Katy also reported a net loss for the year ended
During the fourth quarter of 2008, Katy reported restructuring and other non-recurring or unusual items of
For the year ended
Financial highlights for the fourth quarter of 2008, as compared to the same period in the prior year, included:
-- Net sales in the fourth quarter of 2008 were $36.6 million, a decrease
of $6.4 million compared to the same period in 2007. Overall, the
decrease of 14.9% resulted primarily from lower volumes within our
Contico, Continental and Glit business units. Within the Contico
business unit, which sells primarily to mass merchant customers, the
volume decline was partially due to our decision to exit certain
unprofitable business lines in the face of rising resin costs earlier in
the year.
-- Gross margin was 8.1% in the fourth quarter of 2008, versus 5.8% in the
fourth quarter of 2007. The increase in gross margin occurred as a
result of a $2.2 million favorable variance in our LIFO adjustment.
-- Selling, general and administrative expenses were $1.6 million higher in
the fourth quarter of 2008 than in the fourth quarter of 2007. The
increase was primarily driven by higher costs associated with the
Company's self-insurance programs along with costs related to the
Company's plan to deregister its common stock under the Securities
Exchange Act of 1934, as amended, which has subsequently been abandoned.
-- Debt at December 31, 2008 was $17.5 million [48% of total
capitalization], versus $13.5 million [27% of total capitalization] at
December 31, 2007.
-- Katy used free cash flow of $12.4 million during the year ended December
31, 2008 versus using $14.5 million of free cash flow during the year
ended December 31, 2007. The decrease in free cash flow usage from 2007
to 2008 was primarily a result of lower accounts receivable and
inventory levels due to reduced volume. Free cash flow, a non-GAAP
financial measure, is discussed further below.
"The fourth quarter results were representative of the overall economic decline and the continued softness in our markets," said
Non-GAAP Financial Measures
To provide transparency about measures of Katy's financial performance which management considers most relevant, we supplement the reporting of Katy's consolidated financial information under GAAP with certain non-GAAP financial measures, including Net Income (Loss), as adjusted, Net Income (Loss), as adjusted per share, Operating Income (Loss) and Operating Income (Loss) as adjusted, as a percentage of net sales, and Free Cash Flow. Details regarding these measures and reconciliations of these non-GAAP measures to comparable GAAP measures are provided in the "Reconciliations of GAAP Results to Results Excluding Certain Unusual Items" and "Statements of Cash Flows" accompanying this press release. These non-GAAP financial measures should be considered in addition to, and not as a substitute or superior to, the other measures of financial performance prepared in accordance with GAAP. Using only the non-GAAP financial measures to analyze our performance would have material limitations because their calculation is based on the subjective determinations of management regarding the nature and classification of events and circumstances that investors may find material. Management compensates for these limitations by utilizing both the GAAP and non-GAAP measures reflected below to understand and analyze the results of its business. Katy believes the presentation of these measures is nonetheless useful to investors for the following reasons:
Net Income (Loss), as adjusted, Net Income (Loss), as adjusted per share, Operating Income (Loss) and Operating Income (Loss) as adjusted, as a percentage of net sales: All of these non-GAAP operating measurements adjust the corresponding GAAP measurement to exclude restructuring and other non-recurring and unusual items, including activity from discontinued operations, and to reflect a more normalized effective tax rate. Following the recapitalization of the company in 2001, a comprehensive restructuring program became essential to the future viability of Katy. All other non-recurring and unusual items are typically indicative of non-cash impacts to Katy's results of operations. Management believes that these non-GAAP measures provide useful information to investors because they are more indicative of the Company's underlying business performance and that eliminating restructuring and other non-recurring and unusual charges provides more meaningful year-to-year comparison of the Company's operations.
Free Cash Flow: Free cash flow is defined by Katy as cash flow from operations less capital expenditures and cash dividends paid. Katy believes that free cash flow is useful to management and investors in measuring cash generated that is available for repayment of debt obligations, investment in growth through acquisitions, new business development and stock repurchases.
This press release may contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements may be identified by such words of phrases as "should", "intends", "is subject to", "expects", "will", "continue", "anticipate", "estimated", "projected", "may", "we believe", "future prospects", or similar expressions. The forward-looking statements are based on the opinions and beliefs of Katy's management, as well as assumptions made by, and information currently available to, the company's management. Additionally, the forward-looking statements are based on Katy's current expectations and projections about future events and trends affecting the financial condition of its business. The forward-looking statements are subject to risks and uncertainties that may lead to results that differ materially from those expressed in any forward-looking statement made by the company or on its behalf. These risks and uncertainties include, without limitation, conditions in the general economy and in the markets served by the Company, including changes in the demand for our products; success of any restructuring or cost control efforts; an increase in interest rates; competitive factors, such as price pressures and the potential emergence of rival technologies; interruptions of suppliers' operations or other causes affecting availability of component materials or finished goods at reasonable prices; changes in product mix, costs and yields; labor issues at our facilities or those of our suppliers; legal claims or other regulator actions; and other risks identified from time to time in the Company's filings with the SEC, including its Report on Form 10-K for the year ended
Katy Industries, Inc. is a diversified corporation focused on the manufacturing and distribution of commercial cleaning products and consumer home products.
Company contact:
Katy Industries, Inc.
James W. Shaffer
(314) 656-4321
KATY INDUSTRIES, INC. SUMMARY OF OPERATIONS - UNAUDITED
(In thousands, except per share data)
Three Months Year Ended
Ended December 31, December 31,
--------------- --------------
2008 2007 2008 2007
---- ---- ---- ----
Net sales $36,613 $43,039 $167,802 $187,771
Cost of goods sold 33,653 40,560 155,678 167,517
------ ------ ------- -------
Gross profit 2,960 2,479 12,124 20,254
Selling, general and
administrative expenses 6,574 5,003 28,944 25,985
Severance, restructuring and
related charges 50 (75) (360) 2,581
Loss on sale or disposal of
assets 233 907 995 2,434
--- --- --- -----
Operating loss (3,897) (3,356) (17,455) (10,746)
Equity in income of equity
method investment - 783 - 783
Interest expense (389) (1,400) (1,686) (4,565)
Other, net 433 56 467 (72)
--- -- --- ---
Loss from continuing
operations before income
tax (provision) benefit (3,853) (3,917) (18,674) (14,600)
Income tax (provision)
benefit from continuing
operations (1,349) 1,370 (127) 719
------ ----- ---- ---
Loss from continuing
operations (5,202) (2,547) (18,801) (13,881)
Income from operations of
discontinued businesses
(net of tax) 1,322 2,523 584 2,259
Gain on sale of discontinued
businesses (net of tax) - 1,304 1,735 10,121
--- ----- ----- ------
Net (loss) income $(3,880) $1,280 $(16,482) $(1,501)
======= ====== ======== =======
(Loss) earnings per share
of common stock -basic
and diluted:
Loss from continuing
operations $(0.65) $(0.32) $(2.36) $(1.75)
Discontinued operations 0.16 0.48 0.29 1.56
---- ---- ---- ----
Net (loss) income $(0.49) $0.16 $(2.07) $(0.19)
====== ===== ====== ======
Weighted average common
shares outstanding -basic
and diluted 7,951 7,951 7,951 7,951
===== ===== ===== =====
December 31, December 31,
Other Information: 2008 2007
---- ----
Working capital, exclusive of deferred tax
assets and liabilities and debt classified
as current $8,030 $15,622
====== =======
Long-term debt, including current maturities $17,546 $13,453
======= =======
Stockholders' equity $19,293 $36,456
======= =======
Capital expenditures $7,535 $4,403
====== ======
KATY INDUSTRIES, INC. RECONCILIATIONS OF GAAP RESULTS
TO RESULTS EXCLUDING CERTAIN UNUSUAL ITEMS - UNAUDITED
(In thousands, except percentages and per share data)
Three Months Ended Year Ended
December 31, December 31,
--------------- -------------
2008 2007 2008 2007
---- ---- ---- ----
Reconciliation of net (loss)
income to net loss, as
adjusted:
Net (loss) income $(3,880) $1,280 $(16,482) $(1,501)
Unusual items:
Severance, restructuring and
related charges 50 (75) (360) 2,581
Loss on sale or disposal
of assets 233 907 995 2,434
Equity in income of equity
method investment - (783) - (783)
Discontinued operations (1,322) (3,827) (2,319) (12,380)
Adjustment to reflect a more
normalized effective tax rate 2,706 100 6,982 3,221
----- --- ----- -----
Net loss, as adjusted $(2,213) $(2,398) $(11,184) $(6,428)
======= ======= ======== =======
Net loss, as adjusted per share:
Net (loss) income per share $(0.49) $0.16 $(2.07) $(0.19)
Unusual items per share (0.13) (0.47) (0.21) (1.02)
Adjustment to reflect a more
normalized effective tax rate 0.34 0.01 0.87 0.40
---- ---- ---- ----
Net loss, as adjusted per share $(0.28) $(0.30) $(1.41) $(0.81)
====== ====== ====== ======
Weighted average common shares
outstanding:
Basic and diluted 7,951 7,951 7,951 7,951
===== ===== ===== =====
Operating loss, as adjusted:
Operating loss $(3,897) $(3,356) $(17,455) $(10,746)
Severance, restructuring and
related charges 50 (75) (360) 2,581
Loss on sale or disposal
of assets 233 907 995 2,434
--- --- --- -----
Operating loss, as adjusted: $(3,614) $(2,524) $(16,820) $(5,731)
======= ======= ======== =======
Operating loss, as adjusted,
as a % of sales -9.9% -5.9% -10.0% -3.1%
==== ==== ===== ====
KATY INDUSTRIES, INC. BALANCE SHEETS - UNAUDITED
(In thousands)
Assets December 31, December 31,
Current assets: 2008 2007
---- ----
Cash $683 $2,015
Accounts receivable, net 13,773 18,077
Inventories, net 19,911 26,160
Other current assets 3,516 9,319
----- -----
Total current assets 37,883 55,571
------ ------
Other assets:
Goodwill 665 665
Intangibles, net 4,455 4,853
Other 1,809 3,470
----- -----
Total other assets 6,929 8,988
----- -----
Property and equipment 101,715 106,652
Less: accumulated depreciation (69,232) (72,647)
------- -------
Property and equipment, net 32,483 34,005
------ ------
Total assets $77,295 $98,564
======= =======
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $10,283 $10,452
Book overdraft 2,289 4,543
Accrued expenses 17,281 24,954
Current maturities of long-term debt 1,500 1,500
Revolving credit agreement 9,118 2,853
----- -----
Total current liabilities 40,471 44,302
Long-term debt, less current maturities 6,928 9,100
Other liabilities 10,603 8,706
------ -----
Total liabilities 58,002 62,108
------ ------
Stockholders' equity:
Convertible preferred stock 108,256 108,256
Common stock 9,822 9,822
Additional paid-in capital 27,248 27,338
Accumulated other comprehensive loss (1,742) (1,112)
Accumulated deficit (102,397) (85,915)
Treasury stock (21,894) (21,933)
------- -------
Total stockholders' equity 19,293 36,456
------ ------
Total liabilities and stockholders'
equity $77,295 $98,564
======= =======
KATY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
Year Ended
December 31,
-------------
2008 2007
---- ----
Cash flows from operating activities:
Net loss $(16,482) $(1,501)
Income from discontinued operations (2,319) (12,380)
------ -------
Loss from continuing operations (18,801) (13,881)
Depreciation and amortization 8,259 7,294
Write-off and amortization of debt issuance
costs 382 2,007
Write-off of assets due to lease termination - 751
Stock option (income) expense (51) 262
Loss on sale or disposal of assets 995 2,434
Gain on litigation settlement (723) -
Equity in income of equity method investment - (783)
Deferred income taxes 48 (48)
--- ---
(9,891) (1,964)
------ ------
Changes in operating assets and liabilities:
Accounts receivable 4,060 1,383
Inventories 5,738 (5,330)
Other assets (1,094) (220)
Accounts payable 53 60
Accrued expenses (2,739) (5,541)
Other (1,378) 1,399
------ -----
4,640 (8,249)
----- ------
Net cash used in continuing operations (5,251) (10,213)
Net cash provided by discontinued operations 425 74
--- ---
Net cash used in operating activities (4,826) (10,139)
------ -------
Cash flows from investing activities:
Capital expenditures (7,535) (4,403)
Proceeds from sale of assets, net 159 246
--- ---
Net cash used in continuing operations (7,376) (4,157)
Net cash provided by discontinued operations 9,169 55,195
----- ------
Net cash provided by investing
activities 1,793 51,038
----- ------
Cash flows from financing activities:
Net borrowings (repayments) on revolving
loans 6,264 (41,026)
Decrease in book overdraft (2,254) (1,903)
Proceeds from term loans - 573
Repayments of term loans (2,172) (2,965)
Direct costs associated with debt facilities - (236)
Repurchases of common stock - (3)
--- --
Net cash provided by (used in) continuing
operations 1,838 (45,560)
Net cash used in discontinued operations - (570)
--- ----
Net cash provided by (used in) financing
activities 1,838 (46,130)
----- -------
Effect of exchange rate changes on cash (137) (146)
---- ----
Net decrease in cash (1,332) (5,377)
Cash, beginning of period 2,015 7,392
----- -----
Cash, end of period $683 $2,015
==== ======
Reconciliation of free cash flow to GAAP Results:
Net cash used in operating activities $(4,826) $(10,139)
Capital expenditures (7,535) (4,403)
------ ------
Free cash flow $(12,361) $(14,542)
======== ========
SOURCE Katy Industries, Inc.
