Katy also reported a net loss for the six months ended
During the second quarter of 2008, Katy reported restructuring and other
non-recurring or unusual items of
For the six months ended
Financial highlights for the second quarter of 2008, as compared to the same period in the prior year, included:
-- Net sales in the second quarter of 2008 were
-- Gross margins were 5.5% in the second quarter of 2008, versus 13.3% in
the second quarter of 2007. In 2008, our margins were adversely impacted by
an unfavorable variance incurred in our LIFO adjustment of
-- Selling, general and administrative expenses were
-- Debt at
-- Katy used free cash flow of
"The results of the second quarter were reflective of the current economic
environment. Since joining the company in mid-April, my focus has been to
determine how best to improve both our top and bottom line results," 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, as appropriate. 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. These non-GAAP measures are used by management as Katy believes that these measures 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. 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, detailed from time to time in Katy's filings with the SEC that may lead to results that differ materially from those expressed in any forward-looking statement made by the company or on its behalf. Katy undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
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. Amir Rosenthal (314) 656-4321 KATY INDUSTRIES, INC. SUMMARY OF OPERATIONS - UNAUDITED (In thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Net sales $45,134 $49,972 $86,825 $95,524 Cost of goods sold 42,668 43,332 80,531 83,288 Gross profit 2,466 6,640 6,294 12,236 Selling, general and administrative expenses 8,030 6,797 14,767 14,371 Severance, restructuring and related charges (548) 2,402 (410) 2,610 Loss on sale of assets 201 1,691 734 1,571 Operating loss (5,217) (4,250) (8,797) (6,316) Interest expense (420) (919) (903) (2,114) Other, net 30 70 16 102 Loss from continuing operations before benefit from (provision for) income taxes (5,607) (5,099) (9,684) (8,328) Benefit from (provision for) income taxes from continuing operations 805 (136) 1,157 (225) Loss from continuing operations (4,802) (5,235) (8,527) (8,553) Loss from operations of discontinued businesses (net of tax) (415) (108) (667) (2,235) Gain on sale of discontinued businesses (net of tax) 1,002 7,151 1,545 8,817 Net (loss) income $(4,215) $1,808 $(7,649) $(1,971) (Loss) income per share of common stock - basic and diluted: Loss from continuing operations $(0.60) $(0.66) $(1.07) $(1.08) Discontinued operations 0.07 0.89 0.11 0.83 Net (loss) income $(0.53) $0.23 $(0.96) $(0.25) Weighted average common shares outstanding - basic and diluted 7,951 7,951 7,951 7,951 June 30, June 30, Other Information: 2008 2007 Working capital $3,279 $6,496 Working capital, exclusive of deferred tax assets and liabilities and debt classified as current $10,256 $44,686 Long-term debt, including current maturities $14,906 $48,889 Stockholders' equity $28,417 $37,045 Capital expenditures $2,934 $2,040 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 Six Months Ended June 30, June 30, 2008 2007 2008 2007 Reconciliation of net (loss) income to net loss, as adjusted: Net (loss) income $(4,215) $1,808 $(7,649) $(1,971) Unusual items: Severance, restructuring and related charges (548) 2,402 (410) 2,610 Loss on sale of assets 201 1,691 734 1,571 Discontinued operations (587) (7,043) (878) (6,582) Adjustment to reflect a more normalized effective tax rate excluding unusual items 1,458 518 2,400 1,801 Net loss, as adjusted $(3,691) $(624) $(5,803) $(2,571) Net loss, as adjusted per share: Net (loss) income per share $(0.53) $0.23 $(0.96) $(0.25) Unusual items per share (0.12) (0.37) (0.07) (0.30) Adjustment to reflect a more normalized effective tax rate excluding unusual items per share 0.19 0.06 0.30 0.23 Net loss, as adjusted per share $(0.46) $(0.08) $(0.73) $(0.32) Weighted average common shares outstanding: Basic and diluted 7,951 7,951 7,951 7,951 Operating loss, as adjusted: Operating loss $(5,217) $(4,250) $(8,797) $(6,316) Severance, restructuring and related charges (548) 2,402 (410) 2,610 Loss on sale of assets 201 1,691 734 1,571 Operating loss, as adjusted: $(5,564) $(157) $(8,473) $(2,135) Operating loss, as adjusted, as a % of sales -12.3% -0.3% -9.8% -2.2% KATY INDUSTRIES, INC. BALANCE SHEETS - UNAUDITED (In thousands) Assets June 30, December 31, June 30, Current assets: 2008 2007 2007 Cash and cash equivalents $1,167 $2,015 $2,483 Accounts receivable, net 21,736 18,077 40,272 Inventories, net 25,490 26,160 63,976 Other current assets 2,296 9,319 3,004 Total current assets 50,689 55,571 109,735 Other assets: Goodwill 665 665 665 Intangibles, net 4,659 4,853 5,237 Other 2,204 3,470 8,067 Total other assets 7,528 8,988 13,969 Property and equipment 106,677 106,652 126,055 Less: accumulated depreciation (74,425) (72,647) (88,610) Property and equipment, net 32,252 34,005 37,445 Total assets $90,469 $98,564 $161,149 Liabilities and stockholders' equity Current liabilities: Accounts payable $15,739 $14,995 $28,206 Accrued expenses 24,694 24,954 35,936 Current maturities of long-term debt 1,500 1,500 1,500 Revolving credit agreement 5,477 2,853 37,597 Total current liabilities 47,410 44,302 103,239 Long-term debt, less current maturities 7,929 9,100 9,792 Other liabilities 6,713 8,706 11,073 Total liabilities 62,052 62,108 124,104 Stockholders' equity: Convertible preferred stock 108,256 108,256 108,256 Common stock 9,822 9,822 9,822 Additional paid-in capital 27,041 27,338 27,274 Accumulated other comprehensive (loss) income (1,244) (1,112) 38 Accumulated deficit (93,564) (85,915) (86,385) Treasury stock (21,894) (21,933) (21,960) Total stockholders' equity 28,417 36,456 37,045 Total liabilities and stockholders' equity $90,469 $98,564 $161,149 KATY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS - UNAUDITED (In thousands) Six Months Ended June 30, 2008 2007 Cash flows from operating activities: Net loss $(7,649) $(1,971) Income from operations of discontinued businesses (878) (6,582) Loss from continuing operations (8,527) (8,553) Depreciation and amortization 4,094 3,799 Write-off and amortization of debt issuance costs 191 906 Write-off of assets due to lease termination - 751 Stock option (income) expense (258) 171 Loss on sale of assets 734 1,571 Deferred income taxes - (94) (3,766) (1,449) Changes in operating assets and liabilities: Accounts receivable (3,693) (3,667) Inventories 603 (1,009) Other assets 487 (107) Accounts payable 1,342 2,427 Accrued expenses (289) (2,186) Other, net (1,539) 1,997 (3,089) (2,545) Net cash used in continuing operations (6,855) (3,994) Net cash used in discontinued operations (654) (3,989) Net cash used in operating activities (7,509) (7,983) Cash flows from investing activities: Capital expenditures of continuing operations (2,934) (2,040) Proceeds from sale of assets, net 49 197 Net cash used in continuing operations (2,885) (1,843) Net cash provided by discontinued operations 8,685 15,661 Net cash provided by investing activities 5,800 13,818 Cash flows from financing activities: Net borrowings (repayments) on revolving loans 2,624 (6,282) Decrease in book overdraft (544) (2,143) Repayments of term loans (1,171) (1,700) Direct costs associated with debt facilities - (127) Repurchases of common stock - (3) Net cash provided by (used in) continuing operations 909 (10,255) Net cash used in discontinued operations - (381) Net cash provided by (used in) financing activities 909 (10,636) Effect of exchange rate changes on cash and cash equivalents (48) (108) Net decrease in cash and cash equivalents (848) (4,909) Cash and cash equivalents, beginning of period 2,015 7,392 Cash and cash equivalents, end of period $1,167 $2,483 Reconciliation of free cash flow to GAAP Results: Net cash used in operating activities $(7,509) $(7,983) Capital expenditures (2,934) (2,040) Free cash flow $(10,443) $(10,023)
SOURCE Katy Industries, Inc.