KII LIQUIDATING INC 
By During the first quarter of 2008, Katy reported expense for restructuring and other non-recurring or unusual items of
Financial highlights for the first quarter of 2009, as compared to the same period in the prior year, included:
-- Net sales in the first quarter of 2009 were $35.1 million, a decrease of
$6.6 million, or 15.8%, compared to the same period in 2008. The
decrease resulted from lower volumes across all of the business units
driven by market softness, as well as the decision to exit certain
unprofitable business lines.
-- Gross margin was 14.6% in the first quarter of 2009 versus 8.1% in the
fourth quarter of 2008 and 9.2% in the first quarter of 2008. Gross
margin was impacted by a favorable quarter over quarter variance in the
LIFO adjustment of $1.5 million resulting from a decrease in resin costs
and lower inventory levels, in addition to improved factory productivity
and cost controls.
-- Selling, general and administrative expenses were $0.4 million higher in
the first quarter of 2009 than in the first quarter of 2008. The
increase was driven primarily by costs associated with the transition
and hiring of executive level personnel, restructuring of the commercial
organization and costs related to the plan to deregister the
Company's common stock under the Securities and Exchange Act of
1934, as amended, which was abandoned on March 12, 2009.
-- Debt at April 3, 2009 was $17.0 million (50% of total capitalization),
versus $17.5 million (48% of total capitalization) at December 31, 2008.
-- Operations generated $1.2 million of free cash flow in the first quarter
of 2009 compared to a $6.2 million usage during the same period a year
ago. The fluctuation was a result of lower net loss quarter over
quarter, lower inventory and accounts receivable balances, and a
reduction in capital spending. Free cash flow, a non-GAAP financial
measure, is discussed further below.
"While we reported a net loss in the first quarter of 2009, our results showed improvement over both the first and fourth quarters of 2008," said
Non-GAAP Financial Measures
To provide transparency about measures of Katy's financial performance which management considers most relevant, the Company supplements the reporting of Katy's consolidated financial information under GAAP with a non-GAAP financial measure, Free Cash Flow. Free cash flow is defined by Katy as cash flow from operations less capital expenditures and cash dividends paid. Details regarding this measure and a reconciliation of this non-GAAP measure to a comparable GAAP measure are provided in the "Statements of Cash Flows" accompanying this press release. This non-GAAP financial measure 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 measure to analyze the Company's performance would have material limitations because its 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 this measure is nonetheless 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 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 include all statements of the Company's plans, beliefs or expectations with respect to future events or developments and often may be identified by such words or phrases as "should", "intends", "is subject to", "expects", "will", "continue", "anticipate", "estimated", "projected", "may", "we believe", "future prospects", or similar expressions. These 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 its 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 the Company's facilities or those of its 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 manufacture, import 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 Ended
April 3, March 31,
2009 2008
---- ----
Net sales $35,092 $41,691
Cost of goods sold 29,955 37,863
------ ------
Gross profit 5,137 3,828
Selling, general and administrative expenses 7,164 6,737
Severance, restructuring and related charges - 138
Loss on sale or disposal of assets - 533
--- ---
Operating loss (2,027) (3,580)
Interest expense (309) (483)
Other, net (73) (14)
--- ---
Loss from continuing operations before income tax
(provision) benefit (2,409) (4,077)
Income tax (provision) benefit from continuing
operations (6) 352
--- ---
Loss from continuing operations (2,415) (3,725)
Loss from operations of discontinued businesses (net
of tax) - (252)
Gain on sale of discontinued businesses (net of tax) - 543
--- ---
Net loss $(2,415) $(3,434)
======= =======
Loss per share of common stock - basic and diluted:
Loss from continuing operations $(0.30) $(0.47)
Discontinued operations - 0.04
--- ----
Net loss $(0.30) $(0.43)
====== ======
Weighted average common shares outstanding - basic
and diluted 7,951 7,951
===== =====
Other Information:
Working capital $(5,647) $8,735
======= ======
Working capital, exclusive of deferred tax assets and
liabilities and debt classified as current $4,810 $16,029
====== =======
Long-term debt, including current maturities $17,010 $15,995
======= =======
Stockholders' equity $17,004 $32,894
======= =======
Capital expenditures $186 $1,037
==== ======
KATY INDUSTRIES, INC. BALANCE SHEETS - UNAUDITED
(In thousands)
April 3, December 31, March 31,
Assets 2009 2008 2008
---- ---- ----
Current assets:
Cash $855 $683 $618
Accounts receivable, net 15,220 13,773 19,868
Inventories, net 15,808 19,911 25,150
Other current assets 1,136 3,516 5,617
----- ----- -----
Total current assets 33,019 37,883 51,253
------ ------ ------
Other assets:
Goodwill 665 665 665
Intangibles, net 4,355 4,455 4,733
Other 2,861 1,809 2,959
----- ----- -----
Total other assets 7,881 6,929 8,357
----- ----- -----
Property and equipment 101,799 101,715 105,834
Less: accumulated depreciation (70,672) (69,232) (73,090)
------- ------- -------
Property and equipment, net 31,127 32,483 32,744
------ ------ ------
Total assets $72,027 $77,295 $92,354
======= ======= =======
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $9,531 $10,283 $8,907
Book overdraft 1,776 2,289 2,433
Accrued expenses 16,902 17,281 23,884
Current maturities of long-term
debt 1,500 1,500 1,500
Revolving credit agreement 8,957 9,118 5,794
----- ----- -----
Total current liabilities 38,666 40,471 42,518
Long-term debt, less current
maturities 6,553 6,928 8,701
Other liabilities 9,804 10,603 8,241
----- ------ -----
Total liabilities 55,023 58,002 59,460
------ ------ ------
Stockholders' equity:
Convertible preferred stock 108,256 108,256 108,256
Common stock 9,822 9,822 9,822
Additional paid-in capital 26,951 27,248 27,375
Accumulated other comprehensive
loss (1,776) (1,742) (1,277)
Accumulated deficit (104,812) (102,397) (89,349)
Treasury stock (21,437) (21,894) (21,933)
------- ------- -------
Total stockholders' equity 17,004 19,293 32,894
------ ------ ------
Total liabilities and stockholders'
equity $72,027 $77,295 $92,354
======= ======= =======
KATY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
Three Months Ended
April 3, March 31,
2009 2008
---- ----
Cash flows from operating activities:
Net loss $(2,415) $(3,434)
Income from discontinued operations - (291)
--- ----
Loss from continuing operations (2,415) (3,725)
Depreciation and amortization 1,656 1,823
Amortization of debt issuance costs 96 96
Stock-based compensation 7 (127)
Loss on sale or disposal of assets - 533
--- ---
(656) (1,400)
---- ------
Changes in operating assets and liabilities:
Accounts receivable (1,479) (1,833)
Inventories 4,032 928
Other assets 1,148 134
Accounts payable (728) (1,489)
Accrued expenses (214) (853)
Other (749) (363)
---- ----
2,010 (3,476)
----- ------
Net cash provided by (used in) continuing
operations 1,354 (4,876)
Net cash used in discontinued operations - (320)
--- ----
Net cash provided by (used in) operating
activities 1,354 (5,196)
----- ------
Cash flows from investing activities:
Capital expenditures (186) (1,037)
Proceeds from sale of assets, net - 35
--- ---
Net cash used in continuing operations (186) (1,002)
Net cash provided by discontinued operations - 4,424
--- -----
Net cash (used in) provided by investing
activities (186) 3,422
---- -----
Cash flows from financing activities:
Net (repayments) borrowings on revolving loans (131) 2,940
Decrease in book overdraft (513) (2,110)
Repayments of term loans (375) (399)
---- ----
Net cash (used in) provided by financing
activities (1,019) 431
------ ---
Effect of exchange rate changes on cash 23 (54)
--- ---
Net increase (decrease) in cash 172 (1,397)
Cash, beginning of period 683 2,015
--- -----
Cash, end of period $855 $618
==== ====
Reconciliation of free cash flow to GAAP Results:
Net cash provided by (used in) operating
activities $1,354 $(5,196)
Capital expenditures (186) (1,037)
---- ------
Free cash flow $1,168 $(6,233)
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SOURCE Katy Industries, Inc.
