KII LIQUIDATING INC 
By BRIDGETON, Mo., Nov. 12, 2013 /PRNewswire/ -- Katy Industries, Inc. (OTC BB: KATY) today reported net income in the third quarter of 2013 of $0.2 million versus a net loss of $2.8 million in the third quarter of 2012. Income from continuing operations was $0.2 million in the third quarter of 2013 compared to a loss of $0.4 million in the third quarter of 2012. Operating income was $0.4 million, or 2.0% of net sales, in the third quarter of 2013, compared to a loss of $0.2 million, or 1.0% of net sales, for the same period in 2012.
Financial highlights for the third quarter of 2013, as compared to the same period in the prior year, included:
-- Net sales in the third quarter of 2013 were $20.9 million, a decrease of
$1.4 million, or 6.1%, compared to the same period in 2012. The decrease
was a result of volume shortfall in our Wilen business unit.
-- Gross margin was 17.3% in the third quarter of 2013, an increase from
14.6% in the third quarter of 2012. The increase in gross margin was
primarily a result a mix of higher margin product sales and operational
efficiencies.
-- Selling, general and administrative expenses decreased from $3.4 million
in the third quarter of 2012 to $3.0 million in the third quarter of
2013. The decrease was primarily due to headcount reductions and better
casualty insurance experience in the third quarter of 2013.
The Company reported a net loss for the nine months ended September 27, 2013 of $0.5 million, or $0.06 per share, versus a net loss of $6.1 million, or $0.76 per share, for the nine months ended September 28, 2012. Loss from continuing operations was $0.9 million for the nine months ended September 27, 2013 compared to $2.2 million for the nine months ended September 28, 2012. Operating loss was $0.3 million, or 0.6% of net sales, for the nine months ended September 27, 2013, compared to $1.9 million, or 3.1% of net sales, for the nine months ended September 28, 2012.
Financial highlights for the nine months ended September 27, 2013, as compared to the nine months ended September 28, 2012, included:
-- Net sales for the nine months ended September 27, 2013 were $59.8
million, a decrease of $2.2 million, or 3.5%, compared to the same
period in 2012. The decrease was a result of volume shortfall in our
Wilen business unit.
-- Gross margin was 15.8% for the nine months ended September 27, 2013, an
increase of 70 basis points from the same period a year ago. The
increase in gross margin was primarily a result a mix of higher margin
product sales and operational efficiencies.
-- Selling, general and administrative expenses were $9.2 million for the
first nine months of 2013 as compared to $11.3 million for the first
nine months of 2012. The decrease was primarily due to one-time
settlements, headcount reductions and better insurance experience for
the nine months ended September 27, 2013 as compared to the nine months
ended September 28, 2012.
Operations provided $3.0 million of free cash flow in the first nine months of 2013 compared to providing $3.3 million during the same period a year ago. This decrease was primarily the result of cash provided by the refund of $2.5 million in cash collateralization of letters of credit in connection with the termination of the PNC credit agreement during the nine months ended September 28, 2012 partially offset by cash provided by discontinued operations in the nine months ended September 27, 2013. Free cash flow, a non-GAAP financial measure, is discussed further below.
Debt at September 27, 2013 was $8.7 million, versus $10.9 million at December 31, 2012.
"We are pleased to report net income in the third quarter due to improvement in our operations," stated David J. Feldman, Katy's President and Chief Executive Officer. "We expect to realize ongoing benefits as the economy strengthens and raw material prices stabilize."
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 operating activities less capital expenditures. A reconciliation of this non-GAAP measure to a comparable GAAP measure is 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 "anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," "may," "should," "will," "continue," "is subject to," 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 regulatory 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 December 31, 2012. 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 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 Nine Months Ended
September 27, September 28, September 27, September 28,
2013 2012 2013 2012
---- ---- ---- ----
Net sales $20,852 $22,209 $59,817 $61,969
Cost of goods sold 17,246 18,997 50,364 52,630
------ ------ ------ ------
Gross profit 3,606 3,212 9,453 9,339
Selling, general
and administrative
expenses 2,951 3,444 9,236 11,287
Severance,
restructuring and
related charges - - 321 -
Loss on disposal of
assets 230 - 230 -
--- --- --- ---
Operating income
(loss) 425 (232) (334) (1,948)
Interest expense (302) (233) (678) (559)
Other, net 66 40 137 264
--- --- --- ---
Income (loss) from
continuing
operations before
income tax expense 189 (425) (875) (2,243)
Income tax expense
from continuing
operations (4) (3) (17) (2)
--- --- --- ---
Income (loss) from
continuing
operations 185 (428) (892) (2,245)
(Loss) income from
operations of
discontinued
businesses (net of
tax) (14) (1,710) 373 (3,193)
Loss on sale of
discontinued
business (net of
tax) - (616) - (616)
--- ---- --- ----
Net income (loss) $171 $(2,754) $(519) $(6,054)
==== ======= ===== =======
Net income (loss) $171 $(2,754) $(519) $(6,054)
Other comprehensive
(loss) income:
Foreign currency
translation (34) 67 (45) 61
--- --- --- ---
Total comprehensive
income (loss) $137 $(2,687) $(564) $(5,993)
==== ======= ===== =======
Income (loss)
income per share
of common stock -
Basic
Income (loss) from
continuing
operations $0.02 $(0.06) $(0.11) $(0.28)
Discontinued
operations (0.00) (0.29) 0.05 (0.48)
----- ----- ---- -----
Net income (loss) $0.02 $(0.35) $(0.06) $(0.76)
===== ====== ====== ======
Income (loss)
income per share
of common stock -
Diluted
Income (loss) from
continuing
operations $0.01 $(0.06) $(0.11) $(0.28)
Discontinued
operations (0.01) (0.29) 0.05 (0.48)
----- ----- ---- -----
Net income (loss) $ - $(0.35) $(0.06) $(0.76)
=================== ====== ====== ======
Weighted average
common shares
outstanding:
Basic 7,951 7,951 7,951 7,951
===== ===== ===== =====
Diluted 26,810 7,951 7,951 7,951
====== ===== ===== =====
Other Information:
LIFO adjustment
expense $(9) $301 $179 $678
=== ==== ==== ====
KATY INDUSTRIES, INC. BALANCE SHEETS - UNAUDITED
(In thousands)
September 27, December 31,
Assets 2013 2012
---- ----
Current assets:
Cash $1,062 $621
Accounts
receivable, net 8,666 9,270
Inventories, net 11,385 12,733
Other current
assets 681 1,456
Assets held for
sale 74 1,675
Total current
assets 21,868 25,755
------ ------
Other Assets: 1,617 1,835
----- -----
Property and
equipment 55,480 55,118
Less: accumulated
depreciation (48,210) (46,716)
-------
Property and
equipment, net 7,270 8,402
----- -----
Total assets $30,755 $35,992
======= =======
Liabilities and
stockholders'
equity
Current
liabilities:
Accounts payable $6,710 $6,172
Book overdraft 190 493
Accrued expenses 9,498 10,198
Payable to related
party 2,625 2,250
Deferred revenue 186 688
Revolving credit
agreement 8,710 10,903
Total current
liabilities 27,919 30,704
Deferred revenue 356 1,917
Other liabilities 5,602 5,964
Total liabilities 33,877 38,585
------ ------
Stockholders'
equity:
Convertible
preferred stock 108,256 108,256
Common stock 9,822 9,822
Additional paid-
in capital 27,110 27,110
Accumulated other
comprehensive
loss (2,473) (2,463)
Accumulated
deficit (124,400) (123,881)
Treasury stock (21,437) (21,437)
Total
stockholders'
equity (3,122) (2,593)
------ ------
Total liabilities
and stockholders'
equity $30,755 $35,992
======= =======
KATY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
Nine Months Ended
September 27, September 28,
2013 2012
---- ----
Cash flows from operating
activities:
Net loss $(519) $(6,054)
Income (loss)
from
discontinued
operations 373 (3,809)
--- ------
Loss from continuing operations (892) (2,245)
Depreciation
and
amortization 1,550 1,597
Amortization
of
intangible
assets - 196
Amortization
of debt
issuance
costs 155 178
Stock-based
compensation 15 52
Loss (gain)
on sale or
disposal of
assets 230 (2)
1,058 (224)
----- ----
Changes in
operating
assets and
liabilities:
Accounts receivable (1,830) (1,541)
Inventories (742) 1,993
Other assets 379 3,184
Accounts payable 1,390 (103)
Accrued expenses 265 410
Payable to related party 375 500
Deferred revenue (155) (146)
Other (393) 115
(711) 4,412
Net cash
provided by
operating
activities 347 4,188
Net cash
provided by
(used in)
discontinued
operations 1,133 (590)
----- ----
Net cash
provided by
operating
activities 1,480 3,598
----- -----
Cash flows from investing
activities:
Capital
expenditures (391) (548)
---- ----
Net cash used
in
continuing
operations (391) (548)
Net cash
provided by
discontinued
operations 1,913 258
----- ---
Net cash
provided by
(used in)
investing
activities 1,522 (290)
----- ----
Cash flows from financing
activities:
Net
repayments (2,193) (3,126)
Decrease in
book
overdraft (303) (216)
---- ----
Net cash used
in financing
activities (2,496) (3,342)
------ ------
Effect of exchange rate changes
on cash from continuing
operations (49) 388
Effect of exchange rate changes
on cash from discontinued
operations (16) (147)
Effect of exchange rate changes
on cash (65) 241
--- ---
Net increase in cash 441 207
Cash, beginning of period 621 730
Cash, end of period $1,062 $937
====== ====
Reconciliation of free cash flow
to GAAP Results:
Net cash
provided by
operating
activities $1,480 $3,598
Net capital
expenditures 1,522 (290)
Free cash
flow $3,002 $3,308
====== ======
SOURCE Katy Industries, Inc.
