SOURCE: Katy Industries Inc

November 10, 2014 13:49 ET

Katy Industries, Inc. Reports Net Income in 2014 Third Quarter Results

BRIDGETON, MO--(Marketwired - November 10, 2014) - Katy Industries, Inc. (OTCBB: KATY) today reported net income in the third quarter of 2014 of $1.4 million, or $0.17 per basic ($0.05 per diluted) share versus net income of $0.2 million, or $0.02 per basic ($0.00 per diluted) share, in the third quarter of 2013. Income from continuing operations was $1.4 million in the third quarter of 2014 compared to income of $0.2 million in the third quarter of 2013. Operating income was $1.5 million, or 5.8% of net sales, in the third quarter of 2014, compared to income of $0.4 million, or 2.0% of net sales, for the same period in 2013. 

Financial highlights for the third quarter of 2014, as compared to the same period in the prior year, included:

  • Net sales in the third quarter of 2014 were $26.5 million, an increase of $5.7 million, or 27.3%, compared to the same period in 2013. The increase was a result of the acquisition of Ft. Wayne Plastics ("FWP"); which contributed $4.4 million in net sales for the three months ended September 26, 2014, and increased demand in our Continental business unit.
  • Gross margin was 18.8% in the third quarter of 2014, an increase from 17.3% in the third quarter of 2013. The increase in gross margin was primarily a result of a mix of higher margin product sales and operational efficiencies.
  • Selling, general and administrative ("SG&A") expenses increased from $3.0 million in the third quarter of 2013 to $3.5 million in the third quarter of 2014. The increase was primarily due to the first quarter acquisition of FWP, which increased SG&A expenses for the three months ended September 26, 2014, and better casualty insurance experience during the three months ended September 27, 2013 as compared to the three months ended September 26, 2014.

The Company reported net income for the nine months ended September 26, 2014 of $3.1 million, or $0.38 per basic ($0.11 per diluted) share, versus a net loss of $0.5 million, or $0.06 per share, for the nine months ended September 27, 2013. Income from continuing operations was $3.1 million for the nine months ended September 26, 2014 compared to a loss of $0.9 million for the nine months ended September 27, 2013. Operating income was $1.4 million, or 2.0% of net sales, for the nine months ended September 26, 2014, compared to a loss of $0.3 million, or 0.1% of net sales, for the nine months ended September 27, 2013.

Financial highlights for the nine months ended September 26, 2014, as compared to the nine months ended September 27, 2013, included:

  • Net sales for the nine months ended September 26, 2014 were $72.1 million, an increase of $12.3 million, or 20.5%, compared to the same period in 2013. The increase was a result of the acquisition of FWP, which contributed $9.6 million in net sales for the nine months ended September 26, 2014, and increased demand in our Continental business unit. The increase in net sales was partially offset, however, by a volume shortfall in our Wilen business unit and two less shipping days in the first nine months of 2014 versus the first nine months of 2013. Gross margin was 16.7% for the nine months ended September 26, 2014, an increase of 90 basis points from the same period a year ago. The increase was primarily a result of higher margins on the sales mix in our Continental business unit.
  • Selling, general and administrative expenses were $10.6 million for the first nine months of 2014 as compared to $9.2 million for the first nine months of 2013. The increase was primarily due to the acquisition of FWP for the nine months ended September 26, 2014, which was partially offset by better casualty insurance experience and one-time settlements received during the nine months ended September 27, 2013.
  • Income tax benefit for the nine months ended September 26, 2014 includes a benefit as a result of the acquisition of FWP. The Company recorded deferred tax liabilities of $2.4 million which reduced its net deferred tax assets. The reduction in deferred tax assets caused a release of a valuation allowance of $2.3 million.

Cash provided by operating activities before changes in operating assets and liabilities was $2.7 million in the first nine months of 2014 as compared to $1.1 million in the same period of 2013. Changes in operating assets and liabilities from continuing operations used $5.7 million in the first nine months of 2014 as compared to $0.7 million in the same period of 2013. The increase in usage is primarily attributable to an increase in accounts receivables and inventory, which was partially offset by an increase in accounts payable.

Debt at September 26, 2014 was $22.0 million, versus $7.7 million at December 31, 2013.

"We are pleased to report net income for a third consecutive quarter," stated David J. Feldman, Katy's President and Chief Executive Officer. "The acquisition of FWP has been a great addition to our company and we expect to realize ongoing benefits as we continue to implement our strategic operational plans."

Non-GAAP Financial Measures
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, 2013. 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.

  
KATY INDUSTRIES, INC. SUMMARY OF OPERATIONS - UNAUDITED  
(In thousands, except per share data)  
  
     Three Months Ended   Nine Months Ended  
     September 26,   September 27,   September 26,   September 27,  
     2014   2013   2014   2013  
                    
Net sales  $26,543   $20,852   $72,077   $59,817  
Cost of goods sold   21,549    17,246    60,020    50,364  
 Gross profit   4,994    3,606    12,057    9,453  
Selling, general and administrative expenses   3,451    2,951    10,633    9,236  
Severance, restructuring and related charges   -    -    -    321  
Loss on disposal of assets        230         230  
 Operating income (loss)   1,543    425    1,424    (334 )
Interest expense   (229 )  (302 )  (786 )  (678 )
Other, net   40    66    117    137  
 Income (loss) from continuing operations before income tax benefit (expense)   1,354    189    755    (875 )
Income tax (expense) benefit from continuing operations   (4 )  (4 )  2,303    (17 )
 Income (loss) from continuing operations   1,350    185    3,058    (892 )
(Loss) income from operations of discontinued business (net of tax)   -    (14 )  -    373  
 Net income (loss)  $1,350   $171   $3,058   $(519 )
                      
Net income (loss)  $1,350   $171   $3,058   $(519 )
Other comprehensive loss                     
Foreign currency translation   (43 )  (34 )  (75 )  (45 )
 Total comprehensive income (loss)  $1,307   $137   $2,983   $(564 )
                      
                      
Income (loss) income per share of common stock - Basic                     
 Income (loss) from continuing operations  $0.17   $0.02   $0.38   $(0.11 )
 Discontinued operations   -    -    -    0.05  
 Net income (loss)  $0.17   $0.02   $0.38   $(0.07 )
                      
Income (loss) income per share of common stock - Diluted                     
 Income (loss) from continuing operations  $0.05   $0.01   $0.11   $(0.12 )
 Discontinued operations   -    (0.01 )  -    0.05  
 Net income (loss)  $0.05   $(0.00 ) $0.11   $(0.06 )
                      
                      
                      
Weighted average common shares outstanding:                     
 Basic   7,951    7,951    7,951    7,951  
 Diluted   26,810    26,810    26,810    7,951  
Other Information:                     
                      
LIFO adjustment expense  $19   $(9 ) $251   $179  
                 
                 
  
KATY INDUSTRIES, INC. BALANCE SHEETS - UNAUDITED  
(In thousands)  
          
   September 26,   December 31,  
Assets  2014   2013  
Current assets:           
 Cash  $399   $708  
 Accounts receivable, net   11,719    7,206  
 Inventories, net   17,804    10,004  
 Other current assets   777    663  
 Assets held for sale   -    74  
Total current assets   30,699    18,655  
            
Other Assets:           
 Goodwill   2,556    -  
 Intangibles, net   3,958    -  
 Other   1,895    1,375  
Total other assets   8,409    1,375  
            
Property and equipment   60,424    55,495  
Less: accumulated depreciation   (50,008 )  (48,533 )
Property and equipment, net   10,416    6,962  
            
Total assets  $49,524   $26,992  
            
            
Liabilities and stockholders' equity           
Current liabilities:           
 Accounts payable  $9,507   $5,983  
 Book overdraft   361    264  
 Accrued expenses   9,527    8,473  
 Payable to related party   3,525    2,750  
 Deferred revenue   186    186  
 Revolving credit agreement   22,043    7,706  
Total current liabilities   45,149    25,362  
            
Deferred revenue   170    316  
Other liabilities   3,702    3,794  
Total liabilities   49,021    29,472  
            
Stockholders' equity (deficit):           
 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   (923 )  (848 )
 Accumulated deficit   (122,325 )  (125,383 )
 Treasury stock   (21,437 )  (21,437 )
Total stockholders' equity (deficit)   503    (2,480 )
            
Total liabilities and stockholders' equity  $49,524   $26,992  
         
         
  
KATY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS - UNAUDITED  
(In thousands)  
   Nine Months Ended  
   September 26,   September 27,  
   2014   2013  
Cash flows from operating activities:         
 Net income (loss)  $3,058   $(519 )
 Income from discontinued operations   -    373  
  Income (loss) from continuing operations   3,058    (892 )
 Depreciation and amortization   1,655    1,550  
 Amortization of debt issuance costs   272    155  
 Stock-based compensation   50    15  
 Loss on sale or disposal of assets   -    230  
 Deferred income taxes   (2,318 )  -  
    2,717    1,058  
 Changes in operating assets and liabilities:           
  Accounts receivable   (2,985 )  (1,830 )
  Inventories   (6,395 )  (742 )
  Other assets   (65 )  379  
  Accounts payable   2,912    1,390  
  Accrued expenses   843    265  
  Payable to related party   375    375  
  Deferred revenue   (147 )  (155 )
  Other   (275 )  (393 )
    (5,737 )  (711 )
            
 Net cash (used in) provided by continuing operations   (3,020 )  347  
 Net cash provided by discontinued operations   74    1,133  
 Net cash (used in) provided by operating activities   (2,946 )  1,480  
            
Cash flows from investing activities:           
 Payment for acquisition, net of cash received   (10,774 )  -  
 Capital expenditures   (642 )  (391 )
 Net cash used in continuing operations   (11,416 )  (391 )
 Net cash provided by discontinued operations   -    1,913  
 Net cash (used in) provided by investing activities   (11,416 )  1,522  
            
Cash flows from financing activities:           
 Net borrowings   14,337    (2,193 )
 Loan from related party   400    -  
 Decrease in book overdraft   97    (303 )
 Direct costs associated with debt facilities   (672 )  -  
 Net cash provided by (used in) financing activities   14,162    (2,496 )
            
Effect of exchange rate changes on cash from continuing operations   (109 )  (49 )
Effect of exchange rate changes on cash from discontinued operations   -    (16 )
Effect of exchange rate changes on cash   (109 )  (65 )
            
Net decrease in cash   (309 )  441  
Cash, beginning of period   708    621  
Cash, end of period  $399   $1,062  

Contact Information

  • Company contact:
    Katy Industries, Inc.
    James W. Shaffer
    (314) 656-4321