EX-99.1 2 ex99_1.htm EXHIBIT 99.1

Exhibit 99.1
 
KATY NEWS
FOR IMMEDIATE RELEASE

KATY INDUSTRIES, INC.
REPORTS NET INCOME IN 2014 SECOND QUARTER RESULTS
 
BRIDGETON, MO – August 11, 2014 – Katy Industries, Inc. (OTC BB: KATY) today reported net income in the second quarter of 2014 of $0.5 million, or $0.07 per basic ($0.02 per diluted) share versus net income of $0.1 million, or $0.02 per basic ($0.01 per diluted) share, in the second quarter of 2013.  Income from continuing operations was $0.5 million in the second quarter of 2014 compared to income of $0.3 million in the second quarter of 2013. Operating income was $0.8 million, or 3.1% of net sales, in the second quarter of 2014, compared to income of $0.5 million, or 2.4% of net sales, for the same period in 2013.
 
Financial highlights for the second quarter of 2014, as compared to the same period in the prior year, included:
 
· Net sales in the second quarter of 2014 were $25.6 million, an increase of $4.8 million, or 23.1%, compared to the same period in 2013.  The increase was a result of the acquisition of Ft. Wayne Plastics (“FWP”); which contributed $3.6 million in net sales for the three months ended June 27, 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 one less shipping day in the second quarter 2014 versus the second quarter 2013.
 
· Gross margin was 15.9% in the second quarter of 2014, a decrease from 16.5% in the second quarter of 2013.  The decrease was primarily a result of lower margins on the sales mix in our Continental business unit.
 
· Selling, general and administrative (”SG&A”) expenses increased from $2.9 million in the second quarter of 2013 to $3.3 million in the second 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 June 27, 2014, and one-time settlements received during the three months ended June 28, 2013.
 
The Company reported net income for the six months ended June 27, 2014 of $1.7 million, or $0.21 per basic ($0.06 per diluted )share, versus a net loss of $0.7 million, or $0.09 per share, for the six months ended June 28, 2013. Income from continuing operations was $1.7 million for the six months ended June 27, 2014 compared to a loss of $1.1 million for the six months ended June 28, 2013. Operating loss was $0.1 million, or 0.3% of net sales, for the six months ended June 27, 2014, compared to $0.8 million, or 1.9% of net sales, for the six months ended June 28, 2013.

Financial highlights for the six months ended June 27, 2014, as compared to the six months ended June 28, 2013, included:
 
· Net sales for the six months ended June 27, 2014 were $45.5 million, an increase of $6.6 million, or 16.9%, compared to the same period in 2013. The increase was a result of the acquisition of FWP, which contributed $5.2 million in net sales for the six months ended June 27, 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 half  2014 versus the first half 2013.
 
· Gross margin was 15.5% for the six months ended June 27, 2014, an increase of 50 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 $7.2 million for the first half of 2014 as compared to $6.3 million for the first half of 2013. The increase was primarily due to the acquisition of FWP for the six months ended June 27, 2014 and one-time settlements received during the six months ended June 28, 2013.
 
· Income tax benefit for the six months ended June 27, 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 $0.8 million in the first half of 2014 as compared to $0.1 million in the same period of 2013.  Changes in operating assets and liabilities from continuing operations used $4.0 million in the first half of 2014 as compared to $2.0 million in the same period of 2013. The increase in usage is primarily attributable to an increase in accounts receivable and posting cash collateralization of $1.0 million with PrivateBank in connection with our letters of credit following the refinancing of our debt with the BMO Credit Agreement.
 
Debt at June 27, 2014 was $22.2 million, versus $7.7 million at December 31, 2013.
 
“We are pleased to report net income in the second 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 we continue to implement our strategic operational plans and the economy strengthens.”

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.

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
   
Six Months Ended
 
 
 
June 27,
   
June 28,
   
June 27,
   
June 28,
 
 
 
2014
   
2013
   
2014
   
2013
 
 
 
   
   
   
 
Net sales
 
$
25,608
   
$
20,804
   
$
45,534
   
$
38,965
 
Cost of goods sold
   
21,534
     
17,370
     
38,471
     
33,118
 
Gross profit
   
4,074
     
3,434
     
7,063
     
5,847
 
Selling, general and administrative expenses
   
3,292
     
2,900
     
7,182
     
6,285
 
Severance, restructuring and related charges
   
-
     
37
     
-
     
321
 
Operating income (loss)
   
782
     
497
     
(119
)
   
(759
)
Interest expense
   
(276
)
   
(206
)
   
(557
)
   
(376
)
Other, net
   
37
     
37
     
77
     
71
 
Income (loss) from continuing operations before income tax benefit (expense)
   
543
     
328
     
(599
)
   
(1,064
)
Income tax benefit (expense) from continuing operations
   
3
     
(6
)
   
2,307
     
(13
)
Income (loss) from continuing operations
   
546
     
322
     
1,708
     
(1,077
)
(Loss) income from operations of discontinued business (net of tax)
   
-
     
(182
)
   
-
     
387
 
Net income (loss)
 
$
546
   
$
140
   
$
1,708
   
$
(690
)
 
                               
Net income (loss)
 
$
546
   
$
140
   
$
1,708
   
$
(690
)
Other comprehensive income (loss)
                               
Foreign currency translation
   
6
     
1
     
(32
)
   
(11
)
Total comprehensive income (loss)
 
$
552
   
$
141
   
$
1,676
   
$
(701
)
 
                               
Income (loss) income per share of common stock - Basic
                               
Income (loss) from continuing operations
 
$
0.07
   
$
0.04
   
$
0.21
   
$
(0.14
)
Discontinued operations
   
-
     
(0.02
)
   
-
     
0.05
 
Net income (loss)
 
$
0.07
   
$
0.02
   
$
0.21
   
$
(0.09
)
 
                               
Income (loss) income per share of common stock - Diluted
                               
Income (loss) from continuing operations
 
$
0.02
   
$
0.02
   
$
0.06
   
$
(0.14
)
Discontinued operations
   
-
     
(0.01
)
   
-
     
0.05
 
Net income (loss)
 
$
0.02
   
$
0.01
   
$
0.06
   
$
(0.09
)
 
                               
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
 
$
74
   
$
17
   
$
232
   
$
188
 


KATY INDUSTRIES, INC. BALANCE SHEETS - UNAUDITED
(In thousands)

 
 
June 27,
   
December 31,
 
Assets
 
2014
   
2013
 
Current assets:
 
   
 
Cash
 
$
512
   
$
708
 
Accounts receivable, net
   
12,752
     
7,206
 
Inventories, net
   
12,336
     
10,004
 
Other current assets
   
2,042
     
663
 
Assets held for sale
   
21
     
74
 
Total current assets
   
27,663
     
18,655
 
 
               
Other Assets:
               
Goodwill
   
2,788
     
-
 
Intangibles, net
   
4,005
     
-
 
Other
   
1,869
     
1,375
 
Total other assets
   
8,662
     
1,375
 
 
               
Property and equipment
   
60,193
     
55,495
 
Less: accumulated depreciation
   
(49,620
)
   
(48,533
)
Property and equipment, net
   
10,573
     
6,962
 
 
               
Total assets
 
$
46,898
   
$
26,992
 
 
               
Liabilities and stockholders' equity
               
Current liabilities:
               
Accounts payable
 
$
8,408
   
$
5,983
 
Book overdraft
   
328
     
264
 
Accrued expenses
   
9,151
     
8,473
 
Payable to related party
   
3,400
     
2,750
 
Deferred revenue
   
186
     
186
 
Revolving credit agreement
   
22,237
     
7,706
 
Total current liabilities
   
43,710
     
25,362
 
 
               
Deferred revenue
   
227
     
316
 
Other liabilities
   
3,765
     
3,794
 
Total liabilities
   
47,702
     
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
   
(880
)
   
(848
)
Accumulated deficit
   
(123,675
)
   
(125,383
)
Treasury stock
   
(21,437
)
   
(21,437
)
Total stockholders' equity (deficit)
   
(804
)
   
(2,480
)
 
               
Total liabilities and stockholders' equity
 
$
46,898
   
$
26,992
 


KATY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)

 
 
Six Months Ended
 
 
 
June 27,
   
June 28,
 
 
 
2014
   
2013
 
Cash flows from operating activities:
 
   
 
Net income (loss)
 
$
1,708
   
$
(690
)
Income from discontinued operations
   
-
     
387
 
Income (loss) from continuing operations
   
1,708
     
(1,077
)
Depreciation and amortization
   
1,171
     
1,084
 
Amortization of debt issuance costs
   
213
     
102
 
Stock-based compensation
   
35
     
19
 
Deferred income taxes
   
(2,318
)
   
-
 
 
   
809
     
128
 
Changes in operating assets and liabilities:
               
Accounts receivable
   
(4,031
)
   
(2,566
)
Inventories
   
(940
)
   
(1,994
)
Other assets
   
(1,245
)
   
436
 
Accounts payable
   
1,812
     
2,026
 
Accrued expenses
   
338
     
365
 
Payable to related party
   
250
     
250
 
Deferred revenue
   
(90
)
   
(98
)
Other
   
(66
)
   
(377
)
 
   
(3,972
)
   
(1,958
)
 
               
Net cash used in continuing operations
   
(3,163
)
   
(1,830
)
Net cash provided by discontinued operations
   
53
     
866
 
Net cash used in operating activities
   
(3,110
)
   
(964
)
 
               
Cash flows from investing activities:
               
Payment for acquisition, net of cash received
   
(11,006
)
   
-
 
Capital expenditures
   
(373
)
   
(193
)
Net cash used in continuing operations
   
(11,379
)
   
(193
)
Net cash provided by discontinued operations
   
-
     
1,786
 
Net cash (used in) provided by investing activities
   
(11,379
)
   
1,593
 
 
               
Cash flows from financing activities:
               
Net borrowings
   
14,531
     
(512
)
Loan from related party
   
400
     
-
 
Decrease in book overdraft
   
64
     
(118
)
Direct costs associated with debt facilities
   
(672
)
   
-
 
Net cash provided by (used in) financing activities
   
14,323
     
(630
)
 
               
Effect of exchange rate changes on cash from continuing operations
   
(30
)
   
(76
)
Effect of exchange rate changes on cash from discontinued operations
   
-
     
(25
)
Effect of exchange rate changes on cash
   
(30
)
   
(101
)
 
               
Net decrease in cash
   
(196
)
   
(102
)
Cash, beginning of period
   
708
     
621
 
Cash, end of period
 
$
512
   
$
519