BUSINESS ACQUISITIONS

6 Months Ended

Jun. 26, 2015

BUSINESS ACQUISITIONS [Abstract]

BUSINESS ACQUISITIONS

Note 10.  BUSINESS ACQUISITIONS

On February 19, 2014, the Company acquired all of the equity interests of FTW, the parent company of Ft. Wayne Plastics, Inc. (“FWP”), a leading manufacturer of medium- to large- sized molded plastic components, specializing in low pressure, multi-nozzle structural plastic and gas assist solutions, for $11.0 million in cash, less $200,000 in subsequent working capital adjustments. The acquisition of FWP’s premiere manufacturing capabilities and dedication to customer service are highly complementary with the Company.

The accompanying consolidated statements of income for the three and six months ended June 27, 2014, do not include any revenues or expenses related to the acquisitions prior to the closing date. The following unaudited pro forma consolidated financial information is presented as if the FTW acquisition had occurred at the beginning of the periods presented. In addition, this unaudited pro forma financial information is provided for illustrative purposes only and should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the acquisition had actually occurred during those periods, or the results that may be obtained in the future as a result of the acquisition.

Pro Forma (unaudited)	Three months ended		Six months ended
	June 27, 2014		June 27, 2014
Net Sales	$	25,625	$	47,063
Gross profit		3,979		7,182
Net income		411		1,707
Average common shares outstanding - Basic		7,951		7,951
Dilutive effect of convertible preferred stock		18,859		18,859
Average common shares outstanding - Diluted		26,810		26,810
Basic earnings per share	$	0.05	$	0.21
Diluted earnings per share	$	0.02	$	0.06

On April 7, 2015, Continental Commercial Products, LLC, a Delaware limited liability company (“CCP”) and wholly owned subsidiary of Katy Industries, Inc. (the “Company”), completed the acquisition of substantially all of the  assets and business operations related to the plastics shelving and cabinet business of Centrex Plastics, LLC, an Ohio limited liability company (“Centrex”) and T.R. Plastics, LLC, an Ohio limited liability company (“TR Plastics”) for $23.9 million in cash at closing, plus certain post-closing earnout payments of not less than $2.0 million over three years, as described in the Asset Purchase Agreement dated April 7, 2015 (the “Purchase Agreement”) by and between CCP, Centrex, TR Plastics, and Terrence L. Reinhart, the majority member of Centrex and the sole member of TR Plastics. The acquisition of the Tiffin, Ohio manufacturing facility brings a breadth of shelving and storage cabinet solutions to the Katy consumer storage product line which we believe are highly complementary to our current products. The accompanying consolidated statements of income for the three and six months ended June 26, 2015 and June 27, 2014, do not include any revenues or expenses related to the acquisition prior to the closing date.

The Company recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the date of the acquisition as outlined in the table below. As of the filing date of this Form 10-Q, the Company is still finalizing the allocation of the purchase price, primarily related to goodwill and intangibles. Further, the Company notes it is impracticable to present pro forma comparative financial statements as the standalone audit of the Tiffin manufacturing facility has not been completed as of the current filing date due to discrete financial statements not being readily available. The audit of such financial statements is currently in process.

Accounts receivable	$	757
Inventory		1,399
Fixed assets		2,317
Intangible assets		11,805
Goodwill		11,805
Total assets acquired		28,083
Accounts payable		2,162
Accrued expenses		66
Total liabilities assumed		2,228
Net assets acquired	$	25,855

The Company incurred $1.0 million and $1.3 million in costs related to the April 7, 2015 acquisition during the three and six months ended June 26, 2015. These costs were included within general and administrative expenses.