BUSINESS ACQUISITIONS

9 Months Ended

Sep. 25, 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 nine months ended September 26, 2014, do not include any revenues or expenses related to the acquisition 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 September 26, 2014		Nine Months Ended September 26, 2014
Net Sales	$	26,543	$	73,606
Gross profit		4,994		12,176
Net income		1,351		3,058
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	$	0.17	$	0.38
Diluted earnings per share	$	0.05	$	0.11

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 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.

Accounts receivable	$	757
Inventory		1,399
Property and equipment		2,317
Intangible assets		17,789
Goodwill		5,821
Total assets acquired		28,083
Accounts payable		2,162
Accrued expenses		66
Total liabilities assumed		2,228
Net assets acquired	$	25,855

The amounts in the above table vary from those previously reported in the prior Form 10-Q due to new information that became available to management in the three months ended September 25, 2015, which resulted in an additonal $6.0 million being allocated to customer lists, with the offset to goodwill. 

The accompanying consolidated statements of income for the three and nine months ended September 25, 2015 and September 26, 2014, do not include any revenues or expenses related to the acquisition prior to the closing date. The following unaudited pro forma consolidated financial information is presented as if the Tiffin, Ohio 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					Nine Months Ended
	September 25, 2015			September 26, 2014		September 25, 2015			September 26, 2014
Net Sales	$	31,048		$	33,356	$	90,431		$	92,480
Gross profit		4,775			5,993		15,044			15,046
Net (loss) income		(1,605	)		2,349		(2,549	)		6,047
Average common shares outstanding - Basic		7,951			7,951		7,951			7,951
Dilutive effect of convertible preferred stock		-			18,859		-			18,859
Average common shares outstanding - Diluted		7,951			26,810		7,951			26,810
Basic earnings per share	$	(0.20	)	$	0.30	$	(0.32	)	$	0.76
Diluted earnings per share	$	(0.20	)	$	0.09	$	(0.32	)	$	0.23

The Company incurred no costs and $1.3 million in costs related to the April 7, 2015 acquisition during the three and nine months ended September 25, 2015. These costs were included within general and administrative expenses.