KATY INDUSTRIES, INC.
REPORTS
2007
THIRD
QUARTER
RESULTS
ARLINGTON, VA –
November
13,
2007 –
Katy
Industries,
Inc.
(OTC
BB:
KATY)
today
reported
a
net
loss
in
the
third
quarter
of
2007
of
($1.5)
million
[($0.18)
per
share],
versus
a
net
loss
of
($0.9)
million
[($0.11)
per
share],
in
the
third
quarter
of
2006,
as
adjusted
to
exclude
restructuring
and
other
non-recurring
or
unusual
items,
which
are
discussed
below.
Including
these
items,
Katy
reported
a
net
loss
in
the
third
quarter
of
2007
of
($0.8)
million
[($0.10)
per
share],
versus
a
net
loss
of
($2.0)
million
[($0.25)
per
share],
in
the
same
period
of
2006.
Operating
loss,
as
adjusted
to
exclude
all
restructuring
and
other
non-recurring
or
unusual
items,
was
($1.1)
million
[(2.2%)
of
net
sales]
in
the
third
quarter
of
2007,
compared
to
an
operating
loss,
as
adjusted,
of
($0.2)
million
[(0.5%)
of
net
sales]
in
the
same
period
in
2006.
Net
income
(loss),
as
adjusted,
and
operating
income
(loss),
as
adjusted,
are
non-GAAP
financial
measures
and
are
further
discussed
below.
Katy
also
reported
a
net
loss
for
the
nine
months
ended
September
30,
2007
of
($4.0)
million
[($0.51)
per
share],
versus
a
net
loss
of
($4.9)
million
[($0.62)
per
share],
for
the
nine
months
ended
September
30,
2006,
as
adjusted
to
exclude
restructuring
and
other
non-recurring
or
unusual
items,
which
are
discussed
below.
Including
these
items,
Katy
reported
a
net
loss
for
the
nine
months
ended
September
30,
2007
of
($2.8)
million
[($0.35)
per
share],
versus
a
net
loss
of
($9.7)
million
[($1.22)
per
share],
in
the
same
period
of
2006.
The
operating
loss,
as
adjusted
to
exclude
all
restructuring
and
other
non-recurring
or
unusual
items,
was
($3.2)
million
[(2.2%)
of
net
sales]
for
the
nine
months
ended
September
30,
2007,
compared
to
an
operating
loss,
as
adjusted,
of
($4.5)
million
[(3.0%)
of
net
sales]
in
the
same
period
in
2006.
Net
income
(loss),
as
adjusted,
and
operating
income
(loss),
as
adjusted,
are
non-GAAP
financial
measures
and
are
further
discussed
below.
During
the
third
quarter
of
2007,
Katy
reported
restructuring
and
other
non-recurring
or
unusual
items
of
$1.6
million
pre-tax
[$0.20
per
share]
which
represents
operating
activities
of
the
discontinued
businesses
as
discussed
further
below.
During
the
third
quarter
of
2006,
Katy
reported
restructuring
and
other
non-recurring
or
unusual
items
of
($1.3)
million
pre-tax
[($0.17)
per
share],
primarily
consisting
of
severance,
restructuring
and
related
costs
as
well
as
operating
activities
of
the
discontinued
businesses.
Details
regarding
these
items
are
provided
in
the
“Reconciliations
of
GAAP
Results
to
Results
Excluding
Certain
Unusual
Items”
accompanying
this
press
release.
For
the
nine
months
ended
September
30,
2007,
Katy
reported
restructuring
and
other
non-recurring
or
unusual
items
of
$4.4
million
pre-tax
[$0.55
per
share],
including
a
gain
on
the
sale
and
operating
activities
of
discontinued
businesses
of
$8.6
million
offset
by
severance,
restructuring
and
related
costs
of
($2.7)
million
and
loss
on
sale
of
assets
of
($1.5)
million.
For
the
nine
months
ended
September
30,
2006,
Katy
reported
restructuring
and
other
non-recurring
or
unusual
items
of
($2.5)
million
pre-tax
[($0.32)
per
share],
including
severance,
restructuring
and
related
costs
of
($1.6)
million,
loss
from
discontinued
businesses
of
($0.7)
million
and
costs
of
($0.8)
million
related
to
the
cumulative
effect
of
a
change
in
accounting
principle
for
the
implementation
of
SFAS
No.
123R,
Accounting
for
Stock-Based
Compensation
offset
by
gain
on
SESCO
joint
venture
transaction
of
$0.6
million.
Details
regarding
these
items
are
provided
in
the
“Reconciliations
of
GAAP
Results
to
Results
Excluding
Certain
Unusual
Items”
accompanying
this
press
release.
Financial
highlights
for
the
third
quarter
of
2007,
as
compared
to
the
same
period
in
the
prior
year,
included:
·
On
November
1,
2007,
the
Company
entered
into
a
definitive
agreement
to
sell
the
Woods
U.S.
and
Woods
Canada
businesses
which
comprises
our
Electrical
Products
Group.
The
sale
is
expected
to
close
by
November
30,
2007.
As
of
September
30,
2007,
the
Company
determined
these
businesses
met
the
criteria
as
an
Asset
Held
for
Sale
which
results
in
all
operating
activities
being
classified
as
discontinued
operations
for
all
periods
presented.
Besides
the
Woods
U.S.
and
Woods
Canada
businesses,
the
discontinued
operations
also
includes
the
Metal
Truck
Box
business,
Consumer
United
Kingdom
business
and
Contico
Manufacturing,
Ltd.
business,
all
of
which
were
sold
in
either
2006
or
2007.
.
·
Net
sales
in
the
third
quarter
of
2007
were
$49.2
million,
a
decrease
of
$2.7
million
compared
to
the
same
period
in
2006
primarily
due
to
lower
volume
activity
within
our
Glit
business
unit.
Overall,
the
decrease
in
net
sales
of
5%
resulted
from
lower
volumes
of
11%
offset
by
higher
pricing
of
6%.
·
Gross
margins
were
11.3%
in
the
third
quarter
of
2007,
versus
14.6%
in
the
third
quarter
of
2006.
In
2007,
our
margins
were
adversely
impacted
by
the
above
lower
volume
as
well
as
production
inefficiencies
at
our
Glit
business
unit.
In
addition,
the
Company
had
an
unfavorable
variance
of
approximately
$0.7
million
to
its
quarterly
LIFO
adjustment.
·
Selling,
general
and
administrative
expenses
were
$1.2
million
lower
than
the
third
quarter
of
2006.
These
costs
represented
13.4%
of
net
sales
in
the
third
quarter
of
2007,
a
decrease
from
15.0%
of
net
sales
for
the
same
period
of
2006.
The
reduction
in
percentage
reflects
the
lower
requirements
under
the
Company’s
incentive
compensation
plan
and
self
insurance
programs
as
well
as
various
cost
improvements
implemented
during
the
past
year.
·
Debt
at
September
30,
2007
was
$52.4
million
[61%
of
total
capitalization],
versus
$62.1
million
[58%
of
total
capitalization]
at
September
30,
2006.
The
increase
in
the
ratio
of
debt
to
total
capitalization
was
principally
due
to
the
lower
stockholders’
equity
which
resulted
from
the
net
loss
reflected
over
the
past
twelve
months.
In
addition,
stockholders’
equity
has
been
impacted
from
the
adoption
of
SFAS
No.
158,
Employers’
Accounting
for
Defined
Benefit
Pension
and
Other
Postretirement
Plans
and
FIN
48,
Accounting for Uncertainty in Income Taxes.
Debt
has
been
reduced
as
a
result
of
proceeds
received
from
the
various
business
units
sold
in
the
past
twelve
months.
Cash
on
hand
at
September
30,
2007
was
$2.2
million
versus
$4.2
million
at
September
30,
2006.
·
Katy
Katy
used
free
cash
flow
of
$15.7
million
during
the
nine
month
period
ended
September
30,
2007
versus
using
$5.9
million
of
free
cash
flow
during
the
nine
month
period
ended
September
30,
2006.
The
increased
use
of
cash
was
primarily
attributable
to
the
higher
working
capital
requirements
in
2007
as
compared
to
2006.
Free
cash
flow,
a
non-GAAP
financial
measure,
is
discussed
further
below.
“The Electrical Products
Group
transaction
will
move
Katy
to
a
single-business
model
which
will
allow
the
organization
to
further
focus
its
resources
on
our
core
business,
Continental
Commercial
Products,
which
services
the
janitorial/sanitary
and
food
service
markets,”
said
Anthony
T.
Castor
III,
Katy’s
President
and
Chief
Executive
Officer.
“While
our
quarterly
performance
was
impacted
by
lower
volume,
we
believe
that
our
cost
position
will
improve
as
we
continue
to
focus
on
our
core
business,”
added
Mr.
Castor.
Non-GAAP Financial Measures
To
provide
transparency
about
measures
of
Katy’s
financial
performance
which
management
considers
most
relevant,
we
supplement
the
reporting
of
Katy’s
consolidated
financial
information
under
GAAP
with
certain
non-GAAP
financial
measures,
including
Net
Income
(Loss),
as
adjusted,
Net
Income
(Loss),
as
adjusted
per
share,
Operating
Income
(Loss)
and
Operating
Income
(Loss)
as
adjusted,
as
a
percentage
of
sales,
and
Free
Cash
Flow.
Details
regarding
these
measures
and
reconciliations
of
these
non-GAAP
measures
to
comparable
GAAP
measures
are
provided
in
the
“Reconciliations
of
GAAP
Results
to
Results
Excluding
Certain
Unusual
Items”
and
“Statements
of
Cash
Flows”
accompanying
this
press
release.
These
non-GAAP
financial
measures
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
measures
to
analyze
our
performance
would
have
material
limitations
because
their
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
measure
reflected
below
to
understand
and
analyze
the
results
of
its
business.
Katy
believes
the
presentation
of
these
measures
is
nonetheless
useful
to
investors
for
the
following
reasons:
Net
Income
(Loss),
as
adjusted,
Net
Income
(Loss),
as
adjusted
per
share,
Operating
Income
(Loss)
and
Operating
Income
(Loss)
as
adjusted,
as
a
percentage
of
sales:
All
of
these
non-GAAP
operating
measurements
adjust
the
corresponding
GAAP
measurement
to
exclude
restructuring
and
other
non-recurring
and
unusual
items,
as
appropriate.
Following
the
recapitalization
of
the
company
in
2001,
a
comprehensive
restructuring
program
became
essential
to
the
future
viability
of
Katy.
All
other
non-recurring
and
unusual
items
are
typically
indicative
of
non-cash
impacts
to
Katy’s
results
of
operations.
These
non-GAAP
measures
are
used
by
management
as
Katy
believes
that
these
measures
are
more
indicative
of
the
company’s
underlying
business
performance
and
that
eliminating
restructuring
and
other
non-recurring
and
unusual
charges
provides
more
meaningful
year-to-year
comparison
of
the
company’s
operations.
Free
Cash
Flow:
Free
cash
flow
is
defined
by
Katy
as
cash
flow
from
operations
less
capital
expenditures
and
cash
dividends
paid.
Katy
believes
that
free
cash
flow
is
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 various forward-looking statements. The forward-looking statements are based on the 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, detailed from time to time in Katy’s filings with the SEC, that may lead to results that differ materially from those expressed in any forward-looking statement made by the company or on its behalf. 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
with
current
interests
primarily
in
Maintenance
Products
and
Electrical
Products.
After
the
sale
of
the
Electrical
Products
Group,
Katy
will
be
focused
on
the
manufacturing
and
distribution
of
commercial
cleaning
products
and
consumer
home
products.
2007
Third Quarter Report
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