|
KATY
INDUSTRIES, INC. REPORTS 2008 FIRST QUARTER RESULTS
ARLINGTON,
VA – May 8, 2008 – Katy Industries, Inc. (OTC BB: KATY) today
reported a net loss in the first quarter of 2008 of ($2.1)
million [($0.27) per share], versus a net loss of ($1.9) million
[($0.24) per share], in the first quarter of 2007, 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 first
quarter of 2008 of ($3.4) million [($0.43) per share], versus a
net loss of ($3.8) million [($0.48) per share], in the same
period of 2007. The operating
loss, as adjusted to exclude all restructuring and other non-recurring
or unusual items, was ($2.9) million [(7.0%) of net sales] in the
first quarter of 2008, compared to an operating loss, as adjusted,
of ($2.0) million [(4.3%) of net sales] in the same period in 2007. Net income (loss), as adjusted,
and operating income (loss), as adjusted, are non-GAAP financial measures
and are further discussed below.
During the first quarter of 2008, Katy reported restructuring
and other non-recurring or unusual items of ($0.3) million
pre-tax [($0.04) per share], including severance, restructuring
and related costs of ($0.1) million, loss on sale of assets of
($0.5) million offset by activity from discontinued businesses of
$0.3 million. During the first
quarter of 2007, Katy reported restructuring and other
non-recurring or unusual items of ($0.5) million pre-tax [($0.07)
per share], including severance, restructuring and related costs of
($0.2) million and loss from operations of discontinued
operations of ($0.4) million offset by a gain on the sale of
assets of $0.1 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 first quarter of 2008, as compared to the same
period in the prior year, included:
·
Net sales in the first
quarter of 2008 were $41.7 million, a decrease of $3.9 million
compared to the same period in 2007. Overall, the decrease of 9% resulted
from lower volumes which are reflective of activity within the janitorial and
food service markets in which we serve as well as reduced
building industry activity.
·
Gross margins
were 9.2% in the first quarter of 2008, versus 12.3% in the first
quarter of 2007. In 2008,
our margins were adversely impacted by overall lower volume
within several of our manufacturing facilities as well as an
unfavorable variance incurred in our LIFO adjustment of $0.6
million.
·
Selling, general
and administrative expenses were $0.8 million lower than the first
quarter of 2007. These
costs represented 16.2% of net sales in the first quarter of 2008,
a decrease from 16.6% of net sales for the same period of 2007. The reduction in percentage
reflects the lower requirements under the Company’s incentive
compensation program as well as various cost improvements.
·
Debt at March 31,
2008 was $16.0 million [33% of total capitalization], versus $54.5
million [60% of total capitalization] at March 31, 2007. The decrease in the ratio of
debt to total capitalization was principally due to the reduction
of debt levels from the proceeds received on the sale of
businesses in 2007. Cash
on hand at March 31, 2008 was $0.6 million versus $2.9 million at
March 31, 2007.
·
Katy used free
cash flow of $6.2 million during the three month period ended
March 31, 2008 versus using $5.8 million of free cash flow during
the three month period ended March 31, 2007. The free cash flow usage during
the first quarter of 2008 was comparable to 2007 as the first
quarter includes higher working capital requirements. Free cash flow, a non-GAAP
financial measure, is discussed further below.
“The results of the first quarter were
disappointing. Since
joining the company in mid-April, my focus has been to conduct a
thorough review of our organization to understand how we can
improve our top and bottom line results,” said David J. Feldman,
Katy’s President and Chief Executive Officer. “The current economic
environment makes the challenge of improving more difficult, but
with a renewed sense of urgency and focus, I am confident that
the company’s performance will improve in the future,” added Mr.
Feldman.
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 measures 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 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, 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
focused on the manufacturing and distribution of commercial cleaning
products and consumer home products.
2008
First Quarter Report
Back to top
|
