KATY NEWS
FOR IMMEDIATE RELEASE
REPORTS 2008 FOURTH QUARTER RESULTS
Katy also reported
a net loss for the year ended December 31, 2008 of ($11.2) million [($1.41) per
share], versus a net loss of ($6.4) million [($0.81) per share], for the year
ended December 31, 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 for the year ended December 31, 2008 of ($16.5)
million [($2.07) per share], versus a net loss of ($1.5) million [($0.19) per
share], in the prior year. The operating loss, as adjusted to exclude all
restructuring and other non-recurring or unusual items, was ($16.8) million
[(10.0%) of net sales] for the year ended December 31, 2008, compared to an
operating loss, as adjusted, of ($5.7) million [(3.1%) of net sales] in the prior
year. Net income (loss), as adjusted, and operating income (loss), as adjusted,
are non-GAAP financial measures and are further discussed below.
During the fourth quarter
of 2008, Katy reported restructuring and other non-recurring or unusual items
of $1.0 million pre-tax [$0.13 per share] primarily consisting of foreign tax
credits from discontinued operations and a loss on the sale of assets. During
the fourth quarter of 2007, Katy reported restructuring and other non-recurring
or unusual items of $3.8 million pre-tax [$0.47 per share] primarily consisting
of activity from 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 year ended
December 31, 2008, Katy reported restructuring and other non-recurring or
unusual items of $1.7 million pre-tax [$0.21 per share], including activity
from discontinued businesses of $2.3 million and severance, restructuring and
related costs of $0.4 million offset by the loss on sale of assets of ($1.0)
million. For the year ended December 31, 2007, Katy reported restructuring and
other non-recurring or unusual items of $8.2 million pre-tax [$1.02 per share],
including activity from discontinued businesses of $12.4 million and income
from the sale of our equity investment of $0.8 million, offset by severance,
restructuring and related costs of ($2.6) million and a loss on the sale of
assets of ($2.4) 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 fourth quarter of 2008, as compared to the same period in
the prior year, included:
·
Net sales in the fourth
quarter of 2008 were $36.6 million, a decrease of $6.4 million compared to the
same period in 2007. Overall, the decrease of 14.9% resulted primarily from lower
volumes within
our Contico, Continental and Glit business units. Within the Contico business
unit, which sells primarily to mass merchant customers, the volume decline was
partially due to our decision to exit certain unprofitable business lines in
the face of rising resin costs earlier in the year.
·
Selling, general
and administrative expenses were $1.6 million higher in the fourth quarter of
2008 than in the fourth quarter of 2007. The increase was primarily driven by higher
costs associated with the Company’s self-insurance programs along with costs
related to the Company’s plan to deregister its common stock under the
Securities Exchange Act of 1934, as amended, which has subsequently been
abandoned.
·
Debt at December
31, 2008 was $17.5 million [48% of total capitalization], versus $13.5 million
[27% of total capitalization] at December 31, 2007.
·
Katy used free
cash flow of $12.4 million during the year ended December 31, 2008 versus using
$14.5 million of free cash flow during the year ended December 31, 2007. The decrease
in free cash flow usage from 2007 to 2008 was primarily a result of lower
accounts receivable and inventory levels due to reduced volume. Free cash flow,
a non-GAAP financial measure, is discussed further below.
“The fourth quarter results were representative of the
overall economic decline and the continued softness in our markets,” said David
J. Feldman, Katy’s President and Chief Executive Officer. “We believe that 2009
will be a better year with performance improvements coming in the second half
of the year.”
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 net 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 net sales: All of these non-GAAP operating measurements
adjust the corresponding GAAP measurement to exclude restructuring and other
non-recurring and unusual items, including activity from discontinued
operations, and to reflect a more normalized effective tax rate. 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. Management believes that these non-GAAP measures provide useful
information to investors because they 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 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 may be identified
by such words of phrases as “should”, “intends”, “is subject to”, “expects”,
“will”, “continue”, “anticipate”, “estimated”, “projected”, “may”, “we
believe”, “future prospects”, or similar expressions. 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 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 our 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 our
facilities or those of our suppliers; legal claims or other regulator 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, 2007. 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.
Company
contact:
Katy
Industries, Inc.
James
W. Shaffer
(314)
656-4321