Katy Industries, Inc. Reports 2013 Fourth Quarter Results

BRIDGETON, Mo., March 31, 2014 /PRNewswire/ -- Katy Industries, Inc. (OTC BB: KATY) today reported a net loss in the fourth quarter of 2013 of $1.0 million, or $0.13 per share, versus a net loss of $9.1 million, or $1.14 per share, in the fourth quarter of 2012. The fourth quarter 2012 included a one-time impairment charge of $1.9 million and a loss from discontinued operations of $5.9 million. Loss from continuing operations was $0.7 million in the fourth quarter of 2013 compared to $3.1 million in the fourth quarter of 2012. Operating loss was $0.6 million, or 3.4% of net sales, in the fourth quarter of 2013. Excluding the one-time impairment charge the operating loss was $1.0 million, or 5.6% of net sales in the fourth quarter of 2012.

Financial highlights for the fourth quarter of 2013, as compared to the same period in the prior year, included:

• Net sales in the fourth quarter of 2013 were $18.4 million, an increase of $0.1 million from the fourth quarter of 2012. Net sales increased primarily as a result of a volume increase in our Continental business unit, which was partially offset by a volume shortfall in our Wilen business unit.
• Gross margin was 13.3% in the fourth quarter of 2013, a decrease from 15.9% in the fourth quarter of 2012. The decrease was primarily a result of higher raw material prices.
• Selling, general and administrative expenses were $3.1 million for the fourth quarter of 2013 compared to $3.9 million in the fourth quarter of 2012. The reduction was primarily due to headcount reductions and more favorable claims experience related to casualty insurance in the current year.

Katy also reported a net loss for the year ended December 31, 2013 of $1.5 million, or $0.19 per share, versus a net loss of $15.2 million, or $1.90 per share, for the year ended December 31, 2012. The year ended December 31, 2012 included a one-time impairment charge of $1.9 million and a loss from discontinued operations of $9.7 million. Loss from continuing operations was $1.6 million in 2013 compared to $5.4 million in 2012. Operating loss was $1.0 million, or 1.2% of net sales.  Excluding the one-time impairment charge the operating loss was $3.0 million, or 3.7% of net sales for the year ended December 31, 2012.

Financial highlights for the year ended December 31, 2013, as compared to the year ended December 31, 2012, included:

• Net sales for the year ended December 31, 2013 were $78.3 million, a decrease of $2.1 million, or 2.6%, compared to 2012. The majority of the decrease was a result of volume shortfall in our Wilen unit, which was partially offset by a volume increase in our Continental business unit.
• Gross margin was 15.2% for the year ended December 31, 2013, a decrease of 0.1 percentage point from the prior year. Gross margin was impacted by an unfavorable LIFO adjustment of $0.1 million for the year ended December 31, 2013 as compared to $0.6 million for the year ended December 31, 2012. Excluding the LIFO adjustment in both periods, gross margin decreased by 0.7 percentage points from the year ended December 31, 2012. The decrease was primarily a result of higher raw material costs.
• Selling, general and administrative expenses were $12.3 million for the year ended December 31, 2013, a $3.0 million decrease from the prior year. The decrease was primarily due to one-time settlements, headcount reductions and better insurance experience.

During 2013 Katy closed its Glit division and sold property, equipment and intangibles, which were reported as assets held for sale as of December 31, 2012. All other working capital items were settled in the ordinary course of business.  Income from discontinued operations was $0.1 million for the year ended December 31, 2013 compared to a loss from discontinued operations of $9.7 million for the year ended December 31, 2012.

Operations provided $1.8 million of free cash flow in 2013 compared to providing $2.7 million during the prior year. The decrease is primarily due to the prior year having a refund of $2.6 million of cash collateralization of letters of credit in connection with the termination of the PNC Credit Agreement, which was partially offset by an increase in accounts payable. Free cash flow, a non-GAAP financial measure, is discussed further below.

Debt at December 31, 2013 was $7.7 million versus $10.9 million at December 31, 2012.

"The fourth quarter saw higher raw material prices which negatively impacted gross margin," said David J. Feldman, Katy's President and Chief Executive Officer. "In 2013 we were able to significantly reduce our net loss and outstanding debt. We look forward to continued earnings improvement in 2014."

Non-GAAP Financial Measures
To provide transparency about measures of Katy's financial performance which management considers most relevant, the Company supplements the reporting of Katy's consolidated financial information under GAAP with a non-GAAP financial measure, Free Cash Flow.  Free Cash Flow is defined by Katy as cash flow from operating activities less capital expenditures. A reconciliation of this non-GAAP measure to a comparable GAAP measure is provided in the "Statements of Cash Flows" accompanying this press release. This non-GAAP financial measure 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 measure to analyze the Company's performance would have material limitations because its 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 this measure is nonetheless 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 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 include all statements of the Company's plans, beliefs or expectations with respect to future events or developments and often may be identified by such words or phrases as "anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," "may," "should," "will," "continue," "is subject to," or similar expressions.  These 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 its 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 the Company's facilities or those of its 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, 2013. 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 manufacture, import and distribution of commercial cleaning products and consumer home products.

Company contact:
Katy Industries, Inc.
James W. Shaffer
(314) 656-4321

SOURCE Katy Industries, Inc.