-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DhF4styfQIdhHgQe34abSjbRbMzObUitYuP9yV5EY+3ulFcit2b2bIKOzUbWEcGA tOnBnMFrd5yxhcG+CP4YIw== 0000054681-96-000008.txt : 19960816 0000054681-96-000008.hdr.sgml : 19960816 ACCESSION NUMBER: 0000054681-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KATY INDUSTRIES INC CENTRAL INDEX KEY: 0000054681 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 751277589 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05558 FILM NUMBER: 96614965 BUSINESS ADDRESS: STREET 1: 6300 S SYRACUSE WAY STE 300 CITY: ENGLEWOOD STATE: CO ZIP: 80111-6723 BUSINESS PHONE: 3034860017 MAIL ADDRESS: STREET 1: 6300 S SYRACUSE WAY SUITE 300 CITY: ENGLEWOOD STATE: CO ZIP: 80111 10-Q 1 Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: June 30, 1996 Commission File Number 1-5558 Katy Industries, Inc. (Exact name of registrant as specified in its charter) Delaware 75-1277589 (State of Incorporation) (I.R.S. Employer Identification No.) 6300 S. Syracuse Way, Suite 300, Englewood, Colorado 80111 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (303)290-9300 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Class Outstanding at July 30, 1996 Common stock, $1 par value 8,247,562 KATY INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 AND DECEMBER 31, 1995 June 30, December 31, 1996 1995 -------- -------- (Thousands of Dollars) CURRENT ASSETS: Cash and cash equivalents $ 39,113 $ 43,701 Marketable securities - available for sale 8,185 16,653 Accounts receivable, trade, net 28,034 22,399 Notes and other receivables, net 2,962 15,645 Inventories - Note 1 38,263 35,902 Other current assets 16,376 15,297 -------- -------- Total current assets 132,933 149,597 -------- -------- OTHER ASSETS: Investments, at equity, in unconsolidated subsidiaries 6,875 7,328 Investments in waste-to-energy facility 11,209 11,360 Notes receivable, net 1,457 1,566 Cost in excess of net assets of businesses acquired, net 6,990 7,249 Miscellaneous 6,080 5,664 -------- -------- Total other assets 32,611 33,167 -------- -------- PROPERTIES, at cost: Land and improvements 3,759 4,308 Buildings and improvements 32,219 32,464 Machinery and equipment 40,962 38,723 -------- -------- 76,940 75,495 Accumulated depreciation (34,478) (32,847) -------- -------- Net properties 42,462 42,648 -------- -------- $208,006 $225,412 ======== ======== See Notes to Condensed Consolidated Financial Information. KATY INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 1996 AND DECEMBER 31, 1995 June 30, December 31, 1996 1995 -------- -------- (Thousands of Dollars) CURRENT LIABILITIES: Notes payable - banks $ - $ 14,193 Accounts payable 9,623 8,361 Accrued compensation 2,922 3,792 Accrued expenses 24,230 23,947 Accrued interest and taxes 285 1,342 Current maturities, long-term debt 703 913 Dividends payable 675 624 -------- -------- Total current liabilities 38,438 53,172 -------- -------- LONG-TERM DEBT, less current maturities 8,878 9,346 DEFERRED INCOME TAXES 25,310 24,598 OTHER LIABILITIES 8,085 7,966 -------- -------- Total liabilities 80,711 95,082 -------- -------- SHAREHOLDERS' EQUITY: Common stock, $1 par value, authorized 25,000,000 shares, issued 9,822,204 and 9,821,329 shares 9,822 9,821 Additional paid-in capital 51,117 51,111 Foreign currency translation adjustment (1,644) (1,640) Unrealized holding gains, net of tax 2,669 5,297 Retained earnings 87,414 81,925 Treasury stock, 1,569,712 and 1,097,142 shares (22,083) (16,184) -------- -------- Total shareholders' equity 127,295 130,330 -------- -------- $208,006 $225,412 ======== ======== See Notes to Condensed Consolidated Financial Information. KATY INDUSTRIES, INC. STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995 Three Months Six Months Ended June 30, Ended June 30, 1996 1995 1996 1995 ------- ------- ------- ------- (Thousands of Dollars Except Per Share Data) Net sales $44,857 $49,609 $87,322 $87,967 Cost of goods sold 30,272 35,717 58,823 63,091 ------- ------- ------- ------- Gross profit 14,585 13,892 28,499 24,876 Selling, general and administrative 11,642 13,929 23,436 25,342 ------- ------- ------- ------- Income (loss) from operations 2,943 (37) 5,063 (466) Interest expense (290) (945) (597) (1,363) Interest income 557 380 1,258 656 Other, net 432 1,060 5,355 822 Reversal of previously recorded losses - 4,920 - 4,920 ------- ------- ------- ------- Income from consolidated operations before provision for income taxes 3,642 5,378 11,079 4,569 (Provision) benefit for income taxes (1,250) 2,477 (4,075) 1,849 ------- ------- ------- ------- Income from consolidated operations 2,392 7,855 7,004 6,418 Equity in income (loss) of unconsolidated subsidiaries (net of tax) (93) 500 (276) 1,200 ------- ------- ------- ------- Net income 2,299 8,355 6,728 7,618 ======= ======= ======= ======= Earnings per share $ .28 $ .92 $ .80 $ .84 ======= ======= ======= ======= Average shares outstanding (in thousands) 8,298 9,076 8,443 9,076 ======= ======= ======= ======= Dividends paid per share - Common Stock $ .0750 $ .0625 $ .1375 $ .1250 ======= ======= ======= ======= See Notes to Condensed Consolidated Financial Information. KATY INDUSTRIES, INC. STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS SIX MONTHS ENDED JUNE 30, 1996 AND 1995 Six Months Ended June 30, 1996 1995 ------- ------- (Thousands of Dollars) Cash flows from operating activities: Net income $ 6,728 $ 7,618 Depreciation and amortization 2,945 3,646 Disposition of portion of investment in subsidiary - (7,902) Gain on marketable security transactions (4,914) - Adjustments to reconcile net income to net cash flows from operating activities (7,936) (7,119) ------- ------- Net cash flows from operating activities (3,177) (3,757) ------- ------- Cash flows from investing activities: Proceeds from sale of assets 1,170 94 Collections of notes receivable 13,509 481 Acquisition of business, net of cash acquired - (23,480) Time deposits and marketable securities, net 9,191 - Capital expenditures (3,299) (5,317) ------- ------- Net cash flows from investing activities 20,571 (28,222) ------- ------- Cash flows from financing activities: Notes payable activity, net (14,193) 23,063 Principal payments on long-term debt (678) (1,662) Payment of dividends (1,212) (1,135) Purchase of treasury shares (5,899) - Proceeds from issuance of long-term debt - 5,938 ------- ------- Net cash flows from financing activities (21,982) 26,204 ------- ------- Net decrease in cash and cash equivalents (4,588) (5,775) Cash and cash equivalents beginning of period 43,701 8,475 ------- ------- Cash and cash equivalents end of period $39,113 $ 2,700 ======= ======= See Notes to Condensed Consolidated Financial Information. KATY INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION JUNE 30, 1996 (1) Significant Accounting Policies Consolidation Policy - -------------------- The condensed financial statements include, on a consolidated basis, the accounts of Katy Industries, Inc. and subsidiaries (Katy) in which it has a greater than 50% interest. The condensed consolidated financial statements at June 30, 1996 and for the three and six month periods then ended are unaudited and reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of financial condition and results of operations. Interim figures are subject to year-end audit adjustments and may not be indicative of results to be realized for the entire year. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Inventories - ----------- The components of inventories are as follows: June 30, December 31, 1996 1995 ------- ------- (Thousands of Dollars) Raw materials $16,265 $14,471 Work in process 8,296 7,132 Finished goods 13,702 14,299 ------- ------- $38,263 $35,902 ======= ======= Earnings Per Share - ------------------ Earnings per share is computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents, in the form of stock options, have been included in the calculation of weighted average shares outstanding under the treasury stock method. Stock-Based Compensation - ------------------------ In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which is effective for the Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosure of stock-based compensation arrangements with employees. Companies are permitted to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of equity instruments awarded. Katy will continue to apply APB Opinion No. 25 to its stock-based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share. (2) Nonrecurring Items Included in Other, net during the first half of 1996 was a gain of $4,914,000 resulting from the sale of Union Pacific Corporation common stock during the first quarter of 1996. On June 30, 1995 the Company sold one-half of its interest in Schon & Cie, AG (Schon), reducing its interest to 37.5%. In connection with the sale, the Company recorded a gain of $4,920,000, reflecting the reversal of previously recorded losses of Schon, and a tax benefit of $3,000,000 associated with the transaction. Losses from the operations of Schon recorded in the first and second quarters of 1995 were $2,124,000 and $1,658,000, respectively. During the second quarter, 1996, Schon acquired J. Sandt AG, a major competitor in the same geographical area. The transaction reduced Katy's interest in Schon to 27.6%. The transaction had no effect on Katy's results for the period. KATY INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS JUNE 30, 1996 RESULTS OF OPERATIONS Three Months Ended June 30, 1996 - -------------------------------- Following are summaries of sales and operating income for Katy's operating segments for the three months ended June 30, 1996 and 1995: Sales ---------------------------------------- Increase (Decrease) 1996 1995 Amount Percent ------- ------- ------- ------- (Thousands of Dollars) Distribution and Service $21,671 $19,471 $ 2,200 11.3% Industrial and Consumer Manufacturing 14,029 11,830 2,199 18.6 Machinery Manufacturing 9,157 18,308 (9,151) (50.0) Operating Income ---------------------------------------- Percent of Sales 1996 1995 1996 1995 ------ ------ ----- ----- (Thousands of Dollars) Distribution and Service $2,168 $ 961 10.0% 4.9% Industrial and Consumer Manufacturing 1,283 1,241 9.1 10.5 Machinery Manufacturing 729 34 8.0 0.2 The Distribution and Service Group's sales increase was due to increases in the electronic components and rerolled metals areas. The increase in the Group's operating income was a result of this increased volume and margin improvements. The increased sales of the Industrial and Consumer Manufacturing Group was due primarily to the acquisition of Gemtex in August 1995, partially offset by the sale of Moldan in December 1995. Sales from existing operations increased due to increases in sales of sanitary maintenance supplies. Lower margins resulting from a change in product mix accounted for the lower increase in operating income. The Machinery Manufacturing Group's sales decrease results primarily from the absence of sales of Schon and B.M. Root in 1996. The improvement in operating income in 1996 was primarily due to the absence of losses from Schon. The decrease in selling, general and administrative expenses is primarily due to the absence of Schon. Interest expense declined due to lower debt levels, while interest income increased due to higher cash levels resulting from the sale of Syratech stock and Union Pacific stock. Reversal of previously recorded losses represents the reversal of losses of Schon, the investment in which was fully written-off in the second quarter of 1995. The tax benefit in 1995 results from the restoration of losses from Schon not requiring tax effect and the related tax benefit of $3,000,000. Equity in income of unconsolidated subsidiaries in the 1995 period includes income from Katy's interest in Syratech which was sold in December 1995. Six Months Ended June 30, 1996 - ------------------------------ Following are summaries of sales and operating income for the six months ended June 30, 1996 and 1995 by industry segment: Sales --------------------------------------- Increase (Decrease) 1996 1995 Amount Percent ------- ------- ------- ------- (Thousands of Dollars) Distribution and Service $41,875 $28,563 $13,312 46.6% Industrial and Consumer Manufacturing 28,566 24,399 4,167 17.1 Machinery Manufacturing 16,881 35,005 (18,124) (51.8) Operating Income -------------------------------------- Percent of Sales 1996 1995 1996 1995 ------ ------ ----- ----- (Thousands of Dollars) Distribution and Service $3,967 $1,859 9.5% 6.5% Industrial and Consumer Manufacturing 2,942 2,702 10.3 11.1 Machinery Manufacturing 1,488 (779) 8.8 (2.2) The increase in the Distribution and Service Group's sales was due to increases in sales of electronic components and rerolled metals and to the addition of GC Thorsen at the end of the first quarter of 1995. The increased sales of the Industrial and Consumer Manufacturing Group was due primarily to the acquisition of Gemtex in August 1995, partially offset by the sale of Moldan in December 1995. Sales from existing operations increased due to increases in sales of sanitary maintenance supplies. Lower margins resulting from a change in product mix accounted for the lower increase in operating income. The Machinery Manufacturing Group's sales decrease results primarily from the absence of sales of Schon and B.M. Root in 1996. The improvement in operating income in 1996 was primarily due to the exclusion of losses from Schon. The decrease in selling, general and administrative expenses is primarily due to the absence of Schon, offset by the addition of GC Thorsen in the second quarter of 1995. Interest expense decreased due to lower debt levels, while interest income increased due to higher cash levels resulting from the sale of Syratech stock and Union Pacific stock. Reversal of previously recorded losses represents the reversal of losses of Schon, the investment in which was fully written-off in the second quarter of 1995. Other, net in 1996 includes a $4,914,000 gain on the sale of Union Pacific stock. The tax benefit in 1995 results from the restoration of losses from Schon not requiring tax effect and the related tax benefit of $3,000,000. Equity in income of unconsolidated subsidiaries in the 1995 period includes income from Katy's interest in Syratech which was sold in December 1995. LIQUIDITY AND CAPITAL RESOURCES Combined cash, cash equivalents and marketable securities decreased to $47,298,000 on June 30, 1996 compared to $60,354,000 on December 31, 1995 primarily due to the repurchase of Katy common stock and to increases in working capital needs caused by higher sales and seasonal factors. Katy expects to commit an additional $3,000,000 for capital projects during the remainder of 1996. Funding for these expenditures and for working capital needs is expected to be accomplished through use of available cash and internally generated funds. The Company also continues to search for appropriate acquisition candidates, and may obtain all or a portion of the financing for future acquisitions through the incurrence of additional debt, which the Company believes it can obtain at reasonable terms and pricing. At June 30, 1996, Katy had short and long-term indebtedness for money borrowed of $9,581,000. Total debt was 7% of total debt plus equity at June 30, 1996. Katy has a secured short-term line of credit with The Northern Trust Company in the amount of $20,000,000 which it expects to use principally for letters of credit. In August 1995, Katy's Board of Directors authorized the Company to repurchase up to 400,000 shares of its common stock over the subsequent twelve months in open market transactions. In January 1996, the board authorized an additional 500,000 shares to be repurchased. In connection therewith, Katy repurchased 155,600 shares in the quarter ended June 30, 1996 at a total cost of $2,089,000. Subsequent to June 30, 1996 through August 13, 1996 the Company purchased an additional 22,700 shares at a cost of $290,900, bringing the total shares repurchased under the authorization to 846,700. The company will finalize this program by year-end 1996. The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the U.S. Environmental Protection Agency and certain state environmental agencies and private parties as potentially responsible parties ("PRP's") at a number of hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act ("Superfund") and equivalent state laws and, as such, may be liable for the cost of cleanup and other remedial activities at these sites. Responsibility for cleanup and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation formula. The means of determining allocation among PRPs is generally set forth in a written agreement entered into by the PRPs at a particular site. An allocation share assigned to a PRP is often based on the PRP's volumetric contribution of waste to a site. The Company is also involved in remedial response and voluntary environmental clean-up at a number of other sites which are not currently the subject of any legal proceedings under Superfund, including certain of its current and formerly owned manufacturing facilities. Based on its estimate of allocation of liability among PRPs, the probability that other PRPs, many of whom are large, solvent, public companies, will fully pay the costs apportioned to them, currently available information concerning the scope of contamination, estimated remediation costs, estimated legal fees and other factors, the Company believes that it has an adequate accrual for all known liabilities at June 30, 1996. Although management believes that these actions in the aggregate are not likely to have a material adverse effect on Katy's consolidated financial position or results of operations, further costs could be significant and will be recorded as a charge to operations when such costs become probable and reasonably estimable. Katy also has a number of product liability and workers' compensation claims pending against it and its subsidiaries. With respect to the product liability and workers' compensation claims, Katy has provided for its share of expected losses beyond the applicable insurance coverage, including those incurred but not reported. Such accruals are developed using currently available claim information. The incurred but not reported component of the liability was developed using actuarial techniques. KATY INDUSTRIES, INC. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS During the quarter for which this report is filed, there have been no material developments in previously reported legal proceedings, and no other cases or legal proceedings, other than ordinary routine litigation incidental to the Company's business and other non-material proceedings, have been brought against the Company. EXHIBITS AND REPORTS ON FORM 8-K (a) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed. Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KATY INDUSTRIES, INC. Registrant DATE: August 14, 1996 By /s/John R. Prann, Jr. John R. Prann, Jr. President, Chief Executive Officer & Chief Operating Officer DATE: August 14, 1996 By /s/Stephen P. Nicholson Stephen P. Nicholson Vice President, Finance & Chief Financial Officer EX-27 2
5 6-MOS DEC-31-1996 JUN-30-1996 39,113 8,185 28,034 0 38,263 132,933 76,940 34,478 208,006 38,438 8,878 0 0 9,822 117,473 208,006 87,322 87,322 58,823 82,259 (6,016) 0 597 11,079 4,075 6,278 0 0 0 6,728 .80 .80 Accounts Receivable, trade is reported net of Allowance for Doubtful Accounts in the Condensed Consolidated Balance Sheets.
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