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, 1995 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 June 30, 1995
Common stock, $1 par value 9,076,387<PAGE>
KATY INDUSTRIES, INC.
FORM 10-Q
JUNE 30, 1995
INDEX
Page No.
PART I FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets
June 30, 1995 and December 31, 1994 2
Statements of Condensed Consolidated Operations
Three months and six months ended
June 30, 1995 and 1994 4
Statements of Condensed Consolidated Cash Flows
Six months ended June 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial Information 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II OTHER INFORMATION
Item 1 Legal Proceedings 17
Item 6 Exhibits and Reports on Form 8-K 17
Signatures 18
KATY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
June 30, December 31,
1995 1994
(Thousands of Dollars)
CURRENT ASSETS:
Cash and cash equivalents $ 2,700 $ 8,475
Marketable securities - available for sale 28,062 23,756
Accounts receivable, trade, net of allowance
for doubtful accounts of $965 and $3,183 27,832 20,423
Notes and other receivables, net of allowance
for doubtful notes of $504 and $854 2,026 2,112
Inventories - Note 1 36,594 31,312
Other current assets 12,468 13,784
Total current assets 109,682 99,862
OTHER ASSETS:
Investments, at equity, in
unconsolidated subsidiaries - Note 3 47,440 45,310
Investments, at cost - Note 4 424 406
Investments in waste-to-energy facility 11,532 11,759
Notes receivable, net of allowance for
doubtful notes of $2,500 1,430 2,283
Miscellaneous (Note 2) 12,045 4,982
Total other assets 72,871 64,740
PROPERTIES, at cost:
Land and improvements 4,407 4,868
Buildings and improvements 33,829 25,152
Machinery and equipment 38,876 56,743
77,112 86,763
Accumulated depreciation ( 35,090) ( 48,223)
Net properties 42,022 38,540
$224,575 $203,142
See Notes to Condensed Consolidated Financial Statements.
KATY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
June 30, December 31,
1995 1994
(Thousands of Dollars)
CURRENT LIABILITIES:
Notes payable - banks $ 24,353 $ 7,948
Accounts payable 8,218 6,807
Accrued compensation 2,789 6,180
Accrued expenses 26,632 25,060
Accrued interest and taxes 1,408 773
Current maturities, long-term debt 527 2,407
Dividends payable 646 646
Total current liabilities 64,573 49,821
LONG-TERM DEBT, less current maturities 9,763 10,572
OTHER LIABILITIES 34,469 31,759
MINORITY INTEREST 215 212
Total liabilities 109,020 92,364
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, authorized
25,000,000 shares, issued 9,821,329 shares 9,821 9,821
Additional paid-in capital 51,111 51,111
Foreign currency translation adjustment ( 1,674) 2,676
Unrealized holding gains, net of tax 7,069 4,426
Retained earnings 62,071 55,587
Treasury stock, at cost, 744,942 shares ( 12,843) ( 12,843)
Total stockholders' equity 115,555 110,778
$224,575 $203,142
See Notes to Condensed Consolidated Financial Statements.
KATY INDUSTRIES, INC.
STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1995 1994 1995 1994
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C>
Net sales $ 49,609 $ 42,641 $ 87,967 $ 81,064
Costs and expenses:
Cost of goods sold 34,131 36,116 60,587 63,152
Selling, general and administrative 13,253 11,580 24,207 21,443
Depreciation and amortization 2,268 1,514 3,646 3,058
Interest expense 945 502 1,363 1,022
Interest income ( 380)( 1,294)( 656)( 2,519)
Other, net ( 1,066) 1,792 ( 829) 1,562
Write off of assets - Notes 4 and 6 - 2,708 - 9,288
Reversal of previously recorded
losses - Note 2 ( 4,920) - ( 4,920) -
44,231 52,918 83,398 97,006
Income (loss) from consolidated
operations before income tax credit 5,378 ( 10,277) 4,569 ( 15,942)
Income tax credit 2,477 1,739 1,849 3,603
Income (loss) from
consolidated operations 7,855 ( 8,538) 6,418( 12,339)
Equity in income of unconsolidated
subsidiaries (net of tax)- Note 3 500 691 1,200 1,304
Net income (loss) 8,355 ( 7,847) 7,618( 11,035)
Income (loss) per share $ .92 ($ .87) $ .84 ($ 1.22)
Average shares outstanding 9,076 9,017 9,076 9,017
Dividends per common share $ .0625 $14.0000 $ .1250 $14.0625
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
KATY INDUSTRIES, INC.
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Six Months Ended
June 30,
1995 1994
(Thousands of dollars)
Cash flows from operating activities:
Net income (loss) $ 7,618 ($ 11,035)
Write off of assets - 9,288
(Gain) loss on sale of assets ( 18) 76
Disposition of portion of investment in subsidiary( 7,902) -
Provisions for inventory valuation reserves - 5,072
Adjustments to reconcile net income to net cash
flows from operating activities ( 3,455) ( 124)
Net cash flows from operating activities 3,757 3,277
Cash flows from investing activities:
Proceeds from sale of assets 94 217
Collections of notes receivable 481 227
Acquisition of businesses, net of cash acquired ( 23,480) -
Other investments - ( 2,226)
Capital expenditures ( 5,317) ( 1,614)
Net cash flows from investing activities ( 28,222) ( 3,396)
Cash flows from financing activities:
Notes payable activity, net 23,063 ( 171)
Principal payments on long-term debt ( 1,662) ( 1,479)
Payment of dividends ( 1,135) ( 1,126)
Proceeds from issuance of long-term debt 5,938 -
Net cash flows from financing activities 26,204 ( 2,776)
Net increase (decrease) in cash and cash
equivalents ( 5,775) ( 2,895)
Cash and cash equivalents beginning of period 8,475 130,289
Cash and cash equivalents end of period $ 2,700 $127,394
See Notes to Condensed Consolidated Financial Statements.
(1) Significant Accounting Policies
Consolidation Policy
The financial statements include, on a consolidated basis,
the accounts of Katy Industries, Inc. and subsidiaries (Katy)
in which Katy has greater than a 50% interest or exercises
significant influence or control.
The information included herein reflects all known
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.
Inventories
The components of inventories are as follows:
June 30, December 31,
1995 1994
(Thousands of Dollars)
Raw materials $ 14,447 $ 11,304
Work in process 6,442 7,137
Finished goods 15,705 12,871
$ 36,594 $ 31,312
(2) Acquisitions and Divestitures:
Effective March 31, 1995, Katy purchased all of the
outstanding shares of common stock of GC Thorsen, Inc. (GCT),
a leading value-added marketer and distributor of electronic
and electrical parts and accessories and nonpowered handtools.
The purchase price, including acquisition costs, was
approximately $24,000,000, of which $19,500,000 was financed
through Katy's bank line of credit. The acquisition has been
accounted for under the purchase method. The excess of the
purchase price over the fair value of the net assets acquired
of approximately $4,200,000 is included in Other Assets -
Miscellaneous on the accompanying balance sheet and is being
amortized over 20 years.
On June 30, 1995, Katy sold one half of its 75%
interest (90,000 shares) in Schoen & Cie, AG (Schoen) to
Pegasus Beteiligungen AG of Heidelberg, Germany. The sale,
which is irrevocable, was made on the basis of a contingent
price, whereby Katy will receive two-thirds of the amount
ultimately realized by Pegasus in any future sale of such
shares, or, under some circumstances, Katy will be entitled to
find a purchaser for two-thirds of such shares and receive the
proceeds of the sale thereof. Katy continues to hold 90,000
shares, or a 37.5% interest in Schoen. With the reduction in
its ownership interest and influence, Katy is reporting its
continuing investment in Schoen using the equity method of
accounting for this minority owned subsidiary effective June
30, 1995. In connection with the sale, Katy recorded a gain of
$4,920,000 reflecting the reversal of previously recorded
losses of Schoen and a deferred tax asset of $3,000,000.
(2) Acquisitions and Divestitures (Continued)
Katy has previously stated its intent to not fund future
operations of Schoen and has no legal liability for any of
Schoen's liabilities. Katy's investment in Schoen is recorded
at zero as of June 30, 1995.
The unaudited pro forma consolidated results of operations
of Katy for the six months ended June 30, 1995, reflecting the
allocation of the purchase and related costs of the GC Thorsen
transaction and the sale of 50% of Katy's interest in Schoen,
would have been as follows (in thousands except per share
amounts), assuming that the Thorsen acquisition and the Schoen
sale had taken place at the beginning of the period.
Six Months Ended
June 30, 1995
Net sales $ 76,979
Net income $ 5,596
Net income per common share $ .62
On July 14, 1995, Katy sold the assets of its B.M. Root
operation in York, Pennsylvania to a group headed by the
General Manager of the operation. The sale was at net book
value (approximately $700,000).
(3) Investments in Unconsolidated Subsidiaries, at Equity
Katy's investments in unconsolidated subsidiaries are
comprised of the following:
June 30, December 31,
1995 1994
(Thousands of Dollars)
Syratech Corporation $40,214 $38,325
Bee Gee Holding Company, Inc. 7,226 6,985
Schoen & Cie, AG -0- N/A
$47,440 $45,310
(3) Investments in Unconsolidated Subsidiaries, at Equity
(Continued)
The condensed financial information which follows reflects
Katy's proportionate share in the financial position and
results of operations of all of its unconsolidated
subsidiaries:
June 30, December 31,
1995 1994
(Thousands of Dollars)
Current assets $ 54,826 $ 40,474
Current liabilities ( 27,883) ( 16,196)
Working capital 26,943 24,278
Properties, net 30,763 27,590
Other assets 2,113 836
Long-term debt ( 7,860) ( 4,894)
Other liabilities ( 4,840) ( 3,086)
Stockholders' equity 47,119 44,724
Unamortized excess of cost
over net assets acquired 356 586
Investments, at equity, in
unconsolidated subsidiaries $ 47,440 $ 45,310
(3) Investments in Unconsolidated Subsidiaries, at Equity
(Continued)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1995 1994 1995 1994
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Sales $14,687 $20,890 $40,038 $41,784
Cost and expenses ( 14,246)( 20,435) ( 38,334)( 40,010)
Net income from
continuing operations 441 455 1,704 1,774
Income from discontinued
operations - net of tax 680 1,002 680 1,002
Net income 1,121 1,457 1,024 2,776
Amortization of excess
of cost over net
assets required ( 127)( 198) ( 254)( 402)
Provision for income
taxes ( 494)( 568) ( 930)( 1,070)
Equity in net income
of unconsolidated
subsidiaries $ 500 $ 691 $ 1,200 $ 1,304
</TABLE>
The financial statements of Syratech Corporation
included herein are for the six months ended March 31, 1995,
which is the latest date available, with results of
discontinued operations presented only for the three months
ending March 31, 1995 and 1994. On March 28, 1995, Syratech
sold its subsidiary, Syroco, Inc., for $140,000,000 resulting
in a gain of $30,451,000 which Syratech will report in the
quarter ended June 30, 1995. Syroco is shown above as a
discontinued operation. Katy will report its share of the gain
on sale (approximately $5,000,000 net of tax) in Katy's third
quarter ended September 30, 1995.
(4) Investments, at Cost
In April, 1994 management of Katy met with Katy's oil
exploration joint venture partners and, based on current facts
and circumstances, Katy has decided not to commit further funds
to the oil exploration project and will not participate in any
further activities on the site. Accordingly, in March, 1994
Katy wrote off its $6,580,000 investment.
(5) Special Dividend
On June 29, 1994, Katy's Board of Directors declared a
special cash dividend of $14.00 per share on Katy's common
stock, payable August 19, 1994 to stockholders of record at the
close of business on July 22, 1994.
(6) Nonrecurring Items
During the second quarter of 1994 Katy provided
$6,156,000 of inventory and other adjustments at certain
subsidiaries, which were primarily inventory adjustments within
the industrial machinery group. Katy management also concluded
that the value ($2,708,000) of the Seghers waste-to-energy
technology that was acquired in 1987 had been significantly
impaired and wrote it off in the second quarter of 1994.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1995 working
capital decreased $5,134,000 compared to December 31, 1994.
Current ratios were 1.69 to 1.00 at June 30, 1995 and 2.00 to
1.00 at December 31, 1994, respectively. The decrease in
working capital and in the current ratio results from short-term
borrowings in connection with the acquisition of GC
Thorsen on March 31, 1995. Katy has authorized and expects to
commit an additional $4,000,000 for capital projects during the
remainder of 1995. Funding for these expenditures and for
working capital needs is expected to be accomplished
substantially through use of internally generated funds from
operations supplemented by short-term borrowing.
Effective March 31, 1995 Katy purchased all of the
outstanding shares of common stock of GC Thorsen, Inc. (GCT),
a leading value-added marketer and distributor of electronic
and electrical parts and accessories and nonpowered handtools.
The purchase price, including acquisition costs, was
approximately $24,000,000, of which $19,500,000 was financed
through Katy's bank line of credit. The acquisition has been
accounted for under the purchase method. The excess of the
purchase price over the fair value of the net assets acquired
of approximately $4,200,000 is being amortized over 20 years.
Effective June 30, 1995 Katy sold one-half of its
interest in Schoen & Cie, AG to a German investment company in
an irrevocable transaction. The purchaser, Pegasus
Beteiligungen AG of Heidelberg, Germany, acquired 90,000
shares, representing a 37.5% interest in Schoen. The sale was
made on the basis of a contingent purchase price, whereby the
amount Pegasus will pay Katy for the shares is dependent on the
amount ultimately realized by Pegasus in the future. Katy
continues to hold its remaining 90,000 shares, or a 37.5%
interest, in Schoen. As a result of the sale, Katy will no
longer consolidate the results of Schoen in Katy's financial
statements, and will use the equity method of accounting to
report Katy's continuing investment in Schoen. As a result of
the sale Katy recorded a gain in the second quarter from the
reversal of previously recorded losses of Schoen ($4,920,000)
and deferred tax benefits from the sale ($3,000,000).
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
LIQUIDITY AND CAPITAL RESOURCES (Continued)
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 has an
accrual at June 30, 1995 for indicated environmental
liabilities in the aggregate amount of approximately
$7,150,000.
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.
On January 13, 1995, the Board of Directors adopted a
Stockholder Rights Plan in which Common Stock Purchase Rights
("Rights") were distributed as a dividend at the rate of one
Right for each share of Common Stock held as of the close of
business on January 24, 1995.
The Rights were designed to guard against (I) coercive
and abusive tactics that might be used in an attempt to gain
control of the Company without paying all stockholders a fair
price for their shares, or (ii) the accumulation of a
substantial block of stock without Board approval. The Rights
Plan will not prevent takeovers, but was designed to deter
coercive and abusive takeover tactics and to encourage anyone
attempting to acquire the Company to first negotiate with the
Board. Furthermore, the Rights also permit the Board to have
some input with respect to
possible future acquisitions of Company stock by the Carroll
family and certain investment funds managed by Mario J.
Gabelli.
As of January 13, 1995 the Carroll family beneficially
owned approximately 47% and the Gabelli group beneficially
owned approximately 21% of the Company's Common Stock. As of
August 14, 1995, the Carroll family beneficially owns
approximately 46% and the Gabelli group owns approximately
21.8%.
Such Rights only become exercisable, or transferable
apart from the Common Stock, ten business days after a person
or group (an "Acquiring Person") acquires beneficial ownership
of, or commences a tender or exchange offer for, 10% or more of
the Company's Common Stock. Any additional acquisition of
shares by the Carroll family or the Gabelli group which would
increase their beneficial ownership in the Company's Common
Stock by more than 1% above their holdings at January 13, 1995,
respectively, will also make the Rights exercisable.
LIQUIDITY AND CAPITAL RESOURCES (Continued)
Once exercisable, each Right not owned by an Acquiring
Person, or if the Carroll family or the Gabelli group acquires
additional shares, then that family or group, allows the
Rightholder to acquire one share of the Company's Common Stock
at an exercise price of $35, subject to adjustment.
Thereafter, upon the occurrence of certain events (for example,
if the Company is the surviving corporation of a merger with an
Acquiring Person), the Rights entitle holders other than the
Acquiring Person to acquire Common Stock having a value of
twice the exercise price of the Right. Alternatively, upon the
occurrence of certain other events (for example, if the Company
is acquired in a merger or other business combination
transaction in which the Company is not the surviving
corporation), the Rights would entitle holders other than the
Acquiring Person to acquire Common Stock of the Acquiring
Person having a value twice the exercise price of the Rights.
The Rights may be redeemed by the Company at a
redemption price of $.01 per Right at any time until the tenth
business day following public announcement that a 10% position
has been acquired (or an additional 1% if by the Carroll family
or Gabelli group) or ten business days after commencement of a
tender or exchange offer. The Rights will expire on January
24, 2005.
By its terms, the Rights Plan reserves for the Board of
Directors the right to amend the Plan and redeem the Rights.
All the terms of the Plan, including but not limited to the
exercise price of the Rights and the ownership percentages
leading to a triggering event, may be amended by the Board of
Directors of the Company at any time prior to the triggering of
the Rights Plan's "flip-over" and "flip-in" provisions.
At June 30, 1995, Katy had short and long-term
indebtedness for money borrowed of $34,643,000 of which
$24,000,000 represented short-term borrowings under Katy's
domestic bank line of credit, which borrowings were used
primarily for the acquisition of GC Thorsen, Inc. Total debt
was 23.1% of total debt and equity at June 30, 1995. Katy has
a line of credit with The Northern Trust Company in the amount
of $40,000,000. The line of credit may be used for letters of
credit, working capital and/or acquisitions.
Management continuously reviews each of its businesses.
As a result of these ongoing reviews, management may determine
to sell certain companies and may augment its remaining
businesses with acquisitions. When sales do occur, management
anticipates that funds from these sales will be used for
general corporate purposes or to fund acquisitions.
Acquisitions may also be funded through cash balances,
available lines of credit and future borrowings.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1995
Following are summaries of sales and operating income
for the six months ended June 30, 1995 and 1994 by industry
segment:
<TABLE>
<CAPTION>
Sales
Increase (Decrease)
1995 1994 Amount Per Cent
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Industrial Machinery $ 29,033 $ 31,368 ( $ 2,335) ( 7.4%)
Industrial Components 14,117 16,871 ( 2,754) (16.3 )
Consumer Products 44,817 32,825 11,992 36.5
Total sales $ 87,967 $ 81,064 ($ 6,903) ( 8.5%)
Operating Income
Percent of Sales
1995 1994 1995 1994
(Thousands of Dollars)
Industrial Machinery ($ 1,900) ($ 5,550) ( 6.5%) ( 17.7%)
Industrial Components 1,995 270 14.1 1.6
Consumer Products 3,676 3,913 8.2 11.9
Total operating income $ 3,771 $ 1,367 4.3% ( 1.7%)
</TABLE>
The decreased sales of the Industrial Machinery segment is
attributable to decreased sales of Schoen and its subsidiaries,
where operations continue to decline, partially offset by
increases of the manufacturers of machinery for the food
processing industry and for the wood processing industry. The
1995 operating loss reported for the segment was considerably
less than the loss reported in 1994, the result of 1994
adjustments to inventory values at certain locations, primarily
foreign operations, which did not recur in 1995.
The Industrial Components segment reported decreased
sales, primarily due to the sale of the business that refitted
machinery for the oil, gas petrochemical industries in the
fourth quarter of 1994. Sales increases were reported by the
Six Months Ended June 30, 1995 (Continued)
manufacturers of electrical equipment, specialty metals and
gauging and control systems. Operating income increased
primarily as the result of the sales increases, improved
margins in 1995 and 1994 adjustments to inventory values of a
foreign subsidiary.
The Consumer Products segment reported increased sales,
primarily due to the acquisition on March 31, 1995 of GC
Thorsen, a marketer of electronic parts and handtools.
Significant sales increases in the refrigeration and cold
storage business and the stain, coating and water repellant
business were largely offset by decreases in the filter
business. Operating income decreased due to lower sales and
margin levels at the filter and abrasives businesses, offset by
increased margins in the refrigeration and cold storage
business.
Selling, general and administrative expenses increased by
$2,765,000, primarily the result of the acquisition of GC
Thorsen and increased sales expenses due to higher sales in
1995.
Income before income taxes increased by $20,511,000
primarily the result of the reversal of previously recorded
losses of Schoen of $4,902,000 in 1995 and the write-off of
assets of $9,288,000 and reserves against inventories of
$6,156,000 in 1994.
The effective tax rate for the six months ended June 30,
1995 was a credit of 40.5% compared to 22.6% for 1994. The
1995 credit is due primarily to the deferred tax benefit
resulting from the sale of 50% of Katy's investment in Schoen
and the reversal of previously recorded losses of Schoen, which
does not require a tax provision since no benefit was provided
on such losses. The low effective rate in 1994 is due
primarily to foreign losses for which no tax benefit was
provided.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1995
Following are summaries of sales and operating income for
the three months ended June 30, 1995 and 1994 by industry
segment:
<TABLE>
<CAPTION>
Sales
Increase (Decrease)
1995 1994 Amount Per Cent
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Industrial Machinery $ 15,296 $ 15,787 ($ 491) ( 3.1%)
Industrial Components 7,139 9,238 ( 2,099) ( 22.7 )
Consumer Products 27,174 17,616 9,558 54.3
Total sales $ 49,609 $ 42,641 $ 6,968 16.3%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1995 (Continued)
Operating Income
Percent of Sales
1995 1994 1995 1994
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Industrial Machinery ($ 512) ($ 5,352) ( 3.3%) ( 33.9%)
Industrial Components 1,080 ( 235) 15.1 ( 2.6 )
Consumer Products 1,656 2,161 6.1 12.3
Total operating income $ 2,224 ($ 3,426) ( 4.5%) ( 8.0%)
</TABLE>
In the Industrial Machinery segment, the decrease in sales
of Schoen and its subsidiaries was partially offset by
increased sales of the manufacturers of machinery for the food
processing industry and for the wood processing industry. The
1995 operating loss reported for the segment was considerably
less than the loss reported in 1994. The improvement was
attributable to 1994 adjustments to inventory values at certain
locations, primarily foreign operations which did not recur in
1995.
The Industrial Components segment reported decreased
sales, substantially due to the sale of the business that
refitted machinery for the oil, gas and petrochemical
industries in the fourth quarter of 1994. The manufacturer of
electrical equipment reported increased sales with higher
operating income, the result of higher profit margins in 1995.
The manufacturer of gauging and control systems experienced
higher sales and higher operating income due to improved
margins.
The Consumer Products segment reported increased sales due
to the acquisition of the marketer of electronic parts and
handtools. Increased sales by the refrigeration and cold
storage company were offset by lower sales of the filter and
stain businesses. Operating income declined due to lower sales
and margin levels at the filter and stain businesses.
Income before income taxes increased by $15,655,000,
primarily the result of the reversal of the previously recorded
losses of Schoen of $4,920,000 in 1995 and the write-off of
assets of $2,708,000 and reserves against inventories of
$6,156,000 along with costs of downsizing certain operations in
1994.
The effective tax rate for the three months ended June 30,
1995 was a credit of 46.1% compared to 16.9% for 1994. The
1995 credit is due primarily to the deferred tax benefit
resulting from the sale of 50% of Katy's investment in Schoen
and the reversal of previously recorded losses of Schoen, which
does not require a tax provision since no benefit was provided
on such losses. The low effective rate in 1994 is due
primarily to foreign losses for which no tax benefit was
provided.
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 Katy's
business and other non-material
proceedings, have been brought
against Katy.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits will be filed in paper copy under "Rule 201"
Temporary Hardship Exemption.
(b) Reports on Form 8-K
On April 20, 1995, the Company filed a current report on
Form 8-K (Item 2) stating that the Company purchased for
cash all of the outstanding capital stock of GC Thorsen,
Inc., on April 5, 1995.
On June 15, 1995, the Company filed a current report on
Form 8-K/A (Item 7) providing information in response to
items 7(a) and 7(b) to Form 8-K with respect to audited
financial statements of GC Thorsen, Inc. for the year
ended December 31, 1994, unaudited interim financial
statements of GC Thorsen, Inc. for the three months ended
March 31, 1995 and 1994, and pro forma financial
statements of Katy Industries, Inc. for the year ended
December 31, 1994 and three months ended March 31, 1995
giving effect to the GC Thorsen, Inc. acquisition as
provided therein.
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, 1995
By /s/John R. Prann, Jr.
John R. Prann, Jr.
President,
Chief Executive Officer &
Chief Operating Officer
DATE: August 14, 1995
By /s/P. Kurowski
P. Kurowski
Secretary, Treasurer &
Chief Financial Officer
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