United States
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: September 30, 1997 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 November 12, 1997
Common stock, $1 par value 8,284,702
KATY INDUSTRIES, INC.
FORM 10-Q
SEPTEMBER 30, 1997
INDEX
-----
Page
PART I FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 2,3
Statements of Condensed Consolidated Income
Nine Months Ended September 30, 1997 and 1996 4
Statements of Condensed Consolidated Cash Flows
Nine Months Ended September 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Information 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 6 Exhibits and Reports on Form 8-K 13
Signatures 14
Page 1
KATY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
September 30, December 31,
1997 1996
---- ----
(Thousands of dollars)
CURRENT ASSETS:
Cash and cash equivalents $ 7,393 $ 27,321
Accounts receivable, trade, net 62,534 50,324
Notes and other receivables, net 2,049 2,154
Inventories - Note 1 78,528 68,885
Deferred income taxes 14,330 14,331
Other current assets 4,805 3,500
------- -------
Total current assets 169,639 166,515
------- -------
OTHER ASSETS:
Investments, at equity, in
unconsolidated affiliates 6,422 6,382
Investments in waste-to-energy facility 10,832 11,058
Notes receivable, net 1,405 1,260
Cost in excess of net assets of
businesses acquired, net 9,889 6,723
Miscellaneous 7,379 5,211
------- -------
Total other assets 35,927 30,634
------- -------
PROPERTIES, at cost:
Land and improvements 3,397 3,776
Buildings and improvements 31,364 32,545
Machinery and equipment 48,688 41,773
------- -------
83,449 78,094
Accumulated depreciation (35,101) (35,734)
------- -------
Net properties 48,348 42,360
------- -------
$253,914 $239,509
======= =======
See Notes to Condensed Consolidated Financial Statements.
Page 2
KATY INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
September 30, December 31,
1997 1996
---- ----
(Thousands of dollars)
CURRENT LIABILITIES:
Accounts payable $ 28,961 $ 20,318
Accrued expenses 36,204 37,351
Other current liabilities 1,261 1,277
------- -------
Total current liabilities 66,426 58,946
------- -------
LONG-TERM DEBT, less current maturities 8,092 8,582
DEFERRED INCOME TAXES 23,198 23,861
EXCESS OF ACQUIRED NET
ASSETS OVER COST, Net 7,239 8,517
OTHER LIABILITIES 12,766 9,557
------- -------
Total liabilities 117,721 109,463
------- -------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, authorized
25,000,000 shares, issued 9,822,204 shares 9,822 9,822
Additional paid-in capital 51,146 51,117
Foreign currency translation
and other adjustments (1,869) (1,778)
Retained earnings 98,891 93,099
Treasury stock, at cost, 1,550,877 and
1,582,942 shares (21,797) (22,214)
------- -------
Total shareholders' equity 136,193 130,046
------- -------
$253,914 $239,509
======= =======
See Notes to Condensed Consolidated Financial Statements.
Page 3
KATY INDUSTRIES, INC.
STATEMENTS OF CONDENSED CONSOLIDATED INCOME
NINE MONTHS MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
(Thousands of Dollars Except Per Share Data)
Net sales $ 83,520 $ 46,068 $ 234,104 $ 133,390
Cost of goods sold 60,205 32,084 165,126 90,907
------- ------- ------- -------
Gross profit 23,315 13,984 68,978 42,483
Selling, general and administrative 19,732 12,008 57,560 35,444
------- ------- ------- -------
Income from operations 3,583 1,976 11,418 7,039
Interest and other, net - Note 3 205 779 511 6,795
------- ------- ------- -------
Income from consolidated operations
before provision for income taxes 3,788 2,755 11,929 13,834
Provision for income taxes (1,445) (976) (4,294) (5,051)
------- ------- ------- -------
Income from consolidated operations 2,343 1,779 7,635 8,783
Equity in income(loss) of unconsolidated
affiliates (net of tax) 267 (144) 24 (420)
------- ------- ------- -------
Net income $ 2,610 $ 1,635 $ 7,659 $ 8,363
======= ======= ======= =======
Earnings per share $ .31 $ .20 $ .92 $ 1.00
======= ======= ======= =======
Average shares outstanding 8,307 8,258 8,305 8,380
======= ======= ======= =======
Dividends paid per share - common stock$ .0750 $ .0750 $ .2250 $ .2125
======= ======= ======= =======
See Notes to Condensed Consolidated Financial Statements.
Page 4
KATY INDUSTRIES, INC.
STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Nine Months Ended September 30, 1997 1996
---- ----
(Thousands of dollars)
Cash flows from operating activities:
Net income $7,659 $ 8,363
Depreciation and amortization 2,999 4,362
Gain on marketable security transactions - (4,914)
Adjustments to reconcile net income to net cash
flows from operating activities (mainly changes
in working capital, net of
acquisition/disposition of subsidiaries): (14,811) (5,412)
------ ------
Net cash flows from operating activities (4,153) 2,399
------ ------
Cash flows from investing activities:
Proceeds from sale of assets 598 1,170
Collections of notes receivable 320 13,908
Disposition of subsidiary 5,444 -
Proceeds from sale of marketable securities - 9,191
Payment for purchase of subsidiary (12,617) -
Capital expenditures (6,676) (4,047)
------ ------
Net cash flows from investing activities (12,931) 20,222
------ ------
Cash flows from financing activities:
Notes payable activity, net - (14,193)
Principal payments on long-term debt (506) (879)
Payment of dividends (1,867) (1,831)
Purchase of treasury shares (566) (6,177)
Other 95 -
------ ------
Net cash flows from financing activities (2,844) (23,080)
------ ------
Net decrease in cash and cash equivalents (19,928) (459)
------ ------
Cash and cash equivalents, beginning of period 27,321 43,701
------ ------
Cash and cash equivalents, end of period $ 7,393 $43,242
====== ======
See Notes to Condensed Consolidated Financial Statements.
Page 5
KATY INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER 30, 1997
(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
greater than 50% interest. Investments in affiliates which are not majority
owned are reported using the equity method. The condensed consolidated
financial statements at September 30, 1997 and December 31, 1996 and for the
three and nine month periods ended September 30, 1997 and 1996 are unaudited
and reflect all adjustments (consisting only of normal recurring 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, 1996.
Inventories
- -----------
The components of inventories are as follows:
September 30, December 31,
1997 1996
(Thousands of dollars)
Raw materials $18,149 $15,933
Work in process 6,376 6,269
Finished goods 54,003 46,683
------ ------
$78,528 $68,885
====== ======
Earnings Per Share
- ------------------
Earnings per share for the nine months ended September 30, 1997 and 1996 are
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.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share". This Statement
establishes standards for computing and presenting earnings per share ("EPS")
and applies to all entities with publicly held common stock or potential common
stock. This Statement replaces the presentation of primary EPS and fully
diluted EPS with a presentation of basic EPS and diluted EPS, respectively.
Basic EPS excludes dilution and is computed by dividing earnings available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Similar to fully diluted EPS, diluted EPS reflects the
potential dilution of securities that could share in the earnings. This
Statement is effective for the Company's financial statement for the year ended
December 31, 1997 and is not expected to have a material effect on the
Company's reported EPS amounts.
Page 6
(2) Contingencies
-------------
In December, 1996, Banco del Atlantico, a bank located in Mexico, filed a
lawsuit against Woods Industries, Inc. ("Woods"), a subsidiary of the Company,
and against certain past and present officers and directors and former owners
of Woods alleging that the defendants participated in a violation of the
Racketeer Influenced and Corrupt Organizations Act involving allegedly
fraudulently obtained loans from Mexican banks, including the plaintiff, and
"money laundering" of the proceeds of the illegal enterprise. The plaintiff
also alleges that it made loans to an entity controlled by officers and
directors based upon fraudulent representations. The plaintiff seeks to hold
Woods liable for its alleged damage under principles of respondeat superior and
successor liability. The plaintiff is claiming damages in excess of
$24,000,000 and is requesting treble damages under the statutes. Katy may have
recourse against the former owners of Woods under the purchase agreement;
however, as the litigation is in preliminary stages, it is impossible at this
time for the Company to determine an outcome or reasonably estimate the range
of potential exposure.
(3) Nonrecurring Items
------------------
Included in Interest and other, net for the nine months ended September 30,
1996 is a gain of $4,914,000 resulting from the sale of Union Pacific
Corporation common stock.
(4) Acquisitions and Dispositions
-----------------------------
On August 6, 1997, the Company purchased Loren Products, Inc., ("Loren").
Loren is a manufacturer and distributor of cleaning and abrasives products for
the industrial markets and building products for the consumer markets. The
estimated purchase price, including acquisition costs was approximately
$10,900,000 plus an adjustment for changes in working capital, which exceeded
Lorens' book value. The purchase price for Loren is preliminary and
adjustments may be recorded through 1998. The accounts of Loren have been
included in the Company's Financial Statements from the acquisition date.
On July 14, 1997, the Company completed its divestiture of the Beehive
division of Hamilton Precision Metals, Inc., ("Beehive") for approximately
$6,000,000 and the assumption of certain liabilities of Beehive. Beehive is
engaged in the manufacture and sale of machinery for the meat, poultry, fruit
and vegetable processing industries. This divestiture, along with other
planned divestitures, is not expected to result in a significant gain or loss.
Page 7
KATY INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997
- -------------------------------------
Following are summaries of sales and operating income for the three months
ended September 30, 1997 and 1996 by industry segment:
Sales Increase (Decrease)
- ----- -------------------
1997 1996 Amount Percent
---- ---- ------ -------
Distribution and Service $20,295 $22,760 $(2,465) (10.8)%
Industrial and
Consumer Manufacturing 57,285 16,149 41,136 254.7
Machinery Manufacturing 5,940 7,159 (1,219) (17.0)
Operating Income Increase (Decrease)
- ---------------- -------------------
1997 1996 Amount Percent
---- ---- ------ -------
Distribution and Service $ 798 $2,004 $(1,206) (60.2)%
Industrial and
Consumer Manufacturing 4,366 2,093 2,273 108.6
Machinery Manufacturing 602 180 422 234.4
The Distribution and Service Group's sales decreased due to decreases in
sales of electronic components and electrical parts and accessories and
waste-to-energy services. This decrease was partially offset by increased
sales in the refrigeration and cold storage facilities portion of this segment.
The decrease in the Group's operating income was mainly a result of the
decreased volume in the electronic components and electrical parts and
accessories and waste-to-energy services areas, along with decreased margins in
the rerolled metals area. Higher selling, general and administrative costs as
a percentage of sales in each of the above mentioned areas further contributed
to the decrease in the Group's operating income.
The increased sales of the Industrial and Consumer Manufacturing Group was
primarily due to both the acquisition of Woods, in December 1996 and the
acquisition of Loren, in August of 1997. Increased sales in the stain products
portion also contributed to the improvement. The increase in the Group's
operating income was primarily a result of the above mentioned acquisitions,
complemented with increased margins in the sanitary and maintenance areas.
The Machinery Manufacturing Group's sales decreased mainly as a result of the
Company's divestiture of Beehive, on July 14, 1997, offset partially by
increased sales in the cookie sandwich machinery business. The increase in the
Group's operating income was primarily due to increased margins in the cookie
Page 8
sandwich machinery business and the wood processing machinery business.
Selling, general and administrative expenses decreased as a percentage of
sales to 23.6% in 1997 from 26.1% in 1996. The decrease in this percentage is
primarily due to the acquisition of Woods. Excluding Woods from the third
quarter of 1997, selling, general and administrative expenses as a percentage
of sales increased slightly due to the previously mentioned increase in the
Distribution and Service Group.
Interest and other, net decreased due to lower cash levels during the third
quarter of 1997.
Nine Months Ended September 30, 1997
- ------------------------------------
Following are summaries of sales and operating income for the nine months
ended September 30, 1997 and 1996 by industry segment:
Sales Increase (Decrease)
- ----- -------------------
1997 1996 Amount Percent
---- ---- ------ -------
Distribution and Service $61,460 $64,635 $(3,175) (4.9)%
Industrial and
Consumer Manufacturing 149,491 44,715 104,776 234.3
Machinery Manufacturing 23,153 24,040 (887) (3.7)
Operating Income Increase (Decrease)
- ---------------- -------------------
1997 1996 Amount Percent
---- ---- ------ -------
Distribution and Service $ 2,688 $5,971 $(3,283) (55.0)%
Industrial and
Consumer Manufacturing 12,463 5,035 7,428 147.5
Machinery Manufacturing 2,519 1,668 851 51.0
The Distribution and Service Group's sales decreased due to volume decreases
of rerolled metals, waste-to-energy services and electronic components and
electrical parts and accessories which also contributed to the decline in
operating income for the Group. In addition, operating income decreased as a
result of increased selling, general and administrative expenses as a
percentage of sales in the electronic components and electrical parts portions
of this segment.
The increased sales of the Industrial and Consumer Manufacturing Group was
primarily due to the acquisition of Woods, in December 1996 and the acquisition
of Loren, in August 1997. Increased sales in the sanitary maintenance supplies
and stain businesses also contributed to the improvement. The increase in the
Group's operating income was due to the above mentioned acquisitions and the
increased volume in the above mentioned areas.
The Machinery Manufacturing Group's sales decreased primarily as a result of
the divestiture of Beehive, on July 14, 1997, offset partially by increased
sales in the cookie sandwich machinery business. The Group's increased
Page 9
operating income is mainly due to increased margins in both the cookie sandwich
machinery business and the wood processing machinery business.
Selling, general and administrative expenses decreased as a percentage of
sales to 24.6% in 1997 from 26.6% in 1996. The decrease in this percentage is
primarily due to the acquisition of Woods. Excluding Woods from the first
three quarters of 1997, selling, general and administrative expenses remained
fairly constant between the periods.
Interest and other, net in 1996 includes a gain of $4,914,000 resulting from
the sale of Union Pacific Corporation common stock in the first quarter of
1996. Excluding this gain, Interest and other, net decreased due to lower cash
levels during the first three quarters of 1997.
The effective tax rate decreased during the first three quarters of 1997
primarily due to the benefits resulting from the Woods acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Combined cash and cash equivalents decreased to $7,393,000 on September 30,
1997 compared to $27,321,000 on December 31, 1996 primarily due to the
acquisition of Loren on August 6, 1997 and the increase in working capital
needs caused by higher sales and seasonal factors.
Katy expects to commit an additional $4,436,000 for capital projects during
the remainder of 1997. Funding for these expenditures and for working capital
needs is expected to be accomplished through the 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 September 30, 1997, Katy had short and long-term indebtedness for money
borrowed of $8,733,000. Total debt was 6.0% of total debt and equity at
September 30, 1997. The Company has a committed unsecured line of credit with
The Northern Trust Company in the amount of $30,000,000, which is used
principally for letters of credit. Katy intends to secure an additional
commitment of bank credit in an amount it determines appropriate for future
acquisitions.
In August 1995, Katy's Board of Directors authorized the Company to
repurchase up to 400,000 shares of its common stock in open market
transactions. In January 1996, Katy's board authorized the Company to
repurchase an additional 500,000 shares, bringing the total authorization to
900,000 shares. In connection, therewith, Katy repurchased 38,000 shares in
1997, bringing the total repurchased to 900,000, thus, completing the
repurchase program.
ACQUISITIONS AND DISPOSITIONS
On August 6, 1997, the Company purchased Loren. Loren is a manufacturer and
distributor of cleaning and abrasives products for the industrial markets and
building products for the consumer markets. The estimated purchase price,
including acquisition costs was $10,900,000 plus an adjustment for changes in
working capital, which exceeded Lorens' book value. The purchase price for
Loren is preliminary and adjustments may be recorded through 1998. The
accounts of Loren have been included in the Company's Financial Statements from
the acquisition date.
Page 10
On July 14, 1997, the Company completed its divestiture of the Beehive
division of Hamilton Precision Metals, Inc., for approximately $6,000,000
and the assumption of certain liabilities of Beehive. Beehive is engaged
in the manufacture and sale of machinery for the meat, poultry, fruit and
vegetable processing industries. This divestiture, along with other
planned divestitures, are not expected to result in a significant gain or loss.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This statement establishes standards for
the way public business enterprises report information about operating
segments. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. This statement is
effective for the Company's financial statement for the year ended December 31,
1998 and the Company does not expect the adoption of SFAS 131 to materially
effect the financial statement presentation.
In June 1997, the Financial Accounting Standards Board issued Statement
Financial Accounting Standard No. 130, "Reporting Comprehensive Income". This
statement establishes standards for reporting and display of comprehensive
income in financial statements. Under this statement, all components of
comprehensive income shall be reported in the financial statements for the
period in which they are recognized. This statement divides comprehensive
income into net income and other comprehensive income. Other comprehensive
income shall be classified separately into foreign currency items, minimum
pension liability adjustments, and unrealized gains and losses on certain
investments in debt and equity securities. The accumulated balance of other
comprehensive income shall be reported in the equity section of the balance
sheet separately from retained earnings and additional paid-in-capital. This
statement is effective for the Company's financial statement for the year ended
December 31, 1998 and the Company does not expect the adoption of SFAS 130 to
materially effect the financial statement presentation.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, "Earnings Per Share". This statement
establishes standards for computing and presenting earnings per share ("EPS")
and applies to all entities with publicly held common stock or potential common
stock. This statement replaces the presentation of primary EPS and fully
diluted EPS with a presentation of basic EPS and diluted EPS, respectively.
Basic EPS excludes dilution and is computed by dividing earnings available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Similar to fully diluted EPS, diluted EPS reflects the
potential dilution of securities that could share in the earnings. This
statement is not expected to have a material effect on the Company's reported
EPS amounts. This statement is effective for the Company's financial
statements for the year ended December 31, 1997.
OTHER FACTORS
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
Page 11
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 September 30, 1997. 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.
Some of the statements in this Form 10-Q Quarterly Report, as well as
statements by the Company in periodic press releases, oral statements made by
the Company's officials to analysts and shareholders in the course of
presentations about the Company and conference calls following earning
releases, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements.
Page 12
KATY INDUSTRIES, INC.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
-----------------
Except as set forth below, 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 nonmaterial
proceedings, have been brought against the Company.
With respect to the request for information from the United States Environment
Protection Agency (the "EPA") received by Hamilton Precision Metals concerning
the Reclaim Barrel Company site in West Jordan, Utah, described in the
Company's Form 10-K for the year ended December 31, 1996, the Company entered
into an Administrative Order on Consent with the EPA on September 15, 1997,
settling the Company's liability with respect to this matter in return for a
nominal payment.
On June 16, 1997, the EPA made a claim against GC Electronics, a division of
GC Thorsen, Inc. ("GC Thorsen"), a subsidiary of Hallmark Holdings, Inc.
(a Company subsidiary) and forty-one other potentially responsible parties
regarding contamination at the Interstate Pollution Control Superfund Site in
Rockford, Illinois, seeking to recover an aggregate of $399,951 of costs
allegedly incurred by the EPA at such site. The Company has tendered this
claim to Jupiter Industries, a former owner of GC Thorsen, and Jupiter
Industries had agreed to assume responsibility for this matter. The Company
may also have a right to indemnification for this matter from Elgin National
Industries, Inc., the party that sold GC Thorsen to the Company. The liability
of the Company's subsidiary, if any, cannot be determined at this time.
On March 24, 1997, the EPA issued a request for information to GC Thorsen
concerning shipments of waste to the Daly Drum Site in Rockford, Illinois.
GC Thorsen responded to this request by stating that its records identified no
such shipments. The liability of the Company's subsidiary, if any, cannot be
determined at this time.
EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------
(a) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 1997.
Page 13
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: November 12, 1997 By /s/Stephen P. Nicholson
------------------------
Stephen P. Nicholson
Vice President, Finance &
Chief Financial Officer
Page 14
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,393
<SECURITIES> 0
<RECEIVABLES> 62,534<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 78,528
<CURRENT-ASSETS> 169,639
<PP&E> 83,449
<DEPRECIATION> (35,101)
<TOTAL-ASSETS> 253,914
<CURRENT-LIABILITIES> 66,426
<BONDS> 8,733
0
0
<COMMON> 9,822
<OTHER-SE> 126,371
<TOTAL-LIABILITY-AND-EQUITY> 253,914
<SALES> 234,104
<TOTAL-REVENUES> 234,104
<CGS> 165,126
<TOTAL-COSTS> 222,686
<OTHER-EXPENSES> (511)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0<F2>
<INCOME-PRETAX> 11,929
<INCOME-TAX> (4,294)
<INCOME-CONTINUING> 7,635
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,659
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
<FN>
<F1>Accounts receivable, net, are reported net of allowance for doubtful accounts
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<F2>Interest Expense is included within the line item Interest and other, net.
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