Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K/A
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 21, 1998
(Date of earliest event reported): (August 11, 1998)
Commission file number 1-5558
Katy Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-1277589
(State of Incorporation) (IRS Employer Identification Number)
6300 S. Syracuse #300, Englewood, Colorado 80111
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 290-9300
(Former name or former address, if changed since last report) Not applicable
Item 7. Financial Statements and Exhibits
---------------------------------
Set forth below is the information required by Items 7(a), Financial
Statements of Acquired Businesses, and 7(b), Pro Forma Financial Statements,
of Form 8-K with respect to the acquisition of Wilen Companies, Incorporated
by Katy Industries, Inc. ("Katy"), as disclosed on Katy's Form 8-K, filed with
the Securities and Exchange Commission on August 14, 1998.
Financial Statements of Acquired Business and Pro Forma Financial Statements
- ----------------------------------------------------------------------------
Unaudited Financial Statements:
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 4
Consolidated Statements of Operations for the six months
ended June 30, 1998 and 1997 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Audited Financial Statements:
Independent Auditors' Report 8
Consolidated Balance Sheet as of December 31, 1997 9
Consolidated Statement of Income and Retained
Earnings for the year ended December 31, 1997 11
Consolidated Statement of Cash Flows for the year
ended December 31, 1997 12
Notes to Consolidated Financial Statements 13
Pro Forma Financial Statements:
Unaudited Pro Forma Balance Sheet as of June 30, 1998 19
Unaudited Pro Forma Statement of Operations
for the six months ended June 30, 1998 21
Unaudited Pro Forma Statement of Operations
for the year ended December 31, 1997 22
Unaudited Notes to Pro Forma Financial Statements 23
Exhibit 23 Independent Auditors' Consent from Smith & Radigan 25
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it behalf by the
undersigned hereunto duly authorized.
Katy Industries, Inc.
---------------------
(Registrant)
By /S/ John R. Prann, Jr.
-----------------------
John R. Prann, Jr.
Chief Executive Officer
Date: October 20, 1998
----------------
WILEN COMPANIES, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In 000's)
- ------------------------------------------------------------------------------
(Unaudited)
June 30, December 31,
1998 1997
---- ----
ASSETS
CURRENT ASSETS:
Cash $ 857 $ 1,522
Accounts receivable, net 4,974 4,695
Inventories (Note 2) 2,856 2,901
Other current assets 175 205
------ ------
Total current assets 8,862 9,323
PROPERTY AND EQUIPMENT - Net 7,029 7,012
OTHER ASSETS:
Investments 69 69
Cash surrender value of life insurance policies 355 343
Deposits 60 366
Intangible assets, net 129 135
------ ------
TOTAL ASSETS $16,504 $17,248
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable 2,429 1,966
Accrued expenses 1,196 989
Current portion of capital lease obligation 219 219
Current portion of notes payable 300 300
------ ------
Total current liabilities 4,144 3,474
------ ------
LONG-TERM DEBT:
Capital lease obligation,
net of current portion 2,547 2,756
Notes payable, net of current portion 2,630 2,630
------ ------
5,177 5,386
------ ------
Total liabilities 9,321 8,860
------ ------
STOCKHOLDER'S EQUITY:
Common stock, no par value, stated
value $1 per share; 1,000,000 shares
authorized, 2,000 shares issued and
outstanding 2 2
Retained earnings 7,181 8,386
------ ------
TOTAL STOCKHOLDER'S EQUITY 7,183 8,388
------ ------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $16,504 $17,248
====== ======
See Notes to Consolidated Financial Statements.
WILEN COMPANIES, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In 000's) - UNAUDITED
- ------------------------------------------------------------------------------
1998 1997
---- ----
NET REVENUES $20,005 $18,318
COST OF GOODS SOLD 14,465 13,329
------ ------
5,540 4,989
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,834 3,545
------ ------
INCOME FROM OPERATIONS 1,706 1,444
INTEREST EXPENSE (137) (154)
INTEREST INCOME 40 52
OTHER INCOME / (EXPENSE), NET 46 (221)
------ ------
NET INCOME 1,655 1,121
------ ------
DISTRIBUTIONS (2,860) (1,446)
RETAINED EARNINGS AT BEGINNING OF YEAR 8,386 7,268
RETAINED EARNINGS AT END OF YEAR $ 7,181 $ 6,943
====== ======
See Notes to Consolidated Financial Statements.
WILEN COMPANIES, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In 000's) - UNAUDITED
- ------------------------------------------------------------------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,655 $ 1,121
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 496 516
Changes in assets and liabilities:
Increase in accounts receivable, net (279) (1,031)
Decrease in inventories 45 432
(Increase) Decrease in prepaid expenses
and other assets 24 (650)
Decrease in noncurrent assets 312 426
Decrease in accounts payable and
accrued expenses 670 706
------ ------
Net cash provided by operating activities 2,923 1,520
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (507) (643)
Increase on cash surrender value of
life insurance policies (12) (25)
------ ------
Net cash used in investing activities (519) (668)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (209) (122)
Distributions to stockholder (2,860) (1,446)
------ ------
Net cash used in financing activities (3,069) (1,568)
------ ------
NET DECREASE IN CASH (665) (716)
CASH AT BEGINNING OF PERIOD 1,522 1,998
------ ------
CASH AT END OF PERIOD $ 857 $ 1,282
====== ======
See Notes to Consolidated Financial Statements.
WILEN COMPANIES, INCORPORATED
Notes to Consolidated Financial Statements - Unaudited
June 30, 1998
1. Significant Accounting Policies
In the opinion of management, the unaudited information presented as of
June 30, 1998 and for the six months ended June 30, 1998 and 1997 reflects all
adjustments necessary, which consists only of normal recurring adjustments,
for a fair presentation of the interim period.
2. Inventories
Inventories are valued at lower of cost (first-in, first-out) or market and at
June 30, 1998 and December 31, 1997 consisted of the following (in thousands):
June 30, December 31,
1998 1997
---- ----
(Unaudited)
Finished goods $ 563 $ 571
Work-in-process 23 24
Raw materials 2,270 2,306
------ ------
$ 2,856 $ 2,901
====== ======
3. Subsequent Event
On August 11, 1998, substantially all of the Company's assets were acquired by
Katy Industries, Inc. ("Katy"). Katy is a publicly-held diversified
corporation with interests in Electrical/Electronics and Maintenance Products.
The purchase price was approximately $50,000,000, including certain
indebtedness.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
The Wilen Companies, Incorporated:
We have audited the accompanying consolidated balance sheet of The Wilen
Companies, Incorporated as of December 31, 1997, and the related
consolidated statements of income and retained earnings and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Wilen Companies, Incorporated as of December 31, 1997, and the results of
its operations and its cash flows for the year then ended, in conformity
with generally accepted accounting principles.
/S/ Smith & Radigan
- -------------------
Atlanta, Georgia
February 24, 1998
Consolidated Balance Sheet
THE WILEN COMPANIES, INCORPORATED
December 31, 1997
ASSETS
------
CURRENT ASSETS
Cash $ 1,522,095
Accounts receivable, net of
allowance for doubtful accounts
of $150,000 4,694,680
Inventories 2,901,422
Other current assets 204,958
----------
9,323,155
PROPERTY AND EQUIPMENT
Land 475,797
Buildings and improvements 3,580,904
Machinery and equipment 6,501,574
Office equipment and furniture 1,214,110
Vehicles 39,962
Aircraft 694,247
----------
12,506,594
Less accumulated depreciation 5,494,834
----------
7,011,760
OTHER ASSETS
Investments 69,208
Cash surrender value of life
insurance policies 342,845
Deposits 366,033
Intangible assets, net of accumulated
amortization of $34,044 134,661
----------
912,747
----------
$17,247,662
==========
The Notes to Consolidated Financial Statements are an integral part of these
statements.
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 1,966,269
Accrued expenses 988,299
Current potion of capital lease
obligation 218,811
Current portion of notes payable 300,000
----------
TOTAL CURRENT LIABILITIES 3,473,379
LONG-TERM OBLIGATIONS
Capital lease obligation, net of
current portion 2,756,301
Notes payable, net of current portion 2,630,000
----------
5,386,301
STOCKHOLDER'S EQUITY
Common stock, $1 par value:
Authorized - 1,000,000 shares
Issued and outstanding - 2,000 shares 2,000
Retained earnings 8,385,982
----------
8,387,982
----------
$17,247,662
==========
The Notes to Consolidated Financial Statements are an integral part of these
statements
Consolidated Statement of Income and Retained Earnings
THE WILEN COMPANIES, INCORPORATED
For the Year Ended December 31, 1997
REVENUES
Gross sales $39,079,651
Less: discounts 1,085,624
----------
37,994,027
COST OF GOODS SOLD 24,416,423
13,577,604
OPERATING EXPENSES
Selling 6,498,048
General and administrative 2,839,759
----------
9,337,807
----------
INCOME FROM OPERATIONS 4,239,797
OTHER INCOME (EXPENSE)
Interest income 100,294
Loss on disposal of asset (84,697)
Miscellaneous income 32,946
Equity in income of partnership 8,795
Interest expense (288,704)
----------
(231,366)
----------
INCOME BEFORE INCOME TAXES 4,008,431
----------
NET INCOME 4,008,431
DISTRIBUTIONS (2,890,241)
RETAINED EARNINGS AT BEGINNING OF YEAR 7,267,792
----------
RETAINED EARNINGS AT END OF YEAR $ 8,385,982
==========
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Consolidated Statement of Cash Flows
THE WILEN COMPANIES, INCORPORATED
For the Year Ended December 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,008,431
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 948,835
Loss on disposal of asset 84,697
Equity in income of partnership (8,795)
Decrease (increase) in:
Accounts receivable (1,194,878)
Inventory (507,817)
Other current assets (92,352)
Deposits 3,733
Increase (decrease) in:
Accounts payable and accrued expenses 321,892
Deferred compensation (7,490)
----------
Total adjustments (452,175)
----------
Net cash provided by operating
activities 3,556,256
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,385,670)
Proceeds from disposal of asset 622,086
Decrease in construction-in-progress 38,133
Increase in cash surrender value
of life insurance (86,290)
----------
Net cash used by investing
activities (811,741)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholder (2,890,241)
Principal payments on notes payable and
capital lease obligation (330,456)
----------
Net cash used by financing activities (3,220,697)
----------
DECREASE IN CASH (476,182)
CASH BALANCE AT BEGINNING OF YEAR 1,998,277
----------
CASH BALANCE AT END OF YEAR $ 1,522,095
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 288,333
==========
The Notes to Consolidated Financial Statements are an integral part of these
statements.
Notes to Consolidated Financial Statements
THE WILEN COMPANIES, INCORPORATED
December 31, 1997
Note A - Summary of Significant Accounting Policies
- ---------------------------------------------------
Investments
-----------
Investments in general partnerships are carried at the lower of net
realizable value or cost plus equity in net earnings and losses since
acquisition.
Intangible Assets
-----------------
Intangible assets consist of bond closing costs that are amortized on
the straight-line method over fifteen years.
Amortization expense of $11,222 was recorded for the year ended
December 31, 1997.
Capital Lease Obligation
------------------------
During 1995, the Company sold real estate used in manufacturing to the
stockholder of the Company and is leasing the facility from the
stockholder. The lease has been recorded as a capital lease in the
accompanying financial statements.
Accrual for Compensated Absences
--------------------------------
The Company cannot reasonably estimate the liability for compensated
absences and therefore no accrual is recorded.
Income Taxes
------------
Effective November 1, 1995, the Company elected to be taxed as an S
corporation under the Internal Revenue Code. Accordingly, no
provision for federal and state income taxes is necessary in the
accompanying financial statements since income, losses and tax credits
are reported on the stockholder's individual income tax returns. All
income tax related accounts were reversed and included in 1996
operations due to the Company's change to a nontaxable status.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Notes to Consolidated Financial Statements
THE WILEN COMPANIES, INCORPORATED
December 31, 1997
Note B - Inventories
- --------------------
A summary of inventories is as follows:
December 31,
1997
----
Finished goods $ 571,547
Goods-in-process 23,767
Raw materials 2,306,108
---------
Total inventory $2,901,422
=========
Note C - Investments
- --------------------
A summary of investments is as follows:
December 31,
1997
----
Note receivable:
Lindberg Livestock Partnership, due on
demand with interest as a function of
the prime rate $ -0-
49% general partnership interest:
1721 DeKalb Associates -0-
Piedmont 11th Street Associates 69,208
--------
$ 69,208
========
During 1997, the Company was paid $350,000 for payment in full of the note
receivable from Lindberg Livestock Partnership. A loss of $46,000 was
recognized. In addition, in 1997 the Company sold its general partnership
interest in 1721 DeKalb Associates for $122,500 and recorded a $116,697 loss
on the sale.
Note D - Line of Credit
- -----------------------
The Company has a line of credit arrangement that provides for a credit
commitment of $3,500,000 available for working capital in the ordinary course
of business. The Company had no borrowings against this commitment at
December 31, 1997. Borrowings against the line of credit are secured by a
blanket lien on the accounts receivable and inventory and cross collateralized
with other bank debt and the real estate subject to the capital lease
(Note A). The amount borrowed under the line of credit is limited to eighty
percent of eligible accounts receivable plus twenty-five percent of eligible
inventory.
Notes to Consolidated Financial Statements
THE WILEN COMPANIES, INCORPORATED
December 31, 1997
Note D - Line of Credit - Continued
- ------------------------------------
The line of credit provides that interest will accrue on the outstanding
balance at the prime rate. The bank's prime rate was eight and one-half
percent at December 31, 1997. The credit agreement limits the Company's
outside borrowings, lease commitments and dividends. In addition, the
lender may require the Company to maintain a certain net worth.
Note E - Capital Lease Obligation and Notes Payable
- ---------------------------------------------------
A summary of the capital lease obligation and notes payable are as follows:
December 31,
1997
----
Capital lease obligation for the manufacturing
facility, payable to the stockholder of the
Company. The monthly payments under the triple
net capital lease equal, at a minimum, an
amount equal to the sum of the payments under
an industrial development revenue bond issued
November 1, 1995 by the Development Authority
of Fulton County and an installment note. The
underlying bond (original amount of $2,370,000)
is payable in annual principal installments com-
mencing January 1, 1995 through January 1, 2009.
Interest on the underlying bond balance is pay-
able quarterly. Interest rates vary but cannot
exceed the lesser of 12% or the maximum rate
permitted by applicable law. The installment note
(original amount $1,055,000) is amortized through
October 31, 2010 with interest accruing at 7.5%. $2,975,112
Industrial development revenue bond issued
November 1, 1995 by the Development Authority
of Fulton County for the repayment of debt
and the acquisition of equipment. The bond is
payable in annual principal installments com-
mencing January 1, 1995 through January 1, 2009.
Interest on the principal balance is payable
quarterly. Interest rates vary but cannot
exceed the lesser of 12% or the maximum rate
permitted by applicable law. 2,930,000
Note payable to an affiliate of the stockholder of
the Company. The note was paid in full during 1997. -0-
---------
5,905,112
Current maturities 518,811
---------
Long-term portion $5,386,301
=========
Notes to Consolidated Financial Statements
THE WILEN COMPANIES, INCORPORATED
December 31, 1997
Note E - Capital Lease Obligation and Notes Payable - Continued
- ---------------------------------------------------------------
The industrial development revenue bonds recorded directly on the books of
the Company and through the capital lease obligation are secured by a letter
of credit from Wachovia Bank of Georgia, N.A. and the Company. The letter
of credit is guaranteed by the Company and its stockholder.
Future maturities of the capital lease obligation and note payable are as
follows:
Year Ending
December 31, Amount
------------ ------
1998 $ 518,811
1999 320,271
2000 521,845
2001 323,541
2002 525,368
Thereafter 3,695,276
---------
$5,905,112
=========
Note F - Deferred Compensation
- ------------------------------
The Company entered into an unfunded deferred compensation plan with a
former officer in May 1980. The plan provided for monthly payments through
February 1997 or the former officer's death. The resulting liability was
paid in full during 1997. Benefits paid by the Company amounted to $7,583
in 1997. The plan did not qualify under the Internal Revenue Code and
benefits are tax deductible only when paid.
Note G - 401(k) Profit Sharing Plan
- -----------------------------------
During the year ended December 31, 1996, the Company entered into two 401(k)
profit sharing plan agreements, one with employees not covered by a
collective bargaining agreement ("Plan A") and another with employees
covered by a collective bargaining agreement ("Plan B"). Approximately
seventy-five percent of the Company's work force is covered by a collective
bargaining agreement. The Plans cover all qualified employees as defined
under the agreements. Employee contributions under Plan A are matched at
one-half of the employee's contribution, limited to the first six percent of
their compensation contributed. Under Plan B, the Company contributes three
cents for each hour of service performed during the Plan year. The Company
made contributions of $41,429 and $13,593 in 1997 to Plan A and Plan B,
respectively.
Notes to Consolidated Financial Statements
THE WILEN COMPANIES, INCORPORATED
December 31, 1997
Note H - Commitments
- --------------------
The Company leases vehicles, equipment and the Phoenix facility under
operating lease agreements that expire on various dates through 2002.
Future minimum lease payments are as follows:
Year Ending
December 31, Vehicles Equipment Facility Amount
1998 $ 18,332 $ 22,111 $121,651 $162,094
1999 8,882 19,609 121,651 150,142
2000 -0- 11,396 121,651 133,047
2001 -0- 1,459 111,514 112,973
2002 -0- 122 -0- 122
------- ------- ------- -------
$ 27,214 $ 54,697 $476,467 $558,378
======= ======= ======= =======
KATY INDUSTRIES, INC. AND WILEN COMPANIES, INCORPORATED
UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 1998 AND
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1998 AND FOR THE YEAR ENDED DECEMBER 31, 1997
The following unaudited pro forma balance sheet as of June 30, 1998 and
unaudited pro forma statements of operations for the six months ended June 30,
1998 and the year ended December 31, 1997 give effect to the acquisition by
Katy Industries, Inc. ("Katy") of the assets and assumptions of certain
liabilities of Wilen Companies, Incorporated ("Wilen") as if the acquisition
had occurred on June 30, 1998 for purposes of the balance sheet and on January
1, of the respective period for purposes of the statements of operations. The
transaction was accounted for as a purchase in accordance with the provisions
of Accounting Principles Board Opinion No. 16.
The historical financial data included in the pro forma statements is as of
the periods presented. The historical financial data of Wilen as of June 30,
1998 and for the six months ended June 30,1998 was derived from unaudited
financial statements for the six months ended June 30, 1998. The historical
financial data of Wilen included in the pro forma statement of operations for
the year ended December 31, 1997 was derived from audited financial statements
for the year ended December 31, 1997.
The unaudited pro forma financial data is based on management's best estimate
of the effects of the acquisition of Wilen. Pro forma adjustments are
intended to present the recurring effects directly related to the transaction
and are based on currently available information. The actual adjustments will
be based on more precise appraisals, evaluations and estimates of fair values.
It is possible that the actual adjustments could differ substantially from
those presented in the unaudited pro forma financial statements.
The unaudited pro forma balance sheet as of June 30, 1998 and the statements
of operations for the six months ended June 30, 1998 and the year ended
December 31, 1997 are not necessarily indicative of the results of operations
that actually would have been achieved had the acquisition of Wilen been
consummated as of the dates indicated, or that may be achieved in the future.
The unaudited pro forma financial statements should be read in conjunction
with the accompanying notes and historical financial statements and notes
thereto.
In accordance with the rules regarding the preparation of pro forma financial
statements, income of $2,712,000, or $.33 per share, from discontinued
operations, other operations to be disposed of, and certain nonrecurring items
(related to Katy historical financial statements) has not been considered in
the unaudited pro forma statements of operations for the six months ended June
30, 1998 or the year ended December 31, 1997.
Pursuant to the purchase agreement related to this transaction, the estimated
purchase price including certain indebtedness of $50,000,000 was based on an
estimated balance sheet as of March 31, 1998 and is subject to possible
adjustment based on the July 31, 1998 balance sheet prepared on a post closing
basis. The ultimate purchase price will be based upon an audit of this balance
sheet, which has not yet been completed. On the closing date, Katy paid an
amount equal to 95% of the estimated purchase price, which was funded through
a $33,000,000 borrowing against the Company's unsecured line of credit at Bank
of America, with the balance being funded from cash on hand. The accompanying
pro forma financial statements do not include adjustments which may result
from this audit or from the resolution of any issues between the parties.
Certain balance sheet adjustments and/or resolution of issues between the
parties will also affect the ultimate price of the acquisition and the
allocation of the purchase price.
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1998
(in thousands)
Katy Wilen Pro forma
Historical Historical Adjustments Pro forma
---------- ---------- ----------- ---------
Cash and cash equivalents $ 19,690 $ 857 $(16,693) [b] $3,854
Accounts receivable, trade, net 47,581 4,974 - 52,555
Notes and other receivables, net 1,963 6 - 1,969
Inventories 65,748 2,856 (100) [d] 68,504
Net current assets of
discontinued operations 11,269 - - 11,269
Net current assets of
other operations 5,677 - - 5,677
Other current assets 15,715 169 (40) [d] 15,844
------- ------ ------ -------
Total current assets 167,643 8,862 (16,833) 159,672
------- ------ ------ -------
Notes receivable, net 1,071 - - 1,071
Cost in excess of net assets
of businesses acquired, net 9,881 - 41,183 [d] 51,064
Net noncurrent assets of
discontinued operations 4,544 - - 4,544
Net noncurrent assets of
other operations 24,769 - - 24,769
Miscellaneous 10,069 613 (603) [d] 10,079
------- ------ ------ -------
Total other assets 50,334 613 40,580 91,527
------- ------ ------ -------
Property and equipment, net 27,937 7,029 (3,704) [d] 31,262
------- ------ ------ -------
Total assets $245,914 $16,504 $20,043 $282,461
======= ====== ====== =======
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1998
(in thousands)
Katy Wilen Pro forma
Historical Historical Adjustments Pro forma
---------- ---------- ----------- ---------
Accounts payable 24,119 2,429 - 26,548
Accrued compensation 3,603 - - 3,603
Accrued expenses 35,721 1,196 (78) [d] 36,839
Accrued interest and taxes 562 - - 562
Dividends Payable 621 - - 621
Current maturities, long-term debt 85 519 (519) [d] 85
------- ------ ------ -------
Total current liabilities 64,711 4,144 (597) 68,258
Long-term debt,
less current maturities 933 5,177 (5,177) [d] 33,933
33,000 [c]
------- ------ ------ -------
Excess of acquired net
assets over cost, net 6,050 - - 6,050
------- ------ ------ -------
Deferred income taxes 22,479 - - 22,479
------- ------ ------ -------
Other liabilities 9,062 - - 9,062
------- ------ ------ -------
Total liabilities 103,235 9,321 27,226 139,782
------- ------ ------ -------
Stockholders' equity:
Common stock 9,822 2 (2) [d] 9,822
Additional paid-in capital 51,174 - - 51,174
Foreign currency translation
adjustment (2,435) - - (2,435)
Retained earnings 105,609 7,181 (7,181) [d] 105,609
Treasury Stock (21,491) - - (21,491)
------- ------ ------ -------
Total stockholders' equity 142,679 7,183 (7,183) 142,679
------- ------ ------ -------
Total liabilities and
stockholders' equity $245,914 $ 16,504 $ 20,043 $282,461
======= ====== ====== =======
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(in thousands except per share information)
Katy Wilen Pro forma
Historical Historical Adjustments Pro forma
---------- ---------- ----------- ---------
Net sales $132,732 $20,005 - $152,737
Cost of goods sold 93,440 14,465 - 107,905
------- ------ ------ -------
Gross profit 39,292 5,540 44,832
Selling, general and
administrative expenses 34,766 3,834 1,030 [a] 39,335
(77) [a]
(87) [a]
(113) [a]
------- ------ ------ -------
Income from operations 4,526 1,706 (753) 5,479
Interest expense (104) (137) 137 [a] (794)
(690) [a]
Interest income 713 40 (753) [a]
Other, net 407 46 - 453
------- ------ ------ -------
Income before taxes 5,542 1,655 (2,059) 5,138
Provision for income taxes 1,940 - (149) [a] 1,791
------- ------ ------ -------
Net income $ 3,602 $ 1,655 ($1,910) $ 3,347
======= ====== ====== =======
Basic earnings per share
of common stock $ .43 $ .40
======= =======
Diluted earnings per share
of common stock $ .43 $ .40
======= =======
Weighted average shares
outstanding - Basic 8,288 8,288
======= =======
Weighted average shares
outstanding - Diluted 8,459 8,459
======= =======
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands except per share information)
Katy Wilen Pro forma
Historical Historical Adjustments Pro forma
---------- ---------- ----------- ---------
Net sales $274,033 $37,994 - $312,027
Cost of goods sold 197,633 24,416 - 222,049
------- ------ ------ -------
Gross profit 76,400 13,578 89,978
Selling, general and
administrative expenses 64,221 9,338 2,059 [a] 75,063
(155) [a]
(175) [a]
(225) [a]
------- ------ ------ -------
Income from operations 12,179 4,240 (1,504) 14,915
Interest expense (236) (289) 289 [a] (1,928)
(1,692) [a]
Interest income 1,183 100 (1,283) [a]
Other, net 310 (43) - 267
------- ------ ------ -------
Income before taxes 13,436 4,008 (4,190) [a] 13,254
Provision for income taxes 4,546 - (67) [a] 4,479
------- ------ ------ -------
Net income $ 8,890 $ 4,008 ($4,123) $ 8,775
======= ====== ====== =======
Basic earnings per share
of common stock $ 1.07 $ 1.06
======= =======
Diluted earnings per share
of common stock $ 1.06 $ 1.04
======= =======
Weighted average shares
outstanding - Basic 8,273 8,273
======= =======
Weighted average shares
outstanding - Diluted 8,405 8,405
======= =======
KATY INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(in 000's)
[a] The following pro forma adjustments are reflected in the pro
forma statements of operations:
Six Months Ended Year Ended
June 30, December 31,
1998 1997
-------- --------
1. Amortization of goodwill recorded
pursuant to purchase accounting (1,030) (2,059)
2. Elimination of Wilen's depreciation on
assets not included in the purchase 77 155
3. Elimination of the difference between
Wilen's prior officers' salaries and
new president's salaries pursuant to
the purchase agreement. 87 175
4. Elimination of Wilen's airplane expense
pursuant to the purchase agreement. 113 225
5. Elimination of Wilen's interest expense
as all debt is repaid on date of purchase
pursuant to the purchase agreement 137 289
6. Increase in interest expense due to
additional indebtedness at applicable
rates for purchase cost (690) (1,692)
7. Decrease in interest income due to use
of cash for purchase cost and elimination
of Wilen's cash (753) (1,283)
8. Net tax benefit related to items 1-7
above and Wilen historical income at
the statutory rate of 37% 149 97
----- -----
($1,910) ($4,123)
===== =====
[b] Decrease in cash as a result of cash used in the purchase of Wilen.
[c] Record required borrowings of $33,000,000 from the Company's unsecured
line of credit with Bank of America for the acquisition of Wilen.
[d] The following pro forma adjustments are made to reflect (1) the
allocation of cost greater than the fair value of assets acquired
resulting in the recording of goodwill, (2) the repayment of all
outstanding debt of the acquired company on the purchase date in
accordance with the purchase agreement, (3) the elimination of assets not
purchased pursuant to the purchase agreement, and (4) the elimination of
Wilen's shareholders' equity as of June 30, 1998.
Record excess and obsolete inventory reserve (100)
Eliminate prepaid bond interest upon repayment of debt (40)
Eliminate assumption of indebtedness by seller 5,774
Record goodwill (Expected Useful Life - 20 years) 41,183
Eliminate assets not included in the purchase (4,307)
Elimination of Wilen's shareholders' equity 7,183
------
Total allocation of estimated purchase price $49,693
======
Exhibit 23 Independent Auditors' Consent from Smith & Radigan
- -----------------------------------------------------------------
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use in the Katy Industries, Inc. Form 8-K/A dated
October 20, 1998 of our report dated February 24, 1998, relating to the
financial statements of Wilen Companies, Incorporated, which appears in the
Form 8-K/A. We also consent to the reference to us under the heading
"Independent Auditors" in this form.
/S/ Smith & Radigan, Certified Public Accountants, LLC
Atlanta, Georgia
October 13, 1998
