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United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-Q

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly period ended: June 30, 2004

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURTIES EXCHANGE ACT OF 1934
For the transition period from_______________ to________________

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.)

765 Straits Turnpike, Suite 2000, Middlebury, Connecticut 06762
(Address of Principal Executive Offices) (Zip Code)


Registrant's telephone number, including area code: (203)598-0397

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 o
 


Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).


 
Yes o
 
No x
 


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 August 13, 2004
Common Stock, $1 Par Value
 
7,870,377

 
 
     
 
 
 
 
KATY INDUSTRIES, INC.
FORM 10-Q
June 30, 2004


INDEX

 
 
 
 
 
 
 
Page
PART I
FINANCIAL INFORMATION
 
 
 
 
 
 
Item 1.
Financial Statements:
 
 
 
 
 
 
 
Condensed Consolidated Balance Sheets
 
 
 
June 30, 2004 and December 31, 2003 (unaudited)
2,3
 
 
 
 
 
 
Condensed Consolidated Statements of Operations
 
 
 
Three Months and Six Months Ended
 
 
 
June 30, 2004 and 2003 (unaudited)
4
 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows
 
 
 
Six Months Ended June 30, 2004 and 2003 (unaudited)
5
 
 
 
 
 
 
Notes to Condensed Consolidated Financial Statements (unaudited)
6
 
 
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
23
 
 
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
39
 
 
 
 
 
Item 4.
Controls and Procedures
39
 
 
 
 
 
 
 
 
PART II
OTHER INFORMATION
 
 
 
 
 
 
Item 1.
Legal Proceedings
40
 
 
 
 
 
Item 2.
Changes in Securities, Use of Proceeds and Issuer Proceeds of Equity Securities
40
 
 
 
 
 
Item 6.
Exhibits and Reports on Form 8-K
41
 
 
 
 
 
Signatures
42
 
 
 
 
 
Certifications
43-46
 
 
 
 
 
 
1  
 
 
 

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

KATY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)

ASSETS

 
  
June 30,
December 31,
 
  
2004
2003
   
 
 
CURRENT ASSETS:
    
 
    
 
  
 
    
 
    
 
  
Cash and cash equivalents
 
$
5,684
 
$
6,748
 
Accounts receivable, net
   
61,007
   
65,197
 
Inventories, net
    
68,116
   
53,545
 
Other current assets
    
4,847
   
1,658
 
   
 
 
 
    
 
    
 
  
Total current assets
    
139,654
   
127,148
 
   
 
 
 
    
 
    
 
  
 
    
 
    
 
  
OTHER ASSETS:
    
 
    
 
  
 
    
 
    
 
  
Goodwill
    
10,215
   
10,215
 
Intangibles, net
    
21,647
   
22,399
 
Other
    
10,427
   
10,352
 
   
 
 
 
    
 
    
 
  
Total other assets
    
42,289
   
42,966
 
   
 
 
 
    
 
    
 
  
 
    
 
    
 
  
PROPERTY AND EQUIPMENT
    
 
    
 
  
Land and improvements
    
1,812
   
3,196
 
Buildings and improvements
    
14,188
   
17,198
 
Machinery and equipment
    
134,092
   
129,240
 
   
 
 
 
    
 
    
 
  
 
    
150,092
   
149,634
 
Less - Accumulated depreciation
    
(83,778
)
  
(78,040
)
   
 
 
 
    
 
    
 
  
Property and equipment, net
    
66,314
   
71,594
 
   
 
 
 
    
 
    
 
  
Total assets
  
$
248,257
 
$
241,708
 
   
 
 
    
 
    
 
  
See Notes to Condensed Consolidated Financial Statements.
   
 
    
 
  
 
 
2  
 
 

KATY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Share Data)
(Unaudited)

LIABILITIES AND STOCKHOLDERS’ EQUITY

 
  
June 30,
December 31,
 
  
2004
2003
   
 
 
CURRENT LIABILITIES:
    
 
    
 
  
 
    
 
    
 
  
Accounts payable
  
$
29,503
 
$
37,259
 
Accrued compensation
    
5,022
   
6,212
 
Accrued expenses
    
38,276
   
40,238
 
Current maturities of long-term debt
    
2,857
   
2,857
 
Revolving credit agreement
    
43,022
   
36,000
 
   
 
 
 
    
 
    
 
  
Total current liabilities
    
118,680
   
122,566
 
   
 
 
 
    
 
    
 
  
LONG-TERM DEBT, less current maturities
    
16,429
   
806
 
 
    
 
    
 
  
OTHER LIABILITIES
    
14,077
   
16,044
 
   
 
 
 
    
 
    
 
  
Total liabilities
    
149,186
   
139,416
 
   
 
 
 
    
 
    
 
  
COMMITMENTS AND CONTINGENCIES (Notes 10 and 12)
    
-
   
-
 
   
 
 
 
    
 
    
 
  
STOCKHOLDERS’ EQUITY
   
 
    
 
  
15% Convertible Preferred Stock, $100 par value, authorized
    
 
    
 
  
1,200,000 shares, issued and outstanding 925,750 shares,
   
 
    
 
  
liquidation value $105,320 and $98,396, respectively
    
100,431
   
93,507
 
Common stock, $1 par value authorized 35,000,000 shares,
    
 
    
 
  
issued 9,822,204 shares
    
9,822
   
9,822
 
Additional paid-in capital
    
33,508
   
40,441
 
Accumulated other comprehensive income
   
2,296
   
2,387
 
Accumulated deficit
    
(24,201
)
  
(21,137
)
Treasury stock, at cost, 1,951,827 and 1,941,327 shares, respectively
    
(22,785
)
  
(22,728
)
   
 
 
 
    
 
    
 
  
Total stockholders' equity
    
99,071
   
102,292
 
   
 
 
 
    
 
    
 
  
Total liabilities and stockholders' equity
  
$
248,257
 
$
241,708
 
   
 
 
 
    
 
    
 
  
See Notes to Condensed Consolidated Financial Statements.
    
 
    
 
  

 
3  
 
 
KATY INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(Thousands of Dollars, Except Share and Per Share Data)
(Unaudited)
 
  
 
 
 
 
 
  
Three Months
Six Months
 
  
Ended June 30,
Ended June 30,
 
  
2004
2003
2004
2003
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Net sales
  
$
100,522
  
$
101,461
  
$
200,417
  
$
191,913
  
Cost of goods sold
    
87,261
   
87,512
   
170,526
   
163,679
 
   
 
 
 
 
Gross profit
    
13,261
   
13,949
   
29,891
   
28,234
 
Selling, general and administrative expenses
    
(14,240
)
  
(15,353
)
  
(28,988
)
  
(30,171
)
Severance, restructuring and related  income (charges)
    
109
   
(1,713
)
  
(1,789
)
  
(1,941
)
Impairments of long-lived assets
    
-
   
(1,800
)
  
-
   
(1,800
)
   
 
 
 
 
Operating loss
    
(870
)
  
(4,917
)
  
(886
)
  
(5,678
)
Equity in income (loss) of equity method investment
    
-
   
156
   
-
   
(211
)
Gain on sale of assets
    
549
   
50
   
549
   
803
 
Interest expense
    
(997
)
  
(1,186
)
  
(1,797
)
  
(3,613
)
Other, net
    
144
   
448
   
(231
)
  
444
 
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Loss before provision for income taxes
    
(1,174
)
  
(5,449
)
  
(2,365
)
  
(8,255
)
 
    
 
    
 
    
 
    
 
  
Provision for income taxes
    
(109
)
  
(102
)
  
(699
)
  
(75
)
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Loss from continuing operations before distributions on preferred
   
 
    
 
    
 
    
 
  
interest of subsidiary
    
(1,283
)
  
(5,551
)
  
(3,064
)
  
(8,330
)
 
    
 
    
 
    
 
    
 
  
Distributions on preferred interest of subsidiary (net of tax)
    
-
   
-
   
-
   
(123
)
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Loss from continuing operations
    
(1,283
)
  
(5,551
)
  
(3,064
)
  
(8,453
)
 
    
 
    
 
    
 
    
 
  
Income from operations of discontinued businesses (net of tax)
    
-
   
545
   
-
   
1,603
 
Loss on sale of discontinued business
    
-
   
(196
)
  
-
   
(196
)
   
 
 
 
 
 
    
 
    
 
    
 
    
 
  
Net loss
    
(1,283
)
  
(5,202
)
  
(3,064
)
  
(7,046
)
 
    
 
    
 
    
 
    
 
  
Gain on early redemption of preferred interest of subsidiary
    
-