Katy Industries, Inc. (fka KATYQ)

[Enterprising Investor]

Katy Industries, Inc. Reports Net Income in 2014 Third Quarter Results (11/10/14)

BRIDGETON, MO--(Marketwired - November 10, 2014) - Katy Industries, Inc. (OTCBB: KATY) today reported net income in the third quarter of 2014 of $1.4 million, or $0.17 per basic ($0.05 per diluted) share versus net income of $0.2 million, or $0.02 per basic ($0.00 per diluted) share, in the third quarter of 2013. Income from continuing operations was $1.4 million in the third quarter of 2014 compared to income of $0.2 million in the third quarter of 2013. Operating income was $1.5 million, or 5.8% of net sales, in the third quarter of 2014, compared to income of $0.4 million, or 2.0% of net sales, for the same period in 2013.

Financial highlights for the third quarter of 2014, as compared to the same period in the prior year, included:

•Net sales in the third quarter of 2014 were $26.5 million, an increase of $5.7 million, or 27.3%, compared to the same period in 2013. The increase was a result of the acquisition of Ft. Wayne Plastics ("FWP"); which contributed $4.4 million in net sales for the three months ended September 26, 2014, and increased demand in our Continental business unit.

•Gross margin was 18.8% in the third quarter of 2014, an increase from 17.3% in the third quarter of 2013. The increase in gross margin was primarily a result of a mix of higher margin product sales and operational efficiencies.

•Selling, general and administrative ("SG&A") expenses increased from $3.0 million in the third quarter of 2013 to $3.5 million in the third quarter of 2014. The increase was primarily due to the first quarter acquisition of FWP, which increased SG&A expenses for the three months ended September 26, 2014, and better casualty insurance experience during the three months ended September 27, 2013 as compared to the three months ended September 26, 2014.

The Company reported net income for the nine months ended September 26, 2014 of $3.1 million, or $0.38 per basic ($0.11 per diluted) share, versus a net loss of $0.5 million, or $0.06 per share, for the nine months ended September 27, 2013. Income from continuing operations was $3.1 million for the nine months ended September 26, 2014 compared to a loss of $0.9 million for the nine months ended September 27, 2013. Operating income was $1.4 million, or 2.0% of net sales, for the nine months ended September 26, 2014, compared to a loss of $0.3 million, or 0.1% of net sales, for the nine months ended September 27, 2013.

Financial highlights for the nine months ended September 26, 2014, as compared to the nine months ended September 27, 2013, included:

•Net sales for the nine months ended September 26, 2014 were $72.1 million, an increase of $12.3 million, or 20.5%, compared to the same period in 2013. The increase was a result of the acquisition of FWP, which contributed $9.6 million in net sales for the nine months ended September 26, 2014, and increased demand in our Continental business unit. The increase in net sales was partially offset, however, by a volume shortfall in our Wilen business unit and two less shipping days in the first nine months of 2014 versus the first nine months of 2013. Gross margin was 16.7% for the nine months ended September 26, 2014, an increase of 90 basis points from the same period a year ago. The increase was primarily a result of higher margins on the sales mix in our Continental business unit.

•Selling, general and administrative expenses were $10.6 million for the first nine months of 2014 as compared to $9.2 million for the first nine months of 2013. The increase was primarily due to the acquisition of FWP for the nine months ended September 26, 2014, which was partially offset by better casualty insurance experience and one-time settlements received during the nine months ended September 27, 2013.

•Income tax benefit for the nine months ended September 26, 2014 includes a benefit as a result of the acquisition of FWP. The Company recorded deferred tax liabilities of $2.4 million which reduced its net deferred tax assets. The reduction in deferred tax assets caused a release of a valuation allowance of $2.3 million.

Cash provided by operating activities before changes in operating assets and liabilities was $2.7 million in the first nine months of 2014 as compared to $1.1 million in the same period of 2013. Changes in operating assets and liabilities from continuing operations used $5.7 million in the first nine months of 2014 as compared to $0.7 million in the same period of 2013. The increase in usage is primarily attributable to an increase in accounts receivables and inventory, which was partially offset by an increase in accounts payable.

Debt at September 26, 2014 was $22.0 million, versus $7.7 million at December 31, 2013.

"We are pleased to report net income for a third consecutive quarter," stated David J. Feldman, Katy's President and Chief Executive Officer. "The acquisition of FWP has been a great addition to our company and we expect to realize ongoing benefits as we continue to implement our strategic operational plans."

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http://www.marketwired.com/press-release/katy-industries-inc-reports-net-income-in-2014-third-quarter-results-1966340.htm