SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
September 16, 2003
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Date of report (Date of Earliest Event Reported)
KATY INDUSTRIES, INC.
(Exact name of Registrant as specified in Its Charter)
DELAWARE 1-5558 75-1277589
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
765 Straits Turnpike, Middlebury, Connecticut 06762
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(Address of principal executive offices and zip code)
(203) 598-0397
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Registrant's telephone number, including area code
Item 2. Acquisition or Disposition of Assets.
On September 16, 2003, Katy Industries, Inc. ("Katy") consummated the sale
(the "Duckback Sale") of substantially all of the assets of its subsidiary,
Duckback Products, Inc. ("Duckback"). Katy sold Duckback to an unrelated party,
Duckback Acquisition Corp. (an affiliate of Professional Paint, Inc.), for
$15,000,000, subject to a post-closing adjustment based on the working capital
of Duckback as of the closing date. The sale price was determined by arms-length
negotiation between the parties based on a variety of factors, including
Duckback's profitability. This sale was part of a larger, previously disclosed,
restructuring effort in which Katy is exiting non-core businesses.
The proceeds from the Duckback Sale were used to reduce Katy's long-term
debt under its credit facility, in accordance with the terms thereof.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated balance sheet has
been derived from the unaudited condensed consolidated balance sheet of Katy as
of June 30, 2003 and gives effect to the Duckback Sale as if such sale had
occurred on June 30, 2003. The following unaudited pro forma statements of
operations have been derived from the audited consolidated statement of
operations of Katy for the year ended December 31, 2002 and the unaudited
condensed consolidated statement of operations of Katy for the six months ended
June 30, 2003, and reflect the operations of Katy as if Duckback had been sold
as of January 1, 2002.
The unaudited pro forma consolidated financial statements are presented
for illustrative purposes only and are not necessarily indicative of the
operating results or financial position that would have resulted had the sale
been consummated on the date indicated, nor do they represent a forecast thereof
at any future date or for any future period. This pro forma information should
be read in conjunction with Katy's 2002 Annual Report on Form 10-K.
Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
(In thousands)
As of June 30, 2003
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Actual Adjustments Pro Forma
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Assets
Current assets:
Cash $ 6,673 $ 15,842 (1) $ 6,673
-- (15,842)(2) --
Accounts receivable, net 65,365 (4,062)(1) 61,303
Inventory, net 58,975 (1,022)(1) 57,953
Prepaid assets and other 1,883 (101)(1) 1,782
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Total current assets 132,896 (5,185) 127,711
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Other assets:
Goodwill 11,211 (668)(1) 10,543
Intangibles, net 25,272 (2)(1) 25,270
Equity method investment 7,095 -- 7,095
Other assets 11,031 -- 11,031
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Total other assets 54,609 (670) 53,939
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Property, plant and equipment, net 80,206 (304)(1) 79,902
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Total assets $ 267,711 $ (6,159) $ 261,552
============= ============= =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 29,655 $ (1,129)(1) $ 28,526
Accrued liabilities 47,733 (701)(1) 47,032
Current maturities of long-term debt 2,857 -- 2,857
Revolving credit facility 51,000 (3,508)(2) 47,492
Current liabilities of discontinued operations 142 -- 142
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Total current liabilities 131,387 (5,338) 126,049
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Long-term debt, less current portion 14,239 (12,334)(2) 1,905
Other liabilities 17,770 -- 17,770
Non-current liabilities of discontinued operations 52 -- 52
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Total liabilities 163,448 (17,672) 145,776
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Stockholders' equity
Convertible preferred stock 86,721 -- 86,721
Common stock 9,822 -- 9,822
Additional paid in capital 47,236 -- 47,236
Accumulated other comprehensive loss (127) -- (127)
Accumulated deficit (18,819) 11,513 (1) (7,306)
Treasury stock (20,570) -- (20,570)
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Total stockholders' equity 104,263 11,513 115,776
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Total liabilities and stockholders' equity $ 267,711 $ (6,159) $ 261,552
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See Notes to Unaudited Pro Forma Consolidated Financial Information.
Notes to Pro Forma Consolidated Condensed Balance Sheet
(1) Adjustment to reflect the estimated net proceeds from the Duckback Sale
and the elimination of the assets sold and the liabilities assumed by the
buyer.
Sale Proceeds $ 15,000
Estimated post-closing working capital adjustment 2,000
Less estimated fees and expenses (1,158)
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Estimated net proceeds 15,842
Assets sold, net of liabilities assumed
(based on June 30, 2003 book value) (4,329)
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Estimated gain on sale $ 11,513
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(2) Reflects the repayment of long-term debt with the entire estimated net
proceeds from the Duckback Sale in accordance with the terms of Katy's
credit facility.
Pro Forma Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
For the Six Months Ended For the Year Ended
June 30, 2003 December 31, 2002
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Actual Adjustments Pro Forma (1) Actual Adjustments Pro Forma (1)
------------ ------------ ------------- ------------ ------------ ------------
Net sales $ 201,199 $ (9,286)(2) $ 191,913 $ 459,990 $ (14,235)(2) $ 445,755
Cost of goods sold 168,876 (5,198)(2) 163,678 381,846 (8,268)(2) 373,578
------------ ------------ ------------ ------------ ------------ ------------
Gross profit 32,323 (4,088) 28,235 78,144 (5,967) 72,177
Selling, general and
administrative expenses 31,867 (1,697)(2) 30,170 66,803 (3,146)(2) 63,657
Impairments of long-lived assets 1,800 -- 1,800 21,204 -- 21,204
Severance, restructuring and
related costs 1,941 -- 1,941 19,155 -- 19,155
Loss on SESCO transaction -- -- -- 6,010 -- 6,010
------------ ------------ ------------ ------------ ------------ ------------
Operating loss (3,285) (2,391) (5,676) (35,028) (2,821) (37,849)
Equity in (loss) income of
equity method investment (211) -- (211) 295 -- 295
Interest, net (3,563) 587 (3) (2,976) (6,046) 1,246 (3) (4,800)
Other, net 1,197 -- 1,197 (407) -- (407)
------------ ------------ ------------ ------------ ------------ ------------
Loss before provision
for income taxes (5,862) (1,804) (7,666) (41,186) (1,575) (42,761)
Provision for income taxes (939) -- (4) (939) (8,612) -- (4) (8,612)
------------ ------------ ------------ ------------ ------------ ------------
Loss from continuing operations
before distributions on
preferred interest in subsidiary (6,801) (1,804) (8,605) (49,798) (1,575) (51,373)
Distributions on preferred interest
in subsidiary, net of tax (123) -- (123) (1,593) -- (1,593)
------------ ------------ ------------ ------------ ------------ ------------
Loss from continuing operations (6,924) (1,804) (8,728) (51,391) (1,575) (52,966)
Income (loss) from operations
of discontinued businesses,
net of tax 74 -- 74 (6,150) -- (6,150)
(Loss) gain on sale of discontinued
businesses, net of tax (196) -- (196) 3,306 -- 3,306
------------ ------------ ------------ ------------ ------------ ------------
Loss before cumulative effect of
a change in accounting
principle, net of tax (7,046) (1,804) (8,850) (54,235) (1,575) (55,810)
Cumulative effect of a change in
accounting principle, net of tax -- -- -- (2,514) -- (2,514)
------------ ------------ ------------ ------------ ------------ ------------
Net loss (7,046) (1,804) (8,850) (56,749) (1,575) (58,324)
Gain on early redemption of
preferred interest in subsidiary 6,560 -- 6,560 -- -- --
Payment in kind dividends on
convertible preferred stock (6,025) -- (6,025) (11,136) -- (11,136)
------------ ------------ ------------ ------------ ------------ ------------
Net loss attributable to
common stockholders $ (6,511) $ (1,804) $ (8,315) $ (67,885) $ (1,575) $ (69,460)
============ ============ ============ ============ ============ ============
Loss per share of common stock - Basic and diluted:
Loss from continuing
operations attributable
common stockholders ($0.76) ($0.98) ($7.47) ($7.66)
Discontinued operations (0.02) (0.02) (0.34) (0.34)
Cumulative effect of a change
in accounting principle -- -- (0.30) (0.30)
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Net loss attributable to common stockholders $ (0.78) $ (1.00) $ (8.11) $ (8.30)
========= ========= ========= =========
Weighted average shares
outstanding - Basic and
diluted 8,352 8,352 8,371 8,371
========= ========= ========= =========
See Notes to Unaudited Pro Forma Consolidated Financial Information.
Notes to Pro Forma Consolidated Statements of Operations
(1) These Pro Forma Consolidated Statements of Operations exclude a non-
recurring gain which will be recorded in connection with or due to
the Duckback Sale, estimated at $11.5 million, based on June 30,
2003 book values.
(2) Reflects the elimination of Duckback's results of operations for the
periods presented.
(3) Assumes the estimated net proceeds of $15.8 million from the
Duckback Sale are used to repay long-term debt (in accordance with
Katy's credit facility) with a weighted average interest rate of
7.4% and 7.9% for the six months ended June 30, 2003 and the year
ended December 31, 2002, respectively.
(4) No adjustment has been made for income taxes as Katy assumed that
any incremental tax benefit would be offset by a corresponding
increase in a deferred tax valuation allowance. Such valuation
allowance had been established due to Katy's significant net
operating loss carryforward position.
(c) Exhibits.
The following exhibit is filed with this current report on Form 8-K:
10 Asset Purchase Agreement, dated as of September, 15, 2003, by and
between Katy Industries, Inc., Duckback Products, Inc. and Duckback
Acquisition Corp.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KATY INDUSTRIES, INC.
Date: October 1, 2003 By: /s/ Amir Rosenthal
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Amir Rosenthal
Vice President, Chief Financial Officer,
General Counsel and Secretary