Katy Industries, Inc. Reports 2014 First Quarter Results

BRIDGETON, Mo., May 12, 2014

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

• Net sales in the first quarter of 2014 were $19.9 million, an increase of $1.8 million, or 9.7%, compared to the same period in 2013.  The increase was a result of our acquisition of Ft. Wayne Holdings, Inc. ("FTW") on February 19, 2014, which contributed $1.6 million in net sales for the three months ended March 28, 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 quarter 2014 versus the first quarter 2013.
• Gross margin was 15.0% in the first quarter of 2014, an increase from 13.3% in the first quarter of 2013.  The increase in gross margin was primarily a result of higher margins on our sales mix in our Continental business unit.
• Selling, general and administrative expenses were $0.5 million higher in the first quarter of 2014 than in the first quarter of 2013.  The increase was primarily due to the acquisition of FTW and incentive compensation expense for the three months ended March 28, 2014.
• Income tax benefit for the three months ended March 28, 2014 includes a benefit as a result of the acquisition of FTW. 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 used by operating activities before changes in operating assets and liabilities was $0.4 million in the first quarter of 2014 as compared to $0.7 million in the same period of 2013.  Changes in operating assets and liabilities from continuing operations used $2.9 million in the first quarter of 2014 as compared to $1.0 million in the same period of 2013. The increase in usage is primarily attributable to posting cash collateralization of $1.5 million with PrivateBank and Trust Company in connection with our letters of credit.

Cash flows used by investing activities in the first quarter of 2014 reflect an $11.2 million increase due to the purchase of FTW. 

Debt at March 28, 2014 was $22.5 million, versus $7.7 million at December 31, 2013.

"During the first quarter of 2014 we successfully acquired Ft. Wayne Holdings, Inc.," said David J. Feldman President & CEO of Katy Industries. "Going forward we will continue our commitment to our core business and remain focused on additional operational improvements that will move us to profitability in the future."

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.  Forward-looking statements include all statements of the Company's plans, beliefs or expectations with respect to future events or developments and often may be identified by such words or phrases as "anticipates," "believes," "estimates," "expects," "intends," "plans," "projects," "may," "should," "will," "continue," "is subject to," or similar expressions.  These forward-looking statements are based on the opinions and beliefs of Katy's management, as well as assumptions made by, and information currently available to, the Company's management.  Additionally, the forward-looking statements are based on Katy's current expectations and projections about future events and trends affecting the financial condition of its business.  The forward-looking statements are subject to risks and uncertainties that may lead to results that differ materially from those expressed in any forward-looking statement made by the Company or on its behalf.  These risks and uncertainties include, without limitation, conditions in the general economy and in the markets served by the Company, including changes in the demand for its products; success of any restructuring or cost control efforts; an increase in interest rates; competitive factors, such as price pressures and the potential emergence of rival technologies; interruptions of suppliers' operations or other causes affecting availability of component materials or finished goods at reasonable prices; changes in product mix, costs and yields; labor issues at the Company's facilities or those of its suppliers; legal claims or other regulator actions; and other risks identified from time to time in the Company's filings with the SEC, including its Report on Form 10-K for the year ended December 31, 2013. Katy undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.