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Katy Industries Posts 2013 Fourth Quarter Results

Proquest LLC

Katy Industries, Inc. reported a net loss in the fourth quarter of 2013 of $1.0 million, or $0.13 per share, versus a net loss of $9.1 million, or $1.14 per share, in the fourth quarter of 2012.

In a release on March 31, the Company noted earnings details:

The fourth quarter 2012 included a one-time impairment charge of $1.9 million and a loss from discontinued operations of $5.9 million. Loss from continuing operations was $0.7 million in the fourth quarter of 2013 compared to $3.1 million in the fourth quarter of 2012. Operating loss was $0.6 million, or 3.4 percent of net sales, in the fourth quarter of 2013. Excluding the one-time impairment charge the operating loss was $1.0 million, or 5.6 percent of net sales in the fourth quarter of 2012.

Financial highlights for the fourth quarter of 2013, as compared to the same period in the prior year, included:

Net sales in the fourth quarter of 2013 were $18.4 million, an increase of $0.1 million from the fourth quarter of 2012. Net sales increased primarily as a result of a volume increase in our Continental business unit, which was partially offset by a volume shortfall in our Wilen business unit.

Gross margin was 13.3 percent in the fourth quarter of 2013, a decrease from 15.9 percent in the fourth quarter of 2012. The decrease was primarily a result of higher raw material prices.

Selling, general and administrative expenses were $3.1 million for the fourth quarter of 2013 compared to $3.9 million in the fourth quarter of 2012. The reduction was primarily due to headcount reductions and more favorable claims experience related to casualty insurance in the current year.

Katy also reported a net loss for the year ended December 31, 2013 of $1.5 million, or $0.19 per share, versus a net loss of $15.2 million, or $1.90 per share, for the year ended December 31, 2012. The year ended December 31, 2012 included a one-time impairment charge of $1.9 million and a loss from discontinued operations of $9.7 million. Loss from continuing operations was $1.6 million in 2013 compared to $5.4 million in 2012. Operating loss was $1.0 million, or 1.2 percent of net sales. Excluding the one-time impairment charge the operating loss was $3.0 million, or 3.7 percent of net sales for the year ended December 31, 2012.

Financial highlights for the year ended December 31, 2013, as compared to the year ended December 31, 2012, included:

Net sales for the year ended December 31, 2013 were $78.3 million, a decrease of $2.1 million, or 2.6 percent, compared to 2012. The majority of the decrease was a result of volume shortfall in our Wilen unit, which was partially offset by a volume increase in our Continental business unit.

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Gross margin was 15.2 percent for the year ended December 31, 2013, a decrease of 0.1 percentage point from the prior year. Gross margin was impacted by an unfavorable LIFO adjustment of $0.1 million for the year ended December 31, 2013 as compared to $0.6 million for the year ended December 31, 2012. Excluding the LIFO adjustment in both periods, gross margin decreased by 0.7 percentage points from the year ended December 31, 2012. The decrease was primarily a result of higher raw material costs.

Selling, general and administrative expenses were $12.3 million for the year ended December 31, 2013, a $3.0 million decrease from the prior year. The decrease was primarily due to one-time settlements, headcount reductions and better insurance experience.

During 2013 Katy closed its Glit division and sold property, equipment and intangibles, which were reported as assets held for sale as of December 31, 2012. All other working capital items were settled in the ordinary course of business. Income from discontinued operations was $0.1 million for the year ended December 31, 2013 compared to a loss from discontinued operations of $9.7 million for the year ended December 31, 2012.

Operations provided $1.8 million of free cash flow in 2013 compared to providing $2.7 million during the prior year. The decrease is primarily due to the prior year having a refund of $2.6 million of cash collateralization of letters of credit in connection with the termination of the PNC Credit Agreement, which was partially offset by an increase in accounts payable.

Debt at December 31, 2013 was $7.7 million versus $10.9 million at December 31, 2012.

"The fourth quarter saw higher raw material prices which negatively impacted gross margin," said David J. Feldman, Katy's President and CEO. "In 2013 we were able to significantly reduce our net loss and outstanding debt. We look forward to continued earnings improvement in 2014."

Katy Industries, Inc. is a diversified corporation focused on the manufacture, import and distribution of commercial cleaning products and consumer home products.

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