restructuring and related charges. Excluding these charges, we generated operating income of $3.0 million during the third quarter of 2004 versus $4.8 million in the third quarter of 2003. To provide additional transparency about measures of our performance, we supplement the reporting of our financial information under generally accepted accounting principles (GAAP) with non-GAAP information on operating income (loss) excluding severance, restructuring and related charges and impairments of long-lived assets. We believe the use of this measure is a better indicator of the underlying operating performance of our businesses and allows us to make meaningful comparisons of different operating periods.
Other, net for the three months ended September 30, 2003 included costs associated with the proposed sale of Woods and Woods Canada of $0.3 million, realized foreign exchange losses of $0.2 million and the net write-off of amounts related to previously divested businesses of $0.1 million.
The provision for income taxes for the three months ended September 30, 2004 reflects current expense for state and foreign income taxes. Our income tax benefit related to continuing operations was $3.2 million in the third quarter of 2003. In addition, $0.3 million and $3.8 million of income tax expense was attributable to income from discontinued businesses and the gain on the sale of discontinued businesses, respectively.
[a] Included in “Total Company” are certain amounts in addition to those shown for the Maintenance Products and Electrical Products segments, including amounts associated with (1) unallocated corporate expenses, (2) our equity investment in a shrimp harvesting and farming operation, and (3) our waste-to-energy facility (SESCO). See Note 11 to the Condensed Consolidated Financial Statements for detailed reconciliations of segment information to the Condensed Consolidated Financial Statements.
[b] Excludes discontinued operations.
[c] Includes discontinued operations.
Maintenance Products Group
While net sales during the third quarter of 2004 in the Maintenance Products Group were essentially flat versus the third quarter of 2003, performance declined due to an overall decrease in margins primarily resulting from accelerating raw material costs and higher operating costs incurred due to continuing shipping and production inefficiencies caused by the delayed consolidation of the abrasives facilities which were only partially offset by the favorable impact of restructuring, cost containment and lower depreciation from levels that were atypically high in 2003 due to the revision of the estimated useful lives of certain manufacturing assets, specifically molds and tooling equipment used in the
manufacture of plastic products, from seven to five years, effective January 1, 2003. This change in estimate was made following significant impairments to these types of assets recorded during 2002. Operating results were also favorably impacted by cost reduction initiatives including the consolidation of our facilities in the St. Louis area. We originally anticipated the consolidation of our abrasives facilities to occur in the first half of 2004. The consolidation has been delayed primarily as a result of (i) certain environmental permits not being received timely (ii) increased demand from certain of our abrasives customers and (iii) other operational issues. We are now evaluating the timing of this facility consolidation and expect it to occur during 2005.
Net sales
Net sales from the Maintenance Products Group decreased from $72.4 million during the three months ended September 30, 2003 to $72.2 million during the three months ended September 30, 2004 (a decrease of less than 1%). Overall, this decline was due to lower volumes of 3%, partially offset by the favorable impact of exchange rates of 2% and higher pricing of 1%. We experienced volume declines in our abrasives business unit in the U.S. due to shipping and production inefficiencies caused by the delayed consolidation of two abrasives facilities into the Wrens, Georgia facility which were partially offset by stronger sales of roofing products to the construction industry. Both the Jan/San and Consumer businesses in the U.K. benefited from favorable exchange rates in th e current year, while the U.K. Consumer business has also seen improved volumes due primarily to additional retail store penetration with customers and new product introductions. In addition, the U.S. Jan/San and Container businesses implemented price increases during 2004 to offset the rising cost of resin.
Operating loss
The Maintenance Products Group’s operating deficit improved by $5.9 million from $6.0 million in the third quarter of 2003 to $0.1 million in 2004. The operating deficit for both periods was impacted by costs for severance, restructuring and related charges, while the 2003 period also included impairments of fixed assets. Excluding those charges, operating income decreased by $1.8 million from income of $1.9 million during the three months ended September 30, 2003 to income of $0.1 million for the same period in 2004. The decrease in operating income was attributable mostly to lower volumes and margins for our abrasives business resulting from shipping and production inefficiencies caused by the delayed consolidation of two abrasives facilities into the Wrens, Georgia facility. In addition, raw material costs were significantly higher in the third quarter of 2004 versus the third quarter of 2003 and were not fully recoverable through higher selling prices. Operating results were positively impacted by lower depreciation levels that were atypically high in 2003 related to the revision of the estimated useful lives of certain manufacturing assets and benefits realized from the implementation of cost reduction strategies.
During the three months ended September 30, 2004 and 2003, operating results for the Maintenance Products Group included severance, restructuring and related charges of $0.1 million and $2.7 million, respectively. Charges in the third quarter of 2004 related primarily to the restructuring of the abrasives business (principally severance) of $0.2 million, the movement of inventory and equipment in connection with the consolidation of St. Louis manufacturing and distribution facilities of $0.2 million, which were offset by a credit of $0.3 million to reverse a non-cancelable lease accrual based on a change in usage of a previously impaired leased facility in Hazelwood, Missouri. The costs in the third quarter of 2003 were related primarily to the establishment of and adjustments to non-cancelable lease liabilities for abandoned facilities ($1.9 million), costs associated with the consolidation efforts at the Contico division of CCP, including severance and moving inventory and equipment ($0.7 million), and charges associated with the restructuring of its abrasives business ($0.1 million). During the third quarter of 2003, the Maintenance Products Group also recorded impairments of long-lived assets of $5.3 million, and included $3.7 million of idle and obsolete equipment and leasehold improvements at Warson Road, Hazelwood and Bridgeton, $1.2 million related to the closure of abrasives facilities in Lawrence, Massachusetts and Pineville, North Carolina and the subsequent consolidation into the Wrens facility, and $0.3 million of obsolete molds and tooling at the Consumer operation in the United Kingdom.
Total assets for the group increased $8.2 million primarily as a result of increased inventory due to higher raw material prices, and to a lesser extent, higher accounts receivable.Electrical Products Group
The Electrical Products Group continued its strong performance into the third quarter of 2004, driven primarily by higher volumes at Woods Industries, Inc. (“Woods”) versus the third quarter of 2003, and secondarily, by higher margins over the prior year resulting from Woods (Canada), Inc.’s (“Woods Canada”) decision to source substantially all of its products from Asia.
Net sales
The Electrical Products Group’s sales improved from $53.5 million in the third quarter of 2003 to $63.2 million in the third quarter of 2004, an increase of 18%. Higher pricing of 15%, increased volume of 2% and favorable currency translation of 1% contributed to the improvement in sales performance. Higher selling prices were implemented throughout the first nine months of 2004 to offset the rising cost of copper and other materials. Woods benefited from new store and same store volume growth for its two largest customers, both national mass market retailers. Demand for our products increased in the third quarter of 2004 due to the hurricanes that affected the Southeastern United States during that period. Sales at Woods Canada were also favorably impacted by a stronger Canadian dollar versus the U.S. dollar in the second quarter of 2004. Woods Canada experienced volume declines due to an excess inventory position in the third quarter of 2004 at one of its larger customers.
Operating income
The Electrical Products Group’s operating income increased from $4.9 million for the three months ended September 30, 2003 to $6.3 million for the three months ended September 30, 2004, an increase of 28%. Operating income in the third quarter of 2003 and 2004 was impacted by severance, restructuring and related costs, which are discussed further below. Excluding these costs, operating income improved by only $0.2 million in the quarter, an increase of 3%. The strong volume increases at Woods as well as improved gross margins contributed to the higher profitability of the Electrical Products Group. Margins were positively impacted in the third quarter of 2004 by the closure of the Woods Canada manufacturing facility in December 2003 an d the completion of a fully outsourced product strategy. Higher selling prices at Woods were mostly offset by an increase in materials (principally copper) used in the their products.
Operating results in the third quarter of 2004 and 2003 included severance, restructuring and related charges of less than $0.1 million and $1.2 million, respectively. In the third quarter of 2004, the Electrical Products Group recorded a charge of $0.1 million for the shutdown and relocation of a procurement office in Asia offset by a credit of $0.1 million to reverse a non-cancelable lease accrual based on a change in usage of leased facility that was previously impaired at Woods. The 2003 costs relate primarily to severance for Woods Canada in connection with the announced shutdown of their manufacturing facility in the fourth quarter of 2003.
Total assets for the Electrical Products Group increased $20.3 million primarily due to higher accounts receivable balances due to seasonally stronger sales at the end of the third quarter of 2004 versus the end of 2003, and higher inventory levels resulting from higher material costs (due to the increase in copper prices) and a planned seasonal build for expected strong early fourth quarter sales. These increases were offset by lower fixed assets (primarily due to the sale of the Woods Canada manufacturing facility).Nine Months Ended September 30, 2004 versus Nine Months Ended September 30, 2003
| | Nine Months | |
| | Ended September 30, | |
| | 2004 | | | 2003 | |
| | | | | | | |
| Net sales | | 100.0 | % | | 100.0 | % |
| Cost of goods sold | | 85.8 | % | | 84.8 | % |
| Gross profit | | 14.2 | % | | 15.2 | % |
| Selling, general and administrative expenses | | (13.1 | %) | | (14.3 | %) |
| Severance, restructuring and related charges | | (0.5 | %) | | (1.8 | %) |
| Impairments of long-lived assets | | 0.0 | % | | (2.2 | %) |
| Operating income (loss) | | 0.6 | % | | (3.1 | %) |
| Equity in loss of equity method investment (net of impairment | | | | | | |
| charge of $5.5 million in 2003) | | 0.0 | % | | (1.8 | %) |
| Gain on sale of assets | | 0.2 | % | | 0.2 | % |
| Interest expense | | (0.9 | %) | | (1.6 | %) |
| Other, net | | (0.1 | %) | | (0.0 | %) |
| | | | | | | |
| Loss before (provision) benefit for income taxes | | (0.2 | %) | | (6.3 | %) |
| | | | | | | |
| (Provision) benefit for income taxes | | (0.5 | %) | | 1.0 | % |
| | | | | | | |
| Loss from continuing operations before distributions on preferred | | | | | | |
| interest of subsidiary | | (0.7 | %) | | (5.3 | %) |
| | | | | | | |
| Distributions on preferred interest of subsidiary | | 0.0 | % | | (0.0 | %) |
| | | | | | | |
| Loss from continuing operations | | (0.7 | %) | | (5.3 | %) |
| | | | | | | |
| Income from operations of discontinued businesses (net of tax) | | 0.0 | % | | 0.7 | % |
| Gain on sale of discontinued business | | 0.0 | % | | 2.3 | % |
| | | | | | | |
| Net loss | | (0.7 | %) | | (2.3 | %) |
| | | | | | | |
| Gain on early redemption of preferred interest of subsidiary | | 0.0 | % | | 2.1 | % |
| Payment in kind dividends on convertible preferred stock | | (3.2 | %) | | (3.0 | %) |
| | | | | | | |
| Net loss attributable to common stockholders | | (3.9 | %) | | (3.2 | %) |
| | | | | | | |
Company Overview
Overall, our net sales in the first nine months of 2004 increased $18.0 million, or 6%, from the first nine months of 2003. Higher net sales resulted from a higher pricing of 3%, favorable currency translation of 2% and a volume increase of 1%. Gross margins were 14.2% in the nine months ended September 30, 2004 a decrease of 1.0 percentage points from the same period of 2003. Accelerating raw material costs and incremental operating costs incurred due to the delayed consolidation of the abrasives facilities were mostly offset by the favorable impact of restructuring, cost containment and lower depreciation from levels that were atypically high in 2003. SG&A as a percentage of sales declined from 14.3% in the first nine months of 2003 to 13.1% in the first nine months of 2004. This decrease can be primarily attributed to maintaining these costs despite the increase in net sales. Operating income improved by $12.0 million to $2.0 million, mostly as a result of improved sales, lower SG&A, lower impairments, and lower severance, restructuring and relatedcharges. Excluding these charges, we generated operating profit of $3.9 million during the nine months ended September 30, 2004 versus $2.9 million of operating profit during the nine months ended September 30, 2003. To provide additional transparency about measures of our performance, we supplement the reporting of our financial information under generally accepted accounting principles (GAAP) with non-GAAP information on operating income (loss) excluding severance, restructuring and related charges and impairments of long-lived assets. We believe the use of this measure is a better indicator of the underlying operating performance of our businesses and allows us to make meaningful comparisons of different operating periods.
Interest expense decreased by $2.0 million in the first nine months of 2004 versus the same period of 2003, primarily due to the write-off of unamortized debt costs of $1.2 million in the first quarter of 2003 resulting from a February 2003 refinancing. Excluding the write-off, interest expense decreased by $0.8 million, due mainly to lower average borrowings during the first nine months of 2004, principally as a result of applying the proceeds from the sale of non-core businesses in 2003 to repay debt. Other, net for the nine months ended September 30, 2004 included the write-off of fees and expenses of $0.4 million associated with a financing which we chose not to pursue. Other, net for the nine months ended September 30, 2003 included costs associated with the proposed sale of certain subsidiaries of $0.3 mi llion and the net write-off of net amounts related to previously divested businesses of $0.2 million.
The provision for income taxes for the nine months ended September 30, 2004 reflects current expense for state and foreign income taxes partially offset by the reduction of certain tax reserves. Our income tax benefit related to continuing operations was $3.1 million for the nine months ended September 30, 2003. In addition, $1.1 million and $3.8 million of income tax expense was attributable to income from discontinued businesses and the gain on the sale of discontinued businesses, respectively.
Discontinued Operations
Two business units are reported as discontinued operations for the nine months ended September 30, 2003: GC/Waldom Electronics, Inc. (“GC/Waldom”) and Duckback. GC/Waldom reported income (net of tax) of less than $0.1 million in the first half of 2003. We sold GC/Waldom on April 2, 2003 and recognized a loss (net of tax) of $0.2 million in the second quarter of 2003 as a result of the sale. Duckback generated income (net of tax) of $2.1 million in the first nine months of 2003. We sold Duckback on September 16, 2003 and recognized a gain (net of tax) of $7.6 million in the third quarter of 2003 as a result of the sale. There was no discontinued operations activity for the first nine months of 2004.
The table below and the narrative that follows summarize the key factors in the year-to-year changes in operating results for our segments. | | | Nine months ended September 30, | | Percentage | |
| | | 2004 | | 2003 | | Variance | |
| | | (Thousands of dollars) | | | | |
Maintenance Products Group | | | | | | | | | | |
| Net external sales | | $ | 212,444 | | $ | 213,509 | | | (0.5 | %) |
| Operating income (loss) | | | 112 | | | (6,286 | ) | | (101.8 | %) |
| Operating margin (deficit) | | | 0.1 | % | | (2.9 | %) | | N/A | |
| Severance, restructuring and related charges | | | 1,012 | | | 4,013 | | | (74.8 | %) |
| Impairments of long-lived assets | | | - | | | 7,055 | | | (100.0 | %) |
| Depreciation and amortization | | | 9,976 | | | 15,111 | | | (34.0 | %) |
| Capital expenditures | | | 10,332 | | | 6,580 | | | 57.0 | % |
| | | | | | | | | | | |
Electrical Products Group | | | | | | | | | | |
| Net external sales | | $ | 123,399 | | $ | 104,305 | | | 18.3 | % |
| Operating income | | | 9,935 | | | 6,409 | | | 55.0 | % |
| Operating margin | | | 8.1 | % | | 6.1 | % | | N/A | |
| Severance, restructuring and related charges | | | 944 | | | 1,404 | | | (32.8 | %) |
| Depreciation and amortization | | | 948 | | | 893 | | | 6.2 | % |
| Capital expenditures | | | 504 | | | 432 | | | 16.7 | % |
| | | | | | | | | | | |
Total Company [a] | | | | | | | | | | |
| Net external sales [b] | | $ | 335,843 | | $ | 317,814 | | | 5.7 | % |
| Operating income (loss) [b] | | | 1,958 | | | (10,001 | ) | | (119.6 | %) |
| Operating margin (deficit) [b] | | | 0.6 | % | | (3.1 | %) | | N/A | |
| Severance, restructuring and related charges [b] | | | 1,956 | | | 5,812 | | | (66.3 | %) |
| Impairments of long-lived assets [d] | | | - | | | 7,055 | | | (100.0 | %) |
| Depreciation and amortization [b] | | | 11,102 | | | 16,531 | | | (32.8 | %) |
| Capital expenditures [c] | | | 10,838 | | | 7,137 | | | 51.9 | % |
[a] Included in “Total Company” are certain amounts in addition to those shown for the Maintenance Products and Electrical Products segments, including amounts associated with 1) unallocated corporate expenses, 2) our equity investment in a shrimp harvesting and farming operation, and 3) our waste-to-energy facility (SESCO). See Note 11 to the Condensed Consolidated Financial Statements for detailed reconciliations of segment information to the Condensed Consolidated Financial Statements.
[b] Excludes discontinued operations.
[c] Includes discontinued operations.
Maintenance Products Group
Overall, the Maintenance Products Group’s performance during the first nine months of 2004 was behind that of the same period in 2003. Operating results were unfavorably impacted by the lower volumes, higher raw material costs as well as lower margins for our abrasives business continuing from shipping and production inefficiencies caused by the delayed consolidation of two facilities into the Wrens, Georgia facility.
Net sales
Net sales from the Maintenance Products Group decreased from $213.5 million during the nine months ended September 30, 2003 to $212.4 million during the nine months ended September 30, 2004, a decrease of less than 1%. Overall, this decline was primarily due to lower volumes of 3%, partially offset by the favorable impact of exchange rates of 2%. Sales volume for the Consumer business unit in the U.S., which sells primarily to mass market retail customers, was significantly lower due to the elimination of certain product lines with major outlet customers and to a lesser extent due to promotions in the first nine months of 2003 which did not recur in the first nine months of 2004. We also experiencedvolume declines in our abrasives business unit in the U.S. due to shipping and production inefficiencies caused by the delayed consolidation of two abrasives facilities into the Wrens, Georgia facility which were partially offset by stronger sales of roofing products to the construction industry. We experienced volume gains in many of our businesses that sell to commercial customers, particularly in our Canadian abrasives, the U.K. Jan/San and Consumer business units, and the Wilen (mop, broom and brush) and domestic Jan/San business units. Canadian abrasives sales benefited from an improving North American economy. Jan/San volumes in the U.K. increased primarily as a result of the acquisition of Spraychem Limited on April 1, 2003, while the U.K. Consumer business saw improvement due primarily to additional retail store penetration with customers and new product introduct ions. Sales of textile and domestic Jan/San products benefited from the ability of customers to order products from all Continental Commercial Products, LLC (“CCP”) divisions on one purchase order. The Consumer and Jan/San businesses in the U.K. also benefited from favorable exchange rates in 2004 versus 2003.
Since the fourth quarter of 2003, we centralized our customer service and administrative functions for CCP divisions Jan/San, Glit/Microtron (abrasives), Wilen (mops, brooms and brushes) and Disco (filters and grillbricks) in one location, allowing customers to order products from any CCP division on one purchase order. We expect to add thecustomer service and administrative functions for the Loren business unit during 2005. We believe that operating these businesses as a cohesive unit will improve customer service in that our customers’ purchasing processes will be simplified, as will follow up on order status, billing, collection and other rel ated functions. We believe that this may increase customer loyalty, help in attracting new customers and lead to increased top line sales in future years.
Operating income
The Maintenance Products Group’s operating income improved by $6.4 million from an operating deficit of $6.3 million in the first nine months of 2003 to operating income of $0.1 million in the first nine months of 2004. Operating income for both periods was impacted by costs for severance, restructuring and related charges, while the 2003 period also included impairments of fixed assets. These items are discussed further below. Excluding the aforementioned charges, operating income decreased by $3.7 million from $4.8 million during the nine months ended September 30, 2003 to $1.1 million for the same period in 2004. The decrease was primarily attributable to a decline in the profitability of our abrasives business resulting from shippi ng and production inefficiencies caused by the delayed consolidation of two facilities into the Wrens, Georgia facility as well as higher raw material costs in the first nine months of 2004 versus 2003 that were only partially recoverable through higher selling prices. Operating results were positively impacted by lower depreciation levels that were atypically high in 2003 related to the revision of the estimated useful lives of certain manufacturing assets and benefits realized from the implementation of cost reduction strategies.
Operating results for the Maintenance Products Group during the nine months ended September 30, 2004 and 2003 were negatively impacted by severance, restructuring and related charges of $1.0 million and $4.0 million, respectively. Charges in the first nine months of 2004 related to the restructuring of the abrasives business ($0.9 million); costs for the movement of inventory and equipment in connection with the consolidation of St. Louis manufacturing and distribution facilities ($0.4 million); costs incurred for the consolidation of administrative functions for CCP ($0.2 million); expenses for the closure of CCP’s facility in Canada and the subsequent consolidation into the Woods Canada facility ($0.1 million); and offset by income f or adjustments to non-cancelable lease liabilities for abandoned facilities of $0.6 million. During the first nine months of 2003, costs related primarily to the establishment of and adjustments to non-cancelable lease liabilities for abandoned facilities ($2.4 million), costs associated with the consolidation efforts at the Contico division of CCP, including severance and moving inventory and equipment ($1.1 million) and charges associated with the restructuring of the abrasives business ($0.5 million). During the nine months ended September 30, 2003, the Maintenance Products Group also recorded impairments of long-lived assets of $7.1 million. These charges included $5.5 million related to idle and obsolete equipment and leasehold improvements at Warson Road, Hazelwood and Bridgeton, $1.2 million related to the closure of abrasives facilities in Lawrence, Massachusetts and Pineville, North Carolina and the subsequent consolidation into the Wrens facility, and $0.3 million of obsolete molds and tooling at C ontico’s plastics operation in the United Kingdom.Electrical Products Group
The Electrical Products Group’s performance in the first nine months of 2004 was driven primarily by improved sales volume at Woods over the first nine months of 2003, and secondarily, by higher margins over the prior year resulting from Woods Canada’s decision to source substantially all of its products from Asia.
Net sales
The Electrical Products Group’s sales improved from $104.3 million for the nine months ended September 30, 2003 to $123.4 million for the nine months ended September 30, 2004, an increase of 18%. Sales improved as a result of a higher pricing of 9%, an increase in volume of 8%, and favorable currency translation of 1%. Woods benefited from new store and same store growth for its two largest customers, both national mass market retailers and to a lesser extent, higher volumes of direct import merchandise, which are shipped directly from our suppliers to our customers. Woods Canada experienced volume declines principally due to an excess inventory position at one of its larger customers and the loss of certain lines of business at certai n customers which were only partially offset by increased sales of direct import merchandise. Higher selling prices were implemented throughout the first three quarters of 2004 at Woods (and to a lesser extent at Woods Canada) to offset the rising cost of copper, and were offset slightly by pricing declines due to increasing levels of direct import sales (which generally provide lower gross margins) at Woods Canada. Sales at Woods Canada were favorably impacted by a stronger Canadian dollar versus the U.S. dollar in the first nine months of 2004.
Operating income
The Electrical Products Group’s operating income increased from $6.4 million for the nine months ended September 30, 2003 to $9.9 million for the nine months ended September 30, 2004, an increase of 55%. The strong volume increases at Woods as well as improved gross margins contributed to the higher profitability of the Electrical Products Group. Margins were positively impacted in the first nine months of 2004 by the closure of the Woods Canada manufacturing facility in December and the completion of a fully outsourced product strategy. Operating income in the first nine months of 2003 and 2004 was reduced by costs for severance, restructuring and related costs, which are discussed further below. Excluding these costs, operating income increased from $7.8 mill ion for the nine months ended September 30, 2003 to $10.9 million for the same period in 2004, an increase of 39%.
Operating results in the first nine months of 2004 and 2003 were negatively impacted by severance, restructuring and related charges of $0.9 million and $1.4 million, respectively. In the first nine months of 2004, Woods Canada incurred a charge of $1.0 million for a non-cancelable lease accrual associated with a sale/leaseback transaction and idle capacity as a result of the shutdown of manufacturing, and $0.1 million for the shutdown and relocation of a procurement office in Asia, which were offset by a credit to reverse a non-cancelable lease accrual based on a change in usage of leased facility that was previously impaired at Woods ($0.2 million). The costs in 2003 are mostly related to severance for Woods Canada in connection with the announced shutdown of thei r manufacturing facility in the fourth quarter of 2003 and to a lesser degree, consulting fees for sourcing projects.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity was negatively impacted during the first nine months of 2004 as a result of lower operating cash flow. We used $18.7 million of operating cash compared to operating cash used during the first nine months of 2003 of $10.1 million. Debt obligations at September 30, 2004 increased $27.4 million from December 31, 2003. This increase in debt was primarily the result of working capital changes (higher inventory and receivables) and capital expenditures partially offset by the proceeds from the sale of assets. The growth in inventory is due to increased levels to support higher volumes and higher material prices. Accounts receivable were higher as a result of seasonally higher sales in the third quarter. Sales of our Electrical Products are typically much higher in the third quarter than other quarters during the year. On March 31, 2004, Woods Canada sold its manufacturing facility for net proceeds of $3.2 million and immediately entered into a sale/leaseback arrangement to allow that business unit to occupy this property as a distribution facility. On June 28, 2004, CCP sold its vacant metals facility in Santa Fe Springs, California for net proceeds of $1.9 million.
On April 20, 2004, we completed a refinancing of our outstanding indebtedness (the “Refinancing”) and entered into a new agreement with Bank of America Business
Capital (formerly Fleet Capital Corporation) (the “Bank of America Credit Agreement”). Like the previous credit agreement with Fleet Capital Corporation, the Bank of America Credit Agreement is a $110 million facility with a $20 million term loan (“Term Loan”) and a $90 million revolving credit facility (“Revolving Credit Facility”) with essentially the same terms as the previous credit agreement. The Bank of America Credit Agreement is an asset-based lending agreement and involves a syndicate of four banks, all of which participated in the syndicate from the previous credit agreement. Since the inception of the previous credit agreement, we had repaid $18.2 million of the previous Term Loan. The ability to repay that loan on a faster than anticipated timetable was primarily due to funds generated by the sale of GC/Waldom in April 2003, the sale of Duckback in September 2003 and various sales of ex cess real estate. The additional funds raised by the Term Loan were used to pay down revolving loans (after costs of the transaction), creating additional borrowing capacity. In addition, the Bank of America Credit Agreement contains credit sub-facilities in Canada and the United Kingdom which will allow us to borrow funds locally in these countries and provide a natural hedge against currency fluctuations.
Below is a summary of the sources and uses associated with the funding of the Bank of America Credit Agreement (in thousands):
| Sources: | | | |
| Term Loan incremental borrowings | | $ | 18,152 |
| | | | |
| Uses: | | | |
| Repayment of Revolving Credit Facility borrowings | | $ | 16,713 |
| Certain costs associated with the Bank of America Credit Agreement | | | 1,439 |
| | | $ | 18,152 |
| | | | |
The Bank of America Credit Agreement allows us to more efficiently leverage our entire asset base, and to create more borrowing capacity under our new Revolving Credit Facility. The Revolving Credit Facility has an expiration date of April 20, 2009 and its borrowing base is determined by eligible inventory and accounts receivable. Unused borrowing availability on the Revolving Credit Facility was $32.7 million at September 30, 2004. The Term Loan also has a final maturity date of April 20, 2009 with quarterly payments of $0.7 million. A final payment of $6.4 million is scheduled to be paid in April 2009. The term loan is collateralized by our property, plant and equipment.
Our borrowing base under the Bank of America Credit Agreement is reduced by the outstanding amount of standby and commercial letters of credit. Vendors, financial institutions and other parties with whom we conduct business may require letters of credit in the future that either (1) do not exist today or (2) would be at higher amounts than those that exist today. Currently, our largest letters of credit relate to our casualty insurance programs. At September 30, 2004, total outstanding letters of credit were $8.8 million.
All extensions of credit under the Bank of America Credit Agreement are collateralized by a first priority security interest in and lien upon the capital stock of each material domestic subsidiary (65% of the capital stock of certain foreign subsidiaries), and all of our present and future assets and properties. Customary financial covenants and restrictions apply under the Bank of America Credit Agreement. Until September 30, 2004, interest accrued on the Revolving Credit Facility borrowings at 175 basis points over applicable LIBOR rate and at 200 basis points over LIBOR for borrowings under the Term Loan. Subsequent to September 30, 2004 in accordance with the Bank of America Credit Agreement, our margins (i.e. the interest rate spread a bove LIBOR) will increase by 25 basis points based upon certain leverage measurements. Also in accordance with the Bank of America Credit Agreement, margins on the term borrowings will drop an additional 25 basis points if the balance of the Term Loan is reduced below $10.0 million. Interest accrues at higher margins on prime rates for swing loans, the amounts of which were nominal at September 30, 2004.
We have incurred additional debt issuance costs in 2004 associated with the Bank of America Credit Agreement. Additionally, at the time of the inception of the New Fleet Credit Agreement, we had approximately $4.0 million of unamortized debt issuance costs associated with the previous credit agreement. The remainder of the previously capitalized costs, along with the capitalized costs from the Bank of America Credit Agreement will be amortized over the life of the Bank of America Credit Agreement through April 2009. Also, during the first quarter of 2004, we incurred fees and expenses of $0.4 million associated with a financing which we chose not to pursue. The revolving credit facility under the Bank of America Credit Agreement requires lockbox agreements which provide for all receipts to be swept daily to reduce borrowings outstanding. These agreements, combined with the existence of a material adverse effect (“MAE”) clause in the Bank of America Credit Agreement, causes the revolving credit facility to be classified as a current liability (except as noted below), per guidance in the Emerging Issues Task Force Issue No. 95-22 ,Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include Both a Subjective Acceleration Clause and a Lock-Box Arrangem ent. We do not expect to repay, or be required to repay, within one year, the balance of the revolving credit facility classified as a current liability. The MAE clause, which is a fairly typical requirement in commercial credit agreements, allows the lenders to require the loan to become due if they determine there has been a material adverse effect on our operations, business, properties, assets, liabilities, condition or prospects. The classification of the revolving credit facility as a current liability (except as noted above) is a result only of the combination of the lockbox agreements and the MAE clause. The Bank of America Credit Agreement does not expire or have a maturity date within one year, but rather has a final expiration date of April 20, 2009. Also, we were in compliance with the applicable financial covenants of the Bank of America Credit Agreement at September 30, 2004. The lender had not notif ied us of any indication of a MAE at September 30, 2004, and we were not in default of any provision of the Bank of America Credit Agreement at September 30, 2004.
The Bank of America Credit Agreement, and the additional borrowing ability under the Revolving Credit Facility obtained by incurring new term debt, results in three important benefits related to our long-term strategy: (1) additional borrowing capacity to invest in capital expenditures and/or acquisitions key to our strategic direction, (2) increased working capital flexibility to build inventory when necessary to accommodate lower cost outsourced finished goods inventory and (3) the ability to borrow locally in Canada and the United Kingdom and provide a natural hedge against currency fluctuations.
On May 10, 2004, we suspended our $5.0 million share repurchase program after announcing the resumption of the plan on April 20, 2004. We had previously suspended the program in November 2003. In 2004, 12,000 shares of common stock were repurchased on the open market for approximately $75,000 under this plan, while in 2003, 482,800 shares of common stock were repurchased on the open market for approximately $2.5 million.
Funding for capital expenditures and working capital needs is expected to be accomplished through the use of available borrowings under the Bank of America Credit Agreement. Anticipated capital expenditures are expected to be slightly higher in 2004 than in 2003, mainly due to the commencement of an equipment replacement program and additional investments planned for the development of new products. Restructuring and consolidation activities are important to reducing our cost structure to a competitive level. We believe that our operations and the Bank of America Credit Agreement provide sufficient liquidity for our operations going forward.
We have a number of obligations and commitments, which are listed on the schedule later in this section entitled “Contractual Cash Obligations” and “Other Commercial Commitments.” We have considered all of these obligations and commitments in structuring our capital resources to ensure that they can be met. See the notes accompanying the table in that section for further discussions of those items.
We are continually evaluating alternatives relating to divestitures of certain of our businesses. Divestitures present opportunities to de-leverage our financial position and free up cash for further investments in core activities. In addition to the sale of the GC/Waldom and Duckback businesses in 2003 for aggregate proceeds of $23.6 million, we sold additional assets in 2003 and the first nine months of 2004 for net proceeds of $2.4 million and $5.5 million, respectively. The largest of these was the March 31, 2004 sale of the Woods Canada manufacturing facility in Toronto, Ontario for net proceeds of $3.2 million, all of which was used to repay our outstanding debt obligations. Contemporaneously with the sale, Woods Canada entered into a five-year lease with the buyer to continue the distribution of their products from that facility. In addition, we sold our vacant metals facility in Santa Fe Springs, California on June 28, 2004 for net proceeds of $1.9 million.OFF-BALANCE SHEET ARRANGEMENTS
Contractual Obligations and Commercial Obligations
Our obligations as of September 30, 2004 are summarized below
(In thousands of dollars)
Contractual Cash Obligations | Total | | Due in less than 1 year | | Due in 1-3 years | | Due in 4-5 years | | Due after 5 years |
| Revolving credit facility [a] | $ | 48,507 | | $ | - | | $ | - | | $ | 48,507 | | $ | - |
| Term loans | | 18,571 | | | 2,857 | | | 5,714 | | | 5,714 | | | 4,286 |
| Operating leases [b] | | 24,765 | | | 8,247 | | | 10,899 | | | 4,713 | | | 906 |
| Severance and restructuring [c] | | 3,351 | | | 1,728 | | | 1,042 | | | 534 | | | 47 |
| SESCO payable to Montenay [d] | | 3,800 | | | 1,050 | | | 2,200 | | | 550 | | | - |
| Total Contractual Obligations | $ | 98,994 | | $ | 13,882 | | $ | 19,855 | | $ | 60,018 | | $ | 5,239 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other Commercial Commitments | | Total | | | Due in less than 1 year | | | Due in 1-3 years | | | Due in 4-5 years | | | Due after 5 years |
| Commercial letters of credit | $ | 1,083 | | $ | 1,083 | | $ | - | | $ | - | | $ | - |
| Stand-by letters of credit | | 7,716 | | | 7,716 | | | - | | | - | | | - |
| Guarantees [e] | | 30,435 | | | 6,765 | | | 23,670 | | | - | | | - |
| Total Commercial Commitments | $ | 39,234 | | $ | 15,564 | | $ | 23,670 | | $ | - | | $ | - |
| | | | | | | | | | | | | | | |
[a] As discussed in the Liquidity and Capital Resources section above, a portion of the Bank of America Revolving Credit Facility is classified as a current liability on the Condensed Consolidated Balance Sheets as a result of the combination in the Bank of America Credit Agreement of (1) lockbox agreements on our depository bank accounts and (2) a subjective Material Adverse Effect (MAE) clause. The Revolving Credit Facility expires in April of 2009.
[b] Future non-cancelable lease rentals are included in the line entitled “Operating leases.” Operating leases also includes future non-cancelable lease obligations associated with restructuring activities. Our Condensed Consolidated Balance Sheet at September 30, 2004 includes $5.1 million in discounted liabilities associated with non-cancelable operating lease rentals, net of estimated sub-lease revenues, related to facilities that have been abandoned as a result of restructuring and consolidation activities.
[c] These obligations represent liabilities associated with restructuring activities, other than liabilities for non-cancelable lease obligations.
[d] Amount owed to Montenay as a result of the SESCO partnership. $1.1 million of this obligation is classified in the Condensed Consolidated Balance Sheets as an Accrued Expense in Current Liabilities, while the remainder is included in Other Liabilities, recorded on a discounted basis.
[e] Savannah Energy Systems Company (“SESCO”), our indirect wholly-owned subsidiary, is party to a partnership that operates a waste-to-energy facility and has certain contractual obligations, for which we provide guarantees. If the partnership is not able to perform its obligations under the contracts, under certain circumstances SESCO and we could be subject to damages equal to the amount of Industrial Revenue Bonds outstanding (which financed construction of the facility) of $30.4 million less amounts held by the partnership in debt service reserve funds. SESCO and we do not anticipate non-performance by parties to the contracts. See Note 5 to the Condensed Consolidated Financial Statements in Part I, Item 1.
SEVERANCE, RESTRUCTURING AND RELATED CHARGES
See Note 12 to the Condensed Consolidated Financial Statements in Part I, Item 1 for a discussion of severance, restructuring and related charges.OUTLOOK FOR REMAINDER OF 2004
We continue to anticipate only a modest improvement for the remainder of 2004 from the general economic conditions and business environment that existed in 2003 and the early part of 2004. However, we have seen recent improvement in the restaurant, travel and hotel markets to which we sell products. We have also seen a strong sales performance for the first nine months of 2004 from the Woods and Woods Canada retail electrical corded products business, and we expect to see strong year-over-year improvement in the fourth quarter of 2004. We have a significant concentration of customers in the mass-market retail, discount and do-it-yourself market channels. Our ability to maintain and increase our sales levels depends in part on our ability to retain and improve relationships with these customers.
We expect that the continued shipping and production inefficiencies at our abrasives facilities will result in higher operating costs until the consolidation of two facilities into the Wrens, Georgia facility is completed. We currently believe this consolidation will occur in 2005. Early in the fourth quarter of 2004, we experienced a small fire at the Wrens facility. The fire damaged certain production equipment and affected the operations of certain of our production lines. However, we were able to continue to operate the remainder of our production lines at this facility and have since put back into service all but one of the production lines that were impacted by the fire. We are currently in the process of replacing the damaged equipment and we expect to return to full operations of the Wrens facility by the end of November 2004. We are currently unable to assess the full impact of this event on our cash flows and results of operations.
We expect increases in raw material costs to impact gross margins. Further, the consolidation of our facilities has been delayed. We anticipate these developments to be partially off set by the benefits of various profit enhancing strategies implemented since our recapitalization in June 2001. These strategies include outsourcing previously manufactured products, as well as locating new vendors for products already sourced outside of our facilities. We have significantly reduced headcount, and continue to monitor whether we can further consolidate any of our facilities. Cost of goods sold is subject to variability in the prices for certain raw materials, most significantly thermoplastic resins used in the manufacture of plastic products for the Ja n/San and consumer plastic businesses. Prices of plastic resins, such as polyethylene and polypropylene, increased steadily from the latter half of 2002 through the middle of 2003, then fell slightly in the second half of the year, and have increased again during 2004, with a notable acceleration in the third quarter. Management has observed that the prices of plastic resins are driven to an extent by prices for crude oil and natural gas, in addition to other factors specific to the supply and demand of the resins themselves. We expect resin prices to remain high during the fourth quarter of 2004. We are also exposed to price changes for copper (a primary material in many of the products sold by Woods and Woods Canada), aluminum and steel (primary materials in production of truck boxes), corrugated packaging material and other raw materials. Prices for aluminum and steel have increased throughout 2004, while prices for copper, which increased in late 2003 and early 2004, now appear to have stabilized in a hi storically high range. We have not employed an active hedging program related to our commodity price risk, but are employing other strategies for managing this risk, including contracting for a certain percentage of resin needs through supply agreements and opportunistic spot purchases. Price increases were passed along to our Woods’ customers during 2004 as a result of the rise in copper prices in late 2003 and early 2004 and we are implementing price increases on certain plastic products for the Jan/San, Container and Consumer business units. We face the continuing challenge of recovering or offsetting cost increases for raw materials, especially in our Consumer plastics business.
Depreciation expense was higher during 2003 as a result of the reduction in depreciable lives for certain CCP manufacturing assets, specifically molds and tooling equipment used in the manufacture of plastic products, from seven to five years, effective January 1, 2003. This change in estimate was made following significant impairments to these types of assets recorded during 2002. The amount of incremental depreciation expense during 2003 as a result of this reduction in depreciable lives was $5.4 million. However, many of these assets became fully depreciated during 2003 since the CCP acquisition occurred in early 1999. Therefore, depreciation expense related to these assets is expected to reduce again in 2004 and subsequent years. Our to tal depreciation expense in 2004 and subsequent years will also depend on changes in the level of depreciable assets.
Selling, general and administrative expenses have declined this year as a percentage of sales and should remain stable or drop as a percentage of sales from 2003 levels in the last quarter of 2004. Cost reduction efforts are ongoing throughout the Company. We expect to maintain modest headcount and rental costs for our corporate office. We havecompleted the process of transferring most back-office functions of our Wilen (mops, brooms and brushes), Glit/Microtron (abrasives) and Disco (filters and miscellaneous food service items) businesses from Georgia to Bridgeton, Missouri, the headquarters of CCP. We expect to consolidate administrative processes at our Loren business in 2005 and will continue to evaluate the possibility of further consolidation of administrative processes.
We are nearing completion of several restructuring plans involving our operations. The significant charges recorded during 2002 and 2003 related to these facilities were mainly to accrue non-cancelable lease payments for these facilities. These accruals do not create incremental cash obligations in that we are obligated to make the associated payments whether we occupy the facilities or not. The amount we will ultimately pay out under these accruals is dependent on our ability to successfully sublet all or a portion of the abandoned facilities. We expect the Jan/San and consumer plastics business units to continue to benefit from lower overhead costs in the remainder of 2004 as a result of these consolidations. In 2002, we initiated a plan to consolidate the manufacturing facilities of our abrasives business in order to implement a more competitive cost structure. We expect that the Lawrence, Massachusetts and Pineville, North Carolina facilities will be closed in 2005. When closed, we intend to consolidate those operations into the newly expanded Wrens, Georgia facility. Costs have been incurred in 2003 and 2004 principally for the closure of facilities, expansion of the Wrens facility and severance for terminated employees.
Our integration cost reduction efforts, integration of back office functions and simplifications of our business transactions are all dependent on executing a system integration plan. This plan involves the migration of data across information technology platforms and implementation of new software and hardware. The domestic systems integration plan was substantially completed in October 2003, while we expect the international systems integration plan to be completed during the first half of 2005.
The labor agreement with our largest union expires in late December. Historically, the parties have been successful in negotiating new agreements. While we remain optimistic regarding these upcoming negotiations, we also recognize there are some issues of potential dispute, primarily economic in nature. Accordingly, we will be taking appropriate actions to ensure that our ability to service our customers is not impeded during this time frame.
We originally expected interest rates in 2004 to be slightly higher than 2003. During the first half of 2004, rates had been relatively comparable to last year, but have risen slightly since the end of the second quarter. Ultimately, we cannot predict the future levels of interest rates. Until September 30, 2004, interest accrued on the Bank of America Credit Facility borrowings at 175 basis points over applicable LIBOR rates, and at 200 basis points over LIBOR for Term Loan borrowings. Subsequent to September 30, 2004, in accordance with the Bank of America Credit Agreement, our margins (i.e. the interest rate spread above LIBOR) will increase by 25 basis points based upon certain leverage measurements. Also margins on the term borrowings will drop an additional 25 basis points if the balance of the Term Loan is reduced below $10.0 million.
Given our history of operating losses, along with guidance provided by the accounting literature covering accounting for income taxes, we are unable to conclude it is more likely than not that we will be able to generate future taxable income sufficient to realize the benefits of deferred tax assets carried on our books. Therefore, a full valuation allowance on the net deferred tax asset position was recorded at September 30, 2004 and December 31, 2003, and we do not expect to record the benefit of any deferred tax assets that may be generated in 2004. We will continue to record current expense associated with federal, foreign and state income taxes.
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
This report and the information incorporated by reference in this report contain various “forward-looking statements” as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934, as amended. The forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. We have based these forward-looking statements on current expectations and projections about future events and trends affecting the financial condition of our business. These 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 mad e by us or on our behalf, including, among other things:
| - | Increases in the cost of, or in some cases continuation of, the current price levels of plastic resins, copper, paper board packaging, and other raw materials. |
| - | Our inability to reduce product costs, including manufacturing, sourcing, freight, and other product costs. |
| - | Greater reliance on third parties for our finished goods as we increase the portion of our manufacturing that is outsourced. |
| - | Our inability to reduce administrative costs through consolidation of functions and systems improvements. |
| - | Our inability to execute our systems integration plan. |
| - | Our inability to successfully integrate our operations as a result of the facility consolidations. |
| - | Our inability to sub-lease rented facilities which have been abandoned as a result of consolidation and restructuring initiatives. |
| - | Our inability to achieve product price increases, especially as they relate to potentially higher raw material costs. |
| - | The potential impact of losing lines of business at large retail outlets in the discount and do-it-yourself markets. |
| - | Competition from foreign competitors. |
| - | The potential impact of new distribution channels, such as e-commerce, negatively impacting us and our existing channels. |
| - | The potential impact of rising interest rates on our LIBOR-based Bank of America Credit Agreement. |
| - | Our inability to meet covenants associated with the Bank of America Credit Agreement. |
| - | The potential impact of rising costs for insurance for properties and various forms of liabilities. |
| - | The potential impact of changes in foreign currency exchange rates related to our foreign operations. |
| - | Labor issues, including union activities that require an increase in production costs or lead to a strike, thus impairing production and decreasing sales. We are also subject to labor relations issues at entities involved in our supply chain, including both suppliers and those involved in transportation and shipping. |
| - | Changes in significant laws and government regulations affecting environmental compliance and income taxes. |
Words and phrases such as “expects,” “estimates,” “will,” “intends,” “plans,” “believes,” “anticipates” and the like are intended to identify forward-looking statements. The results referred to in forward-looking statements may differ materially from actual results because they involve estimates, assumptions and uncertainties. Forward-looking statements included herein are as of the date hereof and we undertake no obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. All forward-looking statements should be viewed with caution.
ENVIRONMENTAL AND OTHER CONTINGENCIES
See Note 10 to the Condensed Consolidated Financial Statements in Part I, Item 1 for a discussion of environmental and other contingencies.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
See Note 2 to the Condensed Consolidated Financial Statements in Part I, Item 1 for a discussion of recently issued accounting pronouncements.
Interest Rate Risk
Our exposure to market risk associated with changes in interest rates relates primarily to our debt obligations. We currently do not use derivative financial instruments relating to this exposure. Our interest obligations on outstanding debt at September 30, 2004 were indexed from short-term LIBOR. We do not believe our exposures to interest rate risks are material to our financial position or results of operations.
Foreign Exchange Risk
We are exposed to fluctuations in the Euro, British pound, Canadian dollar and Chinese Yuan. Some of our subsidiaries make significant U.S. dollar purchases from Asian suppliers, particularly in China. An adverse change in foreign currency exchange rates of Asian countries could result in an increase in the cost of purchases. We do not currently hedge foreign currency transaction or translation exposures.
Commodity Price Risk
We have not employed an active hedging program related to our commodity price risk, but are employing other strategies for managing this risk, including contracting for a certain percentage of resin needs through supply agreements and opportunistic spot purchases. See Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - OUTLOOK FOR 2004, for further discussion of our exposure to increasing raw material costs.
| (a) | Evaluation of Disclosure Controls and Procedures |
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our SEC filings is reported within the time periods specified in the SEC's rules, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We have investments in certain unconsolidated entities. As we do not control or manage these entities, the disclosure controls and procedures with respect to such entities are necessarily more limited than those we maintain with respect to our consolidated subsidiaries.
Pursuant to Rule 13a--15(b) under the Securities Exchange Act of 1934, Katy carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period of our report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to Katy (including its consolidated subsidiaries) required to be included in our periodic SEC filings.
| (b) | Change in Internal Controls |
There have been no changes in Katy’s internal control over financial reporting during the quarter ended September 30, 2004 that has materially affected, or is reasonably likely to materially affect Katy’s internal control over financial reporting.
PART II - OTHER INFORMATION
During the quarter for which this report is filed, there have been no material developments in previously reported legal proceedings, and no other cases or legal proceedings, other than (a) ordinary routine litigation incidental to the Company’s business and other nonmaterial proceedings, brought against the Company and (b) updates to those matters specified in Note 10 to the Condensed Consolidated Financial Statements in Part I, Item 1.
On April 20, 2003, the Company announced a plan to spend up to $5.0 million to repurchase shares of its common stock. In 2004, 12,000 shares of common stock were repurchased on the open market for approximately $75 thousand under this plan, while in 2003, 482,800 shares of common stock were repurchased on the open market for approximately $2.6 million. The Company suspended further purchases under the plan on May 10, 2004.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | |
| | KATY INDUSTRIES, INC. |
| Registrant |
|
| Date: November 10, 2004 | By: | /s/ C. Michael Jacobi |
| |
C. Michael Jacobi |
| | President and Chief Executive Officer |
| | |
| | |
| By: | /s/ Amir Rosenthal |
| |
Amir Rosenthal |
| | Vice President, Chief Financial Officer, General Counsel and Secretary |
