KII Liquidating (KATYQ) 8-K Reports 2016 First Quarter Results

Exhibit 99.1

KATY NEWS

FOR IMMEDIATE RELEASE

KATY INDUSTRIES, INC.

REPORTS 2016 FIRST QUARTER RESULTS

- Net sales increased 33% over prior year

- Gross profit increased $1.4 million over prior year

- Operating income increased $1.4 million over prior year with the exclusion of one-time items

St. Louis, MO – May 3, 2016 – Katy Industries, Inc. (Pink: KATY), a leading manufacturer, importer and distributor of commercial cleaning and consumer storage products, as well as a contract manufacturer of structural foam products, today reported financial results for the first quarter ended April 1, 2016.

“We are pleased that the first Quarter continued to show improvement in our operations,” said David J. Feldman, Katy Chief Executive Officer. “Sales demand remains strong and we will continue to have gains in operating income throughout 2016 by capitalizing on the synergies of our acquisitions and manufacturing realignment.”

Year-to-Date Financial Results

Financial highlights for the three months ended April 1, 2016 as compared to the three months ended March 27, 2015, included:

● Net sales increased 33.2% from $21.3 million during the three months ended March 27, 2015 to $28.4 million during the three months ended April 1, 2016.  The increase was a result of the Tiffin, Ohio business acquisition, which contributed an incremental $6.5 million in net sales. Gross margin was 16.3% for the three months ended April 1, 2016, an increase of 130 basis points from the same period a year ago. The increase was primarily a result of lower operating costs associated with the relocation of our Bridgeton, Missouri facility to Jefferson City, Missouri and reduced raw material prices during the three months ended April 1, 2016. As a result of the increase in sales and an increase in gross margin, our gross profit increased $1.4 million from $3.2 million to $4.6 million.

● Selling, general and administrative expenses increased $0.7 million to $4.0 million for the three months ended April 1, 2016 from $3.3 million for the same period a year ago. The increase was primarily due to the derecognition of a deferred lease obligation no longer owed as a result of our termination of the lease for our Bridgeton, Missouri facility during the three months ended March 27, 2015.

● Severance, restructuring and related charges decreased $1.1 million to $0.5 million for the three months ended April 1, 2016 as compared to $1.6 million for the three months ended March 27, 2015 due to the relocation of our Bridgeton, Missouri facility to Jefferson City, Missouri.

● Operating income increased from an operating loss of $1.6 million during the three months ended March 27, 2015 to operating income of $0.1 million during the three months ended April 1, 2016 primarily due to the reduction of severance, restructuring and related charges and increased gross profit. With the exclusion of one-time items related to our facility relocation, operating income was $0.7 million for the three months ended April 1, 2016 versus an operating loss of $0.7 million for the three months ended March 27, 2015.

● Interest expense increased by $1.2 million during the three months ended April 1, 2016 as compared to the three months ended March 27, 2015 as a result of the increased borrowings under the BMO Credit Agreement and Second Lien Credit Agreement which were entered into in the second quarter of 2015.

● Overall, we reported a net loss of $1.2 million, or $0.15 per basic and diluted share, for the three months ended April 1, 2016, as compared to net loss of $1.8 million, or $0.23 per basic and diluted share, for the three months ended March 27, 2015. With the exclusion of one-time items related to our facility relocation, net loss was $0.6 million for the three months ended April 1, 2016 versus net loss of $1.0 million for the three months ended March 27, 2015.

Liquidity and Capital Resources

Cash used in operating activities before changes in operating assets and liabilities was $1.2 million in the three months ended March 27, 2015 as compared to $0.1 million in the same period of 2016. Changes in operating assets and liabilities from continuing operations provided $2.1 million in the three months ended April 1, 2016 as compared to $2.3 million in the same period of 2015.

Cash flows used by investing activities of $0.7 million in the three months ended April 1, 2016 were primarily due to capital expenditures related to the relocation of the Bridgeton, Missouri facility to Jefferson City, Missouri.

Cash flows used by financing activities of $1.3 million in the three months ended April 1, 2016 were due to a reduction of $0.8 million in our bank borrowings, net of debt issuance costs since December 31, 2015, primarily due to the timing of needed borrowings.

Non-GAAP Financial Measures

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 regulatory 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, 2015. 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.

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

Company contact:

Katy Industries, Inc.

Curt Kroll

(314) 656-4381

KATY INDUSTRIES, INC. SUMMARY OF OPERATIONS AND

COMPREHENSIVE LOSS - UNAUDITED

(In thousands, except per share data)

	Three Months Ended
	April 1, 2016			March 27, 2015
Net sales	$	28,394		$	21,310
Cost of goods sold		23,774			18,105
Gross profit		4,620			3,205
Selling, general and administrative expenses		3,955			3,252
Severance, restructuring and related charges		526			1,600
Operating income (loss)		139			(1,647	)
Interest expense		(1,392	)		(209	)
Other, net		30			28
Loss before income tax expense		(1,223	)		(1,828	)
Income tax expense		(6	)		(8	)
Net loss	$	(1,229	)	$	(1,836	)
Other comprehensive income (loss):
Foreign currency translation		23			(58	)
Total comprehensive loss	$	(1,206	)	$	(1,894	)
Loss per share of common stock - Basic	$	(0.15	)	$	(0.23	)
Loss per share of common stock - Diluted	$	(0.15	)	$	(0.23	)

KATY INDUSTRIES, INC. BALANCE SHEETS – UNAUDITED

(In thousands)

	April 1, 2016			December 31, 2015
Assets
Current Assets:
Cash	$	63		$	53
Accounts receivable, net		14,171			12,211
Inventories, net		16,194			19,267
Other current assets		1,564			2,164
Total current assets		31,992			33,695
Other Assets:
Goodwill		8,377			8,377
Intangibles, net		20,608			20,877
Other		1,761			1,747
Total other assets		30,746			31,001
Property and Equipment:
Land and improvements		535			535
Buildings and improvements		6,696			6,269
Machinery and equipment		45,815			44,617
		53,046			51,421
Less - Accumulated depreciation		(37,122	)		(36,646	)
Property and equipment, net		15,924			14,775
Total assets	$	78,662		$	79,471
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable	$	21,725		$	20,440
Book overdraft		486			918
Accrued compensation		1,077			1,149
Accrued expenses		7,271			7,142
Deferred revenue		93			130
Current maturities of long-term debt		1,663			1,143
Revolving credit agreement		23,093			23,969
Total current liabilities		55,408			54,891
Payable to Related Party		4,419			4,268
Long-Term Debt		21,093			21,435
Other Liabilities		7,686			7,615
Total liabilities		88,606			88,209
Stockholders' Deficit
15% Convertible preferred stock, $100 par value; authorized 1,200,000 shares; issued and outstanding 1,131,551 shares; liquidation value $113,155		108,256			108,256
Common stock, $1 par value; authorized 35,000,000 shares; issued 9,822,304 shares		9,822			9,822
Additional paid-in capital		27,110			27,110
Accumulated other comprehensive loss		(1,608	)		(1,631	)
Accumulated deficit		(132,087	)		(130,858	)
Treasury stock, at cost, 1,871,128 shares		(21,437	)		(21,437	)
Total stockholders' deficit		(9,944	)		(8,738	)
Total liabilities and stockholders' deficit	$	78,662		$	79,471

KATY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS – UNAUDITED

(In thousands)

	Three Months Ended
	April 1, 2016			March 27, 2015
Cash flows from operating activities:
Net loss	$	(1,229	)	$	(1,836	)
Depreciation		504			545
Amortization of intangible assets		268			47
Amortization of debt issuance costs		37			57
Stock-based compensation		32			20
Payment In Kind interest expense		280			-
Other		(20	)		-
		(128	)		(1,167	)
Changes in operating assets and liabilities:
Accounts receivable		(1,975	)		(519	)
Inventories		3,031			(2,522	)
Other assets		479			(726	)
Accounts payable		847			4,426
Accrued expenses		(114	)		764
Payable to related party		125			125
Deferred revenue		(37	)		(37	)
Other liabilities		(304	)		760
		2,052			2,271
Net cash provided by operations		1,924			1,104
Cash flows from investing activities:
Capital expenditures		(748	)		(362	)
Net cash used in investing activities		(748	)		(362	)
Cash flows from financing activities:
Net borrowings on revolving credit facility		(876	)		(199	)
Payment on capital lease obligation		(23	)		-
Decrease in book overdraft		(432	)		(349	)
Direct costs associated with debt facilities		62			-
Net cash used in financing activities		(1,269	)		(548	)
Effect of exchange rate changes on cash		103			(117	)
Net increase in cash		10			77
Cash, beginning of period		53			66
Cash, end of period	$	63		$	143
Supplemental cash flows disclosure:
Interest paid	$	843		$	127
Income taxes paid	$	1		$	1
Supplemental information of non-cash investing and financing activities:
Capital leases included in accrued expenses and other noncurrent liabilities	$	473		$	-
Capital expenditures included in accounts payable	$	429		$	-
Collateralized debt fees included in accrued expenses	$	240		$	-