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
Date of Report: July 17, 1995
(Date of earliest event reported): (June 30, 1995)
Commission file number 1-5558
Katy Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-1277589
(State of Incorporation) (IRS Employer
Identification Number)
6300 S. Syracuse #300, Englewood, Colorado 80111
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (303)
290-9300
(Former name or former address, if changed since last report)
Not applicable
Item 2. Acquisition or Disposition of Assets
On June 30, 1995, Katy Industries, Inc. ("Katy" or the "Company"), sold
one-half of its interest (90,000 shares) in Schon & Cie, AG ("Schon") to
Pegasus Beteiligungen AG ("Pegasus") of Heidelberg, Germany. Schon has
three wholly-owned subsidiaries, Sofema S.A.R.L., Schoen Machinery USA,
Inc. and American Shoe Machinery Company (collectively referred to with
Schon as the "Schon Group"). The sale, which is irrevocable, was made on
the basis of a contingent price, whereby Katy will receive two-thirds of the
amount ultimately realized by Pegasus in any future sale of such shares, or,
under some circumstances, will be entitled to find a purchaser for
two-thirds of such shares and receive the proceeds of the sale thereof.
Katy continues to hold 90,000 shares, or a 37.5% interest in Schon, and
Katy and Pegasus have agreed that Pegasus will secure three seats, and Katy
will retain two seats, on Schon's nine-member Supervisory Board. The Schon
Group manufactures and sells a wide range of mechanical and
programmable four post, web and flat bed die-cutting equipment, and shoe
manufacturing machines. The assets of the Schon Group include accounts
receivable, machinery and equipment, inventory and real property. With
the reduction in its ownership interest, Katy will report its continuing
investment in Schon using the equity basis of accounting for an
unconsolidated subsidiary effective June 30, 1995. There is no
material relationship between Pegasus and Katy, or any of their respective
affiliates, directors or officers or to the knowledge of Katy, any associate
of any such director or officer.
Item 7. Financial Statements and Exhibits
Set forth below is the information required by 7(b), Pro Forma Financial
Information of Form 8-K with respect to the sale of 37.5% of the outstanding
stock of Schon & Cie, AG.
Pro Forma Financial Statements F-1
Unaudited Pro Forma Balance Sheet as of March 31, 1995 F-2
Unaudited Pro Forma Statement of Operations for the
twelve months ended December 31, 1994 F-3
Unaudited Pro Forma Statement of Operations for the
three months ended March 31, 1995 F-4
Unaudited Pro Forma Notes to the Pro Forma
Financial Statements F-5
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 AND
THE THREE MONTHS ENDED MARCH 31, 1995
The following unaudited pro forma balance sheet as of March 31, 1995, gives
effect to the sale of 37.5% of the common stock of Schon & Cie, AG ("Schon")
by Katy Industries, Inc. ("Katy") as if the sale had occurred on
January 1, 1994. The unaudited statements of operations for the twelve
months ended December 31, 1994 and the three months ended March 31, 1995
give effect to the above transaction and to the acquisition by Hallmark
Holdings, Inc., a wholly-owned subsidiary of Katy, of the common stock of
GC Thorsen, Inc. ("Thorsen") as if both transactions had occurred on
January 1, 1994. The acquisition of Thorsen was previously reported on
Form 8K/A on June 19, 1995.
The historical financial data of Katy and Thorsen included in the pro forma
statements is as of the periods presented. The financial statements of
Schon are as of a different date because of the time required to prepare and
translate such financial statements under United States generally accepted
accounting principles, and the presentation is consistent with prior
practice. The historical financial data of Schon included in the pro forma
balance sheet is as of January 31, 1995. The historical financial data of
Schon included in the pro forma statements of operations is for the twelve
months ended October 30, 1994 and for the three months ended
January 31,1995.
The unaudited pro forma financial data is based on management's best
estimate of the effects of the disposition of 37.5% of Schon's outstanding
shares, and the acquisition of Thorsen. Pro forma adjustments are based on
currently available information; however, the actual adjustments will be
based on more precise appraisals, evaluations and estimates of fair values.
It is possible that the actual adjustments could differ from those presented
in the unaudited pro forma combined financial statements.
The unaudited pro forma statements of operations for the twelve months ended
December 31, 1994, and the three months ended March 31, 1995, are not
necessarily indicative of the results of operations that actually would have
been achieved had the sale of Schon and the acquisition of Thorsen been
consummated as of the dates indicated, or that may be achieved in the future.
The unaudited pro forma financial statements should be read in conjunction
with the accompanying notes.
Thorsen's financial performance for the three months ended March 31, 1995,
prior to the acquisition by Katy, was affected by several factors. In 1994,
the cost basis of a portion of the inventory sold had been stepped up to
approximately its selling price as a part of the acquisition of Thorsen by
its previous parent, Elgin National Industries,Inc., late in 1993.
The effect in 1994 of this cost basis step-up was to depress margins
on sales made in early 1994, and as a result, 1995 margins are higher.
The improved margins in 1995 were partially offset by higher material prices
for Thorsen's tool business and higher selling expenses due to the increase
in sales during the three months ended March 31, 1995.
The unaudited pro forma statements of operations do not reflect the tax
benefit (approximately $3,000,000) resulting from the sale of the Schon
stock. This benefit will be reflected in Katy's financial statements for
the period ended June 30, 1995.
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1995
(in thousands except per share information)
Katy Schon
Historical Historical Pro Forma
CURRENT ASSETS:
Cash and cash equivalents $ 2,607 $ 731 $ 1,876
Marketable securities 27,812 - 27,812
Accounts and notes receivable 31,417 4,594 26,823
Inventories 45,903 9,049 36,854
Other current assets 13,413 1,169 12,244
Total current assets 121,152 15,543 105,609
NON-CURRENT ASSETS:
Investments, at equity, in
unconsolidated subsidiaries 46,524 - 46,524
Other investments 12,058 - 12,058
Property, plant and equipment 95,285 20,644 74,641
Accumulated depreciation ( 48,608) ( 15,545) ( 33,063)
Net property, plant
and equipment 46,677 5,099 41,578
Other assets 12,161 1,245 10,916
Total assets $238,572 $21,887 $216,685
CURRENT LIABILITIES:
Accounts and notes payable $ 37,554 $ 7,941 $ 29,613
Other current liabilities 39,161 6,779 32,382
Total current liabilities 76,715 14,720 61,995
LONG-TERM DEBT AND OTHER LIABILITIES 50,148 7,752 42,396
MINORITY INTEREST 215 215
STOCKHOLDERS' EQUITY:
Common stock and additional paid-
in capital 60,932 - 60,932
Retained earnings 54,282 ( 2,681) 56,963
Other equity adjustments ( 3,720) 2,096 ( 5,816)
Total stockholders' equity 111,494 ( 585) 112,079
Total liabilities and
stockholders' equity $238,572 $ 21,887 $216,685
See Unaudited Pro Forma Notes to Financial Statements
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
(in thousands except per share information)
Katy Schon GC Thorsen Pro Forma
Historical Historical Historical Adjustments Pro Forma
Net sales $159,581 $ 34,256 $ 41,843 $167,168
Costs and expenses:
Cost of goods sold 113,932 32,298 31,152 ( 420) (1) 112,366
Selling, general and
administrative expenses 47,630 8,048 8,595 ( 282) (1)(2) 47,895
Depreciation and amortization 6,049 1,325 555 279 (1)(3) 5,558
Interest expense 1,916 1,450 452 1,108 (4) 2,026
Interest income ( 3,438) ( 124) ( 3,314)
Other, net 252 ( 1,365) 80 (2) 1,697
Write-off of assets 9,288 9,288
175,629 41,632 40,754 765 175,516
Income (Loss) from consolidated
operations before benefit
(provision) for income taxes
and minority interest ( 16,048) ( 7,376) 1,089 ( 765) ( 8,348)
Benefit (Provision) for income taxes 3,923 ( 239) ( 481) 454 (5) 4,135
Minority interest ( 13) ( 13)
Income (Loss) from consolidated
operations ( 12,138) ( 7,615) 608 ( 311) ( 4,226)
Equity in income (loss) of unconsolidated
subsidiaries (net of tax) 3,295 ( 2,631) (6) 664
Income (Loss) from operations ($ 8,843) ($ 7,615) $ 608 ($ 2,942) ($ 3,562)
Income (Loss) per share of
Common Stock ($ 0.98) ($ 0.39)
Weighted average shares outstanding 9,032 9,032
See Unaudited Pro Forma Notes to Financial Statements
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(in thousands except per share information)
Katy Schon GC Thorsen Pro Forma
Historical Historical Historical Adjustments Pro Forma
Net sales $ 38,358 $ 7,056 $ 10,481 $ 41,783
Costs and expenses:
Cost of goods sold 26,456 6,101 7,817 ( 110) (1) 28,062
Selling, general and
administrative expenses 10,954 2,230 2,272 ( 55) (1) 10,941
Depreciation and amortization 1,378 270 139 79 (1)(3) 1,326
Interest expense 418 259 110 304 (4) 573
Interest income ( 276) ( 276)
Other, net 237 290 ( 53)
39,167 9,150 10,338 218 40,573
Income (Loss) from consolidated
operations before benefit (provision) for
income taxes and minority interest ( 809) ( 2,094) 143 ( 218) 1,210
Benefit (Provision) for income taxes ( 628) ( 30) ( 59) 125 (5) ( 532)
Income (Loss) from consolidated
operations ( 1,437) ( 2,124) 84 ( 93) 678
Equity in income (loss) of unconsolidated
subsidiaries (net of tax) 700 700
Income (Loss) from operations ($ 737) ($ 2,124) $ 84 ($ 93) $1,378
Income (Loss) per share of
Common Stock ($ 0.08) $ 0.15
Weighted average shares outstanding 9,076 9,076
See Unaudited Pro Forma Notes to Financial Statements
KATY INDUSTRIES, INC.
UNAUDITED PRO FORMA NOTES TO FINANCIAL STATEMENTS
(In thousands except per share information)
NOTES:
(1) Reclassifies GC Thorsen's depreciation expense from Cost of Goods sold
($420 for the twelve months and $110 for the three months) and Selling,
general and administrative expenses ($202 for the twelve months and $55 for
the three months) to Depreciation and amortization to be consistent with
Katy's classification.
(2) Reclassifies GC Thorsen's provision for doubtful accounts to be
consistent with Katy's classification.
(3) Represents the elimination of GC Thorsen's amortization expense relating to
certain non-competition agreements ($555 for the twelve months and $139
for the three months) which will no longer be incurred as a result of the
acquisition and the amortization of the purchase price paid by Katy in
excess of the fair value of the net assets acquired ($212 for the
twelve months and $53 for the three months) arising from the
acquisition of GC Thorsen.
(4) Represents the estimated effect on interest expense ($1,560 for the
twelve months and $414 for the three months) from the $19,500 of
borrowings under the Katy bank line of credit to finance the
acquisition of GC Thorsen at an effective borrowing rate of
approximately 8.5% and the elimination of interest expense
($452 for the twelve months and $110 for the three months)
on GC Thorsen's mortgage note retired by Katy.
(5) Represents the tax effects of the pro forma adjustments described above.
(6) Represents Katy's share of the losses of Schon for the year of 1994
as equity in the loss of unconsolidated subsidiaries.
SIGNATURES
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.
(Registrant)
By /S/Paul Kurowski
Paul Kurowski
Chief Financial Officer
Date: July 17, 1995