Securities and Exchange Commission Washington, D.C. 20549 FORM 8-K/A Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: October 21, 1998 (Date of earliest event reported): (August 11, 1998) 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 7. Financial Statements and Exhibits --------------------------------- Set forth below is the information required by Items 7(a), Financial Statements of Acquired Businesses, and 7(b), Pro Forma Financial Statements, of Form 8-K with respect to the acquisition of Wilen Companies, Incorporated by Katy Industries, Inc. ("Katy"), as disclosed on Katy's Form 8-K, filed with the Securities and Exchange Commission on August 14, 1998. Financial Statements of Acquired Business and Pro Forma Financial Statements - ---------------------------------------------------------------------------- Unaudited Financial Statements: Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 4 Consolidated Statements of Operations for the six months ended June 30, 1998 and 1997 5 Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997 6 Notes to Consolidated Financial Statements 7 Audited Financial Statements: Independent Auditors' Report 8 Consolidated Balance Sheet as of December 31, 1997 9 Consolidated Statement of Income and Retained Earnings for the year ended December 31, 1997 11 Consolidated Statement of Cash Flows for the year ended December 31, 1997 12 Notes to Consolidated Financial Statements 13 Pro Forma Financial Statements: Unaudited Pro Forma Balance Sheet as of June 30, 1998 19 Unaudited Pro Forma Statement of Operations for the six months ended June 30, 1998 21 Unaudited Pro Forma Statement of Operations for the year ended December 31, 1997 22 Unaudited Notes to Pro Forma Financial Statements 23 Exhibit 23 Independent Auditors' Consent from Smith & Radigan 25 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on it behalf by the undersigned hereunto duly authorized. Katy Industries, Inc. --------------------- (Registrant) By /S/ John R. Prann, Jr. ----------------------- John R. Prann, Jr. Chief Executive Officer Date: October 20, 1998 ---------------- WILEN COMPANIES, INCORPORATED CONSOLIDATED BALANCE SHEETS (In 000's) - ------------------------------------------------------------------------------ (Unaudited) June 30, December 31, 1998 1997 ---- ---- ASSETS CURRENT ASSETS: Cash $ 857 $ 1,522 Accounts receivable, net 4,974 4,695 Inventories (Note 2) 2,856 2,901 Other current assets 175 205 ------ ------ Total current assets 8,862 9,323 PROPERTY AND EQUIPMENT - Net 7,029 7,012 OTHER ASSETS: Investments 69 69 Cash surrender value of life insurance policies 355 343 Deposits 60 366 Intangible assets, net 129 135 ------ ------ TOTAL ASSETS $16,504 $17,248 ====== ====== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable 2,429 1,966 Accrued expenses 1,196 989 Current portion of capital lease obligation 219 219 Current portion of notes payable 300 300 ------ ------ Total current liabilities 4,144 3,474 ------ ------ LONG-TERM DEBT: Capital lease obligation, net of current portion 2,547 2,756 Notes payable, net of current portion 2,630 2,630 ------ ------ 5,177 5,386 ------ ------ Total liabilities 9,321 8,860 ------ ------ STOCKHOLDER'S EQUITY: Common stock, no par value, stated value $1 per share; 1,000,000 shares authorized, 2,000 shares issued and outstanding 2 2 Retained earnings 7,181 8,386 ------ ------ TOTAL STOCKHOLDER'S EQUITY 7,183 8,388 ------ ------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $16,504 $17,248 ====== ====== See Notes to Consolidated Financial Statements. WILEN COMPANIES, INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (In 000's) - UNAUDITED - ------------------------------------------------------------------------------ 1998 1997 ---- ---- NET REVENUES $20,005 $18,318 COST OF GOODS SOLD 14,465 13,329 ------ ------ 5,540 4,989 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,834 3,545 ------ ------ INCOME FROM OPERATIONS 1,706 1,444 INTEREST EXPENSE (137) (154) INTEREST INCOME 40 52 OTHER INCOME / (EXPENSE), NET 46 (221) ------ ------ NET INCOME 1,655 1,121 ------ ------ DISTRIBUTIONS (2,860) (1,446) RETAINED EARNINGS AT BEGINNING OF YEAR 8,386 7,268 RETAINED EARNINGS AT END OF YEAR $ 7,181 $ 6,943 ====== ====== See Notes to Consolidated Financial Statements. WILEN COMPANIES, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (In 000's) - UNAUDITED - ------------------------------------------------------------------------------ 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,655 $ 1,121 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 496 516 Changes in assets and liabilities: Increase in accounts receivable, net (279) (1,031) Decrease in inventories 45 432 (Increase) Decrease in prepaid expenses and other assets 24 (650) Decrease in noncurrent assets 312 426 Decrease in accounts payable and accrued expenses 670 706 ------ ------ Net cash provided by operating activities 2,923 1,520 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (507) (643) Increase on cash surrender value of life insurance policies (12) (25) ------ ------ Net cash used in investing activities (519) (668) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt (209) (122) Distributions to stockholder (2,860) (1,446) ------ ------ Net cash used in financing activities (3,069) (1,568) ------ ------ NET DECREASE IN CASH (665) (716) CASH AT BEGINNING OF PERIOD 1,522 1,998 ------ ------ CASH AT END OF PERIOD $ 857 $ 1,282 ====== ====== See Notes to Consolidated Financial Statements. WILEN COMPANIES, INCORPORATED Notes to Consolidated Financial Statements - Unaudited June 30, 1998 1. Significant Accounting Policies In the opinion of management, the unaudited information presented as of June 30, 1998 and for the six months ended June 30, 1998 and 1997 reflects all adjustments necessary, which consists only of normal recurring adjustments, for a fair presentation of the interim period. 2. Inventories Inventories are valued at lower of cost (first-in, first-out) or market and at June 30, 1998 and December 31, 1997 consisted of the following (in thousands): June 30, December 31, 1998 1997 ---- ---- (Unaudited) Finished goods $ 563 $ 571 Work-in-process 23 24 Raw materials 2,270 2,306 ------ ------ $ 2,856 $ 2,901 ====== ====== 3. Subsequent Event On August 11, 1998, substantially all of the Company's assets were acquired by Katy Industries, Inc. ("Katy"). Katy is a publicly-held diversified corporation with interests in Electrical/Electronics and Maintenance Products. The purchase price was approximately $50,000,000, including certain indebtedness. INDEPENDENT AUDITORS' REPORT To the Board of Directors The Wilen Companies, Incorporated: We have audited the accompanying consolidated balance sheet of The Wilen Companies, Incorporated as of December 31, 1997, and the related consolidated statements of income and retained earnings and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Wilen Companies, Incorporated as of December 31, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /S/ Smith & Radigan - ------------------- Atlanta, Georgia February 24, 1998 Consolidated Balance Sheet THE WILEN COMPANIES, INCORPORATED December 31, 1997 ASSETS ------ CURRENT ASSETS Cash $ 1,522,095 Accounts receivable, net of allowance for doubtful accounts of $150,000 4,694,680 Inventories 2,901,422 Other current assets 204,958 ---------- 9,323,155 PROPERTY AND EQUIPMENT Land 475,797 Buildings and improvements 3,580,904 Machinery and equipment 6,501,574 Office equipment and furniture 1,214,110 Vehicles 39,962 Aircraft 694,247 ---------- 12,506,594 Less accumulated depreciation 5,494,834 ---------- 7,011,760 OTHER ASSETS Investments 69,208 Cash surrender value of life insurance policies 342,845 Deposits 366,033 Intangible assets, net of accumulated amortization of $34,044 134,661 ---------- 912,747 ---------- $17,247,662 ========== The Notes to Consolidated Financial Statements are an integral part of these statements. LIABILITIES AND STOCKHOLDER'S EQUITY ------------------------------------ CURRENT LIABILITIES Accounts payable $ 1,966,269 Accrued expenses 988,299 Current potion of capital lease obligation 218,811 Current portion of notes payable 300,000 ---------- TOTAL CURRENT LIABILITIES 3,473,379 LONG-TERM OBLIGATIONS Capital lease obligation, net of current portion 2,756,301 Notes payable, net of current portion 2,630,000 ---------- 5,386,301 STOCKHOLDER'S EQUITY Common stock, $1 par value: Authorized - 1,000,000 shares Issued and outstanding - 2,000 shares 2,000 Retained earnings 8,385,982 ---------- 8,387,982 ---------- $17,247,662 ========== The Notes to Consolidated Financial Statements are an integral part of these statements Consolidated Statement of Income and Retained Earnings THE WILEN COMPANIES, INCORPORATED For the Year Ended December 31, 1997 REVENUES Gross sales $39,079,651 Less: discounts 1,085,624 ---------- 37,994,027 COST OF GOODS SOLD 24,416,423 13,577,604 OPERATING EXPENSES Selling 6,498,048 General and administrative 2,839,759 ---------- 9,337,807 ---------- INCOME FROM OPERATIONS 4,239,797 OTHER INCOME (EXPENSE) Interest income 100,294 Loss on disposal of asset (84,697) Miscellaneous income 32,946 Equity in income of partnership 8,795 Interest expense (288,704) ---------- (231,366) ---------- INCOME BEFORE INCOME TAXES 4,008,431 ---------- NET INCOME 4,008,431 DISTRIBUTIONS (2,890,241) RETAINED EARNINGS AT BEGINNING OF YEAR 7,267,792 ---------- RETAINED EARNINGS AT END OF YEAR $ 8,385,982 ========== The Notes to Consolidated Financial Statements are an integral part of these statements. Consolidated Statement of Cash Flows THE WILEN COMPANIES, INCORPORATED For the Year Ended December 31, 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $4,008,431 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 948,835 Loss on disposal of asset 84,697 Equity in income of partnership (8,795) Decrease (increase) in: Accounts receivable (1,194,878) Inventory (507,817) Other current assets (92,352) Deposits 3,733 Increase (decrease) in: Accounts payable and accrued expenses 321,892 Deferred compensation (7,490) ---------- Total adjustments (452,175) ---------- Net cash provided by operating activities 3,556,256 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (1,385,670) Proceeds from disposal of asset 622,086 Decrease in construction-in-progress 38,133 Increase in cash surrender value of life insurance (86,290) ---------- Net cash used by investing activities (811,741) CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to stockholder (2,890,241) Principal payments on notes payable and capital lease obligation (330,456) ---------- Net cash used by financing activities (3,220,697) ---------- DECREASE IN CASH (476,182) CASH BALANCE AT BEGINNING OF YEAR 1,998,277 ---------- CASH BALANCE AT END OF YEAR $ 1,522,095 ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 288,333 ========== The Notes to Consolidated Financial Statements are an integral part of these statements. Notes to Consolidated Financial Statements THE WILEN COMPANIES, INCORPORATED December 31, 1997 Note A - Summary of Significant Accounting Policies - --------------------------------------------------- Investments ----------- Investments in general partnerships are carried at the lower of net realizable value or cost plus equity in net earnings and losses since acquisition. Intangible Assets ----------------- Intangible assets consist of bond closing costs that are amortized on the straight-line method over fifteen years. Amortization expense of $11,222 was recorded for the year ended December 31, 1997. Capital Lease Obligation ------------------------ During 1995, the Company sold real estate used in manufacturing to the stockholder of the Company and is leasing the facility from the stockholder. The lease has been recorded as a capital lease in the accompanying financial statements. Accrual for Compensated Absences -------------------------------- The Company cannot reasonably estimate the liability for compensated absences and therefore no accrual is recorded. Income Taxes ------------ Effective November 1, 1995, the Company elected to be taxed as an S corporation under the Internal Revenue Code. Accordingly, no provision for federal and state income taxes is necessary in the accompanying financial statements since income, losses and tax credits are reported on the stockholder's individual income tax returns. All income tax related accounts were reversed and included in 1996 operations due to the Company's change to a nontaxable status. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Notes to Consolidated Financial Statements THE WILEN COMPANIES, INCORPORATED December 31, 1997 Note B - Inventories - -------------------- A summary of inventories is as follows: December 31, 1997 ---- Finished goods $ 571,547 Goods-in-process 23,767 Raw materials 2,306,108 --------- Total inventory $2,901,422 ========= Note C - Investments - -------------------- A summary of investments is as follows: December 31, 1997 ---- Note receivable: Lindberg Livestock Partnership, due on demand with interest as a function of the prime rate $ -0- 49% general partnership interest: 1721 DeKalb Associates -0- Piedmont 11th Street Associates 69,208 -------- $ 69,208 ======== During 1997, the Company was paid $350,000 for payment in full of the note receivable from Lindberg Livestock Partnership. A loss of $46,000 was recognized. In addition, in 1997 the Company sold its general partnership interest in 1721 DeKalb Associates for $122,500 and recorded a $116,697 loss on the sale. Note D - Line of Credit - ----------------------- The Company has a line of credit arrangement that provides for a credit commitment of $3,500,000 available for working capital in the ordinary course of business. The Company had no borrowings against this commitment at December 31, 1997. Borrowings against the line of credit are secured by a blanket lien on the accounts receivable and inventory and cross collateralized with other bank debt and the real estate subject to the capital lease (Note A). The amount borrowed under the line of credit is limited to eighty percent of eligible accounts receivable plus twenty-five percent of eligible inventory. Notes to Consolidated Financial Statements THE WILEN COMPANIES, INCORPORATED December 31, 1997 Note D - Line of Credit - Continued - ------------------------------------ The line of credit provides that interest will accrue on the outstanding balance at the prime rate. The bank's prime rate was eight and one-half percent at December 31, 1997. The credit agreement limits the Company's outside borrowings, lease commitments and dividends. In addition, the lender may require the Company to maintain a certain net worth. Note E - Capital Lease Obligation and Notes Payable - --------------------------------------------------- A summary of the capital lease obligation and notes payable are as follows: December 31, 1997 ---- Capital lease obligation for the manufacturing facility, payable to the stockholder of the Company. The monthly payments under the triple net capital lease equal, at a minimum, an amount equal to the sum of the payments under an industrial development revenue bond issued November 1, 1995 by the Development Authority of Fulton County and an installment note. The underlying bond (original amount of $2,370,000) is payable in annual principal installments com- mencing January 1, 1995 through January 1, 2009. Interest on the underlying bond balance is pay- able quarterly. Interest rates vary but cannot exceed the lesser of 12% or the maximum rate permitted by applicable law. The installment note (original amount $1,055,000) is amortized through October 31, 2010 with interest accruing at 7.5%. $2,975,112 Industrial development revenue bond issued November 1, 1995 by the Development Authority of Fulton County for the repayment of debt and the acquisition of equipment. The bond is payable in annual principal installments com- mencing January 1, 1995 through January 1, 2009. Interest on the principal balance is payable quarterly. Interest rates vary but cannot exceed the lesser of 12% or the maximum rate permitted by applicable law. 2,930,000 Note payable to an affiliate of the stockholder of the Company. The note was paid in full during 1997. -0- --------- 5,905,112 Current maturities 518,811 --------- Long-term portion $5,386,301 ========= Notes to Consolidated Financial Statements THE WILEN COMPANIES, INCORPORATED December 31, 1997 Note E - Capital Lease Obligation and Notes Payable - Continued - --------------------------------------------------------------- The industrial development revenue bonds recorded directly on the books of the Company and through the capital lease obligation are secured by a letter of credit from Wachovia Bank of Georgia, N.A. and the Company. The letter of credit is guaranteed by the Company and its stockholder. Future maturities of the capital lease obligation and note payable are as follows: Year Ending December 31, Amount ------------ ------ 1998 $ 518,811 1999 320,271 2000 521,845 2001 323,541 2002 525,368 Thereafter 3,695,276 --------- $5,905,112 ========= Note F - Deferred Compensation - ------------------------------ The Company entered into an unfunded deferred compensation plan with a former officer in May 1980. The plan provided for monthly payments through February 1997 or the former officer's death. The resulting liability was paid in full during 1997. Benefits paid by the Company amounted to $7,583 in 1997. The plan did not qualify under the Internal Revenue Code and benefits are tax deductible only when paid. Note G - 401(k) Profit Sharing Plan - ----------------------------------- During the year ended December 31, 1996, the Company entered into two 401(k) profit sharing plan agreements, one with employees not covered by a collective bargaining agreement ("Plan A") and another with employees covered by a collective bargaining agreement ("Plan B"). Approximately seventy-five percent of the Company's work force is covered by a collective bargaining agreement. The Plans cover all qualified employees as defined under the agreements. Employee contributions under Plan A are matched at one-half of the employee's contribution, limited to the first six percent of their compensation contributed. Under Plan B, the Company contributes three cents for each hour of service performed during the Plan year. The Company made contributions of $41,429 and $13,593 in 1997 to Plan A and Plan B, respectively. Notes to Consolidated Financial Statements THE WILEN COMPANIES, INCORPORATED December 31, 1997 Note H - Commitments - -------------------- The Company leases vehicles, equipment and the Phoenix facility under operating lease agreements that expire on various dates through 2002. Future minimum lease payments are as follows: Year Ending December 31, Vehicles Equipment Facility Amount 1998 $ 18,332 $ 22,111 $121,651 $162,094 1999 8,882 19,609 121,651 150,142 2000 -0- 11,396 121,651 133,047 2001 -0- 1,459 111,514 112,973 2002 -0- 122 -0- 122 ------- ------- ------- ------- $ 27,214 $ 54,697 $476,467 $558,378 ======= ======= ======= ======= KATY INDUSTRIES, INC. AND WILEN COMPANIES, INCORPORATED UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 1998 AND UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND FOR THE YEAR ENDED DECEMBER 31, 1997 The following unaudited pro forma balance sheet as of June 30, 1998 and unaudited pro forma statements of operations for the six months ended June 30, 1998 and the year ended December 31, 1997 give effect to the acquisition by Katy Industries, Inc. ("Katy") of the assets and assumptions of certain liabilities of Wilen Companies, Incorporated ("Wilen") as if the acquisition had occurred on June 30, 1998 for purposes of the balance sheet and on January 1, of the respective period for purposes of the statements of operations. The transaction was accounted for as a purchase in accordance with the provisions of Accounting Principles Board Opinion No. 16. The historical financial data included in the pro forma statements is as of the periods presented. The historical financial data of Wilen as of June 30, 1998 and for the six months ended June 30,1998 was derived from unaudited financial statements for the six months ended June 30, 1998. The historical financial data of Wilen included in the pro forma statement of operations for the year ended December 31, 1997 was derived from audited financial statements for the year ended December 31, 1997. The unaudited pro forma financial data is based on management's best estimate of the effects of the acquisition of Wilen. Pro forma adjustments are intended to present the recurring effects directly related to the transaction and are based on currently available information. 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 substantially from those presented in the unaudited pro forma financial statements. The unaudited pro forma balance sheet as of June 30, 1998 and the statements of operations for the six months ended June 30, 1998 and the year ended December 31, 1997 are not necessarily indicative of the results of operations that actually would have been achieved had the acquisition of Wilen 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 and historical financial statements and notes thereto. In accordance with the rules regarding the preparation of pro forma financial statements, income of $2,712,000, or $.33 per share, from discontinued operations, other operations to be disposed of, and certain nonrecurring items (related to Katy historical financial statements) has not been considered in the unaudited pro forma statements of operations for the six months ended June 30, 1998 or the year ended December 31, 1997. Pursuant to the purchase agreement related to this transaction, the estimated purchase price including certain indebtedness of $50,000,000 was based on an estimated balance sheet as of March 31, 1998 and is subject to possible adjustment based on the July 31, 1998 balance sheet prepared on a post closing basis. The ultimate purchase price will be based upon an audit of this balance sheet, which has not yet been completed. On the closing date, Katy paid an amount equal to 95% of the estimated purchase price, which was funded through a $33,000,000 borrowing against the Company's unsecured line of credit at Bank of America, with the balance being funded from cash on hand. The accompanying pro forma financial statements do not include adjustments which may result from this audit or from the resolution of any issues between the parties. Certain balance sheet adjustments and/or resolution of issues between the parties will also affect the ultimate price of the acquisition and the allocation of the purchase price. KATY INDUSTRIES, INC. UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 1998 (in thousands) Katy Wilen Pro forma Historical Historical Adjustments Pro forma ---------- ---------- ----------- --------- Cash and cash equivalents $ 19,690 $ 857 $(16,693) [b] $3,854 Accounts receivable, trade, net 47,581 4,974 - 52,555 Notes and other receivables, net 1,963 6 - 1,969 Inventories 65,748 2,856 (100) [d] 68,504 Net current assets of discontinued operations 11,269 - - 11,269 Net current assets of other operations 5,677 - - 5,677 Other current assets 15,715 169 (40) [d] 15,844 ------- ------ ------ ------- Total current assets 167,643 8,862 (16,833) 159,672 ------- ------ ------ ------- Notes receivable, net 1,071 - - 1,071 Cost in excess of net assets of businesses acquired, net 9,881 - 41,183 [d] 51,064 Net noncurrent assets of discontinued operations 4,544 - - 4,544 Net noncurrent assets of other operations 24,769 - - 24,769 Miscellaneous 10,069 613 (603) [d] 10,079 ------- ------ ------ ------- Total other assets 50,334 613 40,580 91,527 ------- ------ ------ ------- Property and equipment, net 27,937 7,029 (3,704) [d] 31,262 ------- ------ ------ ------- Total assets $245,914 $16,504 $20,043 $282,461 ======= ====== ====== ======= KATY INDUSTRIES, INC. UNAUDITED PRO FORMA BALANCE SHEET AS OF JUNE 30, 1998 (in thousands) Katy Wilen Pro forma Historical Historical Adjustments Pro forma ---------- ---------- ----------- --------- Accounts payable 24,119 2,429 - 26,548 Accrued compensation 3,603 - - 3,603 Accrued expenses 35,721 1,196 (78) [d] 36,839 Accrued interest and taxes 562 - - 562 Dividends Payable 621 - - 621 Current maturities, long-term debt 85 519 (519) [d] 85 ------- ------ ------ ------- Total current liabilities 64,711 4,144 (597) 68,258 Long-term debt, less current maturities 933 5,177 (5,177) [d] 33,933 33,000 [c] ------- ------ ------ ------- Excess of acquired net assets over cost, net 6,050 - - 6,050 ------- ------ ------ ------- Deferred income taxes 22,479 - - 22,479 ------- ------ ------ ------- Other liabilities 9,062 - - 9,062 ------- ------ ------ ------- Total liabilities 103,235 9,321 27,226 139,782 ------- ------ ------ ------- Stockholders' equity: Common stock 9,822 2 (2) [d] 9,822 Additional paid-in capital 51,174 - - 51,174 Foreign currency translation adjustment (2,435) - - (2,435) Retained earnings 105,609 7,181 (7,181) [d] 105,609 Treasury Stock (21,491) - - (21,491) ------- ------ ------ ------- Total stockholders' equity 142,679 7,183 (7,183) 142,679 ------- ------ ------ ------- Total liabilities and stockholders' equity $245,914 $ 16,504 $ 20,043 $282,461 ======= ====== ====== ======= KATY INDUSTRIES, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (in thousands except per share information) Katy Wilen Pro forma Historical Historical Adjustments Pro forma ---------- ---------- ----------- --------- Net sales $132,732 $20,005 - $152,737 Cost of goods sold 93,440 14,465 - 107,905 ------- ------ ------ ------- Gross profit 39,292 5,540 44,832 Selling, general and administrative expenses 34,766 3,834 1,030 [a] 39,335 (77) [a] (87) [a] (113) [a] ------- ------ ------ ------- Income from operations 4,526 1,706 (753) 5,479 Interest expense (104) (137) 137 [a] (794) (690) [a] Interest income 713 40 (753) [a] Other, net 407 46 - 453 ------- ------ ------ ------- Income before taxes 5,542 1,655 (2,059) 5,138 Provision for income taxes 1,940 - (149) [a] 1,791 ------- ------ ------ ------- Net income $ 3,602 $ 1,655 ($1,910) $ 3,347 ======= ====== ====== ======= Basic earnings per share of common stock $ .43 $ .40 ======= ======= Diluted earnings per share of common stock $ .43 $ .40 ======= ======= Weighted average shares outstanding - Basic 8,288 8,288 ======= ======= Weighted average shares outstanding - Diluted 8,459 8,459 ======= ======= KATY INDUSTRIES, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (in thousands except per share information) Katy Wilen Pro forma Historical Historical Adjustments Pro forma ---------- ---------- ----------- --------- Net sales $274,033 $37,994 - $312,027 Cost of goods sold 197,633 24,416 - 222,049 ------- ------ ------ ------- Gross profit 76,400 13,578 89,978 Selling, general and administrative expenses 64,221 9,338 2,059 [a] 75,063 (155) [a] (175) [a] (225) [a] ------- ------ ------ ------- Income from operations 12,179 4,240 (1,504) 14,915 Interest expense (236) (289) 289 [a] (1,928) (1,692) [a] Interest income 1,183 100 (1,283) [a] Other, net 310 (43) - 267 ------- ------ ------ ------- Income before taxes 13,436 4,008 (4,190) [a] 13,254 Provision for income taxes 4,546 - (67) [a] 4,479 ------- ------ ------ ------- Net income $ 8,890 $ 4,008 ($4,123) $ 8,775 ======= ====== ====== ======= Basic earnings per share of common stock $ 1.07 $ 1.06 ======= ======= Diluted earnings per share of common stock $ 1.06 $ 1.04 ======= ======= Weighted average shares outstanding - Basic 8,273 8,273 ======= ======= Weighted average shares outstanding - Diluted 8,405 8,405 ======= ======= KATY INDUSTRIES, INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (in 000's) [a] The following pro forma adjustments are reflected in the pro forma statements of operations: Six Months Ended Year Ended June 30, December 31, 1998 1997 -------- -------- 1. Amortization of goodwill recorded pursuant to purchase accounting (1,030) (2,059) 2. Elimination of Wilen's depreciation on assets not included in the purchase 77 155 3. Elimination of the difference between Wilen's prior officers' salaries and new president's salaries pursuant to the purchase agreement. 87 175 4. Elimination of Wilen's airplane expense pursuant to the purchase agreement. 113 225 5. Elimination of Wilen's interest expense as all debt is repaid on date of purchase pursuant to the purchase agreement 137 289 6. Increase in interest expense due to additional indebtedness at applicable rates for purchase cost (690) (1,692) 7. Decrease in interest income due to use of cash for purchase cost and elimination of Wilen's cash (753) (1,283) 8. Net tax benefit related to items 1-7 above and Wilen historical income at the statutory rate of 37% 149 97 ----- ----- ($1,910) ($4,123) ===== ===== [b] Decrease in cash as a result of cash used in the purchase of Wilen. [c] Record required borrowings of $33,000,000 from the Company's unsecured line of credit with Bank of America for the acquisition of Wilen. [d] The following pro forma adjustments are made to reflect (1) the allocation of cost greater than the fair value of assets acquired resulting in the recording of goodwill, (2) the repayment of all outstanding debt of the acquired company on the purchase date in accordance with the purchase agreement, (3) the elimination of assets not purchased pursuant to the purchase agreement, and (4) the elimination of Wilen's shareholders' equity as of June 30, 1998. Record excess and obsolete inventory reserve (100) Eliminate prepaid bond interest upon repayment of debt (40) Eliminate assumption of indebtedness by seller 5,774 Record goodwill (Expected Useful Life - 20 years) 41,183 Eliminate assets not included in the purchase (4,307) Elimination of Wilen's shareholders' equity 7,183 ------ Total allocation of estimated purchase price $49,693 ====== Exhibit 23 Independent Auditors' Consent from Smith & Radigan - ----------------------------------------------------------------- INDEPENDENT AUDITORS' CONSENT We hereby consent to the use in the Katy Industries, Inc. Form 8-K/A dated October 20, 1998 of our report dated February 24, 1998, relating to the financial statements of Wilen Companies, Incorporated, which appears in the Form 8-K/A. We also consent to the reference to us under the heading "Independent Auditors" in this form. /S/ Smith & Radigan, Certified Public Accountants, LLC Atlanta, Georgia October 13, 1998