UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
SCHEDULE 14D-9
Solicitation/Recommendation Statement Under
Section 14(D)(4) Of The Securities Exchange Act Of 1934
(Amendment No. )
KATY INDUSTRIES, INC.
(Name of Subject Company)
KATY INDUSTRIES, INC.
(Name of Persons Filing Statement)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
486026107
(CUSIP Number of Class of Securities)
Robert M. Baratta
President and Chief Executive Officer
6300 S. Syracuse Way, Suite 300
Englewood, Colorado 80111
(303) 290-9300
(Name, address and telephone number of person authorized
to receive notice and communications on behalf
of the person(s) filing statement)
Copy to:
Meredith M. Brown, Esq.
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
(212) 909-6000
[X] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
KATY NEWS
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FOR IMMEDIATE RELEASE
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KATY INDUSTRIES, INC.
ANNOUNCES RESULTS FOR FOURTH QUARTER AND YEAR 2000
AND DEFINITIVE AGREEMENT FOR RECAPITALIZATION
ENGLEWOOD, CO - March 30, 2001 -- Katy Industries, Inc. (NYSE: KT) today
reported a net loss for the fourth quarter of 2000 of ($2,275,000) or ($.28) per
diluted share, compared to net income of $4,459,000, or $.49 per diluted share,
in the fourth quarter of 1999. Fourth quarter results of 2000 include unusual
charges totaling ($706,000) after-tax, or ($.08) per share, while the same
period results of 1999 include unusual income of $2,238,000 after-tax, or $.22
per diluted share. Unusual items are detailed on a schedule accompanying this
release.
For the full year 2000, the Company reported a net loss of ($5,458,000) or
($.65) per diluted share, compared to net income of $10,455,000, or $1.21 per
diluted share, in 1999. The year 2000 results include unusual charges totaling
($3,237,000) after-tax, or ($.39) per share, while 1999's results include
unusual income of $1,848,000 after-tax, or $.18 per diluted share.
Katy indicated that it expects a loss for the first quarter of 2001 from its
continuing segments which is estimated to be in the range of ($.20) to ($.30)
per share, excluding unusual charges.
Katy also announced that the Board had determined to suspend payments of
quarterly dividends and that the Company has obtained waivers from its existing
bank lenders for compliance with certain financial covenants through June 30,
2001.
Katy further announced that it has entered into a definitive agreement with an
affiliate of Kohlberg Investors IV, L.P. an affiliate of Kohlberg & Co. L.L.C.
("Kohlberg") for a recapitalization of Katy. Under the agreement, the Kohlberg
affiliate would commence a tender offer for up to 2,500,000 shares of Katy
common stock at a price of $8.00 per share and would purchase at least 400,000
shares of newly issued convertible preferred stock at $100 per share for not
less than $40,000,000. Proceeds from the newly issued convertible preferred
stock would principally be used to reduce Katy's existing debt and would also be
used to partially redeem a third party's preferred interest in a Katy
subsidiary.
Each preferred share would be convertible into 12.5 shares of common stock. The
common stock underlying the preferred, together with the common stock to be
purchased in the tender offer, would represent a majority of the outstanding
common stock after giving effect to the conversion of the preferred.
The Kohlberg affiliate has obtained a commitment letter from Deutsche Banc Alex.
Brown to provide Katy up to $150 million of senior secured term and revolving
loans to refinance the balance of the Company's existing debt.
Completion of the transaction is subject to a number of conditions, including
affirmative vote of Katy's shareholders to authorize the convertible preferred
stock and to elect six Kohlberg designees as directors of the Company, who will
then represent a majority of the Board, and completion of the sale of an
operating subsidiary pursuant to an existing letter of intent.
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KATY INDUSTRIES, INC.
HEADQUARTERS
6300 S. SYRACUSE WAY, SUITE 300, ENGLEWOOD, CO 80111-6723
TELEPHONE: (303) 290-9300 * FACSIMILE: (303) 290-9344
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KATY NEWS
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Page 2
Shareholder approval of the transaction will be the subject of a proxy statement
expected to be mailed to Katy shareholders in April for a shareholders' meeting
to be held in May, 2001. The tender offer will not be commenced until the proxy
statement is mailed.
Mr. Robert M. Baratta, Katy's Chief Executive Officer, commented: "This
transaction will increase Katy's financial strength. Shareholders will have the
opportunity to tender shares in the tender offer at a substantial premium over
our recent market price. Through the shares they keep, they will also be able
to participate in the future of a financially stronger Katy."
Katy Industries, Inc. is a diversified corporation with interests primarily in
Electrical/Electronics and Maintenance Products.
Kohlberg is a private merchant banking firm with offices in New York and
California. Founded in 1987, Kohlberg has completed more than 70 acquisitions
and recapitalization transactions in a variety of industries.
Company contact:
Stephen Nicholson, Vice President of Finance, in Englewood at (303) 290-9300, or
at www.katyindustries.com
----------------------
Where You Can Find Additional Information:
Katy strongly advises all Katy shareholders to read Katy's proxy statement,
which will be filed with the Securities and Exchange Commission (the "SEC").
Katy's proxy statement will contain important information that you should
consider before making any decision about the proposals to be voted on at Katy's
shareholder meeting. When completed, Katy's proxy statement will be mailed to
all Katy shareholders and will be available, together with the annual report,
quarterly reports, current reports and other documents filed by Katy, at no
charge at the SEC's web site at http://www.sec.gov or from Katy by contacting
Stephen Nicholson at (303) 290-9300.
Katy and certain other persons named below may be deemed to be participants in
the solicitation of proxies under the rules of the SEC. Participants may
include (1) the current directors of Katy: William F. Andrews, Robert M.
Baratta, Amelia M. Carroll, Daniel B. Carroll, Wallace E. Carroll, Jr., Arthur
R. Miller, Charles W. Sahlman, Jacob Saliba and Glenn W. Turcotte, (2) the
nominees to the board who are not currently directors: C. Michael Jacobi,
Christopher Anderson, Samuel P. Frieder, James A. Kohlberg and Christopher
Lacovara and (3) the executive officers of Katy who are not directors: Roger G.
Engle, Larry D. Hudson, Michael H. Kane, Stephen P. Nicholson and William J.
Wagner. A description of any interests that these persons have in proposals to
be voted on at Katy's shareholder meeting will be available in the proxy
statement.
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell shares of Katy. At the time the tender offer is commenced, the
acquiring entity will file a tender offer statement and Katy will file a
solicitation/recommendation statement with the SEC with respect to the tender
offer. The tender offer statement (including the offer to purchase, the related
letter of transmittal and the other offer documents attached as exhibits
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KATY INDUSTRIES, INC.
HEADQUARTERS
6300 S. SYRACUSE WAY, SUITE 300, ENGLEWOOD, CO 80111-6723
TELEPHONE: (303) 290-9300 * FACSIMILE: (303) 290-9344
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KATY NEWS
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Page 3
thereto) and the solicitation/recommendation statement will contain important
information which should be read carefully before any decision is made with
respect to the tender offer. The offer to purchase, the related letter of
transmittal and certain other offer documents, as well as the
solicitation/recommendation statement, will be made available to all Katy
shareholders at no expense to them. The tender offer statement (including the
offer to purchase, the related letter of transmittal and all other offer
documents filed with the SEC) and the solicitation/recommendation statement will
also be available at no charge at the SEC's website at http://www.sec.gov.
Some of the foregoing communications constitute "forward-looking statements".
Such forward-looking statements are subject to various risks and uncertainties
and Katy claims the protection afforded by the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
These statements include all statements regarding the timing, completion and
effect of the proposed recapitalization of Katy. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
including risks of consummation of the sale of the subsidiary of the Company
referred to above, the ability to consummate the new financing with Bankers
Trust Company and the ability to obtain the needed shareholder approvals on a
timely basis, that, together with other risks and uncertainties detailed from
time to time in Katy's filings with the SEC, may cause the actual results,
performance or achievements of Katy to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements. The safe harbor is not applicable to the foregoing communications
to the extent that they constitute tender offer materials and has not been
judicially determined to be applicable to such communications to the extent that
they constitute soliciting materials in connection with the tender offer.
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KATY INDUSTRIES, INC.
HEADQUARTERS
6300 S. SYRACUSE WAY, SUITE 300, ENGLEWOOD, CO 80111-6723
TELEPHONE: (303) 290-9300 * FACSIMILE: (303) 290-9344
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KATY INDUSTRIES, INC. SUMMARY OF OPERATIONS
(In thousands, except per share data)
Twelve Months Ended
------------------------- $ %
December 31, December 31, Change Change
2000 1999 Inc/(Dec) Inc/(Dec)
------------ ------------ --------- ---------
Sales $ 553,249 $ 565,941 ($12,692) (2.24%)
Cost of goods sold 399,315 391,382 7,933 2.03%
----------- --------- --------- ---------
Gross profit 153,934 174,559 (20,625) (11.82%)
Selling, general & administrative expenses 144,839 146,788 (1,949) (1.33%)
----------- --------- --------- ---------
Operating income 9,095 27,771 (18,676) (67.25%)
Equity in loss of operations to be disposed of (853) (206) (647) (314.08%)
Interest and other, net (14,011) (10,515) (3,496) (33.25%)
----------- --------- --------- ---------
(Loss) income before provision for income taxes (5,769) 17,050 (22,819) (133.84%)
Benefit from (provision for) income taxes 2,022 (3,217) 5,239 162.85%
----------- --------- --------- ---------
(Loss) income before distributions on preferred securities (3,747) 13,833 (17,580) (127.09%)
Distributions on preferred interest of subsidiary, net of tax (1,711) (1,678) (33) (1.97%)
----------- --------- --------- ---------
(Loss) income from continuing operations (5,458) 12,155 (17,613) (144.90%)
Discontinued operations -- (1,700) -- N/M
----------- --------- --------- ---------
Net (loss) income ($5,458) $ 10,455 ($15,913) (152.20%)
=========== ========= ========= =========
Earnings (loss) per share of common stock - Basic
Continuing segments - businesses to be retained ($0.19) $ 1.25 ($1.44) (115.20%)
Unusual items (1) (0.39) 0.22 (0.61) (277.27%)
Operations to be disposed of (0.07) (0.02) (0.05) (250.00%)
----------- --------- --------- ---------
Income from continuing operations ($0.65) $ 1.45 ($2.10) (144.83%)
Discontinued operations -- (0.20) 0.20 100.00%
----------- --------- --------- ---------
Net (loss) income ($0.65) $ 1.25 ($1.90) (152.00%)
=========== ========= ========= =========
Earnings (loss) per share of common stock - Diluted
Continuing segments - businesses to be retained ($0.19) $ 1.21 ($1.40) (115.70%)
Unusual items (1) (0.39) 0.18 (0.57) (316.67%)
Operations to be disposed of (0.07) (0.01) (0.06) (600.00%)
----------- --------- --------- ---------
Income from continuing operations ($0.65) $ 1.38 (2.03) (147.10%)
Discontinued operations -- (0.17) 0.17 100.00%
----------- --------- --------- ---------
Net (loss) income ($0.65) $ 1.21 ($1.86) (153.72%)
=========== ========= ========= =========
Average shares outstanding - Basic 8,404 8,366
=========== =========
Average shares outstanding - Diluted 8,404 10,015
=========== =========
Dividends paid per share $ 0.300 $ 0.300
=========== =========
Other Information
-----------------
Working capital, including current maturities of
indebtedness in 2000 of $133,067 ($ 28,265) $ 120,893 ($149,158) (123.38%)
=========== ========= ========= =========
Preferred interest in subsidiary $ 32,900 $ 32,900 $ 0 0.00%
=========== ========= ========= =========
Stockholders' equity $ 150,333 $ 160,311 ($ 9,978) (6.22%)
=========== ========= ========= =========
Capital expenditures $ 14,196 $ 21,066 ($ 6,870) (32.61%)
=========== ========= ========= =========
Operating income by segment:
Electrical/Electronics $ 8,055 $ 8,303 ($ 248) (2.99%)
Maintenance Products 10,298 29,458 (19,160) (65.04%)
Corporate (9,258) (9,990) 732 7.33%
----------- --------- --------- ---------
Total $ 9,095 $ 27,771 ($ 18,676) (67.25%)
=========== ========= ========= =========
N/M Not meaningful
(1) See attached Schedule of Unusual Items
KATY INDUSTRIES, INC. SUMMARY OF OPERATIONS
(In thousands, except per share data)
Three Months Ended
------------------------------ $ %
December 31, December 31, Change Change
2000 1999 Inc/(Dec) Inc/(Dec)
------------ --------- ---------- -----------
Sales $ 139,783 $ 164,570 ($ 24,787) (15.06%)
Cost of goods sold 104,716 118,025 (13,309) (11.28%)
--------- --------- --------- --------
Gross profit 35,067 46,545 (11,478) (24.66%)
Selling, general & administrative expenses 34,413 39,252 (4,839) (12.33%)
--------- --------- --------- --------
Operating income 654 7,293 (6,639) (91.03%)
Equity in income of operations to be disposed of 44 716 (672) (93.85%)
Interest and other, net (3,554) (2,114) (1,440) (68.12%)
--------- --------- --------- --------
(Loss) income before income taxes (2,856) 5,895 (8,751) (148.45%)
Benefit from income taxes 1,011 687 324 47.16%
--------- --------- --------- --------
(Loss) income before distributions on preferred securities (1,845) 6,582 (8,427) (128.03%)
Distributions on preferred interest of subsidiary, net of tax (430) (423) (7) (1.65%)
--------- --------- --------- --------
(Loss) income from continuing operations (2,275) 6,159 (8,434) (136.94%)
Discontinued operations -- (1,700) -- N/M
--------- --------- --------- --------
Net (loss) income ($2,275) $ 4,459 ($6,734) (151.02%)
========= ========= ========= =========
Earnings (loss) per share of common stock - Basic
Continuing segments - businesses to be retained ($0.20) $ 0.41 ($0.61) (148.78%)
Unusual items (1) (0.08) 0.27 (0.35) (129.63%)
Operations to be disposed of 0.00 0.05 (0.05) (100.00%)
--------- --------- --------- --------
Income from continuing operations ($0.28) $ 0.73 ($1.01) (138.36%)
Discontinued operations -- (0.20) 0.20 100.00%
--------- --------- --------- --------
Net (loss) income ($0.28) $ 0.53 ($0.81) (152.83%)
========= ========= ========= =========
Earnings (loss) per share of common stock - Diluted
Continuing segments - businesses to be retained ($0.20) $ 0.39 ($0.59) (151.28%)
Unusual items (1) (0.08) 0.22 (0.30) (136.36%)
Operations to be disposed of 0.00 0.05 (0.05) (100.00%)
--------- --------- --------- --------
Income from continuing operations ($0.28) $ 0.66 (0.94) (142.42%)
Discontinued operations -- (0.17) 0.17 100.00%
--------- --------- --------- --------
Net (loss) income ($0.28) $ 0.49 ($0.77) (157.19%)
========= ========= ========= =========
Average shares outstanding - Basic 8,396 8,380
========= =========
Average shares outstanding - Diluted 8,396 9,972
========= =========
Dividends paid per share $ 0.075 $ 0.075
========= =========
Other Information
-----------------
Working capital, including current maturities of
indebtedness in 2000 of $133,067 ($28,265) $ 120,893 ($149,158) (123.38%)
========= ========= ========= =========
Preferred interest in subsidiary $ 32,900 $ 32,900 $ 0 0.00%
========= ========= ========= =========
Stockholders' equity $ 150,333 $ 160,311 ($9,978) (6.22%)
========= ========= ========= =========
Capital expenditures $ 2,468 $ 9,810 ($7,342) (74.84%)
========= ========= ========= =========
Operating income by segment:
Electrical/Electronics $ 2,968 $ 3,667 ($699) (19.06%)
Maintenance Products (513) 5,433 (5,946) (109.44%)
Corporate (1,801) (1,807) 6 0.33%
--------- --------- --------- --------
Total $ 654 $ 7,293 ($6,639) (91.03%)
========= ========= ========= =========
N/M Not meaningful
(1) See attached Schedule of Unusual Items
KATY INDUSTRIES, INC. SUMMARY OF UNUSUAL ITEMS
(In thousands, except per share data)
(all items after-tax)
Three Months Ended Twelve Months Ended
-------------------------------- --------------------------------------
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
---------- ------------ ------------ ------------
Diluted Diluted Diluted Diluted
Amount Per Share Amount Per Share Amount Per Share Amount Per Share
Severance and other restructuring ($300) ($0.03) ($363) ($0.04) ($1,723) ($0.21) ($753) ($0.07)
Product recall -- -- -- -- (523) (0.06) -- --
LIFO inventory adjustments 162 0.02 (669) (0.07) (423) (0.05) (669) (0.07)
Inventory adjustments (892) (0.11) -- -- (892) (0.11) -- --
Proceeds on previously written-off
notes and investments 324 0.04 520 0.05 324 0.04 520 0.05
Reduction of income tax reserves -- -- 2,750 0.28 -- -- 2,750 0.27
---------------------------------------- ----------------------------------------------
($706) ($0.08) $ 2,238 $0.22 ($3,237) ($0.39) $ 1,848 $0.18
======================================== ==============================================