KATY INDUSTRIES, INC. SUMMARY OF OPERATIONS - UNAUDITED (In thousands, except percentages and per share data) Three Months Ended $ % March 31, March 31, Change Change 2004 2003 Inc/(Dec) Inc/(Dec) Net sales $99,895 $90,452 $9,443 10.4% Cost of goods sold 83,265 76,167 7,098 9.3% Gross profit 16,630 14,285 2,345 16.4% Selling, general and administrative expenses 14,748 14,818 (70) (0.5%) Severance, restructuring and related charges 1,898 228 1,670 732.5% Operating loss (16) (761) 745 97.9% Equity in loss of equity method investment -- (367) 367 100.0% Gain on sale of assets -- 753 (753) (100.0%) Interest expense (800) (2,427) 1,627 67.0% Other, net (375) (4) (371) (9275.0%) Loss before (provision) benefit for income taxes (1,191) (2,806) 1,615 57.6% (Provision) benefit for income taxes (590) 27 (617) (2285.2%) Loss from continuing operations before distributions on preferred interest of subsidiary (1,781) (2,779) 998 35.9% Distributions on preferred interest of subsidiary, net of tax -- (123) 123 100.0% Loss from continuing operations (1,781) (2,902) 1,121 38.6% Income from operations of discontinued businesses, net of tax -- 1,058 (1,058) (100.0%) Net loss (1,781) (1,844) 63 3.4% Gain on early redemption of preferred interest of subsidiary -- 6,560 (6,560) (100.0%) Payment in kind dividends on convertible preferred stock (3,462) (3,014) (448) (14.9%) Net (loss) income attributable to common stockholders $(5,243) $1,702 $(6,945) (408.0%) (Loss) income per share of common stock - basic and diluted: Loss from continuing operations $(0.23) $(0.35) $0.12 34.3% Gain on early redemption of preferred interest of subsidiary -- 0.78 (0.78) (100.0%) Payment in kind (PIK) dividends on convertible preferred stock (0.44) (0.36) (0.08) (22.2%) (Loss) income from continuing operations attributable to common stockholders (0.67) 0.07 (0.74) (1057.1%) Discontinued operations -- 0.13 (0.13) (100.0%) Net (loss) income attributable to common stockholders $(0.67) $ 0.20 $(0.87) (435.0%) Weighted average shares outstanding - basic and diluted 7,881 8,362 Other Information: Working capital, excluding current maturities, long-term debt $58,792 $54,463 $4,329 7.9% Long-term debt, including current maturities $51,754 $70,402 $(18,648) (26.5%) Stockholders' equity $100,957 $107,416 $(6,459) (6.0%) Capital expenditures $2,415 $1,315 $1,100 83.7% KATY INDUSTRIES, INC. RECONCILIATIONS OF GAAP RESULTS TO RESULTS EXCLUDING CERTAIN UNUSUAL ITEMS - UNAUDITED (In thousands, except percentages and per share data) Three Months Ended March 31, March 31, 2004 2003 Reconciliation of loss from continuing operations to income (loss) from continuing operations, as adjusted Loss from continuing operations $(1,781) $(2,902) Unusual items: Severance, restructuring and related charges 1,898 228 Write-off of unamortized debt costs (included in interest expense) -- 1,172 Costs associated with abandoned financing (included in other, net) 435 -- Gain on sale of real estate -- (753) Adjustment to reflect a more normalized effective tax rate excluding unusual items 156 793 Income (loss) from continuing operations, as adjusted $708 $(1,462) Income (loss) from continuing operations, as adjusted per share Loss from continuing operations per share $(0.23) $(0.35) Unusual items per share 0.30 0.08 Adjustment to reflect a more normalized effective tax rate excluding unusual items per share 0.02 0.10 Income (loss) from continuing operations, as adjusted per share $0.09 $(0.17) Weighted average shares outstanding - basic and diluted 7,881 8,362 EBITDA, as adjusted: Net loss $(1,781) $(1,844) Interest expense 800 2,427 Provision (benefit) for income taxes 590 (27) Depreciation and amortization 3,802 5,414 EBITDA 3,411 5,970 Add back: Distributions on preferred interest of subsidiary, net of tax -- 123 Income from operations of discontinued businesses, net of tax -- (1,058) Severance, restructuring and related charges 1,898 228 Costs associated with abandoned financing (included in other, net) 435 -- Gain on sale of real estate -- (753) EBITDA, as adjusted $5,744 $4,510 EBITDA, as adjusted, as a % of sales 5.8% 5.0% KATY INDUSTRIES, INC. BALANCE SHEETS - UNAUDITED (In thousands) Assets March 31, December 31, March 31, Current assets: 2004 2003 2003 Cash $3,996 $ 6,748 $6,096 Accounts receivable, net 59,517 65,197 55,086 Inventory, net 66,865 53,545 65,659 Other current assets 4,216 1,658 1,861 Current assets of discontinued operations (a) -- -- 13,141 Total current assets 134,594 127,148 141,843 Other assets: Goodwill 10,215 10,215 10,543 Intangibles, net 22,040 22,399 25,027 Other 9,615 10,352 18,703 Non-current assets of discontinued operations (a) -- -- 3,946 Total other assets 41,870 42,966 58,219 Property, plant and equipment 148,694 149,634 158,828 Less: accumulated depreciation (80,680) (78,040) (76,881) Property, plant and equipment, net 68,014 71,594 81,947 Total assets $244,478 $241,708 $282,009 Liabilities and stockholders' equity Current liabilities: Accounts payable $31,267 $37,259 $31,976 Accrued expenses 44,535 46,450 50,875 Current maturities, long-term debt 1,848 2,857 2,857 Revolving credit agreement 32,763 36,000 50,402 Current liabilities of discontinued operations (a) -- -- 4,529 Total current liabilities 110,413 122,566 140,639 Revolving credit agreement 17,143 -- -- Long-term debt, less current maturities -- 806 17,143 Other liabilities 15,965 16,044 16,811 Total liabilities 143,521 139,416 174,593 Stockholders' equity Convertible preferred stock 96,969 93,507 83,710 Common stock 9,822 9,822 9,822 Additional paid-in capital 36,979 40,441 50,247 Accumulated other comprehensive income (loss) 2,833 2,387 (2,518) Accumulated deficit (22,918) (21,137) (13,617) Treasury stock (22,728) (22,728) (20,228) Total stockholders' equity 100,957 102,292 107,416 Total liabilities and stockholders' equity $244,478 $241,708 $282,009 (a) Amounts include assets and liabilities of GC/Waldom Electronics, Inc. and Duckback Products, Inc. KATY INDUSTRIES, INC. STATEMENTS OF CASH FLOWS - UNAUDITED (In thousands, except percentages) Three Months Ended $ % March 31, March 31, Change Change 2004 2003 Inc/(Dec) Inc/(Dec) Cash flows from operating activities: Net loss $(1,781) $(1,844) Income from operations of discontinued businesses -- (1,058) Loss from continuing operations (1,781) (2,902) Depreciation and amortization 3,802 5,414 Write-off and amortization of debt issuance costs 264 1,397 Gain on sale of assets -- (753) Equity in loss of equity method investment -- 367 2,285 3,523 Changes in operating assets and liabilities: Accounts receivable 5,956 3,743 Inventories (13,188) (8,475) Other assets (2,514) 16 Accounts payable (6,243) (4,906) Accrued expenses (1,923) (4,085) Other, net (91) (717) (18,003) (14,424) Net cash used in continuing operations (15,718) (10,901) Net cash used in discontinued operations -- (2,589) Net cash used in operating activities (15,718) (13,490) (2,228) (17%) Cash flows from investing activities: Capital expenditures of continuing operations (2,415) (1,258) Capital expenditures of discontinued operations -- (57) Proceeds from sale of assets 3,673 1,900 Net cash provided by investing activities 1,258 585 673 115% Cash flows from financing activities: Net borrowings on revolving loans 13,906 5,651 Proceeds of term loans - 20,000 Repayments of term loans (1,815) -- Direct costs associated with debt facilities (209) (886) Redemption of preferred interest of subsidiary -- (9,840) Repayment of real estate and chattel mortgages -- (700) Net cash provided by financing activities 11,882 14,225 (2,343) (16%) Effect of exchange rate changes on cash and cash equivalents (174) (66) Net (decrease) increase in cash and cash equivalents (2,752) 1,254 Cash and cash equivalents, beginning of period 6,748 4,842 Cash and cash equivalents, end of period $3,996 $6,096 $(2,100) (34%) Free Cash Flow Net cash used in operating activities $(15,718) $(13,490) Capital expenditures of continuing operations (2,415) (1,258) Capital expenditures of discontinued operations -- (57) $(18,133) $(14,805)