Exhibit 99.1

KATY NEWS

FOR IMMEDIATE RELEASE

KATY INDUSTRIES, INC.

REPORTS 2004 SECOND QUARTER RESULTS

MIDDLEBURY, CT – August 9, 2004 – Katy Industries, Inc. (NYSE: KT) today reported a loss from continuing operations in the second quarter of 2004 of ($1.2) million [($0.15) per share], versus a loss from continuing operations of ($1.4) million [($0.17) per share], in the second quarter of 2003, as adjusted to exclude restructuring and other non-recurring or unusual items, which are discussed below.  Including these items and payment-in-kind dividends on convertible preferred stock, Katy reported a net loss attributable to common shareholders of ($4.7) million [($0.60) per share], in the second quarter of 2004, versus a net loss attributable to common shareholders of ($8.2) million [($0.98) per share], in the same period of 2003.  Net sales in the second quarter of 2004 were $100.5 million, down 0.9% compared to the same period in 2003.  Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted to exclude all restructuring and other non-recurring or unusual items, was $3.0 million in the second quarter of 2004, compared to $4.6 million in the same period in 2003.  Income (loss) from continuing operations, as adjusted, and EBITDA, as adjusted, are non-GAAP financial measures and are further discussed below. 

Katy also reported a loss from continuing operations for the six months ended June 30, 2004 of ($0.5) million [($0.06) per share], versus a loss from continuing operations of ($2.9) million [($0.34) per share], for the six months ended June 30, 2003, as adjusted to exclude restructuring and other non-recurring or unusual items, which are discussed below.  Including these items and payment-in-kind dividends on convertible preferred stock, Katy reported a net loss attributable to common shareholders of ($10.0) million [($1.27) per share], for the six months ended June 30, 2004, versus a net loss attributable to common shareholders of ($6.5) million [$0.78 per share], in the same period of 2003.  Net sales in the six months ended June 30, 2004 were $200.4 million, up 4.4% compared to the same period in 2003.  Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted to exclude all restructuring and other non-recurring or unusual items, was $8.8 million in the six months ended June 30, 2004, compared to $9.2 million in the same period in 2003. 

During the second quarter of 2004, Katy reported income from restructuring and other non-recurring or unusual items of $0.7 million pre-tax [$0.09 per share], including severance, restructuring and related income of $0.1 million, income from the reversal of reserves related to divested businesses of $0.1 million and a gain on the sale of real estate of $0.5 million.  Also, during the second quarter of 2004, Katy recorded the impact of paid-in-kind dividends earned on its convertible preferred stock of ($3.5) million [($0.44) per share].  During the second quarter of 2003, Katy reported restructuring and other non-recurring or unusual items of ($3.2) million pre-tax [($0.38) per share], including impairments of long-lived assets of ($1.8) million, severance, restructuring and related costs of ($1.7) million and income from the reversal of reserves related to divested businesses of $0.3 million.  Also during the second quarter of 2003, Katy reported income from discontinued operations of $0.3 million, net of tax [$0.04 per share] and the impact of payment-in-kind dividends earned on its convertible preferred stock of ($3.0) million [($0.36) per share].  Details regarding these items are provided in the “Reconciliations of GAAP Results to Results Excluding Certain Unusual Items” accompanying this press release.

For the six months ended June 30, 2004, Katy reported restructuring and other non-recurring or unusual items of ($1.6) million pre-tax [($0.21) per share], including severance, restructuring and related charges of ($1.8) million, costs associated with a proposed financing which Katy chose to abandon of ($0.4) million, income from the reversal of reserves related to divested businesses of $0.1 million and a gain on the sale of real estate of $0.5 million.  Also, during the six months ended June 30, 2004, Katy recorded the impact of paid-in-kind dividends earned on its convertible preferred stock of ($6.9) million [($0.88) per share].  During the six months ended June 30, 2003, Katy reported restructuring and other non-recurring or unusual items of ($3.8) million pre-tax [($0.46) per share], including impairments of long-lived assets of ($1.8) million, severance, restructuring and related costs of ($1.9) million, the write-off of unamortized debt costs related to the refinancing of debt in February 2003 of ($1.2) million, income from the reversal of reserves related to divested businesses of $0.3 million and a gain on the sale of real estate of $0.8 million.  Also during the six months ended June 30, 2003, Katy reported income from discontinued operations of $1.4 million, net of tax [$0.17 per share], a gain on the early redemption of a preferred interest in a subsidiary of $6.6 million [$0.78 per share] and the impact of payment-in-kind dividends earned on its convertible preferred stock of ($6.0) million [($0.72) per share].  Details regarding these items are provided in the “Reconciliations of GAAP Results to Results Excluding Certain Unusual Items” accompanying this press release.

“We were hurt by rising prices for some of our key raw materials and experienced inefficiencies in certain of our facilities due to consolidation efforts,” said C. Michael Jacobi, Katy Industries’ President and Chief Executive Officer.  “These cost increases were partially offset by continued expense containment and the benefit of lower costs due to our ongoing restructuring efforts,” added Mr. Jacobi.

Gross margins were 13.2% in the second quarter of 2004, a decrease of 50 basis points from the second quarter of 2003.  The higher cost of materials, which could not be passed on through price increases, and manufacturing inefficiencies related to the consolidation of our abrasives facilities were offset partially by the favorable impact of restructuring, cost containment and lower depreciation.  Selling, general and administrative expenses were $1.1 million lower than the second quarter of 2003.  These costs represented 14.2% of sales in the second quarter of 2004, a significant improvement from the same period of 2003, when these costs represented 15.1% of sales. 

Interest expense was $0.2 million lower in the second quarter of 2004 versus the same period of 2003, primarily a result of lower levels of borrowings.  Debt at June 30, 2004 was $62.3 million [39% of total capitalization], versus $68.1 million [40% of total capitalization] at June 30, 2003.  Cash on hand at June 30, 2004 was $5.7 million, versus $6.7 million at June 30, 2003.

Liquidity was negatively impacted during the six months ended June 30, 2004, as Katy used free cash flow of $27.8 million versus the $18.5 million of free cash flow used during the six months ended June 30, 2003.  The increased use of free cash flow during the first half of 2004 was primarily attributable to higher inventories resulting from early purchasing of certain materials in advance of scheduled cost increases, increased material prices and planned builds in connection with manufacturing facility closures.  The Company expects these liquidity trends to reverse in the second half of the year.  Free cash flow, a non-GAAP financial measure, is discussed further below.

Katy expects to substantially complete its restructuring program in 2004.  Capital expenditures, and severance, restructuring and related costs for these initiatives are expected to be in the range of $1.5 million to $2.0 million for the remainder of the year.  Katy has completed the sales of its non-core businesses, Duckback Products, Inc. on September 16, 2003 and GC/Waldom Electronics, Inc. on April 2, 2003.  The results of these businesses have been classified as discontinued operations as of and for the three and six month periods ended June 30, 2003.  There was no discontinued operations activity for the three and six month periods ended June 30, 2004.

Payment-in-kind dividends on convertible preferred stock will end in December 2004, or upon the conversion of the convertible preferred stock, whichever is sooner. 

Non-GAAP Financial Measures

To provide transparency about measures of Katy’s financial performance which management considers most relevant, we supplement the reporting of Katy’s consolidated financial information under GAAP with certain non-GAAP financial measures, including income (loss) from continuing operations, as adjusted; EBITDA, as adjusted; and free cash flow.  Details regarding these measures and reconciliations of these non-GAAP measures to comparable GAAP measures are provided in the “Reconciliations of GAAP Results to Results Excluding Certain Unusual Items” and “Statements of Cash Flows” accompanying this press release.  These measures should not be considered in isolation or as an alternative to measures determined in accordance with GAAP.  Katy believes the presentation of these measures is nonetheless useful to investors for the following reasons:

Income (Loss) from Continuing Operations, as adjusted.  Income (loss) from continuing operations, as adjusted, is income (loss) from Katy’s continuing operations that excludes restructuring and other non-recurring and unusual items.  Katy believes that its presentation of this measure provides useful information to management and investors regarding certain financial and business trends relating to its results of operations.

EBITDA, as adjusted.  EBITDA, as adjusted, is calculated as earnings before interest, taxes, depreciation and amortization, excluding discontinued operations and unusual items such as severance, restructuring and related costs, impairments of long-lived assets, and other non-recurring items.  Katy believes that EBITDA, as adjusted, is useful to report because it (i) is used extensively on an internal basis, acting as a primary metric for operating performance measurement, (ii) is the prime measure of operating results used by the lenders in Katy’s bank group when evaluating Katy’s performance and (iii) provides a link between profitability and operating cash flow.  The presentation of EBITDA, as adjusted, enables investors to view Katy’s performance in a manner similar to the method used by management. 

Free Cash Flow.  Free cash flow is defined by Katy as cash flow from operations less capital expenditures and cash dividends paid.  Katy believes that free cash flow is useful to management and investors in measuring cash generated that is available for repayment of debt obligations, investment in growth through acquisitions, new business development and stock repurchases. 

This press release may contain various forward-looking statements.  The forward-looking statements are based on the beliefs of the company’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, detailed from time to time in Katy’s filings with the SEC, that may lead to results that differ materially from those expressed in any forward-looking statement made by the company or on its behalf.  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 with interests primarily in Maintenance Products and Electrical Products.

Company contact:

Katy Industries, Inc.

Amir Rosenthal

(203) 598-0397