May 8, 2003 FOR IMMEDIATE RELEASE		For more information contact: Amir Rosenthal (203) 598-0397 Vice President, Chief Financial Officer, General Counsel & Secretary

KATY INDUSTRIES, INC. REPORTS 2003 FIRST QUARTER RESULTS MIDDLEBURY, CT - May 8, 2003 - Katy Industries, Inc. (NYSE: KT) today reported a net loss from continuing operations in the first quarter of 2003 of ($2.4) million, or ($0.29) per share, versus net income from continuing operations of $0.01 million, or $0.00 per share, in the first quarter of 2002, excluding restructuring and other non-recurring or unusual items, which are discussed below. Net sales in the first quarter of 2003 were $95.8 million, down 4.8% compared to the same period in 2002 (excluding SESCO, a business which was exited in April 2002). Earnings before interest, taxes, depreciation and amortization (EBITDA), excluding all unusual and non-recurring items, was $6.1 million in the first quarter of 2003, compared to $7.1 million in the same period in 2002. During the first quarter of 2003, Katy reported restructuring and other non-recurring or unusual items of $0.5 million pre-tax [$0.06 per share], results of discontinued operations of $0.1 million, net of tax [$0.01 per share], a gain on the early redemption of a preferred interest in a subsidiary of $6.6 million [$0.78 per share], as well as the impact of paid-in-kind dividends earned on convertible preferred stock of ($3.0) million [($0.36) per share]. Including these items, Katy reported net income attributable to common shareholders of $1.7 million, or $0.20 per share, in the first quarter of 2003, versus a net loss attributable to common shareholders of ($10.2) million, or ($1.22) per share, in the same period of 2002. During the first quarter of 2002, Katy reported restructuring and other non-recurring or unusual items of ($8.3) million pre-tax [($0.97) per share], results of discontinued operations of $0.5 million, net of tax [$0.06 per share], as well as the impact of paid-in-kind dividends earned on convertible preferred stock of ($2.6) million [($0.31) per share]. Details regarding these items are provided in the "Reconciliation of GAAP Results to Results Excluding Certain Unusual Items" accompanying this press release. "Despite very challenging economic conditions, our gross margins and overall profitability improved during the first quarter. We experienced price increases on certain key raw materials, most notably plastic resins, and in response we are tightly managing our costs," said C. Michael Jacobi, Katy Industries' President and Chief Executive Officer. "Through the refinancing of our debt obligations during the first quarter, we were also able to redeem at a significant discount a preferred interest in one of our subsidiaries that had incurred high interest costs, generating an immediate gain to our shareholders of $6.6 million and reducing our ongoing financing expense." Gross margins were 17.5% in the first quarter of 2003, up from 17.2% in the first quarter of 2002. Selling, general and administrative expenses were unchanged year-over-year but were higher as a percentage of sales in the first quarter of 2003 compared to the same period of 2002 due to lower sales. These amounts exclude severance, restructuring and related costs, which are detailed in the "Reconciliation of GAAP Results to Results Excluding Certain Unusual Items" accompanying this press release. Interest expense increased by $0.9 million, due primarily to the write-off of certain capitalized debt issuance costs as a result of the refinancing during the first quarter of 2003 of Katy's debt obligations. Excluding this write-off, interest expense declined by $0.3 million due to lower levels of borrowings. Debt at March 31, 2003 was $70.4 million, which is 40% of total capitalization. Cash on hand at December 31, 2002 was $6.1 million. Liquidity was negatively impacted during the first quarter of 2003, as the company used free cash flow of $14.9 million versus $2.4 million of free cash flow generated during the first quarter of 2002. The Company defines free cash flow as cash generated from operations less capital expenditures and cash dividends. Liquidity was negative due to payments of accrued expenses for severance and restructuring, property taxes, customer returns and allowances, seasonal credit terms for customers of Duckback Products, early buying of resin to secure lower prices and an inventory build-up in excess of the Company's immediate needs. The Company expects these liquidity trends to substantially reverse as the year progresses. Katy completed the sale of GC/Waldom Electronics on April 2, 2003. Also, Katy announced on November 1, 2002, that it had completed the sale of its Hamilton Precision Metals, L.P. business. As a result, the results of these businesses have been classified as discontinued operations for all periods presented. To comply with new SEC regulations regarding the disclosure of non-GAAP financial measures, the "Reconciliation of GAAP Results to Results Excluding Certain Unusual Items" accompanying this press release exclude certain other unusual items that were previously included in similar reconciliations in the Company's prior press releases. 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. 2003 First Quarter Report Back to top