August 1, 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 SECOND QUARTER RESULTS MIDDLEBURY, CT - July 31, 2003 - Katy Industries, Inc. (NYSE: KT) today reported a loss from continuing operations in the second quarter of 2003 of ($1.5) million, or ($0.18) per share, versus a loss from continuing operations of ($1.1) million, or ($0.13) per share, in the second quarter of 2002, excluding restructuring and other non-recurring or unusual items, which are discussed below. Net sales in the second quarter of 2003 were $105.4 million, down 2.9% compared to the same period in 2002. Earnings before interest, taxes, depreciation and amortization (EBITDA), excluding all restructuring and other non-recurring or unusual items, was $5.8 million in the second quarter of 2003, compared to $6.5 million in the same period in 2002. Katy also reported a loss from continuing operations for the six months ended June 30, 2003 of ($3.9) million, or ($0.47) per share, versus a loss from continuing operations of ($0.4) million, or ($0.04) per share, in the same period of 2002, excluding restructuring and other non-recurring or unusual items, which are discussed below. Net sales in the six months ended June 30, 2003 were $201.2 million, down 3.6% from the same period in 2002 (excluding SESCO, a business which was exited in April 2002). EBITDA, excluding all restructuring and other non-recurring or unusual items, was $11.9 million in the six months ended June 30, 2003, compared to $13.6 million for the same period in 2002. During the second quarter of 2003, Katy reported restructuring and other non-recurring or unusual items of ($3.5) million pre-tax [($0.42) per share], including impairments of long-lived assets of ($1.8) million and severance, restructuring and related costs of ($1.7) million. Katy also incurred a loss on the sale of discontinued operations of ($0.2) million, net of tax [($0.02) 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 a net loss attributable to common shareholders of ($8.2) million, or ($0.98) per share, in the second quarter of 2003, versus a net loss attributable to common shareholders of ($9.2) million, or ($1.10) per share, in the same period of 2002. During the second quarter of 2002, Katy reported restructuring and other non-recurring or unusual items of ($6.2) million pre-tax [($0.74) per share], including impairments of long-lived assets of ($2.4) million and severance, restructuring and related costs of ($3.8) million. Katy also reported results of discontinued operations of $0.7 million, net of tax [$0.08 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 "Reconciliations of GAAP Results to Results Excluding Certain Unusual Items" accompanying this press release. For the six months ended June 30, 2003, Katy reported restructuring and other non-recurring or unusual items of ($3.0) million pre-tax [($0.36) per share], including impairments of long-lived assets of ($1.8) million and severance, restructuring and related costs of ($1.9) million, and a gain on the sale of a building of $0.7 million. Katy also reported results of discontinued operations (including a loss on sale) of $(0.1) million, net of tax [($0.02) per share], a gain on the early redemption of a preferred interest in a subsidiary of $6.6 million [$0.79 per share], and the impact of paid-in-kind dividends earned on convertible preferred stock of $(6.0) million [($0.72) per share]. Including these items, Katy reported a net loss attributable to common shareholders of ($6.5) million, or ($0.78) per share, in the six months ended June 30, 2003, versus a net loss attributable to common shareholders of ($19.4) million, or $(2.32) per share, in the same period of 2002. During the six months ended June 30, 2002, Katy reported restructuring and other non-recurring or unusual items of ($14.5) million pre-tax [($1.79) per share], including impairments of long-lived assets of ($2.4) million, severance, restructuring and related costs of ($6.1) million, and a loss on exit of the SESCO business of ($6.0) million. Katy also reported results of discontinued operations of $1.2 million, net of tax [$0.14 per share], as well as the impact of paid-in-kind dividends earned on convertible preferred stock of $(5.2) million [$(0.63) per share]. Details regarding these items are provided in the "Reconciliations of GAAP Results to Results Excluding Certain Unusual Items" accompanying this press release. "In a sustained challenging economic environment, we continue to implement our restructuring plans and tightly control costs," said C. Michael Jacobi, Katy Industries' President and Chief Executive Officer. "The sale of GC/Waldom is part of the execution of our strategy to divest of non-core businesses," added Mr. Jacobi. Gross margins were 14.8% in the second quarter of 2003, down from 16.4% in the second quarter of 2002. An unfavorable mix of higher sales to lower-margin customers contributed to the reduced margins, as well as higher costs for resins. Gross margins are expected to be positively impacted in 2004 by lower depreciation expense (estimated impact of approximately $5 million), as a result of a significant number of assets becoming fully depreciated at the Contico business unit by the end of 2003. Selling, general and administrative expenses were down year-over-year but were essentially the same as a percentage of sales. Contributing to these costs during the second quarter of 2003 is $0.4 million of compensation expense associated with stock-based compensation, costs which were not incurred in the same period of 2002. Selling, general and administrative costs discussed here exclude severance, restructuring and related costs, which are detailed in the "Reconciliations of GAAP Results to Results Excluding Certain Unusual Items" accompanying this press release. Interest expense declined by $0.3 million in the second quarter of 2003 versus the same period of 2002 due to lower levels of borrowings and lower interest rates. Debt at June 30, 2003 was $68.1 million [40% of total capitalization], versus $76.1 million at June 30, 2002. Cash on hand at June 30, 2003 was $6.7 million, versus $5.2 million at June 30, 2002. Liquidity was negatively impacted during the six months ended June 30, 2003, as the company used free cash flow of $18.4 million versus $5.3 million of free cash flow generated during the six months ended June 30, 2002. Katy defines free cash flow as cash generated from operations less capital expenditures and cash dividends. Contributing to the uses of cash during the first half of 2003 were payments on previously recorded restructuring liabilities and lower accounts payable balances. However, during the second quarter of 2003, liquidity benefited from the sale of the GC/Waldom Electronics (GC/Waldom) business, which generated $7.5 million in net proceeds. Katy expects to continue to incur costs associated with restructuring initiatives through the end of 2003 and into the first half of 2004. Capital expenditures, severance, restructuring and related costs, and potential asset impairments related to these initiatives are expected to be in the range of $15 - $20 million. 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. Katy owns a 43% equity investment in Sahlman Holding Company, Inc. (Sahlman), a shrimp harvesting and farming business operating in South and Central America. Management has reviewed Sahlman's financial results for 2002 (and year-to-date in 2003), has conducted an initial study of the status of the shrimp industry and markets in the United States, and has concluded there is a need for evaluating the business further to determine if there is a loss in the value of the investment that is other than temporary. In accordance with ABP No. 18, "The Equity Method of Accounting for Investments in Common Stock," losses in the value of equity investments that are other than temporary should be recognized. Once it completes its full evaluation and determines a reasonable estimate of the value of its investment in Sahlman, Katy will adjust the carrying value to such estimate, if it is less than the carrying value at that point in time. Katy completed the sale of GC/Waldom on April 2, 2003. Also, Katy completed the sale of its Hamilton Precision Metals, L.P. business on October 31, 2002. As a result, the results of these businesses have been classified as discontinued operations for all periods presented. Katy also announced that it has completed its exploration of alternatives related to the sale of Woods Industries, Inc., Woods Industries (Canada), and Katy International (the Asia-based sourcing arm for these businesses), and has decided not to pursue a sale of these businesses at this time. These businesses comprise Katy's Electrical Products group. According to Mr. Jacobi, "Current market conditions did not warrant the sale of the Woods businesses." He added, "These businesses are performing well and can be important contributors to the success of Katy." EBITDA is not a GAAP financial performance measure and should not be considered in isolation or as an alternative to measures determined in accordance with accounting principles generally accepted in the United States. Details regarding these items and other non-GAAP items are provided in the "Reconciliations of GAAP Results to Results Excluding Certain Unusual Items" accompanying this press release. To comply with new SEC regulations regarding the disclosure of non-GAAP financial measures, the "Reconciliations of GAAP Results to Results Excluding Certain Unusual Items" accompanying this press release exclude certain 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 Second Quarter Report Back to top