April 29, 2004 FOR IMMEDIATE RELEASE		For more information contact: Amir Rosenthal (203) 598-0397 Vice President, Chief Financial Officer, General Counsel & Secretary

KATY INDUSTRIES, INC. REPORTS 2004 FIRST QUARTER RESULTS Sales grow 10.4%. Gross margins improve. SG&A as a percent of sales decline. Completes refinancing. Resumes share repurchase. MIDDLEBURY, CT – April 29, 2004 – Katy Industries, Inc. (NYSE: KT) today reported income from continuing operations in the first quarter of 2004 of $0.7 million, or $0.09 per share, versus a loss from continuing operations of ($1.5) million, or ($0.17) per share, in the first quarter of 2003, as adjusted to exclude restructuring and other non-recurring or unusual items, which are discussed below. Including these items, Katy reported a net loss attributable to common shareholders of ($5.2) million, or ($0.67) per share, in the first quarter of 2004, versus net income attributable to common shareholders of $1.7 million, or $0.20 per share, in the same period of 2003. Net sales in the first quarter of 2004 were $99.9 million, up 10.4% 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 $5.7 million in the first quarter of 2004, compared to $4.5 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. During the first quarter of 2004, Katy reported restructuring and other non-recurring or unusual items of ($2.3) million pre-tax [($0.30) per share], including severance, restructuring and related costs of ($1.9) million and costs associated with a proposed financing which Katy chose to abandon of ($0.4) million. Also, during the first quarter of 2004, Katy recorded the impact of paid-in-kind dividends earned on convertible preferred stock of ($3.5) million [($0.44) per share]. During the first quarter of 2003, Katy reported restructuring and other non-recurring or unusual items of $0.6 million pre-tax [($0.08) per share], including, the write-off of unamortized debt costs related to the refinancing of debt in February 2003 of ($1.2) million, severance, restructuring and related costs of ($0.2) million and a gain on the sale of excess real estate of $0.8 million. Also during the first quarter of 2003, Katy reported income from discontinued operations of $1.1 million, net of tax [$0.13 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 paid-in-kind dividends earned on 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. "We have achieved another quarter of revenue growth and improved margins, even in the face of raw material cost rising faster than we are able to implement new cost reductions and price increases," said C. Michael Jacobi, Katy Industries’ President and Chief Executive Officer. "In addition, in the first quarter we invested in the implementation of Lean Manufacturing and other productivity initiatives that will yield significant savings later this year," added Mr. Jacobi. Gross margins were 16.6% in the first quarter of 2004, an increase of 80 basis points from the first quarter of 2003. The favorable impact of restructuring, cost containment and lower depreciation was offset partially by higher raw material costs. Selling, general and administrative expenses were $0.1 million lower than the first quarter of 2003. These costs represented 14.8% of sales in the first quarter of 2004, a significant improvement from the same period of 2003, when these costs represented 16.4% of sales. Interest expense decreased by $1.6 million in the first quarter of 2004 versus the same period of 2003, primarily due to the write-off of unamortized debt costs of $1.2 million in the first quarter of 2003 (which added to interest expense in that quarter), and to a lesser extent lower levels of borrowings. Debt at March 31, 2004 was $51.8 million [34% of total capitalization], versus $70.4 million [40% of total capitalization] at March 31, 2003. Cash on hand at March 31, 2004 was $4.0 million, versus $6.1 million at March 31, 2003. Liquidity was negatively impacted during the three months ended March 31, 2004, as Katy used free cash flow of $18.1 million versus $14.8 million of free cash flow used during the three months ended March 31, 2003. Contributing to the increased use of free cash flow during the first quarter of 2004 were early purchasing of certain raw materials in advance of scheduled cost increases and lower accounts payable primarily resulting from improved terms for such purchases. The Company expects these liquidity trends to reverse as the year progresses. Free cash flow, a non-GAAP financial measure, is discussed further below. On April 20, 2004, Katy announced the refinancing of its outstanding debt through a new credit agreement with Fleet Capital Corporation as agent. This new agreement continues to provide the Company with $110 million of committed funds consisting of $20 million of term debt and a $90 million revolving loan facility. Since the inception of a similar facility in February 2003, Katy had repaid $18.2 million of the previous $20 million term loan. The additional borrowing capacity created by the incremental term loan proceeds will be a key source of liquidity as the Company looks to grow its revenues in 2004 and beyond through new product development and acquisitions. In addition, this agreement provides for separate credit facilities in Canada and the United Kingdom which gives Katy the flexibility to borrow funds locally in these countries and provides the Company a natural hedge against foreign currency fluctuations. Katy also announced that it has resumed its $5.0 million share repurchase plan, which had been previously suspended in November 2003. 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 $2.0 million to $3.0 million for the remainder of the year. 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 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 months ended March 31, 2003. There was no discontinued operations activity for the first quarter of 2004. 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 EBITDA, as adjusted; free cash flow; and income (loss) from continuing operations, as adjusted. Details regarding these measures and reconciliations of these non-GAAP measures to comparable GAAP measures is provided in the "Reconciliations of GAAP Results to Results Excluding Certain Unusual Items" and "Statement 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: 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. 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 Income (Loss) from Continuing Operations, as adjusted provides useful information to management and investors regarding certain financial and business trends relating to its results of operations. 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. 2004 First Quarter Report Back to top