For more information contact:
Amir Rosenthal
(203) 598-0397
Vice President, Chief Financial Officer,
General Counsel & Secretary

KATY INDUSTRIES, INC. REPORTS 2002 SECOND QUARTER RESULTS

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MIDDLEBURY, CT – August 9, 2002 – Katy Industries, Inc. (NYSE: KT) today
reported a net loss of $(6.6) million, or $(1.10) per share, in the second
quarter of 2002, versus a net loss of $(31.6) million, or $(3.78) per share, in
the second quarter of 2001. Excluding restructuring and other non-recurring or
unusual items [$(0.82) per share], as well as the impact of paid-in-kind
dividends earned on convertible preferred stock [$(0.31) per share], the net
income in the second quarter of 2002 was $0.3 million, or $0.03 per share,
versus a net loss of $(3.2) million, or $(0.38) per share, in the second
quarter of 2001.

Net sales in the second quarter of 2002 were $118.4 million, unchanged on a
comparable basis from the second quarter of 2001 (excluding Thorsen Tools and
SESCO, businesses which were exited in May 2001 and April 2002, respectively).
Approximately half of the company's sales are consumer products and half are
commercial products. Sales of consumer products were up 4.8% and sales of
commercial products were down 4.8% from the second quarter of 2001.
"We are pleased that our restructuring efforts are showing results and sales
have stabilized,” said C. Michael Jacobi, Katy Industries' President and Chief
Executive Officer. "We have recently consolidated two large plastic molding
facilities and have organized so that consumer products and commercial products
report through structures that are dedicated to these channels. Dave Rahilly
was promoted to President of Consumer Products and Tom Burns has been appointed
President of Commercial Products. Mr. Burns was previously head of several
divisions of Newell Rubbermaid.”

Earnings for the second quarter of 2002 were unfavorably impacted by charges of
$6.5 million, before tax, for restructuring and other non-recurring or unusual
items related to severance payments, facility exit costs, impairments of
machinery and equipment, consulting fees on a resourcing project and a LIFO
inventory adjustment.

Gross margins excluding unusual items were 17.9%, up from 15.8% in the second
quarter of 2001. Selling, general and administrative expenses, excluding
unusual items, were down $1.5 million, or 16.1% of sales in the second quarter
of 2002, down from 17.1% of sales in the second quarter of 2001.
Interest expense was down $1.5 million as quarter-end debt was reduced by $13.8
million from June 30, 2001. Debt was reduced $1.9 million during the quarter
to $76.1 million, which is 32% of total capitalization. Cash on hand at June
30, 2002 was $5.1 million.

Liquidity was improved during the second quarter of 2002, as the company
generated free cash flow of $2.6 million versus $2.3 million generated in the
second quarter of 2001. The company defines free cash flow as cash generated
from operations, net of capital expenditures and cash dividends.
Earnings before interest, taxes, depreciation and amortization, excluding all
unusual and non-recurring items, was $7.9 million for the second quarter of
2002, compared to $4.1 million in the second quarter of 2001.
Management of inventory continues to be a major contributor to cash flow. At
June 30, 2002, inventory was $70.1 million, down $18.9 million from a year
earlier.

The 2001 earnings per share are presented to show more meaningful comparisons
as a result of the impact of the adoption of the non-amortization provisions of
SFAS No. 142, “Goodwill and Other Intangible Assets.” This accounting change
resulted in a second quarter earnings improvement of $0.3 million, or $.04 per
share. The company adopted these provisions on January 1, 2002. The company
has completed the initial assessment of transitional goodwill impairment, and
has determined that the fair values of certain reporting units are less than
their carrying values at December 31, 2001. As a result, the company expects
to incur a transitional goodwill impairment of up to $11.5 million, depending
upon the results of the final assessment of transitional goodwill impairment,
expected to be completed during the third quarter of 2002.

Katy also reported a net loss of $(14.2) million, or $(2.32) per share, for the
six months ended June 30, 2002, versus a net loss of $(40.0) million, or
$(4.79) per share, in the same period of 2001. Excluding restructuring and
other non-recurring or unusual items [$(1.69) per share], as well as the impact
of paid-in-kind dividends earned on convertible preferred stock [$(0.62) per
share], net income for the six months ended June 30, 2002 was $(0.1) million,
or $(0.01) per share, versus a net loss of $(5.4) million, or $(.64) per share,
in the same period of 2001. Earnings before interest, taxes, depreciation and
amortization, excluding all unusual and non-recurring items, was $14.9 million
for the six months ended June 30, 2002, compared to $11.6 million for the same
period in 2001.

This press release may contain various “forward-looking statements” as defined
in Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Act of 1934, as amended. The forward-looking statements are based on the
beliefs of our management, as well as assumptions made by, and information
currently available to our management. We have based these forward-looking
statements on current expectations and projections about future events and
trends affecting the financial condition of our business. These 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 us or
on our behalf.

Katy Industries, Inc. is a diversified corporation with interests primarily in
Electrical/Electronics and Maintenance Products.

Click below for PDF financials:
Second Quarter 2002 Financials


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