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United States Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended: December 31, 2005
 OR
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission file number 1-5558
 Katy Industries, Inc.
  Delaware
(State of Incorporation)
    
    75-1277589
(IRS Employer Identification Number)765 Straits Turnpike,
Suite 2000, Middlebury, CT
(Address of Principal Executive Offices)
    
    06762
 (Zip Code)
 
   (Title of each class)
Common Stock, $1.00 par value
Common Stock Purchase Rights
    
    (Name of each exchange on which registered)
New York Stock Exchange
   o þ
  o þ
  þ o
 þ
  o o þ
 o þ
  
 *
    
    Calculated by excluding all shares held by executive officers and directors of the registrant
without conceding that all such persons are affiliates of the registrant for purposes of federal
securities laws. DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IItem 1. BUSINESSItem 1A: RISK FACTORSItem 1B: UNRESOLVED STAFF COMMENTSItem 2. PROPERTIESItem 3. LEGAL PROCEEDINGSItem 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIItem 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER MARKET PURCHASES OF EQUITY SECURITIESItem 6. SELECTED FINANCIAL DATAItem 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAItem 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSUREItem 9A. CONTROLS AND PROCEDURESItem 9B. OTHER INFORMATIONPart IIIItem 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTItem 11. EXECUTIVE COMPENSATIONItem 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTItem 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSItem 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPart IVItem 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULESSIGNATURESINDEX OF EXHIBITS6th Amendment to Amended and Restated Loan AgreementDirector Compensation ArrangementsExecutive Officer Compensation ArrangementsSubsidiaries of RegistrantConsent of Independent Registered Public Accounting FirmConsent of Independent Public Accounting FirmConsent of Independent Public Accounting FirmCEO Certification Pursuant to Section 302CFO Certification Pursuant to Section 302CEO Certification Required by 18 U.S.C. Section 1350CFO Certification Required by 18 U.S.C. Section 1350    Table of Contents  
 PART I
 
 Item 1. BUSINESS
  Recapitalization
   
    
    Consolidation of facilities: 36 manufacturing, distribution and office
facilities closed or consolidated (including 1 to be closed during 2006); manufacture and
distribution of each business unit centralized; Electrical Products manufacturing
outsourced to Asia.
    
    Divestitures of non-core operations: 4 non-core business units have been sold
or otherwise exited and proceeds have been applied to reduce debt.
    
    Selling general and administrative (SG&A) cost rationalization: restructured
duplicative corporate and support functions; overhead reduced; implemented shared sales,
administrative and support services model.
    
    Organizational changes: across-the-board review of management talent and key
hires made at both the corporate and operational levels.
  Operations
   2




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Maintenance Products Group
  Continental Commercial Products, LLC (CCP
 Continental
 Contico
 Metal Truck Box
 Container
 Disco
 Glit
  Wilen
 3




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CCP Canada
 Gemtex
 Contico Manufacturing, Ltd.
 Contico Europe Limited
 Electrical Products Group
  Woods US
 Woods Canada
  Other Operations
  Sahlman
 4




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SESCO
 Discontinued Operations
  Customers
  Backlog
 Maintenance Products
  Electrical Products
  Markets and Competition
 Maintenance Products
    5




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Electrical Products
    Raw Materials
  6




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Employees
  Regulatory and Environmental Matters
  Licenses, Patents and Trademarks
   Available Information
  http://www.katyindustries.com
 7




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Item 1A: RISK FACTORS
  Our inability to achieve product price increases, especially as they relate to potentially higher
raw material costs, may negatively impact our earnings.
  The loss of a significant customer or the financial weakness of a significant customer could
negatively impact our results of operations.
  Increases in the cost of, or in some cases continuation of, the current price levels of plastic
resins, copper, and other raw materials may negatively impact our earnings.
  Disruption of our information technology and communications systems or our failure to adequately
maintain our information technology and communications systems could have a material adverse effect
on our business and operations.
   Our inability to execute our acquisition integration and consolidation of facilities plans could
adversely affect our business and results of operations.
  8




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Fluctuations in the price, quality and availability of certain portions of our finished goods due
to greater reliance on third parties could negatively impact our results of operations.
  Labor issues, including union activities that require an increase in production costs or lead to a
strike, thus impairing production and decreasing sales. We are also subject to labor relations
issues at entities involved in our supply chain, including both suppliers and those involved in
transportation and shipping.
  Our future performance is influenced by our ability to remain competitive.
  We may not be able to protect our intellectual property rights adequately.
  We have a high amount of debt, and the cost of servicing that debt could adversely affect our
ability to take actions or our liquidity or financial condition.
    9




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Our inability to meet covenants associated with the Bank of America Credit Agreement could result
in acceleration of all or a substantial portion of our debt.
    If we cannot meet the New York Stock Exchange (NYSE) continued listing requirement, the NYSE may
delist our common stock, which could negatively affect the price of the common stock and your
ability to sell the common stock.
    Changes in significant laws and government regulations affecting environmental compliance and
income taxes.
   We are subject to litigation that could adversely affect our operating results.
  10




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Because we translate foreign currency from international sales into U.S. dollars and are required
to make foreign currency payments, we may incur losses due to fluctuations in foreign currency
exchange rates.
  
 Item 1B: UNRESOLVED STAFF COMMENTS
  11




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Location
    
    Facility
    
    Business UnitUNITED STATESCaliforniaNorwalk*
    
    Manufacturing, Distribution
    
    Continental, Contico, ContainerChino*
    
    Distribution
    
    Continental, Contico, Glit, Wilen, DiscoConnecticutMiddlebury**
    
    Corporate Headquarters
    
    CorporateGeorgiaAtlanta*
    
    Manufacturing, Distribution
    
    WilenMcDonough*
    
    Manufacturing, Distribution
    
    DiscoWrens
    
    Manufacturing, Distribution
    
    GlitWashington*
    
    Manufacturing
    
    GlitIndianaCarmel*
    
    Manufacturing
    
    Woods USIndianapolis*
    
    Office, Distribution
    
    Woods USMissouriBridgeton*
    
    Office, Manufacturing, Distribution
    
    Continental, ConticoHazelwood*
    
    Manufacturing
    
    Continental, ConticoNorth CarolinaPineville* **
    
    Manufacturing
    
    GlitTexasWinters
    
    Manufacturing, Distribution
    
    Metal Truck BoxVirginiaArlington*
    
    Corporate Headquarters
    
    CorporateCANADAOntarioToronto*
    
    Office, Manufacturing, Distribution
    
    GemtexToronto*
    
    Office, Distribution
    
    Woods Canada, CCP CanadaCHINAShenzhen*
    
    Office
    
    Woods USUNITED KINGDOMCornwallRedruth
    
    Office, Manufacturing, Distribution
    
    CEL, CMLBerkshireSlough*
    
    Office
    
    CML
 
 *
    
    Facility is leased.**
    
    During 2006, we expect to consolidate all of our abrasives operations in Pineville, North
Carolina into our recently expanded Wrens, Georgia (Wrens) Glit facility. In addition,
certain corporate functions of our headquarters will be relocated to the CCP location in
Bridgeton, Missouri, other functions will be outsourced, and the balance will be relocated to
a new location in Arlington, Virginia in April, 2006.  12




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Item 3. LEGAL PROCEEDINGS
 General Environmental Claims
  W.J. Smith Wood Preserving Company (W.J. Smith)
    Asbestos Claims
    13




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Non-Environmental Litigation  Banco del Atlantico, S.A.
 Banco del Atlantico, S.A. v. Woods Industries, Inc., et al. Civil Action No. L-96-139 (now 1:03-CV-1342-LJM-VSS, U.S. District Court, Southern District of Indiana).
  with prejudice
   14




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Other Claims
   
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  15




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PART II
 
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER
MARKET PURCHASES OF EQUITY SECURITIES
  Period
    
    High
    
    
    Low2005First Quarter
    
    $
    5.41
    
    
    $
    3.80Second Quarter
    
    
    3.98
    
    
    
    2.35Third Quarter
    
    
    3.70
    
    
    
    2.25Fourth Quarter
    
    
    3.50
    
    
    
    1.802004First Quarter
    
    $
    6.50
    
    
    $
    5.70Second Quarter
    
    
    6.47
    
    
    
    4.71Third Quarter
    
    
    5.40
    
    
    
    4.94Fourth Quarter
    
    
    5.45
    
    
    
    4.36
  Dividend Policy
  Equity Compensation Plan Information
  Share Repurchase Plan
  16




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##### Table of Contents



Total Number
    
    
    Maximumof Shares
    
    
    Number ofPurchased as
    
    
    Shares ThatPart of
    
    
    May Yet BePublicly
    
    
    PurchasedTotal Number
    
    
    
    
    
    
    Announced
    
    
    Under theof Shares
    
    
    Average Price
    
    
    Plans or
    
    
    Plans orPeriod
    
    Purchased
    
    
    Paid per Share
    
    
    Programs
    
    
    ProgramsDecember, 2005
    
    
    3,200
    
    
    $
    2.35
    
    
    
    3,200
    
    
    
    333,333Total
    
    
    3,200
    
    
    $
    2.35
    
    
    
    3,200
  
 Item 6. SELECTED FINANCIAL DATA
 Years Ended December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(Amounts in Thousands, except per share data and percentages)Net sales
    
    $
    455,197
    
    
    $
    457,642
    
    
    $
    436,410
    
    
    $
    445,755
    
    
    $
    447,108Loss from continuing operations [a]
    
    $
    (13,157
    )
    
    $
    (36,121
    )
    
    $
    (18,887
    )
    
    $
    (53,083
    )
    
    $
    (65,464
    )Discontinued operations [b]
    
    
    
    
    
    
    
    
    
    
    9,523
    
    
    
    (1,152
    )
    
    
    2,202Cumulative effect of a change in accounting principle [b] [c]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,514
    )
    
    
    Net loss
    
    $
    (13,157
    )
    
    $
    (36,121
    )
    
    $
    (9,364
    )
    
    $
    (56,749
    )
    
    $
    (63,262
    )(Loss) earnings per share  Basic and diluted:Loss from continuing operations
    
    $
    (1.66
    )
    
    $
    (6.45
    )
    
    $
    (3.06
    )
    
    $
    (7.67
    )
    
    $
    (7.54
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    1.16
    
    
    
    (0.14
    )
    
    
    0.26Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.30
    )
    
    
    Loss per common share
    
    $
    (1.66
    )
    
    $
    (6.45
    )
    
    $
    (1.90
    )
    
    $
    (8.11
    )
    
    $
    (7.28
    )Total assets
    
    $
    212,683
    
    
    $
    224,464
    
    
    $
    241,708
    
    
    $
    275,977
    
    
    $
    347,955Total liabilities
    
    
    157,390
    
    
    
    155,879
    
    
    
    139,416
    
    
    
    157,405
    
    
    
    173,691Preferred interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,400
    
    
    
    16,400Stockholders equity
    
    
    55,293
    
    
    
    68,585
    
    
    
    102,292
    
    
    
    102,172
    
    
    
    157,864Long-term debt, including current maturities
    
    
    57,660
    
    
    
    58,737
    
    
    
    39,663
    
    
    
    45,451
    
    
    
    84,093Impairments of long-lived assets
    
    
    2,112
    
    
    
    30,831
    
    
    
    11,880
    
    
    
    21,204
    
    
    
    47,469Severance, restructuring and related charges
    
    
    1,090
    
    
    
    3,505
    
    
    
    8,132
    
    
    
    19,155
    
    
    
    13,380Depreciation and amortization [d]
    
    
    11,046
    
    
    
    14,266
    
    
    
    21,954
    
    
    
    19,259
    
    
    
    20,216Capital expenditures
    
    
    9,366
    
    
    
    13,876
    
    
    
    13,435
    
    
    
    10,119
    
    
    
    12,566Working capital [e]
    
    
    48,338
    
    
    
    59,855
    
    
    
    43,439
    
    
    
    35,206
    
    
    
    65,733Ratio of debt to capitalization
    
    
    51.0
    %
    
    
    46.1
    %
    
    
    27.9
    %
    
    
    27.7
    %
    
    
    32.5
    %Weighted average common shares outstanding  Basic and diluted
    
    
    7,948,749
    
    
    
    7,883,265
    
    
    
    8,214,712
    
    
    
    8,370,815
    
    
    
    8,393,210Number of employees
    
    
    1,544
    
    
    
    1,793
    
    
    
    1,808
    
    
    
    2,261
    
    
    
    2,922Cash dividends declared per common share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
 
 [a]
    
    Includes distributions on preferred securities in 2003, 2002, and 2001.[b]
    
    Presented net of tax.[c]
    
    This amount is a transitional impairment of goodwill recorded with the adoption of SFAS No. 142, Goodwill and Other Intangible Assets.[d]
    
    From continuing operations only.[e]
    
    Defined as current assets minus current liabilities, exclusive of deferred tax assets and liabilities and debt classified as current. 17




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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 COMPANY OVERVIEW
   
    
    Consolidation of facilities: 36 manufacturing, distribution and office
facilities closed or consolidated (including 1 to be closed during 2006); manufacture and
distribution of each business unit centralized; Electrical Products manufacturing
outsourced to Asia.
    
    Divestitures of non-core operations: 4 non-core business units have been sold
or otherwise exited and proceeds have been applied to reduce debt.
    
    Selling general and administrative (SG&A) cost rationalization: restructured
duplicative corporate and support functions; overhead reduced; implemented shared sales,
administrative and support services model.
    
    Organizational changes: across-the-board review of management talent and key
hires made at both the corporate and operational levels.
     18




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19




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Years Ended December 31,2005
    
    
    2004
    
    
    2003(Amounts in Millions, except per share data and percentages)$
    
    
    % to Sales
    
    
    $
    
    
    % to Sales
    
    
    $
    
    
    % to SalesNet sales
    
    $
    455.2
    
    
    
    100.0
    
    
    $
    457.6
    
    
    
    100.0
    
    
    $
    436.4
    
    
    
    100.0Cost of goods sold
    
    
    402.3
    
    
    
    88.4
    
    
    
    396.6
    
    
    
    86.7
    
    
    
    365.5
    
    
    
    83.8Gross profit
    
    
    52.9
    
    
    
    11.6
    
    
    
    61.0
    
    
    
    13.3
    
    
    
    70.9
    
    
    
    16.2Selling, general and administrative expenses
    
    
    56.7
    
    
    
    (12.5
    )
    
    
    57.3
    
    
    
    (12.5
    )
    
    
    59.8
    
    
    
    (13.7
    )Impairments of long-lived assets
    
    
    2.1
    
    
    
    (0.5
    )
    
    
    30.8
    
    
    
    (6.7
    )
    
    
    11.9
    
    
    
    (2.7
    )Severance, restructuring and related charges
    
    
    1.1
    
    
    
    (0.2
    )
    
    
    3.5
    
    
    
    (0.8
    )
    
    
    8.1
    
    
    
    (1.8
    )Gain on sale of assets
    
    
    (0.3
    )
    
    
    0.1
    
    
    
    (0.3
    )
    
    
    0.1
    
    
    
    (0.6
    )
    
    
    0.1Operating loss
    
    
    (6.7
    )
    
    
    (1.5
    )
    
    
    (30.3
    )
    
    
    (6.6
    )
    
    
    (8.3
    )
    
    
    (1.9
    )Equity in income (loss) of equity method investment
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.7
    )Interest expense
    
    
    (5.7
    )
    
    
    
    
    
    
    (4.0
    )
    
    
    
    
    
    
    (6.2
    )Other, net
    
    
    0.1
    
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    (1.8
    )Loss from continuing operations before (provision) benefit for
income taxes
    
    
    (11.7
    )
    
    
    
    
    
    
    (35.2
    )
    
    
    
    
    
    
    (22.0
    )(Provision) benefit for income taxes from continuing operations
    
    
    (1.5
    )
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    3.2Loss from continuing operations before distributions on preferred
interest of subsidiary
    
    
    (13.2
    )
    
    
    
    
    
    
    (36.1
    )
    
    
    
    
    
    
    (18.8
    )Distributions on preferred interest of subsidiary (net of tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Loss from continuing operations
    
    
    (13.2
    )
    
    
    
    
    
    
    (36.1
    )
    
    
    
    
    
    
    (18.9
    )
    
    
    
    

Income from operations of discontinued businesses (net of tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.1Gain on sale of discontinued businesses (net of tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.4Net loss
    
    
    (13.2
    )
    
    
    
    
    
    
    (36.1
    )
    
    
    
    
    
    
    (9.4
    )Gain on early redemption of preferred interest of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.6Payment in kind of dividends on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (14.8
    )
    
    
    
    
    
    
    (12.8
    )Net loss attributable to common stockholders
    
    $
    (13.2
    )
    
    
    
    
    
    $
    (50.9
    )
    
    
    
    
    
    $
    (15.6
    )Loss per share of common stock  basic and diluted:Loss from continuing operations
    
    $
    (1.66
    )
    
    
    
    
    
    $
    (4.58
    )
    
    
    
    
    
    $
    (2.30
    )Gain on early redemption of preferred interest of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.80Payment-in-kind (PIK) dividends on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (1.87
    )
    
    
    
    
    
    
    (1.56
    )Loss from continuing operations attributable to common
stockholders
    
    
    (1.66
    )
    
    
    
    
    
    
    (6.45
    )
    
    
    
    
    
    
    (3.06
    )Discontinued operations (net of tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.16Net loss attributable to common stockholders
    
    $
    (1.66
    )
    
    
    
    
    
    $
    (6.45
    )
    
    
    
    
    
    $
    (1.90
    )
 20




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RESULTS OF OPERATIONS
 2005 COMPARED TO 2004
 Overview
   Net Sales
 Maintenance Products Group
   Electrical Products Group
    21




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Operating Income
 2005
    
    
    2004
    
    
    ChangeOperating income (loss)
    
    $
    
    
    % Margin
    
    
    $
    
    
    % Margin
    
    
    $
    
    
    % MarginMaintenance Products Group
    
    $
    (8.4
    )
    
    
    (3.4
    )
    
    $
    (2.7
    )
    
    
    (1.0
    )
    
    $
    (5.7
    )
    
    
    (2.4
    )Electrical Products Group
    
    
    17.4
    
    
    
    8.4
    
    
    
    16.8
    
    
    
    9.4
    
    
    
    0.6
    
    
    
    (1.0
    )Unallocated corporate expense
    
    
    (12.8
    )
    
    
    
    
    
    
    (10.4
    )
    
    
    
    
    
    
    (2.4
    )(3.8
    )
    
    
    (0.8
    )
    
    
    3.7
    
    
    
    0.8
    
    
    
    (7.5
    )
    
    
    (1.6
    )Impairments of long-lived assets
    
    
    (2.1
    )
    
    
    
    
    
    
    (30.8
    )
    
    
    
    
    
    
    28.7Severance, restructuring and
related charges
    
    
    (1.1
    )
    
    
    
    
    
    
    (3.5
    )
    
    
    
    
    
    
    2.4Gain on sale of assets
    
    
    0.3
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    Operating loss
    
    $
    (6.7
    )
    
    
    (1.5
    )
    
    $
    (30.3
    )
    
    
    (6.6
    )
    
    $
    23.6
    
    
    
    5.1
 Maintenance Products Group
  Electrical Products Group
  Corporate
  Impairments of Long-lived Assets
 Goodwill and Intangible Assets Accounting for the
Impairment or Disposal of Long-Lived Assets
  22




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Severance, Restructuring and Related Charges
   Other
    23




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##### Table of Contents



2004 COMPARED TO 2003
 Overview
   Net Sales
 Maintenance Products Group
  Electrical Products Group
  24




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##### Table of Contents



Operating Income
 2004
    
    
    2003
    
    
    ChangeOperating income (loss)
    
    $
    
    
    % Margin
    
    
    $
    
    
    % Margin
    
    
    $
    
    
    % MarginMaintenance Products Group
    
    $
    (2.7
    )
    
    
    (1.0
    )
    
    $
    9.3
    
    
    
    3.3
    
    
    $
    (12.0
    )
    
    
    (4.3
    )Electrical Products Group
    
    
    16.8
    
    
    
    9.4
    
    
    
    15.6
    
    
    
    10.3
    
    
    
    1.2
    
    
    
    (0.9
    )Unallocated corporate expense
    
    
    (10.4
    )
    
    
    
    
    
    
    (13.8
    )
    
    
    
    
    
    
    3.43.7
    
    
    
    0.8
    
    
    
    11.1
    
    
    
    2.5
    
    
    
    (7.4
    )
    
    
    (1.7
    )Impairments of long-lived assets
    
    
    (30.8
    )
    
    
    
    
    
    
    (11.9
    )
    
    
    
    
    
    
    (18.9
    )Severance, restructuring and
related charges
    
    
    (3.5
    )
    
    
    
    
    
    
    (8.1
    )
    
    
    
    
    
    
    4.6Gain on sale of assets
    
    
    0.3
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    (0.3
    )Operating loss
    
    $
    (30.3
    )
    
    
    (6.6
    )
    
    $
    (8.3
    )
    
    
    (2.0
    )
    
    $
    (22.0
    )
    
    
    (4.6
    )
 Maintenance Products Group
  Electrical Products Group
  Corporate
  Impairments of Long-lived Assets
 Goodwill and Intangible Assets Accounting for the Impairment or Disposal of Long-Lived Assets
 25




---



##### Table of Contents



Severance, Restructuring and Related Charges
   Other
    26




---



##### Table of Contents



Discontinued Operations
    LIQUIDITY AND CAPITAL RESOURCES
   Bank of America Credit Agreement
  27




---



##### Table of Contents



Sources:Term Loan incremental borrowings
    
    $
    18,152Uses:Repayment of Revolving Credit Facility borrowings
    
    $
    16,713Certain costs associated with the Bank of America Credit Agreement
    
    
    1,439$
    18,152
      28




---



##### Table of Contents



Minimum Availability
 Fixed Charge Coverage Ratio
 Capital Expenditures
 Leverage Ratio
   Balance Sheet
Classification of Borrowings Outstanding under Revolving Credit Agreements that Include Both a
Subjective Acceleration Clause and a Lock-Box Arrangement
 29




---



##### Table of Contents



Contractual Obligations
  Due in less
    
    
    Due in 1-3
    
    
    Due in 3-5
    
    
    Due afterContractual Obligations
    
    Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    5 yearsRevolving credit facility [a]
    
    $
    41,946
    
    
    $
    41,946
    
    
    $
    
    
    
    $
    
    
    
    $
    Term loans
    
    
    15,714
    
    
    
    2,857
    
    
    
    5,714
    
    
    
    7,143
    
    
    
    Interest on debt [b]
    
    
    12,804
    
    
    
    4,068
    
    
    
    7,049
    
    
    
    1,687
    
    
    
    Operating leases [c]
    
    
    29,181
    
    
    
    7,843
    
    
    
    14,546
    
    
    
    5,683
    
    
    
    1,109Severance and restructuring [c]
    
    
    2,261
    
    
    
    1,184
    
    
    
    600
    
    
    
    324
    
    
    
    153SESCO payable to Montenay [d]
    
    
    2,750
    
    
    
    1,100
    
    
    
    1,650
    
    
    
    
    
    
    
    Postretirement benefits [e]
    
    
    6,098
    
    
    
    940
    
    
    
    1,491
    
    
    
    1,360
    
    
    
    2,307Total Contractual Obligations
    
    $
    110,754
    
    
    $
    59,938
    
    
    $
    31,050
    
    
    $
    16,197
    
    
    $
    3,569
 Due in less
    
    
    Due in 1-3
    
    
    Due in 4-5
    
    
    Due after 5Other Commercial Commitments
    
    Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    yearsCommercial letters of credit
    
    $
    1,297
    
    
    $
    1,297
    
    
    $
    
    
    
    $
    
    
    
    $
    Stand-by letters of credit
    
    
    8,702
    
    
    
    8,702
    
    
    
    
    
    
    
    
    
    
    
    Guarantees [f]
    
    
    15,300
    
    
    
    15,300
    
    
    
    
    
    
    
    
    
    
    
    Total Commercial Commitments
    
    $
    25,299
    
    
    $
    25,299
    
    
    $
    
    
    
    $
    
    
    
    $
    
 
 [a]
    
    As discussed in the Liquidity and Capital Resources section above and in Note 8 to the
Consolidated Financial Statements in Part I, Item 1, the entire revolving credit facility under the
Bank of America Revolving Credit Agreement is classified as a current liability on the Consolidated
Balance Sheets as a result of the combination in the Bank of America Credit Agreement of (i)
lockbox agreements on Katys depository bank accounts, and (ii) a subjective Material Adverse
Effect (MAE) clause. The Revolving Credit Facility expires in April of 2009.[b]
    
    Represents interest on the Revolving Credit Facility and Term Loan of the Bank of America
Credit Agreement. Amounts assume interest accrues at the current rate in effect, including the
effect of the impact of the increased margins through the end of the first quarter of 2007 pursuant
to the Sixth Amendment. The amount also assumes the principal balance of the Revolving Credit
Facility remains constant through its expiration date of April 20, 2009 and the principal balance
of the Term Loan amortizes in accordance with the terms of the Bank of America Credit Agreement.
Due to the variable nature of the Bank of America Credit Agreement, actual interest rates could
differ from the assumptions above. In addition, actual borrowing levels could differ from the
assumptions above due to liquidity needs.[c]
    
    Future non-cancelable lease rentals are included in the line entitled Operating leases, which
also includes obligations associated with restructuring activities. The Consolidated Balance
Sheets at December 31, 2005 and 2004, includes $3.0 million and $3.6 million, respectively, in
discounted liabilities associated with non-cancelable operating lease rentals, net of estimated
sub-lease revenues, related to facilities that have been abandoned as a result of restructuring and
consolidation activities.[d]
    
    Amount owed to Montenay as a result of the SESCO partnership, discussed in Note 7 to the
Consolidated Financial Statements. $1.1 million of this obligation is classified in the
Consolidated Balance Sheets as an Accrued Expense in Current Liabilities, while the remainder is
included in Other Liabilities, recorded on a discounted basis.[e]
    
    Benefits consisting of post-retirement medical obligations to retirees of former subsidiaries
of Katy, as well as deferred compensation plan liabilities to former officers of the Company,
discussed in Note 10 to the Consolidated Financial Statements.[f]
    
    As discussed in Note 7 to the Consolidated Financial Statements in Part I, Item 1, SESCO, an
indirect wholly-owned subsidiary of Katy, is party to a partnership that operates a waste-to-energy
facility, and has certain contractual obligations, for which Katy provides certain guarantees. If
the partnership is not able to perform its obligations under the contracts, under certain
circumstances SESCO and Katy could be subject to damages equal to the amount of Industrial Revenue
Bonds outstanding (which financed construction of the facility) less amounts held by the
partnership in debt service reserve funds. As of December 31, 2005, $15.3 million of the
Industrial Revenue Bonds remained outstanding. Katy and SESCO do not anticipate non-performance by
parties to the contracts. 30




---



##### Table of Contents



Off-balance Sheet Arrangements
  Cash Flow
  Operating Activities
  Investing Activities
  Financing Activities
  TRANSACTIONS WITH RELATED AND CERTAIN OTHER PARTIES
  31




---



##### Table of Contents



SEVERANCE, RESTRUCTURING AND RELATED CHARGES
   2005
    
    
    2004
    
    
    2003(Amounts in Thousands)Consolidation of St. Louis manufacturing/distribution facilities
    
    $
    39
    
    
    $
    1,460
    
    
    $
    3,731Shutdown of Woods Canada manufacturing
    
    
    134
    
    
    
    841
    
    
    
    1,497Consolidation of Glit facilities
    
    
    724
    
    
    
    791
    
    
    
    1,151Consolidation of administrative functions for CCP
    
    
    21
    
    
    
    215
    
    
    
    314Shutdown of Woods U.S. manufacturing
    
    
    
    
    
    
    38
    
    
    
    503Senior management transition and headcount rationalization
    
    
    
    
    
    
    
    
    
    
    645Consultant  outsourcing
    
    
    
    
    
    
    
    
    
    
    84Corporate office relocation
    
    
    172
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    160
    
    
    
    207Total severance, restructuring and related costs
    
    $
    1,090
    
    
    $
    3,505
    
    
    $
    8,132
  Total Expected
    
    
    Total ProvisionCost
    
    
    to DateMaintenance Products Group
    
    $
    21,243
    
    
    $
    20,993Electrical Products Group
    
    
    12,776
    
    
    
    12,776Corporate
    
    
    12,323
    
    
    
    12,073$
    46,342
    
    
    $
    45,842
 32




---



##### Table of Contents



One-time
    
    
    ContractTermination
    
    
    TerminationTotal
    
    
    Benefits [a]
    
    
    Costs [b]
    
    
    Other [c]Restructuring and related liabilities at December 31, 2003
    
    $
    7,888
    
    
    $
    1,622
    
    
    $
    6,211
    
    
    $
    55Additions
    
    
    3,974
    
    
    
    968
    
    
    
    2,224
    
    
    
    782Reductions
    
    
    (469
    )
    
    
    (10
    )
    
    
    (459
    )
    
    $
    Payments
    
    
    (7,032
    )
    
    
    (1,775
    )
    
    
    (4,420
    )
    
    
    (837
    )Currency Translation
    
    
    93
    
    
    
    2
    
    
    
    91
    
    
    $
    Restructuring and related liabilities at December 31, 2004
    
    $
    4,454
    
    
    $
    807
    
    
    $
    3,647
    
    
    $
    Additions
    
    
    1,170
    
    
    
    506
    
    
    
    516
    
    
    
    148Reductions
    
    
    (80
    )
    
    
    (19
    )
    
    
    (61
    )
    
    $
    Payments
    
    
    (2,252
    )
    
    
    (861
    )
    
    
    (1,243
    )
    
    
    (148
    )Currency Translation
    
    
    127
    
    
    
    (1
    )
    
    
    128
    
    
    $
    Restructuring and related liabilities at December 31,
2005 [d]
    
    $
    3,419
    
    
    $
    432
    
    
    $
    2,987
    
    
    $
    
 
 [a]
    
    Includes severance, benefits, and other employee-related costs associated with the employee
terminations.[b]
    
    Includes charges related to non-cancelable lease liabilities for abandoned facilities, net of
estimated sub-lease revenue. Total maximum potential amount of lease loss, excluding any sublease
rentals, is $3.9 million as of December 31, 2005. We have included $0.9 million as an offset for
sublease rentals.[c]
    
    Includes charges associated with moving inventory, machinery and equipment, consolidation of
administrative and operational functions, and consultants working on sourcing and other
manufacturing and production efficiency initiatives.[d]
    
    Katy expects to substantially complete its restructuring program in 2006. The remaining
severance, restructuring and related costs for these initiatives are expected to be approximately
$0.5 million.  OUTLOOK FOR 2006
    33




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##### Table of Contents



34




---



##### Table of Contents



Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995
  
    
    Increases in the cost of, or in some cases continuation of, the current price levels
of plastic resins, copper, paper board packaging, and other raw materials.
    
    Our inability to reduce product costs, including manufacturing, sourcing, freight,
and other product costs.
    
    Greater reliance on third parties for our finished goods as we increase the portion
of our manufacturing that is outsourced.
    
    Our inability to reduce administrative costs through consolidation of functions and systems improvements.
    
    Our inability to execute our systems integration plan.
    
    Our inability to successfully integrate our operations as a result of the facility consolidations.
    
    Our inability to sub-lease rented facilities which have been abandoned as a result of
consolidation and restructuring initiatives.
    
    Our inability to achieve product price increases, especially as they relate to
potentially higher raw material costs.
    
    The potential impact of losing lines of business at large mass merchant retailers in
the discount and do-it-yourself markets.
    
    Competition from foreign competitors.
    
    The potential impact of rising interest rates on our LIBOR-based Bank of America Credit Agreement.
    
    Our inability to meet covenants associated with the Bank of America Credit Agreement.
    
    The potential impact of rising costs for insurance for properties and various forms of liabilities.
    
    The potential impact of changes in foreign currency exchange rates related to our foreign operations.
    
    Labor issues, including union activities that require an increase in production costs
or lead to a strike, thus impairing production and decreasing sales. We are also
subject to labor relations issues at entities involved in our supply chain, including
both suppliers and those involved in transportation and shipping.
    
    Changes in significant laws and government regulations affecting environmental
compliance and income taxes.
  35




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES
  Revenue Recognition Accounting
for Consideration Given by a Vendor to a Customer
 Stock-based Compensation Accounting for Stock Issued to Employees
  Accounts Receivable
 Inventories
  36




---



##### Table of Contents



Goodwill and Impairments of Long-Lived Assets Goodwill and Intangible Assets,
 Accounting for
the Impairment or Disposal of Long-Lived Assets,
 Deferred income taxes Accounting for Income Taxes
 Workers compensation and product liabilities
 37




---



##### Table of Contents



Environmental and Other Contingencies
 Severance, Restructuring and Related Charges Accounting for Costs Associated with Exit or Disposal
Activities
 NEW ACCOUNTING PRONOUNCEMENTS
  
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  38




---



##### Table of Contents



Expected Maturity Dates
 2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueASSETSTemporary cash investmentsFixed rate
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    INDEBTEDNESSFixed rate debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable interest rate
    
    $
    2,857
    
    
    $
    2,857
    
    
    $
    2,857
    
    
    $
    49,089
    
    
    $
    
    
    
    $
    
    
    
    $
    57,660
    
    
    $
    57,660Average interest rate
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    7.17
    %
 Foreign Exchange Risk
  Commodity Price Risk
  39




---



##### Table of Contents



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
     
 40




---



##### Table of Contents



ASSETS
 2005
    
    
    2004CURRENT ASSETS:Cash and cash equivalents
    
    $
    8,421
    
    
    $
    8,525Trade accounts receivable, net of allowances of $2,445 and $2,827
    
    
    63,612
    
    
    
    66,689Inventories, net
    
    
    62,799
    
    
    
    65,674Other current assets
    
    
    3,600
    
    
    
    4,233Total current assets
    
    
    138,432
    
    
    
    145,121OTHER ASSETS:Goodwill
    
    
    665
    
    
    
    2,239Intangibles, net
    
    
    6,946
    
    
    
    7,428Other
    
    
    8,643
    
    
    
    9,946Total other assets
    
    
    16,254
    
    
    
    19,613PROPERTY AND EQUIPMENTLand and improvements
    
    
    1,732
    
    
    
    1,897Buildings and improvements
    
    
    14,011
    
    
    
    13,537Machinery and equipment
    
    
    140,514
    
    
    
    132,825156,257
    
    
    
    148,259Less  Accumulated depreciation
    
    
    (98,260
    )
    
    
    (88,529
    )Property and equipment, net
    
    
    57,997
    
    
    
    59,730Total assets
    
    $
    212,683
    
    
    $
    224,464
  41




---



##### Table of Contents



LIABILITIES AND STOCKHOLDERS EQUITY
 2005
    
    
    2004CURRENT LIABILITIES:Accounts payable
    
    $
    47,449
    
    
    $
    39,079Accrued compensation
    
    
    4,071
    
    
    
    5,269Accrued expenses
    
    
    37,713
    
    
    
    39,939Current maturities, long-term debt
    
    
    2,857
    
    
    
    2,857Revolving credit agreement
    
    
    41,946
    
    
    
    40,166Total current liabilities
    
    
    134,036
    
    
    
    127,310LONG-TERM DEBT, less current maturities
    
    
    12,857
    
    
    
    15,714OTHER LIABILITIES
    
    
    10,497
    
    
    
    12,855Total liabilities
    
    
    157,390
    
    
    
    155,879COMMITMENTS AND CONTINGENCIES (Notes 18 and 21)
    
    
    
    
    
    
    STOCKHOLDERS EQUITY15% Convertible preferred stock, $100 par value, authorized
1,200,000 shares, issued and outstanding 1,131,551
shares, liquidation value $113,155
    
    
    108,256
    
    
    
    108,256Common stock, $1 par value; authorized 35,000,000 shares;
issued 9,822,204 shares
    
    
    9,822
    
    
    
    9,822Additional paid-in capital
    
    
    27,016
    
    
    
    25,111Accumulated other comprehensive income
    
    
    3,158
    
    
    
    4,564Accumulated deficit
    
    
    (70,415
    )
    
    
    (57,258
    )Treasury stock, at cost, 1,874,027 shares
and 1,876,827 shares, respectively
    
    
    (22,544
    )
    
    
    (21,910
    )Total stockholders equity
    
    
    55,293
    
    
    
    68,585Total liabilities and stockholders equity
    
    $
    212,683
    
    
    $
    224,464
  42




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003Net sales
    
    $
    455,197
    
    
    $
    457,642
    
    
    $
    436,410Cost of goods sold
    
    
    402,276
    
    
    
    396,608
    
    
    
    365,563Gross profit
    
    
    52,921
    
    
    
    61,034
    
    
    
    70,847Selling, general and administrative expenses
    
    
    56,716
    
    
    
    57,283
    
    
    
    59,740Impairments of goodwill
    
    
    1,574
    
    
    
    7,976
    
    
    
    328Impairments of other long-lived assets
    
    
    538
    
    
    
    22,855
    
    
    
    11,552Severance, restructuring and related charges
    
    
    1,090
    
    
    
    3,505
    
    
    
    8,132Gain on sale of assets
    
    
    (316
    )
    
    
    (278
    )
    
    
    (627
    )Operating loss
    
    
    (6,681
    )
    
    
    (30,307
    )
    
    
    (8,278
    )Equity in income (loss) of equity method investment (including
impairment charge of $5.5 million in 2003)
    
    
    600
    
    
    
    
    
    
    
    (5,689
    )Interest expense
    
    
    (5,713
    )
    
    
    (3,968
    )
    
    
    (6,193
    )Other, net
    
    
    66
    
    
    
    (963
    )
    
    
    (1,805
    )Loss from continuing operations before (provision) benefit
for income taxes
    
    
    (11,728
    )
    
    
    (35,238
    )
    
    
    (21,965
    )(Provision) benefit for income taxes from continuing operations
    
    
    (1,429
    )
    
    
    (883
    )
    
    
    3,158Loss from continuing operations before distributions on preferred
interest of subsidiary
    
    
    (13,157
    )
    
    
    (36,121
    )
    
    
    (18,807
    )Distributions on preferred interest of subsidiary (net of tax)
    
    
    
    
    
    
    
    
    
    
    (80
    )Loss from continuing operations
    
    
    (13,157
    )
    
    
    (36,121
    )
    
    
    (18,887
    )Income from operations of discontinued businesses (net of tax)
    
    
    
    
    
    
    
    
    
    
    2,081Gain on sale of discontinued businesses (net of tax)
    
    
    
    
    
    
    
    
    
    
    7,442Net loss
    
    
    (13,157
    )
    
    
    (36,121
    )
    
    
    (9,364
    )Gain on early redemption of preferred interest of subsidiary
    
    
    
    
    
    
    
    
    
    
    6,560Payment-in-kind of dividends on convertible preferred stock
    
    
    
    
    
    
    (14,749
    )
    
    
    (12,811
    )Net loss attributable to common stockholders
    
    $
    (13,157
    )
    
    $
    (50,870
    )
    
    $
    (15,615
    )Loss (earnings) per share of common stock  Basic and dilutedLoss from continuing operations attributable to common stockholders
    
    $
    (1.66
    )
    
    $
    (6.45
    )
    
    $
    (3.06
    )Discontinued operations (net of tax)
    
    
    
    
    
    
    
    
    
    
    1.16Net loss attributable to common stockholders
    
    $
    (1.66
    )
    
    $
    (6.45
    )
    
    $
    (1.90
    )
  43




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##### Table of Contents



Convertible
    
    
    Common
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Compre-Preferred Stock
    
    
    Stock
    
    
    Additional
    
    
    Compre-
    
    
    
    
    
    
    
    
    
    
    hensive
    
    
    TotalNumber of
    
    
    Par
    
    
    Number of
    
    
    Par
    
    
    Paid-in
    
    
    hensive
    
    
    Accumulated
    
    
    Treasury
    
    
    Income
    
    
    StockholdersShares
    
    
    Value
    
    
    Shares
    
    
    Value
    
    
    Capital
    
    
    (Loss) Income
    
    
    Deficit
    
    
    Stock
    
    
    (Loss)
    
    
    EquityBalance, January 1, 2003
    
    
    805,000
    
    
    $
    80,696
    
    
    
    9,822,204
    
    
    $
    9,822
    
    
    $
    46,701
    
    
    $
    (3,046
    )
    
    $
    (11,773
    )
    
    $
    (20,228
    )
    
    
    
    
    
    $
    102,172Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,364
    )
    
    
    
    
    
    $
    (9,364
    )
    
    
    (9,364
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,419
    
    
    
    
    
    
    
    
    
    
    
    5,419
    
    
    
    5,419Pension minimum liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    14Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (3,931
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,520
    )
    
    
    
    
    
    
    (2,520
    )Issuance of convertible preferred stock
related to PIK dividends accrued
    
    
    120,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redemption of preferred
interest in subsidiary, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,560Payment in kind dividends accrued
    
    
    
    
    
    
    12,811
    
    
    
    
    
    
    
    
    
    
    
    (12,811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    11Balance, December 31, 2003
    
    
    925,750
    
    
    $
    93,507
    
    
    
    9,822,204
    
    
    $
    9,822
    
    
    $
    40,441
    
    
    $
    2,387
    
    
    $
    (21,137
    )
    
    $
    (22,728
    )
    
    
    
    
    
    $
    102,292Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,121
    )
    
    
    
    
    
    $
    (36,121
    )
    
    
    (36,121
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,065
    
    
    
    
    
    
    
    
    
    
    
    2,065
    
    
    
    2,065Pension minimum liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    112Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (33,944
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )Issuance of convertible preferred stock
related to PIK dividends accrued
    
    
    205,801
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payment in kind dividends accrued
    
    
    
    
    
    
    14,749
    
    
    
    
    
    
    
    
    
    
    
    (14,749
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock option exercise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (571
    )
    
    
    
    
    
    
    
    
    
    
    875
    
    
    
    
    
    
    
    304Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    8Balance, December 31, 2004
    
    
    1,131,551
    
    
    $
    108,256
    
    
    
    9,822,204
    
    
    $
    9,822
    
    
    $
    25,111
    
    
    $
    4,564
    
    
    $
    (57,258
    )
    
    $
    (21,910
    )
    
    
    
    
    
    $
    68,585Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,157
    )
    
    
    
    
    
    $
    (13,157
    )
    
    
    (13,157
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,352
    )
    
    
    
    
    
    
    
    
    
    
    (1,352
    )
    
    
    (1,352
    )Pension minimum liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    (109
    )
    
    
    (109
    )Interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    55Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    .
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (14,563
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,953
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,953Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    (627
    )
    
    
    
    
    
    
    (675
    )Balance, December 31, 2005
    
    
    1,131,551
    
    
    $
    108,256
    
    
    
    9,822,204
    
    
    $
    9,822
    
    
    $
    27,016
    
    
    $
    3,158
    
    
    $
    (70,415
    )
    
    $
    (22,544
    )
    
    
    
    
    
    $
    55,293
  44




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net loss
    
    $
    (13,157
    )
    
    $
    (36,121
    )
    
    $
    (9,364
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (9,523
    )Loss from continuing operations
    
    $
    (13,157
    )
    
    $
    (36,121
    )
    
    $
    (18,887
    )Depreciation and amortization
    
    
    11,046
    
    
    
    14,266
    
    
    
    21,954Impairments of goodwill
    
    
    1,574
    
    
    
    7,976
    
    
    
    328Impairments of other long-lived assets
    
    
    538
    
    
    
    22,855
    
    
    
    11,552Write-off and amortization of debt issuance costs
    
    
    1,122
    
    
    
    1,076
    
    
    
    2,981Stock compensation expense
    
    
    1,953
    
    
    
    
    
    
    
    Gain on sale of assets
    
    
    (316
    )
    
    
    (278
    )
    
    
    (627
    )Equity in (income) loss of equity method investment
    
    
    (600
    )
    
    
    
    
    
    
    5,689Deferred income taxes
    
    
    240
    
    
    
    (1,228
    )
    
    
    Other
    
    
    (192
    )
    
    
    
    
    
    
    2,208
    
    
    
    8,546
    
    
    
    22,990Changes in operating assets and liabilities:Accounts receivable
    
    
    2,663
    
    
    
    (177
    )
    
    
    (3,869
    )Inventories
    
    
    2,842
    
    
    
    (11,146
    )
    
    
    5,504Other assets
    
    
    251
    
    
    
    (1,313
    )
    
    
    1,100Accounts payable
    
    
    4,793
    
    
    
    918
    
    
    
    (727
    )Accrued expenses
    
    
    (3,801
    )
    
    
    (1,662
    )
    
    
    (9,679
    )Other, net
    
    
    (2,394
    )
    
    
    (3,137
    )
    
    
    (2,125
    )4,354
    
    
    
    (16,517
    )
    
    
    (9,796
    )Net cash provided by (used in) continuing operations
    
    
    6,562
    
    
    
    (7,971
    )
    
    
    13,194Net cash used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    (5,159
    )Net cash provided by (used in) operating activities
    
    
    6,562
    
    
    
    (7,971
    )
    
    
    8,035Cash flows from investing activities:Capital expenditures of continuing operations
    
    
    (9,366
    )
    
    
    (13,876
    )
    
    
    (13,324
    )Capital expenditures of discontinued operations
    
    
    
    
    
    
    
    
    
    
    (111
    )Acquisition of subsidiary, net of cash acquired
    
    
    (1,115
    )
    
    
    
    
    
    
    (1,161
    )Collections of notes receivable from sales of subsidiaries
    
    
    106
    
    
    
    43
    
    
    
    1,035Proceeds from sale of subsidiaries, net
    
    
    
    
    
    
    
    
    
    
    23,647Proceeds from sale of assets, net
    
    
    981
    
    
    
    5,778
    
    
    
    2,839Net cash (used in) provided by investing activities
    
    
    (9,394
    )
    
    
    (8,055
    )
    
    
    12,925Cash flows from financing activities:Net borrowings (repayments) of revolving loans
    
    
    1,450
    
    
    
    4,037
    
    
    
    (8,751
    )Increase in
book overdraft
    
    
    4,028
    
    
    
    
    
    
    
    Proceeds of term loans
    
    
    
    
    
    
    18,152
    
    
    
    20,000Repayments of term loans
    
    
    (2,857
    )
    
    
    (3,244
    )
    
    
    (16,337
    )Direct costs associated with debt facilities
    
    
    (151
    )
    
    
    (1,485
    )
    
    
    (1,583
    )Redemption of preferred interest of subsidiary
    
    
    
    
    
    
    
    
    
    
    (9,840
    )Repayment of real estate mortgage
    
    
    
    
    
    
    
    
    
    
    (700
    )Repurchases of common stock
    
    
    (7
    )
    
    
    (75
    )
    
    
    (2,520
    )Proceeds from the exercise of stock options
    
    
    
    
    
    
    304
    
    
    
    Net cash
provided by (used in) financing activities
    
    
    2,463
    
    
    
    17,689
    
    
    
    (19,731
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    265
    
    
    
    114
    
    
    
    677Net (decrease) increase in cash and cash equivalents
    
    
    (104
    )
    
    
    1,777
    
    
    
    1,906Cash and cash equivalents, beginning of period
    
    
    8,525
    
    
    
    6,748
    
    
    
    4,842Cash and cash equivalents, end of period
    
    $
    8,421
    
    
    $
    8,525
    
    
    $
    6,748
  45




---



##### Table of Contents



Consolidation Policy
   Use of Estimates
 Revenue Recognition Accounting for Consideration Given by a Vendor to a Customer
 Cash and Cash Equivalents
 Advertising Costs
 Accounts Receivable and Allowance for Doubtful Accounts
 46




---



##### Table of Contents



Inventories
 December 31,2005
    
    
    2004(Amounts in Thousands)Raw materials
    
    $
    23,314
    
    
    $
    25,402Work in process
    
    
    1,766
    
    
    
    2,230Finished goods
    
    
    48,949
    
    
    
    47,430Excess and obsolete inventory reserve
    
    
    (4,548
    )
    
    
    (4,671
    )LIFO reserve
    
    
    (6,682
    )
    
    
    (4,717
    )$
    62,799
    
    
    $
    65,674
 Goodwill Goodwill and Intangible Assets
 Property and Equipment
 Accounting for Asset Retirement Obligations
 47




---



##### Table of Contents



SFAS No. 143 Obligation at December 31, 2003
    
    $
    1,170Accretion expense
    
    
    49Changes in estimates, including timing
    
    
    18SFAS No. 143 Obligation at December 31, 2004
    
    $
    1,237Accretion expense
    
    
    49Additions
    
    
    330Changes in estimates, including timing
    
    
    32Payments
    
    
    (580
    )SFAS No. 143 Obligation at December 31, 2005
    
    $
    1,068
 Impairment of Long-lived Assets
 Income Taxes
 Foreign Currency Translation
 Fair Value of Financial Instruments
 Stock Options and Other Stock Awards Accounting for Stock Issued to Employees
  48




---



##### Table of Contents



Accounting for Stock-Based Compensation,
 Accounting for Stock-Based Compensation  Transition and Disclosure
  49




---



##### Table of Contents



For the years ended December 31,2005
    
    
    2004
    
    
    2003Net loss attributable to common stockholders, as reported
    
    $
    (13,157
    )
    
    $
    (50,870
    )
    
    $
    (15,615
    )Add: Stock-based employee compensation expense
included in reported net loss, with no related
tax effects
    
    
    1,953Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects
    
    
    (293
    )
    
    
    (1,852
    )
    
    
    (378
    )Pro forma net loss
    
    $
    (11,497
    )
    
    $
    (52,722
    )
    
    $
    (15,993
    )Earnings per shareBasic and diluted-as reported
    
    $
    (1.66
    )
    
    $
    (6.45
    )
    
    $
    (1.90
    )Basic and diluted-pro forma
    
    $
    (1.45
    )
    
    $
    (6.69
    )
    
    $
    (1.95
    )
  Derivative Financial Instruments Accounting for Derivative Financial Instruments and Hedging Activities
   50




---



##### Table of Contents



Notional Amount
    
    Maturity
    
    Rate Paid
    
    Rate Received
    
    Fair Value (2)$25,000
    
    August 17, 2007
    
    
    4.49
    %
    
    LIBOR (1)
    
    $
    65
 (1)
    
    LIBOR rate is determined on the 23rd of each month and continues up to and
including the maturity date(2)
    
    The fair value is the mark-to-market value. New Accounting Pronouncements Inventory Costs, an amendment of ARB No. 43, Chapter 4
 Reclassifications
   Goodwill at December 31, 2002
    
    $
    10,543Impairment charge
    
    
    (328
    )Goodwill at December 31, 2003
    
    
    10,215Impairment charge
    
    
    (7,976
    )Goodwill at December 31, 2004
    
    
    2,239Impairment charge
    
    
    (1,574
    )Goodwill at December 31, 2005
    
    $
    665
  December 31,
    
    
    December 31,2005
    
    
    2004Gross
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Gross
    
    
    Accumulated
    
    
    Net CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountPatents
    
    $
    1,409
    
    
    $
    (954
    )
    
    $
    455
    
    
    $
    1,114
    
    
    $
    (727
    )
    
    $
    387Customer lists
    
    
    10,643
    
    
    
    (7,997
    )
    
    
    2,646
    
    
    
    10,666
    
    
    
    (7,619
    )
    
    
    3,047Tradenames
    
    
    5,498
    
    
    
    (2,075
    )
    
    
    3,423
    
    
    
    5,531
    
    
    
    (1,537
    )
    
    
    3,994Other
    
    
    441
    
    
    
    (19
    )
    
    
    422
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    17,991
    
    
    $
    (11,045
    )
    
    $
    6,946
    
    
    $
    17,311
    
    
    $
    (9,883
    )
    
    $
    7,428
 51




---



##### Table of Contents



2006
    
    $
    6162007
    
    
    5912008
    
    
    5782009
    
    
    5432010
    
    
    496
   Clarification of Reporting Unit
Guidance in Paragraph 30 of FASB Statement No. 142
   52




---



##### Table of Contents



The Equity Method for of Accounting for Investments in Common Stock,
   Accounting for the Impairments or
Disposal of Long Lived Assets
   53




---



##### Table of Contents



2005
    
    2004
    
    2003Net sales
    
    $
    
    
    
    $
    
    
    
    $
    18,896Pre-tax operating profit (loss)
    
    $
    
    
    
    $
    
    
    
    $
    3,201Pre-tax gain on sale of discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    11,449
   Offsetting of Amounts
Related to Certain Contracts
   54




---



##### Table of Contents



Consolidation of Variable Interest Entities
     2006
    
    $
    1,1002007
    
    
    1,1002008
    
    
    550$
    2,750
 55




---



##### Table of Contents



December 31,2005
    
    
    2004(Amounts in Thousands)Term loan payable under Fleet Credit Agreement, interest based on
LIBOR and Prime Rates (7.375% - 8.5%), due through 2009
    
    $
    15,714
    
    
    $
    18,571Revolving loans payable under the Bank of America Credit Agreement,
interest based on LIBOR and Prime Rates (7.125% - 8.25%)
    
    
    41,946
    
    
    
    40,166Total debt
    
    
    57,660
    
    
    
    58,737Less revolving loans, classified as current (see below)
    
    
    (41,946
    )
    
    
    (40,166
    )Less current maturities
    
    
    (2,857
    )
    
    
    (2,857
    )Long-term debt
    
    $
    12,857
    
    
    $
    15,714
  2006
    
    $
    2,8572007
    
    
    2,8572008
    
    
    2,8572009
    
    
    7,143
   56




---



##### Table of Contents



Sources:Term Loan incremental borrowings
    
    $
    18,152Uses:Repayment of Revolving Credit Facility borrowings
    
    $
    16,713Certain costs associated with the Bank of America Credit Agreement
    
    
    1,439$
    18,152
     57




---



##### Table of Contents



Minimum Availability
 Fixed Charge Coverage Ratio
 Capital Expenditures
 Leverage Ratio
     58




---



##### Table of Contents



Balance Sheet Classification
of Borrowings Outstanding under Revolving Credit Agreements that Include Both a Subjective
Acceleration Clause and a Lock-Box Arrangement
  Earnings Per Share
 For the Year Ended December 31,
    
    2005
    
    
    2004
    
    
    2003Basic and Diluted EPS:Loss from continuing operations
    
    $
    (13,157
    )
    
    $
    (36,121
    )
    
    $
    (18,887
    )Gain on early redemption of preferred interest of subsidiary
    
    
    
    
    
    
    
    
    
    
    6,560Payment-in-kind dividends on convertible preferred stock
    
    
    
    
    
    
    (14,749
    )
    
    
    (12,811
    )Loss from continuing operations attributable to common stockholders
    
    
    (13,157
    )
    
    
    (50,870
    )
    
    
    (25,138
    )Discontinued operations (net of tax)
    
    
    
    
    
    
    
    
    
    
    9,523Net loss attributable to common stockholders
    
    $
    (13,157
    )
    
    $
    (50,870
    )
    
    $
    (15,615
    )Weighted average shares  Basic and Diluted
    
    
    7,949
    
    
    
    7,883
    
    
    
    8,215Per share amount:Loss from continuing operations attributable to common stockholders
    
    $
    (1.66
    )
    
    $
    (6.45
    )
    
    $
    (3.06
    )Discontinued operations (net of tax)
    
    
    
    
    
    
    
    
    
    
    1.16Net loss attributable to common stockholders
    
    $
    (1.66
    )
    
    $
    (6.45
    )
    
    $
    (1.90
    )
  59




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##### Table of Contents



Pension and Other Postretirement Plans
   60




---



##### Table of Contents



Pension Benefits
    
    
    Other Benefits2005
    
    
    2004
    
    
    2005
    
    
    2004(Amounts in Thousands)Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    1,544
    
    
    $
    1,608
    
    
    $
    3,171
    
    
    $
    2,613Service cost
    
    
    7
    
    
    
    6
    
    
    
    
    
    
    
    Interest cost
    
    
    90
    
    
    
    95
    
    
    
    160
    
    
    
    188Plan amendments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Actuarial loss
    
    
    123
    
    
    
    64
    
    
    
    (246
    )
    
    
    720Settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (130
    )
    
    
    (229
    )
    
    
    (284
    )
    
    
    (350
    )Benefit obligation at end of year
    
    $
    1,634
    
    
    $
    1,544
    
    
    $
    2,801
    
    
    $
    3,171Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    1,306
    
    
    $
    1,435
    
    
    $
    
    
    
    $
    Actuarial return on plan assets
    
    
    63
    
    
    
    100
    
    
    
    
    
    
    
    Employer contributions
    
    
    
    
    
    
    
    
    
    
    284
    
    
    
    350Settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (130
    )
    
    
    (229
    )
    
    
    (284
    )
    
    
    (350
    )Fair value of plan assets at end of year
    
    $
    1,239
    
    
    $
    1,306
    
    
    $
    
    
    
    $
    Reconciliation of prepaid (accrued) benefit cost:Funded status
    
    $
    (395
    )
    
    $
    (238
    )
    
    $
    (2,801
    )
    
    $
    (3,171
    )Unrecognized net actuarial loss (gain)
    
    
    766
    
    
    
    657
    
    
    
    633
    
    
    
    918Unrecognized prior service cost
    
    
    
    
    
    
    
    
    
    
    74
    
    
    
    129Prepaid (accrued) benefit cost
    
    $
    371
    
    
    $
    419
    
    
    $
    (2,094
    )
    
    $
    (2,124
    )Amount recognized in financial statements:Other current assets
    
    $
    150
    
    
    $
    148
    
    
    $
    
    
    
    $
    Accrued expenses and other liabilities
    
    
    (453
    )
    
    
    (294
    )
    
    
    (2,094
    )
    
    
    (2,124
    )Accumulated other comprehensive income
    
    
    674
    
    
    
    565
    
    
    
    
    
    
    
    Total recognized
    
    $
    371
    
    
    $
    419
    
    
    $
    (2,094
    )
    
    $
    (2,124
    )Components of net periodic benefit cost:Service cost
    
    $
    7
    
    
    $
    6
    
    
    $
    
    
    
    $
    Interest cost
    
    
    90
    
    
    
    95
    
    
    
    160
    
    
    
    188Expected return on plan assets
    
    
    (101
    )
    
    
    (112
    )
    
    
    
    
    
    
    Amortization of net transition asset
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    60Amortization of net gain
    
    
    52
    
    
    
    53
    
    
    
    39
    
    
    
    42Curtailment/settlement recognition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    48
    
    
    $
    53
    
    
    $
    254
    
    
    $
    290Assumptions as of December 31:Discount rates
    
    
    5.50
    %
    
    
    5.75
    %
    
    
    5.50
    %
    
    
    5.75
    %Expected return on plan assets
    
    
    7.00
    %
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/AAssumed rates of compensation increases
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 61




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##### Table of Contents



Pension Benefits
    
    
    Other Benefits2005
    
    
    2004
    
    
    2005
    
    
    2004(Amounts in Thousands)Impact of one-percent increase in health care trend rate:Increase in accumulated postretirement benefit obligation
    
    
    
    
    
    
    
    
    
    $
    391
    
    
    $
    288Increase in service cost and interest cost
    
    
    
    
    
    
    
    
    
    $
    25
    
    
    $
    18Impact of one-percent decrease in health care trend rate:Decrease in accumulated postretirement benefit obligation
    
    
    
    
    
    
    
    
    
    $
    315
    
    
    $
    231Decrease in service cost and interest cost
    
    
    
    
    
    
    
    
    
    $
    20
    
    
    $
    14
   Target
    
    Percentage ofAllocation
    
    Plan AssetsAsset Category
    
    2006
    
    2005
    
    2004Equity Securities
    
    
    30 - 35
    %
    
    
    35
    %
    
    
    35
    %Debt Securities
    
    
    60 - 65
    %
    
    
    65
    %
    
    
    65
    %Real estate
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Other
    
    
    0 - 3
    %
    
    
    0
    %
    
    
    0
    %100
    %
   Pension Plans
    
    
    Other Plans2006
    
    
    92
    
    
    
    3302007
    
    
    87
    
    
    
    3202008
    
    
    79
    
    
    
    3002009
    
    
    73
    
    
    
    2902009
    
    
    69
    
    
    
    2702011-2015
    
    
    287
    
    
    
    1,100Total
    
    $
    687
    
    
    $
    2,610
  62




---



##### Table of Contents



401(k) Plans
     Convertible Preferred Stock
  63




---



##### Table of Contents



Share Repurchase
  Rights Plan
   Restricted Stock Grant
  Director Stock Grant
  64




---



##### Table of Contents



Stock Options
      65




---



##### Table of Contents



66




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##### Table of Contents



WeightedAverage
    
    
    WeightedRemaining
    
    
    AverageContractual
    
    
    ExerciseOptions
    
    
    Exercise Price
    
    
    Life
    
    
    PriceOutstanding at December 31, 2002
    
    
    1,950,750
    
    
    $
    3.02 - 19.56
    
    
    8.27 years
    
    $
    4.94Granted
    
    
    36,000
    
    
    $
    4.31 - 4.85
    
    
    
    
    
    
    $
    4.76Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (187,550
    )
    
    $
    3.11 - 19.56
    
    
    
    
    
    
    $
    5.05Outstanding at December 31, 2003
    
    
    1,799,200
    
    
    $
    3.02 - 19.56
    
    
    7.28 years
    
    $
    4.92Granted
    
    
    6,000
    
    
    $
    5.91 - 5.91
    
    
    
    
    
    
    $
    5.91Exercised
    
    
    (75,000
    )
    
    $
    4.05 - 4.05
    
    
    
    
    
    
    $
    4.05Cancelled
    
    
    (4,550
    )
    
    $
    9.88 - 17.00
    
    
    
    
    
    
    $
    12.70Outstanding at December 31, 2004
    
    
    1,725,650
    
    
    $
    3.02 - 19.56
    
    
    6.25 years
    
    $
    4.94Granted
    
    
    936,000
    
    
    $
    2.36 - 3.69
    
    
    
    
    
    
    $
    2.71Expired
    
    
    (55,000
    )
    
    $
    8.50 - 9.25
    
    
    
    
    
    
    $
    8.98Cancelled
    
    
    (750,300
    )
    
    $
    4.20 - 9.88
    
    
    
    
    
    
    $
    4.20Outstanding at December 31, 2005
    
    
    1,856,350
    
    
    $
    2.36 - 19.56
    
    
    7.42 years
    
    $
    3.99Vested and Exercisable at December 31, 2005
    
    
    926,350Available to grant as of December 31, 2005
    
    
    711,148
  Options Outstanding
    
    Options ExercisableWeighted-Number
    
    Average
    
    Weighted-
    
    Number
    
    Weighted-Range of Exercise
    
    Outstanding at
    
    Remaining
    
    Average Exercise
    
    Exerciseable at
    
    Average ExercisePrices
    
    12/31/2005
    
    Contractual Life
    
    Price
    
    12/31/2005
    
    Price$  2.36 - 3.02
    
    
    920,000
    
    
    
    9.38
    
    
    $
    2.69
    
    
    
    20,000
    
    
    $
    3.02$  3.02 - 4.20
    
    
    750,000
    
    
    
    5.95
    
    
    
    3.83
    
    
    
    720,000
    
    
    
    3.86$  4.20 - 13.19
    
    
    143,250
    
    
    
    4.07
    
    
    
    9.38
    
    
    
    143,250
    
    
    
    9.38$13.19 - 19.56
    
    
    43,100
    
    
    
    2.36
    
    
    
    16.70
    
    
    
    43,100
    
    
    
    16.701,856,350
    
    
    
    7.42
    
    
    $
    3.99
    
    
    
    926,350
    
    
    $
    5.29
 Stock Appreciation Rights
  67




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##### Table of Contents



2005
    
    
    2004
    
    
    2003(Amounts in Thousands)Domestic
    
    $
    (13,364
    )
    
    $
    (40,134
    )
    
    $
    (21,662
    )Foreign
    
    
    1,636
    
    
    
    4,896
    
    
    
    (303
    )Total
    
    $
    (11,728
    )
    
    $
    (35,238
    )
    
    $
    (21,965
    )
 68




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003(Amounts in Thousands)Current tax provision (benefit):Federal
    
    $
    
    
    
    $
    (343
    )
    
    $
    (5,084
    )State
    
    
    100
    
    
    
    (204
    )
    
    
    970Foreign
    
    
    1,089
    
    
    
    2,658
    
    
    
    956Total
    
    $
    1,189
    
    
    $
    2,111
    
    
    $
    (3,158
    )Deferred tax provision (benefit):Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    240
    
    
    
    (1,228
    )
    
    
    Total
    
    $
    240
    
    
    $
    (1,228
    )
    
    
    Total provision (benefit) from continuing operations
    
    $
    1,429
    
    
    $
    883
    
    
    $
    (3,158
    )
  2005
    
    
    2004
    
    
    2003(Amounts in Thousands)Benefit for income taxes at statutory rate
    
    $
    (4,105
    )
    
    $
    (12,333
    )
    
    $
    (7,688
    )State income taxes, net of federal benefit
    
    
    65
    
    
    
    (133
    )
    
    
    631Foreign tax rate differential
    
    
    (246
    )
    
    
    945
    
    
    
    1,062Foreign tax credits
    
    
    (1,266
    )
    
    
    (245
    )
    
    
    (406
    )Utilization of foreign losses
    
    
    718
    
    
    
    
    
    
    
    Return to provision adjustments
    
    
    (166
    )
    
    
    (991
    )
    
    
    Dividend income from foreign subsidiary
    
    
    913
    
    
    
    
    
    
    
    Dividend gross-up
    
    
    494
    
    
    
    
    
    
    
    Stock option expense
    
    
    529
    
    
    
    
    
    
    
    Valuation allowance adjustments
    
    
    4,510
    
    
    
    13,857
    
    
    
    6,222Permanent items
    
    
    4
    
    
    
    103
    
    
    
    Reduction of tax reserves
    
    
    
    
    
    
    (343
    )
    
    
    (2,837
    )Other, net
    
    
    (21
    )
    
    
    23
    
    
    
    (142
    )Net provision (benefit) for income taxes
    
    $
    1,429
    
    
    $
    883
    
    
    $
    (3,158
    )
 69




---



##### Table of Contents



2005
    
    
    2004(Amounts in Thousands)Deferred tax liabilitiesWaste-to-energy facility
    
    $
    (2,602
    )
    
    $
    (4,531
    )Inventory costs
    
    
    (1,800
    )
    
    
    (1,696
    )Unremitted foreign earnings
    
    
    (4,428
    )
    
    
    (3,800
    )$
    (8,830
    )
    
    $
    (10,027
    )Deferred tax assetsAllowance for doubtful receivables
    
    $
    972
    
    
    $
    1,069Accrued expenses and other items
    
    
    13,425
    
    
    
    14,281Difference between book and tax basis of property
    
    
    16,149
    
    
    
    19,620Operating loss carry-forwards  domestic
    
    
    34,770
    
    
    
    28,877Operating loss carry-forwards  foreign
    
    
    45
    
    
    
    335Tax credit carry forwards
    
    
    4,567
    
    
    
    3,301Estimated foreign tax credit related to unremitted earnings
    
    
    4,428
    
    
    
    3,80074,356
    
    
    
    71,283Less valuation allowance
    
    
    (64,538
    )
    
    
    (60,028
    )9,818
    
    
    
    11,255Net deferred income tax asset
    
    $
    988
    
    
    $
    1,228
   Deduction for Qualified Domestic Production Activities
  70




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##### Table of Contents



Repatriation of Foreign Earnings
     2006
    
    $
    7,8432007
    
    
    7,5192008
    
    
    7,0272009
    
    
    3,1332010
    
    
    2,550Later years
    
    
    1,109Total minimum payments
    
    $
    29,181
      71




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##### Table of Contents



72




---



##### Table of Contents



Years Ended December 31,2005
    
    
    2004
    
    
    2003(Thousands of dollars)Maintenance Products GroupNet external sales
    
    
    
    
    
    $
    247,875
    
    
    $
    278,888
    
    
    $
    285,289Operating (loss) income
    
    
    
    
    
    
    (8,416
    )
    
    
    (2,717
    )
    
    
    9,339Operating (deficit) margin
    
    
    
    
    
    
    (3.4
    %)
    
    
    (1.0
    %)
    
    
    3.3
    %Depreciation and amortization
    
    
    
    
    
    
    9,751
    
    
    
    12,714
    
    
    
    20,162Capital expenditures
    
    
    
    
    
    
    8,770
    
    
    
    13,205
    
    
    
    12,366Total assets
    
    
    
    
    
    
    133,186
    
    
    
    154,635
    
    
    
    176,214Electrical Products GroupNet external sales
    
    
    
    
    
    $
    207,322
    
    
    $
    178,754
    
    
    $
    151,121Operating income
    
    
    
    
    
    
    17,385
    
    
    
    16,809
    
    
    
    15,557Operating margin
    
    
    
    
    
    
    8.4
    %
    
    
    9.4
    %
    
    
    10.3
    %Depreciation and amortization
    
    
    
    
    
    
    1,191
    
    
    
    1,327
    
    
    
    1,217Capital expenditures
    
    
    
    
    
    
    596
    
    
    
    671
    
    
    
    833Total assets
    
    
    
    
    
    
    66,744
    
    
    
    57,698
    
    
    
    51,353Net sales
    
    - Operating segments
    
    $
    455,197
    
    
    $
    457,642
    
    
    $
    436,410Total
    
    $
    455,197
    
    
    $
    457,642
    
    
    $
    436,410Operating (loss) income
    
    - Operating segments
    
    $
    8,969
    
    
    $
    14,092
    
    
    $
    24,896- Unallocated corporate
    
    
    (12,764
    )
    
    
    (10,341
    )
    
    
    (13,789
    )- Impairments of long-lived assets
    
    
    (2,112
    )
    
    
    (30,831
    )
    
    
    (11,880
    )- Severance, restructuring and related charges
    
    
    (1,090
    )
    
    
    (3,505
    )
    
    
    (8,132
    )- Gain on sale of assets
    
    
    316
    
    
    
    278
    
    
    
    627Total
    
    $
    (6,681
    )
    
    $
    (30,307
    )
    
    $
    (8,278
    )Depreciation and amortization
    
    - Operating segments
    
    $
    10,942
    
    
    $
    14,041
    
    
    $
    21,379- Unallocated corporate
    
    
    104
    
    
    
    225
    
    
    
    575Total
    
    $
    11,046
    
    
    $
    14,266
    
    
    $
    21,954Capital expenditures
    
    - Operating segments
    
    $
    9,366
    
    
    $
    13,876
    
    
    $
    13,199- Unallocated corporate
    
    
    
    
    
    
    
    
    
    
    125- Discontinued operations
    
    
    
    
    
    
    
    
    
    
    111Total
    
    $
    9,366
    
    
    $
    13,876
    
    
    $
    13,435Total assets
    
    - Operating segments
    
    
    199,930
    
    
    
    212,333
    
    
    
    227,567- Other [a]
    
    
    2,217
    
    
    
    1,624
    
    
    
    1,627- Unallocated corporate
    
    
    10,536
    
    
    
    10,507
    
    
    
    12,514Total
    
    $
    212,683
    
    
    $
    224,464
    
    
    $
    241,708
 
 [a]
    
    Amounts shown as other represent items associated with Sahlman, the Companys equity
method investment. 73




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##### Table of Contents



United
    
    
    
    
    
    
    
    
    
    Europe(Thousands of Dollars)
    
    States
    
    Canada
    
    U.K.
    
    (Excluding U.K.)
    
    Other
    
    Consolidated2005:Sales to unaffiliated customers
    
    $
    363,038
    
    
    $
    53,684
    
    
    $
    30,098
    
    
    $
    4,427
    
    
    $
    3,950
    
    
    $
    455,197Total assets
    
    $
    161,633
    
    
    $
    25,950
    
    
    $
    24,881
    
    
    $
    
    
    
    $
    219
    
    
    $
    212,6832004:Sales to unaffiliated customers
    
    $
    364,209
    
    
    $
    47,555
    
    
    $
    36,453
    
    
    $
    5,214
    
    
    $
    4,211
    
    
    $
    457,642Total assets
    
    $
    170,166
    
    
    $
    23,513
    
    
    $
    30,227
    
    
    $
    558
    
    
    $
    
    
    
    $
    224,4642003:Sales to unaffiliated customers
    
    $
    351,796
    
    
    $
    42,765
    
    
    $
    32,333
    
    
    $
    5,167
    
    
    $
    4,349
    
    
    $
    436,410Total assets
    
    $
    191,599
    
    
    $
    23,260
    
    
    $
    26,615
    
    
    $
    
    
    
    $
    234
    
    
    $
    241,708
   General Environmental Claims
  W.J. Smith Wood Preserving Company (W.J. Smith)
   74




---



##### Table of Contents



Asbestos Claims
       Non-Environmental Litigation  Banco del Atlantico, S.A.
 Banco del Atlantico, S.A. v. Woods Industries, Inc., et al. Civil Action No. L-96-139 (now 1:03-CV-1342-LJM-VSS, U.S. District Court, Southern District of Indiana).
 75




---



##### Table of Contents



with prejudice
   Other Claims
   76




---



##### Table of Contents



2005
    
    
    2004
    
    
    2003(Amounts in Thousands)Consolidation of St. Louis manufacturing/distribution facilities
    
    $
    39
    
    
    $
    1,460
    
    
    $
    3,731Shutdown of Woods Canada manufacturing
    
    
    134
    
    
    
    841
    
    
    
    1,497Consolidation of Glit facilities
    
    
    724
    
    
    
    791
    
    
    
    1,151Consolidation of administrative functions for CCP
    
    
    21
    
    
    
    215
    
    
    
    314Shutdown of Woods U.S. manufacturing
    
    
    
    
    
    
    38
    
    
    
    503Senior management transition and headcount rationalization
    
    
    
    
    
    
    
    
    
    
    645Consultant  outsourcing
    
    
    
    
    
    
    
    
    
    
    84Corporate office relocation
    
    
    172
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    160
    
    
    
    207Total severance, restructuring and related costs
    
    $
    1,090
    
    
    $
    3,505
    
    
    $
    8,132
 Consolidation of St. Louis manufacturing/distribution facilities
 77




---



##### Table of Contents



One-time
    
    
    ContractTermination
    
    
    TerminationTotal
    
    
    Benefits [a]
    
    
    Costs [b]
    
    
    Other [c]Restructuring
liabilities at
December 31, 2003
    
    $
    5,419
    
    
    $
    121
    
    
    $
    5,298
    
    
    $
    Additions
    
    
    1,460
    
    
    
    
    
    
    
    1,122
    
    
    
    338Reductions
    
    
    (3
    )
    
    
    (3
    )
    
    
    
    
    
    
    Payments
    
    
    (4,474
    )
    
    
    (118
    )
    
    
    (4,018
    )
    
    
    (338
    )Restructuring
liabilities at
December 31, 2004
    
    $
    2,402
    
    
    $
    
    
    
    $
    2,402
    
    
    $
    Additions
    
    
    100
    
    
    
    
    
    
    
    100
    
    
    
    Reductions
    
    
    (61
    )
    
    
    
    
    
    
    (61
    )
    
    
    Payments
    
    
    (596
    )
    
    
    
    
    
    
    (596
    )
    
    
    Restructuring
liabilities at
December 31, 2005
    
    $
    1,845
    
    
    $
    
    
    
    $
    1,845
    
    
    $
    
 Shutdown of Woods Canada manufacturing
 One-time
    
    
    ContractTermination
    
    
    TerminationTotal
    
    
    Benefits [a]
    
    
    Costs [b]Restructuring liabilities at December 31, 2003
    
    $
    771
    
    
    $
    771
    
    
    $
    Additions
    
    
    1,045
    
    
    
    52
    
    
    
    993Reductions
    
    
    (203
    )
    
    
    
    
    
    
    (203
    )Payments
    
    
    (898
    )
    
    
    (771
    )
    
    
    (127
    )Currency translation and other
    
    
    93
    
    
    
    2
    
    
    
    91Restructuring liabilities at December 31, 2004
    
    $
    808
    
    
    $
    54
    
    
    $
    754Additions
    
    
    153
    
    
    
    
    
    
    
    153Reductions
    
    
    (19
    )
    
    
    (19
    )
    
    
    Payments
    
    
    (242
    )
    
    
    (34
    )
    
    
    (208
    )Currency translation and other
    
    
    17
    
    
    
    (1
    )
    
    
    18Restructuring liabilities at December 31, 2005
    
    $
    717
    
    
    $
    
    
    
    $
    717
 Consolidation of Glit facilities
 78




---



##### Table of Contents



One-time
    
    
    ContractTermination
    
    
    TerminationTotal
    
    
    Benefits [a]
    
    
    Costs [b]
    
    
    Other [c]Restructuring liabilities at December 31, 2003
    
    $
    462
    
    
    $
    462
    
    
    $
    
    
    
    $
    Additions
    
    
    791
    
    
    
    407
    
    
    
    250
    
    
    
    134Payments
    
    
    (270
    )
    
    
    (136
    )
    
    
    
    
    
    
    (134
    )Restructuring liabilities at December 31, 2004
    
    $
    983
    
    
    $
    733
    
    
    $
    250
    
    
    $
    Additions
    
    
    724
    
    
    
    313
    
    
    
    263
    
    
    
    148Payments
    
    
    (1,202
    )
    
    
    (791
    )
    
    
    (263
    )
    
    
    (148
    )Restructuring liabilities at December 31, 2005
    
    $
    505
    
    
    $
    255
    
    
    $
    250
    
    
    $
    
 Consolidation of administrative functions for CCP
 One-timeTerminationBenefits [a]Restructuring liabilities at December 31, 2003
    
    $
    52Additions
    
    
    215Payments
    
    
    (267
    )Restructuring liabilities at December 31, 2004
    
    $
    Additions
    
    
    21Payments
    
    
    (21
    )Restructuring liabilities at December 31, 2005
    
    $
    
 Shutdown of Woods US manufacturing
 79




---



##### Table of Contents



One-time
    
    
    ContractTermination
    
    
    TerminationTotal
    
    
    Benefits [a]
    
    
    Costs [b]
    
    
    Other [c]Restructuring liabilities at December 31, 2003
    
    $
    975
    
    
    $
    10
    
    
    $
    965
    
    
    $
    Additions
    
    
    292
    
    
    
    289
    
    
    
    
    
    
    
    3Reductions
    
    
    (254
    )
    
    
    
    
    
    
    (254
    )
    
    
    Payments
    
    
    (752
    )
    
    
    (279
    )
    
    
    (470
    )
    
    
    (3
    )Restructuring liabilities at December 31, 2004
    
    $
    261
    
    
    $
    20
    
    
    $
    241
    
    
    $
    Additions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reductions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments
    
    
    (176
    )
    
    
    
    
    
    
    (176
    )
    
    
    Currency translation and other
    
    
    110
    
    
    
    
    
    
    
    110
    
    
    
    Restructuring liabilities at December 31, 2005
    
    $
    195
    
    
    $
    20
    
    
    $
    175
    
    
    $
    
 Senior management transition and headcount rationalization
 Consultant  outsourcing
 Corporate office relocation
 One-timeTerminationBenefits [a]Restructuring liabilities at December 31, 2004
    
    $
    Additions
    
    
    172Payments
    
    
    (15
    )Restructuring liabilities at December 31, 2005
    
    $
    157
 Other
 80




---



##### Table of Contents



One-time
    
    
    ContractTermination
    
    
    TerminationTotal
    
    
    Benefits [a]
    
    
    Costs [b]
    
    
    Other [c]Restructuring and
related liabilities
at December 31,
2003
    
    $
    7,888
    
    
    $
    1,622
    
    
    $
    6,211
    
    
    $
    55Additions
    
    
    3,974
    
    
    
    968
    
    
    
    2,224
    
    
    
    782Reductions
    
    
    (469
    )
    
    
    (10
    )
    
    
    (459
    )
    
    $
    Payments
    
    
    (7,032
    )
    
    
    (1,775
    )
    
    
    (4,420
    )
    
    
    (837
    )Currency Translation
    
    
    93
    
    
    
    2
    
    
    
    91
    
    
    $
    Restructuring and
related liabilities
at December 31,
2004
    
    $
    4,454
    
    
    $
    807
    
    
    $
    3,647
    
    
    $
    Additions
    
    
    1,170
    
    
    
    506
    
    
    
    516
    
    
    
    148Reductions
    
    
    (80
    )
    
    
    (19
    )
    
    
    (61
    )
    
    $
    Payments
    
    
    (2,252
    )
    
    
    (861
    )
    
    
    (1,243
    )
    
    
    (148
    )Currency Translation
    
    
    127
    
    
    
    (1
    )
    
    
    128
    
    
    $
    Restructuring and
related liabilities
at December 31,
2005 [d]
    
    $
    3,419
    
    
    $
    432
    
    
    $
    2,987
    
    
    $
    
 
 [a]
    
    Includes severance, benefits, and other employee-related costs associated with the
employee terminations.[b]
    
    Includes charges related to non-cancelable lease liabilities for abandoned facilities, net of
estimated sub-lease revenue. Total maximum potential amount of lease loss, excluding any sublease
rentals, is $3.9 million as of December 31, 2005. We have included $0.9 million as an offset for
sublease rentals.[c]
    
    Includes charges associated with moving inventory, machinery and equipment, consolidation of
administrative and operational functions, and consultants working on sourcing and other
manufacturing and production efficiency initiatives.[d]
    
    Katy expects to substantially complete its restructuring program in 2006. The remaining
severance, restructuring and related costs for these initiatives are expected to be approximately
$0.5 million.  Maintenance
    
    
    ElectricalProducts
    
    
    ProductsTotal
    
    
    Group
    
    
    Group
    
    
    CorporateRestructuring and related liabilities at December 31, 2003
    
    $
    7,888
    
    
    $
    5,981
    
    
    $
    1,749
    
    
    $
    158Additions
    
    
    3,974
    
    
    
    2,637
    
    
    
    1,337
    
    
    
    Reductions
    
    
    (469
    )
    
    
    (12
    )
    
    
    (457
    )
    
    
    Payments
    
    
    (7,032
    )
    
    
    (5,221
    )
    
    
    (1,653
    )
    
    
    (158
    )Currency Translation
    
    
    93
    
    
    
    
    
    
    
    93
    
    
    
    Restructuring and related liabilities at December 31, 2004
    
    $
    4,454
    
    
    $
    3,385
    
    
    $
    1,069
    
    
    
    Additions
    
    
    1,170
    
    
    
    845
    
    
    
    153
    
    
    
    172Reductions
    
    
    (80
    )
    
    
    (61
    )
    
    
    (19
    )
    
    
    Payments
    
    
    (2,252
    )
    
    
    (1,819
    )
    
    
    (418
    )
    
    
    (15
    )Currency Translation
    
    
    127
    
    
    
    
    
    
    
    127
    
    
    
    Restructuring and related liabilities at December 31, 2005
    
    $
    3,419
    
    
    $
    2,350
    
    
    $
    912
    
    
    $
    157
 81




---



##### Table of Contents



Maintenance
    
    
    ElectricalProducts
    
    
    ProductsTotal
    
    
    Group
    
    
    Group
    
    
    Corporate2006
    
    
    1,708
    
    
    
    1,145
    
    
    
    406
    
    
    
    1572007
    
    
    481
    
    
    
    263
    
    
    
    218
    
    
    
    2008
    
    
    443
    
    
    
    219
    
    
    
    224
    
    
    
    2009
    
    
    294
    
    
    
    230
    
    
    
    64
    
    
    
    2009
    
    
    242
    
    
    
    242
    
    
    
    
    
    
    
    Thereafter
    
    
    251
    
    
    
    251
    
    
    
    
    
    
    
    Total Payments
    
    $
    3,419
    
    
    $
    2,350
    
    
    $
    912
    
    
    $
    157
    2005
    
    1st Qtr
    
    
    2nd Qtr
    
    
    3rd Qtr
    
    
    4th QtrNet sales
    
    $
    95,513
    
    
    $
    98,210
    
    
    $
    140,557
    
    
    $
    120,917Gross profit
    
    $
    9,497
    
    
    $
    11,476
    
    
    $
    17,263
    
    
    $
    14,695Net (loss) income
    
    $
    (4,648
    )
    
    $
    (6,046
    )
    
    $
    1,333
    
    
    $
    (3,796
    )Net (loss) income attributable to common stockholders
    
    $
    (4,648
    )
    
    $
    (6,046
    )
    
    $
    1,333
    
    
    $
    (3,796
    )(Loss) earnings per share of common stock  Basic and diluted [a]
    
    $
    (0.59
    )
    
    $
    (0.76
    )
    
    $
    0.17
    
    
    $
    (0.48
    )
  1st Qtr
    
    2nd Qtr
    
    3rd Qtr
    
    4th QtrSeverance, restructuring and related charges
    
    $
    172
    
    
    $
    466
    
    
    $
    254
    
    
    $
    198Impairments of long-lived assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,112
  82




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##### Table of Contents



2004
    
    1st Qtr
    
    
    2nd Qtr
    
    
    3rd Qtr
    
    
    4th QtrNet sales
    
    $
    99,895
    
    
    $
    100,522
    
    
    $
    135,426
    
    
    $
    121,799Gross profit
    
    $
    16,630
    
    
    $
    13,261
    
    
    $
    17,857
    
    
    $
    13,286Net (loss) income
    
    $
    (1,781
    )
    
    $
    (1,283
    )
    
    $
    876
    
    
    $
    (33,933
    )Payment in kind of dividends on convertible preferred stock
    
    
    (3,462
    )
    
    
    (3,462
    )
    
    
    (3,822
    )
    
    
    (4,003
    )Net loss attributable to common stockholders
    
    $
    (5,243
    )
    
    $
    (4,745
    )
    
    $
    (2,946
    )
    
    $
    (37,936
    )Loss per share of common stock  Basic and diluted [a]
    
    $
    (0.67
    )
    
    $
    (0.60
    )
    
    $
    (0.37
    )
    
    $
    (4.80
    )
  1st Qtr
    
    
    2nd Qtr
    
    
    3rd Qtr
    
    
    4th QtrSeverance, restructuring and related charges (income)
    
    $
    1,898
    
    
    $
    (109
    )
    
    $
    167
    
    
    $
    1,549Impairments of long-lived assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,831
 
    December 31,2005
    
    
    2004Debt issuance costs, net
    
    $
    3,750
    
    
    $
    4,721Equity method investment in unconsolidated affiliate
    
    
    2,217
    
    
    
    1,617Notes and other receivables  sales of subsidiaries
    
    
    
    
    
    
    106Other
    
    
    2,676
    
    
    
    3,502Total
    
    $
    8,643
    
    
    $
    9,946
  December 31,2005
    
    
    2004Contingent liabilities
    
    $
    15,413
    
    
    $
    14,054Advertising and rebates
    
    
    11,979
    
    
    
    13,551SESCO note payable to Montenay
    
    
    1,100
    
    
    
    1,050Non-cancelable lease liabilities  restructuring
    
    
    837
    
    
    
    1,023Professional services
    
    
    644
    
    
    
    839Other restructuring
    
    
    117
    
    
    
    807Other
    
    
    7,623
    
    
    
    8,615Total
    
    $
    37,713
    
    
    $
    39,939
  83




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##### Table of Contents



December 31,2005
    
    
    2004Deferred compensation
    
    $
    3,552
    
    
    $
    3,974Non-cancelable lease liabilities  restructuring
    
    
    1,941
    
    
    
    2,624SESCO note payable to Montenay
    
    
    1,487
    
    
    
    2,441Other
    
    
    3,517
    
    
    
    3,816Total
    
    $
    10,497
    
    
    $
    12,855
   Years Ended December 31,2005
    
    2004
    
    2003Interest
    
    $
    3,953
    
    
    $
    2,411
    
    
    $
    2,688Income taxes
    
    $
    1,789
    
    
    $
    759
    
    
    $
    2,924
   
 Item 9 CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
  
 Item 9A. CONTROLS AND PROCEDURES
   84




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##### Table of Contents




    
    Implementation of short term corrective actions in shipping and receiving 
Revised shipping, receiving, physical inventory, period end cut-off and returned goods
procedures have been issued. Training to reinforce the importance of the physical
verification was provided to all appropriate material handlers. Products loaded for
shipment are now verified against system generated bill of ladings. A receiving log
was implemented in the first quarter of 2005 and is reviewed at least weekly by the
distribution manager.
 85




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##### Table of Contents




    
    Establish improved interim recording of raw material usage  The shop floor
module in PRMS (the facilitys ERP system) was activated on July 1, 2005. Large raw
material variances are now reviewed and/or isolated by work order to allow bill of
material (BOM) corrections as required. Miscellaneous inventory transactions are
being downloaded and reviewed at least weekly by cost accounting. A supplemental
system was also re-implemented to allow the daily review of costed non-woven
production runs to identify process or material variances. The output of this system
yields a daily cost per yard of non-woven material produced, as well as an average
cost per yard over multiple batches/runs. This information was used as a reference
point and allowed material cost verifications with PRMS formula BOMs.
    
    Reestablish a monthly physical inventory until the PRMS perpetual inventory
process is re-implemented  This locations monthly physical inventory was
reinstituted for the February 2005 accounting close. We continued taking a monthly
physical inventory throughout the remaining part of 2005 and into 2006
    
    Establish security measures to mitigate the risk of theft  All employees
were issued parking permits to help identify on-site traffic of non-employees. A
security camera system was installed and became operational in June 2005. Cameras
provide monitoring of key plant areas by both security personnel and key managers.
    
    Improve bill of material and routing accuracy  In July 2005, a BOM
accuracy project was completed which encompassed the review of the most significant
BOMs across all product lines. Efforts are now ongoing to review remaining BOMs,
prioritizing based on sales volumes and comparative analysis with other BOMs of like
material/sizes. All remaining significant BOMs, based on volume levels, were updated
by February 1, 2006.
    
    Properly staff and plan PRMS re-implementation  The PRMS re-implementation
was completed at the end of July 2005. The Material Planning and Scheduling module of
PRMS was completed in the fourth quarter of 2005. The total re-implementation was
facilitated by a consultant with expertise with both PRMS and ERP system
implementation across varied industries.
    
    Establish procedures for production reporting and inventory transactions 
Detailed procedures for reporting of production in PRMS have been issued. The
implementation of scanning for inventory transactions was completed in August and
documented procedures were completed in September, 2005. Any additional procedures
will be finalized and documented when they are validated.
    
    Activation of PRMS production and inventory system  The system
was fully activated on February 1, 2006 which allows the accumulation and reporting of
transactions, maintenance of perpetual inventory records, and the calculation of
standard cost and related variances. The system will continue to operate in parallel
with the monthly physical inventory until all significant variances will be identified
and corrected.
  
 Item 9B. OTHER INFORMATION
 Executive Compensation
  86




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##### Table of Contents



Anthony T. Castor III
    
    $
    525,000Amir Rosenthal
    
    $
    332,500David S. Rahilly
    
    $
    250,000Keith Mills
    
    $
    235,000Robert A. Gail
    
    $
    205,000
  87




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##### Table of Contents



Part III
 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
     
 Item 11. EXECUTIVE COMPENSATION
  
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  88




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##### Table of Contents



Equity Compensation Plan Information
 Number of SecuritiesRemaining Available forNumber of Securities to
    
    Weighted-average
    
    Future Issuances Under EquityBe Issued on Exercise of
    
    Exercise Price of
    
    Compensation PlansOutstanding Option,
    
    Outstanding Options,
    
    (Excluding SecuritiesPlan Category
    
    Warrants and Rights
    
    Warrants and Rights
    
    Reflected in Column (a))(a)
    
    (b)
    
    (c)Equity Compensation
Plans Approved by
Stockholders
    
    
    904,023
    
    
    $
    5.40
    
    
    
    711,148Equity Compensation
Plans Not Approved by
Stockholders
    
    
    1,882,342
    
    
    $
    3.60
    
    
    
    
 Equity Compensation Plans Not Approved by Stockholders
     89




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##### Table of Contents



Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  90




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##### Table of Contents



Part IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES
 1. Financial Statements
       2. Financial Statement Schedules
  3. Exhibits
  
   Dated: March 31, 2006
    
    
    
    KATY INDUSTRIES, INC.
Registrant/S/ Anthony T. Castor IIIAnthony T. Castor IIIPresident and Chief Executive Officer/S/ Amir RosenthalAmir RosenthalVice President, Chief Financial Officer,General Counsel and Secretary
 91




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##### Table of Contents



Signature
    
    Title/S/ William F. Andrews

William F. Andrews
    
    Chairman of the Board and Director/S/ Anthony T. Castor III

Anthony T. Castor III
    
    President, Chief Executive Officer and Director
(Principal Executive Officer)/S/ Amir Rosenthal

Amir Rosenthal
    
    Vice President, Chief Financial Officer,
General Counsel and Secretary
(Principal Financial and Accounting Officer)/S/ Christopher Lacovara

Christopher Lacovara
    
    Director/S/ Robert M. Baratta

Robert M. Baratta
    
    Director/S/ James A. Kohlberg

James A. Kohlberg
    
    Director/S/ Daniel B. Carroll

Daniel B. Carroll
    
    Director/S/ Wallace E. Carroll, Jr.

Wallace E. Carroll, Jr.
    
    Director/S/ Samuel P. Frieder

Samuel P. Frieder
    
    Director/S/ Christopher Anderson

Christopher Anderson
    
    Director
 92




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
    
    94Schedule II  Valuation and Qualifying Accounts
    
    
    95Financial Statements (Unaudited) of Sahlman Holding Company, Inc.:
    
    
    96- Consolidated Balance Sheet (Unaudited) as of December 31, 2005- Consolidated Statement of Operations (Unaudited) for the year ended
December 31, 2005- Consolidated Statement of Changes in Shareholders Equity (Unaudited)
for the year ended December 31, 2005- Consolidated Statement of Cash Flows (Unaudited) for the year ended
December 31, 2005- Notes to Consolidated Financial Statements (Unaudited)Financial Statements of Sahlman Holding Company, Inc.:
    
    
    112- Report of Independent Auditors: Sahlman Holding Company, Inc.- Report of Independent Auditors: Sahlman Seafoods of Nicaragua, S.A.- Consolidated Balance Sheets as of December 31, 2004 and 2003- Consolidated Statements of Operations for the years ended December 31,
2004 and 2003- Consolidated Statements of Changes in Shareholders Equity for the years
ended December 31, 2004 and 2003- Consolidated Statements of Cash Flows for the years ended December 31,
2004 and 2003- Notes to Consolidated Financial StatementsConsent of Independent Registered Public Accounting Firm
    
    
    155Consent of Independent Public Accounting Firm
    
    
    156Consent of Independent Public Accounting Firm
    
    
    157
  93




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94




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##### Table of Contents



Balance at
    
    
    Additions
    
    
    
    
    
    
    
    
    
    
    BalanceBeginning
    
    
    Charged to
    
    
    Write-offs
    
    
    Other
    
    
    at EndAccounts Receivable Reserves
    
    of Year
    
    
    Expense
    
    
    to Reserves
    
    
    Adjustments
    
    
    of YearYear ended December 31, 2005Trade receivables
    
    $
    2,827
    
    
    $
    3,294
    
    
    $
    (3,705
    )
    
    $
    29
    
    
    $
    2,445Sales allowances
    
    
    14,571
    
    
    
    37,168
    
    
    
    (37,699
    )
    
    
    31
    
    
    
    14,071$
    17,398
    
    
    $
    40,462
    
    
    $
    (41,404
    )
    
    $
    60
    
    
    $
    16,516Year ended December 31, 2004Trade receivables
    
    $
    3,029
    
    
    $
    3,099
    
    
    $
    (3,092
    )
    
    $
    (209
    )
    
    $
    2,827Long-term notes receivable
    
    
    105
    
    
    
    250
    
    
    
    (355
    )
    
    
    
    
    
    
    Sales allowances
    
    
    11,355
    
    
    
    38,070
    
    
    
    (35,071
    )
    
    
    217
    
    
    
    14,571$
    14,489
    
    
    $
    41,419
    
    
    $
    (38,518
    )
    
    $
    8
    
    
    $
    17,398Year ended December 31, 2003Trade receivables
    
    $
    2,771
    
    
    $
    3,163
    
    
    $
    (3,113
    )
    
    $
    208
    
    
    $
    3,029Long-term notes receivable
    
    
    1,000
    
    
    
    105
    
    
    
    (1,000
    )
    
    
    
    
    
    
    105Sales allowances
    
    
    15,675
    
    
    
    31,771
    
    
    
    (36,874
    )
    
    
    783
    
    
    
    11,355$
    19,446
    
    
    $
    35,039
    
    
    $
    (40,987
    )
    
    $
    991
    
    
    $
    14,489
 Balance at
    
    Additions
    
    
    
    
    
    
    
    
    
    BalanceBeginning
    
    Charged to
    
    Write-offs
    
    Other
    
    at EndInventory Reserves
    
    of Year
    
    Expense
    
    to the Reserve
    
    Adjustments
    
    of YearYear ended December 31, 2005
    
    $
    4,671
    
    
    $
    1,527
    
    
    $
    (1,346
    )
    
    $
    (304
    )
    
    $
    4,548Year ended December 31, 2004
    
    $
    5,630
    
    
    $
    1,758
    
    
    $
    (2,766
    )
    
    $
    49
    
    
    $
    4,671Year ended December 31, 2003
    
    $
    5,730
    
    
    $
    1,822
    
    
    $
    (2,261
    )
    
    $
    339
    
    
    $
    5,630
 Balance at
    
    
    
    
    
    
    
    
    
    
    
    
    
    BalanceBeginning
    
    
    
    
    
    
    
    
    
    Other
    
    at EndIncome Tax Valuation Allowances
    
    of Year
    
    Provision
    
    Reversals
    
    Adjustments
    
    of YearYear ended December 31, 2005
    
    $
    60,028
    
    
    $
    4,510
    
    
    $
    
    
    
    $
    
    
    
    $
    64,538Year ended December 31, 2004
    
    $
    46,171
    
    
    $
    13,857
    
    
    $
    
    
    
    $
    
    
    
    $
    60,028Year ended December 31, 2003
    
    $
    42,828
    
    
    $
    3,343
    
    
    $
    
    
    
    $
    
    
    
    $
    46,171
 95




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FINANCIAL STATEMENT SCHEDULES
  SAHLMAN HOLDING COMPANY, INC.
 TAMPA, FLORIDA
 CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
  96




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED BALANCE SHEET
 DECEMBER 31,2005ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    4,676,235Accounts receivable  net of allowance for
doubtful account of $9,755
    
    
    2,281,060Inventories
    
    
    4,245,352Note and other receivables
    
    
    6,691,035Prepaid expenses
    
    
    400,777Deferred income taxes
    
    
    574,860Total current assets
    
    
    18,869,319PROPERTY, PLANT AND EQUIPMENT, NET
    
    
    4,617,355OTHER ASSETSGoodwill, net
    
    
    165,366Other, net
    
    
    96,148261,514$
    23,748,188LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    557,021Accrued expenses
    
    
    872,588Current maturities of long-term debt
    
    
    1,362,250Income taxes payable
    
    
    376,857Total current liabilities
    
    
    3,168,716LONG-TERM DEBT
    
    
    2,775,011DEFERRED INCOME TAXES
    
    
    2,783,796Total liabilities
    
    
    8,727,523SHAREHOLDERS EQUITY
    
    
    15,020,665$
    23,748,188
  97




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SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED STATEMENT OF OPERATIONS
 YEAR ENDED DECEMBER 31,2005GROSS SALES
    
    $
    18,961,419EXPENSESCost of goods sold
    
    
    16,468,527General and administrative expense
    
    
    2,098,048Total expenses
    
    
    18,566,575GAIN ON SALE OF ASSETS, NET
    
    
    1,674,366INCOME FROM OPERATIONS
    
    
    2,069,210OTHER INCOME AND (EXPENSE)Interest expense
    
    
    (184,670
    )Other income
    
    
    542,745Other expense
    
    
    (532,951
    )INCOME BEFORE INCOME TAXES
    
    
    1,894,334PROVISION FOR INCOME TAXES
    
    
    1,061,488NET INCOME
    
    $
    832,846
  98




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SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 YEAR ENDED DECEMBER 31, 2005
 ADDITIONAL
    
    
    FOREIGN
    
    
    
    
    
    
    TOTALTREASURY STOCK
    
    
    COMMON STOCK
    
    
    PAID-IN
    
    
    CURRENCY
    
    
    RETAINED
    
    
    SHAREHOLDERS'SHARES
    
    
    AMOUNT
    
    
    SHARES
    
    
    AMOUNT
    
    
    CAPITAL
    
    
    TRANSLATION
    
    
    EARNINGS
    
    
    EQUITYBALANCE,JANUARY 1, 2005
    
    
    (11,182
    )
    
    $
    (1,805,111
    )
    
    
    80,000
    
    
    $
    8,000
    
    
    $
    1,949,000
    
    
    $
    (231,375
    )
    
    $
    14,484,396
    
    
    $
    14,404,910PURCHASE OF TREASURY
STOCK
    
    
    (1,669
    )
    
    
    (217,091
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (217,091
    )NET INCOME
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    832,846
    
    
    
    832,846BALANCE,DECEMBER 31, 2005
    
    
    (12,851
    )
    
    $
    (2,022,202
    )
    
    
    80,000
    
    
    $
    8,000
    
    
    $
    1,949,000
    
    
    $
    (231,375
    )
    
    $
    15,317,242
    
    
    $
    15,020,665
  99




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED STATEMENT OF CASH FLOWS
 YEAR ENDED DECEMBER 31,2005CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    832,846Adjustments to reconcile net income to net cash
used in operating activities -Depreciation and amortization
    
    
    990,279Gain on sale of assets
    
    
    (1,674,357
    )Deferred income taxes
    
    
    (313,565
    )(Increase) decrease in operating assets -Accounts receivable
    
    
    (7,719,065
    )Inventories
    
    
    (1,165,878
    )Prepaid expenses
    
    
    37,765Other assets
    
    
    211,716(Decrease) increase in operating liabilities -Accounts payable
    
    
    (643,460
    )Accrued expenses
    
    
    392,313Income taxes payable
    
    
    191,427Net cash
used in operating activities
    
    
    (8,859,979
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (233,607
    )Proceeds from sale of property, plant
and equipment
    
    
    13,391,986Net cash provided by investing
activities
    
    
    13,158,379CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long-term debt
    
    
    4,000,000Payments on long-term debt
    
    
    (2,255,457
    )Net payments under line of credit
    
    
    (1,264,439
    )Purchase o f treasury stock
    
    
    (217,091
    )Net cash
provided by financing activities
    
    
    263,013NET INCREASE IN CASH AND CASH
EQUIVALENTS
    
    
    4,561,413CASH AND CASH EQUIVALENTS  BEGINNING
    
    
    114,822CASH AND CASH EQUIVALENTS  ENDING
    
    $
    4,676,235
  100




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SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 1 DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 Nature of Business
 Use of Estimates
 Principles of Consolidation
 Cash and Cash Equivalents
 Accounts Receivable
  Inventories
 Other Assets
  Property, Plant and Equipment
 Land improvements
    
    15yearsBuilding
    
    5-30yearsMarine vessels
    
    10-20yearsMachinery and equipment
    
    5-20years
 101




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SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 1 DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Income Taxes
 Concentration of Credit Risk
  Foreign Currency Translation
 Advertising Costs
 Impairment of Long-Lived Assets
 Asset Disposals
  102




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 2 INVENTORIES
  2005Seafood products
    
    $
    3,435,299Supplies
    
    
    810,053Total inventories
    
    $
    4,245,352
 NOTE 3 PROPERTY, PLANT AND EQUIPMENT
  2005Land and land improvements
    
    $
    1,832,516Buildings
    
    
    3,285,763Marine vessels
    
    
    325,899Machinery and equipment
    
    
    3,319,698Furniture and fixtures
    
    
    330,678Construction in progress
    
    
    278,607Total property, plant and equipment
    
    
    9,373,161Less accumulated depreciation
    
    
    (4,755,806
    )Property, plant and equipment, net
    
    $
    4,617,355
 NOTE 4 OTHER ASSETS
  2005Goodwill
    
    $
    566,880Less accumulated amortization
    
    
    (401,514
    )Goodwill, net
    
    $
    165,366Deferred financing costs
    
    $
    51,690Less accumulated amortization
    
    
    Deferred financing costs, net
    
    
    51,690Other assets (see Note 11)
    
    
    44,458Total other assets, net
    
    $
    96,148
   103




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SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 4 OTHER ASSETS
  2006
    
    $
    30,8042007
    
    
    20,886$
    51,690
 NOTE 5 LONG-TERM DEBT
  2005Fifth Third
term loan
    
    $
    4,000,000Sahlman Seafoods of Nicaragua,
SA bank loan
    
    
    137,261Total long-term debt
    
    
    4,137,261Less current maturities of long-term debt
    
    
    1,362,250Total long-term debt
    
    $
    2,775,011
 104




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 5 LONG-TERM DEBT
 SouthTrust
   105




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 5 LONG-TERM DEBT
   2006
    
    $
    1,362,2502007
    
    
    2,775,011$
    4,137,261
 NOTE 6 INCOME TAXES
  2005CurrentFederal
    
    $
    1,156,621Foreign
    
    
    267,332Total current
    
    
    1,423,953DeferredFederal
    
    
    (344,586
    )State
    
    
    (17,879
    )Foreign
    
    
    Total deferred
    
    
    (362,465
    )Total provision for income taxes
    
    $
    1,061,488
 106




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE
6 INCOME TAXES
  NOTE 7 CAPITAL STOCK
 Common Stock
 Voting Rights
 Liquidation Preferences
 107




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SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 7 CAPITAL STOCK
 Redeemable Stock
 Convertible Stock
 108




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 7 CAPITAL STOCK
  2005Class A common stock:Par value per share
    
    
    .10Shares authorized
    
    
    60,000Shares outstanding, net of
treasury stock
    
    
    25,399Class B common stock:Par value per share
    
    
    .10Shares authorized
    
    
    50,000Shares outstanding, net of
treasury stock
    
    
    41,750Class C common stock:Par value per share
    
    
    .10Shares authorized
    
    
    40,000Shares outstanding, net of
treasury stock
    
    
    Class D common stock:Par value per share
    
    
    .10Shares authorized
    
    
    40,000Shares outstanding, net of
treasury stock
    
    
    
 NOTE 8 STOCK OPTION PLANS
  109




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 NOTE 8 STOCK OPTION PLANS
  Number
    
    
    Weighted Averageof Shares
    
    
    Option PriceOptions (granted and unexercised)
at January 1, 2005
    
    
    4,117
    
    
    $
    160.08Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Options (granted and unexercised)
at December 31, 2005
    
    
    4,117
    
    
    $
    160.08
  NOTE 9 EMPLOYEE BENEFIT PLAN
   NOTE 10 COMMITMENTS AND CONTINGENCIES
 Litigation
 Insurance Coverage
 110




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2005
 Rights and Concessions
    111




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 TAMPA, FLORIDA
 CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 112




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113




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114




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED BALANCE SHEETS
 DECEMBER 31,2004
    
    
    2003ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    114,822
    
    
    $
    235,628Accounts receivable  net of allowance for
doubtful account of $14,406 and $9,000
    
    
    1,224,575
    
    
    
    1,578,551Inventories
    
    
    3,079,474
    
    
    
    3,204,570Note and other receivables, current portion
    
    
    225,076
    
    
    
    127,648Prepaid expenses
    
    
    438,542
    
    
    
    456,883Recoverable income taxes
    
    
    48,900
    
    
    
    225,626Deferred income taxes
    
    
    212,395
    
    
    
    221,798Total current assets
    
    
    5,343,784
    
    
    
    6,050,704NOTE RECEIVABLE, LESS CURRENT PORTION
    
    
    
    
    
    
    173,271PROPERTY, PLANT AND EQUIPMENT, NET
    
    
    16,906,280
    
    
    
    17,863,528OTHER ASSETSForeclosed property
    
    
    179,744
    
    
    
    Goodwill, net
    
    
    165,366
    
    
    
    165,366Other, net
    
    
    116,875
    
    
    
    115,420461,985
    
    
    
    280,786$
    22,712,049
    
    
    $
    24,368,289LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    1,200,481
    
    
    $
    942,401Accrued expenses
    
    
    480,275
    
    
    
    475,538Short-term debt
    
    
    1,264,439
    
    
    
    1,731,000Current maturities of long-term debt
    
    
    246,200
    
    
    
    611,617Income taxes payable
    
    
    185,430
    
    
    
    843,220Total current liabilities
    
    
    3,376,825
    
    
    
    4,603,776LONG-TERM DEBT
    
    
    2,146,518
    
    
    
    1,745,543DEFERRED INCOME TAXES
    
    
    2,783,796
    
    
    
    3,162,715Total liabilities
    
    
    8,307,139
    
    
    
    9,512,034SHAREHOLDERS EQUITY
    
    
    14,404,910
    
    
    
    14,856,255$
    22,712,049
    
    
    $
    24,368,289
  115




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 YEAR
ENDED DECEMBER 31,2004
    
    
    2003GROSS SALES
    
    $
    16,925,341
    
    
    $
    15,802,189EXPENSESCost of goods sold
    
    
    15,368,379
    
    
    
    15,200,241Freight and other sales expense
    
    
    343,076
    
    
    
    349,161General and administrative expense
    
    
    1,843,940
    
    
    
    2,080,068Total expenses
    
    
    17,555,395
    
    
    
    17,629,470GAIN ON SALE OF ASSETS, NET
    
    
    116
    
    
    
    233,671LOSS FROM OPERATIONS
    
    
    (629,938
    )
    
    
    (1,593,610
    )OTHER INCOME AND (EXPENSE)Interest expense
    
    
    (181,878
    )
    
    
    (131,578
    )Other income
    
    
    295,738
    
    
    
    130,409Other expense
    
    
    (174,967
    )
    
    
    (147,461
    )LOSS BEFORE INCOME TAXES
    
    
    (691,045
    )
    
    
    (1,742,240
    )PROVISION FOR (BENEFIT FROM)INCOME TAXES
    
    
    (239,700
    )
    
    
    (383,863
    )NET LOSS
    
    $
    (451,345
    )
    
    $
    (1,358,377
    )
  116




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 YEAR ENDED DECEMBER 31, 2004
 ADDITIONAL
    
    
    FOREIGN
    
    
    
    
    
    
    TOTALTREASURY STOCK
    
    
    COMMON STOCK
    
    
    PAID-IN
    
    
    CURRENCY
    
    
    RETAINED
    
    
    SHAREHOLDERSSHARES
    
    
    AMOUNT
    
    
    SHARES
    
    
    AMOUNT
    
    
    CAPITAL
    
    
    TRANSLATION
    
    
    EARNINGS
    
    
    EQUITYBALANCE,JANUARY 1, 2004
    
    
    (11,182
    )
    
    $
    (1,805,111
    )
    
    
    80,000
    
    
    $
    8,000
    
    
    $
    1,949,000
    
    
    $
    (231,375
    )
    
    $
    14,935,741
    
    
    $
    14,856,255NET LOSS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (451,345
    )
    
    
    (451,345
    )BALANCE,DECEMBER 31, 2004
    
    
    (11,182
    )
    
    $
    (1,805,111
    )
    
    
    80,000
    
    
    $
    8,000
    
    
    $
    1,949,000
    
    
    $
    (231,375
    )
    
    $
    14,484,396
    
    
    $
    14,404,910
 YEAR ENDED DECEMBER 31, 2003
 BALANCE,JANUARY 1, 2003
    
    
    (10,632
    )
    
    $
    (1,717,067
    )
    
    
    80,000
    
    
    $
    8,000
    
    
    $
    1,949,000
    
    
    $
    (231,375
    )
    
    $
    16,294,118
    
    
    $
    16,302,676PURCHASE OF TREASURY
STOCK
    
    
    (550
    )
    
    
    (88,044
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88,044
    )NET LOSS
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,358,377
    )
    
    
    (1,358,377
    )BALANCE,DECEMBER 31, 2003
    
    
    (11,182
    )
    
    $
    (1,805,111
    )
    
    
    80,000
    
    
    $
    8,000
    
    
    $
    1,949,000
    
    
    $
    (231,375
    )
    
    $
    14,935,741
    
    
    $
    14,856,255
  117




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEAR ENDED DECEMBER 31,2004
    
    
    2003CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (451,345
    )
    
    $
    (1,358,377
    )Adjustments to reconcile net loss to net cash
provided by operating activities Depreciation and amortization
    
    
    1,517,600
    
    
    
    1,577,543Gain on sale of assets
    
    
    (116
    )
    
    
    (233,671
    )Deferred income taxes
    
    
    (369,516
    )
    
    
    (738,804
    )(Increase)
decrease in operating assets Accounts receivable
    
    
    353,976
    
    
    
    (198,869
    )Inventories
    
    
    125,096
    
    
    
    769,009Other receivables
    
    
    (105,140
    )
    
    
    160,733Prepaid expenses
    
    
    18,341
    
    
    
    (118,780
    )Recoverable income taxes
    
    
    176,726
    
    
    
    (225,626
    )Other assets
    
    
    17,066
    
    
    
    (403
    )(Decrease)
increase in operating liabilities Accounts payable
    
    
    258,080
    
    
    
    (193,165
    )Accrued expenses
    
    
    4,737
    
    
    
    (15,597
    )Income taxes payable
    
    
    (657,790
    )
    
    
    724,750Net cash provided by operating activities
    
    
    887,715
    
    
    
    148,743CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (546,683
    )
    
    
    (1,014,339
    )Proceeds from sale of property, plant and equipment
    
    
    1,250
    
    
    
    1,102,319Proceeds from note receivable
    
    
    1,239
    
    
    
    7,086Net cash provided by (used in) investing activities
    
    
    (544,194
    )
    
    
    95,066CASH FLOWS FROM FINANCING ACTIVITIESFinance costs
    
    
    (33,324
    )
    
    
    (16,122
    )Proceeds from long-term debt
    
    
    604,660
    
    
    
    400,000Payments on long-term debt
    
    
    (569,102
    )
    
    
    (799,228
    )Net (payments) borrowings under line of credit
    
    
    (466,561
    )
    
    
    220,953Purchase of treasury stock
    
    
    
    
    
    
    (88,044
    )Net cash used in financing activities
    
    
    (464,327
    )
    
    
    (282,441
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (120,806
    )
    
    
    (38,632
    )CASH AND CASH EQUIVALENTS  BEGINNING
    
    
    235,628
    
    
    
    274,260CASH AND CASH EQUIVALENTS  ENDING
    
    $
    114,822
    
    
    $
    235,628
  118




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEAR ENDED DECEMBER 31,2004
    
    
    2003SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATIONIncome taxes paid (refunded)
    
    $
    360,803
    
    
    $
    (190,131
    )Interest paid
    
    $
    183,638
    
    
    $
    134,045SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONSTransfer of note receivable to other asssets
as a result of foreclosure on real property
    
    $
    179,744
    
    
    $
    
  119




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 1 DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business
 Use of Estimates
 Principles of Consolidation
 Cash and Cash Equivalents
 Accounts Receivable
  Inventories
 120




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 1 DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Other Assets
  Property, Plant and Equipment
 Land improvements
    
    15yearsBuilding
    
    5-30yearsMarine vessels
    
    10-20yearsMachinery and equipment
    
    5-20years
  Income Taxes
 Concentration of Credit Risk
  121




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 1 DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Foreign Currency Translation
  Advertising Costs
 Shipping and Handling Costs
 Impairment of Long-Lived Assets
 Asset Disposals
 122




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 1 DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  NOTE 2 INVENTORIES
  2004
    
    
    2003Seafood products
    
    $
    1,233,091
    
    
    $
    1,474,220Supplies
    
    
    1,751,653
    
    
    
    1,635,113Stock in ponds
    
    
    94,730
    
    
    
    95,237Total inventories
    
    $
    3,079,474
    
    
    $
    3,204,570
 NOTE 3 PROPERTY, PLANT AND EQUIPMENT
  2004
    
    
    2003Land
    
    $
    559,801
    
    
    $
    559,801Land improvements
    
    
    1,541,082
    
    
    
    1,541,082Buildings
    
    
    4,430,362
    
    
    
    4,240,560Marine vessels
    
    
    15,987,066
    
    
    
    15,987,066Machinery and equipment
    
    
    5,559,121
    
    
    
    5,767,265Furniture and fixtures
    
    
    555,342
    
    
    
    748,797Construction in progress
    
    
    100,184
    
    
    
    322,883Total property, plant and equipment
    
    
    28,732,958
    
    
    
    29,167,454Less accumulated depreciation
    
    
    (11,826,678
    )
    
    
    (11,303,926
    )Property, plant and equipment, net
    
    $
    16,906,280
    
    
    $
    17,863,528
   123




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 4 OTHER ASSETS
  2004
    
    
    2003Foreclosed property
    
    $
    179,744
    
    
    $
    Goodwill
    
    $
    566,880
    
    
    $
    566,880Less accumulated amortization
    
    
    (401,514
    )
    
    
    (401,514
    )Goodwill, net
    
    $
    165,366
    
    
    $
    165,366Deferred financing costs
    
    $
    85,318
    
    
    $
    51,994Less accumulated amortization
    
    
    (44,479
    )
    
    
    (29,676
    )Deferred financing costs, net
    
    
    40,839
    
    
    
    22,318Other assets (see Note 11)
    
    
    76,036
    
    
    
    93,102Total other assets, net
    
    $
    116,875
    
    
    $
    115,420
    124




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 4 OTHER ASSETS
  2005
    
    $
    8,4482006
    
    
    8,4482007
    
    
    8,4482008
    
    
    8,4482009
    
    
    7,047$
    40,839
 NOTE 5 SHORT-TERM DEBT
   125




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 6 LONG-TERM DEBT
  2004
    
    
    2003SouthTrust term loans
    
    $
    2,168,633
    
    
    $
    2,202,330Sahlman Seafoods of Nicaragua, SA bank loan
    
    
    224,085
    
    
    
    150,000Other
    
    
    
    
    
    
    4,830Total long-term debt
    
    
    2,392,718
    
    
    
    2,357,160Less current maturities of long-term debt
    
    
    246,200
    
    
    
    611,617Total long-term debt
    
    $
    2,146,518
    
    
    $
    1,745,543
 SouthTrust
  126




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 6 LONG-TERM DEBT
     2005
    
    $
    246,2002006
    
    
    270,2852007
    
    
    146,2002008
    
    
    146,2002009
    
    
    1,583,833$
    2,392,718
 127




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE
7 INCOME TAXES
  2004
    
    
    2003CurrentFederal
    
    $
    (46,900
    )
    
    $
    354,941Foreign
    
    
    49,377
    
    
    
    Total current
    
    
    2,477
    
    
    
    354,941DeferredFederal
    
    
    (212,720
    )
    
    
    (693,156
    )State
    
    
    (10,020
    )
    
    
    (45,648
    )Foreign
    
    
    (19,437
    )
    
    
    Total deferred
    
    
    (242,177
    )
    
    
    (738,804
    )Total provision for (benefit from) income taxes
    
    $
    (239,700
    )
    
    $
    (383,863
    )
    128




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE
7 INCOME TAXES
   NOTE 8 CAPITAL STOCK
 Common Stock
 Voting Rights
 Liquidation Preferences
 Redeemable Stock
 129




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 8 CAPITAL STOCK
 Convertible Stock
  2004
    
    
    2003Class A common stock:Par value per share
    
    
    .10
    
    
    
    .10Shares authorized
    
    
    60,000
    
    
    
    60,000Shares outstanding, net of
treasury stock
    
    
    27,068
    
    
    
    27,068Class B common stock:Par value per share
    
    
    .10
    
    
    
    .10Shares authorized
    
    
    50,000
    
    
    
    50,000Shares outstanding, net of
treasury stock
    
    
    41,750
    
    
    
    41,750Class C common stock:Par value per share
    
    
    .10
    
    
    
    .10Shares authorized
    
    
    40,000
    
    
    
    40,000Shares outstanding, net of
treasury stock
    
    
    
    
    
    
    Class D common stock:Par value per share
    
    
    .10
    
    
    
    .10Shares authorized
    
    
    40,000
    
    
    
    40,000Shares outstanding, net of
treasury stock
    
    
    
    
    
    
    
 NOTE 9 STOCK OPTION PLANS
  130




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 9 STOCK OPTION PLANS
  Numberof
    
    
    Weighted AverageShares
    
    
    Option PriceOptions (granted and unexercised)
at January 1, 2004Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Options (granted and unexercised)
at December 31, 2004
    
    
    4,117
    
    
    $
    160.08
 Numberof
    
    
    Weighted AverageShares
    
    
    Option PriceOptions (granted and unexercised)
at January 1, 2003
    
    
    4,117
    
    
    $
    160.08Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Options (granted and unexercised)
at December 31, 2003
    
    
    4,117
    
    
    $
    160.08
  NOTE 10 EMPLOYEE BENEFIT PLAN
  131




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##### Table of Contents



SAHLMAN HOLDING COMPANY, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2004 AND 2003
 NOTE 10 EMPLOYEE BENEFIT PLAN
  NOTE 11 COMMITMENTS AND CONTINGENCIES
 Litigation
 Insurance Coverage
 Letters of Credit
 Rights and Concessions
    132




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##### Table of Contents



ExhibitNumber
    
    Exhibit Title
    
    Page2
    
    Preferred Stock Purchase and Recapitalization Agreement, dated as of June 2,
2001 (incorporated by reference to Annex B to the Companys Proxy Statement
on Schedule 14A filed June 8, 2001).
    
    
    *3.1
    
    The Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Companys Current Report
on Form 8-K on July 13, 2001).
    
    
    *3.2
    
    The By-laws of the Company, as amended (incorporated by reference to Exhibit 3.1
of the Companys Quarterly Report on Form 10-Q filed May 15, 2001).
    
    
    *4.1
    
    Rights Agreement dated as of January 13, 1995 between Katy and Harris Trust
and Savings Bank as Rights Agent (incorporated by reference to Exhibit 2.1 of
the Companys Form 8-A filed January 17, 1995).
    
    
    *4.1a
    
    Amendment dated as of October 31, 1996 to the Rights Agreement dated as of
January 13, 1995 between Katy and Harris Trust and Savings Bank as Rights
Agent (incorporated by reference to Companys Current Report on Form 8-K filed
November 8, 1996).
    
    
    *4.1b
    
    Amendment dated as of January 8, 1999 to the Rights Agreement dated as of
January 13, 1995 between Katy and LaSalle National Bank as Rights
Agent (incorporated by reference to Exhibit 4.1(b) of the Companys Annual Report
on Form 10-K filed March 18, 1999).
    
    
    *4.1c
    
    Third Amendment to Rights Agreement, dated March 30, 2001, between the
Company and LaSalle Bank, N.A., as Rights Agent (incorporated by reference
to Exhibit (e) (3) to the Companys Solicitation/Recommendation Statement on
Schedule 14D-9 filed April 25, 2001).
    
    
    *10.1
    
    Katy Industries, Inc. Long-Term Incentive Plan (incorporated by
reference to the Companys Registration Statement on Form S-8 filed
June 21, 1995).
    
    
    *10.2
    
    Katy Industries, Inc. Non-Employee Director Stock Option Plan
(incorporated by reference to Katys Registration Statement on
Form S-8 filed June 21, 1995).
    
    
    *10.3
    
    Katy Industries, Inc. Supplemental Retirement and Deferral
Plan effective as of June 1, 1995 (incorporated by reference
to Katys Registration Statement on Form S-8 filed June 21, 1995)
    
    
    *10.4
    
    Katy Industries, Inc. Directors Deferred Compensation Plan
effective as of June 1, 1995 (incorporated by reference to Katys
Registration Statement on Form S-8 filed June 21, 1995).
    
    
    *10.5
    
    Employment Agreement dated as of June 1, 2005 between Anthony T. Castor
III and the Company (incorporated by reference to Exhibit 10.1 to the Companys
Quarterly Report on Form 10-Q filed August 15, 2005).
    
    
    *
 133




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##### Table of Contents



ExhibitNumber
    
    Exhibit Title
    
    Page10.6
    
    Katy Industries, Inc. 2005 Chief Executive Officers Plan (incorporated by
reference to Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q
filed August 15, 2005).
    
    
    *10.7
    
    Employment Agreement dated as of September 1, 2001 between Amir Rosenthal
and the Company (incorporated by reference to Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q dated November 14, 2001).
    
    
    *10.8
    
    Amendment dated as of October 1, 2004 to the Employment Agreement
dated as of September 1, 2001 between Amir Rosenthal and the Company
(incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report
on Form 10-Q dated November 10, 2004).
    
    
    *10.9
    
    Katy Industries, Inc. 2001 Chief Financial Officers Plan (incorporated by
reference to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q dated
November 14, 2001).
    
    
    *10.10
    
    Katy Industries, Inc. 2002 Stock Appreciation Rights Plan,
dated November 21, 2002, (incorporated by reference to Exhibit 10.17 to the
Companys Annual Report on Form 10-K dated April 15, 2003).
    
    
    *10.11
    
    Katy Industries, Inc. Executive Bonus Plan dated December 2001
(incorporated by reference to Exhibit 10.18 to the Companys Annual
Report on Form 10-K dated April 15, 2005).
    
    
    *10.12
    
    Amended and Restated Loan Agreement dated as of April 20, 2004 with
Fleet Capital Corporation, (incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q dated May 10, 2004).
    
    
    *10.13
    
    First Amendment to Amended and Restated Loan Agreement dated as of
June 29, 2004 with Fleet Capital Corporation, (incorporated by reference to Exhibit
10.1 to the Companys Quarterly Report on Form 10-Q dated August 16, 2004).
    
    
    *10.14
    
    Second Amendment to Amended and Restated Loan Agreement dated as of
March 29, 2005 with Fleet Capital Corporation (incorporated by reference to
Exhibit 10.1 of the Companys Current Report on Form 8-K filed April 1, 2005)
    
    
    *10.15
    
    Third Amendment to Amended and Restated Loan Agreement dated as of
April 13, 2005 with Fleet Capital Corporation (incorporated by
reference to Exhibit 10.17 of the Companys Annual Report
on Form 10-K dated April 14, 2005).
    
    
    *10.16
    
    Fourth Amendment to Amended and Restated Loan Agreement dated as of June 8, 2005
with Fleet Capital Corporation (incorporated by reference to Exhibit 10.2 of the
Companys Quarterly Report on Form 10-Q dated August 15, 2005).
    
    
    *10.17
    
    Fifth Amendment to Amended and Restated Loan Agreement dated as of
August 4, 2005 with Fleet Capital Corporation (incorporated by reference to
Exhibit 10.3 of the Companys Quarterly Report on Form 10-Q dated August 15, 2005).
    
    
    *10.18
    
    Sixth Amendment to Amended and Restated Loan Agreement dated as of
March 9, 2006 with Fleet Capital Corporation (filed herewith).
    
    
    **10.19
    
    ISDA Master Agreement and Schedule dated as of August 11, 2005,
between Bank of America, N.A. and Katy Industries, Inc. and Transaction
    
    
    *
 134




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##### Table of Contents



ExhibitNumber
    
    Exhibit Title
    
    PageConfirmation dated as of August 16, 2005 (incorporated by reference to
Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q dated
November 15, 2005).10.20
    
    Director Compensation Arrangements
    
    
    15210.21
    
    Executive Officer Compensation Arrangements
    
    
    15321
    
    Subsidiaries of registrant
    
    
    15423
    
    Consent of Independent Registered Public Accounting Firm
    
    
    15523.1
    
    Consent of Independent Public Accounting Firm
    
    15623.2
    
    Consent of Independent Public Accounting Firm
    
    15731.1
    
    CEO Certification pursuant to Securities Exchange Act Rule 13a-14,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    
    
    15831.2
    
    CFO Certification pursuant to Securities Exchange Act Rule 13a-14,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
    
    
    15932.1
    
    CEO Certification required by 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
    
    
    16032.2
    
    CFO Certification required by 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
    
    
    161
 
 *
    
    Indicates incorporated by reference.**
    
    Indicates filed herewith. 135