##### 



FORM 10-K
  þ
   December 31, 2006
   o
    Katy Industries, Inc.
   Delaware

75-1277589(State or other jurisdiction of
    incorporation or organization)

(IRS Employer Identification No.)2461 South Clark Street,
    Suite 630, Arlington, Virginia
    (Address of Principal Executive Offices)

22202
    (Zip Code)   code: (703) 236-4300
    (Title of each class)

(Name of each exchange on which
    registered)Common Stock, $1.00 par value

New York Stock ExchangeCommon Stock Purchase Rights      o þ
   o þ
   þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o o þ
  Rule 12b-2 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




---



##### 



TABLE
    OF CONTENTS
  PART IItem 1.
    BUSINESS


2Item 1A. RISK
    FACTORS


7Item 1B.
    UNRESOLVED STAFF COMMENTS


11Item 2.
    PROPERTIES


12Item 3. LEGAL
    PROCEEDINGS


12Item 4.
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


12PART IIItem 5. MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES


13Item 6.
    SELECTED FINANCIAL DATA


16Item 7.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND RESULTS OF OPERATIONS


17Item 7A.
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK


36Item 8.
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


38Item 9.
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE


81Item 9A.
    CONTROLS AND PROCEDURES


81Item 9B. OTHER
    INFORMATION


83Part IIIItem 10.
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


84Item 11.
    EXECUTIVE COMPENSATION


84Item 12.
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    AND RELATED STOCKHOLDER MATTERS


84Item 13.
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE


85Item 14.
    PRINCIPAL ACCOUNTING FEES AND SERVICES


85Part IVItem 15.
    EXHIBITS, FINANCIAL STATEMENTS SCHEDULES


86SIGNATURES


87EXHIBITS


91




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##### 



PART I Item 1.  BUSINESS    Recapitalization
    Operations
      Maintenance
    Products Group
   2




---



##### 



Continental Commercial Products, LLC (CCP
  Continental ® tm tm tm ® ® tm .
  Contico ® ®
  Container ®
  Disco ® ® ® ® ®
  Glit ® ® ® ® ® ® ® ® ® tm ® ® ® tm
    Wilen tm ® ®
    CCP Canada
  Gemtex ®
 3




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##### 



Contico Manufacturing, Ltd.
  Electrical
    Products Group
    Woods US ® ® ® ® ® ®
  Woods Canada ® ® ®
    Other
    Operations
    Discontinued
    Operations
    waste-to-energy
   4




---



##### 



Customers
    Backlog
  Maintenance
    Products :
    Electrical
    Products :
    Markets
    and Competition
  Maintenance
    Products :
       5




---



##### 



Electrical
    Products :
        Raw
    Materials
   6




---



##### 



Employees
    Regulatory
    and Environmental Matters
    Licenses,
    Patents and Trademarks
  ® ® ® ® ® ® ® ® ® ® tm ®
  Available
    Information
  http://www.sec.gov
  http://www.katyindustries.com Form 10-K, Form 10-Q, Form 8-K,
 Item 1A.  RISK
    FACTORS  Form 10-K,
 7




---



##### 



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.
    The
    Companys success depends on its ability to continuously
    improve productivity and streamline operations, principally by
    reducing its manufacturing overhead.
    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.
     8




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##### 



Our
    inability to execute our acquisition integration and
    consolidation of facilities plans could adversely affect our
    business and results of operations.
    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 entities 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.
   9




---



##### 



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.
        Our
    inability to meet covenants associated with the Companys
    Amended and Restated Loan with Bank of America, N.A. (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.
     10




---



##### 



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.
    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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##### 



Item 2.
    PROPERTIES    Location

Facility

Business UnitUNITED STATESCaliforniaNorwalk

Manufacturing, Distribution

Continental, Contico, ContainerChino

Distribution

Continental, Contico, Glit, Wilen,
    DiscoGeorgiaAtlanta

Manufacturing, Distribution

WilenMcDonough

Manufacturing, Distribution

Glit, Wilen, DiscoWrens*

Manufacturing, Distribution

GlitWashington**

Manufacturing

GlitIndianaCarmel

Manufacturing

Woods USIndianapolis

Office, Distribution

Woods USMissouriBridgeton

Office, Manufacturing, Distribution

Continental, ConticoHazelwood

Manufacturing

Continental, ConticoVirginiaArlington

Corporate Headquarters

CorporateCANADAOntarioToronto

Office, Manufacturing, Distribution

GemtexToronto

Office, Distribution

Woods Canada, CCP CanadaCHINAShenzhen

Office

Woods USUNITED KINGDOMCornwallRedruth***

Office, Distribution

CMLBerkshireSlough

Office

CML   *
    
    Facility is owned.**
    
    During 2007, we expect to consolidate all of our abrasives
    operations in Washington, Georgia into our Wrens, Georgia
    (Wrens) facility.***
    
    Facility was sold in January, 2007; however, we will lease a
    portion of the facility.   Item 3.  LEGAL
    PROCEEDINGS   Item 4.  SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   12




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##### 



PART II Item 5.  MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Period

High


Low2006First Quarter

$
3.75


$
2.80Second Quarter


3.61



2.24Third Quarter


3.23



1.85Fourth Quarter


3.40



2.512005First Quarter

$
5.41


$
3.80Second Quarter


3.98



2.35Third Quarter


3.70



2.25Fourth Quarter


3.50



1.80     Dividend
    Policy
    Equity
    Compensation Plan Information
    Share
    Repurchase Plan
   13




---



##### 



MaximumTotal Number


Number ofof Shares


Shares ThatPurchased as


May YetPart of


BePublicly


PurchasedTotal Number





Announced


Under theof Shares


Average Price


Plans or


Plans orPeriod

Purchased


Paid per Share


Programs


Programs2005


3,200


$
2.35



3,200



333,3332006


40,800


$
2.71



40,800Total


44,000


$
2.68



44,000    14




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##### 



Performance
    Graph
  Form 10-K
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
 Among Katy Industries, Inc., The Russell 2000 Index,
 The Dow Jones US Diversified Industrials Index
 And The S & P SmallCap Industrial Conglomerates
  
     12/01


12/02


12/03


12/04


12/05


12/06Katy Industries,
    Inc.



100.00




100.58




166.96




151.46




90.64




78.36Russell 2000



100.00




79.52




117.09




138.55




144.86




171.47Dow Jones US Diversified
    Industrials



100.00




64.93




87.84




104.69




101.95




111.68S & P SmallCap
    Industrial Conglomerates



100.00




59.47




80.21




95.65




92.02




99.94  15




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##### 



Item 6.  SELECTED
    FINANCIAL DATA  Years Ended December 31,2006


2005


2004


2003


2002(Amounts in Thousands, except per share data and percentages)Net sales

$
396,166


$
423,390


$
416,681


$
398,249


$
402,422Loss from continuing operations [a]

$
(4,884
)

$
(10,836
)

$
(36,342
)

$
(16,981
)

$
(47,533
)Discontinued operations [b]


(6,348
)


(2,321
)


221



7,617



(6,702
)Cumulative effect of a change in
    accounting principle [b] [c]


(756
)














(2,514
)Net loss


(11,988
)


(13,157
)


(36,121
)


(9,364
)


(56,749
)Gain on early redemption of
    preferred interest of subsidiary [d]














6,560



Payment-in-kind
    of dividends on convertible preferred stock [e]










(14,749
)


(12,811
)


(11,136
)Net loss attributable to common
    stockholders

$
(11,988
)

$
(13,157
)

$
(50,870
)

$
(15,615
)

$
(67,885
)(Loss) earnings per share of
    common stock  Basic and diluted:Loss from continuing operations
    attributable to common stockholders

$
(0.61
)

$
(1.37
)

$
(6.48
)

$
(2.83
)

$
(7.01
)Discontinued operations


(0.80
)


(0.29
)


0.03



0.93



(0.80
)Cumulative effect of a change in
    accounting principle


(0.09
)














(0.30
)Net loss attributable to common
    stockholders

$
(1.50
)

$
(1.66
)

$
(6.45
)

$
(1.90
)

$
(8.11
)Total assets

$
183,674


$
212,683


$
224,464


$
241,708


$
275,977Total liabilities


140,662



157,390



155,879



139,416



157,405Preferred interest in subsidiary


















16,400Stockholders equity


43,012



55,293



68,585



102,292



102,172Long-term debt, including current
    maturities


56,871



57,660



58,737



39,663



45,451Impairments of long-lived assets
    [f]






2,112



30,056



11,525



21,204Severance, restructuring and
    related charges [f]


(112
)


1,090



3,505



8,132



18,868Depreciation and amortization [f]


8,640



8,968



12,145



18,877



17,732Capital expenditures [f]


4,614



8,925



10,782



11,062



8,714Working capital [g]


49,590



48,338



59,855



43,439



35,206Ratio of debt to capitalization


56.9
%


51.0
%


46.1
%


27.9
%


27.7
%Weighted average common shares
    outstanding  Basic and diluted


7,966,742



7,948,749



7,883,265



8,214,712



8,370,815Number of employees


1,172



1,544



1,793



1,808



2,261Cash dividends declared per common
    share

$



$



$



$



$
   [a]
    
    Includes distributions on preferred securities in 2003 and 2002.[b]
    
    Presented net of tax. 16




---



##### 



[c]
    
    In 2006, this amount is stock compensation expense recorded with
    the adoption of Statement of Financial Accounting Standards
    (SFAS) No. 123R, Share-Based Payment. In
    2002, this amount is a transitional impairment of goodwill
    recorded with the adoption of SFAS No. 142,
    Goodwill and Other Intangible Assets.[d]
    
    Represents the gain recognized on a redemption of a preferred
    interest of our CCP subsidiary.[e]
    
    Represents a 15%
    payment-in-kind
    dividend on our Convertible Preferred Stock. See Note 11 to
    the Consolidated Financial Statements in Part II,
    Item 8.[f]
    
    From continuing operations only.[g]
    
    Defined as current assets minus current liabilities, exclusive
    of deferred tax assets and liabilities and debt classified as
    current. Item 7.  MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  COMPANY
    OVERVIEW
           17




---



##### 



18




---



##### 



Years Ended December 31,2006


2005


2004(Amounts in Millions, except per share data and percentages)$


% to Sales


$


% to Sales


$


% to SalesNet sales

$
396.2



100.0


$
423.4



100.0


$
416.7



100.0Cost of goods sold


344.7



87.0



372.7



88.0



361.7



86.8Gross profit


51.5



13.0



50.7



12.0



55.0



13.2Selling, general and administrative
    expenses


46.9



(11.8
)


52.3



(12.4
)


52.7



(12.6
)Impairments of long-lived assets










2.1



(0.5
)


30.0



(7.2
)Severance, restructuring and
    related charges


(0.1
)


0.0



1.1



(0.3
)


3.5



(0.9
)Loss (gain) on sale of assets


0.5



(0.1
)


(0.3
)


0.1



(0.3
)


0.1Operating income (loss)


4.2



1.1



(4.5
)


(1.1
)


(30.9
)


(7.4
)Equity in income of equity method
    investment










0.6







Interest expense


(7.1
)






(5.6
)






(3.8
)Other, net


0.3







0.2







(1.0
)Loss from continuing operations
    before provision for income taxes


(2.6
)






(9.3
)






(35.7
)Provision for income taxes from
    continuing operations


(2.3
)






(1.6
)






(0.6
)Loss from continuing operations


(4.9
)






(10.9
)






(36.3
)(Loss) income from operations of
    discontinued businesses (net of tax)


(1.0
)






(2.3
)






1.0Loss on sale of discontinued
    businesses (net of tax)


(5.3
)














(0.8
)Loss before cumulative effect of a
    change in accounting principle


(11.2
)






(13.2
)






(36.1
)Cumulative effect of a change in
    accounting principle (net of tax)


(0.8
)














Net loss


(12.0
)






(13.2
)






(36.1
)Payment-in-kind
    of dividends on convertible preferred stock


















(14.8
)Net loss attributable to common
    stockholders

$
(12.0
)





$
(13.2
)





$
(50.9
)Loss per share of common
    stock  Basic and dilutedLoss from continuing operations

$
(0.61
)





$
(1.37
)





$
(4.60
)Payment-in-kind
    of dividends on convertible preferred stock


















(1.88
)Loss from continuing operations
    attributable to common stockholders


(0.61
)






(1.37
)






(6.48
)Discontinued operations (net of tax)


(0.80
)






(0.29
)






0.03Cumulative effect of a change in
    accounting principle


(0.09
)














Net loss attributable to common
    stockholders

$
(1.50
)





$
(1.66
)





$
(6.45
)  19




---



##### 



RESULTS
    OF OPERATIONS
  2006
    COMPARED TO 2005
  Overview
    Shared
    Based Payments
  Net
    Sales
  Maintenance
    Products Group
      Electrical
    Products Group
       20




---



##### 



Operating
    Income
  2006


2005


ChangeOperating income
    (loss)

$


% Margin


$


% Margin


$


% MarginMaintenance Products Group

$
6.3



3.0


$
(6.3
)


(2.9
)

$
12.6



5.9Electrical Products Group


8.8



4.7



17.4



8.4



(8.6
)


(3.7
)Unallocated corporate expense


(10.5
)






(12.7
)






2.24.6



1.1



(1.6
)


(0.4
)


6.2



1.5Impairments of long-lived assets










(2.1
)






2.1Severance, restructuring and
    related charges


0.1







(1.1
)






1.2(Loss) gain on sale of assets


(0.5
)






0.3







(0.8
)Operating income (loss)

$
4.2



1.1


$
(4.5
)


(1.1
)

$
8.7



2.2   Maintenance
    Products Group
  (-2.9% of last-in,
  Electrical
    Products Group
    Corporate
    Impairments
    of Long-lived Assets
  Goodwill and Intangible Assets Accounting for the Impairment or
    Disposal of Long-Lived Assets.
 21




---



##### 



Severance,
    Restructuring and Related Charges
    Other
        Share-Based
    Payments.
  2005
    COMPARED TO 2004
  Overview
    paid-in-kind
 22




---



##### 



Net
    Sales
  Maintenance
    Products Group
      Electrical
    Products Group
      Operating
    Income
  2005


2004


ChangeOperating income
    (loss)

$


% Margin


$


% Margin


$


% MarginMaintenance Products Group

$
(6.3
)


(2.9
)

$
(4.1
)


(1.7
)

$
(2.2
)


(1.2
)Electrical Products Group


17.4



8.4



16.8



9.4



0.6



(1.0
)Unallocated corporate expense


(12.7
)






(10.4
)






(2.3
)(1.6
)


(0.4
)


2.3



0.6



(3.9
)


(1.0
)Impairments of long-lived assets


(2.1
)






(30.0
)






27.9Severance, restructuring and
    related charges


(1.1
)






(3.5
)






2.4Gain on sale of assets


0.3







0.3







Operating loss

$
(4.5
)


(1.1
)

$
(30.9
)


(7.4
)

$
26.4



6.4   Maintenance
    Products Group
   23




---



##### 



Electrical
    Products Group
    Corporate
    Impairments
    of Long-lived Assets
    Severance,
    Restructuring and Related Charges
      Other
   24




---



##### 



LIQUIDITY
    AND CAPITAL RESOURCES
      Bank of
    America Credit Agreement
  and/or
 25




---



##### 



Fixed Charge Coverage Ratio
  Capital Expenditures
  Leverage Ratio
     26




---



##### 



and/or
    No. 95-22, Balance Sheet Classification of Borrowings Outstanding under
    Revolving Credit Agreements that Include Both a Subjective
    Acceleration Clause and a Lock-Box Arrangement.
  Contractual
    Obligations
    Due in less


Due in


Due in


Due afterContractual Cash Obligations

Total


than 1 Year


1-3 Years


3-5 Years


5 YearsRevolving credit facility [a]

$
43,879


$
43,879


$



$



$
Term loans


12,992



1,125



11,867







Interest on debt [b]


10,128



4,500



5,628







Operating leases [c]


22,090



7,663



10,571



3,242



614Severance and restructuring [c]


653



247



280



126



SESCO payable to Montenay [d]


400



400











Postretirement benefits [e]


6,203



901



1,505



1,257



2,540Total Contractual Obligations

$
96,345


$
58,715


$
29,851


$
4,625


$
3,154   27




---



##### 



Due in less


Due in


Due in


Due afterOther Commercial Commitments

Total


than 1 Year


1-3 Years


3-5 Years


5 YearsCommercial letters of credit

$
762


$
762


$



$



$
Stand-by letters of credit


7,121



7,121











Total Commercial Commitments

$
7,883


$
7,883


$



$



$
       sub-lease
      Off-balance
    Sheet Arrangements
    Cash
    Flow
    Operating
    Activities
   28




---



##### 



Investing
    Activities
    Financing
    Activities
    TRANSACTIONS
    WITH RELATED AND CERTAIN OTHER PARTIES
      SEVERANCE,
    RESTRUCTURING AND RELATED CHARGES
   29




---



##### 



2006


2005


2004(Amounts in Thousands)Consolidation of St. Louis
    manufacturing/distribution facilities

$
(499
)

$
39


$
1,460Consolidation of Glit facilities


299



724



791Corporate office relocation


217



172



Shutdown of Woods
    U.S. manufacturing


(115
)






38Shutdown of Woods Canada
    manufacturing


(14
)


134



841Consolidation of administrative
    functions for CCP






21



215Other










160Total severance, restructuring and
    related costs

$
(112
)

$
1,090


$
3,505     Total Expected


Total ProvisionCost


to DateMaintenance Products Group

$
21,993


$
20,993Electrical Products Group


12,776



12,776Corporate


12,323



12,073$
47,092


$
45,842     One-time


ContractTermination


TerminationTotal


Benefits [a]


Costs [b]


Other [c]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 and other


127



(1
)


128



Restructuring and related
    liabilities at
    December 31, 2005

$
3,419


$
432


$
2,987


$
Additions


516



326







190Reductions


(628
)


(19
)


(609
)


Payments


(2,354
)


(739
)


(1,425
)


(190
)Currency translation


8







8



Restructuring and related
    liabilities at
    December 31, 2006 [d]

$
961


$



$
961


$
      sub-lease
   30




---



##### 



OUTLOOK
    FOR 2007
           31




---



##### 



and/or
  Cautionary
    Statement Pursuant to Safe Harbor Provisions of the Private
    Securities Litigation Reform Act of 1995
   32




---



##### 




    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 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.    CRITICAL
    ACCOUNTING POLICIES
    Revenue Recognition 01-09, Accounting for Consideration Given by a Vendor to a
    Customer.
 33




---



##### 



Stock-based Compensation Share-Based Payment
  Accounts Receivable
  Inventories and/or
    Goodwill and Impairments of Long-Lived Assets Goodwill and Intangible Assets
 34




---



##### 



Accounting for the Impairment or
    Disposal of Long-Lived Assets
  Deferred Income Taxes Accounting for Income Taxes
  Workers Compensation and Product
    Liabilities
  Environmental and Other Contingencies
 35




---



##### 



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
   36




---



##### 



Expected
    Maturity Dates
   ASSETS
  2007


2008


2009


2010


2011


Thereafter


Total


Fair ValueTemporary cash
    investments
    Fixed rate

$



$



$



$



$



$



$



$
Average interest rate






























INDEBTEDNESSFixed rate debt

$



$



$



$



$



$



$



$
Average interest rate






























Variable rate debt

$
1,125


$
1,500


$
54,246


$



$



$



$
56,871


$
56,871Average interest rate


8.38
%


8.38
%


8.18
%


















   Foreign
    Exchange Risk
    Commodity
    Price Risk
   37




---



##### 



Item 8.  FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
          
    38




---



##### 



KATY
    INDUSTRIES, INC. AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    AS OF DECEMBER 31, 2006 and 2005
    (Amounts in Thousands)ASSETS
  2006


2005CURRENT ASSETS:Cash and cash equivalents

$
7,392


$
8,421Trade accounts receivable, net of
    allowances of $2,213 and $2,445


55,014



63,612Inventories, net


55,960



62,799Other current assets


2,991



3,600Asset held for sale


4,483



Total current assets


125,840



138,432OTHER ASSETS:Goodwill


665



665Intangibles, net


6,435



6,946Other


8,990



8,643Total other assets


16,090



16,254PROPERTY AND EQUIPMENTLand and improvements


336



1,732Buildings and improvements


9,669



14,011Machinery and equipment


119,703



140,514129,708



156,257Less  Accumulated
    depreciation


(87,964
)


(98,260
)Property and equipment, net


41,744



57,997Total assets

$
183,674


$
212,683    39




---



##### 



KATY
    INDUSTRIES, INC. AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    AS OF DECEMBER 31, 2006 and 2005
    (Amounts in Thousands, Except Share Data)
  LIABILITIES AND STOCKHOLDERS EQUITY
  2006


2005CURRENT LIABILITIES:Accounts payable

$
33,684


$
47,449Accrued compensation


3,518



4,071Accrued expenses


38,187



37,713Current maturities, long-term debt


1,125



2,857Revolving credit agreement


43,879



41,946Total current liabilities


120,393



134,036LONG-TERM DEBT, less current
    maturities


11,867



12,857OTHER LIABILITIES


8,402



10,497Total liabilities


140,662



157,390COMMITMENTS 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 9,822,304 shares


9,822



9,822Additional paid-in capital


27,069



27,016Accumulated other comprehensive
    income


2,242



3,158Accumulated deficit


(82,403
)


(70,415
)Treasury stock, at cost,
    1,869,827 shares and 1,874,027 shares, respectively


(21,974
)


(22,544
)Total stockholders equity


43,012



55,293Total liabilities and
    stockholders equity

$
183,674


$
212,683    40




---



##### 



KATY
    INDUSTRIES, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF OPERATIONS
    FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
    (Amounts in Thousands, Except Per Share Data)
  2006


2005


2004Net sales

$
396,166


$
423,390


$
416,681Cost of goods sold


344,695



372,715



361,660Gross profit


51,471



50,675



55,021Selling, general and
    administrative expenses


46,939



52,315



52,668Impairments of goodwill






1,574



7,976Impairments of other long-lived
    assets






538



22,080Severance, restructuring and
    related charges


(112
)


1,090



3,505Loss (gain) on sale of assets


467



(377
)


(288
)Operating income (loss)


4,177



(4,465
)


(30,920
)Equity in income of equity method
    investment






600



Interest expense


(7,037
)


(5,570
)


(3,782
)Other, net


302



207



(998
)Loss from continuing operations
    before provision for income taxes


(2,558
)


(9,228
)


(35,700
)Provision for income taxes from
    continuing operations


(2,326
)


(1,608
)


(642
)Loss from continuing operations


(4,884
)


(10,836
)


(36,342
)(Loss) income from operations of
    discontinued businesses (net of tax)


(1,043
)


(2,321
)


996Loss on sale of discontinued
    businesses (net of tax)


(5,305
)






(775
)Loss before cumulative effect of a
    change in accounting principle


(11,232
)


(13,157
)


(36,121
)Cumulative effect of a change in
    accounting principle (net of tax)


(756
)






Net loss


(11,988
)


(13,157
)


(36,121
)Payment-in-kind
    of dividends on convertible preferred stock










(14,749
)Net loss attributable to common
    stockholders

$
(11,988
)

$
(13,157
)

$
(50,870
)Loss per share of common
    stock  Basic and dilutedLoss from continuing operations
    attributable to common stockholders

$
(0.61
)

$
(1.37
)

$
(6.48
)Discontinued operations (net of
    tax)


(0.80
)


(0.29
)


0.03Cumulative effect of a change in
    accounting principle


(0.09
)






Net loss attributable to common
    stockholders

$
(1.50
)

$
(1.66
)

$
(6.45
)    41




---



##### 



KATY
    INDUSTRIES, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
    FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
    (Amounts in Thousands, Except Share Data)
  Convertible


Common





OtherPreferred Stock


Stock


Additional


Compre-








Compre-


TotalNumber of


Par


Number of


Par


Paid-in


hensive


Accumulated


Treasury


hensive


StockholdersShares


Value


Shares


Value


Capital


Income


Deficit


Stock


Loss


EquityBalance, January 1, 2004


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
)





$
55,293Net loss


























(11,988
)





$
(11,988
)


(11,988
)Foreign currency translation
    adjustment






















686











686



686Adoption of SFAS 158






















(1,624
)










(1,624
)


(1,624
)Interest rate swap






















22











22



22Comprehensive loss

































$
(12,904
)Purchase of treasury stock






























(111
)






(111
)Stock option exercise


















(378
)










525







147Stock compensation


















587



















587Other










100







(156
)










156







Balance, December 31, 2006


1,131,551


$
108,256



9,822,304


$
9,822


$
27,069


$
2,242


$
(82,403
)

$
(21,974
)





$
43,012    42




---



##### 



KATY
    INDUSTRIES, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
    (Amounts in Thousands)
  2006


2005


2004Cash flows from operating
    activities:Net loss

$
(11,988
)

$
(13,157
)

$
(36,121
)Loss (income) from discontinued
    operations


6,348



2,321



(221
)Loss from continuing operations


(5,640
)


(10,836
)


(36,342
)Cumulative effect of a change in
    accounting principle


756







Depreciation and amortization


8,640



8,968



12,145Impairments of goodwill






1,574



7,976Impairments of other long-lived
    assets






538



22,080Write-off and amortization of debt
    issuance costs


1,178



1,122



1,076Stock option expense


587



1,953



Loss (gain) on sale of assets


467



(377
)


(288
)Equity in income of equity method
    investment






(600
)


Deferred income taxes


14



240



(1,228
)Amortization of debt issue costs


6,002



2,582



5,419Changes in operating assets and
    liabilities:Accounts receivable


2,743



(16
)


(215
)Inventories


2,056



2,054



(8,649
)Other assets


600



(1,045
)


307Accounts payable


(8,000
)


7,503



200Accrued expenses


622



(3,047
)


(681
)Other, net


(3,237
)


(1,187
)


(3,508
)(5,216
)


4,262



(12,546
)Net cash provided by (used in)
    continuing operations


786



6,844



(7,127
)Net cash provided by (used in)
    discontinued operations


1,037



(282
)


(844
)Net cash provided by (used in)
    operating activities


1,823



6,562



(7,971
)Cash flows from investing
    activities:Capital expenditures of continuing
    operations


(4,614
)


(8,925
)


(10,782
)Capital expenditures of
    discontinued operations


(128
)


(441
)


(3,094
)Acquisition of subsidiary, net of
    cash acquired






(1,115
)


Collections of notes receivable
    from sales of subsidiaries






106



43Proceeds from sale of discontinued
    operations, net


5,520







Proceeds from sale of assets, net


267



981



5,778Net cash provided by (used in)
    investing activities


1,045



(9,394
)


(8,055
)Cash flows from financing
    activities:Net borrowings of revolving loans


1,761



1,450



4,037(Decrease) increase in book
    overdraft


(2,322
)


4,028



Proceeds of term loans


1,364







18,152Repayments of term loans


(4,086
)


(2,857
)


(3,244
)Direct costs associated with debt
    facilities


(312
)


(151
)


(1,485
)Repurchases of common stock


(111
)


(7
)


(75
)Proceeds from the exercise of stock
    options


147







304Net cash (used in) provided by
    financing activities


(3,559
)


2,463



17,689Effect of exchange rate changes on
    cash and cash equivalents


(338
)


265



114Net (decrease) increase in cash and
    cash equivalents


(1,029
)


(104
)


1,777Cash and cash equivalents,
    beginning of period


8,421



8,525



6,748Cash and cash equivalents, end of
    period

$
7,392


$
8,421


$
8,525Supplemental disclosure of non-cash
    investing activities:Note receivable from sale of
    discontinued operations

$
1,200


$



$
    43




---



##### 



KATY
    INDUSTRIES, INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    As of December 31, 2006 and 2005
    (Amounts in Thousands, Except Per Share Data)
  Note 1.
    ORGANIZATION
    OF THE BUSINESS    Note 2.
    SIGNIFICANT
    ACCOUNTING POLICIES  Consolidation Policy
      Use of Estimates
  Revenue Recognition No. 01-09, Accounting for Consideration Given by a Vendor to a
    Customer.
  Cash and Cash Equivalents
  Advertising Costs
  Accounts Receivable and Allowance for Doubtful
    Accounts
 44




---



##### 



Inventories last-in, first-in,
  December 31,2006


2005(Amounts in Thousands)Raw materials

$
15,915


$
23,314Work in process


613



1,766Finished goods


47,230



48,949Inventory reserves


(3,769
)


(4,548
)LIFO reserve


(4,029
)


(6,682
)$
55,960


$
62,799   Inventory Costs,
    an amendment of ARB No. 43, Chapter 4
  Goodwill Goodwill and
    Intangible Assets
  Property and Equipment (10-40 years) (3-20 years)
 45




---



##### 



Accounting for Asset
    Retirement Obligations
    SFAS 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

$
1,068Accretion expense


49SFAS No. 143 Obligation
    at December 31, 2006

$
1,117   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 Accounting for Stock-Based Compensation Accounting for Stock-Based
    Compensation  Transition and Disclosure
 46




---



##### 



Share-Based Payment
    Year EndedDecember 31,2006Selling, general and
    administrative expense

$
398Cumulative effect of a change in
    accounting principle


756$
1,154     Share-Based
    Payment
 47




---



##### 



For the Years EndedDecember 31,2005


2004Net loss attributable to common
    stockholders, as reported

$
(13,157
)

$
(50,870
)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
)Pro forma net loss

$
(11,497
)

$
(52,722
)Earnings per shareBasic and diluted-as reported

$
(1.66
)

$
(6.45
)Basic and diluted-pro forma

$
(1.45
)

$
(6.69
)     Derivative Financial Instruments Accounting for Derivative Financial Instruments and Hedging
    Activities
   48




---



##### 



Rate

FairNotional Amount

Maturity

Rate Paid

Received

Value(2)$15,000

August 17, 2007

4.49%

LIBOR (1)

$87    (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 Accounting for Uncertainty in Income Taxes
  Fair Value Measurements
  Reclassifications
  Note 3.
    GOODWILL AND
    INTANGIBLE ASSETS    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


665Impairment charge


Goodwill at December 31, 2006

$
665  49




---



##### 



December 31, 2006


December 31, 2006Gross


Accumulated


Net Carrying


Gross


Accumulated


Net CarryingAmount


Amortization


Amount


Amount


Amortization


AmountPatents

$
1,511


$
(1,065
)

$
446


$
1,409


$
(954
)

$
455Customer lists


10,454



(8,111
)


2,343



10,643



(7,997
)


2,646Tradenames


5,612



(2,345
)


3,267



5,498



(2,075
)


3,423Other


441



(62
)


379



441



(19
)


422Total

$
18,018


$
(11,583
)

$
6,435


$
17,991


$
(11,045
)

$
6,946     2007

$
6452008


6322009


5972010


5492011


508Thereafter


3,504   Note 4.
    IMPAIRMENTS
    OF LONG-LIVED ASSETS      Accounting
    for the Impairments or Disposal of Long Lived Assets Clarification of Reporting Unit Guidance in Paragraph 30
    of FASB Statement No. 142
   50




---



##### 



Note 5.
    EQUITY
    METHOD INVESTMENT    The Equity Method for of Accounting for
    Investments in Common Stock,
    Note 6.
    DISCONTINUED
    OPERATIONS      waste-to-energy
 51




---



##### 



December 31,2006


2005Current assets:Accounts receivable, net

$
83


$
6,434Inventories, net






5,746Other current assets






583$
83


$
12,763Non-current assets:Intangibles, net

$



$
166Property and equipment, net






12,145$



$
12,311Current liabilities:Accounts payable

$



$
3,834Accrued compensation






119Accrued expenses


1,143



2,545$
1,143


$
6,498Other liabilities:

$



$
1,486      52




---



##### 



2006


2005


2004Net sales

$
21,485


$
31,807


$
40,961Pre-tax operating (loss) income

$
(1,050
)

$
(2,500
)

$
1,237Pre-tax loss on sale of
    discontinued businesses

$
(5,305
)

$



$
(775
)   Note 7.
    SAVANNAH
    ENERGY SYSTEMS COMPANY PARTNERSHIP  waste-to-energy waste-to-energy
  Offsetting of Amounts Related to
    Certain Contracts.
  waste-to-energy waste-to-energy
  Consolidation of Variable Interest Entities
  waste-to-energy
 53




---



##### 



Note 8.  INDEBTEDNESS
    December 31,2006


2005(Amounts in Thousands)Term loan payable under the Bank
    of America Credit Agreement, interest based on LIBOR and Prime
    Rates (8.38%  9.50%), due through 2009

$
12,992


$
15,714Revolving loans payable under the
    Bank of America Credit Agreement, interest based on LIBOR and
    Prime Rates (8.13%  9.25%)


43,879



41,946Total debt


56,871



57,660Less revolving loans, classified
    as current (see below)


(43,879
)


(41,946
)Less current maturities


(1,125
)


(2,857
)Long-term debt

$
11,867


$
12,857  54




---



##### 



2007

$
1,1252008


1,5002009


10,367   and/or
           55




---



##### 



Fixed Charge Coverage Ratio
  Capital Expenditures
  Leverage Ratio
      and/or
    No. 95-22, Balance Sheet Classification of Borrowings Outstanding under
    Revolving Credit Agreements that Include Both a Subjective
 56




---



##### 



Acceleration Clause and a Lock-Box Arrangement.
  Note 9.
    EARNINGS PER
    SHARE  Earnings Per Share.
  For the Year Ended
    December 31,

2006


2005


2004Basic and Diluted EPS:Loss from continuing operations

$
(4,884
)

$
(10,836
)

$
(36,342
)Payment-in-kind
    dividends on convertible preferred stock










(14,749
)Loss from continuing operations
    attributable to common stockholders


(4,884
)


(10,836
)


(51,091
)Discontinued operations (net of
    tax)


(6,348
)


(2,321
)


221Cumulative effect of a change in
    accounting principle


(756
)






Net loss attributable to common
    stockholders

$
(11,988
)

$
(13,157
)

$
(50,870
)Weighted average
    shares  Basic and Diluted


7,967



7,949



7,883Per share amount:Loss from continuing operations
    attributable to common stockholders

$
(0.61
)

$
(1.37
)

$
(6.48
)Discontinued operations (net of
    tax)


(0.80
)


(0.29
)


0.03Cumulative effect of a change in
    accounting principle


(0.09
)






Net loss attributable to common
    stockholders

$
(1.50
)

$
(1.66
)

$
(6.45
)   in-the-money out-of-the In-the-money
  Note 10.
    RETIREMENT
    BENEFIT PLANS  Pension and Other Postretirement Plans
   57




---



##### 



Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans, an amendment of FASB Statements
    No. 87, 88, 106 and 132(R)
  Incremental
    Effect of Applying SFAS No. 158 on Individual Line
    Items in Katys
    Consolidated Balance Sheets as of December 31, 2006
  Before





AfterApplication of





Application ofSFAS No. 158


Adjustments


SFAS No. 158Assets:Other non-current assets

$
136


$
(94
)

$
42Deferred taxes










Liabilities:Accrued expenses






327



327Other liabilities


2,585



1,203



3,788Stockholders Equity:Accumulated OCI

$
(500
)

$
(1,624
)

$
(2,124
)  58




---



##### 



Pension Benefits


Other Benefits2006


2005


2006


2005(Amounts in Thousands)Change in benefit obligation:Benefit obligation at beginning of
    year

$
1,634


$
1,544


$
2,801


$
3,171Service cost


9



7







Interest cost


90



90



209



160Actuarial (gain) loss


(43
)


123



1,093



(246
)Benefits paid


(151
)


(130
)


(272
)


(284
)Benefit obligation at end of year

$
1,539


$
1,634


$
3,831


$
2,801Accumulated benefit obligation at
    end of year

$
1,539


$
1,634Change in plan assets:Fair value of plan assets at
    beginning of year

$
1,239


$
1,306


$



$
Actuarial return on plan assets


106



63







Employer contributions


102







272



284Benefits paid


(150
)


(130
)


(272
)


(284
)Fair value of plan assets at end
    of year

$
1,297


$
1,239


$



$
Funded status 
    deficiency

$
242


$
395


$
3,831


$
2,801Unrecognized net actuarial loss






(766
)






(633
)Unrecognized prior service cost














(74
)Accrued (prepaid) benefit cost at
    end of year

$
242


$
(371
)

$
3,831


$
2,094Amount recognized in financial
    statements:Other non-current assets

$
(42
)

$
(150
)

$



$
Accrued expenses






453



327



Other liabilities


284







3,504



2,094Accumulated other comprehensive
    income






(674
)






Total

$
242


$
(371
)

$
3,831


$
2,094Amounts recognized in accumulated
    OCI consist of:Unrecognized net actuarial loss
    (gain)

$
604


$
(395
)

$
285


$
(2,801
)Unrecognized prior service cost










1,235



Prepaid (accrued) benefit cost

$
604


$
(395
)

$
1,520


$
(2,801
)  59




---



##### 



Pension Benefits


Other Benefits2006


2005


2006


2005Assumptions as of December 31:Discount rates


5.75
%


5.50
%


5.75
%


5.50
%Assumed rates of compensation
    increases


N/A



N/A



N/A



N/AMedical trend rate (initial)


N/A



N/A



8.50
%


9.00
%Medical trend rate (ultimate)






N/A



5.00
%


5.00
%Years to ultimate rate






N/A



7



7Impact of one-percent increase in
    health care trend rate:Increase in accumulated
    postretirement benefit obligation









$
322


$
391Increase in service cost and
    interest cost









$
18


$
25Impact of one-percent decrease in
    health care trend rate:Decrease in accumulated
    postretirement benefit obligation









$
280


$
315Decrease in service cost and
    interest cost









$
16


$
20     Target


Percentage ofAllocation


Plan AssetsAsset Category

2007


2006


2005Equity Securities


30 - 35
%


45
%


35
%Debt Securities


60 - 65
%


55
%


65
%Real estate


0
%


0
%


0
%Other


0 - 3
%


0
%


0
%100
%


100
%     Pension Benefits


Other Benefits2006


2005


2006


2005Components of net periodic benefit
    cost:Service cost

$
9


$
7


$



$
Interest cost


90



90



209



160Expected return on plan assets


(90
)


(101
)






Amortization of prior service cost










126



55Amortization of net gain


59



52



16



39Net periodic benefit cost

$
68


$
48


$
351


$
254  60




---



##### 



Pension Benefits


Other Benefits2007

$
53


$
3372008


60



3382009


71



3362010


80



3332011


83



3272012-2016


454



1,474Total

$
801


$
3,145     Pension Benefits


Other BenefitsActuarial loss

$
48


$
6Prior service cost






89Total

$
48


$
95     and/or
  401(k) Plans
    Note 11.
    STOCKHOLDERS
    EQUITY  Convertible Preferred Stock
   61




---



##### 



Share Repurchase
    Rights Plan
    Note 12.
    STOCK
    INCENTIVE PLANS  Director Stock Grant
   62




---



##### 



Stock Options
           63




---



##### 



64




---



##### 



WeightedWeighted


Average


AggregateAverage


Remaining


IntrinsicExercise


Contractual


ValueOptions


Price


Life


(In Thousands)Outstanding at December 31,
    2003


1,799,200


$
4.92Granted


6,000



5.91Exercised


(75,000
)


4.05Cancelled


(4,550
)


12.70Outstanding at December 31,
    2004


1,725,650


$
4.94Granted


936,000



2.71Expired


(55,000
)


8.98Cancelled


(750,300
)


4.20Outstanding at December 31,
    2005


1,856,350


$
3.99Exercised


(45,000
)


3.26Expired


(60,750
)


13.23Cancelled


(32,600
)


5.53Outstanding at December 31,
    2006


1,718,000


$
3.66



6.69 years


$
48Vested and Exercisable at
    December 31, 2006


1,098,000


$
4.20



5.69 years


$
16     Stock Appreciation Rights
       65




---



##### 



Non-Vested at December 31,
    2005


85,115Granted


26,000Vested


(55,998
)Cancelled


(1,683
)Non-Vested at December 31,
    2006


53,434Total Outstanding at
    December 31, 2006


798,281     Note 13.
    INCOME TAXES    2006


2005


2004(Amounts in Thousands)Domestic

$
(7,504
)

$
(13,947
)

$
(38,939
)Foreign


4,946



4,719



3,239Total

$
(2,558
)

$
(9,228
)

$
(35,700
)     2006


2005


2004(Amounts in Thousands)Current tax provision (benefit):Federal

$



$



$
(343
)State


110



100



(204
)Foreign


2,202



1,268



2,417Total

$
2,312


$
1,368


$
1,870Deferred tax provision (benefit):Federal

$



$



$
State










Foreign


14



240



(1,228
)Total

$
14


$
240


$
(1,228
)Total provision from continuing
    operations

$
2,326


$
1,608


$
642  66




---



##### 



2006


2005


2004(Amounts in Thousands)Benefit for income taxes at
    statutory rate

$
(898
)

$
(3,230
)

$
(12,495
)State income taxes, net of federal
    benefit


72



65



(133
)Foreign tax rate differential


95



112



463Foreign tax credits


(2,080
)


(1,266
)


(245
)Utilization of foreign losses


823



718



Return to provision adjustments


2,739



(166
)


(991
)Dividend income from foreign
    subsidiary


1,267



913



Dividend
    gross-up


698



494



Stock option expense






529



Valuation allowance adjustments


(277
)


3,456



14,260Permanent items


(115
)


4



103Increase (reduction) of tax
    reserves










(343
)Other, net


2



(21
)


23Net provision for income taxes

$
2,326


$
1,608


$
642     2006


2005(Amounts in Thousands)Deferred tax liabilitiesWaste-to-energy
    facility

$
160


$
(2,602
)Inventory costs


(1,072
)


(1,800
)Unremitted foreign earnings


(4,153
)


(4,428
)$
(5,065
)

$
(8,830
)Deferred tax assetsAllowance for doubtful receivables

$
1,862


$
972Accrued expenses and other items


12,069



13,425Difference between book and tax
    basis of property


12,859



16,149Operating loss
    carry-forwards  domestic


35,103



34,770Operating loss
    carry-forwards  foreign


94



45Tax credit carry forwards


6,647



4,567Estimated foreign tax credit
    related to unremitted earnings


4,153



4,42872,787



74,356Less valuation allowance


(66,748
)


(64,538
)6,039



9,818Net deferred income tax asset

$
974


$
988    67




---



##### 



Deduction for Qualified Domestic Production Activities
    Repatriation of Foreign Earnings
      Note 14.
    LEASE
    OBLIGATIONS    2007

$
7,6632008


7,2392009


3,3322010


2,7322011


510Thereafter


614Total minimum payments

$
22,090  68




---



##### 



sub-lease. sub-lease
    Note 15.
    RELATED
    PARTY TRANSACTIONS      Note 16.
    INDUSTRY
    SEGMENTS AND GEOGRAPHIC INFORMATION   69




---



##### 



year-to-year
  Years Ended December 31,2006


2005


2004(Amounts in Thousands)Maintenance Products
    GroupNet external sales



$
208,423


$
216,068


$
237,927Operating income (loss)




6,275



(6,261
)


(4,115
)Operating margin (deficit)




3.0
%


(2.9
)%


(1.7
)%Depreciation and amortization




7,694



7,673



10,593Capital expenditures




3,855



8,329



10,111Total assets




95,963



108,012



124,458Electrical Products
    GroupNet external sales



$
187,743


$
207,322


$
178,754Operating income




8,846



17,385



16,809Operating margin




4.7
%


8.4
%


9.4
%Depreciation and amortization




827



1,191



1,327Capital expenditures




739



596



671Total assets




74,161



66,744



57,698Net sales

- Operating segments

$
396,166


$
423,390


$
416,681Total

$
396,166


$
423,390


$
416,681Operating income (loss)

- Operating segments

$
15,121


$
11,124


$
12,694- Unallocated corporate


(10,589
)


(12,764
)


(10,341
)- Impairments of long-lived assets






(2,112
)


(30,056
)- Severance, restructuring and
    related charges


112



(1,090
)


(3,505
)- (Loss) gain on sale of assets


(467
)


377



288Total

$
4,177


$
(4,465
)

$
(30,920
)Depreciation and amortization

- Operating segments

$
8,521


$
8,864


$
11,920- Unallocated corporate


119



104



225Total

$
8,640


$
8,968


$
12,145Capital expenditures

- Operating segments

$
4,594


$
8,925


$
10,782- Unallocated corporate


20







- Discontinued operations


128



441



3,094Total

$
4,742


$
9,366


$
13,876Total assets

- Operating segments

$
170,124


$
174,756


$
182,156- Other [a]


6,700



27,391



31,801- Unallocated corporate


6,850



10,536



10,507Total

$
183,674


$
212,683


$
224,464  70




---



##### 



[a] Amounts shown as Other represent items
    associated with Sahlman Holding Company, Inc., the
    Companys equity method investment, and the assets of the
    United Kingdom consumer plastics and the Metal Truck
    Box business units.    United








Europe(Thousands of Dollars)

States


Canada


U.K.


(Excluding U.K.)


Other


Consolidated2006:Sales to unaffiliated customers

$
316,313


$
58,334


$
14,289


$
3,826


$
3,404


$
396,166Total assets

$
146,492


$
24,678


$
12,264


$



$
240


$
183,6742005:Sales to unaffiliated customers

$
347,894


$
53,684


$
14,185


$
3,721


$
3,906


$
423,390Total assets

$
161,633


$
25,950


$
24,881


$



$
219


$
212,6832004:Sales to unaffiliated customers

$
346,346


$
47,549


$
14,167


$
4,423


$
4,196


$
416,681Total assets

$
170,166


$
23,513


$
30,227


$
558


$



$
224,464     Note 17.
    COMMITMENTS
    AND CONTINGENCIES  General
    Environmental Claims
    W.J.
    Smith Wood Preserving Company (W.J. Smith)
     71




---



##### 



Asbestos
    Claims
      and/or
        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). and/or
 72




---



##### 



with prejudice
        Other
    Claims
   73




---



##### 



Note 18.
    SEVERANCE,
    RESTRUCTURING AND RELATED CHARGES      2006


2005


2004(Amounts in Thousands)Consolidation of St. Louis
    manufacturing/distribution facilities

$
(499
)

$
39


$
1,460Consolidation of Glit facilities


299



724



791Corporate office relocation


217



172



Shutdown of Woods
    U.S. manufacturing


(115
)






38Shutdown of Woods Canada
    manufacturing


(14
)


134



841Consolidation of administrative
    functions for CCP






21



215Other










160Total severance, restructuring and
    related costs

$
(112
)

$
1,090


$
3,505   Consolidation of St. Louis manufacturing/distribution
    facilities
  ContractTerminationCosts [b]Restructuring liabilities at
    December 31, 2004

$
2,402Additions


100Reductions


(61
)Payments


(596
)Restructuring liabilities at
    December 31, 2005

$
1,845Additions


Reductions


(499
)Payments


(881
)Restructuring liabilities at
    December 31, 2006

$
465  74




---



##### 



Consolidation of Glit facilities
  One-time


ContractTermination


TerminationTotal


Benefits [a]


Costs [b]


Other [c]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


$
Additions


299



109







190Payments


(799
)


(364
)


(245
)


(190
)Restructuring liabilities at
    December 31, 2006

$
5


$



$
5


$
   Corporate office relocation
  One-timeTerminationBenefits [a]Restructuring liabilities at
    December 31, 2004

$
Additions


172Payments


(15
)Restructuring liabilities at
    December 31, 2005

$
157Additions


217Payments


(374
)Restructuring liabilities at
    December 31, 2006

$
   Shutdown of Woods U.S. manufacturing
 75




---



##### 



One-time


ContractTermination


TerminationTotal


Benefits [a]


Costs [b]Restructuring liabilities at
    December 31, 2004

$
261


$
20


$
241Additions










Reductions










Payments


(176
)






(176
)Currency translation and other


110







110Restructuring liabilities at
    December 31, 2005

$
195


$
20


$
175Additions










Reductions


(115
)


(19
)


(96
)Payments


(80
)


(1
)


(79
)Restructuring liabilities at
    December 31, 2006

$



$



$
   Shutdown of Woods Canada manufacturing
  One-time


ContractTermination


TerminationTotal


Benefits [a]


Costs [b]Restructuring 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


$



$
717Additions










Reductions


(14
)






(14
)Payments


(220
)






(220
)Currency translation


8







8Restructuring liabilities at
    December 31, 2006

$
491


$



$
491  76




---



##### 



Consolidation of administrative functions for
    CCP
  One-timeTerminationBenefits [a]Restructuring liabilities at
    December 31, 2004

$
Additions


21Payments


(21
)Restructuring liabilities at
    December 31, 2005

$
Additions


Payments


Restructuring liabilities at
    December 31, 2006

$
   Other
    One-time


ContractTermination


TerminationTotal


Benefits [a]


Costs [b]


Other [c]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 and other


127



(1
)


128



Restructuring and related
    liabilities at
    December 31, 2005

$
3,419


$
432


$
2,987


$
Additions


516



326







190Reductions


(628
)


(19
)


(609
)


Payments


(2,354
)


(739
)


(1,425
)


(190
)Currency translation


8







8



Restructuring and related
    liabilities at
    December 31, 2006 [d]

$
961


$



$
961


$
     sub-lease
 77




---



##### 



Maintenance


ElectricalProducts


ProductsTotal


Group


Group


CorporateRestructuring 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 and other


127







127



Restructuring and related
    liabilities at December 31, 2005

$
3,419


$
2,350


$
912


$
157Additions


516



299







217Reductions


(628
)


(499
)


(129
)


Payments


(2,354
)


(1,680
)


(300
)


(374
)Currency translation


8







8



Restructuring and related
    liabilities at December 31, 2006

$
961


$
470


$
491


$
     Maintenance


ElectricalProducts


ProductsTotal


Group


Group


Corporate2007

$
419


$
186


$
233


$
2008


336



94



242



2009


75



59



16



2010


63



63







2011


68



68







Total Payments

$
961


$
470


$
491


$
   Note 19.
    ACQUISITION   78




---



##### 



Note 20.
    QUARTERLY
    RESULTS OF OPERATIONS (UNAUDITED):    2006

1st Qtr


2nd Qtr


3rd Qtr


4th QtrNet sales

$
75,818


$
88,618


$
121,217


$
110,513Gross profit

$
10,411


$
12,469


$
16,305


$
12,286Loss before cumulative effect of a
    change in accounting principle

$
(5,035
)

$
(1,882
)

$
(1,812
)

$
(2,503
)Net loss

$
(5,791
)

$
(1,882
)

$
(1,812
)

$
(2,503
)Net loss attributable to common
    stockholders

$
(5,791
)

$
(1,882
)

$
(1,812
)

$
(2,503
)Loss per share of common
    stock  Basic and diluted [a]:Loss before cumulative effect of a
    change in accounting principle

$
(0.64
)

$
(0.23
)

$
(0.23
)

$
(0.31
)Net loss attributable to common
    stockholders

$
(0.73
)

$
(0.23
)

$
(0.23
)

$
(0.31
)   2005

1st Qtr


2nd Qtr


3rd Qtr


4th QtrNet sales

$
86,511


$
90,048


$
133,165


$
113,666Gross profit

$
8,754


$
10,747


$
16,763


$
14,411Net (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      79




---



##### 



Note 21.
    SUPPLEMENTAL
    BALANCE SHEET INFORMATION    December 31,2006


2005Debt issuance costs, net

$
2,885


$
3,750Equity method investment in
    unconsolidated affiliate


2,217



2,217Rabbi trust assets


1,455



1,221Notes receivable  sale
    of business


1,200



Other


1,233



1,455Total

$
8,990


$
8,643     December 31,2006


2005Contingent liabilities

$
15,705


$
15,413Advertising and rebates


11,594



11,979Accrued income taxes


1,649



775Commissions


1,215



1,118Professional services


847



644Accrued SARs


567



Non-cancelable lease
    liabilities  restructuring


428



837SESCO note payable to Montenay


400



1,100Other restructuring






117Other


5,782



5,730Total

$
38,187


$
37,713       December 31,2006


2005Pension and postretirement benefits

$
3,763


$
2,475Deferred compensation


2,983



3,552Non-cancelable lease
    liabilities  restructuring


703



1,941SESCO note payable to Montenay






1,487Other


953



1,042Total

$
8,402


$
10,497  80




---



##### 



Note 22.
    SUPPLEMENTAL
    CASH FLOW INFORMATION    Years Ended December 31,2006


2005


2004Interest

$
5,486


$
3,953


$
2,411Income taxes

$
1,067


$
1,789


$
759        Item 9.CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   Item 9A.CONTROLS
    AND PROCEDURES  (a)
    Evaluation
    of Disclosure Controls and Procedures    Rule 13a-15(b) Rule 13a-15(e)
 81




---



##### 



(b)
    Change in
    Internal Controls    Form 10-K
    on-site
      
    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.
    Establishment of 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 continue to be 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. In 2005, 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. During the third quarter of 2006, the
    Company discontinued the supplemental system given the higher
    level of accuracy being obtained from the shop floor module in
    PRMS.
    Reestablishment of 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 continue taking a monthly physical
    inventory throughout 2005 and 2006. Over the past year, overall
    accuracy, based on inventory value, continues to significantly
    improve. 82




---



##### 




    Establishment of 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.
    Improvement in 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.
    Proper staffing and planning of 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.
    Establishment of 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   83




---



##### 



Part III Item 10.DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE         Item 11.EXECUTIVE
    COMPENSATION   Item 12.SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    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


753,173


$
4.92



721,748Equity Compensation Plans Not
    Approved by Stockholders


1,763,108


$
3.56



Total


2,516,281







721,748  84




---



##### 



Equity
    Compensation Plans Not Approved by Stockholders
         Item 13.CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE   Item 14.PRINCIPAL
    ACCOUNTING FEES AND SERVICES   85




---



##### 



Part IV Item 15.  EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a)
    1.
    Financial Statements  Form 10-K:
  - Consolidated Balance Sheets
    as of December 31, 2006 and 2005

39- Consolidated Statements of
    Operations for the years ended December 31, 2006, 2005 and
    2004

41- Consolidated Statements of
    Stockholders Equity for the years ended December 31,
    2006, 2005 and 2004

42- Consolidated Statements of
    Cash Flows for the years ended December 31, 2006, 2005 and
    2004

43- Notes to Consolidated
    Financial Statements

44   2. Financial Statement Schedules
  Form 10-K.
  3. Exhibits
   SIGNATURES    Dated: March 16, 2007

KATY INDUSTRIES, INC.
    Registrant    /S/
    Anthony T. Castor III
    /S/ Amir
    Rosenthal
    86




---



##### 



POWER OF
    ATTORNEY
  attorneys-in-fact
    Signature

Title/S/ William F. AndrewsWilliam
    F. Andrews

Chairman of the Board and Director/S/ Anthony T. Castor IIIAnthony
    T. Castor III

President, Chief Executive Officer
    and Director (Principal Executive Officer)/S/ Amir RosenthalAmir
    Rosenthal

Vice President, Chief Financial
    Officer, General Counsel and Secretary (Principal Financial and
    Accounting Officer)/S/ Christopher AndersonChristopher
    Anderson

Director/S/ Robert M. BarattaRobert
    M. Baratta

Director/S/ Daniel B. CarrollDaniel
    B. Carroll

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

Director/S/ Samuel P. Frieder Samuel
    P. Frieder

Director/S/ Christopher LacovaraChristopher
    Lacovara

Director/S/ Shant MardirossianShant
    Mardirossian

Director  87




---



##### 



INDEX TO
    FINANCIAL STATEMENT SCHEDULES
  Report of Independent Registered
    Public Accounting Firm


89Schedule II 
    Valuation and Qualifying Accounts


90Consent of Independent Registered
    Public Accounting Firm


96    88




---



##### 



REPORT OF
    INDEPENDENT REGISTERED ACCOUNTING FIRM ON
    FINANCIAL STATEMENT SCHEDULE
    Form 10-K) Form 10-K.
      89




---



##### 



KATY
    INDUSTRIES, INC. AND SUBSIDIARIES
    SCHEDULE II  VALUATION AND QUALIFYING
    ACCOUNTS
    Years Ended December 31, 2006, 2005 AND 2004
    (Amounts in Thousands)
  Balance at


Additions


Write-offs





BalanceBeginning


Charged to


to


Other


at EndAccounts Receivable Reserves

of Year


Expense


Reserves


Adjustments


of YearYear ended December 31, 2006Trade receivables

$
2,445


$
3,008


$
(3,188
)

$
(52
)

$
2,213Sales allowances


14,071



32,413



(27,855
)


(736
)


17,893$
16,516


$
35,421


$
(31,043
)

$
(788
)

$
20,106Year ended December 31, 2005Trade receivables

$
2,827


$
3,283


$
(3,663
)

$
(2
)

$
2,445Sales allowances


14,571



31,768



(32,575
)


307



14,071$
17,398


$
35,051


$
(36,238
)

$
305


$
16,516Year ended December 31, 2004Trade receivables

$
3,029


$
3,096


$
(2,985
)

$
(313
)

$
2,827Long-term notes receivable


105



250



(355
)






Sales allowances


11,355



31,955



(28,791
)


52



14,571$
14,489


$
35,301


$
(32,131
)

$
(261
)

$
17,398   Balance at


Additions


Write-offs





BalanceBeginning


Charged to


to


Other


at EndInventory Reserves

of Year


Expense


Reserves


Adjustments


of YearYear ended December 31, 2006

$
4,548


$
979


$
(1,239
)

$
(519
)

$
3,769Year ended December 31, 2005

$
4,671


$
952


$
(1,043
)

$
(32
)

$
4,548Year ended December 31, 2004

$
5,630


$
1,727


$
(2,766
)

$
80


$
4,671   Balance at











BalanceBeginning








Other


at EndIncome Tax Valuation Allowances

of Year


Provision


Reversals


Adjustments


of YearYear ended December 31, 2006

$
64,538


$
2,210


$



$



$
66,748Year ended December 31, 2005

$
60,028


$
4,510


$



$



$
64,538Year ended December 31, 2004

$
46,171


$
13,857


$



$



$
60,028  90




---



##### 



KATY
    INDUSTRIES, INC.
    EXHIBIT INDEX
    DECEMBER 31, 2006
  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

First Amendment to Rights
    Agreement, dated as of October 30, 1996, between Katy and
    Harris Trust and Savings Bank as Rights Agent (incorporated by
    reference to Exhibit 4.1(a) of the Companys Quarterly
    Report on
    Form 10-Q
    filed August 9, 2006).

*4
.1b

Second Amendment to Rights
    Agreement, dated as of January 8, 1999, 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 as of March 30, 2001, between Katy 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).

*4
.1d

Forth Amendment to Rights
    Agreement, dated as of June 2, 2001, between Katy and
    LaSalle Bank N.A. as Rights Agent (incorporated by reference to
    Exhibit 4.1(d) of the Companys Quarterly Report on
    Form 10-Q
    filed August 9, 2006).

*10
.1

Amended and Restated Katy
    Industries, Inc. 1995 Long-Term Incentive Plan (incorporated by
    reference to Exhibit 10.1 of the Companys Quarterly
    Report on
    Form 10-Q
    filed August 9, 2006).

*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 Exhibit 10.4 to
    Companys Annual Report on
    Form 10-K
    filed April 1, 1996).

*10
.4

Katy Industries, Inc.
    Directors Deferred Compensation Plan effective as of
    June 1, 1995 (incorporated by reference to
    Exhibit 10.5 to Companys Annual Report on
    Form 10-K
    filed April 1, 1996).

*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).

*10
.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).

* 91




---



##### 



ExhibitNumber

Exhibit Title

Page10
.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 15, 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 Bank
    of America, N.A. (incorporated by reference to
    Exhibit 10.18 of the Companys Annual Report on
    Form 10-K
    dated March 31, 2006).

*10
.19

Seventh Amendment to Amended and
    Restated Loan Agreement dated as of November 27, 2006 with
    Bank of America, N.A. (incorporated by reference to
    Exhibit 10.2 of the Companys Current Report on
    Form 8-K
    filed November 28, 2006).

*10
.20

Eighth Amendment to Amended and
    Restated Loan Agreement dated as of March 8, 2007 with Bank
    of America, N.A. (incorporate by reference to Exhibit 10.1
    of the Companys Current Report on
    Form 8-K
    filed March 12, 2007).

*10
.21

ISDA Master Agreement and Schedule
    dated as of August 11, 2005, between Bank of America, N.A.
    and Katy Industries, Inc. and Transaction Confirmation 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
.22

Amended and Restated Katy
    Industries, Inc. 1997 Long-Term Incentive Plan (incorporated by
    reference to Exhibit 10.20 of the Companys Quarterly
    Report on
    Form 10-Q
    filed August 9, 2006).

*10
.23

Stand-Alone Stock Appreciation
    Rights Agreement (incorporated by reference to Exhibit 99.1
    of the Companys Current Report on
    Form 8-K
    filed September 6, 2006).

*21


Subsidiaries of registrant

9423


Consent of Independent Registered
    Public Accounting Firm

9531
.1

CEO Certification pursuant to
    Securities Exchange Act
    Rule 13a-14,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.

9631
.2

CFO Certification pursuant to
    Securities Exchange Act
    Rule 13a-14,
    as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.

97 92




---



##### 



ExhibitNumber

Exhibit Title

Page32
.1

CEO Certification required by
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.

98#32
.2

CFO Certification required by
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.

99#     *
    
    Indicates incorporated by reference.#
    
    These certifications are being furnished solely to accompany
    this report pursuant to 18 U.S.C. 1350, and are not being
    filed for purposes of Section 18 of the Securities and
    Exchange Act of 1934, as amended, and are not to be incorporated
    by reference into any filing of Katy Industries, Inc. whether
    made before or after the date hereof, regardless of any general
    incorporation language in such filing. 93