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United States
Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-K/A
Amendment No. 1
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the fiscal year ended: December 31, 2006
 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 or other jurisdiction of 
incorporation or organization)
    
    75-1277589
(IRS Employer Identification No.)
 
   (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
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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EXPLANATORY NOTE
       Impact of Error on Previously filed Financial Statements
  Internal Control Considerations
    2




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3




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##### 



TABLE OF CONTENTS
 PART I
    
    
    5Item 1. BUSINESS
    
    
    5Item 1A. RISK FACTORS
    
    
    10Item 1B. UNRESOLVED STAFF COMMENTS
    
    
    14Item 2. PROPERTIES
    
    
    15Item 3. LEGAL PROCEEDINGS
    
    
    15Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    15PART II
    
    
    16Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    16Item 6. SELECTED FINANCIAL DATA
    
    
    19Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    20Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    37Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    38Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    90Item 9A. CONTROLS AND PROCEDURES
    
    
    90Item 9B. OTHER INFORMATION
    
    
    93Part III
    
    
    94Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    94Item 11. EXECUTIVE COMPENSATION
    
    
    94Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    94Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    96Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    96Part IV
    
    
    97Item 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
    
    
    97SIGNATURES
    
    
    97EXHIBITS
    
    
    101Exhibit 21Exhibit 23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   4




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PART I
 
 Item 1. BUSINESS
  Recapitalization
  Operations
   Maintenance Products Group
  Continental Commercial Products, LLC (CCP
  5




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Continental ® ® ®
 Contico ® ®
 Container ®
 Disco ® ® ® ® ®
 Glit ® ® ® ® ® ® ® ® ® ® ® ®
  Wilen ® ®
  CCP Canada
 Gemtex ®
 Contico Manufacturing, Ltd.
 Electrical Products Group
   6




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Woods US ® ® ® ® ® ®
 Woods Canada ® ® ®
  Other Operations
    Discontinued Operations
   Customers
   7




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Backlog
 Maintenance Products
  Electrical Products
  Markets and Competition
 Maintenance Products
     Electrical Products
   8




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Raw Materials
  Employees
  Regulatory and Environmental Matters
  Licenses, Patents and Trademarks
 ® ® ® ® ® ® ® ® ® ® ®
  9




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Available Information
 http://www.sec.gov
 http://www.katyindustries.com
 
 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.
   10




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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.
   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.
   11




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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.
    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.
   12




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If our internal controls over financial reporting are found not to be effective or if we make
disclosure of existing or potential significant deficiencies or material weaknesses in those
controls, Investors could lose confidence in our financial reports, and our stock price may be
adversely affected.
    Changes in significant laws and government regulations affecting environmental compliance and
income taxes.
    13




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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
   14




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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
   15




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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
   16




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Share Repurchase Plan
  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
    
    
    Programs2005
    
    
    3,200
    
    
    $
    2.35
    
    
    
    3,200
    
    
    
    333,3332006
    
    
    40,800
    
    
    $
    2.71
    
    
    
    40,800Total
    
    
    44,000
    
    
    $
    2.68
    
    
    
    44,000
  Performance Graph
   17




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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
  18




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Item 6. SELECTED FINANCIAL DATA
 Years Ended December 31,As Restated, see Note 22006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(Amounts in Thousands, except per share data and percentages)Net sales
    
    $
    396,166
    
    
    $
    423,390
    
    
    $
    416,681
    
    
    $
    398,249
    
    
    $
    403,599Loss from continuing operations [a]
    
    $
    (4,789
    )
    
    $
    (11,619
    )
    
    $
    (36,528
    )
    
    $
    (17,255
    )
    
    $
    (55,149
    )Discontinued operations [b]
    
    
    (6,834
    )
    
    
    (2,178
    )
    
    
    407
    
    
    
    7,891
    
    
    
    914Cumulative effect of a change in accounting principle [b] [c]
    
    
    (756
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,514
    )Net loss
    
    
    (12,379
    )
    
    
    (13,797
    )
    
    
    (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
    
    $
    (12,379
    )
    
    $
    (13,797
    )
    
    $
    (50,870
    )
    
    $
    (15,615
    )
    
    $
    (67,885
    )(Loss) earnings per share of common stock  Basic and diluted:Loss from continuing operations attributable to
common stockholders
    
    $
    (0.60
    )
    
    $
    (1.47
    )
    
    $
    (6.50
    )
    
    $
    (2.86
    )
    
    $
    (7.92
    )Discontinued operations
    
    
    (0.86
    )
    
    
    (0.27
    )
    
    
    0.05
    
    
    
    0.96
    
    
    
    0.11Cumulative effect of a change in accounting principle
    
    
    (0.09
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.30
    )Net loss attributable to common stockholders
    
    $
    (1.55
    )
    
    $
    (1.74
    )
    
    $
    (6.45
    )
    
    $
    (1.90
    )
    
    $
    (8.11
    )Total assets
    
    $
    182,694
    
    
    $
    212,094
    
    
    $
    224,464
    
    
    $
    241,708
    
    
    $
    275,977Total liabilities
    
    
    140,662
    
    
    
    157,390
    
    
    
    155,879
    
    
    
    139,416
    
    
    
    157,405Preferred interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,400Stockholders equity
    
    
    42,032
    
    
    
    54,704
    
    
    
    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
    
    
    
    19,155Depreciation 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]
    
    
    48,610
    
    
    
    48,132
    
    
    
    59,855
    
    
    
    43,439
    
    
    
    35,206Ratio of debt to capitalization
    
    
    57.5
    %
    
    
    51.3
    %
    
    
    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.[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 12 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.
  19




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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Restatement of Prior Financial Information
    COMPANY OVERVIEW
        20




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Years Ended December 31,As Restated, see Note 22006
    
    
    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
    
    
    345.5
    
    
    
    87.2
    
    
    
    372.9
    
    
    
    88.0
    
    
    
    361.7
    
    
    
    86.8Gross profit
    
    
    50.7
    
    
    
    12.8
    
    
    
    50.5
    
    
    
    12.0
    
    
    
    55.0
    
    
    
    13.2Selling, general and administrative expenses
    
    
    46.5
    
    
    
    (11.7
    )
    
    
    52.7
    
    
    
    (12.5
    )
    
    
    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)
    
    
    3.8
    
    
    
    1.0
    
    
    
    (5.1
    )
    
    
    (1.2
    )
    
    
    (30.9
    )
    
    
    (7.4
    )Equity in income of equity method investment
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    Gain on SESCO joint venture transaction
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    (7.1
    )
    
    
    
    
    
    
    (5.7
    )
    
    
    
    
    
    
    (4.0
    )Other, net
    
    
    0.2
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    (1.0
    )Loss from continuing operations before provision for
income taxes
    
    
    (2.5
    )
    
    
    
    
    
    
    (10.0
    )
    
    
    
    
    
    
    (35.9
    )Provision for income taxes from continuing operations
    
    
    (2.3
    )
    
    
    
    
    
    
    (1.6
    )
    
    
    
    
    
    
    (0.6
    )Loss from continuing operations
    
    
    (4.8
    )
    
    
    
    
    
    
    (11.6
    )
    
    
    
    
    
    
    (36.5
    )(Loss) income from operations of discontinued businesses (net of tax)
    
    
    (1.4
    )
    
    
    
    
    
    
    (2.2
    )
    
    
    
    
    
    
    1.2Loss on sale of discontinued businesses (net of tax)
    
    
    (5.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.8
    )Loss before cumulative effect of a change in accounting principle
    
    
    (11.6
    )
    
    
    
    
    
    
    (13.8
    )
    
    
    
    
    
    
    (36.1
    )Cumulative effect of a change in accounting principle (net of tax)
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (12.4
    )
    
    
    
    
    
    
    (13.8
    )
    
    
    
    
    
    
    (36.1
    )Payment-in-kind of dividends on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14.8
    )Net loss attributable to common stockholders
    
    $
    (12.4
    )
    
    
    
    
    
    $
    (13.8
    )
    
    
    
    
    
    $
    (50.9
    )Loss per share of common stock  Basic and dilutedLoss from continuing operations
    
    $
    (0.60
    )
    
    
    
    
    
    $
    (1.47
    )
    
    
    
    
    
    $
    (4.63
    )Payment-in-kind of dividends on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.88
    )Loss from continuing operations
attributable to common stockholders
    
    
    (0.60
    )
    
    
    
    
    
    
    (1.47
    )
    
    
    
    
    
    
    (6.50
    )Discontinued operations (net of tax)
    
    
    (0.86
    )
    
    
    
    
    
    
    (0.27
    )
    
    
    
    
    
    
    0.05Cumulative effect of a change in accounting principle
    
    
    (0.09
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (1.55
    )
    
    
    
    
    
    $
    (1.74
    )
    
    
    
    
    
    $
    (6.45
    )
  21




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RESULTS OF OPERATIONS
 2006 COMPARED TO 2005
 Overview
  Shared Based Payments
 Net Sales
 Maintenance Products Group
   Electrical Products Group
      22




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Operating Income
 As Restated, see Note 22006
    
    
    2005
    
    
    Change$
    
    
    % Margin
    
    
    $
    
    
    % Margin
    
    
    $
    
    
    % MarginMaintenance Products Group
    
    $
    5.7
    
    
    
    2.7
    
    
    $
    (6.4
    )
    
    
    (3.0
    )
    
    $
    12.1
    
    
    
    5.7Electrical Products Group
    
    
    8.7
    
    
    
    4.6
    
    
    
    17.4
    
    
    
    8.4
    
    
    
    (8.7
    )
    
    
    (3.8
    )Unallocated corporate expense
    
    
    (10.2
    )
    
    
    
    
    
    
    (13.2
    )
    
    
    
    
    
    
    3.04.2
    
    
    
    1.0
    
    
    
    (2.2
    )
    
    
    (0.5
    )
    
    
    6.4
    
    
    
    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)
    
    $
    3.8
    
    
    
    1.0
    
    
    $
    (5.1
    )
    
    
    (1.2
    )
    
    $
    8.9
    
    
    
    2.2
 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
  23




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##### Table of Contents



Severance, Restructuring and Related Charges
  Other
     Share-Based Payments
 2005 COMPARED TO 2004
 Overview
    24




---



##### Table of Contents



Net Sales
 Maintenance Products Group
   Electrical Products Group
   Operating Income
 As Restated, see Note 22005
    
    
    2004
    
    
    Change$
    
    
    % Margin
    
    
    $
    
    
    % Margin
    
    
    $
    
    
    % MarginMaintenance Products Group
    
    $
    (6.4
    )
    
    
    (3.0
    )
    
    $
    (4.1
    )
    
    
    (1.7
    )
    
    $
    (2.3
    )
    
    
    (1.3
    )Electrical Products Group
    
    
    17.4
    
    
    
    8.4
    
    
    
    16.8
    
    
    
    9.4
    
    
    
    0.6
    
    
    
    (1.0
    )Unallocated corporate expense
    
    
    (13.2
    )
    
    
    
    
    
    
    (10.4
    )
    
    
    
    
    
    
    (2.8
    )(2.2
    )
    
    
    (0.5
    )
    
    
    2.3
    
    
    
    0.6
    
    
    
    (4.5
    )
    
    
    (1.1
    )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
    
    $
    (5.1
    )
    
    
    (1.2
    )
    
    $
    (30.9
    )
    
    
    (7.4
    )
    
    $
    25.8
    
    
    
    6.2
 Maintenance Products Group
   25




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##### Table of Contents



Electrical Products Group
  Corporate
  Impairments of Long-lived Assets
  Severance, Restructuring and Related Charges
   Other
      26




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   Bank of America Credit Agreement
       27




---



##### Table of Contents



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
  28




---



##### Table of Contents



Contractual Obligations
  Due in less
    
    
    Due in 1-3
    
    
    Due in 3-5
    
    
    Due after 5Contractual Cash Obligations
    
    Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    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
 Due in less
    
    
    Due in 1-3
    
    
    Due in 3-5
    
    
    Due after 5Other Commercial Commitments
    
    Total
    
    
    than 1 year
    
    
    years
    
    
    years
    
    
    yearsCommercial letters of credit
    
    $
    762
    
    
    $
    762
    
    
    $
    
    
    
    $
    
    
    
    $
    Stand-by letters of credit
    
    
    7,121
    
    
    
    7,121
    
    
    
    
    
    
    
    
    
    
    
    Total Commercial Commitments
    
    $
    7,883
    
    
    $
    7,883
    
    
    $
    
    
    
    $
    
    
    
    $
    
 [a]
    
    As discussed in the Liquidity and Capital Resources section above and in Note 9 to the
Consolidated Financial Statements in Part II, Item 8, 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, 2006 and 2005, includes $1.0 million and $3.0 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 8 to the
Consolidated Financial Statements in Part II, Item 8. This obligation is classified in the
Consolidated Balance Sheets as an Accrued Expense in Current Liabilities.[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 11 to the Consolidated Financial Statements in Part II, Item 8.
 Off-balance Sheet Arrangements
   29




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##### Table of Contents



Cash Flow
  Operating Activities
  Investing Activities
  Financing Activities
  TRANSACTIONS WITH RELATED AND CERTAIN OTHER PARTIES
    30




---



##### Table of Contents



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
  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
    
    
    $
    
 [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 $1.8 million as of December 31, 2006. We have included $0.8 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
$0.3 million.
  31




---



##### Table of Contents



OUTLOOK FOR 2007
        32




---



##### 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 achieve product price increases, especially as they relate to
potentially higher raw material costs.
  33




---



##### Table of Contents




    
    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.
 
    
    Our failure to identify, and promptly and effectively remediate, any material
weaknesses or significant deficiencies in our internal control over financial reporting.
    
    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 Accounting
for Consideration Given by a Vendor to a Customer
 Stock-based Compensation Share-Based Payment
  34




---



##### Table of Contents



Accounts Receivable
 Inventories
  Goodwill and Impairments of Long-Lived Assets Goodwill and Intangible Assets,
 Accounting for
the Impairment or Disposal of Long-Lived Assets,
  35




---



##### Table of Contents



Deferred Income Taxes Accounting for Income Taxes
 Workers Compensation and Product Liabilities
 Environmental and Other Contingencies
 Severance, Restructuring and Related Charges Accounting for Costs Associated with Exit or Disposal Activities
 NEW ACCOUNTING PRONOUNCEMENTS
   36




---



##### Table of Contents



Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
   Expected Maturity Dates(Amounts in Thousands)ASSETS2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueTemporary cash investmentsFixed 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




---



##### Table of Contents



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of Independent Registered Public Accounting Firm
       
  38




---



##### Table of Contents



ASSETS
 As Restated, see Note 22006
    
    
    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
    
    
    54,980
    
    
    
    62,593Other current assets
    
    
    2,991
    
    
    
    3,600Asset held for sale
    
    
    4,483
    
    
    
    Total current assets
    
    
    124,860
    
    
    
    138,226OTHER ASSETS:Goodwill
    
    
    665
    
    
    
    665Intangibles, net
    
    
    6,435
    
    
    
    6,946Other
    
    
    8,990
    
    
    
    8,260Total other assets
    
    
    16,090
    
    
    
    15,871PROPERTY 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
    
    $
    182,694
    
    
    $
    212,094
   39




---



##### Table of Contents



LIABILITIES AND STOCKHOLDERS EQUITY
 As Restated, see Note 22006
    
    
    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
    
    
    27,120
    
    
    
    27,067Accumulated other comprehensive income
    
    
    2,242
    
    
    
    3,158Accumulated deficit
    
    
    (83,434
    )
    
    
    (71,055
    )Treasury stock, at cost, 1,869,827 shares
and 1,874,027 shares, respectively
    
    
    (21,974
    )
    
    
    (22,544
    )Total stockholders equity
    
    
    42,032
    
    
    
    54,704Total liabilities and stockholders equity
    
    $
    182,694
    
    
    $
    212,094
   40




---



##### Table of Contents



As Restated, see Note 22006
    
    
    2005
    
    
    2004Net sales
    
    $
    396,166
    
    
    $
    423,390
    
    
    $
    416,681Cost of goods sold
    
    
    345,469
    
    
    
    372,921
    
    
    
    361,660Gross profit
    
    
    50,697
    
    
    
    50,469
    
    
    
    55,021Selling, general and administrative expenses
    
    
    46,556
    
    
    
    52,749
    
    
    
    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)
    
    
    3,786
    
    
    
    (5,105
    )
    
    
    (30,920
    )Equity in income of equity method investment
    
    
    
    
    
    
    600
    
    
    
    Gain on SESCO joint venture transaction
    
    
    563
    
    
    
    
    
    
    
    Interest expense
    
    
    (7,114
    )
    
    
    (5,713
    )
    
    
    (3,968
    )Other, net
    
    
    302
    
    
    
    207
    
    
    
    (998
    )Loss from continuing operations before provision for
income taxes
    
    
    (2,463
    )
    
    
    (10,011
    )
    
    
    (35,886
    )Provision for income taxes from continuing operations
    
    
    (2,326
    )
    
    
    (1,608
    )
    
    
    (642
    )Loss from continuing operations
    
    
    (4,789
    )
    
    
    (11,619
    )
    
    
    (36,528
    )(Loss) income from operations of discontinued businesses (net of tax)
    
    
    (1,429
    )
    
    
    (2,178
    )
    
    
    1,182Loss on sale of discontinued businesses (net of tax)
    
    
    (5,405
    )
    
    
    
    
    
    
    (775
    )Loss before cumulative effect of a change in accounting principle
    
    
    (11,623
    )
    
    
    (13,797
    )
    
    
    (36,121
    )Cumulative effect of a change in accounting principle (net of tax)
    
    
    (756
    )
    
    
    
    
    
    
    Net loss
    
    
    (12,379
    )
    
    
    (13,797
    )
    
    
    (36,121
    )Payment-in-kind of dividends on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (14,749
    )Net loss attributable to common stockholders
    
    $
    (12,379
    )
    
    $
    (13,797
    )
    
    $
    (50,870
    )Loss per share of common stock  Basic and dilutedLoss from continuing operations attributable to
common stockholders
    
    $
    (0.60
    )
    
    $
    (1.47
    )
    
    $
    (6.50
    )Discontinued operations (net of tax)
    
    
    (0.86
    )
    
    
    (0.27
    )
    
    
    0.05Cumulative effect of a change in accounting principle
    
    
    (0.09
    )
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (1.55
    )
    
    $
    (1.74
    )
    
    $
    (6.45
    )
   41




---



##### Table of Contents



AccumulatedConvertible
    
    
    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, As
Restated, see Note 2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,797
    )
    
    
    
    
    
    $
    (13,797
    )
    
    
    (13,797
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,352
    )
    
    
    
    
    
    
    
    
    
    
    (1,352
    )
    
    
    (1,352
    )Pension minimum liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    (109
    )
    
    
    (109
    )Interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    55Comprehensive
loss, As Restated, see Note 2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (15,203
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    (7
    )Stock
compensation, As Restated, see Note
2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,004Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    (627
    )
    
    
    
    
    
    
    (675
    )Balance,
December 31, 2005, As Restated, see
Note 2
    
    
    1,131,551
    
    
    $
    108,256
    
    
    
    9,822,204
    
    
    $
    9,822
    
    
    $
    27,067
    
    
    $
    3,158
    
    
    $
    (71,055
    )
    
    $
    (22,544
    )
    
    
    
    
    
    $
    54,704Net loss, As
Restated, see Note 2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,379
    )
    
    
    
    
    
    $
    (12,379
    )
    
    
    (12,379
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    686
    
    
    
    
    
    
    
    
    
    
    
    686
    
    
    
    686Interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    22Comprehensive
loss, As Restated, see Note 2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (11,671
    )Adoption of SFAS 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,624
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,624
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (111
    )
    
    
    
    
    
    
    (111
    )Stock option exercise
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (378
    )
    
    
    
    
    
    
    
    
    
    
    525
    
    
    
    
    
    
    
    147Stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    587
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    587Other
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    
    
    
    
    (156
    )
    
    
    
    
    
    
    
    
    
    
    156
    
    
    
    
    
    
    
    Balance,
December 31, 2006, As Restated, see
Note 2
    
    
    1,131,551
    
    
    $
    108,256
    
    
    
    9,822,304
    
    
    $
    9,822
    
    
    $
    27,120
    
    
    $
    2,242
    
    
    $
    (83,434
    )
    
    $
    (21,974
    )
    
    
    
    
    
    $
    42,032
   42




---



##### Table of Contents



As Restated, see Note 22006
    
    
    2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (12,379
    )
    
    $
    (13,797
    )
    
    $
    (36,121
    )Loss (income) from discontinued operations
    
    
    6,834
    
    
    
    2,178
    
    
    
    (407
    )Loss from continuing operations
    
    
    (5,545
    )
    
    
    (11,619
    )
    
    
    (36,528
    )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
    
    
    
    2,004
    
    
    
    Loss (gain) on sale of assets
    
    
    467
    
    
    
    (377
    )
    
    
    (288
    )Equity in income of equity method investment
    
    
    
    
    
    
    (600
    )
    
    
    Deferred income taxes
    
    
    14
    
    
    
    240
    
    
    
    (1,228
    )6,097
    
    
    
    1,850
    
    
    
    5,233Changes in operating assets and liabilities:Accounts receivable
    
    
    2,743
    
    
    
    (16
    )
    
    
    (215
    )Inventories
    
    
    2,830
    
    
    
    2,260
    
    
    
    (8,649
    )Other assets
    
    
    600
    
    
    
    (1,045
    )
    
    
    307Accounts payable
    
    
    (8,000
    )
    
    
    7,503
    
    
    
    200Accrued expenses
    
    
    (78
    )
    
    
    (3,952
    )
    
    
    (1,595
    )Other, net
    
    
    (5,206
    )
    
    
    (804
    )
    
    
    (3,508
    )(7,111
    )
    
    
    3,946
    
    
    
    (13,460
    )Net cash (used in) provided by continuing operations
    
    
    (1,014
    )
    
    
    5,796
    
    
    
    (8,227
    )Net cash provided by discontinued operations
    
    
    2,837
    
    
    
    766
    
    
    
    256Net 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
    )Acquisition of subsidiary, net of cash acquired
    
    
    
    
    
    
    (1,115
    )
    
    
    Proceeds from sale of assets, net
    
    
    367
    
    
    
    981
    
    
    
    5,778Net cash used in continuing operations
    
    
    (4,247
    )
    
    
    (9,059
    )
    
    
    (5,004
    )Net cash provided by (used in) discontinued operations
    
    
    5,292
    
    
    
    (335
    )
    
    
    (3,051
    )Net 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




---



##### Table of Contents



Restatement
 (A) Impact of error on previously filed financial statements
 Other Out-of-Period Adjustments and Revisions
  (B) Accelerated vesting of stock options
 (C) Deferred compensation
 (D) Inventory reserves
 (E) Revision of SESCO as a continuing operation
   44




---



##### Table of Contents



December 31, 2006
    
    
    December 31, 2005Previously
    
    
    
    
    
    
    PreviouslyAssets
    
    reported
    
    
    Restated
    
    
    reported
    
    
    RestatedCURRENT ASSETS:Cash and cash equivalents
    
    $
    7,392
    
    
    $
    7,392
    
    
    $
    8,421
    
    
    $
    8,421Trade accounts receivable, net
    
    
    55,014
    
    
    
    55,014
    
    
    
    63,612
    
    
    
    63,612Inventories, net (A)(D)
    
    
    55,960
    
    
    
    54,980
    
    
    
    62,799
    
    
    
    62,593Other current assets
    
    
    2,991
    
    
    
    2,991
    
    
    
    3,600
    
    
    
    3,600Asset held for sale
    
    
    4,483
    
    
    
    4,483
    
    
    
    
    
    
    
    Total current assets
    
    
    125,840
    
    
    
    124,860
    
    
    
    138,432
    
    
    
    138,226OTHER ASSETS:Goodwill
    
    
    665
    
    
    
    665
    
    
    
    665
    
    
    
    665Intangibles, net
    
    
    6,435
    
    
    
    6,435
    
    
    
    6,946
    
    
    
    6,946Other (C)
    
    
    8,990
    
    
    
    8,990
    
    
    
    8,643
    
    
    
    8,260Total other assets
    
    
    16,090
    
    
    
    16,090
    
    
    
    16,254
    
    
    
    15,871Property and equipment, net
    
    
    41,744
    
    
    
    41,744
    
    
    
    57,997
    
    
    
    57,997Total assets
    
    $
    183,674
    
    
    $
    182,694
    
    
    $
    212,683
    
    
    $
    212,094Liabilities and Stockholders EquityCURRENT LIABILITIES:Accounts payable
    
    $
    33,684
    
    
    
    33,684
    
    
    $
    47,449
    
    
    
    47,449Accrued compensation
    
    
    3,518
    
    
    
    3,518
    
    
    
    4,071
    
    
    
    4,071Accrued expenses
    
    
    38,187
    
    
    
    38,187
    
    
    
    37,713
    
    
    
    37,713Current maturities, long-term debt
    
    
    1,125
    
    
    
    1,125
    
    
    
    2,857
    
    
    
    2,857Revolving credit agreement
    
    
    43,879
    
    
    
    43,879
    
    
    
    41,946
    
    
    
    41,946Total current liabilities
    
    
    120,393
    
    
    
    120,393
    
    
    
    134,036
    
    
    
    134,036LONG-TERM DEBT, less current maturities
    
    
    11,867
    
    
    
    11,867
    
    
    
    12,857
    
    
    
    12,857OTHER LIABILITIES
    
    
    8,402
    
    
    
    8,402
    
    
    
    10,497
    
    
    
    10,497Total liabilities
    
    
    140,662
    
    
    
    140,662
    
    
    
    157,390
    
    
    
    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
    
    
    
    108,256
    
    
    
    108,256
    
    
    
    108,256Common stock, $1 par value; authorized 35,000,000 shares;
issued 9,822,304 shares
    
    
    9,822
    
    
    
    9,822
    
    
    
    9,822
    
    
    
    9,822Additional paid-in capital (B)
    
    
    27,069
    
    
    
    27,120
    
    
    
    27,016
    
    
    
    27,067Accumulated other comprehensive income
    
    
    2,242
    
    
    
    2,242
    
    
    
    3,158
    
    
    
    3,158Accumulated deficit
    
    
    (82,403
    )
    
    
    (83,434
    )
    
    
    (70,415
    )
    
    
    (71,055
    )Treasury stock, at cost
    
    
    (21,974
    )
    
    
    (21,974
    )
    
    
    (22,544
    )
    
    
    (22,544
    )Total stockholders equity
    
    
    43,012
    
    
    
    42,032
    
    
    
    55,293
    
    
    
    54,704Total liabilities and stockholders equity
    
    $
    183,674
    
    
    $
    182,694
    
    
    $
    212,683
    
    
    $
    212,094
  45




---



##### Table of Contents



For the years endedDecember 31, 2006
    
    
    December 31, 2005Previously
    
    
    
    
    
    
    Previouslyreported
    
    
    Restated
    
    
    reported
    
    
    RestatedNet sales
    
    $
    396,166
    
    
    
    396,166
    
    
    $
    423,390
    
    
    
    423,390Cost of goods sold (A)(D)
    
    
    344,695
    
    
    
    345,469
    
    
    
    372,715
    
    
    
    372,921Gross profit
    
    
    51,471
    
    
    
    50,697
    
    
    
    50,675
    
    
    
    50,469Selling, general and administrative expenses (B)(C)
    
    
    46,939
    
    
    
    46,556
    
    
    
    52,315
    
    
    
    52,749Impairments of goodwill
    
    
    
    
    
    
    
    
    
    
    1,574
    
    
    
    1,574Impairments of other long-lived assets
    
    
    
    
    
    
    
    
    
    
    538
    
    
    
    538Severance, restructuring and related charges
    
    
    (112
    )
    
    
    (112
    )
    
    
    1,090
    
    
    
    1,090Loss (gain) on sale of assets
    
    
    467
    
    
    
    467
    
    
    
    (377
    )
    
    
    (377
    )Operating income (loss)
    
    
    4,177
    
    
    
    3,786
    
    
    
    (4,465
    )
    
    
    (5,105
    )Equity in income of equity method investment
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    600Gain on SESCO joint venture transaction (E)
    
    
    
    
    
    
    563
    
    
    
    
    
    
    
    Interest expense (E)
    
    
    (7,037
    )
    
    
    (7,114
    )
    
    
    (5,570
    )
    
    
    (5,713
    )Other, net
    
    
    302
    
    
    
    302
    
    
    
    207
    
    
    
    207Loss from continuing operations before provision for
income taxes
    
    
    (2,558
    )
    
    
    (2,463
    )
    
    
    (9,228
    )
    
    
    (10,011
    )Provision for income taxes from continuing operations
    
    
    (2,326
    )
    
    
    (2,326
    )
    
    
    (1,608
    )
    
    
    (1,608
    )Loss from continuing operations
    
    
    (4,884
    )
    
    
    (4,789
    )
    
    
    (10,836
    )
    
    
    (11,619
    )(Loss) income from operations of discontinued
businesses (net of tax) (E)
    
    
    (1,043
    )
    
    
    (1,429
    )
    
    
    (2,321
    )
    
    
    (2,178
    )Loss on sale of discontinued businesses (net of tax) (E)
    
    
    (5,305
    )
    
    
    (5,405
    )
    
    
    
    
    
    
    Loss before cumulative effect of a change in
accounting principle
    
    
    (11,232
    )
    
    
    (11,623
    )
    
    
    (13,157
    )
    
    
    (13,797
    )Cumulative effect of a change in accounting
principle (net of tax)
    
    
    (756
    )
    
    
    (756
    )
    
    
    
    
    
    
    Net loss
    
    
    (11,988
    )
    
    
    (12,379
    )
    
    
    (13,157
    )
    
    
    (13,797
    )Payment-in-kind of dividends on convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (11,988
    )
    
    $
    (12,379
    )
    
    $
    (13,157
    )
    
    $
    (13,797
    )Loss per share of common stock  Basic and dilutedLoss from continuing operations attributable
to common stockholders
    
    $
    (0.61
    )
    
    $
    (0.60
    )
    
    $
    (1.37
    )
    
    $
    (1.47
    )Discontinued operations (net of tax)
    
    
    (0.80
    )
    
    
    (0.86
    )
    
    
    (0.29
    )
    
    
    (0.27
    )Cumulative effect of a change in accounting principle
    
    
    (0.09
    )
    
    
    (0.09
    )
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (1.50
    )
    
    $
    (1.55
    )
    
    $
    (1.66
    )
    
    $
    (1.74
    )
  46




---



##### Table of Contents



For the years endedDecember 31, 2006
    
    
    December 31, 2005Previously
    
    
    
    
    
    
    Previouslyreported
    
    
    Restated
    
    
    reported
    
    
    RestatedCash flows from operating activities:Net loss
    
    $
    (11,988
    )
    
    $
    (12,379
    )
    
    $
    (13,157
    )
    
    $
    (13,797
    )Loss (income) from discontinued operations (E)
    
    
    6,348
    
    
    
    6,834
    
    
    
    2,321
    
    
    
    2,178Loss from continuing operations
    
    
    (5,640
    )
    
    
    (5,545
    )
    
    
    (10,836
    )
    
    
    (11,619
    )Cumulative effect of a change in accounting principle
    
    
    756
    
    
    
    756
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    8,640
    
    
    
    8,640
    
    
    
    8,968
    
    
    
    8,968Impairments of goodwill
    
    
    
    
    
    
    
    
    
    
    1,574
    
    
    
    1,574Impairments of other long-lived assets
    
    
    
    
    
    
    
    
    
    
    538
    
    
    
    538Write-off and amortization of debt issuance costs
    
    
    1,178
    
    
    
    1,178
    
    
    
    1,122
    
    
    
    1,122Stock option expense (B)
    
    
    587
    
    
    
    587
    
    
    
    1,953
    
    
    
    2,004Loss (gain) on sale of assets
    
    
    467
    
    
    
    467
    
    
    
    (377
    )
    
    
    (377
    )Equity in income of equity method investment
    
    
    
    
    
    
    
    
    
    
    (600
    )
    
    
    (600
    )Deferred income taxes
    
    
    14
    
    
    
    14
    
    
    
    240
    
    
    
    2406,002
    
    
    
    6,097
    
    
    
    2,582
    
    
    
    1,850Changes in operating assets and liabilities:Accounts receivable
    
    
    2,743
    
    
    
    2,743
    
    
    
    (16
    )
    
    
    (16
    )Inventories (A)(D)
    
    
    2,056
    
    
    
    2,830
    
    
    
    2,054
    
    
    
    2,260Other assets
    
    
    600
    
    
    
    600
    
    
    
    (1,045
    )
    
    
    (1,045
    )Accounts payable
    
    
    (8,000
    )
    
    
    (8,000
    )
    
    
    7,503
    
    
    
    7,503Accrued expenses (E)
    
    
    622
    
    
    
    (78
    )
    
    
    (3,047
    )
    
    
    (3,952
    )Other, net (C)(E)
    
    
    (3,237
    )
    
    
    (5,206
    )
    
    
    (1,187
    )
    
    
    (804
    )(5,216
    )
    
    
    (7,111
    )
    
    
    4,262
    
    
    
    3,946Net cash (used in) provided by continuing operations
    
    
    786
    
    
    
    (1,014
    )
    
    
    6,844
    
    
    
    5,796Net cash provided by discontinued operations (E)
    
    
    1,037
    
    
    
    2,837
    
    
    
    (282
    )
    
    
    766Net cash provided by (used in) operating activities
    
    
    1,823
    
    
    
    1,823
    
    
    
    6,562
    
    
    
    6,562Cash flows from investing activities:Capital expenditures of continuing operations
    
    
    (4,614
    )
    
    
    (4,614
    )
    
    
    (8,925
    )
    
    
    (8,925
    )Acquisition of subsidiary, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (1,115
    )
    
    
    (1,115
    )Proceeds from sale of assets, net (E)
    
    
    267
    
    
    
    367
    
    
    
    981
    
    
    
    981Net cash used in continuing operations
    
    
    (4,347
    )
    
    
    (4,247
    )
    
    
    (9,059
    )
    
    
    (9,059
    )Net cash
provided by (used in) discontinued operations (E)
    
    
    5,392
    
    
    
    5,292
    
    
    
    (335
    )
    
    
    (335
    )Net cash provided by (used in) investing activities
    
    
    1,045
    
    
    
    1,045
    
    
    
    (9,394
    )
    
    
    (9,394
    )Cash flows from financing activities:Net borrowings on revolving loans
    
    
    1,761
    
    
    
    1,761
    
    
    
    1,450
    
    
    
    1,450(Decrease) increase in book overdraft
    
    
    (2,322
    )
    
    
    (2,322
    )
    
    
    4,028
    
    
    
    4,028Proceeds of term loans
    
    
    1,364
    
    
    
    1,364
    
    
    
    
    
    
    
    Repayments of term loans
    
    
    (4,086
    )
    
    
    (4,086
    )
    
    
    (2,857
    )
    
    
    (2,857
    )Direct costs associated with debt facilities
    
    
    (312
    )
    
    
    (312
    )
    
    
    (151
    )
    
    
    (151
    )Repurchases of common stock
    
    
    (111
    )
    
    
    (111
    )
    
    
    (7
    )
    
    
    (7
    )Proceeds from the exercise of stock options
    
    
    147
    
    
    
    147
    
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (3,559
    )
    
    
    (3,559
    )
    
    
    2,463
    
    
    
    2,463Effect of exchange rate changes on cash and cash equivalents
    
    
    (338
    )
    
    
    (338
    )
    
    
    265
    
    
    
    265Net
(decrease) increase in cash and cash equivalents
    
    
    (1,029
    )
    
    
    (1,029
    )
    
    
    (104
    )
    
    
    (104
    )Cash and cash equivalents, beginning of period
    
    
    8,421
    
    
    
    8,421
    
    
    
    8,525
    
    
    
    8,525Cash and cash equivalents, end of period
    
    $
    7,392
    
    
    $
    7,392
    
    
    $
    8,421
    
    
    $
    8,421Supplemental disclosure of non-cash investing activities:Note receivable from sale of discontinued operations
    
    $
    1,200
    
    
    $
    1,200
    
    
    $
    
    
    
    $
    
  47




---



##### Table of Contents



3.
    
    Significant Accounting Policies;7.
    
    Discontinued Operations;8.
    
    Savannah Energy Systems Company Partnership;10.
    
    Earnings Per Share;14.
    
    Income Taxes;17.
    
    Industry Segments and Geographic Information; and21.
    
    Quarterly Results of Operations (Unaudited).
  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
  48




---



##### Table of Contents



Inventories
 As Restated, see Note 2December 31,2006
    
    
    2005(Amounts in Thousands)Raw materials
    
    $
    14,777
    
    
    $
    22,997Work in process
    
    
    613
    
    
    
    1,766Finished goods
    
    
    47,230
    
    
    
    48,949Inventory reserves
    
    
    (3,905
    )
    
    
    (4,548
    )LIFO reserve
    
    
    (3,735
    )
    
    
    (6,571
    )$
    54,980
    
    
    $
    62,593
 Inventory Costs, an amendment of ARB No. 43,
Chapter 4
 Goodwill Goodwill
and Intangible Assets
 Property and Equipment
  49




---



##### Table of Contents



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
   50




---



##### Table of Contents



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
   51




---



##### Table of Contents



For the years endedDecember 31,2005
    
    
    2004As Restated,see Note 2Net loss attributable to common stockholders, as
reported
    
    $
    (13,797
    )
    
    $
    (50,870
    )Add: Stock-based employee compensation expense
included in reported net loss, with no related
tax effects
    
    
    2,004Deduct: 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
    
    $
    (12,086
    )
    
    $
    (52,722
    )Earnings per shareBasic and diluted-as reported
    
    $
    (1.74
    )
    
    $
    (6.45
    )Basic and diluted-pro forma
    
    $
    (1.52
    )
    
    $
    (6.69
    )
  Derivative Financial Instruments Accounting for Derivative Financial Instruments and Hedging Activities
    52




---



##### Table of Contents



Notional Amount
    
    
    Maturity
    
    Rate Paid
    
    
    Rate Received
    
    
    Fair 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
   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
  December 31,
    
    
    December 31,2006
    
    
    2005Gross
    
    
    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
  53




---



##### Table of Contents



2007
    
    $
    6452008
    
    
    6322009
    
    
    5972010
    
    
    5492011
    
    
    508Thereafter
    
    
    3,504
    Accounting for the Impairments or
Disposal of Long Lived Assets Clarification of Reporting
Unit Guidance in Paragraph 30 of FASB Statement No. 142
   54




---



##### Table of Contents



The Equity Method for of Accounting for Investments
in Common Stock,
       55




---



##### Table of Contents



As Restated, see Note 2December 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
    
    
    743
    
    
    
    1,445$
    743
    
    
    $
    5,398
    As Restated, see Note 22006
    
    
    2005
    
    
    2004Net sales
    
    $
    21,485
    
    
    $
    31,807
    
    
    $
    40,961Pre-tax operating (loss) income
    
    $
    (1,436
    )
    
    $
    (2,357
    )
    
    $
    1,423Pre-tax loss on sale of discontinued businesses
    
    $
    (5,405
    )
    
    $
    
    
    
    $
    (775
    )
  56




---



##### Table of Contents



Offsetting of Amounts Related to Certain Contracts
  Consolidation of Variable Interest Entities
     57




---



##### Table of Contents



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
  2007
    
    $
    1,1252008
    
    
    1,5002009
    
    
    10,367
     58




---



##### Table of Contents



Fixed Charge Coverage Ratio
 Capital Expenditures
 Leverage Ratio
    59




---



##### 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
 As Restated, see Note 2For the Year Ended December 31,
    
    2006
    
    
    2005
    
    
    2004Basic and Diluted EPS:Loss from continuing operations
    
    $
    (4,789
    )
    
    $
    (11,619
    )
    
    $
    (36,528
    )Payment-in-kind dividends on convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    (14,749
    )Loss from continuing operations attributable to common stockholders
    
    
    (4,789
    )
    
    
    (11,619
    )
    
    
    (51,277
    )Discontinued operations (net of tax)
    
    
    (6,834
    )
    
    
    (2,178
    )
    
    
    407Cumulative effect of a change in accounting principle
    
    
    (756
    )
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (12,379
    )
    
    $
    (13,797
    )
    
    $
    (50,870
    )Weighted average shares  Basic and Diluted
    
    
    7,967
    
    
    
    7,949
    
    
    
    7,883Per share amount:Loss from continuing operations attributable to common stockholders
    
    $
    (0.60
    )
    
    $
    (1.47
    )
    
    $
    (6.50
    )Discontinued operations (net of tax)
    
    
    (0.86
    )
    
    
    (0.27
    )
    
    
    0.05Cumulative effect of a change in accounting principle
    
    
    (0.09
    )
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (1.55
    )
    
    $
    (1.74
    )
    
    $
    (6.45
    )
  60




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##### Table of Contents



Pension and Other Postretirement Plans
  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'sConsolidated Balance Sheets as of December 31, 2006Before
    
    
    
    
    
    
    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
    )
  61




---



##### Table of Contents



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
    )
  62




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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
  63




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##### Table of Contents



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
   401(k) Plans
   Convertible Preferred Stock
   64




---



##### Table of Contents



Share Repurchase
  Rights Plan
   Director Stock Grant
  Stock Options
   65




---



##### Table of Contents



66




---



##### Table of Contents



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
  67




---



##### Table of Contents



Stock Appreciation Rights
     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
    As Restated, see Note 22006
    
    
    2005
    
    
    2004(Amounts in Thousands)Domestic
    
    $
    (7,409
    )
    
    $
    (14,730
    )
    
    $
    (39,125
    )Foreign
    
    
    4,946
    
    
    
    4,719
    
    
    
    3,239Total
    
    $
    (2,463
    )
    
    $
    (10,011
    )
    
    $
    (35,886
    )
  68




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##### Table of Contents



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
  As Restated, see Note 22006
    
    
    2005
    
    
    2004(Amounts in Thousands)Benefit for income taxes at statutory rate
    
    $
    (865
    )
    
    $
    (3,504
    )
    
    $
    (12,560
    )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
    
    
    
    
    
    
    547
    
    
    
    Valuation allowance adjustments
    
    
    (310
    )
    
    
    3,712
    
    
    
    14,325Permanent items
    
    
    (115
    )
    
    
    4
    
    
    
    103Increase (reduction) of tax reserves
    
    
    
    
    
    
    
    
    
    
    (343
    )Other, net
    
    
    2
    
    
    
    (21
    )
    
    
    23Net provision for income taxes
    
    $
    2,326
    
    
    $
    1,608
    
    
    $
    642
  69




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##### Table of Contents



As Restated, see Note 22006
    
    
    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
    
    
    35,326
    
    
    
    35,026Operating loss carry-forwards  foreign
    
    
    94
    
    
    
    45Tax credit carry forwards
    
    
    6,647
    
    
    
    4,567Estimated foreign tax credit related to
unremitted earnings
    
    
    4,153
    
    
    
    4,42873,010
    
    
    
    74,612Less valuation allowance
    
    
    (66,971
    )
    
    
    (64,794
    )6,039
    
    
    
    9,818Net deferred income tax asset
    
    $
    974
    
    
    $
    988
   Deduction for Qualified Domestic Production Activities
  Repatriation of Foreign Earnings
   70




---



##### Table of Contents



2007
    
    $
    7,6632008
    
    
    7,2392009
    
    
    3,3322010
    
    
    2,7322011
    
    
    510Thereafter
    
    
    614Total minimum payments
    
    $
    22,090
         71




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##### Table of Contents



Years Ended December 31,2006
    
    
    2005
    
    
    2004As Restated, see Note 2(Amounts in thousands)Maintenance Products GroupNet external sales
    
    
    
    $
    208,423
    
    
    $
    216,068
    
    
    $
    237,927Operating income (loss)
    
    
    
    
    5,637
    
    
    
    (6,467
    )
    
    
    (4,115
    )Operating margin (deficit)
    
    
    
    
    2.7
    %
    
    
    (3.0
    %)
    
    
    (1.7
    %)Depreciation
and amortization
    
    
    7,694
    
    
    
    7,673
    
    
    
    10,593Capital expenditures
    
    
    
    
    3,855
    
    
    
    8,329
    
    
    
    10,111Total assets
    
    
    
    
    95,119
    
    
    
    107,806
    
    
    
    124,458Electrical Products GroupNet external sales
    
    
    
    $
    187,743
    
    
    $
    207,322
    
    
    $
    178,754Operating income
    
    
    
    
    8,710
    
    
    
    17,385
    
    
    
    16,809Operating margin
    
    
    
    
    4.6
    %
    
    
    8.4
    %
    
    
    9.4
    %Depreciation
and amortization
    
    
    827
    
    
    
    1,191
    
    
    
    1,327Capital expenditures
    
    
    
    
    739
    
    
    
    596
    
    
    
    671Total assets
    
    
    
    
    74,025
    
    
    
    66,744
    
    
    
    57,698Net sales
    
    - Operating segments
    
    $
    396,166
    
    
    $
    423,390
    
    
    $
    416,681Total
    
    $
    396,166
    
    
    $
    423,390
    
    
    $
    416,681Operating income (loss)
    
    - Operating segments
    
    $
    14,347
    
    
    $
    10,918
    
    
    $
    12,694- Unallocated corporate
    
    
    (10,206
    )
    
    
    (13,198
    )
    
    
    (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
    
    $
    3,786
    
    
    $
    (5,105
    )
    
    $
    (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
    
    $
    169,144
    
    
    $
    174,550
    
    
    $
    182,156-       Other [a]
    
    
    6,700
    
    
    
    27,391
    
    
    
    31,801-       Unallocated corporate
    
    
    6,850
    
    
    
    10,153
    
    
    
    10,507Total
    
    $
    182,694
    
    
    $
    212,094
    
    
    $
    224,464
 [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.
  72




---



##### Table of Contents



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, As Restated, see Note 2
    
    $
    145,512
    
    
    $
    24,678
    
    
    $
    12,264
    
    
    $
    
    
    
    $
    240
    
    
    $
    182,6942005:Sales to unaffiliated
customers
    
    $
    347,894
    
    
    $
    53,684
    
    
    $
    14,185
    
    
    $
    3,721
    
    
    $
    3,906
    
    
    $
    423,390Total
assets, As Restated, see Note 2
    
    $
    161,044
    
    
    $
    25,950
    
    
    $
    24,881
    
    
    $
    
    
    
    $
    219
    
    
    $
    212,0942004: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
   General Environmental Claims
  W.J. Smith Wood Preserving Company (W.J. Smith)
    73




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##### 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).
   74




---



##### Table of Contents



with prejudice
    Other Claims
      75




---



##### Table of Contents



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
 Consolidation of Glit facilities
  76




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##### Table of Contents



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
 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
    
    $
    
    
    
    $
    
    
    
    $
    
  77




---



##### Table of Contents



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
 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
  78




---



##### Table of Contents



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
    
    
    $
    
 [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
potential sub-lease revenue. Total maximum potential amount of lease loss, excluding any sublease
rentals, is $1.8 million as of December 31, 2006. The Company has included $0.8 million as an
offset for sublease rentals.[c]
    
    Includes charges associated with moving inventory, machinery and equipment, and consolidation
of administrative and operational functions.[d]
    
    Katy expects to substantially complete its restructuring program in 2007. The remaining
severance, restructuring and related costs for these initiatives are expected to be approximately
$0.3 million.
  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
    
    
    $
    
  79




---



##### Table of Contents



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
    
    
    $
    
    80




---



##### Table of Contents



Consolidated Statements of Operations
    
    2006(Amounts in thousands, except per share data)
    
    1st Qtr
    
    
    2nd QtrPreviously
    
    
    
    
    
    
    Previouslyreported
    
    
    Restated
    
    
    reported
    
    
    RestatedNet sales
    
    $
    75,818
    
    
    $
    75,818
    
    
    $
    88,618
    
    
    $
    88,618Cost of goods sold (A)(D)
    
    
    65,407
    
    
    
    65,553
    
    
    
    76,149
    
    
    
    76,392Gross profit
    
    
    10,411
    
    
    
    10,265
    
    
    
    12,469
    
    
    
    12,226Selling, general and administrative expenses (B)(C)
    
    
    12,481
    
    
    
    12,289
    
    
    
    12,064
    
    
    
    11,873Severance, restructuring and related charges
    
    
    782
    
    
    
    782
    
    
    
    71
    
    
    
    71Loss (gain) on sale of assets
    
    
    102
    
    
    
    102
    
    
    
    (48
    )
    
    
    (48
    )Operating (loss) income
    
    
    (2,954
    )
    
    
    (2,908
    )
    
    
    382
    
    
    
    330Gain on SESCO joint venture transaction (E)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    563Interest expense (E)
    
    
    (1,740
    )
    
    
    (1,771
    )
    
    
    (1,743
    )
    
    
    (1,775
    )Other, net
    
    
    341
    
    
    
    341
    
    
    
    83
    
    
    
    83(Loss)
income from continuing operations before
provision for income taxes
    
    
    (4,353
    )
    
    
    (4,338
    )
    
    
    (1,278
    )
    
    
    (799
    )Provision for income taxes from continuing operations
    
    
    (262
    )
    
    
    (262
    )
    
    
    (406
    )
    
    
    (406
    )(Loss) income from continuing operations
    
    
    (4,615
    )
    
    
    (4,600
    )
    
    
    (1,684
    )
    
    
    (1,205
    )Loss from operations of discontinued businesses
(net of tax) (E)
    
    
    (420
    )
    
    
    (389
    )
    
    
    (268
    )
    
    
    (699
    )Gain (loss) on sale of discontinued businesses
(net of tax) (E)
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    (30
    )Loss before cumulative effect of a change in
accounting principle
    
    
    (5,035
    )
    
    
    (4,989
    )
    
    
    (1,882
    )
    
    
    (1,934
    )Cumulative effect of a change in accounting
principle (net of tax)
    
    
    (756
    )
    
    
    (756
    )
    
    
    
    
    
    
    Net loss
    
    
    (5,791
    )
    
    
    (5,745
    )
    
    
    (1,882
    )
    
    
    (1,934
    )Payment-in-kind of dividends on convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (5,791
    )
    
    $
    (5,745
    )
    
    $
    (1,882
    )
    
    $
    (1,934
    )Loss per share of common stock  Basic and diluted(Loss) income from continuing operations
attributable to common stockholders
    
    $
    (0.58
    )
    
    $
    (0.57
    )
    
    $
    (0.21
    )
    
    $
    (0.15
    )Discontinued operations (net of tax)
    
    
    (0.05
    )
    
    
    (0.05
    )
    
    
    (0.03
    )
    
    
    (0.09
    )Cumulative effect of a change in accounting principle
    
    
    (0.10
    )
    
    
    (0.10
    )
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (0.73
    )
    
    $
    (0.72
    )
    
    $
    (0.24
    )
    
    $
    (0.24
    )
  81




---



##### Table of Contents



20063rd Qtr
    
    
    4th QtrPreviously
    
    
    
    
    
    
    Previouslyreported
    
    
    Restated
    
    
    reported
    
    
    RestatedNet sales
    
    $
    121,217
    
    
    $
    121,217
    
    
    $
    110,513
    
    
    $
    110,513Cost of goods sold (A)(D)
    
    
    104,912
    
    
    
    105,120
    
    
    
    98,227
    
    
    
    98,404Gross profit
    
    
    16,305
    
    
    
    16,097
    
    
    
    12,286
    
    
    
    12,109Selling, general and administrative expenses (B)(C)
    
    
    11,753
    
    
    
    11,753
    
    
    
    10,641
    
    
    
    10,641Severance, restructuring and related charges
    
    
    738
    
    
    
    738
    
    
    
    (1,703
    )
    
    
    (1,703
    )Loss (gain) on sale of assets
    
    
    49
    
    
    
    49
    
    
    
    364
    
    
    
    364Operating (loss) income
    
    
    3,765
    
    
    
    3,557
    
    
    
    2,984
    
    
    
    2,807Gain on SESCO joint venture transaction (E)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense (E)
    
    
    (1,715
    )
    
    
    (1,724
    )
    
    
    (1,839
    )
    
    
    (1,844
    )Other, net
    
    
    42
    
    
    
    42
    
    
    
    (164
    )
    
    
    (164
    )(Loss) income from continuing operations before
provision for income taxes
    
    
    2,092
    
    
    
    1,875
    
    
    
    981
    
    
    
    799Provision for income taxes from continuing operations
    
    
    (553
    )
    
    
    (553
    )
    
    
    (1,105
    )
    
    
    (1,105
    )(Loss) income from continuing operations
    
    
    1,539
    
    
    
    1,322
    
    
    
    (124
    )
    
    
    (306
    )Loss from operations of discontinued businesses
(net of tax) (E)
    
    
    (151
    )
    
    
    (142
    )
    
    
    (204
    )
    
    
    (199
    )Gain (loss) on sale of discontinued businesses
(net of tax) (E)
    
    
    (3,200
    )
    
    
    (3,200
    )
    
    
    (2,175
    )
    
    
    (2,175
    )Loss before cumulative effect of a change in
accounting principle
    
    
    (1,812
    )
    
    
    (2,020
    )
    
    
    (2,503
    )
    
    
    (2,680
    )Cumulative effect of a change in accounting
principle (net of tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (1,812
    )
    
    
    (2,020
    )
    
    
    (2,503
    )
    
    
    (2,680
    )Payment-in-kind of dividends on convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (1,812
    )
    
    $
    (2,020
    )
    
    $
    (2,503
    )
    
    $
    (2,680
    )Loss per share of common stock  Basic and diluted(Loss) income from continuing operations attributable
to common stockholders
    
    $
    0.19
    
    
    $
    0.17
    
    
    $
    (0.01
    )
    
    $
    (0.04
    )Discontinued operations (net of tax)
    
    
    (0.42
    )
    
    
    (0.42
    )
    
    
    (0.30
    )
    
    
    (0.30
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to common stockholders
    
    $
    (0.23
    )
    
    $
    (0.25
    )
    
    $
    (0.31
    )
    
    $
    (0.34
    )
  82




---



##### Table of Contents



20051st Qtr
    
    
    2nd QtrPreviously
    
    
    
    
    
    
    Previouslyreported
    
    
    Revised
    
    
    reported
    
    
    RevisedNet sales
    
    $
    86,511
    
    
    $
    86,511
    
    
    $
    90,048
    
    
    $
    90,048Cost of goods sold (A)(D)
    
    
    77,757
    
    
    
    77,757
    
    
    
    79,301
    
    
    
    79,301Gross profit
    
    
    8,754
    
    
    
    8,754
    
    
    
    10,747
    
    
    
    10,747Selling, general and administrative expenses (B)(C)
    
    
    11,380
    
    
    
    11,763
    
    
    
    14,858
    
    
    
    14,858Impairments of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Impairments of other long-lived assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Severance, restructuring and related charges
    
    
    172
    
    
    
    172
    
    
    
    466
    
    
    
    466Loss (gain) on sale of assets
    
    
    186
    
    
    
    186
    
    
    
    (352
    )
    
    
    (352
    )Operating (loss) income
    
    
    (2,984
    )
    
    
    (3,367
    )
    
    
    (4,225
    )
    
    
    (4,225
    )Equity in income of equity method investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense (E)
    
    
    (1,224
    )
    
    
    (1,264
    )
    
    
    (1,350
    )
    
    
    (1,392
    )Other, net
    
    
    (46
    )
    
    
    (46
    )
    
    
    34
    
    
    
    34(Loss) income from continuing operations before
provision for income taxes
    
    
    (4,254
    )
    
    
    (4,677
    )
    
    
    (5,541
    )
    
    
    (5,583
    )Provision for income taxes from continuing operations
    
    
    (329
    )
    
    
    (329
    )
    
    
    (89
    )
    
    
    (89
    )(Loss) income from continuing operations
    
    
    (4,583
    )
    
    
    (5,006
    )
    
    
    (5,630
    )
    
    
    (5,672
    )Loss from operations of discontinued businesses
(net of tax) (E)
    
    
    (65
    )
    
    
    (25
    )
    
    
    (416
    )
    
    
    (374
    )(Loss) income before cumulative effect of a change in
accounting principle
    
    
    (4,648
    )
    
    
    (5,031
    )
    
    
    (6,046
    )
    
    
    (6,046
    )Cumulative effect of a change in accounting
principle (net of tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    
    (4,648
    )
    
    
    (5,031
    )
    
    
    (6,046
    )
    
    
    (6,046
    )Payment-in-kind of dividends on convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income attributable to common stockholders
    
    $
    (4,648
    )
    
    $
    (5,031
    )
    
    $
    (6,046
    )
    
    $
    (6,046
    )(Loss) income per share of common stock  Basic and diluted(Loss) income from continuing operations attributable
to common stockholders
    
    $
    (0.58
    )
    
    $
    (0.63
    )
    
    $
    (0.71
    )
    
    $
    (0.71
    )Discontinued operations (net of tax)
    
    
    (0.01
    )
    
    
    (0.00
    )
    
    
    (0.05
    )
    
    
    (0.05
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income attributable to common stockholders
    
    $
    (0.59
    )
    
    $
    (0.63
    )
    
    $
    (0.76
    )
    
    $
    (0.76
    )
  83




---



##### Table of Contents



20053rd Qtr
    
    
    4th QtrPreviously
    
    
    
    
    
    
    Previouslyreported
    
    
    Revised
    
    
    reported
    
    
    RestatedNet sales
    
    $
    133,165
    
    
    $
    133,165
    
    
    $
    113,666
    
    
    $
    113,666Cost of goods sold (A)(D)
    
    
    116,402
    
    
    
    116,402
    
    
    
    99,255
    
    
    
    99,461Gross profit
    
    
    16,763
    
    
    
    16,763
    
    
    
    14,411
    
    
    
    14,205Selling, general and administrative expenses (B)(C)
    
    
    12,820
    
    
    
    12,820
    
    
    
    13,257
    
    
    
    13,308Impairments of goodwill
    
    
    
    
    
    
    
    
    
    
    1,574
    
    
    
    1,574Impairments of other long-lived assets
    
    
    
    
    
    
    
    
    
    
    538
    
    
    
    538Severance, restructuring and related charges
    
    
    254
    
    
    
    254
    
    
    
    198
    
    
    
    198Loss (gain) on sale of assets
    
    
    (176
    )
    
    
    (176
    )
    
    
    (35
    )
    
    
    (35
    )Operating (loss) income
    
    
    3,865
    
    
    
    3,865
    
    
    
    (1,121
    )
    
    
    (1,378
    )Equity in income of equity method investment
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    600Interest expense (E)
    
    
    (1,457
    )
    
    
    (1,487
    )
    
    
    (1,539
    )
    
    
    (1,570
    )Other, net
    
    
    215
    
    
    
    215
    
    
    
    4
    
    
    
    4(Loss) income from continuing operations before
provision for income taxes
    
    
    2,623
    
    
    
    2,593
    
    
    
    (2,056
    )
    
    
    (2,344
    )Provision for income taxes from continuing operations
    
    
    (304
    )
    
    
    (304
    )
    
    
    (886
    )
    
    
    (886
    )(Loss) income from continuing operations
    
    
    2,319
    
    
    
    2,289
    
    
    
    (2,942
    )
    
    
    (3,230
    )Loss from operations of discontinued businesses
(net of tax) (E)
    
    
    (986
    )
    
    
    (956
    )
    
    
    (854
    )
    
    
    (823
    )(Loss) income before cumulative effect of a change in
accounting principle
    
    
    1,333
    
    
    
    1,333
    
    
    
    (3,796
    )
    
    
    (4,053
    )Cumulative effect of a change in accounting
principle (net of tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    
    1,333
    
    
    
    1,333
    
    
    
    (3,796
    )
    
    
    (4,053
    )Payment-in-kind of dividends on convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income attributable to common stockholders
    
    $
    1,333
    
    
    $
    1,333
    
    
    $
    (3,796
    )
    
    $
    (4,053
    )(Loss) income per share of common stock  Basic and diluted(Loss) income from continuing operations attributable
to common stockholders
    
    $
    0.29
    
    
    $
    0.29
    
    
    $
    (0.37
    )
    
    $
    (0.41
    )Discontinued operations (net of tax)
    
    
    (0.12
    )
    
    
    (0.12
    )
    
    
    (0.11
    )
    
    
    (0.10
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income attributable to common stockholders
    
    $
    0.17
    
    
    $
    0.17
    
    
    $
    (0.48
    )
    
    $
    (0.51
    )
  84




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##### Table of Contents



March 31, 2006PreviouslyAssets
    
    reported
    
    
    RestatedCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,001
    
    
    $
    3,001Trade accounts receivable, net
    
    
    46,503
    
    
    
    46,503Inventories, net
    
    
    67,960
    
    
    
    67,608Other current assets
    
    
    3,822
    
    
    
    3,822Asset held for sale
    
    
    
    
    
    
    Total current assets
    
    
    121,286
    
    
    
    120,934OTHER ASSETS:Goodwill
    
    
    665
    
    
    
    665Intangibles, net
    
    
    6,827
    
    
    
    6,827Other
    
    
    8,605
    
    
    
    8,414Total other assets
    
    
    16,097
    
    
    
    15,906Property and equipment, net
    
    
    56,157
    
    
    
    56,157Total assets
    
    $
    193,540
    
    
    $
    192,997Liabilities and Stockholders EquityCURRENT LIABILITIES:Accounts payable
    
    $
    27,379
    
    
    $
    27,379Accrued compensation
    
    
    3,714
    
    
    
    3,714Accrued expenses
    
    
    36,482
    
    
    
    36,482Current maturities, long-term debt
    
    
    2,857
    
    
    
    2,857Revolving credit agreement
    
    
    50,477
    
    
    
    50,477Total current liabilities
    
    
    120,909
    
    
    
    120,909LONG-TERM DEBT, less current maturities
    
    
    12,143
    
    
    
    12,143OTHER LIABILITIES
    
    
    10,642
    
    
    
    10,642Total liabilities
    
    
    143,694
    
    
    
    143,694COMMITMENTS AND CONTINGENCIES (Notes 18 and 21)
    
    
    
    
    
    
    STOCKHOLDERS EQUITY15% Convertible preferred stock, $100 par value, authorized1,200,000 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
    
    
    26,829
    
    
    
    26,880Accumulated other comprehensive income
    
    
    3,167
    
    
    
    3,167Accumulated deficit
    
    
    (76,206
    )
    
    
    (76,800
    )Treasury stock, at cost
    
    
    (22,022
    )
    
    
    (22,022
    )Total stockholders equity
    
    
    49,846
    
    
    
    49,303Total liabilities and stockholders equity
    
    $
    193,540
    
    
    $
    192,997
  85




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##### Table of Contents



June 30, 2006PreviouslyAssets
    
    reported
    
    
    RestatedCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,565
    
    
    $
    4,565Trade accounts receivable, net
    
    
    54,102
    
    
    
    54,102Inventories, net
    
    
    57,522
    
    
    
    56,927Other current assets
    
    
    3,653
    
    
    
    3,653Asset held for sale
    
    
    
    
    
    
    Total current assets
    
    
    119,842
    
    
    
    119,247OTHER ASSETS:Goodwill
    
    
    665
    
    
    
    665Intangibles, net
    
    
    6,563
    
    
    
    6,563Other
    
    
    9,706
    
    
    
    9,706Total other assets
    
    
    16,934
    
    
    
    16,934Property and equipment, net
    
    
    53,604
    
    
    
    53,604Total assets
    
    $
    190,380
    
    
    $
    189,785Liabilities and Stockholders EquityCURRENT LIABILITIES:Accounts payable
    
    $
    28,714
    
    
    $
    28,714Accrued compensation
    
    
    3,583
    
    
    
    3,583Accrued expenses
    
    
    38,208
    
    
    
    38,208Current maturities, long-term debt
    
    
    2,857
    
    
    
    2,857Revolving credit agreement
    
    
    49,056
    
    
    
    49,056Total current liabilities
    
    
    122,418
    
    
    
    122,418LONG-TERM DEBT, less current maturities
    
    
    10,248
    
    
    
    10,248OTHER LIABILITIES
    
    
    8,764
    
    
    
    8,764Total liabilities
    
    
    141,430
    
    
    
    141,430COMMITMENTS 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
    
    
    26,969
    
    
    
    27,020Accumulated other comprehensive income
    
    
    4,045
    
    
    
    4,045Accumulated deficit
    
    
    (78,088
    )
    
    
    (78,734
    )Treasury stock, at cost
    
    
    (22,054
    )
    
    
    (22,054
    )Total stockholders equity
    
    
    48,950
    
    
    
    48,355Total liabilities and stockholders equity
    
    $
    190,380
    
    
    $
    189,785
  86




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##### Table of Contents



September 30, 2006PreviouslyAssets
    
    reported
    
    
    RestatedCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,117
    
    
    $
    4,117Trade accounts receivable, net
    
    
    66,966
    
    
    
    66,966Inventories, net
    
    
    60,247
    
    
    
    59,444Other current assets
    
    
    4,376
    
    
    
    4,376Asset held for sale
    
    
    12,152
    
    
    
    12,152Total current assets
    
    
    147,858
    
    
    
    147,055OTHER ASSETS:Goodwill
    
    
    665
    
    
    
    665Intangibles, net
    
    
    6,481
    
    
    
    6,481Other
    
    
    9,253
    
    
    
    9,253Total other assets
    
    
    16,399
    
    
    
    16,399Property and equipment, net
    
    
    42,436
    
    
    
    42,436Total assets
    
    $
    206,693
    
    
    $
    205,890Liabilities and Stockholders EquityCURRENT LIABILITIES:Accounts payable
    
    $
    42,936
    
    
    $
    42,936Accrued compensation
    
    
    4,008
    
    
    
    4,008Accrued expenses
    
    
    38,659
    
    
    
    38,659Current maturities, long-term debt
    
    
    2,857
    
    
    
    2,857Revolving credit agreement
    
    
    49,729
    
    
    
    49,7293,434
    
    
    
    3,434Total current liabilities
    
    
    141,623
    
    
    
    141,623LONG-TERM DEBT, less current maturities
    
    
    9,510
    
    
    
    9,510OTHER LIABILITIES
    
    
    9,012
    
    
    
    9,012Total liabilities
    
    
    160,145
    
    
    
    160,145COMMITMENTS 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
    
    
    26,968
    
    
    
    27,019Accumulated other comprehensive income
    
    
    3,362
    
    
    
    3,362Accumulated deficit
    
    
    (79,900
    )
    
    
    (80,754
    )Treasury stock, at cost
    
    
    (21,960
    )
    
    
    (21,960
    )Total stockholders equity
    
    
    46,548
    
    
    
    45,745Total liabilities and stockholders equity
    
    $
    206,693
    
    
    $
    205,890
  87




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##### Table of Contents



2006 Quarters
    
    
    2006 Fiscal1st
    
    
    2nd
    
    
    3rd
    
    
    4th
    
    
    Year(Loss) income from continuing operationsAs previously reported
    
    $
    (4,615
    )
    
    $
    (1,684
    )
    
    $
    1,539
    
    
    $
    (124
    )
    
    $
    (4,884
    )Inventory restatement (A)
    
    
    (146
    )
    
    
    (243
    )
    
    
    (208
    )
    
    
    (41
    )
    
    
    (638
    )Deferred compensation (C)
    
    
    192
    
    
    
    191
    
    
    
    
    
    
    
    
    
    
    
    383Inventory reserves (D)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (136
    )
    
    
    (136
    )Revision of SESCO (E)
    
    
    (31
    )
    
    
    531
    
    
    
    (9
    )
    
    
    (5
    )
    
    
    486As restated
    
    $
    (4,600
    )
    
    $
    (1,205
    )
    
    $
    1,322
    
    
    $
    (306
    )
    
    $
    (4,789
    )
 2005 Quarters
    
    
    2005 Fiscal1st
    
    
    2nd
    
    
    3rd
    
    
    4th
    
    
    Year(Loss) income from continuing operationsAs previously reported
    
    $
    (4,583
    )
    
    $
    (5,630
    )
    
    $
    2,319
    
    
    $
    (2,942
    )
    
    $
    (10,836
    )Inventory restatement (A)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (206
    )
    
    
    (206
    )Accelerated vesting of stock options (B)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    (51
    )Deferred compensation (C)
    
    
    (383
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (383
    )Revision of SESCO (E)
    
    
    (40
    )
    
    
    (42
    )
    
    
    (30
    )
    
    
    (31
    )
    
    
    (143
    )As restated
    
    $
    (5,006
    )
    
    $
    (5,672
    )
    
    $
    2,289
    
    
    $
    (3,230
    )
    
    $
    (11,619
    )
 (A)
    
    The Company recorded an adjustment to raw material inventory and costs of goods sold as
it related to an overstatement of raw material inventory when completing physical
inventories.(B)
    
    The Company recorded non-cash compensation expense and corresponding impact to
additional paid in capital related to stock options which would have not otherwise vested
but for an accelerated vesting.(C)
    
    The Company recorded an adjustment to compensation expense and other assets associated
with a retirement compensation program.(D)
    
    The Company recorded an adjustment to inventory and costs of goods sold associated with
our lower of cost or market valuation.(E)
    
    The Company previously inappropriately reported the results of the SESCO operation as
discontinued operations. The financial information was revised to reflect SESCO within
continuing operations.
   1st Qtr
    
    
    2nd Qtr
    
    
    3rd Qtr
    
    
    4th QtrSeverance, restructuring and related charges
    
    $
    172
    
    
    $
    466
    
    
    $
    254
    
    
    $
    198Impairments of long-lived assets
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,112
   88




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##### Table of Contents



As Restated, see Note 2December 31,2006
    
    
    2005Debt issuance costs, net
    
    $
    2,885
    
    
    $
    3,750Equity method investment in unconsolidated
affiliate
    
    
    2,217
    
    
    
    2,217Rabbi trust assets
    
    
    1,455
    
    
    
    838Notes receivable  sale of business
    
    
    1,200
    
    
    
    Other
    
    
    1,233
    
    
    
    1,455Total
    
    $
    8,990
    
    
    $
    8,260
  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
  89




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##### Table of Contents



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
     90




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##### Table of Contents




    
    The Company did not maintain a proper level of segregation of duties, specifically the
verification process of physical raw material inventory on hand and the operational
handling of this inventory; and
 
    
    The Company did not maintain sufficient oversight of the raw material inventory counting
and reconciliation process.
  Remediation of Material Weaknesses
  
    
    Completed a full resin physical inventory by independent employees not involved in the
operational handling and reporting of resin inventory;
 
    
    Completed a full comparison of the physical resin inventory to the general ledger and
recorded the appropriate adjustment;
 
    
    Verified the automated measurement systems with third parties as well as the physical
observation of the resin inventory by independent employees;
 
    
    Initiated weekly physical counts of resin inventory and completed a comparison to the
perpetual inventory system for any differences with any significant differences
investigated by management. We will continue to perform these weekly physical counts until
management believes the process and related controls are operating as designed; and
 
    
    Reviewed and adjusted, as necessary, procedures and personnel involved in the physical
inventory counting of resin.
   91




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##### Table of Contents



(b)
    
    Change in Internal Controls
       
    
    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.
 
    
    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.
  92




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##### Table of Contents




    
    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
   93




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##### Table of Contents



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
   94




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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
    
    
    753,173
    
    
    $
    4.92
    
    
    
    721,748Equity Compensation
Plans Not Approved
by
Stockholders
    
    
    1,763,108
    
    
    $
    3.56
    
    
    
    Total
    
    
    2,516,281
    
    
    
    
    
    
    
    721,748
 Equity Compensation Plans Not Approved by Stockholders
      95




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##### Table of Contents



Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
   96




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##### Table of Contents



Part IV
 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    
    1. Financial Statements
  - Consolidated Balance Sheets as of December 31, 2006 and 2005- Consolidated Statements of Operations for the years ended December 31,
2006, 2005 and 2004- Consolidated Statements of Stockholders Equity for the years ended
December 31, 2006, 2005 and 2004- Consolidated Statements of Cash Flows for the years ended December 31,
2006, 2005 and 2004- Notes to Consolidated Financial Statements
 2. Financial Statement Schedules
  3. Exhibits
  
   Dated: August 17, 2007
    
    KATY INDUSTRIES, INC.Registrant
 /S/ Anthony T. Castor III
 /S/ Amir Rosenthal
  97




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
    
    99Schedule II  Valuation and Qualifying
Accounts
    
    
    100Consent of Independent Registered Public Accounting Firm
    
    
    Exhibit 23
    98




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULE
    
  99




---



##### Table of Contents



Balance at
    
    
    Additions
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    Charged to
    
    
    Write-offs
    
    
    Other
    
    
    EndAccounts Receivable Reserves
    
    of Year
    
    
    Expense
    
    
    to 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
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    Charged to
    
    
    Write-offs
    
    
    Other
    
    
    EndInventory Reserves
    
    of Year
    
    
    Expense
    
    
    to Reserves
    
    
    Adjustments
    
    
    of YearYear ended December 31, 2006
    
    $
    4,548
    
    
    $
    1,115
    
    
    $
    (1,239
    )
    
    $
    (519
    )
    
    $
    3,905
    *Year 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    EndIncome Tax Valuation Allowances
    
    of Year
    
    
    Provision
    
    
    Reversals
    
    
    Adjustments
    
    
    of YearYear ended December 31, 2006
    
    $
    64,794
    
    
    $
    2,177
    
    
    $
    
    
    
    $
    
    
    
    $
    66,971
    *Year ended December 31, 2005
    
    $
    60,028
    
    
    $
    4,766
    
    
    $
    
    
    
    $
    
    
    
    $
    64,794
    *Year ended December 31, 2004
    
    $
    46,171
    
    
    $
    13,857
    
    
    $
    
    
    
    $
    
    
    
    $
    60,028
 *
    
    As Restated, see Note 2
  100




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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
    
    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).
    
    
    *
  101




---



##### Table of Contents



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
    
    
    **23
    
    Consent of Independent Registered Public Accounting Firm
    
    
    **31.1
    
    CEO Certification pursuant to Securities Exchange Act
Rule 13a-14, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
    
    
    **31.2
    
    CFO Certification pursuant to Securities Exchange Act
Rule 13a-14, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
    
    
    **32.1
    
    CEO Certification required by 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
    
    
    **#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.
    
    
    **#
 *
    
    Indicates incorporated by reference.**
    
    Indicates filed herewith.#
    
    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.
  102