----

----

| Delaware                                                                      |   | 75-1277589                                          |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) |   | (I.R.S.                Employer Identification No.) |

|   | Yes  x |   | No** **o |   |
|--------|------------------|--------|---------------|--------|

| Large                accelerated filer  o | Accelerated                filer  o | Non-accelerated                filer x |
|-----------------------------------------------------|-----------------------------------------------|----------------------------------------|

|   | Yes  o |   | No** **x |   |
|--------|------------------|--------|---------------|--------|

| Class                                     |   | Outstanding                at October 31, 2007 |
|-------------------------------------------|--------|------------------------------------------------|
| Common                Stock, $1 Par Value |   | 7,951,176                Shares                |

----

INDEX

|                   |                                 |                                                                                                     | Page    |
|------------------------|--------------------------------------|----------------------------------------------------------------------------------------------------------|---------|
| PART                I  | FINANCIAL                INFORMATION |                                                                                                     |
|                   |                                 |                                                                                                     |    |
|                   | Item                1.               | Financial                Statements:                                                                     |    |
|                   |                                 |                                                                                                     |    |
|                   |                                 | Condensed                Consolidated Balance Sheets                                                     |    |
|                   |                                 | September                30, 2007 and December 31, 2006                (unaudited)                       | 3,4     |
|                   |                                 |                                                                                                     |    |
|                   |                                 | Condensed                Consolidated Statements of                Operations                            |    |
|                   |                                 | Three                Months and Nine Months Ended September 30,                2007 and 2006 (unaudited) |  5 |
|                   |                                 |                                                                                                     |    |
|                   |                                 | Condensed                Consolidated Statement of Stockholders’                Equity             |    |
|                   |                                 | Nine                Months Ended September 30, 2007                (unaudited)                           | 6       |
|                   |                                 |                                                                                                     |    |
|                   |                                 | Condensed                Consolidated Statements of Cash                Flows                            |    |
|                   |                                 | Nine                Months Ended September 30, 2007 and 2006                (unaudited)                  | 7       |
|                   |                                 |                                                                                                     |    |
|                   |                                 | Notes                to Condensed Consolidated Financial Statements                (unaudited)           | 8       |
|                   |                                 |                                                                                                     |    |
|                   | Item                2.               | Management's                Discussion and Analysis of Financial Condition                and            |    |
|                   |                                 | Results                of Operations                                                                     | 27      |
|                   |                                 |                                                                                                     |    |
|                   | Item                3.               | Quantitative                and Qualitative Disclosures About Market                Risk                 | 39      |
|                   |                                 |                                                                                                     |    |
|                   | Item                4.               | Controls                and Procedures                                                                   | 40      |
|                   |                                 |                                                                                                     |    |
|                   |                                 |                                                                                                     |    |
| PART                II | OTHER                INFORMATION     |                                                                                                     |
|                   |                                 |                                                                                                     |    |
|                   | Item                1.               | Legal                Proceedings                                                                         | 42      |
|                   |                                 |                                                                                                     |    |
|                   | Item                1A.              | Risk                Factors                                                                              | 42      |
|                   |                                 |                                                                                                     |    |
|                   | Item                2.               | Unregistered                Sales of Equity Securities and Use of                Proceeds                | 42      |
|                   |                                 |                                                                                                     |    |
|                   | Item                3.               | Defaults                Upon Senior Securities                                                           | 42      |
|                   |                                 |                                                                                                     |    |
|                   | Item                4.               | Submission                of Matters to a Vote of Security                Holders                        | 43      |
|                   |                                 |                                                                                                     |    |
|                   | Item                5.               | Other                Information                                                                         | 43      |
|                   |                                 |                                                                                                     |    |
|                   | Item                6.               | Exhibits                                                                                                 | 43      |
|                   |                                 |                                                                                                     |    |
|                   | Signatures                           |                                                                                                     | 44      |

----

Index

PART      I  FINANCIAL INFORMATION

Item      1.  Financial Statements

ASSETS

|                                                                       |   | September                  30, |    |   | December                  31, |   |
|----------------------------------------------------------------------------|--------|--------------------------------|---------|--------|-------------------------------|--------|
|                                                                       |   | 2007                           |    |   | 2006                          |   |
| CURRENT                  ASSETS:                                           |   |                           |    |   |                          |   |
|                                                                       |   |                           |    |   |                          |   |
| Cash                  and cash equivalents                                 |   | $                              | 2,171   |   |                          | $      | 7,392 |   |
| Accounts                  receivable, net                                  |   |                           | 22,994  |   |                          |   | 55,014 |   |
| Inventories,                  net                                          |   |                           | 23,822  |   |                          |   | 54,980 |   |
| Other                  current assets                                      |   |                           | 2,160   |   |                          |   | 2,991 |   |
| Assets                  held for sale                                      |   |                           | 74,660  |   |                          |   | 4,483 |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
| Total                  current assets                                      |   |                           | 125,807 |   |                          |   | 124,860 |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
| OTHER                  ASSETS:                                             |   |                           |    |   |                          |   |   |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
| Goodwill                                                                   |   |                           | 665     |   |                          |   | 665 |   |
| Intangibles,                  net                                          |   |                           | 5,001   |   |                          |   | 6,435 |   |
| Other                                                                      |   |                           | 7,070   |   |                          |   | 8,990 |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
| Total                  other assets                                        |   |                           | 12,736  |   |                          |   | 16,090 |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
| PROPERTY                  AND EQUIPMENT                                    |   |                           |    |   |                          |   |   |   |
| Land                  and improvements                                     |   |                           | 336     |   |                          |   | 336 |   |
| Buildings                  and improvements                                |   |                           | 9,716   |   |                          |   | 9,669 |   |
| Machinery                  and equipment                                   |   |                           | 102,472 |   |                          |   | 119,703 |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
|                                                                       |   |                           | 112,524 |   |                          |   | 129,708 |   |
| Less                  - Accumulated depreciation                           |   |                           | (77,595 | )      |                          |   | (87,964 | ) |
|                                                                       |   |                           |    |   |                          |   |   |   |
| Property                  and equipment, net                               |   |                           | 34,929  |   |                          |   | 41,744 |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
| Total                  assets                                              |   | $                              | 173,472 |   |                          | $      | 182,694 |   |
|                                                                       |   |                           |    |   |                          |   |   |   |
| See                  Notes to Condensed Consolidated Financial Statements. |   |                           |    |   |                          |   |   |   |

----

Index

LIABILITIES      AND STOCKHOLDERS’ EQUITY

|                                                                                                    |   | September                  30, |    |   | December                  31, |   |
|---------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|--------|-------------------------------|--------|
|                                                                                                    |   | 2007                           |    |   | 2006                          |   |
| CURRENT                  LIABILITIES:                                                                   |   |                           |    |   |                          |   |
|                                                                                                    |   |                           |    |   |                          |   |
| Accounts                  payable                                                                       |   | $                              | 18,317  |   |                          | $      | 33,684 |   |
| Accrued                  compensation                                                                   |   |                           | 2,845   |   |                          |   | 3,518 |   |
| Accrued                  expenses                                                                       |   |                           | 26,422  |   |                          |   | 38,187 |   |
| Current                  maturities of long-term debt                                                   |   |                           | 1,500   |   |                          |   | 1,125 |   |
| Revolving                  credit agreement                                                             |   |                           | 41,977  |   |                          |   | 43,879 |   |
| Liabilities                  held for sale                                                              |   |                           | 28,758  |   |                          |   | - |   |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| Total                  current liabilities                                                              |   |                           | 119,819 |   |                          |   | 120,393 |   |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| LONG-TERM                  DEBT, less current maturities                                                |   |                           | 8,918   |   |                          |   | 11,867 |   |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| OTHER                  LIABILITIES                                                                      |   |                           | 10,928  |   |                          |   | 8,402 |   |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| Total                  liabilities                                                                      |   |                           | 139,665 |   |                          |   | 140,662 |   |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| COMMITMENTS                  AND CONTINGENCIES (Note 10)                                                |   |                           | -       |   |                          |   | - |   |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| STOCKHOLDERS’                  EQUITY                                                             |   |                           |    |   |                          |   |   |   |
| 15%                  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 |   |
| Common                  stock, $1 par value, authorized 35,000,000 shares,                              |   |                           |    |   |                          |   |   |   |
| issued                  9,822,304 shares                                                                |   |                           | 9,822   |   |                          |   | 9,822 |   |
| Additional                  paid-in capital                                                             |   |                           | 27,296  |   |                          |   | 27,120 |   |
| Accumulated                  other comprehensive (loss) income                                          |   |                           | (2,439  | )      |                          |   | 2,242 |   |
| Accumulated                  deficit                                                                    |   |                           | (87,195 | )      |                          |   | (83,434 | ) |
| Treasury                  stock, at cost, 1,871,128 and 1,869,827 shares,                  respectively |   |                           | (21,933 | )      |                          |   | (21,974 | ) |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| Total                  stockholders' equity                                                             |   |                           | 33,807  |   |                          |   | 42,032 |   |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| Total                  liabilities and stockholders' equity                                             |   | $                              | 173,472 |   |                          | $      | 182,694 |   |
|                                                                                                    |   |                           |    |   |                          |   |   |   |
| See                  Notes to Condensed Consolidated Financial Statements.                              |   |                           |    |   |                          |   |   |   |

----

Index

KATY      INDUSTRIES, INC. AND SUBSIDIARIES

|                                                                                |   | Three                  Months    |   |   | Nine                  Months                          |   |
|-------------------------------------------------------------------------------------|--------|-------------------------------------------------|--------|--------|----------------------------------------------------------------------|--------|
|                                                                                |   | Ended                  September 30,            |   |   | Ended                  September 30,                                 |   |
|                                                                                |   | 2007                                            |   |   | 2006                                                                 |   |   | 2007 |   |   | 2006 |   |
|                                                                                |   |                                            |   |   |  As                  Restated, see                  Note 1 |   |   |   |   |   |    As                  Restated,    see Note 1 |   |
|                                                                                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |
| Net                  sales                                                          |   | $                                               | 49,208 |   |                                                                 | $      | 51,920 |   |   | $ | 144,732 |   |   | $ | 148,823 |   |
| Cost                  of goods sold                                                 |   |                                            | 43,669 |   |                                                                 |   | 44,354 |   |   |   | 126,957 |   |   |   | 129,594 |   |
| Gross                  profit                                                       |   |                                            | 5,539  |   |                                                                 |   | 7,566 |   |   |   | 17,775 |   |   |   | 19,229 |   |
| Selling,                  general and administrative expenses                       |   |                                            | 6,611  |   |                                                                 |   | 7,807 |   |   |   | 20,982 |   |   |   | 23,721 |   |
| Severance,                  restructuring and related charges                       |   |                                            | 46     |   |                                                                 |   | 738 |   |   |   | 2,656 |   |   |   | 1,591 |   |
| (Gain)                  loss on sale of assets                                      |   |                                            | (44    | )      |                                                                 |   | 39 |   |   |   | 1,527 |   |   |   | 48 |   |
| Operating                  loss                                                     |   |                                            | (1,074 | )      |                                                                 |   | (1,018 | ) |   |   | (7,390 | ) |   |   | (6,131 | ) |
| Gain                  on SESCO joint venture transaction                            |   |                                            | -      |   |                                                                 |   | - |   |   |   | - |   |   |   | 563 |   |
| Interest                  expense                                                   |   |                                            | (1,051 | )      |                                                                 |   | (1,188 | ) |   |   | (3,165 | ) |   |   | (3,900 | ) |
| Other,                  net                                                         |   |                                            | (229   | )      |                                                                 |   | 19 |   |   |   | (128 | ) |   |   | 415 |   |
|                                                                                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from continuing operations before (provision for)             |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| benefit                  from income taxes                                          |   |                                            | (2,354 | )      |                                                                 |   | (2,187 | ) |   |   | (10,683 | ) |   |   | (9,053 | ) |
| (Provision                  for) benefit from income taxes from                     |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| continuing                  operations                                              |   |                                            | (19    | )      |                                                                 |   | 731 |   |   |   | (651 | ) |   |   | 841 |   |
|                                                                                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from continuing operations                                    |   |                                            | (2,373 | )      |                                                                 |   | (1,456 | ) |   |   | (11,334 | ) |   |   | (8,212 | ) |
| Income                  (loss) from operations of discontinued businesses           |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| (net                  of tax)                                                       |   |                                            | 1,563  |   |                                                                 |   | 2,636 |   |   |   | (264 | ) |   |   | 2,499 |   |
| (Loss)                  gain on sale of discontinued businesses (net of tax)        |   |                                            | -      |   |                                                                 |   | (3,200 | ) |   |   | 8,817 |   |   |   | (3,230 | ) |
|                                                                                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  before cumulative effect of a change in                       |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| accounting                  principle                                               |   |                                            | (810   | )      |                                                                 |   | (2,020 | ) |   |   | (2,781 | ) |   |   | (8,943 | ) |
| Cumulative                  effect of a change in accounting principle (net of tax) |   |                                            | -      |   |                                                                 |   | - |   |   |   | - |   |   |   | (756 | ) |
|                                                                                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                           |   | $                                               | (810   | )      |                                                                 | $      | (2,020 | ) |   | $ | (2,781 | ) |   | $ | (9,699 | ) |
|                                                                                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  per share of common stock - Basic and diluted:                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Loss                  from continuing operations                                    |   | $                                               | (0.30  | )      |                                                                 | $      | (0.18 | ) |   | $ | (1.43 | ) |   | $ | (1.03 | ) |
| Discontinued                  operations                                            |   |                                            | 0.20   |   |                                                                 |   | (0.07 | ) |   |   | 1.08 |   |   |   | (0.10 | ) |
| Cumulative                  effect of a change in accounting principle              |   |                                            | -      |   |                                                                 |   | - |   |   |   | - |   |   |   | (0.09 | ) |
| Net                  loss                                                           |   | $                                               | (0.10  | )      |                                                                 | $      | (0.25 | ) |   | $ | (0.35 | ) |   | $ | (1.22 | ) |
|                                                                                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average common shares outstanding (thousands):            |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |
| Basic                  and diluted                                                  |   |                                            | 7,951  |   |                                                                 |   | 7,962 |   |   |   | 7,951 |   |   |   | 7,971 |   |
|                                                                                |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |
| See                  Notes to Condensed Consolidated Financial Statements.          |   |                                            |   |   |                                                                 |   |   |   |   |   |   |   |   |

----

Index

KATY      INDUSTRIES, INC. AND SUBSIDIARIES

|                                                             |   |                             |      |   |   |   |    |                       |   |   |      |   |   |    |   |   | Accumulated |   |   |        |   |   |     |   |   |    |    |   |          |   |
|------------------------------------------------------------------|--------|----------------------------------|-----------|--------|--------|--------|---------|----------------------------|--------|--------|-----------|--------|--------|---------|--------|--------|-------------|--------|--------|-------------|--------|--------|----------|--------|--------|---------|---------|--------|---------------|--------|
|                                                             |   | Convertible                      |      |   | Common |   |    |                       |   |   | Other     |   |   |    |   |   |        |   |   |        |   |   |     |   |
|                                                             |   | Preferred                  Stock |      |   | Stock  |   |    | Additional                 |   |   | Compre-   |   |   |    |   |   |        |   |   | Compre-     |   |   | Total    |   |
|                                                             |   | Number                  of       |      |   | Par    |   |    | Number                  of |   |   | Par       |   |   | Paid-in |   |   | hensive     |   |   | Accumulated |   |   | Treasury |   |   | hensive |    |   | Stockholders' |   |
|                                                             |   | Shares                           |      |   | Value  |   |    | Shares                     |   |   | Value     |   |   | Capital |   |   | Income      |   |   | Deficit     |   |   | Stock    |   |   | Loss    |    |   | Equity        |   |
| Balance,                  January 1, 2007                        |   |                             | 1,131,551 |   |   | $      | 108,256 |                       |   |   | 9,822,304 |   |   | $       | 9,822  |   |        | $      | 27,120 |        |   | $      | 2,242    |   |   | $       | (83,434 | )      |          | $      | (21,974 | ) |   |   |   |   | $ | 42,032 |   |
| Implementation                  of new accounting                |   |                             |      |   |   |   |    |                       |   |   |      |   |   |    |   |   |        |   |   |        |   |   |     |   |   |    |    |   |          |   |   |   |   |   |   |   |   |   |   |
| pronouncement                                                    |   |                             |      |   |   |   |    |                       |   |   |      |   |   |    |   |   |        |   |   |        |   |   |     |   |   |    | (980    | )      |          |   |   |   |   |   |   |   |   | (980 | ) |
| Net                  loss                                        |   |                             | -         |   |   |   | -       |                       |   |   | -         |   |   |    | -      |   |        |   | -      |        |   |   | -        |   |   |    | (2,781  | )      |          |   | - |   |   | $ | (2,781 | ) |   |   | (2,781 | ) |
| Foreign                currency translation                 |   |                             |      |   |   |   |    |                       |   |   |      |   |   |    |   |   |        |   |   |        |   |   |     |   |   |    |    |   |          |   |   |   |   |   |   |   |   |   |   |   |
|                     adjustment                         |   |                             | -         |   |   |   | -       |                       |   |   | -         |   |   |    | -      |   |        |   | -      |        |   |   | (1,834   | )      |   |    | -       |   |          |   | - |   |   |   | (1,834 | ) |   |   | (1,834 | ) |
| Other                                                            |   |                             | -         |   |   |   | -       |                       |   |   | -         |   |   |    | -      |   |        |   | -      |        |   |   | (75      | )      |   |    | -       |   |          |   | - |   |   |   | (75 | ) |   |   | (75 | ) |
| Comprehensive                  loss                              |   |                             |      |   |   |   |    |                       |   |   |      |   |   |    |   |   |        |   |   |        |   |   |     |   |   |    |    |   |          |   |   |   |   | $ | (4,690 | ) |   |   |   |   |
| Reclass                  to assets held for sale                 |   |                             | -         |   |   |   | -       |                       |   |   | -         |   |   |    | -      |   |        |   | -      |        |   |   | (2,772   | )      |   |    | -       |   |          |   | - |   |   |   |   |   |   |   | (2,772 | ) |
| Purchase                  of treasury stock                      |   |                             | -         |   |   |   | -       |                       |   |   | -         |   |   |    | -      |   |        |   | -      |        |   |   | -        |   |   |    | -       |   |          |   | (3 | ) |   |   |   |   |   |   | (3 | ) |
| Stock                  compensation                              |   |                             | -         |   |   |   | -       |                       |   |   | -         |   |   |    | -      |   |        |   | 220    |        |   |   | -        |   |   |    | -       |   |          |   | - |   |   |   |   |   |   |   | 220 |   |
| Other                                                            |   |                             | -         |   |   |   | -       |                       |   |   | -         |   |   |    | -      |   |        |   | (44    | )           |   |   | -        |   |   |    | -       |   |          |   | 44 |   |   |   |   |   |   |   | - |   |
| Balance,                  September 30, 2007                     |   |                             | 1,131,551 |   |   | $      | 108,256 |                       |   |   | 9,822,304 |   |   | $       | 9,822  |   |        | $      | 27,296 |        |   | $      | (2,439   | )      |   | $       | (87,195 | )      |          | $      | (21,933 | ) |   |   |   |   |   | $ | 33,807 |   |
|                                                             |   |                             |      |   |   |   |    |                       |   |   |      |   |   |    |   |   |        |   |   |        |   |   |     |   |   |    |    |   |          |   |   |   |   |   |   |   |   |   |   |   |
| See                  Notes to Consolidated Financial Statements. |   |                             |      |   |   |   |    |                       |   |   |      |   |   |    |   |   |        |   |   |        |   |   |     |   |   |    |    |   |          |   |   |   |   |   |   |   |   |

----

Index

KATY      INDUSTRIES, INC. AND SUBSIDIARIES

|                                                                          |   |   |    |   | As                  Restated, see                  Note 1 |   |
|-------------------------------------------------------------------------------|--------|--------|---------|--------|----------------------------------------------------------------|--------|
|                                                                          |   | 2007   |    |   | 2006                                                           |   |
| Cash                  flows from operating activities:                        |   |   |    |   |                                                           |   |
| Net                  loss                                                     |   | $      | (2,781  | )      |                                                           | $      | (9,699 | ) |
| (Income)                  loss from operations of discontinued business       |   |   | (8,553  | )      |                                                           |   | 731 |   |
| Loss                  from continuing operations                              |   |   | (11,334 | )      |                                                           |   | (8,968 | ) |
| Cumulative                  effect of a change in accounting principle        |   |   | -       |   |                                                           |   | 756 |   |
| Depreciation                  and amortization                                |   |   | 5,492   |   |                                                           |   | 5,711 |   |
| Write-off                  and amortization of debt issuance costs            |   |   | 1,194   |   |                                                           |   | 877 |   |
| Write-off                  of assets due to lease termination                 |   |   | 751     |   |                                                           |   | - |   |
| Stock                  option expense                                         |   |   | 220     |   |                                                           |   | 486 |   |
| Loss                  on sale of assets                                       |   |   | 1,527   |   |                                                           |   | 48 |   |
| Deferred                  income taxes                                        |   |   | (94     | )      |                                                           |   | - |   |
|                                                                          |   |   | (2,244  | )      |                                                           |   | (1,090 | ) |
| Changes                  in operating assets and liabilities:                 |   |   |    |   |                                                           |   |   |   |
| Accounts                  receivable                                          |   |   | (3,557  | )      |                                                           |   | (1,717 | ) |
| Inventories                                                                   |   |   | (3,064  | )      |                                                           |   | 6,747 |   |
| Other                  assets                                                 |   |   | (1,219  | )      |                                                           |   | 44 |   |
| Accounts                  payable                                             |   |   | 3,190   |   |                                                           |   | (717 | ) |
| Accrued                  expenses                                             |   |   | (1,977  | )      |                                                           |   | 1,831 |   |
| Other,                  net                                                   |   |   | 2,155   |   |                                                           |   | (2,610 | ) |
|                                                                          |   |   | (4,472  | )      |                                                           |   | 3,578 |   |
|                                                                          |   |   |    |   |                                                           |   |   |   |
| Net                  cash (used in) provided by continuing operations         |   |   | (6,716  | )      |                                                           |   | 2,488 |   |
| Net                  cash used in discontinued operations                     |   |   | (6,196  | )      |                                                           |   | (6,177 | ) |
| Net                  cash used in operating activities                        |   |   | (12,912 | )      |                                                           |   | (3,689 | ) |
|                                                                          |   |   |    |   |                                                           |   |   |   |
| Cash                  flows from investing activities:                        |   |   |    |   |                                                           |   |   |   |
| Capital                  expenditures of continuing operations                |   |   | (2,811  | )      |                                                           |   | (2,252 | ) |
| Proceeds                  from sale of assets                                 |   |   | 246     |   |                                                           |   | 285 |   |
|                                                                          |   |   |    |   |                                                           |   |   |   |
| Net                  cash used in continuing operations                       |   |   | (2,565  | )      |                                                           |   | (1,967 | ) |
| Net                  cash provided by discontinued operations                 |   |   | 16,645  |   |                                                           |   | 1,747 |   |
| Net                  cash provided by (used in) investing activities          |   |   | 14,080  |   |                                                           |   | (220 | ) |
|                                                                          |   |   |    |   |                                                           |   |   |   |
| Cash                  flows from financing activities:                        |   |   |    |   |                                                           |   |   |   |
| Net                  (repayments) borrowings on revolving loans               |   |   | (1,903  | )      |                                                           |   | 7,783 |   |
| Decrease                  in book overdraft                                   |   |   | (1,646  | )      |                                                           |   | (4,261 | ) |
| Repayments                  of term loans                                     |   |   | (2,574  | )      |                                                           |   | (3,347 | ) |
| Direct                  costs associated with debt facilities                 |   |   | (130    | )      |                                                           |   | (166 | ) |
| Repurchases                  of common stock                                  |   |   | (3      | )      |                                                           |   | (97 | ) |
| Proceeds                  from the exercise of stock options                  |   |   | -       |   |                                                           |   | 147 |   |
| Net                  cash (used in) provided by financing activities          |   |   | (6,256  | )      |                                                           |   | 59 |   |
|                                                                          |   |   |    |   |                                                           |   |   |   |
| Effect                  of exchange rate changes on cash and cash equivalents |   |   | (133    | )      |                                                           |   | (454 | ) |
| Net                  decrease in cash and cash equivalents                    |   |   | (5,221  | )      |                                                           |   | (4,304 | ) |
| Cash                  and cash equivalents, beginning of period               |   |   | 7,392   |   |                                                           |   | 8,421 |   |
| Cash                  and cash equivalents, end of period                     |   | $      | 2,171   |   |                                                           | $      | 4,117 |   |
|                                                                          |   |   |    |   |                                                           |   |   |   |
| Supplemental                  disclosure of non-cash investing activities:    |   |   |    |   |                                                           |   |   |   |
| Note                  receivable from sale of discontinued operations         |   | $      | -       |   |                                                           | $      | 1,200 |   |
|                                                                          |   |   |    |   |                                                           |   |   |   |
| See                  Notes to Condensed Consolidated Financial Statements.    |   |   |    |   |                                                           |   |   |   |

----

Index

KATY      INDUSTRIES, INC. AND SUBSIDIARIES

*(A)      Impact of error on previously filed financial *

* (B)      *
*Deferred compensation *

* (C)      Revision*
* of SESCO as a continuing operation *

----

Index

| Consolidated                  Statements of Operations                           |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |
|----------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|---------|--------|----------------------------------|--------|--------|------------------------------------|--------|--------|------------------------------------------|--------|--------|----------|--------|
| (Amounts                  in thousands, except per share data)                   |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |
|                                                                             |   | For                  the three months ended                 |    |
|                                                                             |   | September                  30, 2006          |    |
|                                                                             |   |                                                                                      |    |
|                                                                             |   | Previously                  reported                                                      |    |   | CML                  Transaction |   |   | Woods                  Transaction |   |   | Restatement                  Adjustments |   |   | Restated |   |
|                                                                             |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |
| Net                  sales                                                       |   | $                                                                                         | 121,217 |   |                             | $      | (4,022 | )                                  |   | $      | (65,275                                  | )      |   | $        | -      |   |   | $ | 51,920 |   |
| Cost                  of goods sold (A)                                          |   |                                                                                      | 104,912 |   |                             |   | (2,986 | )                                  |   |   | (57,780                                  | )      |   |     | 208    |   |   |   | 44,354 |   |
| Gross                  profit                                                    |   |                                                                                      | 16,305  |   |                             |   | (1,036 | )                                  |   |   | (7,495                                   | )      |   |     | (208   | ) |   |   | 7,566 |   |
| Selling,                  general and administrative expenses                    |   |                                                                                      | 11,753  |   |                             |   | (842   | )                                  |   |   | (3,104                                   | )      |   |     | -      |   |   |   | 7,807 |   |
| Severance,                  restructuring and related charges                    |   |                                                                                      | 738     |   |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | 738 |   |
| Loss                  on sale of assets                                          |   |                                                                                      | 49      |   |                             |   | -      |                               |   |   | (10                                      | )      |   |     | -      |   |   |   | 39 |   |
| Operating                  income (loss)                                         |   |                                                                                      | 3,765   |   |                             |   | (194   | )                                  |   |   | (4,381                                   | )      |   |     | (208   | ) |   |   | (1,018 | ) |
| Interest                  expense (C)                                            |   |                                                                                      | (1,715  | )      |                             |   | -      |                               |   |   | 536                                      |   |   |     | (9     | ) |   |   | (1,188 | ) |
| Other,                  net                                                      |   |                                                                                      | 42      |   |                             |   | (3     | )                                  |   |   | (20                                      | )      |   |     | -      |   |   |   | 19 |   |
| Income                  (loss) from continuing operations before (provision for) |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |
| benefit                  from income taxes                                       |   |                                                                                      | 2,092   |   |                             |   | (197   | )                                  |   |   | (3,865                                   | )      |   |     | (217   | ) |   |   | (2,187 | ) |
| (Provision                  for) benefit from income taxes from                  |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| continuing                  operations                                           |   |                                                                                      | (553    | )      |                             |   | (185   | )                                  |   |   | 1,469                                    |   |   |     | -      |   |   |   | 731 |   |
| Income                  (loss) from continuing operations                        |   |                                                                                      | 1,539   |   |                             |   | (382   | )                                  |   |   | (2,396                                   | )      |   |     | (217   | ) |   |   | (1,456 | ) |
| (Loss)                  income from operations of discontinued businesses        |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |
| (net                  of tax) (C)                                                |   |                                                                                      | (151    | )      |                             |   | 382    |                               |   |   | 2,396                                    |   |   |     | 9      |   |   |   | 2,636 |   |
| Loss                  on sale of discontinued businesses (net of tax)            |   |                                                                                      | (3,200  | )      |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | (3,200 | ) |
| Net                  loss                                                        |   | $                                                                                         | (1,812  | )      |                             | $      | -      |                               |   | $      | -                                        |   |   | $        | (208   | ) |   | $ | (2,020 | ) |
|                                                                             |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Loss                  per share of common stock - Basic and diluted              |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Income                  (loss) from continuing operations                        |   | $                                                                                         | 0.19    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   | $ | (0.18 | ) |
| Discontinued                  operations                                         |   |                                                                                      | (0.42   | )      |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   | (0.07 | ) |
| Net                  loss                                                        |   | $                                                                                         | (0.23   | )      |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   | $ | (0.25 | ) |
|                                                                             |   |                                                                                      |    |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |

----

Index

| Consolidated                Statements of Operations                                            |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |
|-------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|---------|--------|--------------------------------|--------|---------|----------------------------------|--------|--------|----------------------------------------|--------|--------|----------|--------|
| (Amounts                in thousands, except per share data)                                    |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |
|                                                                                            |   | For                the nine months ended                  |    |
|                                                                                            |   | September                30, 2006          |    |
|                                                                                            |   |                                                                                    |    |
|                                                                                            |   | Previously                reported                                                      |    |   | CML                Transaction |   |    | Woods                Transaction |   |   | Restatement                Adjustments |   |   | Restated |   |
|                                                                                            |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |
| Net                sales                                                                        |   | $                                                                                       | 285,653 |   |                           | $      | (11,964 | )                                |   | $      | (124,866                               | )      |   | $        | -      |   |   | $ | 148,823 |   |
| Cost                of goods sold (A)                                                           |   |                                                                                    | 246,468 |   |                           |   | (8,711  | )                                |   |   | (108,760                               | )      |   |     | 597    |   |   |   | 129,594 |   |
| Gross                profit                                                                     |   |                                                                                    | 39,185  |   |                           |   | (3,253  | )                                |   |   | (16,106                                | )      |   |     | (597   | ) |   |   | 19,229 |   |
| Selling,                general and administrative expenses (B)                                 |   |                                                                                    | 36,298  |   |                           |   | (2,460  | )                                |   |   | (9,734                                 | )      |   |     | (383   | ) |   |   | 23,721 |   |
| Severance,                restructuring and related charges                                     |   |                                                                                    | 1,591   |   |                           |   | -       |                             |   |   | -                                      |   |   |     | -      |   |   |   | 1,591 |   |
| Loss                on sale of assets                                                           |   |                                                                                    | 103     |   |                           |   | -       |                             |   |   | (55                                    | )      |   |     | -      |   |   |   | 48 |   |
| Operating                income (loss )                                                         |   |                                                                                    | 1,193   |   |                           |   | (793    | )                                |   |   | (6,317                                 | )      |   |     | (214   | ) |   |   | (6,131 | ) |
| Gain                on SESCO joint venture transaction (C)                                      |   |                                                                                    | -       |   |                           |   | -       |                             |   |   | -                                      |   |   |     | 563    |   |   |   | 563 |   |
| Interest                expense (C)                                                             |   |                                                                                    | (5,198  | )      |                           |   | -       |                             |   |   | 1,370                                  |   |   |     | (72    | ) |   |   | (3,900 | ) |
| Other,                net                                                                       |   |                                                                                    | 466     |   |                           |   | (12     | )                                |   |   | (39                                    | )      |   |     | -      |   |   |   | 415 |   |
| Loss                from continuing operations before (provision for)                           |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   |
| benefit                from income taxes                                                        |   |                                                                                    | (3,539  | )      |                           |   | (805    | )                                |   |   | (4,986                                 | )      |   |     | 277    |   |   |   | (9,053 | ) |
| (Provision                for) benefit from income taxes from                                   |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   |   |   |   |
| continuing                operations                                                            |   |                                                                                    | (1,211  | )      |                           |   | 9       |                             |   |   | 2,043                                  |   |   |     | -      |   |   |   | 841 |   |
| Loss                from continuing operations                                                  |   |                                                                                    | (4,750  | )      |                           |   | (796    | )                                |   |   | (2,943                                 | )      |   |     | 277    |   |   |   | (8,212 | ) |
| (Loss)                income from operations of discontinued businesses                         |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   |
| (net                of tax) (C)                                                                 |   |                                                                                    | (849    | )      |                           |   | 796     |                             |   |   | 2,943                                  |   |   |     | (391   | ) |   |   | 2,499 |   |
| Loss                on sale of discontinued businesses (net of tax) (C)                         |   |                                                                                    | (3,130  | )      |                           |   | -       |                             |   |   | -                                      |   |   |     | (100   | ) |   |   | (3,230 | ) |
| Loss                before cumulative effect of a change in accounting                principle |   |                                                                                    | (8,729  | )      |                           |   | -       |                             |   |   | -                                      |   |   |     | (214   | ) |   |   | (8,943 | ) |
| Cumulative                effect of a change in accounting principle (net of tax)               |   |                                                                                    | (756    | )      |                           |   | -       |                             |   |   | -                                      |   |   |     | -      |   |   |   | (756 | ) |
| Net                loss                                                                         |   | $                                                                                       | (9,485  | )      |                           | $      | -       |                             |   | $      | -                                      |   |   | $        | (214   | ) |   | $ | (9,699 | ) |
|                                                                                            |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   |   |   |   |
| Loss                per share of common stock - Basic and diluted                               |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   |   |   |   |
| Loss                from continuing operations                                                  |   | $                                                                                       | (0.60   | )      |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   | $ | (1.03 | ) |
| Discontinued                operations                                                          |   |                                                                                    | (0.50   | )      |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   |   | (0.10 | ) |
| Cumulative                effect of a change in accounting principle                            |   |                                                                                    | (0.09   | )      |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   |   | (0.09 | ) |
| Net                loss                                                                         |   | $                                                                                       | (1.19   | )      |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   | $ | (1.22 | ) |
|                                                                                            |   |                                                                                    |    |   |                           |   |    |                             |   |   |                                   |   |   |     |   |   |   |   |   |   |

----

Index

| Consolidated                  Statements of Cash Flows                        |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|--------|----------------------------------|--------|--------|------------------------------------|--------|--------|------------------------------------------|--------|--------|----------|--------|
| (Amounts                  in thousands, except per share data)                |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |
|                                                                          |   | For                  the nine months ended          |   |
|                                                                          |   | September                  30, 2006                 |   |
|                                                                          |   |                                                                                             |   |
|                                                                          |   | Previously                  reported                                                             |   |   | CML                  Transaction |   |   | Woods                  Transaction |   |   | Restatement                  Adjustments |   |   | Restated |   |
| Cash                  flows from operating activities:                        |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |
| Net                  loss                                                     |   | $                                                                                                | (9,485 | )      |                             | $      | -      |                               |   | $      | -                                        |   |   | $   | (214   | ) |   | $ | (9,699 | ) |
| Loss                  from operations of discontinued business (C)            |   |                                                                                             | 3,979  |   |                             |   | (796   | )                                  |   |   | (2,943                                   | )      |   |     | 491    |   |   |   | 731 |   |
| Loss                  from continuing operations                              |   |                                                                                             | (5,506 | )      |                             |   | (796   | )                                  |   |   | (2,943                                   | )      |   |     | 277    |   |   |   | (8,968 | ) |
| Cumulative                  effect of a change in accounting principle        |   |                                                                                             | 756    |   |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | 756 |   |
| Depreciation                  and amortization                                |   |                                                                                             | 6,578  |   |                             |   | (212   | )                                  |   |   | (655                                     | )      |   |     | -      |   |   |   | 5,711 |   |
| Write-off                  and amortization of debt issuance costs            |   |                                                                                             | 877    |   |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | 877 |   |
| Stock                  option expense                                         |   |                                                                                             | 486    |   |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | 486 |   |
| Loss                  on sale of assets                                       |   |                                                                                             | 103    |   |                             |   | -      |                               |   |   | (55                                      | )      |   |     | -      |   |   |   | 48 |   |
|                                                                          |   |                                                                                             | 3,294  |   |                             |   | (1,008 | )                                  |   |   | (3,653                                   | )      |   |     | 277    |   |   |   | (1,090 | ) |
| Changes                  in operating assets and liabilities:                 |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Accounts                  receivable                                          |   |                                                                                             | (8,589 | )      |                             |   | (478   | )                                  |   |   | 7,350                                    |   |   |     | -      |   |   |   | (1,717 | ) |
| Inventories                  (A)                                              |   |                                                                                             | (2,201 | )      |                             |   | (264   | )                                  |   |   | 8,615                                    |   |   |     | 597    |   |   |   | 6,747 |   |
| Other                  assets (B)                                             |   |                                                                                             | (490   | )      |                             |   | (1,047 | )                                  |   |   | 1,964                                    |   |   |     | (383   | ) |   |   | 44 |   |
| Accounts                  payable                                             |   |                                                                                             | 3,449  |   |                             |   | 817    |                               |   |   | (4,983                                   | )      |   |     | -      |   |   |   | (717 | ) |
| Accrued                  expenses (C)                                         |   |                                                                                             | 3,414  |   |                             |   | 161    |                               |   |   | 47                                       |   |   |     | (1,791 | ) |   |   | 1,831 |   |
| Other,                  net (C)                                               |   |                                                                                             | (3,478 | )      |                             |   | 716    |                               |   |   | 252                                      |   |   |     | (100   | ) |   |   | (2,610 | ) |
|                                                                          |   |                                                                                             | (7,895 | )      |                             |   | (95    | )                                  |   |   | 13,245                                   |   |   |     | (1,677 | ) |   |   | 3,578 |   |
|                                                                          |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Net                  cash (used in) provided by continuing operations         |   |                                                                                             | (4,601 | )      |                             |   | (1,103 | )                                  |   |   | 9,592                                    |   |   |     | (1,400 | ) |   |   | 2,488 |   |
| Net                  cash provided by (used in) discontinued operations (C)   |   |                                                                                             | 2,116  |   |                             |   | 798    |                               |   |   | (10,491                                  | )      |   |     | 1,400  |   |   |   | (6,177 | ) |
| Net                  cash used in operating activities                        |   |                                                                                             | (2,485 | )      |                             |   | (305   | )                                  |   |   | (899                                     | )      |   |     | -      |   |   |   | (3,689 | ) |
|                                                                          |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Cash                  flows from investing activities:                        |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Capital                  expenditures of continuing operations                |   |                                                                                             | (2,947 | )      |                             |   | 125    |                               |   |   | 570                                      |   |   |     | -      |   |   |   | (2,252 | ) |
| Proceeds                  from sale of assets (C)                             |   |                                                                                             | 263    |   |                             |   | -      |                               |   |   | (78                                      | )      |   |     | 100    |   |   |   | 285 |   |
|                                                                          |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Net                  cash used in continuing operations                       |   |                                                                                             | (2,684 | )      |                             |   | 125    |                               |   |   | 492                                      |   |   |     | 100    |   |   |   | (1,967 | ) |
| Net                  cash provided by discontinued operations (C)             |   |                                                                                             | 2,464  |   |                             |   | (125   | )                                  |   |   | (492                                     | )      |   |     | (100   | ) |   |   | 1,747 |   |
| Net                  cash used in investing activities                        |   |                                                                                             | (220   | )      |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | (220 | ) |
|                                                                          |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Cash                  flows from financing activities:                        |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Net                  borrowings on revolving loans                            |   |                                                                                             | 7,418  |   |                             |   | 209    |                               |   |   | 156                                      |   |   |     | -      |   |   |   | 7,783 |   |
| Decrease                  in book overdraft                                   |   |                                                                                             | (5,031 | )      |                             |   | -      |                               |   |   | 770                                      |   |   |     | -      |   |   |   | (4,261 | ) |
| Repayments                  of term loans                                     |   |                                                                                             | (3,347 | )      |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | (3,347 | ) |
| Direct                  costs associated with debt facilities                 |   |                                                                                             | (166   | )      |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | (166 | ) |
| Repurchases                  of common stock                                  |   |                                                                                             | (97    | )      |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | (97 | ) |
| Proceeds                  from the exercise of stock options                  |   |                                                                                             | 147    |   |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | 147 |   |
| Net                  cash (used in) provided by financing activities          |   |                                                                                             | (1,076 | )      |                             |   | 209    |                               |   |   | 926                                      |   |   |     | -      |   |   |   | 59 |   |
|                                                                          |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Effect                  of exchange rate changes on cash and cash equivalents |   |                                                                                             | (523   | )      |                             |   | 96     |                               |   |   | (27                                      | )      |   |     | -      |   |   |   | (454 | ) |
| Net                  decrease in cash and cash equivalents                    |   |                                                                                             | (4,304 | )      |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | (4,304 | ) |
| Cash                  and cash equivalents, beginning of period               |   |                                                                                             | 8,421  |   |                             |   | -      |                               |   |   | -                                        |   |   |     | -      |   |   |   | 8,421 |   |
| Cash                  and cash equivalents, end of period                     |   | $                                                                                                | 4,117  |   |                             | $      | -      |                               |   | $      | -                                        |   |   | $        | -      |   |   | $ | 4,117 |   |
|                                                                          |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Supplemental                  disclosure of non-cash investing activities:    |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |
| Note                  receivable from sale of discontinued operations         |   | $                                                                                                | 1,200  |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   | $ | 1,200 |   |
|                                                                          |   |                                                                                             |   |   |                             |   |   |                               |   |   |                                     |   |   |     |   |   |   |   |   |   |

----

Index

|                                |   | September                  30, |   |   | December                  31, |   |
|-------------------------------------|--------|--------------------------------|--------|--------|-------------------------------|--------|
|                                |   | 2007                           |   |   | 2006                          |   |
|                                |   |                           |   |   |                          |   |
| Raw                  materials      |   | $                              | 14,435 |   |                          | $      | 14,777 |   |
| Work                  in process    |   |                           | 543    |   |                          |   | 613 |   |
| Finished                  goods     |   |                           | 13,888 |   |                          |   | 47,230 |   |
| Inventory                  reserves |   |                           | (1,232 | )      |                          |   | (3,905 | ) |
| LIFO                  reserve       |   |                           | (3,812 | )      |                          |   | (3,735 | ) |
|                                |   | $                              | 23,822 |   |                          | $      | 54,980 |   |
|                                |   |                           |   |   |                          |   |   |   |

** **

----

Index

*Share-Based Payment*

|                                                                   |   | Three                  Months    |   |   | Nine                  Months    |   |
|------------------------------------------------------------------------|--------|-------------------------------------------------|--------|--------|------------------------------------------------|--------|
|                                                                   |   | Ended                  September 30,            |   |   | Ended                  September 30,           |   |
|                                                                   |   | 2007                                            |   |   | 2006                                           |   |   | 2007 |   |   | 2006 |   |
|                                                                   |   |                                            |   |   |                                           |   |   |   |   |   |   |   |
| Selling,                  general and administrative expense           |   | $                                               | 183    |   |                                           | $      | 354 |   |   | $ | (44 | ) |   | $ | 381 |   |
| Cumulative                  effect of a change in accounting principle |   |                                            | -      |   |                                           |   | - |   |   |   | - |   |   |   | 756 |   |
|                                                                   |   | $                                               | 183    |   |                                           | $      | 354 |   |   | $ | (44 | ) |   | $ | 1,137 |   |
|                                                                   |   |                                            |   |   |                                           |   |   |   |   |   |   |   |   |   |   |   |

*Share-Based Payment*

| Expected                  term (years)   | 5.3                  - 6.5     |
|------------------------------------------|--------------------------------|
| Volatility                               | 53.8%                  - 57.6% |
| Risk-free                  interest rate | 3.98%                  - 4.48% |

|                                     | September                  30, |   | September                  30, |
|------------------------------------------|--------------------------------|--------|--------------------------------|
|                                     | 2007                           |   | 2006                           |
|                                     |                           |   |                           |
| Expected                  term (years)   | 0.1                  - 4.8     |   | 3.0                  - 5.8     |
| Volatility                               | 68.2%                  - 77.2% |   | 53.5%                  - 54.9% |
| Risk-free                  interest rate | 3.43%                  - 4.13% |   | 4.57%                  - 4.60% |

----

Index

*Accounting for Uncertainty in Income      Taxes*

*Fair Value Measurements*

*The Fair Value Option for      Financial Assets and Financial Liabilities Including an Amendment of FASB      Statement No. 115*

|                                    |   | September                    30,       |   |   | December                    31,       |   |
|-----------------------------------------|--------|----------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------|--------|
|                                    |   | 2007                                   |   |   | 2006                                  |   |
|                                    |   | Gross                                                                |   |   | Accumulated                                                         |   |   | Net                    Carrying |   |   | Gross |   |   | Accumulated |   |   | Net                    Carrying |   |
|                                    |   | Amount                                                               |   |   | Amortization                                                        |   |   | Amount |   |   | Amount |   |   | Amortization |   |   | Amount |   |
|  Patents                           |   | $                                                                    | 1,017  |   |                                                                | $      | (673 | ) |   | $ | 344 |   |   | $ | 1,511 |   |   | $ | (1,065 | ) |   | $ | 446 |   |
|  Customer                    lists |   |                                                                 | 10,231 |   |                                                                |   | (8,197 | ) |   |   | 2,034 |   |   |   | 10,454 |   |   |   | (8,111 | ) |   |   | 2,343 |   |
|  Tradenames                        |   |                                                                 | 5,054  |   |                                                                |   | (2,431 | ) |   |   | 2,623 |   |   |   | 5,612 |   |   |   | (2,345 | ) |   |   | 3,267 |   |
|  Other                             |   |                                                                 | 441    |   |                                                                |   | (441 | ) |   |   | - |   |   |   | 441 |   |   |   | (62 | ) |   |   | 379 |   |
|  Total                             |   | $                                                                    | 16,743 |   |                                                                | $      | (11,742 | ) |   | $ | 5,001 |   |   | $ | 18,018 |   |   | $ | (11,583 | ) |   | $ | 6,435 |   |
|                                    |   |                                                                 |   |   |                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| 2007                      (remainder) |   | $      | 147    |   |
|---------------------------------------|--------|--------|--------|--------|
| 2008                                  |   |   | 495    |   |
| 2009                                  |   |   | 474    |   |
| 2010                                  |   |   | 445    |   |
| 2011                                  |   |   | 418    |   |
| 2012                                  |   |   | 399    |   |
| Thereafter                            |   |   | 2,623  |   |
|                                  |   | $      | 5,001  |   |
|                                  |   |   |   |   |

----

Index

|                                                                                                       |   | September                  30, |    |   | December                  31, |   |
|------------------------------------------------------------------------------------------------------------|--------|--------------------------------|---------|--------|-------------------------------|--------|
|                                                                                                       |   | 2007                           |    |   | 2006                          |   |
| Term                  loan payable under Bank of America Credit Agreement, interest                  based |   |                           |    |   |
| on                  LIBOR and Prime Rates (8.25% - 8.75%), due through 2009                                |   | $                              | 10,418  |   |                          | $      | 12,992 |   |
| Revolving                  loans payable under the Bank of America Credit Agreement,                       |   |                           |    |   |                          |   |   |   |
| interest                  based on LIBOR and Prime Rates (8.00% - 8.50%)                                   |   |                           | 41,977  |   |                          |   | 43,879 |   |
| Total                  debt                                                                                |   |                           | 52,395  |   |                          |   | 56,871 |   |
| Less                  revolving loans, classified as current (see below)                                   |   |                           | (41,977 | )      |                          |   | (43,879 | ) |
| Less                  current maturities                                                                   |   |                           | (1,500  | )      |                          |   | (1,125 | ) |
| Long-term                  debt                                                                            |   | $                              | 8,918   |   |                          | $      | 11,867 |   |
|                                                                                                       |   |                           |    |   |                          |   |   |   |

| 2007   |   | $      | 375    |   |
|--------|--------|--------|--------|--------|
| 2008   |   |   | 1,500  |   |
| 2009   |   |   | 8,543  |   |
|   |   | $      | 10,418 |   |
|   |   |   |   |   |

----

Index

*Balance Sheet Classification of Borrowings Outstanding under Revolving      Credit Agreements that Include Both a Subjective Acceleration Clause and a      Lock-Box Arrangement*

----

Index

|                                                      |   | Pension                  Benefits       |   |
|-----------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|
|                                                      |   | Three                  Months Ended                                   |   |   | Nine                  Months Ended |   |
|                                                      |   | September                  30,                         |   |   | September                  30,    |   |
|                                                      |   | 2007                                                                  |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| Components                  of net periodic benefit cost: |   |                                                                  |   |   |   |   |   |   |   |   |   |   |
| Service                  cost                             |   | $                                                                     | 6      |   |   | $ | 3 |   |   | $ | 9 |   |   | $ | 7 |   |
| Interest                  cost                            |   |                                                                  | 22     |   |   |   | 24 |   |   |   | 68 |   |   |   | 68 |   |
| Expected                  return on plan assets           |   |                                                                  | (22    | ) |   |   | (24 | ) |   |   | (70 | ) |   |   | (68 | ) |
| Amortization                  of net loss                 |   |                                                                  | 9      |   |   |   | 16 |   |   |   | 37 |   |   |   | 44 |   |
| Net                  periodic benefit cost                |   | $                                                                     | 15     |   |   | $ | 19 |   |   | $ | 44 |   |   | $ | 51 |   |
|                                                      |   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                        |   | Other                    Benefits          |   |
|-------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|
|                                                        |   | Three                    Months Ended                                                   |   |   | Nine                    Months Ended |   |
|                                                        |   | September                    30,                                         |   |   | September                    30,    |   |
|                                                        |   | 2007                                                                                    |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
| Components                    of net periodic benefit cost: |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |
| Interest                    cost                            |   | $                                                                                       | 16     |   |   | $ | 85 |   |   | $ | 117 |   |   | $ | 157 |   |
| Amortization                    of prior service cost       |   |                                                                                    | (30    | ) |   |   | 66 |   |   |   | 14 |   |   |   | 94 |   |
| Amortization                    of net loss                 |   |                                                                                    | 18     |   |   |   | (8 | ) |   |   | 26 |   |   |   | 12 |   |
| Net                    periodic benefit cost                |   | $                                                                                       | 4      |   |   | $ | 143 |   |   | $ | 157 |   |   | $ | 263 |   |
|                                                        |   |                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                          |   |    |      |   |     |   | Weighted    |   |                            |   |
|---------------------------------------------------------------|--------|---------|-----------|--------|----------|--------|-------------|--------|---------------------------------|--------|
|                                                          |   |    |      |   | Weighted |   | Average     |   | Aggregate                       |   |
|                                                          |   |    |      |   | Average  |   | Remaining   |   | Intrinsic                       |   |
|                                                          |   |    |      |   | Exercise |   | Contractual |   | Value                           |   |
|                                                          |   | Options |      |   | Price    |   | Life        |   | (in                  thousands) |   |
|                                                          |   |    |      |   |     |   |        |   |                            |   |
| Outstanding                  at December 31, 2006             |   |    | 1,718,000 |   |     | $      | 3.66        |   |                            |   |   |   |
|                                                          |   |    |      |   |     |   |        |   |                            |   |   |   |
| Granted                                                       |   |    | -         |   |     | $      | 0.00        |   |                            |   |   |   |
| Exercised                                                     |   |    | -         |   |     | $      | 0.00        |   |                            |   |   |   |
| Expired                                                       |   |    | (6,000    | )      |     | $      | 16.13       |   |                            |   |   |   |
| Cancelled                                                     |   |    | (78,200   | )      |     | $      | 3.71        |   |                            |   |   |   |
|                                                          |   |    |      |   |     |   |        |   |                            |   |   |   |
| Outstanding                  at September 30, 2007            |   |    | 1,633,800 |   |     | $      | 3.61        |   | 6.05                  years     |   | $ | - |   |
|                                                          |   |    |      |   |     |   |        |   |                            |   |   |   |   |
| Vested                  and Exercisable at September 30, 2007 |   |    | 1,313,800 |   |     | $      | 3.83        |   | 5.64                  years     |   | $ | - |   |
|                                                          |   |    |      |   |     |   |        |   |                            |   |   |   |   |

----

Index

| Non-Vested                  at December 31, 2006         |            53,434            |
|----------------------------------------------------------|-------------------------------------------------------------------------------------|
|                                                     |                                                                                |
| Granted                                                  |              6,000 |
| Vested                                                   |          (42,768)                      |
| Cancelled                                                |            (3,333)           |
|                                                     |                                                                                |
| Non-Vested                  at September 30, 2007        |            13,333            |
|                                                     |                                                                                |
| Total                  Outstanding at September 30, 2007 |          731,748                       |
|                                                     |                                                                                |

----

Index

*General      Environmental      Claims*

*W.J.      Smith Wood Preserving Company (“W.J. Smith”)*

----

Index

*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*
* U.S. District Court,      Southern District of      Indiana, appeal docketed, United States Court of Appeals for the Seventh      Circuit, Appeal No. 07-2238)*

----

Index

*with prejudice *
*with prejudice*

*with prejudice*

*Other      Claims*

----

Index

|                                                                    |   |   |   |   |                                           | Three                  months ended |                           |    | Nine                  months ended |                          |
|-------------------------------------------------------------------------|--------|--------|--------|--------|------------------------------------------------|-------------------------------------|--------------------------------|---------|------------------------------------|-------------------------------|
|                                                                    |   |   |   |   |                                           | September                  30,      |                           |    | September                  30,     |                          |
|                                                                    |   |   |   |   |                                           | 2007                                |                           |    | 2006                               |                          |   | 2007 |   |   | 2006 |   |
| Maintenance                  Products Group                             |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |
|      Net                  external sales       |   |   |   |   |                                           | $                                   | 49,208                         |    |                               | $                             | 51,920 |   |   | $ | 144,732 |   |   | $ | 148,823 |   |
|      Operating                  income         |   |   |   |   |                                           |                                | 528                            |    |                               |                          | 2,526 |   |   |   | 2,721 |   |   |   | 3,308 |   |
|      Operating                  margin         |   |   |   |   |                                           |                                | 1.1                            | %       |                               |                          | 4.9 | % |   |   | 1.9 | % |   |   | 2.2 | % |
|                       Depreciation and amortization |   |   | 1,667  |   |                                           |                                | 1,826                          |    |                               |                          | 5,401 |   |   |   | 5,619 |   |
|      Capital                  expenditures     |   |   |   |   |                                           |                                | 742                            |    |                               |                          | 893 |   |   |   | 2,781 |   |   |   | 2,232 |   |
|                                                                    |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |
| Total                                                                   |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |
| Net                  external sales                                     |   |   | -      |   | Operating                  segments            |                                | $                              | 49,208  |                               |                          | $ | 51,920 |   |   | $ | 144,732 |   |   | $ | 148,823 |   |
|                                                                    |   |   |   |   | Total                                          |                                | $                              | 49,208  |                               |                          | $ | 51,920 |   |   | $ | 144,732 |   |   | $ | 148,823 |   |
|                                                                    |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  loss                                         |   |   | -      |   | Operating                  segments            |                                | $                              | 528     |                               |                          | $ | 2,526 |   |   | $ | 2,721 |   |   | $ | 3,308 |   |
|                                                                    |   |   | -      |   | Unallocated                  corporate         |                                |                           | (1,600  | )                                  |                          |   | (2,767 | ) |   |   | (5,928 | ) |   |   | (7,800 | ) |
|                                                                    |   |   | -      |   | Severance,                  restructuring,     |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   | and                  related charges           |                                |                           | (46     | )                                  |                          |   | (738 | ) |   |   | (2,656 | ) |   |   | (1,591 | ) |
|                                                                    |   |   | -      |   | Gain                  (loss) on sale of assets |                                |                           | 44      |                               |                          |   | (39 | ) |   |   | (1,527 | ) |   |   | (48 | ) |
|                                                                    |   |   |   |   | Total                                          |                                | $                              | (1,074  | )                                  |                          | $ | (1,018 | ) |   | $ | (7,390 | ) |   | $ | (6,131 | ) |
|                                                                    |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                  and amortization                          |   |   | -      |   | Operating                  segments            |                                | $                              | 1,667   |                               |                          | $ | 1,826 |   |   | $ | 5,401 |   |   | $ | 5,619 |   |
|                                                                    |   |   | -      |   | Unallocated                  corporate         |                                |                           | 23      |                               |                          |   | 20 |   |   |   | 91 |   |   |   | 92 |   |
|                                                                    |   |   |   |   | Total                                          |                                | $                              | 1,690   |                               |                          | $ | 1,846 |   |   | $ | 5,492 |   |   | $ | 5,711 |   |
|                                                                    |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |   |
| Capital                  expenditures                                   |   |   | -      |   | Operating                  segments            |                                | $                              | 742     |                               |                          | $ | 893 |   |   | $ | 2,781 |   |   | $ | 2,232 |   |
|                                                                    |   |   | -      |   | Unallocated                  corporate         |                                |                           | 30      |                               |                          |   | 7 |   |   |   | 30 |   |   |   | 20 |   |
|                                                                    |   |   | -      |   | Discontinued                  operations       |                                |                           | 104     |                               |                          |   | 268 |   |   |   | 399 |   |   |   | 773 |   |
|                                                                    |   |   |   |   | Total                                          |                                | $                              | 876     |                               |                          | $ | 1,168 |   |   | $ | 3,210 |   |   | $ | 3,025 |   |
|                                                                    |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |                                           |                                | September                  30, |    |                               | December                  31, |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |                                           |                                | 2007                           |    |                               | 2006                          |   |   |   |   |   |   |   |   |   |
| Total                  assets                                           |   |   | -      |   | Maintenance                  Products Group    |                                | $                              | 90,310  |                               |                          | $ | 87,430 |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   | -      |   | Electrical                  Products Group     |                                |                           | -       |                               |                          |   | 74,025 |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   | -      |   | Other                  [a]                     |                                |                           | 76,934  |                               |                          |   | 14,389 |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   | -      |   | Unallocated                  corporate         |                                |                           | 6,228   |                               |                          |   | 6,850 |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   | Total                                          |                                | $                              | 173,472 |                               |                          | $ | 182,694 |   |   |   |   |   |   |   |   |   |
|                                                                    |   |   |   |   |                                           |                                |                           |    |                               |                          |   |   |   |   |   |   |   |   |   |   |   |

----

Index

|                                                                              |   | Three                  Months Ended |   |   | Nine                  Months Ended |   |
|-----------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|------------------------------------|--------|
|                                                                              |   | September                  30,      |   |   | September                  30,     |   |
|                                                                              |   | 2007                                |   |   | 2006                               |   |   | 2007 |   |   | 2006 |   |
| Consolidation                  of St. Louis manufacturing/distribution facilities |   | $                                   | -      |   |                               | $      | 704 |   |   | $ | 882 |   |   | $ | 1,403 |   |
| Consolidation                  of Glit facilities                                 |   |                                | 46     |   |                               |   | - |   |   |   | 1,774 |   |   |   | - |   |
| Corporate                  office relocation                                      |   |                                | -      |   |                               |   | 34 |   |   |   | - |   |   |   | 188 |   |
| Total                  severance, restructuring and related charges               |   | $                                   | 46     |   |                               | $      | 738 |   |   | $ | 2,656 |   |   | $ | 1,591 |   |
|                                                                              |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |

|                                                             |   | Contract                   |   |
|------------------------------------------------------------------|--------|----------------------------|--------|
|                                                             |   | Termination                |   |
|                                                             |   | Costs                  [b] |   |
| Restructuring                  liabilities at December 31, 2006  |   | $                          | 465    |   |
| Additions                                                        |   |                       | 882    |   |
| Payments                                                         |   |                       | (351   | ) |
| Restructuring                  liabilities at September 30, 2007 |   | $                          | 996    |   |
|                                                             |   |                       |   |   |

----

Index

|                                                             |   |   |   |   | One-time                      |   |   | Contract                   |   |   |                       |   |
|------------------------------------------------------------------|--------|--------|--------|--------|-------------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|
|                                                             |   |   |   |   | Termination                   |   |   | Termination                |   |   |                       |   |
|                                                             |   | Total  |   |   | Benefits                  [a] |   |   | Costs                  [b] |   |   | Other                  [c] |   |
| Restructuring                  liabilities at December 31, 2006  |   | $      | 5      |   |                          | $      | -      |                       |   | $      | 5                          |   |   | $ | - |   |
| Additions                                                        |   |   | 1,774  |   |                          |   | 151    |                       |   |   | 1,450                      |   |   |   | 173 |   |
| Payments                                                         |   |   | (365   | )      |                          |   | (151   | )                          |   |   | (41                        | )      |   |   | (173 | ) |
| Other                                                            |   |   | (689   | )      |                          |   | -      |                       |   |   | (689                       | )      |   |   |   |   |
| Restructuring                  liabilities at September 30, 2007 |   | $      | 725    |   |                          | $      | -      |                       |   | $      | 725                        |   |   | $ | - |   |
|                                                             |   |   |   |   |                          |   |   |                       |   |   |                       |   |   |   |   |   |

|                                                                                                |   |   |   |   | One-time                      |   |   | Contract                   |   |   |                       |   |
|-----------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-------------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|
|                                                                                                |   |   |   |   | Termination                   |   |   | Termination                |   |   |                       |   |
|                                                                                                |   | Total  |   |   | Benefits                  [a] |   |   | Costs                  [b] |   |   | Other                  [c] |   |
| Restructuring                  liabilities at December 31, 2006                                     |   | $      | 470    |   |                          | $      | -      |                       |   | $      | 470                        |   |   | $ | - |   |
|                               Additions |   |   | 2,656  |   |                          |   | 151    |                       |   |   | 2,332                      |   |   |   | 173 |   |
|                               Payments  |   |   | (716   | )      |                          |   | (151   | )                          |   |   | (392                       | )      |   |   | (173 | ) |
|                               Other     |   |   | (689   | )      |                          |   | -      |                       |   |   | (689                       | )      |   |   |   |   |
| Restructuring                  liabilities at September 30, 2007 [d]                                |   | $      | 1,721  |   |                          | $      | -      |                       |   | $      | 1,721                      |   |   | $ | - |   |
|                                                                                                |   |   |   |   |                          |   |   |                       |   |   |                       |   |   |   |   |   |

|                                                                                                |   | Maintenance |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------|--------|
|                                                                                                |   | Products    |   |
|                                                                                                |   | Group       |   |
| Restructuring                  liabilities at December 31, 2006                                     |   | $           | 470    |   |
|                               Additions |   |        | 2,656  |   |
|                               Payments  |   |        | (716   | ) |
|                               Other     |   |        | (689   | ) |
| Restructuring                  liabilities at September 30, 2007                                    |   | $           | 1,721  |   |
|                                                                                                |   |        |   |   |

----

Index

|                            |   | Maintenance |   |
|---------------------------------|--------|-------------|--------|
|                            |   | Products    |   |
|                            |   | Group       |   |
| 2007                            |   | $      | 169    |   |
| 2008                            |   |        | 309    |   |
| 2009                            |   |        | 271    |   |
| 2010                            |   |        | 297    |   |
| 2011                            |   |        | 299    |   |
| Thereafter                      |   |        | 376    |   |
| Total                  Payments |   | $           | 1,721  |   |
|                            |   |        |   |   |

*Accounting for the Impairments or Disposal of Long Lived      Assets*

*Accounting for Impairment or Disposal of Long-Lived Assets*

----

Index

|                                         |   | September                  30, |   |   | December                  31, |   |
|----------------------------------------------|--------|--------------------------------|--------|--------|-------------------------------|--------|
|                                         |   | 2007                           |   |   | 2006                          |   |
|                                         |   |                           |   |   |                          |   |
| Current                  assets:             |   |                           |   |   |                          |   |
| Accounts                  receivable, net    |   | $                              | -      |   |                          | $      | 3,364 |   |
| Inventories,                  net            |   |                           | -      |   |                          |   | 2,947 |   |
| Other                  current assets        |   |                           | -      |   |                          |   | 152 |   |
|                                         |   | $                              | -      |   |                          | $      | 6,463 |   |
|                                         |   |                           |   |   |                          |   |   |   |
| Non-current                  assets:         |   |                           |   |   |                          |   |   |   |
| Intangibles,                  net            |   | $                              | -      |   |                          | $      | 648 |   |
| Property                  and equipment, net |   |                           | -      |   |                          |   | 661 |   |
|                                         |   | $                              | -      |   |                          | $      | 1,309 |   |
|                                         |   |                           |   |   |                          |   |   |   |
| Current                  liabilities:        |   |                           |   |   |                          |   |   |   |
| Accounts                  payable            |   | $                              | -      |   |                          | $      | 1,777 |   |
| Accrued                  expenses            |   |                           | 350    |   |                          |   | 2,590 |   |
|                                         |   | $                              | 350    |   |                          | $      | 4,367 |   |
|                                         |   |                           |   |   |                          |   |   |   |

| Assets                  held for sale:                                                                       |   |   |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|           Cash                  and cash equivalents       |   | $      | 1,627  |   |
|                            Accounts receivable, net             |   |   | 29,584 |   |
|                            Inventories, net                     |   |   | 41,744 |   |
|                            Other current assets                 |   |   | 2,037  |   |
|                            Intangibles, net                     |   |   | 174    |   |
|                            Other                                |   |   | 546    |   |
|                            Property and equipment, net          |   |   | 1,720  |   |
|                            Accumulated other comprehensive loss |   |   | (2,772 | ) |
|                                                                                                         |   | $      | 74,660 |   |
|                                                                                                         |   |   |   |   |
| Liabilities                  held for sale:                                                                  |   |   |   |   |
|                            Accounts payable                     |   | $      | 19,944 |   |
|                            Accrued compensation                 |   |   | 501    |   |
|                            Accrued expenses                     |   |   | 8,079  |   |
|                            Other liabilities                    |   |   | 234    |   |
|                                                                                                         |   | $      | 28,758 |   |
|                                                                                                         |   |   |   |   |

----

Index

|                                                                    |   | Three                  Months Ended |   |   | Nine                  Months Ended |   |
|-------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|------------------------------------|--------|
|                                                                    |   | September                  30,      |   |   | September                  30,     |   |
|                                                                    |   | 2007                                |   |   | 2006                               |   |   | 2007 |   |   | 2006 |   |
|                                                                    |   |                                |   |   |                               |   |   |   |   |   |   |   |
| Net                  sales                                              |   | $                                   | 46,487 |   |                               | $      | 73,770 |   |   | $ | 130,587 |   |   | $ | 155,945 |   |
| Pre-tax                  profit                                         |   | $                                   | 2,500  |   |                               | $      | 3,920 |   |   | $ | 913 |   |   | $ | 4,551 |   |
| Pre-tax                  (loss) gain on sale of discontinued operations |   | $                                   | -      |   |                               | $      | (3,200 | ) |   | $ | 8,817 |   |   | $ | (3,230 | ) |
|                                                                    |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |

Item      2.  

----

Index

|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |
|-------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|----------------------------------|--------|--------|--------|--------|--------|----------------------------------|--------|
|                                                                    |   | 2007                                           |   |   | 2006              |   |
|                                                                    |   | (Amounts                  in Millions, Except Per Share Data) |   |
|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |
|                                                                    |   | $                                                             |   |   | % to                  Sales |   |   | $      |   |   | % to                  Sales |   |
| Net                  sales                                              |   | $                                                             | 49.2   |   |                             |   | 100.0  |   |   | $      | 51.9                             |   |   |   | 100.0 |   |
| Cost                  of goods sold                                     |   |                                                          | 43.7   |   |                             |   | 88.8   |   |   |   | 44.4                             |   |   |   | 85.5 |   |
| Gross                  profit                                           |   |                                                          | 5.5    |   |                             |   | 11.2   |   |   |   | 7.5                              |   |   |   | 14.5 |   |
| Selling,                  general and administrative expenses           |   |                                                          | 6.6    |   |                             |   | 13.4   |   |   |   | 7.8                              |   |   |   | 15.0 |   |
| Severance,                  restructuring and related charges           |   |                                                          | -      |   |                             |   | 0.1    |   |   |   | 0.7                              |   |   |   | 1.4 |   |
| (Gain)                  loss on sale of assets                          |   |                                                          | -      |   |                             |   | (0.1   | )      |   |   | -                                |   |   |   | 0.1 |   |
| Operating                  loss                                         |   |                                                          | (1.1   | )      |                             |   | (2.2   | )      |   |   | (1.0                             | )      |   |   | (2.0 | ) |
|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Interest                  expense                                       |   |                                                          | (1.1   | )      |                             |   |   |   |   |   | (1.2                             | )      |   |   |   |   |
| Other,                  net                                             |   |                                                          | (0.2   | )      |                             |   |   |   |   |   | -                                |   |   |   |   |   |
|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  from continuing operations before (provision for) |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| benefit                  from income taxes                              |   |                                                          | (2.4   | )      |                             |   |   |   |   |   | (2.2                             | )      |   |   |   |   |
| (Provision                  for) benefit from income taxes from         |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| continuing                  operations                                  |   |                                                          | -      |   |                             |   |   |   |   |   | 0.7                              |   |   |   |   |   |
|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  from continuing operations                        |   |                                                          | (2.4   | )      |                             |   |   |   |   |   | (1.5                             | )      |   |   |   |   |
| Income                  from operations of discontinued businesses      |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| (net                  of tax)                                           |   |                                                          | 1.6    |   |                             |   |   |   |   |   | 2.7                              |   |   |   |   |   |
| Loss                  on sale of discontinued businesses (net of tax)   |   |                                                          | -      |   |                             |   |   |   |   |   | (3.2                             | )      |   |   |   |   |
|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Net                  loss                                               |   | $                                                             | (0.8   | )      |                             |   |   |   |   | $      | (2.0                             | )      |   |   |   |   |
|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  per share of common stock - basic and diluted:    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  from continuing operations                        |   | $                                                             | (0.30  | )      |                             |   |   |   |   | $      | (0.18                            | )      |   |   |   |   |
| Discontinued                  operations                                |   |                                                          | 0.20   |   |                             |   |   |   |   |   | (0.07                            | )      |   |   |   |   |
| Net                  loss                                               |   | $                                                             | (0.10  | )      |                             |   |   |   |   | $      | (0.25                            | )      |   |   |   |   |
|                                                                    |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |

----

Index

*Maintenance      Products Group*

|                                                                |   | Three                  months ended September 30, |   |   |                   |   |   |                     |   |
|---------------------------------------------------------------------|--------|---------------------------------------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
|                                                                |   | (Amounts                  in Millions)            |   |   |                   |   |   |                     |   |
|                                                                |   | 2007                               |   |   | 2006    |   |   | Change    |   |
|                                                                |   | $                                                 |   |   | % Margin          |   |   | $                        |   |   | % Margin |   |   | $ |   |   | % Margin |   |
|  Maintenance                  Products Group                   |   | $                                                 | 0.5    |   |                   |   | 1.1    |                     |   | $ | 2.5 |   |   |   | 4.9 |   |   | $ | (2.0 | ) |   |   | (3.8 | ) |
|  Unallocated                  corporate expense                |   |                                              | (1.6   | )      |                   |   |   |                     |   |   | (2.8 | ) |   |   |   |   |   |   | 1.2 |   |   |   |   |   |
|                                                                |   |                                              | (1.1   | )      |                   |   | (2.2   | )                        |   |   | (0.3 | ) |   |   | (0.5 | ) |   |   | (0.8 | ) |   |   | (1.7 | ) |
|                                                                |   |                                              |   |   |                   |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Severance,                  restructuring and related charges |   |                                              | -      |   |                   |   |   |                     |   |   | (0.7 | ) |   |   |   |   |   |   | 0.7 |   |   |   |   |   |
|  Gain                  (loss) on sale of assets                |   |                                              | -      |   |                   |   |   |                     |   |   | - |   |   |   |   |   |   |   | - |   |   |   |   |   |
|  Operating                  loss                               |   | $                                                 | (1.1   | )      |                   |   | (2.2   | )                        |   | $ | (1.0 | ) |   |   | (2.0 | ) |   | $ | (0.1 | ) |   |   | (0.2 | ) |
|                                                                |   |                                              |   |   |                   |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

*Maintenance      Products Group*

*Corporate*

*Severance,      Restructuring and Related Charges*

----

Index

|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |
|-----------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|--------|----------------------------------|--------|--------|--------|--------|--------|----------------------------------|--------|
|                                                                                                |   | 2007                                           |   |   | 2006              |   |
|                                                                                                |   | (Amounts                  in Millions, Except Per Share Data) |   |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |
|                                                                                                |   | $                                                             |   |   | % to                  Sales |   |   | $      |   |   | % to                  Sales |   |
| Net                  sales                                                                          |   | $                                                             | 144.7  |   |                             |   | 100.0  |   |   | $      | 148.8                            |   |   |   | 100.0 |   |
| Cost                  of goods sold                                                                 |   |                                                          | 126.9  |   |                             |   | 87.7   |   |   |   | 129.6                            |   |   |   | 87.1 |   |
| Gross                  profit                                                                       |   |                                                          | 17.8   |   |                             |   | 12.3   |   |   |   | 19.2                             |   |   |   | 12.9 |   |
| Selling,                  general and administrative expenses                                       |   |                                                          | 21.0   |   |                             |   | 14.5   |   |   |   | 23.7                             |   |   |   | 15.9 |   |
| Severance,                  restructuring and related charges                                       |   |                                                          | 2.7    |   |                             |   | 1.8    |   |   |   | 1.6                              |   |   |   | 1.1 |   |
| Loss                  on sale of assets                                                             |   |                                                          | 1.5    |   |                             |   | 1.1    |   |   |   | -                                |   |   |   | 0.0 |   |
| Operating                  loss                                                                     |   |                                                          | (7.4   | )      |                             |   | (5.1   | )      |   |   | (6.1                             | )      |   |   | (4.1 | ) |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Gain                  on SESCO joint venture transaction                                            |   |                                                          | -      |   |                             |   |   |   |   |   | 0.6                              |   |   |   |   |   |
| Interest                  expense                                                                   |   |                                                          | (3.2   | )      |                             |   |   |   |   |   | (3.9                             | )      |   |   |   |   |
| Other,                  net                                                                         |   |                                                          | (0.1   | )      |                             |   |   |   |   |   | 0.4                              |   |   |   |   |   |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  from continuing operations before (provision for)                             |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| benefit                  from income taxes                                                          |   |                                                          | (10.7  | )      |                             |   |   |   |   |   | (9.0                             | )      |   |   |   |   |
| (Provision                  for) benefit from income taxes from                                     |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| continuing                  operations                                                              |   |                                                          | (0.6   | )      |                             |   |   |   |   |   | 0.8                              |   |   |   |   |   |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  from continuing operations                                                    |   |                                                          | (11.3  | )      |                             |   |   |   |   |   | (8.2                             | )      |   |   |   |   |
| (Loss)                  income from operations of discontinued businesses                           |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| (net                  of tax)                                                                       |   |                                                          | (0.3   | )      |                             |   |   |   |   |   | 2.5                              |   |   |   |   |   |
| Gain                  (loss) on sale of discontinued businesses (net of tax)                        |   |                                                          | 8.8    |   |                             |   |   |   |   |   | (3.2                             | )      |   |   |   |   |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  before cumulative effect of a change in accounting                  principle |   |                                                          | (2.8   | )      |                             |   |   |   |   |   | (8.9                             | )      |   |   |   |   |
| Cumulative                  effect of a change in accounting principle (net of tax)                 |   |                                                          | -      |   |                             |   |   |   |   |   | (0.8                             | )      |   |   |   |   |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Net                  loss                                                                           |   | $                                                             | (2.8   | )      |                             |   |   |   |   | $      | (9.7                             | )      |   |   |   |   |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  per share of common stock - basic and diluted:                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |
| Loss                  from continuing operations                                                    |   | $                                                             | (1.43  | )      |                             |   |   |   |   | $      | (1.03                            | )      |   |   |   |   |
| Discontinued                  operations                                                            |   |                                                          | 1.08   |   |                             |   |   |   |   |   | (0.10                            | )      |   |   |   |   |
| Cumulative                  effect of a change in accounting principle                              |   |                                                          | -      |   |                             |   |   |   |   |   | (0.09                            | )      |   |   |   |   |
| Net                  loss                                                                           |   | $                                                             | (0.35  | )      |                             |   |   |   |   | $      | (1.22                            | )      |   |   |   |   |
|                                                                                                |   |                                                          |   |   |                             |   |   |   |   |   |                             |   |   |   |   |   |

----

Index

*Maintenance      Products Group*

|                                                                |   | Nine                  months ended September 30, |   |   |                   |   |   |                     |   |
|---------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|------------------------|--------|--------|--------------------------|--------|
|                                                                |   | (Amounts                  in Millions)           |   |   |                   |   |   |                     |   |
|                                                                |   | 2007                              |   |   | 2006    |   |   | Change    |   |
|                                                                |   | $                                                |   |   | % Margin          |   |   | $                        |   |   | % Margin |   |   | $ |   |   | % Margin |   |
|  Maintenance                  Products Group                   |   | $                                                | 2.7    |   |                   |   | 1.9    |                     |   | $ | 3.3 |   |   |   | 2.2 |   |   | $ | (0.6 | ) |   |   | (0.3 | ) |
|  Unallocated                  corporate expense                |   |                                             | (5.9   | )      |                   |   |   |                     |   |   | (7.8 | ) |   |   |   |   |   |   | 1.9 |   |   |   |   |   |
|                                                                |   |                                             | (3.2   | )      |                   |   | (2.2   | )                        |   |   | (4.5 | ) |   |   | (3.0 | ) |   |   | 1.3 |   |   |   | 0.8 |   |
|                                                                |   |                                             |   |   |                   |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Severance,                  restructuring and related charges |   |                                             | (2.7   | )      |                   |   |   |                     |   |   | (1.6 | ) |   |   |   |   |   |   | (1.1 | ) |   |   |   |   |
|  Loss                  on sale of assets                       |   |                                             | (1.5   | )      |                   |   |   |                     |   |   | - |   |   |   |   |   |   |   | (1.5 | ) |   |   |   |   |
|  Operating                  loss                               |   | $                                                | (7.4   | )      |                   |   | (5.1   | )                        |   | $ | (6.1 | ) |   |   | (4.1 | ) |   | $ | (1.3 | ) |   |   | (1.0 | ) |
|                                                                |   |                                             |   |   |                   |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

*Maintenance      Products Group*

*Corporate*

*Severance,      Restructuring and Related Charges*

----

Index

----

Index

*Balance Sheet Classification of Borrowings Outstanding under Revolving      Credit Agreements that Include Both a Subjective Acceleration Clause and a      Lock-Box Arrangement*

----

Index

| Contractual                  Cash Obligations    |   | Total  |   |   | Due                  in less                  than                  1 year |   |   | Due                  in 1-3                  years |   |   | Due                  in 3-5                  years |   |   | Due                  after 5                  years |   |
|--------------------------------------------------|--------|--------|--------|--------|----------------------------------------------------------------------------|--------|--------|---------------------------------------------------------|--------|--------|---------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|
| Revolving                  credit facility [a]   |   | $      | 41,977 |   |                                                                       | $      | 41,977 |                                                    |   | $      | -                                                       |   |   | $                                                        | -      |   |   | $ | - |   |
| Term                  loans                      |   |   | 10,418 |   |                                                                       |   | 1,500  |                                                    |   |   | 8,918                                                   |   |   |                                                     | -      |   |   |   | - |   |
| Interest                  on debt [b]            |   |   | 6,622  |   |                                                                       |   | 4,298  |                                                    |   |   | 2,324                                                   |   |   |                                                     | -      |   |   |   | - |   |
| Operating                  leases [c]            |   |   | 16,876 |   |                                                                       |   | 7,731  |                                                    |   |   | 7,362                                                   |   |   |                                                     | 1,445  |   |   |   | 338 |   |
| Severance                  and restructuring [c] |   |   | 1,081  |   |                                                                       |   | 400    |                                                    |   |   | 347                                                     |   |   |                                                     | 202    |   |   |   | 132 |   |
| Post-retirement                  benefits [d]    |   |   | 5,447  |   |                                                                       |   | 754    |                                                    |   |   | 1,375                                                   |   |   |                                                     | 1,020  |   |   |   | 2,298 |   |
| Total                  Contractual Obligations   |   | $      | 82,421 |   |                                                                       | $      | 56,660 |                                                    |   | $      | 20,326                                                  |   |   | $                                                        | 2,667  |   |   | $ | 2,768 |   |
|                                             |   |   |   |   |                                                                       |   |   |                                                    |   |   |                                                    |   |   |                                                     |   |   |   |   |   |   |
|                                             |   |   |   |   |                                                                       |   |   |                                                    |   |   |                                                    |   |   |                                                     |   |   |   |   |   |   |
| Other                  Commercial Commitments    |   | Total  |   |   | Due                  in less than 1 year                                   |   |   | Due                  in 1-3 years                  |   |   | Due                  in 3-5 years                  |   |   | Due                  after 5 years                  |   |
| Commercial                  letters of credit    |   | $      | 350    |   |                                                                       | $      | 350    |                                                    |   | $      | -                                                       |   |   | $                                                        | -      |   |   | $ | - |   |
| Stand-by                  letters of credit      |   |   | 5,650  |   |                                                                       |   | 5,650  |                                                    |   |   | -                                                       |   |   |                                                     | -      |   |   |   | - |   |
| Total                  Commercial Commitments    |   | $      | 6,000  |   |                                                                       | $      | 6,000  |                                                    |   | $      | -                                                       |   |   | $                                                        | -      |   |   | $ | - |   |
|                                             |   |   |   |   |                                                                       |   |   |                                                    |   |   |                                                    |   |   |                                                     |   |   |   |   |   |   |

----

Index

*Operating      Activities*

** **

*Investing      Activities*

*Financing      Activities*

----

Index

|                                                                              |   | Three                  Months Ended |   |   | Nine                  Months Ended |   |
|-----------------------------------------------------------------------------------|--------|-------------------------------------|--------|--------|------------------------------------|--------|
|                                                                              |   | September                  30,      |   |   | September                  30,     |   |
|                                                                              |   | 2007                                |   |   | 2006                               |   |   | 2007 |   |   | 2006 |   |
| Consolidation                  of St. Louis manufacturing/distribution facilities |   | $                                   | -      |   |                               | $      | 704 |   |   | $ | 882 |   |   | $ | 1,403 |   |
| Consolidation                  of Glit facilities                                 |   |                                | 46     |   |                               |   | - |   |   |   | 1,774 |   |   |   | - |   |
| Corporate                  office relocation                                      |   |                                | -      |   |                               |   | 34 |   |   |   | - |   |   |   | 188 |   |
| Total                  severance, restructuring and related charges               |   | $                                   | 46     |   |                               | $      | 738 |   |   | $ | 2,656 |   |   | $ | 1,591 |   |
|                                                                              |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |

|                                        |   | Total                  Expected Cost |   |   | Total                  Provision to Date |   |
|---------------------------------------------|--------|--------------------------------------|--------|--------|------------------------------------------|--------|
|                                        |   |                                 |   |   |                                     |   |
| Maintenance                  Products Group |   | $                                    | 23,749 |   |                                     | $      | 23,449 |   |
| Electrical                  Products Group  |   |                                 | 12,683 |   |                                     |   | 12,683 |   |
| Corporate                                   |   |                                 | 12,290 |   |                                     |   | 12,290 |   |
|                                        |   | $                                    | 48,722 |   |                                     | $      | 48,422 |   |
|                                        |   |                                 |   |   |                                     |   |   |   |

|                                                                                                |   |   |   |   | One-time                      |   |   | Contract                   |   |   |                       |   |
|-----------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-------------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|
|                                                                                                |   |   |   |   | Termination                   |   |   | Termination                |   |   |                       |   |
|                                                                                                |   | Total  |   |   | Benefits                  [a] |   |   | Costs                  [b] |   |   | Other                  [c] |   |
| Restructuring                  liabilities at December 31, 2006                                     |   | $      | 470    |   |                          | $      | -      |                       |   | $      | 470                        |   |   | $ | - |   |
|                               Additions |   |   | 2,656  |   |                          |   | 151    |                       |   |   | 2,332                      |   |   |   | 173 |   |
|                               Payments  |   |   | (716   | )      |                          |   | (151   | )                          |   |   | (392                       | )      |   |   | (173 | ) |
|                               Other     |   |   | (689   | )      |                          |   | -      |                       |   |   | (689                       | )      |   |   |   |   |
| Restructuring                  liabilities at September 30, 2007 [d]                                |   | $      | 1,721  |   |                          | $      | -      |                       |   | $      | 1,721                      |   |   | $ | - |   |
|                                                                                                |   |   |   |   |                          |   |   |                       |   |   |                       |   |   |   |   |   |

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Index

----

Index

| -   | Increases                in the cost of, or in some cases continuation of, the current price                levels                of plastic resins, copper, paper board packaging, and other raw                materials. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Our                inability to reduce product costs, including manufacturing, sourcing,                freight, and other product costs. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Greater                reliance on third parties for our finished goods as we increase the                portion of our manufacturing that is                outsourced. |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Our                inability to reduce administrative costs through consolidation of                functions and systems improvements. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| -   | Our                inability to execute our systems integration                plan. |
|---------------|--------------------------------------------------------------------------------------|

| -   | Our                inability to successfully integrate our operations as a result of                the                facility consolidations. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Our                inability to achieve product price increases, especially as they                relate to                potentially higher raw material                costs. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | The                potential impact of losing lines of business at large mass merchant                retailers in the discount and do-it-yourself                markets. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | Competition                from foreign competitors. |
|---------------|------------------------------------------------------|

----

Index

| -   | 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. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------|

Item      3. 

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Index

Item      4.  

|   | (a)   Evaluation                of Disclosure Controls and                Procedures |
|--------|-----------------------------------------------------------------------------------------------------|

----

Index

| ·   | 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. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b)   Change                in Internal Controls |
|--------|-----------------------------------------------------------------|

*Remediation of Material Weaknesses*

----

Index

PART      II - OTHER INFORMATION

Item      1.  LEGAL PROCEEDINGS

Item      1A.  RISK FACTORS

**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.**

Item      2.  

Item      3.  

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Index

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

Item      5.  OTHER INFORMATION

Item      6.  EXHIBITS

| **Exhibit****Number** |  **Exhibit                Title**                                                                                                                                                               |
|-----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                                                 |
| 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.              |

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Index

Signatures

----