Catalina Lighting, Inc. Reports Annual and Fourth Quarter Results

MIAMI, Dec. 28 /PRNewswire/ -- Catalina Lighting, Inc. (NYSE: LTG), a leading international designer, manufacturer and distributor of lighting products for residential and office environments, today announced sales and earnings for its fourth quarter and fiscal year ended September 30, 2000.

The Company reported record sales for its fiscal year and fourth quarter of $202.6 million and $70.7 million, respectively, as a result of the addition of $24.5 million in sales for the quarter from Ring PLC, which was acquired by the Company on July 5, 2000. Annual and fourth quarter sales for 1999 were $176.6 million and $45.3 million, respectively.

Net income for the year ended September 30, 2000, declined to $2.8 million or $0.37 per diluted share, after pretax charges aggregating $1.3 million that related to actions taken by management during the year to improve the Company. Net income for the 1999 fiscal year, which included a non-recurring item that increased net income by $2.0 million ($0.23 per diluted share), was $6.5 million or $0.80 per diluted share. The Company earned $476,000, or $0.06 per diluted share, during the quarter ended September 30, 2000, as compared to $954,000 or $0.12 per diluted share in the same quarter of last year.

"Fiscal 2000 was a year in which Catalina continued its evolution as a world-class global lighting supplier," noted Chairman and C.E.O. Robert Hersh. "With the Ring acquisition, we enhanced our distribution network and diversified our customer base and product lines. In addition, we expanded our manufacturing facilities and product development efforts this year."

"The Company's sales in fiscal 2000, excluding Ring, improved slightly from last year, as net sales for fiscal 2000 were $178.1 million, as compared to $176.6 million for 1999," continued Mr. Hersh. "Operating income, as adjusted to exclude Ring and the restructuring charges in 2000 and 1999's non- recurring item, was $7.9 million in fiscal 2000, as opposed to $7.1 million in 1999. Results for the fourth quarter reflected similar improvements."

The Company's fiscal 2000 and fourth quarter earnings were reduced by reorganization and restructuring charges and by unanticipated conditions in the United Kingdom during the fourth quarter that adversely affected Ring. Actions taken by management in two areas of Catalina's business resulted in charges that lowered 2000 pretax earnings by approximately $1.3 million. The Company recorded a $788,000 charge during the first quarter pursuant to a reorganization of its executive management structure. To improve customer service and reduce costs the Company finalized plans in September 2000 to close its Boston office and consolidate its activities into the Miami headquarters. A charge of $500,000 was recorded in the fourth quarter for this consolidation. Ring's operating results for the fourth quarter, combined with the incremental costs of acquiring Ring, also negatively impacted Catalina's annual and fourth quarter earnings. For the quarter ended September 30, 2000, Ring's results reflected the effects of a substantial weakening of the British pound relative to the U.S. dollar and an unfavorable retail environment in the United Kingdom. These developments significantly reduced Ring's profitability, and this subsidiary reported a pretax loss for the fourth quarter of approximately $200,000, before interest and financing costs and goodwill amortization related to the Ring acquisition aggregating $1.1 million.

Retail conditions in the United Kingdom have continued to negatively impact Ring's business. In addition, to date in the current quarter Catalina has experienced a significant decline in sales to its U.S. customers. Consequently the Company expects to report a consolidated loss for the quarter ending December 31, 2000. "We believe our lower domestic sales for the first quarter of fiscal 2001 represents a general slowdown in the U.S. retail economy that has affected the purchasing patterns of our major customers, as evidenced by recent public announcements from a number of retailers," commented Mr. Hersh.

As a result of the Company's performance for the quarter ended September 30, 2000, the Company was out of compliance with a financial covenant under its $75 million credit facility. The Company obtained an amendment of this credit facility and is in compliance with the amended credit facility for the quarter ended September 30, 2000. However, due to the sales decline the Company is experiencing in the current quarter ending December 31, 2000, the Company does not expect to be in compliance with the financial covenants under the amended credit facility for the quarter ending December 31, 2000. Based on on-going discussions with its bank lenders, the Company believes that it will be able to successfully negotiate a mutually agreeable second amendment or waiver under the credit facility with respect to the quarter ending December 31, 2000. There can be no assurance, however, that the Company will be successful in finalizing or obtaining such second amendment or waiver, or in avoiding the adverse consequences that could result from a failure to obtain such waiver or amendment.

Catalina Lighting also announced the hiring this month of SunTrust Equitable Securities to render financial advisory and investment banking services in connection with the Company's evaluation of possible strategic alternatives to maximize shareholder value. This press release includes statements that constitute "forward-looking" statements, usually containing the words "believes," "anticipates," "estimates," "is optimistic," "expects" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, general domestic and international economic conditions which may affect consumer spending; reliance on key customers who may delay, cancel or fail to place orders; continued acceptance of the Company's products in the marketplace; new products and technological changes; pressures on product prices and pricing inventories; increases in the costs of labor and raw material; dependence upon third-party vendors and imports from China, which may limit the Company's margins or affect the timing of revenue and sales recognition; competitive developments, changes in manufacturing and transportation costs, the availability of capital, the ability to satisfy the terms and covenants of credit and loan agreements, and the impact of increases in borrowing costs, each of which affect the Company's short-term and long- term liquidity and ability to operate as a going concern; foreign currency exchange rates; changes in the Company's effective tax rate, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release. The Company will host a conference call to discuss operating results for the fiscal year ended September 30, 2000, at 10:00 a.m. EST on December 29, 2000. To participate in the conference call, please dial (888) 222-2994 or for international callers, (973) 694-6836. A replay of the conference call will be available until January 4, 2001, by dialing (800) 428-6051 or for international callers by dialing (973) 709-2089. The Access Code is 151378 for the replay. For further information, please contact David Sasnett, Chief Financial Officer, or Robert Hersh, Chief Executive Officer, at (305) 558-4777. Copies of Catalina press releases may be obtained by fax at any time by calling (800) 758-5804 and inputting access number 146925.

                                  2000*        1999**
Net sales                     $202,630,000  $176,561,000
Gross profit                  $38,414,000   $35,655,000
Selling, general and
 administrative expenses      $32,105,000   $25,826,000
Operating income              $6,309,000    $9,829,000
Income before income taxes    $3,919,000    $9,427,000
Net income                    $2,845,000    $6,489,000
Basic earnings per share      $0.40         $0.92
Diluted earnings per share    $0.37         $0.80
Diluted EPS - as adjusted for
 non-recurring items          $0.47         $0.57
Weighted avg. basic shares
 outstanding                  7,074,000     7,055,000
Weighted avg. diluted shares
 outstanding                  8,419,000    8,688,000

S,G&A expenses for 2000 include a charge of $788,000 related to the reorganization of the Company's executive management structure and a $500,000 charge related to the closing of an office.

** Amounts for 1999 reflect a $2,728,000 reduction in S,G&A expenses and an $893,000 reduction of interest expense, both relating to a non- recurring settlement of litigation.

                                      2000*       1999
Net sales                         $70,684,000  $45,315,000
Gross profit                      $12,611,000  $8,729,000
Selling, general and
 administrative expenses          $11,071,000  $7,189,000
Operating income                  $1,540,000   $1,540,000
Income before income taxes        $288,000     $1,328,000
Net income                        $476,000     $954,000
Basic earnings per share          $0.07        $0.14
Diluted earnings per share        $0.06        $0.12
Diluted earnings per share - as
 adjusted for non-recurring item  $0.10        $0.12
Weighted avg. basic shares
 outstanding                      7,272,000    6,989,000
Weighted avg. diluted shares
 outstanding                      7,651,000    8,955,000

S,G&A expenses for 2000 include a charge of $500,000 related to the closing of an office. SOURCE Catalina Lighting, Inc.

CONTACT:
David Sasnett, Chief Financial Officer, or Robert Hersh, Chief Executive Officer, both of Catalina Lighting, 305-558-4777