Catalina Lighting, Inc. Reports First Quarter Operating Results

MIAMI, Feb. 14 /PRNewswire/ -- Catalina Lighting, Inc. (NYSE: LTG), a leading international designer, manufacturer and distributor of lighting products for residential and office environments, today announced operating results for the first quarter of FY2001. The Company also announced that it continues to work with its investment bankers to explore strategic alternatives to maximize shareholder value.

For the three months ended December 31, 2000, net sales approximated $64.6 million, including $28.3 million in sales generated by Ring Ltd., a British subsidiary that was acquired in July 2000. Excluding Ring's results, Catalina's net sales totaled $36.3 million in the first quarter of FY2001, compared with $43.2 million in the prior-year period. The reduction in sales was attributable to a $10.1 million decline in sales to U.S. customers, which was partially offset by increased sales to European and Canadian customers.

The Company reported a net loss of $1.9 million, or ($0.26) per share, in its most recent quarter, compared with net income of $537,000, or $0.07 per diluted share, in the quarter ended December 31, 1999.

"In our opinion, the softness in sales during the first quarter was due to a general slowdown in retail activity in the U.S. economy during the final months of the year 2000," stated Robert Hersh, President and Chief Executive Officer of Catalina Lighting, Inc. "Our relationships with major customers remain solid, and we believe the sales decline reflects changes in customer purchasing patterns in response to a softening retail environment. It appears that retailers cut back on purchases in order to balance inventories, and this was reflected in lower sales at Catalina Lighting during its first fiscal quarter.

"In addition to the weakening U.S. economy, sales at our recently acquired British subsidiary declined due to unfavorable retail conditions in the United Kingdom during the most recent quarter. Our profitability in Britain was also affected by a weak British pound, relative to the U.S. dollar.

"During previous business cycles, sales of lighting products have begun to recover within a few months after retailers have completed inventory adjustments, and we are cautiously optimistic that this will be the case during the second half of Fiscal 2001," continued Hersh. "We are somewhat encouraged by a strengthening in sales at our U.K. subsidiary during the month of January, but it is too early to tell if this trend will continue." As a result of the Company's operating results for the quarter ended December 31, 2000, the Company initially was not in compliance with the financial covenants under its $75 million credit facility for the quarter ended December 31, 2000. The Company obtained a second amendment of the credit facility on February 9, 2001 which modified the financial covenants for the December 31, 2000 and subsequent quarters, and brought the Company into compliance with the amended financial covenants for the quarter ended December 31, 2000. As discussed in the Company's Form 10-Q for the quarter December 31, 2000, the February 9, 2001 amendment to the credit facility also requires the Company to obtain by March 31, 2001 certain statutory declarations and an auditors' report related to the Company's acquisition of Ring PLC and based upon recent and near-term expected results, the Company believes that it will need to seek an extension or modification of this obligation. Based on on-going discussions with its bank lenders, the Company believes that, to the extent necessary, it will be able to successfully negotiate a mutually agreeable amendment or waiver under the credit facility with respect to its covenants and terms for the quarter ending March 31, 2001. There can be no assurance, however, that the Company will be able to comply with the amended financial covenants and terms of the credit facility for quarters subsequent to December 31, 2000, be successful in finalizing or obtaining an amendment or waiver, or in avoiding the adverse consequences that could result from a failure to obtain such waiver or amendment.

As previously disclosed, the Company has not satisfied certain requirements for its stock to remain listed on the NYSE. At the request of the NYSE, the Company provided the NYSE with its plan to meet the new requirements by February 2001. The Company's plan was accepted by the NYSE in October 1999. The Company intends to communicate with the NYSE regarding its status under the plan and to seek an extension of time to satisfy the listing requirements pursuant to its plan. If the Company is ultimately unable to meet the new NYSE listing rules or obtain an extension for its plan, the Company's shares could be suspended from trading on the NYSE; however the Company believes other trading venues are available for its stock. 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. 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                           $64,608,000     $43,208,000
Gross profit                        $10,184,000     $8,895,000
Selling, general and
 administrative expenses            $10,816,000     $7,569,000
Operating income (loss)             $(632,000)      $1,326,000
Income (loss) before income taxes   $(2,181,000)    $789,000
Net income (loss)                   $(1,899,000)    $537,000
Basic earnings (loss) per share     $(0.26)         $0.08
Diluted earnings (loss) per share   $(0.26)         $0.07
Diluted earnings (loss) per share - 
 as adjusted for non-recurring item $(0.26)        $0.14
Weighted avg. basic shares
 outstanding                        7,358,000      6,986,000
Weighted avg. diluted shares
 outstanding                        7,358,000      7,745,000

*S,G&A expenses for 1999 include a charge of $788,000 related to the reorganization of the Company's executive management structure. SOURCE Catalina Lighting, Inc.

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