Catalina Lighting, Inc. Reports Second Quarter Operating Results

MIAMI, May 15 /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 second quarter of its fiscal year ending September 30, 2001. The Company also announced that progress continues toward completion of the proposed $20.5 million junior capital infusion for the Company.

For the quarter ended March 31, 2001, net sales were $55.8 million, including $27.8 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 $28.0 million in the second quarter of FY2001, compared with $42.0 million in the prior-year period. The reduction in sales was primarily attributable to declines in sales to U.S. customers.

The Company reported a net loss of $3.4 million, or ($0.46) per diluted share, in the quarter ended March 31, 2001, compared with net income of $752,000 or $0.10 per diluted share, in the quarter ended March 31, 2000.

Net sales for the six months ended March 31, 2001 were $120.4 million. Excluding Ring's sales, net sales for this six month period ended March 31, 2001 were $64.4 million, as compared to $85.2 million for the six months ended March 31, 2000.

The net loss for the six months ended March 31, 2001 was $5.3 million, or ($0.72) per share, as compared to net income of $1.3 million, or $0.17 per share, for the six months ended March 31, 2000.

"The prevailing downturn in the U.S. economy has had a major adverse impact on our operating results to this point in our 2001 fiscal year," stated Robert Hersh, Catalina's Chairman and Chief Executive Officer. "However, the financial press for several of our retail customers has been more favorable in the last month, and Catalina's open orders backlog improved in the month of April. Historically, sales and profitability for the second half of our fiscal year has been stronger than the first. While we continue to feel the effects of the current economic environment, we currently expect operating results for the latter half of fiscal 2001 to be significantly better than those for the first six months of fiscal 2001."

The Company also announced that the proposed $20.5 million capital infusion from Sun Catalina Holdings LLC (an affiliate of Sun Capital Partners, Inc.) and a separate lender is proceeding as expected with SCH presently engaged in due diligence and discussions with the bank syndication group for the proposed restructuring of the Company's $75 million credit facility. The transaction remains subject to a number of conditions.

Due to the net loss for the quarter, the Company was not in compliance with a financial covenant under its $75 million credit facility. On May 15, 2001 the Company obtained a forbearance of actions by its lenders resulting from this covenant violation through June 15, 2001. This forbearance agreement also extended the deadline under the credit facility for the Company's procurement of certain statutory declarations and an auditors' report related to the Company's acquisition of Ring Plc to June 15, 2001. Based upon ongoing discussions with its bank lenders, the Company believes that it will be able to successfully negotiate a mutually agreeable waiver or amendment to its credit facility on or prior to June 15, 2001.

On April 5, 2001 the New York Stock Exchange (NYSE) announced that it had determined that the common stock of the Company should be removed from the list of companies trading on the NYSE. The Company has determined not to appeal the NYSE's decision. The Company is working with Nasdaq and Nasdaq market makers in order to allow the Company's stock to be quoted through the Nasdaq Bulletin Board. The Company believes that its stock will be quoted through the Bulletin Board under a new trading symbol shortly after the stock ceases to trade on the NYSE.

There can be no assurance that the Company's proposed capital infusion will be consummated, that the Company will be successful in negotiating a further waiver or amendment to its credit facility on or prior to June 15, 2001, or that market makers will quote the Company's stock on the Nasdaq Bulleting Board. These and other forward-looking statements in this press release, usually containing the words "believes," "anticipates," "estimates," "is optimistic," "expects" or similar expressions, 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 the inability to obtain the results or to fulfill the other forward-looking statements include, but are not limited to, general domestic and international economic conditions which may affect consumer spending; the Company's 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; the Company's dependence upon agreements or consents from various third parties in order to satisfy conditions under various agreements; 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.

                           CATALINA LIGHTING, INC.
                      SELECTED OPERATING RESULTS FOR THE
                           QUARTER ENDED MARCH 31,

                                                  2001              2000

    Net sales                                  $55,789,000       $42,033,000
    Gross profit                                $7,986,000        $8,001,000
    Selling, general and administrative
     expenses                                  $10,433,000        $6,696,000
    Operating income (loss)                    $(2,447,000)       $1,305,000
    Income (loss) before income taxes          $(4,138,000)       $1,106,000
    Net income (loss)                          $(3,368,000)         $752,000
    Basic earnings (loss) per share                 $(0.46)            $0.11
    Diluted earnings (loss) per share               $(0.46)            $0.10
    Weighted average basic shares
     outstanding                                 7,358,000         6,931,000
    Weighted average diluted shares
     outstanding                                 7,358,000         8,761,000



                           CATALINA LIGHTING, INC.
                      SELECTED OPERATING RESULTS FOR THE
                          SIX MONTHS ENDED MARCH 31,

                                                  2001             2000

    Net sales                                 $120,397,000      $85,241,000
    Gross profit                               $18,170,000      $16,896,000
    Selling, general and administrative
     expenses                                  $21,249,000      $14,265,000
    Operating income (loss)                    $(3,079,000)      $2,631,000
    Income (loss) before income taxes          $(6,319,000)      $1,895,000
    Net income (loss)                          $(5,267,000)      $1,289,000
    Basic earnings (loss) per share                 $(0.72)           $0.19
    Diluted earnings (loss) per share               $(0.72)           $0.17
    Weighted average basic shares
     outstanding                                 7,358,000        6,962,000
    Weighted average diluted shares
     outstanding                                 7,358,000        8,830,000

                    

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