CATALINA LIGHTING REPORTS SECOND-QUARTER FISCAL 2004 RESULTS

MIAMI ( May 17, 2004 ) … Catalina Lighting, Inc. (Nasdaq:CALA), a leading international designer, manufacturer, and distributor of lighting products for residential and office environments, today announced results for its second quarter ended March 31, 2004 .  The Company reported a net loss of $712,000, or a loss of $0.13 per diluted share, for its fiscal 2004 second quarter, compared to net income of $1.3 million, or $0.23 per diluted share, for the second quarter of fiscal 2003.  For the six months ended March 31, 2004 , the Company reported net income of $1.2 million, or $0.21 per diluted share, compared to net income of $3.5 million, or $0.60 per diluted share, for the six months ended March 31, 2003 .

Approximately 47 percent of the $712,000 loss in the second quarter was attributable to a foreign currency exchange impact resulting from the Company’s borrowing in British Pounds from its UK subsidiary, utilizing their primary credit facility, which was established on December 23, 2003 , with a UK lender.  The balance of the loss was attributable to a number of other factors, including pricing pressures, product costs, production mix and facility closing costs in Mexico .  In spite of challenges in other areas of the business, the UK segment continued to turn in a solid performance.  Net sales of the UK subsidiary, translated in USD, increased $10.4 million, or 15.9 percent, to $75.8 million for the six months ended March 31, 2004 , when compared to the same period in the prior year.  

Catalina CEO Bob Varakian commented, “As we continue to revitalize the Company, we are increasing our investments in product development as part of our overall focus on customer satisfaction, including new product designs and the support required to launch these new products.  In the second quarter, we increased our product development spending 51 percent over the same quarter in the prior year, and for the six months our spending in this area increased 55 percent over the same period in the prior year.”  

Varakian continued, “We are excited about our new rollout program with a national DIY retailer that operates over 1,000 store locations in the US , which began April 1, 2004 , during our third quarter.  We have dedicated shelf space for our private label track lighting products in over 800 of their locations.  We expect this new program to benefit both US sales and the China Manufacturing and Distribution division factory utilization.” 

Consolidated net sales for the second quarter rose three percent to $51.5 million; while net sales for the six months ended March 31, 2004 , increased 1.5 percent to $107.7 million, compared to the same periods in the prior year. CEO Varakian noted that the Company has yet to realize the positive impact of our investments in new products and customer expansion programs.  Varakian added that Catalina expects to see the benefits of our revitalization efforts in the North American market, during the second half of this fiscal year.