CATALINA LIGHTING, INC. REPORTS THIRD-QUARTER FISCAL 2003 RESULTS

Strength in U.K. Markets, Continued Emphasis on Cost-containment and Product Mix Contribute to Continuing Positive Margin Trends

     MIAMI (August 4, 2003) … 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 third fiscal quarter ended

     June 30, 2003. Catalina reported $1.3 million of net income, or $0.22 per diluted share for the quarter, compared to a loss of $409,000, or $0.12 per diluted share in the prior-year period.  For the nine months ended June 30, 2003, the Company recorded $4.7 million of net income, or $0.82 per diluted share, versus a loss of $269,000, or $0.08 per diluted share in the prior-year period.  The inclusion of a one-time $963,000 pretax loss on disposal of property in the second quarter of fiscal 2002 plus a $959,000 pretax litigation settlement expense in the third quarter of fiscal 2002 contributed to the sharp improvement indicated by the year-to-year comparisons.

     Third-quarter fiscal 2003 sales were $48.4 million, down from $53.4 million in the third quarter of fiscal 2002.  For the nine-month period, sales were $154.5 million, versus

     $163.5 million in the prior-year period.  Continuing the trend of recent quarters, the Company’s gross profit margin for the quarter increased to 22.0 percent from 19.6 percent in the prior-year period.  For the first nine months of fiscal 2003, gross profit margin increased to 21.6 percent from 19.7 percent in the prior-year period.

     Catalina Chief Executive Officer Bob Varakian commented, “We are pleased to report such positive margin trends in the face of ongoing sluggishness in demand in certain areas.  We continue to see sales strength and margin improvements in our U.K. markets.  In North America, we are implementing a broad range of product development and distribution initiatives that we believe will enhance our competitive strengths.”

     As in the first half of 2003, the Company’s focus on cost containment resulted in further operating margin improvement in the third quarter.  Third-quarter 2003 operating margin rose from 4.1 percent in the prior-year period (adjusted by adding back litigation settlement expense) to 5.9 percent.  The operating margin for the first nine months of fiscal 2003 was 6.7 percent, up from 4.4 percent in the prior-year period (also similarly adjusted).

     Chief Financial Officer Stephen Marble added, “Our continuing emphasis on new product development, our low-cost manufacturing base in China, and our increasingly lean cost structure have all contributed to our continued strong performance during these difficult times.  Moreover, we think that our ongoing focus on new products and revamped distribution channels is positioning Catalina strongly for any upturn in the retail climate.”