Carrington Laboratories, Inc. Reports First Quarter Results

IRVING, Texas, May 4 /PRNewswire-FirstCall/ -- Carrington Laboratories, Inc., reported revenue of $7.5 million for the quarter ended March 31, 2006. While this is a decrease of 8.5% from last year's record- breaking first quarter, it was the second highest first quarter revenue in the Company's history. Reduced sales in bulk raw materials, due to a material decrease in purchases by a leading customer, were responsible for the bulk of the decline. This decrease was partially offset by an 18% increase in other revenues.

Net loss for the first quarter of 2006 was $1.5 million, or ($0.14) per basic and diluted share. Pro forma loss for the quarter was $719,000, excluding net expenses of $813,000 for the Company's drug delivery subsidiary, DelSite Biotechnologies, Inc. In the year-ago first quarter, the Company recorded revenue of $8.2 million and a net loss of $80,000, or ($0.01) per basic and diluted share, while pro forma profit was $930,000 before net DelSite funding of $1.0 million.

A decrease in royalty income impacted revenue for Carrington's Medical Services Division. Revenue for the Medical Services Division was $2.2 million in the quarter just ended, compared to $2.7 million a year ago, a decrease of 17.1%. Royalty income decreased 83.1% from $617,000 in the first quarter of 2005 to $104,000 in the first quarter of 2006 as the initial term of the Distributor and License Agreement with Medline expired in November 2005 and the three-year extension term, with significantly lower royalties, commenced immediately thereafter. Excluding the royalty payments, ongoing revenues for the Medical Services Division improved 3% for the quarter.

The Company's Consumer Services Division recorded revenue of $4.9 million versus $5.2 million in the year-ago period, a decrease of 5.2%. As noted above, the decrease here was the result of the lower bulk raw materials sales. Partially offsetting the decrease in bulk raw material sales was a 91% increase in specialty manufacturing and finished goods sales, from $1.3 million in the year-ago period to $2.5 million in the current period.

Carlton E. Turner, president and CEO, stated, "Although our revenues were down, the first quarter did show encouraging results in a number of areas and steps are being taken to continue this growth and improve operations. We have made a change in leadership and management for corporate sales and marketing and have added a new director of research and development for Carrington. We continue to add, train and retain sales personnel in the specialty manufacturing area of the Consumer Services Division. As noted previously, sales in this Division, excluding bulk raw materials, were up $1 million over the fourth quarter of 2005 and $1.2 million over the first quarter of 2005. Interest in our specialty manufacturing area remains strong. Additionally, four new raw materials covered by patents until 2017 have been developed and submitted to a leading customer for evaluation.

"DelSite continues development of its GelVac(TM) powder delivery system and the related GelVac(TM) avian flu vaccine with the necessary clinical and regulatory activities continuing, with completion expected in late 2006 and clinical trials being carried out in 2007. DelSite's research staff continues to advance the development of our platform technology for nasal delivery of vaccines and therapeutics. Development of our GelVac(TM) technology has been enhanced by progress with our avian influenza vaccine program and our recent collaboration agreement with Invitrogen will further development. DelSite scientists recently presented data on the GelVac(TM) vaccine delivery system at the World Vaccine Congress in Washington, D.C. in March and at the Biotechnology Industry Organization Annual International Convention in Chicago in April."

Conference Call Today

Investors are invited to listen to today's conference call at 4:30 p.m. Eastern, 3:30 p.m. Central, by dialing 800-901-5248 in the US or 617-786-4512 internationally. The pass code is 93868132. The call is also being web cast by CCBN and can be accessed at Carrington's web site at http://www.carringtonlabs.com . A replay of the call will be available a few hours after the call concludes by dialing 888-286-8010 in the US and 617-801-6888 internationally. The pass code for the replay is 23499632.

The web cast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at http://www.fulldisclosure.com , Thomson/CCBN's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (http://www.streetevents.com ).

About Carrington

Carrington Laboratories, Inc. is an ISO 9001-certified, research-based biopharmaceutical company currently utilizing naturally-occurring complex carbohydrates to:

* manufacture and market products for mucositis, radiation dermatitis, wound and oral care; * manufacture and market the nutraceutical and cosmetic raw materials Manapol(R) and Hydrapol(TM); and, * manufacture and market consumer products under various brands. About DelSite

DelSite Biotechnologies, Inc. was formed based on discoveries at Carrington Laboratories, Inc., and is a wholly-owned subsidiary of Carrington. DelSite Biotechnologies is a drug delivery and biotechnology company established to provide the pharmaceutical and biotechnology industries with novel delivery solutions for vaccines and therapeutic agents.

Non-GAAP Financial Information

This press release contains the non-generally accepted accounting principle financial measure of Pro forma profit and loss which is defined as net income or loss excluding net DelSite expenses. The amounts included in the calculation of this measure are computed in accordance with generally accepted accounting principles (GAAP). We believe this measure is useful to investors because it may provide users of this financial information with a meaningful measure of the Company's profitability before funding the research and development activities of its DelSite subsidiary. Pro forma profit and loss is not a measure of financial performance under GAAP and thus should not be considered in isolation. Furthermore, it should not be seen as a substitute for metrics prepared in accordance with GAAP. Our reconciliation of this measure to net income or loss is included in the following tables.

This press release also contains the non-generally accepted accounting principle financial measure of Medical Services revenue excluding royalties, which is defined as total Medical Services division revenues less licensing royalties. The amounts included in the calculation of this measure are computed in accordance with generally accepted accounting principles (GAAP). We believe this measure is useful to investors because it may provide users of this financial information with a meaningful measure of the Company's sales growth as the result of increased shipments without the impact of the decrease in contractual royalties. This measure is not a measure of financial performance under GAAP and thus should not be considered in isolation. Furthermore, it should not be seen as a substitute for metrics prepared in accordance with GAAP. Our reconciliation of this measure to GAAP revenues is included in the following tables.

This press release also contains the non-generally accepted accounting principle financial measure of Consumer Services revenue excluding bulk raw material sales, which is defined as total revenues for the Consumer Services Division less sales of bulk raw materials. The amounts included in the calculation of this measure are computed in accordance with generally accepted accounting principles (GAAP). We believe this measure is useful to investors because it may provide users of this financial information with a meaningful measure of the Company's growth in specialty manufacturing products and finished consumer goods sales. This measure is not a measure of financial performance under GAAP and thus should not be considered in isolation. Furthermore, it should not be seen as a substitute for metrics prepared in accordance with GAAP. Our reconciliation of this measure to GAAP revenues is included in the following tables.

Certain statements in this release concerning Carrington may be forward- looking. Actual events will be dependent upon a number of factors and risks including, but not limited to: subsequent changes in plans by the Company's management; delays or problems in formulation, manufacturing, distribution, production and/or launch of new finished products; changes in the regulatory process; changes in market trends; and a number of other factors and risks described from time to time in the Company's filings with the Securities & Exchange Commission, including the Form 10-K, filed on March 31, 2006.

Carrington, Manapol, AloeCeuticals, Hydrapol, GelSite, GelVac and Acemannan Hydrogel are trademarks, registered trademarks or service marks of Carrington Laboratories, Inc., in the United States and other countries. All other trademarks or service marks contained herein are the properties of their respective owners.

CARRINGTON LABORATORIES, INC. Condensed Consolidated Statements of Operations (unaudited) (in thousands, except per share amounts) Three Months Ended March 31, 2006 2005 Revenue: Medical Services $ 2,111 $ 2,055 Royalty income 104 617 Medical Services, total 2,215 2,672 Consumer Services 4,929 5,200 Grant income, DelSite 343 310 7,487 8,182 Cost and expenses: Cost of product sales 5,600 4,872 Selling, general and administrative 1,850 1,841 Research and development 203 264 Research and development-DelSite 1,156 1,320 Other income (7) (80) Interest expense, net 217 43 Net loss before income taxes (1,532) (78) Provision for income taxes --- 2 Net loss $(1,532) $ (80) Net loss per common share - basic and diluted $ (0.14) $ (0.01) Weighted average shares outstanding - basic 10,810 10,731 Weighted average shares outstanding - diluted 10,810 10,731 Reconciliation of Non-GAAP Financial Measures: Net loss: $(1,532) $ (80) Less: DelSite grant income 343 310 Plus: DelSite expenses 1,156 1,320 Pro forma profit (loss) before DelSite $ (719) $ 930 Medical Services revenue: $ 2,215 $ 2,672 Less: royalties 104 617 Medical Services revenue excluding royalties $ 2,111 $ 2,055 Consumer Services revenue: $ 4,929 $ 5,200 Less: bulk raw material sales 2,454 3,905 Consumer Services revenue excluding bulk raw material sales $ 2,475 $ 1,295 CARRINGTON LABORATORIES, INC Condensed Consolidated Balance Sheets (in thousands) March 31, December 31, 2006 2005 (unaudited) (audited) ASSETS: Current Assets: Cash and cash equivalents $ 4,454 $ 6,262 Accounts receivable, net 3,162 2,679 Inventories, net 4,919 4,705 Prepaid expenses 540 392 Total current assets 13,075 14,038 Property, plant and equipment, net 6,667 6,755 Customer relationships, net 344 392 Other assets, net 732 804 Total assets $20,818 $21,989 LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Line of credit $ 1,812 $ 1,812 Accounts payable 2,321 2,092 Accrued liabilities 1,794 1,585 Current portion of long-term debt and capital lease obligations 175 188 Deferred revenue 1,220 1,386 Total current liabilities 7,322 7,063 Long-term debt and capital lease obligations, net of debt discount 3,479 3,418 Commitments and contingencies --- --- Shareholders' Equity: Common stock 108 108 Capital in excess of par value 57,226 57,185 Accumulated deficit (47,314) (45,782) Treasury stock at cost (3) (3) Total shareholders' equity 10,017 11,508 Total liabilities and shareholders' equity $20,818 $21,989

Carrington Laboratories, Inc.

CONTACT: Carlton E. Turner, Chief Executive Officer of CarringtonLaboratories, Inc., +1-972-518-1300

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