Castelle Reports Multi-Year Highs in Sales and Net Income for Fourth Quarter and Full Year 2003.Business Editors/High-Tech Writers MORGAN Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. HILL, Calif.--(BUSINESS WIRE)--Feb. 13, 2004 New FaxPress Premier(TM) Network Fax Servers Expected to Contribute to Sales Growth in 2004 -- Fourth quarter sales reach $2.64 million, highest since Q4 2000 -- Company records a non-cash tax benefit of $526,000, or $0.12 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share in fourth quarter -- Excluding non-cash tax benefit, pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income for fourth quarter increases approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 17% from the year-ago quarter to $395,000, or $0.09 per diluted share -- 2003 full year sales increase nearly 5% from 2002 to $10.21 million, highest since 2000 -- Excluding non-cash tax benefit, pro forma net income for full year rises approximately 68% from prior year to $1.11 million, or $0.26 per diluted share -- Balance sheet continues to strengthen with cash at $4.61 million, up from $3.46 million at end of 2002; Company remains virtually free of long term debt Castelle (Nasdaq:CSTL CSTL Chemical Science and Technology Laboratory CSTL Clinical Study Team Leader ), a leading provider of fax solutions for Fortune 1000 companies and small to medium-sized Me´di`um-sized` a. 1. Having a medium size; as, a medium-sized man s>. Adj. 1. medium-sized - intermediate in size medium-size, moderate-size, moderate-sized businesses, today announced financial results for the fourth quarter and full year ended December December: see month. 31, 2003. The Company reported that sales and net income, on both a quarterly and annual basis, rose to levels not seen since 2000 and 1996, respectively. For the fourth quarter of 2003 sales totaled $2.64 million, up approximately 2% from $2.59 million in the fourth quarter of 2002. This represents Castelle's highest quarterly sales since $3.24 million reported in the fourth quarter of 2000. On a sequential One after the other in some consecutive order such as by name or number. basis, fourth quarter 2003 sales were up 2.7% from $2.57 million in the third quarter. For the full year 2003, sales reached $10.21 million, up 4.6% from $9.76 million in 2002. Net income for the fourth quarter of 2003 was $921,000, or $0.21 per diluted share, as determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), representing an increase of approximately 173% from net income of $337,000, or $0.08 per diluted share in the same period of 2002. Fourth quarter net income included a non-cash tax benefit of $526,000, or $0.12 per diluted share. Excluding this non-cash benefit, pro forma net income for the fourth quarter of 2003 was $395,000, or $0.09 per diluted share. Net income for 2003 was $1.63 million, or $0.39 per diluted share on a GAAP basis, representing an increase of 148% over net income of $659,000, or $0.14 per diluted share in 2002. Excluding the non-cash tax benefit, pro forma net income for 2003 was $1.11 million, or $0.26 per diluted share, representing an increase of 68% over the net income of $659,000, or $0.14 per diluted share, in 2002. Scott McDonald Scott Douglas McDonald (born 21 August 1983, Melbourne, Australia) is a professional football (soccer) player who currently plays in Scotland for Celtic as a striker. After a £400,000 bid from Rangers was rejected in January 2007,[1] , President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Castelle, said, "The past year was a period of transition for Castelle, marked by significant financial improvements as well as reinvestments in engineering and the subsequent introduction of FaxPress Premier network fax servers. Our fourth quarter and full year results for 2003 are a reflection of how the Company has managed the change while continuing to grow. Operational success can be seen in our net income and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. , which have risen significantly faster than sales due to cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. and an emphasis on profit margin." As of December 31, 2003, cash and cash equivalents increased to $4.61 million, up from $3.46 million at the end of 2002. Cash and cash equivalents at the end of 2003 totaled $1.35 per outstanding share. Castelle remains virtually free of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. at the end of 2003. FaxPress Premier Expected to Contribute to Growth in 2004 Castelle expects the recently introduced FaxPress Premier network fax servers for the enterprise market to contribute to sales growth in 2004. The Company bases this expectation on the initial market acceptance of FaxPress Premier following product launches in the U.S. and Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). in the third and fourth quarters of 2003. FaxPress Premier is
Castelle's most significant product introduction in recent years,
taking the Company's fax solution to an entirely new level by
addressing the needs of customers looking for Looking forIn the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. enterprise-level capabilities. Its patent-pending technology builds on Castelle's existing FaxPress hardware and software features, offering advanced network capabilities such as integrated file storage, embedded Inserted into. See embedded system. email gateways and a secure web interface. FaxPress Premier doubles the number of fax channels available in Castelle's analog fax server line, and adds T-1 and ISDN ISDN in full Integrated Services Digital Network Digital telecommunications network that operates over standard copper telephone wires or other media. support for customers in a digital environment. To learn more about FaxPress Premier, visit Castelle's web site at www.castelle.com/products/premier. Mr. McDonald said, "The initial response to FaxPress Premier, from new as well as existing customers, is evidence that our new enterprise-level fax server may become a catalyst catalyst, substance that can cause a change in the rate of a chemical reaction without itself being consumed in the reaction; the changing of the reaction rate by use of a catalyst is called catalysis. for Castelle sales growth. At the same time, we anticipate our existing core products to maintain sufficient sales volume, which together with FaxPress Premier would lead to continued financial and operational success in 2004 and beyond." Use of Pro Forma Operating Results Since the non-cash tax benefit recorded by the Company in the fourth quarter, which is not considered indicative indicative: see mood. of Castelle's core operating results, Castelle will begin using certain non-GAAP measures to help clarify (company) Clarify - A software vendor, specialising in Customer Relationship Management software. Nortel Networks sold Clarify to Amdocs in 2002. http://amdocsclarify.com/. the overall understanding of Castelle's current operational performance, its prospects for the future and to provide a more consistent basis for comparison between quarters. Accordingly, pro forma net income and per diluted share for the fourth quarter and 2003 excluded the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact of a $526,000, or $0.12 per diluted share, non-cash tax benefit resulting from the Company's release of a portion of its tax valuation allowance. Prior to the fourth quarter of 2003, Castelle had not reported significant income tax expenses because it had utilized available Net Operating Loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. (NOL NOL - Never Offline ) and tax credit carryforwards Carryforwards Tax losses allowed to be applied to offset future income in some specified number of future years. in the determination of its GAAP operating results. For financial reporting purposes, these NOLs were fully reserved by a valuation allowance due to uncertainty surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. the likelihood of their realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. . Due to the Company's continued profitability over the past ten quarters and a determination that it is likely that certain future tax benefits will be realized as required by GAAP, a portion of the deferred tax assets were recognized in the fourth quarter of 2003. While the Company expects to provide for income taxes at an effective tax rate of 40% commencing in the first quarter of 2004, as of December 31, 2003, the Company had $12.9 million of NOLs available to offset future taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . Accordingly, the Company does not expect to utilize significant amounts of cash for income tax payments until these NOLs have been utilized. The reconciliation of the GAAP statement of operations See Income statement. amounts to the respective pro forma figures, for the three and twelve months ended December 31, 2003, is set forth at the end of this press release. About Castelle Castelle, a market leader in fax solutions for small to medium-sized workgroups See workgroup, workgroup-based network and Windows for Workgroups. , develops office automation systems that allow organizations to easily implement faxing and printing over local area networks and the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . Castelle's network fax servers, FaxPress and FaxPress Premier, provide a simple way to integrate fax with email, desktop and back-end (programming) back-end - Any software performing either the final stage in a process, or a task not apparent to the user. A common usage is in a compiler. A compiler's back-end generates machine language and performs optimisations specific to the machine's architecture. applications. The Company also manufactures LANpress print servers, which enable users to locate printers anywhere on the network. Castelle products are designed to be easy to use and maintain, and provide an economical way for companies to share resources over the network. Castelle was founded in 1987 and is headquartered in Morgan Hill, California Morgan Hill (IPA: /ˈmɔrgɨn ˈhɪl/) is a city located in the southern part of Santa Clara County, California, USA. . Its products are available through a worldwide network of distributors, resellers, online retailers, and the Castelle Online Store. Visit Castelle online at www.castelle.com. If you would like to be added to Castelle's investor email list, please contact Karin Karin is a common feminine given name in various Germanic languages (geographically including Germany, Scandinavia, and Holland), Japanese, and in some French-speaking areas. Smith at ksmith@castelle.com. FaxPress Premier(TM) and FaxPress(TM) are trademarks; and LANPress(R) is a registered trademark of Castelle. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking statements including references to demand for Castelle products, sales growth and our ability to control costs, increase productivity and remain profitable. These statements are subject to risks and uncertainties, including but not limited to the impact on our results from fluctuations in demand for our products, introduction of new products by our competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. , the timely development, acceptance and pricing of new products, the effectiveness of our cost control and productivity improvement procedures and general economic conditions as they affect the Company's customers. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements as contained in our reports to the Securities and Exchange Commission, including our Forms 10-K and 10-Q. The Company assumes no obligation to update the forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information.
CASTELLE
Condensed Consolidated Statements of Operations
(in thousands, except percentages and per share data)
Three months ended Twelve months ended
12/31/2003 12/31/2002 12/31/2003 12/31/2002
----------- ----------- ----------- -----------
Net sales $2,637 $2,587 $10,214 $9,759
Cost of sales 660 655 2,485 2,836
Gross profit 1,977 1,932 7,729 6,923
Operating expenses:
Research and
development 379 309 1,590 1,383
Sales and
marketing 790 674 3,131 3,016
General and
administrative 439 614 1,902 1,943
Restructuring
charges - - - (40)
----------- ----------- ----------- -----------
Total operating
expenses 1,608 1,597 6,623 6,302
Income from
operations 369 335 1,106 621
Other
income/(expense), net 9 8 (10) 44
----------- ----------- ----------- -----------
Income before
income taxes 378 343 1,096 665
Provision (benefit) for
income taxes (543) 6 (537) 6
----------- ----------- ----------- -----------
Net income $921 $337 $1,633 $659
=========== =========== =========== ===========
Net income per common
share:
Basic $0.27 $0.09 $0.50 $0.15
=========== =========== =========== ===========
Diluted $0.21 $0.08 $0.39 $0.14
=========== =========== =========== ===========
Shares used in per
share calculation:
Basic 3,370 3,913 3,254 4,539
=========== =========== =========== ===========
Diluted 4,307 4,010 4,186 4,586
=========== =========== =========== ===========
As a percentage of net
sales:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 25.0% 25.3% 24.3% 29.1%
----------- ----------- ----------- -----------
Gross profit 75.0% 74.7% 75.7% 70.9%
Operating expenses:
Research and
development 14.4% 11.9% 15.6% 14.2%
Sales and
marketing 30.0% 26.1% 30.7% 30.9%
General and
administrative 16.6% 23.8% 18.6% 19.9%
Restructuring
charges - - - (0.5%)
----------- ----------- ----------- -----------
Total operating
expenses 61.0% 61.8% 64.9% 64.5%
Income from
operations 14.0% 12.9% 10.8% 6.4%
Other
income/(expense), net 0.3% 0.3% (0.1%) 0.4%
----------- ----------- ----------- -----------
Income before
income taxes 14.3% 13.2% 10.7% 6.8%
Provision (benefit) for
income taxes (20.6%) 0.2% (5.3%) -
----------- ----------- ----------- -----------
Net income 34.9% 13.0% 16.0% 6.8%
=========== =========== =========== ===========
CASTELLE
Pro Forma Condensed Consolidated Statements of Operations
Excluding Deferred tax asset valuation allowance reversal
(in thousands, except per share data)
Three months ended Twelve months ended
12/31/2003 12/31/2002 12/31/2003 12/31/2002
----------- ----------- ----------- -----------
Net sales $2,637 $2,587 $10,214 $9,759
Cost of sales 660 655 2,485 2,836
Gross profit 1,977 1,932 7,729 6,923
Operating expenses:
Research and
development 379 309 1,590 1,383
Sales and
marketing 790 674 3,131 3,016
General and
administrative 439 614 1,902 1,943
Restructuring
recovery - - - (40)
Total operating
expenses 1,608 1,597 6,623 6,302
Income from
operations 369 335 1,106 621
Other
income/(expenses),
net 9 8 (10) 44
----------- ----------- ----------- -----------
Income before income
taxes 378 343 1,096 665
Provision (benefit)
for income taxes (17) 6 (11) 6
----------- ----------- ----------- -----------
Net income $395 $337 $1,107 $659
=========== =========== =========== ===========
Net income per common
share:
Basic $0.12 $0.09 $0.34 $0.15
=========== =========== =========== ===========
Diluted $0.09 $0.08 $0.26 $0.14
=========== =========== =========== ===========
Shares used in per
share calculation:
Basic 3,370 3,913 3,254 4,539
=========== =========== =========== ===========
Diluted 4,307 4,010 4,186 4,586
=========== =========== =========== ===========
CASTELLE
GAAP To Pro Forma Reconciliation
(in thousands, except per share data)
Three months ended Twelve months ended
December 31, 2003 December 31, 2002
------------------------ --------------------------
Pro Pro
GAAP Excluded forma GAAP Excluded forma
------- -------- ------- -------- -------- --------
Net sales $2,637 - $2,637 $10,214 - $10,214
Cost of sales 660 - 660 2,485 - 2,485
Gross profit 1,977 - 1,977 7,729 - 7,729
Operating
expenses:
Research and
development 379 - 379 1,590 - 1,590
Sales and
marketing 790 - 790 3,131 - 3,131
General and
administrative 439 - 439 1,902 - 1,902
Total
operating
expenses 1,608 - 1,608 6,623 - 6,623
Operating
income 369 - 369 1,106 - 1,106
Other income/
(expenses), net 9 - 9 (10) - (10)
------- -------- ------- -------- -------- --------
Income before
income taxes 378 - 378 1,096 - 1,096
Provision
(benefit) for
income taxes (543) 526 (17) (537) 526 (11)
------- -------- ------- -------- -------- --------
Net income $921 ($526) $395 $1,633 ($526) $1,107
======= ======== ======= ======== ======== ========
Net income per
common share:
Basic $0.27 ($0.15) $0.12 $0.50 ($0.16) $0.34
======= ======== ======= ======== ======== ========
Diluted $0.21 ($0.12) $0.09 $0.39 ($0.13) $0.26
======= ======== ======= ======== ======== ========
Shares used in
per share
calculation:
Basic 3,370 3,370 3,370 3,254 3,254 3,254
======= ======== ======= ======== ======== ========
Diluted 4,307 4,307 4,304 4,186 4,186 4,186
======= ======== ======= ======== ======== ========
CASTELLE
Condensed Consolidated Balance Sheets
(in thousands)
December December
31, 2003 31, 2002
--------- ---------
Assets
Current assets:
Cash and cash equivalents $4,614 $3,460
Accounts receivable, net 873 444
Inventories 1,177 1,110
Prepaid and other assets 134 88
Deferred taxes 380 -
--------- ---------
Total current assets 7,178 5,102
Property, plant & equipment, net 376 425
Other assets, net 103 108
Deferred taxes 146 -
--------- ---------
Total assets $7,803 $5,635
========= =========
Liabilities & shareholders' equity
Current liabilities:
Long-term debt, current portion $16 $21
Accounts payable 314 359
Accrued liabilities 2,668 2,288
--------- ---------
Total current liabilities 2,998 2,668
Long-term debt, net of current portion 29 44
--------- ---------
Total liabilities 3,027 2,712
Shareholders' equity 4,776 2,923
--------- ---------
Total liabilities & shareholders' equity $7,803 $5,635
========= =========
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