Castelle Reports Positive Third Quarter 2002 Results; Company Reports Fifth Consecutive Quarter of Profitability; Sales at Seven Quarter High.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)--Oct. 24, 2002 Castelle (Nasdaq:CSTL CSTL Chemical Science and Technology Laboratory CSTL Clinical Study Team Leader )
-- Net Income of $228,000 or $0.05 per diluted share
-- Fifth Consecutive Quarter of Profitability
-- Sales reach $2.54 Million, a Seven Quarter High
-- Cash at approximately $1.00 per share
-- Stock Buyback Program to start Monday
Castelle (Nasdaq:CSTL), 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 Company's third fiscal quarter ended September September: see month. 30, 2002. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the third quarter of fiscal 2002 were $2.54 million, compared to $2.50 million for the same period in 2001, and up sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen from $2.26 million in the second quarter of 2002. Sales in the quarter were the highest in the past seven quarters, since the fourth quarter of 2000. Net income for the third quarter of 2002 was $228,000, or $0.05 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, up from a net income of $53,000, or $0.01 per diluted share, for the same period in 2001. Sequentially, third quarter 2002 net income was up from $62,000, or $0.01 per diluted share, in the second quarter of 2002. The Company has now reported a profit in each of the past five quarters. Net sales for the first nine months of 2002 were $7.17 million, compared to $7.10 million for the same nine-month period of 2001. Net income for the nine-month period in 2002 was $322,000 or $0.07 per diluted share, compared to a net loss of $623,000, or $0.13 per diluted share, for the same period in 2001. The loss for the first nine months of 2001 included non-recurring charges of $243,000, or $0.05 per diluted share. Scott C. McDonald, President & 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. , stated, "We are extremely pleased with our third quarter financial results as they point to the focus the Company has had over the past several quarters on improving operational efficiencies, cost improvements and most importantly Adv. 1. most importantly - above and beyond all other consideration; "above all, you must be independent" above all, most especially on increasing our top-line sales growth. The consistent profits and rising sales show the impact of staying focused on our primary market niche, Fax Network Server Appliances A self-contained computer system specialized for network use. Its applications are pre-installed, and access to setup and configuration is via a Web browser. Server appliances may provide a single application or several applications; for example, a single device may provide file server, . The improved profit results are primarily due to the sales growth in the third quarter and demonstrate the continued strong demand for Castelle products." Company Strengthens Balance Sheet McDonald also noted that the Company continues to have a very strong balance sheet with cash and cash equivalents of $4.84 million, or $1.00 per diluted share, an increase from $4.31 million, or $0.90 per diluted share, at the end of the second quarter of 2002. "We believe long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. shareholder value must be built on consistent profitability and financial soundness. Castelle has been delivering on both counts over the past five quarters, a continuation of the work by Donald Donald (Domnall, Domhnall, Dumhnuil, Dónall) is an anglicized version of a Scottish or Irish Gaelic personal name, containing the elements dumno "world" and val "rule", viz. "ruler of the world". Compare Dumnorix. L. Rich, our former CEO and current Chairman of the Board." Company Reports on Status of Stock Buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. Program McDonald provided an update on the status of the Company's Stock Buyback Program, which was announced on October October: see month. 16, 2002. "We are commencing our Stock Buyback Program on Monday Monday: see week. , October 28, 2002. As previously noted, under current market conditions, we have an opportunity to buy back shares of Castelle stock at what we believe are attractive levels. We believe repurchasing shares at current market prices is a productive use of capital that will help increase earnings per share," concluded McDonald. About Castelle Castelle 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 . It is a market leader in fax solutions for small to medium sized workgroups See workgroup, workgroup-based network and Windows for Workgroups. . Castelle's FaxPress fax servers 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, Calif. Its products are utilized by Fortune 1000 companies as well as small to medium-sized businesses and are available through a worldwide network of distributors, value-added resellers A value-added reseller (VAR) is a company that adds some feature(s) to an existing product(s), then resells it (usually to end-users) as an integrated product or complete "turn-key" solution. , systems integrators An individual or organization that builds systems from a variety of diverse components. With increasing complexity of technology, more customers want complete solutions to information problems, requiring hardware, software and networking expertise in a multivendor environment. , e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. 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 lists, 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 (see contact information below). Note to Editors: FaxPress(TM) is a trademark, 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 the demand for Castelle products and our stock buyback program. 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. , fluctuations in our stock price and the potential delisting Delisting When the stock of a company is removed from a stock exchange. Notes: Reasons for delisting include violating regulations and/or failure to meet financial specifications set out by the stock exchange. of our stock by the NASDAQ SmallCap Market. 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 per share data)
(unaudited)
Three months ended Nine months ended
9/30/2002 9/28/2001 9/30/2002 9/28/2001
--------- --------- --------- ---------
Net sales $2,543 $2,500 $7,172 $7,106
Cost of sales 735 770 2,181 2,310
--------- --------- --------- ---------
Gross profit 1,808 1,730 4,991 4,796
Operating expenses:
Research and development 312 470 1,074 1,336
Sales and marketing 799 860 2,342 2,912
General and administrative 475 353 1,329 1,052
Restructuring charges - 5 (40) 243
--------- --------- --------- ---------
Total operating expenses 1,586 1,688 4,705 5,543
Income/(Loss) from
operations 222 42 286 (747)
Interest and other income,
net 6 11 36 124
--------- --------- --------- ---------
Income/(Loss) before
income taxes 228 53 322 (623)
Provision for income taxes - - - -
--------- --------- --------- ---------
Net income/(loss) $228 $53 $322 $(623)
========= ========= ========= =========
Net income/(loss) per share
-- basic $0.05 $0.01 $0.07 $(0.13)
========= ========= ========= =========
Shares used in per share
calculation -- basic 4,755 4,745 4,750 4,743
========= ========= ========= =========
Net income/(loss) per share
-- diluted $0.05 $0.01 $0.07 $(0.13)
========= ========= ========= =========
Shares used in per share
calculation - diluted 4,787 4,782 4,778 4,742
========= ========= ========= =========
As a percentage of net
sales:
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 28.9% 30.1% 30.4% 31.7%
--------- --------- --------- ---------
Gross profit 71.1% 69.9% 69.6% 68.3%
Operating expenses:
Research and development 12.3% 18.4% 15.0% 18.4%
Sales and marketing 31.4% 35.9% 32.7% 42.4%
General and administrative 18.7% 13.8% 18.5% 14.5%
Restructuring charges - 0.2% (0.6%) 3.3%
--------- --------- --------- ---------
Total operating expenses 62.4% 68.3% 65.6% 78.6%
Income/(Loss) from
operations 8.7% 1.6% 4.0% (10.3%)
Interest and other income,
net 0.3% 0.5% 0.5% 1.7%
--------- --------- --------- ---------
Income/(Loss) before
income taxes 9.0% 2.1% 4.5% (8.6%)
Provision for income taxes 0.0% 0.0% 0.0% 0.0%
--------- --------- --------- ---------
Net income/(loss) 9.0% 2.1% 4.5% (8.6%)
========= ========= ========= =========
CASTELLE
Condensed Consolidated Balance Sheets
(in thousands)
September December
30, 2002 31, 2001
(unaudited) (audited)
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 4,838 $ 4,568
Accounts receivable, net 611 680
Inventories, net 993 926
Prepaid and other assets 174 130
---------- ----------
Total current assets 6,616 6,304
Property & equipment, net 473 598
Other assets 108 108
---------- ----------
Total assets $ 7,197 $ 7,010
========== ==========
Liabilities & shareholders' equity
Current liabilities:
Long-term debt, current portion $ 19 $ 18
Accounts payable 223 280
Accrued liabilities 2,378 2,446
---------- ----------
Total current liabilities 2,620 2,744
Long-term debt, net of current portion 50 64
---------- ----------
Total liabilities 2,670 2,808
Shareholders' equity 4,527 4,202
---------- ----------
Total liabilities & shareholders' equity $ 7,197 $ 7,010
========== ==========
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