Castelle Reports Strong Financial Results for Second Quarter and First Half of 2005.MORGAN Morgan, American family of financiers and philanthropists. Junius Spencer Morgan, 1813–90, b. West Springfield, Mass., prospered at investment banking. HILL, Calif. -- Castelle(R) (Nasdaq:CSTL CSTL Chemical Science and Technology Laboratory CSTL Clinical Study Team Leader ), a leader in 'all-in-one' network fax solutions for the business and enterprise markets, today announced strong financial and operational results for the second quarter and six months ended June June: see month. 30, 2005. Sales for the second quarter of 2005 totaled $2.85 million, up 6% from $2.69 million in the second quarter of 2004. This represents the Company's highest quarterly sales figure since the fourth quarter of 2000. For the first six months of 2005, sales were $5.44 million, an increase of 4% from $5.23 million in the first half of 2004. Net income for the second quarter of 2005 was $316,000, or $0.07 per fully 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 133% from $146,000, or $0.03 per fully diluted share, in the second quarter of 2004. Results for the second quarter of 2004 included a provision for income taxes of $121,000. There was no income tax provision in the second quarter of 2005. Net income in the second quarter of 2005 was negatively impacted by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $80,000, or $0.02 per fully diluted share, as a result of accounting and legal fees related to the restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of the Company's historical financial statements included in its December December: see month. 31, 2004 Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . For the six months ended June 30, 2005, net income totaled $451,000, or $0.10 per fully diluted share, up 67% from $275,000, or $0.06 per fully diluted share, in the first half of 2004. The 2004 results included a provision for income taxes of $219,000. There was no income tax provision for the six months ended June 30, 2005. Net income for the first six months of 2005 was negatively impacted by approximately $240,000, or $0.05 per fully diluted share, as a result of accounting and legal fees related to the Company's restatement of historical financial statements referred to above. Castelle's cash position reached the highest level since the second quarter of 1998. As of June 30, 2005, cash and cash equivalents totaled $6.35 million, compared to $5.91 million as of March 31, 2005 and $5.60 million as of December 31, 2004. The Company continues to operate with virtually no 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. . "The rise in sales and earnings in the second quarter of 2005 represented one of Castelle's strongest quarters in recent years as reflected by continued and increasing demand for our products and services worldwide," said 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. "As indicated by our financial results, we are successfully executing a major product transition by introducing our FaxPress Premier(TM) enterprise network fax servers to the market while simultaneously phasing out our print server and storage server product lines." During the second quarter, Castelle released FaxPress Premier 4.0 software, which includes a customizable navigation pane A rectangular area within an on-screen window that contains information for the user. A window may have many panes. See menu pane. , one-click "Drag & Drop" features, and expanded routing capabilities. The Company also was named to the Fortune Small Business 100 List of America's fastest growing small companies. In the past three months, Castelle has exhibited its products at major expositions in Tokyo Tokyo (tō`kēō), city (1990 pop. 8,163,573), capital of Japan and of Tokyo prefecture, E central Honshu, at the head of Tokyo Bay. , Amsterdam Amsterdam, city, Netherlands Amsterdam (ăm`stərdăm', Dutch ämstərdäm`), city (1994 pop. 724,096), constitutional capital and largest city of the Kingdom of the Netherlands, North Holland prov. , Boston Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. , Philadelphia Philadelphia, ancient cities Philadelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. and Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and , and has been named a "Xerox (Xerox Corporation, Stamford, CT, www.xerox.com) A major manufacturer of analog and digital copy machines, computer printers and document management systems. Corporate headquarters are in Stamford, CT, while manufacturing and marketing is in Rochester, NY. Alliance Partner" in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. 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). .
About Castelle Castelle, a market leader in 'all-in-one' network fax solutions for business and enterprise, develops office automation systems that allow organizations to easily implement faxing 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(TM) and FaxPress Premier(TM), 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. 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, and online retailers. 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(TM) and FaxPress Premier(TM) are trademarks of Castelle. All other trademarks are the property of their respective owners. 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 may contain forward-looking statements, including but not limited to references to sales growth and our ability to successfully expand our product offering 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, our ability to contain services costs for our independent auditors Independent Auditor An external auditor with a certified public accounting designation that qualifies him or her to provide an auditor's report. Notes: These auditors aren't affiliated with the company being audited. 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 Earnings
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
------------ --------- --------- ----------
Sales:
Products $ 2,116 $ 2,090 $ 4,009 $ 4,102
Services 730 601 1,431 1,128
------------ --------- --------- ----------
Total net sales 2,846 2,691 5,440 5,230
Cost of sales:
Products 674 592 1,216 1,231
Services 258 216 528 414
------------ --------- --------- ----------
Total cost of sales 932 808 1,744 1,645
------------ --------- --------- ----------
Gross profit 1,914 1,883 3,696 3,585
------------ --------- --------- ----------
Operating expenses:
Research and development 418 428 857 842
Sales and marketing 618 675 1,216 1,270
General and
administrative 582 508 1,217 973
------------ --------- --------- ----------
Total operating
expenses 1,618 1,611 3,290 3,085
------------ --------- --------- ----------
Operating income 296 272 406 500
Other income/(expense), net 20 (5) 45 (6)
------------ --------- --------- ----------
Income before income taxes 316 267 451 494
Provision for income taxes -- 121 -- 219
------------ --------- --------- ----------
Net income $ 316 $ 146 $ 451 $ 275
============ ========= ========= ==========
Net income per
common share:
Basic $ 0.08 $ 0.04 $ 0.12 $ 0.08
============ ========= ========= ==========
Diluted $ 0.07 $ 0.03 $ 0.10 $ 0.06
============ ========= ========= ==========
Shares used in per share
calculation:
Basic 3,871 3,573 3,843 3,536
============ ========= ========= ==========
Diluted 4,460 4,428 4,463 4,439
============ ========= ========= ==========
As a percentage of net
sales:
Sales:
Products 74.3% 77.7% 73.7% 78.4%
Services 25.7% 22.3% 26.3% 21.6%
------------ --------- --------- ----------
Total net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales:
Products 23.7% 22.0% 22.4% 23.6%
Services 9.0% 8.0% 9.7% 7.9%
------------ --------- --------- ----------
Total cost of sales 32.7% 30.0% 32.1% 31.5%
------------ --------- --------- ----------
Gross profit 67.3% 70.0% 67.9% 68.5%
------------ --------- --------- ----------
Operating expenses:
Research and development 14.7% 15.9% 15.8% 16.1%
Sales and marketing 21.7% 25.1% 22.3% 24.3%
General and
administrative 20.5% 18.9% 22.3% 18.6%
------------ --------- --------- ----------
Total operating
expenses 56.9% 59.9% 60.4% 59.0%
------------ --------- --------- ----------
Operating income 10.4% 10.1% 7.5% 9.5%
Other income/(expense), net 0.7% (0.2%) 0.8% (0.1%)
------------ --------- --------- ----------
Income before income taxes 11.1% 9.9% 8.3% 9.4%
Provision for income taxes 0.0% 4.5% -- 4.1%
------------ --------- --------- ----------
Net income 11.1% 5.4% 8.3% 5.3%
============ ========= ========= ==========
CASTELLE
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)
June 30, 2005 December 31, 2004
------------------- -----------------
Assets:
Current Assets:
Cash and cash equivalents $ 6,350 $ 5,599
Accounts receivable, net 723 857
Inventories 1,553 1,785
Prepaid Expenses and other
current assets 178 130
Deferred Taxes 231 231
------------------- ----------------
Total current assets 9,035 8,602
Property and equipment, net 203 203
Other non-current assets 46 50
Deferred taxes, non-current 1,292 1,292
------------------- ----------------
Total assets $ 10,576 $ 10,147
=================== ================
Liabilities and Shareholders'
Equity
Current liabilities:
Long-term debt, current
portion $ 15 $ 15
Accounts payable 277 511
Accrued liabilities 1,098 1,073
Deferred revenue 1,334 1,253
------------------- ----------------
Total current
liabilities 2,724 2,852
Long-term debt, net of
current portion 5 14
------------------- ----------------
Total liabilities 2,729 2,866
Shareholders' equity 7,847 7,281
------------------- ----------------
Total liabilities and
shareholder's equity $ 10,576 $ 10,147
=================== ================
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