Castle Dental Centers Reports 81% Increase in Quarterly Revenues; Announces Acquisition of Two Practices in Los Angeles.

HOUSTON--(BUSINESS WIRE)--Aug. 5, 1998--Castle Dental Centers, Inc. (Nasdaq/NM: CASL) today announced that revenues of affiliated dental practices for the second quarter ended June 30, 1998, rose 81% to a quarterly record of $19.7 million compared with $10.9 million for the second quarter of 1997. Net income for the quarter increased to $781,000 compared with a net loss of $101,000 for the prior-year period. Diluted earnings per share increased to $0.12 on 6.7 million weighted average shares outstanding compared with a loss per share of $0.03 on 3.3 million weighted average shares outstanding for the second quarter of 1997.

For the six months ended June 30, 1998, revenues of affiliated dental practices increased 61% to a record $34.2 million from $21.3 million for the comparable period in 1997. Net income for the first half increased to $1.4 million from a loss of $80,000 for the prior-year period. Diluted earnings per share increased to $0.22 on 6.5 million weighted average shares outstanding compared with a loss per share of $0.02 on 3.3 million weighted average shares outstanding for the first half of 1997.

The increase in weighted average shares outstanding for both periods resulted primarily from the Company's initial public offering in September 1997 in which 2.8 million shares were issued.

"We're very pleased to report record revenue and earnings growth in the second quarter," said Jack H. Castle, Jr., chairman and chief executive officer. "Our performance this quarter includes the contribution of Dental World, Inc. and Dental Consulting Services, which contributed, in aggregate, approximately 20% to total revenues. We also opened three de novo dental centers during the quarter, two in Houston and one in Nashville. So far this year we have opened five de novo centers, all of which are operating well ahead of our expectations. We're on target with our plans to open a total of 12 new centers this year."

Today, the Company also announced the acquisition of two dental practices in the Los Angeles area, consisting of three dental centers in Torrance, Lawndale and Canoga Park. These practices had patient revenues of $1.3 million in the past 12 months.

On July 16, 1998, Castle announced the acquisition of five dental centers in Florida with annual revenues of approximately $3.4 million. The acquisitions included three dental centers in the Sarasota area, expanding Castle's network on the west coast of Florida to 14 offices, and two centers in North Fort Lauderdale and Delray Beach, marking Castle's initial entry into the rapidly growing east coast Florida market.

Castle added, "The Los Angeles acquisitions we are announcing today represent our first fill-in expansion in this high-growth market since we acquired Dental Consulting Services. The Sarasota dental centers extend our Tampa/Clearwater network and will allow us to further leverage our advertising and administrative costs in that market. The Fort Lauderdale-area centers provide our initial entry into one of the most densely populated regions of the country, and we see significant opportunities for growth in this dynamic market."

In 1998 Castle has acquired 19 dental centers with more than $21 million in annual patient revenues. "We will continue to expand our network of dental practices through new offices and the acquisition of attractive dental practices that solidify our market share position in existing markets, and we will continue to be opportunistic for platform acquisitions that enable us to enter attractive new markets," Castle said.

Castle Dental Centers, Inc. develops, manages and operates integrated dental networks through contractual affiliations with general, orthodontic and multi-specialty dental practices in the U.S. Including the recently announced acquisitions, Castle manages 66 dental centers with 170 affiliated dentists in Texas, Florida, Tennessee and California with annualized patient revenues of approximately $85 million.

Information contained in this press release, other than historical information, may be considered forward-looking in nature and is subject to various risks, uncertainties and assumptions. Among the key factors that may have a direct bearing on the operating results, performance or condition of the Company are fluctuations in the economy, the degree and nature of competition and the demand for the Company's services, changes in laws and regulations affecting the Company's business, the Company's inability at any time to complete acquisitions and integrate the operations of acquired businesses, and numerous other factors discussed in Castle Dental's filings with the Securities and Exchange Commission. -0-

                      CASTLE DENTAL CENTERS, INC.
                 Consolidated Statements of Operations
                 (In thousands, except per share data)

                                  Three Months Ended Six Months Ended
                                       June 30,          June 30,
                                   ----------------  ----------------
                                    1998     1997     1998     1997
Patient revenues of affiliated     -------  -------  -------  -------
 dental practices                  $19,679  $10,871  $34,220  $21,327
Amounts retained by affiliated
 dental practices                    4,538    2,424    8,285    4,911
                                   -------  -------  -------  -------

  Net revenues                      15,141    8,447   25,935   16,416
                                   -------  -------  -------  -------

Expenses:
  Clinical salaries                  4,447    2,460    7,638    4,824
  Dental supplies and laboratory
   fees                              1,948    1,056    3,266    1,967
  Rent and lease expense               996      621    1,755    1,258
  Advertising and marketing            800      518    1,394    1,031
  Depreciation and amortization        987      536    1,608      963
  Other operating expenses           1,880      928    3,257    1,784
  General and administrative         2,370    1,589    4,229    3,047
                                   -------  -------  -------  -------
    Total expenses                  13,428    7,708   23,147   14,874
                                   -------  -------  -------  -------

Operating income                     1,713      739    2,788    1,542

Interest expense                       493      905      617    1,683
Minority interest                       58       --       58       --
Other income                            (3)      (3)     (26)     (12)
                                   -------  -------  -------  -------

Income before income taxes           1,165     (163)   2,139     (129)
Provision for income taxes             384      (62)     696      (49)
                                   -------  -------  -------  -------

Net income (loss)                  $   781  $  (101) $ 1,443  $   (80)

Preferred stock accretion               --     (159)      --     (309)
                                   -------  -------  -------  -------

Income (loss) attributable to
 common stock                      $   781  $  (260) $ 1,443  $  (389)
                                   =======  =======  =======  =======

Income (loss) per common share: (1)
  Basic                            $  0.12  $ (0.03) $  0.22  $ (0.02)
                                   =======  =======  =======  =======
  Diluted                          $  0.12  $ (0.03) $  0.22  $ (0.02)
                                   =======  =======  =======  =======

Weighted average common and common
 equivalent shares outstanding:
    Basic                            6,660    3,308    6,448    3,308
                                   =======  =======  =======  =======
    Diluted                          6,704    3,308    6,461    3,308
                                   =======  =======  =======  =======

(1)  Per share information differs from loss attributable to common
     stock divided by weighted average number of common and common
     equivalent shares outstanding because accretion of the preferred
     stock is added back to the loss attributable to common stock
     under the if-converted method of arriving at common and common
     equivalent shares outstanding.



    CONTACT:  Castle Dental Centers Inc., Houston
               John M. Slack, 713/479-8264