Exhibit 99.1
FOR IMMEDIATE RELEASE | JULY 27, 2005 |
Castelle Reports Strong Financial Results for Second Quarter and First Half of 2005
MORGAN HILL, CA – July 27, 2005 – Castelle® (Nasdaq: CSTL), 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 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 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 $80,000, or $0.02 per fully diluted share, as a result of accounting and legal fees related to the restatement of the Company’s historical financial statements included in its December 31, 2004 Form 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.
“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, President and CEO of Castelle. “As indicated by our financial results, we are successfully executing a major product transition by introducing our FaxPress Premier™ enterprise network fax servers to the market while simultaneously phasing out our print server and storage server product lines.”
Exhibit 99.1
During the second quarter, Castelle released FaxPress Premier 4.0 software, which includes a customizable navigation 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, Amsterdam, Boston, Philadelphia and Florida, and has been named a “Xerox Alliance Partner” in North America and Europe.
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. Castelle's network fax servers, FaxPress™ and FaxPress Premier™, provide a simple way to integrate fax with email, desktop and back-end 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. 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 Smith at ksmith@castelle.com.
FaxPress™ and FaxPress Premier™ are trademarks of Castelle. All other trademarks are the property of their respective owners.
Forward-Looking Statements
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, 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 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 information.
Exhibit 99.1
CASTELLE | |||||||||||
Condensed Consolidated Statements of Earnings | |||||||||||
(in thousands, except per share data) | |||||||||||
(Unaudited) | |||||||||||
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| Three Months Ended |
| Six Months Ended |
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| June 30, 2005 |
| June 30, 2004 |
| June 30, 2005 |
| June 30, 2004 |
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Sales: |
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| Products |
| $ 2,116 |
| $ 2,090 |
| $ 4,009 |
| $ 4,102 |
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| Services |
| 730 |
| 601 |
| 1,431 |
| 1,128 |
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| Total net sales |
| 2,846 |
| 2,691 |
| 5,440 |
| 5,230 |
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Cost of sales: |
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| Products |
| 674 |
| 592 |
| 1,216 |
| 1,231 |
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| Services |
| 258 |
| 216 |
| 528 |
| 414 |
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| Total cost of sales |
| 932 |
| 808 |
| 1,744 |
| 1,645 |
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| Gross profit |
| 1,914 |
| 1,883 |
| 3,696 |
| 3,585 |
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Operating expenses: |
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| Research and development |
| 418 |
| 428 |
| 857 |
| 842 |
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| Sales and marketing |
| 618 |
| 675 |
| 1,216 |
| 1,270 |
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| General and administrative |
| 582 |
| 508 |
| 1,217 |
| 973 |
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| Total operating expenses |
| 1,618 |
| 1,611 |
| 3,290 |
| 3,085 |
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| Operating income |
| 296 |
| 272 |
| 406 |
| 500 |
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Other income/(expense), net |
| 20 |
| (5) |
| 45 |
| (6) |
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Income before income taxes |
| 316 |
| 267 |
| 451 |
| 494 |
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Provision for income taxes |
| -- |
| 121 |
| -- |
| 219 |
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| Net income |
| $ 316 |
| $ 146 |
| $ 451 |
| $ 275 |
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Net income per common share : |
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| Basic |
| $ 0.08 |
| $ 0.04 |
| $ 0.12 |
| $ 0.08 |
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| Diluted |
| $ 0.07 |
| $ 0.03 |
| $ 0.10 |
| $ 0.06 |
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Shares used in per share calculation: |
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| Basic |
| 3,871 |
| 3,573 |
| 3,843 |
| 3,536 |
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| Diluted |
| 4,460 |
| 4,428 |
| 4,463 |
| 4,439 |
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As a percentage of net sales: |
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Sales: |
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| Products |
| 74.3% |
| 77.7% |
| 73.7% |
| 78.4% |
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| Services |
| 25.7% |
| 22.3% |
| 26.3% |
| 21.6% |
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| Total net sales |
| 100.0% |
| 100.0% |
| 100.0% |
| 100.0% |
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Cost of sales: |
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| Products |
| 23.7% |
| 22.0% |
| 22.4% |
| 23.6% |
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| Services |
| 9.0% |
| 8.0% |
| 9.7% |
| 7.9% |
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| Total cost of sales |
| 32.7% |
| 30.0% |
| 32.1% |
| 31.5% |
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| Gross profit |
| 67.3% |
| 70.0% |
| 67.9% |
| 68.5% |
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Exhibit 99.1
Operating expenses: |
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| Research and development |
| 14.7% |
| 15.9% |
| 15.8% |
| 16.1% |
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| Sales and marketing |
| 21.7% |
| 25.1% |
| 22.3% |
| 24.3% |
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| General and administrative |
| 20.5% |
| 18.9% |
| 22.3% |
| 18.6% |
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| Total operating expenses |
| 56.9% |
| 59.9% |
| 60.4% |
| 59.0% |
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| Operating income |
| 10.4% |
| 10.1% |
| 7.5% |
| 9.5% |
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Other income/(expense), net |
| 0.7% |
| (0.2%) |
| 0.8% |
| (0.1%) |
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Income before income taxes |
| 11.1% |
| 9.9% |
| 8.3% |
| 9.4% |
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Provision for income taxes |
| 0.0% |
| 4.5% |
| -- |
| 4.1% |
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| Net income |
| 11.1% |
| 5.4% |
| 8.3% |
| 5.3% |
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Exhibit 99.1
CASTELLE | |||||||
Condensed Consolidated Balance Sheets | |||||||
(Unaudited) |
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| June 30, 2005 |
| December 31, 2004 |
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Assets: |
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| Current Assets: |
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| Cash and cash equivalents |
| $ 6,350 |
| $ 5,599 |
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| Accounts receivable, net |
| 723 |
| 857 |
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| Inventories |
| 1,553 |
| 1,785 |
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| Prepaid Expenses and other current assets |
| 178 |
| 130 |
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| Deferred Taxes |
| 231 |
| 231 |
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| Total current assets |
| 9,035 |
| 8,602 |
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| Property and equipment, net |
| 203 |
| 203 |
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| Other non-current assets |
| 46 |
| 50 |
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| Deferred taxes, non-current |
| 1,292 |
| 1,292 |
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| Total assets |
| $ 10,576 |
| $ 10,147 |
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Liabilities and Shareholders' Equity |
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| Current liabilities: |
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| Long-term debt, current portion |
| $ 15 |
| $ 15 |
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| Accounts payable |
| 277 |
| 511 |
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| Accrued liabilities |
| 1,098 |
| 1,073 |
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| Deferred revenue |
| 1,334 |
| 1,253 |
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| Total current liabilities |
| 2,724 |
| 2,852 |
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| Long-term debt, net of current portion |
| 5 |
| 14 |
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| Total liabilities |
| 2,729 |
| 2,866 |
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| Shareholders' equity |
| 7,847 |
| 7,281 |
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| Total liabilities and shareholder's equity |
| $ 10,576 |
| $ 10,147 |
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# # # # #
Contact Information:
Scott C. McDonald | Karin Smith |
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President & Chief Executive Officer | Director of Marketing | ||
Tel. 408.852.8000 | Tel. 408.852.8034 |
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Fax 408.852.8100 | Fax 408.852.8134 |
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