EX-99 2 cstl8k_051005ex99-1.txt EXHIBIT 99.1 TEXT OF EARNINGS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE MAY 6, 2005 Castelle Reports Financial Results for First Quarter of 2005 MORGAN HILL, CA - May 6, 2005 - Castelle (Nasdaq: CSTL), a market leader in fax solutions for small to medium-sized workgroups and enterprise applications, today announced financial results for the first quarter ended March 31, 2005. Sales for the first quarter of 2005 totaled $2.59 million, up 2% from $2.54 million in the first quarter of 2004. Net income was $135,000, or $0.03 per fully diluted share, compared to $129,000, also $0.03 per fully diluted share, a year earlier. Net income for the first quarter of 2004 included a provision for income taxes of $98,000, or $0.02 per fully diluted share; there was no corresponding provision in the first quarter of 2005. Castelle's gross profit in the latest quarter was $1.78 million compared to $1.70 million in the first quarter of 2004. The Company attributed the improvement to a phasing out of its low margin legacy print servers and other products. Net income for the first quarter of 2005 was negatively impacted by approximately $180,000, or $0.04 per diluted share, as a result of accounting and legal fees related to the restatement of the Company's historical financial statements included in the Company's December 31, 2004 Form 10-K and Castelle's response to comment letters issued by the Division of Corporate Finance of the Securities and Exchange Commission. The restatements were described in detail in the Company's Form 8-K filed on March 31, 2005. Castelle completed the restatement of its historical financial statements in April 2005 and incurred additional accounting and legal expenses. "This quarter represents Castelle's 15th consecutive quarter of profitability," said Scott C. McDonald, President and CEO of Castelle. "The Company remains on track with steadily advancing sales, a commitment to our family of network fax servers for business and enterprise, and the introduction of FaxPress Premier(TM) to the international fax server market. The first quarter saw significant expansion of our marketing reach as we launched FaxPress Premier into Japan, Hong Kong and Mainland China." As of March 31, 2005, cash and equivalents totaled $5.91 million, up from $5.60 million at the end of fiscal 2004. The Company continued to increase its cash and cash equivalents, which had increased 21% during 2004. Castelle continues to operate with virtually no long-term debt. Also during the first quarter of 2005, Castelle was accepted by 3Com Corporation as a member of the 3Com(R) Voice over Internet Protocol (VoIP) Solution Providers Program (VSPP). This designation recognized Castelle's long-standing record of successful FaxPress(TM) installations integrated with the 3Com NBX(R) IP telephony system for small to medium-sized enterprises. About Castelle Castelle, a market leader in fax solutions for small to medium-sized workgroups and enterprise applications, 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. FaxPress(TM) and FaxPress Premier(TM) are trademarks of Castelle. 3Com, the 3Com logo and NBX are registered trademarks of 3Com Corporation. All other trademarks are the property of their respective owners. If you would like to be added to Castelle's investor email list, please contact Karin Smith at ksmith@castelle.com. 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.
CASTELLE Condensed Consolidated Statements of Earnings (in thousands, except per share data) (Unaudited) Three Months Ended March 31, 2005 March 31, 2004 ---------------------- ---------------------- Net sales Products $1,893 $2,012 Services 701 527 ---------------------- ---------------------- Total net sales 2,594 2,539 Cost of sales Products 542 639 Services 270 198 ---------------------- ---------------------- Total cost of sales 812 837 Gross profit 1,782 1,702 Operating expenses: Research and development 439 414 Sales and marketing 598 595 General and administrative 635 465 ---------------------- ---------------------- Total operating expenses 1,672 1,474 Operating income 110 228 Other income/(expense), net 25 (1) ---------------------- ---------------------- Income before income taxes 135 227 Provision for income taxes - 98 ---------------------- ---------------------- Net income $135 $129 ====================== ====================== Net income per common share : Basic $0.04 $0.04 ====================== ====================== Diluted $0.03 $0.03 ====================== ====================== Shares used in per share calculation: Basic 3,820 3,499 ====================== ====================== Diluted 4,465 4,450 ====================== ======================
CASTELLE Condensed Consolidated Balance Sheets (in thousands) (Unaudited) March 31, 2005 December 31, 2004 -------------------- ------------------------ Assets: Current Assets: Cash and cash equivalents $ 5,914 $ 5,599 Accounts receivable, net of allowance for doubtful accounts of $27 and $30, respectively 831 857 Inventories 1,672 1,785 Prepaid expenses and other current assets 184 130 Deferred taxes 231 231 -------------------- ------------------------ Total current assets 8,832 8,602 Property and equipment, net 208 203 Other non-current assets 47 50 Deferred taxes, non-current 1,292 1,292 -------------------- ------------------------ Total assets $ 10,379 $ 10,147 ==================== ======================== Liabilities and Shareholders' Equity Current liabilities: Long-term debt, current portion $ 15 $ 15 Accounts payable 209 511 Accrued liabilities 1,430 1,073 Deferred revenue 1,256 1,253 -------------------- ------------------------ Total current liabilities 2,910 2,852 Long-term debt, net of current portion 10 14 -------------------- ------------------------ Total liabilities 2,920 2,866 Shareholders' equity: Common stock, no par value: Authorized: 25,000 shares Issued and outstanding: 3,841 and 3,799, respectively 27,711 27,668 Accumulated deficit (20,252) (20,387) -------------------- ------------------------ Total shareholders' equity 7,459 7,281 -------------------- ------------------------ Total liabilities and shareholder's equity $ 10,379 $ 10,147 ==================== ========================
# # # # # Castelle Contact Information: Scott C. McDonald President & Chief Executive Officer Tel. 408.852.8000 Fax 408.852.8100 Karin Smith Director of Marketing Tel. 408.852.8034 Fax 408.852.8134