Special Committee of Independent Directors Continues to Evaluate
Strategic Alternatives BELLEVUE, Wash., May 9
/PRNewswire-FirstCall/ -- Captaris, Inc. (NASDAQ:CAPA), a leading
provider of software products that automate document-centric
processes, today reported financial results for its first quarter
ended March 31, 2008. Total revenue for the quarter was $27.9
million, a 36% increase over the prior year's first quarter.
Revenue by category, compared to the first quarter of 2007 was as
follows: -- Software revenue was $8.9 million, an increase of $1.8
million, or 25% -- Maintenance, support and services revenue was
$14.4 million, an increase of $5.0 million or 53% -- Hardware
revenue was $3.7 million, a decrease of $379,000 or 9% -- Appliance
revenue, the FaxPress product line of hardware and embedded
software, was $1.0 million "We transformed our business in the
first quarter of 2008," said David P. Anastasi, President and CEO
of Captaris. "The acquisition of CDT, with the expanded
international reach and document capture technology it brought to
Captaris, marked a major milestone in realizing our strategic
vision. In addition, we made several important product
announcements and enhanced our customer offerings with our ability
to integrate acquired technologies with existing Captaris
products." "Captaris has a solid set of assets including a large
customer base, a worldwide distribution network, a collection of
intellectual property rights and a skilled and diverse work force,"
continued Mr. Anastasi. "The integration of our acquisitions of
Castelle and CDT are on track. We have also initiated cost
reductions and will continue to eliminate redundant headcount and
programs. We expect these actions will favorably impact our
operating expenses in the second quarter and we will continue to
look for additional opportunities to run the business more
efficiently." Gross profit was $18.2 million, an increase of $3.9
million from the first quarter of 2007; gross margin was 65.1%,
compared to 69.5% in the same quarter last year. The decline in the
gross margin was due to the inclusion of CDT and Castelle, which
have lower gross margins than our legacy business. Technology
amortization expense recognized in the first quarter of 2008
related to CDT and Castelle was $634,000. Total operating expenses
for the quarter were $26.9 million, compared to $15.3 million in
the prior year's first quarter. R&D increased $3.2 million,
including $2.4 million due to acquisitions and $750,000 for the
consolidation and outsourcing of the Company's software development
activities. Sales and marketing increased $3.9 million, including
$3.1 million from the acquisitions and $1.1 million for additional
sales resources, primarily in International markets, partially
offset by a reduction of $273,000 in marketing. G&A increased
$1.7 million, including $906,000 for the acquisitions and $695,000
associated with the evaluation of strategic alternatives and
related shareholder matters. The operating results also include a
$1.2 million charge for acquired in-process development expense
associated with the acquisition of CDT. In addition, during the
first quarter of 2007 the Company received a final $1.0 million
cash payment related to the sale of the CallXpress product line
which was recorded as a reduction of operating expenses; no similar
payment was received during the first quarter of 2008. Amortization
of intangible assets for the quarter was $1.7 million, including
$1.1 million in cost of revenue and $664,000 in operating expenses,
compared to $622,000 for the same quarter last year, including
$481,000 in cost of revenue and $141,000 in operating expenses.
Depreciation was $936,000 in the first quarter of 2008, compared to
$726,000 in the first quarter of 2007. Stock based compensation
expense was $396,000 in the first quarter of 2008 compared to
$195,000 in the first quarter of 2007. The decrease in other income
for the quarter ended March 31, 2008 compared to the same quarter
last year was primarily due to less interest income earned as a
result of cash used for the acquisition of CDT. Interest expense
included $234,000 for CDT's pension plan and $184,000 for the
credit facility. Included in other income for the quarters ended
March 31, 2008 and 2007 were gains on foreign currency translation
of $474,000 and $125,000, respectively. The Company reported a net
loss for the first quarter of 2008 of $6.6 million, or $0.25 per
basic and diluted share, compared to a net loss of $265,000, or
$0.01 per basic and diluted share for the first quarter of 2007.
Cash flow from operations was $836,000 million in the first quarter
of 2008, compared to $2.1 million in the same quarter last year.
Consolidated cash, cash equivalents and investment balances as of
March 31, 2008 totaled $39.9 million, compared to $47.2 million as
of December 31, 2007 and $58.9 million as of March 31, 2007. On
January 4, 2008 the Company purchased Captaris Document
Technologies GmbH ("CDT") (formerly Oce Document Technologies GmbH)
for a net cash payment of $17.9 million. Deferred revenue at March
31, 2008 was $31.5 million compared to $28.7 million at December
31, 2007 and $27.8 million as of March 31, 2007. Stock Repurchase
During the quarter, the Company repurchased 36,000 shares of its
outstanding common stock at a cost of $138,000, at an average
purchase price of $3.85 per share. On March 31, 2008, approximately
26.4 million shares of common stock were outstanding and $9.5
million was available for share repurchase under the Company's
stock repurchase program. Captaris may repurchase shares under its
stock repurchase program subject to overall market conditions,
stock prices and its cash position and requirements. Evaluation of
Strategic Alternatives In March, 2008, the company announced that
the Board of Directors decided to evaluate strategic alternatives
to further enhance shareholder value. To oversee and expedite this
process, the Board established a special committee of the Board
comprised of independent directors. This evaluation is ongoing and
developments will be disclosed as the Board deems appropriate.
Conference Call The Company will discuss its 2008 first quarter
results and business outlook on its regularly scheduled conference
call today, May 9th, at 7:30 a.m. PT (10:30 a.m. ET). The live web
cast of the conference call can be accessed from the Captaris Web
site at http://www.captaris.com/ under About Us -- Investor
Relations or by dialing into the call at 1-800-240-7305 and
providing the Company name "Captaris." An audio replay of the
conference call can be accessed at 1-800-405-2236. The replay will
be available starting two hours after the call and remain in effect
until Friday, May 16th at 11:59 PT. The required pass code is
11113910#. About Captaris, Inc. Captaris, Inc. is a leading
provider of software products that automate business processes,
manage documents electronically and provide efficient information
delivery. The products of Captaris and its subsidiaries Castelle
and Captaris Document Technologies GmbH, including Captaris
RightFax, Captaris Workflow, Captaris Alchemy, the FaxPress line of
products, RecoStar, DOKuStar, DOKuStar Capture Suite, Single Click
Entry, ID-Star, BUSY, Invoice CENTER, Tax CENTER, and Mail CENTER
are distributed through a global network of leading technology
partners. We have customers in financial services, healthcare,
government and many other industries, and our products are
installed in all of the Fortune 100 and many Global 2000 companies.
Headquartered in Bellevue, Washington, Captaris was founded in 1982
and is publicly traded on the NASDAQ Global Market under the symbol
CAPA. For more information please visit http://www.captaris.com/.
The following are registered trademarks and trademarks of Captaris:
Captaris, Alchemy, RightFax and Captaris Workflow. FaxPress is a
trademark of Castelle. RecoStar, DOKuStar, DOKuStar Capture Suite,
Single Click Entry, ID- Star, BUSY, Invoice CENTER, Tax CENTER and
Mail CENTER are trademarks of Captaris Document Technologies GmbH.
All other brand names and trademarks are the property of their
respective owners. Certain statements in this press release are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including, without
limitation, statements regarding the expected impact of our cost
reduction actions on our operating expenses in the second quarter.
Forward-looking statements include all passages containing verbs
such as "aims," "anticipates," "estimates," "expects," "intends,"
"plans," "predicts," "projects" or "targets" or nouns corresponding
to such verbs. Forward-looking statements also include any other
passages that are primarily relevant to expected future events or
that can only be evaluated by events that will occur in the future.
Forward-looking statements are based on the opinions and estimates
of the management at the time the statements are made and are
subject to certain risks and uncertainties that could cause actual
results to differ materially from those anticipated in the
forward-looking statements. Factors that could affect Captaris'
actual results include, among others, the impact, if any, of
stock-based compensation charges, the potential failure to maintain
and expand Captaris' network of dealers and resellers or to
establish and maintain strategic relationships, inability to
integrate recent and future acquisitions, including the recent
acquisition of Captaris Document Technologies GmbH, inability to
develop new products or product enhancements on a timely basis,
inability to protect our proprietary rights or to operate without
infringing the patents and proprietary rights of others, and
quarterly and seasonal fluctuations in operating results. More
information about factors that potentially could affect Captaris'
financial results is included in Captaris' most recent annual
report on Form 10-K filed with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance upon
these forward-looking statements that speak only as to the date of
this release. Except as required by law, Captaris undertakes no
obligation to update any forward-looking or other statements in
this press release, whether as a result of new information, future
events or otherwise. Captaris, Inc. Condensed Consolidated Balance
Sheets (in thousands) (Unaudited) March 31, December 31, 2008 2007
Assets Current assets: Cash and cash equivalents $39,851 $46,182
Restricted cash -- 1,000 Accounts receivable, net 21,647 19,348
Inventories 2,568 1,681 Prepaid expenses and other current assets
2,252 4,564 Income tax receivable and current deferred tax assets,
net 3,263 3,527 Total current assets 69,581 76,302 Other long-term
assets 1,122 847 Equipment and leasehold improvements, net 10,220
7,735 Intangible assets, net 31,851 11,748 Goodwill 57,181 37,522
Long-term deferred tax assets, net 2,199 5,344 Total assets
$172,154 $139,498 Liabilities and Shareholders' Equity Current
liabilities: Accounts payable $13,589 $8,621 Accrued compensation
and benefits 6,114 5,528 Other accrued liabilities 3,708 1,706
Income taxes payable 49 327 Deferred revenue 25,791 22,747 Total
current liabilities 49,251 38,929 Other long-term accrued
liabilities 654 696 Long-term deferred revenue 5,716 5,962 Pension
and other long-term employee benefit obligations 19,513 -- Bank
loan 9,675 -- Total liabilities 84,809 45,587 Shareholders' equity:
Common stock 264 264 Additional paid-in capital 41,442 40,971
Retained earnings 43,314 49,961 Accumulated other comprehensive
income 2,325 2,715 Total shareholders' equity 87,345 93,911 Total
liabilities and shareholders' equity $172,154 $139,498 Captaris,
Inc. Condensed Consolidated Statements of Operations (in thousands,
except per share data) (Unaudited) Quarter Ended March 31, 2008
2007 Net revenue $27,919 $20,513 Cost of revenue 9,753 6,258 Gross
profit 18,166 14,255 Operating expenses: Research and development
6,351 3,186 Selling and marketing 12,222 8,278 General and
administrative 6,461 4,716 Amortization of intangible assets 664
141 In-process research and development 1,224 -- Gain on sale of
discontinued product line CallXpress -- (1,000) Total operating
expenses 26,922 15,321 Operating loss (8,756) (1,066) Other income
(expense): Interest income 271 575 Interest expense (440) - Other
income, net 474 144 Other income 305 719 Loss from continuing
operations before income tax benefit (8,451) (347) Income tax
benefit (1,805) (84) Loss from continuing operations (6,646) (263)
Discontinued operations: Loss from sale of MediaTel assets, net of
income tax benefit (1) (2) Loss from discontinued operations (1)
(2) Net loss $(6,647) $(265) Basic and diluted net loss per common
share: Loss from continuing operations $(0.25) $(0.01) Loss from
discontinued operations (0.00) (0.00) Net loss $(0.25) $(0.01)
Weighted average basic and diluted common shares 26,406 27,476
Captaris, Inc. Condensed Consolidated Statements of Cash Flows (in
thousands) (Unaudited) Quarter Ended March 31, 2008 2007 Cash flows
from operating activities: Net loss $(6,647) $(265) Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation 936 726 Amortization 1,744 622 Stock-based
compensation expense 396 195 Gain on foreign currency revaluation
(525) (63) Pension and long-term employee benefit expense 458 --
Provision for doubtful accounts 64 49 In-process research and
development 1,224 - (Gain) loss on disposition of assets 29 (46)
Deferred income tax benefit (1,717) (426) Changes in assets and
liabilities (net of acquired assets and liabilities): Accounts
receivable 3,180 1,415 Inventories (346) 362 Prepaid expenses and
other assets (622) (401) Accounts payable 2,514 (778) Accrued
compensation and benefits (1,538) (882) Other accrued liabilities
857 (243) Income taxes payable (8) (40) Pension liability (43) -
Deferred revenue 880 1,914 Net cash flow provided by operating
activities 836 2,139 Cash flows from investing activities: Purchase
of equipment and leasehold improvements (2,590) (1,149) Purchase of
investments -- (10,171) Purchase of Captaris Document Technologies
GmbH (17,926) -- Proceeds from disposals of assets 35 55 Proceeds
from sales and maturities of investments 4 7,328 Net cash used in
investing activities (20,477) (3,937) Cash flows from financing
activities: Proceeds from bank loan 9,675 -- Proceeds from release
of restricted cash 1,000 -- Proceeds from exercise of common stock
options 208 1,009 Repurchase of common stock (138) (2,649) Excess
tax benefits from stock-based compensation 5 135 Net cash provided
by (used in) financing activities 10,750 (1,505) Net decrease in
cash (8,891) (3,303) Effect of exchange rate changes on cash 2,560
(3) Cash and cash equivalents at beginning of period 46,182 10,695
Cash and cash equivalents at end of period $39,851 $7,389
DATASOURCE: Captaris, Inc. CONTACT: investor relations, Erika
Simms, Treasury Analyst of Captaris, Inc., +1-425-638-4048, Web
site: http://www.captaris.com/
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