Aastra Technologies Limited
TSX : AAH

Aastra Technologies Limited

April 20, 2010 17:01 ET

Aastra Reports Quarterly Earnings

TORONTO, ONTARIO--(Marketwire - April 20, 2010) - Aastra Technologies Limited - (TSX:AAH) today reported its unaudited financial results for the first quarter ended March 31, 2010.

Sales for the three months ended March 31, 2010 were $171.9 million compared to $219.3 million for the same quarter in 2009. The Company experienced a significant drop of $18.4 million or 8.4% of sales directly as a result of the strength in the Canadian dollar when compared to the Euro and U.S. dollar. Excluding the impact of foreign exchange, sales dropped 13.2% from the same period last year as a result of lower sales volumes. There was a general decrease in revenue experienced in most regions.

Gross margin decreased to 44.2% of sales in the first quarter of 2010 compared to 48.0% of sales in the same period in 2009 and 45.0% of sales in the fourth quarter of 2009. Material margins remained relatively flat against the first quarter of 2009 and the fourth quarter of 2009. Fixed costs in cost of sales, including certain restructuring charges recognized in the first quarter of 2010, caused the decrease in gross margin relative to these earlier periods.

Research and development expenses in the first quarter of 2010 were $18.5 million or 10.8% of sales, compared to $21.9 million or 10.0% of sales in the same quarter of 2009. The decrease was primarily related to the impact of foreign exchange rates on European development costs, while the increase as a percentage of revenue is based on solely on the lower sales volume.

Selling, general and administrative ("SG&A") expenses were $46.4 million or 27.0% of sales in the first quarter of 2010 compared to $60.3 million or 27.5% of sales in the first quarter of 2009. SG&A expenses decreased as a result of the impact of foreign exchange as well from further cost saving measures and lower provisions for bad debts when compared to the level recorded in the first quarter of last year.

Foreign exchange losses of $4.1 million were recognized in the first quarter of 2010, primarily in our European operations, where a significant weakening of the Euro to the Canadian dollar occurred during the period. Amortization expense recorded in operating expenses decreased to $5.5 million in the first quarter of 2010 compared to $5.9 million in the first quarter of 2009.

The Company recorded interest expense of $0.1 million in the first quarter of 2010 compared to $0.7 million in the first quarter last year as both the outstanding principal balance and variable interest rates on the company's term loan were lower. Investment income totaled $0.7 million in the first quarter, consistent with the same quarter of 2009. In addition, the Company recorded a gain of $2.7 million on the previously announced sale of its optical transmission and multiplexer product line during the first quarter of 2010. Income tax expense was recognized at $0.8 million or 17.0% of pre-tax earnings in the quarter compared to $3.7 million or 20.7% of pre-tax earnings in the first quarter last year.

As a result of the above, net earnings decreased sharply in the first quarter in 2010 to $3.9 million or $0.28 diluted earnings per share compared to $14.1 million or $1.02 diluted earnings per share in the same period in 2009.

Cash and short-term investments totaled $118.8 million at the end of March 2010 compared to $116.9 million at December 31, 2009. During the first quarter of 2010, the Company generated $7.7 million in cash flow from operations and $3.6 million from the sale of the non-core product line. In addition, the Company used $2.8 million to pay dividends to shareholders while $7.1 million was used to repay a portion of its loan balance outstanding.

The Company is also pleased to announce that it will pay a dividend to its shareholders of $0.20 per share for this quarter, payable on May 24, 2010 to all shareholders of record on May 3, 2010. The dividend declared today has been designated as an "eligible" dividend for the purposes of the Income Tax Act (Canada) and similar provincial legislation. Shareholders of Aastra are entitled to receive dividends only if and when such dividends have been declared and there is no entitlement to any dividends prior to any declaration thereof by Aastra's Board of Directors.

About Aastra Technologies Limited

Aastra Technologies Limited (TSX:AAH) is a global company at the forefront of the Enterprise Communication market. Headquartered in Concord, Ontario, Canada, Aastra develops and delivers innovative and integrated solutions that address the communication needs of businesses small and large around the world. Aastra enables Enterprises to communicate and collaborate more efficiently and effectively by offering customers a full range of open standard IP-based and traditional communications solutions, including terminals, systems, and applications. For additional information on Aastra, visit our website at http://www.aastra.com.

Certain statements made herein may be forward-looking statements within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements with respect to our Board of Directors declaring any future quarterly dividends and, if so declared, the amount of such dividends. By their very nature, forward-looking statements involve numerous factors and assumptions, and are subject to inherent risks and uncertainties, both general and specific, which give rise to the possibility that such forward-looking statements will not be achieved.

Shareholders are entitled to receive dividends only if and when such dividends have been declared and there is no entitlement to any dividends prior to any declaration thereof by our Board of Directors. The material factors that will be considered by our Board of Directors in determining whether it is appropriate to declare any future dividends, and the amount of any such dividends, include: our earnings, cash flow, quarterly fluctuations in financial results and financing requirements to fund acquisitions or other business opportunities. Please refer to our filings on the website maintained by the Canadian Securities Administrators at www.sedar.com, including our Annual Information Form and our annual and quarterly Management Discussion and Analyses for other material factors that may be considered by our Board of Directors in determining whether to declare any future dividends and the amount of any such dividends.

We caution readers not to place undue reliance on these forward-looking statements as our actual results may differ materially from our expectations if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. Therefore, we cannot provide any assurance that forward-looking statements will materialize. Unless otherwise required pursuant to applicable Canadian securities legislation, we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason.

AASTRA TECHNOLOGIES LIMITED  
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)  
Stated in thousands of Canadian dollars, except per share amounts  
   
    1st QUARTER  
    Three months  
    ended March 31st  
    2010     2009  
Sales $ 171,933   $ 219,276  
Cost of goods sold   95,909     114,124  
    76,024     105,152  
Expenses (income):            
  Selling, general and administrative   46,443     60,273  
  Research and development   18,502     21,909  
  Depreciation and amortization   5,525     5,898  
  Interest expense   106     736  
  Foreign exchange loss (gain)   4,077     (832 )
  Investment income   (699 )   (671 )
  Other income   (2,682 )   -  
Earnings before income taxes   4,752     17,839  
Income taxes   809     3,706  
Net earnings for the period $ 3,943   $ 14,133  
Earnings per share:            
  Basic $ 0.28   $ 1.02  
  Diluted $ 0.28   $ 1.02  
 
*       Actual common shares outstanding as at March 31, 2010 – 13,956,885 (2009 – 13,432,835)
 
**    Weighted average common shares outstanding for the three months ended March 31, 2010 –
        13,905,772 (2009 – 13,832,353)
 
***  Weighted average fully diluted common shares outstanding for the three months ended
       March 31, 2010 – 14,145,546 (2009 – 13,832,353)
 

The interim consolidated financial statements for the three months ended March 31, 2010 have not been reviewed by an auditor.

AASTRA TECHNOLOGIES LIMITED  
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)  
Stated in thousands of Canadian dollars  
             
    1st QUARTER  
    Three months  
    ended March 31st  
    2010     2009  
Cash and cash equivalents provided by (used in):            
Operations:            
  Net earnings for the period $ 3,943   $ 14,133  
  Depreciation of property, plant and equipment   3,052     2,936  
  Amortization of intangible assets   3,610     4,079  
  Future income taxes   (1,069 )   (1,911 )
  Stock-based compensation expense   569     644  
  Loss on sale of property, plant and equipment   131     168  
  Other income   (2,682 )   -  
  Change in non-cash pension liabilities   93     172  
  Change in non-cash operating working capital   99     (16,335 )
    7,746     3,886  
Financing:            
  Dividends to shareholders   (2,787 )   -  
  Issuance of common shares on exercise of options   2,216     807  
  Repurchase of shares   -     (17,722 )
  Receipt of acquired lease receivables   430     987  
  Payment of loan to Seller   (430 )   (987 )
  Payment of loans payable   (7,124 )   (14,899 )
    (7,695 )   (31,814 )
Investing:            
  Maturity of short-term investments   3,063     -  
  Purchase of short-term investments   -     (3,038 )
  Interest received from long-term investment   6     295  
  Proceeds on disposal of property, plant and equipment   -     2  
  Purchase of property, plant and equipment   (2,891 )   (2,780 )
  Purchase of intangible assets   (220 )   (421 )
  Business acquisition, net of cash acquired   -     2,663  
  Disposition, net of cash   3,649     -  
  Changes in non-cash investing working capital   201     -  
    3,808     (3,279 )
Foreign exchange on cash held in foreign currency   1,088     (3,098 )
Increase (decrease) in cash and cash equivalents   4,947     (34,305 )
Cash and cash equivalents, beginning of period   113,596     97,637  
Cash and cash equivalents, end of period $ 118,543   $ 63,332  

The interim consolidated financial statements for the three months ended March 31, 2010 have not been reviewed by an auditor.

AASTRA TECHNOLOGIES LIMITED 
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Stated in thousands of Canadian dollars 
             
  MARCH 31ST 2010 DECEMBER 31st 2009 MARCH 31st 2009
ASSETS            
Current assets:            
  Cash and cash equivalents $ 118,543 $ 113,596 $ 63,332
  Short-term investments   245   3,309   3,600
  Accounts receivable   157,295   175,331   219,188
  Income taxes receivable   3,541   5,986   10,695
  Inventories   81,553   81,398   105,991
  Net investment in leases   11,735   11,831   7,605
  Acquired lease receivables   1,217   1,544   3,119
  Prepaid expenses and other assets   9,504   7,088   9,741
  Future income tax assets   5,476   6,395   9,370
    389,109   406,478   432,641
             
Long-term investment   4,519   4,525   5,121
Future income tax assets   3,562   3,901   5,146
Net investment in leases   26,748   28,597   26,025
Acquired lease receivables   1,249   1,597   3,164
Property, plant and equipment   38,953   41,920   46,695
Goodwill   44,546   46,391   49,385
Intangible assets   44,648   51,460   66,522
Other assets   681   611   677
  $ 554,015 $ 585,480 $ 635,376
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities:            
  Accounts payable and accrued liabilities $ 147,620 $ 148,076 $ 189,923
  Income taxes payable   27,174   33,294   32,229
  Deferred revenue   22,091   23,686   29,071
  Current portion of loans payable   8,549   16,490   18,628
  Future income tax liabilities   82   961   810
    205,516   222,507   270,661
             
Pensions   21,704   25,488   27,191
Loans payable   15,591   16,561   26,705
Future income tax liabilities   12,786   14,281   19,977
Other long-term liabilities   3,532   3,802   2,960
    259,129   282,639   347,494
 
Shareholders' equity:            
  Share capital   92,704   90,488   83,025
  Contributed surplus   8,034   7,465   7,128
  Accumulated other comprehensive (loss) income   (17,352)   (5,456)   15,801
  Retained earnings   211,500   210,344   181,928
    294,886   302,841   287,882
             
  $ 554,015 $ 585,480 $ 635,376

The interim consolidated financial statements for the three months ended March 31, 2010 have not been reviewed by an auditor.

AASTRA TECHNOLOGIES LIMITED  
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME  
(UNAUDITED)  
Stated in thousands of Canadian dollars, except share amounts
                  Accumulated                    
                  Other                    
  Common     Share     Contributed   Comprehensive     Retained           Comprehensive  
  Shares     Capital     Surplus   Income (Loss )   Earnings     Total     Income (Loss )
Balance, December 31, 2009 13,852,335   $ 90,488   $ 7,465 $ (5,456 ) $ 210,344   $ 302,841   $ -  
Dividends -     -     -   -     (2,787 )   (2,787 )   -  
Shares issued on exercise of options 104,550     2,216     -   -     -     2,216     -  
Stock-based compensation -     -     569   -     -     569     -  
Translation of self-sustaining operations -     -     -   (11,896 )   -     (11,896 )   (11,896 )
Net earnings -     -     -   -     3,943     3,943     3,943  
   
Balance, March 31, 2010 13,956,885   $ 92,704   $ 8,034 $ (17,352 ) $ 211,500   $ 294,886   $ (7,953 )
                  Accumulated                    
                  Other                    
  Common     Share     Contributed   Comprehensive     Retained           Comprehensive  
  Shares     Capital     Surplus   Income (Loss )   Earnings     Total     Income (Loss )
Balance, December 31, 2008 14,765,573   $ 90,951   $ 6,484 $ 19,588   $ 176,784   $ 293,807   $ -  
Shares issued on exercise of options 85,000     807     -   -     -     807     -  
Stock-based compensation -     -     644   -     -     644     -  
Shares repurchased for cancellation (1,417,738 )   (8,733 )   -   -     (8,989 )   (17,722 )   -  
Translation of self-sustaining operations -     -     -   (3,787 )   -     (3,787 )   (3,787 )
Net earnings -     -     -   -     14,133     14,133     14,133  
   
Balance, March 31, 2009 13,432,835   $ 83,025   $ 7,128 $ 15,801   $ 181,928   $ 287,882   $ 10,346  

The interim consolidated financial statements for the three months ended March 31, 2010 have not been reviewed by an auditor.

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