Aastra Technologies Limited
TSX : AAH

Aastra Technologies Limited

July 26, 2005 16:01 ET

Aastra Reports Second Quarter Financial Results

TORONTO, ONTARIO--(CCNMatthews - July 26, 2005) - Aastra Technologies Limited (TSX:AAH) today announced its unaudited financial results for the second quarter ended June 30, 2005. Net earnings for the three months ended June 30, 2005 were $7.0 million or $0.39 diluted earnings per share compared to $5.8 million or $0.33 diluted earnings per share in the same period last year. The second quarter results for this year include the results of operations from the EADS Enterprise Telephony acquisition that was completed on February 28th of this year. Excluding the impact of this acquisition, net earnings would have been $9.8 million or $0.55 diluted earnings per share, an increase of 67% over the comparable period last year.

Net sales for the three months ended June 30, 2005 were $125.8 million compared to net sales of $64.9 million for the same period last year, an increase of approximately 94%. Net sales from the recently acquired EADS Enterprise Telephony group were approximately $56 million for the second quarter. Excluding the impact of this acquisition, net sales would have been approximately $69.8 million, an increase of 7.5% from the same period last year.

Net sales in the Enterprise Communications segment, including sales from the EADS acquisition, were $117.4 million in the second quarter compared to $55.4 million for the three months ended June 30, 2004. Excluding the acquisition, net sales in this segment increased by 10.8% to $61.4 million when compared to the same period last year. Net sales from the Network Access segment were $8.4 million in the second quarter compared to $9.5 million in the same period last year. Sales in this segment were primarily related to sales of the digital video products while revenue from the CVX product line continued to decline as expected.

Gross profit margin was 44% of sales for the three months ended June 30, 2005 compared to 49% of sales in the same quarter last year. While the gross margin on our existing product lines continued to improve when compared to last year, these stronger margins were offset by the expected lower gross margins experienced on the new product lines.

Research and development expenses in the second quarter of 2005 were $12.4 million or 9.9% of sales, compared to $6.1 million or 9.3% of sales in the comparable quarter of 2004. Excluding the impact of the EADS acquisition, research and development expenses would have $6.1 million, consistent with the same period last year.

Selling, general and administrative expenses were $29.8 million or 23.7% of sales in the quarter compared to $16.8 million or 25.8% of sales in the second quarter of 2004. Excluding the impact of the EADS acquisition, selling, general and administrative expenses would have declined slightly to $16.7 million when compared to the last period last year.

Earnings before income taxes, amortization and interest for the quarter were $13.6 million or 10.8% of sales compared to $9.2 million or 14.1% of sales in the same period of 2004. Amortization of capital and intangible assets, excluding tooling, was $4.9 million for the second quarter compared to $2.9 million in the same period last year. Amortization of capital and intangible assets arising from the EADS acquisition was $2.5 million during the second quarter.

As a result of the completion of the EADS acquisition in February, the Company's excess cash and short term investment balances were significantly lower during the second quarter and as a result Aastra recorded investment income of $0.1 million in the second quarter compared to $0.5 million for the second quarter last year.

Income tax expense was $1.7 million in the second quarter or 19.3% of pre-tax profits compared to $0.6 million or 8.7% of pre-tax profits in the second quarter last year. While income tax rates have continued to be impacted by profits in lower tax jurisdictions, there was a continued shift towards more of the Company's taxable income coming from higher tax jurisdictions in Europe during the second quarter.

Cash and short-term investments totaled approximately $64.5 million at the end of the second quarter compared to a balance of approximately $129.0 million at the end of December 2004. During the second quarter, the Company generated approximately $23.2 million of positive cash flow from operations, including working capital improvements of $9.0 million primarily related to the EADS acquisition.

After the completion of the second quarter, the Company and EADS agreed on certain adjustments that resulted in a EUR 6.8 million or approximately $11.1 million reduction in the previously announced purchase price of EUR 68.4 million or approximately $112.0 million. As a result of finalizing the completion adjustment with EADS, Aastra now anticipates that it will be in a position to file its business acquisition report ("BAR") relating to the EADS acquisition in September 2005. Based on securities legislation, the BAR filing related to this acquisition was due to be filed by the Company on or before May 15, 2005. The delay was primarily attributed to the purchase price adjustment process wherein certain audit opinions would not be available until a settlement was concluded.

Finally, as previously announced, the Company expects to complete its acquisition of DeTeWe's telecommunication business during the third quarter and will fund this acquisition with its internal cash resources.

About Aastra Technologies Limited

Aastra Technologies Limited (TSX: "AAH"), headquartered in Concord, Ontario, Canada, develops and markets products and systems for accessing communication networks. Aastra's products include a full range of residential and business telephone terminals, Enterprise Private Branch Exchanges (PBX), network access servers and high quality digital video gateways. Aastra serves the majority of telephone companies and certain broadcasters in North America and Europe, with a growing presence in South America and Asia. For more information on Aastra, visit our Web site at http://www.aastra.com.

Certain information discussed in this press release is forward-looking and is subject to important risks and uncertainties. Forward-looking statements include statements of plans, objectives, strategies and expectations. The words "anticipate", "believe", "estimate", and "expect" and similar expressions are intended to identify forward looking statements. The results or events predicted in these statements may differ materially from actual results or events. Please refer to reports filed by Aastra with securities regulatory authorities in Canada for an identification of factors which could cause results or events to differ from current expectations. Aastra disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



AASTRA TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Stated in thousands of Canadian dollars except per share data

YEAR-TO-DATE 2nd QUARTER
Six months Three months
ended June 30TH ended June 30TH
2005 2004 2005 2004
---------------------------------------------------------------------
Sales $206,705 $128,865 $125,778 $64,901
Cost of goods sold 112,259 66,014 70,414 33,035
---------------------------------------------------------------------
$94,446 $62,851 $55,364 $31,866

Selling, general and administrative 50,442 33,990 29,828 16,769
Research and development 20,292 12,493 12,432 6,065
Amortization 8,147 5,760 4,860 2,865
Foreign exchange loss (gain) (424) 129 (344) 323
Investment Income (605) (1,013) (114) (494)
---------------------------------------------------------------------
Earnings before income taxes $16,594 $11,492 $8,702 $6,338

Income taxes 3,031 1,099 1,680 550
---------------------------------------------------------------------
Net earnings for the period $13,563 $10,393 $7,022 $5,788
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic earnings per share for
the period (note 4) $0.79 $0.61 $0.41 $0.34
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted earnings per share for
the period (note 4) $0.76 $0.59 $0.39 $0.33
---------------------------------------------------------------------
---------------------------------------------------------------------
(i) Actual common shares outstanding as at June 30, 2005 - 17,309,459
(2004 - 17,086,684)

(ii) Weighted average common shares outstanding for the six months
and three months ended June 30, 2005-17,253,140 and 17,278,308
(2004 - 17,061,180 and 17,074,514)


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Stated in thousands of Canadian dollars

YEAR-TO-DATE 2nd QUARTER
Six months Three months
ended June 30TH ended June 30TH
2005 2004 2005 2004
---------------------------------------------------------------------
Cash and cash equivalents provided
by (used for) operations:
Net earnings for the period $13,563 $10,393 $7,022 $5,788
Amortization of capital assets 6,413 5,457 3,913 2,629
Amortization of intangible assets 3,691 2,829 1,980 1,216
Future income taxes 108 (831) 1,161 (344)
Stock compensation expense 282 124 175 62
Pension asset amortization 51 53 26 27
Net change in non-cash operating
working capital 3,180 10,135 8,958 7,725
---------------------------------------------------------------------
27,288 28,160 23,235 17,103
---------------------------------------------------------------------

Cash and cash equivalents provided
by (used in) financing activities:
Bank indebtedness 984 (5,827) 593 (6,879)
Issuance of common shares 48 555 211 228
---------------------------------------------------------------------
1,032 (5,272) 804 (6,651)
---------------------------------------------------------------------

Cash and cash equivalents provided
by (used for) investing
activities:
Short-term investments 64,736 28,973 7,155 (12,660)
Net purchase of capital assets (3,398) (1,015) (2,522) (563)
Business acquisition (note 2) (86,809) - 726 -
---------------------------------------------------------------------
(25,471) 27,958 5,359 (13,223)
---------------------------------------------------------------------

Foreign exchange on cash held
in foreign currency (2,606) 299 (1,541) 292
---------------------------------------------------------------------

Increase (decrease) in cash
and cash equivalents 243 51,145 27,857 (2,479)
Cash and cash equivalents,
beginning of period 64,181 25,879 36,567 79,503
---------------------------------------------------------------------
Cash and cash equivalents,
end of period $64,424 $77,024 $64,424 $77,024
---------------------------------------------------------------------
The interim Consolidated Financial Statements for the six months and
three months ended June 30, 2005 have not been reviewed by an
auditor.


AASTRA TECHNOLOGIES LIMITED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Stated in thousands of Canadian dollars

JUNE 30TH DECEMBER 31ST JUNE 30TH
2005 2004 2004
---------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $64,424 $64,181 $77,024
Short-term investments 117 64,853 27,339
Accounts receivable 131,749 50,149 50,573
Income taxes receivable - 2,039 -
Net investment in leases 753 756 628
Inventories 56,533 47,229 55,808
Deposits and prepaid expenses 4,246 2,193 2,390
Future income taxes 3,143 1,326 4,313
---------------------------------------------------------------------
$260,965 $232,726 $218,075

Future income taxes 8,842 9,690 5,413
Net investment in leases 1,786 1,793 1,864
Capital assets, net 32,865 16,974 20,146
Investments 68 - -
Accrued pension asset 915 1,046 1,116
Goodwill 6,353 6,353 6,353
Intangible assets 40,723 13,875 20,588
---------------------------------------------------------------------

$352,517 $282,457 $273,555
---------------------------------------------------------------------
---------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities:
Indebtedness 1,258 - 783
Accounts payable and accrued
liabilities 95,863 44,901 50,302
Income taxes payable 9,919 8,972 4,658
Deferred revenue 7,658 2,339 4,951
---------------------------------------------------------------------
$114,698 $56,212 $60,694

Contingent consideration payable 5,770 6,300 6,420
Pension liability 4,204 - -
Future income taxes 1,076 - 1,265
Long term liability 3,446 - -
---------------------------------------------------------------------
129,194 62,512 68,379

Shareholders' equity:
Share capital 103,391 102,407 101,254
Contributed surplus 615 333 209
Cumulative translation adjustments (11,240) 211 524
Retained earnings 130,557 116,994 103,189
---------------------------------------------------------------------
223,323 219,945 205,176
---------------------------------------------------------------------

$352,517 $282,457 $273,555
---------------------------------------------------------------------
---------------------------------------------------------------------
The interim Consolidated Financial Statements for the six months and
three months ended June 30, 2005 have not been reviewed by an
auditor.


AASTRA TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Stated in thousands of Canadian dollars
---------------------------------------------------------------------
Cumu-
lative
Trans-
Contri- lation
Common Share buted Adjust- Retained
Shares Capital Surplus ment Earnings Total
---------------------------------------------------------------------
Balance,
December
31, 2004 17,206,634 $102,407 $333 $211 $116,994 $219,945
Shares issued
on exercise
of options 41,200 391 - - - 391
Stock option
compensation - - 107 - - 107
Translation of
self sustaining
operations - - - (5,101) - (5,101)
Net income - - - - 6,541 6,541
---------------------------------------------------------------------

Balance,
March
31, 2005 17,247,834 102,798 440 (4,890) 123,535 221,883
---------------------------------------------------------------------
Shares issued
on exercise
of options 61,625 593 - - - 593
Stock option
compensation - - 175 - - 175
Translation
of self
sustaining
operations - - - (6,350) - (6,350)
Net income - - - - 7,022 7,022
---------------------------------------------------------------------
Balance, June
30, 2005 17,309,459 $103,391 $615 $(11,240) $130,557 $223,323
---------------------------------------------------------------------
---------------------------------------------------------------------

---------------------------------------------------------------------
---------------------------------------------------------------------
Cumu-
lative
Trans-
Contri- lation
Common Share buted Adjust- Retained
Shares Capital Surplus ment Earnings Total
---------------------------------------------------------------------
Balance,
December
31, 2003 17,032,109 $100,699 $85 $1,101 $92,796 $194,681
Shares issued
on exercise
of options 30,500 327 - - - 327
Stock option
compensation - - 62 - - 62
Translation
of self
sustaining
operations - - - (333) - (333)
Net income - - - - 4,605 4,605
---------------------------------------------------------------------
Balance,
March
31, 2004 17,062,609 101,026 147 768 97,401 199,342
---------------------------------------------------------------------
Shares issued
on exercise
of options 24,075 228 - - - 228
Stock option
compensation - - 62 - - 62
Translation
of self
sustaining
operations - - - (244) - (244)
Net income - - - - 5,788 5,788
---------------------------------------------------------------------
Balance, June
30, 2004 17,086,684 $101,254 $209 $524 $103,189 $205,176
---------------------------------------------------------------------
---------------------------------------------------------------------


Contact Information