Aastra Technologies Limited
TSX : AAH

Aastra Technologies Limited

August 11, 2008 16:01 ET

Aastra Reports Second Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - Aug. 11, 2008) - Aastra Technologies Limited - (TSX:AAH) today announced its unaudited financial results for the second quarter ended June 30, 2008. Sales for the three months ended June 30, 2008 were $205.8 million compared to $157.0 million for the same quarter in 2007, an increase of 31.1%.

Sales in European Enterprise Communication segment increased 24.2% from $133.9 million in the three months ended June 30, 2007 to $166.3 million in the same period of 2008. Sales in American Enterprise Communication segment increased to $26.4 million in the three months ended June 30, 2008 from $22.4 million in the same period of 2007. Sales in Other regions increased from $0.7 million to $13.1 million. The Company experienced a significant increase in sales in all regions as a result of the Ericsson acquisition which closed on April 30, 2008. Excluding the impact of this acquisition, sales would have declined by approximately 4.0% as sales of existing products were lower in each of the Company's largest markets in Europe.

Gross margin was consistent at 42.5% of sales for the three months ended June 30, 2008 compared to 42.6% during the same period last year. Research and development expenses in the second quarter of 2008 were $26.8 million or 13.0% of sales, compared to $14.4 million or 9.2% of sales in the same quarter of 2007. The increase in research and development expenses is mainly a result of the Ericsson acquisition. In addition, the Company recorded severance costs of $5.6 million related to a restructuring in Germany while the Company also recorded a benefit of $3.1 million relating to the receipt of certain investment tax credits in Europe. Selling, general and administrative expenses were $53.2 million or 25.8% of sales in the quarter compared to $37.9 million or 24.2% of sales in the second quarter of 2007. The increase was also driven by the impact of the Ericsson acquisition.

Gains from foreign exchange were $1.2 million in the second quarter of 2008 compared with losses of $0.1 million in the same period last year as the Euro and Swiss franc strengthened against the Canadian dollar during the quarter. In the three months ended June 30, 2008, the Company recognized a further loss on the change in fair value of its investment in asset-backed commercial paper of $0.3 million, resulting in an accumulated discount from face value of approximately 28.0%.

The Company recorded investment income of $0.8 million in the second quarter of 2008 compared to $0.4 million for the second quarter of 2007. Income tax expense was $0.4 million in the second quarter or 15.5% of pre-tax profits compared to $3.1 million or 27.4% of pre-tax profits in the second quarter of 2007.

Net earnings for the three months ended June 30, 2008 were $2.1 million or $0.13 diluted earnings per share compared to $8.2 million or $0.50 diluted earnings per share in the same period in 2007. Net earnings were adversely impacted in the second quarter by the restructuring efforts undertaken in Europe as well as a negative financial impact from the recent acquisition of the Ericsson Enterprise Communication Business.

On June 30, 2008, Aastra's balance of cash and short-term investments was $82.9 million compared to $133.2 million on December 31, 2007. Cash used in operations for the three months ended June 30, 2008 was $13.6 million compared to $4.3 million for the same period of 2007. During the second quarter, the Company built up its working capital balances related to the Ericsson acquisition. In addition, the Company used $12.7 million to repurchase 487,000 common shares during the second quarter of 2008 under its on-going Normal Course Issuer Bid.

As previously reported, on April 30, 2008, the Company acquired all of the shares and certain assets of Enterprise Communication Business from Telefonaktiebolaget LM Ericsson and its subsidiaries. The purchase price for the business was $104.6 million for goodwill and intangible assets of which approximately $58.9 million was financed through a three year term loan. At the closing date, $38.5 million (net of acquired cash of $7.1 million) was settled from the cash and short-term investments on hand. The final purchase price is subject to adjustment upon the completion of the ongoing negotiation of the closing balance sheet of the acquired business.

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 networking products, including terminals, systems, and applications. For additional information on Aastra, visit our website at http://www.aastra.com.

From time to time, we make written or oral forward-looking statements within the meaning of applicable Canadian securities legislation. We may make such statements in this press release, in other filings with Canadian regulators in reports to shareholders or in other communications. These forward-looking statements include, among others, statements with respect to our medium-term and 2008 objectives, and strategies to achieve our objectives, as well as statements with respect to our beliefs, outlooks, plans, objectives, expectations, anticipations, estimates and intentions. The words "may," "could," "should," "would," "suspect," "outlook," "believe," "plan," "anticipate," "estimate," "expect," "intend," "forecast," "objective" and words and expressions of similar import are intended to identify forward-looking statements. 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 predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements.

As described in detail under the heading "Risk Factors" in our Annual Information Form filed on www.sedar.com, some of the material factors that could cause our actual results to differ materially from the forward-looking statements in this press release include: integration of our recent acquisitions and continued demand for our products; exchange rate fluctuation of the Canadian dollar against other currencies, particularly with respect to the Swiss franc, Euro and US dollar; product concentration and limited range of products; geographic market concentration in Europe; reliance on third party manufacturers and component suppliers; longer credit terms to customers; continued implementation of our enterprise resource planning system; potential fluctuations in quarterly financial results, particularly as a result of seasonality and geographic market concentration; risks associated with product returns and defects; intellectual proprietary protection; security; competition and rapid technological change in our market; and the risk of third party claims for infringement.

We caution readers not to place undue reliance on these 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.



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

YEAR-TO-DATE 2nd QUARTER
Six months Three months
ended June 30th ended June 30th
2008 2007 2008 2007
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Sales $ 345,828 $ 310,233 $ 205,793 $ 156,982
Cost of goods sold 196,159 179,165 118,252 90,182
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149,669 131,068 87,541 66,800

Expenses (income):
Selling, general and
administrative 91,363 75,431 53,176 37,937
Research and development 40,514 28,741 26,840 14,368
Depreciation and amortization 9,477 6,998 6,150 3,376
Interest expense 604 88 587 47
Foreign exchange (gain) loss (292) (1,058) (1,241) 110
Investment income (2,065) (1,480) (766) (388)
Other charges 785 - 280 -
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Earnings from continuing
operations before income taxes 9,283 22,348 2,515 11,350
Income taxes 1,902 5,811 390 3,113
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Net earnings from continuing
operations 7,381 16,537 2,125 8,237
Net loss from discontinued
operations - (141) - -
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Net earnings for the period $ 7,381 $ 16,396 $ 2,125 $ 8,237
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Earnings per share from
continuing operations:
Basic $ 0.46 $ 1.03 $ 0.13 $ 0.51
Diluted $ 0.46 $ 1.01 $ 0.13 $ 0.50
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Earnings per share:
Basic $ 0.46 $ 1.02 $ 0.13 $ 0.51
Diluted $ 0.46 $ 1.00 $ 0.13 $ 0.50
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(i) Actual common shares outstanding as at June 30, 2008 - 15,539,573 (2007
- 16,001,573)

(ii) Weighted average common shares outstanding for the six and three months
ended June 30, 2008 - 15,900,220 and 15,783,222 (2007 - 16,015,463 and
16,000,815)

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The interim consolidated financial statements for the six months and three
months ended June 30, 2008 have not been reviewed by an auditor.



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AASTRA TECHNOLOGIES LIMITED
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
2008 2007 2008 2007
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Cash and cash equivalents
provided by (used in):
Operations:
Net earnings for the period $ 7,381 $ 16,396 $ 2,125 $ 8,237
Net loss from discontinued
operations - 141 - -
Depreciation of property and
equipment 5,799 5,610 3,077 2,734
Amortization of intangible
assets 5,769 3,330 4,171 1,665
Future income taxes (2,420) 1,333 (2,344) 2,548
Stock-based compensation
expense 1,212 986 638 515
Loss on short-term investments - 940 (13) 822
Loss on sale of property and
equipment 242 178 102 136
Other charges 785 - 280 -
Change in pension liabilities 1,341 273 1,157 576
Change in non-cash operating
working capital (18,012) (23,295) (22,833) (21,498)
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2,097 5,892 (13,640) (4,265)
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Discontinued operations: - (141) - -
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Financing:
Issuance of common shares on
exercise of options 177 1,013 65 379
Repurchase of shares (12,746) (2,328) (12,746) (718)
Receipt of acquired lease
receivables 3,468 5,191 1,692 2,397
Payment of loan to Seller (3,468) (5,191) (1,692) (2,397)
Increase in loan payable 58,798 607 58,867 669
Increase (decrease) in bank
indebtedness (16) (796) - (808)
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46,213 (1,504) 46,186 (478)
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Investments:
Maturity of short-term
investments 19,857 46,956 3,425 29,532
Purchase of short-term
investments (2,000) (43,307) - (40,307)
Proceeds on disposal of
property and equipment 8 172 2 136
Purchase of property and
equipment (5,874) (4,861) (3,302) (2,797)
Business acquisitions, net of
cash acquired (97,479) 632 (97,479) 632
Change in non-cash investing
working capital - 1,159 - 1,159
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(85,488) 751 (97,354) (11,645)
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Foreign exchange on cash held
in foreign currency 4,735 (2,649) (2,695) (2,665)
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Increase (decrease) in cash and
cash equivalents (32,443) 2,349 (67,503) (19,053)
Cash and cash equivalents,
beginning of period 112,802 57,713 147,862 79,115
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Cash and cash equivalents, end
of period $ 80,359 $ 60,062 $ 80,359 $ 60,062
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The interim consolidated financial statements for the six months and three
months ended June 30, 2008 have not been reviewed by an auditor.



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

JUNE DECEMBER JUNE
30th 2008 31st 2007 30th 2007
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Assets
Current assets:
Cash and cash equivalents $ 80,359 $ 112,802 $ 60,062
Short-term investments 2,590 20,365 53,441
Accounts receivable 203,418 123,010 142,649
Inventories 116,614 77,745 79,940
Net investment in leases 2,696 1,731 1,206
Acquired lease receivables 5,073 5,931 7,706
Prepaid expenses and other assets 8,465 4,201 5,384
Future income tax assets 8,780 8,935 9,302
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427,995 354,720 359,690
Long-term investment 6,211 6,996 -
Future income tax assets 1,263 2,853 4,569
Net investment in leases 8,234 3,532 3,187
Acquired lease receivables 5,686 6,992 10,765
Property and equipment 41,218 35,703 34,016
Goodwill 12,481 10,802 11,246
Intangible assets 123,177 24,221 28,222
Other assets 475 651 762
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$ 626,740 $ 446,470 $ 452,457
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Liabilities and Shareholders' Equity
Current liabilities:
Indebtedness $ - $ 14 $ 1,470
Accounts payable and accrued liabilities 207,149 98,836 113,749
Income taxes payable 25,938 24,833 22,809
Deferred revenue 12,528 11,900 12,104
Current portion of contingent consideration
payable 1,997 1,744 1,737
Current portion of loans payable 22,056 5,986 7,973
Future income tax liabilities 665 1,015 3,325
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270,333 144,328 163,167

Contingent consideration payable - - 1,738
Pensions 23,392 19,784 19,141
Loans payable 48,816 7,905 11,812
Future income tax liabilities 3,911 7,633 7,334
Other long-term liabilities 1,830 1,773 2,759
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348,282 181,423 205,951
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Shareholders' equity:
Share capital 95,623 98,442 98,099
Contributed surplus 5,241 4,029 3,230
Accumulated other comprehensive income
(loss) 1,857 (15,530) (13,558)
Retained earnings 175,737 178,106 158,735
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278,458 265,047 246,506
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$ 626,740 $ 446,470 $ 452,457
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The interim consolidated financial statements for the six months and three
months ended June 30, 2008 have not been reviewed by an auditor.



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AASTRA TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(UNAUDITED)
Stated in thousands of Canadian dollars, except share amounts

Common Share Contributed
Shares Capital Surplus
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Balance, December 31, 2007 16,015,323 $ 98,442 $ 4,029
Shares issued on exercise of options 6,250 112 -
Stock-based compensation - - 574
Translation of self-sustaining
operations - - -
Net earnings - - -
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Balance, March 31, 2008 16,021,573 $ 98,554 $ 4,603
Shares issued on exercise of options 5,000 65 -
Stock-based compensation - - 638
Shares repurchased for cancellation (487,000) (2,996) -
Translation of self-sustaining
operations - - -
Net earnings - - -
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Balance, June 30, 2008 15,539,573 $ 95,623 $ 5,241
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Common Share Contributed
Shares Capital Surplus
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Balance, December 31, 2006 16,009,573 $ 97,513 $ 2,244
Change in accounting policy related to
financial instruments, net of income
taxes of $65 - - -
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Adjusted balance, December 31, 2006 16,009,573 97,513 2,244
Shares issued on exercise of options 40,500 634 -
Stock-based compensation - - 471
Shares repurchased for cancellation (50,000) (305) -
Translation of self-sustaining
operations - - -
Net earnings - - -
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Balance, March 31, 2007 16,000,073 $ 97,842 $ 2,715
Shares issued on exercise of options 21,500 379 -
Stock-based compensation - - 515
Shares repurchased for cancellation (20,000) (122) -
Translation of self-sustaining
operations - - -
Net earnings - - -
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Balance, June 30, 2007 16,001,573 $ 98,099 $ 3,230
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Accumulated
Other
Comprehensive Retained Comprehensive
Income (Loss) Earnings Total Income (Loss)
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Balance, December
31, 2007 $ (15,530) $ 178,106 $ 265,047 $ -
Shares issued on
exercise of
options - - 112 -
Stock-based
compensation - - 574 -
Translation of
self-sustaining
operations 21,317 - 21,317 21,317
Net earnings - 5,256 5,256 5,256
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Balance, March 31,
2008 $ 5,787 $ 183,362 $ 292,306 $ 26,573
Shares issued on
exercise of
options - - 65 -
Stock-based
compensation - - 638 -
Shares repurchased
for cancellation - (9,750) (12,746) -
Translation of
self-sustaining
operations (3,930) - (3,930) (3,930)
Net earnings - 2,125 2,125 2,125
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Balance, June 30,
2008 $ 1,857 $ 175,737 $ 278,458 $ 24,768
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Accumulated
Other
Comprehensive Retained Comprehensive
Income (Loss) Earnings Total Income (Loss)
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Balance, December
31, 2006 $ (1,549) $ 144,125 $ 242,333 $ -
Change in
accounting policy
related to
financial
instruments, net
of income
taxes of $65 - 115 115 -
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Adjusted balance,
December 31, 2006 (1,549) 144,240 242,448 -
Shares issued on
exercise of
options - - 634 -
Stock-based
compensation - - 471 -
Shares repurchased
for cancellation - (1,305) (1,610) -
Translation of
self-sustaining
operations (722) - (722) (722)
Net earnings - 8,159 8,159 8,159
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Balance, March 31,
2007 $ (2,271) $ 151,094 $ 249,380 $ 7,437
Shares issued on
exercise of
options - - 379 -
Stock-based
compensation - - 515 -
Shares repurchased
for cancellation - (596) (718) -
Translation of
self-sustaining
operations (11,287) - (11,287) (11,287)
Net earnings - 8,237 8,237 8,237
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Balance, June 30,
2007 $ (13,558) $ 158,735 $ 246,506 $ 4,387
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The interim consolidated financial statements for the six months and three
months ended June 30, 2008 have not been reviewed by an auditor.



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