Aastra Technologies Limited
TSX : AAH

Aastra Technologies Limited

October 23, 2007 16:01 ET

Aastra Reports Strong Third Quarter Earnings

TORONTO, ONTARIO--(Marketwire - Oct. 23, 2007) - Aastra Technologies Limited - (TSX:AAH) today announced its unaudited financial results for the three months ended September 30, 2007. Net earnings for the third quarter were $7.1 million or $0.43 diluted earnings per share, an increase of 51% when compared to net earnings of $4.7 million or $0.27 diluted earnings per share in the same period last year.

Sales for the third quarter of 2007 were $141.1 million compared to sales of $142.8 million for the same period of 2006, a decrease of 1.1%. Sales in European Enterprise Communication were flat at $117.1 million in the three months ended September 30, 2007 compared to $117.5 million in the same period of 2006. Sales in this segment were negatively impacted by weaker sales in France at the end of the quarter.

Sales in the North American Enterprise Communication segment were $24.0 million in the three months ended September 30, 2007, down from $25.2 million in the same period of 2006 primarily as a result of weakness in U.S. sales of large systems as well as a negative impact from foreign exchange on U.S. sales. Sales of terminals, particularly open standard IP terminals continued to show growth, increasing from approximately $13.9 million in the third quarter of 2006 to $15.3 million this quarter.

Gross margin was 42.5% of sales for the three months ended September 30, 2007, compared with 40.5% of sales for the same period last year. Gross margins improved in Europe to approximately 43.3% of sales from 39.1% of sales in the same period of 2006, as our efforts to improve our cost of supply have started to produce results while pricing across most of Europe has remained fairly stable. Gross margins in North American Enterprise Communication were 40.5% in the second quarter of 2007, down from 47.1% in the same quarter of 2006 as a result of a shift in product sales towards lower margin IP products as well as the effect of lower volumes of service revenue experienced on large systems in the U.S.

Research and development expenses in the third quarter of 2007 were $12.9 million or 9.2% of sales, compared to $14.3 million or 10.0% of sales in the same quarter of 2006. The reduction in research and development expenses reflects the impact of certain restructuring efforts taken in Europe in the second half of 2006. Selling, general and administrative ("SG&A") expenses were $34.7 million or 24.6% of sales in the quarter compared to $35.4 million or 24.8% of sales in the third quarter of 2006. The decrease in SG&A expenses was driven mainly by the impact of foreign exchange as well as lower labour costs in administration while marketing and other expenses were generally flat when compared to the same period last year.

Losses from foreign exchange were $0.8 million in the third quarter of 2007 compared with a gain of $0.2 million in the same period last year as the Canadian dollar strengthened significantly against the Euro and the U.S. dollar during the quarter. The Company recorded investment income of $1.0 million in the third quarter of 2007 compared to $1.5 million for the third quarter of 2006 due to higher average cash balances in 2006.

Income tax expense was $2.2 million in the third quarter or 23.7% of pre-tax profits compared to a tax expense of $1.3 million or 21.3% in the third quarter of 2006.

On September 30, 2007, Aastra's balance of cash and short-term investments was $125.6 million compared to $115.7 million on December 31, 2006. Cash flow from operations for the three months ended September 30, 2007 was $20.3 million primarily as a result of strong operating profits and a decrease in accounts receivables. These were offset partially by an increase in inventory and a decrease in accounts payable balances during the quarter. In addition, the Company invested $3.4 million in capital assets during the third quarter.

Finally, as previously announced during the quarter, the Company currently holds $13.7 million of non-bank owned asset-backed commercial papers for which, currently, there is no active market. Of these investments, $8.5 million is invested in Structured Investment Trust III and was not repaid to the Company when it became due on October 10th while $5.2 million invested in Lafayette Structured Credit Trust is not yet due until October 30th of this year.

As a result of the developments above, Aastra commenced legal proceedings today against its investment advisor, HSBC Securities (Canada) Inc. and one of its employees, in the Ontario Superior Court of Justice seeking damages relating to investment advice provided with respect to Aastra's purchase of the Structured Investment Trust III asset-backed commercial paper.

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 2007 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, the material factors that could cause our actual results to differ materially from the forward-looking statements in this press release include: 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; continued demand for our 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; consolidation, reorganization and rapid technological change in our market; competition and the risk of third party claims for infringement; and other risk factors that our business faces.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about these factors that may affect future results can be found under the "Risk Factors" section and in our 2006 Annual Information Form. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.



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

YEAR-TO-DATE 3rd QUARTER
Nine months Three months
ended September 30th ended September 30th
2007 2006 2007 2006
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Sales $ 451,381 $ 439,750 $ 141,148 $ 142,777

Cost of goods sold 260,265 256,413 81,100 84,911
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191,116 183,337 60,048 57,866

Expenses (income):

Selling, general and
administrative 110,236 106,337 34,717 35,408

Research and development 41,667 43,636 12,926 14,265

Amortization 10,278 12,287 3,280 4,019

Foreign exchange (gain) loss (244) (1,035) 814 (228)

Investment income (2,490) (2,888) (1,010) (1,543)

Other charges - 12,860 - -
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Earnings from continuing
operations before
income taxes 31,669 12,140 9,321 5,945

Income taxes 8,020 122 2,209 1,267
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Net earnings from
continuing operations 23,649 12,018 7,112 4,678

Net earnings (loss) from
discontinued operations (141) 17,427 - -
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Net earnings for the
period $ 23,508 $ 29,445 $ 7,112 $ 4,678
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Earnings per share from
continuing operations:

Basic $ 1.48 $ 0.69 $ 0.44 $ 0.27

Diluted $ 1.44 $ 0.67 $ 0.43 $ 0.27
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Earnings per share:

Basic $ 1.47 $ 1.69 $ 0.44 $ 0.27

Diluted $ 1.43 $ 1.65 $ 0.43 $ 0.27
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(a) Actual common shares outstanding as at September 30, 2007 --
16,012,323 (2006 -- 16,930,209)

(a)(a) Weighted average common shares outstanding for the nine months and
three months ended September 30, 2007 -- 16,012,554 and 16,006,831
(2006 -- 17,472,594 and 17,284,497)
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The interim consolidated financial statements for the nine months and
three months ended September 30, 2007 and 2006 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 3rd QUARTER
Nine months Three months
ended September 30th ended September 30th
2007 2006 2007 2006
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Cash and cash equivalents
provided by (used in):

Operations:
Net earnings for
the period $ 23,508 $ 29,445 $ 7,112 $ 4,678
Net loss (earnings) from
discontinued operations 141 (17,427) - -
Amortization of capital
assets 8,111 10,288 2,501 3,091
Amortization of
intangible assets 4,950 5,844 1,620 1,926
Future income taxes 108 4,638 (1,225) 1,334
Stock-based compensation
expense 1,500 880 514 300
Loss on short-term
investments 1,044 379 104 38
Loss on sale of capital
assets 237 103 59 131
Other charges - 12,860 - -
Other - 583 - 195
Change in non-cash
operating working capital (13,053) (1,803) 9,577 (2,689)
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26,546 45,790 20,262 9,004
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Discontinued operations: (141) 20,445 - -
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Financing:
Increase (decrease) in
pension liabilities 617 (104) 344 533
Issuance of common shares
on exercise of options 1,220 1,611 207 82
Repurchase of shares (2,328) (19,729) - (19,729)
Receipt of acquired lease
receivables 7,619 17,106 2,428 4,776
Payment of loan payable
to Seller (7,619) (16,361) (2,428) (2,886)
Bank indebtedness (2,429) (3,583) (1,575) (1,093)
Change in non-cash
financing working capital - 2,137 - 2,137
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(2,920) (18,923) (1,024) (16,180)
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Investments:
Maturity of short-term
investments 77,710 57,925 30,754 9,884
Purchase of short-term
investments (57,012) (93,187) (13,705) (67,716)
Proceeds on disposal of
capital assets 172 378 - 183
Purchase of capital
assets (8,231) (5,993) (3,370) (691)
Business acquisitions,
net of cash acquired (527) - (1,159) -
Change in non-cash
investing working capital - 466 (1,159) -
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12,112 (40,411) 11,361 (58,340)
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Foreign exchange on cash
held in foreign currency (3,997) 155 (1,348) (275)
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Increase (decrease) in
cash and cash equivalents 31,600 7,056 29,251 (65,791)

Cash and cash equivalents,
beginning of period 57,713 54,140 60,062 126,987
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Cash and cash equivalents,
end of period $ 89,313 $ 61,196 $ 89,313 $ 61,196
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The interim consolidated financial statements for the nine months and
three months ended September 30, 2007 and 2006 have not been reviewed by
an auditor.


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

SEPTEMBER DECEMBER SEPTEMBER
30th 2007 31st 2006 30th 2006
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Assets
Current assets:
Cash and cash equivalents $ 89,313 $ 57,713 $ 61,196
Short-term investments 36,310 58,030 82,768
Accounts receivable 124,944 145,350 131,386
Income taxes receivable - - 307
Inventories 83,616 73,484 65,133
Net investment in leases 1,070 1,665 1,340
Acquired lease receivables 6,879 9,998 10,420
Prepaid expenses and other assets 5,146 4,401 5,766
Future income tax assets 8,562 11,671 1,976
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355,840 362,312 360,292

Future income tax assets 3,862 3,879 5,687
Net investment in leases 3,555 3,017 2,849
Acquired lease receivables 8,927 15,053 16,308
Capital assets 33,591 37,182 34,602
Goodwill 11,181 11,547 18,448
Intangible assets 26,185 31,742 25,372
Other assets 742 815 794
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$443,883 $465,547 $464,352
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Liabilities and Shareholders' Equity
Current liabilities:
Indebtedness $ 65 $ 2,586 $ 2,033
Accounts payable and accrued
liabilities 104,585 118,002 116,772
Restructuring accruals 1,451 3,668 6,461
Income taxes payable 24,658 20,999 14,106
Deferred revenue 12,854 14,546 14,401
Loan payable 6,879 9,998 10,420
Future income tax liabilities 1,821 364 1,703
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152,313 170,163 165,896

Contingent consideration payable 3,414 3,822 5,350
Pensions 19,193 20,195 16,820
Loan payable 8,927 15,053 17,057
Future income tax liabilities 6,486 10,380 6,659
Other long-term liabilities 3,557 2,672 2,095
Restructuring accruals - 929 1,999
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193,890 223,214 215,876

Shareholders' equity:
Share capital 98,306 97,513 102,786
Contributed surplus 3,744 2,244 1,939
Accumulated other
comprehensive loss (17,904) (1,549) (13,520)
Retained earnings 165,847 144,125 157,271
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249,993 242,333 248,476
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$443,883 $465,547 $464,352
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The interim consolidated financial statements for the nine months and
three months ended September 30, 2007 and 2006 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
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Accumulated
Other
Common Share Contributed Comprehensive
Shares Capital Surplus Income (Loss)
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Balance, December
31, 2006 16,009,573 $ 97,513 $ 2,244 $ (1,549)

Cumulative impact
of adjusting fair
value of short-term
investments on
adoption of new
standard, net of
income taxes of $65 - - - -

Shares issued on
exercise of options 62,000 1,013 - -

Stock-based compensation - - 986 -

Shares repurchased
for cancellation (70,000) (427) - -

Translation of
self-sustaining
operations - - - (12,009)

Net earnings - - - -
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Balance, June 30,
2007 16,001,573 98,099 3,230 (13,558)
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Shares issued on
exercise of options 10,750 207 - -

Stock-based compensation - - 514 -

Translation of
self-sustaining
operations - - - (4,346)

Net earnings - - - -
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Balance, September
30, 2007 16,012,323 $ 98,306 $ 3,744 $ (17,904)
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Accumulated
Other
Common Share Contributed Comprehensive
Shares Capital Surplus Income (Loss)
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Balance, December
31, 2005 17,473,784 $ 105,370 $ 1,110 $ (25,512)

Shares issued on
exercise of options 149,925 1,529 - -

Stock-based compensation - - 580 -

Translation of
self-sustaining
operations - - - 13,521

Net earnings - - - -
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Balance, June 30,
2006 17,623,709 106,899 1,690 (11,991)
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Shares issued on
exercise of options 6,500 82 - -

Stock-based compensation - - 300 -

Shares repurchased
for cancellation (700,000) (4,246) - -

Transfer from contributed
surplus to share capital - 51 (51) -

Translation of
self-sustaining
operations - - - (1,529)

Net earnings - - - -
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Balance, September
30, 2006 16,930,209 $ 102,786 $ 1,939 $ (13,520)
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Retained Comprehensive
Earnings Total Income (Loss)
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Balance, December 31, 2006 $ 144,125 $ 242,333 $ -

Cumulative impact of adjusting fair
value of short-term investments on
adoption of new standard, net of
income taxes of $65 115 115 -

Shares issued on exercise of options - 1,013 -

Stock-based compensation - 986 -

Shares repurchased for cancellation (1,901) (2,328) -

Translation of self-sustaining
operations - (12,009) (12,009)

Net earnings 16,396 16,396 16,396
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Balance, June 30, 2007 158,735 246,506 4,387
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Shares issued on exercise of options - 207 -

Stock-based compensation - 514 -

Translation of self-sustaining
operations - (4,346) (4,346)

Net earnings 7,112 7,112 7,112
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Balance, September 30, 2007 $ 165,847 $ 249,993 $ 7,153
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Retained Comprehensive
Earnings Total Income (Loss)
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Balance, December 31, 2005 $ 143,309 $ 224,277 $ -

Shares issued on exercise of options - 1,529 -

Stock-based compensation - 580 -

Translation of self-sustaining
operations - 13,521 13,521

Net earnings 24,767 24,767 24,767
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Balance, June 30, 2006 168,076 264,674 38,288
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Shares issued on exercise of options - 82 -

Stock-based compensation - 300 -

Shares repurchased for cancellation (15,483) (19,729) -

Transfer from contributed surplus to
share capital - - -

Translation of self-sustaining
operations - (1,529) (1,529)

Net earnings 4,678 4,678 4,678
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Balance, September 30, 2006 $ 157,271 $ 248,476 $ 41,437
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The interim consolidated financial statements for the nine months and
three months ended September 30, 2007 and 2006 have not been reviewed by
an auditor.

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