Aastra Technologies Limited

Aastra Technologies Limited

March 03, 2005 16:42 ET

Aastra Reports Strong Year End Financial Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: AASTRA TECHNOLOGIES LIMITED

TSX SYMBOL: AAH

MARCH 3, 2005 - 16:42 ET

Aastra Reports Strong Year End Financial Results

TORONTO, ONTARIO--(CCNMatthews - March 3, 2005) - Aastra Technologies
Limited - (TSX:AAH) today announced its unaudited financial results for
the fourth quarter and year ended December 31, 2004. Net earnings for
the three months ended December 31, 2004 were $10.2 million or $0.58
diluted earnings per share compared to $7.1 million or $0.41 diluted
earnings per share in the same period last year.

The fourth quarter results in 2004 included a foreign exchange gain of
approximately $1.6 million as a result of the decision by management to
repatriate the profits of certain foreign operations. Excluding this
gain, the net earnings in the fourth quarter would have been $8.6
million or $0.49 diluted earnings per share. The remainder of the
improvement in the fourth quarter 2004 profits was a result of the
strong operating results of the PBX product line as the full effect of
previous restructuring efforts was realized during the quarter. Net
earnings for the year ended December 31, 2004 were $24.2 million or
$1.38 diluted earnings per share compared to $21.0 million or $1.20
diluted earnings per share for 2003.

Net sales for the three months ended December 31, 2004 were $66.7
million compared to net sales of $73.5 million for the same period last
year, a decrease of approximately 9%. Net sales from the Enterprise
Communications segment, formerly referred to as the Communication Access
Terminals segment, were $58.2 million in the fourth quarter compared to
$61.5 million for the three months ended December 31, 2003. Sales in
this segment included approximately $42.0 million in sales of PBX
communication systems compared to $40.0 million in sales of this product
line in the same period last year.

Net sales from the Network Communication Products segment were $8.5
million in the fourth quarter compared to $12.0 million in the same
period last year. Net sales for the year ended December 31, 2004 were
$256 million compared to net sales of $192 million for the year ended
December 31, 2003, an increase of approximately 33%.

Gross profit margin was 51% of sales for the three months ended December
31, 2004 compared to gross margin of 44% of sales for the same period
last year. This increase was a result of higher gross margins in most
product lines across the Enterprise Communications segment but primarily
the PBX product line. Research and development expenses in the fourth
quarter of 2004 were $4.9 million or 7% of sales, compared to $7.0
million or 9% of sales in the comparable quarter of 2003. Selling,
general and administrative expenses were $16.8 million or 25% of sales
in the fourth quarter of 2004 compared to $16.3 million or 22% in the
fourth quarter of 2003.

The Company recorded a net foreign exchange gain of $1.4 million in the
fourth quarter. This includes the gain of $1.6 million previously
mentioned, as funds from certain self sustaining foreign operations were
repatriated back to Canada in order to assist in funding the EADS
Enterprise Telephony acquisition. If these foreign profits were not
repatriated, this foreign exchange gain would have been recorded as a
Cumulative Translation Adjustment in the equity section of the Balance
Sheet similar to the accounting treatment in previous quarters and would
not have had an impact on the Income Statement.

Earnings before income taxes, amortization and interest for the fourth
quarter ended December 31, 2004 were $14 million or 21% of sales
compared to $10.0 million or 14% of sales in the same period of 2003.
Amortization of capital and intangible assets, excluding tooling, was
$2.7 million for the fourth quarter of 2004 compared to $3.2 million in
the same period last year as certain assets become fully amortized and
not replaced. Investment income was $0.6 million during the fourth
quarter compared to $1.1 million in 2003 as the Company made the
decision during 2004 to significantly reduce the average holding period
of its investments in preparation for the EADS Enterprise Telephony
acquisition.

Income tax expense increased to $1.7 million or 15% of pre-tax income
compared to $0.8 million or 10% of pre-tax income in the fourth quarter
of 2003. While income tax rates have continued to be impacted by profits
in lower tax jurisdictions, there was a shift in the source of the
Company's taxable income during the fourth quarter towards higher
taxation countries in Europe. For the year, income tax expense was $3.2
million or 12% of pre-tax income compared to $3.3 million or 14% in 2003.

As a result of its continued profitability, Aastra experienced an
increase in cash, cash equivalents and short-term investments to
approximately $129 million at the end of 2004 from approximately $119
million at the end of September 2004 and $82 million at the end of 2003.
During the fourth quarter, the Company generated $10 million of positive
cash flow from operations. For the year, the cash generated from
operations was an impressive $54 million in 2004 compared to $24 million
in 2003 as a result of continued profitability and strong working
capital management.

Finally, as previously announced earlier this week, the Company is
pleased to report that it is has closed its acquisition of the EADS
Enterprise Telephony business effective February 28, 2005. This business
includes a unit in Western Europe, with a significant presence in
France, that is focused on VoIP enabled communication systems for medium
to large enterprises as well as a separate unit focused on
communications solutions for the very large call center and campus
market in the United States.

This acquisition included a cash payment of approximately Euro 63.4
million or $104 million on closing and includes potential deferred
payments of up to Euro 5 million or $8 million. In addition, the
acquisition price is subject to certain price adjustments which could
decrease the purchase price based on the final value of the net assets
transferred to Aastra on closing.

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
cable operators and 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, including the "Risk Factors" section of Aastra's Prospectus
dated December 2, 2002, 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 4th QUARTER
Year-ended Three months
Ended ended
December 31st December 31st
2004 2003 2004 2003
---------------------------------------------------------------------
Sales $ 256,119 $ 191,662 $ 66,717 $ 73,466
Cost of goods sold 130,894 105,670 32,422 41,018
---------------------------------------------------------------------
$ 125,225 $ 85,992 $ 34,295 $ 32,448

Selling, general and
administrative 66,526 34,231 16,823 16,294
Research and development 23,599 20,599 4,945 6,979
Amortization 11,320 9,551 2,698 3,189
Foreign exchange loss (gain) (1,229) 928 (1,431) (823)
Investment Income (2,364) (3,560) (616) (1,081)
---------------------------------------------------------------------
Earnings before income
taxes $ 27,373 $ 24,243 $ 11,876 $ 7,890

Income taxes 3,175 3,287 1,724 767
---------------------------------------------------------------------
Net earnings for the period $ 24,198 $ 20,956 $ 10,152 $ 7,123
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic earnings per share
for the period (note 4) $ 1.42 $ 1.24 $ 0.59 $ 0.42
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted earnings per
share for the period
(note 4) $ 1.38 $ 1.20 $ 0.58 $ 0.41
---------------------------------------------------------------------
---------------------------------------------------------------------

(a) Actual common shares outstanding as at December 31, 2004 -
17,206,634 (2003 - 17,032,109)
(b) YTD Weighted average common shares outstanding as at December 31,
2004 -17,093,740 (2003 - 16,941,316)


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

YEAR-TO-DATE 4th QUARTER
Year-ended Three months
Ended ended
December 31st December 31st
2004 2003 2004 2003
---------------------------------------------------------------------
Cash and cash equivalents
provided by (used for)
operations:
Net earnings for the
period $ 24,198 $ 20,956 $ 10,152 $ 7,123
Amortization of capital
assets 9,856 8,037 1,702 3,454
Amortization of
intangible assets 6,206 4,149 1,326 1,730
Future income taxes 1,611 2,081 279 665
Stock compensation expense 248 85 124 85
Pension asset amortization 93 163 (17) 163
Unrealized net foreign
exchange gains (141) - 506 -
Net change in non-cash
working capital 12,406 (11,917) (4,048) 4,618
---------------------------------------------------------------------
54,477 23,554 10,024 17,838
---------------------------------------------------------------------

Cash and cash equivalents
provided by (used in)
financing activities:
Issuance of common shares 1,708 1,455 970 672
Bank indebtedness (6,610) (2,904) (16) (2,538)
---------------------------------------------------------------------
(4,902) (1,449) 954 (1,866)
---------------------------------------------------------------------

Cash and cash equivalents
provided by (used for)
investing activities:
Maturity of short-term
investments 70,280 49,660 26,421 2,692
Purchase of short-term
investments (78,821) (93,843) (29,932) (31,214)
Net purchase of capital
assets (2,242) (3,919) (830) (3,753)
Business acquisition - (26,225) - 8,110
---------------------------------------------------------------------
(10,783) (74,327) (4,341) (24,165)
---------------------------------------------------------------------

Foreign exchange on cash
held in foreign currency (490) (86) (48) 1,488
---------------------------------------------------------------------

Increase (decrease) in
cash and cash equivalents 38,302 (52,308) 6,589 (6,705)
Cash and cash equivalents,
beginning of period 25,879 78,187 57,592 32,584
---------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 64,181 $ 25,879 $ 64,181 $ 25,879
---------------------------------------------------------------------
---------------------------------------------------------------------


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


DECEMBER 31st DECEMBER 31st
2004 2003
--------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 64,181 $ 25,879
Short-term investments 64,853 56,312
Accounts receivable 50,149 69,084
Income taxes receivable 2,039 539
Net investment in leases 756 336
Inventories 47,229 52,783
Deposits and prepaid expenses 2,193 1,785
Future income taxes 1,326 4,801
--------------------------------------------------------------------
$ 232,726 $ 211,519

Future income taxes 9,690 4,491
Net investment in leases 1,793 740
Capital assets, net 16,974 24,588
Accrued pension asset 1,046 1,139
Goodwill 6,353 6,353
Intangible assets 13,875 23,417
--------------------------------------------------------------------
$ 282,457 $ 272,247
--------------------------------------------------------------------
--------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current liabilities:
Indebtedness - 6,610
Accounts payable and accrued liabilities 44,901 55,194
Income taxes payable 8,972 5,483
Deferred revenue 2,339 4,039
--------------------------------------------------------------------
$ 56,212 $ 71,326

Contingent consideration payable 6,300 6,240
--------------------------------------------------------------------
62,512 77,566

Shareholders' equity:
Share capital 102,407 100,699
Contributed surplus 333 85
Cumulative foreign currency
translation adjustment 211 1,101
Retained earnings 116,994 92,796
--------------------------------------------------------------------
219,945 194,681
--------------------------------------------------------------------

$ 282,457 $ 272,247
--------------------------------------------------------------------
--------------------------------------------------------------------


---------------------------------------------------------------------
---------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)

YEAR-TO-DATE 4th QUARTER
Year-ended Three months
ended December 31st ended December 31st
2004 2003 2004 2003
---------------------------------------------------------------------
Retained earnings,
beginning of period $ 92,796 $ 71,840 $ 106,842 $ 85,673
Net earnings 24,198 20,956 10,152 7,123
---------------------------------------------------------------------
Retained earnings,
end of period $ 116,994 $ 92,796 $ 116,994 $ 92,796
---------------------------------------------------------------------
---------------------------------------------------------------------



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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Aastra Technologies Limited
    Allan Brett
    CFO
    905-760-4160
    abrett@aastra.com