Aastra Technologies Limited
TSX : AAH

Aastra Technologies Limited

October 19, 2010 17:01 ET

Aastra Reports Third Quarter Earnings

TORONTO, ONTARIO--(Marketwire - Oct. 19, 2010) - Aastra Technologies Limited - (TSX:AAH) today reported its unaudited financial results for the third quarter ended September 30, 2010.

Sales for the three months ended September 30, 2010 were $161.8 million compared to $198.7 million for the same quarter in 2009, a decline of approximately 18.6%. As a result of the continued strength of the Canadian dollar against most other currencies, the Company experienced a significant sales drop of $18.7 million directly from changes in foreign exchange when compared to the third quarter of 2009. Excluding the impact of foreign exchange, sales would have decreased approximately $18.2 million or 9.2% in the third quarter from the same period last year.

Gross margin was 41.3% of sales in the third quarter of 2010 compared to 44.7% of sales in the same period in 2009. While the weaker Euro is still having a negative impact compared to last year, gross margin for the quarter was also negatively impacted by an unfavorable product mix and a higher overhead ratio.

Research and development expenses in the third quarter of 2010 were $16.1 million or 10.0% of sales, compared to $18.8 million or 9.5% of sales in the same quarter of 2009. The decrease was partially related to the impact of foreign exchange rates on European development costs, while the increase as a percentage of revenue is the result of the lower revenue recorded in the third quarter this year.

Selling, general and administrative ("SG&A") expenses were $43.9 million or 27.2% of sales in the third quarter of 2010 compared to $49.6 million or 25.0% of sales in the third quarter of 2009. SG&A expenses decreased mainly as a result of the impact of foreign exchange rates on European SG&A costs.

Foreign exchange losses of $1.7 million were recognized in the third quarter of 2010, primarily in our European operations, where a continued weakening of the Euro to the Swedish Krona and the Swiss Franc occurred during the quarter. In addition, the continued strength of the Canadian dollar to the Euro and U.S. dollar had a negative impact in the third quarter. Amortization expense recorded in operating expenses decreased to $5.1 million in the third quarter of 2010 compared to $6.2 million in the third quarter of 2009 as a result of foreign exchange rates as well as the fact that certain intangible assets have become fully amortized during the past year.

The Company recorded interest expense of $0.1 million in the third quarter of 2010 compared to $0.2 million in the third quarter last year as both the outstanding principal balance and variable interest rates on the company's term loan are lower. Investment income totaled $0.6 million in the third quarter, down slightly from $0.8 million in the same quarter of 2009 as a result of a lower excess cash position. Income tax expense was recognized at $0.1 million or 19.3% of pre-tax earnings in the third quarter compared to $2.8 million or 22.7% of pre-tax earnings in the third quarter last year.

As a result of the above, net earnings were $0.4 million or $0.03 diluted earnings per share in the third quarter compared to $9.6 million or $0.71 diluted earnings per share in the same period in 2009.

Cash and short-term investments totaled $82.2 million at the end of September 2010 compared to $116.9 million at December 31, 2009 and $104.4 million at the end of the second quarter this year. During the third quarter of 2010, the Company invested $9.0 million of cash in operating activities as, despite continued cash flow from earnings, there was a reduction of $15.2 million in the quarter from an increase in non-cash working capital. The working capital increase was driven by an increase of $26.7 million in inventory and offset partially by an increase in accounts payable. In addition, the Company used $2.8 million to pay dividends to shareholders and $7.7 million to repay long term debt while an additional $2.9 million was invested in capital and intangible assets during the third quarter.

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 November 24, 2010 to all shareholders of record on November 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                 
      YEAR-TO-DATE       3rd QUARTER  
      Nine months       Three months  
      ended September 30th       ended September 30th  
      2010       2009       2010       2009  
Sales   $ 504,900     $ 615,093     $ 161,760     $ 198,666  
Cost of goods sold     286,576       331,199       94,938       109,853  
      218,324       283,894       66,822       88,813  
Expenses (income):                                
  Selling, general and administrative     136,492       165,828       43,942       49,568  
  Research and development     51,193       62,580       16,116       18,845  
  Depreciation and amortization     15,706       17,672       5,122       6,167  
  Interest expense     282       1,109       99       176  
  Foreign exchange loss     7,405       1,397       1,727       1,959  
  Investment income     (1,903 )     (2,157 )     (644 )     (778 )
  Other (income) charges     (2,682 )     399       -       399  
Earnings before income taxes     11,831       37,066       460       12,477  
Income taxes     2,248       7,766       89       2,829  
Net earnings for the period   $ 9,583     $ 29,300     $ 371     $ 9,648  
Earnings per share:                                
  Basic   $ 0.69     $ 2.09     $ 0.03     $ 0.71  
  Diluted   $ 0.68     $ 2.09     $ 0.03     $ 0.71  
     
  * Actual common shares outstanding as at September 30, 2010 – 14,034,385 (2009 – 13,674,710)
     
  ** Weighted average common shares outstanding for the nine months and three months ended September 30, 2010 – 13,978,455 and 14,034,385 (2009 – 14,007,901 and 13,674,710)
     
  *** Weighted average fully diluted common shares outstanding for the nine months and three months ended September 30, 2010 – 14,136,397 and 14,098,247 (2009 – 14,007,901 and 13,674,710)
     
 
The interim consolidated financial statements for the nine months and three months ended September 30, 2010 have not been reviewed by an auditor.
 
 
 
   
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  
      2010       2009       2010       2009  
Cash and cash equivalents provided by (used in):                                
Operations:                                
  Net earnings for the period   $ 9,583     $ 29,300     $ 371     $ 9,648  
  Depreciation of property, plant and equipment     8,566       9,081       2,892       3,046  
  Amortization of intangible assets     10,234       12,254       3,330       4,177  
  Future income taxes     (2,422 )     (1,766 )     (705 )     (1,617 )
  Stock-based compensation expense     1,718       1,792       573       558  
  Loss on sale of property, plant and equipment     447       359       129       149  
  Other (income) charges     (2,682 )     399       -       399  
  Change in non-cash pension liabilities     (74 )     573       (420 )     328  
  Change in non-cash operating working capital     (33,686 )     4,808       (15,162 )     21,146  
      (8,316 )     56,800       (8,992 )     37,834  
Financing:                                
  Dividends to shareholders     (8,387 )     -       (2,807 )     -  
  Issuance of common shares on exercise of options     3,063       3,395       -       -  
  Repurchase of shares     -       (17,722 )     -       -  
  Receipt of acquired lease receivables     1,156       2,863       292       976  
  Payment of loan to Seller     (1,156 )     (2,863 )     (292 )     (976 )
  Payment of loans payable     (14,874 )     (22,742 )     (7,681 )     (7,764 )
      (20,198 )     (37,069 )     (10,488 )     (7,764 )
Investing:                                
  Maturity of short-term investments     3,068       -       5       -  
  Purchase of short-term investments     -       (3,038 )     -       -  
  Interest received from long-term investment     12       417       4       -  
  Proceeds on disposal of property, plant and equipment     9       41       9       14  
  Purchase of property, plant and equipment     (8,033 )     (7,855 )     (2,370 )     (2,202 )
  Purchase of intangible assets     (1,057 )     (1,108 )     (521 )     (403 )
  Business acquisition, net of cash acquired     -       2,663       -       -  
  Disposition, net of cash     3,649       -       -       -  
      (2,352 )     (8,880 )     (2,873 )     (2,591 )
Foreign exchange on cash held in foreign currency     (758 )     (6,580 )     212       (2,514 )
Increase (decrease) in cash and cash equivalents     (31,624 )     4,271       (22,141 )     24,965  
Cash and cash equivalents, beginning of period     113,596       97,637       104,113       76,943  
Cash and cash equivalents, end of period   $ 81,972     $ 101,908     $ 81,972     $ 101,908  
 
The interim consolidated financial statements for the nine months and three months ended September 30, 2010 have not been reviewed by an auditor.
 
 
 
 
AASTRA TECHNOLOGIES LIMITED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Stated in thousands of Canadian dollars                     
    SEPTEMBER 30th 2010     DECEMBER 31st 2009     SEPTEMBER 30th 2009
ASSETS                      
Current assets:                      
  Cash and cash equivalents   $ 81,972     $ 113,596     $ 101,908
  Short-term investments     272       3,309       3,695
  Accounts receivable     160,526       175,331       163,815
  Income taxes receivable     4,727       5,986       7,080
  Inventories     114,898       81,398       96,495
  Net investment in leases     15,682       11,831       5,924
  Acquired lease receivables     906       1,544       1,998
  Prepaid expenses and other assets     9,372       7,088       7,392
  Future income tax assets     5,654       6,395       5,190
      394,009       406,478       393,497
Long-term investment     4,517       4,525       4,600
Future income tax assets     3,751       3,901       4,822
Net investment in leases     27,042       28,597       34,733
Acquired lease receivables     839       1,597       2,037
Property, plant and equipment     39,028       41,920       42,747
Goodwill     47,897       46,391       49,333
Intangible assets     41,440       51,460       58,108
Other assets     664       611       677
    $ 559,187     $ 585,480     $ 590,554
LIABILITIES AND SHAREHOLDERS' EQUITY                      
Current liabilities:                      
  Accounts payable and accrued liabilities   $ 150,548     $ 148,076     $ 163,947
  Income taxes payable     23,207       33,294       29,749
  Deferred revenue     22,207       23,686       21,335
  Current portion of loans payable     16,395       16,490       17,665
  Future income tax liabilities     574       961       1,255
      212,931       222,507       233,951
                       
Pensions     21,961       25,488       25,923
Loans payable     956       16,561       17,838
Future income tax liabilities     11,921       14,281       18,544
Other long-term liabilities     3,413       3,802       2,732
      251,182       282,639       298,988
 
Shareholders' equity:                      
  Share capital     93,551       90,488       85,613
  Contributed surplus     9,183       7,465       8,276
  Accumulated other comprehensive (loss) income     (6,269 )     (5,456 )     582
  Retained earnings     211,540       210,344       197,095
      308,005       302,841       291,566
    $ 559,187     $ 585,480     $ 590,554
 
The interim consolidated financial statements for the nine months and three months ended September 30, 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   -     -     -     -       (5,580 )     (5,580 )     -  
Shares issued on exercise of options   182,050     3,063     -     -       -       3,063       -  
Stock-based compensation   -     -     1,145     -       -       1,145       -  
Translation of self-sustaining                                                
operations   -     -     -     (15,895 )     -       (15,895 )     (15,895 )
Net earnings   -     -     -     -       9,212       9,212       9,212  
Balance, June 30, 2010   14,034,385   $ 93,551   $ 8,610   $ (21,351 )   $ 213,976     $ 294,786     $ (6,683 )
Dividends   -     -     -     -       (2,807 )     (2,807 )     -  
Stock-based compensation   -     -     573     -       -       573       -  
Translation of self-sustaining operations   -     -     -     15,082       -       15,082       15,082  
Net earnings   -     -     -     -       371       371       371  
   
Balance, September 30, 2010   14,034,385   $ 93,551   $ 9,183   $ (6,269 )   $ 211,540     $ 308,005     $ 8,770  

 

                          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   326,875       3,395       -     -       -       3,395       -  
Stock-based compensation   -       -       1,234     -       -       1,234       -  
Shares repurchased for cancellation   (1,417,738 )     (8,733 )     -     -       (8,989 )     (17,722 )     -  
Translation of self-sustaining operations   -       -       -     (11,230 )     -       (11,230 )     (11,230 )
Net earnings   -       -       -     -       19,652       19,652       19,652  
Balance, June 30, 2009   13,674,710     $ 85,613     $ 7,718   $ 8,358     $ 187,447     $ 289,136     $ 8,422  
Stock-based compensation   -       -       558     -       -       558       -  
Translation of self-sustaining operations   -       -       -     (7,776 )     -       (7,776 )     (7,776 )
Net earnings   -       -       -     -       9,648       9,648       9,648  
   
Balance, September 30, 2009   13,674,710     $ 85,613     $ 8,276   $ 582     $ 197,095     $ 291,566     $ 10,294  
 
The interim consolidated financial statements for the nine months and three months ended September 30, 2010 have not been reviewed by an auditor.

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