Aastra Technologies Limited
TSX : AAH

Aastra Technologies Limited

October 24, 2006 16:01 ET

Aastra Reports Third Quarter Financial Results

TORONTO, ONTARIO--(CCNMatthews - Oct. 24, 2006) - Aastra Technologies Limited -(TSX:AAH) today announced its unaudited financial results for the third quarter ended September 30, 2006. Net earnings for the three months ended September 30, 2006 were $4.7 million or $0.27 diluted earnings per share compared to $3.6 million or $0.20 diluted earnings per share in the same period last year. The results of continuing operations for the third quarter of 2005 have been adjusted to exclude sales and expenses of the Digital Video group. As previously announced, Aastra completed the sale of its Digital Video group on May 31, 2006 and as a result its results of operations have been presented separately as discontinued operations in the consolidated financial statements.

Sales for the three months ended September 30, 2006 were $142.8 million compared to sales of $138.4 million for the same period last year, an increase of approximately 3.2%. Sales in the North American Enterprise Segment were $25.2 million in the quarter compared to sales of $26.6 million in the third quarter last year, a decrease of 5.1%. Sales in the European Enterprise Communication Segment were $117.5 million in the third quarter compared to $111.8 million, an increase of 5.1%.

Gross margin was 40.5% of sales for the three months ended September 30, 2006, a decrease from a gross margin of 42.1% in the third quarter last year. The decrease in gross margins is primarily a result of lower gross margins in Europe resulting from an unfavorable shift in product mix as well as increased inventory provisions in this region.

Research and development expenses in the third quarter of 2006 were $14.3 million or 10.0% of sales, compared to $13.7 million or 9.9% of sales in the same quarter of 2005. Selling, general and administrative expenses were $35.4 million or 24.8% of sales in the quarter compared to $34.9 million or 25.2% of sales in the third quarter of 2005.

Amortization of capital and intangible assets, excluding tooling, was $4.0 million for the third quarter compared to $4.3 million in the same period last year. The Company recorded investment income of $1.5 million in the third quarter compared to $0.3 million for the third quarter last year as a result of substantially higher average interest rates on larger excess cash and short-term investment cash balances this quarter. The Company recorded a foreign exchange gain of $0.2 million in the third quarter of 2006 compared to a foreign exchange loss of $1.9 million in the same period last year. During the third quarter in 2005 the Canadian dollar appreciated rapidly against the Euro while it moved mildly weaker against the Euro in the third quarter this year.

During the third quarter the Company repurchased 700,000 of its own common shares for gross costs of $19.7 million under the terms of the Normal Course Issuer bid that it previously announced. A total of $4.2 million of the cost of this share repurchase has been recorded as a reduction to share capital while the remainder of the repurchase cost has been recorded as a reduction to retained earnings during the quarter.

The Company continued to generate positive cash flow from operations of approximately $11.3 million in the third quarter. At the end of the third quarter, Aastra had cash, cash equivalent and short-term investment balances of $144.0 million compared to $102.0 million at the end of December last year. The Company expects to see continued positive cash flows from operations in the quarters ahead.

About Aastra Technologies Limited

Aastra Technologies Limited (TSX: "AAH"), headquartered in Concord, Ontario, Canada, develops, markets, and supports a comprehensive portfolio of products, systems, and applications for building and accessing communication networks. Aastra's products include a full range of both open-standard Internet Protocol (IP)-based and traditional networking solutions including; Enterprise Private Branch Exchanges (PBXs), gateways, digital and analog telephone terminals, VoIP telephones, wireless handsets, and advanced software applications. Aastra serves the majority of telephone companies 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/

This press release may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation ("forward-looking statements"). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, potentials, future events or performance (often, but not always, using words or phrases such as "believes", "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", or "intends" or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken or achieved) are not statements of historical fact, but are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Aastra, or developments in Aastra's business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements.

Forward-looking statements may include, but are not limited to: expectations regarding Aastra's restructuring and integration plans for the DeTeWe Telecommunications business acquired on July 31, 2005. As described in detail under the heading "Risk Factors" in Aastra's 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: integration of Aastra's recent acquisition of DeTeWe's telephony business; continued demand for Aastra's recently-acquired products; Aastra's reliance on third party manufacturers and component suppliers (in general and related to the recently-acquired business); dependence on key personnel; risks related to expansion of Aastra's business operations-domestically and internationally; exchange rate fluctuations; risks related to future acquisitions; requirements for additional financing of Aastra's business; longer credit terms extended to Aastra's customers; continued implementation of an enterprise resource planning system; potential fluctuations in quarterly financial results; possible volatility to Aastra's share price; limited range of products that Aastra sells; risks associated with product returns and product defects; Aastra's ability to protect its intellectual property; Aastra's potential vulnerability to computer and information systems security breaches; competition from third parties; consolidation and reorganization in the telecommunications industry; rapid technological change; risk of third party claims for infringement of intellectual property rights by others; and risks related to technical standards and the certification our products. The material factors and assumptions that were applied in making the forward-looking statements in this press include: that Aastra will be able to continue with its restructuring and integration plans for the DeTeWe Telecommunications business; and that, after the implementation of the restructuring and integration plans, no further changes will be required in order to return the DeTeWe Telecommunications business to profitability based upon expected revenues.

It is important to note that: unless otherwise indicated, forward-looking statements in this press release describe Aastra's expectations as of the date of this press release; Aastra cautions readers not to place undue reliance on the forward-looking statements in this press release as actual results may differ materially from expectations if known and unknown risks or uncertainties affect Aastra's business, or if estimates or assumptions prove inaccurate. Therefore, Aastra cannot provide any assurance that forward-looking statements will materialize and Aastra assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or other reason.



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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 ended Three months ended
September 30th September 30th

2006 2005 2006 2005
------------------------------------------------------------------------

Sales $ 439,750 $ 337,641 $ 142,777 $ 138,429

Cost of goods sold 256,413 189,119 84,911 80,122
------------------------------------------------------------------------
$ 183,337 $ 148,522 $ 57,866 $ 58,307

Selling, general and
administrative 106,337 83,352 35,408 34,862

Research and development 43,636 31,736 14,265 13,651

Amortization 12,287 11,852 4,019 4,303

Foreign exchange (gain) loss (1,035) 1,510 (228) 1,934

Investment income (2,888) (868) (1,543) (263)

Other charges 12,860 - - -
------------------------------------------------------------------------

Earnings from continuing
operations before
income taxes 12,140 20,940 5,945 3,820

Income taxes 122 3,851 1,267 610
------------------------------------------------------------------------

Net earnings from
continuing operations 12,018 17,089 4,678 3,210

Earnings from discontinued
operations, net of
income taxes 853 43 - 359

Gain on sale of discontinued
operations, net of income
taxes and transaction costs 16,574 - - -
------------------------------------------------------------------------

Net earnings for the period $ 29,445 $ 17,132 $ 4,678 $ 3,569
------------------------------------------------------------------------

Earnings per share from
continuing operations:

Basic $ 0.69 $ 0.99 $ 0.27 $ 0.19

Diluted $ 0.67 $ 0.96 $ 0.27 $ 0.18
------------------------------------------------------------------------

Net earnings per share:

Basic $ 1.69 $ 0.99 $ 0.27 $ 0.21

Diluted $ 1.65 $ 0.96 $ 0.27 $ 0.20
------------------------------------------------------------------------
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(i) Actual common shares outstanding as at September 30,
2006 - 16,930,209 (2005 - 17,423,059)

(ii) Weighted average common shares outstanding for the nine months and
three months ended September 30, 2006 - 17,472,594 and 17,284,497
(2005 - 17,290,844 and 17,365,024)

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The interim consolidated financial statements for the nine months and
three months ended September 30, 2006 and 2005 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 ended Three months ended
September 30th September 30th

2006 2005 2006 2005
------------------------------------------------------------------------

Cash and cash equivalents
provided by (used in)
operations:

Net earnings for the period $ 29,445 $ 17,132 $ 4,678 $ 3,569
(Earnings) loss from
discontinued operations (17,427) (43) - (359)

Amortization of capital
assets 10,288 9,750 3,091 3,935

Amortization of intangible
assets 5,844 5,337 1,926 1,646

Future income taxes 4,638 820 1,334 502

Stock-based compensation
expense 880 536 300 254

Other charges 12,860 - - -

Other 583 68 195 17

Change in non-cash operating
working capital (696) 25,149 (266) 21,969
------------------------------------------------------------------------

46,415 58,749 11,258 31,533
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Cash and cash equivalents
provided by discontinued
operations 20,445 726 - 654
------------------------------------------------------------------------

Cash and cash equivalents
provided by (used in)
financing activities:

Bank indebtedness (3,583) 53 (1,093) 5

Issuance of common shares
on exercise of options 1,611 2,351 82 1,367

Repurchase of shares (19,729) - (19,729) -

Change in non-cash financing
working capital 2,137 - 2,137 -
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(19,564) 2,404 (18,603) 1,372
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Cash and cash equivalents
provided by (used in)
investing activities:

(Purchase) maturity of
short-term investments (34,883) 41,808 (57,794) (22,928)

Net purchase of capital
assets (5,512) (4,845) (377) (1,447)

Business acquisitions - (99,253) - (12,444)
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(40,395) (62,290) (58,171) (36,819)
------------------------------------------------------------------------

Foreign exchange on cash held
in foreign currency 155 (4,311) (275) (1,705)
------------------------------------------------------------------------

Increase (decrease) in cash
and cash equivalents 7,056 (4,722) (65,791) (4,965)

Cash and cash equivalents,
beginning of period 54,140 64,181 126,987 64,424
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Cash and cash equivalents,
end of period $ 61,196 $ 59,459 $ 61,196 $ 59,459
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The interim consolidated financial statements for the nine months and
three months ended September 30, 2006 and 2005 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 2006 31st 2005 30th 2005
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Assets
Current assets:
Cash and cash equivalents $ 61,196 $ 54,140 $ 59,459
Short-term investments 82,768 47,885 23,045
Accounts receivable 131,386 144,480 157,275
Income taxes receivable 307 404 -
Inventories 65,133 59,941 69,082
Net investment in leases 1,340 2,071 746
Acquired lease receivables 10,420 18,789 -
Prepaid expenses and other assets 5,766 9,457 5,761
Future income tax assets 1,976 9,651 4,573
------------------------------------------------------------------------
$360,292 $346,818 $319,941

Future income tax assets 5,687 5,932 10,669
Net investment in leases 2,849 2,793 1,495
Acquired lease receivables 16,308 24,031 -
Capital assets 34,602 39,378 42,895
Goodwill 18,448 18,147 6,353
Intangible assets 25,372 32,131 44,973
Other assets 794 787 908
------------------------------------------------------------------------
$ 464,352 $ 470,017 $ 427,234
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Liabilities and Shareholders' Equity
Current liabilities:
Indebtedness 2,033 5,640 1,224
Accounts payable and accrued
liabilities 116,772 121,068 144,549
Restructuring accruals 6,461 16,973 17,330
Income taxes payable 14,106 11,426 11,128
Deferred revenue 14,401 13,960 8,984
Loan payable 10,420 18,789 -
Future income tax liabilities 1,703 262 -
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$165,896 $188,118 $183,215

Contingent consideration payable 5,350 5,313 5,448
Pensions 16,820 16,506 12,453
Loan payable 17,057 24,031 -
Future income tax liabilities 6,659 8,623 1,075
Other long-term accruals 2,095 622 3,320
Restructuring accruals 1,999 2,527 2,936
------------------------------------------------------------------------
215,876 245,740 208,447

Shareholders' equity:
Share capital 102,786 105,370 104,758
Contributed surplus 1,939 1,110 869
Cumulative foreign currency
translation adjustment (13,520) (25,512) (20,966)
Retained earnings 157,271 143,309 134,126
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248,476 224,277 218,787
------------------------------------------------------------------------

$464,352 $470,017 $427,234
------------------------------------------------------------------------
------------------------------------------------------------------------

The interim consolidated financial statements for the nine months and
three months ended September 30, 2006 and 2005 have not been reviewed by
an auditor.


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AASTRA TECHNOLOGIES LIMITED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
Stated in thousands of Canadian dollars
------------------------------------------------------------------------
Cumul-
ative
Trans-
Contri- lation
Common Share buted Adjust- Retained
Shares Capital Surplus ment Earnings Total
------------------------------------------------------------------------

Balance,
December 31,
2005 17,473,784 $105,370 $1,110 $(25,512) $143,309 $224,277
Shares issued
on exercise
of options 149,925 1,529 - - - 1,529
Stock option
compensation - - 580 - - 580
Translation
of self
sustaining
operations - - - 13,521 - 13,521
Net earnings - - - - 24,767 24,767
------------------------------------------------------------------------

Balance, June
30, 2006 17,623,709 106,899 1,690 (11,991) 168,076 264,674
------------------------------------------------------------------------

Shares issued
on exercise
of options 6,500 82 - - - 82

Stock option
compensation - - 300 - - 300

Shares
repurchased
for
cancellation (700,000) (4,246) - - (15,483) (19,729)

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

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

Net earnings - - - - 4,678 4,678
------------------------------------------------------------------------

Balance,
September
30, 2006 16,930,209 102,786 1,939 (13,520) 157,271 248,476
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------------------------------------------------------------------------
Cumul-
ative
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 102,825 984 - - - 984

Stock option
compensation - - 282 - - 282

Translation of
self
sustaining
operations - - - (11,451) - (11,451)

Net earnings - - - - 13,563 13,563
------------------------------------------------------------------------

Balance,
June 30,
2005 17,309,459 103,391 615 (11,240) 130,557 223,323
------------------------------------------------------------------------

Shares issued
on exercise
of options 113,600 1,367 - - - 1,367

Stock option
compensation - - 254 - - 254

Translation of
self
sustaining
operations - - - (9,726) - (9,726)

Net earnings - - - - 3,569 3,569
------------------------------------------------------------------------

Balance,
September 30,
2005 17,423,059 $104,758 $869 $(20,966) $134,126 $218,787
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The interim consolidated financial statements for the nine months and
three months ended September 30, 2006 and 2005 have not been reviewed by
an auditor.


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