Aastra Technologies Limited
TSX : AAH

Aastra Technologies Limited

October 21, 2008 16:01 ET

Aastra Reports Third Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - Oct. 21, 2008) - Aastra Technologies Limited - (TSX:AAH) today announced its unaudited financial results for the third quarter ended September 30, 2008. Net earnings for the three months ended September 30, 2008 were $2.6 million or $0.17 diluted earnings per share compared to $7.1 million or $0.43 diluted earnings per share in the same period in 2007. The financial results for the third quarter include a loss before income taxes of approximately $10.0 million from the acquired Ericsson business. Excluding the impact of this acquisition, net earnings would have been approximately $11.3 million or $0.73 diluted earnings per share due to stable revenue, improved gross margins and strong cost control. In order to address the disappointing results from the acquired Ericsson business, the Company has initiated a restructuring program that is expected to be completed in the fourth quarter of this year.

Sales for the three months ended September 30, 2008 were $224.5 million compared to $141.1 million for the same quarter in 2007, an increase of 59.0%. Sales in European Enterprise Communication segment increased 50.6% from $117.1 million in the three months ended September 30, 2007 to $176.5 million in the same period of 2008. Sales in American Enterprise Communication segment increased to $34.3 million in the three months ended September 30, 2008 from $23.0 million in the same period of 2007. Sales in other regions increased from $1.0 million in the third quarter of last year to $13.7 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 increased by 6.6%.

Gross margin increased to 45.1% of sales for the three months ended September 30, 2008 compared to 42.5% during the same period last year. Gross margins were aided by a positive product mix as well as the impact of a weaker U.S. dollar compared to the Euro in the quarter. Research and development expenses in the third quarter of 2008 were $29.7 million or 13.2% of sales, compared to $12.9 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. Selling, general and administrative expenses were $58.8 million or 26.2% of sales in the quarter compared to $34.7 million or 24.6% of sales in the third quarter of 2007. The increase was also driven by the impact of the Ericsson acquisition.

Losses from foreign exchange were $1.3 million in the third quarter of 2008 compared with losses of $0.8 million in the same period last year as the Euro and Swiss franc weakened against the Canadian dollar during the quarter. In the three months ended September 30, 2008, the Company recognized a further loss on the change in fair value of its investment in asset-backed commercial paper of $0.4 million, resulting in an accumulated discount from face value
of approximately 32.0%.

The Company recorded investment income of $0.5 million in the third quarter of 2008 compared to $1.0 million for the third quarter of 2007. Income tax expense was $0.7 million in the third quarter or 21.7% of pre-tax profits compared to $2.2 million or 23.7% of pre-tax profits in the third quarter of 2007.

On September 30, 2008, Aastra's balance of cash and short-term investments was $82.4 million compared to $133.2 million on December 31, 2007. Cash provided in operations for the three months ended September 30, 2008 was $6.9 million whereas operations provided cash of $20.6 million for the same period of 2007. The Company will continue to focus closely on managing its working capital in light of the recent conditions in the financial markets.

As previously reported, on April 30, 2008, the Company acquired all of the shares and certain assets of the Enterprise Communication Business from Telefonaktiebolaget LM Ericsson and its subsidiaries ("Ericsson"). Subsequently, on October 6, 2008 the Company completed the acquisition of Ericsson's Enterprise Communications Business operations in South Africa. The aggregate purchase price for the total acquisition, now including operations in South Africa, is $107.7 million for goodwill and intangible assets, of which approximately $58.9 million was financed through a three year term loan. On April 30, 2008, $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.

As previously announced, Aastra expected to file the Business Acquisition Report ("BAR") in connection with the completion of the Ericsson acquisition in October 2008. Aastra is taking all necessary steps to file the BAR as soon as possible and now anticipates filing the BAR by the end of November 2008.

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.

Our expectations that we will file our BAR by the end of November 2008 and complete our restructuring program in the fourth quarter of 2008 constitute forward-looking statements within the meaning of applicable Canadian securities legislation. 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 and projections will not be achieved.

We caution readers not to place undue reliance on these forward-looking statements as a number of important factors could cause our actual results to differ materially from the expectations expressed herein. The material factors that could cause our actual filing date for the BAR to differ materially from the forward-looking statement made herein include: the complexity of the carve-out of the related assets and liabilities of Ericsson's Enterprise Communications Business from numerous Ericsson affiliates, including, but not limited to, that the acquired business is global in nature but did not comprise a stand-alone business unit within Ericsson and, as such, did not prepare its own audited financial statements; Ericsson providing reasonable access to the books and records and necessary staff of Ericsson and its affiliates in order for us to prepare the BAR; and Ericsson ensuring that its auditors provide us and our auditors with access to necessary audit papers to complete the BAR. The material factors that could cause our completion of our restructuring program to differ materially from the forward-looking statement made herein include: the complexity of the negotiations with the applicable employee union representatives in Sweden and the magnitude and scope of the proposed restructuring.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on the forward-looking statements made herein to make decisions with respect to us, investors and others should carefully consider the foregoing factors as well as other uncertainties and potential events as further described in detail under the heading "Risk Factors" in our 2007 Annual Information Form filed on www.sedar.com.



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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 3rd QUARTER
Nine months Three months
ended September 30th ended September 30th
2008 2007 2008 2007
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Sales $ 570,292 $ 451,381 $ 224,464 $ 141,148
Cost of goods sold 319,396 260,265 123,237 81,100
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250,896 191,116 101,227 60,048

Expenses (income):
Selling, general and
administrative 150,184 110,118 58,821 34,687
Research and development 70,253 41,667 29,739 12,926
Depreciation and
amortization 16,828 10,278 7,351 3,280
Interest expense 1,502 118 898 30
Foreign exchange loss
(gain) 1,001 (244) 1,293 814
Investment income (2,605) (2,490) (540) (1,010)
Other charges 1,135 - 350 -
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Earnings from continuing
operations before
income taxes 12,598 31,669 3,315 9,321
Income taxes 2,622 8,020 720 2,209
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Net earnings from
continuing operations 9,976 23,649 2,595 7,112
Net loss from discontinued
operations - (141) - -
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Net earnings for the
period $ 9,976 $ 23,508 $ 2,595 $ 7,112
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Earnings per share from
continuing operations:
Basic $ 0.63 $ 1.48 $ 0.17 $ 0.44
Diluted $ 0.63 $ 1.44 $ 0.17 $ 0.43
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Earnings per share:
Basic $ 0.63 $ 1.47 $ 0.17 $ 0.44
Diluted $ 0.63 $ 1.43 $ 0.17 $ 0.43
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(i) Actual common shares outstanding as at September 30, 2008 - 15,540,573
(2007 - 16,012,323)

(ii) Weighted average common shares outstanding for the nine months and
three months ended September 30, 2008 - 15,778,848 and 15,540,062
(2007 - 16,012,554 and 16,006,831)

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The interim consolidated financial statements for the nine months and three
months ended September 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 3rd QUARTER
Nine months Three months
ended September 30th ended September 30th
2008 2007 2008 2007
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Cash and cash equivalents
provided by (used in):
Operations:
Net earnings for the
period $ 9,976 $ 23,508 $ 2,595 $ 7,112
Net loss from
discontinued operations - 141 - -
Depreciation of property
and equipment 8,775 8,111 2,976 2,501
Amortization of
intangible assets 11,230 4,950 5,461 1,620
Future income taxes (5,035) 108 (2,615) (1,225)
Stock-based compensation
expense 1,852 1,500 640 514
Loss on short-term
investments - 1,044 - 104
Loss on sale of property
and equipment 283 237 41 59
Other charges 1,135 - 350 -
Change in pension
liabilities 1,472 617 131 344
Change in non-cash
operating working capital (20,680) (13,708) (2,669) 9,587
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9,008 26,508 6,910 20,616
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Discontinued operations: - (141) - -
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Financing:
Issuance of common shares
on exercise of options 193 1,220 16 207
Repurchase of shares (12,746) (2,328) - -
Receipt of acquired lease
receivables 5,679 7,619 2,211 2,428
Payment of loan to Seller (5,679) (7,619) (2,211) (2,428)
Increase (decrease) in
loans payable 58,724 527 (73) (80)
(Decrease) increase in
bank indebtedness (16) (2,301) - (1,505)
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46,155 (2,882) (57) (1,378)
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Investments:
Maturity of short-term
investments 21,919 77,710 2,062 30,754
Purchase of short-term
investments (20,631) (48,498) (18,631) (5,191)
Purchase of long-term
investment - (8,514) - (8,514)
Proceeds on disposal of
property and equipment 16 172 8 -
Purchase of property and
equipment (12,289) (8,231) (6,415) (3,370)
Business acquisitions,
net of cash acquired (97,479) (527) - (1,159)
Change in non-cash
investing working capital - - - (1,159)
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(108,464) 12,112 (22,976) 11,361
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Foreign exchange on cash
held in foreign currency 3,656 (3,997) (1,079) (1,348)
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Increase (decrease) in
cash and cash equivalents (49,645) 31,600 (17,202) 29,251
Cash and cash equivalents,
beginning of period 112,802 57,713 80,359 60,062
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Cash and cash equivalents,
end of period $ 63,157 $ 89,313 $ 63,157 $ 89,313
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The interim consolidated financial statements for the nine months and three
months ended September 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

SEPTEMBER DECEMBER SEPTEMBER
30th 2008 31st 2007 30th 2007
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Assets
Current assets:
Cash and cash equivalents $ 63,157 $ 112,802 $ 89,313
Short-term investments 19,195 20,365 27,796
Accounts receivable 195,587 123,010 124,944
Inventories 106,465 77,745 83,616
Net investment in leases 3,694 1,731 1,070
Acquired lease receivables 3,848 5,931 6,879
Prepaid expenses and
other assets 9,625 4,201 5,146
Future income tax assets 8,999 8,935 8,562
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410,570 354,720 347,326
Long-term investment 5,861 6,996 8,514
Future income tax assets 996 2,853 3,862
Net investment in leases 12,774 3,532 3,555
Acquired lease receivables 4,046 6,992 8,927
Property and equipment 42,168 35,703 33,591
Goodwill 12,089 10,802 11,181
Intangible assets 109,662 24,221 26,185
Other assets 448 651 742
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$ 598,614 $ 446,470 $ 443,883
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Liabilities and
Shareholders' Equity
Current liabilities:
Indebtedness $ - $ 14 $ -
Accounts payable and
accrued liabilities 196,026 98,836 106,036
Income taxes payable 25,889 24,833 24,658
Deferred revenue 15,562 11,900 12,854
Current portion of contingent
consideration payable 1,895 1,744 1,707
Current portion of loans payable 26,929 5,986 7,143
Future income tax liabilities 735 1,015 1,821
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267,036 144,328 154,219

Contingent consideration payable - - 1,707
Pensions 21,882 19,784 19,193
Loans payable 35,266 7,905 9,891
Future income tax liabilities 3,410 7,633 6,486
Other long-term liabilities 1,653 1,773 2,394
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329,247 181,423 193,890
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Shareholders' equity:
Share capital 95,639 98,442 98,306
Contributed surplus 5,881 4,029 3,744
Accumulated other comprehensive
income (loss) (10,485) (15,530) (17,904)
Retained earnings 178,332 178,106 165,847
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269,367 265,047 249,993
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$ 598,614 $ 446,470 $ 443,883
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The interim consolidated financial statements for the nine months and
three months ended September 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
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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 11,250 177 -
Stock-based compensation - - 1,212
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
Shares issued on exercise
of options 1,000 16 -
Stock-based compensation - - 640
Translation of
self-sustaining
operations - - -
Net earnings - - -
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Balance, September 30, 2008 15,540,573 $ 95,639 $ 5,881
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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 62,000 1,013 -
Stock-based compensation - - 986
Shares repurchased for
cancellation (70,000) (427) -
Translation of
self-sustaining
operations - - -
Net earnings - - -
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Balance, June 30, 2007 16,001,573 $ 98,099 $ 3,230
Shares issued on exercise
of options 10,750 207 -
Stock-based compensation - - 514
Translation of
self-sustaining
operations - - -
Net earnings - - -
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Balance, September 30, 2007 16,012,323 $ 98,306 $ 3,744
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The interim consolidated financial statements for the nine months and
three months ended September 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

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 - - 177 -
Stock-based compensation - - 1,212 -
Shares repurchased for
cancellation - (9,750) (12,746) -
Translation of
self-sustaining
operations 17,387 - 17,387 17,387
Net earnings - 7,381 7,381 7,381
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Balance, June 30, 2008 $ 1,857 $ 175,737 $ 278,458 $ 24,768
Shares issued on
exercise of options - - 16 -
Stock-based
compensation - - 640 -
Translation of
self-sustaining
operations (12,342) - (12,342) (12,342)
Net earnings - 2,595 2,595 2,595
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Balance, September
30, 2008 $ (10,485) $ 178,332 $ 269,367 $ 15,021
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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 - - 1,013 -
Stock-based compensation - - 986 -
Shares repurchased for
cancellation - (1,901) (2,328) -
Translation of
self-sustaining
operations (12,009) - (12,009) (12,009)
Net earnings - 16,396 16,396 16,396
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Balance, June
30, 2007 $ (13,558) $ 158,735 $ 246,506 $ 4,387
Shares issued on
exercise of options - - 207 -
Stock-based compensation - - 514 -
Translation of
self-sustaining
operations (4,346) - (4,346) (4,346)
Net earnings - 7,112 7,112 7,112
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Balance, September
30, 2007 $ (17,904) $ 165,847 $ 249,993 $ 7,153
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The interim consolidated financial statements for the nine months and three
months ended September 30, 2008 have not been reviewed by an auditor.


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