Aastra Reports Third Quarter Financial Results

Transcription

1 PRESS RELEASE For Immediate Release Aastra Reports Third Quarter Financial Results TORONTO, ONTARIO (October 21, 2008) -- Aastra Technologies Limited - (TSX: AAH ) today announced its unaudited financial results for the third quarter ended September 30, 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 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 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 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, 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 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 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 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 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, 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 The Company will continue to focus closely on managing its working capital in light of the recent conditions in the financial markets. 1

2 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 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 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 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 For further information contact: Kathy Ristic, V.P. Finance, (905) investors@aastra.com 2

3 A Aastra Technologies Limited CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) Stated in thousands of Canadian dollars, except per share amounts First Quarter ended March 31, 2005 YEAR-TO-DATE Nine months 3 rd QUARTER Three months Sales $ 570,292 $ 451,381 $ 224,464 $ 141,148 Cost of goods sold 319, , ,237 81,100 Expenses (income): 250, , ,227 60,048 Selling, general and administrative 150, ,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, Foreign exchange loss (gain) 1,001 (244) 1, Investment income (2,605) (2,490) (540) (1,010) Other charges 1, Earnings from continuing operations before income taxes 12,598 31,669 3,315 9,321 Income taxes 2,622 8, ,209 Net earnings from continuing operations 9,976 23,649 2,595 7,112 Net loss from discontinued operations - (141) - - Net earnings for the period $ 9,976 $ 23,508 $ 2,595 $ 7,112 Earnings per share from continuing operations: Basic $ 0.63 $ 1.48 $ 0.17 $ 0.44 Diluted $ 0.63 $ 1.44 $ 0.17 $ 0.43 Earnings per share: Basic $ 0.63 $ 1.47 $ 0.17 $ 0.44 Diluted $ 0.63 $ 1.43 $ 0.17 $ 0.43 * Actual common shares outstanding as at September 30, ,540,573 ( ,012,323) ** Weighted average common shares outstanding for the nine months and three months ended September 30, ,778,848 and 15,540,062 ( ,012,554 and 16,006,831) 3

4 A Aastra Technologies Limited CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Stated in thousands of Canadian dollars First Quarter ended March 31, 2005 Cash and cash equivalents provided by (used in): Operations: YEAR-TO-DATE Nine months 3 rd QUARTER Three months Net earnings for the period $ 9,976 $ 23,508 $ 2,595 $ 7,112 Net loss from discontinued operations 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, Loss on short-term investments - 1, Loss on sale of property and equipment Other charges 1, Change in pension liabilities 1, Change in non-cash operating working capital (20,680) (13,708) (2,669) 9,587 9,008 26,508 6,910 20,616 Discontinued operations: - (141) - - Financing: Issuance of common shares on exercise of options 193 1, 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, (73) (80) (Decrease) increase in bank indebtedness (16) (2,301) - (1,505) Investments: 46,155 (2,882) (57) (1,378) 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 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) (108,464) 12,112 (22,976) 11,361 Foreign exchange on cash held in foreign currency 3,656 (3,997) (1,079) (1,348) 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 Cash and cash equivalents, end of period $ 63,157 $ 89,313 $ 63,157 $ 89,313 4

5 CONSOLIDATED BALANCE SHEETS (UNAUDITED) Stated in thousands of Canadian dollars SEPTEMBER 30 th 2008 DECEMBER 31 st 2007 SEPTEMBER 30 th 2007 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, , ,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, , , ,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 $ 598,614 $ 446,470 $ 443,883 Liabilities and Shareholders Equity Current liabilities: Indebtedness $ - $ 14 $ - Accounts payable and accrued liabilities 196,026 98, ,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, , , ,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, , , ,890 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, , , , , ,993 $ 598,614 $ 446,470 $ 443,883 5

6 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (UNAUDITED) Stated in thousands of Canadian dollars, except share amounts Common Shares Share Capital Contributed Surplus Accumulated Other Retained Earnings Total Balance, December 31, ,015,323 $ 98,442 $ 4,029 $ (15,530) $ 178,106 $ 265,047 $ - Shares issued on exercise of options 11, Stock-based compensation - - 1, ,212 - Shares repurchased for cancellation (487,000) (2,996) - - (9,750) (12,746) - operations ,387-17,387 17,387 Net earnings ,381 7,381 7,381 Balance, June 30, ,539,573 $ 95,623 $ 5,241 $ 1,857 $ 175,737 $ 278,458 $ 24,768 Shares issued on exercise of options 1, Stock-based compensation operations (12,342) - (12,342) (12,342) Net earnings ,595 2,595 2,595 Balance, September 30, ,540,573 $ 95,639 $ 5,881 $ (10,485) $ 178,332 $ 269,367 $ 15,021 Common Shares Share Capital Contributed Surplus Accumulated Other Retained Earnings Total Balance, December 31, ,009,573 $ 97,513 $ 2,244 $ (1,549) $ 144,125 $ 242,333 $ - Change in accounting policy related to financial instruments, net of income taxes of $ Adjusted balance, December 31, ,009,573 97,513 2,244 (1,549) 144, ,448 - Shares issued on exercise of options 62,000 1, ,013 - Stock-based compensation Shares repurchased for cancellation (70,000) (427) - - (1,901) (2,328) - operations (12,009) - (12,009) (12,009) Net earnings ,396 16,396 16,396 Balance, June 30, ,001,573 $ 98,099 $ 3,230 $ (13,558) $ 158,735 $ 246,506 $ 4,387 Shares issued on exercise of options 10, Stock-based compensation operations (4,346) - (4,346) (4,346) Net earnings ,112 7,112 7,112 Balance, September 30, ,012,323 $ 98,306 $ 3,744 $ (17,904) $ 165,847 $ 249,993 $ 7,153 6