Aastra Reports Second Quarter 2008 Financial Results

Sales in European Enterprise Communication segment increased 24.2% from $133.9 million in the three months ended June 30, 2007 to $166.3 million in the same period of 2008. Sales in American Enterprise Communication segment increased to $26.4 million in the three months ended June 30, 2008 from $22.4 million in the same period of 2007. Sales in Other regions increased from $0.7 million to $13.1 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 declined by approximately 4.0% as sales of existing products were lower in each of the Company’s largest markets in Europe.

Gross margin was consistent at 42.5% of sales for the three months ended June 30, 2008 compared to 42.6% during the same period last year. Research and development expenses in the second quarter of 2008 were $26.8 million or 13.0% of sales, compared to $14.4 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. In addition, the Company recorded severance costs of $5.6 million related to a restructuring in Germany while the Company also recorded a benefit of $3.1 million relating to the receipt of certain investment tax credits in Europe. Selling, general and administrative expenses were $53.2 million or 25.8% of sales in the quarter compared to $37.9 million or 24.2% of sales in the second quarter of 2007. The increase was also driven by the impact of the Ericsson acquisition.

Gains from foreign exchange were $1.2 million in the second quarter of 2008 compared with losses of $0.1 million in the same period last year as the Euro and Swiss franc strengthened against the Canadian dollar during the quarter. In the three months ended June 30, 2008, the Company recognized a further loss on the change in fair value of its investment in asset-backed commercial paper of $0.3 million, resulting in an accumulated discount from face value of approximately 28.0%.

The Company recorded investment income of $0.8 million in the second quarter of 2008 compared to $0.4 million for the second quarter of 2007. Income tax expense was $0.4 million in the second quarter or 15.5% of pre-tax profits compared to $3.1 million or 27.4% of pre-tax profits in the second quarter of 2007.

Net earnings for the three months ended June 30, 2008 were $2.1 million or $0.13 diluted earnings per share compared to $8.2 million or $0.50 diluted earnings per share in the same period in 2007. Net earnings were adversely impacted in the second quarter by certain restructuring efforts undertaken in Europe as well as a negative financial impact from the recent acquisition of the Ericsson Enterprise Communication Business.

On June 30, 2008, Aastra’s balance of cash and short-term investments was $82.9 million compared to $133.2 million on December 31, 2007. Cash used in operations for the three months ended June 30, 2008 was $13.6 million compared to $4.3 million for the same period of 2007. During the second quarter, the Company built up its working capital balances related to the Ericsson acquisition. In addition, the Company used $12.7 million to repurchase 487,000 common shares during the second quarter of 2008 under its on-going Normal Course Issuer Bid.

As previously reported, on April 30, 2008, the Company acquired all of the shares and certain assets of Enterprise Communication Business from Telefonaktiebolaget LM Ericsson and its subsidiaries. The purchase price for the business was $104.6 million for goodwill and intangible assets of which approximately $58.9 million was financed through a three year term loan. At the closing date, $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.

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 .

From time to time, we make written or oral forward-looking statements within the meaning of applicable Canadian securities legislation. We may make such statements in this press release, in other filings with Canadian regulators in reports to shareholders or in other communications. These forward-looking statements include, among others, statements with respect to our medium-term and 2008 objectives, and strategies to achieve our objectives, as well as statements with respect to our beliefs, outlooks, plans, objectives, expectations, anticipations, estimates and intentions. The words “may,” “could,” “should,” “would,” “suspect,” “outlook,” “believe,” “plan,” “anticipate,” “estimate,” “expect,” “intend,” “forecast,” “objective” and words and expressions of similar import are intended to identify forward-looking statements. 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, projections and other forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause our actual results to differ materially from the expectations expressed in such forward-looking statements.

As described in detail under the heading “Risk Factors” in our Annual Information Form filed on www.sedar.com , some of the material factors that could cause our actual results to differ materially from the forward-looking statements in this press release include: integration of our recent acquisitions and continued demand for our products; exchange rate fluctuation of the Canadian dollar against other currencies, particularly with respect to the Swiss franc, Euro and US dollar; product concentration and limited range of products; geographic market concentration in Europe; reliance on third party manufacturers and component suppliers; longer credit terms to customers; continued implementation of our enterprise resource planning system; potential fluctuations in quarterly financial results, particularly as a result of seasonality and geographic market concentration; risks associated with product returns and defects; intellectual proprietary protection; security; competition and rapid technological change in our market; and the risk of third party claims for infringement.

We caution readers not to place undue reliance on these 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.

For further information contact:
Kathy Ristic, V.P. Finance,
(905) 760-6704
investors@aastra.com

2nd Quarter 2008 , PDF, 150 KB

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