Aastra Reports Strong Third Quarter 2007 Financial Earnings

Sales for the third quarter of 2007 were $141.1 million compared to sales of $142.8 million for the same period of 2006, a decrease of 1.1%. Sales in European Enterprise Communication were flat at $117.1 million in the three months ended September 30, 2007 compared to $117.5 million in the same period of 2006. Sales in this segment were negatively impacted by weaker sales in France at the end of the quarter.

Sales in the North American Enterprise Communication segment were $24.0 million in the three months ended September 30, 2007, down from $25.2 million in the same period of 2006 primarily as a result of weakness in U.S. sales of large systems as well as a negative impact from foreign exchange on U.S. sales. Sales of terminals, particularly open standard IP terminals continued to show growth, increasing from approximately $13.9 million in the third quarter of 2006 to $15.3 million this quarter.

Gross margin was 42.5% of sales for the three months ended September 30, 2007, compared with 40.5% of sales for the same period last year. Gross margins improved in Europe to approximately 43.3% of sales from 39.1% of sales in the same period of 2006, as our efforts to improve our cost of supply have started to produce results while pricing across most of Europe has remained fairly stable. Gross margins in North American Enterprise Communication were 40.5% in the second quarter of 2007, down from 47.1% in the same quarter of 2006 as a result of a shift in product sales towards lower margin IP products as well as the effect of lower volumes of service revenue experienced on large systems in the U.S.

Research and development expenses in the third quarter of 2007 were $12.9 million or 9.2% of sales, compared to $14.3 million or 10.0% of sales in the same quarter of 2006. The reduction in research and development expenses reflects the impact of certain restructuring efforts taken in Europe in the second half of 2006. Selling, general and administrative (“SG&A”) expenses were $34.7 million or 24.6% of sales in the quarter compared to $35.4 million or 24.8% of sales in the third quarter of 2006. The decrease in SG&A expenses was driven mainly by the impact of foreign exchange as well as lower labour costs in administration while marketing and other expenses were generally flat when compared to the same period last year.

Losses from foreign exchange were $0.8 million in the third quarter of 2007 compared with a gain of $0.2 million in the same period last year as the Canadian dollar strengthened significantly against the Euro and the U.S. dollar during the quarter. The Company recorded investment income of $1.0 million in the third quarter of 2007 compared to $1.5 million for the third quarter of 2006 due to higher average cash balances in 2006.

Income tax expense was $2.2 million in the third quarter or 23.7% of pre-tax profits compared to a tax expense of $1.3 million or 21.3% in the third quarter of 2006.

On September 30, 2007, Aastra’s balance of cash and short-term investments was $125.6 million compared to $115.7 million on December 31, 2006. Cash flow from operations for the three months ended September 30, 2007 was $20.3 million primarily as a result of strong operating profits and a decrease in accounts receivables. These were offset partially by an increase in inventory and a decrease in accounts payable balances during the quarter. In addition, the Company invested $3.4 million in capital assets during the third quarter.

Finally, as previously announced during the quarter, the Company currently holds $13.7 million of non-bank owned asset-backed commercial papers for which, currently, there is no active market. Of these investments, $8.5 million is invested in Structured Investment Trust III and was not repaid to the Company when it became due on October 10th while $5.2 million invested in Lafayette Structured Credit Trust is not yet due until October 30th of this year.
As a result of the developments above, Aastra commenced legal proceedings today against its investment advisor, HSBC Securities (Canada) Inc. and one of its employees, in the Ontario Superior Court of Justice seeking damages relating to investment advice provided with respect to Aastra’s purchase of the Structured Investment Trust III asset-backed commercial paper.

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 2007 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 , the material factors that could cause our actual results to differ materially from the forward-looking statements in this press release include: 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; continued demand for our 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; consolidation, reorganization and rapid technological change in our market; competition and the risk of third party claims for infringement; and other risk factors that our business faces.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to us, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about these factors that may affect future results can be found under the “Risk Factors” section and in our 2006 Annual Information Form. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by us or on our behalf.

For further information contact:

Allan Brett, CFO,
(905) 760-4160
investors@aastra.com
 

3rd Quarter 2007 , 154 KB

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