TORONTO, ONTARIO (October 25, 2005) -- Aastra Technologies Limited - (TSX: “AAH”) today announced its unaudited financial results for the third quarter ended September 30, 2005. Net earnings for the three months ended September 30, 2005 were $3.6 million or $0.20 diluted earnings per share compared to $3.7 million or $0.21 diluted earnings per share in the same period last year. The third quarter results for this year include three months of operations from the EADS Enterprise Telephony acquisition that was completed on February 28th as well as two months operating results of the DeTeWe Telecommunication Systems business acquired on July 31st of this year. Net income for the nine months ended September 30, 2005 was $17.1 million or $0.96 diluted earnings per share compared to $14.0 million or $0.80 diluted earnings per share for the same period last year.
Net sales for the three months ended September 30, 2005 were $144.0 million compared to net sales of $60.5 million for the same period last year, an increase of approximately 138%. Excluding the impact of the EADS and DeTeWe acquisitions as well as the change in foreign exchange, net sales would have increased by approximately 8%.
Net sales for the nine months ended September 30, 2005 were $350.7 million compared to $189.4 million for the same period in 2004, an increase of approximately 85%. In addition, excluding the impact of acquisitions as well as changes in foreign exchange, net sales would have increased by 7% in 2005 from the same nine month period in 2004.
Net sales in the Enterprise Communications segment, including sales from the EADS and DeTeWe acquisitions, were $135.7 million in the third quarter compared to $51.7million for the three months ended September 30, 2004. Net sales from the Network Access segment were $8.3 million in the third quarter compared to $8.8 million in the same period last year. While sales of the digital video products increased over the comparable period last year, revenue from the CVX product line continued to decline as expected.
Gross profit margin was 42% of sales for the nine months ended September 30, 2005 compared to 46% of sales in the same quarter last year. While the gross margin on our existing product lines continued to consistent to last year, this decrease is a result of lower gross margins experienced on the new acquired product lines as expected.
Research and development expenses in the third quarter of 2005 were $14.4 million or 10% of sales, compared to $6.2 million or 10% of sales in the comparable quarter of 2004. Selling, general and administrative expenses were $35.9 million or 25% of sales in the quarter compared to $15.7 million or 26% of sales in the third quarter of 2004.
Earnings before income taxes, amortization, foreign exchange and investment income for the quarter were $12.0 million or 8.3% of sales compared to $8.0 million or 13.2% of sales in the same period of 2004. Amortization of capital and intangible assets, excluding tooling, was $4.6 million for the third quarter compared to $2.9 million in the same period last year.
As a result of the completion of two acquisitions in 2005, the Company’s excess cash and short term investment balances were significantly lower during the third quarter and as a result Aastra recorded investment income of $0.3 million in the third quarter compared to $0.7 million for the third quarter last year.
During the third quarter, in anticipation of closing the DeTeWe acquisition, the Company chose to repatriate certain excess funds from its foreign subsidiaries. Primarily as a result of bringing this excess cash back to Canadian dollars, the Company recorded a foreign currency loss of $1.9 million during the third quarter compared to $Nil in the third quarter last year. In addition, as a result of the significant appreciation of the Canadian dollar against both the Euro and the Swiss franc in the past few months, the Company has recorded a potential loss of $21 million in its cumulative translation adjustment account in the equity section of its balance sheet. This implies that, in absence of a decline in the value of the Canadian dollar, the Company would incur additional foreign exchange losses as and when it repatriates additional excess cash from its many foreign subsidiaries.
Income tax expense was $0.8 million in the third quarter or 19.2% of pre-tax profits compared to $0.4 million or 8.8% of pre-tax profits in the third quarter last year. While income tax rates have continued to be impacted by profits in lower tax jurisdictions, there was a continued shift towards more of the Company’s taxable income coming from higher tax jurisdictions in Europe.
Cash and short-term investments totaled approximately $82.5 million at the end of the third quarter compared to a balance of approximately $129.0 million at the end of December 2004. On July 31st, the Company used cash resources of $21.4 (€14.4 million) to purchase the Telecommunication Systems business from DeTeWe Deutsche Telephonwerke AG while early in the 3rd quarter Aastra and EADS agreed on certain adjustments that resulted in an $11.1 million (€6.8 million) reduction in the previously announced purchase price. Finally, the Company generated $32.2 million of positive cash flow from operating profits as well as significant improvements in working capital.
About Aastra Technologies Limited
Aastra Technologies Limited (TSX: “AAH”), headquartered in Concord, Ontario, Canada, develops and markets products and systems for accessing communication networks. Aastra’s products include a full range of residential and business telephone terminals, Enterprise Private Branch Exchanges (PBX), network access servers and high quality digital video gateways. Aastra serves the majority of telephone companies and certain broadcasters in North America and Europe. For more information on Aastra, visit our Web site at http://www.aastra.com .
Certain information discussed in this press release is forward-looking and is subject to important risks and uncertainties. Forward-looking statements include statements of plans, objectives, strategies and expectations. The words “anticipate”, “believe”, “estimate”, and “expect” and similar expressions are intended to identify forward looking statements. The results or events predicted in these statements may differ materially from actual results or events. Please refer to reports filed by Aastra with securities regulatory authorities in Canada for an identification of factors which could cause results or events to differ from current expectations. Aastra disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
For further information contact:
Allan Brett, CFO
905-760-4160
abrett@aastra.com
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