TORONTO, ONTARIO (March 2, 2006) -- Aastra Technologies Limited - (TSX: “AAH”) today announced its unaudited financial results for the fourth quarter and year ended December 31, 2005. During the fourth quarter of 2005 Aastra continued to implement its restructuring plans and work actively on integrating both the EADS Enterprise Telephony business acquired on February 28, 2005 as well as the DeTeWe Telecommunication Systems business acquired on July 31, 2005.
Net earnings for the three months ended December 31, 2005 were $9.2 million or $0.51 diluted earnings per share compared to $10.2 million or $0.58 diluted earnings per share in the same period in 2004. The fourth quarter results for 2005 include three months of operations from both the EADS Enterprise Telephony business as well as the DeTeWe Telecommunication Systems business. Net income for the year ended December 31, 2005 was $26.3 million or $1.46 diluted earnings per share compared to $24.2 million or $1.38 diluted earnings per share in 2004. Excluding acquisitions, net income for 2005 would have been approximately $33.2 million or $1.84 diluted earnings per share, an increase of 37% when compared to 2004 actual results.
In addition, these fourth quarter and year-end 2005 financial results include a significant negative impact from the rapid increase in the value of the Canadian dollar during 2005. During 2005, the Canadian dollar appreciated significantly against both the Euro and Swiss Franc while it also continued to strengthen against the U.S. dollar.
Sales for the three months ended December 31, 2005 were $171.9 million compared to sales of $66.7 million for the same period in 2004, an increase of approximately 158%. Excluding the impact of the EADS and DeTeWe acquisitions as well as changes in foreign exchange, sales in the fourth quarter of 2005 would have increased by more than 11% over the fourth quarter of 2004.
Sales for the year ended December 31, 2005 were $522.6 million compared to $256.1 million for the same period in 2004, an increase of approximately 104%. Again, excluding the impact of acquisitions as well as changes in foreign exchange, sales would have increased by 7% in 2005 from the year ended December 31, 2004.
Including sales from the U.S. operations acquired in the EADS acquisition, sales in the Enterprise Communications - North America segment were $27.3 million in the fourth quarter compared to $15.9 million in the same period in 2004. Including sales from the EADS and DeTeWe acquisitions, sales in the Enterprise Communications – Europe segment were $133.3 million in the fourth quarter compared to $42.3 million for the three months ended December 31, 2004. Sales from the Network Access segment, primarily sales of digital video equipment, were $11.3 million in the fourth quarter compared to $8.5 million in the same period last year.
Gross profit margin was 40% of sales for the three months ended December 31, 2005 compared to 51% of sales in the same quarter last year. While the gross margin on our existing product lines continued to be consistent to last year, this decrease is a result of lower gross margins experienced on the newly acquired product lines as expected.
Research and Development expenses in the fourth quarter of 2005 were $16.2 million or 9.5% of sales, compared to $4.9 million or 7.4% of sales in the comparable quarter of 2004. Selling, general and administrative expenses were $33.1 million or 19.2% of sales in the quarter compared to $16.8 million or 25.2% of sales in the fourth quarter of 2004. In both cases, the increase over the fourth quarter of 2004 is a result of the increased operating costs added as a result of the EADS and DeTeWe acquisitions.
Primarily as a result of bringing certain foreign cash balances back to Canadian dollars from its European operations, Aastra recorded a foreign currency loss of $2.8 million during the fourth quarter compared to a foreign exchange gain of $1.4 million in the fourth quarter of 2004. In addition, as a result of the significant appreciation of the Canadian dollar against both the Euro and the Swiss franc throughout 2005, the Company has recorded a decrease of $25.5 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.
As a result of the lower average cash balances, investment income declined to $0.3 million in the fourth quarter of 2005 compared to $0.6 million in the fourth quarter of 2004. Income tax expense was $2.7 million in the fourth quarter or 22.6% of pre-tax profits compared to $1.7 million or 14.5% of pre-tax profits in the fourth quarter of 2004. 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 $102 million at the end of 2005 compared to a balance of approximately $129 million at the end of December 2004. During 2005, the Company spent $97.6 million on the EADS and DeTeWe business acquisitions while also investing $11.4 million on new capital assets. However, during 2005 Aastra also generated $80.0 million in cash flow from its operations.
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 .
This press release contains forward-looking information or forward-looking statements within the meaning of applicable securities legislation (“forward-looking statements”). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, potentials, future events or performance (often, but not always, using words or phrases such as “believes”, “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, or “intends” or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken or achieved) are not statements of historical fact, but are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Aastra, or developments in Aastra’s business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements may include, but are not limited to: expectations regarding the Aastra’s restructuring and integration plans for the EADS Enterprise Telephony business acquired on February 28, 2005 as well as the DeTeWe Telecommunications Systems business acquired on July 31, 2005. As described in detail under the heading “Risk Factors” in Aastra’s 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: integration of Aastra’s recent acquisitions of EADS’ enterprise telephony business and DeTeWe’s telephony business; continued demand for Aastra’s recently-acquired products; Aastra’s reliance on third party manufacturers and component suppliers (in general and related to the recently-acquired businesses); dependence on key personnel; risks related to expansion of Aastra’s business operations-domestically and internationally; exchange rate fluctuations; risks related to future acquisitions; requirements for additional financing of Aastra’s business; longer credit terms extended to Aastra’s customers; continued implementation of an enterprise resource planning system; potential fluctuations in quarterly financial results; possible volatility to Aastra’s share price; limited range of products that Aastra sells; risks associated with product returns and product defects; Aastra’s ability to protect its intellectual property; Aastra’s potential vulnerability to computer and information systems security breaches; competition from third parties; consolidation and reorganization in the telecommunications industry; rapid technological change; risk of third party claims for infringement of intellectual property rights by others; and risks related to technical standards and the certification our products. The material factors and assumptions that were applied in making the forward-looking statements in this press include: that Aastra will be able to continue with its restructuring and integration plans for the EADS Enterprise Telephony business and the DeTeWe Telecommunications Systems business; that the DeTeWe’s workers’ council will not prevent Aastra from implementing its restructuring plans without any material amendments; and that, after the implementation of the restructuring and integration plans, no further changes will be required in order to return the EADS Enterprise Telephony business and the DeTeWe Telecommunications, respectively, to profitability based upon expected revenues for each.
It is important to note that: unless otherwise indicated, forward-looking statements in this press release describe Aastra’s expectations as of the date of this press release; Aastra cautions readers not to place undue reliance on the forward-looking statements in this press release as actual results may differ materially from expectations if known and unknown risks or uncertainties affect Aastra’s business, or if estimates or assumptions prove inaccurate. Therefore, Aastra cannot provide any assurance that forward-looking statements will materialize and Aastra assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events o other reason.
For further information contact:
Allan Brett, CFO,
905-760-4160
abrett@aastra.com
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Press Contact
Aastra Technologies Ltd.
155 Snow Blvd.
Concord, Ontario
Canada
L4K 4N9
press@aastra.com
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