TORONTO, ONTARIO (February 27, 2007) -- Aastra Technologies Limited - (TSX: “AAH”) today announced its unaudited financial results for the fourth quarter and year ended December 31, 2006. During the fourth quarter of 2006 Aastra continued to focus on integrating its European operations while at the same time actively worked on completing several new product initiatives.
Net earnings for the three months ended December 31, 2006 were $12.5 million or $0.74 diluted earnings per share compared to $9.2 million or $0.51 diluted earnings per share in the same period in 2005. Excluding the impact of earnings from discontinued operations as a result of the sale of the Digital Video business, earnings from continuing operations, net of income taxes were $11.6 million or $0.68 diluted earnings per share in the fourth quarter compared to $5.9 million or $0.33 diluted earnings per share for the same period in 2005. The fourth quarter results in 2006 and 2005 both include three full months of operations from the EADS Telephony Business (“EADS”) and the DeTeWe Telecom Systems Business (“DTW”) acquired in 2005.
Net earnings for the year ended December 31, 2006 were $42.0 million or $2.38 diluted earnings per share compared to $26.3 million or $1.46 diluted earnings per share in 2005. Results for the year ended December 31, 2005 included only ten months and five months of the EADS and DTW businesses respectively.
Sales for the three months ended December 31, 2006 were $160.8 million compared to $163.1 million for the same quarter in 2005, a decrease of 1.4%. Sales in the European Enterprise Communication segment remained flat in the fourth quarter at $134.6 million while sales in the North American Enterprise Communication segment declined 9.0% to $26.7 million primarily as a result of weaker analog and digital terminal sales.
Sales for the year ended December 31, 2006 were $600.5 million compared to $500.8 million for 2005, an increase of approximately 19.9%. Excluding the impact of foreign exchange, the increase in sales would have been approximately 22.6% driven entirely by acquisitions completed in 2005.
Gross profit margin was 42.5% of sales in the fourth quarter of 2006 compared to 37.4% of sales in the same period in 2005. This increase in gross margin is a result of the combined effect of a favourable product mix and lower inventory provisions in the fourth quarter of 2006. Material costs also decreased slightly in the fourth quarter of 2006 as a result of the Company’s ongoing focus to improve its product acquisition cost.
Gross margins for the year ended December 31, 2006 were stable with 2005 at 41.9%. Gross margins were negatively influenced by the full year impact of lower margins experienced on the EADS and DTW product lines. However, this was offset by lower overhead costs and an improvement in product mix.
Research and development expenses in the fourth quarter of 2006 were $16.0 million or 9.9% of sales, compared to $15.4 million or 9.5% of sales in the same quarter of 2005. Research and development expenses increased in the fourth quarter as a result of increased development project activities as well as a decrease in government assistance benefits when compared to the same quarter in 2005. These factors were partially offset with lower research and development labour costs from certain restructuring efforts during the year.
Research and development expenses for the year ended December 31, 2006 increased to $59.6 million or 9.9% of sales from $47.2 million or 9.4% of sales in 2005. Government assistance benefits as well as the full year impact of acquisitions were the main reasons for this increase.
Selling, general and administrative expenses were $38.0 million or 23.6% of sales in the fourth quarter of 2006 compared to $32.3 million or 19.8% of sales in the fourth quarter of 2005. Selling, general and administrative expenses increased substantially as a result of higher sales and marketing expenses incurred in the fourth quarter of 2006.
Selling, general and administrative expenses for the year ended December 31, 2006 were $144.3 million or 24.0% of sales compared to $115.9 million or 23.1% of sales in 2005.
As a result of a weakening Canadian dollar against the euro and Swiss franc in the fourth quarter of 2006, the Company recorded a foreign exchange gain of $1.9 million compared to a loss of $2.8 million in the same quarter last year when the Canadian dollar strengthened significantly against these same currencies. For the year, we recorded foreign exchange gain of $2.9 million compared to a loss of $4.3 million in 2005.
The balance of other charges on the income statement for the year ended December 31, 2006, includes the effects of two unrelated transactions. The first was a one-time foreign exchange loss of $13.2 million and was incurred when one of the Company’s U.S. subsidiaries made the decision to repurchase certain shares that it had previously issued to its Canadian parent company. This transaction resulted in a decrease to the cumulative foreign currency translation account in the equity section of the balance sheet. The second was a gain from contingent consideration not earned by the Seller on a previous acquisition.
As a result of substantially higher average cash balances and better interest rates, investment income increased to $1.5 million in the fourth quarter of 2006 compared to $0.3 million in the same quarter of 2005. Investment income for the year was $4.4 million in 2006 compared to $1.1 million in 2005. Income tax expense was $3.0 million or 20.9% of pre-tax profits in the fourth quarter compared to $0.5 million or 7.5% of pre-tax profits in the same period of 2005. Income tax expenses from continuing operations were $3.2 million for the year in 2006 compared to $4.2 million in 2005. In addition, income tax expense of $10.6 million was recorded against discontinued operations in 2006 and $2.3 million 2005.
Cash and short-term investments totaled $115.7 million at the end of 2006 compared to a balance of $102.0 million at the end of 2005. During 2006, the Company used $51.2 million to repurchase approximately 1.7 million of its common shares. In addition, during 2006 the Company continued to generate strong cash flow from operations of approximately $55 million.
About Aastra Technologies Limited
Aastra Technologies Limited (TSX: “AAH”), headquartered in Concord, Ontario, Canada, develops, markets, and supports a comprehensive portfolio of products, systems, and applications for building and accessing communication networks. Aastra’s products include a full range of both open-standard Internet Protocol (IP)-based and traditional networking solutions including; Enterprise Private Branch Exchanges (PBXs), gateways, digital and analog telephone terminals, VoIP telephones, wireless handsets, and advanced software applications. Aastra serves the majority of telephone companies in North America and Europe, with a growing presence in Australia. For more information on Aastra, visit our Web site at http://www.aastra.com .
This press release may contain 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 Aastra’s restructuring and integration plans for the DeTeWe Telecommunications 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 acquisition of 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 business); 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 DeTeWe Telecommunications business; and that, after the implementation of the restructuring and integration plans, no further changes will be required in order to return the DeTeWe Telecommunications business, to profitability based upon expected revenues.
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 or other reason.
For further information contact:
Allan Brett, CFO,
(905) 760-4200
abrett@aastra.com
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Press Contact
Aastra Technologies Ltd.
155 Snow Blvd.
Concord, Ontario
Canada
L4K 4N9
press@aastra.com
Media Contact:
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Contact Investor Relations:
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