Aastra Reports Solid Second Quarter 2007 Financial Results

Sales in the North American Enterprise Communication segment were $23.1 million in the three months ended June 30, 2007, down from $26.0 million in the same period of 2006 primarily as a result of weakness in U.S. sales of large systems during the second quarter as well as a negative impact from foreign exchange on U.S. sales.

Gross margin was 42.6% of sales for the three months ended June 30, 2007, compared with 42.4% of sales for the same period last year. Gross margins improved in Europe to approximately 43.1% of sales from 40.7% 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 41.0% in the second quarter of 2007, down from 50.4% 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 second quarter of 2007 were $14.4 million or 9.2% of sales, compared to $14.5 million or 9.6% of sales in the same quarter of 2006. The reduction in research and development expenses reflects the impact of restructuring efforts taken in Europe in the second half of 2006 offset partially by an increase due to the impact of foreign exchange rates. Selling, general and administrative (“SG&A”) expenses were $38.0 million or 24.2% of sales in the quarter compared to $37.5 million or 24.8% of sales in the second quarter of 2006. The increase in SG&A expenses was driven mainly by the impact of foreign exchange as the labour costs have remained flat in source currencies while marketing and other general expenses increased modestly when compared to the same period last year.

Losses from foreign exchange were $0.1 million in the second quarter of 2007 compared with a gain of $0.6 million in the same period last year as the Canadian dollar strengthened significantly against the Euro, the Swiss franc and the U.S. dollar in the second half of the quarter. The Company recorded investment income of $0.4 million in the second quarter of 2007 compared to $0.8 million for the first quarter of 2006 mainly as a result of mark to market losses incurred due to the sharp increase in the yield curve on high quality fixed income securities held by the Company. Other charges were $nil compared to $12.9 million that was recorded in the second quarter last year as a result of foreign exchange losses incurred as one of the Company’s U.S. subsidiaries repurchased certain shares that it had previously issued to its Canadian parent company.

Income tax expense was $3.1 million in the second quarter or 27.4% of pre-tax profits compared to a tax recovery of $3.0 million in the second quarter of 2006 as a result of the impact of the other charges recorded in that quarter. In addition, the Company recorded a gain of $17.3 million net of tax, from discontinued operations in the second quarter of 2006 as a result of closing the sale of the Digital Video business during that quarter.

Net earnings for the three months ended June 30, 2007 were $8.2 million or $0.50 diluted earnings per share compared to $17.1 million or $0.94 diluted earnings per share in the same period last year. Excluding the gain from discontinued operations and the other charges as described above, net earnings from continuing operations in the second quarter of 2006 would have been approximately $7.5 or $0.41 diluted earnings per share.

On June 30, 2007, Aastra’s balance of cash and short-term investments was $113.5 million compared to $115.7 million on December 31, 2006. Cash flow used in operations for the three months ended June 30, 2007 was $4.2 million primarily as a result of an increase in accounts receivables and inventory and a decrease in accounts payable balances during the quarter. In addition, the Company repurchased 20,000 common shares for $0.7 million and repaid $0.8 million of bank indebtedness during the second quarter of 2007.

Finally, during the second quarter of 2007, the Company completed the purchase of 60% of the outstanding common shares of Soluções de Comunicação, Limitada. (“Elocom”), based in Lisbon, Portugal for consideration of Euro 750,000 ($1.2 million) plus contingent consideration of up to Euro 437,000 ($0.7 million) payable based on the results of operations over the two year period ending December 31, 2008. After the acquisition, the Company owns 100% of Elocom which distributes the NeXspan product line in the Portuguese market.

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
 

2nd Quarter 2007 , PDF, 153 KB

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