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Press release from Marketwire

Aastra Reports Second Quarter Earnings

Tuesday, July 20, 2010

Aastra Reports Second Quarter Earnings17:01 EDT Tuesday, July 20, 2010TORONTO, ONTARIO--(Marketwire - July 20, 2010) - Aastra Technologies Limited - (TSX:AAH) today reported its unaudited financial results for the second quarter ended June 30, 2010.Sales for the three months ended June 30, 2010 were $171.2 million compared to $197.2 million for the same quarter in 2009, a decline of approximately 13%. As a result of the continued strength of the Canadian dollar against most other currencies, the Company experienced a significant sales drop of $29.0 million directly from changes in foreign exchange when compared to the second quarter of 2009. Excluding the impact of foreign exchange, sales would have increased approximately $3 million or 1.6% in the second quarter from the same period last year. In addition, as a result of higher sales in Germany and several other regions, sales would have increased approximately $12 million or 7.0% when compared to the first quarter of this year if changes in the foreign exchange were excluded.Gross margin was 44.1% of sales in the second quarter of 2010 compared to 45.6% of sales in the same period in 2009. While the weaker Euro is still having a negative impact compared to last year, gross margin for the quarter was relatively stable to gross margin of 44.2% of sales realized in the first quarter of this year.Research and development expenses in the second quarter of 2010 were $16.6 million or 9.7% of sales, compared to $21.8 million or 11.1% of sales in the same quarter of 2009. The decrease was primarily related to the impact of foreign exchange rates on European development costs, while the decrease as a percentage of revenue is the result of a continued streamlining of development costs across all major product lines.Selling, general and administrative ("SG&A") expenses were $46.1 million or 26.9% of sales in the first quarter of 2010 compared to $56.0 million or 28.4% of sales in the second quarter of 2009. SG&A expenses decreased as a result of the impact of foreign exchange rates on European SG&A costs as well as general reduction in over-all expenses.Foreign exchange losses of $1.6 million were recognized in the second quarter of 2010, primarily in our European operations, where a continued weakening of the Euro to the Swiss Franc and the Canadian dollar occurred during the quarter. Amortization expense recorded in operating expenses decreased to $5.1 million in the second quarter of 2010 compared to $5.6 million in the second quarter of 2009 as a result of foreign exchange rates as well as the fact that certain intangible assets have become fully amortized during the past year.The Company recorded interest expense of $0.1 million in the second quarter of 2010 compared to $0.2 million in the second quarter last year as both the outstanding principal balance and variable interest rates on the company's term loan are lower. Investment income totaled $0.6 million in the second quarter, down slightly from $0.7 million in the same quarter of 2009. Income tax expense was recognized at $1.4 million or 20.4% of pre-tax earnings in the quarter compared to $1.2 million or 18.2% of pre-tax earnings in the first quarter last year.As a result of the above, net earnings were $5.3 million or $0.37 diluted earnings per share in the second quarter in 2010 compared to $5.5 million or $0.40 diluted earnings per share in the same period in 2009.Cash and short-term investments totaled $104.4 million at the end of June 2010 compared to $116.9 million at December 31, 2009 and $118.8 million at the end of the first quarter this year. During the second quarter of 2010, the Company used $6.3 million of cash in operating activities as, despite continued cash flow from earnings, there was a reduction of $17.9 million in the quarter from an increase in non-cash working capital. The working capital increase was mainly driven by an increase of $6.6 million in inventory and a decrease in accounts payable by $10.8 million during the quarter. In addition, the Company used $2.8 million to pay dividends to shareholders while an additional $2.8 million was invested in capital asset during the second quarter.The Company is also pleased to announce that it will pay a dividend to its shareholders of $0.20 per share for this quarter, payable on August 24, 2010 to all shareholders of record on August 3, 2010. The dividend declared today has been designated as an "eligible" dividend for the purposes of the Income Tax Act (Canada) and similar provincial legislation. Shareholders of Aastra are entitled to receive dividends only if and when such dividends have been declared and there is no entitlement to any dividends prior to any declaration thereof by Aastra's Board of Directors.About Aastra Technologies LimitedAastra 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 solutions, including terminals, systems, and applications. For additional information on Aastra, visit our website at http://www.aastra.com.Certain statements made herein may be forward-looking statements within the meaning of applicable Canadian securities legislation. These forward-looking statements include, among others, statements with respect to our Board of Directors declaring any future quarterly dividends and, if so declared, the amount of such dividends. 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 such forward-looking statements will not be achieved.Shareholders are entitled to receive dividends only if and when such dividends have been declared and there is no entitlement to any dividends prior to any declaration thereof by our Board of Directors. The material factors that will be considered by our Board of Directors in determining whether it is appropriate to declare any future dividends, and the amount of any such dividends, include: our earnings, cash flow, quarterly fluctuations in financial results and financing requirements to fund acquisitions or other business opportunities. Please refer to our filings on the website maintained by the Canadian Securities Administrators at www.sedar.com, including our Annual Information Form and our annual and quarterly Management Discussion and Analyses for other material factors that may be considered by our Board of Directors in determining whether to declare any future dividends and the amount of any such dividends.We caution readers not to place undue reliance on these forward-looking statements as our actual results may differ materially from our expectations if known and unknown risks or uncertainties affect our business, or if our estimates or assumptions prove inaccurate. Therefore, we cannot provide any assurance that forward-looking statements will materialize. Unless otherwise required pursuant to applicable Canadian securities legislation, we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason. ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- AASTRA TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) Stated in thousands of Canadian dollars, except per share amounts YEAR-TO-DATE 2nd QUARTER Six months Three months ended June 30th ended June 30th 2010 2009 2010 2009 ---------------------------------------------------------------------------- Sales $ 343,140 $ 416,427 $ 171,207 $ 197,151 Cost of goods sold 191,638 221,346 95,729 107,222 ---------------------------------------------------------------------------- 151,502 195,081 75,478 89,929 Expenses (income): Selling, general and administrative 92,550 116,260 46,107 55,987 Research and development 35,077 43,735 16,575 21,826 Depreciation and amortization 10,584 11,505 5,059 5,607 Interest expense 183 933 77 197 Foreign exchange loss (gain) 5,678 (562) 1,601 270 Investment income (1,259) (1,379) (560) (708) Other income (2,682) - - - ---------------------------------------------------------------------------- Earnings before income taxes 11,371 24,589 6,619 6,750 Income taxes 2,159 4,937 1,350 1,231 ---------------------------------------------------------------------------- Net earnings for the period $ 9,212 $ 19,652 $ 5,269 $ 5,519 ---------------------------------------------------------------------------- Earnings per share: Basic $ 0.66 $ 1.44 $ 0.38 $ 0.41 Diluted $ 0.65 $ 1.44 $ 0.37 $ 0.40 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (i) Actual common shares outstanding as at June 30, 2010 - 14,034,385 (2009 - 13,674,710) (ii) Weighted average common shares outstanding for the six months and three months ended June 30, 2010 - 13,950,491 and 13,995,209 (2009 - 13,691,626 and 13,552,444) (iii) Weighted average fully diluted common shares outstanding for the six months and three months ended June 30, 2010 - 14,155,472 and 14,165,398 (2009 - 13,691,626 and 13,635,143) The interim consolidated financial statements for the six months and three months ended June 30, 2010 have not been reviewed by an auditor. ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- AASTRA TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Stated in thousands of Canadian dollars YEAR-TO-DATE 2nd QUARTER Six months Three months ended June 30th ended June 30th 2010 2009 2010 2009 ---------------------------------------------------------------------------- Cash and cash equivalents provided by (used in): Operations: Net earnings for the period $ 9,212 $ 19,652 $ 5,269 $ 5,519 Depreciation of property, plant and equipment 5,674 6,035 2,622 3,099 Amortization of intangible assets 6,904 8,077 3,294 3,998 Future income taxes (1,717) (149) (648) 1,762 Stock-based compensation expense 1,145 1,234 576 590 Loss on sale of property, plant and equipment 318 210 187 42 Other income (2,682) - - - Change in non-cash pension liabilities 346 245 253 73 Change in non-cash operating working capital (18,524) (16,338) (18,623) (3) ---------------------------------------------------------------------------- 676 18,966 (7,070) 15,080 ---------------------------------------------------------------------------- Financing: Dividends to shareholders (5,580) - (2,793) - Issuance of common shares on exercise of options 3,063 3,395 847 2,588 Repurchase of shares - (17,722) - - Receipt of acquired lease receivables 864 1,887 434 900 Payment of loan to Seller (864) (1,887) (434) (900) Payment of loans payable (7,193) (14,978) (69) (79) ---------------------------------------------------------------------------- (9,710) (29,305) (2,015) 2,509 ---------------------------------------------------------------------------- Investing: Maturity of short-term investments 3,063 - - - Purchase of short-term investments - (3,038) - - Interest received from long-term investment 8 417 2 122 Proceeds on disposal of property, plant and - 27 - 25 equipment Purchase of property, plant and equipment (5,663) (5,653) (2,772) (2,873) Purchase of intangible assets (536) (705) (316) (284) Business acquisition, net of cash acquired - 2,663 - - Disposition, net of cash 3,649 - - - Changes in non-cash investing working capital - - (201) - ---------------------------------------------------------------------------- 521 (6,289) (3,287) (3,010) ---------------------------------------------------------------------------- Foreign exchange on cash held in foreign currency (970) (4,066) (2,058) (968) ---------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (9,483) (20,694) (14,430) 13,611 Cash and cash equivalents, beginning of period 113,596 97,637 118,543 63,332 ---------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 104,113 $ 76,943 $ 104,113 $ 76,943 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- The interim consolidated financial statements for the six months and three months ended June 30, 2010 have not been reviewed by an auditor. ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- AASTRA TECHNOLOGIES LIMITED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Stated in thousands of Canadian dollars JUNE 30th DECEMBER 31st JUNE 30th 2010 2009 2009 ---------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 104,113 $ 113,596 $ 76,943 Short-term investments 256 3,309 3,639 Accounts receivable 154,786 175,331 190,687 Income taxes receivable 4,264 5,986 8,847 Inventories 88,177 81,398 102,173 Net investment in leases 12,551 11,831 7,551 Acquired lease receivables 965 1,544 2,562 Prepaid expenses and other assets 8,850 7,088 8,448 Future income tax assets 5,684 6,395 6,264 ---------------------------------------------------------------------------- 379,646 406,478 407,114 Long-term investment 4,517 4,525 4,999 Future income tax assets 3,625 3,901 4,709 Net investment in leases 26,441 28,597 32,330 Acquired lease receivables 945 1,597 2,642 Property, plant and equipment 37,901 41,920 45,508 Goodwill 43,153 46,391 48,498 Intangible assets 40,253 51,460 61,467 Other assets 676 611 709 ---------------------------------------------------------------------------- $ 537,157 $ 585,480 $ 607,976 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 136,863 $ 148,076 $ 175,884 Income taxes payable 26,306 33,294 27,532 Deferred revenue 20,260 23,686 23,584 Current portion of loans payable 21,744 16,490 17,831 Future income tax liabilities 535 961 274 ---------------------------------------------------------------------------- 205,708 222,507 245,105 Pensions 20,839 25,488 26,595 Loans payable 1,114 16,561 25,722 Future income tax liabilities 11,554 14,281 18,551 Other long-term liabilities 3,156 3,802 2,867 ---------------------------------------------------------------------------- 242,371 282,639 318,840 ---------------------------------------------------------------------------- Shareholders' equity: Share capital 93,551 90,488 85,613 Contributed surplus 8,610 7,465 7,718 Accumulated other comprehensive (loss) income (21,351) (5,456) 8,358 Retained earnings 213,976 210,344 187,447 ---------------------------------------------------------------------------- 294,786 302,841 289,136 ---------------------------------------------------------------------------- $ 537,157 $ 585,480 $ 607,976 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- The interim consolidated financial statements for the six months and three months ended June 30, 2010 have not been reviewed by an auditor. ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- AASTRA TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (UNAUDITED) Stated in thousands of Canadian dollars, except share amounts ---------------------------------------------------------------------------- Accumulated Other Common Share Contributed Comprehensive Shares Capital Surplus Income (Loss) ---------------------------------------------------------------------------- Balance, December 31, 2009 13,852,335 $ 90,488 $ 7,465 $ (5,456) Dividends - - - - Shares issued on exercise of options 104,550 2,216 - - Stock-based compensation - - 569 - Translation of self- sustaining operations - - - (11,896) Net earnings - - - - ---------------------------------------------------------------------------- Balance, March 31, 2010 13,956,885 $ 92,704 $ 8,034 $ (17,352) Dividends - - - - Shares issued on exercise of options 77,500 847 - - Stock-based compensation - - 576 - Translation of self- sustaining operations - - - (3,999) Net earnings - - - - ---------------------------------------------------------------------------- Balance, June 30, 2010 14,034,385 $ 93,551 $ 8,610 $ (21,351) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Accumulated Other Common Share Contributed Comprehensive Shares Capital Surplus Income (Loss) ---------------------------------------------------------------------------- Balance, December 31, 2008 14,765,573 $ 90,951 $ 6,484 $ 19,588 Shares issued on exercise of options 85,000 807 - - Stock-based compensation - - 644 - Shares repurchased for cancellation (1,417,738) (8,733) - - Translation of self- sustaining operations - - - (3,787) Net earnings - - - - ---------------------------------------------------------------------------- Balance, March 31, 2009 13,432,835 $ 83,025 $ 7,128 $ 15,801 Shares issued on exercise of options 241,875 2,588 - - Stock-based compensation - - 590 - Translation of self- sustaining operations - - - (7,443) Net earnings - - - - ---------------------------------------------------------------------------- Balance, June 30, 2009 13,674,710 $ 85,613 $ 7,718 $ 8,358 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- AASTRA TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (UNAUDITED) Stated in thousands of Canadian dollars, except share amounts -------------------------------------------------------------------- Retained Comprehensive Earnings Total Income (Loss) -------------------------------------------------------------------- Balance, December 31, 2009 $ 210,344 $ 302,841 $ - Dividends (2,787) (2,787) - Shares issued on exercise of options - 2,216 - Stock-based compensation - 569 - Translation of self- sustaining operations - (11,896) (11,896) Net earnings 3,943 3,943 3,943 -------------------------------------------------------------------- Balance, March 31, 2010 $ 211,500 $ 294,886 $ (7,953) Dividends (2,793) (2,793) - Shares issued on exercise of options - 847 - Stock-based compensation - 576 - Translation of self- sustaining operations - (3,999) (3,999) Net earnings 5,269 5,269 5,269 -------------------------------------------------------------------- Balance, June 30, 2010 $ 213,976 $ 294,786 $ (6,683) -------------------------------------------------------------------- -------------------------------------------------------------------- Retained Comprehensive Earnings Total Income (Loss) -------------------------------------------------------------------- Balance, December 31, 2008 $ 176,784 $ 293,807 $ - Shares issued on exercise of options - 807 - Stock-based compensation - 644 - Shares repurchased for cancellation (8,989) (17,722) - Translation of self- sustaining operations - (3,787) (3,787) Net earnings 14,133 14,133 14,133 -------------------------------------------------------------------- Balance, March 31, 2009 $ 181,928 $ 287,882 $ 10,346 Shares issued on exercise of options - 2,588 - Stock-based compensation - 590 - Translation of self- sustaining operations - (7,443) (7,443) Net earnings 5,519 5,519 5,519 -------------------------------------------------------------------- Balance, June 30, 2009 $ 187,447 $ 289,136 $ 8,422 -------------------------------------------------------------------- -------------------------------------------------------------------- The interim consolidated financial statements for the six months and three months ended June 30, 2010 have not been reviewed by an auditor. FOR FURTHER INFORMATION PLEASE CONTACT: Aastra Technologies Limited Kathy Ristic V.P. Finance (905) 760-4200 investors@aastra.com www.aastra.com