The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Marketwire

Aastra Reports Third Quarter Earnings

Tuesday, October 19, 2010

Aastra Reports Third Quarter Earnings17:01 EDT Tuesday, October 19, 2010TORONTO, ONTARIO--(Marketwire - Oct. 19, 2010) - Aastra Technologies Limited - (TSX:AAH) today reported its unaudited financial results for the third quarter ended September 30, 2010.Sales for the three months ended September 30, 2010 were $161.8 million compared to $198.7 million for the same quarter in 2009, a decline of approximately 18.6%. As a result of the continued strength of the Canadian dollar against most other currencies, the Company experienced a significant sales drop of $18.7 million directly from changes in foreign exchange when compared to the third quarter of 2009. Excluding the impact of foreign exchange, sales would have decreased approximately $18.2 million or 9.2% in the third quarter from the same period last year.Gross margin was 41.3% of sales in the third quarter of 2010 compared to 44.7% 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 also negatively impacted by an unfavorable product mix and a higher overhead ratio.Research and development expenses in the third quarter of 2010 were $16.1 million or 10.0% of sales, compared to $18.8 million or 9.5% of sales in the same quarter of 2009. The decrease was partially related to the impact of foreign exchange rates on European development costs, while the increase as a percentage of revenue is the result of the lower revenue recorded in the third quarter this year.Selling, general and administrative ("SG&A") expenses were $43.9 million or 27.2% of sales in the third quarter of 2010 compared to $49.6 million or 25.0% of sales in the third quarter of 2009. SG&A expenses decreased mainly as a result of the impact of foreign exchange rates on European SG&A costs.Foreign exchange losses of $1.7 million were recognized in the third quarter of 2010, primarily in our European operations, where a continued weakening of the Euro to the Swedish Krona and the Swiss Franc occurred during the quarter. In addition, the continued strength of the Canadian dollar to the Euro and U.S. dollar had a negative impact in the third quarter. Amortization expense recorded in operating expenses decreased to $5.1 million in the third quarter of 2010 compared to $6.2 million in the third 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 third quarter of 2010 compared to $0.2 million in the third 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 third quarter, down slightly from $0.8 million in the same quarter of 2009 as a result of a lower excess cash position. Income tax expense was recognized at $0.1 million or 19.3% of pre-tax earnings in the third quarter compared to $2.8 million or 22.7% of pre-tax earnings in the third quarter last year.As a result of the above, net earnings were $0.4 million or $0.03 diluted earnings per share in the third quarter compared to $9.6 million or $0.71 diluted earnings per share in the same period in 2009.Cash and short-term investments totaled $82.2 million at the end of September 2010 compared to $116.9 million at December 31, 2009 and $104.4 million at the end of the second quarter this year. During the third quarter of 2010, the Company invested $9.0 million of cash in operating activities as, despite continued cash flow from earnings, there was a reduction of $15.2 million in the quarter from an increase in non-cash working capital. The working capital increase was driven by an increase of $26.7 million in inventory and offset partially by an increase in accounts payable. In addition, the Company used $2.8 million to pay dividends to shareholders and $7.7 million to repay long term debt while an additional $2.9 million was invested in capital and intangible assets during the third 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 November 24, 2010 to all shareholders of record on November 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 3rd QUARTER Nine months Three months ended September ended September 30th 30th 2010 2009 2010 2009 ---------------------------------------------------------------------------- Sales $504,900 $ 615,093 $161,760 $ 198,666 Cost of goods sold 286,576 331,199 94,938 109,853 ---------------------------------------------------------------------------- 218,324 283,894 66,822 88,813 Expenses (income): Selling, general and administrative 136,492 165,828 43,942 49,568 Research and development 51,193 62,580 16,116 18,845 Depreciation and amortization 15,706 17,672 5,122 6,167 Interest expense 282 1,109 99 176 Foreign exchange loss 7,405 1,397 1,727 1,959 Investment income (1,903) (2,157) (644) (778) Other (income) charges (2,682) 399 - 399 ---------------------------------------------------------------------------- Earnings before income taxes 11,831 37,066 460 12,477 Income taxes 2,248 7,766 89 2,829 ---------------------------------------------------------------------------- Net earnings for the period $ 9,583 $ 29,300 $ 371 $ 9,648 ===========================================================================- Earnings per share: Basic $ 0.69 $ 2.09 $ 0.03 $ 0.71 Diluted $ 0.68 $ 2.09 $ 0.03 $ 0.71 ===========================================================================- (i) Actual common shares outstanding as at September 30, 2010 - 14,034,385 (2009 - 13,674,710) (ii) Weighted average common shares outstanding for the nine months and three months ended September 30, 2010 - 13,978,455 and 14,034,385 (2009 - 14,007,901 and 13,674,710) (iii) Weighted average fully diluted common shares outstanding for the nine months and three months ended September 30, 2010 - 14,136,397 and 14,098,247 (2009 - 14,007,901 and 13,674,710) ---------------------------------------------------------------------------- The interim consolidated financial statements for the nine months and three months ended September 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 3rd QUARTER Nine months Three months ended September ended September 30th 30th 2010 2009 2010 2009 ---------------------------------------------------------------------------- Cash and cash equivalents provided by (used in): Operations: Net earnings for the period $ 9,583 $ 29,300 $ 371 $ 9,648 Depreciation of property, plant and equipment 8,566 9,081 2,892 3,046 Amortization of intangible assets 10,234 12,254 3,330 4,177 Future income taxes (2,422) (1,766) (705) (1,617) Stock-based compensation expense 1,718 1,792 573 558 Loss on sale of property, plant and equipment 447 359 129 149 Other (income) charges (2,682) 399 - 399 Change in non-cash pension liabilities (74) 573 (420) 328 Change in non-cash operating working capital (33,686) 4,808 (15,162) 21,146 ---------------------------------------------------------------------------- (8,316) 56,800 (8,992) 37,834 ---------------------------------------------------------------------------- Financing: Dividends to shareholders (8,387) - (2,807) - Issuance of common shares on exercise of options 3,063 3,395 - - Repurchase of shares - (17,722) - - Receipt of acquired lease receivables 1,156 2,863 292 976 Payment of loan to Seller (1,156) (2,863) (292) (976) Payment of loans payable (14,874) (22,742) (7,681) (7,764) ---------------------------------------------------------------------------- (20,198) (37,069) (10,488) (7,764) ---------------------------------------------------------------------------- Investing: Maturity of short-term investments 3,068 - 5 - Purchase of short-term investments - (3,038) - - Interest received from long- term investment 12 417 4 - Proceeds on disposal of property, plant and equipment 9 41 9 14 Purchase of property, plant and equipment (8,033) (7,855) (2,370) (2,202) Purchase of intangible assets (1,057) (1,108) (521) (403) Business acquisition, net of cash acquired - 2,663 - - Disposition, net of cash 3,649 - - - ---------------------------------------------------------------------------- (2,352) (8,880) (2,873) (2,591) ---------------------------------------------------------------------------- Foreign exchange on cash held in foreign currency (758) (6,580) 212 (2,514) ---------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (31,624) 4,271 (22,141) 24,965 Cash and cash equivalents, beginning of period 113,596 97,637 104,113 76,943 ---------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 81,972 $ 101,908 $ 81,972 $ 101,908 ===========================================================================- The interim consolidated financial statements for the nine months and three months ended September 30, 2010 have not been reviewed by an auditor. ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- AASTRA TECHNOLOGIES LIMITED CONSOLIDATED BALANCE SHEETS (UNAUDITED) Stated in thousands of Canadian dollars SEPTEMBER DECEMBER SEPTEMBER 30th 2010 31st 2009 30th 2009 ---------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 81,972 $ 113,596 $ 101,908 Short-term investments 272 3,309 3,695 Accounts receivable 160,526 175,331 163,815 Income taxes receivable 4,727 5,986 7,080 Inventories 114,898 81,398 96,495 Net investment in leases 15,682 11,831 5,924 Acquired lease receivables 906 1,544 1,998 Prepaid expenses and other assets 9,372 7,088 7,392 Future income tax assets 5,654 6,395 5,190 ---------------------------------------------------------------------------- 394,009 406,478 393,497 Long-term investment 4,517 4,525 4,600 Future income tax assets 3,751 3,901 4,822 Net investment in leases 27,042 28,597 34,733 Acquired lease receivables 839 1,597 2,037 Property, plant and equipment 39,028 41,920 42,747 Goodwill 47,897 46,391 49,333 Intangible assets 41,440 51,460 58,108 Other assets 664 611 677 ---------------------------------------------------------------------------- $ 559,187 $ 585,480 $ 590,554 ---------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 150,548 $ 148,076 $ 163,947 Income taxes payable 23,207 33,294 29,749 Deferred revenue 22,207 23,686 21,335 Current portion of loans payable 16,395 16,490 17,665 Future income tax liabilities 574 961 1,255 ---------------------------------------------------------------------------- 212,931 222,507 233,951 Pensions 21,961 25,488 25,923 Loans payable 956 16,561 17,838 Future income tax liabilities 11,921 14,281 18,544 Other long-term liabilities 3,413 3,802 2,732 ---------------------------------------------------------------------------- 251,182 282,639 298,988 ---------------------------------------------------------------------------- Shareholders' equity: Share capital 93,551 90,488 85,613 Contributed surplus 9,183 7,465 8,276 Accumulated other comprehensive (loss) income (6,269) (5,456) 582 Retained earnings 211,540 210,344 197,095 ---------------------------------------------------------------------------- 308,005 302,841 291,566 ---------------------------------------------------------------------------- $ 559,187 $ 585,480 $ 590,554 ============================================================================ The interim consolidated financial statements for the nine months and three months ended September 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 -------------------------------------------------------- Common Share Contributed Shares Capital Surplus -------------------------------------------------------- Balance, December 31, 2009 13,852,335 $ 90,488 $ 7,465 Dividends - - - Shares issued on exercise of options 182,050 3,063 - Stock-based compensation - - 1,145 Translation of self- sustaining operations - - - Net earnings - - - -------------------------------------------------------- Balance, June 30, 2010 14,034,385 $ 93,551 $ 8,610 Dividends - - - Stock-based compensation - - 573 Translation of self- sustaining operations - - - Net earnings - - - -------------------------------------------------------- Balance, September 30, 2010 14,034,385 $ 93,551 $ 9,183 -------------------------------------------------------- -------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- AASTRA TECHNOLOGIES LIMITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (UNAUDITED) Stated in thousands of Canadian dollars, except share amounts ---------------------------------------------------------------------------- Accumulated Other Comprehensive Retained Comprehensive Income (Loss) Earnings Total Income (Loss) ---------------------------------------------------------------------------- Balance, December 31, 2009 $ (5,456) $ 210,344 $ 302,841 $ - Dividends - (5,580) (5,580) - Shares issued on exercise of options - - 3,063 - Stock-based compensation - - 1,145 - Translation of self- sustaining operations (15,895) - (15,895) (15,895) Net earnings - 9,212 9,212 9,212 ---------------------------------------------------------------------------- Balance, June 30, 2010 $ (21,351) $ 213,976 $ 294,786 $ (6,683) Dividends - (2,807) (2,807) - Stock-based compensation - - 573 - Translation of self- sustaining operations 15,082 - 15,082 15,082 Net earnings - 371 371 371 ---------------------------------------------------------------------------- Balance, September 30, 2010 $ (6,269) $ 211,540 $ 308,005 $ 8,770 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- Common Share Contributed Shares Capital Surplus ---------------------------------------------------------- Balance, December 31, 2008 14,765,573 $ 90,951 $ 6,484 Shares issued on exercise of options 326,875 3,395 - Stock-based compensation - - 1,234 Shares repurchased for cancellation (1,417,738) (8,733) - Translation of self- sustaining operations - - - Net earnings - - - ---------------------------------------------------------- Balance, June 30, 2009 13,674,710 $ 85,613 $ 7,718 Stock-based compensation - - 558 Translation of self- sustaining operations - - - Net earnings - - - ---------------------------------------------------------- Balance, September 30, 2009 13,674,710 $ 85,613 $ 8,276 ---------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Accumulated Other Comprehensive Retained Comprehensive Income (Loss) Earnings Total Income (Loss) ---------------------------------------------------------------------------- Balance, December 31, 2008 $ 19,588 $ 176,784 $293,807 $ - Shares issued on exercise of options - - 3,395 - Stock-based compensation - - 1,234 - Shares repurchased for cancellation - (8,989) (17,722) - Translation of self- sustaining operations (11,230) - (11,230) (11,230) Net earnings - 19,652 19,652 19,652 ---------------------------------------------------------------------------- Balance, June 30, 2009 $ 8,358 $ 187,447 $289,136 $ 8,422 Stock-based compensation - - 558 - Translation of self- sustaining operations (7,776) - (7,776) (7,776) Net earnings - 9,648 9,648 9,648 ---------------------------------------------------------------------------- Balance, September 30, 2009 $ 582 $ 197,095 $291,566 $ 10,294 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- The interim consolidated financial statements for the nine months and three months ended September 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