Aastra Reports Fourth Quarter Financial Results
TORONTO, ONTARIO (February 20, 2008) -- Aastra Technologies Limited - (TSX: “AAH”) today announced its unaudited financial results for the fourth quarter and year ended December 31, 2007. Net earnings for the three months ended December 31, 2007 were $12.3 million or $0.75 diluted earnings per share compared to $12.5 million or $0.74 diluted earnings per share in the same period in 2006.
Net earnings for the year ended December 31, 2007 were $35.8 million or $2.17 diluted earnings per share compared to $42.0 million or $2.38 diluted earnings per share in 2006.
Sales for the three months ended December 31, 2007 were $155.2 million compared to $160.8 million for the same quarter in 2006, a decrease of 3.5%. Sales in European Enterprise Communication increased from $134.6 million in the fourth quarter of 2006 to $135.0 in the same quarter of 2007, an increase of 0.3%. Excluding the impact of foreign exchange, the increase in sales of European Enterprise Communication would have been 3.6%.
Sales in North American Enterprise Communication decreased by $6.0 million from $26.2 million in the fourth quarter of 2006 to $20.2 million in the same quarter of 2007, a decrease of 23.0%. Excluding the impact of foreign exchange, the decrease in sales of North American Enterprise Communication would have been 13.8%.
Sales for the year ended December 31, 2007 were $606.6 million compared to $600.5 million for 2006, an increase of approximately 1.0%. Excluding the impact of foreign exchange, sales would have decreased by 0.6% from 2006. While sales increased by 3.4% in European Enterprise Communication from $497.8 million in 2006 to $514.8 million in 2007, this was offset by a sales decline in North American Enterprise Communication from $102.7 million in 2006 to $91.8 million.
Gross margin was 42.8% of sales in the fourth quarter of 2007 compared to 42.5% of sales in the same period in 2006. Gross margin for the year ended December 31, 2007 was 42.5% compared to 41.9% in 2006. The modest gross margin improvements in the quarter and year over year represent the decrease in cost of product through consolidation of our vendors.
Research and development expenses in the fourth quarter of 2007 were $13.0 million or 8.4% of sales, compared to $16.0 million or 9.9% of sales in the same quarter of 2006. Research and development expenses for the year ended December 31, 2007 decreased to $54.6 million or 9.0% of sales from $59.6 million or 9.9% of sales in 2006. Cost reductions were obtained through the realignment of our research and development groups in various countries in Europe and North America into centers of excellence.
Selling, general and administrative expenses were $35.0 million or 22.5% of sales in the fourth quarter of 2007 compared to $38.0 million or 23.6% of sales in the fourth quarter of 2006. Selling, general and administrative expenses for the year ended December 31, 2007 were stable at $145.2 million or 23.9% of sales compared to $144.3 million or 24.0% of sales in 2006.
Cash and short-term investments totaled $133.2 million at the end of 2007 compared to a balance of $115.7 million at the end of 2006. During 2007, the Company continued to generate strong cash flow from operations of approximately $46.8 million.
In July 2007, Aastra purchased an asset-backed commercial paper from the issuer Structured Investment Trust III (the “SIT ABCP”). This asset is part of the restructuring currently being coordinated by the Pan-Canadian Investors Committee (“Investors Committee”). As this investment is no longer being actively traded on quoted stock markets, the Company performed a detailed valuation to determine the fair value of the SIT ABCP at December 31, 2007 using information gained from the press releases of the Investors Committee. The Company recorded a fair value adjustment loss on this investment of $1.6 million during the fourth quarter of 2007. The SIT ABCP has been classified as a long-term investment and has not been included in cash and short-term investments as at December 31, 2007.
As previously announced on February 18, 2008, the Company entered into an agreement with Telefonaktiebolaget LM Ericsson (“Ericsson”) to acquire Ericsson’s Enterprise Communication Business for consideration of $103.0 million (Swedish krone 650 million) for intangible assets. The Company expects that this business will require an additional $57 million of working capital for a total investment of $160 million. The acquisition is scheduled to close in April 2007 and the Company expects to finance the acquisition through existing excess cash, short-term investments, and credit facilities
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