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Mitel Corporation. (55PT)

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Friday 05 November, 1999

Mitel Corporation.

2nd Quarter & Interim Results

Mitel Corporation
5 November 1999


Mitel Corporation Announces Second Quarter Results: Order
Backlog Continues to Gain Momentum

OTTAWA, ONTARIO--Mitel Corporation (NYSE:MLT;TSE:MLT) today
announced second quarter results for the Fiscal 2000 period ended
September 24, 1999.

Revenue from continuing operations was $348.8 million, up from
$347.6 million in the second quarter of Fiscal 1999. For the first
six months of Fiscal 2000, revenue from continuing operations was
$660.0 million, up 4% from $637.2 million in Fiscal 1999.

Adjusted Net Income (*) for the quarter was $27.7 million, or
$0.23 per share, compared to $25.7 million, or $0.22 per share, in
Fiscal 1999, and $0.10 per share in the first quarter of this
Fiscal year. The improvement from a year ago is due mainly to
enhanced margins in the Systems business.  Adjusted Net Income for
the first half of the year was $40.2 million, or $0.33 per share,
compared to $42.8 million, or $0.37 per share, for the same period
in Fiscal 1999.

'Mitel is moving forward as expected,' said Kirk K. Mandy,
President and Chief Executive Officer, Mitel Corporation. 'I am
particularly pleased with the improved performance of our
communications semiconductor business and the continued strength
of our systems business.'

Order backlog continued to strengthen substantially, reaching $265
million, up $25 million from the previous quarter and up $85
million from the end of Fiscal 1999.

Consistent with the previously announced policy of amortizing
acquired intangibles over a shorter period, Mitel recorded net
income of $12.5 million in the second quarter, or $0.10 per share,
after deduction of amortization of intangibles totaling $15.2
million.  This compares to net income of $12.8 million, or $0.10
per share, in the second quarter of Fiscal 1999.

For the year to date, net income was $7.9 million, or $0.05 per
share, after deducting the amortization of intangibles amounting
to $32.3 million.  This compares to a net income of $27.4 million,
or $0.23 per share in the first half of Fiscal 1999.  The Fiscal
1999 figures reflect the amortization of intangibles of $2.2
million and $3.6 million for the respective quarter and year to
date periods.  Amortization periods were revised in the fourth
quarter of Fiscal 1999.

Cash flow from operations before working capital changes amounted
to $95 million in the first six months compared with $93 million
in the previous year. Cash and short-term investments totaled $140
million, up from $138 million at the end of the first quarter.

Mitel Communications Systems performed better than expected, with
revenues reaching $209.4 million, up 4% from $201.9 million last
year and up 13% from $186.0 million last quarter. The increase
reflects continued strength in sales of enterprise communications
systems, particularly in North America. Operating income improved
to $26.3 million from $18.6 million last year, chiefly as a result
of improved voice systems margins that were partially offset by
increased channel development expenses.

'The Systems business enjoyed sustained volume and revenue
growth,' said Mandy. 'During the quarter, the company also took
steps to further strengthen the business. For instance, Mitel
entered into a strategic technology alliance with Nuance
Communications to incorporate natural language speech recognition
into our core PBX platforms and applications business.'

As expected, sales for Mitel Semiconductor for the quarter
amounted to $139.4 million, down from $145.7 million in the
preceding year mainly due to reduced sales in the Asia Pacific
region but up 11% from $125.2 million in the first quarter of this
Fiscal year. Operating income decreased from $18.7 million last
year to $16.6 million as a result of lower sales and an
unfavorable product mix, partially offset by reduced operating
expenses.

Semiconductor order backlog improved substantially to $209
million, up by $32 million over the previous quarter.

'We are seeing strong recovery in our Asia-Pacific markets and
solid growth in our communications semiconductor business,
particularly in WAN/internetworking and cellular,' said Mandy.

Margins and Expenses

Gross margin for the quarter improved from 46% to 47% of revenue,
reflecting higher shipments and cost efficiencies in the Systems
business.

Selling and administrative expenses were 25% of sales. These
expenses are at the same level as last year, but down 2 percentage
points from the first quarter of this Fiscal year.

Research and development expenses remained at 10% of sales and
totaled $33.7 million for the quarter.

Mitel's effective income tax rate on adjusted pre-tax income was
30% as against 21% last year as a result of higher taxable income
in Canada. The year to date effective income tax rate on adjusted
pre-tax income was 26% and in line with expectations, as compared
to 22% in Fiscal 1999.

About Mitel

Mitel is a growing global provider of converging voice and data
systems and applications, and specialty semiconductors for the
communications industry.  The company has revenues of more than
$1.3 billion and employs some 6,000 people worldwide.

(*) As a supplementary measure to assess financial performance,
management utilizes Adjusted Net Income and Adjusted Net Income
per common share which exclude the impact of amortization of
acquired intangibles, special charges, non-cash debt issue and
other costs expensed on an early partial debt repayment, and
discontinued operations.

Editor: Mitel Corporation will hold a conference call to discuss
second quarter results with financial analysts at 8:30am today.
Media can listen to the call by dialing 1-800-273-9672.  A
playback number is also available for 48 hours.  For a replay,
dial 1-416-695-5800, pass code 337116.

Certain statements in this press release constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance or
achievements of the company, to be materially different from any
future results, performance, or achievements expressed or implied
by such forward-looking statements. Such risks, uncertainties and
assumptions include, among others, the risks discussed in
documents filed by the Company with the Securities and Exchange
Commission. Investors are encouraged to consider the risks
detailed in those filings.

Mitel Corporation
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars)
(Unaudited)

                                              Sept. 24,  March 26,
                                              1999       1999
                                              ---------  ---------
ASSETS
Current assets:
  Cash and cash equivalents                   $   112.0  $   125.3
  Short-term investments                           27.8          -
  Accounts receivable                             302.7      326.3
  Inventories                                     196.0      198.1
  Prepaid expenses and other                       23.8       27.4
                                              ---------  ---------
                                                  662.3      677.1

Long-term receivables                              30.3       35.4
Fixed assets                                      490.4      507.7
Acquired intangible assets                         25.8       56.7
Patents, trademarks and other                       9.7       23.4
                                              ---------  ---------
                                              $ 1,218.5  $ 1,300.3
                                              ---------  ---------
                                              ---------  ---------    

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities    $   225.7  $   254.1
  Income and other taxes payable                   17.8       11.8
  Deferred revenue                                 34.6       36.6
  Current portion of long-term debt                39.4       37.6
                                              ---------  ---------
                                                  317.5      340.1
Long-term debt                                    256.9      276.5
Pension liability                                  13.6       13.2
Deferred income taxes                              12.5       23.2
                                              ---------  ---------
                                                  600.5      653.0
                                              ---------  ---------
Shareholders' equity:
  Capital stock
     Preferred shares                              37.0       37.2
     Common shares                                323.4      331.2
  Contributed surplus                              16.5       32.3
  Retained earnings                               222.5      218.4
  Translation account                              18.6       28.2
                                              ---------  ---------
                                                  618.0      647.3
                                              ---------  ---------
                                              $ 1,218.5  $ 1,300.3
                                              ---------  ---------
                                              ---------  ---------
                                             
Mitel Corporation
CONSOLIDATED STATEMENTS OF INCOME
(in millions of Canadian dollars, except per share amounts)
(Unaudited)
                            Three Months Ended  Six Months Ended

                            Sept. 24, Sept. 25, Sept. 24, Sept. 25,
                            1999      1998      1999      1998
                            ---------------------------------------
Revenue                     $  348.8  $  347.6  $  660.0  $  637.2
                            ---------------------------------------

Cost of sales:
  Cost of sales other than
    amortization               166.8     171.8     318.0     315.0
  Amortization of
    manufacturing assets        17.4      17.1      34.9      33.7
                            ---------------------------------------
                               184.2     188.9     352.9     348.7
                            ---------------------------------------
Gross margin                   164.6     158.7     307.1     288.5
                            ---------------------------------------
Expenses:
  Selling and administrative    88.0      86.0     173.4     153.2
  Research and development
    (net)                       33.7      35.4      72.5      70.8
  Amortization of acquired
    intangibles                 15.2       2.2      32.3       3.6
                            ---------------------------------------
                               136.9     123.6     278.2     227.6
                            ---------------------------------------
Operating income from
  continuing operations         27.7      35.1      28.9      60.9
Interest income                  1.7       1.1       3.6       2.7
Interest expense                (5.2)     (5.8)    (10.4)    (12.4)
Debt issue and other costs         -      (7.2)        -      (7.2)
                            ---------------------------------------
Income from continuing
  operations before income
  taxes                         24.2      23.2      22.1      44.0
Income tax expense             (11.7)     (6.9)    (14.2)    (12.0)
                            ---------------------------------------
Net income from continuing
  operations for the period     12.5      16.3       7.9      32.0
Loss from discontinued
  operations for the period        -      (3.5)        -      (4.6)
                            ---------------------------------------
Net income for the period   $   12.5  $   12.8  $    7.9  $   27.4
                            ---------------------------------------
                            ---------------------------------------

Net income attributable to
  common shareholders after
  preferred share dividends $   11.7  $   12.0  $    6.3  $   25.8
                            ---------------------------------------
                            ---------------------------------------

Net income per common share:
  Net income per common
    share from continuing
    operations:
      Basic and fully
        diluted             $   0.10  $   0.13  $   0.05  $   0.27
                            ---------------------------------------
  Net income per common
    share:
      Basic and fully
        diluted             $   0.10  $   0.10  $   0.05  $   0.23
                            ---------------------------------------
                            ---------------------------------------

Weighted average number of
  common shares outstanding
  (millions):
      Basic                    114.9     115.3     115.6     111.9
                            ---------------------------------------
                            ---------------------------------------
      Fully diluted            121.1     118.1     116.0     114.7
                            ---------------------------------------
                            ---------------------------------------


Mitel Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions of Canadian dollars)
(Unaudited)

                                                Six Months Ended
                                              Sept. 24,  Sept. 25,
                                              1999       1998
                                              ---------  ---------
CASH PROVIDED BY (USED IN)

Operating activities:
  Net income for the period                   $     7.9  $    27.4
  Amortization of capital and other assets         84.4       64.5
  Debt issue and other costs expensed                 -        8.8
  Investment tax credits                            4.5       (7.0)
  Gain on sale of capital assets                   (0.1)      (0.5)
  Deferred income taxes                            (2.8)      (1.0)
  Change in pension liability                       0.6        0.6
  Decrease (increase) in working capital            5.6     (109.3)
                                              ---------  ---------
    Total                                         100.1      (16.5)
                                              ---------  ---------

Investing activities:
  Change in short-term investments                (27.8)      34.5
  Additions to capital and other assets           (28.1)     (26.0)
  Proceeds from disposal of capital assets          0.1        1.9
  Acquisitions                                        -      (46.6)
  Net change in non-cash balances related
    to investing activities                        (7.8)      (6.0)
                                              ---------  ---------
     Total                                        (63.6)     (42.2)
                                              ---------  ---------

Financing activities:
  Repayment of long-term debt                      (5.3)    (123.1)
  Repayment of capital lease liabilities          (16.4)     (12.1)
  Debt issue costs                                    -       (1.9)
  Dividends on preferred shares                    (1.6)      (1.6)
  Issue of common shares                            0.3      166.2
  Repurchase of common shares                     (26.1)         -
  Net change in non-cash balances related
    to financing activities                        (0.1)       0.8
                                              ---------  ---------
     Total                                        (49.2)      28.3
                                              ---------  ---------
Effect of currency translation on cash             (0.6)       4.5
                                              ---------  ---------
Decrease in cash and cash equivalents             (13.3)     (25.9)
Cash and cash equivalents, beginning of period    125.3      117.2
                                              ---------  ---------
Cash and cash equivalents, end of period      $   112.0  $    91.3
                                              ---------  ---------
                                              ---------  ---------

Mitel Corporation
SUPPLEMENTARY SCHEDULES
(in millions of Canadian dollars, except per share amounts)
(Unaudited)

Adjusted Net Income

As a supplementary measure to assess financial performance,
management utilizes Adjusted Net Income and Adjusted Net Income per
common share which exclude the impact of amortization of acquired
intangibles, special charges (net), non-cash debt issue and other
costs expensed on an early partial debt repayment and discontinued
operations.  The Adjusted Net Income and Adjusted Net Income per
common share are as follows:

                            Three Months Ended  Six Months Ended
                            Sept. 24, Sept. 25, Sept. 24, Sept. 25,
                            1999      1998      1999      1998
                            ---------------------------------------
Net income for the period
  as reported               $   12.5  $   12.8  $    7.9  $   27.4

Adjusted net income, as
  adjusted for:
    Amortization of
      acquired intangibles      15.2       2.2      32.3       3.6
    Loss from discontinued
      operations                   -       3.5         -       4.6
    Debt issue and other
      costs                        -       7.2         -       7.2
                            ---------------------------------------
Adjusted Net Income for the
  period                    $   27.7  $   25.7  $   40.2  $   42.8
                            ---------------------------------------

Adjusted Net Income per
  common share - basic      $   0.23  $   0.22  $   0.33  $   0.37
                            ---------------------------------------

Geographic Information

Revenue, based on the geographic location of Mitel's customers, was
distributed as follows:


                       Three Months           Three Months
                       Ended           % of   Ended           % of
                       Sept. 24, 1999  Total  Sept. 25, 1998  Total
                       --------------------------------------------
United States          $ 163.4          47 %  $ 162.8          47 %
Europe                   109.5          31      104.7          30
Other Regions             56.1          16       62.2          18
Canada                    19.8           6       17.9           5
                       --------------------------------------------
Total                  $ 348.8         100 %  $ 347.6         100 %
                       --------------------------------------------

                       Three Months           Three Months
                       Ended           % of   Ended           % of
                       Sept. 24, 1999  Total  Sept. 25, 1998  Total
                       --------------------------------------------
United States          $ 302.1          46 %  $ 301.5          47 %
Europe                   215.3          33      189.4          30
Other Regions            106.3          16      112.9          18
Canada                    36.3           5       33.4           5
                       --------------------------------------------
Total                  $ 660.0         100 %  $ 637.2         100 %
                       --------------------------------------------


Mitel Corporation
SUPPLEMENTARY SCHEDULES
(in millions of Canadian dollars)
(Unaudited)

Information on Business Segments

Three Months Ended September 24, 1999
                      Systems  Semiconductor  Unallocated  Total
                                                Costs
                      ---------------------------------------------
Total external sales
  revenue             $ 209.4  $ 139.4        $     -      $ 348.8
Amortization of
  buildings and
  equipment               4.4     20.4              -         24.8
Amortization of
  acquired intangibles      -        -           15.2         15.2
Segment's operating
  income from
  continuing
  operations             26.3     16.6          (15.2)        27.7


Three Months Ended September 25, 1998
                      Systems  Semiconductor  Unallocated  Total
                                                Costs
                      ---------------------------------------------
Total external sales
  revenue             $ 201.9  $ 145.7        $     -      $ 347.6
Amortization of
  buildings and
  equipment               5.1     21.9              -         27.0
Amortization of
  acquired intangibles      -        -            2.2          2.2
Segment's operating
  income from
  continuing
  operations             18.6     18.7           (2.2)        35.1


Six Months Ended September 24, 1999
                      Systems  Semiconductor  Unallocated  Total
                                                Costs
                      ---------------------------------------------
Total external sales
  revenue             $ 395.4  $ 264.6        $     -      $ 660.0
Amortization of
  buildings and
  equipment               8.9     40.4              -         49.3
Amortization of
  acquired intangibles      -        -           32.3         32.3
Segment's operating
  income from
  continuing
  operations             39.5     21.7          (32.3)        28.9


Six Months Ended September 25, 1998
                      Systems  Semiconductor  Unallocated  Total
                                                Costs
                      ---------------------------------------------
Total external sales
  revenue             $ 357.8  $ 279.4        $     -      $ 637.2
Amortization of
  buildings and
  equipment               9.9     43.7              -         53.6
Amortization of
  acquired intangibles      -        -            3.6          3.6
Segment's operating
  income from
  continuing
  operations             33.0     31.5           (3.6)        60.9


FOR FURTHER INFORMATION PLEASE CONTACT:

Mitel Corporation
Jacques Guerette
Corporate Communications
(613) 592-2122
E-mail: jacques_guerette@mitel.com
Website: www.mitel.com
or
Mitel Corporation
Mike McGinn
Investor Relations
(613) 592-2122
E-mail: mike_mcginn@mitel.com

INDUSTRY:  CMT
SUBJECT:  ERN