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Mitel Corporation. (55PT)

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Thursday 20 July, 2000

Mitel Corporation.

1st Quarter Results

Mitel Corporation
20 July 2000


NYSE, TSE SYMBOL: MLT
LSE SYMBOL: MLT.L


Mitel Corporation Releases Fiscal 2001 First Quarter Results

OTTAWA, CANADA--

*  Adjusted EPS above expectations

*  Record Semiconductor revenue, up 47%

*  Strong order backlog

Mitel Corporation (TSE:MLT, NYSE:MLT) today announced first quarter results
for the Fiscal 2001 quarterly period ended June 30, 2000.

'Mitel's performance for the first quarter was a good start to the new fiscal
year,' said Kirk K. Mandy, President and Chief Executive Officer, Mitel
Corporation. 'Our Semiconductor division continues to gain momentum in
multiple high growth areas while the Systems business was adversely influenced
by lingering Y2K effects.'

Revenue for the quarter reached $328.8 million, up 6% from $311.2 million for
the same period last year. 

Adjusted Net Income (+) for the quarter reached $25.3 million or $0.21 per
share, up from $0.10 per share in the first quarter of Fiscal 2000. The
significant improvement from a year ago is due to continuing growth of the
company's Semiconductor business in the areas of broadband networking,
subscriber access and optical components. 

Order backlog was strong at $323 million, up $43 million from the end of
Fiscal 2000.

In the first quarter, Mitel recorded net income of $21.5 million, or $0.18 per
share, after the amortization of acquired intangibles of $3.2 million and debt
issue costs of $0.6 million. This compares to a loss of $4.6 million,
equivalent to $0.05 per share, for the same period in Fiscal 2000.

For the quarter, cash flow from operations before working capital changes was
$52.2 million, up by 40% from $37.3 million in the previous year as a result
of increased earnings in Semiconductor.

Review of Operations

Mitel Semiconductor

Mitel Semiconductor sales for the first quarter of Fiscal 2001 reached a
record $183.8 million, a 47% increase over the $125.2 million achieved for the
same period last year. 

For the quarter, operating income was $44.5 million, up sharply from the $5.1
million for same period in Fiscal 2000. This improvement resulted from higher
sales and improved manufacturing utilization. 
Semiconductor order backlog also continued to increase and reached $288
million for the quarter, up $35 million over the previous quarter.

'Our Semiconductor business is gaining considerable strength as a result of a
sharper focus on high growth opportunities, especially in broadband
networking, optical components, and subscriber access,' said Mandy. 

'We expect these businesses to continue to show strength. In addition, we are
looking forward to the technological and business development contributions of
our planned acquisition of Vertex Networks which will further position Mitel
as a unique supplier offering system-wide, Internet Protocol-based, Quality of
Service (QoS) for converging voice and data networks.'

Mitel Communications Systems

Mitel Communications Systems recorded first quarter revenue of $145 million as
compared to $186 million for the first quarter of Fiscal 2000.

For the quarter, the division recorded an operating loss of $10.5 million
arising from the lower levels of sales and manufacturing activity. For the
same period last year, operating income was $13.2 million. 

'As the industry prepares itself for large scale adoption of communications
solutions based on Internet technology, Mitel is ready with a portfolio of
Internet Protocol-based products and R&D investments focused on new
opportunities in this emerging space,' said Mandy 'Additionally, it appears
that the general market softness experienced over the last quarter is
improving. Accordingly, we expect sales to increase over the coming quarters.'


Margins and Expenses

Gross margin for the quarter improved from 46% of revenue last year to 49%,
reflecting higher shipments and improved production efficiencies in
Semiconductor.

Selling and administrative expenses represented 27% of sales, the same level
as the first quarter of Fiscal 2000.

Research and development expenses remained at 12% of sales, also the same
level as the first quarter of last year. For Fiscal 2001, first quarter R&D
expenses were $39.7 million. R&D investment continues to reflect Mitel's
commitment to emerging opportunities related to the Internet and broadband
interconnection in the areas of wired, wireless, and optoelectronic
networking. 

About Mitel

Mitel is a global provider of semiconductors and communication systems for
converging voice and data networks in a rapidly evolving Internet economy. The
company has annual revenues of $1.4 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.
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.

A conference call for analysts will be held today from 8:30-9:30am EST. Media
can listen by dialing 1-800-273-9672. A replay number is 1-800-408-3053 or
416-695-5800, passcode 519991 and will be available until midnight, July 27.
The analyst call will also be webcast via www.Q1234.com and
www.streetevents.com. 

Mitel's Annual General Meeting will be held today in Ottawa at the Chateau
Laurier Hotel beginning at 10:30am. At 12:00, a conference call for media as
well as an on-site press conference will be held. The media call number is
1-800-478-9326. The replay number is 1-800-408-3053 or 416-695-5800, passcode
520002 and will be available until midnight, July 27.


                          Mitel Corporation
                      CONSOLIDATED BALANCE SHEETS
                   (in millions of Canadian dollars)
                              (Unaudited)
                                  June 30,               March 31,
                                     2000                     2000
                                  --------------------------------
ASSETS  
  
Current assets:  
  Cash and cash equivalents         $94.0                   $195.5
  Short-term investments             71.9                     32.9
  Accounts receivable               294.6                    288.2
  Inventories                       197.4                    187.7
  Prepaid expenses and other         39.7                     37.2
  Future income tax assets            9.5                      9.5
                                  --------------------------------
                                    707.1                    751.0
  
Long-term receivables                22.5                     21.7
Fixed assets                        445.0                    457.4
Acquired intangible assets            1.2                      3.0
Patents, trademarks and other         8.9                     11.3
                                  --------------------------------
                                $ 1,184.7                $ 1,244.4
                                  --------------------------------
                                  --------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY  
  
Current liabilities:  
  Accounts payable and 
    accrued liabilities            $190.4                   $215.4
  Income and other taxes payable     10.8                     26.2
  Future income tax liabilities      11.7                     11.7
  Deferred revenue                   43.6                     44.1
  Current portion of long-term 
    debt                             30.5                     57.9
                                  --------------------------------
                                    287.0                    355.3
Long-term debt                      211.1                    217.5
Pension liability                    17.7                     13.4
Future income tax liabilities        24.7                     27.2
                                  --------------------------------
                                    540.5                    613.4
                                  --------------------------------
Shareholders' equity:  
  Capital stock   
     Preferred shares                37.0                     37.0
     Common shares                  328.2                    325.6
  Contributed surplus                 9.2                      9.2
  Retained earnings                 283.3                    262.6
  Translation account               (13.5)                    (3.4)
                                  --------------------------------
                                    644.2                    631.0
                                  --------------------------------
                                 $1,184.7                 $1,244.4
                                  --------------------------------
                                  --------------------------------

Note: Certain of the Fiscal 2000 balance sheet comparative figures 
has been reclassified to reflect the adoption of the new Canadian 
Handbook rules for income tax accounting.

                          Mitel Corporation
                    CONSOLIDATED STATEMENTS OF INCOME
     (in millions of Canadian dollars, except per share amounts)
                            (Unaudited)

                                          Three Months Ended
                                  June 30,                June 25,
                                     2000                     1999
                                  --------------------------------

Revenue                            $328.8                   $311.2
                                  --------------------------------
  
Cost of sales:  
  Cost of sales other than
    amortization                    150.4                    151.2
  Amortization of manufacturing 
    assets                           17.0                     17.5
                                  --------------------------------
                                    167.4                    168.7
                                  --------------------------------
Gross margin                        161.4                    142.5
                                  --------------------------------
  
Expenses:  
  Selling and administrative         87.7                     85.4
  Research and development (net)     39.7                     38.8
  Amortization of acquired 
    intangibles                       3.2                     17.1
                                  --------------------------------
                                    130.6                    141.3
                                  --------------------------------
Operating income                     30.8                      1.2
Interest income                       3.0                      1.9
Interest expense                     (5.3)                    (5.2)
Debt issue costs                     (0.6)                       -
                                  --------------------------------
Income (loss) before income taxes    27.9                     (2.1)
Income tax expense                    6.4                      2.5
                                  --------------------------------
  
Net income (loss) for the period    $21.5                    $(4.6)
                                  --------------------------------
                                  --------------------------------
  
Net income (loss) attributable to 
  common shareholders after 
  preferred share dividends         $20.7                    $(5.4)
                                  --------------------------------
                                  --------------------------------
  
Net income (loss) per common share:  
  Basic and fully diluted           $0.18                   $(0.05)
                                  --------------------------------
                                  --------------------------------
  
Weighted average number of common
shares outstanding (millions):  
      Basic                         114.2                    116.5
                                  --------------------------------
                                  --------------------------------
      Fully diluted                 122.6                    116.5
                                  --------------------------------
                                  --------------------------------


                          Mitel Corporation
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                  (in millions of Canadian dollars)
                             (Unaudited)
                                         Three Months Ended
                                  June 30,                June 25,
                                     2000                     1999
                                  --------------------------------

CASH PROVIDED BY (USED IN)  
  
Operating activities:  
  Net income (loss) for the period  $21.5                    $(4.6)
  Amortization of capital and 
    other assets                     31.1                     43.4
  Investment tax credits                -                      1.4
  Loss (gain) on sale of capital
    assets                            2.0                     (0.1)
  Future income taxes                (2.5)                    (3.1)
  Change in pension liability         0.1                      0.3
  (Increase) decrease in working
    capital                         (51.5)                    20.2
                                  --------------------------------
 
    Total                             0.7                     57.5
                                  --------------------------------
 
Investing activities:  
  Change in short-term investments  (38.7)                   (48.2)
  Additions to capital and other 
    assets                          (24.6)                   (13.6)
  Proceeds from disposal of capital
    assets                            0.6                      0.1
  Net change in non-cash balances
    related to investing activities  (2.3)                    (9.4)
                                   --------------------------------
 
     Total                          (65.0)                   (71.1)
                                  --------------------------------
 
Financing activities:  
  Repayment of long-term debt       (27.1)                    (2.7)
  Repayment of capital lease   
    liabilities                     (12.0)                    (9.9)
  Dividends on preferred shares      (0.8)                    (0.8)
  Issue of common shares              2.6                      0.1
  Repurchase of common shares           -                     (6.4)
                                  --------------------------------
  
     Total                          (37.3)                   (19.7)
                                  --------------------------------

Effect of currency translation 
  on cash                             0.1                     (1.8)
                                  --------------------------------
 
Decrease in cash and cash 
  equivalents                      (101.5)                   (35.1)
  
Cash and cash equivalents, 
  beginning of period               195.5                    125.3
                                  --------------------------------
 
Cash and cash equivalents, 
  end of period                     $94.0                    $90.2
                                  --------------------------------
                                  --------------------------------


                           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 costs expensed on an early partial debt repayment
and discontinued operations.  The Adjusted Net Income and Adjusted Net Income
per common share were as follows:


                                          Three Months Ended
                                  June 30,                 June 25,
                                     2000                     1999
                                  --------------------------------
 
Net income (loss) as reported       $21.5                    $(4.6)
  
Adjusted Net Income, 
 as adjusted for:  
  Debt issue costs                    0.6                        -
  Amortization of acquired 
    intangibles                       3.2                     17.1
                                  --------------------------------

Adjusted Net Income                 $25.3                    $12.5
                                  --------------------------------
                                  --------------------------------
  
Adjusted Net Income per common
  share - basic                     $0.21                    $0.10
                                  --------------------------------
                                  --------------------------------

Geographic Information

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


                      Three Months            Three Months
                             Ended    % of           Ended    % of
                     June 30, 2000   Total   June 25, 1999   Total
                     ---------------------------------------------

United States               $144.2    44 %          $138.7    45 %
Europe                       112.6    34             105.8    34 
Asia/Pacific                  52.2    16              34.2    11 
Canada                        14.0     4              16.5     5 
Other                          5.8     2              16.0     5 
                     --------------------------------------------
                            $328.8   100 %          $311.2   100 %
                     --------------------------------------------
                     --------------------------------------------


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

Information On Business Segments


                                               Unallocated   
Three Months Ended 
June 30, 2000           Systems    Semiconductor    Costs    Total
                        ------------------------------------------
       
  Total external sales 
    revenue              $145.0           $183.8       $-   $328.8
  Amortization of 
    buildings and 
    equipment               5.1             18.8        -     23.9
  Amortization of 
    acquired intangibles      -                -      3.2      3.2
  Segment's operating 
    income (loss)         (10.5)            44.5     (3.2)    30.8

                                              Unallocated   
Three Months Ended 
June 25, 1999           Systems    Semiconductor    Costs    Total
                        ------------------------------------------
       
  Total external sales
     revenue             $186.0           $125.2       $-   $311.2
  Amortization of 
    buildings and 
    equipment               5.8             20.1        -     25.9
  Amortization of 
    acquired intangibles      -                -     17.1     17.1
  Segment's operating 
    income                 13.2              5.1    (17.1)     1.2


FOR FURTHER INFORMATION PLEASE CONTACT:

Mitel Corporation
Jacques Guerette, Corporate Communications
613 592-2122
jacques_guerette@mitel.com

OR

Mike McGinn, Investor Relations
613 592-2122
mike_mcginn@mitel.com