Mitel Reports Second Quarter 2014 Financial Results

Mitel Reports Second Quarter 2014 Financial Results     53,000 recurring cloud seats added in the quarter, up 98% year-over-year    Strong cash generation enables another voluntary prepayment of $25 million                            against credit facility  OTTAWA, Aug. 7, 2014 (GLOBE NEWSWIRE) -- Mitel® (Nasdaq:MITL) (TSX:MNW), a global leader in business communications, today announced financial results for the second quarter ended June 30, 2014.                     As Reported       Pro-forma                    Q2 '14      Q2'13  Q2'13* Revenue             $288.7      $146.6 $293.0 Net Income (Loss)   $0.8        $2.7   -$1.6 Non-GAAP Net Income $22.2       $9.9   $18.9 Adjusted EBITDA     $38.8       $21.4  $35.2  All results are reported in millions of US dollars  See tables for reconciliation of non-GAAP measures to GAAP measures  *consists of the combined results of Mitel and Aastra from April 1, 2013 through June 30, 2013  "Mitel emerged from the second quarter with record reported quarterly revenue and global market momentum that enabled us to beat consensus and deliver consistently strong financial results through the first half of the year," said Richard McBee, Chief Executive Officer, Mitel. "The expanded global Mitel team demonstrated an outstanding ability to address immediate customer needs, and, at the same time, maintain tight focus on the execution of our long-term strategy to invest in the cloud, expand our contact center business, and leverage our installed base of 60 million end-customers worldwide."  In the second quarter Mitel continued to see strong cloud growth, installing 128,000 new cloud seats during the quarter including an impressive 53,000 recurring cloud seats, taking Mitel's total installed cloud base to 754,000, up 75% year-over-year. The table below highlights Mitel's cloud operational metrics, as of June 30, 2014.  Cloud Operational Metrics*                                   Q2 '13   Q3'13    Q4'13    Q1 '14   Q2 '14 Total Cloud Seats                 431,886 497,489 566,562 625,699 754,045 Recurring Cloud Seats             98,727  115,870 121,314 142,600 195,673 Retail Cloud Monthly Average      $48    $46    $48    $48    $47 Revenue Per User (ARPU) Retail Cloud Average # of Seats   32      33      31      32      34 per Customer Retail Cloud Monthly Customer     0.7%     0.7%     0.5%     0.6%     0.6% Churn  *Information reflects results on a pro-forma basis, as if the Aastra acquisition had been completed on January 1, 2013.  "Our strategic progress is being recognized and rewarded by customers and the industry. In a highly competitive environment we announced global market share gains including #1 market share positions in Western Europe and EMEA overall. We were also acknowledged by leading industry research firm Gartner as a Leader in Unified Communications and a Challenger in Contact Center in their 2014 Magic Quadrant reports. We have entered the second half of the year with strong momentum," said Mr. McBee.  Financial Highlights  Mitel completed the acquisition of Aastra Technologies Limited on January 31, 2014. "As reported" results are referred to below and in the tables attached to this press release. Comparative pro-forma results reflect results of the company as if it had been fully combined with Aastra Technologies for the period April 1, 2013 through June 30, 2013.  AS REPORTED:    oTotal revenue increased 97% to $288.7 million from second quarter 2013,     primarily as a result of the Aastra acquisition.   oGross margins were 52.6%, down from 55.0% in the prior year, reflecting     the acquisition of Aastra, which was a lower gross margin business.   oNet income was $0.8 million compared to net income of $2.7 million in the     prior year, driven principally by the integration costs related to the     acquisition of Aastra.   oAdjusted EBITDA was $38.8 million compared to $21.4 million in the year     ago period, due to a combination of EBITDA growth from the legacy Mitel     business and EBITDA resulting from the acquisition of Aastra.   oNon-GAAP net income for the second quarter of 2014 was $22.2 million, or     $0.21 per diluted share, compared to $9.9 million, or $0.18 per diluted     share in the second quarter of 2013. The number of non-GAAP     weighted-average common shares outstanding was 103.7 million and 56.3     million, respectively.   oOperating cash flow for the quarter ended June 2014 was $25.8 million     compared to $25.3 million in the quarter ended June 2013.   oCash and cash equivalents as of June 30, 2014 were $134.2 million.  PRO-FORMA*:    oTotal revenue decreased 1.5% from $293.0 million in second quarter 2013,     driven principally by customers moving from premise to recurring     cloud-based solutions.   oGross margins improved to 52.6% compared to 48.6% in the prior year, as a     result of the prairieFyre acquisition and other cost reductions.   oNet income improved to $0.8 million compared to a net loss of $1.6 million     in the prior year, driven principally by margin improvements.   oAdjusted EBITDA increased to $38.8 million compared to $35.2 million in     the year ago period, reflecting improved operating performance.   oNon-GAAP net income improved to $22.2 million, or $0.21 per share,     compared to $18.9 million, or $0.19 per diluted share in the second     quarter of 2013. The number of non-GAAP weighted-average common shares     outstanding for the second quarter of 2013 was 100.5 million.  *Information reflects results on a pro-forma basis, as if the Aastra acquisition had been completed on January 1, 2013.  "The global Mitel team executed well during the quarter while meeting our aggressive integration timelines and synergy targets. Given our favorable financial results reported, and in light of the strength of our cash position, we are announcing that today we will be making another voluntary pre-payment of $25 million on our term loan credit facility," said Steve Spooner, Chief Financial Officer, Mitel. He added, "We were especially pleased to note that Standard & Poor's has recognized Mitel's performance and strategy. Shortly before the close of the June quarter, they raised our long-term corporate credit rating to B+ from B on the strength of early integration success. These views are based on the expectation that Mitel will continue improving our financial performance and further enhance our global market position."  Business Highlights    oRecognized by Gartner as a Leader in the 2014 Magic Quadrant for Unified     Communications, the second significant advancement in consecutive months     by the prestigious research firm following Mitel's move into the     Challengers Quadrant for Contact Center Infrastructure.    oIntroduction of a new Partner program in North America with a redesigned     reward system that recognizes both revenue success and IT and technical     skill credentials, including technical and sales certifications,     operational efficiency and installation expertise as well as specialized     expertise in contact center, cloud and hospitality solutions.    oIn conjunction with Mitel emerging as the #1 market share leader in both     Western Europe and Europe Middle East and Africa (EMEA) overall, and to     further strengthen and expand our market position in the region we     completed the consolidation of Mitel's European sales organization into a     single structure under the leadership of Graham Bevington, Executive Vice     President for EMEA.  Business Outlook  Mitel has set the following financial performance guidance for the third quarter of 2014 ending September 30, 2014.    oGAAP revenue is expected to be in the range of $261 million to $276     million, reflecting typical third quarter seasonality.   oGAAP gross margin percentage is expected to be in the range of 51.5% to     53.0%.   oAdjusted EBITDA margins to be in the range 10.5% to 12.0%; and   oNon-GAAP earnings per share to be in the range of $0.14 to $0.16  Conference Call Information  Mitel will host an investor conference call and live webcast today at 8:30 a.m. ET (5:30 a.m. PT) to discuss its financial results for the second quarter ended June 30, 2014. To access the conference call, dial 888-734-0328. Callers outside the U.S. and Canada should dial 678-894-3054. A replay of the conference call will be available through Friday, August 15, 2014. To access the replay, all callers should please dial 404-537-3406 and enter pass code 72200477. The live webcast will be accessible on Mitel's investor relations website at http://investor.mitel.com/ and will be archived and available on this site for at least three months.  Non-GAAP Financial Measurements  This press release includes references to non-GAAP financial measures including adjusted EBITDA, non-GAAP net income and non-GAAP operating expenses. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. We use these non-GAAP financial measures to assist management and investors in understanding our past financial performance and prospects for the future, including changes in our operating results, trends and marketplace performance, exclusive of unusual events or factors which do not directly affect what we consider to be our core operating performance. Non-GAAP measures are among the primary indicators management uses as a basis for our planning and forecasting of future periods. Investors are cautioned that non-GAAP financial measures should not be relied upon as a substitute for financial measures prepared in accordance with generally accepted accounting principles. Please see the reconciliation of non-GAAP financial measures to the most directly comparable U.S. GAAP measure attached to this release.  Forward Looking Statements  Some of the statements in this press release are forward-looking statements (or forward-looking information) within the meaning of applicable U.S. and Canadian securities laws. These include statements using the words target, outlook, may, will, should, could, estimate, continue, expect, intend, plan, predict, potential, project and anticipate, and similar statements which do not describe the present or provide information about the past. There is no guarantee that the expected events or expected results will actually occur. Such statements reflect the current views of management of Mitel and are subject to a number of risks and uncertainties. These statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, operational and other factors. Any changes in these assumptions or other factors could cause actual results to differ materially from current expectations. All forward-looking statements attributable to Mitel, or persons acting on its behalf, and are expressly qualified in their entirety by the cautionary statements set forth in this paragraph. Undue reliance should not be placed on such statements. In addition, material risks that could cause results of operations to differ include the Mitel's ability to achieve or sustain profitability in the future since its acquisition of Aastra; fluctuations in the quarterly and annual revenues and operating results; fluctuations in foreign exchange rates; current and ongoing global economic instability, political unrest and related sanctions, particularly in connection with the Ukraine and the Middle East; intense competition; reliance on channel partners for a significant component of sales; dependence upon a small number of outside contract manufacturers to manufacture products; the ability to successfully integrate the acquisition of Aastra and realize certain synergies; and, our ability to implement and achieve our business strategies successfully. Additional risks are described under the heading "Risk Factors" in Mitel's Transition Report on Form 10-K for the eight month period ended December 31, 2013, filed with the Securities and Exchange Commission on March 31, 2014. Forward-looking statements speak only as of the date they are made. Except as required by law, we do not have any intention or obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements.  About Mitel  Mitel® (Nasdaq:MITL) (TSX:MNW) is a global leader in business communications that easily connect employees, partners and customers -- anywhere, anytime and over any device, for the smallest business to the largest enterprise. Mitel offers customers maximum choice with one of the industry's broadest portfolios and the best path to the cloud. With more than $1 billion in combined annual revenue, 60 million end-user customers worldwide, and #1 market share in Western Europe and EMEA, Mitel is a clear market leader in business communications. For more information, go to www.mitel.com.  MITL-F  Mitel and the Mitel logo are registered trademarks of Mitel Networks Corporation.  All other trademarks are the property of their respective owners.                                                                MITEL NETWORKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions of US dollars) (unaudited)                                                    June 30,   December 31,                                                    2014       2013                                                               ASSETS                                                         Current assets:                                                Cash and cash equivalents                           $134.2   $40.2 Accounts receivable                                 230.1     104.3 Sales-type lease receivables                        21.9      13.9 Inventories                                         89.3      36.9 Deferred tax asset                                  27.9      17.3 Other current assets                                53.7      26.5                                                                                                                  557.1     239.1 Non-current portion of sales-type lease receivables 23.1      12.1 Deferred tax asset                                  118.8     127.5 Property and equipment                              52.4      28.5 Identifiable intangible assets                      204.0     50.7 Goodwill                                            333.4     147.3 Other non-current assets                            19.1      15.3                                                                                                                  $1,307.9 $620.5                                                               LIABILITIES AND SHAREHOLDERS' EQUITY                           Current liabilities:                                           Accounts payable and accrued liabilities            $212.1   $82.8 Current portion of deferred revenue                 75.8      39.4 Current portion of long-term debt                   6.0       5.3                                                                                                                  293.9     127.5 Long-term debt                                      336.0     264.2 Lease recourse liability                            2.5       3.5 Long-term portion of deferred revenue               34.7      16.6 Deferred tax liability                              23.5      14.4 Pension liability                                   102.4     57.3 Other non-current liabilities                       28.6      18.6                                                                                                                  821.6     502.1                                                               Shareholders' equity                                486.3     118.4                                                                                                                  $1,307.9 $620.5                                                                                                                                  MITEL NETWORKS CORPORATION STATEMENT OF OPERATIONS (in millions of US dollars) (unaudited)                                                                                                                   Proforma  US GAAP As Proforma                                   US GAAP As    Quarter   Reported   Quarter                                  Reported      Ended     Quarter    Ended                                   Quarter Ended June 30,  Ended      June 30,                                   June 30, 2014 2014      June 30,   2013                                                           2013                                                                   Revenues                          $288.7      $288.7  $146.6   $293.0 Cost of revenues                  136.9        136.9    66.0      150.5 Gross margin                      151.8        151.8    80.6      142.5 Expenses:                                                          Selling, general and              91.8         91.8     50.7      86.8 administrative Research and development          31.9         31.9     13.5      31.6 Special charges and restructuring 10.9         10.9     2.6       7.5 costs Amortization of acquisition-related intangible    14.0         14.0     5.6       13.0 assets                                  148.6        148.6    72.4      138.9 Operating income                  3.2          3.2      8.2       3.6 Interest expense                  (5.5)        (5.5)    (6.3)     (6.4) Debt retirement costs             (0.8)        (0.8)    --       -- Other income (loss)               1.7          1.7      (0.3)     (1.2) Income (loss) from operations,    (1.4)        (1.4)    1.6       (4.0) before income taxes Current income tax recovery       (0.6)        (0.6)    3.3       2.6 (expense) Deferred income tax recovery      2.8          2.8      (2.2)     (0.2) (expense) Net income (loss)                 $0.8        $0.8    $2.7     $(1.6)                                                                   Non-GAAP measures:                                                 Adjusted EBITDA                   38.8         38.8     21.4      35.2 Non-GAAP net income               22.2         22.2     9.9       18.9                                                                                                                                     MITEL NETWORKS CORPORATION STATEMENT OF OPERATIONS (in millions of US dollars) (unaudited)                                                                                                  US GAAP As    Proforma   US GAAP As Proforma                                 Reported      Six Months Reported   Six Months                                Six Months    Ended      Six Months Ended                                 Ended         June 30,   Ended      June 30,                                 June 30, 2014 2014       June 30,   2013                                                          2013                                                                  Revenues                        $530.2      $566.1   $289.7   $566.5 Cost of revenues                249.0        270.3     128.3     289.5 Gross margin                    281.2        295.8     161.4     277.0 Expenses:                                                         Selling, general and            168.7        182.4     99.6      172.7 administrative Research and development        58.2         63.8      27.3      64.2 Special charges and             24.1         39.1      4.1       9.9 restructuring costs Amortization of acquisition-related intangible  25.3         27.8      11.2      26.0 assets                                276.3        313.1     142.2     272.8 Operating income (loss) from    4.9          (17.3)    19.2      4.2 continuing operations Interest expense                (11.4)       (11.5)    (11.7)    (11.9) Debt retirement costs           (15.5)       (15.5)    (2.6)     (2.6) Fair value adjustment on        --          --       --       0.4 derivative instruments Other income (loss)             1.8          0.8       (0.2)     -- Income (loss) from operations,  (20.2)       (43.5)    4.7       (9.9) before income taxes Current income tax recovery     (0.3)        5.2       3.9       2.5 (expense) Deferred income tax recovery    7.7          8.3       (4.6)     -- (expense) Net income (loss) from          (12.8)       (30.0)    4.0       (7.4) continuing operations Net loss from discontinued      --          --       (3.0)     (3.0) operations Net income (loss) from          $(12.8)     $(30.0)  $1.0     $(10.4) continuing operations                                                                  Non-GAAP measures:                                                Adjusted EBITDA                 74.4         71.6      44.4      62.9 Non-GAAP net income             42.0         39.1      22.0      32.9                                                                                                                                 MITEL NETWORKS CORPORATION Cash flow information (in millions of US dollars) (unaudited)                                                                                                     As Reported  As Reported   As Reported                         As Reported   Quarter      Six Months    Six Months                        Quarter Ended Ended        Ended         Ended                         June 30, 2014 June 30,     June 30, 2014 June 30, 2013                                       2013                                                               Cash provided by (used                                         in): Net cash provided by    $25.8       $25.3      $52.6       $35.0 operating activities Net cash used in        (4.3)        (25.5)      (13.7)       (27.1) investing activities Net cash provided by (used in) financing     (23.9)       (1.5)       53.5         (38.7) activities Effect of exchange rate changes on cash         0.6          (0.1)       1.6          (1.8) balances Net increase (decrease) in cash and cash        (1.8)        (1.8)       94.0         (32.6) equivalents                                                               Cash and cash equivalents, beginning  136.0        39.4        40.2         70.2 of period                                                               Cash and cash equivalents, end of     $134.2      $37.6      $134.2      $37.6 period                                                                                                                             Additional information on capital                                                     expenditures: Capital expenditures    4.3          2.4         7.5          4.0 acquired with cash Capital expenditures financed through        1.5          0.9         2.7          2.2 capital leases                                                               Total capital           $5.8        $3.3       $10.2       $6.2 expenditures                                                                 MITEL NETWORKS CORPORATION Segmented Information (in millions of US dollars) (unaudited)                                                                                U.S. GAAP, As Reported      Proforma                    Quarter Ended June 30, 2014 Quarter Ended June 30, 2014 Revenues           Premise   Cloud    Total   Premise   Cloud    Total                    segment  segment          segment  segment Product            $194.7  $6.2   $200.9 $194.7  $6.2   $200.9 Services           66.5     0.4     66.9    66.5     0.4     66.9 Cloud recurring    --      20.9    20.9    --      20.9    20.9 Total revenues     $261.2  $27.5  $288.7 $261.2  $27.5  $288.7                                                              Gross margin                                                  Product            $112.0  $3.7   $115.7 $112.0  $3.7   $115.7 Services           25.8     0.2     26.0    25.8     0.2     26.0 Cloud recurring    --      10.1    10.1    --      10.1    10.1 Total gross margin $137.8  $14.0  $151.8 $137.8  $14.0  $151.8                                                                                U.S. GAAP, As Reported      Proforma                    Quarter Ended June 30, 2013 Quarter Ended June 30, 2013 Revenues           Premise   Cloud    Total   Premise   Cloud    Total                    segment  segment          segment  segment Product            $90.0   $3.1   $93.1  $201.0  $6.1   $207.1 Services           40.0     --     40.0    69.7     0.6     70.3 Cloud recurring    --      13.5    13.5    --      15.6    15.6 Total revenues     $130.0  $16.6  $146.6 $270.7  $22.3  $293.0                                                              Gross margin                                                  Product            $58.5   $1.8   $60.3  $108.7  $3.6   $112.3 Services           14.2     --     14.2    22.8     0.3     23.1 Cloud recurring    --      6.1     6.1     --      7.1     7.1 Total gross margin $72.7   $7.9   $80.6  $131.5  $11.0  $142.5                                                                                                                               MITEL NETWORKS CORPORATION Segmented Information (in millions of US dollars) (unaudited)                                                                                 U.S. GAAP, As Reported         Proforma                  Six Months Ended June 30, 2014 Six Months Ended June 30, 2014 Revenues         Premise    Cloud     Total    Premise    Cloud     Total                  segment   segment            segment   segment Product          $354.5   $12.9   $367.4  $381.1   $13.6   $394.7 Services         122.4     0.4      122.8    130.0     0.6      130.6 Cloud recurring  --       40.0     40.0     --       40.8     40.8 Total revenues   $476.9   $53.3   $530.2  $511.1   $55.0   $566.1                                                                 Gross margin                                                     Product          $207.3   $6.9    $214.2  $219.3   $7.2    $226.5 Services         47.4      0.2      47.6     49.4      0.2      49.6 Cloud recurring  --       19.4     19.4     --       19.7     19.7 Total gross      $254.7   $26.5   $281.2  $268.7   $27.1   $295.8 margin                                                                                 U.S. GAAP, As Reported         Proforma                  Six Months Ended June 30, 2013 Six Months Ended June 30, 2013 Revenues         Premise    Cloud     Total    Premise    Cloud     Total                  segment   segment            segment   segment Product          $177.1   $4.3    $181.4  $388.9   $8.5    $397.4 Services         82.7      --      82.7     138.4     1.0      139.4 Cloud recurring  --       25.6     25.6     --       29.7     29.7 Total revenues   $259.8   $29.9   $289.7  $527.3   $39.2   $566.5                                                                 Gross margin                                                     Product          $116.5   $2.6    $119.1  $211.2   $5.1    $216.3 Services         30.6      --      30.6     46.3      0.6      46.9 Cloud recurring  --       11.7     11.7     --       13.8     13.8 Total gross      $147.1   $14.3   $161.4  $257.5   $19.5   $277.0 margin                                                                                                                                    MITEL NETWORKS CORPORATION Reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions of US dollars) (unaudited)                                                                                                                                        Proforma                            As Reported   Proforma      As Reported   Quarter                           Quarter Ended Quarter Ended Quarter Ended Ended                            June 30, 2014 June 30, 2014 June 30, 2013 June 30,                                                                      2013                                                                   Net income (loss)          $0.8        $0.8        $2.7        $(1.6) Adjustments:                                                       Interest expense           5.5          5.5          6.3          6.4 Income tax expense         (2.2)        (2.2)        (1.1)        (2.4) (recovery) Amortization and           19.6         19.6         9.0          18.9 depreciation Foreign exchange loss      (1.3)        (1.3)        0.5          1.6 (gain) Special charges and        10.9         10.9         2.6          7.5 restructuring costs Stock-based compensation   1.7          1.7          1.0          1.1 Debt retirement costs      0.8          0.8          --          -- Acquisition accounting for 3.0          3.0          --          3.0 deferred revenue Other                      --          --          0.4          0.7                                                                   Adjusted EBITDA            $38.8       $38.8       $21.4       $35.2                                                                                                                                  MITEL NETWORKS CORPORATION Reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions of US dollars) (unaudited)                                                                                       As Reported   Proforma      As Reported  Proforma                         Six Months    Six Months    Six Months   Six Months                        Ended         Ended         Ended        Ended                         June 30, 2014 June 30, 2014 June 30,     June 30, 2013                                                     2013  Net income (loss)       $(12.8)     $(30.0)     $1.0       $(10.4) Net loss from           --          --          3.0         3.0 discontinued operations Net income (loss) from  (12.8)       (30.0)       4.0         (7.4) continuing operations Adjustments:                                                   Interest expense        11.4         11.5         11.7        11.9 Income tax expense      (7.4)        (13.5)       0.7         (2.5) (recovery) Amortization and        35.8         39.1         17.9        37.4 depreciation Foreign exchange loss   (1.0)        --          1.0         1.3 (gain) Special charges and     24.1         39.1         4.1         9.9 restructuring costs Stock-based             3.0          3.0          2.1         2.4 compensation Debt retirement costs   15.5         15.5         2.6         2.6 Acquisition accounting  5.8          6.9          --         6.9 for deferred revenue Other                   --          --          0.4         0.5                                                               Adjusted EBITDA from    74.4         71.6         44.5        63.0 continuing operations                                                               Adjusted EBITDA from discontinued            --          --          (0.1)       (0.1) operations^(1)                                                               Adjusted EBITDA         $74.4       $71.6       $44.4      $62.9                                                               (1)The reconciliation of net loss from discontinued operations to Adjusted EBITDA from discontinued operations for the six months ended June 30, 2013 consists of special charges and restructuring costs of $1.6 million, non-cash impairment of goodwill of $1.9 million and an income tax recovery of $0.6 million.                                                                                                                                 MITEL NETWORKS CORPORATION Reconciliation of Net Income (Loss) to Non-GAAP Net Income (in millions of US dollars, except per share amounts) (unaudited)                                                                                                              Proforma   As Reported  Proforma                               As Reported   Quarter    Quarter      Quarter                              Quarter Ended Ended      Ended        Ended                               June 30, 2014 June 30,   June 30,     June 30,                                             2014       2013         2013                                                                  Net income (loss)             $0.8        $0.8     $2.7       $(1.6) Income tax expense (recovery) (2.2)        (2.2)     (1.1)       (2.4) Net income (loss), before     (1.4)        (1.4)     1.6         (4.0) income taxes                                                                  Adjustments:                                                      Foreign exchange loss (gain)  (1.3)        (1.3)     0.5         1.6 Special charges and           10.9         10.9      2.6         7.5 restructuring costs Stock-based compensation      1.7          1.7       1.0         1.1 Amortization of acquisition-related           14.0         14.0      5.6         13.0 intangibles assets Debt retirement costs         0.8          0.8       --         -- Acquisition accounting for    3.0          3.0       --         3.0 deferred revenue Other                         --          --       0.4         0.7 Non-GAAP net income, before   27.7         27.7      11.7        22.9 income taxes Non-GAAP tax expense^(1)      (5.5)        (5.5)     (1.8)       (4.0) Non-GAAP net income           $22.2       $22.2    $9.9       $18.9                              .             .          .             Non-GAAP net income per                                           share, diluted: Non-GAAP net income per       $0.21       $0.21    $0.18      $0.19 common share Non-GAAP weighted-average number of common shares       103.7        103.7     56.3        100.5 outstanding (in millions):                                                                  (1) Non-GAAP tax expense for 2013 is based on an estimated effective tax rate of 15% for Mitel and 20% for Aastra.Non-GAAP tax expense for 2014 is based on an effective tax rate of 20%.                                                                                                                                    MITEL NETWORKS CORPORATION Reconciliation of Net Income (Loss) to Non-GAAP Net Income (in millions of US dollars, except per share amounts) (unaudited)                                                                                              As Reported    Proforma    As Reported  Proforma                             Six Months     Six Months  Six Months   Six Months                            Ended          Ended       Ended        Ended                             June 30, 2014  June 30,    June 30,     June 30,                                            2014        2013         2013                                                                  Net income (loss) from      $(12.8)      $(30.0)   $4.0       $(7.4) continuing operations Income tax expense          (7.4)         (13.5)     0.7         (2.5) (recovery) Net income (loss) from continuing operations,      (20.2)        (43.5)     4.7         (9.9) before income taxes                                                                  Adjustments:                                                      Foreign exchange loss       (1.0)         --        1.0         1.3 (gain) Special charges and         24.1          39.1       4.1         9.9 restructuring costs Stock-based compensation    3.0           3.0        2.1         2.4 Amortization of acquisition-related         25.3          27.8       11.2        26.0 intangibles assets Debt retirement costs       15.5          15.5       2.6         2.6 Acquisition accounting for  5.8           6.9        --         6.9 deferred revenue Other                       --           --        0.4         0.5 Non-GAAP net income from continuing operations,      52.5          48.8       26.1        39.7 before income taxes Non-GAAP tax expense^(1)    (10.5)        (9.7)      (4.0)       (6.7) Non-GAAP net income from    42.0          39.1       22.1        33.0 continuing operations Non-GAAP net loss from      --           --        (0.1)       (0.1) discontinued operations Non-GAAP net income         $42.0        $39.1     $22.0      $32.9                                                                  Non-GAAP net income per                                           share, diluted: Non-GAAP net income per common share from           $0.44        $0.38     $0.39      $0.33 continuing operations Non-GAAP net loss per common share from           $--         $--      $--       $-- discontinued operations Non-GAAP net income per     $0.44        $0.38     $0.39      $0.33 common share Non-GAAP weighted-average number of common shares     96.1          103.5      56.3        100.5 outstanding (in millions):                                                                  (1) Non-GAAP tax expense for 2013 is based on an estimated effective tax rate of 15% for Mitel and 20% for Aastra.Non-GAAP tax expense for 2014 is based on an effective tax rate of 20%.                                                                                                                                   STATEMENT OF OPERATIONS QUARTER ENDED JUNE 30, 2013 (in millions of US dollars) (unaudited)                                                                                      Mitel,                                         Proforma                     as           Aastra and Purchase price        results                      reported^(1) Telepo^(2) adjustments^(3)        of                                                                     operations                                                                 Revenues             $146.6     $149.4   $(3.0)        ^(4) $293.0 Cost of revenues     66.0        84.5      --                  150.5 Gross margin         80.6        64.9      (3.0)                142.5 Expenses:                                                        Selling, general and 50.7        36.1      --                  86.8 administrative Research and         13.5        18.1      --                  31.6 development Special charges and  2.6         4.9       --                  7.5 restructuring costs Amortization of acquisition-related  5.6         2.2       5.2            ^(5) 13.0 intangible assets                     72.4        61.3      5.2                  138.9 Operating income     8.2         3.6       (8.2)                3.6 (loss) Interest expense     (6.3)       (0.1)     --                  (6.4) Other expense        (0.3)       (0.9)     --                  (1.2) Income (loss) before 1.6         2.6       (8.2)                (4.0) income taxes Current income tax   3.3         (0.7)     --                  2.6 recovery (expense) Deferred income tax  (2.2)       0.4       1.6            ^(6) (0.2) recovery (expense) Net income (loss)    $2.7       $2.3     $(6.6)              $(1.6)                                                                 (1) Consists of the results of operations of Mitel. (2) Consists of the results of operations of Aastra and Telepo. (3) Consists of purchase price allocation adjustments relating to Aastra and Telepo results for the quarter included in the pro-forma period. (4) Relates to the reduction in revenues as a result of the valuation of deferred revenue being below the historical book value. (5) Relates to the amortization of intangibles acquired in the acquisition of Aastra. (6) Relates to the tax effect on the above adjustments using an effective tax rate of 20%.                                                                                                                                  STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2014 (in millions of US dollars) (unaudited)                                                                                      Mitel,                                         Proforma                     as           Aastra and Purchase price        results                      reported^(1) Telepo^(2) adjustments^(3)        of                                                                     operations                                                                 Revenues             $530.2     $37.0    $(1.1)        ^(4) $566.1 Cost of revenues     249.0       21.3      --                  270.3 Gross margin         281.2       15.7      (1.1)                295.8 Expenses:                                                        Selling, general and 168.7       13.7      --                  182.4 administrative Research and         58.2        5.6       --                  63.8 development Special charges and  24.1        15.0      --                  39.1 restructuring costs Amortization of acquisition-related  25.3        0.7       1.8            ^(5) 27.8 intangible assets                     276.3       35.0      1.8                  313.1 Operating income     4.9         (19.3)    (2.9)                (17.3) (loss) Interest expense     (11.4)      (0.1)     --                  (11.5) Debt retirement      (15.5)      --       --                  (15.5) costs Other income (loss)  1.8         (1.0)     --                  0.8 Loss before income   (20.2)      (20.4)    (2.9)                (43.5) taxes Current income tax   (0.3)       5.5       --                  5.2 recovery (expense) Deferred income tax  7.7         --       0.6            ^(6) 8.3 recovery (expense) Net loss             $(12.8)    $(14.9)  $(2.3)              $(30.0)                                                                 (1) Consists of the results of operations of Mitel, which include the results of Aastra and Telepo from the acquisition date of January 31, 2014 (2) Consists of the results of operations of Aastra and Telepo for the month of January 2014. (3) Consists of purchase price allocation adjustments relating to Aastra and Telepo results for the month of January included in the pro-forma period. (4) Relates to the reduction in revenues as a result of the valuation of deferred revenue being below the historical book value. (5) Relates to the amortization of intangibles acquired in the acquisition of Aastra. (6) Relates to the tax effect on the above adjustments using an effective tax rate of 20%.                                                                                                                                  STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2013 (in millions of US dollars) (unaudited)                                                                                      Mitel,                                         Proforma                     as           Aastra and Purchase price        results                      reported^(1) Telepo^(2) adjustments^(3)        of                                                                     operations                                                                 Revenues             $289.7     $283.7   $(6.9)        ^(4) $566.5 Cost of revenues     128.3       161.2     --                  289.5 Gross margin         161.4       122.5     (6.9)                277.0 Expenses:                                                        Selling, general and 99.6        73.1      --                  172.7 administrative Research and         27.3        36.9      --                  64.2 development Special charges and  4.1         5.8       --                  9.9 restructuring costs Amortization of acquisition-related  11.2        4.5       10.3           ^(5) 26.0 intangible assets                     142.2       120.3     10.3                 272.8 Operating income (loss) from          19.2        2.2       (17.2)               4.2 continuing operations Interest expense     (11.7)      (0.2)     --                  (11.9) Debt retirement      (2.6)       --       --                  (2.6) costs Fair value adjustment on        --         0.4       --                  0.4 derivative instruments Other income         (0.2)       0.2       --                  -- (expense) Income from continuing           4.7         2.6       (17.2)               (9.9) operations, before income taxes Current income tax   3.9         (1.4)     --                  2.5 recovery (expense) Deferred income tax  (4.6)       1.2       3.4            ^(6) -- recovery (expense) Net income (loss) from continuing      4.0         2.4       (13.8)               (7.4) operations Net loss from discontinued         (3.0)       --       --                  (3.0) operations Net income (loss)    $1.0       $2.4     $(13.8)             $(10.4)                                                                 (1) Consists of the results of operations of Mitel. (2) Consists of the results of operations of Aastra and Telepo. (3) Consists of purchase price allocation adjustments relating to Aastra and Telepo results for the quarter included in the pro-forma period. (4) Relates to the reduction in revenues as a result of the valuation of deferred revenue being below the historical book value. (5) Relates to the amortization of intangibles acquired in the acquisition of Aastra. (6) Relates to the tax effect on the above adjustments using an effective tax rate of 20%.                                                                  CONTACT: Amy MacLeod (media)          613-592-2122 x71245          amy_macleod@mitel.com          Cynthia Navarro (industry analysts)          469-574-8113          cynthia_navarro@mitel.com          Michael McCarthy (investor relations)          469-574-8134          michael_mccarthy@mitel.com  company logo  
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