http://www.mitel.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 22, 1999
MITEL CORPORATION
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(Exact name of registrant as specified in its charter)
CANADA 1-8139 NONE
--------------------------- ------------------- ---------------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
350 Legget Drive
P.O. Box 13089
Kanata, Ontario, Canada K2K 2W7
-------------------------- ------------
(Address of principal (Postal Code)
executive offices)
Registrant's telephone number, including area code: (613) 592-2122
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Item 5. Press Release
On April 22, 1999, Mitel Corporation (the "Company") issued a press release
reporting preliminary unaudited financial results for the fourth quarter and
the fiscal year ended March 26, 1999 and announcing the adoption of new
amortization periods for intangibles and the approval of certain special
charges. A copy of the press release is attached to this Form 8-K as Exhibit
99.1 and is incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- ------------------
<S> <C>
99.1 Press Release dated April 22, 1999
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
<TABLE>
<CAPTION>
MITEL CORPORATION
<S> <C>
April 27, 1999 by: Jean-Jacques Carrier
- -------------- --------------------------------
Date Jean-Jacques Carrier
Senior Vice President of Finance
and Chief Financial Officer
</TABLE>
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
MITEL ADOPTS NEW AMORTIZATION PERIODS FOR INTANGIBLES, CONSISTENT WITH
EVOLVING INDUSTRY PRACTICES, AND RATIONALIZATION PLANS.
RELEASES PRELIMINARY, UNAUDITED FISCAL 1999 RESULTS
KANATA, ONTARIO, April 22, 1999 - Mitel Corporation today announced that its
Board of Directors has adopted new amortization periods for intangibles,
consistent with evolving industry practices, and approved certain special
charges in the interest of improving shareholder value. In order to put into
context these actions, the Company also released today its preliminary
unaudited financial results for the fourth quarter and for the fiscal year
ended March 26, 1999, which reflect the new amortization periods and special
charges.
Mitel will release audited results on May 20, 1999, following a regularly
scheduled meeting of the Company's Board of Directors.
"We are pleased to announce that we expect to report record revenue of $1.310
billion for Fiscal 1999; however, we must take the necessary measures now to
strengthen our balance sheet and enhance our prospects for improved
profitability" said Kirk K. Mandy, Mitel CEO and President. "Such measures
will allow our assets to be in better alignment with the technological and
competitive dynamics of our industry and will also improve our financial
ability to seize new growth opportunities. Accordingly, our Board, which
regularly reviews the estimated useful lives of Mitel's acquired intangibles,
has approved a reduction of our amortization time periods to better reflect
the estimated period of advantage achieved by our recent acquisitions, and to
be in line with evolving industry practices. As part of their review of
Mitel's operations, the Board also approved certain rationalization plans."
Preliminary Adjusted Expected Earnings
For the fourth quarter, Mitel expects to report sales from continuing
operations of $329.1 million, an increase of 18% over the $278.9 million from
continuing operations in the comparable 1998 period, and adjusted net income
(see Table A) of $15.5 million, or $0.13 per share, (before intangible
amortization and other special charges of $34 million or $0.30 per share)
compared to $25.5 million, or $0.23 per share, last year. In addition,
income from discontinued operations totaled $8.6 million, or $0.07 per share,
in the final quarter. The earnings reduction from a year ago is mainly
attributable to lower earnings in semiconductors as a result of poor markets
in Asia-Pacific and certain pricing pressures and to increased interest
expense.
For the fiscal year ended March 26, 1999, Mitel expects to report that sales
from continuing operations rose 49%, to $1.310 billion from $881.4 million,
and adjusted net income totaled $80.2 million, or $0.67 per share, compared
to adjusted net income of $93.8 million, or $0.84 per share, in Fiscal 1998.
Mitel's year-end total order backlog from continuing operations was $179.8
million, down from $221.3 million at the end of the third quarter.
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For Fiscal 1999, Mitel expects to achieve an EBITDA (earnings before
interest, tax, depreciation and amortization) from continuing operations of
$216 million, up sharply from $157 million a year ago. Mandy said that
Mitel's liquidity has improved as reflected by cash and cash equivalents of
$125 million, up from $95 million at the end of the third quarter.
Semiconductor sales of $557.7 million are expected to be up 77% over last
year mainly as a result of the Plessey acquisition. Business Communications
Systems sales of $752.7 million are expected to have increased by 33% from
last year, chiefly due to higher shipments of PBXs in Europe and North
America, increased sales of alternate access products and the effects of
consolidating recently-acquired businesses.
"Fiscal year 1999 has been a year of substantial increases in revenue and
available markets for Mitel. Recent acquisitions have allowed us to expand
our technology base, product offerings and customer coverage, setting the
stage for continued growth" said Kirk Mandy.
Amortization and Other Special Charges
The new amortization time periods -- accelerating the amortization of
existing intangibles and reducing to two years from 5-15 years the estimated
useful life of acquired intangible assets -- and the one-time charges are
expected to reduce results for the fourth quarter and Fiscal 1999 by $34
million, or $0.30 per share, and $54 million, or $0.47 per share,
respectively.
The amortization and other special charges, related primarily to Mitel's
acquisitions during the last two years, include:
$22.4 million of pre-tax costs arising from the accelerated amortization
of recently-acquired intangible assets ($16.6m in Q4, $22.4m in FY99)
$10.1 million of one-time pre-tax charges (net) to rationalize certain
Company business segments (Q4 and FY99)
$7.2 million of non-cash debt issue and related costs expensed on an
early partial debt repayment resulting from proceeds of an equity
offering (FY99)
$16.3 million after-tax write-down of discontinued operations related to
a formal plan to exit the Lincoln Power & Automotive business segment
(Q4 and FY99), partially offset by income from these discontinued
operations ($8.6m in Q4, $2.0m in FY99).
Including the amortization and other special charges, the Company expects to
report a fourth quarter net loss of $18.9 million, or $0.17 per share,
compared to net income of $24.8 million, or $0.22 per share, in the Fiscal
1998 fourth quarter. For the 1999 fiscal year and including the
charges, Mandy said Mitel expects to report net income of $26.2 million, or
$0.20 per share, compared to $91.9 million, or $0.82 per share, reported in
Fiscal 1998.
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Table A
The impact of the amortization of the acquired intangibles and other special
charges is shown below:
<TABLE>
<CAPTION>
(Unaudited)
Fourth Quarter Fiscal Year
FY99 FY98 FY99 FY98
-------- -------- -------- -------
Expected Expected
<S> <C> <C> <C> <C>
Net income (loss) for the period $(18.9)m $ 24.8 m $ 26.2 m $ 91.9 m
EPS $(0.17) $ 0.22 $ 0.20 $ 0.82
Add back:
Amortization of acquired intangibles $ 16.6 m $ 0.6 m $ 22.4 m $ 1.8 m
Special charges (net) $ 10.1 m - $ 10.1 m -
Debt issue and other costs - - $ 7.2 m -
(Income) loss from discontinued
operations $ (8.6)m $ 0.1 m $ (2.0)m $ 0.1 m
Estimated loss on disposal of
discontinued operations $ 16.3 m - $ 16.3 m -
Adjusted:
Net income for the period $ 15.5 m $ 25.5 m $ 80.2 m $ 93.8 m
EPS $ 0.13 $ 0.23 $ 0.67 $ 0.84
Weighted average number of common
shares outstanding 116.7 m 107.8 m 114.3 m 107.8 m
</TABLE>
Mitel Corporation (NYSE:MLT)(TSE:MLT) is a designer, manufacturer and
marketer of semiconductors and systems for the communications industries.
The Company's products include integrated circuits for wired and wireless
applications, applications-specific integrated circuits (ASICs), custom
silicon wafers and optoelectronic devices; voice communications systems;
networked voice and data systems, CTI systems and applications; telephony-
enabled servers; public switching systems; and alternate network and remote
access products. Mitel's leadership strategy is centered on developing
strong microelectronics technology and advancing people-to-people
communications in an open, distributed and standards-based environment.
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.
-30-
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For further information please call:
Investor Relations
Connie Cochran
Telephone: (613) 592-2122
Fax: (613) 592-4170
Email: [email protected]
Internet: www.mitel.com
Media Relations
Jim Barbagallo
Copithorne & Bellows
Telephone: (617) 450-4300
Fax: (617) 450-4343
Email: [email protected]
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Mitel Corporation
CONSOLIDATED STATEMENTS OF INCOME
(in millions of Canadian dollars, except per share amounts)
(Preliminary and Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Years Ended
March 26, March 27, March 26, March 27,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue $ 329.1 $ 278.9 $1,310.4 $ 881.4
------- ------- ------- -------
Cost of sales:
Cost of sales other than
depreciation 166.2 133.5 645.6 432.6
Depreciation of manufacturing
assets 15.2 13.1 66.8 25.0
------- ------- ------- -------
181.4 146.6 712.4 457.6
------- ------- ------- -------
Gross margin 147.7 132.3 598.0 423.8
------- ------- ------- -------
Expenses:
Selling and administrative 87.1 72.7 332.9 246.0
Research and development (net) 39.0 22.4 149.8 52.0
Amortization of acquired
intangibles 16.6 0.6 22.4 1.8
Special charges (net) 10.1 - 10.1 -
------- ------- ------- -------
152.8 95.7 515.2 299.8
------- ------- ------- -------
Operating income (loss) (5.1) 36.6 82.8 124.0
Other income and expenses:
Interest income 1.7 1.7 5.9 5.7
Interest expense (5.4) (4.3) (23.5) (7.2)
Debt issue and other costs - - (7.2) -
------- ------- ------- -------
Income (loss) before income taxes (8.8) 34.0 58.0 122.5
Income tax expense 2.4 9.1 17.5 30.5
------- ------- ------- -------
Income (loss) from continuing
operations (11.2) 24.9 40.5 92.0
------- ------- ------- -------
</TABLE>
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Continued:
Mitel Corporation
CONSOLIDATED STATEMENTS OF INCOME
(in millions of Canadian dollars, except per share amounts)
(Preliminary and Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Years Ended
March 26, March 27, March 26, March 27,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Income (loss) from discontinued
operations 8.6 (0.1) 2.0 (0.1)
Estimated loss on disposal of
discontinued operations (16.3) - (16.3) -
------- ------- ------- -------
Loss from discontinued operations (7.7) (0.1) (14.3) (0.1)
------- ------- ------- -------
Net income (loss) for the period $ (18.9) $ 24.8 $ 26.2 $ 91.9
======= ======= ======= =======
Net income (loss) for the period
attributable to common shareholders
after preferred share dividends $ (19.7) $ 24.0 $ 23.0 $ 88.7
======= ======= ======= =======
Net income (loss) per common share
Basic $ (0.17) $ 0.22 $ 0.20 $ 0.82
======= ======= ======= =======
Fully diluted $ (0.17) $ 0.21 $ 0.20 $ 0.80
======= ======= ======= =======
</TABLE>
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REVENUE
(Preliminary and Unaudited)
Revenue, by product group, was distributed as follows:
<TABLE>
<CAPTION>
Three Three
Months Months
Ended % of Ended % of
March 26, Total March 27, Total
1999 1998
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Semiconductors $ 129.9 39 % $ 110.8 40 %
Business Communications Systems 199.2 61 168.1 60
-------- ----- -------- -----
$ 329.1 100 % $ 278.9 100 %
======== ===== ======== =====
</TABLE>
<TABLE>
<CAPTION>
Year Year
Ended % of Ended % of
March 26, Total March 27, Total
1999 1998
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Semiconductors $ 557.7 43 % $ 314.6 36 %
Business Communications Systems 752.7 57 566.8 64
--------- ----- -------- -----
$1,310.4 100 % $ 881.4 100 %
======== ===== ======== =====
</TABLE>
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Mitel Corporation
ADJUSTED NET INCOME RECONCILIATION
(in millions of Canadian dollars, except per share amounts)
(Preliminary and Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Years Ended
March 26, March 27, March 26, March 27,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Adjusted Net Income
- -------------------
Net income (loss) as reported $ (18.9) $ 24.8 $ 26.2 $ 91.9
Adjusted net income, as adjusted for:
Amortization of acquired
intangibles 16.6 0.6 22.4 1.8
Special charges (net) 10.1 - 10.1 -
Debt issue and other costs - - 7.2 -
(Income) loss from discontinued
operations (8.6) 0.1 (2.0) 0.1
Estimated loss on disposal of
discontinued operations 16.3 - 16.3 -
------- ------- ------- -------
Adjusted net income (++) $ 15.5 $ 25.5 $ 80.2 $ 93.8
======= ======= ======= =======
Adjusted Earnings Per Share
- ---------------------------
Earnings (loss) per share as
reported $ (0.17) $ 0.22 $ 0.20 $ 0.82
Adjusted earnings per share, as adjusted for:
Amortization of acquired intangibles 0.14 0.01 0.20 0.02
Special charges (net) 0.09 - 0.09 -
Debt issue and other costs - - 0.06 -
(Income) loss from discontinued
operations (0.07) - (0.02) -
Estimated loss on disposal of
discontinued operations 0.14 - 0.14 -
------- ------- ------- -------
Adjusted earnings per share (++) $ 0.13 $ 0.23 $ 0.67 $ 0.84
======= ======= ======= =======
Weighted average number of common shares
outstanding (millions) 116.7 107.8 114.3 107.8
======= ======= ======= =======
</TABLE>
(++) Excludes 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.
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