Net earnings improved significantly in the first quarter in 2009 to $14.1 million or $1.02 diluted earnings per share compared to $5.3 million or $0.33 diluted earnings per share in the same period in 2008.
Sales for the three months ended March 31, 2009 were $219.3 million compared to $140.0 million for the same quarter in 2008. The Company experienced a significant increase in revenue in all regions as a result of the acquisition of the Ericsson Enterprise portfolio which closed on April 30, 2008. Sales decreased by 16.2% from $261.8 million in the fourth quarter of 2008. This sequential decrease is partly due to the seasonality of the business, but it also appears that the current economic crisis has had an impact on the sales results in the quarter.
Gross margin increased to 48.0% of sales in the first quarter of 2009 compared to 44.4% of sales in the same period in 2008 and 47.0% of sales in the fourth quarter of 2008. The increase in gross margin in the quarter resulted from the addition of the former Ericsson product lines as well as a continued improvement in overhead costs and a favourable product mix.
Research and development expenses in the first quarter of 2009 were $21.9 million or 10.0% of sales, compared to $13.7 million or 9.8% of sales in the same quarter of 2008 with the increase attributable to the acquisition from Ericsson. The Company continues to streamline its R&D investments and explore synergy opportunities across its product lines.
Selling, general and administrative expenses were $60.3 million or 27.5% of sales in the first quarter of 2009 compared to $38.2 million or 27.3% of sales in the first quarter of 2008. Selling, general and administrative expenses included significantly higher provisions for bad debts in the first quarter this year when compared to the level recorded in the first quarter last year.
Amortization expense recorded in operating expenses increased to $5.9 million in the first quarter of 2009 compared to $3.3 million in the first quarter of 2008 as a result of the inclusion of amortization on the intangible assets added as part of the acquisition from Ericsson.
The Company recorded interest expense of $0.7 million in the first quarter of 2009 as a result of the term loan added as part of the 2008 acquisition. Foreign exchange gains were $0.8 million in the first quarter of 2009, compared to a foreign exchange loss of $0.9 million in the first quarter of 2008, due to the relative weakness in the Canadian dollar to the Euro and U.S. dollar in the first quarter of 2009.
Investment income totaled $0.7 million in the first quarter compared to $1.3 million in the same quarter of 2008, mainly as a result of lower average rates of return on excess cash balances.
Cash and short-term investments totaled $66.9 million at the end of March 2009 compared to $98.2 million at December 31, 2008, a decrease of $31.3 million. During the first quarter of 2009, the Company generated $20.2 million in cash flow from operations but increased its investment in non-cash working capital by $13.7 million. In addition, the Company used $17.7 million of its cash to repurchase 1.4 million of its own common shares during the first quarter and used $14.9 million of its cash to repay a portion of its long-term loan balance.