Exhibit 99.1
Leitch Investor Contact: David Toews
Chief Financial Officer
Tel: +1 416-445-9640
Investors@leitch.com
Press Contact: Laura Whitaker
Vice President of Marketing Communications
Leitch Incorporated
Tel: +1 416-445-9640
Laura.Whitaker@leitch.com
www.leitch.com
| November 23, 2004 | FOR IMMEDIATE RELEASE |
LEITCH TECHNOLOGY ANNOUNCES SECOND QUARTER RESULTS
Reports First Net Earnings in Four Years
TORONTO — Leitch Technology Corporation (TSX: LTV) today announced its financial results for the second quarter ended October 31, 2004. Revenue for thefirstsecond quarter was $55.8 million, representing a 53% increase from $36.4 million during the same period last year. Revenue for the first six months of fiscal 2005 was $111.0 million, representing a 50% increase from $73.9 million during the same period last year.
Earnings (loss) before amortization, equity interests adjusted for income taxes and restructuring charges ("Net Operating Income (Loss)" * see definition section below) for the quarter were $1.6 million compared to a loss of $(6.4) million during the same period last year. For the first quarter since fiscal 2001, the Company is reporting positive net earnings. The net earnings for the second quarter were $1.0 million or $0.03 per share, compared to a net loss of $(6.4) million or $(0.19) per share during the same period last year. For the six months ended October 31, 2004, the Net Operating Income (Loss)* was $3.9 million compared to a loss of $(8.5) million during the same period last year. The net loss for the six months ending October 31, 2004, was $(1.7) million or $(0.05) per share, compared to $(11.4) millio n or $(0.36) per share during the same period last year.
"Last quarter we reported our first operating profit in two years. This quarter, we are reporting our first net earnings in four years. In the last twelve months we have returned the Company to profitability, completed an accretive acquisition, and this quarter added over $40 million in cash to allow us to continue on our strategic path," said Tim Thorsteinson, president and CEO of Leitch. "Our growth in revenue, in particular Server revenue this quarter, shows we are gaining market acceptance of our product portfolio. We continue to execute on the strategy we outlined last year, and now have the financial resources to facilitate the continued growth of the business."
Leitch Technology Announces First Quarter Results - 2 |
The chart below shows revenue by product line and geography for the three and six months ended October 31, 2004, and 2003:
Product Line | Three months ended October 31 | Six months ended October 31 | |||||||||||||||||||||||
($000s) | 2004 | 2003 | Variance | % Change | 2004 | 2003 | Variance | % Change | |||||||||||||||||
| VP&D | 37,550 | 28,006 | 9,544 | 34 | % | 81,201 | 53,620 | 27,581 | 51 | % | |||||||||||||||
| Servers | 14,191 | 4,241 | 9,950 | 235 | % | 22,744 | 12,704 | 10,040 | 79 | % | |||||||||||||||
| Post | 4,064 | 4,165 | (101 | ) | (2 | %) | 7,102 | 7,612 | (510 | ) | (7 | %) | |||||||||||||
Total | 55,805 | 36,412 | 19,393 | 53 | % | 111,047 | 73,936 | 37,111 | 50 | % | |||||||||||||||
Geography | Three months ended October 31, | Six months ended October 31, | |||||||||||||||||||||||
($000s) | 2004 | 2003 | Variance | % Change | 2004 | 2003 | Variance | % Change | |||||||||||||||||
| USA | 21,234 | 14,509 | 6,725 | 46 | % | 45,111 | 31,763 | 13,348 | 42 | % | |||||||||||||||
| Non-U.S. Americas | 5,997 | 5,425 | 572 | 11 | % | 12,060 | 10,232 | 1,828 | 18 | % | |||||||||||||||
| Europe | 16,745 | 10,263 | 6,482 | 63 | % | 29,331 | 17,307 | 12,024 | 69 | % | |||||||||||||||
| Pacific Rim | 11,829 | 6,215 | 5,614 | 90 | % | 24,545 | 14,634 | 9,911 | 68 | % | |||||||||||||||
Total | 55,805 | 36,412 | 19,393 | 53 | % | 111,047 | 73,936 | 37,111 | 50 | % | |||||||||||||||
The increase in revenue from the prior year quarter of $19.4 million was generated from the Company’s Server and Video Processing and Distribution ("VP&D") product lines. The weakening U.S. dollar negatively impacted revenue for the quarter by approximately $1.8 million compared to the prior year quarter. The increase in Server revenue from the second quarter of last year to the current year was 235%, due to the growth in sales from the Company’s NEXIOTM product, which was introduced in September of 2003, as well as to a large contract in Jordan, which included approximately $3 million of low-margin third-party equipment. Last year’s revenue for Servers was low due to the transition from the Company’s previous "VR" server line to the NEXIO platform, as customers delayed their buying decision to evaluate the NEXIO offering. VP&D revenue increased by 34% for the quarter compared to the prior year period. The increase in revenue from VP&D is the result of both organic growth and the acquisition of Videotek, Inc. Videotek, which was acquired in May 2004, contributed approximately 70% of the increase in VP&D for the current quarter compared to the prior year quarter, and approximately 60% of the year-to-date increase. The Company’s Post Production product line was flat with the prior year period; however, sales did increase over 30% compared to the first quarter of the current year, as its next-generation non-linear editor, VelocityHDTM, began shipping in late July 2004.
Geographically, the increase in Europe was largely due to the contract in Jordan. The USA growth was driven largely by the acquisition of Videotek; however, the region also saw growth in Server revenue. The Pacific Rim performed very well, with this region being the largest growth opportunity for the Company. The Company increased revenue in all its product lines in the Pacific Rim during the quarter compared to the prior year quarter.
| Leitch Technology Announces First Quarter Results - 3 |
Gross margin for the quarter was $25.0 million or 45% of revenue, compared to $15.7 million or 43% of revenue in the same period of fiscal 2004. Gross margin improved slightly as a result of the increased volumes, offset by approximately $3 million of low-margin third-party equipment. Gross margins were 47% in the current quarter after removing the impact of the third party equipment. "We continue to focus on improving our gross margins. We have reduced our factory costs and added more flexible equipment to help in our strategy. The next phase is to aggressively target component pricing and low-cost designs," said Thorsteinson. "We have not changed our target of improving gross margins to over 50% by the end of this fiscal year. We expect the competitive and pricing pressures to continue and therefore remain focus ed on cost reduction."
Operating expenses excluding restructuring charges in the second quarter were $23.5 million or 42% of revenue, compared to $22.1 million or 61% of revenue for the same period last year. Operating expenses were reduced by approximately $1.0 million for the quarter after removing the impact of Videotek. The Company also incurred approximately $0.4 million of severance costs in the current quarter related to the headcount reductions announced in August 2004. The prior year quarter’s expenses were reduced by gains related to the settlement of foreign exchange contracts of $0.6 million. After normalizing out the impact of Videotek, severance and foreign exchange, operating expenses were approximately $2.0 million lower than the prior year as a result of cost saving initiatives undertaken in fiscal 2004 and the imp act of foreign currency fluctuations.
The Company’s balance sheet improved significantly, mostly as a result of the public offering completed in October 2004, which raised net proceeds of $40.5 million through the issuance of 4,520,000 common shares. The Company finished the quarter with cash of $58.8 million, an increase of $41.6 million from the prior quarter, and $27.2 million from April 30, 2004. In the first quarter, the Company acquired Videotek, which resulted in a cash outflow of $20.1 million. After removing the impact of the acquisition and public offering, the Company’s cash balance increased by approximately $6.8 million from April 30, 2004, largely through the sale of Path 1 in the first quarter, Net Operating Income and inventory reduction activities. The Company’s accounts receivable balance increased from $26.3 million a t year end to $33.1 million due to the increase in revenue. Days sales outstanding decreased to 53 days at October 31, 2004, compared to 57 days at April 30, 2004. The Company’s inventory balance dropped from $44.6 million at April 30, 2004, to $40.8 million at October 31, 2004, despite the acquisition of Videotek, which added approximately $4 million in inventory. The reduction was the result of continued inventory management and the simplification of the Company’s product lines, initiated in the fourth quarter of the previous year.
Leitch Technology Announces First Quarter Results - 4 |
Other highlights from the quarter include:
| l | Receiving the "Best Broadcast Solution of the Show" award for NEXIO NewsNetTM at the Broadcast India 2004 Exhibition & Symposium. |
| l | Receiving the Product Technology Award for outstanding achievement from the Beijing International Radio, Film and Television Equipment Exhibition (BIRTV) for the Videotek DL-850HD Legalizer. |
| l | Supplying Integrated Content Environment solutions to support our customers’ coverage of the 2004 Athens Games. |
| l | Completing a successful public offering in October 2004, raising over $40 million. |
| l | Announcing the high-definition NEXIOTMserver system, shown at IBC in September 2004. |
| l | Adding Ian McElroy to the board of directors. |
| l | Investing in surface mount equipment to improve the quality and flexibility of manufacturing. |
* Definitions
It is important to note that Net Operating Income (Loss) is not a measure of performance under Canadian or U.S. GAAP. Net Operating Income (Loss) should not be considered in isolation or as a substitute for net earnings (loss) prepared in accordance with Canadian or U.S. GAAP nor as a measure of operating performance or profitability. Net Operating Income (Loss) does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. The Company uses Net Operating Income (Loss) to remove acquisition and investment-related charges, and restructuring charges, as well as discontinued operations, which the Company views as outside its core operating results. The following table reconciles net earnings (loss) to Net Operating Income (Loss):
| (In $000s) | Three months ended October 31, | Six months ended October 31, | |||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
| Net earnings (loss) under Canadian GAAP | $ | 966 | $ | (6,392 | ) | $ | (1,672 | ) | $ | (11,448 | ) | ||
| Restructuring/accretion charges | 97 | - | 6,918 | 2,918 | |||||||||
| Amortization of acquired technology | 366 | - | 616 | - | |||||||||
| Gain on disposal of partly owned business | - | - | (2,057 | ) | - | ||||||||
| Equity interest in losses of partly owned businesses | 123 | 3 | 140 | 9 | |||||||||
| Total adjustments | $ | 586 | $ | 3 | $ | 5,617 | $ | 2,927 | |||||
| Net Operating Income (Loss) | $ | 1,552 | $ | (6,389 | ) | $ | 3,945 | $ | (8,521 | ) | |||
Forward Looking Statements
This news release contains forward-looking statements that involve risk and uncertainties. These statements can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," "plans," "continue," or the negative thereof or other variations thereon or comparable terminology referring to future events or results. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous factors including, without limitation, the timing of acquisitions, restructuring and
| Leitch Technology Announces First Quarter Results - 5 |
expansion opportunities, technological change which may impact the Company’s capital expenditures and results of operations, and competitive factors which may alter the timing and amount of the Company’s capital expenditures, any of which could cause actual results to vary materially from current results or the Company’s currently anticipated future results. Additional information concerning factors that could cause actual results to materially differ from those in such forward-looking statements is contained in the Company’s filings with Canadian and United States securities regulatory authorities. The Company wishes to caution readers not to place undue reliance upon such forward-looking statements that speak only as of the date made. The Company assumes no obligation to update the information contained in this press release.
About Leitch
Leitch Technology is a 33-year global leader in the design and distribution of high-performance video systems for the professional television industry. Leitch offers extensible products and interoperable systems, enabling operations of any size to achieve a truly Integrated Content Environment. Leitch is a trusted name for increasing performance and productivity through solutions that streamline workflow of content production, processing, transmission and management. With a sole focus on and commitment to the television industry, Leitch provides quality customer support. (www.leitch.com)
# # #
Leitch Technology Corporation |
| Consolidated Statements of Earnings |
| (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
Three months | Three months | Six months | Six months | ||||||||||
ended | ended | ended | ended | ||||||||||
October 31, | October 31, | October 31, | October 31, | ||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
| Revenue | $ | 55,805 | $ | 36,412 | $ | 111,047 | $ | 73,936 | |||||
| Cost of goods sold | 30,769 | 20,667 | 60,140 | 40,999 | |||||||||
| Gross margin | 25,036 | 15,745 | 50,907 | 32,937 | |||||||||
| Expenses (income) | |||||||||||||
Selling and administrative expenses | 16,334 | 15,086 | 31,808 | 28,671 | |||||||||
Gross research and development | 8,260 | 7,976 | 17,046 | 16,774 | |||||||||
Investment tax credits | (542 | ) | (774 | ) | (1,083 | ) | (1,548 | ) | |||||
Other charges (note 3) | 97 | - | 6,918 | 2,918 | |||||||||
Investment income, net | (568 | ) | (154 | ) | (809 | ) | (196 | ) | |||||
23,581 | 22,134 | 53,880 | 46,619 | ||||||||||
| Earnings (loss) before amortization, equity interest and income taxes | 1,455 | (6,389 | ) | (2,973 | ) | (13,682 | ) | ||||||
| Amortization of acquired technology | 366 | - | 616 | - | |||||||||
| Gain on disposal of partly owned business (note 10) | - | - | (2,057 | ) | - | ||||||||
| Equity interest in losses of partly owned businesses | 123 | 3 | 140 | 9 | |||||||||
| Earnings (loss) before income taxes | 966 | (6,392 | ) | (1,672 | ) | (13,691 | ) | ||||||
| Income taxes (recovery) | - | - | - | (2,243 | ) | ||||||||
| Net earnings (loss) | $ | 966 | $ | (6,392 | ) | $ | (1,672 | ) | $ | (11,448 | ) | ||
| Earnings (loss) per share: | |||||||||||||
Basic | $ | 0.03 | $ | (0.19 | ) | $ | (0.05 | ) | $ | (0.36 | ) | ||
Diluted | $ | 0.03 | $ | (0.19 | ) | $ | (0.05 | ) | $ | (0.36 | ) | ||
| Weighted average number of shares outstanding (thousands): | |||||||||||||
Basic | 35,124 | 32,962 | 34,863 | 31,372 | |||||||||
Diluted | 35,936 | 32,962 | 34,863 | 31,372 | |||||||||
% of Revenue | |||||||||||||
| Gross margin | 45 | % | 43 | % | 46 | % | 45 | % | |||||
| Sales and administrative | 29 | % | 41 | % | 29 | % | 39 | % | |||||
| Gross research and development | 15 | % | 22 | % | 15 | % | 23 | % | |||||
| Net earnings (loss) | 2 | % | -18 | % | -2 | % | -15 | % | |||||
| Consolidated Statements of Retained Earnings |
| (In thousands of Canadian dollars - Unaudited) |
Three months | Three months | Six months | Six months | ||||||||||
ended | ended | ended | ended | ||||||||||
October 31, | October 31, | October 31, | October 31, | ||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
| Deficit, beginning of period | $ | (97,661 | ) | $ | (62,780 | ) | $ | (95,023 | ) | $ | (57,724 | ) | |
| Net earnings (loss) | 966 | (6,392 | ) | (1,672 | ) | (11,448 | ) | ||||||
| Deficit, end of period | $ | (96,695 | ) | $ | (69,172 | ) | $ | (96,695 | ) | $ | (69,172 | ) | |
Leitch Technology Corporation |
| Consolidated Statements of Cash Flows |
| (In thousands of Canadian dollars - Unaudited) |
Three months | Three months | Six months | Six months | ||||||||||
ended | ended | ended | ended | ||||||||||
October 31, | October 31, | October 31, | October 31, | ||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
| Cash flows provided by (used in): | |||||||||||||
| Operating activities: | |||||||||||||
Net earnings (loss) | $ | 966 | $ | (6,392 | ) | $ | (1,672 | ) | $ | (11,448 | ) | ||
Items not involving cash: | |||||||||||||
Depreciation | 2,980 | 2,960 | 6,023 | 5,893 | |||||||||
Future income taxes | (141 | ) | (1,586 | ) | 679 | (2,832 | ) | ||||||
Stock-based compensation | 319 | - | 586 | - | |||||||||
Amortization of goodwill and acquired technology | 366 | - | 616 | - | |||||||||
Equity interest in losses of partly owned businesses | 123 | 3 | 140 | 9 | |||||||||
Gain on disposal of partly owned businesses | - | - | (2,057 | ) | - | ||||||||
Loss (gain) on disposal of capital assets | (435 | ) | 3 | 1,662 | 71 | ||||||||
Net change in non-cash balancesrelated to operations (note 9) | (696 | ) | 972 | 2,689 | 3,542 | ||||||||
Cash flows provided by (used in) operating activities | 3,482 | (4,040 | ) | 8,666 | (4,765 | ) | |||||||
| Financing activities: | |||||||||||||
Issuance of capital stock | 42,714 | 21,546 | 42,714 | 21,546 | |||||||||
Share issue costs | (2,223 | ) | (1,067 | ) | (2,223 | ) | (1,067 | ) | |||||
Proceeds from exercise of stock options | 147 | - | 311 | - | |||||||||
Repayment of mortgage payable | - | - | (1,692 | ) | - | ||||||||
Other long-term liabilities | (752 | ) | - | 592 | - | ||||||||
Cash flows provided by financing activities | 39,886 | 20,479 | 39,702 | 20,479 | |||||||||
| Investing activities: | |||||||||||||
Investment in capital assets | (1,125 | ) | (734 | ) | (1,799 | ) | (1,067 | ) | |||||
Business acquisitions and investments, net of cash acquired | - | - | (18,770 | ) | - | ||||||||
Proceeds from disposal of shares in partly owned business | - | - | 2,057 | - | |||||||||
Proceeds from disposal of capital assets | 436 | - | 593 | - | |||||||||
Cash flows used in investing activities | (689 | ) | (734 | ) | (17,919 | ) | (1,067 | ) | |||||
| Change in cash balances due to foreign exchange | (1,052 | ) | (180 | ) | (3,251 | ) | (2,560 | ) | |||||
| Increase in cash and cash equivalents | 41,627 | 15,525 | 27,198 | 12,087 | |||||||||
| Cash and cash equivalents, beginning of period | 17,174 | 15,122 | 31,603 | 18,560 | |||||||||
| Cash and cash equivalents, end of period | $ | 58,801 | $ | 30,647 | $ | 58,801 | $ | 30,647 | |||||
| Supplementary cash flow information: | |||||||||||||
Income taxes paid | $ | - | $ | - | $ | - | $ | - | |||||
Interest paid | 30 | 3 | 30 | 3 | |||||||||
Leitch Technology Corporation |
| Consolidated Balance Sheets |
| (In thousands of Canadian dollars - Unaudited) |
October 31, 2004 | April 30, 2004 | ||||||
| Assets | |||||||
| Current assets: | |||||||
Cash and cash equivalents | $ | 58,801 | $ | 31,603 | |||
Accounts receivable | 33,123 | 26,347 | |||||
Inventory | 40,806 | 44,605 | |||||
Future income taxes | 3,316 | 3,085 | |||||
Income taxes recoverable | 740 | 481 | |||||
Prepaid expenses and other assets | 5,348 | 6,383 | |||||
142,134 | 112,504 | ||||||
| Capital assets | 37,010 | 34,656 | |||||
| Future income taxes | 24,954 | 27,473 | |||||
| Investments in partly owned businesses | 1,623 | 1,763 | |||||
| Acquired technology | 4,760 | - | |||||
| Goodwill (note 2) | 7,166 | - | |||||
$ | 217,647 | $ | 176,396 | ||||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
Accounts payable and accrued liabilities (note 4) | $ | 31,353 | $ | 26,296 | |||
Income taxes payable | 40 | 19 | |||||
31,393 | 26,315 | ||||||
| Future income taxes | 6,459 | 6,650 | |||||
| Long term liabilities (note 5) | 8,626 | 5,880 | |||||
| Shareholders' equity: | |||||||
Capital stock (note 6) | 275,550 | 234,637 | |||||
Contributed surplus | 589 | 114 | |||||
Cumulative translation account | (8,275 | ) | (2,177 | ) | |||
Deficit | (96,695 | ) | (95,023 | ) | |||
171,169 | 137,551 | ||||||
| Commitments and contingencies | |||||||
$ | 217,647 | $ | 176,396 | ||||
Key Ratios: | |||||||
| Days sales outstanding | 53 | 57 | |||||
| Inventory turns | 2.72 | 1.90 | |||||
Leitch Technology Corporation Notes to the Consolidated Financial Statements (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
| 1. | SIGNIFICANT ACCOUNTING POLICIES |
| These consolidated financial statements have been prepared in accordance with The Canadian Institute of Chartered Accountants ("CICA") Standards for interim financial statements. These consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements except as disclosed herein, however, they do not include all of the disclosure requirements for annual financial statements. For a full description of accounting policies, refer to Leitch Technology Corporation’s ("Leitch" or the "Company") 2004 Audited Consolidated Annual Financial Statements. |
| 2. | BUSINESS ACQUISITION |
| In May, 2004, the Company acquired all the shares of Videotek, Inc. ("Videotek"). Videotek designs, manufactures and distributes innovative hardware and software products that focus on test and measurement equipment, video demodulators, routing switchers, colour correctors and processors and related equipment for the professional video and television broadcast markets. The purchase consideration for the acquisition consisted of cash of $22,478, assumption of debt of $2,056 and acquisition costs of $1,028. The cash consideration is payable as follows: (i) $18,366 on the closing date of May 14, 2004, (ii) $2,741 six months after the closing date and, (iii) $1,371 twelve months after the closing date. In addition, $2,741 will become payable upon the achievement of certain revenue and margin targets as specified in the agreement. The excess of the purchase price over the fair value of net tangible assets acquired is $12,542, and has been allocated $5,376 to acquired technology, and $7,166 to goodwill. The acquired technology is being amortized over four years, its estimated useful life. | |
| In June 2004, the Company paid down Videotek’s mortgages by $1,716692, and the remaining $340 was paid during the second quarter of fiscal 2005. | |
| The acquisition has been accounted for using the purchase method and, accordingly, the results of operations are included in the consolidated financial statements from the date of acquisition. | |
| The preliminary allocation of the purchase price, based on management’s estimates, is as follows: |
| Net working capital | $ | 5,344 | ||
| Capital assets | 6,991 | |||
| Other assets | 685 | |||
| Acquired technology | 5,376 | |||
| Goodwill | 7,166 | |||
| $ | 25,563 | |||
| Consideration comprises: | ||||
Cash | $ | 18,366 | ||
Future non-contingent cash payments | 4,112 | |||
Assumption of debt | 2,056 | |||
Acquisition costs | 1,028 | |||
| $ | 25,563 | |||
| Any contingent consideration paid will be recorded as additional goodwill. | ||||
Leitch Technology Corporation Notes to the Consolidated Financial Statements (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
| 3. | RESTRUCTURING AND OTHER CHARGES: |
| During the first quarter of fiscal 2005, the Company vacated two floors of the facilities in Toronto and accrued the lease rental costs for the remaining lease term and related asset impairment charges, totalling $5,368. The Company also announced an additional headcount reduction of 34 employees in its Toronto manufacturing operation. Costs associated with this reduction were $1,373. These costs have been recorded in the consolidated statements of earnings as Other charges. | |
| The following table details the activity through the accrued restructuring liability and the non-cash charge: |
| Outstanding | Additions to | Accretion to | Amounts paid to | Outstanding | Long | |||||||||||||||||||||||||
| April 30, | October 31, | October 31, | October 31, | October 31, | Term | |||||||||||||||||||||||||
2004 | 2004 | 2004 | 2004 | 2004 | Portion | |||||||||||||||||||||||||
| Severance | $ | 2,974 | $ | 1,276 | $ | -- | $ | 2,696 | $ | 1,554 | $ | -- | ||||||||||||||||||
| Lease exit costs | 6,045 | 3,168 | 177 | 1,452 | 7,938 | 6,106 | ||||||||||||||||||||||||
| Other | 148 | 97 | -- | 245 | - | -- | ||||||||||||||||||||||||
| $ | 9,167 | $ | 4,541 | $ | 177 | $ | 4,393 | $ | 9,492 | $ | 6,106 | |||||||||||||||||||
| Additions to restructuring liability | $ | 4,541 | ||||||||||||||||||||||||||||
| Non-cash component: | ||||||||||||||||||||||||||||||
Asset write-down | 2,200 | |||||||||||||||||||||||||||||
Accretion charge | 177 | |||||||||||||||||||||||||||||
Total other charges | $ | 6,918 | ||||||||||||||||||||||||||||
| 4. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES: |
| Accounts payable and accrued liabilities are comprised of: |
| October 31, 2004 | April 30, 2004 | ||||||
| Current portion of lease exit costs | $ | 1,832 | $ | 1,010 | |||
| Severance costs from restructuring activities | 1,554 | 2,974 | |||||
| Deferred gain on sale of building | 175 | 175 | |||||
| Videotek purchase price payable | 4,112 | - | |||||
| Current portion of capital lease | 463 | - | |||||
| Trade accounts payable and accrued liabilities | 23,217 | 22,137 | |||||
$ | 31,353 | $ | 26,296 | ||||
Leitch Technology Corporation Notes to the Consolidated Financial Statements (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
| 5. | LONG TERM LIABILITIES: |
| Long term liabilities are comprised of: |
| October 31, 2004 | April 30, 2004 | ||||||
| Lease exit costs - Bracknell, UK | $ | 4,128 | $ | 5,055 | |||
| Lease exit costs - Ferrand, Toronto, Canada | 1,978 | - | |||||
| Deferred gain on sale of building | 738 | 825 | |||||
| Long term portion of capital lease | 1,782 | - | |||||
$ | 8,626 | $ | 5,880 | ||||
| The capital lease is repayable in monthly installments of $48 over the first two years, with a balloon payment due after two years equal to $858 and twelve monthly payments of $44 thereafter. The lease is secured by the equipment under lease, and a $636 letter of credit. The effective interest rate of the capital lease is approximately 5.8%. | |
| These long-term liabilities are expected to be relieved as follows: |
| Fiscal year ending April 30 | Lease exit costs | Deferred gain | Capital lease | Total | |||||||||
| 2006 | 1,970 | 175 | 579 | 2,724 | |||||||||
| 2007 | 1,635 | 175 | 1,348 | 3,158 | |||||||||
| 2008 | 1,635 | 175 | 131 | 1,941 | |||||||||
| 2009 | 1,648 | 128 | - | 1,776 | |||||||||
| 2010 | 1,668 | 37 | - | 1,705 | |||||||||
| Thereafter | 1,172 | 135 | - | 1,307 | |||||||||
| 9,728 | 825 | 2,058 | 12,611 | ||||||||||
| Present value adjustment | (2,543 | ) | - | (134 | ) | (2,677 | ) | ||||||
| Total | 7,185 | 825 | 1,924 | 9,934 | |||||||||
| Less current portion : | (1,308 | ) | |||||||||||
| Long-term liabilities | $ | 8,626 | |||||||||||
| 6. | CAPITAL STOCK: |
| Pursuant to a short form prospectus filed on October 15, 2004, the Company issued 4,250,000 common shares and a further 270,000 common shares through an over allotment option. The price per share for the offering was $9.45, and the net proceeds from the issue was $40,491 (net of share issue costs of $2,223, net of taxes of $nil.) |
Leitch Technology Corporation Notes to the Consolidated Financial Statements (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
| 7. | STOCK-BASED COMPENSATION: |
| The Company has established a stock option plan to encourage ownership in the Company's shares by directors, officers and employees of the Company and its subsidiaries. Options are granted with an exercise price equal to or greater than the market price of the common shares of the Company at the date of grant, for a term of five years, vesting at 5% per three-month period. | |
| Activity under the Company's stock option plan is summarized as follows: |
| Weighted | |||||
| average | |||||
| excercise | |||||
| price | |||||
| Options | per option | ||||
| Outstanding, April 30, 2004 | 2,007,725 | 13.68 | |||
| Granted | 934,500 | 7.15 | |||
| Exercised | (24,750 | ) | 6.50 | ||
| Cancelled | (223,750 | ) | 15.78 | ||
| Outstanding, July 31, 2004 | 2,693,725 | 11.31 | |||
| Granted | 71,000 | 9.44 | |||
| Exercised | (20,975 | ) | 7.04 | ||
| Cancelled | (257,975 | ) | 20.20 | ||
| Outstanding, October 31, 2004 | 2,485,775 | 10.37 | |||
| Exercisable, October 31, 2004 | 966,700 | $ | 14.32 | ||
| The Company applies the fair value method of accounting for stock option awards granted after May 1, 2003 and, accordingly, has recorded compensation expense of $264 in the second quarter of fiscal 2005, and $475 for the six months ending October 31, 2004. |
Leitch Technology Corporation Notes to the Consolidated Financial Statements (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
| 7. | STOCK-BASED COMPENSATION (Continued): |
| Prior to May 1, 2003, the Company accounted for its employee stock options using the intrinsic value method and no compensation expense was recorded. CICA Handbook Section 3870, provides that companies also disclose, on a pro forma basis, loss for the year and loss per share had the Company adopted the fair value method for accounting for stock options granted from May 1, 2001 to April 30, 2003. Had compensation expense been determined based on the fair value at the grant dates for these stock options, the Company's results would have been as follows: |
| Three months ended October 31, | Six months ended October 31, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
| Net earnings (loss) as reported | $ | 966 | $ | (6,392 | ) | $ | (1,672 | ) | $ | (11,448 | ) | ||
| Pro forma | 849 | (6,681 | ) | (2,146 | ) | (12,034 | ) | ||||||
| Earnings (loss) per share as reported | |||||||||||||
| Basic | $ | 0.03 | $ | (0.19 | ) | $ | (0.05 | ) | $ | (0.36 | ) | ||
| Diluted | 0.03 | (0.19 | ) | (0.05 | ) | (0.36 | ) | ||||||
| Loss per share pro forma | |||||||||||||
| Basic | $ | 0.02 | $ | (0.20 | ) | $ | (0.06 | ) | $ | (0.38 | ) | ||
| Diluted | 0.02 | (0.20 | ) | (0.06 | ) | (0.38 | ) | ||||||
| The fair value of each stock option grant was determined on the date of grant and the estimated fair value of the options is amortized over the vesting period on a straight-line basis. The fair value of the stock options was determined using the Black-Scholes option pricing model, based on the following weighted average assumptions: |
| Three months ended October 31, | Six months ended October 31, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
| Risk-free interest rate | 3.9 | % | - | 3.5 | % | 3.4 | % | ||||||
| Dividend yield | - | - | - | - | |||||||||
| Expected life | 5 years | - | 5 years | 5 years | |||||||||
| Expected volatility | 35 | % | - | 48.69 | % | 49 | % | ||||||
| Weighted average grant date fair values of options issued: | |||||||||||||
Options granted at estimated market price | $ | 2.88 | $ | - | $ | 3.37 | $ | - | |||||
Options granted at greater than estimated market price | - | - | - | 1.66 | |||||||||
| Note - no stock options were granted during the three months ended October 31, 2003, therefore no assumptions have been disclosed | |
| Because additional stock options are expected to be granted each year, the above pro forma disclosure is not representative of pro forma effects on reported financial results for future periods. |
Leitch Technology Corporation Notes to the Consolidated Financial Statements (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
| 8. | SEGMENTED INFORMATION | |
| For a full description of the Company’s operating segments, reference should be made to Leitch’s 2004 Audited Consolidated Annual Financial Statements. | ||
| a) | Industry Segments |
Three months ended October 31, 2004 | Video Processing and Distribution | Servers | Post Production | Other | Total | |||||||||||
| Revenue | $ | 37,550 | $ | 14,191 | $ | 4,064 | $ | - | $ | 55,805 | ||||||
| Contribution margin | 11,624 | 4,499 | 1,195 | - | 17,318 | |||||||||||
| Selling and administrative | 16,334 | |||||||||||||||
| Other charges | 97 | |||||||||||||||
| Investment income | (568 | ) | ||||||||||||||
| Earnings before amortization, equity interest and income taxes | $ | 1,455 | ||||||||||||||
| Total assets | $ | 133,191 | $ | 26,786 | $ | 11,190 | $ | 46,480 | $ | 217,647 | ||||||
| Capital asset expenditures | 2,206 | 834 | 239 | - | 3,279 | |||||||||||
| Goodwill and acquired technology | 11,926 | - | - | - | 11,926 | |||||||||||
Three months ended October 31, 2003 | Video Processing and Distribution | Servers | Post Production | Other | Total | |||||||||||
| Revenue | $ | 28,006 | $ | 4,241 | $ | 4,165 | $ | - | $ | 36,412 | ||||||
| Contribution margin | 7,567 | (83 | ) | 1,059 | - | 8,543 | ||||||||||
| Selling and administrative | 15,086 | |||||||||||||||
| Investment income | (154 | ) | ||||||||||||||
| Loss before amortization, equity interest and income taxes | ($6,389 | ) | ||||||||||||||
| Total assets | $ | 122,497 | $ | 27,728 | $ | 15,915 | $ | 24,966 | $ | 191,106 | ||||||
| Capital asset expenditures | 541 | 123 | 70 | - | 734 | |||||||||||
| Goodwill and acquired technology | - | - | - | - | - | |||||||||||
Leitch Technology Corporation Notes to the Consolidated Financial Statements (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
| 8. | SEGMENTED INFORMATION (Continued) |
| a) | Industry Segments (continued) |
Six months ended October 31, 2004 | Video Processing and Distribution | Servers | Post Production | Other | Total | |||||||||||
| Revenue | $ | 81,201 | $ | 22,744 | $ | 7,102 | $ | - | $ | 111,047 | ||||||
| Contribution margin | 26,492 | 6,604 | 1,848 | - | 34,944 | |||||||||||
| Selling and administrative | 31,808 | |||||||||||||||
| Other charges | 6,918 | |||||||||||||||
| Investment income | (809 | ) | ||||||||||||||
| Loss before amortization, equity interest and income taxes | ($2,973 | ) | ||||||||||||||
| Total assets | $ | 133,191 | $ | 26,786 | $ | 11,190 | $ | 46,480 | $ | 217,647 | ||||||
| Capital asset expenditures | 2,665 | 993 | 295 | - | 3,953 | |||||||||||
| Goodwill and acquired technology | 11,926 | - | - | - | 11,926 | |||||||||||
Six months ended October 31, 2003 | Video Processing and Distribution | Servers | Post Production | Other | Total | |||||||||||
| Revenue | $ | 53,620 | $ | 12,704 | $ | 7,612 | $ | - | $ | 73,936 | ||||||
| Contribution margin | 13,715 | 2,131 | 1,865 | - | 17,711 | |||||||||||
| Selling and administrative | 28,671 | |||||||||||||||
| Other charges | 2,918 | |||||||||||||||
| Investment income | (196 | ) | ||||||||||||||
| Loss before amortization, equity interest and income taxes | ($13,682 | ) | ||||||||||||||
| Total assets | $ | 122,497 | $ | 27,728 | $ | 15,915 | $ | 24,966 | $ | 191,106 | ||||||
| Capital asset expenditures | 784 | 182 | 101 | - | 1,067 | |||||||||||
| Goodwill and acquired technology | - | - | - | - | - | |||||||||||
| b) | Geographic Segments |
Three months ended October 31, 2004 | United States | Europe | Non-U.S. Americas | Pacific Rim | Total | |||||||||||
| Revenue | $ | 21,234 | $ | 16,745 | $ | 5,997 | $ | 11,829 | $ | 55,805 | ||||||
| Identifiable assets | $ | 79,824 | $ | 20,694 | $ | 109,636 | $ | 7,493 | 217,647 | |||||||
| Goodwill and acquired technology | 11,926 | - | - | - | 11,926 | |||||||||||
Three months ended October 31, 2003 | United States | Europe | Non-U.S. Americas | Pacific Rim | Total | |||||||||||
| Revenue | $ | 14,509 | $ | 10,263 | $ | 5,425 | $ | 6,215 | $ | 36,412 | ||||||
| Identifiable assets | 50,890 | 30,636 | 103,362 | 6,218 | 191,106 | |||||||||||
| Goodwill and acquired technology | - | - | - | - | - | |||||||||||
Leitch Technology Corporation Notes to the Consolidated Financial Statements (In thousands of Canadian dollars, except share and per share amounts - Unaudited) |
| 8. | SEGMENTED INFORMATION (Continued) |
| b) | Geographic Segments (continued) |
Six months ended October 31, 2004 | United States | Europe | Non-U.S. Americas | Pacific Rim | Total | |||||||||||
| Revenue | $ | 45,111 | $ | 29,331 | $ | 12,060 | $ | 24,545 | $ | 111,047 | ||||||
| Identifiable assets | 79,824 | 20,694 | 109,636 | 7,493 | 217,647 | |||||||||||
| Goodwill and acquired technology | 11,926 | - | - | - | 11,926 | |||||||||||
Six months ended October 31, 2003 | United States | Europe | Non-U.S. Americas | Pacific Rim | Total | |||||||||||
| Revenue | $ | 31,763 | $ | 17,307 | $ | 10,232 | $ | 14,634 | $ | 73,936 | ||||||
| Identifiable assets | 50,890 | 30636 | 103,362 | 6,218 | 191,106 | |||||||||||
| Goodwill and acquired technology | - | - | - | - | - | |||||||||||
| 9. | NET CHANGE IN NON-CASH BALANCES RELATED TO OPERATIONS |
| The net change in non-cash balances related to continuing operations is as follows: |
| Three months ended October, | Six months ended October, | ||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||
| Accounts receivable | $ | 1,726 | $ | 2,719 | $ | (5,678 | ) | $ | 3,409 | ||||
| Inventory | 875 | (1,548 | ) | 8,125 | (1,631 | ) | |||||||
| Income taxes | (135 | ) | 591 | (578 | ) | 895 | |||||||
| Prepaid expenses and other assets | 1,173 | 550 | 1,711 | 878 | |||||||||
| Accounts payable and accrued liabilities | (4,335 | ) | (1,340 | ) | (891 | ) | (9 | ) | |||||
$ | (696 | ) | $ | 972 | $ | 2,689 | $ | 3,542 | |||||
| 10. | SALE OF PARTLY OWNED BUSINESS |
| During the first quarter, the Company sold its investment in Path 1 Network Technologies Inc. for net proceeds of $2,057 cash. This investment had been written down to a carrying value of nil during fiscal 2002, therefore the entire proceeds have been recorded as a gain on sale of partly owned business. | |
| 11. | COMPARATIVE FIGURES |
| Certain comparative figures have been reclassified to conform to the current period’s presentation. |