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Leitch turning around

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Leitch Technology International Inc.
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TORONTO - Broadcast gear manufacturer Leitch Technologies reported a strong first quarter with 47% growth in revenue, and operating income of $2.4 million, for the period ended July 31, 2004.

Revenue was $55.2 million in the quarter and the company said the increase in revenue from the prior year period of $17.7 million was generated from the company's video processing and distribution ("VP&D;") product line, which includes $8.4 million of revenue from recently acquired Videotek.

Earnings before amortization, equity interests adjusted for income
taxes and restructuring charges, or net operating Income, for the quarter were $2.4 million compared to a loss of $2.2 million during the same period last year.

The net loss for the first quarter was $2.6 million, compared to a loss of $5.1 million during the same period last year.

The company completed facility and staff reductions which were outlined last quarter, and recorded a charge of $6.8 million related to lease exit costs, the write-down of leasehold improvements and severance-related costs.

"In December 2003, I told our shareholders that we would turn the company profitable within 12 months. I am very pleased to say that we have achieved that goal ahead of schedule. We are showing an operating profit for the first time in two years, and continue to believe that we can do better," said Tim Thorsteinson, president and CEO. "Our growth in revenue and the results from Videotek this quarter was impressive. We booked $56 million in orders, finished the quarter with strong backlog, and importantly we saw strong growth in VP&D.; We believe we grew our market share in VP&D;, and while server shipments were flat, we continued to see growth in orders year over year.

"We continue to execute on the strategy we outlined last year, and have crossed a major hurdle by showing an operating profit. We still have opportunities to improve the results through continued margin improvement and aggressive sales management," added the CEO.

Gross margin for the quarter was $25.9 million or 47% of revenue compared to $17.2 million or 46% of revenue in the same period of fiscal 2004. Gross margin improved slightly as a result of the increased volumes, offset by higher discounting as the company has adopted a more aggressive sales approach in order to grow revenue and net operating income.

"We continue to focus on improving our gross margins. Our reduced factory costs have allowed us to price more aggressively to gain share," said Thorsteinson.

Leitch also announced it has reduced its factory headcount in August 2004 by another 18 people. "We continue to target improving gross margins to over 50% by the end of this fiscal year. We expect the competitive and pricing pressures to continue and are therefore focusing on cost reduction."

Operating expenses excluding restructuring charges in the first quarter were $23.7 million or 43% of revenue, compared to $21.6 million or 58% of revenue for the same period last year. Operating expenses were reduced $500,000 for the quarter after removing the impact of Videotek, which added $2.6 million in operating expense. The company also incurred approximately $600,000 of non-recurring consulting costs related to the review of its manufacturing strategy. The prior year expenses were reduced by gains related to the settlement of foreign exchange contracts of $800,000.

For more, go to www.leitch.com.
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