Electrohome Announces Fourth Quarter and Year End Results
Jan 22, 2004

Kitchener, Ontario - Electrohome Limited today announced earnings of $0.8 million or $0.09 per share for the fourth quarter ended September 30, 2003. This compares to earnings of $1.5 million or $0.16 per share for the same quarter last year. A net loss pf $1.4 million or ($0.15) per share for the year ended September 30, 2003 compares to a loss of $1.3 million or ($0.14) per share last year.

Overview

Fiscal 2003 and 2002 financial results for Electrohome Limited ("Electrohome") consist of:

•  the results from Fakespace Systems Inc., in which the Company held a 66.7% interest to March 31, 2003. Electrohome consolidated its interest in Fakespace Systems Inc. for the total year in fiscal 2002 and for the six months ended March 31, 2003 in fiscal 2003.,

  the results from the newly merged Mechdyne Corporation (operating as Fakespace Systems - "Fakespace"), in which the Company holds a 30.6% interest, from April 1, 2003 to September 30, 2003, and 

• the results from the Electrohome Head Office ("Corporate"), which includes royalty income, post-employment benefit costs and general and administrative expenses.

On April 1, 2003 Fakespace Systems Inc. merged with Mechdyne Corporation of Marshalltown, Iowa. Electrohome's previous 66.7% interest in Fakespace was exchanged for a 30.6% interest in the merged company.Robotel Electronique Inc. ("Robotel") was declared insolvent during the third quarter of fiscal 2003 and accordingly all current and prior results of Robotel have been restated as discontinued operations.The subsequent sale of Electrohome's facility resulted in net facility income being reclassified as discontinued operations. The associated assets have been segregated from regular capital assets to capital assets held for sale.As a result of the above changes, most of the comparative results are not meaningful.

Fourth Quarter Results

As Fakespace is no longer accounted for on a consolidation basis, there were no revenues in the fourth quarter this year while $7.1 million was posted last year. An operating loss of $0.2 million this year compares to operating earnings last year of $1.5 million including the operating results from Fakespace, which were exceptionally strong due to a particularly large sale in the final quarter of 2002.Interest expense was marginally higher this year due to the increased level of debt. Other income was $0.1 million favourable to last year due to increased royalties. Investment income from Fakespace, based on the Company's 30.6% equity interest (applicable only to the current year), was $0.2 million. As a result of the sale of Electrohome's facility subsequent to the year end, a future income tax recovery associated with the utilization of tax loss carry-forwards was required to be recognized in fiscal 2003 in the amount of $0.6 million. When the actual gain on sale of the facility is recorded in the first quarter of 2004, an equal and offsetting tax expense (non-cash) will be recorded at that time.Last year's figures also included a reduction to earnings as a result of the minority interest share in the earnings from Fakespace, however, with accounting for the newly merged Fakespace on an equity basis, minority interest is no longer applicable. Earnings from discontinued operations of $0.2 million, mainly due to net facility income, compares to earnings of $0.5 million last year, which was primarily due to a recovery of income taxes related to previously discontinued operations as well as facility income which was largely offset by operational losses incurred by Robotel.As a result, earnings in the fourth quarter of $0.8 million compares to earnings of $1.5 million for the same quarter of 2002.

Total Year Results

Fiscal 2003 revenues (which were only for a period of six months) of $6.5 million resulted in a gross profit of 44% or $2.8 million. Fiscal 2002 revenues (which were for a 12 month period) of $16.7 million resulted in a gross profit of 40% or $6.6 million. An operating loss of $2.8 million was $1.8 million worse than last year. Gross profit for the six months this year was $3.8 million lower than for the 12 months last year which was entirely due to volume as gross margin in 2003 increased by 4 percentage points. Six months of expenses this year for Fakespace, including approximately $0.8 million in one-time costs associated with the merger, were $2.3 million lower than for the 12 months last year. Corporate costs (12 months both years) were $0.3 million higher than last year due to increased legal expenses and costs associated with Robotel. Interest expense for the year was $0.1 million higher than last year due to the increased level of debt. Other income was marginally ahead of last year due to an increase in royalties. Current year figures also include a $0.9 million gain from the settlement of a lawsuit, which resulted from an award of damages associated with a previously owned parcel of land in Edmonton. As well, a $1.9 million non-taxable gain on dilution was booked in fiscal 2003 resulting from the Fakespace merger. Investment income from the Company's 30.6% equity interest in Fakespace (post merger) for the six months was breakeven as a loss of $0.2 million in the third quarter was offset by earnings of $0.2 million in the fourth quarter. An income tax recovery of $0.7 million was $0.8 million better than last year primarily due to the recognition of a future income tax recovery in the amount of $0.6 million. This recovery is based on the utilization of tax loss carry-forwards associated with the subsequent sale of the Company's facility in the first quarter of 2004, in which an equal and offsetting tax expense (non-cash) will be recorded at that time. A loss from discontinued operations of $2.6 million was $2.3 million worse than the $0.2 million loss booked last year. The current year loss is comprised of total operational and insolvency losses associated with Robotel of $3.9 million, which was offset in part by an income tax recovery of $0.7 million related to previously discontinued operations and net facility income of $0.6 million. This compares to Robotel losses last year of $2.1 million, which were partially offset by an income tax recovery of $1.7 million and net facility income of $0.2 million. The increase in facility income this year was due to securing an additional tenant. The overall loss for the year of $1.4 million compares to a $1.3 million loss last year.

Outlook

Subsequent to the sale of the Company's facility in December 2003, its earnings will be based on its share of Fakespace's earnings and on royalties from third parties for the use of the Electrohome name. These earnings will be offset in part by post-employment benefit costs and general and administrative expenses. Electrohome also has a number of one-time opportunities related to existing assets which could result in additional future earnings. Going into the new year, Fakespace has a strong order backlog. Integration issues have been fully resolved which should result in renewed focus on operations and on cost reductions as each major facet of the organization has been strengthened as a result of the merger. Fakespace continues to expand its markets, particularly in Europe where there is an abundance of new opportunities. This, combined with a strengthening US economy, should result in continued revenue growth and positive earnings. Fakespace will also continue with its research and development efforts as it plans to retain and grow its leadership position in this industry. Electrohome's annual report is being mailed to shareholders of record on January 9, 2004. Electrohome's Annual Meeting of the Shareholders will be held on Tuesday, February 17, 2004 at 10:30 a.m. at the Head Office of the Corporation at 809 Wellington St. N, Kitchener, Ontario.

This press release contains certain "forward looking statements" that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements.

Electrohome's shares are traded on the TSX under the symbols ELL.X and ELL.Y.