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EB, Elektrobit Corporation, Interim Report January-September 2012

SUMMARY JULY – SEPTEMBER 2012

  • Net sales of the third quarter grew to EUR 47.0 million (EUR 37.0 million, 3Q 2011), representing an increase of 27.0 % year-on-year. Net sales of Automotive Business Segment grew to EUR 30.2 million (EUR 23.9 million, 3Q 2011), representing a 26.5 % growth year-on-year. The Wireless Business Segment’s net sales grew by 29.2 % to EUR 16.8 million (EUR 13.0 million, 3Q 2011).
  • The figures of the third quarter include non-recurring income of EUR 1.2 million and a positive cash flow impact of EUR 10.8 million resulting from the settlement payment of USD 13.5 million received in the reorganization case of TerreStar Corporation. Regarding to the impacts on the income statement, the currency conversion has been made by using the exchange rate used for the third quarter income statement, and regarding the cash flow impacts, by using the exchange rate of the date of payment.
  • Operating profit was EUR 2.1 million (operating loss of EUR -3.1 million, 3Q 2011). Operating profit without non-recurring items from the reorganization cases of TerreStar companies was EUR 0.8 million (operating loss of EUR -2.9 million without non-recurring items related to reorganization cases of from TerreStar companies, 3Q 2011).
  • Operating profit of the Automotive Business Segment was EUR 0.2 million (operating loss of EUR -1.4 million, 3Q 2011).
  • Operating profit of the Wireless Business Segment was EUR 1.9 million (operating loss of EUR -1.7 million, 3Q 2011). Operating profit of Wireless Business Segment without non-recurring items related to reorganization cases of TerreStar companies was EUR 0.6 million (operating loss of EUR -1.4 million without non-recurring items related to reorganization cases of TerreStar companies, 3Q 2011).
  • EBITDA was EUR 3.9 million (EUR -1.2 million, 3Q 2011). Automotive Business Segment’s EBITDA was EUR 1.3 million (EUR -0.2 million, 3Q 2011) and Wireless Business Segment’s EBITDA was EUR 2.6 million (EUR -0.9 million, 3Q 2011).
  • Cash flow from operating activities was EUR 2.1 million including an approximately EUR 10.8 million positive cash flow effect resulting from the settlement payment in the reorganization cases of TerreStar Corporation (EUR -6.6 million, 3Q 2011). Net cash flow was EUR 9.7 million (EUR -10.6 million, 3Q 2011).
  • Earnings per share were EUR 0.01 (EUR -0.02, 3Q 2011).
  • On August 28, 2012 U.S. time, Elektrobit Inc., a subsidiary of Elektrobit Corporation, received based on a settlement, a cash payment of USD 13.5 million (EUR 10.8 million) in full and final satisfaction of its claim against TerreStar Corporation and in resolution of all disputes between EB and other parties in the TerreStar Corporation Chapter 11 reorganization cases under United States Bankruptcy Code. On August 24, 2012 U.S. time, the United States Bankruptcy Court formally approved TerreStar Corporation’s motion for final settlement with Elektrobit Inc. (a subsidiary of Elektrobit Corporation) and TerreStar Corporation and certain of its preferred shareholders entered into between the parties on August 8, 2012. The settlement does not include the TerreStar Networks Chapter 11 cases, which remain pending, and does not include any distribution therefrom that may be available for EB.
  • The settlement payment in the TerreStar Corporation Chapter 11 cases resulted a non-recurring positive effect of approximately USD 1.6 million (EUR 1.2 million) to EB’s operating result, and a non-recurring positive effect of USD 13.5 million (EUR 10.8 million) to EB’s cash flow in the third quarter of the year.

SUMMARY JANUARY – SEPTEMBER 2012

  • Net sales of the reporting period was EUR 143.6 million (EUR 113.1 million, 1-9 2011), representing an increase of 26.9 % year-on-year. Net sales of Automotive Business Segment grew to EUR 85.9 million (EUR 70.2 million, 1-9 2011), representing a 22.3 % growth year-on-year. The Wireless Business Segment’s net sales grew by 35.0 %, to EUR 57.9 million (EUR 42.9 million, 1-9 2011).
  • Operating profit was EUR 2.6 million (operating loss of EUR -7.5 million, 1-9 2011), including EUR 1.2 million non-recurring costs related to collecting the receivables from TerreStar Companies (EUR 0.2 million, 1-9 2011) and non-recurring income of EUR 1.2 million resulting from the settlement payment in TerreStar Corporation’s reorganization cases. Operating profit without these non-recurring items was EUR 2.6 million (operating loss of EUR -7.3 million, 1-9 2011).
  • Operating profit of the Automotive Business Segment was EUR 1.4 million (operating loss of EUR -1.3 million, 1-9 2011). The Wireless Business Segment’s operating profit was EUR 1.3 million (operating loss of EUR -6.1 million, 1-9 2011), including EUR 1.2 million non-recurring costs related to collecting the receivables from TerreStar Companies (EUR 0.2 million, 1-9 2011) and non-recurring income of EUR 1.2 million resulting from the settlement payment in TerreStar Corporation’s reorganization cases. Wireless Business Segment’s operating profit without these non-recurring items was EUR 1.3 million (operating loss of EUR -5.9 million, 1-9 2011).
  • EBITDA was EUR 8.0 million (EUR -0.6 million, 1-9 2011). Automotive Business Segment’s EBITDA was EUR 4.4 million (EUR 3.0 million, 1-9 2011) and Wireless Business Segment’s EBITDA was EUR 3.6 million (EUR -3.7 million, 1-9 2011).
  • Cash flow from operating activities was EUR 2.1 million (EUR -1.8 million, 1-9 2011) including an approximately EUR 10.8 million positive cash flow effect resulting from the settlement payment in the reorganization cases of TerreStar Corporation in the third quarter of 2012. Net cash flow was EUR 8.4 million (EUR -13.3 million, 1-9 2011)
  • Cash and other liquid assets totaled EUR 18.3 million (EUR 7.2 million, 1-9 2011).
  • Equity ratio was 54.8% (63.6%, 1-9 2011).
  • Earnings per share were EUR 0.01 (EUR -0.06, 1-9 2011).

EB’S CEO JUKKA HARJU:

“During the third quarter EB’s net sales continued to grow strongly and operating result improved clearly from previous year. The net sales and operating result in January-September also grew clearly from previous year in EB and in its both business segments.

The settlement made with TerreStar Corporation in August, and the settlement payment of USD 13.5 million from our receivables concluded our 1.5 years long process of collecting the receivables from TerreStar Corporation in its reorganization cases in the USA.

The outlook for the final quarter of the year is good and, EB has good preconditions to achieve this year a clearly better profitability level than in 2011, which is our most important target for this year.”

OUTLOOK FOR 2012

Compared to the previous year, the demand for EB’s products and services is estimated to grow year-on-year during 2012 in both Automotive and Wireless Business Segments. Carmakers continue to invest in software for new car models and the market for automotive software products and services is estimated to continue growing. In Wireless Business Segment the demand growth will be driven by especially the increasing use of the LTE technology that increases the performance of mobile networks, and the authorities’ needs for new communication solutions that use commercial technologies of smart phones and mobile networks.

EB expects for the year 2012 that net sales and operating result will grow clearly from the previous year (net sales of EUR 162.2 million, and operating loss of EUR -4.0 million in 2011). For the second half of 2012 EB expects that the net sales will grow clearly (EUR 86.1 million in 2H 2011) and operating result to be clearly positive (EUR 0.4 million in 2H 2011). Due to the seasonal nature of the EB’s business and due to the holiday period during the third quarter, the net sales and operating result without non-recurring items in the fourth quarter are expected to be higher than in the third quarter of 2012 (net sales EUR 47.0 million, operating profit without non-recurring items EUR 0.8 million, 3Q 2012).

More specific market outlook is presented under the “Business Segments’ development during July – September 2012 and Market Outlook” section.

The profit outlook for the year 2012 does not include possible non-recurring income or costs related to the reorganization cases of TerreStar Networks Inc. More information about the reorganization cases of TerreStar Networks and the amount of the receivables and collecting the receivables as well as other uncertainties regarding the outlook is presented under “Risks and Uncertainties” section.

In addition, more information on TerreStar Networks Inc.’s and its parent company TerreStar Corporation’s reorganization cases are presented in the October 20 and 25, November 20 and December 30, 2010, February 17, 2011, November 18, 2011, June 21, 2012, August 3, 2012, August 24, 2012 and August 28, 2012 stock exchange releases as well as in EB’s interim reports and financial statements atwww.elektrobit.com.

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