Matsushita Reports Second Quarter and First Half Results / Sales and Operating Profit Decline, Net Income Rises (PART ONE)

OSAKA, Japan (PROTEXT) - Matsushita Electric Industrial Co., Ltd. (NYSE: MC; PCX) today reported its consolidated financial results for the fiscal second quarter and first half, ended September 30, 1999, and non- consolidated (parent company alone) results for the fiscal first half. Consolidated Second-quarter Results Consolidated group sales for the second quarter decreased 9% to 1,837.3 billion yen (U.S.$17.17 billion), from 2,016.0 billion yen in the same period a year ago. This decrease reflects the current Japanese economic environment, continued sluggish demand in emerging countries and the adverse effects of the strong yen. The Company's second-quarter domestic sales were 902.7 billion yen ($8.44 billion), down 4% from the comparable quarter a year ago, despite moderate signs of recovery in several product lines in Industrial products and Components. Overseas sales decreased 13% to 934.6 billion yen ($8.74 billion), due to a setback in sales in the CIS, Latin America and China and the negative effect of the yen's higher exchange rate when translating overseas sales into domestic currency for consolidation. Consolidated operating profit for the second quarter decreased 30% to 50.8 billion yen ($475 million), from 72.5 billion yen a year ago. Despite efforts to reduce production costs and improve overall efficiency, operating profit declined due to a sales decrease, lower product prices, and a strong yen. However, consolidated income before income taxes increased 82% to 51.2 billion yen ($479 million), compared to 28.1 billion yen in the same quarter a year ago, when the Company incurred a one-time non-operating loss of 46.5 billion yen on valuation of investment securities. Improvement in equity earnings of associated companies also contributed to net income, which increased to 24.5 billion yen ($229 million) compared to a net loss of 1.6 billion yen in the same quarter a year ago. Consolidated net income per common share for the second quarter was 11.40 yen ($1.07 per American Depositary Share (ADS), each representing 10 shares of common stock), compared to a net loss per common share of 0.59 yen for the same period a year ago, both on a diluted basis. Consolidated First-half Results Consolidated group sales for the first half decreased 8% to 3,592.7 billion yen ($33.58 billion) from 3,891.8 billion yen in the same six- month period a year ago, reflecting the aforementioned market factors and a strong yen. Domestic sales slipped 3% to 1,755.9 billion yen ($16.41 billion), while overseas sales declined 12% to 1,836.8 billion yen ($17.17 billion). First-half operating profit decreased 38% to 65.2 billion yen ($609 million), compared to 105.6 billion yen for the same period a year ago. Primarily due to the previous year's non-operating loss on valuation of investment securities, income before income taxes increased 28% to 84.3 billion yen ($788 million) compared to 65.8 billion yen a year ago, and net income increased by 258% to 34.1 billion yen ($318 million) from 9.5 billion yen in the same period last year. Consolidated net income per common share on a diluted basis for the six- month period was 15.95 yen ($1.50 per ADS), compared to 4.51 yen for the same period a year ago. Consolidated First-half Sales Breakdown by Product Category The Company's first-half consolidated sales by major product categories are summarized as follows: Consumer Products Sales of Consumer products decreased 11% to 1,488.5 billion yen ($13.91 billion) compared to the previous year's first half. Sales of video and audio equipment declined 13%. Although domestic and overseas sales of DVD players increased, stagnant sales of TVs and VCRs in the CIS, China, and the rest of Asia reduced sales in this category. Sales of home appliances and household equipment fell by 9%, reflecting continued sluggish demand in the domestic and overseas markets. However, the Company's "product firsts" such as the centrifugal washing machine and the high powered, energy saving vacuum cleaner continued to receive favorable response in Japan. Industrial Products Sales of Industrial products for the first half were 1,351.5 billion yen ($12.63 billion), down 7% from the same period last year. Sales of information and communications equipment declined by 10% despite continued growth in mobile communications products such as cellular phones and personal computers. This decline was caused mainly by sharp price decreases in computer peripherals, such as CRT display monitors and hard disk drives. Sales of Industrial equipment, driven by continued strong growth of car AV equipment in both the domestic and overseas markets, increased 3% over last year. Components Although sales of Components edged down 1% to 752.7 billion yen ($7.04 billion), several product lines, specifically semiconductors, liquid crystal display panels, and compressors for use in air conditioners achieved double- digit sales growth. Non-consolidated (Parent Company alone) First-half Results First-half parent company sales decreased 5% to 2,200.7 billion yen, from 2,312.1 billion yen a year ago, for virtually the same reasons as the consolidated results. Domestic sales decreased 2% to 1,432.5 billion yen, while exports dropped 10% to 768.1 billion yen. Parent company operating profit decreased 9% to 30.6 billion yen, from 33.7 billion yen in the first half of 1998, with recurring profit decreasing 15% to 51.1 billion yen, from 59.8 billion yen. Parent company net income for the first half increased 373% to 36.7 billion yen, compared to 7.8 billion yen in the same period a year ago. This increase is due mainly to a non-recurring loss on valuation of investment securities, which the Company incurred in the first half of last year, and to the implementation of tax effect accounting in accordance with a revision in Japanese accounting rules. Parent company net income per common share (basic) was 17.79 yen for the first six months, compared with 3.68 yen a year ago. Interim Dividend The Matsushita Board of Directors voted today to distribute an interim cash dividend of 6.25 yen per common share, payable December 10, 1999, to shareholders of record on September 30, 1999. Outlook for the Full Fiscal Year 2000 Matsushita announced today a revision of its earlier forecasts for consolidated and non-consolidated sales and earnings for the current fiscal year, ending March 31, 2000. Given the current conditions, the Company expects annual consolidated sales to decrease 4% from the last fiscal year, to about 7,300 billion yen. Annual consolidated operating profit is forecast to decline 15%, to about 164 billion yen. Consolidated pre-tax income for fiscal 2000 is anticipated to increase 11%, to approximately 225 billion yen. The projected increase in pre-tax income includes the effect of non-operating profit on the sale of shares in EPCOS AG in Germany in which Matsushita holds a minority equity interest. EPCOS AG, as previously announced, went public in October 1999. Annual consolidated net income is expected to total about 95 billion yen, up 604%, compared to the previous year's net income of 13.5 billion yen. Fiscal 1999 net income includes a 52.8 billion yen deduction, adjusting net deferred tax assets to reflect a reduction in Japan's corporate income tax rate. Excluding this tax effect, annual net income is projected to increase 43% compared to the previous fiscal year. On a parent company alone basis, sales for fiscal 2000 are expected to decrease 2% to approximately 4,520 billion yen. Parent company annual operating profit is projected to decrease 7% to approximately 75 billion yen, and recurring profit to decrease 9% to approximately 112 billion yen. Parent company annual net income is expected to increase 23% to approximately 76 billion yen. Statements made in the Outlook for the Full Fiscal Year 2000 and other statements herein that are not historical facts are forward-looking statements about the future performance of Matsushita and its group companies which are based on management's assumptions and beliefs in light of information currently available to it and involve risks and uncertainties. Actual results may differ materially from these forecasts. Potential risks and uncertainties include, but are not limited to: general economic conditions in Matsushita's major markets, particularly Japan and elsewhere in Asia, the United States and Europe; general consumer spending; rapid exchange rate fluctuations, particularly between the yen and U.S. dollar, euro and other currencies in which Matsushita makes significant sales or in which Matsushita's assets and liabilities are denominated; direct and indirect restrictions by other countries of imports, or exchange or other limitations imposed by other countries in which Matsushita conducts significant production and marketing operations; fluctuation in market prices of securities of which Matsushita has substantial holdings; and Matsushita's ability to maintain its strength in many product and geographical areas, through such means as new product introductions, in a market that is highly competitive in terms of both price and technology, pertinent to the industry to which the Company primarily belongs. Matsushita Electric Industrial Co., Ltd. is one of the world's leading producers of electronic and electric products for consumer, business and industrial use, which it markets around the world under the "Panasonic," "National," "Technics" and "Quasar" brand names. Matsushita's shares are listed outside Japan on the Amsterdam, Dusseldorf, Frankfurt, New York, Pacific, and Paris stock exchanges. Notes to consolidated financial statements: 1. The Company's consolidated financial statements are prepared in conformity with United States generally accepted accounting principles. 2. The Company has not applied SFAS No.115 in accounting for certain investments in debt and equity securities. If SFAS No.115 had been adopted as of September 30, 1999, and March 31, 1999, the combined carrying amounts of marketable securities and investments and advances would increase by 259.7 billion yen ($2,427 million) and 197.6 billion yen, respectively. Stockholders' equity would also increase by 145.7 billion yen ($1,362 million) and 109.1 billion yen, on the respective dates. 3. For the fiscal first half ended September 30, 1999, comprehensive loss totaled 43.1 billion yen ($403 million), as compared with comprehensive loss of 1.8 billion yen a year ago. In calculating comprehensive income (loss), the Company has applied SFAS No.115. Comprehensive income (loss) includes net income, increases (decreases) in cumulative translation adjustments, and unrealized holding gains of available-for-sale securities. 4. Number of consolidated companies: 327 5. Number of companies reflected by the equity method: 60 6. United States dollar amounts are translated from yen for convenience at the rate of U.S. $1.00 = 107 yen, the approximate rate on the Tokyo Foreign Exchange Market on September 30, 1999. 7. Each American Depositary Share (ADS) represents 10 shares of common stock. Matsushita Electric Industrial Co., Ltd. Consolidated Statement of Income * (Three Months Ended September 30) Yen U.S. Dollars (millions) Percentage (millions) 1999 1998 1999/1998 1999 Net sales Y1,837,286 Y2,015,996 91% $17,171 Cost of sales (1,305,343) (1,414,186) (12,199) Selling, general and administrative expenses (481,138) (529,290) (4,497) Operating profit 50,805 72,520 70% 475 Other income (deductions): Interest income 9,799 15,382 92 Dividend income 3,225 514 30 Interest expense (11,459) (15,548) (107) Loss on valuation of investment securities(2,670) (46,521) (25) Other income (loss), net 1,533 1,778 14 Income before income taxes 51,233 28,125 182% 479 Provision for income taxes (22,845) (20,716) (214) Minority interests (8,777) (8,003) (82) Equity in earnings (losses) of associated companies 4,903 (1,014) 46 Net income (loss) Y24,514 Y(1,608) -- $229 Net income (loss) per share, basic per common share 11.89 yen (0.75) yen 11 cents per American Depositary Share(ADS) 119 yen (8) yen 1.11 dollars Net income (loss) per share, diluted per common share 11.40 yen (0.59) yen 11 cents per ADS 114 yen (6) yen 1.07 dollars (Parentheses indicate expenses or deductions.) * See notes to consolidated financial statements. Supplementary Information (Three months ended September 30) Yen U.S. Dollars (millions) (millions) 1999 1998 1999 Depreciation: Y92,326 Y92,289 $863 Capital investment: Y87,404 Y103,449 $817 R&D expenditures: Y134,577 Y127,407 $1,258 Matsushita Electric Industrial Co., Ltd. Consolidated Statement of Income * (Six Months Ended September 30) Yen U.S.Dollars (millions) Percentage (millions) 1999 1998 1999/1998 1999 Net sales Y3,592,692 Y3,891,842 92% $33,577 Cost of sales (2,547,047) (2,720,264) (23,804) Selling, general and administrative expenses (980,489) (1,065,937) (9,164) Operating profit 65,156 105,641 62% 609 Other income (deductions): Interest income 20,137 30,124 188 Dividend income 8,019 5,359 75 Interest expense (23,588) (32,215) (220) Loss on valuation of investment securities (2,670)(46,521) (25) Other income, net 17,218 3,396 161 Income before income taxes 84,272 65,784 128% 788 Provision for income taxes (42,053) (41,944) (393) Minority interests (15,742) (9,819) (147) Equity in earnings (losses) of associated companies 7,589 (4,513) 70 Net income Y34,066 Y9,508 358% $318 Net income per share, basic per common share 16.52 yen 4.51 yen 15 cents per ADS 165 yen 45 yen 1.54 dollars Net income per share, diluted per common share 15.95 yen 4.51 yen 15 cents per ADS 160 yen 45 yen 1.50 dollars (Parenthesis indicate expenses or deductions.) * See notes to consolidated financial statements. Supplementary Information (Six months ended September 30) Yen U.S.Dollars (millions) (millions) 1999 1998 1999 Depreciation: Y178,201 Y179,996 $1,665 Capital investment: Y155,689 Y183,468 $1,455 R&D expenditures: Y262,513 Y250,453 $2,453 Total employees (September 30): 290,436 284,720 Matsushita Electric Industrial Co., Ltd. Consolidated Balance Sheet * September 30, 1999 With Comparative Figures for March 31, 1999 Yen U.S. Dollars (millions) (millions) Sept. 30, 1999 March 31, 1999 Sept. 30, 1999 Assets Current assets: Cash Y1,519,891 Y1,529,584 $14,204 Marketable securities 141,774 128,328 1,325 Trade receivables (notes and accounts) 1,239,274 1,321,303 11,582 Inventories 995,307 1,018,663 9,302 Other current assets 438,667 411,428 4,100 Total current assets 4,334,913 4,409,306 40,513 Noncurrent receivables 279,806 276,311 2,615 Investments and advances 1,293,842 1,279,828 12,092 Property, plant and equipment, net of accumulated depreciation 1,435,180 1,493,551 13,413 Other assets 494,453 479,252 4,621 Total assets Y7,838,194 Y7,938,248 $73,254 Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings Y661,977 Y650,147 $6,187 Trade payables (notes and accounts) 591,678 635,351 5,530 Other current liabilities 1,337,007 1,305,441 12,495 Total current liabilities 2,590,662 2,590,939 24,212 Long-term liabilities 1,195,949 1,205,174 11,177 Minority interests 612,707 609,080 5,726 Common stock 209,554 209,444 1,959 Capital surplus 569,374 567,696 5,321 Retained earnings 2,929,016 2,910,932 27,374 Cumulative translation adjustments (268,528) (154,765) (2,510) Treasury stock (540) (252) (5) Total liabilities and stockholders' equity Y7,838,194 Y7,938,248 $73,254 * See notes to consolidated financial statements. With respect to SFAS No.115, please refer to note 2. Matsushita Electric Industrial Co., Ltd. Consolidated Sales Breakdown * ** (Three Months Ended September 30) Yen U.S. Dollars (billions) Percentage (millions) 1999 1998 1999/1998 1999 Consumer products Video and audio equipment Y449.4 Y500.0 90% $4,200 Home appliances and household equipment 332.2 362.0 92% 3,105 Subtotal 781.6 862.0 91% 7,305 Industrial products Information and communications equipment 488.2 570.0 86% 4,562 Industrial equipment 188.4 186.9 101% 1,761 Subtotal 676.6 756.9 89% 6,323 Components 379.1 397.1 95% 3,543 Total Y1,837.3 Y2,016.0 91% $17,171 Domestic sales 902.7 943.9 96% 8,436 Overseas sales 934.6 1,072.1 87% 8,735 (Six Months Ended September 30) Yen U.S.Dollars (billions) Percentage (millions) 1999 1998 1999/1998 1999 Consumer products Video and audio equipment Y841.3 Y964.7 87% $7,863 Home appliances and household equipment 647.2 711.5 91% 6,048 Subtotal 1,488.5 1,676.2 89% 13,911 Industrial products Information and communications equipment 995.3 1,105.8 90% 9,302 Industrial equipment 356.2 345.8 103% 3,329 Subtotal 1,351.5 1,451.6 93% 12,631 Components 752.7 764.0 99% 7,035 Total Y3,592.7 Y3,891.8 92% $33,577 Domestic sales 1,755.9 1,806.8 97% 16,410 Overseas sales 1,836.8 2,085.0 88% 17,167 * See details of product categories. ** See notes to consolidated financial statements. [Domestic/Overseas Sales Breakdown for Six Months Ended September 30, 1999] (in yen only) Yen (billions) Yen (billions) Domestic Sales Percentage Overseas Sales Percentage 1999 1999/1998 1999 1999/1998 Consumer products Video and audio equipment Y283.3 89% Y558.0 87% Home appliances and household equipment 482.2 94% 165.0 82% Subtotal 765.5 92% 723.0 86% Industrial products Information and communications equipment 434.1 101% 561.2 83% Industrial equipment 224.8 103% 131.4 104% Subtotal 658.9 101% 692.6 86% Components 331.5 101% 421.2 96% Total Y1,755.9 97% Y1,836.8 88% Details of Product Categories Consumer Products Video and audio equipment: (video cassette recorders, video camcorders, TVs, TV/VCR combination units, DVD players, satellite broadcast receivers, radios, radio/cassette stereos, portable headphone players, CD and MD players, stereo hi-fi equipment, electronic musical instruments, prerecorded video and audio tapes and discs, etc.) Home appliances and household equipment: (refrigerators, air conditioners, home laundry equipment, vacuum cleaners, microwave ovens, other cooking appliances, kitchen fixture systems, electric, gas and kerosene hot-water supply systems, heating appliances, bath and sanitary equipment, electric lamps, cameras and flash units, bicycles, etc.) Industrial Products Information and communications equipment: (facsimiles, telephones, mobile communications equipment, personal computers, printers and peripherals, copiers, CRT and LCD displays, hard disk drives, CD-ROM, DVD-ROM/RAM and other optical disk drives, CATV systems, AV systems for commercial and industrial use, communication network equipment, etc.) Industrial equipment: (electronic-parts-mounting machines, industrial robots, welding machines, air-conditioning equipment, vending machines, electronic measuring instruments, medical equipment, car audio and DVD/CD-ROM car navigation equipment, etc.) Components (semiconductors, cathode-ray tubes, printed circuit boards, PDP and LCD devices, tuners, capacitors, other general components, speakers, electric motors, compressors, dry batteries, storage batteries, etc.) Please Note: The following are financial statements on a parent company alone basis, and should not be confused with the aforementioned consolidated results. Matsushita Electric Industrial Co., Ltd. (Parent Alone) Statement of Income * ** *** Yen (millions) Six Months Ended Six Months Ended Percentage Sept. 30, 1999 Sept. 30, 1998 1999/1998 Net sales Y2,200,717 Y2,312,182 95% Cost of sales (1,860,148) (1,919,882) Selling, general and administrative expenses (309,964) (358,602) Operating profit 30,605 33,697 91% Interest income 6,396 8,178 Dividend income 27,868 36,226 Other income 14,559 12,992 Interest expense (12,736) (12,935) Other expenses (15,611) (18,351) Recurring profit 51,082 59,807 85% Non-recurring profit 342 -- Non-recurring loss (403) (45,555) Income before income taxes 51,020 14,252 358% Provision for income taxes Current (25,460) (6,500) Deferred 11,130 -- Net income Y36,690 Y7,752 473% Unappropriated retained earnings at beginning of period 40,639 40,852 Adjustment for prior-year tax effects 184,690 -- Unappropriated retained earnings at end of period 262,019 48,604 (Parentheses indicate expenses or deductions.) * To conform to a revision in Japanese corporate accounting standards, local enterprise tax previously included in selling, general and administrative expenses has been transferred to provision for income taxes for the fiscal first half ended September 30, 1999, without retroactive restatement for prior periods. For the first-half period a year ago, the local enterprise tax totaled 3.5 billion yen. ** Net income per common share, basic Six Months Ended Six Months Ended Sept. 30, 1999 Sept. 30, 1998 17.79 yen 3.68 yen *** See notes to parent-alone financial statements. END of PART ONE ots Original Text Service: Matsushita Electric Industrial Co., Ltd. Internet: http://www.newsaktuell.de Contact: Akihiro Takei of Panasonic Finance (America), Inc. 212- 371-5447 Subscribers please note that material bearing the slug "PROTEXT" is not part of CTK's news service and is not to be published under the "CTK" slug. Protext is a commercial service providing distribution of press releases from clients, who are identified in the text of Protext reports and who bear full responsibility for their contents. PROTEXT