Toshiba announces consolidated results for first half of fiscal year to march 2000

Tokyo (PROTEXT) - Toshiba Corporation today announced itsconsolidated results for April 1 to September 30, 1999, the firsthalf of the current fiscal year to March 31, 2000. 1) General Overview of First Half of Fiscal Year 1999

Theeconomic environment in which Toshiba and its consolidated groupcompanies operate remained tough throughout the period, despitesigns of recovery in the domestic economy. The group continued toput into effect extensive restructuring programs and maximizedefforts to secure profitability. Compared with the same period a year ago, net sales increasedfive percent to 2,622,464 million yen (approximately US$24,509million). Gains were recorded in semiconductors, LCDs, thedomestic market for personal computers and cellular phones. Theresults reported below reflect the inclusion of Toshiba TECCorporation and its subsidiaries in consolidated reporting forthe first time. Net income decreased to minus 48,323 million yen (minus US$452million), the result of significantly lower than expected pricesfor 128-megabit DRAM and other memories, declines inprofitability in logic and system LSIs, and restructuring costsfor semiconductor operations, including realignment of productionfacilities and decommissioning of aging assets. 2) Breakdown by Industry Segments for First Half of FY1999Following the introduction of an in-house company system in April1999, Toshiba Corporation revised its segment information fromfive segments to six: Information & Communications and IndustrialSystems; Digital Media; Power Systems; Electronic Devices &Components; Home Appliances; and Others. All comparisons belowrefer to the relevant results of sales and operating income forthe same period a year ago. Sales Information & Communications and Industrial Systems wereup 17 percent to 828,461 million yen US$7,743 million),reflecting the inclusion of Toshiba TEC Corporation and itssubsidiaries. However, private sector demand remained sluggishand sales of industrial systems slumped. Digital Media sales rosetwo percent to 706,000 million yen (US$6,598 million), withincreased demand for personal computers in Japan and robustgrowth in cellular phones making up for a decline in sales of HDDand CD-ROM. In Power Systems, sales remained flat at 253,303 million yen(US$2,367 million), as an increase in domestic sales and inexports of thermal power generating equipment offset a decline innuclear power related equipment and other systems. ElectronicDevices & Components marked an eight percent gain in sales to684,299 million yen (US$6,396 million) as memories and LCDdevices enjoyed considerable sales growth and sales of discreteproducts increased. In Home Appliances, sales declined six percent to 340,183million yen (US$3,179 million) and Others declined two percent to208,000 million yen (US$1,944 million). Operating income

Information & Communications and IndustrialSystems declined by 160 million yen (US$1.5 million) to minus2,385 million yen (minus US$22 million). This was due to lowerreturns from sales of industrial and medical systems and fromsales to national and local government

offices, and despitethe inclusion of the result of Toshiba TEC Corporation and itssubsidiaries in the segment. In Digital Media, a profit declinein the international personal computer business and in peripheralproducts could not be offset by rising profits in the domesticmarket for personal computers and increased sales of cellularphones, resulting in a 30 percent decrease in operating income to18,047 million yen (US$168 million) Power Systems declined 59 percent to 2,426 million yen (US$23million), reflecting a tough overall business environment andworsened results at Toshiba Plant Kensetsu Co., Ltd. ElectronicDevices & Components saw a major decline of 35,592 million yen(US$333 million) to minus 64,933 million yen (minus US$607million), despite improvement in the LCD business. This result reflects lower than expected prices for memories,declines in profitability in system LSIs, and the cost ofdecommissioning of aging assets. Home Appliances improved its operating income as extensiverestructuring efforts strengthened profitability, allowing thesegment to record a profit for the first time in eight years.Operating income rose 19,129 million yen (US$179 million) to1,471 million yen (US$14 million). Others also increased by 33percent to 15,594 million yen (US$146 million). 3) Projection for FY1999

The Japanese market is expected tocontinue a gradual recovery, despite such concerns as exchangerate fluctuations. Toshiba Corporation forecasts an increase intotal sales, as semiconductors will see improved volumes andprice stabilization. Sales of information and communicationssystems will also make positive contributions. Annual sales for the fiscal year ended March 2000 are forecastat 5,650,000 million yen (US$ 52,804 million). The company anticipates a substantial recovery in profitabilityin the second half of FY1999, as the semiconductor businessreturns to the black. However, the large losses incurred in thefirst half will not be covered by profit generated in the secondhalf. In addition, Toshiba Corp. will reflect a 110,000 million yen(US$1,000 million) expense in its financial results for fiscalyear 1999 in connection with the settlement in a class- actionlawsuit in the U.S. concerning the floppy disk controller thathad been incorporated in the company's portable PCs. A profit of50,000 million yen (US$467 million) from selling securities willbe also reflected in the results for the year. As a result, thecompany forecasts income before income taxes and minorityinterests of minus 70,000 million yen (minus US$654 million) andnet income of minus 50,000 million yen (minus US$467 million). 4) FY1999

Projection by Industry Segments Projections forFY1999 are shown below, compared against actual results forFY1998.

Unit: billionyen

Sales

OperatingIncome

FY1999

FY1998 FY1999FY1998

Forecast

Actual ForecastActual Information & Communications and Industrial Systems

1,880

1,720.2

4045.1 Digital Media

1,450

1,406.5

4343.0 Power Systems

490

520.6

813.9 Electronic Devices & Components

1,520

1,265.8

-40-69.6 Home Appliances

690

718.7

2-28.0 Others

420

424.9

2824.4 Total

6,450

6,056.7

8128.8 Elimination

-800

-755.8

-11.7 Consolidated

5,650

5,300.9

8030.5 Sales For fiscal year 1999 as a whole, Information & Communicationsand Industrial Systems will see an increase in sales due topositive second half contributions from systems projects ininformation and communications systems. Sales of Digital Mediawill be spurred by continued growth in personal computers andcellular phones. Power Systems will see a decline in sales, asits business environment remains severe. Sales of ElectronicDevices & Components will rise, led by growth in semiconductorsand LCDs. The Home Appliances segment will decline, mainly as aresult of a fall in sales of lighting equipmen and air-conditioners. Others will see a slight decline. Operating income Compared with the same period a year earlier,FY1999 will see a decline in Information & Communications andIndustrial Systems, while Digital Media will remain flat, HomeAppliances will be back in the black, and Other will increase.Power Systems will decrease. Electronic Devices & Components willimprove its operating income but remain in the red. The companassumed an exchange rate of 110 yen to the US$1 for its second-half projection. N.B. The U.S. dollar is valued at 107 yen for the first halfresults for convenience only. Year 2000 Readiness Disclosure Toshiba Corporation's Response to Y2K 1.Basic stance and action 1) Policy Toshiba is fully aware of the impact on business ofthe Y2K issue associated with computer systems (hardware,application programs, etc.) and equipment incorporatingmicroprocessors. The Toshiba Group, including subsidiaries andaffiliates worldwide, is tackling the problem with the utmostvigor. (2)Organizational structure Concerted efforts to deal with theY2K issue began in April 1995. October 1998 saw establishment ofthe Year 2000 Solution Division, a corporate-level organizationthat reports directly to the president, and the initiation of thecorporate Y2K-Project, under the leadership of a senior executivevice president and the deputy leadership of an executive vicepresident. The Y2K-Project embraces activities in all ofToshiba's operations, including the corporate staff divisions,in-house companies (including factories) and branch offices.Subsidiaries and affiliates in Japan and overseas also haveinitiated their own Y2K projects, which receive guidance fromtheir supervisory organization in Toshiba. Employee awareness ofY2K-related issues is enhanced by means of in-house publicity andevents and the company web site. Progress in Y2K readiness isreported periodically to the board of directors. (3) Current situation All Toshiba products have been checkedfor Y2K compliance. If any product requires Y2K action, Toshibanotifies customers to that effect, and measures are implementedfollowing discussion with customers. Toshiba provides information on Y2K compliance of mass-producedproducts on its web site, including notification of products thatdo not require Y2K measures. Where products require action but itis not possible for Toshiba to identify all the customers, thecompany provides information by means of newspaper advertisementsrequesting customers to contact Toshiba. The company alsoresponds to inquiries from customers. Toshiba is inspecting all of its facilities and systems inorder to assure that its provision of products and services isnot affected. As of September 1999, the company had almostcompleted replacing or remedying Y2K-affected facilities andsystems and conducting Y2K compliance simulations according tothe Y2K compliance plans. Plans are already in place to supportminor adjustments such as setting dates on equipment, on andafter January 1, 2000. The company requested its suppliers to achieve Y2K complianceby September 1999. The company has monitored progress andcompliance at its main suppliers through written inquiries andsite visits. Connectivity tests between Toshiba's IT systems and those ofoutside parties with which Toshiba has EDI links were almostcompleted in September and are expected to be finished by the endof November 1999. Toshiba's budget for Y2K measures is included in the ordinarybudget. Sufficient personnel have been secured for Y2K projects. 2.Expenditures on Y2K measures Information systems in Toshibaand Toshiba Group are being reconstructed through use of ERPpackages, and Y2K measures are included in the reconstruction.Expenditures exclusively on Y2K measures are expected to total17.3 billion yen, 14.2 billion yen of which had been expended bySeptember 1999. Expenditure on existing plans that include Y2Kmeasures, such as reconstruction of information systems, isexpected to amount to 28.2 billion yen, of which 24.5 billion yenhad been expended by September 1999. The expenditures are bothnecessary and sufficient as Y2K measures. The cost impact of thecompany's Y2K measures is slight within the context of Toshiba'soverall operations, and funding is provided from cash flow fromoperating activities. Expenditure on Y2K measures covers expenditure on in-housefacilities and systems and expenditure on products. Expenditureson plans that include but are not limited to Y2K measures, suchas system reconstruction, mainly concern measures for in-housefacilities and systems. Expenditures also include the cost oflabor required to implement Y2K measures and plans. 3. Contingency plans etc. During the transitional period fromthe end of 1999 to the beginning of 2000 (Dec. 25, 1999 to Jan.12, 2000, as well as Feb. 28 to Mar. 1, 2000), ToshibaCorporation will establish a 24-hour-service inquiry hot line tosupport our customers. Staff working in Y2K- related areas willbe on call throughout the transitional period. Toshiba will do its utmost to ensure the Y2K compliance of itsfacilities and systems by means of simulation tests before 2000,data back up at 1999 year-end, start-up prior to the start ofoperations in 2000, and other measures. Systems and proceduresfor recovery of facilities and systems will be established inreadiness for unexpected eventualities resulting from oversightsor errors in countermeasures. At the same time, alternativeoperations will be devised by each department, based onevaluation of risks to facilities and systems, including risks tosuppliers and parties with which Toshiba has EDI connections. As a risk-management structure, Toshiba will set up a Y2Kheadquarters, drawing on the staff of its corporate staffdivision, in-house companies and subsidiaries and affiliates. TheY2K headquarters will take the lead in communications anddecision making in the event of any emergency. Contingency plans for each division and Toshiba itself werealmost finalized by September 1999, through drawing up manuals,pilot cases and training courses. We are currently making thenecessary preparations called for in the contingency plans, andall preparations, including rehearsal of an emergencycommunications channel, will be completed by the end of thisyear. 3.Other Toshiba and Toshiba Group are promoting Y2K solutionsin terms of both products and facilities and systems, in aneffort to ensure that customers are not affected and that thereis no serious impact on business activities. However, Y2Kproblems are multifaceted and a problem may arise that cannot besolved by Toshiba and Toshiba Group alone. Consequently, it isnot possible for Toshiba to be certain that its thoroughpreparations and implementation of measures will preclude Toshibaor the Toshiba Group from being the source of inconvenience toany third party. Toshiba is establishing systems and proceduresto enable the accurate assessment of situations and swiftjudgment and to minimize risks. ots Original Text Service:Toshiba Corporation Internet: http://www.newsaktuell.de Contact:Keisuke Ohmori of Toshiba Corporation, +81-3-3457-2105, orkeisuke.oomori@toshiba.co.jp

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