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Hitachi Announces Consolidated Financial Results for the Third Quarter Ended December 31, 2005

Posted on: Friday, 3 February 2006, 00:00 CST

Hitachi, Ltd. (NYSE:HIT)(TOKYO:6501) today announced its consolidated financial results for the third quarter of fiscal 2005, ended December 31, 2005. Notes: 1. All figures, except for the outlook for fiscal 2005, were converted at the rate of 118 yen to the U.S. dollar, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 30, 2005. 2. Segment information and operating income (loss) are presented in accordance with financial reporting principles and practices generally accepted in Japan. 1. Business Results for the Three Months Ended December 31, 2005 (1) Summary of Fiscal 2005 Third Quarter Consolidated Business Results Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 2,258.8 6% 19,143 Operating income 39.1 14% 332 Income before income taxes and minority interests 59.6 (16%) 506 Income before minority interests 24.2 (33%) 205 Net income 5.4 (79%) 47 ----------------------------------------------------------------------

During the third quarter, the world economy was strong overall, despite the effect of much higher prices worldwide for crude oil and other raw materials. The healthy world economy reflected strength in the U.S. economy, which was underpinned by consumer spending and plant and equipment investment, the continuation of robust economic growth in China and recovery in European economies.

In Japan, the economy remained generally healthy, with higher corporate earnings fueling growth in plant and equipment investment. The Japanese economy was also supported by moderate growth in consumer spending.

In these circumstances, Hitachi's consolidated revenues increased 6%, to 2,258.8 billion yen. This was due to higher year-on-year revenues in a number of segments. Higher revenues were posted by the Information & Telecommunication Systems segment, which continues to see sales grow; the Power & Industrial Systems segment, which turned in a strong performance due to rebounding private-sector plant and equipment investment; the Digital Media & Consumer Products segment, thanks to higher sales of flat-panel TVs and other products; and the High Functional Materials & Components segment, mainly due to growth in sales of components and materials for electronics-related fields.

Overseas revenues rose 16%, to 947.3 billion yen due mainly to higher year-on-year sales in the Power & Industrial Systems, Digital Media & Consumer Products and High Functional Materials & Components segments. As a result, the ratio of overseas revenues to consolidated revenues rose by 4 percentage points to 42%.

Operating income rose 14% year on year, to 39.1 billion yen on higher earnings mainly in the Electronic Devices, Power & Industrial Systems and High Functional Materials & Components segments.

Other income dropped 39%, to 29.8 billion yen due to less year on year earnings from net gain on securities. Other deductions declined 26%, to 9.3 billion yen.

As a result, Hitachi recorded income before income taxes and minority interests of 59.6 billion yen, down 16% year on year. After income taxes of 35.4 billion yen, Hitachi posted income before minority interests of 24.2 billion yen. Net income was 5.4 billion yen, a 79% drop from the third quarter of fiscal 2004. (2) Revenues and Operating Income (Loss) by Segment Results by segment were as follows. Information & Telecommunication Systems Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 511.3 6% 4,334 Operating income 0.5 (75%) 5 ----------------------------------------------------------------------

Information & Telecommunication Systems revenues increased 6%, to 511.3 billion yen. This was attributable to firm sales by software and outsourcing businesses in software and services, and year-on-year growth in hardware revenues on higher sales of disk array subsystems and other products.

Operating income fell 75%, to 0.5 billion yen, despite healthy growth in earnings in services and a solid performance in disk array subsystems and other areas. Losses in HDD and PC operations brought down earnings. Another reason for the earnings decline is an effect of the return of the Substitutional Portion of Employee Pension Fund Liabilities booked by a subsidiary in the same period of the previous fiscal year. Note: HDD operations are conducted by Hitachi Global Storage Technologies (Hitachi GST), which has a December 31 fiscal year-end, different from Hitachi's March 31 year-end. Hitachi's results for the third quarter ended December 31, 2005 include operating results of Hitachi GST for the three-month period from July through September 2005. Electronic Devices Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 296.6 (1%) 2,514 Operating income 6.5 186% 55 ----------------------------------------------------------------------

Electronic Devices revenues were 296.6 billion yen, on a par with the previous fiscal year. Hitachi High-Technologies Corporation performed well on higher sales of LCD manufacturing equipment. Growth was also recorded in sales of displays, particularly small and medium-sized LCDs.

Operating income climbed 186% year on year, to 6.5 billion yen, due to a smaller loss in the display business. Power & Industrial Systems Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 605.7 8% 5,134 Operating income 12.9 117% 110 ----------------------------------------------------------------------

Power & Industrial Systems revenues rose 8%, to 605.7 billion yen. In addition to growth in sales at Hitachi Construction Machinery Co., Ltd., mainly outside Japan, this increase reflected healthy sales of air-conditioning systems and industrial machinery thanks to recovering private-sector plant and equipment investment. Sales of automotive systems products also posted healthy growth.

The segment posted a 117% increase in operating income, to 12.9 billion yen due to higher earnings at Hitachi Construction Machinery, as well as in industrial machinery and other businesses. Digital Media & Consumer Products Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of Yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 362.3 11% 3,071 Operating loss (5.8) - (49) ----------------------------------------------------------------------

Digital Media & Consumer Products revenues increased 11%, to 362.3 billion yen due to growth in sales of plasma TVs and other digital media products and higher sales at Hitachi Maxell, Ltd.

The segment posted an operating loss of 5.8 billion yen due to an operating loss at Fujitsu Hitachi Plasma Display Limited, which became a subsidiary in April 2005. High Functional Materials & Components Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 414.2 9% 3,511 Operating income 30.9 40% 262 ----------------------------------------------------------------------

Revenues rose 9%, to 414.2 billion yen due to strong growth in sales at Hitachi Chemical Co., Ltd. and Hitachi Metals, Ltd., principally in the electronics-related and automotive fields. Hitachi Cable, Ltd. also recorded sales growth.

Operating income rose 40%, to 30.9 billion yen due to strong earnings at Hitachi Chemical, Hitachi Metals and Hitachi Cable. Logistics, Services & Others Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 317.1 2% 2,688 Operating income 1.1 (54%) 9 ----------------------------------------------------------------------

In Logistics, Services & Others, revenues edged up 2%, to 317.1 billion yen due in part to higher sales at Hitachi Transport System, Ltd.

The segment posted operating income of 1.1 billion yen, 54% lower year on year, mainly due to lower product prices, principally at overseas sales companies. Financial Services Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 126.8 (3%) 1,075 Operating income 9.6 20% 82 ----------------------------------------------------------------------

Segment revenues declined 3%, to 126.8 billion yen. However, operating income rose 20%, to 9.6 billion yen. (3) Revenues by Market Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Japan 1,311.4 0% 11,114 ---------------------------------------------------------------------- Overseas 947.3 16% 8,029 ---------------------------------------------------------------------- Asia 408.2 20% 3,460 ---------------------------------------------------------------------- North America 255.5 7% 2,166 ---------------------------------------------------------------------- Europe 197.2 11% 1,672 ---------------------------------------------------------------------- Other Areas 86.2 45% 731 ----------------------------------------------------------------------

Revenues in Japan were 1,311.4 billion yen, on a par with the previous fiscal year.

Overseas revenues rose 16%, to 947.3 billion yen due mainly to higher sales of flat-panel TVs, materials for electronics-related products and higher sales at Hitachi Construction Machinery.

As a result, the ratio of overseas revenues to consolidated revenues rose by 4 percentage points to 42%. (4) Financial Position As of December 31, 2005 ---------------------------------------------------------------------- Change from Billions of September 30, Millions of yen 2005 U.S. dollars ---------------------------------------------------------------------- Total assets 10,111.3 221.7 85,690 ---------------------------------------------------------------------- Total liabilities 6,775.1 177.2 57,417 ---------------------------------------------------------------------- Debt 2,698.4 95.9 22,868 ---------------------------------------------------------------------- Minority interests 984.9 29.0 8,347 ---------------------------------------------------------------------- Stockholders' equity 2,351.2 15.3 19,926 ---------------------------------------------------------------------- 0.3 point Stockholders' equity ratio 23.3% deterioration - ---------------------------------------------------------------------- D/E ratio (including minority 0.02 point interests) 0.81 times deterioration - ----------------------------------------------------------------------

Total assets as of December 31, 2005 were 10,111.3 billion yen, 221.7 billion yen more than at September 30, 2005 due to increase of inventories and other factors. Debt increased 95.9 billion yen over the same period to 2,698.4 billion yen. Stockholders' equity rose 15.3 billion yen, to 2,351.2 billion yen. As a result, the stockholders' equity ratio fell 0.3 of a percentage point to 23.3%. The debt-to-equity ratio (including minority interests) was 0.81 times due to the increase in debt. (5) Cash Flows Three months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen change U.S. dollars ---------------------------------------------------------------------- Cash flows from operating activities (4.5) 40.6 (38) Cash flows from investing activities (135.0) 26.1 (1,145) ---------------------------------------------------------------------- Free cash flows (139.6) 66.7 (1,183) ---------------------------------------------------------------------- Cash flows from financing activities 43.6 (80.3) 370 ----------------------------------------------------------------------

Operating activities used net cash of 4.5 billion yen, a decrease of 40.6 billion yen from the same period a year ago.

Investing activities used net cash of 135.0 billion yen, 26.1 billion yen less than the same period a year ago due to efforts to collect investments in leases earlier and other factors.

Free cash flows, the sum of cash flows from operating and investing activities, were an outflow of 139.6 billion yen, 66.7 billion yen less than the same period a year ago.

Financing activities provided net cash of 43.6 billion yen, 80.3 billion yen less than in the same period a year ago, reflecting factors such as a year-on-year decline in issues of corporate debentures. 2. Business Results for the Nine Months Ended December 31, 2005 (1) Summary, Revenues and Operating Income by Segment Summary Nine months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 6,672.1 3% 56,544 Operating income 116.8 (28%) 991 Income before income taxes and minority interests 141.7 (31%) 1,201 Income before minority interests 45.3 (56%) 385 Net loss (5.4) - (46) ---------------------------------------------------------------------- Revenues by Segment Nine months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Revenues 6,672.1 3% 56,544 Information & Telecommunication Systems 1,568.5 1% 13,293 Electronic Devices 879.7 (11%) 7,456 Power & Industrial Systems 1,884.6 12% 15,972 Digital Media & Consumer Products 974.2 0% 8,256 High Functional Materials & Components 1,174.7 5% 9,956 Logistics, Services & Others 887.6 (4%) 7,523 Financial Services 387.7 (3%) 3,286 Subtotal 7,757.5 2% 65,742 Eliminations & Corporate Items (1,085.3) - (9,198) ---------------------------------------------------------------------- Operating Income (Loss) by Segment Nine months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Operating Income (Loss) 116.8 (28%) 991 Information & Telecommunication Systems 23.7 (24%) 202 Electronic Devices 15.7 (51%) 133 Power & Industrial Systems 36.1 125% 307 Digital Media & Consumer Products (22.0) - (187) High Functional Materials & Components 78.9 27% 669 Logistics, Services & Others 8.0 (20%) 68 Financial Services 25.6 42% 218 Subtotal 166.3 (7%) 1,410 Eliminations & Corporate Items (49.4) - (419) ----------------------------------------------------------------------

The world economy in the nine months to December 31, 2005, a period including the third quarter of fiscal 2005, posted strong growth due to robust economic expansion in the U.S. and China as well as an economic recovery in Europe. This was despite the negative impact of sharply higher raw materials prices and other factors.

The Japanese economy posted healthy growth due to such factors as higher plant and equipment investment and consumer spending.

In these circumstances, Hitachi's consolidated revenues for the nine months to December 31, 2005 increased 3%, to 6,672.1 billion yen. The Power & Industrial Systems segment posted higher revenues on the back of recovering private-sector plant and equipment investment, as did the High Functional Materials & Components segment, mainly due to growth in sales of components and materials for electronics- and automotive-related fields.

Operating income declined 28%, to 116.8 billion yen due to lower earnings in the Information & Telecommunication Systems and Electronic Devices segments as well as an operating loss in the Digital Media & Consumer Products segment. On the other hand, the Power & Industrial Systems, High Functional Materials & Components and Financial Services segments recorded higher operating income.

Other income was 56.8 billion yen, down 29% on the same period a year ago, the result mainly of lower earnings from net gain on securities. Other deductions decreased 9%, to 31.9 billion yen.

As a result, Hitachi recorded income before income taxes and minority interests of 141.7 billion yen, down 31% year on year. After income taxes of 96.3 billion yen, Hitachi posted income before minority interests of 45.3 billion yen. Hitachi posted a net loss of 5.4 billion yen, compared with net income of 67.8 billion yen in the same period a year ago. (2) Revenues by Market Nine months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen % change U.S. dollars ---------------------------------------------------------------------- Japan 4,052.7 1% 34,345 ---------------------------------------------------------------------- Overseas 2,619.4 8% 22,199 Asia 1,134.9 10% 9,618 North America 710.7 4% 6,024 Europe 537.4 2% 4,555 Other Areas 236.2 20% 2,002 ----------------------------------------------------------------------

Revenues in Japan were 4,052.7 billion yen, on a par with the same period a year ago.

Overseas revenues increased 8%, to 2,619.4 billion yen due to growth in sales at Hitachi Construction Machinery, particularly in Europe and the U.S., as well as higher sales of HDDs and electronics-related components and materials, particularly in China.

As a result, the ratio of overseas revenues to consolidated revenues rose by 1 percentage point to 39%. (3) Cash Flows Nine months ended December 31, 2005 ---------------------------------------------------------------------- Billions of Year-over-year Millions of yen Change U.S. dollars ---------------------------------------------------------------------- Cash flows from operating activities 216.5 111.2 1,835 Cash flows from investing activities (390.5) (35.7) (3,310) ---------------------------------------------------------------------- Free cash flows (174.0) 75.5 (1,475) ---------------------------------------------------------------------- Cash flows from financing activities 5.8 (6.8) 50 ----------------------------------------------------------------------

Operating activities provided net cash of 216.5 billion yen, 111.2 billion yen more than in the same period a year ago.

Investing activities used net cash of 390.5 billion yen, an increase of 35.7 billion yen. This was the result mainly of an increase in capital investments.

Free cash flows, the sum of cash flows from operating and investing activities, were an outflow of 174.0 billion yen, 75.5 billion yen less than the same period a year ago.

Financing activities provided net cash of 5.8 billion yen, 6.8 billion yen less than the same period a year ago.

Cash and cash equivalents as of December 31, 2005 amounted to 557.4 billion yen, a decrease of 151.2 billion yen during the nine-month period, which includes the third quarter. 3. Outlook for Fiscal 2005 Consolidated Fiscal 2005, ending March 31, 2006 ---------------------------------------------------------------------- Year-over-year Billions of yen % change ---------------------------------------------------------------------- Revenues 9,220.0 2% Operating income 240.0 (14%) Income before income taxes and minority interests 220.0 (17%) Income before minority interests 95.0 (17%) Net income 20.0 (61%) ----------------------------------------------------------------------

Regarding trends in the world economy, Hitachi expects the U.S. economy to remain firm, supported by consumer spending and plant and equipment investment. In Asia, Hitachi expects that domestic demand will continue to support brisk economic growth in China. European economies, meanwhile, are forecasted to continue their moderate pace of recovery. Overall, therefore, the global economy is expected to continue expanding.

The forecast for the Japanese economy is firm growth, underpinned by continuing strength in exports to China and elsewhere in Asia and by rising consumer spending. There are, however, some concerns, such as the possibility of an upturn in long-term interest rates.

Under these circumstances, Hitachi is forecasting results shown above for fiscal 2005, the same as projections announced on October 31, 2005.

Hitachi will continue to make aggressive investments in targeted businesses while constantly executing business structural reforms. In this way, Hitachi will reinforce measures to become more competitive on a consolidated basis.

In particular, Hitachi will push forward with ongoing initiatives to improve the HDD, LCD and flat-panel TV businesses quickly.

In other fields, Hitachi will implement sweeping measures to achieve growth, particularly targeted businesses. For example, Hitachi will transfer parts of its Industrial Systems Group to Hitachi Plant Engineering & Construction Co., Ltd. on April 1, 2006. At the same time, Hitachi Plant Engineering & Construction, Hitachi Kiden Kogyo, Ltd. and Hitachi Industries Co., Ltd. will merge. In another move, Hitachi plans to make Hitachi Mobile Co., Ltd. a wholly owned subsidiary on April 1, 2006 with the aim of strengthening Hitachi's automotive systems business.

The projections assume a fourth-quarter exchange rate of 115 yen to the U.S. dollar.

Cautionary Statement

Certain statements found in this document may constitute "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such "forward-looking statements" reflect management's current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as "anticipate,""believe,""expect,""estimate,""forecast,""intend,""plan,""project" and similar expressions which indicate future events and trends may identify "forward-looking statements." Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the "forward-looking statements" and from historical trends. Certain "forward-looking statements" are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on "forward-looking statements," as such statements speak only as of the date of this document.

Factors that could cause actual results to differ materially from those projected or implied in any "forward-looking statement" and from historical trends include, but are not limited to:

-- fluctuations in product demand and industry capacity,

particularly in the Information & Telecommunication Systems

segment, Electronic Devices segment and Digital Media &

Consumer Products segment;

-- uncertainty as to Hitachi's ability to continue to develop and

market products that incorporate new technology on a timely

and cost-effective basis and to achieve market acceptance for

such products;

-- rapid technological change, particularly in the Information &

Telecommunication Systems segment, Electronic Devices segment

and Digital Media & Consumer Products segment;

-- increasing commoditization of information technology products,

and intensifying price competition in the market for such

products, particularly in the Information & Telecommunication

Systems segment, Electronic Devices segment and Digital Media

& Consumer Products segment;

-- fluctuations in rates of exchange for the yen and other

currencies in which Hitachi makes significant sales or in

which Hitachi's assets and liabilities are denominated,

particularly between the yen and the U.S. dollar;

-- uncertainty as to Hitachi's ability to implement measures to

reduce the potential negative impact of fluctuations in

product demand and/or exchange rates;

-- general socio-economic and political conditions and the

regulatory and trade environment of Hitachi's major markets,

particularly, the United States, Japan and elsewhere in Asia,

including, without limitation, a return to stagnation or

deterioration of the Japanese economy, or direct or indirect

restriction by other nations on imports;

-- uncertainty as to Hitachi's access to, or ability to protect,

certain intellectual property rights, particularly those

related to electronics and data processing technologies;

-- uncertainty as to the success of restructuring efforts to

improve management efficiency and to strengthen

competitiveness;

-- uncertainty as to the success of alliances upon which Hitachi

depends, some of which Hitachi may not control, with other

corporations in the design and development of certain key

products;

-- uncertainty as to Hitachi's ability to access, or access on

favorable terms, liquidity or long-term financing; and

-- uncertainty as to general market price levels for equity

securities in Japan, declines in which may require Hitachi to

write down equity securities it holds.

The factors listed above are not all-inclusive and are in addition to other factors contained in Hitachi's periodic filings with the U.S. Securities and Exchange Commission and in other materials published by Hitachi. HITACHI, LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRD QUARTER ENDED DECEMBER 31, 2005 The consolidated financial statements presented herein are expressed in yen and, solely for the convenience of the reader, have been translated into United States dollars at the rate of 118 yen = U.S.$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market as of December 30, 2005. SUMMARY In millions of yen and U.S. dollars, except Net income (loss) per share (6) and Net income (loss) per American Depositary Share (7). ---------------------------------------------------------------------- Three months ended December 31 ----------------------------------------- Yen U.S. $ (millions) (millions) --------------------- (A)/(B) ---------- 2005 (A) 2004 (B) X100 (%) 2005 ---------------------------------------------------------------------- 1. Revenues 2,258,819 2,123,788 106 19,143 ---------------------------------------------------------------------- 2. Operating income 39,138 34,369 114 332 ---------------------------------------------------------------------- 3. Income before income taxes and minority interests 59,652 70,911 84 506 ---------------------------------------------------------------------- 4. Income before minority interests 24,201 35,913 67 205 ---------------------------------------------------------------------- 5. Net income (loss) 5,493 26,644 21 47 ---------------------------------------------------------------------- 6. Net income (loss) per share Basic 1.65 7.99 21 0.01 Diluted 1.64 7.55 22 0.01 ---------------------------------------------------------------------- 7. Net income (loss) per ADS (representing 10 shares) Basic 16 80 20 0.14 Diluted 16 76 21 0.14 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Nine months ended December 31 ----------------------------------------- Yen U.S. $ (millions) (millions) --------------------- (C)/(D) ---------- 2005 (C) 2004 (D) X100 (%) 2005 ---------------------------------------------------------------------- 1. Revenues 6,672,138 6,453,723 103 56,544 ---------------------------------------------------------------------- 2. Operating income 116,892 161,701 72 991 ---------------------------------------------------------------------- 3. Income before income taxes and minority interests 141,769 206,912 69 1,201 ---------------------------------------------------------------------- 4. Income before minority interests 45,373 103,844 44 385 ---------------------------------------------------------------------- 5. Net income (loss) (5,453) 67,802 - (46) ---------------------------------------------------------------------- 6. Net income (loss) per share Basic (1.64) 20.47 - (0.01) Diluted (1.65) 19.98 - (0.01) ---------------------------------------------------------------------- 7. Net income (loss) per ADS (representing 10 shares) Basic (16) 205 - (0.14) Diluted (16) 200 - (0.14) ---------------------------------------------------------------------- Notes: 1. The Company's consolidated financial statements are prepared based on U.S. GAAPs and are unaudited. 2. Segment Information and operating income (loss) are presented in accordance with financial reporting principles and practices generally accepted in Japan. 3. The figures are for 949 consolidated subsidiaries, including Variable Interest Entities, and 155 equity-method affiliates. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ---------------------------------------------------------------------- Three months ended December 31 ----------------------------------------------- U.S. Yen Dollars (millions) (millions) ----------------------- (A)/(B) ----------- 2005 (A) 2004 (B) X100 (%) 2005 ---------------------------------------------------------------------- Revenues 2,258,819 2,123,788 106 19,143 ---------------------------------------------------------------------- Cost of sales 1,754,851 1,642,910 107 14,872 ---------------------------------------------------------------------- Selling, general and administrative expenses 464,830 446,509 104 3,939 ---------------------------------------------------------------------- Operating income 39,138 34,369 114 332 ---------------------------------------------------------------------- Other income 29,890 49,162 61 253 (Interest and dividends) 5,670 3,942 144 48 (Other) 24,220 45,220 54 205 ---------------------------------------------------------------------- Other deductions 9,376 12,620 74 79 (Interest charges) 8,667 7,103 122 73 (Other) 709 5,517 13 6 ---------------------------------------------------------------------- Income before income taxes and minority interests 59,652 70,911 84 506 ---------------------------------------------------------------------- Income taxes 35,451 34,998 101 301 ---------------------------------------------------------------------- Income before minority interests 24,201 35,913 67 205 ---------------------------------------------------------------------- Minority interests 18,708 9,269 202 158 ---------------------------------------------------------------------- Net income 5,493 26,644 21 47 ---------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ---------------------------------------------------------------------- Nine months ended December 31 ---------------------------------------------- U.S. Yen Dollars (millions) (millions) ----------------------- (C)/(D) ----------- 2005 (C) 2004 (D) X100 (%) 2005 ---------------------------------------------------------------------- Revenues 6,672,138 6,453,723 103 56,544 ---------------------------------------------------------------------- Cost of sales 5,194,754 4,966,988 105 44,023 ---------------------------------------------------------------------- Selling, general and administrative expenses 1,360,492 1,325,034 103 11,530 ---------------------------------------------------------------------- Operating income 116,892 161,701 72 991 ---------------------------------------------------------------------- Other income 56,822 80,483 71 481 (Interest and dividends) 17,059 14,077 121 144 (Other) 39,763 66,406 60 337 ---------------------------------------------------------------------- Other deductions 31,945 35,272 91 271 (Interest charges) 24,340 21,338 114 206 (Other) 7,605 13,934 55 65 ---------------------------------------------------------------------- Income before income taxes and minority interests 141,769 206,912 69 1,201 ---------------------------------------------------------------------- Income taxes 96,396 103,068 94 816 ---------------------------------------------------------------------- Income before minority interests 45,373 103,844 44 385 ---------------------------------------------------------------------- Minority interests 50,826 36,042 141 431 ---------------------------------------------------------------------- Net income (loss) (5,453) 67,802 - (46) ---------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (UNAUDITED) ---------------------------------------------------------------------- Yen (millions) --------------------------------------------------- As of As of Dec. 31, Sep. 30, As of Mar. 2005 (A) 2005 (B) (A) - (B) 31, 2005 ---------------------------------------------------------------------- Assets 10,111,383 9,889,628 221,755 9,736,247 ---------------------------------------------------------------------- Current assets 5,559,041 5,394,875 164,166 5,338,835 Cash and cash equivalents 557,461 646,085 (88,624) 708,715 Short-term investments 184,917 180,472 4,445 146,568 Trade receivables (Notes and Accounts) 2,217,508 2,178,106 39,402 2,197,766 Investments in leases 480,826 496,693 (15,867) 526,759 Inventories 1,517,215 1,329,110 188,105 1,198,955 Other current assets 601,114 564,409 36,705 560,072 ---------------------------------------------------------------------- Investments and advances 1,005,209 970,789 34,420 894,851 ---------------------------------------------------------------------- Property, plant and equipment 2,428,423 2,400,050 28,373 2,357,931 ---------------------------------------------------------------------- Other assets 1,118,710 1,123,914 (5,204) 1,144,630 ---------------------------------------------------------------------- ---------------------------------------------------------------------- Liabilities, Minority interests and Stockholders' equity and Stockholders' equity 10,111,383 9,889,628 221,755 9,736,247 ---------------------------------------------------------------------- Current liabilities 4,258,990 4,110,892 148,098 4,064,546 Short-term debt and current installments of long-term debt 1,285,091 1,213,149 71,942 1,183,474 Trade payables (Notes and Accounts) 1,357,205 1,290,177 67,028 1,309,256 Other current liabilities 1,616,694 1,607,566 9,128 1,571,816 ---------------------------------------------------------------------- Noncurrent liabilities 2,516,174 2,486,989 29,185 2,442,818 Long-term debt 1,413,381 1,389,392 23,989 1,319,032 Other liabilities 1,102,793 1,097,597 5,196 1,123,786 ---------------------------------------------------------------------- Minority interests 984,956 955,871 29,085 921,052 ---------------------------------------------------------------------- Stockholders' equity 2,351,263 2,335,876 15,387 2,307,831 Common stock 282,033 282,033 0 282,033 Capital surplus 560,292 562,635 (2,343) 565,360 Legal reserve and retained earnings 1,735,595 1,748,717 (13,122) 1,779,198 Accumulated other comprehensive loss (208,866) (239,991) 31,125 (301,524) (Foreign currency translation adjustments) (57,171) (69,637) 12,466 (90,904) (Minimum pension liability adjustments) (236,123) (237,662) 1,539 (242,672) (Net unrealized holding gain on available-for- sale securities) 85,223 67,589 17,634 32,996 (Cash flow hedges) (795) (281) (514) (944) Treasury stock (17,791) (17,518) (273) (17,236) ---------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (UNAUDITED) ------------------------------- U.S. Dollars (millions) ------------ As of Dec. 31, 2005 ------------------------------- Assets 85,690 ------------------------------- Current assets 47,110 Cash and cash equivalents 4,724 Short-term investments 1,567 Trade receivables (Notes and Accounts) 18,792 Investments in leases 4,075 Inventories 12,858 Other current assets 5,094 ------------------------------- Investments and advances 8,519 ------------------------------- Property, plant and equipment 20,580 ------------------------------- Other assets 9,481 ------------------------------- ------------------------------- Liabilities, Minority interests and Stockholders' equity and Stockholders' equity 85,690 ------------------------------- Current liabilities 36,093 Short-term debt and current installments of long-term debt 10,890 Trade payables (Notes and Accounts) 11,502 Other current liabilities 13,701 ------------------------------- Noncurrent liabilities 21,324 Long-term debt 11,978 Other liabilities 9,346 ------------------------------- Minority interests 8,347 ------------------------------- Stockholders' equity 19,926 Common stock 2,390 Capital surplus 4,748 Legal reserve and retained earnings 14,709 Accumulated other comprehensive loss (1,770) (Foreign currency translation adjustments) (484) (Minimum pension liability adjustments) (2,001) (Net unrealized holding gain on available-for- sale securities) 722 (Cash flow hedges) (7) Treasury stock (151) ------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ---------------------------------------------------------------------- Three months ended December 31 ------------------------------ U.S. Yen Dollars (millions) (millions) ------------------- ---------- 2005 2004 2005 ---------------------------------------------------------------------- Cash flows from operating activities Net income 5,493 26,644 47 Adjustments to reconcile net income to net cash used in operating activities Depreciation 115,118 111,154 976 Increase in receivables and inventories (188,317) (98,665) (1,596) Increase (decrease) in payables 49,360 (11,696) 418 Other 13,793 (72,684) 117 ------------------------------------------------------------------- Net cash used in operating activities (4,553) (45,247) (38) Cash flows from investing activities Increase in short-term investments (3,787) (36,957) (32) Purchase of rental assets and other properties, net (192,649) (183,999) (1,633) Proceeds from sale of investments and subsidiaries' common stock, net (30,573) 40,189 (259) Collection of investment in leases 106,079 60,795 899 Other (14,138) (41,196) (120) ------------------------------------------------------------------- Net cash used in investing activities (135,068) (161,168) (1,145) Cash flows from financing activities Increase in interest-bearing debt 68,209 157,164 578 Dividends paid to stockholders (17,114) (16,957) (145) Dividends paid to minority stockholders of subsidiaries (7,331) (7,530) (62) Other (128) (8,649) (1) ------------------------------------------------------------------- Net cash provided by financing activities 43,636 124,028 370 Effect of exchange rate changes on cash and cash equivalents 7,361 (5,553) 62 ------------------------------ Net decrease in cash and cash equivalents (88,624) (87,940) (751) Cash and cash equivalents at beginning of the period 646,085 619,049 5,475 ------------------------------ Cash and cash equivalents at end of the period 557,461 531,109 4,724 ============================== ---------------------------------------------------------------------- Note: Cash flows related to inventory-related receivables, which were previously included in "cash flows from investing activities," are now included in "cash flows from operating activities." As a result of this change, cash flows for the three months ended December 31, 2004 have been reclassified. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ---------------------------------------------------------------------- Nine months ended December 31 ------------------------------ U.S. Yen Dollars (millions) (millions) ------------------- ---------- 2005 2004 2005 ---------------------------------------------------------------------- Cash flows from operating activities Net income (loss) (5,453) 67,802 (46) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation 333,717 317,425 2,828 Increase in receivables and inventories (202,463) (105,906) (1,716) Decrease in payables (8,152) (95,668) (69) Other 98,903 (78,400) 838 ------------------------------------------------------------------- Net cash provided by operating activities 216,552 105,253 1,835 Cash flows from investing activities Increase in short-term investments (29,073) (6,816) (246) Purchase of rental assets and other properties, net (567,635) (560,407) (4,811) Proceeds from sale of investments and subsidiaries' common stock, net 19,815 65,411 168 Collection of investment in leases 305,310 229,781 2,587 Other (118,977) (82,748) (1,008) ------------------------------------------------------------------- Net cash used in investing activities (390,560) (354,779) (3,310) Cash flows from financing activities Increase in interest-bearing debt 61,993 63,038 525 Dividends paid to stockholders (35,361) (33,363) (300) Dividends paid to minority stockholders of subsidiaries (16,415) (15,665) (139) Other (4,322) (1,220) (36) ------------------------------------------------------------------- Net cash provided by financing activities 5,895 12,790 50 Effect of exchange rate changes on cash and cash equivalents 16,859 3,449 143 ------------------------------ Net decrease in cash and cash equivalents (151,254) (233,287) (1,282) Cash and cash equivalents at beginning of the period 708,715 764,396 6,006 ------------------------------ Cash and cash equivalents at end of the period 557,461 531,109 4,724 ============================== ---------------------------------------------------------------------- Note: Cash flows related to inventory-related receivables, which were previously included in "cash flows from investing activities," are now included in "cash flows from operating activities." As a result of this change, cash flows for the nine months ended December 31, 2004 have been reclassified. SEGMENT INFORMATION (UNAUDITED) INDUSTRY SEGMENTS ---------------------------------------------------------------------- Three months ended December 31 ---------------------------------------- U.S. Yen Dollars (millions) (A)/(B) (millions) --------------------- X100 ---------- 2005 (A) 2004 (B) (%) 2005 ---------------------------------------------------------------------- Information & Telecommunication 511,385 482,487 106 4,334 Systems 19% 19% ------------------------------------------------------------ Electronic Devices 296,617 300,238 99 2,514 11% 12% ------------------------------------------------------------ Power & Industrial 605,790 560,067 108 5,134 Systems 23% 23% ------------------------------------------------------------ Digital Media & Consumer 362,391 325,389 111 3,071 Products 14% 13% ------------------------------------------------------------ Revenues High Functional Materials 414,299 379,518 109 3,511 & Components 16% 15% ------------------------------------------------------------ Logistics, Services 317,140 312,179 102 2,688 & Others 12% 13% ------------------------------------------------------------ Financial Services 126,897 130,386 97 1,075 5% 5% ------------------------------------------------------------ Subtotal 2,634,519 2,490,264 106 22,327 100% 100% ------------------------------------------------------------ Eliminations & Corporate items (375,700) (366,476) - (3,184) ------------------------------------------------------------ Total 2,258,819 2,123,788 106 19,143 ====================================================================== Information & Telecommunication 549 2,188 25 5 Systems 1% 5% ------------------------------------------------------------ Electronic Devices 6,513 2,278 286 55 12% 6% ------------------------------------------------------------ Power & Industrial 12,961 5,978 217 110 Systems 23% 14% ------------------------------------------------------------ Digital Media & Consumer (5,810) (1,790) - (49) Products (10%) (4%) ------------------------------------------------------------ Operating High Functional income Materials 30,914 22,090 140 262 (loss) & Components 55% 54% ------------------------------------------------------------ Logistics, Services 1,129 2,455 46 9 & Others 2% 6% ------------------------------------------------------------ Financial Services 9,668 8,049 120 82 17% 19% ------------------------------------------------------------ Subtotal 55,924 41,248 136 474 100% 100% ------------------------------------------------------------ Eliminations & Corporate items (16,786) (6,879) - (142) ------------------------------------------------------------ Total 39,138 34,369 114 332 ---------------------------------------------------------------------- Note: Revenues by industry segment include intersegment transactions. SEGMENT INFORMATION (UNAUDITED) INDUSTRY SEGMENTS ---------------------------------------------------------------------- Nine months ended December 31 ------------------------------------------ U.S. Yen Dollars (millions) (C)/(D) (millions) ----------- ----------- X100 ---------- 2005 (C) 2004 (D) (%) 2005 ---------------------------------------------------------------------- Information & Telecommunication 1,568,583 1,554,223 101 13,293 Systems 20% 20% ------------------------------------------------------------- Electronic 879,773 992,316 89 7,456 Devices 11% 13% ------------------------------------------------------------- Power & Industrial 1,884,695 1,680,962 112 15,972 Systems 24% 22% ------------------------------------------------------------- Digital Media & Consumer 974,228 971,501 100 8,256 Products 13% 13% ------------------------------------------------------------- Revenues High Functional Materials & 1,174,740 1,119,941 105 9,956 Components 15% 15% ------------------------------------------------------------- Logistics, Services & 887,688 922,496 96 7,523 Others 12% 12% ------------------------------------------------------------- Financial 387,793 401,164 97 3,286 Services 5% 5% ------------------------------------------------------------- Subtotal 7,757,500 7,642,603 102 65,742 100% 100% ------------------------------------------------------------- Eliminations & Corporate items (1,085,362) (1,188,880) - (9,198) ------------------------------------------------------------- Total 6,672,138 6,453,723 103 56,544 ====================================================================== Information & Telecommunication 23,797 31,149 76 202 Systems 14% 17% ------------------------------------------------------------- Electronic 15,743 32,334 49 133 Devices 9% 18% ------------------------------------------------------------- Power & Industrial 36,177 16,066 225 307 Systems 22% 9% ------------------------------------------------------------- Digital Media & Consumer (22,041) 8,828 - (187) Products (13%) 5% ------------------------------------------------------------- Operating High Functional income Materials & 78,967 62,418 127 669 (loss) Components 48% 35% ------------------------------------------------------------- Logistics, Services & 8,027 9,983 80 68 Others 5% 6% ------------------------------------------------------------- Financial 25,687 18,037 142 218 Services 15% 10% ------------------------------------------------------------- Subtotal 166,357 178,815 93 1,410 100% 100% ------------------------------------------------------------- Eliminations & Corporate items (49,465) (17,114) - (419) ------------------------------------------------------------- Total 116,892 161,701 72 991 ---------------------------------------------------------------------- Note: Revenues by industry segment include intersegment transactions. SEGMENT INFORMATION (UNAUDITED) REVENUES BY MARKET ---------------------------------------------------------------------- Three

Source: Business Wire

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