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Panasonic Reports Second Quarter and Six Month Results

October 28, 2008

Panasonic Corporation(1) (Panasonic)(NYSE:PC) today reported its consolidated financial results for the second quarter and six months ended September 30, 2008, of the current fiscal year ending March 31, 2009 (fiscal 2009).

(1) As of October 1, 2008, the company changed its name from “Matsushita Electric Industrial Co., Ltd.” to “Panasonic Corporation.”

Consolidated Second-quarter Results

Consolidated group sales for the second quarter decreased 4% to 2,191.7 billion yen, from 2,285.8 billion yen in the same three-month period a year ago. Explaining the second quarter results, although sales gains were recorded mainly in digital AV products and white goods, total sales declined because sales of information and communication equipment were sluggish and sales of JVC (Victor Company of Japan, Ltd. and its subsidiaries)(2) were included in the consolidated group sales in the previous year’s comparable period. Of the consolidated group total, domestic sales decreased 4% to 1,065.4 billion yen, from 1,109.8 billion yen a year ago. Overseas sales decreased 4% to 1,126.3 billion yen, from 1,176.0 billion yen in the second quarter of fiscal 2008.

(2) Victor Company of Japan, Ltd. and its subsidiaries became associated companies under the equity method from the company’s consolidated subsidiaries from August 2007. For more information, see Note 6 of the Notes to consolidated financial statements on page 15.

In the electronics industry during the second quarter under review, while there was a growing demand for flat-panel TVs related to the Beijing Olympics, severe business conditions continued in Japan and overseas, due mainly to rising prices for raw materials and energy, and price declines centered on digital products. Under these circumstances, in fiscal 2009 as the middle year of the three-year mid-term management plan GP3, Panasonic is striving to produce successful results and create a new trend for achieving goals. Aiming at getting growth back on track and strengthening profitability, Panasonic is implementing initiatives focused on four major themes: double-digit growth in overseas sales, expansion of four strategic businesses, manufacturing innovation and the “eco ideas” strategy.

Regarding earnings, operating profit(3) for the second quarter was down 19%, to 118.6 billion yen, from 146.1 billion yen in the same period a year ago. This decrease was due mainly to the negative effects of intensified global price competition and a stronger yen against the U.S. dollar, as well as rising prices for crude oil and other raw materials. These and other factors resulted in pre-tax income of 84.0 billion yen, down 19% from 103.7 billion yen in the same period a year ago. Net income decreased 16% to 55.5 billion yen, from 65.8 billion yen in the same quarter of the previous year.

(3) For information about operating profit, see Note 2 of Notes to consolidated financial statements on page 15.

Consolidated Six-month Results

Combining the second quarter results with those of the first quarter, consolidated group sales for the six months ended September 30, 2008 decreased 4% to 4,343.7 billion yen, compared with 4,525.3 billion yen in the same six-month period a year ago. Explaining the six-month results, although sales gains were recorded mainly in digital AV products, total sales declined because sales of JVC were included in the consolidated group sales in the previous year’s comparable period. Domestic sales amounted to 2,110.6 billion yen, down 4% from 2,187.8 billion yen in the previous year’s six months, while overseas sales decreased 4% to 2,233.1 billion yen from 2,337.5 billion yen a year ago.

For reasons similar to those given for second quarter results, the company’s operating profit for the six months increased 4% to 228.2 billion yen, from 220.0 billion yen in the comparable period a year ago. Despite the negative effects of intensified global price competition and a stronger yen against the U.S. dollar, as well as rising prices for crude oil and other raw materials, this result was due primarily to comprehensive cost reduction activities including materials costs and fixed costs, and sales gains in real terms excluding specific factors such as the effects of JVC. In other income (deductions), the company incurred less expenses associated with the implementation of early retirement programs compared with a year ago. These and other factors resulted in pre-tax income of 203.3 billion yen, up 8% from 187.6 billion yen in the same period a year ago. Net income increased 22% to 128.5 billion yen, as compared with 105.1 billion yen in the six months of the previous year. The company’s net income per common share was 61.58 yen on a diluted basis, versus 49.32 yen in the six months of last year.

Consolidated Six-month Sales Breakdown by Product Category

The company’s six-month consolidated sales by product category, as compared with prior year amounts, are summarized as follows:

Digital AVC Networks(4)

Digital AVC Networks sales increased 3% to 1,969.0 billion yen, from 1,920.2 billion yen in last year’s six months. Sales of video and audio equipment increased 14% from the previous year’s six months, due mainly to favorable sales in digital AV products such as flat-panel TVs and DVD recorders.

In information and communications equipment, sluggish sales of automotive electronics led to a 6% decrease overall.

Home Appliances

Sales of Home Appliances increased 2% to 654.1 billion yen, compared with 641.8 billion yen in last year’s six months, due mainly to steady sales of air conditioners and refrigerators.

MEW and PanaHome(5)

Sales of MEW and PanaHome decreased 1% to 837.2 billion yen, from 849.1 billion yen last year. At Matsushita Electric Works, Ltd. (MEW)(6) and its subsidiaries, sales decreased mainly in home appliances such as health enhancing products. At PanaHome Corporation and its subsidiaries, sluggish housing market conditions led to a decrease in sales.

Components and Devices

Sales of Components and Devices were down 8% to 541.9 billion yen, compared with 586.0 billion yen in the same period of the previous year. Sluggish sales in general electronic components and batteries led to an overall decrease in sales.

Other

Sales of Other totaled 341.5 billion yen, down 2% from 347.7 billion yen in the same period a year ago, due mainly to a sales decline in factory automation equipment within this category.

(4) From fiscal 2009, the name of “AVC Networks” was changed to “Digital AVC Networks.”

(5) The name of “MEW and PanaHome” was as of September 30, 2008.

(6) From October 1, 2008, the name of Matsushita Electric Works, Ltd. (MEW) was changed to Panasonic Electric Works, Ltd. (PEW).

Consolidated Financial Condition

Net cash provided by operating activities in the fiscal 2009 six months ended September 30, 2008 amounted to 136.3 billion yen. Despite an increase of inventories, this result was due mainly to cash inflows from net income and depreciation. Net cash used in investing activities amounted to 270.0 billion yen. This was due primarily to capital expenditures for tangible fixed assets, mainly consisting of manufacturing facilities for priority business areas such as plasma and liquid crystal display panels, and semiconductors. Net cash used in financing activities was 117.0 billion yen. Major factors included the repurchase of the company’s common stock and the payment of cash dividends. All these activities resulted in cash and cash equivalents of 973.1 billion yen at the end of the second quarter of fiscal 2009, down 241.7 billion yen from the end of the last fiscal year (March 31, 2008).

The company’s consolidated total assets as of September 30, 2008 amounted to 7,299.4 billion yen, a decrease of 144.2 billion yen as compared with the end of the last fiscal year. Although inventories increased as a result of seasonal factors, this result was due primarily to a decrease of cash and cash equivalents. Stockholders’ equity decreased 62.8 billion yen, as compared with the end of the last fiscal year, to 3,679.5 billion yen as of September 30, 2008. This was due mainly to a decrease in other comprehensive income and an increase in treasury stock on continued repurchases of the company’s own shares, despite increases in retained earnings.

Interim and Year-end Dividend

The Board of Directors of the company resolved today to distribute an interim (semiannual) cash dividend of 22.5 yen per common share to shareholders of record as of September 30, 2008, payable November 28, 2008. This is an increase from last year’s interim dividend of 17.5 yen. The company also plans to distribute a year-end cash dividend of 22.5 yen per common share (payable to shareholders of record as of March 31, 2009). If implemented, total dividends for fiscal 2009, including the aforementioned interim dividend of 22.5 yen per common share, will be 45.0 yen per common share.

Outlook for the Full Fiscal Year 2009

Current financial crisis originating in the United States is widespread globally and there are sharp fluctuations in exchange rates and stock prices. Under these circumstances, the company expects the outlook of the business environment for the fiscal year’s third quarter onward to be uncertain, with concerns about the weak real economy. Accordingly, the forecast for the full fiscal year 2009, ending March 31, 2009, remains unchanged at this time from the forecast announced on April 28, 2008. The company will review the outlook for the full year, and make determinations regarding a possible revision at the announcement of third quarter financial results.

Panasonic Corporation, best known for its Panasonic brand products, is one of the world’s leading manufacturers of electronic and electric products for consumer, business and industrial use. Panasonic’s shares are listed on the Tokyo, Osaka, Nagoya and New York stock exchanges.

For more information, please visit the following web sites:

Panasonic home page URL: http://panasonic.net/

Panasonic IR web site URL: http://panasonic.net/ir/

Disclaimer Regarding Forward-Looking Statements

This press release includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) about Panasonic and its Group companies (the Panasonic Group). To the extent that statements in this press release do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of the Panasonic Group in light of the information currently available to it, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause the Panasonic Group’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Panasonic undertakes no obligation to publicly update any forward-looking statements after the date of this press release. Investors are advised to consult any further disclosures by Panasonic in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934.

The risks, uncertainties and other factors referred to above include, but are not limited to, economic conditions, particularly consumer spending and corporate capital expenditures in the United States, Europe, Japan, China and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; currency rate fluctuations, notably between the yen, the U.S. dollar, the euro, the Chinese yuan, Asian currencies and other currencies in which the Panasonic Group operates businesses, or in which assets and liabilities of the Panasonic Group are denominated; the ability of the Panasonic Group to respond to rapid technological changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both price and technology; the ability of the Panasonic Group to achieve its business objectives through joint ventures and other collaborative agreements with other companies; the ability of the Panasonic Group to maintain competitive strength in many product and geographical areas; the possibility of incurring expenses resulting from any defects in products or services of the Panasonic Group; the possibility that the Panasonic Group may face intellectual property infringement claims by third parties; current and potential, direct and indirect restrictions imposed by other countries over trade, manufacturing, labor and operations; fluctuations in market prices of securities and other assets in which the Panasonic Group has holdings or changes in valuation of long-lived assets, including property, plant and equipment and goodwill, deferred tax assets and uncertain tax positions; future changes or revisions to accounting policies or accounting rules; as well as natural disasters including earthquakes and other events that may negatively impact business activities of the Panasonic Group. The factors listed above are not all-inclusive and further information is contained in Panasonic’s latest annual report on Form 20-F, which is on file with the U.S. Securities and Exchange Commission.

  Panasonic Corporation Consolidated Statement of Income * ---------------------------------------------------------------------- (Three months ended September 30)  Yen (millions)        Percentage ----------------------- 2008        2007     2008/2007 ----------- ----------- ----------  Net sales                                 JPY         JPY 2,191,714   2,285,800         96% Cost of sales                       (1,572,854) (1,637,523) Selling, general and administrative expenses               (500,279)   (502,174) Interest income                          7,547       8,653 Dividend income                            888         684 Interest expense                        (5,558)     (5,274) Expenses associated with the implementation of early retirement programs **              (368)    (14,854) Other Income (loss), net               (37,049)    (31,639) ----------- ----------- Income before income taxes              84,041     103,673         81%  Provision for income taxes             (23,765)    (28,868) Minority interests                      (7,955)     (6,800) Equity in earnings (losses) of associated companies                     3,140      (2,197) ----------- ----------- Net income                          JPY 55,461  JPY 65,808         84% =========== ===========  Net income, basic per common share                     26.72 yen   30.99 yen per ADS                              26.72 yen   30.99 yen Net income, diluted per common share                            --   30.99 yen per ADS                                     --   30.99 yen  (Parentheses indicate expenses, deductions or losses.)  * ** See Notes to consolidated financial statements on pages 15-16.   Supplementary Information ---------------------------------------------------------------------- (Three months ended September 30) Yen (millions) ---------------------- 2008        2007 ----------  ----------  Depreciation (tangible assets)      JPY 84,868  JPY 71,601 Capital investment ***                    JPY         JPY 137,175     130,389 R&D expenditures                          JPY         JPY 134,068     141,013  Number of employees (Sep. 30)          313,594     309,037  *** These figures are calculated on an accrual basis.  

 Panasonic Corporation Consolidated Statement of Income * ---------------------------------------------------------------------- (Six months ended September 30)  Yen (millions)        Percentage ----------------------- 2008        2007     2008/2007 ----------- ----------- ----------  Net sales                                 JPY         JPY 4,343,711   4,525,305         96% Cost of sales                       (3,098,704) (3,225,568) Selling, general and administrative expenses             (1,016,853) (1,079,743) Interest income                         14,745      17,315 Dividend income                          6,231       5,568 Interest expense                       (11,314)    (10,580) Expenses associated with the implementation of early retirement programs **              (593)    (15,839) Other Income (loss), net               (33,927)    (28,817) ----------- ----------- Income before income taxes             203,296     187,641        108%  Provision for income taxes             (66,177)    (70,864) Minority interests                     (12,104)     (5,012) Equity in earnings (losses) of associated companies                     3,477      (6,643) ----------- ----------- Net income                                JPY         JPY 128,492     105,122        122% =========== ===========  Net income, basic per common share                     61.58 yen   49.32 yen per ADS                              61.58 yen   49.32 yen Net income, diluted per common share                     61.58 yen   49.32 yen per ADS                              61.58 yen   49.32 yen  (Parentheses indicate expenses, deductions or losses.)  * ** See Notes to consolidated financial statements on pages 15-16.   Supplementary Information ---------------------------------------------------------------------- (Six months ended September 30) Yen (millions) ---------------------- 2008        2007 ----------  ---------- Depreciation (tangible assets)            JPY         JPY 165,979     136,500 Capital investment ***                    JPY         JPY 239,857     217,162 R&D expenditures                          JPY         JPY 265,142     279,916  Number of employees (Sep. 30)          313,594     309,037  *** These figures are calculated on an accrual basis.  

 Panasonic Corporation Consolidated Balance Sheet ** ---------------------------------------------------------------------- September 30, 2008 With comparative figures for March 31, 2008  Yen (millions) ----------------------- Assets                                         Sept. 30,   March 31, 2008        2008 ---------------------------------------------- ----------- ----------- Current assets: Cash and cash equivalents                           JPY         JPY 973,133   1,214,816 Time deposits                                     98,867      70,108 Short-term investments                            17,374      47,414 Trade receivables: Notes                                            60,490      59,060 Accounts                                      1,017,179   1,046,991 Allowance for doubtful receivables              (22,020)    (20,868) Inventories                                      999,454     864,264 Other current assets                             507,467     517,409 ----------- ----------- Total current assets                            3,651,944   3,799,194 ----------- ----------- Investments and advances                          777,983     842,156 Property, plant and equipment, net of accumulated depreciation                 1,840,318   1,757,373 Other assets                                    1,029,134   1,044,891 ----------- ----------- Total assets                                         JPY         JPY 7,299,379   7,443,614 =========== ===========  Liabilities, Minority Interests and Stockholders' Equity ---------------------------------------------------------------------- Current liabilities: Short-term borrowings                               JPY         JPY 157,828     156,260 Trade payables: Notes                                            40,924      37,175 Accounts                                        887,874     903,379 Other current liabilities                      1,361,630   1,464,145 ----------- ----------- Total current liabilities                       2,448,256   2,560,959 ----------- ----------- Noncurrent liabilities: Long-term debt                                   262,152     232,346 Other long-term liabilities                      398,292     393,360 ----------- ----------- Total noncurrent liabilities                      660,444     625,706 ----------- -----------  Minority interests                                511,145     514,620  Common stock                                      258,740     258,740 Capital surplus                                 1,217,901   1,217,865 Legal reserve                                      92,262      90,129 Retained earnings                               3,033,928   2,948,065 Accumulated other comprehensive income (loss) *                    (253,215)   (173,897) Treasury stock                                   (670,082)   (598,573) ----------- ----------- Total stockholders' equity                      3,679,534   3,742,329 ----------- ----------- Total liabilities, minority interests and            JPY         JPY stockholders' equity                            7,299,379   7,443,614 =========== ===========  * Accumulated other comprehensive income (loss) breakdown:  Yen (millions) ----------------------- Sept. 30,   March 31, 2008        2008 ----------- ----------- Cumulative translation adjustments                  JPY         JPY (213,054)   (228,792) Unrealized holding gains of available-for-sale securities                      20,244      45,442 Unrealized gains of derivative instruments                              4,475       4,326 Pension liability adjustments                     (64,880)      5,127  ** See Notes to consolidated financial statements on pages 15-16.  

 Panasonic Corporation Consolidated Sales Breakdown * ---------------------------------------------------------------------- (Three months ended September 30)  Yen (billions)      Percentage ------------------- 2008      2007      2008/2007 --------- --------- ----------- Digital AVC Networks -------------------------------------- Video and audio equipment             JPY 496.4 JPY 445.3        111%  Information and communications equipment                                 497.2     550.2         90% --------- ---------  Subtotal                                  993.6     995.5        100% --------- ---------  Home Appliances                            311.3     301.9        103% -------------------------------------- --------- ---------  MEW and PanaHome                           448.1     463.4         97% -------------------------------------- --------- ---------  Components and Devices                     272.6     301.3         90% -------------------------------------- --------- ---------  Other                                      166.1     178.5         93% -------------------------------------- --------- ---------  JVC                                           --      45.2         -- -------------------------------------- --------- ---------  Total                                       JPY       JPY 2,191.7   2,285.8         96% ========= =========  Domestic sales                          1,065.4   1,109.8         96%  Overseas sales                          1,126.3   1,176.0         96%  (Six months ended September 30)  Yen (billions)      Percentage ------------------- 2008      2007      2008/2007 --------- --------- ----------- Digital AVC Networks -------------------------------------- Video and audio equipment             JPY 962.7 JPY 847.7        114%  Information and communications equipment                               1,006.3   1,072.5         94% --------- ---------  Subtotal                                1,969.0   1,920.2        103% --------- ---------  Home Appliances                            654.1     641.8        102% -------------------------------------- --------- ---------  MEW and PanaHome                           837.2     849.1         99% -------------------------------------- --------- ---------  Components and Devices                     541.9     586.0         92% -------------------------------------- --------- ---------  Other                                      341.5     347.7         98% -------------------------------------- --------- ---------  JVC                                           --     180.5         -- -------------------------------------- --------- ---------  Total                                       JPY       JPY 4,343.7   4,525.3         96% ========= =========  Domestic sales                          2,110.6   2,187.8         96%  Overseas sales                          2,233.1   2,337.5         96%  * See Notes to consolidated financial statements on pages 15-16.  

 Panasonic Corporation Consolidated Sales Breakdown * ---------------------------------------------------------------------- (Six months ended September 30)   (Overseas Sales by Region)                        Yen (billions)        Percentage ---------------------- 2008        2007      2008/2007 ----------- ----------  -----------  North and South America                 JPY 584.6  JPY 658.0      89% Europe                       575.4      604.9      95% Asia and China             1,073.1    1,074.6     100% ----------- ---------- Total                                    JPY JPY 2,233.1    2,337.5      96% =========== ==========   (Domestic/Overseas Sales Breakdown)  Domestic sales          Overseas sales Yen                     Yen (billions) Percentage   (billions)  Percentage -----------             ----------- 2008     2008/2007      2008      2008/2007 ----------- ----------  -----------  ---------- Digital AVC Networks ---------------------- Video and audio equipment               JPY 257.7    114%       JPY 705.0     113%  Information and communications equipment                   481.4    95%            524.9     93% -----------             -----------  Subtotal                    739.1    101%         1,229.9     104% -----------             -----------  Home Appliances              340.6    102%           313.5     101% ---------------------- -----------             -----------  MEW and PanaHome             662.2    96%            175.0     111% ---------------------- -----------             -----------  Components and Devices       181.3    93%            360.6     92% ---------------------- -----------             -----------  Other                        187.4    99%            154.1     97% ---------------------- -----------             -----------  Total                  JPY 2,110.6    96%      JPY 2,233.1     96% ===========             ===========  * See Notes to consolidated financial statements on pages 15-16.  

 Panasonic Corporation Consolidated Information by Business Segment * ---------------------------------------------------------------------- (Six months ended September 30)  By Business Segment: ---------------------------------------  Yen (billions)    Percentage ------------------- (Sales)                                   2008      2007    2008/2007 --------  --------  ----------  Digital AVC Networks                        JPY       JPY 2,102.9   2,059.6        102% Home Appliances                            685.5     667.0        103% MEW and PanaHome                           928.7     937.2         99% Components and Devices                     670.2     712.3         94% Other                                      598.6     542.3        110% JVC                                           --     183.1         -- --------- --------- Subtotal                               4,985.9   5,101.5         98% Eliminations                              (642.2)   (576.2)        -- --------- --------- Consolidated total                          JPY       JPY 4,343.7   4,525.3         96% ========= =========  (Segment Profit)**  Digital AVC Networks                        JPY       JPY 102.8     110.1         93% Home Appliances                             46.9      37.3        126% MEW and PanaHome                            35.8      41.1         87% Components and Devices                      49.0      49.5         99% Other                                       28.8      34.9         82% JVC                                           --      (9.7)        -- --------- --------- Subtotal                                 263.3     263.2        100% Corporate and eliminations                 (35.1)    (43.2)        -- --------- --------- Consolidated total                          JPY       JPY 228.2     220.0        104% ========= =========   * ** See Notes to consolidated financial statements on pages 15-16.  

 (For Reference) Panasonic Corporation Consolidated Information by Business Field (unreviewed) * --------------------------------------------------------------------- (Six months ended September 30, 2008)  By Business Field**: --------------------------------------------------------- Yen (billions) ------------ (Sales)                                                      2008 -----------  Digital AVC Networks Solution                             JPY 2,102.9 Solutions for the Environment and Comfortable Living          1,614.2 Devices and Industry Solution                                 1,268.8 ------------ Subtotal                                                4,985.9 Eliminations                                                   (642.2) ------------ Consolidated total                                        JPY 4,343.7 ============   (Business Field Profit)***  Digital AVC Networks Solution                               JPY 102.8 Solutions for the Environment and Comfortable Living             82.7 Devices and Industry Solution                                    77.8 ------------ Subtotal                                                  263.3 Corporate and eliminations                                      (35.1) ------------ Consolidated total                                          JPY 228.2 ============  * *** See Notes to consolidated financial statements on pages 15-16. ** For definition of business fields of the Group, see Note 9 of Notes to consolidated financial statements on page 16.  

 Panasonic Corporation Consolidated Statement of Cash Flows * ---------------------------------------------------------------------- (Six months ended September 30)  Yen (millions) --------------------- Cash flows from operating activities:             2008        2007 ----------------------------------------------- ---------  ---------- Net income                                         JPY         JPY 128,492     105,122 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization               185,160     155,982 Net (gain) loss on sale of investments       (5,836)     (2,446) Minority interests                           12,104       5,012 (Increase) decrease in trade receivables     25,203     (16,878) (Increase) decrease in inventories         (135,804)    (84,362) Increase (decrease) in trade payables        26,216      10,416 Increase (decrease) in retirement and severance benefits                      (54,997)    (62,747) Other                                       (44,274)     71,590 ---------- ----------- Net cash provided by operating activities      JPY         JPY 136,264     181,689 ========== ===========  Cash flows from investing activities: ---------------------------------------------------------------------- (Increase) decrease in short-term investments        --         697 Proceeds from disposition of investments and advances                                     83,944      88,063 Increase in investments and advances            (25,579)    (92,141) Capital expenditures                           (271,773)   (219,019) Proceeds from sale of fixed assets               14,331     123,335 (Increase) decrease in time deposits            (47,548)    188,187 Purchase of shares of a newly consolidated subsidiary                                          --     (50,465) Other                                           (23,342)    (23,140) ---------- ----------- Net cash provided by (used in) investing      JPY activities                                (269,967) JPY 15,517 ========== ===========  Cash flows from financing activities: ---------------------------------------------------------------------- Increase (decrease) in short-term borrowings     (8,479)    (21,546) Increase (decrease) in deposits and advances from employees                             (37)        (44) Increase (decrease) in long-term debt            13,029     (20,613) Dividends paid                                  (36,769)    (32,194) Dividends paid to minority interests            (13,270)    (10,783) (Increase) decrease in treasury stock           (71,473)    (61,629) Proceeds from issuance of shares by subsidiaries                                        --      39,866 ---------- ----------- Net cash used in financing activities         JPY         JPY (116,999)   (106,943) ========== ===========  Effect of exchange rate changes on cash and cash equivalents                                9,019     (10,944) ---------- ----------- Effect of changes in consolidated subsidiaries         --     (93,441) Net increase (decrease) in cash and cash equivalents                                     (241,683)    (14,122) Cash and cash equivalents at beginning of period                                         1,214,816   1,236,639 ---------- ----------- Cash and cash equivalents at end of period           JPY         JPY 973,133   1,222,517 ========== ===========   * See Notes to consolidated financial statements on pages 15-16.  

Notes to consolidated financial statements:

1. The company’s consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP).

2. In order to be consistent with generally accepted financial reporting practices in Japan, operating profit is presented as net sales less cost of sales and selling, general and administrative expenses. The company believes that this is useful to investors in comparing the company’s financial results with those of other Japanese companies. Please refer to the accompanying consolidated statement of income and Note 5 for U.S. GAAP reconciliation.

3. The company changed the measurement date to March 31 for those postretirement benefit plans with a December 31 measurement date in conformity with the provisions regarding the change in the measurement date of postretirement benefit plan of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statement No. 87, 88, 106, and 132(R).” With the change in the measurement date, beginning fiscal 2009 balance of “retained earnings” and pension liability adjustments of “accumulated other comprehensive income (loss)” has been reduced by 3,727 million yen and 73,571 million yen, respectively.

4. Comprehensive income was reported as a gain of 122,745 million yen for the six months ended September 30, 2008. Comprehensive income includes net income and increases (decreases) in accumulated other comprehensive income (loss) for this period.

5. Under U.S. GAAP, expenses associated with the implementation of early retirement programs at certain domestic and overseas companies are included as part of operating profit in the statement of income.

6. Victor Company of Japan, Ltd. (JVC) issued and allocated new shares of common stock to third parties on August 10, 2007 for a cash consideration of 35 billion yen. As a result, the company’s shareholding in JVC decreased from 52.4% to 36.8%. JVC and its subsidiaries became associated companies under the equity method from consolidated subsidiaries from August 2007. JVC and Kenwood Corporation integrated management by establishing JVC KENWOOD Holdings, Inc. (JVC KENWOOD HD) as of October 1, 2008 through a share transfer. The company has 24.4% of total issued shares of JVC KENWOOD HD. JVC KENWOOD HD and its subsidiaries became associated companies under the equity method from October 1, 2008.

7. Regarding consolidated segment profit, expenses for basic research and administrative expenses at the corporate headquarters level are treated as unallocatable expenses for each business segment, and are included in Corporate and eliminations.

8. The company’s business segments are classified according to a business domain-based management system, which focuses on global consolidated management by each business domain, in order to ensure consistency of its internal management structure and disclosure. The company has changed the transaction between Global Procurement Service Company and other segments since April 1, 2008. Accordingly, segment information for Other and Corporate and eliminations of fiscal 2008 has been reclassified to conform to the presentation for fiscal 2009.

Principal internal divisional companies or units and subsidiaries operating in respective segments as of September 30, 2008 are as follows:

Digital AVC Networks

Panasonic AVC Networks Company, Panasonic Communications Co., Ltd.,

Panasonic Mobile Communications Co., Ltd., Panasonic Automotive Systems Company,

Panasonic System Solutions Company, Panasonic Shikoku Electronics Co., Ltd.

Home Appliances

Matsushita Home Appliances Company, Lighting Company,

Matsushita Ecology Systems Co., Ltd.

MEW and PanaHome

Matsushita Electric Works, Ltd., PanaHome Corporation

Components and Devices

Semiconductor Company, Matsushita Battery Industrial Co., Ltd.,

Panasonic Electronic Devices Co., Ltd., Motor Company

Other

Panasonic Factory Solutions Co., Ltd., Matsushita Welding Systems Co., Ltd.

From fiscal 2009, the name of “AVC Networks” was changed to “Digital AVC Networks.”

9. In a new phase of further growth, Panasonic has been accelerating initiatives to achieve global excellence. From fiscal 2009 onward, in order to further clarify its business fields for investors, Panasonic discloses three new business fields of the group which consist of five segments as shown below. Sales and profits by business fields are calculated as the simple total of business segments making up each business field.

Digital AVC Networks Solution

Digital AVC Networks

Solutions for the Environment and Comfortable Living

Home Appliances, MEW and PanaHome

Devices and Industry Solution

Components and Devices, Other

10. Number of consolidated companies: 537 (including parent company)

11. Number of companies reflected by the equity method: 137

  Supplemental Consolidated Financial Data for Fiscal 2009 Second Quarter and Six Months ended September 30, 2008  1. Sales breakdown ---------------------------------------------------------------------- yen (billions) ====================================================================== Total ---------------------- Fiscal 2009                                 Local Second Quarter                         09/08 currency basis 09/08 ====================================================================== Video and Audio Equipment       496.4  111%     116% --------------------------------------- Information and             497.2   90%      94% Communications Equipment --------------------------------------- Digital AVC Networks        993.6  100%     104% ---------------------------------------------------------------------- Home Appliances      311.3  103%     106% ---------------------------------------------------------------------- MEW and PanaHome        448.1   97%      98% ---------------------------------------------------------------------- Components and Devices         272.6   90%      93% ---------------------------------------------------------------------- Other            166.1   93%      94% ====================================================================== Total          2,191.7   96%      99% ======================================================================   Supplemental Consolidated Financial Data for Fiscal 2009 Second Quarter and Six Months ended September 30, 2008  1. Sales breakdown ---------------------------------------------------------------------- yen (billions) ====================================================================== Domestic           Overseas ------------- ---------------------- Fiscal 2009                                          Local Second Quarter                   09/08         09/08 currency basis 09/08 ====================================================================== Video and Audio Equipment        125.9  112%   370.5  111%     117% ---------------------------------------------------- Information and              232.7   91%   264.5   90%      96% Communications Equipment ---------------------------------------------------- Digital AVC Networks         358.6   97%   635.0  101%     107% ---------------------------------------------------------------------- Home Appliances       167.4  105%   143.9  101%     107% ---------------------------------------------------------------------- MEW and PanaHome         357.7   95%    90.4  106%     113% ---------------------------------------------------------------------- Components and Devices           89.2   90%   183.4   91%      95% ---------------------------------------------------------------------- Other              92.5  100%    73.6   86%      89% ====================================================================== Total           1,065.4   96% 1,126.3   96%     101% ====================================================================== 

 yen (billions) ====================================================================== Total ---------------------- Fiscal 2009 Six Months                            Local ended September 30, 2008                    09/08 currency basis 09/08 ====================================================================== Video and Audio Equipment                     962.7  114%     119% ---------------------------------------------------------------------- Information and                             1,006.3   94%      98% Communications Equipment ---------------------------------------------------------------------- Digital AVC Networks                        1,969.0  103%     107% ---------------------------------------------------------------------- Home Appliances                               654.1  102%     106% ---------------------------------------------------------------------- MEW and PanaHome                              837.2   99%     100% ---------------------------------------------------------------------- Components and Devices                        541.9   92%      97% ---------------------------------------------------------------------- Other                                         341.5   98%     100% ====================================================================== Total                                       4,343.7   96%      99% ====================================================================== Note: The name of "AVC Networks" was changed to "Digital AVC Networks" from fiscal 2009. The name of "MEW and PanaHome" was as of September 30, 2008.  yen (billions) ====================================================================== Domestic           Overseas ------------- ---------------------- Fiscal 2009 Six Months                                    Local ended September 30, 2008              09/08         09/08 currency basis 09/08 ====================================================================== Video and Audio Equipment         257.7  114%   705.0  113%     120% ---------------------------------------------------------------------- Information and                   481.4   95%   524.9   93%     101% Communications Equipment ---------------------------------------------------------------------- Digital AVC Networks              739.1  101% 1,229.9  104%     111% ---------------------------------------------------------------------- Home Appliances                   340.6  102%   313.5  101%     109% ---------------------------------------------------------------------- MEW and PanaHome                  662.2   96%   175.0  111%     120% ---------------------------------------------------------------------- Components and Devices            181.3   93%   360.6   92%      98% ---------------------------------------------------------------------- Other                             187.4   99%   154.1   97%     101% ====================================================================== Total                           2,110.6   96% 2,233.1   96%     102% ====================================================================== Note: The name of "AVC Networks" was changed to "Digital AVC Networks" from fiscal 2009. The name of "MEW and PanaHome" was as of September 30, 2008. 

  2. Overseas Sales by Region ---------------------------------------------------------------------- yen (billions) ====================================================================== Fiscal 2009 Second    Fiscal 2009 Six Months Quarter         ended September 30, 2008 ---------------------- ---------------------- Local                  Local 09/08 currency         09/08 currency basis                  basis 09/08                  09/08 ====================================================================== North and South America   298.2   90%      98%   584.6   89%      99% ---------------------------------------------------------------------- Europe                    281.7   97%     101%   575.4   95%      98% ---------------------------------------------------------------------- Asia                      273.4   92%      99%   540.8   93%     101% ---------------------------------------------------------------------- China                     273.0  106%     108%   532.3  108%     112% ====================================================================== Total                   1,126.3   96%     101% 2,233.1   96%     102% ====================================================================== 

  3. Sales by Products ---------------------------------------------------------------------- (Consolidated)                                          yen (billions) ====================================================================== Fiscal 2009 ----------------------- Product Category           Products                  Six Months Second      ended Quarter    September 30 ----------------------- Sales 09/08 Sales 09/08 ====================================================================== VCRs         24.5   86%  49.3   88% ------------------------------------------ Digital cameras   62.7   95% 127.7  102% ------------------------------------------ TVs        295.8  124% 565.5  125% ----------------------------------------- Plasma TVs     168.9  115% 318.4  116% ----------------------------------------- LCD TVs      102.9  164% 198.8  166% ------------------------------------------ Digital AVC Networks          DVD recorders    32.6  115%  64.3  114% ------------------------------------------ Audio equipment   26.5   76%  52.3   81% ------------------------------------------ Information equipment     335.9   89% 660.4   91% ------------------------------------------ Communications equipment     161.3   94% 345.9  100% ----------------------------------------- Mobile communications equipment      74.8   97% 179.0  109% ====================================================================== Air conditioners   62.8  108% 163.4  103% Home Appliances            ------------------------------------------ Refrigerators    32.1  100%  63.2  103% ====================================================================== General components    103.2   88% 208.8   90% Components and Devices     ------------------------------------------ Semiconductors *  121.8  103% 244.0  106% ------------------------------------------ Batteries      80.4   95% 152.4   95% ====================================================================== Other                         FA equipment     45.9   73% 102.5   89% ====================================================================== * Information for semiconductors is on a production basis. Note: The name of "AVC Networks" was changed to "Digital AVC Networks" from fiscal 2009. 

  4. Segment Information ---------------------------------------------------------------------- (Consolidated) ====================================================================== Fiscal 2009 Second Quarter ================================== = Sales  09/08 Segment % of   09/08 Profit   sales ====================================================================== Digital AVC Networks              1,056.5   99%    47.8   4.5%   67% ---------------------------------------------------------------------- Home Appliances                     333.4  105%    15.4   4.6%   80% ---------------------------------------------------------------------- MEW and PanaHome                    495.9   98%    25.3   5.1%   81% ---------------------------------------------------------------------- Components and Devices              335.7   92%    29.5   8.8%   95% ---------------------------------------------------------------------- Other                               309.2  110%    14.9   4.8%   70% ====================================================================== Total                             2,530.7   98%   132.9   5.3%   78% ====================================================================== Corporate and eliminations         -339.0     -   -14.3      -     - ====================================================================== Consolidated total                2,191.7   96%   118.6   5.4%   81% ====================================================================== Note: The name of "AVC Networks" was changed to "Digital AVC Networks" from fiscal 2009. The name of "MEW and PanaHome" was as of September 30, 2008.   4. Segment Information ---------------------------------------------------------------------- (Consolidated)                                          yen (billions) ====================================================================== Fiscal 2009 Six Months ended September 30 =================================== Sales  09/08 Segment % of   09/08 Profit   sales ====================================================================== Digital AVC Networks                2,102.9  102%   102.8   4.9%   93% ---------------------------------------------------------------------- Home Appliances                       685.5  103%    46.9   6.8%  126% ---------------------------------------------------------------------- MEW and PanaHome                      928.7   99%    35.8   3.9%   87% ---------------------------------------------------------------------- Components and Devices                670.2   94%    49.0   7.3%   99% ---------------------------------------------------------------------- Other                                 598.6  110%    28.8   4.8%   82% ====================================================================== Total                               4,985.9   98%   263.3   5.3%  100% ====================================================================== Corporate and eliminations           -642.2     -   -35.1      -     - ====================================================================== Consolidated total                  4,343.7   96%   228.2   5.3%  104% ====================================================================== Note: The name of "AVC Networks" was changed to "Digital AVC Networks" from fiscal 2009. The name of "MEW and PanaHome" was as of September 30, 2008. 

  5. Financial data for the primary domain companies ---------------------------------------------------------------------- (Business domain company basis)  (Sales, Domain company profit (production division basis), and Capital Investment * )  yen Fiscal 2009 Second Quarter                                  (billions) ====================================================================== Sales      Domain company    Capital profit       Investment ------------- ----------------- ----------- % of 09/08      09/08  Sales       09-08 ====================================================================== Panasonic AVC Networks Company                     553.1  115% 21.5   65%   3.9%  59.2  +7.9 ---------------------------------------------------------------------- Panasonic Mobile Communications Co., Ltd.     90.4   93%  6.4  256%   7.1%   1.5  +0.5 ---------------------------------------------------------------------- Panasonic Electronic Devices Co., Ltd.           120.5   92%  8.1   71%   6.7%   9.7  +1.5 ---------------------------------------------------------------------- Factory Automation Business                     51.1   75%  5.8   49%  11.4%   0.6  -1.1 ======================================================================  yen Fiscal 2009 Six Months ended September 30, 2008             (billions) ====================================================================== Sales      Domain company    Capital profit       Investment ------------- ----------------- ----------- % of 09/08      09/08  Sales       09-08 ====================================================================== Panasonic AVC Networks Company                   1,083.0  115% 35.9   76%   3.3%  96.6 +19.6 ---------------------------------------------------------------------- Panasonic Mobile Communications Co., Ltd.    209.2  102% 21.3 2367%  10.2%   2.0  +0.5 ---------------------------------------------------------------------- Panasonic Electronic Devices Co., Ltd.           245.4   94% 17.1   83%   7.0%  19.0  +1.5 ---------------------------------------------------------------------- Factory Automation Business                    112.0   89% 15.3   70%  13.7%   1.0  -1.5 ====================================================================== * These figures are calculated on an accrual basis. Note: The name of "Panasonic AVC Networks Company" was as of September 30, 2008. 

  6. Capital Investment by segments * --------------------------------------------------------------------- (Consolidated)                                          yen (billions) ====================================================================== Six Months ended September 30, 2008 ------------------- 09-08 ====================================================================== Digital AVC Networks                           122.0    +21.9 ---------------------------------------------------------------------- Home Appliances                                 25.5     +2.9 ---------------------------------------------------------------------- MEW and PanaHome                                19.9     +1.1 ---------------------------------------------------------------------- Components and Devices **                       58.4     -8.7 ---------------------------------------------------------------------- Other                                           14.1     +8.5 ---------------------------------------------------------------------- JVC                                                -     -3.0 ---------------------------------------------------------------------- Total                                          239.9    +22.7 ====================================================================== (** semiconductors only)                               (23.3)   (-4.2) * These figures are calculated on an accrual basis. Note: The name of "AVC Networks" was changed to "Digital AVC Networks" from fiscal 2009. The name of "MEW and PanaHome" was as of September 30, 2008. 

  7. Foreign Currency Exchange Rates ---------------------------------------------------------------------- (Export Rates) ====================================================================== Fiscal 2008             Fiscal 2009 -------------------------- ------------------- Second   Six Months Full   Second   Six Months Quarter    ended    Year   Quarter    ended September                  September 30                         30 ====================================================================== U.S. Dollars                         JPY JPY 118   JPY 118     115  JPY 104   JPY 104 ---------------------------------------------------------------------- Euro                                 JPY JPY 160   JPY 159     160  JPY 160   JPY 159 ====================================================================== (Rates Used for Consolidation) ====================================================================== Fiscal 2008             Fiscal 2009 -------------------------- ------------------- Second   Six Months Full   Second   Six Months Quarter    ended    Year   Quarter    ended September                  September 30                         30 ====================================================================== U.S. Dollars                         JPY JPY 118   JPY 119     114  JPY 108   JPY 106 ---------------------------------------------------------------------- Euro                                 JPY JPY 162   JPY 162     162  JPY 162   JPY 163 ====================================================================== (Foreign Currency Transaction) *                            (billions) ====================================================================== Fiscal 2008             Fiscal 2009 -------------------------- ------------------- Second   Six Months Full   Second   Six Months Quarter    ended    Year   Quarter    ended September                  September 30                         30 ====================================================================== U.S. Dollars     US$0.6    US$1.2   US$2.5  US$1.0    US$1.5 ---------------------------------------------------------------------- Euro                                 EUR EUR 0.3   EUR 0.6     1.2  EUR 0.4   EUR 0.8 ====================================================================== * These figures are based on the net foreign exchange exposure of the company.  

 8. Number of Employees ---------------------------------------------------------------------- (Consolidated)                                               (persons) ====================================================================== End of    End of  End of   End of September  March   June    September 2007      2008    2008     2008 ====================================================================== Domestic                   136,663   135,563 134,950  134,481 ---------------------------------------------------------------------- Overseas                   172,374   170,265 175,631  179,113 ====================================================================== Total                      309,037   305,828 310,581  313,594 ======================================================================  

Quarterly segment information for the past two years is shown on the company’s website (http://panasonic.net/ir/).




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