Matsushita Reports Gains in Third Quarter Financial Results; Full-year

Matsushita Reports Gains in Third Quarter Financial Results; Full-year Operating Profit Forecast Revised Upward

    Business Editors

    OSAKA, Japan--(BUSINESS WIRE)--Feb. 4, 2005--

(Note: Dollar amounts for the most recent period have been translated for convenience at the rate of U.S.$1.00 = 104 yen.)
    Matsushita Electric Industrial Co., Ltd. (Matsushita (NYSE symbol: MC)) today reported its consolidated financial results for the third quarter and nine months, ended December 31, 2004, of the current fiscal year ending March 31, 2005 (fiscal 2005).

    Consolidated Third-quarter Results(1)

    Consolidated group sales for the third quarter increased 13% to 2,296.5 billion Yen (U.S.$22.08 billion), from 2,031.3 billion yen in the same three-month period a year ago. Explaining third quarter results, the company cited sales gains in digital audiovisual (AV) products, especially "V-products," increased sales in Home Appliances, and the addition of MEW, PanaHome and their respective subsidiaries to the company's consolidated financial results. Sales declines, however, were recorded in information and communications equipment, Components and Devices, and JVC. Of the consolidated group total, domestic sales increased 28% to 1,189.0 billion yen ($11.43 billion). Overseas sales edged up 1% to 1,107.5 billion yen ($10.65 billion). Excluding the effects of currency translation, overseas sales increased 1% from a year ago on a local currency basis(2).
    During the third quarter under review, the overall economic situation in Japan remained stable, despite lingering negative factors including a strong yen, mainly against the U.S. dollar, rising oil and raw materials prices, downturns in the information technology (IT) and components and devices industries, as well as slowed exports. Global economies, however, were characterized by generally slow conditions, although the U.S. economy showed modest progress, and China also continued an upward trend, supported by domestic consumer spending.
    During the third quarter of fiscal 2005, Matsushita continued to implement initiatives relating to product competitiveness, enhanced profitability and strengthened overseas businesses, all aimed at achieving global excellence and sustainable growth. In particular, Matsushita further augmented its line of competitive V-products that feature proprietary "black-box" technologies, incorporate universal design concepts and are environmentally friendly. Matsushita also strengthened its overall management structure through sweeping cost reduction activities and proactive business restructuring. Furthermore, management maintained a high priority on the improvement of cash flows, focusing on the reduction of total assets, particularly inventories.
    As part of its comprehensive collaboration activities with MEW, the two companies unified brands and product designs, opened new product showrooms and announced "Collaboration V-products," which utilize the respective strengths of both companies. In addition, Matsushita and MEW will integrate overlapping businesses in the areas of electrical supplies, building materials and equipment, and home appliances to establish an optimum organizational structure from a customer's point of view.
    Regarding earnings, negative factors such as a strong yen, increased raw materials costs and intensified global price competition were more than offset by sales gains, cost reduction efforts and other positive factors. As a result, operating profit(3) for the third quarter increased 24%, to 88.3 billion yen ($849 million), from 70.9 billion yen in the same three-month period a year ago. During the third quarter, the company incurred restructuring charges of 10.0 billion yen ($96 million) related to early retirement programs. This, and other factors, resulted in pre-tax income of 83.1 billion yen ($799 million), mostly unchanged from the third quarter of last year. Net income for the quarter totaled 35.6 billion yen ($342 million), up from 24.2 billion yen in the same quarter of the previous year. Net income per common share for the third quarter was 15.56 yen ($0.15) on a diluted basis, versus a net income per common share of 10.32 yen on the same basis a year ago.

    Consolidated Nine-month Results

    Consolidated group sales for the nine months ended December 31, 2004 increased 17% to 6,615.1 billion yen ($63.61 billion), compared with 5,671.0 billion yen in the same nine-month period a year ago. Domestic sales increased 30% to 3,391.9 billion yen ($32.62 billion), while overseas sales were up 5% to 3,223.2 billion yen ($30.99 billion). Excluding the effects of currency translation, overseas sales increased 8% from a year ago on a local currency basis.
    For reasons similar to those given for the third quarter results, the company's operating profit for the nine months increased 62% to 244.6 billion yen ($2.35 billion), from 150.5 billion yen in the comparable period a year ago. Income before income taxes for the nine-month period increased 57% to 220.4 billion yen ($2.12 billion), from 140.2 billion yen in the comparable period a year ago. Net income also improved, increasing 94% to 91.7 billion yen ($882 million), as compared with a net income of 47.4 billion yen in the same nine-month period of the previous year. This resulted in a net income per common share of 39.79 yen ($0.38) on a diluted basis, versus a net income per common share of 20.11 yen on the same basis a year ago.

    Third-quarter Sales Breakdown by Product Category

    Effective April 1, 2004, the company reclassified its previous five product categories (AVC Networks, Home Appliances, Components and Devices, JVC, and Other) into six new product categories to reflect the consolidation of MEW, PanaHome and their respective subsidiaries. The six new product categories are: AVC Networks, Home Appliances, Components and Devices, MEW and PanaHome, JVC, and Other.
    The company's third-quarter consolidated sales by reclassified product category, as compared with prior year amounts, are summarized as follows:

    AVC Networks

    AVC Networks sales decreased 5% to 966.9 billion yen ($9.30 billion), from 1,013.4 billion yen in last year's third quarter. Within this category, sales of video and audio equipment increased 4%, due mainly to strong sales of digital AV products, such as flat-panel TVs, including PDP TVs, and digital cameras, which were more than sufficient to offset sluggish sales in VCRs and audio equipment.
    Sales of information and communications equipment were down 12% due to sales declines in cellular phones and other products, although increased sales were recorded for PCs and peripherals.

    Home Appliances

    Sales of Home Appliances increased 3% to 316.5 billion yen ($3.04 billion), compared with 306.9 billion yen in the third quarter of the previous year. Although sales of seasonal products in Japan decreased due to an unusually warm winter, sales of new air conditioners, washing machines and refrigerators contributed to improved overall results.

    Components and Devices

    Sales of Components and Devices decreased 7% to 279.1 billion yen ($2.68 billion), compared with 301.4 billion yen in the same three-month period of the previous year. Although sales of batteries increased from last year's third quarter, sluggish sales of general electronic components and semiconductors resulted in overall lower sales.

    MEW and PanaHome

    Sales of MEW and PanaHome and their respective subsidiaries totaled 376.6 billion yen ($3.62 billion).

    JVC

    Sales for JVC (Victor Company of Japan, Ltd. and its subsidiaries) totaled 209.4 billion yen ($2.01 billion), down 7% from 225.9 billion yen in the third quarter of the previous year. Although sales of AV equipment increased in the Japanese domestic market, overseas sales, particularly in the Americas, declined from the previous year's third quarter. Sales decreases were also recorded in software.

    Other

    Sales for Other were down 19% to 148.0 billion yen ($1.42 billion), from 183.7 billion yen a year ago. Within this category, sluggish sales of factory automation (FA) equipment and the reclassification of MEW products (which were traditionally sold through the parent company) into a new product category resulted in the overall lower sales.

    Consolidated Financial Condition

    On a consolidated basis, total assets as of December 31, 2004 were 8,329.0 billion yen ($80.09 billion), a decrease of 76.3 billion yen from the end of the first fiscal half (September 30, 2004). This was attributable mainly to a decrease of 77.0 billion yen ($740 million) in inventories. Stockholders' equity decreased 48.9 billion yen, due mainly to repurchases of the company's own shares from the market. Consolidated total assets as of December 31, 2004 increased 891.0 billion yen as compared with the end of the previous fiscal year (March 31, 2004), due mainly to the consolidation of MEW and PanaHome.

    Outlook for the Full Fiscal Year 2005, ending March 31, 2005

    Regarding the outlook for the remainder of fiscal 2005, while the company currently expects severe conditions, including sharp price declines due to fierce competition and other negative factors, Matsushita today announced an upward revision of its operating profit forecast for the full fiscal year, ending March 31, 2005. On a consolidated basis, operating profit is now expected to increase to 300 billion yen, as compared with the previous forecast (announced on April 28, 2004) of 280 billion yen. The revised forecast for operating profit represents an increase of 53% from the previous year. Reasons given for the upward revision included strong sales of V-products, such as PDP TVs and washer/dryers, and the positive effects of cost reductions and other management initiatives. Matsushita maintained its original forecast for consolidated income before income taxes(4) of 230 billion yen. The pre-tax income forecast was left unchanged due mainly to an increase in restructuring charges from the original projection of 75 billion yen to 130 billion yen. Net income is now expected to decrease to 50 billion yen, compared with the previous forecast of 63 billion yen, considering a possible increase in tax expenses related to the re-evaluation of deferred tax assets, resulting from the aforementioned structural reforms. The new forecast for net income represents an increase of 19% compared to the previous year. Regarding net sales on a consolidated basis, Matsushita maintained its original forecast of approximately 8,800 billion yen.
    Matsushita Electric Industrial Co., Ltd., 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. Matsushita's shares are listed on the Tokyo, Osaka, Nagoya, New York, Euronext Amsterdam, and Frankfurt stock exchanges.
    For more information, please visit the following web sites:

    Matsushita home page URL: http://panasonic.co.jp/global/

    Matsushita IR web site URL: http://ir-site.panasonic.com/

    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 Matsushita and its Group companies (the Matsushita 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 Matsushita 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 Matsushita 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. Matsushita 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 Matsushita 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 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, Asian currencies and other currencies in which the Matsushita Group operates businesses, or in which assets and liabilities of the Matsushita Group are denominated; the ability of the Matsushita 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 Matsushita Group to achieve its business objectives through joint ventures and other collaborative agreements with other companies; the ability of the Matsushita Group to maintain competitive strength in many product and geographical areas; 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 Matsushita Group has holdings; 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 Matsushita Group.

    (1.) On April 1, 2004, Matsushita acquired a controlling interest in Matsushita Electric Works, Ltd. (MEW). As a result, MEW, PanaHome Corporation (PanaHome) and their respective subsidiaries became consolidated subsidiaries of the company. The current third quarter and nine-month consolidated results include the results of these subsidiaries on a full consolidated basis. For more information, see Notes 5 and 8 of Notes to consolidated financial statements on pages 14 and 15.

    (2.) Sales on a local currency basis is not a measure conforming with U.S. generally accepted accounting principles (U.S. GAAP). However, the company believes that this measure is useful to investors in promoting understanding of the company's business conditions by excluding the influence of foreign currency exchange rate fluctuations.

    (3.) For information about operating profit, see Note 2 of Notes to consolidated financial statements on page 14.

    (4.) Other income (deductions) affecting the forecast for income before income taxes consists of other income expected to amount to 60 billion yen, such as a gain from the transfer of the substitutional portion of Japanese Welfare Pension Insurance, and restructuring charges of 130 billion yen.

    (Financial Tables Attached)

Matsushita Electric Industrial Co., Ltd. Consolidated Statement of Income * (Three months ended December 31)

U.S. Yen Percentage Dollars (millions) 2004/ (millions) 2004 2003 2003 2004 ---- ---- ---- ----

Net sales Yen 2,296,525 Yen 2,031,319 113% $22,082 Cost of sales (1,631,230) (1,422,963) (15,685) Selling, general and administrative expenses (577,041) (537,420) (5,548) ------------- ------------- ------- Operating profit 88,254 70,936 124% 849

Other income (deductions): Interest income 4,644 5,018 45 Dividend income 1,466 1,459 14 Gain from the transfer of the substitutional portion of Japanese Welfare Pension Insurance -- 39,580 -- Interest expense (5,075) (6,412) (49) Restructuring charges ** (10,000) (35,919) (96) Write-down of investment securities (1,409) (13) (14) Other income (loss), net 5,210 8,328 50 ------------- ------------- ------- Income before income taxes 83,090 82,977 100% 799

Provision for income taxes (35,701) (52,030) (343) Minority interests (10,029) (6,888) (97) Equity in earnings (losses) of associated companies (1,790) 187 (17) ------------- ------------- ------- Net income Yen 35,570 Yen 24,246 147% $342 ------------- ------------- -------

Net income, basic per common share 15.56 yen 10.50 yen $0.15 per ADS 15.56 yen 10.50 yen $0.15 Net income, diluted per common share 15.56 yen 10.32 yen $0.15 per ADS 15.56 yen 10.32 yen $0.15

(Parentheses indicate expenses, deductions or losses.)

* ** See Notes to consolidated financial statements on pages 14-15.

Supplementary Information (Three months ended December 31)

U.S. Yen Dollars (millions) (millions) 2004 2003 2004 ---- ---- ---- Depreciation (tangible assets): Yen 69,370 Yen 60,669 $667 Capital investment: Yen 76,908 Yen 58,723 $740 R&D expenditures: Yen 148,649 Yen 140,555 $1,429

Number of employees (Dec. 31) 337,863 294,614

Matsushita Electric Industrial Co., Ltd. Consolidated Statement of Income * (Nine months ended December 31)

U.S. Yen Percentage Dollars (millions) 2004/ (millions) 2004 2003 2003 2004 ---- ---- ---- ----

Net sales Yen 6,615,062 Yen 5,671,007 117% $63,606 Cost of sales (4,706,826) (4,007,059) (45,258) Selling, general and administrative expenses (1,663,648) (1,513,406) (15,996) ----------- ----------- -------- Operating profit 244,588 150,542 162% 2,352

Other income (deductions): Interest income 13,762 14,827 132 Dividend income 5,374 5,017 52 Gain from the transfer of the substitutional portion of Japanese Welfare Pension Insurance 31,509 39,580 303 Interest expense (16,569) (20,300) (159) Restructuring charges ** (58,191) (36,788) (560) Write-down of investment securities (3,072) (48,024) (30) Other income (loss), net 2,962 35,377 29 ----------- ----------- -------- Income before income taxes 220,363 140,231 157% 2,119

Provision for income taxes (96,533) (74,377) (928) Minority interests (25,375) (15,104) (244) Equity in earnings (losses) of associated companies (6,706) (3,358) (65) ----------- ----------- -------- Net income Yen 91,749 Yen 47,392 194% $882 ----------- ----------- --------

Net income, basic per common share 39.79 yen 20.38 yen $0.38 per ADS 39.79 yen 20.38 yen $0.38 Net income, diluted per common share 39.79 yen 20.11 yen $0.38 per ADS 39.79 yen 20.11 yen $0.38

(Parentheses indicate expenses, deductions or losses.)

* ** See Notes to consolidated financial statements on pages 14-15.

Supplementary Information (Nine months ended December 31)

U.S. Yen Dollars (millions) (millions) 2004 2003 2004 ---- ---- ---- Depreciation (tangible assets): Yen 208,038 Yen 183,187 $2,000 Capital investment: Yen 222,551 Yen 180,603 $2,140 R&D expenditures: Yen 465,176 Yen 418,210 $4,473

Matsushita Electric Industrial Co., Ltd. Consolidated Balance Sheet ** December 31, 2004 With comparative figures for September 30, 2004

U.S. Yen Dollars (millions) (millions) Assets Dec. 31, 2004 Sept. 30, 2004 Dec. 31, 2004 ------ ------------- -------------- ------------- Current assets: Cash and cash Yen 1,255,716 Yen 1,253,608 $12,074 equivalents Time deposits 104,851 171,630 1,008 Marketable securities 8,536 7,645 82 Trade receivables (notes and accounts) and other current assets 1,867,896 1,800,993 17,961 Inventories 991,694 1,068,646 9,536 ---------- ----------- ------- Total current assets 4,228,693 4,302,522 40,661 ---------- ----------- -------

Noncurrent receivables 251,211 253,243 2,415 Investments and advances 1,154,621 1,113,505 11,102 Property, plant and equipment, net of accumulated depreciation 1,629,950 1,642,578 15,673 Other assets 1,064,566 1,093,502 10,236 ---------- ----------- ------- Total assets Yen 8,329,041 Yen 8,405,350 $80,087 ---------- ----------- -------

Liabilities and Stockholders' Equity ---------------------

Current liabilities: Short-term borrowings Yen 468,789 Yen 387,572 $4,508 Trade payables (notes and accounts) and other current liabilities 2,499,048 2,494,878 24,029 ---------- ----------- ------- Total current liabilities 2,967,837 2,882,450 28,537 ---------- ----------- ------- Long-term debt 524,462 577,688 5,043 Other long-term liabilities 795,842 866,048 7,652 Minority interests 485,241 474,572 4,666 Common stock 258,740 258,740 2,488 Capital surplus 1,230,365 1,230,315 11,830 Legal reserve 88,395 88,166 850 Retained earnings 2,493,782 2,475,725 23,979 Accumulated other comprehensive income (loss) * (285,409) (264,262) (2,744) Treasury stock (230,214) (184,092) (2,214) ---------- ----------- ------- Total liabilities and stockholders' equity Yen 8,329,041 Yen 8,405,350 $80,087 ---------- ----------- ------- * Accumulated other comprehensive income (loss) breakdown:

U.S. Yen Dollars (millions) (millions) Dec. 31, 2004 Sept. 30, 2004 Dec. 31, 2004 ------------- -------------- ------------- Cumulative translation adjustments Yen (276,372) Yen (217,897) $(2,657) Unrealized holding gains of available-for-sale securities 81,261 70,453 781 Unrealized gains of derivative instruments 4,878 4,964 47 Minimum pension liability adjustments (95,176) (121,782) (915)

** See Notes to consolidated financial statements on pages 14-15.

Matsushita Electric Industrial Co., Ltd. Consolidated Sales Breakdown *

(Three months ended December 31)

U.S. Yen Percentage Dollars (billions) 2004/ (millions) 2004 2003 2003 2004 ---- ---- ---- ---- AVC Networks ----------------- Video and audio equipment Yen 476.2 Yen 457.1 104% $4,579

Information and communications equipment 490.7 556.3 88% 4,718 --------- --------- ------- Subtotal 966.9 1,013.4 95% 9,297 --------- --------- ------- Home Appliances 316.5 306.9 103% 3,043 ----------------- --------- --------- -------

Components and Devices 279.1 301.4 93% 2,684 ----------------- --------- --------- -------

MEW and PanaHome 376.6 -- -- 3,621 ----------------- --------- --------- -------

JVC 209.4 225.9 93% 2,014 --- --------- --------- -------

Other 148.0 183.7 81% 1,423 ----- --------- --------- -------

Total Yen 2,296.5 Yen 2,031.3 113% $22,082 --------- --------- -------

Domestic sales 1,189.0 932.5 128% 11,433

Overseas sales 1,107.5 1,098.8 101% 10,649

(Nine months ended December 31)

U.S. Yen Percentage Dollars (billions) 2004/ (millions) 2004 2003 2003 2004 ---- ---- ---- ---- AVC Networks ----------------- Video and audio equipment Yen 1,208.4 Yen 1,127.0 107% $11,619

Information and communications equipment 1,504.5 1,612.9 93% 14,466 --------- --------- ------- Subtotal 2,712.9 2,739.9 99% 26,085 --------- --------- ------- Home Appliances 926.0 893.1 104% 8,904 ----------------- --------- --------- -------

Components and Devices 861.6 864.1 100% 8,285 ----------------- --------- --------- -------

MEW and PanaHome 1,088.2 -- -- 10,463 ----------------- --------- --------- -------

JVC 563.6 629.6 90% 5,419 --- --------- --------- -------

Other 462.8 544.3 85% 4,450 ----- --------- --------- -------

Total Yen 6,615.1 Yen 5,671.0 117% $63,606 --------- --------- -------

Domestic sales 3,391.9 2,608.9 130% 32,614

Overseas sales 3,223.2 3,062.1 105% 30,992

* See Notes to consolidated financial statements on pages 14-15.

(Domestic/Overseas Sales Breakdown for Three Months ended December 31, 2004) (in yen only)

Domestic sales Overseas sales Yen Percentage Yen Percentage (billions) 2004/ (billions) 2004/ 2004 2003 2004 2003

AVC Networks ----------------- Video and audio equipment Yen 154.8 113% Yen 321.4 100%

Information and communications equipment 230.8 88% 259.9 89% --------- -------

Subtotal 385.6 96% 581.3 95% --------- ------- Home Appliances 205.8 99% 110.7 112% ----------------- --------- -------

Components and Devices 114.7 91% 164.4 94% ----------------- --------- -------

MEW and PanaHome 325.4 -- 51.2 -- ----------------- --------- -------

JVC 61.0 90% 148.4 94% --- --------- -------

Other 96.5 74% 51.5 96% ----- --------- ------- Total Yen 1,189.0 128% Yen 1,107.5 101% --------- -------

(Domestic/Overseas Sales Breakdown for Nine Months ended December 31, 2004) (in yen only)

Domestic sales Overseas sales Yen Percentage Yen Percentage (billions) 2004/ (billions) 2004/ 2004 2003 2004 2003 AVC Networks ----------------- Video and audio equipment Yen 379.3 115% Yen 829.1 104%

Information and communications equipment 710.2 92% 794.3 94% --------- ------- Subtotal 1,089.5 99% 1,623.4 99% --------- -------

Home Appliances 571.8 99% 354.2 112% ----------------- --------- -------

Components and Devices 342.5 98% 519.1 101% ----------------- --------- -------

MEW and PanaHome 936.5 -- 151.7 -- ----------------- --------- -------

JVC 158.5 82% 405.1 93% --- --------- ------- Other 293.1 75% 169.7 111% ----- --------- -------

Total Yen 3,391.9 130% Yen 3,223.2 105% --------- -------

Matsushita Electric Industrial Co., Ltd. Consolidated Information by Segments * (Three months ended December 31)

By Business Segment: ---------------- U.S. Percentage Dollars Yen (billions) 2004/ (millions) (Sales) 2004 2003 2003 2004

AVC Networks Yen 1,041.0 Yen 1,068.4 97% $10,009 Home Appliances 343.8 312.6 110% 3,306 Components and Devices 356.3 432.3 82% 3,426 MEW and PanaHome 390.8 -- -- 3,758 JVC 213.4 233.3 91% 2,052 Other 250.5 238.6 105% 2,409 ----------- ----------- ------- Subtotal 2,595.8 2,285.2 114% 24,960 Eliminations (299.3) (253.9) -- (2,878) ----------- ----------- ------- Consolidated total Yen 2,296.5 Yen 2,031.3 113% $22,082 ----------- ----------- -------

(Segment Profit) **

AVC Networks Yen 25.7 Yen 33.6 77% $247 Home Appliances 21.6 20.0 108% 208 Components and Devices 9.1 13.5 67% 87 MEW and PanaHome 20.3 -- -- 195 JVC 7.2 10.0 72% 69 Other 8.9 4.3 208% 86 ----------- ----------- ------- Subtotal 92.8 81.4 114% 892 Corporate and eliminations (4.5) (10.5) -- (43) ----------- ----------- ------- Consolidated total Yen 88.3 Yen 70.9 124% $849 ----------- ----------- -------

(Nine months ended December 31)

By Business Segment: ---------------- U.S. Percentage Dollars Yen (billions) 2004/ (millions) (Sales) 2004 2003 2003 2004 ---- ---- ---- ---- AVC Networks Yen 2,924.5 Yen 2,896.3 101% $28,120 Home Appliances 1,004.2 916.5 110% 9,656 Components and Devices 1,148.7 1,258.8 91% 11,045 MEW and PanaHome 1,125.3 -- -- 10,820 JVC 573.8 642.7 89% 5,517 Other 789.8 714.7 111% 7,594 ----------- ----------- ------- Subtotal 7,566.3 6,429.0 118% 72,752 Eliminations (951.2) (758.0) -- (9,146) ----------- ----------- ------- Consolidated total Yen 6,615.1 Yen 5,671.0 117% $63,606 ----------- ----------- -------

(Segment Profit) **

AVC Networks Yen 94.0 Yen 91.8 102% $904 Home Appliances 59.4 39.1 152% 571 Components and Devices 48.6 39.3 124% 467 MEW and PanaHome 44.9 -- -- 432 JVC 11.8 20.1 59% 114 Other 25.0 11.4 219% 240 ----------- ----------- ------- Subtotal 283.7 201.7 141% 2,728 Corporate and eliminations (39.1) (51.2) -- (376) ----------- ----------- ------- Consolidated total Yen 244.6 Yen 150.5 162% $2,352 ----------- ----------- -------

* ** See Notes to consolidated financial statements on pages 14-15.

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 4 for U.S. GAAP reconciliation.

3. Comprehensive income was reported as a gain of 14,423 million yen ($139 million) for the third quarter ended December 31, 2004, a gain of 223,115 million yen for the third quarter ended December 31, 2003. Comprehensive income was a gain of 205,842 million yen ($1,979 million) for the nine months ended December 31, 2004, and a gain of 252,750 million yen for the nine months a year ago. Comprehensive income (loss) includes net income and increases (decreases) in cumulative translation adjustments, unrealized holding gains (losses) of available-for-sale securities, unrealized gains (losses) of certain derivative instruments and minimum pension liability adjustments.

4. ''Restructuring charges'' in "Other income (deductions)" of the consolidated statements of income for the third quarter and nine months ended December 31, 2004 and 2003 include expenses associated with the implementation of early retirement programs at certain domestic companies. Under U.S. generally accepted accounting principles, these charges are included as part of operating profit in the statement of income.

5. On April 1, 2004, the company acquired 19.2% of the issued common shares of MEW through a tender offer, of which the company had a 31.8% equity ownership until then, to obtain its controlling interest. This acquisition also resulted in another acquisition of controlling interest of PanaHome because both the company and MEW have 27% equity ownership. The acquired assets and assumed liabilities on April 1, 2004 are as shown below. As a result, the total assets at the beginning of the period increased 1,043,282 million yen, the balance that deducts 343,844 million yen, the company's new basis of investment in MEW and PanaHome upon the acquisition of additional shares, from 1,387,126 million yen, the total assets acquired.

Yen (millions) --------------

Current assets Yen 658,544 Property, plant and equipment 440,584 Other assets 287,998 ----------- Total assets acquired 1,387,126 ----------- Current liabilities 335,899 Noncurrent liabilities 419,803 ----------- Total liabilities assumed 755,702 ----------- Minority interests 287,580 ----------- Net assets acquired Yen 343,844 ----------- 6. Certain of the company's subsidiaries obtained approvals from Japan's Ministry of Health, Labour and Welfare (the Ministry) for exemption from the past benefit obligation with respect to the portion of the Employees Pension Funds that certain of the company's subsidiaries operated for the Government (the so-called ''substitutional portion''), and transferred the substitutional portion to the Government in the first half ended September 30, 2004. The gain of 31,509 million yen for the nine months ended December 31, 2004 from the transfer of the substitutional portion of the Japanese Welfare Pension Insurance is reported as other income in the consolidated statement of income.

Matsushita Electric Welfare Pension Funds obtained approval from the Ministry for exemption from the past benefit obligation with respect to the substitutional portion and transferred it to the Government in December 2003. Income related to the transfer of the substitutional portion of the Employees Pension Funds is reported as other income of 39,580 million yen for the third quarter and for the nine months, ended December 31, 2003 in the consolidated statement of income.

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. MEW, PanaHome and their respective subsidiaries became consolidated subsidiaries of the company on April 1, 2004. Accordingly, a new segment, MEW and PanaHome, has been added to the company's business segment classifications from this fiscal year (fiscal 2005).

Principal internal divisional companies or units and subsidiaries operating in respective segments are as follows:

AVC Networks: -------------

Panasonic AVC Networks Company, Panasonic Communications Co., Ltd., Panasonic Mobile Communications Co., Ltd., Panasonic Automotive Systems Company, Panasonic System Solutions Company, Matsushita Kotobuki Electronics Industries, Ltd. Home Appliances: ----------------

Home Appliances Group, Healthcare Business Company, Lighting Company, Matsushita Ecology Systems Co., Ltd.

Components and Devices: -----------------------

Semiconductor Company, Matsushita Battery Industrial Co., Ltd., Matsushita Electronic Components Co., Ltd., Motor Company

MEW and PanaHome: -----------------

Matsushita Electric Works, Ltd., PanaHome Corporation

JVC: ----

Victor Company of Japan, Ltd.

Other: ------

Panasonic Factory Solutions Co., Ltd., Matsushita Industrial Information Equipment Co., Ltd.

9. Number of consolidated companies: 565

10. Number of companies reflected by the equity method: 82

11. United States Dollar amounts are translated from yen for convenience at the rate of U.S. $1.00 = 104 yen, the approximate rate on the Tokyo Foreign Exchange Market on December 30, 2004.

12. Each American Depositary Share (ADS) represents 1 share of common stock.

Details of Product Categories

AVC Networks

Color TVs, PDP and LCD TVs, VCRs, camcorders, digital cameras, DVD players, DVD recorders, compact disc (CD), Mini Disc (MD) and SD players, other personal and home audio equipment, AV and computer product devices, prerecorded AV software, broadcast- and business-use AV equipment and systems, PCs, CD-ROM, DVD-ROM/RAM and other optical disk drives, SD Memory Cards, other data storage devices, copiers, printers, telephones, cellular phones and other mobile communications equipment, facsimile equipment, car AVC equipment, traffic-related systems, communications network-related equipment, other information and communications equipment and systems, etc.

Home Appliances

Refrigerators, room air conditioners, washing machines, clothes dryers, vacuum cleaners, electric irons, microwave ovens, cooking appliances, dish washer/dryers, electric fans, air purifiers, heating equipment, kitchen fixture systems, electric, gas and kerosene hot water supply equipment, bath and sanitary equipment, healthcare equipment, electric lamps, ventilation and air-conditioning equipment, car air conditioners, compressors, vending machines, etc.

Components and Devices

Semiconductors, general components (capacitors, resistors, coils, speakers, power supplies, electro-mechanical components, high frequency components, printed circuit boards, etc.), magnetic recording heads, electric motors, dry batteries, rechargeable batteries, etc.

MEW and PanaHome

Lighting fixtures, wiring devices, distribution panelboards, personal-care products, healthy-life products, exterior and interior furnishing materials, bathroom units, molding compounds, laminates, relays, connectors, housings, etc.

JVC

VCRs, camcorders, CRT TVs, PDP TVs, LCD TVs, stereo hi-fi and related equipment, car audio, DVD players, DVD recorders, CD radio cassette recorders, business-use audiovisual equipment, information equipment, video projectors, display components, optical pickups, motors, high-density multi-layered printed circuit boards, AV software for DVD, CD and video tapes, recordable media, etc.

Other

Electronic-parts-mounting machines, industrial robots, electronic measuring instruments, welding equipment, power distribution equipment, elevators, escalators, bicycles, leasing and credit operations, imported materials and components, etc.

--30--RC/ny*

CONTACT: Media: Mike Kitadeya / Karl Takahashi (Osaka) International PR (Tel: +81-6-6949-2293) or Panasonic News Bureau (Tokyo) (Tel: +81-3-3542-6205) or Jim Reilly (U.S.) (Tel: +1-201-392-6067) or Brendon Gore (Europe) (Tel: +44-20-8899-2217) or Investor Relations: Ryuichi Tsuruta (Japan) Investor Relations (Tel: +81-6-6908-1121) or Akihiro Takei (U.S.) Panasonic Finance (America), Inc. (Tel: +1-212-698-1365) or Norio Iino (Europe) Panasonic Finance (Europe) plc (Tel: +44-20-7562-4400)

KEYWORD: NEW YORK JAPAN INTERNATIONAL ASIA PACIFIC INDUSTRY KEYWORD: HARDWARE COMPUTERS/ELECTRONICS CONSUMER/HOUSEHOLD ENTERTAINMENT RETAIL EARNINGS SOURCE: Matsushita Electric Industrial Co., Ltd.

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