Sony Consolidated Financial Results for the Third Quarter
TOKYO, Jan. 28 / -- Sony Corporation announced today
its consolidated results for the third quarter ended December 31, 2003
(October 1, 2003 to December 31, 2003).
(Billions of yen, millions of U.S. dollars, except per share amounts)
Third quarter ended December 31
2002 2003 Change 2003*
Sales and operating revenue Y2,307.7 Y2,323.4 +0.7% $21,714
Operating income 199.5 158.8 -20.4 1,484
Income before income taxes 201.9 157.8 -21.8 1,475
Net income 125.4 92.6 -26.2 866
Net income per share of common
stock
- Basic Y136.19 Y100.16 -26.5% $0.94
- Diluted 126.05 93.14 -26.1 0.87
* U.S. dollar amounts have been translated from yen, for convenience
only, at the rate of Y107=U.S.$1, the approximate Tokyo foreign
exchange market rate as of December 30, 2003.
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Consolidated Results for the Third Quarter ended December 31, 2003
Sales increased 0.7% year on year setting a new quarterly record for Sony.
Sales grew 6% on a local currency basis. (For all references herein to
results on a local currency basis, see Note I.) In the Electronics segment,
sales to outside customers (excludes sales between consolidated companies)
increased, led by increases in the sales of cellular phones (sold mainly to
Sony Ericsson Mobile Communications ("Sony Ericsson")), flat panel
televisions, DVD recorders (including PSX), VAIO PCs, and digital still
cameras, while sales of other products such as CRT televisions decreased. In
the Pictures segment, sales decreased compared with the same quarter of the
prior year due to a decrease in home entertainment revenues as compared to
those recorded from the strong performance of Spider-Man and other releases
during the same quarter of the prior year. Sales in the Game segment
decreased due to decreased sales of hardware, although sales of software
increased.
Operating income decreased 20.4% (15% decrease on a local currency basis)
compared with the same quarter of the previous year mainly due to an increase
in restructuring expenses. Operating income in the Electronics segment
decreased primarily due to an increase in restructuring expenses (mainly
severance related expenses). In the Pictures segment, operating income
decreased mainly due to the lower home entertainment revenues noted above. In
the Game segment, operating income decreased slightly despite the contribution
to profit of increased PlayStation 2 ("PS 2") software unit sales, primarily
because research and development expenses for semiconductors increased
compared with the same quarter of the previous year. However, operating
income increased in the Music segment, primarily due to benefits realized from
restructuring activities, and in the Financial Services segment, due to
improvements in valuation gains and losses from investments in the general
account of Sony Life Insurance Co., Ltd. ("Sony Life").
Restructuring charges for the current quarter amounted to Y53.6 billion
($501 million) compared to Y14.0 billion in the same quarter of the previous
year. In the Electronics segment, restructuring charges of Y46.3 billion
($433 million) were recorded compared to Y8.5 billion in the same quarter of
the previous year.
Income before income taxes decreased 21.8% compared with the same quarter
of the previous year. Although net foreign exchange gain increased compared
to the same quarter of the previous year, an increase in loss on devaluation
of securities investments resulted in deterioration in the net effect of other
income and other expenses. The increase in loss on devaluation of securities
investments was due to the devaluation of an investment in a privately held
Japanese company in which Sony has a minority interest.
Net income decreased 26.2% compared with the same quarter of the previous
year. Compared to an effective tax rate of 32.5% in the same quarter of the
prior year, the effective tax rate was 42.8% in the current quarter. Equity
in net income of affiliated companies consisted of an equity gain, primarily
due to profits recorded at Sony Ericsson (the profit Sony recorded from its
equity holding was Y2.8 billion ($26 million)) as compared with equity losses
recorded in the same quarter of the previous year.
Remarks by Nobuyuki Idei, Chairman and Group CEO of Sony Corporation
Consolidated sales for the quarter slightly exceeded the record
consolidated sales achieved in the same quarter of the previous year. In the
Electronics segment, we introduced new models of flat panel televisions, DVD
recorders, digital still cameras, video cameras and other products, the
competitiveness of which we enhanced in advance of the year-end selling
season. As a result, we enjoyed growth in sales to outside customers in all
regions on a local currency basis. Going forward, we will continue to spare
no effort to expand sales and improve profitability.
The restructuring plan we outlined at our Corporate Strategy Meeting last
year is progressing smoothly as all the businesses within the Sony Group work
together to build a management structure that produces a high profit margin.
Operating Performance Highlights by Business Segment
Electronics
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2002 2003 Change 2003
Sales and operating revenue Y1,468.2 Y1,474.7 +0.4% $13,783
Operating income 82.1 49.5 -39.7 463
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales increased 0.4% (5% increase on a local currency basis). Sales to
outside customers increased 8.1% compared to the same quarter of the previous
year. Products contributing to the increase in outside sales included
cellular phones (sold mainly to Sony Ericsson), which benefited from increased
demand for camera-equipped models in Japan and Europe; flat panel televisions,
which exhibited significantly increased sales in all geographic regions; DVD
recorders (including PSX), which recorded strong sales of new products in
Japan; VAIO PCs, which enjoyed strong sales mainly in the U.S. and Cybershot
digital still cameras, which saw continued market growth. On the other hand,
sales of other products, including CRT televisions, which experienced a market
contraction due to a shift in demand to flat panel televisions, decreased. In
addition, intersegment sales to the Game segment decreased significantly
primarily due to the outsourcing of PS 2 game console production to third
parties in China.
Operating income decreased by Y32.6 billion, or 39.7%, compared to the
same quarter of the previous year. Although sales to outside customers
increased, operating income decreased primarily due to a Y37.9 billion
increase in restructuring expenses (mainly severance related expenses), a
decline in prices and the yen's appreciation against the U.S. dollar.
CCDs, which enjoyed an increase in sales for digital still cameras and
cellular phones, and VAIO PCs, which experienced an improvement in operating
performance due to contributions from high value-added models, had an increase
in operating income. However, Cybershot digital still cameras, which suffered
from price declines; CRT televisions, which had a significant decrease in
sales due to market contraction; and CLIE personal digital assistants, which
were adversely effected by heightened market competition in the U.S., had a
decrease in operating income.
Inventory on December 31, 2003 was Y534.0 billion ($4,991 million), a
Y27.5 billion, or 5.4%, increase compared with the level on December 31, 2002
and a Y22.3 billion, or 4.0%, decrease compared with the level on September
30, 2003.
Game
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2002 2003 Change 2003
Sales and operating revenue Y384.1 Y367.0 -4.5% $3,429
Operating income 71.7 70.5 -1.6 659
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales decreased 4.5% compared with the same quarter of the previous year
(2% decrease on a local currency basis) because sales of hardware decreased,
although sales of software increased.
Hardware: Although PS 2 unit sales in Japan, the U.S., and Europe exceeded
unit sales recorded in the same quarter of the previous year, revenue
decreased due to strategic price reductions on the PS 2 that were undertaken
in Japan, the U.S. and Europe during the current fiscal year.
Software: Revenue increased, although PlayStation software unit sales
decreased, as overall quarterly unit sales set a record due to the steady
increase in unit sales of PS 2 software in Japan, the U.S. and Europe.
Operating income decreased by Y1.1 billion, or 1.6%, despite the
contribution to profit of the increase in PS 2 software unit sales, mainly due
to increased research and development expenses for semiconductors designed for
use in future businesses.
Worldwide hardware production shipments*:
--> PS 2: 6.83 million units (a decrease of 1.20 million units)
--> PS one: 1.02 million units (a decrease of 2.00 million units)
Worldwide software production shipments*:
--> PS 2: 104 million units (an increase of 25 million units)
--> PlayStation: 10 million units (a decrease of 12 million units)
* Production shipment units of hardware and software are counted upon
shipment of the products from manufacturing bases. Sales of such
products are recognized when the products are delivered to customers.
Inventory on December 31, 2003 was Y128.6 billion ($1,202 million), a
Y16.1 billion, or 11.1%, decrease compared with the level on December 31, 2002
and a Y65.0 billion, or 33.6%, decrease compared with the level on September
30, 2003.
Music
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2002 2003 Change 2003
Sales and operating revenue Y188.0 Y182.1 -3.1% $1,702
Operating income 20.2 30.3 +50.3 283
The amounts presented above are the sum of the yen-translated results of
Sony Music Entertainment Inc. ("SMEI"), a U.S. based operation which
aggregates the results of its worldwide subsidiaries on a U.S. dollar
basis, and the results of Sony Music Entertainment (Japan) Inc. ("SMEJ"),
a Japan based operation which aggregates results in yen. Management
analyzes the results of SMEI in U.S. dollars, so discussion of certain
portions of its results are specified as being on "a U.S. dollar basis."
Sales decreased 3.1% compared with the same quarter of the previous year
(6% increase on a local currency basis). Of the Music segment's sales, 76%
were generated by SMEI, and 24% were generated by SMEJ.
SMEI: Sales on a U.S. dollar basis increased 6%. Album sales increased
due to higher sales outside of the U.S. Appreciation of European currencies
also contributed to the increase in sales on a U.S. dollar basis. Albums
which contributed to sales during the quarter included Michael Jackson's
Number Ones, the Now 14 compilation album and Beyonce's Dangerously in Love.
SMEJ: Sales increased 8% due to an increase in album sales. Albums which
contributed to sales during the quarter were Mika Nakashima's LOVE, Ken
Hirai's Ken's Bar and ORANGE RANGE's 1st CONTACT.
Operating income increased by Y10.1 billion, or 50.3%, from the same
quarter of the prior year, as operating performance at both SMEI and SMEJ
continued to improve.
SMEI: Operating income, on a U.S. dollar basis, increased significantly
from the same quarter of the prior year due to the continued benefits realized
from worldwide restructuring activities implemented over the past two years.
The higher revenues noted above, together with lower advertising, promotion
and overhead expenses, also contributed to the improved operating results.
SMEJ: Operating income increased significantly compared with the same
quarter of the prior year due to an improvement in the cost of sales ratio
achieved mainly by the above-mentioned sales increase and a reduction in
selling, general and administrative expenses, such as advertising and
promotion expenses.
During the quarter, Sony and Bertelsmann AG announced that they had signed
a binding agreement to combine their recorded music businesses in a joint
venture. The newly formed company, which will be known as Sony BMG, will be
50% owned by each parent company. It will not include SMEI's music
publishing, physical distribution and disc manufacturing businesses or SMEJ.
The merger is subject to regulatory approvals in the United States and the
European Union.
Pictures
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2002 2003 Change 2003
Sales and operating revenue Y256.3 Y181.2 -29.3% $1,694
Operating income 31.7 5.6 -82.3 53
The results presented above are a yen-translation of the results of Sony
Pictures Entertainment ("SPE"), a U.S. based operation which aggregates
the results of its worldwide subsidiaries on a U.S. dollar basis.
Management analyzes the results of SPE in U.S. dollars, so discussion of
certain portions of its results are specified as being on "a U.S. dollar
basis."
Sales decreased 29.3% compared with the same quarter of the prior year
(20% decrease on a U.S dollar basis) due to lower home entertainment revenues
this quarter as compared to those recorded from the strong performance of
Spider-Man and other home entertainment releases during the same quarter of
the prior year. However, theatrical revenues increased, benefiting from the
strong U.S. theatrical release of Something's Gotta Give and the theatrical
revenues generated outside the U.S. by Bad Boys 2 and S.W.A.T.
Operating income decreased by Y26.1 billion, or 82.3%, from the same
quarter of the prior year. The primary reason for the decline in
profitability was the absence of profits generated by the home entertainment
release of Spider-Man discussed above. Results for the quarter were
negatively impacted by the disappointing U.S. theatrical performance of The
Missing.
Financial Services
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2002 2003 Change 2003
Financial Services revenue Y133.1 Y137.3 +3.2% $1,284
Operating income 3.1 12.7 +307.5 118
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Financial Services revenue increased 3.2% compared with the same quarter
of the previous year due to an increase in revenue at Sony Life and Sony
Assurance Inc. Regarding Sony Life, the recognition method of insurance
premiums received on certain products was changed from being recorded as
revenues to being offset against the related provision for future insurance
policy benefits in this quarter. Although revenue was reduced by Y15.4
billion as a result of this change, revenue at Sony Life increased by Y2.0
billion or 1.8% to Y117.6 billion ($1,099 million) due to improvements in
valuation gains and losses from investments compared with the same quarter of
the previous year.*
Operating income increased by Y9.6 billion, or 307.5%, compared with the
same quarter of the previous year due to improvements in valuation gains and
losses from investments in the general account at Sony Life. Operating income
at Sony Life increased by Y9.4 billion or 221.8% to Y13.7 billion ($128
million).* The above mentioned change in revenue recognition method did not
have a material effect on operating income at Sony Life.
* The Financial Services revenue and operating income at Sony Life are
calculated on a U.S. GAAP basis. Therefore, they differ from the
results that Sony Life discloses on a Japanese statutory basis. The
above mentioned change in revenue recognition method did not have an
impact on results on a Japanese statutory basis.
Other
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2002 2003 Change 2003
Sales and operating revenue Y79.4 Y85.2 +7.3% $796
Operating loss (3.6) (2.6) - (24)
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales increased 7.3% compared with the same quarter of the previous year
primarily due to an increase in sales of a business which provides information
system services to other businesses within the Sony Group and an IC card
business. Of the sales in the Other segment, 54% were sales to outside
customers.
Operating loss decreased due to the absence of severance-related expenses
recorded in the same quarter of the previous year at an advertising agency
business subsidiary in Japan.
Cash Flow
The following charts show Sony's unaudited condensed statements of cash
flow on a consolidated basis for all segments excluding the Financial Services
segment and for the Financial Services segment alone. These separate
condensed presentations are not required under U.S. GAAP, which is used in
Sony's consolidated financial statements. However, because the Financial
Services segment is different in nature from Sony's other segments, Sony
believes that these presentations may be useful in understanding and analyzing
Sony's consolidated financial statements.
Cash Flow - Consolidated (excluding Financial Services segment)
(Billions of yen, millions of U.S. dollars)
Nine months ended December 31
Cash flow 2002 2003 Change 2003
- From operating activities Y292.7 Y191.6 Y -101.1 $1,790
- From investing activities (70.7) (268.7) -198.0 (2,511)
- From financing activities (52.7) 319.9 +372.7 2,990
Cash and cash equivalents at
beginning of the fiscal year 356.6 438.5 +82.0 4,098
Cash and cash equivalents at
December 31 501.7 636.5 +134.8 5,948
Operating Activities: During the first nine months of the current fiscal
year, despite an increase in notes and accounts receivable, trade and other
factors, operating activities generated more cash than was used primarily due
to factors such as profit contributions from the Electronics, Game, and Music
segments, and an increase in notes and accounts payable, trade. Compared with
the same period of the previous year, while there was an increase in the
growth in notes and accounts payable, trade, net cash provided by operating
activities declined due to factors such as an increase in the growth in notes
and accounts receivable, trade mainly from the increase in sales to outside
customers in the Electronics segment and decreases in profits primarily in the
Electronics, Pictures, and Game segments.
Investing Activities: During the first nine months of the fiscal year,
cash was used to purchase fixed assets, such as semiconductor manufacturing
equipment, primarily in the Electronics and Game segments. Compared with the
same period of the previous year, net cash used in investing activities
increased because proceeds from the sales of securities investments (which
included Y88.4 billion from the sale of Sony's equity in Telemundo
Communications Group, Inc. and its subsidiaries (a U.S.-based Spanish language
television network and station group)), maturities of marketable securities
and collections of advances were realized in the same period of the previous
year, and because of an increase in the aforementioned purchases of fixed
assets during the first nine months of the current fiscal year.
Financing Activities: Financing proceeds exceeded repayments during the
first nine months of the fiscal year primarily due to proceeds from the
issuance, in December 2003, of Y250 billion of convertible bonds (bonds with
stock acquisition rights), which will be applied principally towards
investment in semiconductors and key devices, and as a result of the issuance
of commercial paper, for the purpose of raising working capital.
Cash and Cash Equivalents: During the first nine months of the current
fiscal year, although the difference between net cash provided by operating
activities and net cash used in investing activities was a negative Y77.1
billion ($720 million), because financing proceeds significantly exceeded this
level, the total balance of cash and cash equivalents was Y636.5 billion
($5,948 million) on December 31, 2003, an increase of Y198.0 billion compared
with the level on March 31, 2003.
Cash Flow - Financial Services segment
(Billions of yen, millions of U.S. dollars)
Nine months ended December 31
Cash flow 2002 2003 Change 2003
- From operating activities Y215.4 Y204.5 Y -10.9 $1,911
- From investing activities (323.5) (333.7) -10.2 (3,118)
- From financing activities 77.8 115.8 +38.1 1,083
Cash and cash equivalents at
beginning of the fiscal year 327.2 274.5 -52.7 2,566
Cash and cash equivalents at
December 31 296.9 261.2 -35.7 2,442
Operating Activities: Operating activities generated more cash than was
used due to an increase in future insurance policy benefits and other in the
first nine months of the current fiscal year reflecting an increase in
insurance-in-force.
Investing Activities: During the first nine months of the current fiscal
year, payments for investments and advances exceeded proceeds from sales of
securities investments, maturities of marketable securities and collections of
advances, reflecting an increase in assets under management in Financial
Services businesses.
Financing Activities: Due to factors which included expansion in the
number of accounts, deposits from customers in the banking business increased
in the first nine months of the current fiscal year.
Cash and Cash Equivalents: The total balance of cash and cash equivalents
was Y261.2 billion ($2,442 million) on December 31, 2003, a decrease of Y13.3
billion compared with the level on March 31, 2003.
Notes
Note I: During the third quarter ended December 31, 2003, the average
value of the yen was Y107.9 against the U.S. dollar and Y127.9 against the
euro, which was 12.7% higher against the U.S. dollar and 5.4% lower against
the euro, compared with the average rates for the same quarter of the previous
fiscal year. Operating results on a local currency basis described herein
reflect sales and operating revenue ("sales") and operating income obtained by
applying the yen's average exchange rate in the same quarter of the previous
fiscal year to local currency-denominated monthly sales, cost of sales, and
selling, general and administrative expenses in the current quarter. Local
currency basis results are not reflected in Sony's financial statements and
are not measures conforming with Generally Accepted Accounting Principles in
the U.S. ("U.S. GAAP"). In addition, Sony does not believe that these
measures are a substitute for U.S. GAAP measures. However, Sony believes that
local currency basis results provide additional useful analytical information
to investors regarding operating performance.
Note II: "Sales and operating revenue" in each business segment represents
sales and operating revenue recorded before intersegment transactions are
eliminated. "Operating income" in each business segment represents operating
income recorded before intersegment transactions and unallocated corporate
expenses are eliminated.
Note III: Commencing with the first quarter ended June 30, 2003, Sony has
partly realigned its business segment configuration. Also, in the Network
Application and Content Service Sector ("NACS"), expenses incurred in
connection with the creation of a network platform business have been
transferred out of the Other segment and reclassified as unallocated corporate
expenses, because the expected future benefits of this business will be spread
across the Sony Group. In accordance with this realignment, results for the
third quarter of the previous fiscal year have been reclassified to conform to
the presentation of the third quarter of the current fiscal year.
Outlook for the Fiscal Year ending March 31, 2004
We have revised upward our forecast for income before income taxes and net
income for the fiscal year ending March 31, 2004 from the figures announced on
October 23, 2003. No change was made to our forecast for sales, operating
income, capital expenditures or depreciation and amortization. Our
restructuring expense forecast for the fiscal year has also been changed from
Y140 billion to Y150 billion.
Current Forecast October Forecast
Sales and operating revenue Y7,400 billion Y7,400 billion
Operating income 100 billion 100 billion
Income before income taxes 130 billion 120 billion
Net income 55 billion 50 billion
Assumed exchange rates for the fourth quarter ending March 31, 2004:
approximately Y105 to the U.S. dollar (October forecast was approximately Y110
to the U.S. dollar) and approximately Y135 to the euro (October forecast was
approximately Y125 to the euro).
Although restructuring expenses are expected to exceed our previous
forecast, the stronger than expected results of the Game segment in the third
quarter, resulting from strong software sales, and the improvement in
valuation gains and losses from investments at Sony Life in the Financial
Services segment, caused us to make no change in our forecast for operating
income.
The forecast for income before income taxes and net income was revised
upward due to the net foreign exchange gain recorded in the third quarter.
Capital expenditures (additions to fixed assets) Y350 billion
Depreciation and amortization* 390 billion
(Depreciation expenses for tangible assets) (280 billion)
* Including amortization of intangible assets and amortization of
deferred insurance acquisition costs.
For the fiscal year ended March 31, 2003, Sony recorded sales and
operating revenue of Y7,473.6 billion, operating income of Y185.4 billion,
income before income taxes of Y247.6 billion, and net income of Y115.5
billion.
Cautionary Statement
Statements made in this release with respect to Sony's current plans,
estimates, strategies and beliefs and other statements that are not historical
facts are forward-looking statements about the future performance of Sony.
Forward-looking statements include, but are not limited to, those statements
using words such as "believe," "expect," "plans," "strategy," "prospects,"
"forecast," "estimate," "project," "anticipate," "may" or "might" and words of
similar meaning in connection with a discussion of future operations,
financial performance, events or conditions. From time to time, oral or
written forward-looking statements may also be included in other materials
released to the public. These statements are based on management's
assumptions and beliefs in light of the information currently available to it.
Sony cautions you that a number of important risks and uncertainties could
cause actual results to differ materially from those discussed in the forward-
looking statements, and therefore you should not place undue reliance on them.
You also should not rely on any obligation of Sony to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Sony disclaims any such obligation. Risks and
uncertainties that might affect Sony include, but are not limited to (i) the
global economic environment in which Sony operates, as well as the economic
conditions in Sony's markets, particularly levels of consumer spending; (ii)
exchange rates, particularly between the yen and the U.S. dollar, euro, and
other currencies in which Sony makes significant sales or in which Sony's
assets and liabilities are denominated; (iii) Sony's ability to continue to
design and develop and win acceptance of its products and services, which are
offered in highly competitive markets characterized by continual new product
introductions, rapid development in technology, and subjective and changing
consumer preferences (particularly in the Electronics, Game, Music and
Pictures segments); (iv) Sony's ability to implement successfully personnel
reduction and other business reorganization activities in its Electronics and
Music segments; (v) Sony's ability to implement successfully its network
strategy for its Electronics, Music, Pictures and Other segments and to
develop and implement successful sales and distribution strategies in its
Music and Pictures segments in light of the Internet and other technological
developments; (vi) Sony's continued ability to devote sufficient resources to
research and development and, with respect to capital expenditures, to
correctly prioritize investments (particularly in the Electronics segment);
(vii) the success of Sony's joint ventures and alliances; and (viii) the risk
of being able to obtain regulatory approval and successfully form a jointly
owned recorded music company with BMG. Risks and uncertainties also include
the impact of any future events with material unforeseen impacts.
Business Segment Information (Unaudited)
(Millions of yen, millions of U.S. dollars)
Three months ended December 31
2002 2003 Change 2003
Sales and operating revenue
Electronics
Customers Y 1,343,231 Y 1,451,754 +8.1% $13,568
Intersegment 125,017 22,974 215
Total 1,468,248 1,474,728 +0.4 13,783
Game
Customers 377,027 356,212 -5.5 3,329
Intersegment 7,096 10,739 100
Total 384,123 366,951 -4.5 3,429
Music
Customers 160,470 157,912 -1.6 1,476
Intersegment 27,568 24,217 226
Total 188,038 182,129 -3.1 1,702
Pictures
Customers 256,332 181,227 -29.3 1,694
Intersegment 0 0 0
Total 256,332 181,227 -29.3 1,694
Financial Services
Customers 126,366 130,319 +3.1 1,218
Intersegment 6,755 7,023 66
Total 133,121 137,342 +3.2 1,284
Other
Customers 44,307 45,977 +3.8 429
Intersegment 35,101 39,258 367
Total 79,408 85,235 +7.3 796
Elimination (201,537) (104,211) -- (974)
Consolidated total Y 2,307,733 Y 2,323,401 +0.7% $21,714
Electronics intersegment amounts primarily consist of transactions with
the Game business.
Music intersegment amounts primarily consist of transactions with the
Game and Pictures businesses.
Other intersegment amounts primarily consist of transactions with the
Electronics business.
2002 2003 Change 2003
Operating income (loss)
Electronics Y 82,146 Y 49,500 -39.7% $463
Game 71,664 70,519 -1.6 659
Music 20,167 30,305 +50.3 283
Pictures 31,715 5,613 -82.3 53
Financial Services 3,108 12,666 +307.5 118
Other (3,581) (2,583) -- (24)
Total 205,219 166,020 -19.1 1,552
Unallocated corporate
expenses and elimination (5,703) (7,248) -- (68)
Consolidated total Y 199,516 Y 158,772 -20.4% $1,484
Commencing with the first quarter ended June 30, 2003, Sony has partly
realigned its business segment configuration. In the NACS, expenses
incurred in connection with the creation of a network platform business
have been transferred out of the Other segment and reclassified as
unallocated corporate expenses, because the expected future benefits of
this business will be spread across the Sony Group. In accordance with
these realignments, results for the previous year have been reclassified
to conform to the presentation for the current year.
In the quarter ended December 31, 2003, regarding Sony Life, the
recognition method of insurance premiums received on certain products was
changed from being recorded as revenues to being offset against the
related provision for future insurance policy benefits, reducing revenue
in the Financial Services segment in the quarter by Y15.4 billion. This
change did not have a material effect on operating income.
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
2002 2003 Change 2003
Sales and operating revenue
Electronics
Customers Y 3,547,650 Y 3,654,022 +3.0% $34,150
Intersegment 367,505 131,170 1,226
Total 3,915,155 3,785,192 -3.3 35,376
Game
Customers 772,559 632,296 -18.2 5,909
Intersegment 15,134 21,187 198
Total 787,693 653,483 -17.0 6,107
Music
Customers 388,550 368,318 -5.2 3,442
Intersegment 66,891 57,465 537
Total 455,441 425,783 -6.5 3,979
Pictures
Customers 615,530 519,768 -15.6 4,858
Intersegment 0 0 0
Total 615,530 519,768 -15.6 4,858
Financial Services
Customers 369,256 421,073 +14.0 3,935
Intersegment 20,620 20,330 190
Total 389,876 441,403 +13.2 4,125
Other
Customers 125,724 128,723 +2.4 1,203
Intersegment 96,348 113,057 1,057
Total 222,072 241,780 +8.9 2,260
Elimination (566,498) (343,209) -- (3,208)
Consolidated total Y 5,819,269 Y 5,724,200 -1.6% $53,497
Electronics intersegment amounts primarily consist of transactions with
the Game business.
Music intersegment amounts primarily consist of transactions with the
Game and Pictures businesses.
Other intersegment amounts primarily consist of transactions with the
Electronics business.
2002 2003 Change 2003
Operating income (loss)
Electronics Y 157,524 Y 98,066 -37.7% $916
Game 99,022 74,464 -24.8 696
Music 4,576 24,571 +437.0 230
Pictures 50,882 (1,404) -- (13)
Financial Services 19,645 37,969 +93.3 355
Other (15,396) (3,687) -- (35)
Total 316,253 229,979 -27.3 2,149
Unallocated corporate
expenses and elimination (14,346) (21,321) -- (199)
Consolidated total Y 301,907 Y 208,658 -30.9% $1,950
Commencing with the first quarter ended June 30, 2003, Sony has partly
realigned its business segment configuration. In the NACS, expenses
incurred in connection with the creation of a network platform business
have been transferred out of the Other segment and reclassified as
unallocated corporate expenses, because the expected future benefits of
this business will be spread across the Sony Group. In accordance with
these realignments, results for the previous year have been reclassified
to conform to the presentation for the current year.
In the quarter ended December 31, 2003, regarding Sony Life, the
recognition method of insurance premiums received on certain products was
changed from being recorded as revenues to being offset against the
related provision for future insurance policy benefits, reducing revenue
in the Financial Services segment in nine months ended December 31, 2003,
by Y15.4 billion. This change did not have a material effect on
operating income.
Electronics Sales and Operating Revenue to Customers by Product Category
(Millions of yen, millions of U.S. dollars)
Three months ended December 31
Sales and operating revenue 2002 2003 Change 2003
Audio Y 215,565 Y 200,428 -7.0% $1,873
Video 264,445 309,136 +16.9 2,889
Televisions 314,665 303,875 -3.4 2,840
Information and Communications 216,197 231,454 +7.1 2,163
Semiconductors 52,844 69,460 +31.4 649
Components 142,616 169,857 +19.1 1,588
Other 136,899 167,544 +22.4 1,566
Total Y 1,343,231 Y1,451,754 +8.1% $13,568
Nine months ended December 31
Sales and operating revenue 2002 2003 Change 2003
Audio Y 548,962 Y 502,122 -8.5% $4,693
Video 697,867 750,655 +7.6 7,015
Televisions 747,131 703,413 -5.9 6,574
Information and Communications 621,902 625,941 +0.6 5,850
Semiconductors 152,257 187,074 +22.9 1,748
Components 396,654 464,335 +17.1 4,340
Other 382,877 420,482 +9.8 3,930
Total Y3,547,650 Y3,654,022 +3.0% $34,150
The above table is a breakdown of Electronics sales and operating revenue
to customers in the Business Segment Information on pages F-1 and F-2.
The Electronics segment is managed as a single operating segment by
Sony's management. However, Sony believes that the information in this
table is useful to investors in understanding the sales contributions of
the products in this business segment. In addition, commencing with the
first quarter ended June 30, 2003, Sony has partly realigned its product
category configuration in the Electronics segment. Accordingly, results
of the previous year have been reclassified. The primary changes are as
follows:
Main Product Previous Product Category New Product Category
Set-top box "Televisions" "Video"
Computer display "Information and Communications" "Televisions"
LCD television "Information and Communications" "Televisions"
CRT "Components" "Televisions"
Geographic Segment Information (Unaudited)
(Millions of yen, millions of U.S. dollars)
Three months ended December 31
Sales and operating revenue 2002 2003 Change 2003
Japan Y576,943 Y622,930 +8.0% $5,822
United States 748,374 650,658 -13.1 6,081
Europe 591,181 633,889 +7.2 5,924
Other Areas 391,235 415,924 +6.3 3,887
Total Y2,307,733 Y2,323,401 +0.7% $21,714
Nine months ended December 31
Sales and operating revenue 2002 2003 Change 2003
Japan Y1,575,947 Y1,670,787 +6.0% $15,615
United States 1,922,199 1,628,381 -15.3 15,219
Europe 1,302,616 1,358,097 +4.3 12,692
Other Areas 1,018,507 1,066,935 +4.8 9,971
Total Y5,819,269 Y5,724,200 -1.6% $53,497
Classification of Geographic Segment Information shows sales and
operating revenue recognized by location of customers.
Consolidated Statements of Income (Unaudited)
(Millions of yen, millions of U.S. dollars, except per share amounts)
Three months ended December 31
2002 2003 Change 2003
Sales and operating revenue: %
Net sales Y2,166,684 Y2,180,714 $20,380
Financial service revenue 126,366 130,319 1,218
Other operating revenue 14,683 12,368 116
2,307,733 2,323,401 +0.7 21,714
Costs and expenses:
Cost of sales 1,507,867 1,551,627 14,501
Selling, general and
administrative 469,765 485,073 4,533
Financial service expenses 123,250 117,665 1,100
Loss on sale, disposal or
impairment of assets, net 7,335 10,264 96
2,108,217 2,164,629 20,230
Operating income 199,516 158,772 -20.4 1,484
Other income:
Interest and dividends 3,340 3,337 31
Royalty income 5,581 5,671 53
Foreign exchange gain, net 2,840 9,278 87
Gain on sale of securities
investments, net -- 1,269 12
Other 8,009 6,154 57
19,770 25,709 240
Other expenses:
Interest 6,673 7,196 67
Loss on devaluation of
securities investments 1,720 10,911 102
Other 8,993 8,564 80
17,386 26,671 249
Income before income taxes 201,900 157,810 -21.8 1,475
Income taxes 65,536 67,587 632
Income before minority interest
and equity in net gain (loss)
of affiliated companies 136,364 90,223 -33.8 843
Minority interest in income
of consolidated subsidiaries 928 656 6
Equity in net gain (loss) of
affiliated companies (10,005) 3,052 29
Net income Y125,431 Y92,619 -26.2 $866
Per share data:
Common stock
Net income
- Basic 136.19 100.16 -26.5 0.94
- Diluted 126.05 93.14 -26.1 0.87
Subsidiary tracking stock
Net income (loss)
- Basic 1.11 (10.71) -- (0.10)
Consolidated Statements of Income (Unaudited)
(Millions of yen, millions of U.S. dollars, except per share amounts)
Nine months ended December 31
2002 2003 Change 2003
Sales and operating revenue: %
Net sales Y5,412,892 Y5,267,642 $49,230
Financial service revenue 369,256 421,073 3,935
Other operating revenue 37,121 35,485 332
5,819,269 5,724,200 -1.6 53,497
Costs and expenses:
Cost of sales 3,838,888 3,819,905 35,700
Selling, general and
administrative 1,305,484 1,302,861 12,176
Financial service expenses 349,451 379,165 3,544
Loss on sale, disposal or
impairment of assets, net 23,539 13,611 127
5,517,362 5,515,542 51,547
Operating income 301,907 208,658 -30.9 1,950
Other income:
Interest and dividends 10,161 13,368 125
Royalty income 22,246 23,855 223
Foreign exchange gain, net 2,192 10,471 98
Gain on sale of securities
investments, net 70,870 12,665 118
Other 24,672 26,448 247
130,141 86,807 811
Other expenses:
Interest 20,063 20,670 193
Loss on devaluation of
securities investments 17,925 12,550 117
Other 26,697 24,605 230
64,685 57,825 540
Income before income taxes 367,363 237,640 -35.3 2,221
Income taxes 104,243 103,272 965
Income before minority interest,
equity in net loss of
affiliated companies and
cumulative effect of an
accounting change 263,120 134,368 -48.9 1,256
Minority interest in income
of consolidated subsidiaries 6,671 1,822 17
Equity in net loss of
affiliated companies 29,786 3,763 35
Income before cumulative effect
of an accounting change 226,663 128,783 -43.2 1,204
Cumulative effect of an
accounting change
(2003: Net of income taxes
of Y0 million) -- (2,117) (20)
Net income Y226,663 Y126,666 -44.1 $1,184
Per share data:
Common stock
Income before cumulative
effect of an accounting
change
- Basic Y246.46 Y139.56 -43.4 $1.30
- Diluted 228.77 130.49 -43.0 1.22
Net income
- Basic 246.46 137.27 -44.3 1.28
- Diluted 228.77 128.37 -43.9 1.20
Subsidiary tracking stock
Net income (loss)
- Basic 27.88 (28.67) -- (0.27)
Consolidated Balance Sheets (Unaudited)
(Millions of yen, millions of U.S. dollars)
December 31 March 31 December 31 December 31
2002 2003 2003 2003
ASSETS
Current assets:
Cash and cash
equivalents Y 798,635 Y 713,058 Y 897,691 $ 8,390
Time deposits 6,103 3,689 7,611 71
Marketable securities 218,448 241,520 273,261 2,554
Notes and accounts
receivable, trade 1,635,099 1,117,889 1,496,804 13,989
Allowance for doubtful
accounts and sales
returns (152,518) (110,494) (118,125) (1,104)
Inventories 701,068 625,727 712,737 6,661
Deferred income taxes 149,865 143,999 122,579 1,146
Prepaid expenses and
other current assets 493,120 418,826 480,276 4,488
3,849,820 3,154,214 3,872,834 36,195
Film costs 275,801 287,778 269,183 2,516
Investments and advances:
Affiliated companies 72,479 111,510 85,364 798
Securities investments
and other 1,745,558 1,882,613 2,230,022 20,841
1,818,037 1,994,123 2,315,386 21,639
Property, plant and equipment:
Land 189,518 188,365 193,278 1,806
Buildings 873,645 872,228 950,656 8,885
Machinery and
equipment 2,118,062 2,054,219 2,073,346 19,377
Construction in
progress 61,588 60,383 92,273 862
Less-Accumulated
depreciation (1,927,595) (1,896,845) (1,945,638) (18,183)
1,315,218 1,278,350 1,363,915 12,747
Other assets:
Intangibles, net 258,229 258,624 250,856 2,344
Goodwill 291,412 290,127 284,911 2,663
Deferred insurance
acquisition costs 326,401 327,869 344,835 3,223
Deferred income taxes 220,938 328,091 265,356 2,480
Other 435,492 451,369 425,136 3,973
1,532,472 1,656,080 1,571,094 14,683
Y 8,791,348 Y 8,370,545 Y 9,392,412 $ 87,780
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings Y 80,608 Y 124,360 Y 228,625 $ 2,137
Current portion of
long-term debt 230,479 34,385 30,439 284
Notes and accounts
payable, trade 896,089 697,385 916,594 8,566
Accounts payable, other
and accrued expenses 889,754 864,188 868,899 8,121
Accrued income and
other taxes 172,238 109,199 115,633 1,081
Deposits from customers
in the banking
business 213,881 248,721 358,611 3,352
Other 377,343 356,810 392,509 3,668
2,860,392 2,435,048 2,911,310 27,209
Long-term liabilities:
Long-term debt 811,151 807,439 1,129,989 10,561
Accrued pension and
severance costs 317,514 496,174 535,021 5,000
Deferred income taxes 162,379 159,079 99,185 927
Future insurance
policy benefits
and other 1,848,136 1,914,410 2,111,994 19,738
Other 282,878 255,478 244,565 2,286
3,422,058 3,632,580 4,120,754 38,512
Minority interest in
consolidated
subsidiaries 22,220 22,022 18,493 173
Stockholders' equity:
Capital stock 476,261 476,278 480,263 4,488
Additional paid-in
capital 984,181 984,196 993,138 9,281
Retained earnings 1,424,413 1,301,740 1,416,786 13,241
Accumulated other
comprehensive income (388,895) (471,978) (540,503) (5,051)
Treasury stock,
at cost (9,282) (9,341) (7,829) (73)
2,486,678 2,280,895 2,341,855 21,886
Y 8,791,348 Y 8,370,545 Y 9,392,412 $ 87,780
Consolidated Statements of Cash Flows (Unaudited)
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
2002 2003 2003
Cash flows from operating activities:
Net income Y 226,663 Y 126,666 $1,184
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation and amortization,
including amortization of
deferred insurance
acquisition costs 255,684 266,930 2,495
Amortization of film costs 232,727 209,035 1,954
Accrual for pension and
severance costs, less
payments 20,125 42,936 401
Loss on sale, disposal or
impairment of assets, net 23,539 13,611 127
Gain on sales of securities
investments, net (70,870) (12,665) (118)
Deferred income taxes (65,648) 7,591 71
Equity in net loss of
affiliated companies,
net of dividends 30,880 5,070 47
Cumulative effect of an
accounting change -- 2,117 20
Changes in assets and liabilities:
Increase in notes and accounts
receivable, trade (298,009) (423,890) (3,962)
Increase in inventories (41,752) (109,843) (1,027)
Increase in film costs (226,738) (212,481) (1,986)
Increase in notes and
accounts payable, trade 139,788 229,608 2,146
Increase in accrued income
and other taxes 69,970 7,295 68
Increase in future insurance
policy benefits and other 167,718 197,584 1,846
Increase in deferred insurance
acquisition costs (49,808) (53,118) (496)
Increase in other current
assets (40,929) (82,315) (769)
Increase in other current
liabilities 76,405 95,610 893
Other 53,321 76,705 717
Net cash provided by
operating activities 503,066 386,446 3,611
Cash flows from investing activities:
Payments for purchases of fixed
assets (203,552) (306,204) (2,862)
Proceeds from sales of fixed
assets 23,567 31,672 296
Payments for investments and
advances by financial service
business (674,948) (899,450) (8,406)
Payments for investments and
advances (other than financial
service business) (61,813) (31,997) (299)
Proceeds from sales of securities
investments, maturities of
marketable securities and
collections of advances by
financial service business 374,587 584,602 5,464
Proceeds from sales of securities
investments, maturities of
marketable securities and
collections of advances
(other than financial service
business) 138,786 26,933 252
Increase in time deposits (1,196) (4,352) (41)
Cash assumed upon acquisition
by stock exchange offering -- 3,634 34
Net cash used in
investing activities (404,569) (595,162) (5,562)
Cash flows from financing activities:
Proceeds from issuance of
long-term debt 10,506 258,776 2,419
Payments of long-term debt (23,101) (23,866) (223)
Increase (decrease) in
short-term borrowings (22,147) 109,497 1,023
Increase in deposits from
customers in the banking
business 106,462 109,316 1,022
Dividends paid (22,965) (23,189) (217)
Other (8,219) 7,705 72
Net cash provided by
financing activities 40,536 438,239 4,096
Effect of exchange rate changes
on cash and cash equivalents (24,198) (44,890) (419)
Net increase in cash and
cash equivalents 114,835 184,633 1,726
Cash and cash equivalents
at beginning of the fiscal year 683,800 713,058 6,664
Cash and cash equivalents
at December 31 Y 798,635 Y 897,691 $ 8,390
(Notes)
1. U.S. dollar amounts have been translated from yen, for convenience
only, at the rate of Y107 = U.S. $1, the approximate Tokyo foreign
exchange market rate as of December 30, 2003.
2. As of December 31, 2003, Sony had 1,049 consolidated subsidiaries
(including variable interest entities ("VIE"s)). It has applied the
equity accounting method in respect to 72 affiliated companies.
3. Sony calculates and presents per share data separately for Sony's
common stock and for the subsidiary tracking stock which is linked to
the economic value of Sony Communication Network Corporation, based
on Statement of Financial Accounting Standards ("FAS") No.128,
"Earnings per Share". The holders of the tracking stock have the
right to participate in earnings, together with common stock holders.
Accordingly, Sony calculates per share data by the "two-class" method
based on FAS No.128. Under this method, basic net income per share
for each class of stock is calculated based on the earnings allocated
to each class of stock for the applicable period, divided by the
weighted-average number of outstanding shares in each class during
the applicable period. The earnings allocated to the subsidiary
tracking stock are determined based on the subsidiary tracking
stockholders' economic interest in the targeted subsidiary's earnings
available for dividends or change in accumulated losses that do not
include those of the targeted subsidiary's subsidiaries. The
earnings allocated to common stock are calculated by subtracting the
earnings allocated to the subsidiary tracking stock from Sony's net
income for the period.
Weighted-average shares used for computation of earnings per share
of common stock are as follows. The dilutive effect in the
weighted-average shares for the three months and nine months ended
December 31, 2002 and 2003 mainly resulted from convertible bonds.
Weighted-average shares (Thousands of shares)
Three months ended December 31
2002 2003
Net income
- Basic 920,961 925,086
- Diluted 999,828 1,000,852
Weighted-average shares (Thousands of shares)
Nine months ended December 31
2002 2003
Income before cumulative
effect of an accounting
change and net income
- Basic 919,337 923,387
- Diluted 998,275 1,000,606
Weighted-average shares used for computation of earnings per share of
the subsidiary tracking stock for the three months and nine months
ended December 31, 2002 and 2003 are 3,072 thousand shares. There
were no potentially dilutive securities or options granted for
earnings per share of the subsidiary tracking stock.
4. Sony's comprehensive income is comprised of net income and other
comprehensive income. Other comprehensive income includes changes in
unrealized gains or losses on securities, unrealized gains or losses
on derivative instruments, minimum pension liabilities adjustments
and foreign currency translation adjustments. Net income, other
comprehensive income (loss) and comprehensive income for the three
months and nine months ended December 31, 2002 and 2003 were as
follows:
(Millions of yen, millions of U.S. dollars)
Three months ended Nine months ended
December 31 December 31
2002 2003 2003 2002 2003 2003
Net income Y125,431 Y92,619 $866 Y226,663 Y126,666 $1,184
Other comprehensive
income (loss):
Unrealized gains
(losses) on
Securities (744) 1,026 10 (8,173) 30,907 289
Unrealized gains
(losses) on
derivative
instruments (1,066) (3,303) (31) (3,414) 2,891 27
Minimum pension
liabilities
Adjustments -- 788 7 -- (2,196) (21)
Foreign currency
translation
adjustments (12,467) (22,004) (206) (101,715) (100,129) (936)
(14,277) (23,493) (220) (113,302) (68,527) (641)
Comprehensive
income Y111,154 Y69,126 $646 Y113,361 Y58,139 $543
5. On April 1, 2002, Sony adopted FAS No.144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". FAS No.144 addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets. FAS No.144 establishes a single accounting model
for long-lived assets to be disposed of by sale and modifies the
accounting and disclosure rules for discontinued operations. The
adoption of the provision of FAS No.144 did not have a material
impact on Sony's results of operations and financial position for the
year ended March 31, 2003.
6. In April 2002, the Financial Accounting Standards Board ("FASB")
issued FAS No.145, "Rescission of FASB Statements No.4, 44 and 64,
Amendment of FASB Statement No.13, and Technical Corrections". This
statement rescinds certain authoritative pronouncements and amends,
clarifies or describes the applicability of others, effective for
fiscal years beginning or transactions occurring after May 15, 2002,
with early adoption encouraged. Sony elected early adoption of this
statement retroactive to April 1, 2002. The adoption of this
statement did not have an impact on Sony's results of operations and
financial position.
7. In June 2002, the FASB issued FAS No.146, "Accounting for Costs
Associated with Exit or Disposal Activities". FAS No.146 is
effective for exit or disposal activities that are initiated after
December 31, 2002. FAS No.146 addresses financial accounting and
reporting for costs associated with exit or disposal activities.
Sony adopted FAS No.146 on January 1, 2003. The adoption of this
statement did not have a material effect on Sony's results of
operations and financial position.
8. In November 2002, the FASB issued FASB Interpretation ("FIN") No.45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, an
interpretation of FASB Statements No.5, 57, and 107 and rescission of
FASB Interpretation No.34". The interpretation elaborates on the
existing disclosure requirements for most guarantees. It also
clarifies that at the time a company issues a guarantee, the company
must recognize an initial liability for the fair value of the
obligations it assumes under the guarantee. The initial recognition
and initial measurement provisions of FIN No.45 are applicable on a
prospective basis to guarantees issued or modified after December 31,
2002. The initial recognition and initial measurement provisions of
FIN No.45 did not have a material effect on Sony's results of
operations and financial position as at and for the year ended
March 31, 2003.
9. In December 2002, the FASB issued FAS No.148, "Accounting for Stock-
Based Compensation - Transition and Disclosure - an Amendment of FASB
Statement No.123". FAS No.148 amends FAS No.123, "Accounting for
Stock-Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. FAS No.148 also
requires that disclosures of the pro forma effect of using the fair
value method of accounting for stock-based employee compensation be
displayed more prominently and in a tabular format. Sony adopted the
disclosure-only requirements in accordance with FAS No.148 for the
year ended March 31, 2003. Sony has accounted for its employee
stock-based compensation in accordance with Accounting Principles
Board Opinion No.25, "Accounting for Stock Issued to Employees" and,
therefore, the adoption of the provisions of FAS No.148 did not have
an impact on Sony's results of operations and financial position.
10. Effective with the first quarter ended June 30, 2003, "(Gain) loss on
sale, disposal or impairment of assets, net" which was previously
included in "Selling, general and administrative" is disclosed
separately in "Costs and expenses". Such amounts for the three months
and nine months ended December 31, 2002 have been reclassified to
conform to the presentation for this year.
11. Adoption of New Accounting Standards
Consolidation of Variable Interest Entities
In January 2003, the FASB issued FIN No.46, "Consolidation of
Variable Interest Entities - an Interpretation of ARB No.51". This
interpretation addresses consolidation by a primary beneficiary of a
variable interest entity ("VIE"). FIN No.46 is effective immediately
for all new VIEs created or acquired after January 31, 2003. Sony
has not entered into any new arrangements with VIEs on or after
February 1, 2003. For VIEs created or acquired prior to February 1,
2003, the provisions of FIN No.46 must be adopted by the end of the
third quarter of the year ending March 31, 2004, with early adoption
from the second quarter encouraged. For VIEs acquired prior to
February 1, 2003, any difference between the net amount added to the
balance sheet and the amount of any previously recognized interest in
the VIE will be recognized as a cumulative effect of an accounting
change. For VIEs created or acquired prior to February 1, 2003, Sony
adopted FIN No.46 on July 1, 2003. As a result of the adoption of
FIN No.46, Sony recognized Y2,117 million ($20 million) of loss as
the cumulative effect of accounting change. Additionally, Sony's
assets and liabilities increased as non-cash transactions, which
resulted in no cash flows, by Y95,255 million ($890 million) and
Y97,950 million ($915 million), respectively, as well as cash and
cash equivalents of Y1,521 million ($14 million).
Accounting for Asset Retirement Obligations
In June 2001, the FASB issued FAS No.143, "Accounting for Asset
Retirement Obligations". This statement addresses financial
accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset
retirement costs. Sony adopted FAS No.143 on April 1, 2003. The
adoption of FAS No.143 did not have a material impact on Sony's
results of operations and financial position.
Multiple Element Revenue Arrangements
In November 2002, the FASB issued Emerging Issues Task Force ("EITF")
Issue No.00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables". EITF Issue No.00-21 provides guidance on when and how
to account for arrangements that involve the delivery or performance
of multiple products, services and/or rights to use assets. Sony
adopted EITF Issue No.00-21 on July 1, 2003. The adoption of EITF
Issue No.00-21 did not have a material impact on Sony's results of
operations and financial position.
Derivative Instruments and Hedging Activities
In April 2003, the FASB issued FAS No.149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities". This
statement amends and clarifies financial accounting and reporting for
derivative instruments, including derivative instruments embedded in
other contracts and for hedging activities under FAS No.133. Sony
adopted FAS No.149 on July 1, 2003. The adoption of FAS No.149 did
not have an impact on Sony's results of operations and financial
position.
Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity
In May 2003, the FASB issued FAS No.150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity". FAS No.150 establishes standards for how certain financial
instruments with characteristics of both liabilities and equity shall
be classified and measured. This statement is effective for
financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. Sony adopted FAS No.150 during
the first quarter of the year ending March 31, 2004. The adoption of
FAS No.150 did not have an impact on Sony's results of operations and
financial position.
Other Consolidated Financial Data
(Millions of yen, millions of U.S. dollars)
Three months ended December 31
2002 2003 Change 2003
Capital expenditures
(additions to property,
plant and equipment) Y 56,937 Y 97,649 +71.5% $ 913
Depreciation and
amortization expenses* 88,716 95,229 +7.3 890
(Depreciation expenses
for tangible assets) (70,304) (74,670) (+6.2) (698)
R&D expenses 105,564 123,760 +17.2 1,157
Nine months ended December 31
2002 2003 Change 2003
Capital expenditures
(additions to property,
plant and equipment) Y 184,631 Y 268,682 +45.5% $ 2,511
Depreciation and
amortization expenses* 255,684 266,930 +4.4 2,495
(Depreciation expenses for
tangible assets) (205,136) (210,426) (+2.6) (1,967)
R&D expenses 311,749 374,115 +20.0 3,496
* Including amortization expenses for intangible assets and for deferred
insurance acquisition costs
Condensed Financial Services Financial Statements (Unaudited)
The results of the Financial Services segment are included in Sony's
consolidated financial statements. The following schedules shows
unaudited condensed financial statements for the Financial Services
segment and all other segments excluding Financial Services. These
presentations are not required under U.S. GAAP, which is used in Sony's
consolidated financial statements. However, because the Financial
Services segment is different in nature from Sony's other segments, Sony
believes that a comparative presentation may be useful in understanding
and analyzing Sony's consolidated financial statements.
Transactions between the Financial Services segment and Sony without
Financial Services are eliminated in the consolidated figures shown
below.
Condensed Statements of Income
(Millions of yen, millions of U.S. dollars)
Three months ended December 31
Financial Services 2002 2003 Change 2003
Financial service revenue Y 133,121 Y 137,342 +3.2% $ 1,284
Financial service expenses 130,013 124,676 -4.1 1,166
Operating income 3,108 12,666 +307.5 118
Other income (expenses), net (95) 2,137 -- 20
Income before income taxes 3,013 14,803 +391.3 138
Income taxes and other 2,311 6,006 +159.9 56
Net income Y 702 Y 8,797 +1,153.1 $ 82
(Millions of yen, millions of U.S. dollars)
Sony without Financial Three months ended December 31
Services 2002 2003 Change 2003
Net sales and operating
revenue Y 2,184,119 Y 2,195,686 +0.5% $ 20,520
Costs and expenses 1,987,597 2,049,716 +3.1 19,156
Operating income 196,522 145,970 -25.7 1,364
Other income (expenses), net 2,365 (2,963) -- (27)
Income before income taxes 198,887 143,007 -28.1 1,337
Income taxes and other 74,399 59,426 -20.1 556
Net income Y 124,488 Y 83,581 -32.9 $ 781
(Millions of yen, millions of U.S. dollars)
Three months ended December 31
Consolidated 2002 2003 Change 2003
Financial service revenue Y 126,366 Y 130,319 +3.1% $ 1,218
Net sales and operating
revenue 2,181,367 2,193,082 +0.5 20,496
2,307,733 2,323,401 +0.7 21,714
Costs and expenses 2,108,217 2,164,629 +2.7 20,230
Operating income 199,516 158,772 -20.4 1,484
Other income (expenses), net 2,384 (962) -- (9)
Income before income taxes 201,900 157,810 -21.8 1,475
Income taxes and other 76,469 65,191 -14.7 609
Net income Y 125,431 Y 92,619 -26.2 $ 866
Condensed Statements of Income
(Millions of yen, millions of U.S. dollars)
Financial Services Nine months ended December 31
2002 2003 Change 2003
Financial service revenue Y 389,876 Y 441,403 +13.2% $ 4,125
Financial service expenses 370,231 403,434 +9.0 3,770
Operating income 19,645 37,969 +93.3 355
Other income (expenses), net (2,454) 2,049 -- 19
Income before income taxes 17,191 40,018 +132.8 374
Income taxes and other 9,321 15,872 +70.3 148
Net income Y 7,870 Y 24,146 +206.8 $ 226
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Sony without Financial
Services 2002 2003 Change 2003
Net sales and operating
revenue Y 5,457,205 Y 5,309,512 -2.7% $ 49,622
Costs and expenses 5,174,412 5,138,694 -0.7 48,026
Operating income 282,793 170,818 -39.6 1,596
Other income (expenses),
net 72,379 36,196 -50.0 339
Income before income
taxes 355,172 207,014 -41.7 1,935
Income taxes and other 132,065 93,336 -29.3 872
Income before cumulative
effect of an accounting
change 223,107 113,678 -49.0 1,063
Cumulative effect of an
accounting change -- (2,117) -- (20)
Net income Y 223,107 Y 111,561 -50.0 $ 1,043
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Consolidated 2002 2003 Change 2003
Financial service revenue Y 369,256 Y 421,073 +14.0% $ 3,935
Net sales and operating
revenue 5,450,013 5,303,127 -2.7 49,562
5,819,269 5,724,200 -1.6 53,497
Costs and expenses 5,517,362 5,515,542 -0.0 51,547
Operating income 301,907 208,658 -30.9 1,950
Other income (expenses),
net 65,456 28,982 -55.7 271
Income before income taxes 367,363 237,640 -35.3 2,221
Income taxes and other 140,700 108,857 -22.6 1,017
Income before cumulative
effect of an accounting
change 226,663 128,783 -43.2 1,204
Cumulative effect of an
accounting change -- (2,117) -- (20)
Net income Y 226,663 Y 126,666 -44.1 $1,184
Condensed Balance Sheets
(Millions of yen, millions of U.S. dollars)
Financial Services December 31 March 31 December 31 December 31
2002 2003 2003 2003
ASSETS
Current assets:
Cash and cash
equivalents Y 296,949 Y 274,543 Y 261,222 $ 2,442
Marketable
securities 213,428 236,621 268,944 2,514
Notes and accounts
receivable, trade 78,793 68,188 84,141 786
Other 107,034 105,593 113,840 1,063
696,204 684,945 728,147 6,805
Investments and
advances 1,585,125 1,731,415 2,067,251 19,320
Property, plant and
equipment 39,595 45,990 40,503 379
Other assets:
Deferred insurance
acquisition costs 326,401 327,869 344,835 3,223
Other 112,961 106,900 108,514 1,014
439,362 434,769 453,349 4,237
Y 2,760,286 Y 2,897,119 Y 3,289,250 $ 30,741
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term
borrowings Y 36,543 Y 72,753 Y 79,010 $ 738
Notes and accounts
payable, trade 8,013 5,417 9,759 91
Deposits from customers
in the banking
business 213,881 248,721 358,611 3,352
Other 91,460 88,986 104,441 976
349,897 415,877 551,821 5,157
Long-term liabilities:
Long-term debt 140,551 140,908 139,184 1,301
Accrued pension and
severance costs 8,788 8,737 10,064 94
Future insurance
policy benefits
and other 1,848,136 1,914,410 2,111,994 19,738
Other 104,305 104,421 120,033 1,122
2,101,780 2,168,476 2,381,275 22,255
Stockholders' equity 308,609 312,766 356,154 3,329
Y 2,760,286 Y 2,897,119 Y 3,289,250 $30,741
(Millions of yen, millions of U.S. dollars)
Sony without Financial
Services December 31 March 31 December 31 December 31
ASSETS 2002 2003 2003 2003
Current assets:
Cash and cash
equivalents Y 501,686 Y 438,515 Y 636,469 $ 5,948
Marketable
securities 5,020 4,899 4,317 40
Notes and accounts
receivable, trade 1,407,547 943,073 1,298,808 12,139
Other 1,268,121 1,117,453 1,245,792 11,643
3,182,374 2,503,940 3,185,386 29,770
Film costs 275,801 287,778 269,183 2,516
Investments and
advances 353,153 383,004 368,341 3,443
Investments in Financial
Services, at cost 166,905 166,905 176,905 1,653
Property, plant and
equipment 1,275,623 1,232,359 1,323,412 12,368
Other assets 1,128,385 1,251,810 1,227,008 11,467
Y 6,382,241 Y 5,825,796 Y 6,550,235 $61,217
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term
borrowings Y 296,844 Y 126,687 Y 217,312 $ 2,031
Notes and accounts
payable, trade 890,224 693,589 910,052 8,505
Other 1,351,974 1,245,578 1,284,782 12,007
2,539,042 2,065,854 2,412,146 22,543
Long-term liabilities:
Long-term debt 791,440 802,911 1,125,553 10,519
Accrued pension and
severance costs 308,726 487,437 524,957 4,906
Other 373,438 310,136 304,079 2,842
1,473,604 1,600,484 1,954,589 18,267
Minority interest in
consolidated
subsidiaries 16,267 16,288 13,014 122
Stockholders' equity 2,353,328 2,143,170 2,170,486 20,285
Y 6,382,241 Y 5,825,796 Y 6,550,235 $61,217
Consolidated (Millions of yen, millions of U.S. dollars)
December 31 March 31 December 31 December 31
ASSETS 2002 2003 2003 2003
Current assets:
Cash and cash
equivalents Y 798,635 Y 713,058 Y 897,691 $ 8,390
Marketable securities 218,448 241,520 273,261 2,554
Notes and accounts
receivable, trade 1,482,581 1,007,395 1,378,679 12,885
Other 1,350,156 1,192,241 1,323,203 12,366
3,849,820 3,154,214 3,872,834 36,195
Film costs 275,801 287,778 269,183 2,516
Investments and advances 1,818,037 1,994,123 2,315,386 21,639
Property, plant and
equipment 1,315,218 1,278,350 1,363,915 12,747
Other assets:
Deferred insurance
acquisition costs 326,401 327,869 344,835 3,223
Other 1,206,071 1,328,211 1,226,259 11,460
1,532,472 1,656,080 1,571,094 14,683
Y 8,791,348 Y 8,370,545 Y 9,392,412 $87,780
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term
borrowings Y 311,087 Y 158,745 Y 259,064 $ 2,421
Notes and accounts
payable, trade 896,089 697,385 916,594 8,566
Deposits from customers
in the banking business 213,881 248,721 358,611 3,352
Other 1,439,335 1,330,197 1,377,041 12,870
2,860,392 2,435,048 2,911,310 27,209
Long-term liabilities:
Long-term debt 811,151 807,439 1,129,989 10,561
Accrued pension and
severance costs 317,514 496,174 535,021 5,000
Future insurance policy
benefits and other 1,848,136 1,914,410 2,111,994 19,738
Other 445,257 414,557 343,750 3,213
3,422,058 3,632,580 4,120,754 38,512
Minority interest in
consolidated subsidiaries 22,220 22,022 18,493 173
Stockholders' equity 2,486,678 2,280,895 2,341,855 21,886
Y 8,791,348 Y 8,370,545 Y 9,392,412 $87,780
Condensed Statements of Cash Flows
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Financial Services 2002 2003 2003
Net cash provided by operating
activities Y 215,410 Y 204,485 $ 1,911
Net cash used in investing
activities (323,489) (333,650) (3,118)
Net cash provided by financing
activities 77,793 115,844 1,083
Net decrease in cash and cash
equivalents (30,286) (13,321) (124)
Cash and cash equivalents at
beginning of the fiscal year 327,235 274,543 2,566
Cash and cash equivalents at
December 31 Y 296,949 Y 261,222 $ 2,442
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Sony without Financial Services 2002 2003 2003
Net cash provided by operating
activities Y 292,731 Y 191,620 $ 1,790
Net cash used in investing
activities (70,666) (268,699) (2,511)
Net cash provided by (used in)
financing activities (52,746) 319,923 2,990
Effect of exchange rate changes
on cash and cash equivalents (24,198) (44,890) (419)
Net increase in cash and cash
equivalents 145,121 197,954 1,850
Cash and cash equivalents at
beginning of the fiscal year 356,565 438,515 4,098
Cash and cash equivalents
at December 31 Y 501,686 Y 636,469 $ 5,948
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Consolidated 2002 2003 2003
Net cash provided by operating
activities Y 503,066 Y 386,446 $ 3,611
Net cash used in investing
activities (404,569) (595,162) (5,562)
Net cash provided by financing
activities 40,536 438,239 4,096
Effect of exchange rate changes
on cash and cash equivalents (24,198) (44,890) (419)
Net increase in cash and cash
equivalents 114,835 184,633 1,726
Cash and cash equivalents at
beginning of the fiscal year 683,800 713,058 6,664
Cash and cash equivalents
at December 31 Y 798,635 Y 897,691 $ 8,390
SOURCE Sony Corporation
-0- 01/28/2004
/CONTACT: Investor Relations, Tokyo - Yukio Ozawa, +81-3-5448-2180, New
York - Masaaki Konoo or Kumiko Koyama, +1-212-833-6722, or London - Chris
Hohman or Shinji Tomita, +44-20-7444-9713, all of Sony Corporation/
/Web site: http://www.sony.net/IR /
(SNE)
END