BW20030425002019 20030425T130902Z UTC
( BW)(SONY-CORP.)(SON) Final Results
Business Editors
UK REGULATORY NEWS
TOKYO--(BUSINESS WIRE)--April 25, 2003--
Consolidated Financial Results for the Fiscal Year ended March 31, 2003
Electronics, Game and Pictures Businesses Lead an Improvement in Full
Year Operating Performance Although Fourth Quarter Sales Decreased and
Losses Increased
Sony Corporation announced today its consolidated results for the
fiscal year ended March 31, 2003 (April 1, 2002 to March 31, 2003).
Highlights
-- Although sales decreased slightly year on year to Yen7,473.6
billion ($62.3 billion), operating income increased Yen50.8
billion to Yen185.4 billion ($1.55 billion). Net income was
Yen115.5 billion ($963 million), a year on year increase of
Yen100.2 billion. The depreciation of the yen against the euro
had a positive impact on sales and operating income.
-- Although sales in the Electronics business decreased 6.5% due
to a decrease in sales of Aiwa products and VAIO PCs, an
operating income of Yen41.4 billion ($345 million) was recorded
compared to an operating loss of Yen1.2 billion in the previous
fiscal year. The improved operating performance resulted from
the benefit of restructuring initiatives primarily in the
components category, and the contribution to profitability of
digital still cameras and CCDs. Inventory decreased Yen79.6
billion year on year.
-- Unit sales of hardware and software in the Game business
increased mainly in the U.S and Europe. Sales decreased 4.9%
year on year due, in part, to strategic price reductions of
hardware in all major regions. Operating income increased
Yen29.7 billion to Yen112.7 billion ($939 million) because of
strong software unit sales and reductions of hardware
manufacturing costs.
-- The Pictures business recorded its highest ever sales and
operating income, Yen802.8 billion ($6,690 million) and Yen59.0
billion ($491 million), respectively, for the fiscal year due
to the strong worldwide theatrical and home entertainment
performance of current year releases including Spider-Man, Men
in Black II, xXx and Mr. Deeds.
-- The Music business recorded a Yen8.7 billion ($72 million)
operating loss due to an increase in restructuring charges at
the U.S. subsidiary and a decrease in worldwide album sales,
as a result of the contraction of the global music market
primarily brought on by increased digital piracy.
-- Cash flow was positive throughout the fiscal year and
significantly improved compared with the previous fiscal year
due to an increase in operating income and reduced capital
expenditures.
-- In the quarter ended March 31, 2003, sales decreased 12% year
on year to Yen1,654.4 billion ($13.8 billion), operating loss
increased Yen92.9 billion to Yen116.5 billion ($971 million),
and net loss increased Yen105.7 billion to Yen111.1 billion
($926 million), primarily due to a deterioration in the
operating performance of the Electronics business. The primary
reasons for the increase in operating loss included the lower
sales, the implementation of inventory adjustments resulting
from production adjustments in the Electronics business, the
acceleration of restructuring initiatives in the Electronics
and Music businesses, and increased expenses related to patent
royalties.
(Billions of yen, millions of U.S.
dollars, except per share amounts)
Year ended March 31
2002 2003 Change 2003*
-----------------------------------------------------------------------------------------------
Sales and operating revenue Yen7,578.3 Yen7,473.6 -1.4% $62,280
Operating income 134.6 185.4 +37.7 1,545
Income before income taxes 92.8 247.6 +166.9 2,064
Net income 15.3 115.5 +654.5 963
Net income per share of
common stock
-- Basic Yen16.72 Yen125.74 +652.0 $1.05
-- Diluted 16.67 118.21 +609.1 0.99
* U.S. dollar amounts have been translated from yen, for
convenience only, at the rate of Yen120=U.S.$1, the approximate Tokyo
foreign exchange market rate as of March 31, 2003.
Consolidated Results for the Fiscal Year
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Yen7,473.6 billion ($62.3 billion), a decrease of 1.4%
year on year (2% decrease on a local currency basis - see Note I on
page 10).
-- Sales to external customers fell 4.8% in the Electronics
business and 5.1% in the Game business.
-- However, sales in the Pictures segment rose 26.3% to reach a
record Yen802.8 billion ($6,690 million).
Operating income was Yen185.4 billion ($1,545 million), an increase
of Yen50.8 billion, or 37.7%, year on year (5% decrease on a local
currency basis).
-- Business segments that contributed to an increase in operating
income:
-- Operating performance in the Electronics business improved
Yen42.5 billion from an operating loss recorded in the previous
year. In the Game business, operating income increased Yen29.7
billion, and in the Pictures business, operating income
increased Yen27.7 billion.
-- Business segments that contributed to a decrease in operating
income:
-- Operating performance in the Music business deteriorated
significantly, by Yen28.8 billion, and an operating loss was
recorded. In the Other business, operating loss increased
Yen15.3 billion (an operating loss was recorded in the previous
year as well).
-- Selling, general and administrative expenses during the fiscal
year increased Yen76.6 billion primarily due to an increase in
advertising and promotion expenses and severance related
expenses.
-- Restructuring charges for the fiscal year amounted to
approximately Yen100 billion ($833 million). The severance
related expenses mentioned above are included in these
charges.
-- On a business segment basis, the most significant charges were
recorded in Electronics, approximately Yen70 billion ($583
million), and in Music, approximately Yen24 billion ($200
million).
Income before income taxes was Yen247.6 billion ($2,064 million),
an increase of Yen154.8 billion, or 166.9%, year on year.
-- In addition to the increase in operating income, other income
increased Yen61.2 billion and other expenses decreased Yen42.8
billion.
-- Primary factor contributing to the increase in other income:
~ The recording of a Yen66.5 billion gain* on the sale of Sony's
equity interest in Telemundo Communications Group, Inc. and its
subsidiaries ("Telemundo"), a U.S. based Spanish language television
network and station group that was accounted for by the equity method.
(he dollar amount of the gain recorded on the sale of Telemundo at
Sony's U.S. based subsidiary was $511 million.)
-- Primary factors contributing to the decrease in other
expenses:
~ The recording of a net foreign exchange gain of Yen1.9 billion
($16 million) compared with a net foreign exchange loss of Yen31.7
billion recorded in the previous year.
~ A decrease in interest expense of Yen9.1 billion as a result of
lower average balances of short-term borrowings and lower interest
rates.
~ Partially offsetting these factors was a Yen4.7 billion increase
in losses on the devaluation of securities.
Net income was Yen115.5 billion ($963 million), an increase of
Yen100.2 billion, or 654.5%, year on year.
-- Factor positively effecting net income: increase in income
before income taxes.
-- Factors negatively effecting net income:
-- An income tax increase of Yen15.6 billion.
~ Factor adding to tax expense: increase in income before income
taxes.
~ Factors offsetting the increase in tax expense:
- A reversal of Yen51.9 billion ($433 million) in valuation
allowances on deferred tax assets held by Aiwa Co. Ltd. ("Aiwa")
because these assets became recoverable as a result of Sony's decision
to merge with Aiwa.
~ The effective income tax rate was 32.6% compared to 70.3% in the
previous year.
-- The recording of a Yen6.6 billion ($55 million) minority
interest in the income of consolidated subsidiaries, compared
to a Yen16.2 billion minority interest in the loss of
consolidated subsidiaries in the previous year.
~ With regards to minority interest of Aiwa, a significant loss
was recorded in the previous year due to a loss incurred by Aiwa, and
income was recorded in the current year due to a reversal in taxable
incomes mentioned above.
-- A Yen10.2 billion increase in equity in net losses of affiliated
companies.
~ Losses increased at the following companies:
- Sony Ericsson Mobile Communications ("SEMC"), a mobile handset
joint venture established in October 2001 in which Sony has a 50%
equity holding.
- ST-Liquid Crystal Display Corp ("ST-LCD"), a joint venture based
in Japan which manufactures LCD panels.
~ Factors offsetting the increase in net losses of affiliated
companies.
- The elimination of losses at Columbia House Company, a direct
marketer of music and videos in the U.S., and Telemundo, due to the
sale of Sony's equity interest in these companies, which had recorded
losses in the prior year.
SEMC performance for the year ended March 31, 2003
Shipments of mobile handsets: 22.49 million
Net sales: 3,860 million euro
Loss before tax: 404 million euro
Net loss: 348 million euro
Sony's equity in net loss of affiliate: Yen20.8 billion ($173 million)
Reasons for loss: Lower than expected revenues for CDMA and TDMA handsets in the U.S. market.
Delays in the launches of certain low-end to mid-end GSM products.
Expenses for establishing the joint venture and product development.
-- The absence of the Yen6.0 billion gain recorded in the previous
year due to the cumulative effect of a change in accounting
principles.
Operating Performance Highlights by Business Segment
Electronics
(Billions of yen, millions of U.S.
dollars)
Year ended March 31
2002 2003 Change 2003
-----------------------------------------------------------------------------------------------
Sales and operating revenue Yen5,286.2 Yen4,940.5 - 6.5% $41,170
Operating income (loss) (1.2) 41.4 - 345
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Yen4,940.5 billion ($41.2 billion), a decrease of 6.5%
year on year (7% decrease on a local currency basis).
-- Product categories with increased sales:
-- "Semiconductors" by 12.3%, "Components" by 2.2%, "Video" by
2.1% and "Television" by 0.4%.
-- Products categories with decreased sales:
-- "Information and Communication" by 17.9%, "Audio" by 8.7% and
"Other" (which contains Aiwa) by 2.1%.
-- On a local currency basis:
-- Products with the largest decreases in sales:
~ Aiwa products, VAIO PCs, audio products, CRT computer displays,
cellular phones (now sold mainly to SEMC), video cameras and CRT
televisions.
-- Products with the largest increases in sales:
~ Digital still cameras ("Cybershot"), personal digital assistants
("CLIE"), semiconductors (especially CCDs and LCDs) and projection
TVs.
-- On a geographic basis:
~ Sales fell in the U.S., Japan and Europe.
~ Sales rose in other areas, particularly in East Asia (not
including Japan).
In terms of profitability, operating income of Yen41.4 billion
($345 million) was recorded compared with operating loss of Yen1.2
billion in the previous fiscal year, an improvement of Yen42.5 billion
year on year.
-- The following factors contributed to the improvement in
profitability:
-- Increased demand for semiconductors, particularly CCDs, and an
increase in sales in the digital still camera and battery
businesses.
-- An improvement in the profit structure of businesses such as
portable audio and components, particularly cathode ray tubes,
due to the benefit of restructuring (reductions in fixed
costs, via the sale and disposal of underused production
facilities, and headcount reductions) carried out in the
previous year.
-- The positive impact of the depreciation of the yen against the
euro which exceeded the negative impact of the depreciation of
the yen against the U.S. dollar.
-- The transfer of the mobile handset business (which recorded a
loss in the previous year) to SEMC, an affiliate accounted for
under the equity method.
-- Product categories information:
-- Categories recording operating income:
~ "Audio", which benefited from the effects of restructuring,
"Television", in which demand rose for large-screen televisions, and
"Video", in which there was a significant increase in sales for
digital still cameras. "Components" changed from loss to profit due to
the effects of restructuring.
-- Categories recording operating loss:
~ Losses decreased in "Information and Communications", because
the mobile handset business was transferred to SEMC, and in
"Semiconductors", where there was an increase in demand, particularly
for CCDs. Losses increased in the "Other" segment, principally due to
losses at Aiwa.
Sales of Aiwa products fell year on year. Aiwa recorded an
operating loss due expenses incurred for restructuring including
headcount reductions, inventory write-downs brought about by the
concentration of product lines, and the sale and disposal of
production facilities. Sony absorbed Aiwa by merger on December 1,
2002.
Inventory on March 31, 2003 was Yen432.4 billion ($3,603 million),
a Yen79.6 billion, or 15.6%, decrease compared with the level on March
31, 2002.
Game
(Billions of yen, millions of U.S.
dollars)
Year ended March 31
2002 2003 Change 2003
-----------------------------------------------------------------------------------------------
Sales and operating revenue Yen1,003.7 Yen955.0 - 4.9% $7,958
Operating income 82.9 112.7 + 35.9 939
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Yen955.0 billion ($7,958 million), a decrease of 4.9%
year on year (7% decrease on a local currency basis).
-- Although hardware sales decreased, software sales increased,
year on year.
-- Strategic price reductions of PlayStation 2 hardware in all
major regions contributed to a year on year decrease in
hardware sales revenue in the U.S. and Japan, although sales
revenue increased in Europe mainly due to the positive impact
of the depreciation of the yen against the euro. Hardware unit
sales of PlayStation 2 decreased in Japan, but increased in
the U.S. and Europe.
-- Unit sales of PlayStation 2 software significantly increased
in Japan, the U.S. and Europe. Sales revenue increased in the
U.S. and Europe, but decreased in Japan due to a decrease in
unit sales of in-house developed software.
-- Worldwide hardware production shipments:*
-- PS 2: 22.52 million units (an increase of 4.45 million units)
-- PS one: 6.78 million units (a decrease of 0.62 million units)
-- Worldwide software production shipments:*
-- PS 2: 189.90 million units (an increase of 68.10 million
units)
-- PlayStation: 61.00 million units (a decrease of 30.00 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.
Operating income was Yen112.7 billion ($939 million), an increase
of Yen29.7 billion, or 35.9%, year on year (12% increase on a local
currency basis).
-- Although hardware sales decreased primarily due to strategic
price reductions in all major regions, the positive impact of
the depreciation of the yen against the euro, in addition to
the continued reduction of manufacturing costs, led to an
increase in operating income.
-- Strong software sales mainly in the U.S. and Europe also
contributed to an overall increase in operating income.
Inventory on March 31, 2003 was Yen143.4 billion ($1,195 million),
a Yen24.4 billion, or 20.5%, increase compared with the level on March
31, 2002.
Music
(Billions of yen, millions of U.S.
dollars)
Year ended March 31
2002 2003 Change 2003
-----------------------------------------------------------------------------------------------
Sales and operating revenue Yen642.8 Yen636.3 - 1.0% $5,303
Operating income (loss) 20.2 (8.7) - (72)
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 were Yen636.3 billion ($5,303 million), a decrease of 1.0%
year on year (1% increase on a local currency basis). Of the Music
segment's sales, 72% were generated by SMEI, and 28% were generated by
SMEJ.
-- SMEI's sales (on a U.S. dollar basis) increased 6%.
-- Sales increased due to an increase in manufacturing sales of
DVD software to the Pictures and Game segments.
-- Partially offsetting the increase in sales was a decline in
album sales in many regions worldwide due to the continued
contraction of the global music industry brought on by digital
piracy combined with competition from other entertainment
sectors and economic uncertainty impacting consumer spending.
-- Titles contributing the most to sales:
~ Dixie Chicks' Home, Shakira's Laundry Service, Jennifer Lopez's
This is Me...Then, and Celine Dion's One Heart.
-- SMEJ's sales decreased 10%.
-- Sales decreased because of the continued contraction of the
music industry.
-- Titles contributing the most to sales:
~ Chemistry's Second to None, Mika Nakashima's TRUE, Chitose
Hajime's Hainumikaze, and Ken Hirai's Life is...
In terms of profitability, an operating loss of Yen8.7 billion
($72 million) was recorded compared with operating income of Yen20.2
billion in the previous year, a deterioration of Yen28.8 billion year
on year.
-- SMEI incurred an operating loss (on a U.S. dollar basis)
compared to operating income in the prior year.
-- Reasons for the decline in profit performance:
~ An increase year on year in restructuring charges of
approximately $120 million.
- During the fiscal year, restructuring charges of approximately
$190 million were recorded for initiatives including the closure of a
manufacturing facility in the U.S., the consolidation of several
distribution facilities outside of the U.S., and the further
consolidation of various support functions across labels and operating
units.
- The restructuring activities undertaken resulted in a reduction
during the fiscal year of over 1,400 employees worldwide.
- These continuing aggressive restructuring activities are being
taken to counteract the effect of the decrease in album sales.
~ A decrease in album sales and an increase in talent-related
expenses.
-- Factors partially offsetting the decline in profit
performance:
~ A decrease in advertising and promotion expenses.
~ Savings realized from SMEI's previously implemented
restructuring initiatives.
~ Higher income generated by the increased DVD software
manufacturing activity.
-- SMEJ's operating income decreased 81% year on year due to the
drop in sales and an increase in severance related expenses
incurred from restructuring.
Pictures
(Billions of yen, millions of U.S.
dollars)
Year ended March 31
2002 2003 Change 2003
-----------------------------------------------------------------------------------------------
Sales and operating revenue Yen635.8 Yen802.8 + 26.3% $6,690
Operating income 31.3 59.0 +88.6 491
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 were Yen802.8 billion ($6,690 million), an increase of 26.3%
year on year (30% increase on a U.S. dollar basis). This represented
the highest sales ever recorded by SPE.
-- The reasons for the significant increase in sales (on a U.S.
dollar basis) were:
-- The strong worldwide performance, both theatrically and in
home entertainment, of current year releases including
Spider-Man, Men in Black II, xXx, and Mr. Deeds.
~ Spider-Man, the highest grossing film in SPE's history, exceeded
$800 million in worldwide box office.
~ The increased worldwide popularity of DVDs, together with the
successful film slate, contributed to the higher home entertainment
revenues.
Operating income was Yen59.0 billion ($491 million), an increase
of Yen27.7 billion, or 88.6%, year on year (92% increase on a U.S.
dollar basis). This also represented the highest operating income ever
achieved by SPE.
-- The reasons for the increase in profitability were:
-- Substantially higher theatrical and home entertainment
revenues, as noted above, driven by SPE's successful summer
theatrical release slate.
-- Higher television operating income due to the recording of
restructuring expenses in the previous fiscal year.
-- Lower losses on and a reduction in the number of new network
television shows and pilots as a result of that restructuring.
-- Increased revenues from the game show, Wheel of Fortune.
-- Partially offsetting the increase in profitability were:
-- Disappointing performance from several films including I Spy
and Stuart Little 2.
-- A provision with respect to previously recorded revenue and
adjustments to ultimate film income from KirchMedia.
~ KirchMedia is an insolvent licensee in Germany of SPE's feature
film and television products.
In April 2002, SPE sold its entire equity interest in Telemundo.
Cash proceeds of Yen88.4 billion* were received upon the closing and a
gain of Yen66.5 billion* was recorded on this sale in "gain on sales
of securities investments, net" (in other income).
(he dollar amount of the cash proceeds and gain recorded on the
sale of Telemundo were $679 million and $511 million, respectively.)
Financial Services
(Billions of yen, millions of U.S.
dollars)
Year ended March 31
2002 2003 Change 2003
-----------------------------------------------------------------------------------------------
Financial Service revenue Yen512.2 Yen540.5 + 5.5% $4,504
Operating income 22.1 23.3 +5.4 194
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Financial Service revenue was Yen540.5 billion ($4,504 million),
an increase of 5.5% year on year.
-- Revenue increased primarily due to an increase in revenue at
Sony Life Insurance Co., Ltd. ("Sony Life").
-- Insurance revenue rose due to an increase in
insurance-in-force.
-- Valuation gains and losses from investments in the general
account improved because, even though a slight loss was
recorded due to the devaluation of Argentine government bonds
held in that account, the amount of that loss decreased
significantly compared with the loss recorded in the previous
year.
-- Sony Life's revenue gains were partially offset by a
deterioration of valuation gains and losses from investments
in the separate account, which resulted from the stock market
downturn.
~ Valuation gains and losses from investments in the separate
account accrue directly to the account of policyholders and,
therefore, do not affect operating income.
-- In addition, the following factors affected Financial Services
business segment revenue:
-- An increase in revenue at Sony Assurance Inc. due to higher
insurance revenue brought about by an expansion in
insurance-in-force.
-- A decrease in revenue at Sony Finance International, Inc.
("Sony Finance") brought about by a decrease in revenues from
rent, despite an increase in leasing and other revenue.
Operating income increased Yen1.2 billion or 5.4% year on year to
Yen23.3 billion ($194 million).
-- Operating income at Sony Life increased due to an increase in
insurance revenue and the improvement in valuation gains and
losses from investments in the general account.
-- In addition, the following factors affected Financial Services
business operating income:
-- Fewer losses at Sony Assurance Inc. due to an increase in
insurance revenue, a decrease in the proportion of insurance
payouts relative to the number of policy holders, and an
improvement in the ratio of sales to sales to operating
expenses.
-- A recording of a loss at Sony Finance due to a deterioration
of profitability brought on by an increase in operating
expenses in connection with the credit card business.
-- Continuing losses at Sony Bank, which began operations in June
2001.
Other
(Billions of yen, millions of U.S.
dollars)
Year ended March 31
2002 2003 Change 2003
-----------------------------------------------------------------------------------------------
Sales and operating revenue Yen203.8 Yen250.3 +22.8% $2,086
Operating income (loss) (16.6) (32.0) - (266)
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Yen250.3 billion ($2,086 million), an increase of 22.8%
year on year. (Of sales in the Other segment, 48% were sales to
outside customers).
-- Sales increased due to increased sales of NACS-related
businesses (see Note II on page 10), due primarily to
increased sales at an in-house oriented information system
service business, and increased sales at an advertising agency
business subsidiary in Japan.
In terms of profitability, an operating loss of Yen32.0 billion
($266 million) was recorded compared with an operating loss of Yen16.6
billion in the previous year, a deterioration of Yen15.3 billion.
-- An increase in aggregate losses at NACS-related businesses was
the principal cause of the deterioration:
-- There was an increase in expenses incurred in connection with
the creation of a platform business, such as expenses for the
development of network technology.
-- Impairments of professional-use software were recorded.
-- Offsetting the increase in operating losses for the segment
was the recording of operating income at Sony Communication
Network Corporation.
Cash Flow
(Billions of yen, millions of U.S. dollars)
Year ended March 31
2002 2003 Difference 2003
-----------------------------------------------------------------------------------------------
Cash flow
- From operating activities Yen737.6 Yen853.8 Yen + 116.2 $7,115
- From investing activities (767.1) (706.4) + 60.7 (5,887)
- From financing activities 85.0 (93.1) - 178.2 (776)
Cash and cash equivalents as of March 31 683.8 713.1 + 29.3 5,942
Cash provided by operating activities during the fiscal year ended
March 31, 2003 was Yen853.8 billion ($7,115 million), an increase of
Yen116.2 billion compared with the previous fiscal year.
-- While cash was used to increase deferred insurance acquisition
costs and decrease notes and accounts payable during the
fiscal year, the contribution to profit of the Game, Pictures
and Electronics businesses, an increase in future insurance
policy benefits and other in accordance with an increase in
insurance-in-force, and a decrease in notes and accounts
receivable caused cash generated from operating activities to
exceed expenditures.
-- Although there was a smaller decrease in inventories and a
smaller increase in future insurance policy benefits and other
benefits, the increase in the operating income of the
Electronics, Game and Pictures businesses, a smaller decrease
in notes and accounts payable, and a larger decrease in notes
and accounts receivable contributed to the net increase in
cash provided by operating activities compared with the
previous year.
Cash used in investing activities for the fiscal year was Yen706.4
billion ($5,887 million), a decrease of Yen60.7 billion year on year.
-- The use of cash derived primarily from the fact that
investments and advances of Yen1,026.4 billion ($8,553
million) exceeded sales and maturities of securities
investments and collections of advances of Yen542.5 billion
($4,521 million) in the Financial Services business,
reflecting an increase in assets under management in the
financial services businesses.
-- In addition, Yen275.3 billion ($2,294 million) was used to
purchase fixed assets, primarily in the Electronics business
but, as a result of the reduction in capital expenditures, the
figure decreased by Yen113.2 billion compared with the
previous fiscal year. Cash proceeds of Yen135.8 billion
($1,132 million) were also generated from the sales of
securities investments and collections of advances, including
Yen88.4 billion* from the sale of equity in Telemundo.
(*The U.S. dollar amount of the cash proceeds recorded on the sale
of Telemundo was $679 million.)
Cash used in financing activities for the fiscal year was Yen93.1
billion ($776 million) compared to Yen85.0 billion of cash provided by
financing activities in the previous fiscal year.
-- Although cash was provided by a Yen142.0 billion ($1,184
million) increase in deposits from customers in the banking
business, cash was used during the year for repayments of
Yen238.1 billion ($1,985 million) of long-term debt including
$1.5 billion of U.S. dollar notes redeemed on March 4, 2003,
and the payment of Yen22.9 billion ($191 million) in dividends.
This caused cash used in financing activities to exceed cash
generated by financing activities.
Consolidated Results for the Fourth Quarter ended March 31, 2003
Sales were Yen1,654.4 billion ($13.8 billion), a decrease of 12.2%
compared with the fourth quarter of the previous year (8% decrease on
a local currency basis).
-- Sales in the Electronics business decreased significantly due
to a decrease in sales of CRT televisions and VAIO PCs,
brought on by increased price competition and market
contraction. On a geographic basis, sales decreased
significantly in Japan and the U.S.
-- Sales in the Game business decreased due to a decrease in
hardware revenue caused, in part, by strategic price
reductions.
An operating loss of Yen116.5 billion ($971 million) was recorded
compared with an operating loss of Yen23.6 billion in the fourth
quarter of the previous year, a deterioration of Yen92.9 billion.
-- Losses in the Electronics business increased significantly due
to a decrease in sales, an increase in selling, general and
administrative expenses associated with an increase in patent
related expenses, and an increase in expenses resulting from
adjustments in production that were undertaken to lower
inventory to an appropriate level.
-- Losses in the Music business also increased dramatically
because restructuring charges of approximately $100 million
were recorded for such initiatives as the closure of a
manufacturing facility in the U.S. and the further
consolidation of various support functions across labels and
operating units worldwide.
In terms of income (loss) before income taxes, a loss of Yen119.7
billion ($998 million) was recorded compared with a loss of Yen12.8
billion in the fourth quarter of the previous year, a deterioration of
Yen106.9 billion.
-- In addition to the increase in operating loss, other income
decreased Yen12.4 billion, primarily due to a decrease in
royalty income in the Electronics business.
In terms of net income (loss), a loss of Yen111.1 billion ($926
million) was recorded compared with a loss of Yen5.5 billion in the
fourth quarter of the previous year, a deterioration of Yen105.7 billion
year on year.
-- In addition to the increased loss before income tax, income
tax benefits increased Yen14.5 billion and equity in net
losses of affiliated companies increased Yen6.7 billion.
-- Income tax benefits increased due to a significant increase in
loss before income taxes.
-- Equity in net losses of affiliated companies increased due to
an increase in losses at SEMC and ST-LCD.
SEMC performance for the fourth quarter ended March 31, 2003
Shipments of mobile handsets: 5.40 million. Year on year decrease:
400,000.
Net sales: 806 million euro. Year on year decrease: 317 million
euro.
Losses before tax: 113 million euro. Nominal income recorded in
prior year.
Net loss: 104 million euro. Nominal income recorded in prior year.
Sony's equity in net loss of affiliate: Yen6.5 billion ($54
million). Nominal income recorded in prior year.
Reasons for performance decline: Increased pricing pressure.
Expenses due to the phase-in of new products in the GSM and
Japanese markets.
The same quarter of the prior year benefited from two successful
high-end models in the Japanese and European markets, and operating
income was recorded.
Notes
Note I: During the fiscal year ended March 31, 2003, the average
value of the yen was Yen120.9 against the U.S. dollar and Yen119.5
against the euro, which was 2.6% higher against the U.S. dollar and
8.8% lower against the euro, compared with the average rate for 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 previous fiscal year to local currency-denominated monthly
sales, cost of sales, and selling, general and administrative expenses
in the current fiscal year. 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: Commencing with the first quarter ended June 30, 2002,
Sony partly realigned its business segment configuration and
Electronics segment product category configuration. In accordance with
this realignment, results of the previous fiscal year have been
reclassified to conform to the presentation for the current fiscal
year. Sales of related businesses in the Network Application and
Contents Service Sector ("NACS"), established in April 2002 to enhance
network businesses, are included in the "Other" segment. In addition
to Sony Communication Network Corporation, which was originally
contained in the "Other" segment, NACS-related businesses include an
in-house oriented information system service business and an IC card
business formerly contained in the "Other" category of the Electronics
segment.
Note III: "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. "Sales
on a product category basis" in the Electronics segment represents
only sales of products to external customers, i.e. those sales
recorded after intersegment and intercategory transactions have been
eliminated.
Note IV: During the fourth quarter ended March 31, 2003, the
average value of the yen was Yen117.9 against the U.S. dollar and Yen126.2
against the euro, which was 11.5% higher against the U.S. dollar and
9.2% lower against the euro, compared with the fourth quarter of the
previous fiscal year.
Other Matters
In November 2002, Sony Corporation of America, a subsidiary of
Sony Corporation, together with other investors, executed a definitive
agreement to acquire all of the outstanding common stock of InterTrust
Technologies Corporation ("InterTrust") for approximately $453
million. In January 2003, the acquisition of InterTrust by Sony
Corporation of America, Koninklijke Philips Electronics N.V. of
Holland, and another investor was successfully completed. InterTrust
is a leading holder of intellectual property in digital rights
management. This transaction fits with Sony's network strategy which
is to enable wide access to secure digital content through networks.
In April 2003, Sony Computer Entertainment Inc. (SCEI) and Sony
Corporation announced that together they will invest a total of
approximately Yen200 billion during the three fiscal years beginning
with the fiscal year ending March 31, 2003, including Yen73 billion in
the first fiscal year, for the installation of a semiconductor
fabrication line to build chips with 65 nanometer line width on 300 mm
wafers. With this investment, SCEI will be able to manufacture a new
microprocessor for the broadband era, as well as other system LSI for
the broadband era, which will be used in a next generation computer
entertainment system. This investment serves an important role in
developing future broadband network businesses, not only for SCEI, but
also for Sony Group.
Rewarding Shareholders
A year-end cash dividend of Yen12.5 ($1.04) per share of Sony
Corporation common stock will be proposed for approval at the ordinary
general meeting of shareholders, which will be held on June 20, 2003.
Sony Corporation has already paid an interim dividend of Yen12.5 per
share to each shareholder; accordingly the total annual cash dividend
per share will be Yen25.0.
Sony believes that by continuously increasing corporate value, its
shareholders can be rewarded. Accordingly, Sony plans to utilize
retained earnings to carry out various investments that are
indispensable for ensuring future growth and strengthening
competitiveness.
Regarding shares of subsidiary tracking stock in Japan issued by
Sony Corporation, Sony Communication Network Corporation ("SCN") has
been working to manage its operations so as to expand cash flow, fully
solidify its financial base, and utilize retained earnings to
aggressively expand its business to strengthen its foundation and
respond to the quickly expanding Internet market. For these reasons,
SCN does not plan to distribute earnings to SCN shareholders for the
time being. As such, Sony Corporation will continue to not pay
dividends to shareholders of the subsidiary tracking stock.
Numbers of Employees
As a result of its continuing restructuring activities, Sony
reduced the number of employees, primarily in the Electronics and
Music businesses. As a result, the number of employees at the end of
March 2003 was approximately 161,100, a decrease of approximately
6,900 from the end of March 2002.
Remarks on Upcoming Initiatives by Nobuyuki Idei, Chairman and CEO
of Sony Corporation
In 2006, Sony will celebrate its 60th anniversary. In the next
three years up until this landmark date, we will invest a total of
Yen1.3 trillion in the following initiatives as we create a new profit
model and accelerate our transformation into a knowledge and
capital-intensive company.
1) We will strengthen our semiconductor business with investments
of approximately Yen500 billion over the next three years. The
investments will drive the development and manufacture of key devices
such as imaging devices, a market for which we foresee significant
growth, and semiconductors, which make use of the latest process
technology, to help form the foundation of our competitive strength in
the broadband network era.
2) We will increase investment in R&D to enhance the
competitiveness of products and create a new laboratory to further
stimulate content distribution. Investment in R&D over the next three
years will total Yen500 billion.
3) In order to transform Sony into a highly profitable company, we
will record, over the next three years, approximately Yen300 billion
in restructuring costs for a variety of initiatives, including the
further pursuit of downsizing and withdrawal from selected businesses
and the continued implementation of fixed cost reductions.
In addition, Sony will continue to strengthen its potential for
growth, competitiveness, and earnings capacity in the middle to long
term through strategic alliances and other endeavors.
Outlook for the Fiscal Year ending March 31, 2004
Change from previous year
Sales and operating revenue Yen7,400 billion - 1%
Operating income 130 billion - 30
Income before income taxes 130 billion - 48
Net income 50 billion - 57
Capital expenditures (additions to fixed assets) Yen310 billion + 19%
Depreciation and amortization* 390 billion + 11
(Depreciation expenses for tangible assets) (270 billion) (- 3)
* Including amortization of intangible assets and amortization of deferred insurance acquisition costs.
Assumed exchange rates: approximately Yen115 to the dollar, approximately Yen125 to the euro.
Because we expect the uncertain economic environment to continue
in the fiscal year ending March 31 2004, with personal consumption
declining and price competition intensifying, we have decided to
implement a restructuring program, primarily in the Electronics
business, which will be even more aggressive than the one we
implemented in the fiscal year just ended. As a result, we expect to
record restructuring charges of approximately Yen140 billion across the
Sony Group, which will result in a decrease in our consolidated
operating income.
Income before income taxes will decrease primarily because a gain
of Yen66.5 billion was recorded in the fiscal year ending March 31,
2003, due to the sale of Sony's equity interest in Telemundo.
The forecast for each business segment is as follows:
Electronics
Although sales from plasma televisions, LCD televisions, digital
still cameras, CLIEs, CCDs, and other products are expected to
increase, we expect segment sales to decrease due to a decrease in
intersegment sales to the Game business and the net effect of foreign
exchange rates. Operating income is also expected to decrease due to
increased restructuring expenses.
Game
Although strong sales of software for the PS2 will continue, we
expect segment sales to decrease. We have set a cautious forecast of
20 million units for PS2 hardware production shipments due to our
concern that the global economy will contract, and we expect PSone
units to decrease year on year. Regarding operating income, although
growth in PS2 software sales and other factors will positively
influence profitability, the effect of the aforementioned decrease in
sales, combined with the start, in earnest, of investments in next
generation hardware (including research and development expenses),
leads us to anticipate a drop in operating income.
Music
We expect sales to decrease due to the expected continued
contraction in the music industry and a reduction in the unit price of
DVDs in the manufacturing division. However, a decrease in
restructuring expenses, the benefits of restructuring activities
already carried out, and a decrease in talent-related expenses are
projected to return the segment to profitability.
Pictures
We forecast that sales and operating income will decrease compared
with the fiscal year ended March 31, 2003 because record sales and
operating income were recorded in the fiscal year ended March 31, 2003
due to the success of box office hits such as Spider-Man.
Financial Services
Although increased revenue is anticipated in the life and
automobile insurance businesses, due to the planned expansion of these
businesses, increased expenses resulting from the planned expansion of
Sony Finance and other factors are expected to lead to a decrease in
operating income.
Capital expenditures
We are planning to invest approximately Yen200 billion over 3 years
in semiconductor production facilities for next-generation broadband
processors. We expect approximately Yen73 billion of this investment to
take place in the fiscal year ending March 31, 2004. Across the Sony
Group, we expect capital expenditures for the fiscal year ending March
31, 2004 to amount to approximately Yen310 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 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 or financial
performance. 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 (particularly in the Electronics business),
and subjective and changing consumer preferences (particularly in the
Game, Music, and Pictures businesses); (iv) Sony's ability to
implement successfully the restructuring initiatives in its
Electronics, Music and Pictures businesses and its network strategy
for its Electronics, Music, Pictures, and Game businesses; (v) Sony's
ability to compete and develop and implement successful sales and
distribution strategies in light of Internet and other technological
developments in its Music and Pictures businesses; (vi) Sony's
continued ability to devote sufficient resources to research and
development and, with respect to capital expenditures, to prioritize
investments (particularly in the Electronics business); (vii) the
success of Sony's joint ventures and alliances; and (viii) the outcome
of contingencies. Risks and uncertainties also include the impact of
any future events with material unforeseen impacts.
Tokyo New York London
Yukio Ozawa Yas Hasegawa/Kumiko Koyama Chris Hohman/Shinji Tomita
+81-(0)3-5448-2180 +1-212-833-6820/5011 +44-(0)20-7444-9711/9713
Home Page: www.sony.net/IR/
Business Segment Information
(Millions of yen, millions of U.S. dollars)
Year ended March 31
Sales and operating revenue 2002 2003 Change 2003
--------------------------- ------------- ------------- ------- --------
Electronics
Customers Yen4,772,550 Yen4,543,313 -4.8% $37,861
Intersegment 513,631 397,137 3,309
--------------------------- ------------- ------------- --------
Total 5,286,181 4,940,450 -6.5 41,170
Game
Customers 986,529 936,274 -5.1 7,802
Intersegment 17,185 18,757 156
--------------------------- ------------- ------------- --------
Total 1,003,714 955,031 -4.9 7,958
Music
Customers 588,191 559,042 -5.0 4,659
Intersegment 54,649 77,256 644
--------------------------- ------------- ------------- --------
Total 642,840 636,298 -1.0 5,303
Pictures
Customers 635,841 802,770 +26.3 6,690
Intersegment 0 0 0
--------------------------- ------------- ------------- --------
Total 635,841 802,770 +26.3 6,690
Financial Services
Customers 483,313 512,641 +6.1 4,272
Intersegment 28,932 27,878 232
--------------------------- ------------- ------------- --------
Total 512,245 540,519 +5.5 4,504
Other
Customers 111,834 119,593 +6.9 996
Intersegment 91,977 130,721 1,090
--------------------------- ------------- ------------- --------
Total 203,811 250,314 +22.8 2,086
Elimination (706,374) (651,749) -- (5,431)
--------------------------- ------------- ------------- --------
Consolidated total Yen7,578,258 Yen7,473,633 -1.4% $62,280
Electronics intersegment amounts primarily consist of transactions with the Game business.
Music intersegment amounts primarily consist of transactions with Game and Pictures businesses.
Other intersegment amounts primarily consist of transactions with the Electronics business.
Operating income (loss) 2002 2003 Change 2003
-------------------------------------------- ----------- ----------- --------- ----------
Electronics Yen (1,158) Yen 41,380 --% $ 345
Game 82,915 112,653 +35.9 939
Music 20,175 (8,661) -- (72)
Pictures 31,266 58,971 +88.6 491
Financial Services 22,134 23,338 +5.4 194
Other (16,604) (31,950) -- (266)
-------------------------------------------- ----------- ----------- ---------
Total 138,728 195,731 +41.1 1,631
Corporate and elimination (4,097) (10,291) -- (86)
-------------------------------------------- ----------- ----------- ----------
Consolidated total Yen134,631 Yen185,440 +37.7% $ 1,545
(Millions of yen, millions of U.S. dollars)
Three months ended March 31(Unaudited)
Sales and operating revenue 2002 2003 Change 2003
--------------------------- ------------- ------------- ------- --------
Electronics
Customers Yen1,160,751 Yen 995,663 -14.2% $ 8,297
Intersegment 91,505 29,632 247
--------------------------- ------------- ------------- --------
Total 1,252,256 1,025,295 -18.1 8,544
Game
Customers 217,740 163,715 -24.8 1,364
Intersegment 5,079 3,623 30
--------------------------- ------------- ------------- --------
Total 222,819 167,338 -24.9 1,394
Music
Customers 140,496 136,444 -2.9 1,137
Intersegment 13,189 15,966 133
--------------------------- ------------- ------------- --------
Total 153,685 152,410 -0.8 1,270
Pictures
Customers 194,776 187,240 -3.9 1,560
Intersegment 0 0 0
--------------------------- ------------- ------------- --------
Total 194,776 187,240 -3.9 1,560
Financial Services
Customers 141,134 141,148 +0.0 1,176
Intersegment 7,647 7,258 60
--------------------------- ------------- ------------- --------
Total 148,781 148,406 -0.3 1,236
Other
Customers 29,654 30,154 +1.7 252
Intersegment 24,380 39,112 326
--------------------------- ------------- ------------- --------
Total 54,034 69,266 +28.2 578
Elimination (141,800) (95,591) -- (796)
--------------------------- ------------- ------------- --------
Consolidated total Yen1,884,551 Yen1,654,364 -12.2% $13,786
Electronics intersegment amounts primarily consist of transactions with the Game business.
Music intersegment amounts primarily consist of transactions with Game and Pictures businesses.
Other intersegment amounts primarily consist of transactions with the Electronics business.
Operating income (loss) 2002 2003 Change 2003
-------------------------------------------- ----------- ------------ -------- ----------
Electronics Yen(51,346) Yen(116,144) --% $ (968)
Game 15,558 13,631 -12.4 114
Music (2,057) (13,688) -- (114)
Pictures 11,606 8,089 -30.3 67
Financial Services 10,788 3,024 -72.0 25
Other (5,186) (10,681) -- (89)
-------------------------------------------- ----------- ------------ ----------
Total (20,637) (115,769) -- (965)
Corporate and elimination (2,955) (698) -- (6)
-------------------------------------------- ----------- ------------ ----------
Consolidated total Yen(23,592) Yen(116,467) --% $ (971)
Electronics Sales and Operating Revenue to Customers by Product Category
(Millions of yen, millions of U.S. dollars)
Year ended March 31
Sales and operating revenue 2002 2003 Change 2003
-------------------------------------------- ------------- ------------- ------- --------
Audio Yen 747,469 Yen 682,517 -8.7% $ 5,688
Video 806,401 823,354 +2.1 6,861
Televisions 842,388 846,139 +0.4 7,051
Information and Communications 1,167,328 958,556 -17.9 7,988
Semiconductors 182,276 204,710 +12.3 1,706
Components 525,568 537,358 +2.2 4,478
Other 501,120 490,679 -2.1 4,089
-------------------------------------------- ------------- ------------- --------
Total Yen4,772,550 Yen4,543,313 -4.8% $37,861
Three months ended March 31(Unaudited)
Sales and operating revenue 2002 2003 Change 2003
-------------------------------------------- ------------- ----------- ------- ----------
Audio Yen 148,396 Yen133,555 -10.0% $ 1,113
Video 157,428 146,892 -6.7 1,224
Televisions 219,375 179,456 -18.2 1,496
Information and Communications 312,721 242,815 -22.4 2,023
Semiconductors 45,309 52,453 +15.8 437
Components 141,441 132,946 -6.0 1,108
Other 136,081 107,546 -21.0 896
-------------------------------------------- ------------- ----------- ----------
Total Yen1,160,751 Yen995,663 -14.2% $ 8,297
The above table is a breakdown of Electronics sales and operating
revenue to customers in the Business Segment Information on page F-1
and F-2. The Electronics business 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, 2002, Sony
has partly realigned its product category configuration in the
Electronics business. In accordance with this change, results of the
previous year have been reclassified to conform to the presentations
for the current year. Sales of mobile phones are no longer recorded in
the "Information and Communications" category as of the third quarter
ended December 31, 2001. From the third quarter of the previous year,
sales of mobile phones manufactured for Sony Ericsson Mobile
Communications, AB are recorded in the "Other" product category.
Geographic Segment Information
(Millions of yen, millions of U.S. dollars)
Year ended March 31
Sales and operating revenue 2002 2003 Change 2003
-------------------------------------------- ------------- ------------- ------- --------
Japan Yen2,248,115 Yen2,093,880 -6.9% $17,449
United States 2,461,523 2,403,946 -2.3 20,033
Europe 1,609,111 1,665,976 +3.5 13,883
Other Areas 1,259,509 1,309,831 +4.0 10,915
-------------------------------------------- ------------- ------------- --------
Total Yen7,578,258 Yen7,473,633 -1.4% $62,280
Three months ended March 31(Unaudited)
Sales and operating revenue 2002 2003 Change 2003
-------------------------------------------- ------------- ------------- ------- --------
Japan Yen 586,037 Yen 517,933 -11.6% $ 4,316
United States 575,407 481,747 -16.3 4,014
Europe 408,507 363,360 -11.1 3,028
Other Areas 314,600 291,324 -7.4 2,428
-------------------------------------------- ------------- ------------- --------
Total Yen1,884,551 Yen1,654,364 -12.2% $13,786
Classification of Geographic Segment Information shows sales and operating revenue recognized by location of customers.
Consolidated Statements of Income
(Millions of yen, millions of U.S. dollars, except per share amounts)
Year ended March 31
2002 2003 Change 2003
------------- ------------- ---------- --------
Sales and operating revenue: %
Net sales Yen7,058,755 Yen6,916,042 $57,634
Financial service revenue 483,313 512,641 4,272
Other operating revenue 36,190 44,950 374
------------- ------------- --------
7,578,258 7,473,633 -1.4 62,280
Costs and expenses:
Cost of sales 5,239,592 4,979,421 41,495
Selling, general and administrative 1,742,856 1,819,468 15,162
Financial service expenses 461,179 489,304 4,078
------------- ------------- --------
7,443,627 7,288,193 60,735
Operating income 134,631 185,440 +37.7 1,545
Other income:
Interest and dividends 16,021 14,441 120
Royalty income 33,512 32,375 270
Foreign exchange gain, net -- 1,928 16
Gain on sale of securities investments, net 1,398 72,552 605
Other 45,397 36,232 302
------------- ------------- --------
96,328 157,528 1,313
Other expenses:
Interest 36,436 27,314 228
Loss on devaluation of securities
investments 18,458 23,198 193
Foreign exchange loss, net 31,736 -- --
Other 51,554 44,835 373
------------- ------------- --------
138,184 95,347 794
------------- ------------- --------
Income before income taxes 92,775 247,621 +166.9 2,064
Income taxes 65,211 80,831 674
Income before minority interest,
equity in net losses of affiliated
companies ------------- ------------- --------
and cumulative effect of accounting changes 27,564 166,790 +505.1 1,390
Minority interest in income (loss) of
consolidated subsidiaries (16,240) 6,581 55
Equity in net losses of affiliated companies 34,472 44,690 372
Income before cumulative effect of
accounting changes ------------- ------------- --------
9,332 115,519 +1,137.9 963
Cumulative effect of accounting changes
(2002:Net of income taxes of Yen2,975
million) 5,978 -- --
------------- ------------- --------
Net income Yen 15,310 Yen 115,519 +654.5 $ 963
------------- ------------- --------
Per share data:
Common stock
Income before cumulative effect of
accounting changes
-- Basic Yen 10.21 Yen 125.74 +1,131.5 $ 1.05
-- Diluted 10.18 118.21 +1,061.2 0.99
Net income
-- Basic 16.72 125.74 +652.0 1.05
-- Diluted 16.67 118.21 +609.1 0.99
Subsidiary tracking stock
Net income (loss)
-- Basic (15.87) (41.98) -- (0.35)
Additional Paid-in Capital and Retained Earnings
The following information shows change in additional paid-in
capital for the year ended March 31, 2003 and change in retained
earnings for the year ended March 31, 2002 and 2003. Sony discloses
this supplemental information in accordance with disclosure
requirements of the Japanese Securities and Exchange Law, to which
Sony, as a Japanese public company, is subject.
(Millions of yen, millions of U.S. dollars)
Year ended March 31
2003 2003
----------- --------------
Additional Paid-in Capital:
Balance, beginning of year Yen968,223 $ 8,069
Exchange offerings 15,791 132
Conversion of convertible bonds 172 1
Reissuance of treasury stock 10 0
----------- --------------
Balance, end of year 984,196 8,202
(Millions of yen, millions of U.S. dollars)
Year ended March 31
2002 2003 2003
------------- ------------- ----------
Retained Earnings:
Balance, beginning of year Yen1,217,110 Yen1,209,262 $ 10,077
Net income 15,310 115,519 963
Cash dividends (22,992) (23,022) (192)
Common stock issue costs, net of tax (166) (19) (0)
------------- ------------- ----------
Balance, end of year 1,209,262 1,301,740 10,848
Consolidated Statements of Income (Unaudited)
(Millions of yen, millions of U.S. dollars, except per share amounts)
Three months ended March 31
2002 2003 Change 2003
------------- ------------- ------- --------
Sales and operating revenue: %
Net sales Yen1,733,679 Yen1,503,150 $12,526
Financial service revenue 141,134 141,148 1,176
Other operating revenue 9,738 10,066 84
------------- ------------- --------
1,884,551 1,654,364 -12.2 13,786
Costs and expenses:
Cost of sales 1,313,570 1,140,533 9,505
Selling, general and administrative 464,227 492,173 4,101
Financial service expenses 130,346 138,125 1,151
------------- ------------- --------
1,908,143 1,770,831 14,757
Operating income (loss) (23,592) (116,467) -- (971)
Other income:
Interest and dividends 4,403 4,280 36
Royalty income 14,769 10,129 84
Gain on sale of securities investments, net 1,081 1,682 14
Other 19,750 11,560 96
------------- ------------- --------
40,003 27,651 230
Other expenses:
Interest 3,897 7,251 60
Loss on devaluation of securities investments 4,843 5,273 44
Foreign exchange loss, net 773 264 2
Other 19,695 18,138 151
------------- ------------- --------
29,208 30,926 257
------------- ------------- --------
Income (loss) before income taxes (12,797) (119,742) -- (998)
Income taxes (8,908) (23,412) (195)
------------- ------------- --------
Income (loss) before minority interest and
equity in net
losses of affiliated companies (3,889) (96,330) -- (803)
Minority interest in income (loss) of
consolidated subsidiaries (6,605) (90) (1)
Equity in net losses of affiliated companies 8,174 14,904 124
------------- ------------- --------
Net income (loss) Yen (5,458) Yen (111,144) -- $ (926)
------------- ------------- --------
Per share data:
Common stock
Net income (loss)
-- Basic Yen (5.91) Yen (120.47) -- $ (1.00)
-- Diluted (5.91) (120.47) -- (1.00)
Subsidiary tracking stock
Net income (loss)
-- Basic (10.97) (69.86) -- (0.58)
Consolidated Balance Sheets
(Millions of yen, millions of U.S.
dollars)
March 31
ASSETS 2002 2003 2003
-------------- -------------- ---------
Current assets:
Cash and cash equivalents Yen 683,800 Yen 713,058 $ 5,942
Time deposits 5,176 3,689 31
Marketable securities 162,147 241,520 2,013
Notes and accounts receivable, trade 1,363,652 1,117,889 9,316
Allowance for doubtful accounts and sales returns (120,826) (110,494) (921)
Inventories 673,437 625,727 5,214
Deferred income taxes 134,299 143,999 1,200
Prepaid expenses and other current assets 435,527 418,826 3,490
-------------- -------------- ---------
3,337,212 3,154,214 26,285
Film costs 313,054 287,778 2,398
Investments and advances:
Affiliated companies 131,068 111,510 929
Securities investments and other 1,566,739 1,882,613 15,689
-------------- -------------- ---------
1,697,807 1,994,123 16,618
Property, plant and equipment:
Land 195,292 188,365 1,570
Buildings 891,436 872,228 7,269
Machinery and equipment 2,216,347 2,054,219 17,118
Construction in progress 66,825 60,383 503
Less-Accumulated depreciation (1,958,234) (1,896,845) (15,807)
-------------- -------------- ---------
1,411,666 1,278,350 10,653
Other assets:
Intangibles, net 245,639 258,624 2,155
Goodwill 317,240 290,127 2,418
Deferred insurance acquisition costs 308,204 327,869 2,732
Other 554,973 779,460 6,496
-------------- -------------- ---------
1,426,056 1,656,080 13,801
-------------- -------------- ---------
Yen 8,185,795 Yen 8,370,545 $ 69,755
-------------- -------------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings Yen 113,277 Yen 124,360 $ 1,036
Current portion of long-term debt 240,786 34,385 287
Notes and accounts payable, trade 767,625 697,385 5,812
Accounts payable, other and accrued expenses 869,533 864,188 7,202
Accrued income and other taxes 105,470 109,199 910
Deposits from customers in the banking business 106,472 248,721 2,073
Other 355,333 356,810 2,972
-------------- -------------- ---------
2,558,496 2,435,048 20,292
Long-term liabilities:
Long-term debt 838,617 807,439 6,729
Accrued pension and severance costs 299,089 496,174 4,135
Deferred income taxes 159,573 159,079 1,326
Future insurance policy benefits and other 1,680,418 1,914,410 15,953
Other 255,824 255,478 2,129
-------------- -------------- ---------
3,233,521 3,632,580 30,272
Minority interest in consolidated subsidiaries 23,368 22,022 184
Stockholders' equity:
Capital stock 476,106 476,278 3,969
Additional paid-in capital 968,223 984,196 8,202
Retained earnings 1,209,262 1,301,740 10,848
Accumulated other comprehensive income (275,593) (471,978) (3,934)
Treasury stock, at cost (7,588) (9,341) (78)
-------------- -------------- ---------
2,370,410 2,280,895 19,007
-------------- -------------- ---------
Yen 8,185,795 Yen 8,370,545 $ 69,755
-------------- -------------- ---------
Consolidated Statements of Cash Flows
(Millions of yen, millions of U.S.
dollars)
Year ended March 31
2002 2003 2003
------------ -------------- ----------
Cash flows from operating activities:
Net income Yen 15,310 Yen 115,519 $ 963
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization, including
amortization of
deferred insurance acquisition costs 354,135 351,925 2,933
Amortization of film costs 242,614 312,054 2,600
Accrual for pension and severance costs, less
payments 14,995 37,858 316
Loss on sale, disposal or impairment of long-
lived assets, net 49,862 39,941 333
Gain on sales of securities investments, net (1,398) (72,552) (605)
Deferred income taxes (49,719) (98,016) (817)
Equity in net losses of affiliated companies, net
of dividends 37,537 46,692 389
Cumulative effect of accounting changes (5,978) -- --
Changes in assets and liabilities:
Decrease in notes and accounts receivable, trade 111,301 174,679 1,456
Decrease in inventories 290,872 36,039 300
Increase in film costs (236,072) (317,953) (2,650)
Decrease in notes and accounts payable, trade (172,626) (58,384) (486)
Increase (decrease) in accrued income and other
taxes (39,589) 14,637 122
Increase in future insurance policy benefits and
other 314,405 233,992 1,950
Increase in deferred insurance acquisition costs (71,522) (66,091) (551)
Increase in marketable securities held in the
insurance
business for trading purpose (55,661) -- --
Decrease in other current assets 5,543 29,095 242
Increase (decrease) in other current liabilities (19,418) 26,205 218
Other (46,995) 48,148 402
------------ -------------- ----------
Net cash provided by operating activities 737,596 853,788 7,115
------------ -------------- ----------
Cash flows from investing activities:
Payments for purchases of fixed assets (388,514) (275,285) (2,294)
Proceeds from sales of fixed assets 37,434 25,711 214
Payments for investments and advances by financial
service business (705,796) (1,026,361) (8,553)
Payments for investments and advances (other than
financial service business) (90,544) (109,987) (917)
Proceeds from sales of securities investments,
maturities of marketable
securities and collections of advances by
financial service business 345,112 542,539 4,521
Proceeds from sales of securities investments,
maturities of marketable
securities and collections of advance (other than
financial service business) 33,969 135,834 1,132
Decrease in time deposits 1,222 1,124 10
------------ -------------- ----------
Net cash used in investing activities (767,117) (706,425) (5,887)
------------ -------------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 228,999 12,323 103
Payments of long-term debt (171,739) (238,144) (1,985)
Decrease in short-term borrowings (78,104) (7,970) (66)
Increase in deposits from customers in the banking
business 106,472 142,023 1,184
Proceeds from issuance of subsidiary tracking stock 9,529 -- --
Dividends paid (22,951) (22,871) (191)
Other 12,834 21,505 179
------------ -------------- ----------
Net cash provided by (used in) financing
activities 85,040 (93,134) (776)
------------ -------------- ----------
Effect of exchange rate changes on cash and cash
equivalents 21,036 (24,971) (208)
------------ -------------- ----------
Net increase in cash and cash equivalents 76,555 29,258 244
Cash and cash equivalents at beginning of year 607,245 683,800 5,698
------------ -------------- ----------
Cash and cash equivalents at end of year Yen 683,800 Yen 713,058 $ 5,942
============ ============== ==========
(Notes)
1. U.S. dollar amounts have been translated from yen, for
convenience only, at the rate of Yen120 = U.S.$1, the approximate Tokyo
foreign exchange market rate as of March 31, 2003.
2. As of March 31, 2003, Sony had 1,035 consolidated subsidiaries.
It has applied the equity accounting method in respect to 84
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 stock holders' economic interest in the targeted subsidiary's
earnings available for dividends or change in accumulated losses. 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 shown in the chart below. The dilutive effect in
the weighted-average shares for the year ended March 31, 2002 and 2003
mainly resulted from convertible bonds. In accordance with FAS No.128,
the computation of diluted net income per share for the year ended
March 31, 2002 uses the same weighted-average shares used for the
computation of diluted income before cumulative effect of accounting
changes per share, and reflects the effect of the assumed conversion
of convertible bonds in diluted net income.
(Thousands of shares)
Year ended March 31
Weighted-average shares 2002 2003
-------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes
and net income
-- Basic 918,462 919,706
-- Diluted 921,234 998,591
(Thousands of shares)
Three months ended March 31
Weighted-average shares 2002 2003
-------------------------------------------------------------------------------------------
Net loss
-- Basic 918,498 920,814
-- Diluted 918,498 920,814
Weighted-average shares used for computation of earnings per share
of the subsidiary tracking stock for the year and three months ended
March 31, 2002 and 2003 are 3,072 thousand shares. There were no
potentially dilutive securities or options granted for EPS of the
subsidiary tracking stock outstanding at March 31, 2002 and 2003.
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 liability
adjustment and foreign currency translation adjustments. Net income
(loss), other comprehensive income (loss) and comprehensive income
(loss) for the year and three months ended March 31, 2002 and 2003
were as follows;
(Millions of yen, millions of U.S. dollars)
Year ended March 31 Three months ended March 31
--------------------------------- ----------------------------------
2002 2003 2003 2002 2003 2003
--------------------------------------------------------------------------------------------
Net income (loss) Yen 15,310 Yen 115,519 $ 963 Yen (5,458) Yen(111,144) $ (926)
Other comprehensive
income (loss) :
Unrealized gains
(losses) on
securities (21,519) (5,339) (45) 14,394 2,834 24
Unrealized gains
(losses) on
derivative instruments (711) (4,082) (34) (3,532) (668) (6)
Minimum pension
liability
adjustment (22,228) (110,636) (922) (22,228) (110,636) (922)
Foreign currency
translation
adjustments 97,432 (76,328) (636) 9,561 25,387 211
--------------------------------------------------------------------
52,974 (196,385) (1,637) (1,805) (83,083) (693)
--------------------------------------------------------------------------------------------
Comprehensive income Yen Yen Yen Yen
(loss) 68,284 (80,866) $ (674) (7,263) (194,227) $ (1,619)
--------------------------------------------------------------------------------------------
5. In April 2001, Sony adopted FAS No.133, "Accounting for
Derivative Instruments and Hedging Activities" as amended by FAS
No.138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an Amendment of FASB statement No.133". As a
result of the adoption of the new standard, Sony recorded a one-time
non-cash after-tax unrealized gain of Yen1,089 million in accumulated
other comprehensive income in the consolidated balance sheet, as well
as an after-tax gain of Yen5,978 million in the cumulative effect of
accounting changes in the consolidated statement of income.
6. In July 2001, the Financial Accounting Standards Board ("FASB")
issued FAS No.142, "Goodwill and Other Intangible assets" which
supersedes Accounting Principles Board Opinion No.17, "Intangible
Assets". Sony elected early adoption of FAS No.142 retroactive to
April 1, 2001.
7. In the fourth quarter of the year ended March 31, 2002, Sony
adopted Emerging Issues Task Force Issue No.01-09, "Accounting for
Consideration Given by a Vendor to a Customer or Reseller of the
Vendor's Products", retroactive to April 1, 2001.
8. Adoption of New Accounting Standards
Impairment or Disposal of Long-Lived Assets
In April 2002, Sony adopted FAS No.144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement
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 this statement did not
have an impact on Sony's results of operations and financial position.
Rescission of FASB Statements No.4, 44 and 64, Amendment of FASB
Statement No.13, and Technical Corrections
In April 2002, the 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.
Accounting for Costs Associated with Exit or Disposal Activities
In July 2002, the FASB issued FAS No.146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement
establishes accounting and disclosure rules for costs associated with
exit or disposal activities that are initiated after December 31,
2002. The impact of the adoption of this statement on Sony's results
of operations and financial position was immaterial.
Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others
In November 2002, the FASB issued FASB Interpretation 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". This interpretation addresses the
accounting for guarantees issued or modified after December 31, 2002
and the disclosure requirements for all guarantees. The impact of the
adoption of this interpretation on Sony's results of operations and
financial position was immaterial.
Consolidation of Variable Interest Entities
In January 2003, the FASB issued FASB Interpretation No.46,
"Consolidation of Variable Interest Entities - an interpretation of
ARB No.51". This interpretation addresses consolidation by a primary
beneficiary of variable interest entities. FIN 46 is effective
immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 become
effective for Sony during the second quarter of the fiscal year ending
March 31, 2004. As no new variable interest entity created or acquired
after January 31, 2003 exists, the adoption of this interpretation did
not have an impact on Sony's results of operations and financial
position for the year and three months ended March 31, 2003. Sony is
now in the process of assessing the impact for variable interest
entities created or acquired before February 1, 2003.
Other Consolidated Financial Data
(Millions of yen, millions of U.S. dollars)
Year ended March 31
2002 2003 Change 2003
------------ ------------ ------- ----------
Capital expenditures (additions to fixed
assets) Yen 326,734 Yen 261,241 -20.0% $ 2,177
Depreciation and amortization expenses* 354,135 351,925 -0.6 2,933
(Depreciation expenses for tangible assets) (297,581) (279,476) (-6.1) (2,329)
R&D expenses 433,214 443,128 2.3 3,693
Three months ended March 31
2002 2003 Change 2003
----------- ----------- --------- ----------
Capital expenditures (additions to fixed
assets) Yen 72,140 Yen 76,610 6.2% $ 638
Depreciation and amortization expenses* 91,956 96,241 4.7 802
(Depreciation expenses for tangible assets) (81,935) (74,340) (-9.3) (620)
R&D expenses 107,931 131,379 21.7 1,095
* Including amortization expenses for intangible assets and for deferred insurance acquisition costs
Condensed Financial Services Balance Sheet (Unaudited)
The following schedule shows unaudited condensed balance sheets
for Financial Services and for Sony without Financial Services. While
this presentation is not required under U.S. GAAP used in Sony's
consolidated financial statements, because the Financial Services is
different in nature from Sony's Electronics, Game, Music, and Pictures
segments, Sony believes that this type of comparative presentation
helps the understanding and analysis of Sony's consolidated balance
sheet.
(Millions of yen, millions of U.S. dollars)
Financial Services Sony without Financial Services
---------------------------------------------------------------------------
March 31 March 31
2002 2003 2003 2002 2003 2003
------------- ------------- --------- ------------- ------------- ---------
ASSETS
Cash and cash
equivalents Yen 327,262 Yen 274,928 $ 2,291 Yen 356,538 Yen 438,130 $ 3,651
Marketable securities 157,363 236,621 1,972 4,784 4,899 41
Other current assets 142,051 176,376 1,470 2,412,799 2,057,930 17,149
Investments and
advances 1,388,556 1,741,748 14,515 420,226 372,671 3,106
Investments in
Financial
Services -- -- -- 170,189 170,189 1,418
Deferred insurance
acquisition
costs 308,204 327,869 2,732 -- -- --
Other long-lived assets 172,616 152,892 1,274 2,702,352 2,771,946 23,100
------------- ------------- --------- ------------- ------------- ---------
Yen2,496,052 Yen2,910,434 $ 24,254 Yen6,066,888 Yen5,815,765 $ 48,465
------------- ------------- --------- ------------- ------------- ---------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits from customers
in the
banking business Yen 106,472 Yen 248,721 $ 2,073 Yen -- Yen -- $ --
Future insurance policy
benefits
and other 1,680,418 1,914,410 15,953 -- -- --
Other liabilities and
minority
interest in
consolidated
subsidiaries 390,976 425,591 3,547 3,834,544 3,677,646 30,647
------------- ------------- --------- ------------- ------------- ---------
Total liabilities and
minority
interest in
consolidated
subsidiaries 2,177,866 2,588,722 21,573 3,834,544 3,677,646 30,647
Stockholders' equity 318,186 321,712 2,681 2,232,344 2,138,119 17,818
------------- ------------- --------- ------------- ------------- ---------
Yen2,496,052 Yen2,910,434 $ 24,254 Yen6,066,888 Yen5,815,765 $ 48,465
------------- ------------- --------- ------------- ------------- ---------
Short Name: Sony Corp.
Category Code: FR
Sequence Number: 00004294
Time of Receipt (offset from UTC): 20030425T102437+0100
--30--AC/uk*
CONTACT: Sony Corporation
KEYWORD: UNITED KINGDOM JAPAN INTERNATIONAL EUROPE ASIA PACFIC
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS
ELECTRONIC GAMES/MULTIMEDIA HARDWARE
SOURCE: Sony Corp.
Today's News On The Net - Business Wire's full file on the Internet
with Hyperlinks to your home page.
URL: http://www.businesswire.com