BW20030602002101 20030602T151235Z UTC
( BW)(SONY-CORP.)(SON) Final Results - Part 1
Business Editors
UK REGULATORY NEWS
TOKYO--(BUSINESS WIRE)--June 2, 2003--
Contents
Financial Highlights
Operational Review
Five-Year Summary of Selected Financial Data
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Stockholders' Equity
Index to Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Report of Independent Accountants
Management
Investor Information
Cautionary Statement
Statements made in this document 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.
Financial Highlights
----------------------------------------------------------------------------------------------------------------------
Sony Corporation and Consolidated Subsidiaries - Year ended March 31
OPERATING RESULTS
Yen in billions Dollars in
except per share amounts and millions
number of employees except per
share amounts
Percent
change
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
FOR THE YEAR
Sales and operating revenue . . . . . . . . . Y7,578.3 Y7,473.6 -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
. . .
Income before cumulative
effect of accounting changes . . . . . . . .
. . . . 9.3 115.5 +1,137.9 963
Net income . . . . . . . . . . . . . . . . . . 15.3 115.5 +654.5 963
. . . . . . . . . .
Per share of common stock:
Income before cumulative effect of
accounting changes
Basic . . . . . . . . . . . . . . . . . Y 10.21 Y 125.74 +1,131.5% $ 1.05
. . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . 10.18 +1,061.2 0.99
. . . . . . . . . . 118.21
Net income
Basic . . . . . . . . . . . . . . . . . 16.72 125.74 +652.0 1.05
. . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . 16.67 118.21 +609.1 0.99
. . . . . . . . . .
Cash dividends . . . . . . . . . . . . . . 25.00 25.00 0.21
. . . . . . . .
AT YEAR-END
Stockholders' equity . . . . . . . . . . . . . -3.8%
. . . . . . . Y2,370.4 Y2,280.9 $19,007
Total assets . . . . . . . . . . . . . . . . . +2.3
. . . . . . . . . . 8,185.8 8,370.5 69,755
Number of employees . . . . . . . . . . . . .
. . . . . 168,000 161,100
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Notes: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of
Y120=U.S.$1, the approximate Tokyo foreign exchange market rate as of March 31, 2003.
2. Cash dividends per share of common stock for the year
ended March 31, 2003 include a dividend which is
subject to approval of the Ordinary General Meeting of
Shareholders to be held on June 20, 2003.
3. On April 1, 2002, Sony adopted Statement of Financial
Accounting Standards ("FAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". 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.
4. 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". 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.
5. In June 2002, the FASB issued FAS No.146, "Accounting
for Costs Associated with Exit or Disposal Activities"
which nullifies Emerging Issues Task Force ("EITF")
Issue No.94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit
an activity (including Certain Costs Incurred in a
Restructuring)". Sony adopted FAS No.146 on January 1,
2003. The impact of the adoption of this statement on
Sony's results of operations and financial position
was immaterial.
6. 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
initial recognition and initial measurement provisions
of FIN No.45 did not have material effect on Sony's
results of operations and financial position as at and
for the year ended March 31, 2003.
7. In December 2002, the FASB issued FAS No.148,
"Accounting for Stock-Based Compensation - Transition
and Disclosure - an Amendment of FASB Statement
No.123". Sony has accounted for its employee
stock-based compensation in accordance with Accounting
Principles Board Opinion ("APB") 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.
8. 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 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 No.46
become effective for Sony during the second quarter of
the year ending March 31, 2004. Sony did not enter
into any new arrangements with VIEs during the period
February 1, 2003 through March 31, 2003.
9. On April 1, 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, Sony's operating income, income
before income taxes and net income for the year ended March 31, 2002 decreased by(Y)3.0 billion,(Y)3.4
billion and(Y)2.2 billion, respectively. Additionally, Sony recorded a one-time non-cash after-tax
unrealized gain of(Y)1.1 billion in accumulated other comprehensive income in the consolidated balance
sheet, as well as an after-tax gain of(Y)6.0 billion in the cumulative effect of accounting changes in
the consolidated statement of income.
10. In July 2001, the FASB issued FAS No. 142 "Goodwill
and Other Intangible Assets". Sony adopted FAS No. 142
retroactive to April 1, 2001. As a result, Sony's
operating income and income before income taxes for
the year ended March 31, 2002 increased by (Y)20.1
billion and income before cumulative effect of
accounting changes as well as net income for the year
ended March 31, 2002 increased by (Y)18.9 billion.
Operational Review
----------------------------------------------------------------------------------------------------------------------
Highlights
o Although sales decreased slightly year on year to (Y)7,473.6
billion ($62.3 billion), operating income increased Y50.8 billion
to Y185.4 billion ($1.55 billion). Net income was Y115.5 billion
($963 million), a year on year increase of Y100.2 billion. The
depreciation of the yen against the euro had a positive impact on
sales and operating income.
o 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 Y41.4 billion ($345 million) was recorded compared to
an operating loss of Y1.2 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 (Y)79.6 billion year on year.
o 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 Y29.7
billion to Y112.7 billion ($939 million) because of strong
software unit sales and reductions of hardware manufacturing
costs.
o The Pictures business recorded its highest ever sales and
operating income, Y802.8 billion ($6,690 million) and Y59.0
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.
o The Music business recorded a Y8.7 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.
o 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.
Consolidated Results for the Fiscal Year
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Y7,473.6 billion ($62.3 billion), a decrease of 1.4% year
on year (2% decrease on a local currency basis - see Note I on page
14).
o Sales to external customers fell 4.8% in the Electronics
business and 5.1% in the Game business.
o However, sales in the Pictures segment rose 26.3% to reach a record Y802.8 billion ($6,690
million).
Operating income was Y185.4 billion ($1,545 million), an increase of
Y50.8 billion, or 37.7%, year on year (5% decrease on a local currency
basis).
o Business segments that contributed to an increase in
operating income:
-> Operating performance in the Electronics business
improved Y42.5 billion from an operating loss recorded in
the previous year. In the Game business, operating income
increased (Y)29.7 billion, and in the Pictures business,
operating income increased Y27.7 billion.
o Business segments that contributed to a decrease in operating
income:
-> Operating performance in the Music business deteriorated
significantly, by Y28.8 billion, and an operating loss was
recorded. In the Other business, operating loss increased Y15.3
billion (an operating loss was recorded in the previous year as
well).
o Selling, general and administrative expenses during the fiscal
year increased Y76.6 billion primarily due to an increase in
advertising and promotion expenses and severance related
expenses.
o Restructuring charges for the fiscal year amounted to
approximately Y100 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 Y70 billion ($583 million),
and in Music, approximately Y24 billion ($200 million).
Income before income taxes was (Y)247.6 billion ($2,064 million), an
increase of (Y)154.8 billion, or 166.9%, year on year.
o In addition to the increase in operating income, other income increased (Y)61.2
billion and other expenses decreased(Y)42.8 billion.
-> Primary factor contributing to the increase in other income:
~ The recording of a Y66.5 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. (*The 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(Y)1.9 billion ($16
million) compared with a net foreign exchange loss of Y31.7
billion recorded in the previous year.
~ A decrease in interest expense of Y9.1 billion as a result of
lower average balances of short-term borrowings and lower interest
rates.
~ Partially offsetting these factors was a Y4.7 billion increase in
losses on the devaluation of securities.
Net income was (Y)115.5 billion ($963 million), an increase of
(Y)100.2 billion, or 654.5%, year on year.
o Factor positively affecting net income: increase in income before
income taxes.
o Factors negatively affecting net income:
-> An income tax increase of Y15.6 billion.
~ Factor adding to tax expense: increase in income before income
taxes.
~ Factors offsetting the increase in tax expense:
o A reversal of Y51.9 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 Y6.6 billion ($55 million) minority interest in
the income of consolidated subsidiaries, compared to a Y16.2
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 Y10.2 billion increase in equity in net losses of affiliated
companies.
~ Losses increased at the following companies:
o Sony Ericsson Mobile Communications ("SEMC"), a mobile handset
joint venture established in October 2001 in which Sony has a 50%
equity holding.
o 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.
o 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: Y20.8 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 Y6.0 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
Year ended March 31
------------------------------------------- --------------------------------- --- -------------- --- ---------------
Percent Dollars in
Yen in billions change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------- ---------------- ---------------- --- -------------- --- ---------------
Sales and operating revenue . . . . . . . . . Y5,286.2 Y4,940.5 - 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 (Y)4,940.5 billion ($41.2 billion), a decrease of 6.5% year
on year (7% decrease on a local currency basis).
o Product categories with increased sales: -> "Semiconductors" by
12.3%, "Components" by 2.2%, "Video" by 2.1% and "Television" by 0.4%.
o Product categories with decreased sales:
-> "Information and Communications" by 17.9%, "Audio" by 8.7% and "Other" (which contains Aiwa) by 2.1%.
o 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 (Y)41.4 billion ($345
million) was recorded compared with operating loss of (Y)1.2 billion
in the previous fiscal year, an improvement of (Y)42.5 billion year on
year. o 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.
o 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 to 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 (Y)432.4 billion ($3,603 million), a
Y79.6 billion, or 15.6%, decrease compared with the level on March 31,
2002.
Game
Year ended March 31
------------------------------------------------ --------------------------------- --- -------------- --- ---------------
Yen in billions Percent Dollars in
change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Sales and operating revenue . . . . . . . . . Y1,003.7 Y955.0 - 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 (Y)955.0 billion ($7,958 million), a decrease of 4.9% year
on year (7% decrease on a local currency basis).
o 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.
o 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)
o 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 (Y)112.7 billion ($939 million), an increase of
(Y)29.7 billion, or 35.9%, year on year (12% increase on a local
currency basis).
o 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.
o 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 (Y)143.4 billion ($1,195 million), a
(Y)24.4 billion, or 20.5%, increase compared with the level on March
31, 2002.
Music
Year ended March 31
------------------------------------------------ --------------------------------- --- -------------- --- ---------------
Yen in billions Percent Dollars in
change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Sales and operating revenue . . . . . . . . . Y642.8 Y636.3 - 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 (Y)636.3 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.
o 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.
o 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 (Y)8.7 billion ($72
million) was recorded compared with operating income of (Y)20.2
billion in the previous year, a deterioration of (Y)28.8 billion year
on year.
o 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.
o 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.
o The restructuring activities undertaken resulted in a reduction
during the fiscal year of over 1,400 employees worldwide.
o 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.
o 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
Year ended March 31
------------------------------------------------ --------------------------------- --- -------------- --- ---------------
Yen in billions Percent Dollars in
change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Sales and operating revenue . . . . . . . . . Y635.8 Y802.8 + 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(Y)802.8 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.
o 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 (Y)59.0 billion ($491 million), an increase of
(Y)27.7 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.
o 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.
o 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 (Y)88.4 billion* were received upon the closing and a gain
of (Y)66.5 billion* was recorded on this sale in "gain on sales of
securities investments, net" (in other income).
(*The dollar amount of the cash proceeds and gain recorded on the
sale of Telemundo were $679 million and $511 million, respectively.)
Financial Services
Year ended March 31
------------------------------------------------ --------------------------------- --- -------------- --- ---------------
Yen in billions Percent Dollars in
change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Financial services revenue . . . . . . . . . . Y512.2 Y540.5 + 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 Services revenue was (Y)540.5 billion ($4,504 million), an
increase of 5.5% year on year.
o 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.
o 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 Y1.2 billion or 5.4% year on year to
(Y)23.3 billion ($194 million).
o 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.
o 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 policyholders, and an
improvement in the ratio of operating expenses to sales.
-> 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
Year ended March 31
------------------------------------------------ --------------------------------- --- -------------- --- ---------------
Yen in billions Percent Dollars in
change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Sales and operating revenue . . . . . . . . . Y203.8 Y250.3 +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 (Y)250.3 billion ($2,086 million), an increase of 22.8%
year on year. (Of sales in the Other segment, 48% were sales to
outside customers).
o Sales increased due to increased sales of NACS-related businesses
(see Note II on page 14), 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 (Y)32.0 billion ($266
million) was recorded compared with an operating loss of Y16.6 billion
in the previous year, a deterioration of Y15.3 billion.
o 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.
Notes
Note I:
During the fiscal year ended March 31, 2003, the average value of the
yen was(Y)120.9 against the U.S. dollar and (Y)119.5 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 II: 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 lll:
"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.
======================================================================
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
(Y)1.3 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 (Y)500 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
(Y)500 billion.
3) In order to transform Sony into a highly profitable company, we
will record, over the next three years, approximately (Y)300 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.
BUSINESS SEGMENT INFORMATION Year ended March 31
------------------------------------------------ --------------------------------- --- -------------- --- ---------------
Percent Dollars in
Yen in millions change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Sales and operating revenue:
Electronics -
Customers . . . . . . . . . . . . . . . Y4,772,550 Y4,543,313 -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 . . . . . . . . . . . . . . Y7,578,258 Y7,473,633 -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.
Year ended March 31
------------------------------------------------ --------------------------------- --- -------------- --- ---------------
Yen in millions Percent Dollars in
change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Operating income (loss):
Electronics . . . . . . . . . . . . . . . . Y (1,158) Y 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 . . . . . . . . . . . . . . Y 134,631 Y 185,440 +37.7% $ 1,545
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Electronics Sales and Operating Revenue to Customers by Product Category Year ended March 31
------------------------------------------- --------------------------------- --- -------------- --- ---------------
Yen in millions Percent Dollars in
change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------- ---------------- ---------------- --- -------------- --- ---------------
Sales and operating revenue:
Audio . . . . . . . . . . . . . . . . Y 747,469 Y 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 . . . . . . . . . . . . . . . Y4,772,550 Y4,543,313 -4.8% $37,861
------------------------------------------- ---------------- ---------------- --- -------------- --- ---------------
The above table is a breakdown of Electronics sales and operating
revenue to customers in the Business Segment Information on page
16. 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 Year ended March 31
---- ------------------------------------------- --------------------------------- --- -------------- --- ---------------
Yen in millions Percent Dollars in
change millions
--------------------------------- ---------------
---------------- ---------------- ---------------
2002 2003 2003/2002 2003
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Sales and operating revenue:
Japan . . . . . . . . . . . . . . . . . . Y2,248,115 Y2,093,880 -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 . . . . . . . . . . . . . . . . . Y7,578,258 Y7,473,633 -1.4% $62,280
------------------------------------------------ ---------------- ---------------- --- -------------- --- ---------------
Classification of Geographic Segment Information shows sales and
operating revenue recognized by location of customers.
CONDENSED FINANCIAL SERVICES FINANCIAL STATEMENTS
The Financial Services is included on a consolidated basis in Sony's
consolidated financial statements. The following schedule shows
unaudited condensed financial statements for Financial Services and
for Sony without Financial Services. While these presentations are 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 these types of comparative presentations help the understanding
and analysis of Sony's consolidated financial statements.
Condensed balance sheets (unaudited)
March 31
Financial Services Sony without Financial Services Consolidated
Dollars Dollars Dollars
in in in
Yen in millions millions Yen in millions millions Yen in millions millions
2002 2003 2003 2002 2003 2003 2002 2003 2003
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
ASSETS
Cash and cash
equivalents . . .
. Y327,262 Y 274,928 $2,291 Y 356,538 Y 438,130 $3,651 Y 683,800 Y 713,058 $5,942
Marketable
securities . . . .
. . 157,363 236,621 1,972 4,784 4,899 41 162,147 241,520 2,013
Other current
assets . . . . . .
. . 142,051 176,376 1,470 2,412,799 2,057,930 17,149 2,491,265 2,199,636 18,330
Investments and
advances . . . .
. . 1,388,556 1,741,748 14,515 420,226 372,671 3,106 1,697,807 1,994,123 16,618
Investments in
Financial
Services . . . . .
. . . - - - 170,189 170,189 1,418 - - -
Deferred insurance
acquisition costs
. . 308,204 327,869 2,732 - - - 308,204 327,869 2,732
Other long-lived
assets . . . . . .
. . 172,616 152,892 1,274 2,702,352 2,771,946 23,100 2,842,572 2,894,339 24,120
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
Y2,496,052 Y2,910,434 $24,254 Y6,066,888 Y5,815,765 $48,465 Y8,185,795 Y8,370,545 $69,755
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits from
customers in
the banking
business . . . .
. . Y 106,472 Y 248,721 $2,073 - - - Y106,472 Y248,721 $2,073
Future insurance
policy benefits
and other . . . . 1,680,418 1,914,410 15,953 - - - 1,914,410 15,953
. . 1,680,418
Other liabilities
and minority
interest in
consolidated
subsidiaries . . 390,976 425,591 3,547 Y3,834,544 Y3,677,646 $30,647 4,028,495 3,926,519 32,722
. .
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
Total liabilities
and minority
interest in
consolidated
subsidiaries . . 2,177,866 2,588,722 21,573 3,834,544 3,677,646 30,647 5,815,385 6,089,650 50,748
. .
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
Stockholders' 318,186 321,712 2,681 2,232,344 2,138,119 17,818 2,370,410 2,280,895 19,007
equity . . . . .
. . . .
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
Y2,496,052 Y2,910,434 $24,254 Y6,066,888 Y5,815,765 $48,465 Y8,185,795 Y8,370,545 $69,755
--------------------- ---------- ----------- --------- ----------- ----------- --------- ----------- -------------------
Condensed statements of income (unaudited)
Year ended March 31
Financial Services Sony without Financial Services Consolidated
Dollars Dollars Dollars
in in in
Yen in millions millions Yen in millions millions Yen in millions millions
2002 2003 2003 2002 2003 2003 2002 2003 2003
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ----------- ---------
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ----------- ---------
Financial services
revenue . . . . Y512,245 Y540,519 $4,504 - - - Y483,313 Y 512,641 $4,272
. . .
Net sales and
operating
revenue . . . . - - - Y7,102,369 Y6,971,737 $58,098 7,094,945 6,960,992 58,008
. .
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
512,245 540,519 4,504 7,102,369 6,971,737 58,098 7,578,258 7,473,633 62,280
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
Financial services
expenses and
operating
expenses . . . . 490,111 517,181 4,310 6,989,446 6,808,635 56,739 7,443,627 7,288,193 60,735
. .
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
Operating
income . . . . . 22,134 23,338 194 112,923 163,102 1,359 134,631 185,440 1,545
. . .
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
Non-operating
income
(expenses), net (1,861) (1,307) (10) (40,421) 67,878 566 (41,856) 62,181 519
. .
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
Income before
income taxes . . 20,273 22,031 184 72,502 230,980 1,925 92,775 247,621 2,064
.
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
Income taxes
and other . . . 11,477 13,072 109 72,785 120,062 1,001 83,443 132,102 1,101
. . .
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
Cumulative effect
of accounting
changes . . . . 4,305 - - 1,673 - - 5,978 - -
. . .
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
Net income . . . . Y13,101 Y 8,959 $ 75 Y 1,390 Y 110,918 $ 924 Y 15,310 Y 115,519 $ 963
.
-------------------- ----------- ----------- --------- ----------- ----------- --------- ----------- ------------------
Condensed statements of cash flows (unaudited)
Year ended March 31
Financial Services Sony without Financial Services Consolidated
Dollars Dollars Dollars
in in in
Yen in millions millions Yen in millions millions Yen in millions millions
2002 2003 2003 2002 2003 2003 2002 2003 2003
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
Net cash provided
by operating
activities . . . Y301,625 Y315,968 $2,633 Y436,059 Y 542,848 $4,524
. . . Y 737,596 Y 853,788 $7,115
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
Net cash used in
investing
activities . . .
. . . (401,866) (517,383) (4,311) (368,951) (185,163) (1,543) (767,117) (706,425) (5,887)
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
Net cash provided
by (used in)
financing
-------------------
activities . . . 1,242
. . . 120,255 149,086 (31,603) (251,128) (2,093) 85,040 (93,134) (776)
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
Effect of exchange
rate changes on
cash and cash
equivalents . .
. . 3 (5) (0) 21,033 (24,965) (208) 21,036 (24,971) (208)
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
Net increase
(decrease) in
cash and cash
equivalents . . 680
. . 20,017 (52,334) (436) 56,538 81,592 76,555 29,258 244
Cash and cash
equivalents at
beginning of
year . . . . . . 2,727 2,971
. . . . 307,245 327,262 300,000 356,538 607,245 683,800 5,698
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
Cash and cash
equivalents at
end of year . . Y327,262 Y274,928 $2,291 Y356,538 Y 438,130 $3,651
. . Y 683,800 Y 713,058 $5,942
-------------------- ----------- ---------- ---------- ----------- ----------- --------- ----------- ----------- --------
Five-Year Summary of Selected Financial Data
---------------------------------------------------------------------------------------------------------------------
Sony Corporation and Consolidated Subsidiaries - Year ended March 31
Yen in millions Dollars in
millions
except
per share
except per share amounts amounts
-------------------------------------------------------------------- -------------
------------- ------------ ------------- ------------- ------------- -------------
1999 2000 2001 2002 2003 2003
------------------------------------- ------------- ------------ ------------- ------------- ------------- -- -------------
------------------------------------- ------------- ------------ ------------- ------------- ------------- -- -------------
FOR THE YEAR
Sales and operating revenue . . . . Y6,804,182 Y6,686,661 Y7,314,824 Y7,578,258 Y 7,473,633 $62,280
Operating income . . . . . . . . . 338,061 223,204 225,346 134,631 185,440 1,545
. . . .
Income before income taxes . . . . . 377,691 264,310 265,868 92,775 247,621 2,064
Income taxes . . . . . . . . . . . 176,973 94,644 115,534 65,211 80,831 674
. . . . . .
Income before cumulative effect of
accounting changes . . . . . . . 179,004 121,835 121,227 9,332 115,519 963
. . .
Net income . . . . . . . . . . . . 179,004 121,835 16,754 15,310 115,519 963
. . . . . . .
Per share data:
Common stock
Income before cumulative effect
of accounting changes
Basic . . . . . . . . . . . . Y 218.43 Y 144.58 Y 132.64 Y 10.21 Y 125.74 $ 1.05
. . . . . .
Diluted . . . . . . . . . . . 195.51 131.70 124.36 10.18 118.21 0.99
. . . . . .
Net income
Basic . . . . . . . . . . . . 218.43 144.58 18.33 16.72 125.74 1.05
. . . . . .
Diluted . . . . . . . . . . . 195.51 131.70 19.28 16.67 118.21 0.99
. . . . . .
Cash dividends . . . . . . . . . 25.00 25.00 25.00 25.00 25.00 0.21
. . . .
Subsidiary tracking stock
Net income (loss)
Basic . . . . . . . . . . . . - - - (15.87) (41.98) (0.35)
. . . . . .
Cash dividends . . . . . . . . . - - - - - -
. . . .
Depreciation and amortization* . . Y 307,173 Y 306,505 Y 348,268 Y 354,135 Y 351,925 $ 2,933
Capital expenditures
(additions to fixed assets) . . .
. . 353,730 435,887 465,209 326,734 261,241 2,177
R&D expenses . . . . . . . . . . . 375,314 394,479 416,708 433,214 443,128 3,693
. . . . .
AT YEAR-END
Net working capital . . . . . . . . Y 1,030,463 Y 861,674 Y 830,734 Y 778,716 Y 719,166 $ 5,993
. . . .
Stockholders' equity . . . . . . . 1,823,665 2,182,906 2,315,453 2,370,410 2,280,895 19,007
. . . .
Stockholders' equity per share
attributable to common stock . . . Y 2,224.35 Y 2,409.36 Y 2,521.19 Y 2,570.31 Y 2,466.81 $ 20.56
Total assets . . . . . . . . . . . Y 6,299,053 Y 6,807,197 Y 7,827,966 Y 8,370,545 $69,755
. . . . . . . Y 8,185,795
Number of shares issued at
year-end (thousands of shares)
Common stock . . . . . . . . . .
. . . . 410,439 453,639 919,617 919,744 922,385
Subsidiary tracking stock . . . - - -
. . . 3,072 3,072
------------------------------------- ------------- ------------ ------------- ------------- ------------- --
* Including amortization of deferred insurance acquisition costs.
Notes: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of
Y120=U.S.$1, the approximate Tokyo foreign exchange market rate as of March 31, 2003.
2. Per share data prior to the year ended March 31, 2001
have been adjusted to reflect the two-for-one stock
split that has completed on May 19, 2000. However, no
adjustment to reflect such stock sprit has been made
to the number of shares issued at prior year-ends.
3. Cash dividends per share of common stock for the year
ended March 31, 2003 include a dividend which is
subject to approval of the Ordinary General Meeting of
Shareholders to be held on June 20, 2003.
4. On April 1, 2002, Sony adopted Statement of Financial
Accounting Standards ("FAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". 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.
5. 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". 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.
6. In June 2002, the FASB issued FAS No.146, "Accounting
for Costs Associated with Exit or Disposal Activities"
which nullifies Emerging Issues Task Force ("EITF")
Issue No.94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit
an activity (including Certain Costs Incurred in a
Restructuring)". Sony adopted FAS No.146 on January 1,
2003. The impact of the adoption of this statement on
Sony's results of operations and financial position
was immaterial.
7. 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
initial recognition and initial measurement provisions
of FIN No.45 did not have material effect on Sony's
results of operations and financial position as at and
for the year ended March 31, 2003.
8. In December 2002, the FASB issued FAS No.148,
"Accounting for Stock-Based Compensation - Transition
and Disclosure - an Amendment of FASB Statement
No.123". Sony has accounted for its employee
stock-based compensation in accordance with Accounting
Principles Board Opinion ("APB") 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.
9. 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 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 No.46
become effective for Sony during the second quarter of
the year ending March 31, 2004. Sony did not enter
into any new arrangements with VIEs during the period
February 1, 2003 through March 31, 2003.
10. On April 1, 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,
Sony's operating income, income before income taxes
and net income for the year ended March 31, 2002
decreased by (Y)3.0 billion, (Y)3.4 billion and (Y)2.2
billion, respectively. Additionally, Sony recorded a
one-time non-cash after-tax unrealized gain of (Y)1.1
billion in accumulated other comprehensive income in
the consolidated balance sheet, as well as an
after-tax gain of (Y)6.0 billion in the cumulative
effect of accounting changes in the consolidated
statement of income.
11. In July 2001, the FASB issued FAS No. 142 "Goodwill
and Other Intangible Assets". Sony adopted FAS No. 142
retroactive to April 1, 2001. As a result, Sony's
operating income and income before income taxes for
the year ended March 31, 2002 increased by (Y)20.1
billion and income before cumulative effect of
accounting changes as well as net income for the year
ended March 31, 2002 increased by (Y)18.9 billion.
12. In June 2000, the Accounting Standards Executive
Committee of the American Institute of Certified
Public Accountants issued Statement of Position
("SOP") 00-2, "Accounting by Producers or Distributors
of Films". Sony adopted SOP 00-2 retroactive to April
1, 2000. As a result, Sony's net income for the year
ended March 31, 2001 included a one-time, non-cash
charge with no tax effect of Y101.7 billion, primarily
to reduce the carrying value of its film inventory.
13. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB")
No. 101, "Revenue Recognition in Financial Statements". Sony adopted SAB No. 101 in the fourth quarter
ended March 31, 2001 retroactive to April 1, 2000. As a result, a one-time no-cash cumulative effect
adjustment of Y2.8 billion was recorded in the income statement directly above the caption of "net
income" for a change in accounting principle.
Consolidated Balance Sheets
Sony Corporation and Consolidated Subsidiaries - March 31
Dollars
in
millions
Yen in millions (Note 3)
------------------------- ---------
2002 2003 2003
------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents YEN683,800 YEN713,058 $5,942
Time deposits 5,176 3,689 31
Marketable securities (Note 8) 162,147 241,520 2,013
Notes and accounts receivable, trade (Notes 6 and 7) 1,363,652 1,117,889 9,316
Allowance for doubtful accounts and sales returns (120,826) (110,494) (921)
Inventories (Note 4) 673,437 625,727 5,214
Deferred income taxes (Note 21) 134,299 143,999 1,200
Prepaid expenses and other current assets 435,527 418,826 3,490
------------------------------------------------------------------------------------------------------------------------
Total current assets 3,337,212 3,154,214 26,285
------------------------------------------------------------------------------------------------------------------------
Film costs (Note 5) 313,054 287,778 2,398
------------------------------------------------------------------------------------------------------------------------
Investments and advances:
Affiliated companies (Note 6) 131,068 111,510 929
Securities investments and other (Notes 8, 11 and 12) 1,566,739 1,882,613 15,689
------------------------------------------------------------------------------------------------------------------------
1,697,807 1,994,123 16,618
------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment (Note 9):
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
------------------------------------------------------------------------------------------------------------------------
3,369,900 3,175,195 26,460
Less - Accumulated depreciation 1,958,234 1,896,845 15,807
------------------------------------------------------------------------------------------------------------------------
1,411,666 1,278,350 10,653
------------------------------------------------------------------------------------------------------------------------
Other assets:
Intangibles, net (Notes 10 and 15) 233,088 258,624 2,155
Goodwill (Note 10) 317,240 290,127 2,418
Deferred insurance acquisition costs (Note 11) 308,204 327,869 2,732
Deferred income taxes (Note 21) 120,168 328,091 2,734
Other 447,356 451,369 3,762
------------------------------------------------------------------------------------------------------------------------
1,426,056 1,656,080 13,801
------------------------------------------------------------------------------------------------------------------------
YEN8,185,795 YEN8,370,545 $69,755
------------------------------------------------------------------------------------------------------------------------
(Continued on following page.)
(MORE TO FOLLOW)
Short Name: Sony Corp.
Category Code: FR
Sequence Number: 00005355
Time of Receipt (offset from UTC): 20030602T155753+0100
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CONTACT: Sony Corporation
KEYWORD: UNITED KINGDOM JAPAN INTERNATIONAL EUROPE ASIA PACFIC
INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS
ELECTRONIC GAMES/MULTIMEDIA HARDWARE
SOURCE: Sony Corp.
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