BW20030724002114 20030724T160807Z UTC
( BW)(SONY-CORP.)(SON) Final Results
Business Editors
UK REGULATORY NEWS
TOKYO--(BUSINESS WIRE)--July 24, 2003--
News & Information
No.03-030E
2003/07/23
15:00
Subsidiary Tracking Stock
Sony Communication Network Corporation
Financial Results: First Quarter ended June 30, 2003
During the three-months ended June 30, 2003, the Japanese economy was
at a near standstill, in an environment of anxiety over deep-rooted
deflation.
In this economic situation, in the area of those Internet sectors
that are connected with the SCN Group, the number of broadband,
dedicated-line users of cable modems, FTTH, and ADSL in particular
passed 10 million as of the end of June. (Data according to the
Ministry of Public Management, Home Affairs, Posts and
Telecommunications.)
In this business environment, the SCN Group made efforts to acquire
subscribers by strengthening its various free-time campaigns, for ADSL
and FTTH, as well as by enriching its service line-up from the second
half of the previous fiscal year. As a result, the number of broadband
subscribers reached 460,000, an increase of 190,000 from the year
earlier period, although the increase in total So-net subscribers
since the year earlier period was only 20,000, to a total of 2.29
million.
As a result, sales for the SCN Group for the quarter ended June 30,
2003 decreased 3.4% from the year earlier period to 9,323 million yen.
Sales were impacted by factors including price reductions from January
of this year and the rolling out of free-time campaigns.
Regarding profitability, communication line usage costs decrease
compared to the year earlier period resulting from pushing costs down
by the SCN group through actions such as optimizing the number of
ports for access points. However, although the SCN Group worked to
carry out structural improvements such as reducing costs by improving
operation efficiency, it was unable to offset factors such as the
impact of cost increases related to subscriber acquisition and price
reductions, as well as increases in production costs for broadband
content. Thus, the SCN Group recorded an operating loss of 276 million
yen, compared with an operating income of 191 million yen in the year
earlier period. Also, equity losses of 20 million yen were recorded,
which resulted in an ordinary loss of 302 million yen, compared with
an ordinary income of 122 million yen in the year earlier period. With
an increase in deferred tax assets, net loss for the period under
review was 229 million yen, compared with a loss of 80 million yen in
the year earlier period.
Sales by Category
Consolidated Results for the Three-months ended June 30, 2003
(Millions of Yen)
Three-months ended June 30
2002 2003 Change (%)
Sales Y 9,656 Y 9,323 (3.4)
Operating income (loss) 191 (276) -
Ordinary income (loss) 122 (302) -
Net income (loss) (80) (229) -
The three-months ended June 30, 2003
------------------------------------------------------------------------------------------------------------------------
Three-months Three-months
ended June 30, ended June 30, Year-on-
2002 (millions of Percentage 2003 (millions Percentage year change
yen) of total (%) of yen) of total (%) (%)
---------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Operating Internet 8,117 84.1 7,814 83.8 (3.7)
revenue provider
services
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Internet- 1,150 11.9 1,308 14.0 13.7
related
services
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Merchandise sales 389 4.0 201 2.2 (48.4)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Total 9,656 100.0 9,323 100.0 (3.4)
------------------------------------------------------------------------------------------------------------------------
ISP services
In this category, the SCN Group recognizes that as the availability
of broadband, dedicated line connections expands, users are making a
changeover from narrowband to broadband is being stimulated by
increased market penetration.
In order to respond to subscriber needs, the SCN Group lowered
usage fees including connection prices for FTTH, from January of this
year and reduced connection prices for FTTH, newly released the
"So-net ADSL 1M" course with moderate fees, as a strong action to
acquire new subscribers. Based on these steps, the number of broadband
subscribers increased, although the total number of So-net subscribers
saw an actual decline.
As a result, sales of ISP services for the quarter ended June 30,
2003 were 7,814 million yen, a decrease of 3.7% compared with the year
earlier period. Such sales accounted for 83.8% of total sales.
Internet-related services
In this category, the SCN Group strived to offer contents aimed at
the spread of dedicated-line broadband, including the production of
video programming such as the So-net Channel and So-net TV, as well as
sales of expansion packages for the online game EverQuest.
Furthermore, sales of consolidated subsidiaries that are included
in this category smoothly increased. As a result, sales in this
category for the quarter ended June 30, 2003 were 1,308 million yen,
an increase of 13.7% compared with the year earlier period. Sales in
this category accounted for 14.0% of total sales.
In this category, although there were contributions from sales of
"PostPet V.3" e-mail pet software and broadband AV routers, sales were
impacted by decreased sales of PlayStation 2 broadband units. As a
result, sales in this category for the quarter ended June 30, 2003
were 201 million yen, a decrease of 48.4% compared with the year
earlier period. Such sales accounted for 2.2% of total sales.
Results of Consolidated Subsidiaries and of Affiliated Companies Accounted for by the Equity Method
The SCN Group includes the following four consolidated subsidiaries: So-net Sports.com Corp., So-net M3 Inc.,
Skygate, Co., Ltd., and Drivegate Inc., and two affiliated companies accounted for by the equity method: Label Gate
Co., Ltd. and DeNA Co., Ltd. Regarding Drivegate Inc., the SCN Group has completed the wrapping up or transfer to
other companies of a majority of its business.
Overall, during the quarter under review, equity losses of 20
million yen were recorded compared with 88 million yen in the year
earlier period. Among these companies, DeNA Co., Ltd. progressed well,
including increasing the number of goods it offers for auction.
Cash Flow
Cash and cash equivalents decreased 1,256 million yen from the end
of the previous period, to 2,128 million yen at June 30, 2003, which
was a decrease of 1,995 million yen compared with the end of the year
earlier period. During the quarter under review, the SCN Group used
403 million yen of cash in operating activities, used 553 million yen
of cash in investing activities, and used 300 million yen of cash in
financing activities.
During the quarter ended June 30, 2003, regarding cash flows from
operating activities, the SCN Group used 403 million yen, while during
the quarter ended June 30, 2002, the SCN Group generated 65 million
yen. This was mainly due to the recording of net loss before income
taxes of 303 million yen during the period under review, compared with
net income before income taxes of 122 million yen in the year earlier
period. Also, included in the net loss before income taxes during the
period under review was depreciation of 191 million yen and
amortization for goodwill of 78 million yen.
During the quarter ended June 30, 2003, regarding cash flows from
investing activities, the SCN Group used 553 million yen, while during
the quarter ended June 30, 2002, the SCN Group used 143 million yen.
Factors influencing cash flows from investing activities during the
quarter under review included outlays of 204 million yen for
acquisition of intangible assets such as connection services and
e-commerce related systems as well as homepage development, compared
with outlays of 151 million yen in the year earlier period; outlays of
144 million yen for loans to affiliated companies, compared with 73
million yen in the year earlier period; and payments for long term
prepaid expenses of 193 million yen.
During the quarter ended June 30, 2003, regarding cash flows from
financing activities, the SCN Group used 300 million yen, while during
the quarter ended June 30, 2002, the SCN Group used 440 million yen.
During the quarter under review, this reflected the repayment of
long-term debt to Sony Corp.
For inquiries, please contact:
Sony Corp., IR Department
7-35, Kita-Shinagawa 6-chome Shinagawa-ku, Tokyo 141 Tel:(03) 5448-2180
Tokyo 141-0001
www.sony.co.jp/IR/
Sony Communication Network Corporation, PR/IR Section
7-35, Kita-Shinagawa 4-chome Shinagawa-ku, Tokyo 140 Tel:(03) 3446-7210
Tokyo 141-0001
www.so-net.ne.jp/corporation/IR/
Condensed Consolidated Statements of Income (Unaudited)
For the three-months ended June 30, 2003
(Millions of yen)
Three-months ended June 30
2002 2003 Change
----------------------- ----------------------- -------------
Sales 9,656 9,323 (3.4%)
Cost of sales 5,698 5,772
------------- -------------
------------- -------------
Gross profit 3,958 3,551
Selling, general and administrative expenses 3,767 3,827
------------- -------------
------------- -------------
Operating income (loss) 191 (276) --%
Non-operating income 30 36
Non-operating expenses
Equity in net loss of affiliated companies 88 20
Other 10 99 42 62
----------------------- -----------------------
----------------------- -----------------------
Ordinary income (loss) 122 (302) --%
Extraordinary loss
Loss on issuance of stock by equity investee -- 1
------------- -------------
------------- -------------
Net income (loss) before income taxes 122 (303) --%
Income tax current 4 (18)
Income tax deferred 220 224 (63) (81)
-----------
-----------
Minority interest profit -- 6
------------- -------------
------------- -------------
Minority interest loss 22 --
------------- -------------
------------- -------------
Net income (loss) (80) (229) --%
------------- -------------
------------- -------------
Condensed Consolidated Balance Sheets
(Millions of yen)
June 30 March 31 June 30
2003
ASSETS 2002 2003
----------------- ----------------- ------------------
Current assets 8,965 8,594 7,343
----- ----- -----
Cash and bank deposit 415 517 509
Notes and account receivable, trade 4,144 3,803 3,671
Inventories 77 278 206
Deposits in parent company 3,708 -- --
Deposits in Sony group company -- 2,867 1,619
Other 652 1,176 1,374
Allowance for bad debt (30) (47) (36)
Noncurrent assets 4,773 5,458 5,628
----- ----- -----
Property, plant and equipment 423 349 332
--- --- ---
Intangible assets 2,789 2,465 2,454
----- ----- -----
Software 1,079 1,141 1,202
Goodwill 1,337 1,104 1,026
Other 373 220 225
Investment and other assets 1,561 2,644 2,843
----- ----- -----
Investment in affiliates and others 786 1,618 1,637
Other 774 1,025 1,205
----------------- ----------------- ------------------
Total assets 13,738 14,051 12,972
----------------- ----------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities 5,411 5,880 5,012
----- ----- -----
Account payable, trade 2,114 2,428 2,287
Current portion of long-term borrowing from parent 1,200 800 500
company
Accrued expense 1,727 1,889 1,772
Other 369 763 453
Long-term liabilities 574 94 103
--- -- ---
Long-term borrowing from parent company 500 -- --
Other 74 94 103
Total liabilities 5,985 5,974 5,116
----- ----- -----
----------------- ----------------- ------------------
----------------- ----------------- ------------------
Minority interest (236) 33 40
----------------- ----------------- ------------------
Common stock 5,246 5,246 5,246
Additional paid-in capital 4,765 4,765 4,765
Retained earnings (accumulated losses) (2,025) (1,961) (2,190)
Unrealized exchange gains (losses) of investment securities 3 (6) (5)
----------------- ----------------- ------------------
----------------- ----------------- ------------------
Total stockholders' equity 7,989 8,044 7,816
----------------- ----------------- ------------------
----------------- ----------------- ------------------
Total liabilities and stockholders' equity 13,738 14,051 12,972
----------------- ----------------- ------------------
Consolidated Statements of Cash Flow (Unaudited)
(Millions of yen)
Three-months ended June 30
2002 2003
----------------- -----------------
I. Cash flows from operating activities
Net income (loss) before income taxes 122 (303)
Depreciation and amortization 202 191
Amortization for goodwill 78 78
Equity in net losses of affiliated companies 88 20
Loss on issuance of stock by equity investee -- 1
Decrease in accrued bonuses (184) (165)
Increase in accrued severance costs for employees 6 5
Increase in accrued severance indemnities for directors 1 4
Increase (decrease) in allowance for bad debt 2 (11)
Interest and dividend income (1) (1)
Interest expenses 2 1
Loss on disposal of tangible fixed assets 6 8
(Increase) decrease in account receivable, trade (157) 131
(Increase) decrease in inventories (13) 72
Increase in other current assets (135) (25)
Increase (decrease) in accounts payable, trade 146 (140)
Increase (decrease) in accrued expenses 14 (117)
Increase (decrease) in other current liabilities 16 (23)
----------------- -----------------
Sub Total 194 (276)
----------------- -----------------
Receipt of interest 1 1
Payments for interest (2) (1)
Payments for income taxes (128) (127)
----------------- -----------------
Net cash provided by (used in) operating activities 65 (403)
----------------- -----------------
II. Cash flows from investing activities
Payment for acquisition of fixed assets (17) (14)
Proceeds from sales of fixed assets 6 --
Payment for acquisition of intangible assets (151) (204)
Proceeds from sales of intangible assets 20 --
Proceeds from deposits 42 1
Payments for long-term prepaid expenses -- (193)
Net cash increase resulting from acquiring subsidiary 30 --
Payments for loan (73) (144)
----------------- -----------------
----------------- -----------------
Net cash used in investing activities (143) (553)
----------------- -----------------
(Millions of yen)
Three-months ended June 30
2002 2003
----------- -------
III. Cash flows from financing activities
Decrease in short-term borrowing (140) --
Payments of long term debt (300) (300)
----------------- -----------------
Net cash used in financing activities (440) (300)
----------------- -----------------
IV. Effect of exchange rate difference on cash and cash equivalents -- --
V. Decrease in cash and cash equivalents (518) (1,256)
VI. Cash and cash equivalents at beginning of year 4,641 3,384
----------------- -----------------
VII. Cash and cash equivalents at end of the period 4,123 2,128
================= =================
(Notes)
1. As of June 30, 2003, there were 4 consolidated subsidiaries, and 2 affiliated companies accounted for by
the equity method.
2. Consolidated financial statements of the SCN Group are based on the standards conforming with the Generally
Accepted Accounting Principles in Japan.
3. SCN and part of consolidated subsidiaries are included in the consolidated tax return system of Sony
Corporation.
4. Cash and cash equivalents include cash and bank deposit and deposits in parent company or Sony group
company.
(For reference)
(millions of yen)
Three-months ended Three-months ended Change
June 30, 2002 June 30, 2003 (%)
Increase in fixed assets 6 11 69.9
Increase in intangible assets 187 214 14.1
Depreciation of fixed assets 32 25 (22.6)
Amortization of intangible assets 160 142 (11.1)
R&D expenses -- -- --
Forecast of Consolidated Results
Regarding the forecast of the consolidated results for the fiscal
year ending March 31, 2004, the SCN Group announces the following
changes to the forecast announced April 23, 2003.
The reasons for the changes are as follows.
1. Regarding sales, the number of customer acquisitions in the quarter ended June 30, 2003 was below that
forecast originally.
2. Regarding profitability, it is expected that there will be cost improvements.
(Forecast as of July 23, 2003)
(millions of yen)
Consolidated Results Change from previous forecast
-------------------- -----------------------------
Sales 40,000 (7.0%)
Operating income (loss) (1,500) +11.8%
Ordinary income (loss) (1,700) +10.5%
Net income (loss) (1,200) +7.7%
(Forecast as of April 23, 2003)
(millions of yen)
Consolidated Results Change from previous year
-------------------- -------------------------
Sales 43,000 +10.8%
Operating income (loss) (1,700) --
Ordinary income (loss) (1,900) --
Net income (loss) (1,300) --
(For reference)
(Year ended March 31, 2003)
Consolidated Results Change from previous year
-------------------- -------------------------
Sales 38,795 +17.0%
Operating income (loss) 472 --
Ordinary income (loss) 96 --
Net income (loss) (16) --
Cautionary statement:
Statements made in this release with respect to Sony Corporation and
Sony Communication Network's ("SCN") current plans, estimates,
strategies and beliefs and other statements that are not historical
facts are forward-looking statements about the future performance of
SCN. These statements are based on management's assumptions and
beliefs in light of the information currently available to it.
Therefore, SCN 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.
Short Name: Sony Corp.
Category Code: FR
Sequence Number: 00007547
Time of Receipt (offset from UTC): 20030724T163630+0100
--30--ZW/uk*
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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