Form 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of October 2005
Commission File Number: 001-06439
SONY CORPORATION
(Translation of registrant's name into English)
7-35 KITASHINAGAWA 6-CHOME, SHINAGAWA-KU, TOKYO, JAPAN
(Address of principal executive offices)
The registrant files annual reports under cover of Form 20-F.
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F,
Form 20-F X Form 40-F __
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934,
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):82-______
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SONY CORPORATION
(Registrant)
By: /s/ Nobuyuki Oneda
(Signature)
Nobuyuki Oneda
Executive Vice President and
Chief Financial Officer
Date: October 27, 2005
List of materials
Documents attached hereto:
i) Press release announcing Sony Corporation's Consolidated Financial
Results for the Second Quarter Ended September 30, 2005
Sony Corporation
6-7-35 Kitashinagawa
Shinagawa-ku
Tokyo 141-0001 Japan
No: 05-063E
3:00 P.M. JST,
October 27, 2005
Consolidated Financial Results
for the Second Quarter Ended September 30, 2005
Tokyo, October 27, 2005 -- Sony Corporation today announced its
consolidated results for the second quarter ended September 30,
2005 (July 1, 2005 to September 30, 2005).
(Billions of yen, millions of U.S. dollars, except per share
amounts)
Second quarter ended September 30
2004 2005 Change 2005*
in Yen
---------- ------ ------ ------ ------
Sales and operating Y1,702.3 Y1,703.0 +0.0% $15,071
revenue
Operating income 43.4 65.9 +51.9 583
Income before income 63.3 95.4 +50.8 844
taxes
Equity in net income 6.1 (2.6) - (23)
(loss) of affiliated
companies
Net income 53.2 28.5 -46.5 252
Net income per share of
common stock
- Basic Y57.50 Y28.63 -50.2 $0.25
- Diluted 51.47 27.32 -46.9 0.24
* U.S. dollar amounts have been translated from yen, for
convenience only, at the rate of Y113=U.S.$1, the approximate
Tokyo foreign exchange market rate as of September 30, 2005.
Unless otherwise specified, all amounts are on the basis of
Generally Accepted Accounting Principles in the U.S. ("U.S.
GAAP").
Consolidated Results for the Second Quarter Ended September 30,
2005
---------------------------------------------------------------
Sales and operating revenue ("sales") remained almost unchanged
compared with the same quarter of the previous fiscal year; on a
local currency basis sales decreased 1%. (For all references
herein to results on a local currency basis, see Note I.) This
reflects a decrease in sales resulting from the establishment
of SONY BMG MUSIC ENTERTAINMENT ("SONY BMG") (please refer to
Note to Operating Performance Highlights by Business Segment).
Sales within the Electronics segment remained largely unchanged
compared with the same quarter of the previous fiscal year. In
terms of product categories within the Electronics segment,
although sales of LCD flat panel televisions and video cameras
increased, there was a decrease in sales of CRT televisions,
plasma televisions and digital cameras. In the Game segment,
sales increased 79.1% as a result of the contribution from
hardware and software sales of the PlayStation Portable ("PSP").
In the Pictures segment, there was a 17.2% decrease in revenue
primarily due to lower theatrical revenues. In the Financial
Services segment, revenue increased by 39.7% mainly due to an
improvement in gains and losses on investments at Sony Life
Insurance Co., Ltd. ("Sony Life").
Operating income increased 51.9% (a 34% increase on a local
currency basis) compared with the same quarter of the previous
fiscal year. This includes a one time gain of Y73.5 billion
($650 million), which resulted from the transfer to the Japanese
Government of the substitutional portion of Sony's Employee
Pension Fund. Of this, a gain of Y63.9 billion ($565 million)
was recorded within the Electronics segment. In addition,
restructuring charges, which were recorded as operating
expenses, for the second quarter amounted to Y32.9 billion ($291
million) compared to Y18.8 billion in the same quarter of the
previous fiscal year. In the Electronics segment, restructuring
charges were Y32.3 billion ($286 million) compared to Y15.6
billion in the same quarter of the previous fiscal year.
In the Electronics segment, although there was a decrease in
sales to outside customers, operating income was recorded solely
as a result of a gain resulting from the transfer to the
Japanese Government of the substitutional portion of Sony's
Employee Pension Fund. In the Game segment, operating income was
recorded in association with the favorable growth of the PSP
business. In the Pictures segment, disappointing theatrical
revenues resulted in an operating loss. In the Financial
Services segment, there was a significant increase in operating
income mainly attributable to the increase in gains on
investments at Sony Life.
Income before income taxes increased 50.8% compared to the same
quarter of the previous fiscal year. An improvement in the net
effect of other income and other expenses was mainly the result
of a gain of Y20.7 billion ($183 million) on the change in
interest resulting from the sale of a portion of stock in Monex
Beans Holdings, Inc. ("Monex Beans"), previously an equity
affiliate of Sony. In the same quarter of the previous year,
Sony also recognized a gain of Y9.0 billion from a change in
interest in subsidiaries and equity investees resulting from the
establishment of Monex Beans, and a Y4.2 billion gain resulting
from the initial public offering of So-net M3 Inc., a
consolidated subsidiary of Sony Communications Network
Corporation ("SCN").
Income taxes: During the current quarter, Sony recorded Y65.1
billion ($576 million) of income tax expense, resulting in an
effective tax rate of 68.3%. This effective tax rate exceeded
the Japanese statutory tax rate due primarily to the recording
of both an additional tax provision for undistributed earnings
of foreign subsidiaries and additional valuation allowances
against deferred tax assets.
Equity in net loss of affiliated companies of Y2.6 billion ($23
million) was recorded, a Y8.7 billion deterioration compared to
the same quarter of the previous fiscal year.
An equity loss of Y2.8 billion ($25 million) was recorded for
S-LCD Corporation, a joint-venture with Samsung Electronics Co.,
Ltd. ("S-LCD"), for the manufacture of amorphous TFT LCD panels.
Sony also recorded equity in net loss of approximately Y4.4
billion ($39 million) for Metro-Goldwyn-Mayer Inc. ("MGM")* and
of Y3.2 billion ($29 million) for SONY BMG. The equity in net
loss for MGM includes non-cash interest of Y1.5 billion ($13
million) on cumulative preferred stock. This equity in net loss
is subject to adjustment reflecting the final allocation of the
purchase price for the acquisition.
Sony Ericsson Mobile Communications AB ("Sony Ericsson")
contributed Y7.0 billion ($62 million) to equity in net income,
an increase of Y1.0 billion compared to the same quarter of the
previous fiscal year.
*On April 8, 2005, a consortium led by Sony Corporation of
America and its equity partners completed the acquisition of
MGM. As part of the acquisition, Sony invested $257 million in
exchange for 20% of the total equity. However, based on the
percentage of common stock owned, Sony records 45% of MGM's net
income (loss) as equity in net income (loss) of affiliated
companies.
Net income, as a result, decreased 46.5% compared to the same
quarter of the previous fiscal year.
Operating Performance Highlights by Business Segment
----------------------------------------------------
Note: As of August 1, 2004, Sony and Bertelsmann AG combined
their recorded music businesses in a joint venture. The newly
formed company, SONY BMG, is 50% owned by each parent company.
Under U.S. GAAP, SONY BMG is accounted for by Sony using the
equity method and, since August 1, 2004, 50% of net profits or
losses of this business have been included under "Equity in net
income (loss) of affiliated companies."
In connection with the establishment of this joint venture,
Sony's non-Japan based disc manufacturing and physical
distribution businesses, formerly included within the Music
segment, have been reclassified to the Electronics segment to
recognize the new management reporting structure whereby Sony's
Electronics segment has now assumed responsibility for these
businesses. Effective April 1, 2005, a similar change was made
with respect to Sony's Japan based disc manufacturing business.
Results for the three and six month periods ended September 30,
2004 in the Electronics segment have been restated to account
for these reclassifications.
Effective April 1, 2005, Sony no longer breaks out its music
business as a reportable segment as it no longer meets the
materiality threshold. Accordingly, the results for Sony's music
business are now included within the Other segment and the prior
year's results have been reclassified to the Other segment for
comparative purposes. Results for the first quarter and first
half of this fiscal year in the Other segment include the
results of Sony Music Entertainment Inc.'s ("SMEI") music
publishing business and Sony Music Entertainment (Japan) Inc.
("SMEJ"), excluding Sony's Japan based disc manufacturing
business which, as noted above, has been reclassified to the
Electronics segment. However, results for the same periods of
the previous fiscal year in the Other segment include the
consolidated results for SMEI's recorded music business for the
period through July 31, 2004, as well as the results for SMEI's
music publishing business and SMEJ excluding Sony's Japan based
disc manufacturing business.
Electronics
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2004 2005 Change in 2005
Yen
---------- ------ ------ ------ ------
Sales and operating Y1,219.4 Y1,216.1 -0.3% $10,762
revenue
Operating income 7.1 17.3 +144.6 153
Unless otherwise specified, all amounts are on a U.S. GAAP
basis.
Sales remained largely unchanged (a 2% decrease on a local
currency basis). Sales to outside customers decreased 7.8%
compared to the same quarter of the previous fiscal year. There
was a decline in sales of CRT televisions which experienced a
continued shift in demand towards flat panel televisions, plasma
televisions and digital cameras, which both faced intense
business competition. On the other hand, there was an increase
in sales of several products including LCD flat panel
televisions, which experienced increased sales in the U.S. and
Europe, as well as DVD "Handycam" video cameras, which saw
increased sales in all geographic areas, and digital
high-definition "Handycam" video cameras, which saw increased
sales in Japan.
Operating income increased by Y10.2 billion or 144.6% compared
with the same quarter of the previous fiscal year. Despite the
decline in sales to outside customers as a result of the
aforementioned factors, as well as an increase in the loss on
impairment of assets particularly with regard to CRT television
manufacturing facilities primarily in the U.S, there was an
increase in income solely as a result of a Y63.9 billion ($565
million) gain, which resulted from the transfer to the Japanese
government of the substitutional portion of Sony's Employee
Pension Fund. With regard to products within the Electronics
segment, products which had a negative impact on operating
income included CRT televisions, which experienced a significant
decrease in sales, CCDs and LCD televisions, which were both
impacted by a decline in unit selling prices. On the other hand,
"Handycam" video cameras experienced an increase in operating
income due to good sales performance.
Inventory, as of September 30, 2005, was Y642.4 billion ($5,685
million), a Y46.1 billion, or 6.7%, decrease compared with the
level as of September 30, 2004 and a Y68.8 billion, or 12.0%,
increase compared with the level as of June 30, 2005.
Operating Results for Sony Ericsson Mobile Communications AB
The following operating results for Sony Ericsson, which is
accounted for by the equity method, are not consolidated in
Sony's consolidated financial statements. However, Sony believes
that this disclosure provides additional useful analytical
information to investors regarding operating performance. In
addition, please note that the operating results of Sony
Ericsson discussed below are reported on an International
Financial Reporting Standards basis, and thereby differ from the
operating results reported on a U.S. GAAP basis contained within
Sony's equity in net income (loss) of affiliated companies.
Sales for the quarter were Euro 2,055 million, representing a
year-on-year increase of Euro 377 million, or 22%, boosted by
hit models such as 2 megapixel auto-focus camera phones and the
"Walkman" phone. Units shipped in the quarter reached 13.8
million, a 29% increase compared to the same period last year,
higher than market growth. Income before taxes was Euro 151
million and net income was Euro 104 million, which represents a
year-on-year increase of Euro 15 million, or 11%, and Euro 14
million, or 16%, respectively. As a result, equity in net income
of Y7.0 billion ($62 million) was recorded by Sony.
Game
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2004 2005 Change in 2005
Yen
---------- ------ ------ ------ ------
Sales and operating Y119.6 Y214.2 +79.1% $1,896
revenue
Operating income (loss) (0.0) 8.2 - 73
Unless otherwise specified, all amounts are on a U.S. GAAP
basis.
Sales increased 79.1% compared with the same quarter of the
previous fiscal year (a 77% increase on a local currency basis).
Hardware: In addition to the significant contribution to sales
from PSP, an increase of PlayStation 2 ("PS2") unit sales in
Europe and the U.S. compared to the same quarter of the previous
fiscal year resulted in a significant increase in sales in all
geographic areas.
Software: Overall software sales increased as a result of the
contribution to sales from PSP software, despite a decrease in
PS2 software sales. On a regional basis, revenue significantly
increased in Japan and Europe, although it slightly decreased in
the U.S.
Operating income of Y8.2 billion ($73 million) was recorded
compared to a very small operating loss in the same quarter of
the previous fiscal year mainly due to the favorable performance
of the PS2 and PSP businesses. This was partially offset by an
increase in selling, general and administrative expenses mainly
reflecting advertising and marketing expenses associated with
the launch of PSP incurred during the quarter, as well as
continued aggressive research and development spending
associated with the PLAYSTATION 3 business.
Worldwide hardware production shipments:*
-> PS2: 5.01 million units (an increase of 3.02 million units)
-> PSP: 3.75 million units**
Worldwide software production shipments:*
-> PS2: 50 million units (a decrease of 6 million units)
-> PSP: 9.0 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.
**There were no sales of PSP during the same quarter of the
previous fiscal year.
Inventory, as of September 30, 2005, was Y114.9 billion ($1,017
million), a Y61.5 billion, or 115.2%, increase compared with the
level as of September 30, 2004 and a Y30.9 billion, or 36.7%,
increase compared with the level as of June 30, 2005.
Pictures
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2004 2005 Change in 2005
Yen
---------- ------ ------ ------ ------
Sales and operating Y191.7 Y158.9 -17.2% $1,406
revenue
Operating income (loss) 27.4 (6.6) - (59)
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 discussions of certain portions of its results
are specified as being on "a U.S. dollar basis."
Sales decreased 17.2% compared with the same quarter of the
previous fiscal year (18% decrease on a U.S dollar basis).
Sales, on a U.S. dollar basis, decreased primarily due to lower
theatrical revenues as a result of the strong performance of
Spider-Man 2 in the prior year's second quarter coupled with the
current year's disappointing performance of Stealth.
An operating loss of Y6.6 billion ($59 million) was recorded as
compared to operating income of Y27.4 billion in the same
quarter of the previous fiscal year. The decrease is due to the
same factors contributing to the revenue decrease discussed
above. In addition, marketing costs related to forthcoming
theatrical releases were significantly higher than those
incurred in the prior year's second quarter. Television
operating income decreased due to the comparative lack of major
syndication revenues recognized on library product during the
quarter.
Financial Services
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2004 2005 Change in 2005
Yen
---------- ------ ------ ------ ------
Financial service Y125.9 Y175.9 +39.7% $1,556
revenue
Operating income 14.9 40.0 +169.1 354
Unless otherwise specified, all amounts are on a U.S. GAAP
basis. Therefore, they differ from the results that Sony Life
discloses on a Japanese statutory basis.
Financial service revenue was Y175.9 billion ($1,556 million), a
39.7% increase compared with the same quarter of the previous
fiscal year, mainly due to an increase in revenue at Sony Life.
Revenue at Sony Life was Y153.3 billion ($1,356 million), a
Y47.4 billion, or 44.7% increase compared with the same quarter
of the previous fiscal year. The reasons for this increase were
an improvement in gains and losses from investments and an
increase in revenue from insurance premiums reflecting a stable
increase of insurance-in-force.
Operating income was Y40.0 billion ($354 million), a Y25.2
billion, or 169.1% increase compared with the same quarter of
the previous fiscal year, mainly as a result of an improvement
in gains and losses on investments in the general account at
Sony Life, primarily resulting from an improvement in valuation
gains from stock conversion rights in convertible bonds. As a
result of the abovementioned factors, operating income at Sony
Life increased by Y21.5 billion or 121.9% to Y39.1 billion ($346
million).
Other
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2004 2005 Change in 2005
Yen
---------- ------ ------ ------ ------
Sales and operating Y112.9 Y100.0 -11.4% $885
revenue
Operating income 0.7 7.7 +972.7 69
Unless otherwise specified, all amounts are on a U.S. GAAP
basis.
Sales decreased 11.4% compared with the same quarter of the
previous year. Sales in the Other segment for the second quarter
of the current fiscal year incorporate the results of Sony's
music businesses (please refer to Note to Operating Performance
Highlights by Business Segment) which include both
SMEI's music publishing business and SMEJ. There was a decrease
in sales within the Other segment reflecting the fact that the
results for the same quarter of the previous fiscal year in the
Other segment incorporated the results for SMEI's recorded music
business for only the month of July 2004, as it was combined as
of August 1, 2004 with Bertelsmann AG's recorded music business
to form the SONY BMG joint venture.
Sales at SMEJ decreased compared to the same quarter of the
previous fiscal year due to the absence in the current quarter
of a best selling album compared to the same quarter of the
previous fiscal year when Porno Graffitti's two greatest hits
albums were successful releases. Best selling singles during the
quarter included GLAMOROUS SKY by NANA starring MIKA NAKASHIMA,
Kizuna by ORANGE RANGE and the best selling DVD SHOGO HAMADA
Visual Collection "Flash & Shadow" by Shogo Hamada also
contributed to sales.
Excluding sales recorded within Sony's music business, there was
an increase in sales within the Other segment. This increase was
mainly the result of favorable sales recorded at SCN, where
contents businesses performed well during the quarter.
Operating income of Y7.7 billion ($69 million) was recorded,
representing an increase of Y7.0 billion compared to the same
quarter of the previous fiscal year. This increase was mainly
the result of the recording of a gain resulting from the
transfer to the Japanese government of the substitutional
portion of the Employee Pension Fund at several businesses
within the segment including SMEJ.
Operating Results for SONY BMG MUSIC ENTERTAINMENT
The following operating results for SONY BMG, which is accounted
for by the equity method, are not consolidated in Sony's
consolidated financial statements. However, Sony believes that
this disclosure provides additional useful analytical
information to investors regarding operating performance.
SONY BMG recorded sales revenue of $936 million, loss before
income taxes of $58 million, and a net loss of $60 million
during the quarter ended September 30, 2005. Loss before income
taxes includes $43 million of restructuring charges and also
reflects harsh market conditions in many territories worldwide,
most notably the U.S., Germany, the U.K., Italy, Spain and
Australia. As a result, equity in net loss of Y3.2 billion ($29
million) was recorded by Sony.
Cash Flow
The following charts show Sony's unaudited condensed statements
of cash flow for all segments excluding the Financial Services
segment and for the Financial Services segment alone. These
separate condensed presentations are not required under U.S.
GAAP, which is used in Sony's consolidated financial statements.
However, because the Financial Services segment is different in
nature from Sony's other segments, Sony believes that these
presentations may be useful in understanding and analyzing
Sony's consolidated financial statements.
Cash Flow - Excluding Financial Services segment
------------------------------------------------
(Billions of yen, millions of U.S. dollars)
Six months ended September 30
Cash flow 2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
- From operating activities Y35.0 (Y91.9) Y-126.9 ($813)
- From investing activities (330.1) (145.1) +185.0 (1,284)
- From financing activities (25.6) 97.1 +122.7 859
Cash and cash equivalents 592.9 519.7 -73.2 4,599
at beginning of the fiscal
year
Cash and cash equivalents 290.1 393.9 +103.8 3,486
as of September 30
Operating Activities: During the six months ended September 30,
2005, in addition to the recording of a net loss, compared with
the net income recorded in the same period of the previous
fiscal year, there was an increase in inventory mainly within
the Electronics and Game segments resulting from increased
production in anticipation of the year-end sales season.
Investing Activities: During the six months ended September 30,
2005, Sony carried out capital investments mainly in relation to
semiconductor manufacturing facilities. In addition, Sony also
carried out the sale of securities investments. In the same
period of the previous fiscal year, in addition to investment in
semiconductor manufacturing facilities, Sony also carried out
investment towards S-LCD.
As a result, the total amount of cash flow from operating
activities and from investing activities was a use of cash of
Y237.0 billion ($2,097 million).
Financing Activities: During the six months ended September 30,
2005, financing was carried out through the issuance of
commercial paper and straight bonds. The proceeds from the
issuance of a total of Y120 billion in straight bonds in Japan,
including Y50 billion of bonds with a maturity of 5 years, Y40
billion with a maturity of 7 years and Y30 billion with a
maturity of 10 years, was used by Sony to redeem a portion of
its existing bonds.
Cash and Cash Equivalents: In addition to the aforementioned
information, the total balance of cash and cash equivalents,
accounting for the effect of foreign currency exchange rate
fluctuations, decreased Y125.8 billion compared to March 31,
2005, and increased by Y103.8 billion compared to September 30,
2004, to Y393.9 billion ($3,486 million) as of September 30,
2005.
Cash Flow - Financial Services segment
--------------------------------------
(Billions of yen, millions of U.S. dollars)
Six months ended September 30
Cash flow 2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
- From operating activities Y83.6 Y50.9 Y-32.6 $451
- From investing activities (344.7) (261.9) +82.7 (2,318)
- From financing activities 164.3 138.9 -25.4 1,229
Cash and cash equivalents 256.3 259.4 +3.1 2,295
at beginning of the fiscal
year
Cash and cash equivalents 159.5 187.3 +27.7 1,657
as of September 30
Operating Activities: Net cash from operating activities was
generated mainly due to an increase in revenue from insurance
premiums, reflecting primarily an increase in insurance-in-force
at Sony Life.
Investing Activities: Payments for investments and advances
exceeded proceeds from maturities of marketable securities,
sales of securities investments and collections of advances
primarily as a result of investments in mainly Japanese fixed
income securities carried out at Sony Life, as well as an
increase in advance payments for housing loans and investments
in marketable securities at Sony Bank.
Financing Activities: Net cash from financing activities was
generated as a result of an increase in policyholders' accounts
at Sony Life and an increase in deposits from customers in the
banking business.
Cash and Cash Equivalents: As a result of the above, cash and
cash equivalents decreased Y72.1 billion compared to March 31,
2005, and increased Y27.7 billion compared to September 30,
2004, to Y187.3 billion ($1,657 million) as of September 30,
2005.
Notes
Note I: During the quarter ended September 30, 2005, the average
value of the yen was Y110.3 against the U.S. dollar and Y134.2
against the Euro, which was 1.2% lower against the U.S. dollar
and 1.0% lower against the Euro, compared with the average rates
for the same quarter of the previous fiscal year. Operating
results on a local currency basis described herein reflect sales
and operating income obtained by applying the yen's average
exchange rate in the same quarter of the previous fiscal year to
local currency-denominated monthly sales, cost of sales, and
selling, general and administrative expenses in the current
quarter. Local currency basis results are not reflected in
Sony's financial statements and are not measures conforming with
U.S. GAAP. In addition, Sony does not believe that these
measures are a substitute for U.S. GAAP measures. However, Sony
believes that local currency basis results provide additional
useful analytical information to investors regarding operating
performance.
Note II: "Sales and operating revenue" in each business segment
represents sales and operating revenue recorded before
intersegment transactions are eliminated. "Operating income" in
each business segment represents operating income recorded
before intersegment transactions and unallocated corporate
expenses are eliminated.
Note III: In the third quarter ended December 31, 2004,
Sony adopted Emerging Issues Task Force ("EITF") Issue No. 04-8,
"The Effect of Contingently Convertible Instruments on Diluted
Earnings per Share." As a result of adopting EITF Issue No.
04-8, diluted earnings per share of net income (loss) for the
three and six months ended September 30, 2004 have been restated
(see Note 9 regarding EITF Issue No. 04-8).
Outlook for the Fiscal Year ending March 31, 2006
-------------------------------------------------
On September 22, 2005, Sony announced organizational
restructuring and adjusted its forecast to reflect additional
restructuring costs to be incurred. Subsequent to this, Sony
realized a gain that was higher than anticipated from the
transfer to the Japanese Government of the substitutional
portion of Sony's Employee Pension Fund. At this point in time,
however, we have not revised our forecast for the fiscal year
ending March 31, 2006 from the forecast announced on September
22, 2005, as stated below, since there continue to be many
uncertainties in the business environment for the second half of
the fiscal year.
The forecast announced on September 22, 2005
--------------------------------------------
Change from
previous
Forecast fiscal year
-------- -----------
Sales and operating revenue Y7,250 billion +1%
Operating income (loss) (20 billion) -
(Restructuring charges included 140 billion +56%)
within operating income
Income before income taxes 40 billion -75%
Equity in net income (loss) of (8 billion) -
affiliated companies
Net income (loss) (10 billion) -
Assumed foreign currency exchange rates for the second half of
the fiscal year: approximately Y107 to the U.S. dollar and
approximately Y130 to the Euro.
Our forecast for capital expenditures, depreciation and
amortization or research and development costs, as per the table
below, is unchanged from the forecast of April 27, 2005.
The forecast announced on April 27, 2005
----------------------------------------
Change from
previous
Forecast fiscal year
-------- -----------
Capital expenditures Y410 billion +15%
(additions to fixed assets)
Depreciation and amortization* 390 billion +5
(Depreciation expenses for 320 billion +6)
tangible assets
Research and development expenses 520 billion +4
*Including amortization of intangible assets and amortization of
deferred insurance acquisition costs.
In addition, as was announced on April 26, 2005, Sony is
considering the possibility of an initial public offering of SCN
common stock. However, the impact of such an offering on Sony's
financial results is not reflected within this forecast.
Cautionary Statement
--------------------
Statements made in this release with respect to Sony's current
plans, estimates, strategies and beliefs and other statements
that are not historical facts are forward-looking statements
about the future performance of Sony. Forward-looking statements
include, but are not limited to, those statements using words
such as "believe," "expect," "plans," "strategy," "prospects,"
"forecast," "estimate," "project," "anticipate," "may" or
"might" and words of similar meaning in connection with a
discussion of future operations, financial performance, events
or conditions. From time to time, oral or written
forward-looking statements may also be included in other
materials released to the public. These statements are based on
management's assumptions and beliefs in light of the information
currently available to it. Sony cautions you that a number of
important risks and uncertainties could cause actual results to
differ materially from those discussed in the forward-looking
statements, and therefore you should not place undue reliance on
them. You also should not rely on any obligation of Sony to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Sony
disclaims any such obligation. Risks and uncertainties that
might affect Sony include, but are not limited to (i) the global
economic environment in which Sony operates, as well as the
economic conditions in Sony's markets, particularly levels of
consumer spending; (ii) exchange rates, particularly between the
yen and the U.S. dollar, the Euro and other currencies in which
Sony makes significant sales or in which Sony's assets and
liabilities are denominated; (iii) Sony's ability to continue to
design and develop and win acceptance of its products and
services, which are offered in highly competitive markets
characterized by continual new product introductions, rapid
development in technology and subjective and changing consumer
preferences (particularly in the Electronics, Game and Pictures
segments, and music business); (iv) Sony's ability to implement
successfully personnel reduction and other business
reorganization activities in its Electronics segment and music
business; (v) Sony's ability to implement successfully its
network strategy for its Electronics, Pictures and Other
segments, including the music business, and to develop and
implement successful sales and distribution strategies in its
Pictures segment and music business in light of the Internet and
other technological developments; (vi) Sony's continued ability
to devote sufficient resources to research and development and,
with respect to capital expenditures, to correctly prioritize
investments (particularly in the Electronics segment); (vii)
shifts in customer demand for financial services such as life
insurance and Sony's ability to conduct successful Asset
Liability Management in the Financial Services segment; and
(viii) the success of Sony's joint ventures and alliances. Risks
and uncertainties also include the impact of any future events
with material unforeseen impacts.
Business Segment Information (Unaudited)
----------------------------------------
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
Sales and operating 2004 2005 Change 2005
revenue
---------- ------ ------ ------ ------
Electronics
Customers Y1,182,004 Y1,090,250 -7.8% $9,648
Intersegment 37,351 125,825 1,114
---------- ------ ------ ------
Total 1,219,355 1,216,075 -0.3 10,762
Game
Customers 114,874 203,994 +77.6 1,805
Intersegment 4,771 10,252 91
---------- ------ ------ ------
Total 119,645 214,246 +79.1 1,896
Pictures
Customers 191,742 158,855 -17.2 1,406
Intersegment 0 0 0
---------- ------ ------ ------
Total 191,742 158,855 -17.2 1,406
Financial Services
Customers 119,643 170,103 +42.2 1,505
Intersegment 6,219 5,779 51
---------- ------ ------ ------
Total 125,862 175,882 +39.7 1,556
Other
Customers 94,009 79,794 -15.1 707
Intersegment 18,849 20,238 178
---------- ------ ------ ------
Total 112,858 100,032 -11.4 885
Elimination (67,190) (162,094) - (1,434)
---------- ------ ------ ------
Consolidated total Y1,702,272 Y1,702,996 +0.0% $15,071
Electronics intersegment amounts primarily consist of
transactions with the Game, Pictures and Other segments.
Other intersegment amounts primarily consist of transactions
with the Electronics and Game segments.
Operating income (loss) 2004 2005 Change 2005
---------- ------ ------ ------ ------
Electronics Y7,063 Y17,273 +144.6% $153
Game (11) 8,220 - 73
Pictures 27,418 (6,633) - (59)
Financial Services 14,881 40,046 +169.1 354
Other 722 7,745 +972.7 69
---------- ------ ------ ------
Total 50,073 66,651 +33.1 590
Corporate and (6,688) (734) - (7)
elimination
---------- ------ ------ ------
Consolidated total Y43,385 Y65,917 +51.9% $583
Commencing April 1, 2005, Sony has partly realigned its business
segment configuration. Results of the previous year have been
reclassified to conform to the presentations for the current
quarter (see notes 5 and 6).
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Sales and operating 2004 2005 Change 2005
revenue
---------- ------ ------ ------- ------
Electronics
Customers Y2,288,163 Y2,113,735 -7.6% $18,706
Intersegment 62,473 217,593 1,925
---------- ------ ------ ------
Total 2,350,636 2,331,328 -0.8 20,631
Game
Customers 214,935 369,471 +71.9 3,270
Intersegment 10,075 17,553 155
---------- ------ ------ ------
Total 225,010 387,024 +72.0 3,425
Pictures
Customers 339,933 303,236 -10.8 2,684
Intersegment 0 0 0
---------- ------ ------ ------
Total 339,933 303,236 -10.8 2,684
Financial Services
Customers 247,349 318,691 +28.8 2,820
Intersegment 12,137 11,005 98
---------- ------ ------ ------
Total 259,486 329,696 +27.1 2,918
Other
Customers 224,030 157,296 -29.8 1,391
Intersegment 36,528 38,179 339
---------- ------ ------ ------
Total 260,558 195,475 -25.0 1,730
Elimination (121,213) (284,330) - (2,517)
---------- ------ ------ ------
Consolidated total Y3,314,410 Y3,262,429 -1.6% $28,871
Electronics intersegment amounts primarily consist of
transactions with the Game, Pictures and Other segments.
Other intersegment amounts primarily consist of transactions
with the Electronics and Game segments.
Operating income (loss) 2004 2005 Change 2005
---------- ------ ------ ------ ------
Electronics Y15,340 Y(19,007) - $(168)
Game (2,892) 2,325 - 21
Pictures 31,519 (2,387) - (21)
Financial Services 25,284 61,969 +145.1% 548
Other (2,470) 12,640 - 112
---------- ------ ------ ------
Total 66,781 55,540 -16.8 492
Corporate and (13,622) (4,905) - (44)
elimination
---------- ------ ------ ------
Consolidated total Y53,159 Y50,635 -4.7% $ 448
Commencing April 1, 2005, Sony has partly realigned its business
segment configuration. Results of the previous year have been
reclassified to conform to the presentations for the current
quarter (see notes 5 and 6).
Electronics Sales and Operating Revenue to Customers by Product
Category
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
Sales and operating 2004 2005 Change 2005
revenue
---------- ------ ------ ------ ------
Audio Y147,025 Y129,605 -11.8% $1,147
Video 245,876 247,327 +0.6 2,189
Televisions 211,099 171,731 -18.6 1,520
Information and 189,494 183,781 -3.0 1,626
Communications
Semiconductors 74,992 61,909 -17.4 548
Components 160,381 156,279 -2.6 1,383
Other 153,137 139,618 -8.8 1,235
---------- ------ ------ ------
Total Y1,182,004 Y1,090,250 -7.8% $9,648
Six months ended September 30
Sales and operating 2004 2005 Change 2005
revenue
---------- ------ ------ ------ ------
Audio Y 281,411 Y 246,944 -12.2% $2,185
Video 497,081 498,400 +0.3 4,411
Televisions 400,167 322,036 -19.5 2,850
Information and 371,630 367,087 -1.2 3,249
Communications
Semiconductors 141,902 115,555 -18.6 1,023
Components 312,091 307,304 -1.5 2,719
Other 283,881 256,409 -9.7 2,269
---------- ------ ------ ------
Total Y2,288,163 Y2,113,735 -7.6% $18,706
The above table is a breakdown of Electronics sales and
operating revenue to customers in the Business Segment
Information. The Electronics segment is managed as a
single operating segment by Sony's management. However,
Sony believes that the information in this table is useful
to investors in understanding the product categories in
this business segment. In addition, commencing April 1, 2005,
Sony has partly realigned its product category configuration in
the Electronics segment. Accordingly, results of the previous
year have been restated (see note 7).
Geographic Segment Information (Unaudited)
------------------------------------------
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
Sales and operating 2004 2005 Change 2005
revenue
---------- ------ ------ ------ ------
Japan Y490,764 Y503,388 +2.6% $4,455
United States 457,670 436,297 -4.7 3,861
Europe 360,270 368,910 +2.4 3,265
Other Areas 393,568 394,401 +0.2 3,490
---------- ------ ------ ------
Total Y1,702,272 Y1,702,996 +0.0% $15,071
Six months ended September 30
Sales and operating 2004 2005 Change 2005
revenue
---------- ------ ------ ------ ------
Japan Y975,396 Y971,660 -0.4% $8,599
United States 875,966 854,778 -2.4 7,564
Europe 735,603 700,033 -4.8 6,195
Other Areas 727,445 735,958 +1.2 6,513
---------- ------ ------ ------
Total Y3,314,410 Y3,262,429 -1.6% $28,871
Classification of Geographic Segment Information shows sales and
operating revenue recognized by location of customers.
Consolidated Statements of Income (Unaudited)
---------------------------------------------
(Millions of yen, millions of U.S. dollars, except per share
amounts)
Three months ended September 30
2004 2005 Change 2005
------ ------ ------ ------
Sales and operating %
revenue:
Net sales Y1,568,026 Y1,517,412 $13,429
Financial service 119,643 170,103 1,505
revenue
Other operating 14,603 15,481 137
revenue
------ ------ ------
1,702,272 1,702,996 +0.0 15,071
Costs and expenses:
Cost of sales 1,184,124 1,179,803 10,441
Selling, general and 361,683 300,279 2,657
administrative
Financial service 105,216 130,228 1,153
expenses
Loss on sale, 7,864 26,769 237
disposal or
impairment of
assets, net
------ ------ ------
1,658,887 1,637,079 14,488
Operating income 43,385 65,917 +51.9 583
Other income:
Interest and 3,109 4,674 41
dividends
Royalty income 11,458 8,638 76
Foreign exchange - 326 3
gain, net
Gain on sale of 1,337 4,259 38
securities
investments, net
Gain on change in 13,188 20,662 183
interest in
subsidiaries and
equity investees
Other 5,834 5,068 45
------ ------ ------
34,926 43,627 386
Other expenses:
Interest 7,031 7,135 63
Loss on devaluation 1,382 2,144 19
of securities
investments
Foreign exchange 251 - -
loss, net
Other 6,386 4,882 43
------ ------ ------
15,050 14,161 125
------ ------ ------
Income before income 63,261 95,383 +50.8 844
taxes
Income taxes 16,203 65,143 576
------ ------ ------
Income before minority 47,058 30,240 -35.7 268
interest and equity in
net income (loss) of
affiliated companies
Minority interest in (49) (837) (7)
income (loss) of
consolidated
subsidiaries
Equity in net income 6,103 (2,609) (23)
(loss) of affiliated
companies
------ ------ ------
Net income Y53,210 Y28,468 -46.5 $252
------ ------ ------
Per share data:
Common stock
Net income
- Basic Y57.50 Y28.63 -50.2 $0.25
- Diluted 51.47 27.32 -46.9 0.24
Subsidiary tracking
stock
Net income (loss)
- Basic 4.25 (19.90) - (0.18)
(Millions of yen, millions of U.S. dollars, except per share
amounts)
Six months ended September 30
2004 2005 Change 2005
------ ------ ------ ------
Sales and operating %
revenue:
Net sales Y3,039,147 Y2,915,146 $25,798
Financial service 247,349 318,691 2,820
revenue
Other operating 27,914 28,592 253
revenue
------ ------ ------
3,314,410 3,262,429 -1.6 28,871
Costs and expenses:
Cost of sales 2,287,395 2,276,579 20,147
Selling, general 738,620 649,755 5,750
and administrative
Financial service 222,510 256,865 2,273
expenses
Loss on sale, 12,726 28,595 253
disposal or
impairment of
assets, net
------ ------ ------
3,261,251 3,211,794 28,423
Operating income 53,159 50,635 -4.7 448
Other income:
Interest and 8,090 10,843 96
dividends
Royalty income 17,119 17,338 153
Gain on sale of 2,026 6,400 57
securities
investments, net
Gain on change in 13,495 38,531 341
interest in
subsidiaries and
equity investees
Other 12,683 10,826 96
------ ------ ------
53,413 83,938 743
Other expenses:
Interest 14,558 11,981 106
Loss on devaluation 2,313 2,944 26
of securities
investments
Foreign exchange 5,934 1,066 10
loss, net
Other 13,892 10,296 91
------ ------ ------
36,697 26,287 233
------ ------ ------
Income before income 69,875 108,286 +55.0 958
taxes
Income taxes 14,361 77,194 683
------ ------ ------
Income before 55,514 31,092 -44.0 275
minority interest,
equity in net income
(loss) of affiliated
companies and
cumulative effect of
an accounting change
Minority interest 572 (1,808) (16)
in income (loss) of
consolidated
subsidiaries
Equity in net 26,245 (11,695) (103)
income (loss) of
affiliated
companies
------ ------ ------
Income before 81,187 21,205 -73.9 188
cumulative effect of an
accounting change
Cumulative effect (4,713) - -
of an accounting
change
(2004: Net of
income taxes of
Y2,675 million)
------ ------ ------
Net income Y76,474 Y21,205 -72.3 $188
------ ------ ------
Per share data:
Common stock
Income before
cumulative effect of
an accounting change
- Basic Y87.70 Y - - $ -
- Diluted 78.77 - - -
Net income
- Basic 82.61 19.95 -75.9 0.18
- Diluted 74.26 19.01 -74.4 0.17
Subsidiary tracking
stock
Net income
- Basic 18.12 430.74 2,277.2 3.81
Additional Paid-in Capital and Retained Earnings (Unaudited)
------------------------------------------------------------
The following information shows change in additional paid-in
capital for the six months ended September 30, 2004 and 2005 and
change in retained earnings for the six months ended September 30,
2004 and 2005.
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)
Six months ended September 30
2004 2005 2005
------ ------ ------
Additional Paid-in Capital:
Balance, beginning of year Y992,817 Y1,134,222 $10,037
Conversion of convertible bonds 26 - -
Exercise of stock acquisition - 16 0
rights
Stock based compensation - 66 1
Reissuance of treasury stock (342) - -
------ ------ ------
Balance as of September 30 Y992,501 Y1,134,304 $10,038
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
2004 2005 2005
------ ------ ------
Retained Earnings:
Balance, beginning of year Y1,367,060 Y1,506,082 $13,328
Net income 76,474 21,205 188
Cash dividends (11,573) (12,456) (110)
Reissuance of treasury stock (237) (1,349) (12)
Common stock issue costs, net (5) (759) (7)
of tax
------ ------ ------
Balance as of September 30 Y1,431,719 Y1,512,723 $13,387
Consolidated Balance Sheets (Unaudited)
(Millions of yen, millions of U.S. dollars)
September 30 March 31 September 30 September 30
ASSETS 2004 2005 2005 2005
-------- -------- -------- -------
Current assets:
Cash and cash Y 449,626 Y 779,103 Y 581,200 $ 5,143
equivalents
Time deposits 3,325 1,492 1,857 16
Marketable 533,373 460,202 508,017 4,496
securities
Notes and 1,133,252 1,113,071 1,087,120 9,621
accounts
receivable,
trade
Allowance for (76,966) (87,709) (78,352) (693)
doubtful
accounts and
sales returns
Inventories 781,361 631,349 805,856 7,131
Deferred income 128,595 141,154 138,160 1,223
taxes
Prepaid expenses 463,670 517,509 551,019 4,876
and other
current assets
-------- -------- -------- -------
3,416,236 3,556,171 3,594,877 31,813
Film costs 270,090 278,961 343,998 3,044
Investments and
advances:
Affiliated 252,966 252,905 263,524 2,332
companies
Securities 2,410,396 2,492,784 2,900,196 25,666
investments and
other
-------- -------- -------- -------
2,663,362 2,745,689 3,163,720 27,998
Property, plant
and equipment:
Land 186,168 182,900 181,130 1,603
Buildings 929,142 925,796 936,291 8,286
Machinery and 2,096,564 2,192,038 2,304,687 20,395
equipment
Construction in 144,570 92,611 90,822 804
progress
Less-Accumulated (1,973,005) (2,020,946) (2,133,025) (18,876)
depreciation
-------- -------- -------- -------
1,383,439 1,372,399 1,379,905 12,212
Other assets:
Intangibles, net 208,251 187,024 192,688 1,705
Goodwill 274,662 283,923 291,021 2,575
Deferred 366,983 374,805 384,917 3,406
insurance
acquisition
costs
Deferred income 177,973 240,396 205,019 1,814
taxes
Other 492,160 459,732 452,169 4,002
-------- -------- -------- -------
1,520,029 1,545,880 1,525,814 13,502
-------- -------- -------- -------
Y 9,253,156 Y 9,499,100 Y 10,008,314 $ 88,569
-------- -------- -------- -------
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Short-term Y 158,151 Y 63,396 Y 202,882 $ 1,795
borrowings
Current portion 452,986 166,870 165,091 1,461
of long-term
debt
Notes and 826,719 806,044 854,982 7,566
accounts
payable, trade
Accounts 731,145 746,466 756,985 6,699
payable, other
and accrued
expenses
Accrued income 42,968 55,651 33,211 294
and other taxes
Deposits from 451,231 546,718 591,540 5,235
customers in the
banking business
Other 371,978 424,223 489,937 4,336
-------- -------- -------- -------
3,035,178 2,809,368 3,094,628 27,386
Long-term
liabilities:
Long-term debt 677,262 678,992 690,320 6,109
Accrued pension 325,664 352,402 221,915 1,964
and severance
costs
Deferred income 67,470 72,227 143,793 1,273
taxes
Future insurance 2,314,369 2,464,295 2,598,208 22,993
policy benefits
and other
Other 267,809 227,631 234,321 2,073
-------- -------- -------- -------
3,652,574 3,795,547 3,888,557 34,412
Minority interest 24,171 23,847 25,947 230
in consolidated
subsidiaries
Stockholders'
equity:
Capital stock 480,293 621,709 621,724 5,502
Additional 992,501 1,134,222 1,134,304 10,038
paid-in capital
Retained 1,431,719 1,506,082 1,512,723 13,387
earnings
Accumulated (357,467) (385,675) (266,656) (2,360)
other
comprehensive
income
Treasury stock, (5,813) (6,000) (2,913) (26)
at cost
-------- -------- -------- -------
2,541,233 2,870,338 2,999,182 26,541
-------- -------- -------- -------
Y 9,253,156 Y 9,499,100 Y 10,008,314 $ 88,569
-------- -------- -------- -------
Consolidated Statements of Cash Flows (Unaudited)
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
2004 2005 2005
------ ------ ------
Cash flows from operating
activities:
Net income Y 76,474 Y 21,205 $ 188
Adjustments to reconcile net
income to net cash provided by
(used in) operating
activities:
Depreciation and 176,704 181,416 1,605
amortization,
including amortization
of deferred insurance
acquisition costs
Amortization of film costs 127,305 170,624 1,510
Accrual for pension and 11,269 (3,503) (31)
severance costs, less
payments
Gain on the transfer to the - (73,472) (650)
Japanese Government of the
substitutional portio n of
employee pension fund
Loss on sale, disposal or 12,726 28,595 253
impairment of assets, net
Gain on sale or loss on 287 (3,456) (31)
devaluation of securities
investments, net
Gain on change in interest in (13,495) (38,531) (341)
subsidiaries and equity
investees
Deferred income taxes (11,274) 67,569 598
Equity in net (income) (25,661) 12,443 110
losses of affiliated
companies, net
of dividends
Cumulative effect of an 4,713 - -
accounting change
Changes in assets and
liabilities:
Increase in notes and (43,346) (22,704) (201)
accounts receivable,
trade
Increase in inventories (109,507) (158,851) (1,406)
Increase in film costs (127,647) (218,406) (1,933)
Increase in notes and 48,286 39,971 354
accounts payable, trade
Decrease in accrued income (13,669) (22,790) (202)
and other taxes
Increase in future 63,841 62,113 550
insurance policy
benefits and other
Increase in deferred (32,597) (32,080) (284)
insurance acquisition
costs
Increase in marketable (16,270) (13,216) (117)
securities held in the
financial service
business for trading
purpose
Increase in other (47,262) (58,603) (519)
current assets
Increase (decrease) in (20,970) 18,029 160
other current
liabilities
Other 52,000 2,750 25
------ ------ ------
Net cash provided by 111,907 (40,897) (362)
(used in) operating
activities
Cash flows from investing
activities:
Payments for purchases of (251,558) (234,310) (2,074)
fixed assets
Proceeds from sales of fixed 18,397 9,978 88
assets
Payments for investments and (723,732) (712,454) (6,305)
advances by financial service
business
Payments for investments and (136,082) (15,217) (135)
advances (other than financial
service business)
Proceeds from maturities of 401,202 471,167 4,170
marketable securities, sales
of securities
investments and collections of
advances by financial service
business
Proceeds from maturities of 19,973 50,293 445
marketable securities, sales of
securities
investments and collections of
advances (other than financial
service
business)
Other 1,046 15,875 141
------ ------ ------
Net cash used in investing (670,754) (414,668) (3,670)
activities
------ ------ ------
Cash flows from financing
activities:
Proceeds from issuance of 9,589 121,280 1,073
long-term debt
Payments of long-term debt (53,511) (115,563) (1,023)
Increase in short-term 31,221 101,073 894
borrowings
Increase in deposits from 129,335 116,856 1,034
customers in the financial
service business
Increase in call money and 35,209 31,500 279
bills sold in the banking
business
Dividends paid (11,441) (12,368) (109)
Other 956 753 7
------ ------ ------
Net cash provided by 141,358 243,531 2,155
financing activities
------ ------ ------
Effect of exchange rate 17,904 14,131 125
changes on cash and cash
equivalents
------ ------ ------
Net decrease in cash and cash (399,585) (197,903) (1,752)
equivalents
Cash and cash equivalents at 849,211 779,103 6,895
beginning of the fiscal year
------ ------ ------
Cash and cash equivalents at Y 449,626 Y 581,200 $ 5,143
September 30
------ ------ ------
(Notes)
1. U.S. dollar amounts have been translated from yen, for
convenience only, at the rate of Y113 = U.S. $1, the approximate
Tokyo foreign exchange market rate as of September 30, 2005.
2. As of September 30, 2005, Sony had 920 consolidated
subsidiaries (including variable interest entities). It has
applied the equity accounting method in respect to56 affiliated
companies.
3. Sony calculates and presents per share data separately
for Sony's common stock and for the subsidiary tracking stock
which is linked to the economic value of Sony Communication
Network Corporation, based on Statement of Financial Accounting
Standards ("FAS") No.128, "Earnings per Share". The holders of
the tracking stock have the right to participate in earnings,
together with common stock holders. Accordingly, Sony calculates
per share data by the "two-class" method based on FAS No.128.
Under this method, basic net income per share for each class of
stock is calculated based on the earnings allocated to each
class of stock for the applicable period, divided by the
weighted-average number of outstanding shares in each class
during the applicable period. The earnings allocated to the
subsidiary tracking stock are determined based on the subsidiary
tracking stockholders' economic interest in the targeted
subsidiary's earnings available for dividends or change in
accumulated losses that do not include those of the targeted
subsidiary's subsidiaries. The earnings allocated to common
stock are calculated by subtracting the earnings allocated to
the subsidiary tracking stock from Sony's net income for the
period.
Weighted-average shares used for computation of earnings per
share of common stock are as follows. The dilutive effect in the
weighted-average shares for the three months and six months
ended September 30, 2004 and 2005 mainly resulted from
convertible bonds.
Weighted-average shares (Thousands of shares)
Three months ended September 30
2004 2005
Net income ----- ----
- Basic 925,227 996,523
- Diluted 1,045,097 1,044,215
Weighted-average shares (Thousands of shares)
Six months ended September 30
2004 2005
---- ----
Income before cumulative effect
of an accounting change and
net income
- Basic 925,091 996,305
- Diluted 1,045,007 1,044,040
By adopting the Emerging Issues Task Force ("EITF") Issue No.
04-8, "The Effect of Contingently Convertible Instruments on
Diluted Earnings per Share", issued in July 2004, diluted
earnings per share of income before cumulative effect of an
accounting change and net income for the three months and six
months ended September 30, 2004 were retroactively restated (see
Note 9).
Weighted-average shares used for computation of earnings per
share of the subsidiary tracking stock for the three months and
six months ended September 30, 2004 are 3,072 thousand shares.
Weighted-average shares used for the three months and six months
ended September 30, 2005 are 3,083 and 3,077 thousand shares,
respectively. There were no potentially dilutive securities or
options granted for earnings per share of the subsidiary
tracking stock.
4. Sony's comprehensive income is comprised of net income
and other comprehensive income. Other comprehensive income
includes changes in unrealized gains or losses on securities,
unrealized gains or losses on derivative instruments, minimum
pension liabilities adjustments and foreign currency translation
adjustments. Net income, other comprehensive income and
comprehensive income for the three months and six months ended
September 30, 2004 and 2005 were as follows:
(Millions of yen, millions of U.S. dollars)
Three months ended Six months ended
September 30 September 30
-------------------------- --------------------------
2004 2005 2005 2004 2005 2005
---------------------------------------------------------------------
Net income Y53,210 Y28,468 $252 Y76,474 Y21,205 $188
Other
comprehensive
income:
Unrealized 2,649 24,595 218 (12,514) 32,974 292
gains (losses)
on securities
Unrealized (151) (758) (7) (2,413) 732 6
gains (losses)
on derivative
instruments
Minimum 21,316 31,663 280 20,953 31,432 278
pension
liabilities
adjustments
Foreign 56,243 37,640 333 86,466 53,881 477
currency
translation
adjustments
-------------------------------------------------------
80,057 93,140 824 92,492 119,019 1,053
---------------------------------------------------------------------
Comprehensive Y133,267 Y121,608 $1,076 Y168,966 Y140,224 $1,241
income
---------------------------------------------------------------------
5. As of August 1, 2004, Sony and Bertelsmann AG combined
their recorded music businesses in a joint venture. In
connection with the establishment of this joint venture, the
non-Japan based disc manufacturing and physical distribution
businesses, formerly included within the Music segment, have
been reclassified to "Other" category in the Electronics
segment. In addition, effective April 1, 2005, a similar change
was made with respect to the Japan based disc manufacturing
businesses. Results for the same period of the previous year in
the Electronics segment have been restated to account for these
reclassifications.
As a result of these changes in the Music segment, Sony no
longer breaks out the Music segment as a reportable segment as
it no longer meets the materiality threshold. Effective April 1,
2005, results for the Music segment are included within the
Other segment. Accordingly, results for the same period of the
previous year in the Electronics and the Other segments have
been restated to conform to the presentation for this year.
6. In July 2004, in order to establish a more efficient
and coordinated semiconductor supply structure, the Sony group
has integrated its semiconductor manufacturing business by
transferring Sony Computer Entertainment's semiconductor
manufacturing operation from the Game segment to the Electronics
segment. As a result of this transfer, sales revenue and
expenditures associated with this operation are now recorded
within the "Semiconductor" category in the Electronics segment.
The results for the three months ended June 30, 2004 have not
been restated as such comparable figures cannot be practically
obtained given that it was not operated as a separate line of
business within the Game segment. This integration of the
semiconductor manufacturing businesses is a part of Sony's
semiconductor strategy of utilizing semiconductor technologies
and manufacturing equipment originally developed or designed for
the Game business within the Sony group as a whole.
7. Commencing April 1, 2005, Sony has partly realigned
its product category configuration in the Electronics segment.
Accordingly, results for the same period of the previous year
have been reclassified. The primary change is as shown below:
Main Product Previous Product Category New Product Category
------------ ------------------------- --------------------
Professional "Televisions" --> "Information and
-use projector Communications"
8. In July 2003, the Accounting Standards Executive
Committee of the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 03-1,
"Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate
Accounts". SOP 03-1 requires insurance enterprises to record
additional reserves for long-duration life insurance contracts
with minimum guarantee or annuity receivable options.
Additionally, SOP 03-1 provides guidance for the presentation of
separate accounts. This statement is effective for fiscal years
beginning after December 15, 2003. Sony adopted SOP 03-1 on
April 1, 2004. As a result of the adoption of SOP 03-1, Sony's
operating income for the six months ended September 30, 2004
decreased by Y968 million. Additionally, on April 1, 2004, Sony
recognized Y4,713 million of loss (net of income taxes of Y2,675
million) as a cumulative effect of an accounting change.
9. In July 2004, the EITF issued EITF Issue No. 04-8,
"The Effect of Contingently Convertible Instruments on Diluted
Earnings per Share". In accordance with FAS No.128, Sony had not
included in the computation of diluted earnings per share
("EPS") the number of potential common stock upon the conversion
of contingently convertible debt instruments ("Co-Cos") that
have not met the conditions to exercise the stock acquisition
rights. EITF Issue No. 04-8 requires that the maximum number of
common stock that could be issued upon the conversion of Co-Cos
be included in diluted EPS computations from the date of
issuance regardless of whether the conditions to exercise the
rights have been met. EITF Issue No. 04-8 is effective for
reporting periods ending after December 15, 2004. Sony adopted
EITF Issue No. 04-8 during the quarter ended December 31, 2004.
As a result of the adoption of EITF Issue No. 04-8, Sony's
diluted EPS of income before cumulative effect of an accounting
change and net income for the three months and six months ended
September 30, 2004 were restated. Sony's diluted EPS of net
income for the three months ended September 30, 2004 decreased
by Y2.29, compared to those before adopting EITF Issue No. 04-8.
Sony's diluted EPS of income before cumulative effect of an
accounting change and net income for the six months ended
September 30, 2004 decreased by Y3.52 and Y3.32, respectively,
compared to those before adopting EITF Issue No. 04-8.
10. In December 2004, the FASB issued FAS No. 153,
"Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29". This statement requires that exchanges of productive
assets be accounted for at fair value unless fair value cannot
be reasonably determined or the transaction lacks commercial
substance. This statement is effective for nonmonetary asset
exchanges occurring in the fiscal periods beginning after June
15, 2005. Sony adopted FAS No.153 during the quarter ended
September 30, 2005. The adoption of FAS No.153 did not have a
material impact on Sony's results of operations and financial
position.
Other Consolidated Financial Data
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
2004 2005 Change 2005
------- ------- ----- -----
Capital expenditures Y 90,051 Y 87,798 -2.5% $ 777
(additions to property,
plant and equipment)
Depreciation and 91,173 92,752 +1.7 821
amortization expenses*
(Depreciation expenses (72,579) (74,845) +3.1 (662)
for tangible assets)
R&D expenses 127,018 131,369 +3.4 1,163
Six months ended September 30
2004 2005 Change 2005
------- ------- ----- -----
Capital expenditures Y 178,122 Y 185,781 +4.3% $ 1,644
(additions to
property, plant and
equipment)
Depreciation and 176,704 181,416 +2.7 1,605
amortization expenses*
(Depreciation (141,486) (146,726) +3.7 (1,298)
expenses for tangible
assets)
R&D expenses 250,600 249,757 -0.3 2,210
* Including amortization expenses for intangible assets and for
deferred insurance acquisition costs
Condensed Financial Services Financial Statements (Unaudited)
-------------------------------------------------
The results of the Financial Services segment are included in
Sony's consolidated financial statements. The following
schedules show unaudited condensed financial statements for the
Financial Services segment and all other segments excluding
Financial Services. These presentations are not required under
U.S. GAAP, which is used in Sony's consolidated financial
statements. However, because the Financial Services segment is
different in nature from Sony's other segments, Sony believes
that a comparative presentation may be useful in understanding
and analyzing Sony's consolidated financial statements.
Transactions between the Financial Services segment and Sony
without Financial Services are eliminated in the consolidated
figures shown below.
Condensed Statements of Income (Millions of yen, millions of U.S. dollars)
------------------------------ Three months ended September 30
Financial Services 2004 2005 Change 2005
------ ----- ---- -----
%
Financial service Y 125,862 Y 175,882 +39.7 $ 1,556
revenue
Financial service 110,981 135,836 +22.4 1,202
expenses
------ ----- -----
Operating income 14,881 40,046 +169.1 354
Other income (expenses), 8,955 23,351 +160.8 207
net
------ ----- -----
Income before income 23,836 63,397 +166.0 561
taxes
Income taxes and other 9,632 23,555 +144.5 208
------ ----- -----
Net income Y 14,204 Y 39,842 +180.5 $ 353
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
Sony without 2004 2005 Change 2005
Financial Services
------ ----- ---- -----
%
Net sales and Y 1,584,969 Y 1,535,125 -3.1 $ 13,585
operating revenue
Costs and expenses 1,556,733 1,509,731 -3.0 13,360
------ ----- -----
Operating income 28,236 25,394 -10.1 225
Other income 17,688 6,461 -63.5 57
(expenses), net
------ ----- -----
Income before income 45,924 31,855 -30.6 282
taxes
Income taxes and 418 43,361 +10,273.4 384
other
------ ----- -----
Net income (loss) Y 45,506 Y (11,506) - $ (102)
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
Consolidated 2004 2005 Change 2005
------ ----- ---- -----
%
Financial service Y 119,643 Y 170,103 +42.2 $ 1,505
revenue
Net sales and 1,582,629 1,532,893 -3.1 13,566
operating revenue
------ ----- -----
1,702,272 1,702,996 +0.0 15,071
Costs and expenses 1,658,887 1,637,079 -1.3 14,488
------ ----- -----
Operating income 43,385 65,917 +51.9 583
Other income 19,876 29,466 +48.2 261
(expenses), net
------ ----- -----
Income before income 63,261 95,383 +50.8 844
taxes
Income taxes and other 10,051 66,915 +565.8 592
------ ----- -----
Net income Y 53,210 Y 28,468 -46.5 $ 252
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Condensed Statements of Income Six months ended September 30
------------------------------
Financial Services 2004 2005 Change 2005
------ ----- ---- -----
%
Financial service Y 259,486 Y 329,696 +27.1 $ 2,918
revenue
Financial service 234,202 267,727 +14.3 2,370
expenses
------ ----- -----
Operating income 25,284 61,969 +145.1 548
Other income (expenses), 8,893 23,234 +161.3 206
net
------ ----- -----
Income before income taxes 34,177 85,203 +149.3 754
Income taxes and other 13,458 33,289 +147.4 295
------ ----- -----
Income before cumulative 20,719 51,914 +150.6 459
effect of an accounting
change
Cumulative effect of an (4,713) - - -
accounting change
------ ----- -----
Net income Y 16,006 Y 51,914 +224.3 $ 459
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Sony without Financial 2004 2005 Change 2005
Services
------ ----- ---- -----
%
Net sales and Y 3,071,378 Y 2,947,918 -4.0 $ 26,088
operating revenue
Costs and expenses 3,043,660 2,960,161 -2.7 26,196
------ ----- -----
Operating income 27,718 (12,243) - (108)
(loss)
Other income 14,479 35,196 +143.1 311
(expenses), net
------ ----- -----
Income before income 42,197 22,953 -45.6 203
taxes
Income taxes and other (24,771) 53,793 - 476
------ ----- -----
Net income (loss) Y 66,968 Y (30,840) - $ (273)
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Consolidated 2004 2005 Change 2005
------ ----- ---- -----
%
Financial service Y 247,349 Y 318,691 +28.8 $ 2,820
revenue
Net sales and 3,067,061 2,943,738 -4.0 26,051
operating revenue
------ ----- -----
3,314,410 3,262,429 -1.6 28,871
Costs and expenses 3,261,251 3,211,794 -1.5 28,423
------ ----- -----
Operating income 53,159 50,635 -4.7 448
Other income 16,716 57,651 +244.9 510
(expenses), net
------ ----- -----
Income before income 69,875 108,286 +55.0 958
taxes
Income taxes and other (11,312) 87,081 - 770
------ ----- -----
Income before 81,187 21,205 -73.9 188
cumulative effect of
an accounting change
Cumulative effect of (4,713) - - -
an accounting change
------ ----- -----
Net income Y 76,474 Y 21,205 -72.3 $ 188
------ ----- -----
Condensed Balance Sheets
------------------------
(Millions of yen, millions of U.S. dollars)
Financial September 30 March 31 September 30 September 30
Services
ASSETS 2004 2005 2005 2005
----- ------- ------ ------
Current
assets:
Cash and Y 159,523 Y 259,371 Y 187,269 $ 1,657
cash
equivalents
Marketable 529,302 456,130 503,946 4,460
securities
Other 164,919 274,690 204,377 1,809
----- ------- ------ ------
853,744 990,191 895,592 7,926
Investments 2,297,300 2,378,966 2,788,864 24,680
and advances
Property, 39,828 38,551 34,053 301
plant and
equipment
Other assets:
Deferred 366,983 374,805 384,917 3,406
insurance
acquisition
costs
Other 102,369 103,004 122,102 1,081
----- ------- ------ ------
469,352 477,809 507,019 4,487
----- ------- ------ ------
Y 3,660,224 Y 3,885,517 Y 4,225,528 $ 37,394
----- ------- ------ ------
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Short-term Y 117,715 Y 45,358 Y 70,862 $ 627
borrowings
Notes and 7,378 7,099 10,643 94
accounts
payable,
trade
Deposits 451,231 546,718 591,540 5,235
from
customers
in the
banking
business
Other 96,269 109,438 147,191 1,303
----- ------- ------ ------
672,593 708,613 820,236 7,259
Long-term
liabilities:
Long-term 137,249 135,750 131,507 1,164
debt
Accrued 11,163 14,362 13,641 121
pension and
severance
costs
Future 2,314,369 2,464,295 2,598,208 22,993
insurance
policy
benefits
and other
Other 130,237 142,272 158,976 1,406
----- ------- ------ ------
2,593,018 2,756,679 2,902,332 25,684
Minority 5,567 5,476 4,279 38
interest in
consolidated
subsidiaries
Stockholders' 389,046 414,749 498,681 4,413
equity
----- ------- ------ ------
Y 3,660,224 Y 3,885,517 Y 4,225,528 $ 37,394
----- ------- ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without September 30 March 31 September 30 September 30
Financial
Services
ASSETS 2004 2005 2005 2005
----- ------- ------ ------
Current
assets:
Cash and Y 290,103 Y 519,732 Y 393,931 $ 3,486
cash
equivalents
Marketable 4,071 4,072 4,071 36
securities
Notes and 989,216 952,692 1,000,575 8,855
accounts
receivable,
trade
Other 1,294,395 1,116,353 1,317,568 11,660
----- ------- ------ ------
2,577,785 2,592,849 2,716,145 24,037
Film costs 270,090 278,961 343,998 3,044
Investments 500,041 445,446 464,700 4,112
and advances
Investments 187,400 187,400 187,400 1,658
in Financial
Services, at
cost
Property, 1,343,611 1,333,848 1,345,852 11,911
plant and
equipment
Other assets 1,165,449 1,189,398 1,106,129 9,789
----- ------- ------ ------
Y 6,044,376 Y 6,027,902 Y 6,164,224 $ 54,551
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Short-term Y 508,649 Y 204,027 Y 311,405 $ 2,756
borrowings
Notes and 822,333 801,252 847,049 7,496
accounts
payable,
trade
Other 1,057,377 1,132,201 1,144,494 10,128
----- ------- ------ ------
2,388,359 2,137,480 2,302,948 20,380
Long-term
liabilities:
Long-term 671,067 627,367 638,502 5,650
debt
Accrued 314,500 338,040 208,274 1,843
pension and
severance
costs
Other 302,589 263,520 304,974 2,700
----- ------- ------ ------
1,288,156 1,228,927 1,151,750 10,193
Minority 18,704 18,471 21,717 192
interest in
consolidated
subsidiaries
Stockholders' 2,349,157 2,643,024 2,687,809 23,786
equity
----- ------- ------ ------
Y 6,044,376 Y 6,027,902 Y 6,164,224 $ 54,551
----- ------- ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated September 30 March 31 September 30 September 30
ASSETS 2004 2005 2005 2005
----- ------- ------ ------
Current
assets:
Cash and Y 449,626 Y 779,103 Y 581,200 $ 5,143
cash
equivalents
Marketable 533,373 460,202 508,017 4,496
securities
Notes and 1,056,286 1,025,362 1,008,768 8,928
accounts
receivable,
trade
Other 1,376,951 1,291,504 1,496,892 13,246
----- ------- ------ ------
3,416,236 3,556,171 3,594,877 31,813
Film costs 270,090 278,961 343,998 3,044
Investments 2,663,362 2,745,689 3,163,720 27,998
and advances
Property, 1,383,439 1,372,399 1,379,905 12,212
plant and
equipment
Other assets:
Deferred 366,983 374,805 384,917 3,406
insurance
acquisition
costs
Other 1,153,046 1,171,075 1,140,897 10,096
----- ------- ------ ------
1,520,029 1,545,880 1,525,814 13,502
----- ------- ------ ------
Y 9,253,156 Y 9,499,100 Y 10,008,314 $ 88,569
----- ------- ------ ------
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Short-term Y 611,137 Y 230,266 Y 367,973 $ 3,256
borrowings
Notes and 826,719 806,044 854,982 7,566
accounts
payable,
trade
Deposits 451,231 546,718 591,540 5,235
from
customers
in the
banking
business
Other 1,146,091 1,226,340 1,280,133 11,329
----- ------- ------ ------
3,035,178 2,809,368 3,094,628 27,386
Long-term
liabilities:
Long-term 677,262 678,992 690,320 6,109
debt
Accrued 325,664 352,402 221,915 1,964
pension and
severance
costs
Future 2,314,369 2,464,295 2,598,208 22,993
insurance
policy
benefits
and other
Other 335,279 299,858 378,114 3,346
----- ------- ------ ------
3,652,574 3,795,547 3,888,557 34,412
Minority 24,171 23,847 25,947 230
interest in
consolidated
subsidiaries
Stockholders' 2,541,233 2,870,338 2,999,182 26,541
equity
----- ------- ------ ------
Y 9,253,156 Y 9,499,100 Y 10,008,314 $ 88,569
(Millions of yen, millions of U.S. dollars)
Condensed Statements of Cash Flows Six months ended September 30
----------------------------------
Financial Services 2004 2005 2005
----- ----- ------
Net cash provided by operating Y 83,562 Y 50,949 $ 451
activities
Net cash used in investing (344,674) (261,946) (2,318)
activities
Net cash provided by financing 164,319 138,895 1,229
activities
----- ----- ------
Net decrease in cash and cash (96,793) (72,102) (638)
equivalents
Cash and cash equivalents at 256,316 259,371 2,295
beginning of the fiscal year
----- ----- ------
Cash and cash equivalents at Y 159,523 Y 187,269 $ 1,657
September 30
----- ----- ------
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Sony without Financial 2004 2005 2005
Services ----- ----- ------
Net cash provided by (used in) Y 34,975 Y (91,879) $ (813)
operating activities
Net cash used in investing (330,078) (145,119) (1,284)
activities
Net cash provided by (used in) (25,593) 97,066 859
financing activities
Effect of exchange rate 17,904 14,131 125
changes on cash and cash
equivalents
----- ----- ------
Net decrease in cash and cash (302,792) (125,801) (1,113)
equivalents
Cash and cash equivalents at 592,895 519,732 4,599
beginning of the fiscal year
----- ----- ------
Cash and cash equivalents at Y 290,103 Y 393,931 $ 3,486
September 30
----- ----- ------
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Consolidated 2004 2005 2005
----- ----- ------
Net cash provided by (used in) Y 111,907 Y (40,897) $ (362)
operating activities
Net cash used in investing (670,754) (414,668) (3,670)
activities
Net cash provided by financing 141,358 243,531 2,155
activities
Effect of exchange rate 17,904 14,131 125
changes on cash and cash
equivalents
----- ----- ------
Net decrease in cash and cash (399,585) (197,903) (1,752)
equivalents
Cash and cash equivalents at 849,211 779,103 6,895
beginning of the fiscal year
----- ----- ------
Cash and cash equivalents at Y 449,626 Y 581,200 $ 5,143
September 30
----- ----- ------
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