Consolidated Financial Results for the Second Quarter Ended September 30, 2002
Large Improvement in Consolidated Operating and Net Income Electronics and Game Segments Contribute to Improved Profitability
PRNewswire-FirstCall
TOKYO
10/28/2002
Sony Corporation announced today its consolidated results for the second quarter ended September 30, 2002 (July 1, 2002 to September 30, 2002).
Highlights
-- Despite relatively flat sales year on year of Y1,789.7 billion
($14.7 billion), Sony was able to achieve operating income of
Y50.5 billion ($414 million) and net income of Y44.1 billion
($361 million) compared to an operating loss and net loss recorded in
the same quarter of the previous year - a significant improvement in
profitability.
-- In the Electronics business, while sales decreased, the contribution to
profit of the consumer AV business and the benefit of improvements in
profitability from business unit restructuring, primarily in the
components business, resulted in a significant improvement in operating
performance compared with the previous year and the recording of
operating income. The mobile phone business that recorded operating
losses in the same quarter of the previous year was transferred to Sony
Ericsson Mobile Communications, AB ("SEMC"), an affiliate accounted for
by the equity method. Sony recorded an equity loss from SEMC in this
quarter.
-- In the Game business, an increase in unit sales of both hardware and
software in Europe and the U.S. yielded an increase in both sales and
profit.
-- In the Pictures business, the strong theatrical performance from a
number of films, including Men in Black II, Mr. Deeds and xXx,
contributed to a large increase in sales. However, higher advertising
and promotion expenses incurred in support of a greater number of major
summer releases resulted in a decline in operating income.
-- As a result of the decision to merge with Aiwa Co., Ltd. ("Aiwa"), Sony
recognized a tax benefit of Y46.5 billion ($381 million) due to the
reversal of valuation allowances on deferred tax assets held by Aiwa.
The effect of this adjustment, net of a minority interest in income of
consolidated subsidiaries therein of Y10.4 billion ($85 million), was a
positive impact to net income of Y36.1 billion ($296 million).
-- Cash flow significantly improved compared with the same period of the
previous year due to an increase in the operating income of the
Electronics and Game businesses, a prioritization of investments in the
Electronics business and a decrease in funds used for operations. As a
result, total interest-bearing debt significantly decreased.
-- Sony revised downward by Y100 billion to Y7,600 billion ($62 billion)
its sales forecast for the fiscal year ending March 31, 2003, announced
in July. Operating income and income before income taxes remained
unchanged while net income was revised upward by Y30 billion to
Y180 billion ($1.5 billion).
(Billions of yen, millions of U.S. dollars, except per share amounts)
Second quarter ended September 30
2001 2002 Change 2002*
Sales and operating
revenue Y1,780.9 Y1,789.7 + 0.5% $14,669
Operating income (loss) (3.4) 50.5 -- 414
Income before
income taxes 0.6 48.8 + 7,903 400
Net income (loss) (13.2) 44.1 -- 361
Net income (loss) per share for common stock
- Basic Y(14.34) Y47.89 -- $0.39
- Diluted (14.34) 44.70 -- 0.37
* U.S. dollar amounts have been translated from yen, for convenience only,
at the rate of Y122=U.S.$1, the approximate Tokyo foreign exchange
market rate as of September 30, 2002.
Remarks by Nobuyuki Idei, Chairman and CEO of Sony Corporation
During the second quarter of this fiscal year which began so well for Sony, we achieved a significant improvement in profitability compared with the same quarter of the previous year.
Especially in the Electronics business, strong sales of consumer AV products, a recovery in our semiconductor and components businesses, and the positive impact of the restructuring activities that we accelerated since last year caused a steady improvement in profitability. In the Game business, we achieved an increase in sales and operating income, and our PS 2 business continued its remarkable expansion.
However, looking forward to the second half of the fiscal year ending March 31, 2003, we are concerned that consumer confidence may deteriorate even further. To deal with this environment, we will strive to improve profitability further by restructuring and reducing investment, offering more network-capable products that will drive future growth, and enhancing our brand strategy through the merger with Aiwa.
Consolidated Results for the Second Quarter
Note I: During the second quarter ended September 30, 2002, the average value of the yen was Y118.2 against the U.S. dollar and Y115.8 against the euro, which was 2.1% higher against the U.S. dollar and 7.8% lower against the euro, compared with the average rate for the second quarter of the previous fiscal year. Operating results on a local currency basis described in the following pages reflect sales and operating revenue ("sales") and operating income (loss) obtained by applying the yen's average exchange rate in the second quarter of the previous fiscal year to local currency-denominated monthly sales, cost of sales, and selling, general and administrative expenses in the second quarter of the current fiscal year. Local currency basis results are not reflected in Sony's financial statements and are not measures conforming with Generally Accepted Accounting Principles in the U.S. ("U.S. GAAP"). In addition, Sony does not believe that these measures are a substitute for U.S. GAAP measures. However, Sony believes that local currency basis results provide additional useful information to investors regarding operating performance.
Note II: Commencing with the first quarter ended June 30, 2002, Sony has partly realigned its business segment configuration and Electronics segment product category configuration. In accordance with this realignment, results of the second quarter of the previous fiscal year have been reclassified to conform to the presentation for the second quarter ended September 30, 2002. Sales of related businesses in the Network Application and Contents Service Sector ("NACS"), established in April 2002 to enhance network businesses, are included in the "Other" segment. In addition to Sony Communication Network Corporation, which was originally contained in the "Other" segment, NACS-related businesses include an in-house oriented information system service business, a subscriber-based wireless access system ("WLL") business and an IC card business formerly contained in the "Other" category of the Electronics segment.
Note III: On October 1, 2002, Sony implemented a share exchange as a result of which Aiwa Co., Ltd. became a wholly-owned subsidiary, and signed a merger agreement to absorb Aiwa by merger on December 1, 2002. As a result of this share exchange, Sony issued 2,502,491 new shares, and additional paid-in capital increased Y15.8 billion.
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Y1,789.7 billion ($14.7 billion), almost flat year on year (flat on a local currency basis).
-- Increased sales in the Pictures and Financial Services segments offset
decreased sales in the Electronics segment.
In terms of profitability, operating income of Y50.5 billion ($414 million) was recorded compared with an operating loss of Y3.4 billion, an improvement of Y53.9 billion year on year.
-- Operating performance in the Electronics segment improved a significant
Y49.6 billion from an operating loss recorded in the same quarter of
the previous year. Operating income in the Game segment increased
Y20.7 billion. On the other hand, operating income in the Pictures
segment decreased Y12.2 billion.
-- Selling, general and administrative expenses increased Y10.2 billion
primarily due to an increase in advertising and marketing expenses.
Although such expenses decreased in the Electronics business, they
increased significantly in the Pictures business.
Income before income taxes was Y48.8 billion ($400 million), an increase of Y48.2 billion, or 7,903%, year on year.
-- Income before income taxes increased because operating income increased
Y53.9 billion and other income increased Y1.3 billion despite a
Y7.0 billion increase in other expenses.
- Other expenses increased because a Y6.3 billion ($52 million)
foreign exchange loss was recorded during the quarter, compared with
a Y4.4 billion foreign exchange gain recorded in other income in the
same quarter of the previous year, and because loss on devaluation
of securities investments increased Y2.7 billion.
~ Partially offsetting the increase in other expenses was a
Y4.1 billion decrease in interest expense.
- The primary reasons for the increase in other income were a
recording of Y3.5 billion ($29 million) in gain on sale of
securities investments and a Y2.7 billion increase in royalty
income, despite the absence of the Y4.4 billion foreign exchange
gain mentioned above.
Net income of Y44.1 billion ($361 million) was recorded, compared with a net loss of Y13.2 billion in the same quarter of the previous year, an improvement of Y57.2 billion year on year.
-- The significant improvement occurred as a result of the increase in
income before income taxes discussed above and a decrease in income
taxes.
- Income taxes decreased Y29.7 billion, changing from a tax expense of
Y14.8 billion recorded in the same quarter of the previous year to a
tax benefit of Y14.9 billion ($122 million). This was because a tax
benefit of Y46.5 billion ($381 million) was recorded due to the
reversal of valuation allowances on deferred tax assets held by
Aiwa Co., Ltd. ("Aiwa") because these assets became recoverable as a
result of Sony's decision to merge with Aiwa.
-- Partially offsetting the improvement was the recording of a minority
interest in income of consolidated subsidiaries and an increase in
equity in net losses of affiliated companies.
- The increase in minority interest in income of Aiwa that resulted
from the recognition of the tax benefit mentioned above was
Y10.4 billion ($85 million). As a result, minority interest in
income of consolidated companies amounted to Y8.4 billion
($68 million) compared with a minority interest in loss of
consolidated companies of Y5.7 billion recorded in the same quarter
of the previous year.
- Equity in net losses of affiliated companies increased Y6.7 billion
to Y11.3 billion ($93 million) primarily because Sony recorded a
Y5.4 billion ($44 million) loss for its portion of the loss
generated by Sony Ericsson Mobile Communications, AB, a mobile
handset joint venture established in October 2001.
Operating Performance Highlights by Business Segment
Note IV: "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 V: Sales of mobile handsets are no longer recorded in the "Information and Communications" product category of the Electronics segment as of the second half of the previous fiscal year. From the second half of the previous fiscal year, sales of mobile handsets manufactured for Sony Ericsson Mobile Communications, AB, established in October 2001, are recorded in the "Other" product category of the Electronics segment.
Electronics
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2001 2002 Change 2002
Sales and operating
revenue Y1,274.2 Y1,228.0 -3.6% $10,066
Operating income
(loss) (23.3) 26.3 -- 215
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Y1,228.0 billion ($10 billion), a decrease of 3.6% year on year (4% decrease on a local currency basis).
-- On a product category basis, sales increased in "Semiconductors" by
13.2%, in "Video" by 4.3%, and in "Components" by 2.3%.
-- Sales decreased in "Audio" by 9.9%, "Information and Communications"
(excluding the sales of the mobile phone business in the previous year)
by 8.7%, and in "Televisions" by 0.8%.
- On a local currency basis:
~ Products with significant increases in sales were digital still
cameras ("Cybershot"), desktop VAIO PCs, semiconductors
(especially LCDs for camcorder use and CCDs for digital still
camera use), and personal digital assistants ("CLIE").
~ Products with significant decreases in sales were mobile phones
(see Note V), computer displays, and home telephones from which
Sony withdrew (home use telephones were contained in the "Audio"
category).
~ On a geographic basis, sales in Other areas increased, while sales
in Japan, the U.S. and Europe decreased.
In terms of profitability, operating income of Y26.3 billion ($215 million) was recorded compared with an operating loss of Y23.3 billion in the same quarter of the previous year, an improvement of Y49.6 billion.
-- In addition to the strong performance of consumer AV products, the
following factors led to the significant change from loss to profit:
- An improvement in profitability from the rationalization and
downsizing of loss-making businesses (primarily in the components
business, including CRTs) and a reduction in fixed costs.
- The mobile phone business that recorded operating losses in the same
quarter of the previous year became an equity affiliate as a result
of the establishment of the joint venture with Ericsson.
- A decrease in selling, general and administrative expenses including
advertising and marketing expenses and personnel expenses.
-- On a product category basis, "Video," in which unit sales of digital
still cameras increased, and "Audio," in which unit sales of CD Walkman
increased and restructuring initiatives took effect, increased in
profitability. "Components," in which restructuring initiatives
resulted in the improvement of the CRTs for display, optical pick-ups,
battery and recording media businesses, and "Semiconductors," which
enjoyed an increase in demand for CCDs used in digital still cameras,
changed from loss to profit.
Regarding the performance during the quarter of Aiwa Co., Ltd. ("Aiwa"), sales decreased and operating loss decreased slightly. Sony took Aiwa private on October 1, 2002 (see Note III).
Inventory as of September 30, 2002 was Y595.6 billion ($4,882 million), a Y175.2 billion, or 22.7%, decrease compared with the level as of September 30, 2001.
Game
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2001 2002 Change 2002
Sales and operating
revenue Y242.8 Y250.4 + 3.1% $2,052
Operating income 4.1 24.8 508.4 203
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Y250.4 billion ($2,052 million), an increase of 3.1% compared with the same quarter of the previous year (2% increase on a local currency basis).
-- Software sales and hardware sales increased compared with the same
quarter of the previous year.
- Software sales increased in Europe and the U.S., but decreased in
Japan.
- Hardware sales increased in Europe and the U.S. as unit sales of
PlayStation 2 ("PS 2") hardware increased, while hardware sales
decreased in Japan as unit sales decreased.
-- Worldwide hardware production shipments:*
- PS 2: 8.29 million units (an increase of 3.67 million units)
- PS one: 1.90 million units (a decrease of 0.92 million units)
-- Worldwide software production shipments:*
- PS 2: 42.00 million units (an increase of 19.30 million units)
- PlayStation: 16.00 million units (a decrease of 3.00 million units)
* Production shipment units of hardware and software are counted upon
shipment of the products from manufacturing bases. Sales of such
products are recognized when the products are delivered to customers.
Operating income was Y24.8 billion ($203 million), an increase of Y20.7 billion, or 508.4%, year on year (416% increase on a local currency basis).
-- An improvement in the profitability of PS 2 hardware due to lower
manufacturing costs, and strong software sales especially in Europe and
the U.S., led to the increase in operating income.
Inventory as of September 30, 2002 was Y167.2 billion ($1,370 million), a Y24.5 billion, or 12.8%, decrease compared with the level as of September 30, 2001.
Music
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2001 2002 Change 2002
Sales and operating
revenue Y138.3 Y147.9 + 6.9% $1,212
Operating income
(loss) (5.3) (5.6) -- (46)
The amounts presented above are the sum of the yen-translated results of Sony Music Entertainment Inc. ("SMEI"), a U.S. based operation which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis and the results of Sony Music Entertainment (Japan) Inc. ("SMEJ"), a Japan based operation which aggregates results in yen. Management analyzes the results of SMEI in U.S. dollars, so discussion of certain portions of its results are specified as on "a U.S. dollar basis."
Sales were Y147.9 billion ($1,212 million), an increase of 6.9% year on year (8% increase on a local currency basis). Of the Music segment's sales, 71% were generated by SMEI, and 29% were generated by SMEJ.
-- SMEI's sales (on a U.S. dollar basis) increased 15%.
- The sales increase was due to higher manufacturing sales of DVD
software to the Pictures and Game segments.
- Despite the continued contraction of the global music industry
brought on by digital piracy and other factors, SMEI increased its
album sales during the quarter resulting in an increase in market
share.
- Best selling albums included Bruce Springsteen's The Rising and
Dixie Chicks' Home.
-- SMEJ's sales decreased 5%.
- Sales decreased because, in addition to a slight decrease in album
sales, sales of books and miscellaneous items at certain
subsidiaries declined.
- Best selling albums included Mika Nakashima's TRUE and Chitose
Hajime's Hainumikaze.
In terms of profitability, an operating loss of Y5.6 billion ($46 million) was recorded compared with an operating loss of Y5.3 billion in the same quarter of the previous year.
-- SMEI's operating loss (on a U.S. dollar basis) increased compared to
the same quarter of the previous year.
- The loss was impacted by increased costs incurred for ongoing
restructuring activities, including the closure and consolidation of
certain international distribution facilities and worldwide
headcount reductions.
- Operating results were negatively impacted by higher talent-related
costs.
- Partially offsetting the increased loss were higher profits from
the DVD software manufacturing mentioned above and the benefit of
aggressive worldwide restructuring and cost reduction initiatives.
-- SMEJ recorded operating income compared with an operating loss in the
same quarter of the previous year.
- Despite the lower sales, profitability improved due to contributions
from the best selling albums TRUE and Hainumikaze and a reduction in
operating expenses.
In August 2002, SMEI's joint venture publishing company Sony/ATV Music Publishing LLC purchased from Gaylord Entertainment Company the music publishing catalogue and real estate of Acuff-Rose, a music publishing business, for $157 million in cash.
Pictures
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2001 2002 Change 2002
Sales and operating
revenue Y146.5 Y185.6 + 26.6% $1,521
Operating income 22.1 9.9 - 55.2 81
The results presented above are a yen translation of the results of Sony Pictures Entertainment ("SPE"), a U.S. based operation which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis. Management analyzes the results of SPE in U.S. dollars, so discussion of certain portions of its results are specified as on "a U.S. dollar basis."
Sales were Y185.6 billion ($1,521 million), an increase of 26.6% year on year (29% increase on a U.S. dollar basis).
-- The reasons for the increase in sales (on a U.S. dollar basis) were:
- The strong worldwide theatrical performance of current year releases
including Spider-Man, Men in Black II, Mr. Deeds and xXx, each of
which exceeded $100 million at the worldwide box office during the
quarter.
~ Worldwide box office for Spider-Man, the highest grossing film in
SPE's history, has surpassed $800 million since its release
in May.
- Higher television syndication sales, primarily from cable sales of
VIP and Seinfeld.
-- The increase in sales was partially offset (on a U.S. dollar basis) by:
- Lower DVD and VHS title revenues due to fewer releases this quarter
as compared to the same quarter of the previous fiscal year, despite
the successful releases of Panic Room and Resident Evil in the
current quarter.
Operating income was Y9.9 billion ($81 million), a decrease of Y12.2 billion, or 55.2% year on year (55% decrease on a U.S. dollar basis).
-- The reasons for the decline in profitability (on a U.S. dollar basis)
were:
- Much higher advertising and promotion expenses incurred during the
quarter in support of the greater number of major summer releases.
These expenditures are expensed when incurred, while a significant
portion of the revenue from these releases will be realized in
subsequent periods in the home entertainment and other ancillary
markets.
- Disappointing U.S. box office performance of Stuart Little 2,
Stealing Harvard and Trapped.
- Fewer major DVD and VHS title releases during the quarter.
- The results for the same quarter of the previous year were favorably
impacted by recognition of an insurance recovery for prior film
losses.
-- Partially offsetting the decline in profitability (on a U.S. dollar
basis) was:
- Increased profit contributions in the second quarter from current
year releases, including Spider-Man and Men in Black II.
- Higher television operating income from the syndication sales
of Seinfeld.
Financial Services
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2001 2002 Change 2002
Financial service
revenue Y109.8 Y129.1 + 17.5% $1,058
Operating income (loss) (0.3) 5.9 -- 48
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Financial service revenue was Y129.1 billion ($1,058 million), an increase of 17.5% year on year.
-- Revenue at Sony Life Insurance Co., Ltd. ("Sony Life") increased
primarily due to an increase in insurance revenue brought on by an
increase in insurance-in-force, an improvement in valuation gains and
losses from investment under separate account for variable life
insurance and variable annuity products, and a reduction in the amount
of the decrease in valuation gains on conversion rights for convertible
bonds. Valuation gains and losses from investment under separate
account accrue directly to the account of policyholders and, therefore,
do not affect operating income.
-- In addition, the following factors affected the results of the
Financial Services segment:
- Revenue at Sony Assurance Inc. increased significantly due to an
increase in insurance revenue brought about by an expansion of newly
acquired insurance-in-force.
- Revenue at Sony Finance International, Inc. ("Sony Finance")
increased slightly as a result of an increase in leasing and other
revenue, despite a decrease in revenues from rent.
- Revenue at Sony Bank increased only slightly due to a reduction in
gains and losses from investment.
In terms of profitability, operating income of Y5.9 billion ($48 million) was recorded compared with an operating loss of Y0.3 billion in the same quarter of the previous year, an improvement of Y6.2 billion year on year.
-- Operating income at Sony Life increased mainly due to the increase in
insurance revenue, and a reduction in the amount of the decrease of
valuation gains on conversion rights for convertible bonds.
-- In addition, the following factors affected the results of the
Financial Services segment:
- Sony Assurance Inc. recorded slight losses despite an improvement
in profitability brought on by the increase in insurance revenue.
- Losses were recorded at Sony Finance due to a deterioration of
profitability brought about by an increase in operating expenses,
despite the increase in leasing and other revenue.
- Sony Bank, which began operations in June 2001, recorded a loss due
to start-up expenses.
Other
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2001 2002 Change 2002
Sales and operating
revenue Y50.6 Y61.9 + 22.3% $507
Operating income (loss) (3.6) (7.8) -- (64)
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales were Y61.9 billion ($507 million), an increase of 22.3% year on year.
-- Sales of NACS-related businesses (see Note II) and sales at the
advertising agency business subsidiary in Japan increased.
In terms of profitability, an operating loss of Y7.8 billion ($64 million) was recorded compared with an operating loss of Y3.6 billion in the same quarter of the previous year, a deterioration of Y4.2 billion year on year.
-- Loss increased at NACS-related businesses in the aggregate, mainly
because of losses incurred in conjunction with the creation of a
platform business for the networked era, although operating income was
recorded at Sony Communication Network Corporation.
Cash Flow
(Billions of yen, millions of U.S. dollars)
Six months ended September 30
2001 2002 Change 2002
Cash flow
- From operating
activities (Y120.0) Y252.0 Y + 372.0 $2,066
- From investing
activities (403.7) (251.1) + 152.6 (2,059)
- From financing
activities 666.2 (21.6) - 687.9 (177)
Cash and cash
equivalents as of
September 30 741.6 643.0 - 98.6 5,271
Cash provided by operating activities was Y252.0 billion ($2,066 million), an increase of Y372.0 billion.
-- While uses of cash, including an increase in inventories in the
Electronics and Game businesses, took place during the six months, the
contribution to profit of the Electronics and Game business, which
exhibited improvements in operating performance, and an increase in
notes and accounts payable caused cash generated to exceed
expenditures.
-- Although notes and accounts receivable changed from a decrease to an
increase, leading to a decrease in cash provided by operating
activities, an increase in the operating income of the Electronics and
Game businesses and a change from a decrease to an increase in notes
and accounts payable contributed to the significant increase in cash
provided by operating activities compared with the same period of the
previous year.
Cash used in investing activities was Y251.1 billion ($2,059 million), a decrease of Y152.6 billion.
-- The use of cash derived primarily from the fact that, reflecting an
increase in assets under management in the life insurance and banking
businesses, investments and advances of Y462.8 billion ($3,793 million)
exceeded sales and maturities of securities investments and collections
of advances of Y242.3 billion ($1,986 million) in the Financial
Services business.
-- In addition, Y136.4 billion ($1,118 million), compared with
Y220.2 billion in the same period of the previous year, was used to
purchase fixed assets, primarily in the Electronics business, which is
continuing to engage in the prioritization of investments, and
Y18.5 billion* was invested in Acuff-Rose, a music publishing business.
-- On the other hand, cash proceeds of Y122.2 billion ($1,002 million)
from the sales of securities investments and collections of advances,
including Y88.4 billion* from the sale of equity in Telemundo and
Y17.8 billion ($146 million) from the sale of equity in CHC were
realized.
(*The U.S. dollar amount of the cash payment recorded for the purchase
of Acuff-Rose was $157 million and the U.S. dollar amount of the cash
proceeds recorded on the sale of Telemundo was $679 million.)
Cash used in financing activities was Y21.6 billion ($177 million) compared to Y666.2 billion of cash provided by financing activities in the same quarter of the previous year.
-- Although cash was provided by an increase in deposits from customers in
the banking business, cash was used during the six months to pay down
borrowings of the Sony group as a whole.
Outlook for the Fiscal Year ending March 31, 2003
We believe that the business environment in which Sony operates will become even more difficult because uncertainty regarding economic recovery is increasing and consumer confidence is waning. Due to this belief, we have revised our July forecast for sales from Y7,700 billion to Y7,600 billion, mainly because we believe market conditions in our Electronics segment will deteriorate in the second half of the fiscal year. However, we have made no change to our forecast for operating income and income before income taxes because we believe improvements in operations (such as materials cost reductions in the Electronics business) and a revision in our yen to dollar exchange rate assumption to reflect the depreciation of the yen will have a positive effect on profitability.
We have revised our July forecast for net income from Y150 billion to Y180 billion mainly due to the tax benefit made possible by the recording of deferred tax assets held at Aiwa Co., Ltd., scheduled to be merged with Sony in December 2002.
Change from previous year Sales and operating revenue Y7,600 billion Unchanged Operating income 280 billion + 108 % Income before income taxes 310 billion + 234 Net income 180 billion + 1,076
Assumed exchange rates from the third quarter: approximately Y120 to the dollar and Y115 to the euro.
(Exchange rates assumed in July: approximately Y115 to the dollar and Y115 to the euro.)
No change was made in capital expenditures and depreciation and amortization.
Capital expenditures (additions to fixed assets) Y280 billion - 14%
Depreciation and amortization* 350 billion - 1
(Depreciation expenses for tangible assets 260 billion - 13)
* Including amortization of intangible assets and amortization of deferred
insurance acquisition costs.
Cautionary Statement
Statements made in this release with respect to Sony's current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include but are not limited to those using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "may" or "might" and words of similar meaning in connection with a discussion of future operations or financial performance. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management's assumptions and beliefs in light of the information currently available to it. Sony cautions you that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to (i) the global economic environment in which Sony operates, as well as the economic conditions in Sony's markets, particularly levels of consumer spending; (ii) exchange rates, particularly between the yen and the U.S. dollar, euro, and other currencies in which Sony makes significant sales or in which Sony's assets and liabilities are denominated; (iii) Sony's ability to continue to design and develop and win acceptance of its products and services, which are offered in highly competitive markets characterized by continual new product introductions, rapid development in technology (particularly in the Electronics business), and subjective and changing consumer preferences (particularly in the Game, Music, and Pictures businesses); (iv) Sony's ability to implement successfully the restructuring initiatives in its Electronics, Music and Pictures businesses and its network strategy for its Electronics, Music and Pictures businesses; (v) Sony's ability to compete and develop and implement successful sales and distribution strategies in light of Internet and other technological developments in its Music and Pictures businesses; (vi) Sony's continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to prioritize investments (particularly in the Electronics business); (vii) the success of Sony's joint ventures and alliances; and (viii) the outcome of contingencies. Risks and uncertainties also include the impact of any future events with material unforeseen impacts.
Business Segment Information (Unaudited)
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
Sales and operating
revenue 2001 2002 Change 2002
Electronics
Customers Y 1,140,579 Y 1,077,699 -5.5% $8,834
Intersegment 133,616 150,330 1,232
Total 1,274,195 1,228,029 -3.6 10,066
Game
Customers 239,152 245,997 +2.9 2,016
Intersegment 3,643 4,394 36
Total 242,795 250,391 +3.1 2,052
Music
Customers 125,390 127,414 +1.6 1,044
Intersegment 12,931 20,464 168
Total 138,321 147,878 +6.9 1,212
Pictures
Customers 146,539 185,569 +26.6 1,521
Intersegment 0 0 0
Total 146,539 185,569 +26.6 1,521
Financial Services
Customers 102,627 122,011 +18.9 1,000
Intersegment 7,209 7,046 58
Total 109,836 129,057 +17.5 1,058
Other
Customers 26,618 31,040 +16.6 254
Intersegment 23,985 30,871 253
Total 50,603 61,911 +22.3 507
Elimination (181,384) (213,105) - (1,747)
Consolidated
total Y 1,780,905 Y 1,789,730 +0.5% $14,669
Electronics intersegment amounts primarily consist of transactions with
the Game business.
Music intersegment amounts primarily consist of transactions with Game
and Pictures businesses.
Other intersegment amounts primarily consist of transactions with the
Electronics business.
Operating income (loss) 2001 2002 Change 2002
Electronics Y (23,299) Y 26,252 -% $215
Game 4,074 24,785 +508.4 203
Music (5,255) (5,623) - (46)
Pictures 22,078 9,901 -55.2 81
Financial Services (339) 5,891 - 48
Other (3,602) (7,825) - (64)
Total (6,343) 53,381 - 437
Corporate and
elimination 2,952 (2,860) - (23)
Consolidated total Y (3,391) Y 50,521 -% $414
Commencing with the first quarter ended June 30, 2002, Sony has partly realigned its business segment configuration. In accordance with this change, results of the previous year have been reclassified to conform to the presentation for the current year.
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Sales and operating
revenue 2001 2002 Change 2002
Electronics
Customers Y 2,208,866 Y 2,204,419 -0.2% $18,069
Intersegment 285,361 242,488 1,988
Total 2,494,227 2,446,907 -1.9 20,057
Game
Customers 390,042 395,532 +1.4 3,242
Intersegment 7,694 8,038 66
Total 397,736 403,570 +1.5 3,308
Music
Customers 258,980 249,244 -3.8 2,043
Intersegment 24,649 35,802 293
Total 283,629 285,046 +0.5 2,336
Pictures
Customers 282,707 359,198 +27.1 2,944
Intersegment 0 0 0
Total 282,707 359,198 +27.1 2,944
Financial Services
Customers 222,227 244,361 +10.0 2,003
Intersegment 14,183 13,865 114
Total 236,410 258,226 +9.2 2,117
Other
Customers 51,579 58,782 +14.0 482
Intersegment 45,186 58,126 476
Total 96,765 116,908 +20.8 958
Elimination (377,073) (358,319) - (2,937)
Consolidated
total Y 3,414,401 Y 3,511,536 +2.8% $28,783
Electronics intersegment amounts primarily consist of transactions with
the Game business.
Music intersegment amounts primarily consist of transactions with Game
and Pictures businesses.
Other intersegment amounts primarily consist of transactions with the
Electronics business.
Operating income (loss) 2001 2002 Change 2002
Electronics Y (21,820) Y 75,378 -% $618
Game 947 27,358 +2,788.9 224
Music (864) (15,875) - (130)
Pictures 19,368 19,167 -1.0 157
Financial Services 9,283 16,757 +80.5 137
Other (7,949) (14,647) - (120)
Total (1,035) 108,138 - 886
Corporate and
elimination 647 (5,747) - (47)
Consolidated total Y (388) Y 102,391 -% $839
Commencing with the first quarter ended June 30, 2002, Sony has partly realigned its business segment configuration. In accordance with this change, results of the previous year have been reclassified to conform to the presentation for the current year.
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
revenue 2001 2002 Change 2002
Audio Y 190,809 Y 171,917 -9.9% $1,409
Video 199,275 207,824 +4.3 1,703
Televisions 189,576 188,029 -0.8 1,541
Information and
Communications 283,021 212,434 -24.9 1,741
Semiconductors 45,118 51,059 +13.2 419
Components 127,586 130,558 +2.3 1,070
Other 105,194 115,878 +10.2 951
Total Y 1,140,579 Y 1,077,699 -5.5% $8,834
Six months ended September 30
Sales and operating
revenue 2001 2002 Change 2002
Audio Y 360,651 Y 333,397 -7.6% $2,733
Video 399,231 419,188 +5.0 3,436
Televisions 342,045 382,727 +11.9 3,137
Information and
Communications 547,014 464,023 -15.2 3,803
Semiconductors 97,372 99,413 +2.1 815
Components 249,368 259,557 +4.1 2,128
Other 213,185 246,114 +15.4 2,017
Total Y 2,208,866 Y 2,204,419 -0.2% $18,069
The above table is a breakdown of Electronics sales and operating revenue to customers in the Business Segment Information. The Electronics business is managed as a single operating segment by Sony's management. However, Sony believes that the information in this table is useful to investors in understanding the sales contributions of the products in this business segment. In addition, commencing with the first quarter ended June 30, 2002, Sony has partly realigned its product category configuration in the Electronics business. In accordance with this change, results of the previous year have been reclassified to conform to the presentations for the current year.
Sales of mobile phones are no longer recorded in the "Information and Communications" category as of the third quarter ended December 31, 2001. From the third quarter of the previous year, sales of mobile phones manufactured for Sony Ericsson Mobile Communications, AB are recorded in the "Other" product category.
Geographic Segment Information (Unaudited)
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
Sales and operating
revenue 2001 2002 Change 2002
Japan Y 522,336 Y 495,870 -5.1% $4,064
United States 608,736 615,611 +1.1 5,046
Europe 351,954 365,708 +3.9 2,997
Other Areas 297,879 312,541 +4.9 2,562
Total Y 1,780,905 Y 1,789,730 +0.5% $14,669
Six months ended September 30
Sales and operating
revenue 2001 2002 Change 2002
Japan Y 1,055,093 Y 999,004 -5.3% $8,189
United States 1,111,410 1,173,825 +5.6 9,622
Europe 662,531 711,435 +7.4 5,830
Other Areas 585,367 627,272 +7.2 5,142
Total Y 3,414,401 Y 3,511,536 +2.8% $28,783
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
2001 2002 Change 2002
Sales and operating %
revenue
Net sales Y 1,668,871 Y 1,657,050 $13,582
Financial service
revenue 102,627 122,011 1,000
Other operating
revenue 9,407 10,669 87
1,780,905 1,789,730 +0.5 14,669
Costs and expenses
Cost of sales 1,263,204 1,194,772 9,793
Selling, general
and administrative 418,127 428,317 3,510
Financial service
expenses 102,965 116,120 952
1,784,296 1,739,209 14,255
Operating income
(loss) (3,391) 50,521 - 414
Other income
Interest and dividends 3,544 2,883 24
Royalty income 8,718 11,376 93
Foreign exchange gain,
net 4,408 - -
Gain on sale of
securities investments,
net - 3,509 29
Other 9,506 9,676 79
26,176 27,444 225
Other expenses
Interest 10,615 6,560 54
Loss on devaluation of
securities investments 2,023 4,681 38
Foreign exchange loss,
net - 6,326 52
Other 9,537 11,578 95
22,175 29,145 239
Income before income
taxes 610 48,820 +7,903.3 400
Income taxes 14,814 (14,926) (122)
Income (loss) before
minority interest and
equity in net losses of
affiliated companies (14,204) 63,746 - 522
Minority interest
in income (loss) of
consolidated
subsidiaries (5,715) 8,350 68
Equity in net losses
of affiliated companies 4,688 11,345 93
Net income (loss) Y (13,177) Y 44,051 - $361
Per share data:
Common stock
Net income (loss)
- Basic Y (14.34) Y 47.89 - $0.39
- Diluted (14.34) 44.70 - 0.37
Subsidiary tracking
stock
Net income (loss)
- Basic (0.58) 19.47 - 0.16
Consolidated Statements of Income (Unaudited)
(Millions of yen, millions of U.S. dollars,
except per share amounts)
Six months ended September 30
2001 2002 Change 2002
Sales and operating revenue %
Net sales Y 3,175,263 Y 3,246,208 $26,608
Financial service
revenue 222,227 244,361 2,003
Other operating revenue 16,911 20,967 172
3,414,401 3,511,536 +2.8 28,783
Costs and expenses
Cost of sales 2,375,860 2,331,021 19,107
Selling, general and
administrative 825,986 850,520 6,971
Financial service
expenses 212,943 227,604 1,866
3,414,789 3,409,145 27,944
Operating income (loss) (388) 102,391 - 839
Other income
Interest and dividends 7,645 6,821 56
Royalty income 13,894 16,665 137
Gain on sale of
securities investments,
net - 71,875 589
Other 21,235 16,663 136
42,774 112,024 918
Other expenses
Interest 22,697 13,390 110
Loss on devaluation
of securities
investments 10,826 16,205 133
Foreign exchange loss,
net 215 648 5
Other 22,365 18,709 153
56,103 48,952 401
Income (loss) before
income taxes (13,717) 165,463 - 1,356
Income taxes 35,081 38,707 317
Income (loss) before
minority interest,
equity in net losses
of affiliated companies
and cumulative effect
of accounting changes (48,798) 126,756 - 1,039
Minority interest in
income (loss) of
consolidated
subsidiaries (8,929) 5,743 47
Equity in net losses
of affiliated companies 9,364 19,781 162
Income (loss) before
cumulative effect of
accounting changes (49,233) 101,232 - 830
Cumulative effect of
accounting changes
(2001: Net of income
taxes of Y2,975 million) 5,978 - -
Net income (loss) Y (43,255) Y 101,232 - $830
Per share data:
Common stock
Income (loss) before
cumulative effect of
accounting changes
- Basic Y (53.60) Y 110.12 - $0.90
- Diluted (53.60) 102.60 - 0.84
Net income (loss)
- Basic (47.09) 110.12 - 0.90
- Diluted (47.09) 102.60 - 0.84
Subsidiary tracking stock
Net income (loss)
- Basic (0.84) 26.77 - 0.22
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, 2002 and change in retained earnings for the six months ended September 30, 2001 and 2002.
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
2002 2002
Additional Paid-in Capital:
Balance, beginning of year Y 968,223 $7,936
Conversion of convertible bonds 118 1
Reissuance of treasury stock 12 0
Balance, as of September 30 968,353 7,937
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
2001 2002 2002
Retained earnings:
Balance, beginning
of year Y 1,217,110 Y 1,209,262 $9,912
Net income (43,255) 101,232 830
Cash dividends (11,496) (11,497) (95)
Common stock issue costs,
net of tax (162) (4) 0
Balance, as of
September 30 1,162,197 1,298,993 10,647
Consolidated Balance Sheets (Unaudited)
(Millions of yen, millions of U.S. dollars)
September 30 March 31 September 30 September 30
ASSETS 2001 2002 2002 2002
Current assets:
Cash and cash
equivalents Y 741,563 Y 683,800 Y 643,037 $5,271
Time deposits 5,053 5,176 5,713 47
Marketable securities 157,003 162,147 168,318 1,380
Notes and accounts
receivable, trade 1,300,254 1,363,652 1,325,130 10,862
Allowance for doubtful
accounts and sales
returns (112,019) (120,826) (110,734) (908)
Inventories 1,007,580 673,437 812,724 6,662
Deferred income taxes 144,931 134,299 142,383 1,167
Prepaid expenses and
other current assets 410,075 435,527 546,928 4,482
3,654,440 3,337,212 3,533,499 28,963
Film costs 316,546 313,054 286,321 2,347
Investments and advances:
Affiliated companies 103,682 131,068 81,435 668
Securities investments
and other 1,395,973 1,566,739 1,659,247 13,600
1,499,655 1,697,807 1,740,682 14,268
Property, plant and
equipment:
Land 184,429 195,292 192,333 1,577
Buildings 842,147 891,436 875,551 7,177
Machinery and
equipment 2,160,719 2,216,347 2,131,273 17,469
Construction in
progress 96,832 66,825 58,000 475
Less-Accumulated
depreciation (1,866,414) (1,958,234) (1,919,220) (15,731)
1,417,713 1,411,666 1,337,937 10,967
Other assets:
Intangibles, net 223,860 245,639 259,105 2,124
Goodwill 300,107 317,240 297,388 2,438
Deferred insurance
acquisition costs 286,947 308,204 320,631 2,628
Other 450,745 554,973 639,468 5,241
1,261,659 1,426,056 1,516,592 12,431
Y 8,150,013 Y 8,185,795 8,415,031 $68,976
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term
borrowings Y 756,912 Y 113,277 Y 43,038 $353
Current portion
of long-term debt 59,987 240,786 223,269 1,830
Notes and accounts
payable, trade 788,583 767,625 878,012 7,197
Accounts payable,
other and accrued
expenses 745,413 869,533 867,575 7,111
Accrued income and
other taxes 94,079 105,470 112,027 918
Deposits from
customers in the
banking business 34,302 106,472 177,551 1,455
Other 364,300 355,333 355,633 2,916
2,843,576 2,558,496 2,657,105 21,780
Long-term liabilities:
Long-term debt 955,839 838,617 823,295 6,748
Accrued pension and
severance costs 223,632 299,089 307,932 2,524
Deferred income
taxes 161,896 159,573 164,715 1,350
Future insurance
policy benefits
and other 1,495,064 1,680,418 1,796,587 14,726
Other 235,551 255,824 266,580 2,185
3,071,982 3,233,521 3,359,109 27,533
Minority interest
in consolidated
subsidiaries 33,020 23,368 37,672 309
Stockholders' equity:
Capital stock 476,028 476,106 476,224 3,903
Additional paid-in
capital 968,144 968,223 968,353 7,937
Retained earnings 1,162,197 1,209,262 1,298,993 10,647
Accumulated other
comprehensive
income (397,510) (275,593) (374,618) (3,069)
Treasury stock,
at cost (7,424) (7,588) (7,807) (64)
2,201,435 2,370,410 2,361,145 19,354
Y 8,150,013 Y 8,185,795 Y 8,415,031 $68,976
Consolidated Statements of Cash Flows (Unaudited)
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
2001 2002 2002
Cash flows from operating
activities:
Net income (loss) Y(43,255) Y101,232 $830
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities-
Depreciation and amortization,
including amortization of
deferred insurance acquisition
costs 167,576 166,968 1,369
Amortization of film costs 102,717 138,676 1,137
Accrual for pension and
severance costs,
less payments 3,661 10,390 85
Gain or loss on sale, disposal
or impairment of long-lived
assets, net 16,865 16,204 133
Gain on sales of securities
investments, net -- (71,875) (589)
Deferred income taxes (16,400) (34,109) (280)
Equity in net losses of
affiliated companies,
net of dividends 9,505 20,293 166
Cumulative effect of accounting
changes (5,978) -- --
Changes in assets and liabilities:
(Increase) decrease in notes
and accounts receivable,
trade 84,389 (24,953) (205)
Increase in inventories (77,261) (150,766) (1,236)
Increase in film costs (132,907) (137,025) (1,123)
Increase (decrease) in
notes and accounts
payable, trade (131,272) 120,541 988
Increase (decrease) in
accrued income and
other taxes (42,113) 13,687 112
Increase in future
insurance policy
benefits and other 129,051 116,169 952
Increase in deferred
insurance acquisition
costs (35,097) (32,118) (263)
Increase in marketable
securities held in the
insurance business for
trading purpose (58,375) -- --
Changes in other current
assets and liabilities,
net (83,503) (35,833) (294)
Other (7,573) 34,541 284
Net cash provided by
(used in) operating
activities (119,970) 252,022 2,066
Cash flows from investing
activities:
Payments for purchases of
fixed assets (220,180) (136,351) (1,118)
Proceeds from sales of fixed
assets 22,904 21,646 177
Payments for investments and
advances by financial service
business (275,653) (462,765) (3,793)
Payments for investments and
advances (other than financial
service business) (35,708) (37,378) (306)
Proceeds from sales of
securities investments,
maturities of marketable
securities and collections
of advances by financial
service business 85,248 242,325 1,986
Proceeds from sales of
securities investments,
maturities of marketable
securities and collections
of advances (other than
financial service business) 18,863 122,239 1,002
(Increase) decrease in time
deposits 795 (857) (7)
Net cash used in investing
activities (403,731) (251,141) (2,059)
Cash flows from financing
activities:
Proceeds from issuance of
long-term debt 154,340 8,654 71
Payments of long-term debt (120,885) (22,775) (187)
Increase (decrease) in
short-term borrowings 582,853 (55,987) (459)
Increase in deposits from
customers in the banking
business 34,302 70,984 582
Proceeds from issuance of
subsidiary tracking stock 9,529 -- --
Dividends paid (11,514) (11,560) (95)
Other 17,624 (10,956) (89)
Net cash provided by
(used in) financing
activities 666,249 (21,640) (177)
Effect of exchange rate changes
on cash and cash equivalents (8,230) (20,004) (164)
Net increase (decrease) in cash
and cash equivalents 134,318 (40,763) (334)
Cash and cash equivalents at
beginning of the year 607,245 683,800 5,605
Cash and cash equivalents at
end of the second quarter Y741,563 Y643,037 $5,271
(Notes)
1. U.S. dollar amounts have been translated from yen, for convenience
only, at the rate of Y122 = U.S.$1, the approximate Tokyo foreign
exchange market rate as of September 30, 2002.
2. As of September 30, 2002, Sony had 1,052 consolidated subsidiaries.
It has applied the equity accounting method in respect to its
81 affiliated companies.
3. Sony calculates and presents per share data separately for Sony's
Common stock and for the subsidiary tracking stock which is linked
to the economic value of Sony Communication Network Corporation,
based on Statement of Financial Accounting Standards ("FAS")
No.128, "Earnings per Share". The holders of the tracking stock
have the right to participate in earnings, together with common
stock holders. Accordingly, Sony calculates per share data by the
"two-class" method based on FAS No.128. Under this method, basic
net income per share for each class of stock is calculated based on
the earnings allocated to each class of stock for the applicable
period, divided by the weighted-average number of outstanding shares
in each class during the applicable period. The earnings allocated
to the subsidiary tracking stock are determined based on the
subsidiary tracking stock holders' economic interest in the
targeted subsidiary's earnings available for dividends. 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 mainly resulted
from convertible bonds. In accordance with FAS No.128, the
computation of diluted net loss per share for the six months ended
September 30, 2001 uses the same weighted-average shares used for
the computation of diluted loss before cumulative effect of
accounting changes per share, and reflects the effect of the
assumed conversion of convertible bonds in diluted net loss. No
additional shares were included in the computation of diluted net
loss per share and in the computation of diluted net loss before
cumulative effect of accounting changes per share for the three
months and six months ended September 30, 2001 because to do so
would have been antidilutive.
Weighted-average shares (Thousands of shares)
Three months ended September 30
2001 2002
Net income (loss)
- Basic 918,464 918,534
- Diluted 918,464 997,504
Weighted-average shares (Thousands of shares)
Six months ended September 30
2001 2002
Income (loss) before cumulative effect of
accounting changes and net income (loss)
- Basic 918,439 918,525
- Diluted 918,439 997,539
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, 2001 and 2002 are 3,072 thousand shares. There
were no potentially dilutive securities for the subsidiary tracking
stock outstanding at September 30, 2001 and 2002.
4. Sony's comprehensive income is comprised of net income and other
comprehensive income. Other comprehensive income includes changes in
unrealized gains or losses on securities, unrealized gains or losses
on derivative instruments, minimum pension liability adjustment and
foreign currency translation adjustments. Net income (loss), other
comprehensive income (loss) and comprehensive income (loss) for the
three months and six months ended September 30, 2001 and 2002 were as
follows;
(Millions of yen, millions of U.S. dollars)
Three months ended Six months ended
September 30 September 30
2001 2002 2002 2001 2002 2002
Net income (loss) Y(13,177) Y44,051 $361 Y(43,255) Y101,232 $830
Other comprehensive
income (loss) :
Unrealized gains
(losses) on
securities (18,596) (13,423) (110) (26,662) (7,429) (61)
Unrealized gains
(losses) on
derivative
instruments 284 (2,637) (22) 1,734 (2,348) (19)
Foreign currency
translation
adjustments (42,238) 32,277 265 (44,015) (89,248) (732)
(60,550) 16,217 133 (68,943) (99,025) (812)
Comprehensive
income (loss) Y(73,727) Y60,268 $494 Y(112,198) Y2,207 $18
5. On April 1, 2001, Sony adopted FAS No.133, "Accounting for Derivative
Instruments and Hedging Activities" as amended by FAS No.138
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities - an Amendment of FASB statement No.133". As a result of
the adoption of the new standard, Sony recorded a one-time non-cash
after-tax unrealized gain of Y1,089 million in accumulated other
comprehensive income in the consolidated balance sheet, as well as an
after-tax gain of Y5,978 million in the cumulative effect of
accounting changes in the consolidated statement of income.
6. In the fourth quarter of the year ended March 31, 2002, Sony adopted
Emerging Issues Task Force Issue No. 01-09, "Accounting for
Consideration Given by a Vendor to a Customer or Reseller of the
Vendor's Products", retroactive to April 1, 2001. As a result of the
adoption of new statement, certain cooperative advertising and product
placement costs previously classified as selling, general
and administrative expenses for the three months and six months ended
September 30, 2001 have been reclassified as a reduction of revenues
to conform to the presentation for the three months and six months
ended September 30, 2002.
7. Adoption of New Accounting Standards
Impairment or Disposal of Long-Lived Assets
On April 1, 2002, Sony adopted FAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement
establishes a single accounting model for long-lived assets to be
disposed of by sale and modifies the accounting and disclosure rules
for discontinued operations. The adoption of this statement did not
have an impact on Sony's results of operations and financial position.
FAS No.145, "Rescission of FASB Statements No.4, 44 and 64, Amendment
of FASB Statement No.13, and Technical Corrections"
In April 2002, the Financial Accounting Standards Board issued
FAS No. 145. This statement rescinds certain authoritative
pronouncements and amends, clarifies or describes the applicability of
others, effective for fiscal years beginning or transactions occurring
after May 15, 2002, with early adoption encouraged. Sony elected
early adoption of this statement retroactive to the beginning of the
fiscal year. The adoption of this statement did not have an impact on
Sony's results of operations and financial position.
8. Recent pronouncements
Accounting for Costs Associated with Exit or Disposal Activities
In July 2002, the Financial Accounting Standards Board issued FAS
No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities". This statement establishes accounting and disclosure
rules for costs associated with exit or disposal activities. This
statement shall be effective for exit or disposal activities that are
initiated after December 31, 2002.
Other Consolidated Financial Data
(Millions of yen, millions of U.S. dollars)
Three months ended September 30
2001 2002 Change 2002
Capital expenditures
(additions to fixed
assets) Y93,340 Y67,022 -28.2% $549
Depreciation and
amortization expenses* 87,531 83,650 -4.4 686
(Depreciation expenses
for tangible assets) (72,534) (67,781) (-6.6) (556)
R&D expenses 123,215 108,290 -12.1 888
Six months ended September 30
2001 2002 Change 2002
Capital expenditures
(additions to fixed
assets) Y179,434 Y127,694 -28.8% $1,047
Depreciation and
amortization
expenses* 167,576 166,968 -0.4 1,369
(Depreciation expenses
for tangible assets) (138,074) (134,832) (-2.3) (1,105)
R&D expenses 226,365 206,185 -8.9 1,690
*Including amortization expenses for intangible assets and for deferred
insurance acquisition costs
SOURCE: Sony Corporation
CONTACT: Tokyo, Takeshi Sudo, +81-3-5448-2180, New York, Yas Hasegawa,
1-212-833-6820, or Chris Hohman, +1-212-833-5011, or London, Hanako Muto,
44-20-7426-8760, or Vanessa Jubenot, +44-20-7426-8606, all of Sony
orporation
Web site: http://www.sony.net/IR