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 January 2006
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: January 26 2006
List of materials
Documents attached hereto:
i) Press Release Announcing Consolidated Financial Results for the Third
Quarter Ended December 31, 2005
Sony Corporation
6-7-35 Kitashinagawa
Shinagawa-ku
Tokyo 141-0001 Japan
No: 06-007E
3:00 P.M. JST, January 26, 2006
Consolidated Financial Results
for the Third Quarter Ended December 31, 2005
Tokyo, January 26, 2006 -- Sony Corporation today announced its
consolidated results for the third quarter ended December 31, 2005
(October 1, 2005 to December 31, 2005).
(Billions of yen, millions of U.S. dollars, except per share
amounts)
Third quarter ended December 31
2004 2005 Change 2005*
in Yen
---------- ------ ------ ------ ------
Sales and operating Y2,148.2 Y2,367.6 +10.2% $20,064
revenue
Operating income 138.2 202.8 +46.8 1,719
Income before income 149.2 225.9 +51.4 1,914
taxes
Equity in net income 2.3 19.5 +735.6 165
of affiliated companies
Net income 143.8 168.9 +17.5 1,432
Net income per share
of common stock
- Basic Y155.32 Y169.36 +9.0 $1.44
- Diluted 138.08 161.60 +17.0 1.37
* U.S. dollar amounts have been translated from yen, for convenience
only, at the rate of Y118=U.S.$1, the approximate Tokyo foreign
exchange market rate as of December 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 Third Quarter Ended December 31, 2005
------------------------------------------------------------------
Sales and operating revenue ("sales") increased by 10.2%
compared with the same quarter of the previous fiscal year; on a
local currency basis sales increased 3%. (For all references
herein to results on a local currency basis, see Note I.)
Sales within the Electronics segment increased by 4.7% compared
with the same quarter of the previous fiscal year (a 2% decrease
on a local currency basis). In terms of product categories
within the Electronics segment, sales of LCD televisions, LCD
rear-projection televisions and flash memory and hard drive
Walkman(R) digital audio players increased, while there was a
decrease in sales of CRT and plasma televisions. In the Game
segment, sales increased 48.3% as a result of the contribution
from hardware and software sales of PSP(R) (PlayStation(R) Portable)
("PSP"). In the Pictures segment, sales decreased 0.4%, a 10%
decrease on a U.S. dollar basis (please refer to the note
regarding the Pictures segment), compared with the same quarter
of the prior fiscal year primarily due to the significant home
entertainment contribution of Spider-Man 2 in the prior fiscal
year's third quarter and lower theatrical revenues from the
underperformance of The Legend of Zorro and Zathura. In the
Financial Services segment, revenue increased by 31.3% compared
to the same quarter of the previous fiscal year mainly due to an
improvement in gains and losses on investments primarily at
Sony Life Insurance Co., Ltd. ("Sony Life").
Operating income increased 46.8% (a 30% increase on a local
currency basis) compared with the same quarter of the previous
fiscal year. Within the Electronics segment, an improvement in
the cost of sales ratio, as well as favorable foreign exchange
rates, resulted in an increase in operating income. In the Game
segment, operating income increased primarily due to the steady
expansion of the PSP platform in all geographic areas. In the
Pictures segment, a small operating loss was recorded due to the
factors noted above for sales and operating revenue. 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.
Restructuring charges, which were recorded as operating
expenses, for the third quarter amounted to Y14.7 billion ($125
million) compared to Y10.5 billion in the same quarter of the
previous fiscal year. In the Electronics segment, restructuring
charges were Y14.6 billion ($124 million) compared to Y10.5
billion in the same quarter of the previous fiscal year.
Income before income taxes increased 51.4% 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 Y19.0 billion ($161 million) on the change in
interest resulting from the initial public offering of Sony
Communication Network Corporation ("SCN").
Income taxes: During the third quarter of the current fiscal
year, Sony recorded Y75.7 billion ($642 million) of income tax
expense, resulting in an effective tax rate of 33.5%. This
effective tax rate was lower than the Japanese statutory tax
rate primarily as a result of an increase in profits at foreign
subsidiaries subject to lower rates of tax. In the same quarter
of the previous fiscal year, valuation allowances at Sony's
U.S. subsidiaries were reversed resulting in an effective tax
rate of 4.7%.
Equity in net income of affiliated companies of Y19.5 billion
($165 million) was recorded, a Y17.2 billion increase compared
to the same quarter of the previous fiscal year.
Sony recorded equity income of Y10.3 billion ($87 million) for
SONY BMG MUSIC ENTERTAINMENT ("SONY BMG") and Y9.8 billion
($83 million) for Sony Ericsson Mobile Communications AB ("Sony
Ericsson"). However, Sony also recorded equity in net loss of
approximately Y2.4 billion ($20 million) for Metro-Goldwyn-Mayer
Inc. ("MGM")*. 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. In addition, Sony recorded equity income
of Y1.0 billion ($8 million) for S-LCD Corporation, a
joint-venture with Samsung Electronics Co., Ltd. ("S-LCD").
*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, was Y168.9 billion ($1,432 million), an
increase of 17.5% 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 nine month periods ended December 31, 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 fiscal year's results have been reclassified to the Other
segment for comparative purposes. Results for the three and
nine month periods ended December 31, 2005 and the three month
period ended December 31, 2004 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 nine month period
ended December 31, 2004 in the Other segment include the
consolidated results for SMEI's recorded music business for the
period through August 1, 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)
Third quarter ended December 31
2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
Sales and operating Y1,524.6 Y1,595.8 +4.7% $13,523
revenue
Operating income 50.5 78.9 +56.2 668
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales increased by 4.7% compared to the same quarter of the
previous fiscal year (a 2% decrease on a local currency basis).
Sales to outside customers increased 2.5% compared to the same
quarter of the previous fiscal year. There was an increase in
sales of several products including LCD televisions, following
the launch of the new BRAVIA TM models, which experienced increased
sales in all geographic areas, as well as LCD rear-projection
televisions, which saw increased sales in the U.S., and flash
memory and hard drive Walkman digital audio players, which saw
increased sales in all geographic areas. On the other hand,
there was a decline in sales of CRT televisions which
experienced a continued shift in demand towards flat panel
televisions, as well as plasma televisions, which faced intense
business competition. By geographic area, declining sales in
Japan and Europe were offset by increased sales in Other Areas
and the U.S.
Operating income increased by Y28.4 billion or 56.2% compared
with the same quarter of the previous fiscal year, due to an
improvement in the cost of sales ratio associated with enhanced
product appeal and cost reductions, as well as favorable foreign
exchange rates. With regard to products within the Electronics
segment, products which had a positive impact on operating
income included "VAIO" PCs, which experienced an increase in
operating profit margin mainly due to favorable notebook PC
sales and cost reductions, "Handycam(R)" video cameras, which
experienced an increase in sales of DVD and high definition
video cameras, and broadcast-use equipment, which experienced
good sales performance of high definition broadcast production
equipment. On the other hand, CRT televisions experienced a
decrease in operating income due to a significant decrease in
sales.
Inventory, as of December 31, 2005, was Y598.8 billion ($5,075
million), a Y27.9 billion, or 4.9%, increase compared with the
level as of December 31, 2004 and a Y43.6 billion, or 6.8%,
decrease compared with the level as of September 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 2,310 million, an increase of
Euro 305 million, or 15%, compared with the same quarter of the
previous fiscal year, boosted by hit models such as camera
phones and "Walkman" phones. Units shipped in the quarter
reached 16.1 million, a 28% increase compared to the same period
last fiscal year. Income before taxes was Euro 206 million and
net income was Euro 144 million, which represents a year-on-year
increase of Euro 66 million, or 47%, and Euro 89 million, or
162%, respectively. As a result, equity in net income of Y9.8
billion ($83 million) was recorded by Sony.
Game
---- (Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
Sales and operating Y282.6 Y419.2 +48.3% $3,553
revenue
Operating income 44.6 67.8 +52.1 575
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales increased 48.3% compared with the same quarter of the
previous fiscal year (a 42% increase on a local currency basis).
Hardware: There was a significant increase in sales in all
geographic areas primarily due to a significant contribution to
sales from PSP, which experienced favorable growth in all
geographic areas. In addition, PlayStation 2 ("PS2")
continued its favorable performance, experiencing sales on a par
with those in the same quarter of the previous fiscal year.
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 increased in
the U.S. and Europe, although it decreased in Japan.
Operating income of Y67.8 billion ($575 million) was recorded,
an increase of Y23.2 billion or 52.1% compared with the same
quarter of the previous fiscal year mainly due to the steady
expansion of the PSP platform in all geographic areas, as well
as the continued favorable performance of the PS2 business.
This increase was partially offset by continued aggressive
research and development spending associated with PLAYSTATION(R)
3, as well as an increase in advertising and promotion expenses
incurred during the quarter.
Worldwide hardware production shipments:*
-> PS2: 5.36 million units (a decrease of 2.03 million units)
-> PSP: 6.22 million units (an increase of 5.71 million units)
Worldwide software production shipments:*
-> PS2: 93 million units (a decrease of 16 million units)
-> PSP: 14.5 million units (an increase of 13.2 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.
Inventory, as of December 31, 2005, was Y103.9 billion ($881
million), a Y58.5 billion, or 128.8%, increase compared with the
level as of December 31, 2004 and a Y11.0 billion, or 9.5%,
decrease compared with the level as of September 30, 2005.
Pictures
-------- (Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
Sales and operating Y203.1 Y202.2 -0.4% $1,714
revenue
Operating income (loss) 18.6 (0.4) - (3)
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 0.4% compared with the same quarter of the
previous fiscal year (a 10% decrease on a U.S dollar basis).
Sales on a U.S. dollar basis decreased primarily due to the
significant home entertainment contribution of Spider-Man 2 in
the prior fiscal year's third quarter and lower theatrical
revenues from the underperformance of The Legend of Zorro and
Zathura. Although there were no comparable releases to
Spider-Man 2 in the third quarter of this fiscal year, the home
entertainment releases of Christmas with the Kranks and The
Exorcism of Emily Rose contributed to the current quarter's
revenues.
An operating loss of Y0.4 billion ($3 million) was recorded as
compared to operating income of Y18.6 billion in the same
quarter of the previous fiscal year. The decrease was due to
the lack of a comparable Spider-Man 2 home entertainment
operating profit contribution in the current fiscal year's
third quarter combined with losses recorded from the
underperformance in the current quarter on the films noted
above.
Financial Services
------------------ (Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
Financial service Y145.0 Y190.4 +31.3% $1,613
revenue
Operating income 13.9 47.0 +238.4 399
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 Y190.4 billion ($1,613 million), a
31.3% 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 Y167.2 billion ($1,417 million), a
Y45.4 billion, or 37.3% 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 an
increase of insurance-in-force.
Operating income was Y47.0 billion ($399 million), a Y33.1
billion, or 238.4% 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 Y34.1 billion or 243.8% to Y48.0 billion ($407
million).
Other
----- (Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
Sales and operating Y109.3 Y118.1 +8.1% $1,001
revenue
Operating income 13.4 14.9 +11.0 126
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales increased 8.1% compared with the same quarter of the
previous fiscal year. This increase was mainly due to strong
sales at a business within the segment engaged in the production
and marketing of animation products, at a Japanese subsidiary
involved in the advertising agency business, and at SMEJ.
Sales at SMEJ increased compared to the same quarter of the
previous fiscal year primarily as a result of increased album
and single sales. Best selling albums during the quarter
included Ken Hirai 10th Anniversary Complete Single Collection
'95- '05 "Uta Baka" by Ken Hirai, BEST by Mika Nakashima, and
NATURAL by ORANGE RANGE.
Operating income of Y14.9 billion ($126 million) was recorded,
representing an increase of Y1.5 billion compared to the same
quarter of the previous fiscal year. Despite the recording of a
gain related to the sale of a retail and showroom building in
Japan during the same quarter of the previous fiscal year, this
increase was mainly the result of cost reductions at network
related businesses within Sony Corporation and an improvement in
the cost of sales ratio and the higher sales, as noted above, at
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 $1,496 million, a less than
1% year-on-year decline, income before income taxes of $252
million, an increase of $217 million year-on-year, and net
income of $178 million, an increase of $157 million
year-on-year, during the quarter ended December 31, 2005.
Income before income taxes included $47 million of restructuring
charges. Despite continued sluggish market conditions in a
number of territories worldwide, the significant year-on-year
increase in income before income taxes was due to a $121 million
year-on-year reduction in restructuring charges, the realization
of incremental cost savings and the success of several releases
in the marketplace. Best selling albums during the quarter
included Il Divo's Ancora, Kelly Clarkson's Breakaway and
Kenny Chesney's The Road and The Radio. As a result, equity in
net income of Y10.3 billion ($87 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)
Nine months ended December 31
Cash flow 2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
- From operating Y230.8 Y45.2 Y-185.6 $383
activities
- From investing (414.7) (205.4) +209.3 (1,741)
activities
- From financing (35.4) 50.9 +86.3 432
activities
Cash and cash 592.9 519.7 -73.2 4,405
equivalents at
beginning of
the fiscal year
Cash and cash 378.1 438.7 +60.6 3,717
equivalents as
of December 31
Operating Activities: During the nine months ended December 31,
2005, net cash was generated mainly as a result of the recording
of net income resulting primarily from the contribution of the
Game segment, and from the Electronics segment during the
year-end sales season.
Investing Activities: During the nine months ended December 31,
2005, although Sony purchased fixed assets mainly within the
Electronics segment consisting primarily of semiconductor
manufacturing facilities, Sony carried out the sale of a portion
of stock resulting from the initial public offering of SCN and
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 during the nine months
ended December 31, 2005 was a use of cash of Y160.2 billion
($1,358 million).
Financing Activities: During the nine months ended December 31,
2005, although Sony redeemed a portion of its long-term debt
including bonds, financing was carried out through the issuance
of straight bonds and commercial paper.
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 Y81.1 billion compared to March 31,
2005, and increased by Y60.6 billion compared to December 31,
2004, to Y438.7 billion ($3,717 million) as of December 31,
2005.
Cash Flow - Financial Services segment
--------------------------------------
(Billions of yen, millions of U.S. dollars)
Nine months ended December 31
Cash flow 2004 2005 Change 2005
in Yen
---------- ------ ------ ------ ------
- From operating Y114.5 Y78.3 Y-36.2 $664
activities
- From investing (455.2) (369.9) +85.3 (3,135)
activities
- From financing 281.7 208.7 -73.0 1,768
activities
Cash and cash 256.3 259.4 +3.1 2,198
equivalents at
beginning of
the fiscal year
Cash and cash 197.2 176.4 -20.8 1,495
equivalents as
of December 31
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 Y83.0 billion compared to March 31,
2005, and decreased Y20.8 billion compared to December 31, 2004,
to Y176.4 billion ($1,495 million) as of December 31, 2005.
Notes
-----
Note I: During the quarter ended December 31, 2005, the average
value of the yen was Y116.4 against the U.S. dollar and Y137.9
against the Euro, which was 9.8% lower against the U.S. dollar
and 1.7% 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 monthly
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.
Outlook for the Fiscal Year ending March 31, 2006
-------------------------------------------------
Sony's consolidated operating results forecast for the fiscal
year ending March 31, 2006 has been revised as per the table
below:
Change from
Current September September
Forecast Forecast Forecast
------ ------ ------
Sales and operating Y7,400 billion +2% Y7,250 billion
revenue
Operating income 100 billion - (20 billion)
(loss)
(Restructuring
charges included
within
Operating income 140 billion unchanged 140 billion)
Income before 190 billion +375% 40 billion
income taxes
Equity in net 5 billion - (8 billion)
income (loss)
of affiliated
companies
Net income (loss) 70 billion - (10 billion)
Assumed foreign currency exchange rates for the fourth quarter
of the fiscal year: approximately Y114 to the U.S. dollar and
approximately Y138 to the Euro.
The principal reason for this revision is that, in addition to
the higher than anticipated depreciation of the yen during the
third quarter of the current fiscal year, operating results
during the third quarter were higher than forecast mainly within
the Electronics and Financial Services segments. Within the
Electronics segment, the television business in particular
performed significantly better than anticipated, as did the
"VAIO" PC business. On the other hand, the performance of the
Pictures segment for the third quarter of the current fiscal
year was lower than expected.
The revision to income before income taxes, in addition to the
above, reflects the change in interest resulting from SCN's
initial public offering. In addition, the revision to equity in
net income (loss) of affiliated companies is a result of better
than anticipated results in particular at S-LCD and Sony
Ericsson.
Although the factors set out above had a positive effect on
operating results during the third quarter, Sony continues to
operate in an uncertain global business environment during the
fourth quarter of the fiscal year.
Our forecast for research and development costs has been revised
down by Y10 billion since our forecast of April 27, 2005 as per
the table below. However, our forecast for capital expenditures
and depreciation and amortization is unchanged from the forecast
of 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 510 billion +2
expenses
* 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 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)
Sales and Three months ended December 31
operating revenue 2004 2005 Change 2005
---------- ------ ------ ------ ------
Electronics
Customers Y1,444,257 Y1,480,466 +2.5% $12,546
Intersegment 80,373 115,288 977
---------- ------ ------ ------
Total 1,524,630 1,595,754 +4.7 13,523
Game
Customers 273,599 402,925 +47.3 3,415
Intersegment 9,022 16,321 138
---------- ------ ------ ------
Total 282,621 419,246 +48.3 3,553
Pictures
Customers 203,097 202,241 -0.4 1,714
Intersegment - - -
---------- ------ ------ ------
Total 203,097 202,241 -0.4 1,714
Financial Services
Customers 139,479 184,586 +32.3 1,564
Intersegment 5,483 5,805 49
---------- ------ ------ ------
Total 144,962 190,391 +31.3 1,613
Other
Customers 87,753 97,344 +10.9 825
Intersegment 21,571 20,801 176
---------- ------ ------ ------
Total 109,324 118,145 +8.1 1,001
Elimination (116,449) (158,215) - (1,340)
---------- ------ ------ ------
Consolidated total Y2,148,185 Y2,367,562 +10.2% $20,064
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 Y50,519 Y78,888 +56.2% $668
Game 44,574 67,819 +52.1 575
Pictures 18,646 (378) - (3)
Financial Services 13,904 47,048 +238.4 399
Other 13,383 14,858 +11.0 126
---------- ------ ------ ------
Total 141,026 208,235 +47.7 1,765
Corporate and (2,853) (5,414) - (46)
elimination
---------- ------ ------ ------
Consolidated total Y138,173 Y202,821 +46.8% $1,719
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).
Business Segment Information (Unaudited)
----------------------------------------
(Millions of yen, millions of U.S. dollars)
Sales and Nine months ended December 31
operating revenue 2004 2005 Change 2005
---------- ------ ------ ------ ------
Electronics
Customers Y3,739,558 Y3,600,837 -3.7% $30,516
Intersegment 143,517 333,332 2,824
---------- ------ ------ ------
Total 3,883,075 3,934,169 +1.3 33,340
Game
Customers 488,534 772,396 +58.1 6,546
Intersegment 19,097 33,874 287
---------- ------ ------ ------
Total 507,631 806,270 +58.8 6,833
Pictures
Customers 543,030 505,477 -6.9 4,284
Intersegment - - -
---------- ------ ------ ------
Total 543,030 505,477 -6.9 4,284
Financial Services
Customers 386,828 503,277 +30.1 4,265
Intersegment 17,620 16,810 143
---------- ------ ------ ------
Total 404,448 520,087 +28.6 4,408
Other
Customers 304,645 248,004 -18.6 2,101
Intersegment 58,968 59,301 503
---------- ------ ------ ------
Total 363,613 307,305 -15.5 2,604
Elimination (239,202) (443,317) - (3,757)
---------- ------ ------ ------
Consolidated total Y5,462,595 Y5,629,991 +3.1% $47,712
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 Y66,184 Y60,955 -7.9% $517
Game 41,682 70,144 +68.3 594
Pictures 50,165 (2,765) - (23)
Financial Services 39,188 109,017 +178.2 924
Other 10,588 26,460 +149.9 224
---------- ------ ------ ------
Total 207,807 263,811 +27.0 2,236
Corporate and (16,475) (10,355) - (88)
elimination
---------- ------ ------ ------
Consolidated total Y191,332 Y253,456 +32.5% $2,148
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
period (see Notes 5 and 6).
Electronics Sales and Operating Revenue to Customers by Product
Category
(Millions of yen, millions of U.S. dollars)
Sales and operating Three months ended December 31
revenue 2004 2005 Change 2005
---------- ------ ------ ------ ------
Audio Y183,977 Y184,559 +0.3% $1,564
Video 330,815 313,082 -5.4 2,653
Televisions 307,762 359,248 +16.7 3,044
Information and 228,407 220,157 -3.6 1,866
Communications
Semiconductors 53,755 63,974 +19.0 542
Components 164,746 185,575 +12.6 1,573
Other 174,795 153,871 -12.0 1,304
---------- ------ ------ ------
Total Y1,444,257 Y1,480,466 +2.5% $12,546
Sales and operating Nine months ended December 31
revenue 2004 2005 Change 2005
---------- ------ ------ ------ ------
Audio Y465,388 Y431,503 -7.3% $3,657
Video 828,197 812,041 -2.0 6,882
Televisions 707,628 680,725 -3.8 5,769
Information and 601,784 589,317 -2.1 4,994
Communications
Semiconductors 195,657 179,529 -8.2 1,521
Components 476,837 492,879 +3.4 4,177
Other 464,067 414,843 -10.6 3,516
---------- ------ ------ ------
Total Y3,739,558 Y3,600,837 -3.7% $30,516
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)
Sales and operating Three months ended December 31
revenue 2004 2005 Change 2005
---------- ------ ------ ------ ------
Japan Y605,877 Y610,939 +0.8% $5,177
United States 576,459 659,222 +14.4 5,587
Europe 548,235 619,456 +13.0 5,250
Other Areas 417,614 477,945 +14.4 4,050
---------- ------ ------ ------
Total Y2,148,185 Y2,367,562 +10.2% $20,064
Sales and operating Nine months ended December 31
revenue 2004 2005 Change 2005
---------- ------ ------ ------ ------
Japan Y1,581,273 Y1,582,599 +0.1% $13,412
United States 1,452,425 1,514,000 +4.2 12,831
Europe 1,283,838 1,319,489 +2.8 11,182
Other Areas 1,145,059 1,213,903 +6.0 10,287
---------- ------ ------ ------
Total Y5,462,595 Y5,629,991 +3.1% $47,712
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 December 31
2004 2005 Change 2005
------ ------ ------ ------
Sales and operating %
revenue:
Net sales Y1,996,676 Y2,165,618 $18,353
Financial service 139,479 184,586 1,564
revenue
Other operating 12,030 17,358 147
revenue
------ ------ ------
2,148,185 2,367,562 +10.2 20,064
Costs and expenses:
Cost of sales 1,489,359 1,574,321 13,342
Selling, general and 393,269 447,277 3,790
administrative
Financial service 125,609 137,337 1,164
expenses
Loss on sale, disposal 1,775 5,806 49
or impairment of
assets, net
------ ------ ------
2,010,012 2,164,741 18,345
Operating income 138,173 202,821 +46.8 1,719
Other income:
Interest and dividends 2,427 6,633 56
Royalty income 4,898 7,524 64
Foreign exchange gain, 5,381 - -
net
Gain on sale of 3,425 2,447 21
securities
investments, net
Gain on change in interest 1,612 18,946 160
in subsidiaries and equity
investees
Other 5,924 5,254 44
------ ------ ------
23,667 40,804 345
Other expenses:
Interest 7,265 7,983 68
Loss on devaluation of 106 171 1
securities investments
Foreign exchange loss, - 2,223 19
net
Other 5,244 7,342 62
------ ------ ------
12,615 17,719 150
Income before income 149,225 225,906 +51.4 1,914
taxes
Income taxes 7,017 75,749 641
------ ------ ------
Income before minority 142,208 150,157 +5.6 1,273
interest and equity
in net income of
affiliated companies
Minority interest in 728 715 6
income of consolidated
subsidiaries
Equity in net income 2,334 19,502 165
of affiliated
companies
------ ------ ------
Net income Y143,814 Y168,944 +17.5 $1,432
------ ------ ------
Per share data:
Common stock
Net income
- Basic Y155.32 Y169.36 +9.0 $1.44
- Diluted 138.08 161.60 +17.0 1.37
Subsidiary tracking
stock
Net income
- Basic * 27.29 - - -
* See Note 3.
(Millions of yen, millions of U.S. dollars, except per share amounts)
Nine months ended December 31
2004 2005 Change 2005
------ ------ ------ ------
Sales and operating %
revenue:
Net sales Y5,035,823 Y5,080,764 $43,057
Financial service 386,828 503,277 4,265
revenue
Other operating 39,944 45,950 390
revenue
------ ------ ------
5,462,595 5,629,991 +3.1 47,712
Costs and expenses:
Cost of sales 3,776,754 3,850,900 32,635
Selling, general and 1,131,889 1,097,032 9,297
administrative
Financial service 348,119 394,202 3,341
expenses
Loss on sale, disposal 14,501 34,401 291
or impairment of
assets, net
------ ------ ------
5,271,263 5,376,535 45,564
Operating income 191,332 253,456 +32.5 2,148
Other income:
Interest and dividends 10,517 17,476 148
Royalty income 22,017 24,862 211
Gain on sale of 5,451 8,847 75
securities
investments, net
Gain on change in interest 15,107 57,477 487
in subsidiaries and equity
investees
Other 18,607 16,080 136
------ ------ ------
71,699 124,742 1,057
Other expenses:
Interest 21,823 19,964 169
Loss on devaluation of 2,419 3,115 26
securities investments
Foreign exchange loss, 553 3,289 28
net
Other 19,136 17,638 150
------ ------ ------
43,931 44,006 373
Income before income 219,100 334,192 +52.5 2,832
taxes
Income taxes 21,378 152,943 1,296
------ ------ ------
Income before minority 197,722 181,249 -8.3 1,536
interest, equity in net
income of affiliated
companies and cumulative
effect of an accounting
change
Minority interest in 1,300 (1,093) (9)
income (loss) of
consolidated
subsidiaries
Equity in net income 28,579 7,807 66
of affiliated
companies
Income before cumulative 225,001 190,149 -15.5 1,611
effect of an accounting
change
Cumulative effect of (4,713) - -
an accounting change
(2004: Net of income
taxes of Y2,675
million)
------ ------ ------
Net income Y220,288 Y190,149 -13.7 $1,611
------ ------ ------
Per share data:
Common stock
Income before cumulative
effect of an accounting
change
- Basic Y243.04 Y- - $-
- Diluted 216.87 - - -
Net income
- Basic 237.95 189.45 -20.4 1.61
- Diluted 212.36 180.76 -14.9 1.53
Subsidiary tracking
stock
Net income
- Basic * 45.41 - - -
* See Note 3.
Consolidated Balance Sheets (Unaudited)
---------------------------------------
(Millions of yen, millions of U.S. dollars)
December March December December
31 31 31 31
ASSETS 2004 2005 2005 2005
------ ------ ------ ------
Current assets:
Cash and cash Y575,341 Y779,103 Y615,072 $5,212
equivalents
Time deposits 2,485 1,492 1,830 16
Marketable securities 540,177 460,202 527,689 4,472
Notes and accounts 1,383,540 1,113,071 1,448,520 12,276
receivable, trade
Allowance for (97,979) (87,709) (100,516) (852)
doubtful accounts
and sales returns
Inventories 653,790 631,349 751,545 6,369
Deferred income 121,938 141,154 177,123 1,501
taxes
Prepaid expenses and 489,047 517,509 568,831 4,820
other current assets
------ ------ ------ ------
3,668,339 3,556,171 3,990,094 33,814
Film costs 263,157 278,961 371,895 3,152
Investments and
advances:
Affiliated companies 262,287 252,905 299,996 2,542
Securities 2,501,026 2,492,784 3,083,230 26,129
investments and
other
------ ------ ------ ------
2,763,313 2,745,689 3,383,226 28,671
Property, plant
and equipment:
Land 182,133 182,900 182,297 1,545
Buildings 912,906 925,796 954,464 8,089
Machinery and 2,102,492 2,192,038 2,370,265 20,087
equipment
Construction in 141,645 92,611 76,774 651
progress
Less-Accumulated (1,978,404) (2,020,946) (2,202,122) (18,663)
depreciation
------ ------ ------ ------
1,360,772 1,372,399 1,381,678 11,709
Other assets:
Intangibles, net 209,385 187,024 194,959 1,652
Goodwill 270,645 283,923 296,601 2,514
Deferred insurance 373,288 374,805 389,933 3,305
acquisition costs
Deferred income 224,694 240,396 183,349 1,554
taxes
Other 465,869 459,732 474,700 4,023
------ ------ ------ ------
1,543,881 1,545,880 1,539,542 13,048
------ ------ ------ ------
Y9,599,462 Y9,499,100 Y10,666,435 $90,394
------ ------ ------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term Y207,504 Y63,396 Y198,969 $1,686
borrowings
Current portion 450,305 166,870 200,763 1,701
of long-term debt
Notes and accounts 848,643 806,044 925,997 7,847
payable, trade
Accounts payable, 771,552 746,466 828,850 7,024
other and accrued
expenses
Accrued income 79,282 55,651 93,721 794
and other taxes
Deposits from 512,800 546,718 601,446 5,097
customers in the
banking business
Other 408,991 424,223 487,502 4,133
------ ------ ------ ------
3,279,077 2,809,368 3,337,248 28,282
Long-term liabilities:
Long-term debt 637,063 678,992 650,514 5,513
Accrued pension and 328,562 352,402 222,834 1,888
severance costs
Deferred income 66,949 72,227 193,193 1,637
taxes
Future insurance 2,383,749 2,464,295 2,680,265 22,714
policy benefits
and other
Other 242,628 227,631 248,953 2,110
------ ------ ------ ------
3,658,951 3,795,547 3,995,759 33,862
Minority interest 24,140 23,847 37,014 314
in consolidated
subsidiaries
Stockholders' equity:
Capital stock 480,348 621,709 621,775 5,269
Additional paid-in 992,556 1,134,222 1,134,289 9,613
capital
Retained earnings 1,575,526 1,506,082 1,681,691 14,252
Accumulated other (405,232) (385,675) (138,330) (1,172)
comprehensive
income
Treasury stock, (5,904) (6,000) (3,011) (26)
at cost
------ ------ ------ ------
2,637,294 2,870,338 3,296,414 27,936
------ ------ ------ ------
Y9,599,462 Y9,499,100 Y10,666,435 $90,394
------ ------ ------ ------
Consolidated Statements of Cash Flows (Unaudited)
-------------------------------------------------
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
2004 2005 2005
------ ------ ------
Cash flows from operating
activities:
Net income Y220,288 Y190,149 $1,611
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and 268,740 278,259 2,358
amortization, including
amortization of
deferred insurance
acquisition costs
Amortization of film costs 206,925 190,603 1,615
Accrual for pension and 14,475 (4,146) (35)
severance costs, less
payments
Gain on the transfer to the - (73,472) (623)
Japanese Government of the
substitutional portion
of employee pension fund
Loss on sale, disposal or 14,501 34,401 291
impairment of assets, net
Gain on sale or loss on (3,032) (5,732) (49)
devaluation of securities
investments, net
Gain on change in interest in (15,107) (57,477) (487)
subsidiaries and equity
investees
Deferred income taxes (57,349) 80,709 684
Equity in net income of (27,851) (4,160) (35)
affiliated companies, net of
dividends
Cumulative effect of an 4,713 - -
accounting change
Changes in assets and
liabilities:
Increase in notes and (288,539) (325,032) (2,754)
accounts receivable, trade
(Increase) Decrease in 5,099 (90,694) (769)
inventories
Increase in film costs (217,185) (251,836) (2,134)
Increase in notes and 77,125 104,058 882
accounts payable, trade
Increase in accrued income 23,073 27,061 229
and other taxes
Increase in future insurance 100,665 110,014 932
policy benefits and other
Increase in deferred (48,882) (47,667) (404)
insurance acquisition costs
Increase in marketable (23,138) (29,896) (253)
securities held in the
financial service
business for trading purpose
Increase in other current (59,213) (66,110) (560)
assets
Increase in other current 96,528 101,471 860
liabilities
Other 47,009 (36,241) (306)
------ ------ ------
Net cash provided by 338,845 124,262 1,053
operating activities
------ ------ ------
Cash flows from investing
activities:
Payments for purchases of fixed (345,073) (326,200) (2,765)
assets
Proceeds from sales of fixed 27,504 11,632 99
assets
Payments for investments and (998,760) (1,061,286) (8,994)
advances by financial service
business
Payments for investments and (143,382) (20,944) (177)
advances (other than financial
service business)
Proceeds from maturities of 573,218 722,132 6,120
marketable securities, sales of
securities investments and
collections of advances by
financial service business
Proceeds from maturities of 22,534 22,202 188
marketable securities, sales of
securities investments and
collections of advances (other
than financial service business)
Proceeds from sales of 3,162 72,045 611
subsidiaries' and equity
investees' stocks
Other 1,709 (198) (2)
------ ------ ------
Net cash used in investing (859,088) (580,617) (4,920)
activities
------ ------ ------
Cash flows from financing
activities:
Proceeds from issuance of 10,286 127,653 1,082
long-term debt
Payments of long-term debt (86,516) (132,776) (1,125)
Increase in short-term 64,356 73,731 625
borrowings
Increase in deposits from 222,735 160,348 1,359
customers in the financial
service business
Increase in call money and 53,012 52,800 447
bills sold in the banking
business
Dividends paid (23,049) (24,853) (211)
Proceeds from issuance of 3,463 6,937 59
stocks by subsidiaries
Other (2,395) 245 2
------ ------ ------
Net cash provided by 241,892 264,085 2,238
financing activities
------ ------ ------
Effect of exchange rate changes 4,481 28,239 238
on cash and cash equivalents
------ ------ ------
Net decrease in cash and cash (273,870) (164,031) (1,391)
equivalents
Cash and cash equivalents at 849,211 779,103 6,603
beginning of the fiscal year
------ ------ ------
Cash and cash equivalents at Y575,341 Y615,072 $5,212
December 31
------ ------ ------
(Notes)
1. U.S. dollar amounts have been translated from yen, for
convenience only, at the rate of Y118 = U.S. $1, the approximate
Tokyo foreign exchange market rate as of December 30, 2005.
2. As of December 31, 2005, Sony had 928 consolidated subsidiaries
(including variable interest entities). It has applied the equity
accounting method in respect to 56 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
subsidiary 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.
On October 26, 2005, the Board of Directors of Sony Corporation
decided to terminate all shares of subsidiary tracking stock with
the method of compulsory conversion to shares of Sony's common
stock. All shares of subsidiary tracking stock were converted to
shares of Sony's common stock on December 1, 2005. As a result of
the conversion, earnings per share of the subsidiary tracking
stock for the three months and nine months ended December 31, 2005
are not calculated. The earnings allocated to common stock for the
three months and nine months ended December 31, 2005 are
calculated by subtracting the earnings allocated to the subsidiary
tracking stock for the two months and eight months ended November
30, 2005, respectively.
Weighted-average number of outstanding shares used for computation
of earnings per share of common stock are as follows. The dilutive
effect in the weighted-average number of outstanding shares for
the three months and nine months ended December 31, 2004 and 2005
mainly resulted from convertible bonds.
Weighted-average number (Thousands of shares)
of outstanding shares Three months ended December 31
----------------------- 2004 2005
Net income ------ ------
- Basic 925,368 997,683
- Diluted 1,045,178 1,045,558
Weighted-average number (Thousands of shares)
of outstanding shares Nine months ended December 31
----------------------- 2004 2005
------ ------
Income before cumulative
effect of an accounting
change and net income
- Basic 925,183 996,764
- Diluted 1,045,037 1,044,546
Weighted-average number of outstanding shares used for computation
of earnings per share of the subsidiary tracking stock for the
three months and nine months ended December 31, 2004 are 3,072
thousand shares. 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 nine months ended December 31, 2004 and 2005
were as follows:
(Millions of yen, millions of U.S. dollars)
Three months ended Nine months ended
December 31 December 31
------ ------ ------ ------ ------ ------
2004 2005 2005 2004 2005 2005
---------- ------ ------ ------ ------ ------ ------
Net income Y143,814 Y168,944 $1,432 Y220,288 Y190,149 $1,611
Other
comprehensive
income:
Unrealized (1,779) 49,614 420 (14,293) 82,588 700
gains
(losses) on
securities
Unrealized 2,532 272 2 119 1,004 9
gains
(losses) on
derivative
instruments
Minimum 7,582 (3) (0) 28,535 31,429 266
pension
liabilities
adjustments
Foreign (56,100) 78,443 665 30,366 132,324 1,121
currency
translation
adjustments
------ ------ ------ ------ ------ ------
(47,765) 128,326 1,087 44,727 247,345 2,096
---------- ------ ------ ------ ------ ------ ------
Comprehensive Y96,049 Y297,270 $2,519 Y265,015 Y437,494 $3,707
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, 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 New Product Category
Category
----------- ---------------- --------------------
Professional-use "Televisions" -> "Information and
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 nine months ended December
31, 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 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 December 31
2004 2005 Change 2005
------ ------ ------ ------
Capital expenditures Y78,700 Y76,139 -3.3% $645
(additions to property,
plant and equipment)
Depreciation and 92,036 96,843 +5.2 821
amortization expenses*
(Depreciation expenses for (75,594) (79,780) +5.5 (676)
tangible assets)
R&D expenses 119,430 121,668 +1.9 1,031
Nine months ended December 31
2004 2005 Change 2005
------ ------ ------ ------
Capital expenditures Y256,822 Y261,920 +2.0% $2,220
(additions to property,
plant and equipment)
Depreciation and 268,740 278,259 +3.5 2,358
amortization expenses*
(Depreciation expenses (217,080) (226,506) +4.3 (1,920)
for tangible assets)
R&D expenses 370,030 371,425 +0.4 3,148
* 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
------------------------------
Financial Services (Millions of yen, millions of U.S. dollars)
Three months ended December 31
2004 2005 Change 2005
------ ------ ------ ------
%
Financial service Y144,962 Y190,392 +31.3 $1,613
revenue
Financial service 131,058 143,344 +9.4 1,214
expenses
------ ------ ------
Operating income 13,904 47,048 +238.4 399
Other income (expenses), 861 1,412 +64.0 12
net
------ ------ ------
Income before income 14,765 48,460 +228.2 411
taxes
Income taxes and other 5,399 17,539 +224.9 149
------ ------ ------
Net income Y9,366 Y30,921 +230.1 $262
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without Three months ended December 31
Financial Services 2004 2005 Change 2005
------ ------ ------ ------
%
Net sales and Y2,012,140 Y2,184,904 +8.6 $18,516
operating revenue
Costs and 1,888,195 2,029,297 +7.5 17,197
expenses
------ ------ ------
Operating income 123,945 155,607 +25.5 1,319
Other income 10,516 21,840 +107.7 185
(expenses), net
------ ------ ------
Income before 134,461 177,447 +32.0 1,504
income taxes
Income taxes and 13 39,424 +303,161.5 334
other
------ ------ ------
Net income Y134,448 Y138,023 +2.7 $1,170
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated Three months ended December 31
2004 2005 Change 2005
------ ------ ------ ------
%
Financial service Y139,479 Y184,586 +32.3 $1,564
revenue
Net sales and 2,008,706 2,182,976 +8.7 18,500
operating revenue
------ ------ ------
2,148,185 2,367,562 +10.2 20,064
Costs and expenses 2,010,012 2,164,741 +7.7 18,345
------ ------ ------
Operating income 138,173 202,821 +46.8 1,719
Other income 11,052 23,085 +108.9 195
(expenses), net
------ ------ ------
Income before income 149,225 225,906 +51.4 1,914
taxes
Income taxes and other 5,411 56,962 +952.7 482
------ ------ ------
Net income Y143,814 Y168,944 +17.5 $1,432
------ ------ ------
Condensed Statements of Income
------------------------------
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Financial Services 2004 2005 Change 2005
%
------ ------ ------ ------
Financial service Y404,448 Y520,088 +28.6 $4,408
revenue
Financial service 365,260 411,071 +12.5 3,484
expenses
------ ------ ------
Operating income 39,188 109,017 +178.2 924
Other income (expenses), 9,754 24,646 +152.7 209
net
------ ------ ------
Income before income 48,942 133,663 +173.1 1,133
taxes
Income taxes and other 18,857 50,827 +169.5 431
------ ------ ------
Income before cumulative 30,085 82,836 +175.3 702
effect of an accounting
change
Cumulative effect of an (4,713) - - -
accounting change
------ ------ ------
Net income Y25,372 Y82,836 +226.5 $702
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without Nine months ended December 31
Financial Services 2004 2005 Change 2005
------ ------ ------ ------
%
Net sales and Y5,083,519 Y5,132,822 +1.0 $43,498
operating revenue
Costs and expenses 4,931,856 4,989,458 +1.2 42,283
------ ------ ------
Operating income 151,663 143,364 -5.5 1,215
Other income 24,995 57,035 +128.2 483
(expenses), net
------ ------ ------
Income before income 176,658 200,399 +13.4 1,698
taxes
Income taxes and other (24,758) 93,216 - 790
------ ------ ------
Net income Y201,416 Y107,183 -46.8 $908
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated Nine months ended December 31
2004 2005 Change 2005
------ ------ ------ ------
%
Financial service Y386,828 Y503,277 +30.1 $4,265
revenue
Net sales and 5,075,767 5,126,714 +1.0 43,447
operating revenue
------ ------ ------
5,462,595 5,629,991 +3.1 47,712
Costs and expenses 5,271,263 5,376,535 +2.0 45,564
------ ------ ------
Operating income 191,332 253,456 +32.5 2,148
Other income 27,768 80,736 +190.8 684
(expenses), net
------ ------ ------
Income before income 219,100 334,192 +52.5 2,832
taxes
Income taxes and other (5,901) 144,043 - 1,221
------ ------ ------
Income before 225,001 190,149 -15.5 1,611
cumulative effect of
an accounting change
Cumulative effect of (4,713) - - -
an accounting change
------ ------ ------
Net income Y220,288 Y190,149 -13.7 $1,611
------ ------ ------
Condensed Balance Sheet
-----------------------
(Millions of yen, millions of U.S. dollars)
Financial Services December March December December
31 31 31 31
ASSETS 2004 2005 2005 2005
------ ------ ------ ------
Current assets:
Cash and cash Y197,245 Y259,371 Y176,411 $1,495
equivalents
Marketable 536,099 456,130 523,612 4,437
securities
Other 207,810 274,690 206,092 1,747
------ ------ ------ ------
941,154 990,191 906,115 7,679
Investments and 2,383,676 2,378,966 2,962,820 25,109
advances
Property, plant and 38,686 38,551 36,339 308
equipment
Other assets:
Deferred insurance 373,288 374,805 389,933 3,305
acquisition costs
Other 103,539 103,004 141,837 1,201
------ ------ ------ ------
476,827 477,809 531,770 4,506
------ ------ ------ ------
Y3,840,343 Y3,885,517 Y4,437,044 $37,602
------ ------ ------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term Y141,777 Y45,358 Y94,848 $804
borrowings
Notes and accounts 8,747 7,099 12,142 103
payable, trade
Deposits from 512,800 546,718 601,446 5,097
customers in the
banking business
Other 108,416 109,438 128,119 1,085
------ ------ ------ ------
771,740 708,613 836,555 7,089
Long-term liabilities:
Long-term debt 136,472 135,750 134,785 1,142
Accrued pension and 11,518 14,362 13,614 115
severance costs
Future insurance 2,383,749 2,464,295 2,680,265 22,714
policy benefits
and other
Other 135,749 142,272 192,240 1,631
------ ------ ------ ------
2,667,488 2,756,679 3,020,904 25,602
Minority interest in 5,560 5,476 4,054 34
consolidated
subsidiaries
Stockholders' equity 395,555 414,749 575,531 4,877
------ ------ ------ ------
Y3,840,343 Y3,885,517 Y4,437,044 $37,602
------ ------ ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without December March December December
Financial Services 31 31 31 31
ASSETS 2004 2005 2005 2005
------ ------ ------ ------
Current assets:
Cash and cash Y378,096 Y519,732 Y438,661 $3,717
equivalents
Marketable 4,078 4,072 4,077 35
securities
Notes and accounts 1,212,422 952,692 1,337,504 11,335
receivable, trade
Other 1,156,326 1,116,353 1,334,372 11,308
------ ------ ------ ------
2,750,922 2,592,849 3,114,614 26,395
Film costs 263,157 278,961 371,895 3,152
Investments and 504,131 445,446 502,252 4,256
advances
Investments in 187,400 187,400 187,400 1,588
Financial Services, at
cost
Property, plant and 1,322,086 1,333,848 1,345,339 11,401
equipment
Other assets 1,183,216 1,189,398 1,083,003 9,178
------ ------ ------ ------
Y6,210,912 Y6,027,902 Y6,604,503 $55,970
------ ------ ------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term Y537,924 Y204,027 Y321,783 $2,727
borrowings
Notes and accounts 842,852 801,252 916,700 7,769
payable, trade
Other 1,160,417 1,132,201 1,296,755 10,989
------ ------ ------ ------
2,541,193 2,137,480 2,535,238 21,485
Long-term liabilities:
Long-term debt 630,981 627,367 595,784 5,049
Accrued pension and 317,044 338,040 209,220 1,773
severance costs
Other 273,839 263,520 323,070 2,738
------ ------ ------ ------
1,221,864 1,228,927 1,128,074 9,560
Minority interest in 18,680 18,471 32,571 276
consolidated
subsidiaries
Stockholders' equity 2,429,175 2,643,024 2,908,620 24,649
------ ------ ------ ------
Y6,210,912 Y6,027,902 Y6,604,503 $55,970
------ ------ ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated December March December December
31 31 31 31
ASSETS 2004 2005 2005 2005
------ ------ ------ ------
Current assets:
Cash and cash Y575,341 Y779,103 Y615,072 $5,212
equivalents
Marketable 540,177 460,202 527,689 4,472
securities
Notes and accounts 1,285,561 1,025,362 1,348,004 11,424
receivable, trade
Other 1,267,260 1,291,504 1,499,329 12,706
------ ------ ------ ------
3,668,339 3,556,171 3,990,094 33,814
Film costs 263,157 278,961 371,895 3,152
Investments and 2,763,313 2,745,689 3,383,226 28,671
advances
Property, plant and 1,360,772 1,372,399 1,381,678 11,709
equipment
Other assets:
Deferred insurance 373,288 374,805 389,933 3,305
acquisition costs
Other 1,170,593 1,171,075 1,149,609 9,743
------ ------ ------ ------
1,543,881 1,545,880 1,539,542 13,048
------ ------ ------ ------
Y9,599,462 Y9,499,100 Y10,666,435 $90,394
------ ------ ------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term Y657,809 Y230,266 Y399,732 $3,388
borrowings
Notes and accounts 848,643 806,044 925,997 7,847
payable, trade
Deposits from 512,800 546,718 601,446 5,097
customers in the
banking business
Other 1,259,825 1,226,340 1,410,073 11,950
------ ------ ------ ------
3,279,077 2,809,368 3,337,248 28,282
Long-term liabilities:
Long-term debt 637,063 678,992 650,514 5,513
Accrued pension 328,562 352,402 222,834 1,888
and severance
costs
Future insurance 2,383,749 2,464,295 2,680,265 22,714
policy benefits
and other
Other 309,577 299,858 442,146 3,747
------ ------ ------ ------
3,658,951 3,795,547 3,995,759 33,862
Minority interest in 24,140 23,847 37,014 314
consolidated
subsidiaries
Stockholders' equity 2,637,294 2,870,338 3,296,414 27,936
------ ------ ------ ------
Y9,599,462 Y9,499,100 Y10,666,435 $90,394
------ ------ ------ ------
Condensed Statements of Cash Flows
----------------------------------
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Financial Services 2004 2005 2005
------ ------ ------
Net cash provided by operating Y114,487 Y78,296 $664
activities
Net cash used in investing (455,219) (369,939) (3,135)
activities
Net cash provided by financing 281,661 208,683 1,768
activities ------ ------ ------
Net decrease in cash and cash (59,071) (82,960) (703)
equivalents
Cash and cash equivalents at 256,316 259,371 2,198
beginning of the fiscal year ------ ------ ------
Cash and cash equivalents at Y197,245 Y176,411 $1,495
December 31 ------ ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without Financial Nine months ended December 31
Services 2004 2005 2005
------ ------ ------
Net cash provided by operating Y230,785 Y45,207 $383
activities
Net cash used in investing (414,690) (205,433) (1,741)
activities
Net cash provided by (used in) (35,375) 50,916 432
financing activities
Effect of exchange rate changes on 4,481 28,239 238
cash and cash equivalents ------ ------ ------
Net decrease in cash and cash (214,799) (81,071) (688)
equivalents
Cash and cash equivalents at 592,895 519,732 4,405
beginning of the fiscal year ------ ------ ------
Cash and cash equivalents at Y378,096 Y438,661 $3,717
December 31 ------ ------ ------
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Consolidated 2004 2005 2005
------ ------ ------
Net cash provided by operating Y338,845 Y124,262 $1,053
activities
Net cash used in investing (859,088) (580,617) (4,920)
activities
Net cash provided by financing 241,892 264,085 2,238
activities
Effect of exchange rate changes on 4,481 28,239 238
cash and cash equivalents ------ ------ ------
Net decrease in cash and cash (273,870) (164,031) (1,391)
equivalents
Cash and cash equivalents at 849,211 779,103 6,603
beginning of the fiscal year ------ ------ ------
Cash and cash equivalents at Y575,341 Y615,072 $5,212
December 31 ------ ------ ------
Investor Relations Contacts:
----------------------------
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