-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TKoihVrX4BkT7uXA0UR+ADpe9q4NG4yo4eYbFshnAGeBHaanXYlX6B3ZcPqU7D2B Hizs3WZzcgQLGi1C00i9GQ== 0001191638-06-001786.txt : 20060727 0001191638-06-001786.hdr.sgml : 20060727 20060727061701 ACCESSION NUMBER: 0001191638-06-001786 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20060727 FILED AS OF DATE: 20060727 DATE AS OF CHANGE: 20060727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONY CORP CENTRAL INDEX KEY: 0000313838 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 000000000 STATE OF INCORPORATION: M0 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06439 FILM NUMBER: 06982843 BUSINESS ADDRESS: STREET 1: 7-35 KITASHINAGAWA STREET 2: 6-CHOME SHINAGAWA-KU CITY: TOKYO 141 JAPAN STATE: M0 BUSINESS PHONE: 0354482180 MAIL ADDRESS: STREET 1: 7-35 KITASHINAGAWA STREET 2: 6-CHOME, SHINAGAWA-KU CITY: TOKYO 141 JAPAN STATE: M0 6-K 1 son200607276k.txt 1ST QUARTER RESULTS 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 July 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: July 27, 2006 List of materials Documents attached hereto: i)Press release announcing Consolidated Financial Results for the First Quarter Ended June 30, 2006 Sony Corporation 6-7-35 Kitashinagawa Shinagawa-ku Tokyo 141-0001 Japan News & Information No: 06-063E 3:00 P.M. JST, July 27, 2006 Consolidated Financial Results for the First Quarter Ended June 30, 2006 Tokyo, July 27, 2006 -- Sony Corporation today announced its consolidated results for the first quarter of the fiscal year ending March 31, 2007 (April 1, 2006 to June 30, 2006).
(Billions of yen, millions of U.S. dollars, except per share amounts) First quarter ended June 30 2005 2006 Change 2006* in Yen - ---------- ------ ------ ------ ------ Sales and operating Y1,568.1 Y1,744.2 +11.2% $15,167 revenue** Operating income (loss) (6.6) 27.0 - 235 Income before income 12.9 54.0 +318.7 470 taxes Equity in net income (9.1) 3.6 - 32 (loss) of affiliated companies Net income (loss) (7.3) 32.3 - 281 Net income (loss) per share of common stock - Basic (Y8.68) Y32.25 - $0.28 - Diluted (8.68) 30.75 - 0.27
Unless otherwise specified, all amounts are on the basis of Generally Accepted Accounting Principles in the U.S. ("U.S. GAAP"). * U.S. dollar amounts have been translated from yen, for convenience only, at the rate of Y115=U.S.$1, the approximate Tokyo foreign exchange market rate as of June 30, 2006. ** Effective the first quarter of the fiscal year ending March 31, 2007, Sony reclassified royalty income as a component of sales and operating revenue, rather than as a component of other income as previously recorded. In connection with this reclassification, sales and operating revenue, operating income (loss) and other income for the first quarter of the fiscal year ended March 31, 2006 have been reclassified to conform with the presentation of these items for the first quarter of the fiscal year ending March 31, 2007. Royalty income for the first quarters ended June 30, 2005 and 2006 was Y8.7 billion and Y8.6 billion, respectively. These amounts were recorded primarily within the Electronics segment. Consolidated Results for the First Quarter Ended June 30, 2006 - -------------------------------------------------------------- Sales and operating revenue ("sales") increased 11.2% compared with the same quarter of the previous fiscal year; on a local currency basis sales increased 6%. (For all references herein to results on a local currency basis, see Note I.) Sales within the Electronics segment increased 13.5%. Products such as BRAVIA TM LCD televisions contributed to the sales increase, although there was a decline in sales of such products as CRT and plasma televisions. In the Game segment, sales decreased 29.1% compared to the same quarter of the previous fiscal year primarily as a result of a decrease in hardware unit sales of PlayStation(R)2 ("PS2") and PSP(R) (PlayStation(R) Portable) ("PSP"), as well as a decrease in PS2 software sales. In the Pictures segment, there was a 41.8% increase in revenue mainly due to the success of The Da Vinci Code. In the Financial Services segment, revenue decreased by 19.3% mainly due to a decrease in valuation gains in the general account and the separate account at Sony Life Insurance Co., Ltd. ("Sony Life"). Operating income of Y27.0 billion ($235 million) was recorded, an improvement of Y33.6 billion compared to the operating loss recorded in the same quarter of the previous fiscal year. In the Electronics segment, there was a significant improvement compared to the operating loss recorded in the same quarter of the previous fiscal year and operating income was recorded. This was principally a result of an improvement in the cost of sales ratio and a sales increase of such products as BRAVIA LCD televisions, coupled with favorable exchange rates. In the Game segment, although combined profit from the PS2 and PSP businesses was relatively unchanged, operating loss increased primarily as the result of the recording of charges associated with preparation for the launch of the PLAYSTATION(R)3 ("PS3") platform, in addition to continued high research and development costs associated with PS3. In the Pictures segment, an operating loss was recorded primarily as a result of higher marketing costs incurred for upcoming second quarter theatrical releases and lower contributions during the current quarter from the prior fiscal year film slate. In the Financial Services segment, there was a decrease in operating income mainly attributable to the decrease in valuation gains in the general account at Sony Life. Restructuring charges, which are recorded as operating expenses, amounted to Y10.7 billion ($93 million) for the quarter compared to Y15.9 billion for the same quarter of the previous fiscal year. In the Electronics segment, restructuring charges were Y10.1 billion ($88 million) compared to Y15.5 billion in the same quarter of the previous fiscal year. Income before income taxes increased to Y54.0 billion ($470 million), compared to Y12.9 billion in the same quarter of the previous year, as a result of an improvement in the net effect of other income and expenses, in addition to the significant improvement in operating income (loss). The net effect of other income and expenses improved principally due to the recording of a foreign exchange gain, net, compared to the foreign exchange loss, net, recorded in the same quarter of the previous fiscal year, as well as an increase in gain on sales of securities investments, net. With regard to the gain on change in interest in subsidiaries and equity investees, a gain of Y18.0 billion ($157 million) was recorded during the current quarter resulting from the transfer of 51% of the stock in StylingLife Holdings Inc. ("StylingLife"), a holding company that comprised six of Sony's retail businesses, to a wholly-owned subsidiary of Nikko Principal Investments Japan Ltd. However, despite this transaction, gain on change in interest in subsidiaries and equity investees remained relatively unchanged compared to the same quarter of the previous fiscal year, as a Y17.9 billion gain on change in interest in subsidiaries and equity investees from the sales of a portion of the stock in So-Net M3 Inc., a consolidated subsidiary of Sony Communication Network Corporation ("SCN"), and in DeNA Co., Ltd., an equity affiliate of SCN, was recorded in the same quarter of the previous fiscal year. Income taxes: During the current quarter, the effective tax rate was 45.8% compared to an effective tax rate of 93.4% in the same quarter of previous year. The effective tax rate of the same quarter of previous year exceeded the Japanese statutory tax rate due primarily to the recording of valuation allowances against deferred tax assets by several of Sony's Japanese and overseas consolidated subsidiaries. Equity in net income of affiliated companies of Y3.6 billion ($32 million) was recorded, an improvement of Y12.7 billion from the equity in net loss recorded in the same quarter of the previous fiscal year. S-LCD Corporation, a joint-venture with Samsung Electronics Co., Ltd., for the manufacture of amorphous TFT LCD panels, contributed Y3.4 billion ($30 million) to equity in net income before the elimination of unrealized intercompany profits as a result of a significant increase in LCD panel shipments, an improvement of Y11.0 billion compared to the same quarter of the previous fiscal year. Sony recorded equity in net income for Sony Ericsson Mobile Communications AB ("Sony Ericsson") of Y10.2 billion ($89 million), an increase of Y5.6 billion compared to the same quarter of the previous year. An equity in net loss of Y4.6 billion ($40 million) was recorded by Sony for SONY BMG MUSIC ENTERTAINMENT ("SONY BMG"), an increase in the amount of equity loss of Y3.6 billion compared to the same quarter of the previous fiscal year, primarily due to lower sales stemming from the change in timing of several key releases into the second half of the calendar year. Sony also recorded equity in net loss of approximately Y2.6 billion ($22 million) for Metro-Goldwyn-Mayer Inc. ("MGM")*, an improvement of Y3.9 billion compared to the same quarter of the previous fiscal year. The equity in net loss for MGM includes non-cash interest of Y1.6 billion ($14 million) on cumulative preferred stock, compared to the Y1.2 billion of non-cash interest on cumulative preferred stock recorded in the same quarter of the previous fiscal year. *On April 8, 2005, a consortium led by Sony Corporation of America and its equity partners completed the acquisition of MGM. As part of the acquisition, Sony invested $257 million in exchange for 20% of the total equity. However, based on the percentage of common stock owned, Sony records 45% of MGM's net income (loss) as equity in net income (loss) of affiliated companies. As a result, net income of Y32.3 billion ($281 million) was recorded, an improvement of Y39.6 billion compared to the net loss recorded in the same quarter of the previous fiscal year. Operating Performance Highlights by Business Segment - ----------------------------------------------------
Electronics - ----------- (Billions of yen, millions of U.S. dollars) First quarter ended June 30 2005 2006 Change in 2006 Yen - ---------- ------ ------ ------ ------ Sales and operating Y1,128.4 Y1,280.9 +13.5% $11,138 revenue Operating income (26.7) 47.4 - 412 (loss)
Unless otherwise specified, all amounts are on a U.S. GAAP basis. Sales increased by 13.5% compared to the same quarter of the previous fiscal year (a 8% increase on a local currency basis). Sales to outside customers increased 19% compared to the same quarter of the previous fiscal year. There was an increase in sales of products including BRAVIA LCD televisions, which experienced favorable sales in all regions, Cyber-shot TM digital cameras and "VAIO" PCs, where favorable sales of notebook PCs were recorded. On the other hand, there was a decrease in sales of several products including CRT and plasma televisions. CRT televisions experienced a continued shift in demand towards flat panel televisions and new product development of plasma televisions has been terminated. Operating income of Y47.4 billion ($412 million) was recorded, an improvement of Y74.1 billion compared with the Y26.7 billion operating loss recorded in the same quarter of the previous fiscal year. This was primarily the result of an improvement in the cost of sales ratio, an increase in sales to outside customers, as well as favorable foreign exchange rates, although this was partially offset by an increase in loss on sale, disposal or impairment of fixed assets. With regard to products within the Electronics segment, the improvement was mainly attributable to strong sales of Cyber-shot digital cameras and BRAVIA LCD televisions, as well has "Handycam(R)" video cameras, which experienced increased sales of high value-added models, and broadcast-use equipment, which experienced strong sales of high definition broadcast production equipment. Other products which contributed positively included CRT televisions, where fixed costs have been lowered as a result of previous restructuring activities. This was partially offset by a decrease in contribution from other products including system LSIs, where sales of semiconductors to the Game segment decreased. Inventory, as of June 30, 2006, was Y807.6 billion ($7,023 million), which represents a Y233.3 billion, or 40.6%, increase compared with the level as of June 30, 2005 and a Y141.8 billion, or 21.3%, increase compared with the level as of March 31, 2006. This increase was primarily a result of increased LCD television inventory in connection with the expansion of Sony's LCD television business and increased semiconductor inventory in preparation for the PS3 launch. 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 2,272 million, representing a year-on-year increase of Euro 658 million, or 41%. Income before taxes was Euro 211 million and net income was Euro 143 million, representing year-on-year increases of Euro 124 million, and Euro 68 million, respectively. Results were boosted by sales of hit models such as "Walkman(R)" phones and camera phones. As a result, equity in net income of Y10.2 billion ($89 million) was recorded by Sony.
Game - ---- (Billions of yen, millions of U.S. dollars) First quarter ended June 30 2005 2006 Change in 2006 Yen - ---------- ------ ------ ------ ------ Sales and operating Y172.8 Y122.5 -29.1% $1,065 revenue Operating loss (5.9) (26.8) - (233)
Unless otherwise specified, all amounts are on a U.S. GAAP basis. Sales decreased 29.1% compared with the same quarter of the previous fiscal year (a 32% decrease on a local currency basis). Hardware: There was a decrease in sales as a result of lower PS2 and PSP unit sales compared to the same quarter of the previous fiscal year when there was continued strong demand for the new PS2 model. On a regional basis, sales increased in Europe, but decreased in Japan and the U.S. Software: Although sales from PSP software increased compared to the same quarter of the previous fiscal year, overall software sales decreased in Japan, the U.S. and Europe mainly as a result of a decrease in sales from PS2 software. The amount of operating loss increased by Y20.9 billion compared with the same quarter of the previous fiscal year. This deterioration was due primarily to the recording of charges associated with preparation for the launch of the PS3 platform, in addition to continued high research and development costs associated with PS3, although combined profit from the PS2 and PSP businesses was relatively unchanged. Worldwide hardware production shipments:* -> PS2: 2.54 million units (a decrease of 0.99 million units) -> PSP: 2.02 million units (a decrease of 0.07 million units) Worldwide software production shipments:* -> PS2: 33 million units (a decrease of 2 million units) -> PSP: 9.1 million units (an increase of 4.2 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 June 30, 2006, was Y122.0 billion ($1,061 million), which represents a Y37.9 billion, or 45.1%, increase compared with the level as of June 30, 2005. This increase was primarily a result of the worldwide full-scale deployment of the PSP platform. Inventory, as of June 30, 2006, was a Y10.5 billion, or 9.4%, increase compared with the level as of March 31, 2006.
Pictures - -------- (Billions of yen, millions of U.S. dollars) First quarter ended June 30 2005 2006 Change in 2006 Yen - ---------- ------ ------ ------ ------ Sales and operating Y144.4 Y204.8 +41.8% $1,780 revenue Operating income (loss) 4.2 (1.2) - (10)
The results presented above are a yen-translation of the results of Sony Pictures Entertainment ("SPE"), a U.S. based operation which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis. Management analyzes the results of SPE in U.S. dollars, so discussion of certain portions of its results are specified as being on "a U.S. dollar basis." Sales increased 41.8% compared with the same quarter of the previous fiscal year (34% increase on a U.S dollar basis). Sales increased primarily due to the worldwide success of the theatrical release of The Da Vinci Code. Home entertainment revenues also increased due to higher DVD sales of acquired product including Hostel and Final Fantasy VII: Advent Children. Television product revenues increased due to higher advertising and subscription revenues from several international channels. An operating loss of Y1.2 billion ($10 million) was recorded as compared to operating income of Y4.2 billion in the same quarter of the previous fiscal year. Despite the sales increases noted above, compared to the prior fiscal year's first quarter, an operating loss was recorded primarily as a result of higher marketing costs incurred for upcoming second quarter theatrical releases. In addition, contributions during the current quarter from the prior fiscal year film slate were lower as compared to the same quarter of the previous fiscal year, which included the substantial contribution realized from the DVD release of Hitch. Television operating income declined due to production expenses incurred on new network series for the upcoming fall season partially offset by the higher international channel revenues noted above.
Financial Services - ------------------ (Billions of yen, millions of U.S. dollars) First quarter ended June 30 2005 2006 Change in 2006 Yen - ---------- ------ ------ ------ ------ Financial service Y153.8 Y124.1 -19.3% $1,079 revenue Operating income 21.9 4.6 -79.1 40
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 decreased 19.3% compared with the same quarter of the previous fiscal year, mainly due to a decrease in revenue at Sony Life. Revenue at Sony Life was Y98.1 billion ($853 million), a Y29.5 billion, or 23.1% decrease compared with the same quarter of the previous fiscal year. The main reason for this decrease was lower valuation gains in the general account and the separate account as a result of unfavorable Japanese stock market conditions. Operating income decreased by Y17.3 billion or 79.1% compared with the same quarter of the previous fiscal year, mainly as a result of a decrease in valuation gains in the general account at Sony Life. Although revenue from insurance premiums at Sony Life increased, operating income at Sony Life decreased by Y19.4 billion or 86.3% to Y3.1 billion ($27 million) mainly as a result of a significant decrease in valuation gains from convertible bonds held in the general account due to unfavorable Japanese stock market conditions.
All Other - --------- (Billions of yen, millions of U.S. dollars) First quarter ended June 30 2005 2006 Change 2006 in Yen - ---------- ------ ------ ------ ------ Sales and operating Y93.1 Y88.1 -5.3% $766 revenue Operating income 5.2 4.7 -9.6 41
Unless otherwise specified, all amounts are on a U.S. GAAP basis. Sales decreased 5.3% compared with the same quarter of the previous fiscal year. This sales decrease reflects the fact that, as a result of the transfer of 51% of the stock in StylingLife, a holding company that comprised six of Sony's retail businesses (see the explanation regarding "Income before income taxes"), the consolidated results for the first quarter within All Other only incorporate results for Sony's retail businesses for the first two months of the quarter through May 31, 2006, as well as a decline in sales at Sony Music Entertainment Japan ("SMEJ"). Sales decreased at SMEJ as a result of a decline in album and singles sales compared to the same quarter of the previous fiscal year. This decrease was attributable to the stronger performance of the previous fiscal year's first quarter releases which included THUMP X by PORNO GRAFFITTI. Best-selling albums and singles during the current quarter included HOME by Angela Aki, FAITH by HYDE and 1000000000000 by T.M. Revolution. Operating income of Y4.7 billion ($41 million) was recorded, representing a slight decline of Y0.5 billion compared with the same quarter of the previous fiscal year. This was principally a result of the lower sales recorded at SMEJ as noted above. 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 $872 million, a decrease of $147 million compared with the same period of the previous fiscal year, a loss before income taxes of $73 million, a deterioration of $50 million compared to the same quarter of the previous fiscal year, and a net loss of $81 million, a deterioration of $63 million compared with the same period of the previous fiscal year, during the quarter ended June 30, 2006. Loss before income taxes includes $47 million of restructuring charges, a decrease of $46 million year-on-year. This sales decrease and increased loss before income taxes was a result of a year-on-year decrease in unit sales primarily due to the change in timing of several key releases into the second half of the calendar year, and the continued decline in the overall market. As a result, equity in net loss of Y4.6 billion ($40 million) was recorded by Sony. Best selling albums during the quarter included the Dixie Chicks' Taking the Long Way and Tool's 10,000 Days. In August 2004, Sony combined its recorded music business outside of Japan with the recorded music business of Bertelsmann AG, forming SONY BMG, after approval from, among others, the European Commission competition authorities. On December 3, 2004, an association of independent recorded music companies applied for annulment of the decision to clear the merger. On July 13, 2006, the Court of First Instance overruled the Commission's decision to allow the merger to go forward, requiring the Commission to re-examine the merger. While the Commission completes its reexamination, Sony continues to account for the results of Sony BMG under the equity method. Cash Flow - --------- The following charts show Sony's unaudited condensed statements of cash flows on a consolidated basis 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 - Consolidated (excluding Financial Services segment) - --------------------------------------------------------------- (Billions of yen, millions of U.S. dollars) First quarter ended June 30 Cash flow 2005 2006 Change 2006 in Yen - ---------- ------ ------ ------ ------ - - From operating activities (Y97.3) (Y189.1) Y-91.8 ($1,644) - - From investing activities (70.4) (100.4) -30.0 (873) - - From financing activities (28.4) 95.8 +124.3 833 Cash and cash equivalents 519.7 585.5 +65.7 5,091 at beginning of the fiscal year Cash and cash equivalents 327.7 381.6 +53.9 3,318 as of June 30
Operating Activities: During the quarter ended June 30, 2006, although net income was recorded, cash flow from operating activities resulted in a net use of cash primarily as a result of an increase of LCD television inventory in connection with the expansion of Sony's LCD television business and semiconductor inventory for use in PS3, both within the Electronics segment. In addition, among other factors, there was also an increase in notes and accounts receivable, trade in connection with the increase in sales. Investing Activities: During the quarter ended June 30, 2006, although cash was generated from the transfer of 51% of the stock in StylingLife (see the explanation regarding "Income before income taxes"), cash was used by Sony within the Electronics segment primarily for the purchase of fixed assets, including semiconductor manufacturing equipment. As a result, the total amount of cash flow from operating activities and from investing activities was a net use of cash of Y289.5 billion ($2,517 million). Financing Activities: During the quarter ended June 30, 2006, although cash was used to make dividend payments, Y80.0 billion of long-term debt was raised through syndicated bank loans. Cash and Cash Equivalents: The total balance of cash and cash equivalents, accounting for the effect of foreign currency exchange rate fluctuations, was Y381.6 billion ($3,318 million) as of June 30, 2006, a decrease of Y203.9 billion compared to March 31, 2006 and an increase of Y53.9 billion compared with June 30, 2005.
Cash Flow - Financial Services segment - -------------------------------------- (Billions of yen, millions of U.S. dollars) First quarter ended June 30 Cash flow 2005 2006 Change 2006 in Yen - ---------- ------ ------ ------ ------ - - From operating activities Y8.7 Y91.9 Y+83.3 $799 - - From investing activities (150.1) (40.1) +110.0 (348) - - From financing activities 62.5 9.4 -53.1 81 Cash and cash equivalents 259.4 117.6 -141.7 1,023 at beginning of the fiscal year Cash and cash equivalents 180.5 178.8 -1.6 1,555 as of June 30
Operating Activities: Net cash from operating activities was generated mainly due to an increase in revenue from insurance premiums, reflecting 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. Financing Activities: In addition to the increase in policyholders' accounts at Sony Life, there was an increase in deposits from customers in the banking business. Cash and Cash Equivalents: As a result of the above, the balance of cash and cash equivalents was Y178.8 billion ($1,555 million) as of June 30, 2006, which was an increase of Y61.2 billion compared to March 31, 2006 and a decrease of Y1.6 billion compared to June 30, 2005. Notes - ----- Note I: During the quarter ended June 30, 2006, the average value of the yen was Y113.5 against the U.S. dollar and Y142.3 against the Euro, which was 6.0% lower against the U.S. dollar and 5.8% 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 (loss)" in each business segment represents operating income (loss) recorded before intersegment transactions and unallocated corporate expenses are eliminated.
Outlook for the Fiscal Year ending March 31, 2007 - ------------------------------------------------- Change from Current Previous April Forecast* Fiscal Year Forecast --------- ----------- -------- Sales and operating Y8,230 billion +10% Y8,200 billion revenue Operating income 130 billion -43 100 billion (Restructuring charges 50 billion -64 50 billion) included within Operating income Income before income 150 billion -48 150 billion taxes Equity in net income 40 billion +204 40 billion of affiliated companies Net income 130 billion +5 130 billion
*Assumed foreign currency exchange rates for the remainder of the fiscal year: approximately Y113 to the U.S. dollar and approximately Y136 to the Euro. Effective the first quarter of the fiscal year ending March 31, 2007, Sony reclassified royalty income as a component of sales and operating revenue, rather than as a component of other income as previously recorded. In connection with this reclassification, the forecasts for both sales and operating revenue and operating income for the current fiscal year are being reclassified from Sony's April 2006 forecast to incorporate Y30 billion of anticipated royalty income, compared to Y35.2 billion recorded during the fiscal year ended March 31, 2006. Excluding the impact of this change, Sony's forecast for the current fiscal year is unchanged from that announced on April 27, 2006. Our forecast for capital expenditures, depreciation and amortization or research and development costs, as per the table below, is unchanged from the forecast of April 27, 2006.
Forecast Change from previous fiscal year -------- ----------- Capital expenditures Y460 billion +20% (additions to fixed assets) Depreciation and amortization* 410 billion +7 (Depreciation expenses for 340 billion +9) tangible assets * Including amortization of intangible assets and amortization of deferred insurance acquisition costs. Research and development expenses 550 billion +3
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," "aim," "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, as well as achieve sufficient cost reductions for, 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 recoup large-scale investment required for technology development, increasing production capacity and by the Game segment for the development and introduction of a new platform; (v) Sony's ability to implement successfully personnel reduction and other business reorganization activities in its Electronics segment; (vi) Sony's ability to implement successfully its network strategy for its Electronics, Game and Pictures segments and All Other, 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; (vii) 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); (viii) 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 (ix) the success of Sony's joint ventures and alliances. Risks and uncertainties also include the impact of any future events with material unforeseen impacts.
Business Segment Information (Unaudited) - ---------------------------- (Millions of yen, millions of U.S. dollars) Three months ended June 30 Sales and operating 2005 2006 Change 2006 revenue ---------- ------ ------ ------ ------ Electronics Customers Y1,034,931 Y1,231,640 +19.0% $10,710 Intersegment 93,442 49,252 428 ---------- ------ ------ ------ Total 1,128,373 1,280,892 +13.5 11,138 Game Customers 165,477 117,026 -29.3 1,018 Intersegment 7,301 5,463 47 ---------- ------ ------ ------ Total 172,778 122,489 -29.1 1,065 Pictures Customers 144,381 204,751 +41.8 1,780 Intersegment - - - ---------- ------ ------ ------ Total 144,381 204,751 +41.8 1,780 Financial Services Customers 148,588 118,540 -20.2 1,031 Intersegment 5,226 5,561 48 ---------- ------ ------ ------ Total 153,814 124,101 -19.3 1,079 All Other Customers 74,756 72,279 -3.3 628 Intersegment 18,306 15,860 138 ---------- ------ ------ ------ Total 93,062 88,139 -5.3 766 Elimination (124,275) (76,136) - (661) ---------- ------ ------ ------ Consolidated total Y1,568,133 Y1,744,236 +11.2% $15,167
Electronics intersegment amounts primarily consist of transactions with the Game segment, Pictures segment and All Other. All Other intersegment amounts primarily consist of transactions with the Electronics and Game segments.
Operating income (loss) 2005 2006 Change 2006 ---------- ------ ------ ------ ------ Electronics Y(26,677) Y47,419 -% $412 Game (5,895) (26,803) - (233) Pictures 4,246 (1,165) - (10) Financial Services 21,923 4,579 -79.1 40 All Other 5,233 4,731 -9.6 41 ---------- ------ ------ ------ Total (1,170) 28,761 - 250 Corporate and (5,412) (1,713) - (15) elimination ---------- ------ ------ ------ Consolidated total Y(6,582) Y27,048 -% $235
Electronics Sales and Operating Revenue to Customers by Product Category (Millions of yen, millions of U.S. dollars) Three months ended June 30 Sales and operating 2005 2006 Change 2006 revenue ---------- ------ ------ ------ ------ Audio Y117,339 Y116,292 -0.9% $1,011 Video 251,331 270,181 +7.5 2,349 Televisions 150,047 262,054 +74.6 2,279 Information and 184,176 213,150 +15.7 1,854 Communications Semiconductors 39,373 47,991 +21.9 417 Components 182,830 204,736 +12.0 1,780 Other 109,835 117,236 +6.7 1,020 ---------- ------ ------ ------ Total Y1,034,931 Y1,231,640 +19.0% $10,710
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. Commencing April 1, 2006, Sony has partly realigned its product category configuration in the Electronics segment. Accordingly, results for the same period of the previous fiscal year have been reclassified. The primary change is as shown below;
Main Product Previous Product New Product Category Category - ------------ ---------------- -------------------- Low-temperature "Semiconductors" -> "Components" polysilicon thin film transistor LCD Chemical component "Other" -> "Components"
Geographic Segment Information (Unaudited) - ------------------------------ (Millions of yen, millions of U.S. dollars) Three months ended June 30 Sales and operating 2005 2006 Change 2006 revenue ---------- ------ ------ ------ ------ Japan Y476,970 Y476,198 -0.2% $4,141 United States 418,481 447,917 +7.0 3,895 Europe 331,125 398,852 +20.5 3,468 Other Areas 341,557 421,269 +23.3 3,663 ---------- ------ ------ ------ Total Y1,568,133 Y1,744,236 +11.2% $15,167
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 June 30 2005 2006 Change 2006 ------ ------ ------ ------ Sales and operating % revenue: Net sales Y1,397,734 Y1,599,536 $13,909 Financial service 148,588 118,540 1,031 revenue Other operating 21,811 26,160 227 revenue ------ ------ ------ 1,568,133 1,744,236 +11.2 15,167 Costs and expenses: Cost of sales 1,096,776 1,212,079 10,540 Selling, general 349,476 383,887 3,338 and administrative Financial service 126,637 113,951 991 expenses Loss on sale, 1,826 7,271 63 disposal or impairment of assets, net ------ ------ ------ 1,574,715 1,717,188 14,932 Operating income (loss) (6,582) 27,048 - 235 Other income: Interest and dividends 6,169 7,094 62 Foreign exchange - 2,542 22 gain, net Gain on sale 2,141 3,901 34 of securities investments, net Gain on change in 17,869 18,046 157 interest in subsidiaries and equity investees Other 5,758 4,767 41 ------ ------ ------ 31,937 36,350 316 Other expenses: Interest 4,846 5,411 47 Loss on devaluation 800 16 0 of securities investments Foreign exchange 1,392 - - loss, net Other 5,414 3,943 34 ------ ------ ------ 12,452 9,370 81 ------ ------ ------ Income before income 12,903 54,028 +318.7 470 taxes Income taxes 12,051 24,767 216 ------ ------ ------ Income before minority 852 29,261 +3,334.4 254 interest and equity in net income of affiliated companies Minority interest in (971) 592 5 income (loss) of consolidated subsidiaries Equity in net (9,086) 3,622 32 income (loss) of affiliated companies ------ ------ ------ Net income (loss) Y(7,263) Y32,291 - $281 ------ ------ ------ Per share data: Common stock Net income (loss) - Basic Y(8.68) Y32.25 - $0.28 - Diluted (8.68) 30.75 - 0.27 Subsidiary tracking stock Net income - Basic* 449.14 - - - * See Note 3.
Consolidated Balance Sheets (Unaudited) - --------------------------- (Millions of yen, millions of U.S. dollars) June 30 March 31 June 30 June 30 ASSETS 2005 2006 2006 2006 ------ ------ ------ ------ Current assets: Cash and cash Y508,103 Y703,098 Y560,400 $4,873 equivalents Marketable 479,801 536,968 461,655 4,014 securities Notes and accounts 1,021,903 1,075,071 1,125,063 9,783 receivable, trade Allowance for (82,622) (89,563) (85,384) (742) doubtful accounts and sales returns Inventories 702,107 804,724 948,126 8,245 Deferred income 131,738 221,311 200,966 1,748 taxes Prepaid expenses 433,307 517,915 537,180 4,670 and other current assets ------ ------ ------ ------ 3,194,337 3,769,524 3,748,006 32,591 Film costs 313,940 360,372 355,609 3,092 Investments and advances: Affiliated companies 273,221 285,870 296,261 2,576 Securities 2,746,073 3,234,037 3,235,834 28,138 investments and other ------ ------ ------ ------ 3,019,294 3,519,907 3,532,095 30,714 Property, plant and equipment: Land 183,007 178,844 179,824 1,564 Buildings 927,776 926,783 945,258 8,220 Machinery and 2,213,789 2,327,676 2,375,891 20,660 equipment Construction in 118,638 116,149 105,307 916 progress Less-Accumulated (2,054,443) (2,160,905) (2,167,871) (18,852) depreciation ------ ------ ------ ------ 1,388,767 1,388,547 1,438,409 12,508 Other assets: Intangibles, net 192,902 207,034 204,130 1,775 Goodwill 288,028 299,024 292,497 2,543 Deferred insurance 380,238 383,156 385,152 3,349 acquisition costs Deferred income 242,917 178,751 162,078 1,409 taxes Other 454,050 501,438 407,741 3,547 ------ ------ ------ ------ 1,558,135 1,569,403 1,451,598 12,623 ------ ------ ------ ------ Y9,474,473 Y10,607,753 Y10,525,717 $91,528 ------ ------ ------ ------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term Y54,147 Y142,766 Y81,422 $708 borrowings Current portion 162,969 193,555 188,232 1,637 of long-term debt Notes and accounts 758,955 813,332 836,632 7,275 payable, trade Accounts payable, 666,433 854,886 762,463 6,630 other and accrued expenses Accrued income 28,550 87,295 40,328 351 and other taxes Deposits from 574,814 599,952 634,950 5,521 customers in the banking business Other 439,507 508,442 491,487 4,274 ------ ------ ------ ------ 2,685,375 3,200,228 3,035,514 26,396 Long-term liabilities: Long-term debt 678,303 764,898 868,204 7,550 Accrued pension 351,141 182,247 175,042 1,522 and severance costs Deferred income 76,889 216,497 178,468 1,552 taxes Future insurance 2,521,860 2,744,321 2,799,808 24,346 policy benefits and other Other 244,682 258,609 256,109 2,226 ------ ------ ------ ------ 3,872,875 4,166,572 4,277,631 37,196 Minority interest 27,870 37,101 39,084 340 in consolidated subsidiaries Stockholders' equity: Capital stock 621,717 624,124 624,967 5,434 Additional 1,134,263 1,136,638 1,138,213 9,898 paid-in capital Retained earnings 1,498,227 1,602,654 1,630,569 14,179 Accumulated other (359,796) (156,437) (217,044) (1,887) comprehensive income Treasury stock, (6,058) (3,127) (3,217) (28) at cost ------ ------ ------ ------ 2,888,353 3,203,852 3,173,488 27,596 ------ ------ ------ ------ Y9,474,473 Y10,607,753 Y10,525,717 $91,528 ------ ------ ------ ------
Consolidated Statements of Cash Flows (Unaudited) - ------------------------------------- (Millions of yen, millions of U.S. dollars) Three months ended June 30 2005 2006 2006 ------ ------ ------ Cash flows from operating activities: Net income (loss) Y(7,263) Y32,291 $281 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization, 88,664 91,265 794 including amortization of deferred insurance acquisition costs Amortization of film costs 53,654 79,320 690 Accrual for pension and (1,101) (1,349) (12) severance costs, less payments Loss on sale, disposal or 1,826 7,271 63 impairment of assets, net Gain on sale or loss on (1,341) (3,885) (34) devaluation of securities investments, net (Gain) Loss on evaluation of (1,476) 14,994 130 marketable securities held in the financial service business for trading purpose Gain on change in interest in (17,869) (18,046) (157) subsidiaries and equity investees Deferred income taxes (2,624) 29,271 255 Equity in net (income) loss of 9,406 (2,935) (26) affiliated companies, net of dividends Changes in assets and liabilities: (Increase) Decrease in 96,786 (64,622) (562) notes and accounts receivable, trade Increase in inventories (64,677) (155,591) (1,353) Increase in film costs (79,247) (81,673) (710) Increase (Decrease) in (50,570) 26,605 231 notes and accounts payable, trade Decrease in accrued income (23,849) (37,680) (328) and other taxes Increase in future insurance 19,248 25,089 218 policy benefits and other Increase in deferred insurance (16,023) (14,959) (130) acquisition costs (Increase) Decrease in (13,956) 23,111 201 marketable securities held in the financial service business for trading purpose (Increase) Decrease in (30,814) 16,521 144 other current assets Decrease in other current (65,074) (116,126) (1,010) liabilities Other 17,668 53,196 463 ------ ------ ------ Net cash used in operating (88,632) (97,932) (852) activities ------ ------ ------ Cash flows from investing activities: Payments for purchases of (114,074) (132,167) (1,149) fixed assets Proceeds from sales of fixed 7,232 6,437 56 assets Payments for investments and (301,423) (252,547) (2,196) advances by financial service business Payments for investments and (13,136) (5,888) (51) advances (other than financial service business) Proceeds from maturities of 169,551 220,449 1,917 marketable securities, sales of securities investments and collections of advances by financial service business Proceeds from maturities of 6,347 966 8 marketable securities, sales of securities investments and collections of advances (other than financial service business) Proceeds from sales of 22,199 30,298 263 subsidiaries' and equity investees' stocks Other 173 116 1 ------ ------ ------ Net cash used in investing (223,131) (132,336) (1,151) activities ------ ------ ------ Cash flows from financing activities: Proceeds from issuance of 717 105,453 917 long-term debt Payments of long-term debt (6,644) (952) (8) Increase (Decrease) in (11,095) 1,857 16 short-term borrowings Increase in deposits from 66,162 64,907 564 customers in the financial service business Increase (Decrease) in call 400 (62,700) (545) money and bills sold in the banking business Dividends paid (12,474) (12,552) (109) Other (414) 1,811 16 ------ ------ ------ Net cash provided by financing 36,652 97,824 851 activities ------ ------ ------ Effect of exchange rate 4,111 (10,254) (89) changes on cash and cash equivalents ------ ------ ------ Net decrease in cash (271,000) (142,698) (1,241) and cash equivalents Cash and cash equivalents at 779,103 703,098 6,114 beginning of the fiscal year ------ ------ ------ Cash and cash equivalents at Y508,103 Y560,400 $4,873 June 30 ------ ------ ------
(Notes) 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of Y115 = U.S. $1, the approximate Tokyo foreign exchange market rate as of June 30, 2006. 2. As of June 30, 2006, Sony had 942 consolidated subsidiaries (including variable interest entities). It has applied the equity accounting method in respect to 59 affiliated companies. 3. Through September 30, 2005, Sony calculated and presented per share data separately for Sony's common stock and for the subsidiary tracking stock applying "two-class" method based on Statement of Financial Accounting Standards ("FAS") No.128, "Earnings per Share". 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 are not calculated from October 1, 2005. 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 mainly resulted from convertible bonds.
Weighted-average number of (Thousands of shares) outstanding shares First quarter ended June 30 2005 2006 -------------------------- ------ ------ Net income (loss) - Basic 996,087 1,001,206 - Diluted 996,087 1,049,969
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 first quarter of the fiscal year ending March 31, 2006 and 2007 were as follows:
(Millions of yen, millions of U.S. dollars) First quarter ended June 30 ------ ------ ------ 2005 2006 2006 ------ ------ ------ Net income (loss) Y(7,263) Y 32,291 $281 Other comprehensive income (loss): Unrealized gains (losses) on 8,379 (48,226) (419) securities Unrealized gains (losses) on 1,490 (55) (0) derivative instruments Minimum pension liabilities (231) (36) (0) adjustments Foreign currency translation 16,241 (12,290) (107) adjustments ------ ------ ------ 25,879 (60,607) (526) ------ ------ ------ Comprehensive income (loss) Y18,616 Y(28,316) $(245) ------ ------ ------
5. Effective the first quarter of the fiscal year ending March 31, 2007, Sony reclassified royalty income as a component of sales and operating revenue, rather than as a component of other income as previously recorded. In connection with this reclassification, sales and operating revenue, operating income (loss) and other income for the first quarter of the fiscal year ending March 31, 2006 have been reclassified to conform with the presentation of these items for the first quarter of the fiscal year ending March 31, 2007. Royalty income for the first quarter of the fiscal year ending March 31, 2006 and 2007 was Y8.7 billion and Y8.6 billion, respectively. These amounts were recorded primarily within the Electronics segment. 6. In December 2004, the FASB issued FAS No. 123 (revised 2004), "Share-Based Payment" ("FAS No. 123(R)"). This statement requires the use of the fair value based method of accounting for employee stock-based compensation and eliminates the alternative to use of the intrinsic value method prescribed by APB No. 25. With limited exceptions, FAS No. 123(R) requires that the grant-date fair value of share-based payments to employees be expensed over the period the service is received. Sony had accounted for its employee stock-based compensation in accordance with the intrinsic value method prescribed by APB No. 25 and its related interpretations and had disclosed the net effect on net income and net income per share allocated to the common stock if Sony had applied the fair value recognition provisions of FAS No. 123 to stock-based compensation. Sony adopted FAS No. 123(R) on April 1, 2006. Sony elected the modified prospective method of transition prescribed in FAS No. 123(R), which requires that compensation expense be recorded for all unvested stock acquisition rights as the requisite service is rendered beginning with the first period of adoption. As a result of adoption of FAS No. 123(R), Sony's operating income decreased Y700 million for the first quarter of the fiscal year ending March 31, 2007. 7. In February 2006, the Financial Accounting Standards Board ("FASB") issued FAS No. 155, "Accounting for Certain Hybrid Financial Instruments", an amendment of FAS No. 133 and FAS No. 140. This statement permits an entity to elect fair value remeasurement for any hybrid financial instrument if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounted for separately under FAS No. 133. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irreversible. The statement is effective for all financial instruments acquired, issued, or subject to a remeasurement event occurring after the beginning of an entity's fiscal years beginning after September 15, 2006, with earlier adoption permitted as of the beginning of fiscal year, provided that financial statements for any interim period of that fiscal year have not been issued. Sony early adopted FAS No. 155 on April 1, 2006. As a result of adoption of FAS No. 155, Sony's operating income decreased approximately Y1.6 billion for the first quarter of the fiscal year ending March 31, 2007. Additionally, on April 1, 2006, Sony recognized Y3,785 million of loss (net of income taxes of Y2,148million) as a cumulative-effect adjustment to beginning retained earnings.
Other Consolidated Financial Data (Millions of yen, millions of U.S. dollars) First quarter ended June 30 2005 2006 Change 2006 ------ ------ ------ ------ Capital expenditures Y97,983 Y134,056 +36.8% $1,166 (additions to property, plant and equipment) Depreciation and 88,664 91,265 +2.9 794 amortization expenses* (Depreciation expenses for (71,881) (71,002) -1.2 (617) tangible assets) R&D expenses 118,388 119,370 +0.8 1,038
* Including amortization expenses for intangible assets and for deferred insurance acquisition costs Condensed Financial Services Financial Statements (Unaudited) - ------------------------------------------------- The results of the Financial Services segment are included in Sony's consolidated financial statements. The following schedules show unaudited condensed financial statements for the Financial Services segment and all other segments excluding Financial Services. These presentations are not required under U.S. GAAP, which is used in Sony's consolidated financial statements. However, because the Financial Services segment is different in nature from Sony's other segments, Sony believes that a comparative presentation may be useful in understanding and analyzing Sony's consolidated financial statements. Transactions between the Financial Services segment and Sony without Financial Services are eliminated in the consolidated figures shown below.
Condensed Statements of Income - ------------------------------ (Millions of yen, millions of U.S. dollars) Three months ended June 30 Financial Services 2005 2006 Change 2006 ------ ------ ------ ------ % Financial service revenue Y153,814 Y124,101 -19.3 $1,079 Financial service expenses 131,891 119,522 -9.4 1,039 ------ ------ ------ Operating income 21,923 4,579 -79.1 40 Other income (expenses), net (117) (57) - (1) ------ ------ ------ Income before income taxes 21,806 4,522 -79.3 39 Income taxes and other 9,734 1,401 -85.6 12 ------ ------ ------ Net income Y12,072 Y3,121 -74.1 $27 ------ ------ ------ (Millions of yen, millions of U.S. dollars) Sony without Financial Three months ended June 30 Services 2005 2006 Change 2006 ------ ------ ------ ------ % Net sales and operating Y1,421,493 Y1,628,283 +14.5 $14,159 revenue Costs and expenses 1,450,404 1,606,130 +10.7 13,966 ------ ------ ------ Operating income (loss) (28,911) 22,153 - 193 Other income 20,009 33,465 +67.2 291 (expenses), net ------ ------ ------ Income (loss) before (8,902) 55,618 - 484 income taxes Income taxes and other 10,432 20,173 +93.4 176 ------ ------ ------ Net income (loss) Y(19,334) Y35,445 - $308 ------ ------ ------ (Millions of yen, millions of U.S. dollars) Three months ended June 30 Consolidated 2005 2006 Change 2006 ------ ------ ------ ------ % Financial service revenue Y148,588 Y118,540 -20.2 $1,031 Net sales and operating 1,419,545 1,625,696 +14.5 14,136 revenue ------ ------ ------ 1,568,133 1,744,236 +11.2 15,167 Costs and expenses 1,574,715 1,717,188 +9.0 14,932 ------ ------ ------ Operating income (loss) (6,582) 27,048 - 235 Other income 19,485 26,980 +38.5 235 (expenses), net ------ ------ ------ Income before income taxes 12,903 54,028 +318.7 470 Income taxes and other 20,166 21,737 +7.8 189 ------ ------ ------ Net income (loss) Y(7,263) Y32,291 - $281 ------ ------ ------
Condensed Balance Sheet - ----------------------- (Millions of yen, millions of U.S. dollars) Financial Services June 30 March 31 June 30 June 30 ASSETS 2005 2006 2006 2006 ------ ------ ------ ------ Current assets: Cash and cash Y180,452 Y117,630 Y178,848 $1,555 equivalents Marketable 475,728 532,895 454,081 3,948 securities Other 178,894 200,929 217,525 1,892 ------ ------ ------ ------ 835,074 851,454 850,454 7,395 Investments and 2,644,653 3,128,748 3,146,583 27,362 advances Property, plant and 33,866 37,422 38,056 331 equipment Other assets: Deferred insurance 380,238 383,156 385,152 3,349 acquisition costs Other 104,991 164,827 96,223 837 ------ ------ ------ ------ 485,229 547,983 481,375 4,186 ------ ------ ------ ------ Y3,998,822 Y4,565,607 Y4,516,468 $39,274 ------ ------ ------ ------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term Y42,346 Y136,723 Y82,917 $721 borrowings Notes and accounts 8,232 11,707 12,516 109 payable, trade Deposits from 574,814 599,952 634,950 5,521 customers in the banking business Other 112,359 169,956 150,784 1,311 ------ ------ ------ ------ 737,751 918,338 881,167 7,662 Long-term liabilities: Long-term debt 134,879 128,097 127,284 1,107 Accrued pension and 14,685 13,479 13,438 117 severance costs Future insurance 2,521,860 2,744,321 2,799,808 24,346 policy benefits and other Other 149,169 173,354 152,709 1,328 ------ ------ ------ ------ 2,820,593 3,059,251 3,093,239 26,898 Minority interest 5,402 4,089 4,123 36 in consolidated subsidiaries Stockholders' 435,076 583,929 537,939 4,678 equity ------ ------ ------ ------ Y3,998,822 Y4,565,607 Y4,516,468 $39,274 ------ ------ ------ ------ (Millions of yen, millions of U.S. dollars) Sony without June 30 March 31 June 30 June 30 Financial Services 2005 2006 2006 2006 ------ ------ ------ ------ ASSETS Current assets: Cash and cash Y327,651 Y585,468 Y381,552 $3,318 equivalents Marketable 4,073 4,073 7,574 66 securities Notes and accounts 865,106 973,675 1,023,490 8,900 receivable, trade Other 1,189,093 1,393,306 1,539,698 13,388 ------ ------ ------ ------ 2,385,923 2,956,522 2,952,314 25,672 Film costs 313,940 360,372 355,609 3,092 Investments and 465,380 477,089 470,454 4,091 advances Investments in 187,400 187,400 187,400 1,630 Financial Services, at cost Property, plant 1,354,901 1,351,125 1,400,353 12,177 and equipment Other assets 1,199,863 1,059,786 1,008,794 8,772 ------ ------ ------ ------ Y5,907,407 Y6,392,294 Y6,374,924 $55,434 ------ ------ ------ ------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term Y191,677 Y225,082 Y220,448 $1,917 borrowings Notes and accounts 752,804 804,394 825,028 7,174 payable, trade Other 1,040,032 1,299,809 1,172,416 10,195 ------ ------ ------ ------ 1,984,513 2,329,285 2,217,892 19,286 Long-term liabilities: Long-term debt 626,821 701,372 804,854 6,999 Accrued pension 336,456 168,768 161,604 1,405 and severance costs Other 296,385 352,457 332,586 2,892 ------ ------ ------ ------ 1,259,662 1,222,597 1,299,044 11,296 Minority interest 22,517 32,623 34,572 301 in consolidated subsidiaries Stockholders' 2,640,715 2,807,789 2,823,416 24,551 equity ------ ------ ------ ------ Y5,907,407 Y6,392,294 Y6,374,924 $55,434 ------ ------ ------ ------ (Millions of yen, millions of U.S. dollars) Consolidated June 30 March 31 June 30 June 30 ASSETS 2005 2006 2006 2006 ------ ------ ------ ------ Current assets: Cash and cash Y508,103 Y703,098 Y560,400 $4,873 equivalents Marketable 479,801 536,968 461,655 4,014 securities Notes and accounts 939,281 985,508 1,039,679 9,041 receivable, trade Other 1,267,152 1,543,950 1,686,272 14,663 ------ ------ ------ ------ 3,194,337 3,769,524 3,748,006 32,591 Film costs 313,940 360,372 355,609 3,092 Investments and 3,019,294 3,519,907 3,532,095 30,714 advances Property, plant 1,388,767 1,388,547 1,438,409 12,508 and equipment Other assets: Deferred 380,238 383,156 385,152 3,349 insurance acquisition costs Other 1,177,897 1,186,247 1,066,446 9,274 ------ ------ ------ ------ 1,558,135 1,569,403 1,451,598 12,623 ------ ------ ------ ------ Y9,474,473 Y10,607,753 Y10,525,717 $91,528 ------ ------ ------ ------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term Y217,116 Y336,321 Y269,654 $2,345 borrowings Notes and accounts 758,955 813,332 836,632 7,275 payable, trade Deposits from 574,814 599,952 634,950 5,521 customers in the banking business Other 1,134,490 1,450,623 1,294,278 11,255 ------ ------ ------ ------ 2,685,375 3,200,228 3,035,514 26,396 Long-term liabilities: Long-term debt 678,303 764,898 868,204 7,550 Accrued pension 351,141 182,247 175,042 1,522 and severance costs Future insurance 2,521,860 2,744,321 2,799,808 24,346 policy benefits and other Other 321,571 475,106 434,577 3,778 ------ ------ ------ ------ 3,872,875 4,166,572 4,277,631 37,196 Minority interest 27,870 37,101 39,084 340 in consolidated subsidiaries Stockholders' 2,888,353 3,203,852 3,173,488 27,596 equity ------ ------ ------ ------ Y9,474,473 Y10,607,753 Y10,525,717 $91,528 ------ ------ ------ ------
Condensed Statements of Cash Flows - ---------------------------------- (Millions of yen, millions of U.S. dollars) Three months ended June 30 Financial Services 2005 2006 2006 ------ ------ ------ Net cash provided by operating Y8,650 Y91,910 $799 activities Net cash used in investing (150,060) (40,061) (348) activities Net cash provided by financing 62,491 9,369 81 activities ------ ------ ------ Net increase (decrease) in cash (78,919) 61,218 532 and cash equivalents Cash and cash equivalents at 259,371 117,630 1,023 beginning of the fiscal year ------ ------ ------ Cash and cash equivalents Y180,452 Y178,848 $1,555 at June 30 ------ ------ ------ (Millions of yen, millions of U.S. dollars) Sony without Financial Three months ended June 30 Services 2005 2006 2006 ------ ------ ------ Net cash used in operating Y(97,332) Y(189,114) $(1,644) activities Net cash used in investing (70,426) (100,376) (873) activities Net cash provided by (used in) (28,434) 95,828 833 financing activities Effect of exchange rate changes 4,111 (10,254) (89) on cash and cash equivalents ------ ------ ------ Net decrease in cash (192,081) (203,916) (1,773) and cash equivalents Cash and cash equivalents at 519,732 585,468 5,091 beginning of the fiscal year ------ ------ ------ Cash and cash equivalents Y327,651 Y381,552 $3,318 at June 30 ------ ------ ------ (Millions of yen, millions of U.S. dollars) Three months ended June 30 Consolidated 2005 2006 2006 ------ ------ ------ Net cash used in operating Y(88,632) Y(97,932) $(852) activities Net cash used in investing (223,131) (132,336) (1,151) activities Net cash provided by financing 36,652 97,824 851 activities Effect of exchange rate changes 4,111 (10,254) (89) on cash and cash equivalents ------ ------ ------ Net decrease in cash (271,000) (142,698) (1,241) and cash equivalents Cash and cash equivalents at 779,103 703,098 6,114 beginning of the fiscal year ------ ------ ------ Cash and cash equivalents Y508,103 Y560,400 $4,873 at June 30 ------ ------ ------
Investor Relations Contacts: - ---------------------------- Tokyo New York London Takao Yuhara Justin Hill/ Chris Hohman/ Miki Emura Shinji Tomita +81-(0)3-5448-2180 +1-212-833-6722 +44-(0)20-7444-9713 Home Page: http://www.sony.net/IR/ -----END PRIVACY-ENHANCED MESSAGE-----