Sony Corporation
6-7-35 Kitashinagawa
Shinagawa-ku
Tokyo 141-0001 Japan
No: 07-009E
3:00 P.M. JST, January 30, 2007
Consolidated Financial Results
for the Third Quarter Ended December 31, 2006
Tokyo, January 30, 2007 -- Sony Corporation today announced its
consolidated results for the third quarter of the fiscal year
ending March 31, 2007 (October 1, 2006 to December 31, 2006).
(Billions of yen, millions of U.S. dollars, except per share amounts)
Third quarter ended December 31
2005 2006 Change 2006*
in Yen
---------- ------ ------ ------ ------
Sales and Y2,375.1 Y2,607.7 +9.8% $ 21,913
operating
revenue**
Operating income 210.3 178.9 -14.9 1,503
Income before 225.9 179.8 -20.4 1,511
income taxes
Equity in net 19.5 43.0 +120.5 362
income of
affiliated
companies
Net income 168.9 159.9 -5.3 1,344
Net income per
share of
common stock
- Basic Y169.36 Y159.70 -5.7 $1.34
- Diluted 161.60 152.49 -5.6 1.28
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 Y119=U.S.$1, the approximate
Tokyo foreign exchange market rate as of December 29, 2006.
** Effective April 1, 2006, 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 and other income for the third quarter of the
fiscal year ended March 31, 2006 have been reclassified to
conform with the presentation of these items for the third
quarter of the fiscal year ending March 31, 2007. Royalty income
for the third quarters ended December 31, 2005 and 2006 was Y7.5
billion and Y9.5 billion, respectively. These amounts were
recorded primarily within the Electronics segment.
Consolidated Results for the Third Quarter Ended December 31, 2006
------------------------------------------------------------------
Sales and operating revenue ("sales") increased 9.8% compared
with the same quarter of the previous fiscal year; on a local
currency basis sales increased 7%. (For all references herein to
results on a local currency basis, see Note I.)
Sales within the Electronics segment increased 16.9%. Products
such as "BRAVIA(TM)" LCD televisions and "Cyber-shot(TM)" digital
cameras contributed to the increase in sales to outside
customers. This was partially offset by a decline in sales of
such products as LCD rear-projection televisions, due to an
increasingly competitive market environment, and CRT
televisions, where the market continues to contract. In the Game
segment, sales increased by 5.6% compared to the same quarter of
the previous fiscal year due to the launch of PLAYSTATION(R)3
("PS3") in both Japan and North America. In the Pictures
segment, there was a 46.8% increase in revenue primarily due to
significantly higher DVD revenues on films led by the releases
of The Da Vinci Code and Talladega Nights: The Ballad of Ricky
Bobby. In the Financial Services segment, revenue decreased by
9.2% 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 Y178.9 billion ($1,503 million) was
recorded, a decrease of 14.9% compared to the same quarter of
the previous fiscal year.
In the Electronics segment, operating income increased
principally as a result of an increase in sales to outside
customers and the positive impact from the depreciation of the
yen. In particular, the favorable performance of products such
as "BRAVIA" LCD televisions and "Cyber-shot" digital cameras
during the year-end sales season resulted in new quarterly
records for sales and operating income within the Electronics
segment, and approximately twice the amount of operating income
was recorded in this segment as in the same quarter of the
previous fiscal year.
In the Game segment, an operating loss was recorded primarily as
a result of the loss arising from the sale of PS3 at strategic
price points. In the Pictures segment, operating income was
recorded as a result of the strong performance of films during
the quarter in both the home entertainment and theatrical
markets as compared to an operating loss in the same quarter of
the previous fiscal year in which losses were recorded on
several films. In the Financial Services segment, operating
income declined primarily as a result of decreased valuation
gains from investments in the general account, including
valuation gains from convertible bonds.
During the current quarter, a credit to restructuring charges of
Y0.3 billion ($3 million) was recorded due to a gain of Y3.6
billion ($31 million) on sale of assets associated with
restructuring activities, compared to Y14.7 billion of
restructuring charges recorded in the same quarter of the
previous fiscal year. Most of the above credit was recorded in
the Electronics segment. In the same quarter of the previous
fiscal year Y14.6 billion of restructuring charges were recorded
within the Electronics segment.
In addition, resolutions of pending patent claims resulted in a
gain of Y9.7 billion ($82 million) in this quarter as a result
of the reversal of a portion of provisions recorded in prior
periods.
Income before income taxes of Y179.8 billion ($1,511 million)
was recorded, a decline of 20.4% compared to the same quarter of
the previous fiscal year. This resulted because the net effect
of other income and expenses was Y14.7 billion lower compared to
the same quarter of the previous fiscal year, and because of a
decline in operating income.
The lower net effect of other income and expenses was primarily
a result of an increase in the amount of net foreign exchange
loss and a decrease in the gain on change in interest in
subsidiaries and investees resulting from lower year-on-year
gains. During the current quarter, a Y9.4 billion ($79 million)
gain was recorded from the sale of a portion of stock in
StylingLife Holdings Inc. ("StylingLife"). In the same quarter
of the previous fiscal year, a gain of Y19.0 billion was
recorded on the change in interest resulting from the initial
public offering of So-net Entertainment Corporation ("So-net").
Income taxes: During the current quarter, Sony recorded Y61.5
billion ($517 million) of income taxes at an effective tax rate
of 34.2%. The effective tax rate was lower than the Japanese
statutory tax rate due primarily to the reversal of valuation
allowances against deferred tax assets previously recorded by
Sony Corporation and certain Japanese subsidiaries resulting
from the utilization of net operating loss carryforwards.
Equity in net income of affiliated companies of Y43.0 billion
($362 million) was recorded, an increase of 120.5% 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 Y33.6 billion ($282 million), an increase
of Y23.8 billion compared to the same quarter of the previous
fiscal year. Sony also recorded equity in net income of Y13.1
billion ($110 million) for SONY BMG MUSIC ENTERTAINMENT ("SONY
BMG"), an increase of Y2.8 billion compared to the same quarter
of the previous fiscal year. S-LCD Corporation ("S-LCD"), a
joint-venture with Samsung Electronics Co., Ltd. for the
manufacture of amorphous TFT LCD panels, recorded equity in net
loss of Y0.7 billion ($5 million) (before the elimination of
unrealized intercompany profits), a decrease of Y1.6 billion
compared to the same quarter of the previous fiscal year. Sony
recorded equity in net loss of Y5.4 billion ($45 million) for
Metro-Goldwyn-Mayer Inc. ("MGM")*, an increase in the amount of
equity loss of Y3.0 billion compared to the same quarter of the
previous fiscal year. The equity in net loss for MGM includes
non-cash interest of Y2.1 billion ($18 million) on cumulative
preferred stock compared to the Y1.5 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 Y159.9 billion ($1,344 million) was
recorded, a decrease of 5.3% compared to the same quarter of the
previous fiscal year.
Operating Performance Highlights by Business Segment
----------------------------------------------------
Electronics
-----------
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2005 2006 Change 2006
in Yen
---------- ------ ------ ------ ------
Sales and Y1,601.5 Y1,872.7 +16.9% $15,737
operating revenue
Operating income 87.5 177.4 +102.8 1,491
Unless otherwise specified, all amounts are on a U.S. GAAP
basis.
Sales increased by 16.9% compared to the same quarter of the
previous fiscal year (a 14% increase on a local currency basis).
Sales to outside customers increased 10.4% compared to the same
quarter of the previous fiscal year. There was an increase in
sales of products including "BRAVIA" LCD televisions and
"Cyber-shot" digital cameras, which both experienced favorable
sales in all regions. This was partially offset by a decrease in
sales of LCD rear-projection televisions, due to an increasingly
competitive market environment, and CRT televisions, where the
market continues to contract. There was a significant increase
in intersegment sales mainly due to increased sales of
semiconductors to the Game segment.
Operating income increased by 102.8% compared with the same
quarter of the previous fiscal year. Operating income increased
significantly due to an increase in sales to outside customers
and the positive impact from the depreciation of the yen. With
regard to products within the Electronics segment, there was a
positive contribution to operating income from strong sales of
such products as "Cyber-shot" digital cameras and "BRAVIA" LCD
televisions. However, products such as LCD rear-projection
televisions, which were impacted by price deterioration and
lower sales volume, contributed negatively compared to the same
quarter of the previous fiscal year.
Inventory, as of December 31, 2006, was Y851.7 billion ($7,157
million), a Y252.9 billion, or 42.2%, increase compared with the
level as of December 31, 2005 and a Y120.0 billion, or 12.3%,
decrease compared with the level as of September 30, 2006. The
year-on-year increase was primarily due to an increase in LCD
television inventory, as a result of increasing sales, as well
as an increase in the inventory of semiconductors for PS3.
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 of affiliated companies.
(Millions of Euros)
Three months ended December 31
2005 2006 Change in
Euros
---------- ------ ------ ------
Sales and operating EUR2,310 EUR3,782 +64%
revenue
Income before income 206 502 +144
taxes
Net income 144 447 +210
Sales for the quarter increased by 64% compared to the same
quarter of the previous fiscal year. Sales of hit models such as
"Cyber-shot" phones and "Walkman(R)" phones boosted results,
helping Sony Ericsson achieve record quarterly sales, income
before income taxes and net income. As a result, equity in net
income of Y33.6 billion ($282 million) was recorded by Sony.
Game
----
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2005 2006 Change 2006
in Yen
---------- ------ ------ ------ ------
Sales and Y419.2 Y442.8 +5.6% $3,721
operating revenue
Operating income 67.8 (54.2) - (455)
(loss)
Unless otherwise specified, all amounts are on a U.S. GAAP
basis.
Sales increased 5.6% compared with the same quarter of the
previous fiscal year (a 3% increase on a local currency basis).
Hardware: There was an increase in overall sales as a result of
the launch of PS3 in Japan and North America. However,
PlayStation(R)2 ("PS2") sales declined as a result of strategic
price reductions despite the fact that unit sales were
relatively unchanged compared to the same quarter of the
previous fiscal year. PSP(R) (PlayStation(R)Portable) ("PSP") sales
declined due to a decrease in unit sales compared with the same
quarter of the previous fiscal year.
Software: Despite an increase in sales from PSP software
compared to the same quarter of the previous fiscal year, as
well as the contribution from PS3 software sales, overall
software sales decreased as a result of lower PS2 software
sales.
An operating loss of Y54.2 billion ($455 million) was recorded
compared to the Y67.8 billion of operating income recorded
during the same quarter of the previous fiscal year. This
deterioration was primarily the result of the loss arising from
the sale of PS3 at strategic price points, as well as the
recording of other charges in association with preparation for
the launch of the PS3 platform. In addition, operating income
from the PS2 business and PSP business declined due to sales
declines.
Worldwide hardware production shipments (and decrease compared
to the same quarter of the previous fiscal year):*
-> PS2: 4.11 million units (a decrease of 1.25 million units)
-> PSP: 1.76 million units (a decrease of 4.46 million units)
-> PS3: 1.84 million units
Worldwide software production shipments (and increase/decrease
compared to the same quarter of the previous fiscal year):*
-> PS2: 78 million units (a decrease of 15 million units)
-> PSP: 21.2 million units (an increase of 4.1 million units)
-> PS3: 5.2 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, 2006, was Y103.2 billion ($868
million), which represents a Y0.7 billion, or 0.7%, decrease
compared with the level as of December 31, 2005. Inventory, as
of December 31, 2006, decreased by Y84.9 billion, or 45.1%,
compared with the level as of September 30, 2006.
Pictures
--------
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2005 2006 Change in 2006
Yen
---------- ------ ------ ------ ------
Sales and Y202.2 Y297.0 +46.8% $2,495
operating revenue
Operating income (0.4) 26.2 - 220
(loss)
Unless otherwise specified, all amounts are on a U.S. GAAP
basis. 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 46.8% compared to the same quarter of the
previous fiscal year (a 46% increase on a U.S. dollar basis).
Sales increased primarily due to significantly higher DVD
revenues on films led by the releases of The Da Vinci Code,
Talladega Nights: The Ballad of Ricky Bobby and Click.
Theatrical revenues were also higher in the current fiscal
year's third quarter due to the box office performance of Casino
Royale and The Pursuit of Happyness, while television revenues
increased primarily from additional syndication sales of The
King of Queens.
Operating income of Y26.2 billion ($220 million) was recorded as
compared to an operating loss of Y0.4 billion in the same
quarter of the previous fiscal year. These results were achieved
through the strong performance during the quarter of the films
noted above in both the home entertainment and theatrical
markets as compared to the film results from the same quarter of
the previous fiscal year in which losses were recorded on
several films. In the television business, operating income
remained relatively unchanged compared with the same quarter of
the previous fiscal year, as the benefit from The King of Queens
syndication sales was largely offset by production and marketing
expenses associated with several new network and
made-for-syndication television shows.
Financial Services
------------------
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2005 2006 Change in 2006
Yen
---------- ------ ------ ------ ------
Financial service Y190.4 Y172.9 -9.2% $1,453
revenue
Operating income 47.0 25.5 -45.9 214
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 9.2% compared with the same
quarter of the previous fiscal year due to a decrease in revenue
at Sony Life. Although revenue from insurance premiums increased
at Sony Life reflecting an increase in insurance-in-force,
revenue at Sony Life decreased by Y19.7 billion or 11.8% to
Y147.5 billion ($1,239 million). This was primarily a result of
lower valuation gains in the general account and the separate
account reflecting the fact that there was only a modest
increase in Japanese stock market prices during the quarter as
opposed to the significant increase experienced in the same
quarter of the previous fiscal year.
Operating income decreased by 45.9% compared with the same
quarter of the previous fiscal year due to a decrease in
operating income at Sony Life. Despite an increase in insurance
premium revenue, operating income at Sony Life declined by Y22.1
billion or 46.1%, compared to the same quarter of the previous
fiscal year, to Y25.9 billion ($218 million). This decline was
principally due to a decrease in valuation gains from
investments in the general account, including valuation gains
from convertible bonds, reflecting the abovementioned modest
increase in Japanese stock market prices during the quarter
compared to the same quarter of the previous fiscal year.
All Other
---------
(Billions of yen, millions of U.S. dollars)
Third quarter ended December 31
2005 2006 Change 2006
in Yen
---------- ------ ------ ------ ------
Sales and Y122.7 Y99.3 -19.1% $834
operating revenue
Operating income 16.3 13.9 -14.9 117
Unless otherwise specified, all amounts are on a U.S. GAAP
basis.
Sales decreased 19.1% compared with the same quarter of the
previous fiscal year. This sales decrease mainly reflects the
deconsolidation of StylingLife, a holding company that comprised
six of Sony's retail businesses, following the sale of 51% of
the stock in the company during the first quarter of the current
fiscal year, and a decline in sales at Sony Music Entertainment
(Japan) Inc. ("SMEJ").
Best-selling albums and singles at SMEJ during the current
quarter included CHEMISTRY's ALL THE BEST, ORANGE RANGE's ORANGE
RANGE and PORNO GRAFFITTI's m-CABI. Despite these successes,
album and singles sales declined compared to sales in the same
quarter of the previous fiscal year, which included the strong
performance of Ken Hirai's Ken Hirai 10th Anniversary Complete
Single Collection '95-'05 "Uta Baka." Sales at SMEJ also
declined as a result of lower intersegment sales in association
with the transfer of business activity relating to Sony's disc
custom press business, carried out at SMEJ during the same
quarter of the previous fiscal year, from SMEJ to other segments
within the Sony Group.
Operating income decreased by 14.9% compared to the same quarter
of the previous fiscal year. Although operating income at So-net
increased in association with greater revenue relating to an
increase in fiber optic service subscribers, operating income
within All Other declined as a result of the sales decrease at
SMEJ and the sale of stock in StylingLife 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. Please
note that the operating results of Sony BMG discussed below are
reported on a U.S. GAAP basis.
(Millions of U.S. dollars)
Three months ended December 31
2005 2006 Change in
Dollars
---------- ------ ------ ------
Sales and operating $1,464 $1,441 -1.6%
revenue
Income before income 252 278 +10.3
taxes
Net income 178 225 +26.4
During the three months ended December 31, 2006, sales revenue at
SONY BMG decreased by 1.6% compared to the same period of the
previous fiscal year primarily due to greater contraction in
physical compact disc sales than growth in digital download sales
in many markets. Despite the decrease in sales, income before
income taxes improved by 10.3% compared to the same period of the
previous fiscal year primarily due to lower overhead and
restructuring costs. The company also benefited from an
industry-related legal settlement affecting the major record
companies. Income before income taxes includes $41 million of
restructuring charges, a year-on-year reduction of $7 million. As
a result, equity in net income of Y13.1 billion ($110 million) was
recorded by Sony. Best selling albums during the quarter included
Il Divo's Siempre, the compilation release NOW That's What I Call
Music Vol. 23 and Oasis' Stop The Clocks.
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 2005 2006 Change 2006
in Yen
---------- ------ ------ ------ ------
- From operating Y43.7 (Y11.6) Y-55.3 ($97)
activities
- From investing (203.9) (374.7) -170.7 (3,149)
activities
- From financing 50.9 305.6 +254.7 2,568
activities
Cash and cash 519.7 585.5 +65.7 4,920
equivalents at
beginning of the
fiscal year
Cash and cash 438.7 510.9 +72.2 4,293
equivalents as of
December 31
Operating Activities: During the nine months ended December 31,
2006, although net income was recorded, cash flow from operating
activities resulted in a net use of cash primarily due to an
increase in notes and accounts receivable, trade, principally
within the Electronics and Game segments.
Investing Activities: During the nine months ended December 31,
2006, although cash was generated primarily from the sale of a
majority of Sony's holding in StylingLife, pursuant to Sony's
planned gradual reduction in its stake in the company, cash was
used by Sony within the Electronics segment primarily for the
purchase of fixed assets, principally semiconductor
manufacturing facilities, and part of the investment towards the
manufacturing facilities for 8th generation TFT LCD panels at
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, 2006 was a use of cash of Y386.3 billion
($3,246 million).
Financing Activities: During the nine months ended December 31,
2006, although Sony redeemed a portion of its long-term debt
including bonds and used cash to make dividend payments,
financing was carried out through the issuance of commercial
paper and syndicated bank loans.
Cash and Cash Equivalents: As a result of the above factors, the
total balance of cash and cash equivalents, accounting for the
effect of foreign currency exchange rate fluctuations, decreased
Y74.6 billion compared to March 31, 2006, and increased by Y72.2
billion compared to December 31, 2005, to Y510.9 billion ($4,293
million) as of December 31, 2006.
Cash Flow - Financial Services segment
--------------------------------------
(Billions of yen, millions of U.S. dollars)
Nine months ended December 31
Cash flow 2005 2006 Change 2006
in Yen
---------- ------ ------ ------ ------
- From operating Y79.8 Y170.3 Y+90.5 $1,431
activities
- From investing (371.4) (199.0) +172.4 (1,673)
activities
- From financing 208.7 133.6 -75.1 1,123
activities
Cash and cash 259.4 117.6 -141.7 988
equivalents at
beginning of the
fiscal year
Cash and cash 176.4 222.4 +46.0 1,869
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: Sony Life carried out investments
primarily in Japanese fixed income securities.
Financing Activities: Despite a decrease in the balance of call
money within the banking business, 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 increased Y104.8 billion compared to March 31,
2006, and increased Y46.0 billion compared to December 31, 2005,
to Y222.4 billion ($1,869 million) as of December 31, 2006.
Notes
-----
Note I: During the quarter ended December 31, 2006, the average
value of the yen was Y116.8 against the U.S. dollar and Y150.4
against the Euro, which was 0.4% lower against the U.S. dollar
and 8.3% 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
-------------------------------------------------
Sony's consolidated results forecast for the fiscal year ending
March 31, 2007, as announced on October 19, 2006, has been
revised as per the table below:
Current Change from October
Forecast October Forecast
Forecast
-------- ----------- --------
Sales and operating Y8,230 No Change Y8,230
revenue billion billion
Operating income 60 billion +20% 50 billion
(Restructuring charges
recorded as
operating expenses 30 billion -25% 40 billion)
Income before income 80 billion +14% 70 billion
taxes
Equity in net income of
affiliated companies 60 billion +50% 40 billion
Net income 110 billion +38% 80 billion
*Assumed foreign currency exchange rates for the fourth quarter:
approximately Y117 to the U.S. dollar and approximately Y153 to
the Euro.
The principal reasons for the revision are as follows:
1. As a result of the strong performance of the Electronics
segment during the third quarter, operating results for the
segment are trending higher than anticipated at the time of our
previous forecast in October 2006.
2. Despite the continued favorable performance of the PS2
business, the overall performance of the Game segment is
trending below that anticipated at the time of our previous
forecast in October 2006 due to lower than expected sales from
the PSP business and higher than anticipated charges associated
with the launch of the PS3 platform.
3. Restructuring charges, recorded as operating expenses, are
now forecast to be Y30 billion, compared to an anticipated Y40
billion of restructuring charges included in the October
forecast. This reduction was a result of a revision to the
timing of business rationalization scheduled to be carried out
in several business areas.
4. Equity in net income of affiliated companies is now forecast
to be Y60 billion, compared to the October forecast of Y40
billion. This revision is the result of the favorable
performance of Sony Ericsson.
Our forecast for capital expenditures, depreciation and
amortization or research and development expenses, as per the
table below, is unchanged from the forecast of July 27, 2006.
Change from
previous
Forecast 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
including newly introduced platforms within the Game segment,
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 and increasing
production capacity; (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)
Third quarter ended December 31
Sales and operating
revenue 2005 2006 Change 2006
----------- ------ ------ ------ ------
Electronics
Customers Y 1,483,592 Y 1,638,560 +10.4 % $ 13,769
Intersegment 117,921 234,098 1,968
----------- ------ ------ ------
Total 1,601,513 1,872,658 +16.9 15,737
Game
Customers 402,925 424,331 +5.3 3,566
Intersegment 16,321 18,468 155
----------- ------ ------ ------
Total 419,246 442,799 +5.6 3,721
Pictures
Customers 202,241 296,955 +46.8 2,495
Intersegment - - -
----------- ------ ------ ------
Total 202,241 296,955 +46.8 2,495
Financial Services
Customers 184,586 167,060 -9.5 1,404
Intersegment 5,805 5,850 49
----------- ------ ------ ------
Total 190,391 172,910 -9.2 1,453
All Other
Customers 101,742 80,769 -20.6 679
Intersegment 20,934 18,491 155
----------- ------ ------ ------
Total 122,676 99,260 -19.1 834
Elimination (160,981) (276,907) - (2,327)
----------- ------ ------ ------
Consolidated total Y 2,375,086 Y 2,607,675 +9.8 % $ 21,913
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 87,487 Y 177,394 +102.8 % $ 1,491
Game 67,819 (54,168) - (455)
Pictures (378) 26,238 - 220
Financial Services 47,048 25,470 -45.9 214
All Other 16,343 13,908 -14.9 117
----------- ------ ------ ------
Total 218,319 188,842 -13.5 1,587
Corporate and (7,974) (9,935) - (84)
elimination
----------- ------ ------ ------
Consolidated total Y 210,345 Y 178,907 -14.9 % $ 1,503
Commencing with the third quarter ended December 31, 2006, Sony has partly
realigned its business segment configuration.
In accordance with this change, results of the previous fiscal year
have been reclassified to conform to the presentation for the quarter
ended December 31, 2006.
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
Sales and operating
revenue 2005 2006 Change 2006
----------- ------ ------ ------ ------
Electronics
Customers Y 3,614,003 Y 4,147,247 +14.8 % $ 34,851
Intersegment 339,193 375,738 3,157
----------- ------ ------ ------
Total 3,953,196 4,522,985 +14.4 38,008
Game
Customers 772,396 703,928 -8.9 5,915
Intersegment 33,874 31,680 266
----------- ------ ------ ------
Total 806,270 735,608 -8.8 6,181
Pictures
Customers 505,477 679,859 +34.5 5,713
Intersegment - - -
----------- ------ ------ ------
Total 505,477 679,859 +34.5 5,713
Financial Services
Customers 503,277 447,798 -11.0 3,763
Intersegment 16,810 17,314 146
----------- ------ ------ ------
Total 520,087 465,112 -10.6 3,909
All Other
Customers 259,700 227,258 -12.5 1,910
Intersegment 59,729 50,894 428
----------- ------ ------ ------
Total 319,429 278,152 -12.9 2,338
Elimination (449,606) (475,626) - (3,997)
----------- ------ ------ ------
Consolidated total Y 5,654,853 Y 6,206,090 +9.7 % $ 52,152
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 88,475 Y 230,880 +161.0 % $ 1,940
Game 70,144 (124,498) - (1,046)
Pictures (2,765) 9,796 - 82
Financial Services 109,017 54,616 -49.9 459
All Other 29,473 26,971 -8.5 227
----------- ------ ------ ------
Total 294,344 197,765 -32.8 1,662
Corporate and (16,026) (12,643) - (106)
elimination
----------- ------ ------ ------
Consolidated total Y 278,318 Y 185,122 -33.5 % $ 1,556
Commencing with the third quarter ended December 31, 2006, Sony has
partly realigned its business segment configuration.
In accordance with this change, results of the first half of the
current fiscal year and the previous fiscal year have been reclassified
to conform to the presentation for the quarter ended December 31, 2006.
Electronics Sales and Operating Revenue to Customers by Product Category
------------------------------------------------------------------------
(Millions of yen, millions of U.S. dollars)
Third quarter ended December 31
Sales and operating
revenue 2005 2006 Change 2006
----------- ------ ------ ------ ------
Audio Y 184,559 Y 174,689 -5.3 % $ 1,468
Video 313,082 355,433 +13.5 2,987
Televisions 359,248 420,817 +17.1 3,536
Information and 220,157 256,724 +16.6 2,157
Communications
Semiconductors 44,695 52,199 +16.8 439
Components 226,580 227,588 +0.4 1,912
Other 135,271 151,110 +11.7 1,270
----------- ------ ------ ------
Total Y 1,483,592 Y 1,638,560 +10.4 % $ 13,769
Nine months ended December 31
Sales and operating
revenue 2005 2006 Change 2006
----------- ------ ------ ------ ------
Audio Y 431,503 Y 412,636 -4.4 % $ 3,467
Video 812,041 908,534 +11.9 7,635
Televisions 680,725 934,357 +37.3 7,852
Information and 589,317 690,215 +17.1 5,800
Communications
Semiconductors 127,602 152,672 +19.6 1,283
Components 602,513 653,659 +8.5 5,493
Other 370,302 395,174 +6.7 3,321
----------- ------ ------ ------
Total Y 3,614,003 Y 4,147,247 +14.8 % $ 34,851
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 Category New Product 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)
Third quarter ended December 31
Sales and operating
revenue 2005 2006 Change 2006
----------- ------ ------ ------ ------
Japan Y 618,438 Y 609,734 -1.4 % $ 5,124
United States 659,222 763,651 +15.8 6,417
Europe 619,481 682,402 +10.2 5,734
Other Areas 477,945 551,888 +15.5 4,638
----------- ------ ------ ------
Total Y 2,375,086 Y 2,607,675 +9.8 % $ 21,913
Nine months ended December 31
Sales and operating
revenue 2005 2006 Change 2006
----------- ------ ------ ------ ------
Japan Y 1,607,434 Y 1,583,365 -1.5 % $ 13,306
United States 1,514,000 1,691,037 +11.7 14,210
Europe 1,319,516 1,498,273 +13.5 12,591
Other Areas 1,213,903 1,433,415 +18.1 12,045
----------- ------ ------ ------
Total Y 5,654,853 Y 6,206,090 +9.7 % $ 52,152
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)
Third quarter ended December 31
Sales and operating %
revenue 2005 2006 Change 2006
----------- ------ ------ ------ ------
Net sales Y 2,165,618 Y 2,413,485 $ 20,281
Financial service 184,586 167,060 1,404
revenue
Other operating 24,882 27,130 228
revenue
------ ------ ------
2,375,086 2,607,675 +9.8 21,913
Costs and expenses:
Cost of sales 1,574,321 1,820,172 15,296
Selling, general and 447,277 470,346 3,952
administrative
Financial service 137,337 141,621 1,190
expenses
(Gain) loss on sale, 5,806 (3,371) (28)
disposal or impairment
of assets, net
------ ------ ------
2,164,741 2,428,768 20,410
Operating income 210,345 178,907 -14.9 1,503
Other income:
Interest and 6,633 5,914 50
dividends
Gain on sale of 2,447 4,867 41
securities
investments, net
Gain on change in interest 18,946 11,377 96
in subsidiaries and equity
investees
Other 5,254 2,533 21
------ ------ ------
33,280 24,691 208
Other expenses:
Interest 7,983 9,064 76
Loss on devaluation 171 294 2
of securities
investments
Foreign exchange 2,223 10,309 87
loss, net
Other 7,342 4,116 35
------ ------ ------
17,719 23,783 200
------ ------ ------
Income before income 225,906 179,815 -20.4 1,511
taxes
Income taxes 75,749 61,530 517
------ ------ ------
Income before minority 150,157 118,285 -21.2 994
interest and equity
in net income of
affiliated companies
Minority interest in 715 1,369 12
income of consolidated
subsidiaries
Equity in net income 19,502 43,001 362
of affiliated
companies
------ ------ ------
Net income Y 168,944 Y 159,917 -5.3 $ 1,344
------ ------ ------
Per share data:
Common stock
Net income
- Basic Y 169.36 Y 159.70 -5.7 $ 1.34
- Diluted 161.60 152.49 -5.6 1.28
(Millions of yen, millions of U.S. dollars, except per share amounts)
Nine months ended December 31
2005 2006 Change 2006
------ ------ ------ ------
Sales and operating %
revenue:
Net sales Y 5,080,764 Y 5,680,568 $ 47,736
Financial service 503,277 447,798 3,763
revenue
Other operating 70,812 77,724 653
revenue
------ ------ ------
5,654,853 6,206,090 +9.7 52,152
Costs and expenses:
Cost of sales 3,850,900 4,318,663 36,291
Selling, general and 1,097,032 1,303,483 10,954
administrative
Financial service 394,202 393,195 3,304
expenses
Loss on sale, 34,401 5,627 47
disposal or impairment
of assets, net
------ ------ ------
5,376,535 6,020,968 50,596
Operating income 278,318 185,122 -33.5 1,556
Other income:
Interest and 17,476 17,856 150
dividends
Gain on sale of 8,847 9,319 79
securities
investments, net
Gain on change in 57,477 31,452 264
interest in subsidiaries
and equity investees
Other 16,080 12,964 109
------ ------ ------
99,880 71,591 602
Other expenses:
Interest 19,964 20,449 172
Loss on devaluation 3,115 1,044 9
of securities
investments
Foreign exchange 3,289 13,803 116
loss, net
Other 17,638 13,696 115
------ ------ ------
44,006 48,992 412
------ ------ ------
Income before income 334,192 207,721 -37.8 1,746
taxes
Income taxes 152,943 78,746 662
------ ------ ------
Income before minority 181,249 128,975 -28.8 1,084
interest and equity
in net income of
affiliated companies
Minority interest in (1,093) 1,431 12
income (loss) of
consolidated
subsidiaries
Equity in net income 7,807 66,344 557
of affiliated
companies
------ ------ ------
Net income Y 190,149 Y 193,888 +2.0 $ 1,629
------ ------ ------
Per share data:
Common stock
Net income
- Basic Y 189.45 Y 193.64 +2.2 $ 1.63
- Diluted 180.76 184.81 +2.2 1.55
Consolidated Balance Sheets (Unaudited)
---------------------------
(Millions of yen, millions of U.S. dollars)
December March December December
31 31 31 31
ASSETS 2005 2006 2006 2006
--------- --------- --------- --------
Current assets:
Cash and cash Y 615,072 Y 703,098 Y 733,323 $ 6,162
equivalents
Marketable 527,689 536,968 488,585 4,106
securities
Notes and 1,448,520 1,075,071 1,811,216 15,220
accounts
receivable,
trade
Allowance for (100,516) (89,563) (112,641) (947)
doubtful
accounts and
sales returns
Inventories 751,545 804,724 966,205 8,119
Deferred income 177,123 221,311 247,536 2,080
taxes
Prepaid expenses 570,661 517,915 705,928 5,934
and other
current assets
--------- --------- --------- --------
3,990,094 3,769,524 4,840,152 40,674
Film costs 371,895 360,372 337,616 2,837
Investments and
advances:
Affiliated 299,996 285,870 445,544 3,744
companies
Securities 3,083,230 3,234,037 3,382,862 28,427
investments and
other
--------- --------- --------- --------
3,383,226 3,519,907 3,828,406 32,171
Property, plant
and equipment:
Land 182,297 178,844 173,262 1,456
Buildings 954,464 926,783 1,002,042 8,421
Machinery and 2,370,265 2,327,676 2,477,664 20,821
equipment
Construction in 76,774 116,149 61,754 519
progress
Less-Accumulated (2,202,122) (2,160,905) (2,262,609) (19,014)
depreciation
--------- --------- --------- --------
1,381,678 1,388,547 1,452,113 12,203
Other assets:
Intangibles, net 194,959 207,034 215,145 1,808
Goodwill 296,601 299,024 301,643 2,535
Deferred 389,933 383,156 394,527 3,315
insurance
acquisition costs
Deferred income 183,349 178,751 156,032 1,311
taxes
Other 474,700 501,438 415,227 3,489
--------- --------- --------- --------
1,539,542 1,569,403 1,482,574 12,458
--------- --------- --------- --------
Y 10,666,435 Y10,607,753 Y 11,940,861 $ 100,343
--------- --------- --------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term Y 198,969 Y 142,766 Y 316,203 $ 2,657
borrowings
Current portion 200,763 193,555 45,304 381
of long-term debt
Notes and 925,997 813,332 1,174,004 9,866
accounts
payable, trade
Accounts 828,850 854,886 971,932 8,167
payable, other
and accrued
expenses
Accrued income 93,721 87,295 54,484 458
and other taxes
Deposits from 601,446 599,952 717,528 6,030
customers in the
banking business
Other 487,502 508,442 480,118 4,034
--------- --------- --------- --------
3,337,248 3,200,228 3,759,573 31,593
Long-term liabilities:
Long-term debt 650,514 764,898 1,003,159 8,430
Accrued pension 222,834 182,247 170,501 1,433
and severance costs
Deferred income 193,193 216,497 254,331 2,137
taxes
Future insurance 2,680,265 2,744,321 2,960,559 24,879
policy benefits
and other
Other 248,953 258,609 290,970 2,444
--------- --------- --------- --------
3,995,759 4,166,572 4,679,520 39,323
Minority interest 37,014 37,101 41,967 353
in consolidated
subsidiaries
Stockholders' equity:
Capital stock 621,775 624,124 625,305 5,255
Additional 1,134,289 1,136,638 1,140,639 9,585
paid-in capital
Retained 1,681,691 1,602,654 1,780,228 14,960
earnings
Accumulated (138,330) (156,437) (82,928) (697)
other comprehensive
income
Treasury stock, (3,011) (3,127) (3,443) (29)
at cost
--------- --------- --------- --------
3,296,414 3,203,852 3,459,801 29,074
--------- --------- --------- --------
Y 10,666,435 Y 10,607,753 Y 11,940,861 $ 100,343
--------- --------- --------- --------
Consolidated Statements of Cash Flows (Unaudited)
-------------------------------------
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
2005 2006 2006
Cash flows from operating ------ ------ ------
activities:
Net income Y 190,149 Y 193,888 $ 1,629
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization, 278,259 284,854 2,394
including amortization of
deferred insurance
acquisition costs
Amortization of film costs 190,603 261,327 2,196
Accrual for pension and (4,146) (8,109) (68)
severance costs, less
payments
Gain on the transfer to the (73,472) - -
Japanese Government of
the substitutional portion of
employee pension fund, net
Loss on sale, disposal or 34,401 5,627 47
impairment of assets, net
Gain on sale or loss on (5,732) (8,275) (70)
devaluation of securities
investments, net
Gain on evaluation of (42,919) (10,756) (89)
marketable securities held
in the financial service
business for trading
purpose, net
Gain on change in interest in (57,477) (31,452) (264)
subsidiaries and equity
investees
Deferred income taxes 80,709 26,418 222
Equity in net income of (4,160) (64,226) (540)
affiliated companies, net
of dividends
Changes in assets and
liabilities:
Increase in notes and (325,032) (664,338) (5,583)
accounts receivable, trade
Increase in inventories (90,694) (139,796) (1,175)
Increase in film costs (251,836) (236,775) (1,990)
Increase in notes and 104,058 351,645 2,955
accounts payable, trade
Increase (Decrease) in 27,061 (20,579) (173)
accrued income and other
taxes
Increase in future insurance 110,014 127,210 1,069
policy benefits and other
Increase in deferred
insurance acquisition costs (47,667) (46,133) (388)
(Increase) Decrease (29,896) 16,969 143
in marketable securities
held in the financial service
business for trading purpose
Increase in other current (66,110) (82,246) (691)
assets
Increase in other current 101,471 120,176 1,010
liabilities
Other 6,678 81,396 684
------ ------ ------
Net cash provided by 124,262 156,825 1,318
operating activities
------ ------ ------
Cash flows from investing
activities:
Payments for purchases of (326,200) (410,217) (3,447)
fixed assets
Proceeds from sales of fixed 11,632 41,580 349
assets
Payments for investments and (1,061,286) (651,961) (5,479)
advances by financial
service business
Payments for investments and (20,944) (92,163) (774)
advances (other than
financial service business)
Proceeds from maturities of 722,132 488,153 4,102
marketable securities,
sales of securities
investments and
collections of
advances by financial
service business
Proceeds from maturities of 22,202 15,415 130
marketable securities,
sales of securities
investments and collections
of advances (other than
financial service business)
Proceeds from sales of 72,045 43,157 362
subsidiaries' and
equity investees' stocks
Other (198) (1,349) (11)
------ ------ ------
Net cash used in investing (580,617) (567,385) (4,768)
activities
Cash flows from financing
activities:
Proceeds from issuance of 127,653 267,085 2,244
long-term debt
Payments of long-term debt (132,776) (179,492) (1,508)
Increase in short-term 73,731 256,577 2,156
borrowings
Increase in deposits from 160,348 206,420 1,735
customers in the financial
service business
Increase (Decrease) in 52,800 (92,700) (779)
call money and bills sold
in the banking business
Dividends paid (24,853) (25,085) (211)
Other 7,182 1,916 16
------ ------ ------
Net cash provided by 264,085 434,721 3,653
financing activities
------ ------ ------
Effect of exchange rate changes 28,239 6,064 51
on cash and cash equivalents
------ ------ ------
Net increase (decrease) in cash (164,031) 30,225 254
and cash equivalents
Cash and cash equivalents at 779,103 703,098 5,908
beginning of the fiscal year
------ ------ ------
Cash and cash equivalents at Y615,072 Y733,323 $6,162
December 31
------ ------ ------
(Notes)
1. U.S. dollar amounts have been translated from yen, for
convenience only, at the rate of Y119 = U.S. $1, the approximate
Tokyo foreign exchange market rate as of December 29, 2006.
2. As of December 31, 2006, Sony had 949 consolidated subsidiaries
(including variable interest entities). It has applied the equity
accounting method in respect to 61 affiliated companies.
3. Prior to December 1, 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 has not been presented since the third quarter of the fiscal
year ended March 31, 2006.
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 outstanding shares (Thousands of shares)
----------------------- Third quarter ended December 31
2005 2006
------ ------
Net income
- Basic 997,683 1,001,333
- Diluted 1,045,558 1,048,692
Weighted-average number
of outstanding shares (Thousands of shares)
----------------------- Nine months ended December 31
2005 2006
------ ------
Net income
- Basic 996,764 1,001,276
- Diluted 1,044,546 1,049,130
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 third quarter and the nine months of the fiscal year ended
March 31, 2006 and for the third quarter and the nine months of
the fiscal year ending March 31, 2007 were as follows:
(Millions of yen, millions of U.S. dollars)
Third quarter ended Nine months ended
December 31 December 31
------ ------ ------ ------ ------ ------
2005 2006 2006 2005 2006 2006
---------- ------ ------ ------ ------ ------ ------
Net income Y168,944 Y159,917 $1,344 Y190,149 Y193,888 $1,629
Other
comprehensive
income :
Unrealized 49,614 3,515 29 82,588 (18,174) (153)
gains
(losses) on
securities
Unrealized 272 947 8 1,004 (79) (0)
gains
(losses) on
derivative
instruments
Minimum (3) (1,906) (16) 31,429 (4,553) (38)
pension
liabilities
adjustments
Foreign 78,443 59,138 497 132,324 96,315 809
currency
translation
adjustments
------ ------ ------ ------ ------ ------
128,326 61,694 518 247,345 73,509 618
---------- ------ ------ ------ ------ ------ ------
Comprehensive
income Y297,270 Y221,611 $1,862 Y437,494 Y267,397 $2,247
---------- ------ ------ ------ ------ ------ ------
5. Effective April 1, 2006, 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 and other income for the third quarter and the nine months
of the fiscal year ended March 31, 2006 have been reclassified to
conform with the presentation of these items for the third quarter
and the nine months of the fiscal year ending March 31, 2007.
Royalty income for the third quarter and the nine months of the
fiscal year ended March 31, 2006 was Y7,529 million and
Y24,878 million, respectively. Royalty income for the third quarter
and the nine months of the fiscal year ending March 31, 2007 was
Y9,548 million and Y25,492 million, respectively. These amounts
were recorded primarily within the Electronics segment.
6. In December 2004, the Financial Accounting Standards Board ("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
Y693 million and Y2,090 million for the third quarter and the
nine months of the fiscal year ending March 31, 2007,
respectively.
7. In February 2006, the 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 increased approximately
Y0.4 billion and Y0.5 billion for the third quarter and the nine
months of the fiscal year ending March 31, 2007, respectively.
Additionally, on April 1, 2006, Sony recognized Y3,785 million
of loss (net of income taxes of Y2,148 million) as a
cumulative-effect adjustment to beginning retained earnings.
Other Consolidated Financial Data
(Millions of yen, millions of U.S. dollars)
Third quarter ended December 31
2005 2006 Change 2006
------ ------ ------ ------
Capital expenditures Y76,139 Y87,965 +15.5% $739
(additions to property,
plant and equipment)
Depreciation and 96,843 99,935 + 3.2 840
amortization expenses*
(Depreciation expenses for (79,780) (80,477) +0.9 (676)
tangible assets)
R&D expenses 121,668 133,522 + 9.7 1,122
(Millions of yen, millions of U.S. dollars)
Nine months ended December 31
2005 2006 Change 2006
------ ------ ------ ------
Capital expenditures Y261,920 Y312,045 +19.1% $2,622
(additions to property,
plant and equipment)
Depreciation and 278,259 284,854 + 2.4 2,394
amortization expenses*
(Depreciation expenses for (226,506) (225,969) -0.2 (1,899)
tangible assets)
R&D expenses 371,425 396,377 + 6.7 3,331
* Including amortization expenses for intangible assets and
for deferred insurance acquisition costs
(Condensed Financial Services Financial Statements)
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 (Unaudited)
------------------------------
(Millions of yen, millions of U.S. dollars)
Financial Services Third quarter ended December 31
2005 2006 Change 2006
------ ------ ------ ------
%
Financial service Y190,391 Y172,910 -9.2 $1,453
revenue
Financial service 143,343 147,440 +2.9 1,239
expenses
------ ------ ------
Operating income 47,048 25,470 -45.9 214
Other income (expenses), 1,412 5,893 +317.4 50
net
------ ------ ------
Income before income 48,460 31,363 -35.3 264
taxes
Income taxes and 17,086 11,868 -30.5 100
other
------ ------ ------
Net income Y31,374 Y19,495 -37.9 $164
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without Third quarter ended December 31
Financial Services 2005 2006 Change 2006
------ ------ ------ ------
%
Net sales and Y2,192,428 Y2,442,878 +11.4 $20,528
operating revenue
Costs and expenses 2,029,276 2,289,791 +12.8 19,242
------ ------ ------
Operating income 163,152 153,087 -6.2 1,286
Other income 14,294 (4,634) - (38)
(expenses), net
------ ------ ------
Income before 177,446 148,453 -16.3 1,248
income taxes
Income taxes and 39,875 8,031 -79.9 68
other
------ ------ ------
Net income Y137,571 Y140,422 +2.1 $1,180
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated Third quarter ended December 31
2005 2006 Change 2006
------ ------ ------ ------
%
Financial service Y184,586 Y167,060 -9.5 $1,404
revenue
Net sales and 2,190,500 2,440,615 +11.4 20,509
operating revenue
------ ------ ------
2,375,086 2,607,675 +9.8 21,913
Costs and expenses 2,164,741 2,428,768 +12.2 20,410
------ ------ ------
Operating income 210,345 178,907 -14.9 1,503
Other income 15,561 908 -94.2 8
(expenses), net
------ ------ ------
Income before income 225,906 179,815 -20.4 1,511
taxes
Income taxes and 56,962 19,898 -65.1 167
other
------ ------ ------
Net income Y168,944 Y159,917 -5.3 $1,344
------ ------ ------
Condensed Statements of Income (Unaudited)
------------------------------
(Millions of yen, millions of U.S. dollars)
Financial Services Nine months ended December 31
2005 2006 Change 2006
------ ------ ------ ------
%
Financial service Y520,087 Y465,112 -10.6 $3,909
revenue
Financial service 411,070 410,496 -0.1 3,450
expenses
------ ------ ------
Operating income 109,017 54,616 -49.9 459
Other income 24,646 5,698 -76.9 48
(expenses), net
------ ------ ------
Income before 133,663 60,314 -54.9 507
income taxes
Income taxes and 49,325 21,794 -55.8 183
other
------ ------ ------
Net income Y84,338 Y38,520 -54.3 $324
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without Financial Nine months ended December 31
Services 2005 2006 Change 2006
------ ------ ------ ------
%
Net sales and Y5,157,684 Y5,765,255 +11.8 $48,448
operating
revenue
Costs and expenses 4,989,392 5,635,762 +13.0 47,360
------ ------ ------
Operating income 168,292 129,493 -23.1 1,088
Other income 32,107 24,025 -25.2 202
(expenses), net
------ ------ ------
Income before 200,399 153,518 -23.4 1,290
income taxes
Income taxes and 94,718 (8,125) - (68)
other
------ ------ ------
Net income Y105,681 Y161,643 +53.0 $1,358
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated Nine months ended December 31
2005 2006 Change 2006
------ ------ ------ ------
%
Financial service Y503,277 Y447,798 -11.0 $3,763
revenue
Net sales and 5,151,576 5,758,292 +11.8 48,389
operating revenue
------ ------ ------
5,654,853 6,206,090 +9.7 52,152
Costs and expenses 5,376,535 6,020,968 +12.0 50,596
------ ------ ------
Operating income 278,318 185,122 -33.5 1,556
Other income 55,874 22,599 -59.6 190
(expenses), net
------ ------ ------
Income before 334,192 207,721 -37.8 1,746
income taxes
Income taxes and 144,043 13,833 -90.4 117
other
------ ------ ------
Net income Y190,149 Y193,888 +2.0 $1,629
------ ------ ------
Condensed Balance Sheet (Unaudited)
-----------------------
(Millions of yen, millions of U.S. dollars)
Financial Services December March December December
31 31 31 31
ASSETS 2005 2006 2006 2006
------ ------ ------ ------
Current assets:
Cash and cash Y176,411 Y117,630 Y222,442 $1,869
equivalents
Marketable 523,612 532,895 485,502 4,080
securities
Other 206,092 200,929 303,162 2,548
------ ------ ------ ------
906,115 851,454 1,011,106 8,497
Investments and 2,964,784 3,131,269 3,298,833 27,721
advances
Property, plant 36,339 37,422 39,214 330
and equipment
Other assets:
Deferred insurance 389,933 383,156 394,527 3,315
acquisitioncosts
Other 141,837 164,827 107,280 901
------ ------ ------ ------
531,770 547,983 501,807 4,216
------ ------ ------ ------
Y4,439,008 Y4,568,128 Y4,850,960 $40,764
------ ------ ------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term Y94,848 Y136,723 Y69,563 $585
borrowings
Notes and accounts 12,142 11,707 14,935 126
payable, trade
Deposits from 601,446 599,952 717,528 6,030
customers in the
banking business
Other 128,119 169,956 134,785 1,131
------ ------ ------ ------
836,555 918,338 936,811 7,872
Long-term liabilities:
Long-term debt 134,785 128,097 131,671 1,106
Accrued pension and 13,614 13,479 13,038 110
severance costs
Future insurance 2,680,265 2,744,321 2,960,559 24,879
policy benefits
and other
Other 189,180 170,294 198,987 1,671
------ ------ ------ ------
3,017,844 3,056,191 3,304,255 27,766
Minority interest in 4,054 4,089 4,587 39
consolidated
subsidiaries
Stockholders' equity 580,555 589,510 605,307 5,087
------ ------ ------ ------
Y4,439,008 Y4,568,128 Y4,850,960 $40,764
------ ------ ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without December March December December
Financial Services 31 31 31 31
ASSETS 2005 2006 2006 2006
------ ------ ------ ------
Current assets:
Cash and cash Y438,661 Y585,468 Y510,881 $4,293
equivalents
Marketable 4,077 4,073 3,083 26
securities
Notes and accounts 1,337,504 973,675 1,676,464 14,088
receivable, trade
Other 1,334,372 1,393,306 1,692,507 14,223
------ ------ ------ ------
3,114,614 2,956,522 3,882,935 32,630
Film costs 371,895 360,372 337,616 2,837
Investments and 500,288 474,568 614,597 5,165
advances
Investments in 187,400 187,400 187,400 1,575
Financial Services, at
cost
Property, plant and 1,345,339 1,351,125 1,412,900 11,873
equipment
Other assets 1,079,943 1,056,726 1,029,913 8,654
------ ------ ------ ------
Y6,599,479 Y6,386,713 Y7,465,361 $62,734
------ ------ ------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term Y321,783 Y225,082 Y338,052 $2,841
borrowings
Notes and accounts 916,700 804,394 1,160,617 9,753
payable, trade
Other 1,296,755 1,299,809 1,387,184 11,657
------ ------ ------ ------
2,535,238 2,329,285 2,885,853 24,251
Long-term liabilities:
Long-term debt 595,784 701,372 927,711 7,796
Accrued pension and 209,220 168,768 157,463 1,323
severance costs
Other 323,070 352,457 415,043 3,487
------ ------ ------ ------
1,128,074 1,222,597 1,500,217 12,606
Minority interest in 32,571 32,623 36,363 306
consolidated
subsidiaries
Stockholders' equity 2,903,596 2,802,208 3,042,928 25,571
------ ------ ------ ------
Y6,599,479 Y6,386,713 Y7,465,361 $62,734
------ ------ ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated December March December December
31 31 31 31
ASSETS 2005 2006 2006 2006
------ ------ ------ ------
Current assets:
Cash and cash Y615,072 Y703,098 Y733,323 $6,162
equivalents
Marketable 527,689 536,968 488,585 4,106
securities
Notes and accounts 1,348,004 985,508 1,698,575 14,273
receivable, trade
Other 1,499,329 1,543,950 1,919,669 16,133
------ ------ ------ ------
3,990,094 3,769,524 4,840,152 40,674
Film costs 371,895 360,372 337,616 2,837
Investments and 3,383,226 3,519,907 3,828,406 32,171
advances
Property, plant 1,381,678 1,388,547 1,452,113 12,203
and equipment
Other assets:
Deferred insurance 389,933 383,156 394,527 3,315
acquisition costs
Other 1,149,609 1,186,247 1,088,047 9,143
------ ------ ------ ------
1,539,542 1,569,403 1,482,574 12,458
------ ------ ------ ------
Y10,666,435 Y10,607,753 Y11,940,861 $100,343
------ ------ ------ ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term Y399,732 Y336,321 Y361,507 $3,038
borrowings
Notes and accounts 925,997 813,332 1,174,004 9,866
payable, trade
Deposits from 601,446 599,952 717,528 6,030
customers in the
banking business
Other 1,410,073 1,450,623 1,506,534 12,659
------ ------ ------ ------
3,337,248 3,200,228 3,759,573 31,593
Long-term liabilities:
Long-term debt 650,514 764,898 1,003,159 8,430
Accrued pension 222,834 182,247 170,501 1,433
and severance
costs
Future insurance 2,680,265 2,744,321 2,960,559 24,879
policy benefits
and other
Other 442,146 475,106 545,301 4,581
------ ------ ------ ------
3,995,759 4,166,572 4,679,520 39,323
Minority interest in 37,014 37,101 41,967 353
consolidated
subsidiaries
Stockholders' equity 3,296,414 3,203,852 3,459,801 29,074
------ ------ ------ ------
Y10,666,435 Y10,607,753 Y11,940,861 $100,343
------ ------ ------ ------
Condensed Statements of Cash Flows (Unaudited)
----------------------------------
(Millions of yen, millions of U.S. dollars)
Financial Services Nine months ended December 31
2005 2006 2006
------ ------ ------
Net cash provided by Y79,798 Y170,258 $1,431
operating activities
Net cash used in investing (371,441) (199,042) (1,673)
activities
Net cash provided by 208,683 133,596 1,123
financing activities
------ ------ ------
Net increase (decrease) (82,960) 104,812 881
in cash and cash
equivalents
Cash and cash equivalents 259,371 117,630 988
at beginning of the
fiscal year
------ ------ ------
Cash and cash equivalents Y176,411 Y222,442 $1,869
at December 31
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Sony without Financial Nine months ended December 31
Services 2005 2006 2006
------ ------ ------
Net cash provided by Y43,704 Y(11,574) $(97)
(used in) operating
activities
Net cash used in investing (203,931) (374,679) (3,149)
activities
Net cash provided by 50,917 305,602 2,568
financing activities
Effect of exchange rate 28,239 6,064 51
changes on cash and cash
equivalents
------ ------ ------
Net decrease in cash (81,071) (74,587) (627)
and cash equivalents
Cash and cash equivalents 519,732 585,468 4,920
at beginning of the
fiscal year
------ ------ ------
Cash and cash equivalents Y438,661 Y510,881 $4,293
at December 31
------ ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated Nine months ended December 31
2005 2006 2006
------ ------ ------
Net cash provided by Y124,262 Y156,825 $1,318
operating activities
Net cash used in investing (580,617) (567,385) (4,768)
activities
Net cash provided by 264,085 434,721 3,653
financing activities
Effect of exchange rate 28,239 6,064 51
changes on cash and cash
equivalents
------ ------ ------
Net increase (decrease) (164,031) 30,225 254
in cash and cash
equivalents
Cash and cash equivalents 779,103 703,098 5,908
at beginning of the
fiscal year
------ ------ ------
Cash and cash equivalents Y615,072 Y733,323 $6,162
at December 31
------ ------ ------
Investor Relations Contacts:
---------------------------
Tokyo New York London
Takao Yuhara Sam Levenson/ Shinji Tomita
Justin Hill/
Miki Emura
+81-(0)3-5448-2180 +1-212-833-6722 +44-(0)20-7444-9713
Home Page: http://www.sony.net/IR/
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The company news service from the London Stock Exchange
Sony Corp announces 3rd Quarter Results
| Source: Sony Corp
Tokyo, Japan -- (MARKET WIRE) -- January 30, 2007 --