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/