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 October 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: October 26, 2006
List of materials
Documents attached hereto:
i) Press release announcing Consolidated Financial Results for the Second
Quarter Ended September 30, 2006
Sony Corporation
6-7-35 Kitashinagawa
Shinagawa-ku
Tokyo 141-0001 Japan
No: 06--101E
3:00 P.M. JST, October 26, 2006
Consolidated Financial Results
for the Second Quarter Ended September 30, 2006
Tokyo, October 26, 2006 -- Sony Corporation today announced its
consolidated results for the second quarter of the fiscal year
ending March 31, 2007 (July 1, 2006 to September 30, 2006).
(Billions of yen, millions of U.S. dollars, except per share
amounts)
Second quarter ended September 30
2005 2006 Change 2006*
in Yen
---------- ------ ------ ------ ------
Sales and operating Y1,711.6 Y1,854.2 +8.3% $15,713
revenue**
Operating income 74.6 (20.8) - (177)
(loss)
Income (loss) before 95.4 (26.1) - (221)
income taxes
Equity in net income (2.6) 19.7 - 167
(loss) of affiliated
companies
Net income 28.5 1.7 -94.1 14
Net income per share
of common stock
- Basic Y28.63 Y1.68 -94.1 $0.01
- Diluted 27.32 1.60 -94.1 0.01
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 Y118=U.S.$1, the approximate
Tokyo foreign exchange market rate as of September 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 second quarter of the
fiscal year ended March 31, 2006 have been reclassified to
conform with the presentation of these items for the second
quarter of the fiscal year ending March 31, 2007. Royalty income
for the second quarters ended September 30, 2005 and 2006 was
Y8.6 billion and Y7.3 billion, respectively. These amounts were
recorded primarily within the Electronics segment.
Consolidated Results for the Second Quarter Ended September 30,
2006
---------------------------------------------------------------
Sales and operating revenue ("sales") increased 8.3% compared
with the same quarter of the previous fiscal year; on a local
currency basis sales increased 4%. (For all references herein to
results on a local currency basis, see Note I).
Sales within the Electronics segment increased 12.1%. Products
such as "BRAVIA TM" LCD televisions, "VAIO" PCs, and
"Cyber-shot TM" digital cameras contributed to the sales
increase, although there was a decline in sales of such products
as CRT televisions. In the Game segment, sales decreased 20.5%
compared to the same quarter of the previous fiscal year
primarily as a result of a decrease in hardware unit sales of
PSP(R) (PlayStation(R)Portable) ("PSP"). In the Pictures
segment, there was a 12.1% increase in revenue mainly due to the
greater number of theatrical releases during the quarter,
combined with higher theatrical revenue per film on titles
including Talladega Nights: The Ballad of Ricky Bobby and Monster
House. In the Financial Services segment, revenue decreased by
4.4% mainly due to a decrease in valuation gains in the general
account and the separate account at Sony Life Insurance Co.,
Ltd. ("Sony Life").
An operating loss of Y20.8 billion ($177 million) was recorded,
a deterioration of Y95.4 billion compared to the same quarter of
the previous fiscal year. This includes the recording of a Y51.2
billion provision that relates to charges expected to be
incurred as a result of the recall by Dell Inc., Apple Computer
Inc. and Lenovo, Inc. of notebook computer battery packs that
use lithium-ion battery cells manufactured by Sony and the
subsequent global replacement program initiated by Sony for
certain notebook computer battery packs used by Sony and other
notebook computer manufacturers that use lithium-ion battery
cells manufactured by Sony. The operating income recorded during
the same quarter of the previous fiscal year includes a one time
gain of Y73.5 billion resulting from the transfer to the
Japanese Government of the substitutional portion of Sony's
Employee Pension Fund.
In the Electronics segment, there was an improvement in the cost
of sales ratio, a decrease in loss on sale, disposal or
impairment of fixed assets and an increase in sales to outside
customers, as well as a positive impact from the depreciation of
the yen. However, decreased operating income was recorded as a
result of the absence of the above-mentioned transfer to the
Japanese Government of the substitutional portion of Sony's
Employee Pension Fund, of which Y64.5 billion yen was recorded
within the Electronics segment during the same quarter of the
previous fiscal year, and the notebook computer battery
provision recorded during the current quarter.
In the Game segment, an operating loss was recorded as a result
of the recording of charges associated with preparation for the
launch of the PLAYSTATION(R)3 ("PS3") platform. In the Pictures
segment, the amount of operating loss increased primarily due to
higher total marketing expenses resulting from a greater number
of theatrical releases and the theatrical underperformance of
Zoom and All The King's Men. 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, recorded as operating expenses, for the
second quarter amounted to Y5.3 billion ($45 million) compared
to Y32.9 billion in the same quarter of the previous fiscal
year. In the Electronics segment, restructuring charges were
Y5.2 billion ($44 million) compared to Y32.3 billion in the same
quarter of the previous fiscal year.
A loss before income taxes of Y26.1 billion ($221 million) was
recorded, a deterioration of Y121.5 billion compared to the same
quarter of the previous year. This was the result of the fact
that the net effect of other income and expenses was Y26.1
billion lower compared to the same quarter of the previous year,
in addition to the deterioration in operating income (loss). The
lower net effect of other income and expenses was primarily a
result of the absence of the recording of a gain of Y20.7
billion on the change in interest resulting from the sale of a
portion of stock in Monex Beans Holdings, Inc. which was
recorded in the same quarter of the previous fiscal year and the
recording of a net foreign exchange loss in the current quarter
versus the net foreign exchange gain recorded in the same
quarter of the previous fiscal year.
Equity in net income (loss) of affiliated companies of Y19.7
billion ($167 million) was recorded, an improvement of Y22.3
billion from the equity in net loss recorded in the same quarter
of the previous fiscal year. Sony recorded equity in net income
for Sony Ericsson Mobile Communications AB ("Sony Ericsson") of
Y21.8 billion ($185 million), an increase of Y14.8 billion
compared to the same quarter of the previous year. S-LCD
Corporation ("S-LCD"), a joint-venture with Samsung Electronics
Co., Ltd. for the manufacture of amorphous TFT LCD panels,
contributed Y1.6 billion ($14 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 Y4.4 billion compared to the same quarter of the
previous fiscal year. Sony also recorded equity in net loss of
Y2.2 billion ($19 million) for SONY BMG MUSIC ENTERTAINMENT
("SONY BMG"), a decrease in the amount of equity loss of Y1.0
billion compared to the same quarter of the previous fiscal
year. An equity in net loss of Y2.8 billion ($24 million) for
Metro-Goldwyn-Mayer Inc. ("MGM")* was recorded by Sony, a
decrease in the amount of equity loss of Y1.6 billion compared
to the same quarter of the previous fiscal year. The equity in
net loss for MGM includes non-cash interest expense of Y2.1
billion ($18 million) on cumulative preferred stock compared to
the Y1.5 billion of non-cash interest expense 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 decreased by 94.1% 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)
Second quarter ended September 30
2005 2006 Change in 2006
Yen
---------- ------ ------ ------ ------
Sales and operating Y1,229.4 Y1,378.4 +12.1% $11,681
revenue
Operating income 28.1 8.0 -71.4 68
Unless otherwise specified, all amounts are on a U.S. GAAP
basis.
Sales increased by 12.1% compared to the same quarter of the
previous fiscal year (a 7% increase on a local currency basis).
Sales to outside customers increased 16.7% compared to the same
quarter of the previous fiscal year. There was an increase in
sales of products including "BRAVIA" LCD televisions, "VAIO"
PCs, and "Cyber-shot" digital cameras, all of which experienced
favorable sales in all regions, partially offset by a decrease
in sales of several products primarily CRT televisions.
Operating income decreased by 71.4% compared with the same
quarter of the previous fiscal year. An improvement in the cost
of sales ratio, a decrease in loss on sale, disposal or
impairment of fixed assets, an increase in sales to outside
customers, as well as a positive impact from the depreciation of
the yen favorably impacted operating income. However, these
factors were more than offset by the absence of the Y64.5
billion gain which resulted from the transfer to the Japanese
government of the substitutional portion of Sony's Employee
Pension Fund recorded in the same quarter of the previous fiscal
year, as well as by the recording in the current quarter of the
Y51.2 billion provision for charges related to the notebook
computer battery pack recall and subsequent global replacement
program. With regard to products within the Electronics segment,
there was a positive contribution to operating income from
strong sales of "Cyber-shot" digital cameras and "BRAVIA" LCD
televisions. Other products which contributed positively
compared to the same quarter of the previous fiscal year
included CRT televisions, where fixed costs have been lowered as
a result of previous restructuring activities.
Inventory, as of September 30, 2006, was Y971.6 billion ($8,234
million), a Y328.7 billion, or 51.1%, increase compared with the
level as of September 30, 2005 and a Y164.0 billion, or 20.3%,
increase compared with the level as of June 30, 2006. This
increase was primarily a result of increased LCD television
inventory as well as 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.
(millions of Euros)
Second quarter ended September 30
2005 2006 Change in
Euros
---------- ------ ------ ------
Sales and operating EUR2,055 EUR2,913 +42%
revenue
Income before income 151 433 +187
taxes
Net income 104 298 +187
Sales for the quarter increased by 42% compared to the same
quarter of the previous year. Results were boosted by sales of
hit models such as "Cyber-shot" and "Walkman(R)" phones. As a
result, equity in net income of Y21.8 billion ($185 million) was
recorded by Sony.
Game
----
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2005 2006 Change in 2006
Yen
---------- ------ ------ ------ ------
Sales and operating Y214.2 Y170.3 -20.5% $1,443
revenue
Operating income (loss) 8.2 (43.5) - (369)
Unless otherwise specified, all amounts are on a U.S. GAAP
basis.
Sales decreased 20.5% compared with the same quarter of the
previous fiscal year (a 25% decrease on a local currency basis).
Hardware: There was a decrease in sales in Japan, the U.S. and
Europe mainly as a result of lower PSP and PlayStation(R)2 ("PS2")
unit sales compared to the same quarter of the previous fiscal
year, as well as a strategic price reduction for PS2 in those
markets.
Software: Although sales from PSP software increased compared to
the same quarter of the previous fiscal year, overall software
sales decreased as a result of lower PS2 software sales.
An operating loss of Y43.5 billion ($369 million) was recorded,
a decline compared to the Y8.2 billion operating income recorded
during the same quarter of the previous fiscal year. This
deterioration was due 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 (and increase/decrease
compared to the same quarter of the previous fiscal year):*
-> PS2: 5.02 million units (an increase of 0.01 million units)
-> PSP: 3.89 million units (an increase of 0.14 million units)
Worldwide software production shipments (and increase/decrease
compared to the same quarter of the previous fiscal year):*
-> PS2: 47 million units (a decrease of 3 million units)
-> PSP: 12.9 million units (an increase of 3.9 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 September 30, 2006, was Y188.2 billion ($1,595
million), which represents a Y73.3 billion, or 63.8%, increase
compared with the level as of September 30, 2005. This increase
was due to the low level of overall PSP inventory as of
September 30, 2005, following the launch of PSP in Europe, in
addition to inventory recorded from PS3-related components as of
September 30, 2006. Inventory, as of September 30, 2006, was a
Y66.2 billion, or 54.3%, increase compared with the level as of
June 30, 2006.
Pictures
--------
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2005 2006 Change in 2006
Yen
---------- ------ ------ ------ ------
Sales and operating Y158.9 Y178.2 +12.1% $1,510
revenue
Operating loss (6.6) (15.3) - (129)
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 12.1% compared with the same quarter of the
previous fiscal year (7% increase on a U.S. dollar basis). Sales
increased primarily due to a greater number of theatrical
releases in the current year's second quarter, combined with
higher theatrical revenue per film on titles released during the
quarter. This was partially offset by lower DVD revenues on
theatrical films. Major theatrical releases that contributed to
revenues during the quarter included Talladega Nights: The
Ballad of Ricky Bobby, Monster House and Click.
An operating loss of Y15.3 billion ($129 million) was recorded,
a deterioration of Y8.6 billion compared to the same quarter of
the previous fiscal year. Despite the sales increases noted
above, motion picture operating income was adversely affected by
higher total marketing expenses resulting from a greater number
of theatrical releases and the theatrical underperformance of
Zoom and All The King's Men. The lower DVD revenues noted above
also contributed to the increased operating loss. Television
operating income declined in the current quarter due to
production and marketing expenses associated with new network
and made-for-syndication television shows.
Financial Services
------------------
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2005 2006 Change in 2006
Yen
---------- ------ ------ ------ ------
Financial service Y175.9 Y168.1 -4.4% $1,425
revenue
Operating income 40.0 24.6 -38.7 208
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 4.4% compared with the same
quarter of the previous fiscal year, mainly 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 Y9.1 billion or 5.9% to
Y144.2 billion ($1,222 million), mainly as a result of lower
valuation gains in the general account and the separate account.
Operating income decreased by 38.7% 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 Y13.5 billion or 34.5% to Y25.6
billion ($217 million) mainly as a result of a decrease in
valuation gains from investments in the general account, including
valuation gains from convertible bonds.
All Other
---------
(Billions of yen, millions of U.S. dollars)
Second quarter ended September 30
2005 2006 Change in 2006
Yen
---------- ------ ------ ------ ------
Sales and operating Y97.3 Y81.5 -16.3% $690
revenue
Operating income 7.6 6.5 -14.3 55
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales decreased 16.3% compared with the same quarter of the
previous fiscal year. This sales decrease mainly reflects the
sale, during the first quarter of the current fiscal year, 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.
Sales decreased at Sony Music Entertainment (Japan) Inc. ("SMEJ")
due to lower intersegment sales in association with the transfer
of business activity relating to Sony's disc custom press business
from SMEJ to other segments within the Sony Group during the
second quarter of the fiscal year. Excluding this impact, there
was an increase in album and singles sales compared to the same
quarter of the previous fiscal year. Best-selling albums and
singles during the current quarter included Yuki's WAVE, Beyonce's
B'Day and Shogo Hamada's The Best of Shogo Hamada vol.1 and vol.2.
Operating income decreased by 14.3% compared to the same quarter
of the previous fiscal year. This decrease was the result of the
absence of the gain resulting from the transfer to the Japanese
government of the substitutional portion of the Employee Pension
Fund at several businesses within All Other including SMEJ which
was recorded during the same quarter of the previous fiscal year.
Excluding this impact, there was a significant increase in
operating income within All Other mainly driven by an increase in
operating income at Sony Music Entertainment Inc.'s U.S.-based
music publishing business due to an improvement in the royalty
expense-to-revenue ratio and at So-net Entertainment Corporation
in association with increased revenue relating to an increase in
optical fiber service subscribers.
Excluding the above-mentioned impact of the transfer to the
Japanese government of the substitutional portion of the Employee
Pension Fund during the same quarter of the previous fiscal year
and the decrease in intersegment sales at SMEJ, operating income
at SMEJ was relatively unchanged compared to the same quarter of
the previous fiscal year.
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.
(millions of U.S. dollars)
Second quarter ended September 30
2005 2006 Change in
Dollars
---------- ------ ------ ------
Sales and operating $936 $948 +1%
revenue
Loss before income (58) (31) -
taxes
Net loss (60) (39) -
SONY BMG recorded increased sales of 1% compared with the same
period of the previous fiscal year primarily due to the benefit
of foreign exchange rates. Loss before income taxes includes $39
million of restructuring charges, a year-on-year reduction of $4
million. Decreased loss before income taxes was primarily the
result of lower legal and restructuring costs. As a result,
equity in net loss of Y2.2 billion ($19 million) was recorded by
Sony. Best selling albums during the quarter included Justin
Timberlake's Future Sex/Love Sounds, Beyonce's B'Day, and
Christina Aguilera's Back to Basics.
In August 2004, Sony combined its recorded music business
outside of Japan with the recorded music business of Bertelsmann
AG ("Bertelsmann"), forming SONY BMG, upon 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. On October 3,
2006, Bertelsmann and Sony Corporation of America ("SCA") filed
a joint appeal against the Court of First Instance's judgment.
In addition, Bertelsmann and SCA are in the process of updating
the notification filed in 2004 to permit the European Commission
to reexamine the transaction. 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 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)
Six months ended September 30
Cash flow 2005 2006 Change 2006
in Yen
---------- ------ ------ ------ ------
- From operating activities (Y91.9) (Y191.2) Y -99.3 ($1,620)
- From investing activities (145.1) (217.5) -72.4 (1,843)
- From financing activities 97.1 191.2 +94.1 1,620
Cash and cash equivalents 519.7 585.5 +65.7 4,961
at beginning of the fiscal
year
Cash and cash equivalents 393.9 363.9 -30.0 3,084
as of September 30
Operating Activities: During the six months ended September 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 in inventory within the Electronics and Game
segments in preparation for the year-end sales season. Within
the Electronics segment, there was an increase in LCD television
inventory and semiconductor inventory for use in PS3.
Investing Activities: During the six months ended September 30,
2006, although cash was generated from the transfer of 51% of
the stock in StylingLife, 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 was a use of cash of
Y408.7 billion ($3,463 million).
Financing Activities: During the six months ended September 30,
2006, financing was carried out through the issuance of
commercial paper and syndicated bank loans. These sources were
partially offset by cash used to redeem straight bonds and make
dividend payments.
Cash and Cash Equivalents: In addition to the aforementioned
information, the total balance of cash and cash equivalents,
accounting for the effect of foreign currency exchange rate
fluctuations, decreased Y221.6 billion compared to March 31,
2006, and decreased by Y30.0 billion compared to September 30,
2005, to Y363.9 billion ($3,084 million) as of September 30,
2006.
Cash Flow - Financial Services segment
--------------------------------------
(Billions of yen, millions of U.S. dollars)
Six months ended September 30
Cash flow 2005 2006 Change 2006
in Yen
---------- ------ ------ ------ ------
- From operating activities Y50.9 Y121.8 Y +70.8 $1,032
- From investing activities (261.9) (113.2) +148.8 (959)
- From financing activities 138.9 65.2 -73.7 552
Cash and cash equivalents 259.4 117.6 -141.7 997
at beginning of the fiscal
year
Cash and cash equivalents 187.3 191.4 +4.2 1,622
as of September 30
Operating Activities: Net cash from operating activities was
generated due to an increase in revenue from insurance premiums,
reflecting primarily an increase in insurance-in-force at Sony
Life.
Investing Activities: Payments for investments and advances
exceeded proceeds from maturities of marketable securities,
sales of securities investments and collections of advances
primarily as a result of investments in mainly Japanese fixed
income securities carried out at Sony Life.
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 Y73.8 billion compared to March 31,
2006, and increased Y4.2 billion compared to September 30, 2005,
to Y191.4 billion ($1,622 million) as of September 30, 2006.
Notes
-----
Note I: During the quarter ended September 30, 2006, the average
value of the yen was Y115.3 against the U.S. dollar and Y146.6
against the Euro, which was 4.3% lower against the U.S. dollar
and 8.5% 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
-------------------------------------------------
Our forecast for the fiscal year ending March 31, 2007, as
revised on October 19, 2006, is as per the table below:
Change from
Current previous
Forecast* fiscal year
--------- -----------
Sales and operating revenue Y8,230 billion +10%
Operating income 50 billion -78
(Restructuring charges included
within Operating income 40 billion -71)
Income before income taxes 70 billion -76
Equity in net income of
affiliated companies 40 billion +204
Net income 80 billion -35
*Assumed foreign currency exchange rates for the second half of
the fiscal year: approximately Y114 to the U.S. dollar and
approximately Y145 to the Euro.
Please note that the above operating income forecast reflects
the Y51.2 billion provision for charges related to the notebook
computer battery pack recall and subsequent global replacement
program.
Our forecast for capital expenditures, depreciation and
amortization or research and development costs, 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, 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)
Second quarter ended September 30
Sales and operating 2005 2006 Change 2006
revenue
---------- ------ ------ ------ ------
Electronics
Customers Y1,101,562 Y1,286,026 +16.7% $10,899
Intersegment 127,817 92,364 782
---------- ------ ------ ------
Total 1,229,379 1,378,390 +12.1 11,681
Game
Customers 203,994 162,571 -20.3 1,378
Intersegment 10,252 7,749 65
---------- ------ ------ ------
Total 214,246 170,320 -20.5 1,443
Pictures
Customers 158,855 178,153 +12.1 1,510
Intersegment - - -
---------- ------ ------ ------
Total 158,855 178,153 +12.1 1,510
Financial Services
Customers 170,103 162,198 -4.6 1,374
Intersegment 5,779 5,903 51
---------- ------ ------ ------
Total 175,882 168,101 -4.4 1,425
All Other
Customers 77,120 65,231 -15.4 552
Intersegment 20,193 16,255 138
---------- ------ ------ ------
Total 97,313 81,486 -16.3 690
Elimination (164,041) (122,271) - (1,036)
---------- ------ ------ ------
Consolidated total Y1,711,634 Y1,854,179 +8.3% $15,713
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 Y28,081 Y8,027 -71.4% $68
Game 8,220 (43,527) - (369)
Pictures (6,633) (15,277) - (129)
Financial Services 40,046 24,567 -38.7 208
All Other 7,585 6,497 -14.3 55
---------- ------ ------ ------
Total 77,299 (19,713) - (167)
Corporate and (2,744) (1,120) - (10)
elimination
---------- ------ ------ ------
Consolidated total Y74,555 Y(20,833) -% $(177)
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Sales and operating 2005 2006 Change 2006
revenue
---------- ------ ------ ------- ------
Electronics
Customers Y2,136,493 Y2,517,666 +17.8% $21,336
Intersegment 221,259 141,616 1,200
---------- ------ ------ ------
Total 2,357,752 2,659,282 +12.8 22,536
Game
Customers 369,471 279,597 -24.3 2,369
Intersegment 17,553 13,212 112
---------- ------ ------ ------
Total 387,024 292,809 -24.3 2,481
Pictures
Customers 303,236 382,904 +26.3 3,245
Intersegment - - -
---------- ------ ------ ------
Total 303,236 382,904 +26.3 3,245
Financial Services
Customers 318,691 280,738 -11.9 2,379
Intersegment 11,005 11,464 97
---------- ------ ------ ------
Total 329,696 292,202 -11.4 2,476
All Other
Customers 151,876 137,510 -9.5 1,166
Intersegment 38,499 32,115 272
---------- ------ ------ ------
Total 190,375 169,625 -10.9 1,438
Elimination (288,316) (198,407) - (1,681)
---------- ------ ------ ------
Consolidated total Y3,279,767 Y3,598,415 +9.7% $30,495
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 Y1,404 Y55,446 +3,849.1% $470
Game 2,325 (70,330) - (596)
Pictures (2,387) (16,442) - (139)
Financial Services 61,969 29,146 -53.0 247
All Other 12,818 11,228 -12.4 95
---------- ------ ------ ------
Total 76,129 9,048 -88.1 77
Corporate and (8,156) (2,833) - (24)
elimination
---------- ------ ------ ------
Consolidated total Y67,973 Y6,215 -90.9% $53
Electronics Sales and Operating Revenue to Customers
by Product Category
(Millions of yen, millions of U.S. dollars)
Second quarter ended September 30
Sales and operating 2005 2006 Change 2006
revenue
---------- ------ ------ ------ ------
Audio Y129,605 Y121,655 -6.1% $1,031
Video 247,628 282,920 +14.3 2,398
Televisions 171,430 251,486 +46.7 2,131
Information and 184,984 220,341 +19.1 1,867
Communications
Semiconductors 43,534 52,482 +20.6 445
Components 193,103 221,335 +14.6 1,876
Other 131,278 135,807 +3.4 1,151
---------- ------ ------ ------
Total Y1,101,562 Y1,286,026 +16.7% $10,899
Six months ended September 30
Sales and operating 2005 2006 Change 2006
revenue
---------- ------ ------ ------ ------
Audio Y246,944 Y237,947 -3.6% $2,017
Video 498,959 553,101 +10.9 4,687
Televisions 321,477 513,540 +59.7 4,352
Information and 369,160 433,491 +17.4 3,674
Communications
Semiconductors 82,907 100,473 +21.2 851
Components 375,933 426,071 +13.3 3,611
Other 241,113 253,043 +4.9 2,144
---------- ------ ------ ------
Total Y2,136,493 Y2,517,666 +17.8% $21,336
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- "Semiconductors" --> "Components"
temperature
polysilicon
thin film
transistor
LCD
Chemical "Other" --> "Components"
component
Geographic Segment Information (Unaudited)
------------------------------
(Millions of yen, millions of U.S. dollars)
Second quarter ended September 30
Sales and operating 2005 2006 Change 2006
revenue
---------- ------ ------ ------ ------
Japan Y512,026 Y497,433 -2.9% $4,216
United States 436,297 479,469 +9.9 4,063
Europe 368,910 417,019 +13.0 3,534
Other Areas 394,401 460,258 +16.7 3,900
---------- ------ ------ ------
Total Y1,711,634 Y1,854,179 +8.3% $15,713
Six months ended September 30
Sales and operating 2005 2006 Change 2006
revenue
---------- ------ ------ ------ ------
Japan Y988,996 Y973,631 -1.6% $8,251
United States 854,778 927,386 +8.5 7,859
Europe 700,035 815,871 +16.5 6,914
Other Areas 735,958 881,527 +19.8 7,471
---------- ------ ------ ------
Total Y3,279,767 Y3,598,415 +9.7% $30,495
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)
Second quarter ended September 30
2005 2006 Change 2006
------ ------ ------ ------
Sales and operating %
revenue:
Net sales Y1,517,412 Y1,667,547 $14,132
Financial service 170,103 162,198 1,374
revenue
Other operating 24,119 24,434 207
revenue
------ ------ ------
1,711,634 1,854,179 +8.3 15,713
Costs and expenses:
Cost of sales 1,179,803 1,286,412 10,902
Selling, general and 300,279 449,250 3,807
administrative
Financial service 130,228 137,623 1,166
expenses
Loss on sale, 26,769 1,727 15
disposal or
impairment of
assets, net
------ ------ ------
1,637,079 1,875,012 15,890
Operating income (loss) 74,555 (20,833) - (177)
Other income:
Interest and 4,674 4,848 41
dividends
Foreign exchange 326 - -
gain, net
Gain on sale of 4,259 551 5
securities
investments, net
Gain on change in 20,662 2,029 18
interest in
subsidiaries and
equity investees
Other 5,068 5,664 48
------ ------ ------
34,989 13,092 112
Other expenses:
Interest 7,135 5,974 51
Loss on devaluation 2,144 734 6
of securities
investments
Foreign exchange - 6,036 51
loss, net
Other 4,882 5,637 48
------ ------ ------
14,161 18,381 156
------ ------ ------
Income (loss) before 95,383 (26,122) - (221)
income taxes
Income taxes 65,143 (7,551) (64)
------ ------ ------
Income (loss) before 30,240 (18,571) - (157)
minority interest and
equity in net income
(loss) of affiliated
companies
Minority interest in (837) (530) (4)
income (loss) of
consolidated
subsidiaries
Equity in net income (2,609) 19,721 167
(loss) of affiliated
companies
------ ------ ------
Net income Y28,468 Y1,680 -94.1 $14
------ ------ ------
Per share data:
Common stock
Net income
- Basic Y28.63 Y1.68 -94.1 $0.01
- Diluted 27.32 1.60 -94.1 0.01
Subsidiary tracking
stock
Net income (loss)
- Basic* (19.90) - - -
* See Note 3
(Millions of yen, millions of U.S. dollars, except per share
amounts)
Six months ended September 30
2005 2006 Change 2006
------ ------ ------ ------
Sales and operating %
revenue:
Net sales Y2,915,146 Y3,267,083 $27,687
Financial service 318,691 280,738 2,379
revenue
Other operating 45,930 50,594 429
revenue
------ ------ ------
3,279,767 3,598,415 +9.7 30,495
Costs and expenses:
Cost of sales 2,276,579 2,498,491 21,174
Selling, general 649,755 833,137 7,060
and administrative
Financial service 256,865 251,574 2,132
expenses
Loss on sale, 28,595 8,998 76
disposal or
impairment of
assets, net
------ ------ ------
3,211,794 3,592,200 30,442
Operating income 67,973 6,215 -90.9 53
Other income:
Interest and 10,843 11,942 101
dividends
Gain on sale 6,400 4,452 38
of securities
investments, net
Gain on change in 38,531 20,075 170
interest in
subsidiaries and
equity investees
Other 10,826 10,431 88
------ ------ ------
66,600 46,900 397
Other expenses:
Interest 11,981 11,385 97
Loss on devaluation 2,944 750 6
of securities
investments
Foreign exchange 1,066 3,494 30
loss, net
Other 10,296 9,580 81
------ ------ ------
26,287 25,209 214
------ ------ ------
Income before income 108,286 27,906 -74.2 236
taxes
Income taxes 77,194 17,216 145
------ ------ ------
Income before minority 31,092 10,690 -65.6 91
interest and equity
in net income (loss) of
affiliated companies
Minority interest in (1,808) 62 1
income (loss) of
consolidated
subsidiaries
Equity in net (11,695) 23,343 198
income (loss)
of affiliated
companies
------ ------ ------
Net income Y21,205 Y33,971 +60.2 $288
------ ------ ------
Per share data:
Common stock
Net income
- Basic Y19.95 Y33.93 +70.1 $0.29
- Diluted 19.01 32.36 +70.2 0.27
Subsidiary tracking
stock
Net income
- Basic* 430.74 - - -
* See Note 3
Consolidated Balance Sheets (Unaudited)
---------------------------
(Millions of yen, millions of U.S. dollars)
September 30 March 31 September 30 September 30
ASSETS 2005 2006 2006 2006
-------- -------- -------- -------
Current assets:
Cash and cash Y 581,200 Y 703,098 Y 555,330 $ 4,706
equivalents
Marketable 508,017 536,968 471,332 3,994
securities
Notes and 1,087,120 1,075,071 1,233,207 10,451
accounts
receivable,
trade
Allowance for (78,352) (89,563) (82,340) (698)
doubtful
accounts and
sales returns
Inventories 805,856 804,724 1,152,646 9,768
Deferred income 138,160 221,311 251,374 2,130
taxes
Prepaid expenses 552,876 517,915 636,325 5,394
and other
current assets
-------- -------- -------- -------
3,594,877 3,769,524 4,217,874 35,745
Film costs 343,998 360,372 370,905 3,143
Investments and
advances:
Affiliated 263,524 285,870 339,702 2,879
companies
Securities 2,900,196 3,234,037 3,310,692 28,057
investments and
other
-------- -------- -------- -------
3,163,720 3,519,907 3,650,394 30,936
Property, plant
and equipment:
Land 181,130 178,844 172,242 1,460
Buildings 936,291 926,783 939,040 7,958
Machinery and 2,304,687 2,327,676 2,437,235 20,655
equipment
Construction in 90,822 116,149 93,568 793
progress
Less-Accumulated (2,133,025) (2,160,905) (2,200,498) (18,649)
depreciation
-------- -------- -------- -------
1,379,905 1,388,547 1,441,587 12,217
Other assets:
Intangibles, net 192,688 207,034 213,422 1,809
Goodwill 291,021 299,024 300,627 2,548
Deferred 384,917 383,156 389,695 3,303
insurance
acquisition
costs
Deferred income 205,019 178,751 159,563 1,352
taxes
Other 452,169 501,438 399,578 3,385
-------- -------- -------- -------
1,525,814 1,569,403 1,462,885 12,397
-------- -------- -------- -------
Y 10,008,314 Y 10,607,753 Y 11,143,645 $ 94,438
-------- -------- -------- -------
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Short-term Y 202,882 Y 142,766 Y 247,953 $ 2,101
borrowings
Current portion 165,091 193,555 111,620 946
of long-term
debt
Notes and 854,982 813,332 975,543 8,267
accounts
payable, trade
Accounts 756,985 854,886 908,378 7,698
payable, other
and accrued
expenses
Accrued income 33,211 87,295 26,810 227
and other taxes
Deposits from 591,540 599,952 682,717 5,786
customers in the
banking business
Other 489,937 508,442 490,134 4,154
-------- -------- -------- -------
3,094,628 3,200,228 3,443,155 29,179
Long-term
liabilities:
Long-term debt 690,320 764,898 868,231 7,358
Accrued pension 221,915 182,247 169,667 1,438
and severance
costs
Deferred income 143,793 216,497 238,021 2,017
taxes
Future insurance 2,598,208 2,744,321 2,880,479 24,411
policy benefits
and other
Other 234,321 258,609 267,088 2,264
-------- -------- -------- -------
3,888,557 4,166,572 4,423,486 37,488
Minority interest 25,947 37,101 40,259 341
in consolidated
subsidiaries
Stockholders'
equity:
Capital stock 621,724 624,124 625,194 5,298
Additional 1,134,304 1,136,638 1,139,185 9,654
paid-in capital
Retained 1,512,723 1,602,654 1,620,312 13,731
earnings
Accumulated (266,656) (156,437) (144,619) (1,225)
other
comprehensive
income
Treasury stock, (2,913) (3,127) (3,327) (28)
at cost
-------- -------- -------- -------
2,999,182 3,203,852 3,236,745 27,430
-------- -------- -------- -------
Y 10,008,314 Y 10,607,753 Y 11,143,645 $ 94,438
-------- -------- -------- -------
Consolidated Statements of Cash Flows (Unaudited)
-------------------------------------
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
2005 2006 2006
------ ------ ------
Cash flows from operating
activities:
Net income Y 21,205 Y 33,971 $ 288
Adjustments to
reconcile net
income to net
cash used in
operating
activities:
Depreciation and 181,416 184,919 1,567
amortization,
including
amortization of
deferred insurance
acquisition costs
Amortization of 170,624 148,714 1,260
film costs
Accrual for (3,503) (8,479) (72)
pension and
severance
costs, less
payments
Gain on the (73,472) - -
transfer to the
Japanese
Government of
the
substitutional
portion
of employee
pension fund
Loss on sale, 28,595 8,998 76
disposal or
impairment of
assets, net
Gain on sale or (3,456) (3,702) (32)
loss on
devaluation of
securities
investments,
net
(Gain) Loss on (17,394) 3,864 33
evaluation of
marketable
securities held in
the financial
service
business for trading
purpose
Gain on change (38,531) (20,075) (170)
in interest in
subsidiaries
and equity
investees
Deferred income 67,569 (4,575) (39)
taxes
Equity in net 12,443 (21,987) (186)
(income) loss
of affiliated
companies, net
of dividends
Changes in
assets and
liabilities:
Increase in (22,704) (154,431) (1,309)
notes and
accounts
receivable,
trade
Increase in (158,851) (338,190) (2,866)
inventories
Increase in (218,406) (157,992) (1,339)
film costs
Increase in 39,971 159,742 1,354
notes and
accounts
payable, trade
Decrease in (22,790) (49,918) (423)
accrued income
and other taxes
Increase in 62,113 76,270 646
future
insurance
policy benefits
and other
Increase in (32,080) (30,152) (255)
deferred
insurance
acquisition
costs
(Increase) Decrease (13,216) 18,874 160
in marketable
securities held in
the financial
service
business for trading
purpose
Increase in (58,603) (26,462) (224)
other current
assets
Increase in 18,029 37,034 314
other current
liabilities
Other 20,144 70,802 600
------ ------ ------
Net cash used (40,897) (72,775) (617)
in operating
activities
------ ------ ------
Cash flows from
investing activities:
Payments for (234,310) (258,061) (2,187)
purchases of
fixed assets
Proceeds from 9,978 25,098 213
sales of fixed
assets
Payments for (712,454) (470,577) (3,988)
investments and
advances by
financial service
business
Payments for (15,217) (32,751) (277)
investments and
advances (other
than financial
service business)
Proceeds from 471,167 374,782 3,176
maturities of
marketable securities,
sales of securities
investments and
collections of
advances by financial
service business
Proceeds from 16,873 4,139 35
maturities of
marketable securities,
sales of securities
investments and
collections of
advances (other than
financial service
business)
Proceeds from 49,578 32,165 272
sales of
subsidiaries' and
equity investees'
stocks
Other (283) 667 6
------ ------ ------
Net cash used (414,668) (324,538) (2,750)
in investing
activities
------ ------ ------
Cash flows from financing
activities:
Proceeds from 121,280 125,047 1,060
issuance of
long-term debt
Payments of (115,563) (103,479) (877)
long-term debt
Increase in 101,073 187,021 1,585
short-term
borrowings
Increase in 116,856 142,793 1,210
deposits from
customers in the
financial service
business
Increase 31,500 (87,700) (743)
(Decrease) in
call money and
bills sold in the
banking business
Dividends paid (12,368) (12,514) (106)
Other 753 2,449 20
------ ------ ------
Net cash 243,531 253,617 2,149
provided by
financing
activities
------ ------ ------
Effect of exchange 14,131 (4,072) (34)
rate changes on
cash and cash
equivalents
------ ------ ------
Net decrease in (197,903) (147,768) (1,252)
cash and cash
equivalents
Cash and cash 779,103 703,098 5,958
equivalents at
beginning of the
fiscal year
------ ------ ------
Cash and cash Y 581,200 Y 555,330 $ 4,706
equivalents at
September 30
------ ------ ------
The following information shows change in additional paid-in
capital and change in retained earnings for the six months
of the fiscal year ended March 31, 2006, and consolidated
statement of changes in stockholders' equity for the six
months of the fiscal year ending March 31, 2007.
Sony discloses these supplemental information in accordance
with disclosure requirements of the Japanese Securities and
Exchange Law, to which Sony, as a Japanese public company, is
subject.
Additional Paid-in Capital and Retained Earnings (Unaudited)
------------------------------------------------
(Millions of yen)
Six months ended September 30
2005
------
Additional Paid-in Capital:
Balance at March 31,2005 Y 1,134,222
Exercise of stock acquisition rights 16
Stock based compensation 66
------
Balance at September 30, 2005 Y 1,134,304
------
(Millions of yen)
Six months ended September 30
2005
------
Retained Earnings:
Balance at March 31, 2005 Y 1,506,082
Net income 21,205
Cash dividends (12,456)
Reissuance of treasury stock (1,349)
Common stock issue costs, net of tax (759)
------
Balance at September 30, 2005 Y 1,512,723
------
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
----------------------------------------------------------
(Millions of yen)
Common Additional Retained Accumu- Treasury Total
stock paid-in earnings lated stock,
capital other at cost
compre-
hensive
income
------ ------ ------ ------ ------ ------
Balance Y624,124 Y1,136,638 Y1,602,654 Y(156,437) Y(3,127) Y3,203,852
at
March
31, 2006
Exercise 478 478 956
of stock
acquisition
rights
Conversion 592 592 1,184
of
convertible
bonds
Stock 1,472 1,472
based
compensation
Comprehensive
income:
Net income 33,971 33,971
Cumulative (3,785) (3,785)
effect
of an
accounting
change,
net of tax
Other
comprehensive
income,
net of
tax
Unrealized (21,689) (21,689)
gains
on
securities
Unrealized (1,026) (1,026)
losses
on
derivative
instruments
Minimum (2,647) (2,647)
pension
liability
adjustment
Foreign 37,180 37,180
currency
translation
adjustments
------
Total 42,004
comprehensive
income
------
Stock (11) (11)
issue
costs,
net of tax
Dividends (12,517) (12,517)
declared
Purchase of (226) (226)
treasury
stock
Reissuance 5 26 31
of
treasury
stock
------ ------ ------ ------ ------ ------
Balance Y625,194 Y1,139,185 Y1,620,312 Y(144,619) Y(3,327) Y3,236,745
at
September
30, 2006
------ ------ ------ ------ ------ ------
(Millions of U.S. dollars)
Common Additional Retained Accumu- Treasury Total
stock paid-in earnings lated stock,
capital other at cost
compre-
hensive
income
------ ------ ------ ------ ------ ------
Balance $ 5,289 $ 9,633 $ 13,582 $ (1,326) $ (27) $ 27,151
at
March
31,
2006
Exercise 4 4 8
of stock
acquisition
rights
Conversion 5 5 10
of
convertible
bonds
Stock 12 12
based
compensation
Comprehensive
income:
Net income 288 288
Cumulative (33) (33)
effect
of an
accounting
change,
net of tax
Other
comprehensive
income,
net of
tax
Unrealized (184) (184)
gains
on
securities
Unrealized (8) (8)
losses
on
derivative
instruments
Minimum (22) (22)
pension
liability
adjustment
Foreign 315 315
currency
translation
adjustments
------
Total 356
comprehensive ------
income
Stock (0) (0)
issue
costs,
net of tax
Dividends (106) (106)
declared
Purchase of (1) (1)
treasury
stock
Reissuance 0 0 0
of
treasury
stock
------ ------ ------ ------ ------ ------
Balance $ 5,298 $ 9,654 $ 13,731 $ (1,225) $ (28) $ 27,430
at
September
30, 2006
------ ------ ------ ------ ------ ------
(Notes)
1. U.S. dollar amounts have been translated from yen, for
convenience only, at the rate of Y118 = U.S. $1, the approximate
Tokyo foreign exchange market rate as of September 29, 2006.
2. As of September 30, 2006, Sony had 947 consolidated
subsidiaries (including variable interest entities). It has
applied the equity accounting method in respect to 59 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)
Second quarter ended September 30
2005 2006
----- ----
Net income
- Basic 996,523 1,001,293
- Diluted 1,044,215 1,049,549
Weighted-average number
of outstanding shares (Thousands of shares)
Six months ended September 30
2005 2006
----- ----
Net income
- Basic 996,305 1,001,250
- Diluted 1,044,040 1,049,803
4. 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 (loss) and other income for the
second quarter and the six months of the fiscal year ended
March 31, 2006 have been reclassified to conform with the
presentation of these items for the second quarter and the
six months of the fiscal year ending March 31, 2007. Royalty
income for the second quarter and the six months of the fiscal
year ended March 31, 2006, was Y8.6 billion and Y17.3 billion,
respectively. Royalty income for the second quater and the six
months of the fiscal year ending March 31, 2007 was Y7.3 billion
and Y15.9 billion, respectively. These amounts were recorded
primarily within the Electronics segment.
5. 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
(loss) decreased (increased) Y697 million and Y1,397 million for
the second quarter and the six months of the fiscal year ending
March 31, 2007, respectively.
6. 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 (loss) increased (decreased) approximately
Y1.7 billion and Y0.1 billion for the second quarter and the six
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 Y2,148million) as a
cumulative-effect adjustment to beginning retained earnings.
Other Consolidated Financial Data
(Millions of yen, millions of U.S. dollars)
Second quarter ended September 30
2005 2006 Change 2006
------- ------- ----- -----
Capital expenditures Y 87,798 Y 90,024 +2.5% $ 763
(additions to property,
plant and equipment)
Depreciation and 92,752 93,654 + 1.0 794
amortization expenses*
(Depreciation expenses for (74,845) (74,490) -0.5 (631)
tangible assets)
R&D expenses 131,369 143,485 + 9.2 1,216
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
2005 2006 Change 2006
------- ------- ----- -----
Capital expenditures Y 185,781 Y 224,080 +20.6% $ 1,899
(additions to property,
plant and equipment)
Depreciation and 181,416 184,919 + 1.9 1,567
amortization expenses*
(Depreciation expenses for (146,726) (145,492) -0.8 (1,233)
tangible assets)
R&D expenses 249,757 262,855 + 5.2 2,228
* 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)
Second quarter ended September 30
Financial Services 2005 2006 Change 2006
------ ----- ----- -----
%
Financial service Y 175,882 Y 168,101 -4.4 $ 1,425
revenue
Financial service 135,836 143,534 +5.7 1,217
expenses
------ ----- -----
Operating income 40,046 24,567 -38.7 208
Other income 23,351 121 -99.5 1
(expenses), net
------ ----- -----
Income before income 63,397 24,688 -61.1 209
taxes
Income taxes and other 23,555 9,395 -60.1 79
------ ----- -----
Net income Y 39,842 Y 15,293 -61.6 $ 130
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Second quarter ended September 30
Sony without 2005 2006 Change 2006
Financial Services
------ ----- ---- -----
%
Net sales and Y 1,543,763 Y 1,694,094 +9.7 $ 14,357
operating revenue
Costs and 1,509,712 1,739,841 +15.2 14,745
expenses
------ ----- -----
Operating income (loss) 34,051 (45,747) - (388)
Other income (2,196) (5,065) - (43)
(expenses), net
------ ----- -----
Income (loss) before 31,855 (50,812) - (431)
income taxes
Income taxes and other 43,361 (37,199) - (316)
------ ----- -----
Net income (loss) Y (11,506) Y (13,613) - $ (115)
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Second quarter ended September 30
Consolidated 2005 2006 Change 2006
------ ----- ---- -----
%
Financial service Y 170,103 Y 162,198 -4.6 $ 1,374
revenue
Net sales and 1,541,531 1,691,981 +9.8 14,339
operating revenue
------ ----- -----
1,711,634 1,854,179 +8.3 15,713
Costs and expenses 1,637,079 1,875,012 +14.5 15,890
------ ----- -----
Operating income (loss) 74,555 (20,833) - (177)
Other income 20,828 (5,289) - (44)
(expenses), net
------ ----- -----
Income (loss) before 95,383 (26,122) - (221)
income taxes
Income taxes and other 66,915 (27,802) - (235)
------ ----- -----
Net income Y 28,468 Y 1,680 -94.1 $ 14
------ ----- -----
Condensed Statements of Income (Unaudited)
------------------------------
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Financial Services 2005 2006 Change 2006
------ ----- ----- -----
%
Financial service Y 329,696 Y 292,202 -11.4 $ 2,476
revenue
Financial service 267,727 263,056 -1.7 2,229
expenses
------ ----- -----
Operating income 61,969 29,146 -53.0 247
Other income 23,234 64 -99.7 1
(expenses), net
------ ----- -----
Income before 85,203 29,210 -65.7 248
income taxes
Income taxes and other 33,289 10,796 -67.6 92
------ ----- -----
Net income Y 51,914 Y 18,414 -64.5 $ 156
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Sony without 2005 2006 Change 2006
Financial Services
------ ----- ---- -----
%
Net sales and Y 2,965,256 Y 3,322,377 +12.0 $ 28,156
operating revenue
Costs and expenses 2,960,116 3,345,971 +13.0 28,356
------ ----- -----
Operating income 5,140 (23,594) - (200)
(loss)
Other income 17,813 28,400 +59.4 241
(expenses), net
------ ----- -----
Income before 22,953 4,806 -79.1 41
income taxes
Income taxes and other 53,793 (17,026) - (144)
------ ----- -----
Net income (loss) Y (30,840) Y 21,832 - $ 185
------ ----- -----
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Consolidated 2005 2006 Change 2006
------ ----- ---- -----
%
Financial service Y 318,691 Y 280,738 -11.9 $ 2,379
revenue
Net sales and 2,961,076 3,317,677 +12.0 28,116
operating revenue
------ ----- -----
3,279,767 3,598,415 +9.7 30,495
Costs and expenses 3,211,794 3,592,200 +11.8 30,442
------ ----- -----
Operating income 67,973 6,215 -90.9 53
Other income 40,313 21,691 -46.2 183
(expenses), net
------ ----- -----
Income before 108,286 27,906 -74.2 236
income taxes
Income taxes and other 87,081 (6,065) - (52)
------ ----- -----
Net income Y 21,205 Y 33,971 +60.2 $ 288
------ ----- -----
Condensed Balance Sheet (Unaudited)
-----------------------
(Millions of yen, millions of U.S. dollars)
Financial September March September September
Services 30 31 30 30
ASSETS 2005 2006 2006 2006
----- ------- ------ ------
Current assets:
Cash and cash Y 187,269 Y 117,630 Y 191,438 $ 1,622
equivalents
Marketable 503,946 532,895 468,256 3,968
securities
Other 204,377 200,929 274,626 2,328
----- ------- ------ ------
895,592 851,454 934,320 7,918
Investments and 2,788,864 3,128,748 3,220,740 27,294
advances
Property, plant 34,053 37,422 39,427 334
and equipment
Other assets:
Deferred 384,917 383,156 389,695 3,303
insurance
acquisition
costs
Other 122,102 164,827 97,983 830
----- ------- ------ ------
507,019 547,983 487,678 4,133
----- ------- ------ ------
Y 4,225,528 Y 4,565,607 Y 4,682,165 $ 39,679
----- ------- ------ ------
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Short-term Y 70,862 Y 136,723 Y 67,548 $ 572
borrowings
Notes and 10,643 11,707 12,601 107
accounts
payable,
trade
Deposits 591,540 599,952 682,717 5,786
from
customers
in the
banking
business
Other 147,191 169,956 113,157 959
----- ------- ------ ------
820,236 918,338 876,023 7,424
Long-term
liabilities:
Long-term 131,507 128,097 129,415 1,097
debt
Accrued 13,641 13,479 13,222 112
pension and
severance
costs
Future 2,598,208 2,744,321 2,880,479 24,411
insurance
policy
benefits
and other
Other 158,976 173,354 200,367 1,697
----- ------- ------ ------
2,902,332 3,059,251 3,223,483 27,317
Minority 4,279 4,089 4,228 36
interest in
consolidated
subsidiaries
Stockholders' 498,681 583,929 578,431 4,902
equity
----- ------- ------ ------
Y 4,225,528 Y 4,565,607 Y 4,682,165 $ 39,679
----- ------- ------ ------
Sony without (Millions of yen, millions of U.S. dollars)
Financial September March September September
Services 30 31 30 30
ASSETS 2005 2006 2006 2006
----- ------- ------ ------
Current assets:
Cash and cash Y 393,931 Y 585,468 Y 363,892 $ 3,084
equivalents
Marketable 4,071 4,073 3,076 26
securities
Notes and 1,000,575 973,675 1,132,099 9,594
accounts
receivable,
trade
Other 1,317,568 1,393,306 1,825,897 15,474
----- ------- ------ ------
2,716,145 2,956,522 3,324,964 28,178
Film costs 343,998 360,372 370,905 3,143
Investments and 464,700 477,089 509,565 4,318
advances
Investments in 187,400 187,400 187,400 1,588
Financial
Services, at
cost
Property, plant 1,345,852 1,351,125 1,402,160 11,883
and equipment
Other assets 1,106,129 1,059,786 1,021,756 8,659
----- ------- ------ ------
Y 6,164,224 Y 6,392,294 Y 6,816,750 $ 57,769
----- ------- ------ ------
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Short-term Y 311,405 Y 225,082 Y 329,624 $ 2,793
borrowings
Notes and 847,049 804,394 963,939 8,169
accounts
payable,
trade
Other 1,144,494 1,299,809 1,324,318 11,223
----- ------- ------ ------
2,302,948 2,329,285 2,617,881 22,185
Long-term
liabilities:
Long-term 638,502 701,372 802,173 6,798
debt
Accrued 208,274 168,768 156,445 1,326
pension and
severance
costs
Other 304,974 352,457 358,479 3,038
----- ------- ------ ------
1,151,750 1,222,597 1,317,097 11,162
Minority 21,717 32,623 35,593 302
interest in
consolidated
subsidiaries
Stockholders' 2,687,809 2,807,789 2,846,179 24,120
equity
----- ------- ------ ------
Y 6,164,224 Y 6,392,294 Y 6,816,750 $ 57,769
----- ------- ------ ------
(Millions of yen, millions of U.S. dollars)
Consolidated September 30 March 31 September 30September 30
ASSETS 2005 2006 2006 2006
----- ------- ------ ------
Current assets:
Cash and Y 581,200 Y 703,098 Y 555,330 $ 4,706
cash
equivalents
Marketable 508,017 536,968 471,332 3,994
securities
Notes and 1,008,768 985,508 1,150,867 9,753
accounts
receivable,
trade
Other 1,496,892 1,543,950 2,040,345 17,292
----- ------- ------ ------
3,594,877 3,769,524 4,217,874 35,745
Film costs 343,998 360,372 370,905 3,143
Investments and 3,163,720 3,519,907 3,650,394 30,936
advances
Property, plant 1,379,905 1,388,547 1,441,587 12,217
and equipment
Other assets:
Deferred 384,917 383,156 389,695 3,303
insurance
acquisition
costs
Other 1,140,897 1,186,247 1,073,190 9,094
----- ------- ------ ------
1,525,814 1,569,403 1,462,885 12,397
----- ------- ------ ------
Y 10,008,314 Y 10,607,753 Y 11,143,645 $ 94,438
----- ------- ------ ------
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Short-term Y 367,973 Y 336,321 Y 359,573 $ 3,047
borrowings
Notes and 854,982 813,332 975,543 8,267
accounts
payable,
trade
Deposits 591,540 599,952 682,717 5,786
from
customers
in the
banking
business
Other 1,280,133 1,450,623 1,425,322 12,079
----- ------- ------ ------
3,094,628 3,200,228 3,443,155 29,179
Long-term
liabilities:
Long-term 690,320 764,898 868,231 7,358
debt
Accrued 221,915 182,247 169,667 1,438
pension and
severance
costs
Future 2,598,208 2,744,321 2,880,479 24,411
insurance
policy
benefits
and other
Other 378,114 475,106 505,109 4,281
----- ------- ------ ------
3,888,557 4,166,572 4,423,486 37,488
Minority 25,947 37,101 40,259 341
interest in
consolidated
subsidiaries
Stockholders' 2,999,182 3,203,852 3,236,745 27,430
equity
----- ------- ------ ------
Y 10,008,314 Y 10,607,753 Y 11,143,645 $ 94,438
----- ------- ------ ------
Condensed Statements of Cash Flows (Unaudited)
----------------------------------
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Financial Services 2005 2006 2006
----- ----- ------
Net cash provided Y 50,949 Y 121,798 $ 1,032
by operating
activities
Net cash used in (261,946) (113,193) (959)
investing activities
Net cash provided 138,895 65,203 552
by financing
activities
----- ----- ------
Net increase (72,102) 73,808 625
(decrease) in cash
and cash equivalents
Cash and cash 259,371 117,630 997
equivalents at
beginning of the
fiscal year
----- ----- ------
Cash and cash Y 187,269 Y 191,438 $ 1,622
equivalents at
September 30
----- ----- ------
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Sony without Financial 2005 2006 2006
Services ----- ----- ------
Net cash used in Y (91,879) Y (191,169) $ (1,620)
operating activities
Net cash used in (145,119) (217,499) (1,843)
investing activities
Net cash provided 97,066 191,164 1,620
by financing
activities
Effect of exchange 14,131 (4,072) (34)
rate changes on
cash and cash
equivalents
----- ----- ------
Net decrease in (125,801) (221,576) (1,877)
cash and cash equivalents
Cash and cash 519,732 585,468 4,961
equivalents at
beginning of the
fiscal year
----- ----- ------
Cash and cash Y 393,931 Y 363,892 $ 3,084
equivalents at
September 30
----- ----- ------
(Millions of yen, millions of U.S. dollars)
Six months ended September 30
Consolidated 2005 2006 2006
----- ----- ------
Net cash used in Y (40,897) Y (72,775) $ (617)
operating activities
Net cash used in (414,668) (324,538) (2,750)
investing activities
Net cash provided 243,531 253,617 2,149
by financing activities
Effect of exchange 14,131 (4,072) (34)
rate changes on
cash and cash
equivalents
----- ----- ------
Net decrease in (197,903) (147,768) (1,252)
cash and cash equivalents
Cash and cash 779,103 703,098 5,958
equivalents at
beginning of the
fiscal year
----- ----- ------
Cash and cash Y 581,200 Y 555,330 $ 4,706
equivalents at
September 30
----- ----- ------
Investor Relations Contacts:
---------------------------
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