TOKYO, April 27 /PRNewswire-FirstCall/ -- Sony Corporation (NYSE: SNE)
today announced its consolidated results for the fiscal year ended March 31,
2004 (April 1, 2003 to March 31, 2004).
(Billions of yen, millions of U.S. dollars,
except per share amounts)
Year ended March 31
2003 2004 Change 2004*
Sales and operating
revenue Y7,473.6 Y7,496.4 +0.3% $72,081
Operating income 185.4 98.9 -46.7 951
Income before income
taxes 247.6 144.1 -41.8 1,385
Net income 115.5 88.5 -23.4 851
Net income per share
of common stock
- Basic Y125.74 Y95.97 -23.7% $0.92
- Diluted 118.21 90.88 -23.1 0.87
* U.S. dollar amounts have been translated from yen, for convenience only,
at the rate of Y104=U.S.$1, the approximate Tokyo foreign exchange
market rate as of March 31, 2004.
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Consolidated Results for the Fiscal Year ended March 31, 2004
Sales increased 0.3% year on year; on a local currency basis, sales grew
3%. (For all references herein to results on a local currency basis, see Note
I.) In the Electronics segment, sales to outside customers increased, while
overall sales declined slightly due to a decrease in sales between
consolidated companies resulting from the outsourcing of PlayStation 2 ("PS
2") production to third parties in China. With respect to major products in
the Electronics segment, despite a decrease in sales of CRT televisions and
portable audio, sales of cellular phones (sold mainly to Sony Ericsson Mobile
Communications ("Sony Ericsson")), digital still cameras, and flat panel
televisions increased. Sales declined in the Game segment due to lower sales
of both hardware and software. In the Pictures segment, although sales on a
U.S. dollar basis increased due to the contribution of television revenues,
sales decreased due to foreign exchange rate fluctuations. Sales in the Music
segment also decreased primarily due to foreign exchange rate fluctuations.
At the same time, Financial Services revenue increased mainly due to
improvements in valuation gains and losses from investments at Sony Life
Insurance Co., Ltd. ("Sony Life").
Operating income decreased 46.7% (47% decrease on a local currency basis)
compared with the previous fiscal year mainly due to an increase in
restructuring expenses. The Electronics segment recorded an operating loss
owing mainly to an increase in restructuring expenses, principally from
severance related expenses. In the Game segment, operating income declined
due to the decrease in sales and an increase in research and development
expenses for future businesses. In the Pictures segment, despite the
contribution from higher television revenues, operating income decreased
compared with the previous year, which had benefited from the profits
generated by Spider-Man. By contrast, improvements in valuation gains and
losses from investments in the general account at Sony Life resulted in an
increase in operating income in the Financial Services segment. In the Music
segment, operating income was recorded, compared with an operating loss
recorded in the prior year, due to the benefits of restructuring, a reduction
in advertising and promotion expenses and a decrease in restructuring
expenses.
Restructuring expenses for the fiscal year amounted to Y168.1 billion
($1,616 million) compared to Y106.3 billion in the previous fiscal year. In
the Electronics segment, restructuring expenses were Y143.3 billion ($1,378
million) compared to Y72.5 billion in the previous fiscal year.
Income before income taxes decreased 41.8% compared with the previous
fiscal year. Although royalty income and net foreign exchange gain increased
compared to the previous fiscal year, other income declined in this fiscal
year due to the gain on the sale in the previous year of Sony's equity
interest in Telemundo Communications Group, Inc. and its subsidiaries
("Telemundo"), a U.S. based Spanish language television network and station
group that was accounted for by the equity method.
Net income decreased 23.4% compared with the previous fiscal year. Equity
in net income of affiliated companies consisted of an equity gain, primarily
due to profits recorded at Sony Ericsson (the profit Sony recorded from its
equity holding was Y6.4 billion ($62 million)) as compared with equity losses
recorded in the previous fiscal year. The effective tax rate for the fiscal
year of 36.6% was lower than the statutory rate in Japan due to a decrease in
deferred tax liabilities on undistributed earnings of foreign subsidiaries and
because U.S. income was taxed at a lower rate due to utilization of tax loss
and foreign tax credit carryforwards. However, this rate was higher than the
effective tax rate of 32.6% in the prior fiscal year, which benefited from a
reversal in valuation allowances on deferred tax assets held by Aiwa Co., Ltd.
Remarks by Nobuyuki Idei, Chairman and Group CEO of Sony Corporation
During the fiscal year ended March 31, 2004, we worked to enhance the
competitiveness of our products, especially in the Electronics segment,
through the aggressive introduction of new models in such categories as
digital still cameras, flat panel televisions and DVD recorders. The result
was a strong contribution to sales by these products in the year-end and new-
year selling season. In the area of restructuring, we worked to concentrate
management resources in focused business areas and reduce fixed costs,
including via headcount reduction, on a more accelerated basis than originally
planned. In the Financial Services segment, in April 2004, we established a
holding company to integrate financial functions and provide a higher level of
customer service.
In the fiscal year ending March 31, 2005, we will work to concentrate
management resources on growing businesses through initiatives such as
proactive investment in key devices, including next generation broadband
microprocessors, and we will strive to bring value into the Sony Group and
differentiate our products. Through the release of enticing products such as
the PSP handheld entertainment system, the online distribution of music, and
other initiatives, we will venture into new businesses. Moreover, we will
continue to enhance our management structure through restructuring and promote
greater efficiencies in product development and design.
Through these actions, the entire Sony Group will endeavor to strengthen a
foundation designed to achieve mid- to long-term growth and improved
profitability.
Operating Performance Highlights by Business Segment
Electronics
(Billions of yen, millions of U.S. dollars)
Year ended March 31
2003 2004 Change 2004
Sales and operating revenue Y4,940.5 Y4,897.4 -0.9% $47,090
Operating income (loss) 41.4 (35.3) - (339)
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales decreased 0.9% (1% increase on a local currency basis) due to a
significant decline in intersegment sales to the Game segment primarily owing
to outsourcing of PS 2 game console production to third parties in China. On
the other hand, sales to outside customers increased 4.7% compared to the
previous year. Although market conditions had a negative effect on sales of
such products as CRT televisions and portable audio, this was more than offset
by an increase in sales of cellular phones (sold mainly to Sony Ericsson),
which benefited from increased demand for camera-equipped models in Japan and
Europe; Cybershot digital still cameras, which saw continued market growth and
an increase in the number of units sold; and flat panel televisions, which
exhibited significantly increased sales in all geographic regions.
Operating loss of Y35.3 billion was recorded, a deterioration of Y76.7
billion compared to the profit recorded in the previous year. Although sales
to outside customers increased, the operating loss primarily resulted from a
Y70.8 billion increase in restructuring expenses (mainly severance related
expenses) and a decline in prices. Operating performance of CRT televisions,
CLIE personal digital assistants, and optical pickups deteriorated, mainly due
to price declines. On the other hand, operating performance of VAIO PCs
improved because emphasis was placed on high value-added models. Operating
performance of CCDs also improved due to an increase in sales mainly for
digital still cameras.
Inventory as of March 31, 2004 was Y490.5 billion ($4,716 million), a
Y58.1 billion, or 13.4%, increase compared with the level as of March 31, 2003
and a Y43.5 billion, or 8.1%, decrease compared with the level as of December
31, 2003.
Game
(Billions of yen, millions of U.S. dollars)
Year ended March 31
2003 2004 Change 2004
Sales and operating revenue Y955.0 Y780.2 -18.3% $7,502
Operating income 112.7 67.6 -40.0 650
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales decreased 18.3% compared with the previous year (18% decrease on a
local currency basis) as sales of hardware and software decreased.
Hardware: Although PS 2 unit sales in Europe and Japan increased compared
with the previous year, unit sales in the U.S. decreased, contributing to an
overall unit sales decline. This overall unit sales decline, combined with
strategic price reductions on the PS 2 undertaken in Japan, the U.S. and
Europe during the fiscal year, caused a decrease in sales.
Software: Although PS 2 software unit sales and revenue increased,
PlayStation software unit sales and revenue decreased, resulting in an overall
decrease in software sales. Revenue increased in Europe but decreased in
Japan and the U.S.
Operating income decreased by Y45.1 billion, or 40.0%, due to an increase
in research and development expenses for future businesses and the decrease in
hardware sales. Profit from software was nearly unchanged compared with the
previous fiscal year.
Worldwide hardware production shipments*:
-- PS 2: 20.10 million units (a decrease of 2.42 million units)
-- PS one: 3.31 million units (a decrease of 3.47 million units)
Worldwide software production shipments*:
-- PS 2: 222 million units (an increase of 32 million units)
-- PlayStation: 32 million units (a decrease of 29 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 on March 31, 2004 was Y130.9 billion ($1,259 million), a Y12.6
billion, or 8.7%, decrease compared with the level on March 31, 2003 and a
Y2.3 billion, or 1.8%, increase compared with the level on December 31, 2003.
Music
(Billions of yen, millions of U.S. dollars)
Year ended March 31
2003 2004 Change 2004
Sales and operating revenue Y597.5 Y559.9 - 6.3% $5,384
Operating income (loss) (7.9) 19.0 - 182
The amounts presented above are the sum of the yen-translated results of
Sony Music Entertainment Inc. ("SMEI"), a U.S. based operation which
aggregates the results of its worldwide subsidiaries on a U.S. dollar basis,
and the results of Sony Music Entertainment (Japan) Inc. ("SMEJ"), a Japan
based operation which aggregates results in yen. Management analyzes the
results of SMEI in U.S. dollars, so discussion of certain portions of its
results are specified as being on "a U.S. dollar basis."
Sales decreased 6.3% compared with the previous year (flat on a local
currency basis). Of the Music segment's sales, 74% were generated by SMEI,
and 26% were generated by SMEJ.
SMEI: Sales on a U.S. dollar basis were flat compared with the previous
year. Appreciation of European currencies contributed to higher sales outside
of the U.S. which were offset by lower sales in the U.S. Album sales
decreased worldwide due to the continued contraction of the global music
industry brought on by piracy (i.e. unauthorized file sharing and CD burning)
and competition from other entertainment sectors. Best selling albums during
the year included Beyonce's Dangerously in Love and Evanescence's Fallen.
SMEJ: Sales were flat compared with the previous year. Best selling
albums during the year were Mika Nakashima's LOVE and Chemistry's Between the
Lines.
Operating income of Y19.0 billion was recorded compared with an operating
loss of Y7.9 billion in the prior year, an improvement of Y26.9 billion year
on year, as operating performance at both SMEI and SMEJ improved.
SMEI: Operating income was recorded this year, compared with an operating
loss recorded in the prior year, as SMEI realized benefits from the worldwide
restructuring activities implemented over the past two years. These
activities included the rationalization of manufacturing, distribution and
support functions including record label shared services. Also contributing
to the improved operating results were lower advertising and promotion
expenses. In addition, restructuring expenses decreased compared with the
prior year.
SMEJ: Operating income increased compared with the prior year due to a
reduction in selling, general and administrative expenses, primarily
advertising and promotion expenses, and strong sales of Japanese artists'
recordings.
In December 2003, Sony and Bertelsmann AG announced that they had signed a
binding agreement to combine their recorded music businesses in a joint
venture. The newly formed company, which will be known as Sony BMG, will be
50% owned by each parent company. It will not include SMEI's music
publishing, physical distribution and disc manufacturing business or SMEJ.
The merger is subject to regulatory approvals in the United States and the
European Union.
Pictures
(Billions of yen, millions of U.S. dollars)
Year ended March 31
2003 2004 Change 2004
Sales and operating revenue Y802.8 Y756.4 - 5.8% $7,273
Operating income 59.0 35.2 - 40.3 339
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 decreased 5.8% compared with the prior year (2% increase on a U.S.
dollar basis). The U.S. dollar revenues represented a new record for SPE, led
by higher television performance in the fiscal year. Television revenues
increased significantly due to initial syndication sales of The King of Queens
and third cycle syndication sales of Seinfeld, as well as the extension of a
licensing agreement for Wheel of Fortune. Notable film releases during the
year included Bad Boys 2, S.W.A.T., Anger Management and Something's Gotta
Give.
Operating income decreased by Y23.7 billion, or 40.3%, from the prior year
(30% decrease on a U.S. dollar basis). The higher television revenues noted
above contributed significantly to operating income in the year. However, the
primary reason for the decline was the absence of profits contributed by the
breakaway performance of Spider-Man in the prior year. Results for the year
were negatively impacted by the disappointing performances of Gigli, Hollywood
Homicide, The Missing and Charlie's Angels: Full Throttle.
Financial Services
(Billions of yen, millions of U.S. dollars)
Year ended March 31
2003 2004 Change 2004
Financial Services revenue Y537.3 Y593.5 +10.5% $5,707
Operating income 22.8 55.2 +142.4 530
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Financial Services revenue increased 10.5% compared with the previous
fiscal year mainly due to an increase in revenue at Sony Life. Regarding Sony
Life, the method of recognizing insurance premiums received on certain
products was changed from being recorded as revenues to being offset against
the related provision for future insurance policy benefits since the third
quarter beginning October 1, 2003. Although revenue was reduced by Y30.8
billion as a result of this change, revenue at Sony Life increased by Y46.4
billion or 9.9% to Y513.0 billion ($4,933 million) due to improvements in
valuation gains and losses from investments compared with the previous year.*
Operating income increased by Y32.4 billion, or 142.4%, compared with the
previous year due to improvements in valuation gains and losses from
investments in the general account at Sony Life. Operating income at Sony
Life increased by Y33.6 billion or 113.3% to Y63.2 billion ($608 million).*
The above mentioned change in revenue recognition method did not have a
material effect on operating income at Sony Life.
* The Financial Services revenue and operating income at Sony Life are
calculated on a U.S. GAAP basis. Therefore, they differ from the results
that Sony Life discloses on a Japanese statutory basis. The above
mentioned change in revenue recognition method did not have an impact on
results on a Japanese statutory basis.
Other
(Billions of yen, millions of U.S. dollars)
Year ended March 31
2003 2004 Change 2004
Sales and operating revenue Y306.3 Y330.4 +7.9% $3,177
Operating loss (25.0) (10.0) - (96)
Unless otherwise specified, all amounts are on a U.S. GAAP basis.
Sales increased 7.9% compared with the previous year due to an increase in
sales of a business which provides information system services to other
businesses within the Sony Group and of an IC card business. Of the sales in
the Other segment, 53% were sales to outside customers.
Operating loss was reduced because a Network Application and Contents
Service Sector ("NACS") -related business operated by a U.S. subsidiary
recorded a one-time gain on the sale of rights related to a portion of the
Sony Credit Card portfolio.
Cash Flow
The following charts show Sony's unaudited condensed statements of cash
flow 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)
Year ended March 31
Cash flow 2003 2004 Change 2004
- From operating activities Y544.1 Y401.1 Y -143.0 $3,856
- From investing activities (185.9) (352.5) -166.6 (3,389)
- From financing activities (251.2) 153.8 +405.0 1,478
Cash and cash equivalents at
beginning of the fiscal year 356.6 438.5 +82.0 4,216
Cash and cash equivalents at
end of the fiscal year 438.5 592.9 +154.4 5,700
Operating Activities: During the fiscal year, cash increased primarily due
to profit contributions from the Game, Pictures and Music segments and an
increase in notes and accounts payable, trade, while cash decreased primarily
due to an increase in inventory and notes and accounts receivable, trade in
the Electronics segment. Compared with the previous fiscal year, although
there was an increase in the growth in notes and accounts payable, trade, cash
flow from operating activities declined due to factors such as an increase in
the growth in notes and accounts receivable, trade, the increase in inventory
in the Electronics segment, the recording of an operating loss in the
Electronics segment, and a decrease in profits in the Game and Pictures
segments.
Investing Activities: During the fiscal year, proactive capital
expenditures were made, primarily in the Electronics and Game segments, for
semiconductor manufacturing and other equipment. Compared with the previous
fiscal year, net cash used in investing activities increased because, in the
previous fiscal year, proceeds were received from the sale of Sony's equity
interest in Telemundo (Y88.4 billion) and because, during this fiscal year,
capital expenditures increased, as noted above.
As a result, cash flow from operating activities exceeded cash flow from
investing activities by Y48.6 billion in the fiscal year.
Financing Activities: In the fiscal year, repayments of short-term debt,
such as commercial paper, were made while long-term financing was received
through the issuance of Y250 billion of convertible bonds (bonds with stock
acquisition rights). Proceeds from the issuance are expected to be applied
towards investment in semiconductors and key devices.
Cash and Cash Equivalents: The total balance of cash and cash equivalents,
accounting for the effect of exchange rate fluctuations, increased Y154.4
billion to Y592.9 billion as of March 31, 2004 compared to March 31, 2003.
Cash Flow - Financial Services segment
(Billions of yen, millions of U.S. dollars)
Year ended March 31
Cash flow 2003 2004 Change 2004
- From operating activities Y314.8 Y241.6 Y -73.1 $2,323
- From investing activities (516.7) (401.6) +115.1 (3,860)
- From financing activities 149.2 141.7 -7.5 1,362
Cash and cash equivalents at
beginning of the fiscal year 327.2 274.5 -52.7 2,640
Cash and cash equivalents at
end of the fiscal year 274.5 256.3 -18.2 2,465
Operating Activities: Operating activities generated more cash than was
used due to an increase in future insurance policy benefits and other in the
fiscal year, reflecting an increase in insurance-in-force.
Investing Activities: In the fiscal year, payments for investments and
advances exceeded proceeds from sales of securities investments, maturities of
marketable securities and collections of advances, reflecting an increase in
assets under management in the Financial Services businesses.
Financing Activities: Deposits from customers in the banking business
increased in the fiscal year due to factors including an increase in the
number of accounts.
Cash and Cash Equivalents: Cash and cash equivalents decreased Y18.2
billion to Y256.3 billion as of March 31, 2004 compared to March 31, 2003.
Consolidated Results for the Fourth Quarter ended March 31, 2004
Sales were Y1,772.2 billion ($17.0 billion), an increase of 7.1% compared
to the same quarter of the prior year (12% increase on a local currency
basis). In the Electronics segment, sales to outside customers (excludes
sales between consolidated companies) increased 10.9%. Sales of digital still
cameras and flat panel televisions, which benefited from growing demand, and
sales of cellular phones (sold mainly to Sony Ericsson) increased, while sales
of CRT televisions continued to decline. In the Pictures segment, sales
increased significantly due to a television syndication sale and a licensing
agreement extension. In the Financial Services segment, despite a decrease in
sales as a result of a change in the method of recognizing insurance premiums
received, sales increased because of improvements in valuation gains and
losses from investments at Sony Life. However, a decline in the sales of both
software and hardware resulted in a decrease in sales in the Game segment. As
a result of foreign exchange rate fluctuations, sales in the Music segment
decreased.
Operating loss was Y109.8 billion ($1.1 billion), an improvement of Y6.7
billion compared with the same quarter of the previous year. The operating
loss of the Electronics segment increased due to an increase in restructuring
expenses, principally from severance related expenses. The Game segment
recorded an operating loss compared to a profit in the same quarter of the
previous year due to an increase in research and development expenses for
future businesses. In contrast, operating income of the Pictures segment
increased significantly due to the syndication sale and the licensing
agreement extension noted above. Improvements in valuation gains and losses
from investments in the general account at Sony Life resulted in a substantial
increase in operating income in the Financial Services segment. The operating
loss of the Music segment decreased due to lower restructuring expenses
compared with the same quarter of the previous year.
Restructuring expenses for the quarter amounted to Y96.8 billion ($931
million) compared to Y48.7 billion in the fourth quarter of the previous year.
In the Electronics segment, restructuring expenses were Y86.9 billion ($836
million) compared to Y32.9 billion in the same quarter of the previous year.
Loss before income taxes was Y93.6 billion ($900 million), an improvement
of Y26.2 billion compared with the previous year's same quarter. A net
foreign exchange gain was recorded in other income while a net foreign
exchange loss was recorded in the same quarter of the prior year.
Net loss was Y38.2 billion ($367 million), an improvement of Y73.0 billion
compared with the same quarter of the previous year. Income tax benefit
increased due to the utilization of tax loss and foreign and other tax credit
carryforwards. In addition, equity in net income of affiliated companies was
recorded during the quarter compared to equity in net losses in the same
quarter of the previous year. The change from loss to income from equity
affiliates was primarily due to the contribution of Sony Ericsson (the profit
Sony recorded from its equity holding was Y5.4 billion ($52 million)).
Notes
Note I: During the fiscal year ended March 31, 2004, the average value of
the yen was Y112.1 against the U.S. dollar and Y131.1 against the euro, which
was 7.3% higher against the U.S. dollar and 9.7% lower against the euro,
compared with the average rates for the previous fiscal year. Operating
results on a local currency basis described herein reflect sales and operating
revenue ("sales") and operating income obtained by applying the yen's average
exchange rate in the previous fiscal year to local currency-denominated
monthly sales, cost of sales, and selling, general and administrative expenses
in the fiscal year. Local currency basis results are not reflected in Sony's
financial statements and are not measures conforming with Generally Accepted
Accounting Principles in the U.S. ("U.S. GAAP"). In addition, Sony does not
believe that these measures are a substitute for U.S. GAAP measures. However,
Sony believes that local currency basis results provide additional useful
analytical information to investors regarding operating performance.
Note II: "Sales and operating revenue" in each business segment represents
sales and operating revenue recorded before intersegment transactions are
eliminated. "Operating income" in each business segment represents operating
income recorded before intersegment transactions and unallocated corporate
expenses are eliminated.
Note III: Commencing with the first quarter ended June 30, 2003, Sony has
partly realigned its business segment configuration. Also, in the Network
Application and Content Service Sector ("NACS"), expenses incurred in
connection with the creation of a network platform business have been
transferred out of the Other segment and reclassified as unallocated corporate
expenses, because the expected future benefits of this business will be spread
across the Sony Group. In accordance with this realignment, results for the
previous fiscal year have been reclassified to conform to the presentation of
the current fiscal year.
Note IV: During the fourth quarter ended March 31, 2004, the average value
of the yen was Y106.3 against the U.S. dollar and Y132.6 against the euro,
which was 9.8% higher against the U.S. dollar and 5.1% lower against the euro,
compared with the average rates for the same quarter of the previous fiscal
year.
Rewarding Shareholders
Sony believes that continuously increasing corporate value and providing
dividends are essential to rewarding shareholders. It is Sony's policy to
utilize retained earnings, after ensuring the perpetuation of stable
dividends, to carry out various investments that contribute to an increase in
corporate value such as those that ensure future growth and strengthen
competitiveness.
A year-end cash dividend of Y12.5 ($0.12) per share of Sony Corporation
common stock was approved at the Board of Directors meeting held on April 26,
2004 and will be payable on June 1, 2004. Sony Corporation has already paid
an interim dividend of Y12.5 per share to each shareholder; accordingly, the
total annual cash dividend per share is Y25.0.
Regarding shares of subsidiary tracking stock issued in Japan by Sony
Corporation, Sony Communication Network Corporation ("SCN") has been working
to manage its operations so as to expand cash flow, fully solidify its
financial base, and increase its retained earnings to aggressively expand its
business to strengthen its foundation and respond to the quickly expanding
Internet market. For these reasons, SCN does not plan to distribute earnings
to SCN shareholders for the time being. As such, Sony Corporation will
continue its policy of not paying dividends to shareholders of the subsidiary
tracking stock.
Numbers of Employees
Although employees were reduced through restructuring activities, due to
an increase at manufacturing facilities in Asia, primarily in China, the
number of employees at the end of March 2004 was approximately 162,000, an
increase of approximately 900 from the end of March 2003. Approximately 3,600
employees in Japan who left Sony on March 31, 2004, through the early
retirement program and other means, are counted as a part of this total.
Outlook for the Fiscal Year ending March 31, 2005
Change from
previous year
Sales and operating revenue Y7,550 billion +1%
Operating income 160 billion +62
Income before income taxes 160 billion +11
Net income 100 billion +13
Capital expenditures (additions to
fixed assets) Y410 billion +8%
Depreciation and amortization* 370 billion +1
(Depreciation expenses for tangible
assets) (290 billion) (+1)
* Including amortization of intangible assets and amortization of
deferred insurance acquisition costs.
Research and development expenses 550 billion +7%
Assumed exchange rates: approximately Y105 to the U.S. dollar,
approximately Y125 to the euro.
During the fiscal year, primarily in the Electronics segment,
restructuring expenses of approximately Y130 billion are expected to be
incurred across the Sony Group (Y168.1 billion in restructuring expenses were
recorded in the fiscal year ended March 31, 2004).
During the fiscal year, approximately $100 million is expected to be
recorded as equity in net income from InterTrust Technologies Corporation, an
equity affiliate of Sony. This equity in net income includes the proceeds
from the settlement of a patent-related suit against another company and is
included in the above net income forecast.
The forecast for each business segment is as follows:
Electronics
Sales of products such as digital still cameras, flat panel televisions
and DVD recorders are expected to continue to increase, resulting in an
anticipated increase in overall sales of the segment, despite an expected
decrease in sales of CRT televisions. Operating income is expected to
increase due to the increase in sales and the benefit of restructuring
activities undertaken in the previous fiscal year, despite an anticipated
appreciation of the yen and an expected increase in research and development
expenses.
From the fiscal year ending March 31, 2005, research and development
expenses associated with process technologies, including those technologies
used in the Game segment, will be recorded in the Electronics segment, due to
an integration of the semiconductor businesses in the Electronics and Game
segments.
Game
Although software production shipments are expected to remain unchanged
year on year, production shipments of PS one and PS 2 hardware are expected to
decrease compared with the previous year, resulting in a decrease in sales for
the segment. Although a portion of research and development expenses will be
recorded in the Electronics segment, as described above, operating income is
expected to decrease due to continued investment in products such as the PSP
handheld entertainment system and the next generation computer entertainment
system.
Music
Sales are expected to decrease due to an anticipated continued contraction
of the market for music and a reduction in the unit price of DVDs in the
manufacturing division. However, due to factors such as the benefits of
restructuring activities already carried out, operating income is expected to
increase.
Pictures
Sales are expected to decrease due to the absence of the significant
television revenues in the fiscal year ended March 31, 2004. However,
operating income is expected to remain unchanged primarily due to the
contribution of films scheduled for release during the year, most notably
Spider-Man 2.
Financial Services
Although an increase in insurance-in-force is expected at Sony Life, a
decrease in insurance revenue is expected due to a change, at Sony Life, in
the recognition method of insurance premiums received on certain products from
being recorded as revenue to being offset against the related provision for
future insurance policy benefits. A decrease in operating income is also
expected because valuation gains from marketable securities are not included
in the forecast.
Semiconductor capital expenditures
Capital expenditures on semiconductors (in the Electronics and Game
segments) during the fiscal year are expected to amount to Y190 billion
(actual amount in the fiscal year ended March 31, 2004 was Y175 billion). Of
that amount, Y120 billion is expected to be spent for the installation of
semiconductor production equipment designed for next generation broadband
microprocessors (actual amount in the fiscal year ended March 31, 2004 was Y69
billion).
Cautionary Statement
Statements made in this release with respect to Sony's current plans,
estimates, strategies and beliefs and other statements that are not historical
facts are forward-looking statements about the future performance of Sony.
Forward-looking statements include, but are not limited to, those statements
using words such as "believe," "expect," "plans," "strategy," "prospects,"
"forecast," "estimate," "project," "anticipate," "may" or "might" and words of
similar meaning in connection with a discussion of future operations,
financial performance, events or conditions. From time to time, oral or
written forward-looking statements may also be included in other materials
released to the public. These statements are based on management's
assumptions and beliefs in light of the information currently available to it.
Sony cautions you that a number of important risks and uncertainties could
cause actual results to differ materially from those discussed in the forward-
looking statements, and therefore you should not place undue reliance on them.
You also should not rely on any obligation of Sony to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Sony disclaims any such obligation. Risks and
uncertainties that might affect Sony include, but are not limited to (i) the
global economic environment in which Sony operates, as well as the economic
conditions in Sony's markets, particularly levels of consumer spending; (ii)
exchange rates, particularly between the yen and the U.S. dollar, euro, and
other currencies in which Sony makes significant sales or in which Sony's
assets and liabilities are denominated; (iii) Sony's ability to continue to
design and develop and win acceptance of its products and services, which are
offered in highly competitive markets characterized by continual new product
introductions, rapid development in technology, and subjective and changing
consumer preferences (particularly in the Electronics, Game, Music and
Pictures segments); (iv) Sony's ability to implement successfully personnel
reduction and other business reorganization activities in its Electronics and
Music segments; (v) Sony's ability to implement successfully its network
strategy for its Electronics, Music, Pictures and Other segments and to
develop and implement successful sales and distribution strategies in its
Music and Pictures segments in light of the Internet and other technological
developments; (vi) Sony's continued ability to devote sufficient resources to
research and development and, with respect to capital expenditures, to
correctly prioritize investments (particularly in the Electronics segment);
(vii) the success of Sony's joint ventures and alliances; and (viii) the risk
of being able to obtain regulatory approval and successfully form a jointly
owned recorded music company with BMG. Risks and uncertainties also include
the impact of any future events with material unforeseen impacts.
SOURCE Sony Corporation
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Related links:
http://www.sony.com
http://www.sony.net/IR
CONTACT:
Investors, in Tokyo, Yukio Ozawa,
+81-3-5448-2180, in New York, Masaaki Konoo or Kumiko Koyama,
+1-212-833-6722, or in London, Chris Hohman or Shinji Tomita,
+44-20-7444-9713, all of Sony Corporation
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