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ANNUAL REPORT 2001
YEAR ENDED MARCH 31, 2001

Table of contents

  • Page 1
    ANNUAL REPORT 2001 Y E A R E N D E D M A R C H 31, 2 0 0 1

  • Page 2
    ...its products and services, which are offered in highly competitive markets characterized by continual new product introductions, rapid development in technology (particularly in the Electronics business), and subjective and changing consumer preferences (particularly in the Game, Music, and Pictures...

  • Page 3
    ..., each of those TV commercials has a different ending. At the same time, it is both the message of Sony and the message of the people who are being connected over the Net. Management Tracking Stock Community Relations Music Pictures Insurance Environmental Activities From this site, you can make...

  • Page 4
    Sony Corporation Annual Report 2001 TO OUR SHAREHOLDERS About one year has elapsed since Sony entered a new stage of development, one that seeks to target opportunities in the upcoming era of broadband networks. A new top-management team made up of CEO Nobuyuki Idei, COO Kunitake Ando, and CFO ...

  • Page 5
    ...2001 was positioned as the second phase of Sony's corporate reform initiatives. We enacted a number of reforms in April 2000 with regard to our management team, management architecture, and Electronics business. The new management team concentrated on implementing the Sony Group's network strategies...

  • Page 6
    ... the internet. Structural Reforms in the Electronics Business On April 1, 2001, two companies, one intended to serve as a platform for product assembly operations and the other as a platform for the design and manufacture of semiconductors, started operations. The former, Sony EMCS Corporation...

  • Page 7
    ... increase returns on invested capital. Our Electronics business was the first to apply this system. The result was a series of decisive actions including the realignment of manufacturing facilities, the application of stringent standards to all new EVA ® (Economic Value Added), registered trademark...

  • Page 8
    ...cover higherranking managers as well as corporate executive officers. As a result, in each of our Electronics business units, awareness of the cost of capital increased significantly. In the fiscal year ending March 31, 2002, we plan to apply EVA ® to our Music and Pictures entertainment businesses...

  • Page 9
    Sony Corporation Annual Report 2001 Becoming a "Knowledge-emergent Enterprise in t he Broadband Era" Points become a line. Lines become a network. When the network is turned towards the outside, an open network becomes real. In a world of open networks, for both individuals and companies, barriers...

  • Page 10
    Sony Corporation Annual Report 2001 8

  • Page 11
    Sony Corporation Annual Report 2001 RECOGNITION OF AN ERA Since its commercialization in 1995, the internet has seen explosive growth, revolutionizing our society. New services and markets have come to the fore, including internet connection services, e-commerce, and business-to-business (B2B) ...

  • Page 12
    Sony Corporation Annual Report 2001 strategies as only Sony can. Providing arenas in which to promote strategic collaboration among the managements of group companies, or among strategy makers, is a key mission for the Sony Group Headquarters. REORGANIZATION OF THE SONY GROUP HEADQUARTERS To ...

  • Page 13
    Sony Corporation Annual Report 2001 11

  • Page 14
    Sony Corporation Annual Report 2001 12

  • Page 15
    ... allows owners of VAIO notebook PCs equipped with a CCD camera to transmit live images over the internet. By offering such network services, Sony aims to add value to its hardware and expand its business. Furthermore, we are aggressively investing resources to develop and improve key devices such as...

  • Page 16
    ... a game played over the internet by more than 360,000 registered subscribers. In addition, we are working to build other new business models such as an electronic movie distribution service. MANAGING WITH THE COST OF CAPITAL IN MIND We are now examining new methods of managing Sony's entertainment...

  • Page 17
    Sony Corporation Annual Report 2001 15

  • Page 18
    Sony Corporation Annual Report 2001 AT A GLANCE Business Areas Sales and Revenue, Operating I n c o m e (Billion ¥) ELECTRONICS Electronics business consists of Audio, Video, Televisions, Information and communications, and Electronic components and other. 01 00 99 Sales 0 3,000 6,000 ...

  • Page 19
    ... •international box office receipts in 2000: more than $1 billion •largest independent supplier of television programming in North America: 34 programs •plans to start Screenblast, a suite of digital tools which helps PC users create entertainment content and share it electronically • SOE...

  • Page 20
    ...by PCs, digital video camcorders and digital still cameras, semiconductors, mobile phones, and televisions (including large-screen projection televisions), among others. Earnings were supported by strong sales in these products as well as by a rebound in earnings from broadcast- and professional-use...

  • Page 21
    ...to home entertainment. technology. A new desktop model enables users to enter data easily by writing on its screen with a stylus. In digital video camcorders and digital still cameras, Sony preserved its high global market share by bolstering networking capabilities and releasing worldwide a number...

  • Page 22
    ... its "four network gateways" strategic product groups: digital TVs/set-top boxes, VAIO PCs, PlayStation 2, and mobile communications products. To further reinforce the operating base, the entire Electronics business was reorganized in April 2001. Headquarters for the Electronics business, now...

  • Page 23
    ..., VHS, DVD-Video players, hi-fi audio systems, and other â- Mobile Network Company: Notebook PCs, PDAs, personal audio products, car audio products, camcorders, digital still cameras, and other â- Digital Telecommunications Network Company: Mobile phones Home Network Company: Televisions, CRT...

  • Page 24
    Sony Corporation Annual Report 2001 This new compact-size VAIO notebook PC model can be linked to Sony's PercasTV service website to broadcast live moving pictures taken with the built-in video camera. With the adoption of Bluetooth TM wireless networking technology, this new VAIO can also exchange...

  • Page 25
    ... Corporation Annual Report 2001 By linking digital moving image compression and wireless communication technologies, Sony's "airboard" personal IT television allows users to view TV broadcasts, e-mail, the internet, and other material freely in the home, thus creating a new concept in entertainment...

  • Page 26
    Sony Corporation Annual Report 2001 The Memory Stick offers new forms of enjoyment as a networking medium, by bringing together many Sony digital products and services. Acceptance of this format is growing rapidly. By the spring of 2001, Sony's worldwide shipments of these IC recording media and ...

  • Page 27
    Sony Corporation Annual Report 2001 This new CLIÉ PDA features many high value-added Sony devices, such as a slender lithium-ion polymer battery and a low-temperature polysilicon TFT LCD display that produces vivid images. Users can easily enjoy music by inserting a MagicGate Memory Stick, which ...

  • Page 28
    ... result is upgraded capabilities at Network Companies for research that can be quickly applied to ongoing businesses. The Corporate Laboratories, which are overseen directly by Sony headquarters, will focus on themes that relate to the entire Sony Group's medium- and long-term strategic goals. The...

  • Page 29
    ..., was made public in February 2001. expected to lead to displays with a longer life. The two companies will now accelerate development of technologies to realize such displays. Functioning as interfaces linking people with content and services offered over networks, display devices are an essential...

  • Page 30
    ...this new VAIO notebook PC can exchange data with compatible devices without any cables. A small AIT-2 library system stores, on compact 8mm cassettes, the increasing volumes of data of the broadband network age. This headphone-type Network Walkman is small enough to be placed on the ears. Built-in...

  • Page 31
    ...Pictured here is a stylish new VAIO desktop PC that comes with an LCD monitor. For added convenience, an LCD pen tablet allows users to input data by writing directly on the screen with a special stylus. Functioning as a mobile phone and music player, these handsets have slots for MagicGate Memory...

  • Page 32
    Sony Corporation Annual Report 2001 The PlayStation 2 computer entertainment system BUSINESS REVIEW: GAME MESSAGE FROM TOP MANAGEMENT In 2000, Sony Computer Entertainment (SCE) launched the PlayStation 2 (PS2) computer entertainment system in Japan, North America, and Europe. After one year from...

  • Page 33
    Sony Corporation Annual Report 2001 K E N K U TA R A G I President and Chief Executive Officer Sony Computer Entertainment Inc. GLOBAL EXPANSION OF THE PLAYSTATION FORMATS As of March 31, 2001, SCE achieved worldwide production shipments of 10.61 million PS2 computer entertainment systems. This ...

  • Page 34
    ...in January 2001 to research together a new business linking Vodafone group's mobile phones and PS. SCE recognizes that protecting copyrights for digital content and maintaining security in the network era are becoming the most pressing issues. Thus, SCE is working to develop a copy management system...

  • Page 35
    Sony Corporation Annual Report 2001 TOPICS: GAME The PS one home-use game console. This image comes from i-mode mo issho, appendix disk released in Japan in May 2001. This title is used with the Dokodemo-issho game developed for SCE's PocketStation. Compatible with SCE's mobile phone connection ...

  • Page 36
    ...Corporation Annual Report 2001 Jennifer Lopez became the first artist ever to have an album (J. Lo ) and a film ( The Wedding Planner), both Sony releases, debut the same week at number one. BUSINESS REVIEW: MUSIC MESSAGE FROM TOP MANAGEMENT During the year under review, Sony Music Entertainment...

  • Page 37
    ... Corporation Annual Report 2001 T H O M A S D. M OT TO L A Chairman and Chief Executive Officer Sony Music Entertainment Inc. HIGH NOTES Sade's Lovers Rock and Ricky Martin's Sound Loaded, together with releases by Destiny's Child, Jennifer Lopez, and Offspring, were multimillion-selling global...

  • Page 38
    ...In December 1999, SMEJ began selling music through its fee-based "bitmusic" internet site, and a new service was launched during the year under review to further enlarge sales channels. Customers can now download titles to MDs from terminals located in record stores and convenience stores. SMEJ will...

  • Page 39
    Sony Corporation Annual Report 2001 TOPICS: MUSIC Sade's Lovers Rock has sold more than 5.4 million units both in the United States and internationally, for career sales of more than 45 million units. Destiny's Child's Independent Women Part I , from the Charlie's Angels soundtrack, reached the ...

  • Page 40
    ...REVIEW: PICTURES MESSAGE FROM TOP MANAGEMENT During the year under review, we strengthened the position of Sony Pictures Entertainment (SPE) as a premier global content provider, enhanced SPE's corporate value by adding to our film and TV libraries and expanding our international channels business...

  • Page 41
    Sony Corporation Annual Report 2001 JOHN CALLEY Chairman and Chief Executive Officer Sony Pictures Entertainment Inc. MOTION PICTURE & HOME ENTERTAINMENT HIGHLIGHTS In Motion Pictures, a challenging first half of the year was followed by a strong second half, partly because of our competitive ...

  • Page 42
    Sony Corporation Annual Report 2001 STRONG TELEVISION PERFORMANCE In Television, our performance was driven by growth opportunities in international markets and our popular game show and soap opera formats. Columbia TriStar Television delivered strong earnings from our Wheel of Fortune and ...

  • Page 43
    Sony Corporation Annual Report 2001 TOPICS: PICTURES The action comedy Charlie's Angels topped more than $250 million in worldwide box office receipts and became a major hit in direct-to-sales DVD release. Strong Medicine, produced by Columbia TriStar Television Distribution for Lifetime Networks...

  • Page 44
    .... BUSINESS REVIEW: INSURANCE MESSAGE FROM TOP MANAGEMENT Ensuring the financial security and stability of our customers by offering effective life insurance and quality services is the basic mission of Sony Life Insurance Co., Ltd., reflecting the Sony Group's philosophy of making peoples' dreams...

  • Page 45
    ... offices and 1,775 independent agencies throughout Japan. TO PROVIDE SERVICE TO A GREATER NUMBER OF CUSTOMERS Sony Life has made consulting-based sales offered by Lifeplanners the nucleus of its sales activities. Sony Life has allocated considerable resources to direct sales through the internet...

  • Page 46
    Sony Corporation Annual Report 2001 system able to accurately monitor and control such risks as vital in ensuring that the company generates a return suitable to the risks assumed. This is why the upgrading of risk management capabilities is one of Sony Life's primary policy objectives. To oversee ...

  • Page 47
    ...was made public in October 2000. Embodying business models, education, and technology, the vision points Sony's activities in a more environmentally conscious direction. Every stage in a product's lifecycle is covered, from strategic planning to recycling. In numerical terms, by 2010 Sony intends to...

  • Page 48
    ... and purchasing, site management and production processing, marketing, distribution, repair services, customer services, and even information disclosure programs. ADDING THE ENVIRONMENT TO PERFORMANCE CRITERIA AT NETWORK COMPANIES Beginning with the year under review, Sony added the "Environment...

  • Page 49
    ... techniques. Knowledge gained from this research center is now utilized by Green Cycle Corp., a company that mainly recycles end-of-life electronics products. Sony is the leading shareholder of this company, which began operations in March 2001. Also, to comply with Japan's new home appliance...

  • Page 50
    ... Corporation Annual Report 2001 COMMUNITY RELATIONS On April 26, 2000, 78 enthusiastic employees of the Sony Technology Center in San Diego participated in a program under the "SOMEONE NEEDS YOU" project to clean a local beach. The Sony Asia Fund helped a local Indonesian NPO to provide learning...

  • Page 51
    ... of science and digital technology. SOCIAL RESPONSIBILITIES AND COMMUNITY RELATIONS ACTIVITIES As a globally operating company with annual sales of ¥7 trillion, and 180,000 employees, Sony is keenly aware of its social responsibilities to contribute to the development of communities. To address...

  • Page 52
    Sony Corporation Annual Report 2001 TRACKING STOCK ISSUANCE OF TRACKING STOCK LINKED TO SONY COMMUNICATION NETWORK CORPORATION Sony Corporation is proceeding with preparations to issue a new class of stock whose price would reflect the economic value of Sony Communication Network Corporation (SCN...

  • Page 53
    Sony Corporation Annual Report 2001 So-net is an internet-related service offered by SCN. Through it, SCN strives to offer a new style of network services, including a variety of unique and appealing content. Going forward, SCN plans to further enhance its content development, while extending ties ...

  • Page 54
    ... of America) KEN KUTARAGI Director (President and Chief Executive Officer of Sony Computer Entertainment Inc.) PETER G. PETERSON Director (Chairman of The Blackstone Group) KENICHI SUEMATSU Director (Advisor of Sumitomo Mitsui Banking Corporation) IWAO NAKATANI Director (Director of Research...

  • Page 55
    ... is to maximize shareholder value. To this end, they deliberate and authorize the Sony Group's fundamental strategies, business plans, major investments, and business alliances. Directors also evaluate performance as well as supervise the overall business operations of Sony Corporation and its...

  • Page 56
    Sony Corporation Annual Report 2001 CORPORATE EXECUTIVE OFFICERS Chairman and Chief Executive Officer Corporate Executive Vice President Corporate Vice President Nobuyuki Idei President and Chief Operating Officer Sunobu Horigome Corporate Executive Vice President Tsutomu Yamashita Corporate ...

  • Page 57
    Sony Corporation Annual Report 2001 FINANCIAL SECTION Operating and Financial Review and Prospects Quarterly Financial and Stock Information Five-Year Summary of Selected Financial Data Composition of Sales and Operating Revenue by Business and Geographic Segment Consolidated Balance Sheets ...

  • Page 58
    ... and Financial Review and Prospects" is based on current information known to management as of May 31, 2001. (Notes) i) On January 5, 2000, the acquisition transactions by way of exchanges of stock, whereby Sony Music Entertainment (Japan) Inc., Sony Chemicals Corporation, and Sony Precision...

  • Page 59
    ..., cost of sales, and selling, general and administrative expenses for the fiscal year ended March 31, 2001, assuming the value of the yen had remained the same. Regarding the U.S. based Music and Pictures businesses, results of worldwide subsidiaries (in the case of Music, excluding those of Japan...

  • Page 60
    ... euro. In addition, in the Pictures business, due to Sony's adoption in April 2000 of the new film accounting standard (refer to Note 2 of Notes to Consolidated Financial Statements), certain exploitation costs such as advertising expenses and marketing costs are now recorded as incurred in selling...

  • Page 61
    ...The following discussion is based on segment information. Sales and operating revenue in each business segment include intersegment transactions. In the Electronics business, sales and operating revenue by product category represent sales to customers, which do not include intersegment transactions...

  • Page 62
    Sony Corporation Annual Report 2001 Business segment information Year ended March 31 Yen in billions 2000 2001 Percent change Percent change on a local currency basis SALES AND OPERATING REVENUE: Electronics ...Game ...Music ...Pictures ...Insurance ...Other ...Elimination ...Consolidated ......

  • Page 63
    ...due to higher sales of digital still cameras, home-use video cameras, and DVD-Video players, although sales of home-use video decks decreased. Regarding digital still cameras, sales increased due to higher demand primarily in Japan, the U.S., and Europe, reflecting improvement in picture quality and...

  • Page 64
    ... Corporation Annual Report 2001 PCs. Regarding home-use video cameras, overall sales increased due to higher demand for digital format primarily in the U.S., Europe, and Asia, although sales in Europe decreased due to the significant strength of the yen against the euro. Regarding DVD-Video players...

  • Page 65
    ... In Europe, sales of PCs, home-use video cameras, digital still cameras, mobile phones, computer displays, DVD-Video players, home-use audio, televisions, and semiconductors increased, while sales of home-use video decks and radio cassette recorders decreased. In Other areas, sales of CD-R/RW drives...

  • Page 66
    ... units as of March 31, 2001. Operating losses were recorded during the year principally due to the aforementioned software sales decrease and start-up expenses for the PlayStation 2 format. Cost of sales in the Game business increased principally due to manufacturing-related expenses for PlayStation...

  • Page 67
    ...) box office revenues from successful current year Operating income (right) Operating margin motion picture releases as well as the growth of DVD * Year ended March 31 software sales in the home entertainment business. However, the sales increase was partly offset by fewer network television series...

  • Page 68
    ...by revaluation losses from investments under separate account for variable life insurance and variable annuity products. Regarding profit performance, operating profit decreased primarily because reserves for the Life Insurance Policyholders Protection Corporation of Japan were recorded, and because...

  • Page 69
    ... securities ...87,539 Other current assets ...14,646 Investments and advances ...810,963 Investments in Insurance business, at cost ...- Deferred insurance acquisition costs ...239,981 Other long-lived assets ...13,908 ¥1,383,717 LIABILITIES AND STOCKHOLDERS' EQUITY Future insurance policy benefits...

  • Page 70
    ... Trading International Corporation, a subsidiary focused on a parts trading services business within the Sony group; an advertising agency business in Japan; location-based entertainment businesses in Japan, the U.S., and Germany; and satellite distribution-related businesses engaged in programming...

  • Page 71
    ... to employee retirement benefit trusts. Gain on sales of securities investments and other, net during the year was 41.7 billion yen. This gain resulted primarily from the sale to Liberty Digital of 50% of the equity of Game Show Network, a subsidiary that provides television programming services in...

  • Page 72
    Sony Corporation Annual Report 2001 To hedge risks from exchange rate fluctuations, Sony primarily employs foreign exchange forward contracts and foreign currency option contracts. During the year, 15.7 billion yen of foreign exchange loss, net was recorded. This loss was primarily due to foreign ...

  • Page 73
    ... a direct marketer of music and videos, iii) in the Pictures business - Telemundo, a U.S. based Spanish language television network and station group and Loews Cineplex Entertainment Corporation ("Loews"), a theatrical exhibition company, and iv) in the Other business - a commercial- and other-use...

  • Page 74
    ... new film accounting standard (refer to Note 2 of Notes to Consolidated Financial Statements) and the accounting standard regarding revenue recognition (refer to Note 2 of Notes to Consolidated Financial Statements), as well as the increase in equity in net losses of affiliated companies, partially...

  • Page 75
    ...Corporation Annual Report 2001 LIQUIDITY AND CAPITAL RESOURCES Finance and Liquidity Management Sony's financial policy is to assure adequate financing and liquidity for its operations and to maintain the strength of its balance sheet. Regarding types and maturities of funding, it is a basic policy...

  • Page 76
    ... requirements and investments related to the expansion of existing businesses and the development of new projects, it is able to secure adequate resources through its access to financial and capital markets. Assets, Liabilities and Stockholders' Equity Total assets at March 31, 2001 increased by...

  • Page 77
    ... as digital equipment and electronic devices, and this was followed by a slowdown in the rate of sales growth in the U.S. becoming clear from December 2000 to the end of the year. However, due to Sony's efforts to reduce inventories by reducing manufacturing output and further promoting sales during...

  • Page 78
    ...increases in notes and accounts payable, trade and accounts payable, other and accrued expenses were due to sales increases in the Electronics and Game businesses. Among long-term liabilities, future insurance policy benefits and other increased due to net increases in life insurance-in-force in the...

  • Page 79
    ...2001, Sony generated 544.8 billion yen (a decrease of 34.7 billion yen, or 6.0%, compared with the previous year) of net cash from operating activities. Sony used 719.0 billion yen (an increase of 269.2 billion yen, or 59.8%, compared with the previous year) of net cash in investing activities. Sony...

  • Page 80
    ... group, Transmeta Corporation, which is a chip manufacturer, and Candescent Technologies Inc., which has technologies for next-generation flat panel displays. Investments in Europe included that in Canal + Technologies, which is a developer of digital and interactive television-related software...

  • Page 81
    ... that support service businesses carried out over broadband networks. At present, regarding Sony's research and development activities, areas that require rapid introduction to market are handled at each business unit, and lateral areas based on mid-to-long term strategies are handled at corporate...

  • Page 82
    ..."knowledge-emergent enterprise in the broadband network era", which offers customers appealing and useful services through the cooperation of the five key business areas including electronics, game, entertainment (primarily consisting of the music and pictures businesses), Internet and communication...

  • Page 83
    ... of applicable regulatory requirements. Sony plans to account for this investment under the equity method. Sony and Ericsson intend that the new company, to which the mobile phone businesses of the parties will be transferred, will be responsible for product research, design, and development, as...

  • Page 84
    ... Mitsui Banking Corporation, established in January 2001 a joint venture company named "bitwallet, Inc." to promote a prepaid electronic money service named "Edy" in Japan through the use of "FeliCa", a non-contact IC card technology developed by Sony. The total capitalization of the company is...

  • Page 85
    ... Report 2001 In June 2001, Sony Corporation intends to issue shares of subsidiary tracking stock in Japan, the economic value of which is intended to be linked with the economic value of Sony Communication Network Corporation ("SCN"), a wholly-owned subsidiary of Sony engaged in Internet-related...

  • Page 86
    ... network environments. Regarding sales by product categories, sales of such products as PCs, mobile phones, televisions, digital still cameras, DVD-Video players, projectors, and LCDs are expected to increase. On the other hand, sales of such products as PC-related equipment and such related devices...

  • Page 87
    Sony Corporation Annual Report 2001 In the Pictures business, sales are expected to increase slightly primarily because revenues from production and distribution in the television business are expected to increase in international markets outside the U.S., although box office revenues from films to...

  • Page 88
    Sony Corporation Annual Report 2001 NEW STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS Derivative Instruments and Hedging Activities: On April 1, 2001, Sony adopted Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended ...

  • Page 89
    Sony Corporation Annual Report 2001 QUARTERLY FINANCIAL AND STOCK INFORMATION Sony Corporation and Consolidated Subsidiaries (Unaudited) Year ended March 31 1st Quarter 2000 2001 Yen in billions except per share amounts 2nd Quarter 3rd Quarter 2000 2001 4th Quarter 2000 2001 2000 2001 Sales ...

  • Page 90
    ... capital at all prior year-ends have been restated to conform to the presentation at March 31, 2001. 5. Effective as of April 1, 2000, Sony adopted Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements" issued by the United States of America Securities and Exchange...

  • Page 91
    ... breakdown of Electronics sales and operating revenue to customers by product category. The Electronics business 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 sales contributions of...

  • Page 92
    ...Dollars in millions (Note 3) 2001 ASSETS Current assets: Cash and cash equivalents (Note 13) ...Time deposits (Note 13) ...Marketable securities (Note 8) ...Notes and accounts receivable, trade (Note 7) ...Allowance for doubtful accounts and sales returns ...Inventories (Note 5) ...Deferred income...

  • Page 93
    Sony Corporation Annual Report 2001 Yen in millions 2000 2001 Dollars in millions (Note 3) 2001 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings (Notes 12 and 13) ...Current portion of long-term debt (Notes 9, 12 and 13) ...Notes and accounts payable, trade (Note 7)...

  • Page 94
    Sony Corporation Annual Report 2001 CONSOLIDATED STATEMENTS OF INCOME Sony Corporation and Consolidated Subsidiaries Year ended March 31 • 1999 Yen in millions 2000 Dollars in millions (Note 3) 2001 2001 Sales and operating revenue: Net sales (Note 7) ...¥6,415,418 Insurance revenue ...339,...

  • Page 95
    Sony Corporation Annual Report 2001 1999 Yen 2000 Dollars (Note 3) 2001 2001 Per share data (Note 21): Income before cumulative effect of accounting changes - Basic ...- Diluted ...Cumulative effect of accounting changes - Basic ...- Diluted ...Net income - Basic ...- Diluted ...Cash dividends ...

  • Page 96
    ...387,614 376,067 244,649 Accrual for pension and severance costs, less payments ...25,817 22,860 21,759 Loss on sale, disposal or impairment of long-lived assets, net . . 10,151 17,423 24,304 Gain on securities contribution to employee retirement benefit trust (Note 8) ...(58,698) - (11,120) Gain on...

  • Page 97
    ... Interest ...49,096 43,668 47,806 Non-cash investing and financing activities- Integration of three listed subsidiaries through exchange offerings (Note 4) Fair value of assets acquired ...- ¥ 282,488 - Deferred tax liabilities thereon ...- (46,794) - Minority interest eliminated ...- 112,242 - Net...

  • Page 98
    ... Annual Report 2001 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Sony Corporation and Consolidated Subsidiaries Year ended March 31 • Common stock Additional paid-in capital Yen in millions Accumulated other Treasury Retained comprehensive stock, at earnings income cost Total...

  • Page 99
    Sony Corporation Annual Report 2001 Common stock Additional paid-in capital Yen in millions Accumulated other Retained comprehensive earnings income Treasury stock, at cost Total Balance at March 31, 2000 ...Â¥451,550 Exercise of stock purchase warrants ...297 Conversion of convertible bonds ...

  • Page 100
    ... devices for consumer and industrial markets. Sony also develops, produces, manufactures, and markets home-use game consoles and software. Sony's principal manufacturing facilities are located in Japan, the United States of America, Europe, and Asia. Its electronic products are marketed throughout...

  • Page 101
    ...the United States of America Securities and Exchange Commission retroactively to April 1, 2000. As a result, Sony has changed its method of accounting for revenues from electronics, game and music sales. Revenues from electronics, game and music sales are recognized upon delivery which is considered...

  • Page 102
    ... No. 101, revenues from electronics, game and music sales are recognized upon delivery which is considered to have occurred when the customer has taken title to the product and the risk and rewards of ownership have been substantively transferred. Previously, such revenues were recognized when Sony...

  • Page 103
    Sony Corporation Annual Report 2001 Film costs- Film costs related to theatrical and television product (which includes direct production costs, production overhead and acquisition costs) are stated at the lower of amortized cost or net realizable value. Film costs are amortized, and the estimated ...

  • Page 104
    ... and Distributors of Motion Picture Films" issued by Financial Accounting Standards Board ("FASB"), advertising costs for theatrical and television product were capitalized and amortized over the related revenue streams in each market that such costs were intended to benefit. Income taxes- The...

  • Page 105
    ... price of the award. Free distribution of common stock- On occasion, Sony Corporation may make a free distribution of common stock which is accounted for either by a transfer of the applicable par value from additional paid-in capital to the common stock account or with no entry if free shares...

  • Page 106
    ... companies through exchange offer procedures. Prior to the exchange offer procedures, Sony Corporation owned 71.0%, 69.6% and 69.2% of common stock of SMEJ, SCC and SPT, respectively. SMEJ operates primarily in the recording business; SCC is engaged in manufacturing and sale of recording media...

  • Page 107
    Sony Corporation Annual Report 2001 Unaudited Year ended March 31 1999 2000 Yen in millions Net sales (No change) ...Net income ... ¥6,415,418 174,870 Yen ¥6,238,401 123,183 Net income per common share: Basic ...Diluted ... ¥197.49 178.37 ¥138.07 126.50 The pro forma results of operations ...

  • Page 108
    ...millions March 31 2000 2001 Dollars in millions March 31, 2001 Current assets ...Property, plant and equipment ...Other assets ...Total assets ...Current liabilities ...Long-term liabilities ...Stockholders' equity ...Total liabilities and stockholders' equity ...Number of companies at end of year...

  • Page 109
    Sony Corporation Annual Report 2001 During the year ended March 31, 2001, ¥25,026 million ($200 million) of equity in net losses of Loews were recorded, principally due to continued losses as well as the impairment loss recorded against the entire carrying value of Sony's investment in Loews. In ...

  • Page 110
    ... short-term investments in money market funds of ¥85,928 million and ¥72,152 million ($577 million), respectively. In the ordinary course of business, Sony maintains long-term investment securities, included in securities investments and other, issued by a number of nonpublic companies. The...

  • Page 111
    Sony Corporation Annual Report 2001 9. Leased assets Sony leases certain communication and commercial equipment, plant, office space, warehouses, employees' residential facilities and other assets. An analysis of leased assets under capital leases is as follows: Yen in millions March 31 Class of ...

  • Page 112
    ...out of any other business of a life insurance subsidiary. Separate account assets, which consist primarily of debt and equity securities, are carried at fair value and included in securities investments and other. The related liabilities are recognized as separate account liabilities and included in...

  • Page 113
    Sony Corporation Annual Report 2001 12. Short-term borrowings and long-term debt Short-term borrowings comprise the following: Yen in millions March 31 2000 2001 Dollars in millions March 31, 2001 Loans, principally from banks: with weighted-average interest rate of 3.72 % per annum ...with ...

  • Page 114
    ... a consolidated subsidiary, due 2010 ...Unsecured fixed coupon U.S. dollar notes linked to the Yen/U.S. dollar rate of a consolidated subsidiary, due 2001 ...Secured 3.8% bonds of a consolidated subsidiary, due 2001 ...Long-term capital lease obligations: Due 2000 to 2013 with interest ranging from...

  • Page 115
    ... in the normal course of business. In applying a consistent risk management strategy, Sony manages the exposure to market rate movements of its financial assets and liabilities through the use of derivative financial instruments which include foreign exchange forward contracts, foreign currency...

  • Page 116
    ...1999, 2000 and 2001 were insignificant. The estimated fair values of Sony's financial instruments, both on and off the balance sheets excluding cash and cash equivalents, time deposits, notes and accounts receivable, trade, short-term borrowings and notes and accounts payable, trade that are carried...

  • Page 117
    ...approval of Sony's shareholders. Sony Corporation and most subsidiaries in Japan have contributory funded defined benefit pension plans, which are pursuant to the Japanese Welfare Pension Insurance Law. The contributory pension plans cover a portion of the governmental welfare pension program, under...

  • Page 118
    Sony Corporation Annual Report 2001 The changes in benefit obligation and plan assets, funded status and composition of amounts recognized in the consolidated balance sheets were as follows: Japanese plans Yen in millions March 31 2000 2001 Foreign plans Dollars in millions March 31, 2001 Yen in ...

  • Page 119
    ...,876 million ($4,743 million) and ¥425,554 million ($3,404 million), respectively. As discussed in Note 8, in March 2001, Sony Corporation and consolidated subsidiaries contributed certain marketable equity securities to an employee retirement benefit trust, which is included in plan assets. 117

  • Page 120
    ... in the common stock account because the new shares were distributed from the portion of previously issued shares accounted for as excess of par value in the common stock account in accordance with the Japanese Commercial Code. On November 20, 1991, Sony Corporation made a free share distribution of...

  • Page 121
    Sony Corporation Annual Report 2001 The Ordinary General Meeting of Shareholders held on June 27, 1997 authorized Sony Corporation, pursuant to the Japanese regulations, to acquire and retire up to a total not exceeding 30 million outstanding shares of its common stock with its profit, whenever ...

  • Page 122
    ...value of Sony Communication Network Corporation, a wholly-owned Japanese subsidiary engaged in internet related services. Subsequently, Sony Corporation resolved at the meeting of its Board of Directors held on May 15, 2001 to issue 3,072,000 shares of the subsidiary tracking stock to general public...

  • Page 123
    Sony Corporation Annual Report 2001 Presented below is a summary of the activity for both the warrant and convertible bond plans for the years shown: 1999 Weightedaverage exercise price Yen Year ended March 31 2000 Weightedaverage Number of exercise Number of Shares price Shares Yen 2001 Number of...

  • Page 124
    Sony Corporation Annual Report 2001 In accordance with FAS No. 123 "Accounting for Stock-Based Compensation", Sony has elected to account for stock-based compensation under the provisions of APB No. 25 for both the warrant and convertible bond plans. Had compensation for Sony's warrant and ...

  • Page 125
    ... Annual Report 2001 (3) SAR plan: Sony grants stock appreciation rights ("SARs") in Japan, Europe and the United States of America for selected employees. Under the terms of these plans, employees on exercise receive cash equal to the amount that the market price of Sony Corporation's common stock...

  • Page 126
    ..., advertising costs for theatrical and television product were capitalized into film inventory and amortized in cost of sales. 19. Gain on issuances of stock by equity investees During the year ended March 31, 1999, Sony merged its Loews Theatres exhibition business with Cineplex Odeon Corporation...

  • Page 127
    Sony Corporation Annual Report 2001 20. Income taxes Income before income taxes and income tax expense comprise the following: Yen in millions Year ended March 31 1999 2000 2001 Dollars in millions Year ended March 31, 2001 Income before income taxes: Sony Corporation and subsidiaries in Japan ...

  • Page 128
    ... ...Total deferred tax assets ...Deferred tax liabilities: Insurance acquisition costs ...Undistributed earnings of foreign subsidiaries ...Intangible assets acquired through exchange offerings ...Unrealized gains on securities ...Gain on securities contribution to employee retirement benefit trust...

  • Page 129
    ... common stock of Sony Music Entertainment (Japan) Inc. in a public offering to third parties in November 1991, as Sony does not anticipate any significant tax consequences on possible future disposition of its investment based on its tax planning strategies. The unrecognized deferred tax liabilities...

  • Page 130
    ...of America and Europe, manufactures semiconductors used in the game consoles in Japan, and licenses to third party software developers. The Music segment is mainly engaged worldwide in the development, production, manufacture, and distribution of recorded music, in all commercial formats and musical...

  • Page 131
    Sony Corporation Annual Report 2001 Business segments- Sales and operating revenue: Yen in millions Year ended March 31 1999 2000 2001 Dollars in millions Year ended March 31, 2001 Sales and operating revenue: Electronics- Customers ...Intersegment ...Total ...Game- Customers ...Intersegment ......

  • Page 132
    ...March 31, 2001 was primarily due to a decrease in stock-based compensation expenses (Note 16). Assets: Yen in millions March 31 1999 2000 2001 Dollars in millions March 31, 2001 Total assets: Electronics ...Game ...Music ...Pictures ...Insurance ...Other ...Total ...Elimination ...Corporate assets...

  • Page 133
    ..., 2001 Depreciation and amortization: Electronics ...Game ...Music ...Pictures ...Insurance, including deferred insurance acquisition costs ...Other ...Total ...Corporate ...Consolidated total ...Capital expenditures for segment assets: Electronics ...Game ...Music ...Pictures ...Insurance ...Other...

  • Page 134
    Sony Corporation Annual Report 2001 Geographic information- Sales and operating revenue which are attributed to countries based on location of customers and long-lived assets for the years ended March 31, 1999, 2000 and 2001 are as follows: Yen in millions Year ended March 31 1999 2000 2001 ...

  • Page 135
    ...and Exchange Law, to which Sony, as a Japanese public company, is subject. Yen in millions Year ended March 31 1999 2000 2001 Dollars in millions Year ended March 31, 2001 Sales and operating revenue: Japan- Customers ...Intersegment ...Total ...U.S.A.- Customers ...Intersegment ...Total ...Europe...

  • Page 136
    ... cash flows for each of the three years in the period ended March 31, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these...

  • Page 137
    ... Officer of Sony Corporation of America) Ke n K u t a r a g i President and Chief Operating Officer, Representative Director Te r u h i s a To k u n a k a Director (President and Chief Executive Officer of Sony Computer Entertainment Inc.) Executive Deputy President and Chief Financial Officer...

  • Page 138
    Sony Corporation Annual Report 2001 NEW STATUTORY AUDITOR Assuming shareholders' approval, Masasuke Ohmori will be elected an auditor at the Ordinary General Meeting of Shareholders to be held on June 21, 2001. STATUTORY AUDITORS Auditors Akihisa Ohnishi and Takafumi Abe were elected at the June 29...

  • Page 139
    ...6849 Facsimile: 212-833-6938 U.K. SONY GLOBAL TREASURY SERVICES PLC. Investor Relations St. Helens, 1 Undershaft, London EC3A 8NP Phone: 020-7426-8606 Facsimile: 020-7426-8677 SONY ON THE INTERNET Morgan Guaranty Trust Company of New York Shareholder Relations P.O. Box 842006, Boston, MA 02284-2006...

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    Sony Corporation Printed in Japan