Sony 2003 Annual Report Download - page 104

Consolidated Financial Information 2003
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video software business due to a discontinuation of that business. Operating losses for the Other segment increased
despite the fact that operating income was recorded at SCN, as compared to an operating loss in the previous fiscal
year. SCN recorded operating income due to an increase in sales resulting from a rise in broadband subscribers and
a reduction in costs associated with communication line usage.
Other Income and Expenses
In the consolidated results for the fiscal year ended March 31, 2003, other income increased by 61.2 billion yen,
or 63.5 percent, to 157.5 billion yen, while other expenses decreased by 42.8 billion yen, or 31.0 percent, to 95.3
billion yen, compared with the previous fiscal year. The net amount of other income and other expenses was net
income of 62.2 billion yen compared to net expense of 41.9 billion yen in the previous fiscal year.
The increase in other income was primarily due to the recording of a 72.6 billion yen gain on sales of securities
investments and other, net, for the year ended March 31, 2003. This was mostly due to a 66.5 billion yen gain on the
sale, in April 2002, 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 under the
equity method. In addition, Sony deferred an approximate 6.0 billion yen gain on this sale due to provisions in the
sale agreement that required a partial refund of the purchase price for certain losses or claims as defined in the
agreement. The right of the acquirer to claim such refunds expired in April 2003 without any such claim being made.
Therefore, Sony recorded an additional gain of 6.0 billion yen in April 2003. Gains were also recorded on the sale of
the equity interest in Sony Tektronix Inc., which develops, manufactures and sells electronic measuring instruments
and related devices, and Columbia House Company (“CHC”), a direct marketer of music and videos. Other income
was positively impacted by a net foreign exchange gain of 1.9 billion yen recorded during the year, compared with a
net foreign exchange loss of 31.7 billion yen recorded in the previous fiscal year. The net foreign exchange gain
recorded during the year was primarily due to gains incurred on foreign exchange forward contracts and foreign
currency option contracts, which Sony employs to hedge the risk from exchange rate fluctuations, while the foreign
exchange losses recorded during the previous fiscal year were due to losses incurred on such contracts due to the
rapid depreciation of the yen between December 2001 and March 2002. Compared to the previous fiscal year,
interest and dividends decreased from 16.0 billion yen in the previous fiscal year to 14.4 billion yen, primarily due to
lower interest earned from investments.
The decrease in other expenses was primarily due to the absence of the net foreign exchange loss recorded in
the previous fiscal year as noted above. Interest expense also decreased by 9.1 billion yen, or 25.0 percent, to 27.3
billion yen, primarily due to lower average balances of short-term borrowings and lower interest rates. As a result, the
amount of income from interest and dividends less interest expense improved to a net expense of 12.9 billion yen,
compared with a net expense of 20.4 billion yen in the previous fiscal year. Partially offsetting the decrease in other
expenses was an increase of 4.7 billion yen, or 25.7 percent, to 23.2 billion yen, in losses on the devaluation of
securities investments, including securities issued by companies in the U.S. and Europe with which Sony has
strategic relationships for the purpose of developing and marketing new technologies. Such companies include
Canal+ Technologies, a developer of middleware and conditional access technologies for digital broadcasting, TIVO