Sony 2007 Annual Report Download - page 66

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63
INCOME TAXES
During the fiscal year ended March 31, 2007, Sony recorded
53.9 billion yen of income taxes at an effective tax rate of
52.8 percent. This effective tax rate exceeded the Japanese
statutory tax rate as a result of the recording of losses by certain
overseas subsidiaries with tax rates that are lower than the rate
in Japan. The effective tax rate was 61.6 percent in the previous
fiscal year and exceeded the Japanese statutory tax rate due to
the recording of additional valuation allowances against deferred
tax assets by Sony Corporation and several of Sony’s Japanese
and overseas consolidated subsidiaries due to continued losses
recorded by these entities and the recording of an additional tax
provision for the undistributed earnings of overseas subsidiaries.
RESULTS OF AFFILIATED COMPANIES ACCOUNTED FOR
UNDER THE EQUITY METHOD
Equity in net income of affiliated companies during the fiscal year
ended March 31, 2007 was 78.7 billion yen, an increase of
65.5 billion yen, or 496.9 percent compared to the previous
fiscal year. Equity in net income of affiliated companies reported
for Sony Ericsson Mobile Communications AB (“Sony Ericsson”)
was 85.3 billion yen, an increase of 56.3 billion yen compared
to the previous fiscal year, due to the increase in sales of hit
models such as “Walkman®” and “Cyber-shot” phones. Sony
recorded equity in net income of 5.0 billion yen for SONY BMG
MUSIC ENTERTAINMENT (“SONY BMG”), a decrease of 0.8
billion yen compared to the previous fiscal year. Although there
was a favorable impact due to an industry-related legal settle-
ment, a year-on-year reduction in restructuring charges, and
reductions in overhead costs from continued restructuring,
sales declined due to the accelerated decline in the worldwide
physical music market. Sony recorded equity in net income of
6.4 billion yen (before the elimination of unrealized intercompany
profits of 1.4 billion yen), a 13.6 billion yen improvement com-
pared to the prior fiscal year, for S-LCD, a joint venture with
Samsung for the manufacture of amorphous TFT LCD panels.
Sony recorded equity in net loss of 18.9 billion yen for Metro-
Goldwyn-Mayer Inc. (“MGM”), an increase in the amount of
equity in net loss of 2.0 billion yen compared to the previous
fiscal year. The equity in net loss for MGM includes non-cash
interest expense of 9.6 billion yen on cumulative preferred stock
compared to the 6.0 billion yen of non-cash interest expense on
cumulative preferred stock recorded in the previous fiscal year.
With respect to equity in net income of affiliated companies,
MGM is expected to have no effect on equity in net income or
loss during the fiscal year ending March 31, 2008, due to the
fact that Sony no longer has any book basis in MGM as of
March 31, 2007.
MINORITY INTEREST IN INCOME (LOSS) OF
CONSOLIDATED SUBSIDIARIES
In the fiscal year ended March 31, 2007, minority interest in
income of consolidated subsidiaries of 0.5 billion yen was
recorded compared to minority interest in loss of 0.6 billion yen
in the previous year.
NET INCOME
Net income for the fiscal year ended March 31, 2007 increased
by 2.7 billion yen, or 2.2 percent, to 126.3 billion yen compared
with the previous fiscal year. Despite the decrease in income
before income taxes, net income increased mainly due to the
decrease of income taxes and increase in equity in net income
of affiliated companies. As a percentage of sales, net income
decreased from 1.6 percent to 1.5 percent. Return on stock-
holders’ equity decreased from 4.1 percent to 3.8 percent. (This
ratio is calculated by dividing net income by the simple average
of stockholders’ equity at the end of the previous fiscal year and
at the end of the fiscal year ended March 31, 2007.)
Basic net income per share was 126.15 yen compared with
122.58 yen in the previous fiscal year, and diluted net income
per share was 120.29 yen compared with 116.88 yen in the
previous fiscal year. Refer to Notes 2 and 21 of Notes to
Consolidated Financial Statements.
Net income and ROE
■ Net income
● ROE
*Years ended March 31
(Yen in billions) (%) (Yen)
Net income per share of
common stock
■ Basic
■ Diluted
*Years ended March 31
200
150
100
50
02005 2006 2007
10.0
7.5
5.0
2.5
0
200
150
100
50
02005 2006 2007
6.2%
4.1% 3.8%