Sony 2007 Annual Report Download - page 72

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69
■ALL OTHER
During the fiscal year ended March 31, 2007, sales within All Other
were comprised mainly of sales from Sony Music Entertainment
(Japan) Inc. (“SMEJ”), a Japanese domestic recorded music
business; Sony Music Entertainment Inc.’s (“SMEI”) music publish-
ing business; So-net, an Internet-related service business subsidiary
operating mainly in Japan; a contactless integrated circuit (“IC”)
card business; and an advertising agency business in Japan. In
June 2006, Sony Corporation sold 51 percent of the stock of
StylingLife, a holding company comprised of six retail businesses
within Sony previously included within All Other, to a wholly-
owned subsidiary of Nikko Principal Investments Japan Ltd. Sony
Corporation sold additional shares of StylingLife in December
2006, and currently holds approximately 23 percent of the total
outstanding stock in StylingLife.
Sales for the fiscal year ended March 31, 2007 decreased by
48.4 billion yen, or 11.4 percent, to 377.6 billion yen, compared
with the previous fiscal year. During the fiscal year, the sales
decrease within All Other reflects the deconsolidation of the six
retail businesses noted above after the sale of a majority of the
stock of StylingLife. Of total segment sales, 82 percent were
sales to outside customers. In terms of profit performance,
operating income for All Other increased from 20.5 billion yen
in the previous fiscal year to 32.4 billion yen.
Sales at SMEJ declined mainly due to lower intersegment
sales in association with the transfer of business activity relating
to Sony’s disc custom press business, which was carried out at
SMEJ during the previous fiscal year, to other segments within
Sony Group. Best selling albums during the fiscal year included
CHEMISTRY’s ALL THE BEST, Yuna Ito’s HEART and Angela
Aki’s HOME.
Excluding sales recorded within Sony’s music business, there
was a decrease in sales within All Other. This decrease was
mainly due to the above-mentioned deconsolidation of Sony’s
retail businesses, partially offset by an increase in sales at the
contactless IC card business and So-net, where there was a
favorable increase in fiber optic connection service subscribers.
Regarding profit performance within All Other, operating income
of 32.4 billion yen was recorded, an 11.9 billion yen increase
compared to the 20.5 billion yen of operating income recorded
in the previous fiscal year. Operating income at SMEJ declined
approximately 37 percent compared to the previous fiscal year,
mainly due to a decrease in album and single sales and the
recognition of a gain in the previous fiscal year resulting from
the transfer to the Japanese government of the substitutional
portion of Sony’s Employee Pension Fund.
Excluding the decrease in operating income in the music
business, there was an increase in operating income within All
Other, mainly due to an asset impairment write-down associated
with the sale of the Metreon, a U.S. entertainment complex,
recorded in the previous fiscal year. Operating income at So-net
increased mainly due to an increase in profit resulting from
greater fee revenue from new subscribers.
During the fiscal year ended March 31, 2007, a gain on the sale
of a portion of Sony’s former headquarters site in the amount of
2.6 billion yen is included in operating income within All Other.
FOREIGN EXCHANGE FLUCTUATIONS AND RISK
HEDGING
During the fiscal year ended March 31, 2007, the average value
of the yen was 116.0 yen against the U.S. dollar, and 148.6 yen
against the Euro, which was 3.2 percent lower against the U.S.
dollar and 8.2 percent lower against the Euro, compared with
the average of the previous fiscal year.
In the Pictures segment, Sony translates into yen the U.S.
dollar consolidated results of SPE (a U.S.-based operation that
has worldwide subsidiaries).
Therefore, analysis and discussion of certain portions of the
operating results of SPE are specified as being on “a U.S. dollar
basis.” Results on a U.S. dollar basis are not on the same basis
as Sony’s consolidated financial statements and do not conform
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 results presented on a local currency basis
provide additional useful information to investors regarding
operating performance.
Sony’s consolidated results are subject to foreign currency
rate fluctuations mainly derived from the fact that the countries
Sales and operating income
in All Other
2005 2006 2007
1.1%
600
450
300
150
0
60
45
30
15
0
4.8%
8.6%
(Yen in billions) (Yen in billions)
■ Sales (left)
■ Operating income (right)
● Operating margin
*Years ended March 31