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Sony Announces Losses

Posted: 15th May 2014 15:14
Consolidated Results for the Fiscal Year Ended March 31, 2014

Sales and operating revenue (“sales”) were 7,767.3 billion yen (75,410 million U.S. dollars), an increase of 14.3% compared to the previous fiscal year (“year-on-year”). This increase was primarily due to the favorable impact of foreign exchange rates, the launch of the PlayStation®4 (PS4™), as well as a significant increase in sales of smartphones. On a constant currency basis, sales decreased 2% year-on-year. For further details about sales on a constant currency basis.

Operating income decreased 200.0 billion yen year-on-year to 26.5 billion yen (257 million U.S. dollars). This significant decrease was primarily due to a year-on-year decrease in gains on the sale of assets and remeasurement gains (see below), a recording of 91.7 billion yen (890 million U.S. dollars) in losses related to the PC business, including restructuring charges, compared to 38.6 billion yen in PC business-related losses recorded in the previous fiscal year, and a recording of impairment charges in the battery business and in the disc manufacturing business.

This decrease was partially offset by the favorable impact of foreign exchange rates, a significant improvement in operating results in the mobile phone business and a significant decrease in loss in Televisions.

Of the 91.7 billion yen (890 million U.S. dollars) in losses related to the PC business in the current fiscal year, 58.3 billion yen (566 million U.S. dollars) were costs related to the decision to exit the business, of which 45.5 billion yen (442 million U.S. dollars) was recorded in the Mobile Products & Communications (“MP&C”) segment and 12.8 billion yen (124 million U.S. dollars) was recorded in Corporate and elimination. The 12.8 billion yen (124 million U.S. dollars) represents restructuring costs related to reducing the scale of sales companies resulting from Sony’s exit from the PC business. Of the 58.3 billion yen (566 million U.S. dollars), 40.9 billion yen (397 million U.S. dollars) was recognized as restructuring charges, and the remaining 17.4 billion yen (169 million U.S. dollars)
was an expense primarily for the write-down of excess components in inventory. The following table provides a reconciliation of the PC business operating loss.
 
Included in operating income in the current fiscal year was a gain of 12.8 billion yen (124 million U.S. dollars) from the sale of certain shares of M3, Inc. (“M3”). Included in operating income in the previous fiscal year were a gain of 122.2 billion yen from the sale of certain shares of M3 and the subsequent remeasurement of Sony’s remaining interest in M3, formerly a consolidated subsidiary, in All Other, a gain of 691 million U.S. dollars (65.5 billion yen) from the sale of Sony’s U.S. headquarters building at 550 Madison Avenue in New York City (“Sony’s U.S. headquarters building”), a gain of 42.3 billion yen from the sale of the “Sony City Osaki” office building and premises (“Sony City Osaki”) in Tokyo in Corporate and elimination, and a gain of 9.1 billion yen recognized on the sale of the chemical products related business in the Devices segment.

Total impairment charges of 86.0 billion yen (835 million U.S. dollars) in the current fiscal year includes a 32.1 billion yen (312 million U.S. dollars) impairment charge related to long-lived assets in the battery business in the Devices segment, a 25.6 billion yen (249 million U.S. dollars) impairment charge related to long-lived assets in the disc manufacturing business outside of Japan and the U.S. and goodwill across the entire disc manufacturing business in All Other, and a 12.8 billion yen (124 million U.S. dollars) impairment charge related to long-lived assets in the PC business in the MP&C segment.

Restructuring charges, net, increased 3.1 billion yen year-on-year to 80.6 billion yen (782 million U.S. dollars).  The charges in the current fiscal year were primarily related to restructuring initiatives in the PC business and at Sony’s headquarters and sales companies. Restructuring charges related to Sony’s exit from the PC business were 40.9 billion yen (397 million U.S. dollars), which includes 12.8 billion yen (124 million U.S. dollars) in impairment charges for long-lived assets in the PC business, 12.8 billion yen (124 million U.S. dollars) in restructuring charges related to reducing the scale of sales companies resulting from Sony’s exit from the PC business, 8.0 billion yen (78 million U.S. dollars) of expenses to compensate suppliers for unused components reflecting the termination of
future manufacturing and 7.3 billion yen (71 million U.S. dollars) primarily in early retirement costs.
Operating income for the current fiscal year included a net benefit of 11.9 billion yen (116 million U.S. dollars) from insurance recoveries related to damages and losses incurred from the floods in Thailand (the “Floods”), which took place in the fiscal year ended March 31, 2012. Operating results for the previous fiscal year included a net benefit of 40.0 billion yen from the above-mentioned insurance recoveries.

Equity in net loss of affiliated companies, recorded within operating income, increased 0.4 billion yen year-on-year to 7.4 billion yen (72 million U.S. dollars).

The net effect of other income and expenses was an expense of 0.8 billion yen (7 million U.S. dollars), compared to income of 15.6 billion yen in the previous fiscal year. This change was primarily due to a decrease in gain on the sale of securities investments, partially offset by a decrease in interest expense. Sales of securities investments in the current fiscal year include a gain of 7.4 billion yen (72 million U.S. dollars) from the sale of Sony’s shares in Sky Perfect JSAT Holdings Inc., which were sold in December 2013. Sales of securities investments in the previous fiscal year included a gain of 40.9 billion yen from the sale of Sony’s shares in DeNA Co., Ltd. (“DeNA”), which were sold in March 2013.
 
Income before income taxes decreased 216.3 billion yen year-on-year to 25.7 billion yen (250 million U.S. dollars).

Income taxes: During the current fiscal year, Sony recorded 94.6 billion yen (918 million U.S. dollars) of income tax expense, and Sony’s effective tax rate exceeded the Japanese statutory tax rate. During the current fiscal year, Sony Corporation and certain of its subsidiaries which had established valuation allowances incurred losses and, as such, Sony continued to not recognize the associated tax benefits, although this was partially offset by the recording of certain tax benefits associated with the impact of gains in other comprehensive income. Sony also recorded additional tax reserves during the current fiscal year.

Net loss attributable to Sony Corporation’s stockholders, which excludes net income attributable to
noncontrolling interests, was 128.4 billion yen (1,246 million U.S. dollars) compared to net income of 41.5 billion yen in the previous fiscal year.

For more information, visit: http://www.sony.net/SonyInfo/IR/index.html