SONY Annual Report 1991 Year ended March 31, 1991 ony Corporation is one of the world's leading manufacturers of video and audio Sequipment, televisions, displays, semicon­ ductors, computers, and such information-related products as micro floppydisk systems. Keenly aware of the interrelated nature of software and hardware, Sony is bolstering its presence in the music and image-based software markets through Sony Music Entertainment Inc. and Columbia Pictures Entertainment, Inc. A firm commitment to research and development has helped Sony build a reputation as a pacesetter in the electronic equipment industry. Having also garnered recognition as one of Japan's most international corporations by manufacturing in the markets where its products are sold, Sony is expanding its other corporate functions, such as management and R&D, on a global basis. CONTENTS Financial Highlights To Our Shareholders 2 Review of Operations 5 Video Equipment 6 Audio Equipment 9 Televisions 12 Other Products 15 Music Entertainment 18 Filmed Entertainment 21 Directors and Officers 24 History 25 Glossary 26 Financial Review 27 Quarterly Financial and Stock Information 31 Five-Year Summary of Selected Financial Data 32 Composition of Net Sales by Area and Product Group 33 COVER: Consolidated Balance Sheets 34 Sony seeks to create synergies between its hardware and software Consolidated Statements of Income and Retained Earnings 36 businesses. Shown on the cover of Consolid9ted Statements of Cash Flows 37 this year's annual report is a scene Notes to Consolidated Financial Statements 38 from the Columbia Pictures' film Report of Independent Accountants 49 Awakenings (simulated picture) displayed on a Sony home-use Principal Subsidiaries and Affiliated Companies 50 HD (high-definition) Trinitron Investor Information 52 color television. FINANCIAL HIGHLIGHTS So ny Corporation and Co nso lidated Subsidiari es Year ended March 31 OPERATING RESULTS Thousa nds of U.S. doll ars · Millions of yen (Note 1) pe rcent change 1990 1991 1991/1990 1991 FOR THE FISCAL PERIOD Net sal es ¥2,879,856 ¥3,616,517 + 25.6% $25,649,057 Operating inco me . 295,191 297,449 + 0.8 2,109,567 Net income. 102,808 116,925 +13.7 829,255 Per Depos itary Share (Yen and U. S. dollars): Net in co me ¥ 279.0 ¥ 285.9 +2.5 $ 2.03 Cash dividends 50.0 50.0 0.35 Cash dividends (Note 2) 45.5 45.5 0.32 AT FISCAL PERIOD-END Stockhol ders' equ ity ¥ 1,430,058 ¥1,476,414 +3.2 $10,471 ,021 Total assets. 4,370,085 4,602,495 + 5.3 32,641,809 Number of employees 95,600 112,900 Notes: 1. U.S. doll ar amounts have bee n tra nslated from yen, for convenience only, at the rate of ¥141 = U.S.$1 , the approximate Tokyo foreign exchange market rate as of March 29, 1991 , as described in Note 2 of Notes to Consolidated financial Statements. 2 . Cash dividends per Depositary Share after giving effect to the free distribution of common stock determined on May 22, 1991 are ¥45.5 ($0.32) for the years ended March 31, 1990 and 1991, as described in Note 12 of Notes to Co nso lidated financial Statements. NET SALES (Billion ¥) 11 '91 3,6 17 '90 2,880 '89 2,145 '88 1,555 '87 * 609 NET INCOME (Billion '¥) '9 1 11 7 '90 103 '89 72 '88 37 '87 *-- 13 NET INCOME PER DEPOSITARY SHARE M '91 285.9 '90 279.0 '89 219.7 '88 137.2 '87 * 52.1 *Five-month fiscal period ended March 3 1, 1987 TO OUR SHAREHOLDERS During the fiscal year ended March 31, a consulting firm in the United States, R&D expenditures during the year 1991, Iraq's invasion of Kuwait, which and other sources. We believe this in review amounted to ¥206 billion eventually led to the Gulf War, had severe recognition reflects vigorous activities ($1 ,459 million), an increase of 24.5% repercussions in the world economy. In to globalize operations and introduce over the corresponding period a year addition, the U.S. economy entered a new products incorporating the latest ago, and represented 5. 7% of consoli­ recession in the second half of the year, technological advances-such as 8mm dated net sales. Capital investments influenced by such factors as declining video products and CD systems-as well during the period increased 27.2% consumer spending and a sharp drop as the expansion of our software over the previous year, to ¥412 billion in capital investment. The European business. ($2,920 million), reflecting endeavors to economy was expected to gain momen- strengthen Sony's production capabilities, tum with the reunification of Germany; Performance Highlights particularly for semiconductors, however, rising · inflation and sluggish Sony's consolidated net sales for the image-based devices, VTRs, and growth in consumer spending prompted fiscal year ended March 31, 1991, magnetic products. economic deceleration. In contrast, the amounted to ¥3,617 billion ($25,649 Subject to shareholders' approval Japanese economy continued to grow as million), an increase of 25.6% over at the General Meeting of Shareholders capital investment remained the driving the previous year. Although growth to be held in Tokyo on June 27, 1991, force behind domestic demand, despite in operating income was held at Sony will pay to shareholders of record significantly higher interest rates and 0.8%, amounting to ¥297 billion as of March 31, 1991, a cash dividend slower economic growth toward the end ($2, 11 0 million), net income advanced of ¥25 (before deduction of withholding of the term. 13. 7%, to ¥117 billion ($829 million). taxes) per Depositary Share for the six- Within this operating environment, Sony attained unprecedented results month period ended March 31, 1991. Sony was successful in attaining the in net sales, operating income, This payment, combined with the ¥25 highest sales and profits in its history. and net income. Primary net income per Depositary Share paid in December Such results were underpinned by the per Depositary Share (each Depositary 1990, will bring the total annual cash active development and introduction Share represents one share of Common dividend for the fiscal year ended of attractive products, which secured Stock) rose 2.5%, to ¥285.9 ($2.03). March 31, 1991, to ¥50 ($0.35) per continued strong growth in electronics, In addition, stockholders' equity per Depositary Share (before adjustment to and the contribution of advancing sales Depositary Share was ¥3,964 ($28.11 ), give effect to the free distribution of from our entertainment businesses. compared with ¥3,917 the previous year. Common Stock determined on May 22, Moreover, in areas not limited to its Sony actively engaged in research 1991, at a meeting of the Board of business performance, Sony's corporate and development activities targeted Directors), equivalent to the previous year. image won extremely high acclaim in at creating competitive new products. Japan and overseas, as indicated by surveys conducted by Landor Associates, Akio Morita, Chairman of the Board (left), and Norio Ohga, President and Chief Executive Officer, in the boardroom of Sony's headquarters in Japan Electronics years ahead, Sony will pursue the since January 1, 1991) and Columbia In electronics, Video Equipment following medium- and long-term Pictures Entertainment, Inc., while sales continued to be strong, under­ policies to build a stronger corporate creating synergies with its electronics scoring the phenomenal success of the structure capable of responding to any businesses. Handycam 8mm camcorder and large change in the operating environment, Fourth, in addition to promoting the advances in our highly regarded digital steadily develop its businesses, and more efficient allocation of its capital, VTRs in broadcast- and professional-use improve its corporate performance. personnel, and other management equipment. Sales of Audio Equipment First, in consumer electronics, we resources as well as improving its were brisk, reflecting the expansion of will strive to accelerate the development financial soundness, Sony will remain our lineup of such products as CD and marketing of attractive and original committed to upgrading efficiency in players, headphone stereo Walkman products and revitalize established all areas, from design to distribution models, and mini-component stereos. markets while creating new ones. We and marketing. In Televisions, sales of color TVs were will also work to expand our operations Finally, Sony will seek to bring healthy, and we significantly expanded in HDTV (high-definition television) all facets of its overseas operations, our computer display business. In the products and information-related including procurement of components, Other Products category, sales of such equipment for use in the home. R&D, production, and marketing, in even devices as semiconductors and electronic Second, in industrial electronics, we closer contact with local communities. components rose significantly. will seek to further strengthen our oper­ ations in broadcast- and professional­ May 22, 1991 Entertainment use VTRs and displays while addressing In Music Entertainment, records released a wide spectrum of market needs. We by established stars and hit albums by will also focus our energies on expand­ promising newcomers contributed to ing the scope of operations in areas sales growth. In Filmed Entertainment, that are vital for future growth, such as Akio Morita Columbia Pictures and Tri-Star Pictures recording media, semiconductors, Chairman of the Board unveiled a succession of popular movie electronic components, and equipment releases, and in February 1991, Tri-Star related to computers, information Pictures began filming the epic fantasy processing, and telecommunications. adventure Hook. Third, Sony will intensify its activities to strengthen its music and image-based future Operating Environment software operations, centering on President and Chief Executive Officer and Managerial Policies Sony Music Entertainment Inc. Sony has overcome various hurdles to (as CBS Records Inc.