6-K 1 sony-6k_1201.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of December 2008
Commission File Number: 001-06439

SONY CORPORATION
(Translation of registrant's name into English)

1-7-1 KONAN, MINATO-KU, TOKYO, 108-0075, JAPAN
(Address of principal executive offices)

The registrant files annual reports under cover of Form 20-F.

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F,
 
Form 20-F  X
Form 40-F __
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, Yes No X
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-______
 
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
SONY CORPORATION
 
(Registrant)
   
   
 
By:  /s/  Nobuyuki Oneda
 
                (Signature)
 
Nobuyuki Oneda
 
Executive Vice President and
 
Chief Financial Officer
 
Date: December 1, 2008
 

 

 

Quarterly Securities Report

For the three months ended September 30, 2008

 

(TRANSLATION)

 

 

Sony Corporation

 

 

 

 

 

 

 

 

 

1

 

 


CONTENTS

 

 

 

  

Page

 

 

 

Note for readers of this English translation

 

3

 

 

 

 

I

Corporate Information

 

4

 

(1)     Selected Consolidated Financial Data

  

4

 

(2)     Business Overview

 

4

 

(3)     Changes in Subsidiaries and Affiliated Companies

 

4

 

(4)     Number of Employees

 

4

 

 

 

 

II

State of Business

 

5

 

(1)     Manufacturing, Orders Received and Sales

 

5

 

(2)     Material Contracts

 

5

 

(3)     Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

5

 

 

 

 

III

Property, Plant and Equipment

 

9

 

 

 

 

IV

Company Information

 

10

 

(1)     Information on the Company’s Shares

 

10

 

(i)    Total Number of Shares

 

10

 

(ii)   Stock Acquisition Rights

 

10

 

(iii)  Status of Rights Plan

 

12

 

(iv)  Changes in the Number of Total Shares and the Amount of Common Stock

 

12

 

(v)   Status of Major Shareholders

 

12

 

(vi)  Status of Voting Rights

 

13

 

(2)     Stock Price Range

 

14

 

(3)     Directors and Corporate Executive Officers

 

14

 

 

 

 

V

Financial Statements

  

15

 

(1)   Consolidated Financial Statements

 

16

 

(i)   Consolidated Balance Sheets

 

16

 

(ii)   Consolidated Statements of Income

 

18

 

(iii)  Consolidated Statement of Cash Flows

 

20

 

(2)   Other Information

 

35

 

2

 

 


 

 

Note for readers of this English translation:

On November 14, 2008, Sony Corporation (the “Company”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended September 30, 2008 with the Kanto Financial Bureau in Japan (the “Report”) pursuant to the Financial Instruments and Exchange Act of Japan. This document is an English translation of the Report in its entirety, except for (i) information which had been previously submitted to the U.S. Securities and Exchange Commission in a Form 20-F, Form 6-K and any other forms and (ii) a description of differences between generally accepted accounting principles in the U.S. (“U.S. GAAP”) and generally accepted accounting principles in Japan (“J-GAAP”) which are required to be described in the Quarterly Securities Report under the Financial Instruments and Exchange Act of Japan if the Company prepares its financial statements in conformity with accounting principles other than J-GAAP.

 

Cautionary Statement

Statements made in this translation with respect to Sony’s (as defined below) current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “may” or “might” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. Sony cautions you that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to (i) the global economic environment in which Sony operates, as well as the economic conditions in Sony’s markets, particularly levels of consumer spending as well as the recent worldwide crisis in the financial markets and housing sectors; (ii) exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales or in which Sony’s assets and liabilities are denominated; (iii) Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including newly introduced platforms within the Game segment, which are offered in highly competitive markets characterized by continual new product introductions, rapid development in technology and subjective and changing consumer preferences (particularly in the Electronics, Game and Pictures segments, and the music business); (iv) Sony’s ability and timing to recoup large-scale investments required for technology development and increasing production capacity; (v) Sony’s ability to implement successfully business reorganization activities in its Electronics segment; (vi) Sony’s ability to implement successfully its network strategy for its Electronics, Game and Pictures segments, and All Other, including the music business, and to develop and implement successful sales and distribution strategies in its Pictures segment and the music business in light of the Internet and other technological developments; (vii) Sony’s continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to correctly prioritize investments (particularly in the Electronics segment); (viii) Sony’s ability to maintain product quality (particularly in the Electronics and Game segments); (ix) the success of Sony’s joint ventures and alliances; (x) the outcome of pending legal and/or regulatory proceedings; (xi) shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment; and (xii) the impact of unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment. Risks and uncertainties also include the impact of any future events with material adverse impacts.


3

 

 


I    Corporate Information

(1) Selected Consolidated Financial Data

 

Yen in millions, Yen per share amounts

 

Six Months Ended
September 30, 2008

Three Months Ended
September 30, 2008

Fiscal Year Ended
March 31, 2008

Sales and operating revenue

4,051,349

2,072,305

8,871,414

Operating income

84,487

11,048

475,299

Income before income taxes

70,229

7,307

567,134

Net income

55,793

20,816

369,435

Stockholders’ equity

3,431,916

3,465,089

Total assets

12,972,416

12,552,739

Stockholders’ equity per share of common stock (yen)

3,419.98

3,453.25

Net income per share of common stock, basic (yen)

55.60

20.74

368.33

Net income per share of common stock, diluted (yen)

53.11

19.83

351.10

Ratio of stockholders’ equity to total assets (%)

26.5

27.6

Net cash provided by (used in) operating activities

(144,078)

757,684

Net cash provided by (used in) investing activities

(488,106)

(910,442)

Net cash provided by (used in) financing activities

236,585

505,518

Cash and cash equivalents at the end of the period

700,923

1,086,431

Number of employees

185,800

180,500

Notes:

1.

The Company’s consolidated financial statements are prepared in conformity with U.S. GAAP.

2.

Effective April 1, 2008, the Company reports equity in net income of affiliated companies as a component of operating income. Prior to April 1, 2008, equity in net income of affiliated companies was shown below minority interest in income (loss) of consolidated subsidiaries and above net income in the Company’s consolidated results of operations.  In connection with this reclassification, operating income and income before income taxes for the fiscal year ended March 31, 2008 have been reclassified to conform with the presentation of these items for the second quarter ended September 30, 2008.

3.

Consumption taxes are not included in sales and operating revenue.

4.

The Company prepares its consolidated financial statements, and therefore parent-alone financial data is not prepared.

 

(2) Business Overview

There was no significant change in the business of the Company and its consolidated subsidiaries (collectively “Sony”) during the three months ended September 30, 2008.

As of September 30, 2008, the Company had 1,069 subsidiaries and 78 affiliated companies, among which 1,029 companies are consolidated subsidiaries (including variable interest entities) of the Company. It has applied the equity accounting method for 71 affiliated companies.

 

(3) Changes in Subsidiaries and Affiliated Companies

There was no significant change in subsidiaries and affiliated companies during the three months ended September 30, 2008.

 

(4) Number of Employees

The following table shows the number of employees as of September 30, 2008.

Consolidated

185,800*

Parent-alone

18,040

* Figures less than one hundred are rounded to the nearest unit.

 

4

 

 


II    State of Business

(1) Manufacturing, Orders Received and Sales

The products that Sony manufactures and sells are extremely diverse. Due to the nature of electronics devices, home game consoles, game software, and music and video software, Sony generally manufactures products based on forecasts. Because Sony maintains a relatively stable and necessary level of product inventory in order to carry out manufacturing for the Electronics segment, its level of production is similar to its level of sales. As a result, please refer to the description of the Electronics segment results in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.

Note for readers of this English translation:

The description of the Electronics segment results in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” referred to the above item II.(1) is the same as described in the “Operating Performance Highlights by Business Segment” in the press release titled “Consolidated Financial Results for the Second Quarter Ended September 30, 2008” submitted to the SEC under Form 6-K on October 29, 2008.

URL: The press release titled “Consolidated Financial Results for the Second Quarter Ended September 30, 2008”

http://www.sec.gov/Archives/edgar/data/313838/000115752308008486/a5813878.htm

(2) Material Contracts

There was no execution of material contracts during the three months ended September 30, 2008.

Note for readers of this English translation:

The above means that there is no update from the description in the Securities Report (Yukashoken Houkokusho) and the Company’s Annual Report on Form 20-F (“Patents and Licenses” in item 4) for the fiscal year ended March 31, 2008, as well as the Quarterly Securities Report (Shihanki Houkokusho) for the three months ended June 30, 2008.

 

(3) Management’s Discussion and Analysis of Financial Condition and Results of Operations

i) Results of Operation

Note for readers of this English translation:

Except for information specifically described in this English translation, the translation of the description set out in the Japanese-language Quarterly Securities Report is omitted in this document, since it is the same as described in the press release previously submitted to the SEC. Please refer to “Consolidated Financial Results for the Second Quarter Ended September 30, 2008” submitted to the SEC on Form 6-K on October 29, 2008.

 

URL: The press release titled “Consolidated Financial Results for the Second Quarter Ended September 30, 2008”

http://www.sec.gov/Archives/edgar/data/313838/000115752308008486/a5813878.htm

 

Foreign Exchange Fluctuations and Risk Hedging

There was no significant change during the three months ended September 30, 2008.

 

Note for readers of this English translation:

The above means that there was no significant change from the description in the Annual Report on Form 20-F filed with the SEC on June 23, 2008.

 

URL: The Form 20-F filed with the SEC on June 23, 2008

http://www.sec.gov/Archives/edgar/data/313838/000114554908001104/k01608e20vf.htm

 

 

5

 

 


Status of Cash Flow

Operating Activities: During the three months ended September 30, 2008, there was a net cash inflow of 72.9 billion yen in operating activities, an increase of 48.0 billion yen, or 192.5 percent year-on-year. For all segments excluding the Financial Services segment, 4.9 billion yen of net cash was provided in operating activities, a decrease of 0.4 billion yen, or 7.9 percent year-on-year. The Financial Services segment had a net cash inflow of 67.9 billion yen from operating activities, an increase of 42.4 billion yen, or 165.7 percent year-on-year.

During the three months ended September 30, 2008, with respect to all segments excluding the Financial Services segment, the major inflow factors included an increase in notes and accounts payable, trade and a cash contribution from net income, after taking into account depreciation and amortization. This exceeded cash outflow, which included an increase in inventory within the Electronics and Game segments. The Financial Services segment generated net cash mainly from an increase in revenue from insurance premiums reflecting a steady increase in insurance-in-force at Sony Life.

Compared with the same period of the previous fiscal year, within all segments excluding the Financial Services segment, although there was a significant decrease in cash outflow from notes and accounts receivable, trade, net cash inflow decreased slightly mainly as a result of an increase in inventory within the Electronics and Game segments. Within the Financial Services segment, net cash generated increased year-on-year mainly due to an increase in revenue from insurance premiums reflecting a steady increase in insurance-in-force at Sony Life.

Investing Activities: During the three months ended September 30, 2008, Sony used 273.8 billion yen of net cash in investing activities, an increase of 124.8 billion yen, or 83.7 percent year-on-year. For all segments excluding the Financial Services segment, 128.0 billion yen of net cash was used in investing activities, an increase of 84.4 billion yen, or 193.2 percent year-on-year. The Financial Services segment used 149.0 billion yen in net cash, a increase of 51.6 billion yen, or 53.0 percent year-on-year.

During the three months ended September 30, 2008, with respect to all segments excluding the Financial Services segment, there were payments for items such as purchases of manufacturing equipment in the Electronics segment. Within the Financial Services segment, payments for investments carried out at Sony Life, and payments for investments and advances carried out at Sony Bank, where operations are expanding, exceeded proceeds from the maturities and sales of marketable securities and collections of advances.

Compared with the same period of the previous fiscal year, net cash used in investing activities increased within all segments excluding the Financial Services segment, mainly due to the proceeds from the sale of a portion of Sony’s former headquarters site in the same period of the previous fiscal year. Within the Financial Services segment, net cash used in investing activities increased year-on-year mainly due to a decrease in proceeds from the maturities and sales of marketable securities and collections of advances, which were partially offset by a decrease in payments for investments, carried out at Sony Life.

In all segments excluding the Financial Services segment, net cash used by operating and investing activities combined was 123.1 billion yen compared to net cash used of 38.3 billion yen in the same period of the previous fiscal year.

Financing Activities: During the three months ended September 30, 2008, 122.9 billion yen of net cash was provided by financing activities, a decrease of 192.9 billion yen, or 61.1 percent year-on-year. For all segments excluding the Financial Services segment, there was a net cash inflow of 4.8 billion yen in financing activities, a decrease of 176.6 billion yen compared to a net cash inflow of 181.4 billion yen in the same period of the previous fiscal year. This was primarily due to an issuance of commercial paper in the same period of the previous fiscal year. There was no such issuance in the period of this fiscal year. In the Financial Services segment, as a result of an increase in policyholder accounts at Sony Life and an increase in deposits from customers at Sony Bank, financing activities generated 121.3 billion yen of net cash, an increase of 0.9 billion yen, or 0.7 percent year-on-year.

Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in the exchange rate, the total outstanding balance of cash and cash equivalents at September 30, 2008 was 700.9 billion yen, a decrease of 86.8 billion yen, or 11.0 percent compared with the balance as of June 30, 2008. This is an increase of 73.9 billion yen, or 11.8 percent compared with the balance as of September 30, 2007. The outstanding balance of cash and cash equivalents of all segments excluding the Financial Services segment, was 533.7 billion yen, a decrease of 127.1 billion yen, or 19.2 percent compared with the balance as of June 30, 2008. This is an increase of 78.5 billion yen, or 17.3 percent compared with the balance as of September 30, 2007. Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 167.3 billion yen, an increase of 40.2 billion yen, or 31.7 percent compared with the balance as of June 30, 2008. This is a decrease of 4.6 billion yen, or 2.7 percent compared with the balance as of September 30, 2007.

 

6

 

 


Information of Cash Flows Separating Out the Financial Services Segment (Unaudited)

The following charts show Sony’s unaudited cash flow information for all segments excluding the Financial Services segment and for the Financial Services segment alone. These separate condensed presentations are not required under U.S. GAAP, which is used in Sony’s consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony utilizes this information to analyze its results without Financial Services segment and believes that these presentations may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and all other segments excluding the Financial Services segment are eliminated in the consolidated figures shown below.

 

Condensed Statements of Cash Flows  (Unaudited)

 

 

 

 

Yen in millions

 

Financial Services

 

Three months ended September 30

 

 

 

 

2008

 

 

 

 

 

Net cash provided by operating activities

¥

67,925

Net cash used in investing activities

 

(149,006)

Net cash provided by financing activities

 

121,323

Net increase in cash and cash equivalents

40,242 

Cash and cash equivalents at beginning of the period

 

127,024

Cash and cash equivalents at the end of the period

¥

167,266

 

 

 

 

 

 

 

 

Yen in millions

 

Sony without Financial Services

Three months ended September 30

 

 

 

 

2008

 

 

 

 

 

Net cash provided by operating activities

¥

4,915

Net cash used in investing activities

 

(128,032)

Net cash provided by financing activities

 

4,816

Effect of exchange rate changes on cash and cash equivalents

 

(8,782)

Net decrease in cash and cash equivalents

(127,083)

Cash and cash equivalents at beginning of the period

 

660,740

Cash and cash equivalents at the end of the period

¥

533,657

 

 

 

 

 

 

 

 

Yen in millions

 

Consolidated

Three months ended September 30

 

 

 

 

2008

 

 

 

 

 

Net cash provided by operating activities

¥

72,859

Net cash used in investing activities

 

(273,844)

Net cash provided by financing activities

 

122,926

Effect of exchange rate changes on cash and cash equivalents

 

(8,782)

Net decrease in cash and cash equivalents

 

(86,841)

Cash and cash equivalents at beginning of the period

 

787,764

Cash and cash equivalents at the end of the period

¥

700,923

 

 

 

 

 

 

 

7

 

 


 

ii) Issues Facing Sony and Management’s Response to those Issues

There was no significant change during the three months ended September 30, 2008.

 

Note for readers of this English translation:

The above means that there was no significant change from the description in the Annual Report on Form 20-F filed with the SEC on June 23, 2008.

 

URL: The Form 20-F filed with the SEC on June 23, 2008

http://www.sec.gov/Archives/edgar/data/313838/000114554908001104/k01608e20vf.htm

 

iii) Research and Development

Research and development costs for the three months ended September 30, 2008 increased 0.6 billion yen, or 0.5 percent, to 132.3 billion yen, compared with the same quarter of the previous fiscal year. The ratio of research and development costs to sales (excluding Financial Services segment revenue) decreased from 6.8 percent to 6.7 percent. The bulk of research and development costs were incurred in the Electronics and Game segments. Expenses in the Electronics segment increased 1.6 billion yen, or 1.4 percent, to 112.7 billion yen and expenses in the Game segment increased 0.4 billion yen, or 2.1 percent, to 19.4 billion yen. In the Electronics segment, approximately 67 percent of expenses were for the development of new product prototypes while the remaining 33 percent were for the development of mid- to long-term new technologies in such areas as next-generation displays, semiconductors and communications.

 

iv) Liquidity and Capital Resources

There was no significant change during the three months ended September 30, 2008.

 

Note for readers of this English translation:

The above means that there was no significant change from the description in the Annual Report on Form 20-F filed with the SEC on June 23, 2008.

 

URL: The Form 20-F filed with the SEC on June 23, 2008

http://www.sec.gov/Archives/edgar/data/313838/000114554908001104/k01608e20vf.htm

 

 

 

8

 

 


III    Property, Plant and Equipment

(1) Major Property, Plant and Equipment

There was no significant change during the three months ended September 30, 2008.

 

(2) Plan for the Purchase and Retirement of Major Property, Plant and Equipment

During the three months ended September 30, 2008, there was no significant change in the purchase and retirement of property, plant and equipment from the plan at June 30, 2008. During the three months ended September 30, 2008, there was no significant new firm plan of the purchase and retirement of major property, plant and equipment.

 

 

 

 

 

 

9

 

 


IV   Company Information

(1) Information on the Company’s Shares

i) Total Number of Shares

1) Total Number of Shares

 

Class

Total number of shares authorized to be issued

Common stock

3,600,000,000

Total

3,600,000,000

 

2) Number of Shares Issued

 

Class

Number of shares issued

Securities exchange where the shares are listed or registered/authorized Financial Instruments Firms Association

Description

As of the end of the second quarterly period

(September 30, 2008)

As of the filing date of the Quarterly Securities Report

(November 14, 2008)

Common stock

1,004,535,364

1,004,535,364

Tokyo Stock Exchange

Osaka Securities Exchange

New York Stock Exchange

London Stock Exchange

Total

1,004,535,364

1,004,535,364

Notes:

 

1.

The Company’s shares of common stock are listed on the First Sections of the Tokyo Stock Exchange and the Osaka Securities Exchange in Japan.

 

2.

The number of shares issued as of the filing date of the Quarterly Securities Report does not include shares issued upon the exercise of stock acquisition rights (“SARs”) (including the conversion of convertible bonds and the exercise of warrants of bonds with warrants issued under the previous Commercial Code in Japan) during November 2008, the month the Quarterly Securities Report (Shihanki Houkokusho) was filed.

 

ii) Stock Acquisition Rights

 

Note for readers of this English translation: The Japanese-language Quarterly Securities Report includes a summary of the main terms and conditions of the stock acquisitions rights, bonds with stock acquisition rights and convertible bonds listed below. A summary of such terms and conditions has previously been submitted to the Securities and Exchange Commission under Form 20-F, Form 6-K and Form S-8. There has been no change to such terms and conditions since the applicable date of such submissions, except a revision of the total outstanding number of SARs issued and number of outstanding shares to be issued or transferred, as provided in the schedule below.

 

URL: The list of documents previously submitted by the Company

http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000313838&owner=include&count=40

 

Stock acquisition rights (outstanding as of September 30, 2008)

Name

(Date of Shareholders’ Resolution)

Total outstanding number of SARs issued

Number of outstanding shares of common stock to be issued or transferred

The first series of Common Stock Acquisition Rights

(June 20, 2002)

9,878

987,800

 

 

10

 

 


 

The third series of Common Stock Acquisition Rights

(June 20, 2002)

9,332

933,200

The fourth series of Common Stock Acquisition Rights

(June 20, 2003)

8,145

814,500

The sixth series of Common Stock Acquisition Rights

(June 20, 2003)

8,941

894,100

The seventh series of Common Stock Acquisition Rights

(June 22, 2004)

9,540

954,000

The ninth series of Common Stock Acquisition Rights

(June 22, 2004)

8,085

808,500

The tenth series of Common Stock Acquisition Rights

(June 22, 2005)

10,093

1,009,300

The eleventh series of Common Stock Acquisition Rights

(June 22, 2005)

10,717

1,071,700

The twelfth series of Common Stock Acquisition Rights

(June 22, 2006)

10,579

1,057,900

The thirteenth series of Common Stock Acquisition Rights

(June 22, 2006)

13,734

1,373,400

The fourteenth series of Common Stock Acquisition Rights

(June 21, 2007)

7,962

796,200

The fifteenth series of Common Stock Acquisition Rights

(June 21, 2007)

15,844

1,584,400

 

Bonds with stock acquisition rights (outstanding as of September 30, 2008)

Name

(Date of Management Committee’s Resolution)

Total number of SARs issued

Number of shares of common stock to be issued or transferred

Bonds with Stock Acquisition Rights

(December 1, 2003)

50,000

44,603,033

 

 

11

 

 


 

 

Convertible bonds (outstanding as of September 30, 2008)

Name

(Date of issuance)

Outstanding balance

U.S. Dollar convertible bonds (April 17, 2000)

U.S. $ 45,550 thousand

U.S. Dollar convertible bonds (April 16, 2001)

U.S. $ 45,730 thousand

U.S. Dollar convertible bonds (April 15, 2002)

U.S. $ 33,002 thousand

 

iii) Status of Rights Plan

 

Not applicable.

 

iv) Changes in the Number of Total Shares Issued and the Amount of Common Stock

 

Period

Change in the number of total shares issued

Balance of the number of total shares issued

Change in

the amount of

capital stock

Balance of

the amount of

capital stock

Change in
capital reserve

Balance of
capital reserve

(Thousands)

(Thousands)

(Millions of yen)

(Millions of yen)

(Millions of yen)

(Millions of yen)

From July 1 to September 30, 2008*1, 2

7

1,004,535

15

630,765

15

837,453

Notes:

 

1.

Increase due to the exercise of SARs.

 

2.

The total number of shares, the amount of capital stock and the capital reserve did not increase during the period from October 1 to October 31, 2008.

 

v) Status of Major Shareholders

(As of September 30, 2008)     

Name

Address

Number of
shares held

(Thousands)

Number of shares held

as a percentage of total shares issued

(%)

Moxley and Company*1

(Local Custodian: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)

New York, U.S.A.

(2-7-1, Marunouchi, Chiyoda-ku, Tokyo)

148,669

14.80

Japan Trustee Services Bank, Ltd.*2

(Trust account)

1-8-11, Harumi, Chuo-ku, Tokyo

59,995

5.97

The Master Trust Bank of Japan, Ltd. *2
(Trust account)

2-11-3, Hamamatsu-cho, Minato-ku, Tokyo

43,397

4.32

Japan Trustee Services Bank, Ltd.*2

(Trust account 4G)

1-8-11, Harumi, Chuo-ku, Tokyo

40,158

4.00

State Street Bank and Trust Company*3

(Local Custodian: Mizuho Corporate Bank, Ltd.)

Boston, U.S.A.

(6-7, Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)

33,138

3.30

 

 

12

 

 


 

SSBT OD05 Omnibus China Treaty 808150*3

(Local Custodian: Sumitomo Mitsui Banking Corporation)

Sydney, Australia

(1-3-2, Marunouchi , Chiyoda-ku, Tokyo)

10,373

1.03

State Street Bank and Trust Company 505223*3

(Local Custodian: Mizuho Corporate Bank, Ltd.)

Boston, U.S.A.

(6-7, Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)

9,551

0.95

State Street Bank and Trust Company 505225*3

(Local Custodian: Mizuho Corporate Bank, Ltd.)

Boston, U.S.A.

(6-7, Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)

8,466

0.84

The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account *3

(Local Custodian: Mizuho Corporate Bank, Ltd.)

London, U.K.

(6-7, Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)

8,088

0.81

Japan Trustee Services Bank, Ltd.*2

(Trust account 4)

1-8-11, Harumi Chuo-ku, Tokyo

8,003

0.80

Total

369,839

36.82

Notes:

 

1.

Moxley and Company is the nominee of JP Morgan Chase Bank, N.A. which is the Depositary for holders of the Company's American Depositary Receipts (ADRs).

 

2.

The shares held by each corporation are held in trust for investors, including shares in securities investment trusts.

 

3.

Each shareholder provides depositary services for shares owned by institutional investors, mainly in Europe and North America.  They are also the nominees for these investors.

 

4.

Dodge & Cox sent a copy of the “Amendment to the Bulk Shareholding Report” (which was filed with the Kanto Financial Bureau in Japan) to the Company as of September 21, 2007 and reported that they held shares of the Company (including ADRs) as of September 15, 2007 as provided in the below table.  The Company has not been notified of any change in such shareholding.  The Company has not been able to confirm the number of shares beneficially held by Dodge & Cox as of September 30, 2008.

 

Name

Number of shares held

(Thousands)

Number of shares held as a percentage of total shares issued
(%)

Dodge & Cox

84,461

8.42

 

vi) Status of Voting Rights

1) Shares Issued

(As of September 30, 2008)      

Classification

Number of shares of common stock

Number of votes

Description

(Shares)

(Units)

Shares without voting rights

Shares with restricted voting rights (Treasury stock, etc.)

Shares with restricted voting rights (Others)

Shares with full voting rights (Treasury stock, etc.)

1,057,500                             

 

 

13

 

 


 

Shares with full voting rights (Others)

1,000,800,400

10,008,004

Shares less than one unit

2,677,464                             

Shares less than

one unit (100 shares)

Total shares issued

1,004,535,364

Total voting rights held by all shareholders

10,008,004

 

Note:

Included in “Shares with full voting rights (Others)” under “Number of shares of common stock” are 46,800 shares of common stock held under the name of Japan Securities Depository Center, Inc.  Also included in “Shares with full voting rights (Others)” under “Number of votes” are 468 voting rights regarding the shares of common stock related to such shares with full voting rights held under the name of Japan Securities Depository Center, Inc.

 

2) Treasury Stock

(As of September 30, 2008)    

Shareholder

Address of shareholder

Number of shares of common stock held under own name

(Shares)

Number of
shares of common stock held
under the
names of others

(Shares)

Total number of shares of common stock held

(Shares)

Total of shares held to total shares issued

(%)

 

 

 

 

 

 

Sony Corporation

(Treasury stock)*1

1-7-1, Konan, Minato-ku, Tokyo

1,043,900

-

1,043,900

0.1

Kyoshin Technosonic Co., Ltd.

(Cross-holding stock)*2

1-31-1, Nishi-Gotanda, Shinagawa-ku, Tokyo

12,600

1,000

13,600

0.0

Total

1,056,500

1,000

1,057,500

0.1

Notes:

 

1.

In addition to the above, there are 383 shares of common stock held by the Company in the register of shareholders that the Company does not beneficially own.  These shares are included in “Shares with full voting rights (Others)” and “Shares less than one unit” in Table (i) “Shares Issued” above.

 

2.

Kyoshin Technosonic Co., Ltd. is a member of a stock ownership plan (The Sony Stock Ownership Plan 7-1, Konan 1-chome, Minato-ku, Tokyo), which is composed of the Company’s business partners and other members, holding 1,000 shares of the Company under the name thereof.

 

(2)    Stock Price Range

Highest and lowest prices during the past six months

 

Month of 2008

April

May

June

July

August

September

Highest (yen)*

4,910

5,350

5,560

4,710

4,430

4,190

Lowest (yen)*

4,000

4,560

4,620

4,050

4,000

3,120

 

*

As quoted on the First Section of the Tokyo Stock Exchange.

 

(3)    Directors and Corporate Executive Officers

There were no changes in directors and corporate executive officers between the filing date of the Securities Report

(Yukashoken Houkokusho) for the fiscal year ended March 31, 2008 and the filing date of this Quarterly Securities Report (Shihanki Houkokusho) on November 14, 2008.

 

14

 

 


 

 

V Financial Statements

 

Page

(1) Consolidated Financial Statements

 

 

(i)

Consolidated Balance Sheets at September 30 and March 31, 2008

16

 

(ii)

Consolidated Statements of Income for the three and six months ended September 30, 2008

18

 

(iii)

Consolidated Statement of Cash Flows for the six months ended September 30, 2008

20

(2) Other Information

35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

 


(i) Consolidated Balance Sheets (Unaudited)

Sony Corporation and Consolidated Subsidiaries

 

 

 

 

Yen in millions

 

At September 30, 2008

At March 31,  2008

ASSETS

 

 

Current assets:

 

 

Cash and cash equivalents

700,923

1,086,431

Call loan in the banking business

325,765

352,569

Marketable securities

475,158

427,709

Notes and accounts receivable, trade

1,206,065

1,183,620

Allowance for doubtful accounts and sales returns

(71,974)

(93,335)

Inventories

1,365,392

1,021,595

Deferred income taxes

230,419

237,073

Prepaid expenses and other current assets

897,764

794,001

Total current assets

5,129,512

5,009,663

 

 

 

Film costs

324,118

304,243

 

 

 

Investments and advances:

 

 

Affiliated companies

333,236

381,188

Securities investments and other

4,187,704

3,954,460

 

4,520,940

4,335,648

Property, plant and equipment:

 

 

Land

157,888

158,289

Buildings

911,878

903,116

Machinery and equipment

2,417,791

2,483,016

Construction in progress

80,480

55,740

 

3,568,037

3,600,161

Less – Accumulated depreciation

2,339,054

2,356,812

 

1,228,983

1,243,349

 

 

 

Other assets:

 

 

Intangibles, net

307,447

263,490

Goodwill

341,207

304,423

Deferred insurance acquisition costs

401,324

396,819

Deferred income taxes

210,915

198,666

Other

507,970

496,438

 

1,768,863

1,659,836

 

 

 

Total assets:

12,972,416

12,552,739

(Continued on following page.)

16

 

 


Consolidated Balance Sheets (Unaudited)

 

 

 

 

 

Yen in millions

 

At September 30, 2008

At March 31,   2008

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

Short-term borrowings

71,215

63,224

Current portion of long-term debt

378,313

291,879

Notes and accounts payable, trade

1,228,377

920,920

Accounts payable, other and accrued expenses

987,859

896,598

Accrued income and other taxes

51,318

200,803

Deposits from customers in the banking business

1,338,223

1,144,399

Other

456,412

505,544

Total current liabilities

4,511,717

4,023,367 

 

 

 

Long-term debt

649,414

729,059

Accrued pension and severance costs

221,084

231,237

Deferred income taxes

238,631

268,600

Future insurance policy benefits and other

3,420,503

3,298,506

Other

236,521

260,032

Total liabilities:

9,277,870

8,810,801

Commitments and contingent liabilities

 

 

 

 

 

Minority interest in consolidated subsidiaries

262,630

276,849

 

 

 

Stockholders’ equity:

Common stock, no par value

At September 30, 2008–Shares authorized: 3,600,000,000, shares issued: 1,004,535,364

At March 31, 2008– Shares authorized: 3,600,000,000, shares issued: 1,004,443,364

 

 

630,765

 

 

 

630,576

Additional paid-in capital

1,153,571

1,151,447

Retained earnings

2,085,045

2,059,361

Accumulated other comprehensive income –

 

 

Unrealized gains on securities

41,399

70,929

Unrealized gains (losses) on derivative instruments

1,438

(3,371)

Pension liability adjustment

(96,518)

(97,562)

Foreign currency translation adjustments

(378,890)

(341,523)

 

(432,571)

(371,527)

Treasury stock, at cost

 

 

Common stock

At September 30, 2008–1,043,930 shares

At March 31, 2008–1,015,596 shares

 

(4,894)

 

 

(4,768)

 

3,431,916

3,465,089

 

 

 

Total liabilities and stockholders’ equity:

12,972,416

12,552,739

The accompanying notes are an integral part of these statements.

17

 

 


(ii) Consolidated Statements of Income (Unaudited)

Sony Corporation and Consolidated Subsidiaries

 

Yen in millions

 

Six Months Ended
September 30, 2008

Sales and operating revenue:

 

Net sales

3,725,551

Financial service revenue

275,851

Other operating revenue

49,947

 

4,051,349

Costs and expenses:

 

Cost of sales

2,882,477

Selling, general and administrative

814,137

Financial service expenses

269,425

Loss on sale, disposal or impairment of assets, net

4,208

 

3,970,247

Equity in net income of affiliated companies

3,385

Operating income

84,487

Other income:

 

Interest and dividends

14,313

Gain on sale of securities investments, net

461

Gain on change in interest in subsidiaries and equity investees

324

Other

11,803

 

26,901

Other expenses:

 

Interest

11,427

Loss on devaluation of securities investments

1,442

Foreign exchange loss, net

19,730

Other

8,560

 

41,159

Income before income taxes

70,229

Income taxes:

 

Current

47,003

Deferred

(36,937)

 

10,066

Income before minority interest

60,163

Minority interest in income (loss) of consolidated

subsidiaries

4,370

Net income

55,793

   
   

 

Yen in millions

 

Six Months Ended
September 30, 2008

Per share data:

 

Common stock

 

Net income

 

Basic

55.60

Diluted

53.11

 

 

Cash dividends

30.00

 The accompanying notes are an integral part of these statements.

 

18

 

 


Consolidated Statements of Income (Unaudited)

Sony Corporation and Consolidated Subsidiaries

 

Yen in millions

 

Three Months Ended
September 30, 2008

Sales and operating revenue:

 

Net sales

1,950,289

Financial service revenue

97,469

Other operating revenue

24,547

 

2,072,305

Costs and expenses:

 

Cost of sales

1,514,812

Selling, general and administrative

419,888

Financial service expenses

121,641

Loss on sale, disposal or impairment of assets, net

6,061

 

2,062,402

Equity in net income of affiliated companies

1,145

Operating income

11,048

Other income:

 

Interest and dividends

6,531

Gain on sale of securities investments, net

319

Gain on change in interest in subsidiaries and equity investees

336

Other

6,620

 

13,806

Other expenses:

 

Interest

6,611

Loss on devaluation of securities investments

502

Foreign exchange loss, net

6,803

Other

3,631

 

17,547

Income before income taxes

7,307

Income taxes:

 

Current

6,956

Deferred

(15,891)

 

(8,935)

Income before minority interest

16,242

Minority interest in income (loss) of consolidated

subsidiaries

(4,574)

Net income

20,816

   

 

Yen in millions

 

Three Months Ended
September 30, 2008

Per share data:

 

Common stock

 

Net income

 

Basic

20.74

Diluted

19.83

 

The accompanying notes are an integral part of these statements.

 

19

 

 


(iii) Consolidated Statement of Cash Flows (Unaudited)

Sony Corporation and Consolidated Subsidiaries

 

 

 

Yen in millions

 

Six Months Ended
September 30, 2008

Cash flows from operating activities:

 

Net income

55,793

Adjustments to reconcile net income to net cash

 

used in operating activities –

 

Depreciation and amortization, including amortization

 

  of deferred insurance acquisition costs

195,026

Amortization of film costs

125,271

Stock-based compensation expense

1,967

Accrual for pension and severance costs, less payments

(11,143)

Loss on sale, disposal or impairment of assets, net

4,208

Gain on sale or loss on devaluation of securities investments, net

981

Loss on revaluation of marketable securities held in the
financial service business for trading purpose, net

26,312

Gain on change in interest in subsidiaries and equity investees

(324)

Deferred income taxes

(36,937)

Equity in net income of affiliated companies, net of
dividends

28,164

Changes in assets and liabilities:

 

Increase in notes and accounts receivable, trade

(43,857)

Increase in inventories

(364,438)

Increase in film costs

(135,025)

Increase in notes and accounts payable, trade

297,840

Decrease in accrued income and other taxes

(137,391)

Increase in future insurance policy benefits and other

78,754

Increase in deferred insurance acquisition costs

(35,122)

Increase in marketable securities held in the

 

  financial service business for trading purpose

(26,057)

Increase in other current assets

(230,880)

Decrease in other current liabilities

(1,379)

Other

64,159

Net cash used in operating activities

(144,078)

 

(Continued on following page.)

20

 

 


Consolidated Statement of Cash Flows (Unaudited)

 

 

 

 

Yen in millions

 

Six Months Ended
September 30, 2008

Cash flows from investing activities:

 

Payments for purchases of fixed assets

(236,183)

Proceeds from sales of fixed assets

139,867

Payments for investments and advances by financial service
business

(823,116)

Payments for investments and advances (other than financial
service business)

(73,226)

Proceeds from maturities of marketable securities, sales of
securities investments and collections of advances by financial
service business

500,942

Proceeds from maturities of marketable securities, sales of
securities investments and collections of advances
(other than financial service business)

4,016

Other

(406)

Net cash used in investing activities

(488,106)

Cash flows from financing activities:

 

Proceeds from issuance of long-term debt

12,055

Payments of long-term debt

(9,408)

Increase in short-term borrowings, net

12,237

Increase in deposits from customers in the financial service business, net

237,183

Dividends paid

(12,517)

Proceeds from the issuance of shares under stock-based compensation
plans

378

Other

(3,343)

Net cash provided by financing activities

236,585

Effect of exchange rate changes on cash and cash equivalents

10,091

Net decrease in cash and cash equivalents

(385,508)

Cash and cash equivalents at beginning of the period

1,086,431

Cash and cash equivalents at end of the period

700,923

 

 

The accompanying notes are an integral part of these statements.

 

 

21

 

 


Index to Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

 

Notes to Consolidated Financial Statements

Page

 

1.

Summary of Significant Accounting Policies

23

 

2.

Inventories

24

 

3.

Reconciliation of the Differences between Basic and Diluted Net Income per Share

24

 

4.

Commitments and Contingent Liabilities

25

 

5.

Business Segment Information

26

 

6.

Subsequent Event

34

 

 

 

 

 

 

 

22

 

 


Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

 

1. Summary of Significant Accounting Policies

Sony Corporation and its subsidiaries in Japan maintain their records and prepare their financial statements in accordance with accounting principles generally accepted in Japan while its foreign subsidiaries maintain their records and prepare their financial statements in conformity with accounting principles generally accepted in the countries of their domiciles. Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except for certain disclosures which have been omitted.

 

(1) Newly Adopted Accounting Pronouncements:

Fair Value Measurements -

In September 2006, the FASB issued FAS No. 157, “Fair Value Measurements”. FAS No. 157 establishes a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures about the use of fair value measurements. FAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. In February 2008, the FASB issued FASB Staff Positions (“FSP”) FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” and FSP FAS 157-2, “Effective Date of FASB Statement No. 157”. FSP FAS 157-1 removes certain leasing transactions from the scope of FAS No. 157. FSP FAS 157-2 partially delays the effective date of FAS No. 157 until April 1, 2009 for Sony for certain nonfinancial assets and liabilities. In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset Is Not Active”. FSP FAS 157-3 clarifies the application of FAS No. 157 in a market that is not active. Sony adopted FAS No. 157 on April 1, 2008 with regards to financial assets and liabilities. The adoption of FAS No. 157 as it relates to financial assets and liabilities did not have a material impact on Sony’s consolidated results of operations and financial position. Sony is currently evaluating the impact for nonfinancial assets and liabilities. Descriptions required to be disclosed by FAS No. 157 are omitted.

 

Fair Value Option for Financial Assets and Financial Liabilities -

In February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. FAS No. 159 permits companies to choose to measure, on an instrument-by-instrument basis, various financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The fair value measurement election is irrevocable and subsequent changes in fair value must be recorded in earnings. Sony adopted FAS No. 159 on April 1, 2008. Sony did not elect the fair value option for any assets or liabilities, that were not previously carried at fair value. Accordingly, the adoption of FAS No. 159 had no impact on Sony’s consolidated financial statements. However, its effects on future periods will depend on the nature of instruments held by Sony and its elections under the provisions of FAS No. 159.

 

 

(2)

Changes in Accounting Policies, Procedures and Presentation Rules Applied in the Preparation of the Interim Consolidated Financial Statements:

 

Equity in Net Income of Affiliated Companies -  

Sony periodically reviews the presentation of its financial information to ensure that it is consistent with the way management views the consolidated operations. Since Sony considers its equity investments to be integral to its operations, effective April 1, 2008, Sony reports equity in net income of affiliated companies as a component of operating income. Prior to April 1, 2008, equity in net income of affiliated companies was presented below minority interest in income (loss) of consolidated subsidiaries and above net income in Sony’s consolidated results of operations. As a result of the reclassification, both operating income and income before income taxes increased by 1,145 million yen for the three months ended September 30, 2008, and by 3,385 million yen for the six months ended September 30, 2008. The reclassification did not affect net income for the three and six months ended September 30, 2008.

 

 

(3)

Accounting Methods Used Specifically for Interim Consolidated Financial Statements:

 

Income Taxes -

Sony estimates the annual effective tax rate (“ETR”) derived from a projected annual net income before taxes and calculates the interim period income tax provision based on the year-to-date income tax provision computed by applying the ETR to the year-to-date net income before taxes at the end of each interim period. The income tax provision based on the ETR reflects

 

23

 

 


anticipated income tax credits and net operating loss carryforwards; however, it excludes the income tax provision related to significant unusual or extraordinary transactions. Such income tax provision will be included with the provision based on the ETR in the interim period in which they occur.

 

 

(4)

Reclassifications:

Certain reclassifications of the financial statements for the fiscal year ended March 31, 2008 have been made to conform to the presentation for the interim period ended September 30, 2008.

 

2. Inventories

Inventories at September 30 and March 31, 2008 are summarized as follows:

 

 

Yen in millions

 

At September 30, 2008

At March

31, 2008

Finished products

1,018,502

687,095

Work in process

115,440

119,656

Raw materials, purchased components and supplies

231,450

214,844

 

1,365,392

1,021,595

 

 

3. Reconciliation of the Differences between Basic and Diluted Net Income per Share (“EPS”)

Reconciliation of the differences between basic and diluted EPS for the six and three months ended September 30, 2008 is as follows:

 

 

Yen in millions

 

 

Six Months Ended
September 30, 2008

 

Net income allocated to common stock

55,793

 

Effect of dilutive securities:

 

 

Stock acquisition rights

-

 

Convertible bonds

-

 

Net income allocated to common stock for dilutive EPS computation

55,793

 

 

 

Thousands of shares

 

Weighted-average shares

1,003,480

 

Effect of dilutive securities:

 

 

Stock acquisition rights

823

 

Convertible bonds

46,246

 

Weighted-average shares for dilutive EPS computation

1,050,549

 

 

 

Yen

 

Basic EPS

55.60

 

Diluted EPS

53.11

 

 

 

 

 

 

24

 

 


Potential shares of common stock upon the exercise of stock acquisition rights, which were excluded from the computation of diluted EPS since they had an exercise price in excess of the average market value of Sony’s common stock during the fiscal period, were 11,491 thousand shares for the six months ended September 30, 2008.

 

 

Yen in millions

 

 

Three Months Ended
September 30, 2008

 

Net income allocated to common stock

20,816

 

Effect of dilutive securities:

 

 

Stock acquisition rights

-

 

Convertible bonds

-

 

Net income allocated to common stock for dilutive EPS computation

20,816

 

 

 

Thousands of shares

 

Weighted-average shares

1,003,495

 

Effect of dilutive securities:

 

 

Stock acquisition rights

211

 

Convertible bonds

46,246

 

Weighted-average shares for dilutive EPS computation

1,049,952

 

 

 

Yen

 

Basic EPS

20.74

 

Diluted EPS

19.83

 

 

Potential shares of common stock upon the exercise of stock acquisition rights, which were excluded from the computation of diluted EPS since they had an exercise price in excess of the average market value of Sony’s common stock during the fiscal period, were 12,075 thousand shares for the three months ended September 30, 2008.

 

4. Commitments and Contingent Liabilities

 

(1)

Commitments:

A. Loan Commitments

Commitments outstanding at September 30, 2008 totaled 300,787 million yen. The main components of these commitments are loan agreements that subsidiaries in the Financial Services segment have entered into with their customers in accordance with the condition of the contracts.

 

B. Purchase Commitments and other

Commitments outstanding at September 30, 2008 amounted to 225,973 million yen. The major components of these commitments are as follows:

In the ordinary course of business, Sony makes commitments for the purchase of property, plant and equipment. As of September 30, 2008, such commitments outstanding were 33,614 million yen.

Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of films and television programming as well as agreements with third parties to acquire completed films, or certain rights therein. These agreements mainly cover various periods through March 31, 2011. As of September 30, 2008, these subsidiaries were committed to make payments under such contracts of 53,671 million yen.

In April 2005, Sony Corporation has entered into a partnership program contract with Fédération Internationale de Football Association (“FIFA”). Through this program Sony Corporation will be able to exercise various rights as an official sponsor of FIFA events including the FIFA World CupTM* from 2007 to 2014. As of September 30, 2008, Sony Corporation was committed to make payments under such contract of 23,718 million yen.

* FIFA World CupTM is a registered trademark of FIFA.

 

 

25

 

 


 

(2)

Contingent Liabilities:

Sony had contingent liabilities including guarantees given in the ordinary course of business, which amounted to 47,590 million yen at September 30, 2008. The major components of the contingent liabilities are as follows:

In connection with the December 2007 refinancing of the debt obligation of a third party investor in Sony’s U.S. based music publishing business, Sony has issued a guarantee to a creditor of the third party investor pursuant to which Sony will provide a minimum offer of 300 million U.S. dollars to the creditor to purchase certain assets that are being held as collateral by the third party creditor against the obligation of the third party investor. The assets held as collateral for the third party investor’s obligation consist of the third party investor’s 50% ownership interest in the music publishing subsidiary. At September 30, 2008, the fair value of the collateral exceeded 300 million U.S. dollars.

The European Commission (“EC”) issued the Waste Electrical and Electronic Equipment (“WEEE”) directive in February 2003. The WEEE directive requires electronics producers after August 2005 to finance the cost for collection, treatment, recovery and safe disposal of waste products. In most member states of the European Union (“EU”), the directive has been transposed into national legislation subject to which Sony recognizes the liability for obligations associated with WEEE. As of the interim period ended September 30, 2008, the accrued amounts in respect to the above mentioned WEEE have not been significant. However, since the regulation has not been finally adopted and put into practice in all individual member states, Sony will continue to evaluate the impact of this regulation.

Sony Corporation and certain of its subsidiaries are defendants in several pending lawsuits and are subject to inquiries by various government authorities. However, based upon the information currently available to both Sony and its legal counsel, the management of Sony believes that damages from such lawsuits or inquiries, if any, are not likely to have a material effect on Sony's consolidated financial statements.

 

5. Business Segment Information

Sony is comprised of the Electronics segment, Game segment, Pictures segment, Financial Services segment and All Other. Business segment information is prepared in accordance with these segments.

The Electronics segment designs, develops, manufactures and distributes audio-visual, informational and communicative equipment, instruments and devices throughout the world. The Game segment designs, develops and sells PlayStation®2, PLAYSTATION®3 and PSP® (PlayStation Portable) game consoles and related software mainly in Japan, the U.S. and Europe, and licenses to third party software developers. The Pictures segment develops, produces and manufactures image-based software, including film, video, and television mainly in the U.S., and markets, distributes and broadcasts in the worldwide market. The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market, leasing and credit financing businesses and a bank business in Japan. All Other consists of various operating activities, primarily including a music business, a network service business, an animation production and marketing business, and an advertising agency business in Japan. Sony’s products and services are generally unique to a single operating segment.

The operating segments reported below are the segments of Sony for which separate financial information is available and for which operating profit or loss amounts are evaluated regularly by executive management in deciding how to allocate resources and in assessing performance.

 

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Business Segments -

 

Sales and operating revenue for the six months ended September 30, 2008 is as follows:

 

 

Yen in millions

 

 

Six Months Ended
September 30, 2008

 

 

 

 

Sales and operating revenue:

 

 

Electronics -

 

 

Customers

2,811,672

 

Intersegment

280,752

 

Total

3,092,424

 

Game -

 

 

Customers

460,419

 

Intersegment

37,742

 

Total

498,161

 

Pictures -

 

 

Customers

355,717

 

Intersegment

 

Total

355,717

 

Financial Services -

 

 

Customers

275,851

 

Intersegment

7,877

 

Total

283,728

 

All Other -

 

 

Customers

147,690

 

Intersegment

34,731

 

Total

182,421

 

 

 

 

Elimination

(361,102)

 

 

 

 

Consolidated total

4,051,349

 

 

 

Electronics intersegment amounts primarily consist of transactions with the Game segment, Pictures segment and All Other.

Game intersegment amounts primarily consist of transactions with the Electronics segment.

All Other intersegment amounts primarily consist of transactions with the Electronics, Game and Pictures segments.

 

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Sales and operating revenue for the three months ended September 30, 2008 is as follows:

 

 

Yen in millions

 

 

Three Months Ended
September 30, 2008

 

 

 

 

Sales and operating revenue:

 

 

Electronics -

 

 

Customers

1,461,081

 

Intersegment

192,229

 

Total

1,653,310

 

Game -

 

 

Customers

245,427

 

Intersegment

23,119

 

Total

268,546

 

Pictures -

 

 

Customers

196,079

 

Intersegment

— 

 

Total

196,079

 

Financial Services -

 

 

Customers

97,469

 

Intersegment

3,234

 

Total

100,703

 

All Other -

 

 

Customers

72,249

 

Intersegment

18,033

 

Total

90,282

 

 

 

 

Elimination

(236,615)

 

 

 

 

Consolidated total

2,072,305

 

 

 

Electronics intersegment amounts primarily consist of transactions with the Game segment, Pictures segment and All Other.

Game intersegment amounts primarily consist of transactions with the Electronics segment.

All Other intersegment amounts primarily consist of transactions with the Electronics, Game and Pictures segments.

 

 

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Segment profit or loss for the six and three months ended September 30, 2008 are as follows:

 

 

Yen in millions

 

 

Six Months Ended
September 30, 2008

 

 

 

 

Operating income (loss):

 

 

Electronics

119,997

 

Game

(34,047)

 

Pictures

2,725

 

Financial Services

5,298

 

All Other

10,264

 

Total

104,237

 

Elimination

(538)

 

Unallocated amounts:

 

 

Corporate expenses

(19,212)

 

Consolidated operating income

84,487

 

 

 

 

Other income

26,901

 

Other expenses

(41,159)

 

 

 

 

Consolidated income before income taxes

70,229

 

 

 

 

Yen in millions

 

 

Three Months Ended
September 30, 2008

 

 

 

 

Operating income (loss):

 

 

Electronics

75,646

 

Game

(39,465)

 

Pictures

10,987

 

Financial Services

(25,279)

 

All Other

3,542

 

Total

25,431

 

Elimination

(5,330)

 

Unallocated amounts:

 

 

Corporate expenses

(9,053)

 

Consolidated operating income

11,048

 

 

 

 

Other income

13,806

 

Other expenses

(17,547)

 

 

 

 

Consolidated income before income taxes

7,307

 

 

Operating income (loss) is Sales and operating revenue less Costs and expenses, and includes Equity in net income of affiliated companies.

 

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Other Significant Items:

 

The following table is a breakdown of Electronics sales and operating revenue to external customers by product category. The Electronics segment is managed as a single operating segment by Sony’s management.

 

 

Yen in millions

 

 

Six Months Ended
September 30, 2008

 

 

 

 

Audio

235,161

 

Video

612,676

 

Televisions

676,030

 

Information and Communications

506,817

 

Semiconductors

117,873

 

Components

400,505

 

Other

262,610

 

 

 

 

Total

2,811,672

 

 

 

 

Yen in millions

 

 

Three Months Ended
September 30, 2008

 

 

 

 

Audio

121,592

 

Video

297,262

 

Televisions

364,492

 

Information and Communications

277,749

 

Semiconductors

59,123

 

Components

211,631

 

Other

129,232

 

 

 

 

Total

1,461,081

 

 

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Geographic Information -

Sales and operating revenue attributed to countries based on location of customers for the six and three months ended September 30, 2008 are as follows:

 

 

Yen in millions

 

 

Six Months Ended
September 30, 2008

 

 

 

 

Sales and operating revenue:

 

 

Japan

938,165

 

U.S.A.

929,342

 

Europe

981,107

 

Other

1,202,735

 

 

 

 

Total

4,051,349

 

 

 

 

Yen in millions

 

 

Three Months Ended
September 30, 2008

 

 

 

 

Sales and operating revenue:

 

 

Japan

418,852

 

U.S.A.

495,842

 

Europe

519,418

 

Other

638,193

 

 

 

 

Total

2,072,305

 

 

There are not any individually material countries with respect to the sales and operating revenue included in Europe and Other areas.

Transfers between reportable business or geographic segments are made at arms-length prices.

There were no sales and operating revenue with any single major external customer for the six and three months ended September 30, 2008.

 

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The following information shows sales and operating revenue and operating income by geographic origin for the six months ended September 30, 2008. In addition to the disclosure requirements under FAS No. 131, Sony discloses this supplemental information in accordance with disclosure requirements of the Financial Instruments and Exchange Act of Japan, to which Sony, as a Japanese public company, is subject.

 

 

Yen in millions

 

 

Six Months Ended
September 30, 2008

 

 

 

 

Sales and operating revenue:

 

 

Japan -

 

 

Customers

1,013,069

 

Intersegment

2,383,934

 

Total

3,397,003

 

U.S.A. -

 

 

Customers

1,074,026

 

Intersegment

197,119

 

Total

1,271,145

 

Europe -

 

 

Customers

909,795

 

Intersegment

35,330

 

Total

945,125

 

Other -

 

 

Customers

1,054,459

 

Intersegment

1,099,441

 

Total

2,153,900

 

 

 

 

Elimination

(3,715,824)

 

 

 

 

Consolidated total

4,051,349

 

 

 

 

 

 

 

Operating income (loss):

 

 

Japan

134,318

 

U.S.A.

(43,583)

 

Europe

(19,696)

 

Other

60,434

 

Corporate and elimination

(46,986)

 

 

 

 

Consolidated total

84,487

 

 

 

32

 

 


The following information shows sales and operating revenue and operating income by geographic origin for the three months ended September 30, 2008. In addition to the disclosure requirements under FAS No. 131, Sony discloses this supplemental information in accordance with disclosure requirements of the Financial Instruments and Exchange Act of Japan, to which Sony, as a Japanese public company, is subject.

 

 

Yen in millions

 

 

Three Months Ended
September 30, 2008

 

 

 

 

Sales and operating revenue:

 

 

Japan -

 

 

Customers

458,438

 

Intersegment

1,350,394

 

Total

1,808,832

 

U.S.A. -

 

 

Customers

581,188

 

Intersegment

106,024

 

Total

687,212

 

Europe -

 

 

Customers

475,678

 

Intersegment

19,031

 

Total

494,709

 

Other -

 

 

Customers

557,001

 

Intersegment

627,937

 

Total

1,184,938

 

 

 

 

Elimination

(2,103,386)

 

 

 

 

Consolidated total

2,072,305

 

 

 

 

 

 

 

Operating income (loss):

 

 

Japan

43,607

 

U.S.A.

(24,057)

 

Europe

(19,281)

 

Other

30,930

 

Corporate and elimination

(20,151)

 

 

 

 

Consolidated total

11,048

 

 

 

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6. Subsequent Event

On October 1, 2008, Sony completed the acquisition of Bertelsmann AG's (“Bertelsmann”) 50% stake in SONY BMG MUSIC ENTERTAINMENT (“SONY BMG”). The music company, to be called SONY MUSIC ENTERTAINMENT, became a wholly owned subsidiary of Sony. The transaction was structured as follows: First, a portion of Bertelsmann's interest in SONY BMG was redeemed for approximately $600 million of cash by SONY BMG. Sony then purchased the remaining interest from Bertelsmann for approximately $600 million.

 

 

 

 

 

 

 

 

 

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 (2) Other Information

 

i) Subsequent to September 30, 2008

An interim cash dividend for Sony Corporation Common Stock was approved at the Board of Directors meeting held on October 29, 2008 as below:

 

1. Total amount of interim cash dividends:

30,105 million yen

2. Amount of an interim cash dividend per share:

30 yen, comprising a regular cash dividend of 20 yen and a special cash dividend of 10 yen

3. Payment date:

December 1, 2008

 

Note: Interim dividends are to be distributed to the shareholders and beneficial shareholders registered as the holders or pledgees of one or more unit of shares in Sony Corporation’s register of shareholders and/or beneficial shareholders at the end of September 30, 2008.

 

ii) Litigation

On October 18, 2006, class action lawsuits were filed in California in which the plaintiffs alleged that Sony Corporation, Sony Corporation of America, Sony Electronics Inc., other named defendants, and other unnamed parties had entered into and carried out an agreement, combination, or conspiracy to fix, raise, maintain or stabilize the prices of, and allocate the market for and production of, Static Random Access Memory (“SRAM”). Numerous similar lawsuits were filed in various jurisdictions throughout the United States, which were consolidated in a single federal court for coordinated pre-trial proceedings (the “MDL Proceeding”). Sony entities reached tolling agreements with the plaintiffs’ counsel, pursuant to which such Sony entities were not named as defendants in the Consolidated Amended Complaint for the MDL Proceeding. Also, there have been similar lawsuits filed in Canada (Quebec, British Columbia and Ontario) against those Sony entities in addition to Sony of Canada Ltd. and other major SRAM manufacturers. Sony entities including Sony of Canada Ltd. entered into a tolling agreement with the plaintiffs’ counsel, pursuant to which plaintiffs withdrew their claim against all such Sony entities in these proceedings. Also, in October 2006, Sony Electronics Inc. received a Grand Jury subpoena related to a Department of Justice investigation of potential antitrust violations in the SRAM industry. Sony continues to cooperate fully with the investigation.

 

 

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