6-K 1 sony-6k_0217.htm Unassociated Document
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 February 2010
Commission File Number: 001-06439
SONY CORPORATION
(Translation of registrant’s name into English)
7-1, KONAN 1-CHOME, 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 þ                    Form 40-F o
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  o   No  þ
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-                    
 

 







Quarterly Securities Report
For the three months ended December 31, 2009

(TRANSLATION)




Sony Corporation
 
 
 
 
 

 
1

 

CONTENTS
 
   
  
Page
     
Note for readers of this English translation
Cautionary Statement
 
3
3
       
I
Corporate Information
 
4
 
(1)     Selected Consolidated Financial Data
  
4
 
(2)     Business Overview
 
5
 
(3)     Changes in Subsidiaries and Affiliated Companies
 
5
 
(4)     Number of Employees
 
5
       
II
State of Business
 
5
 
(1)     Manufacturing, Orders Received and Sales
 
5
 
(2)     Risk Factors
 
6
 
(3)     Material Contracts
 
7
 
(4)     Management’s Discussion and Analysis of Financial Condition, Results of Operations and
Status of Cash Flows
 
7
       
III
Property, Plant and Equipment
 
14
 
(1)   Major Property, Plant and Equipment
 
14
 
(2)   Plans for the Purchase and Retirement of Major Property, Plant and Equipment
 
14
       
IV
Company Information
 
15
 
(1)     Information on the Company’s Shares
 
15
 
(2)     Stock Price Range
 
19
 
(3)     Directors and Corporate Executive Officers
 
19
       
V
Financial Statements
  
20
 
(1)   Consolidated Financial Statements
 
21
 
(2)   Other Information
 
45

 

 
2

 

 
 
Note for readers of this English translation
 
On February 12, 2010, Sony Corporation (the “Company”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended December 31, 2009 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 filed with or submitted to the U.S. Securities and Exchange Commission (the “SEC”) 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 the current plans, estimates, strategies and beliefs and other statements of the Company and its consolidated subsidiaries (collectively “Sony”) 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,” “intend,” “seek,” “may,” “might,” “could” or “should,” 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 and 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 which began in 2008; (ii) exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, 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 platforms within the game business, which are offered in highly competitive markets characterized by continual new product introductions, rapid development in technology and subjective and changing consumer preferences; (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 restructuring and transformation efforts; (vi) Sony’s ability to implement successfully its hardware, software, and content integration strategy and to develop and implement successful sales and distribution strategies 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; (viii) Sony’s ability to maintain product quality; (ix) Sony’s ability to secure adequate funding to finance restructuring activities and capital investments given the current state of global capital markets; (x) the success of Sony’s joint ventures and alliances; (xi) the outcome of pending legal and/or regulatory proceedings; (xii) 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 (xiii) 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, except per share amount
 
 
Nine Months Ended December 31, 2008
 
Nine Months Ended
December 31, 2009
 
Three Months Ended
December 31, 2008
Three Months Ended
December 31, 2009
Fiscal Year Ended
March 31, 2009
 
Sales and operating revenue
6,205,933
 
5,498,928
 
2,154,584
2,237,865
7,729,993
 
Operating income (loss)
66,525
 
87,811
 
(17,962)
146,103
 (227,783)
 
Income (loss) before income taxes
136,680
 
73,895
 
66,451
123,865
(174,955)
 
Net income (loss) attributable to Sony Corporation’s stockholders
66,202
 
15,766
 
10,409
79,167
(98,938)
 
Total equity
 
 
3,456,445
3,307,610
3,216,602
 
Total assets
 
 
12,562,884
12,821,850
12,013,511
 
Stockholders’ equity per share of common stock (yen)
 
 
3,184.51
2,994.64
2,954.25
 
Net income (loss) attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)
65.97
 
15.71
 
10.37
78.89
(98.59)
 
Net income (loss) attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen)
63.16
 
15.69
 
9.98
78.76
(98.59)
 
Ratio of stockholders’ equity to total assets (%)
 
 
25.4
23.4
24.7
 
Net cash provided by (used in) operating activities
(34,967)
542,318
 
407,153
 
Net cash used in investing activities
(596,625)
(538,740)
)  
(1,081,342)
Net cash provided by financing activities
382,969
 
350,276
 
267,458
 
Cash and cash equivalents at end of the period
 
 
786,763
1,004,785
660,789
 
Number of employees
 
 
179,400
170,200
171,300
 
Notes:
1.  
The Company’s consolidated financial statements are prepared in conformity with U.S. GAAP.
2.  
The Company reports equity in net income (loss) of affiliated companies as a component of operating income (loss).
3.  
The Company adopted the accounting guidance for noncontrolling interests in consolidated financial statements on April 1, 2009, via retrospective application of the presentation and disclosure requirements.  Upon the adoption of this guidance, noncontrolling interests, which were previously referred to as minority interests and classified between total liabilities and stockholders’ equity on the consolidated balance sheets, are now included as a separate component of total equity.  In addition, the net income (loss) on the consolidated statements of income now includes the net income (loss) attributable to noncontrolling interests.  Consistent with the retrospective application required by this guidance, the prior year amounts in the consolidated financial statements have been reclassified or adjusted to conform to the current presentation.
4.  
Consumption taxes are not included in sales and operating revenue.
5.  
Total equity is presented based on U.S. GAAP.
6.  
Stockholders’ equity per share of common stock and Ratio of stockholders’ equity to total assets are calculated by using total equity attributable to the shareholders of the Company.

4

7.  
The Company prepares its consolidated financial statements, and therefore parent-alone selected financial data is not prepared.

 
(2) Business Overview
 
There was no significant change in the business of Sony during the three months ended December 31, 2009.
Sony realigned its reportable segments effective from the first quarter of the fiscal year ending March 31, 2010 to reflect the Company’s reorganization as of April 1, 2009.  For further information on the realignment, please refer to “V Financial Statements – Notes to Consolidated Financial Statements – 1. Summary of significant accounting policies (2) Changes in accounting policies, procedures and presentation rules applied in the preparation of the interim consolidated financial statements: Business segment realignment.”
As of December 31, 2009, the Company had 1,291 subsidiaries and 86 affiliated companies, of which 1,258 companies are consolidated subsidiaries (including variable interest entities) of the Company.  The Company has applied the equity accounting method for 79 affiliated companies.

 
(3) Changes in Subsidiaries and Affiliated Companies
 
Significant changes in subsidiaries and affiliated companies during the three months ended December 31, 2009 are as follows:
Sony Broadband Media Co., Ltd. was merged into the Company on November 1, 2009. Accordingly, Sony Broadband Media Co., Ltd. was no longer a consolidated subsidiary.
Kyoshin Technosonic Co., Ltd., jointly with USC Corporation, established UKC Holdings Corporation as of October 1, 2009 by way of share transfers.  As a result of this transaction, all shares of Kyoshin Technosonic Co., Ltd. then held by the Company were replaced with the shares of UKC Holdings Corporation and Kyoshin Technosonic Co., Ltd. was no longer an equity method affiliate.

 
(4) Number of Employees
 
The following table shows the number of employees as of December 31, 2009.
 
Consolidated
170,200*
Parent-alone
16,383
* Figures less than one hundred are rounded to the nearest unit.
 

 

 
II                      State of Business
 
(1) Manufacturing, Orders Received and Sales
The products that Sony manufactures and sells are extremely diverse.  Due to the cyclical nature of electronics devices, home game consoles, game software, and music and video software, Sony generally manufactures products based on forecasts.  Because Sony carries out the manufacturing of electronic devices such that it maintains a relatively stable and necessary level of product inventory of such electronic devices, its level of production is generally similar to its level of sales.  For further information regarding the level of sales, please refer to “(4) Management’s Discussion and Analysis of Financial Condition, Results of Operations and Status of Cash Flows” below.

 
5

(2) Risk Factors
 
 
 Note for readers of this English translation:
 
Aside from the description of the joint venture agreement with Sharp Corporation (“Sharp”) and the judicial review on Sony’s music business by the European Court discussed in the risk factors below, there are no significant changes from the information presented in the Risk Factors section of the Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) on June 23, 2009.  The descriptions below are based on the information currently available to the management.

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2009
http://www.sec.gov/Archives/edgar/data/313838/000095012309016105/k02095e20vf.htm
 
Sony’s utilization of joint ventures and alliances within strategic business areas may not be successful.

During the last several years Sony has moved toward the establishment of joint ventures and strategic alliances in order to supplement or replace functions that were previously performed by divisions of the Company or its wholly-owned subsidiaries.

Sony currently has investments in several joint ventures, including Sony Ericsson Mobile Communications AB, and S-LCD Corporation.  If Sony and its partners from existing alliances, joint ventures and strategic investments are unable to reach their common financial objectives successfully, Sony’s financial performance may be adversely affected.  Sony’s financial performance may also be adversely affected temporarily or in the short- and medium-term during the period of alliances, joint ventures and strategic investments even if Sony and its partners remain on course to achieve their common objectives.  On July 30, 2009, Sony entered into an agreement to establish a joint venture company with Sharp to produce and sell large-sized LCD panels and modules.

Sony may not adequately manage the growing number of joint ventures and strategic alliances, and, in particular, may not deal effectively with the legal and cultural differences that can arise in such relationships, with changes in the relationships, or with changes in the financial status of its partners.  In addition, by participating in joint ventures or strategic alliances, Sony may encounter conflicts of interest, may not maintain sufficient control over the joint venture or strategic alliance, including over cash flow, and may be faced with an increased risk of the loss of proprietary technology or know-how.  Sony’s reputation could be harmed by the actions or activities of a joint venture that uses the Sony brand.

6

 
Sony’s music business may be subject to renewed judicial review by the European Court.
 
In August 2004, Sony combined its recorded music business outside of Japan with the recorded music business of Bertelsmann AG (“Bertelsmann”), forming SONY BMG MUSIC ENTERTAINMENT (“SONY BMG”), after receiving antitrust approval from, among others, the European Commission. On December 3, 2004, Impala, an international association of 2,500 independent recorded music companies, appealed the European Commission’s clearance decision to the EU Court of First Instance (“CFI”).

On July 13, 2006, the CFI annulled the Commission’s decision to allow the merger to go forward, requiring the Commission to re-examine the transaction. In October 2006, Sony Corporation of America (“SCA”) and Bertelsmann filed an appeal of the CFI’s judgment to the Court of Justice of the European Communities (“ECJ”). On October 3, 2007, following its re-examination of the merger, the Commission rendered a second clearance decision reaffirming the conclusion reached in 2004 that the transaction raised no competition concerns. On June 16, 2008, Impala announced that it had filed an appeal of that second clearance decision to the CFI. On July 10, 2008, the ECJ rendered judgment on the 2006 appeal of SCA and Bertelsmann, setting aside the CFI’s annulment of the Commission’s original clearance decision and referring the case back to the CFI for further consideration. On September 26, 2008, the CFI stayed Impala’s 2008 appeal of the Commission’s second clearance decision pending a final ruling by the CFI on the original clearance decision. As of October 1, 2008, SONY BMG became a wholly-owned subsidiary of Sony and was renamed Sony Music Entertainment as of January 1, 2009. On June 30, 2009, the CFI determined that Impala’s 2004 appeal of the Commission’s original clearance decision was devoid of purpose and that there was therefore no longer any need to adjudicate on that appeal. Accordingly, the 2004 clearance decision has become final. On September 30, 2009, the CFI further determined that Impala’s appeal of the second clearance decision was devoid of purpose and that there was therefore no longer any need to adjudicate on that appeal. Since the CFI’s determination was not appealed, the 2007 clearance decision also became final and the judicial proceedings relating to the formation of Sony BMG were concluded.

 
(4) Management’s Discussion and Analysis of Financial Condition, Results of Operations and Status of Cash Flows
 
i) Results of Operations
 
 
Note for readers of this English translation:
 
Except for information specifically included in this English translation, this document omits certain information set out in the Japanese-language Quarterly Securities Report for the three month period ended December 31, 2009, since it is the same as described in the press release previously submitted to the SEC.  Please refer to “Consolidated Financial Results for the Third Quarter Ended December 31, 2009” submitted to the SEC on Form 6-K on February 4, 2010.

URL: The press release titled “Consolidated Financial Results for the Third Quarter Ended December 31, 2009”
http://www.sec.gov/Archives/edgar/data/313838/000115752310000614/a6162452.htm
 
Foreign Exchange Fluctuations and Risk Hedging
 
Note for readers of this English translation:
 
Even though foreign exchange rates fluctuated, there was no significant change in risk hedging policy from the description in the Annual Report on Form 20-F filed with the SEC on June 23, 2009.

 
7

 
URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2009
http://www.sec.gov/Archives/edgar/data/313838/000095012309016105/k02095e20vf.htm
 
Status of Cash Flow
 
The following analysis refers to the status of cash flow during the third quarter ended December 31, 2009.

Operating Activities: During the third quarter ended December 31, 2009, there was a net cash inflow of 309.9 billion yen from operating activities, an increase of 200.8 billion yen, or 184.0% year-on-year.

For all segments excluding the Financial Services segment, there was a net cash inflow of 234.1 billion yen during the current quarter, an increase of 185.4 billion yen, or 380.8% year-on-year.  During the current quarter, the major cash inflow factors included a cash contribution from a decrease in inventory and net income, after taking into account depreciation and amortization.  This exceeded cash outflow, which included increases in notes and accounts receivable, trade.  Compared with the same quarter of the previous fiscal year, net cash generated during the current quarter increased mainly as a result of a smaller decrease in notes and accounts payable, trade.

The Financial Services segment had a net cash inflow of 75.5 billion yen, an increase of 15.3 billion yen, or 25.5% year-on-year.  During the current quarter, net cash was generated mainly due to an increase in revenue from insurance premiums reflecting a steady increase in policy amount in force at Sony Life.  Compared with the same quarter of the previous fiscal year, net cash generated increased year-on-year mainly due to the increase in revenue from insurance premiums at Sony Life noted above.

Investing Activities: During the current quarter, Sony used 208.8 billion yen of net cash in investing activities, an increase of 100.3 billion yen, or 92.4% year-on-year.

For all segments excluding the Financial Services segment, 85.8 billion yen of net cash was used, a decrease of ¥51.9 billion yen, or 37.7% year-on-year.  During the current quarter, net cash was used mainly to purchase manufacturing equipment.  Compared with the same quarter of the previous fiscal year, net cash used decreased primarily due to a decrease in purchases of manufacturing equipment and investments.

The Financial Services segment used 115.7 billion yen of net cash during the current quarter, compared to net cash generated of 33.4 billion yen in the same quarter of the previous fiscal year.  During the current quarter, cash payments for investments and advances, carried out primarily at Sony Life where operations are expanding, exceeded proceeds from the maturities of marketable securities, sales of securities investments and collections of advances.  Compared with the same quarter of the previous fiscal year, a decrease in proceeds from the maturities of marketable securities, sale of securities investments and collection of advances exceeded a decrease in investments at Sony Life and Sony Bank.  As a result, net cash was used within the Financial Services segment compared to net cash generated from investing activities in the same quarter of the previous fiscal year.

8

In all segments excluding the Financial Services segment, net cash generated by operating and investing activities combined for the current quarter was 148.3 billion yen, compared to net cash used of 89.0 billion yen in the same quarter of the previous fiscal year.

Financing Activities: During the current quarter, 51.4 billion yen of net cash was provided by financing activities, a decrease of 95.0 billion yen, or 64.9% year-on-year.  For all segments excluding the Financial Services segment, there was 84.8 billion yen of net cash outflow during the current quarter, compared to a net cash inflow of 122.2 billion yen in the same quarter of the previous fiscal year.  This was primarily due to a decrease in short-term borrowings including commercial paper.  In the Financial Services segment, financing activities generated 129.2 billion yen of net cash, an increase of 109.0 billion yen, or 538.7% year-on-year, mainly due to a higher increase in deposits from customers at Sony Bank compared to the same quarter of the previous fiscal year.

Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in the exchange rates, the total outstanding balance of cash and cash equivalents as of December 31, 2009 was 1,004.8 billion yen.  The outstanding balance of cash and cash equivalents of all segments excluding the Financial Services segment was 743.0 billion yen, an increase of 77.3 billion yen, or 11.6%, compared with the balance as of September 30, 2009.  This is an increase of 237.3 billion yen, or 46.9%, compared with the balance as of December 31, 2008.  Sony believes it continues to maintain sufficient liquidity through access to a total, translated into yen, of approximately 785 billion yen of unused committed lines of credit with financial institutions in addition to the cash and cash equivalents balance at December 31, 2009.  Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 261.8 billion yen, an increase of 89.0 billion yen, or 51.5%, compared with the balance as of September 30, 2009.  This is a decrease of 19.3 billion yen, or 6.9%, compared with the balance as of December 31, 2008.
 
 
 
 

 
9

 

Information on Cash Flow Separating Out the Financial Services Segment
The following charts show Sony’s unaudited cash flow information for all segments (consolidated), 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 Sony uses in its consolidated financial statements.  However, because the Financial Services segment is different in nature from Sony’s other segments, Sony utilizes this information to analyze the results without the 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 segments excluding the Financial Services segment are eliminated in the consolidated figures shown below.


Condensed Statements of Cash Flows
         
   
Yen in millions
 
Financial Services
Three months ended December 31
    2009
       
Net cash provided by operating activities
¥
75,474
Net cash used in investing activities
 
(115,738)
Net cash provided by financing activities
 
129,227
Net increase in cash and cash equivalents
 
88,963
Cash and cash equivalents at beginning of the period
 
172,821
Cash and cash equivalents at the end of the period
¥
261,784
       
   
Yen in millions
                                     Sony without Financial Services
Three months ended December 31
    2009
       
Net cash provided by operating activities
¥
234,125
Net cash used in investing activities
 
(85,832)
Net cash used in financing activities
 
(84,780)
Effect of exchange rate changes on cash and cash equivalents
 
13,824
Net increase in cash and cash equivalents
 
77,337
Cash and cash equivalents at beginning of the period
 
665,664
Cash and cash equivalents at the end of the period
¥
743,001
       
   
Yen in millions
 
Consolidated
Three months ended December 31
    2009
       
Net cash provided by operating activities
¥
309,886
Net cash used in investing activities
 
(208,791)
Net cash provided by financing activities
 
51,381
Effect of exchange rate changes on cash and cash equivalents
 
13,824
Net increase in cash and cash equivalents
 
166,300
Cash and cash equivalents at beginning of the period
 
838,485
Cash and cash equivalents at the end of the period
¥
1,004,785

 
10

 

ii) Issues Facing Sony and Management’s Response to those Issues
 
 
Note for readers of this English translation:
 
Excluding that below, Issues Facing Sony and Management’s Response to those Issues are the same as those found in the Trend Information section of the Annual Report on Form 20-F filed with the SEC on June 23, 2009.  The descriptions below are based on the information currently available to the management.

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2009
http://www.sec.gov/Archives/edgar/data/313838/000095012309016105/k02095e20vf.htm
 
On July 30, 2009, Sony entered into an agreement to establish a joint venture entity with Sharp to produce and sell large-sized LCD panels and modules (the “Joint Venture Agreement”).  On July 1, 2009, Sharp split out its new LCD panel plant located in Sakai City, which was under construction, and transferred it to Sharp Display Products Corporation (“SDP”), which was its wholly-owned subsidiary.  SDP commenced operations in October 2009.  On December 29, 2009, as the first step toward the final investment ratio (66% by Sharp and 34% by Sony), Sony invested 10 billion yen into SDP in exchange for new shares issued by SDP to Sony as third-party allotment, and then SDP became a joint venture entity between Sony and Sharp as of the same date.  The Joint Venture Agreement further provides that, subject to its conditions, Sony will make a number of additional capital injections to SDP, resulting in a maximum 34% ownership by Sony of SDP by the end of April 2011.  SDP produces and sells large-sized LCD panels and modules, utilizing the new LCD panel production plant using the world's first 10th generation glass substrate.  LCD panel production capacity is planned at 72,000 substrates of mother glass per month (initially 36,000 substrates per month).

Under the leadership of its new executive management team established in April 2009, Sony has reformed its organizational structure in order to bolster profitability and transform its operations, with the aim of accelerating innovation and growth and optimizing business processes, particularly within its electronics and networked service businesses. On November 19, 2009, in order to permit further growth and continue to enhance profitability, Sony announced additional transformation measures centering on the following four initiatives:
•  
Target consistent profitability in core hardware businesses (TV, game and digital imaging);
•  
Provide new user experiences integrating innovative hardware, software and services;
•  
Reach out to new customers and develop new geographic markets; and
•  
Increase Sony’s focus on environmentally conscious products and processes.



11


iii)  Research and Development

 
Note for readers of this English translation:
 
Excluding that below and the description in theQuarterly Securities Report for the three months ended June 30, 2009” submitted to the SEC on Form 6-K on August 20, 2009, Research and Development is the same as that found in the Research and Development section of the Annual Report on Form 20-F filed with the SEC on June 23, 2009.

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2009
http://www.sec.gov/Archives/edgar/data/313838/000095012309016105/k02095e20vf.htm

URL: The press release titled “Quarterly Securities Report for the three months ended June 30, 2009”
http://www.sec.gov/Archives/edgar/data/313838/000090342309000742/sony6-k_0820.htm
 
Research and development (“R&D”) costs for the three months ended December 31, 2009 decreased 10.4 billion yen, or 8.9%, to 106.7 billion yen, compared with the same quarter of the previous fiscal year due to reorganization in R&D focused domains.  The ratio of research and development costs to sales (which excludes the financial service revenue) decreased from 5.7% to 5.3%.  Expenses in the Consumer Products & Devices segment decreased 9.5 billion yen, or 12.9%, to 64.1 billion yen and expenses in the Networked Products & Services segment increased 5.0 billion yen, or 23.4%, to 26.2 billion yen.  In the Consumer Products & Devices segment, approximately 73% of expenses were spent on the development of new product prototypes while the remaining 27% was spent on the development of mid- to long-term new technologies in such areas as next-generation displays, semiconductors, new materials and software.

 
(iv) Liquidity and Capital Resources
 
 
Note for readers of this English translation:
 
Excluding that below, there are no significant changes from the information presented in the Annual Report on Form 20-F filed with the SEC on June 23, 2009.  The descriptions below are based on the information currently available to the management.

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2009
http://www.sec.gov/Archives/edgar/data/313838/000095012309016105/k02095e20vf.htm
 
Sony executed syndicated loans totaling 162.5 billion yen in June 2009 (3-year, 5-year and 7-year terms respectively). The proceeds of these loans were partially used for the redemption of an 80 billion yen syndicated loan (executed in June 2006), which matured in June 2009, and the rest of the proceeds have been used for funding general business activities, including working capital.  In addition, Sony executed a 1.0 billion U.S. dollar long-term bank loan (3-year term) in July
 
 
12

 
2009. The proceeds of this loan have been used as general corporate funds for overseas operations, in regions including North America and Europe.
 
As of December 31, 2009, Sony had a total, translated into yen, of 785 billion yen in unused committed lines of credit with financial institutions, of this total, in October 2009, Sony extended the term for 475 billion yen-based committed lines of credit (effective for three years, originally due November 2011) contracted with Japanese financial institutions by one year (now due November 2012).
 
 
 
 
 

 

 
13

 

III           Property, Plant and Equipment
 
(1) Major Property, Plant and Equipment
 
There was no significant change during the three months ended December 31, 2009.
 

 
(2) Plans for the Purchase and Retirement of Major Property, Plant and Equipment
 
During the three months ended December 31, 2009, primarily as a result of the decline of the planned capital expenditures in the Consumer Products & Devices segment, Networked Products & Services segment and B2B & Disc Manufacturing segment, Sony’s planned capital expenditures for the fiscal year ending March 31, 2010 are 220 billion yen, a decrease of 30 billion yen from the plan at the end of September 30, 2009.  During the three months ended December 31, 2009, there was no significant new firm plan for the purchase and retirement, etc. of major property, plant and equipment.

 
 
 
 
 
 

 
 
14

 

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 Exchanges where the shares are listed or authorized Financial Instruments Firms Association where the shares are registered
Description
As of the end of the
third quarterly period
(December 31, 2009)
As of the filing date of
the Quarterly
Securities Report
(February 12, 2010)
Common stock
1,004,535,364
1,004,535,764
Tokyo Stock Exchange
Osaka Securities Exchange
New York Stock Exchange
London Stock Exchange
The number of shares constituting one full unit is one hundred (100).
Total
1,004,535,364
1,004,535,764
 
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 issued under the previous Commercial Code in Japan) during February 2010, the month in which this 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 SARs and convertible bonds listed below.  A summary of such terms and conditions has previously been filed with or submitted to the SEC 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 filings or submissions, except a revision of the total outstanding number of SARs issued and number of outstanding shares to be issued or transferred and outstanding balance of convertible bonds, 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
 
 
15

 
 
Stock acquisition rights (outstanding as of December 31, 2009)
 
Name
(Date of shareholders’ resolution)
Total outstanding
number of
SARs issued
Number of shares of common stock
to be issued or transferred
The first series of Common Stock Acquisition Rights
(June 20, 2002)
              9,878
987,800
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
The sixteenth series of Common Stock Acquisition Rights
(June 20, 2008)
              8,318
831,800
The seventeenth series of Common Stock Acquisition Rights
(June 20, 2008)
              16,767
1,676,700
The eighteenth series of Common Stock Acquisition Rights
(June 19, 2009)
         7,905
790,500
The nineteenth series of Common Stock Acquisition Rights
(June 19, 2009)
        15,283
1,528,300

Convertible bonds (outstanding as of December 31, 2009)
 
Name (Date of issuance)
Outstanding balance
(Thousands of U.S. dollars)
2010 due U.S. Dollar denominated convertible bonds (April 17, 2000)
45,427
2010 due U.S. Dollar denominated convertible bonds (April 16, 2001)
45,189
2010 due U.S. Dollar denominated convertible bonds (April 15, 2002)
32,401

iii)  Status of Rights Plan

Not applicable.


16




iv)  Changes in the Total Number of Shares Issued and the Amount of Common Stock
 
Period
Change in the total number of shares issued
Balance of the total number of shares issued
Change in
the amount of
common stock
Balance of
the amount of
common stock
Change in the capital reserve
Balance of the capital reserve
(Thousands)
(Thousands)
(Millions of yen)
(Millions of yen)
(Millions of yen)
(Millions of yen)
From October 1 to
December 31, 2009
1,004,535
630,765
837,453
 
Note:
Upon the exercise of SARs during the period from January 1 to January 31, 2010, the total number of shares issued increased by 400 shares, the amount of common stock increased by 627 thousand yen and the capital reserve increased by 626 thousand yen, respectively.

v)   Status of Major Shareholders
 (As of December 31, 2009)
Name
Address
Number of
shares held
(Thousands)
*4
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)
99,379
9,89
Japan Trustee Services Bank, Ltd.
(Trust account) *2
1-8-11, Harumi, Chuo-ku, Tokyo
63,865
6.36
The Master Trust Bank of Japan, Ltd.
(Trust account) *2
2-11-3, Hamamatsu-cho, Minato-ku, Tokyo
48,432
4.82
State Street Bank and Trust Company *3
(Local Custodian: The Hongkong and Shanghai Banking Corporation Limited)
Boston, U.S.A.
(3-11-1, Nihonbashi, Chuo-ku, Tokyo)
15,121
1.51
Japan Trustee Services Bank, Ltd.
(Trust account 9) *2
1-8-11, Harumi, Chuo-ku, Tokyo
14,846
1.48
SSBT OD05 Omnibus China Treaty 808150 *3
(Local Custodian: The Hongkong and Shanghai Banking Corporation Limited)
Sydney, Australia
(3-11-1, Nihonbashi, Chuo-ku, Tokyo)
12,019
1.20
The Chase Manhattan Bank, N.A. London Secs Lending Omnibus Account *3
(Local Custodian: Mizuho Corporate Bank, Ltd.)
London, U.K.
(4-16-13, Tsukishima, Chuo-ku, Tokyo)
11,638
1.16
State Street Bank and Trust Company 505225 *3
(Local Custodian: Mizuho Corporate Bank, Ltd.)
Boston, U.S.A.
(4-16-13, Tsukishima, Chuo-ku, Tokyo)
10,044
1.00
Mellon Bank, N.A. as Agent for its Client Mellon Omnibus US Pension *3
(Local Custodian: Mizuho Corporate Bank, Ltd.)
Boston, U.S.A.
(4-16-13, Tsukishima, Chuo-ku, Tokyo)
10,026
1.00
State Street Bank West Client Treaty *3
(Local Custodian: Mizuho Corporate Bank, Ltd.)
Quincy, U.S.A.
(4-16-13, Tsukishima, Chuo-ku, Tokyo)
9,284
0.92
Total
294,654
29.33
 
Notes:
 
*1.
Moxley and Company is the nominee of JPMorgan Chase Bank, N.A., which is the Depositary for holders of the Company’s American Depositary Receipts (“ADRs”).

17

 
*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.
The number of shares held is rounded to the nearest thousand.
 
  5.
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 August 6, 2009 and reported that they held shares of the Company (including ADRs) as of July 31, 2009 as provided in the below table.  The Company has not been able to confirm any entry of Dodge & Cox in the register of shareholders as of December 31, 2009.
 
Name
Number of shares held
(Thousands)
Number of shares held as a percentage
of total shares issued (%)
Dodge & Cox
51,320
5.11
 

vi)  Status of Voting Rights

 
1)  Shares Issued
(As of December 31, 2009)
Classification
Number of shares of common stock
Number of voting rights
(Units)
Description
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.)
1,030,100                   
Shares with full voting rights
(Others)
1,000,932,900                   
10,009,328                   
Fractional unit shares
2,572,364                   
Shares less than
one full unit of stock
(100 shares)
Total number of shares issued
1,004,535,364                   
Total voting rights held by all shareholders
10,009,328                   
 
Note:
Included in “Shares with full voting rights (Others)” under “Number of shares of common stock” are 20,100 shares of common stock (including 100 shares accounted for by the Registration of Lost Share Certificates) held under the name of Japan Securities Depository Center, Inc.  Also included in “Shares with full voting rights (Others)” under “Number of voting rights (Units)” are 200 units of voting rights (excluding 1 unit accounted for by the Registration of Lost Share Certificates) relating to the shares of common stock related to such shares with full voting rights held under the name of Japan Securities Depository Center, Inc.




18





 
2)  Treasury Stock, Etc.
 
(As of December 31, 2009)
Name of shareholder
Address of shareholder
Number of shares of common stock held under own name
Number of shares of common stock held under the names of others
Total number of shares of common stock held
Total of shares held to total shares issued
(%)
Sony Corporation
(Treasury stock)
1-7-1, Konan, Minato-ku, Tokyo
1,030,100
1,030,100
0.10
Total
1,030,100
 —
1,030,100
0.10
 
Note:
In addition to the 1,030,100 shares listed here, there are 300 shares of common stock held by the name of 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)” in table 1 “Shares Issued” above.

(2)           Stock Price Range
 
Highest and lowest prices during the past nine months
 
Month of 2009
April
May
June
July
August
September
October
November
December
Highest (yen)
2,655
2,760
2,800
2,680
2,810
2,690
2,830
2,675
2,730
Lowest (yen)
2,050
2,380
2,430
2,145
2,400
2,405
2,390
2,255
2,250
Note:          As quoted on the First Section of the Tokyo Stock Exchange.
 

(3)           Directors and Corporate Executive Officers
There was no change in directors and corporate executive officers between the filing date of the Securities Report (Yukashoken Houkokusho) for the fiscal year ended March 31, 2009 and the filing date of this Quarterly Securities Report (Shihanki Houkokusho).



 

 

 

 
19

 



V           Financial Statements
 
Page
   
(1) Consolidated Financial Statements
21
       
 
(i)
Consolidated Balance Sheets
22
       
 
(ii)
Consolidated Statements of Income
23
       
 
(iii)
Consolidated Statements of Cash Flows
25
   
(2) Other Information
45


 
20

 

(1) Consolidated Financial Statements

 (i)  Consolidated Balance Sheets (Unaudited)
Sony Corporation and Consolidated Subsidiaries
             
   
Yen in millions
 
   
At December 31, 
2009
   
At March 31, 
2009
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
    1,004,785       660,789  
Call loan in the banking business
    56,841       49,909  
Marketable securities
    526,229       466,912  
Notes and accounts receivable, trade
    1,293,176       963,837  
Allowance for doubtful accounts and sales returns
    (120,606 )     (110,383 )
Inventories
    637,790       813,068  
Deferred income taxes
    231,434       189,703  
Prepaid expenses and other current assets
    582,703       586,800  
     Total current assets
    4,212,352       3,620,635  
                 
Film costs
    323,849       306,877  
                 
Investments and advances:
               
Affiliated companies
    227,928       236,779  
Securities investments and other
    4,912,621       4,561,651  
      5,140,549       4,798,430  
Property, plant and equipment:
               
Land
    156,487       155,665  
Buildings
    914,740       911,269  
Machinery and equipment
    2,286,852       2,343,839  
Construction in progress
    79,670       100,027  
      3,437,749       3,510,800  
Less – Accumulated depreciation
    2,350,866       2,334,937  
      1,086,883       1,175,863  
                 
Other assets:
               
Intangibles, net
    388,781       396,348  
Goodwill
    429,005       443,958  
Deferred insurance acquisition costs
    413,001       400,412  
Deferred income taxes
    357,996       359,050  
Other
    469,434       511,938  
      2,058,217       2,111,706  
                 
Total assets:
    12,821,850       12,013,511  
(Continued on following page.)

 
21

 

Consolidated Balance Sheets (Unaudited)

             
   
Yen in millions
 
   
At December 31, 2009
   
At March 31, 
2009
 
LIABILITIES
           
Current liabilities:
           
Short-term borrowings
    80,251       303,615  
Current portion of long-term debt
    258,414       147,540  
Notes and accounts payable, trade
    734,324       560,795  
Accounts payable, other and accrued expenses
    1,030,870       1,036,830  
Accrued income and other taxes
    93,191       46,683  
Deposits from customers in the banking business
    1,441,851       1,326,360  
Other
    371,197       389,077  
     Total current liabilities
    4,010,098       3,810,900  
                 
Long-term debt
    966,328       660,147  
Accrued pension and severance costs
    340,345       365,706  
Deferred income taxes
    198,426       188,359  
Future insurance policy benefits and other
    3,793,842       3,521,060  
Other
    205,201       250,737  
Total liabilities:
    9,514,240       8,796,909  
Commitments and contingent liabilities
               
                 
EQUITY
Sony Corporation’s stockholders’ equity:
Common stock, no par value –
At December 31, 2009–Shares authorized: 3,600,000,000, shares issued: 1,004,535,364
At March 31, 2009– Shares authorized: 3,600,000,000, shares issued: 1,004,535,364
        630,765             630,765  
Additional paid-in capital
    1,157,136       1,155,034  
Retained earnings
    1,920,173       1,916,951  
Accumulated other comprehensive income –
               
   Unrealized gains on securities, net
    60,715       30,070  
 Unrealized losses on derivative instruments, net
    (1,205 )     (1,584 )
   Pension liability adjustment
    (171,016 )     (172,709 )
   Foreign currency translation adjustments
    (586,782 )     (589,220 )
      (698,288 )     (733,443 )
Treasury stock, at cost
               
Common stock
At December 31, 2009–1,030,187 shares
    (4,650 )      
    At March 31, 2009–1,013,287 shares
–1,013,287 shares
            (4,654  )
      3,005,136       2,964,653  
Noncontrolling interests
    302,474       251,949  
Total equity:
    3,307,610       3,216,602  
      12          
Total liabilities and equity:
    12,821,850       12,013,511  
The accompanying notes are an integral part of these statements.

 
22

 

(ii)  Consolidated Statements of Income (Unaudited)
Sony Corporation and Consolidated Subsidiaries
   
Yen in millions
 
   
Nine Months Ended December 31
 
   
2008
   
2009
 
Sales and operating revenue:
           
Net sales
    5,755,002       4,811,827  
Financial services revenue
    375,409       625,238  
Other operating revenue
    75,522       61,863  
      6,205,933       5,498,928  
Costs and expenses:
               
Cost of sales
    4,446,556       3,707,085  
Selling, general and administrative
    1,276,040       1,150,745  
Financial services expenses
    402,207       507,269  
(Gain) loss on sale, disposal or impairment of assets, net
    7,181       12,686  
      6,131,984       5,377,785  
Equity in net loss of affiliated companies
    (7,424 )     (33,332 )
Operating income
    66,525       87,811  
Other income:
               
Interest and dividends
    18,533       10,141  
Gain on sale of securities investments, net
    826       2,584  
Foreign exchange gain, net
    60,072       -  
Other
    23,828       15,960  
      103,259       28,685  
Other expenses:
               
Interest
    18,290       17,883  
Loss on devaluation of securities investments
    2,800       1,140  
Foreign exchange loss, net
    -       13,312  
Other
    12,014       10,266  
      33,104       42,601  
Income before income taxes
    136,680       73,895  
Income taxes
    74,461       19,357  
Net income
    62,219       54,538  
Less - Net income (loss) attributable to noncontrolling interests
    (3,983 )     38,772  
Net income attributable to Sony Corporation's stockholders
    66,202       15,766  


   
Yen
 
   
Nine Months Ended December 31
 
   
2008
   
2009
 
Per share data:
             
Net income attributable to Sony Corporation's stockholders
             
Basic
    65.97       15.71  
Diluted
    63.16       15.69  
The accompanying notes are an integral part of these statements.

 
23

 

Consolidated Statements of Income (Unaudited)
Sony Corporation and Consolidated Subsidiaries

   
Yen in millions
 
   
Three Months Ended December 31
 
   
2008
   
2009
 
Sales and operating revenue:
           
Net sales
    2,029,451       2,014,145  
Financial services revenue
    99,558       202,580  
Other operating revenue
    25,575       21,140  
      2,154,584       2,237,865  
Costs and expenses:
               
Cost of sales
    1,564,079       1,510,841  
Selling, general and administrative
    461,903       402,440  
Financial services expenses
    132,782       167,201  
(Gain) loss on sale, disposal or impairment of assets, net
    2,973       5,353  
      2,161,737       2,085,835  
Equity in net loss of affiliated companies
    (10,809 )     (5,927 )
Operating income (loss)
    (17,962 )     146,103  
Other income:
               
Interest and dividends
    4,220       2,060  
Gain on sale of securities investments, net
    365       2,271  
Foreign exchange gain, net
    79,802       -  
Other
    11,701       3,391  
      96,088       7,722  
Other expenses:
               
Interest
    6,863       5,717  
Loss on devaluation of securities investments
    1,358       5  
Foreign exchange loss, net
    -       19,947  
Other
    3,454       4,291  
      11,675       29,960  
Income before income taxes
    66,451       123,865  
Income taxes
    64,395       33,244  
Net income
    2,056       90,621  
Less - Net income (loss) attributable to noncontrolling interests
    (8,353 )     11,454  
Net income attributable to Sony Corporation's stockholders
    10,409       79,167  


   
Yen
 
   
Three Months Ended December 31
 
   
2008
   
2009
 
Per share data:
             
Net income attributable to Sony Corporation's stockholders
             
Basic
    10.37       78.89  
Diluted
    9.98       78.76  
The accompanying notes are an integral part of these statements.

 
24

 

(iii)  Consolidated Statements of Cash Flows (Unaudited)
Sony Corporation and Consolidated Subsidiaries
   
Yen in millions
 
   
Nine Months Ended December 31
 
   
2008
   
2009
 
Cash flows from operating activities:
           
 Net income
    62,219       54,538  
 Adjustments to reconcile net income to net cash
               
provided by (used in) operating activities –
               
    Depreciation and amortization, including amortization
     of deferred insurance acquisition costs
    300,585       276,065  
   Amortization of film costs
    185,256       199,534  
   Stock-based compensation expense
    2,825       1,611  
    Accrual for pension and severance costs, less payments
    (11,983 )     (21,526 )
    Loss on sale, disposal or impairment of assets, net
    7,181       12,686  
    (Gain) loss on sale or devaluation of securities investments, net
    1,974       (1,444 )
    (Gain) loss on revaluation of marketable securities held in the
financial service business for trading purpose, net
    78,283       (40,273 )
    (Gain) loss on revaluation or impairment of securities investments
held in the financial service business, net
    72,060       (53,450 )
    Deferred income taxes
    (17,496 )     (29,566 )
    Equity in net (income) losses of affiliated companies, net of
dividends
    39,077       34,958  
    Changes in assets and liabilities:
               
     Increase in notes and accounts receivable, trade
    (228,616 )     (330,197 )
     (Increase) decrease in inventories
    (182,727 )     158,058  
     Increase in film costs
    (206,931 )     (235,838 )
     Increase (decrease) in notes and accounts payable, trade
    (79,919 )     181,701  
     Increase (decrease) in accrued income and other taxes
    (130,840 )     81,993  
     Increase in future insurance policy benefits and other
    102,242       221,764  
     Increase in deferred insurance acquisition costs
    (51,868 )     (51,923 )
     Increase in marketable securities held in the
financial service business for trading purpose
    (32,758 )     (1,999 )
     Increase in other current assets
    (150,292 )     (38,075 )
     Increase in other current liabilities
    92,129       24,109  
    Other
    114,632       99,592  
          Net cash provided by (used in) operating activities
    (34,967 )     542,318  

(Continued on following page.)

 
25

 

Consolidated Statements of Cash Flows (Unaudited)

             
   
Yen in millions
 
   
Nine Months Ended December 31
 
   
2008
   
2009
 
Cash flows from investing activities:
           
 Payments for purchases of fixed assets
    (360,339 )     (278,894 )
 Proceeds from sales of fixed assets
    152,474       9,203  
 Payments for investments and advances by financial service
business
    (1,613,519 )     (1,103,707 )
 Payments for investments and advances (other than
financial service business)
    (115,329 )     (30,849 )
 Proceeds from maturities of marketable securities, sales of
securities investments and collections of advances by financial
service business
    1,330,046       849,609  
 Proceeds from maturities of marketable securities, sales of
securities investments and collections of advances
(other than financial service business)
    8,579       13,188  
Other
    1,463       2,710  
          Net cash used in investing activities
    (596,625 )     (538,740 )
Cash flows from financing activities:
               
 Proceeds from issuance of long-term debt
    50,454       509,874  
 Payments of long-term debt
    (260,987 )     (92,383 )
 Increase (decrease) in short-term borrowings, net
    384,129       (241,181 )
 Increase in deposits from customers in the financial service business, net
    255,444       182,452  
 Increase in call money in the banking business, net
    -       21,400  
 Dividends paid
    (42,669 )     (25,116 )
 Proceeds from the issuance of shares under stock-based compensation
plans
    378       -  
 Other
    (3,780 )     (4,770 )
          Net cash provided by financing activities
    382,969       350,276  
Effect of exchange rate changes on cash and cash equivalents
    (51,045 )     (9,858 )
Net increase (decrease) in cash and cash equivalents
    (299,668 )     343,996  
Cash and cash equivalents at beginning of the fiscal year
    1,086,431       660,789  
Cash and cash equivalents at end of the period
    786,763       1,004,785  
                 
The accompanying notes are an integral part of these statements.



 
26

 

Index to Notes to Consolidated Financial Statements
Sony Corporation and Consolidated Subsidiaries

 
Notes to Consolidated Financial Statements
Page
       
 
1.  
Summary of significant accounting policies
28
       
 
2.  
Marketable securities and securities investments and other
31
       
 
3.  
Fair value measurements
32
       
 
4.  
Supplemental equity and comprehensive income information
33
       
 
5.  
Reconciliation of the differences between basic and diluted net income attributable to Sony Corporation's stockholders per share (“EPS”)
34
       
 
6.  
Commitments and contingent liabilities
35
       
 
7.  
Business segment information
36
       
 
8.  
Subsequent events
44
       


 

 
27

 

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:
 
FASB Accounting Standards Codification -
 
In June 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification (the “Codification”).  The Codification became the single source for all authoritative U.S. GAAP recognized by the FASB. The Codification is effective for financial statements issued for periods ending after September 15, 2009, and Sony adopted the Codification from the second quarter of the fiscal year ending March 31, 2010.  The Codification does not change U.S. GAAP and did not have an effect on Sony’s results of operations and financial position.

Fair value measurements -
 
In September 2006, the FASB issued new accounting guidance for fair value measurements. This guidance establishes a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures about the use of fair value measurements.  This guidance is applicable to other accounting guidance that requires or permits fair value measurements and does not require any new fair value measurements.  In February 2008, the FASB partially delayed the effective date of this guidance for fair value measurements for Sony until April 1, 2009 for certain nonfinancial assets and liabilities.  The adoption of this guidance, as it relates to nonfinancial assets and liabilities that are recognized or disclosed at fair value in Sony's consolidated financial statements on a nonrecurring basis, did not have a material impact on Sony’s results of operations and financial position.  Certain disclosures required by this guidance for fair value measurements are omitted.

Accounting for collaborative arrangements -
 
In December 2007, the FASB issued new accounting guidance that defined collaborative arrangements and requires that transactions with third parties that do not participate in the arrangement be reported in the appropriate income statement line items based upon whether the participant is a principal or agent to the arrangement.  Income statement classification of payments made between participants of a collaborative arrangement is to be based on other applicable authoritative accounting literature.  Sony retroactively adopted this guidance on April 1, 2009.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

Business combinations -
 
In December 2007, the FASB issued new accounting guidance for business combinations, which applies prospectively to Sony for business combinations for which the acquisition date is on or after April 1, 2009.  This guidance requires that the acquisition method of accounting be applied to a broader range of business combinations, amends the definition of a business combination, provides a definition of a business, requires an acquirer to recognize an acquired business at its fair value at the acquisition date, and requires the assets acquired and liabilities assumed in a business combination to be measured and recognized at their fair values as of the acquisition date, with limited exceptions.  Also, under this guidance, changes in deferred tax asset valuation allowances and acquired income tax uncertainties after the acquisition date generally will affect income tax expense in periods subsequent to the acquisition date.  Adjustments made to valuation allowances on deferred taxes and acquired tax contingencies associated with acquisitions that closed prior to April 1, 2009 would also apply the provisions of this guidance.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.




 
28

 

Noncontrolling interests in consolidated financial statements -
 
In December 2007, the FASB issued new accounting guidance for noncontrolling interests in consolidated financial statements. This guidance requires that the noncontrolling interests in the equity of a subsidiary be accounted for and reported as equity, provides revised guidance on the treatment of net income and losses attributable to the noncontrolling interests and changes in ownership interests in a subsidiary and requires additional disclosures that identify and distinguish between the interests of the controlling and noncontrolling owners.  As required, Sony adopted this guidance on April 1, 2009, via retrospective application of the presentation and disclosure requirements.  Upon the adoption of this guidance, noncontrolling interests, which were previously referred to as minority interest and classified between total liabilities and stockholders’ equity on the consolidated balance sheets, are now included as a separate component of total equity.  In addition, the net income (loss) on the consolidated statements of income now includes the net income (loss) attributable to noncontrolling interests.  Consistent with the retrospective application required by this guidance, the prior year amounts in the consolidated financial statements have been reclassified or adjusted to conform to the current presentation.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

Determination of the useful life of intangible assets -
 
In April 2008, the FASB issued new accounting guidance for the determination of the useful life of intangible assets, which amends the list of factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets.  This guidance applies to (1) intangible assets that are acquired individually or with a group of other assets and (2) intangible assets acquired in both business combinations and asset acquisitions.  Under this guidance, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension.  For Sony, this guidance will require certain additional disclosures in the periods after the effective date of April 1, 2009, and application to useful life estimates prospectively for intangible assets acquired after March 31, 2009.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

Equity method investment accounting considerations -
 
In November 2008, the FASB issued new accounting guidance, which addresses certain effects that the guidance for business combinations and noncontrolling interests in consolidated financial statements has on an entity’s accounting for equity-method investments.  This guidance indicates, among other things, that transaction costs for an investment should be included in the cost of the equity-method investment (and not expensed) and shares subsequently issued by the equity-method investee that reduce the investor’s ownership percentage should be accounted for as if the investor had sold a proportionate share of its investment, with gains or losses recorded through earnings.  Sony adopted this guidance on April 1, 2009.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

Accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies -
 
In April 2009, the FASB issued new accounting guidance for assets acquired and liabilities assumed in a business combination that arise from contingencies. This guidance addresses the initial recognition, measurement and subsequent accounting for assets and liabilities arising from contingencies in a business combination, and requires that such assets acquired or liabilities assumed be initially recognized at fair value at the acquisition date if fair value can be determined during the measurement period.  If the acquisition-date fair value cannot be determined, the asset acquired or liability assumed arising from a contingency is recognized only if certain criteria are met.  For Sony, this guidance is effective for assets acquired or liabilities assumed arising from contingencies in business combinations for which the acquisition date is on or after April 1, 2009.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

Recognition and presentation of other-than-temporary impairments for debt securities -
 
In April 2009, the FASB issued new accounting guidance for the recognition and presentation of other-than-temporary impairments for debt securities.  This guidance is intended to provide greater clarity to investors about the credit and noncredit component of an other-than-temporary impairment event and to more effectively communicate when an other-than-temporary impairment event has occurred.  This guidance applies to debt securities only and requires the separate display of losses related to credit deterioration and losses related to other market factors.  When an entity does not intend to sell a debt security and it is more likely than not that the entity will not have to sell the debt security before recovery of its cost basis, it must recognize the credit component of an other-than-temporary impairment in earnings and the remaining portion in other comprehensive income.  In addition, upon adoption of this guidance, an entity is required to record a cumulative-effect adjustment as of the beginning of the period of adoption to reclassify the noncredit component of a previously recognized other-than-temporary impairment from retained earnings to accumulated other comprehensive income.  Sony adopted this guidance on April 1, 2009.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.  Certain disclosures required by the accounting guidance for investments in debt and equity securities are omitted.

 
29

 


Fair value measurements when there is no active market -
 
In April 2009, the FASB issued new accounting guidance for determining fair value when there is no active market for an asset or when the pricing inputs used in determining the fair value of an asset represent a distressed sale.  This guidance also reaffirms that the objective of fair value measurement is to reflect an asset’s sale price in an orderly transaction at the date of the financial statements.  This guidance was effective for Sony as of April 1, 2009, and was applied prospectively.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

Subsequent events -
 
In May 2009, the FASB issued new accounting guidance for subsequent events, the objective of which was to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  This guidance sets forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  This guidance was effective for Sony from the first quarter of the fiscal year ending March 31, 2010, and its adoption did not have a material impact on Sony’s results of operations and financial position.


  (2)  
Changes in accounting policies, procedures and presentation rules applied in the preparation of the interim consolidated financial statements:
 

Business segment realignment - 
 
Sony realigned its reportable segments effective from the first quarter of the fiscal year ending March 31, 2010 to reflect Sony’s reorganization as of April 1, 2009, primarily repositioning operations previously reported within the Electronics and Game segments and establishing the Consumer Products & Devices, Networked Products & Services and B2B & Disc Manufacturing segments.  The Consumer Products & Devices segment includes products such as televisions, digital imaging, audio and video, semiconductors, and components.  The equity results of S-LCD Corporation, a joint-venture with Samsung Electronics Co., Ltd., are also included within the Consumer Products & Devices segment.  The Networked Products & Services segment includes Game as well as PC and Other Networked Businesses.  The B2B & Disc Manufacturing segment is comprised of the B2B business, including broadcast and professional-use products, as well as the Blu-ray DiscTM, DVD and CD disc manufacturing business.  Additionally, Music is a new segment effective from the first quarter of the fiscal year ending March 31, 2010. The Music segment includes Sony Music Entertainment, Sony Music Entertainment (Japan) Inc, and a 50% owned U.S. based joint-venture in the music publishing business, Sony/ATV Music Publishing LLC.  For the nine months ended December 31, 2008, the Music segment’s operating income includes the equity results for SONY BMG MUSIC ENTERTAINMENT that were recorded through the six months ended September 30, 2008.  The equity earnings of Sony Ericsson Mobile Communications AB (“Sony Ericsson”) are presented as a separate segment and were previously included in the Electronics segment.  All Other consists of various operating activities, including So-net Entertainment Corporation and an advertising agency business in Japan.  In connection with the realignment, all prior period amounts in the segment disclosures have been restated to conform to the current presentation.



 
30

 


(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 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 anticipated income tax credits and net operating loss carryforwards; however, it excludes income tax provision related to significant unusual or extraordinary transactions.  Such income tax provision will be separately reported from 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, 2009 have been made to conform to the presentation for the interim period ended December 31, 2009.



2. Marketable securities and securities investments and other 

Marketable securities and securities investments and other, mainly included in the Financial Services segment, are comprised of debt and equity securities of which the aggregate cost, gross unrealized gains and losses and fair value pertaining to available-for-sale securities and held-to-maturity securities are as follows:

   
Yen in millions
   
At December 31, 2009
 
At March 31, 2009
   
Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair value
 
Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair value
                                 
Available-for-sale:
                               
Debt securities
 
2,031,560
 
54,407
 
(11,541)
 
2,074,426
 
2,435,846
 
53,494
 
(28,242)
 
2,461,098
Equity securities
 
111,558
 
63,920
 
(11,833)
 
163,645
 
114,910
 
11,254
 
(8,974)
 
117,190
                                 
Held-to-maturity
                               
securities
 
2,083,917
 
7,736
 
(20,487)
 
2,071,166
 
1,465,409
 
32,359
 
(4,454)
 
1,493,314
                                 
Total
 
4,227,035
 
126,063
 
(43,861)
 
4,309,237
 
4,016,165
 
97,107
 
(41,670)
 
4,071,602
                                 




 
31

 

3. Fair value measurements

The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis is as follows:

   
Yen in millions
 
   
At December 31, 2009
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                         
Assets:
                       
Trading securities
    172,633       162,834       385       335,852  
Available-for-sale securities
                               
   Debt securities
    16,097       2,030,316       28,013       2,074,426  
   Equity securities
    148,804       10,975       3,866       163,645  
Other
    5,256       -       66,616       71,872  
Derivative assets *
    -       16,462       186       16,648  
    Total assets
    342,790       2,220,587       99,066       2,662,443  
   Liabilities:
                               
Derivative liabilities *
    -       40,173       -       40,173  
    Total liabilities
    -       40,173       -       40,173  

   
Yen in millions
 
   
At March 31, 2009
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
                         
Assets:
                       
Trading securities
    123,080       160,240       3,003       286,323  
Available-for-sale securities
                               
   Debt securities
    44,794       2,356,876       59,428       2,461,098  
   Equity securities
    92,464       21,164       3,562       117,190  
Other
    3,877       -       59,781       63,658  
Derivative assets *
    -       24,401       -       24,401  
  Total assets
    264,215       2,562,681       125,774       2,952,670  
   Liabilities:
                               
Derivative liabilities *
    -       36,386       -       36,386  
    Total liabilities
    -       36,386       -       36,386  

* Derivative assets and liabilities are recognized and disclosed on a gross basis.



 
32

 

4. Supplemental equity and comprehensive income information
 
A reconciliation of the beginning and ending carrying amounts of Sony Corporation’s stockholders’ equity, noncontrolling interests, and the total equity for the nine months ended December 31, 2008 is as follows:

   
Yen in millions
 
 
Sony Corporation’s
stockholders’ equity
Noncontrolling interests
Total equity
Balance at March 31, 2008
3,465,089
2276,849
3,741,938
Dividends
(30,105)
(4,761)
(34,866)
Stock-based compensation and other
3,094
5,612
8,706
Comprehensive income:
     
Net income (loss)
66,202
(3,983)
62,219
Other comprehensive income, net of tax ―
     
Unrealized gains (losses) on securities
(28,259)
(14,143)
(42,402)
Unrealized gains (losses) on derivative instruments
2,231
-
2,231
Pension liability adjustment
3,731
-
3,731
Foreign currency translation adjustments
(286,261)
1,149
(285,112)
Total comprehensive income
(242,356)
(16,977)
(259,333)
Balance at December 31, 2008
3,195,722
260,723
3,456,445

“Stock-based compensation and other” relating to Noncontrolling interests for the nine months ended December 31, 2008 includes the effect of the purchase of subsidiary shares from noncontrolling interests.

A reconciliation of the beginning and ending carrying amounts of Sony Corporation’s stockholders’ equity, noncontrolling interests and the total equity for the nine months ended December 31, 2009 is as follows:

   
Yen in millions
 
 
Sony Corporation’s
stockholders’ equity
Noncontrolling interests
Total equity
Balance at March 31, 2009
2,964,653
2251,949
3,216,602
Dividends
(12,544)
(5,300)
(17,844)
Stock-based compensation and other
2,106
626
2,732
Comprehensive income:
     
Net income
15,766
38,772
54,538
Other comprehensive income, net of tax ―
     
Unrealized gains (losses) on securities
30,645
16,728
47,373
Unrealized gains (losses) on derivative instruments
379
-
379
Pension liability adjustment
1,693
-
1,693
Foreign currency translation adjustments
2,438
(301)
2,137
Total comprehensive income
50,921
55,199
106,120
Balance at December 31, 2009
3,005,136
302,474
3,307,610

There was no material effect of changes in Sony Corporation’s ownership interest in its subsidiaries on Sony Corporation’s stockholders’ equity for the nine months ended December 31, 2008 and December 31, 2009.


 
33

 

 
5. Reconciliation of the differences between basic and diluted net income attributable to Sony Corporation’s stockholders per share (“EPS”)
 
Reconciliation of the differences between basic and diluted EPS for the nine and three months ended December 31, 2008 and 2009 is as follows:

 
Yen in millions
 
Nine Months Ended December 31
 
2008
 
2009
Net income attributable to Sony Corporation's
   stockholders for basic and diluted EPS computation
66,202
 
15,766

 
Thousands of shares
Weighted-average shares
1,003,492
 
1,003,522
Effect of dilutive securities:
     
Stock acquisition rights
548
 
-
Convertible bonds
44,133
 
1,623
Weighted-average shares for diluted EPS computation
1,048,173
 
1,005,145

 
Yen
Basic EPS
65.97
 
15.71
Diluted EPS
63.16
 
15.69

Potential shares of common stock upon the exercise of stock acquisition rights, which were excluded from the computation of diluted EPS for the nine months ended December 31, 2008 and 2009 were 12,592 thousand shares and 15,566 thousand shares, respectively.  The potential shares were excluded as anti-dilutive in the nine months ended December 31, 2008 and 2009 as the exercise price for those shares was in excess of the average market value of Sony’s common stock during those periods.


 
Yen in millions
 
Three Months Ended December 31
 
2008
 
2009
Net income attributable to Sony Corporation's
   stockholders for basic and diluted EPS computation
10,409
 
79,167

 
Thousands of shares
Weighted-average shares
1,003,516
 
1,003,514
Effect of dilutive securities:
     
Convertible bonds
39,939
 
1,623
Weighted-average shares for diluted EPS computation
1,043,455
 
1,005,137

 
Yen
Basic EPS
10.37
 
78.89
Diluted EPS
9.98
 
78.76

Potential shares of common stock upon the exercise of stock acquisition rights, which were excluded from the computation of diluted EPS for the three months ended December 31, 2008 and 2009 were 14,794 thousand shares and 17,112 thousand shares, respectively.  The potential shares were excluded as anti-dilutive in the three months ended December 31, 2008 and 2009 as the exercise price for those shares was in excess of the average market value of Sony’s common stock during those periods.







 
34

 

6. Commitments and contingent liabilities
(1)  
Commitments:
 
 
A. Loan commitments
 
Loan commitments outstanding at December 31, 2009 totaled 193,343 million yen.
 
 
Subsidiaries in the Financial Services segment have entered into loan agreements with their customers in accordance with the condition of the contracts.  As of December 31, 2009, the total unused portion of the line of credit extended under these contracts was 193,343 million yen.


 
B. Purchase commitments and other
 
Purchase commitments outstanding at December 31, 2009 amounted to 314,381 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 December 31, 2009, such commitments outstanding were 32,520 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 thereon, and to acquire the rights to broadcast certain live action sporting events.  These agreements cover various periods mainly within 5 years.  As of December 31, 2009, these subsidiaries were committed to make payments under such contracts of 128,991 million yen.

Certain subsidiaries in the Music segment have entered into long-term contracts with recording artists and companies for the production and/or distribution of prerecorded music and videos.  These contracts cover various periods mainly within 5 years.  As of December 31, 2009, these subsidiaries were committed to make payments 39,280 million yen under such long-term contracts.

(2)  
Contingent liabilities:
 
Sony had contingent liabilities including guarantees given in the ordinary course of business, which amounted to 51,658 million yen at December 31, 2009.  The major components of the contingent liabilities are as follows:

Sony has issued a guarantee to the creditor of a 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.  At December 31, 2009, the fair value of the collateral exceeded 300 million U.S. dollars.

At December 31, 2009, Sony has agreed to guarantee a portion of Sony Ericsson’s debt and its facilities up to a maximum of 175 million euros. At December 31, 2009, Sony has guaranteed 9,900 million yen (75 million euros) for a portion of Sony Ericsson’s debt under this arrangement. These guarantees expire by September 2011.

The European Commission 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, the directive has been transposed into national legislation subject to which Sony recognizes the liability for obligations associated with WEEE.  At December 31, 2009, the accrued amounts in respect to WEEE have not been significant.  However, Sony will continue to evaluate the impact of this regulation.

Sony Corporation and certain 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.

 

 
35

 

7. Business segment information
 
The reportable segments presented 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 the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Sony’s CODM is its Chairman, Chief Executive Officer and President.

Sony realigned its reportable segments effective from the first quarter of the fiscal year ending March 31, 2010 to reflect Sony’s reorganization as of April 1, 2009, primarily repositioning operations previously reported within the Electronics and Game segments and establishing the Consumer Products & Devices, Networked Products & Services and B2B & Disc Manufacturing segments. Additionally, Music is a new segment effective from the first quarter of the fiscal year ending March 31, 2010. In connection with the realignment, all prior period amounts in the segment disclosures have been restated to conform to the current presentation.

The Consumer Products & Devices segment includes products such as televisions, digital imaging, audio and video, semiconductors and components. The equity results of S-LCD Corporation, a joint-venture with Samsung Electronics Co., Ltd., are also included within the Consumer Products & Devices segment.  The Networked Products & Services segment includes Game as well as PC and Other Networked Businesses.  The B2B & Disc Manufacturing segment is comprised of the B2B business, including broadcast and professional-use products, as well as the Blu-ray DiscTM, DVD and CD disc manufacturing business.  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 Music segment includes Sony Music Entertainment, Sony Music Entertainment (Japan) Inc., and a 50% owned U.S. based joint-venture in the music publishing business, Sony/ATV Music Publishing LLC. For the nine months ended December 31, 2008, the Music segment’s operating income includes the equity results for SONY BMG MUSIC ENTERTAINMENT that were recorded through the six months ended September 30, 2008. 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. The equity earnings from Sony Ericsson are presented as a separate segment and were previously included in the Electronics segment.  All Other consists of various operating activities, including So-net Entertainment Corporation and an advertising agency business in Japan.  Sony’s products and services are generally unique to a single operating segment.

 
36

 

Business segments -
 

Sales and operating revenue:

   
Yen in millions
 
   
Nine Months Ended December 31
 
   
2008
   
2009
 
Sales and operating revenue:
           
Consumer Products & Devices -
           
Customers
    3,000,995       2,278,231  
Intersegment
    409,614       264,822  
Total
    3,410,609       2,543,053  
Networked Products & Services -
               
Customers
    1,390,928       1,155,139  
Intersegment
    63,566       50,459  
Total
    1,454,494       1,205,598  
B2B & Disc Manufacturing -
               
Customers
    366,181       299,043  
Intersegment
    71,379       68,077  
Total
    437,560       367,120  
Pictures -
               
Customers
    530,834       509,646  
Intersegment
    -       -  
Total
    530,834       509,646  
Music -
               
Customers
    248,519       388,613  
Intersegment
    17,627       8,161  
Total
    266,146       396,774  
Financial Services -
               
Customers
    375,409       625,238  
Intersegment
    11,403       10,022  
Total
    386,812       635,260  
All Other -
               
Customers
    240,589       201,358  
Intersegment
    -       -  
Total
    240,589       201,358  
Corporate and elimination
    (521,111 )     (359,881 )
Consolidated total
    6,205,933       5,498,928  


Consumer Products & Devices intersegment amounts primarily consist of transactions with the Networked Products & Services segment.

Networked Products & Services intersegment amounts primarily consist of transactions with the Consumer Products & Devices segment.

B2B & Disc Manufacturing intersegment amounts primarily consist of transactions with the Networked Products & Services, Pictures and Music segments.

Corporate and elimination includes certain brand, patent and royalty income.

 
37

 



   
Yen in millions
 
   
Three Months Ended December 31
 
   
2008
   
2009
 
Sales and operating revenue:
           
Consumer Products & Devices -
           
Customers
    965,953       884,925  
Intersegment
    120,450       84,830  
Total
    1,086,403       969,755  
Networked Products & Services -
               
Customers
    570,249       580,633  
Intersegment
    24,690       25,511  
Total
    594,939       606,144  
B2B & Disc Manufacturing -
               
Customers
    113,194       114,470  
Intersegment
    31,070       29,009  
Total
    144,264       143,479  
Pictures -
               
Customers
    175,117       203,190  
Intersegment
    -       -  
Total
    175,117       203,190  
Music -