6-K 1 sony-6k_021413.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 2013
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, 2012

(TRANSLATION)




Sony Corporation

 
 

 

CONTENTS
 
   
  
Page
     
Note for readers of this English translation
Cautionary Statement
 
1
1
 
I
Corporate Information
 
2
 
(1)     Selected Consolidated Financial Data
  
2
 
(2)     Business Overview
 
3
       
II
State of Business
 
4
 
(1)     Risk Factors
 
4
 
(2)     Material Contracts
 
4
 
(3)     Management’s Discussion and Analysis of Financial Condition, Results of Operations and
Status of Cash Flows
 
4
       
III
Company Information
 
10
 
(1)     Information on the Company’s Shares
 
10
 
(2)     Directors and Corporate Executive Officers
 
17
       
IV
Financial Statements
  
18
 
(1)   Consolidated Financial Statements
 
19
 
(2)   Other Information
 
47

 
 

 
 
 
Note for readers of this English translation
 
On February 14, 2013, Sony Corporation (the “Company” or “Sony Corporation”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended December 31, 2012 with the Director-General of the Kanto Local Finance Bureau in Japan pursuant to the Financial Instruments and Exchange Act of Japan.  This document is an English translation of the Quarterly Securities Report in its entirety, except for (i) information that 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 or any other form 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 release with respect to Sony’s 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, judgments 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; (ii) foreign 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 televisions, game platforms, and smart phones, which are offered in highly competitive markets characterized by severe price competition and continual new product and service 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 production capacity; (v) Sony’s ability to implement successful business restructuring and transformation efforts under changing market conditions; (vi) Sony’s ability to implement successful hardware, software, and content integration strategies for all segments excluding the Financial Services segment, 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 prioritize investments correctly (particularly in the electronics businesses); (viii) Sony’s ability to maintain product quality; (ix) the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures and other strategic investments (in particular the recent acquisition of Sony Ericsson Mobile Communications AB); (x) Sony’s ability to forecast demands, manage timely procurement and control inventories; (xi) the outcome of pending and/or future 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; (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; and (xiv) risks related to catastrophic disasters or similar events, including the Great East Japan Earthquake and its aftermath as well as the floods in Thailand. Risks and uncertainties also include the impact of any future events with material adverse impact.

 
 
- 1 -

 

I            Corporate Information
(1) Selected Consolidated Financial Data
 
   
Yen in millions, Yen per share amounts
 
   
Nine months ended December 31, 2011
   
Nine months ended December 31, 2012
   
Fiscal Year ended March 31, 2012
 
Sales and operating revenue
    4,892,786       5,067,822       6,493,212  
Operating income (loss)
    (65,863 )     82,955       (67,275 )
Income (loss) before income taxes
    (82,700 )     58,493       (83,186 )
Net loss attributable to Sony Corporation’s stockholders
    (201,447 )     (50,874 )     (456,660 )
Comprehensive income (loss)
    (262,502 )     75,288       (428,413 )
Total equity
    2,655,542       2,481,409       2,490,107  
Total assets
    12,916,000       13,861,045       13,295,667  
Net loss attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)
    (200.73 )     (50.69 )     (455.03 )
Net loss attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen)
    (200.73 )     (50.69 )     (455.03 )
Ratio of stockholders’ equity to total assets (%)
    17.2       14.5       15.3  
Net cash provided by operating activities
    283,791       220,353       519,539  
Net cash used in investing activities
    (607,168 )     (721,020 )     (882,886 )
Net cash provided by financing activities
    159,495       286,574       257,336  
Cash and cash equivalents at end of the period
    801,708       698,029       894,576  
                         

   
Yen in millions, Yen per share amounts
 
   
Three months ended
December 31, 2011
   
Three months ended
December 31, 2012
 
Sales and operating revenue
    1,822,876       1,947,980  
Net loss attributable to Sony Corporation’s stockholders
    (158,968 )     (10,763 )
Net loss attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)
    (158.40 )     (10.72 )

Notes:
 
1.  
The Company’s consolidated financial statements are prepared in conformity with U.S. GAAP.
 
2.  
The Company reports equity in net loss of affiliated companies as a component of operating income (loss).
 
3.  
Consumption taxes are not included in sales and operating revenue.
 
4.  
Total equity is presented based on U.S. GAAP.
 
5.  
Ratio of stockholders’ equity to total assets is calculated by using total equity attributable to the stockholders of the Company.
 
6.  
The Company prepares consolidated financial statements.  Therefore parent-only selected financial data is not presented.

 
- 2 -

 

(2) Business Overview
 
There was no significant change in the business of Sony during the nine months ended December 31, 2012.

Sony realigned its reportable segments effective from the first quarter of the fiscal year ending March 31, 2013.  For further information on the realignment, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 12. Business segment information”.

As of December 31, 2012, the Company had 1,341 subsidiaries and 109 affiliated companies, of which 1,320 companies are consolidated subsidiaries (including variable interest entities) of the Company.  The Company has applied the equity accounting method for 102 affiliated companies.

 
- 3 -

 

II                      State of Business
 
(1) Risk Factors
 
 
Note for readers of this English translation:
 
There was no significant change 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 27, 2012, as amended by Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012.   Any forward-looking statement included in the descriptions below is based on the current judgment of management.

URL: The Annual Report on Form 20-F filed with the SEC on June 27, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512284981/d305818d20f.htm

URL: The Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512308053/d305818d20fa.htm
 
 
(2) Material Contracts
 
There were no material contracts executed during the three months ended December 31, 2012.
 
 
Note for readers of this English translation:
 
There was no significant change from the information presented in the Annual Report on Form 20-F (“Patents and Licenses” in Item 4) filed with the SEC on June 27, 2012, the Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012 and the Restatement of Financial Information for New Reporting Segments on Form 6-K submitted to the SEC on November 14, 2012.

URL: The Annual Report on Form 20-F filed with the SEC on June 27, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512284981/d305818d20f.htm

URL: The Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512308053/d305818d20fa.htm

URL: The Restatement of Financial Information for New Reporting Segments on Form 6-K submitted to the SEC on November 14, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512469898/d409265d6k.htm
 
 

(3) 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 and nine-month periods ended December 31, 2012, since it is the same as described in a press release previously submitted to the SEC.  Please refer to “Consolidated Financial Results for the Third Quarter Ended December 31, 2012” submitted to the SEC on Form 6-K on February 7, 2013.

URL: The press release titled “Consolidated Financial Results for the Third Quarter Ended December 31, 2012”
http://www.sec.gov/Archives/edgar/data/313838/000115752313000564/a50554087.htm'
 

 
- 4 -

 

Foreign Exchange Fluctuations and Risk Hedging
 
 
Note for readers of this English translation:
 
Except for the information below, there was no significant change from the information presented in the Foreign Exchange Fluctuations and Risk Hedging section of the Annual Report on Form 20-F filed with the SEC on June 27, 2012, as amended by Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012, and the Restatement of Financial Information for New Reporting Segments on Form 6-K submitted to the SEC on November 14, 2012.  Although foreign exchange rates have fluctuated, there has been no significant change in Sony’s risk hedging policy from the description in the Annual Report on Form 20-F, Amendment No. 1 on Form 20-F/A and the Restatement of Financial Information for New Reporting Segments on Form 6-K.

URL: The Annual Report on Form 20-F filed with the SEC on June 27, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512284981/d305818d20f.htm

URL: The Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512308053/d305818d20fa.htm

URL: The Restatement of Financial Information for New Reporting Segments on Form 6-K submitted to the SEC on November 14, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512469898/d409265d6k.htm
 
 
During the three months ended December 31, 2012, the average rates of the yen were 81.2 yen against the U.S. dollar and 105.4 yen against the euro, which was 6.0 percent lower and 2.5 percent lower, respectively, than the same quarter of the previous fiscal year (“year-on-year”).

For the three months ended December 31, 2012, sales were 1,948.0 billion yen, an increase of 6.9 percent year-on-year, while on a constant currency basis, sales increased approximately 3 percent year-on-year.  For references to information on a constant currency basis, see Note at the bottom of this section.

Consolidated operating income of 46.4 billion yen was recorded for the three months ended December 31, 2012, compared to an operating loss of 91.7 billion yen in the same quarter of the previous fiscal year, an improvement of 138.2 billion yen year-on-year (an improvement of approximately 137.5 billion yen year-on-year on a constant currency basis).

The table below indicates the impact on sales and operating results of each of Sony’s five Electronics segments.  For a detailed analysis of segment performance, please refer to the “Operating Performance Highlights by Business Segment” in the “Results of Operations” section above, which discusses the impact of foreign exchange rates within each segment.

                     
(Billions of yen)
                 
     
Third quarter ended
December 31
     
Change in
yen
     
 Change on
 constant
currency
basis 
     
Impact of
changes in  
foreign
exchange rates
 
     
2011
     
2012
                         
                                         
IP&S
Sales
  189.4       180.5       -4.7 %     -9 %     +8.3  
 
Operating loss
  (6.7 )     (2.9 )     +3.9       +3.0       +0.8  
Game
Sales
  316.1       268.5       -15.1 %     -18 %     +7.8  
Operating income
  33.8       4.6       -29.2       -31.3       +2.1  
MP&C
Sales
  164.0       318.8       +94.4 %     +92 %     +4.3  
Operating loss
  (48.4 )     (21.3 )     +27.1       +33.8       -6.7  
HE&S
Sales
  394.3       323.8       -17.9 %     -22 %     +14.9  
Operating loss
  (89.8 )     (8.0 )     +81.8       +79.8       +2.0  
Devices
Sales
  233.2       217.3       -6.8 %     -11 %     +9.5  
Operating income (loss)
  (15.6 )     9.7       +25.2       +23.1       +2.2  
 
 
- 5 -

 
 
In addition, sales for the Pictures segment increased 30.1 percent year-on-year to 208.9 billion yen, an approximately 22 percent increase on a constant currency (U.S. dollar) basis.  In the Music segment, sales increased 2.4 percent year-on-year to 126.4 billion yen, an approximately 1 percent decrease on a constant currency basis.  Sony’s Financial Services segment consolidates the yen-based results of Sony Financial Holdings Inc.  As most of the operations in this segment are based in Japan, Sony’s management analyzes the performance of the Financial Services segment on a yen basis only.

Note: In this section, the descriptions of sales on a constant currency basis reflect sales obtained by applying the yen’s monthly average exchange rates from the same quarter of the previous fiscal year to local currency-denominated monthly sales in the three months ended December 31, 2012.  The impact of foreign exchange rate fluctuations on operating income (loss) described herein is estimated by deducting cost of sales and SGA expenses on a constant currency basis from sales on a constant currency basis.  Cost of sales and SGA expenses on a constant currency basis are obtained by applying the yen’s monthly average exchange rates from the same quarter of the previous fiscal year to the corresponding local currency-denominated monthly cost of sales and SGA expenses for the three months ended December 31, 2012.  In certain cases, most significantly in the Pictures segment, and Sony Music Entertainment and Sony/ATV Music Publishing LLC in the Music segment, the constant currency amounts are after aggregation on a U.S. dollar basis.  Sales and operating income (loss) on a constant currency basis are not reflected in Sony’s consolidated financial statements and are not measured in accordance with U.S. GAAP.  Sony does not believe that these measures are a substitute for U.S. GAAP measures.  However, Sony believes that disclosing sales and operating income information on a constant currency basis provides additional useful analytical information to investors regarding the operating performance of Sony.

Status of Cash Flows
 
 
 
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 nine-month period ended December 31, 2012, since it is the same as described in a press release previously submitted to the SEC.  Please refer to “Consolidated Financial Results for the Third Quarter Ended December 31, 2012” submitted to the SEC on Form 6-K on February 7, 2013.

URL: The press release titled “Consolidated Financial Results for the Third Quarter Ended December 31, 2012”
http://www.sec.gov/Archives/edgar/data/313838/000115752313000564/a50554087.htm
 

 
- 6 -

 

ii) Issues Facing Sony and Management’s Response to those Issues
 
 
Note for readers of this English translation:
 
Except as set forth below, there was no significant change from the information presented as the Issues Facing Sony and Management’s Response to those Issues in the Trend Information section of the Annual Report on Form 20-F filed with the SEC on June 27, 2012, as amended by Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012, and the Restatement of Financial Information for New Reporting Segments on Form 6-K submitted to the SEC on November 14, 2012.  The changes are indicated by underline below.  Any forward-looking statement included in the descriptions below is based on the current judgment of management.

URL: The Annual Report on Form 20-F filed with the SEC on June 27, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512284981/d305818d20f.htm

URL: The Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512308053/d305818d20fa.htm

URL: The Restatement of Financial Information for New Reporting Segments on Form 6-K submitted to the SEC on November 14, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512469898/d409265d6k.htm
 

4. Creating new businesses and accelerating innovation
 
Sony will continue to aggressively promote innovation intended to deliver mid- to long-term growth, as well as the development of differentiating technologies that enhance core product value.  For example, Sony is targeting mid- to long-term growth in the medical and 4K businesses.  In the medical business Sony has already launched a range of medical peripherals such as printers, monitors, cameras, and recorders. Sony also plans to enter the medical equipment business, where its strengths in various core digital imaging technologies offer significant competitive advantages in applications such as endoscopes.  Furthermore, Sony plans to enter the life science business where it can leverage its expertise in technologies such as semiconductor lasers, image sensors and micro fabrication.  Sony is also drawing on its comprehensive strengths in audio and visual technologies to aggressively promote the growth of 4K technology, which delivers more than four times the resolution of Full HD.  Incorporation of Sony-developed technologies, such as image sensors, image processing compression LSIs and high-speed optical transmission modules into its professional-use and high-end consumer products will pave the way for Sony to continue to expand and enrich its 4K-compatible product lineup.  In an effort to create new businesses, Sony and Olympus Corporation (“Olympus”) entered into a business alliance agreement and a capital alliance agreement through a third-party allotment of Olympus’s common shares to Sony in September 2012, and the two companies agreed to establish a medical business venture.  (For further information on the capital alliance agreement, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 11. Commitments, contingent liabilities and other”.)  Through the utilization of its leading-edge electronics technologies, such as digital imaging, 4K and 3D, Sony believes that it can create new business opportunities by offering innovative and competitive products in the area of surgical endoscopes and other related areas where future growth is anticipated.

 
- 7 -

 

iii) Research and Development
 
Note for readers of this English translation:
Excluding the below, there was no significant change from the information presented as the Research and Development in the Annual Report on Form 20-F filed with the SEC on June 27, 2012, as amended by the Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012, and the Restatement of Financial Information for New Reporting Segments on Form 6-K submitted to the SEC on November 14, 2012.
 
URL: The Annual Report on Form 20-F filed with the SEC on June 27, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512284981/d305818d20f.htm
 
URL: The Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512308053/d305818d20fa.htm
 
URL: The Restatement of Financial Information for New Reporting Segments on Form 6-K submitted to the SEC on November 14, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512469898/d409265d6k.htm
 
 
There were the following significant changes in research and development activities for the period.
The R&D Platform and Common Software Platform were realigned in April 2012, as the System & Software Technology Platform, the Advanced Device Technology Platform and the Corporate R&D to implement a process of stringent selection and focus in the area of R&D, to enable the Company to optimize resource allocation, and to enhance R&D which leads to the generation of new businesses and establishment of next generation basic technology.
In addition, the System Technology Laboratory and the New Business Creating Division were integrated and realigned in July 2012, as the Business Design and Innovation Laboratory to strengthen the development of new businesses.
Research and development costs for the nine months ended December 31, 2012 totaled 349.6 billion yen.

 
- 8 -

 

iv) Liquidity and Capital Resources
 
 
 
Note for readers of this English translation:
 
Except for the information related to the commitment line, execution of syndicated loans and issuance of convertible bonds below, there was no significant change from the information presented in the Annual Report on Form 20-F filed with the SEC on June 27, 2012, as amended by Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012.  The changes are indicated by underline below.  Any forward-looking statement included in the descriptions below is based on the current judgment of management.
 
URL: The Annual Report on Form 20-F filed with the SEC on June 27, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512284981/d305818d20f.htm
 
URL: The Amendment No.1 on Form 20-F/A filed with the SEC on July 20, 2012
http://www.sec.gov/Archives/edgar/data/313838/000119312512308053/d305818d20fa.htm
 
 
Sony typically raises funds through straight bonds, CP programs and bank loans (including syndicated loans).  If market disruption and volatility occur and if Sony could not raise sufficient funds from these sources, Sony may also draw down funds from contractually committed lines of credit from various financial institutions.  Sony has a total, translated into yen, of 777.4 billion yen in unused committed lines of credit as of December 31, 2012.  Details of those committed lines of credit are: a 475.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, effective until November 2015, a 1.5 billion U.S. dollar multi-currency committed line of credit also with a syndicate of Japanese banks, effective until December 2013, and a 2.02 billion U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks, effective until April 2015, in all of which Sony Corporation and its consolidated subsidiary, Sony Global Treasury Services Plc are defined as borrowers.  In November 2012, Sony extended by one year the term for the 475.0 billion yen committed line of credit contracted with a syndicate of Japanese banks.  These contracts are aimed at securing sufficient liquidity in a quick and stable manner even in the event of turmoil within the financial and capital markets.
Sony executed a syndicated loan totaling 65.0 billion yen in July 2012 (with a maturity of 3 to 6 years).  The proceeds of the loan were used for general corporate purposes.  In addition, Sony issued Zero Coupon Convertible Bonds due 2017 (bonds with stock acquisition rights) in the aggregate principal amount of 150.0 billion yen in November 2012.  The proceeds from the issuance of the bonds were applied or are to be applied to capital expenditures, equity investments and the redemption of debt.

 
- 9 -

 

           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
Name of 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, 2012)
As of the filing date of
the Quarterly
Securities Report
(February 14, 2013)
Common stock
1,004,638,164
1,011,950,206
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
1,004,638,164
1,011,950,206
 
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 this Quarterly Securities Report does not include shares issued upon the exercise of stock acquisition rights (“SARs”) during February 2013, 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 listed below which were issued during the three months ended December 31, 2012.  A summary of such terms and conditions has previously been filed with or submitted to the SEC under Form 6-K or Form S-8.  There has been no change to such terms and conditions since the applicable date of such filings or submissions.
 
URL: The list of documents previously filed or 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 December 31, 2012)
Name
(Date of resolution of the Board of Directors and
Date of decision of the Representative Corporate Executive
 Officer, President & CEO)
Number of
SARs issued
Number of shares of
common stock to be issued
or transferred
The twenty-fourth series of Common Stock Acquisition Rights
(October 31, 2012 and November 14, 2012)
7,387
738,700
The twenty-fifth series of Common Stock Acquisition Rights
(October 31, 2012 and November 14, 2012)
11,763
1,176,300

 
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 iii) Zero Coupon Convertible Bonds due 2017 (bonds with stock acquisition rights (tenkanshasaigata shinkabu yoyakuken-tsuki shasai))

Date of resolution
October 31, 2012 (Resolution of the Board of Directors) and November 14, 2012 (Decision of the Representative Director, President and CEO)
Number of the Stock Acquisition Rights
7,500 *1
Of which: Number of treasury stock acquisition rights held by the Company
-
Class of shares to be acquired upon exercise of the Stock Acquisition Rights
Shares of common stock
100 Shares constitute one unit.
Number of shares to be acquired upon exercise of the Stock Acquisition Rights
156,739,811 shares *2
Amount to be paid upon exercise of the Stock Acquisition Rights
20 million yen *3
Exercise period of the Stock Acquisition Rights
Period from and including December 14, 2012 up to and including 3:00 p.m. on November 16, 2017 (London time) *4
Issue price and amount to be accounted for as stated capital in case of an issue of shares upon exercise of the Stock Acquisition Rights
Issue price per share: 957 yen *3
Amount to be accounted for as stated capital per share: 479 yen
Conditions for exercise of the Stock Acquisition Rights
No Stock Acquisition Right may be exercised in part only.
Matters concerning transfers of the Stock Acquisition Rights
The Stock Acquisition Rights are incorporated into the convertible bond-type bonds with stock acquisition rights and shall not be transferable separately from the Bonds.
Matters concerning substitute payments
Upon exercise of one (1) Stock Acquisition Right, the Bond relating to such Stock Acquisition Right shall be contributed.  The price of asset to be contributed upon exercise of one (1) Stock Acquisition Right shall be equal to the principal amount of each Bond.
Matters concerning delivery of the Stock Acquisition Rights in the event of corporate transactions
*5
Outstanding amount of the Bonds with Stock Acquisition Rights
150,000 million yen

Notes:
*1
The number of Shares to be newly issued or to be transferred in lieu of such issuance from the Shares held by the Company as treasury stock upon exercise of the Stock Acquisition Rights (hereinafter, the issuance or transfer of the Shares is referred to as “delivery” thereof) will be determined by dividing the aggregate principal amount of the Bonds with respect to the Stock Acquisition Rights so exercised by the Conversion Price as set forth in Note 3; provided, however, that fractions of a Share will not be issued and no adjustment by means of cash payment will be made in respect thereof.  If a Bondholder would receive a number of Shares not constituting one (1) unit thereof (tangen miman kabushiki) (“Non-unit Shares”) upon exercise of the Stock Acquisition Right(s), such Non-unit Shares shall be delivered to the relevant Bondholder in the same manner as that of the Shares constituting a whole unit of Shares, and no cash amounts shall be paid by the Company in respect of such Non-unit Shares.

 
*2
In the case where the Conversion Price is adjusted in accordance with Note 3, the number of shares to be acquired upon exercise of the Stock Acquisition Rights shall be adjusted to the number obtained by dividing the aggregate principal amount of the Bonds by the adjusted Conversion Price.

 
*3
Each Bond shall be contributed upon exercise of one (1) Stock Acquisition Right in respect of such Bond.  The price of asset to be contributed upon exercise of one (1) Stock Acquisition Right shall be equal to the principal amount of each Bond.
 
 
- 11 -

 
 
The price at which Shares shall be acquired upon the exercise of the Stock Acquisition Rights (the “Conversion Price”) shall initially be 957 yen.

The Conversion Price shall be adjusted in accordance with the following formula, if the Company issues new Shares or disposes of the Shares it holds at an issue price or disposal price below the current market price of the Shares (except in the case of exercising the stock acquisition rights of the Company and exercising the right to demand the acquisition of shares with a put option).  In the following formula, the “Number of shares outstanding” means the total number of the Shares that are issued and outstanding (but excluding those held by the Company).

Conversion
Price
after
adjustment
=
Conversion
Price
before
adjustment
×
Number of
shares
outstanding
+
Number of shares
to be issued
or disposed of
×
Issue or disposal
price per share
Market price per share
Number of
shares outstanding
+
Number of shares
to be issued or disposed of

The Conversion Price will also be appropriately adjusted in accordance with the Terms and Conditions of the Bonds with Stock Acquisition Rights in the case of a stock split (including a free share distribution) of the Shares, consolidation of the Shares, an issue by the Company of stock acquisition rights to acquire the Shares (including stock acquisition rights incorporated into bonds with stock acquisition rights) at a price below the current market price of the Shares, a distribution of a dividend that exceeds certain limits, or in certain other cases.

Furthermore, in the case where (1) a Corporate Event (as defined in the Terms and Conditions of the Bonds with Stock Acquisition Rights) has occurred, (2) the Company is entitled for an early redemption upon occurrence of delisting of the Shares, or (3) the Company is entitled for an early redemption upon occurrence of a Squeezeout Event, the Conversion Price shall be reduced to the price calculated in accordance with the specified manner set forth in the Terms and Conditions of the Bonds with Stock Acquisition Rights.

 
*4
(1) In the case of early redemption at the option of the Company, early redemption upon occurrence of a Corporate Event, early redemption upon occurrence of delisting of the Shares, or early redemption upon occurrence of a Squeezeout Event (unless, in the case of an early redemption for taxation reasons, as categorized in an early redemption at the option of the Company, where the holder of such Bond has elected that such Bond shall not be redeemed early), the exercise period shall be up to 3:00 p.m. on the third (3rd) Tokyo Business Day prior to the date fixed for redemption thereof, (2) in the case of an Early redemption at the option of the Bondholders, the exercise period shall be up to the time when the relevant notice of redemption is deposited at the Exercise Agent, (3) in the case of a purchase and cancellation of the Bond, the exercise period shall be up to the time when such Bond is so cancelled by the Company or delivered by a subsidiary to the Company for cancellation, or (4) in the case where the Bond becomes due and repayable, the exercise period shall be up to the time when such Bond becomes so due and repayable.

In any case of the foregoing, the Stock Acquisition Right may not be exercised after November 16, 2017.

Notwithstanding the foregoing, the Stock Acquisition Right may not be exercised for such period as may be designated by the Company if the Company reasonably determines that such suspension is necessary in order to consummate the relevant reorganisation of the Company; provided that such period may not exceed thirty (30) days and shall expire on or before the date that is fourteen (14) days after the Corporate Event Effective Date.

Furthermore, notwithstanding the foregoing, the Stock Acquisition Rights may not be exercised where the calendar day in Japan on which the exercise of the Stock Acquisition Rights shall become effective (or the next following Tokyo Business Day, if the relevant calendar day will not be a Tokyo Business Day) would fall on a date within the period from and including (x) the second (2nd) Tokyo Business Day falling immediately prior to
 
 
- 12 -

 
 
any record date specified by the Company or any other date set for the purpose of determination of shareholders in connection with Paragraph 1 of Article 151 of the Act on Book-Entry Transfer of Company Bonds, Shares, etc. (together with the record date specified by the Company, collectively, the “Shareholder Determination Date”) (or, if such Shareholder Determination Date falls on a date that is not a Tokyo Business Day, the third (3rd) Tokyo Business Day falling immediately prior to such Shareholder Determination Date), to and including (y) such Shareholder Determination Date (provided that if such Shareholder Determination Date falls on a date that is not a Tokyo Business Day, the Tokyo Business Day immediately following such Shareholder Determination Date).
 

 
*5
Matters concerning delivery of the Stock Acquisition Rights in the event of corporate transactions shall be as follows:

 
 (1)
If a Corporate Event occurs and: (i) it is legally possible under the then applicable laws (taking into account the then official or judicial interpretation or application of such laws) to effect substitution of the New Obligor for the Company and the grant of the New Stock Acquisition Rights (as defined below) in such a manner as set out in the Terms and Conditions of the Bonds with Stock Acquisition Rights; (ii) a practical structure for such substitution and grant has been or can be established; and (iii) such substitution and grant can be consummated without the Company or the New Obligor incurring costs or expenses (including taxes) which are in the opinion of the Company unreasonable in the context of the entire transaction, then the Company shall use its best endeavours to cause the New Obligor to assume the obligations in respect of the Bonds and to grant stock acquisition rights of the New Obligor (hereinafter referred to as the “New Stock Acquisition Rights”) pursuant to the Terms and Conditions of the Bonds with Stock Acquisition Rights and the Trust Deed.  In connection with any assumption of the Bonds by the New Obligor and the grant of the New Stock Acquisition Rights by the New Obligor, the Company shall also use its best endeavours to ensure that the shares of common stock of the New Obligor will be listed on any financial instruments exchange in Japan on the relevant Corporate Event Effective Date.

 
 (2)
The New Stock Acquisition Rights delivered by the New Obligor described in (1) above will be delivered in accordance with the following terms:

 
(a)
Number of New Stock Acquisition Rights:

The number of New Stock Acquisition Rights to be granted will be equal to the number of the Stock Acquisition Rights held by the holders of the Bonds with Stock Acquisition Rights outstanding immediately prior to the relevant Corporate Event Effective Date.

 
(b)
Class of shares to be issued or transferred upon the exercise of the New Stock Acquisition Rights:

Shares of common stock of the New Obligor.

 
(c)
Number of shares to be issued or transferred upon exercise of the New Stock Acquisition Rights:

The number of shares of common stock of the New Obligor to be delivered upon exercise of the New Stock Acquisition Rights shall be determined by the New Obligor by reference to the Terms and Conditions of the Bonds with Stock Acquisition Rights taking into account the terms of the transaction that has caused the relevant Corporate Event, and further subject to the provisions below.  The conversion price shall be adjusted in the same manner as that of the Bonds with Stock Acquisition Rights.

 
(i)
In the case of a merger event, a share exchange or a share transfer, the conversion price for the New Stock Acquisition Rights shall be such that the holder of a New Stock Acquisition Right would upon its exercise immediately after the Corporate Event Effective Date receive the number of shares of common stock of the New Obligor receivable upon transaction that would cause the relevant Corporate Event by a holder of the number of Shares which a holder of a Stock Acquisition Right would have received had such Stock Acquisition Right been exercised immediately prior to the relevant Corporate Event Effective Date.  If securities (other than shares of common stock of the New Obligor) or other property shall be delivered upon the Corporate Event, the conversion price for the New Stock Acquisition Rights shall be the amount that the holders of the New Stock Acquisition Rights may acquire the number of shares of common stock of the New Obligor obtained by dividing the fair market value of such securities or properties delivered by the New Obligor Current Market Price per Share (as defined in the Terms and Conditions of the Bonds with Stock Acquisition Rights).
 
 
- 13 -

 
 
 
(ii)
In the case of any other Corporate Event, the conversion price for the New Stock Acquisition Rights shall be such that the holder of a New Stock Acquisition Right shall upon its exercise immediately after the Corporate Event Effective Date receive an equivalent economic interest to be determined by the Company as that which a Bondholder would have received had such Stock Acquisition Right been exercised immediately before the relevant Corporate Event Effective Date.

 
(d)
Description of asset to be contributed upon exercise of the New Stock Acquisition Rights and amount thereof:

Each assumed Bond shall be contributed upon the exercise of each New Stock Acquisition Right and the price of the asset to be contributed upon the exercise of each New Stock Acquisition Right shall be equal to the principal amount of each assumed Bond.

 
(e)
Period during which the New Stock Acquisition Rights are exercisable:

The New Stock Acquisition Rights may be exercised at any time during the period from, and including, the later of the relevant Corporate Event Effective Date or the date of implementation of the scheme described in (1) above up to, and including, the last day of the exercise period of the Stock Acquisition Rights.

 
(f)
Other conditions for the exercise of the New Stock Acquisition Rights:

No New Stock Acquisition Right may be exercised in part only.

 
(g)
Amount of stated capital and additional paid-in capital increased by issue of shares upon exercise of the New Stock Acquisition Rights:

 
(i)
The amount of stated capital increased by the issue of the shares upon the exercise of the New Stock Acquisition Rights shall be one-half of the “maximum capital and other increase amount” as calculated pursuant to Article 17 of the Rules of Account Settlement of Corporations in respect of such exercise (with any fraction of less than one yen resulting from such calculation being rounded up).

 
(ii)
The amount of additional paid-in capital increased by issue of the shares upon the exercise of the New Stock Acquisition Rights shall be the amount obtained by subtracting the amount of stated capital to be increased as set forth in (i) above from the “maximum capital and other increase amount” as set forth in (i) above.

 
(h)
In case of occurrence of a Corporate Event:

If a Corporate Event occurs to the New Obligor, the New Stock Acquisition Rights shall be dealt with in the same manner as that of the Bonds with Stock Acquisition Rights.

 
(i)
Others:

Fractions of a share of common stock of the New Obligor will not be issued upon exercise of the New Stock Acquisition Rights and no adjustment by means of cash payment will be made in respect thereof.  The holder of each Bond outstanding as of the relevant Corporate Event Effective Date may not transfer such Bond separately from the New Stock Acquisition Rights.  In the case where such restriction on transfer of the Bond would not be effective under the then applicable law, a stock acquisition right of the New Obligor incorporated in a bond that is issued by the New Obligor and equivalent to the Bond may be delivered to the holder of each Bond outstanding immediately prior to the Corporate Event Effective Date in place of the Stock Acquisition Right and the Bond.

 
- 14 -

 

iv) Status of the Exercise of Moving Strike Convertible Bonds
 
Not applicable.

v) Description of Rights Plan
 
Not applicable.

vi) Changes in the Total Number of Shares Issued and the Amount of Common Stock, etc.
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
 legal capital
surplus
Balance of the
legal capital
surplus
(Thousands)
(Thousands)
(Yen in Millions)
(Yen in Millions)
(Yen in Millions)
(Yen in Millions)
From October 1 to December 31, 2012
1,004,638
630,923
837,611
 
Note:  Upon the share exchange implemented by the Company and So-net Entertainment Corporation during the period from January 1, 2013 to January 31, 2013, the total number of shares issued increased by 7,312 thousand shares and the legal capital surplus increased by 7,005 million yen, respectively.

 
- 15 -

 

vii) Status of Major Shareholders
 
   
(As of December 31, 2012)
Name
Address
Number of
shares held
(Thousands)
Percentage
of shares held to total shares issued (%)
Moxley and Co. LLC *1
(Local Custodian: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
New York, U.S.A.
(2-7-1, Marunouchi, Chiyoda-ku,
Tokyo)
64,624
6.43
Japan Trustee Services Bank, Ltd.
(Trust account) *2
1-8-11, Harumi, Chuo-ku, Tokyo
46,702
4.65
The Master Trust Bank of Japan, Ltd.
(Trust account) *2
2-11-3, Hamamatsu-cho, Minato-ku,
Tokyo
40,087
3.99
SSBT OD05 Omnibus Account - Treaty Clients *3
(Local Custodian: The Hongkong and Shanghai
Banking Corporation Limited)
Sydney, Australia
(3-11-1, Nihonbashi, Chuo-ku,
Tokyo)
22,150
2.20
The Bank of New York, Treaty Jasdec Account *3
(Local Custodian: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
Brussels, Belgium
(2-7-1, Marunouchi, Chiyoda-ku,
Tokyo)
13,201
1.31
Japan Trustee Services Bank, Ltd.
(Trust account 1) *2
1-8-11, Harumi, Chuo-ku, Tokyo
11,405
1.14
Japan Trustee Services Bank, Ltd.
(Trust account 6) *2
1-8-11, Harumi, Chuo-ku, Tokyo
11,071
1.10
Japan Trustee Services Bank, Ltd.
(Trust account 3) *2
1-8-11, Harumi, Chuo-ku, Tokyo
10,394
1.03
SIX SIS Ltd. *3
(Local Custodian: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
Olten, Switzerland
(2-7-1, Marunouchi, Chiyoda-ku,
Tokyo)
10,122
1.01
State Street Bank - West Pension Fund Clients - Exempt *3
(Local Custodian: Mizuho Corporate Bank, Ltd.)
Quincy, U.S.A.
(4-16-13, Tsukishima, Chuo-ku,
Tokyo)
9,372
0.93
Total
239,129
23.80
 
Notes:
*1.
Moxley and Co. LLC is the nominee of JPMorgan Chase Bank, N.A., which is the Depositary for holders of the Company’s American Depositary Receipts (“ADRs”).
*2.
The shares held by each shareholder 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.

 
- 16 -

 

viii) Status of Voting Rights
 
1) Shares Issued
 (As of December 31, 2012)
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.)
    1,033,000              
Shares with full voting rights (Others)
    1,001,151,900       10,011,519        
Shares constituting less than one full unit
    2,453,264          
Shares constituting less than one full unit
(100 shares)
 
Total number of shares issued
    1,004,638,164              
Total voting rights held by all shareholders
          10,011,519        
Note:
Included in “Shares with full voting rights (Others)” under “Number of shares of common stock” are 19,500 shares of common stock held under the name of Japan Securities Depository Center, Incorporated.  Also included in “Shares with full voting rights (Others)” under “Number of voting rights (Units)” are 195 units of voting rights relating to the shares of common stock with full voting rights held under the name of Japan Securities Depository Center, Incorporated.

2) Treasury Stock, Etc.
(As of December 31, 2012)
Name of shareholder
Address of shareholder
Number of shares held under own name
Number of shares held under the names of others
Total number of shares held
Percentage of shares held to
total shares issued (%)
Sony Corporation
(Treasury stock)
1-7-1, Konan, Minato-ku, Tokyo
1,033,000
1,033,000
0.10
Total
1,033,000
 —
1,033,000
0.10
Note:
In addition to the 1,033,000 shares listed above, there are 300 shares of common stock held in 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)           Directors and Corporate Executive Officers
 
The change in directors or corporate executive officers in the period from the filing date of the Securities Report (Yukashoken Houkokusho) for the fiscal year ended March 31, 2012 to the filing date of this Quarterly Securities
Report (Shihanki Houkokusho), is as follows:

Retired Corporate Executive Officer

Title
Position
Name
Date of Retirement
Corporate Executive Officer
Executive Deputy President
(Officer in charge of Medical Business)
Hiroshi Yoshioka
December 31, 2012

 
- 17 -

 

IV           Financial Statements
 
Page
(1) Consolidated Financial Statements
19
 
(i)
Consolidated Balance Sheets
19
 
(ii)
Consolidated Statements of Income
21
 
(iii)
Consolidated Statements of Comprehensive Income
23
 
(iv)
Consolidated Statements of Cash Flows
24
(2) Other Information
47

 
- 18 -

 

(1) Consolidated Financial Statements

 (i)  Consolidated Balance Sheets (Unaudited) 

Sony Corporation and Consolidated Subsidiaries
             
   
Yen in millions
 
   
At March 31,
2012
   
At December 31,
2012
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
    894,576       698,029  
Marketable securities
    680,913       658,250  
Notes and accounts receivable, trade
    840,924       1,004,324  
Allowance for doubtful accounts and sales returns
    (71,009 )     (80,715 )
Inventories
    707,052       769,582  
Other receivables
    202,044       171,422  
Deferred income taxes
    36,769       39,501  
Prepaid expenses and other current assets
    463,693       459,752  
     Total current assets
    3,754,962       3,720,145  
                 
Film costs
    270,048       258,297  
                 
Investments and advances:
               
Affiliated companies
    36,800       70,193  
Securities investments and other
    6,282,676       6,883,951  
      6,319,476       6,954,144  
                 
Property, plant and equipment:
               
Land
    139,413       138,854  
Buildings
    817,730       826,648  
Machinery and equipment
    1,957,134       1,910,063  
Construction in progress
    35,648       38,801  
      2,949,925       2,914,366  
Less – Accumulated depreciation
    2,018,927       2,003,099  
      930,998       911,267  
                 
Other assets:
               
Intangibles, net
    503,699       503,946  
Goodwill
    576,758       626,150  
Deferred insurance acquisition costs
    441,236       455,164  
Deferred income taxes
    100,460       95,483  
Other
    398,030       336,449  
      2,020,183       2,017,192  
                 
Total assets
    13,295,667       13,861,045  
(Continued on following page.)

 
- 19 -

 

Consolidated Balance Sheets (Unaudited) 


             
   
Yen in millions
 
   
At March 31,
2012
   
At December 31,
2012
 
LIABILITIES
           
Current liabilities:
           
Short-term borrowings
    99,878       231,838  
Current portion of long-term debt
    310,483       212,656  
Notes and accounts payable, trade
    758,680       633,598  
Accounts payable, other and accrued expenses
    1,073,241       1,033,596  
Accrued income and other taxes
    63,396       84,648  
Deposits from customers in the banking business
    1,761,137       1,868,439  
Other
    463,166       478,323  
     Total current liabilities
    4,529,981       4,543,098  
                 
Long-term debt
    762,226       942,592  
Accrued pension and severance costs
    309,375       310,990  
Deferred income taxes
    284,499       292,913  
Future insurance policy benefits and other
    3,208,843       3,450,383  
Policyholders’ account in the life insurance business
    1,449,644       1,585,375  
Other
    240,978       251,349  
Total liabilities
    10,785,546       11,376,700  
Redeemable noncontrolling interest
    20,014       2,936  
Commitments and contingent liabilities
               
                 
EQUITY
Sony Corporation’s stockholders’ equity:
Common stock, no par value –
At March 31, 2012–Shares authorized: 3,600,000,000, shares issued: 1,004,638,164
At December 31, 2012–Shares authorized: 3,600,000,000, shares issued: 1,004,638,164
   
 
 
 
  630,923
      630,923  
Additional paid-in capital
    1,160,236       1,126,927  
Retained earnings
    1,084,462       1,021,026  
Accumulated other comprehensive income –
               
   Unrealized gains on securities, net
    64,882       95,565  
 Unrealized losses on derivative instruments, net
    (1,050 )     (744 )
   Pension liability adjustment
    (186,833 )     (186,748 )
   Foreign currency translation adjustments
    (719,092 )     (670,322 )
      (842,093 )     (762,249 )
Treasury stock, at cost
               
Common stock
At March 31, 2012–1,061,803 shares
At December 31, 2012–1,033,043 shares
 
 
   
 
(4,637
 
)
   
 
 
(4,459
 
 
)
      2,028,891       2,012,168  
Noncontrolling interests
    461,216       469,241  
Total equity
    2,490,107       2,481,409  
                 
Total liabilities and equity
    13,295,667       13,861,045  

The accompanying notes are an integral part of these statements.

 
- 20 -

 

(ii)  Consolidated Statements of Income (Unaudited) 

Sony Corporation and Consolidated Subsidiaries
   
Yen in millions
 
   
Nine months ended December 31
 
   
2011
   
2012
 
Sales and operating revenue:
           
Net sales
    4,236,557       4,297,417  
Financial services revenue
    603,636       689,940  
Other operating revenue
    52,593       80,465  
      4,892,786       5,067,822  
Costs and expenses:
               
Cost of sales
    3,278,103       3,334,185  
Selling, general and administrative
    1,021,213       1,066,896  
Financial services expenses
    516,554       594,876  
Other operating (income) expense, net
    30,269       (14,855 )
      4,846,139       4,981,102  
Equity in net loss of affiliated companies
    (112,510 )     (3,765 )
Operating income (loss)
    (65,863 )     82,955  
Other income:
               
Interest and dividends
    9,084       11,597  
Gain on sale of securities investments, net
    643       184  
Other
    6,885       2,897  
      16,612       14,678  
Other expenses:
               
Interest
    17,544       20,831  
Loss on devaluation of securities investments
    3,155       7,477  
Foreign exchange loss, net
    7,436       5,812  
Other
    5,314       5,020  
      33,449       39,140  
Income (loss) before income taxes
    (82,700 )     58,493  
Income taxes
    74,807       67,917  
Net loss
    (157,507 )     (9,424 )
Less - Net income attributable to noncontrolling interests
    43,940       41,450  
Net loss attributable to Sony Corporation’s stockholders
    (201,447 )     (50,874 )

   
Yen
 
   
Nine months ended December 31
 
   
2011
   
2012
 
Per share data:
               
Net loss attributable to Sony Corporation’s stockholders
               
Basic
    (200.73 )     (50.69 )
Diluted
    (200.73 )     (50.69 )

The accompanying notes are an integral part of these statements.

 
- 21 -

 

Consolidated Statements of Income (Unaudited) 

Sony Corporation and Consolidated Subsidiaries
   
Yen in millions
 
   
Three months ended December 31
 
   
2011
   
2012
 
Sales and operating revenue:
           
Net sales
    1,588,421       1,660,703  
Financial services revenue
    219,374       265,578  
Other operating revenue
    15,081       21,699  
      1,822,876       1,947,980  
Costs and expenses:
               
Cost of sales
    1,262,557       1,282,776  
Selling, general and administrative
    355,674       388,687  
Financial services expenses
    186,421       230,746  
Other operating (income) expense, net
    1,155       (1,018 )
      1,805,807       1,901,191  
Equity in net loss of affiliated companies
    (108,797 )     (360 )
Operating income (loss)
    (91,728 )     46,429  
Other income:
               
Interest and dividends
    2,469       2,689  
Gain on sale of securities investments, net
    323       52  
Other
    1,613       879  
      4,405       3,620  
Other expenses:
               
Interest
    4,983       7,356  
Loss on devaluation of securities investments
    2,341       7,288  
Foreign exchange loss, net
    9,386       4,120  
Other
    1,881       1,855  
      18,591       20,619  
Income (loss) before income taxes
    (105,914 )     29,430  
Income taxes
    28,916       25,907  
Net income (loss)
    (134,830 )     3,523  
Less - Net income attributable to noncontrolling interests
    24,138       14,286  
Net loss attributable to Sony Corporation’s stockholders
    (158,968 )     (10,763 )


   
Yen
 
   
Three months ended December 31
 
   
2011
   
2012
 
Per share data:
          -  
Net loss attributable to Sony Corporation’s stockholders
             
Basic
    (158.40 )     (10.72 )
Diluted
    (158.40 )     (10.72 )

The accompanying notes are an integral part of these statements.

 
- 22 -

 

(iii)  Consolidated Statements of Comprehensive Income (Unaudited) 

Sony Corporation and Consolidated Subsidiaries
   
Yen in millions
 
   
Nine months ended December 31
 
   
2011
   
2012
 
Net loss
    (157,507 )     (9,424 )
Other comprehensive income, net of tax
               
Unrealized gains on securities
    9,798       39,176  
Unrealized gains on derivative instruments
    1,774       306  
Pension liability adjustment
    (957 )     (1,375 )
Foreign currency translation adjustments
    (115,610 )     46,605  
Total comprehensive income (loss)
    (262,502 )     75,288  
Less – Comprehensive income attributable to noncontrolling interests
    45,477       46,318  
Comprehensive income (loss) attributable to Sony Corporation's stockholders
    (307,979 )     28,970  

   
Yen in millions
 
   
Three months ended December 31
 
   
2011
   
2012
 
Net income (loss)
    (134,830 )     3,523  
Other comprehensive income, net of tax
               
Unrealized gains (losses) on securities
    (9,297 )     20,524  
Unrealized gains (losses) on derivative instruments
    (55 )     169  
Pension liability adjustment
    (3,035 )     (3,421 )
Foreign currency translation adjustments
    25,116       131,934  
Total comprehensive income (loss)
    (122,101 )     152,729  
Less – Comprehensive income attributable to noncontrolling interests
    19,635       15,628  
Comprehensive income (loss) attributable to Sony Corporation's stockholders
    (141,736 )     137,101  

The accompanying notes are an integral part of these statements.

 
- 23 -

 

 (iv)  Consolidated Statements of Cash Flows (Unaudited) 

Sony Corporation and Consolidated Subsidiaries
   
Yen in millions
 
   
Nine months ended December 31
 
   
2011
   
2012
 
Cash flows from operating activities:
           
 Net loss
    (157,507 )     (9,424 )
 Adjustments to reconcile net loss to net cash
               
provided by operating activities –
               
Depreciation and amortization, including amortization
     of deferred insurance acquisition costs
    244,283       242,221  
Amortization of film costs
    124,263       147,004  
  Stock-based compensation expense
    1,604       995  
    Accrual for pension and severance costs, less payments
    9,636       831  
    Other operating (income) expense, net
    30,269       (14,855 )
    Loss on sale or devaluation of securities investments, net
    2,512       7,293  

(Gain) loss on revaluation of marketable securities held in the
financial services business for trading purposes, net
    19,300       (19,265 )
Loss on revaluation or impairment of securities investments
held in the financial services business, net
    8,762       547  
    Deferred income taxes
    (53,716 )     6,737  
Equity in net loss of affiliated companies, net of dividends
    129,544       4,834  
    Changes in assets and liabilities:
               
     Increase in notes and accounts receivable, trade
    (150,924 )     (130,727 )
     Increase in inventories
    (7,055 )     (36,057 )
     Increase in film costs
    (136,785 )     (124,645 )
     Decrease in notes and accounts payable, trade
    (90,908 )     (123,181 )
     Increase in accrued income and other taxes
    31,466       19,587  
     Increase in future insurance policy benefits and other
    224,435       283,133  
     Increase in deferred insurance acquisition costs
    (53,961 )     (54,384 )
     Increase in marketable securities held in the
financial services business for trading purposes
    (25,595 )     (20,708 )
     (Increase) decrease in other current assets
    (22,904 )     34,417  
     Increase (decrease) in other current liabilities
    25,900       (40,125 )
    Other
    131,172       46,125  
          Net cash provided by operating activities
    283,791       220,353  

(Continued on following page.)

 
- 24 -

 

Consolidated Statements of Cash Flows (Unaudited) 

 
             
   
Yen in millions
 
   
Nine months ended December 31
 
   
2011
   
2012
 
Cash flows from investing activities:
           
Payments for purchases of fixed assets
    (272,614 )     (236,302 )
Proceeds from sales of fixed assets
    16,955       26,157  
Payments for investments and advances by financial service business
    (737,689 )     (779,259 )
Payments for investments and advances
 (other than financial services business)
    (16,907 )     (58,323 )
Proceeds from sales or return of investments and collections of advances
by financial services business
    372,619       269,826  
Proceeds from sales or return of investments and collections of advances
(other than financial services business)
    22,820       27,847  
Proceeds from sales of businesses
    2,502       52,756  
Other
    5,146       (23,722 )
          Net cash used in investing activities
    (607,168 )     (721,020 )
Cash flows from financing activities:
               
Proceeds from issuance of long-term debt
    18,961       149,767  
Payments of long-term debt
    (96,887 )     (235,444 )
Increase in short-term borrowings, net
    158,340       109,973  
Increase in deposits from customers in the financial services business, net
    111,494       197,809  
Proceeds from issuance of convertible bonds
          150,000  
Dividends paid
    (25,108 )     (25,072 )
Payment for purchase of So-net shares from noncontrolling interests
          (54,944 )
Other
    (7,305 )     (5,515 )
          Net cash provided by financing activities
    159,495       286,574  
Effect of exchange rate changes on cash and cash equivalents
    (48,822 )     17,546  
Net decrease in cash and cash equivalents
    (212,704 )     (196,547 )
Cash and cash equivalents at beginning of the fiscal year
    1,014,412       894,576  
Cash and cash equivalents at end of the period
    801,708       698,029  
                 
The accompanying notes are an integral part of these statements.

 
- 25 -

 

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

 
Notes to Consolidated Financial Statements
Page
 
1.
 
Summary of significant accounting policies
27
 
2.
 
Marketable securities and securities investments
29
 
3.
 
Fair value measurements
30
 
4.
 
Supplemental equity and comprehensive income information
32
 
5.
 
Thai Floods
33
 
6.
 
EMI Music Publishing investment
33
 
7.
 
Chemical products related business divestiture
33
 
8.
 
Acquisition of Gaikai
33
 
9.
 
Issuance of Zero Coupon Convertible Bonds
34
 
10.
 
Reconciliation of the differences between basic and diluted EPS
34
 
11.
 
Commitments, contingent liabilities and other
36
 
12.
 
Business segment information
38
 
13.
 
Subsequent events
46

 
- 26 -

 
 
Notes to Consolidated Financial Statements (Unaudited)
Sony Corporation and Consolidated Subsidiaries

 
1. Summary of significant accounting policies
 
The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except for certain disclosures which have been omitted.  Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with U.S. GAAP.  These adjustments were not recorded in the statutory books and records as Sony Corporation and its subsidiaries in Japan maintain their records and prepare their statutory 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.

(1)  Recently adopted accounting pronouncements:
 
Accounting for costs associated with acquiring or renewing insurance contracts -
 
In October 2010, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance for costs associated with acquiring or renewing insurance contracts.  Under the new guidance, acquisition costs are to include only those costs that are directly related to the acquisition or renewal of insurance contracts by applying a model similar to the accounting for loan origination costs.  An entity may defer incremental direct costs of contract acquisitions that are incurred in transactions with independent third parties or employees as well as the portion of employee compensation and other costs directly related to underwriting, policy issuance and processing, medical inspection, and contract selling for successfully negotiated contracts.  Additionally, an entity may capitalize as a deferred acquisition cost only those advertising costs meeting the capitalization criteria for direct-response advertising.  This guidance was effective for Sony as of April 1, 2012.  Sony applied this guidance prospectively from the date of adoption.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.
 
Testing goodwill for impairment -
 
In September 2011, the FASB issued a new standard to simplify how an entity tests goodwill for impairment.  The new standard allows companies an option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining if it is necessary to perform the two-step quantitative goodwill impairment test.  Under the new standard, a company is no longer required to calculate the fair value of a reporting unit unless the company determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.  The new standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  This standard was effective for Sony as of April 1, 2012.  The adoption of this standard did not have a material impact on Sony’s results of operations and financial position.
 
Presentation of comprehensive income -
 
In June 2011, the FASB issued new accounting guidance for the presentation of comprehensive income.  The amendments require reporting entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements.  This change is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and is applied retrospectively.  Subsequently, in December 2011, the FASB issued updated accounting guidance for deferral of the effective date for amendments to the presentation of reclassifications of items out of accumulated other comprehensive income.  The remaining requirements of the guidance issued in June 2011 become effective as originally issued.  The guidance was effective for Sony as of April 1, 2012.  Since this guidance impacts disclosures only, its adoption did not have an impact on Sony’s results of operations and financial position.
 
Impairment of film costs -
 
 
     In October 2012, the FASB issued new accounting guidance for the impairment of unamortized film costs.  The guidance has the effect of incorporating into the impairment analysis of unamortized film costs only information that was known or knowable as of the balance sheet date, consistent with how information is incorporated into other fair value measurements.  The new guidance is effective for Sony for impairment assessments performed on or after December 15, 2012.  Sony applied this guidance prospectively from the date of adoption.  The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.
 
 
- 27 -

 
 
(2)  
Change in depreciation method:
 

Effective April 1, 2012, Sony Corporation and its Japanese subsidiaries changed the depreciation method for property, plant and equipment, except for certain semiconductor manufacturing facilities and buildings whose depreciation is computed on the straight-line method, from the declining-balance method to the straight-line method.  Concurrently, estimated useful lives for certain assets were also changed.  Sony believes that the straight-line method better reflects the pattern of consumption of the estimated future benefits to be derived from those assets being depreciated and provides a better matching of costs and revenues over the assets’ estimated useful lives.

In accordance with the accounting guidance for a change in accounting estimate effected by a change in accounting principle, a change in depreciation method is treated on a prospective basis as a change in estimate and prior period results have not been restated.  The net effect of the changes caused a decrease in depreciation expense of 2,296 million yen and 7,529 million yen for the three and nine months ended December 31, 2012, respectively, which is primarily included in cost of sales in the consolidated statements of income.  Net loss attributable to Sony Corporation’s stockholders, basic net loss per share attributable to Sony Corporation’s stockholders and diluted net loss per share attributable to Sony Corporation’s stockholders decreased by 2,321 million yen, 2.31 yen and 2.31 yen, respectively, for the three months ended December 31, 2012, and decreased by 6,423 million yen, 6.40 yen and 6.40 yen, respectively, for the nine months ended December 31, 2012.

(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 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 is separately reported from the provision based on the ETR in the interim period in which they occur.

(4)  
Out of period adjustment:
 
In the first quarter of the fiscal year ended March 31, 2012, Sony recorded an out of period adjustment to correct an error in the calculation of indirect taxes at a subsidiary.  The indirect tax calculation error began in 2005 and continued until it was identified by Sony in the first quarter of the fiscal year ended March 31, 2012.  The adjustment, which primarily related to the Home Entertainment & Sound segment, impacted net sales, selling, general and administrative expenses and interest expenses and, in the aggregate, increased loss before income taxes in consolidated statements of income by 4,413 million yen for the nine months ended December 31, 2011.  Sony determined that the adjustment was not material to the consolidated financial statements for the three and nine months ended December 31, 2011 or any prior annual or interim periods and for the year ended March 31, 2012.

 
- 28 -

 

2. Marketable securities and securities investments

Marketable securities and securities investments, 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
 
   
March 31, 2012
   
December 31, 2012
 
   
Cost
   
Gross
unrealized
gains
   
Gross
unrealized
 losses
   
Fair value
   
Cost
   
Gross
unrealized
gains
   
Gross
 unrealized
losses
   
Fair value
 
                                                 
Available-for-sale:
                                               
Debt securities:
                                               
Japanese national
government bonds
    1,036,946       55,384       (879 )     1,091,451       1,106,460       71,562       (1,317 )     1,176,705  
                                                                 
Japanese local
government bonds
    33,513       163       (1 )     33,675       66,259       214       (3 )     66,470  
                                                                 
Japanese corporate
bonds
    293,885       1,489       (224 )     295,150       236,386       1,288       (141 )     237,533  
                                                                 
Foreign corporate bonds
    377,609       4,705       (7,063 )     375,251       425,755       10,344       (1,792 )     434,307  
                                                                 
Other
    22,383       1,548       (6 )     23,925       19,928       3,055             22,983  
      1,764,336       63,289       (8,173 )     1,819,452       1,854,788       86,463       (3,253 )     1,937,998  
                                                                 
Equity securities
    60,694       53,016       (1,513 )     112,197       58,892       68,513       (271 )     127,134  
                                                                 
Held-to-maturity
                                                               
securities:
                                                               
Japanese national
government bonds
    3,404,069       157,740       (4,499 )     3,557,310       3,744,628       164,835       (8,115 )     3,901,348  
                                                                 
Japanese local
government bonds
    12,592       277             12,869       8,234       317             8,551  
                                                                 
Japanese corporate bonds
    31,379       1,501             32,880       29,720       1,563       (2 )     31,281  
                                                                 
Foreign corporate bonds
    46,441       10             46,451       46,333       15             46,348  
 
    3,494,481       159,528       (4,499 )     3,649,510       3,828,915       166,730       (8,117 )     3,987,528  
 
                                                               
Total
    5,319,511       275,833       (14,185 )     5,581,159       5,742,595       321,706       (11,641 )     6,052,660  

 
- 29 -

 

3. Fair value measurements

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

   
Yen in millions
 
   
March 31, 2012
 
         
Presentation in the consolidated balance sheets
 
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Marketable securities
   
Securities investments
and other
   
Other
current assets/
liabilities
   
Other
 noncurrent assets/
liabilities
 
                                                 
Assets:
                                               
Trading securities
    214,036       219,455             433,491       433,491                    
Available-for-sale securities
                                                               
   Debt securities
                                                               
     Japanese national government bonds
          1,091,451             1,091,451       23,267       1,068,184              
     Japanese local government bonds
          33,675             33,675       1,405       32,270              
     Japanese corporate bonds
          293,637       1,513       295,150       123,434       171,716              
     Foreign corporate bonds
          359,960       15,291       375,251       75,764       299,487              
     Other
          23,616       309       23,925             23,925              
   Equity securities
    111,517       680             112,197             112,197              
Other investments *1
    5,475       4,592       73,451       83,518             83,518              
Derivative assets *2
          18,518             18,518                   18,513       5  
Total assets
    331,028       2,045,584       90,564       2,467,176       657,361       1,791,297       18,513       5  
Liabilities:
                                                               
Derivative liabilities *2
          41,218             41,218                   40,034       1,184  
Total liabilities
          41,218             41,218                   40,034       1,184  

 
- 30 -

 

   
Yen in millions
 
   
December 31, 2012
 
         
Presentation in the consolidated balance sheets
 
   
Level 1
   
Level 2
   
Level 3
   
Total
   
Marketable securities
   
Securities investments
and other
   
Other
current
 assets/
liabilities
   
Other
 noncurrent assets/
liabilities
 
                                                 
Assets: