6-K/A 1 sony6ka0810.htm


 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

FORM 6-K/A

 

REPORT OF FOREIGN PRIVATE ISSUER

 

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

For the month of August 2017

Commission File Number: 001-06439

 

SONY CORPORATION

(Translation of registrant's name into English)

 

1-7-1 KONAN, MINATO-KU, TOKYO, 108-0075, JAPAN

(Address of principal executive offices)

 

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

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F,

 

Form 20-F  X Form 40-F __

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, Yes No X

 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-______

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SONY CORPORATION
  (Registrant)
   
   
  By:  /s/  Kenichiro Yoshida
                  (Signature)
  Kenichiro Yoshida
  Executive Deputy President and
  Chief Financial Officer

 

 

Date: August 11, 2017

 
 

 

EXPLANATORY NOTE

 

This amendment (the “Amendment”) amends Sony Corporation’s (“Sony”) Form 6-K that was filed with the Securities and Exchange Commission (the “SEC”) on August 7, 2017 (the “Form 6-K”).

 

The Amendment amends Sony’s quarterly securities report for the three months ended June 30, 2017 (the “QSR”) as filed on the Form 6-K. Sony amended the QSR solely to correct a typographical error in the second table under “(2) Other Comprehensive Income” on page 27. The amounts reclassified out of accumulated other comprehensive income for the three months ended June 30, 2017 was “(637)”, not “–” as set forth in the table.

 

Other than as expressly set forth above, the Amendment does not revise, update or amend the information presented in the QSR filed on the Form 6-K.

 

 

 

 
 

 

 

 

Quarterly Securities Report 

For the three months ended June 30, 2017

 

(TRANSLATION)

 

Sony Corporation

 

 

 

 

 

 

 

 

 

 

CONTENTS

 

      Page
     

Note for readers of this English translation 

Cautionary Statement

 

1

1

       
I Corporate Information   3
  (1) Selected Consolidated Financial Data   3
  (2) Business Overview   4
       
II State of Business   5
  (1) Risk Factors   5
  (2) Material Contracts   5
  (3) Management’s Discussion and Analysis of Financial Condition, Results of Operations and Status of Cash Flows   5
       
III Company Information   8
  (1) Information on the Company’s Shares   8
  (2) Directors and Corporate Executive Officers   13
       
IV Financial Statements   14
  (1) Consolidated Financial Statements   15
  (2) Other Information   38

 

 

 

 

 

Note for readers of this English translation 

On August 7, 2017, Sony Corporation (the “Company” or “Sony Corporation”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended June 30, 2017 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 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 investors 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 investors should not place undue reliance on them. Investors 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 and political environment in which Sony operates and the economic and political 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 image sensors, game and network platforms, smartphones and televisions, 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 customer 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 and regulatory conditions;

(vi)changes in laws, regulations and government policies in the markets in which Sony operates, including those related to taxation and corporate social responsibility;

(vii)Sony’s ability to implement successful hardware, software, and content integration strategies, and to develop and implement successful sales and distribution strategies in light of new technologies and distribution platforms;

(viii)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);

(ix)Sony’s ability to maintain product quality and customer satisfaction with its products and services;

(x)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;

(xi)significant volatility and disruption in the global financial markets or a ratings downgrade;

(xii)Sony’s ability to forecast demands, manage timely procurement and control inventories;

(xiii)Sony’s reliance on external business partners, including for the procurement of parts, components, software and network services for its products or services, the manufacturing, supply and distribution of its products, and its other business operations;

 

 

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(xiv)the outcome of pending and/or future legal and/or regulatory proceedings;

(xv)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;

(xvi)the impact of changes in interest rates and 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;

(xvii)the ability of Sony, its third-party service providers or business partners to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sony’s business information, potential business disruptions or financial losses; and
(xviii)risks related to catastrophic disasters or similar events.

Risks and uncertainties also include the impact of any future events with material adverse impact.

 

 

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I    Corporate Information

 

(1) Selected Consolidated Financial Data

 

  Yen in millions, Yen per share amounts
  Three months ended June 30, 2016 Three months ended June 30, 2017 Fiscal year ended March 31, 2017
Sales and operating revenue 1,613,199 1,858,113 7,603,250
Operating income 56,192 157,611 288,702
Income before income taxes 57,016 148,894 251,619
Net income attributable to Sony Corporation’s stockholders 21,166 80,871 73,289
Comprehensive income (loss) (30,981) 106,734 143,652
Total equity 3,068,446 3,233,238 3,135,422
Total assets 16,381,745 18,138,219 17,660,556
Net income attributable to Sony Corporation’s stockholders per share of common stock, basic (yen) 16.78 64.03 58.07
Net income attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen) 16.44 62.70 56.89
Ratio of stockholders’ equity to total assets (%) 14.7 14.3 14.1
Net cash provided by operating activities 16,186 51,108 809,262
Net cash used in investing activities (219,178) (193,360) (1,253,973)
Net cash provided by (used in) financing activities (98,553) 165,674 452,302
Cash and cash equivalents at end of the period 631,074 984,165 960,142

 

Notes:

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

2.The Company reports equity in net income of affiliated companies as a component of operating income.

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.

 

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(2) Business Overview

 

There was no significant change in the business of Sony during the three months ended June 30, 2017.

  

Sony realigned its reportable segments effective from the first quarter of the fiscal year ending March 31, 2018. For further information on the realignment, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 8. Business segment information”.

 

As of June 30, 2017, the Company had 1,334 subsidiaries and 114 affiliated companies, of which 1,303 companies are consolidated subsidiaries (including variable interest entities) of the Company. The Company has applied the equity accounting method for 106 affiliated companies.

 

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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 15, 2017. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 15, 2017

https://www.sec.gov/Archives/edgar/data/313838/000119312517203939/d358485d20f.htm

 

(2) Material Contracts

 

There were no material contracts executed or determined to be executed during the three months ended June 30, 2017.

 

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 15, 2017.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 15, 2017

https://www.sec.gov/Archives/edgar/data/313838/000119312517203939/d358485d20f.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 period ended June 30, 2017, since it is the same as described in a press release previously submitted to the SEC. Please refer to “Consolidated Financial Results for the First Quarter Ended June 30, 2017” submitted to the SEC on Form 6-K on August 1, 2017.

 

URL: The press release titled “Consolidated Financial Results for the First Quarter Ended June 30, 2017”

https://www.sec.gov/Archives/edgar/data/313838/000115752317002195/a51599174.htm

 

Foreign Exchange Fluctuations and Risk Hedging

 

Note for readers of this English translation:

 

Except for the information set forth 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 15, 2017. Although foreign exchange rates have fluctuated during the three-month period ended June 30, 2017, there has been no significant change in Sony’s risk hedging policy as described in the Annual Report on Form 20-F.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 15, 2017

https://www.sec.gov/Archives/edgar/data/313838/000119312517203939/d358485d20f.htm

 

During the three months ended June 30, 2017, the average rates of the yen were 111.1 yen against the U.S. dollar, which is 2.7 percent lower than the same quarter of the previous fiscal year (“year-on-year”) and 122.1 yen against the euro, which remains unchanged year-on-year.

 

For the three months ended June 30, 2017, sales were 1,858.1 billion yen, an decrease of 15.2 percent year-on-year, while on a constant currency basis, sales decreased approximately 14 percent year-on-year. For references to information on a constant currency basis, see Note at the bottom of this section.

 

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Consolidated operating income of 157.6 billion yen was recorded for the three months ended June 30, 2017, an increase of 101.4 billion yen year-on-year (an increase of approximately 100.0 billion yen year-on-year on a constant currency basis). Most of the foreign exchange rate impact was attributable to the Mobile Communications (“MC”), Game & Network Services (“G&NS”), Imaging Products & Solutions (“IP&S”), Home Entertainment & Sound (“HE&S”) and Semiconductors segments.

 

The table below indicates the impact of changes in foreign exchange rates on sales and operating results of each of the above-mentioned five segments. For a detailed analysis of segment performance, please refer to the “Results of Operations” section above, which discusses the impact of foreign exchange rates within each segment.

 

  (Billions of yen)
  Impact of
changes in
foreign
exchange rates
Three months ended
June 30
2016 2017
MC Sales 185.9 181.2 +1.1
Operating income 0.4 3.6 +1.4
G&NS Sales 330.4 348.1 +4.0
Operating income 44.0 17.7 -2.4
IP&S Sales 122.2 155.6 +1.4
Operating income 7.5 23.2 -0.0
HE&S Sales 235.9 256.9 +4.1
Operating income 20.2 22.6 +0.2
Semiconductors Sales 144.4 204.3 +4.3
Operating income (loss) (43.5) 55.4 +2.5
           

In addition, sales for the Pictures segment increased 12.3 percent year-on-year to 205.8 billion yen, an approximately 9 percent increase on a constant currency (U.S. dollar) basis. In the Music segment, sales increased 18.8 percent year-on-year to 168.6 billion yen, an approximately 17 percent increase on a constant currency basis. As most of the operations in Sony’s Financial Services 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 impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s quarterly weighted average exchange rate for the three months ended June 30, 2016 from the three months ended June 30, 2017 to the major transactional currencies in which the sales are denominated. The impact of foreign exchange rate fluctuations on operating income (loss) described herein is calculated by subtracting from the impact on sales the impact on cost of sales and selling, general and administrative expenses calculated by applying the same major transactional currencies calculation process to cost of sales and selling, general and administrative expenses as for the impact on sales. Additionally, the MC segment enters into its own foreign exchange hedging transactions. The impact of those transactions is included in the impact of foreign exchange rate fluctuations on operating income (loss) for that segment. The descriptions of sales on a constant currency basis reflects sales obtained by applying the yen’s monthly average exchange rates from the three months ended June 30, 2016 to local currency-denominated monthly sales in the three months ended June 30, 2017. In the Pictures segment as well as Sony Music Entertainment and Sony/ATV Music Publishing LLC in the Music segment, the constant currency amounts are aggregated on a U.S. dollar basis. This information is not a substitute for Sony’s consolidated financial statements measured in accordance with U.S. GAAP. However, Sony believes that these disclosures provide 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 three-month period ended June 30, 2017, since it is the same as described in a press release previously submitted to the SEC. Please refer to “Consolidated Financial Results for the First Quarter Ended June 30, 2017” submitted to the SEC on Form 6-K on August 1, 2017.

 

URL: The press release titled “Consolidated Financial Results for the First Quarter Ended June 30, 2017”

https://www.sec.gov/Archives/edgar/data/313838/000115752317002195/a51599174.htm

 

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

 

Note for readers of this English translation:

 

There was no significant change from the information presented in the Trend Information section of the Annual Report on Form 20-F filed with the SEC on June 15, 2017. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 15, 2017

https://www.sec.gov/Archives/edgar/data/313838/000119312517203939/d358485d20f.htm

 

iii) Research and Development

 

Note for readers of this English translation:

 

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 15, 2017.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 15, 2017

https://www.sec.gov/Archives/edgar/data/313838/000119312517203939/d358485d20f.htm

 

Research and development costs for the three months ended June 30, 2017 totaled 101.8 billion yen. There were no significant changes in research and development activities for the period.

 

iv) Employees

 

Note for readers of this English translation:

 

Excluding the below, there was no significant change from the information presented in the Employees section of the Annual Report on Form 20-F filed with the SEC on June 15, 2017.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 15, 2017

https://www.sec.gov/Archives/edgar/data/313838/000119312517203939/d358485d20f.htm

 

As of June 30, 2017, Sony Corporation had 2,663 employees, a decrease of 3,522 employees from 6,185 employees as of March 31, 2017. The total number of employees decreased mainly due to the separation of its IP&S business. There is no significant change in the number of employees of Sony on the consolidated basis.

 

v) Liquidity and Capital Resources

 

Note for readers of this English translation:

 

Except for the information related to the committed lines of credit below, there was no significant change from the information presented in the Annual Report on Form 20-F filed with the SEC on June 15, 2017. The changes are indicated by underline below. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 15, 2017

https://www.sec.gov/Archives/edgar/data/313838/000119312517203939/d358485d20f.htm

 

Sony typically raises funds through straight bonds, CP programs and bank loans (including syndicated loans). If market disruption and volatility occur and 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 526.8 billion yen in unused committed lines of credit, as of June 30, 2017. Details of those committed lines of credit are: a 300.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, effective until July 2019, a 1.5 billion U.S. dollar multi-currency committed line of credit also with a syndicate of Japanese banks, effective until December 2018, and a 525 million U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks, effective until March 2018, in all of which Sony Corporation and Sony Global Treasury Services Plc are defined as borrowers. 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.

 

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III  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

first quarterly period

(June 30, 2017)

As of the filing date of

the Quarterly

Securities Report

(August 7, 2017)

Common stock 1,264,209,060 1,264,389,760

Tokyo Stock Exchange

New York Stock Exchange

The number of shares constituting one full unit is one hundred (100).
Total 1,264,209,060 1,264,389,760

Notes:

1.The Company’s shares of common stock are listed on the First Section of the Tokyo Stock 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 August 2017, the month in which this Quarterly Securities Report (Shihanki Houkokusho) was filed.

3.On July 18, 2017, the Company issued 155,000 new shares of restricted stock as compensation pursuant to the decision of the Representative Corporate Executive Officer dated June 30, 2017, which was made under the authority delegated by resolutions of the Board of Directors.

 

ii) Stock Acquisition Rights

Not applicable.

 

Note for readers of this English translation:

 

The above means that there was no issuance of SARs during the three months ended June 30, 2017.

 

iii) Status of the Exercise of Moving Strike Convertible Bonds

Not applicable.

 

iv) Description of Rights Plan

Not applicable.

 

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v) 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 April 1 to June 30, 2017 445 1,264,209 717 861,362 717 1,075,055

Notes:

1.The increase is due to the exercise of SARs.

2.Upon the exercise of SARs during the period from July 1, 2017 to July 31, 2017 the total number of shares issued increased by 26 thousand shares, and the amount of common stock and the legal capital surplus increased by 49 million yen, respectively.

3.Upon the issuance of new shares of restricted stock as compensation on July 18, 2017, the total number of shares issued increased by 155 thousand shares, and the amount of common stock and the legal capital surplus increased by 338 million yen, respectively.

 

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vi) Status of Major Shareholders

(As of June 30, 2017)

Name Address

Number of
shares held

(Thousands)

Percentage

of shares held
to total shares
issued (%)

Citibank as Depositary Bank for Depositary Receipt Holders *1

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

New York, U.S.A.

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

Tokyo)

105,897 8.38

JPMorgan Chase Bank 380055 *2

(Local Custodian: Mizuho Bank, Ltd.)

New York, U.S.A.

(Shinagawa Intercity Tower A, 2-15-1, Konan, Minato-ku, Tokyo)

85,745 6.78
Japan Trustee Services Bank, Ltd.
(Trust account) *3
1-8-11, Harumi, Chuo-ku, Tokyo 67,349 5.33
The Master Trust Bank of Japan, Ltd.
(Trust account) *3

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

Tokyo

66,898 5.29

State Street Bank and Trust Company *2

(Local Custodian: The Hongkong and Shanghai

Banking Corporation Limited)

Boston, U.S.A.

(3-11-1, Nihonbashi, Chuo-ku,

Tokyo)

32,108 2.54

Japan Trustee Services Bank, Ltd.

( Trust account 5) *3

1-8-11, Harumi, Chuo-ku, Tokyo 26,006 2.06

State Street Bank and Trust Company 505223 *2

(Local Custodian: Mizuho Bank, Ltd.)

Boston, U.S.A.

(Shinagawa Intercity Tower A, 2-15-1, Konan, Minato-ku, Tokyo)

20,504 1.62

State Street Bank West Client - Treaty 505234 *2

(Local Custodian: Mizuho Bank, Ltd.)

North Quincy, U.S.A.

(Shinagawa Intercity Tower A, 2-15-1, Konan, Minato-ku, Tokyo)

20,396 1.61
Japan Trustee Services Bank, Ltd.
(Trust account 1) *3
1-8-11, Harumi, Chuo-ku, Tokyo 19,347 1.53
Japan Trustee Services Bank, Ltd.
(Trust account 2) *3
1-8-11, Harumi, Chuo-ku, Tokyo 19,137 1.51
Total 463,387 36.65
Notes:

*1.Citibank as Depositary Bank for Depositary Receipt Holders is the nominee of Citibank, N.A.

*2.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.

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

4.Sumitomo Mitsui Trust Bank, Limited sent a copy of its “Bulk Shareholding Report” (which was filed with the Kanto Financial Bureau in Japan) to the Company as of April 4, 2014 and reported that it held shares, etc. of the Company as of March 31, 2014 as provided in the below table. As of June 30, 2017, the Company has not been able to confirm such entry of Sumitomo Mitsui Trust Bank, Limited in the register of shareholders.

Name

Number of shares, etc. held

(Thousands)

Percentage of shares, etc. held

to total shares issued (%)

Sumitomo Mitsui Trust Bank, Limited and the 2 Joint Holders 52,312 5.04

 

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5.BlackRock Japan Co., Ltd. filed its “Amendment to the Bulk Shareholding Report” with the Kanto Financial Bureau in Japan as of March 22, 2017 and reported that it held shares of the Company as of March 15, 2017 as provided in the below table. As of June 30, 2017, the Company has not been able to confirm such entry of BlackRock Japan Co., Ltd. in the register of shareholders.

Name

Number of shares held

(Thousands)

Percentage of shares held

to total shares issued (%)

BlackRock Japan Co., Ltd. and the 8 Joint Holders 79,185 6.27

 

6.Capital Research and Management Company filed its “Amendment to the Bulk Shareholding Report” with the Kanto Financial Bureau in Japan as of April 7, 2017 and reported that it held shares of the Company as of March 31, 2017 as provided in the below table. As of June 30, 2017, the Company has not been able to confirm such entry of Capital Research and Management Company in the register of shareholders.

Name

Number of shares held

(Thousands)

Percentage of shares held

to total shares issued (%)

Capital Research and Management Company 90,945 7.20

 

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vii) Status of Voting Rights 

1) Shares Issued

(As of June 30, 2017) 

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.) 

1,082,200
Shares with full voting rights (Others) 1,261,035,500 12,610,355
Shares constituting less than one full unit 2,091,360

Shares constituting less than one full unit 

(100 shares) 

Total number of shares issued 1,264,209,060
Total voting rights held by all shareholders 12,610,355
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 June 30, 2017) 

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 1,082,200 1,082,200 0.09
Total 1,082,200  — 1,082,200 0.09
Note:In addition to the 1,082,200 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.

 

 - 12 -

 

 

(2)     Directors and Corporate Executive Officers

 

There was no 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, 2017 to the filing date of this Quarterly Securities Report (Shihanki Houkokusho).

 

 - 13 -

 

 

IV    Financial Statements

 

  Page
 
(1) Consolidated Financial Statements 15
  (i) Consolidated Balance Sheets 15
  (ii) Consolidated Statements of Income 17
  (iii) Consolidated Statements of Comprehensive Income 18
  (iv) Consolidated Statements of Cash Flows 19
(2) Other Information 38

- 14 -

 

 


(1) Consolidated Financial Statements 

 

(i)  Consolidated Balance Sheets (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

   Yen in millions 
   At March 31,
2017
   At June 30,
2017
 
ASSETS        
Current assets:          
Cash and cash equivalents   960,142    984,165 
Marketable securities   1,051,441    1,098,894 
Notes and accounts receivable, trade   1,006,961    1,075,304 
Allowance for doubtful accounts and sales returns   (53,150)   (48,627)
Inventories   640,835    728,124 
Other receivables   223,632    254,852 
Prepaid expenses and other current assets   525,861    566,326 
Total current assets   4,355,722    4,659,038 
Film costs   336,928    352,128 
Investments and advances:          
Affiliated companies   149,371    150,263 
Securities investments and other   9,962,422    10,141,062 
    10,111,793    10,291,325 
Property, plant and equipment:          
Land   117,293    117,180 
Buildings   666,381    670,453 
Machinery and equipment   1,842,852    1,848,760 
Construction in progress   28,779    35,934 
    2,655,305    2,672,327 
Less – Accumulated depreciation   1,897,106    1,915,217 
    758,199    757,110 
Other assets:          
Intangibles, net   584,185    576,217 
Goodwill   522,538    525,920 
Deferred insurance acquisition costs   568,837    578,186 
Deferred income taxes   98,958    75,775 
Other   323,396    322,520 
    2,097,914    2,078,618 
Total assets   17,660,556    18,138,219 

(Continued on following page.)

- 15 -

 

 

Consolidated Balance Sheets (Unaudited)

 

   Yen in millions 
   At March 31,
2017
   At June 30,
2017
 
LIABILITIES        
Current liabilities:          
Short-term borrowings   464,655    534,092 
Current portion of long-term debt   53,424    204,275 
Notes and accounts payable, trade   539,900    676,663 
Accounts payable, other and accrued expenses   1,394,758    1,312,946 
Accrued income and other taxes   106,037    117,048 
Deposits from customers in the banking business   2,071,091    2,103,944 
Other   591,874    589,113 
Total current liabilities   5,221,739    5,538,081 
Long-term debt   681,462    601,540 
Accrued pension and severance costs   396,715    399,383 
Deferred income taxes   432,824    430,614 
Future insurance policy benefits and other   4,834,492    4,921,431 
Policyholders’ account in the life insurance business   2,631,073    2,699,854 
Other   314,771    301,837 
Total liabilities   14,513,076    14,892,740 
Redeemable noncontrolling interest   12,058    12,241 
Commitments and contingent liabilities          
EQUITY          
Sony Corporation’s stockholders’ equity:          
Common stock, no par value –          
At March 31, 2017–Shares authorized: 3,600,000,000, shares issued: 1,263,763,660   860,645      
At June 30, 2017–Shares authorized: 3,600,000,000, shares issued: 1,264,209,060        861,362 
Additional paid-in capital   1,275,337    1,276,718 
Retained earnings   984,368    1,065,238 
Accumulated other comprehensive income –          
Unrealized gains on securities, net   126,635    123,692 
Unrealized losses on derivative instruments, net   (58)   (423)
Pension liability adjustment   (308,736)   (306,437)
Foreign currency translation adjustments   (436,610)   (423,916)
    (618,769)   (607,084)
Treasury stock, at cost          
Common stock          
At March 31, 2017–1,073,222 shares   (4,335)     
At June 30, 2017–1,082,243 shares        (4,371)
    2,497,246    2,591,863 
Noncontrolling interests   638,176    641,375 
Total equity   3,135,422    3,233,238 
Total liabilities and equity   17,660,556    18,138,219 

The accompanying notes are an integral part of these statements.

- 16 -

 

 

(ii)  Consolidated Statements of Income (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

   Yen in millions 
   Three months ended June 30 
   2016   2017 
Sales and operating revenue:          
Net sales   1,362,517    1,528,643 
Financial services revenue   230,909    301,360 
Other operating revenue   19,773    28,110 
    1,613,199    1,858,113 
Costs and expenses:          
Cost of sales   1,015,623    1,115,092 
Selling, general and administrative   338,097    357,379 
Financial services expenses   181,631    255,258 
Other operating (income) expense, net   20,873    (26,111)
    1,556,224    1,701,618 
Equity in net income (loss) of affiliated companies   (783)   1,116 
Operating income   56,192    157,611 
Other income:          
Interest and dividends   3,227    8,785 
Foreign exchange gain, net   1,615     
Other   1,102    1,133 
    5,944    9,918 
Other expenses:          
Interest   3,801    4,516 
Foreign exchange loss, net       12,968 
Other   1,319    1,151 
    5,120    18,635 
Income before income taxes   57,016    148,894 
Income taxes   20,475    54,496 
Net income   36,541    94,398 
Less - Net income attributable to noncontrolling interests   15,375    13,527 
Net income attributable to Sony Corporation’s stockholders   21,166    80,871 

 

   Yen 
   Three months ended June 30 
   2016   2017 
Per share data:      
Net income attributable to Sony Corporation’s stockholders          
– Basic   16.78    64.03 
– Diluted   16.44    62.70 

The accompanying notes are an integral part of these statements.

 

- 17 -

 

 

(iii)  Consolidated Statements of Comprehensive Income (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

   Yen in millions 
   Three months ended June 30 
   2016   2017 
Net income   36,541    94,398 
Other comprehensive income, net of tax ―          
Unrealized gains (losses) on securities   20,395    (3,189)
Unrealized losses on derivative instruments   (145)   (365)
Pension liability adjustment   3,226    2,305 
Foreign currency translation adjustments   (90,998)   13,585 
Total comprehensive income (loss)   (30,981)   106,734 
Less – Comprehensive income attributable to noncontrolling interests   25,000    14,178 
Comprehensive income (loss) attributable to Sony Corporation’s stockholders   (55,981)   92,556 

The accompanying notes are an integral part of these statements.

- 18 -

 

 

(iv)  Consolidated Statements of Cash Flows (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

   Yen in millions 
   Three months ended June 30 
   2016   2017 
Cash flows from operating activities:          
Net income   36,541    94,398 
Adjustments to reconcile net income to net cash provided by operating activities –          
Depreciation and amortization, including amortization of deferred insurance acquisition costs   93,557    83,263 
Amortization of film costs   61,229    79,318 
Accrual for pension and severance costs, less payments   3,449    2,067 
Other operating (income) expense, net   20,873    (26,111)
(Gain) loss on sale or devaluation of securities investments, net   (72)   44 
(Gain) loss on revaluation of marketable securities held in the financial services business for trading purposes, net   47,138    (39,151)
Loss on revaluation or impairment of securities investments held in the financial services business, net   2    46 
Deferred income taxes   (266)   9,833 
Equity in net loss of affiliated companies, net of dividends   2,533    256 
Changes in assets and liabilities:          
Increase in notes and accounts receivable, trade   (80,709)   (68,488)
Increase in inventories   (75,044)   (83,354)
Increase in film costs   (98,223)   (94,966)
Increase in notes and accounts payable, trade   76,274    134,162 
Increase (decrease) in accrued income and other taxes   (2,776)   4,021 
Increase in future insurance policy benefits and other   55,216    137,960 
Increase in deferred insurance acquisition costs   (20,528)   (21,617)
Increase in marketable securities held in the financial services business for trading purposes   (26,702)   (12,944)
Increase in other current assets   (75,600)   (54,957)
Decrease in other current liabilities   (62,884)   (92,573)
Other   62,178    (99)
Net cash provided by operating activities   16,186    51,108 

(Continued on following page.)

 

 

- 19 -

 

 

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

   Yen in millions 
   Three months ended June 30 
   2016   2017 
Cash flows from investing activities:          
Payments for purchases of fixed assets   (106,002)   (56,663)
Proceeds from sales of fixed assets   1,829    3,257 
Payments for investments and advances by financial services business   (205,729)   (256,254)
Payments for investments and advances (other than financial services business)   (2,585)   (4,442)
Proceeds from sales or return of investments and collections of advances by financial services business   88,144    94,201 
Proceeds from sales or return of investments and collections of advances (other than financial services business)   2,383    2,363 
Proceeds from sales of businesses       9,378 
Other   2,782    14,800 
Net cash used in investing activities   (219,178)   (193,360)
Cash flows from financing activities:          
Proceeds from issuance of long-term debt   1,031    71,316 
Payments of long-term debt   (48,607)   (4,173)
Increase (decrease) in short-term borrowings, net   (34,895)   70,684 
Increase in deposits from customers in the financial services business, net   12,406    49,827 
Dividends paid   (12,679)   (12,687)
Other   (15,809)   (9,293)
Net cash provided by (used in) financing activities   (98,553)   165,674 
Effect of exchange rate changes on cash and cash equivalents   (50,993)   601 
Net increase (decrease) in cash and cash equivalents   (352,538)   24,023 
Cash and cash equivalents at beginning of the fiscal year   983,612    960,142 
Cash and cash equivalents at end of the period   631,074    984,165 

The accompanying notes are an integral part of these statements.

 

- 20 -

 

 

Index to Notes to Consolidated Financial Statements

 

Sony Corporation and Consolidated Subsidiaries

 

Notes to Consolidated Financial Statements Page
       
  1. Summary of significant accounting policies 22
  2. Marketable securities and securities investments 23
  3. Fair value measurements 24
  4. Supplemental equity and comprehensive income information 26
  5. Reconciliation of the differences between basic and diluted EPS 28
  6. Sale of equity interest in Sony Electronics Huanan Co., Ltd. 28
  7. Commitments, contingent liabilities and other 29
  8. Business segment information 31

- 21 -

 

 

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 required by U.S. GAAP for interim periods 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)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 it occurs.

 

(2)Reclassifications:

 

Certain reclassifications of the financial statements and accompanying footnotes for the three months ended June 30, 2016 have been made to conform to the presentation for the three months ended June 30, 2017.

 

- 22 -

 

 

2.Marketable securities and securities investments

 

Marketable securities and securities investments, primarily included in the Financial Services segment, are comprised of debt and equity securities for 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, 2017  June 30, 2017
   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
   1,161,493    182,836    (928)   1,343,401    1,152,719    179,348    (894)   1,331,173 
                                         
Japanese local
government bonds
   60,450    144    (63)   60,531    65,815    94    (100)   65,809 
                                         
Japanese corporate
bonds
   163,785    7,864    (1,846)   169,803    175,252    7,209    (1,849)   180,612 
                                         
Foreign
government bonds
   27,601    359    (918)   27,042    29,517    833    (563)   29,787 
                                         
Foreign corporate bonds   396,097    4,168    (719)   399,546    400,917    2,817    (682)   403,052 
                                         
Other   15,192        (0)   15,192    73,711    0    (0)   73,711 
    1,824,618    195,371    (4,474)   2,015,515    1,897,931    190,301    (4,088)   2,084,144 
                                         
Equity securities   55,928    69,937    (377)   125,488    55,818    69,617    (271)   125,164 
                                         
Held-to-maturity securities:                                        
Japanese national
government bonds *
   5,661,191    1,520,904    (30,553)   7,151,542    5,691,914    1,484,650    (35,405)   7,141,159 
                                         
Japanese local
government bonds
   4,101    449        4,550    4,040    435        4,475 
                                         
Japanese corporate
bonds
   230,011    12,346    (22,071)   220,286    271,230    11,842    (24,954)   258,118 
                                         
Foreign
government bonds
   253,019    5,269    (22,868)   235,420    275,209    10,237    (15,845)   269,601 
                                         
Foreign corporate bonds   198    18        216    198    17        215 
    6,148,520    1,538,986    (75,492)   7,612,014    6,242,591    1,507,181    (76,204)   7,673,568 
                                         
Total   8,029,066    1,804,294    (80,343)   9,753,017    8,196,340    1,767,099    (80,563)   9,882,876 

 

* As of June 30, 2017, held-to-maturity securities include 279,434 million yen of pledged Japanese national government bonds as collateral for transactions with short-term repurchase agreement.

 

- 23 -

 

 

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, 2017 
                 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   611,108    310,212        921,320    921,320             
Available-for-sale securities                                        
  Debt securities                                        
Japanese national government bonds       1,343,401        1,343,401    18,483    1,324,918         
Japanese local government bonds       60,531        60,531    8,518    52,013         
Japanese corporate bonds       168,493    1,310    169,803    8,433    161,370         
Foreign government bonds       27,042        27,042    1,007    26,035         
Foreign corporate bonds       358,369    41,177    399,546    86,708    312,838         
Other           15,192    15,192        15,192         
  Equity securities   125,306    182        125,488        125,488         
Other investments *1   6,589    4,525    10,483    21,597        21,597         
Derivative assets *2, *3   981    26,279        27,260            25,409    1,851 
Total assets   743,984    2,299,034    68,162    3,111,180    1,044,469    2,039,451    25,409    1,851 
Liabilities:                                        
Derivative liabilities*2,*3   520    33,930        34,450            15,743    18,707 
Total liabilities   520    33,930        34,450            15,743    18,707 

 

- 24 -

 

 

   Yen in millions 
   June 30, 2017 
                   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   655,582    315,099        970,681    970,681             
Available-for-sale securities                                        
Debt securities                                        
Japanese national government bonds       1,331,173        1,331,173    16,998    1,314,175         
Japanese local government bonds       65,809        65,809    10,389    55,420         
Japanese corporate bonds       180,612        180,612    8,712    171,900         
Foreign government bonds       29,787        29,787        29,787         
Foreign corporate bonds       363,288    39,764    403,052    86,595    316,457         
Other           73,711    73,711        73,711         
Equity securities   124,972    192        125,164        125,164         
Other investments *1   6,846    4,823    10,299    21,968        21,968         
Derivative assets *2, *3   1,154    24,821        25,975            24,002    1,973 
Total assets   788,554    2,315,604    123,774    3,227,932    1,093,375    2,108,582    24,002    1,973 
Liabilities:                                        
Derivative liabilities*2,*3   131    43,359        43,490            24,819    18,671 
Total liabilities   131    43,359        43,490            24,819    18,671 

 

*1 Other investments include certain hybrid financial instruments and certain private equity investments.

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

*3 The potential effect of offsetting on assets and liabilities, which primarily consists of derivatives subject to master netting agreements and/or collateral, is insignificant.

 

- 25 -

 

 

4.Supplemental equity and comprehensive income information

 

(1) Stockholders’ Equity

 

A reconciliation of the beginning and ending carrying amounts of Sony Corporation’s stockholders’ equity, noncontrolling interests and the total equity for the three months ended June 30, 2016 and 2017 are as follows:

 

       Yen in millions     
   Sony Corporation’s
stockholders’ equity
   Noncontrolling
interests
   Total equity 
Balance at March 31, 2016   2,463,340    661,070    3,124,410 
Exercise of stock acquisition rights   268        268 
Stock-based compensation   568        568 
Comprehensive income:               
Net income   21,166    15,375    36,541 
Other comprehensive income, net of tax ―               
Unrealized gains on securities   9,029    11,366    20,395 
Unrealized losses on derivative instruments   (145)       (145)
Pension liability adjustment   3,216    10    3,226 
Foreign currency translation adjustments   (89,247)   (1,751)   (90,998)
Total comprehensive income (loss)   (55,981)   25,000    (30,981)
Dividends declared       (16,434)   (16,434)

Transactions with noncontrolling interests shareholders and other

   (26)   (9,359)   (9,385)
Balance at June 30, 2016   2,408,169    660,277    3,068,446 

 

       Yen in millions     
   Sony Corporation’s
stockholders’ equity
   Noncontrolling
interests
   Total equity 
Balance at March 31, 2017   2,497,246    638,176    3,135,422 
Exercise of stock acquisition rights   1,434        1,434 
Stock-based compensation   530        530 
Comprehensive income:               
Net income   80,871    13,527    94,398 
Other comprehensive income, net of tax ―               
Unrealized losses on securities   (2,943)   (246)   (3,189)
Unrealized losses on derivative instruments   (365)       (365)
Pension liability adjustment   2,299    6    2,305 
Foreign currency translation adjustments   12,694    891    13,585 
Total comprehensive income   92,556    14,178    106,734 
Dividends declared       (12,134)   (12,134)

Transactions with noncontrolling interests shareholders and other 

   97    1,155    1,252 
Balance at June 30, 2017   2,591,863    641,375    3,233,238 

 

There was no material effect of changes in Sony Corporation’s ownership interest in its subsidiaries on Sony Corporation’s stockholders’ equity for the three months ended June 30, 2016 and 2017.

 

 - 26 -

 

(2)  Other Comprehensive Income

 

Changes in accumulated other comprehensive income, net of tax by component for the three months ended June 30, 2016 and 2017 are as follows:

 

   Yen in millions 
   Unrealized
gains (losses)
on securities
   Unrealized
gains (losses)
on derivative
instruments
   Pension
liability
adjustment
   Foreign
currency
translation
adjustments
   Total 
Balance at March 31, 2016   140,736    (1,198)   (371,739)   (421,117)   (653,318)

Other comprehensive
income (loss) before reclassifications 

   21,571    (2,628)   (35)   (90,998)   (72,090)

Amounts reclassified out of accumulated other comprehensive income 

   (1,176)   2,483    3,261        4,568 

Net current-period other comprehensive income (loss) 

   20,395    (145)   3,226    (90,998)   (67,522)

Less: Other comprehensive income (loss) attributable to noncontrolling interests 

   11,366        10    (1,751)   9,625 
Balance at June 30, 2016   149,765    (1,343)   (368,523)   (510,364)   (730,465)

 

   Yen in millions 
   Unrealized gains (losses) on securities   Unrealized gains (losses) on derivative instruments   Pension liability adjustment   Foreign currency translation adjustments   Total 
Balance at March 31, 2017   126,635    (58)   (308,736)   (436,610)   (618,769)

Other comprehensive income (loss) before reclassifications 

   (2,914)   (627)   (44)   14,222    10,637 

Amounts reclassified out of accumulated other comprehensive income 

   (275)   262    2,349    (637)   1,699 

Net current-period other comprehensive income (loss) 

   (3,189)   (365)   2,305    13,585    12,336 

Less: Other comprehensive income (loss) attributable to noncontrolling interests 

   (246)       6    891    651 
Balance at June 30, 2017   123,692    (423)   (306,437)   (423,916)   (607,084)

 

 - 27 -

 

5.Reconciliation of the differences between basic and diluted EPS

 

Reconciliation of the differences between basic and diluted net income attributable to Sony Corporation’s stockholders per share (“EPS”) for three months ended June 30, 2016 and 2017 is as follows:

 

   Yen in millions 
   Three months ended June 30 
   2016   2017 

Net income attributable to Sony Corporation’s stockholders for basic and diluted EPS computation 

   21,166    80,871 

 

   Thousands of shares 
Weighted-average shares outstanding   1,261,523    1,262,920 
Effect of dilutive securities:          
Stock acquisition rights   1,730    3,000 
Zero coupon convertible bonds   23,962    23,962 
Weighted-average shares for diluted EPS computation   1,287,215    1,289,882 

 

   Yen 
Basic EPS   16.78    64.03 
Diluted EPS   16.44    62.70 

 

Potential shares of common stock which were excluded from the computation of diluted EPS for the three months ended June 30, 2016 and 2017 were 9,679 thousand shares and 5,658 thousand shares, respectively. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the three months ended June 30, 2016 and 2017 when the exercise price for those shares was in excess of the average market value of Sony’s common stock for the period. The zero coupon convertible bonds issued in July 2015 were included in the diluted EPS calculation under the if-converted method beginning upon issuance.

 

6.Sale of equity interest in Sony Electronics Huanan Co., Ltd.

 

On April 1, 2017, Sony transferred all of the equity interest in Sony Electronics Huanan Co., Ltd. (“SEH”), a wholly-owned subsidiary in the Semiconductors segment that manufactures camera modules, to Shen Zhen O-Film Tech Co., Ltd. The consideration for the transfer was approximately 234 million U.S. dollars, including the assumption of SEH’s debt and the sales price of approximately 95 million U.S. dollars, all of which is subject to customary post-closing adjustments. As the result of the transfer, Sony recognized a gain on transfer totaling 27,529 million yen in other operating (income) expense, net in the consolidated statement of income for the three months ended June 30, 2017.

 

 - 28 -

 

7.Commitments, contingent liabilities and other

 

(1)Loan commitments

 

Subsidiaries in the Financial Services segment have entered into loan agreements with their customers in accordance with the condition of the contracts. As of June 30, 2017, the total unused portion of the lines of credit extended under these contracts was 31,771 million yen. The aggregate amounts of future year-by-year payments for these loan commitments cannot be determined.

 

(2)Purchase commitments and other

 

Purchase commitments and other outstanding commitments as of June 30, 2017 amounted to 346,118 million yen. The major components of these commitments are as follows:

 

Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of motion pictures and television programming as well as agreements with third parties to acquire completed motion pictures, or certain rights therein, and to acquire the rights to broadcast certain live action sporting events. These agreements cover various periods mainly within two years. As of June 30, 2017, these subsidiaries were committed to make payments under such contracts of 129,142 million yen.

 

Certain subsidiaries in the Music segment have entered into long-term contracts with recording artists, songwriters and companies for the future production, distribution and/or licensing of music product. These contracts cover various periods mainly within five years. As of June 30, 2017, these subsidiaries were committed to make payments of 61,686 million yen under such long-term contracts.

 

A subsidiary in the Game & Network Services segment has entered into long-term contracts for programming content. These contracts cover various periods mainly within two years. As of June 30, 2017, this subsidiary was committed to make payments of 14,427 million yen under such long-term contracts.

 

Sony has entered into long-term sponsorship contracts related to advertising and promotional rights. These contracts cover various periods mainly within one year. As of June 30, 2017, Sony has committed to make payments of 5,107 million yen under such long-term contracts.

 

(3)Litigation

 

Beginning in 2009, the U.S. Department of Justice (“DOJ”), the European Commission and certain other governmental agencies outside the United States have conducted investigations relating to competition in the optical disk drives market. Sony Corporation and/or certain of its subsidiaries have been subject to these investigations. Sony understands that the investigations of several agencies, including the DOJ, have ended, and only one agency continues to investigate. However, proceedings initiated by the European Commission as a result of its investigation continue. In October 2015, the European Commission adopted a decision in which it fined Sony Corporation and certain of its subsidiaries 31 million euros; however, Sony filed an appeal against the decision with the European Union’s General Court. In addition, a number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Certain of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States; however, certain other lawsuits continue. Based on the stage of the pending proceedings, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

 

Beginning in 2011, the DOJ, the European Commission and certain other governmental agencies outside the United States conducted investigations relating to competition in the secondary batteries market. Sony Corporation and/or certain of its subsidiaries were subject to these investigations. Sony understands that the investigations by these agencies, including the DOJ and the European Commission, have ended or are no longer active. With respect to the investigation by the European Commission, in December 2016, Sony and certain of its subsidiaries reached a settlement with the European Commission to pay a fine of approximately 29.8 million euros. In addition, a number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Certain of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States; however, certain other lawsuits continue. Based on the stage of the pending proceedings, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

 

In addition, Sony Corporation and certain of its subsidiaries are defendants or otherwise involved in other pending legal and regulatory proceedings. However, based upon the information currently available, Sony believes that the outcome from such legal and regulatory proceedings would not have a material impact on Sony’s results of operations and financial position.

 

29 - 

 

 

(4)Guarantees

 

Sony has issued guarantees that contingently require payments to guaranteed parties if certain specified events or conditions occur. The maximum potential amount of future payments under these guarantees as of June 30, 2017 amounted to 3,457 million yen.

  

30 - 

 

 

8.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. The CODM does not evaluate segments using discrete asset information. Sony’s CODM is its Chief Executive Officer and President.

 

Sony realigned its business segments from the first quarter of the fiscal year ending March 31, 2018. As a result of this realignment, the operation of the former Components segment is now included in All Other. In connection with this realignment, the sales and operating revenue and operating income (loss) of each segment for the comparable period have been reclassified to conform to the current presentation.

 

The Mobile Communications (“MC”) segment includes the manufacture and sales of mobile phones and an Internet-related service businesses. The Game & Network Services (“G&NS”) segment includes the manufacture and sales of home gaming products, network services businesses and production and sales of software. The Imaging Products & Solutions (“IP&S”) segment includes the Still and Video Cameras business. The Home Entertainment & Sound (“HE&S”) segment includes Televisions as well as Audio and Video businesses. The Semiconductors segment includes the image sensors business. The Pictures segment includes the Motion Pictures, Television Productions and Media Networks businesses. The Music segment includes the Recorded Music, Music Publishing and Visual Media and Platform businesses. The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market and a bank business in Japan. All Other consists of various operating activities, including the overseas disc manufacturing, recording media and battery businesses. Sony’s products and services are generally unique to a single operating segment.

 

31 - 

 

 


Business segments -

 

Segment sales and operating revenue:

 

   Yen in millions 
   Three months ended June 30 
   2016   2017 
Sales and operating revenue:          
Mobile Communications -          
Customers   184,868    179,066 
Intersegment   1,055    2,121 
Total   185,923    181,187 
Game & Network Services -          
Customers   310,768    323,051 
Intersegment   19,611    25,011 
Total   330,379    348,062 
Imaging Products & Solutions -          
Customers   120,365    154,117 
Intersegment   1,861    1,518 
Total   122,226    155,635 
Home Entertainment & Sound -          
Customers   234,915    256,465 
Intersegment   1,004    402 
Total   235,919    256,867 
Semiconductors -          
Customers   118,273    172,679 
Intersegment   26,157    31,582 
Total   144,430    204,261 
Pictures -          
Customers   183,123    205,670 
Intersegment   194    141 
Total   183,317    205,811 
Music -          
Customers   138,409    165,076 
Intersegment   3,495    3,496 
Total   141,904    168,572 
Financial Services -          
Customers   230,909    301,360 
Intersegment   1,810    1,800 
Total   232,719    303,160 
All Other -          
Customers   84,936    94,104 
Intersegment   15,828    15,136 
Total   100,764    109,240 
Corporate and elimination   (64,382)   (74,682)
Consolidated total   1,613,199    1,858,113 

 

G&NS intersegment amounts primarily consist of transactions with All Other.

 

Semiconductors intersegment amounts primarily consist of transactions with the MC segment, the G&NS segment and the IP&S segment.

 

All Other intersegment amounts primarily consist of transactions with the Pictures segment, the Music segment and the G&NS segment.

 

Corporate and elimination includes certain brand and patent royalty income.

 

32 - 

 

 

Segment profit or loss:

 

   Yen in millions 
   Three months ended June 30 
   2016   2017 
Operating income (loss):          
Mobile Communications   415    3,616 
Game & Network Services   44,031    17,733 
Imaging Products & Solutions   7,506    23,204 
Home Entertainment & Sound   20,241    22,583 
Semiconductors   (43,549)   55,442 
Pictures   (10,640)   (9,497)
Music   15,876    25,022 
Financial Services   48,547    46,223 
All Other   (6,953)   (8,231)
Total   75,474    176,095 
Corporate and elimination   (19,282)   (18,484)
Consolidated operating income   56,192    157,611 
Other income   5,944    9,918 
Other expenses   (5,120)   (18,635)
Consolidated income before income taxes   57,016    148,894 
           

 

Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.

 

Corporate and elimination includes headquarters restructuring costs and certain other corporate expenses, including the amortization of certain intellectual property assets such as the cross-licensing of intangible assets acquired from Ericsson at the time of the Sony Mobile Communications acquisition, which are not allocated to segments.

 

33 - 

 

 

Other Significant Items:

 

The following table includes a breakdown of sales and operating revenue to external customers by product category for certain segments. Sony management views each segment as a single operating segment.

 

   Yen in millions
   Three months ended June 30
Sales and operating revenue:  2016  2017
Mobile Communications   184,868    179,066 
           
Game & Network Services          
Hardware   119,165    98,315 
Network   145,558    195,302 
Other   46,045    29,434 
Total   310,768    323,051 
           
Imaging Products & Solutions          
Still and Video Cameras   75,529    105,863 
Other   44,836    48,254 
Total   120,365    154,117 
           
Home Entertainment & Sound          
Televisions   166,293    179,374 
Audio and Video   68,307    76,722 
Other   315    369 
Total   234,915    256,465 
           
Semiconductors   118,273    172,679 
           
Pictures          
Motion Pictures   75,322    70,274 
Television Productions   44,193    61,898 
Media Networks   63,608    73,498 
Total   183,123    205,670 
           
Music          
Recorded Music   89,706    99,822 
Music Publishing   15,651    16,858 
Visual Media and Platform   33,052    48,396 
Total   138,409    165,076 
           
Financial Services   230,909    301,360 
All Other   84,936    94,104 
Corporate   6,633    6,525 
Consolidated total   1,613,199    1,858,113 

 

 - 34 -

 

 

In the G&NS segment, Hardware includes home and portable game consoles; Network includes network services relating to game, video and music content provided by Sony Interactive Entertainment; Other includes packaged software and peripheral devices. In the IP&S segment, Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for broadcast; Other includes display products such as projectors and medical equipment. In the HE&S segment, Televisions includes LCD and OLED televisions; Audio and Video includes Blu-ray disc players and recorders, home audio, headphones and memory-based portable audio devices. In the Pictures segment, Motion Pictures includes the worldwide production, acquisition and distribution of motion pictures and direct-to-video content; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks worldwide. In the Music segment, Recorded Music includes the distribution of physical and digital recorded music and revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes the production and distribution of animation titles, including game applications based on the animation titles, and various service offerings for music and visual products.

 

   Yen in millions
   Three months ended June 30
   2016  2017
Depreciation and amortization:          
Mobile Communications   5,151    4,585 
Game & Network Services   5,529    6,904 
Imaging Products & Solutions   6,085    5,861 
Home Entertainment & Sound   5,153    4,989 
Semiconductors   25,306    23,802 
Pictures   4,934    5,972 
Music   3,687    4,142 
Financial Services, including deferred insurance acquisition costs   24,363    15,107 
All Other   2,305    1,723 
Total   82,513    73,085 
           
Corporate   11,044    10,178 
           
Consolidated total   93,557    83,263 

 

 - 35 -

 


   Yen in millions
  

Three months ended June 30, 2016

   Total net
restructuring
charges
  Depreciation
associated with
restructured assets
 

Total

Restructuring charges and associated depreciation:               
Mobile Communications   322        322 
Game & Network Services   110        110 
Imaging Products & Solutions   7        7 
Home Entertainment & Sound   12        12 
Semiconductors   3        3 
Pictures   835        835 
Music   110        110 
Financial Services            
All Other and Corporate   346        346 
Consolidated total   1,745        1,745 

 

   Yen in millions
  

Three months ended June 30, 2017

   Total net
restructuring
charges
  Depreciation
associated with
restructured assets
 

Total

Restructuring charges and associated depreciation:               
Mobile Communications   649    0    649 
Game & Network Services            
Imaging Products & Solutions   12        12 
Home Entertainment & Sound   15        15 
Semiconductors            
Pictures   570        570 
Music   7        7 
Financial Services            
All Other and Corporate   1,185    0    1,185 
Consolidated total   2,438    0    2,438 

 

Depreciation associated with restructured assets as used in the context of the disclosures regarding restructuring activities refers to the increase in depreciation expense caused by revising the useful life and the salvage value of depreciable fixed assets under an approved restructuring plan. Any impairment of the assets is recognized immediately in the period it is identified.

 

 - 36 -

 

 

Geographic Information -

 

Sales and operating revenue attributed to countries and areas based on location of external customers are as follows:

 

   Yen in millions
   Three months ended June 30
Sales and operating revenue:  2016  2017
Japan   511,411    619,741 
United States   353,614    360,936 
Europe   345,517    351,750 
China   109,073    162,216 
Asia-Pacific   191,670    247,398 
Other Areas   101,914    116,072 
Total   1,613,199    1,858,113 

 

Major countries and areas in each geographic segment excluding Japan, United States and China are as follows: 

 

(1) Europe: United Kingdom, France, Germany, Russia, Spain and Sweden
(2) Asia-Pacific: India, South Korea and Oceania
(3) Other Areas: The Middle East/Africa, Brazil, Mexico and Canada

  

There are no individually material countries with respect to sales and operating revenue included in Europe, Asia-Pacific and Other Areas.

 

Transfers between reportable business segments or geographic areas are made at individually negotiated prices that are intended to reflect a market-based transfer price.

 

There were no sales and operating revenue with any single major external customer for the three months ended June 30, 2016 and 2017.

 

 - 37 -

 

 

(2) Other Information

 

(1) Dividends declared

 

A year-end dividend for Sony Corporation’s common stock was approved at the Board of Directors meeting held on April 28, 2017 as below:

 

1.

Total amount of year-end cash dividends:

12,627 million yen

2.

Amount of year-end cash dividends per share:

10.00 yen

3.

Payment date:

May 31, 2017

Year-end cash dividends for the fiscal year ended March 31, 2017 have been incorporated in the consolidated financial statements for the fiscal year ended March 31, 2017.

 

Note: Year-end cash dividends were distributed to the shareholders recorded or registered as the holders or pledgees of shares in Sony Corporation’s register of shareholders at the end of March 31, 2017.

 

(2) Litigation

 

For the legal proceedings, please refer to “IV Financial Statements - Notes to Consolidated Financial Statements – 7. Commitments, contingent liabilities and other”.

 

 - 38 -