6-K 1 a50914202.htm SONY CORPORATION 6-K a50914202.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

For the month of July 2014
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 Vice President and
 
Chief Financial Officer
 
Date: July 31, 2014

List of materials

Documents attached hereto:
 
i) Press release announcing Consolidated Financial Results for the First Quarter Ended June 30, 2014

 
 

 
 
 
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News & Information
1-7-1 Konan, Minato-ku
Tokyo 108-0075 Japan
 


No. 14-072E
3:00 P.M. JST, July 31, 2014
 
Consolidated Financial Results
for the First Quarter Ended June 30, 2014

Tokyo, July 31, 2014 -- Sony Corporation today announced its consolidated financial results for the first quarter ended June 30, 2014 (April 1, 2014 to June 30, 2014).

   
(Billions of yen, millions of U.S. dollars, except per share amounts)
First Quarter ended June 30
 
      2013   2014  
Change in yen
    2014*  
Sales and operating revenue
  ¥ 
1,711.4
  ¥
1,809.9
 
+5.8
%
 
17,920
 
Operating income
   
35.5
   
69.8
 
+96.7
     
691
 
Income before income taxes
   
45.4
   
68.4
 
+50.6
     
677
 
Net income attributable to Sony Corporation’s stockholders
   
3.1
   
26.8
 
+757.3
     
265
 
Net income attributable to Sony Corporation’s stockholders per share of common stock:
                         
    - Basic
  ¥ 
3.09
  ¥
25.69
 
+731.4
%
 
0.25
 
    - Diluted
   
2.68
   
22.94
 
+756.0
     
0.23
 

*
 U.S. dollar amounts have been translated from yen, for convenience only, at the rate of 101 yen = 1 U.S. dollar, the approximate Tokyo foreign exchange market rate as of June 30, 2014.

All amounts are presented on the basis of Generally Accepted Accounting Principles in the U.S. (“U.S. GAAP”).

Sony realigned its business segments from the first quarter of the fiscal year ending March 31, 2015 (“the current quarter”) to reflect modifications to its organizational structure as of April 1, 2014, primarily repositioning the operations of the previously reported Game and Mobile Products & Communications (“MP&C”) segments.  In connection with this realignment, the previously-reported operations of the network business which were included in All Other have been integrated with the previously-reported Game segment and are now reported as the Game & Network Services (“G&NS”) segment.  The previously reported Mobile Communications category which was included in the MP&C segment has been reclassified as the newly established Mobile Communications (“MC”) segment, while the other categories in the previously reported MP&C segment are now included in All Other.  This includes the reclassification of the PC business into All Other.

In addition, as of the current quarter, the power supply business, which was previously included in the Devices segment, has been integrated into All Other to reflect modifications Sony made to its organizational structure as of June 1, 2014.

In connection with these realignments, the sales and operating revenue (“sales”) and operating income (loss) of each segment in the fiscal year ended March 31, 2014 have been reclassified to conform to the presentation of the fiscal year ending March 31, 2015.

Certain figures for the fiscal year ended March 31, 2014 related to the Financial Services segment have been revised from the versions previously disclosed.  For further details, please see Note 8 on page F-14.

The average foreign exchange rates during the quarters ended June 30, 2013 and 2014 are presented below.

   
First quarter ended June 30
 
   
2013
 
2014
 
Change
 
The average rate of yen
                   
1 U.S. dollar
  ¥ 98.7     ¥ 102.2     3.4 %
(yen depreciation
1 Euro
    128.9       140.1     8.0  
(yen depreciation

Consolidated Results for the First Quarter Ended June 30, 2014

Sales were 1,809.9 billion yen (17,920 million U.S. dollars), an increase of 5.8% compared to the same quarter of the previous fiscal year (“year-on-year”).  This increase was primarily due to a significant increase in G&NS segment sales, reflecting the contribution of the PlayStation 4 (“PS4”) which was launched in November 2013, a significant increase in Pictures segment sales primarily due to higher theatrical revenues in Motion Pictures, as well as the favorable impact of foreign exchange rates.  This increase was partially offset by a significant decrease in sales in All Other, primarily related to Sony’s exit from the PC business.  On a constant currency basis, sales increased 3% year-on-year.  For further details about sales on a constant currency basis, see Note on page 9.
 
 
1

 
 
Operating income increased 34.3 billion yen year-on-year to 69.8 billion yen (691 million U.S. dollars).  This increase was primarily due to a significant improvement in the operating results of the G&NS segment partially offset by a significant deterioration in the operating results of the MC segment.

Operating income during the current quarter includes a gain of 14.8 billion yen (146 million U.S. dollars) recognized on the sale of certain buildings and premises at Gotenyama Technology Center in Japan, recorded in Corporate and elimination.

During the current quarter, restructuring charges, net, increased 10.6 billion yen year-on-year to 15.3 billion yen (151 million U.S. dollars).  PC exit costs of 18.3 billion yen (181 million U.S. dollars) were recorded in the current quarter, which includes 10.8 billion yen (107 million U.S. dollars) of restructuring charges.  In addition, 2.4 billion yen (24 million U.S. dollars) of impairment charges that are mainly related to LCD televisions were also booked in the current quarter.  For further details about PC exit costs, see page 7.

Equity in net income of affiliated companies, recorded within operating income, was 3.2 billion yen (32 million U.S. dollars), compared to a loss of 0.4 billion yen in the same quarter of the previous fiscal year.  This improvement was mainly due to the recording of equity in net income for Intertrust Technologies Corporation compared to the equity in net loss in the same quarter of the previous fiscal year.

The net effect of other income and expenses was an expense of 1.4 billion yen (14 million U.S. dollars), compared to income of 9.9 billion yen in the same quarter of the previous fiscal year.  This was primarily due to the recording of a net foreign exchange loss in the current quarter, compared to the recording of a net foreign exchange gain in the same quarter of the previous fiscal year, as well as a decrease in other non-operating income, partially offset by an increase in gains on sale of securities investments.  The sale of securities investments in the current quarter includes a 4.8 billion yen (48 million U.S. dollars) gain on the sale of Sony’s shares in SQUARE ENIX HOLDINGS CO., LTD., which were sold in April, 2014.

Income before income taxes increased 23.0 billion yen year-on-year to 68.4 billion yen (677 million U.S. dollars).

Income taxes: During the current quarter, Sony recorded 26.0 billion yen (258 million U.S. dollars) of income tax expense, resulting in an effective tax rate of 38.1%.

Net income attributable to Sony Corporation’s stockholders, which excludes net income attributable to noncontrolling interests, increased 23.7 billion yen year-on-year to 26.8 billion yen (265 million U.S. dollars).

Operating Performance Highlights by Business Segment

“Sales and operating revenue” in each business segment represents sales and operating revenue recorded before intersegment transactions are eliminated.  “Operating income (loss)” in each business segment represents operating income (loss) reported before intersegment transactions are eliminated and excludes unallocated corporate expenses.

Mobile Communications (MC)
 
   
(Billions of yen, millions of U.S. dollars)
First quarter ended June 30
 
   
2013
 
2014
 
Change in yen
 
2014
Sales and operating revenue
  ¥ 285.5     ¥ 314.3       +10.1 %   $ 3,112  
                                 
Operating income (loss)
    12.6       (2.7 )     -       (27 )
 
 
2

 
 
Sales increased 10.1% year-on-year (a 2% increase on a constant currency basis) to 314.3 billion yen (3,112 million U.S. dollars). This increase was primarily due to the favorable impact of foreign currency exchange rates. Smartphones sales increased year-on-year primarily due to the favorable impact of foreign currency exchange rates, partially offset by a decrease in unit sales.
 
Operating loss of 2.7 billion yen (27 million U.S. dollars) was recorded, compared to operating income of 12.6 billion yen in the same quarter of the previous fiscal year. This deterioration was primarily due to the recording of a benefit of 7.0 billion yen from the reversal of a patent royalty accrual in the same quarter of the previous fiscal year as well as a year-on-year increase in marketing expenses and research and development expenses in order to expand sales channels and broaden the product portfolio.

Game & Network Services (G&NS)

   
(Billions of yen, millions of U.S. dollars)
First quarter ended June 30
 
    2013   2014  
Change in yen
  2014
Sales and operating revenue
  ¥ 131.6     ¥ 257.5       +95.7 %   $ 2,550  
                                 
Operating income (loss)
    (16.4 )     4.3       -       43  

Sales increased 95.7% year-on-year (an 86% increase on a constant currency basis) to 257.5 billion yen (2,550 million U.S. dollars).  This increase was primarily due to the contribution from sales of PS4 hardware which was launched in November 2013, as well as a significant increase in network services revenues accompanying the launch of the PS4.  Sales to external customers increased 101% year-on-year.

Operating income of 4.3 billion yen (43 million U.S. dollars) was recorded, compared to an operating loss of 16.4 billion yen in the same quarter of the previous fiscal year.  This significant improvement was primarily due to the above-mentioned increase in sales, partially offset by a decrease in PlayStation®3 (“PS3”) software sales.

Imaging Products & Solutions (IP&S)

   
(Billions of yen, millions of U.S. dollars)
First quarter ended June 30
 
   
2013
    2014  
Change in yen
  2014
Sales and operating revenue
  ¥ 180.9     ¥ 164.6     -9.0 %   $ 1,630  
                               
Operating income
    9.1       17.4     +91.4       172  

The IP&S segment includes the Digital Imaging Products and Professional Solutions categories. Digital Imaging Products includes compact digital cameras, interchangeable single-lens cameras and video cameras; Professional Solutions includes broadcast- and professional-use products. Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income of the IP&S segment of the comparable prior period have been reclassified to conform to the current presentation.

Sales decreased 9.0% year-on-year (a 10% decrease on a constant currency basis) to 164.6 billion yen (1,630 million U.S. dollars).  This decrease was primarily due to a significant decrease in unit sales of compact digital cameras reflecting a contraction of this market.

Operating income increased 8.3 billion yen year-on-year to 17.4 billion yen (172 million U.S. dollars).  This increase was mainly due to a reduction in selling, general and administrative expenses in the current quarter, partially offset by the above-mentioned decrease in sales.
 
 
3

 
 
Home Entertainment & Sound (HE&S)

   
(Billions of yen, millions of U.S. dollars)
First quarter ended June 30
 
    2013   2014 Change in yen   2014
Sales and operating revenue
  ¥ 275.2     ¥ 285.7   +3.8
%
  $ 2,829  
                             
Operating income
    3.4       7.7   +127.5       76  

The HE&S segment includes the Televisions and Audio and Video categories.  Televisions includes LCD televisions; Audio and Video includes Blu-ray DiscTM players and recorders, home audio, headphones and memory-based portable audio devices.

Sales increased 3.8% year-on-year (a 2% increase on a constant currency basis) to 285.7 billion yen (2,829 million U.S. dollars).  This increase was primarily due to a significant increase in unit sales of LCD televisions, mainly in Europe and Asia-Pacific, partially offset by a decrease in sales of Blu-ray DiscTM players and recorders, and home audio reflecting a contraction of these markets and intensified competition.

Operating income increased 4.3 billion yen year-on-year to 7.7 billion yen (76 million U.S. dollars).  This increase was primarily due to the above-mentioned increase in sales.

In Televisions, sales increased 10.5% year-on-year to 205.0 billion yen (2,030 million U.S. dollars).  Operating income* increased 2.7 billion year-on-year to 7.9 billion yen (78 million U.S. dollars).  This improvement was primarily due to an increase in sales.

*
 The operating income in Televisions excludes restructuring charges, which are included in the overall segment results and are not allocated to product categories.

Devices

     
(Billions of yen, millions of U.S. dollars)
First quarter ended June 30
 
      2013     2014 Change in yen     2014
Sales and operating revenue
  ¥ 
190.4
    ¥
184.1
 
-3.3
%
 
1,823
 
                             
Operating income
   
10.8
     
12.5
 
+15.6
     
124
 

The Devices segment includes the Semiconductors and Components categories.  Semiconductors includes image sensors; Components includes batteries, recording media and data recording systems.  Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income of the Devices segment of the comparable prior period have been reclassified to conform to the current presentation.

Sales decreased 3.3% year-on-year (a 5% decrease on a constant currency basis) to 184.1 billion yen (1,823 million U.S. dollars).  This decrease was primarily due to a decrease in sales of system LSIs, mainly those used for PS3s.  Sales to external customers decreased 0.6% year-on-year.

Operating income increased 1.7 billion yen year-on-year to 12.5 billion yen (124 million U.S. dollars).  This increase was primarily due to the favorable impact of foreign exchange rates and an improvement in the operating results of the battery business, partially offset by an increase in expenses related to the launch of camera module production.

*    *    *    *    *

Total inventory of the five Electronics* segments above as of June 30, 2014 was 681.4 billion yen (6,746 million U.S. dollars), a decrease of 8.0 billion yen, or 1.2% year-on-year.  Inventory increased by 61.8 billion yen, or 10.0% compared with the level as of March 31, 2014.

* The term “Electronics” refers to the sum of the MC, G&NS, IP&S, HE&S and Devices segments.
 
 
4

 
 
In connection with the realignment made from the first quarter of the fiscal year ending March 31, 2015, total inventory of the five Electronics segments as of June 30, 2013 and March 31, 2014 has been reclassified to conform to the presentation for the fiscal year ending March 31, 2015.  For further details, please see page 1.


*    *    *    *    *
 
Pictures

     
(Billions of yen, millions of U.S. dollars)
First quarter ended June 30
 
      2013     2014 Change in yen     2014
Sales and operating revenue
  ¥ 
158.9
    ¥
194.8
 
+22.6
%
 
1,928
 
                             
Operating income
   
3.7
     
7.8
 
+109.3
     
78
 

The Pictures segment is comprised of the Motion Pictures, Television Productions, and Media Networks categories.  Motion Pictures includes the production, acquisition and distribution of motion pictures; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks.

The results presented in Pictures are a yen-translation of the results of Sony Pictures Entertainment (“SPE”), a U.S.-based operation that aggregates the results of its worldwide subsidiaries on a U.S. dollar basis.  Management analyzes the results of SPE in U.S. dollars, so discussion of certain portions of its results is specified as being on “a U.S. dollar basis.”

Sales increased 22.6% year-on-year (an 18% increase on a constant currency (U.S. dollar) basis) to 194.8 billion yen (1,928 million U.S. dollars) primarily due to a significant increase in sales for Motion Pictures.  Sales for Motion Pictures increased mainly due to higher theatrical revenues as the current quarter benefited from the strong worldwide theatrical performances of The Amazing Spider-Man 2 and 22 Jump Street.

Operating income increased 4.1 billion yen year-on-year to 7.8 billion yen (78 million U.S. dollars).  Operating income increased year-on-year as the current quarter benefited from the above-mentioned higher Motion Pictures sales, while the same quarter of the previous fiscal year included the theatrical underperformance of After Earth.  The same quarter of the previous fiscal year included a 106 million U.S. dollars (10.3 billion yen) gain recognized on the sale of SPE’s music publishing catalog.

Music

     
(Billions of yen, millions of U.S. dollars)
     
First quarter ended June 30
 
     
2013
   
2014
Change in yen
   
 2014
Sales and operating revenue
  ¥ 
112.0
    ¥
116.9
 
+4.4
%
 
1,157
 
                             
Operating income
   
10.8
     
11.4
 
+5.7
     
113
 

The Music segment is comprised of the Recorded Music, Music Publishing and Visual Media and Platform categories.  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 various service offerings for music and visual products and the production and distribution of animation titles.

The results presented in Music include the yen-translated results of Sony Music Entertainment (“SME”), a U.S.-based operation which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis, the results of Sony Music Entertainment (Japan) Inc., a Japan-based music company which aggregates its results in yen, and the yen-translated consolidated results of Sony/ATV Music Publishing LLC (“Sony/ATV”), a 50% owned U.S.-based joint venture in the music publishing business which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis.

Sales increased 4.4% year-on-year (a 2% increase on a constant currency basis) to 116.9 billion yen (1,157 million U.S. dollars).  The increase in sales on a constant currency basis is primarily due to higher Music Publishing and Visual Media and Platform sales partially offset by lower Recorded Music sales.  Sales of Music Publishing increased primarily due to an increase in revenue outside of the U.S.  Recorded Music sales decreased primarily resulting from the impact of a larger number of successful releases in the same quarter of the previous fiscal year, and the continued worldwide contraction of the physical music market.  Best-selling titles included Michael Jackson’s Xscape, Pharell Williams’ GIRL, and John Legend’s Love In The Future.
 
 
5

 
 
Operating income was essentially flat year-on-year at 11.4 billion yen (113 million U.S. dollars) due to cost reductions in Recorded Music being offset by a decrease in equity in net income from affiliated companies.

Financial Services

   
(Billions of yen, millions of U.S. dollars)
First quarter ended June 30
 
    2013   2014
Change in yen
 
 2014
Financial services revenue
  ¥ 251.4     ¥ 247.0   -1.8 %   $ 2,445  
                             
Operating income
    45.1       43.8   -3.0       433  

The Financial Services segment results include Sony Financial Holdings Inc. (“SFH”) and SFH’s consolidated subsidiaries such as Sony Life Insurance Co., Ltd. (“Sony Life”), Sony Assurance Inc. and Sony Bank Inc. (“Sony Bank”).  The results of Sony Life discussed in the Financial Services segment differ from the results that SFH and Sony Life disclose separately on a Japanese statutory basis.

Certain figures for the fiscal year ended March 31, 2014 have been revised from the versions previously disclosed.  For details, please see Note 8 on page F-14.

Financial services revenue decreased 1.8% year-on-year to 247.0 billion yen (2,445 million U.S. dollars) due to a deterioration of investment performance in the separate account at Sony Life, mainly resulting from a smaller year-on-year rise in the Japanese stock market.  Revenue at Sony Life decreased 2.2% year-on-year to 216.8 billion yen (2,147 million U.S. dollars).

Operating income decreased 1.3 billion yen year-on-year to 43.8 billion yen (433 million U.S. dollars).  This decrease was mainly due to a decrease in operating income at Sony Life.  Operating income at Sony Life decreased 2.3 billion yen year-on-year to 37.2 billion yen (368 million U.S. dollars) primarily due to an increase in the amortization of deferred insurance acquisition costs mainly in variable insurance, driven by the above-mentioned deterioration of investment performance in the separate account.

All Other

   
(Billions of yen, millions of U.S. dollars)
First quarter ended June 30
 
   
2013
 
2014
Change in yen
 
2014
Sales and operating revenue
  ¥ 194.5     ¥ 128.8   -33.8 %   $ 1,275  
                             
Operating loss
    (16.9 )     (18.4 ) -       (183 )

All Other includes the PC business.  Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating loss of All Other of the comparable prior period have been reclassified to conform to the current presentation.

Sales decreased 33.8% year-on-year (a 39% decrease on a constant currency basis) to 128.8 billion yen (1,275 million U.S. dollars).  This decrease was primarily due to a significant decrease year-on-year in unit sales of PCs reflecting Sony’s exit from the PC business.
 
Operating loss increased 1.5 billion yen year-on-year to 18.4 billion yen (183 million U.S. dollars).  This deterioration was primarily due to the recording of PC exit costs, partially offset by an improvement in equity in net income (loss) for Intertrust Technologies Corporation.  The following table provides PC exit costs and the total PC operating loss.
 
 
6

 

    (Billions of yen, millions of U.S. dollars)  
    First quarter ended June 30, 2014  
   
All Other
   
Corporate
and
Elimination
   
Consolidated
Total
   
Change
from FY13
in yen
   
Consolidated
Total
 
 
i.   Expenses to compensate suppliers
        for unused components held by suppliers
  ¥ 5.0     ¥ -     ¥ 5.0     ¥ +5.0     $ 49  
  ii.  Early retirement costs etc.     3.6       2.2       5.8       +5.8       58  
(I)
Restructuring charges (i + ii)
    8.6       2.2       10.8       +10.8       107  
(II)
After-sales service expenses etc.
    7.5       -       7.5       +7.5       75  
PC exit costs (I+II)
    16.1       2.2       18.3       +18.3       181  
Operating loss excluding exit costs
    (2.4 )     -       (2.4 )     +2.4       (24 )
Total PC Operating Loss
  ¥ (18.5 )   ¥ (2.2 )   ¥ (20.7 )   ¥ (15.9 )   $ (205 )


*    *    *    *    *

Cash Flows

For Consolidated Statements of Cash Flows, charts showing Sony’s cash flow information for all segments, all segments excluding the Financial Services segment and the Financial Services segment alone, please refer to pages F-4 and F-12.

In the Financial Services segment, certain figures for the fiscal year ended March 31, 2014 have been revised from the versions previously disclosed.  For further details, please see Note 8 on page F-14.

Operating Activities: During the current quarter, there was a net cash inflow of 66.2 billion yen (657 million U.S. dollars) from operating activities, compared to a net cash outflow of 133.0 billion yen in the same quarter of the previous fiscal year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 27.5 billion yen (271 million U.S. dollars) for the current quarter, a decrease of outflow of 166.6 billion yen, or 85.8% year-on-year.  This decrease of outflow was primarily due to the positive impact of an improvement in net income after taking into account non-cash adjustments (including depreciation and amortization, other operating expenses, deferred income taxes and equity in net income of affiliated companies), a smaller increase in inventories, and a smaller increase in other receivables from component assembly companies, included in other current assets.  This decrease of outflow was partially offset by the negative impact of a smaller year-on-year increase in notes and accounts payable, trade.

The Financial Services segment had a net cash inflow of 101.6 billion yen (1,006 million U.S. dollars), an increase of 33.7 billion yen, or 49.6% year-on-year.  This increase was primarily due to a year-on-year decrease in the payment of surrender value amounts as well as an increase in insurance premium revenue resulting from an expansion of business at Sony Life.  A lower increase of accounts receivable at SmartLink Network, Inc., a subsidiary of Sony Bank, also contributed to this increase of cash inflow.

Investing Activities: During the current quarter, Sony used 124.7 billion yen (1,235 million U.S. dollars) of net cash in investing activities, an increase of 83.0 billion yen, or 199.3% year-on-year.

For all segments excluding the Financial Services segment, 0.2 billion yen (2 million U.S. dollars) was provided, a decrease of 37.0 billion yen, or 99.6% year-on-year.  The decrease was primarily due to the sale and leaseback of machinery and equipment in the same quarter of the previous fiscal year.  Sales of fixed assets and businesses in the current quarter included the sale of certain buildings and premises at the Gotenyama Technology Center in Japan and the sale of Sony’s shares in SQUARE ENIX HOLDINGS CO., LTD.

The Financial Services segment used 124.9 billion yen (1,237 million U.S. dollars) of net cash, an increase of 46.0 billion yen, or 58.4% year-on-year.  This increase was mainly due to a year-on-year decrease in proceeds from the sale of investment securities at Sony Bank.
 
 
7

 
 
In all segments excluding the Financial Services segment, net cash used in operating and investing activities combined*1 for the current quarter was 27.3 billion yen (269 million U.S. dollars), a decrease of 129.6 billion yen, or 82.6% year-on-year.

Financing Activities: During the current quarter, 291.4 billion yen (2,885 million U.S. dollars) of net cash and cash equivalents was used in financing activities, compared to 122.0 billion yen of net cash and cash equivalents provided in the same quarter of the previous fiscal year.

For all segments excluding the Financial Services segment, there was a 253.7 billion yen (2,512 million U.S. dollars) net cash outflow, compared to a 94.2 billion yen net cash inflow in the same quarter of the previous fiscal year.  This was primarily due to an issuance of straight bonds for Japanese retail investors in the same quarter of the previous fiscal year and the redemption of straight bonds and the repayment of a syndicated loan in the current quarter.

In the Financial Services segment, financing activities used 45.5 billion yen (451 million U.S. dollars) of net cash, compared to 21.0 billion yen of net cash provided in the same quarter of the previous fiscal year.  This was mainly due to a larger decrease in customer deposits at Sony Bank compared to the same quarter of the previous fiscal year.

Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in foreign exchange rates, the total outstanding balance of cash and cash equivalents at June 30, 2014 was 687.4 billion yen (6,806 million U.S. dollars).  Cash and cash equivalents of all segments excluding the Financial Services segment was 515.9 billion yen (5,108 million U.S. dollars) at June 30, 2014, a decrease of 73.7 billion yen, or 12.5% compared with the balance as of June 30, 2013, and a decrease of 290.3 billion yen, or 36.0% compared with the balance as of March 31, 2014.  Sony believes that it continues to maintain sufficient liquidity through access to a total, translated into yen, of 729.4 billion yen (7,222 million U.S. dollars) of unused committed lines of credit with financial institutions in addition to the cash and cash equivalents balance at June 30, 2014.  Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 171.5 billion yen (1,698 million U.S. dollars) at June 30, 2014, a decrease of 40.1 billion yen, or 18.9% compared with the balance as of June 30, 2013, and a decrease of 68.8 billion yen, or 28.6% compared with the balance as of March 31, 2014.

*1
Sony has included the information for cash flow from operating and investing activities combined, excluding the Financial Services segment’s activities, as Sony’s management frequently monitors this financial measure, and believes this non-U.S. GAAP measurement is important for use in evaluating Sony’s ability to generate cash to maintain liquidity and fund debt principal and dividend payments from business activities other than its Financial Services segment.  This information is derived from the reconciliations prepared in the Condensed Statements of Cash Flows on page F-12.  This information and the separate condensed presentations shown below are not required or prepared in accordance with U.S. GAAP.  The Financial Services segment’s cash flow is excluded from the measure because SFH, which constitutes a majority of the Financial Services segment, is a separate publicly traded entity in Japan with a significant minority interest and it, as well as its subsidiaries, secure liquidity on their own.  This measure may not be comparable to those of other companies.  This measure has limitations because it does not represent residual cash flows available for discretionary expenditures principally due to the fact that the measure does not deduct the principal payments required for debt service.  Therefore, Sony believes it is important to view this measure as supplemental to its entire statement of cash flows and together with Sony’s disclosures regarding investments, available credit facilities and overall liquidity.

A reconciliation of the differences between the Consolidated Statement of Cash Flows reported and cash flows from operating and investing activities combined excluding the Financial Services segment’s activities is as follows:

   
(Billions of yen, millions of U.S. dollars)
   
First quarter ended June 30
   
2013
 
2014
 
2014
                   
Net cash provided (used) in operating activities reported in the consolidated statements of cash flows
  ¥ (133.0 )   ¥ 66.2     $ 657  
Net cash used in investing activities reported in the consolidated statements of cash flows
    (41.7 )     (124.7 )     (1,235 )
      (174.7 )     (58.5 )     (578 )
                         
Less: Net cash provided by operating activities within the Financial Services segment
    67.9       101.6       1,006  
Less: Net cash used in investing activities within the Financial Services segment
    (78.8 )     (124.9 )     (1,237 )
Eliminations *2
    6.9       7.9       78  
                         
Cash flow used in operating and investing activities combined excluding the Financial Services segment’s activities
  ¥ (156.9 )   ¥ (27.3 )   $ (269 )

*2
Eliminations primarily consist of intersegment dividend payments.

*    *    *    *    *
 
 
8

 
 
Note

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 current quarter.  In certain cases, most significantly in the Pictures segment and SME and Sony/ATV in the Music segment, the constant currency amounts are after aggregation on a U.S. dollar basis.  Sales on a constant currency basis are not reflected in Sony’s consolidated financial statements and are not measures 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 information on a constant currency basis provides additional useful analytical information to investors regarding the operating performance of Sony.

*    *    *    *    *

Outlook for the Fiscal Year ending March 31, 2015

The forecast for consolidated results for the fiscal year ending March 31, 2015, as announced on May 14, 2014, remains unchanged, as per the table below.

   
(Billions of yen)
       
   
July
Forecast
   
March 31, 2014
Results
   
Change
 
Sales and operating revenue
  ¥ 7,800     ¥ 7,767.3       +0.4 %
Operating income
    140       26.5       +428.4  
Income before income taxes
    130       25.7       +405.0  
Net loss attributable to Sony Corporation’s stockholders
    (50 )     (128.4 )     -  

Assumed foreign currency exchange rates for the remainder of the fiscal year ending March 31, 2015: approximately 103 yen to the U.S. dollar and approximately 137 yen to the euro.  (Assumed foreign currency exchange rates for the current fiscal year at the time of the May forecast: approximately 103 yen to the U.S. dollar and approximately 137 yen to the euro.)

The consolidated sales forecast remains unchanged from the May forecast due to downward revisions in several segments, primarily the MC Segment, being offset by downward revision risk that had been incorporated into Corporate and elimination in the May forecast.

The forecast for costs related to the exit from the PC business and other strategic management initiatives remains unchanged at approximately 135 billion yen for the Sony Group, which is incorporated into the operating income forecast as an operating expense (costs in the previous fiscal year were 177.4 billion yen).  Of the above costs, approximately 80 billion yen is expected to be recorded as restructuring charges (restructuring charges in the previous fiscal year were 80.6 billion yen).

The forecast for each business segment has been revised as follows:

 
9

 

   
(Billions of yen)
   
Change - July Forecast vs.
   
July
Forecast
   
May
Forecast
   
March 31, 2014
Results
   
May
Forecast
 
March 31, 2014
Results
Mobile Communications
                             
Sales and operating revenue
  ¥ 1,360     ¥ 1,530     ¥ 1,191.8       -11.1 %     +14.1 %
Operating income
    0       26       12.6       -       -  
Game & Network Services
                                       
Sales and operating revenue
    1,240       1,220       1,043.9       +1.6       +18.8  
Operating income (loss)
    25       20       (18.8 )     +25.0       -  
Imaging Products & Solutions
                                       
Sales and operating revenue
    700       710       741.2       -1.4       -5.6  
Operating income
    38       38       26.3       -       +44.3  
Home Entertainment & Sound
                                       
Sales and operating revenue
    1,230       1,260       1,168.6       -2.4       +5.3  
Operating income (loss)
    10       10       (25.5 )     -       -  
Devices
                                       
Sales and operating revenue
    870       870       773.0       -       +12.6  
Operating income (loss)
    51       31       (12.4 )     +64.5       -  
Pictures
                                       
Sales and operating revenue
    880       880       829.6       -       +6.1  
Operating income
    65       65       51.6       -       +25.9  
Music
                                       
Sales and operating revenue
    500       500       503.3       -       -0.7  
Operating income
    48       48       50.2       -       -4.4  
Financial Services
                                       
Financial services revenue
    1,000       1,000       993.8       -       +0.6  
Operating income
    164       164       170.3       -       -3.7  
All Other, Corporate and Elimination
                                       
Operating loss
    (261 )     (262 )     (227.8 )     -       -  
Consolidated
                                       
Sales and operating revenue
    7,800       7,800       7,767.3       -       +0.4  
Operating income
    140       140       26.5       -       +428.4  

The forecast for each business segment is as follows:

Mobile Communications
Sales are expected to be below the May forecast primarily due to an expected decrease in unit sales of mid-range smartphones which were expected to significantly grow mainly in emerging market countries.  Operating income is expected to be below the May forecast primarily due to the above-mentioned expected decrease in sales, partially offset by a reduction in marketing expenses and research and development expenses.

The factors described above, including the current quarter’s financial performance and the revised full-year forecast for the business, as well as increasingly competitive markets in various areas, could continue to adversely affect the Mobile Communications business.  In addition, in light of these developments, in July Sony began a review of its Mid-Range Plan (“MRP”) for the Mobile Communications business.  This process is currently on-going, and Sony will continue to evaluate the financial and other consequences of changes, if any, in the MRP or strategic alternatives within the Mobile Communications business, as well as its financial performance.  It is possible that the above-described circumstances might result in an impairment charge against various assets, including goodwill, in that reporting segment.

Game & Network Services
Sales are expected to be higher than the May forecast primarily due to the strong performance of the PS4.  Operating income is expected to be higher than the May forecast primarily due to PS4 hardware cost reductions.

Imaging Products & Solutions
Sales are expected to be below the May forecast primarily due to anticipated lower sales in emerging market countries.  Operating income is expected to remain unchanged from the May forecast due to the above-mentioned decrease in sales being offset primarily by cost reductions.

 
10

 
 
Home Entertainment & Sound
Sales are expected to be below the May forecast mainly due to a downward revision in the annual unit sales forecast for LCD televisions.  Operating income is expected to remain unchanged from the May forecast due to the above-mentioned decrease in sales being offset primarily by cost reductions.

Devices
Sales are expected to remain unchanged from the May forecast primarily due to an anticipated significant increase in sales of image sensors, offset by the transfer of the power supply business to All Other.  Operating income is expected to be higher than the May forecast primarily due to the increase in sales in image sensors.

The forecasts for the Pictures, Music and Financial Services segments remain unchanged from the May forecast.

The effects of gains and losses on investments held by the Financial Services segment due to market fluctuations have not been incorporated within the above forecast as it is difficult for Sony to predict market trends in the future.  Accordingly, future market fluctuations could further impact the current forecast.

Sony’s forecast for capital expenditures, depreciation and amortization, as well as research and development expenses for the current fiscal year has been changed as per the table below.

   
(Billions of yen)
   
Change - July Forecast vs.
   
July
Forecast
   
May
Forecast
   
March 31, 2014
Results
   
May
Forecast
 
March 31, 2014
Results
Capital expenditures (addition to property, plant and equipment)
  ¥ 195     ¥ 180     ¥ 164.6       +8.3 %     +18.5 %
Depreciation and amortization*
    365       370       376.7       -1.4       -3.1  
[for property, plant and equipment (included above)
    175       180       195.8       -2.8       -10.6 ]
Research and development expenses
    485       485       466.0       -       +4.1  

The forecast for depreciation and amortization includes amortization expenses for intangible assets and for deferred insurance acquisition costs.

This forecast is based on management’s current expectations and is subject to uncertainties and changes in circumstances.  Actual results may differ materially from those included in this forecast due to a variety of factors.  See “Cautionary Statement” below.

 
11

 
 
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 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 smartphones, 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;
(x)  
significant volatility and disruption in the global financial markets or a ratings downgrade;
(xi)  
Sony’s ability to forecast demands, manage timely procurement and control inventories;
(xii)  
the outcome of pending and/or future legal and/or regulatory proceedings;
(xiii)  
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;
(xiv)  
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
(xv)  
risks related to catastrophic disasters or similar events.
Risks and uncertainties also include the impact of any future events with material adverse impact.

 
Investor Relations Contacts:
       
Tokyo
 
New York
 
London
Atsuko Murakami
 
Justin Hill
 
Haruna Nagai
+81-(0)3-6748-2111
 
+1-212-833-6722
 
+44-(0)20-7426-8696

IR home page: http://www.sony.net/IR/
Presentation slides: http://www.sony.net/SonyInfo/IR/financial/fr/14q1_sonypre.pdf
 
 
12

 
 
(Unaudited)
                       
Consolidated Financial Statements
                       
Consolidated Balance Sheets
                       
   
(Millions of yen, millions of U.S. dollars)
 
   
March 31
   
June 30
   
Change from
   
June 30
 
ASSETS
 
2014
   
2014
   
March 31, 2014
   
2014
 
Current assets:
                       
Cash and cash equivalents
  ¥ 1,046,466     ¥ 687,405     ¥ -359,061     $ 6,806  
Marketable securities
    832,566       858,964       +26,398       8,505  
Notes and accounts receivable, trade
    946,553       963,736       +17,183       9,542  
Allowance for doubtful accounts and sales returns
    (75,513 )     (65,734 )     +9,779       (651 )
Inventories
    733,943       792,027       +58,084       7,842  
Other receivables
    224,630       235,470       +10,840       2,331  
Deferred income taxes
    53,068       45,489       -7,579       450  
Prepaid expenses and other current assets
    443,173       457,670       +14,497       4,532  
Total current assets
    4,204,886       3,975,027       -229,859       39,357  
                                 
Film costs
    275,799       264,440       -11,359       2,618  
                                 
Investments and advances:
                               
Affiliated companies
    181,263       182,271       +1,008       1,805  
Securities investments and other
    7,737,748       7,850,517       +112,769       77,728  
      7,919,011       8,032,788       +113,777       79,533  
                                 
Property, plant and equipment:
                               
Land
    125,890       125,386       -504       1,241  
Buildings
    674,841       674,749       -92       6,681  
Machinery and equipment
    1,705,774       1,693,853       -11,921       16,771  
Construction in progress
    39,771       38,160       -1,611       378  
      2,546,276       2,532,148       -14,128       25,071  
Less-Accumulated depreciation
    1,796,266       1,790,302       -5,964       17,726  
      750,010       741,846       -8,164       7,345  
                                 
Other assets:
                               
Intangibles, net
    675,663       654,575       -21,088       6,481  
Goodwill
    691,803       682,952       -8,851       6,762  
Deferred insurance acquisition costs
    497,772       503,156       +5,384       4,982  
Deferred income taxes
    105,442       107,652       +2,210       1,066  
Other
    213,334       203,685       -9,649       2,016  
      2,184,014       2,152,020       -31,994       21,307  
                                 
  Total assets
  ¥ 15,333,720     ¥ 15,166,121     ¥ -167,599     $ 150,160  
                                 
                                 
LIABILITIES AND EQUITY
                               
Current liabilities:
                               
Short-term borrowings
  ¥ 111,836     ¥ 92,416     ¥ -19,420     $ 915  
Current portion of long-term debt
    265,918       116,470       -149,448       1,153  
Notes and accounts payable, trade
    712,829       757,901       +45,072       7,504  
Accounts payable, other and accrued expenses
    1,175,413       1,098,690       -76,723       10,878  
Accrued income and other taxes
    81,842       89,705       +7,863       888  
Deposits from customers in the banking business
    1,890,023       1,829,708       -60,315       18,116  
Other
    545,753       546,240       +487       5,409  
Total current liabilities
    4,783,614       4,531,130       -252,484       44,863  
                                 
Long-term debt
    916,648       854,259       -62,389       8,458  
Accrued pension and severance costs
    284,963       280,338       -4,625       2,776  
Deferred income taxes
    410,896       423,633       +12,737       4,194  
Future insurance policy benefits and other
    3,824,572       3,903,227       +78,655       38,646  
Policyholders’ account in the life insurance business
    2,023,472       2,075,157       +51,685       20,546  
Other
    302,299       302,281       -18       2,993  
Total liabilities
    12,546,464       12,370,025       -176,439       122,476  
                                 
Redeemable noncontrolling interest
    4,115       4,129       +14       41  
                                 
Equity:
                               
Sony Corporation’s stockholders’ equity:
                               
Common stock
    646,654       646,663       +9       6,403  
Additional paid-in capital
    1,127,090       1,124,985       -2,105       11,138  
Retained earnings
    940,262       967,066       +26,804       9,575  
Accumulated other comprehensive income
    (451,585 )     (473,418 )     -21,833       (4,687 )
Treasury stock, at cost
    (4,284 )     (4,297 )     -13       (43 )
      2,258,137       2,260,999       +2,862       22,386  
                                 
Noncontrolling interests
    525,004       530,968       +5,964       5,257  
Total equity
    2,783,141       2,791,967       +8,826       27,643  
Total liabilities and equity
  ¥ 15,333,720     ¥ 15,166,121     ¥ -167,599     $ 150,160  
 
 
F-1

 
 
Consolidated Statements of Income
                       
   
(Millions of yen, millions of U.S. dollars, except per share amounts)
 
   
Three months ended June 30
 
   
2013
   
2014
   
Change from 2013
   
2014
 
Sales and operating revenue:
                       
Net sales
  ¥ 1,438,936     ¥ 1,539,806           $ 15,246  
Financial services revenue
    250,170       245,750             2,433  
Other operating revenue
    22,313       24,352             241  
      1,711,419       1,809,908       +5.8 %     17,920  
                                 
Costs and expenses:
                               
Cost of sales
    1,098,880       1,150,839               11,395  
Selling, general and administrative
    384,993       410,447               4,064  
Financial services expenses
    204,297       201,678               1,997  
Other operating (income) expense, net
    (12,673 )     (19,669 )             (195 )
      1,675,497       1,743,295       +4.0       17,261  
                                 
Equity in net income (loss) of affiliated companies
    (425 )     3,201       -       32  
                                 
Operating income
    35,497       69,814       +96.7       691  
                                 
Other income:
                               
Interest and dividends
    3,887       3,415               34  
Gain on sale of securities investments, net
    500       5,200               51  
Foreign exchange gain, net
    6,191    
           
 
Other
    8,462       617               6  
      19,040       9,232       -51.5       91  
                                 
Other expenses:
                               
Interest
    6,956       6,412               63  
Foreign exchange loss, net
 
      1,976               19  
Other
    2,188       2,281               23  
      9,144       10,669       +16.7       105  
                                 
Income before income taxes
    45,393       68,377       +50.6       677  
                                 
Income taxes
    26,468       26,046               258  
                                 
Net income
    18,925       42,331       +123.7       419  
                                 
Less - Net income attributable to noncontrolling interests
    15,798       15,523               154  
                                 
Net income attributable to Sony Corporation’s
                               
stockholders
  ¥ 3,127     ¥ 26,808       +757.3 %   $ 265  
                                 
                                 
Per share data:
                               
Net income attributable to Sony Corporation’s
                               
stockholders
                               
— Basic
  ¥ 3.09     ¥ 25.69       +731.4 %   $ 0.25  
— Diluted
    2.68       22.94       +756.0       0.23  
                                 
                                 
Consolidated Statements of Comprehensive Income
                               
   
(Millions of yen, millions of U.S. dollars)
 
   
Three months ended June 30
 
      2013       2014    
Change from 2013
      2014  
                                 
Net income
  ¥ 18,925     ¥ 42,331       +123.7 %   $ 419  
                                 
Other comprehensive income, net of tax –
                               
Unrealized gains (losses) on securities
    (14,894 )     1,875               19  
Unrealized gains on derivative instruments
    193    
           
 
Pension liability adjustment
    (3,247 )     336               3  
Foreign currency translation adjustments
    62,372       (20,840 )             (206 )
                                 
Total comprehensive income
    63,349       23,702       -62.6       235  
                                 
Less - Comprehensive income attributable
                               
to noncontrolling interests
    6,210       18,727               185  
                                 
Comprehensive income attributable
                               
to Sony Corporation’s stockholders
  ¥ 57,139     ¥ 4,975       -91.3 %   $ 50  
 
 
F-2

 
 
Supplemental equity and comprehensive income information
                 
   
(Millions of yen, millions of U.S. dollars)
 
   
Sony Corporation’s
stockholders’ equity
   
Noncontrolling
interests
   
Total equity
 
Balance at March 31, 2013
  ¥ 2,192,262     ¥ 479,742     ¥ 2,672,004  
Exercise of stock acquisition rights
    12               12  
Conversion of zero coupon convertible bonds
    20               20  
Stock based compensation
    372               372  
                         
Comprehensive income:
                       
Net income
    3,127       15,798       18,925  
Other comprehensive income, net of tax –
                       
Unrealized losses on securities
    (4,948 )     (9,946 )     (14,894 )
Unrealized gains on derivative instruments
    193               193  
Pension liability adjustment
    (3,250 )     3       (3,247 )
Foreign currency translation adjustments
    62,017       355       62,372  
Total comprehensive income
    57,139       6,210       63,349  
                         
Dividends declared
            (6,046 )     (6,046 )
Transactions with noncontrolling interests shareholders and other
    3       402       405  
Balance at June 30, 2013
  ¥ 2,249,808     ¥ 480,308     ¥ 2,730,116  
                         
Balance at March 31, 2014
  ¥ 2,258,137     ¥ 525,004     ¥ 2,783,141  
Exercise of stock acquisition rights
    19               19  
Stock based compensation
    377               377  
                         
Comprehensive income:
                       
Net income
    26,808       15,523       42,331  
Other comprehensive income, net of tax –
                       
Unrealized gains (losses) on securities
    (498 )     2,373       1,875  
Pension liability adjustment
    366       (30 )     336  
Foreign currency translation adjustments
    (21,701 )     861       (20,840 )
Total comprehensive income
    4,975       18,727       23,702  
                         
Dividends declared
            (8,712 )     (8,712 )
Transactions with noncontrolling interests shareholders and other
    (2,509 )     (4,051 )     (6,560 )
Balance at June 30, 2014
  ¥ 2,260,999     ¥ 530,968     ¥ 2,791,967  
                         
                         
   
Sony Corporation’s
stockholders’ equity
   
Noncontrolling
interests
   
Total equity
 
Balance at March 31, 2014
  $ 22,358     $ 5,198     $ 27,556  
Exercise of stock acquisition rights
    0               0  
Stock based compensation
    4               4  
                         
Comprehensive income:
                       
Net income
    265       154       419  
Other comprehensive income, net of tax –
                       
Unrealized gains (losses) on securities
    (4 )     23       19  
Pension liability adjustment
    3               3  
Foreign currency translation adjustments
    (214 )     8       (206 )
Total comprehensive income
    50       185       235  
                         
Dividends declared
            (86 )     (86 )
Transactions with noncontrolling interests shareholders and other
    (26 )     (40 )     (66 )
Balance at June 30, 2014
  $ 22,386     $ 5,257     $ 27,643  
 
 
F-3

 
 
Consolidated Statements of Cash Flows
                 
   
(Millions of yen, millions of U.S. dollars)
 
   
Three months ended June 30
 
   
2013
   
2014
   
2014
 
Cash flows from operating activities:
                 
Net income
  ¥ 18,925     ¥ 42,331     $ 419  
Adjustments to reconcile net income to net cash
                       
provided by (used in) operating activities:
                       
Depreciation and amortization, including amortization of deferred
                       
insurance acquisition costs
    92,929       84,298       835  
Amortization of film costs
    56,324       70,892       702  
Stock-based compensation expense
    374       376       4  
Accrual for pension and severance costs, less payments
    (1,702 )     (3,433 )     (34 )
Other operating (income) expense, net
    (12,673 )     (19,669 )     (195 )
Gain on sale or devaluation of securities investments, net
    (460 )     (5,198 )     (51 )
Gain on revaluation of marketable securities held in the financial
                       
services business for trading purposes, net
    (21,569 )     (10,287 )     (102 )
(Gain) loss on revaluation or impairment of securities investments held
                       
in the financial services business, net
    266       (1,196 )     (12 )
Deferred income taxes
    (4,381 )     4,888       48  
Equity in net (income) loss of affiliated companies, net of dividends
    648       (2,046 )     (20 )
Changes in assets and liabilities:
                       
Increase in notes and accounts receivable, trade
    (51,916 )     (38,005 )     (376 )
Increase in inventories
    (113,680 )     (65,977 )     (653 )
Increase in film costs
    (79,056 )     (63,690 )     (631 )
Increase in notes and accounts payable, trade
    162,054       51,364       509  
Decrease in accrued income and other taxes
    (19,744 )     (1,776 )     (18 )
Increase in future insurance policy benefits and other
    108,162       101,663       1,007  
Increase in deferred insurance acquisition costs
    (20,049 )     (18,526 )     (183 )
Increase in marketable securities held in the financial services
                       
business for trading purposes
    (10,814 )     (8,143 )     (81 )
Increase in other current assets
    (106,791 )     (19,940 )     (197 )
Decrease in other current liabilities
    (108,160 )     (43,164 )