6-K 1 d804720d6k.htm SONY CORPORATION 6-K SONY CORPORATION 6-K
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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 November 2019

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/ Hiroki Totoki
          (Signature)
Hiroki Totoki
Senior Executive Vice President and
Chief Financial Officer

Date: November 6, 2019


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Quarterly Securities Report

For the three months ended September 30, 2019

(TRANSLATION)

Sony Corporation


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CONTENTS

 

    

Page

 

 

Note for readers of this English translation

     1     

Cautionary Statement

     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)   Management’s Discussion and Analysis of Financial Condition, Results of Operations and Status of Cash Flows

     5     

(3)   Material Contracts

 

     13    

   III  Company Information

     14    

(1)   Information on the Company’s Shares

     14    

(2)   Directors and Corporate Executive Officers

 

     17    

   IV Financial Statements

     18    

(1)   Consolidated Financial Statements

     19    

(2)   Other Information

     47    


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Note for readers of this English translation

On November 6, 2019, Sony Corporation (the “Company” or “Sony Corporation” and together with its consolidated subsidiaries, “Sony” or “Sony Group”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended September 30, 2019 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)

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

(ii)

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;

(iii)

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;

(iv)

the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures, investments, capital expenditures, restructurings and other strategic initiatives;

(v)

changes in laws, regulations and government policies in the markets in which Sony and its third-party suppliers, service providers and business partners operate, including those related to taxation, as well as growing consumer focus on corporate social responsibility;

(vi)

Sony’s continued ability to identify the products, services and market trends with significant growth potential, to devote sufficient resources to research and development, to prioritize investments and capital expenditures correctly and to recoup its investments and capital expenditures, including those required for technology development and product capacity;

(vii)

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, marketing and distribution of its products, and its other business operations;

(viii)

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;

(ix)

Sony’s ability to meet operational and liquidity needs as a result of significant volatility and disruption in the global financial markets or a ratings downgrade;

(x)

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



 

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(xi)

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, liabilities and operating results are denominated;

(xii)

Sony’s ability to recruit, retain and maintain productive relations with highly skilled personnel;

(xiii)

Sony’s ability to prevent unauthorized use or theft of intellectual property rights, to obtain or renew licenses relating to intellectual property rights and to defend itself against claims that its products or services infringe the intellectual property rights owned by others;

(xiv)

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;

(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)

risks related to catastrophic disasters or similar events;

(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 and the personally identifiable information of its employees and customers, potential business disruptions or financial losses; and

(xviii) 

the outcome of pending and/or future legal and/or regulatory proceedings.

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

regarding risks and uncertainties is also set forth in Sony’s most recent Form 20-F, which is on file with the SEC.



 

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I     Corporate Information

(1) Selected Consolidated Financial Data

    Yen in millions, Yen per share amounts  
      Six months ended  
  September 30, 2018  
      Six months ended  
  September 30, 2019  
      Fiscal year ended  
  March 31, 2019  
 

 

 
  Sales and operating revenue     4,136,384          4,047,983          8,665,687     

 

 
  Operating income     434,517          509,880          894,235     

 

 
  Income before income taxes     558,484          493,112          1,011,648     

 

 

Net income attributable to Sony Corporation’s stockholders

    399,448          340,009          916,271     

 

 
  Comprehensive income     449,051          348,080          995,542     

 

 
  Total equity     4,013,157          4,618,290          4,436,690     

 

 
  Total assets     20,325,450          21,966,296          20,981,586     

 

 

Net income attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)

    315.02          273.52          723.41     

 

 

Net income attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen)

    308.17          267.65          707.74     

 

 

Ratio of stockholders’ equity to total assets (%)

    16.6          17.8          17.9     

 

 

Net cash provided by operating activities

    410,829          410,485          1,258,738     

 

 
  Net cash used in investing activities     (528,001)         (631,215)         (1,307,445)    

 

 

Net cash provided by (used in) financing activities

    (270)         28,909          (122,884)    

 

 

Cash and cash equivalents at end of the period

    1,540,779          1,252,869          1,470,073     

 

 
    Yen in millions, Yen per share amounts        
      Three months ended  
  September 30, 2018  
   

  Three months ended  

  September 30, 2019  

 

 

 

Sales and operating revenue

    2,182,760          2,122,259     

 

 

Net income attributable to Sony Corporation’s stockholders

    173,001          187,887     

 

 

Net income attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)

    136.38          151.89     

 

 

Net income attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen)

    133.43          148.59     

 

   

  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 six months ended September 30, 2019.

As of September 30, 2019, the Company had 1,587 subsidiaries and 146 affiliated companies, of which 1,546 companies are consolidated subsidiaries (including variable interest entities) of the Company. The Company has applied the equity accounting method for 132 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 SEC on June 18, 2019. 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 18, 2019

https://www.sec.gov/Archives/edgar/data/313838/000119312519175182/d870848d20f.htm

(2) Management’s Discussion and Analysis of Financial Condition, Results of Operations and Status of Cash Flows

i) Results of Operations

Sony realigned its business segments from the first quarter of the fiscal year ending March 31, 2020 to reflect modifications to the organizational structure of certain segments and a change in the Senior Executives in charge of certain segments as of April 1, 2019. In connection with this decision, the former Home Entertainment & Sound, Imaging Products & Solutions and Mobile Communications segments have been realigned as the Electronics Products & Solutions (“EP&S”) segment. The sales and operating revenue and operating income (loss) of each segment for the fiscal year ended March 31, 2019 have been reclassified to conform to the presentation for the fiscal year ending March 31, 2020.

The former Semiconductors segment has been renamed the Imaging & Sensing Solutions (“I&SS”) segment effective from the first quarter of the fiscal year ending March 31, 2020.

All amounts are presented on the basis of U.S. GAAP. “Sales and operating revenue” (“sales”) 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. For details regarding each segment’s product categories, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 8. Business segment information.”

Consolidated Financial Results

 

     (Billions of yen)  
     Six months ended
September 30
 
      2018     2019  

  Sales and operating revenue

       ¥ 4,136.4     ¥ 4,048.0  

  Operating income

     434.5       509.9  

  Income before income taxes

     558.5       493.1  

  Net income attributable to Sony Corporation’s stockholders

     399.4       340.0  

Sales for the six months ended September 30, 2019 (“the current six months”) decreased 88.4 billion yen compared to the same period of the previous fiscal year (“year-on-year”) to 4 trillion 48 billion yen. This decrease was primarily due to significant decreases in sales in the EP&S and Game & Network Services (“G&NS”) segments, partially offset by increases in sales in the I&SS, Music and Pictures segments. Sales in the current six months also include 7.9 billion yen in patent royalty revenue resulting from the signing of a licensing agreement, recorded within Corporate and elimination.

Operating income in the current six months increased 75.4 billion yen year-on-year to 509.9 billion yen. This increase was primarily due to significant increases in operating income in the I&SS, Pictures and EP&S segments, partially offset by a significant decrease in operating income in the G&NS segment.

Operating income for the same period of the previous fiscal year included the following:

   

Impairment charge against long-lived assets: 16.2 billion yen (EP&S segment)

During the current six months, restructuring charges, net, increased 4.9 billion yen year-on-year to 9.9 billion yen. Restructuring charges are recorded as an operating expense and are included in operating income.

 

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Equity in net income (loss) of affiliated companies in the current six months, recorded within operating income, was income of 3.7 billion yen, compared to a loss of 2.2 billion yen in the same period of the previous fiscal year. This improvement was mainly due to the absence of equity in net loss for DH Publishing, L.P. (“EMI”), which owned and managed EMI Music Publishing, recorded in the Music segment in the same period of the previous fiscal year. For details, please refer to the operating performance analysis of the Music segment below.

The net effect of other income and expenses was an expense of 16.8 billion yen, compared to income of 124.0 billion yen in the same period of the previous fiscal year. This was mainly due to the absence of the 117.8 billion yen gain on equity securities, net, recorded in the same period of the previous fiscal year as a result of Spotify Technology S.A.’s (“Spotify”) public listing.

Income before income taxes decreased 65.4 billion yen year-on-year to 493.1 billion yen.

During the current six months, Sony recorded 126.9 billion yen of income tax expense, resulting in an effective tax rate of 25.7%, which was higher than the effective tax rate of 24.1% in the same period of the previous fiscal year. This higher effective tax rate was mainly due to no longer having valuation allowances recorded against a significant portion of the deferred tax assets in the U.S. consolidated tax group, partially offset by utilizing net operating loss carryforwards of Sony Corporation and its national tax filing group, which has valuation allowances recorded, against increased taxable income. Specifically, income tax expense in Sony Corporation and its national tax filing group for the current six months included 12.7 billion yen of tax benefit resulting from the actual tax expense related to the gain on the sale of Olympus Corporation shares being lower than the deferred tax liabilities recorded for the unrealized gain resulting from the revaluation of those shares.

Net income attributable to Sony Corporation’s stockholders decreased 59.4 billion yen year-on-year to 340.0 billion yen.

Operating performance by business segment for the current six months is as follows:

Game & Network Services (G&NS)

Sales decreased 110.3 billion yen year-on-year to 911.9 billion yen. This decrease was primarily due to a year-on-year decrease in the contribution from first-party software titles, a decrease in PlayStation®4 hardware sales, the impact of foreign exchange rates and a decrease in sales of non-first-party software titles, partially offset by an increase in network services revenue including sales for PlayStation®Plus (“PS Plus”). Operating income decreased by 35.3 billion yen year-on-year to 138.8 billion yen. This significant decrease was primarily due to the above-mentioned decrease in sales of software and the negative impact of foreign exchange rates, partially offset by an increase in network services revenue, including sales for PS Plus, and cost reductions.

Music

On November 14, 2018, Sony acquired the entirety of the approximately 60% equity interest held by the investor consortium led by Mubadala Investment Company in EMI, resulting in EMI becoming a wholly-owned subsidiary of Sony. Financial results of EMI included in the Music segment for the fiscal year ended March 31, 2019 include equity earnings (loss) from April 1 through November 13, 2018 and sales and operating income (loss) from November 14, 2018 through March 31, 2019. Sales and operating income (loss) for the Music segment in the fiscal year ending March 31, 2020 include the financial results of EMI from April 1, 2019 onward.

The Music segment results include the yen-translated results of Sony Music Entertainment (“SME”), Sony/ATV Music Publishing (“Sony/ATV”) and EMI, all U.S.-based operations which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis, and the results of Sony Music Entertainment (Japan) Inc., a Japan-based music company which aggregates its results in yen.

Sales increased 36.2 billion yen year-on-year to 421.5 billion yen. This increase was primarily due to higher sales for Music Publishing resulting from the consolidation of EMI, as well as higher sales for Recorded Music primarily due to an increase in streaming revenues, partially offset by lower sales for Visual Media and Platform primarily due to lower sales for Fate/Grand Order, a game application for mobile devices. Operating income increased 12.2 billion yen year-on-year to 75.8 billion yen primarily due to the impact of the above-mentioned increase in overall segment sales, as well as the absence of equity in net loss for EMI that was recorded in the same period of the previous fiscal year due to an increase in expenses incurred for EMI’s warrant and management equity plans, resulting from an appreciation in the EMI valuation as a result of Sony’s agreement to acquire the approximately 60% interest in EMI owned by the consortium led by Mubadala Investment Company.

 

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Pictures

The results presented in Pictures are a yen-translation of the results of Sony Pictures Entertainment Inc. (“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 30.7 billion yen, a 7% increase year-on-year (an approximate 10% increase on a U.S. dollar basis), to 446.7 billion yen. The increase in sales on a U.S. dollar basis was due to higher sales for Motion Pictures, partially offset by lower sales for Media Networks and Television Productions. The increase in sales for Motion Pictures was primarily due to higher worldwide theatrical revenues year-on-year, as the current period benefited from the strong performances of Spider-Man: Far From Home and Once Upon a Time in Hollywood. The decrease in sales for Media Networks was primarily due to lower advertising and subscription revenues across various channels. The decrease in sales for Television Productions was primarily due to lower licensing revenues for U.S. television catalog product. Operating income increased 23.8 billion yen year-on-year to 39.7 billion yen. This significant increase in operating income was primarily due to the higher worldwide theatrical revenues in Motion Pictures, improved operating results in Media Networks reflecting the benefit of the channel portfolio review that began in the previous fiscal year, as well as lower sports programming costs in India. These increases were partially offset by lower licensing revenues from U.S. television catalog product and higher development expenses for Television Productions.

Electronics Products & Solutions (EP&S)

Sales decreased by 146.7 billion yen year-on-year to 977.4 billion yen. This significant decrease was mainly due to a decrease in unit sales of smartphones and televisions, as well as the impact of foreign exchange rates. Operating income increased 17.3 billion yen year-on-year to 66.5 billion yen. This significant increase was primarily due to reductions in operating costs mainly within Mobile Communications, as well as the absence of the impairment charge against long-lived assets in Mobile Communications recorded in the same period of the previous fiscal year, partially offset by the impact of the above-mentioned decrease in sales and the negative impact of foreign exchange rates.

Imaging & Sensing Solutions (I&SS)

Sales increased 84.7 billion yen year-on-year to 541.4 billion yen, primarily due to a significant increase in sales of image sensors for mobile products, resulting from a significant increase in unit sales as well as an improvement in product mix, partially offset by the impact of foreign exchange rates. Operating income increased 48.8 billion yen year-on-year to 125.9 billion yen. This significant increase was mainly due to the impact of the above-mentioned increase in sales, partially offset by an increase in research and development expenses as well as in depreciation and amortization expenses and the negative impact of foreign exchange rates.

Financial Services

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.

Financial Services revenue increased 25.5 billion yen year-on-year to 714.1 billion yen, mainly due to an increase in revenue at Sony Life. Revenue at Sony Life increased 19.8 billion yen year-on-year to 639.1 billion yen, due to higher insurance premium revenue, mainly from single premium insurance, partially offset by a decrease in net gains on investments in the separate accounts. Operating income increased 5.1 billion yen year-on-year to 84.9 billion yen, primarily due to increases in operating income at Sony Life and Sony Bank. Operating income at Sony Life increased 3.2 billion yen year-on-year to 73.9 billion yen, mainly due to an increase in the policy amount in force. Operating income at Sony Bank increased primarily due to higher interest on loans.

Operating Performance by Geographic Area

For operating performance by geographic area, please refer to “Sales and operating revenue attributed to countries and areas based on location of external customers” in “IV Financial Statements – Notes to Consolidated Financial Statements – 8. Business segment information”.

*    *    *    *    *

 

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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 18, 2019. Although foreign exchange rates have fluctuated during the six-month period ended September 30, 2019, 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  18, 2019

https://www.sec.gov/Archives/edgar/data/313838/000119312519175182/d870848d20f.htm

During the current six months, the average rates of the yen were 108.6 yen against the U.S. dollar and 121.4 yen against the euro, which were 1.7 yen and 8.5 yen higher year-on-year, respectively.

For the current six months, sales were 4 trillion 48 billion yen, a 2% decrease year-on-year, while on a constant currency basis sales were essentially flat year-on-year. For further details about the impact of foreign exchange rate fluctuations on sales and operating income, please refer to the below Note.

Consolidated operating income increased 75.4 billion yen year-on-year to 509.9 billion yen for the current six months. Most of the foreign exchange rate impact was attributable to the impact of foreign exchange rates in the G&NS, EP&S and I&SS segments.

The table below indicates the impact of changes in foreign exchange rates on sales and operating results of each of the above-mentioned three segments. Also, please refer to the “Results of Operations” section, which discusses the impact of foreign exchange rates within segments and categories where foreign exchange rate fluctuations had a significant impact.

 

          (Billions of yen)
                

Impact of
changes in
foreign
exchange rates

                      Six months ended             
September 30
 
          2018            2019  

  G&NS

       Sales      1,022.2        911.9                -28.6
         Operating income      174.1        138.8                  -8.8

  EP&S

       Sales      1,124.1        977.4                -29.9
         Operating income      49.2        66.5                -15.1

  I&SS

       Sales      456.7        541.4                  -9.7
         Operating income      77.1        125.9                  -7.1

In addition, sales for the Music segment increased 9% year-on-year to 421.5 billion yen, an approximate 10% increase on a constant currency basis. In the Pictures segment, sales increased 7% year-on-year to 446.7 billion yen, an approximate 10% increase on a U.S. dollar 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:

Sales on a Constant Currency Basis and the Impact of Foreign Exchange Rate Fluctuations

The descriptions of sales on a constant currency basis reflect sales calculated by applying the yen’s monthly average exchange rates from the same period of the previous fiscal year to local currency-denominated monthly sales in the relevant period of the current fiscal year. For SME, Sony/ATV and EMI in the Music segment, the constant currency amounts are calculated by applying the monthly average U.S. dollar / yen exchange rates after aggregation on a U.S. dollar basis.

The Pictures segment reflects the operations of SPE, a U.S.-based operation that aggregates the results of its worldwide subsidiaries in U.S. dollars. Because of this, the description of the year-on-year change in sales for the Pictures segment represents the change on a U.S. dollar basis.

 

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The impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s periodic weighted average exchange rate for the same period of the previous fiscal year from the relevant period of the current fiscal year to the major transactional currencies in which the sales are denominated. The impact of foreign exchange rate fluctuations on operating income (loss) 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. The I&SS segment enters into its own foreign exchange hedging transactions, and the impact of those transactions is included in the impact of foreign exchange rate fluctuations on operating income (loss) for that segment. Additionally, the impact of foreign exchange hedging transactions entered into by Mobile Communications during the previous fiscal year is included in the impact of foreign exchange rate fluctuations on operating income (loss) for the EP&S segment.

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*

Operating Activities: During the current six months, there was a net cash inflow of 410.5 billion yen from operating activities, a decrease of 0.3 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a net cash inflow of 89.7 billion yen, a decrease of 86.8 billion yen year-on-year. This decrease was primarily due to a smaller increase in notes and accounts payable, trade, as well as a larger increase in inventories. This decrease in net cash inflow was partially offset by the positive impact of a year-on-year increase in net income after taking into account non-cash adjustments (including depreciation and amortization, other operating (income) expense, net and (gain) loss on securities investments, net), as well as a smaller increase in accounts receivable, trade and contract assets.

The Financial Services segment had a net cash inflow of 338.1 billion yen, an increase of 87.4 billion yen year-on-year. This increase was primarily due to a year-on-year increase in net income after taking into account non-cash adjustments such as depreciation and amortization, including amortization of deferred insurance acquisition costs and contract costs.

Investing Activities: During the current six months, Sony used 631.2 billion yen of net cash in investing activities, an increase of 103.2 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 78.2 billion yen, a decrease of 18.0 billion yen year-on-year. This decrease was mainly due to the cash inflow from the sale of all of Sony’s shares of Olympus Corporation, partially offset by an increase in payments for purchases of fixed assets. Additionally, the same period of the previous fiscal year included net cash inflow resulting from the sale of certain shares of Spotify.

The Financial Services segment used 553.0 billion yen of net cash in investing activities, an increase of 121.2 billion yen year-on-year. This increase was mainly due to a year-on-year increase in payments for investments and advances at Sony Life and Sony Bank.

Financing Activities: Net cash inflow by financing activities during the current six months was 28.9 billion yen, compared to a net cash outflow of 0.3 billion yen in the same period of the previous fiscal year.

For all segments excluding the Financial Services segment, there was a 230.3 billion yen net cash outflow, a decrease of 39.9 billion yen year-on-year. This decrease was mainly due to a year-on-year decrease in the redemption of straight bonds and the repayment of long-term debt, as well as funds raised through the issuance of commercial paper (“CP”), partially offset by a payment related to the repurchase of shares of Sony’s own common stock (21,409,600 shares for a total purchase price of 125.0 billion yen, as of September 30, 2019) which was approved at the meeting of its Board of Directors held on May 16, 2019.

In the Financial Services segment, there was a 241.9 billion yen net cash inflow, a decrease of 11.7 billion yen year-on-year. This decrease was primarily due to a smaller increase in deposits from customers at Sony Bank.

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 September 30, 2019 was 1 trillion 252.9 billion yen. Cash and cash equivalents of all segments excluding the Financial Services segment was 716.3 billion yen at September 30, 2019, a decrease of 244.2 billion yen compared with the balance as of March 31, 2019, and a decrease of 358.8 billion yen, compared with the balance as of September 30, 2018. Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 536.6 billion yen at September 30, 2019, an increase of 27.0 billion yen compared with the balance as of March 31, 2019, and an increase of 70.9 billion yen compared with the balance as of September 30, 2018.

 

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Table of Contents

* Sony’s disclosure includes information regarding cash flow for all segments excluding the Financial Services segment. This information is derived from the following condensed statement of cash flows. The condensed statement of cash flows, which includes the above-mentioned cash flow information, is not prepared in accordance with U.S. GAAP, which Sony uses to prepare its consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a comparative presentation may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, but are eliminated in the consolidated figures shown below.

 

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Table of Contents

Condensed Statements of Cash Flows

 

    (Yen in millions)  
    Six months ended September 30  
    Financial Services      

Sony without

Financial Services

 

 

     Consolidated  
    2018       2019       2018       2019        2018        2019  

 

   

 

 

    

 

 

 

Cash flows from operating activities:

             

Net income (loss)

    57,775       60,058       382,662       323,806        423,994        366,173  

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

             

Depreciation and amortization, including amortization of deferred insurance acquisition costs and contract costs

    33,438       43,235       138,388       144,704        171,826        189,939  

Amortization of film costs

    -       -       133,892       138,400        133,892        138,400  

Other operating (income) expense, net

    39       44       13,019       (6,019      13,058        (5,961

(Gain) loss on marketable securities and securities investments, net

    (109,791     (25,820     (124,717     12,939        (234,508      (12,881

Changes in assets and liabilities:

             

(Increase) decrease in notes and accounts receivable, trade and contract assets

    388       914       (185,352     (145,747      (185,855      (144,399

(Increase) decrease in inventories

    -       -       (118,255     (144,148      (118,255      (144,148

(Increase) decrease in film costs

    -       -       (190,494     (176,002      (190,494      (176,002

Increase (decrease) in notes and accounts payable, trade

    -       -       302,979       128,786        302,979        128,786  

Increase (decrease) in future insurance policy benefits and other

    368,871       338,457       -       -        368,871        338,457  

(Increase) decrease in deferred insurance acquisition costs

    (47,090     (48,346     -       -        (47,090      (48,346

(Increase) decrease in marketable securities held in the life insurance business

    (43,949     (88,119     -       -        (43,949      (88,119

Other

    (8,949     55,679       (175,651     (187,001      (183,640      (131,414

 

   

 

 

    

 

 

 

Net cash provided by (used in) operating activities

    250,732       338,102       176,471       89,718        410,829        410,485  

 

   

 

 

    

 

 

 

Cash flows from investing activities:

             

Payments for purchases of fixed assets

    (9,600     (9,379     (145,228     (170,398      (154,819      (179,778

Payments for investments and advances

    (563,301     (681,965     (25,373     (32,320      (588,674      (714,285

Proceeds from sales or return of investments and collections of advances

    140,969       138,242       84,463       91,984        225,432        230,226  

Other

    78       64       (10,019     32,571        (9,940      32,622  

 

   

 

 

    

 

 

 

Net cash provided by (used in) investing activities

    (431,854     (553,038     (96,157     (78,163      (528,001      (631,215

 

   

 

 

    

 

 

 

Cash flows from financing activities:

             

Increase (decrease) in borrowings, net

    146,992       158,510       (192,289     (80,880      (45,298      77,309  

Increase (decrease) in deposits from customers, net

    132,628       110,514       -       -        132,628        110,514  

Dividends paid

    (26,100     (27,189     (18,992     (24,994      (18,992      (24,994

Other

    114       62       (58,987     (124,463      (68,608      (133,920

 

   

 

 

    

 

 

 

Net cash provided by (used in) financing activities

    253,634       241,897       (270,268     (230,337      (270      28,909  

 

   

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

    -       -       70,344       (26,029      70,344        (26,029

 

   

 

 

    

 

 

 

Net increase (decrease) in cash and cash equivalents including restricted

    72,512       26,961       (119,610     (244,811      (47,098      (217,850

Cash and cash equivalents, including restricted, at beginning of the fiscal year

    393,133       509,595       1,199,805       964,218        1,592,938        1,473,813  

 

   

 

 

    

 

 

 

Cash and cash equivalents, including restricted, at end of the period

    465,645       536,556       1,080,195       719,407        1,545,840        1,255,963  

 

   

 

 

    

 

 

 

Less – restricted cash and cash equivalents, included in other current assets and other assets

    -       -       5,061       3,094        5,061        3,094  

 

   

 

 

    

 

 

 

Cash and cash equivalents at end of the period

    465,645       536,556       1,075,134       716,313        1,540,779        1,252,869  

 

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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 18, 2019. 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 18, 2019

https://www.sec.gov/Archives/edgar/data/313838/000119312519175182/d870848d20f.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 18, 2019.

URL: The Annual Report on Form 20-F filed with the SEC on June 18, 2019

https://www.sec.gov/Archives/edgar/data/313838/000119312519175182/d870848d20f.htm

Research and development costs for the six months ended September 30, 2019 totaled 235.7 billion yen. There were no significant changes in research and development activities for the period.

iv) Liquidity Management and Market Access

 

Note for readers of this English translation:

Except for the information related to the committed lines of credit and others set forth below, there was no significant change from the information presented in the Annual Report on Form 20-F filed with the SEC on June 18, 2019. 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 18, 2019

https://www.sec.gov/Archives/edgar/data/313838/000119312519175182/d870848d20f.htm

An important financial objective of Sony is to maintain the strength of its balance sheet, while securing adequate liquidity for business activities. Sony defines its liquidity sources as the amount of cash and cash equivalents (“cash balance”) (excluding restrictions on capital transfers mainly due to national regulations) and the unused amount of committed lines of credit.

Funding requirements that arise from maintaining liquidity are principally covered by cash flow from operating and investing activities (including asset sales) and by the available cash balance; however, Sony also raises funds as needed from financial and capital markets through means such as corporate bonds, CP and bank loans.

Sony Corporation, Sony Global Treasury Services Plc (“SGTS”), a subsidiary in the U.K., and Sony Capital Corporation (“SCC”), a finance subsidiary in the U.S., maintain CP programs with access to the Japanese, U.S. and European CP markets. The borrowing limits under these CP programs, translated into yen, were 1,039.6 billion yen in total for Sony Corporation, SGTS and SCC as of September 30, 2019. Sony issued CP in the U.S. during the fiscal year ended March 31, 2019. The largest month-end outstanding balance of the CP programs during the fiscal year ended March 31, 2019 was approximately 19.0 billion yen in November 2018, and there were no amounts outstanding under the CP programs as of March 31, 2019. Current six months, Sony issued CP in the U.S. and Japan. The largest month-end outstanding balance of the CP programs current six months was 100.0 billion yen as of September 30, 2019.

In October 2019, Sony Corporation issued unsecured straight bonds in the total principal amount of 100.0 billion yen. Sony Corporation used all of the proceeds of the issued bonds for the repayment of 100.0 billion yen of CP, including 70.0 billion yen of CP issued for the purpose of redeeming the Thirtieth Series Unsecured Bonds.

 

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If disruption and volatility occur in financial and capital markets and Sony becomes unable to 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 515.1 billion yen in unused committed lines of credit, as of September 30, 2019. Details of those committed lines of credit are: a 275.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, a 1.7 billion U.S. dollar multicurrency committed line of credit also contracted with a syndicate of Japanese banks and a 525 million U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks. Sony currently believes that it can sustain sufficient liquidity through access to committed lines of credit with financial institutions, together with its available cash balance, even in the event that financial and capital markets become illiquid.

In the event of a downgrade in Sony’s credit ratings, there are no financial covenants in any of Sony’s material financial agreements with financial institutions that would cause an acceleration of the obligation. Even though the cost of borrowing for some committed lines of credit could change according to Sony’s credit ratings, there are no financial covenants that would cause any impairment on the ability to draw down on unused facilities.

(3) Material Contracts

There were no material contracts executed or determined to be executed during the three months ended September 30, 2019.

 

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 18, 2019.

URL: The Annual Report on Form 20-F filed with the SEC on June 18, 2019

https://www.sec.gov/Archives/edgar/data/313838/000119312519175182/d870848d20f.htm

 

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Table of Contents

  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    

second quarterly period    

(September 30, 2019)    

  

As of the filing date of    

the Quarterly    

Securities Report    

(November 6, 2019)    

Common stock      1,272,266,343    1,272,290,543   

Tokyo Stock Exchange

New York Stock Exchange

   The number of shares constituting one full unit is one hundred (100).

Total    

 

  

 

1,272,266,343

 

  

 

1,272,290,543

 

  

 

 

  

 

 

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 (Shihanki Houkokusho) does not include shares issued upon the exercise of stock acquisition rights (“SARs”) (including the exercise of unsecured convertible bonds with SARs (6th series)) during November 2019, the month in which this Quarterly Securities Report was filed.

ii) Stock Acquisition Rights

    ①Description of Stock Option

Not applicable.

    ②Other 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 September 30, 2019.

iii) Status of the Exercise of Moving Strike Convertible Bonds

   Not applicable.

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

 

Period  

Change in the  
total number

of shares

issued  
(Thousands)   

 

Balance of the   
total number

of shares

issued  
(Thousands)   

 

Change in  

the amount of  

common stock  
(Yen in Millions)   

 

Balance of  

the amount of  

common stock  
(Yen in Millions)   

 

Change in the  
legal capital  
surplus  

(Yen in Millions)   

 

Balance of the  
legal capital  
surplus  

(Yen in Millions)   

From July 1 to September 30, 2019    741   1,272,266   1,692   876,579   1,692   1,090,272

Notes:

1.

The increase mentioned above is due to the exercise of SARs (including the exercise of unsecured convertible bonds with SARs (6th series)) and the issuance of new shares of restricted stock as compensation.

2.

Upon the exercise of SARs (including the exercise of unsecured convertible bonds with SARs (6th series)) during the period from July 1 to September 30, 2019, the total number of shares issued increased by 572 thousand shares, and the amount of common stock and the legal capital surplus each increased by 1,215 million yen.

 

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3.

Upon the issuance of new shares of restricted stock as compensation on July 23, 2019, the total number of shares issued increased by 169 thousand shares, and the amount of common stock and the legal capital surplus each increased by 477 million yen.

Outline of the issuance of new shares of restricted stock as compensation on July 23, 2019 is as follows:

Issue Price   Amount of paid-in capital     Allottees
5,648 yen per share     2,824 yen per share  

5 Corporate Executive Officers of the Company,

11 Non-Executive Directors of the Company,

7 Executives of the Company and

1 Executive of the subsidiary of the Company

4.

Upon the exercise of SARs (including the exercise of unsecured convertible bonds with SARs (6th series)) during the period from October 1, 2019 to October 31, 2019, the total number of shares issued increased by 24 thousand shares, and the amount of common stock and the legal capital surplus each increased by 57 million yen.

v) Status of Major Shareholders

(As of September 30, 2019)

 

Name   Address  

Number of
shares held

(Thousands)

 

Percentage

of shares held
to total shares
(Excluding
treasury
shares) issued
(%)

Citibank as Depositary Bank for Depositary

Receipt Holders *1

(Local Custodian: MUFG Bank, Ltd.)

 

388 Greenwich St., 14th fl., New York,

NY 10013, U.S.A.

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

  124,413    10.11

The Master Trust Bank of Japan, Ltd.

(Trust account) *2

  2-11-3, Hamamatsu-cho, Minato-ku, Tokyo   89,967    7.31

Japan Trustee Services Bank, Ltd.

(Trust account) *2

  1-8-11, Harumi, Chuo-ku, Tokyo   78,601    6.39

JP Morgan Chase Bank 380055 *3

(Local Custodian: Mizuho Bank, Ltd.)

 

270 Park Avenue, New York, NY 10017,

United States of America

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

  27,524    2.24

Japan Trustee Services Bank, Ltd.

(Trust account 5) *2

  1-8-11, Harumi, Chuo-ku, Tokyo   26,019    2.11

State Street Bank West Client - Treaty 505234 *3

(Local Custodian: Mizuho Bank, Ltd.)

 

1776 Heritage Drive, North Quincy,

MA 02171, U.S.A.

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

  24,414    1.98

Japan Trustee Services Bank, Ltd.

(Trust account 7) *2

  1-8-11, Harumi, Chuo-ku, Tokyo   23,592    1.92

JP Morgan Chase Bank 385151 *3

(Local Custodian: Mizuho Bank, Ltd.)

 

25 Bank Street, Canary Wharf, London,

E14 5JP, United Kingdom

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

  22,427    1.82

GIC Private Limited - C

(Local Custodian: MUFG Bank, Ltd.)

 

168 Robinson Road #37-01 Capital Tower Singapore068912

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

  19,039    1.55

SSBTC Client Omnibus Account *3

(Local Custodian: The Hongkong and Shanghai

Banking Corporation Limited)

 

One Lincoln Street, Boston MA USA 02111

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

  17,849    1.45
Total           453,845    36.89

 

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Table of Contents

Notes:

*1.

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

*2.

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

*3.

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

  4.

Sumitomo Mitsui Trust Bank, Limited filed its “Amendment to the Bulk Shareholding Report” with the Kanto Financial Bureau in Japan as of September 20, 2019 and reported that Sumitomo Mitsui Trust Asset Management Co., Ltd. and 1 joint holder held shares of the Company as of September 13, 2019 as provided in the below table. As of September 30, 2019, the Company has not been able to confirm the entry of such parties in the register of shareholders.

Name  

Number of shares, etc. held  

(Thousands)

 

Percentage of shares, etc. held

to total shares issued (%)

  Sumitomo Mitsui Trust Asset Management Co., Ltd. and 1 Joint Holder     72,546   5.70
  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 BlackRock Japan Co., Ltd. and 8 Joint Holders held shares of the Company as of March 15, 2017 as provided in the below table. As of September 30, 2019, the Company has not been able to confirm the entry of such parties in the register of shareholders.

Name  

Number of shares, etc. held

(Thousands)

 

Percentage of shares, etc. held

to total shares issued (%)

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

 

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Table of Contents

vi) Status of Voting Rights

1) Shares Issued

(As of September 30, 2019)

 

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.)

       41,923,400    

Shares with full voting rights (Others)

  1,228,422,900   12,284,229  

Shares constituting less than one full unit

         1,920,043     Shares constituting    
less than one full unit    

(100 shares)    

Total number of shares issued

  1,272,266,343    

Total voting rights held by all shareholders

              —                12,284,229  

 

Note:

 

Included in “Shares with full voting rights (Others)” under “Number of shares of common stock” are 19,000 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 190 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 September 30, 2019)

 

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     41,923,400     41,923,400   3.30

Total

    41,923,400     41,923,400   3.30

 

Note:

 

In addition to the 41,923,400 shares listed above, there are 300 shares of common stock held in the name of the Company in the register of shareholders that the Company does not beneficially own. These shares are included in “Shares with full voting rights (Others)” in Table 1) “Shares Issued” above.

(2)    Directors and Corporate Executive Officers

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, 2019 to the filing date of this Quarterly Securities Report (Shihanki Houkokusho).

 

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Table of Contents

IV         Financial Statements

 

     Page  

(1) Consolidated Financial Statements

     19  

      (i)         Consolidated Balance Sheets

     19  

      (ii)        Consolidated Statements of Income

     21  

      (iii)       Consolidated Statements of Comprehensive Income

     23  

      (iv)       Consolidated Statements of Cash Flows

     24  

(2) Other Information

     47  

 

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Table of Contents

(1) Consolidated Financial Statements

(i)    Consolidated Balance Sheets (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

                 Yen in millions                  
      At March 31,
            2019             
    At September 30,
            2019             
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

     1,470,073       1,252,869  

Marketable securities

     1,324,538       1,445,531  

Notes and accounts receivable, trade and contract assets

     1,091,242       1,176,090  

Allowance for doubtful accounts

     (25,440     (24,135

Inventories

     653,278       779,533  

Other receivables

     223,620       234,869  

Prepaid expenses and other current assets

     509,301       543,459  

Total current assets

     5,246,612       5,408,216  

Film costs

     409,005       434,782  

Investments and advances:

    

Affiliated companies

     163,365       188,423  

Securities investments and other

     11,561,286       12,028,384  
       11,724,651       12,216,807  

Property, plant and equipment:

    

Land

     83,992       82,727  

Buildings

     664,157       646,786  

Machinery and equipment

     1,585,382       1,602,882  

Construction in progress

     39,208       49,156  
     2,372,739       2,381,551  

Less – Accumulated depreciation

     1,595,686       1,571,317  
       777,053       810,234  

Other assets:

    

Operating lease right-of-use assets

     -       308,358  

Finance lease right-of-use assets

     -       37,552  

Intangibles, net

     917,966       889,562  

Goodwill

     768,552       749,372  

Deferred insurance acquisition costs

     595,265       605,118  

Deferred income taxes

     202,486       190,808  

Other

     339,996       315,487  
       2,824,265       3,096,257  

Total assets

     20,981,586       21,966,296  

  (Continued on following page.)

 

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Table of Contents

            Consolidated Balance Sheets (Unaudited)

 

 

                 Yen in millions                  
      At March 31,
            2019            
    At September 30,
            2019             
 

LIABILITIES

    

Current liabilities:

    

Short-term borrowings

     618,618       875,226  

Current portion of long-term debt

     172,461       31,564  

Current portion of long-term operating lease liabilities

     -       66,477  

Notes and accounts payable, trade

     492,124       610,407  

Accounts payable, other and accrued expenses

     1,693,048       1,499,157  

Accrued income and other taxes

     135,226       197,386  

Deposits from customers in the banking business

     2,302,314       2,365,411  

Other

     666,024       669,810  

Total current liabilities

     6,079,815       6,315,438  

Long-term debt

     568,372       529,561  

Long-term operating lease liabilities

     -       268,007  

Accrued pension and severance costs

     384,232       372,438  

Deferred income taxes

     531,421       517,673  

Future insurance policy benefits and other

     5,642,671       5,912,918  

Policyholders’ account in the life insurance business

     3,048,202       3,161,271  

Other

     281,382       263,172  

Total liabilities

     16,536,095       17,340.478  

Redeemable noncontrolling interest

     8,801       7,528  

Commitments and contingent liabilities

                

EQUITY

                

Sony Corporation’s stockholders’ equity:

    

Common stock, no par value –

    

At March 31, 2019–Shares authorized: 3,600,000,000, shares issued: 1,271,230,341

     874,291    

At September 30, 2019–Shares authorized: 3,600,000,000, shares issued: 1,272,266,343

       876,579  

Additional paid-in capital

     1,266,874       1,269,813  

Retained earnings

     2,320,586       2,628,516  

Accumulated other comprehensive income –

    

Unrealized gains on securities, net

     135,035       160,877  

Unrealized losses on derivative instruments, net

     (19 )       (327 )  

Pension liability adjustment

     (310,457     (304,430

Foreign currency translation adjustments

     (435,229     (497,816
     (610,670     (641,696

Treasury stock, at cost

    

Common stock

    

At March 31, 2019–20,483,474 shares

     (104,704  

At September 30, 2019–41,923,475 shares

             (229,782
       3,746,377       3,903,430  

Noncontrolling interests

     690,313       714,860  

Total equity

     4,436,690       4,618,290  

Total liabilities and equity

     20,981,586       21,966,296  

  The accompanying notes are an integral part of these statements.

 

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Table of Contents

  (ii)    Consolidated Statements of Income (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

    Yen in millions  
              Six months ended September 30            
     2018     2019  

Sales and operating revenue:

   

Net sales

    3,411,934       3,283,956  

Financial services revenue

    684,733       709,909  

Other operating revenue

    39,717       54,118  
      4,136,384       4,047,983  

Costs and expenses:

   

Cost of sales

    2,335,231       2,218,018  

Selling, general and administrative

    746,890       705,083  

Financial services expenses

    604,490       624,671  

Other operating (income) expense, net

    13,058       (5,961
      3,699,669       3,541,811  

Equity in net income (loss) of affiliated companies

    (2,198     3,708  

Operating income

    434,517       509,880  

Other income:

   

Interest and dividends

    9,305       10,758  

Gain on equity securities, net

    124,714       -  

Other

    2,194       3,155  
      136,213       13,913  

Other expenses:

   

Interest

    7,194       7,664  

Loss on equity securities, net

    -       13,020  

Foreign exchange loss, net

    3,911       8,949  

Other

    1,141       1,048  
      12,246       30,681  

Income before income taxes

    558,484       493,112  

Income taxes

    134,490       126,939  

Net income

    423,994       366,173  

Less - Net income attributable to noncontrolling interests

    24,546       26,164  

Net income attributable to Sony Corporation’s stockholders

    399,448       340,009  
    Yen  
                Six months ended September 30              
         2018             2019      

Per share data:

   

Net income attributable to Sony Corporation’s stockholders

   

– Basic

    315.02       273.52  

– Diluted

    308.17       267.65  

The accompanying notes are an integral part of these statements.

 

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Table of Contents

            Consolidated Statements of Income (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

    Yen in millions  
              Three months ended September 30             
     2018      2019  

Sales and operating revenue:

    

Net sales

    1,809,739        1,725,310  

Financial services revenue

    351,493        375,089  

Other operating revenue

    21,528        21,860  
      2,182,760        2,122,259  

Costs and expenses:

    

Cost of sales

    1,222,744        1,156,980  

Selling, general and administrative

    397,129        354,916  

Financial services expenses

    312,334        336,178  

Other operating (income) expense, net

    13,383        (2,404
      1,945,590        1,845,670  

Equity in net income of affiliated companies

    2,341        2,366  

Operating income

    239,511        278,955  

Other income:

    

Interest and dividends

    4,571        4,953  

Gain on equity securities, net

    9,935        -  

Other

    1,461        2,036  
      15,967        6,989  

Other expenses:

    

Interest

    3,876        2,784  

Loss on equity securities, net

    -        13,343  

Foreign exchange loss, net

    4,922        7,253  

Other

    282        470  
      9,080        23,850  

Income before income taxes

    246,398        262,094  

Income taxes

    59,268        61,927  

Net income

    187,130        200,167  

Less - Net income attributable to noncontrolling interests

    14,129        12,280  

Net income attributable to Sony Corporation’s stockholders

    173,001        187,887  
    Yen  
            Three months ended September 30          
         2018              2019      

Per share data:

    

Net income attributable to Sony Corporation’s stockholders

    

– Basic

    136.38        151.89  

– Diluted

    133.43        148.59  

The accompanying notes are an integral part of these statements.

 

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Table of Contents

  (iii)    Consolidated Statements of Comprehensive Income (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

    Yen in millions  
              Six months ended September 30            
         2018             2019      

Net income

    423,994       366,173  

Other comprehensive income, net of tax —

   

Unrealized gains (losses) on securities

    (21,066     39,925  

Unrealized gains (losses) on derivative instruments

    915       (308

Pension liability adjustment

    4,743       6,040  

Foreign currency translation adjustments

    40,465       (63,750

Total comprehensive income

    449,051       348,080  

Less – Comprehensive income attributable to noncontrolling interests

    13,231       39,097  

Comprehensive income attributable to Sony Corporation’s stockholders

    435,820       308,983  
    Yen in millions  
            Three months ended September 30          
         2018             2019      

Net income

    187,130       200,167  

Other comprehensive income, net of tax —

   

Unrealized gains (losses) on securities

    (24,337     13,624  

Unrealized losses on derivative instruments

    (563     (1,072

Pension liability adjustment

    2,467       3,126  

Foreign currency translation adjustments

    32,168       (21,052

Total comprehensive income

    196,865       194,793  

Less – Comprehensive income attributable to noncontrolling interests

    5,314       16,475  

Comprehensive income attributable to Sony Corporation’s stockholders

    191,551       178,318  

  The accompanying notes are an integral part of these statements.

 

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Table of Contents

  (iv)     Consolidated Statements of Cash Flows (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

    Yen in millions  
        Six months ended September 30      
             2018                     2019          

Cash flows from operating activities:

   

Net income

    423,994       366,173  

Adjustments to reconcile net income to net cash provided by operating activities–

   

Depreciation and amortization, including amortization of deferred insurance acquisition costs and contract costs

    171,826       189,939  

Amortization of film costs

    133,892       138,400  

Accrual for pension and severance costs, less payments

    (5,310     (3,744

Other operating (income) expense, net

    13,058       (5,961

(Gain) loss on securities investments, net (other than financial services business)

    (124,717     12,939  

Gain on marketable securities and securities investments held in the financial services business, net

    (109,791     (25,820

Deferred income taxes

    (3,350     (17,978

Equity in net (income) loss of affiliated companies, net of dividends

    4,559       (924

Changes in assets and liabilities:

   

Increase in notes, accounts receivable, trade and contract assets

    (185,855     (144,399

Increase in inventories

    (118,255     (144,148

Increase in film costs

    (190,494     (176,002

Increase in notes and accounts payable, trade

    302,979       128,786  

Increase in accrued income and other taxes

    62,075       47,557  

Increase in future insurance policy benefits and other

    368,871       338,457  

Increase in deferred insurance acquisition costs

    (47,090     (48,346

Increase in marketable securities held in the life insurance business

    (43,949     (88,119

Increase in other current assets

    (72,246     (33,747

Decrease in other current liabilities

    (43,719     (167,023

Other

    (125,649     44,445  

Net cash provided by operating activities

    410,829       410,485  

(Continued on following page.)

 

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Table of Contents

            Consolidated Statements of Cash Flows (Unaudited)

 

 

    Yen in millions  
        Six months ended September 30      
            2018                     2019          

Cash flows from investing activities:

               

Payments for purchases of fixed assets

    (154,819     (179,778

Proceeds from sales of fixed assets

    11,355       10,611  

Payments for investments and advances by financial services business

    (563,301     (681,965

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

    (25,373     (32,320

Proceeds from sales or return of investments and collections of advances by financial services business

    140,969       138,242  

Proceeds from sales or return of investments and collections of advances (other than financial services business)

    1,996       11,627  

Proceeds from sales of businesses

    -       7,864  

Proceeds related to sales of Spotify Technology S.A. Shares

    82,467       -  

Proceeds from sales of Olympus Corporation Shares

    -       80,357  

Other

    (21,295     14,147  

Net cash used in investing activities

    (528,001     (631,215

Cash flows from financing activities:

   

Proceeds from issuance of long-term debt

    50,958       6,283  

Payments of long-term debt

    (229,504     (186,103

Increase in short-term borrowings, net

    133,248       257,129  

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

    132,628       110,514  

Dividends paid

    (18,992     (24,994

Payments for purchase of treasury stock

    (97     (125,078

Payment for purchase of Nile Acquisition LLC shares from noncontrolling interests

    (32,041     -  

Other

    (36,470     (8,842

Net cash provided by (used in) financing activities

    (270     28,909  

Effect of exchange rate changes on cash and cash equivalents, including restricted

    70,344       (26,029

Net decrease in cash and cash equivalents, including restricted

    (47,098     (217,850

Cash and cash equivalents, including restricted, at beginning of the fiscal year

    1,592,938       1,473,813  

Cash and cash equivalents, including restricted, at end of the period

    1,545,840       1,255,963  

Less - restricted cash and cash equivalents, included in other current assets and other assets

    5,061       3,094  

Cash and cash equivalents at end of the period

    1,540,779       1,252,869  

  The accompanying notes are an integral part of these statements.

 

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Table of Contents

    Index to Notes to Consolidated Financial Statements

 

 

Sony Corporation and Consolidated Subsidiaries

 

Notes to Consolidated Financial Statements   

Page

 

  1.   Summary of significant accounting policies

     27  

  2.   Marketable securities and securities investments

     29  

  3.   Fair value measurements

     31  

  4.   Supplemental equity and comprehensive income information

     33  

  5.   Reconciliation of the differences between basic and diluted EPS

     35  

  6.   Revenue

     36  

  7.   Commitments, contingent liabilities and other

     37  

  8.   Business segment information

     38  

  9.   Subsequent events

     46  

 

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Table of Contents

Notes to Consolidated Financial Statements (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

1.

Summary of significant accounting policies

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

 

(1)

Recently adopted accounting pronouncements:

Leases -

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which amends current leasing guidance. The ASU requires substantially all leases to be recognized on the balance sheet.

Sony has applied this ASU as of April 1, 2019, on a modified retrospective basis with no restatement of comparative periods. Sony has applied the package of practical expedients for leases that expired or existed prior to the adoption date. As a result, Sony did not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, or whether initial direct costs for any existing leases qualify for capitalization. In addition, Sony has applied the short-term lease exception.

As a result of the adoption of this ASU, Sony recognized 316,923 million yen of operating lease right-of-use assets and 341,251 million yen of lease liabilities for operating leases on the consolidated balance sheets at April 1, 2019. This impact is mainly due to operating leases of real estate. The difference of 24,328 million yen between right-of-use assets and lease liabilities represents deferred rent for leases that existed as of the date of adoption, which was offset against the opening balance of operating lease right-of-use assets. Finance lease right-of-use assets which are included in property, plant and equipment in the consolidated balance sheets for the fiscal year ended March 31, 2019, are now presented as finance lease right-of-use assets from April 1, 2019 onward.

Premium amortization on purchased callable debt securities -

In March 2017, the FASB issued ASU 2017-08. This ASU requires certain premiums on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a discount will not be affected. This ASU was effective for Sony as of April 1, 2019. The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.

Targeted improvements to accounting for hedging activities -

In August 2017, the FASB issued ASU 2017-12, which made targeted improvements to the accounting for hedging activities. The amendments in this update simplify certain aspects of hedge accounting for both non-financial and financial risks and better align the recognition and measurement of hedge results with an entity’s risk management activities. This ASU also amends certain presentation and disclosure requirements for hedging activities and changes how an entity assesses hedge effectiveness. This ASU was effective for Sony as of April 1, 2019. The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.

 

(2)

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 infrequent transactions. Such income tax provision is separately reported from the provision based on the ETR in the interim period in which it occurs.

 

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Table of Contents
(3)

Reclassifications:

Certain reclassifications of the financial statements and accompanying footnotes for the six and three months ended September 30, 2018 have been made to conform to the presentation for the six and three months ended September 30, 2019.

 

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Table of Contents
2.

Marketable securities and securities investments

Marketable securities and securities investments, primarily held in the Financial Services segment, include debt 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, 2019     September 30, 2019  
    Cost     Gross
unrealized
gains
    Gross
unrealized
losses
    Fair value     Cost     Gross
unrealized
gains
    Gross
unrealized
losses
    Fair value  

Debt securities:

               

Available-for-sale securities:

               

Japanese national government bonds

    1,422,620         220,989         (20)         1,643,589         1,462,670         247,333         (188)         1,709,815    

Japanese local government bonds

    67,461         70         (34)         67,497         64,036         66         (58)         64,044    

Japanese corporate bonds

    202,433         17,178         (223)         219,388         201,815         21,231         (72)         222,974    

Foreign government bonds

    153,429         8,669         (603)         161,495         163,273         32,965         (21)         196,217    

Foreign corporate bonds

    360,299         944         (376)         360,867         373,708         810         (115)         374,403    

Securitized products

    190,111         1         -          190,112         217,246         1         -          217,247    

Other

    2,286         2,402         -          4,688         2,286         2,449         -          4,735    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    2,398,639         250,253         (1,256)         2,647,636         2,485,034         304,855         (454)         2,789,435    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Held-to-maturity securities:

               

Japanese national government bonds *1

    6,042,635         2,016,786         -          8,059,421         6,114,619         2,257,415         (839)         8,371,195    

Japanese local government bonds

    3,518         388         -          3,906         2,986         374         -          3,360    

Japanese corporate bonds

    409,329         44,348         (5,845)         447,832         462,067         64,978         (3,732)         523,313    

Foreign government bonds *2

    386,392         18,609         (13,742)         391,259         588,166         107,798         -          695,964    

Foreign corporate bonds

    198         11         -          209         198         9         -          207    

Securitized products

    -          -          -          -          5,392         -          (395)         4,997    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    6,842,072         2,080,142         (19,587)         8,902,627         7,173,428         2,430,574         (4,966)         9,599,036    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    9,240,711         2,330,395         (20,843)         11,550,263         9,658,462         2,735,429         (5,420)         12,388,471    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

*1

As of September 30, 2019, held-to-maturity securities include 193,228 million yen of pledged Japanese national government bonds as collateral for short-term lending transactions.

*2

As of September 30, 2019, held-to-maturity securities include 222,847 million yen of pledged Foreign government bonds as collateral for short-term repurchase agreements.

 

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Table of Contents

During the six months ended September 30, 2018 and 2019, respectively, with respect to equity securities included in marketable securities and securities investments, Sony recorded net realized gains of 62,120 million yen and 4,314 million yen due to the sale of equity securities and net unrealized gains of 173,662 million yen and 5,046 million yen due to revaluation of equity securities held at the end of the period for the second quarter of the fiscal year ended March 31, 2019 and ending March 31, 2020, respectively. Gains or losses arising from equity securities held in the Financial Services segment are recorded in financial services revenue, and gains or losses arising from equity securities held in all segments other than the Financial Services segment are recorded in gain (loss) on equity securities, net in the consolidated statement of income. Included in the gains noted above were gains recorded by Sony with respect to the equity securities held by Sony in Spotify Technology S.A. (“Spotify”).

On April 3, 2018, Spotify was publicly listed for trading on the New York Stock Exchange. Sony owned 5.707% of Spotify’s shares at the time of the public listing.

During the six months ended September 30, 2018, Sony sold a portion of the shares for aggregate consideration of 82,616 million yen (768 million U.S. dollars) in cash proceeds. The sale of shares, offset by costs to be paid to its artists and distributed labels and other transaction costs which directly related to the gains recognized from the Spotify shares, resulted in a net pre-tax realized gain of 54,179 million yen (504 million U.S. dollars) recorded in gain on equity securities, net in the consolidated statement of income. The payments to its artists and distributed labels are included within other in the investing activities section of the consolidated statement of cash flows.

The remaining shares retained as of September 30, 2018 had a gross fair value of 105,242 million yen (927 million U.S. dollars), and resulted in a pre-tax unrealized gain, net of costs to be paid to its artists and distributed labels and other costs which directly related to the gains recognized from the Spotify shares, of 63,596 million yen (589 million U.S. dollars) recorded in gain on equity securities, net in the consolidated statement of income.

The revaluation of the remaining Spotify shares retained as of September 30, 2019 resulted in a pre-tax unrealized loss, net of costs to be paid to Sony’s artists and distributed labels, of 8,721 million yen (82 million U.S. dollars) recorded in loss on equity securities, net in the consolidated statements of income.

 

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Table of Contents
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, 2019  
            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:

                       

Debt securities

                       

Trading securities

     22,105          212,012          -          234,117          234,117          -          -          -    

Available-for-sale securities

                       

Japanese national government bonds

     -          1,643,589          -          1,643,589          18,719          1,624,870          -          -    

Japanese local government bonds

     -          67,497          -          67,497          7,768          59,729          -          -    

Japanese corporate bonds

     -          219,388          -          219,388          11,472          207,916          -          -    

Foreign government bonds

     -          161,495          -          161,495          3,984          157,511          -          -    

Foreign corporate bonds

     -          338,163          22,704          360,867          90,801          270,066          -          -    

Securitized products

     -          25,029          165,083          190,112          -          190,112          -          -    

Other

     -          4,688          -          4,688          -          4,688          -          -    

Equity securities

     1,037,100          135,794          -          1,172,894          951,390          221,504          -          -    

Other investments *1

     5,489          1,507          6,918          13,914          -          13,914          -          -    

Derivative assets *2, *3

     444          10,042          -          10,486          -          -          9,431          1,055    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     1,065,138          2,819,204          194,705          4,079,047          1,318,251          2,750,310          9,431          1,055    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

                       

Derivative liabilities *2, *3

     136          32,686          -          32,822          -          -          19,852          12,970    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     136          32,686          -          32,822          -          -          19,852          12,970    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     Yen in millions  
     September 30, 2019  
            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:

                       

Debt securities

                       

Trading securities

     21,578          235,533          -          257,111          257,111          -          -          -    

Available-for-sale securities

                       

Japanese national government bonds

     -          1,709,815          -          1,709,815          15,015          1,694,800          -          -    

Japanese local government bonds

     -          64,044          -          64,044          13,908          50,136          -          -    

Japanese corporate bonds

     -          222,974          -          222,974          18,539          204,435          -          -    

Foreign government bonds

     -          196,217          -          196,217          2,156          194,061          -          -    

Foreign corporate bonds

     -          356,319          18,084          374,403          80,867          293,536          -          -    

Securitized products

     -          32,946          184,301          217,247          -          217,247          -          -    

Other

     -          4,735          -          4,735          -          4,735          -          -    

Equity securities

     1,011,036          141,887          -          1,152,923          1,050,009          102,914          -          -    

Other investments *1

     5,578          1,880          5,892          13,350          -          13,350          -          -    

Derivative assets *2, *3

     47          13,083          -          13,130          -          -          12,659          471    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     1,038,239          2,979,433          208,277          4,225,949          1,437,605          2,775,214          12,659          471    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

                       

Derivative liabilities *2, *3

     1,114          23,600          -          24,714          -          -          10,078          14,636    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     1,114          23,600          -          24,714          -          -          10,078          14,636    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

*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.

 

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Table of Contents
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 six months ended September 30, 2018 and 2019 are as follows:

 

     Yen in millions  
     Sony Corporation’s
    stockholders’ equity    
    Noncontrolling
interests
        Total equity  
  

 

 

 

Balance at March 31, 2018

     2,967,366       679,791       3,647,157     

Cumulative effect of newly adopted ASUs

     (7,550     5,432       (2,118)    

Issuance of new shares

     752       -       752     

Exercise of stock acquisition rights

     11,727       -       11,727     

Conversion of convertible bonds

     14       -       14     

Stock-based compensation

     61       -       61     

Comprehensive income:

      

Net income

     399,448       24,546       423,994     

Other comprehensive income, net of tax —

      

Unrealized losses on securities

     (10,992     (10,074     (21,066)    

Unrealized gains on derivative instruments

     915       -       915     

Pension liability adjustment

     4,674       69       4,743     

Foreign currency translation adjustments

     41,775       (1,310     40,465     
  

 

 

 

Total comprehensive income

     435,820       13,231       449,051     
  

 

 

 

Dividends declared

     (19,034     (27,818     (46,852)    

Purchase of treasury stock

     (97     -       (97)    

Transactions with noncontrolling interests shareholders and other

     (24,021     (22,517     (46,538)    
  

 

 

 

Balance at September 30, 2018

     3,365,038       648,119       4,013,157     
  

 

 

 
     Yen in millions  
     Sony Corporation’s
    stockholders’ equity
    Noncontrolling
interests
        Total equity      
  

 

 

 

Balance at March 31, 2019

     3,746,377       690,313       4,436,690     

Cumulative effect of ASU 2016-02

     (7,472     -       (7,472)    

Issuance of new shares

     954       43       997     

Exercise of stock acquisition rights

     3,599       -       3,599     

Conversion of convertible bonds

     24       -       24     

Stock-based compensation

     1,366       -       1,366     

Comprehensive income:

      

Net income

     340,009       26,164       366,173     

Other comprehensive income, net of tax —

      

Unrealized gains on securities

     25,842       14,083       39,925     

Unrealized losses on derivative instruments

     (308     -       (308)    

Pension liability adjustment

     6,027       13       6,040     

Foreign currency translation adjustments

     (62,587     (1,163     (63,750)    
  

 

 

 

Total comprehensive income

     308,983       39,097       348,080     
  

 

 

 

Dividends declared

     (24,607     (11,438     (36,045)    

Purchase of treasury stock

     (125,078     -       (125,078)    

Transactions with noncontrolling interests shareholders and other

     (716     (3,155     (3,871)    
  

 

 

 

Balance at September 30, 2019

     3,903,430       714,860       4,618,290     
  

 

 

 

There was no material effect of changes in Sony Corporation’s ownership interest in its subsidiaries on Sony Corporation’s stockholders’ equity for the six months ended September 30, 2018 and 2019.

 

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Table of Contents
(2)

Other Comprehensive Income

Changes in accumulated other comprehensive income, net of tax by component for the six months ended September 30, 2018 and 2019 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, 2018

    126,191       (1,242     (296,444     (445,251     (616,746)    

Cumulative effect of ASU2016-01

    (15,526     -       -       -       (15,526)    

Other comprehensive income before reclassifications

    (20,985     2,333       -       43,005       24,353     

Amounts reclassified out of accumulated other comprehensive income

    (81     (1,418     4,743       (2,540     704     
 

 

 

 

Net current-period other comprehensive income

    (21,066     915       4,743       40,465       25,057     

Less: Other comprehensive income attributable to noncontrolling interests

    (10,074     -       69       (1,310     (11,315)    
 

 

 

 

Balance at September 30, 2018

    99,673       (327     (291,770     (403,476     (595,900)    
 

 

 

 
    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, 2019

    135,035       (19     (310,457     (435,229     (610,670)    

Other comprehensive income before reclassifications

    40,058       656       (121     (63,750     (23,157)    

Amounts reclassified out of accumulated other comprehensive income

    (133     (964     6,161       -       5,064     
 

 

 

 

Net current-period other comprehensive income

    39,925       (308     6,040       (63,750     (18,093)    

Less: Other comprehensive income attributable to noncontrolling interests

    14,083       -       13       (1,163     12,933     
 

 

 

 

Balance at September 30, 2019

    160,877       (327     (304,430     (497,816     (641,696)    
 

 

 

 

 

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Table of Contents
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 the three and six months ended September 30, 2018 and 2019 is as follows:

 

    

Yen in millions

    

  Six months ended September 30  

    

2018

  

2019

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

   399,448      340,009  
  

 

  

 

    

Thousands of shares

Weighted-average shares outstanding

   1,268,017      1,243,086  

Effect of dilutive securities:

     

Stock acquisition rights

   4,206      3,247  

Zero coupon convertible bonds

   23,967      24,010  
  

 

  

 

Weighted-average shares for diluted EPS computation

           1,296,190              1,270,343  
  

 

  

 

    

Yen

Basic EPS

   315.02      273.52  
  

 

  

 

Diluted EPS

                   308.17      267.65  
  

 

  

 

Potential shares of common stock that were excluded from the computation of diluted EPS for the six months ended September 30, 2018 and 2019 were 1,412 thousand shares and 2,879 thousand shares, respectively. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the six months ended September 30, 2018 and 2019 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.

 

    

Yen in millions

    

  Three months ended September 30  

    

2018

  

2019

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

   173,001      187,887  
  

 

  

 

    

Thousands of shares

Weighted-average shares outstanding

   1,268,535      1,237,011  

Effect of dilutive securities:

     

Stock acquisition rights

   4,061      3,407  

Zero coupon convertible bonds

   23,966      24,009  
  

 

  

 

Weighted-average shares for diluted EPS computation

           1,296,562              1,264,427  
  

 

  

 

    

Yen

Basic EPS

   136.38      151.89  
  

 

  

 

Diluted EPS

                   133.43      148.59  
  

 

  

 

Potential shares of common stock that were excluded from the computation of diluted EPS for the three months ended September 30, 2018 and 2019 were 1,412 thousand shares and 2,879 thousand shares, respectively. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the three months ended September 30, 2018 and 2019 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.

 

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Table of Contents
6.

Revenue

 

(1)

Contract balances

Contract assets and contract liabilities are composed of the following:

 

     Yen in millions  
     March 31, 2019      September 30, 2019  

Contract assets

     19,147        18,374  

Contract liabilities *

     254,646        234,862  

* Contract liabilities are included in the consolidated balance sheets as Other, both current and non-current.

Contract liabilities principally relate to customer advances received prior to performance. Revenues of 153,638 million yen were recognized during the six months ended September 30, 2019, which were included in the balance of contract liabilities at March 31, 2019.

 

(2)

Performance obligations

Remaining (unsatisfied or partially unsatisfied) performance obligations represent future revenues not yet recorded for firm orders that have not yet been performed. Sony applies practical expedients to exclude certain information about the remaining performance obligations, primarily related to contracts with an expected original duration of less than one year, and sales-based or usage-based royalty revenue on licenses of intellectual property. After applying practical expedients, revenue from contracts with remaining performance obligations, which primarily relate to licensing of theatrical and television content in the Pictures segment, is expected to be recognized primarily within three years.

 

(3)

Disaggregation of revenue

For the breakdown of sales and operating revenue by segments, product categories and geographies, refer to Note 8.

 

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Table of Contents
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 September 30, 2019, the total unused portion of the lines of credit extended under these contracts was 30,737 million yen. Based upon the information currently available, it is not possible to estimate the aggregate amounts of future year-by-year payments for these loan commitments.

 

(2)

Purchase commitments and other

Purchase commitments and other outstanding as of September 30, 2019 amounted to 576,104 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 three years. As of September 30, 2019, these subsidiaries were committed to make payments under such contracts of 100,678 million yen.

Certain subsidiaries in the Music segment have entered into 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 six years. As of September 30, 2019, these subsidiaries were committed to make payments of 113,824 million yen under such contracts.

Sony has entered into purchase contracts for fixed assets. As of September 30, 2019, Sony has committed to make payments of 156,819 million yen under such contracts.

Sony has entered into purchase contracts for materials. As of September 30, 2019, Sony has committed to make payments of 119,642 million yen under such contracts.

Sony has entered into sponsorship contracts related to advertising and promotional rights. These contracts cover various periods mainly within two years. As of September 30, 2019, Sony has committed to make payments of 7,177 million yen under such 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 these investigations have ended. 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 July 2019, the General Court upheld the European Commission’s decision. Sony reviewed the judgment carefully and filed an appeal with the Court of Justice of the European Union in September 2019. 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. All of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States, except one lawsuit which is still pending. Sony believes that final resolution of the pending proceedings will not have a material impact on Sony’s results of operations and financial position.

Since 2011, in relation to the secondary batteries business that was operated by Sony and certain of its subsidiaries, 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. All of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States, except one lawsuit which is still pending. Sony believes that final resolution of the pending proceeding will not have a material impact on Sony’s results of operations and financial position.

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.

 

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Table of Contents
(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 September 30, 2019 amounted to 2,278 million yen.

 

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, 2020 to reflect modifications to the organizational structure of certain segments and a change in the Senior Executives in charge of certain segments as of April 1, 2019. In connection with this decision, the former Home Entertainment & Sound, Imaging Products & Solutions and Mobile Communications segments have been realigned as the Electronics Products & Solutions (“EP&S”) segment. In connection with this realignment, the sales and operating revenue and operating income (loss) of each segment for the fiscal year ended March 31, 2019 have been reclassified to conform to the presentation for the fiscal year ending March 31, 2020. In addition, the former Semiconductors segment has been renamed the Imaging & Sensing Solutions (“I&SS”) segment effective from the first quarter of the fiscal year ending March 31, 2020.

The Game & Network Services (“G&NS”) segment includes network services businesses, the manufacture and sales of home gaming products and production and sales of software. The Music segment includes the Recorded Music, Music Publishing and Visual Media and Platform businesses. The Pictures segment includes the Motion Pictures, Television Productions and Media Networks businesses. The EP&S segment includes the Televisions business, the Audio and Video business, the Still and Video Cameras business, the smartphone business and Internet-related service business. The I&SS segment includes the image sensors business. 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 disc manufacturing and recording media businesses. Sony’s products and services are generally unique to a single operating segment.

 

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Table of Contents

Business segments -

Sales and operating revenue:

 

     Yen in millions  
             Six months ended September 30          

 

       2018             2019      

Sales and operating revenue:

    

Game & Network Services -

    

Customers

             985,734               879,796  

Intersegment

     36,432       32,055  
  

 

 

   

 

 

 

Total

     1,022,166       911,851  

Music -

    

Customers

     378,002       416,780  

Intersegment

     7,325       4,748  
  

 

 

   

 

 

 

Total

     385,327       421,528  

Pictures -

    

Customers

     415,248       446,146  

Intersegment

     704       546  
  

 

 

   

 

 

 

Total

     415,952       446,692  

Electronics Products & Solutions -

    

Customers

     1,115,799       966,967  

Intersegment

     8,322       10,447  
  

 

 

   

 

 

 

Total

     1,124,121       977,414  

Imaging & Sensing Solutions -

    

Customers

     399,597       496,754  

Intersegment

     57,088       44,648  
  

 

 

   

 

 

 

Total

     456,685       541,402  

Financial Services -

    

Customers

     684,733       709,909  

Intersegment

     3,925       4,207  
  

 

 

   

 

 

 

Total

     688,658       714,116  

All Other -

    

Customers

     151,673       118,575  

Intersegment

     20,369       19,913  
  

 

 

   

 

 

 

Total

     172,042       138,488  

Corporate and elimination

     (128,567     (103,508
  

 

 

   

 

 

 
Consolidated total      4,136,384       4,047,983  
  

 

 

   

 

 

 

 

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Table of Contents
     Yen in millions  
             Three months ended September 30          

 

       2018             2019      

Sales and operating revenue:

    

Game & Network Services -

    

Customers

             535,754               438,046  

Intersegment

     14,311       16,344  
  

 

 

   

 

 

 

Total

     550,065       454,390  

Music -

    

Customers

     200,294       216,742  

Intersegment

     3,562       2,533  
  

 

 

   

 

 

 

Total

     203,856       219,275  

Pictures -

    

Customers

     242,021       260,387  

Intersegment

     (1,150     217  
  

 

 

   

 

 

 

Total

     240,871       260,604  

Electronics Products & Solutions -

    

Customers

     551,005       486,311  

Intersegment

     4,958       7,188  
  

 

 

   

 

 

 

Total

     555,963       493,499  

Imaging & Sensing Solutions -

    

Customers

     222,924       285,579  

Intersegment

     31,522       25,145  
  

 

 

   

 

 

 

Total

     254,446       310,724  

Financial Services -

    

Customers

     351,493       375,089  

Intersegment

     1,960       2,092  
  

 

 

   

 

 

 

Total

     353,453       377,181  

All Other -

    

Customers

     77,226       57,943  

Intersegment

     11,892       10,954  
  

 

 

   

 

 

 

Total

     89,118       68,897  

Corporate and elimination

     (65,012     (62,311
  

 

 

   

 

 

 
Consolidated total      2,182,760       2,122,259  
  

 

 

   

 

 

 

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

I&SS intersegment amounts primarily consist of transactions with the G&NS segment and the EP&S segment.

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

Corporate and elimination includes certain brand and patent royalty income.

 

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Table of Contents

Segment profit or loss:

 

     Yen in millions  
             Six months ended September 30          

 

   2018     2019  

Operating income (loss):

    

Game & Network Services

                     174,072                       138,791  

Music

     63,605       75,757  

Pictures

     15,934       39,694  

Electronics Products & Solutions

     49,166       66,453  

Imaging & Sensing Solutions

     77,065       125,906  

Financial Services

     79,741       84,884  

All Other

     5,336       (168
  

 

 

   

 

 

 

Total

     464,919       531,317  

Corporate and elimination

     (30,402     (21,437
  

 

 

   

 

 

 

Consolidated operating income

     434,517       509,880  
  

 

 

   

 

 

 
     Yen in millions  
             Three months ended September 30          

 

   2018     2019  

Operating income (loss):

    

Game & Network Services

     90,622       64,987  

Music

     31,501       37,480  

Pictures

     23,535       39,318  

Electronics Products & Solutions

     16,456       41,387  

Imaging & Sensing Solutions

     47,928       76,378  

Financial Services

     39,160       38,779  

All Other

     5,042       2,434  
  

 

 

   

 

 

 

Total

     254,244       300,763  

Corporate and elimination

     (14,733     (21,808
  

 

 

   

 

 

 

Consolidated operating income

     239,511       278,955  
  

 

 

   

 

 

 

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

 

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Table of Contents

Sales to Customers by Product Category:

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

 

     Yen in millions  
              Six months ended September 30             
  Sales and operating revenue:            2018                      2019          

Game & Network Services

     

Digital Software and Add-on Content

     483,209           442,853     

Network Services

     151,441           167,983     

Hardware and Others

     351,084           268,960     

 

  

 

 

    

 

 

 

Total

     985,734           879,796     

Music

     

Recorded Music

     205,202           224,164     

Music Publishing

     40,900           77,697     

Visual Media and Platform

     131,900           114,919     

 

  

 

 

    

 

 

 

Total

     378,002           416,780     

Pictures

     

Motion Pictures

     177,902           221,241     

Television Productions

     113,897           108,032     

Media Networks

     123,449           116,873     

 

  

 

 

    

 

 

 

Total

     415,248           446,146     

Electronics Products & Solutions

     

Televisions

     378,255           314,240     

Audio and Video

     166,790           162,497     

Still and Video Cameras

     216,290           199,860     

Mobile Communications

     245,240           178,264     

Other

     109,224           112,106     

 

  

 

 

    

 

 

 

Total

     1,115,799           966,967     

Imaging & Sensing Solutions

     399,597           496,754     

Financial Services

     684,733           709,909     

All Other

     151,673           118,575     

Corporate

     5,598           13,056     

 

  

 

 

    

 

 

 

Consolidated total

     4,136,384           4,047,983     
  

 

 

    

 

 

 

 

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Table of Contents
     Yen in millions  
             Three months ended September 30          
Sales and operating revenue:            2018                      2019          

Game & Network Services

     

Digital Software and Add-on Content

     258,267           226,889     

Network Services

     75,997           84,377     

Hardware and Others

     201,490           126,780     

 

  

 

 

    

 

 

 

Total

     535,754           438,046     

Music

     

Recorded Music

     105,463           112,202     

Music Publishing

     19,436           38,407     

Visual Media and Platform

     75,395           66,133     

 

  

 

 

    

 

 

 

Total

     200,294           216,742     

Pictures

     

Motion Pictures

     109,334           140,371     

Television Productions

     68,482           61,546     

Media Networks

     64,205           58,470     

 

  

 

 

    

 

 

 

Total

     242,021           260,387     

Electronics Products & Solutions

     

Televisions

     191,705           166,479     

Audio and Video

     81,861           83,754     

Still and Video Cameras

     103,034           99,606     

Mobile Communications

     114,886           77,714     

Other

     59,519           58,758     

 

  

 

 

    

 

 

 

Total

     551,005           486,311     

Imaging & Sensing Solutions

     222,924           285,579     

Financial Services

     351,493           375,089     

All Other

     77,226           57,943     

Corporate

     2,043           2,162     

 

  

 

 

    

 

 

 

Consolidated total

     2,182,760           2,122,259     
  

 

 

    

 

 

 

Sony has realigned its product category configuration in regard to the new EP&S segment from the first quarter of the fiscal year ending March 31, 2020. In connection with the realignment, all prior period sales amounts by product category in the table above have been reclassified to conform to the current presentation.

In the G&NS segment, Digital Software and Add-on Content includes distribution of software titles and add-on contents through network by Sony Interactive Entertainment; Network Services includes network services relating to game, video and music content; Hardware and Others includes home and portable game consoles, packaged software and peripheral devices. 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. 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 EP&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; Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for broadcast; Mobile Communications includes smartphones and an internet-related service business; Other includes display products such as projectors and medical equipment.

Within the EP&S segment, the operating income (loss) of Mobile Communications for the six months ended September 30, 2018 and 2019 was (40,572) million yen and 1,674 million yen, respectively. In addition, the operating income (loss) of the three months ended September 30, 2018 and 2019 was (29,814) million yen and 635 million yen, respectively.

 

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Table of Contents
     Yen in millions         
             Six months ended September 30                 
     2018      2019         

Depreciation and amortization:

        

Game & Network Services

     14,116           13,690        

Music

     8,867           14,047        

Pictures

     11,864           11,115        

Electronics Products & Solutions, including contract costs

     32,759           29,631        

Imaging & Sensing Solutions

     52,998           61,567        

Financial Services, including deferred insurance acquisition costs

     33,438           45,235        

All Other

     2,356           2,653        
  

 

 

    

 

 

    

Total

     156,398           177,938        

Corporate

     15,428           12,001        
  

 

 

    

 

 

    

Consolidated total

     171,826           189,939        
  

 

 

    

 

 

    
     Yen in millions  
     Six months ended September 30, 2018  
     Total net
      restructuring      
charges
     Depreciation
associated with
  restructured assets  
                 Total              

Restructuring charges and associated depreciation:

        

Game & Network Services

     -           -           -     

Music

     781           -           781     

Pictures

     2,590           -           2,590     

Electronics Products & Solutions

     835           4           839     

Imaging & Sensing Solutions

     -           -           -     

Financial Services

     -           -           -     

All Other and Corporate

     769           -           769     
  

 

 

    

 

 

    

 

 

 

Consolidated total

     4,975           4           4,979     
  

 

 

    

 

 

    

 

 

 
     Yen in millions  
     Six months ended September 30, 2019  
     Total net
      restructuring      
charges
     Depreciation
associated with
  restructured assets  
             Total          

Restructuring charges and associated depreciation:

        

Game & Network Services

     -           -           -     

Music

     485           -           485     

Pictures

     191           -           191     

Electronics Products & Solutions

     6,600           -           6,600     

Imaging & Sensing Solutions

     -           -           -     

Financial Services

     -           -           -     

All Other and Corporate

     2,357           245           2,602     
  

 

 

    

 

 

    

 

 

 

Consolidated total

     9,633           245           9,878     
  

 

 

    

 

 

    

 

 

 

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.

 

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Table of Contents
     Yen in millions         
             Three months ended September 30                 
     2018      2019         

Depreciation and amortization:

        

Game & Network Services

     7,092           6,878        

Music

     4,498           7,268        

Pictures

     5,994           5,362        

Electronics Products & Solutions, including contract costs

     16,467           14,550        

Imaging & Sensing Solutions

     27,058           32,128        

Financial Services, including deferred insurance acquisition costs

     15,532           23,084        

All Other

     1,147           1,257        
  

 

 

    

 

 

    

Total

     77,788           90,527        

Corporate

     7,795           6,000        
  

 

 

    

 

 

    

Consolidated total

     85,583           96,527        
  

 

 

    

 

 

    
     Yen in millions  
     Three months ended September 30, 2018  
     Total net
        restructuring        
charges
     Depreciation
associated with
  restructured assets  
                 Total              

Restructuring charges and associated depreciation:

        

Game & Network Services

     -           -           -     

Music

     781           -           781     

Pictures

     1,988           -           1,988     

Electronics Products & Solutions

     571           4           575     

Imaging & Sensing Solutions

     -           -           -     

Financial Services

     -           -           -     

All Other and Corporate

     326           -           326     
  

 

 

    

 

 

    

 

 

 

Consolidated total

     3,666           4           3,670     
  

 

 

    

 

 

    

 

 

 
     Yen in millions  
     Three months ended September 30, 2019  
     Total net
    restructuring    
charges
     Depreciation
associated with
restructured assets
             Total          

Restructuring charges and associated depreciation:

        

Game & Network Services

     -           -           -     

Music

     485           -           485     

Pictures

     191           -           191     

Electronics Products & Solutions

     4,708           -           4,708     

Imaging & Sensing Solutions

     -           -           -     

Financial Services

     -           -           -     

All Other and Corporate

     896           -           896     
  

 

 

    

 

 

    

 

 

 

Consolidated total

     6,280           -           6,280     
  

 

 

    

 

 

    

 

 

 

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.

 

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Table of Contents

Geographic Information –

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

 

     Yen in millions  
     Six months ended September 30  

  Sales and operating revenue:

               2018                              2019              

Japan

     1,300,839            1,296,780      

United States

     874,767            864,963      

Europe

     843,798            770,006      

China

     383,410            450,408      

Asia-Pacific

     462,018            433,141      

Other Areas

     271,552            232,685      

 

  

 

 

    

 

 

 

Total

     4,136,384            4,047,983      
  

 

 

    

 

 

 
     Yen in millions  
     Three months ended September 30  

  Sales and operating revenue:

               2018                              2019              

Japan

     669,141            669,258      

United States

     475,900            429,935      

Europe

     449,147            407,059      

China

     199,240            249,320      

Asia-Pacific

     255,025            250,038      

Other Areas

     134,307            116,649      
  

 

 

    

 

 

 

Total

     2,182,760            2,122,259      
  

 

 

    

 

 

 

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 six and three months ended September 30, 2018 and 2019.

 

9.

Subsequent event

On October 10, 2019, Sony Corporation issued under its existing domestic bond shelf registration 100.0 billion yen of unsecured straight bonds. The bonds have interest rates and maturity dates as follows:

 

Amount

  

Interest rate

  

Maturity date

30.0 billion yen

   0.13% per annum    October 10, 2024

10.0 billion yen

   0.18% per annum    October 9, 2026

60.0 billion yen

   0.30% per annum    October 10, 2029

 

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Table of Contents

(2) Other Information

(i) Dividends declared

An interim cash dividend for Sony Corporation’s common stock was approved at the Board of Directors meeting held on October 30, 2019 as below:

1. Total amount of interim cash dividends:

24,607 million yen

2. Amount of interim cash dividends per share:

20.00 yen

3. Payment date:

December 2, 2019

Interim cash dividends for the fiscal year ending March 31, 2020 have been incorporated in the accompanying consolidated financial statements.

Note: Interim cash dividends are to be 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 September 30, 2019.

(ii) Litigation

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

 

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