Quarterly Financial Statements
for the Second Quarter Ended September 30, 2019
And
Outlook for the Fiscal Year Ending March 31, 2020
October 30, 2019 | ||
Sony Corporation | ||
Quarterly Financial Statements (Unaudited) | F-1 | |
Consolidated Balance Sheets | F-1 | |
Consolidated Statements of Income (Three months ended September 30) | F-2 | |
Consolidated Statements of Comprehensive Income (Three months ended September 30) | F-2 | |
Consolidated Statements of Income (Six months ended September 30) | F-3 | |
Consolidated Statements of Comprehensive Income (Six months ended September 30) | F-3 | |
Consolidated Statements of Cash Flows (Six months ended September 30) | F-4 | |
Notes to Consolidated Financial Statements | F-5 | |
- | Business Segment Information | F-5 |
- | Going Concern Assumption | F-12 |
- Significant Changes in Shareholders' Equity | F-12 | |
- Accounting Policies and Other Information | F-12 | |
Outlook for the Fiscal Year Ending March 31, 2020 | 1 | |
Outlook for the Fiscal Year Ending March 31, 2020 | 1 | |
Cautionary Statement | 4 |
All amounts are presented on the basis of Generally Accepted Accounting Principles in the U.S. ("U.S. GAAP").
Sony Corporation and its consolidated subsidiaries are together referred to as "Sony".
(Unaudited)
Consolidated Financial Statements
Consolidated Balance Sheets
(Millions of yen) | ||||||||
March 31 | September 30 | Change from | ||||||
ASSETS | 2019 | 2019 | March 31, 2019 | |||||
Current assets: | ||||||||
Cash and cash equivalents | 1,470,073 | 1,252,869 | -217,204 | |||||
Marketable securities | 1,324,538 | 1,445,531 | +120,993 | |||||
Notes and accounts receivable, trade and contract assets | 1,091,242 | 1,176,090 | +84,848 | |||||
Allowance for doubtful accounts | (25,440) | (24,135) | +1,305 | |||||
Inventories | 653,278 | 779,533 | +126,255 | |||||
Other receivables | 223,620 | 234,869 | +11,249 | |||||
Prepaid expenses and other current assets | 509,301 | 543,459 | +34,158 | |||||
Total current assets | 5,246,612 | 5,408,216 | +161,604 | |||||
Film costs | 409,005 | 434,782 | +25,777 | |||||
Investments and advances: | ||||||||
Affiliated companies | 163,365 | 188,423 | +25,058 | |||||
Securities investments and other | 11,561,286 | 12,028,384 | +467,098 | |||||
11,724,651 | 12,216,807 | +492,156 | ||||||
Property, plant and equipment: | ||||||||
Land | 83,992 | 82,727 | -1,265 | |||||
Buildings | 664,157 | 646,786 | -17,371 | |||||
Machinery and equipment | 1,585,382 | 1,602,882 | +17,500 | |||||
Construction in progress | 39,208 | 49,156 | +9,948 | |||||
2,372,739 | 2,381,551 | +8,812 | ||||||
Less-Accumulated depreciation | 1,595,686 | 1,571,317 | -24,369 | |||||
777,053 | 810,234 | +33,181 | ||||||
Other assets: | ||||||||
Operating lease right-of-use assets | - | 308,358 | +308,358 | |||||
Finance lease right-of-use assets | - | 37,552 | +37,552 | |||||
Intangibles, net | 917,966 | 889,562 | -28,404 | |||||
Goodwill | 768,552 | 749,372 | -19,180 | |||||
Deferred insurance acquisition costs | 595,265 | 605,118 | +9,853 | |||||
Deferred income taxes | 202,486 | 190,808 | -11,678 | |||||
Other | 339,996 | 315,487 | -24,509 | |||||
2,824,265 | 3,096,257 | +271,992 | ||||||
Total assets | ||||||||
20,981,586 | 21,966,296 | +984,710 | ||||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings | 618,618 | 875,226 | +256,608 | |||||
Current portion of long-term debt | 172,461 | 31,564 | -140,897 | |||||
Current portion of long-term operating lease liabilities | - | 66,477 | +66,477 | |||||
Notes and accounts payable, trade | 492,124 | 610,407 | +118,283 | |||||
Accounts payable, other and accrued expenses | 1,693,048 | 1,499,157 | -193,891 | |||||
Accrued income and other taxes | 135,226 | 197,386 | +62,160 | |||||
Deposits from customers in the banking business | 2,302,314 | 2,365,411 | +63,097 | |||||
Other | 666,024 | 669,810 | +3,786 | |||||
Total current liabilities | 6,079,815 | 6,315,438 | +235,623 | |||||
Long-term debt | 568,372 | 529,561 | -38,811 | |||||
Long-term operating lease liabilities | - | 268,007 | +268,007 | |||||
Accrued pension and severance costs | 384,232 | 372,438 | -11,794 | |||||
Deferred income taxes | 531,421 | 517,673 | -13,748 | |||||
Future insurance policy benefits and other | 5,642,671 | 5,912,918 | +270,247 | |||||
Policyholders' account in the life insurance business | 3,048,202 | 3,161,271 | +113,069 | |||||
Other | 281,382 | 263,172 | -18,210 | |||||
Total liabilities | 16,536,095 | 17,340,478 | +804,383 | |||||
Redeemable noncontrolling interest | 8,801 | 7,528 | -1,273 | |||||
Equity: | ||||||||
Sony Corporation's stockholders' equity: | ||||||||
Common stock | 874,291 | 876,579 | +2,288 | |||||
Additional paid-in capital | 1,266,874 | 1,269,813 | +2,939 | |||||
Retained earnings | 2,320,586 | 2,628,516 | +307,930 | |||||
Accumulated other comprehensive income | (610,670) | (641,696) | -31,026 | |||||
Treasury stock, at cost | (104,704) | (229,782) | -125,078 | |||||
3,746,377 | 3,903,430 | +157,053 | ||||||
Noncontrolling interests | 690,313 | 714,860 | +24,547 | |||||
Total equity | 4,436,690 | 4,618,290 | +181,600 | |||||
Total liabilities and equity | 20,981,586 | 21,966,296 | +984,710 |
F-1
Consolidated Statements of Income
(Millions of yen, except per share amounts) | |||||||||
Three months ended September 30 | |||||||||
Sales and operating revenue: | 2018 | 2019 | Change | ||||||
Net sales | 1,809,739 | 1,725,310 | -84,429 | ||||||
Financial services revenue | 351,493 | 375,089 | +23,596 | ||||||
Other operating revenue | 21,528 | 21,860 | +332 | ||||||
2,182,760 | 2,122,259 | -60,501 | |||||||
Costs and expenses: | |||||||||
Cost of sales | 1,222,744 | 1,156,980 | -65,764 | ||||||
Selling, general and administrative | 397,129 | 354,916 | -42,213 | ||||||
Financial services expenses | 312,334 | 336,178 | +23,844 | ||||||
Other operating (income) expense, net | 13,383 | (2,404) | -15,787 | ||||||
1,945,590 | 1,845,670 | -99,920 | |||||||
Equity in net income of affiliated companies | 2,341 | 2,366 | +25 | ||||||
Operating income | 239,511 | 278,955 | +39,444 | ||||||
Other income: | |||||||||
Interest and dividends | 4,571 | 4,953 | +382 | ||||||
Gain on equity securities, net | 9,935 | - | -9,935 | ||||||
Other | 1,461 | 2,036 | +575 | ||||||
15,967 | 6,989 | -8,978 | |||||||
Other expenses: | |||||||||
Interest expenses | 3,876 | 2,784 | -1,092 | ||||||
Loss on equity securities, net | - | 13,343 | +13,343 | ||||||
Foreign exchange loss, net | 4,922 | 7,253 | +2,331 | ||||||
Other | 282 | 470 | +188 | ||||||
9,080 | 23,850 | +14,770 | |||||||
Income before income taxes | 246,398 | 262,094 | +15,696 | ||||||
Income taxes | 59,268 | 61,927 | +2,659 | ||||||
Net income | |||||||||
187,130 | 200,167 | +13,037 | |||||||
Less - Net income attributable to noncontrolling interests | 14,129 | 12,280 | -1,849 | ||||||
Net income attributable to Sony Corporation's | |||||||||
173,001 | +14,886 | ||||||||
stockholders | 187,887 | ||||||||
Per share data: | |||||||||
Net income attributable to Sony Corporation's | |||||||||
stockholders | 136.38 | +15.51 | |||||||
- Basic | 151.89 | ||||||||
- Diluted | 133.43 | 148.59 | +15.16 | ||||||
Consolidated Statements of Comprehensive Income | (Millions of yen) | ||||||||
Three months ended September 30 | |||||||||
2018 | 2019 | Change | |||||||
Net income | 187,130 | 200,167 | +13,037 | ||||||
Other comprehensive income, net of tax - | |||||||||
Unrealized gains (losses) on securities | (24,337) | 13,624 | +37,961 | ||||||
Unrealized losses on derivative instruments | (563) | (1,072) | -509 | ||||||
Pension liability adjustment | 2,467 | 3,126 | +659 | ||||||
Foreign currency translation adjustments | 32,168 | (21,052) | -53,220 | ||||||
Total comprehensive income | |||||||||
196,865 | 194,793 | -2,072 | |||||||
Less - Comprehensive income attributable | |||||||||
to noncontrolling interests | 5,314 | 16,475 | +11,161 | ||||||
Comprehensive income attributable | |||||||||
to Sony Corporation's stockholders | 191,551 | 178,318 | -13,233 |
F-2
Consolidated Statements of Income
(Millions of yen, except per share amounts) | ||||||||
Six months ended September 30 | ||||||||
Sales and operating revenue: | 2018 | 2019 | Change | |||||
Net sales | 3,411,934 | 3,283,956 | -127,978 | |||||
Financial services revenue | 684,733 | 709,909 | +25,176 | |||||
Other operating revenue | 39,717 | 54,118 | +14,401 | |||||
4,136,384 | 4,047,983 | -88,401 | ||||||
Costs and expenses: | ||||||||
Cost of sales | 2,335,231 | 2,218,018 | -117,213 | |||||
Selling, general and administrative | 746,890 | 705,083 | -41,807 | |||||
Financial services expenses | 604,490 | 624,671 | +20,181 | |||||
Other operating (income) expense, net | 13,058 | (5,961) | -19,019 | |||||
3,699,669 | 3,541,811 | -157,858 | ||||||
Equity in net income (loss) of affiliated companies | (2,198) | 3,708 | +5,906 | |||||
Operating income | 434,517 | 509,880 | +75,363 | |||||
Other income: | ||||||||
Interest and dividends | 9,305 | 10,758 | +1,453 | |||||
Gain on equity securities, net | 124,714 | - | -124,714 | |||||
Other | 2,194 | 3,155 | +961 | |||||
136,213 | 13,913 | -122,300 | ||||||
Other expenses: | ||||||||
Interest expenses | 7,194 | 7,664 | +470 | |||||
Loss on equity securities, net | - | 13,020 | +13,020 | |||||
Foreign exchange loss, net | 3,911 | 8,949 | +5,038 | |||||
Other | 1,141 | 1,048 | -93 | |||||
12,246 | 30,681 | +18,435 | ||||||
Income before income taxes | 558,484 | 493,112 | -65,372 | |||||
Income taxes | 134,490 | 126,939 | -7,551 | |||||
Net income | ||||||||
423,994 | 366,173 | -57,821 | ||||||
Less - Net income attributable to noncontrolling interests | 24,546 | 26,164 | +1,618 | |||||
Net income attributable to Sony Corporation's | 399,448 | -59,439 | ||||||
stockholders | 340,009 | |||||||
Per share data: | ||||||||
Net income attributable to Sony Corporation's | ||||||||
stockholders | ||||||||
- Basic | 315.02 | 273.52 | -41.50 | |||||
- Diluted | 308.17 | 267.65 | -40.52 | |||||
Consolidated Statements of Comprehensive Income | (Millions of yen) | |||||||
Six months ended September 30 | ||||||||
2018 | 2019 | Change | ||||||
Net income | 423,994 | 366,173 | -57,821 | |||||
Other comprehensive income, net of tax - | ||||||||
Unrealized gains (losses) on securities | (21,066) | 39,925 | +60,991 | |||||
Unrealized gains (losses) on derivative instruments | 915 | (308) | -1,223 | |||||
Pension liability adjustment | 4,743 | 6,040 | +1,297 | |||||
Foreign currency translation adjustments | 40,465 | (63,750) | -104,215 | |||||
Total comprehensive income | ||||||||
449,051 | 348,080 | -100,971 | ||||||
Less - Comprehensive income attributable | ||||||||
to noncontrolling interests | 13,231 | 39,097 | +25,866 | |||||
Comprehensive income attributable | ||||||||
to Sony Corporation's stockholders | 435,820 | 308,983 | -126,837 |
F-3
Consolidated Statements of Cash Flows | (Millions of yen) | ||||||
Six months ended September 30 | |||||||
Cash flows from operating activities: | 2018 | 2019 | |||||
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 | |||||
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 |
F-4
Notes to Consolidated Financial Statements | ||||||||||
Business Segment Information | ||||||||||
(Business Segments) | (Millions of yen) | |||||||||
Sales and operating revenue | Three months ended September 30 | |||||||||
2018 | 2019 | Change | ||||||||
Game & Network Services | 535,754 | -97,708 | ||||||||
Customers | 438,046 | |||||||||
Intersegment | 14,311 | 16,344 | +2,033 | |||||||
Total | 550,065 | 454,390 | -95,675 | |||||||
Music | 200,294 | +16,448 | ||||||||
Customers | 216,742 | |||||||||
Intersegment | 3,562 | 2,533 | -1,029 | |||||||
Total | 203,856 | 219,275 | +15,419 | |||||||
Pictures | 242,021 | +18,366 | ||||||||
Customers | 260,387 | |||||||||
Intersegment | (1,150) | 217 | +1,367 | |||||||
Total | 240,871 | 260,604 | +19,733 | |||||||
Electronics Products & Solutions | 551,005 | -64,694 | ||||||||
Customers | 486,311 | |||||||||
Intersegment | 4,958 | 7,188 | +2,230 | |||||||
Total | 555,963 | 493,499 | -62,464 | |||||||
Imaging & Sensing Solutions | 222,924 | +62,655 | ||||||||
Customers | 285,579 | |||||||||
Intersegment | 31,522 | 25,145 | -6,377 | |||||||
Total | 254,446 | 310,724 | +56,278 | |||||||
Financial Services | 351,493 | +23,596 | ||||||||
Customers | 375,089 | |||||||||
Intersegment | 1,960 | 2,092 | +132 | |||||||
Total | 353,453 | 377,181 | +23,728 | |||||||
All Other | 77,226 | -19,283 | ||||||||
Customers | 57,943 | |||||||||
Intersegment | 11,892 | 10,954 | -938 | |||||||
Total | 89,118 | 68,897 | -20,221 | |||||||
Corporate and elimination | (65,012) | (62,311) | +2,701 | |||||||
Consolidated total | 2,182,760 | 2,122,259 | -60,501 |
Game & Network Services ("G&NS") intersegment amounts primarily consist of transactions with All Other.
Imaging & Sensing Solutions ("I&SS") intersegment amounts primarily consist of transactions with the G&NS segment and the Electronics Products & Solutions ("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.
(Millions of yen) | ||||||||||
Operating income (loss) | Three months ended September 30 | |||||||||
2018 | 2019 | Change | ||||||||
Game & Network Services | 90,622 | 64,987 | -25,635 | |||||||
Music | 31,501 | 37,480 | +5,979 | |||||||
Pictures | 23,535 | 39,318 | +15,783 | |||||||
Electronics Products & Solutions | 16,456 | 41,387 | +24,931 | |||||||
Imaging & Sensing Solutions | 47,928 | 76,378 | +28,450 | |||||||
Financial Services | 39,160 | 38,779 | -381 | |||||||
All Other | 5,042 | 2,434 | -2,608 | |||||||
Total | 254,244 | 300,763 | +46,519 | |||||||
Corporate and elimination | (14,733) | (21,808) | -7,075 | |||||||
Consolidated total | 239,511 | 278,955 | +39,444 |
Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.
The 2018 sales and operating revenue and operating income (loss) above has been reclassified to reflect the change in the business segment classification discussed on page F-13.
F-5
(Business Segments)
(Millions of yen) | ||||||||||
Sales and operating revenue | Six months ended September 30 | |||||||||
2018 | 2019 | Change | ||||||||
Game & Network Services | 985,734 | -105,938 | ||||||||
Customers | 879,796 | |||||||||
Intersegment | 36,432 | 32,055 | -4,377 | |||||||
Total | 1,022,166 | 911,851 | -110,315 | |||||||
Music | ||||||||||
Customers | 378,002 | 416,780 | +38,778 | |||||||
Intersegment | 7,325 | 4,748 | -2,577 | |||||||
Total | 385,327 | 421,528 | +36,201 | |||||||
Pictures | ||||||||||
Customers | 415,248 | 446,146 | +30,898 | |||||||
Intersegment | 704 | 546 | -158 | |||||||
Total | 415,952 | 446,692 | +30,740 | |||||||
Electronics Products & Solutions | ||||||||||
Customers | 1,115,799 | 966,967 | -148,832 | |||||||
Intersegment | 8,322 | 10,447 | +2,125 | |||||||
Total | 1,124,121 | 977,414 | -146,707 | |||||||
Imaging & Sensing Solutions | ||||||||||
Customers | 399,597 | 496,754 | +97,157 | |||||||
Intersegment | 57,088 | 44,648 | -12,440 | |||||||
Total | 456,685 | 541,402 | +84,717 | |||||||
Financial Services | ||||||||||
Customers | 684,733 | 709,909 | +25,176 | |||||||
Intersegment | 3,925 | 4,207 | +282 | |||||||
Total | 688,658 | 714,116 | +25,458 | |||||||
All Other | ||||||||||
Customers | 151,673 | 118,575 | -33,098 | |||||||
Intersegment | 20,369 | 19,913 | -456 | |||||||
Total | 172,042 | 138,488 | -33,554 | |||||||
Corporate and elimination | (128,567) | (103,508) | +25,059 | |||||||
Consolidated total | 4,136,384 | 4,047,983 | -88,401 |
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.
(Millions of yen) | ||||||||||
Operating income (loss) | Six months ended September 30 | |||||||||
2018 | 2019 | Change | ||||||||
Game & Network Services | 174,072 | 138,791 | -35,281 | |||||||
Music | 63,605 | 75,757 | +12,152 | |||||||
Pictures | 15,934 | 39,694 | +23,760 | |||||||
Electronics Products & Solutions | 49,166 | 66,453 | +17,287 | |||||||
Imaging & Sensing Solutions | 77,065 | 125,906 | +48,841 | |||||||
Financial Services | 79,741 | 84,884 | +5,143 | |||||||
All Other | 5,336 | (168) | -5,504 | |||||||
Total | 464,919 | 531,317 | +66,398 | |||||||
Corporate and elimination | (30,402) | (21,437) | +8,965 | |||||||
Consolidated total | 434,517 | 509,880 | +75,363 |
Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.
The 2018 sales and operating revenue and operating income (loss) above has been reclassified to reflect the change in the business segment classification discussed on page F-13.
F-6
(Sales to Customers by Product Category)
The following table is a breakdown of sales and operating revenue to external customers for each segment. Sony management views each segment as a single operating segment.
(Millions of yen) | ||||||||||
Sales and operating revenue (to external customers) | Three months ended September 30 | |||||||||
2018 | 2019 | Change | ||||||||
Game & Network Services | 258,267 | -31,378 | ||||||||
Digital Software and Add-on Content | 226,889 | |||||||||
Network Services | 75,997 | 84,377 | +8,380 | |||||||
Hardware and Others | 201,490 | 126,780 | -74,710 | |||||||
Total | 535,754 | 438,046 | -97,708 | |||||||
Music | ||||||||||
Recorded Music | 105,463 | 112,202 | +6,739 | |||||||
Music Publishing | 19,436 | 38,407 | +18,971 | |||||||
Visual Media and Platform | 75,395 | 66,133 | -9,262 | |||||||
Total | 200,294 | 216,742 | +16,448 | |||||||
Pictures | ||||||||||
Motion Pictures | 109,334 | 140,371 | +31,037 | |||||||
Television Productions | 68,482 | 61,546 | -6,936 | |||||||
Media Networks | 64,205 | 58,470 | -5,735 | |||||||
Total | 242,021 | 260,387 | +18,366 | |||||||
Electronics Products & Solutions | ||||||||||
Televisions | 191,705 | 166,479 | -25,226 | |||||||
Audio and Video | 81,861 | 83,754 | +1,893 | |||||||
Still and Video Cameras | 103,034 | 99,606 | -3,428 | |||||||
Mobile Communications | 114,886 | 77,714 | -37,172 | |||||||
Other | 59,519 | 58,758 | -761 | |||||||
Total | 551,005 | 486,311 | -64,694 | |||||||
Imaging & Sensing Solutions | 222,924 | 285,579 | +62,655 | |||||||
Financial Services | 351,493 | 375,089 | +23,596 | |||||||
All Other | 77,226 | 57,943 | -19,283 | |||||||
Corporate | 2,043 | 2,162 | +119 | |||||||
Consolidated total | 2,182,760 | 2,122,259 | -60,501 |
F-7
(Sales to Customers by Product Category)
(Millions of yen) | ||||||||||
Sales and operating revenue (to external customers) | Six months ended September 30 | |||||||||
2018 | 2019 | Change | ||||||||
Game & Network Services | 483,209 | -40,356 | ||||||||
Digital Software and Add-on Content | 442,853 | |||||||||
Network Services | 151,441 | 167,983 | +16,542 | |||||||
Hardware and Others | 351,084 | 268,960 | -82,124 | |||||||
Total | 985,734 | 879,796 | -105,938 | |||||||
Music | ||||||||||
Recorded Music | 205,202 | 224,164 | +18,962 | |||||||
Music Publishing | 40,900 | 77,697 | +36,797 | |||||||
Visual Media and Platform | 131,900 | 114,919 | -16,981 | |||||||
Total | 378,002 | 416,780 | +38,778 | |||||||
Pictures | ||||||||||
Motion Pictures | 177,902 | 221,241 | +43,339 | |||||||
Television Productions | 113,897 | 108,032 | -5,865 | |||||||
Media Networks | 123,449 | 116,873 | -6,576 | |||||||
Total | 415,248 | 446,146 | +30,898 | |||||||
Electronics Products & Solutions | ||||||||||
Televisions | 378,255 | 314,240 | -64,015 | |||||||
Audio and Video | 166,790 | 162,497 | -4,293 | |||||||
Still and Video Cameras | 216,290 | 199,860 | -16,430 | |||||||
Mobile Communications | 245,240 | 178,264 | -66,976 | |||||||
Other | 109,224 | 112,106 | +2,882 | |||||||
Total | 1,115,799 | 966,967 | -148,832 | |||||||
Imaging & Sensing Solutions | 399,597 | 496,754 | +97,157 | |||||||
Financial Services | 684,733 | 709,909 | +25,176 | |||||||
All Other | 151,673 | 118,575 | -33,098 | |||||||
Corporate | 5,598 | 13,056 | +7,458 | |||||||
Consolidated total | 4,136,384 | 4,047,983 | -88,401 |
Sony has realigned its product category configuration in regard to the segmentation change. For further details, refer to Accounting Policies and Other Information in the Notes to Consolidated Financial Statements. 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 three months ended September 30, 2018 and 2019 was (29,814) million yen and 635 million yen, respectively. In addition, the operating income (loss) of the six months ended September 30, 2018 and 2019 was (40,572) million yen and 1,674 million yen, respectively.
F-8
(Condensed Financial Services Financial Statements)
The following schedules show unaudited condensed financial statements for the Financial Services segment and all other segments excluding Financial Services. These presentations are not in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), which is used by Sony 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, then eliminated in the consolidated figures shown below.
Condensed Balance Sheets
(Millions of yen) | ||||||||||||
Financial Services | Sony without | Consolidated | ||||||||||
Financial Services | ||||||||||||
March 31 | September 30 | March 31 | September 30 | March 31 | September 30 | |||||||
ASSETS | 2019 | 2019 | 2019 | 2019 | 2019 | 2019 | ||||||
Current assets: | ||||||||||||
Cash and cash equivalents | 509,595 | 536,556 | 960,478 | 716,313 | 1,470,073 | 1,252,869 | ||||||
Marketable securities | 1,324,538 | 1,445,531 | - | - | 1,324,538 | 1,445,531 | ||||||
Notes and accounts receivable, trade and contract assets | 16,479 | 15,565 | 1,055,669 | 1,143,171 | 1,065,802 | 1,151,955 | ||||||
Inventories | - | - | 653,278 | 779,533 | 653,278 | 779,533 | ||||||
Other receivables | 63,921 | 52,265 | 159,758 | 183,019 | 223,620 | 234,869 | ||||||
Prepaid expenses and other current assets | 133,214 | 131,303 | 376,778 | 412,863 | 509,301 | 543,459 | ||||||
Total current assets | 2,047,747 | 2,181,220 | 3,205,961 | 3,234,899 | 5,246,612 | 5,408,216 | ||||||
Film costs | - | - | 409,005 | 434,782 | 409,005 | 434,782 | ||||||
Investments and advances | 11,400,938 | 11,971,627 | 399,696 | 320,859 | 11,724,651 | 12,216,807 | ||||||
Investments in Financial Services, at cost | - | - | 153,968 | 153,968 | - | - | ||||||
Property, plant and equipment | 22,920 | 16,132 | 752,847 | 792,816 | 777,053 | 810,234 | ||||||
Other assets: | ||||||||||||
Right-of-use assets | - | 55,984 | - | 290,503 | - | 345,910 | ||||||
Intangibles, net | 42,968 | 44,770 | 874,998 | 844,792 | 917,966 | 889,562 | ||||||
Goodwill | 7,225 | 7,225 | 761,327 | 742,147 | 768,552 | 749,372 | ||||||
Deferred insurance acquisition costs | 595,265 | 605,118 | - | - | 595,265 | 605,118 | ||||||
Deferred income taxes | 3,533 | 3,427 | 198,953 | 187,542 | 202,486 | 190,808 | ||||||
Other | 32,085 | 33,810 | 311,653 | 285,732 | 339,996 | 315,487 | ||||||
681,076 | 750,334 | 2,146,931 | 2,350,716 | 2,824,265 | 3,096,257 | |||||||
Total assets | 14,152,681 | 14,919,313 | 7,068,408 | 7,288,040 | 20,981,586 | 21,966,296 | ||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Short-term borrowings | 564,609 | 723,199 | 226,470 | 183,591 | 791,079 | 906,790 | ||||||
Short-term operating lease liabilities | - | 8,699 | - | 57,969 | - | 66,477 | ||||||
Notes and accounts payable, trade | - | - | 492,124 | 610,407 | 492,124 | 610,407 | ||||||
Accounts payable, other and accrued expenses | 40,228 | 34,246 | 1,653,895 | 1,466,094 | 1,693,048 | 1,499,157 | ||||||
Accrued income and other taxes | 19,655 | 27,015 | 115,571 | 170,371 | 135,226 | 197,386 | ||||||
Deposits from customers in the banking business | 2,302,314 | 2,365,411 | - | - | 2,302,314 | 2,365,411 | ||||||
Other | 197,123 | 213,852 | 474,926 | 462,688 | 666,024 | 669,810 | ||||||
Total current liabilities | 3,123,929 | 3,372,422 | 2,962,986 | 2,951,120 | 6,079,815 | 6,315,438 | ||||||
Long-term debt | 235,761 | 237,809 | 336,349 | 295,811 | 568,372 | 529,561 | ||||||
Long-term operating lease liabilities | - | 41,252 | - | 227,125 | - | 268,007 | ||||||
Accrued pension and severance costs | 33,979 | 34,488 | 350,253 | 337,950 | 384,232 | 372,438 | ||||||
Deferred income taxes | 355,356 | 370,325 | 176,065 | 147,510 | 531,421 | 517,673 | ||||||
Future insurance policy benefits and other | 5,642,671 | 5,912,918 | - | - | 5,642,671 | 5,912,918 | ||||||
Policyholders' account in the life insurance business | 3,048,202 | 3,161,271 | - | - | 3,048,202 | 3,161,271 | ||||||
Other | 15,488 | 18,471 | 288,164 | 266,667 | 281,382 | 263,172 | ||||||
Total liabilities | 12,455,386 | 13,148,956 | 4,113,817 | 4,226,183 | 16,536,095 | 17,340,478 | ||||||
Redeemable noncontrolling interest | - | - | 8,801 | 7,528 | 8,801 | 7,528 | ||||||
Equity: | ||||||||||||
Stockholders' equity of Financial Services | 1,695,563 | 1,768,439 | - | - | - | - | ||||||
Stockholders' equity of Sony without Financial Services | - | - | 2,850,380 | 2,960,149 | - | - | ||||||
Sony Corporation's stockholders' equity | - | - | - | - | 3,746,377 | 3,903,430 | ||||||
Noncontrolling interests | 1,732 | 1,918 | 95,410 | 94,180 | 690,313 | 714,860 | ||||||
Total equity | 1,697,295 | 1,770,357 | 2,945,790 | 3,054,329 | 4,436,690 | 4,618,290 | ||||||
Total liabilities and equity | 14,152,681 | 14,919,313 | 7,068,408 | 7,288,040 | 20,981,586 | 21,966,296 |
F-9
Condensed Statements of Income
(Millions of yen)
Three months ended September 30
Financial Services | Sony without | Consolidated | |||||||||
Financial Services | |||||||||||
2018 | 2019 | 2018 | 2019 | 2018 | 2019 | ||||||
Financial services revenue | 353,453 | 377,181 | - | - | 351,493 | 375,089 | |||||
Net sales and operating revenue | - | - | 1,833,252 | 1,749,121 | 1,831,267 | 1,747,170 | |||||
353,453 | 377,181 | 1,833,252 | 1,749,121 | 2,182,760 | 2,122,259 | ||||||
Cost of sales | - | - | 1,225,837 | 1,160,099 | 1,222,744 | 1,156,980 | |||||
Selling, general and administrative | - | - | 396,019 | 353,760 | 397,129 | 354,916 | |||||
Financial services expenses | 314,296 | 338,273 | - | - | 312,334 | 336,178 | |||||
Other operating (income) expense, net | 14 | 8 | 13,369 | (2,426) | 13,383 | (2,404) | |||||
314,310 | 338,281 | 1,635,225 | 1,511,433 | 1,945,590 | 1,845,670 | ||||||
Equity in net income (loss) of affiliated companies | 17 | (121) | 2,324 | 2,487 | 2,341 | 2,366 | |||||
Operating income | |||||||||||
39,160 | 38,779 | 200,351 | 240,175 | 239,511 | 278,955 | ||||||
Other income (expenses), net | (19) | (45) | 6,906 | (16,815) | 6,887 | (16,861) | |||||
Income before income taxes | |||||||||||
39,141 | 38,734 | 207,257 | 223,360 | 246,398 | 262,094 | ||||||
Income taxes | 10,398 | 10,753 | 48,870 | 51,174 | 59,268 | 61,927 | |||||
Net income | 28,743 | 27,981 | 158,387 | 172,186 | 187,130 | 200,167 | |||||
Less - Net income attributable to noncontrolling interests | 67 | 87 | 4,042 | 2,448 | 14,129 | 12,280 | |||||
Net income of Financial Services | 28,676 | 27,894 | - | - | - | - | |||||
Net income of Sony without Financial Services | - | - | 154,345 | 169,738 | - | - | |||||
Net income attributable to Sony Corporation's stockholders | - | - | - | - | 173,001 | 187,887 | |||||
Six months ended September 30 | |||||||||||
Financial Services | Sony without | Consolidated | |||||||||
Financial Services | |||||||||||
2018 | 2019 | 2018 | 2019 | 2018 | 2019 | ||||||
Financial services revenue | 688,658 | 714,116 | - | - | 684,733 | 709,909 | |||||
Net sales and operating revenue | - | - | 3,455,586 | 3,341,464 | 3,451,651 | 3,338,074 | |||||
688,658 | 714,116 | 3,455,586 | 3,341,464 | 4,136,384 | 4,047,983 | ||||||
Cost of sales | - | - | 2,341,273 | 2,223,968 | 2,335,231 | 2,218,018 | |||||
Selling, general and administrative | - | - | 744,782 | 702,537 | 746,890 | 705,083 | |||||
Financial services expenses | 608,416 | 628,879 | - | - | 604,490 | 624,671 | |||||
Other operating (income) expense, net | 39 | 44 | 13,019 | (6,019) | 13,058 | (5,961) | |||||
608,455 | 628,923 | 3,099,074 | 2,920,486 | 3,699,669 | 3,541,811 | ||||||
Equity in net income (loss) of affiliated companies | (462) | (309) | (1,736) | 4,017 | (2,198) | 3,708 | |||||
Operating income | |||||||||||
79,741 | 84,884 | 354,776 | 424,995 | 434,517 | 509,880 | ||||||
Other income (expenses), net | (36) | (91) | 140,446 | 1,015 | 123,967 | (16,768) | |||||
Income before income taxes | |||||||||||
79,705 | 84,793 | 495,222 | 426,010 | 558,484 | 493,112 | ||||||
Income taxes | 21,930 | 24,735 | 112,560 | 102,204 | 134,490 | 126,939 | |||||
Net income | 57,775 | 60,058 | 382,662 | 323,806 | 423,994 | 366,173 | |||||
Less - Net income attributable to noncontrolling interests | 113 | 173 | 3,689 | 5,072 | 24,546 | 26,164 | |||||
Net income of Financial Services | 57,662 | 59,885 | - | - | - | - | |||||
Net income of Sony without Financial Services | - | - | 378,973 | 318,734 | - | - | |||||
Net income attributable to Sony Corporation's stockholders | - | - | - | - | 399,448 | 340,009 |
F-10
Condensed Statements of Cash Flows
(Millions of yen)
Six months ended September 30
Financial Services | Sony without | Consolidated | ||||||||||
Financial Services | ||||||||||||
Cash flows from operating activities: | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | ||||||
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 | 45,235 | 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, 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 |
F-11
Going Concern Assumption
Not Applicable
Significant Changes in Shareholders' Equity
Based on the resolution of the Board of Directors at the meeting held on May 16, 2019, Sony Corporation repurchased 21,409,600 shares of its common stock for 124,999 million yen during the six months ended September 30, 2019. The balance of treasury stock was 229,782 million yen, at cost, as of September 30, 2019 primarily due to the above-mentioned repurchase of common stock.
Accounting Policies and Other Information
(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.
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.
(Number of Consolidated Subsidiaries and Affiliated Companies)
As of September 30, 2019, Sony had 1,546 consolidated subsidiaries (including variable interest entities) and 132 affiliated companies accounted for under the equity method.
(Weighted-average Number of Outstanding Shares Used for the Computation of EPS of Common Stock)
(Thousands of shares) | ||
Three months ended September 30 | ||
Net income attributable to Sony Corporation's stockholders | 2018 | 2019 |
- Basic | 1,268,535 | 1,237,011 |
- Diluted | 1,296,562 | 1,264,427 |
F-12
(Thousands of shares) | ||
Six months ended September 30 | ||
Net income attributable to Sony Corporation's stockholders | 2018 | 2019 |
- Basic | 1,268,017 | 1,243,086 |
- Diluted | 1,296,190 | 1,270,343 |
The dilutive effect in the weighted-average number of outstanding shares for the three and six months ended September 30, 2018 and 2019 primarily resulted from convertible bonds which were issued in July 2015.
(Segmentation)
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 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.
(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.
(Reclassifications)
Certain reclassifications of the financial statements and accompanying footnotes for the three and six months ended September 30, 2018 have been made to conform to the presentation for the three and six months ended September 30, 2019.
(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 |
F-13
Outlook for the Fiscal Year Ending March 31, 2020
The forecast for consolidated results for the fiscal year ending March 31, 2020, as announced on July 30, 2019, has been revised as follows:
(Billions of yen) | October | Change from | |||||
March 31, 2019 | July | ||||||
Results | Forecast | Forecast | July Forecast | ||||
Sales and operating revenue | ¥8,665.7 | ¥ 8,600 | ¥8,400 | -¥200 billion | -2.3% | ||
Operating income | 894.2 | 810 | 840 | +¥30 billion | +3.7% | ||
Income before income taxes | 1,011.6 | 770 | 800 | +¥30 billion | +3.9% | ||
Net income attributable to Sony | 916.3 | 500 | 540 | +¥40 billion | +8.0% | ||
Corporation's stockholders | |||||||
Assumed foreign exchange rates are the following:
Assumed foreign exchange | (For your reference) | |||
rates for the six months | Assumed foreign exchange rates for the fiscal year ending | |||
ending March 31, 2020 | March 31, 2020 at the time of the July forecast | |||
1 | U.S. dollar | approximately 108 yen | approximately 108 yen | |
1 | Euro | approximately 118 yen | approximately 123 yen |
Consolidated sales and operating revenue ("sales") for the fiscal year ending March 31, 2020 are expected to be lower than the July forecast due to lower-than-expected sales in the Game & Network Services ("G&NS"), Electronics Products & Solutions ("EP&S") and Pictures segments, partially offset by higher-than-expected sales in the Imaging & Sensing Solutions ("I&SS") and Music segments.
Consolidated operating income is expected to be higher than the July forecast due to an expected increase in operating income primarily in the I&SS segment and an expected decrease in operating loss in All Other, Corporate and elimination, partially offset by expected decreases in operating income in the G&NS and EP&S segments.
Restructuring charges for the Sony Group are expected to be approximately 24.0 billion yen, which remains unchanged from the July forecast, compared to 33.1 billion yen in the fiscal year ended March 31, 2019. Restructuring charges are recorded as an operating expense and are included in the forecast for operating income.
Income before income taxes is expected to be 800 billion yen, which is higher than the July forecast. This expected increase is primarily due to the above-mentioned expected increase in operating income.
Net income attributable to Sony Corporation's stockholders is expected to be higher than the July forecast due to the above-mentioned expected increase in income before income taxes, as well as lower-than-expected effective tax rates.
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The forecast for each business segment for the fiscal year ending March 31, 2020 has been revised as follows:
(Billions of yen) | October | ||
March 31, 2019 | July | ||
Results | Forecast | Forecast | |
Game & Network Services (G&NS) | ¥2,000 | ||
Sales and operating revenue | ¥2,310.9 | ¥2,200 | |
Operating income | 311.1 | 280 | 240 |
Music | 850 | ||
Sales and operating revenue | 807.5 | 830 | |
Operating income | 232.5 | 135 | 140 |
Pictures | 1,030 | ||
Sales and operating revenue | 986.9 | 1,080 | |
Operating income | 54.6 | 65 | 70 |
Electronics Products & Solutions (EP&S) * | 2,110 | ||
Sales and operating revenue | 2,320.6 | 2,160 | |
Operating income | 76.5 | 121 | 111 |
Imaging & Sensing Solutions (I&SS) ** | 1,040 | ||
Sales and operating revenue | 879.3 | 990 | |
Operating income | 143.9 | 145 | 200 |
Financial Services | 1,330 | ||
Financial services revenue | 1,282.5 | 1,330 | |
Operating income | 161.5 | 170 | 170 |
All Other, Corporate and elimination | (91) | ||
Operating loss | (85.8) | (106) | |
Consolidated | 8,400 | ||
Sales and operating revenue | 8,665.7 | 8,600 | |
Operating income | 894.2 | 810 | 840 |
- 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 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.
Game & Network Services (G&NS)
Sales are expected to be lower than the July forecast primarily due to lower-than-expected software sales including the impact of a change in the launch date of a first-party title, lower-than-expected PlayStation®4 hardware unit sales and the impact of foreign exchange rates. Operating income is expected to be significantly lower than the July forecast primarily due to the impact of the above-mentioned expected decrease in software sales and the negative impact of foreign exchange rates, partially offset by expected cost reductions and an increase in sales for PlayStation®Plus.
Music
Sales are expected to be higher than the July forecast primarily due to an expected increase in streaming revenues in Recorded Music and Music Publishing. Operating income is expected to be higher than the July forecast primarily due to the impact of the above-mentioned expected increase in sales.
Pictures
Sales are expected to be lower than the July forecast primarily due to a delay in the timing of theatrical releases in Motion Pictures, as well as lower advertising and subscription revenues in Media Networks primarily due to the impact of the channel portfolio review that began in the previous fiscal year. Operating income is expected to be higher than the July forecast primarily due to an expected decrease in marketing costs resulting from the above-mentioned release date changes in Motion Pictures and higher operating results in India as well as the benefit of the above-mentioned portfolio review in Media Networks.
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Electronics Products & Solutions (EP&S)
Sales are expected to be lower than the July forecast primarily due to lower-than-expected unit sales of televisions and the impact of foreign exchange rates. Operating income is expected to be lower than the July forecast primarily due to the negative impact of foreign exchange rates and the impact of the above-mentioned expected decrease in sales, partially offset by expected further reductions in operating costs.
Imaging & Sensing Solutions (I&SS)
Sales are expected to be higher than the July forecast due to higher-than-expected sales of image sensors for mobile products, resulting from an improvement in product mix and higher-than-expected unit sales. Operating income is expected to be significantly higher than the July forecast primarily due to the impact of the above-mentioned expected increase in sales.
The forecasts for financial services revenue and operating income for the Financial Services segment remain unchanged from the July forecast.
The effects of future gains and losses on investments held by the Financial Services segment due to market fluctuations have not been incorporated within the above forecast as it is difficult for Sony to predict market trends in the future. Accordingly, future market fluctuations could further impact the current forecast.
The above forecast is based on management's current expectations and is subject to uncertainties and changes in circumstances. Actual results may differ materially from those included in this forecast due to a variety of factors. See "Cautionary Statement" below.
Notes about Financial Performance of the Music, Pictures and Financial Services segments
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 DH Publishing, L.P. ("EMI"), which owned and managed EMI Music Publishing, 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, Sony/ATV Music Publishing 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.
The results presented in Pictures are a yen-translation of the results of Sony Pictures Entertainment Inc., a U.S.-based operation that aggregates the results of its worldwide subsidiaries on a U.S. dollar basis.
The Financial Services segment results include Sony Financial Holdings Inc. ("SFH") and SFH's consolidated subsidiaries such as Sony Life Insurance Co., Ltd., Sony Assurance Inc. and Sony Bank Inc. The results discussed in the Financial Services segment differ from the results that SFH discloses separately on a Japanese statutory basis.
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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:
- Sony's ability to maintain product quality and customer satisfaction with its products and services;
- 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;
- 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;
- 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;
- changes in laws, regulations and government policies in the markets in which Sony and itsthird-party suppliers, service providers and business partners operate, including those related to taxation, as well as growing consumer focus on corporate social responsibility;
- 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;
- 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;
- 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;
- 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;
- Sony's ability to forecast demands, manage timely procurement and control inventories;
- 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;
- Sony's ability to recruit, retain and maintain productive relations with highly skilled personnel;
- 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;
- 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;
- 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;
- risks related to catastrophic disasters or similar events;
- the ability of Sony, itsthird-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
- 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 U.S. Securities and Exchange Commission.
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Sony Corporation published this content on 30 October 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 October 2019 09:41:10 UTC