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 OCTOBER 2020
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 | |
Executive Deputy President and | |
Chief Financial Officer |
Date: October 28, 2020
List of materials
Documents attached hereto:
i) Press release: Quarterly Financial Statements for the Second Quarter Ended September 30, 2020 And Outlook for the Fiscal Year Ending March 31, 2021
Quarterly Financial Statements
for the Second Quarter Ended September 30, 2020
And
Outlook for the Fiscal Year Ending March 31, 2021
October 28, 2020
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, 2021 | 1 |
Outlook for the Fiscal Year Ending March 31, 2021 | 1 |
Cautionary Statement | 5 |
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 | 2020 | 2020 | March 31, 2020 | |||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | ¥ | 1,512,357 | ¥ | 1,884,368 | ¥ | +372,011 | ||||||
Marketable securities | 1,847,772 | 2,540,460 | +692,688 | |||||||||
Notes and accounts receivable, trade and contract assets | 1,028,793 | 1,046,907 | +18,114 | |||||||||
Allowance for credit losses | (25,873 | ) | (25,011 | ) | +862 | |||||||
Inventories | 589,969 | 681,685 | +91,716 | |||||||||
Other receivables | 188,106 | 315,989 | +127,883 | |||||||||
Prepaid expenses and other current assets | 594,021 | 538,298 | –55,723 | |||||||||
Total current assets | 5,735,145 | 6,982,696 | +1,247,551 | |||||||||
Film costs | 427,336 | 401,499 | –25,837 | |||||||||
Investments and advances: | ||||||||||||
Affiliated companies | 207,922 | 214,217 | +6,295 | |||||||||
Securities investments and other | 12,526,210 | 13,176,045 | +649,835 | |||||||||
Allowance for credit losses | - | (8,124 | ) | –8,124 | ||||||||
12,734,132 | 13,382,138 | +648,006 | ||||||||||
Property, plant and equipment: | ||||||||||||
Land | 81,482 | 79,341 | –2,141 | |||||||||
Buildings | 659,556 | 655,991 | –3,565 | |||||||||
Machinery and equipment | 1,725,720 | 1,656,886 | –68,834 | |||||||||
Construction in progress | 76,391 | 102,084 | +25,693 | |||||||||
2,543,149 | 2,494,302 | –48,847 | ||||||||||
Less-Accumulated depreciation | 1,634,505 | 1,551,922 | –82,583 | |||||||||
908,644 | 942,380 | +33,736 | ||||||||||
Other assets: | ||||||||||||
Operating lease right-of-use assets | 359,510 | 348,177 | –11,333 | |||||||||
Finance lease right-of-use assets | 33,100 | 43,253 | +10,153 | |||||||||
Intangibles, net | 906,310 | 899,281 | –7,029 | |||||||||
Goodwill | 783,888 | 778,297 | –5,591 | |||||||||
Deferred insurance acquisition costs | 600,901 | 627,893 | +26,992 | |||||||||
Deferred income taxes | 210,372 | 197,279 | –13,093 | |||||||||
Other | 340,005 | 348,920 | +8,915 | |||||||||
3,234,086 | 3,243,100 | +9,014 | ||||||||||
Total assets | ¥ | 23,039,343 | ¥ | 24,951,813 | ¥ | +1,912,470 | ||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Short-term borrowings | ¥ | 810,176 | ¥ | 1,294,800 | ¥ | +484,624 | ||||||
Current portion of long-term debt | 29,807 | 118,832 | +89,025 | |||||||||
Current portion of long-term operating lease liabilities | 68,942 | 73,585 | +4,643 | |||||||||
Notes and accounts payable, trade | 380,810 | 669,611 | +288,801 | |||||||||
Accounts payable, other and accrued expenses | 1,630,197 | 1,533,438 | –96,759 | |||||||||
Accrued income and other taxes | 145,996 | 162,066 | +16,070 | |||||||||
Deposits from customers in the banking business | 2,440,783 | 2,655,330 | +214,547 | |||||||||
Other | 733,732 | 1,007,147 | +273,415 | |||||||||
Total current liabilities | 6,240,443 | 7,514,809 | +1,274,366 | |||||||||
Long-term debt | 634,966 | 745,581 | +110,615 | |||||||||
Long-term operating lease liabilities | 314,836 | 299,834 | –15,002 | |||||||||
Accrued pension and severance costs | 324,655 | 316,457 | –8,198 | |||||||||
Deferred income taxes | 549,538 | 325,939 | -223,599 | |||||||||
Future insurance policy benefits and other | 6,246,047 | 6,420,438 | +174,391 | |||||||||
Policyholders’ account in the life insurance business | 3,642,271 | 3,967,126 | +324,855 | |||||||||
Other | 289,285 | 281,117 | –8,168 | |||||||||
Total liabilities | 18,242,041 | 19,871,301 | +1,629,260 | |||||||||
Redeemable noncontrolling interest | 7,767 | 7,674 | –93 | |||||||||
Equity: | ||||||||||||
Sony Corporation’s stockholders’ equity: | ||||||||||||
Common stock | 880,214 | 880,214 | - | |||||||||
Additional paid-in capital | 1,289,719 | 1,485,728 | +196,009 | |||||||||
Retained earnings | 2,768,856 | 3,418,107 | +649,251 | |||||||||
Accumulated other comprehensive income | (580,980 | ) | (597,184 | ) | –16,204 | |||||||
Treasury stock, at cost | (232,503 | ) | (156,364 | ) | +76,139 | |||||||
4,125,306 | 5,030,501 | +905,195 | ||||||||||
Noncontrolling interests | 664,229 | 42,337 | –621,892 | |||||||||
Total equity | 4,789,535 | 5,072,838 | +283,303 | |||||||||
Total liabilities and equity | ¥ | 23,039,343 | ¥ | 24,951,813 | ¥ | +1,912,470 |
F-1
Consolidated Statements of Income | ||||||||||||
(Millions of yen, except per share amounts) | ||||||||||||
Three months ended September 30 | ||||||||||||
2019 | 2020 | Change | ||||||||||
Sales and operating revenue: | ||||||||||||
Net sales | ¥ | 1,725,310 | ¥ | 1,723,575 | ¥ | –1,735 | ||||||
Financial services revenue | 375,089 | 372,107 | –2,982 | |||||||||
Other operating revenue | 21,860 | 17,804 | –4,056 | |||||||||
2,122,259 | 2,113,486 | –8,773 | ||||||||||
Costs and expenses: | ||||||||||||
Cost of sales | 1,156,980 | 1,145,988 | –10,992 | |||||||||
Selling, general and administrative | 354,916 | 329,307 | –25,609 | |||||||||
Financial services expenses | 336,178 | 328,385 | –7,793 | |||||||||
Other operating income, net | (2,404 | ) | (5,538 | ) | –3,134 | |||||||
1,845,670 | 1,798,142 | –47,528 | ||||||||||
Equity in net income of affiliated companies | 2,366 | 2,420 | +54 | |||||||||
Operating income | 278,955 | 317,764 | +38,809 | |||||||||
Other income: | ||||||||||||
Interest and dividends | 4,953 | 2,520 | –2,433 | |||||||||
Other | 2,036 | 1,524 | –512 | |||||||||
6,989 | 4,044 | –2,945 | ||||||||||
Other expenses: | ||||||||||||
Interest expenses | 2,784 | 2,704 | –80 | |||||||||
Loss on equity securities, net | 13,343 | 11,407 | –1,936 | |||||||||
Foreign exchange loss, net | 7,253 | 3,690 | –3,563 | |||||||||
Other | 470 | 4,403 | +3,933 | |||||||||
23,850 | 22,204 | –1,646 | ||||||||||
Income before income taxes | 262,094 | 299,604 | +37,510 | |||||||||
Income taxes | 61,927 | (163,898 | ) | –225,825 | ||||||||
Net income | 200,167 | 463,502 | +263,335 | |||||||||
Less - Net income attributable to noncontrolling interests | 12,280 | 3,868 | –8,412 | |||||||||
Net income attributable to Sony Corporation’s | ||||||||||||
stockholders | ¥ | 187,887 | ¥ | 459,634 | ¥ | +271,747 | ||||||
Per share data: | ||||||||||||
Net income attributable to Sony Corporation’s | ||||||||||||
stockholders | ||||||||||||
— Basic | ¥ | 151.89 | ¥ | 374.34 | ¥ | +222.45 | ||||||
— Diluted | 148.59 | 367.82 | +219.23 |
Consolidated Statements of Comprehensive Income | ||||||||||||
(Millions of yen) | ||||||||||||
Three months ended September 30 | ||||||||||||
2019 | 2020 | Change | ||||||||||
Net income | ¥ | 200,167 | ¥ | 463,502 | ¥ | +263,335 | ||||||
Other comprehensive income, net of tax – | ||||||||||||
Unrealized gains (losses) on securities | 13,624 | (5,771 | ) | –19,395 | ||||||||
Unrealized losses on derivative instruments | (1,072 | ) | (611 | ) | +461 | |||||||
Pension liability adjustment | 3,126 | 3,893 | +767 | |||||||||
Foreign currency translation adjustments | (21,052 | ) | (11,987 | ) | +9,065 | |||||||
Debt valuation adjustments | - | 457 | +457 | |||||||||
Total comprehensive income | 194,793 | 449,483 | +254,690 | |||||||||
Less - Comprehensive income attributable | ||||||||||||
to noncontrolling interests | 16,475 | 4,588 | –11,887 | |||||||||
Comprehensive income attributable | ||||||||||||
to Sony Corporation’s stockholders | ¥ | 178,318 | ¥ | 444,895 | ¥ | +266,577 | ||||||
F-2
Consolidated Statements of Income | |||||||||||
(Millions of yen, except per share amounts) | |||||||||||
Six months ended September 30 | |||||||||||
2019 | 2020 | Change | |||||||||
Sales and operating revenue: | |||||||||||
Net sales | ¥ | 3,283,956 | ¥ | 3,228,445 | ¥ | –55,511 | |||||
Financial services revenue | 709,909 | 817,023 | +107,114 | ||||||||
Other operating revenue | 54,118 | 36,937 | –17,181 | ||||||||
4,047,983 | 4,082,405 | +34,422 | |||||||||
Costs and expenses: | |||||||||||
Cost of sales | 2,218,018 | 2,198,661 | –19,357 | ||||||||
Selling, general and administrative | 705,083 | 630,473 | –74,610 | ||||||||
Financial services expenses | 624,671 | 726,044 | +101,373 | ||||||||
Other operating income, net | (5,961 | ) | (16,786 | ) | –10,825 | ||||||
3,541,811 | 3,538,392 | –3,419 | |||||||||
Equity in net income of affiliated companies | 3,708 | 2,146 | –1,562 | ||||||||
Operating income | 509,880 | 546,159 | +36,279 | ||||||||
Other income: | |||||||||||
Interest and dividends | 10,758 | 5,356 | –5,402 | ||||||||
Gain on equity securities, net | - | 85,493 | +85,493 | ||||||||
Other | 3,155 | 2,797 | –358 | ||||||||
13,913 | 93,646 | +79,733 | |||||||||
Other expenses: | |||||||||||
Interest expenses | 7,664 | 4,509 | –3,155 | ||||||||
Loss on equity securities, net | 13,020 | - | -13,020 | ||||||||
Foreign exchange loss, net | 8,949 | 8,744 | –205 | ||||||||
Other | 1,048 | 7,029 | +5,981 | ||||||||
30,681 | 20,282 | –10,399 | |||||||||
Income before income taxes | 493,112 | 619,523 | +126,411 | ||||||||
Income taxes | 126,939 | (91,020 | ) | –217,959 | |||||||
Net income | 366,173 | 710,543 | +344,370 | ||||||||
Less - Net income attributable to noncontrolling interests | 26,164 | 17,658 | –8,506 | ||||||||
Net income attributable to Sony Corporation’s | |||||||||||
stockholders | ¥ | 340,009 | ¥ | 692,885 | ¥ | +352,876 | |||||
Per share data: | |||||||||||
Net income attributable to Sony Corporation’s | |||||||||||
stockholders | |||||||||||
— Basic | ¥ | 273.52 | ¥ | 565.97 | ¥ | +292.45 | |||||
— Diluted | 267.65 | 554.82 | +287.17 |
Consolidated Statements of Comprehensive Income | |||||||||||
(Millions of yen) | |||||||||||
Six months ended September 30 | |||||||||||
2019 | 2020 | Change | |||||||||
Net income | ¥ | 366,173 | ¥ | 710,543 | ¥ | +344,370 | |||||
Other comprehensive income, net of tax – | |||||||||||
Unrealized gains (losses) on securities | 39,925 | (37,882 | ) | –77,807 | |||||||
Unrealized losses on derivative instruments | (308 | ) | (871 | ) | –563 | ||||||
Pension liability adjustment | 6,040 | 4,459 | –1,581 | ||||||||
Foreign currency translation adjustments | (63,750 | ) | (23,470 | ) | +40,280 | ||||||
Debt valuation adjustments | - | (1,193 | ) | –1,193 | |||||||
Total comprehensive income | 348,080 | 651,586 | +303,506 | ||||||||
Less - Comprehensive income attributable | |||||||||||
to noncontrolling interests | 39,097 | 5,108 | –33,989 | ||||||||
Comprehensive income attributable | |||||||||||
to Sony Corporation’s stockholders | ¥ | 308,983 | ¥ | 646,478 | ¥ | +337,495 |
F-3
Consolidated Statements of Cash Flows |
(Millions of yen) | ||||||||
Six months ended September 30 | ||||||||
2019 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net income | ¥ | 366,173 | ¥ | 710,543 | ||||
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 | 189,939 | 187,728 | ||||||
Amortization of film costs | 138,400 | 117,843 | ||||||
Accrual for pension and severance costs, less payments | (3,744 | ) | 806 | |||||
Other operating income, net | (5,961 | ) | (16,786 | ) | ||||
(Gain) loss on securities investments, net (other than financial services business) | 12,939 | (85,485 | ) | |||||
Gain on marketable securities and securities investments held in the financial | ||||||||
services business, net | (25,820 | ) | (220,776 | ) | ||||
Deferred income taxes | (17,978 | ) | (193,077 | ) | ||||
Equity in net (income) loss of affiliated companies, net of dividends | (924 | ) | 1,502 | |||||
Changes in assets and liabilities: | ||||||||
Increase in notes, accounts receivable, trade and contract assets | (144,399 | ) | (34,684 | ) | ||||
Increase in inventories | (144,148 | ) | (121,772 | ) | ||||
Increase in film costs | (176,002 | ) | (72,916 | ) | ||||
Increase in notes and accounts payable, trade | 128,786 | 290,674 | ||||||
Increase in accrued income and other taxes | 47,557 | 71,859 | ||||||
Increase in future insurance policy benefits and other | 338,457 | 435,225 | ||||||
Increase in deferred insurance acquisition costs | (48,346 | ) | (45,460 | ) | ||||
Increase in marketable securities held in the life insurance business | (88,119 | ) | (91,971 | ) | ||||
Increase in other current assets | (33,747 | ) | (140,607 | ) | ||||
Decrease in other current liabilities | (167,023 | ) | (148,652 | ) | ||||
Other | 44,445 | (10,513 | ) | |||||
Net cash provided by operating activities | 410,485 | 633,481 | ||||||
Cash flows from investing activities: | ||||||||
Payments for purchases of fixed assets | (179,778 | ) | (275,281 | ) | ||||
Proceeds from sales of fixed assets | 10,611 | 10,024 | ||||||
Payments for investments and advances by financial services business | (681,965 | ) | (738,027 | ) | ||||
Payments for investments and advances | ||||||||
(other than financial services business) | (32,320 | ) | (81,959 | ) | ||||
Proceeds from sales or return of investments and collections of advances | ||||||||
by financial services business | 138,242 | 189,301 | ||||||
Proceeds from sales or return of investments and collections of advances | ||||||||
(other than financial services business) | 11,627 | 14,794 | ||||||
Proceeds from sales of businesses | 7,864 | 1,605 | ||||||
Proceeds from sales of Olympus Corporation Shares | 80,357 | - | ||||||
Other | 14,147 | (3,055 | ) | |||||
Net cash used in investing activities | (631,215 | ) | (882,598 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of long-term debt | 6,283 | 301,094 | ||||||
Payments of long-term debt | (186,103 | ) | (59,725 | ) | ||||
Increase in short-term borrowings, net | 257,129 | 160,088 | ||||||
Proceeds from issuance of short-term (more than 3 months) borrowings in connection with | ||||||||
payment for purchase of noncontrolling interest in Sony Financial Holdings Inc. | - | 322,500 | ||||||
Increase in deposits from customers in the financial services business, net | 110,514 | 277,354 | ||||||
Dividends paid | (24,994 | ) | (30,448 | ) | ||||
Payments for purchase of treasury stock | (125,078 | ) | (106 | ) | ||||
Payment for purchase of noncontrolling interest in Sony Financial Holdings Inc. | - | (322,611 | ) | |||||
Other | (8,842 | ) | (11,334 | ) | ||||
Net cash provided by financing activities | 28,909 | 636,812 | ||||||
Effect of exchange rate changes on cash and cash equivalents, including restricted | (26,029 | ) | (17,842 | ) | ||||
Net increase (decrease) in cash and cash equivalents, including restricted | (217,850 | ) | 369,853 | |||||
Cash and cash equivalents, including restricted, at beginning of the fiscal year | 1,473,813 | 1,515,295 | ||||||
Cash and cash equivalents, including restricted, at end of the period | 1,255,963 | 1,885,148 | ||||||
Less - restricted cash and cash equivalents, included in other current assets and | ||||||||
other assets | 3,094 | 780 | ||||||
Cash and cash equivalents at end of the period | ¥ | 1,252,869 | ¥ | 1,884,368 |
F-4
Notes to Consolidated Financial Statements |
Business Segment Information |
(Business Segments) |
(Millions of yen) | |||||||||||
Three months ended September 30 | |||||||||||
Sales and operating revenue | 2019 | 2020 | Changes | ||||||||
Game & Network Services | |||||||||||
Customers | ¥ | 438,046 | ¥ | 494,544 | ¥ | +56,498 | |||||
Intersegment | 16,344 | 12,094 | –4,250 | ||||||||
Total | 454,390 | 506,638 | +52,248 | ||||||||
Music | |||||||||||
Customers | 216,742 | 228,419 | +11,677 | ||||||||
Intersegment | 2,533 | 2,449 | –84 | ||||||||
Total | 219,275 | 230,868 | +11,593 | ||||||||
Pictures | |||||||||||
Customers | 260,387 | 191,975 | –68,412 | ||||||||
Intersegment | 217 | 358 | +141 | ||||||||
Total | 260,604 | 192,333 | –68,271 | ||||||||
Electronics Products & Solutions | |||||||||||
Customers | 486,311 | 500,683 | +14,372 | ||||||||
Intersegment | 7,188 | 3,975 | –3,213 | ||||||||
Total | 493,499 | 504,658 | +11,159 | ||||||||
Imaging & Sensing Solutions | |||||||||||
Customers | 285,579 | 283,954 | –1,625 | ||||||||
Intersegment | 25,145 | 23,130 | –2,015 | ||||||||
Total | 310,724 | 307,084 | –3,640 | ||||||||
Financial Services | |||||||||||
Customers | 375,089 | 372,107 | –2,982 | ||||||||
Intersegment | 2,092 | 1,838 | –254 | ||||||||
Total | 377,181 | 373,945 | –3,236 | ||||||||
All Other | |||||||||||
Customers | 57,943 | 40,342 | –17,601 | ||||||||
Intersegment | 10,954 | 8,859 | –2,095 | ||||||||
Total | 68,897 | 49,201 | –19,696 | ||||||||
Corporate and elimination | (62,311 | ) | (51,241 | ) | +11,070 | ||||||
Consolidated total | ¥ | 2,122,259 | ¥ | 2,113,486 | ¥ | –8,773 | |||||
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) | |||||||||||
Three months ended September 30 | |||||||||||
Operating income (loss) | 2019 | 2020 | Change | ||||||||
Game & Network Services | ¥ | 64,987 | ¥ | 104,932 | ¥ | +39,945 | |||||
Music | 37,480 | 52,851 | +15,371 | ||||||||
Pictures | 39,318 | 31,751 | –7,567 | ||||||||
Electronics Products & Solutions | 41,387 | 53,998 | +12,611 | ||||||||
Imaging & Sensing Solutions | 76,378 | 49,835 | -26,543 | ||||||||
Financial Services | 38,779 | 43,718 | +4,939 | ||||||||
All Other | 2,434 | 3,191 | +757 | ||||||||
Total | 300,763 | 340,276 | +39,513 | ||||||||
Corporate and elimination | (21,808 | ) | (22,512 | ) | –704 | ||||||
Consolidated total | ¥ | 278,955 | ¥ | 317,764 | ¥ | +38,809 | |||||
Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies. |
F-5
(Business Segments) |
(Millions of yen) | ||||||||||||
Six months ended September 30 | ||||||||||||
Sales and operating revenue | 2019 | 2020 | Change | |||||||||
Game & Network Services | ||||||||||||
Customers | ¥ | 879,796 | ¥ | 1,093,593 | ¥ | +213,797 | ||||||
Intersegment | 32,055 | 19,154 | –12,901 | |||||||||
Total | 911,851 | 1,112,747 | +200,896 | |||||||||
Music | ||||||||||||
Customers | 416,780 | 402,154 | –14,626 | |||||||||
Intersegment | 4,748 | 5,829 | +1,081 | |||||||||
Total | 421,528 | 407,983 | –13,545 | |||||||||
Pictures | ||||||||||||
Customers | 446,146 | 366,416 | –79,730 | |||||||||
Intersegment | 546 | 1,006 | +460 | |||||||||
Total | 446,692 | 367,422 | –79,270 | |||||||||
Electronics Products & Solutions | ||||||||||||
Customers | 966,967 | 828,076 | –138,891 | |||||||||
Intersegment | 10,447 | 8,428 | –2,019 | |||||||||
Total | 977,414 | 836,504 | –140,910 | |||||||||
Imaging & Sensing Solutions | ||||||||||||
Customers | 496,754 | 482,325 | –14,429 | |||||||||
Intersegment | 44,648 | 30,945 | –13,703 | |||||||||
Total | 541,402 | 513,270 | –28,132 | |||||||||
Financial Services | ||||||||||||
Customers | 709,909 | 817,023 | +107,114 | |||||||||
Intersegment | 4,207 | 3,682 | 525 | |||||||||
Total | 714,116 | 820,705 | +106,589 | |||||||||
All Other | ||||||||||||
Customers | 118,575 | 86,439 | –32,136 | |||||||||
Intersegment | 19,913 | 16,857 | -–3,056 | |||||||||
Total | 138,488 | 103,296 | –35,192 | |||||||||
Corporate and elimination | (103,508 | ) | (79,522 | ) | +23,986 | |||||||
Consolidated total | ¥ | 4,047,983 | ¥ | 4,082,405 | ¥ | +34,422 | ||||||
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) | ||||||||||||
Six months ended September 30 | ||||||||||||
Operating income (loss) | 2019 | 2020 | Change | |||||||||
Game & Network Services | ¥ | 138,791 | ¥ | 228,969 | ¥ | +90,178 | ||||||
Music | 75,757 | 87,743 | +11,986 | |||||||||
Pictures | 39,694 | 56,493 | +16,799 | |||||||||
Electronics Products & Solutions | 66,453 | 44,877 | –21,576 | |||||||||
Imaging & Sensing Solutions | 125,906 | 75,261 | -50,645 | |||||||||
Financial Services | 84,884 | 90,921 | +6,037 | |||||||||
All Other | (168 | ) | 6,723 | +6,891 | ||||||||
Total | 531,317 | 590,987 | +59,670 | |||||||||
Corporate and elimination | (21,437 | ) | (44,828 | ) | –23,391 | |||||||
Consolidated total | ¥ | 509,880 | ¥ | 546,159 | ¥ | +36,279 | ||||||
Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies. |
F-6
(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. |
(Millions of yen) | ||||||||||||
Three months ended September 30 | ||||||||||||
Sales and operating revenue (to external customers) | 2019 | 2020 | Change | |||||||||
Game & Network Services | ||||||||||||
Digital Software and Add-on Content | ¥ | 226,889 | ¥ | 297,061 | ¥ | +70,172 | ||||||
Network Services | 84,377 | 95,897 | +11,520 | |||||||||
Hardware and Others | 126,780 | 101,586 | –25,194 | |||||||||
Total | 438,046 | 494,544 | +56,498 | |||||||||
Music | ||||||||||||
Recorded Music - Streaming | 66,797 | 78,827 | +12,030 | |||||||||
Recorded Music - Others | 45,405 | 44,497 | –908 | |||||||||
Music Publishing | 38,407 | 37,560 | –847 | |||||||||
Visual Media and Platform | 66,133 | 67,535 | +1,402 | |||||||||
Total | 216,742 | 228,419 | +11,677 | |||||||||
Pictures | ||||||||||||
Motion Pictures | 140,371 | 91,161 | –49,210 | |||||||||
Television Productions | 61,546 | 50,936 | –10,610 | |||||||||
Media Networks | 58,470 | 49,878 | –8,592 | |||||||||
Total | 260,387 | 191,975 | –68,412 | |||||||||
Electronics Products & Solutions | ||||||||||||
Televisions | 166,479 | 204,618 | +38,139 | |||||||||
Audio and Video | 83,754 | 83,887 | +133 | |||||||||
Still and Video Cameras | 99,606 | 90,237 | –9,369 | |||||||||
Mobile Communications | 77,714 | 79,140 | +1,426 | |||||||||
Other | 58,758 | 42,801 | -15,957 | |||||||||
Total | 486,311 | 500,683 | +14,372 | |||||||||
Imaging & Sensing Solutions | 285,579 | 283,954 | –1,625 | |||||||||
Financial Services | 375,089 | 372,107 | –2,982 | |||||||||
All Other | 57,943 | 40,342 | –17,601 | |||||||||
Corporate | 2,162 | 1,462 | -700 | |||||||||
Consolidated total | ¥ | 2,122,259 | ¥ | 2,113,486 | ¥ | –8,773 | ||||||
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. Sony has also realigned its product category configuration in the Music segment with a more detailed breakdown in Recorded Music from the fourth quarter of the fiscal year ended March 31, 2020. In connection with these realignments, 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 content 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 - Streaming includes the distribution of digital recorded music by streaming; Recorded Music - Others includes the distribution of recorded music by physical media and digital download as well as 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 loss of Mobile Communications for the fiscal years ended March 31, 2019 and 2020 was (97,136) million yen and (21,057) million yen, respectively. In addition, the operating loss for the three months ended March 31, 2019 and 2020 was (41,062) million yen and (29,696) million yen, respectively. |
F-7
(Sales to Customers by Product Category) |
(Millions of yen) | ||||||||||||
Six months ended September 30 | ||||||||||||
Sales and operating revenue (to external customers) | 2019 | 2020 | Change | |||||||||
Game & Network Services | ||||||||||||
Digital Software and Add-on Content | ¥ | 442,853 | ¥ | 691,698 | ¥ | +248,845 | ||||||
Network Services | 167,983 | 189,192 | +21,209 | |||||||||
Hardware and Others | 268,960 | 212,703 | –56,257 | |||||||||
Total | 879,796 | 1,093,593 | +213,797 | |||||||||
Music | ||||||||||||
Recorded Music – Streaming | 133,279 | 147,727 | +14,448 | |||||||||
Recorded Music – Others | 90,885 | 73,683 | –17,202 | |||||||||
Music Publishing | 77,697 | 68,656 | –9,041 | |||||||||
Visual Media and Platform | 114,919 | 112,088 | –2,831 | |||||||||
Total | 416,780 | 402,154 | –14,626 | |||||||||
Pictures | ||||||||||||
Motion Pictures | 221,241 | 156,238 | –65,003 | |||||||||
Television Productions | 108,032 | 115,239 | +7,207 | |||||||||
Media Networks | 116,873 | 94,939 | –21,934 | |||||||||
Total | 446,146 | 366,416 | –79,730 | |||||||||
Electronics Products & Solutions | ||||||||||||
Televisions | 314,240 | 311,186 | –3,054 | |||||||||
Audio and Video | 162,497 | 130,968 | –31,529 | |||||||||
Still and Video Cameras | 199,860 | 136,642 | –63,218 | |||||||||
Mobile Communications | 178,264 | 173,369 | –4,895 | |||||||||
Other | 112,106 | 75,911 | –36,195 | |||||||||
Total | 966,967 | 828,076 | –138,891 | |||||||||
Imaging & Sensing Solutions | 496,754 | 482,325 | –14,429 | |||||||||
Financial Services | 709,909 | 817,023 | +107,114 | |||||||||
All Other | 118,575 | 86,439 | –32,136 | |||||||||
Corporate | 13,056 | 6,379 | –6,677 | |||||||||
Consolidated total | ¥ | 4,047,983 | ¥ | 4,082,405 | ¥ | +34,422 | ||||||
Sony has realigned its product category configuration in the Music segment with a more detailed breakdown in Recorded Music from the fourth quarter of the fiscal year ended 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 content through network by Sony Interactive Entertainment; Network Services includes network services relating to game, video and music content; Hardware and Others includes home gaming consoles, packaged software and peripheral devices. In the Music segment, Recorded Music – Streaming includes the distribution of digital recorded music by streaming; Recorded Music – Others includes the distribution of recorded music by physical media and digital download as well as 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 live-action and animated motion pictures; 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 of Mobile Communications for the three months ended September 30, 2019 and 2020 was 635 million yen and 9,458 million yen, respectively. In addition, the operating income of Mobile Communications for the six months ended September 30, 2019 and 2020 was 1,674 million yen and 20,494 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. Both financial statements include transactions between the Financial Services segment and Sony without the Financial Services segment (including noncontrolling interests) and the figures shown in the respective presentations are before the elimination and offsetting of such transactions and deferred tax assets and deferred tax liabilities of each. Such intercompany balances are eliminated and/or offset in the consolidated financial statements.
Condensed Balance Sheets | ||||||||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||
Financial Services | Sony without Financial Services | Consolidated | ||||||||||||||||||||||
March 31 | September 30 | March 31 | September 30 | March 31 | September 30 | |||||||||||||||||||
2020 | 2020 | 2020 | 2020 | 2020 | 2020 | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | ¥ | 550,039 | ¥ | 608,526 | ¥ | 962,318 | ¥ | 1,275,842 | ¥ | 1,512,357 | ¥ | 1,884,368 | ||||||||||||
Marketable securities | 1,847,772 | 2,540,460 | – | – | 1,847,772 | 2,540,460 | ||||||||||||||||||
Notes and accounts receivable, trade and contract assets | 10,532 | 15,316 | 999,976 | 1,023,234 | 1,002,920 | 1,021,896 | ||||||||||||||||||
Inventories | – | – | 589,969 | 681,685 | 589,969 | 681,685 | ||||||||||||||||||
Other receivables | 73,117 | 53,245 | 115,100 | 262,820 | 188,106 | 315,989 | ||||||||||||||||||
Prepaid expenses and other current assets | 181,247 | 175,736 | 413,496 | 363,335 | 594,021 | 538,298 | ||||||||||||||||||
Total current assets | 2,662,707 | 3,393,283 | 3,080,859 | 3,606,916 | 5,735,145 | 6,982,696 | ||||||||||||||||||
Film costs | – | – | 427,336 | 401,499 | 427,336 | 401,499 | ||||||||||||||||||
Investments and advances | 12,457,977 | 12,919,534 | 351,936 | 537,604 | 12,734,132 | 13,382,138 | ||||||||||||||||||
Investments in Financial Services, at cost | – | – | 153,968 | 550,666 | – | – | ||||||||||||||||||
Property, plant and equipment | 18,247 | 19,223 | 890,640 | 923,413 | 908,644 | 942,380 | ||||||||||||||||||
Other assets: | ||||||||||||||||||||||||
Right-of-use assets | 58,897 | 69,570 | 333,753 | 321,890 | 392,610 | 391,430 | ||||||||||||||||||
Intangibles, net | 49,871 | 48,848 | 856,439 | 850,433 | 906,310 | 899,281 | ||||||||||||||||||
Goodwill | 10,834 | 10,834 | 773,054 | 767,463 | 783,888 | 778,297 | ||||||||||||||||||
Deferred insurance acquisition costs | 600,901 | 627,893 | – | – | 600,901 | 627,893 | ||||||||||||||||||
Deferred income taxes | 10,365 | 1,081 | 200,021 | 318,463 | 210,372 | 197,279 | ||||||||||||||||||
Other | 38,949 | 35,410 | 305,028 | 317,478 | 340,005 | 348,920 | ||||||||||||||||||
769,817 | 793,636 | 2,468,295 | 2,575,727 | 3,234,086 | 3,243,100 | |||||||||||||||||||
Total assets | ¥ | 15,908,748 | ¥ | 17,125,676 | ¥ | 7,373,034 | ¥ | 8,595,825 | ¥ | 23,039,343 | ¥ | 24,951,813 | ||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Short-term borrowings | ¥ | 758,737 | ¥ | 939,912 | ¥ | 81,246 | ¥ | 473,720 | ¥ | 839,983 | ¥ | 1,413,632 | ||||||||||||
Short-term operating lease liabilities | 9,363 | 9,377 | 59,595 | 64,220 | 68,942 | 73,585 | ||||||||||||||||||
Notes and accounts payable, trade | – | – | 380,810 | 669,611 | 380,810 | 669,611 | ||||||||||||||||||
Accounts payable, other and accrued expenses | 40,457 | 35,223 | 1,591,072 | 1,499,412 | 1,630,197 | 1,533,438 | ||||||||||||||||||
Accrued income and other taxes | 22,825 | 23,809 | 123,171 | 138,257 | 145,996 | 162,066 | ||||||||||||||||||
Deposits from customers in the banking business | 2,440,783 | 2,655,330 | – | – | 2,440,783 | 2,655,330 | ||||||||||||||||||
Other | 226,455 | 543,706 | 514,368 | 479,747 | 733,732 | 1,007,147 | ||||||||||||||||||
Total current liabilities | 3,498,620 | 4,207,357 | 2,750,262 | 3,324,967 | 6,240,443 | 7,514,809 | ||||||||||||||||||
Long-term debt | 240,143 | 283,935 | 398,793 | 465,615 | 634,966 | 745,581 | ||||||||||||||||||
Long-term operating lease liabilities | 41,192 | 38,001 | 273,668 | 261,851 | 314,836 | 299,834 | ||||||||||||||||||
Accrued pension and severance costs | 34,211 | 34,388 | 290,444 | 282,069 | 324,655 | 316,457 | ||||||||||||||||||
Deferred income taxes | 391,883 | 367,032 | 173,022 | 96,305 | 549,538 | 325,939 | ||||||||||||||||||
Future insurance policy benefits and other | 6,246,047 | 6,420,438 | – | – | 6,246,047 | 6,420,438 | ||||||||||||||||||
Policyholders’ account in the life insurance business | 3,642,271 | 3,967,126 | – | – | 3,642,271 | 3,967,126 | ||||||||||||||||||
Other | 21,843 | 20,793 | 289,574 | 281,705 | 289,285 | 281,117 | ||||||||||||||||||
Total liabilities | 14,116,210 | 15,339,070 | 4,175,763 | 4,712,512 | 18,242,041 | 19,871,301 | ||||||||||||||||||
Redeemable noncontrolling interest | – | – | 7,767 | 7,674 | 7,767 | 7,674 | ||||||||||||||||||
Equity: | ||||||||||||||||||||||||
Stockholders’ equity of Financial Services | 1,790,333 | 1,784,144 | – | – | – | – | ||||||||||||||||||
Stockholders’ equity of Sony without Financial Services | – | – | 3,159,071 | 3,835,764 | – | – | ||||||||||||||||||
Sony Corporation’s stockholders’ equity | – | – | – | – | 4,125,306 | 5,030,501 | ||||||||||||||||||
Noncontrolling interests | 2,205 | 2,462 | 30,433 | 39,875 | 664,229 | 42,337 | ||||||||||||||||||
Total equity | 1,792,538 | 1,786,606 | 3,189,504 | 3,875,639 | 4,789,535 | 5,072,838 | ||||||||||||||||||
Total liabilities and equity | ¥ | 15,908,748 | ¥ | 17,125,676 | ¥ | 7,373,034 | ¥ | 8,595,825 | ¥ | 23,039,343 | ¥ | 24,951,813 |
F-9
Condensed Statements of Income | ||||||||||||||||||||||||
(Millions of yen) | ||||||||||||||||||||||||
Three months ended September 30 | ||||||||||||||||||||||||
Financial Services | Sony without Financial Services | Consolidated | ||||||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
Financial services revenue | ¥ | 377,181 | ¥ | 373,945 | ¥ | – | ¥ | – | ¥ | 375,089 | ¥ | 372,107 | ||||||||||||
Net sales and operating revenue | – | – | 1,749,121 | 1,742,844 | 1,747,170 | 1,741,379 | ||||||||||||||||||
377,181 | 373,945 | 1,749,121 | 1,742,844 | 2,122,259 | 2,113,486 | |||||||||||||||||||
Cost of sales | – | – | 1,160,099 | 1,148,740 | 1,156,980 | 1,145,988 | ||||||||||||||||||
Selling, general and administrative | – | – | 353,760 | 328,028 | 354,916 | 329,307 | ||||||||||||||||||
Financial services expenses | 338,273 | 330,223 | – | – | 336,178 | 328,385 | ||||||||||||||||||
Other operating (income) expenses, net | 8 | 4 | (2,426 | ) | (5,542 | ) | (2,404 | ) | (5,538 | ) | ||||||||||||||
338,281 | 330,227 | 1,511,433 | 1,471,226 | 1,845,670 | 1,798,142 | |||||||||||||||||||
Equity in net income (loss) of affiliated companies | (121 | ) | – | 2,487 | 2,420 | 2,366 | 2,420 | |||||||||||||||||
Operating income | 38,779 | 43,718 | 240,175 | 274,038 | 278,955 | 317,764 | ||||||||||||||||||
Other income (expenses), net | (45 | ) | (22 | ) | (16,815 | ) | (18,139 | ) | (16,861 | ) | (18,160 | ) | ||||||||||||
Income before income taxes | 38,734 | 43,696 | 223,360 | 255,899 | 262,094 | 299,604 | ||||||||||||||||||
Income taxes | 10,753 | 9,885 | 51,174 | (174,008 | ) | 61,927 | (163,898 | ) | ||||||||||||||||
Net income | 27,981 | 33,811 | 172,186 | 429,907 | 200,167 | 463,502 | ||||||||||||||||||
Less - Net income attributable to noncontrolling interests | 87 | 182 | 2,448 | 185 | 12,280 | 3,868 | ||||||||||||||||||
Net income of Financial Services | ¥ | 27,894 | ¥ | 33,629 | ¥ | – | ¥ | – | ¥ | – | ¥ | – | ||||||||||||
Net income of Sony without Financial Services | ¥ | – | ¥ | – | ¥ | 169,738 | ¥ | 429,722 | ¥ | – | ¥ | – | ||||||||||||
Net income attributable to Sony Corporation's stockholders | ¥ | – | ¥ | – | ¥ | – | ¥ | – | ¥ | 187,887 | ¥ | 459,634 |
Six months ended September 30 | ||||||||||||||||||||||||
Financial Services | Sony without Financial Services | Consolidated | ||||||||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | |||||||||||||||||||
Financial services revenue | ¥ | 714,116 | ¥ | 820,705 | ¥ | ¥ | – | ¥ | 709,909 | ¥ | 817,023 | |||||||||||||
Net sales and operating revenue | – | – | 3,341,464 | 3,268,324 | 3,338,074 | 3,265,382 | ||||||||||||||||||
714,116 | 820,705 | 3,341,464 | 3,268,324 | 4,047,983 | 4,082,405 | |||||||||||||||||||
Cost of sales | – | – | 2,223,968 | 2,204,055 | 2,218,018 | 2,198,661 | ||||||||||||||||||
Selling, general and administrative | – | – | 702,537 | 628,040 | 705,083 | 630,473 | ||||||||||||||||||
Financial services expenses | 628,879 | 729,726 | – | – | 624,671 | 726,044 | ||||||||||||||||||
Other operating (income) expenses, net | 44 | 58 | (6,019 | ) | (16,844 | ) | (5,961 | ) | (16,786 | ) | ||||||||||||||
628,923 | 729,784 | 2,920,486 | 2,815,251 | 3,541,811 | 3,538,392 | |||||||||||||||||||
Equity in net income (loss) of affiliated companies | (309 | ) | – | 4,017 | 2,146 | 3,708 | 2,146 | |||||||||||||||||
Operating income | 84,884 | 90,921 | 424,995 | 455,219 | 509,880 | 546,159 | ||||||||||||||||||
Other income (expenses), net | (91 | ) | (42 | ) | 1,015 | 93,220 | (16,768 | ) | 73,364 | |||||||||||||||
Income before income taxes | 84,793 | 90,879 | 426,010 | 548,439 | 493,112 | 619,523 | ||||||||||||||||||
Income taxes | 24,735 | 23,072 | 102,204 | (114,313 | ) | 126,939 | (91,020 | ) | ||||||||||||||||
Net income | 60,058 | 67,807 | 323,806 | 662,752 | 366,173 | 710,543 | ||||||||||||||||||
Less - Net income attributable to noncontrolling interests | 173 | 257 | 5,072 | 2,049 | 26,164 | 17,658 | ||||||||||||||||||
Net income of Financial Services | ¥ | 59,885 | ¥ | 67,550 | ¥ | – | ¥ | – | ¥ | – | ¥ | – | ||||||||||||
Net income of Sony without Financial Services | ¥ | – | ¥ | – | ¥ | 318,734 | ¥ | 660,703 | ¥ | – | ¥ | – | ||||||||||||
Net income attributable to Sony Corporation's stockholders | ¥ | – | ¥ | – | ¥ | – | ¥ | – | ¥ | 340,009 | ¥ | 692,885 |
F-10
Condensed Statements of Cash Flows | |||||||||||||||||||
(Millions of yen) | |||||||||||||||||||
Six months ended September 30 | |||||||||||||||||||
Financial Services | Sony without Financial Services | Consolidated | |||||||||||||||||
2019 | 2020 | 2019 | 2020 | 2019 | 2020 | ||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | ¥ | 60,058 | ¥ | 67,807 | ¥ | 323,806 | ¥ | 662,752 | ¥ | 366,173 | ¥ | 710,543 | |||||||
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 | 45,235 | 25,758 | 144,704 | 161,970 | 189,939 | 187,728 | |||||||||||||
Amortization of film costs | – | – | 138,400 | 117,843 | 138,400 | 117,843 | |||||||||||||
Other operating (income) expenses, net | 44 | 58 | (6,019 | ) | (16,844 | ) | (5,961 | ) | (16,786 | ) | |||||||||
(Gain) loss on marketable securities and securities investments, net | (25,820 | ) | (220,776 | ) | 12,939 | (85,485 | ) | (12,881 | ) | (306,261 | ) | ||||||||
Changes in assets and liabilities: | |||||||||||||||||||
(Increase) decrease in notes, accounts receivable, trade and contract assets | 914 | (4,784 | ) | (145,747 | ) | (38,967 | ) | (144,399 | ) | (34,684 | ) | ||||||||
(Increase) decrease in inventories | – | – | (144,148 | ) | (121,772 | ) | (144,148 | ) | (121,772 | ) | |||||||||
(Increase) decrease in film costs | – | – | (176,002 | ) | (72,916 | ) | (176,002 | ) | (72,916 | ) | |||||||||
Increase (decrease) in notes and accounts payable, trade | – | – | 128,786 | 290,674 | 128,786 | 290,674 | |||||||||||||
Increase (decrease) in future insurance policy benefits and other | 338,457 | 435,225 | – | – | 338,457 | 435,225 | |||||||||||||
(Increase) decrease in deferred insurance acquisition costs | (48,346 | ) | (45,460 | ) | – | – | (48,346 | ) | (45,460 | ) | |||||||||
(Increase) decrease in marketable securities held in the life insurance business | (88,119 | ) | (91,971 | ) | – | – | (88,119 | ) | (91,971 | ) | |||||||||
Other | 55,679 | (6,044 | ) | (187,001 | ) | (403,742 | ) | (131,414 | ) | (418,682 | ) | ||||||||
Net cash provided by (used in) operating activities | 338,102 | 159,813 | 89,718 | 493,513 | 410,485 | 633,481 | |||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Payments for purchases of fixed assets | (9,379 | ) | (9,653 | ) | (170,398 | ) | (265,659 | ) | (179,778 | ) | (275,281 | ) | |||||||
Payments for investments and advances | (681,965 | ) | (738,027 | ) | (32,320 | ) | (81,959 | ) | (714,285 | ) | (819,986 | ) | |||||||
Proceeds from sales or return of investments and collections of advances | 138,242 | 189,301 | 91,984 | 14,794 | 230,226 | 204,095 | |||||||||||||
Other | 64 | 9 | 32,571 | 8,565 | 32,622 | 8,574 | |||||||||||||
Net cash provided by (used in) investing activities | (553,038 | ) | (558,370 | ) | (78,163 | ) | (324,259 | ) | (631,215 | ) | (882,598 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||||||
Increase (decrease) in borrowings, net | 158,510 | 210,147 | (80,880 | ) | 513,811 | 77,309 | 723,957 | ||||||||||||
Increase (decrease) in deposits from customers, net | 110,514 | 277,354 | – | – | 110,514 | 277,354 | |||||||||||||
Dividends paid | (27,189 | ) | (30,454 | ) | (24,994 | ) | (30,448 | ) | (24,994 | ) | (30,448 | ) | |||||||
Other | 62 | (3 | ) | (124,463 | ) | (323,409 | ) | (133,920 | ) | (334,051 | ) | ||||||||
Net cash provided by (used in) financing activities | 241,897 | 457,044 | (230,337 | ) | 159,954 | 28,909 | 636,812 | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | – | – | (26,029 | ) | (17,842 | ) | (26,029 | ) | (17,842 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents, including restricted | 26,961 | 58,487 | (244,811 | ) | 311,366 | (217,850 | ) | 369,853 | |||||||||||
Cash and cash equivalents, including restricted, at beginning of the fiscal year | 509,595 | 550,039 | 964,218 | 965,256 | 1,473,813 | 1,515,295 | |||||||||||||
Cash and cash equivalents, including restricted,at end of the period | 536,556 | 608,526 | 719,407 | 1,276,622 | 1,255,963 | 1,885,148 | |||||||||||||
Less - restricted cash and cash equivalents, included in other current assets and other assets | – | – | 3,094 | 780 | 3,094 | 780 | |||||||||||||
Cash and cash equivalents at end of the period | ¥ | 536,556 | ¥ | 608,526 | ¥ | 716,313 | ¥ | 1,275,842 | ¥ | 1,252,869 | ¥ | 1,884,368 |
F -11
Significant Changes in Shareholders' Equity
Completion of Making Sony Financial Holdings Inc. a Wholly-owned Subsidiary
In the quarter ended September 30, 2020, Sony Corporation acquired all the common shares and the related stock acquisition rights not held by Sony of Sony Financial Holdings Inc. (“SFH”), a consolidated subsidiary of Sony Corporation, and SFH has become a wholly-owned subsidiary of Sony Corporation. Consideration for this acquisition is 396,698 million yen. The net difference between the consideration, the decrease in the carrying amount of the noncontrolling interests of 622,364 million yen and the increase in accumulated other comprehensive income of 30,203 million yen was recognized as an increase to additional paid-in capital of 195,463 million yen. In order to procure the funds necessary to pay the consideration, in addition to the 322,500 million yen of borrowing in July 2020, Sony Corporation borrowed an additional 74,000 million yen from a Japanese private bank in October 2020.
Accounting Policies and Other Information
(Recently adopted accounting pronouncements)
Measurement of credit losses on financial instruments
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, which amends the accounting guidance for credit losses on financial instruments. The ASU requires the consideration of all available relevant information when estimating expected credit losses, including past events, current conditions and forecasts and their implications for expected credit losses. This ASU was effective for Sony as of April 1, 2020. The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.
Improvements to Accounting for Costs of Films and License Agreements for Program Materials
In March 2019, the FASB issued ASU 2019-02, which updates the guidance for the capitalization of film costs associated with episodic television series, requires the use of fair value rather than net realizable value when determining potential impairments of broadcasting rights, and modifies the presentation and disclosure requirements for films and broadcasting rights. In addition, upon capitalization of film costs entities are required to determine qualitatively whether the predominant monetization strategy is on a title-by-title basis or together with other films and/or broadcast rights as part of a film group, such as in the case of a release of a film as part of a library of content on a streaming service. In the case of a film group, impairments are evaluated at the overall film group level rather than the individual title level. This ASU was effective for Sony as of April 1, 2020 and was applied on a prospective basis. Upon adoption, Sony reclassified broadcasting rights in the Pictures segment and animation film production costs in the Music segment included in inventories to film costs.
F -12
Changes to the opening balances resulting from the adoption of the above ASUs were as follows:
Yen in millions | ||||||||||||||||||||
Impact of Adoption | ||||||||||||||||||||
March 31, | April 1, | |||||||||||||||||||
2020 | ASU 2016-13 | ASU 2019-02 | Total | 2020 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Notes and accounts receivable, trade and contract assets | 1,028,793 | - | - | - | 1,028,793 | |||||||||||||||
Allowance for credit losses * | (25,873 | ) | (280 | ) | - | (280 | ) | (26,153 | ) | |||||||||||
Inventories | 589,969 | - | (31,517 | ) | (31,517 | ) | 558,452 | |||||||||||||
Other receivables | 188,106 | (30 | ) | - | (30 | ) | 188,076 | |||||||||||||
Prepaid expenses and other current assets | 594,021 | (12 | ) | - | (12 | ) | 594,009 | |||||||||||||
Total current assets | 5,735,145 | (322 | ) | (31,517 | ) | (31,839 | ) | 5,703,306 | ||||||||||||
Film costs | 427,336 | - | 31,517 | 31,517 | 458,853 | |||||||||||||||
Investments and advances: | ||||||||||||||||||||
Securities investments and other | 12,526,210 | 780 | - | 780 | 12,526,990 | |||||||||||||||
Allowance for credit losses | - | (6,341 | ) | - | (6,341 | ) | (6,341 | ) | ||||||||||||
Total investments and advances | 12,734,132 | (5,561 | ) | - | (5,561 | ) | 12,728,571 | |||||||||||||
Other assets: | ||||||||||||||||||||
Deferred income taxes | 210,372 | 45 | - | 45 | 210,417 | |||||||||||||||
Other | 340,005 | (721 | ) | - | (721 | ) | 339,284 | |||||||||||||
Total other assets | 3,234,086 | (676 | ) | - | (676 | ) | 3,233,410 | |||||||||||||
Total assets | 23,039,343 | (6,559 | ) | - | (6,559 | ) | 23,032,784 | |||||||||||||
LIABILITIES | ||||||||||||||||||||
Deferred income taxes | 549,538 | (1,504 | ) | - | (1,504 | ) | 548,034 | |||||||||||||
Total liabilities | 18,242,041 | (1,504 | ) | - | (1,504 | ) | 18,240,537 | |||||||||||||
EQUITY | ||||||||||||||||||||
Sony Corporation’s stockholders’ equity: | ||||||||||||||||||||
Retained earnings | 2,768,856 | (3,669 | ) | - | (3,669 | ) | 2,765,187 | |||||||||||||
Total Sony Corporation’s stockholders’ equity | 4,125,306 | (3,669 | ) | - | (3,669 | ) | 4,121,637 | |||||||||||||
Noncontrolling interests | 664,229 | (1,386 | ) | - | (1,386 | ) | 662,843 | |||||||||||||
Total equity | 4,789,535 | (5,055 | ) | - | (5,055 | ) | 4,784,480 | |||||||||||||
Total liabilities and equity | 23,039,343 | (6,559 | ) | - | (6,559 | ) | 23,032,784 |
* Under ASU 2016-13, Sony changed the presentation from “Allowance for doubtful accounts” to “Allowance for credit losses” on the consolidated balance sheets.
(Number of Consolidated Subsidiaries and Affiliated Companies)
As of September 30, 2020, Sony had 1,393 consolidated subsidiaries (including variable interest entities) and 135 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 | 2019 | 2020 | ||||||
— Basic | 1,237,011 | 1,227,845 | ||||||
— Diluted | 1,264,427 | 1,249,629 |
(Thousands of shares) | ||||||||
Six months ended September 30 | ||||||||
Net income attributable to Sony Corporation’s stockholders | 2019 | 2020 | ||||||
— Basic | 1,243,086 | 1,224,237 | ||||||
— Diluted | 1,270,343 | 1,248,856 |
The dilutive effect in the weighted-average number of outstanding shares for the three and six months ended September 30, 2019 and 2020 primarily resulted from convertible bonds which were issued in July 2015.
F -13
(Segmentation)
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 items. 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, 2019 have been made to conform to the presentation for the three and six months ended September 30, 2020.
(Reversal of valuation allowances for deferred tax assets of Sony Corporation and its national tax filing group in Japan)
Sony provides a valuation allowance for its deferred tax assets, which includes temporary differences, net operating losses and tax credits, when it is more likely than not that some portion, or all, of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the relevant tax jurisdiction. Despite the spread of COVID-19, as a result of the acquisition of SFH, the taxable income of Sony Corporation and its national tax filing group has increased and is expected to be stable going forward. Based on an assessment of the available positive and negative evidence, in particular recent profit history and forecasted profitability, in the quarter ended September 30, 2020, Sony reversed the valuation allowances recorded against a significant portion of the deferred tax assets in Japan, primarily for temporary differences and certain net operating losses. As a result, Sony recorded a tax benefit of 214,900 million yen in the quarter ended September 30, 2020. Valuation allowances continue to be recorded on the remaining Japan deferred tax assets, primarily foreign tax credits, due to restrictions on the use of such assets and their relatively short remaining carryforward periods.
F -14
Outlook for the Fiscal Year Ending March 31, 2021
The forecast for consolidated results for the fiscal year ending March 31, 2021, as announced on August 4, 2020, has been revised as follows:
(Billions of yen) | |||||||||||||||
March 31, 2020 Results | August Forecast | October Forecast | Change from August Forecast | ||||||||||||
Sales and operating revenue | ¥8,259.9 | ¥8,300 | ¥8,500 | +¥200 billion | +2.4 | % | |||||||||
Operating income | 845.5 | 620 | 700 | +¥80 billion | +12.9 | % |
Income before income taxes | 799.5 | 685 | 765 | +¥80 billion | +11.7 | % | |||||||||
Net income attributable to Sony Corporation’s stockholders | 582.2 | 510 | 800 | +¥290 billion | +56.9 | % |
For all segments excluding the Financial Services segment * | March 31, 2020 Results | August Forecast | October Forecast | Change from August Forecast | |||||||||||
Net cash provided by operating activities | ¥762.9 | 550 | 630 | +¥80 billion | +14.5 | % |
* Cash flow for all segments excluding the Financial Services segment is not a measure in accordance with U.S. GAAP. However, Sony believes that this disclosure may be useful information to investors. Please refer to page F-9 for details about the preparation of the Condensed Statements of Cash Flows.
Assumed foreign exchange rates are the following:
Assumed foreign exchange rates for the six months ending March 31, 2021 | (For your reference) | |
Assumed foreign exchange rates for the fiscal year ending March 31, 2021 at the time of the August forecast | ||
1 U.S. dollar | approximately 105 yen | approximately 107 yen |
1 Euro | approximately 123 yen | approximately 120 yen |
Consolidated sales and operating revenue (“sales”) for the fiscal year ending March 31, 2021 are expected to be higher than the August forecast due to higher-than-expected sales in the Game & Network Services (“G&NS”), Music and Financial Services segments, partially offset by lower-than-expected sales in the Imaging & Sensing Solutions (“I&SS”) segment.
Consolidated operating income is expected to be higher than the August forecast due to expected increases in operating income in all segments except for the I&SS segment, as well as an expected decrease in operating loss in All Other, Corporate and elimination.
Restructuring charges for the Sony Group are expected to increase by 2 billion yen compared to the August forecast to approximately 27 billion yen, compared to 25 billion yen in the fiscal year ended March 31, 2020. 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 765 billion yen, which is higher than the August 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 August forecast due to the above-mentioned expected increase in income before income taxes, as well as the reversal of valuation allowances recorded against a significant portion of the deferred tax assets of Sony Corporation and its national tax filing group in Japan, resulting in a tax benefit in the quarter ended September 30, 2020.
The forecast for each business segment for the fiscal year ending March 31, 2021 has been revised as follows:
(Billions of yen) | ||||||||
March 31, 2020 Results | August Forecast | October Forecast | ||||||
Game & Network Services (G&NS) | ||||||||
Sales and operating revenue | ¥1,977.6 | ¥2,500 | ¥2,600 | |||||
Operating income | 238.4 | 240 | 300 | |||||
Music | ||||||||
Sales and operating revenue | 849.9 | 790 | 850 | |||||
Operating income | 142.3 | 130 | 152 | |||||
Pictures | ||||||||
Sales and operating revenue | 1,011.9 | 760 | 760 | |||||
Operating income | 68.2 | 41 | 48 | |||||
Electronics Products & Solutions (EP&S) | ||||||||
Sales and operating revenue | 1,991.3 | 1,870 | 1,870 | |||||
Operating income | 87.3 | 60 | 67 | |||||
Imaging & Sensing Solutions (I&SS) | ||||||||
Sales and operating revenue | 1,070.6 | 1,000 | 960 | |||||
Operating income | 235.6 | 130 | 81 | |||||
Financial Services | ||||||||
Financial services revenue | 1,307.7 | 1,400 | 1,460 | |||||
Operating income | 129.6 | 142 | 155 | |||||
All Other, Corporate and elimination | ||||||||
Operating loss | (55.9 | ) | (123 | ) | (103 | ) | ||
Consolidated | ||||||||
Sales and operating revenue | 8,259.9 | 8,300 | 8,500 | |||||
Operating income | 845.5 | 620 | 700 |
Game & Network Services (G&NS)
Sales are expected to be higher than the August forecast primarily due to higher-than-expected sales of game software, primarily add-on content. Operating income is expected to be significantly higher than the August forecast due to the above-mentioned expected increase in game software sales and an increase in PlayStation®Plus sales.
Regarding the impact from the spread of COVID-19, Sony is aware that there have been delays in the development of some third-party software titles due to constraints such as working from home. However, necessary measures are being taken and preparations are underway with the aim of ensuring that many strong titles can be released from Sony’s first-party studios and its partners’ studios in connection with the launch of PlayStation®5.
Music
Sales are expected to be higher than the August forecast primarily due to an expected increase in streaming revenues in Recorded Music, in addition to the expected strong performance of game applications for mobile devices and an expected increase in anime business sales in Visual Media and Platform. Operating income is expected to be higher than the August forecast primarily due to the impact of the above-mentioned expected increase in sales.
Regarding the impact from the spread of COVID-19, the release of some new music is being delayed around the world despite a gradual recovery in music recording, as a portion of artists are still unable to record songs and music videos and carry out promotional activities. Ticket and merchandising revenues are also decreasing, as concerts and other events are being restricted in Japan and other areas. Due to a global reduction in advertising spending, revenue from the licensing of music in TV commercials is decreasing. Although it also has been impacted by the reduction in advertising spending, revenue from advertising-supported streaming services is beginning to show signs of recovery due to a gradual recovery in advertising spending.
Pictures
Sales are expected to remain unchanged from the August forecast, mainly due to higher-than-expected home entertainment and television licensing sales in Motion Pictures and a higher-than-expected recovery of advertising sales in Media Networks, substantially offset by delays in theatrical releases due to theater closures resulting from the impact of COVID-19. Operating income is expected to be higher than the August forecast primarily due to higher-than-expected home entertainment and television licensing sales in Motion Pictures.
Regarding the impact from the spread of COVID-19, although some movie theaters are reopening around the world, a large number are still closed or must limit the number of patrons, leading to box office revenue around the world being negatively impacted. For this reason, Sony generally has not been able to release most of its already completed films in theaters. Although the production of new motion pictures and television shows by Sony has gradually resumed, the production schedule is significantly delayed. As a result, in Motion Pictures, theatrical revenues and revenues generated after theatrical release, including home entertainment and television licensing sales, are expected to be significantly lower than the prior fiscal year. Television Production revenues are also expected to be significantly impacted by the production delays. Due to a global reduction in advertising spending, advertising revenue in Media Networks has decreased significantly compared to the prior fiscal year, especially in India. However, advertising revenue has recovered more quickly than expected in some territories due to the gradual recovery of advertising spending. Further improvement in advertising revenue is dependent upon the speed of economic recovery around the world.
Electronics Products & Solutions (EP&S)
Sales are expected to remain unchanged from the August forecast. Operating income is expected to be higher than the August forecast primarily due to the positive impact of foreign exchange rates.
This segment has been significantly impacted by COVID-19, but profitability has improved due to the gradual recovery in consumer demand and reductions in operating costs.
Imaging & Sensing Solutions (I&SS)
Sales are expected to be lower than the August forecast primarily due to a decrease in sales of image sensors for mobile products, partially offset by an increase in sales of image sensors for digital cameras as well as an increase in sales in businesses other than image sensors, such as analog LSIs (large-scale integration systems). Operating income is expected to be lower than the August forecast primarily due to the impact of the above-mentioned expected decrease in sales, the recording of 17.5 billion yen in inventory write-downs of certain image sensors for mobile products in the quarter ended September 30, 2020 and the negative impact of foreign exchange rates.
Financial Services
Financial services revenue is expected to be higher than the August forecast primarily due to an increase in net gains on investments in the separate accounts at Sony Life Insurance Co., Ltd. (“Sony Life”). Operating income is expected to be higher than the August forecast primarily due to a decline in the loss ratio for automobile insurance at Sony Assurance Inc. (“Sony Assurance”), as well as an improvement in valuation gains and losses on securities at Sony Bank Inc. (“Sony Bank”).
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 above forecast.
The above forecast for each segment 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
The Music segment results include the yen-based results of Sony Music Entertainment (Japan) Inc. and the yen-translated results of Sony Music Entertainment, Sony/ATV Music Publishing LLC and EMI Music Publishing Ltd., which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis.
The Pictures segment results are the yen-translated results of Sony Pictures Entertainment Inc., which 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, Sony Assurance and Sony Bank. The results discussed in the Financial Services segment differ from the results that SFH discloses separately on a Japanese statutory basis.
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; |
(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, pandemic disease 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. The continued impact of COVID-19 could heighten many of the risks and uncertainties noted above. 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.