SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

For the month of November 2015
Commission File Number: 001-06439

SONY CORPORATION
(Translation of registrant's name into English)

1-7-1 KONAN, MINATO-KU, TOKYO, 108-0075, JAPAN
(Address of principal executive offices)

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

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F,
 
Form 20-F  X
Form 40-F __
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, Yes No X
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-______
 
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
SONY CORPORATION
 
(Registrant)
   
   
 
By:  /s/  Kenichiro Yoshida
 
                (Signature)
 
Kenichiro Yoshida
 
Executive Deputy President and
 
Chief Financial Officer
 
Date: November 6, 2015

 
 

 

 

Quarterly Securities Report

For the three months ended September 30, 2015

 

(TRANSLATION)

 

 

 

 

Sony Corporation

 
 

CONTENTS

 

 

      Page
     

Note for readers of this English translation

Cautionary Statement

 

1

1

       
I Corporate Information   2
  (1)     Selected Consolidated Financial Data   2
  (2)     Business Overview   3
       
II State of Business   4
  (1)     Risk Factors   4
  (2)     Material Contracts   5
  (3)     Management’s Discussion and Analysis of Financial Condition, Results of Operations and
Status of Cash Flows
  5
       
III Company Information   8
  (1)     Information on the Company’s Shares   8
  (2)     Directors and Corporate Executive Officers   16
       
IV Financial Statements   17
  (1)   Consolidated Financial Statements   18
  (2)   Other Information   47
 
 

Note for readers of this English translation

On November 6, 2015, Sony Corporation (the “Company” or “Sony Corporation”) filed its Japanese-language Quarterly Securities Report (Shihanki Houkokusho) for the three months ended September 30, 2015 with the Director-General of the Kanto Local Finance Bureau in Japan pursuant to the Financial Instruments and Exchange Act of Japan. This document is an English translation of the Quarterly Securities Report in its entirety, except for (i) information that had been previously filed with or submitted to the U.S. Securities and Exchange Commission (the “SEC”) in a Form 20-F, Form 6-K or any other form and (ii) a description of differences between generally accepted accounting principles in the U.S. (“U.S. GAAP”) and generally accepted accounting principles in Japan (“J-GAAP”), which are required to be described in the Quarterly Securities Report under the Financial Instruments and Exchange Act of Japan if the Company prepares its financial statements in conformity with accounting principles other than J-GAAP.

Cautionary Statement

Statements made in this release with respect to Sony’s current plans, estimates, strategies and beliefs and other statements of the Company and its consolidated subsidiaries (collectively “Sony”) that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to (i) the global economic environment in which Sony operates and the economic conditions in Sony’s markets, particularly levels of consumer spending; (ii) foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in which Sony’s assets and liabilities are denominated; (iii) Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including televisions, game platforms, and smartphones, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing consumer preferences; (iv) Sony’s ability and timing to recoup large-scale investments required for technology development and production capacity; (v) Sony’s ability to implement successful business restructuring and transformation efforts under changing market conditions; (vi) Sony’s ability to implement successful hardware, software, and content integration strategies for all segments excluding the Financial Services segment, and to develop and implement successful sales and distribution strategies in light of the Internet and other technological developments; (vii) Sony’s continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to prioritize investments correctly (particularly in the electronics businesses); (viii) Sony’s ability to maintain product quality; (ix) the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures and other strategic investments; (x) significant volatility and disruption in the global financial markets or a ratings downgrade; (xi) Sony’s ability to forecast demands, manage timely procurement and control inventories; (xii) the outcome of pending and/or future legal and/or regulatory proceedings; (xiii) shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment; (xiv) the impact of unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment; (xv) Sony’s ability to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sony’s business information, potential business disruptions or financial losses; and (xvi) risks related to catastrophic disasters or similar events. Risks and uncertainties also include the impact of any future events with material adverse impact.

 

 

-1
 

I Corporate Information

(1) Selected Consolidated Financial Data

  Yen in millions, Yen per share amounts
  Six months ended September 30, 2014 Six months ended September 30, 2015 Fiscal year ended March 31, 2015
Sales and operating revenue 3,711,419 3,700,799 8,215,880
Operating income (loss) (15,774) 184,925 68,548
Income (loss) before income taxes (21,578) 210,904 39,729
Net income (loss) attributable to Sony Corporation’s stockholders (109,161) 115,994 (125,980)
Comprehensive income (loss) (31,169) 76,625 34,317
Total equity 2,839,181 3,266,002 2,928,469
Total assets 15,569,004 16,831,178 15,834,331
Net income (loss) attributable to Sony Corporation’s stockholders per share of common stock, basic (yen) (102.14) 95.53 (113.04)
Net income (loss) attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen) (102.14) 94.41 (113.04)
Ratio of stockholders’ equity to total assets (%) 14.7 15.7 14.6
Net cash provided by operating activities 104,075 25,541 754,640
Net cash used in investing activities (282,859) (457,072) (639,636)
Net cash provided by (used in) financing activities (273,017) 501,307 (263,195)
Cash and cash equivalents at end of the period 610,509 1,010,120 949,413
       

 

  Yen in millions, Yen per share amounts  
  Three months ended September 30, 2014 Three months ended September 30, 2015  
Sales and operating revenue 1,901,511 1,892,740  
Net income (loss) attributable to Sony Corporation’s stockholders (135,969) 33,553  
Net income (loss) attributable to Sony Corporation’s stockholders per share of common stock, basic (yen) (124.32) 26.64  
Net income (loss) attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen) (124.32) 26.10  

 

Notes:

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

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

3.       Consumption taxes are not included in sales and operating revenue.

4.       Total equity is presented based on U.S. GAAP.

5.       Ratio of stockholders’ equity to total assets is calculated by using total equity attributable to the stockholders of the Company.

6.       The Company prepares consolidated financial statements. Therefore parent-only selected financial data is not presented.

-2
 

(2) Business Overview

There was no significant change in the business of Sony during the six months ended September 30, 2015.

 

Sony realigned its reportable segments effective from the first quarter of the fiscal year ending March 31, 2016. For further information on the realignment, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 10. Business segment information”.

 

As of September 30, 2015, the Company had 1,316 subsidiaries and 112 affiliated companies, of which 1,292 companies are consolidated subsidiaries (including variable interest entities) of the Company. The Company has applied the equity accounting method for 104 affiliated companies.

 

-3
 

II State of Business

(1) Risk Factors

Note for readers of this English translation:

Except for the revised risk factors below, there was no significant change from the information presented in the Risk Factors section of the Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”) on June 23, 2015. The changes are indicated by underline below. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2015

http://www.sec.gov/Archives/edgar/data/313838/000119312515231346/d895998d20f.htm

 

Declines in the value of equity securities may have an adverse impact on Sony’s operating results and financial condition, particularly in Sony’s Financial Services segment.

In the Financial Services segment, Sony Life Insurance Co., Ltd. (“Sony Life”) holds equity securities and may hold hybrid bond securities that are affected by changes in the value of equity market indices. Declines in equity prices may result in impairment losses and losses on the sales of the equity securities held by Sony Life. In addition, reductions in gains or increases in losses on the sales of equity securities, as well as reductions in unrealized gains or increases in unrealized losses in respect of such hybrid bond securities may adversely affect the operating results and financial condition of Sony’s Financial Services segment. Declines in the yield of Sony Life’s separate account assets may result in additional policy reserves being recorded and the accelerated amortization of deferred acquisition costs, since U.S. GAAP requires the review of actuarial assumptions used for the valuation of policy reserves concerning minimum death guarantees for variable life insurance and the amortization of deferred acquisition costs. Additional policy reserves and accelerated amortization of deferred acquisition costs may have an adverse impact on Sony’s operating results.

For equity securities held by Sony outside of the Financial Services segment, a decrease in fair value could result in a non-cash impairment charge. Any such charge may adversely affect Sony’s operating results and financial condition.

 

Sony could incur asset impairment charges for goodwill, intangible assets or other long-lived assets.

Sony has a significant amount of goodwill, intangible assets and other long-lived assets, including production facilities and equipment in its electronics businesses. A decline in financial performance, market capitalization or changes in estimates and assumptions used in the impairment analysis, which in many cases requires significant judgment, could result in impairment charges of these assets. Sony tests goodwill and intangible assets that are determined to have an indefinite life for impairment during the fourth quarter of each fiscal year and assesses whether there are any factors or indicators, such as unfavorable variances from established business plans, revisions to such plans, significant changes in forecasted results or volatility inherent to external markets and industries, that would require an interim test. The increased levels of global competition and the faster pace of technological change to which Sony is exposed in these businesses can result in greater volatility of these estimates, assumptions and judgments, which can affect these interim tests and determinations as to whether they are required. In addition, the recoverability of the carrying value of long-lived assets held and used and long-lived assets to be disposed of is reviewed whenever events or changes in circumstances, including the types of events or changes described above in respect of goodwill and intangible assets, indicate that the carrying value of the assets or asset groups may not be recoverable. If the carrying value of the asset or asset group is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the asset or asset group exceeds its fair value. For example, in the fiscal year ended March 31, 2014, Sony recorded impairment charges including a 32.1 billion yen impairment charge related to long-lived assets in the battery business in the Devices segment, a 25.6 billion yen impairment charge related to long-lived assets in the disc manufacturing business outside of Japan and the U.S. and goodwill across the entire disc manufacturing business in All Other, and a 12.8 billion yen impairment charge related to long-lived assets in the PC business in All Other. During the fiscal year ended March 31, 2015, Sony recorded a 176.0 billion yen impairment charge related to goodwill in the Mobile Communications segment. Any such charge may adversely affect Sony’s operating results and financial condition.

In addition, as announced on October 29, 2015 in the consolidated financial results for the second quarter ended September 30, 2015, Sony is currently in the process of its annual review of its Mid-Range Plan, including for the battery business, which process is ongoing. With regard to the battery business, increasingly competitive markets affected the current quarter’s financial performance and could continue to adversely affect this business. It is therefore possible that this business environment might result in an impairment charge against long-lived assets in the battery business.

 

 

-4
 

 

(2) Material Contracts

There were no material contracts executed or determined to be executed during the three months ended September 30, 2015.

 

Note for readers of this English translation:

There was no significant change from the information presented in the Annual Report on Form 20-F (“Patents and Licenses” in Item 4) filed with the SEC on June 23, 2015.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2015

http://www.sec.gov/Archives/edgar/data/313838/000119312515231346/d895998d20f.htm

 

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

i) Results of Operations

Note for readers of this English translation:

Except for information specifically included in this English translation, this document omits certain information set out in the Japanese-language Quarterly Securities Report for the three-month and six-month periods ended September 30, 2015, since it is the same as described in a press release previously submitted to the SEC. Please refer to “Consolidated Financial Results for the Second Quarter Ended September 30, 2015” submitted to the SEC on Form 6-K on October 29, 2015.

 

URL: The press release titled “Consolidated Financial Results for the Second Quarter Ended September 30, 2015”

http://www.sec.gov/Archives/edgar/data/313838/000115752315003525/a51209600.htm

 

Foreign Exchange Fluctuations and Risk Hedging

Note for readers of this English translation:

Except for the information set forth below, there was no significant change from the information presented in the Foreign Exchange Fluctuations and Risk Hedging section of the Annual Report on Form 20-F filed with the SEC on June 23, 2015. Although foreign exchange rates have fluctuated during the three-month period ended September 30, 2015, there has been no significant change in Sony’s risk hedging policy as described in the Annual Report on Form 20-F.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2015

http://www.sec.gov/Archives/edgar/data/313838/000119312515231346/d895998d20f.htm

 

 

During the three months ended September 30, 2015, the average rates of the yen were 122.2 yen against the U.S. dollar, which is 15.0 percent lower than the same quarter of the previous fiscal year (“year-on-year”) and 135.9 yen against the euro, which is 1.4 percent higher year-on-year.

 

For the three months ended September 30, 2015, sales were 1,892.7 billion yen, a decrease of 0.5 percent year-on-year, while on a constant currency basis, sales decreased approximately 7 percent year-on-year. For references to information on a constant currency basis, see Note at the bottom of this section.

 

Consolidated operating income of 88.0 billion yen was recorded for the three months ended September 30, 2015, an increase of 173.6 billion yen year-on-year compared to the same quarter of the previous fiscal year (an improvement of approximately 210.1 billion yen year-on-year on a constant currency basis). Most of the foreign exchange rate impact was attributable to the Mobile Communications (“MC”), Game & Network Services (“G&NS”), Imaging Products & Solutions (“IP&S”), Home Entertainment & Sound (“HE&S”) and Devices segments.

 

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

-5
 

 

  (Billions of yen)
    Change on constant currency basis Impact of changes in  foreign exchange rates
Three months ended
September 30
Change in yen
2014 2015
MC Sales 329.5 279.2 -15.2% -17% +4.6
Operating loss (170.6) (20.6) +150.0 +174.4 -24.4
G&NS Sales 309.5 360.7 +16.5% +10% +20.8
Operating income 21.8 23.9 +2.1 +15.3 -13.1
IP&S Sales 178.6 186.0 +4.1% -3% +13.0
Operating income 20.1 25.9 +5.8 +3.9 +1.9
HE&S Sales 289.7 289.1 -0.2% -7% +19.2
Operating income 9.1 15.8 +6.7 +17.1 -10.4
Devices Sales 240.4 258.1 +7.4% -5% +30.4
Operating income 28.3 32.7 +4.4 -7.7 +12.0

 

In addition, sales for the Pictures segment increased 0.9 percent year-on-year to 183.7 billion yen, an approximately 14 percent decrease on a constant currency (U.S. dollar) basis. In the Music segment, sales increased 15.0 percent year-on-year to 138.7 billion yen, an approximately 4 percent increase on a constant currency basis. As most of the operations in Sony’s Financial Services segment are based in Japan, Sony’s management analyzes the performance of the Financial Services segment on a yen basis only.

 

Note: In this section, for all segments other than Pictures and Music, the impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s periodic weighted average exchange rates for the three and six months ended September 30, 2014 from the three and six months ended September 30, 2015 to the major transactional currencies in which the sales are denominated. The impact of foreign exchange rate fluctuations on operating income (loss) described herein is calculated by subtracting from the impact on sales the impact on cost of sales and selling, general and administrative expenses calculated by applying the same major transactional currencies calculation process to cost of sales and selling, general and administrative expenses as for the impact on sales. Since the worldwide subsidiaries of the Pictures segment and of SME and Sony/ATV in the Music segment are aggregated on a U.S. dollar basis and are translated into yen, the impact of foreign exchange rate fluctuations is calculated by applying the change in the periodic weighted average exchange rates for the three and six months ended September 30, 2014 from the three and six months ended September 30, 2015 from U.S. dollar to yen to the U.S. dollar basis operating results. This information is not a substitute for Sony’s consolidated financial statements measured in accordance with U.S. GAAP. However, Sony believes that these disclosures provide additional useful analytical information to investors regarding the operating performance of Sony.

 

Status of Cash Flows

Note for readers of this English translation:

Except for information specifically included in this English translation, this document omits certain information set out in the Japanese-language Quarterly Securities Report for the six-month period ended September 30, 2015, since it is the same as described in a press release previously submitted to the SEC. Please refer to “Consolidated Financial Results for the Second Quarter Ended September 30, 2015” submitted to the SEC on Form 6-K on October 29, 2015.

 

URL: The press release titled “Consolidated Financial Results for the Second Quarter Ended September 30, 2015”

http://www.sec.gov/Archives/edgar/data/313838/000115752315003525/a51209600.htm

 

-6
 

 

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

Note for readers of this English translation:

There was no significant change from the information presented as the Issues Facing Sony and Management’s Response to those Issues in the Trend Information section of the Annual Report on Form 20-F filed with the SEC on June 23, 2015. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2015

http://www.sec.gov/Archives/edgar/data/313838/000119312515231346/d895998d20f.htm

 

 

iii) Research and Development

 

Note for readers of this English translation:

There was no significant change from the information presented as the Research and Development in the Annual Report on Form 20-F filed with the SEC on June 23, 2015.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2015

http://www.sec.gov/Archives/edgar/data/313838/000119312515231346/d895998d20f.htm

 

 

Research and development costs for the six months ended September 30, 2015 totaled 225.6 billion yen. There were no significant changes in research and development activities for the period.

 

iv) Liquidity and Capital Resources

 

Note for readers of this English translation:

Except for the information related to the committed lines of credit below, there was no significant change from the information presented in the Annual Report on Form 20-F filed with the SEC on June 23, 2015. The changes are indicated by underline below. Any forward-looking statements included in the descriptions below are based on management’s current judgment.

 

URL: The Annual Report on Form 20-F filed with the SEC on June 23, 2015

http://www.sec.gov/Archives/edgar/data/313838/000119312515231346/d895998d20f.htm

 

 

Sony typically raises funds through straight bonds, CP programs and bank loans (including syndicated loans). If market disruption and volatility occur and Sony could not raise sufficient funds from these sources, Sony may also draw down funds from contractually committed lines of credit from various financial institutions. Sony has a total, translated into yen, of 536.9 billion yen in unused committed lines of credit, as of September 30, 2015. Details of those committed lines of credit are: a 300.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, effective until July 2018, a 1.5 billion U.S. dollar multi-currency committed line of credit also with a syndicate of Japanese banks, effective until December 2018, and a 475 million U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks, effective until March 2016, in all of which Sony Corporation and SGTS are defined as borrowers. These contracts are aimed at securing sufficient liquidity in a quick and stable manner even in the event of turmoil within the financial and capital markets.

 

On July 21, 2015, Sony Corporation raised 406.0 billion yen in total from the issuance of 87.2 million new shares by way of a Japanese public offering and an international offering (286.0 billion yen) and the issuance of convertible bonds with stock acquisition rights (120.0 billion yen). In addition, Sony Corporation raised 15.7 billion yen from the issuance of new shares by way of third-party allotment on August 18, 2015. Sony Corporation intends to use 188.0 billion yen of the funds raised by these issuances of new shares to fund capital expenditures in the Devices segment, and the remainder to fund research and development expenditures in the Devices segment. In addition, Sony Corporation intends to use 51.0 billion yen of the funds raised by this issuance of convertible bonds with stock acquisition rights to fund capital expenditures in the Devices segment and the remainder to repay long-term indebtedness.

-7
 

Company Information

(1) Information on the Company’s Shares

i) Total Number of Shares

1) Total Number of Shares

Class Total number of shares authorized to be issued
Common stock 3,600,000,000
Total 3,600,000,000

 

2) Number of Shares Issued

Class Number of shares issued Name of Securities Exchanges where the shares are listed or authorized Financial Instruments Firms Association where the shares are registered Description

As of the end of the second quarterly period

(September 30, 2015)

As of the filing date of

the Quarterly

Securities Report

(November 6, 2015)

Common stock 1,262,215,860 1,262,221,560

Tokyo Stock Exchange

New York Stock Exchange

The number of shares constituting one full unit is one hundred (100).
Total 1,262,215,860 1,262,221,560

Notes:

1.The Company’s shares of common stock are listed on the First Section of the Tokyo Stock Exchange in Japan.
2.The number of shares issued as of the filing date of this Quarterly Securities Report does not include shares issued upon the exercise of stock acquisition rights (“SARs”) during November 2015, the month in which this Quarterly Securities Report (Shihanki Houkokusho) was filed.

 

-8
 

 

ii) Stock Acquisition Rights

The following are the terms and conditions of bonds with SARs which were issued during the three months ended September 30, 2015.

 

130% callable unsecured convertible bonds with stock acquisition rights (6th series) (with an inter-bond pari passu clause)

Date of resolution June 23, 2015 (Delegation by resolution of the Board of Directors) and June 30 (Decision of the Representative Director, President and CEO pursuant to such delegation)
Number of the Stock Acquisition Rights 120,000 *1
  Of which: Number of treasury stock acquisition rights held by the Company -
Class of shares to be acquired upon exercise of the Stock Acquisition Rights

Shares of common stock

100 shares constitute one unit.

Number of shares to be acquired upon exercise of the Stock Acquisition Rights 23,961,661 shares *2
Amount to be paid upon exercise of the Stock Acquisition Rights 1 million yen per Stock Acquisition Right *3
Exercise period of the Stock Acquisition Rights Period from and including September 1, 2015 up to and including September 28, 2022 *4
Issue price and amount to be accounted for as stated capital in case of an issue of shares upon exercise of the Stock Acquisition Rights

Issue price per share: 5,008 yen

Amount to be accounted for as stated capital per share:

2,504 yen

Condition for exercise of the Stock Acquisition Rights No Stock Acquisition Rights may be exercised in part only
Matters concerning transfers of the Stock Acquisition Rights Neither the Stock Acquisition Rights nor the Bonds (as defined below) shall be transferable separately from the other.
Matters concerning substitute payments Upon exercise of a Stock Acquisition Right, the Bond relating to such Stock Acquisition Right shall be contributed and the amount of the Bond to be contributed shall be equal to the amount of payment for each Bond
Matters concerning delivery of the Stock Acquisition Rights associated with Reorganization *5
Outstanding amount of the Convertible Bonds with Stock Acquisition Rights 120,000 million yen

Notes:

*1The number of shares of common stock of the Company (the “Shares”) that the Company shall deliver upon exercise of the Stock Acquisition Rights will be determined by dividing the aggregate principal amount of the bonds with respect to the Stock Acquisition Rights (the “Bonds”) to be exercised by the applicable Conversion Price (as defined in Note 3) on the date of such exercise of the Stock Acquisition Rights. In such case, fractions of a Share will not be issued and no adjustment by means of cash payment will be made in respect thereof.

 

*2In the case where the Conversion Price (as defined in Note 3) is adjusted in accordance with Note 3, the number of Shares to be acquired upon exercise of the Stock Acquisition Rights shall be adjusted to the number obtained by dividing the aggregate principal amount of the Bonds by the Conversion Price after adjustment.

 

*3Upon exercise of a Stock Acquisition Right, the Bond relating to such Stock Acquisition Right shall be contributed and the amount of the Bond to be contributed shall be equal to the amount of payment for each bond.

 

The price for calculating the number of Shares that shall be delivered upon the exercise of each Stock Acquisition Right (the “Conversion Price”) shall initially be 5,008 yen.

 

Subsequent to the issuance of the Convertible Bonds with Stock Acquisition Rights, the Conversion Price shall be adjusted in accordance with the following formula, if the total number of Shares outstanding is changed or may be changed by any of the following events; i) if the Company offers Shares to be subscribed at an amount of payment

-9
 

below the current market price of the Shares; ii) if the Company makes a stock split or a free share distribution of Shares; iii) if the Company issues (x) shares with put options, shares subject to call options, or stock acquisition rights subject to call options (including stock acquisition rights incorporated into bonds with stock acquisition rights) to acquire Shares that shall be delivered at a price below the current market price of the Shares, (y) Stock Acquisition Rights (including stock acquisition rights incorporated into bonds with stock acquisition rights) to acquire the Shares that shall be delivered at a price below the current market price of the Shares.

 

 

 

Conversion

Price

after

adjustment

 

 

=

 

 

Conversion

Price

before

adjustment

 

 

×

 

Number of

Shares
outstanding

 

+

Number of Shares

to be delivered

× Amount of payment per Share
Market price per Share

Number of

Shares outstanding

+

Number of Shares

to be delivered

                     

 

If the Company distributes any dividend in excess of 25 yen per Share per fiscal year (a “Special Dividend”) subsequent to the issuance of the Convertible Bonds with Stock Acquisition Rights, the Conversion Price shall be adjusted in accordance with the following formula:

 

  Conversion
Price after
adjustment
= Conversion
Price before
adjustment
× Market price per share – Special Dividend per Share  
Market price per Share

 

“Special Dividend per Share” shall be the amount obtained by dividing the Special Dividend by the number of Shares to be acquired upon exercise of the Stock Acquisition Right for the amount of each Bond (1 million yen) on the final record date of the relevant fiscal year with respect to the surplus dividends. Such calculation of the Special Dividend per Share shall be made to units of JPY 0.01 and rounded to the first decimal place.

 

The Conversion Price will also be required to be adjusted by the Company upon consultation with the bond administrator in the case of the following;

 

(1)In the event of a consolidation of shares, reduction of stated capital or additional paid-in capital, merger (excluding dissolution of the Company due to the merger), a share exchange or a company split;

 

(2)In addition to item (1) above, the occurrence of an event that causes or may cause a change in the total number of Shares outstanding of the Company;

 

(3)The Conversion Price is required to be adjusted in order to make a free share distribution of other classes of shares to the shareholders of the Shares;

 

(4)The Conversion Price is required to be adjusted in order to distribute a surplus dividend in the form of an asset other than money, the financial value of which will be the same as if it is a Special Dividend; and

 

(5)When two or more events which require adjustment of the Conversion Price coincide in proximate timing, and it is necessary to take into consideration the impact of one event upon the market price which must be used for the calculation of Conversion Price to be adjusted due to the other event(s).

 

Furthermore, when a public notice is made pursuant to the provisions for Early Redemption Due to Reorganization or Early Redemption Due to Delisting (each as defined in the Terms and Conditions of the Convertible Bonds with Stock Acquisition Rights (the “Terms and Conditions”)), the Conversion Price shall be reduced in accordance with the specified manner set forth in the Terms and Conditions.

 

-10
 
*4Holders of the Convertible Bonds with Stock Acquisition Rights may exercise the Stock Acquisition Rights and request the Company to deliver the Shares at any time during the period from September 1, 2015 to September 28, 2022; provided, however, that the application to exercise such rights may not be made during the following times:

 

(1)The date on which the shareholders of the Shares are determined and the immediately preceding business day;
(2)A day deemed necessary by a book-entry transfer institution;
(3)In the case of early redemption of the Bonds on or before September 28, 2022 pursuant to the provisions for the Early Redemption Due to Reorganization, the Early Redemption Due to Delisting, and the 130% Call Option (as defined in the Terms and Conditions), on or after the immediately preceding business day of the day on which the principal for such redemption is to be paid;
(4)In the case where the Bonds become due and payable, on or after the date when such Bonds become due and payable;
(5)In the case where, in a Reorganization (as defined in the Terms and Conditions), the stock acquisition rights of a New Obligor (as defined in the Terms and Conditions) are delivered and it is necessary to suspend the application to exercise the Stock Acquisition Rights, the period with respect to which Sony gives to the bond administrator(s) a prior written notice stating the period for the suspension of the application to exercise the rights (such period shall not exceed one month) and other necessary matters, and gives a public notice for the necessary matters no later than one month before the commencement date of such period.

 

*5 (1) In the case of a Reorganization in which a New Obligor’s common stock is delivered to the shareholder of the Company, excluding the case of early redemption of the Bonds pursuant to the Early Redemption Due to Reorganization, the Company shall deliver the stock acquisition rights of a New Obligor (“New Stock Acquisition Rights”), the details of which are set forth in (2) below, to the holder of the Stock Acquisition Rights that are outstanding immediately prior to the effective date of such Reorganization (the “Reorganization Effective Date”). In such case, as of such Reorganization Effective Date, the Stock Acquisition Rights lapse and the obligations of the Bonds are assumed by a New Obligor (the Bonds assumed by a New Obligor are hereinafter referred to as the “New Bonds”), New Stock Acquisition Rights become stock acquisition rights attached to the New Bonds, and holders of the Stock Acquisition Rights become holders of the New Stock Acquisition Rights. Provisions of the Stock Acquisition Rights in the Terms and Conditions apply mutatis mutandis to the New Stock Acquisition Rights.

 

(2)The details of the New Stock Acquisition Rights are set forth below:

 

(a)Number of New Stock Acquisition Rights:

 

The number of New Stock Acquisition Rights to be granted will be equal to the number of the Stock Acquisition Rights that are outstanding immediately prior to the relevant Reorganization Effective Date.

 

(b)Class of shares to be issued or transferred upon the exercise of the New Stock Acquisition Rights:

 

Shares of the New Obligor’s common stock.

 

(c)Method of determination of the number of shares to be issued or transferred upon exercise of the New Stock Acquisition Rights:

 

The number of shares to be issued or transferred is the number that is obtained by dividing the total value of the New Bonds, to which the New Stock Acquisition Rights exercised are attached, by the Conversion Price as set forth in (d) below. In such case, fractions of a share will not be issued and no adjustment by means of cash payment will be made in respect thereof.

 

(d)Conversion Price for the New Bonds to which the New Stock Acquisition Rights are attached

 

-11
 

The Conversion Price for the New Bonds to which the New Stock Acquisition Rights are attached shall be such that the holder of a New Stock Acquisition Right shall, upon the exercise of such rights immediately after the Reorganization Effective Date, receive an equivalent economic value to be determined by the Company as that which the holder of Stock Acquisition Rights would have received had such Stock Acquisition Right been exercised immediately before the relevant Reorganization Effective Date. On or after the Reorganization Effective Date, the Conversion Price for the New Bonds to which the New Stock Acquisition Rights are attached shall be subject to the same kind of adjustment or reduction as described in Note 3.

 

(e)Description of asset to be contributed upon exercise of the New Stock Acquisition Rights and amount thereof:

 

Upon the exercise of each New Stock Acquisition Right, each New Bond to which each such New Stock Acquisition Right is attached shall be contributed and the amount to be contributed by such New Bonds shall be equal to the subscription amount of the Bond.

 

(f)Period during which the New Stock Acquisition Rights are exercisable:

 

The New Stock Acquisition Rights may be exercised at any time during the period from the relevant Reorganization Effective Date (or, if the Company determines the period during which the application to exercise such rights is suspended as set forth in (5) of Note 4, the later of the date of such Reorganization Effective Date or the business day immediately following the last day of such suspension period) up to, and including, the last day of the period for the application to exercise the Stock Acquisition Rights as set forth in Note 4.

 

(g)Amount of stated capital and additional paid-in capital increased by issuance of shares upon exercise of the New Stock Acquisition Rights:

 

The amount of stated capital to be increased upon exercise of New Stock Acquisition Rights shall be half of the maximum amount of the stated capital increased, as calculated in accordance with Article 17 of the Rules of Account Settlement of Corporations with any fraction less than one yen resulting from such calculation being rounded up to the nearest one yen. The amount of additional paid-in capital to be increased shall be the amount obtained by subtracting the relevant amount of stated capital to be increased from the relevant maximum amount of the stated capital increase.

 

(h)Other conditions for the exercise of the New Stock Acquisition Rights:

 

No application for partial exercise of each New Stock Acquisition Right may be made.

 

(i)Mandatory Repurchase of Stock Acquisition Rights:

 

Not applicable.

 

iii) Status of the Exercise of Moving Strike Convertible Bonds

Not applicable.

 

iv) Description of Rights Plan

Not applicable.

 

-12
 

 

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

Period Change in the total number of shares issued Balance of the total number of shares issued

Change in

the amount of

common stock

Balance of

the amount of

common stock

Change in the legal capital surplus Balance of the legal capital surplus
(Thousands) (Thousands) (Yen in Millions) (Yen in Millions) (Yen in Millions) (Yen in Millions)
July 21, 2015 *1 87,200 1,257,355 142,984 850,587 142,984 1,064,280
August 18, 2015 *2 4,800 1,262,155 7,871 858,458 7,871 1,072,151
From July 1 to September 30, 2015 *3 61 1,262,216 64 858,522 64 1,072,215

Notes:

*1.Public Offering
Offer Price ¥ 3,420.5 per share
Price to Underwriters ¥ 3,279.44 per share
Amount of Stated Capital to be Increased ¥ 1,639.72 per share
Total Price to Underwriters ¥ 285,967 millions

 

 

 

 

 

*2.Third-Party Allotment (Issuance of new shares by way of third-party allotment)
Price to Underwriters ¥ 3,279.44 per share
Amount of Stated Capital to be Increased ¥ 1,639.72 per share
Total Price to Underwriters ¥ 15,741 millions
Subscriber Nomura Securities Co., Ltd.

 

 

 

 

 

*3.The increase is due to the exercise of SARs.

 

4.Upon the exercise of SARs during the period from October 1, 2015 to October 31, 2015 the total number of shares issued increased by 6 thousand shares and the amount of common stock and the legal capital surplus increased by 7 million yen.

 

 

-13
 

 

vi) Status of Major Shareholders

(As of September 30, 2015)

Name Address

Number of
shares held

(Thousands)

Percentage

of shares held to total shares issued (%)

Citibank as Depositary Bank for Depositary Receipt Holders *1

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

New York, U.S.A.

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

Tokyo)

118,292 9.37
The Master Trust Bank of Japan, Ltd.
(Trust account) *2

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

Tokyo

62,194 4.93
Japan Trustee Services Bank, Ltd.
(Trust account) *2
1-8-11, Harumi, Chuo-ku, Tokyo 59,020 4.68

Goldman, Sachs & Co. Reg *3

(Local Custodian: Goldman Sachs Japan Co., Ltd.)

New York, U.S.A.

(Roppongi Hills Mori Tower, 6-10-1, Roppongi, Minato-ku, Tokyo)

38,328 3.04

State Street Bank and Trust Company *3

(Local Custodian: The Hongkong and Shanghai

Banking Corporation Limited)

Boston, U.S.A.

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

Tokyo)

22,828 1.81

The Bank of New York Mellon SA/NV 10 *3

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

Brussels, Belgium

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

Tokyo)

22,579 1.79

State Street Bank West Client - Treaty 505234 *3

(Local Custodian: Mizuho Bank, Ltd.)

North Quincy, U.S.A.

(4-16-13, Tsukishima, Chuo-ku,

Tokyo)

18,314 1.45

State Street Bank and Trust Company 505225 *3

(Local Custodian: Mizuho Bank, Ltd.)

Boston, U.S.A.

(4-16-13, Tsukishima, Chuo-ku,

Tokyo)

16,523 1.31

JPMorgan Chase Bank 385632

(Local Custodian: Mizuho Bank, Ltd.)

London, United Kingdom

(4-16-13, Tsukishima, Chuo-ku,

Tokyo)

16,168 1.28

State Street Bank and Trust Company 505223 *3

(Local Custodian: Mizuho Bank, Ltd.)

Boston, U.S.A.

(4-16-13, Tsukishima, Chuo-ku,

Tokyo)

15,485 1.23
Total 389,731 30.88

Notes:

*1.Citibank as Depositary Bank for Depositary Receipt Holders is the nominee of Citibank, N.A.
*2.The shares held by each shareholder are held in trust for investors, including shares in securities investment trusts.
*3.Each shareholder provides depositary services for shares owned by institutional investors, mainly in Europe and North America. They are also the nominees for these investors.
4.Sumitomo Mitsui Trust Bank, Limited sent a copy of its “Bulk Shareholding Report” (which was filed with the Kanto Financial Bureau in Japan) to the Company as of April 4, 2014 and reported that it held shares of the Company as of March 31, 2014 as provided in the below table. As of September 30, 2015, the Company has not been able to confirm any entry of Sumitomo Mitsui Trust Bank, Limited in the register of shareholders.
-14
 

 

 

Name

Number of shares held

(Thousands)

Percentage of shares held

to total shares issued (%)

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

 

5.BlackRock Japan Co., Ltd. sent a copy of its “Bulk Shareholding Report” (which was filed with the Kanto Financial Bureau in Japan) to the Company as of July 22, 2014 and reported that it held shares of the Company as of July 15, 2014 as provided in the below table. As of September 30, 2015, the Company has not been able to confirm any entry of BlackRock Japan Co., Ltd. in the register of shareholders.
Name

Number of shares held

(Thousands)

Percentage of shares held

to total shares issued (%)

BlackRock Japan Co., Ltd.

and the 8 Joint Holders

52,314 5.01

 

vii) Status of Voting Rights

1) Shares Issued

(As of September 30, 2015)

Classification Number of shares of common stock

Number of voting rights

(Units)

Description
Shares without voting rights

Shares with restricted voting rights

(Treasury stock, etc.)

Shares with restricted voting rights (Others)

Shares with full voting rights

(Treasury stock, etc.)

1,029,600
Shares with full voting rights (Others) 1,258,947,500 12,589,475
Shares constituting less than one full unit 2,238,760

Shares constituting less than one full unit

(100 shares)

Total number of shares issued 1,262,215,860
Total voting rights held by all shareholders 12,589,475
Note:Included in “Shares with full voting rights (Others)” under “Number of shares of common stock” are 19,500 shares of common stock held under the name of Japan Securities Depository Center, Incorporated. Also included in “Shares with full voting rights (Others)” under “Number of voting rights (Units)” are 195 units of voting rights relating to the shares of common stock with full voting rights held under the name of Japan Securities Depository Center, Incorporated.
-15
 

2) Treasury Stock, Etc.

(As of September 30, 2015)

Name of shareholder Address of shareholder Number of shares held under own name Number of shares held under the names of others Total number of shares held

Percentage of shares held to

total shares issued (%)

Sony Corporation

(Treasury stock)

1-7-1, Konan, Minato-ku, Tokyo 1,029,600 1,029,600 0.08
Total 1,029,600  — 1,029,600 0.08
Note:In addition to the 1,029,600 shares listed above, there are 300 shares of common stock held in the name of the Company in the register of shareholders that the Company does not beneficially own. These shares are included in “Shares with full voting rights (Others)” in Table 1 “Shares Issued” above.

 

(2) Directors and Corporate Executive Officers

There was no change in directors or corporate executive officers in the period from the filing date of the Securities Report (Yukashoken Houkokusho) for the fiscal year ended March 31, 2015 to the filing date of this Quarterly Securities Report (Shihanki Houkokusho).

-16
 

IV Financial Statements

  Page
(1) Consolidated Financial Statements 18
  (i) Consolidated Balance Sheets 18
  (ii) Consolidated Statements of Income 20
  (iii) Consolidated Statements of Comprehensive Income 22
  (iv) Consolidated Statements of Cash Flows 23
(2) Other Information 47

 

-17
 


(1) Consolidated Financial Statements

 

(i) Consolidated Balance Sheets (Unaudited)


Sony Corporation and Consolidated Subsidiaries

   Yen in millions
   At March 31,
2015
  At September 30,
2015
ASSETS          
Current assets:          
Cash and cash equivalents   949,413    1,010,120 
Marketable securities   936,731    889,623 
Notes and accounts receivable, trade   986,500    1,095,632 
Allowance for doubtful accounts and sales returns   (86,598)   (86,948)
Inventories   665,432    948,171 
Other receivables   231,947    321,395 
Deferred income taxes   47,788    50,675 
Prepaid expenses and other current assets   466,688    480,526 
     Total current assets   4,197,901    4,709,194 
Film costs   305,232    384,676 
Investments and advances:          
Affiliated companies   171,063    168,905 
Securities investments and other   8,360,290    8,640,342 
    8,531,353    8,809,247 
Property, plant and equipment:          
Land   123,629    123,027 
Buildings   679,125    681,927 
Machinery and equipment   1,764,241    1,820,603 
Construction in progress   35,786    61,013 
    2,602,781    2,686,570 
Less – Accumulated depreciation   1,863,496    1,870,998 
    739,285    815,572 
Other assets:          
Intangibles, net   642,361    635,791 
Goodwill   561,255    610,738 
Deferred insurance acquisition costs   520,571    530,231 
Deferred income taxes   89,637    81,847 
Other   246,736    253,882 
    2,060,560    2,112,489 
Total assets   15,834,331    16,831,178 

(Continued on following page.)

-18
 

Consolidated Balance Sheets (Unaudited)


 

 

   Yen in millions
   At March 31,
2015
  At September 30,
2015
LIABILITIES          
Current liabilities:          
Short-term borrowings   62,008    273,133 
Current portion of long-term debt   159,517    149,454 
Notes and accounts payable, trade   622,215    881,130 
Accounts payable, other and accrued expenses   1,374,099    1,374,279 
Accrued income and other taxes   98,414    105,653 
Deposits from customers in the banking business   1,872,965    1,790,920 
Other   556,372    543,601 
     Total current liabilities   4,745,590    5,118,170 
Long-term debt   712,087    766,675 
Accrued pension and severance costs   298,753    297,205 
Deferred income taxes   445,876    425,809 
Future insurance policy benefits and other   4,122,372    4,316,443 
Policyholders’ account in the life insurance business   2,259,514    2,308,890 
Other   316,422    324,509 
Total liabilities   12,900,614    13,557,701 
Redeemable noncontrolling interest   5,248    7,475 
Commitments and contingent liabilities          
EQUITY          

Sony Corporation’s stockholders’ equity:

Common stock, no par value –

At March 31, 2015–Shares authorized: 3,600,000,000, shares issued: 1,169,773,260

At September 30, 2015–Shares authorized: 3,600,000,000, shares issued: 1,262,215,860

   707,038    858,522 
Additional paid-in capital   1,185,777    1,323,906 
Retained earnings   813,765    917,146 
Accumulated other comprehensive income –          
Unrealized gains on securities, net   154,153    101,288 
Unrealized losses on derivative instruments, net   —      (1,741)
Pension liability adjustment   (201,131)   (200,227)
Foreign currency translation adjustments   (338,305)   (350,342)
    (385,283)   (451,022)
Treasury stock, at cost          

Common stock

At March 31, 2015–1,031,323 shares

At September 30, 2015–1,029,643 shares

   (4,220)   (4,205)
    2,317,077    2,644,347 
Noncontrolling interests   611,392    621,655 
Total equity   2,928,469    3,266,002 
Total liabilities and equity   15,834,331    16,831,178 

The accompanying notes are an integral part of these statements.

-19
 

(ii) Consolidated Statements of Income (Unaudited)


Sony Corporation and Consolidated Subsidiaries

   Yen in millions
   Six months ended September 30
   2014  2015
Sales and operating revenue:          
Net sales   3,145,965    3,166,925 
Financial services revenue   513,942    486,724 
Other operating revenue   51,512    47,150 
    3,711,419    3,700,799 
Costs and expenses:          
Cost of sales   2,319,722    2,362,495 
Selling, general and administrative   829,650    797,030 
Financial services expenses   422,509    399,114 
Other operating (income) expense, net   159,142      (41,399)   
    3,731,023    3,517,240 
Equity in net income of affiliated companies   3,830    1,366 
Operating income (loss)   (15,774)   184,925 
Other income:          
Interest and dividends   5,752    6,316 
Gain on sale of securities investments, net   7,586    51,577 
Other   2,082    1,186 
    15,420    59,079 
Other expenses:          
Interest   12,459    10,975 
Foreign exchange loss, net   4,568    18,348 
Other   4,197    3,777 
    21,224    33,100 
Income (loss) before income taxes   (21,578)   210,904 
Income taxes   56,124    63,678 
Net income (loss)   (77,702)   147,226 
Less - Net income attributable to noncontrolling interests   31,459    31,232 
Net income (loss) attributable to Sony Corporation’s stockholders   (109,161)   115,994 

 

   Yen
   Six months ended September 30
   2014  2015
Per share data:  -  -
Net income (loss) attributable to Sony Corporation’s stockholders          
Basic   (102.14)   95.53 
Diluted    (102.14)   94.41 

The accompanying notes are an integral part of these statements.

-20
 

Consolidated Statements of Income (Unaudited)

Sony Corporation and Consolidated Subsidiaries

   Yen in millions
   Three months ended September 30
   2014  2015
Sales and operating revenue:          
Net sales   1,606,159    1,663,614 
Financial services revenue   268,192    209,035 
Other operating revenue   27,160    20,091 
    1,901,511    1,892,740 
Costs and expenses:          
Cost of sales   1,168,883    1,228,226 
Selling, general and administrative   419,203    418,308 
Financial services expenses   220,831    167,076 
Other operating (income) expense, net   178,811    (7,945)
    1,987,728    1,805,665 
Equity in net income of affiliated companies   629    943 
Operating income (loss)   (85,588)   88,018 
Other income:          
Interest and dividends   2,337    3,664 
Gain on sale of securities investments, net   2,386    795 
Other   1,465    539 
    6,188    4,998 
Other expenses:          
Interest   6,047    6,581 
Foreign exchange loss, net   2,592    12,602 
Other   1,916    1,639 
    10,555    20,822 
Income (loss) before income taxes   (89,955)   72,194 
Income taxes   30,078    23,866 
Net income (loss)   (120,033)   48,328 
Less - Net income attributable to noncontrolling interests   15,936    14,775 
Net income (loss) attributable to Sony Corporation’s stockholders   (135,969)   33,553 


   Yen
   Three months ended September 30
   2014  2015
Per share data:  -  -
Net income (loss) attributable to Sony Corporation’s stockholders          
Basic   (124.32)   26.64 
Diluted   (124.32)   26.10 

The accompanying notes are an integral part of these statements.

 

-21
 

(iii) Consolidated Statements of Comprehensive Income (Unaudited)


Sony Corporation and Consolidated Subsidiaries

   Yen in millions
   Six months ended September 30
   2014  2015
Net income (loss)   (77,702)   147,226 
Other comprehensive income, net of tax ―          
Unrealized gains (losses) on securities   15,066    (57,866)
Unrealized losses on derivative instruments   —      (1,741)
Pension liability adjustment   750    907 
Foreign currency translation adjustments   30,717    (11,901)
Total comprehensive income (loss)   (31,169)   76,625 
Less – Comprehensive income attributable to noncontrolling interests   38,382    26,370 
Comprehensive income (loss) attributable to Sony Corporation's stockholders   (69,551)   50,255 

 

   Yen in millions
   Three months ended September 30
   2014  2015
Net income (loss)   (120,033)   48,328 
Other comprehensive income, net of tax ―          
Unrealized gains (losses) on securities   13,191    (10,800)
Unrealized losses on derivative instruments   —      (1,105)
Pension liability adjustment   414    705 
Foreign currency translation adjustments   51,557    (39,508)
Total comprehensive loss   (54,871)   (2,380)
Less – Comprehensive income attributable to noncontrolling interests   19,655    12,910 
Comprehensive loss attributable to Sony Corporation's stockholders   (74,526)   (15,290)

The accompanying notes are an integral part of these statements.

-22
 

(iv) Consolidated Statements of Cash Flows (Unaudited)


Sony Corporation and Consolidated Subsidiaries

   Yen in millions
   Six months ended September 30
   2014  2015
Cash flows from operating activities:          
 Net income (loss)   (77,702)   147,226 
 Adjustments to reconcile net income (loss) to net cash          
 provided by operating activities–          
 Depreciation and amortization, including amortization
       of deferred insurance acquisition costs
   166,747    184,055 
 Amortization of film costs   127,868    118,669 
 Accrual for pension and severance costs, less payments   (5,754)   (4,794)
 Other operating (income) expense, net   159,142    (41,399)
 Gain on sale or devaluation of securities investments, net   (7,582)   (51,572)

 

 (Gain) loss on revaluation of marketable securities held in the
        financial services business for trading purposes, net
   (37,019)   46,866 
 (Gain) loss on revaluation or impairment of securities investments
         held in the financial services business, net
   (1,251)   2,666 
 Deferred income taxes   (1,783)   10,421 
 Equity in net income of affiliated companies, net of dividends   681    307 
     Changes in assets and liabilities:          
      Increase in notes and accounts receivable, trade   (102,544)   (105,253)
      Increase in inventories   (190,425)   (298,961)
      Increase in film costs   (129,316)   (200,044)
      Increase in notes and accounts payable, trade   163,389    262,949 
      Increase in accrued income and other taxes   19,036    4,657 
      Increase in future insurance policy benefits and other   223,669    176,455 
      Increase in deferred insurance acquisition costs   (38,560)   (45,273)
      Increase in marketable securities held in the
      financial services business for trading purposes
   (30,631)   (46,947)
      Increase in other current assets   (100,128)   (79,972)
      Increase (decrease) in other current liabilities   1,836    (77,940)
    Other   (35,598)   23,425 
          Net cash provided by operating activities   104,075    25,541 


(Continued on following page.)

-23
 

Consolidated Statements of Cash Flows (Unaudited)


 

       
   Yen in millions
   Six months ended September 30
   2014  2015
Cash flows from investing activities:          
 Payments for purchases of fixed assets   (95,778)   (161,954)
 Proceeds from sales of fixed assets   30,407    10,049 
Payments for investments and advances by financial services business   (459,625)   (706,663)
Payments for investments and advances
(other than financial services business)
   (9,408)   (7,252)
Proceeds from sales or return of investments and collections of advances
by financial services business
   232,550    347,989 
Proceeds from sales or return of investments and collections of advances
(other than financial services business)
   32,916    78,104 
Proceeds from sales of businesses   —      17,790 
Other   (13,921)   (35,135)
          Net cash used in investing activities   (282,859)   (457,072)
Cash flows from financing activities:          
 Proceeds from issuance of long-term debt   12,471    19,627 
 Payments of long-term debt   (231,652)   (104,768)
 Increase (decrease) in short-term borrowings, net   (926)   213,787 
Decrease in deposits from customers in the financial services
business, net
   (22,750)   (14,561)
Proceeds from issuance of convertible bonds   —      120,000 
Proceeds from issuance of new shares   —      301,708 
Dividends paid   (13,060)   (105)
Other   (17,100)   (34,381)
          Net cash provided by (used in) financing activities   (273,017)   501,307 
Effect of exchange rate changes on cash and cash equivalents   15,844    (9,069)
Net increase (decrease) in cash and cash equivalents   (435,957)   60,707 
Cash and cash equivalents at beginning of the fiscal year   1,046,466    949,413 
Cash and cash equivalents at end of the period   610,509    1,010,120 

The accompanying notes are an integral part of these statements.

 

-24
 

Index to Notes to Consolidated Financial Statements

Sony Corporation and Consolidated Subsidiaries

 

Notes to Consolidated Financial Statements Page
  1. Summary of significant accounting policies 26
  2. Marketable securities and securities investments 27
  3. Fair value measurements 28
  4. Issuance of convertible bonds 29
  5. Supplemental equity and comprehensive income information 30
  6. Reconciliation of the differences between basic and diluted EPS 32
  7. Orchard Acquisition 33
  8. Sale of the logistics business 33
  9. Commitments, contingent liabilities and other 34
  10. Business segment information 36

 

-25
 

Notes to Consolidated Financial Statements (Unaudited)

Sony Corporation and Consolidated Subsidiaries

1.Summary of significant accounting policies

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

 

(1) Recently adopted accounting pronouncements:

Reporting discontinued operations and disclosures of disposals of components of an entity -

In April 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that changes the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations that has, or will have, a major effect on the entity’s operations and financial results should be presented as discontinued operations. Additionally, the revised guidance requires additional disclosures for discontinued operations as well as for disposals of significant components of an entity that do not qualify for discontinued operations presentation. This guidance was effective for Sony as of April 1, 2015. The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

 

Repurchase-to-maturity transactions and repurchase financings -

In June 2014, the FASB issued new accounting guidance for the accounting and disclosure of repurchase-to-maturity transactions and repurchase financings. The guidance requires that repurchase-to-maturity transactions be accounted for as secured borrowings, and requires that a transfer of a financial asset and a repurchase agreement executed contemporaneously be accounted for separately. The guidance also requires additional disclosures about certain transferred financial assets accounted for as sales and certain transactions accounted for as secured borrowings. Except for the disclosure for transactions accounted for as secured borrowings, the guidance was effective for Sony as of January 1, 2015. The guidance for disclosure for transactions accounted for as secured borrowings was effective for Sony as of April 1, 2015. The adoption of this guidance did not have a material impact on Sony’s results of operations and financial position.

 

(2) Accounting methods used specifically for interim consolidated financial statements:

Income Taxes -

Sony estimates the annual effective tax rate (“ETR”) derived from a projected annual net income before taxes and calculates the interim period income tax provision based on the year-to-date income tax provision computed by applying the ETR to the year-to-date net income before taxes at the end of each interim period. The income tax provision based on the ETR reflects anticipated income tax credits and net operating loss carryforwards; however, it excludes the income tax provision related to significant unusual or extraordinary transactions. Such income tax provision is separately reported from the provision based on the ETR in the interim period in which it occurs.

 

(3) Reclassifications:

Certain reclassifications of the financial statements and accompanying footnotes for the six and three months ended September 30, 2014 have been made to conform to the presentation for the six and three months ended September 30, 2015.

 

-26
 

2. Marketable securities and securities investments

 

Marketable securities and securities investments, primarily included in the Financial Services segment, are comprised of debt and equity securities for which the aggregate cost, gross unrealized gains and losses and fair value pertaining to available-for-sale securities and held-to-maturity securities are as follows:

 

   Yen in millions
   March 31, 2015  September 30, 2015
   Cost  Gross unrealized gains  Gross unrealized losses  Fair value  Cost  Gross unrealized gains  Gross unrealized losses  Fair value
                         
Available-for-sale:                                        
Debt securities:                                        
Japanese national government bonds *   1,074,900    147,274    (80)   1,222,094    1,134,928    141,767    (97)   1,276,598 
                                         
Japanese local
government bonds
   66,442    465    (16)   66,891    57,343    186    (31)   57,498 
                                         
Japanese corporate
bonds
   108,109    767    (7)   108,869    101,358    629    (70)   101,917 
                                         
Foreign
government bonds
   34,168    7,397    (111)   41,454    34,090    6,573    (82)   40,581 
                                         
Foreign corporate bonds   452,145    13,645    (942)   464,848    419,447    8,620    (3,918)   424,149 
    1,735,764    169,548    (1,156)   1,904,156    1,747,166    157,775    (4,198)   1,900,743 
                                         
Equity securities   73,411    127,322    (741)   199,992    46,926    58,991    (1,794)   104,123 
                                         
Held-to-maturity                                        
securities:                                        
Japanese national
government bonds *
   4,846,986    819,386    (103)   5,666,269    5,161,632    778,004    (9)   5,939,627 
                                         
Japanese local
government bonds
   4,996    428    —      5,424    4,530    414    —      4,944 
                                         

Japanese corporate

 bonds

   26,848    4,501    —      31,349    28,871    4,417    —      33,288 
                                         
Foreign
government bonds
   32,682    11,534    —      44,216    38,099    6,769    (4)   44,864 
                                         
Foreign corporate bonds   57,783    25    —      57,808    198    24    —      222 
    4,969,295    835,874    (103)   5,805,066    5,233,330    789,628    (13)   6,022,945 
                                         
Total   6,778,470    1,132,744    (2,000)   7,909,214    7,027,422    1,006,394    (6,005)   8,027,811 

 

* As of September 30, 2015, available-for-sale securities and held-to-maturity securities include 19,949 million yen and 139,605 million yen, respectively, of pledged Japanese national government bonds as collateral for transactions with short-term repurchase agreement.

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3. Fair value measurements

 

The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis are as follows:

 

    Yen in millions
    March 31, 2015
      Presentation in the consolidated balance sheets
    Level 1   Level 2   Level 3   Total   Marketable securities   Securities investments and other  

Other current assets/

liabilities

 

Other noncurrent assets/

liabilities

                                 
Assets:                                
Trading securities   452,830   311,643   -   764,473   764,473   -   -   -
Available-for-sale securities                                
 Debt securities                                
       Japanese national government bonds   -   1,222,094   -   1,222,094   3,124   1,218,970   -   -
       Japanese local government bonds   -   66,891   -   66,891   1,474   65,417   -   -
       Japanese corporate bonds   -   105,363   3,506   108,869   27,030   81,839   -   -
       Foreign government bonds   2,861   38,593   -   41,454   136   41,318   -   -
       Foreign corporate bonds   -   455,357   9,491   464,848   139,540   325,308   -   -
      Equity securities   199,874   118   -   199,992   -   199,992   -   -
Other investments *1   9,306   4,606   74,641   88,553   -   88,553   -   -
Derivative assets *2, *3   -   30,407   -   30,407   -   -   29,951   456
Total assets   664,871   2,235,072   87,638   2,987,581   935,777   2,021,397   29,951   456
Liabilities:                                
Derivative liabilities*2,*3   612   47,712   -   48,324   -   -   23,092   25,232
Total liabilities   612   47,712   -   48,324   -   -   23,092   25,232

 

-28
 

 

 

    Yen in millions
    September 30, 2015
      Presentation in the consolidated balance sheets
    Level 1   Level 2   Level 3   Total   Marketable securities   Securities investments and other  

Other current assets/

liabilities

 

Other noncurrent assets/

liabilities

                                 
Assets:                                
Trading securities   464,508   286,920   -   751,428   751,428   -   -   -
Available-for-sale securities                                
 Debt securities                                
       Japanese national government bonds   -   1,276,598   -   1,276,598   3,719   1,272,879   -   -
       Japanese local government bonds   -   57,498   -   57,498   5,693   51,805   -   -
       Japanese corporate bonds   -   97,409   4,508   101,917   10,024   91,893   -   -
       Foreign government bonds   -   40,581   -   40,581   586   39,995   -   -
       Foreign corporate bonds   -   414,593   9,556   424,149   117,470   306,679   -   -
 Equity securities   103,987   136   -   104,123   -   104,123   -   -
Other investments *1   8,630   4,244   16,303   29,177   -   29,177   -   -
Derivative assets *2, *3   661   17,524   -   18,185   -   -   17,393   792
Total assets   577,786   2,195,503   30,367   2,803,656   888,920   1,896,551   17,393   792
Liabilities:                                
Derivative liabilities*2,*3   -   48,397   -   48,397   -   -   7,857   40,540
Total liabilities   -   48,397   -   48,397   -   -   7,857   40,540

 

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

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

*3 The potential effect of offsetting on assets and liabilities, which primarily consists of derivatives subject to master netting

agreements and/or collateral, is insignificant.

 

 

4. Issuance of convertible bonds

 

On July 21, 2015, Sony issued 120,000 million yen of 130% callable unsecured zero coupon convertible bonds with stock acquisition rights due 2022 (the “Zero Coupon Convertible Bonds”). The bondholders are entitled to stock acquisition rights effective from September 1, 2015 to September 28, 2022. The initial conversion price is 5,008 yen per common share. In addition to the standard anti-dilution provisions, the conversion price is reduced for a certain period before an early redemption triggered upon the occurrence of certain corporate events including a merger, corporate split and delisting event. The reduced amount of the conversion price will be determined by a formula that is based on the effective date of the reduction and Sony’s common stock price. The reduced conversion price ranges from 3,526.5 yen to 5,008 yen per common share. The conversion price is also adjusted for dividends in excess of 25 yen per common share per fiscal year. Sony has the option to redeem all of the Zero Coupon Convertible Bonds outstanding at 100% of the principal amount after July 21, 2020, if the closing sales price per share of Sony’s common stock on the Tokyo Stock Exchange is 130% or more of the conversion price of the Zero Coupon Convertible Bonds for 20 consecutive trading days. Sony was not required to bifurcate any of the embedded features contained in the Zero Coupon Convertible Bonds for accounting purposes. There are no significant adverse debt covenants under the Zero Coupon Convertible Bonds.

 

 

-29
 

 

5. Supplemental equity and comprehensive income information

(1)       Stockholders’ Equity

 

A reconciliation of the beginning and ending carrying amounts of Sony Corporation’s stockholders’ equity, noncontrolling interests and the total equity for the six months ended September 30, 2014 and 2015 are as follows:

 

      Yen in millions   
   Sony Corporation’s stockholders’ equity  Noncontrolling interests  Total equity
Balance at March 31, 2014   2,258,137    525,004    2,783,141 
Exercise of stock acquisition rights   91    —      91 
Conversion of zero coupon convertible bonds   100,400    —      100,400 
Stock-based compensation   529    —      529 
Comprehensive income:               
Net income (loss)   (109,161)   31,459    (77,702)
Other comprehensive income, net of tax ―               
Unrealized gains on securities   10,427    4,639    15,066 
Pension liability adjustment   788    (38)   750 
Foreign currency translation adjustments   28,395    2,322    30,717 
Total comprehensive income (loss)   (69,551)   38,382    (31,169)
Dividends declared   —      (12,270)   (12,270)
Transactions with noncontrolling interests
   shareholders and other
   (2,837)   1,296    (1,541)
Balance at September 30, 2014   2,286,769    552,412    2,839,181 

 

      Yen in millions   
   Sony Corporation’s stockholders’ equity  Noncontrolling interests  Total equity
Balance at March 31, 2015   2,317,077    611,392    2,928,469 
Issuance of new shares   301,708    —      301,708 
Exercise of stock acquisition rights   1,260    —      1,260 
Stock-based compensation   586    —      586 
Comprehensive income:               
Net income   115,994    31,232    147,226 
Other comprehensive income, net of tax ―               
Unrealized losses on securities   (52,865)   (5,001)   (57,866)
Unrealized losses on derivative instruments   (1,741)   —      (1,741)
Pension liability adjustment   904    3    907 
Foreign currency translation adjustments   (12,037)   136    (11,901)
Total comprehensive income   50,255    26,370    76,625 
Dividends declared   (12,612)   (18,655)   (31,267)
Transactions with noncontrolling interests
  shareholders and other
   (13,927)   2,548    (11,379)
Balance at September 30, 2015   2,644,347    621,655    3,266,002 

 

There was no material effect of changes in Sony Corporation’s ownership interest in its subsidiaries on Sony Corporation’s stockholders’ equity for the six months ended September 30, 2014 and 2015.

 

On July 21, 2015, Sony issued 87,200,000 new shares of common stock by way of a Japanese public offering and an international offering. In addition, on August 18, 2015, Sony issued 4,800,000 new shares of common stock by way of third-party allotment in connection with secondary offering of shares to cover over-allotments.

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(2)       Other Comprehensive Income

Changes in accumulated other comprehensive income, net of tax by component for the six months ended September 30, 2014 and 2015 are as follows:

 

  Yen in millions
  Unrealized gains (losses) on securities Pension liability adjustment Foreign currency translation adjustments Total
Balance at March 31, 2014 127,509 (180,039) (399,055) (451,585)

Other comprehensive income

before reclassifications

20,487 48 30,717 51,252

Amounts reclassified out of accumulated other

comprehensive income

(5,421) 702 - (4,719)

Net current-period other comprehensive

income

15,066 750 30,717 46,533

Less: Other comprehensive income (loss)

    attributable to noncontrolling interests

4,639 (38) 2,322 6,923
Balance at September 30, 2014 137,936 (179,251) (370,660) (411,975)

 

  Yen in millions
  Unrealized gains (losses) on securities Unrealized losses on derivative instruments Pension liability adjustment Foreign currency translation adjustments Total
Balance at March 31, 2015 154,153 - (201,131) (338,305) (385,283)

Other comprehensive loss

before reclassifications

(18,545) (1,893) (358) (11,901) (32,697)

Amounts reclassified out of accumulated other

comprehensive income

(39,321) 152 1,265 - (37,904)

Net current-period other comprehensive

income (loss)

(57,866) (1,741) 907 (11,901) (70,601)

Less: Other comprehensive income (loss)

    attributable to noncontrolling interests

(5,001) - 3 136 (4,862)
Balance at September 30, 2015 101,288 (1,741) (200,227) (350,342) (451,022)

 

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6. Reconciliation of the differences between basic and diluted EPS

 

Reconciliation of the differences between basic and diluted net income (loss) attributable to Sony Corporation’s stockholders per share (“EPS”) for the six and three months ended September 30, 2014 and 2015 is as follows:

 

  Yen in millions
  Six months ended September 30
  2014   2015

Net income (loss) attributable to Sony Corporation’s

stockholders for basic and diluted EPS computation

(109,161)   115,994

 

  Thousands of shares
Weighted-average shares outstanding 1,068,703   1,214,268
Effect of dilutive securities:      
Stock acquisition rights -   2,431
Zero coupon convertible bonds -   11,981
Weighted-average shares for diluted EPS computation 1,068,703   1,228,680

 

  Yen          
Basic EPS (102.14)   95.53
Diluted EPS (102.14)   94.41

 

Potential shares of common stock that were excluded from the computation of diluted EPS for the six months ended September 30, 2014 and 2015 were 36,397 thousand shares and 7,880 thousand shares, respectively. The potential shares were excluded as anti-dilutive for the six months ended September 30, 2014 due to Sony incurring a net loss attributable to Sony Corporation’s stockholders for the period, and potential shares related to stock acquisition rights were excluded as anti-dilutive for the six months ended September 30, 2015 when the exercise price for those shares was in excess of the average market value of Sony’s common stock for the period. The zero coupon convertible bonds issued in July 2015 were included in the diluted EPS calculation under the if-converted method beginning upon issuance.

 

  Yen in millions
  Three months ended September 30
  2014   2015

Net income (loss) attributable to Sony Corporation’s

stockholders for basic and diluted EPS computation

(135,969)   33,553

 

  Thousands of shares
Weighted-average shares outstanding 1,093,725   1,259,567
Effect of dilutive securities:      
Stock acquisition rights -   2,012
Zero coupon convertible bonds -   23,962
Weighted-average shares for diluted EPS computation 1,093,725   1,285,541

 

  Yen          
Basic EPS (124.32)   26.64
Diluted EPS (124.32)   26.10

 

Potential shares of common stock that were excluded from the computation of diluted EPS for the three months ended September 30, 2014 and 2015 were 36,397 thousand shares and 7,880 thousand shares, respectively. The potential shares were excluded as anti-dilutive for the three months ended September 30, 2014 due to Sony incurring a net loss attributable to Sony Corporation’s stockholders for the period, and potential shares related to stock acquisition rights were excluded as anti-dilutive for the three months ended September 30, 2015 when the exercise price for those shares was in excess of the average market value of Sony’s common stock for the period. The zero coupon convertible bonds issued in July 2015 were included in the diluted EPS calculation under the if-converted method beginning upon issuance.

 

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7. Orchard Acquisition

 

In April 2015, Sony Music Entertainment (“SME”), a wholly owned subsidiary of Sony, increased its shareholding in Orchard Media, Inc. (“The Orchard”) to 100% by acquiring Orchard Asset Holdings, LLC’s 49% equity interest.

 

Prior to the acquisition, SME’s interest in The Orchard was accounted for under the equity method of accounting. As a result of SME’s obtaining a controlling interest in The Orchard, Sony consolidated The Orchard using the acquisition method of accounting. In accordance with the accounting guidance for business combinations achieved in stages, Sony remeasured the 51% equity interest in The Orchard that it owned prior to the acquisition at a fair value which recognized a gain of 18,085 million yen (151 million U.S. dollars) in other operating (income) expense, net in the consolidated statement of income for the six months ended September 30, 2015. The purchase price allocation for this transaction is still in process and not yet finalized.

 

 

 

8. Sale of the logistics business

 

On April 1, 2015, in connection with the formation of a logistics joint venture, Sony sold a part of its logistics business in Japan, Thailand, and Malaysia within Corporate to MITSUI-SOKO HOLDINGS Co., Ltd. for a sales price of 19,211 million yen. As a result of the sale, Sony recognized a gain of 12,284 million yen in other operating (income) expense, net in the consolidated statement of income for the six months ended September 30, 2015.

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9. Commitments, contingent liabilities and other

(1) Loan commitments

Subsidiaries in the Financial Services segment have entered into loan agreements with their customers in accordance with the condition of the contracts. As of September 30, 2015, the total unused portion of the lines of credit extended under these contracts was 26,942 million yen. The aggregate amounts of future year-by-year payments for these loan commitments cannot be determined.

(2) Purchase commitments and other

Purchase commitments and other outstanding commitments as of September 30, 2015 amounted to 426,634 million yen. The major components of these commitments are as follows:

 

Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of motion pictures and television programming as well as agreements with third parties to acquire completed motion pictures, or certain rights therein, and to acquire the rights to broadcast certain live action sporting events. These agreements cover various periods mainly within three years. As of September 30, 2015, these subsidiaries were committed to make payments under such contracts of 138,416 million yen.

 

Certain subsidiaries in the Music segment have entered into long-term contracts with recording artists, songwriters and companies for the future production, distribution and/or licensing of music product. These contracts cover various periods mainly within five years. As of September 30, 2015, these subsidiaries were committed to make payments of 63,940 million yen under such long-term contracts.

 

Sony has entered into long-term sponsorship contracts related to advertising and promotional rights. These contracts cover various periods mainly within five years. As of September 30, 2015, Sony has committed to make payments of 27,193 million yen under such long-term contracts.

(3) Litigation

In October 2009, Sony Corporation’s U.S. subsidiary, Sony Optiarc America Inc., received a subpoena from the U.S. Department of Justice (“DOJ”) seeking information about its optical disk drive business. Sony understands that the European Commission and certain other governmental agencies outside the United States also opened investigations of competition in the optical disk drives market. In March 2014, the DOJ notified Sony that it had closed its investigation. In October 2015, the European Commission adopted a decision in which it fined Sony Corporation, its subsidiary in Japan, Sony Optiarc Inc. , and two other subsidiaries 31 million euros. Sony has announced an intent to appeal that ruling. Sony understands that the investigations by several other agencies have now ended, but one other agency continues to investigate. A number of direct and indirect purchaser lawsuits, including class actions, were filed in certain jurisdictions, including the United States, in which the plaintiffs alleged that Sony Corporation and certain of its subsidiaries violated antitrust laws and sought recovery of damages and other remedies. In October 2014, the United States District Court hearing the U.S. class actions denied motions for class certification in both the direct and indirect purchaser class actions. The class plaintiffs filed petitions to appeal these rulings, and in January 2015, the appellate court denied the petitions to appeal. However, in February 2015 the district court gave the plaintiffs an opportunity to seek certification of narrower classes, and the civil actions continue. Based on the investigations and cases, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

 

In May 2011, Sony Corporation’s U.S. subsidiary, Sony Electronics Inc., received a subpoena from the DOJ Antitrust Division seeking information about its secondary batteries business. Sony understands that the European Commission and certain other governmental agencies outside the United States also opened investigations of competition in the secondary batteries market. The DOJ has notified Sony that it has closed its investigation, but the European Commission and one other agency continue to investigate. A number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions, including the United States, in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Based on the stage of these proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of all of these matters.

 

Beginning in early 2011, the network services of PlayStation®Network, Qriocity™, Sony Online Entertainment LLC and websites of other subsidiaries came under cyber-attack. As of November 6, 2015, Sony has not received any confirmed reports of customer identity theft issues or misuse of credit cards from such cyber-attacks. In connection with certain of these matters, Sony had received inquiries from authorities in a number of jurisdictions, including formal and/or informal requests for information from Attorneys General from a number of states in the United States; the Attorneys General have indicated that no

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further action is likely to be taken regarding those requests. Additionally, Sony Corporation and/or certain of its subsidiaries were named in a number of purported class actions in certain jurisdictions, including the United States. The U.S. class action suits have been settled, and the settlement has received the final approval of the court. A non-U.S. class action suit remains pending. Based on the stage of these inquiries and proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of all of these matters.

 

In the fall of 2014, Sony Corporation’s U.S. subsidiary, Sony Pictures Entertainment Inc. (“SPE”), was subject to a cyber-attack that resulted in unauthorized access to, and theft and disclosure of SPE business information, including employee information and other information. In connection with the theft and disclosure of information, SPE has been named in a number of purported class action suits in the United States brought by former employees of SPE. A proposed settlement of the class action suits in the United States has been submitted to the court for preliminary court approval. Based on the stage of these proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of these proceedings.

 

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

(4) Guarantees

Sony has issued guarantees that contingently require payments to guaranteed parties if certain specified events or conditions occur. The maximum potential amount of future payments under these guarantees as of September 30, 2015 amounted to 42,336 million yen. The major components of these guarantees are as follows:

 

Sony has agreed to repay the outstanding principal plus accrued interest up to a maximum of 268.5 million U.S. dollars to the creditor of the third-party investor of Sony’s U.S. based music publishing subsidiary should the third-party investor default on its obligation. The obligation of the third-party investor is collateralized by its 50% interest in Sony’s music publishing subsidiary. Should Sony have to make a payment under the terms of the guarantee, Sony would assume the creditor’s rights to the underlying collateral. As of September 30, 2015, the fair value of the collateral exceeded 268.5 million U.S. dollars.

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10. Business segment information

The reportable segments presented below are the segments of Sony for which separate financial information is available and for which operating profit or loss amounts are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM does not evaluate segments using discrete asset information. Sony’s CODM is its Chief Executive Officer and President.

Sony realigned its business segments for the first quarter of the fiscal year ending March 31, 2016 to reflect modifications to its organizational structure as of April 1, 2015, primarily repositioning certain operations in All Other and the Devices segment. In connection with this realignment, the operations of Sony’s disc manufacturing business in Japan, which were included in All Other are now included in the Music segment and the operations of So-net Corporation and its subsidiaries, which were included in All Other are now included in the Mobile Communications (“MC”) segment. Certain operations regarding pre-installed automotive audio products which were included in the Devices segment are now included in the Home Entertainment & Sound (“HE&S”) segment. In connection with these realignments, the sales and operating revenue and operating income (loss) of each segment for the comparable period have been reclassified to conform to the current presentation.

 

The MC segment includes the manufacture and sale of mobile phones and an Internet-related service business. The Game & Network Services (“G&NS”) segment includes the manufacture and sales of home gaming products, network services business and production and sales of software. The Imaging Products & Solutions (“IP&S”) segment includes Digital Imaging Products, and Professional Solutions. The HE&S segment includes Televisions, and Audio and Video. The Devices segment includes Semiconductors and Components. The Pictures segment includes Motion Pictures, Television Productions and Media Networks. The Music segment includes Recorded Music, Music Publishing and Visual Media and Platform. 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 medical business, the disc overseas manufacturing business and the PC business. Sony’s products and services are generally unique to a single operating segment.

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Business segments -

 

Sales and operating revenue:

 

   Yen in millions
   Six months ended September 30
   2014  2015
Sales and operating revenue:          
Mobile Communications -          
Customers   663,954    557,815 
Intersegment   492    1,934 
Total   664,446    559,749 
Game & Network Services -          
Customers   517,122    606,980 
Intersegment   49,887    42,291 
Total   567,009    649,271 
Imaging Products & Solutions -          
Customers   341,288    351,413 
Intersegment   1,922    4,969 
Total   343,210    356,382 
Home Entertainment & Sound -          
Customers   581,913    540,688 
Intersegment   1,489    1,526 
Total   583,402    542,214 
Devices -          
Customers   310,581    396,986 
Intersegment   105,919    99,014 
Total   416,500    496,000 
Pictures -          
Customers   376,573    355,006 
Intersegment   380    285 
Total   376,953    355,291 
Music -          
Customers   231,577    262,059 
Intersegment   9,079    6,803 
Total   240,656    268,862 
Financial Services -          
Customers   513,942    486,724 
Intersegment   2,601    3,394 
Total   516,543    490,118 
All Other -          
Customers   147,694    124,442 
Intersegment   41,754    42,267 
Total   189,448    166,709 
Corporate and elimination   (186,748)   (183,797)
Consolidated total   3,711,419    3,700,799 

 

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

 

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

 

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

 

Corporate and elimination includes certain brand and patent royalty income.

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   Yen in millions
   Three months ended September 30
   2014  2015
Sales and operating revenue:          
Mobile Communications -          
Customers   329,212    278,279 
Intersegment   254    946 
Total   329,466    279,225 
Game & Network Services -          
Customers   285,754    341,082 
Intersegment   23,725    19,600 
Total   309,479    360,682 
Imaging Products & Solutions -          
Customers   177,152    183,156 
Intersegment   1,458    2,855 
Total   178,610    186,011 
Home Entertainment & Sound -          
Customers   288,864    288,201 
Intersegment   795    864 
Total   289,659    289,065 
Devices -          
Customers   173,846    203,981 
Intersegment   66,569    54,122 
Total   240,415    258,103 
Pictures -          
Customers   181,907    183,586 
Intersegment   276    156 
Total   182,183    183,742 
Music -          
Customers   116,716    135,079 
Intersegment   3,903    3,592 
Total   120,619    138,671 
Financial Services -          
Customers   268,192    209,035 
Intersegment   1,384    1,697 
Total   269,576    210,732 
All Other -          
Customers   64,872    63,967 
Intersegment   21,657    23,401 
Total   86,529    87,368 
Corporate and elimination   (105,025)   (100,859)
Consolidated total   1,901,511    1,892,740 

 

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

 

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

 

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

 

Corporate and elimination includes certain brand and patent royalty income.

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Segment profit or loss:

 

   Yen in millions
   Six months ended September 30
   2014  2015
Operating income (loss):          
Mobile Communications   (172,197)   (43,525)
Game & Network Services   26,109    43,379 
Imaging Products & Solutions   37,507    47,125 
Home Entertainment & Sound   17,899    26,686 
Devices   39,835    63,032 
Pictures        6,790    (34,153)
Music   23,797    46,340 
Financial Services   91,458    87,147 
All Other   (39,735)   (4,504)
Total   31,463    231,527 
Corporate and elimination   (47,237)   (46,602)
Consolidated operating income (loss)   (15,774)   184,925 
Other income   15,420    59,079 
Other expenses   (21,224)   (33,100)
Consolidated income (loss) before income taxes   (21,578)   210,904 
           

 

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

 

Corporate and elimination includes headquarters restructuring costs, restructuring costs related to the reduction in scale of sales companies following the decision to exit from the PC business, and certain other corporate expenses, including the amortization of certain intellectual property assets such as the cross-licensing of intangible assets acquired from Ericsson at the time of the Sony Mobile Communications acquisition, which are not allocated to segments.

 

Within the HE&S segment, the operating income of Televisions, which primarily consists of LCD televisions, for the six months ended September 30, 2014 and 2015 was 12,838 million yen and 16,708 million yen, respectively. The operating income of Televisions excludes restructuring charges which are included in the overall segment results and not allocated to product categories.

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   Yen in millions
   Three months ended September 30
   2014  2015
Operating income (loss):          
Mobile Communications   (170,588)   (20,601)
Game & Network Services   21,790    23,920 
Imaging Products & Solutions   20,098    25,854 
Home Entertainment & Sound   9,065    15,763 
Devices   28,335    32,690 
Pictures   (1,041)   (22,466)
Music   12,163    14,590 
Financial Services   47,686    41,175 
All Other   (19,784)   456 
Total   (52,276)   111,381 
Corporate and elimination   (33,312)   (23,363)
Consolidated operating income (loss)   (85,588)   88,018 
Other income   6,188    4,998 
Other expenses   (10,555)   (20,822)
Consolidated income (loss) before income taxes   (89,955)   72,194 
           

 

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

 

Corporate and elimination includes headquarters restructuring costs, restructuring costs related to the reduction in scale of sales companies following the decision to exit from the PC business, and certain other corporate expenses, including the amortization of certain intellectual property assets such as the cross-licensing of intangible assets acquired from Ericsson at the time of the Sony Mobile Communications acquisition, which are not allocated to segments.

 

Within the HE&S segment, the operating income of Televisions, which primarily consists of LCD televisions, for the three months ended September 30, 2014 and 2015 was 4,922 million yen and 9,705 million yen, respectively. The operating income of Televisions excludes restructuring charges which are included in the overall segment results and not allocated to product categories.

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Other Significant Items:

 

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

   Yen in millions
   Six months ended September 30
Sales and operating revenue:  2014  2015
Mobile Communications   663,954    557,815 
           
Game & Network Services          
Hardware   297,562    297,899 
Network   140,376    217,335 
Other   79,184    91,746 
Total   517,122    606,980 
           
Imaging Products & Solutions          
Digital Imaging Products   215,700    220,000 
Professional Solutions   120,538    124,531 
Other   5,050    6,882 
Total   341,288    351,413 
           
Home Entertainment & Sound          
Televisions   404,731    371,928 
Audio and Video   176,437    166,473 
Other   745    2,287 
Total   581,913    540,688 
           
Devices          
Semiconductors   203,043    289,925 
Components   104,326    102,371 
Other   3,212    4,690 
Total   310,581    396,986 
           
Pictures          
Motion Pictures   201,965    149,327 
Television Productions   86,621    93,308 
Media Networks   87,987    112,371 
Total   376,573    355,006 
           
Music          
Recorded Music   159,824    179,895 
Music Publishing   32,654    35,542 
Visual Media and Platform   39,099    46,622 
Total   231,577    262,059 
           
Financial Services   513,942    486,724 
All Other   147,694    124,442 
Corporate   26,775    18,686 
Consolidated total   3,711,419    3,700,799 

 

 

 

 

 

 

 

 

 

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   Yen in millions
   Three months ended September 30
Sales and operating revenue:  2014  2015
Mobile Communications   329,212    278,279 
           
Game & Network Services          
Hardware   160,689    168,434 
Network   71,123    111,534 
Other   53,942    61,114 
Total   285,754    341,082 
           
Imaging Products & Solutions          
Digital Imaging Products   109,565    112,844 
Professional Solutions   64,822    67,411 
Other   2,765    2,901 
Total   177,152    183,156 
           
Home Entertainment & Sound          
Televisions   199,742    203,008 
Audio and Video   89,023    85,162 
Other   99    31 
Total   288,864    288,201 
           
Devices          
Semiconductors   118,095    149,510 
Components   54,287    52,216 
Other   1,464    2,255 
Total   173,846    203,981 
           
Pictures          
Motion Pictures   97,339    91,152 
Television Productions   44,259    42,333 
Media Networks   40,309    50,101 
Total   181,907    183,586 
           
Music          
Recorded Music   80,429    90,567 
Music Publishing   16,366    17,698 
Visual Media and Platform   19,921    26,814 
Total   116,716    135,079 
           
Financial Services   268,192    209,035 
All Other   64,872    63,967 
Corporate   14,996    6,374 
Consolidated total   1,901,511    1,892,740 

 

In the G&NS segment, Hardware includes home and portable game consoles; Network includes network services relating to game, video and music content provided by Sony Network Entertainment International LLC; Other includes packaged software and peripheral devices. In the IP&S segment, Digital Imaging Products includes compact digital cameras, interchangeable single lens cameras and video cameras; Professional Solutions includes broadcast- and professional-use products. In the HE&S segment, Televisions includes LCD televisions; Audio and Video includes Blu-ray disc players and recorders, home audio, headphones and memory-based portable audio devices. In the Devices segment, Semiconductors includes image sensors; Components includes batteries and recording media. In the Pictures segment, Motion Pictures includes the production, acquisition and distribution of motion pictures; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks. In the Music segment, Recorded Music includes the distribution of physical and digital recorded music and revenue derived from artists’ live

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performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes various service offerings for music and visual products and the production and distribution of animation titles.

 

   Yen in millions
   Six months ended September 30
   2014  2015
Depreciation and amortization:          
Mobile Communications   11,900    12,207 
Game & Network Services   8,426    9,147 
Imaging Products & Solutions   15,260    13,807 
Home Entertainment & Sound   12,243    11,387 
Devices   42,602    51,070 
Pictures   9,256    10,723 
Music   7,263    8,805 
Financial Services, including deferred insurance acquisition costs   29,221    40,565 
All Other   5,175    3,583 
Total   141,346    161,294 
           
Corporate   25,401    22,761 
           
Consolidated total   166,747    184,055 
           

 

  
Yen in millions
   Six months ended September 30, 2014
    Total net restructuring charges    Depreciation associated with restructured assets    

 

Total

 
Restructuring charges and associated depreciation:               
Mobile Communications   57    —      57 
Game & Network Services   64    —      64 
Imaging Products & Solutions   200    —      200 
Home Entertainment & Sound   577    —      577 
Devices   3,361    4    3,365 
Pictures   16    —      16 
Music   60    —      60 
Financial Services   —      —      —   
All Other and Corporate   19,678    669    20,347 
Consolidated total   24,013    673    24,686 

 

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   Yen in millions
   Six months ended September 30, 2015
    Total net restructuring charges    Depreciation associated with restructured assets    

 

Total

 
Restructuring charges and associated depreciation:               
Mobile Communications   11,770    540    12,310 
Game & Network Services   15    —      15 
Imaging Products & Solutions   60    —      60 
Home Entertainment & Sound   (52)   —      (52)
Devices   4    —      4 
Pictures   170    —      170 
Music   335    —      335 
Financial Services   —      —      —   
All Other and Corporate   2,352    542    2,894 
Consolidated total   14,654    1,082    15,736 

 

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

 

 

 

   Yen in millions
   Three months ended September 30
   2014  2015
Depreciation and amortization:          
Mobile Communications   4,951    6,011 
Game & Network Services   4,426    4,507 
Imaging Products & Solutions   8,293    6,795 
Home Entertainment & Sound   6,138    5,806 
Devices   21,588    26,935 
Pictures   4,691    5,471 
Music   3,669    4,624 
Financial Services, including deferred insurance acquisition costs   13,602    24,044 
All Other   2,461    1,883 
Total   69,819    86,076 
           
Corporate   12,630    10,958 
           
Consolidated total   82,449    97,034 
           

 

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Yen in millions
   Three months ended September 30, 2014
    Total net restructuring charges    Depreciation associated with restructured assets    

 

Total

 
Restructuring charges and associated depreciation:               
Mobile Communications   44    —      44 
Game & Network Services   —      —      —   
Imaging Products & Solutions   71    —      71 
Home Entertainment & Sound   37    —      37 
Devices   2,819    4    2,823 
Pictures   16    —      16 
Music   35    —      35 
Financial Services   —      —      —   
All Other and Corporate   6,398    —      6,398 
Consolidated total   9,420    4    9,424 

 

 

   Yen in millions
   Three months ended September 30, 2015
    Total net restructuring charges    Depreciation associated with restructured assets    

 

Total

 
Restructuring charges and associated depreciation:               
Mobile Communications   4,033    225    4,258 
Game & Network Services   —      —      —   
Imaging Products & Solutions   16    —      16 
Home Entertainment & Sound   5    —      5 
Devices   34    —      34 
Pictures   121    —      121 
Music   258    —      258 
Financial Services   —      —      —   
All Other and Corporate   774    139    913 
Consolidated total   5,241    364    5,605 

 

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

-45
 

Geographic Information –

 

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

 

    Yen in millions
    Six months ended September 30
Sales and operating revenue:   2014   2015
Japan   1,010,924   1,057,112
United States   633,124   746,011
Europe   853,591   802,884
China   277,581   281,296
Asia-Pacific   504,269   476,609
Other Areas   431,930   336,887
Total   3,711,419   3,700,799

 

 

    Yen in millions
    Three months ended September 30
Sales and operating revenue:   2014   2015
Japan   499,545   495,531
United States   327,838   393,618
Europe   461,395   435,179
China   144,540   150,595
Asia-Pacific   259,396   237,662
Other Areas   208,797   180,155
Total   1,901,511   1,892,740

 

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

 

  (1)    Europe: United Kingdom, France, Germany, Russia, Spain and Sweden

  (2)    Asia-Pacific: India, South Korea and Oceania

  (3)   Other Areas: The Middle East/Africa, Brazil, Mexico and Canada

 

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

 

Transfers between reportable business segments or geographic areas are made at amounts which Sony’s management believes approximate arms-length transactions.

 

There were no sales and operating revenue with any single major external customer for the six and three months ended September 30, 2014 and 2015.

 

 

 

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(2) Other Information

 

(1) Dividends declared

An interim cash dividend for Sony Corporation’s common stock was approved at the Board of Directors meeting held on October 29, 2015 as below:

 

1. Total amount of interim cash dividends:

 12,612 million yen

2. Amount of interim cash dividends per share:

 10 yen

3. Payment date:

December 1, 2015

 Interim cash dividends for the fiscal year ending March 31, 2016 have been incorporated in the accompanying  consolidated financial statements.

 

Note: Interim cash dividends are to be distributed to the shareholders recorded or registered as the holders or pledgees of shares in Sony Corporation’s register of shareholders at the end of September 30, 2015.

 

(2) Litigation

In October 2009, Sony Corporation’s U.S. subsidiary, Sony Optiarc America Inc., received a subpoena from the U.S. Department of Justice (“DOJ”) seeking information about its optical disk drive business. Sony understands that the European Commission and certain other governmental agencies outside the United States also opened investigations of competition in the optical disk drives market. In March 2014, the DOJ notified Sony that it had closed its investigation. In October 2015, the European Commission adopted a decision in which it fined Sony Corporation, its subsidiary in Japan, Sony Optiarc Inc., and two other subsidiaries 31 million euros. Sony has announced an intent to appeal that ruling. Sony understands that the investigations by several other agencies have now ended, but one other agency continues to investigate. A number of direct and indirect purchaser lawsuits, including class actions, were filed in certain jurisdictions, including the United States, in which the plaintiffs alleged that Sony Corporation and certain of its subsidiaries violated antitrust laws and sought recovery of damages and other remedies. In October 2014, the United States District Court hearing the U.S. class actions denied motions for class certification in both the direct and indirect purchaser class actions. The class plaintiffs filed petitions to appeal these rulings, and in January 2015, the appellate court denied the petitions to appeal. However, in February 2015 the district court gave the plaintiffs an opportunity to seek certification of narrower classes, and the civil actions continue. Based on the investigations and cases, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

 

In May 2011, Sony Corporation’s U.S. subsidiary, Sony Electronics Inc., received a subpoena from the DOJ Antitrust Division seeking information about its secondary batteries business. Sony understands that the European Commission and certain other governmental agencies outside the United States also opened investigations of competition in the secondary batteries market. The DOJ has notified Sony that it has closed its investigation, but the European Commission and one other agency continue to investigate. A number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions, including the United States, in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Based on the stage of these proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of all of these matters.

 

Beginning in early 2011, the network services of PlayStation®Network, Qriocity™, Sony Online Entertainment LLC and websites of other subsidiaries came under cyber-attack. As of November 6, 2015, Sony has not received any confirmed reports of customer identity theft issues or misuse of credit cards from such cyber-attacks. In connection with certain of these matters, Sony had received inquiries from authorities in a number of jurisdictions, including formal and/or informal requests for information from Attorneys General from a number of states in the United States; the Attorneys General have indicated that no further action is likely to be taken regarding those requests. Additionally, Sony Corporation and/or certain of its subsidiaries were named in a number of purported class actions in certain jurisdictions, including the United States. The U.S. class action suits have been settled, and the settlement has received the final approval of the court. A non-U.S. class action suit remains pending. Based on the stage of these inquiries and proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of all of these matters.

 

In the fall of 2014, Sony Corporation’s U.S. subsidiary, Sony Pictures Entertainment Inc. (“SPE”), was subject to a cyber-attack that resulted in unauthorized access to, and theft and disclosure of SPE business information, including employee information and other information. In connection with the theft and disclosure of information, SPE has been named in a number of purported class action suits in the United States brought by former employees of SPE. A proposed settlement of the class

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action suits in the United States has been submitted to the court for preliminary court approval. Based on the stage of these proceedings, it is not possible to estimate the amount of loss or range of possible loss, if any, that might result from adverse judgments, settlements or other resolution of these proceedings.

 

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

 

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