a51267712.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

For the month of January 2016
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: January 29, 2016

List of materials

Documents attached hereto:
 
i) Press release announcing Consolidated Financial Results for the Third Quarter Ended December 31, 2015

 
 

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


No. 16-011E
3:00 P.M. JST, January 29, 2016
 
 
Consolidated Financial Results
for the Third Quarter Ended December 31, 2015
 
Tokyo, January 29, 2016 -- Sony Corporation today announced its consolidated financial results for the third quarter ended December 31, 2015 (October 1, 2015 to December 31, 2015).
 
   
(Billions of yen, millions of U.S. dollars, except per share amounts)
 
   
Third Quarter ended December 31
 
   
2014
   
2015 
   
Change in yen
   
2015* 
 
Sales and operating revenue
  ¥ 2,566.7     ¥ 2,580.8       +0.5 %   $ 21,507  
Operating income
    182.1       202.1       +11.0       1,685  
Income before income taxes
    167.8       193.3       +15.2       1,611  
Net income attributable to Sony Corporation’s stockholders
    90.0       120.1       +33.5       1,001  
Net income attributable to Sony Corporation’s stockholders per share of common stock:
                               
    - Basic
  ¥ 78.12     ¥ 95.25       +21.9     $ 0.79  
    - Diluted
    76.96       93.33       +21.3       0.78  
 
* U.S. dollar amounts have been translated from yen, for convenience only, at the rate of 120 yen = 1 U.S. dollar, the approximate Tokyo foreign exchange market rate as of December 31, 2015.

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

Sony Corporation and its consolidated subsidiaries are together referred to as “Sony”.

The average foreign exchange rates during the quarters ended December 31, 2014 and 2015 are presented below.

   
Third Quarter ended December 31
   
   
2014
   
2015
   
Change
   
The average rate of yen
                   
1 U.S. dollar
  ¥ 114.5     ¥ 121.4       5.7 %
(yen depreciation)
1 Euro
    143.0       133.0       7.5  
(yen appreciation)
 
Consolidated Results for the Third Quarter Ended December 31, 2015

Sales and operating revenue (“Sales”) increased 0.5% compared to the same quarter of the previous fiscal year (“year-on-year”) to 2,580.8 billion yen (21,507 million U.S. dollars).  Sales were essentially flat year-on-year mainly due to increases in Game & Network Services (“G&NS”) segment sales, reflecting a significant increase in PlayStation®4 (“PS4”) software sales, and in Pictures segment sales, reflecting a significant increase in Motion Pictures sales, substantially offset by decreases in Mobile Communications (“MC”) segment sales, reflecting a significant decrease in smartphone unit sales, and in Devices segment sales, primarily reflecting a significant decrease in image sensor sales.  On a constant currency basis, sales were essentially flat year-on-year.  For further details about the impact of foreign exchange rate fluctuations on sales and operating income (loss), see Notes on page 10.
 
 
1

 
 
Operating income increased 20.1 billion yen year-on-year to 202.1 billion yen (1,685 million U.S. dollars).  This increase was primarily due to improvements in the results of All Other, the Pictures segment, the MC segment and the G&NS segment.  The increase in consolidated operating income was partially offset by a significant deterioration in the operating results of the Devices segment, primarily due to deterioration in the operating results of the battery business, including the recording of a 30.6 billion yen (255 million U.S. dollars) impairment charge related to long-lived assets.  In the same quarter of the previous fiscal year, an 11.2 billion yen write-down of PlayStation®Vita (“PS Vita”) and PlayStation®TV (“PS TV”) components in the G&NS segment was recorded.

During the current quarter, restructuring charges, net, decreased 3.0 billion yen year-on-year to 6.1 billion yen (51 million U.S. dollars).

Equity in net income of affiliated companies, recorded within operating income, was 1.8 billion yen (15 million U.S. dollars), compared to a loss of 0.1 billion yen in the same quarter of the previous fiscal year.  This improvement was mainly due to an improvement of equity in net income (loss) for AEGON Sony Life Insurance Co., Ltd. in the Financial Services segment.

The net effect of other income and expenses was an expense of 8.9 billion yen (74 million U.S. dollars), an improvement of 5.4 billion yen year-on-year mainly due to a decrease in foreign exchange loss, net.

Income before income taxes increased 25.5 billion yen year-on-year to 193.3 billion yen (1,611 million U.S. dollars).

Income taxes: During the current quarter, Sony recorded 55.7 billion yen (464 million U.S. dollars) of income tax expense, resulting in an effective tax rate of 28.8%.  This effective tax rate was lower than the Japanese statutory tax rate primarily as a result of profits recorded in the insurance business, which is subject to lower tax rates, coupled with lower income tax expenses due to profits recorded at Sony Corporation and its national tax filing group in Japan, which currently have valuation allowances for deferred tax assets.  In the same quarter of the previous fiscal year, Sony recorded 56.2 billion yen of income tax expense, resulting in an effective tax rate of 33.5%.

Net income attributable to Sony Corporation’s stockholders, which deducts net income attributable to noncontrolling interests, increased 30.2 billion yen year-on-year to 120.1 billion yen (1,001 million U.S. dollars).
 
Operating Performance Highlights by Business Segment

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

Mobile Communications (MC)

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Sales and operating revenue
  ¥ 450.9     ¥ 384.5       -14.7 %   $ 3,204  
Operating income
    10.4       24.1       +133.2       201  
 
Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the MC segment of the comparable prior period have been reclassified to conform to the current presentation.  For details, please see Notes on page 10.

Sales decreased 14.7% year-on-year (a 13% decrease on a constant currency basis) to 384.5 billion yen (3,204 million U.S. dollars).  This decrease was due to a significant decrease in smartphone unit sales resulting from a strategic decision not to pursue scale in order to improve profitability.

Operating income increased 13.8 billion yen year-on-year to 24.1 billion yen (201 million U.S. dollars).  This significant increase was primarily due to an improvement in product mix reflecting a shift to high value-added models, as well as reductions in costs including marketing, research and development and other selling, general and administrative expenses, partially offset by the above-mentioned decrease in smartphone unit sales and the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs.  During the current quarter, there was an 18.8 billion yen negative impact from foreign exchange rate fluctuations.
 
 
2

 
 
Game & Network Services (G&NS)

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Sales and operating revenue
  ¥ 531.5     ¥ 587.1       +10.5 %   $ 4,892  
Operating income
    27.6       40.2       +45.5       335  

The G&NS segment includes the Hardware, Network, and Other categories.  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.

Sales increased 10.5% year-on-year (an 11% increase on a constant currency basis) to 587.1 billion yen (4,892 million U.S. dollars).  This significant increase was primarily due to increases in PS4 software sales and PS4 hardware unit sales, partially offset by a decrease in PlayStation®3 (“PS3”) software and hardware sales.

Operating income increased 12.6 billion yen year-on-year to 40.2 billion yen (335 million U.S. dollars).  This increase was primarily due to the increase in PS4 software sales as well as the absence in the current quarter of an 11.2 billion yen write-down of PS Vita and PS TV components recorded in the same quarter of the previous fiscal year.  Partially offsetting the increase in operating income were the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs, and the decrease in PS3 software sales.  During the current quarter, there was a 19.2 billion yen negative impact from foreign exchange rate fluctuations.
 
Imaging Products & Solutions (IP&S)

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Sales and operating revenue
  ¥ 201.9     ¥ 191.9       -5.0 %   $ 1,599  
Operating income
    19.7       23.7       +20.5       197  

The IP&S segment includes the Digital Imaging Products, Professional Solutions and Other categories.  Digital Imaging Products includes compact digital cameras, interchangeable single-lens cameras and video cameras; Professional Solutions includes broadcast- and professional-use products; Other includes operating revenues and flow cytometers. Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the IP&S segment of the comparable prior period have been reclassified to conform to the current presentation. For details, please see Notes on page 10.

Sales decreased 5.0% year-on-year (a 5% decrease on a constant currency basis) to 191.9 billion yen (1,599 million U.S. dollars).  This decrease was primarily due to decreases in unit sales of video cameras and digital cameras* reflecting a contraction of the market, partially offset by an improvement in the product mix of digital cameras reflecting a shift to high value-added models.

Operating income increased 4.0 billion yen year-on-year to 23.7 billion yen (197 million U.S. dollars).  This increase was mainly due to the improvement in the product mix of digital cameras and cost reductions, partially offset by the impact of the above-mentioned decrease in sales.  During the current quarter, there was a 2.3 billion yen negative impact from foreign exchange rate fluctuations.

* Digital cameras includes compact digital cameras, interchangeable single-lens cameras and interchangeable lenses.
 
 
3

 
 
Home Entertainment & Sound (HE&S)

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Sales and operating revenue
  ¥ 420.2     ¥ 402.0       -4.3 %   $ 3,350  
Operating income
    26.0       31.2       +19.8       260  

The HE&S segment includes the Televisions and Audio and Video categories.  Televisions includes LCD televisions; Audio and Video includes Blu-ray DiscTM players and recorders, home audio, headphones and memory-based portable audio devices.  Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the HE&S segment of the comparable prior period have been reclassified to conform to the current presentation. For details, please see Notes on page 10.

Sales decreased 4.3% year-on-year (a 3% decrease on a constant currency basis) to 402.0 billion yen (3,350 million U.S. dollars).  This decrease was primarily due to a decrease in unit sales of LCD televisions, and a decrease in home audio and video unit sales, reflecting a contraction of the market, as well as the impact of foreign exchange rates, partially offset by an improvement in the product mix of LCD televisions, reflecting a shift to high value-added models.

Operating income increased 5.2 billion yen year-on-year to 31.2 billion yen (260 million U.S. dollars).  This increase was primarily due to cost reductions and an improvement in product mix, partially offset by the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs, as well as the impact of the above-mentioned decrease in sales.  During the current quarter, there was a 14.9 billion yen negative impact from foreign exchange rate fluctuations.

In Televisions, sales* were 278.5 billion yen (2,321 million U.S. dollars), essentially flat year-on-year.  This was primarily due to a decrease in LCD television unit sales resulting from a strategic decision not to pursue scale in order to improve profitability and the impact of foreign exchange rates, substantially offset by the improvement in product mix reflecting a shift to high value-added models.  Operating income** increased 6.6 billion yen year-on-year to 15.9 billion yen (132 million U.S. dollars).  This increase was primarily due to cost reductions and the improvement in product mix, partially offset by the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs, and the impact of the decrease in unit sales.

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

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Sales and operating revenue
  ¥ 285.9     ¥ 249.9       -12.6 %   $ 2,082  
Operating income (loss)
    53.8       (11.7 )     -       (97 )

The Devices segment includes the Semiconductors and Components categories.  Semiconductors includes image sensors and camera modules; Components includes batteries and recording media.  Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the Devices segment of the comparable prior period have been reclassified to conform to the current presentation.  For details, please see Notes on page 10.

Sales decreased 12.6% year-on-year (a 16% decrease on a constant currency basis) to 249.9 billion yen (2,082 million U.S. dollars).  This decrease was primarily due to a significant decrease in sales of image sensors, reflecting a decrease in demand for mobile products, and a significant decrease in battery business sales.  This sales decrease was partially offset by an increase in sales of camera modules which were lower than originally forecasted and the impact of foreign exchange rates.  Sales to external customers decreased 7.5% year-on-year.
 
 
4

 
 
Operating loss of 11.7 billion yen (97 million U.S. dollars) was recorded, compared to an operating income of 53.8 billion yen in the same quarter of the previous fiscal year.  This significant deterioration was primarily due to the  deterioration in the operating results of the battery business, including the recording of a 30.6 billion yen (255 million U.S. dollars) impairment charge related to long-lived assets, increases in depreciation and amortization expenses as well as in research and development expenses for image sensors and camera modules, and the impact of the decrease in sales of image sensors.  For the battery business, due to the increasingly competitive markets, Sony performed an impairment analysis in the current quarter ended December 31, 2015, and reduced the corresponding estimated future cash flows and the estimated ability to recover the entire carrying amount of the long-lived assets, resulting in an impairment charge.  During the current quarter, there was a 3.1 billion yen positive impact from foreign exchange rate fluctuations.

 *    *    *    *    *

Total inventory of the five Electronics* segments above as of December 31, 2015 was 644.7 billion yen (5,373 million U.S. dollars), a decrease of 27.6 billion yen, or 4.1% year-on-year.  Inventory decreased by 188.8 billion yen, or 22.7% compared with the level as of September 30, 2015.

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

In connection with the realignments made from the first quarter and the third quarter of the fiscal year ending March 31, 2016, total inventory of the five Electronics segments as of December 31, 2014 and September 30, 2015 has been reclassified to conform to the current presentation.  For further details, please see Notes on page 10.

*    *    *    *    *
 
Pictures

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Sales and operating revenue
  ¥ 206.6     ¥ 262.1       +26.9 %   $ 2,184  
Operating income
    6.2       20.4       +227.4       170  

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

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

Sales increased 26.9% year-on-year (a 21% increase on a U.S. dollar basis) to 262.1 billion yen (2,184 million U.S. dollars).  The increase in sales on a U.S. dollar basis was primarily due to significantly higher sales for Motion Pictures, partially offset by the impact of foreign exchange rates.  The increase in Motion Pictures sales was primarily driven by higher theatrical revenues, as the current quarter benefitted from the strong worldwide theatrical performances of Spectre and Hotel Transylvania 2, partially offset by lower home entertainment revenues, as the same quarter of the previous fiscal year benefitted from the home entertainment performances of 22 Jump Street and The Equalizer.

Operating income increased 14.1 billion yen year-on-year to 20.4 billion yen (170 million U.S. dollars).  This increase was primarily due to the impact of the above-mentioned increase in sales, partially offset by higher theatrical marketing expenses.  The increase in operating income also reflects lower overhead expenses as compared to the same quarter of the previous fiscal year, primarily due to a reduction in incentive compensation expense as well as insurance recoveries related to losses incurred from the cyberattack on SPE’s network and IT infrastructure in the Fall of 2014.
 
 
5

 
 
Music

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Sales and operating revenue
  ¥ 167.5     ¥ 181.2       +8.2 %   $ 1,510  
Operating income
    25.9       27.4       +5.7       228  

The Music segment is comprised of the Recorded Music, Music Publishing and Visual Media and Platform categories.  Recorded Music includes the distribution of physical and digital recorded music and revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes various service offerings for music and visual products and the production and distribution of animation titles.

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

Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the Music segment of the comparable prior period have been reclassified to conform to the current presentation.  For details, please see Notes on page 10.

Sales increased 8.2% year-on-year (a 4% increase on a constant currency basis) to 181.2 billion yen (1,510 million U.S. dollars) primarily due to the impact of the depreciation of the yen against the U.S. dollar.  The increase in sales on a constant currency basis is due to higher Recorded Music sales, reflecting an increase in digital streaming revenue, and higher Visual Media and Platform sales, reflecting the strong performance of a game application for mobile devices.  The current quarter includes the record-breaking sales of Adele’s new album 25.  Other best-selling titles included One Direction’s Made in the A.M., Elvis Presley’s If I Can Dream: Elvis Presley with the Royal Philharmonic Orchestra and Bruce Springsteen’s The Ties That Bind: The River Collection.

Operating income increased 1.5 billion yen year-on-year to 27.4 billion yen (228 million U.S. dollars).  This increase was primarily due to the above-mentioned increase in sales in Recorded Music and Visual Media and Platform.
 
Financial Services

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Financial services revenue
  ¥ 304.9     ¥ 322.0       +5.6 %   $ 2,684  
Operating income
    50.9       52.2       +2.7       435  

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

Financial services revenue increased 5.6% year-on-year to 322.0 billion yen (2,684 million U.S. dollars) primarily due to an increase in revenue at Sony Life.  Revenue at Sony Life increased 5.7% year-on-year to 295.0 billion yen (2,458 million U.S. dollars) mainly due to an increase in insurance premium revenue reflecting a steady increase in policy amount in force.

Operating income of 52.2 billion yen (435 million U.S. dollars) was recorded, essentially flat year-on-year.  At Sony Life, operating income of 51.6 billion yen (430 million U.S. dollars) was recorded, essentially flat year-on-year, mainly due to the above-mentioned increase in insurance premium revenue, substantially offset by an increase in operating expenses.
 
 
6

 
 
All Other

   
(Billions of yen, millions of U.S. dollars)
 
   
Third Quarter ended December 31
 
   
2014
   
2015
   
Change in yen
   
2015
 
Sales and operating revenue
  ¥ 117.6     ¥ 96.8       -17.7 %   $ 807  
Operating income (loss)
    (12.6 )     5.7       -       47  

All Other included costs related to the PC business in the same quarter of the previous fiscal year.  Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of All Other of the comparable prior period have been reclassified to conform to the current presentation.  For details, please see Notes on page 10.

Sales decreased 17.7% year-on-year to 96.8 billion yen (807 million U.S. dollars).
 
Operating income of 5.7 billion yen (47 million U.S. dollars) was recorded, compared to an operating loss of 12.6 billion yen in the same quarter of the previous fiscal year.  This significant improvement was primarily due to a decrease in PC exit costs, including restructuring charges and after-sales service expenses, as well as the absence in the current quarter of sales company fixed costs charged to the PC business in the same quarter of the previous fiscal year which were allocated based on the prior year results.

*    *    *    *    *
 
Consolidated Results for the Nine Months ended December 31, 2015

For Consolidated Statements of Income and Business Segment Information for the nine months ended December 31, 2015 and 2014, please refer to pages F-3 and F-7 respectively.

Sales for the nine months ended December 31, 2015 (“the current nine months”) were 6,281.6 billion yen (52,347 million U.S. dollars), essentially flat year-on-year.  This was primarily due to the significant increase in sales in the G&NS segment and the impact of foreign exchange rates, substantially offset by the significant decrease in sales in the MC segment.

During the current nine months, the average rates of the yen were 121.7 yen against the U.S. dollar and 134.4 yen against the euro, which were 12.2% lower and 4.4% higher, respectively, as compared with the same period in the previous fiscal year.  On a constant currency basis, consolidated sales decreased 4%.  For further details about sales on a constant currency basis, see Notes on page 10.

In the MC segment, sales decreased significantly primarily due to a significant decrease in smartphone unit sales resulting from a strategic decision not to pursue scale in order to improve profitability.  In the G&NS segment, sales increased significantly primarily due to the contribution of PS4 software sales.  In the IP&S segment, sales were essentially flat year-on-year primarily due to an improvement in the product mix of digital cameras reflecting a shift to high value-added models, substantially offset by a decrease in unit sales of digital cameras reflecting a contraction of the market.  In the HE&S segment, sales decreased primarily due to decreases in LCD televisions and home audio and video unit sales.  In the Devices segment, sales increased mainly due to the impact of foreign exchange rates and an increase in sales of image sensors.  In the Pictures segment, sales increased primarily due to the impact of the depreciation of the yen against the U.S. dollar.  On a U.S. dollar basis, sales for the Pictures segment decreased primarily due to lower home entertainment and television licensing revenues for Motion Pictures and the impact of foreign exchange rates.  In the Music segment, sales increased significantly primarily due to the impact of the depreciation of the yen against the U.S. dollar and higher Recorded Music and Visual Media and Platform sales.  In the Financial Services segment, revenue was essentially flat year-on-year primarily due to a deterioration in investment performance in the separate account at Sony Life, substantially offset by an increase in insurance premium revenue at Sony Life.
 
 
7

 
 
Operating income increased 220.7 billion yen year-on-year to 387.1 billion yen (3,226 million U.S. dollars).  This increase was primarily due to the absence of the impairment charge of goodwill of 176.0 billion yen recorded in the MC segment in the same period of the previous fiscal year, the improvement in the operating results of All Other, reflecting a decrease in operating loss of the PC business, as well as the improvements in G&NS, Music, IP&S and HE&S segment results, partially offset by significant deteriorations in the operating results of the Devices and Pictures segments.

Operating income during the current nine months includes a 30.6 billion yen (255 million U.S. dollar) impairment charge of long-lived assets in the battery business recorded in the Devices segment, a 151 million U.S. dollar (18.1 billion yen) gain on the remeasurement to fair value of SME’s 51% equity interest in Orchard Media, Inc. (“The Orchard”), which had previously been accounted for under the equity method, as a result of SME increasing its ownership interest to 100%, recorded in the Music Segment, as well as a gain of 12.3 billion yen (101 million U.S. dollars) from the sale of a part of the logistics business, in connection with the formation of a logistics joint venture, recorded in Corporate and elimination.  The operating income in the same period of the previous fiscal year included the above-mentioned 176.0 billion yen impairment charge of goodwill recorded in the MC segment, a gain of 14.8 billion yen recognized on the sale of certain buildings and premises at the Gotenyama Technology Center in Japan, recorded in Corporate and elimination and an 11.2 billion yen write-down of PS Vita and PS TV components recorded in the G&NS segment.

In the MC segment, operating loss decreased significantly year-on-year mainly due to the absence in the current period of the above-mentioned goodwill impairment charge recorded in the same period of the previous fiscal year.  In the G&NS segment, operating income increased significantly year-on-year primarily due to the contribution of PS4 software sales.  In the IP&S segment, operating income increased significantly year-on-year primarily due to an improvement in the product mix of digital cameras as a result of a shift to high value-added models.  In the HE&S segment, operating income increased year-on-year primarily due to cost reductions and an improvement in product mix reflecting a shift to high value-added models.  In the Devices segment, operating income decreased significantly mainly due to the recording of an impairment charge in the battery business.  In the Pictures segment, operating results deteriorated significantly primarily due to the above-mentioned decrease in Motion Pictures sales.  In the Music segment, operating income increased significantly primarily due to the gain recorded on the remeasurement to fair value of SME’s 51% equity interest in The Orchard.  In the Financial Services segment, operating income was essentially flat year-on-year.  This result was primarily due to increases in the provision of policy reserves and the amortization of deferred insurance acquisition costs, both pertaining to variable insurance, driven by the deterioration in investment performance in the separate account at Sony Life, substantially offset by an improvement in investment performance in the general account at Sony Life.

Restructuring charges, net, recorded as operating expenses, amounted to 21.8 billion yen (182 million U.S. dollars) for the current nine months, compared to 33.7 billion yen for the same period of the previous fiscal year.

Equity in net income of affiliated companies, recorded within operating income, decreased 0.6 billion yen year-on-year to 3.1 billion yen (26 million U.S. dollars) for the current nine months.

The net effect of other income and expenses was income of 17.1 billion yen (142 million U.S. dollars), compared to an expense of 20.1 billion yen in the same period of the previous fiscal year.  This was primarily due to an increase in the gain on sales of securities investments.

Income before income taxes increased 257.9 billion yen year-on-year to 404.2 billion yen (3,368 million U.S. dollars) for the current nine months.

Income taxes: During the current nine months, Sony recorded 119.4 billion yen (994 million U.S. dollars) of income tax expense, resulting in an effective tax rate of 29.5%.  This effective tax rate was lower than the Japanese statutory tax rate primarily as a result of profits recorded in the insurance business, which is subject to lower tax rates, coupled with lower income tax expenses due to profits recorded at Sony Corporation and its national tax filing group in Japan, which currently have valuation allowances for deferred tax assets.  In the same period of the previous fiscal year, Sony recorded 112.3 billion yen of income tax expense, and Sony’s effective tax rate exceeded the Japanese statutory tax rate.  This was primarily due to the nondeductible goodwill impairment recorded during the same period of the previous fiscal year.

Net income attributable to Sony Corporation’s stockholders, which deducts net income attributable to noncontrolling interests, was 236.1 billion yen (1,968 million U.S. dollars) in the current nine months, compared to a loss of 19.2 billion yen in the same period of the previous fiscal year.

*    *    *    *    *
 
 
8

 
 
Cash Flows

For Consolidated Statements of Cash Flows, charts showing Sony’s cash flow information for all segments, all segments excluding the Financial Services segment and the Financial Services segment alone, please refer to pages F-5 and F-17.

Operating Activities: During the current nine months, there was a net cash inflow of 321.5 billion yen (2,680 million U.S. dollars) from operating activities, a decrease of 61.4 billion yen, or 16.0% year-on-year.

For all segments excluding the Financial Services segment, there was a net cash inflow of 22.6 billion yen (189 million U.S. dollars), a decrease of 89.9 billion yen, or 79.9% year-on-year.  This decrease was primarily due to an increase in inventories, compared to a decrease in the same period of the previous fiscal year, partially offset by factors such as a larger increase in notes and accounts payable, trade.

The Financial Services segment had a net cash inflow of 308.2 billion yen (2,569 million U.S. dollars), an increase of 30.0 billion yen, or 10.8% year-on-year.  This increase was primarily due to an increase in insurance premium revenue at Sony Life.

Investing Activities: During the current nine months, Sony used 669.8 billion yen (5,582 million U.S. dollars) of net cash in investing activities, an increase of 306.0 billion yen, or 84.1% year-on-year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 186.6 billion yen (1,555 million U.S. dollars), an increase of 139.9 billion yen, or 299.8% year-on-year.  This increase was primarily due to an increase in the amount of fixed asset purchases, such as semiconductor manufacturing equipment, partially offset by factors such as cash inflow from the sale of certain shares of Olympus Corporation.

The Financial Services segment used 482.1 billion yen (4,018 million U.S. dollars) of net cash, an increase of 165.0 billion yen, or 52.0% year-on-year.  This increase was mainly due to a year-on-year increase in payments for investments and advances at Sony Life.

In all segments excluding the Financial Services segment, net cash used in operating and investing activities combined*1 for the current nine months was 163.9 billion yen (1,366 million U.S. dollars), a 229.8 billion yen deterioration from cash generated in the same period of the previous fiscal year.

Financing Activities: Net cash provided by financing activities during the current nine months was 497.8 billion yen (4,148 million U.S. dollars), compared to a net cash outflow of 184.6 billion yen in the same period of the previous fiscal year.

For all segments excluding the Financial Services segment, there was a 275.3 billion yen (2,294 million U.S. dollars) net cash inflow, compared to a net cash outflow of 281.5 billion yen in the same period of the previous fiscal year.  This change was primarily due to the issuance of new stock and convertible bonds in the current nine months.

In the Financial Services segment, financing activities provided 212.0 billion yen (1,767 million U.S. dollars) of net cash, an increase of 122.9 billion yen, or 137.9% year-on-year.  This increase was primarily due to a larger increase in short-term borrowings and policyholders’ account at Sony Life.

Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in foreign exchange rates, the total outstanding balance of cash and cash equivalents at December 31, 2015 was 1,090.6 billion yen (9,089 million U.S. dollars).  Cash and cash equivalents of all segments excluding the Financial Services segment was 845.0 billion yen (7,042 million U.S. dollars) at December 31, 2015, an increase of 202.0 billion yen, or 31.4% compared with the balance as of December 31, 2014, and an increase of 103.1 billion yen, or 13.9% compared with the balance as of March 31, 2015.  Sony believes that it continues to maintain sufficient liquidity through access to a total, translated into yen, of 537.9 billion yen (4,483 million U.S. dollars) of unused committed lines of credit with financial institutions in addition to the cash and cash equivalents balance at December 31, 2015.  Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 245.7 billion yen (2,047 million U.S. dollars) at December 31, 2015, a decrease of 44.9 billion yen, or 15.4% compared with the balance as of December 31, 2014, and an increase of 38.1 billion yen, or 18.4% compared with the balance as of March 31, 2015.
 
 
9

 
 
 
*1 Sony has included the information for cash flow from operating and investing activities combined, excluding the Financial Services segment’s activities, as Sony’s management frequently monitors this financial measure, and believes this non-U.S. GAAP measurement is important for use in evaluating Sony’s ability to generate cash to maintain liquidity and fund debt principal and dividend payments from business activities other than its Financial Services segment.  This information is derived from the reconciliations prepared in the Condensed Statements of Cash Flows on page F-17.  This information and the separate condensed presentations shown below are not required or prepared in accordance with U.S. GAAP.  The Financial Services segment’s cash flow is excluded from the measure because SFH, which constitutes a majority of the Financial Services segment, is a separate publicly traded entity in Japan with a significant minority interest and it, as well as its subsidiaries, secure liquidity on their own.  This measure may not be comparable to those of other companies.  This measure has limitations because it does not represent residual cash flows available for discretionary expenditures principally due to the fact that the measure does not deduct the principal payments required for debt service.  Therefore, Sony believes it is important to view this measure as supplemental to its entire statement of cash flows and together with Sony’s disclosures regarding investments, available credit facilities and overall liquidity.

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

   
(Billions of yen, millions of U.S. dollars)
 
   
Nine months
ended December 31
 
   
2014
   
2015
   
2015
 
                   
Net cash provided by operating activities reported in the consolidated statements of cash flows
  ¥ 382.9     ¥ 321.5     $ 2,680  
Net cash used in investing activities reported in the consolidated statements of cash flows
    (363.8 )     (669.8 )     (5,582 )
      19.1       (348.3 )     (2,902 )
                         
Less: Net cash provided by operating activities within the Financial Services segment
    278.2       308.2       2,569  
Less: Net cash used in investing activities within the Financial Services segment
    (317.1 )     (482.1 )     (4,018 )
Eliminations *2
    7.9       10.5       87  
                         
Cash flow provided by (used by) operating and investing activities combined excluding the Financial Services segment’s activities
  ¥ 65.9     ¥ (163.9 )   $ (1,366 )

*2
Eliminations primarily consist of intersegment dividend payments.

*    *    *    *    *
Notes

Business Segment Realignment
Sony realigned its business segments from 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 MC segment.  Certain operations regarding pre-installed automotive audio products which were included in the Devices segment are now included in the HE&S segment.

In addition, in order to reflect a change as of October 1, 2015 in the Corporate Executive Officer in charge of the medical business, which was previously included in All Other, this business is now included in the IP&S segment from the third quarter of the fiscal year ending March 31, 2016.

In connection with these realignments, the sales and operating income (loss) of each segment in the fiscal year ended March 31, 2015 have been reclassified to conform to the presentation of the fiscal year ending March 31, 2016.

Impact of Foreign Exchange Rate Fluctuations on Sales and Operating Income (Loss)
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 nine months ended December 31, 2014 from the three and nine months ended December 31, 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 nine months ended December 31, 2014 from the three and nine months ended December 31, 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.

*    *    *    *    *
 
 
10

 
 
Outlook for the Fiscal Year Ending March 31, 2016

The forecast for consolidated results for the fiscal year ending March 31, 2016, as announced on October 29, 2015, remains unchanged, as per the table below.
 
   
(Billions of yen)
 
   
January
Forecast
   
March 31, 2015
Results
   
Change from
March 31, 2015 Results
 
Sales and operating revenue
  ¥ 7,900     ¥ 8,215.9       -3.8 %
Operating income
    320       68.5    
+ ¥251.5 bil
 
Income before income taxes
    345       39.7    
+ ¥305.3 bil
 
Net income (loss) attributable to Sony Corporation’s stockholders
    140       (126.0 )  
+ ¥266.0 bil
 

Assumed foreign currency exchange rates for the remainder of the fiscal year ending March 31, 2016 are the following.
 
 
 
Remainder of the current
fiscal year
 
(For your reference)
Remainder of the current fiscal year
at the time of the October forecast*
 
Consolidated forecast and
forecasts for each segment
 
Consolidated forecast
Forecasts for each segment
1 U.S. dollar
approximately 120 yen
 
approximately 125 yen
approximately 121 yen
1 Euro
approximately 129 yen
 
approximately 130 yen
approximately 132 yen
 
* Due to volatility in foreign exchange rates, the assumed foreign currency exchange rates were revised after the individual segments had already completed their October forecasts.  Accordingly, the impact of the difference between the assumed rates and the rates used when the individual segments completed their forecasts were included in the October forecast for All Other.

Restructuring charges are expected to be approximately 35 billion yen for Sony in the fiscal year ending March 31, 2016, compared to 98.0 billion yen recorded in the fiscal year ended March 31, 2015.  This amount will be recorded as an operating expense included in the above-mentioned forecast for operating income.
 
 
11

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

   
(Billions of yen)
   
Change - January Forecast from
 
   
January
Forecast
   
October
Forecast
   
March 31, 2015
Results
   
October
Forecast
   
March 31, 2015
Results
 
Mobile Communications
                             
Sales and operating revenue
  ¥ 1,140     ¥ 1,190     ¥ 1,410.2       -4.2 %     -19.2 %
Operating loss
    (60 )     (60 )     (217.6 )     -    
+ ¥ 157.6 bil
 
Game & Network Services
                                       
Sales and operating revenue
    1,520       1,520       1,388.0       -       +9.5 %
Operating income
    85       80       48.1    
+ ¥ 5.0 bil
   
+ ¥ 36.9 bil
 
Imaging Products & Solutions
                                       
Sales and operating revenue
    710       720       723.9       -1.4 %     -1.9 %
Operating income
    63       58       41.8    
+¥ 5.0 bil
   
+ ¥ 21.2 bil
 
Home Entertainment & Sound
                                       
Sales and operating revenue
    1,150       1,140       1,238.1       +0.9 %     -7.1 %
Operating income
    38       25       24.1    
+ ¥ 13.0 bil
   
+ ¥ 13.9 bil
 
Devices
                                       
Sales and operating revenue
    940       1,060       927.1       -11.3 %     +1.4 %
Operating income
    39       121       89.0    
- ¥ 82.0 bil
   
- ¥ 50.0 bil
 
Pictures
                                       
Sales and operating revenue
    1,000       1,000       878.7       -       +13.8 %
Operating income
    35       35       58.5       -    
- ¥ 23.5 bil
 
Music
                                       
Sales and operating revenue
    600       550       559.2       +9.1 %     +7.3 %
Operating income
    84       74       60.6    
+ ¥10.0 bil
   
+ ¥ 23.4 bil
 
Financial Services
                                       
Financial services revenue
    1,060       1,060       1,083.6       -       -2.2 %
Operating income
    175       175       193.3       -    
- ¥ 18.3 bil
 
All Other, Corporate and Elimination
                                       
Operating loss
    (139 )     (188 )     (229.3 )  
+ ¥49.0 bil
   
+ ¥ 90.3bil
 
Consolidated
                                       
Sales and operating revenue
    7,900       7,900       8,215.9       -       -3.8 %
Operating income
    320       320       68.5       -    
+ ¥ 251.5 bil
 
 
Mobile Communications
Sales are expected to be lower than the October forecast primarily due to an expected decrease in smartphone unit sales.  The forecast for operating loss remains unchanged from the October forecast due to the above-mentioned decrease in sales being offset mainly by higher than originally anticipated selling prices of smartphones and additional cost reductions.

Game & Network Services
The forecast for sales remains unchanged from the October forecast.  Operating income is expected to be above the October forecast primarily due to an increase in network sales, partially offset by the impact of a change in the launch date of a first-party title.

Imaging Products & Solutions
Sales are expected to be lower than the October forecast primarily due to lower than expected sales of broadcast- and professional-use products.  Operating income is expected to be higher than the October forecast primarily due to an improvement in the product mix of digital cameras reflecting a shift to high value-added models, partially offset by the above-mentioned decrease in sales.

Home Entertainment & Sound
Sales are expected to be higher than the October forecast primarily due to an upward revision in the annual unit sales forecast for LCD televisions.  Operating income is expected to be higher than the October forecast primarily due to the impact of the above-mentioned increase in sales and cost reductions.  Included in this forecast is the reversal recorded for certain sales incentive accruals, which were related to the current and prior periods.  For further details, see Note 8 on page F-19.
 
 
12

 
 
Devices
Sales are expected to be lower than the October forecast primarily due to significantly lower than expected sales of image sensors and camera modules, reflecting a decrease in demand for mobile products and lower than expected sales in the battery business.  The forecast for operating income is expected to be significantly lower than the October forecast primarily due to the impact of the above-mentioned decrease in sales and the recording of an impairment charge related to long-lived assets in the battery business during the current quarter.

Sony is currently formulating its business plan for all of its business segments for the fiscal year ending March 31, 2017.  With regard to the camera module business, there is a possibility that factors such as a decrease in projected future demand, which caused a downward revision in the forecast for the current fiscal year for the business, could continue to have a negative impact on the business going forward.  It is therefore possible that the above-described business environment might result in an impairment charge against long-lived assets in the camera module business.

Music
Sales are expected to be higher than the October forecast primarily due to higher than expected sales for Recorded Music and Visual Media and Platform.  Operating income is expected to be higher than the October forecast due to the impact of the above-mentioned increase in sales.
 
The forecasts for sales and operating income for the Pictures and Financial Services segments remain unchanged from the October forecast.

The effects of future gains and losses on investments held by the Financial Services segment due to market fluctuations have not been incorporated within the above forecast as it is difficult for Sony to predict market trends in the future.  Accordingly, future market fluctuations could further impact the current forecast.
 
Sony’s forecast for capital expenditures and research and development expenses for the current fiscal year, as announced on October 29, 2015, has been changed as per the table below.  The forecast for depreciation and amortization remains unchanged.
 
Consolidated
   
(Billions of yen)
   
Change - January Forecast
from
 
   
January
Forecast
   
October
Forecast
   
March 31, 2015
Results
   
October
Forecast
   
March 31, 2015
Results
 
Capital expenditures*
  ¥ 475     ¥ 510     ¥ 251.0       -6.9 %     +89.2 %
[additions to property, plant and equipment (included above)
    395       430       164.8       -8.1       +139.6 ]
[additions to intangible assets (included above) *
    80       80       86.2       -       -7.2 ]
Depreciation and amortization**
    365       365       354.6       -       +2.9  
[for property, plant and equipment (included above)
    175       175       165.9       -       +5.5 ]
[for intangible assets (included above)
    190       190       188.8       -       +0.7 ]
Research and development expenses
    470       490       464.3       -4.1       +1.2  

* Does not include the increase in intangible assets resulting from business acquisitions.
** The forecast for depreciation and amortization includes amortization expenses for deferred insurance acquisition costs.
 
 
13

 
 
Sony without Financial Services
   
(Billions of yen)
   
Change - January Forecast
from
 
   
January
Forecast
   
October
Forecast
   
March 31, 2015
Results
   
October
Forecast
   
March 31, 2015
Results
 
Capital expenditures*
  ¥ 466     ¥ 501     ¥ 243.9       -7.0 %     +91.0 %
[additions to property, plant and equipment (included above)
    393       428       163.4       -8.2       +140.5 ]
[additions to intangible assets (included above) *
    73       73       80.5       -       -9.3 ]
Depreciation and amortization
    294       294       288.4       -       +1.9  
[for property, plant and equipment (included above)
    174       174       164.7       -       +5.7 ]
[for intangible assets (included above)
    120       120       123.7       -       -3.0 ]
* Does not include the increase in intangible assets resulting from business acquisitions.

A 19.0 billion yen investment related to the purchase of semiconductor fabrication facilities, equipment and related assets from Toshiba Corporation is included in the January forecast for capital expenditures.  This amount was not included in the October forecast because a definitive agreement was reached in December 2015.

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

  *    *    *    *    *

Year-end Dividend for the Fiscal Year Ending March 31, 2016

Sony paid 10 yen per share as an interim dividend, and plans to pay 10 yen per share as the year-end dividend, resulting in a total dividend of 20 yen per share for the fiscal year ending March 31, 2016.

  *    *    *    *    *
 
 
14

 
 
Cautionary Statement
 
Statements made in this release with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony.  Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions.  From time to time, oral or written forward-looking statements may also be included in other materials released to the public.  These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it.  Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them.  Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Sony disclaims any such obligation.  Risks and uncertainties that might affect Sony include, but are not limited to:
(i)
the global economic environment in which Sony operates and the economic conditions in Sony’s markets, particularly levels of consumer spending;
(ii)
foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in which Sony’s assets and liabilities are denominated;
(iii)
Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including televisions, game platforms and smartphones, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing consumer preferences;
(iv)
Sony’s ability and timing to recoup large-scale investments required for technology development and production capacity;
(v)
Sony’s ability to implement successful business restructuring and transformation efforts under changing market conditions;
(vi)
Sony’s ability to implement successful hardware, software, and content integration strategies for all segments excluding the Financial Services segment, and to develop and implement successful sales and distribution strategies in light of the Internet and other technological developments;
(vii)
Sony’s continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to prioritize investments correctly (particularly in the electronics businesses);
(viii)
Sony’s ability to maintain product quality;
(ix)
the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures and other strategic investments;
(x)
significant volatility and disruption in the global financial markets or a ratings downgrade;
(xi)
Sony’s ability to forecast demands, manage timely procurement and control inventories;
(xii)
the outcome of pending and/or future legal and/or regulatory proceedings;
(xiii)
shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment;
(xiv)
the impact of unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment;
(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.
 
Investor Relations Contacts:
Tokyo
New York
London
Atsuko Murakami
Justin Hill
Haruna Nagai
+81-(0)3-6748-2111
+1-212-833-6722
+44-(0)19-3281-6000
 
IR home page: http://www.sony.net/IR/
Presentation slides: http://www.sony.net/SonyInfo/IR/financial/fr/15q3_sonypre.pdf
 
 
15

 
 
(Unaudited)
                       
Consolidated Financial Statements
                       
Consolidated Balance Sheets
                       
   
(Millions of yen, millions of U.S. dollars)
   
March 31
 
December 31
 
Change from
 
December 31
ASSETS
 
2015
 
2015
 
March 31, 2015
 
2015
Current assets:
                       
Cash and cash equivalents
 
¥
949,413
   
¥
1,090,637
   
¥
+141,224
   
$
9,089
 
Marketable securities
   
936,731
     
957,809
     
+21,078
     
7,982
 
Notes and accounts receivable, trade
   
986,500
     
1,318,825
     
+332,325
     
10,990
 
Allowance for doubtful accounts and sales returns
   
(86,598
)
   
(107,848
)
   
-21,250
     
(899
)
Inventories
   
665,432
     
741,727
     
+76,295
     
6,181
 
Other receivables
   
231,947
     
255,882
     
+23,935
     
2,132
 
Deferred income taxes
   
47,788
     
52,061
     
+4,273
     
434
 
Prepaid expenses and other current assets
   
466,688
     
531,525
     
+64,837
     
4,429
 
Total current assets
   
4,197,901
     
4,840,618
     
+642,717
     
40,338
 
                                 
Film costs
   
305,232
     
357,635
     
+52,403
     
2,980
 
                                 
Investments and advances:
                               
Affiliated companies
   
171,063
     
167,334
     
-3,729
     
1,394
 
Securities investments and other
   
8,360,290
     
8,806,908
     
+446,618
     
73,391
 
     
8,531,353
     
8,974,242
     
+442,889
     
74,785
 
                                 
Property, plant and equipment:
                               
Land
   
123,629
     
122,619
     
-1,010
     
1,022
 
Buildings
   
679,125
     
653,706
     
-25,419
     
5,448
 
Machinery and equipment
   
1,764,241
     
1,809,552
     
+45,311
     
15,079
 
Construction in progress
   
35,786
     
85,357
     
+49,571
     
711
 
     
2,602,781
     
2,671,234
     
+68,453
     
22,260
 
Less-Accumulated depreciation
   
1,863,496
     
1,847,339
     
-16,157
     
15,394
 
     
739,285
     
823,895
     
+84,610
     
6,866
 
                                 
Other assets:
                               
Intangibles, net
   
642,361
     
631,990
     
-10,371
     
5,267
 
Goodwill
   
561,255
     
612,614
     
+51,359
     
5,105
 
Deferred insurance acquisition costs
   
520,571
     
538,981
     
+18,410
     
4,492
 
Deferred income taxes
   
89,637
     
78,567
     
-11,070
     
655
 
Other
   
246,736
     
248,181
     
+1,445
     
2,068
 
     
2,060,560
     
2,110,333
     
+49,773
     
17,587
 
Total assets
 
¥
15,834,331
   
¥
17,106,723
   
¥
+1,272,392
   
$
142,556
 
                                 
LIABILITIES AND EQUITY
                               
Current liabilities:
                               
Short-term borrowings
 
¥
62,008
   
¥
211,280
   
¥
+149,272
   
$
1,761
 
Current portion of long-term debt
   
159,517
     
154,300
     
-5,217
     
1,286
 
Notes and accounts payable, trade
   
622,215
     
703,912
     
+81,697
     
5,866
 
Accounts payable, other and accrued expenses
   
1,374,099
     
1,463,292
     
+89,193
     
12,194
 
Accrued income and other taxes
   
98,414
     
147,656
     
+49,242
     
1,230
 
Deposits from customers in the banking business
   
1,872,965
     
1,861,127
     
-11,838
     
15,509
 
Other
   
556,372
     
555,566
     
-806
     
4,630
 
Total current liabilities
   
4,745,590
     
5,097,133
     
+351,543
     
42,476
 
                                 
Long-term debt
   
712,087
     
734,265
     
+22,178
     
6,119
 
Accrued pension and severance costs
   
298,753
     
294,574
     
-4,179
     
2,455
 
Deferred income taxes
   
445,876
     
437,146
     
-8,730
     
3,643
 
Future insurance policy benefits and other
   
4,122,372
     
4,388,208
     
+265,836
     
36,568
 
Policyholders’ account in the life insurance business
   
2,259,514
     
2,413,031
     
+153,517
     
20,109
 
Other
   
316,422
     
313,183
     
-3,239
     
2,610
 
Total liabilities
   
12,900,614
     
13,677,540
     
+776,926
     
113,980
 
                                 
Redeemable noncontrolling interest
   
5,248
     
7,035
     
+1,787
     
59
 
                                 
Equity:
                               
Sony Corporation’s stockholders’ equity:
                               
Common stock
   
707,038
     
858,768
     
+151,730
     
7,156
 
Additional paid-in capital
   
1,185,777
     
1,324,964
     
+139,187
     
11,041
 
Retained earnings
   
813,765
     
1,037,280
     
+223,515
     
8,644
 
Accumulated other comprehensive income
   
(385,283
)
   
(437,250
)
   
-51,967
     
(3,643
)
Treasury stock, at cost
   
(4,220
)
   
(4,244
)
   
-24
     
(35
)
     
2,317,077
     
2,779,518
     
+462,441
     
23,163
 
                                 
Noncontrolling interests
   
611,392
     
642,630
     
+31,238
     
5,354
 
Total equity
   
2,928,469
     
3,422,148
     
+493,679
     
28,517
 
Total liabilities and equity
 
¥
15,834,331
   
¥
17,106,723
   
¥
+1,272,392
   
$
142,556
 
 
 
F-1

 
 
Consolidated Statements of Income
                       
   
(Millions of yen, millions of U.S. dollars, except per share amounts)
   
Three months ended December 31
   
2014
 
2015
 
Change from 2014
 
2015
Sales and operating revenue:
                       
Net sales
 
¥
2,239,485
   
¥
2,238,674
         
$
18,656
 
Financial services revenue
   
303,211
     
320,368
           
2,670
 
Other operating revenue
   
24,053
     
21,770
           
181
 
     
2,566,749
     
2,580,812
     
+0.5
%
   
21,507
 
                                 
Costs and expenses:
                               
Cost of sales
   
1,659,261
     
1,623,410
             
13,528
 
Selling, general and administrative
   
473,282
     
461,418
             
3,845
 
Financial services expenses
   
251,375
     
267,365
             
2,228
 
Other operating expense, net
   
608
     
28,253
             
236
 
     
2,384,526
     
2,380,446
     
-0.2
     
19,837
 
                                 
Equity in net income (loss) of affiliated companies
   
(128
)
   
1,779
     
     
15
 
                                 
Operating income
   
182,095
     
202,145
     
+11.0
     
1,685
 
                                 
Other income:
                               
Interest and dividends
   
3,408
     
2,739
             
23
 
Gain on sale of securities investments, net
   
1,042
     
219
             
2
 
Other
   
10
     
355
             
3
 
     
4,460
     
3,313
     
-25.7
     
28
 
                                 
Other expenses:
                               
Interest
   
5,942
     
8,346
             
70
 
Foreign exchange loss, net
   
10,607
     
1,954
             
16
 
Other
   
2,178
     
1,878
             
16
 
     
18,727
     
12,178
     
-35.0
     
102
 
                                 
Income before income taxes
   
167,828
     
193,280
     
+15.2
     
1,611
 
                                 
Income taxes
   
56,162
     
55,676
             
464
 
                                 
Net income
   
111,666
     
137,604
     
+23.2
     
1,147
 
                                 
Less - Net income attributable to noncontrolling interests
   
21,695
     
17,470
             
146
 
                                 
Net income attributable to Sony Corporation’s stockholders
 
¥
89,971
   
¥
120,134
     
+33.5
%
 
$
1,001
 
                                 
Per share data:
                               
Net income attributable to Sony Corporation’s stockholders
                               
— Basic
 
¥
78.12
   
¥
95.25
     
+21.9
%
 
$
0.79
 
— Diluted
   
76.96
     
93.33
     
+21.3
     
0.78
 
                                 
                                 
Consolidated Statements of Comprehensive Income
                               
   
(Millions of yen, millions of U.S. dollars)
   
Three months ended December 31
    2014   2015  
Change from 2014
  2015
                                 
Net income
 
¥
111,666
   
¥
137,604
     
+23.2
%
 
$
1,147
 
                                 
Other comprehensive income, net of tax –
                               
Unrealized gains on securities
   
34,324
     
23,002
             
192
 
Unrealized gains on derivative instruments
 
     
3,855
             
32
 
Pension liability adjustment
   
(752
)
   
459
             
4
 
Foreign currency translation adjustments
   
75,051
     
(10,338
)
           
(87
)
                                 
Total comprehensive income
   
220,289
     
154,582
     
-29.8
     
1,288
 
                                 
Less - Comprehensive income attributable to noncontrolling interests
   
33,754
     
20,676
             
172
 
                                 
Comprehensive income attributable to Sony Corporation’s stockholders
 
¥
186,535
   
¥
133,906
     
-28.2
%
 
$
1,116
 
 
 
F-2

 
 
Consolidated Statements of Income
                       
   
(Millions of yen, millions of U.S. dollars, except per share amounts)
   
Nine months ended December 31
   
2014
 
2015
 
Change from 2014
 
2015
Sales and operating revenue:
                       
Net sales
 
¥
5,385,450
   
¥
5,405,599
         
$
45,047
 
Financial services revenue
   
817,153
     
807,092
           
6,726
 
Other operating revenue
   
75,565
     
68,920
           
574
 
     
6,278,168
     
6,281,611
     
+0.1
%
   
52,347
 
                                 
Costs and expenses:
                               
Cost of sales
   
3,978,983
     
3,985,905
             
33,216
 
Selling, general and administrative
   
1,302,932
     
1,258,448
             
10,487
 
Financial services expenses
   
673,884
     
666,479
             
5,554
 
Other operating (income) expense, net
   
159,750
     
(13,146
)
           
(110
)
     
6,115,549
     
5,897,686
     
-3.6
     
49,147
 
                                 
Equity in net income of affiliated companies
   
3,702
     
3,145
     
-15.0
     
26
 
                                 
Operating income
   
166,321
     
387,070
     
+132.7
     
3,226
 
                                 
Other income:
                               
Interest and dividends
   
9,160
     
9,055
             
75
 
Gain on sale of securities investments, net
   
8,628
     
51,796
             
432
 
Other
   
2,092
     
1,541
             
13
 
     
19,880
     
62,392
     
+213.8
     
520
 
                                 
Other expenses:
                               
Interest
   
18,401
     
19,321
             
161
 
Foreign exchange loss, net
   
15,175
     
20,302
             
169
 
Other
   
6,375
     
5,655
             
48
 
     
39,951
     
45,278
     
+13.3
     
378
 
                                 
Income before income taxes
   
146,250
     
404,184
     
+176.4
     
3,368
 
                                 
Income taxes
   
112,286
     
119,354
             
994
 
                                 
Net income
   
33,964
     
284,830
     
+738.6
     
2,374
 
                                 
Less - Net income attributable to noncontrolling interests
   
53,154
     
48,702
             
406
 
                                 
Net income (loss) attributable to Sony Corporation’s stockholders
 
¥
(19,190
)
 
¥
236,128
   
%  
$
1,968
 
                                 
Per share data:
                               
Net income (loss) attributable to Sony Corporation’s stockholders
                               
— Basic
 
¥
(17.50
)
 
¥
191.98
   
%
 
$
1.60
 
— Diluted
   
(17.50
)
   
189.17
   
     
1.58
 
                                 
                                 
Consolidated Statements of Comprehensive Income
                               
   
(Millions of yen, millions of U.S. dollars)
   
Nine months ended December 31
    2014   2015  
Change from 2014
  2015
                                 
Net income
 
¥
33,964
   
¥
284,830
     
+738.6
%
 
$
2,374
 
                                 
Other comprehensive income, net of tax –
                               
Unrealized gains (losses) on securities
   
49,390
     
(34,864
)
           
(290
)
Unrealized gains on derivative instruments
 
     
2,114
             
18
 
Pension liability adjustment
   
(2
)
   
1,366
             
11
 
Foreign currency translation adjustments
   
105,768
     
(22,239
)
           
(185
)
                                 
Total comprehensive income
   
189,120
     
231,207
     
+22.3
     
1,928
 
                                 
Less - Comprehensive income attributable to noncontrolling interests
   
72,136
     
47,046
             
393
 
                                 
Comprehensive income attributable to Sony Corporation’s stockholders
 
¥
116,984
   
¥
184,161
     
+57.4
%
 
$
1,535
 
 
 
F-3

 
 
Supplemental equity and comprehensive income information
 
(Millions of yen, millions of U.S. dollars)
   
Sony Corporation’s
stockholders’ equity 
 
Noncontrolling
interests
    Total equity  
Balance at March 31, 2014
 
¥
2,258,137
   
¥
525,004
   
¥
2,783,141
 
Exercise of stock acquisition rights
   
703
   
     
703
 
Conversion of zero coupon convertible bonds
   
107,660
   
     
107,660
 
Stock based compensation
   
845
   
     
845
 
                         
Comprehensive income:
                       
Net income (loss)
   
(19,190
)
   
53,154
     
33,964
 
Other comprehensive income, net of tax –
                       
Unrealized gains on securities
   
33,778
     
15,612
     
49,390
 
Pension liability adjustment
   
44
     
(46
)
   
(2
)
Foreign currency translation adjustments
   
102,352
     
3,416
     
105,768
 
Total comprehensive income
   
116,984
     
72,136
     
189,120
 
                         
Dividends declared
 
     
(13,075
)
   
(13,075
)
Transactions with noncontrolling interests shareholders and other
   
(2,951
)
   
8,713
     
5,762
 
Balance at December 31, 2014
 
¥
2,481,378
   
¥
592,778
   
¥
3,074,156
 
                         
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
   
1,752
   
     
1,752
 
Stock based compensation
   
977
   
     
977
 
                         
Comprehensive income:
                       
Net income
   
236,128
     
48,702
     
284,830
 
Other comprehensive income, net of tax –
                       
Unrealized losses on securities
   
(33,853
)
   
(1,011
)
   
(34,864
)
Unrealized gains on derivative instruments
   
2,114
   
     
2,114
 
Pension liability adjustment
   
1,361
     
5
     
1,366
 
Foreign currency translation adjustments
   
(21,589
)
   
(650
)
   
(22,239
)
Total comprehensive income
   
184,161
     
47,046
     
231,207
 
                         
Dividends declared
   
(12,612
)
   
(19,947
)
   
(32,559
)
Transactions with noncontrolling interests shareholders and other
   
(13,545
)
   
4,139
     
(9,406
)
Balance at December 31, 2015
 
¥
2,779,518
   
¥
642,630
   
¥
3,422,148
 
                         
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.
 
                         
                         
   
Sony Corporation’s
 stockholders’ equity
 
Noncontrolling
interests
  Total equity
Balance at March 31, 2015
 
$
19,310
   
$
5,095
   
$
24,405
 
Issuance of new shares
   
2,514
   
     
2,514
 
Exercise of stock acquisition rights
   
15
   
     
15
 
Stock based compensation
   
8
   
     
8
 
                         
Comprehensive income:
                       
Net income
   
1,968
     
406
     
2,374
 
Other comprehensive income, net of tax –
                       
Unrealized losses on securities
   
(282
)
   
(8
)
   
(290
)
Unrealized gains on derivative instruments
   
18
   
     
18
 
Pension liability adjustment
   
11
     
0
     
11
 
Foreign currency translation adjustments
   
(180
)
   
(5
)
   
(185
)
Total comprehensive income
   
1,535
     
393
     
1,928
 
                         
Dividends declared
   
(106
)
   
(166
)
   
(272
)
Transactions with noncontrolling interests shareholders and other
   
(113
)
   
32
     
(81
)
Balance at December 31, 2015
 
$
23,163
   
$
5,354
   
$
28,517
 
 
 
F-4

 
 
Consolidated Statements of Cash Flows
               
 
(Millions of yen, millions of U.S. dollars)
 
 
Nine months ended December 31
 
 
2014  
2015
 
2015
Cash flows from operating activities:
               
Net income
 
¥
33,964
   
¥
284,830
   
$
2,374
 
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation and amortization, including amortization of deferred insurance acquisition costs
   
251,080
     
275,130
     
2,293
 
Amortization of film costs
   
190,892
     
200,643
     
1,672
 
Accrual for pension and severance costs, less payments
   
(7,694
)
   
(6,667
)
   
(56
)
Other operating (income) expense, net
   
159,750
     
(13,146
)
   
(110
)
Gain on sale or devaluation of securities investments, net
   
(8,193
)
   
(51,546
)
   
(430
)
Gain on revaluation of marketable securities held in the financial services business for trading purposes, net
   
(88,299
)
   
(4,347
)
   
(36
)
(Gain) loss on revaluation or impairment of securities investments held in the financial services business, net
   
(2,363
)
   
2,586
     
22
 
Deferred income taxes
   
16,585
     
12,543
     
105
 
Equity in net income of affiliated companies, net of dividends
   
1,633
     
3,816
     
32
 
Changes in assets and liabilities:
                       
Increase in notes and accounts receivable, trade
   
(318,401
)
   
(310,954
)
   
(2,591
)
(Increase) decrease in inventories
   
20,366
     
(91,742
)
   
(765
)
Increase in film costs
   
(205,190
)
   
(252,998
)
   
(2,108
)
Increase in notes and accounts payable, trade
   
34,943
     
85,718
     
714
 
Increase in accrued income and other taxes
   
46,113
     
43,932
     
366
 
Increase in future insurance policy benefits and other
   
355,114
     
312,040
     
2,600
 
Increase in deferred insurance acquisition costs
   
(58,352
)
   
(67,354
)
   
(561
)
Increase in marketable securities held in the financial services business for trading purposes
   
(40,051
)
   
(69,941
)
   
(583
)
Increase in other current assets
   
(33,385
)
   
(57,444
)
   
(479
)
Increase in other current liabilities
   
124,037
     
9,931
     
83
 
Other
   
(89,617
)
   
16,481
     
138
 
Net cash provided by operating activities
   
382,932
     
321,511
     
2,680
 
                         
Cash flows from investing activities:
                       
Payments for purchases of fixed assets
   
(145,813
)
   
(254,272
)
   
(2,119
)
Proceeds from sales of fixed assets
   
31,631
     
18,369
     
153
 
Payments for investments and advances by financial services business
   
(678,116
)
   
(942,226
)
   
(7,852
)
Payments for investments and advances (other than financial services business)
   
(13,951
)
   
(18,784
)
   
(157
)
Proceeds from sales or return of investments and collections of advances by financial services business
   
417,799
     
465,525
     
3,879
 
Proceeds from sales or return of investments and collections of advances (other than financial services business)
   
37,096
     
79,754
     
665
 
Proceeds from sales of businesses
     
17,790
     
148
 
Other
   
(12,436
)
   
(35,958
)
   
(299
)
Net cash used in investing activities
   
(363,790
)
   
(669,802
)
   
(5,582
)
                         
Cash flows from financing activities:
                       
Proceeds from issuance of long-term debt
   
15,203
     
18,772
     
156
 
Payments of long-term debt
   
(243,652
)
   
(137,743
)
   
(1,148
)
Increase in short-term borrowings, net
   
43,353
     
151,485
     
1,262
 
Increase in deposits from customers in the financial services business, net
   
30,605
     
91,113
     
759
 
Proceeds from issuance of convertible bonds
     
120,000
     
1,000
 
Proceeds from issuance of new shares
     
301,708
     
2,514
 
Dividends paid
   
(13,106
)
   
(12,766
)
   
(106
)
Other
   
(16,978
)
   
(34,819
)
   
(289
)
Net cash provided by (used in) financing activities
   
(184,575
)
   
497,750
     
4,148
 
                         
Effect of exchange rate changes on cash and cash equivalents
   
52,465
     
(8,235
)
   
(69
)
                         
Net increase (decrease) in cash and cash equivalents
   
(112,968
)
   
141,224
     
1,177
 
Cash and cash equivalents at beginning of the fiscal year
   
1,046,466
     
949,413
     
7,912
 
                         
Cash and cash equivalents at end of the period
 
¥
933,498
   
¥
1,090,637
   
$
9,089
 
 
 
F-5

 
 
Business Segment Information
                   
 
 
(Millions of yen, millions of U.S. dollars)
 
 
Three months ended December 31
Sales and operating revenue
 
2014  
2015
 
Change  
2015
Mobile Communications
                   
Customers
 
¥
450,600
   
¥
382,262
     
-15.2
%
 
$
3,186
 
Intersegment
   
258
     
2,252
             
18
 
Total
   
450,858
     
384,514
     
-14.7
     
3,204
 
                                 
Game & Network Services
                               
Customers
   
499,242
     
565,220
     
+13.2
     
4,710
 
Intersegment
   
32,295
     
21,868
             
182
 
Total
   
531,537
     
587,088
     
+10.5
     
4,892
 
                                 
Imaging Products & Solutions
                               
Customers
   
201,319
     
190,112
     
-5.6
     
1,584
 
Intersegment
   
612
     
1,778
             
15
 
Total
   
201,931
     
191,890
     
-5.0
     
1,599
 
                                 
Home Entertainment & Sound
                               
Customers
   
419,682
     
400,564
     
-4.6
     
3,338
 
Intersegment
   
565
     
1,428
             
12
 
Total
   
420,247
     
401,992
     
-4.3
     
3,350
 
                                 
Devices
                               
Customers
   
224,756
     
207,867
     
-7.5
     
1,732
 
Intersegment
   
61,188
     
42,008
             
350
 
Total
   
285,944
     
249,875
     
-12.6
     
2,082
 
                                 
Pictures
                               
Customers
   
206,470
     
259,800
     
+25.8
     
2,165
 
Intersegment
   
110
     
2,319
             
19
 
Total
   
206,580
     
262,119
     
+26.9
     
2,184
 
                                 
Music
                               
Customers
   
162,810
     
176,954
     
+8.7
     
1,475
 
Intersegment
   
4,715
     
4,280
             
35
 
Total
   
167,525
     
181,234
     
+8.2
     
1,510
 
                                 
Financial Services
                               
Customers
   
303,211
     
320,368
     
+5.7
     
2,670
 
Intersegment
   
1,715
     
1,675
             
14
 
Total
   
304,926
     
322,043
     
+5.6
     
2,684
 
                                 
All Other
                               
Customers
   
91,598
     
71,564
     
-21.9
     
596
 
Intersegment
   
25,997
     
25,234
             
211
 
Total
   
117,595
     
96,798
     
-17.7
     
807
 
                                 
Corporate and elimination
   
(120,394
)
   
(96,741
)
 
       
(805
)
Consolidated total
 
¥
2,566,749
   
¥
2,580,812
     
+0.5
%
 
$
21,507
 
                                 
Game & Network Services (“G&NS”) intersegment amounts primarily consist of transactions with All Other.
Devices intersegment amounts primarily consist of transactions with the Mobile Communications (“MC”) segment, the G&NS segment and the Imaging Products & Solutions (“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.
 
                                 
                                 
 
 
(Millions of yen, millions of U.S. dollars)
    Three months ended December 31
Operating income (loss)
  2014   2015   Change   2015
Mobile Communications
 
¥
10,356
   
¥
24,148
     
+133.2
%
 
$
201
 
Game & Network Services
   
27,608
     
40,168
     
+45.5
     
335
 
Imaging Products & Solutions
   
19,660
     
23,688
     
+20.5
     
197
 
Home Entertainment & Sound
   
25,993
     
31,151
     
+19.8
     
260
 
Devices
   
53,833
     
(11,672
)
     
(97
)
Pictures
   
6,219
     
20,358
     
+227.4
     
170
 
Music
   
25,923
     
27,407
     
+5.7
     
228
 
Financial Services
   
50,850
     
52,220
     
+2.7
     
435
 
All Other
   
(12,576
)
   
5,689
 
     
47
 
Total
   
207,866
     
213,157
     
+2.5
     
1,776
 
                                 
Corporate and elimination
   
(25,771
)
   
(11,012
)
     
(91
)
Consolidated total
 
¥
182,095
   
¥
202,145
     
+11.0
%
 
$
1,685
 
                                 
The 2014 segment disclosure above has been reclassified to reflect the change in the business segment classification discussed in Note 5.
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 Home Entertainment & Sound (“HE&S”) segment, the operating income of Televisions, which primarily consists of LCD televisions, for the three months ended December 31, 2014 and 2015 was 9,256 million yen and 15,853 million yen, respectively. The operating income of Televisions excludes restructuring charges which are included in the overall segment results and are not allocated to product categories.
 
 
F-6

 
 
Business Segment Information
                   
    (Millions of yen, millions of U.S. dollars)
    Nine months ended December 31
Sales and operating revenue
  2014  
2015
 
Change  
2015
Mobile Communications
                   
Customers
 
¥
1,114,554
   
¥
940,077
     
-15.7
%
 
$
7,834
 
Intersegment
   
750
     
4,186
             
35
 
Total
   
1,115,304
     
944,263
     
-15.3
     
7,869
 
                                 
Game & Network Services
                               
Customers
   
1,016,364
     
1,172,200
     
+15.3
     
9,768
 
Intersegment
   
82,182
     
64,159
             
535
 
Total
   
1,098,546
     
1,236,359
     
+12.5
     
10,303
 
                                 
Imaging Products & Solutions
                               
Customers
   
543,996
     
545,948
     
+0.4
     
4,550
 
Intersegment
   
2,534
     
4,860
             
40
 
Total
   
546,530
     
550,808
     
+0.8
     
4,590
 
                                 
Home Entertainment & Sound
                               
Customers
   
1,001,595
     
941,252
     
-6.0
     
7,844
 
Intersegment
   
2,054
     
2,954
             
24
 
Total
   
1,003,649
     
944,206
     
-5.9
     
7,868
 
                                 
Devices
                               
Customers
   
535,337
     
604,853
     
+13.0
     
5,040
 
Intersegment
   
167,107
     
141,022
             
1,176
 
Total
   
702,444
     
745,875
     
+6.2
     
6,216
 
                                 
Pictures
                               
Customers
   
583,043
     
614,806
     
+5.4
     
5,123
 
Intersegment
   
490
     
2,604
             
22
 
Total
   
583,533
     
617,410
     
+5.8
     
5,145
 
                                 
Music
                               
Customers
   
394,387
     
439,013
     
+11.3
     
3,658
 
Intersegment
   
13,794
     
11,083
             
93
 
Total
   
408,181
     
450,096
     
+10.3
     
3,751
 
                                 
Financial Services
                               
Customers
   
817,153
     
807,092
     
-1.2
     
6,726
 
Intersegment
   
4,316
     
5,069
             
42
 
Total
   
821,469
     
812,161
     
-1.1
     
6,768
 
                                 
All Other
                               
Customers
   
237,903
     
191,583
     
-19.5
     
1,597
 
Intersegment
   
67,750
     
67,479
             
562
 
Total
   
305,653
     
259,062
     
-15.2
     
2,159
 
                                 
Corporate and elimination
   
(307,141
)
   
(278,629
)
 
       
(2,322
)
Consolidated total
 
¥
6,278,168
   
¥
6,281,611
     
+0.1
%
 
$
52,347
 
                                 
The 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.
 
                                 
                                 
    (Millions of yen, millions of U.S. dollars)
    Nine months ended December 31
Operating income (loss)
  2014   2015
 
Change   2015
Mobile Communications
 
¥
(161,841
)
 
¥
(19,377
)
%  
$
(161
)
Game & Network Services
   
53,717
     
83,547
     
+55.5
     
696
 
Imaging Products & Solutions
   
51,379
     
65,678
     
+27.8
     
547
 
Home Entertainment & Sound
   
43,892
     
57,837
     
+31.8
     
482
 
Devices
   
93,668
     
51,360
     
-45.2
     
428
 
Pictures
   
13,009
     
(13,795
)
     
(115
)
Music
   
49,720
     
73,747
     
+48.3
     
615
 
Financial Services
   
142,308
     
139,367
     
-2.1
     
1,161
 
All Other
   
(46,523
)
   
6,320
 
     
53
 
Total
   
239,329
     
444,684
     
+85.8
     
3,706
 
                                 
Corporate and elimination
   
(73,008
)
   
(57,614
)
     
(480
)
Consolidated total
 
¥
166,321
   
¥
387,070
     
+132.7
%
 
$
3,226
 
                                 
The 2014 segment disclosure above has been reclassified to reflect the change in the business segment classification discussed in Note 5.
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 nine months ended December 31, 2014 and 2015 was 22,094 million yen and 32,561 million yen, respectively. The operating income of Televisions excludes restructuring charges which are included in the overall segment results and are not allocated to product categories.
 
 
F-7

 
 
Sales to Customers by Product Category
                       
   
(Millions of yen, millions of U.S. dollars)
   
Three months ended December 31
Sales and operating revenue (to external customers)
 
2014
 
2015
 
Change
 
2015
                         
Mobile Communications
 
¥
450,600
   
¥
382,262
     
-15.2
%
 
$
3,186
 
                                 
Game & Network Services
                               
Hardware
   
321,744
     
326,589
     
+1.5
     
2,722
 
Network
   
102,025
     
152,067
     
+49.0
     
1,267
 
Other
   
75,473
     
86,564
     
+14.7
     
721
 
Total
   
499,242
     
565,220
     
+13.2
     
4,710
 
                                 
Imaging Products & Solutions
                               
Digital Imaging Products
   
126,361
     
119,397
     
-5.5
     
995
 
Professional Solutions
   
70,658
     
64,943
     
-8.1
     
541
 
Other
   
4,300
     
5,772
     
+34.2
     
48
 
Total
   
201,319
     
190,112
     
-5.6
     
1,584
 
                                 
Home Entertainment & Sound
                               
Televisions
   
280,572
     
278,470
     
-0.7
     
2,321
 
Audio and Video
   
138,013
     
121,975
     
-11.6
     
1,016
 
Other
   
1,097
     
119
     
-89.2
     
1
 
Total
   
419,682
     
400,564
     
-4.6
     
3,338
 
                                 
Devices
                               
Semiconductors
   
162,884
     
155,881
     
-4.3
     
1,299
 
Components
   
59,415
     
49,040
     
-17.5
     
409
 
Other
   
2,457
     
2,946
     
+19.9
     
24
 
Total
   
224,756
     
207,867
     
-7.5
     
1,732
 
                                 
Pictures
                               
Motion Pictures
   
100,723
     
149,140
     
+48.1
     
1,243
 
Television Productions
   
51,831
     
54,863
     
+5.8
     
457
 
Media Networks
   
53,916
     
55,797
     
+3.5
     
465
 
Total
   
206,470
     
259,800
     
+25.8
     
2,165
 
                                 
Music
                               
Recorded Music
   
122,211
     
131,637
     
+7.7
     
1,097
 
Music Publishing
   
16,675
     
16,721
     
+0.3
     
139
 
Visual Media and Platform
   
23,924
     
28,596
     
+19.5
     
239
 
Total
   
162,810
     
176,954
     
+8.7
     
1,475
 
                                 
Financial Services
   
303,211
     
320,368
     
+5.7
     
2,670
 
All Other
   
91,598
     
71,564
     
-21.9
     
596
 
Corporate
   
7,061
     
6,101
     
-13.6
     
51
 
Consolidated total
 
¥
2,566,749
   
¥
2,580,812
     
+0.5
%
 
$
21,507
 
                                 
                                 
The above table includes a breakdown of sales and operating revenue to external customers for certain segments shown in the Business Segment Information on page F-6. Sony management views each segment as a single operating segment. However, Sony believes that the breakdown of sales and operating revenue to external customers for the segments in this table is useful to investors in understanding sales by product category.
 
Sony has realigned its product category configuration from the first and third quarters of the fiscal year ending March 31, 2016. In connection with the realignment, all prior period sales amounts by product category in the table above have been reclassified to conform to the current presentation.
 
In the G&NS segment, 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; Other includes operating revenues and flow cytometers. 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 and camera modules; 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 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.
 
 
F-8

 
 
Sales to Customers by Product Category
                       
   
(Millions of yen, millions of U.S. dollars)
   
Nine months ended December 31
Sales and operating revenue (to external customers)
 
2014
 
2015
 
Change
 
2015
                         
Mobile Communications
 
¥
1,114,554
   
¥
940,077
     
-15.7
%
 
$
7,834
 
                                 
Game & Network Services
                               
Hardware
   
619,306
     
624,488
     
+0.8
     
5,204
 
Network
   
242,401
     
369,402
     
+52.4
     
3,078
 
Other
   
154,657
     
178,310
     
+15.3
     
1,486
 
Total
   
1,016,364
     
1,172,200
     
+15.3
     
9,768
 
                                 
Imaging Products & Solutions
                               
Digital Imaging Products
   
342,061
     
339,397
     
-0.8
     
2,828
 
Professional Solutions
   
191,196
     
189,474
     
-0.9
     
1,579
 
Other
   
10,739
     
17,077
     
+59.0
     
143
 
Total
   
543,996
     
545,948
     
+0.4
     
4,550
 
                                 
Home Entertainment & Sound
                               
Televisions
   
685,303
     
650,398
     
-5.1
     
5,420
 
Audio and Video
   
314,450
     
288,448
     
-8.3
     
2,404
 
Other
   
1,842
     
2,406
     
+30.6
     
20
 
Total
   
1,001,595
     
941,252
     
-6.0
     
7,844
 
                                 
Devices
                               
Semiconductors
   
365,927
     
445,806
     
+21.8
     
3,715
 
Components
   
163,741
     
151,411
     
-7.5
     
1,262
 
Other
   
5,669
     
7,636
     
+34.7
     
63
 
Total
   
535,337
     
604,853
     
+13.0
     
5,040
 
                                 
Pictures
                               
Motion Pictures
   
302,688
     
298,467
     
-1.4
     
2,487
 
Television Productions
   
138,452
     
148,171
     
+7.0
     
1,235
 
Media Networks
   
141,903
     
168,168
     
+18.5
     
1,401
 
Total
   
583,043
     
614,806
     
+5.4
     
5,123
 
                                 
Music
                               
Recorded Music
   
282,035
     
311,532
     
+10.5
     
2,596
 
Music Publishing
   
49,329
     
52,263
     
+5.9
     
436
 
Visual Media and Platform
   
63,023
     
75,218
     
+19.4
     
626
 
Total
   
394,387
     
439,013
     
+11.3
     
3,658
 
                                 
Financial Services
   
817,153
     
807,092
     
-1.2
     
6,726
 
All Other
   
237,903
     
191,583
     
-19.5
     
1,597
 
Corporate
   
33,836
     
24,787
     
-26.7
     
207
 
Consolidated total
 
¥
6,278,168
   
¥
6,281,611
     
+0.1
%
 
$
52,347
 
                                 
 
The above table includes a breakdown of sales and operating revenue to external customers for certain segments shown in the Business Segment Information on page F-7. Sony management views each segment as a single operating segment. However, Sony believes that the breakdown of sales and operating revenue to external customers for the segments in this table is useful to investors in understanding sales by product category.
 
Sony has realigned its product category configuration from the first and third quarters of the fiscal year ending March 31, 2016. In connection with the realignment, all prior period sales amounts by product category in the table above have been reclassified to conform to the current presentation.
 
In the G&NS segment, 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; Other includes operating revenues and flow cytometers. 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 and camera modules; 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 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.
 
 
F-9

 
 
Other Items
                 
 
(Millions of yen, millions of U.S. dollars)
   
Three months ended December 31
Depreciation and amortization
 
2014
  2015  
Change
 
2015
Mobile Communications
 
¥
6,072
   
¥
6,049
     
-0.4
%
 
$
50
 
Game & Network Services
   
4,740
     
5,603
     
+18.2
     
47
 
Imaging Products & Solutions
   
7,449
     
6,757
     
-9.3
     
56
 
Home Entertainment & Sound
   
6,356
     
5,428
     
-14.6
     
45
 
Devices
   
21,967
     
27,836
     
+26.7
     
232
 
Pictures
   
5,241
     
5,922
     
+13.0
     
49
 
Music
   
3,652
     
4,650
     
+27.3
     
39
 
Financial Services, including deferred insurance acquisition costs
   
13,770
     
16,005
     
+16.2
     
133
 
All Other
   
2,414
     
4,564
     
+89.1
     
39
 
Total
   
71,661
     
82,814
     
+15.6
     
690
 
                                 
Corporate
   
12,672
     
8,261
     
-34.8
     
69
 
Consolidated total
 
¥
84,333
   
¥
91,075
     
+8.0
%
 
$
759
 
                                 
 
    (Millions of yen, millions of U.S. dollars)  
 
    Three months ended December 31, 2014
 
 
 
 
Restructuring charges and associated depreciation
 
 
Total net
 restructuring
charges
  Depreciation
associated with
restructured
assets
 
 
 
 
Total
 
 
                                 
Mobile Communications
 
¥
1,768
   
¥
22
   
¥
1,790
         
Game & Network Services
   
12
 
     
12
         
Imaging Products & Solutions
   
315
 
     
315
         
Home Entertainment & Sound
   
3
 
     
3
         
Devices
   
208
     
12
     
220
         
Pictures
   
166
 
     
166
         
Music
   
1,317
 
     
1,317
         
Financial Services
 
 
         
All Other and Corporate
   
5,238
     
(13
)
   
5,225
         
Consolidated total
 
¥
9,027
   
¥
21
   
¥
9,048
         
                                 
                                 
   
Three months ended December 31, 2015
       
 
 
 
Restructuring charges and associated depreciation
 
 
Total net
restructuring
charges
 
Depreciation
associated with
restructured
assets
 
 
 
 
Total
       
                                 
Mobile Communications
 
¥
2,530
   
¥
106
   
¥
2,636
         
Game & Network Services
   
120
 
     
120
         
Imaging Products & Solutions
   
4
 
     
4
         
Home Entertainment & Sound
   
555
 
     
555
         
Devices
   
26
 
     
26
         
Pictures
   
(169
)
     
(169
)
       
Music
   
104
 
     
104
         
Financial Services
 
 
         
All Other and Corporate
   
2,397
     
409
     
2,806
         
Consolidated total
 
¥
5,567
   
¥
515
   
¥
6,082
         
                                 
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.
 
                                 
                                 
   
Three months ended December 31, 2015
       
 
 
 
Restructuring charges and associated depreciation
 
 
Total net
restructuring
charges
 
Depreciation
associated with
restructured
assets
 
 
 
 
Total
       
                                 
Mobile Communications
 
$
22
   
$
0
   
$
22
         
Game & Network Services
   
1
 
     
1
         
Imaging Products & Solutions
   
0
 
     
0
         
Home Entertainment & Sound
   
4
 
     
4
         
Devices
   
0
 
     
0
         
Pictures
   
(1
)
     
(1
)
       
Music
   
1
 
     
1
         
Financial Services
 
 
         
All Other and Corporate
   
20
     
4
     
24
         
Consolidated total
 
$
47
   
$
4
   
$
51
         
 
 
F-10

 
 
Other Items
                 
 
(Millions of yen, millions of U.S. dollars)
   
Nine months ended December 31
Depreciation and amortization
 
2014
 
2015
 
Change
 
2015
Mobile Communications
 
¥
17,972
   
¥
18,256
     
+1.6
%
 
$
152
 
Game & Network Services
   
13,166
     
14,750
     
+12.0
     
123
 
Imaging Products & Solutions
   
23,091
     
21,155
     
-8.4
     
176
 
Home Entertainment & Sound
   
18,599
     
16,815
     
-9.6
     
140
 
Devices
   
64,569
     
78,906
     
+22.2
     
658
 
Pictures
   
14,497
     
16,645
     
+14.8
     
139
 
Music
   
10,915
     
13,455
     
+23.3
     
112
 
Financial Services, including deferred insurance acquisition costs
   
42,991
     
56,570
     
+31.6
     
471
 
All Other
   
7,207
     
7,556
     
+4.8
     
63
 
Total
   
213,007
     
244,108
     
+14.6
     
2,034
 
                                 
Corporate
   
38,073
     
31,022
     
-18.5
     
259
 
Consolidated total
 
¥
251,080
   
¥
275,130
     
+9.6
%
 
$
2,293
 
                                 
 
 
(Millions of yen, millions of U.S. dollars)
       
 
 
Nine months ended December 31, 2014
       
 
 
 
Restructuring charges and associated depreciation
 
 
Total net
restructuring
charges
 
Depreciation
 associated with
 restructured
assets
 
 
 
 
Total
       
                                 
Mobile Communications
 
¥
1,825
   
¥
22
   
¥
1,847
         
Game & Network Services
   
76
 
     
76
         
Imaging Products & Solutions
   
515
 
     
515
         
Home Entertainment & Sound
   
580
 
     
580
         
Devices
   
3,569
     
16
     
3,585
         
Pictures
   
182
 
     
182
         
Music
   
1,377
 
     
1,377
         
Financial Services
 
 
         
All Other and Corporate
   
24,916
     
656
     
25,572
         
Consolidated total
 
¥
33,040
   
¥
694
   
¥
33,734
         
                                 
 
 
Nine months ended December 31, 2015
       
 
 
 
Restructuring charges and associated depreciation
 
 
Total net
restructuring
charges
 
Depreciation
 associated with
 restructured
assets
 
 
 
 
Total
       
                                 
Mobile Communications
 
¥
14,300
   
¥
646
   
¥
14,946
         
Game & Network Services
   
135
 
     
135
         
Imaging Products & Solutions
   
64
 
     
64
         
Home Entertainment & Sound
   
503
 
     
503
         
Devices
   
30
 
     
30
         
Pictures
   
1
 
     
1
         
Music
   
439
 
     
439
         
Financial Services
 
 
         
All Other and Corporate
   
4,749
     
951
     
5,700
         
Consolidated total
 
¥
20,221
   
¥
1,597
   
¥
21,818
         
                                 
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.
 
                                 
 
 
Nine months ended December 31, 2015
       
 
 
 
Restructuring charges and associated depreciation
 
 
Total net
restructuring
charges
 
Depreciation
associated with
 restructured
assets
 
 
 
 
Total
       
                                 
Mobile Communications
 
$
120
   
$
5
   
$
125
         
Game & Network Services
   
1
 
     
1
         
Imaging Products & Solutions
   
1
 
     
1
         
Home Entertainment & Sound
   
4
 
     
4
         
Devices
   
0
 
     
0
         
Pictures
   
0
 
     
0
         
Music
   
4
 
     
4
         
Financial Services
 
 
         
All Other and Corporate
   
39
     
8
     
47
         
Consolidated total
 
$
169
   
$
13
   
$
182
         
 
 
F-11

 
 
Geographic Information
                     
 
 
(Millions of yen, millions of U.S. dollars)
 
 
Three months ended December 31
Sales and operating revenue (to external customers)
 
2014
 
2015
 
Change
 
2015
                       
Japan
 
¥
654,936
   
¥
689,084
     
+5.2
%
 
$
5,742
 
United States
   
496,027
     
586,469
     
+18.2
     
4,887
 
Europe
   
668,333
     
665,849
     
-0.4
     
5,549
 
China
   
155,839
     
150,074
     
-3.7
     
1,251
 
Asia-Pacific
   
308,499
     
280,458
     
-9.1
     
2,337
 
Other Areas
   
283,115
     
208,878
     
-26.2
     
1,741
 
Total
 
¥
2,566,749
   
¥
2,580,812
     
+0.5
%
 
$
21,507
 
                                 
 
 
Nine months ended December 31
Sales and operating revenue (to external customers)
  2014   2015
 
Change
  2015
                                 
Japan
 
¥
1,665,860
   
¥
1,746,196
     
+4.8
%
 
$
14,552
 
United States
   
1,129,151
     
1,332,480
     
+18.0
     
11,104
 
Europe
   
1,521,924
     
1,468,733
     
-3.5
     
12,239
 
China
   
433,420
     
431,370
     
-0.5
     
3,595
 
Asia-Pacific
   
812,768
     
757,067
     
-6.9
     
6,309
 
Other Areas
   
715,045
     
545,765
     
-23.7
     
4,548
 
Total
 
¥
6,278,168
   
¥
6,281,611
     
+0.1
%
 
$
52,347
 
                                 
Geographic Information shows sales and operating revenue recognized by location of customers.
                 
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
                         
 
 
F-12

 
 
Condensed Financial Services Financial Statements
           
             
The results of the Financial Services segment are included in Sony’s consolidated financial statements. The following schedules show unaudited condensed financial statements for the Financial Services segment and all other segments excluding Financial Services. These presentations are not in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which is used by Sony to prepare its consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a comparative presentation may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, then eliminated in the consolidated figures shown below.
             
             
Condensed Balance Sheets
           
 
(Millions of yen, millions of U.S. dollars)
Financial Services
 
March 31
  December 31
 
 
2015
 
2015
 
2015
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
¥
207,527
   
¥
245,673
   
$
2,047
 
Marketable securities
   
933,424
     
954,598
     
7,955
 
Other
   
147,663
     
182,737
     
1,523
 
     
1,288,614
     
1,383,008
     
11,525
 
                         
Investments and advances
   
8,217,715
     
8,730,190
     
72,752
 
Property, plant and equipment
   
17,305
     
18,343
     
153
 
Other assets:
                       
Deferred insurance acquisition costs
   
520,571
     
538,981
     
4,492
 
Other
   
45,645
     
50,744
     
422
 
     
566,216
     
589,725
     
4,914
 
Total assets
 
¥
10,089,850
   
¥
10,721,266
   
$
89,344
 
                         
LIABILITIES AND EQUITY
                       
Current liabilities:
                       
Short-term borrowings
 
¥
6,351
   
¥
154,457
   
$
1,287
 
Deposits from customers in the banking business
   
1,872,965
     
1,861,127
     
15,509
 
Other
   
199,098
     
206,432
     
1,721
 
     
2,078,414
     
2,222,016
     
18,517
 
                         
Long-term debt
   
44,460
     
34,679
     
289
 
Future insurance policy benefits and other
   
4,122,372
     
4,388,208
     
36,568
 
Policyholders’ account in the life insurance business
   
2,259,514
     
2,413,031
     
20,109
 
Other
   
335,964
     
336,335
     
2,803
 
Total liabilities
   
8,840,724
     
9,394,269
     
78,286
 
                         
Equity:
                       
Stockholders’ equity of Financial Services
   
1,247,840
     
1,325,679
     
11,047
 
Noncontrolling interests
   
1,286
     
1,318
     
11
 
Total equity
   
1,249,126
     
1,326,997
     
11,058
 
Total liabilities and equity
 
¥
10,089,850
   
¥
10,721,266
   
$
89,344
 
 
 
F-13

 
 
   
(Millions of yen, millions of U.S. dollars)
Sony without Financial Services
 
March 31
 
December 31
   
2015
 
2015
 
2015
ASSETS
                       
Current assets:
                       
Cash and cash equivalents
 
¥
741,886
   
¥
       844,964
   
$
       7,042
 
Marketable securities
   
3,307
     
           3,211
     
            27
 
Notes and accounts receivable, trade
   
893,847
     
    1,202,659
     
     10,022
 
Other
   
1,272,562
     
    1,408,765
     
     11,739
 
     
2,911,602
     
    3,459,599
     
     28,830
 
                         
Film costs
   
305,232
     
       357,635
     
       2,980
 
Investments and advances
   
395,189
     
       324,499
     
       2,704
 
Investments in Financial Services, at cost
   
111,476
     
       111,476
     
          929
 
Property, plant and equipment
   
720,694
     
       804,266
     
       6,702
 
Other assets
   
1,497,805
     
    1,524,070
     
     12,701
 
Total assets
 
¥
5,941,998
   
¥
    6,581,545
   
$
     54,846
 
                         
LIABILITIES AND EQUITY
                       
Current liabilities:
                       
Short-term borrowings
 
¥
215,175
   
¥
       211,123
   
$
       1,759
 
Notes and accounts payable, trade
   
622,215
     
       703,912
     
       5,866
 
Other
   
1,832,085
     
    1,962,071
     
     16,351
 
     
2,669,475
     
    2,877,106
     
     23,976
 
                         
Long-term debt
   
671,104
     
       703,049
     
       5,859
 
Accrued pension and severance costs
   
274,220
     
       268,792
     
       2,240
 
Other
   
478,704
     
       466,508
     
       3,887
 
Total liabilities
   
4,093,503
     
    4,315,455
     
     35,962
 
                         
Redeemable noncontrolling interest
   
5,248
     
           7,035
     
            59
 
                         
Equity:
                       
Stockholders’ equity of Sony without Financial Services
   
1,733,233
     
    2,148,970
     
     17,908
 
Noncontrolling interests
   
110,014
     
       110,085
     
          917
 
Total equity
   
1,843,247
     
    2,259,055
     
     18,825
 
Total liabilities and equity
 
¥
5,941,998
   
¥
    6,581,545
   
$
     54,846
 
                         
   
(Millions of yen, millions of U.S. dollars)
Consolidated
 
March 31
 
December 31
   
2015
 
2015
 
2015
  ASSETS
                       
Current assets:
                       
Cash and cash equivalents
 
¥
949,413
   
¥
1,090,637
   
$
9,089
 
Marketable securities
   
936,731
     
957,809
     
7,982
 
Notes and accounts receivable, trade
   
899,902
     
1,210,977
     
10,091
 
Other
   
1,411,855
     
1,581,195
     
13,176
 
     
4,197,901
     
4,840,618
     
40,338
 
                         
Film costs
   
305,232
     
357,635
     
2,980
 
Investments and advances
   
8,531,353
     
8,974,242
     
74,785
 
Property, plant and equipment
   
739,285
     
823,895
     
6,866
 
Other assets:
                       
Deferred insurance acquisition costs
   
520,571
     
538,981
     
4,492
 
Other
   
1,539,989
     
1,571,352
     
13,095
 
     
2,060,560
     
2,110,333
     
17,587
 
Total assets
 
¥
15,834,331
   
¥
17,106,723
   
$
142,556
 
                         
LIABILITIES AND EQUITY
                       
Current liabilities:
                       
Short-term borrowings
 
¥
221,525
   
¥
365,580
   
$
3,047
 
Notes and accounts payable, trade
   
622,215
     
703,912
     
5,866
 
Deposits from customers in the banking business
   
1,872,965
     
1,861,127
     
15,509
 
Other
   
2,028,885
     
2,166,514
     
18,054
 
     
4,745,590
     
5,097,133
     
42,476
 
                         
Long-term debt
   
712,087
     
734,265
     
6,119
 
Accrued pension and severance costs
   
298,753
     
294,574
     
2,455
 
Future insurance policy benefits and other
   
4,122,372
     
4,388,208
     
36,568
 
Policyholders’ account in the life insurance business
   
2,259,514
     
2,413,031
     
20,109
 
Other
   
762,298
     
750,329
     
6,253
 
Total liabilities
   
12,900,614
     
13,677,540
     
113,980
 
                         
Redeemable noncontrolling interest
   
5,248
     
7,035
     
59
 
                         
Equity:
                       
Sony Corporation’s stockholders’ equity
   
2,317,077
     
2,779,518
     
23,163
 
Noncontrolling interests
   
611,392
     
642,630
     
5,354
 
Total equity
   
2,928,469
     
3,422,148
     
28,517
 
Total liabilities and equity
 
¥
15,834,331
   
¥
17,106,723
   
$
142,556
 
 
 
F-14

 
 
Condensed Statements of Income
                             
           
(Millions of yen, millions of U.S. dollars)
           
Three months ended December 31
  Financial Services  
2014
 
2015
 
Change
 
2015
                                       
Financial services revenue
 
¥
304,926
   
¥
322,043
   
+5.6
%
 
$
2,684
 
Financial services expenses
   
253,099
     
269,910
   
+6.6
     
2,250
 
Equity in net income (loss) of affiliated companies
   
(977
   
87
   
     
1
 
Operating income
   
50,850
     
52,220
   
+2.7
     
435
 
Other income (expenses), net
   
     
   
     
 
Income before income taxes
   
50,850
     
52,220
   
+2.7
     
435
 
Income taxes and other
   
15,876
     
15,556
   
-2.0
     
129
 
Net income of Financial Services
 
¥
34,974
   
¥
36,664
   
+4.8
%
 
$
306
 
                                       
                                       
           
(Millions of yen, millions of U.S. dollars)
           
Three months ended December 31
  Sony without Financial Services  
2014
   
2015
   
Change
 
2015
 
                                       
Net sales and operating revenue
 
¥
2,264,469
   
¥
2,261,213
   
-0.1
%
 
$
18,843
 
Costs and expenses
   
2,134,072
     
2,112,980
   
-1.0
     
17,608
 
Equity in net income of affiliated companies
   
849
     
1,692
   
+99.3
     
14
 
Operating income
   
131,246
     
149,925
   
+14.2
     
1,249
 
Other income (expenses), net
   
(14,268
   
(8,864
)  
     
(73
)
Income before income taxes
   
116,978
     
141,061
   
+20.6
     
1,176
 
Income taxes and other
   
47,992
     
42,925
   
-10.6
     
358
 
Net income of Sony without Financial Services
 
¥
68,986
   
¥
98,136
   
+42.3
%
 
$
818
 
                                       
                                       
           
(Millions of yen, millions of U.S. dollars)
           
Three months ended December 31
  Consolidated  
2014
 
2015
 
Change
 
2015
                                       
Financial services revenue
 
¥
303,211
   
¥
320,368
   
+5.7
%
 
$
2,670
 
Net sales and operating revenue
   
2,263,538
     
2,260,444
   
-0.1
     
18,837
 
             
2,566,749
     
2,580,812
   
+0.5
     
21,507
 
Costs and expenses
   
2,384,526
     
2,380,446
   
-0.2
     
19,837
 
Equity in net income (loss) of affiliated companies
   
(128
   
1,779
   
     
15
 
Operating income
   
182,095
     
202,145
   
+11.0
     
1,685
 
Other income (expenses), net
   
(14,267
   
(8,865
)  
     
(74
)
Income before income taxes
   
167,828
     
193,280
   
+15.2
     
1,611
 
Income taxes and other
   
77,857
     
73,146
   
-6.1
     
610
 
Net income attributable to Sony Corporation’s stockholders
 
¥
89,971
   
¥
120,134
   
+33.5
%
 
$
1,001
 
 
 
F-15

 
 
Condensed Statements of Income
                           
       
(Millions of yen, millions of U.S. dollars)
       
Nine months ended December 31
Financial Services
2014
 
2015
 
Change
 
2015
                                   
Financial services revenue
¥
821,469
   
¥
812,161
   
-1.1
%
 
$
6,768
 
Financial services expenses
 
678,240
     
672,421
   
-0.9
     
5,604
 
Equity in net in loss of affiliated companies
 
(921
   
(373
)  
     
(3
)
Operating income
 
142,308
     
139,367
   
-2.1
     
1,161
 
Other income (expenses), net
 
     
   
     
 
Income before income taxes
 
142,308
     
139,367
   
-2.1
     
1,161
 
Income taxes and other
 
44,513
     
41,615
   
-6.5
     
346
 
Net income of Financial Services
¥
97,795
   
¥
97,752
   
-0.0
%
 
$
815
 
                                   
                                   
       
(Millions of yen, millions of U.S. dollars)
       
Nine months ended December 31
Sony without Financial Services
2014
 
2015
 
Change
 
2015
                                   
Net sales and operating revenue
¥
5,463,978
   
¥
5,477,465
   
+0.2
%
 
$
45,646
 
Costs and expenses
 
5,393,075
     
5,233,286
   
-3.0
     
43,611
 
Equity in net income of affiliated companies
 
4,623
     
3,518
   
-23.9
     
29
 
Operating income
 
75,526
     
247,697
   
+228.0
     
2,064
 
Other income (expenses), net
 
(12,241
   
27,560
   
     
230
 
Income before income taxes
 
63,285
     
275,257
   
+334.9
     
2,294
 
Income taxes and other
 
81,809
     
87,340
   
+6.8
     
728
 
Net income (loss) of Sony without Financial Services
¥
(18,524
 
¥
187,917
   
%
 
$
1,566
 
                                   
                                   
       
(Millions of yen, millions of U.S. dollars)
       
Nine months ended December 31
Consolidated
2014
 
2015
 
Change
 
2015
                                   
Financial services revenue
¥
817,153
   
¥
807,092
   
-1.2
%
 
$
6,726
 
Net sales and operating revenue
 
5,461,015
     
5,474,519
   
+0.2
     
45,621
 
         
6,278,168
     
6,281,611
   
+0.1
     
52,347
 
Costs and expenses
 
6,115,549
     
5,897,686
   
-3.6
     
49,147
 
Equity in net income of affiliated companies
 
3,702
     
3,145
   
-15.0
     
26
 
Operating income
 
166,321
     
387,070
   
+132.7
     
3,226
 
Other income (expenses), net
 
(20,071
   
17,114
   
     
142
 
Income before income taxes
 
146,250
     
404,184
   
+176.4
     
3,368
 
Income taxes and other
 
165,440
     
168,056
   
+1.6
     
1,400
 
Net income (loss) attributable to Sony Corporation’s stockholders
¥
(19,190
 
¥
236,128
   
%
 
$
1,968
 
 
 
F-16

 
 
Condensed Statements of Cash Flows
                       
   
(Millions of yen, millions of U.S. dollars)
   
Nine months ended December 31
Financial Services
 
2014
 
2015
 
2015
                         
Net cash provided by operating activities
 
¥
278,246
   
¥
308,217
   
$
2,569
 
Net cash used in investing activities
   
(317,125
   
(482,110
)    
(4,018
)
Net cash provided by financing activities
   
89,111
     
212,039
     
1,767
 
Net increase in cash and cash equivalents
   
50,232
     
38,146
     
318
 
Cash and cash equivalents at beginning of the fiscal year
   
240,332
     
207,527
     
1,729
 
Cash and cash equivalents at end of the period
 
¥
290,564
   
¥
245,673
   
$
2,047
 
                         
                         
   
(Millions of yen, millions of U.S. dollars)
   
Nine months ended December 31
Sony without Financial Services
 
2014
 
2015
 
2015
                         
Net cash provided by operating activities
 
¥
112,516
   
¥
22,645
   
$
189
 
Net cash used in investing activities
   
(46,665
   
(186,589
)    
(1,555
)
Net cash provided by (used in) financing activities
   
(281,516
   
275,257
     
2,294
 
Effect of exchange rate changes on cash and cash equivalents
   
52,465
     
(8,235
)    
(69
)
Net increase (decrease) in cash and cash equivalents
   
(163,200
   
103,078
     
859
 
Cash and cash equivalents at beginning of the fiscal year
   
806,134
     
741,886
     
6,183
 
Cash and cash equivalents at end of the period
 
¥
642,934
   
¥
844,964
   
$
7,042
 
                         
                         
   
(Millions of yen, millions of U.S. dollars)
   
Nine months ended December 31
Consolidated
 
2014
 
2015
 
2015
                         
Net cash provided by operating activities
 
¥
382,932
   
¥
321,511
   
$
2,680
 
Net cash used in investing activities
   
(363,790
   
(669,802
)    
(5,582
)
Net cash provided by (used in) financing activities
   
(184,575
   
497,750
     
4,148
 
Effect of exchange rate changes on cash and cash equivalents
   
52,465
     
(8,235
)    
(69
)
Net increase (decrease) in cash and cash equivalents
   
(112,968
   
141,224
     
1,177
 
Cash and cash equivalents at beginning of the fiscal year
   
1,046,466
     
949,413
     
7,912
 
Cash and cash equivalents at end of the period
 
¥
933,498
   
¥
1,090,637
   
$
9,089
 
 
 
F-17

 
 
 (Notes)
1.  
U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥120 = U.S. $1, the approximate Tokyo foreign exchange market rate as of December 31, 2015.

2.  
As of December 31, 2015, Sony had 1,298 consolidated subsidiaries (including variable interest entities) and 102 affiliated companies accounted for under the equity method.

3.  
The weighted-average number of outstanding shares used for the computation of earnings per share of common stock is as follows:

Weighted-average number of outstanding shares
    (Thousands of shares)  
      Three months ended December 31  
Net income attributable to Sony Corporation’s stockholders
   
2014
     
2015
 
— Basic
    1,151,770       1,261,274  
— Diluted
    1,168,990       1,287,220  

Weighted-average number of outstanding shares
 
(Thousands of shares)
 
      Nine months ended December 31  
Net income (loss) attributable to Sony Corporation’s stockholders
   
2014
   
2015
 
— Basic
    1,096,392       1,229,937  
— Diluted
    1,096,392       1,248,258  

The dilutive effect in the weighted-average number of outstanding shares for the three months ended December 31, 2014 primarily resulted from convertible bonds which were issued in November 2012.  All potential shares were excluded as anti-dilutive for the nine months ended December 31, 2014 due to Sony incurring a net loss attributable to Sony Corporation’s stockholders.  The dilutive effect in the weighted-average number of outstanding shares for the three and nine months ended December 31, 2015 primarily resulted from convertible bonds which were issued in July 2015.

4.  
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 result of operations and financial position.

5.  
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, which were 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 MC segment.  Certain operations regarding pre-installed automotive audio products which were included in the Devices segment are now included in the HE&S segment.  In addition, Sony realigned its business segments for the third quarter of the fiscal year ending March 31, 2016 to reflect a change in the Corporate Executive Officer in charge of the medical business as of October 1, 2015.  In connection with this realignment, the medical business, which was included in All Other is now included in the IP&S segment.  For further details of current segments and categories, see page F-8 and F-9.  In connection with this realignment, 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.
 
 
F-18

 
 
6.  
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.

7.  
Certain reclassifications of the financial statements and accompanying footnotes for the three and nine months ended December 31, 2014 have been made to conform to the presentation for the three and nine months ended December 31, 2015.

8.  
For the nine months ended December 31, 2015, Sony recorded an out-of-period adjustment to correct an error in the amount of accruals for certain sales incentives being recorded at a subsidiary.  The error began in the fiscal year ended March 31, 2009 and continued until it was identified by Sony during the three months ended December 31, 2015.  The adjustment, which related to the HE&S segment, impacted net sales and increased income before income taxes in the consolidated statements of income by 8,447 million yen for the nine months ended December 31, 2015.  Sony determined that the adjustment was not material to the consolidated financial statements for the three and nine months ended December 31, 2015 or any prior annual or interim periods.

Other Consolidated Financial Data

   
(Millions of yen, millions of U.S. dollars)
   
Three months ended December 31
   
2014
 
2015
 
2015
Capital expenditures*
  ¥ 56,937     ¥ 119,778     $ 998  
(Additions to property, plant and equipment)
    (36,622 )     (89,518 )     (746 )
(Additions to intangible assets)
    (20,315 )     (30,260 )     (252 )
Depreciation and amortization expenses**
    84,333       91,075       759  
(Depreciation expenses for property, plant and equipment)
    (40,344 )     (45,613 )     (380 )
(Amortization expenses for intangible assets)
    (43,989 )     (45,462 )     (379 )
Research and development expenses
    118,295       114,470       954  

   
(Millions of yen, millions of U.S. dollars)
   
Nine months ended December 31
   
2014
 
2015
 
2015
Capital expenditures*
  ¥ 169,558     ¥ 329,380     $ 2,745  
(Additions to property, plant and equipment)
    (112,948 )     (265,583 )     (2,213 )
(Additions to intangible assets)
    (56,610 )     (63,797 )     (532 )
Depreciation and amortization expenses**
    251,080       275,130       2,293  
(Depreciation expenses for property, plant and equipment)
    (118,329 )     (131,999 )     (1,100 )
(Amortization expenses for intangible assets)
    (132,751 )     (143,131 )     (1,193 )
Research and development expenses
    340,301       340,050       2,834  

*
Excluding additions for tangible and intangible assets from business combinations.
**
Including amortization expenses for deferred insurance acquisition costs.

 
 
F-19