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 July 2018
Commission File Number: 001-06439

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

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

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

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

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
SONY CORPORATION
 
(Registrant)
   
   
 
By:  /s/  Hiroki Totoki
 
                (Signature)
 
Hiroki Totoki
 
Senior Executive Vice President and
 
Chief Financial Officer
 
Date: July 31, 2018

List of materials

Documents attached hereto:
 
i) Press release: Quarterly Financial Statements for the First Quarter Ended June 30, 2018 And Outlook for the Fiscal Year Ending March 31, 2019



Quarterly Financial Statements
for the First Quarter Ended June 30, 2018
And
Outlook for the Fiscal Year Ending March 31, 2019


July 31, 2018
Sony Corporation


Quarterly Financial Statements (Unaudited)
  F-1
   
Consolidated Balance Sheets
   F-1
Consolidated Statements of Income (Three months ended June 30)
   F-2
Consolidated Statements of Comprehensive Income (Three months ended June 30)
   F-2
Consolidated Statements of Cash Flows (Three months ended June 30)
   F-3
Notes to Consolidated Financial Statements
   F-4
-Business Segment Information
   F-4
-Going Concern Assumption
   F-9
-Significant Changes in Shareholders’ Equity
   F-9
-Accounting Policies and Other Information
   F-9
   
Outlook for the Fiscal Year Ending March 31, 2019
1
   
Outlook for the Fiscal Year Ending March 31, 2019
1
   
Cautionary Statement
4

 

 

All amounts are presented on the basis of Generally Accepted Accounting Principles in the U.S. (“U.S. GAAP”).
 
Sony Corporation and its consolidated subsidiaries are together referred to as “Sony”.

(Unaudited)
                 
Consolidated Financial Statements
                 
Consolidated Balance Sheets
                 
   
(Millions of yen)
 
   
March 31
   
June 30
   
Change from
 
ASSETS
 
2018
   
2018
   
March 31, 2018
 
Current assets:
                 
Cash and cash equivalents
 
¥
1,586,329
   
¥
1,509,451
   
¥
-76,878
 
Marketable securities
   
1,176,601
     
1,239,131
     
+62,530
 
Notes and accounts receivable, trade and contract assets
   
1,061,442
     
1,123,475
     
+62,033
 
Allowance for doubtful accounts
   
(48,663
)
   
(23,668
)
   
+24,995
 
Inventories
   
692,937
     
692,633
     
-304
 
Other receivables
   
190,706
     
229,440
     
+38,734
 
Prepaid expenses and other current assets
   
516,744
     
519,843
     
+3,099
 
 Total current assets
   
5,176,096
     
5,290,305
     
+114,209
 
                         
Film costs
   
327,645
     
373,736
     
+46,091
 
                         
Investments and advances:
                       
Affiliated companies
   
157,389
     
149,074
     
-8,315
 
Securities investments and other
   
10,598,669
     
10,925,029
     
+326,360
 
     
10,756,058
     
11,074,103
     
+318,045
 
                         
Property, plant and equipment:
                       
Land
   
84,358
     
84,692
     
+334
 
Buildings
   
655,434
     
661,826
     
+6,392
 
Machinery and equipment
   
1,798,722
     
1,827,988
     
+29,266
 
Construction in progress
   
38,295
     
37,536
     
-759
 
     
2,576,809
     
2,612,042
     
+35,233
 
Less-Accumulated depreciation
   
1,837,339
     
1,867,117
     
+29,778
 
     
739,470
     
744,925
     
+5,455
 
                         
Other assets:
                       
Intangibles, net
   
527,168
     
527,799
     
+631
 
Goodwill
   
530,492
     
541,814
     
+11,322
 
Deferred insurance acquisition costs
   
586,670
     
594,867
     
+8,197
 
Deferred income taxes
   
96,772
     
94,752
     
-2,020
 
Other
   
325,167
     
321,040
     
-4,127
 
     
2,066,269
     
2,080,272
     
+14,003
 
                         
  Total assets
 
¥
19,065,538
   
¥
19,563,341
   
¥
+497,803
 
                         
                         
LIABILITIES AND EQUITY
                       
Current liabilities:
                       
Short-term borrowings
 
¥
496,093
   
¥
623,049
   
¥
+126,956
 
Current portion of long-term debt
   
225,522
     
125,412
     
-100,110
 
Notes and accounts payable, trade
   
468,550
     
582,918
     
+114,368
 
Accounts payable, other and accrued expenses
   
1,514,433
     
1,415,620
     
-98,813
 
Accrued income and other taxes
   
145,905
     
167,717
     
+21,812
 
Deposits from customers in the banking business
   
2,159,246
     
2,206,087
     
+46,841
 
Other
   
610,792
     
646,933
     
+36,141
 
 Total current liabilities
   
5,620,541
     
5,767,736
     
+147,195
 
                         
Long-term debt
   
623,451
     
571,094
     
-52,357
 
Accrued pension and severance costs
   
394,504
     
392,341
     
-2,163
 
Deferred income taxes
   
449,863
     
437,120
     
-12,743
 
Future insurance policy benefits and other
   
5,221,772
     
5,337,847
     
+116,075
 
Policyholders’ account in the life insurance business
   
2,820,702
     
2,896,641
     
+75,939
 
Other
   
278,338
     
288,554
     
+10,216
 
  Total liabilities
   
15,409,171
     
15,691,333
     
+282,162
 
                         
Redeemable noncontrolling interest
   
9,210
     
8,219
     
-991
 
                         
Equity:
                       
Sony Corporation’s stockholders’ equity:
                       
Common stock
   
865,678
     
870,208
     
+4,530
 
Additional paid-in capital
   
1,282,577
     
1,297,954
     
+15,377
 
Retained earnings
   
1,440,387
     
1,674,810
     
+234,423
 
Accumulated other comprehensive income
   
(616,746
)
   
(614,450
)
   
+2,296
 
Treasury stock, at cost
   
(4,530
)
   
(4,570
)
   
-40
 
     
2,967,366
     
3,223,952
     
+256,586
 
                         
Noncontrolling interests
   
679,791
     
639,837
     
-39,954
 
  Total equity
   
3,647,157
     
3,863,789
     
+216,632
 
  Total liabilities and equity
 
¥
19,065,538
   
¥
19,563,341
   
¥
+497,803
 
 
F-1

 
Consolidated Statements of Income
                 
   
(Millions of yen, except per share amounts)
 
   
Three months ended June 30
 
   
2017
   
2018
   
Change
 
Sales and operating revenue:
                 
Net sales
 
¥
1,528,643
   
¥
1,602,195
   
¥
+73,552
 
Financial services revenue
   
301,360
     
333,240
     
+31,880
 
Other operating revenue
   
28,110
     
18,189
     
-9,921
 
     
1,858,113
     
1,953,624
     
+95,511
 
                         
Costs and expenses:
                       
Cost of sales
   
1,115,092
     
1,112,487
     
-2,605
 
Selling, general and administrative
   
357,379
     
349,761
     
-7,618
 
Financial services expenses
   
255,258
     
292,156
     
+36,898
 
Other operating income, net
   
(26,111
)
   
(325
)
   
+25,786
 
     
1,701,618
     
1,754,079
     
+52,461
 
                         
Equity in net income (loss) of affiliated companies
   
1,116
     
(4,539
)
   
-5,655
 
                         
Operating income
   
157,611
     
195,006
     
+37,395
 
                         
Other income:
                       
Interest and dividends
   
8,785
     
4,734
     
-4,051
 
Gain on equity securities, net
 
     
114,779
     
+114,779
 
Foreign exchange gain, net
 
     
1,011
     
+1,011
 
Other
   
1,133
     
733
     
-400
 
     
9,918
     
121,257
     
+111,339
 
                         
Other expenses:
                       
Interest
   
4,516
     
3,318
     
-1,198
 
Foreign exchange loss, net
   
12,968
   
     
-12,968
 
Other
   
1,151
     
859
     
-292
 
     
18,635
     
4,177
     
-14,458
 
                         
Income before income taxes
   
148,894
     
312,086
     
+163,192
 
                         
Income taxes
   
54,496
     
75,222
     
+20,726
 
                         
Net income
   
94,398
     
236,864
     
+142,466
 
                         
Less - Net income attributable to noncontrolling interests
   
13,527
     
10,417
     
-3,110
 
                         
Net income attributable to Sony Corporation’s stockholders
 
¥
80,871
   
¥
226,447
   
¥
+145,576
 
                         
                         
                         
Per share data:
                       
Net income attributable to Sony Corporation’s stockholders
                       
   — Basic
 
¥
64.03
   
¥
178.66
   
¥
+114.63
 
   — Diluted
   
62.70
     
174.80
     
+112.10
 
 
Consolidated Statements of Comprehensive Income
                       
   
(Millions of yen) 
 
   
Three months ended June 30 
 
     
2017
     
2018
   
Change
 
                         
Net income
 
¥
94,398
   
¥
236,864
   
¥
+142,466
 
                         
Other comprehensive income, net of tax –
                       
Unrealized gains (losses) on securities
   
(3,189
)
   
3,271
     
+6,460
 
Unrealized gains (losses) on derivative instruments
   
(365
)
   
1,478
     
+1,843
 
Pension liability adjustment
   
2,305
     
2,276
     
-29
 
Foreign currency translation adjustments
   
13,585
     
8,297
     
-5,288
 
                         
Total comprehensive income
   
106,734
     
252,186
     
+145,452
 
                         
Less - Comprehensive income attributable
                       
   to noncontrolling interests
   
14,178
     
7,917
     
-6,261
 
                         
Comprehensive income attributable
                       
   to Sony Corporation’s stockholders
 
¥
92,556
   
¥
244,269
   
¥
+151,713
 
                         

F-2

Consolidated Statements of Cash Flows
           
   
(Millions of yen)
 
   
Three months ended June 30
 
   
2017
   
2018
 
Cash flows from operating activities:
           
Net income
 
¥
94,398
   
¥
236,864
 
Adjustments to reconcile net income to net cash  provided by operating activities:
               
Depreciation and amortization, including amortization ofdeferred insurance acquisition costs and contract costs
   
83,263
     
86,243
 
Amortization of film costs
   
79,318
     
58,001
 
Accrual for pension and severance costs, less payments
   
2,067
     
(1,881
)
Other operating income, net
   
(26,111
)
   
(325
)
(Gain) loss on securities investments, net (other than financial services business)
   
44
     
(114,778
)
Gain on marketable securities and securities investments held in the financial services business, net
   
(39,105
)
   
(43,547
)
Deferred income taxes
   
9,833
     
1,215
 
Equity in net loss of affiliated companies, net of dividends
   
256
     
6,642
 
Changes in assets and liabilities:
               
   Increase in notes, accounts receivable, trade and contract assets
   
(68,488
)
   
(46,041
)
   Increase in inventories
   
(83,354
)
   
(7,206
)
   Increase in film costs
   
(94,966
)
   
(82,734
)
   Increase in notes and accounts payable, trade
   
134,162
     
109,783
 
   Increase in accrued income and other taxes
   
4,021
     
26,307
 
   Increase in future insurance policy benefits and other
   
137,960
     
173,976
 
   Increase in deferred insurance acquisition costs
   
(21,617
)
   
(23,352
)
   Increase in marketable securities held in the life insurance business
   
(12,944
)
   
(21,421
)
   Increase in other current assets
   
(54,957
)
   
(34,211
)
   Decrease in other current liabilities
   
(92,573
)
   
(162,437
)
Other
   
(1,249
)
   
(64,327
)
        Net cash provided by operating activities
   
49,958
     
96,771
 
                 
Cash flows from investing activities:
               
Payments for purchases of fixed assets
   
(56,663
)
   
(73,179
)
Proceeds from sales of fixed assets
   
3,257
     
3,923
 
Payments for investments and advances by financial services business
   
(256,254
)
   
(267,217
)
Payments for investments and advances (other than financial services business)
   
(4,442
)
   
(3,916
)
Proceeds from sales or return of investments and collections of advances by financial services business
   
94,201
     
64,074
 
Proceeds from sales or return of investments and collections of advances (other than financial services business)
   
2,363
     
635
 
Proceeds from sales of businesses
   
9,378
     
 
Proceeds related to sales of Spotify Technology S.A. Shares, net
   
     
82,467
 
Other
   
14,727
     
(4,148
)
        Net cash used in investing activities
   
(193,433
)
   
(197,361
)
                 
Cash flows from financing activities:
               
Proceeds from issuance of long-term debt
   
71,316
     
20,300
 
Payments of long-term debt
   
(4,173
)
   
(175,444
)
Increase in short-term borrowings, net
   
70,684
     
128,164
 
Increase in deposits from customers in the financial services business, net
   
49,827
     
63,798
 
Dividends paid
   
(12,687
)
   
(19,013
)
Other
   
(9,293
)
   
(39,901
)
        Net cash provided by (used in) financing activities
   
165,674
     
(22,096
)
                 
Effect of exchange rate changes on cash and cash equivalents, including restricted
   
601
     
44,311
 
                 
Net increase (decrease) in cash and cash equivalents, including restricted
   
22,800
     
(78,375
)
Cash and cash equivalents, including restricted, at beginning of the fiscal year
   
968,624
     
1,592,938
 
                 
Cash and cash equivalents, including restricted, at end of the period
   
991,424
     
1,514,563
 
                 
Less - restricted cash and cash equivalents, included in other current assets and other assets
   
7,259
     
5,112
 
Cash and cash equivalents at end of the period
 
¥
984,165
   
¥
1,509,451
 
 
F-3

Notes to Consolidated Financial Statements
                 
Business Segment Information
                 
(Business Segments)
                 
   
(Millions of yen)
 
   
Three months ended June 30
 
Sales and operating revenue
 
2017
   
2018
   
Change
 
                   
Game & Network Services
                 
Customers
 
¥
323,051
   
¥
449,980
   
¥
+126,929
 
Intersegment
   
25,011
     
22,121
     
-2,890
 
Total
   
348,062
     
472,101
     
+124,039
 
                         
Music
                       
Customers
   
165,076
     
177,708
     
+12,632
 
Intersegment
   
3,496
     
3,763
     
+267
 
Total
   
168,572
     
181,471
     
+12,899
 
                         
Pictures
                       
Customers
   
205,670
     
173,227
     
-32,443
 
Intersegment
   
141
     
1,854
     
+1,713
 
Total
   
205,811
     
175,081
     
-30,730
 
                         
Home Entertainment & Sound
                       
Customers
   
256,465
     
271,957
     
+15,492
 
Intersegment
   
402
     
130
     
-272
 
Total
   
256,867
     
272,087
     
+15,220
 
                         
Imaging Products & Solutions
                       
Customers
   
154,117
     
162,483
     
+8,366
 
Intersegment
   
1,518
     
1,719
     
+201
 
Total
   
155,635
     
164,202
     
+8,567
 
                         
Mobile Communications
                       
Customers
   
179,066
     
130,354
     
-48,712
 
Intersegment
   
2,121
     
2,153
     
+32
 
Total
   
181,187
     
132,507
     
-48,680
 
                         
Semiconductors
                       
Customers
   
172,679
     
176,673
     
+3,994
 
Intersegment
   
31,582
     
25,566
     
-6,016
 
Total
   
204,261
     
202,239
     
-2,022
 
                         
Financial Services
                       
Customers
   
301,360
     
333,240
     
+31,880
 
Intersegment
   
1,800
     
1,965
     
+165
 
Total
   
303,160
     
335,205
     
+32,045
 
                         
All Other
                       
Customers
   
94,104
     
74,447
     
-19,657
 
Intersegment
   
15,136
     
8,477
     
-6,659
 
Total
   
109,240
     
82,924
     
-26,316
 
                         
Corporate and elimination
   
(74,682
)
   
(64,193
)
   
+10,489
 
Consolidated total
 
¥
1,858,113
   
¥
1,953,624
   
¥
+95,511
 
 
Game & Network Services (“G&NS”) intersegment amounts primarily consist of transactions with All Other.
Semiconductors 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)
 
   
Three months ended June 30
 
Operating income (loss)
 
2017
   
2018
   
Change
 
                   
Game & Network Services
 
¥
17,733
   
¥
83,450
   
¥
+65,717
 
Music
   
25,022
     
32,104
     
+7,082
 
Pictures
   
(9,497
)
   
(7,601
)
   
+1,896
 
Home Entertainment & Sound
   
22,583
     
17,391
     
-5,192
 
Imaging Products & Solutions
   
23,204
     
26,077
     
+2,873
 
Mobile Communications
   
3,616
     
(10,758
)
   
-14,374
 
Semiconductors
   
55,442
     
29,137
     
-26,305
 
Financial Services
   
46,223
     
40,581
     
-5,642
 
All Other
   
(8,231
)
   
294
     
+8,525
 
Total
   
176,095
     
210,675
     
+34,580
 
                         
Corporate and elimination
   
(18,484
)
   
(15,669
)
   
+2,815
 
Consolidated total
 
¥
157,611
   
¥
195,006
   
¥
+37,395
 
 
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 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.
 
Beginning from the first quarter of the fiscal year ending March 31, 2019, a change has been made to the calculation method used for allocating indirect expenses incurred by sales companies to the segments every quarter. As a result of this change, a year-on-year increase in expenses, composed primarily of 2.4 billion yen in the Home Entertainment & Sound (“HE&S”) segment, is included for the current quarter. However, because a decrease in expenses totaling the same amount is included in Corporate and elimination, this change has no impact on consolidated operating income for the current quarter. Additionally, because increases and decreases in expenses per quarter for each segment resulting from this change in the calculation method will be offset by the increases and decreases in expenses in other quarters for that segment throughout the current year, this change will also have no impact on operating income (loss) for each segment, or for Corporate and elimination, for the fiscal year ending March 31, 2019.
F-4

(Sales to Customers by Product Category)
                 
   
(Millions of yen)
 
   
Three months ended June 30
 
Sales and operating revenue (to external customers)
 
2017
   
2018
   
Change
 
                   
Game & Network Services
                 
Network
 
¥
195,302
   
¥
300,386
   
¥
+105,084
 
Hardware and Others
   
127,749
     
149,594
     
+21,845
 
Total
   
323,051
     
449,980
     
+126,929
 
                         
Music
                       
Recorded Music
   
99,822
     
99,739
     
-83
 
Music Publishing
   
16,858
     
21,464
     
+4,606
 
Visual Media and Platform
   
48,396
     
56,505
     
+8,109
 
Total
   
165,076
     
177,708
     
+12,632
 
                         
Pictures
                       
Motion Pictures
   
70,274
     
68,568
     
-1,706
 
Television Productions
   
61,898
     
45,415
     
-16,483
 
Media Networks
   
73,498
     
59,244
     
-14,254
 
Total
   
205,670
     
173,227
     
-32,443
 
                         
Home Entertainment & Sound
                       
Televisions
   
179,374
     
186,550
     
+7,176
 
Audio and Video
   
76,722
     
84,929
     
+8,207
 
Other
   
369
     
478
     
+109
 
Total
   
256,465
     
271,957
     
+15,492
 
                         
Imaging Products & Solutions
                       
Still and Video Cameras
   
105,863
     
113,256
     
+7,393
 
Other
   
48,254
     
49,227
     
+973
 
Total
   
154,117
     
162,483
     
+8,366
 
                         
Mobile Communications
   
179,066
     
130,354
     
-48,712
 
                         
Semiconductors
   
172,679
     
176,673
     
+3,994
 
                         
Financial Services
   
301,360
     
333,240
     
+31,880
 
                         
All Other
   
94,104
     
74,447
     
-19,657
 
                         
Corporate
   
6,525
     
3,555
     
-2,970
 
Consolidated total
 
¥
1,858,113
   
¥
1,953,624
   
¥
+95,511
 
 
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-4. 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.
 
In the G&NS segment, Network includes network services relating to game, video and music content provided by Sony Interactive Entertainment; Hardware and Others includes home and portable game consoles, packaged software and peripheral devices. In the Music segment, Recorded Music includes the distribution of physical and digital recorded music and revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes the production and distribution of animation titles, including game applications based on the animation titles, and various service offerings for music and visual products. In the Pictures segment, Motion Pictures includes the worldwide production, acquisition and distribution of motion pictures and direct-to-video content; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks worldwide. In the HE&S segment, Televisions includes LCD and OLED televisions; Audio and Video includes Blu-ray disc players and recorders, home audio, headphones and memory-based portable audio devices. In the IP&S segment, Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for broadcast; Other includes display products such as projectors and medical equipment.
 
F-5

(Condensed Financial Services Financial Statements)
 
The following schedules show unaudited condensed financial statements for the Financial Services segment and all other segments excluding Financial Services. These presentations are not in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which is used by Sony to prepare its consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a comparative presentation may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, then eliminated in the consolidated figures shown below.
 
Condensed Balance Sheets
 
                                     
                (Millions of yen)              
   
Financial Services
   
Sony without
Financial Services
   
Consolidated
 
                                     
   
March 31
2018
   
June 30
2018
   
March 31
2018
   
June 30
2018
   
March 31
2018
   
June 30
2018
 
  ASSETS
                                   
Current assets:
                                   
Cash and cash equivalents
 
¥
393,133
   
¥
465,915
   
¥
1,193,196
   
¥
1,043,536
   
¥
1,586,329
   
¥
1,509,451
 
Marketable securities
   
1,176,601
     
1,239,131
   
   
     
1,176,601
     
1,239,131
 
Notes and accounts receivable, trade and contract assets
   
15,612
     
15,395
     
1,003,558
     
1,090,279
     
1,012,779
     
1,099,807
 
Inventories
 
   
     
692,937
     
692,633
     
692,937
     
692,633
 
Other receivables
   
60,819
     
56,118
     
130,393
     
173,723
     
190,706
     
229,440
 
Prepaid expenses and other current assets
   
137,539
     
150,719
     
379,893
     
369,790
     
516,744
     
519,843
 
 Total current assets
   
1,783,704
     
1,927,278
     
3,399,977
     
3,369,961
     
5,176,096
     
5,290,305
 
                                                 
Film costs
 
   
     
327,645
     
373,736
     
327,645
     
373,736
 
                                                 
Investments and advances
   
10,560,933
     
10,789,081
     
272,545
     
341,618
     
10,756,058
     
11,074,103
 
                                                 
Investments in Financial Services, at cost
 
   
     
133,514
     
153,968
   
   
 
                                                 
Property, plant and equipment
   
22,424
     
22,346
     
715,760
     
721,293
     
739,470
     
744,925
 
                                                 
Other assets:
                                               
Intangibles, net
   
34,622
     
34,710
     
492,546
     
493,089
     
527,168
     
527,799
 
Goodwill
   
7,225
     
7,225
     
523,267
     
534,589
     
530,492
     
541,814
 
Deferred insurance acquisition costs
   
586,670
     
594,867
   
   
     
586,670
     
594,867
 
Deferred income taxes
   
1,684
     
1,684
     
95,088
     
93,068
     
96,772
     
94,752
 
Other
   
33,267
     
33,621
     
295,650
     
291,162
     
325,167
     
321,040
 
     
663,468
     
672,107
     
1,406,551
     
1,411,908
     
2,066,269
     
2,080,272
 
                                                 
Total assets
 
¥
13,030,529
   
¥
13,410,812
   
¥
6,255,992
   
¥
6,372,484
   
¥
19,065,538
   
¥
19,563,341
 
                                                 
LIABILITIES AND EQUITY
                                               
Current liabilities:
                                               
Short-term borrowings
 
¥
433,119
   
¥
563,122
   
¥
288,496
   
¥
185,339
   
¥
721,615
   
¥
748,461
 
Notes and accounts payable, trade
 
   
     
468,550
     
582,918
     
468,550
     
582,918
 
Accounts payable, other and accrued expenses
   
37,479
     
30,176
     
1,477,875
     
1,386,324
     
1,514,433
     
1,415,620
 
Accrued income and other taxes
   
19,401
     
13,005
     
126,504
     
154,712
     
145,905
     
167,717
 
Deposits from customers in the banking business
   
2,159,246
     
2,206,087
   
   
     
2,159,246
     
2,206,087
 
Other
   
181,467
     
201,025
     
435,996
     
451,963
     
610,792
     
646,933
 
 Total current liabilities
   
2,830,712
     
3,013,415
     
2,797,421
     
2,761,256
     
5,620,541
     
5,767,736
 
                                                 
Long-term debt
   
205,373
     
205,240
     
421,817
     
369,597
     
623,451
     
571,094
 
Accrued pension and severance costs
   
33,062
     
33,405
     
361,442
     
358,936
     
394,504
     
392,341
 
Deferred income taxes
   
342,405
     
328,153
     
107,458
     
108,967
     
449,863
     
437,120
 
Future insurance policy benefits and other
   
5,221,772
     
5,337,847
   
   
     
5,221,772
     
5,337,847
 
Policyholders’ account in the life insurance business
   
2,820,702
     
2,896,641
   
   
     
2,820,702
     
2,896,641
 
Other
   
17,778
     
16,511
     
284,270
     
295,378
     
278,338
     
288,554
 
  Total liabilities
   
11,471,804
     
11,831,212
     
3,972,408
     
3,894,134
     
15,409,171
     
15,691,333
 
                                                 
Redeemable noncontrolling interest
 
   
     
9,210
     
8,219
     
9,210
     
8,219
 
                                                 
Equity:
                                               
Stockholders’ equity of Financial Services
   
1,557,062
     
1,577,912
   
   
   
   
 
Stockholders’ equity of Sony without Financial Services
 
   
     
2,173,128
     
2,383,913
   
   
 
Sony Corporation’s stockholders’ equity
 
   
   
   
     
2,967,366
     
3,223,952
 
Noncontrolling interests
   
1,663
     
1,688
     
101,246
     
86,218
     
679,791
     
639,837
 
  Total equity
   
1,558,725
     
1,579,600
     
2,274,374
     
2,470,131
     
3,647,157
     
3,863,789
 
                                                 
  Total liabilities and equity
 
¥
13,030,529
   
¥
13,410,812
   
¥
6,255,992
   
¥
6,372,484
   
¥
19,065,538
   
¥
19,563,341
 
 
 
F-6

Condensed Statements of Income
                                   
                                     
          (Millions of yen)      
Three months ended June 30
                                     
   
Financial Services
 
Sony without
 Financial Services
Consolidated
   
2017
 
2018
 
2017
 
2018
 
2017
 
2018
                                     
Financial services revenue
 
¥
303,160
 
¥
335,205
 
¥
 
¥
 
¥
301,360
 
¥
333,240
Net sales and operating revenue
   
       
1,557,692
   
1,622,334
   
1,556,753
   
1,620,384
     
303,160
   
335,205
   
1,557,692
   
1,622,334
   
1,858,113
   
1,953,624
                                     
Cost of sales
   
   
   
1,117,599
   
1,115,436
   
1,115,092
   
1,112,487
Selling, general and administrative
   
   
   
355,811
   
348,763
   
357,379
   
349,761
Financial services expenses
   
257,058
   
294,120
   
   
   
255,258
   
292,156
Other operating (income) expense, net
   
   
25
   
(26,111)
   
(350)
   
(26,111)
   
(325)
     
257,058
   
294,145
   
1,447,299
   
1,463,849
   
1,701,618
   
1,754,079
                                     
Equity in net income (loss) of affiliated companies
   
121
   
(479)
   
995
   
(4,060)
   
1,116
   
(4,539)
                                     
Operating income
   
46,223
   
40,581
   
111,388
   
154,425
   
157,611
   
195,006
                                     
Other income (expenses), net
   
   
(17)
   
6,356
   
133,541
   
(8,717)
   
117,080
                                     
Income before income taxes
   
46,223
   
40,564
   
117,744
   
287,966
   
148,894
   
312,086
                                     
Income taxes
   
13,456
   
11,532
   
41,040
   
63,691
   
54,496
   
75,222
                                     
Net Income
   
32,767
   
29,032
   
76,704
   
224,275
   
94,398
   
236,864
                                     
Less - Net income attributable to noncontrolling interests
   
50
   
46
   
1,372
   
(353)
   
13,527
   
10,417
                                     
Net income of Financial Services
 
¥
32,717
 
¥
28,986
 
¥
 
¥
 
¥
 
¥
                                     
Net income of Sony without Financial Services
 
¥
 
¥
 
¥
75,332
 
¥
224,628
 
¥
 
¥
                                     
Net income attributable to Sony Corporation's stockholders
 
¥
 
¥
 
¥
 
¥
 
¥
80,871
 
¥
226,447
 
 
F-7

Condensed Statements of Cash Flows
                                   
                                     
               
(Millions of yen)
             
   
Three months ended June 30
 
                                     
   
Financial Services
   
Sony without
Financial Services
   
Consolidated
 
   
2017
   
2018
   
2017
   
2018
   
2017
   
2018
 
Cash flows from operating activities:
                                   
Net income loss
 
¥
32,767
   
¥
29,032
   
¥
76,704
   
¥
224,275
   
¥
94,398
   
¥
236,864
 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                                               
Depreciation and amortization, including amortization of deferred insurance acquisition costs and contract costs
   
15,107
     
17,906
     
68,156
     
68,337
     
83,263
     
86,243
 
Amortization of film costs
 
   
     
79,318
     
58,001
     
79,318
     
58,001
 
Other operating (income) expense, net
 
     
25
     
(26,111
)
   
(350
)
   
(26,111
)
   
(325
)
(Gain) loss on marketable securities and securities investments, net
   
(39,105
)
   
(43,547
)
   
44
     
(114,778
)
   
(39,061
)
   
(158,325
)
Changes in assets and liabilities:
                                               
   (Increase) decrease in notes, accounts receivable, trade and contract assets
   
(390
)
   
217
     
(66,988
)
   
(45,734
)
   
(68,488
)
   
(46,041
)
   (Increase) decrease in inventories
 
   
     
(83,354
)
   
(7,206
)
   
(83,354
)
   
(7,206
)
   (Increase) decrease in film costs
 
   
     
(94,966
)
   
(82,734
)
   
(94,966
)
   
(82,734
)
   Increase (decrease) in notes and accounts payable, trade
 
   
     
134,162
     
109,783
     
134,162
     
109,783
 
   Increase (decrease) in future insurance policy benefits and other
   
137,960
     
173,976
   
   
     
137,960
     
173,976
 
   (Increase) decrease in deferred insurance acquisition costs
   
(21,617
)
   
(23,352
)
 
   
     
(21,617
)
   
(23,352
)
   (Increase) decrease in marketable securities held in the life insurance business
   
(12,944
)
   
(21,421
)
 
   
     
(12,944
)
   
(21,421
)
Other
   
(22,438
)
   
(18,837
)
   
(111,276
)
   
(210,426
)
   
(132,602
)
   
(228,692
)
        Net cash provided by (used in) operating activities
   
89,340
     
113,999
     
(24,311
)
   
(832
)
   
49,958
     
96,771
 
                                                 
Cash flows from investing activities:
                                               
Payments for purchases of fixed assets
   
(3,219
)
   
(5,722
)
   
(53,456
)
   
(67,466
)
   
(56,663
)
   
(73,179
)
Payments for investments and advances
   
(256,374
)
   
(267,217
)
   
(4,322
)
   
(3,916
)
   
(260,696
)
   
(271,133
)
Proceeds from sales or return of investments and collections of advances
   
94,201
     
64,074
     
2,363
     
83,102
     
96,564
     
147,176
 
Other
   
117
     
35
     
27,246
     
(260
)
   
27,362
     
(225
)
        Net cash provided by (used in) investing activities
   
(165,275
)
   
(208,830
)
   
(28,169
)
   
11,460
     
(193,433
)
   
(197,361
)
                                                 
Cash flows from financing activities:
                                               
Increase (decrease) in borrowings, net
   
135,508
     
130,449
     
2,325
     
(157,429
)
   
137,827
     
(26,980
)
Increase (decrease) in deposits from customers, net
   
49,827
     
63,798
   
   
     
49,827
     
63,798
 
Dividends paid
   
(23,921
)
   
(26,100
)
   
(12,688
)
   
(19,013
)
   
(12,687
)
   
(19,013
)
Other
   
(459
)
   
(534
)
   
22
     
(29,654
)
   
(9,293
)
   
(39,901
)
        Net cash provided by (used in) financing activities
   
160,955
     
167,613
     
(10,341
)
   
(206,096
)
   
165,674
     
(22,096
)
                                                 
Effect of exchange rate changes on cash and cash equivalents
 
   
     
601
     
44,311
     
601
     
44,311
 
                                                 
Net increase (decrease) in cash and cash equivalents, including restricted
   
85,020
     
72,782
     
(62,220
)
   
(151,157
)
   
22,800
     
(78,375
)
Cash and cash equivalents, including restricted, at beginning of the fiscal year
   
268,382
     
393,133
     
700,242
     
1,199,805
     
968,624
     
1,592,938
 
Cash and cash equivalents, including restricted, at end of the period
   
353,402
     
465,915
     
638,022
     
1,048,648
     
991,424
     
1,514,563
 
    Less - restricted cash and cash equivalents, included in other current assets and other assets
 
   
     
7,259
     
5,112
     
7,259
     
5,112
 
Cash and cash equivalents at end of the period
 
¥
353,402
   
¥
465,915
   
¥
630,763
   
¥
1,043,536
   
¥
984,165
   
¥
1,509,451
 
 
 
F-8

Going Concern Assumption
Not Applicable

 
Significant Changes in Shareholders' Equity
Not Applicable

Accounting Policies and Other Information

(Recently adopted accounting pronouncements)
Revenue from contracts with customers
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 addressing revenue recognition which superseded the previous revenue recognition requirements, including most industry-specific guidance.  The guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Sony adopted the updated guidance from fiscal year beginning April 1, 2018 on a modified retrospective method.  Under this method, Sony applied the new guidance to all open contracts existing as of April 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effect of the change.
Although the adoption of this new guidance did not have a material impact on Sony’s results of operations and financial position, there are several areas where Sony’s revenue recognition changed as compared with historical U.S. GAAP.  The more significant of these areas are as follows:
In the Pictures segment, (1) licensing revenue associated with certain renewals or extensions of existing agreements for motion pictures and television programming is recognized at a later point in time, which is when the licensee can use and benefit from the content, instead of when the agreement is renewed or extended, and (2) licensing revenue associated with minimum guarantees for symbolic intellectual property (e.g., brands, trademarks and logos) is recognized over the license term instead of at the inception of the license term.
In the MC segment, the incremental costs of obtaining contracts for the internet-related service business are recognized as assets and amortized to expense over the contract period.
In addition, the ASU changed the presentation of certain items in the consolidated financial statements, such as sales returns, with no impact to the timing of the recognition of revenue or expense.

Recognition and measurement of financial assets and financial liabilities
In January 2016, the FASB issued ASU 2016-01 amending various aspects of the recognition, measurement, presentation, and disclosure requirements for financial instruments.  The changes mainly relate to the requirement to measure equity investments in unconsolidated subsidiaries, other than those accounted for under the equity method of accounting, at fair value with changes in fair value recognized in earnings.  However, this ASU permits entities to elect to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.  This ASU is effective for Sony as of April 1, 2018.  As a result of the adoption of this ASU, Sony reclassified 15,526 million yen in the unrealized gains and losses, net of tax, on equity securities previously classified as available-for-sale, from accumulated other comprehensive income to retained earnings.  In addition, changes in value due to the revaluation of equity securities held in the Financial Services segment at the end of the period are recorded in financial services revenue, and changes in value due to the revaluation of equity securities held in all segments other than the Financial Services segment are recorded in gain on equity securities, net in the consolidated statement of income.
F-9


Intra-entity transfers of assets other than inventory
In October 2016, the FASB issued ASU 2016-16, which amends the accounting for income taxes.  This update requires recognition of the income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs.  Under historical U.S. GAAP, the income tax consequences for asset transfers other than inventory could not be recognized until the asset was sold to a third party.  This ASU is required to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.  This ASU is effective for Sony as of April 1, 2018.  The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.

Changes to the opening balances resulting from the adoption of the above new guidance were as follows:
 
 
Yen in millions
 
 
 
March 31,
2018
   
Impact of Adoption
   
April 1,
2018
 
 
ASU2014-09
   
ASU2016-01
   
ASU2016-16
 
ASSETS
                             
Current assets:
                             
Notes and accounts receivable, trade
   
1,061,442
     
(2,993
)
   
-
     
-
     
1,058,449
 
Allowance for doubtful accounts and sales returns *
   
(48,663
)
   
25,114
     
-
     
-
     
(23,549
)
Inventories
   
692,937
     
(12,404
)
   
-
     
-
     
680,533
 
Other receivables
   
190,706
     
9,628
     
-
     
-
     
200,334
 
Prepaid expenses and other current assets
   
516,744
     
(5,520
)
   
-
     
-
     
511,224
 
Film costs
   
327,645
     
7,647
     
-
     
-
     
335,292
 
Other assets:
                                       
Deferred income taxes
   
96,772
     
(326
)
   
-
     
-
     
96,446
 
Other
   
325,167
     
1,068
     
-
     
-
     
326,235
 
Total assets
   
19,065,538
     
22,214
     
-
     
-
     
19,087,752
 
LIABILITIES
                                       
Current liabilities:
                                       
Accounts payable, other and accrued expenses
   
1,514,433
     
(3,290
)
   
-
     
-
     
1,511,143
 
Other *
   
610,792
     
31,777
     
-
     
-
     
642,569
 
Deferred income taxes
   
449,863
     
-
     
-
     
(14,680
)
   
435,183
 
Other
   
278,338
     
10,525
     
-
     
-
     
288,863
 
Total liabilities
   
15,409,171
     
39,012
     
-
     
(14,680
)
   
15,433,503
 
EQUITY
                                       
Retained earnings
   
1,440,387
     
(16,798
)
   
15,526
     
9,248
     
1,448,363
 
Accumulated other comprehensive income
   
(616,746
)
   
-
     
(15,526
)
   
-
     
(632,272
)
Noncontrolling interests
   
679,791
     
-
     
-
     
5,432
     
685,223
 
Total equity
   
3,647,157
     
(16,798
)
   
-
     
14,680
     
3,645,039
 
Total liabilities and equity
   
19,065,538
     
22,214
     
-
     
-
     
19,087,752
 
* Under the new guidance, Sony presents sales returns as a liability instead of as a contra-asset allowance.  Accordingly, Sony changed the presentation from “Allowance for doubtful accounts and sales returns” to “Allowance for doubtful accounts” on the consolidated  balance sheet.

Restricted Cash
In November 2016, the FASB issued ASU 2016-18, which requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents in the statement of cash flows.  This ASU also requires entities to disclose how the statement of cash flows that includes restricted cash and restricted cash equivalents with cash and cash equivalents reconciles to the balance sheet.  This ASU is effective for Sony as of April 1, 2018.  This ASU is required to be applied on a retrospective basis.  The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.
F-10

 
Presentation of net periodic pension and postretirement benefit costs
In March 2017, the FASB issued ASU 2017-07, which requires separate presentation of service costs and other components of net benefit costs.  The service costs will only be presented with other employee compensation costs in operating income or capitalized, while the other components of net benefit costs will be presented outside of operating income, and will not be eligible for capitalization.  This ASU is effective for Sony as of April 1, 2018.  This ASU is required to be applied on a retrospective basis for the presentation of service costs and other components of net benefit costs, and on a prospective basis for the capitalization of only the service costs component of net benefit costs.  The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.


(Number of Consolidated Subsidiaries and Affiliated Companies)
As of June 30, 2018, Sony had 1,316 consolidated subsidiaries (including variable interest entities) and 114 affiliated companies accounted for under the equity method.


(Weighted-average Number of Outstanding Shares Used for the Computation of EPS of Common Stock)

   
(Thousands of shares)
 
   
Three months ended June 30
 
Net income attributable to Sony Corporation’s stockholders
 
2017
   
2018
 
— Basic
   
1,262,920
     
1,267,499
 
— Diluted
   
1,289,882
     
1,295,434
 

The dilutive effect in the weighted-average number of outstanding shares for the three months ended June 30, 2017 and 2018 primarily resulted from convertible bonds which were issued in July 2015.


(Segmentation)
The G&NS segment includes network services businesses, the manufacture and sales of home gaming products and production and sales of software.  The Music segment includes the Recorded Music, Music Publishing and Visual Media and Platform businesses.  The Pictures segment includes the Motion Pictures, Television Productions and Media Networks businesses.  The HE&S segment includes Televisions as well as Audio and Video businesses.  The IP&S segment includes the Still and Video Cameras business.  The MC segment includes the manufacture and sales of mobile phones and Internet-related service businesses.  The Semiconductors segment includes the image sensors business.  The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market and a bank business in Japan.  All Other consists of various operating activities, including the overseas disc manufacturing and recording media businesses.  Sony’s products and services are generally unique to a single operating segment.

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


(Reclassifications)
Certain reclassifications of the financial statements and accompanying footnotes for the three months ended June 30, 2017 have been made to conform to the presentation for the three months ended June 30, 2018.
F-11

 
(Spotify Technology S.A. Shares)
On April 3, 2018, Spotify Technology S.A. (“Spotify”) was publicly listed for trading on the New York Stock Exchange.  Sony owned 5.707% of Spotify’s shares at the time of the public listing.
During the first quarter of the fiscal year ending March 31, 2019, Sony sold a portion of the shares for aggregate consideration of 82,616 million yen (768 million U.S. dollars) in cash proceeds.  The sale of shares, offset by costs to be paid to its artists and distributed labels and other transaction costs which directly related to the gains recognized from the Spotify shares, resulted in a net pre-tax realized gain of 53,870 million yen (501 million U.S. dollars) recorded in gain on equity securities, net in the consolidated statement of income.
The remaining shares retained as of June 30, 2018 have a gross fair value of 95,275 million yen (862 million U.S. dollars), and resulted in a pre-tax unrealized gain, net of costs to be paid to its artists and distributed labels and other costs which directly related to the gains recognized from the Spotify shares, of 58,908 million yen (547 million U.S. dollars) recorded in gain on equity securities, net in the consolidated statement of income.

(Acquisition of EMI Music Publishing)
In May 2018, Sony Corporation of America (“SCA”), Sony’s wholly-owned subsidiary, reached an agreement with the investor consortium led by Mubadala Investment Company (the “Mubadala Consortium”) on the sale of the Mubadala Consortium’s approximately 60% equity interest in D.H. Publishing, L.P. (“EMI”), which owns and manages EMI Music Publishing to SCA.  Sony expects to pay total cash consideration of approximately 2.3 billion U.S. dollars in connection with such acquisition as well as assume EMI’s existing gross indebtedness, which was approximately 1.359 billion U.S. dollars as of March 31, 2018.
Subsequent to the end of the first quarter of the fiscal year ending March 31, 2019, in July 2018, SCA acquired from the Estate of Michael Jackson (the “Estate”) the 25.1% interest in Nile Acquisition LLC (“Nile”) held by the Estate. A total of 287.5 million U.S. dollars was paid to the Estate for the acquisition, which payment also includes reimbursement of various expenses and costs related to the acquisition.   As a result of the acquisition, Nile will become a wholly-owned subsidiary of Sony.  Accordingly, since Nile owned an approximately 40% equity interest in EMI, EMI will become a wholly-owned subsidiary of Sony upon the completion of SCA’s acquisition of the Mubadala Consortium’s equity interest in EMI.
F-12

Outlook for the Fiscal Year Ending March 31, 2019

The forecast for consolidated results for the fiscal year ending March 31, 2019, as announced on April 27, 2018, has been revised as follows:
 
    (Billions of yen)                    
    March 31, 2018     April     July     Change from     
    Results     Forecast     Forecast     April Forecast  
Sales and operating revenue
 
 
¥8,544.0
   
 
¥8,300
   
 
¥8,600
   
 
+¥300 billion
     
+3.6%
 
Operating income
   
734.9
     
670
     
670
             
Income before income taxes
   
699.0
     
735
     
760
   
 
+¥25 billion
     
+3.4%
 
Net income attributable to Sony Corporation’s stockholders
   
490.8
     
480
     
500
   
 
+¥20 billion
     
+4.2%
 

Assumed foreign exchange rates are the following:

  Assumed foreign 
(For your reference)
  exchange rates for the nine months Assumed foreign exchange rates for the fiscal year ending 
 
ending March 31, 2019 
March 31, 2019 at the time of the April forecast
1 U.S. dollar
approximately 110 yen
approximately 105 yen
1 Euro
approximately 127 yen
approximately 125 yen

Consolidated sales and operating revenue (“sales”) for the fiscal year ending March 31, 2019 are expected to be higher than the April forecast primarily due to a revision in the assumed foreign exchange rates for the remainder of the current fiscal year to reflect the depreciation of the yen, as well as higher-than-expected sales primarily in the Game & Network Services (“G&NS”) segment, partially offset by lower-than-expected sales in the Mobile Communications (“MC”) segment.

Consolidated operating income is expected to remain unchanged from the April forecast due to an allocation for contingencies, including market competition for the smartphone business in the MC segment discussed below, incorporated in All Other, Corporate and elimination, despite the impact of the above-mentioned revision in the assumed foreign exchange rates and expected increases in operating income, primarily in the G&NS segment.

Restructuring charges for the Sony Group are expected to be approximately 22 billion yen in the fiscal year ending March 31, 2019, which remains unchanged from the April forecast, compared to 22.4 billion yen in the fiscal year ended March 31, 2018.  Restructuring charges are recorded as an operating expense and are included in the forecast for operating income.

Income before income taxes is expected to be 760 billion yen, which is higher than the April forecast.  This expected increase is primarily due to a higher-than-expected gain on equity securities, net, for Spotify Technology S.A. shares, as well as an improvement in foreign exchange loss, net.

Net income attributable to Sony Corporation’s stockholders is expected to be higher than the April forecast due to the expected increase in income before income taxes, partially offset by an expected increase in tax expenses.

1

The forecast for each business segment for the fiscal year ending March 31, 2019 has been revised as follows:

   
(Billions of yen)
 
   
March 31, 2018
Results
   
April
Forecast
   
July
Forecast
 
Game & Network Services (G&NS)
                 
Sales and operating revenue
 
¥
1,943.8
   
¥
1,900
   
¥
2,180
 
Operating income
   
177.5
     
190
     
250
 
Music
                       
Sales and operating revenue
   
800.0
     
750
     
760
 
Operating income
   
127.8
     
112
     
115
 
Pictures
                       
Sales and operating revenue
   
1,011.1
     
960
     
990
 
Operating income
   
41.1
     
42
     
44
 
Home Entertainment & Sound (HE&S)
                       
Sales and operating revenue
   
1,222.7
     
1,150
     
1,150
 
Operating income
   
85.8
     
86
     
86
 
Imaging Products & Solutions (IP&S)
                       
Sales and operating revenue
   
655.9
     
660
     
670
 
Operating income
   
74.9
     
75
     
78
 
Mobile Communications (MC)
                       
Sales and operating revenue
   
723.7
     
640
     
610
 
Operating loss
   
(27.6
)
   
(15
)
   
(30
)
Semiconductors
                       
Sales and operating revenue
   
850.0
     
870
     
890
 
Operating income
   
164.0
     
100
     
120
 
Financial Services
                       
Financial services revenue
   
1,228.4
     
1,270
     
1,270
 
Operating income
   
178.9
     
170
     
170
 
All Other, Corporate and elimination
                       
Operating loss
   
(87.6
)
   
(90
)
   
(163
)
Consolidated
                       
Sales and operating revenue
   
8,544.0
     
8,300
     
8,600
 
Operating income
   
734.9
     
670
     
670
 

Game & Network Services
Sales are expected to be significantly higher than the April forecast primarily due to higher-than-expected PlayStation®4 (“PS4”) software sales including sales through the network, the impact of foreign exchange rates, as well as an expected increase in PS4 hardware unit sales.  The forecast for operating income is expected to be significantly higher than the April forecast primarily due to the impact of the above-mentioned increase in sales.

Music
Sales are expected to be higher than the April forecast primarily due to the impact of foreign exchange rates.  Operating income is expected to be higher than the April forecast primarily due to an expected positive impact from cost reductions and the positive impact of foreign exchange rates, partially offset by the recording in the first quarter of the current fiscal year of equity in net loss for EMI Music Publishing (“EMI”) due to expenses incurred for warrant and management equity plans.

During the first quarter of the current fiscal year, Sony announced that it has entered into an agreement to acquire the approximately 60% interest in EMI owned by the consortium led by Mubadala Investment Company.  The closing of this transaction is subject to certain closing conditions, including regulatory approvals.  Upon closing of this transaction, Sony expects to record in operating income a non-cash step-up gain of approximately 100 billion yen for the equity interest in EMI it currently owns.  The step-up gain and the consolidation of EMI have not been included in the July forecast as the timing of the closing cannot presently be determined.

Pictures
Both sales and operating income are expected to be higher than the April forecast primarily due to the impact of foreign exchange rates.

2

Imaging Products & Solutions
Both sales and operating income are expected to be higher than the April forecast primarily due to the impact of foreign exchange rates.

Mobile Communications
Sales are expected to be lower than the April forecast due to an expected decrease in smartphone unit sales mainly in Europe.  Operating loss is expected to be higher than the April forecast primarily due to the impact of the above-mentioned decrease in sales, as well as the negative impact of foreign exchange rates, partially offset by expected reductions in operating costs.

The underperformance in the first quarter of the current fiscal year and the downward revision to the full-year forecast for the MC segment resulted from severe competition in the smartphone market, which could intensify in the future.  Sony is aware that this severe competition could continue to adversely affect the smartphone business in the MC segment, and in light of these developments, has begun to assess the possible impact on its smartphone sales projections for the second half of the current fiscal year, as well as possible countermeasures, should competition intensify further.  It is possible that this assessment might result in further downward revisions to the results forecast for the MC segment.

Semiconductors
Both sales and operating income are expected to be higher than the April forecast primarily due to the impact of foreign exchange rates.

The forecasts for sales and operating income for the HE&S and Financial Services segments remain unchanged from the April forecast.

The effects of future gains and losses on investments held by the Financial Services segment due to market fluctuations have not been incorporated within the above forecast as it is difficult for Sony to predict market trends in the future.  Accordingly, future market fluctuations could further impact the current forecast.

The above forecast is based on management’s current expectations and is subject to uncertainties and changes in circumstances.  Actual results may differ materially from those included in this forecast due to a variety of factors.  See “Cautionary Statement” below.
 
Notes about Financial Performance of the Music, Pictures and Financial Services segments

The Music segment results include the yen-translated results of Sony Music Entertainment and Sony/ATV Music Publishing, both U.S.-based operations which aggregate the results of their worldwide subsidiaries on a U.S. dollar basis, and the results of Sony Music Entertainment (Japan) Inc., a Japan-based music company which aggregates its results in yen.  The segment also includes equity in net income (loss) for EMI, an affiliated company accounted for under the equity method for which Sony records 39.8% of EMI’s net income in the segment operating income.

The results presented in Pictures are a yen-translation of the results of Sony Pictures Entertainment Inc., a U.S.-based operation that aggregates the results of its worldwide subsidiaries on a U.S. dollar basis.

The Financial Services segment results include Sony Financial Holdings Inc. (SFH) and SFHs 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.

3

Cautionary Statement
Statements made in this release with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to:
 
(i)
Sony’s ability to maintain product quality and customer satisfaction with its products and services;
(ii)
Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including image sensors, game and network platforms, smartphones and televisions, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing customer preferences;
(iii)
Sony’s ability to implement successful hardware, software, and content integration strategies, and to develop and implement successful sales and distribution strategies in light of new technologies and distribution platforms;
(iv)
the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures, investments, capital expenditures, restructurings and other strategic initiatives;
(v)
changes in laws, regulations and government policies in the markets in which Sony and its third-party suppliers, service providers and business partners operate, including those related to taxation, as well as growing consumer focus on corporate social responsibility;
(vi)
Sony’s continued ability to identify the products, services and market trends with significant growth potential, to devote sufficient resources to research and development, to prioritize investments and capital expenditures correctly and to recoup its investments and capital expenditures, including those required for technology development and product capacity;
(vii)
Sony’s reliance on external business partners, including for the procurement of parts, components, software and network services for its products or services, the manufacturing, marketing and distribution of its products, and its other business operations;
(viii)
the global economic and political environment in which Sony operates and the economic and political conditions in Sony’s markets, particularly levels of consumer spending;
(ix)
Sony’s ability to meet operational and liquidity needs as a result of significant volatility and disruption in the global financial markets or a ratings downgrade;
(x)
Sony’s ability to forecast demands, manage timely procurement and control inventories;
(xi)
foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in which Sony’s assets, liabilities and operating results are denominated;
(xii)
Sony’s ability to recruit, retain and maintain productive relations with highly skilled personnel;
(xiii)
Sony’s ability to prevent unauthorized use or theft of intellectual property rights, to obtain or renew licenses relating to intellectual property rights and to defend itself against claims that its products or services infringe the intellectual property rights owned by others;
(xiv)
the impact of changes in interest rates and unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment;
(xv)
shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment;
(xvi)
risks related to catastrophic disasters or similar events;
(xvii)
the ability of Sony, its third-party service providers or business partners to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sony’s business information and the personally identifiable information of its employees and customers, potential business disruptions or financial losses; and
(xviii)
the outcome of pending and/or future legal and/or regulatory proceedings.
 
Risks and uncertainties also include the impact of any future events with material adverse impact. Important information regarding risks and uncertainties is also set forth in Sony’s most recent Form 20-F, which is on file with the U.S. Securities and Exchange Commission.
 
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