SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

For the month of October 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: October 30, 2018

List of materials

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

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


October 30, 2018
Sony Corporation


Quarterly Financial Statements (Unaudited)
F-1
   
Consolidated Balance Sheets
F-1
Consolidated Statements of Income (Three months ended September 30)
F-2
Consolidated Statements of Comprehensive Income (Three months ended September 30)
F-2
Consolidated Statements of Income (Six months ended September 30)
F-3
Consolidated Statements of Comprehensive Income (Six months ended September 30)
F-3
Consolidated Statements of Cash Flows (Six months ended September 30)
F-4
Notes to Consolidated Financial Statements
F-5
-Business Segment Information
F-5
-Going Concern Assumption
F-12
-Significant Changes in Shareholders’ Equity
F-12
-Accounting Policies and Other Information
F-12
   
Outlook for the Fiscal Year Ending March 31, 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
   
September 30
   
Change from
 
ASSETS
 
2018
   
2018
   
March 31, 2018
 
Current assets:
                 
Cash and cash equivalents
 
¥
1,586,329
   
¥
1,540,779
   
¥
-45,550
 
Marketable securities
   
1,176,601
     
1,335,735
     
+159,134
 
Notes and accounts receivable, trade and contract assets
   
1,061,442
     
1,290,317
     
+228,875
 
Allowance for doubtful accounts
   
(48,663
)
   
(24,349
)
   
+24,314
 
Inventories
   
692,937
     
814,639
     
+121,702
 
Other receivables
   
190,706
     
305,880
     
+115,174
 
                         
Prepaid expenses and other current assets
   
516,744
     
480,714
     
-36,030
 
 Total current assets
   
5,176,096
     
5,743,715
     
+567,619
 
                         
Film costs
   
327,645
     
416,527
     
+88,882
 
                         
Investments and advances:
                       
Affiliated companies
   
157,389
     
171,798
     
+14,409
 
Securities investments and other
   
10,598,669
     
11,133,787
     
+535,118
 
     
10,756,058
     
11,305,585
     
+549,527
 
                         
Property, plant and equipment:
                       
Land
   
84,358
     
84,549
     
+191
 
Buildings
   
655,434
     
666,852
     
+11,418
 
Machinery and equipment
   
1,798,722
     
1,852,401
     
+53,679
 
Construction in progress
   
38,295
     
29,245
     
-9,050
 
     
2,576,809
     
2,633,047
     
+56,238
 
Less-Accumulated depreciation
   
1,837,339
     
1,891,203
     
+53,864
 
     
739,470
     
741,844
     
+2,374
 
                         
Other assets:
                       
Intangibles, net
   
527,168
     
522,616
     
-4,552
 
Goodwill
   
530,492
     
551,058
     
+20,566
 
Deferred insurance acquisition costs
   
586,670
     
605,989
     
+19,319
 
Deferred income taxes
   
96,772
     
98,652
     
+1,880
 
Other
   
325,167
     
339,464
     
+14,297
 
     
2,066,269
     
2,117,779
     
+51,510
 
  Total assets
 
¥
19,065,538
   
¥
20,325,450
   
¥
+1,259,912
 
                         
                         
LIABILITIES AND EQUITY
                       
Current liabilities:
                       
Short-term borrowings
 
¥
496,093
   
¥
628,528
   
¥
+132,435
 
Current portion of long-term debt
   
225,522
     
166,423
     
-59,099
 
Notes and accounts payable, trade
   
468,550
     
781,338
     
+312,788
 
Accounts payable, other and accrued expenses
   
1,514,433
     
1,549,389
     
+34,956
 
Accrued income and other taxes
   
145,905
     
197,721
     
+51,816
 
Deposits from customers in the banking business
   
2,159,246
     
2,252,480
     
+93,234
 
Other
   
610,792
     
655,871
     
+45,079
 
 Total current liabilities
   
5,620,541
     
6,231,750
     
+611,209
 
                         
Long-term debt
   
623,451
     
510,165
     
-113,286
 
Accrued pension and severance costs
   
394,504
     
388,955
     
-5,549
 
Deferred income taxes
   
449,863
     
430,704
     
-19,159
 
Future insurance policy benefits and other
   
5,221,772
     
5,452,484
     
+230,712
 
Policyholders’ account in the life insurance business
   
2,820,702
     
2,998,376
     
+177,674
 
Other
   
278,338
     
291,417
     
+13,079
 
  Total liabilities
   
15,409,171
     
16,303,851
     
+894,680
 
                         
Redeemable noncontrolling interest
   
9,210
     
8,442
     
-768
 
                         
Equity:
                       
Sony Corporation’s stockholders’ equity:
                       
Common stock
   
865,678
     
871,925
     
+6,247
 
Additional paid-in capital
   
1,282,577
     
1,264,863
     
-17,714
 
Retained earnings
   
1,440,387
     
1,828,777
     
+388,390
 
Accumulated other comprehensive income
   
(616,746
)
   
(595,900
)
   
+20,846
 
Treasury stock, at cost
   
(4,530
)
   
(4,627
)
   
-97
 
     
2,967,366
     
3,365,038
     
+397,672
 
                         
Noncontrolling interests
   
679,791
     
648,119
     
-31,672
 
  Total equity
   
3,647,157
     
4,013,157
     
+366,000
 
  Total liabilities and equity
 
¥
19,065,538
   
¥
20,325,450
   
¥
+1,259,912
 
 
F-1

Consolidated Statements of Income
                   
 
 
 
(Millions of yen, except per share amounts)
 
 
 
 
Three months ended September 30
 
 
 
 
2017
   
2018
   
Change
 
Sales and operating revenue:
                   
Net sales
 
¥
1,764,916
   
¥
1,809,739
   
¥
+44,823
 
Financial services revenue
   
277,434
     
351,493
     
+74,059
 
Other operating revenue
   
20,181
     
21,528
     
+1,347
 
     
2,062,531
     
2,182,760
     
+120,229
 
Costs and expenses:
                       
Cost of sales
   
1,234,646
     
1,222,744
     
-11,902
 
Selling, general and administrative
   
386,279
     
397,129
     
+10,850
 
Financial services expenses
   
240,305
     
312,334
     
+72,029
 
Other operating (income) expense, net
   
(901
)
   
13,383
     
+14,284
 
     
1,860,329
     
1,945,590
     
+85,261
 
                         
Equity in net income of affiliated companies
   
2,026
     
2,341
     
+315
 
                         
Operating income
   
204,228
     
239,511
     
+35,283
 
                         
Other income:
                       
Interest and dividends
   
4,252
     
4,571
     
+319
 
Gain on equity securities, net
 
 
     
9,935
     
+9,935
 
Other
   
511
     
1,461
     
+950
 
      4,763        15,967        +11,204   
Other expenses:
                       
Interest
   
2,730
     
3,876
     
+1,146
 
Foreign exchange loss, net
   
6,298
     
4,922
     
-1,376
 
Other
   
1,398
     
282
     
-1,116
 
     
10,426
     
9,080
     
-1,346
 
                         
Income before income taxes
   
198,565
     
246,398
     
+47,833
 
                         
Income taxes
   
55,751
     
59,268
     
+3,517
 
Net income
   
142,814
     
187,130
     
+44,316
 
                         
Less - Net income attributable to noncontrolling interests
   
11,962
     
14,129
     
+2,167
 
                         
Net income attributable to Sony Corporation’s stockholders
 
¥
130,852
   
¥
173,001
   
¥
+42,149
 
                         
Per share data:
                       
Net income attributable to Sony Corporation’s stockholders
                       
   — Basic
 
¥
103.57
   
¥
136.38
   
¥
+32.81
 
   — Diluted
   
101.35
     
133.43
     
+32.08
 
 
Consolidated Statements of Comprehensive Income
                       
 
 
 
(Millions of yen)
 
 
 
 
Three months ended September 30
 
     
2017
     
2018
   
Change
 
                         
Net income
 
¥
142,814
   
¥
187,130
   
¥
+44,316
 
                         
Other comprehensive income, net of tax –
                       
Unrealized losses on securities
   
(1,469
)
   
(24,337
)
   
-22,868
 
Unrealized gains (losses) on derivative instruments
   
594
     
(563
)
   
-1,157
 
Pension liability adjustment
   
2,339
     
2,467
     
+128
 
Foreign currency translation adjustments
   
16,502
     
32,168
     
+15,666
 
Total comprehensive income
   
160,780
     
196,865
     
+36,085
 
 Less - Comprehensive income attributableto noncontrolling interests
   
13,178
     
5,314
     
-7,864
 
Comprehensive income attributableto Sony Corporation’s stockholders
 
¥
147,602
   
¥
191,551
   
¥
+43,949
 
 
F-2

Consolidated Statements of Income
                 
   
 
(Millions of yen, except per share amounts)
 
   
 
Six months ended September 30
 
   
 
2017
   
2018
   
Change
 
Sales and operating revenue:
                   
Net sales
 
¥
3,293,559
   
¥
3,411,934
   
¥
+118,375
 
Financial services revenue
   
578,794
     
684,733
     
+105,939
 
Other operating revenue
   
48,291
     
39,717
     
-8,574
 
     
3,920,644
     
4,136,384
     
+215,740
 
Costs and expenses:
                       
Cost of sales
   
2,349,738
     
2,335,231
     
-14,507
 
Selling, general and administrative
   
743,658
     
746,890
     
+3,232
 
Financial services expenses
   
495,563
     
604,490
     
+108,927
 
Other operating (income) expense, net
   
(27,012
)
   
13,058
     
+40,070
 
     
3,561,947
     
3,699,669
     
+137,722
 
                         
Equity in net income (loss) of affiliated companies
   
3,142
     
(2,198
)
   
-5,340
 
                         
Operating income
   
361,839
     
434,517
     
+72,678
 
                         
Other income:
                       
Interest and dividends
   
13,037
     
9,305
     
-3,732
 
Gain on equity securities, net
 
 
     
124,714
     
+124,714
 
Other
   
1,644
     
2,194
     
+550
 
     
14,681
     
136,213
     
+121,532
 
                         
Other expenses:
                       
Interest
   
7,246
     
7,194
     
-52
 
Foreign exchange loss, net
   
19,266
     
3,911
     
-15,355
 
Other
   
2,549
     
1,141
     
-1,408
 
     
29,061
     
12,246
     
-16,815
 
                         
Income before income taxes
   
347,459
     
558,484
     
+211,025
 
                         
Income taxes
   
110,247
     
134,490
     
+24,243
 
                         
Net income
   
237,212
     
423,994
     
+186,782
 
                         
Less - Net income attributable to noncontrolling interests
   
25,489
     
24,546
     
-943
 
 
                       
Net income attributable to Sony Corporation’s stockholders
 
¥
211,723
   
¥
399,448
   
¥
+187,725
 
                         
Per share data:
                       
Net income attributable to Sony Corporation’s stockholders
                       
   — Basic
 
¥
167.61
   
¥
315.02
   
¥
+147.41
 
   — Diluted
   
164.06
     
308.17
     
+144.11
 
 
Consolidated Statements of Comprehensive Income
                       
   
 
(Millions of yen)
 
   
 
Six months ended September 30
 
     
2017
     
2018
   
Change
 
                         
Net income
 
¥
237,212
   
¥
423,994
   
¥
+186,782
 
                         
Other comprehensive income, net of tax –
                       
Unrealized losses on securities
   
(4,658
)
   
(21,066
)
   
-16,408
 
Unrealized gains on derivative instruments
   
229
     
915
     
+686
 
Pension liability adjustment
   
4,644
     
4,743
     
+99
 
Foreign currency translation adjustments
   
30,087
     
40,465
     
+10,378
 
Total comprehensive income
   
267,514
     
449,051
     
+181,537
 
Less - Comprehensive income attributable to noncontrolling interests
   
27,356
     
13,231
     
-14,125
 
Comprehensive income attributable to Sony Corporation’s stockholders
 
¥
240,158
   
¥
435,820
   
¥
+195,662
 


F-3

Consolidated Statements of Cash Flows
           
   
(Millions of yen)
 
   
Six months ended September 30
 
   
2017
   
2018
 
Cash flows from operating activities:
           
Net income
 
¥
237,212
   
¥
423,994
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization, including amortization of deferred insurance acquisition costs and contract costs
   
169,962
     
171,826
 
Amortization of film costs
   
160,142
     
133,892
 
Accrual for pension and severance costs, less payments
   
2,583
     
(5,310
)
Other operating (income) expense, net
   
(27,012
)
   
13,058
 
Gain on securities investments, net (other than financial services business)
   
(167
)
   
(124,717
)
Gain on marketable securities and securities investments held in the financial services business, net
   
(47,715
)
   
(109,791
)
Deferred income taxes
   
8,160
     
(3,350
)
Equity in net (income) loss of affiliated companies, net of dividends
   
(1,312
)
   
4,559
 
Changes in assets and liabilities:
               
   Increase in notes, accounts receivable, trade and contract assets
   
(197,747
)
   
(185,855
)
   Increase in inventories
   
(272,386
)
   
(118,255
)
   Increase in film costs
   
(188,281
)
   
(190,494
)
   Increase in notes and accounts payable, trade
   
309,160
     
302,979
 
   Increase in accrued income and other taxes
   
49,662
     
62,075
 
   Increase in future insurance policy benefits and other
   
258,762
     
368,871
 
   Increase in deferred insurance acquisition costs
   
(43,394
)
   
(47,090
)
   Increase in marketable securities held in the life insurance business
   
(44,002
)
   
(43,949
)
   Increase in other current assets
   
(125,652
)
   
(72,246
)
   Increase (decrease) in other current liabilities
   
23,571
     
(43,719
)
Other
   
(6,190
)
   
(125,649
)
        Net cash provided by operating activities
   
265,356
     
410,829
 
                 
Cash flows from investing activities:
               
Payments for purchases of fixed assets
   
(130,254
)
   
(154,819
)
Proceeds from sales of fixed assets
   
6,760
     
11,355
 
Payments for investments and advances by financial services business
   
(461,046
)
   
(563,301
)
Payments for investments and advances (other than financial services business)
   
(10,969
)
   
(25,373
)
Proceeds from sales or return of investments and collections of advances by financial services business
   
152,561
     
140,969
 
Proceeds from sales or return of investments and collections of advances (other than financial services business)
   
4,219
     
1,996
 
Proceeds from sales of businesses
   
18,684
     
 
Proceeds related to sales of Spotify Technology S.A. Shares
   
     
82,467
 
Other
   
8,199
     
(21,295
)
        Net cash used in investing activities
   
(411,846
)
   
(528,001
)
                 
Cash flows from financing activities:
               
Proceeds from issuance of long-term debt
   
72,430
     
50,958
 
Payments of long-term debt
   
(16,299
)
   
(229,504
)
Increase in short-term borrowings, net
   
55,904
     
133,248
 
Increase in deposits from customers in the financial services business, net
   
88,344
     
132,628
 
Dividends paid
   
(12,649
)
   
(18,992
)
Payment for purchase of Nile Acquisition LLC shares from noncontrolling interests
   
     
(32,041
)
Other
   
(8,207
)
   
(36,567
)
        Net cash provided by (used in) financing activities
   
179,523
     
(270
)
                 
Effect of exchange rate changes on cash and cash equivalents, including restricted
   
6,650
     
70,344
 
                 
Net increase (decrease) in cash and cash equivalents, including restricted
   
39,683
     
(47,098
)
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
   
1,008,307
     
1,545,840
 
                 
Less - restricted cash and cash equivalents, included in other current assets and other assets
   
7,475
     
5,061
 
Cash and cash equivalents at end of the period
 
¥
1,000,832
   
¥
1,540,779
 
 
F-4

Notes to Consolidated Financial Statements
                 
Business Segment Information
                 
(Business Segments)
                 
   
(Millions of yen)
 
   
Three months ended September 30
 
Sales and operating revenue
 
2017
   
2018
   
Change
 
Game & Network Services
                 
Customers
 
¥
414,255
   
¥
535,754
   
¥
+121,499
 
Intersegment
   
18,949
     
14,311
     
-4,638
 
Total
   
433,204
     
550,065
     
+116,861
 
Music
                       
Customers
   
202,837
     
200,294
     
-2,543
 
Intersegment
   
3,729
     
3,562
     
-167
 
Total
   
206,566
     
203,856
     
-2,710
 
Pictures
                       
Customers
   
243,738
     
242,021
     
-1,717
 
Intersegment
   
265
     
(1,150
)
   
-1,415
 
Total
   
244,003
     
240,871
     
-3,132
 
Home Entertainment & Sound
                       
Customers
   
300,770
     
274,496
     
-26,274
 
Intersegment
   
163
     
442
     
+279
 
Total
   
300,933
     
274,938
     
-25,995
 
Imaging Products & Solutions
                       
Customers
   
155,170
     
161,623
     
+6,453
 
Intersegment
   
1,550
     
2,268
     
+718
 
Total
   
156,720
     
163,891
     
+7,171
 
Mobile Communications
                       
Customers
   
169,818
     
114,886
     
-54,932
 
Intersegment
   
2,223
     
2,935
     
+712
 
Total
   
172,041
     
117,821
     
-54,220
 
Semiconductors
                       
Customers
   
193,407
     
222,924
     
+29,517
 
Intersegment
   
34,956
     
31,522
     
-3,434
 
Total
   
228,363
     
254,446
     
+26,083
 
Financial Services
                       
Customers
   
277,434
     
351,493
     
+74,059
 
Intersegment
   
1,790
     
1,960
     
+170
 
Total
   
279,224
     
353,453
     
+74,229
 
All Other
                       
Customers
   
95,592
     
77,226
     
-18,366
 
Intersegment
   
17,228
     
11,892
     
-5,336
 
Total
   
112,820
     
89,118
     
-23,702
 
Corporate and elimination
   
(71,343
)
   
(65,699
)
   
+5,644
 
Consolidated total
 
¥
2,062,531
   
¥
2,182,760
   
¥
+120,229
 
 
Game & Network Services (“G&NS”) intersegment amounts primarily consist of transactions with All Other.
Semiconductors intersegment amounts primarily consist of transactions with the G&NS segment, the Imaging Products & Solutions (“IP&S”) segment and the Mobile Communications (“MC”) segment.
All Other intersegment amounts primarily consist of transactions with the G&NS segment, the Music segment and the Pictures segment.
Corporate and elimination includes certain brand and patent royalty income. 
 
   
(Millions of yen)
 
   
Three months ended September 30
 
Operating income (loss)
 
2017
   
2018
   
Change
 
Game & Network Services
 
¥
54,750
   
¥
90,622
   
¥
+35,872
 
Music
   
32,514
     
31,501
     
-1,013
 
Pictures
   
7,696
     
23,535
     
+15,839
 
Home Entertainment & Sound
   
24,387
     
24,457
     
+70
 
Imaging Products & Solutions
   
18,870
     
21,813
     
+2,943
 
Mobile Communications
   
(2,453
)
   
(29,814
)
   
-27,361
 
Semiconductors
   
49,370
     
47,928
     
-1,442
 
Financial Services
   
36,599
     
39,160
     
+2,561
 
All Other
   
(28
)
   
5,042
     
+5,070
 
Total
   
221,705
     
254,244
     
+32,539
 
Corporate and elimination
   
(17,477
)
   
(14,733
)
   
+2,744
 
Consolidated total
 
¥
204,228
   
¥
239,511
   
¥
+35,283
 
 
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 0.6 billion yen in the Home Entertainment & Sound (“HE&S”) segment, is included for the three months ended September 30, 2018. 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 three months ended September 30, 2018. 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-5

(Business Segments)
                 
   
(Millions of yen)
 
   
Six months ended September 30
 
Sales and operating revenue
 
2017
   
2018
   
Change
 
Game & Network Services
                 
Customers
 
¥
737,306
   
¥
985,734
   
¥
+248,428
 
Intersegment
   
43,960
     
36,432
     
-7,528
 
Total
   
781,266
     
1,022,166
     
+240,900
 
Music
                       
Customers
   
367,913
     
378,002
     
+10,089
 
Intersegment
   
7,225
     
7,325
     
+100
 
Total
   
375,138
     
385,327
     
+10,189
 
Pictures
                       
Customers
   
449,408
     
415,248
     
-34,160
 
Intersegment
   
406
     
704
     
+298
 
Total
   
449,814
     
415,952
     
-33,862
 
Home Entertainment & Sound
                       
Customers
   
557,235
     
546,453
     
-10,782
 
Intersegment
   
565
     
572
     
+7
 
Total
   
557,800
     
547,025
     
-10,775
 
Imaging Products & Solutions
                       
Customers
   
309,287
     
324,106
     
+14,819
 
Intersegment
   
3,068
     
3,987
     
+919
 
Total
   
312,355
     
328,093
     
+15,738
 
Mobile Communications
                       
Customers
   
348,884
     
245,240
     
-103,644
 
Intersegment
   
4,344
     
5,088
     
+744
 
Total
   
353,228
     
250,328
     
-102,900
 
Semiconductors
                       
Customers
   
366,086
     
399,597
     
+33,511
 
Intersegment
   
66,538
     
57,088
     
-9,450
 
Total
   
432,624
     
456,685
     
+24,061
 
Financial Services
                       
Customers
   
578,794
     
684,733
     
+105,939
 
Intersegment
   
3,590
     
3,925
     
+335
 
Total
   
582,384
     
688,658
     
+106,274
 
All Other
                       
Customers
   
189,696
     
151,673
     
-38,023
 
Intersegment
   
32,364
     
20,369
     
-11,995
 
Total
   
222,060
     
172,042
     
-50,018
 
Corporate and elimination
   
(146,025
)
   
(129,892
)
   
+16,133
 
Consolidated total
 
¥
3,920,644
   
¥
4,136,384
   
¥
+215,740
 
 
G&NS intersegment amounts primarily consist of transactions with All Other.
Semiconductors intersegment amounts primarily consist of transactions with the G&NS segment, the IP&S segment and the MC segment.
All Other intersegment amounts primarily consist of transactions with the G&NS segment, the Music segment and the Pictures segment.
Corporate and elimination includes certain brand and patent royalty income. 
 
   
(Millions of yen)
 
   
Six months ended September 30
 
Operating income (loss)
 
2017
   
2018
   
Change
 
Game & Network Services
 
¥
72,483
   
¥
174,072
   
¥
+101,589
 
Music
   
57,536
     
63,605
     
+6,069
 
Pictures
   
(1,801
)
   
15,934
     
+17,735
 
Home Entertainment & Sound
   
46,970
     
41,848
     
-5,122
 
Imaging Products & Solutions
   
42,074
     
47,890
     
+5,816
 
Mobile Communications
   
1,163
     
(40,572
)
   
-41,735
 
Semiconductors
   
104,812
     
77,065
     
-27,747
 
Financial Services
   
82,822
     
79,741
     
-3,081
 
All Other
   
(8,259
)
   
5,336
     
+13,595
 
Total
   
397,800
     
464,919
     
+67,119
 
Corporate and elimination
   
(35,961
)
   
(30,402
)
   
+5,559
 
Consolidated total
 
¥
361,839
   
¥
434,517
   
¥
+72,678
 
 
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 3.0 billion yen in the HE&S segment, is included for the six months ended September 30, 2018. 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 six months ended September 30, 2018. 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-6

(Sales to Customers by Product Category)
 
The following tables include a breakdown of sales and operating revenue to external customers for certain segments shown in the Business Segment Information on page F-5 and 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 these tables is useful to investors in understanding sales by product category.
 
   
(Millions of yen)
 
   
Three months ended September 30
 
Sales and operating revenue (to external customers)
 
2017
   
2018
   
Change
 
                   
Game & Network Services
                 
Network
 
¥
222,986
   
¥
334,264
   
¥
+111,278
 
Hardware and Others
   
191,269
     
201,490
     
+10,221
 
Total
   
414,255
     
535,754
     
+121,499
 
                         
Music
                       
Recorded Music
   
109,177
     
105,463
     
-3,714
 
Music Publishing
   
19,501
     
19,436
     
-65
 
Visual Media and Platform
   
74,159
     
75,395
     
+1,236
 
Total
   
202,837
     
200,294
     
-2,543
 
                         
Pictures
                       
Motion Pictures
   
124,800
     
109,334
     
-15,466
 
Television Productions
   
57,389
     
68,482
     
+11,093
 
Media Networks
   
61,549
     
64,205
     
+2,656
 
Total
   
243,738
     
242,021
     
-1,717
 
                         
Home Entertainment & Sound
                       
Televisions
   
219,553
     
191,705
     
-27,848
 
Audio and Video
   
80,639
     
81,861
     
+1,222
 
Other
   
578
     
930
     
+352
 
Total
   
300,770
     
274,496
     
-26,274
 
                         
Imaging Products & Solutions
                       
Still and Video Cameras
   
99,343
     
103,034
     
+3,691
 
Other
   
55,827
     
58,589
     
+2,762
 
Total
   
155,170
     
161,623
     
+6,453
 
                         
Mobile Communications
   
169,818
     
114,886
     
-54,932
 
                         
Semiconductors
   
193,407
     
222,924
     
+29,517
 
                         
Financial Services
   
277,434
     
351,493
     
+74,059
 
                         
All Other
   
95,592
     
77,226
     
-18,366
 
                         
Corporate
   
9,510
     
2,043
     
-7,467
 
Consolidated total
 
¥
2,062,531
   
¥
2,182,760
   
¥
+120,229
 
 
F-7

(Sales to Customers by Product Category)
                 
   
(Millions of yen)
 
   
Six months ended September 30
 
Sales and operating revenue (to external customers)
 
2017
   
2018
   
Change
 
                   
Game & Network Services
                 
Network
 
¥
418,288
   
¥
634,650
   
¥
+216,362
 
Hardware and Others
   
319,018
     
351,084
     
+32,066
 
Total
   
737,306
     
985,734
     
+248,428
 
                         
Music
                       
Recorded Music
   
208,999
     
205,202
     
-3,797
 
Music Publishing
   
36,359
     
40,900
     
+4,541
 
Visual Media and Platform
   
122,555
     
131,900
     
+9,345
 
Total
   
367,913
     
378,002
     
+10,089
 
                         
Pictures
                       
Motion Pictures
   
195,074
     
177,902
     
-17,172
 
Television Productions
   
119,287
     
113,897
     
-5,390
 
Media Networks
   
135,047
     
123,449
     
-11,598
 
Total
   
449,408
     
415,248
     
-34,160
 
                         
Home Entertainment & Sound
                       
Televisions
   
398,927
     
378,255
     
-20,672
 
Audio and Video
   
157,361
     
166,790
     
+9,429
 
Other
   
947
     
1,408
     
+461
 
Total
   
557,235
     
546,453
     
-10,782
 
                         
Imaging Products & Solutions
                       
Still and Video Cameras
   
205,206
     
216,290
     
+11,084
 
Other
   
104,081
     
107,816
     
+3,735
 
Total
   
309,287
     
324,106
     
+14,819
 
                         
Mobile Communications
   
348,884
     
245,240
     
-103,644
 
                         
Semiconductors
   
366,086
     
399,597
     
+33,511
 
                         
Financial Services
   
578,794
     
684,733
     
+105,939
 
                         
All Other
   
189,696
     
151,673
     
-38,023
 
                         
Corporate
   
16,035
     
5,598
     
-10,437
 
Consolidated total
 
¥
3,920,644
   
¥
4,136,384
   
¥
+215,740
 
 
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-8

(Condensed Financial Services Financial Statements)
 
The following schedules show unaudited condensed financial statements for the Financial Services segment and all other segments excluding Financial Services. These presentations are not in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which is used by Sony to prepare its consolidated financial statements. However, because the Financial Services segment is different in nature from Sony’s other segments, Sony believes that a comparative presentation may be useful in understanding and analyzing Sony’s consolidated financial statements. Transactions between the Financial Services segment and Sony without the Financial Services segment, including noncontrolling interests, are included in those respective presentations, then eliminated in the consolidated figures shown below.
 
 
Condensed Balance Sheets
                                   
                                     
               
(Millions of yen)
             
   
Financial Services
   
   
Sony without
Financial Services
   
Consolidated
 
                                     
   
March 31
   
September 30
   
March 31
   
September 30
   
March 31
   
September 30
 
   
2018
   
2018
   
2018
   
2018
   
2018
   
2018
 
  ASSETS
                                   
Current assets:
                                   
Cash and cash equivalents
 
¥
393,133
   
¥
465,645
   
¥
1,193,196
   
¥
1,075,134
   
¥
1,586,329
   
¥
1,540,779
 
Marketable securities
   
1,176,601
     
1,335,735
   
   
     
1,176,601
     
1,335,735
 
Notes and accounts receivable, trade and contract assets
   
15,612
     
15,224
     
1,003,558
     
1,256,244
     
1,012,779
     
1,265,968
 
Inventories
 
   
     
692,937
     
814,639
     
692,937
     
814,639
 
Other receivables
   
60,819
     
57,795
     
130,393
     
248,445
     
190,706
     
305,880
 
Prepaid expenses and other current assets
   
137,539
     
126,147
     
379,893
     
355,251
     
516,744
     
480,714
 
 Total current assets
   
1,783,704
     
2,000,546
     
3,399,977
     
3,749,713
     
5,176,096
     
5,743,715
 
                                                 
Film costs
 
   
     
327,645
     
416,527
     
327,645
     
416,527
 
                                                 
Investments and advances
   
10,560,933
     
10,980,688
     
272,545
     
381,124
     
10,756,058
     
11,305,585
 
                                                 
Investments in Financial Services, at cost
 
   
     
133,514
     
153,968
   
   
 
                                                 
Property, plant and equipment
   
22,424
     
22,550
     
715,760
     
718,008
     
739,470
     
741,844
 
                                                 
Other assets:
                                               
Intangibles, net
   
34,622
     
36,882
     
492,546
     
485,734
     
527,168
     
522,616
 
Goodwill
   
7,225
     
7,225
     
523,267
     
543,833
     
530,492
     
551,058
 
Deferred insurance acquisition costs
   
586,670
     
605,989
   
   
     
586,670
     
605,989
 
Deferred income taxes
   
1,684
     
1,972
     
95,088
     
96,680
     
96,772
     
98,652
 
Other
   
33,267
     
32,693
     
295,650
     
310,518
     
325,167
     
339,464
 
     
663,468
     
684,761
     
1,406,551
     
1,436,765
     
2,066,269
     
2,117,779
 
Total assets
 
¥
13,030,529
   
¥
13,688,545
   
¥
6,255,992
   
¥
6,856,105
   
¥
19,065,538
   
¥
20,325,450
 
                                                 
LIABILITIES AND EQUITY
                                               
Current liabilities:
                                               
Short-term borrowings
 
¥
433,119
   
¥
570,421
   
¥
288,496
   
¥
224,530
   
¥
721,615
   
¥
794,951
 
Notes and accounts payable, trade
 
   
     
468,550
     
781,338
     
468,550
     
781,338
 
Accounts payable, other and accrued expenses
   
37,479
     
31,698
     
1,477,875
     
1,518,499
     
1,514,433
     
1,549,389
 
Accrued income and other taxes
   
19,401
     
25,486
     
126,504
     
172,235
     
145,905
     
197,721
 
Deposits from customers in the banking business
   
2,159,246
     
2,252,480
   
   
     
2,159,246
     
2,252,480
 
Other
   
181,467
     
191,608
     
435,996
     
470,003
     
610,792
     
655,871
 
 Total current liabilities
   
2,830,712
     
3,071,693
     
2,797,421
     
3,166,605
     
5,620,541
     
6,231,750
 
                                                 
Long-term debt
   
205,373
     
215,089
     
421,817
     
298,818
     
623,451
     
510,165
 
Accrued pension and severance costs
   
33,062
     
33,452
     
361,442
     
355,503
     
394,504
     
388,955
 
Deferred income taxes
   
342,405
     
318,483
     
107,458
     
112,221
     
449,863
     
430,704
 
Future insurance policy benefits and other
   
5,221,772
     
5,452,484
   
   
     
5,221,772
     
5,452,484
 
Policyholders’ account in the life insurance business
   
2,820,702
     
2,998,376
   
   
     
2,820,702
     
2,998,376
 
Other
   
17,778
     
14,885
     
284,270
     
299,500
     
278,338
     
291,417
 
  Total liabilities
   
11,471,804
     
12,104,462
     
3,972,408
     
4,232,647
     
15,409,171
     
16,303,851
 
                                                 
Redeemable noncontrolling interest
 
   
     
9,210
     
8,442
     
9,210
     
8,442
 
                                                 
Equity:
                                               
Stockholders’ equity of Financial Services
   
1,557,062
     
1,582,327
   
   
   
   
 
Stockholders’ equity of Sony without Financial Services
 
   
     
2,173,128
     
2,522,186
   
   
 
Sony Corporation’s stockholders’ equity
 
   
   
   
     
2,967,366
     
3,365,038
 
Noncontrolling interests
   
1,663
     
1,756
     
101,246
     
92,830
     
679,791
     
648,119
 
  Total equity
   
1,558,725
     
1,584,083
     
2,274,374
     
2,615,016
     
3,647,157
     
4,013,157
 
  Total liabilities and equity
 
¥
13,030,529
   
¥
13,688,545
   
¥
6,255,992
   
¥
6,856,105
   
¥
19,065,538
   
¥
20,325,450
 
 
F-9

Condensed Statements of Income
                                   
                                     
                                     
   
(Millions of yen)
 
   
Three months ended September 30
 
                                     
   
Financial Services
   
Sony without
Financial Services
   
Consolidated
 
   
2017
   
2018
   
2017
   
2018
   
2017
   
2018
 
                                     
Financial services revenue
 
¥
279,224
   
¥
353,453
   
¥
   
¥
   
¥
277,434
   
¥
351,493
 
Net sales and operating revenue
 
 
   
 
     
1,787,354
     
1,833,252
     
1,785,097
     
1,831,267
 
     
279,224
     
353,453
     
1,787,354
     
1,833,252
     
2,062,531
     
2,182,760
 
                                                 
Cost of sales
 
 
 –    
 
 –      
1,237,623
     
1,225,837
     
1,234,646
     
1,222,744
 
Selling, general and administrative
 
 
 –    
 
 –      
385,559
     
396,019
     
386,279
     
397,129
 
Financial services expenses
   
242,095
     
314,296
   
 
   
     
240,305
     
312,334
 
Other operating (income) expense, net
   
(24
)
   
14
     
(877
)
   
13,369
     
(901
)
   
13,383
 
     
242,071
     
314,310
     
1,622,305
     
1,635,225
     
1,860,329
     
1,945,590
 
                                                 
Equity in net income (loss) of affiliated companies
   
(554
)
   
17
     
2,580
     
2,324
     
2,026
     
2,341
 
                                                 
Operating income
   
36,599
     
39,160
     
167,629
     
200,351
     
204,228
     
239,511
 
                                                 
Other income (expenses), net
 
 
 –      
(19
)
   
(5,663
)
   
6,906
     
(5,663
)
   
6,887
 
                                                 
Income before income taxes
   
36,599
     
39,141
     
161,966
     
207,257
     
198,565
     
246,398
 
                                                 
Income taxes
   
10,370
     
10,398
     
45,382
     
48,870
     
55,751
     
59,268
 
                                                 
Net Income
   
26,229
     
28,743
     
116,584
     
158,387
     
142,814
     
187,130
 
                                                 
Less - Net income attributable to noncontrolling interests
   
34
     
67
     
2,243
     
4,042
     
11,962
     
14,129
 
                                                 
Net income of Financial Services
 
¥
26,195
   
¥
28,676
   
¥
 –    
¥
 –    
¥
 –    
¥
 –  
                                                 
Net income of Sony without Financial Services
 
¥
 –    
¥
 –    
¥
114,341
   
¥
154,345
   
¥
 –    
¥
 –  
                                                 
Net income attributable to Sony Corporation's stockholders
 
¥
 –    
¥
 –    
¥
 –    
¥
 –    
¥
130,852
   
¥
173,001
 
 
   
 
Six months ended September 30
 
                                                 
   
 
Financial Services
   
 
Sony without
Financial Services
   
 
Consolidated
 
     
2017
     
2018
     
2017
     
2018
     
2017
     
2018
 
                                                 
Financial services revenue
 
¥
582,384
   
¥
688,658
   
¥
 –    
¥
 –    
¥
578,794
   
¥
684,733
 
Net sales and operating revenue
 
   
     
3,345,046
     
3,455,586
     
3,341,850
     
3,451,651
 
     
582,384
     
688,658
     
3,345,046
     
3,455,586
     
3,920,644
     
4,136,384
 
                                                 
Cost of sales
 
 
 –    
 
 –      
2,355,222
     
2,341,273
     
2,349,738
     
2,335,231
 
Selling, general and administrative
 
 
 –    
 
 –      
741,370
     
744,782
     
743,658
     
746,890
 
Financial services expenses
   
499,153
     
608,416
   
 
 –    
     
495,563
     
604,490
 
Other operating (income) expense, net
   
(24
)
   
39
     
(26,988
)
   
13,019
     
(27,012
)
   
13,058
 
     
499,129
     
608,455
     
3,069,604
     
3,099,074
     
3,561,947
     
3,699,669
 
                                                 
Equity in net income (loss) of affiliated companies
   
(433
)
   
(462
)
   
3,575
     
(1,736
)
   
3,142
     
(2,198
)
                                                 
Operating income
   
82,822
     
79,741
     
279,017
     
354,776
     
361,839
     
434,517
 
                                                 
Other income (expenses), net
 
 
 –      
(36
)
   
693
     
140,446
     
(14,380
)
   
123,967
 
                                                 
Income before income taxes
   
82,822
     
79,705
     
279,710
     
495,222
     
347,459
     
558,484
 
                                                 
Income taxes
   
23,826
     
21,930
     
86,422
     
112,560
     
110,247
     
134,490
 
                                                 
Net Income
   
58,996
     
57,775
     
193,288
     
382,662
     
237,212
     
423,994
 
                                                 
Less - Net income attributable to noncontrolling interests
   
84
     
113
     
3,615
     
3,689
     
25,489
     
24,546
 
                                                 
Net income of Financial Services
 
¥
58,912
   
¥
57,662
   
¥
 –    
¥
 –    
¥
 –    
¥
 –  
                                                 
Net income of Sony without Financial Services
 
¥
 –    
¥
 –    
¥
189,673
   
¥
378,973
   
¥
 –    
¥
 –  
                                                 
Net income attributable to Sony Corporation's stockholders
 
¥
 –    
¥
 –    
¥
 –    
¥
 –    
¥
211,723
   
¥
399,448
 
 
F-10

Condensed Statements of Cash Flows
                                   
                                     
   
(Millions of yen)
 
   
Six months ended September 30
 
                                     
   
Financial Services
   
   
Sony without
Financial Services
   
Consolidated
 
   
2017
   
2018
   
2017
   
2018
   
2017
   
2018
 
Cash flows from operating activities:
                                   
Net income  (loss)
 
¥
58,996
   
¥
57,775
   
¥
193,288
   
¥
382,662
   
¥
237,212
   
¥
423,994
 
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
   
32,381
     
33,438
     
137,581
     
138,388
     
169,962
     
171,826
 
Amortization of film costs
 
   
     
160,142
     
133,892
     
160,142
     
133,892
 
Other operating (income) expense, net
   
(24
)
   
39
     
(26,988
)
   
13,019
     
(27,012
)
   
13,058
 
(Gain) loss on marketable securities and securities investments, net
   
(47,715
)
   
(109,791
)
   
(167
)
   
(124,717
)
   
(47,882
)
   
(234,508
)
Changes in assets and liabilities:
                                               
(Increase) decrease in notes, accounts receivable, trade and contract assets
   
(1,351
)
   
388
     
(195,822
)
   
(185,352
)
   
(197,747
)
   
(185,855
)
(Increase) decrease in inventories
 
   
     
(272,386
)
   
(118,255
)
   
(272,386
)
   
(118,255
)
(Increase) decrease in film costs
 
   
     
(188,281
)
   
(190,494
)
   
(188,281
)
   
(190,494
)
Increase (decrease) in notes and accounts payable, trade
 
   
     
309,160
     
302,979
     
309,160
     
302,979
 
Increase (decrease) in future insurance policy benefits and other
   
258,762
     
368,871
   
   
     
258,762
     
368,871
 
(Increase) decrease in deferred insurance acquisition costs
   
(43,394
)
   
(47,090
)
 
   
     
(43,394
)
   
(47,090
)
(Increase) decrease in marketable securities held in the life insurance business
   
(44,002
)
   
(43,949
)
 
   
     
(44,002
)
   
(43,949
)
Other
   
(2,918
)
   
(8,949
)
   
(47,521
)
   
(175,651
)
   
(49,178
)
   
(183,640
)
        Net cash provided by (used in) operating activities
   
210,735
     
250,732
     
69,006
     
176,471
     
265,356
     
410,829
 
                                                 
Cash flows from investing activities:
                                               
Payments for purchases of fixed assets
   
(6,559
)
   
(9,600
)
   
(123,701
)
   
(145,228
)
   
(130,254
)
   
(154,819
)
Payments for investments and advances
   
(460,995
)
   
(563,301
)
   
(10,306
)
   
(25,373
)
   
(472,015
)
   
(588,674
)
Proceeds from sales or return of investments and collections of advances
   
153,177
     
140,969
     
3,603
     
84,463
     
156,780
     
225,432
 
Other
   
79
     
78
     
33,566
     
(10,019
)
   
33,643
     
(9,940
)
        Net cash provided by (used in) investing activities
   
(314,298
)
   
(431,854
)
   
(96,838
)
   
(96,157
)
   
(411,846
)
   
(528,001
)
                                                 
Cash flows from financing activities:
                                               
Increase (decrease) in borrowings, net
   
122,241
     
146,992
     
(10,200
)
   
(192,289
)
   
112,035
     
(45,298
)
Increase (decrease) in deposits from customers, net
   
88,344
     
132,628
   
   
     
88,344
     
132,628
 
Dividends paid
   
(23,921
)
   
(26,100
)
   
(12,649
)
   
(18,992
)
   
(12,649
)
   
(18,992
)
Other
   
111
     
114
     
502
     
(58,987
)
   
(8,207
)
   
(68,608
)
        Net cash provided by (used in) financing activities
   
186,775
     
253,634
     
(22,347
)
   
(270,268
)
   
179,523
     
(270
)
                                                 
Effect of exchange rate changes on cash and cash equivalents
 
   
     
6,650
     
70,344
     
6,650
     
70,344
 
                                                 
Net increase (decrease) in cash and cash equivalents, including restricted
   
83,212
     
72,512
     
(43,529
)
   
(119,610
)
   
39,683
     
(47,098
)
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
   
351,594
     
465,645
     
656,713
     
1,080,195
     
1,008,307
     
1,545,840
 
Less - restricted cash and cash equivalents, included in other current assets and other assets
 
 
   

     
7,475
     
5,061
     
7,475
     
5,061
 
Cash and cash equivalents at end of the period
 
¥
351,594
   
¥
465,645
   
¥
649,238
   
¥
1,075,134
   
¥
1,000,832
   
¥
1,540,779
 
 
F-11

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-12

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-13

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 September 30, 2018, Sony had 1,314 consolidated subsidiaries (including variable interest entities) and 119 affiliated companies accounted for under the equity method.

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

   
(Thousands of shares)
 
   
Three months ended September 30
 
Net income attributable to Sony Corporation’s stockholders
 
2017
   
2018
 
— Basic
   
1,263,452
     
1,268,535
 
— Diluted
   
1,291,038
     
1,296,562
 

   
(Thousands of shares)
 
   
Six months ended September 30
 
Net income attributable to Sony Corporation’s stockholders
 
2017
   
2018
 
— Basic
   
1,263,186
     
1,268,017
 
— Diluted
   
1,290,522
     
1,296,190
 

The dilutive effect in the weighted-average number of outstanding shares for the three and six months ended September 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.

F-14

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

(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 six months ended September 30, 2018, 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 54,179 million yen (504 million U.S. dollars) recorded in gain on equity securities, net in the consolidated statement of income. The payments to its artists and distributed labels are included within other in the investing activities section of the consolidated statement of cash flows.
The remaining shares retained as of September 30, 2018 have a gross fair value of 105,242 million yen (927 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 63,596 million yen (589 million U.S. dollars) recorded in gain on equity securities, net in the consolidated statement of income.
F-15

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 July 31, 2018, has been revised as follows:

   
(Billions of yen)
   
   
March 31, 2018
Results
   
July
Forecast
   
October
Forecast
 
Change from
July Forecast
 
Sales and operating revenue
 
¥
8,544.0
   
¥
8,600
   
¥
8,700
 
+¥100 billion
   
+1.2
%
Operating income 
    734.9       670       870  
+¥200 billion 
    +29.9 %
Income before income taxes
   
699.0
     
760
     
975
 
+¥215 billion
   
+28.3
%
Net income attributable to Sony Corporation’s stockholders
   
490.8
     
500
     
705
 
+¥205 billion
   
+41.0
%


Assumed foreign exchange rates are the following:

 
Assumed foreign exchange
rates for the six months
ending March 31, 2019
(For your reference)
Assumed foreign exchange rates for the fiscal year ending
March 31, 2019 at the time of the July forecast
1 U.S. dollar
approximately 112 yen
approximately 110 yen
1 Euro
approximately 132 yen
approximately 127 yen

Consolidated sales and operating revenue (“sales”) for the fiscal year ending March 31, 2019 are expected to be higher than the July forecast mainly due to higher-than-expected sales primarily in the Game & Network Services (“G&NS”) segment and the Music segment, partially offset by lower-than-expected sales in the Mobile Communications (“MC”) segment.

Consolidated operating income is expected to be higher than the July forecast mainly due to expected increases in operating income primarily in the Music and G&NS segments.  Although an increase in operating loss is expected in the MC segment, a portion of this increase was previously included in the allocation for contingencies incorporated into the July forecast for All Other, Corporate and elimination.  Therefore, the impact of this expected increase in operating loss has been substantially offset by the reduction in allocations for contingencies incorporated into the October forecast.

Concerning the forecast for the Music segment, on June 29, 2018, Sony and the investor consortium led by Mubadala Investment Company announced the signing of a definitive agreement for Sony to acquire the Mubadala consortium’s approximately 60% equity interest in DH Publishing, L.P. (“EMI”), which owns and manages EMI Music Publishing.  Because Sony expects this transaction to close within the 2018 calendar year, approximately 25 billion yen in revenue and 110 billion yen in each of operating income and income before income taxes have been incorporated into the October forecast for the fiscal year ending March 31, 2019, reflecting both an expected non-cash step-up gain for the approximately 40% equity interest in EMI that Sony currently owns, and the expected impact of the consolidation of EMI, which is currently accounted for under the equity method.  As Sony is currently evaluating the income tax expense expected to result from the closing of this transaction, the same amount of increase as has been incorporated into the forecast for income before income taxes is currently incorporated into the forecast for net income attributable to Sony Corporation’s stockholders.  Consequently, there is a possibility that the forecast for net income attributable to Sony Corporation’s stockholders might change as a result of the evaluation of income tax expense related to this transaction.

In light of smartphone sales results in the current quarter, as well as the expectation of continued difficulty in the business environment in the second half of the fiscal year ending March 31, 2019 and beyond, Sony conducted a review of the future profitability forecast for the MC segment, which resulted in a downward revision in that forecast.  The outcome of this downward revision was a decrease in expected future cash flows, which resulted in the recording of an impairment charge against long-lived assets of 16.2 billion yen in the smartphone business within the MC segment, recorded as an operating loss in the current quarter.  When it established the new profitability forecast for the smartphone business, Sony revised its profitability improvement plan and adopted a new goal of reducing operating costs in the fiscal year ending March 31, 2021 compared with the fiscal year ended March 31, 2018 by 50% compared with its previous goal of 30%.
 
 
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Restructuring charges for the Sony Group are expected to increase by 5 billion yen compared to the July forecast to approximately 27 billion yen (22.4 billion yen was recorded in the fiscal year ended March 31, 2018) due to an expected increase in restructuring charges primarily in the Pictures segment.  This amount will be recorded as an operating expense included in the above-mentioned forecast for operating income.

Income before income taxes is expected to be 975 billion yen, which is higher than the July forecast.  This expected increase is primarily due to the above-mentioned expected increase in operating income, as well as a higher-than-expected gain on equity securities, net, in the current quarter.

Net income attributable to Sony Corporation’s stockholders is expected to be higher than the July forecast due to the above-mentioned expected increase in income before income taxes, as well as lower-than-expected effective tax rates.

As of March 31, 2018, Sony has an approximately 250 billion yen valuation allowance recorded against its U.S. federal and state net deferred tax assets that are attributable to Sony Americas Holding Inc. and its U.S. subsidiaries.  Because Sony’s U.S. businesses continue to show improved profitability, it is reasonably possible that more than 50% of this valuation allowance could be reversed in the near future.  The potential reduction in income taxes that may result from such reversal has not been included in the October forecast as Sony continues to monitor the realizability of these assets.

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
   
July
Forecast
   
October
Forecast
 
Game & Network Services (G&NS)
                 
Sales and operating revenue
 
¥
1,943.8
   
¥
2,180
   
¥
2,350
 
Operating income
   
177.5
     
250
     
310
 
Music
                       
Sales and operating revenue
   
800.0
     
760
     
820
 
Operating income
   
127.8
     
115
     
230
 
Pictures
                       
Sales and operating revenue
   
1,011.1
     
990
     
1,000
 
Operating income
   
41.1
     
44
     
50
 
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
     
670
     
680
 
Operating income
   
74.9
     
78
     
81
 
Mobile Communications (MC)
                       
Sales and operating revenue
   
723.7
     
610
     
510
 
Operating loss
   
(27.6
)
   
(30
)
   
(95
)
Semiconductors
                       
Sales and operating revenue
   
850.0
     
890
     
910
 
Operating income
   
164.0
     
120
     
140
 
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
)
   
(163
)
   
(102
)
Consolidated
                       
Sales and operating revenue
   
8,544.0
     
8,600
     
8,700
 
Operating income
   
734.9
     
670
     
870
 

Game & Network Services
Sales are expected to be higher than the July forecast primarily due to higher-than-expected game software sales, the impact of foreign exchange rates, higher-than-expected unit sales of PlayStation®4 (“PS4”) hardware, as well as higher-than-expected sales for PlayStation®Plus (“PS Plus”), a paid membership service.  Operating income is expected to be significantly higher than the July forecast primarily due to the impact of the above-mentioned higher-than-expected game software and PS Plus sales, as well as expected reductions for promotional and other costs related to PS4 hardware, based on the recent strong business momentum.
 
 
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Music
Sales are expected to be higher than the July forecast primarily due to the above-mentioned expected impact from the consolidation of EMI and the strong performance of the mobile gaming application Fate/Grand Order.  Operating income is expected to be significantly higher than the July forecast primarily due to the above-mentioned expected impact of a non-cash step-up gain for the approximately 40% equity interest in EMI that Sony currently owns and the consolidation of EMI, as well as the impact of the above-mentioned increase in sales.

Pictures
Sales are expected to be higher than the July forecast primarily due to the strong theatrical performance of Motion Pictures’ titles released in the current fiscal year and higher-than-expected television licensing revenues for titles released in the previous fiscal year, as well as the impact of foreign exchange rates, partially offset by lower-than-expected sales for Media Networks.  Operating income is expected to be higher than the July forecast primarily due to the impact of the above-mentioned increase in sales.

Imaging Products & Solutions
Both sales and operating income are expected to be higher than the July forecast primarily due to an improvement in the product mix of Still and Video Cameras reflecting a shift to high value-added models, as well as the impact of foreign exchange rates.

Mobile Communications
Sales are expected to be significantly lower than the July forecast due to an expected decrease in smartphone unit sales mainly in Europe and Japan.  Operating loss is expected to be significantly higher than the July forecast primarily due to the impact of the above-mentioned decrease in sales, an impairment charge against long-lived assets of 16.2 billion yen that was recorded as an operating loss in the current quarter, as well as the negative impact of foreign exchange rates, partially offset by expected reductions in operating costs.

Semiconductors
Both sales and operating income are expected to be higher than the July forecast primarily due to higher-than-expected sales of image sensors for mobile products, as well as 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 July forecast.

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

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


Notes about Financial Performance of the Music, Pictures and Financial Services segments

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’s operating income.  Because Sony expects to complete the acquisition of the remaining equity interest in EMI within the 2018 calendar year, both an expected non-cash step-up gain for the equity interest in EMI that Sony currently owns and the expected impact of the consolidation of EMI have been incorporated into the October forecast for the fiscal year ending March 31, 2019.

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

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