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1-7-1 Konan, Minato-ku
Tokyo 108-0075 Japan
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News & Information
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No. 15-064E
3:00 P.M. JST, July 30, 2015
Consolidated Financial Results for the First Quarter Ended June 30, 2015
Tokyo, July 30, 2015 -- Sony Corporation today announced its consolidated financial results for the first quarter ended June 30, 2015 (April 1, 2015 to June 30, 2015).
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(Billions of yen, millions of U.S. dollars, except per share amounts)
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First Quarter ended June 30
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2014
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2015
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Change in yen
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2015*
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Sales and operating revenue
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¥ |
1,809.9 |
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¥ |
1,808.1 |
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-0.1 |
% |
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$ |
14,820 |
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Operating income
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69.8 |
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96.9 |
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+38.8 |
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794 |
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Income before income taxes
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68.4 |
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138.7 |
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+102.9 |
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1,137 |
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Net income attributable to Sony Corporation’s stockholders
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26.8 |
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82.4 |
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+207.5 |
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676 |
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Net income attributable to Sony Corporation’s stockholders per share of common stock:
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- Basic
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¥ |
25.69
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¥ |
70.52
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+174.5 |
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$ |
0.58 |
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- Diluted
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22.94 |
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70.36 |
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+206.7 |
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0.58 |
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* U.S. dollar amounts have been translated from yen, for convenience only, at the rate of 122 yen = 1 U.S. dollar, the approximate Tokyo foreign exchange market rate as of June 30, 2015.
All amounts are presented on the basis of Generally Accepted Accounting Principles in the U.S. (“U.S. GAAP”).
Sony Corporation and its consolidated subsidiaries are together referred to as “Sony”.
The average foreign exchange rates during the quarters ended June 30, 2014 and 2015 are presented below.
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First Quarter ended June 30
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2014
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2015
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Change
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The average rate of yen
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1 U.S. dollar
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¥ |
102.2 |
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¥ |
121.3 |
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15.8 |
% |
(yen depreciation)
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1 Euro
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140.1 |
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134.2 |
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4.5
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(yen appreciation)
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Consolidated Results for the First Quarter Ended June 30, 2015
Sales and operating revenue (“Sales”) decreased by 0.1% compared to the same quarter of the previous fiscal year (“year-on-year”) to 1,808.1 billion yen (14,820 million U.S. dollars). Sales were essentially flat year-on-year mainly due to a decrease in Mobile Communications (“MC”) segment sales reflecting a significant decrease in smartphone unit sales and a decrease in Home Entertainment & Sound (“HE&S”) segment sales reflecting a decrease in unit sales of mid-range LCD televisions, substantially offset by the impact of foreign exchange rates and a significant increase in Devices segment sales reflecting the strong performance of image sensors. On a constant currency basis, sales decreased 7% year-on-year. For further details about the impact of foreign exchange rate fluctuations on sales and operating income (loss), see Notes on page 9.
Operating income increased 27.1 billion yen year-on-year to 96.9 billion yen (794 million U.S. dollars). This significant increase was primarily due to an increase in operating income in the Music segment, reflecting the recording of a remeasurement gain, described below, and the impact of the increase in sales in the Devices segment. This increase was partially offset by the negative impact of foreign exchange rates in the MC segment and lower sales in the Pictures segment due to a decrease in theatrical and television licensing revenues for Motion Pictures.
Operating income in the current quarter includes a 151 million U.S. dollar (18.1 billion yen) gain on the remeasurement to fair value of Sony Music Entertainment (“SME”)’s 51% equity interest in Orchard Media, Inc. (“The Orchard”), which had previously been accounted for under the equity method, as a result of SME increasing its ownership interest to 100%, in the Music Segment, as well as a gain of 12.3 billion yen (101 million U.S. dollars) from the sale of a part of the logistics business, in connection with the formation of a logistics joint venture, recorded in Corporate and elimination. Operating income in the same quarter of the previous fiscal year included a gain of 14.8 billion yen recognized on the sale of certain buildings and premises at the Gotenyama Technology Center in Japan, recorded in Corporate and elimination.
During the current quarter, restructuring charges, net, decreased 5.1 billion yen year-on-year to 10.1 billion yen (83 million U.S. dollars).
Equity in net income of affiliated companies, recorded within operating income, decreased 2.8 billion yen year-on-year to 0.4 billion yen (3 million U.S. dollars). This decrease was mainly due to a deterioration of equity in net income (loss) for Intertrust Technologies Corporation in All Other.
The net effect of other income and expenses was income of 41.8 billion yen (343 million U.S. dollars), an improvement of 43.2 billion yen year-on-year due to a 46.8 billion yen (384 million U.S. dollars) gain on the sale of certain shares of Olympus Corporation (“Olympus”) and a 2.7 billion yen (22 million U.S. dollars) gain on the sale of shares in connection with the above-mentioned formation of a logistics joint venture, partially offset by a gain of 4.8 billion yen on the sale of Sony Corporation’s shares of SQUARE ENIX HOLDINGS CO., LTD. recorded in the same quarter of the previous fiscal year.
Income before income taxes increased 70.3 billion yen year-on-year to 138.7 billion yen (1,137 million U.S. dollars).
Income taxes: During the current quarter, Sony recorded 39.8 billion yen (326 million U.S. dollars) of income tax expense, resulting in an effective tax rate of 28.7%. This effective tax rate was lower than the Japanese statutory tax rate primarily as a result of profits recorded at foreign subsidiaries and in the insurance business, which are both subject to lower tax rates, coupled with lower income tax expenses due to profits recorded at Sony Corporation and its national tax filing group in Japan which currently have valuation allowances.
Net income attributable to Sony Corporation’s stockholders, which deducts net income attributable to noncontrolling interests, increased 55.6 billion yen year-on-year to 82.4 billion yen (676 million U.S. dollars).
Operating Performance Highlights by Business Segment
“Sales and operating revenue” in each business segment represents sales and operating revenue recorded before intersegment transactions are eliminated. “Operating income (loss)” in each business segment represents operating income (loss) reported before intersegment transactions are eliminated and excludes unallocated corporate expenses.
Mobile Communications (MC)
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(Billions of yen, millions of U.S. dollars)
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First Quarter ended June 30
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2014
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2015
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Change in yen
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2015
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Sales and operating revenue
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¥ |
335.0 |
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¥ |
280.5 |
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-16.3 |
% |
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$ |
2,299 |
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Operating loss
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(1.6 |
) |
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(22.9 |
) |
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- |
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(188 |
) |
Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the MC segment of the comparable prior period have been reclassified to conform to the current presentation. For details, please see Notes on page 8.
Sales decreased 16.3% year-on-year (an 18% decrease on a constant currency basis) to 280.5 billion yen (2,299 million U.S. dollars). This decrease was due to a significant decrease in smartphone unit sales resulting from a strategic decision not to pursue scale in order to improve profitability.
Operating loss increased 21.3 billion yen year-on-year to 22.9 billion yen (188 million U.S. dollars). The above-mentioned decrease in smartphone unit sales and an increase in restructuring charges were offset primarily by reductions in marketing and other expenses as well as an improvement in product mix. However, operating loss increased mainly due to the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs. During the current quarter there was a 25.4 billion yen negative impact from foreign exchange rate fluctuations.
Game & Network Services (G&NS)
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(Billions of yen, millions of U.S. dollars)
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First Quarter ended June 30
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2014
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2015
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Change in yen
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2015
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Sales and operating revenue
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¥ |
257.5 |
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¥ |
288.6 |
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+12.1 |
% |
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$ |
2,365 |
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Operating income
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4.3 |
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19.5 |
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+350.5 |
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160 |
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The G&NS segment includes the Hardware, Network, and Other categories. Hardware includes home and portable game consoles; Network includes network services relating to game, video and music content provided by Sony Network Entertainment Inc.; Other includes packaged software and peripheral devices.
Sales increased 12.1% year-on-year (a 7% increase on a constant currency basis) to 288.6 billion yen (2,365 million U.S. dollars). This significant increase was primarily due to increases in PlayStation 4 (“PS4”) software sales and PS4 peripheral device unit sales as well as the impact of foreign exchange rates, partially offset by a decrease in PlayStation®3 (“PS3”) hardware and software sales.
Operating income increased 15.1 billion yen year-on-year to 19.5 billion yen (160 million U.S. dollars). This significant increase was primarily due to PS4 hardware cost reductions, the above-mentioned increases in PS4 software sales and PS4 peripheral device unit sales, partially offset by the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs and the decrease in PS3 software sales. Operating income in the current quarter also includes 4.7 billion yen (39 million U.S. dollars) of insurance recoveries related to losses incurred from the cyberattack on Sony’s network services including the PlayStation®Network in the fiscal year ended March 31, 2012. During the current quarter there was a 15.6 billion yen negative impact from foreign exchange rate fluctuations.
Imaging Products & Solutions (IP&S)
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(Billions of yen, millions of U.S. dollars)
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First Quarter ended June 30
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2014
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2015
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Change in yen
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2015
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Sales and operating revenue
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¥ |
164.6 |
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¥ |
170.4 |
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+3.5 |
% |
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$ |
1,396 |
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Operating income
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17.4 |
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21.3 |
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+22.2 |
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174 |
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The IP&S segment includes the Digital Imaging Products and Professional Solutions categories. Digital Imaging Products includes compact digital cameras, interchangeable single-lens cameras and video cameras; Professional Solutions includes broadcast- and professional-use products.
Sales increased 3.5% year-on-year (a 5% decrease on a constant currency basis) to 170.4 billion yen (1,396 million U.S. dollars), primarily due to the impact of foreign exchange rates and an improvement in the product mix of digital cameras reflecting a shift to high value-added models, partially offset by a decrease in unit sales of digital cameras* reflecting a contraction of the market.
Operating income increased 3.9 billion yen year-on-year to 21.3 billion yen (174 million U.S. dollars). This increase was mainly due to the improvement in digital camera product mix reflecting a shift to high value-added models, a year-on-year increase in insurance recoveries related to damages and losses incurred from the floods in Thailand in the fiscal year ended March 31, 2012, and the positive impact of foreign exchange rates, partially offset by the impact of the decrease in unit sales of digital cameras. During the current quarter there was a 2.0 billion yen positive impact from foreign exchange rate fluctuations.
* Digital cameras includes compact digital cameras, interchangeable single-lens cameras and interchangeable lenses.
Home Entertainment & Sound (HE&S)
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(Billions of yen, millions of U.S. dollars)
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First Quarter ended June 30
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2014
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2015
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Change in yen
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2015
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Sales and operating revenue
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¥ |
293.7 |
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¥ |
253.1 |
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-13.8 |
% |
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$ |
2,075 |
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Operating income
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8.8 |
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10.9 |
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+23.6 |
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90 |
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The HE&S segment includes the Televisions and Audio and Video categories. Televisions includes LCD televisions; Audio and Video includes Blu-ray DiscTM players and recorders, home audio, headphones and memory-based portable audio devices. Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the HE&S segment of the comparable prior period have been reclassified to conform to the current presentation. For details, please see Notes on page 8.
Sales decreased 13.8% year-on-year (a 21% decrease on a constant currency basis) to 253.1 billion yen (2,075 million U.S. dollars). This decrease was primarily due to a decrease in unit sales of LCD televisions, mainly in the mid-range, as well as a decrease in home audio and video unit sales reflecting a contraction of the market.
Operating income increased 2.1 billion yen year-on-year to 10.9 billion yen (90 million U.S. dollars). This increase was primarily due to cost reductions and an improvement in product mix reflecting a shift to high value-added models, partially offset by the above-mentioned decrease in LCD televisions and home audio and video unit sales, as well as the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs. During the current quarter there was a 7.7 billion yen negative impact from foreign exchange rate fluctuations.
In Televisions, sales decreased 17.6% year-on-year to 168.9 billion yen (1,385 million U.S. dollars). This decrease was primarily due to a decrease in unit sales. LCD television unit sales decreased year-on-year in all areas other than North America mainly due to a strategic decision not to pursue scale in order to improve profitability. Operating income* decreased 0.9 billion yen year-on-year to 7.0 billion yen (57 million U.S. dollars). This decrease was primarily due to the impact of the decrease in unit sales and the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs, partially offset by an improvement in product mix reflecting a shift to high value-added models and cost reductions.
* The operating income (loss) in Televisions excludes restructuring charges, which are included in the overall segment results and are not allocated to product categories.
Devices
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(Billions of yen, millions of U.S. dollars)
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First Quarter ended June 30
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2014
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2015
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Change in yen
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2015
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Sales and operating revenue
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¥ |
176.1 |
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¥ |
237.9 |
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+35.1 |
% |
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$ |
1,950 |
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Operating income
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11.5 |
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30.3 |
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+163.8 |
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249 |
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The Devices segment includes the Semiconductors and Components categories. Semiconductors includes image sensors; Components includes batteries and recording media. Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the Devices segment of the comparable prior period have been reclassified to conform to the current presentation. For details, please see Notes on page 8.
Sales increased 35.1% year-on-year (an 18% increase on a constant currency basis) to 237.9 billion yen (1,950 million U.S. dollars). This increase was primarily due to a significant increase in sales of image sensors reflecting higher demand for image sensors for mobile products, the impact of foreign exchange rates, as well as a significant increase in sales of camera modules. Sales to external customers increased 41.2% year-on-year.
Operating income increased 18.8 billion yen year-on-year to 30.3 billion yen (249 million U.S. dollars). This significant increase was primarily due to the impact of the above-mentioned increase in sales of image sensors and the positive impact of foreign exchange rates. During the current quarter there was an 11.0 billion yen positive impact from foreign exchange rate fluctuations.
* * * * *
Total inventory of the five Electronics* segments above as of June 30, 2015 was 675.6 billion yen (5,538 million U.S. dollars), a decrease of 4.8 billion yen, or 0.7% year-on-year. Inventory increased by 114.1 billion yen, or 20.3% compared with the level as of March 31, 2015.
* The term “Electronics” refers to the sum of the MC, G&NS, IP&S, HE&S and Devices segments.
In connection with the realignment made from the first quarter of the fiscal year ending March 31, 2016, total inventory of the five Electronics segments as of June 30, 2014 and March 31, 2015 has been reclassified to conform to the presentation for the fiscal year ending March 31, 2016. For further details, please see Notes on page 8.
* * * * *
Pictures
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(Billions of yen, millions of U.S. dollars)
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First Quarter ended June 30
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2014
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2015
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Change in yen
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2015
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Sales and operating revenue
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¥ |
194.8 |
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¥ |
171.5 |
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-11.9 |
% |
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$ |
1,406 |
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Operating income (loss)
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7.8 |
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(11.7 |
) |
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- |
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(96 |
) |
The Pictures segment is comprised of the Motion Pictures, Television Productions, and Media Networks categories. Motion Pictures includes the production, acquisition and distribution of motion pictures; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks.
The results presented in Pictures are a yen-translation of the results of Sony Pictures Entertainment Inc. (“SPE”), a U.S.-based operation that aggregates the results of its worldwide subsidiaries on a U.S. dollar basis. Management analyzes the results of SPE in U.S. dollars, so discussion of certain portions of its results is specified as being on “a U.S. dollar basis.”
Sales decreased 11.9% year-on-year (a 26% decrease on a U.S. dollar basis) to 171.5 billion yen (1,406 million U.S. dollars). The decrease in sales on a U.S. dollar basis was primarily due to significantly lower sales for Motion Pictures reflecting a decrease in theatrical and television licensing revenues. Theatrical revenues decreased due to the stronger worldwide theatrical performance of films released in the same quarter of the previous fiscal year which benefitted from the performances of The Amazing Spider-Man 2 and 22 Jump Street. Television licensing revenues were lower in the current quarter as the same quarter of the previous fiscal year benefitted from sales of Cloudy With A Chance of Meatballs 2 and Captain Phillips.
Operating loss of 11.7 billion yen (96 million U.S. dollars) was recorded, compared to operating income of 7.8 billion yen in the same quarter of the previous fiscal year. This deterioration in operating results was primarily due to the impact of the decrease in theatrical and television licensing revenues noted above.
Music
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(Billions of yen, millions of U.S. dollars)
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First Quarter ended June 30
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2014
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2015
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Change in yen
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2015
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Sales and operating revenue
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¥ |
120.0 |
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¥ |
130.2 |
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+8.5 |
% |
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$ |
1,067 |
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Operating income
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11.6 |
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31.8 |
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+172.9 |
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260 |
|
The Music segment is comprised of the Recorded Music, Music Publishing and Visual Media and Platform categories. Recorded Music includes the distribution of physical and digital recorded music and revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes various service offerings for music and visual products and the production and distribution of animation titles.
The results presented in Music include the yen-translated results of SME, a U.S.-based operation which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis, the results of Sony Music Entertainment (Japan) Inc., a Japan-based music company which aggregates its results in yen, and the yen-translated consolidated results of Sony/ATV Music Publishing LLC (“Sony/ATV”), a 50% owned U.S.-based joint venture in the music publishing business which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis.
Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the Music segment of the comparable prior period have been reclassified to conform to the current presentation. For details, please see Notes on page 8.
Sales increased 8.5% year-on-year (a 3% decrease on a constant currency basis) to 130.2 billion yen (1,067 million U.S. dollars) primarily due to the impact of the depreciation of the yen against the U.S. dollar. The decrease in sales on a constant currency basis was primarily due to lower Recorded Music sales. Recorded Music sales decreased primarily due to the continued worldwide contraction of the physical music market. Best-selling titles included Meghan Trainor’s Title, Shogo Hamada’s Journey of a Songwriter and Francis Cabrel’s In Extremis.
Operating income increased 20.1 billion yen year-on-year to 31.8 billion yen (260 million U.S. dollars). This increase was primarily due to the 151 million U.S. dollar (18.1 billion yen) gain on the remeasurement to fair value of SME’s 51% equity interest in The Orchard, which had previously been accounted for under the equity method, as a result of SME increasing its ownership interest to 100% and the positive impact of foreign exchange rates.
Financial Services
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(Billions of yen, millions of U.S. dollars)
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|
First Quarter ended June 30
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2014
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|
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2015
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Change in yen
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|
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2015
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|
Financial services revenue
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|
¥ |
247.0 |
|
|
¥ |
279.4 |
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|
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+13.1 |
% |
|
$ |
2,290 |
|
Operating income
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|
|
43.8 |
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46.0 |
|
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+5.0 |
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377 |
|
The Financial Services segment results include Sony Financial Holdings Inc. (“SFH”) and SFH’s consolidated subsidiaries such as Sony Life Insurance Co., Ltd. (“Sony Life”), Sony Assurance Inc. and Sony Bank Inc. (“Sony Bank”) The results of Sony Life discussed in the Financial Services segment differ from the results that SFH and Sony Life disclose separately on a Japanese statutory basis.
Financial services revenue increased 13.1% year-on-year to 279.4 billion yen (2,290 million U.S. dollars) primarily due to an increase in revenue at Sony Life. Revenue at Sony Life increased 15.7% year-on-year to 250.9 billion yen (2,056 million U.S. dollars) mainly due to an increase in insurance premium revenue reflecting an increase in policy amount in force, as well as an improvement in investment performance in the separate account resulting mainly from a larger rise in the Japanese stock market during the current quarter than in the same quarter of the previous fiscal year.
Operating income increased 2.2 billion yen year-on-year to 46.0 billion yen (377 million U.S. dollars). This increase was mainly due to an increase in operating income at Sony Life. Operating income at Sony Life increased 3.7 billion yen year-on-year to 40.9 billion yen (335 million U.S. dollars) primarily due to an improvement in investment performance in the general account.
All Other
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|
(Billions of yen, millions of U.S. dollars)
|
|
|
|
First Quarter ended June 30
|
|
|
|
2014
|
|
|
2015
|
|
|
Change in yen
|
|
|
2015
|
|
Sales and operating revenue
|
|
¥ |
102.9 |
|
|
¥ |
79.3 |
|
|
|
-22.9 |
% |
|
$ |
650 |
|
Operating loss
|
|
|
(20.0 |
) |
|
|
(5.0 |
) |
|
|
- |
|
|
|
(41 |
) |
All Other included the PC business in the previous fiscal year. Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating loss of All Other of the comparable prior period have been reclassified to conform to the current presentation. For details, please see Notes on page 8.
Sales decreased 22.9% year-on-year to 79.3 billion yen (650 million U.S. dollars). This significant decrease in sales was primarily due to the recording of sales in the same quarter of the previous fiscal year from the PC business which was sold in July, 2014.
Operating loss decreased 15.0 billion yen year-on-year to 5.0 billion yen (41 million U.S. dollars). This decrease was primarily due to the absence of the operating loss from the PC business in the same quarter of the previous fiscal year.
* * * * *
Cash Flows
For Consolidated Statements of Cash Flows, charts showing Sony’s cash flow information for all segments, all segments excluding the Financial Services segment and the Financial Services segment alone, please refer to pages F-4 and F-12.
Operating Activities: During the current quarter, there was a net cash outflow of 154.3 billion yen (1,265 million U.S. dollars) from operating activities, compared to a net cash inflow of 66.2 billion yen in the same quarter of the previous fiscal year.
For all segments excluding the Financial Services segment, there was a net cash outflow of 234.6 billion yen (1,923 million U.S. dollars), an increase of 207.1 billion yen, or 752.9% year-on-year. This increase was primarily due to a larger decrease in accrued expenses in other current liabilities, a larger increase in notes and accounts receivable, trade and inventories, and an increase in film costs, partially offset by factors such as a larger increase in notes and accounts payable, trade.
The Financial Services segment had a net cash inflow of 90.8 billion yen (744 million U.S. dollars), a decrease of 10.8 billion yen, or 10.6% year-on-year. This decrease was primarily due to an increase in marketable securities held by Sony Life for trading purposes.
Investing Activities: During the current quarter, Sony used 172.0 billion yen (1,410 million U.S. dollars) of net cash in investing activities, an increase of 47.3 billion yen, or 37.9% year-on-year.
For all segments excluding the Financial Services segment, there was a net cash outflow of 7.5 billion yen (61 million U.S. dollars), compared to a net cash inflow of 0.2 billion yen in the same quarter of the previous fiscal year. The net cash outflow was due to factors such as an increase in the amount of fixed asset purchases, partially offset by factors such as cash inflow from the sale of certain shares of Olympus.
The Financial Services segment used 164.5 billion yen (1,349 million U.S. dollars) of net cash, an increase of 39.7 billion yen, or 31.8% year-on-year. This increase was mainly due to a year-on-year increase in payments for investments and advances at Sony Life.
In all segments excluding the Financial Services segment, net cash used in operating and investing activities combined*1 for the current quarter was 242.1 billion yen (1,984 million U.S. dollars), an increase of 214.8 billion yen, or 785.4% year-on-year.
Financing Activities: Net cash used by financing activities during the current quarter was 7.8 billion yen (64 million U.S. dollars), a decrease of 283.5 billion yen, or 97.3% year-on-year.
For all segments excluding the Financial Services segment, there was a 61.9 billion yen (508 million U.S. dollars) net cash outflow, a decrease of 191.7 billion yen, or 75.6% year-on-year. This decrease was primarily due to the repayment of a syndicated loan in the same quarter of the previous fiscal year and a year-on-year decrease in the redemption of straight bonds.
In the Financial Services segment, financing activities provided 43.6 billion yen (358 million U.S. dollars) of net cash, compared to 45.5 billion yen of net cash used in the same quarter of the previous fiscal year. This change was primarily due to a smaller decrease in customer deposits at Sony Bank and an increase in short-term borrowings at Sony Life.
Total Cash and Cash Equivalents: Accounting for the above factors and the effect of fluctuations in foreign exchange rates, the total outstanding balance of cash and cash equivalents at June 30, 2015 was 628.1 billion yen (5,148 million U.S. dollars). Cash and cash equivalents of all segments excluding the Financial Services segment was 450.7 billion yen (3,694 million U.S. dollars) at June 30, 2015, a decrease of 65.2 billion yen, or 12.6% compared with the balance as of June 30, 2014, and a decrease of 291.2 billion yen, or 39.3% compared with the balance as of March 31, 2015. Sony believes that it continues to maintain sufficient liquidity through access to a total, translated into yen, of 716.8 billion yen (5,876 million U.S. dollars) of unused committed lines of credit with financial institutions in addition to the cash and cash equivalents balance at June 30, 2015. Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 177.4 billion yen (1,454 million U.S. dollars) at June 30, 2015, an increase of 5.9 billion yen, or 3.4% compared with the balance as of June 30, 2014, and a decrease of 30.1 billion yen, or 14.5% compared with the balance as of March 31, 2015.
*1
|
Sony has included the information for cash flow from operating and investing activities combined, excluding the Financial Services segment’s activities, as Sony’s management frequently monitors this financial measure, and believes this non-U.S. GAAP measurement is important for use in evaluating Sony’s ability to generate cash to maintain liquidity and fund debt principal and dividend payments from business activities other than its Financial Services segment. This information is derived from the reconciliations prepared in the Condensed Statements of Cash Flows on page F-12. This information and the separate condensed presentations shown below are not required or prepared in accordance with U.S. GAAP. The Financial Services segment’s cash flow is excluded from the measure because SFH, which constitutes a majority of the Financial Services segment, is a separate publicly traded entity in Japan with a significant minority interest and it, as well as its subsidiaries, secure liquidity on their own. This measure may not be comparable to those of other companies. This measure has limitations because it does not represent residual cash flows available for discretionary expenditures principally due to the fact that the measure does not deduct the principal payments required for debt service. Therefore, Sony believes it is important to view this measure as supplemental to its entire statement of cash flows and together with Sony’s disclosures regarding investments, available credit facilities and overall liquidity.
|
|
A reconciliation of the differences between the Consolidated Statement of Cash Flows reported and cash flows from operating and investing activities combined excluding the Financial Services segments’ activities is as follows:
|
|
|
(Billions of yen, millions of U.S. dollars)
|
|
|
|
First quarter ended June 30
|
|
|
|
2014
|
|
|
2015
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities reported in the consolidated statements of cash flows
|
|
¥ |
66.2 |
|
|
¥ |
(154.3 |
) |
|
$ |
(1,265 |
) |
Net cash used in investing activities reported in the consolidated statements of cash flows
|
|
|
(124.7 |
) |
|
|
(172.0 |
) |
|
|
(1,410 |
) |
|
|
|
(58.5 |
) |
|
|
(326.3 |
) |
|
|
(2,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net cash provided by operating activities within the Financial Services segment
|
|
|
101.6 |
|
|
|
90.8 |
|
|
|
744 |
|
Less: Net cash used in investing activities within the Financial Services segment
|
|
|
(124.9 |
) |
|
|
(164.5 |
) |
|
|
(1,349 |
) |
Eliminations *2
|
|
|
7.9 |
|
|
|
10.5 |
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow used by operating and investing activities combined excluding the Financial Services segment’s activities
|
|
¥ |
(27.3 |
) |
|
¥ |
(242.1 |
) |
|
$ |
(1,984 |
) |
*2
|
Eliminations primarily consist of intersegment dividend payments.
|
* * * * *
Business Segment Realignment
Sony realigned its business segments from the first quarter of the fiscal year ending March 31, 2016 to reflect modifications to its organizational structure as of April 1, 2015, primarily repositioning certain operations in All Other and the Devices segment. In connection with this realignment, the operations of Sony’s disc manufacturing business in Japan, which were included in All Other, are now included in the Music segment and the operations of So-net Corporation and its subsidiaries, which were included in All Other, are now included in the MC segment. Certain operations regarding pre-installed automotive audio products which were included in the Devices segment are now included in the HE&S segment.
In connection with these realignments, the sales and operating income (loss) of each segment in the fiscal year ended March 31, 2015 have been reclassified to conform to the presentation of the fiscal year ending March 31, 2016.
Impact of Foreign Exchange Rate Fluctuations on Sales and Operating Income (Loss)
For all segments other than Pictures and Music, the impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s quarterly weighted average exchange rate for the three months ended June 30, 2014 from the three months ended June 30, 2015 to the major transactional currencies in which the sales are denominated. The impact of foreign exchange rate fluctuations on operating income (loss) described herein is calculated by subtracting from the impact on sales the impact on cost of sales and selling, general and administrative expenses calculated by applying the same major transactional currencies calculation process to cost of sales and selling, general and administrative expenses as for the impact on sales. Since the worldwide subsidiaries of the Pictures segment and of SME and Sony/ATV in the Music segment are aggregated on a U.S. dollar basis and are translated into yen, the impact of foreign exchange rate fluctuations is calculated by applying the change in the periodic weighted average exchange rate for the three months ended June 30, 2014 from the three months ended June 30, 2015 from U.S. dollar to yen to the U.S. dollar basis operating results. This information is not a substitute for Sony’s consolidated financial statements measured in accordance with U.S. GAAP. However, Sony believes that these disclosures provide additional useful analytical information to investors regarding the operating performance of Sony.
Outlook for the Fiscal Year Ending March 31, 2016
The forecast for consolidated results for the fiscal year ending March 31, 2016, as announced on April 30, 2015, remains unchanged, as per the table below.
|
|
(Billions of yen)
|
|
|
|
July
Forecast
|
|
|
March 31, 2015
Results
|
|
|
Change from
March 31, 2015 Results
|
|
Sales and operating revenue
|
|
¥ |
7,900 |
|
|
¥ |
8,215.9 |
|
|
|
-3.8% |
|
Operating income
|
|
|
320 |
|
|
|
68.5 |
|
|
+ ¥251.5 bil
|
|
Income before income taxes
|
|
|
345 |
|
|
|
39.7 |
|
|
+ ¥305.3 bil
|
|
Net income (loss) attributable to Sony
Corporation’s stockholders
|
|
|
140 |
|
|
|
(126.0 |
) |
|
+ ¥266.0 bil
|
|
Assumed foreign currency exchange rates for the remainder of the fiscal year ending March 31, 2016 are the following. Due to the recent volatility in foreign exchange rates, the assumed foreign currency exchange rates were revised after the individual segments had already completed their forecasts. Accordingly, the impact of the difference between the currently assumed rates and the rates used when the individual segments completed their forecasts has been included in the forecast for All Other.
Assumed foreign currency exchange rates for the remainder of the current fiscal year
|
Consolidated forecast
|
Forecasts for each segment
|
1 U.S. dollar
|
approximately 125 yen
|
approximately 123 yen
|
1 Euro
|
approximately 130 yen
|
approximately 134 yen
|
(For your reference)
Assumed foreign currency exchange rates for the current fiscal year at the time of the April forecast
|
Consolidated forecast
|
Forecasts for each segment
|
1 U.S. dollar
|
approximately 120 yen
|
approximately 118 yen
|
1 Euro
|
approximately 125 yen
|
approximately 136 yen
|
The forecast for each business segment has been revised as follows:
|
|
(Billions of yen)
|
|
|
Change - July Forecast from
|
|
|
|
July
Forecast
|
|
|
April
Forecast
|
|
|
March 31, 2015
Results
|
|
|
April
Forecast
|
|
|
March 31, 2015
Results
|
|
Mobile Communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
¥ |
1,190 |
|
|
¥ |
1,310 |
|
|
¥ |
1,410.2 |
|
|
-9.2% |
|
|
-15.6% |
|
Operating loss
|
|
|
(60 |
) |
|
|
(39 |
) |
|
|
(217.6 |
) |
|
- ¥21.0 bil
|
|
|
+ ¥157.6 bil
|
|
Game & Network Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
1,490 |
|
|
|
1,370 |
|
|
|
1,388.0 |
|
|
+8.8% |
|
|
+7.3% |
|
Operating income
|
|
|
60 |
|
|
|
40 |
|
|
|
48.1 |
|
|
+ ¥20.0 bil
|
|
|
+ ¥11.9 bil
|
|
Imaging Products & Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
720 |
|
|
|
690 |
|
|
|
720.0 |
|
|
+4.3% |
|
|
- |
|
Operating income
|
|
|
60 |
|
|
|
50 |
|
|
|
54.7 |
|
|
+¥10.0 bil
|
|
|
+ ¥5.3 bil
|
|
Home Entertainment & Sound
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
1,160 |
|
|
|
1,160 |
|
|
|
1,238.1 |
|
|
- |
|
|
-6.3% |
|
Operating income
|
|
|
22 |
|
|
|
22 |
|
|
|
24.1 |
|
|
- |
|
|
- ¥2.1 bil
|
|
Devices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
1,100 |
|
|
|
1,080 |
|
|
|
927.1 |
|
|
+1.9% |
|
|
+18.7% |
|
Operating income
|
|
|
121 |
|
|
|
121 |
|
|
|
89.0 |
|
|
- |
|
|
+ ¥32.0 bil
|
|
Pictures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
1,020 |
|
|
|
1,020 |
|
|
|
878.7 |
|
|
- |
|
|
+16.1% |
|
Operating income
|
|
|
64 |
|
|
|
64 |
|
|
|
58.5 |
|
|
- |
|
|
+ ¥5.5 bil
|
|
Music
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
550 |
|
|
|
550 |
|
|
|
559.2 |
|
|
- |
|
|
-1.7% |
|
Operating income
|
|
|
74 |
|
|
|
74 |
|
|
|
60.6 |
|
|
- |
|
|
+ ¥13.4 bil
|
|
Financial Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial services revenue
|
|
|
1,060 |
|
|
|
1,060 |
|
|
|
1,083.6 |
|
|
- |
|
|
-2.2% |
|
Operating income
|
|
|
175 |
|
|
|
175 |
|
|
|
193.3 |
|
|
- |
|
|
- ¥18.3 bil
|
|
All Other, Corporate and Elimination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(196 |
) |
|
|
(187 |
) |
|
|
(242.2 |
) |
|
-¥ 9.0 bil
|
|
|
+ ¥46.2 bil
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
7,900 |
|
|
|
7,900 |
|
|
|
8,215.9 |
|
|
- |
|
|
-3.8% |
|
Operating income
|
|
|
320 |
|
|
|
320 |
|
|
|
68.5 |
|
|
- |
|
|
+ ¥251.5 bil
|
|
Mobile Communications
Sales are expected to be lower than the April forecast primarily due to an expected decrease in smartphone unit sales. Although higher than originally anticipated selling prices of smartphones and additional cost reductions are expected to offset the negative impact of the above-mentioned decrease in sales, operating loss is expected to be larger than the April forecast primarily due to the negative impact of foreign exchange rates.
Game & Network Services
Sales are expected to be higher than the April forecast primarily due to an expected increase in PS4 hardware unit sales and PS4 software sales. Operating income is expected to be above the April forecast due to the above-mentioned increase in sales, partially offset by the negative impact of foreign exchange rates and an expected increase in marketing and promotional costs.
Imaging Products & Solutions
Sales and operating income are expected to be higher than the April forecast primarily due to an expected increase in unit sales of digital cameras and the positive impact of foreign exchange rates.
Devices
Sales are expected to be higher than the April forecast primarily due to an expected increase in image sensor sales reflecting the impact of foreign exchange rates, partially offset by an expected decrease in battery business sales. The forecast for operating income remains unchanged from the April forecast mainly due to the above-mentioned increase in image sensor sales being offset mainly by the above-mentioned decrease in battery business sales.
The forecasts for sales and operating income for the HE&S, Pictures, Music, 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 forecast for capital expenditures, depreciation and amortization, as well as research and development expenses for the current fiscal year remains unchanged from the April forecast.
Consolidated
|
|
(Billions of yen)
|
|
|
|
|
|
|
July
Forecast
|
|
|
March 31, 2015
Results
|
|
|
Change from
March 31, 2015 Results
|
|
Capital expenditures*
|
|
¥ |
510 |
|
|
¥ |
251.0 |
|
|
|
+103.1 |
% |
[additions to property, plant and equipment (included above)
|
|
|
430 |
|
|
|
164.8 |
|
|
|
+160.9 |
] |
[additions to intangible assets (included above) *
|
|
|
80 |
|
|
|
86.2 |
|
|
|
-7.2 |
] |
Depreciation and amortization**
|
|
|
365 |
|
|
|
354.6 |
|
|
|
+2.9 |
|
[for property, plant and equipment (included above)
|
|
|
175 |
|
|
|
165.9 |
|
|
|
+5.5 |
] |
[for intangible assets (included above)
|
|
|
190 |
|
|
|
188.8 |
|
|
|
+0.7 |
] |
Research and development expenses
|
|
|
490 |
|
|
|
464.3 |
|
|
|
+5.5 |
|
* Does not include the increase in intangible assets resulting from business acquisitions.
** The forecast for depreciation and amortization includes amortization expenses for deferred insurance acquisition costs.
Sony without Financial Services
|
|
(Billions of yen)
|
|
|
|
|
|
|
July
Forecast
|
|
|
March 31, 2015
Results
|
|
|
Change from
March 31, 2015 Results
|
|
Capital expenditures*
|
|
¥ |
501 |
|
|
¥ |
243.9 |
|
|
|
+105.4 |
% |
[additions to property, plant and equipment (included above)
|
|
|
428 |
|
|
|
163.4 |
|
|
|
+161.9 |
] |
[additions to intangible assets (included above) *
|
|
|
73 |
|
|
|
80.5 |
|
|
|
-9.3 |
] |
Depreciation and amortization**
|
|
|
294 |
|
|
|
288.4 |
|
|
|
+1.9 |
|
[for property, plant and equipment (included above)
|
|
|
174 |
|
|
|
164.7 |
|
|
|
+5.7 |
] |
[for intangible assets (included above)
|
|
|
120 |
|
|
|
123.7 |
|
|
|
-3.0 |
] |
* Does not include the increase in intangible assets resulting from business acquisitions.
This forecast is based on management’s current expectations and is subject to uncertainties and changes in circumstances. Actual results may differ materially from those included in this forecast due to a variety of factors. See “Cautionary Statement” below.
* * * * *
Cautionary Statement
Statements made in this release with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to:
(i)
|
the global economic environment in which Sony operates and the economic conditions in Sony’s markets, particularly levels of consumer spending;
|
(ii)
|
foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in which Sony’s assets and liabilities are denominated;
|
(iii)
|
Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including televisions, game platforms and smartphones, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing consumer preferences;
|
(iv)
|
Sony’s ability and timing to recoup large-scale investments required for technology development and production capacity;
|
(v)
|
Sony’s ability to implement successful business restructuring and transformation efforts under changing market conditions;
|
(vi)
|
Sony’s ability to implement successful hardware, software, and content integration strategies for all segments excluding the Financial Services segment, and to develop and implement successful sales and distribution strategies in light of the Internet and other technological developments;
|
(vii)
|
Sony’s continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to prioritize investments correctly (particularly in the electronics businesses);
|
(viii)
|
Sony’s ability to maintain product quality;
|
(ix)
|
the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures and other strategic investments;
|
(x)
|
significant volatility and disruption in the global financial markets or a ratings downgrade;
|
(xi)
|
Sony’s ability to forecast demands, manage timely procurement and control inventories;
|
(xii)
|
the outcome of pending and/or future legal and/or regulatory proceedings;
|
(xiii)
|
shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment;
|
(xiv)
|
the impact of unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment;
|
(xv)
|
Sony’s ability to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sony’s business information, potential business disruptions or financial losses; and
|
(xvi)
|
risks related to catastrophic disasters or similar events.
|
Risks and uncertainties also include the impact of any future events with material adverse impact.
Investor Relations Contacts:
Tokyo
|
|
New York
|
|
London
|
Atsuko Murakami
|
|
Justin Hill
|
|
Haruna Nagai
|
+81-(0)3-6748-2111
|
|
+1-212-833-6722
|
|
+44-(0)19-3281-6000
|
IR home page: http://www.sony.net/IR/
Presentation slides: http://www.sony.net/SonyInfo/IR/financial/fr/15q1_sonypre.pdf