Going Concern Assumption
Not Applicable
Significant Changes in Shareholders' Equity
Not Applicable
Accounting Policies and Other Information
(Recently adopted accounting pronouncements)
Measurement of credit losses on financial instruments
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2016-13, which amends the accounting guidance for credit losses on financial instruments. The ASU requires the consideration of all available relevant information when estimating expected credit losses, including past events,
current conditions and forecasts and their implications for expected credit losses. This ASU was effective for Sony as of April 1, 2020. The adoption of this ASU did not have a material impact on Sony’s results of operations and
financial position.
Improvements to Accounting for Costs of Films and License Agreements for Program Materials
In March 2019, the FASB issued ASU 2019-02, which updates the guidance for the capitalization of film costs associated with episodic television series, requires the use of fair
value rather than net realizable value when determining potential impairments of broadcasting rights, and modifies the presentation and disclosure requirements for films and broadcasting rights. In addition, upon capitalization of
film costs entities are required to determine qualitatively whether the predominant monetization strategy is on a title-by-title basis or together with other films and/or broadcast rights as part of a film group, such as in the case
of a release of a film as part of a library of content on a streaming service. In the case of a film group, impairments are evaluated at the overall film group level rather than the individual title level. This ASU was effective for
Sony as of April 1, 2020 and was applied on a prospective basis. Upon adoption, Sony reclassified broadcasting rights in the Pictures segment and animation film production costs in the Music segment included in inventories to film
costs.
Changes to the opening balances resulting from the adoption of the above ASUs were as follows:
|
|
|
Yen in millions
|
|
|
|
|
March 31,
2020
|
|
|
Impact of Adoption
|
|
|
April 1,
2020
|
|
|
|
ASU 2016-13
|
|
|
ASU 2019-02
|
|
|
Total
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and accounts receivable, trade and contract assets
|
|
|
1,028,793
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,028,793
|
|
|
Allowance for credit losses *
|
|
|
(25,873
|
)
|
|
|
(280
|
)
|
|
|
–
|
|
|
|
(280
|
)
|
|
|
(26,153
|
)
|
|
Inventories
|
|
|
589,969
|
|
|
|
–
|
|
|
|
(31,517
|
)
|
|
|
(31,517
|
)
|
|
|
558,452
|
|
|
Other receivables
|
|
|
188,106
|
|
|
|
(30
|
)
|
|
|
–
|
|
|
|
(30
|
)
|
|
|
188,076
|
|
|
Prepaid expenses and other current assets
|
|
|
594,021
|
|
|
|
(12
|
)
|
|
|
–
|
|
|
|
(12
|
)
|
|
|
594,009
|
|
|
Total current assets
|
|
|
5,735,145
|
|
|
|
(322
|
)
|
|
|
(31,517
|
)
|
|
|
(31,839
|
)
|
|
|
5,703,306
|
|
|
Film costs
|
|
|
427,336
|
|
|
|
–
|
|
|
|
31,517
|
|
|
|
31,517
|
|
|
|
458,853
|
|
|
Investments and advances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities investments and other
|
|
|
12,526,210
|
|
|
|
780
|
|
|
|
–
|
|
|
|
780
|
|
|
|
12,526,990
|
|
|
Allowance for credit losses
|
|
|
–
|
|
|
|
(6,341
|
)
|
|
|
–
|
|
|
|
(6,341
|
)
|
|
|
(6,341
|
)
|
|
Total investments and advances
|
|
|
12,734,132
|
|
|
|
(5,561
|
)
|
|
|
–
|
|
|
|
(5,561
|
)
|
|
|
12,728,571
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
210,372
|
|
|
|
45
|
|
|
|
–
|
|
|
|
45
|
|
|
|
210,417
|
|
|
Other
|
|
|
340,005
|
|
|
|
(721
|
)
|
|
|
–
|
|
|
|
(721
|
)
|
|
|
339,284
|
|
|
Total other assets
|
|
|
3,234,086
|
|
|
|
(676
|
)
|
|
|
–
|
|
|
|
(676
|
)
|
|
|
3,233,410
|
|
|
Total assets
|
|
|
23,039,343
|
|
|
|
(6,559
|
)
|
|
|
–
|
|
|
|
(6,559
|
)
|
|
|
23,032,784
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
549,538
|
|
|
|
(1,504
|
)
|
|
|
–
|
|
|
|
(1,504
|
)
|
|
|
548,034
|
|
|
Total liabilities
|
|
|
18,242,041
|
|
|
|
(1,504
|
)
|
|
|
–
|
|
|
|
(1,504
|
)
|
|
|
18,240,537
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sony Corporation’s stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
2,768,856
|
|
|
|
(3,669
|
)
|
|
|
–
|
|
|
|
(3,669
|
)
|
|
|
2,765,187
|
|
|
Total Sony Corporation’s stockholders’ equity
|
|
|
4,125,306
|
|
|
|
(3,669
|
)
|
|
|
–
|
|
|
|
(3,669
|
)
|
|
|
4,121,637
|
|
|
Noncontrolling interests
|
|
|
664,229
|
|
|
|
(1,386
|
)
|
|
|
–
|
|
|
|
(1,386
|
)
|
|
|
662,843
|
|
|
Total equity
|
|
|
4,789,535
|
|
|
|
(5,055
|
)
|
|
|
–
|
|
|
|
(5,055
|
)
|
|
|
4,784,480
|
|
|
Total liabilities and equity
|
|
|
23,039,343
|
|
|
|
(6,559
|
)
|
|
|
–
|
|
|
|
(6,559
|
)
|
|
|
23,032,784
|
|
* Under ASU 2016-13, Sony changed the presentation from “Allowance for doubtful accounts” to “Allowance for credit losses” on the consolidated balance sheets.
(Number of Consolidated Subsidiaries and Affiliated Companies)
As of June 30, 2020, Sony had 1,402 consolidated subsidiaries (including variable interest entities) and 141 affiliated companies accounted for under the equity method.
(Weighted-average Number of Outstanding Shares Used for the Computation of EPS of Common Stock)
|
|
|
(Thousands of shares)
|
|
|
|
|
Three months ended June 30
|
|
|
Net income attributable to Sony Corporation’s stockholders
|
|
2019
|
|
|
2020
|
|
|
— Basic
|
|
1,249,160
|
|
|
1,220,629
|
|
|
— Diluted
|
|
1,276,014
|
|
|
1,247,718
|
|
The dilutive effect in the weighted-average number of outstanding shares for the three months ended June 30, 2019 and 2020 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 EP&S segment includes the Televisions
business, the Audio and Video business, the Still and Video Cameras business, the smartphone business and Internet-related service business. The I&SS 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 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 items. Such income tax provision is separately reported from the provision based on the ETR in the interim
period in which it occurs.
(Reclassifications)
Certain reclassifications of the financial statements and accompanying footnotes for the three months ended June 30, 2019 have been made to conform to the presentation for the three
months ended June 30, 2020.
(Subsequent events)
Tender Offer for Common Shares and Stock Acquisition Rights of Sony Financial Holdings Inc.
Sony Corporation resolved, at the meeting of its Board of Directors held on May 19, 2020, to offer to acquire the common shares of Sony Financial Holdings Inc. (“SFH”), a consolidated
subsidiary of Sony Corporation, not held by Sony Corporation and the related stock acquisition rights through a tender offer (“Tender Offer”), with the aim of making SFH a wholly-owned subsidiary of Sony Corporation, and Sony
Corporation undertook the Tender Offer from May 20, 2020 through July 13, 2020. Because the aggregate number of shares (including shares subject to stock acquisition rights) tendered through the Tender Offer (the “Tendered Share
Certificates, Etc.”) was equal to or greater than the minimum number of shares to be purchased through the Tender Offer, all of the Tendered Share Certificates, Etc. have been purchased by Sony Corporation. In order to procure the
funds necessary to acquire the target shares and the related stock acquisition rights for the Tender Offer, Sony Corporation borrowed 322.5 billion yen from a Japanese private bank.
As a result of the Tender Offer, Sony Corporation has commenced the procedures pursuant to the provisions of Article 179 of the Companies Act of Japan, for the mandatory purchase of
all of SFH’s remaining common shares not held by Sony Corporation.
<Overview of Tender Offer>
1. Shares and Stock Acquisition Rights to be purchased: Common shares (excluding SFH’s common shares owned by Sony Corporation and the treasury shares owned by SFH) and the related
stock acquisition rights
2. Period: From May 20, 2020 through July 13, 2020
3. Price: 2,600 yen per common share
259,900 yen per unit of stock acquisition right
4. Number of Shares purchased (including the number of shares subject to stock acquisition rights): 123,655,138 shares
5. Percentage of Ownership of Share Certificates, Etc. After Purchase, Etc.: 93.46%
Borrowing Funds for Acquisition of EMI Music Publishing
In July 2020, in order to enhance liquidity, Sony Corporation executed an approximate 2 billion U.S. dollar bank loan from a group of lenders with eight- to ten-year maturity terms in connection with Sony’s
acquisition of the remaining approximately 60% equity interest in DH Publishing, L.P., which owns EMI Music Publishing, in November 2018. This bank loan utilizes the Japan Bank for International Cooperation (“JBIC”) Facility,
which was established to facilitate overseas mergers and acquisitions by Japanese companies. Approximately 60%, or 1.2 billion U.S. dollars, is from the JBIC
Facility and borrowed in U.S. dollars and approximately 40%, or 86 billion yen (approximately 0.8 billion U.S. dollars), is from Japanese private banks and borrowed in yen.
Setting of parameters for repurchase of shares of its own common stock
Sony Corporation approved on August 4, 2020 by resolution of the Board of Directors the setting of the following parameters for repurchase of its own common stock pursuant to the
Companies Act and Sony Corporation’s Articles of Incorporation:
1. Total number of shares for repurchase: 20 million shares (maximum)
2. Total purchase price for repurchase of shares: 100 billion yen (maximum)
3. Period of repurchase: August 5, 2020 to March 31, 2021
Current View Regarding the Impact on the Business from the Spread of the Coronavirus Disease 2019 (“COVID-19”)
Conditions at Sony’s Manufacturing Plants Resulting from the Spread of COVID-19
Sony has a total of six in-house manufacturing plants located in China and Malaysia. Although these plants were shut down for a period of time between January and April 2020, they have since resumed operations and are currently
operating at the levels they were before the spread of the virus. Sony shut down its manufacturing plant in the U.K. (Wales) from March 26, 2020 in accordance with a mandate from the local government. From March 31, 2020, Sony has
resumed its U.K. manufacturing operations after receiving approval from local authorities, and operations are returning to the level they were before the spread of the virus. Business has been impacted by factors such as restrictions
on the movement of people across national borders, making it difficult for Sony to send engineers to manufacturing hubs such as China and countries in Southeast Asia for the purpose of helping with new product launches or giving
instructions on manufacturing.
Game & Network Services (G&NS)
Although production of PlayStation®4 hardware was slightly impacted due to issues in the component supply chain, these issues have now been addressed. Sales of game software that is downloaded from the network, as well as
PlayStation®Plus (“PS Plus”) and PlayStationTMNow subscriber numbers, have significantly increased. Regarding the launch of PlayStation®5 (“PS5™”), although factors such as constraints due to employees working from home
and restrictions on international travel remain, necessary measures are being taken and preparations are underway with the launch of the console scheduled for the 2020 holiday season. At this time, no major problems have arisen in
the game software development pipeline for Sony’s own first-party studios or its partners’ studios.
Music
Around the world, the release of new music is being delayed primarily due to some artists being unable to record songs and music videos. The impact on profitability from the delays in new music is limited at this time in the U.S.
and other countries where the proportion of music that is streamed is high. However, in countries like Japan where the proportion of music that is streamed is relatively low, CDs and other packaged media sales are decreasing due to
restrictions on going outside. Ticket and merchandising revenues are also decreasing, as concerts and other events are being postponed and cancelled in Japan and other areas. Due to a global reduction in advertising spending,
revenue from advertising-supported streaming services and revenue from the licensing of music in TV commercials is decreasing. Additionally, delays in the production of motion pictures and TV shows are causing a decline in music
licensing revenue.
Pictures
Although some movie theaters are reopening around the world, a large number are still closed or must limit the number of patrons, leading to box office revenue being impacted. For this reason, Sony generally has not been able to
release its already completed films in theaters. Due to restrictions on people’s movement, the production schedules of new motion pictures and television shows by Sony are significantly delayed around the world, especially in the
U.S. As a result, in Motion Pictures, theatrical revenues and revenues generated after theatrical release, including home entertainment and television licensing sales, are expected to decrease. On the other hand, digital rental and
sell-through revenues for films which Sony released theatrically prior to the spread of COVID-19 have been strong. In Television Productions, revenues are beginning to be impacted by delays in the delivery of shows to TV networks and
digital distribution services. Due to a global reduction in advertising spending, advertising revenue in Media Networks is decreasing significantly, especially in India.
Electronics Products & Solutions (EP&S)
The four major in-house and outsourcing manufacturing sites for Sony’s TV business, as well as the factories owned by Sony in China and Thailand that make digital cameras and smartphones, are currently operating as usual. Retail
sales have decreased significantly due to the closure of retail stores globally, the impact of which is continuing to affect markets like Asia and Latin America. Conversely, in Japan, Europe, North America and China, retail stores
are gradually reopening. In addition, although sales and profit from digital cameras were significantly impacted by a substantial slowdown in demand around the world, this business is beginning to show signs of recovery, albeit at a
relatively slower pace compared to other product categories.
Imaging & Sensing Solutions (I&SS)
There has been no major impact on Sony’s manufacturing plants in Japan, which are operating as usual. Sony also understands that factory operations and supply chains at most of its major mobile customers, to whom it sells its
image sensors, have been recovering. On the other hand, image sensor sales are decreasing primarily due to a slowdown in the smartphone market, which is the final outlet for Sony’s products, and a change in the overall composition of
sales in that market resulting from a shift from high-end to mid-range and moderately priced models.
Financial Services
All in-person sales activity of the Lifeplanner® sales employees at Sony Life Insurance Co., Ltd. (“Sony Life”) was temporarily suspended pursuant to the announcement of a state of emergency by the Japanese government, which began
in April 2020. After the state of emergency was fully lifted on May 25, 2020, Sony Life resumed these sales activities from June 1, 2020, and is also expanding its remote consulting services. Despite a gradual recovery, acquisitions
of new insurance policies have decreased compared to the previous fiscal year, and the segment is being impacted by an increase in various expenses including compensation for sales employees. It is possible that fluctuations in the
financial market could impact the financial results of this segment going forward.
Financial results for the three months ended June 30, 2020 are disclosed in the Presentation, Speech Transcript, Quarterly Securities Report (to be furnished on August 11, 2020) and other materials, all
of which are available at Sony’s homepage: https://www.sony.net/SonyInfo/IR/.
Outlook for the Fiscal Year Ending March 31, 2021
The forecast for consolidated results for the fiscal year ending March 31, 2021 is as follows:
|
|
|
(Billions of yen)
|
|
|
|
|
|
|
|
March 31, 2020
Results
|
|
|
March 31, 2021
August Forecast
|
|
|
Change from
March 31, 2020 Results
|
|
|
Sales and operating revenue
|
|
¥
|
8,259.9
|
|
|
|
8,300.0
|
|
|
|
+40.1
|
|
|
|
+0.5
|
%
|
|
Operating income
|
|
|
845.5
|
|
|
|
620.0
|
|
|
|
-225.5
|
|
|
|
-26.7
|
%
|
|
Income before income taxes
|
|
|
799.5
|
|
|
|
685.0
|
|
|
|
-114.5
|
|
|
|
-14.3
|
%
|
|
Net income attributable to Sony Corporation’s stockholders
|
|
|
582.2
|
|
|
|
510.0
|
|
|
|
-72.2
|
|
|
|
-12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Billions of yen)
|
|
|
|
|
|
|
|
|
|
|
For all segments excluding the Financial Services segment *
|
|
March 31, 2020
Results
|
|
|
March 31, 2021
August Forecast
|
|
|
Change from
March 31, 2020 Results
|
|
|
Net cash provided by operating activities
|
|
¥
|
762.9
|
|
|
|
550.0
|
|
|
|
-212.9
|
|
|
|
-27.9
|
%
|
* Cash flow for all segments excluding the Financial Services segment is not a measure in accordance with U.S. GAAP. However, Sony believes that this disclosure may be useful information to investors.
Please refer to page F-6 for details about the preparation of the Condensed Statements of Cash Flows.
Assumed foreign exchange rates for the fiscal year ending March 31, 2021 are the following:
|
|
(For your reference)
Average foreign currency exchange rates for the
fiscal year ended March 31, 2020
|
Assumed foreign currency exchange rates
for the nine months ending March 31,
2021
|
|
1 U.S. dollar
|
108.7 yen
|
approximately 107 yen
|
|
1 Euro
|
120.8 yen
|
approximately 120 yen
|
Consolidated sales and operating revenue (“sales”) for the fiscal year ending March 31, 2021 are expected to be essentially flat year-on-year due to expected increases in sales in the Game & Network Services (“G&NS”) and
Financial Services segments, substantially offset by decreases in sales in the Pictures, Electronics Products & Solutions, Imaging & Sensing Solutions (“I&SS”) and Music segments.
Consolidated operating income is expected to decrease significantly year-on-year due to expected decreases in operating income in I&SS and all other segments, with the exception of the Financial Services and G&NS segments,
where operating income is expected to increase. Restructuring charges are expected to be approximately 25 billion yen in the fiscal year ending March 31, 2021, essentially flat year-on-year. 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 decrease due to the impact of the above-mentioned decrease in consolidated operating income, partially offset by an expected increase in other income primarily resulting from the recording
of unrealized gains on securities.
Net income attributable to Sony Corporation’s stockholders is expected to decrease due to the impact of the above-mentioned expected decrease in income before income taxes, partially offset by an expected reduction in tax expense
and a decrease in net income attributable to non-controlling interests as a result of Sony Financial Holdings Inc. (“SFH”) becoming a wholly-owned subsidiary.
The above forecast includes an expected increase in net income attributable to Sony Corporation’s stockholders that is based on the assumption that SFH will become a wholly-owned subsidiary of Sony Corporation as of September 2,
2020. Please also refer to the Note “Tender Offer for Common Shares and Stock Acquisition Rights of Sony Financial Holdings Inc.” on page F-11.
As of March 31, 2020, Sony had an approximately 270 billion yen valuation allowance recorded against its Japan national net deferred tax assets that are attributable to Sony Corporation and its national tax filing group in Japan.
Because Sony’s Japan businesses are gradually recovering profitability despite the unfavorable impact from the spread of COVID-19, and because additional profit is expected in the national tax filing group in Japan due to making SFH a
wholly-owned subsidiary during the second quarter of the fiscal year ending March 31, 2021, it is reasonably possible that a significant portion 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 above forecast as Sony continues to monitor the possibility of such reversal.
The forecast for each business segment for the fiscal year ending March 31, 2021 is as follows:
|
(Billions of yen)
|
|
(Billions of yen)
|
|
|
|
|
March 31, 2020
Results
|
|
|
March 31, 2021
August Forecast
|
|
|
Game & Network Services (G&NS)
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
¥
|
1,977.6
|
|
|
¥
|
2,500
|
|
|
Operating income
|
|
|
238.4
|
|
|
|
240
|
|
|
Music
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
849.9
|
|
|
|
790
|
|
|
Operating income
|
|
|
142.3
|
|
|
|
130
|
|
|
Pictures
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
1,011.9
|
|
|
|
760
|
|
|
Operating income
|
|
|
68.2
|
|
|
|
41
|
|
|
Electronics Products & Solutions (EP&S)
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
1,991.3
|
|
|
|
1,870
|
|
|
Operating income
|
|
|
87.3
|
|
|
|
60
|
|
|
Imaging & Sensing Solutions (I&SS)
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
1,070.6
|
|
|
|
1,000
|
|
|
Operating income
|
|
|
235.6
|
|
|
|
130
|
|
|
Financial Services
|
|
|
|
|
|
|
|
|
|
Financial services revenue
|
|
|
1,307.7
|
|
|
|
1,400
|
|
|
Operating income
|
|
|
129.6
|
|
|
|
142
|
|
|
All Other, Corporate and elimination
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(55.9
|
)
|
|
|
(123
|
)
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
Sales and operating revenue
|
|
|
8,259.9
|
|
|
|
8,300
|
|
|
Operating income
|
|
|
845.5
|
|
|
|
620
|
|
Game & Network Services (G&NS)
Sales are expected to increase significantly year-on-year mainly due to an expected significant increase in sales of game software and hardware as a result of the launch of PS5. Operating income is expected to be essentially flat
year-on-year primarily due to the above-mentioned expected significant increase in game software sales and PS Plus sales, substantially offset by an expected increase in selling, general and administrative expenses related to the
introduction of PS5 and an expected increase in the cost of sales ratio for hardware.
Music
Sales are expected to decrease year-on-year primarily due to the impact of COVID-19, partially offset by an expected increase in revenues from paid subscription streaming services. This is mainly due to an expected decrease in
sales of physical media in Recorded Music, the expected impact of the postponement and cancellation of live events in Visual Media and Platform, and an expected decrease in music licensing revenues in Music Publishing. Operating
income is expected to decrease year-on-year primarily due to the impact of the above-mentioned expected decrease in sales, partially offset by the recording of a 6.5 billion yen gain on the sale of a portion of shares of Pledis
Entertainment Co., Ltd. during the three months ended June 30, 2020.
Pictures
Sales are expected to decrease significantly year-on-year across all categories mainly due to a decrease in the number of theatrical releases resulting from the impact of theater closures as a result of COVID-19. In addition, the
prior fiscal year also benefited from the strong performances of several major theatrical releases. Operating income is expected to decrease significantly due to the decrease in sales, partially offset by an expected decrease in
marketing costs resulting from the above-mentioned decrease in the number of theatrical releases.
Electronics Products & Solutions (EP&S)
Sales are expected to decrease mainly due to a decrease in sales in the first quarter, resulting from COVID-19, as well as the impact of foreign exchange rates. Operating income is expected to decrease significantly year-on-year
primarily due to the above-mentioned decrease in sales as well as the negative impact of foreign exchange rates, partially offset by significant reductions in operating costs, including cost reductions resulting from restructuring
initiatives undertaken prior to the start of the fiscal year ending March 31, 2021 in Mobile Communications.
Imaging & Sensing Solutions (I&SS)
Sales are expected to decrease primarily due to a decrease in sales of image sensors mainly resulting from a deterioration of the product mix of image sensors for mobile products and a decrease in unit sales of image sensors for
digital cameras, primarily resulting from the impact of COVID-19. Operating income is expected to decrease significantly year-on-year primarily due to the impact of the above-mentioned decrease in sales, and an expected increase in
research and development expenses as well as in depreciation and amortization expenses.
Financial Services
Financial services revenue is expected to increase due to an increase in net gains on investments in the separate account, as well as an improvement in valuation gains and losses on securities at Sony Bank Inc. (“Sony Bank”),
partially offset by a decrease in premiums from single premium insurance. Operating income is expected to increase year-on-year primarily due to an improvement in valuation gains and losses on securities at Sony Bank, partially
offset by expenses for various provisions related to COVID-19.
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 above forecast.
The above forecast for each segment 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-based results of Sony Music Entertainment (Japan) Inc. and the yen-translated results of Sony Music Entertainment, Sony/ATV Music Publishing LLC and EMI Music Publishing Ltd., which
aggregate the results of their worldwide subsidiaries on a U.S. dollar basis.
The results presented in Pictures are a yen-translation of the results of Sony Pictures Entertainment Inc., which aggregates the results of its worldwide subsidiaries on a U.S. dollar basis.
The Financial Services segment results include SFH and SFH’s consolidated subsidiaries such as Sony Life, Sony Assurance Inc. and Sony Bank. The results discussed in the Financial Services segment differ from the results that SFH
discloses 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, pandemic disease 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. The continued impact of COVID-19 could heighten many of the risks and uncertainties noted above. 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.