---

No. 16-046E

3:00 P.M. JST, April 28, 2016

Consolidated Financial Results for the Fiscal Year Ended March 31, 2016

Tokyo, April 28, 2016 -- Sony Corporation today announced its consolidated financial results for the fiscal year ended March 31, 2016 (April 1, 2015 to March 31, 2016).

 

 

(Billions of yen, millions of U.S. dollars, except per share amounts)
		Fiscal Year ended March 31
		2015				2016				Change in yen				2016*
Sales and operating revenue			¥8,215.9				¥8,105.7				–1.3	%			$71,732
Operating income			68.5				294.2				+329.2				2,604
Income before income taxes			39.7				304.5				+666.5				2,695
Net income (loss) attributable to Sony Corporation’s stockholders			(126.0	)			147.8				–				1,308
Net income (loss) attributable to Sony Corporation’s stockholders per share of common stock:
- Basic			¥(113.04	)			¥119.40				–				$1.06
- Diluted			(113.04	)			117.49				–				1.04

 

 

* U.S. dollar amounts have been translated from yen, for convenience only, at the rate of 113 yen = 1 U.S. dollar, the approximate Tokyo foreign exchange market rate as of March 31, 2016.

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 fiscal years ended March 31, 2015 and 2016 are presented below.

Sales and operating revenue (“Sales”) decreased 1.3% compared to the previous fiscal year (“year-on-year”) to 8,105.7 billion yen (71,732 million U.S. dollars).  This decrease was mainly due to a significant decrease in Mobile Communications (“MC”) segment sales, reflecting a significant decrease in smartphone unit sales, partially offset by an increase in Game & Network Services (“G&NS”) segment sales, reflecting a significant increase in PlayStation®4 (“PS4”) software sales, and in Music segment sales mainly reflecting depreciation of the yen against the U.S. dollar.  On a constant currency basis, sales decreased 4% year-on-year.  For further details about the impact of foreign exchange rate fluctuations on sales and operating income (loss), see Notes on page 11.

Operating income increased 225.6 billion yen year-on-year to 294.2 billion yen (2,604 million U.S. dollars).  This significant increase was primarily due to significant improvements in the results of the MC segment and All Other, as well as the G&NS, Imaging Products & Solutions (“IP&S”), Music and Home Entertainment & Sound (“HE&S”) segments.  The increase in consolidated operating income was partially offset by a significant deterioration in the operating results of the Devices, Financial Services and Pictures segments.

---

Operating income during the current fiscal year includes a 59.6 billion yen (528 million U.S. dollars) impairment charge against long-lived assets in the camera module business and a 30.6 billion yen (271 million U.S. dollars) impairment charge against long-lived assets in the battery business, both of which were recorded in the Devices segment, as well as a 151 million U.S. dollars (18.1 billion yen) gain on the remeasurement to fair value of Sony Music Entertainment’s (“SME”) 51% equity interest in Orchard Media, Inc. (“The Orchard”), which had previously been accounted for under the equity method, as a result of SME increasing its ownership interest to 100%, recorded in the Music Segment.  It also includes a gain of 12.3 billion yen (109 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 previous fiscal year included a 176.0 billion yen impairment charge against goodwill recorded in the MC segment, a gain of 14.8 billion yen recognized on the sale of certain buildings and premises at the Gotenyama Technology Center in Japan, recorded in Corporate and elimination, and an 11.2 billion yen write-down of PlayStation®Vita (“PS Vita”) and PlayStation®TV (“PS TV”) components recorded in the G&NS segment.

During the current fiscal year, restructuring charges, net, decreased 59.8 billion yen year-on-year to 38.3 billion yen (339 million U.S. dollars).

Equity in net income of affiliated companies, recorded within operating income, decreased 1.7 billion yen year-on-year to 2.2 billion yen (20 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 10.3 billion yen (91 million U.S. dollars), an improvement of 39.1 billion yen year-on-year mainly due to an increase in the gain on securities investments.  The gain on sales of securities investments in the current fiscal year includes a 46.8 billion yen (414 million U.S. dollars) gain on the sale of certain shares of Olympus Corporation and a 2.7 billion yen (24 million U.S. dollars) gain on the sale of shares in connection with the above-mentioned formation of a logistics joint venture.  The gain on sales of securities investments in the previous fiscal year included a 4.8 billion yen gain on Sony’s shares in SQUARE ENIX HOLDINGS CO., LTD.

Income before income taxes increased 264.8 billion yen year-on-year to 304.5 billion yen (2,695 million U.S. dollars).

Income taxes: During the current fiscal year, Sony recorded 94.8 billion yen (839 million U.S. dollars) of income tax expense, resulting in an effective tax rate of 31.1%.  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, the reversal of valuation allowances on deferred tax assets for local taxes by a subsidiary in Japan, and an income tax benefit due to a reduction in the corporate tax rate in Japan which resulted in a reduction of net deferred tax liabilities.  These reductions were partially offset by increases in valuation allowances for deferred tax assets in the national tax filing group in Japan and certain foreign subsidiaries.  During the previous fiscal year, Sony recorded 88.7 billion yen of income tax expense, and Sony’s effective tax rate exceeded the Japanese statutory tax rate.  This was due to the fact that Sony Corporation and its national tax filing group in Japan, which had established valuation allowances, incurred losses and, as such Sony continued to not recognize the associated tax benefits, except to the extent of certain tax benefits associated with the impact of gains in other comprehensive income.  The higher tax rate was also due to a nondeductible goodwill impairment recorded during the previous fiscal year.

Net income attributable to Sony Corporation’s stockholders, which deducts net income attributable to noncontrolling interests, was 147.8 billion yen (1,308 million U.S. dollars), compared to a loss of 126.0 billion yen in the previous fiscal year.

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

---

Mobile Communications (MC)

 

 

	(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
	2015			2016			Change in yen			2016
Sales and operating revenue		¥1,410.2			¥1,127.5			–20.0%			$9,978
Operating loss		(217.6	)		(61.4	)		–			(544	)

 

 

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 11.

Sales decreased 20.0% year-on-year (a 20% decrease on a constant currency basis) to 1,127.5 billion yen (9,978 million U.S. dollars).  This decrease was due to a strategic decision not to pursue scale in order to improve profitability, resulting in a significant decrease in smartphone unit sales, partially offset by an improvement in the product mix of smartphones, reflecting an increased focus on high value-added models.

Operating loss decreased 156.1 billion yen year-on-year to 61.4 billion yen (544 million U.S. dollars).  This significant decrease was primarily due to the absence in the current fiscal year of the above-mentioned goodwill impairment charge of 176.0 billion yen recorded in the previous fiscal year.  The operating results were also primarily affected by the negative impact of the appreciation of the U.S. dollar, reflecting a high ratio of U.S. dollar-denominated costs, and an increase in restructuring charges.  The negative impact of the above-mentioned decrease in smartphone unit sales was offset by the improvement in product mix, as well as cost reductions.  During the current fiscal year, there was a 67.5 billion yen negative impact from foreign exchange rate fluctuations.

Game & Network Services (G&NS)

 

	(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
	2015				2016			Change in yen			2016
Sales and operating revenue		¥1,388.0				¥1,551.9			+11.8%			$13,734
Operating income		48.1				88.7			+84.3			785

 

 

 

The G&NS segment includes the Hardware, Network, and Other categories.  Hardware includes home and portable game consoles; Network includes network services relating to game, video and music content provided by Sony Network Entertainment International LLC (consolidated into Sony Interactive Entertainment LLC on April 1, 2016); Other includes packaged software and peripheral devices.

Sales increased 11.8% year-on-year (a 10% increase on a constant currency basis) to 1,551.9 billion yen (13,734 million U.S. dollars).  This significant increase was primarily due to increases in PS4 software sales, including sales through the network, and PS4 hardware unit sales, partially offset by a decrease in PlayStation®3 (“PS3”) software and hardware sales.

Operating income increased 40.6 billion yen year-on-year to 88.7 billion yen (785 million U.S. dollars).  This significant increase was primarily due to the increase in PS4 software sales and PS4 hardware cost reductions as well as the absence in the current fiscal year of an 11.2 billion yen write-down of PS Vita and PS TV components recorded in the previous fiscal year.  Partially offsetting the increase in operating income were the negative impact of the appreciation of the U.S. dollar, reflecting a high ratio of U.S. dollar-denominated costs, and the decrease in PS3 software sales.  During the current fiscal year, there was a 47.7 billion yen negative impact from foreign exchange rate fluctuations.

---

Imaging Products & Solutions (IP&S)

 

	(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
		2015		2016		Change in yen			2016
Sales and operating revenue		¥723.9		¥711.2		–1.7%			$6,294
Operating income		41.8		72.1		+72.7			638

The IP&S segment includes the Digital Imaging Products, Professional Solutions and Other categories.  Digital Imaging Products includes compact digital cameras, interchangeable single-lens cameras and video cameras; Professional Solutions includes broadcast- and professional-use products; Other includes operating revenues and flow cytometers.  Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the IP&S segment of the comparable prior period have been reclassified to conform to the current presentation. For details, please see Notes on page 11.

Sales decreased 1.7% year-on-year (a 5% decrease on a constant currency basis) to 711.2 billion yen (6,294 million U.S. dollars).  Sales were essentially flat year-on-year primarily due to decreases in unit sales of video cameras and digital cameras* reflecting a contraction of the market, substantially offset by an improvement in the product mix of digital cameras reflecting a shift to high value-added models.

Operating income increased 30.4 billion yen year-on-year to 72.1 billion yen (638 million U.S. dollars).  This significant increase was mainly due to the improvement in the product mix of digital cameras and cost reductions.  During the current fiscal year, there was a 1.6 billion yen negative impact from foreign exchange rate fluctuations.

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

Home Entertainment & Sound (HE&S)

 

 

(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
		2015			2016			Change in yen			2016
Sales and operating revenue		¥1,238.1			¥1,159.0			–6.4%			$10,257
Operating income		24.1			50.6			+109.8			447

 

 

The HE&S segment includes the Televisions and Audio and Video categories.  Televisions includes LCD televisions; Audio and Video includes Blu-ray Disc^TM 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 11.

Sales decreased 6.4% year-on-year (an 8% decrease on a constant currency basis) to 1,159.0 billion yen (10,257 million U.S. dollars).  This decrease was primarily due to a decrease in unit sales of LCD televisions, and a decrease in home audio and video unit sales reflecting a contraction of the market, partially offset by an improvement in the product mix of LCD televisions reflecting a shift to high value-added models, as well as the impact of foreign exchange rates.

Operating income increased 26.5 billion yen year-on-year to 50.6 billion yen (447 million U.S. dollars).  This significant increase was primarily due to cost reductions and an improvement in product mix, partially offset by the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs, as well as the impact of the above-mentioned decrease in sales.  During the current fiscal year, there was a 36.7 billion yen negative impact from foreign exchange rate fluctuations.

In Televisions, sales* decreased 4.5% year-on-year to 797.8 billion yen (7,060 million U.S. dollars).  This was primarily due to a decrease in LCD television unit sales resulting from a strategic decision not to pursue scale in order to improve profitability and the impact of foreign exchange rates, partially offset by the improvement in product mix reflecting a shift to high value-added models.  Operating income** increased 17.5 billion yen year-on-year to 25.8 billion yen (228 million U.S. dollars).  This increase was primarily due to cost reductions and the improvement in product mix, partially offset by the negative impact of the appreciation of the U.S. dollar, reflecting the high ratio of U.S. dollar-denominated costs, and the impact of the decrease in unit sales.

---

Devices

 

 

 

(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
		2015			2016			Change in yen		2016
Sales and operating revenue		¥927.1			¥935.8			+0.9		$8,281
Operating income (loss)		89.0			(28.6	)		–		(253	)

 

The Devices segment includes the Semiconductors and Components categories.  Semiconductors includes image sensors and camera modules; Components includes batteries and recording media.  Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of the Devices segment of the comparable prior period have been reclassified to conform to the current presentation.  For details, please see Notes on page 11.

Sales increased 0.9% year-on-year (a 6% decrease on a constant currency basis) to 935.8 billion yen (8,281 million U.S. dollars).  Sales were essentially flat primarily due to the impact of foreign exchange rates and increases in camera module and image sensor sales, substantially offset by the impact of a decrease in battery business sales.  Sales to external customers increased 5.6% year-on-year.

Operating loss of 28.6 billion yen (253 million U.S. dollars) was recorded, compared to operating income of 89.0 billion yen in the previous fiscal year.  This significant deterioration was primarily due to the deterioration in the operating results of the camera module business, including the recording of a 59.6 billion yen (528 million U.S. dollars) impairment charge related to long-lived assets, the deterioration in the operating results of the battery business, including the recording of a 30.6 billion yen (271 million U.S. dollars) impairment charge related to long-lived assets, increases in depreciation and amortization expenses as well as an increase in research and development expenses.  This deterioration was partially offset by the positive impact of foreign exchange rates.  For the camera module business, due to a decrease in projected future demand, Sony revised its Mid-Range Plan for the period beginning with the fiscal year ending March 31, 2017.  Given the decrease in projected future demand, Sony performed an impairment analysis in the quarter ended March 31, 2016, and determined that future cash flows would not be sufficient to recover the entire carrying amount of the long-lived assets, resulting in the impairment charge.  For the battery business, due to the increasingly competitive markets, Sony performed an impairment analysis in the quarter ended December 31, 2015, and reduced the corresponding estimated future cash flows and the estimated ability to recover the entire carrying amount of the long-lived assets, resulting in the impairment charge.  During the current fiscal year, there was a 24.7 billion yen positive impact from foreign exchange rate fluctuations.

 *    *    *    *    *

Total inventory of the five Electronics* segments above as of March 31, 2016 was 599.9 billion yen (5,309 million U.S. dollars), an increase of 36.5 billion yen, or 6.5% year-on-year.  Inventory decreased by 44.8 billion yen, or 6.9% compared with the level as of December 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 realignments made in the fiscal year ended March 31, 2016, total inventory of the five Electronics segments as of March 31, 2015 has been reclassified to conform to the current presentation.  For further details, please see Notes on page 11.

*    *    *    *    *

---

Pictures

 

 

 

	(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
		2015			2016			Change in yen			2016
Sales and operating revenue		¥878.7			¥938.1			+6.8%			$8,302
Operating income		58.5			38.5			–34.2			341

 

 

 

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

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

Sales increased 6.8% year-on-year (essentially flat on a U.S. dollar basis) to 938.1 billion yen (8,302 million U.S. dollars).  On a U.S. dollar basis, the impact of foreign exchange rates as well as lower sales in Motion Pictures were substantially offset by higher sales in Media Networks and Television Productions.  The decrease in Motion Pictures sales was primarily due to a decrease in home entertainment revenues as the previous fiscal year benefited from the strong home entertainment performances of The Amazing Spider-Man 2, 22 Jump Street and Heaven Is For Real.  Partially offsetting the decrease in home entertainment revenues was higher theatrical revenues in the current fiscal year driven by the strong worldwide theatrical performances of Spectre and Hotel Transylvania 2.  The increase in Media Networks sales was primarily due to higher advertising revenues in India and the United Kingdom.  The increase in Television Productions sales was primarily due to higher subscription video-on-demand (“SVOD”) revenues for Breaking Bad, The Blacklist and Better Call Saul.

Operating income decreased 20.0 billion yen year-on-year to 38.5 billion yen (341 million U.S. dollars).  This decrease was primarily due to the impact of the above-mentioned lower home entertainment revenues, the underperformance of The Walk and The Brothers Grimsby, and the negative impact of foreign exchange rates.  This decrease was partially offset by the above-mentioned impact of higher Media Networks sales in India and the United Kingdom and the worldwide theatrical performance of Hotel Transylvania 2.

Music

 

(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
		2015			2016			Change in yen			2016
Sales and operating revenue		¥559.2			¥617.6			+10.4%			$5,466
Operating income		60.6			87.3			+44.1			773

 

 

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 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 11.

Sales increased 10.4% year-on-year (a 5% increase on a constant currency basis) to 617.6 billion yen (5,466 million U.S. dollars) primarily due to the impact of the depreciation of the yen against the U.S. dollar.  The increase in sales on a constant currency basis was primarily due to significantly higher Visual Media and Platform sales reflecting the continued strong performance of a game application for mobile devices.  In Recorded Music, digital streaming revenues significantly increased, partially offset by a worldwide decline in physical and digital download sales.  The current year includes the record-breaking sales of Adele’s new album 25.  Other best-selling titles included One Direction’s Made in the A.M., David Bowie’s Blackstar and Meghan Trainor’s Title.

---

Operating income increased 26.7 billion yen year-on-year to 87.3 billion yen (773 million U.S. dollars).  This increase was primarily due to the above-mentioned gain recorded on the remeasurement to fair value of SME’s 51% equity interest in The Orchard as well as the impact of the above-mentioned increases in digital streaming revenues in Recorded Music and in Visual Media and Platform sales.  Partially offsetting the increase was the negative impact of the above-mentioned decline in physical and digital download sales in Recorded Music.

Financial Services

 

 

 

(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
		2015			2016			Change in yen			2016
Financial services revenue		¥1,083.6			¥1,073.1			–1.0%			$9,496
Operating income		193.3			156.5			–19.0			1,385

 

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 was 1,073.1 billion yen (9,496 million U.S. dollars), essentially flat year-on-year.  This was primarily due to a deterioration in investment performance in the separate account at Sony Life, driven by the deterioration in the stock market, substantially offset by an increase in insurance premium revenue reflecting a steady increase in policy amount in force at Sony Life.  Revenue at Sony Life was 952.6 billion yen (8,430 million U.S. dollars), essentially flat year-on-year.

Operating income decreased 36.8 billion year-on-year to 156.5 billion yen (1,385 million U.S. dollars) mainly due to a decrease in operating income at Sony Life.  At Sony Life, operating income decreased 39.2 billion yen year-on-year to 138.8 billion yen (1,228 million U.S. dollars), mainly due to increases in the amortization of deferred insurance acquisition costs and the provision of policy reserves, primarily driven by a significant decrease in interest rates and the deterioration in the stock market.

All Other

 

 

 

(Billions of yen, millions of U.S. dollars)
	Fiscal Year ended March 31
		2015			2016			Change in yen			2016
Sales and operating revenue		¥386.6			¥333.2			–13.8%			$2,949
Operating income (loss)		(95.0	)		2.0			–			19

 

 

All Other included costs related to the PC business in the previous fiscal year.  Due to certain changes in Sony’s organizational structure, sales and operating revenue and operating income (loss) of All Other of the comparable prior period have been reclassified to conform to the current presentation.  For details, please see Notes on page 11.

Sales decreased 13.8% year-on-year to 333.2 billion yen (2,949 million U.S. dollars).  This significant decrease in sales was primarily due to the recording of sales in the previous fiscal year from the PC business, which was sold in July 2014.

Operating income of 2.0 billion yen (19 million U.S. dollars) was recorded, compared to an operating loss of 95.0 billion yen in the previous fiscal year.  This significant improvement was primarily due to a decrease in PC exit costs, including restructuring charges and after-sales service expenses, as well as the absence in the current fiscal year of sales company fixed costs charged to the PC business in the previous fiscal year, which were allocated based on the prior year results.

*    *    *    *    *

---

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

Operating Activities: During the current fiscal year, there was a net cash inflow of 749.1 billion yen (6,630 million U.S. dollars) from operating activities, a decrease of 5.6 billion yen, or 0.7% year-on-year.

For all segments excluding the Financial Services segment, there was a net cash inflow of 262.8 billion yen (2,327 million U.S. dollars), a decrease of 40.9 billion yen, or 13.5% year-on-year.  This decrease was primarily due to the negative impact of an increase in inventories, resulting from a larger increase in inventories in the Devices segment, compared to a decrease in the previous fiscal year, partially offset by positive factors such as a year-on-year improvement in net income after taking into account non-cash adjustments (including depreciation and amortization, other operating expense, net, deferred income taxes and equity in net income of affiliated companies) and a year-on-year smaller decrease in notes and accounts payable, trade.

The Financial Services segment had a net cash inflow of 495.3 billion yen (4,383 million U.S. dollars), an increase of 35.6 billion yen, or 7.7% year-on-year.  This increase was primarily due to an increase in insurance premium revenue at Sony Life.

Investing Activities: During the current fiscal year, Sony used 1,030.4 billion yen (9,119 million U.S. dollars) of net cash in investing activities, an increase of 390.8 billion yen, or 61.1% year-on-year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 334.9 billion yen (2,964 million U.S. dollars), an increase of 231.3 billion yen, or 223.2% year-on-year.  This increase was primarily due to an increase in the amount of fixed asset purchases, such as semiconductor manufacturing equipment, partially offset by factors such as cash inflow from the sale of certain shares of Olympus Corporation.

The Financial Services segment used 694.0 billion yen (6,142 million U.S. dollars) of net cash, an increase of 157.1 billion yen, or 29.3% 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 fiscal year was 72.1 billion yen (638 million U.S. dollars), a 272.1 billion yen deterioration from cash generated in the previous fiscal year.

Financing Activities: Net cash provided by financing activities during the current fiscal year was 380.1 billion yen (3,364 million U.S. dollars), compared to a net cash outflow of 263.2 billion yen in the previous fiscal year.

For all segments excluding the Financial Services segment, there was a 144.8 billion yen (1,281 million U.S. dollars) net cash inflow, compared to a net cash outflow of 315.4 billion yen in the previous fiscal year.  This change was primarily due to the issuance of new stock and convertible bonds in the current fiscal year, partially offset by factors such as repayments of long-term debt.

In the Financial Services segment, financing activities provided 224.9 billion yen (1,990 million U.S. dollars) of net cash, an increase of 180.5 billion yen, or 406.6% year-on-year.  This increase was primarily due to a larger increase in short-term borrowings and policyholders’ account at Sony Life and an increase in customer deposits at Sony Bank, compared to a decrease in the previous fiscal year.

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 March 31, 2016 was 983.6 billion yen (8,705 million U.S. dollars).  Cash and cash equivalents of all segments excluding the Financial Services segment was 749.9 billion yen (6,637 million U.S. dollars) at March 31, 2016, an increase of 8.0 billion yen, or 1.1% compared with the balance as of March 31, 2015, and a decrease of 95.1 billion yen, or 11.2% compared with the balance as of December 31, 2015.  Sony believes that it continues to maintain sufficient liquidity through access to a total, translated into yen, of 522.5 billion yen (4,624 million U.S. dollars) of unused committed lines of credit with financial institutions in addition to the cash and cash equivalents balance at March 31, 2016.  Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 233.7 billion yen (2,068 million U.S. dollars) at March 31, 2016, an increase of 26.2 billion yen, or 12.6% compared with the balance as of March 31, 2015, and a decrease of 12.0 billion yen, or 4.9% compared with the balance as of December 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-17.  This information and the separate condensed presentations shown below are not required or prepared in accordance with U.S. GAAP.  The Financial Services segment’s cash flow is excluded from the measure because SFH, which constitutes a majority of the Financial Services segment, is a separate publicly traded entity in Japan with a significant minority interest and it, as well as its subsidiaries, secure liquidity on their own.  This measure may not be comparable to those of other companies.  This measure has limitations because it does not represent residual cash flows available for discretionary expenditures principally due to the fact that the measure does not deduct the principal payments required for debt service.  Therefore, Sony believes it is important to view this measure as supplemental to its entire statement of cash flows and together with Sony’s disclosures regarding investments, available credit facilities and overall liquidity.

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

 

 

*    *    *    *    *

For Consolidated Statements of Income and Business Segment Information for the three months ended March 31, 2016 and 2015, please refer to pages F-3 and F-7 respectively.

Sales for the fourth quarter ended March 31, 2016 decreased 5.9% year-on-year to 1,824.1 billion yen (16,142 million U.S. dollars).  This decrease was primarily due to the significant decrease in sales in the MC and Devices segments, partially offset by the increase in sales primarily in the G&NS and Pictures segments.

During the current quarter, the average rates of the yen were 115.4 yen against the U.S. dollar and 127.2 yen against the euro, which were 3.3% and 5.6% higher, respectively, as compared with the same quarter in the previous fiscal year.  On a constant currency basis, consolidated sales decreased 3%.  For further details about sales on a constant currency basis, see Notes on page 11.

In the MC segment, sales decreased significantly primarily due to a significant decrease in smartphone unit sales resulting from a strategic decision not to pursue scale in order to improve profitability.  In the G&NS segment, sales increased primarily due to the contribution of PS4 software sales.  In the IP&S segment, sales decreased primarily due to a decrease in unit sales of digital cameras reflecting a contraction of the market, partially offset by an improvement in the product mix of digital cameras reflecting a shift to high value-added models.  In the HE&S segment, sales decreased primarily due to a decrease in unit sales of LCD televisions, and a decrease in home audio and video unit sales.  In the Devices segment, sales decreased significantly mainly due to significant decreases in sales of image sensors and sales in the battery business.  In the Pictures segment, sales increased primarily due to higher SVOD revenues in Motion Pictures and Television Productions as well as higher subscription revenues in Media Networks in Europe and India.  In the Music segment, sales increased significantly primarily due to higher Visual Media and Platform sales.  In the Financial Services segment, revenue was essentially flat year-on-year primarily due to a deterioration in investment performance in the separate account at Sony Life, substantially offset by an increase in insurance premium revenue at Sony Life.

---

Operating loss decreased 4.9 billion yen year-on-year to 92.9 billion yen (822 million U.S. dollars).  This was primarily due to improvements in the results of All Other, as well as the IP&S, MC and HE&S segments.  These improvements were partially offset by the recording of an impairment charge of 59.6 billion yen (528 million U.S. dollars) in the camera module business in the Devices segment and a significant decrease in the operating income of the Financial Services segment.  In the same quarter of the previous fiscal year, an 8.6 billion yen impairment charge related to long-lived assets in the disc manufacturing business outside of Japan was recorded in All Other.

In the MC segment, operating loss decreased year-on-year mainly due to an improvement in product mix reflecting an increased focus on high value-added models and fixed cost reductions, partially offset by the above-mentioned decrease in sales.  In the G&NS segment, operating results improved year-on-year primarily due to the contribution of PS4 software sales.  In the IP&S segment, operating results improved significantly year-on-year primarily due to an improvement in the product mix of digital cameras reflecting a shift to high value-added models.  In the HE&S segment, the operating loss decreased year-on-year primarily due to an improvement in product mix reflecting a shift to high value-added models and cost reductions.  In the Devices segment, operating results deteriorated significantly year-on-year mainly due to the recording of the above-mentioned impairment charge in the camera module business and a decrease in sales.  In the Pictures segment, operating income increased primarily due to the above-mentioned increase in sales and a reduction in investigation and remediation costs, as well as the recording of insurance recoveries related to the cyberattack on SPE’s network and IT infrastructure in the Fall of 2014.  Partially offsetting this increase were higher theatrical marketing expenses and the theatrical underperformance of The Brothers Grimsby.  In the Music segment, operating income increased primarily due to the above-mentioned increase in Visual Media and Platform sales.  In the Financial Services segment, operating income decreased significantly year-on-year primarily due to increases in the amortization of deferred insurance acquisition costs and the provision of policy reserves at Sony Life, primarily driven by a significant decrease in interest rates and the deterioration in the stock market.

Restructuring charges, net, recorded as operating expenses, amounted to 16.4 billion yen (145 million U.S. dollars) for the current quarter, compared to 64.3 billion yen for the same quarter of the previous fiscal year.

Equity in net income (loss) of affiliated companies, recorded within operating loss was a loss of 0.9 billion yen (8 million U.S. dollars), compared to income of 0.2 billion yen in the same quarter of the previous fiscal year.

The net effect of other income and expenses was an expense of 6.8 billion yen (60 million U.S. dollars), an improvement of 1.9 billion yen year-on-year, primarily due to a smaller net foreign exchange loss.

Loss before income taxes decreased 6.8 billion yen year-on-year to 99.7 billion yen (882 million U.S. dollars).

Income taxes: During the current quarter, Sony recorded an income tax benefit amounting to 24.6 billion yen (217 million U.S. dollars).  This was due to the reversal of valuation allowances on deferred tax assets for local taxes by a subsidiary in Japan and an income tax benefit due to a reduction in the corporate tax rate in Japan which resulted in a reduction of net deferred tax liabilities, partially offset by increases in valuation allowances for deferred tax assets in the national tax filing group in Japan and certain foreign subsidiaries.  In the same quarter of the previous fiscal year, Sony recorded an income tax benefit amounting to 23.6 billion yen, primarily due to a reduction in the corporate tax rate in Japan which resulted in a reduction of net deferred tax liabilities.  This was partially offset by the fact that Sony Corporation and its national tax filing group in Japan, which had established valuation allowances, incurred losses and, as such Sony continued to not recognize the associated tax benefits, except to the extent of certain tax benefits associated with the impact of gains in other comprehensive income.

Net loss attributable to Sony Corporation’s stockholders, which deducts net income attributable to noncontrolling interests, decreased 18.5 billion yen year-on-year to 88.3 billion yen (782 million U.S. dollars).

*    *    *    *    *

---

Sony realigned its business segments for the fiscal year ended March 31, 2016 to reflect modifications to its organizational structure, primarily repositioning certain operations in All Other and the Devices segment.  In connection with this realignment, the operations of Sony’s disc manufacturing business in Japan, which were included in All Other, are now included in the Music segment and the operations of So-net Corporation and its subsidiaries, which were included in All Other, are now included in the MC segment.  Certain operations regarding pre-installed automotive audio products which were included in the Devices segment are now included in the HE&S segment.

In addition, the medical business, previously included in All Other, is now included in the IP&S segment as a result of a change in the Corporate Executive Officer in charge of the medical business.

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 ended March 31, 2016.

For all segments other than Pictures and Music, the impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s periodic weighted average exchange rates for the fiscal year and fourth quarter ended March 31, 2015 from the fiscal year and fourth quarter ended March 31, 2016 to the major transactional currencies in which the sales are denominated.  The impact of foreign exchange rate fluctuations on operating income (loss) described herein is calculated by subtracting from the impact on sales the impact on cost of sales and selling, general and administrative expenses calculated by applying the same major transactional currencies calculation process to cost of sales and selling, general and administrative expenses as for the impact on sales.  Since the worldwide subsidiaries of the Pictures segment and of SME and Sony/ATV in the Music segment are aggregated on a U.S. dollar basis and are translated into yen, the impact of foreign exchange rate fluctuations is calculated by applying the change in the periodic weighted average exchange rates for the fiscal year and fourth quarter ended March 31, 2015 from the fiscal year and fourth quarter ended March 31, 2016 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.

*    *    *    *    *

Due to the earthquake of April 14, 2016 and subsequent earthquakes in the Kumamoto region, operations at Sony Semiconductor Manufacturing Corporation’s Kumamoto Technology Center were halted and remain suspended.  The Kumamoto Technology Center is the primary manufacturing site for image sensors for digital cameras and security cameras, as well as for micro-display devices.  It also manufactures a portion of the camera modules that are used in Sony’s smartphones.  Please refer to the press release “Status of Sony Group Manufacturing Operations Affected by 2016 Kumamoto Earthquakes (Third Update)” announced on April 28, 2016, for more details about the extent of the damages and the development of a recovery plan for the Kumamoto Technology Center as of April 28, 2016.

The impact of the earthquakes on Sony’s consolidated results for the fiscal year ending March 31, 2017 continues to be evaluated.  Under the circumstances below, Sony is currently unable to formulate a forecast for the MC, G&NS, IP&S, HE&S and Devices segments, and for the consolidated results for the fiscal year ending March 31, 2017.  Accordingly, after evaluating the impact of the earthquakes, Sony plans to announce the forecast for these five Electronics segments and for the consolidated results for the fiscal year ending March 31, 2017 in May 2016.

-	In the Devices segment, there is expected to be direct physical damage to Kumamoto Technology Center.  Sony expects to incur expenses primarily for recovery and reinforcement work in response to the physical damage to the relevant portion of the Kumamoto Technology Center;

-	Sony may also incur large opportunity losses, mainly in the Devices and IP&S segments due to suspension of production for a certain period of time;

-

Due to the suspension of manufacturing operations at Kumamoto Technology Center and potential disruption to the supply of components to Sony from certain third-party suppliers that also have manufacturing facilities in the Kumamoto region, it is possible that business operations within the MC, G&NS and HE&S segments also may be affected.  This potential impact is currently being evaluated.

However, in order to provide timely disclosure regarding Sony’s future performance based on currently available information, Sony is announcing the forecasts for the other segments listed below.  Sony also plans to announce the forecasts for restructuring charges, capital expenditures, depreciation and amortization, as well as research and development expenses for the fiscal year ending March 31, 2017 in May 2016.

---

Assumed foreign currency exchange rates of each segment for the fiscal year ending March 31, 2017: approximately 113 yen to the U.S. dollar and approximately 129 yen to the euro.

Sony realigned its business segments from the first quarter of the fiscal year ending March 31, 2017 to reflect modifications to its organizational structure as of April 1, 2016, primarily repositioning certain operations in the IP&S and Devices segments.  In connection with this realignment, the operations of the automotive camera business, which were included in the IP&S segment, will be included in the Devices segment, and the operations of the Imaging Device Development Division, which were included in Corporate and elimination, will be included in the Devices segment.

In connection with this realignment, the sales and operating revenue and operating income (loss) of each segment in the fiscal year ended March 31, 2016 have been reclassified in the chart below to conform to the presentation of the fiscal year ending March 31, 2017.

Pursuant to a separation of Sony’s businesses into distinct subsidiaries and a realignment of corporate functions, beginning from the fiscal year ending March 31, 2017, a change has been made to the method of calculating the amount of corporate costs allocated to each business segment and the amount of royalties paid by each business segment for brand and patent utilization.  As a result of this change, an impact of the increase in corporate income will be included in the forecast for All Other, Corporate and elimination for the fiscal year ending March 31, 2017.  Conversely, an increase in expenses totaling the same amount is included in the forecast for each of the following business segments: 2.7 billion yen in the Pictures segment and 2.1 billion yen in the Music segment.  There is no change to the Financial Services segment.  These changes have no impact on consolidated operating income.  Sony plans to announce the forecasts for the increased amount of corporate income in All Other, Corporate and elimination, as well as the increased expense in the five Electronics segments for the fiscal year ending March 31, 2017 in May 2016.

---

The forecast for each business segment is as follows:

Sales are expected to increase year-on-year primarily due to an increase in Media Networks sales.  Operating income is expected to increase year-on-year primarily due to the impact of the above-mentioned increase in sales.

Sales are expected to significantly decrease year-on-year primarily due to the impact of foreign exchange rates, as well as lower sales from Recorded Music’s titles compared to the hit titles in the fiscal year ended March 31, 2016.  Operating income is expected to decrease year-on-year primarily due to the recording of a remeasurement gain associated with acquiring the remaining shares of The Orchard in the fiscal year ended March 31, 2016, as well as the above-mentioned decrease in sales.

Financial services revenue is expected to increase year-on-year primarily due to an increase in insurance premium revenue, reflecting an increase in policy amount in force at Sony Life.  Operating income is expected to slightly decrease year-on-year primarily due to Sony not incorporating into the forecast the impact of market fluctuations, such as foreign exchange net gains on foreign currency-denominated customer deposits at Sony Bank which were realized in the fiscal year ended March 31, 2016.

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.

---

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.

*    *    *    *    *

Sony paid 10 yen per share as an interim dividend, and plans to pay 10 yen per share starting on May 31, 2016 as the year-end dividend, resulting in a total dividend amount of 20 yen per share for the fiscal year ended March 31, 2016.  At this point in time, the amounts of the interim and year-end dividends for the fiscal year ending March 31, 2017 are undetermined.

On February 18, 2015, Sony announced its mid-term corporate strategy.  Sony has positioned Return on Equity (ROE) as its primary key performance indicator and has set a target for consolidated ROE of more than 10% and a target for consolidated operating profit of more than 500 billion yen for the Sony Group in the fiscal year ending March 31, 2018, the final year of its mid-range corporate plan.  The Company aims to achieve these goals and realize its transformation into a highly profitable enterprise by implementing the following key strategies:

l	Business management that emphasizes profitability, without necessarily pursuing volume

l	Business management that grants each business unit greater autonomy and mandates a focus on shareholder value

l	Clearly defined positioning of each business within a broader business portfolio perspective

Based on its specific characteristics and the competitive landscape, each of the Sony Group’s businesses has been classified as a “growth driver,” “stable profit generator,” or “area focusing on volatility management” in terms of its position within the Company’s overall business portfolio.  Each business has been assigned a target figure for Return on Invested Capital (ROIC) linked with the ROE target for Sony Group as a whole, and will be managed with a clear emphasis on profitability.

For additional details about the mid-term strategy announced on February 18, 2015, please refer to Sony’s Corporate Strategy Meeting webpage at http://www.sony.net/SonyInfo/IR/strategy/2015.html

Sony’s consolidated financial statements are prepared in accordance with U.S. GAAP.  Sony’s business is globally diversified and Sony believes that financial statements based on U.S. GAAP contribute to smooth communication with shareholders, investors, and other stakeholders inside and outside of Japan.  Sony is considering whether to adopt International Financial Reporting Standards (“IFRS”) while closely monitoring the development of new accounting standards and the stance of regulatory bodies at home and abroad.

---

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:

IR home page: http://www.sony.net/IR/

Presentation slides: http://www.sony.net/SonyInfo/IR/financial/fr/15q4_sonypre.pdf

---

---

---