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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

For the month of February 2018

Commission File Number: 001-06439

SONY CORPORATION

(Translation of registrant’s name into English)

1-7-1 KONAN, MINATO-KU, TOKYO, 108-0075, JAPAN

(Address of principal executive offices)

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

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F,

 

Form 20-F  X			Form 40-F

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934, Yes No X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-            

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: February 8, 2018

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Quarterly Securities Report

For the three months ended December 31, 2017

(TRANSLATION)

Sony Corporation

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CONTENTS

 

		Page
Note for readers of this English translation			1
Cautionary Statement			1
I   Corporate Information			3
(1)   Selected Consolidated Financial Data			3
(2)   Business Overview			4
II   State of Business			5
(1)   Risk Factors			5
(2)   Material Contracts			5
(3)   Management’s Discussion and Analysis of Financial Condition, Results of Operations and Status of Cash Flows			5
III   Company Information			14
(1)   Information on the Company’s Shares			14
(2)   Directors and Corporate Executive Officers			18
IV  Financial Statements			19
(1)   Consolidated Financial Statements			20
(2)   Other Information			46

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I     Corporate Information

(1) Selected Consolidated Financial Data

		Yen in millions, Yen per share amounts
		Nine months ended     December 31, 2016				Nine months ended     December 31, 2017				Fiscal year ended     March 31, 2017
Sales and operating revenue			5,699,646				6,592,961				7,603,250
Operating income			194,311				712,676				288,702
Income before income taxes			163,763				690,578				251,619
Net income attributable to Sony Corporation’s stockholders			45,639				507,620				73,289
Comprehensive income			75,551				600,028				143,652
Total equity			3,079,285				3,714,947				3,135,422
Total assets			17,695,074				19,420,676				17,660,556
Net income attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)			36.17				401.76				58.07
Net income attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen)			35.43				393.05				56.89
Ratio of stockholders’ equity to total assets (%)			13.9				15.7				14.1
Net cash provided by operating activities			313,252				660,329				809,262
Net cash used in investing activities			(981,514)				(566,913)				(1,253,973)
Net cash provided by financing activities			467,851				265,188				452,302
Cash and cash equivalents at end of the period			771,676				1,328,925				960,142
		Yen in millions, Yen per share amounts
		Three months ended     December 31, 2016				Three months ended     December 31, 2017
Sales and operating revenue			2,397,499				2,672,317
Net income attributable to Sony Corporation’s stockholders			19,631				295,897
Net income attributable to Sony Corporation’s stockholders per share of common stock, basic (yen)			15.55				234.08
Net income attributable to Sony Corporation’s stockholders per share of common stock, diluted (yen)			15.24				228.91

  Notes:

1.	The Company’s consolidated financial statements are prepared in conformity with U.S. GAAP.

2.	The Company reports equity in net income of affiliated companies as a component of operating income.

3.	Consumption taxes are not included in sales and operating revenue.

4.	Total equity is presented based on U.S. GAAP.

5.	Ratio of stockholders’ equity to total assets is calculated by using total equity attributable to the stockholders of the Company.

6.	The Company prepares consolidated financial statements. Therefore parent-only selected financial data is not presented.

 

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(2) Business Overview

There was no significant change in the business of Sony during the nine months ended December 31, 2017.

Sony realigned its reportable segments effective from the first quarter of the fiscal year ending March 31, 2018. For further information on the realignment, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 7. Business segment information”.

As of December 31, 2017, the Company had 1,338 subsidiaries and 115 affiliated companies, of which 1,308 companies are consolidated subsidiaries (including variable interest entities) of the Company. The Company has applied the equity accounting method for 109 affiliated companies.

 

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II    State of Business

(1) Risk Factors

 

(2) Material Contracts

There were no material contracts executed or determined to be executed during the three months ended December 31, 2017.

 

(3) Management’s Discussion and Analysis of Financial Condition, Results of Operations and Status of Cash Flows

i) Results of Operations

All amounts are presented on the basis of U.S. GAAP. “Sales and operating revenue” (“sales”) 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. For details regarding each segment’s product categories and regarding business segment realignment, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 7. Business segment information”.

Consolidated Financial Results

 

		(Billions of yen)
		Nine months ended         December 31
		2016				2017
Sales and operating revenue			5,699.6				6,593.0
Operating income			194.3				712.7
Income before income taxes			163.8				690.6
Net income attributable to Sony Corporation’s stockholders			45.6				507.6

Sales for the nine months ended December 31, 2017 (“the current nine months”) increased by 893.3 billion yen compared to the same period in the previous fiscal year (“year-on-year”) to 6 trillion 593.0 billion yen. This significant increase was primarily due to the impact of foreign exchange rates as well as increases in sales in all segments except for the Mobile Communications segment.

Operating income for the current nine months increased 518.4 billion yen year-on-year to 712.7 billion yen. This significant increase was primarily due to a significant improvement in the operating results in the Semiconductors segment and the absence in the current nine months of the impairment charge of goodwill recorded in the Pictures segment in the same period of the previous fiscal year.

 

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Operating income for the current nine months included the following:

•

A gain resulting from the sale of the entire equity interest in a manufacturing subsidiary in the camera module business: 28.3 billion yen (Semiconductors segment)

•

Insurance recoveries, mainly for opportunity losses related to the 2016 Kumamoto Earthquakes (the “Kumamoto Earthquakes”): 6.7 billion yen (Semiconductors segment) and 2.6 billion yen (IP&S segment)

•

A gain resulting from the sale of manufacturing equipment: 6.7 billion yen (Semiconductors segment)

Operating income for the same period of the previous fiscal year included the following:

•

An impairment charge of goodwill: 112.1 billion yen (962 million U.S. dollars) (Pictures segment)

•

An impairment charge related to the transfer of the battery business: 32.8 billion yen (All Other)

•

An impairment charge against long-lived assets, resulting from the termination of the development and manufacturing of certain high-functionality camera modules for external sale: 23.9 billion yen (Semiconductors segment)

•

Net charges in expenses resulting from the Kumamoto Earthquakes: 14.9 billion yen (Semiconductors segment)

•

Inventory write-downs of certain image sensors for mobile products: 8.3 billion yen (Semiconductors segment)

During the current nine months, restructuring charges, net, decreased 32.3 billion yen year-on-year to 7.1 billion yen, mainly due to the absence in the current nine months of the above-mentioned impairment charge related to the transfer of the battery business. Restructuring charges are recorded as an operating expense and are included in operating income.

Equity in net income of affiliated companies, recorded within operating income, increased 5.8 billion yen year-on-year to 7.4 billion yen.

The net effect of other income and expenses was an expense of 22.1 billion yen, an improvement of 8.5 billion yen year-on-year, mainly due to an increase in interest and dividend income.

Income before income taxes increased 526.8 billion yen to 690.6 billion yen.

During the current nine months, Sony recorded 138.5 billion yen of income tax expense, resulting in an effective tax rate of 20.1% which was lower than the effective tax rate of 49.4% in the same period of the previous fiscal year. This lower effective tax rate was mainly due to profits recorded in Sony Corporation and its national tax filing group in Japan, and in the U.S. consolidated tax filing group, both of which have established valuation allowances for deferred tax assets, compared to the losses recorded in the same period for those groups in the previous fiscal year. In addition, during the three months ended December 31, 2017, Sony recorded a 13.8 billion yen tax benefit related to deferred tax liabilities as a result of U.S. tax reform.

Net income attributable to Sony Corporation’s stockholders increased 462.0 billion yen year-on-year to 507.6 billion yen.

Operating performance by business segment for the current nine months is as follows:

Game & Network Services (G&NS)

Sales increased 231.3 billion yen to 1 trillion 499.2 billion yen, primarily due to an increase in PlayStation^®4 (“PS4”) software sales including sales through the network, as well as the impact of foreign exchange rates. Operating income increased 44.8 billion yen year-on-year to 157.8 billion yen, primarily due to the impact of the above-mentioned increase in sales.

Music

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

Sales increased 122.9 billion yen year-on-year to 593.6 billion yen, primarily due to higher Visual Media and Platform sales due to the continued strong performance of the mobile game application Fate/Grand Order, as well as higher Recorded Music sales due to an increase in digital streaming revenues. Operating income increased 36.5 billion yen year-on-year to 96.9 billion yen primarily due to the above-mentioned increase in sales.

 

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Pictures

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 109.5 billion yen year-on-year to 710.1 billion yen. This significant increase in sales was due to higher advertising and subscription revenues for Media Networks in India primarily due to the acquisition of TEN Sports Network and improved ratings, higher licensing revenues for Television Productions primarily due to various U.S. television series, and higher theatrical revenues for Motion Pictures primarily due to the strong worldwide theatrical performances of Spider-Man: Homecoming and Jumanji: Welcome to the Jungle. Operating income of 8.7 billion yen was recorded compared to an operating loss of 114.2 billion yen in the same period of previous fiscal year. This significant improvement in operating results was due to the absence of a 112.1 billion yen (962 million U.S. dollars) impairment of goodwill that was recorded in the same period of the previous fiscal year as well as the above-mentioned increase in sales.

Home Entertainment & Sound (HE&S)

Sales increased 163.4 billion yen year-on-year to 987.6 billion yen, primarily due to an improvement in the product mix of televisions reflecting a shift to high value-added models, as well as the impact of foreign exchange rates. Operating income increased 29.5 billion yen year-on-year to 93.2 billion yen, primarily due to the above-mentioned improvement in the product mix of televisions, partially offset by an increase in marketing costs and an increase in the price of key components.

Imaging Products & Solutions (IP&S)

Sales increased 68.7 billion yen year-on-year to 493.5 billion yen, mainly due to the absence in the current nine months of the impact from the Kumamoto Earthquakes that was recorded in the same period of the previous fiscal year, as well as the impact of foreign exchange rates. Operating income increased by 24.6 billion yen year-on-year to 68.1 billion yen, primarily due to the impact of the above-mentioned increase in sales.

Mobile Communications (MC)

Sales decreased 32.5 billion yen year-on-year to 570.8 billion yen, mainly due to a decrease in smartphone unit sales. Operating income decreased 8.4 billion yen year-on-year to 17.0 billion yen, mainly due to the above-mentioned decrease in sales as well as an increase in the price of key components, partially offset by reductions in operating costs.

Semiconductors

Sales increased 111.5 billion yen year-on-year to 683.6 billion yen, primarily due to a significant increase in unit sales of image sensors for mobile products as well as the absence in the current nine months of a decrease in image sensor production due to the Kumamoto Earthquakes in the same period of the previous fiscal year. Operating income of 165.4 billion yen was recorded, compared to an operating loss of 20.6 billion yen recorded in the same period of the previous fiscal year. This improvement in operating results was primarily due to the impact of the above-mentioned increase in sales, the 28.3 billion yen gain resulting from the sale of the entire equity interest in a manufacturing subsidiary in the camera module business, a 6.7 billion yen gain resulting from the sale of manufacturing equipment, as well as 6.7 billion yen in insurance recoveries related to the Kumamoto Earthquakes, each in the current nine months. Additionally, in the same period of the previous fiscal year, the Semiconductors segment operating results included the above-mentioned 23.9 billion yen impairment charge against long-lived assets relating to camera modules, net charges of 14.9 billion yen in expenses resulting from the Kumamoto Earthquakes, and 8.3 billion yen in inventory write-downs of certain image sensors for mobile products.

Financial Services

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.

Revenue increased by 143.3 billion yen year-on-year to 955.7 billion yen, mainly due to a significant increase in net gains from investment performance in the separate account at Sony Life, resulting from favorable financial market conditions during the current nine months compared to the same period of the previous fiscal year, as well as higher insurance premiums revenue reflecting an increase in the policy amount in force. Operating income increased by 28.0 billion yen year-on-year to 139.1 billion yen, mainly due to a gain recorded on the sale of real estate held for investment purposes in the general account at Sony Life.

 

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Operating Performance by Geographic Area

For operating performance by geographic area, please refer to “sales and operating revenue attributed to countries and areas based on location of external customers” in “IV Financial Statements – Notes to Consolidated Financial Statements – 7. Business segment information”.

*    *    *    *    *

Foreign Exchange Fluctuations and Risk Hedging

 

During the current nine months, the average rates of the yen were 111.7 yen against the U.S. dollar and 128.5 yen against the euro, which were 5.1 yen and 10.4 yen lower year-on-year.

For the current nine months, sales were 6 trillion 593.0 billion yen, an increase of 15.7% year-on-year, while on a constant currency basis, sales increased approximately 11% year-on-year. For further details about the impact of foreign exchange rate fluctuations on sales and operating income, please refer to the below Note.

Consolidated operating income was 712.7 billion yen for the current nine months, an increase of 518.4 billion yen year-on-year. Most of the foreign exchange rate impact was attributable to the impact of foreign exchange rates in the G&NS, HE&S, IP&S, MC and Semiconductors segments.

The table below indicates the impact of changes in foreign exchange rates on sales and operating results of each of the above-mentioned five segments. For a detailed analysis of segment performance, please refer to the “Results of Operations” section, which discusses the impact of foreign exchange rates within segments and categories where foreign exchange rate fluctuations had a significant impact.

 

						(Billions of yen)
														Impact of changes in foreign exchange rates
						Nine months ended         December 31
						2016				2017
		G&NS		Sales			1,268.0				1,499.2			+79.4
				Operating income			113.1				157.8			+13.1
		HE&S		Sales			824.2				987.6			+55.3
				Operating income			63.7				93.2			+16.3
		IP&S		Sales			424.7				493.5			+22.2
				Operating income			43.5				68.1			+10.2
		MC		Sales			603.3				570.8			+15.7
				Operating income			25.3				17.0			-5.2
		Semiconductors		Sales			572.0				683.6			+26.6
				Operating income (loss)			(20.6	)			165.4			+15.7

 

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In addition, sales for the Music segment increased 26.1% year-on-year to 593.6 billion yen, an approximate 23% increase on a constant currency basis. In the Pictures segment, sales increased 18.2% year-on-year to 710.1 billion yen, an approximate 13% increase on a U.S. dollar basis. As most of the operations in Sony’s Financial Services segment are based in Japan, Sony’s management analyzes the performance of the Financial Services segment on a yen basis only.

Note:

The descriptions of sales on a constant currency basis reflect sales calculated by applying the yen’s monthly average exchange rates from the previous nine months to local currency-denominated monthly sales in the current nine months. For SME and Sony/ATV in the Music segment, and in the Pictures segment, the constant currency amounts are calculated by applying the monthly average U.S. dollar / yen exchange rates after aggregation on a U.S. dollar basis.

The impact of foreign exchange rate fluctuations on sales is calculated by applying the change in the yen’s periodic weighted average exchange rate for the previous nine months from the current nine months to the major transactional currencies in which the sales are denominated. The impact of foreign exchange rate fluctuations on operating income (loss) 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. Additionally, the MC segment enters into its own foreign exchange hedging transactions. The impact of those transactions is included in the impact of foreign exchange rate fluctuations on operating income (loss) for that segment.

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.

*    *    *    *    *

Status of Cash Flows

Operating Activities: During the current nine months, there was a net cash inflow of 660.3 billion yen from operating activities, an increase of 347.1 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a 378.8 billion yen net cash inflow, an increase of 298.2 billion yen year-on-year. This increase was primarily due to an increase in net income after taking into account non-cash adjustments (including depreciation and amortization, other operating (income) expense, net, deferred income taxes and equity in net (income) loss of affiliated companies), as well as an increase in accrued expenses in other current liabilities. This increase in net cash inflow was partially offset by the negative impact of a larger increase in notes and accounts receivable, trade.

The Financial Services segment had a net cash inflow of 295.6 billion yen, an increase of 49.9 billion yen year-on-year. This increase was primarily due to an increase in net income after taking into account non-cash adjustments such as depreciation and amortization, including amortization of deferred insurance acquisition costs.

Investing Activities: During the current nine months, Sony used 566.9 billion yen of net cash in investing activities, a decrease of 414.6 billion yen year-on-year.

For all segments excluding the Financial Services segment, there was a net cash outflow of 141.1 billion yen, a decrease of 100.0 billion yen year-on-year. This decrease was mainly due to a decrease in payments for fixed asset purchases such as semiconductor manufacturing equipment.

The Financial Services segment used 424.8 billion yen of net cash, a decrease of 314.5 billion yen year-on-year. This decrease was mainly due to a year-on-year decrease in payments for investments and advances at Sony Life and Sony Bank.

In all segments excluding the Financial Services segment, net cash generated in operating and investing activities combined *1 for the current nine months was 237.7 billion yen, a 398.3 billion yen improvement from net cash used in the same period of the previous fiscal year.

Financing Activities: During the current nine months, there was a net cash inflow of 265.2 billion yen from financing activities, a decrease of 202.7 billion yen year-on-year.

 

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For all segments excluding the Financial Services segment, there was a 38.1 billion yen net cash outflow, a decrease of 59.0 billion yen year-on-year. This decrease was mainly due to a year-on-year decrease in repayment of long-term debt, as well as the absence in the current nine months of the payment for the purchase of Sony/ATV shares from noncontrolling interests in the same period of the previous fiscal year. On the other hand, during the same period of the previous fiscal year, Sony raised capital from the issuance of straight bonds.

In the Financial Services segment, there was a 288.2 billion yen net cash inflow, a decrease of 262.7 billion yen year-on-year. This decrease was primarily due to a decrease in short-term borrowings at Sony Life, as well as a smaller increase in deposits from customers at Sony Bank.

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 December 31, 2017 was 1 trillion 328.9 billion yen. Cash and cash equivalents of all segments excluding the Financial Services segment was 901.5 billion yen at December 31, 2017, an increase of 209.8 billion yen compared with the balance as of March 31, 2017, and an increase of 420.9 billion yen, compared with the balance as of December 31, 2016. Sony believes that it continues to maintain sufficient liquidity through access to a total, translated into yen, of 528.8 billion yen of unused committed lines of credit with financial institutions in addition to the cash and cash equivalents balance at December 31, 2017. Within the Financial Services segment, the outstanding balance of cash and cash equivalents was 427.4 billion yen at December 31, 2017, an increase of 159.0 billion yen compared with the balance as of March 31, 2017, and an increase of 136.4 billion yen compared with the balance as of December 31, 2016.

*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 below. 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 segment’s activities is as follows:

 

		(Billions of yen)
		Nine months ended         December 31
		2016				2017
Net cash provided by operating activities reported in the consolidated statements of cash flows			313.3				660.3
Net cash used in investing activities reported in the consolidated statements of cash flows			(981.5	)			(566.9	)
Subtotal (A)			(668.3	)			93.4
Less: Net cash provided by operating activities within the Financial Services segment (B)			245.7				295.6
Less: Net cash used in investing activities within the Financial Services segment (C)			(739.3	)			(424.8	)
Eliminations *2 (D)			14.1				15.1
Cash flow provided by (used in) operating and investing activities combined excluding the Financial Services segment’s activities (A)-(B)-(C)+(D)			(160.6	)			237.7

 

*2	Eliminations primarily consist of intersegment dividend payments.

 

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		(Yen in millions)
		Nine months ended December 31
		Financial Services								Sony without Financial Services								Consolidated
		2016				2017				2016				2017				2016				2017
Cash flows from operating activities:
Net income (loss)			79,331				99,059				17,856				468,111				82,832				552,097
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization, including amortization of deferred insurance acquisition costs			52,350				47,887				207,204				210,300				259,554				258,187
Amortization of film costs			-				-				190,539				259,709				190,539				259,709
Other operating (income) expense, net			69				33				165,385				(40,165	)			165,454				(40,131	)
(Gain) loss on sale or devaluation of securities investments,  net			29				213				4,706				324				4,735				537
(Gain) loss on revaluation of marketable securities held for trading purposes, net			(42,727	)			(109,888	)			-				-				(42,727	)			(109,888	)
Changes in assets and liabilities:
(Increase) decrease in notes and accounts receivable, trade			(2,261	)			(3,165	)			(371,914	)			(484,877	)			(372,978	)			(488,285	)
(Increase) decrease in inventories			-				-				(18,622	)			(88,954	)			(18,622	)			(88,954	)
(Increase) decrease in film costs			-				-				(242,875	)			(279,082	)			(242,875	)			(279,082	)
Increase (decrease) in notes and accounts payable, trade			-				-				87,698				90,484				87,698				90,484
Increase (decrease) in future insurance policy benefits and other			336,157				424,084				-				-				336,157				424,084
(Increase) decrease in deferred insurance acquisition costs			(70,070	)			(65,248	)			-				-				(70,070	)			(65,248	)
(Increase) decrease in marketable securities held for trading purposes			(60,868	)			(64,727	)			-				-				(60,868	)			(64,727	)
Other			(46,339	)			(32,631	)			40,605				242,971				(5,577	)			211,546
Net cash provided by (used in) operating activities			245,671				295,617				80,582				378,821				313,252				660,329
Cash flows from investing activities:
Payments for purchases of fixed assets			(10,452	)			(10,553	)			(250,005	)			(179,240	)			(260,457	)			(189,780	)
Payments for investments and advances			(943,712	)			(671,982	)			(7,410	)			(16,456	)			(951,199	)			(688,508	)
Proceeds from sales or return of investments and collections of advances			213,629				257,582				13,837				5,404				226,461				262,056
Other			1,256				157				2,425				49,167				3,681				49,319
Net cash provided by (used in) investing activities			(739,279	)			(424,796	)			(241,153	)			(141,125	)			(981,514	)			(566,913	)
Cash flows from financing activities:
Increase (decrease) in borrowings, net			319,188				157,271				28,914				(12,094	)			347,830				145,176
Increase (decrease) in deposits from customers, net			254,279				154,374				-				-				254,279				154,374
Dividends paid			(23,926	)			(23,921	)			(25,308	)			(27,750	)			(25,308	)			(27,750	)
Other			1,355				457				(100,734	)			1,750				(108,950	)			(6,612	)
Net cash provided by (used in) financing activities			550,896				288,181				(97,128	)			(38,094	)			467,851				265,188
Effect of exchange rate changes on cash and cash equivalents			-				-				(11,525	)			10,179				(11,525	)			10,179
Net increase (decrease) in cash and cash equivalents			57,288				159,002				(269,224	)			209,781				(211,936	)			368,783
Cash and cash equivalents at beginning of the fiscal year			233,701				268,382				749,911				691,760				983,612				960,142
Cash and cash equivalents at end of the period			290,989				427,384				480,687				901,541				771,676				1,328,925

 

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ii) Issues Facing Sony and Management’s Response to those Issues

 

iii) Research and Development

 

Research and development costs for the nine months ended December 31, 2017 totaled 323.4 billion yen. There were no significant changes in research and development activities for the period.

iv) Employees

 

As of December 31, 2017, Sony Corporation had 2,555 employees, a decrease of 3,630 employees from 6,185 employees as of March 31, 2017. The total number of employees decreased mainly due to the separation of its IP&S business. There is no significant change in the number of employees of Sony on the consolidated basis.

 

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v) Liquidity and Capital Resources

 

Sony typically raises funds through straight bonds, CP programs and bank loans (including syndicated loans). If market disruption and volatility occur and Sony could not raise sufficient funds from these sources, Sony may also draw down funds from contractually committed lines of credit from various financial institutions. Sony has a total, translated into yen, of 528.8 billion yen in unused committed lines of credit, as of December 31, 2017. Details of those committed lines of credit are: a 300.0 billion yen committed line of credit contracted with a syndicate of Japanese banks, effective until July 2019, a 1.5 billion U.S. dollar multi-currency committed line of credit also with a syndicate of Japanese banks, effective until December 2018, and a 525 million U.S. dollar multi-currency committed line of credit contracted with a syndicate of foreign banks, effective until March 2018, in all of which Sony Corporation and Sony Global Treasury Services Plc are defined as borrowers. These contracts are aimed at securing sufficient liquidity in a quick and stable manner even in the event of turmoil within the financial and capital markets.

 

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  III    Company Information

  (1) Information on the Company’s Shares

  i) Total Number of Shares

  1) Total Number of Shares

 

Class		Total number of shares authorized to be issued
Common stock		3,600,000,000
Total		3,600,000,000

  2) Number of Shares Issued

 

  Notes:

1.	The Company’s shares of common stock are listed on the First Section of the Tokyo Stock Exchange in Japan.

2.

The number of shares issued as of the filing date of this Quarterly Securities Report (Shihanki Houkokusho) does not include shares issued upon the exercise of stock acquisition rights (“SARs”) (including the exercise of unsecured convertible bonds with SARs (6th series)) during February 2018, the month in which this Quarterly Securities Report was filed.

ii) Stock Acquisition Rights

 

Stock acquisition rights issued during the three months ended December 31, 2017

 

Name (Date of resolution of the Board of Directors)		Number of SARs issued		Number of shares of common stock to be issued or transferred
The thirty-fourth series of Common Stock Acquisition Rights (October 31, 2017)		13,915		1,391,500
The thirty-fifth series of Common Stock Acquisition Rights (October 31, 2017)		15,549		1,554,900

iii) Status of the Exercise of Moving Strike Convertible Bonds

   Not applicable.

 

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iv) Description of Rights Plan

   Not applicable.

v) Changes in the Total Number of Shares Issued and the Amount of Common Stock, etc.

 

Period		Change in the   total number of   shares issued   (Thousands)		Balance of the  total number of    shares issued   (Thousands)		Change in   the amount of   common stock   (Yen in Millions)		Balance of   the amount of   common stock   (Yen in Millions)		Change in the   legal capital   surplus   (Yen in Millions)		Balance of the   legal capital   surplus   (Yen in Millions)
From October 1 to December 31, 2017		1,003		1,265,652		1,922		864,078		1,922		1,077,771

Notes:

1.	The increase mentioned above is due to the exercise of SARs (including the exercise of unsecured convertible bonds with SARs (6th series)) and the issuance of new shares as restricted stock compensation.

2.	Upon the exercise of SARs during the period from January 1, 2018 to January 31, 2018 the total number of shares issued increased by 175 thousand shares, and the amount of common stock and the legal capital surplus increased by 332 million yen, respectively.

 

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vi) Status of Major Shareholders

(As of December 31, 2017)

Name		Address		Number of shares held (Thousands)		Percentage of shares held to total shares issued (%)
Citibank as Depositary Bank for Depositary Receipt Holders *1 (Local Custodian: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)		New York, U.S.A. (2-7-1, Marunouchi, Chiyoda-ku,  Tokyo)		112,844		8.92
JPMorgan Chase Bank 380055 *2 (Local Custodian: Mizuho Bank, Ltd.)		New York, U.S.A. (Shinagawa Intercity Tower A, 2-15-1, Konan, Minato-ku, Tokyo)		71,498		5.65
The Master Trust Bank of Japan, Ltd. (Trust account) *3		2-11-3,  Hamamatsu-cho, Minato-ku, Tokyo		69,245		5.47
Japan Trustee Services Bank, Ltd. (Trust account) *3		1-8-11, Harumi, Chuo-ku, Tokyo		67,154		5.31
State Street Bank and Trust Company *2 (Local Custodian: The Hongkong and Shanghai Banking Corporation Limited)		Boston, U.S.A. (3-11-1, Nihonbashi, Chuo-ku, Tokyo)		27,359		2.16
Japan Trustee Services Bank, Ltd. (Trust account 5) *3		1-8-11, Harumi, Chuo-ku, Tokyo		25,463		2.01
State Street Bank West Client - Treaty 505234 *2 (Local Custodian: Mizuho Bank, Ltd.)		North Quincy, U.S.A. (Shinagawa Intercity Tower A, 2-15-1, Konan, Minato-ku, Tokyo)		21,882		1.73
Japan Trustee Services Bank, Ltd. (Trust account 1) *3		1-8-11, Harumi, Chuo-ku, Tokyo		18,909		1.49
Japan Trustee Services Bank, Ltd. (Trust account 2) *3		1-8-11, Harumi, Chuo-ku, Tokyo		18,683		1.48
State Street Bank and Trust Company 505223 *2 (Local Custodian: Mizuho Bank, Ltd.)		Boston, U.S.A. (Shinagawa Intercity Tower A, 2-15-1, Konan, Minato-ku, Tokyo)		17,634		1.39
Total				450,671		35.61

Notes:

*1.	Citibank as Depositary Bank for Depositary Receipt Holders is the nominee of Citibank, N.A.

*2.	Each shareholder provides depositary services for shares owned by institutional investors, mainly in Europe and North America. They are also the nominees for these investors.

*3.	The shares held by each shareholder are held in trust for investors, including shares in securities investment trusts.

4.

Sumitomo Mitsui Trust Bank, Limited sent a copy of its “Bulk Shareholding Report” as of April 4, 2014 (which was filed with the Kanto Financial Bureau in Japan) to the Company and reported that it held shares, etc. of the Company as of March 31, 2014 as provided in the below table. As of December 31, 2017, the Company has not been able to confirm such entry of Sumitomo Mitsui Trust Bank, Limited in the register of shareholders.

 

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5.

BlackRock Japan Co., Ltd. filed its “Amendment to the Bulk Shareholding Report” with the Kanto Financial Bureau in Japan as of March 22, 2017 and reported that it held shares of the Company as of March 15, 2017 as provided in the below table. As of December 31, 2017, the Company has not been able to confirm such entry of BlackRock Japan Co., Ltd. in the register of shareholders.

6.

Capital Research and Management Company filed its “Amendment to the Bulk Shareholding Report” with the Kanto Financial Bureau in Japan as of April 7, 2017 and reported that it held shares of the Company as of March 31, 2017 as provided in the below table. As of December 31, 2017, the Company has not been able to confirm such entry of Capital Research and Management Company in the register of shareholders.

vii) Status of Voting Rights

1) Shares Issued

(As of December 31, 2017)

 

Classification		Number of shares of     common stock		Number of voting rights   (Units)		Description
Shares without voting rights		—		—		—
Shares with restricted voting rights (Treasury stock, etc.)		—		—		—
Shares with restricted voting rights (Others)		—		—		—
Shares with full voting rights (Treasury stock, etc.)		1,105,600		—		—
Shares with full voting rights (Others)		1,262,510,600		12,625,106		—
Shares constituting less than one full unit		2,035,753		—		Shares constituting     less than one full unit     (100 shares)
Total number of shares issued		1,265,651,953		—		—
Total voting rights held by all shareholders		—		12,625,106		—

 

Note:		Included in “Shares with full voting rights (Others)” under “Number of shares of common stock” are 19,000 shares of common stock held under the name of Japan Securities Depository Center, Incorporated. Also included in “Shares with full voting rights (Others)” under “Number of voting rights (Units)” are 190 units of voting rights relating to the shares of common stock with full voting rights held under the name of Japan Securities Depository Center, Incorporated.

 

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2) Treasury Stock, Etc.

(As of December 31, 2017)

 

Name of shareholder		Address of shareholder		Number of   shares held   under own   name		Number of   shares held   under the names   of others		Total number   of shares   held		Percentage of   shares held to   total shares   issued (%)
Sony Corporation (Treasury stock)		1-7-1, Konan, Minato-ku,  Tokyo		1,105,600		—		1,105,600		0.09
Total		—		1,105,600		—		1,105,600		0.09

 

Note:		In addition to the 1,105,600 shares listed above, there are 300 shares of common stock held in the name of the Company in the register of shareholders that the Company does not beneficially own. These shares are included in “Shares with full voting rights (Others)” in Table 1) “Shares Issued” above.

(2)    Directors and Corporate Executive Officers

The change in directors or corporate executive officers in the period from the filing date of the Securities Report (Yukashoken Houkokusho) for the fiscal year ended March 31, 2017 to the filing date of this Quarterly Securities Report (Shihanki Houkokusho) is as follows:

i) Retired Corporate Executive Officer

 

Title		Position		Name		Date of Retirement
Corporate Executive Officer		Executive  Vice President                     (Officer in charge of Game & Network Services Business)		Andrew House		October 3, 2017

ii) The number of male and female Directors and Corporate Executive Officers after the change

   The Directors and Corporate Executive Officers are composed of 18 males and 1 female.

   (The percentage of female Directors and Corporate Executive Officers is 5.3%.)

 

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IV         Financial Statements

				Page
(1) Consolidated Financial Statements				20
(i)         Consolidated Balance Sheets				20
(ii)        Consolidated Statements of Income				22
(iii)       Consolidated Statements of Comprehensive Income				24
(iv)       Consolidated Statements of Cash Flows				25
(2) Other Information				46

 

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(1) Consolidated Financial Statements

(i)    Consolidated Balance Sheets (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

		Yen in millions
		At March 31,             2017				At December 31,             2017
ASSETS
Current assets:
Cash and cash equivalents			960,142				1,328,925
Marketable securities			1,051,441				1,221,687
Notes and accounts receivable, trade			1,006,961				1,535,912
Allowance for doubtful accounts and sales returns			(53,150	)			(62,135	)
Inventories			640,835				753,658
Other receivables			223,632				234,002
Prepaid expenses and other current assets			525,861				548,742
Total current assets			4,355,722				5,560,791
Film costs			336,928				365,783
Investments and advances:
Affiliated companies			149,371				155,303
Securities investments and other			9,962,422				10,401,319
			10,111,793				10,556,622
Property, plant and equipment:
Land			117,293				114,967
Buildings			666,381				685,576
Machinery and equipment			1,842,852				1,855,459
Construction in progress			28,779				45,041
			2,655,305				2,701,043
Less – Accumulated depreciation			1,897,106				1,909,436
			758,199				791,607
Other assets:
Intangibles, net			584,185				571,027
Goodwill			522,538				552,336
Deferred insurance acquisition costs			568,837				595,180
Deferred income taxes			98,958				91,452
Other			323,396				335,878
			2,097,914				2,145,873
Total assets			17,660,556				19,420,676

  (Continued on following page.)

 

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            Consolidated Balance Sheets (Unaudited)

 

		Yen in millions
		At March 31,             2017				At December 31,             2017
LIABILITIES
Current liabilities:
Short-term borrowings			464,655				537,443
Current portion of long-term debt			53,424				245,646
Notes and accounts payable, trade			539,900				658,250
Accounts payable, other and accrued expenses			1,394,758				1,621,542
Accrued income and other taxes			106,037				213,874
Deposits from customers in the banking business			2,071,091				2,159,747
Other			591,874				585,348
Total current liabilities			5,221,739				6,021,850
Long-term debt			681,462				594,195
Accrued pension and severance costs			396,715				403,663
Deferred income taxes			432,824				428,147
Future insurance policy benefits and other			4,834,492				5,104,322
Policyholders’ account in the life insurance business			2,631,073				2,854,660
Other			314,771				284,283
Total liabilities			14,513,076				15,691,120
Redeemable noncontrolling interest			12,058				14,609
Commitments and contingent liabilities
EQUITY
Sony Corporation’s stockholders’ equity:
Common stock, no par value –
At March 31, 2017–Shares authorized: 3,600,000,000, shares issued: 1,263,763,660			860,645
At December 31, 2017–Shares authorized: 3,600,000,000, shares issued: 1,265,651,953							864,078
Additional paid-in capital			1,275,337				1,279,422
Retained earnings			984,368				1,476,194
Accumulated other comprehensive income –
Unrealized gains on securities, net			126,635				131,333
Unrealized gains and losses on derivative instruments, net			(58	)			92
Pension liability adjustment			(308,736	)			(301,749	)
Foreign currency translation adjustments			(436,610	)			(404,996	)
			(618,769	)			(575,320	)
Treasury stock, at cost
Common stock
At March 31, 2017–1,073,222 shares			(4,335	)
At December 31, 2017–1,105,679 shares							(4,481	)
			2,497,246				3,039,893
Noncontrolling interests			638,176				675,054
Total equity			3,135,422				3,714,947
Total liabilities and equity			17,660,556				19,420,676

  The accompanying notes are an integral part of these statements.

 

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  (ii)    Consolidated Statements of Income (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

		Yen in millions
		Nine months ended December 31
		2016				2017
Sales and operating revenue:
Net sales			4,834,013				5,573,273
Financial services revenue			806,954				950,292
Other operating revenue			58,679				69,396
			5,699,646				6,592,961
Costs and expenses:
Cost of sales			3,559,927				3,957,700
Selling, general and administrative			1,088,096				1,159,190
Financial services expenses			693,537				810,967
Other operating (income) expense, net			165,454				(40,131	)
			5,507,014				5,887,726
Equity in net income of affiliated companies			1,679				7,441
Operating income			194,311				712,676
Other income:
Interest and dividends			7,859				16,556
Gain on sale of securities investments, net			155				1,479
Other			1,906				2,529
			9,920				20,564
Other expenses:
Interest			11,902				10,782
Loss on devaluation of securities investments			4,860				1,803
Foreign exchange loss, net			19,230				25,154
Other			4,476				4,923
			40,468				42,662
Income before income taxes			163,763				690,578
Income taxes			80,931				138,481
Net income			82,832				552,097
Less - Net income attributable to noncontrolling interests			37,193				44,477
Net income attributable to Sony Corporation’s stockholders			45,639				507,620
		Yen
		Nine months ended December 31
		2016				2017
Per share data:
Net income attributable to Sony Corporation’s stockholders
– Basic			36.17				401.76
– Diluted			35.43				393.05

The accompanying notes are an integral part of these statements.

 

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  Consolidated Statements of Income (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

		Yen in millions
		Three months ended December 31
		2016				2017
Sales and operating revenue:
Net sales			2,059,578				2,279,714
Financial services revenue			317,342				371,498
Other operating revenue			20,579				21,105
			2,397,499				2,672,317
Costs and expenses:
Cost of sales			1,495,036				1,607,962
Selling, general and administrative			411,652				415,532
Financial services expenses			286,740				315,404
Other operating (income) expense, net			113,013				(13,119	)
			2,306,441				2,325,779
Equity in net income of affiliated companies			1,314				4,299
Operating income			92,372				350,837
Other income:
Interest and dividends			2,502				3,519
Gain on sale of securities investments, net			92				833
Other			189				1,531
			2,783				5,883
Other expenses:
Interest			3,749				3,536
Loss on devaluation of securities investments			4,810				1,324
Foreign exchange loss, net			18,420				5,888
Other			1,949				2,853
			28,928				13,601
Income before income taxes			66,227				343,119
Income taxes			36,956				28,234
Net income			29,271				314,885
Less - Net income attributable to noncontrolling interests			9,640				18,988
Net income attributable to Sony Corporation’s stockholders			19,631				295,897
		Yen
		Three months ended December 31
		2016				2017
Per share data:
Net income attributable to Sony Corporation’s stockholders
– Basic			15.55				234.08
– Diluted			15.24				228.91

The accompanying notes are an integral part of these statements.

 

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  (iii)    Consolidated Statements of Comprehensive Income (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

		Yen in millions
		Nine months ended December 31
		2016				2017
Net income			82,832				552,097
Other comprehensive income, net of tax —
Unrealized gains (losses) on securities			(25,645	)			7,030
Unrealized gains on derivative instruments			3,690				150
Pension liability adjustment			9,297				7,009
Foreign currency translation adjustments			5,377				33,742
Total comprehensive income			75,551				600,028
Less – Comprehensive income attributable to noncontrolling interests			21,307				48,959
Comprehensive income attributable to Sony Corporation’s stockholders			54,244				551,069
		Yen in millions
		Three months ended December 31
		2016				2017
Net income			29,271				314,885
Other comprehensive income, net of tax —
Unrealized gains (losses) on securities			(8,314	)			11,688
Unrealized gains (losses) on derivative instruments			3,430				(79	)
Pension liability adjustment			3,250				2,365
Foreign currency translation adjustments			112,440				3,655
Total comprehensive income			140,077				332,514
Less – Comprehensive income attributable to noncontrolling interests			2,152				21,603
Comprehensive income attributable to Sony Corporation’s stockholders			137,925				310,911

  The accompanying notes are an integral part of these statements.

 

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  (iv)     Consolidated Statements of Cash Flows (Unaudited)

 

Sony Corporation and Consolidated Subsidiaries

 

		Yen in millions
		Nine months ended December 31
		2016				2017
Cash flows from operating activities:
Net income			82,832				552,097
Adjustments to reconcile net income to net cash provided by operating activities –
Depreciation and amortization, including amortization of deferred insurance acquisition costs			259,554				258,187
Amortization of film costs			190,539				259,709
Accrual for pension and severance costs, less payments			7,270				3,948
Other operating (income) expense, net			165,454				(40,131	)
Loss on sale or devaluation of securities investments, net			4,706				324
Gain on revaluation of marketable securities held in the financial services business for trading purposes, net			(42,727	)			(109,888	)
Loss on revaluation or impairment of securities investments held in the financial services business, net			29				213
Deferred income taxes			4,450				(4,551	)
Equity in net (income) loss of affiliated companies, net of dividends			5,770				(2,125	)
Changes in assets and liabilities:
Increase in notes and accounts receivable, trade			(372,978	)			(488,285	)
Increase in inventories			(18,622	)			(88,954	)
Increase in film costs			(242,875	)			(279,082	)
Increase in notes and accounts payable, trade			87,698				90,484
Increase in accrued income and other taxes			65,951				70,983
Increase in future insurance policy benefits and other			336,157				424,084
Increase in deferred insurance acquisition costs			(70,070	)			(65,248	)
Increase in marketable securities held in the financial services business for trading purposes			(60,868	)			(64,727	)
Increase in other current assets			(46,705	)			(25,633	)
Increase in other current liabilities			55,453				189,524
Other			(97,766	)			(20,600	)
Net cash provided by operating activities			313,252				660,329

(Continued on following page.)

 

 

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            Consolidated Statements of Cash Flows (Unaudited)

 

 

		Yen in millions
		Nine months ended December 31
		2016				2017
Cash flows from investing activities:
Payments for purchases of fixed assets			(260,457	)			(189,780	)
Proceeds from sales of fixed assets			9,134				15,095
Payments for investments and advances by financial services business			(943,712	)			(671,982	)
Payments for investments and advances (other than financial services business)			(7,487	)			(16,526	)
Proceeds from sales or return of investments and collections of advances by financial services business			212,624				256,652
Proceeds from sales or return of investments and collections of advances (other than financial services business)			13,837				5,404
Proceeds from sales of businesses			3,262				44,624
Other			(8,715	)			(10,400	)
Net cash used in investing activities			(981,514	)			(566,913	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			255,416				92,833
Payments of long-term debt			(182,670	)			(20,570	)
Increase in short-term borrowings, net			275,084				72,913
Increase in deposits from customers in the financial services business, net			254,279				154,374
Dividends paid			(25,308	)			(27,750	)
Payment for purchase of Sony/ATV shares from noncontrolling interests			(76,565	)			-
Other			(32,385	)			(6,612	)
Net cash provided by financing activities			467,851				265,188
Effect of exchange rate changes on cash and cash equivalents			(11,525	)			10,179
Net increase (decrease) in cash and cash equivalents			(211,936	)			368,783
Cash and cash equivalents at beginning of the fiscal year			983,612				960,142
Cash and cash equivalents at end of the period			771,676				1,328,925

  The accompanying notes are an integral part of these statements.

 

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    Index to Notes to Consolidated Financial Statements

 

 

Sony Corporation and Consolidated Subsidiaries

 

Notes to Consolidated Financial Statements		Page
1.   Summary of significant accounting policies			28
2.   Marketable securities and securities investments			29
3.   Fair value measurements			30
4.   Supplemental equity and comprehensive income information			32
5.   Reconciliation of the differences between basic and diluted EPS			34
6.   Commitments, contingent liabilities and other			35
7.   Business segment information			37

 

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Notes to Consolidated Financial Statements (Unaudited)

Sony Corporation and Consolidated Subsidiaries

 

1.	Summary of significant accounting policies

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except for certain disclosures which have been omitted. Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with U.S. GAAP. These adjustments were not recorded in the statutory books and records as Sony Corporation and its subsidiaries in Japan maintain their records and prepare their statutory financial statements in accordance with accounting principles generally accepted in Japan while its foreign subsidiaries maintain their records and prepare their financial statements in conformity with accounting principles generally accepted in the countries of their domiciles.

 

(1)	Accounting methods used specifically for interim consolidated financial statements:

Income Taxes -

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

 

(2)	Reclassifications:

Certain reclassifications of the financial statements and accompanying footnotes for the nine and three months ended December 31, 2016 have been made to conform to the presentation for the nine and three months ended December 31, 2017.

 

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2.	Marketable securities and securities investments

Marketable securities and securities investments, primarily included in the Financial Services segment, are comprised of debt and equity securities for which the aggregate cost, gross unrealized gains and losses and fair value pertaining to available-for-sale securities and held-to-maturity securities are as follows:

 

		Yen in millions
		March 31, 2017																December 31, 2017
		Cost				Gross unrealized gains				Gross unrealized losses				Fair value				Cost				Gross unrealized gains				Gross unrealized losses				Fair value
Available-for-sale:
Debt securities:
Japanese national government bonds			1,161,493				182,836				(928)				1,343,401				1,189,954				180,640				(504)				1,370,090
Japanese local government bonds			60,450				144				(63)				60,531				66,022				97				(105)				66,014
Japanese corporate bonds			163,785				7,864				(1,846)				169,803				194,204				8,572				(1,386)				201,390
Foreign government bonds			27,601				359				(918)				27,042				47,633				2,203				(314)				49,522
Foreign corporate bonds			396,097				4,168				(719)				399,546				375,729				2,372				(444)				377,657
Other			15,192				-				(0)				15,192				82,236				1				-				82,237
			1,824,618				195,371				(4,474)				2,015,515				1,955,778				193,885				(2,753)				2,146,910
Equity securities			55,928				69,937				(377)				125,488				55,711				78,807				(269)				134,249
Held-to-maturity securities:
Japanese national government bonds *			5,661,191				1,520,904				(30,553)				7,151,542				5,832,482				1,547,982				(28,878)				7,351,586
Japanese local government bonds			4,101				449				-				4,550				3,913				420				-				4,333
Japanese corporate bonds			230,011				12,346				(22,071)				220,286				320,165				13,646				(21,692)				312,119
Foreign government bonds			253,019				5,269				(22,868)				235,420				279,810				15,318				(12,014)				283,114
Foreign corporate bonds			198				18				-				216				198				15				-				213
			6,148,520				1,538,986				(75,492)				7,612,014				6,436,568				1,577,381				(62,584)				7,951,365
Total			8,029,066				1,804,294				(80,343)				9,753,017				8,448,057				1,850,073				(65,606)				10,232,524

* As of December 31, 2017, held-to-maturity securities include 268,725 million yen of pledged Japanese national government bonds as collateral for transactions with short-term repurchase agreement.

 

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3.	Fair value measurements

The fair value of Sony’s assets and liabilities that are measured at fair value on a recurring basis are as follows:

 

		Yen in millions
		March 31, 2017
																		Presentation in the consolidated balance sheets
		Level 1				Level 2				Level 3				Total				Marketable   securities				Securities investments   and other				Other current assets/   liabilities				Other noncurrent assets/ liabilities
Assets:
Trading securities			611,108				310,212				-				921,320				921,320				-				-				-
Available-for-sale securities
Debt securities
Japanese national government bonds			-				1,343,401				-				1,343,401				18,483				1,324,918				-				-
Japanese local government bonds			-				60,531				-				60,531				8,518				52,013				-				-
Japanese corporate bonds			-				168,493				1,310				169,803				8,433				161,370				-				-
Foreign government bonds			-				27,042				-				27,042				1,007				26,035				-				-
Foreign corporate bonds			-				358,369				41,177				399,546				86,708				312,838				-				-
Other			-				-				15,192				15,192				-				15,192				-				-
Equity securities			125,306				182				-				125,488				-				125,488				-				-
Other investments *1			6,589				4,525				10,483				21,597				-				21,597				-				-
Derivative assets *2, *3			981				26,279				-				27,260				-				-				25,409				1,851
Total assets			743,984				2,299,034				68,162				3,111,180				1,044,469				2,039,451				25,409				1,851
Liabilities:
Derivative liabilities *2, *3			520				33,930				-				34,450				-				-				15,743				18,707
Total liabilities			520				33,930				-				34,450				-				-				15,743				18,707

 

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		Yen in millions
		December 31, 2017
																		Presentation in the consolidated balance sheets
		Level 1				Level 2				Level 3				Total				Marketable   securities				Securities investments   and other				Other current assets/   liabilities				Other noncurrent assets/ liabilities
Assets:
Trading securities			742,836				343,916				-				1,086,752				1,086,752				-				-				-
Available-for-sale  securities
Debt securities
Japanese national government bonds			-				1,370,090				-				1,370,090				20,834				1,349,256				-				-
Japanese local government bonds			-				66,014				-				66,014				9,388				56,626				-				-
Japanese corporate bonds			-				201,390				-				201,390				9,138				192,252				-				-
Foreign government bonds			-				49,522				-				49,522				-				49,522				-				-
Foreign corporate bonds			-				349,534				28,123				377,657				89,771				287,886				-				-
Other			-				-				82,237				82,237				-				82,237				-				-
Equity securities			133,919				330				-				134,249				-				134,249				-				-
Other investments *1			7,047				5,463				9,731				22,241				-				22,241				-				-
Derivative assets *2, *3			613				16,736				-				17,349				-				-				15,358				1,991
Total assets			884,415				2,402,995				120,091				3,407,501				1,215,883				2,174,269				15,358				1,991
Liabilities:
Derivative liabilities *2, *3			616				35,822				-				36,438				-				-				20,153				16,285
Total liabilities			616				35,822				-				36,438				-				-				20,153				16,285

 

*1	Other investments include certain hybrid financial instruments and certain private equity investments.

*2	Derivative assets and liabilities are recognized and disclosed on a gross basis.

*3	The potential effect of offsetting on assets and liabilities, which primarily consists of derivatives subject to master netting agreements and/or collateral, is insignificant.

 

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4.	Supplemental equity and comprehensive income information

 

(1)	Stockholders’ Equity

A reconciliation of the beginning and ending carrying amounts of Sony Corporation’s stockholders’ equity, noncontrolling interests and the total equity for the nine months ended December 31, 2016 and 2017 are as follows:

 

		Yen in millions
		Sony Corporation’s     stockholders’ equity				Noncontrolling interests				Total equity
Balance at March 31, 2016			2,463,340				661,070				3,124,410
Exercise of stock acquisition rights			2,314				-				2,314
Stock-based compensation			1,452				-				1,452
Comprehensive income:
Net income			45,639				37,193				82,832
Other comprehensive income, net of tax —
Unrealized losses on securities			(12,064	)			(13,581	)			(25,645)
Unrealized gains on derivative instruments			3,689				1				3,690
Pension liability adjustment			9,175				122				9,297
Foreign currency translation adjustments			7,805				(2,428	)			5,377
Total comprehensive income			54,244				21,307				75,551
Dividends declared			(12,625	)			(16,480	)			(29,105)
Transactions with noncontrolling interests shareholders and other			(55,791	)			(39,546	)			(95,337)
Balance at December 31, 2016			2,452,934				626,351				3,079,285
		Yen in millions
		Sony Corporation’s     stockholders’ equity				Noncontrolling interests				Total equity
Balance at March 31, 2017			2,497,246				638,176				3,135,422
Issuance of new shares			842				-				842
Exercise of stock acquisition rights			6,008				-				6,008
Conversion of convertible bonds			16				-				16
Stock-based compensation			1,320				-				1,320
Comprehensive income:
Net income			507,620				44,477				552,097
Other comprehensive income, net of tax —
Unrealized gains on securities			4,698				2,332				7,030
Unrealized gains on derivative instruments			150				-				150
Pension liability adjustment			6,987				22				7,009
Foreign currency translation adjustments			31,614				2,128				33,742
Total comprehensive income			551,069				48,959				600,028
Dividends declared			(15,794	)			(14,473	)			(30,267)
Transactions with noncontrolling interests shareholders and other			(814	)			2,392				1,578
Balance at December 31, 2017			3,039,893				675,054				3,714,947

There was no material effect of changes in Sony Corporation’s ownership interest in its subsidiaries on Sony Corporation’s stockholders’ equity for the nine months ended December 31, 2016 and 2017.

 

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(2)	Other Comprehensive Income

Changes in accumulated other comprehensive income, net of tax by component for the nine months ended December 31, 2016 and 2017 are as follows:

 

		Yen in millions
		Unrealized     gains (losses)     on securities				Unrealized gains (losses) on derivative instruments				Pension liability adjustment				Foreign currency translation adjustments				Total
Balance at March 31, 2016			140,736				(1,198	)			(371,739	)			(421,117	)			(653,318)
Other comprehensive income before reclassifications			(25,788	)			6,125				(340	)			5,377				(14,626)
Amounts reclassified out of accumulated other comprehensive income			143				(2,435	)			9,637				-				7,345
Net current-period other comprehensive income			(25,645	)			3,690				9,297				5,377				(7,281)
Less: Other comprehensive income attributable to noncontrolling interests			(13,581	)			1				122				(2,428	)			(15,886)
Balance at December 31, 2016			128,672				2,491				(362,564	)			(413,312	)			(644,713)
		Yen in millions
		Unrealized     gains (losses)     on securities				Unrealized gains (losses) on derivative instruments				Pension liability adjustment				Foreign currency translation adjustments				Total
Balance at March 31, 2017			126,635				(58	)			(308,736	)			(436,610	)			(618,769)
Other comprehensive income before reclassifications			7,897				(149	)			(117	)			36,505				44,136
Amounts reclassified out of accumulated other comprehensive income			(867	)			299				7,126				(2,763	)			3,795
Net current-period other comprehensive income			7,030				150				7,009				33,742				47,931
Less: Other comprehensive income attributable to noncontrolling interests			2,332				-				22				2,128				4,482
Balance at December 31, 2017			131,333				92				(301,749	)			(404,996	)			(575,320)

 

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5.	Reconciliation of the differences between basic and diluted EPS

Reconciliation of the differences between basic and diluted net income attributable to Sony Corporation’s stockholders per share (“EPS”) for the nine and three months ended December 31, 2016 and 2017 is as follows:

 

		Yen in millions
		Nine months ended December 31
		2016		2017
Net income attributable to Sony Corporation’s stockholders for basic and diluted EPS computation		45,639		507,620
		Thousands of shares
Weighted-average shares outstanding		1,261,862		1,263,485
Effect of dilutive securities:
Stock acquisition rights		2,237		4,051
Zero coupon convertible bonds		23,962		23,961
Weighted-average shares for diluted EPS computation		1,288,061		1,291,497
		Yen
Basic EPS		36.17		401.76
Diluted EPS		35.43		393.05

Potential shares of common stock that were excluded from the computation of diluted EPS for the nine months ended December 31, 2016 and 2017 were 8,014 thousand shares and 2,946 thousand shares, respectively. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the nine months ended December 31, 2016 and 2017 when the exercise price for those shares was in excess of the average market value of Sony’s common stock for the period. The zero coupon convertible bonds issued in July 2015 were included in the diluted EPS calculation under the if-converted method beginning upon issuance.

 

		Yen in millions
		Three months ended December 31
		2016		2017
Net income attributable to Sony Corporation’s stockholders for basic and diluted EPS computation		19,631		295,897
		Thousands of shares
Weighted-average shares outstanding		1,262,223		1,264,083
Effect of dilutive securities:
Stock acquisition rights		2,187		4,572
Zero coupon convertible bonds		23,962		23,960
Weighted-average shares for diluted EPS computation		1,288,372		1,292,615
		Yen
Basic EPS		15.55		234.08
Diluted EPS		15.24		228.91

Potential shares of common stock that were excluded from the computation of diluted EPS for the three months ended December 31, 2016 and 2017 were 8,014 thousand shares and 2,946 thousand shares, respectively. The potential shares related to stock acquisition rights were excluded as anti-dilutive for the three months ended December 31, 2016 and 2017 when the exercise price for those shares was in excess of the average market value of Sony’s common stock for the period. The zero coupon convertible bonds issued in July 2015 were included in the diluted EPS calculation under the if-converted method beginning upon issuance.

 

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6.	Commitments, contingent liabilities and other

 

(1)	Loan commitments

Subsidiaries in the Financial Services segment have entered into loan agreements with their customers in accordance with the condition of the contracts. As of December 31, 2017, the total unused portion of the lines of credit extended under these contracts was 31,817 million yen. The aggregate amounts of future year-by-year payments for these loan commitments cannot be determined.

 

(2)	Purchase commitments and other

Purchase commitments and other outstanding commitments as of December 31, 2017 amounted to 410,064 million yen. The major components of these commitments are as follows:

Certain subsidiaries in the Pictures segment have entered into agreements with creative talent for the development and production of motion pictures and television programming as well as agreements with third parties to acquire completed motion pictures, or certain rights therein, and to acquire the rights to broadcast certain live action sporting events. These agreements cover various periods mainly within two years. As of December 31, 2017, these subsidiaries were committed to make payments under such contracts of 118,983 million yen.

Certain subsidiaries in the Music segment have entered into contracts with recording artists, songwriters and companies for the future production, distribution and/or licensing of music product. These contracts cover various periods mainly within five years. As of December 31, 2017, these subsidiaries were committed to make payments of 78,103 million yen under such contracts.

A subsidiary in the Game & Network Services segment has entered into contracts for programming content. These contracts cover various periods mainly within two years. As of December 31, 2017, this subsidiary was committed to make payments of 33,134 million yen under such contracts.

Sony has entered into sponsorship contracts related to advertising and promotional rights. These contracts cover various periods mainly within two years. As of December 31, 2017, Sony has committed to make payments of 6,710 million yen under such contracts.

 

(3)	Litigation

Beginning in 2009, the U.S. Department of Justice (“DOJ”), the European Commission and certain other governmental agencies outside the United States have conducted investigations relating to competition in the optical disk drives market. Sony Corporation and/or certain of its subsidiaries have been subject to these investigations. Sony understands that the investigations of several agencies, including the DOJ, have ended, and only one agency continues to investigate. However, proceedings initiated by the European Commission as a result of its investigation continue. In October 2015, the European Commission adopted a decision in which it fined Sony Corporation and certain of its subsidiaries 31 million euros; however, Sony filed an appeal against the decision with the European Union’s General Court. In addition, a number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Certain of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States; however, certain other lawsuits continue. Based on the stage of the pending proceedings, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

Beginning in 2011, the DOJ, the European Commission and certain other governmental agencies outside the United States conducted investigations relating to competition in the secondary batteries market. Sony Corporation and/or certain of its subsidiaries were subject to these investigations. Sony understands that the investigations by these agencies, including the DOJ and the European Commission, have ended or are no longer active. With respect to the investigation by the European Commission, in December 2016, Sony Corporation and certain of its subsidiaries reached a settlement with the European Commission to pay a fine of approximately 29.8 million euros. In addition, a number of direct and indirect purchaser lawsuits, including class actions, have been filed in certain jurisdictions in which the plaintiffs allege that Sony Corporation and certain of its subsidiaries violated antitrust laws and seek recovery of damages and other remedies. Certain of these lawsuits have been settled, including the class actions brought by the direct and indirect purchasers in the United States; however, certain other lawsuits continue. Based on the stage of the pending proceedings, it is not possible to estimate the amount of losses or range of possible losses, if any, that might ultimately result from adverse judgments, settlements or other resolution of all of these matters.

In addition, Sony Corporation and certain of its subsidiaries are defendants or otherwise involved in other pending legal and regulatory proceedings. However, based upon the information currently available, Sony believes that the outcome from such legal and regulatory proceedings would not have a material impact on Sony’s results of operations and financial position.

 

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(4)    Guarantees

Sony has issued guarantees that contingently require payments to guaranteed parties if certain specified events or conditions occur. The maximum potential amount of future payments under these guarantees as of December 31, 2017 amounted to 3,210 million yen.

 

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7.	Business segment information

The reportable segments presented below are the segments of Sony for which separate financial information is available and for which operating profit or loss amounts are evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM does not evaluate segments using discrete asset information. Sony’s CODM is its Chief Executive Officer and President.

Sony realigned its business segments from the first quarter of the fiscal year ending March 31, 2018. As a result of this realignment, the operation of the former Components segment is now included in All Other. In connection with this realignment, the sales and operating revenue and operating income (loss) of each segment for the comparable period have been reclassified to conform to the current presentation.

The Game & Network Services (“G&NS”) segment includes the manufacture and sales of home gaming products, network services businesses 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 Home Entertainment & Sound (“HE&S”) segment includes Televisions as well as Audio and Video businesses. The Imaging Products & Solutions (“IP&S”) segment includes the Still and Video Cameras business. The Mobile Communications (“MC”) segment includes the manufacture and sales of mobile phones and Internet-related service businesses. The Semiconductors segment includes the image sensors business. The Financial Services segment primarily represents individual life insurance and non-life insurance businesses in the Japanese market and a bank business in Japan. All Other consists of various operating activities, including the overseas disc manufacturing, recording media and battery businesses. Sony’s products and services are generally unique to a single operating segment.

 

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Business segments -

Sales and operating revenue:

 

		Yen in millions
		Nine months ended December 31
		2016				2017
Sales and operating revenue:
Game & Network Services -
Customers			1,212,613				1,418,955
Intersegment			55,345				80,277
Total			1,267,958				1,499,232
Music -
Customers			458,256				582,180
Intersegment			12,366				11,387
Total			470,622				593,567
Pictures -
Customers			599,920				709,458
Intersegment			665				673
Total			600,585				710,131
Home Entertainment & Sound -
Customers			820,799				986,839
Intersegment			3,422				808
Total			824,221				987,647
Imaging Products & Solutions -
Customers			419,662				488,399
Intersegment			5,055				5,058
Total			424,717				493,457
Mobile Communications -
Customers			598,855				564,025
Intersegment			4,435				6,746
Total			603,290				570,771
Semiconductors -
Customers			484,332				584,389
Intersegment			87,714				99,165
Total			572,046				683,554
Financial Services -
Customers			806,954				950,292
Intersegment			5,417				5,363
Total			812,371				955,655
All Other -
Customers			276,660				286,307
Intersegment			57,113				44,335
Total			333,773				330,642
Corporate and elimination			(209,937	)			(231,695	)
Consolidated total			5,699,646				6,592,961

G&NS intersegment amounts primarily consist of transactions with All Other.

Semiconductors intersegment amounts primarily consist of transactions with the MC segment, the G&NS segment and the IP&S segment.

All Other intersegment amounts primarily consist of transactions with the Pictures segment, the Music segment and the G&NS segment.

Corporate and elimination includes certain brand and patent royalty income.

 

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		Yen in millions
		Three months ended December 31
		2016				2017
Sales and operating revenue:
Game & Network Services -
Customers			596,997				681,649
Intersegment			20,702				36,317
Total			617,699				717,966
Music -
Customers			173,218				214,267
Intersegment			5,289				4,162
Total			178,507				218,429
Pictures -
Customers			224,771				260,050
Intersegment			385				267
Total			225,156				260,317
Home Entertainment & Sound -
Customers			351,983				429,604
Intersegment			1,442				243
Total			353,425				429,847
Imaging Products & Solutions -
Customers			165,260				179,112
Intersegment			1,859				1,990
Total			167,119				181,102
Mobile Communications -
Customers			247,173				215,141
Intersegment			1,424				2,402
Total			248,597				217,543
Semiconductors -
Customers			205,021				218,303
Intersegment			28,847				32,627
Total			233,868				250,930
Financial Services -
Customers			317,342				371,498
Intersegment			1,800				1,773
Total			319,142				373,271
All Other -
Customers			109,933				96,611
Intersegment			21,713				11,971
Total			131,646				108,582
Corporate and elimination			(77,660	)			(85,670	)
Consolidated total			2,397,499				2,672,317

G&NS intersegment amounts primarily consist of transactions with All Other.

Semiconductors intersegment amounts primarily consist of transactions with the MC segment, the G&NS segment and the IP&S segment.

All Other intersegment amounts primarily consist of transactions with the Pictures segment, the Music segment and the G&NS segment.

Corporate and elimination includes certain brand and patent royalty income.

 

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Segment profit or loss:

 

		Yen in millions
		Nine months ended December 31
		2016				2017
Operating income (loss):
Game & Network Services			113,051				157,847
Music			60,373				96,878
Pictures			(114,207)				8,688
Home Entertainment & Sound			63,731				93,183
Imaging Products & Solutions			43,467				68,056
Mobile Communications			25,331				16,964
Semiconductors			(20,567)				165,370
Financial Services			111,106				139,109
All Other			(41,604)				(6,004)
Total			240,681				740,091
Corporate and elimination			(46,370)				(27,415)
Consolidated operating income			194,311				712,676

Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.

Corporate and elimination includes headquarters restructuring costs and certain other corporate expenses, including the amortization of certain intellectual property assets such as the cross-licensing of intangible assets acquired from Ericsson at the time of the Sony Mobile Communications acquisition, which are not allocated to segments.

 

		Yen in millions
		Three months ended December 31
		2016				2017
Operating income (loss):
Game & Network Services			50,028				85,364
Music			27,982				39,342
Pictures			(106,774)				10,489
Home Entertainment & Sound			25,934				46,213
Imaging Products & Solutions			21,101				25,982
Mobile Communications			21,218				15,801
Semiconductors			27,166				60,558
Financial Services			28,996				56,287
All Other			(2,049)				2,255
Total			93,602				342,291
Corporate and elimination			(1,230)				8,546
Consolidated operating income			92,372				350,837

Operating income (loss) is sales and operating revenue less costs and expenses, and includes equity in net income (loss) of affiliated companies.

Corporate and elimination includes headquarters restructuring costs and certain other corporate expenses, including the amortization of certain intellectual property assets such as the cross-licensing of intangible assets acquired from Ericsson at the time of the Sony Mobile Communications acquisition, which are not allocated to segments.

 

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Other Significant Items:

The following table includes a breakdown of sales and operating revenue to external customers by product category for certain segments. Sony management views each segment as a single operating segment.

 

		Yen in millions
		Nine months ended December 31
Sales and operating revenue:		2016				2017
Game & Network Services
Hardware			505,409				506,366
Network			504,868				718,695
Other			202,336				193,894
Total			1,212,613				1,418,955
Music
Recorded Music			294,296				337,238
Music Publishing			46,791				54,693
Visual Media and Platform			117,169				190,249
Total			458,256				582,180
Pictures
Motion Pictures			265,701				302,005
Television Productions			168,661				201,514
Media Networks			165,558				205,939
Total			599,920				709,458
Home Entertainment & Sound
Televisions			579,811				700,403
Audio and Video			239,770				284,664
Other			1,218				1,772
Total			820,799				986,839
Imaging Products & Solutions
Still and Video Cameras			267,962				326,362
Other			151,700				162,037
Total			419,662				488,399
Mobile Communications			598,855				564,025
Semiconductors			484,332				584,389
Financial Services			806,954				950,292
All Other			276,660				286,307
Corporate			21,595				22,117
Consolidated total			5,699,646				6,592,961

 

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		Yen in millions
		Three months ended December 31
Sales and operating revenue:		2016				2017
Game & Network Services
Hardware			279,858				270,653
Network			212,701				300,407
Other			104,438				110,589
Total			596,997				681,649
Music
Recorded Music			114,833				128,239
Music Publishing			15,549				18,334
Visual Media and Platform			42,836				67,694
Total			173,218				214,267
Pictures
Motion Pictures			96,427				106,931
Television Productions			73,044				82,227
Media Networks			55,300				70,892
Total			224,771				260,050
Home Entertainment & Sound
Televisions			244,421				301,476
Audio and Video			106,916				127,303
Other			646				825
Total			351,983				429,604
Imaging Products & Solutions
Still and Video Cameras			110,962				121,156
Other			54,298				57,956
Total			165,260				179,112
Mobile Communications			247,173				215,141
Semiconductors			205,021				218,303
Financial Services			317,342				371,498
All Other			109,933				96,611
Corporate			5,801				6,082
Consolidated total			2,397,499				2,672,317

In the G&NS segment, Hardware includes home and portable game consoles; Network includes network services relating to game, video and music content provided by Sony Interactive Entertainment; Other includes packaged software and peripheral devices. In the Music segment, Recorded Music includes the distribution of physical and digital recorded music and revenue derived from artists’ live performances; Music Publishing includes the management and licensing of the words and music of songs; Visual Media and Platform includes the production and distribution of animation titles, including game applications based on the animation titles, and various service offerings for music and visual products. In the Pictures segment, Motion Pictures includes the worldwide production, acquisition and distribution of motion pictures and direct-to-video content; Television Productions includes the production, acquisition and distribution of television programming; Media Networks includes the operation of television and digital networks worldwide. In the HE&S segment, Televisions includes LCD and OLED televisions; Audio and Video includes Blu-ray disc players and recorders, home audio, headphones and memory-based portable audio devices. In the IP&S segment, Still and Video Cameras includes interchangeable lens cameras, compact digital cameras, consumer video cameras and video cameras for broadcast; Other includes display products such as projectors and medical equipment.

 

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		Yen in millions
		Nine months ended December 31
		2016				2017
Depreciation and amortization:
Game & Network Services			18,803				21,486
Music			11,443				12,833
Pictures			14,733				18,190
Home Entertainment & Sound			14,732				15,611
Imaging Products & Solutions			18,627				17,717
Mobile Communications			14,998				14,223
Semiconductors			75,997				73,394
Financial Services, including deferred insurance acquisition costs			52,350				47,887
All Other			5,447				4,385
Total			227,130				225,726
Corporate			32,424				32,461
Consolidated total			259,554				258,187
		Yen in millions
		Nine months ended December 31, 2016
		Total net       restructuring       charges				Depreciation associated with   restructured assets				Total
Restructuring charges and associated depreciation:
Game & Network Services			6				-				6
Music			1,655				-				1,655
Pictures			1,643				(0)				1,643
Home Entertainment & Sound			542				-				542
Imaging Products & Solutions			174				-				174
Mobile Communications			65				127				192
Semiconductors			(0)				-				(0)
Financial Services			-				-				-
All Other and Corporate			35,162				32				35,194
Consolidated total			39,247				159				39,406
		Yen in millions
		Nine months ended December 31, 2017
		Total net     restructuring     charges				Depreciation associated with restructured assets				Total
Restructuring charges and associated depreciation:
Game & Network Services			-				-				-
Music			1,816				-				1,816
Pictures			482				-				482
Home Entertainment & Sound			27				-				27
Imaging Products & Solutions			23				-				23
Mobile Communications			1,229				0				1,229
Semiconductors			-				-				-
Financial Services			-				-				-
All Other and Corporate			3,544				0				3,544
Consolidated total			7,121				0				7,121

Depreciation associated with restructured assets as used in the context of the disclosures regarding restructuring activities refers to the increase in depreciation expense caused by revising the useful life and the salvage value of depreciable fixed assets under an approved restructuring plan. Any impairment of the assets is recognized immediately in the period it is identified.

 

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		Yen in millions
		Three months ended December 31
		2016				2017
Depreciation and amortization:
Game & Network Services			6,644				7,324
Music			4,070				4,444
Pictures			5,052				6,243
Home Entertainment & Sound			4,962				6,053
Imaging Products & Solutions			6,412				6,152
Mobile Communications			5,071				4,923
Semiconductors			24,620				24,955
Financial Services, including deferred insurance acquisition costs			9,999				15,506
All Other			1,254				815
Total			68,084				76,415
Corporate			10,410				11,810
Consolidated total			78,494				88,225
		Yen in millions
		Three months ended December 31, 2016
		Total net       restructuring       charges				Depreciation associated with   restructured assets				Total
Restructuring charges and associated depreciation:
Game & Network Services			-				-				-
Music			837				-				837
Pictures			752				(4)				748
Home Entertainment & Sound			529				-				529
Imaging Products & Solutions			157				-				157
Mobile Communications			38				6				44
Semiconductors			(3)				-				(3)
Financial Services			-				-				-
All Other and Corporate			2,741				32				2,773
Consolidated total			5,051				34				5,085
		Yen in millions
		Three months ended December 31, 2017
		Total net     restructuring     charges				Depreciation associated with restructured assets				Total
Restructuring charges and associated depreciation:
Game & Network Services			-				-				-
Music			1,594				-				1,594
Pictures			39				-				39
Home Entertainment & Sound			8				-				8
Imaging Products & Solutions			2				-				2
Mobile Communications			538				-				538
Semiconductors			-				-				-
Financial Services			-				-				-
All Other and Corporate			911				-				911
Consolidated total			3,092				-				3,092

Depreciation associated with restructured assets as used in the context of the disclosures regarding restructuring activities refers to the increase in depreciation expense caused by revising the useful life and the salvage value of depreciable fixed assets under an approved restructuring plan. Any impairment of the assets is recognized immediately in the period it is identified.

 

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Geographic Information –

Sales and operating revenue attributed to countries and areas based on location of external customers are as follows:

 

		Yen in millions
		Nine months ended December 31
Sales and operating revenue:		2016				2017
Japan			1,772,928				1,991,848
United States			1,259,503				1,412,559
Europe			1,240,258				1,421,847
China			409,385				521,945
Asia-Pacific			657,680				819,837
Other Areas			359,892				424,925
Total			5,699,646				6,592,961
		Yen in millions
		Three months ended December 31
Sales and operating revenue:		2016				2017
Japan			718,286				775,569
United States			543,731				614,438
Europe			551,263				640,214
China			169,318				182,809
Asia-Pacific			264,805				293,992
Other Areas			150,096				165,295
Total			2,397,499				2,672,317

Major countries and areas in each geographic segment excluding Japan, United States and China are as follows:

 

(1) Europe:		United Kingdom, France, Germany, Russia, Spain and Sweden
(2) Asia-Pacific:		India, South Korea and Oceania
(3) Other Areas:		The Middle East/Africa, Brazil, Mexico and Canada

There are no individually material countries with respect to sales and operating revenue included in Europe, Asia-Pacific and Other Areas.

Transfers between reportable business segments or geographic areas are made at individually negotiated prices that are intended to reflect a market-based transfer price.

There were no sales and operating revenue with any single major external customer for the nine and three months ended December 31, 2016 and 2017.

 

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(2) Other Information

(i) Dividends declared

An interim cash dividend for Sony Corporation’s common stock was approved at the Board of Directors meeting held on October 31, 2017 as below:

1. Total amount of interim cash dividends:

15,794 million yen

2. Amount of interim cash dividends per share:

12.50 yen

3. Payment date:

December 1, 2017

Note: Interim cash dividends were distributed to the shareholders recorded or registered as the holders or pledgees of shares in Sony Corporation’s register of shareholders at the end of September 30, 2017.

(ii) Litigation

  For the legal proceedings, please refer to “IV Financial Statements – Notes to Consolidated Financial Statements – 6. Commitments, contingent liabilities and other”.

 

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