6-K 1 d876333d6k.htm SONY CORPORATION 6-K SONY CORPORATION 6-K
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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 May 2020

Commission File Number: 001-06439

SONY CORPORATION

(Translation of registrant’s name into English)

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

(Address of principal executive offices)

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

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

 

Form 20-F X   Form 40-F     

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

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

SIGNATURE

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

 

SONY CORPORATION
(Registrant)
By: /s/ Hiroki Totoki
                (Signature)
Hiroki Totoki
Senior Executive Vice President and
Chief Financial Officer

Date: May 22, 2020


Table of Contents

 

 

 

LOGO

Consolidated Financial Statements

pursuant to the Companies Act of Japan

For the fiscal year ended March 31, 2020

(TRANSLATION)

Sony Corporation

TOKYO, JAPAN


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Table of Contents

Note for readers of this English translation

This document is an English translation of the consolidated financial statements for the fiscal year ended March 31, 2020 (from April 1, 2019 to March 31, 2020) prepared in accordance with the Companies Act of Japan. This document omits certain disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). Sony Corporation expects that full consolidated financial statements for the fiscal year ended March 31, 2020 prepared in accordance with U.S. GAAP will be included in Sony Corporation’s annual report on Form 20-F, which Sony Corporation expects to file with the U.S. Securities and Exchange Commission on or around June 26, 2020.

 

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Consolidated Balance Sheets

 

 

Fiscal year ended March 31

     Yen in millions  
      2019     2020  

ASSETS

    

Current assets:

    

Cash and cash equivalents

     1,470,073       1,512,357  

Marketable securities

     1,324,538       1,847,772  

Notes and accounts receivable, trade and contract assets

     1,091,242       1,028,793  

Allowance for doubtful accounts

     (25,440     (25,873

Inventories

     653,278       589,969  

Other receivables

     223,620       188,106  

Prepaid expenses and other current assets

     509,301       594,021  

Total current assets

     5,246,612       5,735,145  

Film costs

     409,005       427,336  

Investments and advances:

    

Affiliated companies

     163,365       207,922  

Securities investments and other

     11,561,286       12,526,210  
       11,724,651       12,734,132  

Property, plant and equipment:

    

Land

     83,992       81,482  

Buildings

     664,157       659,556  

Machinery and equipment

     1,585,382       1,725,720  

Construction in progress

     39,208       76,391  

Less — Accumulated depreciation

     1,595,686       1,634,505  
       777,053       908,644  

Other assets:

                                                      

Operating lease right-of-use assets

           359,510  

Finance lease right-of-use assets

           33,100  

Intangibles, net

     917,966       906,310  

Goodwill

     768,552       783,888  

Deferred insurance acquisition costs

     595,265       600,901  

Deferred income taxes

     202,486       210,372  

Other

     339,996       340,005  
       2,824,265       3,234,086  

Total assets

     20,981,586       23,039,343  

(Continued on following page.)

 

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Consolidated Balance Sheets (Continued)

 

 

    

 

Yen in millions

 
      2019     2020  

LIABILITIES

                                                      

Current liabilities:

    

Short-term borrowings

     618,618       810,176  

Current portion of long-term debt

     172,461       29,807  

Current portion of long-term operating lease liabilities

           68,942  

Notes and accounts payable, trade

     492,124       380,810  

Accounts payable, other and accrued expenses

     1,693,048       1,630,197  

Accrued income and other taxes

     135,226       145,996  

Deposits from customers in the banking business

     2,302,314       2,440,783  

Other

     666,024       733,732  

Total current liabilities

     6,079,815       6,240,443  

Non-current liabilities:

    

Long-term debt

     568,372       634,966  

Long-term operating lease liabilities

           314,836  

Accrued pension and severance costs

     384,232       324,655  

Deferred income taxes

     531,421       549,538  

Future insurance policy benefits and other

     5,642,671       6,246,047  

Policyholders’ account in the life insurance business

     3,048,202       3,642,271  

Other

     281,382       289,285  

Total non-current liabilities

     10,456,280       12,001,598  

Total liabilities

     16,536,095       18,242,041  

Redeemable noncontrolling interest

     8,801       7,767  

EQUITY

                

Sony Corporation’s stockholders’ equity:

    

Common stock, no par value —

    

2019 — Shares authorized: 3,600,000,000; shares issued: 1,271,230,341

     874,291    

2020 — Shares authorized: 3,600,000,000; shares issued: 1,261,058,781

       880,214  

Additional paid-in capital

     1,266,874       1,289,719  

Retained earnings

     2,320,586       2,768,856  

Accumulated other comprehensive income —

    

Unrealized gains on securities, net

     135,035       161,191  

Unrealized gains (losses) on derivative instruments, net

     (19 )       1,248  

Pension liability adjustment

     (310,457     (235,520

Foreign currency translation adjustments

     (435,229     (509,872

Debt valuation adjustments

           1,973  
     (610,670     (580,980

Treasury stock, at cost

    

Common stock

    

2019 — 20,483,474 shares

     (104,704  

2020 — 40,898,841 shares

             (232,503
       3,746,377       4,125,306  

Noncontrolling interests

     690,313       664,229  

Total equity

     4,436,690       4,789,535  

Total liabilities and equity

     20,981,586       23,039,343  

 

*

The figures for the previous fiscal year (as of March 31, 2019) are for reference and not subject to the current fiscal year audit.

 

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Consolidated Statements of Income

 

 

Fiscal year ended March 31

     Yen in millions  
      2019     2020  

Sales and operating revenue:

                                                      

Net sales

     7,306,235       6,856,090  

Financial services revenue

     1,274,708       1,299,847  

Other operating revenue

     84,744       103,948  
       8,665,687       8,259,885  

Costs and expenses:

    

Cost of sales

     5,150,750       4,753,174  

Selling, general and administrative

     1,576,825       1,502,625  

Financial services expenses

     1,112,446       1,171,875  

Other operating income, net

     (71,568     (3,611
       7,768,453       7,424,063  

Equity in net income (loss) of affiliated companies

     (2,999     9,637  

Operating income

     894,235       845,459  

Other income:

    

Interest and dividends

     21,618       19,278  

Gain on equity securities, net

     118,677        

Other

     4,440       2,671  
       144,735       21,949  

Other expenses:

    

Interest expenses

     12,467       11,090  

Loss on equity securities, net

           20,180  

Foreign exchange loss, net

     11,279       26,789  

Loss on pension plan amendment

           6,358  

Other

     3,576       3,541  
       27,322       67,958  

Income before income taxes

     1,011,648       799,450  

Income taxes:

    

Current

     166,748       172,391  

Deferred

     (121,650     4,799  
       45,098       177,190  

Net income

     966,550       622,260  

Less — Net income attributable to noncontrolling interests

     50,279       40,069  

Net income attributable to Sony Corporation’s stockholders

     916,271       582,191  

 

*

The figures for the previous fiscal year (the fiscal year ended March 31, 2019) are for reference and not subject to the current fiscal year audit.

 

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Consolidated Statements of Changes in Stockholders’ Equity

 

 

 

    Yen in millions  
     Common
stock
    Additional
paid-in
capital
    Retained
earnings
    Accumulated
other
comprehensive
income
    Treasury
stock, at
cost
    Sony
Corporation’s
stockholders’
equity
    Noncontrolling
interests
    Total equity  

Balance at March 31, 2018

    865,678       1,282,577       1,440,387       (616,746     (4,530     2,967,366       679,791       3,647,157  

Cumulative effect of newly adopted ASUs

        7,976       (15,526       (7,550     5,432       (2,118

Issuance of new shares

    431       431             862         862  

Exercise of stock acquisition rights

    8,174       8,174             16,348         16,348  

Conversion of convertible bonds

    8       8             16         16  

Stock-based compensation

      1,159             1,159         1,159  

Comprehensive income:

               

Net income

        916,271           916,271       50,279       966,550  

Other comprehensive income, net of tax —

               

Unrealized gains on securities

          24,370         24,370       8,915       33,285  

Unrealized gains on derivative Instruments

          1,223         1,223         1,223  

Pension liability adjustment

          (14,013       (14,013     53       (13,960

Foreign currency translation adjustments

          10,022         10,022       (1,578     8,444  
           

 

 

 

Total comprehensive income

              937,873       57,669       995,542  
           

 

 

 

Stock issue costs, net of tax

      (147           (147       (147

Dividends declared

        (44,048         (44,048     (28,961     (73,009

Purchase of treasury stock

            (100,177     (100,177       (100,177

Reissuance of treasury stock

      1           3       4         4  

Transactions with noncontrolling interests shareholders and other

      (25,329           (25,329     (23,618     (48,947

 

 

Balance at March 31, 2019

    874,291       1,266,874       2,320,586       (610,670     (104,704     3,746,377       690,313       4,436,690  

 

 

(Continued on following page.)

 

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Consolidated Statements of Changes in Stockholders’ Equity (Continued)

 

 

 

    Yen in millions  
     Common
stock
    Additional
paid-in
capital
    Retained
earnings
    Accumulated
other
comprehensive
income
    Treasury
stock, at
cost
    Sony
Corporation’s
stockholders’
equity
    Noncontrolling
interests
    Total equity  

Balance at March 31, 2019

    874,291       1,266,874       2,320,586       (610,670     (104,704     3,746,377       690,313       4,436,690  

Cumulative effect of ASU 2016-02

        (7,472         (7,472       (7,472

Issuance of new shares

    529       529             1,058         1,058  

Exercise of stock acquisition rights

    5,179       5,180             10,359         10,359  

Conversion of convertible bonds

    215       215             430         430  

Stock-based compensation

      1,980             1,980         1,980  

Comprehensive income:

               

Net income

        582,191           582,191       40,069       622,260  

Other comprehensive income, net of tax —

               

Unrealized gains on securities

          26,156         26,156       14,234       40,390  

Unrealized gains on derivative instruments

          1,267         1,267         1,267  

Pension liability adjustment

          74,937         74,937       34       74,971  

Foreign currency translation adjustments

          (74,643       (74,643     (1,245     (75,888

Debt valuation adjustments

          1,973         1,973       1,059       3,032  
           

 

 

 

Total comprehensive income

              611,881       54,151       666,032  
           

 

 

 

Stock issue costs, net of tax

      (80           (80       (80

Dividends declared

        (55,111         (55,111     (25,885     (80,996

Purchase of treasury stock

            (200,211     (200,211       (200,211

Reissuance of treasury stock

      0           2       2         2  

Cancellation of treasury stock

      (1,072     (71,338       72,410                

Transactions with noncontrolling interests shareholders and other

      16,093             16,093       (54,350     (38,257

 

 

Balance at March 31, 2020

    880,214       1,289,719       2,768,856       (580,980     (232,503     4,125,306       664,229       4,789,535  

 

 

 

*

The figures for the previous fiscal year (the fiscal year ended March 31, 2019) are for reference and not subject to the current fiscal year audit.

 

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Notes to Consolidated Financial Statements

 

 

Sony Corporation and its consolidated subsidiaries are collectively referred to as “Sony.”

 

1.

Significant accounting policies

 

(1)

Basis of consolidated financial statements

Sony’s Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant to Article 120-3, Paragraph 1 of the Regulation on Corporate Accounting. However, in accordance with the provisions of Paragraph 3, certain disclosures required by U.S. GAAP have been omitted.

 

(2)

Valuation standards and methods of inventories

Inventories in the Game & Network Services, Music, Electronics Products & Solutions, and Imaging & Sensing Solutions segments as well as non-film inventories for the Pictures segment are valued at cost, not in excess of the net realizable value – i.e., estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal, cost being determined on the “average cost” basis, except for the cost of finished products carried by certain subsidiary companies which is determined on the “first-in, first-out” basis.

 

(3)

Valuation standards and methods for securities

 

  (i)

Marketable debt and equity securities

Debt securities designated as available-for-sale are carried at fair value with unrealized gains or losses included as a component of accumulated other comprehensive income, net of applicable taxes. Equity securities, and debt securities classified as trading securities, are carried at fair value with unrealized gains or losses included in income. Debt securities that are expected to be held-to-maturity are carried at amortized cost. Individual securities classified as either available-for-sale or held-to-maturity are reduced to fair value by a charge to income when an other-than-temporary impairment is recognized. Realized gains and losses are determined on the average cost method and are reflected in income.

Sony regularly evaluates its investment portfolio to identify other-than-temporary impairments of individual debt securities. Factors that are considered by Sony in determining whether an other-than-temporary decline in value has occurred include: the length of time and extent to which the market value of the security has been less than its original cost, the financial condition, operating results, business plans and estimated future cash flows of the issuer of the security, other specific factors affecting the market value, deterioration of the credit condition of the issuer, sovereign risk, and whether or not Sony is able to retain the investment for a period of time sufficient to allow for the anticipated recovery in market value.

In evaluating the factors for debt securities designated as available-for-sale, Sony presumes a decline in value to be other-than-temporary if the fair value of the security is 20 percent or more below its original cost for an extended period of time (generally for a period of up to six months). This criterion is employed as a threshold to identify securities which may have a decline in value that is other-than-temporary. The presumption of an other-than-temporary impairment in such cases may be overcome if there is evidence to support that the decline is temporary in nature due to the existence of other factors which overcome the duration or magnitude of the decline. On the other hand, there may be cases where impairment losses are recognized when the decline in the fair value of the security is not more than 20 percent or such decline has not existed for an extended period of time, as a result of considering specific factors which may indicate that the decline in the fair value is other-than-temporary.

When an other-than-temporary impairment of a held-to-maturity debt security has occurred, the amount of the other-than-temporary impairment recognized in income depends on whether Sony intends to sell the debt security or more likely than not will be required to sell the debt security before recovery of its amortized cost. If the debt security meets either of these two criteria, the other-than-temporary impairment is recognized in income, measured as the entire difference between the security’s amortized cost and its fair value at the impairment measurement date. For other-than-temporary impairment of the debt security that does not meet these two criteria, the net amount recognized in income is a credit loss, which equals the difference between the amortized cost of the debt security and its net present value calculated by discounting Sony’s best estimate of projected future cash flows at the effective interest rate implicit in the

 

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debt security prior to impairment. Any difference between the fair value and the net present value of the debt security at the impairment measurement date is recorded in accumulated other comprehensive income. Unrealized gains or losses on securities for which an other-than-temporary impairment has been recognized in income are presented as a separate component of accumulated other comprehensive income.

 

  (ii)

Equity securities that do not have readily determinable fair values

Equity securities that do not have readily determinable fair values are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. If the value of equity securities that do not have readily determinable fair values is estimated to have declined and such decline is judged to be other-than-temporary, Sony recognizes the impairment of the investment and the carrying value is reduced to its fair value. Determination of impairment is based on the consideration of several factors, including operating results, business plans and estimated future cash flows. Fair value is determined through the use of various methodologies such as discounted cash flows, valuation of recent financings and comparable valuations of similar companies.

 

(4)

Depreciation methods for fixed assets

 

  (i)

Property, plant and equipment

Depreciation is computed using the straight-line method. Useful lives for depreciation range from two to 50 years for buildings and from two to 10 years for machinery and equipment.

 

  (ii)

Goodwill and other intangible assets

Goodwill and indefinite lived intangible assets are tested annually for impairment during the fourth quarter of the fiscal year and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying amount.

The fair value of a reporting unit or indefinite lived intangible asset is generally determined using a discounted cash flow analysis. This approach uses significant estimates and assumptions, including projected future cash flows, the timing of such cash flows, discount rates reflecting the risk inherent in future cash flows, perpetual growth rates, earnings multiples, the determination of appropriate comparable entities and the determination of whether a premium or discount should be applied to comparables. Intangible assets with finite useful lives mainly consist of patent rights, know-how, license agreements, customer relationships, trademarks, software to be sold, leased or otherwise marketed, internal-use software, music catalogs, artist contracts, and television carriage contracts (broadcasting agreements). Patent rights, know-how, license agreements, trademarks, software to be sold, leased or otherwise marketed, and internal-use software are generally amortized on a straight-line basis over three to 10 years. Customer relationships, music catalogs, artist contracts and television carriage contracts (broadcasting agreements) are generally amortized on a straight-line basis over 10 to 44 years.

 

(5)

Method of accounting for reserves

 

  (i)

Allowance for doubtful accounts

Sony maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. Sony reviews accounts receivable by amounts due from customers which are past due to identify specific customers with known disputes or collectability issues. In determining the amount of the reserve, Sony makes judgments about the creditworthiness of customers based on past collection experience and ongoing credit risk evaluations.

 

  (ii)

Product warranty

Sony provides for the estimated cost of product warranties at the time revenue is recognized. The product warranty is calculated based upon product sales, estimated probability of failure and estimated cost per claim. The variables used in the calculation of the provision are reviewed on a periodic basis.

 

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(6)

Other

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which amends the accounting guidance for leases. The ASU requires substantially all leases to be recognized on the balance sheet.

Sony has adopted this ASU effective April 1, 2019, on a modified retrospective basis with no restatement of comparative periods. Sony has elected the package of practical expedients for leases that expired or existed prior to the adoption date. As a result, Sony did not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, or whether initial direct costs for any existing leases qualify for capitalization. In addition, Sony has applied the short-term lease exception.

As a result of the adoption of this ASU, Sony recognized 316,923 million yen of operating lease right-of-use assets and 341,251 million yen of lease liabilities for operating leases on the consolidated balance sheets at April 1, 2019. This impact is mainly due to operating leases of real estate. The difference of 24,328 million yen between right-of-use assets and lease liabilities represents deferred rent for leases that existed as of the date of adoption, which was offset against the opening balance of operating lease right-of-use assets. Finance lease right-of-use assets which are included in property, plant and equipment in the consolidated balance sheets for the fiscal year ended March 31, 2019, are now presented as finance lease right-of-use assets from April 1, 2019 onward.

Premium amortization on purchased callable debt securities

In March 2017, the FASB issued ASU 2017-08. This ASU requires certain premiums on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a discount will not be affected. This ASU was effective for Sony as of April 1, 2019. The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.

Targeted improvements to accounting for hedging activities

In August 2017, the FASB issued ASU 2017-12, which made targeted improvements to the accounting for hedging activities. The amendments in this update simplify certain aspects of hedge accounting for both non-financial and financial risks and better align the recognition and measurement of hedge results with an entity’s risk management activities. This ASU also amends certain presentation and disclosure requirements for hedging activities and changes how an entity assesses hedge effectiveness. This ASU was effective for Sony as of April 1, 2019. The adoption of this ASU did not have a material impact on Sony’s results of operations and financial position.

 

2.

Consolidated balance sheet

 

(1)

Assets pledged as collateral and debts subject to collateral

 

  (i)

Assets pledged as collateral

 

Restricted cash

     1,205 million yen                                                   

Marketable securities

     17,521 million yen     

Securities Investments

     552,641 million yen     

Housing loans in the banking business

     378,241 million yen     

 

  (ii)

Debts subject to collateral

 

Short-term borrowings

     718,451 million yen                                                   

Long-term debt

     201,205 million yen     

In addition to the above, securities investments with a book value of 12,445 million yen are pledged by subsidiaries in the Financial Services segment as guarantees for transactions such as domestic exchange settlements and derivatives.

 

(2)

Guarantee obligations

The guarantees are mainly for bank loans of affiliated companies.

 

Guarantee obligations

     2,214 million yen                                                                                                    

 

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3.

Consolidated Statement of Changes in Stockholders’ Equity

The number of shares subject to the stock acquisition rights (these exercise periods have commenced) at the end of the current fiscal year

 

Common stock

     6,235,700 shares                                                                                                    

*Sony has prepared a Consolidated Statement of Changes in Stockholders’ Equity that shows the movement of capital accounts as part of the consolidated financial statements based on U.S. GAAP and discloses comprehensive income and its breakdown. Comprehensive income is defined as an increase or decrease in equity accounts other than capital transactions and consists of net income and other comprehensive income. Other comprehensive income includes changes in foreign currency translation adjustments.

Sony discloses the Consolidated Statement of Changes in Stockholders’ Equity in consideration of the disclosure requirements of the consolidated statement of changes in shareholders’ equity stipulated in Article 96 of the Regulation on Corporate Accounting.

 

4.

Notes to financial instruments

 

(1)

Matters related to the status of financial instruments

The funds required for Sony’s business excluding the Financial Services segment are raised from the financial and capital markets and financial institutions through corporate bonds and borrowings. Surplus funds are managed with highly secure financial assets. Sony has entered into derivative contracts such as foreign exchange contracts, currency option contracts, and interest rate swap contracts, which are primarily aimed at reducing the risk of foreign exchange fluctuations and cash flow fluctuations, and does not engage in speculative transactions. In the Financial Services segment, Sony invests in securities and loans to secure stable investment returns, with premium income and customer deposits in the banking business as the main sources of funds. Since these financial assets and liabilities are exposed to the risk of fluctuations in interest rates, stock prices, foreign exchange rates, comprehensive management of assets and liabilities is performed to maintain an appropriate balance.

 

(2)

Matters related to the fair value of financial instruments

The summary below excludes cash and cash equivalents, call loans, time deposits, notes and accounts receivable, trade, call money, short-term borrowings, notes and accounts payable, trade and deposits from customers in the banking business because the carrying values of these financial instruments approximated their fair values due to their short-term nature.

 

            (Unit: Yen in millions)  
     Book value      Fair value      Difference  

Marketable and investment securities

     12,133,832        14,589,956        2,456,124  

Housing loans in the banking business

     1,927,054        2,161,432        234,378  

Total assets

     14,060,886        16,751,388        2,690,502  

Long-term debt including the current portion

     664,773        699,358        34,585  

Investment contracts included in policyholders’ account in the life insurance business

     885,690        969,464        83,774  

Total liabilities

     1,550,463        1,668,822        118,359  

Derivative transactions

     6,517        6,517         

 

1.

   Assets and liabilities arising from derivative transactions are shown on a net basis, and parentheses are used when the total is debt.

2.

   Equity securities that do not have readily determinable fair value are not included in “Marketable and investment securities.”

 

5.

Note to investment and rental properties

The disclosure is omitted because there are no significant investment and rental properties.

 

6.

Note to per share information

 

Basic net income attributable to Sony Corporation’s stockholders per share (Common stock)

     471.64 yen  

 

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7.

Other note

Pension Plan Amendment

From October 1, 2019, Sony Corporation and substantially all of its subsidiaries in Japan have amended their defined benefit pension plans and have implemented defined contribution plans for all employees other than those employees that had retired before the amendments. As a result, accrued pension and severance costs decreased 74,872 million yen and accumulated other comprehensive income increased 81,230 million yen in the consolidated balance sheets as of March 31, 2020. In addition, a loss on the pension plan amendment of 6,358 million yen was recorded in other expenses in the consolidated statements of income for the fiscal year ended March 31, 2020.

 

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