Sony 1999 Annual Report Download - page 72

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Sony Corporation Annual Report 1999
18. Commitments and contingent liabilities
Commitments outstanding at March 31, 1999 for the pur-
chase of property, plant and equipment and other assets
approximated ¥34,305 million ($285,875 thousand).
Contingent liabilities for guarantees given in the
ordinary course of business and for employee loans
amounted to ¥130,795 million ($1,089,958 thousand) at
March 31, 1999.
Certain subsidiaries in the music business have
entered into long-term contracts with recording artists
and companies for the production and/or distribution of
prerecorded music and videos. These contracts cover
various periods mainly through March 31, 2002. As of
March 31, 1999, these subsidiaries were committed to
make payments under such long-term contracts of
¥47,168 million ($393,067 thousand).
Sony Corporation and certain of its subsidiaries are
defendants in several pending lawsuits. However,
based upon the information currently available to both
Sony and its legal counsel, management of Sony believes
that damages from such lawsuits, if any, would not
have a material effect on Sony’s consolidated financial
statements.
Integration of three listed subsidiaries
On March 9, 1999, Sony Corporation and three listed
subsidiaries, Sony Music Entertainment (Japan) Inc.
(“SMEJ”), Sony Chemicals Corporation (“SCC”) and
Sony Precision Technology Inc. (“SPT”) agreed that
each of such three subsidiaries should become a
wholly-owned subsidiary of Sony Corporation on or
about January 1, 2000.
Sony Corporation currently owns approximately 70%
of each subsidiary’s common stock. Sony Corporation
plans to carry out the integration of these subsidiaries
by utilizing the exchange procedures included in the
Law amending the Commercial Code and other laws
which are expected to be deliberated at the ordinary
session of the Diet in 1999. However, if the exchange
offer procedures are judged to be impractical taking into
account the effective date of the amended Commercial
Code and status of the related amendment to other laws
and regulations, an alternative method, which is legal
under the laws and regulations of Japan currently in
effect, may be selected. Any method will require approval
at stockholders’ meetings of each company.
The agreed share exchange ratios are 1 share of SMEJ
for 0.835 share of Sony Corporation, 1 share of SCC for
0.565 share of Sony Corporation, 1 share of SPT for
0.203 share of Sony Corporation. As a result, approxi-
mately 33 million shares of Sony Corporation would be
issued and the total capital (common stock and addi-
tional paid-in capital) would increase by approximately
¥348 billion ($2,900 million). The stock price for a rea-
sonable period before and after the acquisitions were
agreed and announced will be used to calculate the in-
crease in total capital based on U.S. GAAP.
Any of the above exchange ratios may be amended
upon mutual deliberation between Sony Corporation
and the relevant subsidiary if a material change occurs
in respect of conditions based upon which the relevant
ratio is determined. In this case, the stock price for a
reasonable period before and after the amendment was
made will be used for the new calculation of the total
capital increase.
19. Business segment information
Effective for the year ended March 31, 1998, Sony
adopted FAS 131, “Disclosures about Segments of an
Enterprise and Related Information” which requires
disclosure of financial and descriptive information about
Sony’s reportable operating segments. The operating
segments reported below are the segments of Sony for
which separate financial information is available and for
which operating profit/loss amounts are evaluated
regularly by executive management in deciding how to
allocate resources and in assessing performance.
The Electronics segment designs, develops, manufac-
tures and distributes audiovisual equipment, instru-
ments and devices throughout the world. The Game
segment designs, develops and sells PlayStation game
consoles and related software mainly in Japan, the
United States and Europe, and licenses to third party
software developers. The Music segment is mainly
engaged worldwide in the development, production,
manufacture, and distribution of recorded music, in all
commercial formats and musical genres. The Pictures
segment develops, produces and manufactures image-
based software, including film, video, and television
mainly in the United States, and markets, distributes
and broadcasts in the worldwide market. The Insurance
segment represents insurance-related underwriting busi-
ness, primarily individual life insurance business in the
Japanese market. The Other segment consists of various
operating activities, primarily including leasing and
credit card businesses, a business focused on parts trad-
ing services within the Sony group, satellite distribution
services including program supplying businesses in
Japan, internet-related businesses in the United States
and development of location-based entertainment
complexes. Sony’s products and services are generally
unique to a single operating segment.