Sony 2001 Annual Report Download - page 126

Sony Corporation Annual Report 2001
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17. Restructuring charges and assets impairment
Significant restructuring charges and assets impairment are as follows;
In September 1999, Sony discontinued its engineering, sales, and marketing operations for the cellular phone
business in North America and focused its effort on the research and development of next-generation telecommuni-
cations technology. As a result, Sony recorded a one-time expense totaling ¥9,646 million in the year ended March
31, 2000 which is included in the Electronics segment. This charge consisted of facility closing costs of ¥7,420
million; machinery and equipment write-downs of ¥1,802 million and personnel related costs of ¥424 million.
In December 2000, Sony announced the shutdown of a CD and audio cassette manufacturing plant in the
United States of America. As a result of this announcement, Sony recorded a one-time expense totaling ¥4,623
million ($37 million) in the year ended March 31, 2001 which is included in the Music segment. This charge
consisted of facility closing costs of ¥1,001 million ($8 million), building write-downs of ¥3,145 million ($25 million)
and personnel related costs of ¥477 million ($4 million).
18. Research and development expenses and advertising costs
(1) Research and development expenses:
Research and development expenses charged to cost of sales for the years ended March 31, 1999, 2000 and
2001 were ¥375,314 million, ¥394,479 million and ¥416,708 million ($3,334 million), respectively.
(2) Advertising costs:
Advertising costs included in selling, general and administrative expenses for the years ended March 31, 1999,
2000 and 2001 were ¥315,310 million, ¥293,303 million and ¥389,359 million ($3,115 million), respectively.
As described in Note 2, advertising costs for the year ended March 31, 2001 included those for theatrical
and television product. Previously, advertising costs for theatrical and television product were capitalized into
film inventory and amortized in cost of sales.
19. Gain on issuances of stock by equity investees
During the year ended March 31, 1999, Sony merged its Loews Theatres exhibition business with Cineplex Odeon
Corporation to create Loews Cineplex Entertainment Corporation (“Loews”). As a result of the merger, Sony no
longer consolidated the results of Loews; Loews’ results are reported on an equity basis. Subsequent to the merger,
Loews completed a public offering of its common stock. After these transactions, Sony’s ownership in Loews was
39.5%. In connection with the merger and the subsequent public offering, Sony received proceeds of ¥53,007
million and recorded a gain of ¥5,181 million (Note 7).
In August 2000, Monex Inc., which provides on-line security trading services, issued 150,000 shares valued at
¥6,278 million ($50 million) in connection with its initial public offering. As a result of this issuance, Sony recorded
a gain of ¥1,900 million ($15 million). Sony provided deferred taxes on this gain. This issuance reduced Sony’s
ownership interest from 36.6% to 32.8%.
In August 2000, Crosswave Communications Inc., which provides high-capacity/high-speed network services,
issued 101,960 shares valued at ¥28,958 million ($232 million) in connection with its initial public offering. As a
result of this issuance, Sony recorded a gain of ¥6,406 million ($51 million). Sony provided deferred taxes on this
gain. This issuance reduced Sony’s ownership interest from 30.0% to 23.9%.
In October 2000, SKY Perfect Communications Inc., which provides satellite broadcasting services, issued
400,000 shares valued at ¥121,600 million ($973 million) in connection with its initial public offering. In connection
with this issuance, Sony recorded a gain of ¥9,551 million ($76 million). Sony provided deferred taxes on this gain.
This issuance reduced Sony’s ownership interest from 9.9% to 8.1%. As a result of this transaction, SKY Perfect
Communications Inc. is no longer accounted for under the equity method, as Sony no longer has significant influence.