Sony 2003 Annual Report Download - page 211

Consolidated Financial Information 2003
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Due to the continued decline in the operating results of Aiwa, the restructuring program that was
initiated in the year ended March 31, 2002 was accelerated and additional restructuring charges of
¥23,007 million ($192 million) were recorded in the year ended March 31, 2003. Additional restructuring
included further cuts in staffing levels and shutdown of remaining production facilities. These charges
consisted of non-cash equipment write-downs and disposals of ¥3,504 million ($29 million), personnel
related costs of ¥7,647 million ($64 million), devaluation of inventory of ¥6,144 million ($51 million),
operating lease termination costs of ¥3,823 million ($32 million) and other costs of ¥1,889 million ($16
million). Among these charges ¥13,791 million ($115 million) was recorded in cost of sales and ¥9,216
million ($77 million) was included in selling, general and administrative expense in the consolidated
statements of income. The restructuring program was completed in the year ended March 31, 2003 and
no reserve existed as of March 31, 2003. Aiwa Co., Ltd. was merged into Sony Corporation as of
December 1, 2002. No further costs are expected to be incurred for the Aiwa restructuring.
Closing of a semiconductor plant in the U.S. -
Due to a significant decline in the business conditions of the U.S. semiconductor industry, Sony made a
decision in the fourth quarter of the year ended March 31, 2003, to close a semiconductor plant in the U.S.
The total estimated cost of the restructuring program is ¥8,148 million ($68 million), of which ¥5,856 million
($49 million) was incurred through March 31, 2003. These restructuring charges consisted of accelerated
depreciation of equipments of ¥3,128 million ($26 million), personnel related costs of ¥1,329 million ($11
million), the devaluation of inventory and other costs of ¥1,399 million ($12 million). These charges were
all recorded in cost of sales in the consolidated statements of income. This restructuring activity is
expected to complete in the year ending March 31, 2004. The remaining reserve balance as of March 31,
2003 was ¥1,452 million ($12 million).
Early retirement program in Japan -
In addition to the restructuring efforts disclosed above, Sony has undergone several headcount
reduction programs to further reduce operating costs in the Electronics segment. As a result of these
programs, Sony recorded restructuring charges totaling ¥14,440 million, ¥12,252 million and ¥10,932
million ($91 million) for the years ended March 31, 2001, 2002 and 2003, respectively, and these charges
were included in selling, general and administrative expense in the consolidated statements of income.
These staff reductions were achieved through the implementation of early retirement programs in Japan.
The remaining reserve balance as of March 31, 2003 was ¥1,009 million ($8 million) and will be utilized
through the year ending March 31, 2004.
Music Segment
Due to the continued contraction of the worldwide music market due to slow worldwide economic growth,
the saturation of the CD market, the effects of piracy and other illegal duplication, parallel imports, pricing
pressures and the diversification of customer preferences, Sony has been actively repositioning the Music
segment for the future by looking to create a more effective and profitable business model. As a result, the