Sony 2005 Annual Report Download - page 116

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18. Restructuring charges and asset impairments
As part of its effort to improve the performance of the various
businesses, Sony has undertaken a number of restructuring
initiatives within the Electronics, Music and Pictures segments.
For the years ended March 31, 2003, 2004 and 2005, Sony
recorded total restructuring charges of ¥106,251 million,
¥168,091 million and ¥89,963 million ($841 million), respectively.
Significant restructuring charges and asset impairments include
the following:
Electronics Segment
In an effort to improve the performance of the Electronics seg-
ment, Sony has undergone a number of restructuring efforts to
reduce its operating costs. For the years ended March 31,
2003, 2004 and 2005, Sony recorded total restructuring
charges of ¥72,473 million, ¥143,310 million and ¥81,768
million ($764 million), respectively, within the Electronics seg-
ment. In addition to the above charges, the Electronics segment
also reflects restructuring of ¥7,950 million and ¥2,122 million
for the years ended March 31, 2003 and 2004, respectively, that
relate to the non-Japan based disc manufacturing and physical
distribution businesses that were part of the restructuring
charges of the Music segment which is discussed below. These
restructuring charges were formerly included within the Music
segment but were reclassified to the Electronics segment. See
Notes 6 and 25 for more information on this reclassification.
Significant restructuring activities are the following:
Downsizing of computer display CRT operations
In the year ended March 31, 2003, due to the market shrinkage
and demand shift from CRT displays to LCDs, Sony made a
decision to discontinue certain computer display CRT manufac-
turing operations in Japan and Southeast Asia to rationalize
production facilities and downsize its business. Restructuring
charges totaling ¥6,902 million consisted of personnel related
costs of ¥1,208 million, non-cash equipment impairment and
disposal costs of ¥4,010 million and contract termination and
other costs of ¥1,684 million. Of the total restructuring charges,
¥1,264 million was recorded in cost of sales; ¥1,684 million was
included in selling, general and administrative expenses, and
¥3,954 million was recorded in loss on sale, disposal or impair-
ment of assets, net in the consolidated statements of income.
The restructuring activity was completed in the year ended
March 31, 2003 and no liability existed as of March 31, 2004.
Downsizing of CRT TV display operations
Due to the worldwide market shrinkage and demand shift from
CRT displays to plasma and LCD panel displays, Sony has
begun to implement a worldwide plan to rationalize production
facilities of CRT TV display and downsize its business over the
next several years. The overall restructuring plan is still being
formulated as Sony is carefully monitoring the market situation in
each area. As a result, the expected completion date and total
estimated cost of this program cannot be determined at this time.
As part of its worldwide plan, Sony made a decision in the
year ended March 31, 2004 to discontinue certain CRT TV
display manufacturing operations in Japan. Restructuring
charges totaling ¥8,478 million consisted of personnel related
costs of ¥3,139 million and non-cash equipment impairment,
disposal and other costs of ¥5,339 million. Of the total restruc-
turing charges, ¥158 million was recorded in cost of sales,
¥3,139 million was included in selling, general and administrative
expenses, and ¥5,181 million was included in loss on sale,
disposal or impairment of assets, net in the consolidated state-
ments of income. This phase of the restructuring program was
completed in the year ended March 31, 2004 and no liability
existed as of March 31, 2005.
In the year ended March 31, 2005, as part of this restructuring
program, Sony recorded a non-cash impairment charge of
¥7,479 million ($70 million) for the CRT TV display manufactur-
ing facilities located in Europe. The impairment charge was
calculated as the difference between the carrying value of the
asset group and the present value of estimated future cash
flows. The charge was recorded in loss on sale, disposal or
impairment of assets, net in the consolidated statements of
income. This phase of the restructuring program was completed
in the year ended March 31, 2005 and no liability existed as of
March 31, 2005.
Aiwa Co., Ltd. restructuring
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 were recorded in the year ended
March 31, 2003. Additional restructuring included further cuts in
staffing levels and the shutdown of remaining production facili-
ties. These charges consisted of non-cash equipment impair-
ment and disposal costs of ¥3,504 million, personnel related
costs of ¥7,647 million, devaluation of inventory of ¥6,144
million, operating lease termination costs of ¥3,823 million and
other costs of ¥1,889 million. Among these charges ¥13,791
million was recorded in cost of sales, ¥5,712 million was in-
cluded in selling, general and administrative expenses, and
¥3,504 million was included in loss on sale, disposal or impair-
ment of assets, net in the consolidated statements of income.
The restructuring program was completed in the year ended
March 31, 2003 and no liability existed as of March 31, 2003.
Aiwa Co., Ltd. was merged into Sony Corporation as of Decem-
ber 1, 2002.
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