Sony 2005 Annual Report Download - page 118

Sony Corporation 115
administrative expenses, and ¥3,256 million was included in loss
on sale, disposal or impairment of assets, net in the consolidated
statements of income. Employees were eliminated across
various employee levels, business functions, operating units,
and geographic regions during this phase of the worldwide
restructuring program.
During the year ended March 31, 2004, Sony broadened the
scope of its worldwide restructuring of the Music segment,
which resulted in restructuring charges totaling ¥10,691 million.
Restructuring activities included the continuation of the shut-
down of the CD manufacturing facility in the U.S. as well as the
restructuring of music label operations and the further rational-
ization of overhead functions through staff reductions. The
restructuring charges consisted of personnel related costs of
¥5,137 million, lease abandonment costs of ¥1,323 million and
other related costs of ¥4,231 million including non-cash asset
impairment and disposal costs. Most of these charges are
included in selling, general and administrative expenses in the
consolidated statements of income. Employees were eliminated
across various employee levels, business functions, operating
units, and geographic regions during this phase of the world-
wide restructuring program.
During the year ended March 31, 2005, in continuation of the
worldwide restructuring program and in connection with the
establishment of the joint venture with Bertelsmann AG (Note 6),
Sony recorded restructuring charges totaling ¥3,025 million ($28
million) within the Music segment. Restructuring activities included
the shutdown of certain distribution operations that were no
longer required as a result of the recorded music joint venture
with Bertelsmann AG as well as the further rationalization of
overhead functions through staff reductions. The restructuring
charges consisted of personnel related costs of ¥883 million
($8 million) and other related costs of ¥2,142 million ($20 mil-
lion). These charges are included in selling, general and adminis-
trative expenses in the consolidated statements of income.
Employees were eliminated across various employee levels,
business functions, operating units, and geographic regions
during this phase of the worldwide restructuring program.
Pictures Segment
In an effort to improve the performance of the Pictures segment,
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 ¥480
million, ¥4,611 million and ¥385 million ($4 million), respectively,
within the Pictures segment. Significant restructuring activities
are the following:
Consolidation of television operations
Due to changes within the television production and distribution
business, the competition between network owned production
companies and other production and distribution companies to
license product to the major televisions networks is becoming
more intense. This competitive environment has resulted in
fewer opportunities to produce shows for the networks and a
shorter lifespan for ordered shows that do not immediately
achieve favorable ratings. This trend has resulted in an increase
in the number of new programs being distributed yet canceled in
their first or second season, which are generally less profitable,
and a decrease in the number of network programs that are
able to achieve syndication, which are generally more profitable.
As a result, in the year ended March 31, 2002, Sony decided to
consolidate its television operations and downsize the network
television production business in the Pictures segment. In the year
ended March 31, 2003, Sony recorded restructuring charges
totaling ¥480 million. These costs were included in cost of sales
in the consolidated statements of income. This restructuring
program was completed in the year ending March 31, 2005,
and the total cost of the program from the inception was ¥8,932
million ($83 million). No liability existed as of March 31, 2005.
Fixed cost reduction program
During the year ended March 31, 2004, the Pictures segment
implemented a fixed cost reduction program to further reduce its
operating costs. This restructuring program primarily related to
the reduction of staffing levels and the disposal of certain long-
lived assets. This restructuring program was substantially com-
pleted during the year ended March 31, 2005 and the total cost
of this restructuring program was ¥4,996 million ($47 million).
The Pictures segment recorded ¥4,611 million of these costs
during the year ended March 31, 2004. These restructuring
charges consisted of personnel related costs of ¥993 million,
non-cash asset impairment and disposal costs of ¥1,746 million,
and other costs of ¥1,872 million including those relating to the
buy-out of term deal commitments. Of the restructuring costs
incurred, ¥1,525 million was included in cost of sales, ¥1,340
million was included in selling, general and administrative
expenses, and ¥1,746 million was included in loss on sale,
disposal or impairment of assets, net in the consolidated
statements of income.
During the year ended March 31, 2005, the Pictures segment
substantially completed the fixed cost reduction program and
recorded ¥385 million ($4 million) of additional restructuring
costs. These restructuring charges consisted primarily of per-
sonnel related costs of ¥292 million ($3 million) which were
included in selling, general and administrative expenses in the
consolidated statements of income. At March 31, 2005, the
remaining liability balance was ¥207 million ($2 million), which
will be paid or settled over the next year.
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