Sony 2005 Annual Report Download - page 125

122 Sony Corporation
24. Commitments and contingent liabilities
(1) Commitments:
A. Purchase Commitments
Commitments outstanding at March 31, 2005 amounted to
¥240,729 million ($2,250 million). The major components of
these commitments are as follows:
In the ordinary course of business, Sony makes commitments
for the purchase of property, plant and equipment. As of March
31, 2005, such commitments outstanding were ¥83,683 million
($782 million).
Certain subsidiaries in the Pictures segment have entered into
agreements with creative talent for the development and pro-
duction of films and television programming as well as agree-
ments with third parties to acquire completed films, or certain
rights therein. These agreements cover various periods through
March 31, 2008. As of March 31, 2005, these subsidiaries were
committed to make payments under such contracts of ¥51,625
million ($482 million).
A subsidiary in the Pictures segment has also entered into a
distribution agreement with a third party to distribute, in certain
markets and territories, all feature length films produced or
acquired by the third party during the term of the agreement.
The distribution agreement expires on December 31, 2006 if a
minimum of 36 films have been delivered as of that date. If 36
films have not been delivered by December 31, 2006, the
distribution agreement expires on the earlier of the delivery of the
36th film or May 25, 2007. It is estimated that the third party will
produce or acquire a total of 39 films under the distribution
agreement. The subsidiary has the right to distribute the films for
15 years from the initial theatrical release of the film. Under the
terms of the distribution agreement, the subsidiary must fund a
portion of the production cost and is responsible for all distribu-
tion and marketing expenses. As of March 31, 2005, 29 films
have been released or funded by the subsidiary. The subsidiary’s
estimated commitment to fund the production of the remaining
films under this agreement is ¥30,455 million ($285 million).
The schedule of the aggregate amounts of year-by-year
payment of purchase commitments during the next five years
and thereafter is as follows:
Yen in Dollars in
millions millions
Year ending March 31:
2006 . . . . . . . . . . . . . . . . . . . . . . . . .
¥145,111 $1,357
2007 . . . . . . . . . . . . . . . . . . . . . . . . . 53,753 502
2008 . . . . . . . . . . . . . . . . . . . . . . . . . 16,412 153
2009 . . . . . . . . . . . . . . . . . . . . . . . . . 1,632 15
2010 . . . . . . . . . . . . . . . . . . . . . . . . . 712 7
Thereafter . . . . . . . . . . . . . . . . . . . . . . . 23,109 216
Total . . . . . . . . . . . . . . . . . . . . . . . . . . ¥240,729 $2,250
B. Loan Commitments
Subsidiaries in the Financial Services segment have entered into
loan agreements with their customers in accordance with the
condition of the contracts. As of March 31, 2005, the total unused
portion of the line of credit extended under these contracts was
¥199,878 million ($1,868 million).
At August 2004, Sony and Bertelsmann AG (“Bertelsmann”)
combined their recorded music businesses in a joint venture. In
connection with the establishment of the SONY BMG joint
venture, Sony and Bertelsmann have entered into a 5 year
Revolving Credit Agreement with the joint venture. Under the
terms of the Credit Agreement, Sony and Bertelsmann have
each agreed to provide one-half of the funding. The Credit
Agreement, which matures on August 5, 2009, provides for a
base commitment of $300 million and additional incremental
borrowings of up to $150 million. As of March 31, 2005, the joint
venture had no borrowings outstanding under the Credit Agree-
ment. Accordingly, Sony’s outstanding commitment under the
Credit Agreement as of March 31, 2005 was ¥24,075 million
($225 million).
The aggregate amounts of future year-by-year payments for
these loan commitments cannot be determined.
(2) Contingent liabilities:
Sony had contingent liabilities including guarantees given in the
ordinary course of business, which amounted to ¥26,049 million
($243 million) at March 31, 2005. The major components of the
contingent liabilities are as follows:
Sony has issued loan guarantees to related parties comprised
of affiliated companies accounted for under the equity method
and unconsolidated subsidiaries. The terms of these guarantees
are mainly within 1 year. Sony would be required to perform
under these guarantees upon non-performance of the primary
borrowers. The contingent liability related to these guarantees
was ¥7,642 million ($71 million) and was not recorded on the
consolidated balance sheet as of March 31, 2005.
The European Commission (“EC”) has issued the Waste
Electrical and Electronic Equipment (“WEEE”) directive in February
2003. The WEEE directive will require electronics producers after
August 2005 to be responsible for organizing a scheme, and
possibly financing the cost, for collection, treatment, recovery
and safe disposal of waste products. While the cost of this
directive to Sony cannot be determined before regulation is
adopted in individual member states, Sony continues to evaluate
the impact of adopting this regulation.
Sony has agreed to indemnify certain third parties against tax
losses resulting from transactions entered into in the normal
course of business. The maximum amount of potential future
payments under these guarantees cannot be estimated at this
time. These guarantees were not recorded on the consolidated
balance sheet as of March 31, 2005.
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