Sony 2005 Annual Report Download - page 96

Sony Corporation 93
position and operating results of CWC as of and for the years
ended March 31, 2004 and 2005 are not included in the above
summarized combined financial information.
S-LCD, a joint venture with Samsung Electronics Co., Ltd.,
focused on manufacturing amorphous TFT panel, was estab-
lished in April 2004 as a joint venture in which Sony has
an ownership interest of 50% minus 1 share. Sony invested
¥100,073 million ($935 million) in S-LCD during the year ended
March 31, 2005.
As of August 1, 2004, Sony combined its recorded music
business, except for the operations of its recorded music busi-
ness in Japan, with the recorded music business of Bertelsmann
AG in a joint venture. The newly formed company, known as
SONY BMG, is 50% owned by each parent company. As a
result, the results of the recorded music business, except for the
recorded music business in Japan, are no longer consolidated
but are accounted for under the equity method.
On April 8, 2005, a consortium led by Sony Corporation of
America (“SCA”) and its equity partners, Providence Equity
Partners, Texas Pacific Group, Comcast Corporation and DLJ
Merchant Banking Partners, completed the acquisition of Metro–
Goldwyn–Mayer Inc. (“MGM”). Under the terms of the acquisi-
tion agreement, the aforementioned investor group acquired
MGM for $12.00 in cash per MGM share, for a total purchase
price of approximately $5.0 billion. As part of this transaction,
Sony Pictures Entertainment (“SPE”) will co-finance and produce
new motion pictures with MGM as well as distribute MGM’s
existing film and television contents through SPE’s global distri-
bution channels. MGM will continue to operate under the Metro–
Goldwyn–Mayer name as a private company headquartered in
Los Angeles. As part of the acquisition, SCA invested $257
million for 20% of the total equity capital. However, based on the
percentage of common stock owned, Sony will record 45% of
MGM’s net income (loss) as equity in net income of affiliated
companies.
Affiliated companies accounted for under the equity method
with an aggregate carrying amount of ¥6,081 million and
¥17,676 million ($165 million) at March 31, 2004 and 2005,
were quoted on established markets at an aggregate value of
¥37,603 million and ¥95,246 million ($890 million), respectively.
Account balances and transactions with affiliated companies
accounted for under the equity method are presented below:
Dollars in
Yen in millions millions
March 31 2004 2005 2005
Accounts receivable, trade. . ¥62,359 ¥50,062 $468
Advances . . . . . . . . . . . . . . ¥561 ¥16,756 $157
Accounts payable, trade . . . ¥13,547 ¥15,225 $142
Dollars in
Yen in millions millions
Years ended March 31 2003 2004 2005 2005
Sales . . . . . . . . ¥161,983 ¥258,454 ¥256,799 $2,400
Purchases . . . . ¥102,735 ¥106,100 ¥101,976 $ 953
As of April 1, 2004, Sony Corporation made Sony Computer
Entertainment Inc. (“SCE”) a wholly-owned subsidiary through
a stock for stock exchange pursuant to the provision of Article
358 of the Japanese Commercial Code which does not require
the approval of the General Meeting of Shareholders. The stock
for stock exchange ratio was determined based on the estimated
equity values of SCE and Sony on a consolidated basis. Through
the stock for stock exchange, Sony Corporation provided
1,000,000 shares of its common stock to an Executive Deputy
President, Corporate Executive Officer of Sony Corporation who
had owned 100 shares of SCE’s common stock. This transaction
did not have a material impact on Sony’s results of operations
and financial position for the year ended March 31, 2005.
Dividends from affiliated companies accounted for under the
equity method for the years ended March 31, 2003, 2004 and
2005 were ¥2,002 million, ¥3,446 million and ¥13,391 million
($125 million), respectively.
7. Accounts receivable securitization programs
In the United States of America, Sony has set up an accounts
receivable securitization program whereby Sony can sell inter-
ests in up to ¥53,500 million ($500 million) of eligible trade
accounts receivable, as defined. Through this program, Sony
can securitize and sell a percentage of an undivided interest in
that pool of receivables to several multi-seller commercial paper
conduits owned and operated by a bank. Sony can sell receiv-
ables in which the agreed upon original due dates are no more
than 90 days after the invoice dates. The value assigned to
undivided interests retained in securitized trade receivables is
based on the relative fair values of the interest retained and sold
in the securitization. Sony has assumed that the fair value of the
retained interest is equivalent to its carrying value as the receiv-
ables are short-term in nature, high quality and have appropriate
reserves for bad debt incidence. These securitization transac-
tions are accounted for as a sale in accordance with FAS No.
140, “Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities”, because Sony has relin-
quished control of the receivables. During the period from April
2004 to January 2005, Sony sold a total of ¥80,250 million
($750 million) of accounts receivable under this program. There
were no outstanding amounts due at March 31, 2005 relating to
the existing undivided interests in the pool of receivables that
had been sold. Losses from these transactions were insignifi-
cant. This program was terminated in May 2005.
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