Sony 2006 Annual Report Download - page 125

123
($218 million) was included in loss on sale, disposal or impairment
of assets, net in the consolidated statements of income. 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. This phase of the restructuring
program was completed in the fiscal year ended March 31, 2006.
The remaining liability balance as of March 31, 2006 was ¥3,852
million ($33 million) with a large portion of the liabilities to be paid
during the fiscal year ending March 31, 2007.
In the fiscal year ended March 31, 2006, as part of this
restructuring program, Sony recorded a non-cash impairment
charge of ¥2,856 million ($24 million) for CRT TV display manu-
facturing facilities located in Southeast Asia. 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 state-
ments of income. This phase of the restructuring program was
completed in the fiscal year ended March 31, 2006 and no
liability existed as of March 31, 2006.
The worldwide plan to rationalize production facilities of CRT
TV display was substantially completed during the fiscal year
ended March 31, 2006.
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 fiscal year ended March 31, 2003, to close a
semiconductor plant in the U.S. This restructuring activity was
completed in the fiscal year ended March 31, 2005 and total
restructuring charges of ¥4,936 million have been incurred
through March 31, 2005. The remaining liability balance as of
March 31, 2006 was ¥152 million ($1 million) and will be sub-
stantially paid through the fiscal year ending March 31, 2007.
During the fiscal year ended March 31, 2004, Sony recorded
net restructuring charges totaling ¥874 million which consisted
of the accelerated depreciation and write-down of equipment of
¥1,982 million, gain on disposal of assets of ¥1,962 million, and
¥854 million of other costs including lease contract termination
costs. Among these charges ¥1,760 million was recorded in
cost of sales, while asset write-down and disposal costs of
¥1,076 million and the gain on asset disposals of ¥1,962 million
were included in loss on sale, disposal or impairment of assets,
net in the consolidated statements of income.
During the fiscal year ended March 31, 2005, Sony sold the
facilities and recorded a gain on disposal of ¥1,794 million. The
gain was included in loss on sale, disposal or impairment of
assets, net in the consolidated statements of income.
Retirement programs
In addition to the restructuring efforts disclosed above, Sony has
undergone several headcount reduction programs to further
reduce operating costs in its Electronics segment. As a result of
these programs, Sony recorded restructuring charges totaling
¥115,149 million, ¥50,960 million and ¥45,116 million ($386
million) for the fiscal years ended March 31, 2004, 2005 and
2006, respectively, and these charges were included in selling,
general and administrative expenses in the consolidated state-
ments of income. These staff reductions were achieved world-
wide mostly through the implementation of early retirement
programs. The remaining liability balance as of March 31, 2006
was ¥19,424 million ($166 million) and will be paid through the
fiscal year ending March 31, 2007. Sony will continue to imple-
ment programs to reduce headcount by streamlining business
operations, including closure and consolidation of manufacturing
sites, as well as headquarters and administrative functions.
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 fiscal years ended March 31, 2004
and 2005, Sony recorded total restructuring charges of ¥4,611
million and ¥385 million, respectively, within the Pictures seg-
ment. There were no restructuring charges incurred for the fiscal
year ended March 31, 2006. 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 has become
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 fiscal year ended March 31, 2002, Sony decided to
consolidate its television operations and downsize the network
television production business in the Pictures segment. This
restructuring program was completed in the fiscal year ending
March 31, 2005, and the total cost of the program from
the inception was ¥8,932 million. No liability existed as of
March 31, 2006.