Sony 2006 Annual Report Download - page 134

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residual costs. As of March 31, 2006, only one co-financed film
has been released by the company. The subsidiary did not make
any equity investment in the VIE nor issue any guarantees with
respect to the VIE. In April 2006, the subsidiary entered into
a second production/co-financing agreement with a VIE to
co-finance an additional 11 films scheduled to be released over
the following 24 months. The subsidiary will receive approximately
$330 million over the term of the agreement. Similar to the first
agreement, the subsidiary is responsible for marketing and
distribution of the product through its global distribution channels.
The VIE shares in the net profits of the films after the subsidiary
recoups a distribution fee, its marketing and distribution
expenses, and third party participation and residual costs.
24. Commitments and contingent liabilities
(1) Commitments:
A. Purchase Commitments
Commitments outstanding at March 31, 2006 amounted to
¥285,774 million ($2,443 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, 2006, such commitments outstanding were ¥69,286 million
($592 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, 2006, these subsidiaries were
committed to make payments under such contracts of ¥43,659
million ($373 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 43 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, 2006, 34 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 ¥33,077 million ($283 million).
In April 2005, Sony Corporation has entered into a partnership
program contract with Fédération Internationale de Football
Association (“FIFA”). Through this program Sony Corporation will
be able to exercise various rights as an official sponsor of FIFA
events including the FIFA World CupTM * from 2007 to 2014. As
of March 31, 2006, Sony Corporation was committed to make
payments under such contract of ¥34,639 million ($296 million).
* FIFA World CupTM is a registered trademark of FIFA.
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:
2007 . . . . . . . . . . . . . . . . . . . . . . . . . ¥139,130 $1,190
2008 . . . . . . . . . . . . . . . . . . . . . . . . . 44,538 381
2009 . . . . . . . . . . . . . . . . . . . . . . . . . 46,966 401
2010 . . . . . . . . . . . . . . . . . . . . . . . . . 6,003 51
2011 . . . . . . . . . . . . . . . . . . . . . . . . . 6,553 56
Thereafter . . . . . . . . . . . . . . . . . . . . . 42,584 364
Total . . . . . . . . . . . . . . . . . . . . . . . . . . ¥285,774 $2,443
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, 2006, the total
unused portion of the line of credit extended under these
contracts was ¥326,691 million ($2,792 million).
In August 2004, Sony and Bertelsmann AG combined their
recorded music businesses in a joint venture. In connection with
the establishment of the SONY BMG joint venture, Sony and
Bertelsmann AG 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, 2006, the joint venture had no borrow-
ings outstanding under the Credit Agreement. Accordingly,
Sony’s outstanding commitment under the Credit Agreement as
of March 31, 2006 was ¥26,325 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 ¥21,072 million
($180 million) at March 31, 2006. The major components of the
contingent liabilities are as follows: