Sony 2007 Annual Report Download - page 68

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due to sales price reductions associated with severe sales
competition in North America. Restructuring charges recorded in
cost of sales amounted to 12.6 billion yen, a decrease of 11.2
billion yen compared with the 23.8 billion yen recorded in the
previous fiscal year. Research and development costs increased
22.2 billion yen, or 5.3 percent, from 418.1 billion yen in the
previous fiscal year to 440.4 billion yen.
Selling, general and administrative expenses increased by
170.6 billion yen, or 18.3 percent, to 1,101.7 billion yen compared
with the previous fiscal year. A provision of 51.2 billion yen was
recorded for the fiscal year ended March 31, 2007 for recalls by
Dell, Apple and Lenovo of notebook computer battery packs
that use lithium-ion batteries manufactured by Sony, as well as
the subsequent global replacement program initiated by Sony
for certain notebook computer battery packs used by Sony and
several other notebook computer manufacturers that use
lithium-ion battery cells manufactured by Sony. Also, an additional
provision was recorded due to the expansion of models subject
to free repairs and an extension of the repair period for Sony
products and the products of other companies that are equipped
with Sony CCDs. Results for the Electronics segment were also
negatively impacted by an adjustment to reflect a more accurate
method of calculating the provision for free repairs of Sony CCDs,
which had the effect of further increasing the provision. Although
there was a reversal of a portion of provisions related to the
resolution of certain patent claims recorded in prior periods,
this reversal was more than offset by the negative impact of the
recording of certain provisions for outstanding legal proceedings
including the European Commission’s investigation in connection
with professional videotape claims. Finally, a 64.5 billion yen gain
recorded as a result of the transfer to the Japanese government
of the substitutional portion of Sony’s Employee Pension Fund
was included in the previous fiscal year. Total selling, general and
administrative expenses increased because the cumulative
impact of the above-mentioned items exceeded the decrease in
restructuring charges that were recorded in selling, general and
administrative expenses for the fiscal year ended March 31, 2007.
Of the restructuring charges recorded in the Electronics segment,
the amount recorded in selling, general and administrative
expenses decreased by 35.5 billion yen from 49.5 billion yen in
the previous fiscal year to 14.0 billion yen. Of the restructuring
charges recorded in selling, general and administrative expenses,
the amount recorded for headcount reductions, including reduc-
tions through the early retirement program, was 9.7 billion yen,
a decrease of 35.4 billion yen compared with the previous fiscal
year. The ratio of selling, general and administrative expenses
to sales increased 0.2 percentage points from the 18.0 percent
recorded in the previous fiscal year to 18.2 percent.
Loss on sale, disposal or impairment of assets, net decreased
12.3 billion yen to 10.8 billion yen compared with the previous
fiscal year. This amount includes 10.8 billion yen of restructuring
17.0 million units. Sales of DVD recorders decreased as world-
wide shipments decreased by approximately 150,000 units to
approximately 1.85 million units. Worldwide shipments of home-
use video cameras decreased by approximately 150,000 units
to approximately 7.45 million units. DVD player unit shipments
decreased by approximately 100,000 units to approximately
7.9 million units.
“Televisions” sales increased by 299.2 billion yen, or 32.2
percent, to 1,227.0 billion yen. There was a significant increase
in worldwide sales of LCD televisions, as worldwide shipments
of LCD televisions increased by approximately 3.5 million units,
to approximately 6.3 million units. Sales of LCD rear-projection
televisions decreased significantly as a result of declining sales
prices, despite an increase in worldwide shipments of approxi-
mately 50,000 units, as compared to the previous fiscal year, to
approximately 1.10 million units. There was also a significant
decrease in worldwide sales of CRT televisions, primarily as a
result of a decrease in worldwide shipments of CRT televisions by
approximately 2.1 million units to approximately 4.7 million units.
“Information and Communications” sales increased by
107.9 billion yen, or 12.8 percent, to 950.5 billion yen. Sales
of PCs increased due to strong sales in Europe and Other
Areas, and overall sales of PCs increased. Worldwide unit
shipments of PCs increased approximately 300,000 units to
approximately 4.0 million units. Sales of broadcast- and
professional-use products increased as a result of favorable
sales of high-definition related products.
“Semiconductors” sales increased by 33.5 billion yen, or
19.5 percent, to 205.8 billion yen. The increase was due to an
increase in sales of CCDs and CMOS image sensors.
“Components” sales increased by 52.3 billion yen, or 6.5
percent, to 853.0 billion yen. This increase was primarily due to
an increase in sales of lithium-ion batteries, primarily for use in
PCs and power tools, and Memory Stick™. On the other hand,
sales of CD-R/RW drives and optical pickups declined, primarily
as a result of significant unit price declines. Sales of DVD+/-R/RW
drives increased, despite a deterioration in unit selling prices, as
a result of a significant growth in units sold in association with
the expansion of the market.
“Other” sales increased by 37.8 billion yen, or 7.9 percent, to
519.2 billion yen. This increase was the result of an increase in
sales of mobile phones, primarily to Sony Ericsson.
In the Electronics segment, cost of sales for the fiscal year
ended March 31, 2007 increased by 594.4 billion yen, or 14.2
percent, to 4,769.0 billion yen compared with the previous fiscal
year. The cost of sales ratio improved by 1.8 percentage points
to 78.8 percent compared to 80.6 percent in the previous fiscal
year. There was also an improvement in the cost of sales ratio
for such products as digital cameras, LCD televisions and
home-use video cameras, although the cost of sales ratio
deteriorated for products such as LCD rear-projection televisions