Sony 2008 Annual Report Download - page 53

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Sales within the Game segment increased 26.3 percent com-
pared to the previous fiscal year primarily as a result of a signifi-
cant increase in sales of PS3. In the Pictures segment, sales
decreased 11.2 percent compared to the previous fiscal year as
motion pictures sales decreased primarily due to fewer films
being released during the current fiscal year. Revenues
decreased 10.5 percent within the Financial Services segment
primarily due to net losses from investments in the separate
account and the deterioration in net valuation gains from con-
vertible bonds in the general account reflecting a significant
decline in the Japanese stock market partially offset by an
increase in insurance premium revenue at Sony Life.
Operating income increased 421.9 percent compared with
the previous fiscal year. Operating income within the Electronics
segment increased 121.8 percent mainly as a result of an
increase in sales and the positive impact from the depreciation
of the yen against the euro. In the previous fiscal year, a 51.2
billion yen provision was recorded for charges related to recalls
by certain notebook computer makers and the subsequent
global replacement program by Sony and certain notebook
computer makers involving battery packs containing Sony-
manufactured battery cells. A portion of the provision totaling
15.7 billion yen was reversed in the fiscal year ended March 31,
2008 based on the actual results of recalls and replacements as
compared to original estimates. In the Game segment, operating
losses decreased by 107.8 billion yen to 124.5 billion yen pri-
marily due to a decrease in the operating losses of the PS3
business as a result of successful PS3 hardware cost reductions
and increased sales of PS3 software. In the Pictures segment,
operating income increased 26.5 percent compared with the
previous fiscal year primarily due to the strong performance of
prior year films in the home entertainment and television markets
as well as the benefit from the sale of a bankruptcy claim against
Kirch Media GmbH & Co. KGaA (“Kirch Media”), a former
licensee of film and television product. In the Financial Services
segment, operating income decreased 73.1 percent as com-
pared to the previous fiscal year as a result of deterioration in net
valuation gains from convertible bonds and an impairment loss
on equity securities in the general account of Sony Life reflecting
a significant decline in the Japanese stock market.
Operating income in the fiscal year ended March 31, 2008
included one-time gains primarily from a gain on the sale of a
portion of the site of Sony’s former headquarters of 60.7 billion
yen which was recorded in “Corporate,” a 15.6 billion yen gain
which was recorded in the operating income of the Electronics
segment relating to the sale of a portion of Sony’s semiconduc-
tor operations in Nagasaki, Japan, including machinery and
equipment, and a 10.0 billion yen gain on the sale of “The Sony
Center am Potsdamer Platz” in Berlin which was recorded in the
operating income of All Other. Operating income in the previous
fiscal year included a gain on the sale of a portion of the site of
Sony’s former headquarters of 21.7 billion yen, of which 2.6
billion yen was recorded within All Other and the remaining
amount was recorded in “Corporate.”
Operating income in the fiscal year ended March 31, 2008
included a gain from the reversal of a portion of a legal provision
as a result of the resolution of a legal matter, while a comparable
gain was recorded in the previous fiscal year attributed to the
reversal of a portion of patent-related provisions.
RESTRUCTURING
In the fiscal year ended March 31, 2008, Sony recorded
restructuring charges of 47.3 billion yen, an increase from the
38.8 billion yen recorded in the previous fiscal year. The primary
restructuring activities were in the Electronics segment. Of the
total 47.3 billion yen incurred, Sony recorded 12.6 billion yen in
personnel-related costs.
Restructuring charges in the Electronics segment amounted
to 45.6 billion yen for the fiscal year ended March 31, 2008,
compared with 37.4 billion yen in the previous fiscal year.
Sony made the decision to exit the LCD rear-projection televi-
sion business in the fiscal year ended March 31, 2008 due to
the shrinking market for these products. In association with this
action, Sony recorded 19.7 billion yen of restructuring charges
consisting mainly of inventory write downs. Of this amount, 11.9
billion yen was recorded in cost of sales and 6.7 billion yen was
recorded in loss on sale, disposal or impairment of assets, net in
the consolidated statements of income. This phase of the
restructuring program was completed in the fiscal year ended
March 31, 2008, and the remaining liability balance as of March
31, 2008 was 1.6 billion yen, which is expected to be paid
during the fiscal year ending March 31, 2009.
In addition to the restructuring efforts described above, Sony
has undergone several headcount reduction programs to further
reduce operating costs within its Electronics segment. As a
result of these programs, Sony recorded restructuring charges
totaling 11.0 billion yen for the fiscal year ended March 31,
2008, and these charges were included in selling, general and
administrative expenses in the consolidated statements of
income. The remaining liability balance as of March 31, 2008
was 9.4 billion yen and will be paid throughout the fiscal year
ending March 31, 2009.
Refer to Note 17 of Notes to Consolidated Financial
Statements for more information on restructuring. (For the Notes
to Consolidated Financial Statements, visit Sony’s website:
http://www.sony.net/SonyInfo/IR/financial/ar/2008/)