Pioneer 2007 Annual Report Download

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Annual Report 2007
For the Year Ended March 31, 2007
OUR VALUE PROPOSITION

Table of contents

  • Page 1
    OUR VALUE PROPOSITION Annual Report 2007 For the Year Ended March 31, 2007

  • Page 2
    ...forms of new value. These products include laser discs, car navigation systems, DVD recorders and plasma displays. Our group philosophy is "Move the Heart and Touch the Soul. " To realize this philosophy, we have formulated a group vision: "To become a company that encourages all its members to work...

  • Page 3
    ...revenue Operating income (loss) Loss from continuing operations Net loss Per share of common stock: Loss from continuing operations Net loss Cash dividends Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Total assets Shareholders' equity...

  • Page 4
    ... In fiscal 2007, the year ended March 31, 2007, we set forth a new group vision "To become a company that encourages all its members to work as a team, with everyone customer-focused, integrating each one's professionalism in pursuing innovations one after another" and implemented management reforms...

  • Page 5
    ...in North America and Europe in June 2007. Furthermore, we plan on conducting marketing activities globally in an entirely different manner than before to effectively convince the markets of this product's value. Efforts will also focus on developing Blu-ray Disc players and home theater systems that...

  • Page 6
    ..., and increase uptake and sales of in-dash car navigation systems in North America and Europe. In the OEM business, Pioneer grew revenues on brisk deliveries to automakers. Measures aimed at driving further business expansion will include offering new proposals to customers by leveraging our product...

  • Page 7
    ... yielded new value propositions transcending product categories. Furthermore, aiming to sharpen the competitive edge of the Pioneer Group's Car Electronics and speaker businesses in the marketplace, Pioneer plans to realign these operations in conjunction with Tohoku Pioneer Corporation. Regarding...

  • Page 8
    ... manufacturing) sales, despite increased sales of own-brand models in Income Home Electronics (Billions of Yen) Revenue 450 300 150 0 40 20 0 -20 -40 Europe and North America. Plasma display sales accounted for approximately 48% of Home Electronics sales. Meanwhile, sales of DVD drives, DVD...

  • Page 9
    ...7.8% year on year to ¥66.0 billion (US$559.4 million). This mainly reflected higher sales of factory automation systems and passivematrix organic light-emitting diode (OLED) displays, despite lower sales of speaker units for cellular phones. In terms of geographic sales, sales in Japan increased 24...

  • Page 10
    ... flat-panel TVs. Plasma display and other audio/video departments put aside Home Theater System LX01: a DVD recorder, a dual-drive subwoofer receiver, satellite speakers, a separate display and an LCD touch-screen remote control organizational barriers to jointly take part in product planning and...

  • Page 11
    ...of employees Revitalizing the Audio Business Pioneer is making a company-wide effort to revitalize its audio business with the aim of reestablishing a strong brand image in audio products and extending this image to plasma display and other products. Pioneer has organized separate working groups to...

  • Page 12
    ... focused sales promotions to be implemented worldwide. Furthermore, sales methods will focus on convincing customers not just of the value of plasma displays, but also of the benefits of combining them with Pioneer Blu-ray Disc players and home theater systems. In these and other ways, we will offer...

  • Page 13
    ... brand power in car electronics markets worldwide. Pioneer's exhibit at the International Automobile Trade Show held in São Paulo, Brazil in October 2006 The AVIC-D3 DVD car navigation system with built-in audio/video functions was launched at mass-market prices in North America and Europe. Pro DJ...

  • Page 14
    ... picture Value in Products Stunning Audio/Video Entertainment Proposals Using Plasma Displays Beginning in North America and Europe in June 2007, Pioneer has been progressively launching new plasma displays worldwide. This product achieves a much higher contrast ratio than existing flat-panel TVs...

  • Page 15
    ... flatpanel TV market. The BDP-94HD Blu-ray Disc player for North America Top-of-the-line DVJ-1000 DVD/CD Player for DJs and VJs In fall 2006, Pioneer brought to market the DVJ-1000, its latest DVD/CD player model that allows users to freely manipulate video and audio recorded on DVDs. Pioneer has...

  • Page 16
    ... Plasma Displays -Opening Up New Possibilities for Plasma Displays Through Cutting-edge Technologies Pioneer has successfully developed an ultra-high resolution plasma display that reduces pixels to 40% of the size used in the current generation of 50-inch, 1080p high-definition plasma displays...

  • Page 17
    ... a broad range of applications for this technology by adapting it to the user interfaces of many different devices. Unveiled at CEATEC JAPAN 2006, this application of "3D Floating Vision" for car navigation systems projects 3D images of nearby buildings above map screens. Annual Report 2007 16

  • Page 18
    As a Good Corporate Citizen The Pioneer Group's philosophy is to "Move the Heart and Touch the Soul." True to this philosophy, we, the executives and employees of the Pioneer Group, aim to continue our pioneering creation of new markets and constantly conduct business with integrity. We will ...

  • Page 19
    ... that children experience from hearing sound from their first speaker, or watching video from a DVD player they put together, is an important part of the joy of manufacturing and engineering that Pioneer is sharing with more and more children. Annual Report 2007 18 Pioneer's Monozukuri Workshop

  • Page 20
    ..., review and report on the administration of the affairs as well as accounts of Pioneer. The Board of Directors, which includes several outside directors, decides on fundamental issues such as management policies and supervises the execution of business activities, while the Board of Corporate...

  • Page 21
    ... Submit and deliberate Special Committee Group Executive Committee Business execution (Chair: outside director) Audit Division Internal audit Business Divisions and Group Companies "Rules of the Pioneer Group" • "Pioneer Group Charter for Corporate Operations" • "Pioneer Group Code of Conduct...

  • Page 22
    ... Managing Director General Manager of Mobile Entertainment Business Group and in charge of Procurement Group Shinji Yasuda Managing Director General Manager of Home Entertainment Business Group Hideki Okayasu Managing Director General Manager of Finance and Accounting Division, Chief Financial...

  • Page 23
    ... Financial Review Quarterly Information (Unaudited) Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report Annual Report 2007...

  • Page 24
    ...total assets. Return on equity represents net income (loss) as a percentage of average shareholders' equity. 4. In fiscal 2004 the Company sold subsidiaries in the audio/video software business, in fiscal 2006 sold a subsidiary engaged in the development of cable TV software, and in fiscal 2007 sold...

  • Page 25
    ... '03 '04 '05 '06 '07 '03 '04 '05 '06 '07 '03 â- Return on assets â- Return on equity '04 '05 '06 '07 â- Total assets â- Shareholders' equity â- Shareholders' equity ratio â- Short-term borrowings and current portion of long-term debt â- Long-term debt Annual Report 2007 24

  • Page 26
    ... increased sales of own-brand models in Europe and North America. Plasma display sales accounted for approximately 48% of Home Electronics sales. Meanwhile, sales of DVD drives, DVD-related devices and DJ equipment rose, while sales of DVD recorders fell year on year. Car Electronics sales increased...

  • Page 27
    ... of the review, impairment losses of ¥20.4 billion in assets for plasma displays and ¥2.3 billion in those for DVD-related products were recognized as the excess of the carrying value of the asset group over the estimated fair value of the asset group. Income taxes In fiscal 2007, the provision...

  • Page 28
    ...raw materials and parts for manufacturing our products. Also, operating expenses, including manufacturing expenses and SGA expenses, require a substantial amount of operating capital. Payroll and payroll-benefits, and marketing expenses, such as those for advertising and sales promotion, account for...

  • Page 29
    ... hand, financing of long-term funding requirements such as investments in production facilities through debt and equity securities markets are arranged in Japan, and long-term borrowing from financial institutions is arranged locally by each consolidated subsidiary. At March 31, 2007, substantially...

  • Page 30
    .... We sold a total of ¥11.7 billion of receivables under this program in fiscal 2007. We utilize these programs to diversify our options to increase the flexibility of our cash flow control. Our cash flow management would not be critically effected without these programs. 29 PIONEER CORPORATION

  • Page 31
    ... statements. Business segments Millions of Yen Home Electronics Car Electronics Patent Licensing Corporate and Eliminations Year ended March 31, 2007 Operating revenue: Unaffiliated customers Inter-segment Total Operating income (loss) Identifiable assets Depreciation and amortization Capital...

  • Page 32
    ... of Yen North America Other Regions Corporate and Eliminations Year ended March 31, 2007 Operating revenue: Unaffiliated customers Inter-area Total Operating income (loss) Identifiable assets Depreciation and amortization Capital expenditures (additions to fixed assets) Japan Europe Consolidated...

  • Page 33
    ...) Pioneer Corporation and Subsidiaries In millions of yen except per share information and share prices Year ended March 31, 2006 Year ended March 31, 2007 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Revenues and other income: Operating revenue: Net sales...

  • Page 34
    ...Balance Sheets Pioneer Corporation and Subsidiaries March 31 Thousands of U.S. Dollars (Note 1) Millions of Yen Assets Current assets: Cash and cash equivalents- Cash, including time deposits of ¥41,342 million- $350,356 thousand (¥48,211 million in 2006) Trade receivables- Notes Accounts (Notes...

  • Page 35
    ...4) Deposit on sales contract (Note 17) Other current liabilities Total current liabilities Long-term liabilities: Long-term debt (Note 11) Accrued pension and severance cost (Note 12) Deferred income taxes (Note 13) Other long-term liabilities Total long-term liabilities 2006 2007 2007 ¥ 23,205...

  • Page 36
    ...Statements of Operations Pioneer Corporation and Subsidiaries Years ended March 31 Thousands of U.S. Dollars (Note 1) Millions of Yen 2005 2006 2007 2007 Revenues and other income: Operating revenue: Net sales Royalty revenue Total operating revenue Interest income Gain on sale of fixed assets...

  • Page 37
    Consolidated Statements of Shareholders' Equity Pioneer Corporation and Subsidiaries Years ended March 31 Millions of Yen Number of Shares Issued (Thousands) Accumulated Other Comprehensive Loss Total Shareholders' Equity Common Stock Capital Surplus Retained Earnings Treasury Stock Balance at ...

  • Page 38
    ... cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year See notes to consolidated financial statements. PIONEER CORPORATION...

  • Page 39
    ... Company's general books of account. Nature of Operations- The Company is engaged in the development, manufacture and sale of electronic products. The Company is a leading global manufacturer of consumer- and business-use electronic products such as audio-video, plasma displays, and car electronics...

  • Page 40
    ..., cash discounts, and support for dealers' promotion of the Company's products. Sales incentives that are dependent on future customer performance are estimated and recorded at the later of when the original sale is recorded or when the incentive is offered. Cash and Cash Equivalents- Cash and cash...

  • Page 41
    ...No. 123, "Accounting for Stock-Based Compensation." The Company adopted SFAS No. 123 (revised 2004), "Share-Based Payment," during the year ended March 31, 2007. The adoption did not have a material impact on the Company's consolidated statements of operations or financial position. Net Income (Loss...

  • Page 42
    ... a defined benefit postretirement plan as an asset or liability in its statement of financial position, (b) recognize changes in that funded status in the year in which the changes occur through comprehensive income, (c) measure the funded status of a plan as of the date of its year-end statement of...

  • Page 43
    ... for the years ended March 31, 2005, 2006 and 2007 were as follows: Thousands of U.S. Dollars Millions of Yen 2005 2006 2007 2007 Cash payment for interest Cash payment for income taxes Noncash investing activities: Acquisition of a subsidiary: Fair value of assets, net of cash acquired...

  • Page 44
    ..., net of taxes, in the year ended March 31, 2006. The Company has no continuing involvement with Pioneer Digital Technologies, Inc. Pioneer Precision Machinery Corporation ("PPMC") and its subsidiaries- In order to improve management efficiency by concentrating resources in strategic businesses, on...

  • Page 45
    ... financial information for the years ended March 31, 2005, 2006 and 2007 for the discontinued operations was as follows: Thousands of U.S. Dollars Millions of Yen 2005 2006 2007 2007 Revenues Cost and expenses Income before income taxes Gain on sales of discontinued operations Income taxes...

  • Page 46
    ... on available-for-sale securities recorded for the years ended March 31, 2006 and 2007. The Company owns marketable equity securities of customers and financial institutions for the purpose of maintaining long-term relationships, whose share prices are highly volatile. For the years ended March 31...

  • Page 47
    ...to be market rates. Accordingly, no servicing asset or liability has been recorded. In Japan, the Company has set up several accounts receivable sales programs of eligible trade accounts receivable. Through these programs, the Company can sell receivables, without recourse, to financial institutions...

  • Page 48
    ... by Tohoku Pioneer Corporation (itself, a 67.1% owned subsidiary of the parent company) and was liquidated in March, 2006 (See Note 17), accounted for by the equity method of accounting is as follows: Thousands of U.S. Dollars Millions of Yen 2006 2007 2007 Current assets Property, plant and...

  • Page 49
    .... The estimated aggregate amortization expenses for intangible assets for the next five years are as follows: Thousands of U.S. Dollars Years ending March 31 Millions of Yen 2008 2009 2010 2011 2012 ¥9,109 5,293 2,099 1,045 241 $77,195 44,856 17,788 8,856 2,042 Annual Report 2007 48

  • Page 50
    ... value of estimated cash flows. The Company additionally recognized impairment losses of long-lived assets in the aggregate of ¥22,711 million ($192,466 thousand) for the year ended March 31, 2007. The projected estimate of gross profit margins for plasma displays and DVD recorder-related products...

  • Page 51
    ... to commercial paper programs. There were no unused commitments for long-term financing arrangements at March 31, 2007. There were no commitment fees. Accounts receivable with a book value of ¥2,391 million ($20,263 thousand) were pledged as collateral for certain short-term loans of the Company at...

  • Page 52
    ... sufficient plan assets to provide for accrued benefits, subject to the limitation on deductibility imposed by the Japanese income tax laws. The Company also sponsors a domestic non-contributory defined-benefit Corporate Pension Fund ("CPF") under the Defined Benefit Corporate Pension Law of Japan...

  • Page 53
    ... (246) (15,110) (15,110) 8,364 $ 321,212 97,771 5,385,373 171,178 201,635 121,093 (142,237) 2,272,170 5,385,373 The plan assets and pension obligations for the domestic and foreign defined benefit pension plans are measured at March 31 in each fiscal year. Annual Report 2007 52

  • Page 54
    ... prior service (gain) loss Settlement loss Curtailment (gain) loss Derecognition of previously accrued salary progression Net periodic benefit cost Actuarial assumptions used to determine net periodic pension cost: Discount rate Rate of salary increase Long-term rate of return on plan assets...

  • Page 55
    ... Fair value of plan assets at end of year Funded status Unrecognized actuarial loss Unrecognized net assets at the date of application Unrecognized prior service cost (gain) Net amount recognized Amounts recognized in the statement of financial position consist of: Accrued benefit liabilities...

  • Page 56
    ... for the foreign pension plans for which accumulated benefit obligations exceed plan assets are as follows: Thousands of U.S. Dollars Millions of Yen 2006 2007 2007 Accumulated benefit obligations Fair value of plan assets ¥15,161 11,447 ¥9,562 6,844 $81,034 58,000 55 PIONEER CORPORATION

  • Page 57
    ...-term pension plan asset/liability studies, and the weighted-average target asset allocation for these plans at March 31, 2007 is: equity securities 56%, debt securities 41% and other 3%. All the assets are externally managed and investment managers have discretion to carry out investment operations...

  • Page 58
    ... years ended March 31, 2005, 2006 and 2007 were classified as follows: Thousands of U.S. Dollars Millions of Yen 2005 2006 2007 2007 Provision (benefit) for income taxes on income from continuing operations Provision for income taxes on income from discontinued operations Shareholders' equity...

  • Page 59
    ... was not determined to be more likely than not. The increase in valuation allowance for the year ended March 31, 2006 was mainly due to losses incurred at the parent company and certain subsidiaries. At March 31, 2007, the Company had tax loss carryforwards which are available to reduce taxable...

  • Page 60
    ... can pay dividends at any time during the fiscal year in addition to the year-end dividend, upon resolution at the general meeting of shareholders. For companies that meet certain criteria such as; (1) having the board of directors, (2) having independent auditors, (3) having the board of corporate...

  • Page 61
    ... granted share acquisition rights to directors, executive officers and certain employees of the parent company. These stock options become exercisable two years after the date of grant and the exercisable period is three years. The Company recorded the fair value of the stock options as a part of...

  • Page 62
    A summary of the status of the Company's stock options at March 31, 2007, and the changes during the year then ended is as follows: Weighted-Average Exercise Price per Share Yen U.S. Dollars Millions of Yen Aggregate Intrinsic Value Thousands of U.S. Dollars Number of Shares (Thousands) Weighted-...

  • Page 63
    ... U.S. Dollars Before-Tax Amount Tax (Expenses) Benefits Minority Interest Net-of-Tax Amount 2007: Minimum pension liability adjustments Net unrealized gains on securities: Unrealized holding losses arising during year Less-Reclassification adjustment for gains realized in net income Net unrealized...

  • Page 64
    ... the sale of set-top boxes for cable TV providers in the United States in order to shift its research and development resources toward products for the open cable market. The Company continues to manufacture and sell cable TV set-top boxes in Japan; and there was no separate financial reporting for...

  • Page 65
    ... title of those properties has passed to the buyer as of March 31, 2007. The Company received a deposit on the sales contract of ¥14,112 million ($119,593 thousand), equivalent of 90% to the sales price, for these sales during the year ended March 31, 2007. The gain on these sales will be recorded...

  • Page 66
    ... Less-Amount representing interest Present value of net minimum lease payment Less-Current obligations Long-term capital lease obligations ¥2,590 650 640 629 499 292 5,300 198 5,102 2,506 ¥2,596 $21,949 5,508 5,424 5,331 4,229 2,474 44,915 1,678 43,237 21,237 $22,000 65 PIONEER CORPORATION

  • Page 67
    ... Company operates internationally, giving rise to exposure to market risks from changes in foreign exchange rates and interest rates. Derivative financial instruments are utilized by the Company to reduce those risks but are not held or issued for trading purposes. To hedge certain purchase and sale...

  • Page 68
    ... Amounts 2007 Fair Value Carrying Amounts 2007 Fair Value Assets: Available-for-sale securities Sundry investments Long-term receivables Other financial instruments: Forward exchange contracts Currency swap Currency option Liabilities: Long-term debt, including current maturity Less-Capital lease...

  • Page 69
    ... at beginning of year Charged (credited) to costs and expenses Deductions for accounts written off Translation adjustments Balance at end of year ¥3,534 (515) (497) 88 ¥2,610 ¥2,610 850 (517) 222 ¥3,165 ¥3,165 183 (547) 86 ¥2,887 $26,822 1,551 (4,636) 729 $24,466 Annual Report 2007 68

  • Page 70
    ... at the parent company's meeting of the Board of Directors held on May 14, 2007, to make Tohoku Pioneer Corporation (a 67.1% owned subsidiary) a wholly-owned subsidiary by acquiring its minority-held shares and its stock acquisition rights, through a tender offer followed by a share exchange. The...

  • Page 71
    ... Pioneer Corporation and subsidiaries (the "Company") as of March 31, 2006 and 2007, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2007 (all expressed in Japanese yen). These financial statements...

  • Page 72
    ... Japan of Mitsubishi UFJ Trust and Banking Corporation and Nomura Securities Co., Ltd. Composition of Shareholders (As of March 31, 2007) Number of shareholders Number of shares held (thousand) Shareholdings (%) Japanese financial institutions Japanese securities companies Other Japanese business...

  • Page 73
    ... sales or in which our assets and liabilities are denominated; (iii) our ability to continue to design and develop and win acceptance of our products and services, which are offered in highly competitive markets characterized by continual new product introductions, rapid developments in technology...

  • Page 74
    http://pioneer.jp/e Printed in Japan with soy ink on recycled paper