Pioneer 2008 Annual Report Download

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ANNUAL REPORT 2008
For the Year Ended March 31, 2008

Table of contents

  • Page 1
    ANNUAL REPORT 2008 For the Year Ended March 31, 2008

  • Page 2
    ...Market in Japan Car Electronics Markets in North America Car Electronics Markets in Europe Car Electronics Markets in Central and South America Car Electronics Markets in Asia, the Middle East and Other Regions Research and Development Corporate Citizenship Corporate Governance Management Financial...

  • Page 3
    ...473,950 Notes: 1. The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of ¥100=US$1.00 at March 31, 2008. 2. Operating income (loss) is presented as operating revenue less cost of sales and selling, general and administrative expenses in...

  • Page 4
    ...DVD recorders, despite higher sales of DVD drives, Blu-ray Disc-related devices, car audio products and car navigation systems. Operating income decreased 12.7% year on year to ¥10.9 billion, chiefly due to a larger loss in the plasma display business, despite higher earnings in the Car Electronics...

  • Page 5
    .... We will close the rest, and are currently considering ways of utilizing these assets, including selling them. Hand in hand with these measures, Pioneer plans to redeploy plasma display panel production personnel to ongoing display assembly operations, as well as to the Car Electronics business...

  • Page 6
    ... the supply of valueadded products not only in the car speaker business, where we have a solid market position, but also in the home-use speaker business. Efforts will also be made to boost sales by focusing on speaker unit sales to customers outside the company, in parallel with developing speaker...

  • Page 7
    ... Blu-ray Discrelated product businesses. At the same time, in car electronics fields, the two companies will propose new forms of value by combining Pioneer's car navigation system technologies with Sharp's proprietary devices and mobile phones. In December 2007, Pioneer issued 30 million new shares...

  • Page 8
    ...$3,295.3 million). Plasma display sales declined due to a drop in sales volume mainly in North America and Europe. Plasma display sales accounted for approximately 40% of Home Electronics sales, compared with approximately 49% in the previous fiscal year. Sales of DVD drives and Blu-ray Disc-related...

  • Page 9
    ... income Car AV system (Billions of Yen) Revenue Income Car speakers • Plasma Displays • DVD Recorders • DVD Players • DVD Drives 80 60 40 20 0 -20 • Blu-ray Disc Players • Blu-ray Disc Drives • Audio Systems • Audio Components • DJ Equipment • Equipment for Cable-TV Systems...

  • Page 10
    ... INTO CAR ELECTRONICS MARKETS WORLDWIDE It is important for us to continuously generate earnings in the Car Electronics business in order to drive further growth at Pioneer. In our consumer markets, we actively propose value from a customer-centric standpoint so as to garner market support and...

  • Page 11
    ...development costs. Air Navi AVIC-T10 Cyber Navi AVIC-VH9000: The removable main unit allows drivers to bring driving plans prepared on a home PC, information from the Internet, audio data and more into their cars. * Japan Electronics and Information Technology Industries Association Annual Report...

  • Page 12
    ...added value, we plan to increase our market share. In fiscal 2008, the AVIC-D3 model DVD car navigation system, launched at mass-market prices, earned a strong customer response. In June 2008, we brought to Communicating with the Markets Since 2007, we have been holding a series of our own product...

  • Page 13
    ...share by catering to local demand. In Eastern Europe and Turkey, which have strong growth potential, Pioneer is working to expand its business through its European regional headquarters in Belgium. Pioneer products on display at a car dealership Car navigation system for Russia Annual Report 2008...

  • Page 14
    ...: JEITA The Car Electronics business is steadily growing sales in Central and South America, supported by significant growth in Brazil's market. Pioneer's current priorities are to shift its center of gravity to value-added models in car audio products and bolster marketing activities that raise...

  • Page 15
    ... and South Africa, we aim to expand business by conducting marketing activities closely linked to local regions. â- Middle East â- Southeast Asia Southeast Asia and China In Southeast Asia, demand in the car audio product market is shifting to car AV products such as car DVD players. For Pioneer...

  • Page 16
    ... and conducts joint research with universities and other companies. Organic Dye BD-R and Metal Nitride BD-R Discs Pioneer has been focusing on developing technologies for popularizing write-once Blu-ray Discs (BD-R) as a new generation of optical recording media following DVD-R and DVD-RW discs...

  • Page 17
    ... outstanding recording performance. Pioneer exhibited an image recognition car navigation system applying image analysis technologies that was well received at CEATEC JAPAN* 2007 in October 2007. The system has three primary functions: "Real View Navigation" provides real-time video-based driving...

  • Page 18
    ... ISO 14001 environmental management systems of all business sites of the parent company, Pioneer Corporation (Headquarters, the Kawagoe and Kawasaki plants and the Corporate Research and Development Laboratories). With this integration process, Pioneer seeks to promote activities designed to achieve...

  • Page 19
    ... presented with Pioneer products, such as DVD players. Elsewhere, Pioneer North America, Inc. and Pioneer Electronics Service, Inc. have been conducting the Pioneer Academy educational support program for local high school students since 1994. This program offers a wide range of activities, from...

  • Page 20
    ... monthly meetings. The Group Executive Committee, under the supervision of the Board of Directors, thoroughly discusses issues such as priorities for advancing business activities, investment projects, group realignment, and group-wide management strategies, as well as medium- and long-term policies...

  • Page 21
    ... the Group's directors, executive officers and employees, as well as thorough observance of the "Pioneer Group Code of Conduct." We have also established an internal reporting system called the "Business Ethics Hotline." All reports received by this hotline are dealt with in good faith. Furthermore...

  • Page 22
    ... Group and Corporate Planning Division, and export management in general Akira Haeno Senior Managing Director and Representative Director General Manager of Mobile Entertainment Business Group and in charge of Procurement Group Satoshi Matsumoto Managing Director In charge of Quality Control...

  • 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 2008...

  • Page 24
    ... dollar amounts in this report represent translation of Japanese yen, for convenience only, at the rate of ¥100=US$1.00, the approximate current rate prevailing on March 31, 2008. 2. Basic net income (loss) per share of common stock has been computed based on the weighted-average number of shares...

  • Page 25
    ...04 '05 '06 '07 '08 0 '04 '05 '06 '07 '08 '04 '05 '06 '07 '08 â- Total assets â- Shareholders' equity Shareholders' equity ratio â- Short-term borrowings and current portion of long-term debt â- Long-term debt Return on assets (ROA) Return on equity (ROE) Annual Report 2008 23

  • Page 26
    ... in sales volume mainly in North America and Europe. Plasma display sales accounted for approximately 40% of Home Electronics sales, compared with approximately 49% in the previous fiscal year. Sales of DVD drives and Blu-ray Disc-related devices rose, while sales of DVD recorders fell. In terms of...

  • Page 27
    ... revenue. R&D expenses are mostly spent for activities to enhance our technological advantage in our strategic products such as car navigation systems and plasma displays. Loss on sale and disposal of fixed assets decreased by ¥0.7 billion. This decrease was mainly attributable to losses recorded...

  • Page 28
    ... of fixed assets, net of ¥11.7 billion, for which we received most of the cash proceeds as a deposit from the buyer in fiscal 2007. Net cash used in investing activities was ¥72.4 billion. This reflected capital expenditures of ¥42.0 billion, mainly related to the Car Electronics business and the...

  • Page 29
    ...-term debt includes capital lease obligations. 3. The amount that we will contribute under our defined pension plans is based on a number of factors, primarily rate of salary increase and the number of employees. As such, we have estimated the amount of such contribution for the year ending March...

  • Page 30
    ... surrendered control over the receivables. We sold a total of ¥14.7 billion of receivables under this program in fiscal 2008. In Japan and foreign countries, we set up several accounts receivable sale programs of eligible trade accounts receivable. Through these programs, we can sell receivables...

  • Page 31
    ...Law of Japan and is not in accordance with accounting principles generally accepted in the United States. Business segments Millions of Yen Car Electronics Home Electronics Patent Licensing Corporate and Eliminations Year ended March 31, 2008 Operating revenue: Unaffiliated customers Inter-segment...

  • Page 32
    ... of Yen Year ended March 31, 2008 Operating revenue: Unaffiliated customers Inter-area Total Operating income (loss) Identifiable assets Depreciation and amortization Capital expenditures (additions to fixed assets) Japan North America Europe Other Regions Total Corporate and Eliminations...

  • Page 33
    ...the Company sold subsidiaries involved in the electronic components business. As a result, the operating results of these subsidiaries and the gain on the sales are presented as income from discontinued operations in the consolidated statements of operations. Share Price Range (Tokyo Stock Exchange...

  • 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 ¥30,487 million- $304,870 thousand (¥41,342 million in 2007) Trade receivables- Notes Accounts (Notes...

  • Page 35
    ... Dollars (Note 1) Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings (Note 12) Current portion of long-term debt (Note 12) Trade payables Accrued liabilities- Taxes on income Payroll Royalty Other Warranty reserve (Note 24) Dividends payable Deposit on sales contract...

  • Page 36
    ...Statements of Operations Pioneer Corporation and Subsidiaries Years ended March 31 Thousands of U.S. Dollars (Note 1) Millions of Yen 2006 2007 2008 2008 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
    ...(Note 5) Proceeds from sale of investment securities Proceeds from sale of available-for-sale securities Deposit on sales contract (Note 18) Other Net cash used in investing activities Financing activities: Payment of long-term debt Increase (decrease) in short-term borrowings Proceeds from issuance...

  • Page 39
    ... such as car electronics, audio/video and plasma displays. The principal production activities of the Company are carried out in Asia including Japan, the United States, and Europe. The Company's products are generally sold under its own brand names, principally "Pioneer." The principal markets for...

  • Page 40
    ...year or less to be cash equivalents. Such time deposits can be withdrawn at any time without diminution of the principal amount. Available-for-Sale Securities- Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," all debt securities and marketable equity securities...

  • Page 41
    ...) for the years ended March 31, 2006, 2007 and 2008, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations. Accounting for Stock-Based Compensation- Warranty Reserve- The Company engages in extensive product quality programs and...

  • Page 42
    ...the over-funded or under-funded status of 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...

  • Page 43
    ... of U.S. Dollars Millions of Yen 2006 2007 2008 2008 Cash payment for interest Cash payment for income taxes Noncash investing activities: Share exchange in connection with additional investments in subsidiaries: Fair value of shares received Cost of shares surrendered Sales of discontinued...

  • Page 44
    ... per share 41,550 million yen (3) Amount accounted for as stated capital: 692.5 yen per share 4. Additional investments in Tohoku Pioneer: The parent company announced that it resolved, at the meeting of its board of directors held on May 14, 2007, to acquire the shares and the stock acquisition...

  • Page 45
    ... operations. Pioneer Digital Technologies, Inc. ("PDT")- During the year ended March 31, 2006, the Company decided to sell 100% of its shares in PDT through a management buyout. PDT was a wholly owned subsidiary which was engaged in the development of operating software for cable TV set-top boxes in...

  • Page 46
    ... on availablefor-sale securities recorded for the years ended March 31, 2006, 2007 and 2008. 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...

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

  • Page 48
    ... of the parent company) and was liquidated in March 2006 (See Note 18), accounted for by the equity method of accounting is as follows: Thousands of U.S. Dollars Millions of Yen 2007 2008 2008 Current assets Property, plant and equipment Other assets Total assets Current liabilities Long-term...

  • Page 49
    ... 12,270 4,210 Balance at beginning of year Goodwill acquired during year Balance at end of year - ¥1,824 ¥1,824 - $18,240 $18,240 The goodwill acquired during the year ended March 31, 2008 principally relates to the additional investments in Tohoku Pioneer (See Note 4). Annual Report 2008 47

  • Page 50
    ... of long-lived assets in the aggregate of ¥23,293 million ($232,930 thousand). The Company resolved at the meeting of its board of directors held on March 7, 2008 to restructure its display business. In this meeting, the Company decided to cease in-house production of plasma display panels and to...

  • Page 51
    ...and ¥879 million ($8,790 thousand) at March 31, 2008 (effective annual rate of 0.5%) Long-term capital lease obligations, 1.38% to 4.97% at March 31, 2007 and 1.38% to 4.97% at March 31, 2008 due principally 2012 Other Total Less-Portion due within one year Total 5,102 7 92,592 6,577 ¥86,015 2,591...

  • Page 52
    ... Corporate Pension Fund ("CPF") under the Defined Benefit Corporate Pension Law of Japan, which covers substantially all of its Japanese employees. The benefits are determined based on the sum of cumulative points; which are accumulated based on years of service, job class 50 PIONEER CORPORATION

  • Page 53
    ... income for the domestic and foreign defined benefit pension plans for the years ended March 31, 2006, 2007 and 2008 consisted of the following: Thousands of U.S. Dollars Millions of Yen 2006 Domestic Plans Foreign Plans Domestic Plans 2007 Foreign Plans Domestic Plans 2008 Foreign Plans...

  • Page 54
    ...return on plan assets Employer contribution Plan participants' contribution Lump-sum cash payments/Settlements Benefits paid Translation adjustments Fair value of plan assets at end of year Funded status Amounts recognized in the statement of financial position consist of: Other assets Other current...

  • Page 55
    ...plan assets for the foreign pension plans for which accumulated benefit obligations exceed plan assets are as follows: Thousands of U.S. Dollars Millions of Yen 2007 2008 2008 Accumulated benefit obligations Fair value of plan assets ¥9,562 6,844 ¥7,692 6,422 $76,920 64,220 Annual Report...

  • Page 56
    ...-term pension plan asset/liability studies, and the weighted-average target asset allocation for these plans at March 31, 2008 is: equity securities 55%, debt securities 42% and other 3%. All the assets are externally managed and investment managers have discretion to carry out investment operations...

  • Page 57
    ... years ended March 31, 2006, 2007 and 2008 were classified as follows: Thousands of U.S. Dollars Millions of Yen 2006 2007 2008 2008 Provision (benefit) for income taxes on income from continuing operations Provision for income taxes on income from discontinued operations Shareholders' equity...

  • Page 58
    ... at the parent company and certain subsidiaries. The increase during the year ended March 31, 2008 resulted from a provision for additional valuation allowances due to continued losses recorded by the parent company and certain subsidiaries. At March 31, 2008, the Company had tax loss carryforwards...

  • Page 59
    ... to the year-end dividend, upon resolution at the general meeting of shareholders. For companies that meet certain criteria such as; (1) having the Annual Report 2008 board of directors, (2) having independent auditors, (3) having the board of corporate auditors, and (4) the term of service of the...

  • Page 60
    ... 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 61
    ... interest rate Expected lives Expected volatility Expected dividends 0.23% 3.48 years 31.98% 0.90% A summary of the status of the Company's stock options at March 31, 2008, and the changes during the year then ended is as follows: Weighted-Average Exercise Price per Share Yen U.S. Dollars Millions...

  • Page 62
    ... of U.S. Dollars Minority Net-of-Tax Interest Amount 2008: Pension liability adjustments: Net actuarial loss and prior service loss arising during year Less-Reclassification adjustment for amortization Net pension liability adjustments Net unrealized gains on securities: Unrealized holding losses...

  • Page 63
    ... and concentration of planning, development and design departments in the home electronics business at the newly established Kawasaki Plant. Net book value of ¥489 million of land and ¥2,980 million of buildings, which are subject to the sales contract, were included in the property, plant and...

  • Page 64
    ... the years ended March 31, 2006, 2007 and 2008 consisted of the following: Thousands of U.S. Dollars Millions of Yen 2006 2007 2008 2008 Impairment of long-lived assets (Note 11) Special termination benefits Write-down of available-for-sale securities and sundry investments Office relocation...

  • Page 65
    ... banks. Currency swap contracts effectively change, in substance, the U.S. dollar floating interest rate Concentration of Credit Risk- The Company distributes its products to a diverse group of domestic and foreign customers. Trade receivables arising from these sales represent credit risk to the...

  • Page 66
    ...Amounts 2008 Fair Value Carrying Amounts 2008 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 67
    ... of the numerators and denominators of basic and diluted net income (loss) per share computation for the years ended March 31, 2006, 2007 and 2008 is as follows: Thousands of U.S. Dollars Millions of Yen 2006 2007 2008 2008 Loss from continuing operations Effect of dilution-Zero coupon...

  • Page 68
    .... 27. Subsequent event: In March 2008, the parent company decided to cease inhouse production of plasma display panels as soon as the production runs for the next model series are completed. In connection with this decision, the Company's Board of Directors resolved at their meeting held on May...

  • Page 69
    ... and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2008 (all expressed in Japanese yen). These financial statements are the responsibility of the Company's management. Our responsibility is to express...

  • Page 70
    ...) Limited Pioneer Employee Share Ownership Plan Note: The Company holds 5,012 thousand shares (2.38%) as treasury stock. 30,000 14,376 11,779 6,490 4,000 3,955 3,126 3,119 2,857 2,631 14.28 6.84 5.60 3.08 1.90 1.88 1.48 1.48 1.36 1.25 For further information, please contact: Pioneer Corporation...

  • Page 71
    ... successful sales and distribution strategies, in light of technological developments in and affecting our businesses; (vi) our continued ability to devote sufficient resources to research and development, and capital expenditure; (vii) our ability to continuously enhance our brand image; (viii...

  • Page 72
    http://pioneer.jp/e Printed in Japan with soy ink on environmentally friendly paper.