RNS Number : 0524H
Pioneer Corporation
30 October 2008
For Immediate Release
October 30, 2008
Pioneer Announces Business Results for 2Q Fiscal 2009
TOKYO - Pioneer Corporation today announced its consolidated second-quarter and semiannual business results for the periods ended
September 30, 2008.
Consolidated Financial Highlights
(In millions of yen except per share information)
Three months Six months
ended September 30 ended September 30
2008 2007 % to prior year 2008 2007 % to prior year
Operating revenue �166,076 �200,520 82.8% �327,042 �383,161 85.4%
Operating income (loss) (6,872) 939 - (13,091) 2,262 -
Income (loss) (31,201) 1,460 - (36,877) 17,645 -
before income taxes
Net income (loss) �(45,234) �(2,395) -% �(52,978) �9,936 -%
Net income (loss) per share:
Basic �(220.64) �(13.73) �(258.41) �56.97
Diluted �(220.64) �(13.73) �(258.41) �51.65
Consolidated Business Results
For the second quarter of fiscal 2009, the three months ended September 30, 2008, consolidated operating revenue decreased 17.2% from
the second quarter of fiscal 2008 to �166,076 million (US$1,596.9 million), mainly due to lower sales of plasma displays, DVD drives and car
audio products.
Pioneer recorded an operating loss of �6,872 million (US$66.1 million), compared with operating income of �939 million in the second
quarter of fiscal 2008, due to the lower operating revenue and deterioration in the gross profit margin. In addition, Pioneer recorded
business restructuring expenses of �15,616 million (US$150.2 million) mainly for implementing an early retirement program, and a write-down
of marketable securities. Higher income taxes were also recorded following an evaluation of deferred tax assets. Consequently, the net loss
was �45,234 million (US$434.9 million), compared with �2,395 million in the second quarter of fiscal 2008.
During the second quarter of fiscal 2009, the average value of the Japanese yen appreciated 9.5% against the U.S. dollar and
remained mostly unchanged against the euro, compared with the second quarter of fiscal 2008.
Car Electronics operating revenue decreased 7.7% year on year to �85,546 million (US$822.6 million) due to lower overall sales of car
audio products, despite higher overall car navigation system sales. In car navigation systems, consumer-market sales rose year on year,
mainly because of higher sales in Europe. OEM sales also increased due to higher sales in China and Japan, despite lower sales in North
America. In car audio products, consumer-market sales decreased because of lower sales in North America and Europe due to contracting
markets and economic recession. OEM sales also declined due to lower sales in North America and Japan, despite higher sales in China. Total
OEM sales in this segment accounted for approximately 40% of Car Electronics operating revenue, compared with approximately 38% in the
second quarter of fiscal 2008.
In terms of geographic operating revenue, operating revenue in Japan was mostly the same as in the second quarter of fiscal 2008 at
�28,428 million (US$273.3 million) while overseas operating revenue decreased 11.2% year on year to �57,118 million (US$549.2 million).
Operating income in this segment decreased 82.2% year on year to �1,072 million (US$10.3 million). This reflected lower car audio
product sales, and deterioration in the gross profit margin due to a drop in production volume.
Home Electronics operating revenue decreased 30.0% year on year to �62,589 million (US$601.8 million). This largely reflected lower
overseas plasma display sales volume, as well as lower DVD drive sales. Sales of display products accounted for approximately 40% of Home
Electronics operating revenue, compared with approximately 41% in the second quarter of fiscal 2008.
In terms of geographic operating revenue, operating revenue in Japan declined 36.4% year on year to �6,747 million (US$64.9
million), while overseas operating revenue decreased 29.2% to �55,842 million (US$536.9 million).
The operating loss in this segment widened from �4,105 million in the second quarter of fiscal 2008 to �6,953 million (US$66.9
million). This was chiefly due to lower plasma display and DVD drive sales, and erosion in the gross profit margin for these products.
In the Others segment, operating revenue decreased 2.2% year on year to �17,941 million (US$172.5 million) due to lower sales of organic
light-emitting diode displays.
In terms of geographic operating revenue, operating revenue in Japan rose 1.4% year on year to �10,668 million (US$102.6 million),
while overseas operating revenue decreased 7.1% year on year to �7,273 million (US$69.9 million).
Operating income in this segment rose 64.1% year on year to �443 million (US$4.3 million), because of improved profitability in
speaker units for cellular phones.
For the first half of fiscal 2009, the six months ended September 30, 2008, consolidated operating revenue decreased 14.6% to �327,042
million (US$3,144.6 million). Pioneer recorded an operating loss of �13,091 million (US$125.9 million) compared with operating income of
�2,262 million in the first half of fiscal 2008. It also posted a net loss of �52,978 million (US$509.4 million) compared with net income of
�9,936 million in the same period of fiscal 2008, which included a gain on sales of all land and buildings at the Tokorozawa Plant and some
at the Omori Plant.
Notes:
1.Operating income (loss) in each business segment represents operating income (loss) before elimination of intersegment transactions.
2.Effective from the first quarter of fiscal 2009, the patent licensing business, which was previously classified as an independent
business segment, has been included in the "Others" segment because of its reduced importance to consolidated business results. Figures for
the corresponding period of fiscal 2008 have been reclassified.
Consolidated Financial Position
Total assets as of September 30, 2008 were �571,547 million (US$5,495.6 million), a decrease of �4,569 million from March 31, 2008. This
mainly reflected decreases in cash and cash equivalents, investments and long-term receivables, and long-term deferred tax assets, despite
an increase in inventories. Inventories rose �21,696 million to �125,864 million (US$1,210.2 million), mainly due to the stockpiling of new
plasma display models and consumer-market car navigation systems ahead of the launch of new products. On the other hand, investments and
long-term receivables decreased �8,397 million to �28,000 million (US$269.2 million), mainly due to falling share prices. Long-term deferred
tax assets declined �8,997 million to �30,918 million (US$297.3 million) in line with an increase in the valuation allowance.
Total liabilities as of September 30, 2008 were �375,250 million (US$3,608.2 million), up �47,891 million from March 31, 2008. This
mainly reflected increases in short-term borrowings and accrued liabilities. Short-term borrowings rose �41,750 million to �56,562 million
(US$543.9 million). Accrued liabilities increased �9,999 million to �90,631 million (US$871.5 million), primarily due to provisions for
special retirement benefits associated with the implementation of early retirement programs.
Total shareholders' equity was �194,850 million (US$1,873.6 million), a decrease of �52,545 million from March 31, 2008. This mainly
reflected a drop of �53,053 million in retained earnings.
Cash Flows
During the first half of fiscal 2009, operating activities used net cash of �25,642 million (US$246.6 million). The main factors
reducing cash were a net loss of �52,978 million (US$509.4 million) and an increase in inventories of �23,255 million (US$223.6 million).
These factors outweighed the addback of non-cash expenses, namely depreciation and amortization of �13,480 million (US$129.6 million),
deferred taxes of �12,050 million (US$115.9 million), and an increase in other accrued liabilities of �10,829 million (US$104.1 million),
among other factors increasing cash. Investing activities used net cash of �15,264 million (US$146.8 million), mainly for capital
expenditures in the Car Electronics business. Financing activities provided net cash of �30,869 million (US$296.8 million), mainly through
an increase in short-term borrowings.
Consequently, cash and cash equivalents at September 30, 2008 were �72,431 million (US$696.5 million), down �8,749 million from
March 31, 2008.
Business Forecasts for Fiscal 2009
We revised our consolidated business forecasts for fiscal 2009, ending March 31, 2009, which were announced on May 13, 2008, as
follows:
(In millions of yen)
Revised Previous Results
projections projections Changes for fiscal 2008
for fiscal 2009 for fiscal 2009 (A - B)
(A) (B)
Operating revenue �700,000 �780,000 �(80,000) �774,477
Operating income (loss) (17,000) 7,000 (24,000) 10,907
Income (loss) before income (54,000) (7,500) (46,500) 3,434
taxes
Net loss �(78,000) �(19,000) �(59,000) �(17,992)
We have lowered our operating revenue forecast from �780 billion to �700 billion. This is mainly because the Car Electronics business
and Home Electronics business are both expected to post lower-than-projected operating revenue due to intensifying competition involving our
core products, as well as the impact of economic recession and the yen's appreciation.
We have revised our operating income forecast from �7 billion to a projected operating loss of �17 billion based on expectations of
worsening profitability due to lower sales and the impact of the yen's appreciation.
Furthermore, we have decided to carry out additional business restructuring measures in the display business and measures for
improving profitability in the Home Electronics business, among other actions. This means that projected business restructuring expenses for
fiscal 2009 will increase from �15 billion to �29 billion. In addition, we expect to book a write-down of marketable securities.
Consequently, we have revised our forecast for the loss before income taxes from �7.5 billion to �54 billion. We have also revised the
projected net loss from �19 billion to �78 billion based on a projected increase in income taxes associated with the valuation of deferred
tax assets.
We are assuming an average yen-U.S. dollar exchange rate of �100, �5 higher than previously, and a yen-euro exchange rate of �130,
�25 higher than before, for the revised projections.
Basic Management Policies and Issues to Be Addressed
Pioneer seeks to create new value for customers by offering innovative, high-quality, and high value-added electronics products, with
the aim of realizing the Pioneer Group's philosophy of "Move the Heart and Touch the Soul" with more people around the world. Based on this
group philosophy, Pioneer has formulated a group vision that serves as a reference point for the Group's business activities, as follows:
"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."
The overall economic outlook is uncertain given current economic conditions. The economy is experiencing a financial crisis highlighted
by tumbling share prices worldwide, unstable foreign exchange markets and other developments triggered by the U.S. sub-prime loan issue. At
the same time, volatile crude oil prices and soaring raw material costs are driving up the costs of corporate business activities and
weakening consumer spending.
In addition to these difficult economic conditions, Pioneer continues to face an extremely challenging business environment due to
fierce competition involving its core products.
Pioneer has established medium-term management targets of consolidated operating revenue of �900 billion and operating income of �37
billion in fiscal 2011, the year ending March 31, 2011. To this end, the Company had planned to restore the Home Electronics business to
profitability in fiscal 2010 by implementing measures for restructuring the display business and improving profitability in the Home
Electronics business as a whole. However, we are currently reviewing our medium-term management targets because their achievement has become
extremely difficult in light of intensifying competition and sharply deteriorating business conditions highlighted by falling share prices
and other developments worldwide. Pioneer plans to announce its new medium-term management targets along with concrete measures by February
2009, after closely examining the year-end shopping season and other market conditions as well as economic developments going forward.
On May 13, 2008, Pioneer announced measures for restructuring the display business and improving profitability in the Home Electronics
business as a whole.
Pioneer is successively terminating in-house production of plasma display panels as planned. Pioneer Display Products Corporation
(DPC) Yamanashi Plant has already ended production and was closed at the end of September 2008. Going forward, we plan to terminate plasma
display panel production at Pioneer Plasma Display Corporation (PPD) Kagoshima Plant and DPC Shizuoka Plant in November 2008 and February
2009, respectively.
Pioneer continues to consider ways to utilize these facilities after panel production ends. We are currently choosing a buyer and
conducting negotiations on the sale of land and buildings at DPC Yamanashi Plant. Elsewhere, Pioneer has reached a basic agreement on
transferring PPD Kagoshima Plant to Field Emission Technologies Inc. and is proceeding with negotiations. In regard to DPC Shizuoka Plant,
Pioneer plans to convert the plant into a center for Home Electronics product manufacturing, including plasma display assembly, and
aftersales services, in conjunction with downsizing operations.
Furthermore, Pioneer has sought applicants for early retirement through an incentive-based early retirement plan for administrative
and sales divisions in Japan, and a special early retirement program has been applied to DPC Yamanashi Plant. These measures resulted in the
retirement of 309 and 205 employees, respectively, as of September 30, 2008.
Overseas, with the view to closing its plasma display production facilities in the U.S. and the U.K. as an additional measure, and
overhauling the European sales structure for the Home Electronics business, Pioneer is conducting discussions with labor unions in each
region.
The actions above, as well as additional measures, are expected to yield projected cost savings of �26 billion from the second half
of fiscal 2009.
Pioneer will continue working to restore its business performance and generate stable earnings by ensuring that it fully implements the
above initiatives. At the same time, we will step up measures to achieve steady growth in the Car Electronics business and restore
profitability in the Home Electronics business as a whole, while focusing on the factory automation (FA) systems business and electronic
devices and parts business, both of which leverage our extensive technologies.
In the Car Electronics business, Pioneer is working to achieve growth in sales of consumer-market car navigation systems driven by
portable navigation devices with telematics functions, and to reduce costs by boosting development efficiency, in order to improve
profitability in consumer-market car navigation systems. We are also trying to develop new products offering new value propositions with the
aim of expanding our business domains.
In OEM car navigation systems, we will concentrate on winning contracts for assembly line products for automakers and the dealer
options market in Japan.
In car audio products, we will work to maintain our share of contracting consumer markets in Japan, North America and Europe, and to
respond to market expansion in emerging economies, as we strive to shift our center of gravity to car audio/video products. Through these
measures, Pioneer aims to achieve business expansion and better profitability in both consumer markets and the OEM field.
In the Home Electronics business, Pioneer is implementing measures for improving profitability and restructuring the display business.
In the display business, from summer 2009, Pioneer plans to produce plasma displays with plasma display panels supplied by Panasonic
Corporation that incorporate Pioneer's proprietary technologies. Furthermore, Pioneer will conduct development with the view to
incorporating its own technologies into LCD TVs procured from Sharp Corporation.
In the optical disc business, Pioneer will focus on reinforcing its development capabilities, while looking into cooperative ties
with Sharp, in order to establish a strong presence in Blu-ray Disc products, which are rapidly penetrating the market.
In the audio business, Pioneer plans to step up measures to raise its market share.
Additionally, Pioneer will take new initiatives in the area of "sound." Pioneer will offer new products and value propositions that
combine its specialization in "sound" with design and cultural elements. We will focus on all aspects of "sound" in people's lives, without
confining our activities to existing businesses or technologies.
In the speaker business, Pioneer is working to raise efficiency and expand business by concentrating at Tohoku Pioneer Corporation
speaker development and production ranging from car speakers and home-use speakers to speaker units for cellular phones and TVs.
In the FA systems business and electronic devices and parts business, Pioneer seeks to expand its business domains and scope of
operations by responding to demand from outside the electronics industry through the application of highly versatile technologies developed
over the years. We will focus on FA systems such as automotive and precision components production equipment, semiconductors and other
electronic devices and parts.
Cautionary Statement with Respect to Forward-Looking Statements
Statements made in this release with respect to our current plans, estimates, strategies and beliefs, and other statements that are not
historical facts are forward-looking statements about our future performance. These statements are based on management's assumptions and
beliefs in light of the information currently available to it. We caution that a number of important risks and uncertainties could cause
actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue
reliance on them. It is not our obligation to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. We disclaim any such obligation. Risks and uncertainties that might affect us include, but are not limited to:
(i) general economic conditions in our markets, particularly levels of consumer spending; (ii) exchange rates, particularly between the yen
and the U.S. dollar, euro, and other currencies in which we make significant sales or in which our assets and liabilities are denominated; (iii) our ability to continuously design and develop highly
rated products and services in extremely competitive markets, which are characterized by continual product launches, rapid technological
development, intense price-based competition, subjective and changing consumer preferences and other factors; (iv) our ability to
successfully implement our business strategies; (v) our ability to compete, as well as develop and implement 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)
the success of our joint ventures and alliances; (ix) the success of our business restructuring plans; and (x) the outcome of
contingencies.
Pioneer Corporation is a leading global manufacturer of consumer- and business-use electronics products such as audio, video and car
electronics. Its shares are traded on the Tokyo Stock Exchange.
� � � � � �
The U.S. dollar amounts in this release represent translations of Japanese yen, for convenience only, at the rate of �104=US$1.00, the
approximate rate prevailing on September 30, 2008.
Attached are consolidated financial statements for the three months and the six months ended September 30, 2008.
For further information, please contact:
Investor Relations Department, Corporate Communications Division
Pioneer Corporation, Tokyo
Phone: +81-3-3495-6773 / Fax: +81-3-3495-4301
E-mail: pioneer_ir@post.pioneer.co.jp
IR Website: http://pioneer.jp/ir-e/
(1) CONSOLIDATED BALANCE SHEETS
(In millions of yen)
June 30 March 31
2008 2007 Increase 2008 Increase
(Decrease) (Decrease)
ASSETS
Current assets:
Cash and cash equivalents �79,384 �86,506 �(7,122) �81,180 �(1,796)
Trade receivables, less 107,325 131,186 (23,861) 93,068 14,257
allowance
Inventories 122,963 131,114 (8,151) 104,168 18,795
Other current assets 73,666 77,674 (4,008) 70,821 2,845
Total current assets 383,338 426,480 (43,142) 349,237 34,101
Investments and long-term 36,913 28,146 8,767 36,397 516
receivables
Property, plant and equipment, 124,356 146,191 (21,835) 122,752 1,604
less depreciation
Intangible assets 16,929 18,824 (1,895) 17,738 (809)
Other assets 51,684 47,414 4,270 49,992 1,692
Total assets �613,220 �667,055 �(53,835) �576,116 �37,104
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS'
EQUITY
Current liabilities:
Short-term borrowings �48,000 �38,368 �9,632 �14,812 �33,188
Current portion of long-term 13,269 5,731 7,538 13,672 (403)
debt
Trade payables 101,849 119,062 (17,213) 86,195 15,654
Other current liabilities 92,616 99,964 (7,348) 107,328 (14,712)
Total current liabilities 255,734 263,125 (7,391) 222,007 33,727
Long-term debt 71,227 85,021 (13,794) 72,041 (814)
Other long-term liabilities 33,736 23,945 9,791 33,311 425
Total liabilities 360,697 372,091 (11,394) 327,359 33,338
Minority interests 1,455 2,479 (1,024) 1,362 93
Shareholders' equity:
Common stock 69,824 49,049 20,775 69,824 -
Capital surplus 103,578 82,995 20,583 103,578 -
Retained earnings 137,551 177,652 (40,101) 145,295 (7,744)
Accumulated other (48,761) (4,756) (44,005) (60,178) 11,417
comprehensive loss
Treasury stock (11,124) (12,455) 1,331 (11,124) -
Total shareholders' equity 251,068 292,485 (41,417) 247,395 3,673
Total liabilities, minority �613,220 �667,055 �(53,835) �576,116 �37,104
interests and
shareholders' equity
Breakdown of accumulated other
comprehensive loss:
Pension liability adjustments �(12,264) �(5,099) �(7,165) �(12,279) �15
Net unrealized gains on 2,442 8,087 (5,645) 1,943 499
securities
Foreign currency translation (38,939) (7,744) (31,195) (49,842) 10,903
adjustments
Total accumulated other �(48,761) �(4,756) �(44,005) �(60,178) �11,417
comprehensive loss
(2) CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions of yen)
Three months ended June 30
2008 2007 % to
prior year
Operating revenue:
Net sales �160,907 �182,534 88.2%
Royalty revenue 59 107 55.1
Total operating revenue 160,966 182,641 88.1
Operating costs and expenses:
Cost of sales 129,019 138,733 93.0
Selling, general and administrative 38,166 42,585 89.6
expenses
Total operating costs and expenses 167,185 181,318 92.2
Operating income (loss) (6,219) 1,323 -
Other income (expenses):
Interest income 1,035 1,790 57.8
Foreign exchange gain 223 429 52.0
Interest expense (415) (543) 76.4
Other-net (300) 13,186 -
Total other income 543 14,862 3.7
Income (loss) before income taxes (5,676) 16,185 -
Income taxes 1,959 3,651 53.7
Minority interest in earnings of (48) (92) 52.2
subsidiaries
Equity in losses of affiliated (61) (111) 55.0
companies
Net income (loss) �(7,744) �12,331 -%
(3) CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of yen)
Three months ended June 30
2008 2007
I. Cash flows from operating activities:
Net income (loss) �(7,744) �12,331
Depreciation and amortization 6,930 8,717
Gain on sale and disposal of fixed assets, net (322) (12,923)
Increase in trade receivables (10,618) (9,389)
Increase in inventories (14,123) (21,702)
Increase in trade payables 13,386 23,919
Decrease in other accrued liabilities (10,064) (9,445)
Other (5,905) (5,688)
Net cash used in operating activities (28,460) (14,180)
II. Cash flows from investing activities:
Payment for purchase of fixed assets (8,890) (15,460)
Payment for purchase of shares of consolidated - (13,704)
subsidiaries
Other 593 1,511
Net cash used in investing activities (8,297) (27,653)
III. Cash flows from financing activities:
Increase in short-term borrowings and long-term 31,293 24,699
debt
Dividends paid (513) (872)
Other (156) (879)
Net cash provided by financing activities 30,624 22,948
Effect of exchange rate changes on cash and 4,337 3,571
cash equivalents
Net decrease in cash and cash equivalents (1,796) (15,314)
Cash and cash equivalents, beginning of period 81,180 101,820
Cash and cash equivalents, end of period �79,384 �86,506
Free cash flows (I + II) �(36,757) �(41,833)
(4) OPERATING REVENUE BY SEGMENT
(In millions of yen)
Three months ended June 30
2008 2007 % to
Amount % to total Amount % to total prior year
Domestic �34,892 21.7% �32,458 17.8% 107.5%
Overseas 53,203 33.0 64,559 35.3 82.4
Car Electronics 88,095 54.7 97,017 53.1 90.8
Domestic 6,628 4.1 12,763 7.0 51.9
Overseas 50,715 31.5 56,668 31.0 89.5
Home Electronics 57,343 35.6 69,431 38.0 82.6
Domestic 10,369 6.4 10,355 5.6 100.1
Overseas 5,159 3.3 5,838 3.3 88.4
Others 15,528 9.7 16,193 8.9 95.9
Domestic 51,889 32.2 55,576 30.4 93.4
Overseas 109,077 67.8 127,065 69.6 85.8
Total �160,966 100.0% �182,641 100.0% 88.1%
(5) SEGMENT INFORMATION
The following segment information is prepared pursuant to the regulations under the Financial Instruments and Exchange Law of Japan.
(In millions of yen)
Three months ended June 30
2008 2007 % to prior year
Operating Operating Operating Operating Operating Operating
Revenue Income (Loss) Revenue Income (Loss) Revenue Income (Loss)
Car Electronics �88,564 �1,704 �97,511 �7,609 90.8% 22.4%
Home Electronics 57,456 (7,394) 69,592 (5,437) 82.6 -
Others 23,998 (264) 24,812 (750) 96.7 -
Total 170,018 (5,954) 191,915 1,422 88.6 -
Corporate and Eliminations (9,052) (265) (9,274) (99) - -
Consolidated �160,966 �(6,219) �182,641 �1,323 88.1% -%
Notes:
1.The Company's consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America, except for the disclosure of segment information.
2.The Company's business is classified into three segments: "Car Electronics," "Home Electronics," and "Others." Principal products and
services included in each segment are as follows:
Car Electronics:
car navigation systems, car stereos, car AV systems and car speakers
Home Electronics:
plasma displays, DVD recorders, DVD players, DVD drives, Blu-ray Disc players, Blu-ray Disc drives, audio systems, audio components, DJ
equipment and equipment for cable TV systems
Others:
organic light-emitting diode displays, factory automation systems, speaker units, electronics devices and parts, telephones, AV accessories,
business-use AV systems and licensing of patents related to laser optical disc technologies
3.Effective from the first quarter of fiscal 2009, the patent licensing business, which was previously classified as an independent
business segment, has been included in the "Others" segment because of its reduced importance to consolidated business results. Figures for
the corresponding period of fiscal 2008 have been reclassified.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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