Tokyo, May 13, 2009 - (JCN Newswire) - Pioneer Corporation today announced its consolidated and non-consolidated business results for fiscal 2009, the year ended March 31, 2009.
Effective from fiscal 2009, Pioneer has changed its accounting principles for preparing consolidated financial statements from U.S. generally accepted accounting principles (GAAP) to Japanese GAAP. Figures for fiscal 2008 have been reclassified based on Japanese GAAP accordingly.
Consolidated Financial Highlights
(In millions of yen except per share information)
Year ended March 31
2009 2008 % ch.
Operating revenue 558,837 774,477 72.2%
Operating income (loss) (54,529) 9,216 -
Ordinary income (loss) (54,420) 12,428 -
Net loss (130,529) (19,040) -
Net loss per share:
Basic (636.68) (103.95)
Diluted (636.68) (103.95)
Consolidated Business Results
In fiscal 2009, consolidated operating revenue decreased 27.8% year on year to JPY 558,837 million (US$5,702.4 million). This was mainly the result of a decline in sales of car audio products, plasma displays and DVD drives, which largely reflected the sharp deterioration in consumer spending worldwide in the wake of the U.S. financial crisis as well as the impact of the Japanese yen's appreciation.
Pioneer reported an operating loss of JPY 54,529 million (US$556.4 million) in fiscal 2009, compared with operating income of JPY 9,216 million in fiscal 2008, due to lower operating revenue and deterioration in the gross profit margin. In addition to this operating loss, Pioneer recorded business restructuring expenses of JPY 24,744 million (US$252.5 million), a loss on valuation of investment securities of JPY 14,871 million (US$151.7 million) and higher income taxes following an evaluation of deferred tax assets. Consequently, Pioneer reported a net loss of JPY 130,529 million (US$1,331.9 million), compared with a net loss of JPY 19,040 million in the previous fiscal year.
During fiscal 2009, the average value of the Japanese yen appreciated 13.7% and 12.6% against the U.S. dollar and the euro, respectively, compared with the previous fiscal year.
Car Electronics operating revenue decreased 22.0% year on year to JPY 291,704 million (US$2,976.6 million) because of lower sales of both car audio products and car navigation systems, partly due to lackluster auto sales worldwide. In car navigation systems, consumer-market sales declined year on year, mainly due to lower sales in North America, Japan and Europe. Meanwhile, OEM sales rose on the back of higher sales in Japan and China, despite lower sales in North America. In car audio products, consumer-market sales decreased, mainly because of lower overseas sales. OEM sales also decreased due to lower sales in Japan and North America. Total OEM sales in this segment accounted for approximately 41% of Car Electronics operating revenue in fiscal 2009, compared with approximately 39% in fiscal 2008.
In terms of geographic operating revenue, operating revenue in Japan decreased 9.8% to JPY 113,985 million (US$1,163.1 million), and overseas operating revenue declined 28.2% to JPY 177,719 million (US$1,813.5 million).
This segment recorded an operating loss of JPY 12,337 million (US$125.9 million) in fiscal 2009, compared with operating income of JPY 26,101 million in fiscal 2008. This was mainly due to the following factors in the car audio products business: lower sales, and deterioration in the gross profit margin due to a drop in production volume and the impact of the stronger yen.
Home Electronics operating revenue decreased 36.5% year on year to JPY 209,257 million (US$2,135.3 million). This was largely as a result of lower sales of plasma displays and DVD drives. Display product sales accounted for approximately 38% of Home Electronics operating revenue in fiscal 2009, compared with approximately 40% in fiscal 2008.
In terms of geographic operating revenue, operating revenue in Japan declined 33.0% to JPY 31,010 million (US$316.4 million), and overseas operating revenue fell 37.1% to JPY 178,247 million (US$1,818.8 million).
This segment recorded an operating loss of JPY 38,622 million (US$394.1 million), compared with an operating loss of JPY 17,921 million in the previous fiscal year. This was mainly due to lower sales and deterioration in the gross profit margin chiefly in plasma displays.
In the Others segment, operating revenue decreased 18.6% year on year to JPY 57,876 million (US$590.6 million) due principally to lower sales of electronic devices and parts, speaker units for cellular phones, factory automation systems and organic light-emitting diode displays.
In terms of geographic operating revenue, operating revenue in Japan decreased 12.8% to JPY 37,483 million (US$382.5 million), and overseas operating revenue decreased 27.3% to JPY 20,393 million (US$208.1 million).
This segment posted an operating loss of JPY 3,377 million (US$34.5 million), compared with operating income of JPY 1,756 million in the previous fiscal year, due to lower sales.
Notes:
1. Operating loss in each business segment represents operating loss before elimination of intersegment transactions.
2. Effective from 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 fiscal 2008 have been reclassified accordingly.
Consolidated Financial Position
Total assets as of March 31, 2009 were JPY 429,093 million (US$4,378.5 million), a decrease of JPY 133,183 million from March 31, 2008. This mainly reflected decreases in notes and accounts receivable-trade, inventories, deferred tax assets, and investment securities. Notes and accounts receivable-trade decreased JPY 34,460 million to JPY 60,989 million (US$622.3 million), mainly due to lower sales.
Inventories declined JPY 19,990 million to JPY 84,886 million (US$866.2 million), mainly due to production cutbacks centered on plasma displays and car audio products in response to lower sales. Current and noncurrent deferred tax assets decreased JPY 22,758 million to JPY 19,581 million (US$199.8 million), mainly in line with an increase in the valuation allowance. Meanwhile, investment securities declined JPY 16,899 million to JPY 18,972 million (US$193.6 million), mainly due to falling prices of shares held by the Company.
Total liabilities as of March 31, 2009 were JPY 317,245 million (US$3,237.2 million), up JPY 14,324 million from March 31, 2008. This mainly reflected an increase of JPY 95,188 million in short-term loans payable, and decreases of JPY 45,397 million and JPY 16,464 million in notes and accounts payable-trade, and accrued expenses, respectively.
Total net assets were JPY 111,848 million (US$1,141.3 million), a decrease of JPY 147,507 million from March 31, 2008. This mainly reflected a decrease of JPY 131,120 million in retained earnings. Another factor was a decline of JPY 13,850 million in foreign currency translation adjustments from March 31, 2008, due to the impact of the yen's appreciation.
Cash Flows
During fiscal 2009, operating activities used net cash of JPY 61,563 million (US$628.2 million). The main factors reducing cash were a loss before income taxes and minority interests of JPY 99,939 million (US$1,019.8 million) and a decrease in notes and accounts payable-trade of JPY 40,536 million (US$413.6 million). These factors outweighed the addback of non-cash expenses, namely depreciation and amortization of JPY 43,187 million (US$440.7 million) and loss on valuation of investment securities of JPY 14,871 million (US$151.7 million), and a decrease in notes and accounts receivable-trade of JPY 27,213 million (US$277.7 million), among other factors. Investing activities used net cash of JPY 38,292 million (US$390.7 million), mainly for capital expenditures in the Car Electronics business. Financing activities provided net cash of JPY 85,833 million (US$875.8 million), mainly through a net increase in short-term loans payable.
Consequently, cash and cash equivalents as of March 31, 2009 were JPY 63,746 million (US$650.5 million), down JPY 17,434 million from March 31, 2008.
Business Forecasts for Fiscal 2010
Consolidated business forecasts for fiscal 2010, the year ending March 31, 2010, are as follows:
(In millions of yen)
Forecasts for Results for Percent
First half fiscal 2010 fiscal 2009 changes
Operating revenue 195,000 327,042 -40.4%
Operating loss (32,000) (14,340) -
Ordinary loss (35,000) (13,540) -
Net loss (47,000) (44,071) -
Full year
Operating revenue 420,000 558,837 -24.8%
Operating loss (33,000) (54,529) -
Ordinary loss (37,500) (54,420) -
Net (83,000) (130,529) -
In fiscal 2010, Pioneer is forecasting consolidated operating revenue of JPY 420 billion, a decrease of 24.8% year on year, mainly based on the withdrawal from the display business. Another factor is projected lower Car Electronics operating revenue, mainly from consumer-market car audio products, in line with falling auto sales.
The Company is forecasting an operating loss of JPY 33 billion for fiscal 2010, an improvement from fiscal 2009, despite the projected lower operating revenue. This improvement is mainly based on an anticipated reduction of JPY 50 billion in fixed costs due to restructuring.
Pioneer is forecasting an ordinary loss of JPY 37.5 billion, mainly due to an increase of interest expenses.
Combined with restructuring expenses of JPY 47 billion and other factors, Pioneer is also projecting a net loss of JPY 83 billion for fiscal 2010.
We are assuming an average U.S. dollar-yen exchange rate ofJPY 90 and a euro-yen exchange rate of JPY 115 for consolidated business forecasts for fiscal 2010.
Dividends
Pioneer positions its dividend policy as one of its highest management priorities. On the basis of maintaining stable dividends, the Company's policy is to set appropriate dividend payments in light of its financial position, consolidated business results, and other factors.
In fiscal 2009, Pioneer booked a consolidated net loss of JPY 130,529 million, mainly due to lower sales resulting from fierce competition in its core product domains and the global economic downturn. Business restructuring expenses were another factor. Consequently, Pioneer deeply regrets that it has decided to pay no year-end dividend for fiscal 2009. As no interim dividend was paid in fiscal 2009, the annual dividend for fiscal 2009 was cancelled.
Material Events Regarding Going Concern Assumption
In fiscal 2009, conditions gave rise to material uncertainty about Pioneer"s ability to continue its business activities into the future, due to deterioration in its financial position, resulting from a sharp drop in operating revenue, large losses and significant net cash used in operating activities. In response to this situation, Pioneer believes that the uncertainty regarding the going concern assumption can be avoided by implementing drastic restructuring as detailed in the following "Basic Management Policies and Issues to Be Addressed" section.
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."
Pioneer currently faces extremely challenging conditions, such as declining operating revenue, large losses and significant net cash used in operating activities, as well as deterioration in its financial position. In response to this situation, Pioneer is implementing drastic restructuring.
The restructuring now under way is centered on business portfolio realignment, but also comprises measures to streamline the business framework of the entire Pioneer Group, and improve the Company's financial position.
Regarding business portfolio realignment, Pioneer will position the Car Electronics business, with its outstanding technological expertise, product lineup and brand power, as a core business. In this business, we will work to build stronger operations that can stay on top of changes in the operating environment. Meanwhile, through strategic alliances with other companies, the Company will strive to actively create new markets and business domains in a timely and cost effective manner.
Specifically, Pioneer has agreed with Mitsubishi Electric Corporation to jointly develop hardware and software for use in car navigation systems and car AV products. The two companies have mutually used certain car navigation software technologies since 2002.
Pioneer will also strive to expand business in China. Pioneer signed a basic agreement with Shanghai Automotive Industry Corporation (Group) to establish a joint venture specializing in the development and sale of intelligent transport systems and provision of related services as well as in the development and sales of car AV products and car navigation systems.
Pioneer will develop the Home Electronics business centered on home AV products, DJ equipment and cable TV set-top boxes.
Pioneer will completely withdraw from the display business after ending plasma TV sales during fiscal 2010. In the optical disc business, Pioneer will form a joint venture with Sharp Corporation with the aim of restoring this business to profitability by taking advantage of the strengths of both companies. We are currently discussing the details of the joint venture, which we plan to establish by October 1, 2009.
Regarding streamlining the business framework of the entire Pioneer group, Pioneer is working to streamline organizations to match the new business scale after business portfolio realignment.
We plan to consolidate our current network of production companies around the world, to overhaul organizations and structures for sales and to integrate our domestic network. As for R&D, we will select and focus on R&D themes that match the realigned business portfolio.
Through this business framework streamlining, we plan to reduce group-wide personnel by around 5,800 regular employees and about 4,000 temporary and contract employees, compared with our workforce as of December 31, 2008, and the number of directors/executive officers will also be reduced.
Regarding improving the Company's financial position, Pioneer is working hard to bolster its financial position. Given that it is projecting business restructuring expenses of JPY 47 billion in fiscal 2010, the Company believes it must generate cash and boost equity capital.
Through its own continuing efforts, Pioneer will work to generate cash mainly by reducing inventories and accelerating trade receivables collections, curbing capital expenditures, cutting directors and executive officers' remuneration and employees' salaries, and selling idle assets. Also, the Company's fiscal 2009 business performance comes into conflict with financial covenants stipulated by loan agreements with multiple banks. However, the banks have agreed to maintain their existing loans to Pioneer in recognition of the Company's situation as described above. Furthermore, Pioneer has received additional loans chiefly from its main banks, which have pledged their intention to continue providing financial support to the Company.
In regard to boosting equity capital, the Board of Directors resolved on April 28, 2009 to raise JPY 2.5 billion through a third-party allotment of shares to Honda Motor Co., Ltd. In addition, Pioneer continues to examine other possible financial partnerships.
Pioneer is considering plans to raise roughly JPY 40 billion to meet anticipated funding needs for business restructuring expenses and the redemption of convertible bonds, and to implement the medium-term management plan in a timely and steady manner. Going forward, Pioneer will consider all funding options in order to raise the necessary funds for boosting its equity capital and other uses.
Pioneer will make an effort to steadily implement these restructuring measures and conduct business activities based on medium-term management plan below.
Regarding medium-term consolidated forecasts, Pioneer is projecting an operating loss and net loss for fiscal 2010 in connection with the implementation of aforementioned restructuring measures and other factors. However, Pioneer expects to complete restructuring during fiscal 2010, and from fiscal 2011 plans to restore operating profitability in both the Car Electronics and Home Electronics businesses, move back into the black in terms of consolidated net income, and generate positive net operating cash flows and free cash flows (the sum of operating cash flows and investing cash flows). Pioneer aims to achieve consolidated operating revenue of JPY 460 billion, operating income of JPY 22 billion and net income of JPY 16 billion in fiscal 2012. It is also targeting positive net operating cash flows of JPY 60 billion and free cash flows of JPY 29 billion. These figures do not include the impact of the joint venture that is currently being discussed with Sharp Corporation.
In the Car Electronics business, in fiscal 2010, Pioneer plans to implement drastic restructuring to build a highly efficient, lean operating structure that can quickly respond to changes in the business environment. Under this streamlined structure, we will boost our earnings in existing business domains while laying the groundwork for future business expansion when the market recovers.
In the consumer-market business, we will launch affordably priced models in the overseas car navigation and car AV product markets, where future growth is expected. We are also looking to actively expand business in growth markets, particularly in newly emerging economies, centering on our car AV products. In Japan, we aim to stimulate new demand by establishing a telematics business.
In the OEM business, we will bolster ties with longstanding major clients Toyota Motor Corporation and Honda Motor Co., Ltd, as well as fulfil our duties as a supplier even more than before to meet the expectations of automakers. By harnessing proposal capabilities honed in the consumer-market business, we will work to expand the assembly line product and dealer-option businesses with an emphasis on car navigation systems. Efforts will also be focused on newly emerging markets that promise high levels of growth, such as China.
In initiatives to develop new growth businesses, Pioneer will bolster environmental initiatives that address the need for more energy-efficient, compact and light products. In addition, we will expand our business domains, with the aim of becoming a leading company in the car electronics field. In the car safety and reliability domain, we will focus on raising the sophistication of car navigation systems by developing systems that are linked to and operate together with vehicles; in the services domain, we will develop business-use services such as fleet operation and management services; and in the information and content domain, we will mainly provide real-time content.
In the Home Electronics business, specifically home AV products, we are positioning AV receivers, where we have an extensive product lineup covering high-end to middle-market price ranges, as core products. We will concentrate business resources on these products in a bid to boost sales. We are also rolling out new-market products such as built-in home audio systems that cater to living environments within the home through collaboration with housing-related companies.
In DJ equipment, we seek to drive earnings growth by further stimulating and expanding the market through continuous product development that satisfies the demands of professional use. These efforts will build on our outstanding technological expertise and product planning capabilities and the trust we have achieved with professional DJs and nightclubs.
As to cable TV set-top boxes, this market is seeing demand fuelled by digitalization, and demand for regular replacement of products in use at subscribers' homes can also be expected. Building on long-standing trust and our current market position, we seek to steadily expand business to generate stable earnings.
In fiscal 2009, conditions gave rise to material uncertainty about Pioneer's ability to continue its business activities into the future, due to deterioration in the Company's financial position, resulting from a sharp drop in operating revenue, large losses and significant net cash used in operating activities. By implementing drastic restructuring as outlined above, Pioneer believes that the uncertainty regarding the going concern assumption can be avoided.
The U.S. dollar amounts in this release represent translations of the Japanese yen, for convenience only, at the rate of JPY98=US$1.00, the approximate rate prevailing on March 31, 2009.
* 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.
About Pioneer
Pioneer Corporation, headquartered in Tokyo, 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 (TSE: 6773). For more information , please visit http://pioneer.jp .
Contact:
Pioneer Corporation
Investor Relations Department
Corporate Communications Division
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/
May 13, 2009
Source: Pioneer
Pioneer (TSE: 6773) (U.S: PNCOF)
From the Japan Corporate News Network
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