SECURITIES AND EXCHANGE COMMISSIONWashington,WASHINGTON, D.C. 20549 o REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
OF THE SECURITIES EXCHANGE ACT OF 1934 xþ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2005o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended March 31, 2003o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ________________________
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
(Jurisdiction of incorporation or organization)
(Address of principal executive offices) Title of each class Name of each exchange on which registered Common Stock, each represented by
one American Depositary Share New York Stock Exchange Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Section 15(d) of the Act. Title of class Outstanding as of
March 31, 2005
(Japan time) Outstanding as ofMarch 31, 2003Title of class(Japan time)Common Stock 175,434,808174,428,646 xþ NooTABLE OF CONTENTS
3 Page 4 4 4 4 5 13 3028 4851 57Item 8. Financial Information58Item 9. The Offer and Listing60Item 10. Additional Information 61 62 64 65 7685 8087 8188 8188 8188 818989 89 90 91 91 8292 8292 8292 EX-1.01 REGULATIONS OF THE BOARD OF DIRECTORS, AS AMENDED AND CURRENTLY IN EFFECT EX-1.02 REGULATIONS OF THE BOARD OF CORPORATE AUDITORS, AS AMENDED AND CURRENTLY IN EFFECT EX-2.01 SHARE HANDLING REGULATIONS, AS AMENDED AND CURRENTLY IN EFFECT EX-12.01 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 EX-12.02 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 EX-13.01 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
“anticipate,“intend,” “plans,“plan,” “strategy,” “prospects,“aim,” “forecast,” “estimate,” “project,” “may”“anticipate,” “strategy,” “prospects,” “may,” “might” or “might”“will” and words of similar meaning in connection with a discussion of future operations, financial performance, events or financial performance.conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on our 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. You also should not rely on the beliefbelieve that it is 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 the markets in which we sell our markets,products, 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 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, severe price competition and subjective and changing consumer preferences; (iv) our ability to implement successfully our business strategies; (v) our ability to compete and 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; and (ix) the outcome of contingencies.
Not applicable
4 Not applicable
5informationdata as of the registrant at the dates and for the periods indicated. We derived the consolidated statements of operations data for each of the three years indicated,in the period ended March 31, 2005 and has been derivedthe consolidated balance sheet data as of March 31, 2004 and 2005 from our audited consolidated financial statements included elsewhere herein,herein. We derived the consolidated statement of operations data for each of the two years in the period ended March 31, 2002 and the consolidated balance sheets data as of March 31, 2001, 2002 and 2003 from our audited consolidated financial statements which are not included herein. Our audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except for segment data which is prepared in accordance with the regulations under the Securities and Exchange Law of Japan. (In millions of yen, except per share data) Year ended March 31 1999 2000 2001 2002 2003 Operating revenue (Note 5) (Note 6) ¥ 581,197 ¥ 610,673 ¥ 640,358 ¥ 662,125 ¥ 712,268 Operating income (Note 5) (Note 6) 17,433 18,852 32,905 17,941 31,352 Income before income taxes 12,533 27,808 34,193 15,343 28,630 Net income 1,159 13,075 18,298 8,047 16,078 Net income per share of common stock and per American Depositary Share (ADS) (Note 1) : Basic 6.45 72.81 101.76 44.70 90.24 Diluted 6.45 72.80 101.70 44.69 90.24 Total assets ¥ 592,407 ¥ 601,137 ¥ 605,156 ¥ 645,129 ¥ 647,029 Short-term borrowings 46,153 41,318 37,571 45,867 29,893 Current portion of long-term debt 6,455 37,235 7,996 2,551 974 Long-term debt, less current portion 82,958 47,060 38,304 35,677 32,196 Shareholders’ equity 313,244 312,460 336,995 347,003 318,393 Number of shares issued (in thousands) 179,573 179,588 179,894 180,064 180,064 Year ended March 31 2001 2002 2003 2004 2005 (In millions of yen, except per share data) Operating revenue (Note 4) (Note 5) ¥ 610,171 ¥ 629,777 ¥ 677,259 ¥ 700,885 ¥ 733,648 Income (loss) from continuing operations before income taxes (Note 5) 34,216 14,472 28,079 41,848 (187 ) Income (loss) from discontinued operations, net of tax (Note 5) (53 ) 565 136 4,475 — Net income (loss) 18,298 8,047 16,078 24,838 (8,789 ) Per share of common stock and per American Depositary Share (ADS): Income (loss) from continuing operations: Basic 102.06 41.56 89.48 116.07 (50.11 ) Diluted 102.00 41.55 89.48 115.18 (50.11 ) Net income (loss): Basic 101.76 44.70 90.24 141.58 (50.11 ) Diluted 101.70 44.69 90.24 140.52 (50.11 ) Total assets ¥ 605,156 ¥ 645,129 ¥ 647,029 ¥ 722,542 ¥ 725,167 Short-term borrowings 37,571 45,867 29,893 23,327 33,152 Current portion of long-term debt 7,996 2,551 974 4,510 19,276 Long-term debt, less current portion 38,304 35,677 32,196 89,691 81,219 Shareholders’ equity 336,995 347,003 318,393 332,938 332,239 Common stock 48,843 49,049 49,049 49,049 49,049 Number of shares issued (in thousands) 179,894 180,064 180,064 180,064 180,064
(In millions of yen, except per share data | ||||||||||||||||||||||
and percentage amounts) | ||||||||||||||||||||||
Year ended March 31 | ||||||||||||||||||||||
1999 | 2000 | 2001 | 2002 | 2003 | ||||||||||||||||||
Other Data: | ||||||||||||||||||||||
Capital expenditures | ¥ | 33,070 | ¥ | 25,458 | ¥ | 42,183 | ¥ | 46,996 | ¥ | 40,782 | ||||||||||||
Research and development (R&D) expenses | 31,131 | 33,265 | 37,105 | 39,050 | 45,388 | |||||||||||||||||
Cash flows from operating activities | 37,904 | 45,390 | 51,241 | 57,110 | 91,734 | |||||||||||||||||
Cash flows from investing activities | (38,157 | ) | 11,984 | (41,581 | ) | (51,148 | ) | (35,453 | ) | |||||||||||||
Cash flows from financing activities | 13,112 | (4,139 | ) | (46,567 | ) | (4,207 | ) | (34,680 | ) | |||||||||||||
Return on equity (Note 2) | 0.36 | % | 4.18 | % | 5.63 | % | 2.35 | % | 4.83 | % | ||||||||||||
Return on assets (Note 3) | 0.20 | % | 2.19 | % | 3.03 | % | 1.29 | % | 2.49 | % | ||||||||||||
Cash dividends declared per share of common stock and per ADS (Note 4): | ||||||||||||||||||||||
Interim (in yen) | 5.00 | 5.00 | 7.50 | 7.50 | 7.50 | |||||||||||||||||
(in U.S. dollars) | 0.04 | 0.05 | 0.07 | 0.06 | 0.06 | |||||||||||||||||
Year-end (in yen) | 5.00 | 5.00 | 7.50 | 7.50 | 10.00 | |||||||||||||||||
(in U.S. dollars) | 0.04 | 0.05 | 0.06 | 0.06 | 0.08 |
Year ended March 31 | ||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||
(In millions of yen, except per share data and percentage amounts) | ||||||||||||||||||||
Other Data: | ||||||||||||||||||||
Capital expenditures (Note 5) | ¥ | 41,944 | ¥ | 46,909 | ¥ | 40,493 | ¥ | 57,978 | ¥ | 63,866 | ||||||||||
Research and development (R&D) expenses | 37,105 | 39,050 | 45,388 | 51,483 | 55,897 | |||||||||||||||
Cash flows from operating activities (Note 5) | 51,141 | 57,358 | 91,509 | 60,378 | 19,946 | |||||||||||||||
Cash flows from investing activities (Note 5) | (41,481 | ) | (51,396 | ) | (35,228 | ) | (52,754 | ) | (93,516 | ) | ||||||||||
Cash flows from financing activities (Note 5) | (46,567 | ) | (4,207 | ) | (34,680 | ) | 51,827 | (4,019 | ) | |||||||||||
Return on equity (Note 1) | 5.6 | % | 2.4 | % | 4.8 | % | 7.6 | % | (2.6 | %) | ||||||||||
Return on assets (Note 2) | 3.0 | % | 1.3 | % | 2.5 | % | 3.6 | % | (1.2 | %) | ||||||||||
Cash dividends declared per share of common stock and per ADS (Note 3): | ||||||||||||||||||||
Interim (in yen) | 7.50 | 7.50 | 7.50 | 12.50 | 12.50 | |||||||||||||||
(in U.S. dollars) | 0.07 | 0.06 | 0.06 | 0.12 | 0.12 | |||||||||||||||
Year-end (in yen) | 7.50 | 7.50 | 10.00 | 12.50 | 12.50 | |||||||||||||||
(in U.S. dollars) | 0.06 | 0.06 | 0.08 | 0.11 | 0.11 |
Notes: | 1. | |||||
2. | Net income | |||||
3. | Cash dividends in U.S. dollars are based on the noon buying rate in yen for cable transfers in New York City as certified for customs purposes by the Federal Reserve Bank of New York on the date of the dividend payment. | |||||
In fiscal 2003, we adopted EITF (Emerging Issues Task Force) 01-9 “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” The adoption resulted in a reduction in net sales and a corresponding decrease in selling, general and administrative | ||||||
5. | As a result of the sale of subsidiaries in the audio/video software business in fiscal 2004, the gain on such sale, as well as the operating results of the discontinued operations, are presented as a separate line item in the consolidated statements of operations in accordance with |
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September XX, 2005. 7¥120.47¥xxx.xx = US$1.00 on August 4, 2003. Year ended March 31 Average High Low Period-end 1999 ¥ 128.10 ¥ 108.83 ¥ 147.14 ¥ 118.43 2000 110.02 101.53 124.45 102.73 2001 111.65 104.19 125.54 125.54 2002 125.64 115.89 134.77 132.70 2003 121.10 115.71 133.40 118.07 January 117.80 120.18 February 117.14 121.30 March 116.47 121.42 April 118.25 120.55 May 115.94 119.50 June 117.46 119.87 July 117.24 120.55 Year ended March 31 Average High Low Period-end 2001 ¥ 111.65 ¥ 104.19 ¥ 125.54 ¥ 125.54 2002 125.64 115.89 134.77 132.70 2003 121.10 115.71 133.40 118.07 2004 112.75 104.18 120.55 104.18 2005 107.28 102.26 114.30 107.22 March 103.87 107.49 April 104.64 108.67 May 104.41 108.17 June 106.64 110.91 July 110.47 113.42 August 109.37 112.12 Not applicable Not applicable7business resultssales and financial conditionprofitabilitybusiness resultssales and financial condition.profitability.
profitability.
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• | Our products may become obsolete earlier than expected due to rapid advancements in technology and changes in consumer preferences. | |
• | A delay in commercializing new technologies now under development may prevent us from keeping up with market demand. For example, if we lag behind our competitors in the commercialization of active-matrix full-color |
affected.
of operations.
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format. 10DVD-recordernext generation optical disc format to gain broad market acceptance may adversely affect our business and results and financial conditionof operationsa number oftwo generally recognized competing recording formats for digital versatilethe next generation optical discs, (DVDs): the DVD-RW format commercialized by us, Sony, SharpBlu-ray Disc and others, the DVD-RAM format commercialized by Matsushita, Hitachi, Toshiba and others, and the DVD+RW format commercialized by Philips and others.HD DVD. Each of the recording disc formats makes use of its own distinct technology and is generally incompatible with other formats.the DVD- RWour adopted format fail to be accepted as thede factoindustry standard, or otherwise failsfail to gain wide acceptance, our business strategy and results and financial condition wouldof operations may be adversely affected.SubstantialA substantial decline in our royalty revenue as a result of the expiration of many of our existing patents relating to laser optical disc technologies may adversely affect our business results and financial conditionprofitabilityOur license and other intellectual property rights makemakes a significant contribution to our net income. Although less than 2%income since costs related to patent licensing are limited principally to amortization of our revenue in fiscal 2003 was generated by our worldwide patents relating to laser optical disc technologies, thesepatent rights were responsibleand expenses for approximately 35% of our operating income in fiscal 2003.licensing activities. The legal protections afforded to these rights have a limited duration under applicable laws, and the length of protection varies from country to country or region. A significant portion of such patentsour patent rights have expired in Europe and Japan at the end of fiscal 2003.Japan. As a result, our royalty revenue has startedwill continue to decline substantially.in the future. This decline in royalty revenue may in turn have an adverse impact on our business results. While we are working to acquire patents owned by third parties and licensing such patents, we also license patents for third parties as a licensing agent. We do not expect that the revenue, if any, from such new patents/agencies will be sufficient to offset the decrease in royalty revenue resulting from the expiration of our existing patents.profitability. Royalty revenue from patent licensing also depends to a material degree on the sales of patented products by our licensees, making it hard for us to predict actual royalty revenue amounts. For a discussion of our patent licensing business, see “Item 4.B. Business overview–overview—Nature of operations.” successfully the risks inherent in our international activities and our overseas expansion, our business results of operations and financial conditionproduction capacity could be adversely affected• Unexpected legal or regulatory changeschanges; • Unfavorable political or economic factorsfactors; • Difficulties in recruiting and retaining personnelpersonnel; • Labor disputes including strikesstrikes; • Less developed technological infrastructure, which can affect our production or other activities or result in lower customer acceptance of our products and services; • Potentially adverse tax consequences; and • Social, political or economic turmoil due to terrorism, war, or other factorsfactors.10DongguanGuang Dong areas of the People’s Republic of China (China)(“China”). Nevertheless, we may experience difficulties in managing a production facility and entering into business arrangements in China in light of unexpected events, including political or legal changes, labor shortages or strikes or changes in economic conditions in China. Furthermore, the current outbreakoutbreaks of SARS (Severe Acute Respiratory Syndrome) in Chinaepidemics may, depending on how this epidemic develops in the future,they develop, adversely impact our operations in China,
operations.
Such condition may adversely affect our sales and profitability. See “Item 4.B. Business overview—Raw materials and sources of supply” for a discussion of our outside manufacturers and suppliers.
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of operations.
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of operations.
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future growth.
Pioneer’s
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13Japanese Commercial Code of Japan (the “Commercial Code”) as a joint stock company (Kabushiki Kaisha) in May 1947, with the name Fukuin Denki Kabushiki Kaisha, succeeding to the business founded in January 1938 by the late Mr. Nozomu Matsumoto. The present name, Pioneer Kabushiki Kaisha, was adopted in June 1961. Its English name was changed from “Pioneer Electronic Corporation” to “Pioneer Corporation” in June 1999.13cable-TVcable TV systems. Pioneer’s shares of common stock were listed on the Tokyo Stock Exchange and Osaka Securities Exchange in October 1961 and April 1968, respectively. In addition, Pioneer’s ADSsAmerican Depositary Shares (“ADSs”) were listed on the New York Stock Exchange (“NYSE”) in December 1976.(AV)(“AV”) equipment. We started marketing laser disc (LD)(“LD”) players and LDs, and commenced our own music and video software business in Japan. Also, we introduced the world’s first car compact disc (CD)(“CD”) players. We also
Effective April 1, 2003, Pioneer Video Corporation, a wholly-owned subsidiary of Pioneer, established Pioneer Micro Technology Corporation, by spinning off its semiconductor business. On the same day, Shizuoka Pioneer Corporation, a wholly-owned subsidiary of Pioneer, merged In fiscal 2004, we started supplying passive-matrix full-color OLED display panels in cellular phones. In fiscal 2005, we introduced recordable DVD drives for PC use, which are compatible with Pioneer Video Corporationdual layer DVD-R discs and changed its trade name to Pioneer Display Products Corporation.
DVD+R double layer discs.
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Capital
To improve cost competitiveness and to reallocate a major portion of production to China, Pioneer established two production subsidiaries in China in fiscal 2001 and these plants began operation in the fall of 2001. We continue expanding parts procurement, designing products, and increasing the proportion of our production in China. Capital expenditures related to these two plants for fiscal 2002 and fiscal 2003 were ¥4.2 billion and ¥3.2 billion, respectively.
In fiscal 2003, we started construction ofbuilding a new manufacturing line for plasma displays at our plant in Shizuoka, Japan, to meet potential demand for plasma displays. Moreover, we plan to add another line in our Kofuthe Yamanashi Plant, which is expected to startstarted its operation in September 2004. On September 30, 2004, we acquired 100% of the springissued common stock of 2005. This will bringNEC Plasma Display Corporation (“NPD”), a plasma display manufacturing subsidiary of NEC Corporation, and the intellectual property rights of NPD for cash in an aggregate amount of ¥35 billion. NPD changed its name to Pioneer Plasma Display Corporation on September 30, 2004. These investments resulted in increasing our annualplasma display production capacity to approximately 500 thousand units. The planned investment for these two lines aggregates to approximately ¥42 billion, including ¥5 billion paid by March 31, 2003.
In order to improve management efficiency by concentrating resources in strategic businesses, in July 2003 Pioneer reachedabout 1.1 million units a preliminary agreement to sell 100% of our shares in two of its wholly-owned subsidiaries, Pioneer LDC, Inc. and Pioneer Entertainment (USA) Inc., to Dentsu Inc., Japan’s largest comprehensive advertising agency. These subsidiaries are engaged in the audio/video software businesses in Tokyo, Japan and in California, U.S.A., respectively. The individual terms of these share transfers, including the transfer price, are yet to be determined. (See Note 21 in “Notes to Consolidated Financial Statements.”)
We intend to fund the capital requirement to fulfill these capital expenditure plans through internally generated cash.
year.
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optimize efficiency of inventory control worldwide.
• | ¥1.2 trillion of consolidated operating revenue | ||
• | ROE (Return on Equity) in excess of 10% |
(i) No. 1 in DVD worldwide
We believe the DVD format will remain the dominant high-density, high-capacity medium for sound, video
• | No.1 in DVD worldwide | |
• | Establishing a business foundation for plasma displays and OLED displays | |
• | From stand-alone to network | |
• | Toward the key-device, key-technologies business |
(ii) Establishing akaraoke business foundation for plasma displays and OEL displays
We believe large-screen plasma displays offer significant advantages over cathode ray tubes (CRTs). Among other advantages, plasma displays are thinneraudio/video software business, and lighterwithdrawal from cable TV set-top box business in North America, all of which dragged down the increase in our consolidated operating revenue, harsher competition and lower prices than CRTs. Thus, we expect that plasma display panels inprojected. Considering the future will capture a substantial portion of the larger-screen TV market, in which currently CRTs and projection TVs are dominant. Since introducing the first plasma displays in fiscal 1998, we have established a solid presence both in consumer and commercial markets worldwide as a result of our excellent reputation for the large-screen high-resolution images of our plasma displays. To meet increasing demand, we aim to continue expanding our production capacity of plasma display panels by establishing production lines at our Shizuoka and Kofu plants in Japan, enabling us to produce approximately 500 thousand units per year by the spring of 2005.
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OEL display is another type of display, whichsituation, we are promoting aggressively. In fiscal 1998,working hard to take action for early recovery, while we becameseek a new midterm business plan to get back on the first in the worldtrack to market car electronics products equipped with an OEL display, and in fiscal 2000 we were the first company to mass-produce four-color OEL displays. OELs are particularly well-suited for small size displays, and in fiscal 2001 we supplied OEL displays for use in cellular phones of a major U.S. cellular phone manufacturer. To strengthen our market position, Tohoku Pioneer Corporation, Pioneer’s majority-owned subsidiary, established a joint venture company, ELDis, Inc., in fiscal 2001 with Semiconductor Energy Laboratory Co., Ltd. and Sharp Corporation to develop and manufacture active-matrix full-color OEL displays.
(iii) From stand-alone to network
Our current approach is to develop network-related products drawing upon our strength as a consumer- and business-use electronics product manufacturer. We believe we have a competitive advantage in the interface function, where information is delivered to users. We believe we have an excellent brand image, as well as many years of experience in analog/digital cable-TV and digital broadcast markets through the sale of our set-top boxes. We are strengthening the synergy of digital home network-linkage of entertainment/information systems, such as audio/video components, DVD players, DVD recorders, plasma displays and set-top boxes.
(iv) Toward the key-device, key-technologies business
To keep up with the accelerated pace of change in the electronics industry, it is important for us to promote key technologies and key devices, collaborating with third parties when beneficial. We believe such collaboration generates synergies that can create new advances in our key technologies and optimizes the use of our resources.
We believe that a producer of key devices is better able to develop and offer broader product differentiation and to influence the direction of market trends than a company that merely assembles products. Our strategically important key devices are DVD pickups, plasma display panel modules, speaker units, CD mechanisms for car manufacturers and OEL display panels for mobile phone companies.
future growth.
systems in the consumer market.
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In
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Year ended March 31 | |||||||||||||||||||||||||||
2001 | 2002 | 2003 | |||||||||||||||||||||||||
Home Electronics | |||||||||||||||||||||||||||
Domestic | ¥ | 55,201 | 8.6 | % | ¥ | 58,111 | 8.8 | % | ¥ | 72,487 | 10.2 | % | |||||||||||||||
Overseas | 164,742 | 25.7 | 157,334 | 23.7 | 156,257 | 21.9 | |||||||||||||||||||||
Total | ¥ | 219,943 | 34.3 | % | ¥ | 215,445 | 32.5 | % | ¥ | 228,744 | 32.1 | % | |||||||||||||||
Car Electronics | |||||||||||||||||||||||||||
Domestic | ¥ | 94,175 | 14.7 | % | ¥ | 95,578 | 14.4 | % | ¥ | 105,736 | 14.8 | % | |||||||||||||||
Overseas | 153,547 | 24.0 | 162,094 | 24.5 | 175,354 | 24.7 | |||||||||||||||||||||
Total | ¥ | 247,722 | 38.7 | % | ¥ | 257,672 | 38.9 | % | ¥ | 281,090 | 39.5 | % | |||||||||||||||
Others | |||||||||||||||||||||||||||
Domestic | ¥ | 79,995 | 12.5 | % | ¥ | 86,626 | 13.1 | % | ¥ | 103,233 | 14.5 | % | |||||||||||||||
Overseas | 72,168 | 11.3 | 84,794 | 12.8 | 86,617 | 12.1 | |||||||||||||||||||||
Total | ¥ | 152,163 | 23.8 | % | ¥ | 171,420 | 25.9 | % | ¥ | 189,850 | 26.6 | % | |||||||||||||||
Patent Licensing | ¥ | 20,530 | 3.2 | % | ¥ | 17,588 | 2.7 | % | ¥ | 12,584 | 1.8 | % | |||||||||||||||
Total Operating Revenue | ¥ | 640,358 | 100.0 | % | ¥ | 662,125 | 100.0 | % | ¥ | 712,268 | 100.0 | % | |||||||||||||||
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Year ended March 31 | ||||||||||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||||||||||
(In millions of yen, except for percentage amounts) | ||||||||||||||||||||||||
Home Electronics | ||||||||||||||||||||||||
Domestic | ¥ | 86,766 | 12.8 | % | ¥ | 78,798 | 11.2 | % | ¥ | 87,954 | 12.0 | % | ||||||||||||
Overseas | 191,202 | 28.2 | 202,684 | 29.0 | 213,274 | 29.1 | ||||||||||||||||||
Total | ¥ | 277,968 | 41.0 | % | ¥ | 281,482 | 40.2 | % | ¥ | 301,228 | 41.1 | % | ||||||||||||
Car Electronics | ||||||||||||||||||||||||
Domestic | ¥ | 105,736 | 15.6 | % | ¥ | 121,708 | 17.4 | % | ¥ | 120,260 | 16.4 | % | ||||||||||||
Overseas | 175,354 | 25.9 | 170,479 | 24.3 | 183,150 | 25.0 | ||||||||||||||||||
Total | ¥ | 281,090 | 41.5 | % | ¥ | 292,187 | 41.7 | % | ¥ | 303,410 | 41.4 | % | ||||||||||||
Others | ||||||||||||||||||||||||
Domestic | ¥ | 62,137 | 9.2 | % | ¥ | 62,792 | 9.0 | % | ¥ | 53,935 | 7.3 | % | ||||||||||||
Overseas | 43,480 | 6.4 | 52,603 | 7.4 | 64,838 | 8.8 | ||||||||||||||||||
Total | ¥ | 105,617 | 15.6 | % | ¥ | 115,395 | 16.4 | % | ¥ | 118,773 | 16.1 | % | ||||||||||||
Patent Licensing | ¥ | 12,584 | 1.9 | % | ¥ | 11,821 | 1.7 | % | ¥ | 10,237 | 1.4 | % | ||||||||||||
Total Operating Revenue | ¥ | 677,259 | 100.0 | % | ¥ | 700,885 | 100.0 | % | ¥ | 733,648 | 100.0 | % | ||||||||||||
Sales by product for fiscal 2003 in Home Electronics are as follows: DVD players and DVD recorders
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Sales by product for fiscal 2003 in Car Electronics are as follows: Car CD players
Sales based on OEM accounted for 35.7% in this segment.
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Royalty revenue from Patent Licensing of digital playback/recording equipment, such as CD-ROM and CD-R drives, accounted for a substantial portion of revenue in this segment in fiscal 2002. In addition, patent licensing of digital discs contributed significantly tocollect royalty revenue. As world PC market sales continued to slump, our revenue from patent licensing was negatively affected in fiscal 2003. Additionally, a number of these patents in Europe and Japan expired at the end of fiscal 2003, further resulting in a substantial decrease in royalty revenue.
revenue.
Sales by product for fiscal 2003 in this segment are as follows: DVD-R/RW drivessemiconductors related to laser pickups, accounted for the largest sales in this group. DVDssegment for fiscal 2005. Factory automation systems also contributed materially to sales in this segment, due mainlysegment.
Our computer peripheral sales have shifted from DVD-ROM to DVD-R/RW drives.next generation display. In fiscal 2001,2000, we began supplying DVD-R/RW driveswere the first in the world to PC makers on an OEM basis. The DVD-R/RW drives can record, both on a write-once DVD-R disc and a rewritable DVD-RW disc, up to seven times as much data as on a CD-R or CD-RW disc. In fiscal 2002, we launched a Pioneer-brand DVD-R/RW drive, the world’s first model that reads and writes data on all DVD-R, DVD-RW, CD-R and CD-RW discs. In fiscal 2003, we introduced new DVD-R/RW models which are capable of 4X recording for DVD-R discs and 2X recording for DVD-RW discs, respectively. JEITA forecasts strong growth in write-once/rewritable DVD drives including DVD-R/RW drives, from 5.5 million units in 2002 to 52 million units in 2005 worldwide.
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20(In millions of yen, except for percentage amounts) Year ended March 31 2001 2002 2003 Japan ¥ 229,371 35.8 % ¥ 240,315 36.3 % ¥ 281,456 39.5 % North America 209,639 32.8 197,135 29.8 198,297 27.8 Europe 125,071 19.5 131,065 19.8 132,979 18.7 Other Regions 76,277 11.9 93,610 14.1 99,536 14.0 Total ¥ 640,358 100.0 % ¥ 662,125 100.0 % ¥ 712,268 100.0 % Year ended March 31 2003 2004 2005 (In millions of yen, except for percentage amounts) Japan ¥ 254,639 37.6 % ¥ 263,298 37.6 % ¥ 262,149 35.7 % North America 190,147 28.1 170,711 24.3 174,120 23.7 Europe 132,977 19.6 146,250 20.9 150,770 20.6 Other Regions 99,496 14.7 120,626 17.2 146,609 20.0 Total ¥ 677,259 100.0 % ¥ 700,885 100.0 % ¥ 733,648 100.0 % Note: Operating revenue by geographic market represents revenue from unaffiliated customers, based on the geographic location of each unaffiliated customer. DVD-R/RWrecordable DVD drives, on an OEM basis to other manufacturers for resale under their own brand names. Our business is not materially dependent upon any particular customer or group of customers. Most of our sales are made from inventory rather than against customer orders. Our products are generally are sold under our own brand names, principally “Pioneer.”(PSN)(“PSN”), and authorized servicing companies. Pioneer established PSN in April 2000 to enhance the efficiency of our operations for after-sales services and to offer such services with higher quality. In countries where Pioneer’s subsidiaries are located, such as the United States and certain European countries, after-sales services are provided by such subsidiaries or through their authorized independent servicing companies. In other countries, such services are generally performed by our local distributors.
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To date,supply at favorable prices.
We plan to increasein our products. In addition, the percentagerapid economic growth in China has caused a shortage of rawsteel materials and partsnonferrous metals. Although these conditions have not made a significant impact on our current operations, we purchase through online network systems, including the Internet. We believe this will contributeare continuing our efforts to more timely manufacturingprocure a stable supply of these materials and a decrease in production costs.
maintain costs at appropriate levels.
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22We believe that we compete successfully and that we have a leading market position with respect to car electronics,products. Our products, however, are exposed to intense competition in Japan and overseas. Our competitors, which vary in size, area of distribution, range of products and financial resources, are principally companies based in Japan, Europe and Europe,South Korea, some of which are large, integrated home electric or electronic appliance manufacturers having substantially larger capital resources than we do.us. The electronics industry in general has been subject to substantial price competition in lightas part of decreased demand.efforts by electronics manufacturers to increase their market share. In addition, electronics companies in Asia, particularly those from Korea and China, pose a severe threat through price competition. To counter this intense competition, we place great emphasis on extensive marketing to stimulate demand for innovative and value-added products. Furthermore, we concentrate our efforts on technological research, quality control, sales promotion and the lowering of production costs by increasing procurement of parts and products made outside Japan and other measures. See also “Item 3.D. Risk factors — factors—Competition generally, and especially on price and standardization of products, may adversely affect our business results and financial condition”of operations” and “Item 4.B. Business overview — overview—Strategy.”24
23Note:Effective April 1, 2003, Pioneer Video Corporation, a wholly-owned subsidiary of Pioneer, established Pioneer Micro Technology Corporation by spinning off its semiconductor business. On the same day, Shizuoka Pioneer Corporation, a wholly-owned subsidiary of Pioneer, merged with Pioneer Video Corporation and changed its trade name to Pioneer Display Products Corporation.25
24 Ownership Country of interest and voting Name of subsidiary incorporation voting interest Principal business Tohoku Pioneer
Corporation Japan 66.967.0% Manufacture of car electronics products, factory automation systems and OELOLED display panels Pioneer MicroTechnology Corporation*Display Products Corporation Japan 100.0 % Manufacture and distribution of ICs and LSIsplasma displays Pioneer Plasma Display Products Corporation*Corporation Japan 100.0 % Manufacture of plasma displays Pioneer North America, Inc. U.S.A. 100.0 % Coordination of the activities of Pioneer’s North American subsidiaries and affiliates Pioneer Electronics (USA) Inc. U.S.A. 100.0 % Distribution of electronics products and customer support of our products and strategic shared services of Pioneer’s U.S. subsidiaries Pioneer Electronics Capital Inc. U.S.A. 100.0 % Financing to Pioneer and its subsidiaries Discovision Associates* * U.S.A. 100.0 % Licensing of worldwide patents relating to laser optical disc technologies Pioneer Europe NV Belgium 100.0 % Coordination of the activities of Pioneer’s European subsidiaries and affiliates, and distribution of electronics products Pioneer Electronics Asiacentre, Pte. Ltd. Singapore 100.0 % Coordination of the activities of Pioneer’s Asian subsidiaries and affiliates, and manufacture and distribution of electronics products Pioneer China Holding Co., Ltd. China 100.0 % Coordination of the activities of Pioneer’s Chinese subsidiaries and affiliates and distribution of electronics products *Effective April 1, 2003, Pioneer Video Corporation, a wholly-owned subsidiary of Pioneer, established Pioneer Micro Technology Corporation by spinning off its semiconductor business. On the same day, Shizuoka Pioneer Corporation, a wholly-owned subsidiary of Pioneer, merged with Pioneer Video Corporation and changed its trade name to Pioneer Display Products Corporation.** Discovision Associates (DVA) is a general partnership organized under the laws of the State of California in the United States.26
25Of the total of 34 plants, 16 plants are in Japan and the remaining 18 are outside Japan. The following table sets forth information, as of March 31, 2003,2005, with respect to our principal plants. Name of plant Floor space (Name of company (square feet) which owns the plant) Location [leased space] Principal products Kagoshima Plant
(Pioneer Plasma
Display Corporation)Izumi, Kagoshima 1,197,000 Plasma displays Yamanashi Plant
(Pioneer Display
Products Corporation)Nakakoma, Yamanashi 874,000 Plasma displays Shizuoka Plant
(Shizuoka Pioneer Display
Products Corporation) Fukuroi, Shizuoka 558,000730,000 Plasma displays Kawagoe Plant
(Pioneer Corporation)Kawagoe, Saitama 553,000 Car stereos, Car navigation systems Tokorozawa Plant
(Pioneer Corporation)Tokorozawa, Saitama 522,000 DVD recorders Tendo Plant
(Tohoku Pioneer
Corporation) Tendo, Yamagata 504,000479,000 Cassette carCar stereos, CarCD/MD players, Car speakers,
LoudspeakersTokorozawa Plant(PioneerCorporation)Tokorozawa, Saitama490,000Stereo systems, Individualstereo components, DVDplayers, DVD-R/RW drives, DVDrecordersKofu Plant(Pioneer VideoCorporation)Nakakoma, Yamanashi428,000DVDs, DVD-R/RW discs, CDs,Plasma display panelsKawagoe Plant(PioneerCorporation)Kawagoe, Saitama414,000Cassette car stereos, CarCD/MD players, Car navigationsystems Yonezawa Plant
(Tohoku Pioneer
Corporation) Yonezawa, Yamagata 234,000243,000 OELOLED displays Kokubo Plant
(Pioneer VideoMicro
Technology
Corporation) Kofu, Yamanashi 204,000[77,000194,000] ICs, LSIs Tendo the 2nd Plant
(Tohoku Pioneer
Corporation) Tendo, Yamagata 139,000186,000 Factory automation systems Towada the 2ndMogami Plant
(Towada ElectronicsMogami Denki
Corporation) Towada, AomoriMogami, Yamagata 134,000141,000 DVD-ROM pickups, Cassette carstereosSpeaker cone
Name of plant | Floor space | |||||||
(Name of company | (square feet) | |||||||
which owns the plant) | Location | [leased space] | Principal products | |||||
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Outside Japan | ||||||||
Shanghai Plant (Shanghai Pioneer Speakers Co., Ltd.) | Shanghai, China | 458,000 | Car speakers | |||||
Mexico Plant (Pioneer Speakers, S.A. de C.V.) | Baja California, Mexico | Car speakers | ||||||
Shanghai Plant (Pioneer Technology (Shanghai) Co., Ltd.) | Shanghai, China | 374,000 | DVD Recorders, Car AV systems, Car stereos | |||||
Thailand Plant (Pioneer Manufacturing (Thailand) Co., Ltd.) | Ayutthaya, Thailand | 300,000 | Car stereos, Stereo systems | |||||
Guang Dong Plant (Pioneer Technology (Dongguan) Co., Ltd.) | Guang Dong, China | 295,000 | Recordable DVD drives | |||||
Guang Dong Plant (Dongguan Monetech Electronic Co., Ltd.) | Guang Dong, China | 237,000 [237,000] | Speaker systems | |||||
Malaysia Plant (Pioneer Technology (Malaysia) Sdn. Bhd.) | Johor, Malaysia | 262,000 | Stereo systems, | |||||
California Plant (Pioneer Electronics Technology, Inc.) | California, U.S.A. | |||||||
U.K. Plant (Pioneer Technology | West Yorkshire, United Kingdom | 184,000 |
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Ohio Plant (Pioneer Automotive Technologies, Inc.) | Ohio, U.S.A. | 157,000 | ||||||
stereos |
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To improve cost competitiveness and to reallocate a major portion of production to China, Pioneer established two production subsidiaries in China in fiscal 2001 and these plants began operation in the fall of 2001. We continue expanding parts procurement, designing products, and increasing the proportion of our production in China. Capital expenditures related to these two plants for fiscal 2002 and fiscal 2003 were ¥4.2 billion and ¥3.2 billion, respectively. 2005.
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In fiscal 2003, we started construction ofbuilding a new manufacturing line for plasma displays at our plant in Shizuoka, Japan, to meet potential demand for plasma displays. Moreover, we plan to add another line in our Kofuthe Yamanashi Plant, which is expected to startstarted its operation in September 2004. On September 30, 2004, we acquired 100% of the springissued common stock of 2005. This will bringNPD and the intellectual property rights of NPD for cash in an aggregate amount of ¥35 billion. NPD changed its name to Pioneer Plasma Display Corporation on September 30, 2004. These investments resulted in increasing our annualplasma display production capacity to approximately 500 thousand units. The planned investment for these two lines aggregatesabout 1.1 million units a year.
We intend to fund the capital requirement to fulfill these capital expenditure plans through internally generated cash.
30 worldwide.
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Year ended March 31 | ||||||||||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||||||||||
(In millions of yen, except for percentage amounts) | ||||||||||||||||||||||||
Operating Revenue: | ||||||||||||||||||||||||
Home Electronics | ¥ | 277,968 | 41.0 | % | ¥ | 281,482 | 40.2 | % | ¥ | 301,228 | 41.1 | % | ||||||||||||
Car Electronics | 281,090 | 41.5 | 292,187 | 41.7 | 303,410 | 41.4 | ||||||||||||||||||
Patent Licensing | 12,584 | 1.9 | 11,821 | 1.7 | 10,237 | 1.4 | ||||||||||||||||||
Others | 105,617 | 15.6 | 115,395 | 16.4 | 118,773 | 16.1 | ||||||||||||||||||
Total | ¥ | 677,259 | 100.0 | % | ¥ | 700,885 | 100.0 | % | ¥ | 733,648 | 100.0 | % | ||||||||||||
Note: | Operating revenue represents revenue from unaffiliated customers. |
Year ended March 31 | ||||||||||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||||||||||
(In millions of yen, except for percentage amounts) | ||||||||||||||||||||||||
Japan | ¥ | 254,639 | 37.6 | % | ¥ | 263,298 | 37.6 | % | ¥ | 262,149 | 35.7 | % | ||||||||||||
North America | 190,147 | 28.1 | 170,711 | 24.3 | 174,120 | 23.7 | ||||||||||||||||||
Europe | 132,977 | 19.6 | 146,250 | 20.9 | 150,770 | 20.6 | ||||||||||||||||||
Other Regions | 99,496 | 14.7 | 120,626 | 17.2 | 146,609 | 20.0 | ||||||||||||||||||
Total | ¥ | 677,259 | 100.0 | % | ¥ | 700,885 | 100.0 | % | ¥ | 733,648 | 100.0 | % | ||||||||||||
Note: | Operating revenue by geographic market represents revenue from unaffiliated customers, based on the geographic location of each unaffiliated customer. |
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incentives than we estimate, additional reductions toof revenue may be required.
Allowances
specified periods. A price protection discount, which is the discount for the dealers’ inventory at the time of the announcement of the promotional discount, to compensate for the difference between the discounted prices and higher prices the dealers paid for their inventory, is often offered when the promotional discount program is announced. Costs for a price protection program are accrued when the program is announced by estimating discounts to be claimed by the dealers. Such estimates are based on forecasted order quantities during the promotional period and assumptions as to the amount of inventory that dealers have on hand. Dealer rebates include fixed-rate contractual rebates and volume-based rebates. Contractual rebates are recorded at the time of sale. Volume-based rebates, for which the rebate rate is dependent on the amount of the dealer’s purchase during the specified period, are accrued at the time of original sale, estimating the rebate rate the dealer will eventually achieve. We maintain allowancesoccasionally offer incentives directly to consumers in the form of mail-in rebates. Consumer rebates are accrued at the later of when the related sales are recognized or when the program is announced. The actual amounts of consumer rebates are dependent on consumers’ future actions, and our estimates are based on assumptions as to quantities to be purchased by consumers during the program period and consumer redemption rates, which is determined based on historical experience about consumer response to consumer rebate programs. Cash discounts are given for doubtful accountsearly payments in accordance with terms of the contract with customers and are recorded as a reduction of revenue at the time of original sale. The estimate of the cash discounts is based upon information about customers’ payment histories. Also, we provide reimbursements for estimated losses resulting from the inabilitypurpose of supporting dealers’ sales promotions of our customersproducts. The cost mainly includes subsidies for advertising, displays, cost of other sales promotion materials, and salaries of temporary floor sales personnel. We account for all the subsidy reimbursements to make required payments. Ifdealers as reductions from sales. Certain promotional allowances, such as co-op advertising, are determined as certain percentages of the financial conditionrespective sales amount and are recorded at the time of sale. Although reimbursement for such incentives requires dealers to perform sales promotions of our customers wereproducts, we assume, based on historical experience, that almost all dealers will eventually perform such sales promotions and submit claims for reimbursement. Other allowances, whose amounts are not determined by sales factors, are recorded when the subsidy is offered and the amount becomes reasonably determinable. Examples for this type of allowance are display allowances determined by the number of units displayed on the sales floor, and allowances based on agreements to deteriorate, resulting in an impairmentshare costs incurred by dealers for items such as new signboards, new display racks and salaries of their ability to make payments, additional allowances may be required.
temporary floor sales personnel.
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We write down
Impairment of investments
We hold minority interests in customers and financial institutions forselling prices. For the purpose of maintaining long-term relationships, someproperly valuing our inventory, we record inventory reserves for excess, slow-moving and obsolete inventory. Inventory with no potential for future sale or potential use by us is subject to write-off and, inventory which is considered to be obsolete or slow-moving, but salable at reduced prices, is written down to estimated net realizable value. Estimating net realizable value requires assumptions as to uncertain matters such as selling prices and salable quantities to be made based upon judgment about future market prices of competing products and customer demand, taking current market conditions into consideration. As of March 31, 2005, an inventory reserve of ¥10.3 billion included a ¥6.6 billion reserve for inventories to be written off and a ¥3.7 billion reserve for inventories written down to net realizable value.
Beginning | Provision | Reversal | Other | End | ||||||||||||
(In billions of yen) | ||||||||||||||||
8.3 | 7.4 | (6.3 | ) | 0.9 | 10.3 | |||||||||||
valuations of those long-lived assets.
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34based on the market yield from Japanese Government Bonds adjusted for the assumed duration of the pension benefit payment for current employees. The discount rate for our domestic contributory welfare pension plan is further adjusted to reflect pension obligations that can be transferred to the Japanese government. Expecteddetermined by using information about rates of return on currently available high-quality fixed-income bonds. The expected long-term rate of return on pension plan assets areis based on weighted average of expected long-term returns on various categories of plan assets, reflecting the current and target allocations of pension plan assets. Expected long-term return on eachby asset class in which pension assets are invested.category is derived from historical studies by investment advisors. If actual results differ from the assumptions or assumptions are changed, the resulting effects are accumulated and systematically recognized over future periods and, therefore, generally affect recognized expense and the recorded obligations in future periods. Recent declinesnegative returns on plan assets would adversely affect our pension benefit costs. Amortizationthe expected long-term rate of unrecognized net actuarial loss, which is a component of pension benefit costs and represents systematic expense recognition of effects of changes in assumptions and difference between assumptions and actual results, for our domestic pension plans increased to ¥2.9 billion in fiscal 2003 from ¥2.0 billion in fiscal 2002, and the same trend is expected to continue in fiscal 2004. Lowering the discount ratesreturn for pension plans in Japan by 0.5% would have increased the projected benefit obligation at the end of fiscal 2003 by approximately ¥14 billion and would increase the pension cost for fiscal 2004 by approximately ¥1.3 billion. Lowering the expected rate of return on plan assets by 0.5% would increase the pension cost for fiscal 2004 by approximately ¥0.4 billion.Japan. Effect on shareholders’ equity Net periodic pension cost as of March 31, 2005 for fiscal 2006 (In billions of yen) Discount rare: 0.5% increase 5.0 (0.7 ) 0.5% decrease (5.6 ) 0.7 Expected long-term rate of return: 0.5% increase — (0.3 ) 0.5% decrease — 0.3 OverviewWe classify our business groups into four segments: “Home Electronics,” “Car Electronics,” “Patent Licensing” and “Others.” “Car Electronics” is our largest segment by revenue, accounting for 39.5% of operating revenue (net sales plus royalty revenue) in fiscal 2003. In fiscal 2003, “Home Electronics,” “Patent Licensing” and “Others” accounted for 32.1%, 1.8% and 26.6%, respectively, of operating revenue. Our primary markets for our products based on operating revenues from unaffiliated customers for fiscal 2003 were Japan (40%), North America (28%) and Europe (19%).Home Electronics, Car Electronics and OthersThe electronics industry is characterized by rapid technological changes, and our ability to introduce attractive new products to the market significantly affects the operating results of this segment. Sales of new products such as DVD-related products, including DVD players, DVD recorders and DVD-R/RW drives for PC use, plasma displays, car navigation systems, digital cable-TV or broadcast set-top boxes and OEL displays have grown rapidly and in fiscal 2003 sales of such new products accounted for approximately 43% of our total sales. We expect to continue concentrating our resources on these strategic products in order to expand sales even further.The electronics industry is also characterized by continuing sales price decreases in most product categories, making it important for us to continually improve the efficiency of our manufacturing, distribution, service and administrative functions. As an example of our effort, in the past five years, we have increased the percentage of our manufacturing outside Japan from 48% to 63% in terms of the yen value of cost of goods produced, mainly by expanding production facilities in Southeast Asia and China.32
Patent Licensing
Our royalty revenue from Patent Licensing depends to a material extent on the sales of patented products by our licensees, making it difficult for us to predict actual royalty revenue each year. Therefore, sluggishness in the PC market negatively impacts our royalty revenue. In addition, a significant portion of our patents in Japan and Europe relating to laser optical disc technologies expired at the end of fiscal 2003. Accordingly, we have started to experience a substantial decrease in operating revenue and operating income from this segment. While we are working to acquire patents held by third parties and licensing such patents, we also license patents for third parties as a licensing agent. Although these operations may generate additional revenue to help offset a portion of this expected decline, we do not expect that the revenue, if any, from such new patents/agencies will be sufficient to offset the decrease in royalty revenue resulting from the expiration of our existing patents.
Royalty revenue decreased 13.4% from fiscal 2004 to ¥10.2 billion. 3520032005 compared with fiscal 20022004SummaryDuring fiscal 2003, which ended March 31, 2003, economic conditions continued to be generally unfavorable worldwide, with sluggish stock prices in the world’s major stock markets, growing tension in the Middle East, and resulting slow consumer spending worldwide. In the foreign exchange markets, the average value of the yen during fiscal 2003 was approximately 3% higher against the U.S. dollar and approximately 9% lower against the euro, compared with fiscal 2002. In these difficult economic conditions, operating revenue, the sum of net sales and royalty revenue, for fiscal 2003 was the highest ever, at ¥712.3 billion, up 7.6% from fiscal 2002. Operating income was ¥31.4 billion, a 74.8% increase from ¥17.9 billion recorded in fiscal 2002, and net income increased to ¥16.1 billion, almost double that of ¥8.0 billion posted in fiscal 2002.ReclassificationsEffective fiscal 2003, we adopted EITF (Emerging Issues Task Force) 01-9 “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products.)” The adoption resulted in a reduction in net sales and a corresponding decrease in selling, general and administrative (SGA) expenses, with no effect on operating income. For fiscal 2002, ¥6.8 billion was reclassified from SGA expenses to a sales reduction to conform to this presentation.In addition, effective fiscal 2003, we classified losses on sale and disposal of fixed assets, which were previously included in “Other — net” in other income (expense), into SGA expenses. For fiscal 2002, ¥3.3 billion was reclassified from “Other — net” to SGA expenses.Also, we reclassified reportable segments into four categories — “Home Electronics,” “Car Electronics,” “Patent Licensing” and “Others.” Previous figures for the corresponding periods have been restated accordingly.Impact of foreign exchange fluctuationsThe estimated effect of changes in yen exchange rates from fiscal 2002 was to increase operating revenue and operating income by ¥4.4 billion and ¥4.3 billion, respectively. Such estimates are obtained by applying the yen’s daily average exchange rates in the Tokyo foreign exchange market in fiscal 2002 to foreign currency-denominated operating revenue, cost of sales and SGA expenses, and do not account for the effect of changes to sales prices implemented in accordance with foreign exchange fluctuations.33Net sales and royalty revenue¥699.7¥723.4 billion, an 8.6%a 5.0% increase over fiscal 2002.2004. Net sales in Japan came to ¥281.5¥262.1 billion, up 17.1%down 0.4% from fiscal 2002,2004, and overseas net sales increased 3.5%8.3% to ¥418.2¥461.3 billion.6.2%7.0% over fiscal 2002,2004, amounting to ¥228.7¥301.2 billion, primarily as a result of increased sales of plasma displays and DVD recorders, and despite decreasedwhile sales of compact stereo systems worldwide. Net salesrecordable DVD drives for PCs, DVD players, cable TV set-top boxes and audio products decreased. Sales of plasma displays particularly for home use, grew both in Japan and overseas, to approximately twice the levels in fiscal 2002 both in terms of units sold and yen. In Japan sales of DVD recorders increased overseas. In Japan, sales rose 11.6% to ¥88.0 billion, primarily due to a large increase in sales of plasma displays. The increase was largely attributable to expansion of OEM product sales resulting from acquisition of a plasma display production subsidiary, Pioneer Plasma Display Corporation (“PPD”). Pioneer brand plasma display sales to consumer market increased as well. Sales of recordable DVD drives, DVD recorders and audio products decreased in Japan. Sales decrease of recordable DVD drives and DVD recorders were mainly attributable to the impact of a price decline resulting from intensified competition. Overseas sales also rose 5.2% to ¥213.3 billion, due to an increase in sales worldwide of plasma displays and DVD recorders, despite a decrease in sales of audio products and DVD players worldwide, recordable DVD drives in Europe and North America and DVD-ROM drives in Europe, as well as our decision to no longer sell cable TV set-top boxes in North America. In general, the market is shifting from DVD players to DVD recorders worldwide.successful introductionsales growth of car navigation systems overseas. In Japan, net sales decreased 1.2% to ¥120.3 billion, mainly influenced by slow demand for car navigation systems in the consumer market, reflecting shifting demand from the consumer market to the OEM market, although car navigation systems for automobile manufacturers increased. Overseas net sales increased 7.4% to ¥183.2 billion, primarily due to increased sales of car audio products for the OEM market and car navigation systems, despite decreased sales of car audio products for the consumer market in Europe and North America. Sales of car navigation systems for the consumer market, particularly map-type DVD models grew in North America and Europe. Also, sales of car audio products for the consumer market increased in Russia and South and Central America.
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37
Sales of car navigation systems rose in North America and Europe, and sales of car audio products increased in other regions.
certain regions.
38
Cost of sales increased to ¥498.5¥487.3 billion from fiscal 2002’s ¥465.32003’s ¥473.2 billion, associatedconsistent with anthe increase ofin net sales. However, cost of sales as a percentage of operating revenue declined 0.30.4 percentage points to 70.0%.69.5%, despite the adverse effects of keen price competition, particularly for Home Electronics products such as plasma displays and DVD recorders. Gross profit margin in the Car Electronics Businessbusiness improved as a result of cost reductions in car navigation systems and favorable effects of higher sales of car electronics products, absorbing factory overhead.systems. For recordable DVD drives, gross profit margin improved as well. Also, exchange rate fluctuations favorably affected gross profit margin. A weaker yen against the euro favorably affected gross profit margin, as well.
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increased net sales in terms of yen, and a stronger yen against currencies in Asian countries, where our major production facilities are located, reduced production costs in terms of yen.
OLED displays.
Operating incomedecreased by ¥1.1 billion. The decrease was mainly attributable to losses recorded in fiscal 2003 was ¥31.4 billion, a 74.8% increase from ¥17.9 billion recorded in fiscal 2002, mainly resulting from increased net sales and improved gross profit margin. Operating income for theHome Electronics segment was ¥0.4 billion in fiscal 2003 compared with a loss of ¥10.8 billion in fiscal 2002, reflecting increased profit from plasma displays, primarily as a result of expanded production and improved production efficiency. A successful introduction of DVD recorders with HDD was another reason for the turnaroundconversion of optical disc production facilities at the profitability of this segment. Operating income for theYamanashi Plant, Japan into plasma display panel production facilities.
Other income (expense)
Other expense, on a net basis, increased from an expense of ¥2.6 billion to ¥2.7 billion. Net interest (interest income, less interest expense) was an expense of ¥0.7 billion, compared with an expense of ¥0.4 billion in fiscal 2002, mainly due to decreased interest income, which reflected declining interest rates in the U.S. financial market. Gain on sale of subsidiaries’ stock was ¥0.8 billion in fiscal 2003, while there was no gain on the sale of subsidiaries in fiscal 2002. The sale of subsidiaries, mainly in karaoke-related business, is also in line with our policy to concentrate business resources in strategically selected business areas. Foreign exchange gain (loss) swung from ¥0.3 billion gain recorded in fiscal 2002 to ¥2.0 billion loss in fiscal 2003. The losses in fiscal 20032004 primarily arose from conversion of U.S. dollar deposit and receivables into yen due to the yen’s appreciation against the U.S. dollar during fiscal 2004, although such losses decreased when compared with losses incurred in fiscal 2003. Other—net decreased from expense of ¥2.5 billion to expense of ¥0.8 billion. Losses on write-downWrite-down of investments decreased by ¥1.2 billion to ¥1.4¥0.2 billion in fiscal 2003, compared with ¥2.3from ¥1.4 billion losses recorded in fiscal 2002, as2003. During fiscal 2004, the declineprices of stock in market value of our investments in marketable equity securities was smaller in fiscal 2003.
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portfolio recovered, and significant write-downs were not recorded.
39
Minority interest in losses (earnings) of subsidiaries
Minority interest in losses (earnings) of subsidiaries, which primarily consists of the earnings of Tohoku Pioneer Corporation¥0.4 billion and its subsidiaries attributable to its minority shareholders, amounted to ¥0.02by ¥0.8 billion in fiscal 2004 and 2003, compared with ¥0.5 billion in fiscal 2002.
respectively.
increase in operating income.
40
Fiscal 2002 compared with fiscal 2001
Reclassifications
Effective fiscal 2003, we adopted EITF 01-9 “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products.)” The adoption resulted in a reduction in net sales and a corresponding decrease in SGA expenses, with no effect on operating income. For fiscal 2001 and 2002, ¥6.7 billion and ¥6.8 billion were reclassified from SGA expenses to sales reductions, respectively, to conform to this presentation.
In addition, effective fiscal 2003, we classified losses on sale and disposal of fixed assets, which were previously included in “Other — net” in other income (expense), into SGA expenses. For fiscal 2001 and 2002, ¥0.9 billion and ¥3.3 billion were reclassified from “Other — net” to SGA expenses.
Also, we changed reportable segments into four categories — “Home Electronics,” “Car Electronics,” “Patent Licensing” and “Others.” Previous figures for the corresponding periods have been restated accordingly.
36
Summary
During fiscal 2002 which ended March 31, 2002, and, especially after the terrorist attacks on September 11, 2001, economic conditions continued to slow worldwide, with demand for information technology-related products weakening. As for foreign exchange markets, the average value of the yen during fiscal 2002 was approximately 12% lower against the U.S. dollar, and approximately 9% lower against the euro, compared to fiscal 2001. Under such circumstances, operating revenue, the sum of net sales and royalty revenue, for fiscal 2002 was ¥662.1 billion, up 3.4% from fiscal 2001. Operating income was ¥17.9 billion, a 45.5% decrease from ¥32.9 billion recorded in fiscal 2001, and net income came to ¥8.0 billion, down 56.0% from ¥18.3 billion posted in fiscal 2001.
Impact of foreign exchange fluctuations
The estimated effect of changes in yen exchange rates from fiscal 2001 was to increase operating revenue and operating income by ¥43.5 billion and ¥14.4 billion, respectively. Such estimates were obtained by applying the yen’s daily average exchange rates in the Tokyo foreign exchange market in fiscal 2001 to foreign currency-denominated operating revenue, cost of sales and SGA expenses, and do not account for the effect of changes to sales prices implemented in accordance with foreign exchange fluctuations.
Net sales and royalty revenue
Net sales amounted to ¥644.5 billion, a 4.0% increase over fiscal 2001. Sales in Japan came to ¥240.3 billion, up 4.8% from fiscal 2001, and overseas net sales increased 3.5% to ¥404.2 billion.
Home Electronicssales decreased 2.0% over fiscal 2001, amounting to ¥215.4 billion, primarily as a result of a sales decrease of digital cable-TV set-top boxes although sales of plasma displays for home use, DVD players and DVD recorders increased. Plasma display sales grew 16% in terms of yen, and from 35 thousand to 50 thousand in terms of units. Sales in Japan increased 5.3% to ¥58.1 billion, thanks to a large increase in the sale of plasma displays for home use and a rise in sales of DVD recorders, despite a large decrease in compact stereo system sales. Overseas, sales decreased by 4.5% to ¥157.3 billion primarily as a result of a sharp sales decline of digital cable-TV set-top boxes in North America, despite the yen’s depreciation and encouraging sales of plasma displays for home use and DVD home theater systems in North America and Europe.
Car Electronicssales rose 4.0% to ¥257.7 billion, mainly as a result of increased sales to consumer markets. In Japan, sales increased 1.5% to ¥95.6 billion, although car audio product sales to automobile manufacturers fell. The increase was attributed to successful consumer market sales of advanced HDD and affordable, easy-to-operate DVD car navigation systems. Revenue from car navigation systems grew more than 80%. Overseas, sales also increased 5.6% to ¥162.1 billion, despite a sales drop in Europe due to intensified competition. This increase was due to the yen’s depreciation and a sales rise in North America, especially of car audio products incorporating a radio tuner for digital satellite broadcasting, which started in the U.S. in 2001.
Royalty revenue from thePatent Licensingsegment decreased 14.3% to ¥17.6 billion, compared to that of fiscal 2001. This was attributable to a reduction in royalty revenue from digital playback/recording products such as CD-ROM and CD-R drives, as PC market sales slumped.
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Otherssales grew 12.7% to ¥171.4 billion, mainly as a result of a sales increase of DVD-R/RW drives both in Japan and overseas. In Japan, sales increased 8.3% to ¥86.6 billion as sales of DVD-R/RW drives to PC makers increased. Overseas, sales grew 17.5% to ¥84.8 billion, reflecting the yen’s depreciation and a large increase in sales of DVD-R/RW drives to PC makers, although sales of speaker devices for cellular phones fell.
Cost of sales and selling, general and administrative expenses
Cost of sales increased to ¥465.3 billion from fiscal 2001’s ¥447.4 billion and cost of sales as a percentage of operating revenue also increased 0.4 percentage points to 70.3%. However, cost of sales as a percentage of net sales remained the same as in fiscal 2001 at 72.2%. The favorable effects of a weaker yen against the U.S. dollar and the euro on gross profit margin were offset by the unfavorable impact of declining product prices in our major product categories, including DVD players.
SGA expenses increased by 11.7% or by ¥18.8 billion over fiscal 2001 to ¥178.8 billion. Advertising and sales promotion expense increased as a result of vigorous marketing activities worldwide to promote the Pioneer brand name and our strategic products such as plasma displays. Royalty expenses related to digital technologies increased as well. Also, expenses incurred in connection with restructuring of some production sites and withdrawal from certain businesses facing unfavorable prospects account for a part of the increase in SGA expenses. Losses on sale and disposal of fixed assets increased by ¥2.4 billion. The increased losses were attributable to two factors: losses on disposal of production facilities idled as a result of shifts in production capacities contrasted with gains realized on the sale of property in fiscal 2001. In addition, personnel-related expenses increased as costs for pension plans in Japan and overseas increased. The ratio of SGA expenses to operating revenue increased 2.0 percentage points to 27.0%.
R&D expenditures, which are included in cost of sales and SGA expenses, increased 5.2% to ¥39.1 billion, representing 5.9% of operating revenue. The increase primarily reflected R&D activities in developing a next-generation large-capacity optical disc system and new home network control system.
Operating income
Operating income was ¥17.9 billion, a 45.5% decrease from ¥32.9 billion recorded in fiscal 2001, reflecting decreased royalty revenue and increased SGA expenses. TheHome Electronicssegment posted a loss of ¥10.8 billion compared with a loss of ¥4.0 billion in fiscal 2001, reflecting deteriorated profitability resulting from intense price competition for DVD players particularly in North America. Start-up costs incurred in fiscal 2002 for additional plasma display production facilities were the other reason for the increased loss. Operating income for theCar Electronicssegment amounted to ¥16.1 billion, a decrease from ¥18.1 billion posted in fiscal 2001. Cost in connection with withdrawal from the cellular phone market incurred in fiscal 2002 was the main reason for the difference. In thePatent Licensingsegment, operating income decreased to ¥16.8 billion from ¥19.7 billion, mainly due to a decline of royalty revenue from digital playback/recording products such as CD-ROM and CD-R drives, reflecting a sluggish PC market and declining unit prices.Otherssegment posted ¥0.6 billion operating income, compared with a loss of ¥2.0 billion posted in fiscal 2001. Increased sales and reduced costs of DVD-R/RW drives for PC use and increased sales of DVD software were main reasons for the reduced loss.
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Other income (expense)
Other income (expense), on a net basis, decreased from an income of ¥1.3 billion to an expense of ¥2.6 billion. The reasons included a decrease in gain on sale of investment securities. A ¥1.6 billion gain on sale of investment securities was realized in fiscal 2001, while there was no material sale of investment securities in fiscal 2002. The reasons also included a ¥1.0 billion net increase in loss on write-down of investments, reflecting the sharp decline of stock prices in Japan. Foreign exchange losses swung from net losses of ¥1.2 billion to net gains of ¥0.3 billion. A decrease in the loss related to the revaluation of derivative financial instruments intended to minimize foreign currency risk accounted for the improvement. The net interest (interest income, less interest expense) was an expense of ¥0.4 billion, compared with an income of ¥0.6 billion in fiscal 2001. A decrease in interest income resulting from declining interest rates in the U.S. financial market was the main reason for the difference.
Income before income taxes
Income before income taxes decreased 55.1% to ¥15.3 billion from ¥34.2 billion for fiscal 2001.
Income taxes
Income taxes as a percentage of pre-tax income (the effective tax rate) was 43.8%, almost the same level as 41.9% in fiscal 2001 and the normal statutory tax rate of 42.0% in Japan.
Minority interest in losses (earnings) of subsidiaries
Minority interest in losses (earnings) of subsidiaries, which primarily consists of the earnings of Tohoku Pioneer Corporation and its subsidiaries attributable to its minority shareholders, amounted to ¥0.5 billion compared with ¥1.4 billion in fiscal 2001.
Equity in earnings (losses) of affiliated companies
Equity in earnings (losses) of affiliated companies was a loss of ¥0.1 billion, substantially unchanged from fiscal 2001.
Net income
Net income was ¥8.0 billion, a 56.0% decrease from fiscal 2001’s ¥18.3 billion. Basic net income per share of common stock was ¥44.70, compared with fiscal 2001’s ¥101.76. Diluted net income per share was ¥44.69 compared with fiscal 2001’s ¥101.70.
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41Informationinformation Millions of yen Year ended March 31, 2003 Corporate and Home Electronics Car Electronics Patent Licensing Others Eliminations Consolidated Operating revenue: Unaffiliated customers ¥228,744 ¥281,090 ¥12,584 ¥189,850 — ¥712,268 Inter-segment 1,576 1,271 2,014 41,922 (¥46,783 ) — Total ¥230,320 ¥282,361 ¥14,598 ¥231,772 (¥46,783 ) ¥712,268 Operating income ¥384 ¥26,126 ¥10,736 ¥4,089 (¥9,983 ) ¥31,352 Identifiable assets ¥142,428 ¥153,644 ¥4,357 ¥160,163 ¥186,437 ¥647,029 Depreciation and amortization ¥9,704 ¥13,370 ¥1,550 ¥9,863 ¥1,900 ¥36,387 Capital expenditures
(additions to fixed assets) ¥13,960 ¥13,997 ¥398 ¥9,830 ¥3,004 ¥41,189 Millions of yen Year ended March 31, 2002 Corporate and Home Electronics Car Electronics Patent Licensing Others Eliminations Consolidated Operating revenue: Unaffiliated customers ¥215,445 ¥257,672 ¥17,588 ¥171,420 — ¥662,125 Inter-segment 909 1,439 2,208 45,650 (¥50,206 ) — Total ¥216,354 ¥259,111 ¥19,796 ¥217,070 (¥50,206 ) ¥662,125 Operating income (¥10,811 ) ¥16,071 ¥16,837 ¥585 (¥4,741 ) ¥17,941 Identifiable assets ¥134,777 ¥154,783 ¥2,959 ¥191,851 ¥160,759 ¥645,129 Depreciation and amortization ¥8,857 ¥13,047 ¥419 ¥12,333 ¥2,126 ¥36,782 Capital expenditures
(additions to fixed assets) ¥17,381 ¥13,286 ¥58 ¥14,095 ¥2,248 ¥47,068 Year ended March 31, 2005 Corporate and Home Electronics Car Electronics Patent Licensing Others Eliminations Consolidated (In millions of yen) Operating revenue: Unaffiliated customers ¥ 301,228 ¥ 303,410 ¥ 10,237 ¥ 118,773 — ¥ 733,648 Inter-segment 1,960 1,321 1,362 39,725 ¥ (44,368 ) — Total ¥ 303,188 ¥ 304,731 ¥ 11,599 ¥ 158,498 ¥ (44,368 ) ¥ 733,648 Segment income (loss) ¥ (22,127 ) ¥ 18,591 ¥ 9,389 ¥ (272 ) ¥ (2,989 ) ¥ 2,592 Identifiable assets ¥ 227,567 ¥ 167,346 ¥ 2,852 ¥ 106,101 ¥ 221,301 ¥ 725,167 Depreciation and amortization ¥ 21,388 ¥ 12,514 ¥ 311 ¥ 9,299 ¥ 3,478 ¥ 46,990 Capital expenditures (additions to fixed assets) ¥ 32,261 ¥ 12,358 — ¥ 10,299 ¥ 9,568 ¥ 64,486 Year ended March 31, 2004 Corporate and Home Electronics Car Electronics Patent Licensing Others Eliminations Consolidated (In millions of yen) Operating revenue: Unaffiliated customers ¥ 281,482 ¥ 292,187 ¥ 11,821 ¥ 115,395 — ¥ 700,885 Inter-segment 1,399 2,460 2,057 36,860 ¥ (42,776 ) — Total ¥ 282,881 ¥ 294,647 ¥ 13,878 ¥ 152,255 ¥ (42,776 ) ¥ 700,885 Segment income ¥ 3,247 ¥ 29,963 ¥ 11,398 ¥ 2,273 ¥ 292 ¥ 47,173 Identifiable assets ¥ 182,001 ¥ 158,913 ¥ 3,447 ¥ 109,582 ¥ 268,599 ¥ 722,542 Depreciation and amortization ¥ 15,858 ¥ 13,798 ¥ 362 ¥ 8,272 ¥ 2,621 ¥ 40,911 Capital expenditures (additions to fixed assets) ¥ 32,783 ¥ 13,648 ¥ 248 ¥ 7,340 ¥ 4,434 ¥ 58,453 Note: Effective from fiscal 2005, the Company presented segment income (loss) as operating revenue less cost of sales, selling, general and administrative expenses and subsidy from the government recognized in fiscal 2005 in connection with transfer of substitutional portion of employee welfare pension plan to Japanese government. Previously reported amounts for fiscal 2004 have been reclassified accordingly.
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Year ended March 31, 2005 | ||||||||||||||||||||||||
Corporate and | ||||||||||||||||||||||||
Japan | North America | Europe | Other Regions | Eliminations | Consolidated | |||||||||||||||||||
(In millions of yen) | ||||||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||
Unaffiliated customers | ¥ | 300,722 | ¥ | 171,961 | ¥ | 149,117 | ¥ | 111,848 | — | ¥ | 733,648 | |||||||||||||
Inter-area | 294,922 | 5,405 | 805 | 176,198 | ¥ | (477,330 | ) | — | ||||||||||||||||
Total | ¥ | 595,644 | ¥ | 177,366 | ¥ | 149,922 | ¥ | 288,046 | ¥ | (477,330 | ) | ¥ | 733,648 | |||||||||||
Segment income (loss) | ¥ | (9,010 | ) | ¥ | (1,716 | ) | ¥ | (308 | ) | ¥ | 7,029 | ¥ | 6,597 | ¥ | 2,592 | |||||||||
Identifiable assets | ¥ | 315,252 | ¥ | 60,799 | ¥ | 60,463 | ¥ | 112,312 | ¥ | 176,341 | ¥ | 725,167 | ||||||||||||
Depreciation and amortization | ¥ | 31,880 | ¥ | 2,394 | ¥ | 2,444 | ¥ | 6,794 | ¥ | 3,478 | ¥ | 46,990 | ||||||||||||
Capital expenditures (additions to fixed assets) | ¥ | 44,730 | ¥ | 1,953 | ¥ | 1,005 | ¥ | 7,230 | ¥ | 9,568 | ¥ | 64,486 |
Year ended March 31, 2004 | ||||||||||||||||||||||||
Corporate and | ||||||||||||||||||||||||
Japan | North America | Europe | Other Regions | Eliminations | Consolidated | |||||||||||||||||||
(In millions of yen) | ||||||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||
Unaffiliated customers | ¥ | 294,198 | ¥ | 168,194 | ¥ | 145,390 | ¥ | 93,103 | — | ¥ | 700,885 | |||||||||||||
Inter-area | 278,071 | 8,082 | 967 | 182,929 | ¥ | (470,049 | ) | — | ||||||||||||||||
Total | ¥ | 572,269 | ¥ | 176,276 | ¥ | 146,357 | ¥ | 276,032 | ¥ | (470,049 | ) | ¥ | 700,885 | |||||||||||
Segment income | ¥ | 22,003 | ¥ | 11,487 | ¥ | 2,015 | ¥ | 9,511 | ¥ | 2,157 | ¥ | 47,173 | ||||||||||||
Identifiable assets | ¥ | 233,601 | ¥ | 46,034 | ¥ | 61,754 | ¥ | 99,237 | ¥ | 281,916 | ¥ | 722,542 | ||||||||||||
Depreciation and amortization | ¥ | 26,014 | ¥ | 2,450 | ¥ | 2,130 | ¥ | 7,696 | ¥ | 2,621 | ¥ | 40,911 | ||||||||||||
Capital expenditures (additions to fixed assets) | ¥ | 40,314 | ¥ | 2,650 | ¥ | 2,113 | ¥ | 8,942 | ¥ | 4,434 | ¥ | 58,453 |
1. | ||||||
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Geographic Segments
Millions of yen | ||||||||||||||||||||||||||
Year ended March 31, 2003 | ||||||||||||||||||||||||||
Corporate and | ||||||||||||||||||||||||||
Japan | North America | Europe | Other Regions | Eliminations | Consolidated | |||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||||
Unaffiliated customers | ¥298,107 | ¥196,008 | ¥132,776 | ¥85,377 | — | ¥712,268 | ||||||||||||||||||||
Inter-area | 272,393 | 7,594 | 700 | 168,128 | (¥448,815 | ) | — | |||||||||||||||||||
Total | ¥570,500 | ¥203,602 | ¥133,476 | ¥253,505 | (¥448,815 | ) | ¥712,268 | |||||||||||||||||||
Operating income (loss) | ¥16,392 | ¥11,749 | (¥462 | ) | ¥7,415 | (¥3,742 | ) | ¥31,352 | ||||||||||||||||||
Identifiable assets | ¥222,372 | ¥55,940 | ¥57,092 | ¥91,695 | ¥219,930 | ¥647,029 | ||||||||||||||||||||
Depreciation and amortization | ¥22,617 | ¥3,519 | ¥1,843 | ¥6,508 | ¥1,900 | ¥36,387 | ||||||||||||||||||||
Capital expenditures (additions to fixed assets) | ¥24,247 | ¥3,133 | ¥2,019 | ¥8,786 | ¥3,004 | ¥41,189 |
Millions of yen | ||||||||||||||||||||||||||
Year ended March 31, 2002 | ||||||||||||||||||||||||||
Corporate and | ||||||||||||||||||||||||||
Japan | North America | Europe | Other Regions | Eliminations | Consolidated | |||||||||||||||||||||
Operating revenue: | ||||||||||||||||||||||||||
Unaffiliated customers | ¥253,245 | ¥195,766 | ¥130,801 | ¥82,313 | — | ¥662,125 | ||||||||||||||||||||
Inter-area | 266,487 | 7,403 | 416 | 157,780 | (¥432,086 | ) | — | |||||||||||||||||||
Total | ¥519,732 | ¥203,169 | ¥131,217 | ¥240,093 | (¥432,086 | ) | ¥662,125 | |||||||||||||||||||
Operating income (loss) | ¥5,713 | ¥11,266 | (¥122 | ) | ¥6,323 | (¥5,239 | ) | ¥17,941 | ||||||||||||||||||
Identifiable assets | ¥232,541 | ¥58,145 | ¥58,782 | ¥92,353 | ¥203,308 | ¥645,129 | ||||||||||||||||||||
Depreciation and amortization | ¥24,014 | ¥2,238 | ¥2,262 | ¥6,142 | ¥2,126 | ¥36,782 | ||||||||||||||||||||
Capital expenditures (additions to fixed assets) | ¥29,411 | ¥1,735 | ¥1,428 | ¥12,246 | ¥2,248 | ¥47,068 |
Operating revenue reported in geographic segment information above represents that of | ||||||
2. | Effective from fiscal 2005, the Company presented segment income (loss) as operating revenue less cost of sales, selling, general and administrative expenses and subsidy from the government recognized in fiscal 2005 in connection with transfer of substitutional portion of employee welfare pension plan to Japanese government. Previously reported amounts for fiscal 2004 have been reclassified accordingly. |
43
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plasma display production facilities. common stock. 44Fiscal 2003 compared with fiscal 2002 Year ended March 31 2004 2005 (In millions of yen) Net cash provided by operating activities ¥ 60,378 ¥ 19,946 Net cash used in investing activities (52,754 ) (93,516 ) Net cash provided by (used in) financing activities 51,827 (4,019 ) Effect of exchange rate changes on cash and cash equivalents (9,512 ) 1,851 Net increase (decrease) in cash and cash equivalents ¥ 49,939 ¥ (75,738 ) 20032005 was ¥91.7¥19.9 billion, an increasea decrease of ¥34.6¥40.4 billion compared to fiscal 2002.2004. Net income increased although non-cash expenses such as equity in losses of affiliated companiesloss and provision for pension cost increased. Changeschanges in operating assets and liabilities also contributed to increasedwere the primary cause for the decreased cash flows from operating activities. Trade receivable decreased, despite an increaseAmong operating assets and liabilities, trade receivables increased due to increases in net sales, reflecting reduced past due accountssales. Inventories decreased primarily for plasma displays, AV systems, recordable DVD drives for PCs and reduction of notes receivables. Trade payables continued to increase, reflecting increased purchase of materials particularly for DVD-R/RW drives and car electronics products, although overall inventory continued to decrease,factory automation systems, reflecting our continued effortseffort to control and reduce inventories.¥35.5¥93.5 billion for fiscal 2003, a decrease2005, an increase of ¥15.6¥40.8 billion compared to ¥51.1¥52.8 billion in fiscal 2002.2004. The difference was partlymainly the result of a decrease in payments for the purchasean acquisition of fixed assets in fiscal 2003 compared to fiscal 2002, when investments ina plasma display production facilitiessubsidiary, and two new plantsan increase in China were higher. Investment in affiliated companies accountedthe investments for by the equity method also decreased. Increased proceeds from saleexpansion of fixed assets and available-for-sale securities also accounted for part of the decrease in net cash used in investing activities.¥34.7¥4.0 billion, compared with ¥51.8 billion cash provided in fiscal 2003, compared2004. Financing activities in fiscal 2004 included issuance of zero coupon convertible bonds (bonds with ¥4.2 billion cash used for fiscal 2002.stock acquisition rights) due 2011 with net proceeds of ¥60.5 billion. In fiscal 2003,2005, cash was used primarily in reduction of borrowings to solidify financial conditions, paymentsfor reducing long-term debt, payment of dividends and repurchase of shares of Pioneer’s common stock. ¥21.1 billion wasOn the other hand, short-term borrowings increased. Cash used in reducing short-term and long-term borrowings primarily in Japan, Europe and Southeast Asia.debt including capital lease obligations was ¥6.2 billion. Cash used in dividends payment was ¥2.7dividend payments amounted to ¥4.4 billion, almost the same level of fiscal 2002. As2004. Also, ¥2.0 billion was used for repurchase of shares of Pioneer’s stock, we purchased 5.1 million shares from the market for ¥11.5 billion. changes on cash and cash equivalents of overseas subsidiaries, cash and cash equivalents increaseddecreased by ¥15.4¥75.7 billion to ¥142.5¥116.7 billion at the end of fiscal 2003,2005, from ¥127.1¥192.4 billion at the end of fiscal 2002.2004.Fiscal 2002 compared with fiscal 2001Net cash provided by operating activities was ¥57.1 billion, a ¥5.9 billion increase compared to fiscal 2001, despite decreased net income. This mainly reflected changes in operating assets and liabilities. Trade payables increased as a result of increased purchase of materials particularly for DVD-R/RW drives and car navigation systems, although overall inventory decreased, reflecting our continued efforts to control and reduce inventories. Increased notes and accounts receivable reflected strong sales in the last few months of fiscal 2002, compared to the equivalent period of fiscal 2001.Net cash used in investing activities was ¥51.1 billion for fiscal 2002, a ¥9.6 billion increase compared to fiscal 2001. The difference was partly the result of an increase in payment for purchase of fixed assets, reflecting investments to complete expansion of plasma display production facilities and two new plants in China. Decreased proceeds from sale of fixed assets and available-for-sale securities also accounted for part of the increase in net cash used in investing activities.42
Net cash used in financing activities was ¥4.2 billion in fiscal 2002, compared with ¥46.6 billion cash used for fiscal 2001. Financing activities for fiscal 2001 included redemption of ¥30.0 billion in unsecured bonds at maturity and reduction of other short-term and long-term borrowings.
As a result of these activities and the effect of exchange rate changes on cash and cash equivalents of overseas subsidiaries, cash and cash equivalents increased by ¥6.0 billion to ¥127.1 billion at the end of fiscal 2002, from ¥121.1 billion at the end of fiscal 2001.
expenditures. March 2005. 45use in the manufacture ofmanufacturing our products. Also, operating expenses, including manufacturing expenses and SGAselling, general and administrative 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 a materialprimary portion of operating expenses. Our expenditure for R&D is recorded as a part of various operating expenses, and payroll for R&D-related personnel accounts for a material portion of R&D expenses.Contractual obligationscommercial commitmentsTheliquidity discussed in the following summarizes our contractual obligations at March 31, 2003. (Billions of yen) Payment Due by Period Less than Total 1 year 1-3 years 3-5 years More than 5 years Contractual obligations: Short-term debt 29.9 29.9 Long-term debt 33.2 1.0 20.4 0.5 11.3 Operating leases 9.6 3.4 3.9 1.3 1.0 Purchase commitment 7.6 7.6 The ¥7.6 billion purchase commitment outstanding as of March 31, 2003 was for property, plantfinancial management section provide sufficient resources to fund future operating capital requirements and equipment and advertising. This included a part of our ¥60 billion capital expenditure plan in fiscal 2004. The planned increase in capital expenditure in fiscal 2004 from ¥40.8 billion in fiscal 2003 mainly reflects expansion of plasma display production facilities.We provide guarantees to third parties who provide loans to affiliated companies and others. For each guarantee, we would have to pay the guaranteed amount, if they were to default on a payment within contract periods of 1 year to 10 years. The maximum potential amount of undiscounted future payments we could be required to make under the guarantee is ¥27.3 billion at March 31, 2003.We provide for the estimated cost of product warranties against product defects at the time revenue is recognized. Estimates for the cost of product warranties are primarily based on historical information about failure rates and service costs including parts and labor. Warranty reserve at March 31, 2003 is ¥6.5 billion.43Managementmanagementdebtequity financing. With regard to debt financing, short-term debt financing with maturity of one year or less is utilized to fund operating capital requirements. Short-term borrowing is generally arranged locally in the currency in whichby each consolidated company carries outsubsidiary based on its operation.capital requirements. As of March 31, 2003,2005, short-term borrowings of ¥29.9¥33.2 billion comprised bank loanswere principally in nine different currencies, principally Japanese yen.yen, U.S. dollar, and euro. On the other hand, long-term borrowing to finance long-term funding requirements such as investment in production facilities, is generallyfinancing through debt and equity securities markets are arranged in Japan, on a fixed interest rate basis.and long-term borrowing from financial institutions is arranged locally by each consolidated subsidiary. As of March 31, 2003,2005, substantially all of the long-term debt of ¥33.2¥100.5 billion, including the portion due within one year, was fixed-rate yen borrowings and was comprised of ¥7.5¥61.8 billion loans principally from banks,zero coupon convertible bonds due 2011 including ¥1.8 billion unamortized issue premium, ¥15.0 billion unsecured bonds due 2005, ¥10.0 billion unsecured bonds due 2008, and capital lease obligations and other loans arranged locally.2003,2004, we issued zero coupon convertible bonds due 2011 in aggregate principal amount of ¥60.0 billion to finance capital requirements for expansion of plasma display business and enhancement of distribution channels.5.1 million1,000,000 shares of PioneerPioneer’s common stock fromin the market for ¥11.5¥2.0 billion pursuant to the approval at the general shareholders’ meeting held in June 2002. Also, at the general shareholders’ meeting held on June 27, 2003, repurchasing of own shares of up to 5 million shares or up to ¥20 billion was approved up to the timeresolution of the conclusionboard of the next ordinary general meeting of shareholders to be helddirectors in June 2004, although the actual size of the repurchase will depend on our cash position and share price.¥236.8¥235.1 billion, provide sufficient resources to fund future requirements for operating capital and for capital expenditures to sustain the growth of Pioneer. Also, the parent company and its four subsidiaries in Japan and China have entered a three-year global credit facility agreement for the amount of ¥70.0 billion effective from May 2005. This will ensure that these companies in Japan and China have an efficient and stable financing for their operational funding needs.44
global marketplace. 46optical recording/playback,high-density recording, flat-panel displays, digital signal processing, information/communications, and core LSIs. In fiscal 2001, 20022003, 2004 and 2003,2005, our R&D expenses were ¥37,105¥45,388 million, ¥39,050¥51,483 million and ¥45,388¥55,897 million, respectively, or 5.8%6.7%, 5.9%7.3% and 6.4%7.6%, respectively, of our operating revenue. We currently plan to continue to spend more than 5%6% of operating revenue on R&D each year.As of March 31, 2003, approximately 3,800 employees worldwide were engaged in research, product development, and production technique improvement.AVOptical Disc & NetworkSystems Development Center, Information & Communication Development Center, PDP Development Center and PDPMobile Systems Development Center. At Pioneer Research Center USA, Inc. (“PRA”), one of our overseas wholly-owned subsidiaries: Pioneer Research Center USA, Inc.,subsidiaries, we are also actively engaged in research of new technologies, and development of system software related to digital TV and of digital network technologies. At another wholly-owned overseas subsidiary in the United Kingdom, Pioneer Digital Design Centre, Ltd., we are researching cutting-edge technologies related to digital TV for use in Europe. Product development and production improvement activities are the responsibility of each business unit, and are carried out in our various manufacturing facilities both in Japan and overseas.Blu-ray DiscVenturing to Innovate Flexible DisplaysIn February 2002,nine-company consortium including Pioneer jointly announcedlow thermal expansion coefficient. Pioneer’s expertise in organic electronics devices has greatly contributed to this development.next-generation large-capacity rewritable optical disc format, “Blu-ray Disc.” Using blue-violet laser beams, this format enables 23.3-, 25-display device comprised of OLETs requires substantially fewer components than a conventional organic EL display. The substrate, Bio Nanofiber Composite, reinforces transparent polymer with microscopic nanofibers derived from bacteria. It features a low thermal expansion to prevent circuit breakage or 27-gigabyte recording, rewritingdamage in the circuit mounting process. These innovations not only hold great promise to make display devices more light, flexible and playback on a one-sided 5-inch (12cm)-diameter disc, which is enough to hold more than two hours of digital high-definition video recording. In June 2002, the consortium published specificationsdurable; they also come at an opportune time for the Blu-ray Disc rewritable format,next digital generation of new mobile devices, e-books, e-newspapers, e-posters and began licensing itother display products coming through the commercial pipeline to gain traction in February 2003. In another collaboration, together with TDK Corporation, Pioneer has developed a write-once disc with a recording layer free of materials which may harm the environment, and highly compatible with the Blu-ray Disc rewritable format. This new write-once disc was presented in July 2002 at ISOM/ODS 2002 (Joint International Symposium on Optical Memory and Optical Data Storage), and in December 2002 at Eco-Products 2002, a Tokyo exhibition showcasing environment-friendly products and services.Streaming Video Delivery in BroadbandPioneer is developing technology for delivering video content through optical fiber in broadband communication environments. During fiscal 2003, five companies, including Nippon Telegraph and Telephone Corporation (NTT) and Pioneer, succeeded in interconnectivity tests among prototypes that employ the video-on-demand (VOD) control protocol, which enables viewers to watch requested video programs on demand. This is believed to be a major contribution to the standardization of streaming video delivery technologies, which is expected to enhance both the quantity and quality of online content and interactive services. Together with NTT, Pioneer has developed a technology for transferring digital high-definition video content at speeds as high as 25 Mbps, utilizing MPEG-2, an international standard for compression of video data, which is also used as a basic technology for DVDs. This is expected to enrich Internet video streaming with high-quality pictures and sound.45Global demand forhas been sluggish recently, which we believe has resulted incontinue to be exposed to downward price pressure and slower sales. This, in turn, has negatively impacted our production levels and our inventory. We have responded and expect to continue to respond to such downward pressure in sales and production through the introduction of new value-added products and models in Home Electronics, including home theater systems, DVD-related products and plasma displays.
our home-use DVD recorder business.
Set-top boxes. Recently, digital terrestrial
2009.
46
Brazil, Russia, India and China.
47
OELOLED displays. With the entry of other companies, market competition in OELOLED displays is becoming even more intense, while each company in this market is proceeding with the development of full-color OELOLED displays. To meet
48
47
Payment Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 year | 1-3 years | 3-5 years | 5 years | ||||||||||||||||
(In billions of yen) | ||||||||||||||||||||
Contractual obligations: | ||||||||||||||||||||
Long-term debt | 98.7 | 19.3 | 6.0 | 11.4 | 62.0 | |||||||||||||||
Operating leases | 19.7 | 6.3 | 8.5 | 2.3 | 2.6 | |||||||||||||||
Purchase commitment | 4.0 | 4.0 | ||||||||||||||||||
Interest payments | 1.9 | 0.7 | 0.9 | 0.2 | 0.1 | |||||||||||||||
Contribution to defined benefit plans | 6.5 | 6.5 | ||||||||||||||||||
Notes: | 1. | Total long-term debt of ¥98.7 billion does not include ¥1.8 billion unamortized issue premium on convertible bonds. | ||||
2. | Long-term debt includes capital lease obligations. | |||||
3. | Contractual obligations do not include ¥0.7 billion deferred income which is presented as other long-term liabilities on the consolidated balance sheet. | |||||
4. | The amount that the Company will contribute under its defined pension plans are based on a number of factors, primarily rate of salary increase and the number of employees. As such, the Company has estimated the amount of such contribution for the year ending March 31, 2006 and not the contribution for the years thereafter. |
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51JulySeptember 1, 2003,2005, and their pertinent information, such as position and business experience, are as follows: Name Current Position (Date of birth) (Month and year of expiration) Prior Position Kanya Matsumoto
(June 12, 1930) Chairman and Representative Director
(June 2004)2006) Kaneo Ito
(Apr. 30, 1936) President and Representative Director;
Chief Executive Officer
(June 2004)2006) Yoshimichi InadaTamihiko Sudo
(Sept. 8, 1936)Apr. 28, 1947) Executive Vice President and Representative Director; Chief Financial Officer; and in charge of technologies, productionCorporate Strategy Planning Group, Corporate Management Group, Export Management and quality controlQuality Control in general
(June 2004)2006) 2002:2004:Executive Vice President and Representative Director; in charge of technologies, production and quality control in general; and in charge of Components Business Division and Strategic IT DivisionKatsuhiro Abe(Nov. 16, 1936)Executive Vice President and Representative Director;Chief Financial Officer;in charge of administration in general(June 2004)June 2001:
Senior Managing Director and Representative Director;Chief Financial Officer;in charge President of administration in general; and General Manager of Corporate Planning DivisionPioneer’s Mobile Entertainment Company Akira Niijima
(Mar. 9, 1944) Senior Managing Director and Representative Director; Presidentin charge of Pioneer’s Home Entertainment CompanyJapanese domestic subsidiaries
(June 2004)2006) June 2004: Jan. 2001:
Senior Managing Director and Representative Director; PresidentChief Financial Officer; and in charge of Pioneer’s Home Entertainment Companyadministration and export management in general48
Name | Current Position | |||
(Date of birth) | (Month and year of expiration) | Prior Position | ||
Hajime Ishizuka (May 3, 1947) | Senior Managing Director and Representative Director; President of Pioneer��s Home Entertainment Business Company and AV Business Company; and in charge of Procurement Group (June 2006) | June 2003: Director; President of Pioneer’s Components Business Company; and in charge of International Business Division | ||
Osamu Yamada ( | Senior Managing Director; (June | June 2003: Managing Director; Laboratories | ||
Tadahiro Yamaguchi (Mar. 24, 1946) | Managing Director; Executive Vice President of Pioneer’s (June 2006) | June 2002: Managing Director; Executive Vice President of Pioneer’s Home Entertainment Company (in charge of technologies, production and quality control); in charge of Cable & Satellite Systems | ||
Satoshi Matsumoto (Apr. 15, 1954) | Managing Director; General Manager of (June | |||
June 2002: | ||||
Managing Director; General Manager of | ||||
Koichi Shimizu (Feb. 3, 1944) | Managing Director; (June 2006) | June 2004: Managing Director; in charge of technologies, production and | ||
Yoichi Sato (Jan. 15, 1950) | Managing Director; Deputy General Manager of Research & Development Group and General Manager of PDP Development Center (June | July 2004: Executive Officer; |
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Name | Current Position | |||
(Date of birth) | (Month and year of expiration) | Prior Position | ||
Akira Haeno (Feb. 14, 1949) | ||||
Managing Director; President of Pioneer’s (June | June Executive Officer; Plant Manager of Kawagoe Plant; and General Manager of | |||
Tatsuhiro Ishikawa (Apr. 4, 1939) | Director (June | Dec. 2001 to present: Attorney-at-Law | ||
Shunichi Sato (Feb. 10, 1941) | Director (June 2006) | Apr. 2000: Japanese Ambassador Extraordinary and Plenipotentiary to Belgium |
Name | Current Position | |||||
(Date of birth) | (Month and year of expiration) | Prior Position | ||||
Masaru Saotome (Aug. 20, 1944) | Senior Managing Executive Officer; President of Pioneer’s Plasma Display Business Company (June 2006) | June 2003: Senior Managing Executive Officer; Executive Vice President of Pioneer’s Home Entertainment Company (in charge of sales and marketing); and General Manager of Display Business Division | ||||
Kazunori Yamamoto (Oct. 21, 1942) | Senior Managing Executive Officer; General Manager of International Business Group (June 2006) | June 2001: Senior Executive Officer; President of Pioneer North America, Inc. | ||||
Seiichiro Kurihara (Mar. 15, 1943) | Senior Executive Officer; General Manager of Intellectual Property Division of Research & Development Group (June | June 2001: Executive Officer; General Manager of Intellectual Property Division |
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( | Senior Executive Officer; General Manager of (June 2006) | June 2001: Executive Officer; General Manager of |
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Name | Current Position | |||
(Date of birth) | (Month and year of expiration) | Prior Position | ||
Yoshio Taniyama (Nov. 9, 1948) | Senior Executive Officer; General Manager of Corporate Planning Division (June 2006) | June 2001: Executive Officer; General Manager of Finance Division | ||
Hideki Okayasu (May 12, 1950) | Senior Executive Officer; General Manager of Finance and Accounting Division (June 2006) | June 2001: Executive Officer; General Manager of Accounting Division | ||
Buntarou Nishikawa (Mar. 24, 1946) | Executive Officer; Executive Vice President of Pioneer’s Mobile Entertainment Company; and General Manager of OEM Sales Division (June | June 2001: Executive Officer; General Manager of Domestic Sales Division of Pioneer’s Mobile Entertainment Company | ||
Osamu Takada (July 27, 1948) | Executive Officer; General Manager of Personnel Division (June | June 1998: General Manager of Personnel | ||
Sumitaka Matsumura (Oct. 10, 1948) | Executive Officer; Deputy General Manager of Research (June | Jan. 2001: Deputy General Manager of Research | ||
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Chojuro Yamamitsu (Mar. 26, 1946) | Executive Officer; Deputy General Manager of Environmental Preservation Group (in charge of Eco Products) (June 2006) | Sept. 2002: Executive Officer; Deputy General Manager of Research | ||||
Kenji Sato (Aug. 29, 1947) | Executive Officer; General Manager of General Administration Division (June | June 1998: General Manager of General Administration Division | ||||
Susumu Kotani (Apr. 12, 1950) | Executive Officer; Chairman & Managing Director of Pioneer Europe NV (June | Sept. 2002: Managing Director of Pioneer Europe NV |
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Corporate Auditors
Name | Current Position | |||
(Date of birth) | (Month and year of expiration) | Prior Position | ||
Tsutomu Haga (June 2, 1948) | Executive Officer; President & Chief Operating Officer of Pioneer North America, Inc. (June 2006) | July 2003: President & Chief Operating Officer of Pioneer Electronics (USA) Inc. | ||
Kenji Tokuyama (Dec. 16, 1945) | Executive Officer; Executive Vice President of Plasma Display Business Company (in charge of OEM); and President of Pioneer Plasma Display Corporation (June 2006) | Jan. 2003: President of NEC Plasma Display Corporation | ||
Kaoru Sato (July 27, 1948) | Executive Officer; Vice President of Home Entertainment Business Company; and Plant Manager of Tokorozawa Plant (June 2006) | June 2004: President of Components Business Company of Home Entertainment Business Company | ||
Keiichi Yamauchi (Apr. 12, 1952) | Executive Officer; General Manager of Mobile Systems Development Center of Research & Development Group (June 2006) | Nov. 2003: General Manager of Mobile Systems Development Center of Research & Development Group | ||
Kazumi Kuriyama (Sept. 12, 1953) | Executive Officer; Deputy General Manager of Corporate Research & Development Laboratories of Research & Development Group (June 2006) | Sept. 2002: General Manager of Nano Process Technology Department of Corporate Research & Development Laboratories of Research & Development Group |
Name | Current Position | |||
(Date of birth) | (Month and year of expiration) | Prior Position | ||
Makoto Koshiba (Nov. 21, 1943) | Corporate Auditor (full time) (June 2007) | Sept. 1999: Director; General Manager of Accounting Division; in charge of Finance Division | ||
Shinji Yasuda (June 10, 1945) | Corporate Auditor (full time) (June 2007) | July 2001: Director; Managing Director of Pioneer China Holding Co., Ltd. |
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Name | Current Position | |||
(Date of birth) | (Month and year of expiration) | Prior Position | ||
Terumichi Tsuchida (Aug. 22, 1921) | Corporate Auditor (June | July 1998 to present: Advisor of Meiji Yasuda Life Insurance Company | ||
Isao Moriya (Sept. 5, 1937) | Corporate Auditor (June 2007) | Mar. 1968 to present: Certified Public Accountant | ||
Keiichi Nishikido (May 2, 1953) | Corporate Auditor (June 2007) | Jan. 1994 to present: Attorney-at-Law; Managing Partner of Kohwa Sohgoh Law Offices, Japan |
There is no
Mr. Kanya Matsumoto is the uncle of Mr. Satoshi Matsumoto. others.
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Representative Director.
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Year ended March 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Number of employees | 34,656 | 36,360 | 39,362 | |||||||||
Year ended March 31 | ||||||||||||
2001 | 2002 | 2003 | ||||||||||
Number of employees | 28,871 | 31,220 | 34,656 | |||||||||
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Title of class | Identity of person or group | Number of shares owned | Percent of class | |||||
Common Stock | Directors, Executive Officers and Corporate Auditors as a group | % |
* | Except for Mr. Kanya Matsumoto, Chairman of Pioneer, who owns |
Total number of | ||||||||||||||||
shares covered by | Current exercise | Number of shares | ||||||||||||||
warrants | price | exercised | ||||||||||||||
Fiscal year granted | (in thousands) | Exercise period | per share | (in thousands) | ||||||||||||
2000 | 320 | From July 3, 2000 to September 12, 2002 | ¥2,188 | 222 | ||||||||||||
2001 | 191 | From July 2, 2001 to September 11, 2003 | ¥4,674 | — | ||||||||||||
2001 | 93 | From July 2, 2001 to September 25, 2003 | ¥4,839 | — | ||||||||||||
2002 | 413 | From July 1, 2002 to August 26, 2004 | ¥3,266 | — |
Pioneer has also granted the following share subscription rights for its shares of common stock to certain of its employees.
Total number of | ||||||||||||||||
shares covered by | Current exercise | Number of shares | ||||||||||||||
option | price | exercised | ||||||||||||||
Fiscal year granted | (in thousands) | Exercise period | per share | (in thousands) | ||||||||||||
2001 | 191 | From July 1, 2002 to June 30, 2005 | ¥4,400 | — | ||||||||||||
2002 | 191 | From July 1, 2003 to June 30, 2006 | ¥3,791 | — |
Total number of | ||||||||||||
shares covered by | Current exercise | Number of shares | ||||||||||
option | price | exercised | ||||||||||
Fiscal year granted | (in thousands) | Exercise period | per share | (in thousands) | ||||||||
2001 | 191 | From July 1, 2002 to June 30, 2005 | ¥ | 4,400 | — | |||||||
2002 | 191 | From July 1, 2003 to June 30, 2006 | ¥ | 3,791 | — |
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61 Total number of shares covered by Current exercise Number of shares option price exercised Fiscal year granted (in thousands) Exercise period per share (in thousands) 2003 564 From July 1, 2004 to June 29, 2007 ¥2,477 — 2004 313 From July 1, 2005 to June 30, 2008 ¥2,931 — Total number of shares covered by Current exercise Number of shares option price exercised Fiscal year granted (in thousands) Exercise period per share (in thousands) 2003 564 From July 1, 2004 to
June 29, 2007 ¥ 2,477 4 2004 313 From July 1, 2005 to
June 30, 2008 ¥ 2,951 — 2005 316 From July 3, 2006 to
June 30, 2009 ¥ 2,944 — 2006 315 From July 2, 2007 to
June 30, 2010 ¥ 1,828 — 2003,2005, Pioneer holds 4,629,0285,635,190 shares as treasury stock with the purchase of 5,110,0001,007,095 shares and disposal of 518,4004,867 shares both in the market in fiscal 2003.2005.20032005 on the register of shareholders were as follows: Number of shares Percentage of Title of class Name (in thousands) outstanding shares Common Stock Japan Trustee Services Bank, Ltd.
(Trust Account) 15,242 8.68 % Common Stock The Master Trust Bank of Japan,Ltd.
(Trust Account) 11,549 6.58 % Japan Trustee Services Bank, Ltd. and Number of shares Percentage of Title of class Name (in thousands) outstanding shares Common Stock The Master Trust Bank of Japan, Ltd.
(Trust Account) 13,804 7.66 % Common Stock Japan Trustee Services Bank, Ltd.
(Trust Account) 11,666 6.47 % Common Stock Societe Generale Paris
SGOP/DAI Paris 6Z 10,403 5.77 %
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68.
622,7212,916 million translated at the current foreign exchange rate at March 31, 2003)2005) relating to a tax position taken in prior years concerning intercompany purchase prices. We officially challenged the proposed assessment by arbitration procedures. There was no progress in this matter during the year ended March 31, 2003.2005. In the opinion of management, it is not possible at this time to determine the ultimate resolution of this matter.
In August 2002, we
We are also a defendant and counterclaimant in a lawsuit in No provision was made for the United States Federal District Court in which the plaintiff, Gemstar-TV Guide International Inc. (“Gemstar”), alleges that we have infringed two patents, both of which have expired. During August 2002, the Federal District Court granted summary judgment in our favor and against Gemstar ruling that we did not infringe those two patents. We continue to prosecute our counterclaim against the plaintiff and another company.
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In addition, the same plaintiff alleged in separate proceedings that we infringed four other patents. The plaintiff filed both a complaint before the International Trade Commission (“ITC”) alleging patent infringement relating to the importation and sale of the pertinent products in the United States and a complaint for unspecified damages in the United States Federal District Court in multi-district litigation in Atlanta, Georgia. During August 2002, the ITC adopted the findings and conclusions of the ITC’s administrative law judge that we did not infringe the patents at issue held by Gemstar. Gemstar has filed an appeal to the Federal Circuit. The related complaint filed in the District Court is stayed pending a ruling on the appeal of the ITC’s determination.
year ended March 31, 2005.
Dividend per share | ||||||||
Record date | Yen | Dollars | ||||||
March 31, 1999 | ¥5.00 | $ | 0.04 | |||||
September 30, 1999 | ¥5.00 | $ | 0.05 | |||||
March 31, 2000 | ¥5.00 | $ | 0.05 | |||||
September 30, 2000 | ¥7.50 | $ | 0.07 | |||||
March 31, 2001 | ¥7.50 | $ | 0.06 | |||||
September 30, 2001 | ¥7.50 | $ | 0.06 | |||||
March 31, 2002 | ¥7.50 | $ | 0.06 | |||||
September 30, 2002 | ¥7.50 | $ | 0.06 | |||||
March 31, 2003 | ¥10.00 | $ | 0.08 |
Dividend per share | ||||||||
Record date | Yen | Dollars | ||||||
March 31, 2001 | 7.50 | 0.06 | ||||||
September 30, 2001 | 7.50 | 0.06 | ||||||
March 31, 2002 | 7.50 | 0.06 | ||||||
September 30, 2002 | 7.50 | 0.06 | ||||||
March 31, 2003 | 10.00 | 0.08 | ||||||
September 30, 2003 | 12.50 | 0.12 | ||||||
March 31, 2004 | 12.50 | 0.11 | ||||||
September 30, 2004 | 12.50 | 0.12 | ||||||
March 31, 2005 | 12.50 | 0.11 |
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64American Depositary Shares (ADSs)ADSs on the New York Stock Exchange. See “Item 9.C. Markets,” regarding the markets for Pioneer’s shares. Tokyo Stock Exchange New York Stock Exchange Price per share of Common Stock Price per share of ADS (yen) (U.S. dollars) Annual highs and lows High Low High Low Year ended March 31, 1999 ¥2,920 ¥1,720 $ 21.13 $ 14.88 2000 3,690 1,711 34.75 16.13 2001 4,940 2,085 45.38 20.50 2002 4,250 2,150 34.70 16.75 2003 2,860 1,805 21.98 14.83 Quarterly highs and lows Fiscal 2002 1st quarter 4,250 3,020 34.70 25.18 2nd quarter 3,920 2,155 31.05 16.85 3rd quarter 3,290 2,210 26.20 19.01 4th quarter 3,330 2,150 25.06 16.75 Fiscal 2003 1st quarter 2,860 1,981 21.65 16.75 2nd quarter 2,260 1,900 18.60 16.00 3rd quarter 2,490 1,805 19.50 14.83 4th quarter 2,620 2,070 21.98 17.95 Fiscal 2004 1st quarter 2,840 2,225 23.75 18.90 Monthly highs and lows 2003 January 2,405 2,070 19.65 17.95 February 2,600 2,260 21.54 19.01 March 2,620 2,390 21.98 20.25 April 2,460 2,225 20.50 18.90 May 2,555 2,290 22.27 19.78 June 2,840 2,490 23.75 21.00 July 2,970 2,635 25.48 22.50 Tokyo Stock Exchange New York Stock Exchange Price per share of Common Stock Price per share of ADS (yen) (U.S. dollars) High Low High Low Year ended March 31, 2001 ¥ 4,940 ¥ 2,085 $ 45.38 $ 20.50 2002 4,250 2,150 34.70 16.75 2003 2,860 1,805 21.98 14.83 2004 3,370 2,225 31.25 18.90 2005 3,390 1,820 30.85 17.11 Fiscal 2004 1st quarter 2,840 2,225 23.75 18.90 2nd quarter 3,030 2,515 25.75 20.85 3rd quarter 2,995 2,505 28.31 23.30 4th quarter 3,370 2,875 31.25 27.01 Fiscal 2005 1st quarter 3,390 2,635 30.85 23.75 2nd quarter 2,850 2,215 25.90 20.30 3rd quarter 2,430 1,820 21.85 18.05 4th quarter 2,055 1,827 19.90 17.11 Fiscal 2006 1st quarter 2,040 1,655 18.82 15.15 2005 March 2,015 1,827 19.18 17.60 April 2,040 1,760 18.82 16.60 May 1,815 1,703 17.34 16.00 June 1,783 1,655 16.64 15.15 July 1,687 1,604 15.23 14.35 August 1,785 1,634 16.10 14.55 60
B. Plan of distribution
Not applicable
65(TSE)(“TSE”). Pioneer’s shares of common stock have been listed on the TSE since October 1961 and on the Osaka Securities Exchange since April 1968.(NYSE)(“NYSE”), having been traded on the United States over-the-counter market since February 1970. Pioneer’s ADSs, each representing one share of common stock, are evidenced by ADRs issued by Citibank, N.A., New York, as Depositary.61• manufacture and sale of electronic and electrical machinery and appliances,appliances;• manufacture and sale of optical instruments, medical instruments, and other machinery and appliances; • planning, production, manufacture and sale of audio, video and computer software; • manufacture and sale of woodworks, agricultural products and plant for their cultivation;woodwork; • manufacture and sale of foodsagricultural products and plants for their cultivation;
• | sale of food and beverages, including liquor, and operation of restaurants and amusement facilities; | |
• | sale and purchase, rental and lease, and management of real estate and real estate agency business; | |
• | publishing and printing business, advertising agency business, construction business and non-life insurance agency business; | |
• | acquisition, management and transfer of industrial property rights, copyrights and other intellectual property rights; and | |
• | all business incidental and related to each and every one of the businesses in the preceding |
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Set
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(i) | its stated capital; | |
(ii) | its additional paid-in capital; | |
(iii) | its accumulated legal reserve; | |
(iv) | the legal reserve to be set aside in respect of the fiscal period concerned; and | |
(v) | such other amounts as |
(1) | its liabilities; | |
(2) | its stated capital; | |
(3) | its additional paid-in capital and accumulated legal reserve; | |
(4) | other amounts as provided for by an ordinance of the Ministry of Justice; | |
(5) | (if Pioneer transferred its treasury stock after the end of the last fiscal year) the transfer price of its treasury stock after subtracting the book value thereof; | |
(6) | (if Pioneer decreased its stated capital after the end of the last fiscal year) the amount of decrease in its stated capital (excluding the amount transferred to the additional paid-in capital or legal reserve); | |
(7) | (if Pioneer decreased its additional paid-in capital or legal reserve after the end of the last fiscal year) the amount of decrease in its additional paid-in capital or legal reserve (excluding the amount transferred to the stated capital); | |
(8) | (if Pioneer cancelled its treasury stock after the end of the last fiscal year) the book value of its treasury stock so cancelled; |
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(9) | (if Pioneer distributed surplus to shareholders after the end of the last fiscal year) the assets distributed to shareholders by way of such distribution of surplus; and | |
(10) | other amounts as provided for by an ordinance of the Ministry of Justice. |
(1) | the book value of its treasury stock; | |
(2) | (if Pioneer transferred its treasury stock after the end of the last fiscal year) the transfer price of its treasury stock; | |
(3) | the losses as recorded for the period after the end of Pioneer’s last fiscal year until the date of an extraordinary settlement of account (if any) as provided for in an ordinance of the Ministry of Justice; and | |
(4) | other amounts as provided for by an ordinance of the Ministry of Justice. |
(1) | the book value of Pioneer’s treasury stock; | |
(2) | (if Pioneer transferred its treasury stock after the end of the last fiscal year) the transfer price of its treasury stock after the end of Pioneer’s last fiscal year; and | |
(3) | other amounts as provided for by an ordinance of the Ministry of Justice. |
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After the New Company Law becomes effective, no such notice to each shareholder is required. 71 normally held in June in each year in or near Meguro-ku or in Minato-ku, Tokyo, Japan. In addition, Pioneer may hold an extraordinary general meeting of shareholders whenever necessary by giving notice of convocation thereof at least two weeks prior to the date set for the meeting.
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(1) | acquisition of its own shares from a specific party; | |
(2) | consolidation of shares; | |
(3) | any offering of new shares at a “specially favorable” price (or any offering of stock acquisition rights to subscribe for or acquire shares of capital stock, or bonds with stock acquisition rights at “specially favorable” conditions) to any persons other than shareholders; | |
(4) | the removal of a Director or Corporate Auditor (when the New Company Law becomes effective, the removal of a Director who is elected by cumulative voting); |
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(5) | the exemption of liability of a Director or Corporate Auditor with certain exceptions; | |
(6) | a reduction of stated capital (when the New Company Law becomes effective, with certain exceptions in which a shareholders’ resolution is not required); | |
(7) | (when the New Company Law becomes effective ) a distribution of in-kind dividends which meets certain requirements; | |
(8) | dissolution, merger, or consolidation with certain exceptions in which a shareholders’ resolution is not required; | |
(9) | the transfer of the whole or a material part of the business; | |
(10) | the taking over of the whole of the business of any other corporation with certain exceptions in which a shareholders’ resolution is not required; | |
(11) | share exchange or share transfer for the purpose of establishing 100 percent parent-subsidiary relationships with certain exceptions in which a shareholders’ resolution is not required; or | |
(12) | separating of the corporation into two or more corporations with certain exceptions in which a shareholders’ resolution is not required. |
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Rights to subscribe for new shares may be made generally transferable by the Board of Directors. Whether Pioneer will make subscription rights generally transferable in future rights offerings will depend upon the circumstances at the time of such offerings. If subscription rights are not made generally transferable, transfers by a non-resident of Japan or a corporation organized under the laws of a foreign country or whose principal office is located in a foreign country will be enforceable against Pioneer and third parties only if Pioneer’s prior written consent to each such transfer is obtained. When such consent is necessary in the future for the transfer of subscription rights, Pioneer intends to consent, on request, to all such transfers by such a non-resident or foreign corporation.
it as treasury stock.
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75
such shareholder.
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listed.
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Not applicable
• | individuals who | |
• | corporations whose principal offices are located outside Japan. |
• | individuals who are exchange | |
• | corporations that are organized under the laws of foreign countries or whose principal offices are located outside Japan; and | |
• | corporations (1) of which 50% or more of their shares are held by individuals who are exchange non-residents and/or corporations (a) that are organized under the laws of foreign countries or (b) whose principal offices are located outside Japan or (2) a majority of whose officers, or officers having the power of representation, are individuals who are exchange non-residents. |
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The discussion below is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of shares of common stock and ADSs. Prospective purchasers and holders of the shares of common stock or ADSs should consult their own tax advisors concerning the tax consequences of their particular situations.
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• | a citizen or individual resident of the United States, | |
• | a corporation or other entity taxable as a corporation for U.S. federal income tax purposes organized in or under the laws of the United States, any State, or the District of Columbia, | |
• | an estate the income of which is subject to U.S. federal income tax without regard to its source, or | |
• | a trust that is (i) subject to the primary supervision of a U.S. court and the control of one or more U.S. persons, or (ii) that has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. |
• | is a resident of the United States for purposes of the Treaty, | |
• | does not maintain a permanent establishment | |
• | is |
A “Non-U.S. Holder” is any beneficial owner
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This
Pioneer who are either individuals who are not residents of Japan or non-Japanese corporations, without a permanent establishment in Japan (“non-resident Holders”).
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Under
Andistributed, and dividends paid by a Japanese corporation to Eligible U.S. Holders that are pension funds is exempt from Japanese taxation by way of withholding or otherwise
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U.S.
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dividend is actually or constructively received by the U.S. Holder, in the case of shares of common stock, or by the depositary, in the case of ADSs. The dividendDividends paid by us will not be eligible for the dividends received deduction generally allowed to U.S. corporations. However, pursuant to recently enacted legislation, dividendscorporations in respect of ourdividends received from other U.S. corporations.
U.S. Holders should consult their own tax advisors regarding the calculation and U.S. federal income tax treatment of foreign currency gain or loss.
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• | has held shares of common stock or ADSs for less than a specified minimum period, or | |
• | is obligated to make payments related to our dividends, |
Upon The Internal Revenue Service (the “IRS”) has expressed concern that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of ADSs. Accordingly, investors should be aware that the discussion above regarding the creditability of Japanese withholding tax on dividends could be affected by future actions that may be taken by the IRS.
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or loss recognized on the sale or other taxable disposition generally will be capital gain or loss and, if the U.S. Holder’s holding period for those shares or ADSs exceeds one year, will be long-term capital gain or loss. SomeCertain U.S. Holders, including individuals, are eligible for preferential rates of U.S. federal income tax in respect of net long-term capital gain. Under U.S. federal tax law, the deduction of capital losses is subject to limitations. Any gain or loss recognized by a U.S. Holder in respect of the sale or other taxable disposition of shares of common stock or ADSs generally will be treated as derived from U.S. source income or losssources for U.S. foreign tax credit purposes.
We
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Distributions
A
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a lower rate that may be prescribed by an applicable income tax treaty.
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required manner.
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2005. 8576purchasepurchase- and write currencywrite-currency options. WrittenIn order to minimize the risk, written options are entered into only with purchased options.2003 and 2002,2005, which have been translated into yen at the rate as of such date, together with the related weighted average contractual exchange rates at March 31, 2003 and 2002.2005. All of the contracts mature within one year. The amount of forward exchange contract selling euro buying yenThere are no option contracts outstanding as of Mach 31, 2003 increased compared with the amount at March 31, 2002, due to increased coverage against anticipated intercompany export transaction from Japan to Europe.2003 Forward exchange contract Millions of yen except average rates Yen EUR A$ THB S$ Functional currency Sell/Buy US$/Yen EUR/Yen A$/US$ THB/US$ US$/S$ Total Contract amounts ¥721 ¥4,674 ¥2,694 ¥46 ¥361 ¥8,496 Average contractual exchange rates 120.97 127.64 0.5573 42.851 1.771 Fair value ¥12 (¥58 ) (¥192 ) ¥0 ¥1 (¥237 ) Currency option Millions of yen except average rates Yen Functional currency Sell/Buy EUR/Yen Yen/EUR Total Notional amount ¥1,558 ¥1,558 ¥3,116 Average execution rates 120.00 0.00833 Fair value ¥1 (¥8 ) (¥7 ) Functional Yen Yen EUR A$ THB THB NT$ Total currency US$/ Yen/ EUR/ A$/ THB/ US$/ US$/ Sell/Buy Yen US$ Yen US$ US$ THB NT$ (In millions of yen except average rates) Contract amounts ¥ 12,456 ¥ 490 ¥ 18,949 ¥ 1,440 ¥ 181 ¥ 1,063 ¥ 371 ¥ 34,950 average contractual exchange rates 104.50 102.00 135.93 0.7741 39.1100 38.9461 31.2325 Fair value ¥ (243 ) ¥ 23 ¥ (293 ) ¥ 16 ¥ 0 ¥ (5 ) ¥ (3 ) ¥ (505 ) March 31, 2002
Forward exchange contract | Millions of yen except average rates | |||||||||||||||||||||||||||
Yen | THB | A$ | S$ | |||||||||||||||||||||||||
Functional currency | ||||||||||||||||||||||||||||
Sell/Buy | US$/Yen | THB/US$ | A$/Yen | A$/US$ | A$/GBP | US$/S$ | Total | |||||||||||||||||||||
Contract amounts | ¥266 | ¥149 | ¥100 | ¥1,395 | ¥54 | ¥1,067 | ¥3,031 | |||||||||||||||||||||
Average contractual exchange rates | 131.50 | 43.407 | 69.85 | 0.5156 | 0.3640 | 1.829 | ||||||||||||||||||||||
Fair value | (¥1 | ) | ¥0 | ¥1 | (¥26 | ) | (¥1 | ) | (¥6 | ) | (¥33 | ) | ||||||||||||||||
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Currency option | Millions of yen except average rates | |||||||||||
Yen | ||||||||||||
Functional currency | ||||||||||||
Sell/Buy | EUR/Yen | Yen/EUR | Total | |||||||||
Notional amount | ¥1,440 | ¥1,440 | ¥2,880 | |||||||||
Average execution rates | 110.00 | 0.00909 | ||||||||||
Fair value | ¥2 | (¥10 | ) | (¥8 | ) | |||||||
86contract amounts decreased during the year ended March 31, 2003, reflecting decreased intercompany borrowing balances. The foreign exchange risk inherent in our currency swap as of March 31, 2003 and 20022005 are summarized as follows: Currency swap as of March 31, 2003 Millions except average rates Expected maturity date Contract amounts (year ending March 31) Sell Buy 2004 2005 2006 Total Fair value Functional currency: Yen ¥24,860 US$200 ¥6,195 ¥18,665 ¥24,860 (¥586 ) Average contractual exchange rate 123.90 124.43 Functional currency: Euro EUR57 US$50 ¥7,395 ¥7,395 (¥1,490 ) Average contractual exchange rate 0.88 Currency swap as of March 31, 2002 Millions except average rates Expected maturity date Contract amounts (year ending March 31) Sell Buy 2003 2004 2005 Total Fair value Functional currency: Yen ¥24,678 US$200 ¥5,893 ¥6,195 ¥12,590 ¥24,678 ¥2,048 Average contractual exchange rate 117.85 123.90 125.90 Functional currency: Euro EUR116 US$100 ¥13,487 ¥13,487 (¥222 ) Average contractual exchange rate 0.86 Functional currency: Singapore dollar S$65 US$36 ¥4,717 ¥4,717 ¥20 Average contractual exchange rate 1.84 Expected maturity date Contract amounts (year ending March 31) Buy Sell 2006 2007 2008 Total Fair value (In millions except average rates) Functional currency: Yen ¥ 24,540 US$200 ¥ 18,665 ¥ 5,875 ¥ 24,540 ¥ (3,009 ) Average contractual exchange rate 124.43 117.50 Functional currency: Euro EUR76 US$100 ¥ 10,506 ¥ 10,506 ¥ 189 Average contractual exchange rate 1.3218 Functional currency: Euro EUR3 GBP2 ¥ 443 443 ¥ 1 Average contractual exchange rate 0.6901 2003 and 2002,2005, see “Interest rate risk” below.78Interest2003 and 20022005. Variable interest rates are summarizeddetermined using formulas such as follows:LIBOR+a Currency swap as of March 31, 2003 Millions except average rates Expected maturity date Contract amounts (year ending March 31) Sell Buy 2004 2005 2006 Total Fair value Functional currency: Yen Variable (US$) to Fixed (Yen) ¥24,860 US$200 ¥6,195 ¥18,665 ¥24,860 (¥586 ) Average pay rate 0.14 % 0.06 % Average receive rate 1.34 % 2.13 % Functional currency: Euro Variable (US$) to Variable (Euro) EUR57 US$50 ¥7,395 ¥7,395 (¥1,490 ) Average pay rate 3.94 % Average receive rate 1.38 % Currency swap as of March 31, 2002 Millions except average rates Expected maturity date Contract amounts (year ending March 31) Sell Buy 2003 2004 2005 Total Fair value Functional currency: Yen Variable (US$) to Fixed (Yen) ¥24,678 US$200 ¥5,893 ¥6,195 ¥12,590 ¥24,678 ¥2,048 Average pay rate 0.43 % 0.14 % 0.41 % Average receive rate 2.02 % 1.91 % 2.53 % Functional currency: Euro Variable (US$) to Variable (Euro) EUR116 US$100 ¥13,487 ¥13,487 (¥222 ) Average pay rate 3.85 % Average receive rate 1.89 % Functional currency: Euro Variable (US$) to Fixed (S$) S$65 US$36 ¥4,717 ¥4,717 ¥20 Average pay rate 1.14 % Average receive rate 1.95 % Expected maturity date Contract amounts (year ending March 31) Buy Sell 2006 2007 2008 Total Fair value (In millions except average rates) Functional currency: Yen Variable (US$) to Fixed (Yen) ¥ 12,590 US$100 ¥ 12,590 ¥ 12,590 ¥ (1,761 ) Average pay rate 0.41 % Average receive rate 2.17 % Fixed (US$) to Fixed (Yen) ¥ 11,950 US$100 ¥ 6,075 ¥ 5,875 ¥ 11,950 ¥ (1,248 ) Average pay rate (0.65 )% (1.35 )% Average receive rate 2.88 % 1.21 % Functional currency: Euro Variable (US$) to Fixed (Euro) EUR76 US$100 ¥ 10,506 ¥ 10,506 ¥ 189 Average pay rate 2.22 % Average receive rate 2.96 % Functional currency: Euro Fixed (GBP) to Fixed (Euro) EUR3 GBP2 ¥ 443 ¥ 443 ¥ 1 Average pay rate 2.20 % Average receive rate 4.61 % 79
of March 31, 2005 87Principal2003 and 2002 are2005. The interest rate on the variable rate debt is determined based on prevailing market rates for tax-exempt municipal bonds in the U.S.follows: Long-term debt (including due within one year) as of March 31, 2003 Millions of yen except average rates Expected maturity date (year ending March 31) Functional Currency 2004 2005 2006 2007 2008 Thereafter Total Fair value Fixed rate (Yen) Yen ¥973 4,513 15,318 251 244 11,228 ¥32,527 ¥34,087 Average interest rate 2.48 % 3.87 % 2.37 % 3.74 % 3.80 % 2.91 % 2.79 % Variable rate (US$) US$ 601 601 601 Average interest rate 1.59 % 1.59 % Variable rate (EUR) EUR 7 7 7 6 12 39 39 Average interest 3.52 % 3.52 % 3.52 % 3.52 % 3.52 % 3.52 % Total ¥973 4,520 15,926 258 250 11,240 ¥33,167 ¥34,727 Long-term debt (including due within one year) as of March 31, 2002 Millions of yen except average rates Expected maturity date (year ending March 31) Functional Currency 2003 2004 2005 2006 2007 Thereafter Total Fair value Fixed rate (Yen) Yen ¥2,446 1,591 5,831 15,326 256 12,007 ¥37,457 ¥38,254 Average interest rate 2.17 % 3.06 % 3.89 % 2.38 % 3.80 % 2.97 % 2.83 % Variable rate (US$) US$ 666 666 666 Average interest rate 2.41 % 2.41 % Interest free loan (PTE) PTE 43 43 43 Total ¥2,489 1,591 5,831 15,992 256 12,007 ¥38,166 ¥38,963 Functional Expected maturity date (year ending March 31) Currency 2006 2007 2008 2009 2010 Thereafter Total Fair value (In millions of yen except average rates) Fixed rate (Yen) Yen ¥ 15,294 244 244 10,244 244 62,519 ¥ 88,789 ¥ 83,724 Average interest rate 2.36 % 2.90 % 2.90 % 2.80 % 2.90 % 0.03 % 0.78 % Variable rate (US$) US$ 537 537 537 Average interest rate 1.70 % 1.70 % Interest free loan (EUR) EUR 4 7 7 22 40 40 Total ¥ 15,835 251 251 10,266 244 62,519 ¥ 89,366 ¥ 84,301 2003 and 2002. Millions of yen 2003 2002 Cost Fair value Cost Fair value Debt securities (by contractual maturities) Maturing within one year — — ¥3,485 ¥3,447 Maturing over one year ¥85 ¥71 111 78 Equity securities ¥6,636 ¥14,760 ¥7,973 ¥18,290 2005 Cost Fair value (In millions of yen) Debt securities (by contractual maturities) Maturing over one year ¥ 94 ¥ 98 Equity securities ¥ 5,734 ¥ 22,170 80
PART II