PIONEER CORPORATION
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October, 2006
Commission File Number 1-7616
PIONEER CORPORATION
(Translation of registrant’s name into English)
4-1, MEGURO 1-CHOME, MEGURO-KU, TOKYO 153-8654, JAPAN
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F þ Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No þ
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-
 
 

 


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SIGNATURES


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
 
      PIONEER CORPORATION
 
      (Registrant)
 
       
Date: October 31, 2006
       
 
  By   /s/ Tamihiko Sudo
 
       
 
      Tamihiko Sudo
 
      President and Representative Director
This report on Form 6-K contains the following:
1.   The announcement released by the Company to the press in Japan dated October 31, 2006, concerning its consolidated second-quarter and semiannual business results, and non-consolidated semiannual business results, for the periods ended September 30, 2006.
2.   The announcement released by the Company to the press in Japan dated October 31, 2006, concerning its decision to sell some land and buildings, comprising all of its Tokorozawa Plant and some of its Omori Plant.

 


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For Immediate Release
October 31, 2006
Pioneer Announces Business Results for 2Q Fiscal 2007
TOKYO — Pioneer Corporation today announced its consolidated second-quarter and semiannual business results, and non-consolidated semiannual business results, for the periods ended September 30, 2006.
Consolidated Financial Highlights
(In millions of yen except per share information)
                                                 
    Three months   Six months
    ended September 30   ended September 30
                    % to                   % to
                    prior                   prior
    2006   2005   year   2006   2005   year
Operating revenue
  ¥ 188,643     ¥ 179,888       104.9 %   ¥ 380,319     ¥ 339,084       112.2 %
Operating income (loss)
    4,614       (7,733 )           11,691       (16,664 )      
Income (loss) from continuing operations before income taxes
    4,620       (37,481 )           12,624       (44,153 )      
Income (loss) from continuing operations
    887       (52,838 )           6,433       (58,207 )      
Income from discontinued operations, net of tax
    2,659       137             2,775       163        
Net income (loss)
  ¥ 3,546     ¥ (52,701 )     %   ¥ 9,208     ¥ (58,044 )     %
 
                                               
Basic net income (loss) per share:
                                               
Income (loss) from continuing operations
  ¥ 5.09     ¥ (302.92 )           ¥ 36.88     ¥ (333.70 )        
Income from discontinued operations, net of tax
    15.24       0.78               15.91       0.93          
Net income (loss)
  ¥ 20.33     ¥ (302.14 )           ¥ 52.79     ¥ (332.77 )        
 
                                               
Diluted net income (loss) per share:
                                               
Income (loss) from continuing operations
  ¥ 4.28     ¥ (302.92 )           ¥ 33.15     ¥ (333.70 )        
Income from discontinued operations, net of tax
    14.04       0.78               14.65       0.93          
Net income (loss)
  ¥ 18.32     ¥ (302.14 )           ¥ 47.80     ¥ (332.77 )        
Note:   In fiscal 2006, the Company sold a subsidiary engaged in the development of cable TV software, and in the second quarter of fiscal 2007, sold subsidiaries involved in the electronic components business. The operating results of these subsidiaries and the gain on the sales are presented as income from discontinued operations in the above table. Previously reported amounts have been reclassified accordingly.

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Consolidated Business Results
For the second quarter of fiscal 2007, the three months ended September 30, 2006, consolidated operating revenue increased 4.9% from the second quarter of fiscal 2006 to ¥188,643 million (US$1,598.7 million), mainly due to higher sales of plasma displays and car navigation systems, and the weaker yen, despite lower sales of DVD recorders.
     Operating income was ¥4,614 million (US$39.1 million), compared with an operating loss of ¥7,733 million in the corresponding period a year earlier. This reflected higher sales, as well as an improved gross profit margin and lower selling, general and administrative expenses due to the benefits of business restructuring measures started in the previous fiscal year and the weaker yen. Net income totaled ¥3,546 million (US$30.1 million), compared with a net loss of ¥52,701 million in the same period in fiscal 2006. This was due to the absence of impairment losses on property, plant and equipment, equity in losses of affiliated companies and valuation allowances for deferred tax assets, which we recorded in connection with business restructuring in the corresponding period of the previous year, as well as a gain on sale of subsidiaries involved in the electronic components business in the period under review.
     During the second quarter of fiscal 2007, the average value of the Japanese yen was weaker against the U.S. dollar and the euro by 4.3% and 8.4%, respectively, compared with the second quarter of fiscal 2006.
Home Electronics sales increased 6.8% year on year to ¥87,301 million (US$739.8 million). Plasma display sales rose due to strong performance by our own-brand models in North America and Europe, despite a drop in OEM (original equipment manufacturing) sales. Sales of plasma displays accounted for approximately 46% of total Home Electronics sales. In addition, sales of DVD drives rose, while there was a large drop in sales of DVD recorders from the same period a year ago.
     In terms of geographic sales, sales in Japan declined 15.1% to ¥16,152 million (US$136.9 million), while overseas sales climbed 13.4% to ¥71,149 million (US$603.0 million).
     The operating loss in this segment was ¥3,848 million (US$32.6 million), showing an improvement compared with an operating loss of ¥13,140 million in the corresponding period of the previous fiscal year. In addition to growth in sales, this improvement principally reflected an increased gross profit margin mainly in the plasma display field, largely due to the benefits of business restructuring measures and efforts to strictly control costs and improve manufacturing efficiency.
Car Electronics sales increased 7.0% to ¥83,634 million (US$708.8 million), mainly due to increased sales of car navigation systems, despite slightly lower sales of car audio products. In car navigation systems, consumer-market sales increased in Japan and elsewhere, while OEM sales rose in North America. In car audio products, consumer-market sales rose in Central and South America, but fell in Japan and North America. Total OEM sales in this segment accounted for approximately 35% of Car Electronics sales.

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     In terms of geographic sales, sales in Japan increased 8.9% to ¥28,564 million (US$242.1 million), and overseas sales rose 6.1% to ¥55,070 million (US$466.7 million).
     Operating income in this segment increased 92.9% year on year to ¥5,586 million (US$47.3 million) due to sales growth and cost reductions achieved by reorganizing our production sites.
In Patent Licensing, royalty revenue decreased 88.0% to ¥500 million (US$4.2 million). This decrease was mainly attributable to the impact of the expiration of some patents licensed to the optical disc industry.
     Operating income in this segment declined 94.8% to ¥187 million (US$1.6 million) compared with the same period of the previous fiscal year.
In the Others segment, sales rose 8.7% to ¥17,208 million (US$145.8 million), mainly reflecting higher sales of factory automation systems and organic light-emitting diode (OLED) displays in Japan.
     In terms of geographic sales, sales in Japan increased 33.2% to ¥11,262 million (US$95.4 million), while overseas sales declined 19.4% to ¥5,946 million (US$50.4 million).
     Operating income in this segment was ¥2,566 million (US$21.7 million) compared with an operating loss of ¥780 million in the corresponding period of the previous fiscal year. This mainly reflected improved profitability in OLED displays due to the benefits of business restructuring measures.
For the first half of fiscal 2007, the six months ended September 30, 2006, consolidated operating revenue rose 12.2% from the first half of fiscal 2006 to ¥380,319 million (US$3,223.0 million). Operating income was ¥11,691 million (US$99.1 million), compared with an operating loss of ¥16,664 million in the corresponding period a year earlier. Net income was ¥9,208 million (US$78.0 million), compared with a net loss of ¥58,044 million in the same period of fiscal 2006.
Note:   Operating income (loss) in each business segment represents operating income (loss) before elimination of intersegment transactions.
Cash Flows
During the first half of fiscal 2007, operating activities used net cash of ¥9,855 million (US$83.5 million). This was mainly due to an increase in trade receivables and inventories of ¥42,652 million (US$361.5 million), as well as a decrease in accrued liabilities of ¥7,866 million (US$66.7 million), which were partially offset by net income of ¥9,208 million (US$78.0 million) and depreciation and amortization of ¥18,500 million (US$156.8 million) for this period. Meanwhile, investing activities used net cash of ¥7,758 million (US$65.7 million). Although the sale of subsidiaries provided net cash of ¥10,862 million (US$92.1 million), we used ¥20,477 million (US$173.5 million) for capital expenditures related mainly to car electronics products and plasma displays. Financing activities provided net cash of ¥5,035 million (US$42.7 million), mainly from

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an increase in short-term borrowings.
     Consequently, cash and cash equivalents at September 30, 2006 were ¥109,822 million (US$930.7 million), ¥11,858 million lower than at March 31, 2006.
Dividend Policy
Pioneer positions its dividend policy as one of its highest management priorities. On the basis of maintaining stable dividends, the Company sets dividend payments appropriately in light of its financial position, consolidated business results, and other factors. Retained earnings are effectively used primarily to develop businesses, as well as reinforce competitiveness and our management base.
     Based on this dividend policy, Pioneer has decided to pay an interim dividend for fiscal 2007 of ¥5.0 (US$0.04) per share of common stock.
Business Forecasts for Fiscal 2007
We revised our consolidated business forecasts for fiscal 2007, ending March 31, 2007, which were announced on July 31, 2006, as follows:
                                 
    (In millions of yen)  
    Revised     Previous              
    projections     projections              
    for fiscal 2007     for fiscal 2007     Changes     Results  
    (A)     (B)     (A – B)     for fiscal 2006  
Operating revenue
  ¥ 820,000     ¥ 845,000     ¥ (25,000 )   ¥ 754,964  
Operating income (loss)
    18,000       18,000       0       (16,409 )
Income (loss) before income taxes
    19,000       19,000       0       (71,165 )
Net income (loss)
  ¥ 10,000     ¥ 7,500     ¥ 2,500     ¥ (84,986 )
 
                       
Our previous operating revenue forecast has been lowered because second-half sales of plasma displays, DVD recorders and car electronics products are projected to fall below initial forecasts due to intensifying competition, falling market prices and other factors.
     We have not revised our forecasts for operating income and income before income taxes mainly in consideration of the impact of the weaker yen and cost reduction benefits, despite lower operating revenue than forecast previously. Net income is expected to surpass the previous forecast because we posted a gain on sale of subsidiaries involved in the electronic components business in the second quarter of fiscal 2007.
     We are assuming average yen-U.S. dollar and yen-euro exchange rates of ¥115 and ¥145, respectively, for the revised projections.
Cautionary Statement with Respect to Forward-Looking Statements
Statements made in this release with respect to our current plans, estimates, strategies and beliefs, and other statements that are not historical facts are forward-looking statements about our future performance. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. We caution that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place

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undue reliance on them. It is not our obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We disclaim any such obligation. Risks and uncertainties that might affect us include, but are not limited to, (i) general economic conditions in our markets, particularly levels of consumer spending; (ii) exchange rates, particularly between the yen and the U.S. dollar, euro, and other currencies in which we make significant sales or in which our assets and liabilities are denominated; (iii) our ability to continue to design and develop and win acceptance for 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 successfully implement our business strategies; (v) our ability to compete, as well as develop and implement successful sales and distribution strategies, in light of technological developments in and affecting our businesses; (vi) our continued ability to devote sufficient resources to research and development, and capital expenditures; (vii) our ability to continuously enhance our brand image; (viii) the success of our joint ventures and alliances; (ix) the success of our business restructuring plans; and (x) the outcome of contingencies.
Risk Factors
Business risks that may have an adverse effect on our business results, financial position and share price include, but are not limited to, the following:
  Fluctuations in foreign exchange rates, especially the appreciation of the yen
  Intensified competition with other companies
  Larger-than-anticipated declines in prices for our core products
  Failure of the plasma display market, a main area of focus for us, to grow as anticipated
  Failure of Blu-ray Disc, a next-generation optical disc format we have adopted, with the view to gaining broader market acceptance
  Decline in profitability due to a large drop in royalty revenue as a result of the expiration of many of our existing patents relating to laser optical disc technologies
  Greater-than-expected contraction of consumer markets for car electronics products due to growth in OEM markets
  Impact of the growing portable car navigation systems market on growth in the in-dash car navigation systems market, a main area of focus for us
  Substantial dependence of our OEM business on customer business performance and other customer-related factors
  Product recalls or successful product liability claims brought against us, which could result in a significant cost or a negative impact on our reputation
  Significant reduction in our production capacity which may be caused by damage to our production facilities due to natural disasters or other events, as production of certain products is concentrated at specific facilities
Basic Management Policies and Medium-term Business Plan
Pioneer positions customer satisfaction at the core of management. We seek to offer innovative, high-quality, and value-added electronics products that create new value for customers, aiming to share the Pioneer Group’s philosophy, “Move the Heart and Touch the Soul,” with more people around the world.
Based on this group philosophy, in April 2006 Pioneer formulated a new group vision to guide management over the medium term: “To become a company that encourages all its members to work as a team, with everyone customer-focused, integrating each one’s

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professionalism in pursuing innovations one after another.” Through this vision, we believe that we can set a process in motion where employees fulfill their duties from the customer’s perspective, and come up with ideas that resonate with other employees around them to give rise to major innovations. This innovation will realize new lifestyle proposals and revolutionary products that change consumers’ ways of life.
Pioneer has also established new numerical targets for the fiscal year ending March 31, 2009, aiming for operating revenue and operating income of at least ¥950 billion and ¥30 billion, respectively, on a consolidated basis. More specifically, we aim to raise the operating margin to at least 7% in the Car Electronics business, and to improve operating profitability in the Home Electronics business, which is still weak, to at least the break-even level.
To attain these targets, we will allocate more resources to the Car Electronics business to maintain a leading position in consumer markets, while aiming to drive overall earnings growth across the entire business by further expanding OEM operations. Meanwhile, production capacity will be ramped up in Thailand and China to prepare for overall business expansion in this segment.
     In the Home Electronics business, we will provide new forms of value for customers, mainly through plasma displays, in terms of picture quality, product design, user-friendliness, product quality, and sound. Pioneer aims to improve the image of its brands, while improving earnings by carefully screening products based on their profitability.
     We remain committed to enhancing our business results by growing earnings in the Car Electronics business and improving profitability in the Home Electronics business as quickly as possible.
Issues to Be Addressed
The economic outlook is for stable growth overall, supported by favorable corporate earnings and consumer spending, despite some concerns over surging materials prices and slower U.S. economic growth. However, Pioneer faces extremely challenging business conditions such as price-based competition in its core products.
In the plasma display business, Pioneer will continue to reduce costs, and review options for increasing production capacity in response to the higher forecast demand for plasma displays. In this regard, we are considering all options, including renovating existing plants through a “Scrap & Build” approach and joint investments with other companies.
     Demand for high-resolution panels is projected to increase in step with the launch of high-definition (HD) broadcasting, and uptake of HD content worldwide through media such as Blu-ray Discs. Pioneer will therefore leverage its technological edge in panel technologies, one of its defining strengths, to offer outstanding high-resolution plasma displays.

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In the optical disc business, Pioneer is focusing on products based on Blu-ray Disc, a next-generation optical disc format, as well as DVD products. The market for DVD products is growing, but prices are rapidly falling. In response, Pioneer will reduce costs through production in China and collaborations with other companies, and raise the return on product development investments through external sales of key components. Furthermore, Pioneer is shifting the main thrust of product development to Blu-ray Disc products, as part of efforts to improve profitability by offering new value-added proposals.
Turning to the entire Home Electronics business, Pioneer is constructing a new office in Kawasaki City, Kanagawa Prefecture with the aim of consolidating planning, development and design departments to generate synergies between plasma displays and other audio-visual products. Plans call for construction to be completed in spring 2007.
In the Car Electronics business, specifically in car audio products for consumer markets, Pioneer is focusing on fast-growing markets such as Central and South America and Russia in order to retain its position of leadership in these products. The Company will also offer products that stand apart from those of other companies by delivering new value and functions. In car navigation systems for consumer markets, Pioneer will actively press ahead with business expansion in Europe and North America, as well as in Japan, where Pioneer’s car navigation systems have enjoyed a strong reputation. Aiming to reduce increasing software development costs accompanying product advancements, Pioneer is reforming product development processes and pursuing sharing and standardization in this area.
     In the OEM car audio products business, Pioneer aims to make the most of its strengths in consumer markets to drive further business expansion. In the OEM car navigation system business, Pioneer is reinforcing efforts in the growing market for car navigation systems offered as dealer options in Japan. In parallel, the Company aims to capture new orders by offering new proposals to OEM customers that leverage our own product planning capabilities, which have been proven in consumer markets, and the advantages of conducting map-related content production within its group.
Pioneer Corporation is a leading global manufacturer of consumer- and business-use electronics products such as audio, video and car electronics. Its shares are traded on the Tokyo Stock Exchange.
# # # # # #
The U.S. dollar amounts in this release represent translation of Japanese yen, for convenience only, at the rate of ¥118=US$1.00, the approximate rate prevailing on September 30, 2006.

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Attachments:
  I.   Consolidated financial statements for the three months and the six months ended September 30, 2006
 
  II.   Non-consolidated financial statements for the six months ended September 30, 2006
For further information, please contact:
Investor Relations Department, Corporate Branding and Communications Division
Pioneer Corporation, Tokyo
Phone: +81-3-3495-6773 / Fax: +81-3-3495-4301
E-mail: pioneer_ir@post.pioneer.co.jp
IR Website: http://pioneer.jp/ir-e/

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     Pioneer Corporation and Subsidiaries
I. CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE MONTHS AND THE SIX MONTHS ENDED SEPTEMBER 30, 2006
(1) OPERATING REVENUE BY SEGMENT
                                         
                            (In millions of yen)  
    Three months ended September 30  
    2006     2005     % to  
    Amount     % to total     Amount     % to total     prior year  
Domestic
  ¥ 16,152       8.6 %   ¥ 19,028       10.6 %     84.9 %
Overseas
    71,149       37.7       62,725       34.8       113.4  
 
                             
Home Electronics
    87,301       46.3       81,753       45.4       106.8  
 
                             
Domestic
    28,564       15.1       26,236       14.6       108.9  
Overseas
    55,070       29.2       51,904       28.8       106.1  
 
                             
Car Electronics
    83,634       44.3       78,140       43.4       107.0  
 
                             
Domestic
                             
Overseas
    500       0.3       4,162       2.3       12.0  
 
                             
Patent Licensing
    500       0.3       4,162       2.3       12.0  
 
                             
Domestic
    11,262       6.0       8,455       4.7       133.2  
Overseas
    5,946       3.1       7,378       4.2       80.6  
 
                             
Others
    17,208       9.1       15,833       8.9       108.7  
 
                             
Domestic
    55,978       29.7       53,719       29.9       104.2  
Overseas
    132,665       70.3       126,169       70.1       105.1  
 
                             
Total
  ¥ 188,643       100.0 %   ¥ 179,888       100.0 %     104.9 %
 
                             
                                         
                            (In millions of yen)  
    Six months ended September 30  
    2006     2005     % to  
    Amount     % to total     Amount     % to total     prior year  
Domestic
  ¥ 32,602       8.6 %   ¥ 36,068       10.6 %     90.4 %
Overseas
    138,150       36.3       108,890       32.1       126.9  
 
                             
Home Electronics
    170,752       44.9       144,958       42.7       117.8  
 
                             
Domestic
    62,882       16.5       56,177       16.6       111.9  
Overseas
    112,088       29.5       104,176       30.7       107.6  
 
                             
Car Electronics
    174,970       46.0       160,353       47.3       109.1  
 
                             
Domestic
                             
Overseas
    1,761       0.5       5,285       1.6       33.3  
 
                             
Patent Licensing
    1,761       0.5       5,285       1.6       33.3  
 
                             
Domestic
    21,293       5.6       15,016       4.4       141.8  
Overseas
    11,543       3.0       13,472       4.0       85.7  
 
                             
Others
    32,836       8.6       28,488       8.4       115.3  
 
                             
Domestic
    116,777       30.7       107,261       31.6       108.9  
Overseas
    263,542       69.3       231,823       68.4       113.7  
 
                             
Total
  ¥ 380,319       100.0 %   ¥ 339,084       100.0 %     112.2 %
 
                             

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Pioneer Corporation and Subsidiaries
(2) CONSOLIDATED STATEMENTS OF OPERATIONS
                         
            (In millions of yen)  
    Three months ended September 30  
                    % to  
    2006     2005     prior year  
Operating revenue:
                       
Net sales
  ¥ 188,143     ¥ 175,726       107.1 %
Royalty revenue
    500       4,162       12.0  
 
                 
Total operating revenue
    188,643       179,888       104.9  
 
                 
Operating costs and expenses:
                       
Cost of sales
    142,817       143,257       99.7  
Selling, general and administrative expenses
    41,212       44,364       92.9  
 
                 
Total operating costs and expenses
    184,029       187,621       98.1  
 
                 
Operating income (loss)
    4,614       (7,733 )      
Other income (expenses):
                       
Interest income
    1,136       624       182.1  
Foreign exchange loss
    (986 )     (320 )     308.1  
Interest expense
    (217 )     (325 )     66.8  
Other—net
    73       (29,727 )      
 
                 
Total other income (expenses)
    6       (29,748 )      
 
                 
Income (loss) from continuing operations before income taxes
    4,620       (37,481 )      
Income taxes
    3,470       (5,347 )      
Minority interest in losses (earnings) of subsidiaries
    (245 )     3,601        
Equity in losses of affiliated companies
    (18 )     (24,305 )     0.1  
 
                 
Income (loss) from continuing operations
    887       (52,838 )      
Income from discontinued operations, net of tax
    2,659       137        
 
                 
Net income (loss)
  ¥ 3,546     ¥ (52,701 )     %
 
                 
                         
            (In millions of yen)  
    Six months ended September 30  
                    % to  
    2006     2005     prior year  
Operating revenue:
                       
Net sales
  ¥ 378,558     ¥ 333,799       113.4 %
Royalty revenue
    1,761       5,285       33.3  
 
                 
Total operating revenue
    380,319       339,084       112.2  
 
                 
Operating costs and expenses:
                       
Cost of sales
    283,384       269,201       105.3  
Selling, general and administrative expenses
    85,244       86,547       98.5  
 
                 
Total operating costs and expenses
    368,628       355,748       103.6  
 
                 
Operating income (loss)
    11,691       (16,664 )      
Other income (expenses):
                       
Interest income
    2,085       1,251       166.7  
Foreign exchange loss
    (385 )     (1,062 )     36.3  
Interest expense
    (616 )     (720 )     85.6  
Other—net
    (151 )     (26,958 )     0.6  
 
                 
Total other income (expenses)
    933       (27,489 )      
 
                 
Income (loss) from continuing operations before income taxes
    12,624       (44,153 )      
Income taxes
    6,214       (6,935 )      
Minority interest in losses of subsidiaries
    1       4,169       0.0  
Equity in earnings (losses) of affiliated companies
    22       (25,158 )      
 
                 
Income (loss) from continuing operations
    6,433       (58,207 )      
Income from discontinued operations, net of tax
    2,775       163        
 
                 
Net income (loss)
  ¥ 9,208     ¥ (58,044 )     %
 
                 

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Pioneer Corporation and Subsidiaries
(3) CONSOLIDATED BALANCE SHEETS
                                         
                            (In millions of yen)  
    September 30     March 31  
                    Increase/             Increase/  
    2006     2005     (Decrease)     2006     (Decrease)  
ASSETS
                                       
Current assets:
                                       
Cash and cash equivalents
  ¥ 109,822     ¥ 107,198     ¥ 2,624     ¥ 121,680     ¥ (11,858 )
Trade receivables, less allowance
    119,106       126,981       (7,875 )     107,563       11,543  
Inventories
    139,030       126,594       12,436       104,226       34,804  
Assets held for sale
                      25,577       (25,577 )
Others
    70,826       73,878       (3,052 )     69,626       1,200  
 
                             
Total current assets
    438,784       434,651       4,133       428,672       10,112  
 
                             
Investments and long-term receivables
    27,795       25,268       2,527       29,772       (1,977 )
Property, plant and equipment, less depreciation
    159,857       171,893       (12,036 )     160,231       (374 )
Intangible assets
    19,482       22,723       (3,241 )     20,576       (1,094 )
Other assets
    42,232       44,518       (2,286 )     38,795       3,437  
 
                             
Total assets
  ¥ 688,150     ¥ 699,053     ¥ (10,903 )   ¥ 678,046     ¥ 10,104  
 
                             
 
                                       
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                       
Current liabilities:
                                       
Short-term borrowings and current portion of long-term debt
  ¥ 40,270     ¥ 55,560     ¥ (15,290 )   ¥ 30,370     ¥ 9,900  
Trade payables
    120,322       104,831       15,491       102,082       18,240  
Liabilities held for sale
                      17,863       (17,863 )
Others
    116,351       122,463       (6,112 )     121,977       (5,626 )
 
                             
Total current liabilities
    276,943       282,854       (5,911 )     272,292       4,651  
 
                             
Long-term debt
    89,225       79,512       9,713       92,970       (3,745 )
Other long-term liabilities
    25,168       41,225       (16,057 )     25,425       (257 )
Minority interests
    14,056       14,202       (146 )     14,109       (53 )
Shareholders’ equity:
                                       
Common stock
    49,049       49,049             49,049        
Capital surplus
    82,959       82,834       125       82,910       49  
Retained earnings
    182,162       201,204       (19,042 )     173,826       8,336  
Accumulated other comprehensive loss
    (18,964 )     (39,390 )     20,426       (20,092 )     1,128  
Treasury stock
    (12,448 )     (12,437 )     (11 )     (12,443 )     (5 )
 
                             
Total shareholders’ equity
    282,758       281,260       1,498       273,250       9,508  
 
                             
Total liabilities and shareholders’ equity
  ¥ 688,150     ¥ 699,053     ¥ (10,903 )   ¥ 678,046     ¥ 10,104  
 
                             
 
                                       
Breakdown of accumulated other comprehensive loss:
                                       
Minimum pension liability adjustments
  ¥ (4,650 )   ¥ (11,391 )   ¥ 6,741     ¥ (3,680 )   ¥ (970 )
Net unrealized holding gain on securities
    9,342       7,475       1,867       10,352       (1,010 )
Cumulative foreign currency translation adjustments
    (23,656 )     (35,474 )     11,818       (26,764 )     3,108  
 
                             
Total accumulated other comprehensive loss
  ¥ (18,964 )   ¥ (39,390 )   ¥ 20,426     ¥ (20,092 )   ¥ 1,128  
 
                             

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Pioneer Corporation and Subsidiaries
(4) CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
                                                 
    (In millions of yen)  
                            Accumulated                
                            Other             Total  
    Common     Capital     Retained     Comprehensive     Treasury     Shareholders’  
    Stock     Surplus     Earnings     Loss     Stock     Equity  
Balance at March 31, 2005
  ¥ 49,049     ¥ 82,735     ¥ 260,556     ¥ (47,669 )   ¥ (12,432 )   ¥ 332,239  
Net loss
                    (84,986 )                     (84,986 )
Other comprehensive income
                            27,577               27,577  
Value ascribed to stock options
            175                               175  
Cash dividends (¥10 per share)
                    (1,744 )                     (1,744 )
Purchase and sales of treasury stock, net
                                    (11 )     (11 )
 
                                   
Balance at March 31, 2006
  ¥ 49,049     ¥ 82,910     ¥ 173,826     ¥ (20,092 )   ¥ (12,443 )   ¥ 273,250  
Net Income
                    9,208                       9,208  
Other comprehensive income
                            1,128               1,128  
Value ascribed to stock options
            49                               49  
Cash dividends (¥5 per share)
                    (872 )                     (872 )
Purchase and sales of treasury stock, net
                                    (5 )     (5 )
 
                                   
Balance at September 30, 2006
  ¥ 49,049     ¥ 82,959     ¥ 182,162     ¥ (18,964 )   ¥ (12,448 )   ¥ 282,758  
 
                                   
(5) CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 
    (In millions of yen)  
    Three months     Six months  
    ended September 30     ended September 30  
    2006     2005     2006     2005  
I. Operating activities:
                               
Net income (loss)
  ¥ 3,546     ¥ (52,701 )   ¥ 9,208     ¥ (58,044 )
Depreciation and amortization
    9,348       11,575       18,500       24,122  
(Increase) decrease in trade receivables
    1,765       (15,718 )     (9,965 )     7,160  
(Increase) decrease in inventories
    (15,446 )     1,396       (32,687 )     (14,635 )
Increase in trade payables
    9,519       5,607       17,184       8,016  
Increase (decrease) in other accrued liabilities
    8,921       10,822       (7,866 )     2,737  
Other
    (3,348 )     41,299       (4,229 )     31,864  
 
                       
Net cash provided by (used in) operating activities
    14,305       2,280       (9,855 )     1,220  
 
                       
II. Investing activities:
                               
Payment for purchase of fixed assets
    (12,157 )     (10,355 )     (20,477 )     (19,282 )
Proceed from sale of discontinued operations
    10,862             10,862        
Other
    1,584       3,354       1,857       7,357  
 
                       
Net cash provided by (used in) investing activities
    289       (7,001 )     (7,758 )     (11,925 )
 
                       
III. Financing activities:
                               
Increase (decrease) in short-term borrowings and long-term debt
    5,742       (3,183 )     7,198       2,866  
Dividends paid
                (436 )     (2,180 )
Other
    (907 )     (1,034 )     (1,727 )     (2,073 )
 
                       
Net cash provided by (used in) financing activities
    4,835       (4,217 )     5,035       (1,387 )
 
                       
Effect of exchange rate changes on cash and cash equivalents
    1,575       1,366       720       2,609  
 
                       
Net increase (decrease) in cash and cash equivalents
    21,004       (7,572 )     (11,858 )     (9,483 )
Cash and cash equivalents, beginning of period
    88,818       114,770       121,680       116,681  
 
                       
Cash and cash equivalents, end of period
  ¥ 109,822     ¥ 107,198     ¥ 109,822     ¥ 107,198  
 
                       
 
                               
 
                       
Free cash flow (I + II)
  ¥ 14,594     ¥ (4,721 )   ¥ (17,613 )   ¥ (10,705 )
 
                       

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Table of Contents

Pioneer Corporation and Subsidiaries
(6) SEGMENT INFORMATION
The following segment information is prepared pursuant to the regulations under the Securities and Exchange Law of Japan.
<Business Segments>
                                                 
    (In millions of yen)  
    Three months ended September 30  
    2006     2005     % to prior year  
    Operating     Operating     Operating     Operating     Operating     Operating  
    Revenue     Income     Revenue     Income     Revenue     Income  
Home Electronics
  ¥ 87,531     ¥ (3,848 )   ¥ 82,264     ¥ (13,140 )     106.4 %     29.3 %
Car Electronics
    84,124       5,586       78,516       2,896       107.1       192.9  
Patent Licensing
    500       187       4,201       3,598       11.9       5.2  
Others
    25,989       2,566       25,099       (780 )     103.5        
 
                                   
Total
    198,144       4,491       190,080       (7,426 )     104.2        
Corporate and Eliminations
    (9,501 )     123       (10,192 )     (307 )            
 
                                   
Consolidated
  ¥ 188,643     ¥ 4,614     ¥ 179,888     ¥ (7,733 )     104.9 %     %
 
                                   
                                                 
    (In millions of yen)  
    Six months ended September 30  
    2006     2005     % to prior year  
    Operating     Operating     Operating     Operating     Operating     Operating  
    Revenue     Income     Revenue     Income     Revenue     Income  
Home Electronics
  ¥ 171,191     ¥ (4,245 )   ¥ 145,772     ¥ (25,498 )     117.4 %     16.6 %
Car Electronics
    175,913       13,118       161,124       8,210       109.2       159.8  
Patent Licensing
    1,761       974       5,324       3,969       33.1       24.5  
Others
    50,224       2,804       47,013       (1,666 )     106.8        
 
                                   
Total
    399,089       12,651       359,233       (14,985 )     111.1        
Corporate and Eliminations
    (18,770 )     (960 )     (20,149 )     (1,679 )            
 
                                   
Consolidated
  ¥ 380,319     ¥ 11,691     ¥ 339,084     ¥ (16,664 )     112.2 %     %
 
                                   
<Geographic Segments>
                                                 
    (In millions of yen)  
    Six months ended September 30  
    2006     2005     % to prior year  
    Operating     Operating     Operating     Operating     Operating     Operating  
    Revenue     Income     Revenue     Income     Revenue     Income  
Japan
  ¥ 322,597     ¥ 5,525     ¥ 283,600     ¥ (15,923 )     113.8 %     %
North America
    99,623       4,271       92,524       (1,740 )     107.7        
Europe
    80,026       1,528       66,311       (1,315 )     120.7        
Other Regions
    175,437       2,862       155,728       3,612       112.7       79.2  
 
                                   
Total
    677,683       14,186       598,163       (15,366 )     113.3        
Corporate and Eliminations
    (297,364 )     (2,495 )     (259,079 )     (1,298 )            
 
                                   
Consolidated
  ¥ 380,319     ¥ 11,691     ¥ 339,084     ¥ (16,664 )     112.2 %     %
 
                                   

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Pioneer Corporation and Subsidiaries
Notes:
  1.   The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.
 
  2.   The consolidated financial statements include the accounts of the parent company and 118 subsidiaries and the investments in 3 affiliated companies accounted for on an equity basis.
 
  3.   In fiscal 2006, the Company sold a subsidiary engaged in the development of cable TV software, and in the second quarter of fiscal 2007, sold subsidiaries involved in the electronic components business. The operating results of these subsidiaries and the gain on the sales are presented as income from discontinued operations in the consolidated statements of operations. Reclassifications have been made to previously reported operating revenue by segment, consolidated statements of operations and segment information to conform to this presentation.
 
      Summarized financial information of the discontinued operations for the three months and the six months ended September 30, 2005 and 2006 is as follows:
                                 
                    (In millions of yen)  
    Three months     Six months  
    ended September 30     ended September 30  
    2006     2005     2006     2005  
Operating revenue
  ¥ 2,798     ¥ 5,827     ¥ 10,442     ¥ 10,814  
 
                       
Operating income
    151       214       425       276  
 
                       
Income before income taxes
    142       221       324       283  
Gain on sales of discontinued operations
    2,488             2,488        
Income taxes
    (29 )     84       37       120  
 
                       
Income from discontinued operations
  ¥ 2,659     ¥ 137     ¥ 2,775     ¥ 163  
 
                       

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Table of Contents

Pioneer Corporation—Parent Company Only
II.   NON-CONSOLIDATED FINANCIAL STATEMENTS
 
    FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006
(1) SALES BY SEGMENT
                                         
    (In millions of yen)  
    Six months ended September 30  
    2006     2005     % to  
    Amount     % to total     Amount     % to total     prior year  
Domestic
  ¥ 28,748       10.6 %   ¥ 31,923       13.0 %     90.1 %
Export
    105,716       39.0       84,303       34.3       125.4  
 
                             
Home Electronics
    134,464       49.6       116,226       47.3       115.7  
 
                             
Domestic
    62,681       23.2       55,997       22.8       111.9  
Export
    73,391       27.1       73,053       29.7       100.5  
 
                             
Car Electronics
    136,072       50.3       129,051       52.5       105.4  
 
                             
Domestic
    338       0.1       494       0.2       68.5  
Export
    10       0.0       47       0.0       23.0  
 
                             
Others
    349       0.1       541       0.2       64.5  
 
                             
Domestic
    91,768       33.9       88,416       36.0       103.8  
Export
    179,118       66.1       157,403       64.0       113.8  
 
                             
Total
  ¥ 270,886       100.0 %   ¥ 245,819       100.0 %     110.2 %
 
                             
(2) CONDENSED STATEMENTS OF OPERATIONS
                                 
    (In millions of yen)  
    Six months ended September 30  
    2006     2005  
            % to             % to  
    Amount     net sales     Amount     net sales  
Net sales
  ¥ 270,886       100.0 %   ¥ 245,819       100.0 %
Cost of sales
    234,989       86.7       213,720       86.9  
Selling, general and administrative expenses
    41,825       15.5       41,592       17.0  
 
                       
Operating income (loss)
    (5,928 )     (2.2 )     (9,493 )     (3.9 )
Non-operating income —net
    425       0.2       54       0.1  
 
                       
Ordinary income (loss)
    (5,503 )     (2.0 )     (9,439 )     (3.8 )
Other income (expenses)—net
    4,381       1.6       357       0.1  
 
                       
Income (loss) before income taxes
    (1,122 )     (0.4 )     (9,081 )     (3.7 )
Income taxes
    (308 )     (0.1 )     5,679       2.3  
 
                       
Net income (loss)
  ¥ (813 )     (0.3 )%   ¥ (14,761 )     (6.0 )%
 
                       

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Table of Contents

Pioneer Corporation—Parent Company Only
(3) CONDENSED BALANCE SHEETS
(In millions of yen)
                         
    September 30     March 31  
    2006     2005     2006  
ASSETS
                       
Current assets:
                       
Cash
  ¥ 43,289     ¥ 46,162     ¥ 50,305  
Notes and accounts receivable—trade
    49,847       46,605       46,034  
Inventories
    35,298       29,044       30,015  
Other current assets
    48,937       31,020       40,105  
 
                 
Total current assets
    177,373       152,832       166,461  
 
                       
Fixed assets:
                       
Tangible
    56,273       52,674       55,537  
Intangible
    28,366       28,523       28,752  
Investments and others
    200,814       199,361       201,979  
 
                 
Total fixed assets
    285,454       280,559       286,269  
 
                 
Total assets
  ¥ 462,827     ¥ 433,392     ¥ 452,730  
 
                 
 
                       
LIABILITIES AND SHAREHOLDERS’ EQUITY
                       
Current liabilities:
                       
Notes and accounts payable—trade
  ¥ 76,040     ¥ 53,827     ¥ 56,175  
Accrued expenses
    53,505       37,471       61,190  
Other current liabilities
    42,546       15,350       40,512  
 
                 
Total current liabilities
    172,091       106,649       157,879  
Long-term liabilities
    71,860       73,279       73,351  
 
                 
Total liabilities
    243,951       179,929       231,230  
 
                       
Shareholders’ equity
          253,463       221,500  
 
                 
Total liabilities and shareholders’ equity
        ¥ 433,392     ¥ 452,730  
 
                 
 
                       
Net assets
                       
Shareholders’ equity
  ¥ 212,834              
Difference of appreciation and conversion
    6,041              
 
                 
Total net assets
    218,875              
 
                 
Total liabilities and net assets
  ¥ 462,827              
 
                 

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Pioneer Corporation—Parent Company Only
(4) STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In millions of yen)
                                                                 
    Shareholders’ Equity  
            Capital Surplus     Retained Earnings                
                                    Other Retained                
                                    Earnings                
                                            Retained                
            Additional     Other                     Earnings             Total  
    Common     Paid-in     Capital     Legal     Voluntary     Brought     Treasury     Shareholders’  
    Stock     Capital     Surplus     Reserve     Reserves     Forward     Stock     Equity  
Balance at March 31, 2006
  ¥ 49,048     ¥ 81,278     ¥ 36     ¥ 6,140     ¥ 136,931     ¥ (46,902 )   ¥ (12,442 )   ¥ 214,090  
Changes in the period:
                                                               
Issuance of new shares
                                                             
Reversal of voluntary reserves
                                    (47,800 )     47,800                
Dividends from surplus
                                            (436 )             (436 )
Net income (loss)
                                            (813 )             (813 )
Disposal of treasury stock
                    0                               0       0  
Purchase of treasury stock
                                                    (7 )     (7 )
Net change of items other than shareholders’ equity
                                                             
Total changes in the period
                0             (47,800 )     46,550       (7 )     (1,255 )
 
                                               
Balance at September 30, 2006
  ¥ 49,048     ¥ 81,278     ¥ 36     ¥ 6,140     ¥ 89,131     ¥ (351 )   ¥ (12,449 )   ¥ 212,834  
 
                                               
                                 
    Difference of Appreciation and        
    Conversion        
                    Total        
    Net             Difference of        
    Unrealized     Deferred     Appreciation        
    Gains on     Profit     and     Total  
    Securities     on Hedges     Conversion     Net Assets  
Balance at March 31, 2006
  ¥ 7,409           ¥ 7,409     ¥ 221,500  
Changes in the period:
                               
Issuance of new shares
                           
Reversal of voluntary reserves
                           
Dividends from surplus
                          (436 )
Net income (loss)
                          (813 )
Disposal of treasury stock
                          0  
Purchase of treasury stock
                          (7 )
Net change of items other than shareholders’ equity
    (1,120 )     (247 )     (1,368 )     (1,368 )
Total changes in the period
    (1,120 )     (247 )     (1,368 )     (2,625 )
 
                       
Balance at September 30, 2006
  ¥ 6,288     ¥ (247 )   ¥ 6,041     ¥ 218,876  
 
                       

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For Immediate Release
October 31, 2006
Pioneer to Sell Some of Its Properties
TOKYO — Pioneer Corporation today announced that it has decided to sell some land and buildings, comprising all of its Tokorozawa Plant and some of its Omori Plant. As part of business restructuring plans, the functions of the two plants will be consolidated in June 2007 at new facilities currently under construction in Kawasaki City, Kanagawa, Japan.
     The details of the sales are as follows:
Description
1. Properties to Be Sold:
             
    (i)   Tokorozawa Plant (Tokorozawa City, Saitama, Japan)
 
      Land:   34,187.14 m2 (approx. 368,000 sq ft)
 
      Buildings:   47,620.73 m2 (approx. 513,000 sq ft)
 
           
    (ii)   Omori Plant (in part) (Ota-ku, Tokyo, Japan)
 
      Land:   7,034.41 m2 (approx. 76,000 sq ft)
 
      Buildings:   14,838.35 m2 (approx. 160,000 sq ft)
 
           
    Total book value (estimated amount at end of March 2007):
    3,500 million yen
 
           
    Total sales price:    
    15,700 million yen    
 
           
    Note: Pioneer expects losses on disposal of some of machinery and equipment of the above plants. Such amount is, however, yet to be determined.
2. Buyer:
         
 
  Name:   HASEKO Corporation
 
  Headquarters:   Minato-ku, Tokyo, Japan
 
  President:   Mr. Takashi Iwao
 
  Paid-in capital:   50,000 million yen
 
  Principal businesses:   Construction, engineering, real estate,
 
      leasing and management, and hotel businesses
 
       
    Note: Pioneer has no special interests in the buyer.

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3. Schedule:
         
 
  September 2006:   Resolution of the board of directors
 
      Conclusion of the agreement with the buyer
 
       
 
  End of March 2007:   Transfer of property rights
 
       
 
  End of June 2007:   Hand over of properties
4.   Impact on Business Forecasts:
 
    The gain on the above sales will be recorded during the fiscal year ending March 31, 2008, in which the hand over is scheduled.
Pioneer Corporation is a leading global manufacturer of consumer- and business-use electronics products such as audio, video and car electronics. Its shares are traded on the Tokyo Stock Exchange.
#          #          #          #          #          #
For further information, please contact:
Hajime Ishizuka, Senior Managing Director and Representative Director
Pioneer Corporation, Tokyo
Phone: +81-3-3494-1111 / Fax: +81-3-3495-4431
E-mail: pioneer_shr@post.pioneer.co.jp
IR Website: http://pioneer.jp/ir-e/

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