Semi-Annual Report USGAAP
Toyota Motor Corporation
24 December 2003
TOYOTA MOTOR CORPORATION CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2003
CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS
U.S. dollars
in millions
Yen in millions (Note 4)
March 31, September 30, September 30,
2003 2003 2003
Current assets:
Cash and cash equivalents JPY1,592,028 JPY1,243,211 $11,175
Time deposits 55,406 43,086 387
Marketable securities (Note 5) 605,483 787,715 7,081
Trade accounts and notes receivable, less allowance for
doubtful accounts of JPY29,489 million as of March 31,
2003 and JPY34,480 million ($310 million) as of
September 30, 2003 1,475,797 1,290,688 11,602
Finance receivables, net 2,505,140 2,242,227 20,155
Other receivables 513,952 471,139 4,235
Inventories 1,025,838 1,059,824 9,526
Deferred income taxes 385,148 400,218 3,597
Prepaid expenses and other current assets 463,441 566,475 5,092
Total current assets 8,622,233 8,104,583 72,850
Noncurrent finance receivables, net 2,569,808 3,026,614 27,206
Investments and other assets:
Marketable securities and other securities investments
(Note 5) 1,652,110 2,269,829 20,403
Affiliated companies 1,279,645 1,245,596 11,197
Employees receivables 21,270 26,023 234
Other 804,029 703,915 6,327
3,757,054 4,245,363 38,161
Property, plant and equipment:
Land 1,064,125 1,134,538 10,198
Buildings 2,521,208 2,775,775 24,951
Machinery and equipment 7,089,592 7,652,074 68,782
Vehicles and equipment on
operating leases (Note 6) 1,601,060 1,556,037 13,987
Construction in progress 211,584 195,355 1,756
12,487,569 13,313,779 119,674
Less - Accumulated depreciation (7,283,690) (7,913,219) (71,130)
5,203,879 5,400,560 48,544
Total assets JPY20,152,974 JPY20,777,120 $186,761
LIABILITIES AND SHAREHOLDERS' EQUITY
U.S. dollars
in millions
(Note 4)
Yen in millions
March 31, September 30, September 30,
2003 2003 2003
Current liabilities:
Short-term borrowings JPY1,855,648 JPY1,999,453 $17,973
Current portion of long-term debt 1,263,017 1,135,297 10,205
Accounts payable 1,531,552 1,563,774 14,057
Other payables 618,748 633,646 5,696
Accrued expenses 1,063,496 1,054,127 9,475
Income taxes payable 300,718 267,244 2,402
Other current liabilities 420,757 420,324 3,778
Total current liabilities 7,053,936 7,073,865 63,586
Long-term liabilities:
Long-term debt 4,137,528 4,108,804 36,933
Accrued pension and severance costs 1,052,687 1,112,900 10,004
Deferred income taxes 371,004 413,455 3,716
Other long-term liabilities 101,353 68,089 612
Total long-term liabilities 5,662,572 5,703,248 51,265
Minority interest in consolidated subsidiaries 315,466 427,533 3,843
Shareholders' equity:
Common stock, no par value, authorized:
9,740,185,400 shares at March 31, 2003 and
9,740,185,400 shares at September 30, 2003;
issued:
3,609,997,492 shares at March 31, 2003 and
3,609,997,492 shares at September 30, 2003 397,050 397,050 3,569
Additional paid-in capital 493,790 493,790 4,439
Retained earnings 7,301,795 7,756,473 69,721
Accumulated other comprehensive loss (604,272) (476,553) (4,284)
Treasury stock, at cost (467,363) (598,286) (5,378)
158,940,796 shares at March 31, 2003 and
212,015,180 shares at September 30, 2003
Total shareholders' equity 7,121,000 7,572,474 68,067
Commitments and contingencies (Note 9)
Total liabilities and shareholders' equity JPY20,152,974 JPY20,777,120 $186,761
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
U.S. dollars
in millions
Yen in millions (Note 4)
For the six
For the six month periods ended month period
September 30, ended
September 30,
2002 2003 2003
Net revenues:
Sales of products JPY7,270,735 JPY7,861,781 $70,668
Financing operations 342,687 362,460 3,258
7,613,422 8,224,241 73,926
Costs and expenses:
Cost of products sold 5,792,840 6,274,364 56,399
Cost of financing operations 227,292 191,361 1,720
(Note 8)
Selling, general and 908,267 990,747 8,906
administrative
6,928,399 7,456,472 67,025
Operating income 685,023 767,769 6,901
Other income (expense):
Interest and dividend income 29,892 28,779 259
Interest expense (15,464) (12,210) (110)
Foreign exchange gain, net 21,033 26,597 239
(Note 8)
Other income (loss), net (6,023) 1,078 10
29,438 44,244 398
Income before income taxes, 714,461 812,013 7,299
minority interest
and equity in earnings of
affiliated companies
Provision for income taxes 296,920 309,931 2,786
Income before minority
interest and equity in
earnings of affiliated 417,541 502,082 4,513
companies
Minority interest in (9,528) (18,615) (167)
consolidated subsidiaries
Equity in earnings of 17,787 40,993 368
affiliated companies
Net income JPY425,800 JPY524,460 $4,714
Yen U.S. dollars
(Note 4)
Net income per common share:
Basic JPY118.44 JPY153.36 $1.38
Diluted JPY118.44 JPY153.35 $1.38
Interim cash dividends per JPY16.00 JPY20.00 $0.18
common share
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Yen in millions
Accumulated
Additional other Treasury
Common paid-in Retained comprehensive stock,
stock capital earnings income at cost Total
(loss)
Balance at March 31, 2002 397,050 490,538 6,804,722 (267,304) (160,894) 7,264,112
Issuance during the period 620 620
Comprehensive income:
Net income 425,800 425,800
Other comprehensive income (loss)
-
Foreign currency translation (107,889) (107,889)
adjustments
Unrealized gains (losses) on
securities,
net of reclassification 10,182 10,182
adjustments
Minimum pension liability 9,141 9,141
adjustments
Net gains (losses) on derivative (542) (542)
instruments
Total comprehensive income 336,692
Dividends paid (54,108) (54,108)
Purchase and retirement of common (143,292) (19,532) (162,824)
stock
Balance at September 30, 2002 JPY 397,050 JPY 491,158 JPY 7,033,122 JPY (356,412) JPY (180,426) JPY 7,384,492
Balance at March 31, 2003 397,050 493,790 7,301,795 (604,272) (467,363) 7,121,000
Comprehensive income:
Net income 524,460 524,460
Other comprehensive income (loss)
-
Foreign currency translation (112,479) (112,479)
adjustments
Unrealized gains (losses) on
securities,
net of reclassification 228,270 228,270
adjustments
Minimum pension liability 11,928 11,928
adjustments
Total comprehensive income 652,179
Dividends paid (69,782) (69,782)
Purchase and retirement of common (130,923) (130,923)
stock
Balance at September 30, 2003 JPY 397,050 JPY 493,790 JPY 7,756,473 JPY (476,553) JPY (598,286) JPY 7,572,474
U.S. dollars in millions (Note 4)
Accumulated
Additional other Treasury
Common paid-in Retained comprehensive stock,
stock capital earnings income (loss) at cost Total
Balance at March 31, 2003 $ 3,569 $ 4,439 $ 65,634 $ (5,432) $ (4,201) $ 64,009
Comprehensive income:
Net income 4,714 4,714
Other comprehensive income (loss) -
Foreign currency translation (1,011) (1,011)
adjustments
Unrealized gains (losses) on
securities, 2,052 2,052
net of reclassification adjustments
Minimum pension liability 107 107
adjustments
Total comprehensive income 5,862
Dividends paid (627) (627)
Purchase and retirement of common (1,177) (1,177)
stock
Balance at September 30, 2003 $ 3,569 $ 4,439 $ 69,721 $ (4,284) $(5,378) $ 68,067
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
U.S. dollars
in millions
(Note 4)
Yen in millions
For the six month For the six
periods ended month period
September 30, ended
September 30,
2002 2003 2003
Cash flows from operating activities:
Net income JPY425,800 JPY524,460 $4,714
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation 434,995 475,938 4,278
Provision for doubtful accounts and credit losses 19,709 38,418 345
Pension and severance costs, less payments 30,315 33,957 305
Loss on disposal of fixed assets 23,880 18,896 170
Unrealized losses on available-for-sale 23,853 2,697 24
securities, net
Deferred income taxes (24,067) 21,996 198
Minority interest in consolidated subsidiaries 9,528 18,615 167
Equity in earnings of affiliated companies (17,787) (40,993) (368)
Changes in operating assets and liabilities 134,014 80,125 720
Other 50,698 (61,185) (549)
Net cash provided by operating activities 1,110,938 1,112,924 10,004
Cash flows from investing activities:
Additions to finance receivables (2,474,800) (4,182,349) (37,594)
Collection of and proceeds from sales of finance 1,938,368 3,727,776 33,508
receivables
Additions to fixed assets excluding equipment (519,108) (445,522) (4,005)
leased to others
Additions to equipment leased to others (289,594) (298,454) (2,683)
Proceeds from sales of fixed assets excluding
equipment leased to others
31,606 31,234 281
Proceeds from sales of equipment leased to others 125,919 133,073 1,196
Purchases of marketable securities and security (521,364) (1,137,863) (10,228)
investments
Proceeds from sales of and maturity of marketable
securities and security investments 569,846 705,614 6,343
(Increase) decrease in time deposits (12,085) 15,845 143
Decrease in investments and other assets 7,527 138 1
Payments for additional investments in affiliated (16,016) (18,876) (170)
companies,
net of cash acquired
Other 20,652 (2,720) (24)
Net cash used in investing activities (1,139,049) (1,472,104) (13,232)
Cash flows from financing activities:
Purchases of common stock (142,090) (120,229) (1,081)
Proceeds from issuance of long-term debt 907,482 700,149 6,293
Payments of long-term debt (561,651) (622,709) (5,597)
Increase in short-term borrowings 132,004 160,970 1,447
Dividends paid (54,108) (69,782) (627)
Net cash provided by financing activities 281,637 48,399 435
Effect of exchange rate changes on cash and cash (40,533) (38,036) (342)
equivalents
Net increase (decrease) in cash and cash equivalents 212,993 (348,817) (3,135)
Cash and cash equivalents at beginning of period 1,657,160 1,592,028 14,310
Cash and cash equivalents at end of period JPY1,870,153 JPY1,243,211 $11,175
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of preparation:
The accompanying semi-annual condensed consolidated financial statements of
Toyota Motor Corporation as of September 30, 2003 and for the six month periods
ended September 30, 2002 and 2003, respectively, have been prepared in
accordance with accounting principles generally accepted in the United States of
America and on substantially the same basis as Toyota's annual consolidated
financial statements. The semi-annual condensed consolidated financial
statements should be read in conjunction with Toyota's Annual Report on Form
20-F for the year ended March 31, 2003. The semi-annual condensed consolidated
financial statements reflect all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results for
those periods and the financial condition at those dates. The consolidated
results for six month periods are not necessarily indicative of results to be
expected for the full year.
2. Nature of operations:
Toyota Motor Corporation (the 'parent company') and its subsidiaries
(collectively 'Toyota') are primarily engaged in the design, manufacture,
assembly and sale of passenger cars, sport-utility vehicles, minivans, trucks
and related parts and accessories throughout the world. In addition, Toyota
provides retail and wholesale financing, retail leasing and certain other
financial services primarily to its dealers and their customers related to
vehicles manufactured by Toyota.
3. Summary of significant accounting policies:
The parent company and its subsidiaries in Japan maintain their records and
prepare their financial statements in accordance with accounting principles
generally accepted in Japan, and its foreign subsidiaries in conformity with
those of their countries of domicile. Certain adjustments and reclassifications
have been incorporated in the accompanying consolidated financial statements to
conform with accounting principles generally accepted in the United States of
America. These adjustments were not recorded in the statutory books.
Significant accounting policies after reflecting adjustments for the above are
as follows:
Basis of consolidation and accounting for investments in affiliated companies -
The semi-annual condensed consolidated financial statements include the accounts
of the parent company and those of its majority-owned subsidiary companies. All
significant intercompany transactions and accounts have been eliminated.
Investments in affiliated companies in which Toyota exercises significant
influence, but which it does not control, are stated at cost plus equity in
undistributed earnings. Net income includes Toyota's equity in current earnings
of such companies, after elimination of unrealized intercompany profits.
Investments in which Toyota does not exercise significant influence (generally
less than a 20% ownership interest) are stated at cost.
Estimates -
The preparation of Toyota's consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the condensed consolidated financial statements and accompanying
notes. Actual results could differ from those estimates. The more significant
estimates include: product warranties, allowance for doubtful accounts and
credit losses, residual values for leased assets, impairment of long-lived
assets, postretirement benefits costs and obligations and post-employment
benefit costs and other-than-temporary losses on marketable securities.
Translation of foreign currencies -
All asset and liability accounts of foreign subsidiaries and affiliates are
translated into Japanese yen at appropriate period-end current rates and all
income and expense accounts of those subsidiaries are translated at
average-period exchange rates. The resulting translation adjustments are
included as a component of accumulated other comprehensive income/loss.
Foreign currency receivables and payables are translated at appropriate current
rates and the resulting transaction gains or losses are taken into income
currently.
Revenue recognition -
Revenue from sales of vehicles and parts is generally recognized upon delivery
which is considered to have occurred when the dealer has taken title to the
product and the risk and reward of ownership have been substantively
transferred, except as described below.
Toyota's sales incentive programs principally consist of cash payments to
dealers calculated based on vehicle volume or a model sold by the dealer in a
certain period of time. Toyota specifies those volume, model or period covered
in the incentive programs. Toyota accrues these incentives as revenue
reductions at the sale of a vehicle corresponding to the program by the amount
determined in the related incentive program.
Revenue from the sale of vehicles under which Toyota conditionally guarantees
the minimum resale value is recognized on a pro rata basis from the date of sale
to the first exercise date of the guarantee in a manner similar to lease
accounting. The underlying vehicles of these transactions are recorded as
assets and are depreciated in accordance with Toyota's depreciation policy.
Revenue from retail financing contracts and finance leases is recognized using
the effective yield method. Revenue from operating leases is recognized on a
straight-line basis over the lease term.
Toyota on occasion sells finance receivables in transactions subject to limited
recourse provisions. These sales are to trusts and Toyota retains the servicing
and is paid a servicing fee. Gains or losses from the sales of the finance
receivables are recognized in the period in which such sales occur.
Other costs -
Advertising and sales promotion costs are expensed as incurred. Advertising
costs were JPY136,401 million and JPY162,295 million ($1,459 million) for the
six month periods ended September 30, 2002 and 2003, respectively.
Toyota generally warrants its products against certain manufacturing and other
defects. Provisions for product warranties are provided for specific periods of
time and/or usage of the product and vary depending upon the nature of the
product, the geographic location of its sale and other factors. Toyota provides
a provision for estimated product warranty costs at the time the related sale is
recognized based on estimates that Toyota will incur to repair or replace
product parts that fail while still under warranty. The amount of accrued
estimated warranty costs is primarily based on historical experience as to
product failures as well as current information on repair costs. The amount of
warranty costs accrued also contains an estimate as to warranty claim recoveries
from suppliers.
Research and development costs are expensed as incurred and were JPY292,400
million and JPY304,638 million ($2,738 million) for the six month periods ended
September 30, 2002 and 2003, respectively.
Cash and cash equivalents -
Cash and cash equivalents include all highly liquid investments, generally with
original maturities of three months or less, that are readily convertible to
known amounts of cash and are so near maturity that they present insignificant
risk of changes in value because of changes in interest rates.
Marketable securities -
Marketable securities consist of debt and equity securities. Debt and equity
securities designated as available-for-sale are carried at fair value with
changes in unrealized gains or losses included as a component of accumulated
other comprehensive income/loss in shareholders' equity, net of applicable
taxes. Should Toyota acquire securities in the future and designate them as
held-to-maturity investments, such securities would be carried at amortized
cost. Individual securities classified as either available-for-sale or
held-to-maturity are reduced to net realizable value for other-than-temporary
declines in market value. In determining if a decline in value is
other-than-temporary, Toyota considers the length of time and the extent to
which the fair value has been less than the carrying value, the financial
condition and prospects of the company and Toyota's ability and intent to retain
its investment in the company for a period of time sufficient to allow for any
anticipated recovery in market value. Realized gains and losses, which are
determined on the average cost method, are reflected in the statement of income
upon realized.
Security investments in non-public companies -
Security investments in non-public companies are carried at cost as fair value
is not readily determinable. If the value of a non-public security investment
is estimated to have declined and such decline is judged to be
other-than-temporary, Toyota recognizes the impairment of the investment and the
carrying value is reduced to its fair value. Determination of impairment is
based on the consideration of such factors as operating results, business plans
and estimated future cash flows. Fair value is determined principally through
the use of the latest financial information.
Finance receivables -
Finance receivables are recorded at the present value of the related future cash
flows including residual values for finance leases.
Allowance for credit losses -
Allowances for credit losses are established to cover probable losses on
receivables resulting from the inability of customers to make required payments.
The allowance for credit losses is based primarily on historical loss
experience. Other factors affecting collectibility are also evaluated in
determining the amount to be provided.
Losses are charged to the allowance when it has been determined that payments
will not be received and collateral cannot be recovered or the related
collateral is repossessed and sold. Any shortfall between proceeds received and
the carrying cost of repossessed collateral is charged to the allowance.
Recoveries are credited to the allowance for credit losses.
Allowance for Residual Value Losses -
Toyota is exposed to risk of loss on the disposition of off-lease vehicles to
the extent that sales proceeds are not sufficient to cover the carrying value of
the leased asset at lease termination. Toyota maintains an allowance to cover
probable estimated losses related to unguaranteed residual values on its present
owned portfolio. The allowance is evaluated considering projected vehicle return
rates and projected loss severity. Factors considered in the determination of
projected return rates and loss severity include historical and market
information on used vehicle sales, trends in lease returns and new car markets,
and general economic conditions. Management evaluates the foregoing factors,
develops several potential loss scenarios, and reviews allowance levels to
determine whether reserves are considered adequate to cover the probable range
of losses.
The allowance for residual value losses is maintained in amounts considered
Toyota to be appropriate in relation to the estimated losses on the present
owned portfolio. Upon disposal of the assets, the allowance for residual losses
is adjusted for the difference between the net book value and the proceeds from
sale.
Inventories -
Inventories are valued at cost, not in excess of market, cost being determined
on the 'average cost' basis, except for the cost of finished products carried by
certain subsidiary companies which is determined on the 'specific
identification' basis or 'last in, first out' ('LIFO') basis. Inventories
valued on the LIFO basis totaled JPY153,879 million and JPY169,351 million
($1,522 million) at March 31, 2003 and September 30, 2003, respectively. Had
the 'first in, first out' basis been used for those companies using the LIFO
basis, inventories would have been JPY30,489 million and JPY19,136 million ($172
million) higher than reported at March 31, 2003 and September 30, 2003,
respectively.
Property, plant and equipment -
Property, plant and equipment are stated at cost. Major renewals and
improvements are capitalized; minor replacements, maintenance and repairs are
charged to current operations. Depreciation of property, plant and equipment is
mainly computed on the declining-balance method for the parent company and
Japanese subsidiaries and on the straight-line method for foreign subsidiary
companies at rates based on estimated useful lives of the assets according to
general class, type of construction and use. Estimated useful lives range from
3 to 60 years for buildings and from 2 to 20 years for machinery and equipment.
Vehicles and equipment on operating leases to third parties are originated by
dealers and acquired by certain consolidated subsidiaries. Such subsidiaries
are also the lessors of certain property that they acquire directly. Vehicles
and equipment on operating leases are depreciated primarily on a straight-line
basis over the lease term, generally three years, to the estimated residual
value.
Long-lived assets -
Toyota reviews its long-lived assets, including investments in affiliated
companies, for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss
would be recognized when the carrying amount of an asset exceeds the estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition. The amount of the impairment loss to be recorded is
calculated by the excess of the assets carrying value over its fair value. Fair
value is determined mainly using a discounted cash flow valuation method.
Goodwill and intangible assets -
Goodwill is not material to Toyota's consolidated balance sheets.
Intangible assets consist mainly of software. Intangible assets with a definite
life are amortized on a straight-line basis with estimated useful lives mainly
of 5 years. Intangible assets with a definite life are tested for impairment
whenever events or circumstances indicate that a carrying amount of an asset
(asset group) may not be recoverable. An impairment loss would be recognized
when the carrying amount of an asset exceeds the estimated undiscounted cash
flows used in determining the fair value of the asset. The amount of the
impairment loss to be recorded is calculated generally determined using a
discounted cash flow analysis. Costs related to internally developed intangible
assets are expensed as incurred.
Environmental matters -
Environmental expenditures relating to current operations are expensed or
capitalized as appropriate. Expenditures relating to existing conditions caused
by past operations, which do not contribute to current or future revenues, are
expensed. Liabilities for remediation costs are recorded when they are probable
and reasonably estimable, generally no later than the completion of feasibility
studies or Toyota's commitment to a plan of action. The cost of each
environmental liability is estimated by using current technology available and
various engineering, financial and legal specialists within Toyota based on
current law. Such liability does not reflect any offset for possible recoveries
from insurance companies and is not discounted. There were no material changes
in the liability for all periods presented.
Income taxes -
The provision for income taxes is computed based on the pretax income included
in the consolidated statement of income. The asset and liability approach is
used to recognize deferred tax liabilities and assets for the expected future
tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities. Valuation allowances are recorded to
reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized.
Derivative financial instruments -
Toyota employs derivative financial instruments, including foreign exchange
forward contracts, foreign currency options, interest rate swaps, interest rate
currency swap agreements and interest rate options to manage its exposure to
fluctuations in interest rates and foreign currency exchange rates. Toyota does
not use derivatives for speculation or trading purposes. Changes in the fair
value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and the type of hedge transaction. The ineffective portion
of all hedges is recognized currently in earnings.
Net income per share -
Basic net income per common share is calculated by dividing net income by the
weighted-average number of shares outstanding during the reported period
3,595,184,689 and 3,419,900,609 for the six month periods ended September 30,
2002 and 2003, respectively. The calculation of diluted net income per common
share is similar to the calculation of basic net income per common share, except
that the weighted-average number of shares outstanding includes the additional
dilution from assumed exercise of dilutive stock options. The weighted average
numbers of shares outstanding used in diluted net income per common share
calculation were 3,595,190,760 and 3,419,990,391 for the six month periods ended
September 30, 2002 and 2003, respectively.
Stock-based compensation -
Toyota measures compensation expense for its stock-based compensation plan using
the intrinsic value method.
Other comprehensive income/loss -
Other comprehensive income/loss refers to revenues, expenses, gains and losses
that, under accounting principles generally accepted in the United States of
America are included in comprehensive income, but are excluded from net income
as these amounts are recorded directly as an adjustment to shareholders' equity.
Toyota's other comprehensive income/loss is primarily comprised of unrealized
gains/losses on marketable securities designated as available-for-sale, foreign
currency translation adjustments, gains/losses on derivative instruments and
adjustments to recognize additional minimum liabilities associated with Toyota's
defined benefit pension plans.
Accounting changes -
In June 2001, the Financial Accounting Standards Board ('FASB') issued Statement
of Financial Accounting Standards ('FAS') No.143 Accounting for Asset Retirement
Obligations ('FAS 143'). FAS 143 requires full recognition of asset retirement
obligations on the balance sheet from the point in time at which a legal
obligation exists. The obligation is required to be measured at fair value. The
carrying value of the asset or assets to which the retirement obligation relates
would be increased by an amount equal to the liability recognized. This amount
would then be included in the depreciable base of the asset and charged to
income over its life as depreciation. Toyota adopted FAS 143 on April 1, 2003.
The adoption of FAS 143 did not have a material impact on Toyota's consolidated
financial statements.
In April 2002, FASB issued FAS No. 145, Rescission of FAS No. 4, 44, and 64,
Amendment of FAS 13, and Technical Corrections ('FAS 145'). This statement makes
various technical corrections to existing pronouncements including the
classification of gain or loss on extinguishment of debt, sale-lease back
accounting for certain lease modifications. Toyota adopted FAS 145 on April 1,
2003. The adoption of FAS 145 did not have a material impact on Toyota's
consolidated financial statements.
In November 2002, FASB Emerging Issues Task Force ('EITF') reached consensus on
EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables ('EITF
00-21'). EITF 00-21 addresses certain aspects of the accounting by a vendor for
arrangements under which it will perform multiple revenue-generating activities.
Toyota applied this consensus for revenue arrangements entered into in the
period begun July 1, 2003. The adoption of EITF 00-21 did not have a material
impact on Toyota's consolidated financial statements.
In January 2003, FASB issued FASB Interpretation ('FIN') No. 46, Consolidation
of Variable Interest Entities - an interpretation of ARB No. 51 ('FIN
46'). This interpretation provides guidance on identifying variable interest
entities ('VIE') for which control is achieved through means other than voting
rights and on how to determine when a company should consolidate the VIE. It is
not limited to special purpose entities and will require more companies to
consolidate entities with which they have contractual, ownership, or other
pecuniary interests that absorb a portion of that entity's expected losses or
receive a portion of the entity's residual returns. Toyota applied FIN 46 to
VIEs created after January 31, 2003 and to VIEs in which Toyota obtained an
interest after that date upon its creation or obtaining an interest. However,
the application of FIN 46 to these VIEs did not have a material impact on
Toyota's consolidated financial statements. Toyota will apply FIN 46 on
December 31, 2003 to VIEs existed at January 31, 2003. Toyota enters into
securitization transactions with certain special-purpose entities. However,
because securitization transactions are primarily with entities that are
qualifying special-purpose entities ('QSPEs') under FAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities
('FAS 140'), and because QSPEs are excluded from the scope of FIN 46, the
implementation of FIN 46 relating to these securitization transactions is not
expected to have a material impact on Toyota's consolidated financial
statements. Toyota has invested in several joint ventures. These joint
ventures may be deemed as variable interest entities, however, neither the
aggregate size of these joint ventures nor Toyota's involvements in these
entities are expected to be material to Toyota's consolidated financial
statements.
In February 2003, EITF reached a consensus on EITF Issue No. 03-2, Accounting
for the Transfer to the Japanese Government of the Substitutional Portion of
Employee Pension Fund Liabilities ('EITF 03-2'), which should be applied
retroactively to April 1, 2002, the earliest date on which the separation
process begun. EITF 03-2 provides a consensus that the entire process for the
transfer of the substitutional portion of the benefit obligation and related
plan assets to the Japanese government should be accounted for as a single
settlement transaction upon completion of the transfer to the government. Under
the consensus reached, the difference between the obligation settled, assuming
the remeasurement at fair value immediately prior to the settlement, including
the effects of the future salary increases previously accrued under the
substitutional arrangement, and the assets transferred to the government,
determined pursuant to the government formula, should be accounted for as
settlement gain or loss at the time of the settlement. In accounting for the
settlement of the substitutional portion of the obligation, a proportionate
amount of the unrecognized gain or loss relating to the entire employee pension
fund should also be recognized as a settlement gain or loss. Toyota has already
begun the separation process by obtaining the approval from the Japanese
government of exemption from the benefits related to future employee service
under the substitutional portion. However, in accordance with EITF 03-2, no
effect of this transaction has been recognized in the consolidated financial
statements for the six month period ended September 30, 2003 as the transfer of
the substitutional portion of the benefit obligation and related plan assets to
the Japanese government has not been completed as at September 30, 2003.
In March 2003, EITF released Issue No. 02-9, Accounting for Changes That Result
in a Transferor Regaining Control of Financial Assets Sold ('EITF 02-9'). EITF
02-9 relates to securitizations that have been accounted for as sales under FAS
140. In the event that one or more of the control rules are no longer met, the
transferor would have to recognize those assets and the related liabilities on
the consolidated balance sheet at the fair value. Toyota adopted EITF 02-9
prospectively to such events occurring after April 2, 2003. The adoption of
EITF 02-9 did not have a material impact on Toyota's consolidated financial
statements.
In April 2003, the FASB issued FAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities ('FAS 149'). This statement amends
and clarifies financial accounting and reporting for derivative instruments,
including derivative instruments embedded in other contracts and for hedging
activities under FAS No. 133, Accounting for Derivative Instruments and Hedging
Activities ('FAS 133'). Toyota applied FAS 149 (1) to contracts entered into or
modified after June 30, 2003, with certain exceptions, and (2) to hedging
relationships designated after June 30, 2003. The adoption of FAS 149 did not
have a material impact on Toyota's consolidated financial statements.
In May 2003, the FASB issued FAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity ('FAS 150').
This Statement improves the accounting for certain financial instruments that,
under previous guidance, issuers could account for as equity. FAS 150 requires
that those instruments be classified as liabilities in the balance sheets.
Toyota applied FAS 150 to financial instruments entered into or modified after
May 31, 2003, and otherwise in the fiscal period started July 1, 2003. The
adoption of FAS 150 did not have a material impact on Toyota's consolidated
financial statements.
In May 2003, the EITF reached consensus on EITF 01-8, Determining Whether an
Arrangement Contains a Lease. EITF 01-8 clarifies the method to identify lease
elements in arrangements that do not explicitly include lease provisions, and
requires any lease element identified should be accounted for by current
accounting literatures prescribing leases. Toyota applied the provisions of the
EITF in the fiscal period bugun July 1, 2003. The adoption of EITF 01-8 did not
have a significant impact on the Toyota's consolidated financial statements.
Recent pronouncements to be adopted in future periods -
In May 2003, EITF announced EITF Topic No. D-107, Lessor Consideration of
Third-Party Residual Value Guarantees. EITF Topic No. D-107 has clarified that
some of the accounting practices by lessors regarding residual value guarantees
issued by an unrelated third party for a portfolio of leased assets for which
settlement is not solely based upon the residual value of the individual leased
assets. Under this EITF, residual value guarantees of a portfolio of leased
assets preclude a lessor from determining the amount of the guaranteed residual
value of any individual leased asset within the portfolio at lease inception
and, accordingly, no such amounts should be included in minimum lease payments.
Toyota will apply this provision for the fiscal period starting January 1, 2004.
Management does not expect this provision to have a material impact on
Toyota's consolidated financial statements.
Reclassifications -
Certain prior year amounts have been reclassified to conform to the presentation
of the six month period ended September 30, 2003.
4. U.S. dollar amounts:
U.S. dollar amounts presented in the semi-annual condensed consolidated
financial statements and related notes are included solely for the convenience
of the reader. These translations should not be construed as representations
that the yen amounts actually represent, or have been or could be converted
into, U.S. dollars. For this purpose, the rate of JPY111.25 = U.S. $1, the
approximate current exchange rate at September 30, 2003, was used for the
translation of the accompanying consolidated financial amounts of Toyota as of
and for the six month period ended September 30, 2003.
5. Marketable securities and other securities investments:
Marketable securities and other securities investments include debt and equity
securities for which the aggregate cost, gross unrealized gains and losses and
fair value are as follows:
Yen in millions
March 31, 2003
Gross Gross
unrealized unrealized
gains losses Fair
value
Cost
Available-for-sale
Debt securities JPY1,591,393 JPY26,535 JPY2,525 JPY1,615,403
Equity securities 476,870 53,534 42,770 487,634
Total JPY2,068,263 JPY80,069 JPY45,295 JPY2,103,037
Securities not practicable to fair value
Debt securities JPY53,052
Equity securities 101,504
Total JPY154,556
Yen in millions
September 30, 2003
Gross Gross
unrealized unrealized
gains losses Fair
value
Cost
Available-for-sale
Debt securities JPY1,981,094 JPY17,857 JPY4,010 JPY1,994,941
Equity securities 577,227 353,383 10,422 920,188
Total JPY2,558,321 JPY371,240 JPY14,432 JPY2,915,129
Securities not practicable to fair value
Debt securities JPY51,734
Equity securities 90,681
Total JPY142,415
U.S. dollars in millions
September 30, 2003
Gross Gross
unrealized unrealized
gains losses Fair
value
Cost
Available-for-sale
Debt securities $17,808 $160 $36 $17,932
Equity securities 5,188 3,177 93 8,272
Total $22,996 $ 3,337 $ 129 $26,204
Securities not practicable to fair value
Debt securities $465
Equity securities 815
Total $1,280
In the ordinary course of business, Toyota maintains long-term investment
securities, included in 'Marketable securities and other securities
investments', issued by a number of non-public companies which are recorded at
cost, as their fair values were not readily determinable. Toyota's management
employs a systematic methodology to assess the recoverability of such
investments by reviewing the financial viability of the underlying companies and
the prevailing market conditions in which these companies operate to determine
if Toyota's investment in each individual company is impaired and whether the
impairment is other-than-temporary. If the impairment is determined to be
other-than-temporary, the cost of the investment is written-down by the impaired
amount and the losses are recognized currently in earnings.
6. Vehicles and equipment on operating leases:
Vehicles and equipment on operating leases consist of the following:
U.S. dollars
in millions
Yen in millions
March 31, 2003 September 30, September 30,
2003
2003
Vehicles JPY1,480,556 JPY1,439,962 $12,944
Equipment and other 120,504 116,075 1,043
1,601,060 1,556,037 13,987
Less - Accumulated depreciation (397,289) (397,650) (3,574)
Vehicles and equipment on
operating leases, net JPY1,203,771 JPY1,158,387 $ 10,413
Rental income from vehicles and equipment on operating leases was JPY149,591
million ($1,345 million) for the six month period ended September 30, 2003.
Future minimum rentals from vehicles and equipment on operating leases are due
in installments as follows:
Years ending U.S. dollars
September 30: in millions
Yen in millions
2004 JPY 276,546 $ 2,486
2005 187,976 1,690
2006 96,863 871
2007 28,039 252
2008 7,474 67
The future minimum rentals as shown above should not be considered indicative of
future cash collections.
7. Lease commitments:
Toyota leases certain assets under capital lease and operating lease
arrangements.
An analysis of leased assets under capital leases is as follows:
U.S. dollars
Yen in millions in millions
Class of property March 31, September 30, September 30,
2003 2003 2003
Building JPY 11,059 JPY 11,006 $99
Machinery and equipment 155,197 157,121 1,412
Less - Accumulated depreciation (106,633) (111,487) (1,002)
JPY 59,623 JPY56,640 $509
Amortization expenses under capital leases for the six month periods ended
September 30, 2002 and 2003 were JPY6,926 million and JPY9,116 million ($82
million), respectively.
Future minimum lease payments under capital leases together with the present
value of the net minimum lease payments as of September 30, 2003 are as follows:
Years ending September 30: Yen in millions U.S. dollars
in millions
2004 JPY16,817 $151
2005 14,085 127
2006 13,922 125
2007 14,936 135
2008 5,368 48
Thereafter 24,385 219
Total minimum lease payments 89,513 805
Less - Amount representing interest (10,744) (97)
Present value of net minimum lease payments 78,769 708
Less - Current obligations (14,316) (129)
Long-term capital lease obligations JPY 64,453 $ 579
Rental expenses under operating leases for the six month periods ended September
30, 2002 and 2003 were JPY39,703 million and JPY 40,679 million ($366 million),
respectively.
The minimum rental payments required under operating leases relating primarily
to land, buildings and equipment having initial or remaining non-cancelable
lease terms in excess of one year at September 30, 2003 are as follows:
Years ending September 30: Yen in U.S. dollars
millions in millions
2004 JPY8,072 $72
2005 7,186 65
2006 5,185 47
2007 3,670 33
2008 2,703 24
Thereafter 12,192 110
Total minimum future rentals JPY39,008 $351
8. Derivative financial instruments:
Toyota employs derivative financial instruments, including foreign exchange
forward contracts, foreign currency options, interest rate swaps and interest
rate currency swap agreements to manage its exposure to fluctuations in interest
rates and foreign currency exchange rates. Toyota does not use derivatives for
speculation or trading.
Fair value hedges -
Toyota enters into interest rate swaps, and interest rate currency swap
agreements mainly to convert its fixed-rate debt to variable-rate debt. Toyota
uses interest rate swap agreements in managing its exposure to interest rate
fluctuations. Interest rate swap agreements are executed as either an integral
part of specific debt transactions or on a portfolio basis. Toyota uses
interest rate currency swap agreements to entirely hedge exposure to exchange
rate fluctuations on principal and interest payments for borrowings denominated
in foreign currencies. Notes and loans payable issued in foreign currencies are
hedged by concurrently executing interest rate currency swap agreements which
involve the exchange of foreign currency principal and interest obligations for
each functional currency obligations at agreed-upon currency exchange and
interest rates.
For the six month periods ended September 30, 2002 and 2003, Toyota reported
gains of JPY6,400 million, and JPY2,007 million ($18 million), respectively,
related to the ineffective portion of Toyota's fair value hedges which is
included in cost of financing operations in the accompanying consolidated
statements of income. For fair value hedging relationships, the components of
each derivative's gain or loss are included in the assessment of hedge
effectiveness.
Cash flow hedges -
Toyota enters into interest rate swaps, and interest rate currency swap
agreements to manage its exposure to interest rate risk, and foreign currency
exchange risk mainly associated with funding in currencies in which it operates.
Interest rate swap agreements are used in managing Toyota's exposure to the
variability of interest payments due to the changes in interest rates arising
principally in variable-rate debts issued by Toyota. Interest rate swap
agreements, which are designated as, and qualify as cash flow hedges are
executed as an integral part of specific debt transactions and the critical
terms of the interest rate swaps and the hedged debt transactions are the same.
Toyota uses interest rate currency swap agreements to manage the
foreign-currency exposure to variability in functional-currency-equivalent cash
flows principally from debts or borrowings denominated in currencies other than
functional currencies.
Net derivative gains and losses included in other comprehensive income are
reclassified into earnings at the time that the associated hedged transactions
impact the income statement. For the six month period ended September 30, 2002,
net derivative losses of JPY790 million was reclassified to foreign exchange
gain, net in the accompanying consolidated statements of income. These net
gains and losses were offset by net losses and gains from transactions being
hedged. The components of each derivative's gain and loss are included in the
assessment of hedge effectiveness, and no hedge ineffectiveness was reported
because all critical terms of derivative financial instruments designated as,
and qualify as, cash flow hedging instruments are same as those of hedged debt
transactions. Toyota does not expect to reclassify any gains or losses included
in other comprehensive income as at September 30, 2003, into earnings in next
twelve months because no derivative instruments designated as, and qualify as,
cash flow hedges as of the date.
Undesignated derivative financial instruments -
Toyota uses foreign exchange forward contracts, foreign currency options,
interest rate swaps, interest rate currency swap agreements, and interest rate
options, which manage its exposure to foreign currency exchange fluctuation and
interest rate fluctuation from an economic perspective, and which Toyota is
unable or has elected not to apply hedge accounting. Unrealized gains or losses
on these derivative instruments are reported in cost of financing operations and
foreign exchange gain, net in the accompanying consolidated statements of
income.
9. Other commitments and contingencies, concentrations and factors that
may affect future operations:
Commitments outstanding at September 30, 2003 for the purchase of property,
plant and equipment and other assets are JPY78,372 million ($704 million).
Toyota enters into contracts with Toyota dealers to guarantee customers' payment
of their installment payables that arises from installment contracts between
customers and Toyota dealers, as and when requested by Toyota dealers.
Guarantee periods are set to match maturity of installment payments, and range
from 1 month to 105 months at September 30, 2003, however, they are generally
shorter than the useful lives of products sold. Toyota is required to execute
its guarantee primarily when customers are unable to make required payments.
The maximum potential amount of future payments as of September 30, 2003 is
JPY907,069 million ($8,153 million). Liability for guarantee of JPY4,295
million ($39 million) has been provided as of September 30, 2003. Under these
guarantee contracts, Toyota is entitled to recover its payments from customers
either by cash or through vehicles foreclosed.
In February 2003, Toyota, General Motors, Ford, DaimlerChrysler, Honda, Nissan
and BMW and their U.S. and Canadian sales and marketing subsidiaries, the
National Automobile Dealers Association and the Canadian Automobile Dealers
Association were named as defendants in purported nationwide class actions on
behalf of all purchasers of new motor vehicles in the United States since
January 1, 2001. These actions were filed in federal courts in California,
Illinois, New York, Massachusetts, Florida, New Jersey and Pennsylvania.
Additionally, parallel class actions were filed in state courts in California,
Minnesota, New Mexico, New York, Tennessee, Wisconsin, Arizona, Florida,
Massachusetts, Iowa, and New Jersey on behalf of the same purchasers in those
states. As of November 30, 2003, approximately 10 such cases were pending
before the various federal and state courts. (The cases in the federal courts,
and the state courts in California and New Jersey have been consolidated
respectively.) The nearly identical complaints allege that the defendants
violated the Sherman Antitrust Act by conspiring among themselves and with their
dealers to prevent the sale to United States citizens of vehicles produced for
the Canadian market. The complaints allege that new vehicle prices in Canada
are 10% to 30% lower than those in the United States and that preventing the
sale of these vehicles to United States citizens resulted in United States
consumers paying excessive prices for the same type of vehicles. The complaints
seek permanent injunctions against the alleged antitrust violations and treble
damages in an unspecified amount. The cases are at a preliminary stage; as of
November 30, 2003, no defendant has yet answered the complaints and there has
been no decision on the certification of the alleged cases. Toyota believes
that its actions have been lawful and intends to vigorously defend these cases.
Toyota has various other legal actions, governmental proceedings and other
claims pending against it, including product liability claims in the United
States. Although the claimants in some of these actions seek potentially
substantial damages, Toyota cannot currently determine its potential liability
or the damages, if any, with respect to these claims. However, based upon
information currently available to Toyota, Toyota believes that its losses from
these matters, if any, would not have a material adverse effect on Toyota's
financial position, operating results or cash flows.
In September 2000, the European Union approved a directive that mandates member
states to promulgate regulations implementing, by April 21, 2002, the following
requirements: (1) manufacturers shall bear all or a significant part of the cost
for taking back end-of-life vehicles put on the market after July 1, 2002 and
dismantling and recycling those vehicles; provided however, that beginning
January 1, 2007, manufacturers will also be financially responsible for vehicles
put on the market before July 1, 2002; (2) manufacturers may not use certain
hazardous materials in vehicles to be sold after July 2003; (3) vehicle types
approved and put on the market after three years after the amendment of
Directive on Type-approval shall be re-usable and/or recyclable to a minimum of
85% by weight per vehicle and shall be re-usable and/or recoverable to a minimum
of 95% by weight per vehicle; and (4) end-of-life vehicles must meet actual
re-use and recovery targets of 80% and 85%, respectively, of vehicle weight by
January 1, 2006, rising respectively to 85% and 95% by January 1, 2015.
Currently, there are numerous uncertainties surrounding the form and
implementation of the applicable regulations in different European Union member
states, including, in particular, regarding manufacturer responsibilities and
resulting expenses that may be incurred. As of November 30, 2003, the following
10 member states have adopted legislation to implement the directive: The
Netherlands, Germany, Austria, Spain, Luxembourg, Italy, Portugal, France,
United Kingdom and Ireland. In addition, Sweden, Norway and Denmark have
adopted legislation similar to the directive and Belgium has adopted legislation
that partially implements the directive. Despite the requirement to enact
legislation to implement the directive by April 21, 2002, implementation of the
directive has been delayed in some countries. In addition, under this
directive, member states must take measures to ensure that car manufacturers,
distributors and other auto-related businesses establish adequate used vehicle
disposal facilities and to ensure that hazardous materials and recyclable parts
are removed from vehicles prior to scrapping. Accordingly, this directive may
impact Toyota's vehicles sold in the European Union. Based on the legislation
that has been enacted to date, Toyota has provided for its estimated liability
related to covered vehicles in existence as of September 30, 2003. Depending on
the legislation implemented in the 2 member states that have not yet enacted
legislation and other circumstances, Toyota may be required to take additional
accruals for the expected costs to comply with these regulations. Although
Toyota does not expect its compliance with the directive to result in
significant cash expenditures, Toyota is continuing to assess the impact of this
future legislation on its results of operations, cash flows and financial
position.
Toyota has a concentration of material purchases from a supplier which is an
affiliated company. These purchases approximate 10% of material costs.
The parent company has a concentration of labor supply in employees working
under collective bargaining agreements and a substantial portion of these
employees are working under the agreement that will expire on December 31, 2005.
10. Segment data:
The operating segments reported below are the segments of Toyota for which
separate financial information is available and for which operating income/loss
amounts are evaluated regularly by executive management in deciding how to
allocate resources and in assessing performance.
The major portions of Toyota's operations on a worldwide basis are derived from
the Automotive and Financial Services business segments. The Automotive segment
designs, manufactures, assembles and distributes passenger cars, sport-utility
vehicles, minivans, trucks and related parts and accessories. The Financial
Services segment consists primarily of financing operations, and vehicle and
equipment leasing operations to assist in the merchandising of Toyota's products
as well as other products. The All Other segment includes Toyota's housing
business and various other business activities.
The following tables present certain information regarding Toyota's industry
segments and operations by geographic areas as of March 31, 2003 and September
30, 2003 and for the six month periods ended September 30, 2002 and 2003:
Information about segment profit and assets -
As of March 31, 2003 and for the six month period ended September 30, 2002:
Yen in millions
Automotive Financial All Other Intersegment Consolidated
Services Elimination/ Total
Unallocated
Amount
Revenues from external JPY7,038,387 JPY342,377 JPY232,658 JPY- JPY7,613,422
customers
Intersegment revenues 3,164 8,428 128,071 (139,663) -
Total 7,041,551 350,805 360,729 (139,663) 7,613,422
Depreciation 328,501 96,929 9,565 - 434,995
Operating income 685,921 3,805 (1,202) (3,501) 685,023
Segment assets (1) 9,392,749 7,392,486 722,604 2,645,135 20,152,974
Investment in equity 1,054,234 161,820 - 56,493 1,272,547
method investees (1)
Capital expenditures
for segment assets 476,256 263,888 14,586 53,972 808,702
(1) Representing figures as of March 31, 2003.
As of and for the six month period ended September 30, 2003:
Yen in millions
Automotive Financial All Other Intersegment Consolidated
Services Elimination/ Total
Unallocated
Amount
Revenues from external JPY7,584,310 JPY362,460 JPY277,471 JPY- JPY8,224,241
customers
Intersegment revenues 6,126 9,000 126,208 (141,334) -
Total 7,590,436 371,460 403,679 (141,334) 8,224,241
Depreciation 368,242 97,493 10,203 - 475,938
Operating income 702,634 61,681 6,047 (2,593) 767,769
Segment assets 9,689,020 7,560,742 831,670 2,695,688 20,777,120
Investment in equity
method investees 993,789 181,226 - 64,171 1,239,186
Capital expenditures
for segment assets 459,390 238,155 20,371 26,060 743,976
U.S. dollars in millions
Automotive Financial All Other Intersegment Consolidated
Services Elimination/ Total
Unallocated
Amount
Revenues from external $68,174 $3,258 $2,494 $- $73,926
customers
Intersegment revenues 55 81 1,135 (1,271) -
Total 68,229 3,339 3,629 (1,271) 73,926
Depreciation 3,310 876 92 - 4,278
Operating income 6,316 554 54 (23) 6,901
Segment assets 87,092 67,962 7,476 24,231 186,761
Investment in equity
method investees 8,933 1,629 - 577 11,139
Capital expenditures
for segment assets 4,129 2,141 183 234 6,687
Geographic Information -
Revenues for the six month periods ended September 30:
U.S. dollars in
millions
Yen in millions
2002 2003 2003
Japan
External customers JPY3,131,544 JPY3,325,570 $29,893
Intersegment 2,060,909 2,171,720 19,521
Total 5,192,453 5,497,290 49,414
North America
External customers 3,069,254 2,896,155 26,033
Intersegment 127,292 117,912 1,060
Total 3,196,546 3,014,067 27,093
Europe
External customers 713,832 977,630 8,788
Intersegment 32,043 54,645 491
Total 745,875 1,032,275 9,279
Other foreign countries
External customers 698,792 1,024,886 9,212
Intersegment 42,654 77,931 701
Total 741,446 1,102,817 9,913
Elimination of intersegment revenue (2,262,898) (2,422,208) (21,773)
Consolidated total JPY7,613,422 JPY8,224,241 $73,926
Operating income (loss) for the six month periods ended September 30:
U.S. dollars in
millions
Yen in millions
2002 2003 2003
Japan JPY479,783 JPY529,742 $4,762
North America 181,793 163,616 1,470
Europe 5,083 22,474 202
Other foreign countries 21,955 53,293 479
Elimination of intersegment profits (3,591) (1,356) (12)
Consolidated total JPY685,023 JPY767,769 $6,901
Total assets as of March 31 and September 30, 2003:
U.S. dollars in
millions
Yen in millions
March 31 September 30 September 30
Japan JPY9,272,330 JPY9,796,611 $88,059
North America 6,217,941 6,037,536 54,270
Europe 1,516,360 1,616,800 14,533
Other foreign countries 1,072,887 1,309,265 11,769
Unallocated amount 2,073,456 2,016,908 18,130
Consolidated total JPY20,152,974 JPY20,777,120 $186,761
Long-lived assets as of March 31 and September 30, 2003:
U.S. dollars in
millions
Yen in millions
March 31 September 30 September 30
Japan JPY2,732,654 JPY3,016,108 $27,111
North America 1,778,892 1,633,045 14,679
Europe 410,389 424,368 3,814
Other foreign countries 281,944 327,039 2,940
Consolidated total JPY5,203,879 JPY5,400,560 $48,544
Revenues are attributed to geographies based on the country location of the
parent company or the subsidiary that transacted the sale with the external
customer.
There are no any individually material countries with respect to revenues and
long-lived assets included in other foreign countries.
Transfers between industry or geographic segments are made at amounts which
Toyota's management believes arm's-length prices. In measuring the reportable
segments' income or losses, operating income consists of sales and operating
revenue less costs and operating expenses. Unallocated assets consist primarily
of cash and cash equivalents and marketable securities maintained for general
corporate purposes.
The following information shows revenues that are attributed to countries based
on location of customers for the six month periods ended September 30, 2002 and
2003.
In addition to the disclosure requirements under FAS No. 131, Toyota discloses
this supplemental information in order to provide the Japanese readers with
valuable information.
U.S. dollars in
millions
Yen in millions
2002 2003 2003
North America JPY3,194,639 JPY3,013,321 $27,086
Europe 717,015 944,563 8,491
Other foreign countries 1,274,020 1,601,666 14,397
Certain financial statement data on non-financial services business and
financial services business -
Toyota is preparing certain financial statement data relating to the
segmentation of Toyota's non-financial services and financial services
businesses. This financial statement data includes balance sheets at March 31,
2003 and September 30, 2003, and statements of income for the six month periods
ended September 30, 2002 and 2003.
Balance sheets -
Yen in millions U.S. dollars
in millions
March 31, September 30, September 30,
2002 2003 2003
Non-Financial Services Business
Current assets
Cash and cash equivalents JPY1,437,731 JPY1,119,422 $10,062
Time deposits 29,213 17,014 153
Marketable securities 602,634 780,942 7,020
Trade accounts and notes receivable, 1,496,432 1,318,935 11,856
less allowance for doubtful accounts
Finance receivables, net 14,296 14,678 132
Inventories 1,025,838 1,059,824 9,526
Prepaid expenses and other current assets 1,383,264 1,495,026 13,438
Total current assets 5,989,408 5,805,841 52,187
Noncurrent finance receivables, net 14,463 13,319 120
Investments and other assets 3,423,676 3,915,763 35,198
Property, plant and equipment 4,100,077 4,383,157 39,399
Total Non-Financial Services Business assets 13,527,624 14,118,080 126,904
Financial Services Business
Current assets
Cash and cash equivalents 154,297 123,789 1,113
Time deposits 26,193 26,072 234
Marketable securities 2,849 6,773 61
Finance receivables, net 2,490,844 2,227,549 20,023
Prepaid expenses and other current assets 545,701 600,411 5,397
Total current assets 3,219,884 2,984,594 26,828
Noncurrent finance receivables, net 2,555,345 3,013,295 27,086
Investments and other assets 513,455 545,450 4,903
Property, plant and equipment 1,103,802 1,017,403 9,145
Total Financial Services Business assets 7,392,486 7,560,742 67,962
Elimination of assets (767,136) (901,702) (8,105)
Total assets JPY20,152,974 JPY20,777,120 $186,761
Yen in millions U.S. dollars
in millions
March 31, September 30, September 30,
2003 2003 2003
Non-Financial Services Business
Current liabilities
Short-term borrowings JPY 784,501 JPY822,072 $7,390
Current portion of long-term debt 134,636 69,438 624
Accounts payable 1,520,160 1,552,185 13,952
Accrued expenses 1,019,241 1,008,779 9,068
Income taxes payable 293,756 260,128 2,338
Other current liabilities 893,723 914,782 8,223
Total current liabilities 4,646,017 4,627,384 41,595
Long-term liabilities
Long-term debt 789,509 774,022 6,957
Accrued pension and severance costs 1,051,500 1,111,749 9,993
Other long-term liabilities 222,405 269,617 2,424
Total long-term liabilities 2,063,414 2,155,388 19,374
Total Non-Financial Services Business liabilities 6,709,431 6,782,772 60,969
Financial Services Business
Current liabilities
Short-term borrowings 1,542,514 1,783,862 16,035
Current portion of long-term debt 1,200,900 1,129,859 10,156
Accounts payable 11,893 12,083 109
Accrued expenses 51,388 49,302 443
Income taxes payable 6,962 7,116 64
Other current liabilities 177,115 170,337 1,531
Total current liabilities 2,990,772 3,152,559 28,338
Long-term liabilities
Long-term debt 3,532,811 3,531,045 31,739
Accrued pension and severance costs 1,187 1,151 11
Other long-term liabilities 249,952 211,926 1,905
Total long-term liabilities 3,783,950 3,744,122 33,655
Total Financial Services Business liabilities 6,774,722 6,896,681 61,993
Elimination of liabilities (767,645) (902,340) (8,111)
Minority interest in consolidated subsidiaries 315,466 427,533 3,843
Shareholders' equity 7,121,000 7,572,474 68,067
JPY20,152,974 JPY20,777,120 $186,761
Total liabilities and shareholders' equity
Statements of income -
U.S. dollars
Yen in millions in millions
For the six
month
For the six month periods ended period ended
September 30, September 30,
2002 2003 2003
Non- Financial Services Business
Net revenues JPY7,269,669 JPY7,867,021 $70,715
Costs and expenses
Cost of revenues 5,792,839 6,275,627 56,410
Selling, general and administrative 790,455 880,774 7,917
Total costs and expenses 6,583,294 7,156,401 64,327
Operating income 686,375 710,620 6,388
Other income, net 30,377 44,272 398
Income before income taxes, minority interest and
equity in earnings of affiliated companies 716,752 754,892 6,786
Provision for income taxes 300,891 285,959 2,571
Income before minority interest and equity in
earnings of affiliated companies 415,861 468,933 4,215
Minority interest in consolidated subsidiaries (9,002) (18,150) (163)
Equity in earnings of affiliated companies 16,942 37,413 336
Net income- Non- Financial Services Business 423,801 488,196 4,388
Financial Services Business
Net revenues 350,805 371,460 3,339
Costs and expenses
Cost of revenues 228,771 192,157 1,727
Selling, general and administrative 118,229 117,622 1,058
Total costs and expenses 347,000 309,779 2,785
Operating income 3,805 61,681 554
Other expenses, net (5,490) (4,689) (42)
Income (losses) before income taxes, minority
interest and equity in earnings of affiliated
companies (1,685) 56,992 512
Provision for income taxes (3,725) 23,840 214
Income before minority interest and equity in
earnings of affiliated companies 2,040 33,152 298
Minority interest in consolidated subsidiaries (538) (465) (4)
Equity in earnings of affiliated companies 845 3,580 32
Net income- Financial Services Business 2,347 36,267 326
Elimination of net income (348) (3) (0)
Net income JPY425,800 JPY524,460 $4,714
Statement of cash flows -
Yen in millions U.S. dollars
in millions
For the six month period
For the six month periods ended September 30,
ended September 30,
2002 2003 2003
Non-Financial Services Business
Cash flows from operating
activities
Net income JPY423,801 JPY488,196 $4,388
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation 338,066 378,445 3,402
Pension and severance costs, less 30,154 34,000 306
payments
Loss on disposal of fixed assets 23,740 18,423 166
Unrealized losses on 23,853 2,697 24
available-for-sale securities, net
Deferred income taxes (35,867) 6,831 61
Minority interest in consolidated 9,002 18,150 163
subsidiaries
Equity in earnings of affiliated (16,942) (37,413) (336)
companies
Changes in operating assets and 96,578 21,737 195
liabilities
Other 113,912 (66,198) (595)
Net cash provided by operating 1,006,297 864,868 7,774
activities
Cash flows from investing
activities
Additions to fixed assets (493,827) (433,924) (3,901)
excluding equipment leased to
others
Additions to equipment leased to (50,987) (71,897) (646)
others
Proceeds from sales of fixed 25,435 25,888 233
assets excluding equipment leased
to others
Proceeds from sales of equipment 19,579 24,840 223
leased to others
Purchases of marketable securities (427,791) (968,766) (8,708)
and security investments
Proceeds from sales of and 463,882 582,102 5,233
maturity of marketable securities
and security investments
(Increase) decrease in time (173) 15,856 143
deposits
(Increase) decrease in investments 39,225 (15,431) (139)
and other assets
Payments for additional (16,016) (18,876) (170)
investments in affiliated
companies, net of cash acquired
Other 8,259 (3,595) (32)
Net cash used in investing (432,414) (863,803) (7,764)
activities
Cash flows from financing
activities
Purchases of common stock (142,090) (120,229) (1,081)
Proceeds from issuance of 164,337 32,088 288
long-term debt
Payments of long-term debt (168,142) (111,290) (1,000)
Decrease in short-term borrowings (57,167) (4,387) (39)
Dividends paid (54,108) (69,782) (627)
Other - (15,000) (135)
Net cash used in financing (257,170) (288,600) (2,594)
activities
Effect of exchange rate changes on (32,255) (30,774) (277)
cash and cash equivalents
Net increase (decrease) in cash 284,458 (318,309) (2,861)
and cash equivalents
Cash and cash equivalents at 1,510,974 1,437,731 12,923
beginning of period
Cash and cash equivalents at end JPY1,795,432 JPY1,119,422 $ 10,062
of period
Yen in millions U.S. dollars
in millions
For the six month periods For the six month
ended September 30, period ended September
30,
2002 2003 2003
Financial Service Business
Cash flows from operating
activities
Net income JPY2,347 JPY36,267 $326
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation 96,929 97,493 876
Deferred income taxes 12,046 15,033 135
Minority interest in 538 465 4
consolidated subsidiaries
Equity in earnings of (845) (3,580) (32)
affiliated companies
Changes in operating assets (79,197) (43,735) (393)
and liabilities
Other 9,806 44,259 398
Net cash provided by operating 41,624 146,202 1,314
activities
Cash flows from investing
activities
Additions to finance (2,474,800) (4,182,349) (37,594)
receivables
Collection of and proceeds 1,938,368 3,727,776 33,508
from sales of finance receivables
Additions to fixed assets (25,281) (11,598) (104)
excluding equipment leased to
others
Additions to equipment (238,607) (226,557) (2,037)
leased to others
Proceeds from sales of fixed 6,171 5,346 48
assets excluding equipment leased
to others
Proceeds from sales of 106,340 108,233 973
equipment leased to others
Purchases of marketable (93,573) (169,097) (1,520)
securities and security
investments
Proceeds from sales of and 105,964 123,512 1,110
maturity of marketable securities
and security investments
Increase in time deposits (11,912) (11) (0)
Other 5,874 (19,270) (173)
Net cash used in investing (681,456) (644,015) (5,789)
activities
Cash flows from financing
activities
Proceeds from issuance of 750,810 706,040 6,346
long-term debt
Payments of long-term debt (402,905) (546,392) (4,911)
Increase in short-term 228,740 299,919 2,696
borrowings
Other - 15,000 135
Net cash provided by financing 576,645 474,567 4,266
activities
Effect of exchange rate changes (8,278) (7,262) (65)
on cash and cash equivalents
Net decrease in cash and cash (71,465) (30,508) (274)
equivalents
Cash and cash equivalents at 146,186 154,297 1,387
beginning of period
Cash and cash equivalents at end JPY74,721 JPY123,789 $1,113
of period
(Consolidated)
Effect of exchange rate changes on cash and
cash equivalents JPY(40,533) JPY(38,036) $(342)
Net increase (decrease) in cash and cash equivalents 212,993 (348,817) (3,135)
Cash and cash equivalents at beginning of period 1,657,160 1,592,028 14,310
Cash and cash equivalents at end of period JPY1,870,153 JPY1,243,211 $11,175
5. 11. Per share information
The following table shows net assets per common share as of March 31 and
September 30, 2003.
Yen U.S. dollars
March 31, September 30, September 30,2003
2003 2003
Net assets per common share 2,063.43 2,228.52 20.03
6. 12. Subsequent events
On September 1, 2003, the employee pension fund of the parent company received
an approval from the Minister of Health, Labor and Welfare for transition to the
corporate defined benefit pension plan. On December 22, 2003, as required by the
article 112-5 of the Defined Benefit Enterprise Pension Plan Law, the parent
company contributed JPY115,294 million ($1,036 million) in cash, equivalent to
the difference between the minimum funding amount required by the Law and the
amount of net assets of the employee pension fund as at its dissolution. This
contribution did not have any impact on Toyota's consolidated income statement.
At the meeting on November 5, 2003, the Board of Directors of the parent company
approved to repurchase treasury stock from the market, based on the resolution
of the Ordinary Shareholders' Meeting held on June 26, 2003, in order to improve
its capital efficiency and implement its capital policy flexibly in response to
the business environment. During the repurchasing periods, which were November
27, 2003 and from December 2, 2003 to December 15, 2003, the parent company
repurchased 40,000 thousand shares of its common stock amounting to JPY132, 203
million.
END
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