Financial Statement 3
Toyota Motor Corporation
07 August 2002
6. Marketable securities and other securities investments:
Marketable securities and other securities investments include debt and equity
securities for which the aggregate fair value, gross unrealized gains and losses
and cost are as follows:
Yen in millions
March 31, 2001
Gross Gross
unrealized unrealized
gains losses Fair
Cost
value
Available-for-sale
Debt securities Y1,330,994 Y 50,076 Y 9,630 Y1,371,440
Equity securities 664,894 270,183 216,487 718,590
Total Y1,995,888 Y 320,259 Y226,117 Y2,090,030
Securities not practicable to fair value
Debt securities Y244,874
Equity securities 15,581
Total Y260,455
Yen in millions
March 31, 2002
Gross unrealized Gross unrealized
gains losses Fair
Cost Value
Available-for-sale
Debt securities Y1,443,392 Y33,656 Y 9,743 Y1,467,305
Equity securities 481,478 88,196 5,260 564,414
Total Y1,924,870 Y121,852 Y15,003 Y2,031,719
Securities not practicable
to fair value
Debt securities Y 12,629
Equity securities 87,515
Total Y100,144
U.S. dollars in millions
March 31, 2002
Gross unrealized Gross unrealized
gains losses Fair
Cost Value
Available-for-sale
Debt securities $10,832 $253 $ 73 $11,012
Equity securities 3,613 662 39 4,236
Total $14,445 $915 $112 $15,248
Securities not practicable
to fair value
Debt securities $ 95
Equity securities 656
Total $751
At March 31, 2001 and 2002, debt securities classified as available-for-sale
mainly consist of Japanese government and municipal bonds and corporate debt
securities with maturities from 1 to 10 years.
For the year ended March 31, 2000, the net unrealized gains on
available-for-sale securities included as a component of accumulated other
comprehensive income, net of applicable taxes, increased by Y82,870 million.
For the year ended March 31, 2001 and 2002, the net unrealized gains decreased
by Y304,995 and Y3,576 million ($27 million), respectively.
Proceeds from sales of available-for-sale securities were Y447,925 million,
Y234,608 million and Y147,722 million ($1,109 million) for the years ended March
31, 2000, 2001 and 2002, respectively. On those sales, gross realized gains
were Y35,696 million, Y41,134 million and Y8,885 million ($67 million) and gross
realized losses were Y64 million, Y81 million and Y7 million ($0 million),
respectively.
During the year ended March 31, 2001, Toyota contributed certain marketable
equity securities, not including those of its subsidiaries and affiliated
companies, to an employee retirement benefit trust, with no cash proceeds
thereon. The fair value of these securities at the time of contribution was
Y269,700 million. The securities held in this trust are qualified as plan
assets. Upon contribution of these marketable securities, a net unrealized gain
of Y161,151 million was realized and included in 'Other income (loss), net' in
the accompanying consolidated statement of income. Since the unrealized gain,
net of tax, had already been recorded as accumulated other comprehensive income,
the contribution itself did not impact the amount of comprehensive income.
During the year ended March 31, 2002, Toyota recognized a pretax loss of
Y212,909 million ($1,598 million) for other than temporary decline in market
value of its 13.3% ownership interest in KDDI which is included in 'Other income
(loss), net' in the accompany consolidated statements of income.
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 is recognized currently as a realized loss.
7. Finance receivables:
Finance receivables consist of the following:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Retail Y 1,900,537 Y 2,723,834 $ 20,442
Finance leases 1,223,340 1,391,924 10,446
Wholesale and other dealer loans 895,968 952,260 7,146
4,019,845 5,068,018 38,034
Unearned income (279,538) (323,897) (2,431)
Allowance for credit losses (38,292) (52,170) (392)
Finance receivables, net 3,702,015 4,691,951 35,211
Less - Current portion (1,633,247) (2,020,491) (15,163)
Noncurrent finance receivables, net Y 2,068,768 Y 2,671,460 $ 20,048
The contractual maturities of retail receivables, the future minimum lease
payments on finance leases and wholesale and other dealer loans at March 31,
2002 are summarized as follows:
Yen in millions U.S. dollars in millions
Year ending Retail Finance Wholesale and Retail Finance lease Wholesale and
March 31: lease other dealer loans other dealer
loans
2003 Y 815,587 Y 307,428 Y874,928 $ 6,121 $2,307 $6,566
2004 692,768 236,048 10,718 5,199 1,772 81
2005 557,726 190,141 14,304 4,186 1,427 107
2006 403,677 212,959 15,509 3,029 1,598 116
2007 212,234 71,878 23,896 1,593 539 179
Thereafter 41,842 249 12,905 314 2 97
Y2,723,834 Y1,018,703 Y952,260 $20,442 $7,645 $7,146
Finance leases consist of the following:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Minimum lease payments Y 907,992 Y1,018,703 $ 7,645
Estimated unguaranteed residual values 315,348 373,221 2,801
1,223,340 1,391,924 10,446
Less - Unearned income (233,653) (185,219) (1,390)
Less - Allowance for credit losses (13,761) (14,087) (106)
Finance leases, net Y 975,926 Y1,192,618 $ 8,950
Toyota maintains programs to sell retail finance receivables and interests
finance lease receivables through limited purpose subsidiaries. Toyota services
securitized receivables and is paid a servicing fee of 1% of the total principal
balance of the securitizations. In a subordinated capacity, the limited purpose
subsidiaries retain excess servicing cash flows, certain cash deposits and other
related amounts which are held as restricted assets subject to limited recourse
provisions. These restricted assets are not available to satisfy any
obligations of Toyota. The investors have recourse to the interest-only strips,
restricted cash held by the securitization trusts, and any subordinated retained
interest. The investors do not have recourse to other assets held by Toyota for
failure of debtors to pay when due.
At March 31, 2001 and 2002, Toyota's retained interest and investments relating
to these securitizations included interest in trusts of Y65,826 million and
Y68,076 million ($511 million), respectively, interest only strips of Y16,072
million and Y14,971 million ($112 million), respectively, and other receivables
of Y21,975 million and Y6,427 million ($48 million), respectively.
Toyota sold finance receivables under these programs of Y125,791 million,
Y502,765 million and Y613,765 million ($4,606 million) and recognized a pretax
gain resulting from these sales of Y1,246 million, Y5,046 million and Y10,628
million ($80 million) for the years ended March 31, 2000, 2001 and 2002,
respectively, after providing an allowance for estimated credit and residual
value losses. The gain on sale recorded depends on the carrying amount of the
assets at the time of the sale. The carrying amount is allocated between the
assets sold and the retained interests based on their relative fair values at
the date of the sale. The fair value of retained interests was estimated by
discounting expected cash flows using management's best estimates of key
assumptions. Key economic assumptions used in measuring the fair value of
retained interests at the date of securitization for securitizations completed
during the year ended March 31, 2002 were as follows:
Collateral prepayment speed 1.0% - 1.5%
Weighted average life (in years) 1.26 - 1.50
Collateral expected credit losses (per annum) 0.59% - 0.70%
Discount rate used on residual cash flows 8.0% - 24.5%
Discount rate used on the subordinated tranch 5.0% - 8.0%
The following table summarizes certain cash flows received from and paid to the
securitization trusts for the year ended March 31, 2002:
Yen in millions U.S. dollars in millions
Retail Leases Retail Leases
Proceeds from new securitizations Y596,246 Y - $4,475 $ -
Servicing fees received 7,258 675 54 5
Excess interest received from interest only strips 22,438 225 168 2
Repurchases of delinquent receivables (187) (38,893) (1) (292)
Reimbursement of servicer advances 862 2,337 6 18
Reimbursements of maturity advances - 8,623 - 65
During the years ended March 31, 2001 and 2002, servicing fee assets in the
amounts of Y3,221 million and Y1,999 million ($15 million), respectively, were
recorded in conjunction with retail loan securitizations executed. The
amortized balance of servicing fee assets at March 31, 2001 and 2002, amounted
to approximately Y2,230 million and Y2,265 million ($17 million), respectively.
No servicing fee assets were recorded during the year ended March 31, 2000.
The outstanding balance of retail finance receivables sold through
securitizations which Toyota continues to service totaled Y525,146 million and
Y658,127 million ($4,939 million) at March 31, 2001 and 2002, respectively. The
outstanding balance of interests in lease finance receivables sold through
securitizations which Toyota continues to service totaled Y140,379 million at
March 31, 2001. No such outstanding balance of interests in lease finance
receivables existed as at March 31, 2002.
Toyota recorded an adjustment to other receivables totaling Y3,683 million,
Y9,393 million, and Y8,748 million ($66 million) for the years ended March 31,
2000, 2001 and 2002, respectively. These impairments were recognized when the
future undiscounted cash flows of the assets were estimated to be insufficient
to recover the related carrying values resulting from higher return rates and an
increase in vehicle disposition loss assumptions.
Toyota evaluates the key economic assumptions used in the initial valuation of
the retained assets and performs subsequent review of those assumptions on a
quarterly basis. The assumptions reviewed include prepayment speed, loss
severity, and discount rate. The retained assets are not considered to have a
ready available market value. Toyota records its retained assets at fair value
estimated using quoted market prices or discounted cash flow analysis.
Unrealized gains, net of income taxes, related to the retained assets are
included in comprehensive income. If management deems the excess between the
carrying value and the fair value to be unrecoverable, the asset is written down
through earnings.
Historical amounts as of March 31, 2001 and 2002 and delinquency amounts for the
years ended March 31, 2001 and 2002 for the managed portfolio for all
receivables owned and securitized are as follows:
Yen in millions
March 31, 2001
Retail Leases
Principal amount outstanding Y1,743,472 Y1,803,961
Number of contracts outstanding 1,107,442 702,952
Number of delinquent contracts over 60 days 3,388 1,470
Credit losses (net of recoveries) Y 6,356 Y 8,521
Residual value losses - 37,243
Comprised of:
Receivables held in portfolio Y1,218,264 Y1,663,494
Receivables securitized 525,208 140,391
Yen in millions U.S. dollars in millions
March 31, 2002 March 31, 2002
Retail Leases Retail Leases
Principal amount outstanding Y2,534,753 Y1,806,017 $19,023 $13,554
Number of contracts outstanding 1,411,992 620,258
Number of delinquent contracts over 8,403 5,296
60 days
Credit losses (net of recoveries) Y 12,393 Y 12,248 $ 93 $ 92
Residual value losses - 48,541 - 364
Comprised of:
Receivables held in portfolio Y1,876,572 Y1,655,031 $14,083 $12,420
Receivables securitized 658,181 150,986 4,939 1,133
Static pool losses are calculated by summing the actual and projected future
losses and dividing the sum by the original balance of each pool of assets.
Actual to date and expected static pool credit losses for the retail loan
securitizations were 0.18% and 0.52%, respectively, as of March 31, 2001, and
0.42% and 0.60%, respectively, as of March 31, 2002. Actual to date and
expected static pool credit losses for the lease securitizations were 1.64% and
0.12%, respectively, as of March 31, 2001 and 1.74% and 0%, respectively, as of
March 31, 2002. Actual to date and expected residual value losses for the lease
securitizations were 3.75% and 2.72%, respectively, as of March 31, 2001 and
5.95% and 0%, respectively, as of March 31, 2002.
At March 31, 2002, the key economic assumptions and the sensitivity of the
current fair value of the residual cash flows to an immediate 10 and 20 percent
adverse change in those economic assumptions are presented below.
U.S. dollars
Yen in millions in millions
Retail Retail
Balance Sheet carrying amount/fair value Y49,228 $369
of retained interests
Prepayment speed assumption (annual rate) 1.0 - 1.6%
Impact on fair value of 10% adverse change Y(1,386) $(10)
Impact on fair value of 20% adverse change (2,786) (21)
Residual cash flows discount rate (annual rate) 5.0 - 15.0%
Impact on fair value of 10% adverse change Y(558) $(4)
Impact on fair value of 20% adverse change (1,100) (8)
Expected credit losses (annual rate) 0.5 - 0.6%
Impact on fair value of 10% adverse change Y(665) $(5)
Impact on fair value of 20% adverse change (1,331) (10)
This hypothetical scenario does not reflect expected market conditions and
should not be used as a prediction of future performance. As the figures
indicate, changes in the fair value may not be linear. Also, in this table, the
effect of a variation in a particular assumption on the fair value of the
retained interest is calculated without changing any other assumption; in
reality, changes in one factor may result in changes in another, which might
magnify or counteract the sensitivities. Actual cash flows may drastically
differ from the above analysis.
8. Other receivables:
Other receivables relate to arrangements with certain component manufacturers
whereby Toyota procures inventory for these component manufactures and is
reimbursed for the related purchases.
9. Inventories:
Inventories consist of the following:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Finished goods Y601,839 Y653,959 $4,908
Raw materials 110,668 152,712 1,146
Work in process 126,143 113,195 849
Supplies and other 37,602 41,974 315
Y876,252 Y961,840 $7,218
10. Vehicles and equipment on operating leases:
Vehicles and equipment on operating leases consist of the following:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Vehicles Y1,492,901 Y1,556,297 $11,680
Equipment and other 41,167 38,747 291
Less - Allowance for credit losses (8,904) (10,883) (82)
1,525,164 1,584,161 11,889
Less - Accumulated depreciation (372,369) (356,243) (2,674)
Vehicles and equipment on Y1,152,795 Y1,227,918 $ 9,215
operating leases, net
Rental income from vehicles and equipment on operating leases were Y277,426
million, Y289,550 million and Y314,626 million ($2,361 million) for the years
ended March 31, 2000, 2001 and 2002, respectively. Future minimum rentals from
vehicles and equipment on operating leases are due in installments as follows:
Year ending March 31: Yen in millions U.S. dollars
in millions
2003 Y250,288 $1,878
2004 169,311 1,271
2005 94,759 711
2006 39,579 297
2007 5,439 41
The future minimum rentals as shown above should not be considered indicative of
future cash collections.
11. Allowance for doubtful accounts and credit losses:
An analysis of activity within the allowance for doubtful accounts relating to
trade accounts and notes receivable for the years ended March 31, 2000, 2001 and
2002 is as follows:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2000 2001 2002 2002
Allowance for doubtful accounts Y 57,525 Y 59,423 Y40,601 $305
at beginning of year
Provision for doubtful accounts 19,077 5,616 3,728 28
Write-offs (17,726) (12,089) (2,052) (15)
Other 547 (12,349) 17,587 131
Allowance for doubtful accounts Y 59,423 Y 40,601 Y59,864 $449
at end of year
The other amount includes the impact of additional ownership interest acquired
in affiliated companies, disposal of ownership interest in Toyota's
telecommunication subsidiary and currency translation adjustment during the
years ended March 31, 2000, 2001 and 2002.
A portion of the allowance for doubtful accounts balance at March 31, 2001 and
2002 relates to non-current notes receivable balances reported as other assets
totaling Y7,551 million and Y31,682 million ($238 million), respectively.
An analysis of the allowance for credit losses relating to finance receivables
and vehicles and equipment on operating leases for the years ended March 31,
2000, 2001 and 2002 is as follows:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2000 2001 2002 2002
Allowance for credit losses Y 45,537 Y 39,680 Y 47,196 $ 354
at beginning of year
Provision for credit losses 14,678 21,515 40,679 305
Charge-offs, net of recoveries (11,639) (18,315) (29,628) (222)
Other (8,896) 4,316 4,806 37
Allowance for credit losses Y 39,680 Y 47,196 Y 63,053 $ 474
at end of year
The other amount primarily includes the impact of currency translation
adjustment during the years ended March 31, 2000, 2001 and 2002.
12. Investments in and transactions with affiliated companies:
Summarized financial information for affiliated companies accounted for by the
equity method is shown below:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Current assets Y3,533,094 Y3,234,930 $24,277
Noncurrent assets 5,373,996 6,360,853 47,736
Total assets Y8,907,090 Y9,595,783 $72,013
Current liabilities Y2,777,992 Y2,493,933 $18,716
Long-term liabilities 1,998,497 2,846,732 21,364
Shareholders' equity 4,130,601 4,255,118 31,933
Total liabilities and shareholders' equity Y8,907,090 Y9,595,783 $72,013
Toyota's share of shareholders' equity Y1,308,654 Y1,332,458 $10,000
Number of affiliated companies at end of period 60 58
Yen in millions U.S. dollars
in millions
For the year ended March 31 For the year ended
March 31,
2000 2001 2002 2002
Net revenues Y8,891,362 Y9,841,869 Y10,492,823 $78,745
Gross profit Y933,570 Y1,009,400 Y1,037,455 $7,786
Net income Y90,781 Y269,745 Y224,287 $1,683
Entities comprising a significant portion of Toyota's investment in affiliated
companies include Denso Corporation; Aioi Insurance Co., Ltd.; Toyota Industries
Corporation; Toyota Tsusho Corporation; and Aisin Seiki Co., Ltd.
Certain affiliated companies accounted for by the equity method with carrying
amounts of Y1,077,493 million and Y1,088,588 million ($8,170 million) at March
31, 2001 and 2002, respectively, were quoted on various established markets at
an aggregate value of Y1,438,592 million and Y1,150,032 million ($8,631
million), respectively.
Account balances and transactions with affiliated companies are presented below:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Trade accounts and other receivables Y155,973 Y201,527 $1,512
Accounts payable 466,852 461,569 3,464
Yen in millions U.S. dollars
in millions
For the year ended March 31 For the year ended
March 31,
2000 2001 2002 2002
Sales of products Y 697,801 Y 682,317 Y 749,830 $ 5,627
Purchases 2,886,648 3,006,546 3,439,208 25,810
Dividends from affiliated companies accounted for by the equity method for the
years ended March 31, 2000, 2001 and 2002 were Y12,452 million, Y13,871 million
and Y14,530 million ($109 million), respectively.
Toyota has convertible debt securities issued by affiliated companies in amount
of Y57,096 million and Y54,033 million ($406 million) as of March 31, 2001 and
2002, respectively, which were included in 'Investments and other assets -
affiliated companies' in the consolidated balance sheet at cost. Fair value of
those securities as of March 31, 2001 and 2002 were Y80,060 million and Y67,978
million ($510 million), respectively. Maturities of these convertible debt
securities range from 3 to 6 years.
At March 31, 2001, Toyota had a 49.9% ownership interest in The Chiyoda Fire and
Marine Insurance Company ('Chiyoda'), which was accounted for using the equity
method of accounting, and a 19.3% ownership interest in Dai-Tokyo Fire and
Marine Insurance Company Limited ('Dai-Tokyo'), which was accounted for as a
marketable security investment. On April 1, 2001, Chiyoda and Dai-Tokyo merged
with Dai-Tokyo being the surviving corporation and Dai-Tokyo changed its name to
Aioi Insurance Co., Ltd. ('Aioi'). Toyota's ownership interest in Aioi at the
merger was 33.4% and Toyota is accounting for its ownership in Aioi using the
equity method of accounting.
13. Short-term borrowings and long-term debt:
Short-term borrowings at March 31, 2001 and 2002 consisted of the following:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Loans, principally from banks, with a weighted-average interest at Y 664,440 Y 874,416 $ 6,562
March 31, 2001 of 2.96% per annum and at March 31, 2002 of 1.44% per
annum, respectively
Commercial paper with a weighted-average interest at March 31, 2001 804,567 951,148 7,138
of 5.65% per annum and at March 31, 2002 of 2.19% per annum,
respectively
Y1,469,007 Y1,825,564 $13,700
At March 31, 2002, Toyota had unused lines of credit amounting to Y2,739,575
million ($20,560 million) of which Y873,658 million ($6,557 million) related to
commercial paper programs. Under these programs, Toyota is authorized to obtain
short-term financing at prevailing interest rates for periods not in excess of
360 days.
Long-term debt at March 31, 2001 and 2002 comprises the following:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Unsecured loans, representing obligations principally to banks, due Y 416,425 Y 562,231 $ 4,219
2001 to 2031 in 2001 and due 2002 to 2032 in 2002 with interest
ranging from 0.10% to 21.20% per annum in 2001 and from 0.09% to
17.00% per annum in 2002
Secured loans, representing obligations principally to banks, due 12,794 61,290 460
2001 to 2019 in 2001 and due 2002 to 2019 in 2002 with interest
ranging from 0.55% to 8.50% per annum in 2001 and from 0.35% to
4.70% per annum in 2002
Medium-term notes of consolidated subsidiaries, due 2001 to 2011 in 2,006,449 2,632,323 19,755
2001 and due 2002 to 2012 in 2002 with interest ranging from 0.30%
to 8.13% per annum in 2001 and from 0.03% to 8.13% per annum in 2002
Unsecured 0.45% convertible bonds of consolidated subsidiaries, due 13,308 13,308 100
2003, convertible at Y672 ($5) for one common share, redeemable
before due date
Unsecured notes of parent company, due 2002 to 2018 in 2001 and due 523,900 514,750 3,863
2002 to 2018 in 2002 with interest ranging from 1.40% to 6.25% per
annum in 2001 and from 1.40% to 6.25% per annum in 2002
Unsecured notes of consolidated subsidiaries, due 2001 to 2008 in 680,391 871,142 6,538
2001 and due 2002 to 2008 in 2002 with interest ranging from 0.72%
to 7.00% per annum in 2001 and from 0.52% to 7.00% per annum in 2002
Notes payable related to securitized finance receivables structured - 138,103 1,036
as collateralized borrowings
Long-term capital lease obligations, due 2001 to 2017 in 2001 and 144,751 88,373 663
due 2002 to 2017 in 2002, with interest ranging from 0.95% to 9.33%
per annum in 2001 and from 0.95% to 9.33% per annum in 2002
3,798,018 4,881,520 36,634
Less - Current portion due within one year (714,674) (1,158,814) (8,696)
Y3,083,344 Y 3,722,706 $27,938
At March 31, 2002, property, plant and equipment with a book value of Y127,230
million ($955 million) was pledged as collateral by consolidated subsidiaries
for certain debt obligations. In addition, other assets aggregating Y232,384
million ($1,744 million) was pledged as collateral by consolidated subsidiaries
for certain debt obligations including 'Notes payable related to securitized
finance receivables structured as collateralized borrowings'.
At March 31, 2002, approximately 47%, 27% and 26% of long-term debt is
denominated in U.S. dollars, Japanese yen and other currencies, respectively.
The aggregate amounts of annual maturities of long-term debt during the next
five years are as follows:
Year ending March 31: Yen in millions U.S. dollars
in millions
2003 Y1,158,814 $8,696
2004 1,090,072 8,181
2005 722,774 5,424
2006 565,211 4,242
2007 207,789 1,559
Standard agreements with certain banks in Japan include provisions that
collateral (including sums on deposit with such banks) or guarantees will be
furnished upon the banks' request and that any collateral furnished, pursuant to
such agreements or otherwise, will be applicable to all present or future
indebtedness to such banks.
14. Income taxes:
The components of income before income taxes comprise the following:
Yen in millions U.S. dollars
in millions
For the year ended March 31 For the year ended
March 31,
2000 2001 2002 2002
Income before income taxes:
Parent company and domestic subsidiaries Y703,614 Y 920,823 Y706,795 $5,304
Foreign subsidiaries 177,066 186,466 265,306 1,991
Y880,680 Y1,107,289 Y972,101 $7,295
The provision for income taxes consisted of the following:
Yen in millions U.S. dollars
in millions
For the year ended March 31 For the year ended
March 31,
2000 2001 2002 2002
Current income tax expense:
Parent company and domestic subsidiaries Y255,503 Y371,797 Y 467,891 $ 3,511
Foreign subsidiaries 78,822 102,754 97,709 734
Total current 334,325 474,551 565,600 4,245
Deferred income tax expense (benefit):
Parent company and domestic subsidiaries 87,063 58,391 (157,152) (1,179)
Foreign subsidiaries 1,343 (9,066) 14,341 107
Total deferred 88,406 49,325 (142,811) (1,072)
Total provision Y422,731 Y523,876 Y 422,789 $ 3,173
Toyota is subject to a number of different income taxes which, in the aggregate,
indicate a statutory rate in Japan of approximately 41.3% in 2000, 2001 and
2002. Reconciliation of the differences between the statutory tax rate and the
effective income tax rate is as follows:
For the year ended March 31
2000 2001 2002
Statutory tax rate 41.3% 41.3% 41.3%
Increase (reduction) in taxes resulting from:
Non-deductible expenses 0.9 0.7 0.7
Tax on equity earnings in affiliated companies 1.5 2.2 1.0
Valuation allowance 2.2 1.5 1.2
Other 2.1 1.6 (0.7)
Effective income tax rate 48.0% 47.3% 43.5%
The significant components of deferred tax assets and liabilities are as
follows:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Deferred tax assets:
Accrued severance costs Y 254,427 Y 269,834 $ 2,025
Warranty reserves and accrued expenses 92,684 128,344 963
Other accrued employees' compensation 62,751 81,331 610
Operating loss carryforwards for tax purposes 63,186 94,700 711
Inventory adjustments 55,126 45,586 342
Property, plant and equipment and other assets 78,109 92,369 693
Other 113,618 154,657 1,161
Gross deferred tax assets 719,901 866,821 6,505
Less - Valuation allowance (73,339) (103,211) (774)
Total deferred tax assets 646,562 763,610 5,731
Deferred tax liabilities:
Unrealized gain on securities (45,237) (13,494) (101)
Undistributed earnings of affiliates accounted (307,571) (287,073) (2,154)
for by the equity method
Basis difference of acquired assets (15,350) (17,777) (135)
Lease transactions (211,298) (239,900) (1,800)
Gain on securities contribution to employee retirement benefit trust (66,523) (66,523) (499)
Gain on disposition of ownership interest in telecommunication (74,696) - -
subsidiaries
Other (73,497) (78,456) (589)
Gross deferred tax liabilities (794,172) (703,223) (5,278)
Net deferred tax assets (liabilities) Y(147,610) Y 60,387 $ 453
The valuation allowance mainly relates to deferred tax assets of the
consolidated subsidiaries with operating loss carryforwards for tax purposes
that are not expected to be realized. The net changes in the total valuation
allowance for deferred tax assets for the years ended March 31, 2000, 2001 and
2002 consisted of the following:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2000 2001 2002 2002
Valuation allowance at beginning of year Y45,825 Y 72,437 Y 73,339 $ 550
Additions 28,164 27,857 27,976 210
Deductions (5,014) (9,561) (16,089) (121)
Other 3,462 (17,394) 17,985 135
Valuation allowance at end of year Y72,437 Y 73,339 Y103,211 $ 774
The other amount includes the impact of additional ownership interest of
acquired affiliated companies, changes in the statutory tax rates and currency
translation adjustment during the years ended March 31, 2000, 2001 and 2002. In
addition, the other amount during the year ended March 31, 2001, includes the
impact of the disposal of ownership interest in Toyota's telecommunication
subsidiary.
Net deferred tax liabilities are included in the consolidated balance sheets as
follows:
Yen in millions U.S. dollars
in millions
March 31 March 31,
2001 2002 2002
Deferred tax assets:
Deferred income taxes (Current assets) Y 355,051 Y 433,524 $ 3,253
Investments and other assets - other 55,092 101,342 761
Deferred tax liabilities:
Other current liabilities (4,487) (7,418) (56)
Deferred income taxes (Long-term liabilities) (553,266) (467,061) (3,505)
Net deferred tax assets (liabilities) Y(147,610) Y 60,387 $ 453
Management of Toyota intends to reinvest certain undistributed earnings of their
foreign subsidiaries for an indefinite period of time. As a result, no
provision for income taxes has been made on undistributed earnings of these
subsidiaries not expected to be remitted in the foreseeable future aggregating
Y1,282,199 million ($9,623 million) as of March 31, 2002. Toyota estimates an
additional tax provision of Y86,217 million ($647 million) would be required at
such time if the full amount of these accumulated earnings became subject to
Japanese taxes.
Operating loss carryforwards for tax purposes of consolidated subsidiaries at
March 31, 2002 amounted to approximately Y238,393 million ($1,789 million) and
are available as an offset against future taxable income of such subsidiaries.
These carryforwards expire in years 2003 to 2007, with the exception of Y116,645
million ($875 million) which are not subject to expiration.
15. Other payables:
Other payables are mainly related to purchases of property, plant and equipment
and non-manufacturing purchases.
16. Shareholders' equity:
Changes in the number of shares of common stock outstanding have resulted from
the following:
For the year ended March 31
2000 2001 2002
Common stock outstanding:
Balance at beginning of year 3,760,650,129 3,749,405,129 3,684,997,492
Issuance during the year - 588,963 -
Purchase and retirement (11,245,000) (64,996,600) (35,000,000)
Balance at end of year 3,749,405,129 3,684,997,492 3,649,997,492
The Japanese Commercial Code provides that an amount equal to at least 10% of
cash dividends and other distributions from retained earnings paid by the parent
company and its Japanese subsidiaries be appropriated as a legal reserve. No
further appropriation is required when total amount of the legal reserve and
capital surplus equals 25% of stated capital. Legal reserve included in
retained earnings as of March 31, 2001 and 2002 were Y121,405 million and
Y127,100 million ($954 million) and are restricted to be used as dividends.
The amounts of unrestricted consolidated retained earnings pursuant to
accounting principles generally accepted in Japan were Y6,038,471 million and
Y6,398,695 million ($48,020 million) as of March 31, 2001 and 2002,
respectively.
In accordance with customary practice in Japan, the appropriations are not
accrued in the financial statements for the period to which they relate, but are
recorded in the subsequent accounting period after shareholders' approval has
been obtained. Retained earnings at March 31, 2002 includes amounts
representing final cash dividends of Y54,088 million ($406 million), Y15.0
($0.11) per share, which were approved at the shareholders' meeting held on June
26, 2002.
Retained earnings at March 31, 2002 includes Y569,812 million ($4,276 million)
relating to equity in undistributed earnings of companies accounted for by the
equity method.
On June 26, 1997, the shareholders of the parent company approved a stock
repurchase policy in accordance with the Japanese Commercial Code. Under the
stock repurchase policy, the shareholders authorized Toyota's repurchase,
subject to the approval of the Board of Directors, of up to 370 million shares
of its common stock without the limitation of time. In accordance with this
plan, the parent company repurchased shares approximately 11 million, 65 million
and 77 million during the years ended March 31, 2000, 2001 and 2002,
respectively. The results of repurchases and retirement of common stock reduced
retained earnings for the years ended March 31, 2000, 2001 and 2002 by Y45,457
million, Y263,596 million and Y129,218 million ($970 million), respectively. As
of March 31, 2001 and 2002, Toyota's unused authorized shares for the repurchase
of shares of common stock under the policy were 245.7 million shares and 169.1
million shares, respectively. In October 2001, the Japanese Commercial Code has
been modified. The new Japanese Commercial Code allows the company to purchase
treasury stock at any reason at any time by the resolution of the Board of
Directors up to the limitation approved by the Shareholders' meeting. On June
26, 2002, the shareholders of the parent company approved to purchase treasury
stock up to 170 million shares and up to Y600,000 million during the period up
to the resolution of next Ordinary General Shareholders' Meeting which would be
held in June 2003.
In years prior to 1997, Toyota had made free distributions of shares to its
shareholders for which no accounting entry is required in Japan. Had the
distributions been accounted for in a manner used by companies in the United
States of America, Y2,576,606 million ($19,337 million) would have been
transferred from retained earnings to the appropriate capital accounts.
Detailed components of accumulated other comprehensive income at March 31, 2001
and 2002 and the related changes, net of taxes for the years ended March 31,
2000, 2001 and 2002 consist of the following:
Yen in millions
Foreign currency Unrealized Minimum pension Net losses on Accumulated
translation gains (losses) liability derivative other
adjustments on securities adjustment instruments comprehensive
income (loss)
Balance at March Y(286,352) Y 259,448 Y (7,251) Y - Y (34,155)
31, 1999
Other comprehensive (181,313) 82,870 7,251 - (91,192)
income (loss)
Balance at March (467,665) 342,318 - (125,347)
31, 2000
Other comprehensive 161,280 (304,995) (13,429) - (157,144)
income (loss)
Balance at March (306,385) 37,323 (13,429) - (282,491)
31, 2001
Other comprehensive 133,897 (3,576) (114,344) (790) 15,187
income (loss)
Balance at March Y(172,488) Y 33,747 Y(127,773) Y(790) Y(267,304)
31, 2002
U.S. dollars in millions
Foreign currency Unrealized Minimum pension Net losses on Accumulated
translation gains (losses) liability derivative other
adjustments on securities adjustment instruments comprehensive
income (loss)
Balance at March $(2,299) $280 $(101) $ - $(2,120)
31, 2001
Other comprehensive 1,005 (27) (858) (6) 114
income (loss)
Balance at March $(1,294) $253 $(959) $(6) $(2,006)
31, 2002
Tax effects allocated to each component of other comprehensive income for the
years ended March 31, 2000, 2001 and 2002 are as follows:
Yen in millions
Pre-tax Tax Net-of-tax
amount expense amount
(benefit)
For the year ended March 31, 2000:
Foreign currency translation adjustments Y(182,910) Y 1,597 Y(181,313)
Unrealized gains on securities:
Unrealized holding gains arising during period 163,896 (67,657) 96,239
Less: reclassification adjustment for gains included in net income (22,768) 9,399 (13,369)
Minimum pension liability adjustment 12,346 (5,095) 7,251
Other comprehensive loss Y (29,436) Y(61,756) Y (91,192)
For the year ended March 31, 2001:
Foreign currency translation adjustments Y 163,100 Y (1,820) Y 161,280
Unrealized losses on securities:
Unrealized holding losses arising during period (322,266) 147,804 (174,462)
Less: reclassification adjustment for gains included in net income (86,805) 35,833 (50,972)
Less: reclassification adjustment for realized gains on securities (161,151) 81,590 (79,561)
contribution to employee retirement benefit trust
Minimum pension liability adjustment (22,869) 9,440 (13,429)
Other comprehensive income (loss) Y(429,991) Y272,847 Y(157,144)
For the year ended March 31, 2002:
Foreign currency translation adjustments Y 136,250 Y (2,353) Y 133,897
Unrealized losses on securities:
Unrealized holding losses arising during period (166,570) 68,686 (97,884)
Less: reclassification adjustment for losses included in net income 160,606 (66,298) 94,308
Minimum pension liability adjustment (194,727) 80,383 (114,344)
Net losses on derivative instruments (1,074) 284 (790)
Other comprehensive income (loss) Y (65,515) Y80,702 Y 15,187
U.S. dollars in millions
Pre-tax Tax Net-of-tax
amount expense amount
(benefit)
For the year ended March 31, 2002:
Foreign currency translation adjustments $ 1,022 $ (17) $1,005
Unrealized losses on securities:
Unrealized holding losses arising during period (1,250) 515 (735)
Less: reclassification adjustment for losses included in net 1,205 (497) 708
income
Minimum pension liability adjustment (1,461) 603 (858)
Net losses on derivative instruments (8) 2 (6)
Other comprehensive income (loss) $ (492) $606 $ 114
This information is provided by RNS
The company news service from the London Stock Exchange
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