TOYOTA MOTOR CORPORATION
TOYOTA MOTOR CORPORATION
Annual Report 2010
Purpose, Perspective and Passion
Year ended March 31, 2010
Contents
Consolidated Performance
Highlights
Special Feature: Reforging Bonds of Trust
Leading the Automobile Industry in a New Age
Toyota Business Revolution
・ The Transformation to an Evolutionary Business Model
・ State-of-the-Art Developments for the
・ Developing Products from the
Immense China Market
Customer’s Perspective
in India’s High-Growth Market
Top Messages
・ Chairman’s Message
・ President’s Message
・ Commitment to Quality
Business Overview
Operations
・ Automotive Operations
・ Financial Services
・ Other Business
・ Motoｒsports Activities
Operations
Corporate Information
Property
・ R&D and Intellectual
・ Corporate Philosophy
・ Management Team
・ Corporate Governance
・ Risk Factors
・ Other Management and
Corporate Data
Financial Section
・ Message from the
Executive Vice President
Responsible for Accounting
The future Toyota is
aiming for.
Investor
Information
Cautionary Statement with Respect to Forward-Looking Statements
This presentation contains forward-looking statements that reflect Toyota’s plans and expectations. These
forward-looking statements are not guarantees of future performance and involve known and unknown risks,
uncertainties and other factors that may cause Toyota’s actual results, performance, achievements or financial
position to be materially different from any future results, performance, achievements or financial position
expressed or implied by these forward-looking statements. These factors include: (i) changes in economic
conditions and market demand affecting, and the competitive environment in, the automotive markets in Japan,
North America, Europe, Asia and other markets in which Toyota operates; (ii) fluctuations in currency exchange
rates, particularly with respect to the value of the Japanese yen, the U.S. dollar, the Euro, the Australian dollar,
the Canadian dollar and the British pound; (iii) changes in funding environment in financial markets; (iv) Toyota’s
ability to realize production efficiencies and to implement capital expenditures at the levels and times planned by
management; (v) changes in the laws, regulations and government policies in the markets in which Toyota
operates that affect Toyota’s automotive operations, particularly laws, regulations and government policies
relating to vehicle safety including remedial measures such as recalls, trade, environmental protection, vehicle
emissions and vehicle fuel economy, as well as changes in laws, regulations and government policies that affect
Toyota’s other operations, including the outcome of current and future litigation and other legal proceedings
government proceedings and investigations; (vi) political instability in the markets in which Toyota operates; (vii)
Toyota’s ability to timely develop and achieve market acceptance of new products that meet customer demand;
(viii) any damage to Toyota’s brand image; and (ix) fuel shortages or interruptions in transportation systems,
labor strikes, work stoppages or other interruptions to, or difficulties in, the employment of labor in the major
markets where Toyota purchases materials, components and supplies for the production of its products or
where its products are produced, distributed or sold.
A discussion of these and other factors which may affect Toyota’s actual results, performance, achievements
or financial position is contained in Toyota’s annual report on Form 20-F, which is on file with the United States
Securities and Exchange Commission.
Chairman’s Message
Top Messages
Top Messages
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Chairman's Message
President's Message
Commitment to Quality
Thoroughly Reaffirming Toyota’s Founding Principles
Worldwide competition in the automotive industry is growing more intense, as demonstrated by
increasing demand for innovative and competitively priced products that meet unique customer
needs. In addition, environmental concerns are becoming a higher priority for the international
community.
Toyota’s 70-year history has been very valuable in helping the Company address the major
challenges it faces today. We have experienced recessions, automobile trade liberalization,
environmental concerns, oil shocks and other major changes in the operating environment.
In each case, we remained faithful to our founding principles of contributing to society. With
humility, we learned and evolved. The current difficulties have given us cause to reaffirm these
principles. We are confident that by providing safe, high-quality vehicles at affordable prices,
the starting point for growth, we can overcome the issues we now face by adhering steadfastly
to customer-first, Genchi Genbutsu (on-site, hands-on experience) principles and striving for
continuous improvement.
Building the Automobile of the Future
The automobile industry is being driven by advances in environmental technology. Toyota
will work to improve its technology, while broadening its strategy of sustainable mobility to
include new technologies and products, partnerships, the urban environment and energy. By
strengthening the bonds between the customers, dealers and suppliers who represent our
Remaining True to
Customer-First and
Genchi Genbutsu Principles as
We Build the Cars of the Future
In fiscal 2010, Toyota faced very challenging business conditions,
driving force, we will redouble our efforts to create a new future for the automobile.
such that the Company initially forecast operating losses. Although
I ask for the continued support and understanding of all of our stakeholders.
a few emerging markets showed signs of recovery, the global
economic crisis continued to affect markets in Japan, the United
States, Europe and other parts of the world. Although Toyota
July 2010
achieved profitability on a consolidated basis, we fell short of a full-
scale earnings recovery. I apologize sincerely for any concern this
may have caused our shareholders, investors, customers, suppliers,
communities and other stakeholders. Under these circumstances,
we made many difficult decisions and introduced new operating
structures across the Company. In June 2009, we put in place a new
management team to facilitate structural reforms and a recovery
in performance. Returning to the spirit of manufacturing cars that
has been essential to Toyota since its founding, we are preparing to
take the next step forward.
TOYOTA ANNUAL REPORT 2010
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President’s Message
Top Messages
Top Messages
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Chairman's Message
President's Message
Commitment to Quality
well as our overseas business operations for their efforts in working together to return the Company
to its normal state as soon as possible. Above all, I am sincerely grateful to the more than 7 million
customers around the world who purchased new Toyota vehicles during the past year.
Thanks to everyone’s support, consolidated operating income for the fiscal year ended
March 31, 2010, was ¥147.5 billion. I think that quickly moving into the black at a time that will
determine car-making for the next 100 years is hugely significant to the formulation of our next
growth strategy. I have defined fiscal 2011 as the year when Toyota makes a fresh start, and I
intend to steer the Company toward a new growth strategy.
One pillar of this new growth strategy is the next-generation eco-car. In May 2010, we
announced a business partnership with Tesla Motors involving the development of an electric
vehicle. In the spring of 2010, during a visit to the United States, I had an opportunity to test drive
one of Tesla Motors’ electric vehicles, an experience that I can only describe as feeling the wind
of the future. Not only was I impressed by Tesla’s technological capabilities, but I also sensed the
energy that will enable them to produce the vehicle efficiently to meet market demands.
In order to capitalize on technological transitions that occur once every hundred years, I think
that the can-do spirit, quick decision-making and flexibility of venture businesses are as necessary
as the methods of big corporations like Toyota. Toyota was also born as a venture business and that
spirit has contributed to its growth over the years. By working with Tesla, I strongly believe we can
reawaken the creative spirit in our own employees and accept the challenges of facing a new future.
Since its foundation, Toyota’s unchanging mission has been to contribute to society by making
safe and reliable vehicles. This will continue to be our priority. In addition, Toyota has been a
dynamic company. As the particular needs of our customers evolve, I consider the response to
ever-changing times as growth, and I hope that Toyota and I myself will continue to grow.
photo by Kimimasa Mayama
The Road to Making Better Cars
A Fresh Start for Toyota—
Contributing to Society through the
Production of Safe and
Reliable Vehicles
I would like to express my heartfelt thanks for the warm, ongoing support of our stakeholders
To this end, it is important that our customers, shareholders, regional communities, dealers,
worldwide.
suppliers, employees and all other stakeholders support the idea of Toyota’s continuing growth
Over the past several months, I have been involved in a variety of meetings to explain our
as being a good thing.
ongoing commitment to safety and customer satisfaction. These included public hearings in
The growth I want to pursue is not simply expansion to achieve a greater market share. Instead,
the United States and explanatory meetings in Japan and other countries with the support of
I envision a sustainable growth driven by each employee and based on delivering high quality
related personnel from across the Company. During this time, I received constructive suggestions
and safety at an affordable price—as demanded by our customers all over the world.
for improvement as well as words of encouragement and support from many people. I am very
Although the Company finds itself in an environment where conditions are extremely
grateful to those who took the time to help us through this difficult time.
challenging, the hearts of all Toyota associates are united in an effort to make better vehicles. I
Looking back on the past year, I am reminded of when I was appointed as president in June 2009:
hope Toyota will receive your continued support.
then it felt like we were setting sail in stormy economic conditions. It was an extremely severe
operating environment in which we were unable to relax for even one moment all year long.
July 2010
From our withdrawal from F1 to the shutdown of production at New United Motor Manufacturing
Inc. (NUMMI), our former joint venture with GM, there were many hard choices to make. However,
even in such a difficult period for Toyota, I am truly grateful to our dealers and suppliers who remained
fully committed to providing as many vehicles as possible to customers, and to our employees as
TOYOTA ANNUAL REPORT 2010
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Commitment to Quality
Chairman's Message
President's Message
Commitment to Quality
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
General Overview of Quality Issues
Establishment of the Special Committee for Global Quality
Today, as in the past, Toyota is focused on the customer. When problems arise, we thoroughly
In March 2010, the Special Committee for Global Quality, chaired by TMC President Akio Toyoda,
investigate the cause and make all necessary countermeasures and corrections. The idea of
was established. This Global Quality Committee launched initiatives to address the deterioration
creating better cars through repeated improvement has been the foundation of quality control
of communications capabilities between the head office and other regions resulting from rapid
efforts at Toyota since the Company was founded. We are confident that our quality efforts,
globalization. One of the goals of the Global Quality Committee is to eliminate the haphazard
embodied by the Toyota Production System, are among the very best in the world.
sharing of quality information. The Global Quality Committee aims to strengthen quality
Toyota has grown by quickly responding to market needs. In order to ensure that Toyota’s growth
assurance systems through meticulous quality control in each region where Toyota operates.
does not come at the expense of safety, we will reemphasize an alignment of our customers’
To this end, chief quality officers (CQOs), representatives, and related personnel in each region
expectations with our quality control processes.
Excellence of hardware
Sense of safety
Customersʼ
expectations/demands
・Few problems
・Well-produced
・High performance
・Adequate explanation to
customers
・Understanding of
customersʼ feelings
・Consideration to
customersʼ usage
Focus on sense of
safety as well as
excellence of
hardware
New Quality Assurance Systems to Realize Safety and
Security from the Customers’ Point of View
Toyota is redoubling efforts to quickly regain the trust of its
customers. Positioning quality from the customer’s point of
view, we aim to ensure a system that will raise awareness and
facilitate rapid response to market information.
In the past, Toyota’s quality standards focused more on
technical issues. Now, we are incorporating an awareness
of the customer’s perspective as suppliers and dealers work
together to alleviate customer concerns. To this end, we
have established the Special Committee for Global Quality to
develop and strengthen a more advanced quality assurance
system and promote the global and rapid reform of all business
processes from the customer’s point of view. As a result, amid
the procurement of parts from developing countries and other
advances of globalization in the automobile industry, we aspire
to enhance our quality and service.
gather to discuss quality issues with third-party experts and propose improvement plans. In the
past, Senior Managing Director−level Quality Function Meetings were held five times a year to
review quality assurance systems and mechanisms. From this point forward, we will conduct
these meetings three times a year, with the Special Committee for Global Quality meeting
semiannually. The first meeting of the Special Committee for Global Quality, held on March 30,
2010, focused on 1) recalls and other safety decisions; 2) improvement of information gathering;
3) timely and accurate disclosure; 4) overall product safety; and 5) quality assurance and human
resource development. By focusing on these priority objectives, we will reinforce improvement
efforts in tandem with overseas operations and dealerships.
■ Special Committee for Global Quality
Committee chair: TMC President Toyoda
Auditor
Chair: Sasaki EVP
Secretariat:
Quality Group
Domestic
Sales Group
Sales &
Marketing Group
Uchiyamada EVP, Funo EVP,
Niimi EVP, Ichimaru EVP,
Ihara SMD, Hayashi D, BR-CK
R&D Group
CS Group
PE Group
HR Group
Manufacturing
Group
Purchasing
Group
PA Group
Finance Group
Regional Quality Task Force
North America CQO
N.A. Quality Task Force
Europe CQO
Euro. Quality Task Force
China CQO
（CQO team）
AP CQO
（CQO team）
M.A.M. CQO
（CQO team）
China Quality Task Force
AP
Quality Task Force
M.A.M.
Quality Task Force
Japan CQO
Japan Quality Task Force
Improve planning, control progress
Confirmation and advice from outside experts
Public disclosure
TOYOTA ANNUAL REPORT 2010
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Commitment to Quality
Chairman's Message
President's Message
Commitment to Quality
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Sp ecific Measu res to Impro ve S a f e t y a n d Q u a l i ty
■ Current and Future Technical Offices
（１） Strengthened Monitoring Function: The Early Detection and Resolution of Problems
We are improving the safety decision-making process and speed of implementation by
strengthening the process for gathering quality information from our customers in each
region and rapidly and accurately analyzing the information. Furthermore, we will take the
following measures to prevent safety issues before they occur.
１）Strengthening the Information Gathering Function
The inspection of Customer Vehicles: In the United States, Swift Market Analysis Response
Teams (SMARTs) are committed to responding to customers within 24 hours of contact by
the customer. A SMART dispatches trained technical field staff to inspect customer vehicles.
In addition to evaluating customer vehicles, the SMART gathers data and parts as needed to
ensure a thorough understanding of customer concerns in the field.
In May 2010, the Design Quality Innovation Division
was established within the technical divisions to
reflect customer feedback in vehicle design, improve
the quality of design drawings and develop human
r e s o u r c e s . A l s o , w e a r e i m p l e m e n t i n g t h o r o u g h
preventative measures that include gathering Japanese
and overseas market information by SMART members
as well as the inclusion of appropriate countermeasures
●…Existing sites
●…Scheduled sites
●…Proposed sites
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●8
●10
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●9
●12
●13
●20
●15
●19
●
●18
●16
●17
●21
●7
●2
●3
●5
●6
●1
●4
●22
＜North America＞We have plans to establish technical offices in five locations across the United States, including in New York, which has been in operation since
September 2009. We also have plans to establish two technical offices in Canada.
Locations：❶New York, ❷San Francisco, ❸Denver, ❹Florida, ❺Texas, ❻Toronto, ❼Calgary
＜Europe＞New technical offices are scheduled to be established in ❽England, ❾Germany, ❿France, ⓫Spain, ⓬Italy, ⓭Russia and ⓮Northern Europe.
＜ C h i n a＞New technical offices are scheduled to be established in ⓯Beijing, ⓰Shanghai, ⓱Guangzhou, ⓲Chengdu, ⓳Tianjin and ⓴Changchun.
In addition, we will strengthen the function of the existing Bahrain and Panama representative offices. We also plan to respond with direct visits to
distributors in each country.
＜ J a p a n＞There are a total of 12 technical offices conducting operations across Japan.
21
22
３）Using EDRs and Remote Communications Functions to Assist Root Cause Analysis
Onboard event data recorders* (EDRs) record driver operation and vehicle performance data
in the development of each design.
A SMART vehicle inspection
before and after an impact and are used in investigating the cause of an accident. Many
２）Increasing the Number of Technical Offices
vehicle models in Japan and the United States already have onboard EDRs, and by the end
of 2010, EDRs will be included in all Toyota vehicles distributed in the United States. We are
Consisting of several experts in the service, R&D and quality control areas, technical offices
also working to improve the data readout function. Furthermore, the use of existing remote
have been established in each region to enhance the gathering and communication of
communications functions such as G-BOOK will help create a mechanism for information
technical information that is used to determine the necessity of recalls and to improve
overall quality. We are increasing the number of technical offices in North America from
one to seven; we are also establishing new technical offices in other regions, including
collection that is linked to quality improvements and useful for root cause analysis.
* Event data recorder (EDR): A device that records acceleration, braking and other vehicle performance conditions for analysis when an impact occurs.
seven in Europe and six in China.
４）Strengthening Information Analysis and Improving the Safety Decision-Making Process
We have created an Integrated Quality Information System for the uniform management
of customer complaint information from dealers and distributors, as well as warranty repair
and technical information from a variety of sources, to strengthen our analysis capabilities.
This effort targets the early detection and resolution of problem areas. In the safety
decision-making process, customer representatives from each region participate in recall
review meetings to improve the mechanism for accurately reflecting customer feedback
and regional concerns.
TOYOTA ANNUAL REPORT 2010
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Commitment to Quality
Chairman's Message
President's Message
Commitment to Quality
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
■ Early Detection and Early Resolution based on Reinforced Information Gathering and
Genchi Genbutsu
Customer
Dealer/Distributor
Customer Quality Engineering Div.
TMC
Each region
Authorities
w
a
fl
l
i
a
c
n
h
c
e
T
Technical info.
Warranty info.
Customer
complaint info.
Expand intake of
information such
as incidents
Reinforce investigation of
customersʼ vehicles
・Team aiming to investigate certain
vehicles within 24 hours (SMART team)
・Technical branch office (NA: 7, Euro: 6, China: 6)
・Distribution of Event Data Recorder (EDR)
・Utilization of remote function
Integrated Quality Information System
Strengthen Analysis of Information
(Integrated IT system of variety quality info.)
Gather
info.
s
e
i
t
i
r
o
h
t
u
A
m
o
r
f
n
o
i
t
a
m
r
o
f
n
I
Enhance Speed/Contents/Quantity of Information Gathering and Analysis
（２） Strengthening Information Disclosure: Regaining Trust through Comprehensive Communication
In addition to strengthening our processes for the gathering of field performance data, we are
also enhancing the effectiveness of other quality improvement activities. Toyota will release
the results of third-party expert reviews and assessments of the improvement measures
adopted by the Special Committee for Global Quality. Also, Toyota is working closely with its
dealers to promote safer driving by providing customers with comprehensive information
regarding safety technology, safe driving methods, and other awareness tools that contribute
to the safe use of vehicles.
（３） Human Resource Development
In July 2010, we established five Customer First Training Centers to maintain quality and
further develop our human resources. These Customer First Training Centers are in Japan,
North America, Europe, Southeast Asia and China. The HR training programs specialize in
the cultivation of quality control experts and location-specific concerns and employ people
who have been trained for specific regional programs. The programs include Basic Training
—which focuses on the essence of the customer-first philosophy, the importance of quality
and quality the Toyota way—and Expert Training, which cultivates expertise based on
quality case studies. The first training center was set up in Japan in May 2009 and is already
developing additional programs to be conducted at new centers as they are established.
Main Activities Conducted at the Head Office Quality Inspection Building
This facility conducts assessments, investigations and meetings on vehicles, parts and materials
collected from the market based on customer suggestions.
Using a process of assumption to confirm
how parts are used and operated in the field.
Parts investigation
Checking of parts; Checking against schematic
Example of analysis
Taking a part returned from the market and
installing it in a vehicle to re-create use and
analyze the cause of the problem.
Three-dimensional measurement
Using a three-dimensional measuring
instrument to produce pinpoint coordinates
for checking against an original schematic.
Confirmation by simulating field problem condition. Analysis in environment chamber.
Primary
analysis
Detailed
analysis
Environment testing chamber
Chamber capable of producing
various temperature conditions
(from minus 40℃ to 120℃).
Hi-function shower
Testing for water leaks with showers
from various angles and also tilting
the vehicle.
4-wheel chassis dynamo-meter
Running a vehicle on quiet rollers
to analyze cabin sound levels and
isolate noise sources.
Analysis without dissection
CT scanner
Using a CT scanner to produce a 3D image of
the internal structure of parts and materials for analysis.
Scanning Electron Microscope（SEM）
The state of the object surface is observed
clearly with high magnification.
Human
resources
development
Note: Quality Inspection Building established in 2004
Introduction to how Toyota trains
quality-assurance enployees to
confirm defects with real parts and
passes on analytical know-how.
TOYOTA ANNUAL REPORT 2010
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Reforging Bonds of Trust
Special Feature
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Special Feature
Reforging Bonds of Trust
Leading the Automobile Industry in a New Age
Toyota Business Revolution
As emerging markets such as China and India gain
traction in the global economy, shifting the focus
of growth and other strategies from developed
countries to developing countries is an urgent
issue. Aware of these changes, Toyota has already
begun to advance a global strategy, which takes
the concepts of Customer First and
Genchi Genbutsu
to the next level.
This special feature focuses on Toyota business
i n n o v a t i o n t h r o u g h e x a m p l e s o f b u s i n e s s
development in the two largest developing nations.
TOYOTA ANNUAL REPORT 2010
TOYOTA ANNUAL REPORT 2010
6
Reforging Bonds of Trust
Special Feature
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
The Transformation to an Evolutionary Business Model
Further Refinement of Our Customer First Principle
Maximizing Customer Satisfaction by Strengthening Bonds and
Building a Long-Term Trusting Relationship
The era of mass production and mass consumption, along with the 20th century, is behind us. Auto
manufacturers must evolve and adapt to the demands of the 21st century. Traditionally, the automotive
business has flowed downstream in one direction, from manufacturers (production), to dealers (sales),
to customers (purchase). At Toyota, we believe it is important to forge bonds that strengthen the link
between these three parties and build a long-term trusting relationship. These bonds partner the ”
hard power” of the basic vehicle functions of “go, turn and stop” with the ”soft power” of the function
“get connected.” In China, we are building innovative relationships with customers through the forging
of these bonds. In India, we are having success developing vehicles based on the needs of regional
customers, rather than superimposing our global models on local markets. Providing the ultimate user
experience through new relationships and realizing high-quality services that maximize customer
satisfaction are linchpins of our business model for this new era, which seeks to redefine Customer First
and Genchi Genbutsu for the next generation of automobile users.
Accelerating the Creation and Growth of the Toyota Brand through Total Experience
At Toyota, we believe consideration of the user’s total experience is an important factor in providing a
service that maximizes customer satisfaction. This total experience involves strengthening bonds and
building new relationships with customers by providing attractive sales services at three stages. The
first stage seeks to convey the appeal of a space containing a Toyota vehicle and instill the desire to
experience the inside of a Toyota dealership when viewed from the outside. The second stage focuses
on the customer’s experience inside the dealership, while the third stage concentrates on the customer
support experience provided by the aftercare service. By providing customers with this multi-staged
total experience, we can reproduce the essence of the Toyota brand and, in the process, develop
innovative services that we believe will accelerate our growth.
Improving Dealer Operations with e-TOYOTA
The “e” in our e-TOYOTA business comes from the word “evolutionary.” Accordingly, this business
represents the cutting edge in terms of Toyota’s evolution, a business started in Japan that will lead
the automobile industry into a new era, the scope of which has already been expanded overseas to
Asia, China and North America. GAC Toyota Motor Co., Ltd. (GTMC), located in the city of Guangzhou
in Guangdong, China, is engaged in flagship e-TOYOTA business projects.
The basic strategy underlying our e-TOYOTA business, the spearhead of our next-generation
business model, is to provide services that maximize customer satisfaction when searching for,
purchasing and owning a vehicle, with all stages supported by an information network system. Rather
than just planning IT solutions and tools, we apply them across the entire business domain, including
production, distribution, sales and aftercare, aiming to establish an optimal link to the materialization
of supply chain management.
Taking Genchi Genbutsu to the Next Level
From Design to Production, 100% Local Procurement:
The Development of Vehicles Based on Regional Specifications
From now on, the starting point for vehicle production will be the idea that the road makes
the vehicle. Consumer needs differ by road maintenance conditions and fuel prices. To achieve
growth in fast-growing, ever-changing developing nations, it is particularly important to make
vehicles that take into consideration regional characteristics including consumer needs and road
maintenance conditions. To this end, rather than the superimposition of a global model, the
commercialization of the Etios, a compact car for the Indian market, represents a breakthrough in
terms of construction methods that incorporated locally procured materials and local production
technologies from the design stage. Aiming to create high-quality vehicles at affordable prices,
we promoted localization, from the meticulous procurement of parts through the entire
manufacturing process, as well as perfecting the optimal design for local conditions. We will use
this experience and expertise to develop other emerging markets in countries around the world.
■ Transformation of Business Structure
Traditional Business Structure
Production
Sales/Service
Manufacturer
Dealership
Customer
The car is a product.
New Business Structure
Customer
Total Life Service
Total Life Service
Telematics
Collaboration
Dealership
Manufacturer
The car is an item to provide a lifestyle.
TOYOTA ANNUAL REPORT 2010
TOYOTA ANNUAL REPORT 2010
7
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Reforging Bonds of Trust
Special Feature
State-of-the-Art Developments for the Immense China Market
Toward the Realization of Innovative Customer Relationships
In 2004, GAC Toyota Motor Co., Ltd. (GTMC), was created as a factory that was the culmination of innovative
technology and the latest equipment for that time. The factory was innovative in terms of equipment as
well as the various elements that comprised its overall business approach, such as Just-In-Time, Jidoka,
standardization, process management and other Toyota fundamentals. Kaizen (improvements) were
implemented across the entire business domain by visualizing all vehicle-related operations in the areas of
manufacturing, distribution, sales and aftercare service, affecting GTMC as well as dealerships.
These activities have been put into practice as a result of the business revolution that united Toyota’s
cutting-edge IT technology, knowledge gained through dealer operation improvements and
cumulative human resource experience.
Standardizing Service Quality
Using e-CRB to Strengthen our Connection with Customers
e-CRB (evolutionary customer relationship building) is a suite of IT systems centered on a cutting-edge
customer management system that has significantly contributed to the standardization of service in the
massive Chinese market.
In 2009, the GTMC flagship dealer sold 4,300 new vehicles with the assistance of e-CRB in negotiations
and the strengthening of customer relations. Supporting the ongoing approach of potential customers
as well as regular contact with existing customers, the e-CRB assists with orders by standardizing and
partitioning the various processes involved in sales and service activities and provides integrated
management through IT. e-Dealers use e-CRB to share customer information with GTMC, which has
been introduced at all GTMC dealer facilities.
■ CS Cycle of e-CRB
Buy TOYOTA
Satisfactory Purchase
Experience
Sophisticated
Service-in
Experience
TCV
3D Sales Support System
*2
Friendly & Reliable
Delivery Experience
Customer experience after purchase is categorized into five
experiences: “Purchase Experience” “Delivery Experience,”
“Owner Experience,” “Contact Experience,” and “Service-in
Experience.” In each experience, e-CRB provides customers
with exclusive and sophisticated experience.
Express
Maintenance
Fast Inspection
Service
*5
SMB
Appointment/Work
Management System
*1
e-CRB
*3
SPM
Sales Process
Management
System
Owner Logs
Exclusive
Homepage
for Owners
*4
i-CROP
Intelligent CR
Management
System
Telematics
Safety & Security,
Remote Diagnostics
Service
Favorable Contact
Experience
Exclusive Owner
Experience
*1 e-CRB（evolutionary Customer Relationship Building）
*2 TCV（Toyota Car Viewer）
*3 SPM（Sales Process Management）
*4 i-CROP（Intelligent Customer Relationship Optimization Program）
*5 SMB（Service Management Board）
*6 SLIM（Sales Logistics Integrated Management）
*7 TOSS（Total Order Support System）
A Favorable Contact Experience with i-CROP*4
i-CROP, the core of the e-CRB system, provides integrated customer relationship management
and automatically creates customer approach plans for dealers involving periodic inspections and
services, enabling timely follow-ups in conjunction with call centers, the Toyota Car Viewer (TCV)
3D negotiation support system and the Service Management Board (SMB) appointment and work
management system. i-CROP uses customer information to coordinate after-sales customer support,
aftercare service and vehicle replacement support, and provide a sophisticated dealer experience
with a service that thoroughly meets the needs of each customer.
Telematics Service for the Realization of Excellence in Customer Service
As part of our efforts to provide a satisfying ownership experience in China, we developed the
interactive information service G-BOOK, which makes use of an on-board telematics terminal. This
system, which connects to e-CRB via a wireless network, is able to determine specific customer vehicle
information, such as the timing of necessary maintenance. The service regularly gathers information
regarding the status of vehicle operation and is able to determine vehicle speed and location, which
enables it to understand what kind of region the purchased vehicle is being used in. G-BOOK is installed
in high-end Camry and Crown vehicles, and almost all Lexus vehicles (excluding certain low-end
models), and has been increasingly well received as a premium service. From 2010, we are expanding
the application of G-BOOK to include low-end Camry vehicles to increase the penetration ratio.
Extending the Kanban System to the Customer with the SLIM*6 Management Board
The most advanced and specialized component of the IT system used by GTMC is the Sales Logistics
Integrated Management (SLIM) system, a giant, multi-display management board that displays the real-
time status of production, inventory, distribution and sales at a single
glance. This system extends Toyota’s Kanban system by alerting users
to excess or insufficient inventory conditions, changing production
and distribution schedules, and allocating inventory to dealers as
necessary. During the global financial crisis of autumn 2008, the SLIM
management board showed high inventory levels, but emergency
measures were executed with the aid of real-time information that
enabled factory production to proceed without interruption.
SLIM Management Board
Responding to Chinese Customers’ Demand for Shorter Delivery Times with TOSS*7
The Total Order Support System (TOSS) makes further use of SLIM functionality to optimize the receipt
and placement of orders at dealerships. TOSS regulates long-term inventory based on a cautionary notice
regarding the difference between the number of ideal orders based on dealer sales performance and
other factors, and the actual number of orders. In China, customers select the vehicles they want from
available dealer inventories, which they then purchase and drive home as-is. Lost sales opportunities
are a direct result of running out of top-selling vehicle inventory. TOSS facilitates high dealer inventory
rotation while responding to Chinese customers’ demands for shorter delivery times.
TOYOTA ANNUAL REPORT 2010
8
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Reforging Bonds of Trust
Special Feature
■ Overall System Outline of e-TOYOTA Business
CUSTOMER
DEALERSHIP
DISTRIBUTOR
G-BOOK
Owner
Homepage
SMS
Call
Direct
Mail
Showroom
TCV
3D Sales Support System
New Car Yard
IMS
Inventory Management System
*8
SLIM
Management Board
Call Center
i-CMS
Call
Management
System
i-CROP
Integrated CR
Optimization
Program
Service Stall
SMB
Service Management Board
Back Office
SPM
Sales Process
Management System
TOSS
Total Order
Support System
SLIM
Server
TOSS
*8 IMS（Inventory Management System）
i-CROP
i-SMS
SMB
Efforts toward the Establishment of Quality Service
Changing Awareness through Human Resource Training
In addition to the SLIM and e-CRB IT systems, GTMC’s true leadership lies in its efforts to transform the
way working people think. These efforts focus on two areas, the first of which is the standardization
of business operations. The process management and standardization that have been thoroughly
implemented in our factory operations were also introduced in our on-site sales and aftercare services.
e-CRB supports and displays the optimal movement of each employee.
The other area of leadership involves human resource training. The smooth operation of excellent IT
systems and customer visits to dealers, car sales and aftercare support are all activities conducted by
people. Regardless of how superior the SLIM and e-CRB systems may be, if users neglect to register data
into these systems, they will not work effectively. For this reason, the improvement of personnel skills
is an important issue with regard to the operation of this mechanism. GTMC focuses efforts on human
resource training for the stable operation of e-CRB, with particular emphasis on strengthening the
structure for educating dealers with daily training and guidance efforts.
In China, employees are extremely enthusiastic in their efforts to acquire advanced technologies
and expertise. As a company created from the ground up and employing many young people with no
previous training, GTMC has benefited from these improvements and is learning new operational skills.
The e-CRB System
Improves Customer
Service and Employee
Satisfaction
We introduced the e-CRB system in August 2005.
As a result, the daily recording of sales, CR and
service staff activities has become a significant
asset to our organization. Of course, this is also
directly linked to our staff’s effectiveness and sense
of achievement. In this way, we believe the e-CRB
system contributes both to customer satisfaction
(CS) and employee satisfaction (ES).
e-Dealer
Guangzhou Denker Lexus
Ivan Yu, President
Guangzhou Denker Lexus and e-CRB
Guangzhou Denker Lexus is a Lexus dealership in Guangzhou, China, that opened in
February 2005. In August of the same year, we launched the e-CRB system with the
goal of improving customer satisfaction. Using i-CROP, we were able to consolidate
the management of all service appointment information in one place as opposed to
the former method, which was spread out across individual employee memos and
computers. Furthermore, we are also able to share information regarding service
appointments and work in progress via the SMB system. We established a specialized
customer support division that uses e-CRB to develop
regular customer follow-up activities. As a result, we are
able to approach customers in a timely manner and have
improved the retention ratio from 50% to 90%. Also, the
introduction of System Trolleys in an attempt to improve
operating efficiency during maintenance resulted in the
reduction of time required for maintenance activities from
one hour to 26 minutes. We have expanded the scope of
the effective use of IT in sales activities such as potential
customer follow-ups in an effort to continue providing
customers with a high level of service every time we are
in contact with them.
System Trolley
TOYOTA ANNUAL REPORT 2010
9
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Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Meticulous Adherence to Customer Perspective and Genchi Genbutsu
Toyota began introducing compact strategic vehicles into the Indian market in 2006, which were
developed specifically for India rather than adapting existing global models for the Indian market.
Based on the concept of providing an affordably priced vehicle that meets the demands of the Indian
market, Toyota made painstaking efforts to understand local needs from the customers’ perspective
and provide optimal products at an appropriate price in an attempt to increase demand.
While thoroughly pursuing Toyota’s high QDR global standards regarding the strength and reliability
of the basic performance aspects of “go, turn and stop,” we traveled around India, listening carefully to
customer concerns with respect to sound and ride comfort, ease of operation and other performance-
related areas, as well as the practicality of vehicle functions and equipment, in an effort to fully
understand customer needs.
At the same time, at the development stage, we made an effort to put our Genchi Genbutsu
(on-site, hands-on experience) principles into practice by placing a priority on examining materials
that can be procured locally and adopting structures
and construction methods that are compatible with
local production technology. The application of Genchi
Genbutsu is not limited to India; this is how Toyota
establishes solid positions in countries throughout
the world. Etios is a newly developed compact vehicle
in line with Toyota’s global strategy. The knowledge
gained through the application of Genchi Genbutsu in
India will be utilized by Toyota in other projects around
the world.
Etios (Hatchback)
Reforging Bonds of Trust
Special Feature
Developing Products from the Customer’s Perspective
in India’s High-Growth Market
Development of New Compact Car Etios
In recent years, the compact car market has been expanding rapidly, primarily in developing nations.
This trend is also true in India, as customer demands for affordably priced, convenient vehicles are
increasing by the day. Amid the rapid economic development of the past several years, India’s middle
class has grown significantly, from 8% of households earning between 200 thousand and 1 million
rupees in fiscal 2005 to 13% of households earning the same amount in fiscal 2009. One consequence
of this trend was the sale of 2.27 million new vehicles in India in 2009, a 14% increase compared with
the previous year. To achieve growth in the fast-growing Indian market, Toyota engineers personally
conducted market research to review function and performance from a local perspective. The new
compact car Etios is the result of these efforts.
Toyota’s Position in the Indian Market
In the Indian market in the second half of 2008, automotive manufacturers launched new models
in the B-segment (subcompact), increasing the percentage of this segment in the passenger
vehicle market. As a class of vehicles positioned to attract new customers, B-segment or smaller
vehicles are expected to continue to play an important role in the market.
Toyota has established an image as a top-name brand in India because of our achievement of
advanced levels of quality, durability and reliability (QDR) with models such as the Corolla, Camry,
Innova, Fortuner and Land Cruiser. However, until now, Toyota did not offer entry-level vehicles
for Indian customers. This was what led to Toyota’s development of a compact vehicle that
sought to provide high QDR standards at an affordable price.
■ Forecast of Vehicle Market in India
■ Sales Forecast of Toyota Vehicles
（Thousands of units）
（Thousands of units）
4,000
3,000
2,000
1,000
0
FY
1,989
1,900
236
253
254
265
2,150
295
300
3,000
3,000
2,500
355
350
376376
413413
3,500
630630
590590
570570
550550
1,150
1,150
2008
2009
2010
2011
2012
2015
400
300
200
100
0
FY
(10%)
(5.7%)
(2.6%)
2008
2009
2010
2011
2012
2015
Commercial vehicles
Others
B-segment sedans
B-segment hatchbacks
A-segment
Etios/Etios Liva
Foriuner
Innova
Others
Corolla
（Data compiled by TMC）
Note: Figures in parentheses indicate market share.
（Data compiled by TMC）
TOYOTA ANNUAL REPORT 2010
10
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Reforging Bonds of Trust
Special Feature
Etios Development
High QDR Features at an Affordable Price
High QDR features at an affordable price are indispensable in India. Toyota began developing
its first B-segment car for the Indian market by placing the highest priority on developing an
affordably priced vehicle that is within reach of middle-class (family users) while providing value
that is a step above the average and focusing on three selling points: “Highest Quality in its Class”
with the inheritance of Toyota QDR, “Comfortable and Enjoyable Space for All” with superior
seating comfort and storage and “Refined Style” that is unique to the market.
Global Safety Standards
Toyota conducted thorough safety research with regard to the Indian Etios. Customers in
India often use vehicles to transport family members to and from different locations and on
trips. Therefore, a sense of security when transporting precious family members is an essential
requirement. Toyota pursued safety performance from both active and passive perspectives,
focusing on safety requirements that surpass those of the competition.
Local Climate Countermeasures
In addition, when creating measures to counter the rusting and flooding that are possible in
India’s diverse climate, we began by determining the areas on the body where rusting most easily
occurs. To this end, body engineers traveled all over India, from coastal to inland regions, to verify
areas prone to rusting and the severity of its occurrence. Based on this information, we are one of
the few companies to adopt a rust-resistant sheet for sensitive areas. In consideration of the road
flooding that frequently occurs during the rainy season in India, parts easily damaged by water,
such as electrical components, sensors and shock absorbers, were designed to alleviate moisture-
related problems and ensure high reliability.
By selecting functions and equipment deemed necessary from the customers’ perspective, the
Etios truly embodies the idea of a high-quality vehicle at an affordable price based on Toyota’s
high standards of quality, durability and reliability.
Recognizing the Need to
Achieve High QDR
at an Affordable Price
Yoshinori Noritake
Toyota Passenger Vehicle
Development Center 2
Chief Engineer
“In 2006, I visited India to determine the price range
that was affordable to customers there and find out
exactly what customers were looking for in terms of
performance, functions and equipment. During my
visit, I encountered severe weather, narrow roads,
chronic traffic congestion and rough road surfaces,
and observed that parking spaces were extremely
limited. Experiencing this environment first hand,
I understood the importance of B-segment cars
to this market and was able to gain first-hand
knowledge of the basic performance most suited
to this environment.
After our visit, we interviewed and surveyed a
total of 700 customers in the summer of 2006 to
clearly identify and further understand what is important to customers when purchasing a
B-segment car. We found that cost, fuel efficiency, space and style are all major concerns.
We also discovered that Indians expect vehicles to break down and that they are prepared
to fix them if they do.
By creating a vehicle that thoroughly incorporated these findings and provided
performance and equipment at a price consistent with the customers’ perspective, we felt
confident that demand from Indian customers would be high. We also recognized that,
by incorporating Toyota’s strong QDR qualities to introduce a “failure-proof car” into the
market, we would also be able to reduce running costs and pleasantly surprise customers
who have come to expect breakdowns as a fact of life. It was in this spirit that the Etios
was created as an affordably priced vehicle that is a class above the competition.
The name Etios is based on the Greek word “ethos,” which means spirit, character and
ideals. When we conducted local preference
surveys to determine which name resonated
most strongly with the people of India, Etios
stood out as the overwhelming choice.
The Etios was developed and designed
from the perspective of customers in India
and is produced in India. By injecting Toyota
QDR into every detail of the vehicle, we were
able to create a high-quality vehicle at an
affordable price offering the essential functions,
performance and equipment demanded by
customers in India.”
Etios (Sedan)
TOYOTA ANNUAL REPORT 2010
11
Consolidated Performance Highlights
Consolidated Performance Highlights
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
■ Consolidated Performance (U.S. GAAP)
■ Consolidated Vehicle Production and Sales
Yen in millions
U.S. dollars* in millions
% change
Thousands of units
% change
2008
2009
2010
2010
2010 vs. 2009
2008
2009
2010
2010 vs. 2009
For the Year:
Net Revenues
............................................
¥26,289,240
¥20,529,570
¥18,950,973
$203,687
Operating Income (Loss)
......................
2,270,375
（461,011）
Net Income (Loss)
.....................................
1,717,879
（436,937）
ROE
..................................................................
14.5%
- 4.0%
147,516
209,456
2.1%
1,586
2,251
̶
At Year-End:
Total Assets
.................................................
¥32,458,320
¥29,062,037
¥30,349,287
Shareholders’ Equity
..............................
11,869,527
10,061,207
10,359,723
$326,196
111,347
-7.7
̶
̶
̶
+4.4
+3.0
2008
¥540.65
140.00
3,768.97
Per Share Data:
Net Income (Loss) (Basic)
......................
Annual Cash Dividends
.......................
Shareholders' Equity
..............................
Stock Information (March 31):
Stock Price ....................................................
Market Capitalization
(Yen in millions, U.S. dollars in millions)
.....
Yen
2009
U.S. dollars*
% change
2010
2010
2010 vs. 2009
¥ （139.13）
100.00
¥ 66.79
45.00
3,208.41
3,303.49
$0.72
0.48
35.51
̶
-55.0
+3.0
+20.0
+20.0
¥4,970
¥3,120
¥3,745
$40.25
¥17,136,548
¥10,757,752
¥12,912,751
$138,787
* U.S. dollar amounts have been translated at the rate of ¥93.04=US$1, the approximate current exchange rate at March 31, 2010.
■ Net Revenues by Regions
Vehicle Production by Region:
Japan
.................................................................................................
Overseas Total
................................................................................
North America
...........................................................................
Europe
..........................................................................................
Asia
................................................................................................
Central and South America
...................................................
Oceania
........................................................................................
Africa
.............................................................................................
5,160
3,387
1,268
711
961
150
149
148
4,255
2,796
919
482
947
151
130
167
Consolidated Total
.......................................................................
8,547
7,051
Vehicle Sales by Region:
Japan
.................................................................................................
Overseas Total
................................................................................
North America
...........................................................................
Europe
..........................................................................................
Asia
................................................................................................
Central and South America
...................................................
Oceania
........................................................................................
Africa
.............................................................................................
Middle East
.................................................................................
Other
............................................................................................
2,188
6,725
2,958
1,284
956
320
289
314
597
7
1,945
5,622
2,212
1,062
905
279
261
289
606
8
3,956
2,853
1,042
433
1,021
146
106
105
6,809
2,163
5,074
2,098
858
979
231
251
184
466
7
Consolidated Total .......................................................................
8,913
7,567
7,237
-7.0
+2.0
+13.4
-10.2
+7.8
-3.2
-18.7
-37.3
-3.4
+11.2
-9.7
-5.2
-19.2
+8.3
-17.2
-3.9
-36.2
-23.1
-19.3
-4.4
（¥ Billion）
16,000
12,000
8,000
4,000
0
Japan
North America
Europe
Asia
Other Regions
■ Principal Market Data: Automotive Market (Sales)
Japan
United States
Europe
Asia
China
(Thousands of units)
20,000
15,000
10,000
5,000
0
FY
ʼ06 ʼ07 ʼ08 ʼ09 ʼ10
ʼ06 ʼ07 ʼ08 ʼ09 ʼ10
ʼ06 ʼ07 ʼ08 ʼ09 ʼ10
ʼ06 ʼ07 ʼ08 ʼ09 ʼ10
ʼ06 ʼ07 ʼ08 ʼ09 ʼ10
Note: Fiscal years ended March 31
TOYOTA ANNUAL REPORT 2010
TOYOTA ANNUAL REPORT 2010
ʼ05
ʼ06
ʼ07
ʼ08
ʼ09
CY
Source: Toyota Motor Corporation
Note: Market definitions Europe: Germany, France, the United Kingdom, Italy, Spain, the Netherlands, Belgium, Portugal, Denmark, Greece, Ireland, Sweden, Austria, Finland, Switzerland, Norway, Poland,
Hungary, and the Czech Republic
Asia: Indonesia, Thailand, the Philippines, Malaysia, Singapore, Vietnam, Taiwan, South Korea and Brunei Darussalam
Japan: minivehicles included
ʼ09
ʼ09
ʼ09
ʼ08
ʼ07
ʼ06
ʼ05
ʼ08
ʼ07
ʼ06
ʼ05
ʼ08
ʼ07
ʼ06
ʼ05
ʼ08
ʼ07
ʼ06
ʼ05
ʼ09
12
Automotive Operations
(Market Environment and Overview)
Business Overview
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Automotive Operations
Financial Services Operations
Other Business Operations
Motorsports Activities
■ Net Revenues
（¥ Billion）
25,000
20,000
15,000
10,000
5,000
0
FY
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
Note: Fiscal years ended March 31
■ Operating Income
（¥ Billion）
2,200
2,000
1,800
1,600
400
200
0
-200
-400
FY
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
Net revenues in Japan declined 7.9%, or ¥966.4 billion, to ¥11.2 trillion, while cost-reduction
efforts and lower fixed costs resulted in an operating loss of ¥225.2 billion, a ¥12.3 billion
improvement over the ¥237.5 billion operating loss in the previous fiscal year.
North America
Although impacted by the recall, the market recovery trend and improved earnings in the
Financial Services Operations led to significant improvements in the North American Automotive
Operations. Consolidated vehicle sales declined 5.2%, or 114 thousand units, to 2.10 million
units. Our U.S. market share was 17%, with Lexus sales of approximately 25 thousand units.
Consolidated production increased 13.4%, to 1.04 million units.
Net revenues in North America decreased 8.9%, or ¥552.4 billion, to ¥5.7 trillion. Operating income was
¥85.4 billion, ¥475.6 billion higher than the previous year, reflecting our efforts to reduce fixed costs and
Toyota continued its efforts to manufacture vehicles that meet the needs of countries and
achieve cost reduction, a decrease in allowance for credit and residual value losses in our finance services
regions and strengthen its initiatives regarding environmentally friendly models. While the
subsidiaries and in gains on interest rate swaps and certain other instruments stated at fair value.
severe operating environment reduced revenue in each region in fiscal 2010, thorough efforts to
improve earnings resulted in improved operating income in all regions.
M a r k e t E n v i r o n m e n t a n d P e r f o r m a n c e S u m m a r y
During the year, Automotive Operations in China, India and other emerging markets continued
to expand, and stimulus measures supported demand in developed countries. Nevertheless,
overall market conditions remained difficult, owing to a demand shift toward compact, more
affordably priced vehicles.
Amid these conditions, Toyota’s consolidated vehicle sales declined 330 thousand units, or 4.4%, to
7.24 million units. Consolidated vehicle production also decreased 242 thousand units, or 3.4%, to 6.81
million units. In addition to lower vehicle production and sales, performance was also impacted by currency
exchange fluctuations, resulting in a 7.4% decrease in net revenues to ¥17.2 trillion. In terms of operating
income, cost-reduction efforts and decreased fixed costs resulted in an operating loss of ¥86.3
billion, a ¥308.5 billion improvement over the ¥394.8 billion operating loss in the previous fiscal year.
Performance by geographic segments was as follows.
Europe
Consolidated vehicle sales in Europe during the period under review declined 19.2%, or
204 thousand units, to 858 thousand units.
Toyota’s European market share (25 countries) was 5.7%. Lexus sales totaled approximately
26 thousand units.
Consolidated production declined 10.2%, to 433 thousand units.
Net revenues decreased 28.7%, or ¥866.1 billion, to ¥2.1 trillion. In terms of operating income,
efforts to reduce fixed costs and achieve cost reduction resulted in an operating loss of
¥33.0 billion, a ¥110.3 billion improvement over the ¥143.3 billion operating loss in the previous fiscal year.
Asia
Led by robust sales in Taiwan and Thailand, consolidated vehicle sales in Asia grew 8.2%, or
74 thousand units, to 979 thousand units. Consolidated production increased 7.8%, to 1.02 million units.
Although net revenues declined 2.4%, or ¥64.0 billion, to ¥2.7 trillion, operating income increased
15.6%, or ¥27.5 billion, to ¥203.6 billion as a result of increases in production and sales. Furthermore,
unit sales* in China, where growth is expected to continue, grew 21.2%, to 716 thousand units in 2009.
* Unit sales figures for China include domestically produced units as well as units imported from Japan.
Japan
Fiscal 2010 consolidated domestic sales increased 11.2%, or 218 thousand units, to 2.16 million units as
a result of the aggressive introduction of new products and the sales efforts of domestic dealers. Toyota
and Lexus market shares excluding minivehicles were 48.2% and 44.3% including minivehicles, both
of which represent the highest market share yet achieved by Toyota. Furthermore, Lexus sales totaled
Central and South America, Oceania, Africa, the Middle East, etc.
Toyota’s consolidated vehicle sales in all these regions were sluggish in fiscal 2010, declining
21.1%, or 304 thousand units, to 1.14 million units in total. Consolidated production in Central
and South America, Oceania and Africa decreased 20.3%, or 91 thousand units, to 357 thousand units.
As a result, net revenues declined 11.1%, or ¥209.1 billion, to ¥1.7 trillion, while net income
approximately 37 thousand units. Consolidated vehicle production declined 7.0%, to 3.96 million units.
increased 31.8%, or ¥27.9 billion, to ¥115.5 billion.
TOYOTA ANNUAL REPORT 2010
13
Automotive Operations
(Market Environment and Overview)
Business Overview
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Automotive Operations
Financial Services Operations
Other Business Operations
Motorsports Activities
Future Growth Strategy in Consideration of Issues
during the Past Year
Restoring Our Profit Base: Production Restructuring Plan
While proactively investing in growth areas, we will strive to realize a muscular profit
structure that is relatively impervious to changes in the business environment. While
In consideration of the various issues faced during the past year, Toyota’s growth
increasing local production in emerging markets such as China and India, in developed
strategy for the continued realization of Genchi Genbutsu and high quality at
countries with mature markets, including Japan, North America and Europe, we will review
affordable prices will center on a thorough customer-first perspective. Specifically,
production models in response to changes in the market structure and create a flexible
we will review our product lineups to match customer needs in each region and
and efficient production system that is resistant to exchange rate fluctuations to realize an
create a production system that responds to changes in market structure while
optimal global supply system with clearly positioned strategies in each region.
optimally allocating resources in areas where we want to advance.
Accelerating Growth: Support for Developing Nations and
Next-Generation Eco-Cars
To accelerate growth, we are placing a priority on business in developing nations and on
next-generation eco-cars.
First, with regard to developing nations, we will promote the expansion of product
lineups primarily in China and India, as well as the development of a production system.
In fast-growing China, a new plant was built in Changchun to further expand production
capacity in response to local demand, with operation scheduled to commence in the first
half of 2012. To expand Toyota’s product lineup, we have begun local production of the
Camry hybrid, following the Prius. Furthermore, in the Indian market, the newly developed
Etios compact car, designed to thoroughly meet the needs of local drivers, is scheduled to
go on sale at the end of this year.
Second, with regard to our priority focus on next-generation eco-cars, we plan on raising
the level of hybrid technology and expanding models. As for plug-in hybrid vehicles (PHVs),
we have begun aggressive efforts toward a 2012 sales launch. In terms of electric vehicles
(EVs), in May we announced a business partnership with Silicon Valley EV venture Tesla
Motors with the aim of strengthening our next-generation eco-car development structure.
Region
Strategic Positioning
North
America
An important base in
terms of volume and
profitability
Production System Reviews
P r o m o t e s e l f - r e l i a n c e f r o m d e v e l o p m e n t t o p r e - p r o d u c t i o n t o
production in an attempt to revamp the production structure, taking into
consideration local demand trends and the future of hybrid and compact
vehicles.
Europe
A market for further
improved technology
Engage in the building of appealing vehicles and consider production
structure while monitoring product trends.
Japan
A base for developing
models, providing
assistance to our
overseas operations
and for building
vehicles for export
Taking external environment into account, broadly review our current
production structure.
・Thorough review of domestic production model
Conduct mass production of export vehicles in regions where demand
exists, and produce models focusing on new technologies, new
concepts and new manufacturing methods.
・C r e a t e a f l e x i b l e a n d e f f i c i e n t p r o d u c t i o n s t r u c t u r e t h a t c a n
respond to changes in demand
C r e a t e a p r o d u c t i o n s t r u c t u r e c e n t e r e d o n t h e s a m e t y p e s o f
platform, including the introduction of mixed production lines.
・“Stop and Consolidate” domestic production facilities
Maintain current production levels by evening out plant and line
utilization rates to increase efficiency.
TOYOTA ANNUAL REPORT 2010
14
Financial Services Operations
Business Overview
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Automotive Operations
Automotive Operations
Financial Services Operations
Other Business Operations
Motorsports Activities
■ Net Revenues
（¥ Billion）
1,500
1,000
500
0
FY
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
■ Operating Income
（¥ Billion）
250
200
150
100
50
0
-50
-100
FY
Our financial services operations are primarily handled by Toyota Financial Services Corporation (TFS),
which has overall control of financial services subsidiaries worldwide. TFS provides financial
services primarily for vehicle purchases and leases to approximately 8.1 million customers in 33
countries and regions worldwide.
Operating activities during the period under review included enhancing our relationships with
distributors by providing financial products and services that met various national and regional
customer characteristics among regional strategies. New lending share remained high.
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
In Japan, in addition to automotive financing, TFS broadens customer relationships through
Note: Fiscal years ended March 31
the provision of credit cards, home loans and other sound financial services designed to meet the
Toyota provides automotive financing and other financial services designed to meet
customer needs and respond to regional characteristics that contribute to the sales
promotion of Group products. Despite a decline in revenues reflecting the challenging
operating environment, a thorough response to various risks and the expansion of lending
margins resulted in increased income.
■ Financial Services Operations Organization
■ Overview of Toyotaʼs Financial Services Operations
Toyota Motor
Corporation
Toyota
Financial Services
Corporation
Total assets
¥13.3 trillion
Net revenues
¥1.2 trillion
Operating income
¥247.0 billion
Operating areas
33 countries and
regions worldwide
No. of employees
approx. 8,000
(As of March 31, 2010)
Overseas
Sales Finance
Companies
Toyota Finance
Corporation
Toyota
Asset Management
Co., Ltd.
M a r k e t E n v i r o n m e n t a n d P e r f o r m a n c e S u m m a r y
In fiscal 2010, our financial services operations generated operating income of ¥246.9 billion.
This was primarily due to expanded margins resulting from a decrease in allowance for credit
and residual value losses caused by the business recovery in the second half and continued low
interest rates as a result of liquidity provided by the governments of various countries.
intimate needs of our customers.
Overseas, in an attempt to develop business in emerging markets TFS increased its number of
sales bases in China from 27 cities at the beginning of the year to 66 cities, progressing inland
from coastal cities to the interior of the country.
In such major markets as Europe and the United States, TFS aims for further income growth
amid severe business conditions by working to secure margins and achieve thorough low-cost
operations with consideration for vehicle sales support and the balancing of business risks.
To respond to dramatic changes in the business environment, TFS will actively strengthen
its internal controls and business infrastructure, focusing on the IT platform, human resource
development in management and other enhancements to the business platform to further
develop groupwide compliance and risk management structures.
■ Financial Services Operations Organization
■ Overview of Toyotaʼs Financial Services Operations
Toyota Motor
Corporation
Toyota
Financial Services
Corporation
Total assets
¥13.3 trillion
Net revenues
¥1.2 trillion
Operating income
¥247.0 billion
Operating areas
33 countries and
regions worldwide
No. of employees
approx. 8,000
(As of March 31, 2010)
Overseas
Sales Finance
Companies
Toyota Finance
Corporation
Toyota
Asset Management
Co., Ltd.
TOYOTA ANNUAL REPORT 2010
TOYOTA ANNUAL REPORT 2010
15
Other Business Operations
Business Overview
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Automotive Operations
Automotive Operations
Financial Services Operations
Other Business Operations
Motorsports Activities
■ Net Revenues
（¥ Billion）
■ Operating Income
（¥ Billion）
1,400
1,300
1,200
1,100
1,000
0
FY
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
Note: Fiscal years ended March 31
40
30
20
10
0
-10
FY
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
Toyota uses technologies and expertise gained from automotive operations to operate a
variety of businesses that help people lead more fulfilling and enjoyable lives. Although the
number of homes sold in the core housing business continued to improve, overall sales in this
segment were lower than last year, resulting in decreased revenues and income in fiscal 2010.
M a r k e t E n v i r o n m e n t a n d P e r f o r m a n c e S u m m a r y
In fiscal 2010, net revenues of other business operations declined ¥237.3 billion, or 20.0%, to
¥947.6 billion and operating income decreased ¥18.8 billion, to a loss of ¥8.9 billion. This was due
to sales decreases in the information technology and telecommunications business and other
businesses, although the number of home sales in the housing business—a core business in this
segment—fell slightly from the previous year.
Other business operations include the intelligent transport systems, information technology
and telecommunications, e-TOYOTA, housing, marine, and biotechnology and afforestation
businesses. In all these operations, we are fostering a workplace culture that encourages creativity
and entrepreneurship. Also, we are seeking ideas for new businesses outside the Toyota Group as
another key aspect in order to create future core businesses.
Intelligent Transport Systems Business
Toyota is involved in the planning and development of products and services for Intelligent
Transport Systems (ITS). We view this technology as a valuable way to link motor vehicles and
transportation infrastructures, thereby contributing to sustainable economic development.
We are continuing work on the creation of vehicle–infrastructure cooperative systems that
support safe driving so that traffic accidents of the future can be prevented more effectively
than current safety technologies allow. To this end, we participated in road tests and public
demonstrations in various regions through the cooperation of the public and private sectors.
In the fall of 2009, Toyota developed a DSRC* unit that provides drivers with information
about obstacles on the road ahead. This technology has been introduced into the roadway
infrastructure with units already installed in some vehicles.
* 5.8 GHz dedicated short-range communications.
Additional details available at URL
TOYOTA ANNUAL REPORT 2010
Information Technology and Telecommunications Business
In addition to serving as a sales agency for cell phones provided by KDDI Corporation, a general
telecommunications service provider, Toyota is engaged in the planning and commercialization of services that
integrate vehicles and cell phones. Toyota is enhancing the comfort of cars with car navigation system technology
that makes use of wireless Bluetooth® communications*, the hands-free telephone technology, enabling the
playback of songs that have been downloaded on a cell phone, and the Seamless Navigation System, which
allows users to enter a destination by transferring store and facility location data obtained with a cell phone.
* Bluetooth® is a wireless technology that uses short length radio waves to enable communications between cell phones and other devices over short distances.
e-TOYOTA Business
Toyota is developing e-TOYOTA business operations to facilitate the integration of IT services and automobiles.
We designed and developed the GAZOO members-only automobile portal site, a three-dimensional virtual city
called TOYOTA METAPOLIS, and other services. In the field of telematics, we are developing G-BOOK/G-Link, an
information service for onboard terminals, with other telematics services planned for China and other countries.
Additional details available at URL
Housing Business
Since Toyota entered the housing business in 1975, Toyota Home operations have expanded to
provide homes offering high durability and earthquake resistance, as well as excellent security,
health and environmental features. From January 2010, we began using the catch all phrase
Eco-Mirai Home as an expression of the product features involved in our building environment-
friendly homes that conserve and create energy while having the durability to last for many years.
Our Sincé home series, which reduce overall household CO2 emissions, received a special award
for energy and CO2 conservation at the House of the Year in Electric 2009 Awards in Japan.
Additional details available at URL
Marine Business
In the marine business, Toyota manufactures and sells pleasure boats, marine engines and a
variety of marine components. All products take full advantage of our engine technologies and
other advanced technologies cultivated during years of automotive manufacturing.
Our PONAM-28L luxury fishing cruiser received the first Japan Boat of the Year award in March
2009 and the Good Design Award in October 2009.
Additional details available at URL
Biotechnology and Afforestation Business
Toyota is making every effort to contribute to the creation of a resource recycling society through
its biotechnology and afforestation operations.
Following previous afforestation and forestry development projects in Australia, the Philippines and China,
we are engaged in a forest restoration model project in the town of Odaicho, located in Japan’s Mie Prefecture.
We are proactively developing floriculture, roof gardening and bio-plastic businesses, and in
September 2009 we were awarded the Ministry of Land, Infrastructure, Transport and Tourism Award
at the Eighth Competition for Specialized Greening Technology for Rooftops, Wall Facings and New
Green Spaces for greening activities focused on the wall at the Tressa Yokohama north wing.
In August 2009, we concluded our sweet potato cultivation and processing operations in
Indonesia, moving them to the tropical resource crop research institute.
Additional details available at URL
16
Motorsports Activities
Business Overview
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Automotive Operations
Financial Services Operations
Other Business Operations
Motorsports Activities
Toyota views motorsports activities as a valuable component of the process of conceiving
vehicles that embody dreams and excitement.
Formula Nippon
In Formula Nippon, the premier formula racing category in Japan, Toyota supplied RV8K V8 3.4-liter
engines for eight cars driven by five racing teams. In 2010, we aim to recapture the title with a car
A c t i v i t i e s S u m m a r y
powered by a Toyota engine.
In 2009, Toyota was a prominent participant at the highest levels of automobile racing, including
the Formula One World Championship (F1) races around the globe, SUPER GT and Formula
Nippon series races in Japan, and NASCAR* races in the United States. In addition, we played a
part in developing young drivers through activities including the Toyota Young Drivers Program
(TDP).
In 2010, we will continue to participate in the top categories of SUPER GT, Formula Nippon
and NASCAR and develop the skills of young drivers through TDP activities while increasing our
involvement this year in motorsports activities in which customers participate.
* The National Association for Stock Car Auto Racing (NASCAR) is the largest sanctioning body of stock car racing in the United States, consisting of a
variety of race series using modified stock cars run primarily on the North American continent.
NASCAR
In the NASCAR Sprint Cup Series, NASCAR’s highest-ranking races, as well as the Nationwide
Series, we captured the series championship for the second consecutive year in 2009 with the
Toyota Camry, and look for another victory this year.
The Toyota Tundra will again compete in the NASCAR Camping World Truck Series, where we
have captured the manufacturer’s championship for four straight years.
Toyota Young Drivers Program (TDP)
This program supports the ongoing skills development of promising young drivers with the
objective of cultivating talented racing drivers to compete in top category races in Japan and
SUPER GT
On the domestic racing scene, Toyota Technocraft Co., Ltd. (TRD), supported teams running the
overseas.
Lexus SC430 vehicles participated in GT500 races, the top class of SUPER GT. In the GT300 class,
Grassroots Motorsports Activities
we provided support for teams racing the Lexus IS350 and Toyota Corolla Axio. In 2009, the
We support customer-participatory programs such as the Hybrid Driving Challenge through the
GT500 and GT300 class driver and team each won top awards.
promotion of GAZOO Racing activities, which convey the dreams and excitement of automobiles
Additional details available at URL
and enable participants to experience motor sports and circuits firsthand.
Also, the Lexus LFA was the winner in its class* at the 2010 24-Hour Nürburgring race, where it
competed for the third straight year.
* Close-to-production engine (4,000 cc to 6,250 cc class).
SUPER GT
Formula Nippon
NASCAR
Grassroots Motorsports: the Hybrid Driving Challenge
Winning TDP drivers in the GT500 class
(Center left: Hiroaki Ishiura; center right: Kazuya Oshima)
<2010 SUPER GT, Race 3>
TOYOTA ANNUAL REPORT 2010
TOYOTA ANNUAL REPORT 2010
17
R&D and Intellectual Property
Corporate Information
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
R&D and Intellectual Property
Corporate Philosophy
Management Team
Corporate Governance
Risk Factors
Other Management and Corporate Data
Toyota R&D is dedicated to the development of attractive, affordable, high-quality
products for customers worldwide. The intellectual property that R&D generates is a vital
management resource that Toyota utilizes and protects to maximize its corporate value.
R&D Guiding Principles
●
Providing clean and safe products and enhancing the quality of life of
people everywhere through all our activities.
●
Pursuing advanced technological development in a wide range of fields,
we pledge to provide attractive products and services that respond to
the needs of customers worldwide.
R&D Activities
The overriding goal of Toyota’s technology and product development activities is to minimize the
Basic Research
Development theme discovery
Research on basic vehicle-related technology
Forward-Looking and
Leading-Edge Technology
Technological breakthroughs related to components and systems
Development of leading-edge components and systems ahead of
Development
competitors
Product Development
Primary responsibility for new model development
Development of all-new models and existing-model upgrades
R&D Expenditures
In fiscal 2010, R&D expenditures totaled ¥725.3 billion, down 19.7% from the previous fiscal year,
representing 3.8% of consolidated net revenues. We worked closely with suppliers to develop
components and products more efficiently and took steps to reduce our own R&D expenses. At
the same time, we plan to continue making substantial investments in R&D involving forward-
looking, leading-edge technologies and the development of products associated with the
negative aspects of driving, such as traffic accidents and the burden that automobiles have on the
environment, energy, and safety. These investments are essential to preserving our competitive
environment, and maximize the positive aspects, such as driving pleasure, comfort, and convenience.
edge in terms of technologies and products.
By achieving these sometimes conflicting goals to a high degree, we want to open the door to the
automobile society of the future.
To ensure efficient progress in R&D activities, we coordinate and integrate all phases, from basic research
R&D Organization
Toyota operates a global R&D organization with the primary goal of building automobiles that
to forward-looking technology and product development. With respect to such basic research issues
precisely meet the needs of customers in every region of the world.
as energy, the environment, information technology, telecommunications, and materials, projects are
In Japan, R&D operations are led by Toyota Central Research & Development Laboratories,
regularly reviewed and evaluated in consultation with outside experts to achieve efficient R&D cost control.
Inc., which works closely with Daihatsu Motor Co., Ltd., Hino Motors, Ltd., Toyota Auto Body Co.,
And with respect to forward-looking, leading-edge technology and product development, we establish
Ltd., Kanto Auto Works, Ltd., and many other Toyota Group companies. Overseas, we have a
cost-performance benchmarks on a project-by-project basis to ensure efficient development investment.
worldwide network of technical centers as well as design and motorsports R&D centers.
■ R&D Expenses
（¥ Billion）
1,000
800
600
400
200
0
FY
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
Note: Fiscal years ended March 31
TOYOTA ANNUAL REPORT 2010
Please click here for further details on domestic and overseas R&D bases.
18
R&D and Intellectual Property
Corporate Information
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
R&D and Intellectual Property
Corporate Philosophy
Management Team
Corporate Governance
Risk Factors
Other Management and Corporate Data
Intellectual Property Guiding Principle
●
Securing greater corporate flexibility and maximizing corporate value
through the appropriate acquisition and utilization of intellectual
property.
Intellectual Property Activities
Toyota’s competitiveness springs from the forward-looking R&D stance that is instrumental to
core strengths associated with products and technologies. Underlying each new product that
emerges from R&D, there are always intellectual properties such as inventions and expertise that
we value as important management resources.
Intellectual Property Systems
R&D and intellectual property activities are organizationally linked to enable us to focus on
selected development themes and build a strong patent portfolio. We have established an
Intellectual Property Committee made up of individuals involved with management, R&D, and
intellectual property. This committee acquires and utilizes important intellectual property that
contributes to business operations and helps determine policies for management risks associated
with intellectual property.
Intellectual Property Strategies
Toyota carefully analyzes patents and the need for patents in each area of research to formulate
more effective R&D strategies. We identify R&D projects in which Toyota should acquire patents,
and file relevant applications as necessary to help build a strong global patent portfolio. In
addition, we want to contribute to sustainable mobility by promoting the spread of technologies
with environmental and safety benefits. This is why we take an open stance to patent licensing,
and grant licenses when appropriate terms are met. A good example of this policy is the licensing
to other companies of patents in the area of hybrid technology, which is one of our core
technologies involving environmental energy.
TOYOTA ANNUAL REPORT 2010
19
Corporate Philosophy
Corporate Information
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
R&D and Intellectual Property
Corporate Philosophy
Management Team
Corporate Governance
Risk Factors
Other Management and Corporate Data
Since its foundation, Toyota has continuously strived to contribute to the sustainable
development of society through the manufacturing and provision of innovative and quality
products and services that lead the times. The foundations of these endeavors are the Guiding
Principles at Toyota and the CSR* Policy: Contribution towards Sustainable Development.
*CSR = Corporate Social Responsibility
Guiding Principles at Toyota
The Guiding Principles at Toyota (adopted in 1992 and revised in 1997) reflect the kind of
CSR Policy: Contribution towards Sustainable Development
CSR Policy: Contribution towards Sustainable Development (adopted in 2005 and revised in 2008)
company that Toyota seeks to be in light of the unique management philosophy, values, and
explains how we adapt the Guiding Principles at Toyota with regards to social responsibilities to
methods that it has embraced since its foundation. Toyota hopes to contribute to society through
our stakeholders.
its corporate activities based on understanding and sharing of the Guiding Principles at Toyota.
1)
Honor the language and spirit of the law of every nation and undertake open
and fair corporate activities to be a good corporate citizen of the world.
2)
Respect the culture and customs of every nation and contribute to economic
and social development through corporate activities in the communities.
3)
Dedicate ourselves to providing clean and safe products and to
enhancing the quality of life everywhere through all our activities.
4)
Create and develop advanced technologies and provide outstanding
We, TOYOTA MOTOR CORPORATION and our subsidiaries, take initiative
to contribute to harmonious and sustainable development of society
and the earth through all business activities that we carry out in each
country and region, based on our Guiding Principles.
We comply with local, national and international laws and regulations
as well as the spirit thereof and we conduct our business operations
with honesty and integrity.
In order to contribute to sustainable development, we believe that
management interacting with its stakeholders as described on the
following page is of considerable importance, and we will endeavor to
build and maintain sound relationships with our stakeholders through
products and services that fulfill the needs of customers worldwide.
open and fair communication.
5)
Foster a corporate culture that enhances individual creativity and teamwork
value, while honoring mutual trust and respect between labor and management.
6)
Pursue growth in harmony with the global community through
innovative management.
7)
Work with business partners in research and creation to achieve stable, long-
term growth and mutual benefits, while keeping ourselves open to new
partnerships.
We expect our business partners to support this initiative and act in
accordance with it.
TOYOTA ANNUAL REPORT 2010
20
Corporate Philosophy
Corporate Information
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
R&D and Intellectual Property
Corporate Philosophy
Management Team
Corporate Governance
Risk Factors
Other Management and Corporate Data
Customers
Based on our philosophy of “Customer First,” we develop and provide
■
Shareholders
■
We strive to enhance corporate value while achieving a stable and
innovative, safe and outstanding high-quality products and services that
meet a wide variety of customers’ demands to enrich the lives of people
around the world. (Guiding Principles 3 and 4)
■
We will endeavor to protect the personal information of customers and
everyone else we are engaged in business with, in accordance with the
letter and spirit of each country’s privacy laws. (Guiding Principles 1)
Employees
■
We respect our employees and believe that the success of our business
is led by each individual’s creativity and good teamwork. We stimulate
personal growth for our employees. (Guiding Principles 5)
■
We support equal employment opportunities, diversity and inclusion
for our employees and do not discriminate against them.
(Guiding Principles 5)
■
We strive to provide fair working conditions and to maintain a safe and
healthy working environment for all our employees. (Guiding Principles 5)
■
We respect and honor the human rights of people involved in our
business and, in particular, do not use or tolerate any form of forced or
child labor. (Guiding Principles 5)
■
Through communication and dialogue with our employees, we build and
share the value “Mutual Trust and Mutual Responsibility” and work together
for the success of our employees and the company. We recognize our
employees’ right to freely associate, or not to associate, complying with the
laws of the countries in which we operate. (Guiding Principles 5)
■
Management of each company takes leadership in fostering a
corporate culture, and implementing policies, that promote ethical
behavior. (Guiding Principles 1 and 5)
Business Partners
■
We respect our business partners such as suppliers and dealers and
work with them through long-term relationships to realize mutual
growth based on mutual trust. (Guiding Principles 7)
■
Whenever we seek a new business partner, we are open to any and all
candidates, regardless of nationality or size, and evaluate them based
on their overall strengths. (Guiding Principles 7)
■
We maintain fair and free competition in accordance with the letter
and spirit of each country’s competition laws. (Guiding Principles 1 and 7)
long-term growth for the benefit of our shareholders.
(Guiding Principles 6)
■
We provide our shareholders and investors with timely and fair disclosure
on our operating results and financial condition. (Guiding Principles 1 and 6)
Global Society/
Environment
Local Communities
■
We aim for growth that is in harmony with the environment by seeking
to minimize the environmental impact of our business operations,
such as by working to reduce the effect of our vehicles and operations
on climate change and biodiversity. We strive to develop, establish
and promote technologies enabling the environment and economy to
coexist harmoniously, and to build close and cooperative relationships
with a wide spectrum of individuals and organizations involved in
environmental preservation. (Guiding Principles 3)
Community
■
We implement our philosophy of “respect for people” by honoring the
culture, customs, history and laws of each country. (Guiding Principles 2)
■
We constantly search for safer, cleaner and superior technology that
satisfy the evolving needs of society for sustainable mobility.
(Guiding Principles 3 and 4)
■
We do not tolerate bribery of or by any business partner, government
agency or public authority and maintain honest and fair relationships
with government agencies and public authorities. (Guiding Principles 1)
Nurturing Society
■
Wherever we do business, we actively promote and engage, both
individually and with partners, in nurturing society activities that help
strengthen communities and contribute to the enrichment of society.
(Guiding Principles 2)
TOYOTA ANNUAL REPORT 2010
21
Management Team As of June 24, 2010
Corporate Information
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
R&D and Intellectual Property
Corporate Philosophy
Management Team
Corporate Governance
Risk Factors
Other Management and Corporate Data
We are convinced that the fiscal year ending March 31, 2011, offers Toyota the chance for a truly fresh start.
To make the most of this opportunity, we are implementing new strategies that chart a course toward growth.
■ Representative Directors
Chairman of the Board
Fujio Cho
Vice Chairmen of the Board
Katsuaki Watanabe
Kazuo Okamoto
President, Member of the Board
Akio Toyoda
■ Directors and Auditors
Executive Vice Presidents, Members of the Board
（Main operational responsibilities）
Senior Managing Directors, Members of the Board
（Chief officer, Deputy chief officer, General manager or Overseas subsidiary of residence）
Takeshi Uchiyamada
Product Management/Research & Development
Nobuyori Kodaira
Business Development Group/IT & ITS Group/
Corporate Planning Div./Environmental Affairs Div./
e-TOYOTA Div.
Yukitoshi Funo
Government & Public Affairs/Operation Planning & Support/
Asia & Oceania Operations/Middle East Operations/
Africa and Latin America Operations
Akira Okabe
Asia & Oceania Operations Group/
Middle East, Africa and Latin America
Operations Group
Atsushi Niimi
Strategic Production Planning/
Production Engineering/Manufacturing/
North America Operations/China Operations
Shinichi Sasaki
Business Development/
IT & ITS/Information Systems/Purchasing/
Customer Service/Quality
Yoichiro Ichimaru
Corporate Planning/Japan Sales
Satoshi Ozawa
General Administration & Human Resources/
Accounting/Europe Operations
Shinzo Kobuki
R&D Group 2/R&D Management Div./ Higashifuji Technical
Administration Div./Vehicle Control System Development Div./
Advanced Vehicle Control System Development Div./
Automotive Software Engineering Div.
Akira Sasaki
China Operations Group/
Toyota Motor (China) Investment Co., Ltd.
Mamoru Furuhashi
Government & Public Affairs Group/
Tokyo Secretarial Div./
Tokyo General Administration Div.
Iwao Nihashi
Customer Service Operations Group/
Quality Group/TQM Promotion Div.
Tadashi Yamashina
Technical Administration Group/Motor Sports Div.
Note: Yoichi Kaya, Yoichi Morishita, Akishige Okada and Kunihiro Matsuo satisfy the qualifications of Outside Corporate Auditors as provided in Article 2,
Item 16, of the “Corporation Act.”
TOYOTA ANNUAL REPORT 2010
22
■取締役および監査役
専務取締役
（本部長、副本部長、センター長、統括となっている本部・部、常勤の海外事業体を記載）
（本部長、副本部長、センター長、統括となっている本部・部、
取締役
常勤の海外事業体を記載）
安形 哲夫 Tetsuo Agata
トヨタ モーター エンジニアリング アンド
マニュファクチャリング ノース アメリカ（株）
前川 眞基 Masamoto Maekawa
国内営業本部、東京担当
稲葉 良 Yoshimi Inaba
北米本部、トヨタ モーター ノース アメリカ（株）
林 南八 Nampachi Hayashi
オーダーデリバリー改善推進担当、TPS指導担当、
TPS徹底推進担当
事業開発本部、情報事業本部、総合企画部、調査部、
常勤監査役
原 保守 Yasumori Ihara
CSR・環境部、e-TOYOTA部
岩瀬 隆彦 Takahiro Iwase
生産技術本部、製造本部、
グローバル生産推進センター、安全健康推進部、
プラント・エンジニアリング部、工程改善部、
生技管理部
石井 克政 Yoshimasa Ishii
営業企画本部、営業支援部、営業業務部、
営業企画部
白根 武史 Takeshi Shirane
調達本部
加藤 光久 Mitsuhisa Kato
□□□□□□□□□□□□□□
天野 吉和 Yoshikazu Amano
山口 千秋 Chiaki Yamaguchi
中津川 昌樹 Masaki Nakatsugawa
監査役
茅 陽一 Yoichi Kaya
森下 洋一 Yoichi Morishita
岡田 明重 Akishige Okada
松尾 邦弘 Kunihiro Matsuo
山科 忠 Tadashi Yamashina
技術管理本部、モータースポーツ部
伊地知 (cid:8686)彦 Takahiko Ijichi
経理本部
Management Team As of June 24, 2010
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Senior Managing Directors, Members of the Board
（Chief officer, Deputy chief officer, General manager or Overseas subsidiary of residence）
Directors, Members of the Board
Corporate Auditors
（Chief officer, Deputy chief officer, General manager or Overseas subsidiary of residence）
Takahiko Ijichi
General Administration & Human Resources Group/
Accounting Group/Information Systems Group
Yoshimi Inaba
North America Operations Group/
Toyota Motor North America, Inc.
Nampachi Hayashi
Strategic Production Planning Group,
responsible for Order-to-Delivery KAIZEN Promotion/
Production Engineering Group, responsible for TPS Supervising/
Manufacturing Group, responsible for TPS Thorough Promotion
Yoichi Kaya
Yoichi Morishita
Akishige Okada
Full-Time Corporate Auditors
Yoshikazu Amano
Kunihiro Matsuo
Chiaki Yamaguchi
Masaki Nakatsugawa
Tetsuo Agata
Toyota Motor Engineering &
Manufacturing North America, Inc.
Masamoto Maekawa
Japan Sales Operations Group/
Tokyo metropolitan area
Yasumori Ihara
Purchasing Group/Corporate Planning Div./
Research Div.
Takahiro Iwase
Production Engineering Group/
Manufacturing Group
Yoshimasa Ishii
Europe Operations Group/
Operation Planning & Support Group
Takeshi Shirane
Strategic Production Planning Group/
Global Production Center
Mitsuhisa Kato
Customer Service Operations Group/
Product Development Group/R&D Group 1
TOYOTA ANNUAL REPORT 2010
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Corporate Governance
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Corporate Information
Financial Section
Investor Information
R&D and Intellectual Property
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Management Team
Corporate Governance
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Toyota’s Basic Approach to Corporate Governance
Toyota’s top management priority is to steadily increase corporate value over the long term. Further,
our fundamental management philosophy is to remain a trusted corporate citizen in international
society through open and fair business activities that honor the language and spirit of the law of every
nation. In order to put that philosophy into practice, Toyota builds favorable relationships with all of its
stakeholders, including shareholders, customers, business partners, local communities, and employees.
We are convinced that providing products that fully cater to customer needs is essential to achieve stable,
long-term growth. That philosophy is outlined in the “Guiding Principles at Toyota.” Further, to explain
those principles in more detailed terms, we prepared and issued the “Contribution towards Sustainable
Development” statement in January 2005. Through such initiatives, Toyota is taking concrete measures to
reinforce its corporate governance functions and to become an even more competitive global company.
Specifically, we have introduced a unique management system focused on prompt decision
making for developing our global strategy and speeding up operations. Furthermore, we have a
range of long-standing in-house committees and councils responsible for monitoring and discussing
management and corporate activities from the viewpoints of various stakeholders to ensure
heightened transparency and the fulfillment of social obligations.
Ultimately, however, a well-developed awareness of ethics among individuals is the key to successful
governance systems. Without such awareness—regardless of the governance structure of a company—
corporate governance cannot function effectively. Toyota has a unique corporate culture that places emphasis
on problem solving and preventative measures, such as problem solving based on the actual situation on
the site and highlighting problems by immediately flagging and sharing them. In other words, because
Toyota’s approach is to build in quality through manufacturing processes, enhancing the quality of everyday
operations strengthens governance. Toyota’s management team and employees conduct operations and
make decisions founded on that common system of checks and balances and on high ethical standards.
Toyota’s Management System
Toyota introduced its current management system in 2003. The main differences between the
current system and the former system are that the current system set a new non-board position of
Managing Officers and reduced the number of directors. Under the current system, with respect
to various operational functions across the entire Company, in principle the Senior Managing
Directors, who are Directors, serve as the highest authorities of their specific operational functions
while non-board Managing Officers implement the actual operations. The distinctive feature of
this system is that, based on Toyota’s philosophy of emphasizing developments on the site, the
Senior Managing Directors serve as the link between management and on-site operations, instead
of focusing exclusively on management. As a result, this system enables the management to make
decisions directly with on-site operations by reflecting on-site personnel opinions on management
strategy and swiftly implementing management decisions into actual operations.
Systems for Ensuring Appropriate Management
As a system to ensure appropriate management, Toyota has convened meetings of its International
Advisory Board (IAB) annually in principle since 1996. The IAB consists of approximately 10
distinguished advisors from overseas with backgrounds in a wide range of fields, including politics,
economics, the environment, and business. Through the IAB, we receive advice on a diversity of
business issues from a global perspective. In addition, Toyota has a wide variety of conferences
and committees for deliberations and the monitoring of management and corporate activities that
reflect the views of a range of stakeholders, including the Labor-Management Council, the Joint
Labor-Management Round Table Conference, the Toyota Environment Committee, and the Stock
Option Committee. Moreover, Toyota established the CSR Committee by integrating the Corporate
Ethics Committee and the Corporate Philanthropy Committee in October 2007.
Accountability
Toyota has engaged in timely and fair disclosure of corporate and financial information as stated in
“CSR Policy: Contribution towards Sustainable Development.” In order to ensure the accuracy, fairness,
and timely disclosure of information, Toyota has established the Disclosure Committee chaired by
an officer of the Accounting Division. The Committee holds regular meetings for the purpose of
preparation, reporting and assessment of its annual securities report, quarterly report under the
Financial Instruments and Exchange Law of Japan and Form 20-F under the U.S. Securities Exchange
Act, and also holds extraordinary committee meetings from time to time whenever necessary.
Compliance
To firmly establish corporate ethics and ensure strict compliance, Toyota’s CSR Committee, consisting of
Directors at the executive vice president level and above as well as representatives of Corporate Auditors, to
deliberate important issues and measures relating to corporate ethics, compliance and risk management.
Toyota has also created a number of facilities for employees to make inquiries concerning compliance
matters, including the Compliance Hotline, which enables them to consult with an outside attorney,
and takes measures to ensure that Toyota is aware of significant information concerning legal
compliance as quickly as possible.
Toyota will implement the tenets of ethical business practice by further promoting the “Guiding
Principles at Toyota” and the “Toyota Code of Conduct” and by educating and training employees at
all levels and in all areas of operations.
To monitor the management, Toyota has adopted an auditor system that is based on the Japanese
Corporation Act. In order to increase transparency of corporate activities, four of Toyota’s seven
Corporate Auditors are outside Corporate Auditors. Corporate Auditors support the Company’s
corporate governance efforts by undertaking audits in accordance with the audit policies and plans
determined by the Board of Corporate Auditors.
Toyota has secured the personnel and framework supporting the audit by Corporate Auditors.
The Outside Corporate Auditors advise Toyota from a fair and neutral perspective, based on their
broad experiences and insight in their respective field of expertise. The state of internal controls
and internal audit are reported to Corporate Auditors (including Outside Corporate Auditors)
through the Board of Corporate Auditors and the “CSR Committee”, and the status of accounting
audits is reported by independent External Auditors to the Corporate Auditors (including Outside
Corporate Auditors) through the Board of Corporate Auditors.
TOYOTA ANNUAL REPORT 2010
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For internal audit, the management and a specialized independent organization evaluate the
effectiveness of internal controls over financial reporting in accordance with Article 404 of the
U.S. Sarbanes–Oxley Act, applicable to Toyota from the year ended March 31, 2007 to establish a solid
system. In addition, in accordance with Article 24-4-4-1 of the Financial Instruments and Exchange
Law, which is applicable to Toyota starting with the year ended March 31, 2009, there is an assessment
system to ensure that financial statements and other financial information are prepared properly. In
order to enhance the reliability of the financial reporting of Toyota, the three auditing functions, audit
by Corporate Auditors, internal audit, and accounting audit by Independent External Auditors, aid in
conducting an effective and efficient audit through meetings held periodically and as necessary to
share information and come to understandings through discussion on audit plans and results.
■ Toyotaʼs Corporate Governance
Emphasizing Frontline Operation + Mulitidirectional Monitoring
Appointment
Shareholders
Board of
Corporate Auditors
Majority are outside
corporate auditors
External
Accounting Auditor
Audit for consolidated financial
statements and internal control
over financial reporting
Board of
Directors
Senior Managing
Directors
Managing
Officers
International Advisory Board
Labor-Management Council
Joint Labor-Management
Round Table Conference
CSR Committee*
Toyota Environment Committee
Stock Option Committee
Disclosure Committee
Internal
Auditing Department
（internal control systems）
* Review issues relating to corporate ethics, legal compliance, risk management, nurturing society and environmental management
Corporate Social Responsibility
To maintain stable, long-term growth in international society, companies have to earn the respect and trust
of society and individuals. Rather than simply contributing to economic development through operational
activities, growing in harmony with society is a must for good corporate citizens. Mindful of the foregoing,
Toyota has a range of committees that are tasked with monitoring corporate activities and management in
relation to social responsibilities, including the CSR Committee and the Toyota Environment Committee.
Toyota’s Basic Approach to Internal Control System
integrate the principles of problems identification (“Mondai Hakken”) and continuous improvements
(“Kaizen”) into our business operation processes and make continuous efforts to train our employees
who put these principles into practice.
With the above understanding, internal control has been developed under the following basic policies.
（１）System to ensure that the Directors execute their responsibilities in compliance with
relevant laws and regulations and the Articles of Incorporation
１）Toyota will ensure that Directors act in compliance with relevant laws and regulations and the
Articles of Incorporation, based on the Code of Ethics and other explanatory documents that
include necessary legal information, presented on occasions such as trainings for new Directors.
２）Toyota will make decisions regarding business operations after comprehensive discussions
at the Board meetings and other meetings of various cross-sectional decision-making bodies.
Matters to be decided are properly submitted and discussed at the meetings of those decision-
making bodies in accordance with the relevant rules.
３）Toyota will appropriately discuss significant matters and measures relating to issues such as
corporate ethics, compliance, and risk management at the CSR Committee and other meetings.
Toyota will also discuss and decide at the meetings of various cross-sectional decision-making
bodies policies and systems to monitor and respond to risks relating to organizational function.
（２）System to retain and manage information relating to performance of duties by Directors
Information relating to exercising duties by Directors shall be appropriately retained and managed by
each division in charge pursuant to the relevant internal rules and laws and regulations.
（３）Rules and systems related to the management of risk of loss
１）Toyota will properly manage the capital fund through its budgeting system and other forms of
control, conduct business operations, and manage the budget, based on the authorities and
responsibilities in accordance with the “Ringi” system (effective consensus-building and approval
system). Significant matters will be properly submitted and discussed at the Board meetings and
other meetings of various bodies in accordance with the standards stipulated in the relevant rules.
２）Toyota will ensure accurate financial reporting by issuing documentation on the financial
flow and the control system etc., and by properly and promptly disclosing information
through the Disclosure Committee.
３）Toyota will manage various risks relating to safety, quality, the environment and compliance by
establishing rules or preparing and delivering manuals, as necessary, in each relevant division.
４）As a precaution against events such as natural disasters, Toyota will prepare manuals,
conduct emergency drills, arrange risk diversification and insurance as needed.
（４）System to ensure that Directors exercise their duties efficiently
１）Toyota will manage consistent policies by specifying the policies at each level of
the organization based on the medium- to long-term management policies and the
Company’s policies for each fiscal term.
Based on the “Guiding Principles at Toyota” and the “Toyota Code of Conduct,” we, together with our
subsidiaries, have created and maintained a sound corporate climate. In our actual operations, we
２）The Chief Officer, as a liaising officer between the management and operational functions, will
direct and supervise Managing Officers based on the management policies and delegate the
TOYOTA ANNUAL REPORT 2010
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executive authority over each division to the Managing Officers so that flexible and
timely decision making can be achieved.
３）Toyota from time to time will make opportunities to listen to the opinions of various stakeholders,
including external experts, and reflect those opinions in Toyota’s management and corporate activities.
（10）Other systems to ensure that the Corporate Auditors conducted audits effectively
Toyota will ensure that the Corporate Auditors attend major Board meetings, inspect
important Company documents, and make opportunities to exchange information
between the Corporate Auditors and Accounting Auditor periodically and as needed, as
well as appoint external experts.
（５）System to ensure that employees conduct business in compliance with relevant laws and
regulations and the Articles of Incorporation
１）Toyota will clarify the responsibilities of each organization unit and maintain a basis to
ensure continuous improvements in the system.
２）Toyota will continuously review the legal compliance and risk management framework to
ensure effectiveness. For this purpose, each organization unit shall confirm the effectiveness by
conducting self-checks among others, and report the result to the CSR Committee.
３）Toyota will promptly obtain information regarding legal compliance and corporate ethics and
respond to problems and questions related to compliance through its corporate ethics inquiry
office and other channels.
（６）System to ensure the appropriateness of business operations of the corporation and the business
group consisting of the parent company and subsidiaries
１）Toyota will expand the “Guiding Principles at Toyota” and the “Toyota Code of Conduct” to
its subsidiaries as TMC’s common charter of conduct, and develop and maintain a sound
environment of internal controls for TMC. Toyota will also promote the “Guiding Principles at
Toyota” and the “Toyota Code of Conduct” through personal exchange.
２）Toyota will manage its subsidiaries in a comprehensive manner by clarifying the roles of the
division responsible for the subsidiaries’ financing and management and the roles of the
division responsible for the subsidiaries’ business activities. Those divisions will confirm the
appropriateness and legality of the operations of the subsidiaries by exchanging information
with those subsidiaries, periodically and as needed.
（７）System concerning employees who assist the Corporate Auditors when required
Toyota will establish a Corporate Auditors Department and assign a number of full-time staff
to support this function.
（８）Independence of the employees described in the preceding item
Any changes in personnel in the Corporate Auditors Department will require prior consent of the Board
of Corporate Auditors or a full-time Corporate Auditor selected by the Board of Corporate Auditors.
（９） System for Directors and employees to report to Corporate Auditors, and other relative systems
１）Directors, from time to time, will properly report to the Corporate Auditors any major business
operations through the divisions in charge. If any fact that may cause significant damage to the
Company is discovered, they will report the matter to the Corporate Auditors immediately.
２）Directors, Managing Officers, and employees will report to the Corporate Auditors on
the business upon requests by the Corporate Auditors, periodically and as needed.
Toyota’s Basic Policy and Preparation towards the Elimination of Antisocial Forces
（１）Basic Policy for Elimination of Antisocial Forces
Based upon the “Guiding Principles at Toyota” and the “Toyota Code of Conduct,” Toyota’s
basic policy is to have no relationship with antisocial forces. Toyota will take resolute action
as an organization against any undue claims and actions by antisocial forces or groups, and
has drawn the attention of such policy to its employees by means such as clearly stipulating
it in the “Toyota Code of Conduct.”
（２）Preparation towards Elimination of Antisocial Forces
１）Establishment of Divisions Overseeing Measures Against Antisocial Forces and Posts in
Charge of Preventing Undue Claims
Toyota established divisions that oversee measures against antisocial forces (“Divisions
Overseeing Measures Against Antisocial Forces”) in its major offices as well as assigned persons
in charge of preventing undue claims. Toyota also established a system whereby undue claims,
organized violence and criminal activities conducted by antisocial forces are immediately
reported to and consulted with Divisions Overseeing Measures Against Antisocial Forces.
２）Liaising with Specialist Organizations
Toyota has been strengthening its liaison with specialist organizations by joining liaison
committees organized by specialists such as the police. It has also been receiving guidance
on measures to be taken against antisocial forces from such committees.
３）Collecting and Managing Information concerning Antisocial Forces
By liaising with experts and the police, Divisions Overseeing Measures Against Antisocial
Forces share up-to-date information on antisocial forces and utilize such information to
call Toyota’s employees’ attention to antisocial forces.
４）Preparation of Manuals
Toyota compiles cases concerning measures against antisocial forces and distributes them
to each department within Toyota.
５）Training Activities
Toyota promotes training activities to prevent damages caused by antisocial forces by
sharing information on antisocial forces within the Company as well as holding lectures at
Toyota and its Group companies.
Regarding significant differences in corporate governance practices between Toyota and U.S.
companies listed on the New York Stock Exchange, please refer to the annual report on Form
20-F filed with the United States Securities and Exchange Commission. Form 20-F can be viewed
at the Company’s web site (http://www.toyota.co.jp/en/ir/library/sec/index.html).
TOYOTA ANNUAL REPORT 2010
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Risk Factors
Corporate Information
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Operational and other risks faced by Toyota that could significantly influence the decisions
of investors are set out below. However, the following does not encompass all risks related
to the operations of Toyota. There are risk factors other than those given below. Any such
risk factors could influence the decisions of investors. The forward-looking statements
included below are based on information available as of June 25, 2010, the filing date of
Form 20-F.
Industry and Business Risks
The worldwide automotive market is highly competitive
The worldwide automotive market is highly competitive. Toyota faces intense competition from automotive
manufacturers in the markets in which it operates. Competition has intensified amidst difficult overall
market conditions due to the weak global economy. In addition, competition is likely to further intensify in
light of continuing globalization in the worldwide automotive industry, possibly resulting in further industry
reorganization. Factors affecting competition include product quality and features, safety, reliability, the amount
of time required for innovation and development, pricing, fuel economy, customer service and financing
terms. Increased competition may lead to lower vehicle unit sales, which may result in a further downward
price pressure and adversely affect Toyota’s financial condition and results of operations. Toyota’s ability to
adequately respond to the recent rapid changes in the automotive market and to maintain its competitiveness
will be fundamental to its future success in existing and new markets and its market share. There can be no
assurances that Toyota will be able to compete successfully in the future.
The worldwide automotive industry is highly volatile
Each of the markets in which Toyota competes has been subject to considerable volatility in demand.
Demand for vehicles depends to a large extent on social, political and economic conditions in a given
market and the introduction of new vehicles and technologies. As Toyota’s revenues are derived
from sales in markets worldwide, economic conditions in such markets are particularly important to
Toyota. During fiscal 2010, despite government efforts to stimulate demand in Japan, North America
and Europe, which are Toyota’s main markets, market conditions in those areas remained difficult,
and Toyota was adversely affected by changes in the market structure with further shifts in consumer
demand to compact and low-priced vehicles. Such weakness in demand for automobiles and changes
in market structure is continuing, and it is unclear how long this situation would continue or how it
would transition in the future. Toyota’s financial condition and results of operations may be adversely
affected if the weakness in demand for automobiles and changes in market structure continue or
progress further. Demand may also be affected by factors directly impacting vehicle price or the cost of
purchasing and operating vehicles such as sales and financing incentives, prices of raw materials and
parts and components, cost of fuel and governmental regulations (including tariffs, import regulation
and other taxes). Volatility in demand may lead to lower vehicle unit sales, which may result in a further
downward price pressure and adversely affect Toyota’s financial condition and results of operations.
Toyota’s future success depends on its ability to offer new innovative competitively
priced products that meet customer demand on a timely basis
Meeting customer demand with attractive new vehicles and reducing the amount of time required
for product development are critical to automotive manufacturers. In particular, it is critical to
meet customer demand with respect to quality, safety and reliability. The timely introduction of
new vehicle models, at competitive prices, meeting rapidly changing customer preferences and
demands is more fundamental to Toyota’s success than ever, as the automotive market is rapidly
transforming in light of the weak global economic conditions. There is no assurance, however,
that Toyota will adequately and appropriately respond to changing customer preferences and
demands with respect to quality, safety, reliability, styling and other features in a timely manner.
Even if Toyota succeeds in perceiving customer preferences and demands, there is no assurance
that Toyota will be capable of developing and manufacturing new, price-competitive products in
a timely manner with its available technology, intellectual property, sources of raw materials and
parts and components, and production capacity, including cost reduction capacity. Further, there
is no assurance that Toyota will be able to implement capital expenditures at the level and times
planned by management. Toyota’s inability to develop and offer products that meet customers’
preferences and demands with respect to quality, safety, reliability, styling and other features in a
timely manner could result in a lower market share and reduced sales volumes and margins, and
may adversely affect Toyota’s financial condition and results of operations.
Toyota’s ability to market and distribute effectively is an integral part of Toyota’s successful sales
Toyota’s success in the sale of vehicles depends on its ability to market and distribute effectively
based on distribution networks and sales techniques tailored to the needs of its customers.
There is no assurance that Toyota will be able to develop sales techniques and distribution
networks that effectively adapt to changing customer preferences or changes in the regulatory
environment in the major markets in which it operates. Toyota’s inability to maintain well-
developed sales techniques and distribution networks may result in decreased sales and market
share and may adversely affect its financial condition and results of operations.
Toyota’s success is significantly impacted by its ability to maintain and develop its brand image
In the highly competitive automotive industry, it is critical to maintain and develop a brand image.
In order to maintain and develop a brand image, it is necessary to further increase customers’
confidence by providing safe, high-quality products that meet customer preferences and demands.
If Toyota is unable to effectively maintain and develop its brand image as a result of its inability to
provide safe, high-quality products or as result of the failure to promptly implement safety measures
such as recalls when necessary, vehicle unit sales and/or sale prices may decrease, and as a result
revenues and profits may not increase as expected or may decrease, adversely affecting its financial
condition and results of operations.
The worldwide financial services industry is highly competitive
The worldwide financial services industry is highly competitive. Increased competition in automobile
financing may lead to decreased margins. A decline in Toyota’s vehicle unit sales, an increase in residual
value risk due to lower used vehicle price, an increase in the ratio of credit losses and increased funding
TOYOTA ANNUAL REPORT 2010
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costs are factors which may impact Toyota’s financial services operations. The likelihood of these
factors materializing continues to remain at a high level amidst weak global economic conditions, and
competition in automobile financing has intensified. If Toyota is unable to adequately respond to the
changes and competition in automobile financing, Toyota’s financial services operations may adversely
affect its financial condition and results of operations.
Financial Market and Economic Risks
Toyota’s operations are subject to currency and interest rate fluctuations
Toyota is sensitive to fluctuations in foreign currency exchange rates and is principally exposed to
fluctuations in the value of the Japanese yen, the U.S. dollar and the euro and, to a lesser extent, the
Australian dollar, the Canadian dollar and the British pound. Toyota’s consolidated financial statements,
which are presented in Japanese yen, are affected by foreign currency exchange fluctuations through
both translation risk and transaction risk. Changes in foreign currency exchange rates may affect Toyota’s
pricing of products sold and materials purchased in foreign currencies. In particular, strengthening of
the Japanese yen against the U.S. dollar can have an adverse effect on Toyota’s operating results. The
Japanese yen has been appreciating against major currencies including the U.S. dollar in the past year.
If the Japanese yen continues to appreciate against major currencies, including the U.S. dollar, Toyota’s
financial condition and results of operations may be adversely affected.
Toyota believes that its use of certain derivative financial instruments including interest rate
swaps and increased localized production of its products have reduced, but not eliminated, the
effects of interest rate and foreign currency exchange rate fluctuations. Nonetheless, a negative
impact resulting from fluctuations in foreign currency exchange rates and changes in interest
rates may adversely affect Toyota’s financial condition and results of operations.
High prices of raw materials and strong pressure on Toyota’s suppliers could negatively
impact Toyota’s profitability
Increases in prices for raw materials that Toyota and Toyota’s suppliers use in manufacturing their
products or parts and components such as steel, precious metals, non-ferrous alloys including
aluminum, and plastic parts, may lead to higher production costs for parts and components. This
could, in turn, negatively impact Toyota’s future profitability because Toyota may not be able to
pass all those costs on to its customers or require its suppliers to absorb such costs.
The downturn in the financial markets could adversely affect Toyota’s ability to raise capital
The world economy continues to be weak and business conditions remain difficult. A number of
financial institutions and investors have been facing difficulties providing capital to the financial
markets at levels corresponding to their own financial capacity. As a result, there is a risk that
companies may not be able to raise capital under terms that they would expect to receive with their
creditworthiness. If Toyota is unable to raise the necessary capital under appropriate conditions on a
timely basis, Toyota’s financial condition and results of operations may be adversely affected.
Political, Regulatory and Legal Risks
The automotive industry is subject to various governmental regulations
The worldwide automotive industry is subject to various laws and governmental regulations
including those related to vehicle safety and environmental matters such as emission levels, fuel
economy, noise and pollution. In particular, automotive manufacturers such as Toyota are required
to implement safety measures such as recalls for vehicles that do not or may not comply with
the safety standards of laws and governmental regulations. In addition, Toyota may, in order to
reassure its customers of the safety of Toyota’s vehicles, decide to voluntarily implement recalls or
other safety measures even if the vehicle complies with the safety standards of relevant laws and
governmental regulations. Many governments also impose tariffs and other trade barriers, taxes
and levies, or enact price or exchange controls. Toyota has incurred, and expects to incur in the
future, significant costs in complying with these regulations. If Toyota launches products that result
in safety measures such as recalls, Toyota may incur various costs including significant costs for free
repairs. Furthermore, new legislation or changes in existing legislation may also subject Toyota to
additional expenses in the future. If Toyota incurs significant costs related to implementing safety
measures or meeting laws and governmental regulations, Toyota’s financial condition and results of
operations may be adversely affected. Toyota may become subject to various legal proceedings.
Toyota may become subject to various legal proceedings
As an automotive manufacturer, Toyota may become subject to legal proceedings in respect of
various issues, including product liability and infringement of intellectual property. Toyota may
also be subject to legal proceedings brought by its shareholders and governmental proceedings
and investigations. Toyota is in fact currently subject to a number of pending legal proceedings
and government investigations. A negative outcome in one or more of these pending legal
proceedings could adversely affect Toyota’s financial condition and results of operations.
Toyota may be adversely affected by political instabilities, fuel shortages or interruptions
in transportation systems, natural calamities, wars, terrorism and labor strikes
Toyota is subject to various risks associated with conducting business worldwide. These risks
include political and economic instability, natural calamities, fuel shortages, interruption in
transportation systems, wars, terrorisms, labor strikes and work stoppages. The occurrence of any
of these events in the major markets in which Toyota purchases materials, parts and components
and supplies for the manufacture of its products or in which its products are produced,
distributed or sold, may result in disruptions and delays in the operations of Toyota’s business.
Significant or prolonged disruptions and delays in Toyota’s business operations may adversely
affect Toyota’s financial condition and results of operations.
TOYOTA ANNUAL REPORT 2010
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Management Team
Corporate Governance
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Other Management and Corporate Data
Please Click below to access the contents.
Facilities
Market/Toyota Sales and Production
Design, R&D
North America/
Latin America
Toyota Group
Europe/Africa
Japanese Production
Sites and Dealers
Worldwide Operations
Asia
Oceania/
the Middle East
Vehicle Production,
Sales and Exports by Region
Overseas Model Lineup
by Country and Region
Product Lineup
History of Toyota
History of Toyota
TOYOTA ANNUAL REPORT 2010
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Message from the Executive Vice President
Responsible for Accounting
Financial Section
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promotion measures. Also, the rapid appreciation of the Japanese yen against the U.S. dollar, the euro
and other currencies reduced the profitability of exports.
Despite the severe business environment, our dealers and suppliers remained fully committed
to providing as many vehicles as possible to customers. Our employees in Japan, as well as those
involved in overseas operations, made every effort to work together to achieve cost reductions and
decrease fixed costs. The result of their continued hard work was ¥1,690.0 billion in cost reductions, as
well as lowering the break-even point. These cost reductions were a result of the further strengthening
of activities in collaboration with our suppliers, including the expansion of models covered under
emergency VA (Value Analysis) from 15 to 50 vehicles. We also reviewed all expenses related to fixed
costs as well as made reductions to raise the efficiency of capital expenditures. We will continue to
improve our corporate structure in the fiscal year ending March 31, 2011 and beyond.
Consolidated Financial Forecasts for Fiscal 2011
For fiscal 2011, ending March 31, 2011, we forecast vehicle sales of 7.29 million units, net
revenues of ¥19,200.0 billion, operating income of ¥280.0 billion, and net income of ¥310.0
billion on a consolidated basis. The exchange rates assumed for this forecast are ¥90 per US$1
and ¥125 per €1.
Consolidated operating income is expected to increase as a result of ongoing activities to
improve profitability, including ¥130.0 billion cost-reduction and a ¥160.0 billion decrease in
expenses. Factors that are expected to decline operating income include the effect of exchange
rate fluctuations amounting to ¥80.0 billion, sales volume/mix effects of ¥50.0 billion and
¥27.5 billion from other factors.
Looking ahead, to realize sustainable growth we will continue working to improve our
corporate structure and maintain and improve the break-even point, while placing the highest
Targeting sustainable growth
through steadfast efforts
to improve quality
and reduce costs
Fiscal 2010 Business Results
In fiscal 2010, ended March 31, 2010, on a consolidated basis vehicle sales declined 330 thousand units,
priority on customer safety and confidence. We will also make every effort toward the early
to 7,237 thousand units, and net revenues decreased 7.7%, to ¥18,950.9 billion. However, we recorded
commercialization of next-generation environmental and safety technologies that will be
operating income of ¥147.5 billion, up ¥608.5 billion from the operating loss posted in fiscal 2009. Net
successful in the face of intense competition.
income totaled ¥209.4 billion, an increase of ¥646.4 billion from a net loss in fiscal 2009.
With regard to cost reductions and the decrease in fixed costs, we promoted large cost
Factors contributing to the increase in operating income included ¥520.0 billion from cost-reduction
reductions as an emergency countermeasure in the fiscal year ended March 31, 2010. We will
efforts, ¥470.0 billion from the reduction in fixed costs, a ¥270.0 billion increase in income from our
ensure that these work structures and approaches remain in place to achieve steady results.
financial services operations, excluding valuation gains/losses from interest rate swaps and ¥38.5
From the perspective of development and design, we will devote our efforts to cost reductions
billion from other factors. Major factors reducing earnings were a lower sales volume and changes in
and quality maintenance and improvements while strengthening the training and development
the product mix, totaling ¥370.0 billion, and exchange rate fluctuations, amounting to ¥320.0 billion.
of employees in these processes. We aim to improve both quality and profitability by putting
A worsening market environment due to the financial crisis affected sales volume and the sales mix,
Toyota’s Monozukuri (manufacturing) philosophy into practice in all three areas of quality, cost
which was lower in the first half, compared with the same period of the previous fiscal year. In the
and human resource cultivation.
second half despite the impact of the recall, unit sales were up year on year. This was due to measures
by various nations to stimulate demand, which revitalized the market, as well as the effect of our sales
TOYOTA ANNUAL REPORT 2010
30
Message from the Executive Vice President
Responsible for Accounting
Financial Section
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
F i n a n c i a l S t r a t e g y
D i v i d e n d s a n d S h a r e A c q u i s i t i o n s
The three key components of Toyota’s financial strategy are growth, efficiency and stability.
We consider benefiting shareholders one of our top management priorities, and makes an effort
We believe that the balanced pursuit of these three priorities over the medium to long term
to realize sustainable growth through ongoing structural improvements to enhance our corporate
will allow us to achieve steady and sustainable growth as well as increase corporate value.
value. We strive to continue paying dividends while giving due consideration to factors such as the
business results in each term, investment plans, and cash reserves.
１）Growth: Sustainable growth through continuous forward-looking investments
We believe that automotive markets worldwide will grow over the medium to long term. As
To survive amid tough competition, we wi ll utilize our in ternal funds fo r the e arly
commercialization of next-generation technologies targeting safety and the environment. We will
they expand, the center of market growth will shift toward fuel-efficient vehicles, such as hybrid
make customer safety and security our highest priority, along with initiatives that respond to the
vehicles and compact vehicles and toward resource-rich and emerging markets. We plan to invest
needs of customers in emerging markets. Accordingly, we declared an annual dividend payment of
actively in these areas to respond to structural shifts in demand and ensure long-term sustainable
¥45 per share for the fiscal year ended March 31, 2010.
growth. Concurrently, we plan to continue accelerating measures to provide high-quality,
Given the uncertain outlook for global financial conditions, we will put a priority on securing cash
affordable and attractive products that meet customers’ needs in each country and region and to
reserves. Accordingly, we did not repurchase our own shares in fiscal 2010, and we plan to forgo
provide further support in the areas where we want to advance, namely, emerging markets and
such repurchases for the foreseeable future.
next-generation eco-cars.
We will continue striving to further improve profits and meet the expectations of our
２）Efficiency: Improving profitability and capital efficiency
To meet ongoing demand for hybrid and compact vehicles, we aim to provide high-quality
vehicles at affordable prices and to improve profitability through further cost reductions. We will
also create a structure for efficient development, production and sales that can respond flexibly
to changes in the external environment. In manufacturing, we will expand local production in
high-growth emerging markets. On the other hand, in the developed countries such as Japan, the
United States and Europe, we intend to revise our current product lineup to reflect changes in
the market structure. We will also build a flexible and efficient production system that is resistant
to foreign exchange fluctuations. Through the creation of a global and optimal supply system, we
aim to realize a strong profit structure.
３）Stability: Maintaining a solid financial base
We preserve a solid financial base by ensuring sufficient liquidity and stable shareholders’
equity. Our sound financial position enables us to maintain our level of capital expenditures and
investment in research and development even when the price of raw materials increases or there
is drastic foreign exchange rate fluctuation. In view of anticipated medium- to long-term growth
shareholders.
■ Net Revenues
（¥ Billion）
30,000
25,000
20,000
15,000
10,000
0
FY
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
■ Operating Income
（¥ Billion）
2,500
2,000
1,500
1,000
500
0
-500
FY
ʼ06
ʼ07
ʼ08
ʼ09
ʼ10
Note: Fiscal years ended March 31
Note: Fiscal years ended March 31
in automotive markets worldwide, we believe that maintaining adequate liquidity is essential
■ Vehicle Sales by Region
for the implementation of forward-looking investment to improve products and develop next-
generation technologies, as well as to establish a structure for production and sales in both
the Japanese and overseas markets. We will continue to pursue further capital efficiency and
improved cash flows.
Japan
North America
Europe
Asia
Others
29.9%
29.0%
11.9%
13.5%
15.7%
TOYOTA ANNUAL REPORT 2010
31
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Selected Financial Summary (U.S. GAAP)
Financial Section
Toyota Motor Corporation
Fiscal years ended March 31
For the Year:
Net Revenues:
2001
2002
Yen in millions
2003
2004
2005
Sales of Products ··················································································
Financing Operations ········································································
Total ········································································································
¥ 12,402,104
553,133
¥ 12,955,237
Costs and Expenses:
Cost of Products Sold ·········································································
Cost of Financing Operations ························································
Selling, General and Administrative ···········································
Total ········································································································
Operating Income (Loss)
% of Net Revenues ··············································································
Income (Loss) before Income Taxes and Equity in
Earnings of Affi liated Companies ··············································
Provision for Income Taxes ································································
Net Income (Loss) attributable to Toyota Motor Corporation ··
ROE ····················································································································
Net Cash Provided by Operating Activities ·································
Net Cash Used in Investing Activities ·············································
Net Cash Provided by (Used in) Financing Activities ·············
R&D Expenses ····························································································
Capital Expenditures for Property, Plant and Equipment* ·
Depreciation ································································································
¥ 10,218,599
427,340
1,518,569
¥ 12,164,508
¥
790,729
6.1%
1,107,289
523,876
674,898
9.6%
¥ 1,428,018
(1,318,738)
(166,713)
475,716
762,274
784,784
At Year-End:
Toyota Motor Corporation Shareholdersʼ Equity ·····················
Total Assets ···································································································
Long-Term Debt ························································································
Cash and Cash Equivalents ··································································
Ratio of Toyota Motor Corporation Shareholdersʼ Equity ···
¥ 7,077,411
17,019,783
3,083,344
1,510,892
41.6%
¥ 13,499,644
690,664
¥ 14,190,308
¥ 10,874,455
459,195
1,763,026
¥ 13,096,676
¥ 1,093,632
7.7%
972,101
422,789
556,567
7.8%
¥ 1,532,079
(1,810,230)
392,148
589,306
940,547
809,841
¥ 7,264,112
19,305,730
3,722,706
1,657,160
37.6%
Per Share Data:
Net Income (Loss) attributable to
Toyota Motor Corporation (Basic) ··············································
Annual Cash Dividends ··········································································
Toyota Motor Corporation Shareholdersʼ Equity ······················
¥ 180.65
25
1,921.29
¥ 152.26
28
2,015.82
2001
2002
¥ 14,793,973
707,580
¥ 15,501,553
¥ 11,914,245
423,885
1,891,777
¥ 14,229,907
¥ 1,271,646
8.2%
1,226,652
517,014
750,942
10.4%
¥ 1,940,088
(2,001,448)
37,675
668,404
1,005,931
870,636
¥ 7,121,000
20,152,974
4,137,528
1,592,028
35.3%
Yen
2003
¥ 211.32
36
2,063.43
¥ 16,578,033
716,727
¥ 17,294,760
¥ 13,506,337
364,177
1,757,356
¥ 15,627,870
¥ 1,666,890
9.6%
1,765,793
681,304
1,162,098
15.2%
¥ 2,186,734
(2,216,495)
242,223
682,279
945,803
969,904
¥ 8,178,567
22,040,228
4,247,266
1,729,776
37.1%
¥ 17,790,862
760,664
¥ 18,551,526
¥ 14,500,282
369,844
2,009,213
¥ 16,879,339
¥ 1,672,187
9.0%
1,754,637
657,910
1,171,260
13.6%
¥ 2,370,940
(3,061,196)
419,384
755,147
1,068,287
997,713
¥ 9,044,950
24,335,011
5,014,925
1,483,753
37.2%
2004
2005
¥ 342.90
45
2,456.08
¥ 355.35
65
2,767.67
Stock Information (March 31):
Stock Price ·····································································································
Market Capitalization (Yen in millions) ··········································
Number of Shares Issued (shares) ···················································
¥4,350
¥16,029,739
3,684,997,492
¥3,650
¥ 13,332,491
3,649,997,492
¥2,635
¥ 9,512,343
3,609,997,492
¥3,880
¥ 14,006,790
3,609,997,492
¥3,990
¥ 14,403,890
3,609,997,492
* Excluding vehicles and equipment of operating leases
TOYOTA ANNUAL REPORT 2010
32
Selected Financial Summary (U.S. GAAP)
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Toyota Motor Corporation
Fiscal years ended March 31
For the Year:
Net Revenues:
2006
2007
Yen in millions
2008
2009
2010
% change
2010 vs. 2009
Sales of Products ·················································································
Financing Operations ·······································································
Total ·······································································································
¥ 20,059,493
977,416
¥ 21,036,909
Costs and Expenses:
Cost of Products Sold ········································································
Cost of Financing Operations ·······················································
Selling, General and Administrative ··········································
Total ·······································································································
Operating Income (Loss) ······································································
% of Net Revenues ·············································································
Income (Loss) before Income Taxes and Equity in
Earnings of Affi liated Companies ················································
Provision for Income Taxes ··································································
Net Income (Loss) attributable to Toyota Motor Corporation ··
ROE ····················································································································
Net Cash Provided by Operating Activities ·································
Net Cash Used in Investing Activities ·············································
Net Cash Provided by (Used in) Financing Activities ·············
R&D Expenses ······························································································
Capital Expenditures for Property, Plant and Equipment* ·
Depreciation ································································································
¥ 16,335,312
609,632
2,213,623
¥ 19,158,567
¥ 1,878,342
8.9%
2,087,360
795,153
1,372,180
14.0%
¥ 2,515,480
(3,375,500)
876,911
812,648
1,523,459
1,211,178
At Year-End:
Toyota Motor Corporation Shareholdersʼ Equity ······················
Total Assets ···································································································
Long-Term Debt ························································································
Cash and Cash Equivalents ··································································
Ratio of Toyota Motor Corporation Shareholdersʼ Equity·····
¥ 10,560,449
28,731,595
5,640,490
1,569,387
36.8%
¥ 22,670,097
1,277,994
¥ 23,948,091
¥ 18,356,255
872,138
2,481,015
¥ 21,709,408
¥ 2,238,683
9.3%
2,382,516
898,312
1,644,032
14.7%
¥ 3,238,173
(3,814,378)
881,768
890,782
1,425,814
1,382,594
¥ 11,836,092
32,574,779
6,263,585
1,900,379
36.3%
Per Share Data:
Net Income (Loss) attributable to
Toyota Motor Corporation (Basic) ··············································
Annual Cash Dividends ··········································································
Toyota Motor Corporation Shareholdersʼ Equity ······················
Stock Information (March 31):
2006
2007
¥ 421.76
90
3,257.63
¥ 512.09
120
3,701.17
¥ 24,820,510
1,468,730
¥ 26,289,240
¥ 20,452,338
1,068,015
2,498,512
¥ 24,018,865
¥ 2,270,375
8.6%
2,437,222
911,495
1,717,879
14.5%
¥ 2,981,624
(3,874,886)
706,189
958,882
1,480,570
1,491,135
¥ 11,869,527
32,458,320
5,981,931
1,628,547
36.6%
Yen
2008
¥ 540.65
140
3,768.97
¥ 19,173,720
1,355,850
¥ 20,529,570
¥ 17,468,416
987,384
2,534,781
¥ 20,990,581
¥
(461,011)
‒2.2%
(560,381)
(56,442)
(436,937)
‒4.0%
¥ 1,476,905
(1,230,220)
698,841
904,075
1,364,582
1,495,170
¥ 10,061,207
29,062,037
6,301,469
2,444,280
34.6%
¥ 17,724,729
1,226,244
¥ 18,950,973
¥ 15,971,496
712,301
2,119,660
¥ 18,803,457
¥
147,516
0.8%
291,468
92,664
209,456
2.1%
¥ 2,558,530
(2,850,184)
(277,982)
725,345
604,536
1,414,569
¥ 10,359,723
30,349,287
7,015,409
1,865,746
34.1%
‒7.6
‒9.6
‒7.7
‒8.6
‒27.9
‒16.4
‒10.4
̶
̶
̶
̶
̶
̶
+73.2
̶
̶
‒19.8
‒55.7
‒5.4
+3.0
+4.4
+11.3
‒23.7
̶
2009
2010
% change
2010 vs. 2009
¥
(139.13)
100
3,208.41
¥
66.79
45
3,303.49
Stock Price ·····································································································
Market Capitalization (Yen in millions) ··········································
Number of Shares Issued (shares) ···················································
¥6,430
¥23,212,284
3,609,997,492
¥7,550
¥27,255,481
3,609,997,492
¥4,970
¥17,136,548
3,447,997,492
¥3,120
¥10,757,752
3,447,997,492
¥3,745
¥12,912,751
3,447,997,492
* Excluding vehicles and equipment of operating leases
TOYOTA ANNUAL REPORT 2010
̶
‒55.0
+3.0
+20.0
+20.0
̶
33
Consolidated Segment Information
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Toyota Motor Corporation
Fiscal years ended March 31
Business Segment:
Net Revenues:
2005
2006
2007
2008
2009
2010
Yen in millions
% change
2010 vs. 2009
Automotive ········································
¥ 17,113,535
¥ 19,338,144
¥ 21,928,006
¥ 24,177,306
¥ 18,564,723
¥ 17,197,428
Financial Services ····························
All Other ···············································
Intersegment Elimination ···········
Consolidated·································
781,261
1,030,320
(373,590)
¥ 18,551,526
996,909
1,190,291
(488,435)
¥ 21,036,909
1,300,548
1,323,731
(604,194)
¥ 23,948,091
1,498,354
1,346,955
(733,375)
¥ 26,289,240
1,377,548
1,184,947
(597,648)
¥ 20,529,570
1,245,407
947,615
(439,477)
¥ 18,950,973
Operating Income (Loss):
Automotive ········································
¥ 1,452,535
¥ 1,694,045
¥ 2,038,828
¥ 2,171,905
¥ (394,876)
Financial Services ····························
All Other ···············································
Intersegment Elimination ···········
Consolidated·································
200,853
33,743
(14,944)
¥ 1,672,187
155,817
39,748
(11,268)
¥ 1,878,342
158,495
39,679
1,681
¥ 2,238,683
86,494
33,080
(21,104)
¥ 2,270,375
(71,947)
9,913
(4,101)
¥ (461,011)
¥ (86,370)
246,927
(8,860)
(4,181)
¥ 147,516
Geographic Segment:
Net Revenues:
Japan ······················································
¥ 12,004,155
¥ 13,111,457
¥ 14,815,282
¥ 15,315,812
¥ 12,186,737
¥ 11,220,303
North America ···································
Europe ···················································
Asia ··························································
Other ······················································
Intersegment Elimination
Consolidated
6,373,453
2,479,427
1,625,422
1,183,702
(5,114,633)
¥ 18,551,526
7,687,942
2,727,409
2,042,806
1,601,736
(6,134,441)
¥ 21,036,909
9,029,773
3,542,193
2,225,528
1,922,742
(7,587,427)
¥ 23,948,091
9,423,258
3,993,434
3,120,826
2,294,137
(7,858,227)
¥ 26,289,240
Operating Income (Loss):
Japan ······················································
¥ 987,242
¥ 1,075,890
¥ 1,457,246
¥ 1,440,286
North America ···································
Europe ···················································
Asia ··························································
Other ······················································
Intersegment Elimination ···········
Consolidated·································
447,559
108,541
93,772
47,454
(12,381)
¥ 1,672,187
495,638
93,947
145,546
67,190
131
¥ 1,878,342
449,633
137,383
117,595
83,497
(6,671)
¥ 2,238,683
305,352
141,571
256,356
143,978
(17,168)
¥ 2,270,375
6,222,914
3,013,128
2,719,329
1,882,900
(5,495,438)
¥ 20,529,570
¥ (237,531)
(390,192)
(143,233)
176,060
87,648
46,237
5,670,526
2,147,049
2,655,327
1,673,861
(4,416,093)
¥ 18,950,973
¥ (225,242)
85,490
(32,955)
203,527
115,574
1,122
¥ (461,011)
¥ 147,516
‒7.4
‒9.6
‒20.0
̶
‒7.7
̶
̶
̶
̶
̶
‒7.9
‒8.9
‒28.7
‒2.4
‒11.1
̶
‒7.7
̶
̶
̶
+15.6
+31.9
‒97.6
̶
TOYOTA ANNUAL REPORT 2010
34
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Consolidated Quarterly Financial Summary
Financial Section
Toyota Motor Corporation
Fiscal years ended March 31
Net Revenues ··········································································
% Change ········································································
Operating Income (Loss) ···················································
% Change ········································································
Operating Income Margin ················································
Income (Loss) before Income Taxes and Equity in
Earnings of Affi liated Companies
% Change ········································································
Net Income (Loss) attributable to
Toyota Motor Corporation ··········································
% Change ········································································
First Quarter
¥6,215.1
‒4.7%
412.5
‒38.9%
6.6%
453.0
‒38.7%
353.6
‒28.1%
Business Segment:
Net Revenues:
Automotive ····································································
Financial Services ························································
All Other ···········································································
Intersegment Elimination ·······································
Consolidated·····························································
¥ 5,720.9
363.1
288.2
(157.1)
¥ 6,215.1
Operating Income (Loss):
Automotive ····································································
Financial Services ························································
All Other ···········································································
Intersegment Elimination ·······································
Consolidated·····························································
¥332.3
79.1
2.9
(1.8)
¥412.5
Geographic Segment:
Net Revenues:
Japan ··················································································
North America ·······························································
Europe ···············································································
Asia ······················································································
Other ··················································································
Intersegment Elimination ·······································
Consolidated·····························································
¥ 3,660.8
2,091.1
916.2
798.3
628.7
(1,880.0)
¥ 6,215.1
Operating Income (Loss):
Japan ··················································································
North America ·······························································
Europe ···············································································
Asia ······················································································
Other ··················································································
Intersegment Elimination ·······································
Consolidated·····························································
¥217.1
69.1
20.3
69.3
44.5
(7.8)
¥412.5
2009
Second Quarter
¥5,975.3
‒7.9%
169.5
‒71.6%
2.8%
183.4
‒70.6%
139.8
‒69.0%
¥5,439.8
374.6
314.2
(153.3)
¥5,975.3
¥133.6
28.1
8.9
(1.1)
¥169.5
¥ 3,546.5
1,861.9
867.7
827.7
592.7
(1,721.2)
¥ 5,975.3
¥104.6
(34.9)
(11.5)
67.8
34.6
8.9
¥169.5
Yen in billions
Third Quarter
¥4,802.8
‒28.4%
(360.6)
̶ %
‒7.5%
Fourth Quarter
¥ 3,536.3
‒46.2%
(682.5)
̶ %
‒19.3%
First Quarter
¥ 3,836.0
‒38.3%
(194.9)
̶ %
‒5.1%
2010
Second Quarter
¥4,541.6
‒24.0%
58.0
‒65.8%
1.3%
Third Quarter
¥5,292.9
10.2%
189.1
̶ %
3.6%
Fourth Quarter
¥ 5,280.4
49.3%
95.3
̶ %
1.8%
(282.1)
̶ %
(164.7)
̶ %
¥4,311.1
346.6
294.3
(149.2)
¥4,802.8
¥(232.7)
(123.9)
0.0
(4.0)
¥(360.6)
¥ 3,014.1
1,339.0
660.5
683.9
381.5
(1,276.2)
¥ 4,802.8
¥(164.2)
(247.4)
(43.4)
40.5
33.5
20.4
¥(360.6)
(914.7)
̶ %
(765.8)
̶ %
¥3,092.9
293.2
288.2
(138.0)
¥3,536.3
¥(628.1)
(55.4)
(1.9)
2.9
¥(682.5)
¥1,965.3
930.9
568.7
409.5
280.0
(618.1)
¥3,536.3
¥(395.0)
(177.0)
(108.7)
(1.6)
(25.1)
24.9
¥(682.5)
(138.5)
̶ %
(77.8)
̶ %
¥3,413.0
320.1
204.1
(101.2)
¥3,836.0
¥(239.1)
49.6
(4.6)
(0.8)
¥(194.9)
¥2,181.8
1,175.2
515.1
494.1
343.3
(873.5)
¥3,836.0
¥(212.0)
(3.7)
(20.4)
26.9
17.4
(3.1)
¥(194.9)
75.5
‒58.8%
21.8
‒84.4%
¥4,108.3
312.0
225.1
(103.8)
¥4,541.6
¥(21.3)
74.8
5.0
(0.5)
¥ 58.0
¥ 2,656.3
1,419.1
564.3
589.8
389.7
(1,077.6)
¥ 4,541.6
¥(45.6)
30.5
1.7
38.5
23.3
9.6
¥ 58.0
224.9
̶ %
153.2
̶ %
¥4,861.1
307.2
226.2
(101.6)
¥5,292.9
¥124.5
80.6
(14.4)
(1.6)
¥189.1
¥ 3,093.8
1,622.7
561.0
762.5
494.0
(1,241.1)
¥ 5,292.9
¥ 33.9
79.7
(21.3)
67.1
39.4
(9.7)
¥189.1
129.5
̶ %
112.2
̶ %
¥4,815.0
306.2
292.2
(133.0)
¥5,280.4
¥49.6
41.9
5.1
(1.3)
¥95.3
¥ 3,288.3
1,453.5
506.7
809.0
446.8
(1,223.9)
¥ 5,280.4
¥ (1.5)
(21.2)
7.0
71.0
35.5
4.5
¥95.3
TOYOTA ANNUAL REPORT 2010
35
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
All fi nancial information discussed in this section is derived from Toyotaʼs consolidated fi nancial
statements that appear elsewhere in this annual report. The fi nancial statements have been prepared
in conformity with accounting principles generally accepted in the United States of America.
Overview
fi nancial
include
The business segments of Toyota
automotive operations,
services
operations and all other operations. Automotive
operations are Toyotaʼs most signifi cant business
segment, accounting for 89% of Toyotaʼs total
revenues before the elimination of intersegment
revenues for fi scal 2010. Toyotaʼs primary markets
based on vehicle unit sales for fi scal 2010 were
Japan (30%), North America (29%), Europe (12%)
and Asia (14%). During fi scal 2010, as a result
of announcements of recalls and other safety
measures for several models of vehicles in several
countries, the number of recalls and other safety
measures increased. These recalls and other
safety measures have impacted the fi nancial
results of the automotive and fi nancial services
operations and led to a number of claims, lawsuits
and government investigations. As a result of the
foregoing, the fi scal 2010 operating results of the
automotive operations were principally aff ected
by factors including but not limited to the accrued
costs related to the recalls and other safety
measures announced in fi scal 2010, a temporary
decrease in sales mainly in North America and
additional costs resulting from a change in the
estimation model of expenses related to future
recalls and other safety measures. In fi scal 2010,
Toyota has employed an estimation model for
recalls and other safety measures which takes
into account Toyotaʼs historical experience and
individual occurrences of recalls and other safety
measures to accrue recall costs at the time of
vehicle sale. In addition, as a result of the above,
the fi scal 2010 operating results of the fi nancial
services operations were principally aff ected by
the evaluation for credit losses and residual value
losses at March 31, 2010. Not all of the impacts
described above are fi nancially signifi cant or
are able to be precisely measured. Toyota has
included in the following discussion and analysis,
where relevant, signifi cant impacts of these
items.
Automotive Market Environment
The worldwide automotive market is highly
competitive and volatile. The demand
for
automobiles is aff ected by a number of factors
including social, political and general economic
conditions; introduction of new vehicles and
technologies; and costs incurred by customers to
purchase and operate vehicles. These factors can
cause consumer demand to vary substantially in
diff erent geographic markets and for diff erent
types of automobiles.
The automotive industry generally experienced
diffi cult market conditions during fi scal 2010 due
to changes in market demand resulting from
a shift in consumer preference towards small
and low-price vehicles, despite the continuous
growth in China, India and other emerging
countries and the eff ects of government stimulus
packages in developed countries.
The
following
forth Toyotaʼs
table sets
consolidated vehicle unit sales by geographic
Japan ··············································································································
North America ··························································································
Europe ···········································································································
Asia ··················································································································
Other* ············································································································
Overseas total····························································································
Total ················································································································
(Thousands of units)
Year ended March 31,
2009
1,945
2,212
1,062
905
1,443
5,622
7,567
2008
2,188
2,958
1,284
956
1,527
6,725
8,913
2010
2,163
2,098
858
979
1,139
5,074
7,237
* “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc.
market based on location of customers for the
past three fi scal years.
8,000
6,000
4,000
2,000
10,000
（Thousands of units）
Consolidated Vehicle Sales
During fi scal
2009, Toyotaʼs
consolidated ve-
hicle unit sales in
Japan decreased
due to weak mar-
ket conditions as
compared to the
prior fi scal year.
During fi scal 2010,
sales in Japan in-
creased as com-
pared to the prior
fi scal year refl ect-
ing
in-
frequent
troduction of new
products and sales eff orts of domestic dealers on
the sales of new products. In fi scal 2010, Toyota
and Lexus brandsʼ market share excluding mini-
vehicles was 48.2%, and Toyotaʼs market share
(including Daihatsu and Hino brands) including
mini-vehicles was 44.3%, and both market shares
represented record highs. Overseas vehicle unit
sales decreased during fi scal 2009 and 2010,
each compared to the prior fi scal year. During
fi scal 2009, overseas vehicle unit sales decreased,
particularly in North America and Europe, where
70ʼ
80ʼ
60ʼʼ
ʼ10
ʼ09
FY
0
the contraction of automotive markets was
especially pronounced. During fi scal 2010, total
overseas vehicle unit sales decreased, particularly
in Europe, despite an increase in Asia.
Toyotaʼs share of total vehicle unit sales in
each market is infl uenced by the quality, safety,
reliability, price, design, performance, economy
and utility of Toyotaʼs vehicles compared with
those off ered by other manufacturers. The timely
introduction of new or redesigned vehicles is also
an important factor in satisfying customer needs.
Toyotaʼs ability to satisfy changing customer
preferences can aff ect its revenues and earnings
signifi cantly.
The profi tability of Toyotaʼs automotive
operations is aff ected by many factors. These
factors include:
(cid:12255)vehicle unit sales volumes,
(cid:12255)the mix of vehicle models and options sold,
(cid:12255)the level of parts and service sales,
(cid:12255)the levels of price discounts and other sales
incentives and marketing costs,
(cid:12255)the cost of customer warranty claims and
other customer satisfaction actions,
(cid:12255)the cost of research and development and
other fi xed costs,
(cid:12255)the prices of raw materials,
(cid:12255)the ability to control costs,
TOYOTA ANNUAL REPORT 2010
TOYOTA ANNUAL REPORT 2010
36
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
in
those attributed
(cid:12255)the effi cient use of production capacity, and
(cid:12255)changes in the value of the Japanese yen and
other currencies in which Toyota does busi-
ness.
Changes
laws, regulations, policies and
other governmental actions can also materially
impact the profi tability of Toyotaʼs automotive
operations. These laws, regulations and policies
include
to environmental
matters and vehicle safety, fuel economy and
emissions that can add signifi cantly to the cost
of vehicles. The European Union has enforced
a directive that requires manufacturers to be
fi nancially responsible for taking back end-of-
life vehicles and to take measures to ensure
that adequate used vehicle disposal facilities are
established and those hazardous materials and
recyclable parts are removed from vehicles prior to
scrapping. Please see “Legislation Regarding End-
of-Life Vehicles” “Information on the Company ̶
Business Overview ̶ Governmental Regulation,
Environmental and Safety Standards” and note
23 to the consolidated fi nancial statements
for a more detailed discussion of these laws,
regulations and policies.
Many governments also regulate local content,
impose tariff s and other trade barriers, and
enact price or exchange controls that can limit
an automakerʼs operations and can make the
repatriation of profi ts unpredictable. Changes
in these laws, regulations, policies and other
governmental actions may aff ect the production,
licensing, distribution or sale of Toyotaʼs products,
cost of products or applicable tax rates. Toyota
is currently one of the defendants in purported
national class actions alleging violations of the
U.S. Sherman Antitrust Act. Toyota believes that
its actions have been lawful. In order to avoid a
protracted dispute, however, Toyota entered
into a settlement agreement with the plaintiff s
at the end of February 2006. The settlement
agreement is pending the approval of the federal
district court, and immediately upon approval
the plaintiff s will, in accordance with the terms
of the settlement agreement, withdraw all
pending actions against Toyota in the federal
district court as well as all state courts and all
related actions will be closed. From time-to-time,
Toyota issues vehicle recalls and takes other
safety measures including safety campaigns in its
vehicles. In November 2009, Toyota announced
a safety campaign in North America for certain
models of Toyota and Lexus vehicles related to
fl oor mat entrapment of accelerator pedals, and
later expanded it to include additional models.
In January 2010, Toyota announced a recall in
North America for certain models of Toyota
vehicles related to sticking and slow-to-return
accelerator pedals. Also in January 2010, Toyota
recalled in Europe and China certain models of
Toyota vehicles related to sticking accelerator
pedals. In February 2010, Toyota announced a
worldwide recall related to the software program
that controls the antilock braking system (ABS)
in certain vehicles models including the Prius.
The recalls and other safety measures described
above have led to a number of claims, lawsuits
and government investigations against Toyota in
the United States. For a more detailed description
of these claims,
lawsuits and government
investigations, see note 23 to the consolidated
fi nancial statements.
The worldwide automotive industry is in a
period of global competition which may continue
for the foreseeable future, and in general the
competitive environment
in which Toyota
operates is likely to intensify. Toyota believes it
has the resources, strategies and technologies
in place to compete eff ectively in the industry
as an independent company for the foreseeable
future.
Total Assets by Financial
Services Operations
（¥ Billion）
16,000
12,000
8,000
4,000
0
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
Financial Services Operations
The worldwide automobile fi nancial services
industry has become highly competitive due
to the contraction of automotive markets. As
competition increases, margins on fi nancing
transactions may decrease and market share
may also decline as customers obtain fi nancing
for Toyota vehicles from alternative sources.
loans and
leasing programs
Toyotaʼs fi nancial services operations mainly
include
for
customers and dealers. Toyota believes that its
ability to provide fi nancing to its customers is
an important value added service. Therefore,
Toyota has expanded its network of fi nance
subsidiaries in order to off er fi nancial services in
many countries.
Toyotaʼs competitors for retail fi nancing and
retail leasing include commercial banks, credit
unions and other fi nance companies. Meanwhile,
commercial banks and other captive automobile
fi nance companies also compete against Toyotaʼs
wholesale fi nancing activities.
Toyota reasonably estimated and recorded
allowance for credit losses and residual value
losses. This estimation includes the unfavorable
impact of the recalls and other safety measures
announced in fi scal 2010.
Toyotaʼs fi nancial assets decreased during fi scal
2010 primarily due to the impact of fl uctuations
in foreign currency translation rates.
TOYOTA ANNUAL REPORT 2010
37
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
The following table provides information regarding Toyotaʼs fi nance receivables and operating leases
as of March 31, 2009 and 2010.
Yen in millions
March 31,
2009
2010
Finance Receivables
Retail·························································································································································
Finance leases ·····································································································································
Wholesale and other dealer loans····························································································
Deferred origination costs ············································································································
Unearned income ·····························································································································
Allowance for credit losses
Retail ·················································································································································
Finance leases ······························································································································
Wholesale and other dealer loans ····················································································
Total fi nance receivables, net ······················································································
Less ‒ Current portion ····················································································································
Noncurrent fi nance receivables, net ···············································································
Operating Leases
Vehicles ···················································································································································
Equipment ············································································································································
Less ‒ Accumulated depreciation ····························································································
Vehicles and equipment on operating leases, net ··················································
¥ 6,655,404
1,108,408
2,322,721
10,086,533
104,521
(405,171)
(157,359)
(7,776)
(73,797)
(238,932)
9,546,951
(3,891,406)
¥ 5,655,545
¥ 2,729,713
107,168
2,836,881
(795,767)
¥ 2,041,114
¥ 6,810,144
1,232,508
2,403,239
10,445,891
109,747
(482,983)
(148,503)
(36,917)
(47,059)
(232,479)
9,840,176
(4,209,496)
¥ 5,630,680
¥ 2,516,948
96,300
2,613,248
(791,169)
¥ 1,822,079
Toyotaʼs fi nance receivables are subject to
collectability risks. These risks include consumer
and dealer insolvencies and insuffi cient collateral
values (less costs to sell) to realize the full carrying
values of these receivables. See discussion in the
Critical Accounting Estimates section regarding
“Allowance for Doubtful Accounts and Credit
Losses” and note 11 to the consolidated fi nancial
statements regarding the allowance for doubtful
accounts and credit losses.
Toyota continues to originate leases to fi nance
new Toyota vehicles. These leasing activities
are subject to residual value risk. Residual value
losses could be incurred when the lessee of a
vehicle does not exercise the option to purchase
the vehicle at the end of the lease term. See
discussion in the Critical Accounting Estimates
in Operating
section regarding “Investment
Leases” and note 2 to the consolidated fi nancial
statements regarding the allowance for residual
value losses.
into
Toyota primarily enters
interest rate
swap agreements and cross currency interest
rate swap agreements to convert its fi xed-rate
debt to variable-rate functional currency debt.
A portion of the derivative instruments are
entered into to hedge interest rate risk from an
economic perspective and are not designated
to specifi c assets or
liabilities on Toyotaʼs
consolidated balance sheet and accordingly,
unrealized gains or losses related to derivatives
that are not designated are
recognized
currently in operations. See discussion in the
Critical Accounting Estimates section regarding
“Derivatives and Other Contracts at Fair Value”,
further discussion in the Market Risk Disclosures
section and note 20 to the consolidated fi nancial
statements.
Funding costs can aff ect the profi tability of
Toyotaʼs fi nancial services operations. Funding
costs are aff ected by a number of factors, some
of which are not in Toyotaʼs control. These factors
include general economic conditions, prevailing
interest rates and Toyotaʼs fi nancial strength.
Funding costs decreased during fi scal 2009 and
2010, mainly as a result of lower interest rates.
Toyota launched its credit card business in
Japan at the beginning of fi scal 2002. As of March
31, 2009, Toyota had 7.1 million cardholders, an
increase of 0.5 million cardholders compared
with March 31, 2008. As of March 31, 2010,
Toyota had 7.7 million cardholders, an increase
of 0.6 million cardholders compared with March
31, 2009. The credit card receivables at March 31,
2009 decreased by ¥1.1 billion from March 31,
2008 to ¥224.6 billion. The credit card receivables
at March 31, 2010 increased by ¥30.8 billion from
March 31, 2009 to ¥255.4 billion.
Other Business Operations
Toyotaʼs other business operations consist of
housing, including the manufacture and sale of
prefabricated homes; information technology
related businesses,
information
technology and telecommunications, intelligent
transport systems, GAZOO and other.
including
Toyota does not expect its other business
operations to materially contribute to Toyotaʼs
consolidated results of operations.
Currency Fluctuations
Toyota is aff ected by fl uctuations in foreign
currency exchange rates. In addition to the
Japanese yen, Toyota is principally exposed to
fl uctuations in the value of the U.S. dollar and
the euro and, to a lesser extent, the Australian
dollar, the Canadian dollar and the British pound.
Toyotaʼs consolidated fi nancial statements, which
are presented in Japanese yen, are aff ected by
foreign currency exchange fl uctuations through
both translation risk and transaction risk.
Translation risk
is the risk that Toyotaʼs
consolidated fi nancial statements for a particular
period or for a particular date will be aff ected by
changes in the prevailing exchange rates of the
currencies in those countries in which Toyota
does business compared with the Japanese
yen. Even though the fl uctuations of currency
exchange rates to the Japanese yen can be
substantial, and, therefore, signifi cantly impact
comparisons with prior periods and among the
various geographic markets, the translation risk
is a reporting consideration and does not refl ect
Toyotaʼs underlying results of operations. Toyota
does not hedge against translation risk.
Transaction risk is the risk that the currency
structure of Toyotaʼs costs and liabilities will
deviate from the currency structure of sales
proceeds and assets. Transaction risk relates
primarily to sales proceeds from Toyotaʼs non-
domestic operations from vehicles produced in
Japan.
location of
Toyota believes that the
its
production facilities in diff erent parts of the world
has signifi cantly reduced the level of transaction
risk. As part of its globalization strategy, Toyota
has continued
localize production by
constructing production facilities in the major
markets in which it sells its vehicles. In calendar
2008 and 2009, Toyota produced 64.1% and
to
TOYOTA ANNUAL REPORT 2010
38
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
64.5% of Toyotaʼs non-domestic sales outside
Japan, respectively. In North America, 57.4% and
60.0% of vehicles sold in calendar 2008 and 2009
respectively were produced locally. In Europe,
60.9% and 57.0% of vehicles sold in calendar 2008
and 2009 respectively were produced locally.
Localizing production enables Toyota to locally
purchase many of the supplies and resources
used in the production process, which allows for
a better match of local currency revenues with
local currency expenses.
Toyota also enters
foreign currency
transactions and other hedging instruments to
address a portion of its transaction risk. This has
reduced, but not eliminated, the eff ects of foreign
currency exchange rate fl uctuations, which in
some years can be signifi cant. See notes 20 and
21 to the consolidated fi nancial statements for
additional information regarding the extent of
Toyotaʼs use of derivative fi nancial instruments
to hedge foreign currency exchange rate risks.
into
income attributable
Generally, a weakening of the Japanese yen
against other currencies has a positive eff ect
on Toyotaʼs revenues, operating income and
to Toyota Motor
net
Corporation. A strengthening of the Japanese
yen against other currencies has the opposite
eff ect. In fi scal 2009 and 2010, the Japanese yen
was on average and at the end of the fi scal year
stronger against the U.S. dollar and the euro in
comparison to the prior fi scal year. See further
discussion in the Market Risk Disclosures section
regarding “Foreign Currency Exchange Rate Risk”.
During fi scal 2009 and 2010, the average
exchange rate of the Japanese yen strengthened
against the major currencies
including the
U.S. dollar and the euro compared to the
average exchange rate of the prior fi scal year.
The operating results excluding the impact of
currency fl uctuations described in the “Results of
Operations ̶ Fiscal 2010 Compared with Fiscal
2009” and the “Results of Operations ̶ Fiscal
2009 Compared with Fiscal 2008,” show results of
net revenues obtained by applying the Japanese
yenʼs average exchange rate in the previous
fi scal year to the local currency-denominated net
revenues for fi scal 2009 and 2010, respectively, as
if the value of the Japanese yen had remained
constant for the comparable periods. Results
excluding the impact of currency fl uctuations
year-on-year are not on the same basis as
Toyotaʼs consolidated fi nancial statements and
do not conform with U.S. GAAP. Furthermore,
Toyota does not believe that these measures are
a substitute for U.S. GAAP measures. However,
Toyota believes that such results excluding the
impact of currency fl uctuations year-on-year
provide additional useful information to investors
regarding the operating performance on a local
currency basis.
non-fi nancial data such as units of sale, units of
production, market share information, vehicle
model plans and plant location costs to allocate
resources within the automotive operations.
Geographic Breakdown
The following table sets forth Toyotaʼs net revenues in each geographic market based on the country
location of the parent company or the subsidiaries that transacted the sale with the external customer for
the past three fi scal years.
Yen in millions
Year ended March 31,
2008
2009
2010
Revenues by Market
FY2010
Japan ··················································
¥8,418,620
¥7,471,916
¥7,314,813
North America ······························
9,248,950
6,097,676
5,583,228
Europe ···············································
3,802,814
2,889,753
2,082,671
Asia ······················································
2,790,987
2,450,412
2,431,648
Other* ················································
2,027,869
1,619,813
1,538,613
* “Other” consists of Central and South America, Oceania and Africa.
ダミー
38.6 %
Japan
North America 29.5 %
11.0 %
Europe
12.8 %
Asia
All Other Markets 8.1 %
Segmentation
Toyotaʼs most signifi cant business segment is
its automotive operations. Toyota carries out its
automotive operations as a global competitor in
the worldwide automotive market. Management
the
allocates
performance of, its automotive operations as
a single business segment on a worldwide
basis. Toyota does not manage any subset of
its automotive operations, such as domestic
or overseas operations or parts, as separate
management units.
to, and assesses
resources
the
The management of
automotive
operations
is aligned on a functional basis
with managers having oversight responsibility
for the major operating functions within the
segment. Management assesses fi nancial and
Results of Operations ̶Fiscal 2010 Compared with Fiscal 2009
Yen in millions
Year ended March 31,
2010 vs. 2009 change
2009
2010
Amount
Percentage
Net revenues:
Japan ····························································· ¥ 12,186,737
¥ 11,220,303
¥
(966,434)
North America ··········································
Europe ··························································
Asia ·································································
Other* ···························································
Intersegment elimination/
6,222,914
3,013,128
2,719,329
1,882,900
5,670,526
2,147,049
2,655,327
1,673,861
(552,388)
(866,079)
(64,002)
(209,039)
unallocated amount ························
(5,495,438)
(4,416,093)
1,079,345
Total ····················································· ¥ 20,529,570
¥ 18,950,973
¥ (1,578,597)
* “Other” consists of Central and South America, Oceania and Africa.
‒7.9%
‒8.9%
‒28.7%
‒2.4%
‒11.1%
−
‒7.7%
TOYOTA ANNUAL REPORT 2010
39
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Yen in millions
Year ended March 31,
2010 vs. 2009 change
2009
2010
Amount
Percentage
in Europe compared to the prior calendar year due to the continuous market downturn. Aff ected by this
downturn, Toyotaʼs vehicle unit sales decreased to 7,237 thousand vehicles, or by 4.4%, compared to the
prior fi scal year.
Operating income (loss):
Japan ·····························································
¥ (237,531)
¥ (225,242)
¥ 12,289
North America ··········································
(390,192)
Europe ··························································
(143,233)
Asia ·································································
Other* ···························································
176,060
87,648
Intersegment elimination/
85,490
(32,955)
203,527
115,574
unallocated amount ························
46,237
1,122
Total ······················································
¥ (461,011)
¥ 147,516
Operating margin ···········································
‒2.2%
0.8%
475,682
110,278
27,467
27,926
(45,115)
¥ 608,527
3.0%
Income (loss) before income taxes and equity
in earnings of affi liated companies ···············
Net margin from income (loss) before
income taxes and equity in earnings of
affi liated companies ····································
Equity in earnings of affi liated companies ···
42,724
45,408
‒2.7%
1.5%
4.2%
2,684
(560,381)
291,468
851,849
−
−
−
+15.6%
+31.9%
‒97.6%
−
−
+6.3%
Net income (loss) attributable to
Toyota Motor Corporation ····················
(436,937)
209,456
646,393
−
Net margin attributable to
Toyota Motor Corporation ····················
‒2.1%
1.1%
3.2%
* “Other” consists of Central and South America, Oceania and Africa.
Net Revenues
Toyota had net revenues for fi scal 2010 of ¥18,950.9 billion, a decrease
of ¥1,578.6 billion, or 7.7%, compared with the prior year. This decrease
principally refl ects the unfavorable impact of fl uctuations in foreign currency
translation rates of ¥986.9 billion, the impact of decreased vehicle unit sales
and changes in sales mix of approximately ¥570.0 billion, partially off set
by the increased parts sales of ¥34.9 billion during fi scal 2010. Eliminating
the diff erence in the Japanese yen value used for translation purposes,
net revenues would have been approximately ¥19,937.8 billion during
fi scal 2010, a 2.9% decrease compared with the prior year. The automotive
market expanded by 10.0% in Japan compared to the prior fi scal year
due to the government stimulus packages. However, other automotive
markets contracted signifi cantly such as 22.0% in North America and 13.7%
Net Revenues
（¥ Billion）
30,000
24,000
18,000
12,000
6,000
0
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
Toyotaʼs net revenues by product category in each business with external customer is as follows:
Yen in millions
Year ended March 31,
2010 vs. 2009 change
2009
2010
Amount
Percentage
Vehicles ·································································· ¥ 15,635,490
¥ 14,309,595
¥ (1,325,895)
Parts and components for overseas production ··
Parts and components for after service
Other ·······································································
298,176
1,575,316
1,041,519
355,273
1,543,941
978,499
57,097
(31,375)
(63,020)
Total Automotive ········································
18,550,501
17,187,308
(1,363,193)
‒8.5%
+19.1%
‒2.0%
‒6.1%
‒7.3%
All Other ································································
623,219
537,421
(85,798)
‒13.8%
Total sales of products ···································
19,173,720
17,724,729
Financial services ··············································
1,355,850
1,226,244
(1,448,991)
(129,606)
Total ···································································· ¥ 20,529,570
¥ 18,950,973
¥ (1,578,597)
‒7.6%
‒9.6%
‒7.7%
Toyotaʼs net revenues include net revenues
from sales of products, consisting of net
revenues from automotive operations and all
other operations, that decreased by 7.6% during
fi scal 2010 compared with the prior fi scal year
to ¥17,724.7 billion, and net revenues from
fi nancial services operations that decreased by
9.6% during fi scal 2010 compared with the prior
fi scal year to ¥1,226.2 billion. Eliminating the
diff erence in the Japanese yen value used for
translation purposes, net revenues from sales
of products would have been ¥18,618.7 billion,
a 2.9% decrease during fi scal 2010 compared
with the prior fi scal year. The decrease in net
revenues from sales of products is due primarily
to a decrease in vehicle unit sales which resulted
from the generally diffi cult market conditions
in the automotive industry as a whole in fi scal
2010. Eliminating the diff erence in the Japanese
yen value used for translation purposes, net
from fi nancial services operations
revenues
would have been approximately ¥1,319.1 billion,
a 2.7% decrease during fi scal 2010 compared
with the prior fi scal year. The decrease in net
revenues
from fi nancial services operations
resulted primarily from unfavorable impact of
fl uctuations in foreign currency translation rates
and decrease in rental income from vehicles and
equipment on operating leases.
TOYOTA ANNUAL REPORT 2010
40
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Number of fi nancing contracts by geographic region (at the end of the fi scal year 2009 and 2010) is as
(cid:12255)North America
follows:
Number of fi nancing contracts in thousands
Year ended March 31,
2010 vs. 2009 change
Toyotaʼs consolidated vehicle unit sales
Japan ·······································································
North America ···················································
Europe ····································································
Asia ···········································································
Other* ·····································································
2009
1,660
4,403
748
387
440
Total ·······························································
7,638
* “Other” consists of Central and South America, Oceania and Africa.
2010
1,684
4,488
774
428
476
7,850
Amount
Percentage
24
85
26
41
36
212
+1.4%
+1.9%
+3.5%
+10.6%
+8.2%
+2.8%
revenues
Geographically, net
(before the
elimination of intersegment revenues) for fi scal
2010 decreased by 7.9% in Japan, 8.9% in North
America, 28.7% in Europe, 2.4% in Asia and 11.1%
in Other compared with the prior fi scal year.
Eliminating the diff erence in the Japanese yen
value used for translation purposes, net revenues
in fi scal 2010 would have decreased by 7.9% in
Japan, 1.2% in North America, 20.1% in Europe,
7.3% in Other and would have increased by 5.5%
in Asia compared with the prior fi scal year.
The following is a discussion of net revenues in
each geographic market (before the elimination
of intersegment revenues).
(cid:12255)Japan
Toyotaʼs consolidated vehicle unit sales
Thousands of units
Year ended March 31,
2010 vs. 2009 change
2009
1,945
2010
2,163
Amount
218
Percentage
11.2%
Yen in millions
Year ended March 31,
2010
2009
2010 vs. 2009 change
Amount
Percentage
Net revenues:
Sales of products······································
Financial services ·····································
Total ·························································
¥12,067,494
119,243
¥12,186,737
¥11,095,044
125,259
¥11,220,303
¥(972,450)
6,016
¥(966,434)
‒8.1%
+5.0%
‒7.9%
Supported by the government stimulus packages including the eco-car tax reduction and subsidy,
Toyotaʼs domestic vehicle unit sales showed growth as compared to the prior fi scal year mainly within
the environmentally-friendly and new vehicle markets, such as Prius and SAI. However, net revenues in
Japan decreased refl ecting the decrease in the number of exported vehicles for the overseas markets.
Thousands of units
Year ended March 31,
2010 vs. 2009 change
2009
2,212
2010
2,098
Amount
(114)
Percentage
‒5.2%
Yen in millions
Year ended March 31,
2010
2009
2010 vs. 2009 change
Amount
Percentage
Net revenues:
Sales of products······································
Financial services ·····································
Total ·························································
¥5,226,426
996,488
¥6,222,914
¥4,782,379
888,147
¥5,670,526
¥(444,047)
(108,341)
¥(552,388)
‒8.5%
‒10.9%
‒8.9%
The market is recovering gradually from the downturn stemming from the fi nancial crisis since the fall
of 2008 and Toyotaʼs vehicle unit sales in the second half of fi scal 2010 increased year-on-year primarily
due to the sales of new Sienna. However, net revenues in North America decreased primarily as a result of
the substantial decline in vehicle unit sales caused by the downturn in the market during the fi rst half of
fi scal 2010, fl uctuations in foreign currency translation rates and the eff ects of the recalls and other safety
measures.
(cid:12255)Europe
Toyotaʼs consolidated vehicle unit sales
Thousands of units
Year ended March 31,
2010 vs. 2009 change
2009
1,062
2010
858
Amount
(204)
Percentage
‒19.2%
Yen in millions
Year ended March 31,
2010
2009
2010 vs. 2009 change
Amount
Percentage
Net revenues:
Sales of products······································
Financial services ·····································
Total ·························································
¥2,911,234
101,894
¥3,013,128
¥2,065,768
81,281
¥2,147,049
¥(845,466)
(20,613)
¥(866,079)
‒29.0%
‒20.2%
‒28.7%
Although Toyotaʼs vehicle unit sales in some European countries increased compared with the prior fi scal
year benefi ting from various government stimulus packages, net revenues in Europe overall decreased
primarily due to the decrease in vehicle unit sales which resulted from the downturn in the market and
fl uctuations in foreign currency translation rates.
TOYOTA ANNUAL REPORT 2010
41
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
(cid:12255)Asia
Operating Costs and Expenses
Toyotaʼs consolidated vehicle unit sales
Thousands of units
Year ended March 31,
2010 vs. 2009 change
2009
905
2010
979
Amount
74
Percentage
＋8.3%
Yen in millions
Year ended March 31,
2010
2009
2010 vs. 2009 change
Amount
Percentage
Net revenues:
Sales of products······································
Financial services ·····································
Total ·························································
¥2,676,939
42,390
¥2,719,329
¥2,612,595
42,732
¥2,655,327
¥(64,344)
342
¥(64,002)
‒2.4%
＋0.8%
‒2.4%
Although Toyotaʼs vehicle unit sales increased, particularly in Thailand and Indonesia, compared with the
prior fi scal year due primarily to various government stimulus packages, net revenues in Asia decreased
due primarily to the unfavorable impact of fl uctuations in foreign currency translation rates. Eliminating
the diff erence in the Japanese yen value used for translation purposes of ¥212.9 billion, net revenues
would have increased by ¥148.6 billion.
(cid:12255)Other
Toyotaʼs consolidated vehicle unit sales
1,443
1,139
Year ended March 31,
2010
2009
2010 vs. 2009 change
Amount
(304)
Percentage
‒21.1%
Thousands of units
Yen in millions
Year ended March 31,
2010
2009
2010 vs. 2009 change
Amount
Percentage
Net revenues:
Sales of products······································
Financial services ·····································
Total ·························································
¥1,779,089
103,811
¥1,882,900
¥1,571,846
102,015
¥1,673,861
¥(207,243)
(1,796)
¥(209,039)
‒11.6%
‒1.7%
‒11.1%
Net revenues in Other decreased due to the decrease in Toyotaʼs vehicle unit sales compared to the prior
fi scal year as a result of a downturn in the markets in Central and South America, Oceania, Africa, and all
other regions.
Yen in millions
Year ended March 31,
2010 vs. 2009 change
2009
2010
Amount
Percentage
Operating costs and expenses
Cost of products sold ···························
¥17,468,416
¥15,971,496
¥(1,496,920)
Cost of fi nancing operations ···········
987,384
712,301
Selling, general and administrative ·
2,534,781
2,119,660
(275,083)
(415,121)
Total ········································································
¥20,990,581
¥18,803,457
¥(2,187,124)
‒8.6%
‒27.9%
‒16.4%
‒10.4%
Yen in millions
2010 vs. 2009 change
Changes in operating costs and expenses:
Eff ect of decrease in vehicle unit sales and changes in sales mix ···························
Eff ect of fl uctuation in foreign currency translation rates ···········································
Eff ect of increase in parts sales ··································································································
Eff ect of decrease in research and development expenses ······································
Eff ect of cost reduction eff orts, decrease in fi xed costs and other eff orts ·········
Total
(110,000)
(963,300)
11,200
(178,700)
(946,324)
(2,187,124)
Operating costs and expenses decreased by
¥2,187.1 billion, or 10.4%, to ¥18,803.4 billion
during fi scal 2010 compared with the prior fi scal
year. This decrease resulted primarily from the
¥963.3 billion impact of fl uctuations in foreign
currency translation rates, the ¥946.3 billion of
cost reduction eff orts, decrease in fi xed costs
and other eff orts, the ¥178.7 billion decrease in
research and development expenses, and the
approximate ¥110.0 billion impact on costs of
products attributable to the decrease in vehicle
unit sales and the changes in sales mix, partially
off set by the ¥11.2 billion impact on increase in
parts sales. The cost reduction eff orts, decrease
in fi xed costs and other eff orts are partially
off set by the ¥105.7 billion increase in costs
resulting from a change in the estimation model
of expenses related to future recalls and other
safety measures.
(cid:12255)Cost Reduction Eff orts
During fi scal 2010, continued cost reduction
eff orts reduced operating costs and expenses by
approximately ¥520.0 billion. The cost reduction
eff orts include decreases in the prices of steel,
precious metals, non-ferrous alloys including
aluminum, plastic parts and other production
materials and parts. In fi scal 2010, the decline
in raw materials prices and, continued cost
reduction eff orts, by working closely with
suppliers, contributed to the improvement in
earnings. These cost reduction eff orts related to
ongoing value engineering and value analysis
activities, the use of common parts that result in a
reduction of part types and other manufacturing
initiatives designed to reduce the costs of vehicle
production.
TOYOTA ANNUAL REPORT 2010
42
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
in
initiatives. The decrease
(cid:12255)Cost of Products Sold
Cost of products sold decreased by ¥1,496.9
billion, or 8.6%, to ¥15,971.5 billion during fi scal
2010 compared with the prior fi scal year. The
decrease in cost of products sold for automotive
operations is primarily attributed to the decrease
in fi xed costs including the decrease in research
and development expenses, the cost reduction
eff orts, the decrease in vehicle unit sales and
the changes in sales mix, and the impact of
fluctuations
foreign currency translation
rates partially off set by increases in parts sales.
The decrease in fixed costs was due mainly
to a decline in labor costs and research and
development expenses as a result of profit
in
improvement
vehicle unit sales and the changes in sales
mix were due to factors such as the substantial
contraction of the automotive market caused
by the financial crisis since the fall of 2008.
The decrease in research and development
expenses is attributable to reduced develop-
ment costs real-
ized as a result of
Toyotaʼs more fo-
cused investment
decisions for the
future such as in
e n v i r o n m e n t a l
technologies, and
e f f e c t i v e man-
agement over re-
search and devel-
opment expenses
spending.
Cost of Products Sold
（%）
100
（¥ Billion）
12,000
16,000
20,000
4,000
8,000
20
40
60
80
0
0
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
% of sales of products
(Right scale)
TOYOTA ANNUAL REPORT 2010
(cid:12255)Cost of Financing Operations
Changes in cost of fi nancing operations:
Eff ect of fl uctuation in foreign
Yen in millions
2010 vs. 2009
change
currency translation rates ················ ¥ (83,500)
(70,000)
Eff ect of changes in funding costs ··
Eff ect of increase in valuation
gains on interest rate swaps
stated at fair value ·······························
(64,500)
Eff ect of decrease in provision for
residual value losses ···························
Other ································································
(50,000)
(7,083)
Total ······································································· ¥ (275,083)
Cost of fi nancing operations decreased by
¥275.1 billion, or 27.9%, to ¥712.3 billion during
fi scal 2010 compared with the prior year. The
decrease resulted primarily from the ¥83.5
billion impact of fl uctuations in foreign currency
translation rates, the ¥70.0 billion favorable
impact of changes in funding costs, the ¥64.5
billion
recognition of valuation gains on
interest rate swaps stated at fair value, and the
¥50.0 billion decrease in provision for residual
value losses. The favorable impact of changes
in funding costs is attributable to a decline in
market interest rates. The decrease in provision
for residual value losses is primarily attributable
to the recovery of the used vehicles markets
particularly in the United States and other eff ects,
partially off set by the impact from the recalls and
other safety measures.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
decreased by ¥415.1 billion, or 16.4%, to ¥2,119.6
billion during fi scal 2010 compared with the
prior fi scal year. This decrease mainly refl ects the
¥173.8 billion decrease for the fi nancial services
operations and the ¥84.9 billion decrease of mar-
R&D Expenses
6
9
750
500
1,000
（¥ Billion）
（%）
12
expense.
keting
The decrease
in
the fi nancial ser-
vices operations
is primarily due to
the ¥140.0 billion
in pro-
decrease
vision
for credit
losses and net
charge-off s, which
is attributable to
the rise in the ra-
tio of credit losses
as a result of the
economic down-
turn mainly in the
United States
in
the prior fi scal year, partially off set by the impact
from the recalls and other safety measures. The
decrease in marketing expense is attributable to
reduced marketing costs realized as a result of
the profi t improvement initiatives.
% of sales of products
(Right scale)
250
ʼ10
70ʼ
80ʼ
60ʼ
ʼ09
FY
0
0
3
Operating Income and Loss
Changes in operating income and loss:
Eff ect of decrease in vehicle unit
sales and changes in sales mix
and other operational factors ·······
Eff ect of increase in parts sales ··········
Eff ect of fl uctuation in foreign
Yen in millions
2010 vs. 2009
change
¥ (370,000)
23,700
currency translation rates ················
(23,600)
Eff ect of decrease in research
and development expenses ··········
178,700
Eff ect of cost reduction eff orts,
decrease in fi xed costs and
other eff orts ············································
Total ················································································
799,727
¥ 608,527
Toyotaʼs operating income increased by ¥608.5
billion to an operating income of ¥147.5 billion
during fi scal 2010 compared with the prior year.
This operating income was favorably impacted
by the eff ects of a ¥799.7 billion cost reduction
eff orts, decrease in fi xed costs and other eff orts,
the ¥178.7 billion decrease in research and
development expenses, and the ¥23.7 billion
increase in parts sales, partially off set by the
¥380.0 billion decrease in vehicle unit sales and
the changes in sales mix. The cost reduction
eff orts, decrease in fi xed costs and other eff orts
are partially off set by the ¥105.7 billion increase
in costs resulting from a change in the estimation
model of expenses related to future recalls and
other safety measures.
During fi scal 2010, operating income (before the
elimination of intersegment profi ts), increased
by ¥475.6 billion in North America, increased by
¥27.5 billion, or 15.6%, in Asia, and increased by
¥27.9 billion, or 31.9% in Other compared with
the prior fi scal year. During fi scal 2010, operat-
ing loss (before the elimination of intersegment
profi ts) decreased by ¥12.3 billion in Japan and
decreased by ¥110.3 billion in Europe compared
with the prior fi s-
cal year.
Operating Income (Loss)
The following is a
discussion of oper-
ating income and
loss in each geo-
graphic market.
（¥ Billion）
2,500
（%）
20
2,000
1,500
1,000
500
0
-500
16
12
8
4
0
-4
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
% of net revenues (Right scale)
43
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
(cid:12255)Japan
Yen in millions
2010 vs. 2009
change
Changes in operating income and loss:
Eff ect of decrease in production
volume and vehicle unit sales in
the export markets and other
operational factors ································
Eff ect of cost reduction eff orts,
decrease in fi xed costs and other
eff orts ···························································
Total ·········································································
¥ (325,000)
337,289
¥ 12,289
The decrease in operating losses in Japan
was mainly due to the cost reduction eff orts,
decrease in fi xed costs and other eff orts in the
automotive operations segment, partially off set
by the ¥330.0 billion impact of decreases in
both production volume and vehicle unit sales
in the export markets. The decreases in both
production volume and vehicle unit sales in the
export markets are attributable to the diffi cult
market conditions particularly in North America
and Europe.
(cid:12255)North America
Changes in operating income and loss:
Eff ect of decrease in production
volume and vehicle unit sales
and other operational factors ·······
Eff ect of fl uctuation in foreign
Yen in millions
2010 vs. 2009
change
¥(30,000)
currency translation rates ················
(4,100)
Eff ect of cost reduction eff orts,
decrease in fi xed costs and other
eff orts ·························································
Total ·······································································
509,782
¥475,682
The increase in operating income in North
America was due mainly to the ¥200.0 billion
decreases in the provision for credit losses, net
charge-off s and provision for residual value
losses of sales fi nance subsidiaries in the United
States, which are included in “Eff ect of cost
reduction eff orts, decrease in fi xed costs and
other eff orts”, partially off set by the ¥40.0 billion
impact of decreases in both production volume
and vehicle unit sales and the ¥4.1 billion impact
of the fl uctuations in foreign currency translation
rates. The decreases in both production volume
and vehicle unit sales in North America are
attributable to the substantial decline in vehicle
unit sales of commercial vehicles and passenger
vehicles due to the downturn in the market in
the fi rst half of fi scal year 2010.
(cid:12255)Europe
Yen in millions
2010 vs. 2009
change
Changes in operating income and loss:
Eff ect of decrease in production
volume and vehicle unit sales
and other operational factors ······
Eff ect of fl uctuation in foreign
currency translation rates ···············
Eff ect of cost reduction eff orts,
decrease in fi xed costs and other
eff orts ························································
Total ······································································
¥(60,000)
4,900
165,378
¥110,278
The decrease in operating loss in Europe was
mainly due to the ¥155.3 billion impact of cost
reduction eff orts, decrease in fi xed costs and other
eff orts in the automotive operations segment
and the ¥4.9 billion impact of fl uctuations in
foreign currency translation rates, partially off set
by the ¥60.0 billion reduction of both production
volume and vehicle unit sales. The decreases in
both production volume and vehicle unit sales
in Europe was attributable to the decline in
vehicle unit sales in the overall European market
compared to the prior fi scal year despite sales
growth in some of the countries that benefi ted
from government stimulus packages.
(cid:12255)Asia
Changes in operating income and loss:
Eff ect of increase in production
volume and vehicle unit sales
and other operational factors ·······
Eff ect of fl uctuation in foreign
Yen in millions
2010 vs. 2009
change
¥20,000
currency translation rates ················
(16,200)
Eff ect of cost reduction eff orts,
decrease in fi xed costs and other
eff orts ·························································
Total ·······································································
23,667
¥27,467
The increase in operating income in Asia was
mainly due to the ¥20.0 billion impact of increase
in production volume and vehicle unit sales and
the ¥18.6 billion impact of cost reduction eff orts,
decrease in fi xed costs and other eff orts in the
automotive operations segment, partially off set
by the ¥16.2 billion impact of fl uctuation in
foreign currency translation rates. The increase in
production volume and vehicle unit sales in Asia
was primarily attributable to the recovery of Asian
automotive markets, particularly in Thailand and
Indonesia, benefi ting from the government
stimulus packages.
Other Income and Expenses
Interest and dividend income decreased by ¥60.2
billion, or 43.5%, to ¥78.2 billion during fi scal
2010 compared with the prior fi scal year mainly
due to a decrease in interest income refl ecting
decreases in market interest rates.
Interest expense decreased by ¥13.5 billion,
or 28.7%, to ¥33.4 billion during fi scal 2010
compared with the prior fi scal year.
Foreign exchange gains, net increased by ¥70.0
billion to ¥68.2 billion during fi scal 2010 compared
with the prior fi scal year. Foreign exchange gains
and losses include the diff erences between the
value of foreign currency denominated sales
translated at prevailing exchange rates and
the value of the sales amounts settled during
the year, including those settled using forward
foreign currency exchange contracts.
Other income, net increased by ¥220.0 billion
to ¥30.9 billion during fi scal 2010 compared with
the prior fi scal year. This increase was mainly
due to the recognition of impairment losses on
available-for sale securities in the prior fi scal year.
Income Taxes
The provision for income taxes increased by
¥149.1 billion to ¥92.6 billion during fi scal 2010
compared with the prior year primarily due to
the increase in income before income taxes. The
eff ective tax rate was 31.8%, which was lower
than the statutory tax rate in Japan. This was
primarily due to the increase in income before
income taxes of overseas subsidiaries whose
statutory tax rates were lower than the statutory
tax rate in Japan.
Net Income and Loss attributable to the
Noncontrolling Interest and Equity in Earnings
of Affi liated Companies
Net income attributable to the noncontrolling
interest increased by ¥59.0 billion to ¥34.8 billion
during fi scal 2010 compared with the prior year.
This increase was mainly due to an increase in
net income attributable to the shareholders of
consolidated subsidiaries.
Equity
in earnings of affi liated companies
TOYOTA ANNUAL REPORT 2010
44
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
during fi scal 2010 increased by ¥2.7 billion, or
6.3%, to ¥45.4 billion compared with the prior
fi scal year. This increase was due to an increase
in net income attributable to the shareholders of
affi liated companies.
2010 compared with losses of ¥381.3 billion in
the prior fi scal year. The increase in unrealized
holding gains on securities was mainly due to the
recognition of impairment losses on available-for
sale securities in the prior fi scal year.
Net Income and Loss attributable to Toyota
Motor Corporation
Net
income attributable to Toyota Motor
Corporation increased by ¥646.4 billion to ¥209.4
billion during fi scal 2010 compared with the
prior fi scal year.
income
Other Comprehensive Income and Loss
Other comprehensive
increased by
¥1,127.4 billion to ¥260.9 billion for fi scal 2010
compared with the prior fi scal year. This increase
resulted primarily from unrealized holding gains
on securities in fi scal 2010 of ¥176.4 billion
compared with losses of ¥293.1 billion in the prior
fi scal year, and from favorable foreign currency
translation adjustments of ¥9.8 billion in fi scal
Net Income (Loss),
and ROE
（¥ Billoin）
2,000
（%）
20
1,500
1,000
500
0
-500
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
ROE (Right scale)
15
10
5
0
-5
Segment Information
The following is a discussion of results of operations for each of Toyotaʼs operating segments. The amounts
presented are prior to intersegment elimination.
Yen in millions
Year ended March 31,
2010 vs. 2009 change
2009
2010
Amount
Percentage
Automotive:
Financial Services:
All Other:
Intersegment
elimination/unallocated
amount:
Net revenues ·························· ¥ 18,564,723
¥ 17,197,428
¥ (1,367,295)
‒7.4%
Operating income (loss) ···
(394,876)
(86,370)
308,506
‒
Net revenues ·························· ¥ 1,377,548
¥ 1,245,407
¥
(132,141)
‒9.6%
Operating income (loss) ···
(71,947)
246,927
318,874
‒
Net revenues ·························· ¥ 1,184,947
¥
947,615
¥
(237,332)
‒20.0%
Operating income (loss) ···
9,913
(8,860)
(18,773)
Net revenues ·························· ¥
(597,648) ¥
(439,477)
¥ 158,171
Operating income (loss) ···
(4,101)
(4,181)
(80)
‒
‒
‒
(cid:12255)Automotive Operations Segment
The automotive operations segment is Toyotaʼs
largest operating segment by net revenues. Net
revenues for the automotive segment decreased
during fi scal 2010 by ¥1,367.3 billion, or 7.4%,
compared with the prior year to ¥17,197.4 billion.
The decrease was primarily due to fl uctuations
in foreign currency translation rates of ¥886.5
billion and decreased vehicle unit sales and the
changes in sales mix of approximately ¥570.0
billion, partially off set by increased parts sales of
¥34.9 billion.
Operating loss from the automotive operations
decreased by ¥308.5 billion during fi scal 2010
compared with the prior year to an operating
loss of ¥86.3 billion. This decrease in operating
loss was primarily due to cost reduction eff orts,
decrease in fi xed costs of ¥990.0 billion, and
increase in parts sales, partially off set by a ¥380.0
billion decrease in vehicle unit sales and changes
in sales mix.
The decrease
in vehicle unit sales and
changes in sales mix was due primarily to a
decrease in vehicle unit sales which resulted
from the generally diffi cult market conditions
in the automotive industry during fi scal 2010.
The decrease in fi xed costs was due mainly
to the decline in labor costs and research and
development expenses as a result of profi t
improvement initiatives, partially off set by ¥105.7
billion increase in costs resulting from a change
in the estimation model of expenses related to
future recalls and other safety measures.
(cid:12255)Financial Services Operations Segment
Net revenues for the fi nancial services operations
decreased during fi scal 2010 by ¥132.1 billion,
or 9.6%, compared to the prior year to ¥1,245.4
billion. This decrease was primarily due to the
unfavorable impact of fl uctuations in foreign
currency translation
rates of ¥93.3 billion.
Eliminating the diff erence in the Japanese yen
value used for translation purposes, net revenues
for its fi nancial services operations would have
been approximately ¥1,338.7 billion during
fi scal 2010, a 2.8% decrease compared with the
prior fi scal year. The decrease in net revenues
eliminating the diff erence in the Japanese yen
value used for translation purposes resulted
primarily from a decrease in rental income from
vehicles and equipment on operating leases.
income
Operating
from fi nancial services
operations increased by ¥318.9 billion to ¥246.9
billion during fi scal 2010 compared with the
prior year. This increase was primarily due to the
¥140.0 billion decrease in provision for credit
losses, net charge-off s, the ¥64.5 billion of the
recognition of valuation gains on interest rate
swaps stated at fair value, and the ¥50.0 billion
decrease in provision for residual value losses.
The decrease in provision for credit losses,
net charge-off s is primarily attributable to the
increase in provision for credit losses and net
charge-off s in the United States primarily due to
the rise in the ratio of credit losses as a result of
the economic downturn in the prior fi scal year,
partially off set by the impact from the recalls and
other safety measures. The decrease in provision
for residual value losses is primarily attributable to
the recovery in the used vehicle market, partially
off set by the impact from the recalls and other
safety measures.
TOYOTA ANNUAL REPORT 2010
45
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Ratio of credit loss experience in the United States is as follows:
Results of Operations ̶ Fiscal 2009 Compared with Fiscal 2008
Net charge-off s as a percentage of average gross earning assets:
Finance receivables ···············································································································
Operating lease ·······················································································································
Total ····················································································································································
1.54%
0.86%
1.37%
1.15%
0.63%
1.03%
Year ended March 31,
2009
2010
(cid:12255)All Other Operations Segment
Net revenues for Toyotaʼs other operations
segment decreased by ¥237.3 billion, or 20.0%,
to ¥947.6 billion during fi scal 2010 compared
with the prior year.
income
Operating
from Toyotaʼs other
operations segment decreased by ¥18.8 billion,
to operating loss of ¥8.9 billion during fi scal 2010
compared with the prior year.
Yen in millions
Year ended March 31,
2009
2008
2009 vs. 2008 change
Amount
Percentage
Net revenues:
Japan ············································································· ¥15,315,812
9,423,258
North America ··························································
3,993,434
Europe ··········································································
3,120,826
Asia ·················································································
2,294,137
Other* ···········································································
Intersegment elimination/
unallocated amount ·············································
(7,858,227)
¥12,186,737
6,222,914
3,013,128
2,719,329
1,882,900
¥(3,129,075)
(3,200,344)
(980,306)
(401,497)
(411,237)
(5,495,438)
2,362,789
‒20.4%
‒34.0%
‒24.5%
‒12.9%
‒17.9%
−
Total ·········································································· ¥26,289,240
¥20,529,570
¥(5,759,670)
‒21.9%
Operating income (loss):
Japan ·············································································
North America ··························································
Europe ··········································································
Asia ·················································································
Other* ···········································································
Intersegment elimination/
unallocated amount ·············································
Total ··········································································
Operating margin ····························································
Income (loss) before income taxes, minority
interest and equity in earnings of affi liated
companies··································································
Net margin from Income (loss) before income
taxes, minority interest and equity in earnings
of affi liated companies ············································
Equity in earnings of affi liated companies ········
Net income (loss) ······························································
Net margin ···········································································
¥1,440,286
305,352
141,571
256,356
143,978
¥(237,531)
(390,192)
(143,233)
176,060
87,648
¥(1,677,817)
(695,544)
(284,804)
(80,296)
(56,330)
(17,168)
46,237
63,405
¥2,270,375
8.6%
¥(461,011)
‒2.2%
¥(2,731,386)
‒10.8%
2,437,222
(560,381)
(2,997,603)
9.3%
270,114
1,717,879
6.5%
‒2.7%
42,724
(436,937)
‒2.1%
‒12.0%
(227,390)
(2,154,816)
‒8.6%
* “Other” consists of Central and South America, Oceania and Africa.
−
−
−
‒31.3%
‒39.1%
−
−
−
−
‒84.2%
−
Net Revenues
Toyota had net revenues for fi scal 2009 of
¥20,529.5 billion, a decrease of ¥5,759.7 billion,
or 21.9%, compared with the prior year. This
impact of
decrease principally refl ects the
decreased vehicle unit sales and changes in sales
mix of ¥3,400.0 billion, the unfavorable impact of
fl uctuations in foreign currency translation rates
of ¥2,031.2 billion, and decreased parts sales of
¥128.6 billion during fi scal 2009. Eliminating the
diff erence in the Japanese yen value used for
translation purposes, net revenues would have
been approximately ¥22,560.7 billion during
fi scal 2009, a 14.2% decrease compared with the
prior fi scal year. As a result of the downturn in
the global economy stemming from the fi nancial
crisis since the fall of 2008, the automotive
market contracted by 15.6% in Japan compared
to the prior fi scal year, and by 15.8% in North
America and 8.2% in Europe compared to the
TOYOTA ANNUAL REPORT 2010
46
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Business Overview
Corporate Information
Financial Section
Investor Information
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
prior calendar year, respectively. Aff ected by this
downturn, Toyotaʼs vehicle unit sales decreased
to 7,567 thousand vehicles, or by 15.1%,
compared to the prior fi scal year. The decrease in
net revenues was also due to the eff ect of foreign
currency exchange rate fl uctuations and changes
in the market demand resulting from a shift in
consumer preference towards small vehicles and
low-price vehicles.
Toyotaʼs net revenues by product category in each business to external customer is as follows:
Yen in millions
Year ended March 31,
2009 vs. 2008 change
2008
2009
Amount
Percentage
¥20,723,588
¥15,635,490
¥(5,088,098)
‒24.6%
Vehicles ·······································································
Parts and components for
overseas production ·······································
Parts and components for after service ····
Other ············································································
342,244
1,785,684
1,308,738
298,176
1,575,316
1,041,519
(44,068)
(210,368)
(267,219)
Total Automotive ··········································
24,160,254
18,550,501
(5,609,753)
All Other ·····································································
660,256
623,219
(37,037)
Total sales of products ········································
24,820,510
19,173,720
(5,646,790)
Financial services ···················································
1,468,730
1,355,850
(112,880)
Total ·····································································
¥26,289,240
¥20,529,570
¥(5,759,670)
‒12.9%
‒11.8%
‒20.4%
‒23.2%
‒5.6%
‒22.8%
‒7.7%
‒21.9%
Number of fi nancing contracts by geographic region (at the end of the fi scal year 2008 and 2009) is as
follows:
Number of fi nancing contracts in thousands
Year ended March 31,
2009 vs. 2008 change
Japan ·······································································
North America ···················································
Europe ····································································
Asia ···········································································
Other* ·····································································
2008
1,614
4,241
709
357
413
Total ··································································
7,334
* “Other” consists of Central and South America, Oceania and Africa.
2009
1,660
4,403
748
387
440
7,638
Amount
Percentage
46
162
39
30
27
304
＋2.9%
＋3.8%
＋5.5%
＋8.4%
＋6.5%
＋4.1%
revenues
Geographically, net
(before the
elimination of intersegment revenues) for fi scal
2009 decreased by 20.4% in Japan, 34.0% in
North America, 24.5% in Europe, 12.9% in Asia
and 17.9% in Other compared with the prior fi scal
year. Eliminating the diff erence in the Japanese
yen value used for translation purposes, net
revenues in fi scal 2009 would have decreased by
20.4% in Japan, 25.0% in North America, 14.1% in
Europe, 1.1% in Other and 0.5% in Asia compared
with the prior fi scal year.
The following is a discussion of net revenues in
each geographic market (before the elimination
of intersegment revenues).
Toyotaʼs net revenues include net revenues from
sales of products, consisting of net revenues
from automotive operations and all other
operations, which decreased by 22.8% during
fi scal 2009 compared with the prior fi scal year
to ¥19,173.7 billion, and net revenues from
fi nancial services operations, which decreased
by 7.7% during fi scal 2009 compared with the
prior fi scal year to ¥1,355.8 billion. Eliminating
the diff erence in the Japanese yen value used
for translation purposes, net revenues from sales
of products would have been approximately
¥21,011.3 billion, a 15.3% decrease during fi scal
2009 compared with the prior fi scal year. The
decrease in net revenues from sales of products is
primarily attributable to a substantial contraction
of the automotive market caused by a rapid
deterioration of the world economy following
the fi nancial crisis since the fall of 2008, as well as
changes in market demand resulting from a shift
in consumer preference towards small vehicles
and low-price vehicles. Eliminating the diff erence
in the Japanese yen value used for translation
purposes, net revenues from fi nancial services
operations would have been approximately
¥1,549.4 billion, a 5.5% increase during fi scal 2009
compared with the prior year. The increase in net
revenues from fi nancial services operations is
primarily attributable to the increase in volume
of fi nancings as a result of an increase in market
share primarily of the fi nance subsidiary in North
America.
(cid:12255)Japan
Toyotaʼs consolidated vehicle unit sales ·
Thousands of units
Year ended March 31,
2009 vs. 2008 change
2008
2,188
2009
1,945
Amount
Percentage
(243)
‒11.1%
Yen in millions
Year ended March 31,
2009 vs. 2008 change
2008
2009
Amount
Percentage
Net revenues:
Sales of products ······································
¥15,183,262
¥12,067,494
¥(3,115,768)
Financial services ·····································
132,550
119,243
(13,307)
Total ·························································
¥15,315,812
¥12,186,737
¥(3,129,075)
‒20.5%
‒10.0%
‒20.4%
TOYOTA ANNUAL REPORT 2010
47
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
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Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Although Toyota enjoyed strong sales of new car models such as the Alphard and the Vellfi re amid the
downturn in the real economy and increased domestic competition, net revenues in Japan decreased
primarily due to lower vehicle unit sales compared to the prior fi scal year as a result of diffi cult market
conditions. Net revenues in Japan decreased also due to shift in consumer preference towards compact
and subcompact cars infl uenced by decreased consumer spending and heightened environmental
awareness.
(cid:12255)Europe
Toyotaʼs consolidated vehicle unit sales ·
(cid:12255)North America
Toyotaʼs consolidated vehicle unit sales ·
Thousands of units
Net revenues:
Year ended March 31,
2009 vs. 2008 change
2008
2,958
2009
2,212
Amount
Percentage
(746)
‒25.2%
Yen in millions
Year ended March 31,
2009 vs. 2008 change
2008
2009
Amount
Percentage
Net revenues:
Sales of products ······································
¥8,339,887
¥5,226,426
¥(3,113,461)
Financial services ·····································
1,083,371
996,488
(86,883)
Total ·························································
¥9,423,258
¥6,222,914
¥(3,200,344)
‒37.3%
‒8.0%
‒34.0%
Net revenues in North America decreased primarily due to the substantial decrease in vehicle unit sales
as a result of the downturn in the market stemming from the fi nancial crisis since the fall of 2008. In
particular, the decline in vehicle unit sales is attributable to the decline in vehicle unit sales of commercial
vehicles as a result of the surge in prices of crude oil in the fi rst half of fi scal 2009, a shift in consumer
preference towards small vehicles and fuel-effi cient vehicles, and a rapid decline in vehicle unit sales of
passenger vehicles as a result of the fi nancial crisis in the second half of fi scal 2009. Although net revenues
from fi nancing operations decreased, net revenues from fi nancing operations increased by ¥54.3 billion
excluding the ¥141.1 billion impact of fl uctuation in foreign currency exchange rate, which is attributable
to the increase in the volume of fi nancings as a result of an increase in market share primarily of the
fi nance subsidiary in North America.
Thousands of units
Year ended March 31,
2009 vs. 2008 change
2008
1,284
2009
1,062
Amount
Percentage
(222)
‒17.3%
Yen in millions
Year ended March 31,
2009 vs. 2008 change
2008
2009
Amount
Percentage
Sales of products ······································
¥3,878,677
¥2,911,234
¥(967,443)
Financial services ·····································
114,757
101,894
(12,863)
Total ·························································
¥3,993,434
¥3,013,128
¥(980,306)
‒24.9%
‒11.2%
‒24.5%
Although Toyota enjoyed strong sales of compact cars and environmentally-friendly cars such as the
Aygo and the Prius, net revenues in Europe decreased due to lower vehicle unit sales compared to the
prior fi scal year. The decrease in net revenues was also due to the fi scal year falling between periods of
full model changes.
(cid:12255)Asia
Toyotaʼs consolidated vehicle unit sales ·
Thousands of units
Year ended March 31,
2009 vs. 2008 change
2008
956
2009
905
Amount
Percentage
(51)
‒5.4%
Yen in millions
Year ended March 31,
2009 vs. 2008 change
2008
2009
Amount
Percentage
Net revenues:
Sales of products ······································
¥3,082,832
¥2,676,939
¥(405,893)
Financial services ·····································
37,994
42,390
4,396
Total ·························································
¥3,120,826
¥2,719,329
¥(401,497)
‒13.2%
+11.6%
‒12.9%
Although the sales of models such as the Avanza and the Innova increased, net revenues in Asia decreased
due to a decrease in vehicle unit sales compared to the prior fi scal year as a result of the deterioration of
the world economy stemming from the subprime mortgage crisis in the fall of 2008.
TOYOTA ANNUAL REPORT 2010
48
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Performance Highlights
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Corporate Information
Financial Section
Investor Information
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
(cid:12255)Other
Toyotaʼs consolidated vehicle unit sales ·
Thousands of units
Year ended March 31,
2009 vs. 2008 change
2008
1,527
2009
1,443
Amount
Percentage
(84)
‒5.5%
Yen in millions
Year ended March 31,
2009 vs. 2008 change
2008
2009
Amount
Percentage
Net revenues:
Sales of products ·········································
¥2,186,817
¥1,779,089
¥(407,728)
Financial services ·········································
107,320
103,811
(3,509)
Total ·······························································
¥2,294,137
¥1,882,900
¥(411,237)
‒18.6%
‒3.3%
‒17.9%
Net revenues in Other decreased due to the decrease in vehicle unit sales compared to the prior fi scal
year as a result of a downturn in the markets.
Operating Costs and Expenses
Yen in millions
Year ended March 31,
2009 vs. 2008 change
2008
2009
Amount
Percentage
Operating costs and expenses
Cost of products sold
¥20,452,338
¥17,468,416
¥(2,983,922)
Cost of fi nancing operations
1,068,015
987,384
(80,631)
Selling, general and
administrative expenses ·····················
Total ··························································
2,498,512
¥24,018,865
2,534,781
¥20,990,581
36,269
¥(3,028,284)
‒14.6%
‒7.5%
+1.5%
‒12.6%
Yen in millions
2009 vs. 2008 change
Changes in operating costs and expenses:
Eff ect of decrease in vehicle unit sales and changes in sales mix ·································
¥(2,100,000)
Eff ect of fl uctuation in foreign currency translation rates ·················································
(2,062,100)
Eff ect of decrease in parts sales ·······································································································
Eff ect of decrease in research and development expenses ············································
Eff ect of increase in cost reduction, expenses and other eff ects ··································
(64,400)
(54,800)
1,253,016
Total ···························································································································································
¥(3,028,284)
translation rates, the impact of the decrease
in parts sales, and the decrease in research
and development expenses, partially off set by
increases in expenses. The impact of decrease
in vehicle unit sales and the changes in sales
mix refl ected such factors as the substantial
contraction of the automotive market caused
by a rapid deterioration of the world economy
following the fi nancial crisis since the fall of
2008, as well as changes in the market structure
resulting from a shift in consumer preference
towards small vehicles and low-price vehicles.
The decrease in research and development
expenses is attributable to reduced development
costs realized as a result of eff orts to improve
earnings by improving development effi ciency.
This decrease in research and development
expenses was achieved while maintaining a
focus on the development of environmentally
conscious technologies including hybrid and
fuel-cell technology, and the developments in
advanced technologies relating to collision
safety and vehicle stability controls to further
build up competitive strength in the future. The
is attributable to the
increase
ineffi ciency from decreased operational activity,
increase in inventory reserve for the lower of cost
or market, and the incurrence of product-quality
related expenses in the fi rst half of fi scal 2009.
in expenses
Operating costs and expenses decreased by
¥3,028.3 billion, or 12.6%, to ¥20,990.5 billion
during fi scal 2009 compared with the prior fi scal
year. This decrease resulted primarily from the
approximate ¥2,100 billion impact on costs of
products attributable to the decrease in vehicle
unit sales and the changes in sales mix, the
¥2,062.1 billion impact of fl uctuations in foreign
currency translation rates, ¥64.4 billion decreased
costs corresponding to the decrease in parts
sales, and the ¥54.8 billion decrease in research
and development expenses, partially off set by
the ¥1,253.0 billion increase in cost reduction,
expenses and other eff ects.
(cid:12255) Cost Reduction Eff orts
Cost reduction eff orts were off set by increases in
the prices of steel, precious metals, non-ferrous
alloys including aluminum, plastic parts and
other production materials and parts. Although
the prices of raw materials such as steel remained
high through fi scal 2009 as a result of market
conditions, cost reduction eff orts, by working
closely with suppliers, absorbed the impact of
the market price increase. These cost reduction
eff orts related to ongoing value engineering and
value analysis activities, the use of common parts
that result in a reduction of part types and other
manufacturing initiatives designed to reduce the
costs of vehicle production.
(cid:12255)Cost of Products Sold
Cost of products sold decreased by ¥2,984.0
billion, or 14.6%, to ¥17,468.4 billion during fi scal
2009 compared with the prior fi scal year. The
decrease in cost of products sold for automotive
operations is primarily attributed to the decrease
in vehicle unit sales and the changes in sales mix,
the impact of fl uctuations in foreign currency
TOYOTA ANNUAL REPORT 2010
49
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
(cid:12255)Cost of Financing Operations
Yen in millions
2009 vs. 2008
change
Changes in cost of fi nancing operations:
Eff ect of fl uctuation in foreign
currency translation rates ··················
¥ (206,400)
Eff ect of increase in provision for
residual value losses ·····························
Eff ect of increase in valuation losses on
interest rate swaps stated at fair value ·
Other ··································································
Total ·········································································
70,000
12,200
43,569
¥ (80,631)
Cost of fi nancing operations decreased by ¥80.6
billion, or 7.5%, to ¥987.4 billion during fi scal 2009
compared with the prior fi scal year. The decrease
resulted primarily from the ¥206.4 billion impact
of fl uctuations
in foreign currency translation
rates, partially off set by the ¥70.0 billion increase
in provision for residual value losses and the ¥12.2
billion increase in valuation losses on interest rate
swaps stated at fair value. The increase in provision
for residual value losses is primarily attributable to
the increase in provision for residual value losses
of operating lease vehicles resulting from the
decrease in the prices of used vehicles, particularly
of large vehicles with low fuel economy due to
the economic downturn. The increase in valuation
losses on interest rate swaps stated at fair value is
attributable to the valuation losses on fl oating to
fi xed interest rate swaps that are not designated as
hedges due to the decline in market interest rates.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
increased by ¥36.2 billion, or 1.5%, to ¥2,534.7
billion during fi scal 2009 compared with the
prior fi scal year. This increase mainly refl ects
the ¥119.4 billion increase for the fi nancial
services operations, partially off set by the ¥95.2
billion decrease of marketing expense which is
attributable to reduced marketing costs realized
as a result of eff orts to improve earnings. The
increase in the fi nancial services operations is
primarily due to the ¥170.0 billion increase in
provision for credit losses and net charge-off s,
which is attributable to the rise in the ratio of
credit losses as a result of the economic downturn
mainly in the United States.
Operating Income and Loss
Yen in millions
2009 vs. 2008
change
Changes in operating income and loss:
Eff ect of decrease in vehicle unit sales and
changes in sales mix and other
operational factors ············································· ¥ (1,480,000)
(17,300)
Eff ect of decrease in parts sales ···················
Eff ect of fl uctuation in foreign currency
translation rates ······································
Eff ect of decrease in research and
development expenses ······················
Eff ect of increase in cost reduction,
30,900
54,800
expenses and other eff ects ··············
(1,319,786)
Total ········································································· ¥ (2,731,386)
Toyotaʼs operating income decreased by ¥2,731.3
billion to an operating loss of ¥461.0 billion during
fi scal 2009 compared with the prior fi scal year. This
decrease was unfavorably aff ected by the ¥1,300.0
billion decrease in vehicle unit sales and the
changes in sales mix, the ¥1,319.7 billion increase
in cost reduction, expenses and other eff ects, and
the ¥17.3 billion decrease in parts sales, partially
off set by the ¥54.8 billion decrease in research and
development expenses.
During fi scal 2009, operating income (before the
elimination of intersegment profi ts) for signifi cant
geographic regions decreased by ¥1,677.8 billion
in Japan, decreased by ¥695.5 billion in North
America, decreased by ¥284.8 billion in Europe,
decreased by ¥80.3 billion, or 31.3%, in Asia, and
decreased by ¥56.3 billion, or 39.1% in Other
compared with the prior fi scal year.
The following is a discussion of operating
income and loss in each geographic market.
(cid:12255)Japan
Yen in millions
2009 vs. 2008
change
Changes in operating income and loss:
Eff ect of decrease in production
volume and vehicle unit sales
in the export markets and
other operational factors ·················· ¥
(730,000)
Eff ect of increase in cost reduction,
expenses and other eff ects ·············
(947,817)
Total ········································································ ¥ (1,677,817)
impact of decreases
The decrease in Japan was mainly due to the
¥700.0 billion
in both
production volume and vehicle unit sales in the
export markets, partially off set by the decrease
in research and development expenses. The
decreases in both production volume and vehicle
unit sales in the export markets are attributable
to the diffi cult market conditions caused by the
downturn in the real economy.
(cid:12255)North America
Yen in millions
2009 vs. 2008
change
Changes in operating income and loss:
Eff ect of decrease in production volume
and vehicle unit sales and other
operational factors ·······································
Eff ect of fl uctuation in foreign
currency translation rates ·················
Eff ect of increase in cost reduction,
expenses and other eff ects ·············
Total ········································································
¥(580,000)
52,700
(168,244)
¥(695,544)
The decrease in North America was mainly due
to the ¥400.0 billion impact of decreases in
both production volume and vehicle unit sales,
the increases in the provision for credit losses,
net charge-off s and provision for residual value
losses in sales fi nance subsidiaries in the United
States, which are included in “Eff ect of increase
in cost reduction, expenses and other eff ects”,
partially off set by the ¥52.7 billion impact of
the fl uctuations in foreign currency translation
rates. The decreases in both production volume
and vehicle unit sales in North America are
attributable to the rapid decline in vehicle unit
sales of commercial vehicles and passenger
vehicles due to the downturn in the market
stemming from the fi nancial crisis in the fall of
2008.
(cid:12255)Europe
Yen in millions
2009 vs. 2008
change
Changes in operating income and loss:
Eff ect of decrease in production
volume and vehicle unit sales and
other operational factors ···················
¥(190,000)
Eff ect of fl uctuation in foreign
currency translation rates ·················
Eff ect of increase in cost reduction,
expenses and other eff ects ··············
Total ·········································································
18,100
(112,904)
¥(284,804)
The decrease in Europe was mainly due to
the ¥180.0 billion impact of decreases in both
production volume and vehicle unit sales,
partially off set by the ¥18.1 billion impact of
fl uctuations in foreign currency translation rates.
The decreases in both production volume and
vehicle unit sales in Europe was attributable
to the signifi cant decline in vehicle unit sales
in western Europe compared to the prior fi scal
year as a result of the rapid market contraction
due to the fi nancial crisis in the fall of 2008. The
decreases are also attributable to the fi scal year
TOYOTA ANNUAL REPORT 2010
50
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Corporate Information
Financial Section
Investor Information
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
falling between periods of full model changes.
(cid:12255)Asia
Yen in millions
2009 vs. 2008
change
Changes in operating income and loss:
Eff ect of decrease in production volume
and vehicle unit sales and other
operational factors ········································
Eff ect of fl uctuation in foreign
currency translation rates ·················
Eff ect of increase in cost reduction,
expenses and other eff ects ·············
Total ········································································
¥
‒
(24,400)
(55,896)
¥ (80,296)
The decrease in Asia was mainly due to the
¥24.4 billion impact of the fl uctuations in foreign
currency translation rates. The decrease in
production volume and vehicle unit sales in Asia
was primarily attributable to the sales decline
in the market compared to the prior fi scal year
following the fi nancial crisis in the majority of
Asian countries including Thailand.
(cid:12255)Other
The decrease in Other was primarily due to the
decrease in vehicle unit sales.
Other Income and Expenses
Interest and dividend income decreased by
¥27.3 billion, or 16.4%, to ¥138.4 billion during
fi scal 2009 compared with the prior fi scal year
mainly due to a decrease in interest income from
marketable securities.
Interest expense increased by ¥0.8 billion, or
1.7%, to ¥46.9 billion during fi scal 2009 compared
with the prior fi scal year.
Foreign exchange gains, net decreased by
¥11.0 billion to a loss of ¥1.8 billion during
fi scal 2009 compared with the prior fi scal year.
include
Foreign exchange gains and
losses
the diff erences between the value of foreign
currency denominated sales
translated at
prevailing exchange rates and the value of the
sales amounts settled during the fi scal year,
including those settled using forward foreign
currency exchange contracts.
Other income, net decreased by ¥227.2 billion
to a loss of ¥189.1 billion during fi scal 2009
compared with the prior fi scal year. This decrease
was mainly due to the recognition of impairment
losses on available-for sale securities.
Income Taxes
The provision for income taxes decreased by
¥968.0 billion to a tax benefi t of ¥56.5 billion
during fi scal 2009 compared with the prior fi scal
year primarily due to the decrease in income
before income taxes. The eff ective tax rate was
10.1%, which was lower than its statutory tax
rate in Japan primarily due to a recognition of
valuation allowance for deferred tax assets at
domestic and overseas subsidiaries.
Net Income and Loss attributable to the
Noncontrolling Interest and Equity in Earnings
of Affi liated Companies
loss attributable to the
Net
income and
interest decreased by ¥102.2
noncontrolling
billion to a loss of ¥24.2 billion during fi scal 2009
compared with the prior fi scal year. This decrease
was mainly due to a decrease in net income
attributable to the shareholders of consolidated
subsidiaries.
Equity
in earnings of affi liated companies
during fi scal 2009 decreased by ¥227.4 billion, or
84.2%, to ¥42.7 billion compared with the prior
fi scal year. This decrease was due to a decrease
in net income attributable to the shareholders of
affi liated companies.
Net Income and Loss attributable to Toyota
Motor Corporation
Net
income attributable to Toyota Motor
Corporation decreased by ¥2,154.8 billion to a
loss of ¥437.0 billion during fi scal 2009 compared
with the prior fi scal year.
Other Comprehensive Income and Loss
Other comprehensive losses decreased by ¥76.0
billion to losses of ¥866.5 billion for fi scal 2009
compared with the prior fi scal year. This decrease
from
losses resulted primarily
favorable
in
foreign currency translation adjustments in fi scal
2009 to losses of ¥381.3 billion compared with
losses of ¥461.1 billion in the prior fi scal year,
and a decrease in unrealized holding losses
on securities in fi scal 2009 to ¥293.1 billion
compared with ¥347.8 billion in the prior fi scal
year. The decrease in unrealized holding losses
on securities was mainly due to the recognition of
impairment losses on available-for sale securities.
Segment Information
The following is a discussion of results of operations for each of Toyotaʼs operating segments. The amounts
presented are prior to intersegment elimination.
Yen in millions
Year ended March 31,
2009 vs. 2008 change
2008
2009
Amount
Percentage
Automotive:
Financial Services:
All Other:
Intersegment
elimination/unallocated
amount:
Net revenues ························· ¥ 24,177,306
¥ 18,564,723
¥ (5,612,583)
‒23.2%
Operating income (loss) ··
2,171,905
(394,876)
(2,566,781)
‒
Net revenues ························· ¥ 1,498,354
¥ 1,377,548
¥ (120,806)
‒8.1%
Operating income (loss) ··
86,494
(71,947)
(158,441)
Net revenues ························· ¥ 1,346,955
¥ 1,184,947
¥ (162,008)
Operating income (loss) ··
33,080
9,913
(23,167)
Net revenues ························· ¥
(733,375) ¥
(597,648)
¥ 135,727
Operating income (loss) ··
(21,104)
(4,101)
17,003
‒
‒12.0%
‒70.0%
‒
‒
(cid:12255)Automotive Operations Segment
The automotive operations segment is Toyotaʼs
largest operating segment by net revenues. Net
revenues for the automotive segment decreased
during fi scal 2009 by ¥5,612.6 billion, or 23.2%,
compared with the prior fi scal year to ¥18,564.7
billion. The decrease was primarily due to
decreased vehicle unit sales and the changes
in sales mix of approximately ¥3,400.0 billion,
fl uctuations in foreign currency translation rates
of ¥1,833.8 billion and decreased parts sales
during fi scal 2009.
from
income
Operating
the automotive
operations decreased by ¥2,566.7 billion during
fi scal 2009 compared with the prior year to an
operating loss of ¥394.8 billion. This decrease
TOYOTA ANNUAL REPORT 2010
51
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
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Investor Information
in market share primarily of the fi nance subsidiary
in North America.
Ratio of credit loss experience in the United States is as follows:
Net charge-off s as a percentage of average gross earning assets:
Finance receivables ···································································································
Operating lease ···········································································································
Total
Year ended March 31,
2008
1.08%
0.40%
0.91%
2009
1.54%
0.86%
1.37%
(cid:12255)All Other Operations Segment
Net revenues for Toyotaʼs other operations
segment decreased by ¥162.0 billion, or 12.0%,
to ¥1,184.9 billion during fi scal 2009 compared
with the prior fi scal year.
income
Operating
from Toyotaʼs other
operations segment decreased by ¥23.1 billion,
or 70.0%, to ¥9.9 billion during fi scal 2009
compared with the prior fi scal year.
income
Operating
from fi nancial services
operations decreased by ¥158.5 billion to an
operating loss of ¥72.0 billion during fi scal 2009
compared with the prior fi scal year. This decrease
was primarily due to the ¥170.0 billion increase
in provision for credit losses, net charge-off s and
the ¥70.0 billion increase in provision for residual
value losses, and the ¥12.2 billion increase in
valuation losses on interest rate swaps stated at
fair value in sales fi nance subsidiaries primarily in
the United States.
The increase in provision for credit losses,
net charge-off s is primarily attributable to the
increase in provision for credit losses and net
charge-off s in the United States due to the rise
in the ratio of credit losses as a result of the
economic downturn.
The increase in provision for residual value
losses is primarily attributable to the decrease in
the prices of used vehicles, particularly of large
vehicles with low fuel economy, as a result of the
economic downturn. The increase in valuation
losses on interest rate swaps stated at fair value is
attributable to the valuation losses on fl oating to
fi xed interest rate swaps that are not designated
as hedges due to the decline in market interest
rates.
was primarily due to the decrease in vehicle unit
sales and changes in sales mix of ¥1,300.0 billion,
the increase in expenses of ¥491.3 billion, and
the decrease in parts sales, partially off set by the
decrease in research and development expenses.
The decrease in vehicle unit sales and changes
in sales mix refl ected such factors as a substantial
contraction of the automotive market caused
by a rapid deterioration of the world economy
following the fi nancial crisis since the fall of
2008, as well as changes in the market structure
resulting from a shift in consumer preference
towards small vehicles and low-price vehicles.
The increase in expenses is attributable to the
ineffi ciency from decreased operational activity,
increase in inventory reserve for the lower of cost
or market, and the incurrence of product-quality
related expenses in the fi rst half of fi scal 2009.
(cid:12255)Financial Services Operations Segment
Net revenues for the fi nancial services operations
decreased during fi scal 2009 by ¥120.8 billion,
or 8.1%, compared to the prior fi scal year to
¥1,377.5 billion. This decrease was primarily
due to the unfavorable impact of fl uctuations
in foreign currency translation rates of ¥195.0
billion, which was partially off set by a higher
volume of fi nancing of ¥95.0 billion. Eliminating
the diff erence in the Japanese yen value used
for translation purposes, net revenues for its
fi nancial services operations would have been
approximately ¥1,572.5 billion during fi scal 2009,
a 5.0% increase compared with the prior fi scal
year. The increase in net revenues from fi nancial
services operations, eliminating the diff erence
in the Japanese yen value used for translation
purposes, is primarily attributable to the increase
in volume of fi nancings as a result of an increase
TOYOTA ANNUAL REPORT 2010
52
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
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Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Outlook
While Toyota expects that an economic recovery
trend in China will prevail across the Asian
markets and developed countries will see a
gradual economic recovery in fi scal 2011, Toyota
also believes there is a risk of a downturn in the
world economy during fi scal 2011 resulting
from credit contraction in fi nancial markets,
unemployment, increases in raw material prices,
and other factors.
to
Toyota expects the automotive market to
long-term
the medium-
expand over
particularly
resource-rich and emerging
in
countries. Currently, the global competition in
the automotive market has intensifi ed, as shown
in the fi erce competition in the small and low-
price vehicles markets, and the advancement of
introduction of new
new technologies and
products in response to growing environmental
awareness. For purposes of
this outlook
is assuming an average
discussion, Toyota
exchange rate of ¥90 to the U.S. dollar and ¥125
to the euro. With the foregoing external factors
in mind, Toyota expects that net revenues for
fi scal 2011 will increase compared with fi scal
2010 as a result of an increase in vehicle unit
sales. With respect to operating income, factors
increasing operating
include cost
reduction eff orts, a decrease in depreciation and
other eff orts to decrease expenses. Toyota does
not expect a signifi cant increase in expenses
related to recalls and other safety measures,
compared with fi scal 2010. On the other hand,
factors decreasing operating income include the
assumed exchange rate of a stronger Japanese
yen against the U.S. dollar in fi scal 2011 compared
to the prior fi scal year as well as increases in
income
selling expenses and
incentives caused by
strengthened sales promotion activities; which
off set the factors increasing operating income.
As a result, Toyota expects that operating income
will increase in fi scal 2011 compared with fi scal
2010. Also, Toyota expects income before income
in earnings of affi liated
taxes and equity
income attributable to
companies and net
Toyota Motor Corporation will increase in fi scal
2011. Exchange rate fl uctuations can materially
aff ect Toyotaʼs operating results. In particular, a
strengthening of the Japanese yen against the
U.S. dollar can have a material adverse eff ect on
Toyotaʼs operating results. Please see “Operating
and Financial Review and Prospects ̶ Operating
Results ̶ Overview ̶ Currency Fluctuations.”
for further discussion.
The foregoing statements are forward-looking
statements based upon Toyotaʼs managementʼs
assumptions and beliefs regarding exchange
rates, market demand for Toyotaʼs products,
economic conditions and others. Please see
“Cautionary Statement Concerning Forward-
Looking Statements”. Toyotaʼs actual results of
operations could vary signifi cantly from those
described above as a result of unanticipated
changes
in the factors described above or
other factors, including those described in “Risk
Factors”.
Liquidity and capital resources
funded
Historically, Toyota has
its capital
expenditures and research and development
activities primarily through cash generated by
operations. In fi scal 2010, as in the prior fi scal year,
Toyota funded cash partially through additional
loans and issuance of notes, considering the
future business climate as well as to ensure a
sound fi nancial base.
In fi scal 2011, Toyota expects to suffi ciently
fund
its capital expenditures and research
and development activities primarily through
cash and cash equivalents on hand, and cash
generated by operations. Toyota will use its
funds for the development of environment
technologies, maintenance and replacement of
manufacturing facilities, and the introduction
of new products. See “Information on the
Company ̶ Business Overview ̶ Capital
Expenditures and Divestitures” for information
regarding Toyotaʼs material capital expenditures
and divestitures for fi scal 2008, 2009 and 2010,
and information concerning Toyotaʼs principal
capital expenditures and divestitures currently in
progress.
Toyota
for
customers and dealers, including loans and
leasing programs, from both cash generated by
operations and borrowings by its sales fi nance
subsidiaries. Toyota seeks to expand its ability
to raise funds locally in markets throughout
the world by expanding its network of fi nance
subsidiaries.
its fi nancing programs
funds
Net cash provided by operating activities
was ¥2,558.5 billion for fi scal 2010, compared
with ¥1,476.9 billion for the prior fi scal year.
The increase in net cash provided by operating
activities resulted primarily from a decrease
in cash payment to suppliers attributable to
the decrease in cost of products sold in the
automotive operations, and cash payments for
income taxes, partially off set by a decrease in cash
collection received from sale of products due to
a decrease in net revenue for the automotive
operations.
Net cash used in investing activities was ¥2,850.1
billion for fi scal 2010, compared with ¥1,230.2
billion for the prior fi scal year. The increase in net
cash used in investing activities resulted primarily
from an increase in purchases of marketable
securities and security investments.
Net cash provided or used by fi nancing
activities was a ¥277.9 billion decrease for fi scal
2010, compared with ¥698.8 billion increase for
the prior fi scal year. The decrease in net cash
provided by fi nancing activities resulted primarily
from a decrease of short-term borrowings,
partially off set by a decrease in dividends paid.
Total capital expenditures
for property,
plant and equipment, excluding vehicles and
equipment on operating leases, were ¥604.5
billion during fi scal 2010, a decrease of 55.7% over
the ¥1,364.5 billion in total capital expenditures
during the prior fi scal year. The decrease in capital
expenditures resulted primarily from a decrease
of investments in Japan and North America.
Total expenditures for vehicles and equipment
on operating leases were ¥833.0 billion during
fi scal 2010, a decrease of 13.3% over the ¥960.3
billion in expenditures from the prior fi scal year.
The decrease in expenditures for vehicles and
equipment on operating leases resulted primarily
from a decrease in investments in the fi nancial
TOYOTA ANNUAL REPORT 2010
53
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
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Performance Highlights
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Corporate Information
Financial Section
Investor Information
services operations.
Toyota expects
investments
in property,
plant and equipment, excluding vehicles
leases, to be
and equipment on operating
approximately ¥740.0 billion during fi scal 2011.
Toyotaʼs expected investments include ¥440.0
billion in Japan, ¥120.0 billion in North America,
¥40.0 billion in Europe, ¥90.0 billion in Asia and
¥50.0 billion in Other.
Based on current available information, Toyota
does not expect environmental matters to have
a material impact on its fi nancial position, results
of operations, liquidity or cash fl ows during fi scal
2011. However, there exists uncertainty with
respect to Toyotaʼs obligations under current
and future environment regulations as described
in “Information on the Company ̶ Business
Overview ̶ Governmental
Regulations,
Environmental and Safety Standards”.
Cash and cash equivalents were ¥1,865.7 billion
as of March 31, 2010. Most of Toyotaʼs cash and
cash equivalents are held in Japanese yen and
in U.S. dollars. In addition, time deposits were
¥392.7 billion and marketable securities were
¥1,793.1 billion as of March 31, 2010.
Liquid assets, which Toyota defi nes as cash and
cash equivalents, time deposits, marketable debt
securities and its investment in monetary trust
funds, increased during fi scal 2010 by ¥1,069.1
billion, or 25.3%, to ¥5,298.2 billion.
Trade accounts and notes receivable, net
increased during fi scal 2010 by ¥493.5 billion,
Net Cash Provided by
Operating Activities and
Free Cash Flow*
Capital Expenditures for
Property, Plant and Equip-
ment* and Depreciation
Cash and Cash Equivalents
at End of Year
（¥ Billion）
4,000
（¥ Billion）
1,600
（¥ Billion）
2,500
3,000
2,000
1,000
0
1,200
800
400
0
2,000
1,500
1,000
500
0
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
Net cash provided by
operating activities
Free cash flow
* (Net cash provided by operating
activities)−(Capital expenditures
for property, plant and equipment,
excluding vehicles and equipment
on operating leases)
Capital expenditures
Depreciation
* Excluding vehicles and equipment
on operating leases
or 35.4%, to ¥1,886.2 billion. This increase was
primarily due to the increase in the volume of
sales in the second half of fi scal 2010.
Inventories decreased during fi scal 2010 by
¥37.0 billion, or 2.5%, to ¥1,422.3 billion.
Total fi nance receivables, net increased during
fi scal 2010 by ¥293.2 billion, or 3.1%, to ¥9,840.1
billion. The increase in fi nance receivables, net
is mainly due to increase in retail receivables,
partially off set by fl uctuations in foreign currency
translation rates. As of March 31, 2010, fi nance
receivables were geographically distributed as
follows: in North America 61.9%, in Japan 12.8%,
in Europe 10.3%, in Asia 4.7% and in Other 10.3%.
Although Toyota maintains programs to sell
fi nance receivables through qualifying special
purpose entities, no sales of fi nance receivables
were made during fi scal 2010.
Marketable securities and other securities
investments, including those included in current
assets, increased during fi scal 2010 by ¥1,451.2
billion, or 55.9%, primarily refl ecting purchase of
marketable securities and security investments,
and an increase in the fair values of these
securities and investments.
Property, plant and equipment decreased
during fi scal 2010 by ¥690.7 billion, or 9.3%,
primarily refl ecting the impacts of depreciation
changes during the year and fl uctuations in
foreign currency translation rates, partially off set
by the capital expenditures.
Accounts and notes payable increased during
fi scal 2010 by ¥657.0 billion, or 50.6%. This
increase was primarily due to the increase in the
volume of transactions in the second half of fi scal
2010.
Accrued expenses increased during fi scal 2010
by ¥195.2 billion, or 12.7%, refl ecting the increase
in expenses related
to the recalls and
other safety mea-
sures.
Income taxes
payable increased
during fi scal 2010
by ¥102.0 billion,
or 199.0%, primar-
ily as a result of an
increase in income
before income
taxes.
Liquid Assets*
（¥ Billion）
5,000
4,000
3,000
2,000
1,000
0
FY
ʼ09
70ʼ
80ʼ
60ʼ
ʼ10
* Cash and cash equivalents, time
deposits, marketable dept
securities and investment in
monetary trust funds
Toyotaʼs total bor-
rowings decreased
during fi scal 2010
by ¥105.2 billion,
or 0.8%. Toyotaʼs
short-term borrow-
ings consist of loans with a weighted-average
interest rate of 1.55% and commercial paper with
a weighted-average interest rate of 0.44%. Short-
term borrowings decreased during fi scal 2010 by
¥338.0 billion, or 9.3%, to ¥3,279.6 billion. Toyotaʼs
long-term debt consists of unsecured and
secured loans, medium-term notes, unsecured
notes and long-term capital lease obligations
with interest rates ranging from 0.00% to 29.25%,
and maturity dates ranging from 2010 to 2047.
The current portion of long-term debt decreased
during fi scal 2010 by ¥481.2 billion, or 17.8%,
to ¥2,218.3 billion and the non-current portion
increased by ¥714.0 billion, or 11.3%, to ¥7,015.4
billion. The decrease in total borrowings primarily
resulted from decrease in medium-term notes
and short-term borrowings, partially off set by
increase in long-term borrowings. As of March
31, 2010, approximately 36% of long-term debt
TOYOTA ANNUAL REPORT 2010
54
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Section
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Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
was denominated in Japanese yen, 21% in U.S.
dollars, 13% in euros and 30% in other currencies.
Toyota hedges fi xed rate exposure by entering
into interest rate swaps. There are no material
seasonal variations
in Toyotaʼs borrowings
requirements.
Toyotaʼs
As of March 31, 2010, Toyotaʼs total interest
bearing debt was 120.8% of Toyota Motor
Corporation shareholdersʼ equity, compared to
125.4% as of March 31, 2009.
long-term debt
is rated “AA” by
Standard & Poorʼs Ratings Group, “Aa2” by
Moodyʼs Investors Services and “AAA” by Rating
and Investment Information, Inc., as of May 31,
2010. A credit rating is not a recommendation
to buy, sell or hold securities. A credit rating may
be subject to withdrawal or revision at any time.
Each rating should be evaluated separately of
any other rating.
Toyotaʼs unfunded pension liabilities decreased
during fi scal 2010 by ¥106.1 billion, or 16.2%, to
¥547.6 billion. The unfunded pension liabilities
relate primarily to the parent company and its
overseas subsidiaries. The unfunded amounts
will be funded through future cash contributions
by Toyota or in some cases will be funded on the
retirement date of each covered employee. The
unfunded pension liabilities decreased in fi scal
2010 compared to the prior year primarily due to
an increase in the fair value of plan assets. See
note 19 to the consolidated fi nancial statements
for further discussion.
to adhere
Toyotaʼs treasury policy is to maintain controls
on all exposures,
to stringent
counterparty credit standards, and to actively
monitor marketplace exposures. Toyota remains
centralized, and is pursuing global effi ciency of
its fi nancial services operations through Toyota
Financial Services Corporation.
The key element of Toyotaʼs fi nancial strategy
is maintaining a strong fi nancial position that
will allow Toyota to fund
its research and
initiatives, capital expenditures
development
and fi nancing operations effi ciently even
if
earnings experience short-term fl uctuations.
it maintains suffi cient
Toyota believes that
liquidity for its present requirements and that by
maintaining its high credit ratings, it will continue
to be able to access funds from external sources
in large amounts and at relatively low costs.
Toyotaʼs ability to maintain its high credit ratings
is subject to a number of factors, some of which
are not within Toyotaʼs control. These factors
include general economic conditions in Japan
and the other major markets in which Toyota
does business, as well as Toyotaʼs successful
implementation of its business strategy.
Shareholdersʼ Equity
and Equity Ratio
（¥ Billion）
15,000
（%）
100
12,000
9,000
6,000
3,000
0
FY
60ʼ
70ʼ
80ʼ
ʼ09
ʼ10
Equity ratio (Right scale)
80
60
40
20
0
Off -balance sheet arrangements
Toyota uses its securitization program as part of
its funding through qualifying special purpose
entities for its fi nancial services operations. See
note 7 to the consolidated fi nancial statements
Lending commitments
Credit Facilities with Credit Card Holders
Toyotaʼs fi nancial services operation issues credit
cards to customers. As customary for credit card
businesses, Toyota maintains credit facilities
with holders of credit cards issued by Toyota.
These facilities are used upon each holderʼs
requests up to the limits established on an
individual holderʼs basis. Although loans made to
customers through this facility are not secured,
for the purposes of minimizing credit risks and of
appropriately establishing credit limits for each
individual credit card holder, Toyota employs
its own risk management policy which includes
an analysis of information provided by fi nancial
institutions
in alliance with Toyota. Toyota
periodically reviews and revises, as appropriate,
these credit limits. Outstanding credit facilities
with credit card holders were ¥130.3 billion as of
March 31, 2010.
Credit Facilities with Dealers
Toyotaʼs fi nancial services operation maintains
credit facilities with dealers. These credit facilities
may be used for business acquisitions, facilities
refurbishment,
real estate purchases, and
working capital requirements. These loans are
typically collateralized with liens on real estate,
vehicle
inventory, and/or other dealership
assets, as appropriate. Toyota obtains a personal
guarantee
the dealer or corporate
guarantee from the dealership when deemed
from
regarding the impact of the securitization
program on the consolidated fi nancial
statements.
loans are typically
prudent. Although the
collateralized or guaranteed, the value of the
underlying collateral or guarantees may not be
suffi cient to cover Toyotaʼs exposure under such
agreements. Toyota prices the credit facilities
according to the risks assumed in entering into
the credit facility. Toyotaʼs fi nancial services
operation also provides fi nancing to various
multi-franchise dealer organizations, referred
to as dealer groups, often as part of a lending
consortium, for wholesale inventory fi nancing,
business acquisitions, facilities refurbishment,
real estate purchases, and working capital
requirements. Toyotaʼs outstanding
credit
facilities with dealers totaled ¥1,586.8 billion as
of March 31, 2010.
its dealers
Guarantees
Toyota enters into certain guarantee contracts
with
to guarantee customersʼ
payments of their installment payables that arise
from installment contracts between customers
and Toyota dealers, as and when requested by
Toyota dealers. Guarantee periods are set to
match the maturity of installment payments, and
as of March 31, 2010, ranged from one month
to 35 years. 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.
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future
The maximum potential amount of
payments as of March 31, 2010 is ¥1,604.8 billion.
Liabilities for these guarantees of ¥5.9 billion
have been provided as of March 31, 2010. Under
these guarantee contracts, Toyota is entitled
to recover any amounts paid by it from the
customers whose obligations it guaranteed.
Contractual obligations and commitments
lease obligations, operating
information regarding debt obligations,
For
lease
capital
obligations and other obligations,
including
amounts maturing in each of the next fi ve years,
see notes 13, 22 and 23 to the consolidated
fi nancial statements. In addition, as part of
Toyotaʼs normal business practices, Toyota enters
into long-term arrangements with suppliers for
purchases of certain raw materials, components
and services. These arrangements may contain
fi xed/minimum quantity purchase requirements.
to
Toyota enters
facilitate an adequate supply of these materials
and services.
into such arrangements
Total
amounts
committed
Yen in millions
Amount of Commitment Expiration Per Period
Less than 1 year
1 to 3 years
3 to 5 years
5 years and after
￥1,604,893
￥460,460
￥729,509
￥311,760
￥103,164
Commercial Commitments (note 23):
Maximum potential exposure to
guarantees given in the
ordinary course of business
Total Commercial Commitments ········· ￥1,604,893
￥460,460
￥729,509
￥311,760
￥103,164
Related party transactions
Toyota does not have any signifi cant related
party transactions other than transactions with
in the ordinary course
affi liated companies
of business. See note 12 to the consolidated
fi nancial statements for further discussion.
The following tables summarize Toyotaʼs contractual obligations and commercial commitments as of
March 31, 2010:
Legislation regarding end-of-life vehicles
Yen in millions
Payments due by period
Total
Less than 1 year
1 to 3 years
3 to 5 years
5 years and after
Contractual Obligations:
Short-term borrowings (note 13)
Loans ····························································· ￥
Commercial paper ·································
Long-term debt* (note13) ······················
9,191,490
Capital lease obligations (note 13) ·····
42,243
Non-cancelable operating lease
804,066
￥ 804,066
￥
̶ ￥
̶ ￥
2,475,607
̶
̶
̶
̶
2,475,607
2,194,235
24,089
4,232,077
1,464,523
1,300,655
4,224
2,415
11,515
obligations (note 22) ····························
51,953
9,900
14,629
9,302
18,122
Commitments for the purchase of property,
plant and other assets (note 23) ······················
74,529
37,026
20,879
1,622
15,002
Total ······························································· ￥ 12,639,888
￥ 5,544,923
￥ 4,271,809
￥ 1,477,862
￥ 1,345,294
* “Long-term debt” represents future principal payments.
Toyota is unable to make reasonable estimates
of the period of cash settlement with respect to
liabilities recognized for uncertain tax benefi ts,
and accordingly such liabilities are excluded from
the table above. See note 16 to the consolidated
fi nancial statements for further discussion.
Toyota expects to contribute ¥111,112 million to
its pension plans in fi scal 2011.
In October 2000, the European Union enforced
a directive that requires member states to
the
promulgate
following:
implementing
regulations
• manufacturers shall bear all or a signifi cant
part of the costs for taking back end-of-life
vehicles put on the market after July 1, 2002
and dismantling and recycling those vehicles.
Beginning January 1, 2007, this requirement will
also be applicable to vehicles put on the market
before July 1, 2002;
• manufacturers may not use certain hazardous
materials in vehicles sold after July 2003;
• vehicles type-approved and put on the market
after December 15, 2008 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
• end-of-life vehicles must meet actual re-use of
80% and re-use as material or energy of 85%,
respectively, of vehicle weight by 2006, rising to
85% and 95%, respectively, by 2015.
See note 23 to the consolidated fi nancial
statements for further discussion.
Recent accounting pronouncements in the United States
In June 2009, the Financial Accounting Standards
issued updated guidance of
Board (“FASB”)
accounting for and disclosure of transfers and
servicing. This guidance eliminates the concept
of a qualifying special purpose entity, changes
the requirements for derecognizing fi nancial
TOYOTA ANNUAL REPORT 2010
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assets, and requires additional disclosures about
transfers of fi nancial assets. This guidance is
eff ective for fi scal year beginning after November
15, 2009, and for interim period within the fi scal
year. Management is evaluating the impact of
adopting this guidance on Toyotaʼs consolidated
fi nancial statements.
In June 2009, FASB issued updated guidance of
accounting for and disclosure of consolidation.
This guidance changes how a company
determines when a variable
interest entity
should be consolidated. This guidance is eff ective
for fi scal year beginning after November 15,
2009, and for interim period within the fi scal
year. Management is evaluating the impact of
adopting this guidance on Toyotaʼs consolidated
fi nancial statements.
Critical accounting estimates
The consolidated fi nancial statements of Toyota
are prepared in conformity with accounting
principles generally accepted in the United States
of America. The preparation of these fi nancial
statements
requires the use of estimates,
judgments and assumptions that aff ect the
reported amounts of assets and liabilities at the
date of the fi nancial statements and the reported
amounts of revenues and expenses during the
periods presented. Toyota believes that of its
signifi cant accounting policies, the following
may involve a higher degree of judgments,
estimates and assumptions:
Product Warranty
Toyota generally warrants its products against
certain manufacturing and other defects.
Product warranties are provided for specifi c
periods of time and/or usage of the product and
vary depending upon the nature of the product,
the geographic location of the sale and other
factors. All product warranties are consistent
with commercial practices. Toyota includes a
provision for estimated product warranty costs
as a component of cost of sales at the time the
related sale is recognized. The accrued warranty
costs represent managementʼs best estimate
at the time of sale of the total costs 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 of product
failures as well as current information on repair
costs. The amount of warranty costs accrued
also contains an estimate of warranty claim
recoveries to be received from suppliers. The
foregoing evaluations are inherently uncertain,
as they require material estimates and some
productsʼ warranties extend for several years.
Consequently, actual warranty costs may diff er
from the estimated amounts and could require
additional warranty provisions. If these factors
require a signifi cant increase in Toyotaʼs accrued
estimated warranty costs, it would negatively
aff ect future operating results of the automotive
operations.
Toyota accrues for costs of recalls and other
safety measures based on managementʼs
estimates when it is probable a liability has
been incurred and the amount of loss can be
reasonably estimated. Prior to the fourth quarter
of this fi scal year, amounts were accrued based
on individual occurrences of recalls and other
safety measures. During the fourth quarter of this
consolidated fi scal year, as a result of signifi cant
changes in facts and circumstances, Toyota has
employed an estimation model, to accrue at the
time of vehicle sale, an amount that represents
managementʼs best estimate of expenses related
to future recalls and other safety measures. The
estimation model for recalls and other safety
measures takes into account Toyotaʼs historical
experience and individual occurrences of recalls
and other safety measures. This change resulted
from Toyotaʼs most recent experience with
recalls and other safety measures, changes in the
operating processes such as the establishment
of the Special Committee for Global Quality to
address quality-related matters, as well as the
broadening of the number of vehicles subject to
recalls and other safety measures. Consequently,
actual costs of recalls and other safety measures
may diff er from the estimated amounts.
Allowance for Doubtful Accounts
and Credit Losses
(cid:12255)Natures of estimates and assumptions
Sales fi nancing and fi nance lease receivables
consist of retail
installment sales contracts
secured by passenger cars and commercial
vehicles. Collectability risks include consumer
and dealer insolvencies and insuffi cient collateral
values (less costs to sell) to realize the full
carrying values of these receivables. As a matter
of policy, Toyota maintains an allowance for
doubtful accounts and credit losses representing
managementʼs estimate of the amount of asset
impairment in the portfolios of fi nance, trade
and other receivables. Toyota determines the
allowance for doubtful accounts and credit
losses based on a systematic, ongoing review
and evaluation performed as part of the credit-
risk evaluation process, historical loss experience,
the size and composition of the portfolios,
current economic events and conditions, the
estimated fair value, adequacy of collateral
and other pertinent factors. This evaluation is
inherently
judgmental and requires material
estimates, including the amounts and timing
of future cash fl ows expected to be received,
which may be susceptible to signifi cant change.
Although management considers the allowance
for doubtful accounts and credit
losses to
be adequate based on information currently
available, additional provisions may be necessary
due to (i) changes in management estimates
and assumptions about asset impairments, (ii)
information that indicates changes in expected
future cash fl ows, or (iii) changes in economic
and other events and conditions. To the extent
that sales incentives remain an integral part of
sales promotion with the eff ect of reducing new
vehicle prices, resale prices of used vehicles and,
correspondingly, the collateral value of Toyotaʼs
sales fi nancing and fi nance lease receivables
could experience further downward pressure.
If these factors require a signifi cant increase
in Toyotaʼs allowance for doubtful accounts
and credit losses, it could negatively aff ect
future operating results of the fi nancial services
operations. The level of credit losses, which has a
greater impact on Toyotaʼs results of operations,
is infl uenced primarily by two factors: frequency
of occurrence and severity of loss. For evaluation
purposes, exposures to credit loss are segmented
into the two primary categories of “consumer”
and “dealer”. Toyotaʼs consumer portfolio consists
of smaller balances that are homogenous retail
fi nance receivables and lease earning assets.
The dealer portfolio consists of wholesale and
other dealer fi nancing receivables. The overall
TOYOTA ANNUAL REPORT 2010
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allowance for credit losses is evaluated at least
quarterly, considering a variety of assumptions
and factors to determine whether reserves are
considered adequate to cover probable losses.
results of operations,
(cid:12255)Sensitivity analysis
The level of credit losses, which could signifi cantly
impact Toyotaʼs
is
infl uenced primarily by two factors: frequency
of occurrence and severity of loss. The overall
allowance for credit losses is evaluated at least
quarterly, considering a variety of assumptions
and factors to determine whether reserves are
considered adequate to cover probable losses.
The following table illustrates the eff ect of an
assumed change in expected severity of loss,
which Toyota believes is one of the key critical
estimates for determining the allowance for
credit losses, assuming all other assumptions
are held consistent. The table below represents
the impact on the allowance for credit losses
in Toyotaʼs fi nancial services operations as
any change impacts most signifi cantly on the
fi nancial services operations.
Yen in millions
Eff ect on the allowance
for credit losses
as of March 31, 2010
10 percent increase in
expected severity of loss ··
¥14,421
Investment in Operating Leases
(cid:12255)Natures of estimates and assumptions
Vehicles on operating leases, where Toyota is the
lessor, are valued at cost and depreciated over
their estimated useful lives using the straight-
line method to their estimated residual values.
Toyota utilizes industry published information
and its own historical experience to determine
estimated residual values for these vehicles.
Toyota evaluates the recoverability of the
leased vehicles for
carrying values of
its
impairment when there are
indications of
declines in residual values, and if impaired,
Toyota recognizes an allowance for its residual
values. In addition, to the extent that sales
integral part of sales
incentives remain an
promotion with the eff ect of reducing new
vehicle prices, resale prices of used vehicles
and, correspondingly, the fair value of Toyotaʼs
leased vehicles could be subject to downward
pressure. If resale prices of used vehicles decline,
future operating results of the fi nancial services
operations are likely to be adversely aff ected
by incremental charges to reduce estimated
residual values. Throughout the life of the lease,
management performs periodic evaluations
of estimated end-of-term market values to
in the
determine whether estimates used
determination of the contractual residual value
are still considered reasonable. Factors aff ecting
the estimated residual value at lease maturity
include, but are not limited to, new vehicle
incentive programs, new vehicle pricing, used
vehicle supply, projected vehicle return rates,
and projected loss severity. The vehicle return
rate represents the number of leased vehicles
returned at contract maturity and sold by Toyota
during the period as a percentage of the number
of lease contracts that, as of their origination
dates, were scheduled to mature in the same
period. A higher rate of vehicle returns exposes
Toyota to higher potential losses incurred at
lease termination. Severity of loss is the extent to
which the end-of-term market value of a lease is
less than its carrying value at lease end.
(cid:12255)Sensitivity analysis
The following table illustrates the eff ect of an
assumed change in the vehicle return rate, which
Toyota believes is one of the critical estimates, in
determining the residual value losses, holding
all other assumptions constant. The following
table represents the impact on the residual value
losses in Toyotaʼs fi nancial services operations
as those changes have a signifi cant impact on
fi nancing operations.
Yen in millions
Eff ect on the residual
value losses over
the remaining terms
of the operating leases
on and after April 1, 2010
1 percent increase in
vehicle return rate ·········
￥2,047
Impairment of Long-Lived Assets
Toyota periodically reviews the carrying value of
its long-lived assets held and used and assets to
be disposed of, including intangible assets, when
events and circumstances warrant such a review.
This review is performed using estimates of
future cash fl ows. If the carrying value of a long-
lived asset is considered impaired, an impairment
charge is recorded for the amount by which the
carrying value of the long-lived asset exceeds
its fair value. Management believes that the
estimates of future cash fl ows and fair values
are reasonable. However, changes in estimates
of such cash fl ows and fair values would aff ect
the evaluations and negatively aff ect future
operating results of the automotive operations.
Pension Costs and Obligations
(cid:12255)Natures of estimates and assumptions
Pension costs and obligations are dependent
on assumptions used
in calculating such
amounts. These assumptions include discount
rates, benefi ts earned, interest costs, expected
rate of return on plan assets, mortality rates
and other factors. Actual results that diff er
from the assumptions are accumulated and
amortized over future periods and, therefore,
generally affect recognized expense in future
periods. While management believes that the
assumptions used are appropriate, diff erences in
actual experience or changes in assumptions may
aff ect Toyotaʼs pension costs and obligations.
The two most critical assumptions impacting
the calculation of pension costs and obligations
are the discount rates and the expected rates
of returns on plan assets. Toyota determines
the discount rates mainly based on the rates of
high quality fi xed income bonds or fi xed income
governmental bonds currently available and
expected to be available during the period to
maturity of the defi ned benefi t pension plans.
Toyota determines the expected rates of return
for pension assets after considering several
applicable factors including, the composition
of plan assets held, assumed risks of asset
management, historical results of the returns on
plan assets, Toyotaʼs principal policy for plan asset
management, and forecasted market conditions.
A weighted-average discount rate of 2.8% and
a weighted-average expected rate of return on
plan assets of 3.6% are the results of assumptions
used for the various pension plans in calculating
Toyotaʼs consolidated pension costs for fi scal
2010. Also, a weighted-average discount rate
of 2.8% is the result of assumption used for the
various pension plans in calculating Toyotaʼs
consolidated pension obligations for fi scal 2010.
TOYOTA ANNUAL REPORT 2010
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(cid:12255)Sensitivity analysis
The following table illustrates the eff ects of
assumed changes in weighted-average discount
rate and the weighted-average expected rate of
return on plan assets, which Toyota believes are
critical estimates in determining pension costs
and obligations, assuming all other assumptions
are consistent.
Yen in millions
Eff ect on pre-tax income
for the year ended
March 31, 2011
Eff ect on PBO
as of March 31, 2010
Discount rates
0.5% decrease ····································································
￥ (10,057)
0.5% increase ·····································································
9,603
￥ 127,971
(118,378)
Expected rate of return on plan assets
0.5% decrease ····································································
0.5% increase ·····································································
￥ (5,895)
5,895
Derivatives and Other Contracts at Fair Value
Toyota uses derivatives in the normal course
of business to manage its exposure to foreign
currency exchange rates and interest rates. The
accounting is complex and continues to evolve.
In addition, there are signifi cant judgments
and estimates involved in the estimating of fair
value in the absence of quoted market values.
These estimates are based upon valuation
methodologies deemed appropriate under the
circumstances. However, the use of diff erent
assumptions may have a material eff ect on the
estimated fair value amounts.
Marketable Securities and Investments in
Affi liated Companies
Toyotaʼs accounting policy is to record a write-
down of such investments to net realizable value
when a decline in fair value below the carrying
value is other-than-temporary. 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 fi nancial condition
and prospects of the company and Toyotaʼs
ability and intent to retain its investment in the
company for a period of time suffi cient to allow
for any anticipated recovery in fair value.
Deferred Tax Assets
Toyota estimates whether future taxable income
is suffi cient at a particular tax-paying component
and records valuation allowances to reduce
deferred tax assets when it is more likely than
not that a tax benefi t will not be realized in the
future periods. Actual taxable income may diff er
from the estimated amounts due to various
assumptions used to estimate future taxable
income.
is
recorded due to lower actual taxable income
than estimated amounts it would negatively
aff ect future operating results.
If additional valuation allowance
Market risk disclosures
Toyota is exposed to market risk from changes
in foreign currency exchange rates, interest rates,
certain commodity and equity security prices. In
order to manage the risk arising from changes
in foreign currency exchange rates and interest
rates, Toyota enters into a variety of derivative
fi nancial instruments.
A description of Toyotaʼs accounting policies
for derivative instruments is included in note 2
to the consolidated fi nancial statements and
further disclosure is provided in notes 20 and 21
to the consolidated fi nancial statements.
Toyota monitors and manages these fi nancial
exposures as an integral part of its overall risk
management program, which recognizes the
unpredictability of fi nancial markets and seeks
to reduce the potentially adverse eff ects on
Toyotaʼs operating results.
included
The fi nancial
in the
instruments
market risk analysis consist of all of Toyotaʼs cash
and cash equivalents, marketable securities,
fi nance receivables, securities investments, long-
term and short-term debt and all derivative
instruments. Toyotaʼs portfolio of
fi nancial
derivative fi nancial
instruments consists of
forward foreign currency exchange contracts,
foreign currency options, interest rate swaps,
interest rate currency swap agreements and
interest rate options. Anticipated transactions
in foreign currencies that are
denominated
covered by Toyotaʼs derivative hedging are not
included in the market risk analysis. Although
operating leases are not required to be included,
Toyota has
in
determining interest rate risk.
included these
instruments
Foreign Currency Exchange Rate Risk
Toyota has foreign currency exposures related to
buying, selling and fi nancing in currencies other
than the local currencies in which it operates.
Toyota is exposed to foreign currency risk related
to future earnings or assets and liabilities that are
exposed due to operating cash fl ows and various
fi nancial instruments that are denominated in
foreign currencies. Toyotaʼs most signifi cant
foreign currency exposures relate to the U.S.
dollar and the euro.
Toyota uses a value-at-risk analysis (“VAR”)
to evaluate its exposure to changes in foreign
currency exchange rates. The VAR of the
combined foreign exchange position represents
a potential loss in pre-tax earnings that was
estimated to be ¥114.1 billion as of March 31,
2009 and ¥148.9 billion as of March 31, 2010.
Based on Toyotaʼs overall currency exposure
(including derivative positions), the risk during
the year ended March 31, 2010 to pre-tax cash
fl ow from currency movements was on average
¥135.5 billion, with a high of ¥148.9 billion and a
low of ¥123.8 billion.
The VAR was estimated by using a Monte
Carlo Simulation Method and assumed 95%
confi dence level on the realization date and a
10-day holding period.
in
Interest Rate Risk
Toyota is subject to market risk from exposures
to changes
its
interest rates based on
investing and cash management
fi nancing,
activities. Toyota enters into various fi nancial
instrument transactions to maintain the desired
level of exposure to the risk of interest rate
TOYOTA ANNUAL REPORT 2010
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commodity price risk by holding minimum stock
levels.
Equity Price Risk
Toyota holds investments in various available-
for-sale equity securities that are subject to price
risk. The fair value of available-for-sale equity
securities was ¥798.2 billion as of March 31,
2009 and ¥852.7 billion as of March 31, 2010.
The potential change in the fair value of these
investments, assuming a 10% change in prices,
would be approximately ¥79.8 billion as of March
31, 2009 and ¥85.3 billion as of March 31, 2010.
fl uctuations and to minimize interest expense.
The potential decrease in fair value resulting
from a hypothetical 100 basis point upward shift
in interest rates would be approximately ¥55.8
billion as of March 31, 2009 and ¥ 67.8 billion as
of March 31, 2010.
There are certain shortcomings
inherent
to the sensitivity analyses presented. The
model assumes that
interest rate changes
are instantaneous parallel shifts in the yield
curve. However, in reality, changes are rarely
instantaneous. Although certain assets and
liabilities may have similar maturities or periods
to repricing, they may not react correspondingly
to changes in market interest rates. Also, the
interest rates on certain types of assets and
liabilities may fl uctuate with changes in market
interest rates, while interest rates on other types
of assets may lag behind changes in market
rates. Finance receivables are less susceptible to
prepayments when interest rates change and,
as a result, Toyotaʼs model does not address
prepayment risk for automotive related fi nance
receivables. However, in the event of a change
in interest rates, actual loan prepayments may
deviate signifi cantly from the assumptions used
in the model.
Commodity Price Risk
Commodity price risk is the possibility of higher
or lower costs due to changes in the prices of
commodities, such as non-ferrous alloys (e.g.,
aluminum), precious metals (e.g., palladium,
platinum and rhodium) and ferrous alloys, which
Toyota uses in the production of motor vehicles.
Toyota does not use derivative instruments
to hedge the price risk associated with the
purchase of those commodities and controls its
TOYOTA ANNUAL REPORT 2010
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Consolidated Balance Sheets
Toyota Motor Corporation
March 31, 2009 and 2010
ASSETS
Current assets
Cash and cash equivalents ············································································
Time deposits ·······································································································
Marketable securities ·······················································································
Trade accounts and notes receivable, less allowance for
doubtful accounts of ¥15,034 million in 2009 and
¥13,735 million ($148 million) in 2010··············································
Finance receivables, net ·················································································
Other receivables ·······························································································
Inventories ·············································································································
Deferred income taxes ····················································································
Prepaid expenses and other current assets ·········································
Total current assets ······················································································
Yen in millions
2009
2010
U.S. dollars
in millions
2010
¥ 2,444,280 ¥ 1,865,746
392,724
1,793,165
45,178
495,326
$20,053
4,221
19,273
1,392,749
3,891,406
332,722
1,459,394
605,331
632,543
11,298,929
1,886,273
4,209,496
360,379
1,422,373
632,164
511,284
13,073,604
20,274
45,244
3,873
15,288
6,795
5,495
140,516
Noncurrent fi nance receivables, net ···························································
5,655,545
5,630,680
60,519
Investments and other assets
Marketable securities and other securities investments ···············
Affi liated companies ························································································
Employees receivables ····················································································
Other ·························································································································
Total investments and other assets ·····················································
2,102,874
1,826,375
69,523
707,110
4,705,882
2,256,279
1,879,320
67,506
730,997
4,934,102
24,251
20,199
725
7,857
53,032
Property, plant and equipment
Land ···························································································································
Buildings ·················································································································
Machinery and equipment ···········································································
Vehicles and equipment on operating leases ····································
Construction in progress ················································································
Total property, plant and equipment, at cost ································
Less̶Accumulated depreciation ····························································
Total property, plant and equipment, net ·······································
1,257,409
3,633,954
9,201,093
2,836,881
263,602
17,192,939
1,261,349
3,693,972
9,298,967
2,613,248
226,212
17,093,748
13,557
39,703
99,946
28,087
2,432
183,725
(9,791,258)
7,401,681
(10,382,847)
6,710,901
(111,596)
72,129
LIABILITIES AND SHAREHOLDERSʼ EQUITY
Current liabilities
Yen in millions
2009
2010
U.S. dollars
in millions
2010
Short-term borrowings ···················································································
¥ 3,617,672
¥3,279,673
$35,250
Current portion of long-term debt ···························································
2,699,512
2,218,324
Accounts payable ······························································································
1,299,455
1,956,505
Other payables ····································································································
670,634
572,450
Accrued expenses ······························································································
1,540,681
1,735,930
Income taxes payable ······················································································
Other current liabilities ····················································································
51,298
710,041
153,387
769,945
23,843
21,029
6,153
18,658
1,648
8,275
Total current liabilities ···········································································
10,589,293
10,686,214
114,856
Long-term liabilities
Long-term debt···································································································
6,301,469
7,015,409
75,402
Accrued pension and severance costs ···················································
Deferred income taxes ····················································································
Other long-term liabilities ·············································································
634,612
642,293
293,633
678,677
813,221
225,323
7,294
8,741
2,422
Total long-term liabilities ·····································································
7,872,007
8,732,630
93,859
Shareholdersʼ equity
Toyota Motor Corporation shareholders' equity
Common stock, no par value,
authorized: 10,000,000,000 shares in 2009 and 2010;
issued: 3,447,997,492 shares in 2009 and 2010 ·····························
Additional paid-in capital ··············································································
397,050
501,211
397,050
501,331
4,268
5,388
Retained earnings ······························································································
11,531,622
11,568,602
124,340
Accumulated other comprehensive income (loss)··························
(1,107,781)
(846,835)
(9,102)
Treasury stock, at cost, 312,115,017 shares in 2009 and
312,002,149 shares in 2010 ······································································
Total Toyota Motor Corponration shareholdersʼ equity ······
(1,260,895)
10,061,207
(1,260,425)
10,359,723
(13,547)
111,347
Noncontrolling interest ·······················································································
539,530
570,720
6,134
Total shareholdersʼ equity ···································································
10,600,737
10,930,443
117,481
Commitments and contingencies
Total assets ·······································································································
¥29,062,037 ¥30,349,287
$326,196
Total liabilities and shareholdersʼ equity···································
¥29,062,037 ¥30,349,287
$326,196
The accompanying notes are an integral part of these consolidated fi nancial statements.
TOYOTA ANNUAL REPORT 2010
61
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Consolidated Statements of Income
Financial Section
Toyota Motor Corporation
For the years ended March 31, 2008, 2009 and 2010
Net revenues
Sales of products ··········································································································································
Financing operations ·································································································································
Costs and expenses
Cost of products sold ·································································································································
Cost of fi nancing operations ··················································································································
Selling, general and administrative ····································································································
2008
¥ 24,820,510
1,468,730
26,289,240
20,452,338
1,068,015
2,498,512
24,018,865
Yen in millions
2009
¥ 19,173,720
1,355,850
20,529,570
17,468,416
987,384
2,534,781
20,990,581
2010
¥ 17,724,729
1,226,244
18,950,973
15,971,496
712,301
2,119,660
18,803,457
Operating income (loss) ·······························································································································
2,270,375
(461,011)
147,516
Other income (expense)
Interest and dividend income ···············································································································
Interest expense ···········································································································································
Foreign exchange gain (loss), net ·······································································································
Other income (loss), net ···························································································································
Income (loss) before income taxes and
equity in earnings of affi liated companies ···················································································
Provision for income taxes ·························································································································
Equity in earnings of affi liated companies ························································································
Net income (loss) ··············································································································································
Less: Net (income) loss attributable to the noncontrolling interest···································
165,676
(46,113)
9,172
38,112
166,847
2,437,222
911,495
270,114
1,795,841
(77,962)
138,467
(46,882)
(1,815)
(189,140)
(99,370)
(560,381)
(56,442)
42,724
(461,215)
24,278
78,224
(33,409)
68,251
30,886
143,952
291,468
92,664
45,408
244,212
(34,756)
U.S. dollars
in millions
2010
$ 190,507
13,180
203,687
171,663
7,656
22,782
202,101
1,586
841
(359)
733
332
1,547
3,133
996
488
2,625
(374)
Net income (loss) attributable to Toyota Motor Corporation ················································
¥ 1,717,879
¥
(436,937)
¥
209,456
$ 2,251
Net income (loss) attributable to Toyota Motor Corporation per share
̶Basic ·······························································································································································
̶Diluted ··························································································································································
Cash dividends per share ···························································································································
The accompanying notes are an integral part of these consolidated fi nancial statements.
¥ 540.65
¥ 540.44
¥ 140.00
Yen
¥ (139.13)
¥ (139.13)
¥ 100.00
¥ 66.79
¥ 66.79
¥ 45.00
U.S. dollars
$ 0.72
$ 0.72
$ 0.48
TOYOTA ANNUAL REPORT 2010
62
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Consolidated Statements of Shareholders’ Equity
Financial Section
Toyota Motor Corporation
For the years ended March 31, 2008, 2009 and 2010
Balances at March 31, 2007 ·······················································································································
Equity transaction with noncontrolling interests and other ····················································
Issuance during the year ······························································································································
Comprehensive income
Net income ·····················································································································································
Other comprehensive income (loss)
Foreign currency translation adjustments ···············································································
Unrealized losses on securities, net of reclassifi cation adjustments ··························
Pension liability adjustments ···········································································································
Total comprehensive income ···············································································································
Dividends paid to Toyota Motor Corporation shareholders ·····················································
Dividends paid to noncontrolling interests ·······················································································
Purchase and reissuance of common stock ······················································································
Retirement of common stock ···················································································································
Balances at March 31, 2008 ·······················································································································
Equity transaction with noncontrolling interests and other ···················································
Issuance during the year ······························································································································
Comprehensive loss
Net loss ·····························································································································································
Other comprehensive income (loss)
Foreign currency translation adjustments ···············································································
Unrealized losses on securities, net of reclassifi cation adjustments ··························
Pension liability adjustments ···········································································································
Total comprehensive loss ·······················································································································
Dividends paid to Toyota Motor Corporation shareholders ·····················································
Dividends paid to noncontrolling interests ·······················································································
Purchase and reissuance of common stock ······················································································
Balances at March 31, 2009 ·······················································································································
Equity transaction with noncontrolling interests and other ····················································
Issuance during the year ······························································································································
Comprehensive income
Net income ·····················································································································································
Other comprehensive income
Foreign currency translation adjustments ···············································································
Unrealized gains on securities, net of reclassifi cation adjustments ····························
Pension liability adjustments ···········································································································
Total comprehensive income ···············································································································
Dividends paid to Toyota Motor Corporation shareholders ·····················································
Dividends paid to noncontrolling interests ·······················································································
Purchase and reissuance of common stock ······················································································
Balances at March 31, 2010 ·······················································································································
TOYOTA ANNUAL REPORT 2010
Common
stock
Additional
paid-in
capital
Retained
earnings
Yen in millions
Accumulated
other
comprehensive
income (loss)
Treasury
stock,
at cost
Total
Toyota Motor
Corporation
shareholdersʼ
equity
¥397,050
¥497,593
¥11,764,713
¥701,390
¥(1,524,654)
¥11,836,092
3,475
3,475
Noncontrolling
interest
¥628,244
10,330
Total
shareholdersʼ
equity
¥12,464,336
10,330
3,475
1,717,879
1,717,879
77,962
1,795,841
(461,189)
(347,829)
(133,577)
(430,860)
(643,182)
12,408,550
(241,205)
(314,464)
646,681
(1,192,437)
(461,189)
(347,829)
(133,577)
775,284
(430,860)
(314,464)
̶
11,869,527
3,642
(20,128)
(13,734)
(7,068)
37,032
(18,939)
656,667
(30,645)
(481,317)
(361,563)
(140,645)
812,316
(430,860)
(18,939)
(314,464)
̶
12,526,194
(30,645)
3,642
(436,937)
(436,937)
(24,278)
(461,215)
(381,303)
(293,101)
(192,172)
(439,991)
11,531,622
(1,107,781)
(68,458)
(1,260,895)
(381,303)
(293,101)
(192,172)
(1,303,513)
(439,991)
(68,458)
10,061,207
(2,116)
2,236
(18,865)
(13,590)
(8,874)
(65,607)
(20,885)
539,530
(2,748)
(400,168)
(306,691)
(201,046)
(1,369,120)
(439,991)
(20,885)
(68,458)
10,600,737
(4,864)
2,236
209,456
209,456
34,756
244,212
397,050
(3,499)
497,569
3,642
397,050
501,211
(2,116)
2,236
9,894
176,407
74,645
(172,476)
9,894
176,407
74,645
470,402
(172,476)
¥397,050
¥501,331
¥11,568,602
¥(846,835)
470
¥(1,260,425)
470
¥10,359,723
5,721
4,095
98
44,670
(10,732)
¥570,720
15,615
180,502
74,743
515,072
(172,476)
(10,732)
470
¥10,930,443
63
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Consolidated Statements of Shareholders’ Equity
Financial Section
Toyota Motor Corporation
For the years ended March 31, 2008, 2009 and 2010
Balances at March 31, 2009 ·······················································································································
Equity transaction with noncontrolling interests and other ····················································
Issuance during the year ······························································································································
Comprehensive income
Net income ·····················································································································································
Other comprehensive income
Foreign currency translation adjustments ···············································································
Unrealized gains on securities, net of reclassifi cation adjustments ····························
Pension liability adjustments ···········································································································
Total comprehensive income ···············································································································
Dividends paid to Toyota Motor Corporation shareholders ·····················································
Dividends paid to noncontrolling interests ·······················································································
Purchase and reissuance of common stock ······················································································
Balances at March 31, 2010 ·······················································································································
The accompanying notes are an integral part of these consolidated fi nancial statements.
U.S. dollars in millions
Accumulated
other
comprehensive
income (loss)
Treasury
stock,
at cost
Retained
earnings
$123,943
$ (11,907)
$(13,552)
Common
stock
$4,268
Additional
paid-in
capital
$5,387
(23)
24
2,251
(1,854)
107
1,896
802
Total
Toyota Motor
Corporation
shareholdersʼ
equity
$108,139
(23)
24
2,251
107
1,896
802
5,056
(1,854)
5
5
Noncontrolling
interest
$5,798
(29)
Total
shareholdersʼ
equity
$113,937
(52)
24
374
61
44
1
480
(115)
2,625
168
1,940
803
5,536
(1,854)
(115)
5
$4,268
$5,388
$124,340
$ (9,102)
$(13,547)
$111,347
$6,134
$117,481
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Financial Section
Toyota Motor Corporation
For the years ended March 31, 2008, 2009 and 2010
Cash fl ows from operating activities
Cash fl ows from investing activities
Yen in millions
U.S. dollars
in millions
2008
2009
2010
2010
Yen in millions
U.S. dollars
in millions
2008
2009
2010
2010
Net income (loss)········································································· ¥ 1,795,841 ¥ (461,215) ¥ 244,212
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
$ 2,625
Additions to fi nance receivables ······································ ¥ (8,647,717) ¥ (8,612,111) ¥ (7,806,201)
$ (83,902)
Collection of fi nance receivables ······································
7,223,573
8,143,804
7,509,578
80,714
1,491,135
1,495,170
1,414,569
15,204
Depreciation ········································································
Provision for doubtful accounts and credit
losses ························································································
Pension and severance costs, less payments ·····
Losses on disposal of fi xed assets·····························
Unrealized losses on available-for-sale securi-
ties, net ····················································································
Deferred income taxes ···················································
Equity in earnings of affi liated companies ··········
Changes in operating assets and liabilities, and
other
(Increase) decrease in accounts and notes
receivable ····································································
(Increase) decrease in inventories ·······················
122,790
(54,341)
45,437
257,433
(20,958)
68,682
100,775
1,254
46,937
11,346
81,458
220,920
(194,990)
2,486
25,537
(270,114)
(42,724)
(45,408)
(206,793)
(149,984)
791,481
192,379
(576,711)
56,059
(Increase) decrease in other current assets ····
(82,737)
9,923
97,494
Increase (decrease) in accounts payable ·········
Increase
income
taxes ····················································································
Increase (decrease) in other current liabilities ···
in accrued
(decrease)
Other ···················································································
62,241
(837,402)
649,214
(118,030)
206,911
46,464
(251,868)
(41,819)
291,893
102,207
213,341
226,564
1,083
13
505
27
274
(488)
(6,199)
603
1,048
6,978
1,098
2,293
2,435
Net cash provided by operating activities · ¥ 2,981,624 ¥ 1,476,905 ¥ 2,558,530
$ 27,499
Proceeds from sale of fi nance receivables ··················
Additions to fi xed assets excluding equipment
leased to others ·····································································
Additions to equipment leased to others ····················
Proceeds from sales of fi xed assets
excluding equipment leased to others ····················
Proceeds from sales of equipment leased to
others ··························································································
Purchases of marketable securities and security
investments ·············································································
Proceeds from sales of marketable securities
and security investments ·················································
Proceeds upon maturity of marketable
securities and security investments ···························
Payment for additional investments in affi liated
companies,net of cash acquired ··································
Changes in investments and other assets,
and other ··················································································
109,124
11,290
8,390
90
(1,480,570)
(1,364,582)
(604,536)
(1,279,405)
(960,315)
(833,065)
(6,498)
(8,954)
67,551
47,386
52,473
564
375,881
528,749
465,092
4,999
(1,151,640)
(636,030)
(2,412,182)
(25,926)
165,495
800,422
77,025
828
821,915
675,455
1,031,716
11,089
(4,406)
(45)
(1,020)
(11)
(74,687)
135,757
(337,454)
(3,627)
Net cash used in investing activities ····················· ¥ (3,874,886) ¥ (1,230,220) ¥ (2,850,184)
$ (30,634)
Cash fl ows from fi nancing activities
Proceeds from issuance of long-term debt ················ ¥ 3,349,812 ¥ 3,506,990 ¥ 3,178,310
$ 34,161
Payments of long-term debt ··············································
(2,310,008)
(2,704,078)
(2,938,202)
(31,580)
Increase (decrease) in short-term borrowings ··········
408,912
406,507
(335,363)
Dividends paid ············································································
(430,860)
(439,991)
(172,476)
Purchase of common stock, and other ·························
Net cash provided by (used in) fi nancing
activities ············································································
Eff ect of exchange rate changes on cash and
cash equivalents ···········································································
Net increase (decrease) in cash and cash equivalents
(311,667)
(70,587)
(10,251)
706,189
698,841
(277,982)
(2,988)
(84,759)
(271,832)
(129,793)
815,733
(8,898)
(578,534)
Cash and cash equivalents at beginning of year ··········
1,900,379
1,628,547
2,444,280
(3,605)
(1,854)
(110)
(95)
(6,218)
26,271
Cash and cash equivalents at end of year ························ ¥ 1,628,547 ¥ 2,444,280 ¥ 1,865,746
$ 20,053
The accompanying notes are an integral part of these consolidated fi nancial statements.
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1
Nature of operations:
is primarily engaged
Toyota
in the design,
manufacture, and sale of sedans, minivans,
compact cars, sport-utility vehicles, trucks and
related parts and accessories throughout the
world. In addition, Toyota provides fi nancing,
vehicle and equipment leasing and certain other
fi nancial services primarily to its dealers and their
customers to support the sales of vehicles and
other products manufactured by Toyota.
2
Summary of signifi cant accounting policies:
The parent company and its subsidiaries in Japan
maintain their records and prepare their fi nancial
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 reclassifi cations have been incorporated
in the accompanying consolidated fi nancial
statements to conform to U.S. GAAP.
Signifi cant accounting policies after refl ecting
adjustments for the above are as follows:
Basis of consolidation and accounting for
investments in affi liated companies
The consolidated fi nancial statements include
the accounts of the parent company and those
its majority-owned subsidiary companies.
of
All signifi cant intercompany transactions and
accounts have been eliminated. Investments
in affi liated companies
in which Toyota
it
exercises signifi cant
does not control, are stated at cost plus equity
in undistributed earnings. Consolidated net
in current
income
earnings of such companies, after elimination
of unrealized intercompany profi ts. Investments
in such companies are reduced to net realizable
value if a decline in market value is determined
includes Toyotaʼs equity
infl uence, but which
Investments
other-than-temporary.
in non-
public companies in which Toyota does not
exercise signifi cant infl uence (generally less than
a 20% ownership interest) are stated at cost. The
accounts of variable interest entities as defi ned
by U.S. GAAP are included in the consolidated
fi nancial statements, if applicable.
Estimates
The preparation of Toyotaʼs consolidated
fi nancial statements in conformity with U.S. GAAP
requires management to make estimates and
assumptions that aff ect the amounts reported
in the consolidated fi nancial statements and
accompanying notes. Actual results could diff er
from those estimates. The more signifi cant
estimates include: product warranties, allowance
for doubtful accounts and credit losses, residual
values for leased assets, impairment of long-lived
assets, pension costs and obligations, fair value
of derivative fi nancial instruments, other-than-
temporary losses on marketable securities and
valuation allowance for deferred tax assets.
Translation of foreign currencies
All asset and
foreign
subsidiaries and affi liates are translated into
Japanese yen at appropriate year-end current
liability accounts of
exchange rates and all income and expense
accounts of those subsidiaries are translated at
the average exchange rates for each period. The
foreign currency translation adjustments are
included as a component of accumulated other
comprehensive income.
Foreign currency receivables and payables
are translated at appropriate year-end current
exchange rates and the resulting transaction
in operations
gains or
currently.
losses are recorded
Revenue recognition
Revenues from sales of vehicles and parts are
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.
Toyotaʼs sales incentive programs principally
consist of cash payments to dealers calculated
based on vehicle volume or a model sold by a
dealer during a certain period of time. Toyota
accrues these incentives as revenue reductions
upon the sale of a vehicle corresponding to
the program by the amount determined in the
related incentive program.
Revenues from the sales of vehicles under which
Toyota conditionally guarantees the minimum
resale value are recognized on a pro rata basis
from the date of sale to the fi rst exercise date of
the guarantee in a manner similar to operating
lease accounting. The underlying vehicles of
these transactions are recorded as assets and
are depreciated in accordance with Toyotaʼs
depreciation policy.
Revenues from retail fi nancing contracts and
fi nance leases are recognized using the eff ective
yield method. Revenues from operating leases
are recognized on a straight-line basis over the
lease term.
Other costs
Advertising and sales promotion costs are
expensed as incurred. Advertising costs were
¥484,508 million, ¥389,242 million and ¥304,375
million ($3,271 million) for the years ended March
31, 2008, 2009 and 2010, respectively.
Toyota generally warrants its products against
certain manufacturing and other defects.
Provisions for product warranties are provided
for specifi c periods of time and/or usage of the
product and vary depending upon the nature of
the product, the geographic location of the sale
and other factors. Toyota records 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 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 of warranty claim recoveries
to be received from suppliers.
In addition to product warranties above,
Toyota accrues for costs of recalls and other
safety measures based on managementʼs
estimates when it is probable a liability has
been incurred and the amount of loss can be
reasonably estimated. Prior to the fourth quarter
of this fi scal year, amounts were accrued based
on individual occurrences of recalls and other
safety measures. During the fourth quarter of this
consolidated fi scal year, as a result of signifi cant
changes in facts and circumstances, Toyota has
employed an estimation model, to accrue at the
time of vehicle sale, an amount that represents
TOYOTA ANNUAL REPORT 2010
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managementʼs best estimate of expenses related
to future recalls and other safety measures. The
estimation model for recalls and other safety
measures takes into account Toyotaʼs historical
experience and individual occurrences of recalls
and other safety measures. This change resulted
from Toyotaʼs most recent experience with
recalls and other safety measures changes in the
operating processes such as the establishment
of the Special Committee for Global Quality to
address quality-related matters, as well as the
broadening of the number of vehicles subject to
recalls and other safety measures. This change
has resulted in a decrease in each of operating
income and income before income taxes and
equity in earnings of affi liated companies by
¥105,698 million ($1,136 million) in the fourth
quarter of this consolidated fi scal year.
Research and development costs are expensed
as incurred. Research and development costs
were ¥958,882 million, ¥904,075 million and
the
¥725,345 million
years ended March 31, 2008, 2009 and 2010,
respectively.
($7,796 million)
for
Cash and cash equivalents
Cash and cash equivalents include all highly liquid
investments 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 insignifi cant 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 unrealized gains or losses
included as a component of accumulated other
in value
In determining
in market value.
comprehensive income in shareholdersʼ equity,
net of applicable taxes. Individual securities
classifi ed as available-for-sale are reduced to
net realizable value for other-than-temporary
declines
if
a decline
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 fi nancial condition
and prospects of the company and Toyotaʼs
ability and intent to retain its investment in the
company for a period of time suffi cient to allow
for any anticipated recovery in market value.
Realized gains and losses, which are determined
on the average-cost method, are refl ected in the
statement of income when 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 fl ows. Fair value
is determined
principally through the use of the latest fi nancial
information.
Finance receivables
Finance receivables are recorded at the present
value of the related future cash fl ows including
residual values for fi nance leases. Incremental
direct costs incurred in connection with the
acquisition of fi nance receivables are capitalized
and amortized so as to approximate a level rate
of return over the term of the related contracts.
Wholesale and other dealer loan receivables are
placed on nonaccrual status when full payment
of principal or interest is in doubt or principal or
interest is 90 days or more contractually past due,
whichever occurs fi rst. Retail and fi nance lease
receivables are not placed on nonaccrual status.
Rather, these receivables are charged off when
payments due are no longer expected to be
received or the account is 120 days contractually
delinquent, whichever occurs fi rst.
Interest income on nonaccrual receivables is
recognized only to the extent it is received in
cash. Accounts are restored to accrual status
only when principal and
interest payments
are brought current and future payments are
reasonably assured.
Finance receivables on nonaccrual status
were ¥34,586 million and ¥26,599 million ($286
million) and fi nance receivables past due over
90 days and still accruing were ¥43,370 million
and ¥38,150 million ($410 million) as of March 31,
2009 and 2010, respectively.
Allowance for credit losses
Allowance for credit losses is established to
cover probable losses on receivables resulting
from the inability of customers to make required
payments. Provision for credit losses is included
in selling, general and administrative expenses.
The allowance for credit losses is based on a
systematic, ongoing review and evaluation
performed as part of the credit-risk evaluation
process, historical loss experience, the size and
composition of the portfolios, current economic
events and conditions, the estimated fair value
and adequacy of collateral and other pertinent
factors.
In the allowance for credit losses, general
reserves are collectively calculated by applying
reserve rates to each homogenous portfolio. This
reserve rate is based on historical loss experience,
current economic events and conditions and
other pertinent factors. Specifi c reserves on
identifi ed receivables are determined by the
present value of expected future cash fl ows or
the fair value of collateral when it is probable
that such receivables will be unable to be fully
collected.
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 reversed from
the allowance for credit losses.
is exposed to risk of
Allowance for residual value losses
Toyota
loss on the
disposition of off -lease vehicles to the extent
that sales proceeds are not suffi cient 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 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
information on used
historical and market
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.
TOYOTA ANNUAL REPORT 2010
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The allowance for residual value losses is
maintained in amounts considered by Toyota
to be appropriate in relation to the estimated
losses on its owned portfolio. Upon disposal
of the assets, the allowance for residual losses
is adjusted for the diff erence 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 fi nished products
carried by certain subsidiary companies which is
determined on the “specifi c identifi cation” basis
or “last-in, fi rst-out” (“LIFO”) basis. Inventories
valued on the LIFO basis totaled ¥150,110 million
and ¥199,275 million ($2,142 million) at March
31, 2009 and 2010, respectively. Had the “fi rst-in,
fi rst-out” basis been used for those companies
using the LIFO basis, inventories would have
been ¥58,980 million and ¥64,099 million ($689
million) higher than reported at March 31, 2009
and 2010, 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 respective assets
according to general class, type of construction
and use. The estimated useful lives range from 2
to 65 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
method over the lease term, generally from
2 to 5 years, to the estimated residual value.
Incremental direct costs incurred in connection
with the acquisition of operating lease contracts
are capitalized and amortized on a straight-line
method over the lease term.
its
long-lived assets
Long-lived assets
for
reviews
Toyota
impairment whenever events or changes in
circumstances indicate that the carrying amount
of an asset group may not be recoverable. An
impairment loss would be recognized when the
carrying amount of an asset group exceeds the
estimated undiscounted cash fl ows 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 carrying value of the asset group over its fair
value. Fair value is determined mainly using a
discounted cash fl ow valuation method.
Goodwill and intangible assets
Goodwill is not material to Toyotaʼs consolidated
balance sheets.
Intangible assets consist mainly of software.
Intangible assets with a defi nite life are amortized
on a straight-line basis with estimated useful
lives mainly of 5 years. Intangible assets with
an indefi nite 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 fl ows used in determining the fair value of
the asset. The amount of the impairment loss
to be recorded is generally determined by the
diff erence between the fair value of the asset
using a discounted cash fl ow valuation method
and the current book value.
Employee benefi t obligations
Toyota has both defi ned benefi t and defi ned
contribution plans for employeesʼ retirement
benefi ts. Retirement benefi t obligations are
measured by actuarial calculations in accordance
with U.S. GAAP. The overfunded or underfunded
status of the defi ned benefi t postretirement
plans is recognized on the consolidated balance
sheets as prepaid pension and severance costs
or accrued pension and severance costs, and the
funded status change is recognized in the year
in which it occurs through other comprehensive
income.
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 Toyotaʼs commitment to a
plan of action. The cost of each environmental
liability is estimated by using current technology
available and various engineering, fi nancial and
legal specialists within Toyota based on current
law. Such liabilities do not refl ect any off set for
possible recoveries from insurance companies
and are not discounted. There were no material
changes
for all periods
presented.
in these
liabilities
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 assets and liabilities for the expected future
tax consequences of temporary diff erences
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 benefi t will not be
realized.
Derivative fi nancial instruments
Toyota employs derivative fi nancial instruments,
including forward foreign currency exchange
contracts, foreign currency options, interest rate
swaps, interest rate currency swap agreements
and interest rate options to manage its exposure
to fl uctuations 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
in current earnings
recorded each period
or
income,
depending on whether a derivative is designated
as part of a hedge transaction and the type of
hedge transaction. The ineff ective portion of all
hedges is recognized currently in operations.
through other comprehensive
Net income attributable to Toyota Motor
Corporation per share
Basic net income attributable to Toyota Motor
Corporation per common share is calculated by
TOYOTA ANNUAL REPORT 2010
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dividing net income attributable to Toyota Motor
Corporation by the weighted-average number of
shares outstanding during the reported period.
The calculation of diluted net income attributable
to Toyota Motor Corporation per common share
is similar to the calculation of basic net income
attributable to Toyota Motor Corporation per
share, except that the weighted-average number
of shares outstanding includes the additional
dilution from the assumed exercise of dilutive
stock options.
Stock-based compensation
Toyota measures compensation expense for its
stock-based compensation plan based on the
grant-date fair value of the award.
Other comprehensive income
Other comprehensive income refers to revenues,
expenses, gains and losses that, under U.S. GAAP
are included in comprehensive income, but
are excluded from net income as these amounts
are
recorded directly as an adjustment to
shareholdersʼ equity. Toyotaʼs other comprehensive
income is primarily comprised of unrealized
gains/losses on marketable securities designated
as available-for-sale, foreign currency translation
adjustments and adjustments attributed to
pension liabilities or minimum pension liabilities
associated with Toyotaʼs defi ned benefi t pension
plans.
Accounting changes
In December 2007, FASB
issued updated
guidance of accounting for and disclosure
of business combinations. This guidance
establishes principles and requirements
for
how the acquirer recognizes and measures
the identifi able assets acquired, the liabilities
assumed, any noncontrolling interest, and the
goodwill acquired in a business combination or a
gain from a bargain purchase. Also, this guidance
provides several new disclosure requirements
that enable users of the fi nancial statements
to evaluate the nature and fi nancial eff ects of
the business combination. Toyota adopted this
guidance from the business combinations on
and after the beginning of fi scal year begun on
or after December 15, 2008. The adoption of
this guidance did not have a material impact on
Toyotaʼs consolidated fi nancial statements.
In December 2007, FASB
issued updated
guidance of accounting for and disclosure
of consolidation. This guidance establishes
accounting and reporting standards for the
noncontrolling interest in a subsidiary and for
the deconsolidation of a subsidiary. Toyota
adopted this guidance from the fi scal year
begun on or after December 15, 2008. As a result,
noncontrolling interest, formerly reported as
minority interest, is reported as shareholdersʼ
equity in the consolidated balance sheets, and
the amount of net income attributable to the
parent and to the noncontrolling interest are
identifi ed and presented in the consolidated
statements of income. Since the presentation
and disclosure requirements have been applied
retrospectively for all periods presented in the
consolidated fi nancial statements in which this
guidance is applied, certain prior year amounts
have been reclassifi ed to conform to this
guidance. The adoption of this guidance did not
have a material impact on Toyotaʼs consolidated
fi nancial statements.
In December 2008, FASB
issued updated
guidance of accounting for and disclosure
requires
of compensation. This guidance
additional disclosures about postretirement
benefi t plan assets including investment policies
and strategies, classes of plan assets, fair value
measurements of plan assets, and signifi cant
concentrations of risk. Toyota adopted this
guidance from the fi scal year ended after
December 15, 2009. The adoption of this
guidance did not have a material impact on
Toyotaʼs consolidated fi nancial statements.
requirements
In April 2009, FASB issued updated guidance
of accounting for and disclosure of investments.
This guidance revises the recognition and
presentation
for other-than-
temporary impairments of debt securities, and
contains additional disclosure
requirements
related to debt and equity securities. Toyota
adopted this guidance from the fi scal year
ended after June 15, 2009. The adoption of this
guidance did not have a material impact on
Toyotaʼs consolidated fi nancial statements.
In May 2009, FASB issued updated guidance
of accounting for and disclosure of subsequent
events. This guidance is intended to establish
general standards of accounting
for and
disclosure of events that occur after the balance
sheet date but before fi nancial statements are
issued. Toyota adopted this guidance from the
fi scal year ended after June 15, 2009. The adoption
of this guidance did not have a material impact
on Toyotaʼs consolidated fi nancial statements.
Recent pronouncements to be adopted in
future periods
In June 2009, FASB issued updated guidance of
accounting for and disclosure of transfers and
servicing. This guidance eliminates the concept
of a qualifying special-purpose entity, changes
the requirements for derecognizing fi nancial
assets, and requires additional disclosures about
transfers of fi nancial assets. This guidance is
eff ective for fi scal year beginning after November
15, 2009, and for interim period within the fi scal
year. Management is evaluating the impact of
adopting this guidance on Toyotaʼs consolidated
fi nancial statements.
In June 2009, FASB issued updated guidance of
accounting for and disclosure of consolidation.
This guidance changes how a company
determines when a variable
interest entity
should be consolidated. This guidance is eff ective
for fi scal year beginning after November 15,
2009, and for interim period within the fi scal
year. Management is evaluating the impact of
adopting this guidance on Toyotaʼs consolidated
fi nancial statements.
Reclassifi cations
Certain prior year amounts have been reclassifi ed
to conform to the presentations as of and for the
year ended March 31, 2010.
TOYOTA ANNUAL REPORT 2010
69
Notes to Consolidated Financial Statements
Financial Section
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Performance Highlights
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Corporate Information
Financial Section
Investor Information
3
U.S. dollar amounts:
6
Marketable securities and other securities investments:
U.S. dollar amounts presented in the consolidated
fi nancial statements and related notes are
included solely for the convenience of the reader
and are unaudited. 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 ¥93.04 = U.S. $1, the approximate
current exchange rate at March 31, 2010, was
used for the translation of the accompanying
consolidated fi nancial amounts of Toyota as of
and for the year ended March 31, 2010.
4
Supplemental cash fl ow information:
Cash payments for income taxes were ¥921,798
million, ¥563,368 million and ¥(207,278) million
($(2,228) million) for the years ended March
31, 2008, 2009 and 2010, respectively. Interest
payments during the years ended March 31,
2008, 2009 and 2010 were ¥686,215 million,
¥614,017 million and ¥445,049 million ($4,783
million), respectively.
Capital lease obligations of ¥7,401 million,
¥28,953 million and ¥3,400 million ($37 million)
were incurred for the years ended March 31,
2008, 2009 and 2010, respectively.
Toyota corrected the consolidated statements
of cash fl ows for the year ended March 31, 2009
as a result of changes to information gathered
5
Acquisitions and dispositions:
from certain subsidiary. This resulted in increases
to both “Additions to fi nance receivables” and
“Collection of fi nance receivables” within cash
fl ows from investing activities for the year ended
March 31, 2009. “Additions to fi nance receivables”
increased by ¥911,652 million to ¥(8,612,111)
million. “Collection of fi nance receivables” also
increased by ¥911,652 million to ¥8,143,804
million. These adjustments do not have an
impact on “Net cash used in investing activities”
in the consolidated statement of cash fl ows
for the year ended March 31, 2009, and do not
have a material impact on Toyotaʼs consolidated
fi nancial statements.
During the years ended March 31, 2008, 2009
and 2010, Toyota made several acquisitions and
dispositions, however the assets and liabilities
transferred were not material.
The aggregate cost, gross unrealized gains and losses and fair value of marketable securities and other
securities investments are as follows:
Yen in millions
March 31, 2010
Gross
unrealized
gains
Gross
unrealized
losses
Cost
Fair value
Available-for-sale
Debt securities ··········································································· ￥ 1,704,904
736,966
Equity securities ········································································
Total ···························································································· ￥ 2,441,870
￥ 42,326
172,992
￥ 215,318
￥ 65,379 ￥ 1,681,851
798,260
￥ 177,077 ￥ 2,480,111
111,698
Securities not practicable to determine fair value
Debt securities ··········································································· ￥
Equity securities ········································································
26,104
91,985
Total ···························································································· ￥ 118,089
Available-for-sale
Yen in millions
March 31, 2010
Gross
unrealized
gains
Gross
unrealized
losses
Cost
Fair value
Government bonds ································································· ￥ 2,695,248 ￥ 24,228 ￥ 64,647 ￥ 2,654,829
852,775
Common stocks ········································································
421,363
Other ·······························································································
Total ···························································································· ￥ 3,654,550 ￥ 411,486 ￥ 137,069 ￥ 3,928,967
555,526
403,776
369,670
17,588
72,421
1
Securities not practicable to determine fair value
Common stocks ········································································ ￥
Other ·······························································································
95,304
25,173
Total ···························································································· ￥ 120,477
Available-for-sale
Government bonds ·································································
Common stocks ········································································
Other ·······························································································
Total ····························································································
Securities not practicable to determine fair value
Common stocks ········································································
Other ·······························································································
Total ····························································································
Cost
$ 28,968
5,971
4,340
$ 39,279
$ 1,024
271
$ 1,295
U.S. dollars in millions
March 31, 2010
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
$ 261
3,973
189
$ 4,423
$ 695
778
0
$ 1,473
$ 28,534
9,166
4,529
$ 42,229
TOYOTA ANNUAL REPORT 2010
70
Notes to Consolidated Financial Statements
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Performance Highlights
Business Overview
Corporate Information
Financial Section
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individual company
fair values were not readily
cost, as their
determinable. Management employs a systematic
methodology to assess the recoverability of such
investments by reviewing the fi nancial viability
of the underlying companies and the prevailing
market conditions in which these companies
operate to determine if Toyotaʼs investment in
each
impaired and
whether the impairment is other-than-temporary.
Toyota periodically performs this impairment
test for signifi cant investments recorded at cost.
If the impairment is determined to be other-
than-temporary, the carrying value of the
investment is written-down by the impaired
amount and the losses are recognized currently
in operations.
is
As of March 31, 2010, government bonds
include 76% of Japanese government bonds, and
24% of U.S. and European government bonds. As
of March 31, 2010, listed stocks on the Japanese
stock markets represent 88% of common stocks
which are included in available-for-sale. “Other”
includes primarily commercial paper.
Unrealized losses continuing over a 12 month
period or more in the aggregate were not
material at March 31, 2009 and 2010.
As of March 31, 2009 and 2010, maturities
of government bonds and other included in
available-for-sale are mainly from 1 to 10 years.
Proceeds
from sales of available-for-sale
securities were ¥165,495 million, ¥800,422
million and ¥77,025 million ($828 million) for
the years ended March 31, 2008, 2009 and 2010,
respectively. On those sales, gross realized gains
were ¥18,766 million, ¥35,694 million and ¥3,186
million ($34 million) and gross realized losses
were ¥21 million, ¥1,856 million and ¥7 million
($0 million), respectively.
During the years ended March 31, 2008,
2009 and 2010, Toyota recognized impairment
losses on available-for-sale securities of ¥11,346
million, ¥220,920 million and ¥2,486 million
($27 million), respectively, which are included in
“Other income (loss), net” in the accompanying
consolidated statements of income. Impairment
losses
the year ended
March 31, 2009 primarily include a loss for an
other-than-temporary impairment on a certain
investment for which Toyota previously recorded
an exchange gain.
recognized during
long-term
In the ordinary course of business, Toyota
maintains
securities,
included in “Marketable securities and other
securities investments” and issued by a number
of non-public companies which are recorded at
investment
7
Finance receivables:
Finance receivables consist of the following:
Retail····························································································································
Finance leases ········································································································
Wholesale and other dealer loans·······························································
Deferred origination costs ···············································································
Unearned income ································································································
Allowance for credit losses
Retail ························································································································
Finance leases ····································································································
Wholesale and other dealer loans ···························································
Total fi nance receivables, net ································································
Less ‒ Current portion ·······················································································
Noncurrent fi nance receivables, net ··················································
Yen in millions
March 31,
2009
¥ 6,655,404
1,108,408
2,322,721
10,086,533
104,521
(405,171)
(157,359)
(7,776)
(73,797)
(238,932)
9,546,951
(3,891,406)
¥ 5,655,545
2010
¥ 6,810,144
1,232,508
2,403,239
10,445,891
109,747
(482,983)
(148,503)
(36,917)
(47,059)
(232,479)
9,840,176
(4,209,496)
¥ 5,630,680
U.S. dollars
in millions
March 31,
2010
$ 73,196
13,247
25,830
112,273
1,180
(5,191)
(1,596)
(397)
(506)
(2,499)
105,763
(45,244)
$ 60,519
Retail receivables
Toyota acquires new and used vehicle installment
contracts primarily from dealers. Contract period
of these primarily range from 2 years to 7 years.
Installment contracts acquired must fi rst meet
specifi ed credit standards. Thereafter, Toyota
retains responsibility for contract collection and
administration. Toyota acquires security interests
in the vehicles fi nanced and can generally
repossess vehicles if customers fail to meet
their contractual obligations. Almost all retail
receivables are non-recourse, which relieves the
dealers from fi nancial responsibility in the event
of repossession.
Finance lease receivables
Toyota acquires new vehicle lease contracts
originated primarily through dealers. Contract
period of these primarily range from 2 years
to 5 years. Lease contracts acquired must fi rst
meet specifi ed credit standards after which
Toyota assumes ownership of the leased vehicle.
Toyota is responsible for contract collection and
administration during the lease period. Toyota
is generally permitted to take possession of the
vehicle upon a default by the lessee. The residual
value is estimated at the time the vehicle is fi rst
leased. Vehicles returned to Toyota at the end of
their leases are sold by auction.
Wholesale and other dealer loan receivables
to
Toyota provides wholesale fi nancing
qualifi ed dealers to fi nance inventories. Toyota
acquires security interests in vehicles fi nanced
at wholesale. In cases where additional security
interests would be required, Toyota takes
dealership assets or personal assets, or both, as
additional security. If a dealer defaults, Toyota
has the right to liquidate any assets acquired
and seek legal remedies. Toyota also makes
term loans to dealers for business acquisitions,
facilities refurbishment, real estate purchases
and working capital requirements. These loans
are typically secured with liens on real estate,
TOYOTA ANNUAL REPORT 2010
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other dealership assets and/or personal assets of
the dealers.
Finance
receivables were geographically
distributed as follows: in North America 63.6%, in
Japan 14.1%, in Europe 11.0%, in Asia 3.8% and
in Other 7.5% as of March 31, 2009, and in North
America 61.9%, in Japan 12.8%, in Europe 10.3%,
in Asia 4.7% and in Other 10.3% as of March 31,
2010.
recourse to Toyota beyond the contractual cash
fl ows of the securitized receivables, retained
subordinated interests, any cash reserve funds
and any amounts available or funded under the
revolving liquidity notes. Toyotaʼs exposure to
these retained interests exists until the associated
securities are paid in full. Investors do not have
recourse to other assets held by Toyota for failure
of obligors on the receivables to pay when due
or otherwise.
The contractual maturities of retail receivables, the future minimum lease payments on fi nance leases
For the years ended March 31, 2009 and 2010, no retail or fi nance lease receivables were securitized
and wholesale and other dealer loans at March 31, 2010 are summarized as follows:
using QSPEs.
Retail
Years ending March 31,
2011 ·················································· ¥2,050,246
2012 ·················································· 1,748,411
2013 ·················································· 1,367,386
865,988
2014 ··················································
460,657
2015 ··················································
317,456
Thereafter ······································
¥6,810,144
Yen in millions
U.S. dollars in millions
Finance
leases
¥360,722
248,471
184,678
70,352
30,815
8,163
¥903,201
Wholesale
and other
dealer loans
¥1,915,452
120,470
100,886
116,020
43,053
107,358
¥2,403,239
Retail
$22,036
18,792
14,697
9,308
4,951
3,412
$73,196
Finance
leases
$3,877
2,671
1,985
756
331
88
$9,708
Wholesale
and other
dealer loans
$20,587
1,295
1,084
1,247
463
1,154
$25,830
Finance leases consist of the following:
Minimum lease payments ······················································································
Estimated unguaranteed residual values ·······················································
Deferred origination costs ······················································································
Less ‒ Unearned income ························································································
Less ‒ Allowance for credit losses ······································································
Yen in millions
March 31,
2009
¥ 871,250
237,158
1,108,408
6,085
(102,826)
(7,776)
2010
¥ 903,201
329,307
1,232,508
6,423
(121,664)
(36,917)
U.S. dollars
in millions
March 31,
2010
$ 9,708
3,539
13,247
69
(1,307)
(397)
Finance leases, net ···························································································
¥1,003,891
¥1,080,350
$11,612
Toyota maintains a program to sell retail and
fi nance lease receivables. Under the program,
Toyota achieves sale accounting treatment
under U.S. GAAP in securitization transactions
structured as qualifying special-purpose entities
(“QSPE”s). Toyota recognizes a gain or loss on
the sale of the fi nance receivables upon the
transfer of the receivables to the securitization
trusts structured as a QSPE. Toyota retains
servicing rights and earns a contractual servicing
fee of 1% per annum on the total monthly
receivables.
outstanding principal balance of the related
securitized
In a subordinated
interest-only strips,
capacity, Toyota retains
subordinated securities, and cash reserve funds
in these securitizations, and these retained
interests are held as restricted assets subject to
limited recourse provisions and provide credit
enhancement to the senior securities in Toyotaʼs
securitization transactions. The retained interests
are not available to satisfy any obligations of
Toyota. Investors in the securitizations have no
The following table summarizes certain cash fl ows received from and paid to the securitization trusts
for the years ended March 31, 2008, 2009 and 2010.
Yen in millions
For the years ended March 31,
U.S. dollars
in millions
For the year
ended
March 31,
2010
Proceeds from new securitizations, net of purchased
and retained securities ······························································
Servicing fees received ·····························································
Excess interest received from interest only strips ·······
Repurchases of receivables·····················································
Servicing advances ······································································
Reimbursement of servicing and maturity advances ··
2008
¥91,385
1,682
1,865
(4,681)
(114)
114
2009
¥ ̶
777
356
(48)
̶
̶
2010
¥ ̶
$ ̶
393
422
(18,465)
̶
̶
4
5
(198)
̶
̶
Toyota sold fi nance receivables under the
program and recognized pretax gains resulting
from these sales of ¥1,688 million for the
year ended March 31, 2008, after providing
an allowance for estimated credit 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 key
economic assumptions initially and subsequently
measuring the fair value of retained interests
include the market interest rate environment,
severity and rate of credit
losses, and the
prepayment speed of the receivables. All key
economic assumptions used in the valuation of
the retained interests are reviewed periodically
and are revised as considered necessary.
At March 31, 2009 and 2010, Toyotaʼs retained
interests relating to these securitizations include
interest in trusts, interest-only strips, and other
receivables, amounting to ¥19,581 million and
¥12,883 million ($138 million), respectively.
Toyota recorded no impairments on retained
interests for the years ended March 31, 2008,
2009 and 2010. Impairments are calculated, if any,
by discounting cash fl ows using managementʼs
estimates and other key economic assumptions.
Expected cumulative static pool losses over the
life of the securitizations are calculated by taking
actual life to date losses plus projected losses and
dividing the sum by the original balance of each
TOYOTA ANNUAL REPORT 2010
72
Notes to Consolidated Financial Statements
Financial Section
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Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
pool of assets. Expected cumulative static pool
credit losses for fi nance receivables securitized
using QSPEs for the years ended March 31, 2008,
2009 and 2010 were 0.26%, 0.26% and 0.45%,
respectively.
The key economic assumptions and the
sensitivity of the current fair value of the retained
interest to an immediate 10 and 20 percent
adverse change in those economic assumptions
are presented below.
The table below summarizes information about impaired fi nance receivables.
Yen in millions
March 31,
2009
2010
U.S. dollars
in millions
March 31,
2010
Wholesale and other dealer loans
Yen in
millions
U.S. dollars
in millions
March 31, 2010 March 31, 2010
Impaired fi nance receivables with an allowance ······································
Impaired fi nance receivables without an allowance ······························
Total ·······························································································································
¥49,635
3,438
¥53,073
¥37,273
1,582
¥38,855
$401
17
$418
Prepayment speed assumption (annual rate) ··················································································
Impact on fair value of 10% adverse change ················································································
Impact on fair value of 20% adverse change ················································································
Residual cash fl ows discount rate (annual rate) ··············································································
Impact on fair value of 10% adverse change ················································································
Impact on fair value of 20% adverse change ················································································
Expected credit losses (annual rate) ······································································································
Impact on fair value of 10% adverse change ················································································
Impact on fair value of 20% adverse change ················································································
6.0%
¥ (304)
(586)
3.2%
¥ (536)
(1,040)
0.05%
¥ (5)
(10)
$ (3)
(6)
$ (6)
(11)
$ (0)
(0)
These hypothetical scenarios do not refl ect
expected market conditions and should not be
used as a prediction of future performance. As
the fi gures indicate, changes in the fair value
may not be linear. Also, in this table, the eff ect
of a variation in a particular assumption on the
fair value of the retained interest is calculated
without changing any other assumption. Actual
changes in one factor may result in changes in
another, which might magnify or counteract the
sensitivities. Actual cash fl ows may diff er from
the above analysis.
Outstanding receivable balances and delinquency amounts for managed retail and lease receivables,
which include both receivables owned and securitized using QSPEs, as of March 31, 2009 and 2010 are
as follows:
for credit
Allowance
for
losses recorded
impaired fi nance
receivables were ¥13,071
million and ¥14,000 million ($150 million) as of
March 31, 2009 and 2010, respectively.
Average impaired fi nance receivables were
¥45,444 million and ¥42,581 million
($458
million) for the years ended March 31, 2009 and
2010, respectively.
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:
Principal amount outstanding ·············································································
Delinquent amounts over 60 days or more ··················································
Comprised of:
Yen in millions
March 31,
2009
2010
¥7,481,016
83,613
¥7,632,909
62,353
U.S. dollars
in millions
March 31,
2010
$82,039
670
Finished goods ················································································································
Raw materials ···················································································································
Work in process ···············································································································
Supplies and other ········································································································
Receivables owned ································································································
Receivables securitized using QSPEs ····························································
¥7,358,641
122,375
¥7,559,669
73,240
$81,252
787
Credit losses, net of recoveries attributed to
managed retail and lease receivables for the
years ended March 31, 2008, 2009 and 2010
totaled ¥93,036 million, ¥124,939 million and
¥74,240 million ($798 million), respectively.
Yen in millions
March 31,
2009
2010
¥ 875,930
257,899
251,670
73,895
¥1,459,394
¥ 885,005
265,493
199,267
72,608
¥1,422,373
U.S. dollars
in millions
March 31,
2010
$ 9,512
2,854
2,142
780
$15,288
TOYOTA ANNUAL REPORT 2010
73
Notes to Consolidated Financial Statements
Financial Section
Top Messages
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Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
10
Vehicles and equipment on operating leases:
11
Allowance for doubtful accounts and credit losses:
Vehicles and equipment on operating leases consist of the following:
An analysis of activity within the allowance for doubtful accounts relating to trade accounts and notes
receivable for the years ended March 31, 2008, 2009 and 2010 is as follows:
Vehicles ·································································································································
Equipment ··························································································································
Less ‒ Accumulated depreciation ··········································································
Yen in millions
March 31,
2009
2010
¥2,729,713
107,168
2,836,881
(795,767)
¥2,516,948
96,300
2,613,248
(791,169)
Vehicles and equipment on operating leases, net ····································
¥2,041,114
¥1,822,079
U.S. dollars
in millions
March 31,
2010
$27,052
1,035
28,087
(8,503)
$19,584
Rental income from vehicles and equipment on operating leases was ¥588,262 million, ¥560,251 million
and ¥496,729 million ($5,339 million) for the years ended March 31, 2008, 2009 and 2010, respectively.
Future minimum rentals from vehicles and equipment on operating leases are due in installments as
follows:
Years ending March 31,
2011 ·········································································································································································
2012 ·········································································································································································
2013 ·········································································································································································
2014 ·········································································································································································
2015 ·········································································································································································
Thereafter ·····························································································································································
Total minimum future rentals ···············································································································
Yen in
millions
¥417,146
256,211
117,943
29,851
8,476
6,114
¥835,741
U.S. dollars
in millions
$4,483
2,754
1,268
321
91
66
$8,983
The future minimum rentals as shown above should not be considered indicative of future cash
collections.
Yen in millions
For the years ended March 31,
2009
2008
2010
U.S. dollars
in millions
For the year
ended
March 31,
2010
Allowance for doubtful accounts at beginning
of year ····························································································
Provision for doubtful accounts, net of reversal ···········
Write-off s ···························································································
Other ····································································································
Allowance for doubtful accounts at end of year ······
¥58,066
357
(3,348)
(3,012)
¥52,063
¥52,063
(1,663)
(1,695)
(699)
¥48,006
¥48,006
1,905
(1,357)
(1,848)
¥46,706
$516
20
(14)
(20)
$502
The other amount includes the impact of
consolidation and deconsolidation of certain
entities due to changes in ownership interest
and currency translation adjustments for the
years ended March 31, 2008, 2009 and 2010.
A portion of the allowance for doubtful
accounts balance at March 31, 2009 and 2010
totaling ¥32,972 million and ¥32,971 million
($354 million), respectively,
is attributed to
certain non-current receivable balances which
are reported as other assets in the consolidated
balance sheets.
An analysis of the allowance for credit losses relating to fi nance receivables and vehicles and equipment
on operating leases for the years ended March 31, 2008, 2009 and 2010 is as follows:
Yen in millions
For the years ended March 31,
2008
2009
2010
Allowance for credit losses at beginning of year ·······
Provision for credit losses ·······················································
Charge-off s, net of recoveries ··············································
Other ··································································································
Allowance for credit losses at end of year ·················
¥112,116
122,433
(88,902)
(27,941)
¥117,706
¥ 117,706
259,096
(116,793)
(21,077)
¥ 238,932
¥ 238,932
98,870
(102,196)
(3,127)
¥ 232,479
U.S. dollars
in millions
For the year
ended
March 31,
2010
$ 2,568
1,063
(1,098)
(34)
$ 2,499
The other amount primarily includes the impact of currency translation adjustments for the years
ended March 31, 2008, 2009 and 2010.
TOYOTA ANNUAL REPORT 2010
74
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Corporate Information
Financial Section
Investor Information
Notes to Consolidated Financial Statements
Financial Section
12
Affi liated companies and variable interest entities:
Investments in and transactions with affi liated companies -
Summarized fi nancial information for affi liated co mpanies accounted for by the equity method is shown below:
Current assets ···················································································································
Noncurrent assets ··········································································································
Total assets·················································································································
¥ 6,400,685
9,438,905
¥ 15,839,590
¥ 8,034,546
9,300,307
¥ 17,334,853
Yen in millions
March 31,
2009
2010
Current liabilities ·············································································································
Long-term liabilities and noncontrolling interest ········································
Affi liated companies accounted
shareholdersʼ equity ·····································································································
Total liabilities and shareholdersʼ equity ·······················································
for by the equity method
Toyotaʼs share of affi liated companies accounted for by the equity
method shareholdersʼ equity ··············································································
¥ 4,216,956
5,740,150
¥ 5,056,178
5,981,054
5,882,484
¥ 15,839,590
6,297,621
¥ 17,334,853
67,687
$ 186,316
¥ 1,810,106
¥ 1,867,440
$ 20,071
Number of affi liated companies accounted for by the equity method
at end of period ·················································································································
56
56
Yen in millions
U.S. dollars
in millions
March 31,
2010
$ 86,356
99,960
$ 186,316
$ 54,344
64,285
U.S. dollars
in millions
For the year
ended
March 31,
2010
$ 221,406
Net revenues ··················································································
Gross profi t ······················································································
Net income attributable to affi liated companies
accounted for by the equity method ····························
investment
Entities comprising a signifi cant portion of
Toyotaʼs
in affi liated companies
include Denso Corporation; Toyota Industries
Corporation; Aisin Seiki Co., Ltd.; Aioi Insurance
Co., Ltd.; and Toyota Tsusho Corporation.
Aioi Insurance Co., Ltd. ceased to be an
affi liated company accounted for by the equity
method of Toyota Motor Corporation as of April
1, 2010, due to the business integration through
a share-for-share exchange.
Certain affi liated companies accounted for
For the years ended March 31,
2009
¥ 23,149,968
2008
¥ 26,511,831
2010
¥ 20,599,586
¥ 3,081,366
¥ 2,034,617
¥ 2,269,109
$ 24,389
¥
870,528
¥
13,838
¥
317,017
$ 3,407
by the equity method with carrying amounts
of ¥1,417,896 million and ¥1,439,090 million
($15,467 million) at March 31, 2009 and 2010,
respectively, were quoted on various established
markets at an aggregate value of ¥1,127,976
million and ¥1,711,957 million ($18,400 million),
respectively. For the year ended March 31,
2010, Toyota recognized an impairment loss
on a certain investment in affi liated company
accounted for by the equity method of ¥63,575
million ($683 million), which is included in
U.S. dollars
in millions
March 31,
2010
$2,947
6,425
U.S. dollars
in millions
For the year
ended
March 31,
2010
$17,201
42,387
“Equity in earnings of affi liated companies” in
the accompanying consolidated statements
of income. Toyota evaluated its investments in
affi liated companies, considering the length of
time and the extent to which the quoted market
prices have been less than the carrying amounts,
the fi nancial condition and near-term prospects
of the affi liated companies and Toyotaʼs ability
and intent to retain those investments in the
companies for a period of time.
Account balances and transactions with affi liated companies are presented below:
Trade accounts and notes receivable, and other receivables ················
Accounts payable and other payables ·······························································
Yen in millions
March 31,
2009
¥159,821
363,954
2010
¥274,189
597,796
Yen in millions
Net revenues ··················································································
Purchases··························································································
Dividends from affi liated companies accounted
for by the equity method for the years ended
March 31, 2008, 2009 and 2010 were ¥76,351
million, ¥114,409 million and ¥82,149 million
($883 million), respectively.
Toyota does not have any signifi cant related
party transactions other than transactions with
affi liated companies in the ordinary course of
business.
that
entities,
special-purpose
Variable Interest Entities
Toyota enters into securitization transactions
using
are
interest entities (“VIEs”).
considered variable
Although the fi nance receivables related to
securitization transactions have been legally
sold to the VIEs, Toyota holds variable interests
in certain VIEs that are expected to absorb a
majority of the VIEsʼ expected losses, receive a
For the years ended March 31,
2009
¥1,585,814
3,918,717
2010
¥1,600,365
3,943,648
2008
¥1,693,969
4,525,049
majority of the VIEsʼ expected residual returns,
or both. As a result, Toyota is considered the
primary benefi ciary of certain VIEs and therefore
consolidates certain VIEs except for QSPEs.
The consolidated securitization VIEs have
¥366,886 million ($3,943 million) in retail fi nance
receivables, ¥20,581 million ($221 million) in
restricted cash and ¥363,369 million ($3,906
million) in secured debt. Risks to which Toyota
is exposed including credit, interest rate, and/or
prepayment risks are not incremental compared
with the situation before Toyota enters into
securitization transactions.
Certain joint ventures in which Toyota has
invested are VIEs for which Toyota is not the
primary benefi ciary. However, neither
the
aggregate size of these joint ventures nor Toyotaʼs
involvements in these entities are material to
Toyotaʼs consolidated fi nancial statements.
TOYOTA ANNUAL REPORT 2010
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Notes to Consolidated Financial Statements
Financial Section
13
Short-term borrowings and long-term debt:
Short-term borrowings at March 31, 2009 and 2010 consist of the following:
Loans, principally from banks, with a weighted-average interest at
March 31, 2009 and March 31, 2010 of 2.44% and of 1.55% per
annum, respectively ·································································································
Commercial paper with a weighted-average interest at March 31,
2009 and March 31, 2010 of 1.52% and of 0.44% per annum,
respectively ···················································································································
Yen in millions
March 31,
2009
2010
U.S. dollars
in millions
March 31,
2010
¥1,115,122
¥ 804,066
$ 8,642
2,502,550
¥3,617,672
2,475,607
¥3,279,673
26,608
$35,250
As of March 31, 2010, Toyota has unused short-
term lines of credit amounting to ¥2,306,265
million ($24,788 million) of which ¥504,339
million ($5,421 million) related to commercial
paper programs. Under these programs, Toyota
is authorized to obtain short-term fi nancing at
prevailing interest rates for periods not in excess
of 360 days.
Long-term debt at March 31, 2009 and 2010 comprises the following:
Unsecured loans, representing obligations principally to banks, due
2009 to 2028 in 2009 and due 2010 to 2029 in 2010 with interest
ranging from 0.17% to 31.50% per annum in 2009 and from 0.00%
to 29.25% per annum in 2010 ·············································································
Secured loans, representing obligations principally to banks due
2009 to 2019 in 2009 and fi nance receivables securitization due
2010 to 2019 in 2010 with interest ranging from 0.68% to 5.35%
per annum in 2009 and from 0.49% to 6.65% per annum in 2010
Medium-term notes of consolidated subsidiaries, due 2009 to 2047
in 2009 and due 2010 to 2047 in 2010 with interest ranging from
0.19% to 17.47% per annum in 2009 and from 0.04% to 15.25% per
annum in 2010·············································································································
Unsecured notes of parent company, due 2010 to 2018 in 2009 and
due 2010 to 2019 in 2010 with interest ranging from 1.33% to
3.00% per annum in 2009 and from 1.07% to 3.00% per annum in
2010 ···································································································································
Unsecured notes of consolidated subsidiaries, due 2009 to 2031 in
2009 and due 2010 to 2031 in 2010 with interest ranging from
0.59% to 19.42% per annum in 2009 and from 0.25% to 17.03% per
annum in 2010·············································································································
Long‒term capital lease obligations, due 2009 to 2028 in 2009 and
due 2010 to 2028 in 2010 with interest ranging from 0.21% to
15.47% per annum in 2009 and from 0.43% to 14.40% per annum
in 2010······························································································································
Less ‒ Current portion due within one year ····················································
Yen in millions
March 31,
2009
2010
U.S. dollars
in millions
March 31,
2010
¥ 1,536,413
¥ 2,942,012
$ 31,621
11,227
381,307
4,098
5,335,159
3,814,439
40,998
450,000
580,000
6,234
1,616,816
1,473,732
15,840
51,366
9,000,981
(2,699,512)
¥ 6,301,469
42,243
9,233,733
(2,218,324)
¥ 7,015,409
454
99,245
(23,843)
$ 75,402
As of March 31, 2010, approximately 36%, 21%,
13% and 30% of long-term debt are denominated
in Japanese yen, U.S. dollars, euros, and other
currencies, respectively.
As of March 31, 2010, property, plant and
equipment with a book value of ¥82,866 million
($891 million) and in addition, other assets
aggregating ¥388,439 million ($4,175 million)
were pledged as collateral mainly for certain
debt obligations of subsidiaries. These other
assets principally consist of securitized fi nance
receivables.
The aggregate amounts of annual maturities of long-term debt during the next fi ve years are as follows:
Years ending March 31,
2011 ········································································································································································
2012 ········································································································································································
2013 ········································································································································································
2014 ········································································································································································
2015 ········································································································································································
Yen in
millions
¥2,218,324
2,148,481
2,087,820
740,848
726,090
U.S. dollars
in millions
$23,843
23,092
22,440
7,963
7,804
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 banksʼ request and
that any collateral furnished, pursuant to such
agreements or otherwise, will be applicable to
all present or future indebtedness to such banks.
During the year ended March 31, 2010, Toyota
has not received any signifi cant such requests
from these banks.
As of March 31, 2010, Toyota has unused long-
term lines of credit amounting to ¥5,667,638
million ($60,916 million).
14
Product warranties:
Toyota provides product warranties for certain
defects mainly resulting from manufacturing
based on warranty contracts with its customers
at the time of sale of products. Toyota accrues
estimated warranty costs to be incurred in the
future in accordance with the warranty contracts.
The net change in the accrual for the product
warranties for the years ended March 31, 2008,
2009 and 2010, which is included in “Accrued
expenses” in the accompanying consolidated
balance sheets, consist of the following:
TOYOTA ANNUAL REPORT 2010
76
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Yen in millions
For the years ended March 31,
2008
2009
2010
Liabilities for product warranties at beginning of year ·
Payments made during year ··················································
Provision for warranties ····························································
Changes relating to pre-existing warranties ·················
Other ···································································································
Liabilities for product warranties at end of year ··········
¥ 412,452
(324,110)
392,349
(14,155)
(20,152)
¥ 446,384
¥ 446,384
(337,863)
366,604
(17,869)
(27,999)
¥ 429,257
¥ 429,257
(336,180)
301,209
(21,606)
6,306
¥ 378,986
U.S. dollars
in millions
For the year
ended
March 31,
2010
$ 4,613
(3,613)
3,237
(232)
68
$ 4,073
The other amount primarily
includes the
impact of currency translation adjustments and
the impact of consolidation and deconsolidation
of certain entities due to changes in ownership
interest.
In addition to product warranties above,
Toyota initiates recalls and other safety measures
to repair or to replace parts which might be
expected to fail from products safety perspectives
or customer satisfaction standpoints. Toyota
accrues costs of these activities based on
managementʼs estimates. And during the fourth
quarter of this consolidated fi scal year, Toyota has
15
Other payables:
employed an estimation model, to accrue at the
time of vehicle sale, an amount that represents
managementʼs best estimate of expenses related
to future recalls and other safety measures. The
estimation model for recalls and other safety
measures takes into account Toyotaʼs historical
experience and individual occurrences of recalls
and other safety measures. These costs are not
included in the reconciliation above. See note
2 to the consolidated fi nancial statements for
additional information.
Other payables are mainly related to purchases of property, plant and equipment and non-manufacturing
purchases.
16
Income taxes:
The components of income (loss) before income taxes comprise the following:
Yen in millions
For the years ended March 31,
2009
2008
2010
U.S. dollars
in millions
For the year
ended
March 31,
2010
Income (loss) before income taxes:
Parent company and domestic subsidiaries ················
Foreign subsidiaries ···································································
¥1,522,619
914,603
¥2,437,222
¥(224,965)
(335,416)
¥(560,381)
¥ (114,569)
406,037
¥ 291,468
$ (1,231)
4,364
$ 3,133
The provision for income taxes consists of the following:
Yen in millions
For the years ended March 31,
2009
2008
2010
Current income tax expense:
Parent company and domestic subsidiaries ·············
Foreign subsidiaries ································································
Total current ············································································
¥491,185
338,852
830,037
Deferred income tax expense (benefi t):
Parent company and domestic subsidiaries ·············
Foreign subsidiaries ································································
Total deferred ·········································································
Total provision ·······································································
119,333
(37,875)
81,458
¥911,495
¥ 65,684
72,864
138,548
(26,472)
(168,518)
(194,990)
¥ (56,442)
¥ 65,971
1,156
67,127
(126,716)
152,253
25,537
¥ 92,664
U.S. dollars
in millions
For the year
ended
March 31,
2010
$ 709
13
722
(1,362)
1,636
274
$ 996
Toyota is subject to a number of diff erent income taxes which, in the aggregate, indicate a statutory
rate in Japan of approximately 40.2% for the years ended March 31, 2008, 2009 and 2010. Such rate was
also used to calculate the tax eff ects of temporary diff erences, which are expected to be realized in the
future years. Reconciliation of the diff erences between the statutory tax rate and the eff ective income tax
rate is as follows:
Statutory tax rate ··············································································································
Increase (reduction) in taxes resulting from:
Non-deductible expenses ·······················································································
Deferred tax liabilities on undistributed earnings of
foreign subsidiaries ································································································
Deferred tax liabilities on undistributed earnings of affi liates
accounted for by the equity method ····························································
Valuation allowance ···································································································
Tax credits ························································································································
The diff erence between the statutory tax rate in Japan and that
of foreign subsidiaries ····························································································
Other ···································································································································
Eff ective income tax rate ·····························································································
For the years ended March 31,
2009
40.2%
2008
40.2%
2010
40.2%
0.6
0.9
3.1
(0.4)
(4.4)
(3.1)
0.5
37.4%
(5.0)
(2.5)
(2.5)
(25.4)
10.0
1.6
(6.3)
10.1%
1.9
4.4
(0.6)
11.2
(11.8)
(12.9)
(0.6)
31.8%
TOYOTA ANNUAL REPORT 2010
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Signifi cant components of deferred tax assets and liabilities are as follows:
The deferred tax assets and liabilities that comprise the net deferred tax asset (liability) are included in
Yen in millions
March 31,
2009
2010
U.S. dollars
in millions
March 31,
2010
the consolidated balance sheets as follows:
Deferred tax assets
Accrued pension and severance costs ····················································
Warranty reserves and accrued expenses ·············································
Other accrued employeesʼ compensation ············································
Operating loss carryforwards for tax purposes ···································
Inventory adjustments ·····················································································
Property, plant and equipment and other assets ······························
Other ··························································································································
Gross deferred tax assets ·············································································
Less ‒ Valuation allowance ············································································
Total deferred tax assets ··············································································
Deferred tax liabilities
Unrealized gains on securities······································································
Undistributed earnings of foreign subsidiaries ···································
Undistributed earnings of affi liates accounted for
by the equity method ···················································································
Basis diff erence of acquired assets ····························································
Lease transactions ······························································································
Gain on securities contribution to employee retirement
benefi t trust ········································································································
Other ··························································································································
Gross deferred tax liabilities ·······································································
Net deferred tax asset (liability)
¥ 288,849
227,757
99,867
290,044
64,439
208,983
413,728
1,593,667
(208,627)
1,385,040
(100,698)
(13,971)
(536,876)
(38,356)
(472,817)
¥ 210,268
277,696
106,404
146,114
58,561
188,745
488,880
1,476,668
(239,269)
1,237,399
(147,494)
(12,797)
(575,929)
(38,977)
(457,316)
(66,523)
(57,113)
(1,286,354)
¥ 98,686
(66,523)
(6,141)
(1,305,177)
¥ (67,778)
$ 2,260
2,985
1,144
1,570
629
2,029
5,255
15,872
(2,572)
13,300
(1,585)
(138)
(6,190)
(419)
(4,915)
(715)
(66)
(14,028)
$ (728)
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, 2008, 2009 and 2010
consist of the following:
Yen in millions
For the years ended March 31,
2009
2008
2010
U.S. dollars in
millions
For the year
ended
March 31,
2010
Valuation allowance at beginning of year ······················
Additions ······················································································
Deductions ··················································································
Other ·······························································································
Valuation allowance at end of year ····································
¥ 95,225
4,783
(13,508)
(4,309)
¥ 82,191
¥ 82,191
145,707
(3,511)
(15,760)
¥208,627
¥208,627
46,704
(14,066)
(1,996)
¥239,269
$2,242
502
(151)
(21)
$2,572
The other amount includes the impact of
consolidation and deconsolidation of certain
entities due to changes in ownership interest
and currency translation adjustments during the
years ended March 31, 2008, 2009 and 2010.
Yen in millions
March 31,
2009
2010
Deferred tax assets
Deferred income taxes (Current assets) ·························································
Investments and other assets - other ······························································
¥ 605,331
149,511
¥ 632,164
122,617
Deferred tax liabilities
Other current liabilities ····························································································
Deferred income taxes (Long-term liabilities) ············································
Net deferred tax asset (liability) ······································································
(13,863)
(642,293)
¥ 98,686
(9,338)
(813,221)
¥ (67,778)
U.S. dollars
in millions
March 31,
2010
$ 6,795
1,318
(100)
(8,741)
$ (728)
Because management
intends to reinvest
undistributed earnings of foreign subsidiaries
to the extent not expected to be remitted
in the foreseeable future, management has
made no provision for income taxes on those
undistributed earnings aggregating ¥2,429,578
million ($26,113 million) as of March 31, 2010.
Toyota estimates an additional tax provision
of ¥98,035 million ($1,054 million) would be
required if the full amount of those undistributed
earnings were remitted.
Operating loss carryforwards for tax purposes
attributed to consolidated subsidiaries as of
March 31, 2010 were approximately ¥506,209
million ($5,441 million) and are available as an
off set against future taxable income of such
subsidiaries. The majority of these carryforwards
expire in years 2011 to 2030.
A summary of the gross unrecognized tax benefi ts changes for the years ended March 31, 2009 and
2010 is as follows:
Balance at beginning of year ···················································································
Additions based on tax positions related to the current year ···············
Additions for tax positions of prior years ··························································
Reductions for tax positions of prior years ························································
Reductions for tax positions related to lapse of statute of limitations ····
Reductions for settlement ·························································································
Other ·····································································································································
Balance at end of year ·····························································································
Yen in millions
For the years ended
March 31,
2009
¥ 37,722
858
35,464
(24,061)
(114)
(128)
(2,938)
¥ 46,803
2010
¥ 46,803
2,702
6,750
(2,802)
(106)
(27,409)
(1,973)
¥ 23,965
U.S. dollars
in millions
For the year ended
March 31,
2010
$ 503
29
73
(30)
(1)
(295)
(21)
$ 258
The amount of unrecognized tax benefi ts
that, if recognized, would aff ect the eff ective
tax rate was not material at March 31, 2009 and
2010, respectively. Toyota does not believe it
is reasonably possible that the total amounts
of unrecognized tax benefi ts will signifi cantly
increase or decrease within the next 12 months.
Interest and penalties related to income tax
liabilities are included in “Other income (loss),
net”. The amounts of interest and penalties
TOYOTA ANNUAL REPORT 2010
78
Notes to Consolidated Financial Statements
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accrued as of and recognized for the years ended
March 31, 2009 and 2010, respectively, were not
material.
Toyota
remains subject
income
tax
to
examination for the tax returns related to the
years beginning on and after January 1, 2000,
with various tax jurisdictions including Japan.
17
Shareholdersʼ equity:
Changes in the number of shares of common stock issued have resulted from the following:
For the years ended March 31,
2009
2010
2008
Common stock issued
Balance at beginning of year ··········································································
Issuance during the year ···················································································
Purchase and retirement ··················································································
Balance at end of year ····················································································
3,609,997,492
̶
(162,000,000)
3,447,997,492
3,447,997,492
̶
̶
3,447,997,492
3,447,997,492
̶
̶
3,447,997,492
The Corporation Act provides that an amount
equal to 10% of distributions from surplus paid by
the parent company and its Japanese subsidiaries
be appropriated as a capital reserve or a retained
earnings reserve. No further appropriations are
required when the total amount of the capital
reserve and the retained earnings reserve reaches
25% of stated capital.
The retained earnings reserve included in
retained earnings as of March 31, 2009 and
2010 was ¥167,722 million and ¥168,680 million
($1,813 million), respectively. The Corporation Act
provides that the retained earnings reserve of the
parent company and its Japanese subsidiaries is
restricted and unable to be used for dividend
payments, and is excluded from the calculation
of the profi t available for dividend.
The amounts of statutory retained earnings
of the parent company available for dividend
payments to shareholders were ¥5,624,709
million and ¥5,478,747 million ($58,886 million)
as of March 31, 2009 and 2010, respectively. In
accordance with customary practice in Japan,
the distributions from surplus are not accrued in
the fi nancial statements for the corresponding
period, but are recorded in the subsequent
accounting period after shareholdersʼ approval
has been obtained. Retained earnings at March
31, 2010 include amounts representing year-end
cash dividends of ¥78,400 million ($843 million),
¥25 ($0.27) per share, which were approved at
the Ordinary General Shareholdersʼ Meeting,
held on June 24, 2010.
Retained earnings at March 31, 2010 include
¥1,344,903 million ($14,455 million) relating to
equity in undistributed earnings of companies
accounted for by the equity method.
On June 23, 2006, at the Ordinary General
Shareholdersʼ Meeting, the shareholders of the
parent company approved to purchase up to 30
million shares of its common stock at a cost up
to ¥200,000 million during the purchase period
of one year from the following day. As a result,
the parent company repurchased approximately
28 million shares during the approved period of
time.
On June 22, 2007, at the Ordinary General
Shareholdersʼ Meeting, the shareholders of the
parent company approved to purchase up to 30
million shares of its common stock at a cost up to
¥250,000 million during the purchase period of
one year from the following day. As a result, the
parent company repurchased 30 million shares
during the approved period of time.
On February 5, 2008, the Board of Directors
resolved to purchase up to 12 million shares of its
common stock at a cost up to ¥60,000 million in
accordance with the Corporation Act. As a result,
the parent company repurchased approximately
10 million shares.
On the same date, the Board of Directors
also resolved to retire 162 million shares of its
common stock, and then the parent company
retired its common stock on March 31, 2008. This
retirement, in accordance with the Corporation
Act and related regulations, is treated as a
reduction from additional paid-in capital and
retained earnings. As a result, treasury stock,
additional paid-in capital and retained earnings
decreased by ¥646,681 million, ¥3,499 million
and ¥643,182 million, respectively.
On June 24, 2008, at the Ordinary General
Shareholdersʼ Meeting, the shareholders of the
parent company approved to purchase up to 30
million shares of its common stock at a cost up
to ¥200,000 million during the purchase period
of one year from the following day. As a result,
the parent company repurchased approximately
14 million shares during the approved period of
time. These approvals by the shareholders are
not required under the current regulation.
Detailed components of accumulated other comprehensive income (loss) in Toyota Motor Corporation
shareholdersʼ equity at March 31, 2009 and 2010 and the related changes, net of taxes for the years ended
March 31, 2008, 2009 and 2010 consist of the following:
Balances at March 31, 2007 ················································
Other comprehensive income (loss) ······························
Balances at March 31, 2008 ················································
Other comprehensive income (loss) ······························
Balances at March 31, 2009 ················································
Other comprehensive income ···········································
Balances at March 31, 2010 ················································
Balances at March 31, 2009 ················································
Other comprehensive income ···········································
Balances at March 31, 2010 ················································
Foreign
currency
translation
adjustments
¥ (40,178)
(461,189)
(501,367)
(381,303)
(882,670)
9,894
¥ (872,776)
Yen in millions
Unrealized
gains on
securities
¥ 658,808
(347,829)
310,979
(293,101)
17,878
176,407
¥ 194,285
Pension
liability
adjustments
¥ 82,760
(133,577)
(50,817)
(192,172)
(242,989)
74,645
¥ (168,344)
Accumulated
other
comprehensive
income (loss)
¥ 701,390
(942,595)
(241,205)
(866,576)
(1,107,781)
260,946
¥ (846,835)
U.S. dollars in millions
Foreign
currency
translation
adjustments
(9,487)
107
(9,380)
$
$
Unrealized
gains on
securities
192
$
1,896
$ 2,088
Pension
liability
adjustments
(2,612)
802
(1,810)
$
$
Accumulated
other
comprehensive
income (loss)
(11,907)
2,805
(9,102)
$
$
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Tax eff ects allocated to each component of other comprehensive income (loss) for the years ended
18
Stock-based compensation:
March 31, 2008, 2009 and 2010 are as follows:
For the year ended March 31, 2008
Foreign currency translation adjustments ················································
Unrealized losses on securities:
Unrealized net holding losses arising for the year ····························
Less: reclassifi cation adjustments for gains included in net
Yen in millions
Pre-tax
amount
Tax amount
Net-of-tax
amount
¥
(460,723) ¥
(466)
¥
(461,189)
(545,555)
219,313
(326,242)
income attributable to Toyota Motor Corporation ·······················
Pension liability adjustments ············································································
Other comprehensive income (loss)·····················································
(36,099)
(221,142)
14,512
87,565
¥ (1,263,519) ¥ 320,924
(21,587)
(133,577)
(942,595)
¥
For the year ended March 31, 2009
Foreign currency translation adjustments ···············································
Unrealized losses on securities:
Unrealized net holding losses arising for the year ····························
Less: reclassifi cation adjustments for losses included in net loss
¥ (391,873) ¥
10,570
¥ (381,303)
(677,710)
255,890
(421,820)
attributable to Toyota Motor Corporation ········································
Pension liability adjustments ············································································
Other comprehensive income (loss)·····················································
215,249
(319,613)
(86,530)
127,441
¥ (1,173,947) ¥ 307,371
128,719
(192,172)
¥ (866,576)
For the year ended March 31, 2010
Foreign currency translation adjustments ················································
Unrealized gains on securities:
Unrealized net holding gains arising for the year ······························
Less: reclassifi cation adjustments for gains included in net
¥
10,809
¥
(915)
¥ 9,894
277,838
(102,538)
175,300
income attributable to Toyota Motor Corporation ·······················
Pension liability adjustments ············································································
Other comprehensive income ·································································
1,852
124,526
¥ 415,025
(745)
(49,881)
¥ (154,079)
1,107
74,645
¥ 260,946
For the year ended March 31, 2010
Foreign currency translation adjustments ·················································
Unrealized gains on securities:
Unrealized net holding gains arising for the year ·······························
Less: reclassifi cation adjustments for gains included in net
U.S. dollars in millions
Pre-tax
amount
Tax amount
Net-of-tax
amount
$
117
$
(10)
$
107
2,986
(1,102)
1,884
income attributable to Toyota Motor Corporation ························
Pension liability adjustments ·············································································
Other comprehensive income ··································································
20
1,338
$ 4,461
(8)
(536)
$ (1,656)
12
802
$ 2,805
In June 1997, the parent companyʼs shareholders
approved a stock option plan for board members.
In June 2001, the shareholders approved an
amendment of the plan to include both board
members and key employees. Each year, since
inception, the shareholders have
the plansʼ
approved the authorization for the grant of
options for the purchase of Toyotaʼs common
stock. Authorized shares for each year that
remain ungranted are unavailable for grant in
future years. Stock options granted in and after
August 2002 have terms ranging from 6 years to
8 years and an exercise price equal to 1.025 times
the closing price of Toyotaʼs common stock on
the date of grant. These options generally vest 2
years from the date of grant.
On June 24, 2010, at the Ordinary General
Shareholdersʼ Meeting, the shareholders of the
parent company approved the authorization of
an additional up to 3,600,000 shares for issuance
under the Toyotaʼs stock option plan for directors,
offi cers and employees of the parent company,
its subsidiaries and affi liates.
For the years ended March 31, 2008, 2009
and 2010, Toyota
recognized stock-based
compensation expenses for stock options of
¥3,273 million, ¥3,015 million and ¥2,446 million
($26 million) as selling, general and administrative
expenses.
The weighted-average grant-date fair value of
options granted during the years ended March
31, 2008, 2009 and 2010 was ¥1,199, ¥635 and
¥803 ($9), respectively per share. The fair value
of options granted is amortized over the option
vesting period
income
attributable to Toyota Motor Corporation in
the consolidated statements of income. The
grant-date fair value of options granted
is
estimated using the Black-Scholes option pricing
model with the following weighted-average
assumptions:
in determining net
Dividend rate ····················································································································
Risk-free interest rate····································································································
Expected volatility ·········································································································
Expected holding period (years) ············································································
2008
1.7%
1.3%
23%
5.0
2009
3.0%
1.1%
23%
5.0
2010
2.4%
0.7%
30%
5.0
TOYOTA ANNUAL REPORT 2010
80
Notes to Consolidated Financial Statements
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
The following table summarizes Toyotaʼs stock option activity:
19
Employee benefi t plans:
Yen
Weighted-
average
exercise
price
¥ 5,175
7,278
4,208
6,196
6,038
4,726
3,626
6,889
5,631
4,193
3,116
4,646
¥ 5,363
¥ 4,225
¥ 5,302
¥ 6,132
Number of
shares
6,292,700
3,264,000
(792,100)
(423,000)
8,341,600
3,494,000
(119,900)
(375,000)
11,340,700
3,492,000
(157,800)
(958,200)
13,716,700
2,354,600
4,971,700
7,515,700
Yen in
millions
Aggregate
intrinsic
value
¥ 14,947
Weighted-
average
remaining
contractual
life in years
5.53
5.71
1,753
5.51
1
5.23
2.76
3.76
3.86
¥ ̶
¥ 1,753
1
¥
¥ ̶
Options outstanding at March 31, 2007 ·····················
Granted ·······················································································
Exercised ····················································································
Canceled ····················································································
Options outstanding at March 31, 2008 ·····················
Granted ·······················································································
Exercised ····················································································
Canceled ····················································································
Options outstanding at March 31, 2009 ·····················
Granted ·······················································································
Exercised ····················································································
Canceled ····················································································
Options outstanding at March 31, 2010 ·····················
Options exercisable at March 31, 2008 ·························
Options exercisable at March 31, 2009 ·························
Options exercisable at March 31, 2010 ·························
The total intrinsic value of options exercised for
the years ended March 31, 2008, 2009 and 2010
was ¥1,651 million, ¥97 million and ¥113 million
($1 million), respectively.
As of March 31, 2010, there were unrecognized
compensation expenses of ¥1,822 million
($20 million) for stock options granted. Those
expenses are expected to be recognized over a
weighted-average period of 1.1 years.
Cash received from the exercise of stock
options for the years ended March 31, 2008, 2009
and 2010 was ¥3,333 million, ¥435 million and
¥492 million ($5 million), respectively.
The following table summarizes information for options outstanding and options exercisable at March
31, 2010:
Outstanding
Weighted-
average
exercise
price
Weighted-
average
exercise
price
Weighted-
average
remaining
life
Exercisable
Weighted-
average
exercise
price
Weighted-
average
exercise
price
Yen
¥4,429
6,723
5,363
Dollars
$48
72
58
Years
5.50
4.85
5.23
Number of
shares
1,932,700
5,583,000
7,515,700
Yen
¥4,427
6,723
6,132
Dollars
$48
72
66
Exercise price
range
Yen
¥4,193 − 6,000
6,001 − 7,278
4,193 − 7,278
Number of
shares
8,133,700
5,583,000
13,716,700
TOYOTA ANNUAL REPORT 2010
Pension and severance plans
Upon terminations of employment, employees
of the parent company and subsidiaries in Japan
are entitled, under the retirement plans of each
company, to lump-sum indemnities or pension
payments, based on current rates of pay and
lengths of service or the number of “points”
mainly determined by those. Under normal
circumstances, the minimum payment prior to
retirement age is an amount based on voluntary
additional
retirement.
benefi ts on involuntary retirement, including
retirement at the age limit.
Employees
receive
Eff ective October 1, 2004, the parent company
amended its retirement plan to introduce a
“point” based retirement benefi t plan. Under
the new plan, employees are entitled to lump-
sum or pension payments determined based
on accumulated “points” vested in each year of
service.
There are three types of “points” that vest
in each year of service consisting of “service
period points” which are attributed to the
length of service, “job title points” which are
attributed to the job title of each employee,
and “performance points” which are attributed
to the annual performance evaluation of each
employee. Under normal circumstances, the
minimum payment prior to retirement age is an
amount refl ecting an adjustment rate applied
to represent voluntary retirement. Employees
receive additional benefi ts upon involuntary
retirement, including retirement at the age limit.
Eff ective October 1, 2005, the parent company
partly amended
retirement plan and
introduced the quasi cash-balance plan under
which benefi ts are determined based on the
its
variable-interest crediting rate rather than the
fi xed-interest crediting rate as was in the pre-
amended plan.
The parent company and most subsidiaries
in Japan have contributory funded defi ned
benefi t pension plans, which are pursuant to
the Corporate Defi ned Benefi t Pension Plan
Law (CDBPPL). The contributions to the plans
are funded with several fi nancial institutions
in accordance with the applicable laws and
regulations. These pension plan assets consist
principally of common stocks, government
bonds and insurance contracts.
Most foreign subsidiaries have pension plans or
severance indemnity plans covering substantially
all of their employees under which the cost of
benefi ts are currently invested or accrued. The
benefi ts for these plans are based primarily on
lengths of service and current rates of pay.
Toyota uses a March 31 measurement date for
its benefi t plans.
81
Notes to Consolidated Financial Statements
Financial Section
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Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Information regarding Toyotaʼs defi ned benefi t plans is as follows:
The accumulated benefi t obligation for all defi ned benefi t pension plans was ¥1,524,556 million and
Yen in millions
March 31,
2009
2010
U.S. dollars
in millions
March 31,
2010
Change in benefi t obligation
Benefi t obligation at beginning of year ·····················································
Service cost ················································································································
Interest cost ···············································································································
Plan participantsʼ contributions ·····································································
Plan amendments··································································································
Net actuarial (gain) loss ·······················································································
Acquisition and other ··························································································
Benefi ts paid ·············································································································
Benefi t obligation at end of year ·······························································
Change in plan assets
Fair value of plan assets at beginning of year ·········································
Actual return on plan assets ·············································································
Acquisition and other ··························································································
Employer contributions ······················································································
Plan participantsʼ contributions ·····································································
Benefi ts paid ·············································································································
Fair value of plan assets at end of year ···················································
Funded status ··············································································································
¥ 1,693,155
84,206
52,959
750
(2,096)
(47,272)
(64,784)
(84,139)
1,632,779
1,282,048
(307,293)
(43,851)
131,412
835
(84,139)
979,012
¥ 653,767
¥ 1,632,779
75,558
50,559
657
(3,080)
56,843
(2,829)
(83,740)
1,726,747
979,012
171,043
158
111,815
763
(83,740)
1,179,051
¥ 547,696
$ 17,549
812
543
7
(33)
611
(30)
(900)
18,559
10,522
1,838
2
1,202
8
(900)
12,672
$ 5,887
Amounts recognized in the consolidated balance sheet as of March 31, 2009 and 2010 are comprised
of the following:
Accrued expenses (Accrued pension and severance costs) ···············
Accrued pension and severance costs ···························································
Investments and other assets ‒ other (Prepaid pension and
severance costs) ······································································································
Net amount recognized ·····················································································
Yen in millions
March 31,
2009
¥ 30,658
634,612
2010
¥ 28,573
678,677
U.S. dollars
in millions
March 31,
2010
$ 307
7,294
(11,503)
¥ 653,767
(159,554)
¥ 547,696
(1,714)
$ 5,887
Amounts recognized in accumulated other comprehensive income (loss) as of March 31, 2009 and
2010 are comprised of the following:
Net actuarial loss ·······································································································
Prior service costs ······································································································
Net transition obligation ·······················································································
Net amount recognized ····················································································
TOYOTA ANNUAL REPORT 2010
Yen in millions
March 31,
2009
¥ (497,055)
109,570
(5,514)
¥ (392,999)
2010
¥ (385,266)
97,587
(3,570)
¥ (291,249)
U.S. dollars
in millions
March 31,
2010
$ (4,141)
1,049
(38)
$ (3,130)
¥1,571,061 million ($16,886 million) at March 31, 2009 and 2010, respectively.
The projected benefi t obligation, accumulated benefi t obligation and fair value of plan assets for which
the accumulated benefi t obligations exceed plan assets are as follows:
Projected benefi t obligation ····················································································
Accumulated benefi t obligation ···········································································
Fair value of plan assets ······························································································
Components of the net periodic pension cost are as follows:
Yen in millions
March 31,
2009
¥1,076,362
1,039,314
614,377
2010
¥508,501
452,019
65,905
Yen in millions
For the years ended March 31,
2009
2008
2010
Service cost ······················································································
Interest cost ·····················································································
Expected return on plan assets ············································
Amortization of prior service costs ·····································
Recognized net actuarial loss ················································
Amortization of net transition obligation ·······················
Net periodic pension cost ···················································
¥ 96,454
54,417
(43,450)
(17,162)
4,013
1,944
¥ 96,216
¥ 84,206
52,959
(43,053)
(17,677)
5,752
1,944
¥ 84,131
¥ 75,558
50,559
(32,251)
(15,063)
27,246
1,944
¥ 107,993
U.S. dollars
in millions
March 31,
2010
$5,465
4,858
708
U.S. dollars
in millions
For the year
ended
March 31,
2010
$ 812
543
(346)
(162)
293
21
$ 1,161
Other changes in plan assets and benefi t obligations recognized in other comprehensive income (loss)
are as follows:
Yen in millions
For the years ended March 31,
2009
2008
2010
Net actuarial gain (loss) ·····························································
Recognized net actuarial loss ················································
Prior service costs ·········································································
Amortization of prior service costs ·····································
Amortization of net transition obligation ·······················
Other ···································································································
Total recognized in other comprehensive income (loss) ····
¥(227,439)
4,013
7,619
(17,162)
1,944
24,882
¥(206,143)
¥(303,074)
5,752
2,096
(17,677)
1,944
17,003
¥(293,956)
¥ 81,949
27,246
3,080
(15,063)
1,944
2,594
¥ 101,750
U.S. dollars
in millions
For the year
ended
March 31,
2010
$ 881
293
33
(162)
21
28
$ 1,094
The estimated prior service costs, net actuarial loss and net transition obligations that will be amortized
from accumulated other comprehensive income (loss) into net periodic pension cost during the year
82
Top Messages
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Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Notes to Consolidated Financial Statements
Financial Section
ending March 31, 2011 are ¥(15,000) million ($(161) million), ¥15,700 million ($169 million) and ¥1,900
million ($20 million), respectively.
Weighted-average assumptions used to determine benefi t obligations as of March 31, 2009 and 2010
are as follows:
Discount rate ·········································································································································
Rate of compensation increase ···································································································
2.8%
0.1 ‒ 10.0%
2009
2010
2.8%
0.5 ‒ 10.0%
March 31,
Weighted-average assumptions used to determine net periodic pension cost for the years ended March
31, 2008, 2009 and 2010 are as follows:
Discount rate ································································································
Expected return on plan assets ··························································
Rate of compensation increase ··························································
2.7%
3.4%
0.1 ‒ 10.0%
2.8%
3.6%
0.1 ‒ 10.0%
2.8%
3.6%
0.1 ‒ 10.0%
For the years ended March 31,
2009
2008
2010
is
the
results of
to maximize
The expected rate of return on plan assets is
determined after considering several applicable
factors including, the composition of plan assets
held, assumed risks of asset management,
historical
returns on plan
assets, Toyotaʼs principal policy for plan asset
management, and forecasted market conditions.
Toyotaʼs policy and objective for plan asset
management
returns on
plan assets to meet future benefi t payment
requirements under risks which Toyota considers
permissible. Asset allocations under the plan
asset management are determined based on
plan asset management policies of each plan
which are established to achieve the optimized
asset compositions in terms of the long-term
overall plan asset management. Excepting equity
securities contributed by Toyota, approximately
50% of the plan assets is invested in equity
securities, approximately 30% is invested in debt
securities, and the rest of them is invested in
insurance contracts and other products. When
actual allocations are not in line with target
allocations, Toyota rebalances its investments
in accordance with the policies. Prior to making
individual investments, Toyota performs in-depth
assessments of corresponding factors including
category of products, industry type, currencies
and liquidity of each potential investment under
consideration to mitigate concentrations of
risks such as market risk and foreign currency
exchange rate risk. To assess performance of
the investments, Toyota establishes bench mark
return rates for each
investment,
combines these individual bench mark rates
based on the asset composition ratios within
each asset category, and compares the combined
rates with the corresponding actual return rates
on each asset category.
individual
The following table summarizes the fair value
of classes of plan assets as of March 31, 2010. See
note 26 to the consolidated fi nancial statements
for three levels of input which are used to
measure fair value.
Equity securities
Common stocks ········································································
Commingled funds ·································································
Debt securities
Government bonds ·································································
Commingled funds ·································································
Other ·······························································································
Insurance contracts ·····································································
Other ···································································································
Total ·································································································
Equity securities ···········································································
Common stocks ·······································································
Commingled funds ································································
Debt securities
Government bonds ································································
Commingled funds ································································
Other ······························································································
Insurance contracts ····································································
Other ··································································································
Total ································································································
Yen in millions
March 31, 2010
Level 1
Level 2
Level 3
Total
¥ 471,262
̶
471,262
79,739
̶
39,231
118,970
̶
35,774
¥ 626,006
¥
̶
237,495
237,495
̶
147,345
19,561
166,906
97,086
1,449
¥ 502,936
¥ ̶ ¥ 471,262
237,495
708,757
̶
̶
̶
2,663
928
3,591
̶
46,518
¥ 50,109
79,739
150,008
59,720
289,467
97,086
83,741
¥ 1,179,051
U.S. dollars in millions
March 31, 2010
Level 1
Level 2
Level 3
Total
$ 5,065
̶
5,065
857
̶
422
1,279
̶
384
$ 6,728
$ ̶
2,553
2,553
̶
1,584
210
1,794
1,043
16
$ 5,406
$ ̶
̶
̶
̶
28
10
38
̶
500
$ 538
$ 5,065
2,553
7,618
857
1,612
642
3,111
1,043
900
$ 12,672
The following is description of the assets,
information about the valuation techniques used
to measure fair value, key inputs and signifi cant
assumptions:
Quoted market prices for identical securities are
used to measure fair value of common stocks. As
of March 31, 2010, common stocks include 64%
of Japanese stocks and 36% of foreign stocks.
Quoted market prices for identical securities
are used to measure fair value of government
bonds. As of March 31, 2010, government bonds
include 25% of Japanese government bonds and
75% of foreign government bonds.
Commingled funds are benefi cial interests of
collective trust, which are mainly invested by the
parent company and Japanese subsidiaries. The
fair values of commingled funds are measured
using the net asset value (“NAV”) provided by the
administrator of the fund, and are categorized
by the ability to redeem investments at the
TOYOTA ANNUAL REPORT 2010
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measurement day.
The fair values of insurance contracts are
measured using contracted amount with
accrued interest.
Other consists of cash equivalents, other
private placement investment funds and other
assets. The fair values of other private placement
investment funds are measured using the NAV
provided by the administrator of the fund, and are
categorized by the ability to redeem investments
at the measurement day.
Postretirement benefi ts other than pensions
and postemployment benefi ts
Toyotaʼs U.S. subsidiaries provide certain health
insurance benefi ts to eligible
care and
retired employees. In addition, Toyota provides
benefi ts to certain former or inactive employees
after employment, but before retirement. These
life
benefi ts are currently unfunded and provided
through various
insurance companies and
health care providers. The costs of these benefi ts
are recognized over the period the employee
provides credited service to Toyota. Toyotaʼs
obligations under these arrangements are not
material.
The following table summarizes the changes in Level 3 plan assets measured at fair value for the period
ended March 31, 2010:
Balance at beginning of year ·······································································
Actual return on plan assets ·····································································
Purchases, sales and settlements ··························································
Other ·····················································································································
Balance at end of year ·····················································································
Balance at beginning of year ·······································································
Actual return on plan assets ·····································································
Purchases, sales and settlements ··························································
Other ·····················································································································
Balance at end of year ·····················································································
Yen in millions
For the year ended March 31, 2010
Other
¥45,825
(2,206)
3,467
(568)
¥46,518
Debt securities
¥ 5,242
818
(2,233)
(236)
¥ 3,591
Total
¥51,067
(1,388)
1,234
(804)
¥50,109
U.S. dollars in millions
For the year ended March 31, 2010
Other
$ 493
(24)
37
(6)
$ 500
Debt securities
$ 56
9
(24)
(3)
$ 38
Total
$ 549
(15)
13
(9)
$ 538
Toyota expects to contribute ¥111,112 million ($1,194 million) to its pension plans in the year ending
March 31, 2011.
The following pension benefi t payments, which refl ect expected future service, as appropriate, are
expected to be paid:
Years ending March 31,
2011 ········································································································································································
2012 ········································································································································································
2013 ········································································································································································
2014 ········································································································································································
2015 ········································································································································································
from 2016 to 2020 ··········································································································································
Total ····································································································································································
Yen in
millions
¥ 79,457
75,952
74,915
76,933
80,622
455,453
¥843,332
U.S. dollars
in millions
$ 854
816
805
827
867
4,895
$9,064
20
Derivative fi nancial instruments:
Toyota employs derivative fi nancial 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
fl uctuations in interest rates and foreign currency
exchange rates. Toyota does not use derivatives
for speculation or trading.
into
Fair value hedges
interest rate swaps and
Toyota enters
interest rate currency swap agreements mainly
to convert its fi xed-rate debt to variable-rate
debt. Toyota uses interest rate swap agreements
in managing interest rate risk exposure. Interest
rate swap agreements are executed as either
an integral part of specifi c debt transactions or
on a portfolio basis. Toyota uses interest rate
currency swap agreements to hedge exposure
to currency exchange rate fl uctuations 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 years ended March 31, 2008, 2009 and
2010, the ineff ective portion of Toyotaʼs fair value
hedge relationships was not material. For fair
value hedging relationships, the components of
each derivativeʼs gain or loss are included in the
assessment of hedge eff ectiveness.
Undesignated derivative fi nancial instruments
Toyota uses foreign exchange forward contracts,
foreign currency options, interest rate swaps,
interest rate currency swap agreements, and
interest rate options, to manage its exposure
to foreign currency exchange rate fl uctuations
and interest rate fl uctuations from an economic
perspective, and for which Toyota is unable or
has elected not to apply hedge accounting.
TOYOTA ANNUAL REPORT 2010
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Performance Highlights
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Notes to Consolidated Financial Statements
Financial Section
Fair value and gains or losses on derivative fi nancial instruments
The following table summarizes the fair values of derivative fi nancial instruments at March 31, 2009 and 2010:
Yen in millions
For the years ended March
31,
2009
2010
U.S. dollars
in millions
For the year
ended
March 31,
2010
Derivative fi nancial instruments designated as hedging instruments
Interest rate and currency swap agreements
Prepaid expenses and other current assets ···········································
Investments and other assets − Other ····················································
Total ························································································································
Other current liabilities ······················································································
Other long-term liabilities ················································································
Total ························································································································
¥ 35,882
83,014
¥ 118,896
¥ (47,022)
(79,634)
¥ (126,656)
¥ 45,567
94,430
¥ 139,997
¥ (21,786)
(12,045)
¥ (33,831)
Undesignated derivative fi nancial instruments
Interest rate and currency swap agreements
$
490
1,015
$ 1,505
(234)
$
(130)
(364)
$
Prepaid expenses and other current assets ···········································
Investments and other assets − Other ····················································
Total ························································································································
Other current liabilities ······················································································
Other long-term liabilities ················································································
Total ························································································································
Foreign exchange forward and option contracts
Prepaid expenses and other current assets ···········································
Investments and other assets − Other ····················································
Total ························································································································
Other current liabilities ······················································································
Other long-term liabilities ················································································
Total ························································································································
¥ 58,454
177,487
¥ 235,941
¥ (61,593)
(236,877)
¥ (298,470)
¥ 32,443
250
¥ 32,693
¥ (25,675)
̶
¥ (25,675)
¥ 54,474
168,349
¥ 222,823
¥ (38,152)
(179,765)
¥ (217,917)
¥
6,135
38
¥
6,173
¥ (20,843)
(138)
¥ (20,981)
$
586
1,809
$ 2,395
(410)
$
(1,932)
$ (2,342)
$
$
$
$
66
0
66
(224)
(2)
(226)
The following table summarizes the notional amounts of derivative fi nancial instruments at March 31,
2009 and 2010:
Yen in millions
For the years ended March 31,
2009
2010
U.S. dollars in millions
For the year ended March 31,
2010
Designated
derivative
fi nancial
instruments
Undesignated
derivative
fi nancial
instruments
Designated
derivative
fi nancial
instruments
Undesignated
derivative
fi nancial
instruments
Designated
derivative
fi nancial
instruments
Undesignated
derivative
fi nancial
instruments
¥1,907,927
¥12,472,179
¥1,168,882
¥11,868,039
$12,563
$127,559
̶
¥1,907,927
1,562,876
¥14,035,055
̶
¥1,168,882
1,487,175
¥13,355,214
̶
$12,563
15,984
$143,543
Interest rate and
currency swap
agreements ······
Foreign exchange
forward and option
contracts ··················
Total ······················
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The following table summarizes the gains and losses on derivative fi nancial instruments and hedged items reported in the consolidated statement of income for the years ended March 31, 2009 and 2010:
Yen in millions
For the years ended March 31,
2009
2010
U.S. dollars in millions
For the year ended March 31,
2010
Gains (losses) on
derivative fi nancial
instruments
Gains (losses) on hedged
items
Gains (losses) on
derivative fi nancial
instruments
Gains (losses) on hedged
items
Gains (losses) on
derivative fi nancial
instruments
Gains (losses) on hedged
items
Derivative fi nancial instruments
designated as hedging instruments - Fair value hedge
Interest rate and currency swap agreements
Cost of fi nancing operations ··············································
Interest expense ·······································································
¥ (288,553)
(439)
¥ 293,637
439
¥ 138,677
(265)
¥ (135,163)
265
Undesignated derivative fi nancial instruments
Interest rate and currency swap agreements
Cost of fi nancing operations ··············································
Foreign exchange gain (loss), net ···································
Foreign exchange forward and option contracts
Cost of fi nancing operations ··············································
Foreign exchange gain (loss), net ··································
¥ (72,696)
(3,016)
24,183
174,158
¥
̶
̶
̶
̶
¥ 77,939
(2,819)
(21,841)
60,599
¥
̶
̶
̶
̶
$ 1,491
(3)
$
838
(30)
(235)
651
$ (1,453)
3
$ ̶
̶
̶
̶
Undesignated derivative fi nancial instruments
are used to manage risks of fl uctuations in
interest rates to certain borrowing transactions
in foreign currency exchange rates of
and
certain currency
receivables and payables.
Toyota accounts for these derivative fi nancial
instruments as economic hedges with changes
in the fair value recorded directly into current
period earnings.
instruments reported
Unrealized gains or (losses) on undesignated
in
derivative fi nancial
the cost of fi nancing operations for the years
ended March 31, 2008, 2009 and 2010 were
¥(67,991) million, ¥(80,298) million and ¥71,538
million ($769 million) those reported in foreign
gain (loss), net were ¥45,670 million, ¥(33,578)
million and ¥(26,476) million ($(285) million),
respectively.
Toyota corrected the gains or
losses on
derivative fi nancial
instruments and hedged
items disclosed for the year ended March 31,
2009 as a result of changes to information
gathered
from certain subsidiaries. These
adjustments do not have a material impact on
Toyotaʼs consolidated fi nancial statements.
into
Credit risk related contingent features
Toyota enters
International Swaps and
Derivatives Association Master Agreements
with counterparties. These Master Agreements
contain a provision requiring either Toyota or
the counterparty to settle the contract or to post
assets to the other party in the event of a ratings
downgrade below a specifi ed threshold.
The aggregate fair value amount of derivative
fi nancial instruments that contain credit risk
related contingent features that are in a net
liability position as of March 31, 2010 is ¥63,445
million ($682 million). The aggregate fair value
amount of assets that are already posted as of
March 31, 2010 is ¥9,469 million ($102 million).
If the ratings of Toyota decline below specifi ed
thresholds, the maximum amount of assets to
be posted or for which Toyota could be required
to settle the contracts is ¥63,445 million ($682
million) as of March 31, 2010.
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Notes to Consolidated Financial Statements
Financial Section
21
Other fi nancial instruments:
Toyota has certain fi nancial
instruments,
including fi nancial assets and liabilities and off -
balance sheet fi nancial instruments which arose
in the normal course of business. These fi nancial
instruments are executed with creditworthy
fi nancial institutions, and virtually all foreign
currency contracts are denominated
in U.S.
dollars, euros and other currencies of major
industrialized countries. Financial instruments
involve, to varying degrees, market risk as
instruments are subject to price fl uctuations,
and elements of credit risk in the event a
counterparty should default.
In the unlikely
event the counterparties fail to meet the
contractual terms of a foreign currency or an
interest rate instrument, Toyotaʼs risk is limited
to the fair value of the instrument. Although
Toyota may be exposed to losses in the event of
non-performance by counterparties on fi nancial
instruments, it does not anticipate signifi cant
losses due to the nature of its counterparties.
Counterparties to Toyotaʼs fi nancial instruments
represent,
international fi nancial
institutions. Additionally, Toyota does not
have a signifi cant exposure to any individual
counterparty. Toyota believes that the overall
credit risk related to its fi nancial instruments is
not signifi cant.
in general,
The estimated fair values of Toyotaʼs fi nancial instruments, excluding marketable securities and other
securities investments and affi liated companies and derivative fi nancial instruments, are summarized as
follows:
Yen in millions
March 31, 2009
Carrying
amount
Estimated
fair value
Asset (Liability)
Cash and cash equivalents ··················································
Time deposits ·············································································
Total fi nance receivables, net ············································
Other receivables ·····································································
Short-term borrowings ·························································
Long-term debt including the current portion ·······
¥ 2,444,280
45,178
8,450,709
332,722
(3,617,672)
(8,949,615)
¥ 2,444,280
45,178
8,677,228
332,722
(3,617,672)
(9,026,007)
Yen in millions
March 31, 2010
U.S. dollars in millions
March 31, 2010
Carrying
amount
Estimated
fair value
Carrying
amount
Estimated
fair value
Asset (Liability)
Cash and cash equivalents ·················································
Time deposits ············································································
Total fi nance receivables, net ···········································
Other receivables ····································································
Short-term borrowings ························································
Long-term debt including the current portion ······
¥ 1,865,746
392,724
8,759,826
360,379
(3,279,673)
(9,191,490)
¥ 1,865,746
392,724
9,112,527
360,379
(3,279,673)
(9,297,904)
$ 20,053
4,221
94,151
3,873
(35,250)
(98,791)
$ 20,053
4,221
97,942
3,873
(35,250)
(99,934)
Cash and cash equivalents, time deposits and
other receivables
In the normal course of business, substantially
all cash and cash equivalents, time deposits and
other receivables are highly liquid and are carried
at amounts which approximate fair value.
Finance receivables, net
The carrying value of variable rate fi nance
to approximate
receivables was assumed
fair value as they were repriced at prevailing
market rates. The fair value of fi xed rate fi nance
receivables was estimated by discounting
expected cash fl ows to present value using the
rates at which new loans of similar credit quality
and maturity would be made.
long-term debt
Short-term borrowings and long-term debt
The fair values of short-term borrowings and
total
including the current
portion were estimated based on the discounted
amounts of future cash fl ows using Toyotaʼs
current incremental borrowing rates for similar
liabilities.
22
Lease commitments:
Toyota leases certain assets under capital lease and operating lease arrangements.
An analysis of leased assets under capital leases is as follows:
Class of property
Building ·····························································································································
Machinery and equipment ·····················································································
Less - Accumulated depreciation ·······································································
Yen in millions
March 31,
2009
2010
U.S. dollars
in millions
March 31,
2010
¥ 24,369
51,971
(33,845)
¥ 42,495
¥ 23,518
48,043
(36,926)
¥ 34,635
$ 253
516
(397)
$ 372
TOYOTA ANNUAL REPORT 2010
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Amortization expenses under capital leases for the years ended March 31, 2008, 2009 and 2010 were
23
Other commitments and contingencies, concentrations and factors that may aff ect future operations :
¥7,846 million, ¥12,183 million and ¥12,606 million ($135 million), respectively.
Future minimum lease payments under capital leases together with the present value of the net
minimum lease payments as of March 31, 2010 are as follows:
Years ending March 31,
2011 ·········································································································································································
2012 ·········································································································································································
2013 ·········································································································································································
2014 ·········································································································································································
2015 ·········································································································································································
Thereafter ·····························································································································································
Total minimum lease payments ···········································································································
Less ‒ Amount representing interest ····································································································
Present value of net minimum lease payments ··········································································
Less ‒ Current obligations ···························································································································
Long-term capital lease obligations ··································································································
Yen in
millions
¥ 26,327
3,585
2,366
2,028
1,795
16,413
52,514
(10,271)
42,243
(24,089)
¥ 18,154
U.S. dollars
in millions
$ 283
39
25
22
19
176
564
(110)
454
(259)
$ 195
Rental expenses under operating leases for the years ended March 31, 2008, 2009 and 2010 were
¥100,319 million, ¥106,653 million and ¥93,994 million ($1,010 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 March 31,
2010 are as follows:
Years ending March 31,
2011 ··········································································································································································
2012 ··········································································································································································
2013 ··········································································································································································
2014 ··········································································································································································
2015 ··········································································································································································
Thereafter ······························································································································································
Total minimum future rentals ·················································································································
Yen in
millions
¥ 9,900
8,136
6,493
5,029
4,273
18,122
¥51,953
U.S. dollars
in millions
$106
87
70
54
46
195
$558
Commitments
Commitments outstanding at March 31, 2010 for
the purchase of property, plant and equipment
and other assets totaled ¥74,529 million ($801
million).
Guarantees
Toyota enters into contracts with Toyota dealers
to guarantee customersʼ payments of their
installment payables that arise 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 at March 31, 2010,
range from 1 month to 35 years; 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 March
31, 2010 is ¥1,604,893 million ($17,249 million).
Liabilities for guarantees totaling ¥5,969 million
($64 million) have been provided as of March 31,
2010. Under these guarantee contracts, Toyota is
entitled to recover any amount paid by Toyota
from the customers whose original obligations
Toyota has guaranteed.
Legal proceedings
Product Recalls
From time-to-time, Toyota issues vehicle recalls
and takes other safety measures
including
safety campaigns in its vehicles. In November
2009, Toyota announced a safety campaign in
North America for certain models of Toyota and
Lexus vehicles related to fl oor mat entrapment
of accelerator pedals, and later expanded it
to include additional models. In January 2010,
Toyota announced a recall in North America
for certain models of Toyota vehicles related to
sticking and slow-to-return accelerator pedals.
Also in January 2010, Toyota recalled in Europe
and China certain models of Toyota vehicles
related to sticking accelerator pedals. In February
2010, Toyota announced a worldwide recall
related to the software program that controls the
antilock braking system (ABS) in certain vehicles
models including the Prius. Set forth below is a
description of the various claims, lawsuits and
government investigations against Toyota in the
United States relating to recalls and other safety
measures.
There are approximately 200 putative class
actions that have been fi led since November
2009 alleging that certain Toyota, Lexus and
Scion vehicles contain defects that lead to
unintended acceleration. Many of the putative
class actions allege that malfunctions involving
the fl oor mats and accelerator pedals do not
cover the full scope of possible defects related
to unintended acceleration. Rather, they allege
that Electronic Throttle Control-intelligent
(ETCS-i) is the true cause and that Toyota has
failed to inform consumers despite its awareness
of the problem. In general, these cases seek
recovery for the alleged diminution in value of
the vehicles, injunctive and other relief. In April
2010, the approximately 190 federal cases were
consolidated for most purposes into a single
multi-district
in the United States
District Court for the Central District of California.
In addition, around half of the approximately 125
litigation
TOYOTA ANNUAL REPORT 2010
88
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individual product liability personal injury cases
relating to unintended acceleration pending
against Toyota have been consolidated into the
federal class action suit. (The remaining individual
product liability personal injury cases relating
to unintended acceleration remain pending in
various state courts in the United States.) This
consolidated federal class action suit is in its very
early stages and currently activity centers around
case organization and scheduling.
Additionally,
there are approximately 10
putative class actions in various state courts,
including California. The claims are similar to the
class actions in federal court. One of the putative
California class actions was fi led by the Orange
County District Attorney and, among other
things, seeks statutory penalties alleging that
Toyota sold and marketed defective vehicles and
that consumers have been harmed as a result of
diminution in value of their vehicles.
Beginning in February 2010, Toyota has also
been sued in 9 putative class actions in federal
and state courts alleging defects in the braking
systems in various hybrid vehicles that causes
the vehicles to fail to stop in a timely manner
when driving in certain road conditions. The
plaintiff s claim that while a remedy for this
braking issue has been implemented on vehicles
in production since January 2010 and has been
off ered to current owners of certain of the
vehicles, that owners and lessees of all of the
vehicles should recover for diminution in the
value of the vehicles. They also seek injunctions
ordering Toyota to repair the vehicles and to take
other actions, punitive damages and other relief.
From February through April 2010, Toyota has
also been sued in the United States District Court
for the Central District of California in 6 putative
shareholder class actions on behalf of investors
in Toyota American Depository Shares and
common stock, and in a putative bondholder
class action. The complaints of these securities
class action lawsuits allege that defendants
made statements that were false or misleading
in that they failed to disclose problems with, or
the causes of, sudden unintended acceleration
in a number of vehicle models. Plaintiff s seek
monetary damages in an amount to be proven
at trial, interest and attorneysʼ fees and costs.
On May 21, 2010, a shareholder derivative
action was fi led against certain offi cers and
directors of Toyota in the Superior Court of the
State of California, County of Los Angeles. The
complaint alleges that the defendants breached
their fi duciary duties of care and loyalty as well
as wasted corporate assets and unjustly enriched
themselves, with respect to and as a result
of their handling of design defects in Toyota
vehicles, alleging facts similar to those alleged
in the securities class actions. The plaintiff seeks
to recover on behalf of Toyota amounts spent
by Toyota as a result of the defendantsʼ alleged
mishandling of the problem of unintended
acceleration and of the alleged failure to make
accurate and timely public disclosure.
Toyota believes that it has meritorious defenses
to all of the cases and will vigorously defend
against them.
In February 2010, Toyota received a subpoena
from the U.S. Attorney for the Southern District
of New York and a voluntary request and
subpoena from the U.S. Securities and Exchange
Commission (“SEC”). The subpoenas and the
voluntary request primarily request documents
and
related
certain fi nancial records. This is a coordinated
to unintended
acceleration
investigation and has included interviews of
Toyota and non-Toyota witnesses, as well as
production of documents. On June 23, 2010,
request and
Toyota
subpoena from the SEC that primarily requested
production of documents related to the steering
relay rod.
received a voluntary
respectively. The
During the fi rst quarter of calendar year 2010,
Toyota received three formal inquires from the
National Highway Traffi c Safety Administration
(“NHTSA”) related to the recalls related to fl oor
mat entrapment and sticking accelerator pedals.
The fi rst two, TQ10-001 and TQ10-002, address
the timing of the announcement of the recalls
related to fl oor mat entrapment and sticking
third,
accelerator pedals,
RQ10-003, addresses the scope of the recalls
and unintended acceleration generally. On
April 19, 2010, Toyota and the Department of
Transportation announced a settlement resolving
TQ10-002 pursuant to which Toyota paid $16.4
million to the U.S. Treasury. Toyota denied the
allegations that it violated the Motor Vehicle
Safety Act or its implementing regulations but
agreed to the settlement to avoid a protracted
dispute and possible litigation. TQ10-001 is still
pending, and on June 4, Toyota fi led its fi nal
response to RQ10-003.
On May 10, 2010, NHTSA notifi ed Toyota that
it had also opened a Timeliness Query regarding
the 2005 recall of certain pickup trucks and
sport utility vehicles for a possible issue with the
steering relay rod.
Toyota has also received subpoenas and
formal and informal requests from various statesʼ
attorneys general and certain local governmental
agencies regarding various recalls, the facts
its recent recalls and customer
underlying
handling related to those recalls.
Toyota is cooperating with the government
agencies in their investigations, which generally
are on-going.
The
recalls and other safety measures
described above have led to a number of claims,
lawsuits and government investigations against
Toyota in the United States as set forth in the
preceding paragraphs. Amounts accrued as of
March 31, 2010 relate to these legal actions are
not material to Toyotaʼs fi nancial position, results
of operations, or cash fl ows. Toyota cannot
currently estimate its potential liability, damages
or range of potential loss, if any, beyond the
amounts accrued; however, the resolution of
these matters could have an adverse eff ect on
Toyotaʼs fi nancial position, results of operations
or cash fl ows.
United States Antitrust Proceedings
In February 2003, Toyota, General Motors
Corporation, 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. 26 similar actions were fi led
in federal district courts in California, Illinois,
New York, Massachusetts, Florida, New Jersey
and Pennsylvania. Additionally, 56 parallel class
actions were fi led in state courts in California,
Minnesota, New Mexico, New York, Tennessee,
Wisconsin, Arizona, Florida, Iowa, New Jersey
and Nebraska on behalf of the same purchasers
in these states. As of April 1, 2005, actions fi led in
federal district courts were consolidated in Maine
and actions fi led in the state courts of California
TOYOTA ANNUAL REPORT 2010
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and New Jersey were also consolidated.
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.
injunctions
The complaints seek permanent
against the alleged antitrust violations and
treble damages in an unspecifi ed amount. In
March 2004, the federal district court of Maine
(i) dismissed claims against certain Canadian
companies, including Toyota Canada, Inc., for lack
of personal jurisdiction but denied or deferred to
dismiss claims against certain other Canadian
companies, and (ii) dismissed the claim for
damages based on the Sherman Antitrust Act but
did not bar the plaintiff s from seeking injunctive
relief against the alleged antitrust violations. The
plaintiff s have submitted an amended compliant
adding a claim for damages based on state
antitrust laws and Toyota has responded to the
plaintiff ʼs discovery requests. Toyota believes
that its actions have been lawful. In the interest
of quickly resolving these legal actions, however,
Toyota entered into a settlement agreement with
the plaintiff s at the end of February 2006. The
settlement agreement is pending the approval
of the federal district court, and immediately
upon approval the plaintiff s will, in accordance
with the terms of the settlement agreement,
withdraw all pending actions against Toyota in
the federal district court as well as all state courts
and all related actions will be closed.
Other Proceedings
Toyota has various other legal actions, other
governmental proceedings and other claims
pending against it, including other product
liability claims in the United States. Although
the claimants in some of these actions seek
potentially substantial damages, Toyota cannot
currently estimate its potential liability, damages
or range of potential loss, if any, beyond the
amounts accrued, 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 eff ect on Toyotaʼs fi nancial
position, results of operations or cash fl ows.
Environmental matters and others
In October 2000, the European Union brought
into eff ect a directive that requires member
states to promulgate regulations implementing
the following: (i) manufacturers shall bear all or a
signifi cant part of the costs for taking back end-
of-life vehicles put on the market after July 1, 2002
and dismantling and recycling those vehicles.
Beginning January 1, 2007, this requirement
became applicable to vehicles put on the market
before July 1, 2002; (ii) manufacturers may not use
certain hazardous materials in vehicles to be sold
after July 2003; (iii) vehicles type-approved and
put on the market after December 15, 2008, 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 (iv) end-of-life vehicles
must meet actual re-use of 80% and re-use as
material or energy of 85%, respectively, of vehicle
weight by 2006, rising respectively to 85% and
95% by 2015. A law to implement the directive
came into eff ect in all member states including
Bulgaria, Romania that joined the European
Union in January 2007. Currently, there are
uncertainties surrounding the implementation of
the applicable regulations in diff erent European
Union member states, particularly regarding
manufacturer
resultant
expenses that may be incurred.
responsibilities and
In addition, under this directive member
states must take measures to ensure that car
manufacturers, distributors and other auto-
related economic operators establish adequate
used vehicle collection and treatment facilities
and to ensure that hazardous materials and
recyclable parts are removed from vehicles prior
to shredding. This directive impacts Toyotaʼs
vehicles sold in the European Union and Toyota
is introducing vehicles that are in compliance
with such measures taken by the member states
pursuant to the directive.
Based on the legislation that has been enacted
24
Segment data:
The operating segments reported below are the
segments of Toyota for which separate fi nancial
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 Toyotaʼs operations on a
worldwide basis are derived from the Automotive
and Financial Services business segments. The
Automotive segment designs, manufactures
and distributes sedans, minivans, compact cars,
sport-utility vehicles, trucks and related parts
and accessories. The Financial Services segment
consists primarily of fi nancing, and vehicle and
equipment leasing operations to assist in the
to date, Toyota has provided for its estimated
liability related to covered vehicles in existence
as of March 31, 2010. Depending on the
legislation that will be enacted subject to other
circumstances, Toyota may be required to revise
the accruals for the expected costs. Although
Toyota does not expect its compliance with the
directive to result in signifi cant cash expenditures,
Toyota is continuing to assess the impact of this
future legislation on its results of operations, cash
fl ows and fi nancial position.
Toyota purchases materials that are equivalent
to approximately 10% of material costs from a
supplier which is an affi liated company.
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, 2011.
merchandising of the parent company and its
affi liate companies products as well as other
products. The All Other segment includes the
design, manufacturing and sales of housing,
telecommunications and other business.
The following tables present certain informa-
tion regarding Toyotaʼs industry segments and
operations by geographic areas and overseas
revenues by destination as of and for the years
ended March 31, 2008, 2009 and 2010.
TOYOTA ANNUAL REPORT 2010
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Performance Highlights
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Corporate Information
Financial Section
Investor Information
Notes to Consolidated Financial Statements
Financial Section
Segment operating results and assets
As of and for the year ended March 31, 2008:
Yen in millions
Automotive
Financial
Services
All Other
Inter-segment
Elimination/
Unallocated
Amount
Consolidated
Net revenues
Sales to external customers ··· ¥ 24,160,254
Inter-segment sales and
17,052
transfers ············································
Total ················································
24,177,306
22,005,401
Operating expenses ···················
Operating income ······················ ¥ 2,171,905
Assets ················································· ¥ 13,593,025
Investment in equity
method investees ···················
Depreciation expenses·············
Capital expenditure ···················
1,777,956
1,050,541
1,546,524
¥ 1,468,730
¥ 660,256
¥
̶ ¥ 26,289,240
29,624
1,498,354
1,411,860
¥
86,494
¥ 13,942,372
235,166
409,725
1,149,842
686,699
1,346,955
1,313,875
¥
33,080
¥ 1,273,560
̶
30,869
56,439
(733,375)
(733,375)
(712,271)
¥
(21,104)
¥ 3,649,363
̶
26,289,240
24,018,865
¥ 2,270,375
¥ 32,458,320
52,656
̶
7,170
2,065,778
1,491,135
2,759,975
As of and for the year ended March 31, 2009:
Yen in millions
Automotive
Financial
Services
All Other
Inter-segment
Elimination/
Unallocated
Amount
Consolidated
Net revenues
Sales to external customers ··· ¥ 18,550,501
Inter-segment sales and
14,222
transfers ········································
18,564,723
Total ················································
18,959,599
Operating expenses ···················
Operating income (loss) ·········· ¥
(394,876)
Assets ················································· ¥ 11,716,316
Investment in equity
method investees ···················
Depreciation expenses·············
Capital expenditure ···················
1,606,013
1,072,848
1,343,572
¥ 1,355,850
¥ 623,219
¥
̶ ¥ 20,529,570
21,698
1,377,548
1,449,495
¥
(71,947)
¥ 13,631,662
561,728
1,184,947
1,175,034
¥
9,913
¥ 1,131,400
(597,648)
(597,648)
(593,547)
¥
(4,101)
¥ 2,582,659
̶
20,529,570
20,990,581
¥
(461,011)
¥ 29,062,037
168,057
389,937
883,968
̶
32,385
35,334
36,036
̶
62,023
1,810,106
1,495,170
2,324,897
As of and for the year ended March 31, 2010:
Yen in millions
Automotive
Financial
Services
All Other
Inter-segment
Elimination/
Unallocated
Amount
Consolidated
Net revenues
Sales to external customers ··· ¥ 17,187,308
Inter-segment sales and
10,120
transfers ············································
17,197,428
Total ················································
17,283,798
Operating expenses ···················
(86,370)
Operating income (loss) ·········· ¥
Assets ················································· ¥ 12,359,404
Investment in equity
method investees ···················
Depreciation expenses·············
Capital expenditure ···················
1,692,702
1,018,935
616,216
¥ 1,226,244
¥ 537,421
¥
̶ ¥ 18,950,973
19,163
1,245,407
998,480
246,927
¥
¥ 13,274,953
410,194
947,615
956,475
(8,860)
¥
¥ 1,119,635
(439,477)
(439,477)
(435,296)
(4,181)
¥
¥ 3,595,295
̶
18,950,973
18,803,457
147,516
¥
¥ 30,349,287
129,745
348,820
774,102
̶
46,814
21,751
44,993
̶
25,532
1,867,440
1,414,569
1,437,601
U.S. dollars in millions
Automotive
Financial
Services
All Other
Inter-segment
Elimination/
Unallocated
Amount
Consolidated
$ 184,730
$ 13,180
$ 5,777
$ ̶
$ 203,687
109
184,839
185,767
$
(928)
$ 132,840
18,193
10,952
6,623
206
13,386
10,732
$ 2,654
$ 142,680
1,394
3,749
8,320
4,409
10,186
10,281
$
(95)
$ 12,034
̶
503
234
(4,724)
(4,724)
(4,679)
$
(45)
$ 38,642
484
̶
275
̶
203,687
202,101
$ 1,586
$ 326,196
20,071
15,204
15,452
Net revenues
Sales to external customers ···
Inter-segment sales and
transfers ···········································
Total ················································
Operating expenses ···················
Operating income (loss) ··········
Assets ·················································
Investment in equity
method investees ···················
Depreciation expenses·············
Capital expenditure ···················
TOYOTA ANNUAL REPORT 2010
91
Notes to Consolidated Financial Statements
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Geographic information
As of and for the year ended March 31, 2008:
Net revenues
Sales to external customers ···························································
Inter-segment sales and transfers ···············································
Total ········································································································
Operating expenses ···········································································
Operating income ···············································································
Assets ·········································································································
Long-lived assets ·················································································
As of and for the year ended March 31, 2009:
Net revenues
Sales to external customers ···························································
Inter-segment sales and transfers ···············································
Total ········································································································
Operating expenses ···········································································
Operating income (loss) ···································································
Assets ·········································································································
Long-lived assets ·················································································
As of and for the year ended March 31, 2010:
Net revenues
Japan
North America
Europe
Asia
Other
Inter-segment Elimination/
Unallocated Amount
Consolidated
Yen in millions
¥ 8,418,620
6,897,192
15,315,812
13,875,526
¥ 1,440,286
¥ 12,883,255
3,696,081
¥ 9,248,950
174,308
9,423,258
9,117,906
¥
305,352
¥ 10,779,947
2,808,782
¥ 3,802,814
190,620
3,993,434
3,851,863
¥
141,571
¥ 3,125,572
574,854
¥ 2,790,987
329,839
3,120,826
2,864,470
¥
256,356
¥ 1,792,681
446,513
Yen in millions
¥ 2,027,869
266,268
2,294,137
2,150,159
¥
143,978
¥ 1,703,533
285,772
¥
̶
(7,858,227)
(7,858,227)
(7,841,059)
¥
(17,168)
¥ 2,173,332
̶
¥ 26,289,240
̶
26,289,240
24,018,865
¥ 2,270,375
¥ 32,458,320
7,812,002
Japan
North America
Europe
Asia
Other
Inter-segment Elimination/
Unallocated Amount
Consolidated
¥ 7,471,916
4,714,821
12,186,737
12,424,268
¥
(237,531)
¥ 11,956,431
3,658,719
¥ 6,097,676
125,238
6,222,914
6,613,106
¥
(390,192)
¥ 10,685,466
2,726,419
¥ 2,889,753
123,375
3,013,128
3,156,361
¥ (143,233)
¥ 2,324,528
410,185
¥ 2,450,412
268,917
2,719,329
2,543,269
¥ 176,060
¥ 1,547,890
372,330
Yen in millions
¥ 1,619,813
263,087
1,882,900
1,795,252
¥
87,648
¥ 1,446,505
234,028
¥
̶
(5,495,438)
(5,495,438)
(5,541,675)
¥
46,237
¥ 1,101,217
̶
¥ 20,529,570
̶
20,529,570
20,990,581
¥
(461,011)
¥ 29,062,037
7,401,681
Japan
North America
Europe
Asia
Other
Inter-segment Elimination/
Unallocated Amount
Consolidated
Sales to external customers ··························································
Inter-segment sales and transfers ··············································
Total ·······································································································
Operating expenses ··········································································
Operating income (loss) ··································································
Assets ········································································································
Long-lived assets ················································································
¥ 7,314,813
3,905,490
11,220,303
11,445,545
(225,242)
¥
¥ 12,465,677
3,347,896
¥ 5,583,228
87,298
5,670,526
5,585,036
85,490
¥
¥ 10,223,903
2,401,172
¥ 2,082,671
64,378
2,147,049
2,180,004
(32,955)
¥
¥ 2,060,962
351,037
¥ 2,431,648
223,679
2,655,327
2,451,800
¥ 203,527
¥ 1,925,126
361,296
¥ 1,538,613
135,248
1,673,861
1,558,287
¥ 115,574
¥ 1,803,703
249,500
¥
̶
(4,416,093)
(4,416,093)
(4,417,215)
1,122
¥
¥ 1,869,916
̶
¥ 18,950,973
̶
18,950,973
18,803,457
147,516
¥
¥ 30,349,287
6,710,901
Japan
North America
Europe
Asia
Other
Inter-segment Elimination/
Unallocated Amount
Consolidated
U.S. dollars in millions
Net revenues
Sales to external customers ····································································
$ 78,620
$ 60,009
Inter-segment sales and transfers ·······················································
Total ················································································································
Operating expenses ····················································································
Operating income (loss) ···········································································
Assets ··················································································································
Long-lived assets ··························································································
41,976
120,596
123,017
$
(2,421)
$ 133,982
35,983
* “Other” consists of Central and South America, Oceania and Africa.
938
60,947
60,028
$
919
$ 109,887
25,808
$ 22,385
692
23,077
23,431
$
(354)
$ 22,151
3,773
$ 26,136
2,404
28,540
26,352
$ 2,188
$ 20,692
3,883
$ 16,537
1,454
17,991
16,749
$ 1,242
$ 19,386
2,682
$ ̶
(47,464)
(47,464)
(47,476)
$
12
$ 20,098
̶
$ 203,687
̶
203,687
202,101
$ 1,586
$ 326,196
72,129
TOYOTA ANNUAL REPORT 2010
92
Notes to Consolidated Financial Statements
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
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, operating expenses,
operating income, assets and long-lived assets
included in other foreign countries.
Unallocated amounts
in assets
represent assets held for corporate purposes,
which mainly consist of cash and cash equivalents
included
and marketable securities. Such corporate assets
were ¥4,352,498 million, ¥3,225,901 million and
¥4,205,402 million ($45,200 million), as of March
31, 2008, 2009 and 2010, respectively.
Transfers between industries or geographic
segments are made at amounts which Toyotaʼs
management believes approximate armʼs-
length transactions. In measuring the reportable
segmentsʼ income or losses, operating income
consists of revenue less operating expenses.
Overseas Revenues by destination
The following information shows revenues that
are attributed to countries based on location
of customers, excluding customers in Japan. In
addition to the disclosure requirements under
U.S. GAAP, Toyota discloses this information in
order to provide fi nancial statement users with
valuable information.
Yen in millions
For the years ended March 31,
2009
2008
2010
North America ··············································································
Europe ·······························································································
Asia ······································································································
Other ··································································································
¥9,606,481
3,746,362
2,968,460
3,831,739
¥6,294,230
2,861,351
2,530,352
3,421,881
¥5,718,381
2,023,280
2,641,471
2,838,671
“Other” consists of Central and South America, Oceania, Africa and the Middle East, etc.
U.S. dollars
in millions
For the year
ended
March 31,
2010
$61,462
21,746
28,391
30,510
Certain fi nancial statement data on non-fi nancial services and fi nancial services businesses
The fi nancial data below presents separately Toyotaʼs non-fi nancial services and fi nancial services
businesses.
Balance sheets
Non-Financial Services Businesses
Current assets
Cash and cash equivalents ··········································································
Marketable securities ·····················································································
Trade accounts and notes receivable, less allowance for
doubtful accounts ···························································································
Inventories ···········································································································
Prepaid expenses and other current assets ·······································
Total current assets ·····················································································
Investments and other assets ········································································
Property, plant and equipment ····································································
Total Non-Financial Services Businesses assets ···························
Financial Services Businesses
Current assets
Yen in millions
March 31,
2009
2010
U.S. dollars
in millions
March 31,
2010
¥ 1,648,143
494,476
¥ 1,338,821
1,783,629
$ 14,390
19,170
1,404,292
1,459,394
1,534,119
6,540,424
4,254,126
5,504,559
16,299,109
1,908,884
1,422,373
1,793,622
8,247,329
4,549,658
4,996,321
17,793,308
Cash and cash equivalents ··········································································
Marketable securities ·····················································································
Finance receivables, net ···············································································
Prepaid expenses and other current assets ·······································
Total current assets ·····················································································
Noncurrent fi nance receivables, net ······················································
Investments and other assets ····································································
Property, plant and equipment ································································
Total Financial Services Businesses assets ······································
Eliminations ·········································································································
Total assets ·······································································································
796,137
850
3,891,406
790,901
5,479,294
5,655,545
599,701
1,897,122
13,631,662
(868,734)
¥ 29,062,037
526,925
9,536
4,209,496
653,798
5,399,755
5,630,680
529,938
1,714,580
13,274,953
(718,974)
¥ 30,349,287
Assets in the non-fi nancial services include unallocated corporate assets.
20,517
15,288
19,278
88,643
48,900
53,701
191,244
5,663
103
45,244
7,027
58,037
60,519
5,696
18,428
142,680
(7,728)
$ 326,196
TOYOTA ANNUAL REPORT 2010
93
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Notes to Consolidated Financial Statements
Financial Section
Non-Financial Services Businesses
Current liabilities
Short-term borrowings ·················································································
Current portion of long-term debt ·························································
Accounts payable ····························································································
Accrued expenses ····························································································
Income taxes payable ····················································································
Other current liabilities ··················································································
Total current liabilities ···············································································
¥
Long-term liabilities
Long-term debt ·································································································
Accrued pension and severance costs ·················································
Other long-term liabilities ···········································································
Total long-term liabilities ·········································································
Total Non-Financial Services Businesses liabilities ·····················
Financial Services Businesses
Current liabilities
Short-term borrowings ·················································································
Current portion of long-term debt ·························································
Accounts payable ····························································································
Accrued expenses ····························································································
Income taxes payable ····················································································
Other current liabilities ··················································································
Total current liabilities ···············································································
Long-term liabilities
Yen in millions
March 31,
2009
2010
825,029
115,942
1,299,523
1,432,988
47,648
944,303
4,665,433
850,233
629,870
444,529
1,924,632
6,590,065
3,370,981
2,640,104
10,001
111,766
3,650
515,166
6,651,668
¥
575,890
289,447
1,954,147
1,627,228
140,210
931,727
5,518,649
1,095,270
672,905
604,903
2,373,078
7,891,727
3,118,938
1,968,908
13,063
113,559
13,177
519,011
5,746,656
U.S. dollars
in millions
March 31,
2010
$ 6,190
3,111
21,003
17,490
1,507
10,014
59,315
11,772
7,232
6,502
25,506
84,821
33,523
21,162
140
1,221
141
5,578
61,765
Long-term debt ·································································································
Accrued pension and severance costs ·················································
Other long-term liabilities ···········································································
Total long-term liabilities ·········································································
Total Financial Services Businesses liabilities·································
Eliminations ·············································································································
Total liabilities ·································································································
Total Toyota Motor Corporation shareholdersʼ equity ·····················
Noncontrolling interest ····················································································
Total shareholdersʼ equity ·······································································
Total liabilities and shareholdersʼ equity··········································
5,592,641
4,742
491,397
6,088,780
12,740,448
(869,213)
18,461,300
10,061,207
539,530
10,600,737
¥ 29,062,037
6,060,349
5,772
433,641
6,499,762
12,246,418
(719,301)
19,418,844
10,359,723
570,720
10,930,443
¥ 30,349,287
65,137
62
4,661
69,860
131,625
(7,731)
208,715
111,347
6,134
117,481
$ 326,196
Statements of income
Yen in millions
For the years ended March 31,
2009
2010
2008
U.S. dollars
in millions
For the year
ended
March 31,
2010
Non-Financial Services Businesses
Net revenues ········································································
Costs and expenses
Cost of revenues ·····························································
Selling, general and administrative ······················
Total costs and expenses ·······································
Operating income (loss) ·················································
Other income (expense), net ·······································
Income (loss) before income taxes and equity in
earnings of affi liated companies····························
Provision for income taxes ············································
Equity in earnings of affi liated companies ···········
Net income (loss)································································
Less: Net (income) loss attributable to the
noncontrolling interest ···············································
to Toyota
(loss) attributable
Motor Corporation‒ Non‒Financial Services
Businesses ··········································································
income
Net
Financial Services Businesses
Net revenues ········································································
Costs and expenses
Cost of revenues ·····························································
Selling, general and administrative ······················
Total costs and expenses ·······································
Operating income (loss) ·················································
Other expense, net ····························································
Income (loss) before income taxes and equity
in earnings of affi liated companies ······················
Provision for income taxes ············································
Equity in earnings (losses) of
affi liated companies ·····················································
Net income (loss)································································
Less: Net income attributable to the
noncontrolling interest ···············································
Net income (loss) attributable to Toyota Motor
Corporation − Financial Services Businesses ·
Eliminations ···········································································
Net income (loss) attributable to Toyota
¥ 24,831,172
¥ 19,182,161
¥ 17,732,143
$ 190,586
20,459,061
2,181,491
22,640,552
2,190,620
176,417
2,367,037
889,660
268,025
1,745,402
17,470,791
2,097,674
19,568,465
(386,304)
(71,925)
(458,229)
(10,152)
53,226
(394,851)
15,973,442
1,854,710
17,828,152
(96,009)
144,625
48,616
42,342
109,944
116,218
171,684
19,934
191,618
(1,032)
1,554
522
455
1,182
1,249
(73,543)
26,282
(32,103)
(345)
1,671,859
(368,569)
84,115
904
1,498,354
1,377,548
1,245,407
13,386
1,075,972
335,888
1,411,860
86,494
(16,265)
70,229
21,904
2,089
50,414
994,191
455,304
1,449,495
(71,947)
(30,233)
(102,180)
(46,298)
(10,502)
(66,384)
716,997
281,483
998,480
246,927
(3,923)
243,004
50,362
(64,536)
128,106
(4,419)
(2,004)
(2,653)
45,995
25
(68,388)
20
125,453
(112)
7,706
3,026
10,732
2,654
(42)
2,612
541
(694)
1,377
(29)
1,348
(1)
TOYOTA ANNUAL REPORT 2010
94
Motor Corporation ························································
¥ 1,717,879
¥
(436,937)
¥
209,456
$ 2,251
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Notes to Consolidated Financial Statements
Financial Section
Statement of cash fl ows
Cash fl ows from operating activities
Net income (loss)········································································································
Adjustments to reconcile net income (loss) to net cash provided
by operating activities
Depreciation ·········································································································
Provision for doubtful accounts and credit losses ···························
Pension and severance costs, less payments ······································
Losses on disposal of fi xed assets······························································
Unrealized losses on available-for-sale securities, net ····················
Deferred income taxes ····················································································
Equity in (earnings) losses of affi liated companies ··························
Changes in operating assets and liabilities, and other ···················
Net cash provided by operating activities ········································
Cash fl ows from investing activities
Additions to fi nance receivables ·······································································
Collection of and proceeds from sales of fi nance receivables···········
Additions to fi xed assets excluding equipment leased to others ····
Additions to equipment leased to others ·····················································
Proceeds from sales of fi xed assets excluding equipment leased to
others ····························································································································
Proceeds from sales of equipment leased to others ······························
Purchases of marketable securities and security investments ··········
Proceeds from sales of and maturity of marketable securities and
security investments ····························································································
Payment for additional investments in affi liated companies, net of
cash acquired ···········································································································
Changes in investments and other assets, and other ····························
Net cash used in investing activities ····················································
Cash fl ows from fi nancing activities
Yen in millions
For the year ended March 31, 2008
Yen in millions
For the year ended March 31, 2009
Non-Financial
Services
Businesses
Financial
Services
Businesses
Consolidated
Non-Financial
Services
Businesses
Financial
Services
Businesses
Consolidated
¥ 1,745,402
¥ 50,414
¥ 1,795,841
¥ (394,851)
¥ (66,384)
¥ (461,215)
1,081,410
357
(54,868)
44,993
11,346
80,027
(268,025)
(220,217)
2,420,425
̶
̶
(1,472,422)
(137,711)
56,603
80,944
(936,324)
409,725
122,433
527
444
̶
1,500
(2,089)
215,218
798,172
(16,644,139)
15,095,380
(8,148)
(1,141,694)
10,948
294,937
(215,316)
1,491,135
122,790
(54,341)
45,437
11,346
81,458
(270,114)
(241,928)
2,981,624
(8,647,717)
7,332,697
(1,480,570)
(1,279,405)
67,551
375,881
(1,151,640)
1,105,233
(1,663)
(21,428)
68,546
220,920
(132,127)
(53,226)
(223,101)
568,303
389,937
259,096
470
136
̶
(62,871)
10,502
186,234
717,120
̶ (14,230,272)
̶ 13,959,045
(6,064)
(877,904)
(1,358,518)
(82,411)
41,285
55,896
(418,342)
6,101
472,853
(217,688)
1,495,170
257,433
(20,958)
68,682
220,920
(194,990)
(42,724)
154,587
1,476,905
(8,612,111)
8,155,094
(1,364,582)
(960,315)
47,386
528,749
(636,030)
789,366
198,044
987,410
1,295,561
180,316
1,475,877
(4,406)
(44,891)
(1,668,841)
̶
23,024
(2,386,964)
(4,406)
(74,687)
(3,874,886)
(45)
129,834
(336,740)
̶
(2,091)
(715,704)
(45)
135,757
(1,230,220)
Proceeds from issuance of long-term debt ·················································
Payments of long-term debt ···············································································
Increase in short-term borrowings ···································································
Dividends paid ·············································································································
Purchase of common stock, and other ··························································
Net cash provided by (used in) fi nancing activities ·····················
Eff ect of exchange rate changes on cash and cash equivalents ··········
Net increase (decrease) in cash and cash equivalents ·······························
Cash and cash equivalents at beginning of year ··········································
Cash and cash equivalents at end of year ························································
17,162
(226,561)
24,126
(430,860)
(311,667)
(927,800)
(65,405)
(241,621)
1,714,722
¥ 1,473,101
3,364,351
(2,156,709)
370,293
̶
̶
1,577,935
(19,354)
(30,211)
185,657
¥ 155,446
3,349,812
(2,310,008)
408,912
(430,860)
(311,667)
706,189
(84,759)
(271,832)
1,900,379
¥ 1,628,547
545,981
(150,097)
138,387
(439,991)
(70,587)
23,693
(80,214)
175,042
1,473,101
¥ 1,648,143
3,030,029
(2,580,637)
239,462
̶
̶
688,854
(49,579)
640,691
155,446
¥ 796,137
3,506,990
(2,704,078)
406,507
(439,991)
(70,587)
698,841
(129,793)
815,733
1,628,547
¥ 2,444,280
TOYOTA ANNUAL REPORT 2010
95
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Notes to Consolidated Financial Statements
Financial Section
Statement of cash fl ows
Cash fl ows from operating activities
Net income ····················································································································
Adjustments to reconcile net income to net cash provided by
operating activities
Yen in millions
For the year ended March 31, 2010
U.S. dollars in millions
For the year ended March 31, 2010
Non-Financial
Services
Businesses
Financial
Services
Businesses
Consolidated
Non-Financial
Services
Businesses
Financial
Services
Businesses
Consolidated
¥ 116,218
¥ 128,106
¥ 244,212
$ 1,249
$ 1,377
$ 2,625
Depreciation ·········································································································
Provision for doubtful accounts and credit losses ···························
Pension and severance costs, less payments ······································
Losses on disposal of fi xed assets······························································
Unrealized losses on available-for-sale securities, net ····················
Deferred income taxes ····················································································
Equity in (earnings) losses of affi liated companies ··························
Changes in operating assets and liabilities, and other ···················
Net cash provided by operating activities ········································
1,065,749
1,905
55
46,661
2,486
(14,183)
(109,944)
733,338
1,842,285
348,820
98,870
1,199
276
̶
39,759
64,536
133,275
814,841
Cash fl ows from investing activities
Additions to fi nance receivables ·······································································
Collection of and proceeds from sales of fi nance receivables···········
Additions to fi xed assets excluding equipment leased to others ····
Additions to equipment leased to others ·····················································
Proceeds from sales of fi xed assets excluding equipment leased to
others ····························································································································
Proceeds from sales of equipment leased to others ······························
Purchases of marketable securities and security investments ··········
Proceeds from sales of and maturity of marketable securities and
security investments ····························································································
Payment for additional investments in affi liated companies, net of
cash acquired ···········································································································
Changes in investments and other assets, and other ····························
Net cash used in investing activities ························································
Cash fl ows from fi nancing activities
̶ (13,492,119)
13,107,531
̶
(5,382)
(599,154)
(768,720)
(64,345)
46,070
36,668
(2,310,912)
6,403
428,424
(101,270)
1,414,569
100,775
1,254
46,937
2,486
25,537
(45,408)
768,168
2,558,530
(7,806,201)
7,517,968
(604,536)
(833,065)
52,473
465,092
(2,412,182)
11,455
20
0
502
27
(152)
(1,182)
7,882
19,801
̶
̶
(6,440)
(692)
495
394
(24,838)
3,749
1,063
13
3
̶
427
694
1,432
8,758
(145,014)
140,880
(58)
(8,262)
69
4,605
(1,088)
15,204
1,083
13
505
27
274
(488)
8,256
27,499
(83,902)
80,804
(6,498)
(8,954)
564
4,999
(25,926)
1,012,781
95,960
1,108,741
10,886
1,031
11,917
(1,020)
(259,089)
(2,139,001)
̶
102,497
(626,676)
(1,020)
(337,454)
(2,850,184)
(11)
(2,784)
(22,990)
̶
1,101
(6,736)
(11)
(3,627)
(30,634)
Proceeds from issuance of long-term debt ·················································
Payments of long-term debt ···············································································
Decrease in short-term borrowings ·································································
Dividends paid ·············································································································
Purchase of common stock, and other ··························································
Net cash used in fi nancing activities ·······················································
Eff ect of exchange rate changes on cash and cash equivalents ··········
Net decrease in cash and cash equivalents ·····················································
Cash and cash equivalents at beginning of year ··········································
Cash and cash equivalents at end of year ························································
492,300
(77,033)
(249,238)
(172,476)
(10,251)
(16,698)
4,092
(309,322)
1,648,143
¥ 1,338,821
2,733,465
(2,926,308)
(251,544)
̶
̶
(444,387)
(12,990)
(269,212)
796,137
¥ 526,925
3,178,310
(2,938,202)
(335,363)
(172,476)
(10,251)
(277,982)
(8,898)
(578,534)
2,444,280
¥ 1,865,746
5,292
(828)
(2,679)
(1,854)
(110)
(179)
44
(3,324)
17,714
$ 14,390
29,379
(31,452)
(2,704)
̶
̶
(4,777)
(139)
(2,894)
8,557
$ 5,663
34,161
(31,580)
(3,605)
(1,854)
(110)
(2,988)
(95)
(6,218)
26,271
$ 20,053
TOYOTA ANNUAL REPORT 2010
96
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Notes to Consolidated Financial Statements
Financial Section
25
Per share amounts:
Reconciliations of the diff erences between basic and diluted net income (loss) attributable to Toyota
Motor Corporation per share for the years ended March 31, 2008, 2009 and 2010 are as follows:
Yen in
millions
Thousands
of shares
Net income
(loss)
attributable
to Toyota
Motor
Corporation
Weighted-
average
shares
Yen
Net income
(loss)
attributable
to Toyota
Motor
Corporation
per share
U.S. dollars
in millions
U.S. dollars
Net income
attributable
to Toyota
Motor
Corporation
Net income
attributable
to Toyota
Motor
Corporation
per share
For the year ended March 31, 2008
Basic net income attributable to
Toyota Motor Corporation per
common share ···································
Eff ect of dilutive securities
Assumed exercise of
dilutive stock options ·····················
Diluted net income attributable to
Toyota Motor Corporation per
common share ···································
For the year ended March 31, 2009
Basic net loss attributable to
Toyota Motor Corporation per
common share ···································
Eff ect of dilutive securities
Assumed exercise of
¥ 1,717,879
3,177,445
¥ 540.65
(1)
1,217
¥ 1,717,878
3,178,662
¥ 540.44
¥ (436,937)
3,140,417
¥ (139.13)
dilutive stock options ······················
(0)
̶
Diluted net loss attributable to
Toyota Motor Corporation per
common share ···································
¥ (436,937)
3,140,417
¥ (139.13)
For the year ended March 31, 2010
Basic net income attributable to
Toyota Motor Corporation per
common share ···································
Eff ect of dilutive securities
Assumed exercise of
dilutive stock options ·····················
Diluted net income attributable to
Toyota Motor Corporation
per common share ··························
¥ 209,456
3,135,986
¥ 66.79
$ 2,251
$ 0.72
̶
12
¥209,456
3,135,998
¥66.79
$ 2,251
$ 0.72
Certain stock options were not included in the
computation of diluted net income attributable
to Toyota Motor Corporation per share for the
year ended March 31, 2008 and 2010 because
the optionsʼ exercise prices were greater than
the average market price per common share
during the period.
Assumed exercise of certain stock options was
not included in the computation of diluted net
loss attributable to Toyota Motor Corporation per
share for the year ended March 31, 2009 because
it had an antidilutive eff ect due to the net loss
attributable to Toyota Motor Corporation for the
period.
In addition to the disclosure requirements
under U.S. GAAP, Toyota discloses the information
below in order to provide fi nancial statement
users with valuable information.
The following table shows Toyota Motor Corporation shareholdersʼ equity per share as of March 31, 2009
and 2010. Toyota Motor Corporation shareholdersʼ equity per share amounts are calculated by dividing
Toyota Motor Corporation shareholdersʼ equitiesʼ amount at the end of each period by the number of
shares issued and outstanding, excluding treasury stock at the end of the corresponding period.
Yen in
millions
Toyota Motor
Corporation
Shareholdersʼ
equity
¥10,061,207
Thousands
of shares
Shares issued
and
outstanding
at the end of
the year
(excluding
treasury stock)
3,135,882
Yen
U.S. dollars
in millions
U.S. dollars
Toyota Motor
Corporation
Shareholdersʼ
equity per
share
¥3,208.41
Toyota Motor
Corporation
Shareholdersʼ
equity
Toyota Motor
Corporation
Shareholdersʼ
equity per
share
10,359,723
3,135,995
3,303.49
$111,347
$35.51
As of March 31, 2009
As of March 31, 2010
TOYOTA ANNUAL REPORT 2010
97
Notes to Consolidated Financial Statements
Financial Section
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
26
Fair value measurements:
In accordance with U.S. GAAP, Toyota classifi es
fair value into three levels of input as follows
which are used to measure it.
Level 1: Quoted prices in active markets for
identical assets or liabilities
Level 2: Quoted prices for similar assets or
liabilities in active markets; quoted
prices for identical or similar assets
or liabilities in markets that are not
active; inputs other than quoted prices
that are observable for the assets or
liabilities
Level 3: Unobservable
liabilities
inputs for assets or
Assets
Cash equivalents ·································································
Time deposits ········································································
Marketable securities and
other securities investments
Government bonds ·················································
Common stocks ························································
Other ···············································································
Derivative fi nancial instruments ·································
Total ······················································································
Liabilities
U.S. dollars in millions
March 31, 2010
Level 1
Level 2
Level 3
Total
$ 7,281
̶
$
749
1,865
$ ̶
̶
$ 8,030
1,865
28,534
9,166
401
̶
$ 45,382
̶
̶
3,987
3,757
$ 10,358
̶
̶
141
209
$ 350
$ (146)
$ (146)
28,534
9,166
4,529
3,966
$ 56,090
$ (2,932)
$ (2,932)
The following table summarizes the fair values of the assets and liabilities measured at fair value on a
recurring basis at March 31, 2009 and 2010:
Derivative fi nancial instruments ·································
Total ······················································································
$ ̶
$ ̶
$ (2,786)
$ (2,786)
Yen in millions
March 31, 2009
The following is description of the assets and liabilities measured at fair value, information about the
valuation techniques used to measure fair value, key inputs and signifi cant assumptions:
Assets
Cash equivalents ·································································
Marketable securities and
other securities investments ···································
Derivative fi nancial instruments
Total ······················································································
Liabilities
Level 1
Level 2
Level 3
Total
¥ 1,473,407
¥ 115,339
¥ ̶
¥ 1,588,746
2,273,294
̶
¥ 3,746,701
187,236
369,572
¥ 672,147
19,581
17,958
¥ 37,539
2,480,111
387,530
¥ 4,456,387
Derivative fi nancial instruments ·································
Total ······················································································
¥
¥
̶
̶
¥ (427,109)
¥ (427,109)
¥ (23,692)
¥ (23,692)
¥ (450,801)
¥ (450,801)
Yen in millions
March 31, 2010
Cash equivalents and time deposits
Cash equivalents include money market funds
and other investments with original maturities
of three months or less. Time deposits include
negotiable certifi cate of deposit with original
maturities over three months. These are highly
liquid investments, and quoted market prices
are used to determine the fair value of these
investments.
Level 1
Level 2
Level 3
Total
Marketable securities and other securities
Assets
Cash equivalents ·································································
Time deposits ········································································
Marketable securities and
other securities investments
¥ 677,442
̶
¥ 69,702
173,500
¥
̶
̶
¥ 747,144
173,500
Government bonds ·················································
Common stocks ························································
Other ···············································································
Derivative fi nancial instruments ·································
Total ······················································································
2,654,829
852,775
37,296
̶
¥ 4,222,342
̶
̶
370,933
349,556
¥ 963,691
̶
̶
13,134
19,437
¥ 32,571
2,654,829
852,775
421,363
368,993
¥ 5,218,604
Liabilities
Derivative fi nancial instruments ·································
Total ······················································································
¥
¥
̶ ¥ (259,184)
̶ ¥ (259,184)
¥ (13,545)
¥ (13,545)
¥ (272,729)
¥ (272,729)
investments
Marketable securities and other securities
include government bonds,
investments
common stocks and other investments. As of
March 31, 2010, government bonds include
76% of Japanese government bonds, and 24%
of U.S. and European government bonds. As
of March 31, 2010, listed stocks on Japanese
stock market represent 88% of common stocks.
Toyota uses quoted market prices for identical
assets to measure fair value of these securities.
“Other” includes primarily commercial paper.
Generally, Toyota uses quoted market prices
for similar assets or quoted non-active market
prices for identical assets to measure fair value
of these securities. Marketable securities and
other securities investments classifi ed as Level 3
primarily included retained interests in securitized
fi nancial receivables, which are measured at fair
value using assumptions such as interest rate,
loss severity and other factors.
Derivative fi nancial instruments
See note 20 to the consolidated fi nancial
statements about derivative fi nancial instruments.
Toyota estimates the fair value of derivative
industry-standard
fi nancial
valuation models that require observable inputs
including interest rates and foreign exchange
rates, and the contractual terms. The usage of
these models does not require signifi cant
instruments using
TOYOTA ANNUAL REPORT 2010
98
Top Messages
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Notes to Consolidated Financial Statements
Financial Section
judgment to be applied. In other certain cases
when market data is not available, key inputs to
the fair value measurement include quotes from
counterparties, and other market data. Toyota
assesses the reasonableness of changes of the
quotes using observable market data. Toyotaʼs
derivative fair value measurements consider
assumptions about counterparty and our own
non-performance risk, using such as credit
default probabilities.
The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a
recurring basis for the periods ended March 31, 2009 and 2010:
Yen in millions
For the year ended March 31, 2009
Balance at beginning of year ····················································································
Total gains (losses)
Marketable
securities
and other
securities
investments
¥ 23,818
Included in earnings ···························································································
Included in other comprehensive income (loss) ·································
Purchases, issuances and settlements····························································
Other ·································································································································
Balance at end of year ··································································································
586
(1,398)
(1,665)
(1,760)
¥ 19,581
Derivative
fi nancial
instruments
¥ 25,499
(38,538)
̶
7,026
279
¥ (5,734)
Total
¥ 49,317
(37,952)
(1,398)
5,361
(1,481)
¥ 13,847
Yen in millions
For the year ended March 31, 2010
Balance at beginning of year ····················································································
Total gains (losses)
Marketable
securities
and other
securities
investments
¥ 19,581
Included in earnings ···························································································
Included in other comprehensive income (loss) ·································
Purchases, issuances and settlements····························································
Other ·································································································································
Balance at end of year ··································································································
(641)
(99)
(6,376)
669
¥ 13,134
Derivative
fi nancial
instruments
¥ (5,734)
25,057
̶
(13,582)
151
¥ 5,892
Total
¥ 13,847
24,416
(99)
(19,958)
820
¥ 19,026
U.S. dollars in millions
For the year ended March 31, 2010
Balance at beginning of year ····················································································
Total gains (losses)
Marketable
securities
and other
securities
investments
$ 211
Derivative
fi nancial
instruments
$ (62)
Included in earnings ···························································································
Included in other comprehensive income (loss) ·································
Purchases, issuances and settlements····························································
Other ·································································································································
Balance at end of year ··································································································
(7)
(1)
(69)
7
$ 141
269
̶
(146)
2
$ 63
Total
$ 149
262
(1)
(215)
9
$ 204
In the reconciliation table above, derivative
fi nancial
instruments are presented net of
assets and liabilities. The other amount primarily
impact of currency translation
includes the
adjustments.
Certain assets and liabilities are measured at
fair value on a nonrecurring basis. During the
years ended March 31, 2009 and 2010, Toyota
measured certain fi nance receivables at fair value
of ¥25,932 million and ¥13,343 million ($143
million) based on the collateral value, resulting
in loss of ¥10,011 million and ¥2,485 million
($27 million). This fair value measurement on a
nonrecurring basis was classifi ed as level 3.
During the year ended March 31, 2010,
Toyota measured certain investment in affi liated
company at fair value of ¥119,821 million ($1,288
million) based on the quoted market price
resulting in impairment loss of ¥63,575 million
($683 million). This fair value measurement on a
nonrecurring basis was classifi ed as level 1.
TOYOTA ANNUAL REPORT 2010
99
Management’s Annual Report on Internal
Control over Financial Reporting
Financial Section
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
Toyota’s management is responsible for establishing and maintaining effective internal control
over financial reporting. Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. GAAP. Toyota’s internal control
over financial reporting includes those policies and procedures that:
１）pertain to the maintenance of records that in reasonable detail, accurately and fairly
reflect the transactions and dispositions of Toyota’s assets;
２）provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. GAAP, and that Toyota’s
receipts and expenditures are being made only in accordance with authorizations of
Toyota’s management and directors; and
３）provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of Toyota’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Toyota’s management conducted an evaluation of the effectiveness of internal control over
financial reporting based on the framework in “Internal Control — Integrated Framework” issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this evaluation, management concluded that Toyota’s internal control over financial
reporting was effective as of March 31, 2010.
PricewaterhouseCoopers Aarata, an independent registered public accounting firm that audited the
consolidated financial statements included in this report, has also audited the effectiveness of Toyota’s
internal control over financial reporting as of March 31, 2010, as stated in its report included herein.
TOYOTA ANNUAL REPORT 2010
100
Report of Independent Registered Public
Accounting Firm
Financial Section
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
To the Shareholders and Board of Directors of Toyota Jidosha Kabushiki Kaisha
（“Toyota Motor Corporation”）
statements for external purposes in accordance with generally accepted accounting principles.
A company’ s internal control over financial reporting includes those policies and procedures that
（ⅰ）pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; （ⅱ）provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and
directors of the company; and （ⅲ）provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Nagoya, Japan
June 25, 2010
In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of income, shareholders’ equity and cash flows present fairly, in all material respects,
the financial position of Toyota Motor Corporation and its subsidiaries at March 31, 2009 and
2010, and the results of their operations and their cash flows for each of the three years in the
period ended March 31, 2010 in conformity with accounting principles generally accepted
in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of March 31, 2010, based on criteria
established in Internal Control−Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission （COSO）. The Company’s management is responsible
for these financial statements, for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.
Our responsibility is to express opinions on these financial statements and on the Company’s
internal control over financial reporting based on our integrated audits. We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight Board（United
States）. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial
statement presentation. Our audit of internal control over financial reporting included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as
we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
TOYOTA ANNUAL REPORT 2010
101
Investor Information
As of March 31, 2010
Top Messages
Special Feature
Special Feature
Consolidated
Performance Highlights
Business Overview
Corporate Information
Financial Section
Investor Information
■ Corporate Data
■ Major Shareholders (Top 10)
■ Ownership Breakdown
Company Name:
Toyota Motor Corporation
Number of Affiliates:
[Consolidated Subsidiaries]522
[Affiliates Accounted for by the Equity Method] 56
Name
Number of Shares Held
(Thousands)
17.5%
Other corporate entities
35.4%
Financial institutions,
Brokerages
Number of Employees:
71,567 (Consolidated: 320,590)
Corporate Web Site:
[Corporate Information]
http://www.toyota.co.jp/en
[IR Information]
http://www.toyota.co.jp/en/ir
Established:
August 28, 1937
Common Stock:
¥397,049 million
Fiscal Year-End:
March 31
Public Accounting Firm:
PricewaterhouseCoopers
Aarata
■ Stock Data
Number of Shares Authorized:
10,000,000,000 shares
Number of Shares Issued:
3,447,997,492 shares
Number of Treasury Stock:
312,002,149 shares
Number of Shareholders:
660,922
Number of Shares per Trading Unit:
100 shares
Japan Trustee Services Bank, Ltd.
Toyota Industries Corporation
The Master Trust Bank of Japan, Ltd.
Nippon Life Insurance Company
State Street Bank and Trust Company
Trust & Custody Services Bank, Ltd.
The Bank of New York Mellon
as Depositary Bank
for Depositary Receipt Holders
355,468
201,195
191,402
130,469
87,827
86,649
79,850
Tokio Marine & Nichido Fire Insurance Co., Ltd.
77,431
Mitsui Sumitomo Insurance Company, Limited
65,166
22.6%
Individuals, etc.
24.5%
Foreign corporate
entities and others
Note: Individuals, etc. includes shares of 312 million treasury stock.
Stock Listings:
[Japan] Tokyo, Nagoya, Osaka, Fukuoka, Sapporo [Overseas] New York, London
DENSO Corporation
58,678
Securities Code:
[Japan] 7203
American Depositary Receipts (ADR):
[Ratio] 1ADR=2 common stocks [Symbol] TM
Transfer Agent in Japan:
Mitsubishi UFJ Trust and Banking Corporation
10-11, Higashisuna, 7-chome, Koutou-ku, Tokyo 137-8081, Japan
Japan Toll-Free: (0120) 232-711
Depositary and Transfer
Agent for ADR:
The Bank of New York Mellon
101 Barclay Street, New York, NY 10286, U.S.A.
Tel: (866) 238-8978 U.S. Toll-Free: (888) 269-2377, (888) BNY-ADRS
[Depositary Receipts] http://www.adrbnymellon.com
[Transfer Agent] http://www.bnymellon.com/shareowner
■ Contact Points for Investors
Japan
Toyota City Head Office
1, Toyota-cho, Toyota City, Aichi Prefecture 471-8571, Japan
Tel: (0565) 28-2121 Fax: (0565) 23-5721
Tokyo Head Office
4-18, Koraku 1-chome, Bunkyo-ku, Tokyo 112-8701, Japan
Tel: (03) 3817-7111 Fax: (03) 3817-9092
Toyota Motor North America, Inc.
601 Lexington Avenue, 49th Floor, New York, NY 10022, U.S.A.
Tel: (212) 223-0303 Fax: (212) 759-7670
Toyota Motor Europe
Curzon Square, 25 Park Lane, London W1K 1RA, U.K.
Tel: (020) 7290-8500 Fax: (020) 7290-8502
U.S.A.
U.K.
■ Toyotaʼs Stock Price and Trading Volume on the Tokyo Stock Exchange
Stock price (¥)
10,000
8,000
6,000
4,000
2,000
0
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
High (¥)
Low (¥)
At Year-End (¥)
6,560
3,790
6,430
Note: Fiscal years ended March 31
8,350
5,430
7,550
7,880
4,810
4,970
5,710
2,585
3,120
4,235
3,140
3,745
Trading volume
(Million shares)
400
300
200
100
0
TOYOTA ANNUAL REPORT 2010
102