0808
Annual Report 2011
Year ended March 31, 2011
TOYOTA MOTOR CORPORATION
Rewarded with a smileby exceeding your expectations Leading the way to the
future of mobility
0729
A future mobility that links people
with products and services
Toyota's Global Vision not only calls for building better
cars, but also expresses our goal of contributing to the
creation of better communities.
Toyota is developing new products and services for the
future of mobility, with the goal of realizing practical,
low-carbon mobility; new lifestyles; broad application
of environmental technologies and infrastructure for
safer mobility.
Fruit
Fruit
Ever-better cars
Enriching lives of communities
Develop vehicles that
exceed expectations
Contribute to communities
Contribute to the future of mobility
Sustainable growth
Constantly strive for the "ever-better cars" and "enriching lives of communities"
goals by ensuring sustainable profitability with a long-term point of view.
Trunk
Stable business base
Roots
Toyota values
Guiding Principles at Toyota
The Toyota Way
The Toyoda Precepts
Tomorrow's environment-friendly vehicles,
new business activities
2
Meeting challenging goals by engaging
talents and passion
0729
Building cars that meet the needs of
people in every region
Toyota seeks to build ever-better cars that
meet the needs of consumers and society,
based on our principles of “customer-
first,” “genchi genbutsu” (onsite, hands-
on experience) and
“good quality,
affordable price.” We seek to realize this
goal by cultivating global personnel who
maintain the spirit of Toyota’s culture of
craftsmanship (monozukuri ) and skill
proficiency.
Emerging
markets
40%
2010
Sales
performance
Industrialized
nations
60%
Emerging
markets
50%
2015
Sales
plan
Industrialized
nations
50%
Achieve equal weightings in unit sales between
industrialized nations and emerging markets
Manufacturing and Sales Strategies
3
Percentage of Sales by Market Constantly innovating to
create new value
0819
Exceeding expectations and making an impression
We aim to work as hard as we can to
exceed expectations. To that end, we
seek not only to incorporate leading-
edge technologies, but also to create
new value in vehicles in such areas as
design, high-tech communications and
quality, so that people can see, touch and
feel that value when using our products.
Our goal is to build cars that impress by
being one step ahead in innovation.
Product Development Strategies
4
Moving people in the
safest and most responsible ways
0819
Unending pursuit of integrated safety
Toyota takes an integrated approach combining safe
vehicle development, traffic-safety awareness and the
creation of a safe traffic environment based on our
guiding principle of always providing safe products, so
that riding in our vehicles will bring smiles . By offering
safety and quality that exceed expectations, we are
contributing to achieving the goal of next-generation
mobility: zero traffic fatalities.
Special feature: Toyota’s Safety Technology
5
Three-Pronged Integrated ApproachPeopleVehiclesTrafficEnvironment 0810
Contents
Toyota Digest: The Way Forward
2011 Highlights
Message / Vision
7 Chairman’s Message
8 President’s Message
9 TOYOTA Global Vision
Special Feature: Toyota’s Safety Technology
Business and Performance Review
18 Consolidated Performance Highlights
20 Automotive Operations
21 Restore and Renew Our Production Structure for Further Growth
22 Financial Services Operations
23 Other Business Operations
25 New Business Activities
26 Support for Recovery from the Great East Japan Earthquake
Management and Corporate Information
27 R&D and Intellectual Property
29 Corporate Philosophy
30 Management Team
32 Corporate Governance
35 Risk Factors
38 Other Management and Corporate Data
Financial Section and Investor Information
39 Message from the Executive Vice President Responsible for Accounting
41 Selected Financial Summary (U.S. GAAP)
43 Consolidated Segment Information
44 Consolidated Quarterly Financial Summary
45 Management’s Discussion and Analysis of Financial Condition and
Results of Operations
70 Consolidated Financial Statements
75 Notes to Consolidated Financial Statements
110 Management’s Annual Report on Internal Control over Financial Reporting
111 Report of Independent Registered Public Accounting Firm
112 Investor Information
Click any title to link to that section
Message from the President
The President thanks our customers for support during a challenging environment, announcing our Global Vision efforts and our
aim to be “A Company Selected By Customers.” Human life is our top priority, so relief and regional recovery came first in the
aftermath of the earthquake. Next, we set about restarting production, deploying the awesome power of superior “on-the-spot”
efforts for rapid production normalization. We are holding our course toward sustained growth amidst challenging circumstances.
Toyota Global Vision
Our new vision clarifies the kind of company Toyota seeks to be and our course for realizing a “regional initiative” structure for
sustained growth. We aim for coexistence and co-prosperity with customers and society by building better cars and creating good
communities and a good society, providing earnings for a stable business/earnings foundation (consolidated operating margin 5%
on unit sales of 7.5 million, ¥85/US$1 (operating income approx. ¥1 trillion) and nonconsolidated operating income profitability).
Special Feature: Toyota’s Safety Technology
Toyota seeks to offer products that exceed customer expectations for safety and quality, and is working to contribute
to achieving zero traffic injuries and fatalities, which is the ultimate goal of the mobility society. We introduce the three
perspectives we take in striving to provide the world’s highest level of safety: Our basic safe philosophy, the leading-edge
technologies we employ to achieve safer vehicles, and future direction of safety technologies.
New Business: Toyota’s Smart Grid Efforts
Realizing the “future mobility society” conceived in our new vision requires the broad acceptance of next-generation
environmentally-friendly vehicles. We introduce the smart grids that will provide the infrastructure to make this possible, giving
an outline of the overall concept and discussing the trials that will lead to their realization and ties with other companies, such
as Microsoft, that will speed up the process.
New Management Structure
We revamped our management structure on April 1, 2011, so as to achieve our new vision. We introduce structures for
making prompt management decisions based on onsite information and customer opinions and creating a structure for
management that is closely attuned to what is happening at actual sites.
Outline of Results and Future Prospects: Message from the Executive Vice President Responsible for Accounting
During the fiscal 2011 we bounced back from challenging circumstances to produce results showing improved earnings
and profits. We will continue toward the goal set forth in our Global Vision of building consistent, solid profitability in
nonconsolidated operating income, with a consolidated operating margin of 5% and operating income of around ¥1 trillion,
even under such severe conditions as an exchange rate of ¥85/US$1 and consolidated unit sales of 7.5 million.
Cautionary Statement with Respect to Forward-Looking Statements
This document 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; and (x) the impact of the March 11, 2011 Great East Japan Earthquake and ensuing events, including the negative effect on Toyota’s vehicle production and sales.
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.
TOYOTA ANNUAL REPORT 2011
6
Chairman’s Message
Chairman’s Message
President’s Message
Toyota Global Vision
Message/ Vision
Special Feature
Business and
Performance Review
Management and
Corporate Information
Financial Section and
Investor Information
0819
I would like to start by offering sincere condolences on behalf of
everyone at Toyota to those who have faced great hardship due to
the Great East Japan Earthquake.
There are currently a number of measures being undertaken for
post-disaster revival, and we believe that we must give our all in
contributing to the revival of the automobile industry and the manufac-
turing sector as a whole. For Toyota, this means that now, more than
ever, we must remain strongly aware of our founding principle of
contributing to society through the production of automobiles and
that we must put to use the experience that has enabled us to meet
the challenges of enormous changes in the past.
The recent disaster has highlighted not only for Japan but also for
the whole world the important role of northeastern Japan and northern
Kanto in Japan’s component manufacturing industry. I believe that all
of us must work together to find the path to recovery and revival, so
that the stricken regions can continue to be a base of manufacturing
and that the Japanese manufacturing sector can continue to develop.
One of Toyota’s strengths lies in our focus on the power of the
workplace, which is now underpinned by our sense of crisis and
sense of mission. Toyota’s top management is continually observing
the workplace, aiming to create a shared understanding with those
onsite that there is no limit to human capacity and ingenuity as we
seek solutions that bring us closer, one step at a time, to recovery
and revival.
For Toyota, 2010 was a year in which a series of quality issues
spurred us to return to our roots and to work on restoring trust by
rebuilding relationships with our customers, dealers and suppliers. In
returning to the spirit of manufacturing and car building that Toyota
has embraced since its founding and aiming to realize an even higher
level of safety and security from the standpoint of our customers, we
have placed increasing emphasis on being on the spot and are now
even more focused on building ever-better automobiles. We are
continuing to enhance our thorough quality assurance and quality
control systems on a global level.
We will continue to strengthen these efforts, aiming to realize
continuous growth through the thorough application of our principles
of “customer-first,” “genchi genbutsu (onsite, hands-on experience)”
and “good quality, affordable price.” We will also employ innovation
based on knowledge and continuous improvement to earn the
satisfaction of our customers and to contribute to the kind of future
mobility that the world needs.
In closing, I would like to thank all of our stakeholders for their
ongoing understanding and support.
July 2011
Fujio Cho, Chairman
TOYOTA ANNUAL REPORT 2011
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President’s Message
Chairman’s Message
President’s Message
Toyota Global Vision
Message/ Vision
Special Feature
Business and
Performance Review
Management and
Corporate Information
Financial Section and
Investor Information
0822
I would like to begin by offering thanks for the continued support and
understanding of all of our stakeholders. In addition, on behalf of
everyone at Toyota I would like to express my wishes for the restful
peace of all those we lost to the Great East Japan Earthquake, and to
offer our sincerest sympathies to all who have suffered through this
great tragedy.
When I reflect on the past year, I am touched by the support
offered by so many of our customers and stakeholders as we dealt
with the ongoing effects of the global financial crisis, as well as
product quality and safety issues. I offer my sincerest gratitude.
Learning from these experiences, I continued to ask myself,
“What kind of company do we want Toyota to be? What kind of
company should Toyota be?” I realized that Toyota should strive to be
a company that people choose, and that people are happy to have
chosen. The Global Vision we announced in March is strongly imbued
with these ideas.
The Great East Japan Earthquake struck two days after we
announced our Global Vision. Our employees entered the stricken
areas in the immediate aftermath of the earthquake and began
providing support, working together with local residents to reconstruct
and restore communities. Upon viewing the situation after the disaster,
our support teams assessed the situation, quickly worked out what
was best for the communities and immediately set about their tasks
accordingly. This represents the very spirit of Toyota’s “power of the
workplace”—an asset built up and handed down through 70 years of
Toyota history. Priority was given to rescuing and preserving life, then
to the restoration of the communities, with restarting production only
considered after the situation stabilized.
Thanks to these tremendous frontline efforts, the work to get
production back to normal proceeded at a feverish pitch. After a
short delay, we were able to announce our financial, production, and
sales forecasts in June.
When we announced our Global Vision, we noted the need to
quickly establish a revenue base that provides operating income of
around ¥1 trillion, even with an exchange rate of ¥85 to the U.S. dollar
and sales of 7.5 million units. With our breakeven point now more
than 1 million vehicles lower compared to what it was at the time of
our worst reported loss, we are now on pace to reach that income
target despite the effects of the disaster. Compared with our past
earnings of more than ¥2 trillion, this goal may seem insufficient.
However, I believe that being able to make a steady profit while
meeting all tax obligations—no matter the economic situation—is
more meaningful than making a lot of money during the good times.
I believe that the shareholders who keep their shares even during
a difficult business environment are the ones who understand and
truly support Toyota. I want to meet the expectations of those
shareholders, so the course I am charting is one that I strongly believe
will lead to continuous growth.
Toyota will continue to work to be a company that exceeds the
expectations of all our stakeholders and brings smiles to the faces of
our customers. We ask for your continued support of our efforts.
July 2011
Akio Toyoda, President
TOYOTA ANNUAL REPORT 2011
8
Toyota Global Vision
Chairman’s Message
President’s Message
Toyota Global Vision
Message/ Vision
Special Feature
Business and
Performance Review
Management and
Corporate Information
Financial Section and
Investor Information
0804
Exceeding Expectations to Achieve Growth
Toyota Global Vision
Goals of Our Vision
Regional entities to drive further evolution of “Customer First” and “genchi genbutsu”
Toyota has engaged in a variety of management reforms in response to the industry environment.
Our new Global Vision clarifies the corporate image and values for which we aim. Our goal is to
achieve future growth based on the lessons we have learned and our reflection on our experiences
associated with the deterioration of the management environment caused by the Lehman shock
and a series of quality issues. Henceforth, we will establish posts in each region of the world
based on this vision and achieve continuous growth through a structure composed of regional
entities that conduct our actual business.
Toyota Global Vision
Toyota will lead the way to the future of mobility,
enriching lives around the world with the safest
and most responsible ways of moving people.
Through our commitment to quality,
constant innovation and respect for the planet,
we aim to exceed expectations
and be rewarded with a smile.
We will meet challenging goals by engaging
the talent and passion of people,
who believe there is always a better way.
The Toyota Global Vision offers automobile
manufacturing that exceeds customer expectations
and a new mobility society based on the Toyota
Precepts, the Toyota Guiding Principles and the
Toyota Way, which have been the guiding aim
of our spirit of manufacturing (monozukuri )
throughout our 74-year history. By building a
stable management foundation from revenues
gained through coexistence and co-prosperity
with society and our customers, as well as by
contributing
local
communities, we can create a virtuous cycle for
continuous growth.
the development of
to
This Global Vision calls for management at
the head office to determine our overall direction
and conduct regional support, whereas the
regional entities around the world, which are
closest to their customers, make independent
decisions. What this means is realizing “Customer
First” and “genchi genbutsu.” This concept
represents a change in the management structure
aimed at rapid feedback from actual locations
and using that feedback in decision making, while
always being able to ensure that such decisions
are acceptable to society.
Fruit
Fruit
Ever-better cars
Enriching lives of communities
Develop vehicles that
exceed expectations
Contribute to communities
Contribute to the future of mobility
Sustainable growth
Constantly strive for the "ever-better cars" and "enriching lives of communities"
goals by ensuring sustainable profitability with a long-term point of view.
Trunk
Stable business base
Roots
Toyota values
Guiding Principles at Toyota
The Toyota Way
The Toyoda Precepts
Toyota’s Visionary Management
Toyota’s Visionary Management concept can be expressed using the metaphor of a tree. The roots of the tree are the shared values
that underlie our spirit of monozukuri. The fruit of the tree is our contributions to “always making better cars” and “enriching the lives
of communities.” The trunk of the tree is a stable business foundation that supports products that please our customers. Henceforth,
we will conduct our business so as to achieve continuous growth through a virtuous cycle comprising these three elements.
TOYOTA ANNUAL REPORT 2011
9
Toyota Global Vision
Ensuring the realization of Our Vision
Message/ Vision
Special Feature
Business and
Performance Review
Management and
Corporate Information
Financial Section and
Investor Information
0819
Chairman’s Message
President’s Message
Toyota Global Vision
Building a strong revenue base and altering the management structure
Strategies and important efforts by region
For the steady execution of a business strategy
based on our regional entities, we will strengthen
the three core functions of quality maximization,
cost minimization and human
resources
development, while establishing a solid business
foundation that balances quality and cost. The
management structure has been altered so as to
achieve early realization of these goals. Our
efforts to transfer authority from the head office to
regional entities and achieve efficient business
management at the local level include reducing
the number of directors, cutting away some layers
of decision making, stationing Regional Chief
Officers for localized decision making by overseas
affiliates, using external experts to gain feedback
from outside the company and establishing the
Executive General Manager position to promote
local management.
As a result, even in a tough business
environment in which we are contending with an
exchange rate in the range of US$1/¥85 and
vehicle sales of 7.5 million units, we are building a
firm management structure through which we can
soon achieve a consolidated operating margin of
5%, operating income of around ¥1 trillion and a
return to profitability in non-consolidated operating
income.
Toyota and Lexus unit sales
7.29 million units
7.56 million units
Consolidated operating income
¥147.5 billion
FY Ended
March 31, 2010
$1=¥93
1€=¥131
¥468.2 billion
FY Ended
March 31, 2011
$1=¥86
1€=¥113
Sales profit rate:
5%
(approx. ¥1 trillion)
7.5 million units
(precondition)
Achieve as soon
as possible
$1=¥85
1€=¥110
Sustainable
growth
2015
Establish Stable Business Base
Pursue Growth Strategy
in
and
Japan
In Japan, we are engaged
the highly
improved
advanced
technologically
manufacturing that Japanese customers expect.
This includes offering vehicles such as high-
value-added hybrids and Lexus models, as well
as three-row minivans and mini-vehicles, so as to
provide products that will satisfy our customers.
North America
We are promoting further autonomy on the part of
our North American entities by making that region
our global center for models such as the Camry,
as well as by aiming to build a consolidated
structure in North America that covers everything
from development through production and supply
to other countries. Furthermore, we linked up in
May of last year with Tesla Motors in an effort to
create the future mobility society through joint
efforts in advanced IT technologies and IT
industry.
Europe
We are sharpening our technological abilities for
success in this fiercely competitive market with its
mature automotive culture. At the same time, we
are focusing our global product planning efforts
in the region. Our goal is to establish a powerful
brand in Europe by building attractive cars and
developing products optimized to satisfy the
European customer.
vehicles
China, emerging markets, Others
Our efforts in China and other emerging markets
include improving our brand image and working
to introduce environment-friendly vehicles and
otherwise diversify mobility in these countries,
especially China. In Asia and Oceania, we will
continuously release products that meet the
needs of emerging markets, such as international
(IMVs) and newly
multipurpose
developed compact cars, moving forward with a
supply strategy that is responsive to expanding
markets within and outside the region. We will
cultivate this region as a global base for efficient
development and production through greater
productivity.
localization
Furthermore, in the Middle East, Africa and Latin
America we will seek to provide the cars that
customers in each region demand, that is, those
that customers in each country will call “my car.”
improved
and
Promoting management led by regional entities
Global Vision
Expectations
Expectations
Regional missions
Role to play and issues to address in
support of fulfilling Global Vision
Regional goals /
Management strategy
TOYOTA ANNUAL REPORT 2011
10
Toyota Global Vision
Chairman’s Message
President’s Message
Toyota Global Vision
Message/ Vision
Special Feature
Business and
Performance Review
Management and
Corporate Information
Financial Section and
Investor Information
0819
To achieve a 50/50 sales ratio between Japan/Europe/United States and the emerging markets
by leveraging the Toyota product appeal, thereby exceeding expectations
Making Cars that Customers in Each Region Demand
Until now, Toyota has pursued the production of what we considered “good cars,” based on our principles
of “Customer First,” “genchi genbutsu” and “Good quality at an affordable price.” Our new vision calls for
us to build “better cars” that impress our customers by exceeding their expectations. This means fusing
the needs of customers around the world, the values of society and Toyota’s advanced technologies.
Delivering such cars with the right timing means expanding production capacity in emerging markets
in accordance with the expansion of these markets and revising model production in developed markets
to correspond to changes in their market structures. We also must make efforts to optimize and rebuild
our production structure to make it flexible, efficient and resistant to foreign exchange rate fluctuations.
Europe
Contribute to Toyota’s
competitiveness as a global
product center for small cars
China
A driving force for future growth
Technology base to support the
huge market
North America
Greater self-reliance
Collaboration with IT for the
future of mobility
Japan
Monozukuri based on advanced
technology and kaizen
Asia and Oceania
Global center for product development
and preparations for mass production
of IMV/newly developed small cars
Middle East, Africa and Latin America
Vehicles that win the heart of customers and can
be called “my car" with affection in every market
Percentage of Sales by Market
Emerging
markets
40%
2010
Sales
performance
Industrialized
nations
60%
Emerging
markets
50%
2015
Sales
plan
Industrialized
nations
50%
Achieve equal weightings in unit sales between
industrialized nations and emerging markets
Strengthening our production and sales structures
Growing sales in emerging markets for a well-balanced revenue structure
We are optimizing our global production structure
to meet the needs and scale of each region. Our
manufacturing in Japan continues to employ
leading-edge technologies in making high-value-
added products, so as to uphold its core role in our
monozukuri. We are increasing capacity at existing
European and U.S. plants by working to optimize
available production facilities. Furthermore, in the
emerging markets, we are looking into the timing
and scale of investment for capacity expansion.
In terms of our sales strategy, we are develop-
ing sales for an environment-friendly vehicles society
that is being increasingly demanded not only in
Japan, the United States and Europe but also in the
emerging markets. We are also working to strengthen
the sales of locally produced IMVs and compact
cars in the emerging markets. Through such efforts,
we will realize a balanced business structure, transi-
tioning
the
current sales ratio of
60% Japan/Europe/
United States versus
40% emerging mar-
kets to 50/50 by 2015.
from
Strengthening our product appeal
Expand our lineup of environment-friendly cars and globally develop Japanese
premium brands
We aim to create a structure for autonomous partici-
pation in car making by local entities and broadly
improve styling and feel (good quality that can be
felt by the customer by seeing, touching and using).
(FCVs), creating a structure that can meet the
needs of the market. We are proceeding to develop
highly efficient gasoline engines as well, with
improved fuel economy.
Expand our environment-friendly car lineup
We will introduce about 10 new hybrid models by
2015. These will include compact hybrids that
with fuel economy rated at 40 km/l or higher,
which will create true product appeal that exceeds
expectations. We are also developing all types
of next-generation
environment-friendly
cars, including plug-
in hybrids (PHVs),
electric vehicles (EVs)
and fuel cell vehicles
Develop the Lexus brand globally
As Japan’s truly global premium brand, Lexus, which
embodies Toyota’s originality through its drivability,
design and technology, is now more customer-friendly
with the adoption of next-generation IT equipment,
including telematics. Lexus is the brand for high
added value and strong
innovation from Japan.
We are working to de-
liver our full lineup
worldwide, including
in emerging markets.
TOYOTA ANNUAL REPORT 2011
11
Toyota Global Vision
Toyota Global Vision
Chairman’s Message
President’s Message
Toyota Global Vision
Message/ Vision
Special Feature
Business and
Performance Review
Management and
Corporate Information
Financial Section and
Investor Information
0804
Contributing to the urban development of the future and
leading the way to the future of the automotive industry
Realizing the Future Mobility Society
Our new Global Vision promises our customers that we will contribute to enriching the lives of communities
along with better vehicles. Our goal is to be accepted as a good corporate citizen by membership in
such “better communities” through our contributions to creating comfortable, livable towns. These include
offering comfortable, low-carbon automobiles and new lifestyles through the early practical application
of personal robots for mobility support and healthcare, as well as the popularization of hybrids and other
next-generation environment-friendly cars, and safe motoring through the integration of vehicles with
infrastructure.
Amenable,
low-carbon mobility
New lifestyles
Toyota will lead its industry
in tackling technological
advances that will spawn
next-generation mobility.
Infrastructure for
safer mobility
Preserving
environmental quality
Development of next-generation automotive technologies
Toyota’s approach to environmental technology development
Toyota’s three major environmental technology
development themes are energy source diversity,
CO2 emission (global warming prevention) reduc-
tion and air pollution prevention. Based on this
approach, we are working to improve the fuel
economy of cars using conventional engines,
which make up the majority of our sales. We have
also made hybrid (HV) technology our core tech-
nology in next-generation environment-friendly
cars development because it includes the com-
ponent technologies used in the development of
all types of environment-friendly cars.
The popularization of environment-friendly
cars is our primary environmental contribution.
Customers make different decisions about what
kind of environment-friendly cars they want, so we
are developing all types of next-generation
environment-friendly cars, including PHVs, EVs
and FCVs, so that the
customer can decide
which is most suit-
able in terms of use,
performance, price
and other factors.
New business strategy
Contributing to building next-generation environment-friendly
“smart communities” using smart grids
Toyota sees the next major step in realizing a low-
carbon society as the use of new smart power
grids, for which IT is used to control power sup-
plies to make them stable and achieve energy
conservation. The Toyota smart grid ties in the
recharging of next-generation environment-
friendly cars (PHV and EV) batteries with “smart
houses” under development by Toyota Housing
(houses equipped with solar power generators
and storage batteries, as well as control func-
tions for efficient electricity consumption). We
aim to create a grand next-generation environ-
mental city of “smart communities” by gradually
popularizing this concept.
Last year, we developed the Toyota Smart
Center, a system that links vehicles, homes and
information, and enables integrated control of
energy data and information, with trials of the
system conducted beginning this September
over smart grids in Toyota City. Toyota will con-
tinue to conduct trials and tie-ins with other
industries, with the goal of marketing the system.
Our goal is to offer
new products and
services correspond-
ing to the economic
and social conditions
of each region.
Additional details available at Click HERE
TOYOTA ANNUAL REPORT 2011
12
0819
Special Feature: Toyota’s Safety Technology
Safe and Secure Mobility
Toyota’s Approach to Safety
Our three-pronged integrated approach to technology development combining safe vehicles, traffic safety education activities and
the creation of a safe traffic environment is a natural consequence of our guiding principle of always providing safe products.
This approach pleases our customers with safety and quality and contributes to achieving zero casualties from traffic accidents,
which is the ultimate goal of the future mobility society.
The real question is how do we relate to people and communities. What are our goals?
The following section provides a comprehensive overview of Toyota’s approach to safety, focusing on our safety technologies.
TOYOTA ANNUAL REPORT 2011
13
Special Feature: Toyota’s Safety Technology
Our Basic Safe Vehicle Philosophy
Contributing to the ultimate goal of the future mobility society:
Zero casualties from traffic accidents
Toyota’s Global Vision reveals that safety is Toyota’s highest priority and it is important to provide highly
reliable quality that will enable people to feel good about driving and riding in its vehicles. Toyota takes
a three-pronged approach to safety that integrates people, cars and the traffic environment. By doing so,
we seek to contribute to the ultimate goal of the future mobility society, which is zero casualties from
traffic accidents. Another of our core philosophies is to pursue real safety by learning from actual
accidents and continuing to evolve for substantially enhanced safety.
Safety through our three-pronged integrated approach and
the real safety lessons learned by studying accidents
In regions that are rapidly becoming motorized,
driver awareness programs, such as traffic safety
education, are indispensible, as are improvements
to the traffic environment that make accidents
less likely. We believe that our three-pronged
integrated approach, which combines vehicle
safety with traffic safety education activities and
traffic environment improvements, is vital to
realizing a safe mobility society. At the same time,
we pursue real safety through the study of actual
accidents. Accident investigations and analysis
to reveal the causes of accidents and injuries can
help to pursue safety technologies. We continue
to investigate and analyze accidents after vehicles
we have developed reach the market, so we can
confirm their effectiveness.
These two approaches formed the foundation
of the Integrated Safety Management Concept
we announced in 2006, and we proceeded with
the development of “vehicles that support the
driver in avoiding dangerous situations” by linking
individual safety technologies and systems. In
January 2011, we established the Collaborative
Safety Research Center in North America as our
new base for accident analysis and problem
resolution. Toyota’s research goal is to contribute
to the realization of a safe mobility society through
improved driver and pedestrian safety and
security.
Toyota’s Approach to Safety
The safest and
most responsible ways of moving people
Goal
The ultimate goal:
Zero casualties from traffic accidents
Approach
Three-pronged integrated approach
Pursuit of real safety through
study of accidents
Concept
Integrated Safety Management Concept
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Three-pronged approach integrating people, cars and the traffic environment
The number of traffic fatalities in Japan in 2009
was just under 5,000, which is roughly one-third
lower than the historical high. It is likely that this
reduction
is not only because of vehicle
development but also as a result of people-
oriented measures, such as improved rates of
seat-belt usage and stricter penalties for traffic
violations, as well as efforts to create a better
traffic safety environment, such as making
improvements at
the
incidence of accidents is high.
intersections where
Traffic safety education activities for people
Toyota has conducted traffic safety education
activities for drivers since 1960, and in 2005 we
established the TOYOTA Safety Education Center
“mobilitas” at Fuji Speedway with the goal of
increasing
traffic safety awareness among
everyone involved in the traffic infrastructure. At
“mobilitas,” we conduct high-quality safe driver
training, ranging from classroom lectures to
training on specialized courses, for the general
public, as well as for companies and other
organizations.
Vehicle technology for helping to
prevent accidents and crash safety
Toyota’s pursuit of vehicle safety led to the
development and adoption of technologies such
as VSC (Vehicle Stability Control) and GOA
(Global Outstanding Assessment) in 1995 and
PCS (Pre-Crash Safety System) in 2003, each of
which was the first of its kind in the world. Toyota
will continue to lead the world in developing active
safety technology that supports the driver in
avoiding dangerous situations as well as passive
safety technology that contributes to injury
reduction of driver and passengers on vehicle
collision. We plan to adopt these technologies in
most models and encourage their use.
Working with government agencies for
enhanced traffic environment safety
Toyota is going further in our efforts to enhance
traffic environments by participating in “smartway”
projects (next-generation roadways that use IT to
link people, cars and roadways) in cooperation
with government agencies. We will continue our
R&D and testing of the next-generation vehicle
infrastructure integration system.
Additional details available at Click HERE
Three-Pronged Integrated Approach
asualties
Casualties
People
Vehicles
Traffic
Environment
Zero
casualties
20XX
TOYOTA ANNUAL REPORT 2011
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Special Feature: Toyota’s Safety Technology
Pursuit of Real Safety: Accident Reconstruction Technology
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Developing effective safety technology through
accident reconstruction and analysis
Toyota’s safety technology development pursues real safety. Our first step is to analyze a broad spectrum
of accident investigation data to determine why an accident occurred and what kinds of injuries were
incurred. Next, the accident is reconstructed through a simulation and applicable technologies are
developed. In the final stage we conduct vehicle tests to confirm that the targeted performance has been
achieved.
We continue to investigate and analyze accidents after the vehicle have reached the market. By
repeating these steps, we pursue to develop safety technologies. This indicates the substantial importance
of fundamental technologies for accident reconstruction in the development of safety technologies.
Pursuit of Real Safety
Accident Investigation &
Analysis
Development &
Evaluation
Simulations
Accident Reconstruction
Technology
The world’s largest indoor test facilities
Driving Simulator
In 2008, Toyota developed one of the world’s largest driving simulator,
equipped with a high-resolution imaging system and providing a full
360-degree driving perspective. This allows research on the driver behavior
that precedes crashes, which is difficult to be conducted in a real environment.
By repeating the same conditions multiple times, it is possible to examine
the benefits of safety assist equipment.
For example, when measuring the effects of the PCS (Pre-Crash Safety
System), it is possible to sample and analyze the behavior of a variety of
drivers by assessing different drivers under repeated, identical conditions.
Also, the simulator makes it possible to reconstruct driving condition in a state
of reduced consciousness and thereby we are developing technologies for a
safety guidance system to early detect states of mind unsuitable for driving.
Toyota will continue to utilize our driving simulators for tasks such as the
analysis of human behavior and measuring the effectiveness of safety systems.
Additional details available at Click HERE
Accident Reconstruction
Technology
Ascertaining injury mechanisms
THUMS—the virtual human model
Although crash test dummies used to test the effects of crashes on the hu-
man body allow for comparisons of load magnitude on the body, they do not
provide the means for analyzing injury mechanisms. This is particularly true
in the case of pedestrian accidents, in which body positions change moment
by moment, making it difficult to examine what happened where. To meet
that challenge, in 2000 Toyota and Toyota Central R&D Labs developed hu-
man models known as THUMS (Total Human Model for Safety), starting off
with a skeletal model on which the human body is precisely reproduced. The
current THUMS Version 4 is made up of 2 million elements. The digital repre-
sentation of parts of the body such as the brain, internal organs and muscles
enables a detailed analysis of the crash impact on organs.
THUMS: THUMS allows highly detailed analysis of bone fractures, severed ligaments, etc., by simu-
lating many characteristics of the human body, ranging from the shape of the body to its skeletal
structure and skin. Toyota began developing THUMS in 1997 in cooperation with Toyota Central
R&D Labs, Inc. Version 1 was completed and commercially launched in 2000, followed by Version 2
in 2004, which added a face and bones to the model. Version 3 was launched in 2008 through the
completion of a model to which a brain was added in 2006. Version 4, with detailed modeling of the
shape of internal organs made using high-resolution CT scans, was completed and released in 2010.
Driving simulator
Sense of realism through high-
resolution, full-surround CG
Detailed modeling of internal organs
Additional details available at Click HERE
Ascertaining injury mechanisms
on crash
TOYOTA ANNUAL REPORT 2011
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Special Feature: Toyota’s Safety Technology
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Integrating Leading-Edge Safety Technologies Aiming to Make Vehicles Less Likely to Be Involved in an Accident
Toyota technology aiming to minimize risk at every driving stage
Pre-crash safety technologies
Rescue-related technologies
Toyota’s Integrated Safety Management Concept, which is rooted in our technological development,
should not be thought of as a collection of independent safety systems installed in a vehicle. Rather, the
goal is to link each of these systems to enhance overall effectiveness. Not only the conventional safety
technology area which is focused on the sequence just before and after the accident, we are focusing to
provide optimal support at every driving stage, from being parked through normal driving, pre-crash, post-
crash to the arrival of rescue. We are developing active safety, pre-crash safety, passive safety and rescue
technologies with the goal of producing vehicles that support the driver in avoiding dangerous situations.
Active safety technology
VSC (Vehicle Stability Control)
When this driver support system senses a loss of
traction or a slip during cornering or on a slippery
road, braking is automatically applied to all four
individual wheels and engine power is reduced.
Your vehicle
Pedestrian
Oncoming vehicle
Pedestrian
Area where
the high beam light is
partially blocked out
Additional details available at Click HERE
Additional details available at Click HERE
VDIM (Vehicle Dynamics Integrated Management)
The goal of the VDIM is to provide stability of the
vehicle based on vehicle performance control
technology. Great passive safety and ideal maneu-
verability plus driving stability are fundamental
elements of success. The VDIM effectively aims to
reduce the possibility of an accident by integrating
ABS, TRC, VSC and power steering together as one.
Additional details available at Click HERE
Variable light distribution headlamps (ADB)
We are developing an ADB system that aims to retain
night time visibility nearly equivalent to high-beam
illumination while high-beam light from ADB-fitted
vehicle is partially shielded by ECV automatically to
prevent glare that can interfere with the visibility of
drivers of vehicles ahead.
Wrong way driving alert for navigation systems
Drivers unaware that they are on the wrong side of
the road can cause serious highway accidents. Our
navigation system sense when the car is traveling
against traffic and alert the driver.
Additional details available at Click HERE
Infrastructure-linked
driving support safety system
These systems offer transmission between the road
and the vehicle, or between vehicles, to help drivers
prevent accidents. (ITS Spot Service (DSRC) vehicle
infrastructure integration systems, etc.)
Additional details available at Click HERE
Development of the pre-crash safety system
When the pre-crash safety system detects an
obstruction and determines the possibility of collision,
it notifies the driver with a warning buzzer. Then the
pre-crash brake assist is activated and increases the
braking force when the driver hits the brake. By
accident
through
avoidance maneuverability
extended nighttime sensor range and the integration
control of breaking and steering, we are seeking to
develop pre-crash safety system which helps to
avoid collision as well as reduce collision damage
via a “collision avoidance support system.”
2003 Harrier First in the world
Pre-crash Brake Assist
Pre-crash Seatbelt
2004 Crown Majesta
Pre-crash
Brake
2006 Lexus LS First in the world
Pedestrian detection
and collision-avoidance
steering
Collision-avoidance
support PCS
Our ultimate goal:
Zero casualties from traffic accidents
Additional details available at Click HERE
Passive safety technologies
Emergency-response technology
We are developing technologies that predict danger
prior to emergencies caused by the driver losing
consciousness, such steering wheels equipped with
cardiovascular monitors that check for abnormalities
while the steering wheel is gripped. In the future, we
aim to commercialize systems that can assist daily
health maintenance.
Normal
condition
Warning
signs
Sudden
stroke
Loss of
consciousness
Sudden
change in
physical
condition
Fatal arrhythmia
pattern
Cardiovascular
pattern changes
Predict the risk of
a cardiovascular
abnormality
Braking control system
activation
Vehicle bodies which help to mitigate pedestrian injury
Toyota began manufacturing vehicle bodies that help mitigate pedestrian injury in 2001 and has been
expanding their use. Also, we are developing a pop-up hood that even applies to vehicles with low hoods
that cannot maintain sufficient space underneath by which bumper sensors will detect a collision with a
pedestrian, automatically lifting the back section of the hood to expand the space under the hood. This
contributes to a reduction of head injuries to the pedestrians.
Antilock Braking System
Adaptive Driving Beam
ABS：
ADB：
DSRC： Dedicated Short Range Communications
ITS：
PCS：
Intelligent Transport Systems
Pre-Crash Safety System
THUMS： Total Human Model for Safety
TRC：
VDIM： Vehicle Dynamics Integrated Management
VSC：
Vehicle Stability Control
Traction Control
TOYOTA ANNUAL REPORT 2011
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0819
Special Feature: Toyota’s Safety Technology
Future Direction of Safety Technologies
Customers can feel good about driving and riding in Toyota’s vehicles
Toyota is engaged in developing both active and passive safety technologies, based on the Integrated
Safety Management Concept, so as to achieve the future mobility society’s ultimate goal of zero casualties
from traffic accidents. Under the Integrated Safety Management Concept, Toyota is pursuing safety by
linking the various safety systems installed in vehicles.
We also intend to secure product safety by thoroughly incorporating data from simulation and
accident analyses, as well as feedback from customers, in our technology development.
In addition to the reliability design that Toyota has focused on until now for reliable products that are
durable, we are pursuing safety design which aims to avoid occurrance of safety issues when malfunctions
occur in the vehicles or when our customers drive the vehicles and such design that takes into consideration
customers feelings.
Toyota will continue to develop technologies and work to provide solutions with the goal of offering
Placement of a CSTO for vehicle development
On April 1, 2011, Toyota created the position of chief safety technology officer (CSTO)
to comprehensively coordinate Toyota’s safety technologies and appointed Managing
Officer Moritaka Yoshida to the post. The aim of this position is to speed up decision
making and further strengthen global external communication abilities in the field of
vehicle safety technology development.
The CSTO handles the following four main issues: 1) Propose and arrange safety
policies; 2) Promote vehicle safety technology development; 3) Coordinate external safety-
related explanations and technology information; and 4) Act as a spokesperson about
Managing Officer, CSTO
Moritaka Yoshida
safety technological aspects.
Although the CSTO is Toyota’s representative for our technological progress and enhancement at the global
safety technology and policy level, the CQOs (Chief Quality Officers), who were newly appointed last year, are
the world’s highest level of safety.
responsible for regional quality control.
Direction of Future Safety Technologies
Automotive Technologies
Designed to
Achieve Zero Injuries
and Fatalities
p t
e
t
f
y
y
t
e
t
a
e m e
r
g
g
e
a
I n t
n
M a
P a
y
t
e
c
n
e S a
e
f
e
f
d S a
n t C o
t i v
A c
e S a
s i v
s
d
o
P r
y
t
e
f
t S a
c
u
Product Safety
Ensure safety and peace of mind by reflecting benchmarking and
customer information in development
Reliability
Design difficult to
fail/break
Safety
Peace of Mind
Design that does not
cause safety issues
regardless of customer
usage/operation
Design taking
customer
psychology into
account
Integrated Safety Management Concept
Collision
Parking
Active Safety
Pre-Crash Safety Passive Safety
Rescue
Providing information and support
Accident warning and avoidance
Damage mitigation
Passenger protection
Emergency response
Integrated Safety
Management Concept
Active Safety
Radar Cruise Control
Distance Warning
Passive Safety
Product Safety
Frontal Pre-Collision
System with
Pedestrian Detection
Lane Keeping Assist
Lane Departure Warning
VDIM
Brake Assist
Seatbelts Airbags
AFS
VSC
ABS
Rear-End Pre-Collision
System
HELPNET
Back Guide Monitor
Intelligent
Parking Assist
G-BOOK G-Link
Blind Corner Monitor
Night View
Network-Linked
Navigation System
Vehicle-Infrastructure
Cooperative System
Pedestrian
Injury- Reducing Body
TOYOTA ANNUAL REPORT 2011
17
Consolidated Performance Highlights
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Consolidated Performance Highlights
Automotive Operations
Restore and Renew Our Production Structure for Further Growth
Financial Services Operations
Other Business Operations
New Business Activities
Support for Recovery from the Great East Japan Earthquake
Consolidated Performance (U.S. GAAP)
Consolidated Financial Results
Yen in millions
U.S. dollars*1
in millions
% change
2009
2010
2011
2011
2011 vs. 2010
For the Year:
Net Revenues
Operating Income (Loss)
Net Income (Loss) attributable to
Toyota Motor Corporation*2
ROE
At Year-End:
Total Assets
Shareholders’ Equity
¥20,529,570
(461,011)
¥18,950,973
147,516
¥18,993,688
468,279
$228,247
5,632
(436,937)
-4.0%
209,456
2.1%
408,183
3.9%
4,909
—
¥29,062,037
10,061,207
¥30,349,287
10,359,723
¥29,818,166
10,332,371
$358,607
124,262
+0.2
+217.4
+94.9
—
−1.7
−0.3
Consolidated vehicle sales in Japan and overseas increased by 71 thousand units, or
1.0%, to 7,308 thousand units for the fiscal year compared to the previous year. Vehicle
sales in Japan decreased by 11.5%. However, with the efforts of dealers nationwide,
market share including mini-vehicles was 43.7%, that remained at a high level. Meanwhile,
overseas vehicle sales increased by 6.3%, because of the sales expansion in Asia and
Other Regions. As for the results of operations, net revenues increased by 0.2%, to
¥18,993.6 billion for the fiscal year compared to the previous year, and operating income
increased by 217.4%, to ¥468.2 billion. Income before income taxes and equity in earnings
of affiliated companies increased by 93.3%, to ¥563.2 billion. Net income attributable to
Toyota Motor Corporation increased by 94.9%, to ¥408.1 billion.
2009
Yen
2010
U.S. dollars*1
% change
2011
2011
2011 vs. 2010
Net Revenues
Operating Income
Per Share Data:
Net Income (Loss) attributable to
Toyota Motor Corporation*2
Annual Cash Dividends
Shareholders' Equity
Stock Information (March 31):
Stock Price
Market Capitalization
¥ (139.13)
¥ 66.79
¥ 130.17
$ 1.57
100.00
3,208.41
45.00
3,303.49
50.00
3,295.08
0.60
39.63
¥ 3,120
¥ 3,745
¥ 3,350
$ 40.29
(Yen in millions, U.S. dollars in millions)
¥10,757,752
¥12,912,751
¥11,550,792
$138,915
*1: U.S. dollar amounts have been translated at the rate of ¥83.15=US$1, the approximate current exchange rate at March 31, 2011.
*2: “Net Income attributable to Toyota Motor Corporation”, equivalent to “Net Income” up to 2009.
+94.9
+11.1
−0.3
−10.5
−10.5
(¥ Billion)
25,000
20,000
15,000
10,000
5,000
0
(¥ Billion)
2,500
2,000
1,500
1,000
500
0
-500
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
Net Revenues by Region
Net Income (Loss) attributable to
Toyota Motor Corporation
(¥ Billion)
16,000
12,000
8,000
4,000
0
Japan
North America
Europe
Asia
Other Regions
(¥ Billion)
2,500
2,000
1,500
1,000
500
0
-500
FY
‘07
‘08
‘09
‘10
‘11
‘07
‘08
‘09
‘10
‘11
‘07
‘08
‘09
‘10
‘11
‘07
‘08
‘09
‘10
‘11
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
Note: Fiscal years ended March 31
Note: “Net Income attributable to Toyota Motor Corporation”, equivalent to “Net Income” up to 2009.
TOYOTA ANNUAL REPORT 2011
18
Consolidated Performance Highlights
Consolidated Vehicle Production and Sales
Thousands of units
Vehicle Production by Region:
Japan
Overseas Total
North America
Europe
Asia
Central and South America
Oceania
Africa
Consolidated Total
Vehicle Sales by Region:
Japan
Overseas Total
North America
Europe
Asia
Central and South America
Oceania
Africa
Middle East
Other
2009
4,255
2,796
919
482
947
151
130
167
7,051
1,945
5,622
2,212
1,062
905
279
261
289
606
8
2010
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
2011
3,721
3,448
1,338
372
1,344
148
113
133
7,169
1,913
5,395
2,031
796
1,255
281
248
209
569
6
Consolidated Total
7,567
7,237
7,308
−6.0
+20.9
+28.5
−14.1
+31.6
+1.6
+7.1
+26.7
+5.3
−11.5
+6.3
−3.2
−7.3
+28.1
+21.9
−1.2
+13.0
+22.0
−5.3
+1.0
Principal Market Data: Automotive Market (Sales)
(Thousands of units)
20,000
Japan
United States
Europe
Asia
China
15,000
10,000
5,000
0
CY
‘06
‘07
‘08
‘09
‘10
‘06
‘07
‘08
‘09
‘10
‘06
‘07
‘08
‘09
‘10
‘06
‘07
‘08
‘09
‘10
‘06
‘07
‘08
‘09
‘10
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Automotive Operations
Restore and Renew Our Production Structure for Further Growth
Financial Services Operations
Other Business Operations
New Business Activities
Support for Recovery from the Great East Japan Earthquake
% change
2011 vs. 2010
Vehicle Production (Japan)
Vehicle Production (Overseas)
(Thousands of units)
(Thousands of units)
6,000
5,000
4,000
3,000
2,000
1,000
0
6,000
5,000
4,000
3,000
2,000
1,000
0
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
Vehicle Sales (Japan)
Vehicle Sales (Overseas)
(Thousands of units)
(Thousands of units)
8,000
6,000
4,000
2,000
0
8,000
6,000
4,000
2,000
0
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
Note: Fiscal years ended March 31
Source: Toyota Motor Corporation
Note: Market definitions are as follows
Europe:
Asia:
Japan:
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
Indonesia, Thailand, the Philippines, Malaysia, Singapore, Vietnam, Taiwan,
South Korea and Brunei Darussalam
minivehicles included
TOYOTA ANNUAL REPORT 2011
19
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Automotive Operations (Market Environment and Overview)
Net Revenues
(¥ Billion)
25,000
20,000
15,000
10,000
5,000
0
Operating Income
(¥ Billion)
2,200
2,000
1,800
1,600
200
0
-200
-400
year. Sales of the Lexus brand were at approximately
30 thousand units. Consolidated vehicle production
was down 5.9% year-on-year, to 3.72 million units.
As a result, net revenues were ¥10.99 trillion, a
decrease of ¥234.1 billion or 2.1% year-on-year.
Despite cost-reduction efforts, the impact of
currency exchange fluctuations and decreases in
production and units sold resulted in an operating
loss of ¥362.4 billion, a ¥137.2 billion higher loss
than the previous fiscal year’s operating loss of
¥225.2 billion.
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
North America
Under its founding philosophy of contributing to society through the manufacture of automobiles,
Toyota is dedicated to creating “better cars” that are accepted by our customers and society, and
continues its efforts to manufacture vehicles that meet the needs of countries and regions and
strengthen its initiatives regarding environmentally friendly models.
Note: Fiscal years ended March 31
Market Environment and Performance Summary
During the fiscal year ended March 31, 2011,
Automotive Operations continued to expand in
China and other emerging markets. The market
was characterized by a transition to small and
low-priced vehicles, in addition to which growing
environmental awareness across
the globe
spurred
the active development of new
technologies and the introduction of new products.
Within this market environment, consolidated
vehicle sales both in Japan and overseas (including
Daihatsu and Hino) reached 7.31 million units, an
increase of 71 thousand units, or 1%, over the
previous fiscal year. Consolidated vehicle
production also increased, rising by 360 thousand
units, or 5.3% year-on-year, to 7.17 million units.
Due to the rise in both vehicle production and
vehicle sales, net revenues also increased 0.8%
year-on-year to ¥17.34 trillion. Despite the impact
increased
of currency exchange fluctuations,
revenues and cost-reduction efforts resulted in
operating income of ¥86.0 billion, a gain of ¥172.3
billion compared with the previous fiscal year.
Performance by geographic segments was
as follows.
Japan
In FY2011, consolidated vehicle sales in Japan
to weak market conditions
decreased due
compared with the prior fiscal year, down by 250
thousand units, or 11.5%, to 1.91 million units.
Market share for Toyota and Lexus brands,
excluding minivehicles, was 47.3%, while the share
including minivehicles was 43.7%, indicating a
strong market share continuing from the previous
Consolidated vehicle sales in North America in
FY2011 decreased by 67 thousand units, or 3.2%
year-on-year, to 2.03 million units, due to the impact
of a fiercely competitive environment caused by
the introduction of new models by competitors
and other factors. Market share (2010) in the
United States was 15.2%. Sales of the Lexus
brand in North America were at approximately
thousand units. Consolidated vehicle
235
production reached 1.34 million units, a 28.4%
increase year-on-year.
As a result, net revenues were ¥5.43 trillion, a
decrease of ¥241.4 billion or 4.3% year-on-year.
Due to the decrease in the provision for credit
losses of sales finance subsidiaries in the United
States, as well as production increases and cost
reduction efforts, operating income quadrupled
year-on-year, reaching ¥339.5 billion.
Europe
Consolidated vehicle sales in Europe during the
period under review declined 7.2%, or 62
thousand units year-on-year, to 796 thousand
units, due to a reduction of demand stimulus
measures by European governments. Toyota’s
European market share (2010; about 40 countries)
was 4.4%. Lexus sales totaled approximately 36
Consolidated Performance Highlights
Automotive Operations
Restore and Renew Our Production Structure for Further Growth
Financial Services Operations
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thousand units.
Consolidated vehicle production declined
14.1% year-on-year, to 372 thousand units.
As a result, net revenues decreased ¥165.6
billion, or 7.7% year-on-year, to ¥1.98 trillion.
Nonetheless, operating income increased ¥46.1
billion year-on-year due to expense reductions.
Asia
Consolidated vehicle sales in Asia in FY2011 rose
276 thousand units, or 28.2% year-on-year, to
1.26 million units, due to an overall recovery of the
Asian market led by economic growth in Thailand
and Indonesia. Consolidated vehicle production
also rose 31.6% year-on-year, to 1.34 million units.
As a result, net revenues were ¥3.37 trillion, a
rise of ¥719.2 billion or 27.1% year-on-year.
Operating income also rose due to increased
product and sales units, to ¥313.0 billion, an
increase of ¥109.4 billion or 53.8% year-on-year.
Sales in China, which continues to experience
strong economic growth, reached 846 thousand
units in 2010, a year-on-year increase of 19.3%.
* Unit sales figures for China include domestically produced
units as well as units imported from Japan.
Central and South America, Oceania, Africa,
the Middle East, etc.
Among these regions, sales in FY2011 grew in
Central and South America, Africa, and the Middle
East, with combined sales reaching 1.31 million
units, an increase of 174 thousand units or 15.3%
year-on-year. Consolidated vehicle production
(Central and South America, Oceania, Africa) was
394 thousand units, an increase of 37 thousand or
10.4% compared with the previous year.
As a result, net revenue reached ¥1.81 trillion, a
year-on-year increase of 8.1% or ¥135.3 billion,
while operating income also increased ¥44.6 billion
or 38.6% year-on-year, reaching ¥160.1 billion.
TOYOTA ANNUAL REPORT 2011
20
Restore and Renew Our Production Structure for Further Growth
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Promoting restoration and renewal by enlisting the strength of
on-the-spot human resources
The Toyota Group has established a trilateral structure to
unite us in our effort to build better cars
The Toyota Group’s production bases were affected by the Great East Japan Earthquake, which
struck on March 11, 2011. Nonetheless, by July we had restored our production levels to more
or less normal in terms of volume. We are moving forward with efforts to reconstruct our
production structure so as to restore and renew it to enable further future growth. We will
maximize the strengths and resources of each company in our Group, and use our combined
power to enhance the international competitiveness of Japanese manufacturing.
Impact of the Earthquake and Forecast
Efforts toward Further Growth
Reconstructing our production structure
Our philosophy is “to produce where there is demand” globally, so our basic strategy is to strengthen our supply
capacity in emerging economies and resource-rich countries while maximizing the potential of Japan and the
developed countries.
The manufacturing environment in Japan is challenging, but Toyota’s policy is to maintain production in Japan
of three million vehicles. We believe that we can accelerate Toyota’s medium- to long-term growth, as well as that of
Japanese industry, and contribute to global economic development by developing new technologies and
manufacturing methods that are “possible in Japan,” and subsequently establishing mass production of these
technologies at Japanese manufacturing sites and spreading them throughout the world.
Restructuring the Group to strengthen manufacturing
Toyota has established a new plan for restructuring our domestic production structure so as to strengthen
manufacturing. Toyota has reached agreement with Toyota Auto Body and Kanto Auto Works to convert those
Impact of the earthquake and status of recovery
Many of our parts suppliers are located in the affected areas of Tohoku and northern Kanto, so Toyota did suffer
companies to wholly owned subsidiaries of Toyota in January 2012. In addition, Kanto Auto Works, Central
Motor Co. and Toyota Motor Tohoku Corporation have reached an agreement to begin discussions for the
some effects in the immediate aftermath of the Great East Japan Earthquake, such as a temporary production halt
at our domestic auto manufacturing facilities. Toyota immediately initiated relief efforts in the aftermath of the
proposed merger and integration of the three companies (targeted July 2012). The goal is to enhance
manufacturing specialization and provide a more accurate response to customer demands, while reducing the
earthquake, such as dispatching personnel to the affected areas, and we, together with our Group companies
costs of development and production.
and affiliates, began working to recover from the disaster. In terms of impact on our 2011 Production Plan, we
experienced a loss of production of approximately 800 thousand units through June, and despite a forecast
recovery of approximately 350 thousand units from October onward we expect to come in at roughly 450 thousand
units under our production goal for FY2012 (as of June 10, 2011).
Until now, each auto manufacturer in the Toyota Group has had a defined role to play from development
through production in supporting the manufacturing of Toyota vehicles. The new structure will call for each auto
manufacturer to act on its own initiative in fulfilling a role in its area of expertise. This means each will become
a company that can execute the Toyota business strategy. We will strengthen ties in the area of supply strategy
Our plants, dealers and suppliers have been working in unison to restore production to normal levels, and from
as well, including marketing and product planning strategy and overseas business.
April 18 all of our plants, including the Central Motors Plant in Miyagi Prefecture and the Kanto Motors Plant in Iwate
Prefecture, were again producing cars. By June, we had returned to around 70% of our normal production levels
overall for our domestic and overseas plants, and by July we had recovered to the levels on which our annual plan was
based. Production of all lines and models are forecast to be at normal production levels for the second half of FY2012.
Creation of new markets through a trilateral domestic production structure
By restructuring the production structure in Tohoku, Toyota is moving forward with plans to create a Tohoku
area manufacturing hub, which would be Toyota’s third national manufacturing hub following Chubu and Kyushu.
The Tohoku hub will specialize in the development and production of compact cars as a comprehensive,
Production forecast for the second half of FY2012
Toyota began steps to normalize both domestic and overseas production in June. Unit production will recover in
independent base for production and the procurement of engines and other units, as well as parts. Toyota has
also decided to produce our new small hybrids, one of the main focuses of our effort to build environmentally
the second half of the year, with unit production of Toyota and Lexus vehicles for the fiscal year ending March 31,
2012, expected to be approximately 7.39 million units, an increase of 48 thousand units over the same period in
the previous year (April 2010–March 2011) (as of June 10, 2011).
Adjustments were made to North American production after the earthquake, and we aimed to normalize
production ahead of schedule, that is, in May, of eight of the 12 vehicles made there. In China, the status of parts
supply and inventory varies from plant to plant, and we have been working since June with our partners to confirm
and negotiate parts supply so as to proceed toward the normalization of production. We have set supply targets
for the 17 plants in Asia and Oceania where production adjustments were made and are working to restore normal
operations or increase rates of operation to achieve normalization.
friendly vehicles, in Tohoku. Toyota expects Kyushu to become the hub for mid-sized and Lexus brand vehicle
production and Chubu to become the hub for technological and manufacturing innovation. The role of each
region has been clarified so as to lead to the building of better cars and to create new markets that will allow
our suppliers and manufacturers worldwide to work as one and please our customers.
Roles of the three hubs
Role
Concept
Chubu
Kyushu
Tohoku
Core of domestic production/Hub of new technology and new manufacturing method development
Development of technological innovation
Hub for mid-sized and Lexus brand vehicle production
Specializing in compact cars
Application of mass production innovation
TOYOTA ANNUAL REPORT 2011
21
Financial Services Operations
Net Revenues
(¥ Billion)
1,500
1,000
500
0
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Operating Income
Overview of Toyota’s Financial Services Operations
(¥ Billion)
400
300
200
100
0
-100
Total assets
Net revenues
¥13.3 trillion
¥1.2 trillion
Operating income
¥358.2 billion
Operating areas
33 countries and
regions worldwide
No. of employees
approx. 8,000
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
(As of March 31, 2011)
Toyota provides automotive financing and a variety of other financial services aimed at providing
total support for our customers’ lifestyles.
Note: Fiscal years ended March 31
Market Environment and Performance Summary
In fiscal 2011, our financial services operations generated operating income of ¥358.2 billion. This was
mainly due to an increase in the volume of financings and a broad decrease in expenses related to loan
losses and residual value losses.
Our financial services operations are primarily handled by Toyota Financial Services Corporation,
which has overall control of our financial services subsidiaries worldwide. Toyota Financial Services
provides financial services primarily for vehicle purchases and leases to approximately 8.5 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.
In Japan, in addition to automotive financing, Toyota Financial Services broadens customer
relationships through the provision of credit cards, home loans and other sound financial services
designed to closely match the needs of our customers.
Overseas, Toyota Financial Services has engaged in active efforts to develop business in emerging
markets. During the fiscal year under review, it expanded operations in China to include 157 cities, with
sales bases in the major coastal cities as well as in the interior.
In such major markets as Europe and the United States, Toyota Financial Services aims to ensure
stable revenues by continuing to balance vehicle sales support with a variety of business risks, as well
as by securing margins and achieving thorough low-cost operations.
In response to dramatic changes in the business environment, Toyota Financial Services will further
strengthen its group-wide compliance and risk management structures, as well as focus on enhancing
its business foundation through IT platform development, management personnel training and other
efforts.
Financial Services Operations Organization
Toyota Motor
Corporation
Toyota
Financial Services
Corporation
Overseas
Sales Finance
Companies
Toyota Finance
Corporation
Toyota
Asset Management
Co., Ltd.
TOYOTA ANNUAL REPORT 2011
22
Other Business Operations
Net Revenues
(¥ Billion)
1,400
1,300
1,200
1,100
1,000
0
Operating Income
(¥ Billion)
40
30
20
10
0
-10
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
Note: Fiscal years ended March 31
Toyota uses technologies and expertise gained from automotive operations to operate a variety of
businesses that help people lead more fulfilling and enjoyable lives.
Market Environment and Performance Summary
During the fiscal year under review, Toyota Motor Corporation transferred all housing business operations,
which constitute the core business in this segment, to Toyota Housing Corporation effective October
2010. The aim of this move is to integrate the operational organization and enhance specialization, as well
as to consolidate development, production and sales under a management structure that is flexible and
capable of quick decision making. As a result, net revenues for other business operations rose ¥24.6
billion, or 2.6% year on year, to ¥972.2 billion, whereas operating income improved to ¥35.2 billion, an
increase of ¥44.1 billion compared with the previous fiscal 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.
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participated in road tests and public demonstrations in various
regions through the cooperation of the public and private sectors.
In the autumn of 2009, Toyota developed an onboard communications
device that corresponds to the ITS Spot Service for traffic and safe
driving support information, ahead of the full-scale launch of that service
in the spring of 2011. Toyota will continue to expand the number of
models equipped with this device.
Additional details available at Click HERE
Information Technology and Telecommunications Business
In addition to serving as a sales agency for mobile phones provided
by KDDI Corporation (a general
telecommunications service
provider), Toyota is engaged in the promotion of services that link
mobile phones with technologies such as car navigation systems
and G-BOOK (information service for onboard terminals). Toyota is
promoting the sale of car navigation systems by offering appealing
system functions such as hands-free telephones using wireless
Bluetooth® communications and the playback of songs downloaded
to a cell phone, as well as map renewal and user-based destination
setting services that employ telecommunications.
* 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 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 Click HERE
Housing Business
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
Since Toyota entered the housing business in 1975, Toyota Housing Corporation has expanded to provide
homes as Toyota Home offering high durability and earthquake resistance, as well as excellent security,
health and environmental features. From January 2010, we began using the catchall 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. Toyota Housing Corporation
combines the technologies of the Toyota Group to offer comfortable and economical homes that are
TOYOTA ANNUAL REPORT 2011
23
Other Business Operations
gentle on the environment, while at the same time engaging in
leading-edge development in a variety of fields, such as the
operational testing of smart grids.
Note: Effective October 1, 2010, all housing operation production and technical
development functions were transferred from Toyota Motor Corporation to Toyota
Housing Corporation.
Additional details available at Click HERE
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.
This year, Toyota announced the PONAM-35, our first new vessel
in the five years since the PONAM-45. We will continue to expand our
lineup in the future.
Additional details available at Click HERE
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Biotechnology and Afforestation Business
Toyota is making every effort to contribute to the creation of a resource
recycling society through our afforestation activities, as well as our
horticultural, environmental greening and agricultural biomass
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. In May 2010, this forest project acquired
Forest Stewardship Council (FSC) certification. In our environmental
greening business, we began selling Toyota/Midorie Hybrid Green
rooftop greenery products, which we jointly developed with Suntory
Midorie, while in our agricultural biomass operations we launched a
swine manure composting facility deodorizer that is the second
product in the ResQ Series.
Additional details available at Click HERE
Philippine and China afforestation projects
Click HERE
Motorsports
Our main areas of motorsports participation in 2010 were SUPER
GT and Formula Nippon series racing in Japan and NASCAR in the
United States, all of which we promote as “spectator motorsports.”
Also, from last year we sought to strengthen and further promote
our “grassroots motorsports” programs, so as to create opportunities
for more people to enjoy the thrill of automobiles easily.
Our “grassroots motorsports” programs include GAZOO
Racing, which conveys the dreams and excitement of automobile
racing, as well as other events such as the Waku Doki Circuit, an
enjoyable participation-type event for our customers. Also, by
participating in the 24-Hour Nürburgring racing competition our
personnel get hands-on training in building good, fine-tuned
automobiles.
We will continue to provide opportunities for our customers to
enjoy motorsports by making the “spectator motorsports” and
“grassroots motorsports” categories the focus of our motorsports
projects in 2011.
Additional details available at Click HERE
SUPER GT
Formula Nippon
NASCAR
Waku Doki Circuit
TOYOTA ANNUAL REPORT 2011
24
New Business Activities
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Realization of a our new vision of the “future mobility society” requires the widespread use of next-
generation environment-friendly cars as well as an infrastructure that can properly manage electricity
demand. Toyota is strengthening our smart grid effort, and that effort includes moving forward with
trials and testing in various regions and our active cooperation with other industries.
Efforts to make smart grids a reality
Participation in trials worldwide
Toyota is conducting trials in Japan and a number of countries, such as the United States, China, and France,
in cooperation with national and local governments, so as popularize smart grids and environment-friendly cars.
The Toyota smart grid concept
China
America
The Toyota Smart Center optimizes environment-friendly car battery charging
and home energy management
The daily power use of environment-friendly cars such as plug-in hybrid vehicles (PHVs) and electric
vehicles (EVs) is thought to be equal to 30% of the power consumption of the average home. Achievement
of a low-carbon society will require the widespread use of environment-friendly cars, so optimal
management of battery charging and home energy is essential. To meet this aim we have developed our
Toyota Smart Center, a system that uses smart-grid technology to link homes, vehicles, and users.
The smart grid envisioned by Toyota is centered on the Smart Center, and manages the power supply
to “smart houses” developed by Toyota Housing while monitoring the power use status of each home
through a data center. This enables it to reduce the CO2 emissions of the entire region while minimizing
costs. It does so by monitoring both the remaining battery power data transmitted by the car and the power
consumption data from the home, and then proceeds to make a comprehensive determination about how
to optimize power use by also taking into account factors such as weather conditions and power company
fee schedules. Car batteries can then be charged during times of day when the grid power load is low, and
the home’s own power supply from solar panels and storage batteries can be used efficiently. The goal is
to create “smart communities” that optimize the power usage of the entire residential area.
Smart grid Toyota envisions
Tianjin
Joint project with CATARC (China Automotive Technology and
Research Center) to evaluate PHV usability and charging performance.
Boulder, Colorado
First city-level project to evaluate PHV usability and charging
performance and conduct trials of home/PHV links.
France
INES* project
Project in cooperation with the French government to build
a power management system utilizing solar power.
* Institut National de l’Energie Solaire
Strasbourg
Project conducted in cooperation
with EDF (French power company),
consisting of introducing 70 PHVs,
vehicle/infrastructure
confirming
performance and assessing battery
charging.
Japan
Rokkasho Village, Aomori Prefecture
Trials involving powering homes and PHVs using only
natural (wind + solar) energy
EV/PHV Towns
Project with the Ministry of Economy, Trade, and Industry (METI) conducting regional
public relations with local governments in 18 designated model prefectures nationwide
including, encouraging the use of environment-friendly cars as public service vehicles.
Kitakyushu City, Fukuoka Prefecture
Project with METI that conducts trials in plant energy management, which is of
particular interest because of Kitakyushu’s status as an industrial city.
Toyota City, Aichi Prefecture
Project conducted in cooperation with METI that involves the sale of 67 Toyota
Housing demonstration houses and is aimed at optimizing energy use from a consumer
perspective. Four thousand production-model PHVs and EVs were introduced as part
of the effort to construct a low-carbon transportation system.
Toyota Smart Center
Leveling of power demand
Cooperation with other industries to speed up smart grid development
Power company
Total support for low-carbon,
energy-saving life
Sunlight / Temperature / Wind
Electricity rates by periods
Gathering
data
Optimum
calculation
for
energy use
Power
consumption/
storage
planning
Self-supplying
power
Shifting car-charging
to periods with low
power demand
Car
charging
Home
power consumption
r
e
w
o
p
d
n
a
m
e
D
(hour)
0
6
12
18
23
Town (smart shop)
Home (smart house)
Car (PHV, EV)
People (smart phone)
WiFi network
G-Station
Notifies smart phones
when charging ends
Solar panels
HEMS*
Controls home electricity supply/demand
(generation, storage, consumption)
Storage battery
Stores electricity generated
by solar panels
Charging outlet
G-BOOK
Network connecting cars,
homes and people
Car batteries
Used as a household power source
in emergencies
Supporting eco-driving
Checking battery level
Setting charging time
Remote air-conditioning
Supporting ECO life
Home power consumption monitor
Appliances remote control
＊HEMS： Home Energy Management System
Use of the latest IT technology and the expanding data infrastructure
Toyota actively seeks cooperation with other industries.
In April of this year, Toyota teamed up with Microsoft to establish
Windows Azure cloud service as the IT platform for operating Toyota’s own
data center, with the goal of reducing costs and achieving systems
expandability. The two companies will work together to build a global cloud
platform by 2015 to develop the Toyota Smart Center worldwide, with the
goal of early achievement of a low-carbon, energy efficient society.
Also in April, Toyota teamed up with WiTricity to develop wireless, “non-
contact charging” that charges up batteries simply by bringing them into
proximity with chargers embedded in homes or parking spaces. In May, Toyota
and Salesforce.com formed a strategic alliance to build “Toyota Friend,” a
private social network for connecting people, cars, dealers and manufacturers.
Alliances with Microsoft (top photo)
and Salesforce.com (bottom photo)
TOYOTA ANNUAL REPORT 2011
25
Support for Recovery from the Great East Japan Earthquake
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TOPICS
Support for Recovery from the Great East Japan Earthquake
Since the Great East Japan Earthquake struck on March 11, Toyota has been engaged in a variety of recovery efforts.
The Toyota Group, including our affiliates and dealers, will continue to do all we can to assist in the recovery.
Provision of funds
Provision of dorm rooms and Toyota company housing
Toyota has pledged ¥300 million to charities, including the Central Community
Chest of Japan and Japan Platform. In addition, a donation from our executives and
employees of approximately ¥55 million was made to the Japanese Red Cross.
Through Aichi Prefecture authorities, Toyota is providing 160 apartments in
Toyota company housing and 320 dorm rooms in Aichi Prefecture to evacuees
needing shelter.
Children are the “strength for the future” that will drive the recovery of the
Tohoku region, so Toyota will donate ¥100 million each to the educational-
assistance funds for children orphaned by the disaster established by the Iwate
and Miyagi prefectural governments, as well to that planned for establishment
by Fukushima Prefecture (for a total of ¥300 million). In addition, Toyota will
donate to funds that develop activities for support to the stricken areas through
the arts and culture, and we will also sponsor events such as charity concerts
in support of recovery efforts.
Provision of supplies
So far, Toyota has sent 87 11-ton trucks to the region containing such items as
foodstuffs, drinking water, daily necessities, medical supplies and equipment
for recovery work. (Some of these trucks contained items for the recovery
efforts collected from Toyota dealers across the country.) Also, in addition
to supplying fuel such as kerosene, seven tanker trucks have been sent to
provide water to the stricken areas.
Provision of vehicles
Toyota is providing approximately 260 vehicles for use in the four stricken
prefectures of Iwate, Miyagi, Fukushima and Ibaraki.
Provision of support for agriculture
In close cooperation with Nippon Keidanren’s relief efforts, Toyota is engaged
in the following activities to help support those involved in agriculture and food
production in the Tohoku and Kanto regions directly affected by the disaster or
by rumors concerning fallout from the Fukushima nuclear reactor.
At Toyota’s headquarters, Nagoya and Tokyo offices: Serving meals in the
employee dining halls made with produce from Tohoku and Kanto, and
selling produce and goods from the regions at shops for employees.
At Toyota’s Tokyo office lobby: Hosting markets selling produce and
processed items from Tohoku and Kanto.
At Toyota’s headquarters, Nagoya and Tokyo offices: Selling processed
food items from Tohoku and Kanto in our company stores.
Provision of personnel
Toyota dispatched about 60 employees to the affected areas in the immediate
aftermath of the earthquake, where they mainly focused on distributing
emergency provisions and also worked to support the recovery of companies
affiliated with the Toyota Group. We have continued to send volunteers from
15 Toyota Group and affiliated companies, and currently have about 140
employees engaged in relief efforts.
TOYOTA ANNUAL REPORT 2011
26
R&D and Intellectual Property
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 negative
aspects of driving, such as traffic accidents and the burden that automobiles have on the environment,
and maximize the positive aspects, such as driving pleasure, comfort, and convenience. 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 to forward-looking technology and product development. With respect to such basic research
issues as energy, the environment, information technology, telecommunications, and materials, projects
are regularly reviewed and evaluated in consultation with outside experts to achieve efficient R&D cost
control.
And with respect to forward-looking, leading-edge technology and product development, we
establish cost-performance benchmarks on a project-by-project basis to ensure efficient development
investment.
Basic research
Development theme discovery Research on basic vehicle-related technology
Forward-Looking and Leading-Edge Technology Development
Technological breakthroughs related to
components and systems
Development of leading-edge components and systems ahead of competitors
Product development
Primary responsibility for new model development
Development of all-new models and existing-model upgrades
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R&D and Intellectual Property
Corporate Philosophy
Management Team
Corporate Governance
Risk Factors
Other Management and Corporate Data
R&D Expenses
(¥ Billion)
1,000
800
600
400
200
0
FY
‘07
‘08
‘09
‘10
‘11
R&D Expenditures
In fiscal 2011, R&D expenditures totaled ¥730.3
billion, up 0.6% 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-
the
looking,
development of products associated with the
environment, energy, and
safety. These
investments are essential to preserving our
competitive edge in terms of technologies and
products.
technologies and
leading-edge
R&D Organization
Toyota operates a global R&D organization with the primary goal of building automobiles that precisely
meet the needs of customers in every region of the world.
In Japan, R&D operations are led by Toyota Central Research & Development Laboratories, Inc.,
which works closely with Daihatsu Motor Co., Ltd., Hino Motors, Ltd., Toyota Auto Body Co., Ltd., Kanto
Auto Works, Ltd., and many other Toyota Group companies. Overseas, we have a worldwide network of
technical centers as well as design and motorsports R&D centers.
Domestic and Overseas R&D Bases
Facility Name
Japan
Activities
Location
Head Office Toyota Technical Center
Toyota Central Research & Development
Laboratories, Inc.
Product planning, design, prototype development,
vehicle evaluation
Toyota City, Aichi Prefecture
Fundamental research for the Toyota Group
Aichi County, Aichi Prefecture
Higashi-Fuji Technical Center
New technology research for vehicles and engines
Mishuku, Susono City,
Shizuoka Prefecture
Shibetsu Proving Ground
Tokyo Technical Center
Vehicle testing and evaluation at high speed and
under cold conditions
Onnebetsu, Shibetsu City,
Hokkaido
Advanced research for electronic systems
Minato-ku, Tokyo
Head Office Toyota Technical Center
Toyota Central Research & Development
Laboratories, Inc.
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R&D and Intellectual Property
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Facility Name
USA
Activities
Location
Intellectual Property Guiding Principle
Toyota Motor Engineering & Manufacturing
North America, Inc.
Vehicle development & evaluation, certification,
collection of technical information
Calty Design Research, Inc.
Exterior / Interior / Color design
Ann Arbor, Michigan
Torrance, California
Wittman, Arizona
Newport Beach, California
Ann Arbor, Michigan
Securing greater corporate flexibility and maximizing corporate value through the appropriate
acquisition and utilization of intellectual property.
Toyota Motor Engineering & Manufacturing
North America, Inc.
Calty Design Research, Inc.
Europe
Toyota Motor Europe R&D/Manufacturing
Vehicle development & evaluation, certification,
collection of technical information
Brussels, Belgium
Derby, U.K.
Calty Design Research, Inc.
Toyota Europe Design Development
Nice, France
Toyota Motor Europe R&D/Manufacturing
Toyota Europe Design Development
Asia Pacific
Toyota Motor Asia Pacific Engineering and
Manufacturing Co., Ltd.
Vehicle development, software development,
evaluation, collection of technical information
Samutprakarn Province, Thailand
Toyota Technical Center Asia Pacific Australia
Pty., Ltd.
Vehicle development, software development,
evaluation, collection of technical information
Melbourne, Australia
Toyota Motor Asia Pacific Engineering and
Manufacturing Co., Ltd.
Toyota Technical Center Asia Pacific
Australia Pty., Ltd.
Additional details available at Click HERE
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 2011
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Corporate Philosophy
Seeking Harmony between People,
Society and the Global Environment, and
Sustainable Development of Society through Manufacturing
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 Toyota Guiding Principles and an
explanation paper entitled “CSR POLICY: Contribution towards Sustainable Development” that
interprets the Toyota Guiding Principles. The CSR Policy has been compiled based on the Toyota
Guiding Principles and takes into consideration Toyota’s relations with stakeholders. By having all
employees embrace this policy and act accordingly, Toyota aims to remain a company that is
admired and trusted by society.
Five Main Principles of Toyoda
The spirit of the Toyoda Precepts has been passed down since Toyota’s Foundation.
The Toyoda Precepts represent the essential philosophy of the founder of the Toyota Group, Sakichi
Toyoda, and are a source of spiritual support for Toyota employees. The spirit of the Toyota Precepts is
carried on in the Toyota Guiding Principles.
• Always be faithful to your duties, thereby contributing to the company and to the
overall good.
• Always be studious and creative, striving to stay ahead of the times.
• Always be practical and avoid frivolousness.
• Always strive to build a homelike atmosphere at work that is warm and friendly.
• Always have respect for spiritual matters, and remember to be grateful at all times.
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Toyota Guiding Principles
The Toyota Guiding Principles (adopted in 1992 and revised in 1997) reflect the kind of company that
Toyota seeks to be in light of the unique management philosophy, values, and methods that it has
embraced since its foundation. Toyota, along with its consolidated subsidiaries, seeks to contribute to the
continuous development of human society and of the planet through its businesses based on
understanding and sharing the Toyota Guiding Principles.
1. Honor the language and spirit of the law of every nation and undertake open and fair business 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 their respective communities.
3. Dedicate our business to providing clean and safe products and to enhancing the quality of life
everywhere through all of our activities.
4. Create and develop advanced technologies and provide outstanding products and services that fulfill
the needs of customers worldwide.
5. Foster a corporate culture that enhances both individual creativity and the value of teamwork, while
honoring mutual trust and respect between labor and management.
6. Pursue growth through harmony with the global community via innovative management.
7. Work with business partners in research and manufacture to achieve stable, long-term growth and
mutual benefits, while keeping ourselves open to new partnerships.
CSR POLICY: Contribution Towards Sustainable Development
We have compiled our Corporate Social Responsibility Policy: Contribution towards Sustainable
Development, which interprets and explains the Toyota Guiding Principles by taking into consideration
the relationship we have with our stakeholders. Our consolidated subsidiaries share this policy and act
accordingly. Toyota’s business partners are also expected to support this policy and act in accordance
with it.
Toyota also participated in the formulation of and observes the standards outlined in the Charter of
Corporate behavior of the Nippon Keidanren (Japan Business Federation), an alliance of Japanese
leading corporations.
Additional details available at Click HERE
TOYOTA ANNUAL REPORT 2011
29
Management Team (As of June 17, 2011)
Toyota Motor Corporation (TMC) announced the modification of its management structure effective
April 1, as part of its realization of the Toyota Global Vision.
The changes are intended to create a structure that can meet the following objectives: 1) convey
customer opinions and onsite information to management in a timely manner, 2) make prompt
management decisions based on onsite information and 3) make constant checks as to whether
management decisions are acceptable to society.
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Changes to Management Structures
1. Streamlining of the Board of Directors
Effective following the formal decision made at the Board of Directors meeting held after the 107th
General Shareholders Meeting (June 17, 2011), the number of directors was reduced from 27 to 11. The
Board of Directors is henceforth to comprise the chairman, the president, five executive vice presidents
and the four officers responsible for the Corporate Planning, the Accounting Group and the External
Affairs Group.
4. Building a structure that ensures that outside opinions are listened to in earnest and
reflected in management practices
For the management of regional entities, Toyota has established regional advisory committees
composed of well-informed persons in North America, Europe and Asia. This is meant to ensure that
outside opinions are reflected in management practices for decision making that is in touch with work
sites and effective management decisions based on regional understanding.
2. Scaling down of the executive decision-making system
Although previously the executive system was made up of three tiers—executive vice presidents, chief
officers and officers responsible for group affairs—it has been streamlined to two, with the officers
responsible for group affairs removed. The senior managing director position has been eliminated and
the total number of executives broadly reduced, from 77 to 60. Also, chief officers will be appointed in
a flexible manner from the ranks of senior managing officers (a newly established rank) or managing
officers.
3. Changes to structures to allow local decision making by overseas affiliates
Regional chief officers, in principle, will be stationed in their respective regions, and the number of
executives stationed outside Japan will be increased from 13 to 15.
Their divisions’ functions, which are presently performed in Japan, will be transferred overseas
in stages.
5. Promoting management in close contact with work sites
“Executive general manager” has been created as a non-executive position to promote management
that is in close contact with work sites. Executive general managers are to be employees such as
grand chief engineers responsible for vehicle development, general managers responsible for
technology and plant general managers.
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Management Team (As of June 17, 2011)
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Representative Directors
Chairman of the Board
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)
Full-Time Corporate Auditors
Corporate Auditors
Corporate Auditors
Fujio Cho
Takeshi Uchiyamada
Research & Development
Nobuyori Kodaira
Corporate Planning Div. /
Environmental Affairs Div. /
IT Group
Yoichiro Ichimaru
Yoichi Morishita
Yukitoshi Funo
Mamoru Furuhashi
Masaki Nakatsugawa
Akishige Okada
President, Member of the Board
Akio Toyoda
External Affairs Group
Takahiko Ijichi
Accounting Group
Yasumori Ihara
Corporate Planning Div. /
Purchasing Group
Asia & Oceania Operations /
Middle East, Africa and
Latin America Operations /
External Affairs /
Operation Planning and Support
Atsushi Niimi
North America Operations /
China Operations /
Production Control /
Production Engineering /
Manufacturing
Shinichi Sasaki
Business Development /
IT / Purchasing /
Japan Sales Business /
Customer Service /
Quality
Satoshi Ozawa
Europe Operations /
General Administration &
Human Resources /
Accounting
Masahiro Kato
Kunihiro Matsuo
Yoko Wake
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Corporate Governance
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Toyota’s Basic Policy on Corporate Governance
Toyota has positioned the stable long-term growth of corporate value as a top-priority management issue.
We believe that in carrying this out, it is essential that we achieve long-term and stable growth by building
positive relationships with all stakeholders, including shareholders and customers as well as business
partners, local communities and employees, and by supplying products that will satisfy our customers. This
position is reflected in the “Guiding Principles at Toyota,” which is a statement of Toyota’s fundamental
business policies. Also, Toyota adopted and presented the CSR Policy “Contribution toward Sustainable
Development,” an interpretation of the “Guiding Principles at Toyota” that organizes the relationships with its
stakeholders. We are working to enhance corporate governance through a variety of measures designed to
further increase our competitiveness as a global company.
Toyota’s Corporate Governance System
Toyota formulated and announced the Toyota Global Vision in March 2011, based on what it has learned from
the deterioration of the business environment following the Lehman Shock and a series of quality problems.
The Toyota Global Vision, based on Toyota’s values that have guided Toyota since its founding, such as
“Guiding Principles of Toyota” and “Toyota Way,” aims to exceed customer expectations by the development
of ever-better cars and enriching lives of societies, and to be rewarded with a smile which ultimately leads
to the stable base of business. Toyota is to keep this virtuous cycle by focusing on making ever-better cars.
To fulfill the Toyota Global Vision, Toyota made some changes to its management structure such as
reducing the Board of Directors and decision making layers. Toyota will continue to offer products and
services that will satisfy evolving needs in every region. Toyota headquarters will provide overall direction
and furnish support for the initiatives undertaken by the regional operations.
Specifically, with the aim of faster decision making, Toyota drastically reduced the number of Directors
and abolished the position of Senior Managing Director. Furthermore, Toyota will replace the current three-
layer arrangement – Executive Vice President, Chief Officer, and Executive responsible for the operations
involved – with two layers, eliminating the executive immediately below the Chief Officer. Moving forward
with this new structure will support a swifter flow of information from the divisional general managers, who
are intimately familiar with their operations, to senior management.
Toyota is to enhance clarity in organizational responsibilities: the Board of Directors decides what Toyota
will do as global Toyota, and Chief Officers decide how to implement that decision as chief executives for
day-to-day operations, etc. The post of Chief Officer will be filled either by a “Senior Managing Officer” or
“Managing Officer” in a flexible manner. Chief Officers responsible for the region or function conduct local
operations basically at respective sites under the Executive Vice President responsible for each operational
sector to vigorously reflect the voices of local customers in functions of R&D, production, and sales.
Systems for Ensuring Appropriate Management
Toyota has an “International Advisory Board” consisting of advisers from each region overseas, and, as
appropriate, receives advice on a wide range of management 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 various stakeholders, including the “Labor-Management
Council,” the “Joint Labor-Management Round Table Conference” and the “Toyota Environment Committee.”
Accountability
Toyota has engaged in timely and fair disclosure of corporate and financial information as stated in the CSR
Policy “Contribution towards Sustainable Development.” In order to ensure the accurate, fair, 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
In order to manage and implement important activities for fulfilling social responsibilities, Toyota has
established the CSR Committee consisting of directors at the executive vice president level and above as
well as representatives of corporate auditors, to review important issues relating to corporate ethics, legal
compliance, risk management and social contribution, and also to develop action plans concerning these
issues. 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 continue to promote the “Toyota Code of Conduct” which is a guideline for
employees’ behavior and conduct for employees of Toyota and its consolidated subsidiaries (together
“Toyota”) all around the world. Toyota will work to advance corporate ethics through training and education
at all levels and in all departments.
Toyota has adopted an auditor system. Seven Corporate Auditors including four Outside Corporate
Auditors play a role in Toyota’s corporate governance efforts by undertaking audits in accordance with the
audit policies and plans determined by the Board of Corporate Auditors. In addition, 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 fields of expertise. The state of internal controls and internal audits 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. To
enhance the system for internal audits, a specialized organization made independent of direct control by the
management evaluates the effectiveness of the system to secure the appropriateness of documents
regarding financial calculation and other information in accordance with Section 404 of the U.S. Sarbanes-
Oxley Act and Article 24-4-4 (1) of the Financial Instruments and Exchange Law of Japan. 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
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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.
Toyota’s 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 Officers
or Managing Officers
International Advisory Board
Labor-Management Council
Joint Labor-Management Round Table Conference
CSR Committee*
Toyota Environment Committee
Disclosure Committee
Internal
Auditing Department
Internal control systems
* The CSR Committee deliberates on and
makes decisions concerning CSR-related
planning, corporate ethics, legal compliance,
risk management and social contribution
activities.
Basic Approach to Internal Control System and Its Development
Toyota, together with its subsidiaries, has created and maintained a sound corporate climate based on the
“Guiding Principles at Toyota” and the “Toyota Code of Conduct.” Toyota integrates the principles of problem
identification and continuous improvement into its business operation process and makes continuous efforts
to train employees who will put these principles into practice.
Accordingly, Toyota has developed its basic policy regarding the following items as stipulated in the
Corporation Act:
(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 of Directors’ meeting 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) and other
systems. Significant matters will be properly submitted and discussed at the Board of Directors’
meeting 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, etc. and compliance by
establishing coordinated systems with all regions, establishing rules or preparing and delivering
manuals and by other means, as necessary through 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, etc., 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.
2) The Directors will promptly determine the management policies based on precise on-the-spot
information and, in accordance with Toyota’s advantageous “field-oriented” approach, delegate a
high level of authority to Chief Officers (Senior Managing Officers and Managing Officers) who take
responsibility for business operations in each region and function. The Chief Officers will proactively
compose business plans for the regions and functions under their leadership and execute them in a
swift and timely manner in order to carry out Toyota’s management policies. The Directors will supervise
the execution of duties by the Chief Officers.
3) Toyota, from time to time, will make opportunities to listen to the opinions of various stakeholders,
including external experts in each region, and reflect those opinions in Toyota’s management and
corporate activities.
(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.
TOYOTA ANNUAL REPORT 2011
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Corporate Governance
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 and other committees.
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 Toyota’s common charter of conduct, and develop and maintain a sound environment
of internal controls for Toyota. Toyota will also promote the “Guiding Principles at Toyota” and the
“Toyota Code of Conduct” through personnel exchanges.
2) Toyota will manage its subsidiaries in a comprehensive manner appropriate to their positioning 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 (7) from Directors
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 related 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, Senior Managing Officers, Managing Officers, and employees will report to Corporate
Auditors on the business upon requests by the Corporate Auditors, periodically and as needed.
(10) Other systems to ensure that the Corporate Auditors conducted audits effectively
Toyota will ensure that the Corporate Auditors attend major Board of Directors’ 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.
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Basic Policy and Preparation towards the 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.
TOYOTA ANNUAL REPORT 2011
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Risk Factors
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 24, 2011, the filing date of Form 20-F.
Risks relating to the Great East Japan Earthquake
Toyota may be adversely affected by the continuing effects of the Great East Japan Earthquake and
ensuing events.
The Japanese economy as a whole suffered significant damage as a result of the Great East Japan
Earthquake that occurred on March 11, 2011 and the ensuing tsunami and accidents at nuclear power
plants in Fukushima Prefecture (collectively, the “Great East Japan Earthquake”).
After the earthquake’s occurrence on March 11, 2011, Toyota temporarily suspended operations at all of
its domestic factories due to damage to social infrastructure including energy supply, transportation systems,
gas, water and communication systems caused by the earthquake, shortages of parts from suppliers, and
damage sustained by some subsidiaries of Toyota in regions adjacent to the disaster zone. On March 18,
2011, Toyota began resuming production in stages. As of April 18, 2011, Toyota had resumed operations at
all domestic factories. As of the date of this annual report, production levels at both domestic and overseas
factories vary by region and vehicle type and, primarily due to shortages of supplies from external suppliers,
production is not yet normalized at some factories. Toyota anticipates that its factories will reach normal
operational capacity between November and December 2011, but there is no assurance that production will
normalize by that time. Also, in May 2011, operations at the nuclear power plant in Shizuoka Prefecture that
supplied a portion of the electricity to the area where Toyota’s global headquarters and main plants are
located were suspended in light of the damage sustained by the Fukushima nuclear power plant. There is
concern regarding potential shortages of electricity during the demanding summer months, and such a
shortage could negatively impact Toyota’s production. The Great East Japan Earthquake has negatively
impacted Toyota’s operations and the duration and magnitude of the impact ensuing from it remain unclear.
Depending on developments, the impact on Toyota’s results of operations and financial condition may be
significant.
The Japanese economy has been negatively impacted by damage caused by the Great East Japan
Earthquake, costs associated to rebuild the affected areas and interrupted infrastructure, including energy
shortages. The duration and magnitude of the total impact on the Japanese economy are unclear. In addition,
the nuclear power plants in Fukushima Prefecture are not yet fully under control and the resolution of the
situation at these plants, including timing, remains unclear. Continuing radiation leakage and further
aggravation of the nuclear power plants are possible. These various issues in connection with the Great East
Japan Earthquake may cause significant and unforeseeable adverse effects on the Japanese economy,
Toyota’s operations, and demand for Toyota’s products.
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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. Although the global economy is gradually recovering,
competition in the automotive industry has further intensified amidst difficult overall market conditions. In
addition, competition is likely to further intensify in light of further continuing globalization in the worldwide
automotive industry, possibly resulting in further industry reorganization. Factors affecting competition
include product quality and features, safety, reliability, fuel economy, the amount of time required for
innovation and development, pricing, 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 to maintain 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, although government efforts to stimulate demand in Japan, North America and Europe, which
are Toyota’s main markets, resulted in a trend towards economic recovery, 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 this situation will 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 by introducing 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 demand is more fundamental to
Toyota’s success than ever, as the automotive market is rapidly transforming in light of the changing global
economy. There is no assurance, however, that Toyota will adequately and appropriately respond to changing
customer preferences and demand with respect to quality, safety, reliability, styling and other features in a
timely manner. Even if Toyota succeeds in perceiving customer preferences and demand, there is no
TOYOTA ANNUAL REPORT 2011
35
Risk Factors
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 demand 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 demand. 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.
Toyota relies on suppliers for the provision of certain supplies including parts,
components and raw materials.
Toyota purchases supplies including parts, components and raw materials from a number of external
suppliers located around the world. For some supplies, Toyota relies on a single supplier or a limited number
of suppliers, whose replacement with another supplier may be difficult. Inability to obtain supplies from a
single or limited source supplier may result in difficulty obtaining supplies and may restrict Toyota’s ability to
produce vehicles. Furthermore, even if Toyota were to rely on a large number of suppliers, first-tier suppliers
with whom Toyota directly transacts may in turn rely on a single second-tier supplier or limited second-tier
suppliers. Toyota’s ability to continue to obtain supplies from its suppliers in a timely and cost-effective
manner is subject to a number of factors, some of which are not within Toyota’s control. These factors
include the ability of Toyota’s suppliers to provide a continued source of supply, and Toyota’s ability to
effectively compete and obtain competitive prices from suppliers. A loss of any single or limited source
supplier or inability to obtain supplies from suppliers in a timely and cost-effective manner could lead to
increased costs or delays or suspensions in Toyota’s production and deliveries, which could have an adverse
effect on Toyota’s financial conditions and results of operations.
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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
costs are factors which may impact Toyota’s financial services operations. 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.
Should the world economy suddenly deteriorate, a number of financial institutions and investors will face
difficulties in providing capital to the financial markets at levels corresponding to their own financial capacity,
and, 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.
TOYOTA ANNUAL REPORT 2011
36
Risk Factors
Political, Regulatory, Legal and Other 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.
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 natural calamities, political and economic instability,
fuel shortages or interruptions in social infrastructure, wars, terrorism and labor strikes.
Toyota is subject to various risks associated with conducting business worldwide. These risks include natural
calamities; political and economic instability; fuel shortages; interruption in social infrastructure including
energy supply, transportation systems, gas, water, or communication systems resulting from natural hazards
or technological hazards; wars; terrorism; labor strikes and work stoppages. Should the major markets in
which Toyota purchases materials, parts and components and supplies for the manufacture of Toyota
products or in which Toyota’s products are produced, distributed or sold be affected by any of these events,
it may result in disruptions and delays in the operations of Toyota’s business. Should significant or prolonged
disruptions or delays related to Toyota’s business operations occur, it may adversely affect Toyota’s financial
condition and results of operations.
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Other Management and Corporate Data
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R&D and Intellectual Property
Corporate Philosophy
Management Team
Corporate Governance
Risk Factors
Other Management and Corporate Data
Chronology
Research & Development
Operations in Japan
Worldwide Operations
History of Toyota
Domestic and Overseas R&D Sites
Toyota Group Organizations
Overseas Manufacturing Companies
Product Lineup
Technological Development
Number of Vehicles Produced
in Japan by Model
Europe/Africa:
Market /Toyota Sales and Production
Product Lineup
History of Technological
Development from 1990
Number of Vehicles Registered
in Japan by Model
Asia:
Market /Toyota Sales and Production
Japanese Production and Dealer Sites
North America/Latin America:
Market /Toyota Sales and Production
Oceania & Middle East:
Market /Toyota Sales and Production
Vehicle Production,
Sales and Exports by Region
Overseas Model Lineup by
Country & Region
TOYOTA ANNUAL REPORT 2011
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Message from the Executive Vice President Responsible for Accounting
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Fiscal 2011 Business Results
On a consolidated basis for the fiscal year ended March 31, 2011,
year-on-year vehicle sales improved 71 thousand units to 7,308 thousand
units, and net revenues increased 0.2% to ¥18,993.6 billion. Operating
income rose ¥320.7 billion to ¥468.2 billion, whereas net income
advanced ¥198.7 billion to ¥408.1 billion. As a result, Toyota succeeded
in increasing both revenue and income.
Factors contributing to the increase in operating income included
¥490.0 billion from marketing efforts (including ¥130.0 billion from our
financial services operations) and ¥180.0 billion from our continuous
cost-reduction efforts, including companywide VA (Value Analysis)
activities. Major factors reducing income were exchange rate fluctua-
tions, amounting to ¥290.0 billion, increases in expenses, etc., of ¥30.0
billion, and other factors reducing income that amounted to ¥29.3 billion.
In Japan, subsidies for eco-car purchases ended, which had a negative
effect on income, and vehicle sales were drastically down due to the
earthquake of March 11. Nonetheless, sales of IMVs were strong,
especially in Asian countries such as Thailand and Indonesia, reaching
their highest levels ever for the full year and contributing to an increase
in income. The negative impact of the Great East Japan Earthquake on
income amounted to ¥110.0 billion: ¥100.0 billion was due to operating
factors such as reduced vehicle sales as a result of reduced production
and the recording of allowances for our financial services business; other
factors contributing to a ¥10.0 billion reduction in income were decreased
cost reduction associated with lower unit sales and an increase in costs.
Taking the above into consideration, we view the increase in income for
the fiscal year ended March 31, 2011, as offsetting two major impacts
that reduced income, namely, the rapid and steep increase in the value
of the yen and the Great East Japan Earthquake.
Although I have noted previously that in the fiscal year ended March
31, 2010, we succeeded in broadly lowering our break-even point, we
continued to make structural improvements during the fiscal year ended
March 31, 2011, so if we leave out temporary factors such as the impact
of the earthquake, I believe we have succeeded in creating “a structure
that generates profits even with the exchange rate at ¥85 to the U.S.
dollar, and consolidated unit sales of 6.6 million.” We will continue to put
strong efforts into marketing, as well as work to achieve cost reductions
by holding down fixed costs and conducting companywide VA efforts so
as to improve our profitability.
Consolidated Financial Forecasts for Fiscal 2012
For the fiscal year ending March 31, 2012, we forecast vehicle sales of
7.24 million units, net revenues of ¥18,600.0 billion, operating income of
¥300.0 billion and net income of ¥280.0 billion on a consolidated basis.
The exchange rates assumed for this forecast are ¥82 per US$1 and
¥115 per €1.
Factors that are expected to increase income include cost-reduction
efforts amounting to ¥100.0 billion. Factors that are expected to cause a
decrease in income include the effect of exchange rate fluctuations
amounting to ¥100.0 billion, sales volume/mix effects totaling ¥120.0
billion and an increase in expenses, etc., reaching ¥48.2 billion. In terms
of the impact in the next fiscal year of the Great East Japan Earthquake,
we expect a decrease in unit sales, including a surplus after recovery to
regular production levels amounting to ¥320.0 billion and decreased cost
reduction amounting to ¥40.0 billion, for a total impact of ¥360.0 billion.
Despite temporary factors such as the effect of the disaster, I believe we
are making steady progress toward achieving the goal set forth in our
Global Vision of building solid profitability by which we can consistently
achieve a return to profitability in nonconsolidated operating income,
with a consolidated operating margin of 5% and operating income of
around ¥1 trillion even under such severe conditions as an exchange
rate of ¥85 to the U.S. dollar, and consolidated unit sales of 7.5 million.
I believe that the profitability called for in the Global Vision represents
a “bottom line for sustainable growth,” which means creating a structure
that will generate earnings even in the event of another economic
downturn that, for example, results in a 20% decline in unit sales. Doing
so means creating a stable business base by creating “better cars” that
are accepted by our customers and society, and contributing to “enriching
lives of communities,” which will result in winning the hearts of a growing
number of customers. By fostering that kind of virtuous cycle we can
realize sustainable growth and increase our corporate value.
TOYOTA ANNUAL REPORT 2011
39
Message from the Executive Vice President Responsible for Accounting
Financial Strategy
Dividends and Share Acquisitions
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The three key components of Toyota’s financial strategy are growth, efficiency and stability.
We believe that the balanced pursuit of these three priorities over the medium to long term will allow
us to achieve steady and sustainable growth, as well as increase corporate value.
Growth: Sustainable growth through continuous forward-looking investments
We believe that automotive markets worldwide will grow over the medium to long term. As they expand, the
center of market growth will shift toward fuel-efficient vehicles, such as hybrid vehicles and compact vehicles,
and toward resource-rich and emerging markets. We plan to invest actively and efficiently in these areas to
respond to structural shifts in demand and ensure long-term sustainable growth. We will expand our lineup
of hybrids and other eco-cars and develop it globally, while making efforts to increase sales in emerging
markets by working to strengthen locally produced core models, such as IMVs and newly developed
subcompact models. I believe we should work to realize a geographically balanced business structure that
favors neither developed nor emerging economies.
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 continue to slim
down our plant and equipment investment through the effective use of existing facilities and reducing
changeover costs that arise as a result of model changes. Our goal is to achieve the same effect from
minimized capital expenditures as we did when they were at their peak. Through such efforts, we will seek
effective investment that emphasizes eco-cars and emerging markets while improving our income
structure.
Stability: Maintaining a solid financial base
We preserve a solid financial base by ensuring sufficient liquidity and stable shareholders’ equity. Such a
sound financial position enables us to maintain a level of capital expenditures and investment in research
and development geared towards future growth as well as to maintain the necessary level of working
capital, even during difficult business environments such as steep price increases in raw materials or a
drastic foreign exchange rate fluctuation, not to mention such unexpected crises as the recent natural
disaster. In view of anticipated medium to long-term growth in automotive markets worldwide, we believe
that maintaining adequate liquidity is essential for the implementation of forward-looking investment to
improve products and develop next-generation technologies, as well as to establish a structure for produc-
tion and sales in both the Japanese and overseas markets in addition to the crisis measures. We will
continue to pursue further capital efficiency and improved cash flows.
We consider benefiting shareholders one of our top management priorities and make an effort to realize
sustainable growth through ongoing structural improvements to enhance our corporate value. We strive for
the continuous and stable payment of dividends while giving due consideration to factors such as the
business results in each term, investment plans and cash reserves.
To survive amid tough competition, we will utilize our internal funds for the early commercialization of
next-generation environmental and safety technologies that prioritize customer safety and confidence.
Accordingly, we declared an annual dividend payment of ¥50 per share for the fiscal year ended March 31,
2011, an increase of ¥5 per share over the previous year’s annual dividend.
Given the uncertain outlook for the present business environment, we will prioritize securing cash
reserves. Accordingly, we did not repurchase our own shares in the fiscal year ended March 31, 2011, and
we plan to forgo such repurchases for the foreseeable future.
We will continue striving to further improve profits and meet the expectations of our shareholders.
July 2011
Satoshi Ozawa,
Executive Vice President
Net Revenues
Operating Income
Vehicle Sales by Region
(¥ Billion)
25,000
20,000
15,000
10,000
5,000
0
(¥ Billion)
2,500
2,000
1,500
1,000
500
0
-500
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
26.2 %
Japan
North America 27.8 %
10.9 %
Europe
17.2 %
Asia
17.9 %
Others
TOYOTA ANNUAL REPORT 2011
40
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Selected Financial Summary (U.S. GAAP)
Toyota Motor Corporation
Fiscal years ended March 31
For the Year:
Net Revenues:
Sales of Products
Financing Operations
Total
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 Affiliated 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
At Year-End:
Toyota Motor Corporation Shareholders’ Equity
Total Assets
Long-Term Debt
Cash and Cash Equivalents
Ratio of Toyota Motor Corporation Shareholders’ Equity
Per Share Data:
Net Income (Loss) attributable to
Toyota Motor Corporation (Basic)
Annual Cash Dividends
Toyota Motor Corporation Shareholders’ Equity
Stock Information (March 31):
Stock Price
Market Capitalization (Yen in millions)
Number of Shares Issued (shares) ·
* Excluding vehicles and equipment of operating leases
2002
2003
Yen in millions
2004
2005
2006
¥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%
¥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%
2002
2003
¥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%
Yen
2004
¥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%
¥20,059,493
977,416
¥21,036,909
¥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
¥10,560,449
28,731,595
5,640,490
1,569,387
36.8%
2005
2006
¥ 152.26
28
2,015.82
¥ 3,650
¥13,332,491
3,649,997,492
¥ 211.32
36
2,063.43
¥ 2,635
¥ 9,512,343
3,609,997,492
¥ 342.90
45
2,456.08
¥ 3,880
¥14,006,790
3,609,997,492
¥ 355.35
65
2,767.67
¥ 3,990
¥14,403,890
3,609,997,492
¥ 421.76
90
3,257.63
¥ 6,430
¥23,212,284
3,609,997,492
TOYOTA ANNUAL REPORT 2011
41
Selected Financial Summary (U.S. GAAP)
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2007
2008
Yen in millions
2009
2010
2011
% change
2011 vs. 2010
Toyota Motor Corporation
Fiscal years ended March 31
For the Year:
Net Revenues:
Sales of Products
Financing Operations
Total
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 Affiliated 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
At Year-End:
Toyota Motor Corporation Shareholders’ Equity
Total Assets
Long-Term Debt
Cash and Cash Equivalents
Ratio of Toyota Motor Corporation Shareholders’ Equity
¥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%
¥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%
Per Share Data:
Net Income (Loss) attributable to
Toyota Motor Corporation (Basic)
Annual Cash Dividends
Toyota Motor Corporation Shareholders’ Equity
Stock Information (March 31):
Stock Price
Market Capitalization (Yen in millions)
Number of Shares Issued (shares)
* Excluding vehicles and equipment of operating leases
2007
2008
¥ 512.09
120
3,701.17
¥ 7,550
¥27,255,481
3,609,997,492
¥ 540.65
140
3,768.97
¥ 4,970
¥17,136,548
3,447,997,492
¥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%
Yen
2009
¥ (139.13)
100
3,208.41
¥ 3,120
¥10,757,752
3,447,997,492
¥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%
¥17,820,520
1,173,168
¥18,993,688
¥15,985,783
629,543
1,910,083
¥18,525,409
¥ 468,279
2.5%
563,290
312,821
408,183
3.9%
¥ 2,024,009
(2,116,344)
434,327
730,340
629,326
1,175,573
¥10,332,371
29,818,166
6,449,220
2,080,709
34.7%
+0.5
−4.3
+0.2
+0.1
−11.6
−9.9
−1.5
+217.4
—
+93.3
+237.6
+94.9
—
−20.9
—
—
+0.7
+4.1
−16.9
−0.3
−1.8
−8.1
+11.5
—
2010
2011
% change
2011 vs. 2010
¥ 66.79
45
3,303.49
¥ 3,745
¥12,912,751
3,447,997,492
¥ 130.17
50
3,295.08
¥ 3,350
¥11,550,792
3,447,997,492
+94.9
+11.1
−0.3
−10.5
−10.5
—
TOYOTA ANNUAL REPORT 2011
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Consolidated Segment Information
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Toyota Motor Corporation
Fiscal years ended March 31
Business Segment:
Net Revenues:
Automotive
Financial Services
All Other
Intersegment Elimination
Consolidated
Operating Income (Loss):
Automotive
Financial Services
All Other
Intersegment Elimination
Consolidated
Geographic Segment:
Net Revenues:
Japan
North America
Europe
Asia
Other
Intersegment Elimination
Consolidated
Operating Income (Loss):
Japan
North America
Europe
Asia
Other
Intersegment Elimination
Consolidated
2006
2007
2008
2009
2010
2011
Yen in millions
% change
2011 vs. 2010
¥19,338,144
996,909
1,190,291
(488,435)
¥21,036,909
¥ 1,694,045
155,817
39,748
(11,268)
¥ 1,878,342
¥13,111,457
7,687,942
2,727,409
2,042,806
1,601,736
(6,134,441)
¥21,036,909
¥ 1,075,890
495,638
93,947
145,546
67,190
131
¥ 1,878,342
¥21,928,006
1,300,548
1,323,731
(604,194)
¥23,948,091
¥ 2,038,828
158,495
39,679
1,681
¥ 2,238,683
¥14,815,282
9,029,773
3,542,193
2,225,528
1,922,742
(7,587,427)
¥23,948,091
¥ 1,457,246
449,633
137,383
117,595
83,497
(6,671)
¥ 2,238,683
¥24,177,306
1,498,354
1,346,955
(733,375)
¥26,289,240
¥ 2,171,905
86,494
33,080
(21,104)
¥ 2,270,375
¥15,315,812
9,423,258
3,993,434
3,120,826
2,294,137
(7,858,227)
¥26,289,240
¥ 1,440,286
305,352
141,571
256,356
143,978
(17,168)
¥ 2,270,375
¥18,564,723
1,377,548
1,184,947
(597,648)
¥20,529,570
¥ (394,876)
(71,947)
9,913
(4,101)
¥ (461,011)
¥12,186,737
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
¥ (461,011)
¥17,197,428
1,245,407
947,615
(439,477)
¥18,950,973
¥ (86,370)
246,927
(8,860)
(4,181)
¥ 147,516
¥11,220,303
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
¥ 147,516
¥17,337,320
1,192,205
972,252
(508,089)
¥18,993,688
¥ 85,973
358,280
35,242
(11,216)
¥ 468,279
¥10,986,246
5,429,136
1,981,497
3,374,534
1,809,116
(4,586,841)
¥18,993,688
¥ (362,396)
339,503
13,148
312,977
160,129
4,918
¥ 468,279
+0.8
−4.3
+2.6
—
+0.2
—
+45.1
—
—
+217.4
−2.1
−4.3
−7.7
+27.1
+8.1
—
+0.2
—
+297.1
—
+53.8
+38.6
+338.3
+217.4
TOYOTA ANNUAL REPORT 2011
43
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Consolidated Quarterly Financial Summary
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 Affiliated Companies
% Change
Net Income (Loss) attributable to Toyota Motor Corporation
% Change
Business Segment:
Net Revenues:
Automotive
Financial Services
All Other
Intersegment Elimination
Consolidated
Operating Income (Loss):
Automotive
Financial Services
All Other
Intersegment Elimination
Consolidated
Geographic Segment:
Net Revenues:
Japan
North America
Europe
Asia
Other
Intersegment Elimination
Consolidated
Operating Income (Loss):
Japan
North America
Europe
Asia
Other
Intersegment Elimination
Consolidated
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2010
2011
Yen in billions
¥3,836.0
−38.3%
(194.9)
—%
−5.1%
(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)
¥4,541.6
−24.0%
58.0
−65.8%
1.3%
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
¥5,292.9
10.2%
189.1
—%
3.6%
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
¥5,280.4
49.3%
95.3
—%
1.8%
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
¥4,871.8
27.0%
211.6
—%
4.3%
263.0
—%
190.4
—%
¥4,467.8
307.6
212.9
(116.5)
¥4,871.8
¥ 96.7
115.1
4.0
(4.2)
¥ 211.6
¥2,806.6
1,483.6
459.8
834.9
453.7
(1,166.8)
¥4,871.8
¥ (27.5)
109.7
(6.8)
90.2
41.0
5.0
¥ 211.6
¥4,806.7
5.8%
111.5
92.2%
2.3%
129.1
70.9%
98.7
352.0%
¥4,395.8
296.3
233.5
(118.9)
¥4,806.7
¥ 33.0
68.6
10.7
(0.8)
¥ 111.5
¥2,919.6
1,337.6
465.3
794.2
408.0
(1,118.0)
¥4,806.7
¥ (24.5)
36.1
(2.1)
74.0
31.9
(3.9)
¥ 111.5
¥4,673.1
−11.7%
99.0
−47.6%
2.1%
129.6
−42.3%
93.6
−38.9%
¥4,255.1
297.5
238.0
(117.5)
¥4,673.1
¥ (27.5)
116.4
13.4
(3.3)
¥ 99.0
¥2,686.1
1,333.3
524.2
835.1
489.7
(1,195.3)
¥4,673.1
¥ (122.4)
105.2
2.2
68.6
44.3
1.1
¥ 99.0
¥4,642.0
−12.1%
46.1
−51.6%
1.0%
41.5
−67.9%
25.4
−77.4%
¥4,218.5
290.8
287.8
(155.1)
¥4,642.0
¥ (16.2)
58.1
7.1
(2.9)
¥ 46.1
¥2,573.9
1,274.5
532.1
910.5
457.7
(1,106.7)
¥4,642.0
¥ (188.0)
88.4
19.8
80.2
42.9
2.8
¥ 46.1
TOYOTA ANNUAL REPORT 2011
44
Management's Discussion and Analysis of Financial Condition and Results of Operations
All financial information discussed in this section is derived from Toyota’s consolidated financial
statements that appear elsewhere in this annual report. The financial statements have been prepared
in conformity with accounting principles generally accepted in the United States of America.
Consolidated Vehicle Sales
(Thousands of units)
10,000
Overview
the effects of
The business segments of Toyota include automo-
tive operations, financial services operations and
all other operations. Automotive operations are
Toyota’s most significant business segment,
accounting for 89% of Toyota’s total revenues
before the elimination of intersegment revenues
for fiscal 2011. Toyota’s primary markets based
on vehicle unit sales for fiscal 2011 were: Japan
(26%), North America (28%), Europe (11%) and
Asia (17%). Japan’s economy suffered greatly
from
the Great East Japan
Earthquake that occurred on March 11, 2011, and
its aftermath (collectively, the “Great East Japan
Earthquake”). Toyota experienced impacts on its
production in the latter half of March 2011. This
also had an effect on Toyota’s results of operations
in fiscal 2011, particularly in terms of damages on
several types of assets such as inventories and
an increase in provision for credit losses. The
following analysis describes these impacts. See
the Company — Business
“Information on
Overview —” for more detailed information of the
Japan
North America
Europe
Asia
Other*
Overseas total
Total
Great East Japan Earthquake.
Automotive Market Environment
The worldwide automotive market
is highly
competitive and volatile. The demand for automo-
biles is affected 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 or
operate vehicles. These
factors can cause
consumer demand to vary substantially in different
geographic markets and for different types of
automobiles.
During fiscal 2011, the automotive market
expanded especially in emerging countries such
as China, and technological development and
new product launches have accelerated, primarily
due to increased consumer demand for the
compact and low-price vehicles and heightened
worldwide environmental awareness.
The following table sets forth Toyota’s consoli-
dated vehicle unit sales by geographic market
Thousands of units
Year Ended March 31,
2010
2,163
2,098
858
979
1,139
5,074
7,237
2011
1,913
2,031
796
1,255
1,313
5,395
7,308
2009
1,945
2,212
1,062
905
1,443
5,622
7,567
* “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc.
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8,000
6,000
4,000
2,000
0
Toyota’s ability to satisfy changing customer
preferences can affect its revenues and earnings
significantly.
The profitability of Toyota’s automotive
operations is affected by many factors. These
factors include:
• vehicle unit sales volumes,
• the mix of vehicle models and options sold,
• the level of parts and service sales,
• the levels of price discounts and other sales
FY
‘07
‘08
‘09
‘10
‘11
incentives and marketing costs,
based on location of customers for the past three
fiscal years.
During fiscal 2010, Toyota’s consolidated
vehicle unit sales in Japan increased as compared
with the prior fiscal year reflecting frequent
introduction of new products and sales efforts of
domestic dealers. During fiscal 2011, market
conditions in Japan deteriorated as compared
with the prior fiscal year. Despite this, Toyota and
Lexus brands’ market share in Japan excluding
mini-vehicles was 47.3%, and Toyota’s market
share (including Daihatsu and Hino brands) in
Japan including mini-vehicles was 43.7%, both
maintaining the high level of market share in
Japan from the prior fiscal year. Overseas consoli-
dated vehicle unit sales decreased during fiscal
2010, whereas they increased during fiscal 2011.
During fiscal 2010, total overseas vehicle unit
sales decreased, particularly in Europe, despite
an increase in Asia. During fiscal 2011, vehicle
unit sales increased in Asia and Other.
Toyota’s share of total vehicle unit sales in
each market is influenced by the quality, safety,
reliability, price, design, performance, economy
and utility of Toyota’s vehicles compared with
those offered by other manufacturers. The timely
introduction of new or redesigned vehicles is also
an important factor in satisfying customer needs.
• the cost of customer warranty claims and
other customer satisfaction actions,
• the cost of research and development and
other fixed costs,
• the prices of raw materials,
• the ability to control costs,
• the efficient use of production capacity,
• the adverse effect on production due to the
the
reliance on various suppliers
provision of supplies,
for
• the adverse effect on market, sales and
productions of natural calamities and
interruptions of social infrastructure, and
• changes in the value of the Japanese yen
in which Toyota
and other currencies
conducts business.
Changes in laws, regulations, policies and
other governmental actions can also materially
impact the profitability of Toyota’s automotive
operations. These laws, regulations and policies
include those attributed to environmental matters,
vehicle safety, fuel economy and emissions that
can add significantly to the cost of vehicles. The
European Union has enforced a directive that
requires manufacturers to be financially respon-
sible for taking back end-of-life vehicles and to
take measures to ensure that adequate used
vehicle disposal facilities are established and
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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regulate
those hazardous materials and recyclable parts
are removed from vehicles prior to scrapping.
See “Legislation Regarding End-of-Life Vehicles”,
“Information on
the Company — Business
Overview — Governmental Regulation, Environ-
mental and Safety Standards” and note 23 to the
consolidated financial statements for a more
detailed discussion of these laws, regulations and
policies.
Many governments also
local
content, impose tariffs and other trade barriers,
and enact price or exchange controls that can
limit an automaker’s operations and can make the
repatriation of profits unpredictable. Changes in
these
laws, regulations, policies and other
governmental actions may affect the production,
licensing, distribution or sale of Toyota’s 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 plaintiffs at the
end of February 2006. The settlement agreement
is pending the approval of the federal district
court, and
the
plaintiffs will be required under the terms of the
settlement agreement to 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 when potential
safety problems arise, Toyota issues vehicle
recalls and takes other safety measures including
safety campaigns with respect to its vehicles. In
November 2009, Toyota announced a safety
campaign in North America for certain models of
Toyota and Lexus brands’ vehicles related to floor
mat entrapment of accelerator pedals, and later
expanded it to include additional models. In
immediately upon approval
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 recall in
markets including Japan, North America and
Europe related to the braking control system in
certain vehicle 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 investi-
gations, see note 23 to the consolidated financial
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 effectively in the industry as an
independent company for the foreseeable future.
Financial Services Operations
The competition of worldwide automobile financial
services industry is intensifying despite the
recovery trend in the automotive markets. As
competition increases, margins on financing
transactions may decrease and market share
may also decline as customers obtain financing
for Toyota vehicles from alternative sources.
Toyota’s financial services operations mainly
include loans and leasing programs for customers
and dealers. Toyota believes that its ability to
provide financing to its customers is an important
value added service. Therefore, Toyota has
expanded its network of finance subsidiaries in
order to offer financial services in many countries.
Toyota’s competitors for retail financing and
retail leasing include commercial banks, credit
unions and other finance companies. Meanwhile,
commercial banks and other captive automobile
finance companies also compete against Toyota’s
wholesale financing activities.
Toyota’s financial assets decreased during
fiscal 2011 due to the unfavorable impact of
fluctuations in foreign currency translation rates.
Total Assets by Financial Services Operations
(¥ Billion)
16,000
12,000
8,000
4,000
0
FY
‘07
‘08
‘09
‘10
‘11
The following table provides information regarding Toyota’s finance receivables and operating leases in
the past two fiscal years.
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 finance receivables, net
Less – Current portion
Noncurrent finance receivables, net
Operating Leases
Vehicles
Equipment
Less – Accumulated depreciation
Yen in millions
March 31,
2010
2011
¥ 7,162,082
¥ 7,128,453
1,232,508
2,051,301
1,123,188
1,990,557
10,445,891
10,242,198
109,747
(482,983)
(160,351)
(36,917)
(35,211)
(232,479)
9,840,176
(4,209,496)
104,391
(496,235)
(92,199)
(36,024)
(28,580)
(156,803)
9,693,551
(4,136,805)
¥ 5,630,680
¥ 5,556,746
¥ 2,516,948
¥ 2,404,032
96,300
2,613,248
(791,169)
87,914
2,491,946
(662,255)
Vehicles and equipment on operating leases, net
¥ 1,822,079
¥ 1,829,691
TOYOTA ANNUAL REPORT 2011
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Toyota’s finance receivables are subject to
collectability risks. These risks include consumer
and dealer insolvencies and insufficient collateral
values (less costs to sell) to realize the full carrying
values of these receivables. See discussion in
“Critical Accounting Estimates — Allowance for
Doubtful Accounts and Credit Losses” and note
11 to the consolidated financial statements.
Toyota continues to originate leases to finance
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 “Critical Accounting Estimates —
Investment in Operating Leases” and note 2 to
the consolidated financial statements.
interest
Toyota enters
rate swap
into
agreements and cross currency interest rate swap
agreements to convert its fixed-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 as a hedge
liabilities on Toyota’s
of specific assets or
consolidated balance sheet and accordingly,
unrealized gains or losses related to derivatives
that are not designated as a hedge are recognized
currently in operations. See discussion in “Critical
Accounting Estimates — Derivatives and Other
Contracts at Fair Value” and “Quantitative and
Qualitative Disclosures about Market Risk” and
note 20 to the consolidated financial statements.
The fluctuations in funding costs can affect
the profitability of Toyota’s financial services
operations. Funding costs are affected by a
number of factors, some of which are not in
Toyota’s control. These factors include general
economic conditions, prevailing interest rates and
Toyota’s financial strength. Funding costs
decreased during fiscal 2010 and 2011, mainly as
a result of lower interest rates.
Toyota launched its credit card business in
Japan in April 2001. As of March 31, 2010, Toyota
had 7.7 million cardholders, an increase of 0.6
million cardholders compared with March 31,
2009. As of March 31, 2011, Toyota had 8.9 million
cardholders, an increase of 1.2 million cardholders
compared with March 31, 2010. The credit card
receivables at March 31, 2010 increased by ¥30.8
billion from March 31, 2009 to ¥255.4 billion. The
credit card receivables at March 31, 2011
increased by ¥8.1 billion from March 31, 2010 to
¥263.5 billion.
Other Business Operations
Toyota’s other business operations consist of
housing, including the manufacture and sale of
technology
prefabricated homes;
related businesses,
information
technology and telecommunications, intelligent
transport systems, GAZOO and other.
information
including
Toyota does not expect its other business
operations to materially contribute to Toyota’s
consolidated results of operations.
Currency Fluctuations
Toyota is affected by fluctuations in foreign
currency exchange rates. In addition to the
Japanese yen, Toyota is exposed to fluctuations
in the value of the U.S. dollar and the euro and, to
a lesser extent, the Australian dollar, the Canadian
dollar, the British pound, and others. 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.
Translation risk is the risk that Toyota’s
consolidated financial statements for a particular
period or for a particular date will be affected 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 fluctuations of currency exchange
rates to the Japanese yen can be substantial,
and, therefore, significantly impact comparisons
the various
with prior periods and among
geographic markets, the translation risk is a
reporting consideration and does not reflect
Toyota’s underlying results of operations. Toyota
does not hedge against translation risk.
Transaction risk is the risk that the currency
structure of Toyota’s costs and liabilities will
deviate from the currency structure of sales
proceeds and assets. Transaction risk relates
from Toyota’s
primarily
non-domestic operations from vehicles produced
in Japan.
to sales proceeds
to
Toyota believes that the location of its
production facilities in different parts of the world
has significantly 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
2009 and 2010, Toyota produced 64.5% and
73.4% of Toyota’s non-domestic sales outside
Japan, respectively. In North America, 60.0% and
72.6% of vehicles sold in calendar 2009 and 2010
respectively were produced locally. In Europe,
57.0% and 59.0% of vehicles sold in calendar
2009 and 2010 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 into foreign currency
transactions and other hedging instruments to
address a portion of its transaction risk. This has
reduced, but not eliminated, the effects of foreign
currency exchange rate fluctuations, which in
some years can be significant. See notes 20 and
21 to the consolidated financial statements for
additional information.
Generally, a weakening of the Japanese yen
against other currencies has a positive effect on
Toyota’s revenues, operating income and net
income attributable to Toyota Motor Corporation.
A strengthening of the Japanese yen against
other currencies has the opposite effect. In fiscal
2010 and 2011, the Japanese yen was on average
and at the end of the fiscal year stronger against
the U.S. dollar and the euro in comparison to the
prior fiscal year. See
in
“Quantitative and Qualitative Disclosures about
Market Risk — Market Risk Disclosures — Foreign
Currency Exchange Rate Risk”.
further discussion
During fiscal 2010 and 2011, the average
exchange rate of the Japanese yen strengthened
against the major currencies including the U.S.
dollar and the euro compared with the average
exchange rate of the prior fiscal year. The
operating results excluding the impact of currency
fluctuations described in “Results of Operations
— Fiscal 2011 Compared with Fiscal 2010” and
“Results of Operations — Fiscal 2010 Compared
with Fiscal 2009” show results of net revenues
obtained by applying the Japanese yen’s average
exchange rate in the previous fiscal year to the
local currency-denominated net revenues for
fiscal 2010 and 2011, respectively, as if the value
of the Japanese yen had remained constant for
the comparable periods. Results excluding the
impact of currency fluctuations year-on-year are
not on the same basis as Toyota’s consolidated
financial 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
TOYOTA ANNUAL REPORT 2011
47
Management's Discussion and Analysis of Financial Condition and Results of Operations
the
results excluding
impact of currency
fluctuations year-on-year provide additional useful
information to investors regarding the operating
performance on a local currency basis.
Toyota does not manage any subset of its
automotive operations, such as domestic or
overseas operations or parts, as separate
management units.
Segmentation
Toyota’s most significant business segment is its
automotive operations. Toyota carries out its
automotive operations as a global competitor in
the worldwide automotive market. Management
allocates
the
performance of, its automotive operations as a
single business segment on a worldwide basis.
to, and assesses
resources
functions within
The management of the automotive operations
is aligned on a functional basis with managers
having oversight responsibility for the major
operating
segment.
Management assesses financial and non-financial
data such as vehicle unit sales, production
volume, market share information, vehicle model
plans and plant
to allocate
resources within the automotive operations.
location costs
the
Geographic Breakdown
The following table sets forth Toyota’s 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 fiscal years.
Revenues by Market
FY2011
Yen in millions
Year ended March 31,
2010
2009
2011
¥7,471,916
¥7,314,813
¥6,966,929
6,097,676
2,889,753
2,450,412
1,619,813
5,583,228
2,082,671
2,431,648
1,538,613
5,327,809
1,920,416
3,138,112
1,640,422
Japan
North America
Europe
Asia
Other*
* “Other” consists of Central and South America, Oceania and Africa.
Japan
North America
Europe
Asia
All Other Markets
36.7 %
28.1 %
10.1 %
16.5 %
8.6 %
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Results of Operations — Fiscal 2011 Compared with Fiscal 2010
Net revenues:
Japan
North America
Europe
Asia
Other*
Intersegment elimination/
unallocated amount
Total
Operating income (loss):
Japan
North America
Europe
Asia
Other*
Intersegment elimination/
unallocated amount
Total
Operating margin
Income before income taxes and equity
in earnings of affiliated companies
Net margin from income before income taxes
and equity in earnings of affiliated companies
Equity in earnings of affiliated
companies
Net income attributable to Toyota
Motor Corporation
Net margin attributable to Toyota
Motor Corporation
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
¥11,220,303
¥10,986,246
¥ (234,057)
−2.1%
5,670,526
2,147,049
2,655,327
1,673,861
5,429,136
1,981,497
3,374,534
1,809,116
(241,390)
(165,552)
719,207
135,255
(4,416,093)
(4,586,841)
(170,748)
¥18,950,973
¥18,993,688
¥ 42,715
¥ (225,242)
¥ (362,396)
¥ (137,154)
85,490
(32,955)
203,527
115,574
339,503
13,148
312,977
160,129
254,013
46,103
109,450
44,555
1,122
4,918
3,796
¥ 147,516
¥ 468,279
¥ 320,763
0.8%
2.5%
1.7%
−4.3%
−7.7%
+27.1%
+8.1%
—
+0.2%
—
+297.1%
—
+53.8%
+38.6%
+338.3%
+217.4%
291,468
563,290
271,822
+93.3%
1.5%
3.0%
1.5%
45,408
215,016
169,608
+373.5%
209,456
408,183
198,727
+94.9%
1.1%
2.1%
1.0%
* “Other” consists of Central and South America, Oceania and Africa.
TOYOTA ANNUAL REPORT 2011
48
Management's Discussion and Analysis of Financial Condition and Results of Operations
Net Revenues
Toyota had net revenues for fiscal 2011 of ¥18,993.6
billion, an increase of ¥42.7 billion, or 0.2%,
compared with the prior fiscal year. This increase
reflects the impact of increased vehicle unit sales
and changes in sales mix of approximately
¥740.0 billion, as well as increased parts sales of
¥69.8 billion, partially offset by unfavorable impact
of fluctuations in foreign currency translation rates
of ¥801.3 billion. Excluding the difference in the
Japanese yen value used for translation purposes
of ¥801.3 billion, net revenues would have been
approximately ¥19,794.9 billion during fiscal 2011,
a 4.5% increase compared with the prior fiscal
year. The automotive market
in fiscal 2011
contracted by 6.6% in Japan compared with the
prior fiscal year due to the decline in demand
following
for
(“eco-car”)
environmentally-friendly vehicles
offered by the government as a part of its stimulus
packages, as well as the impact of the Great East
the conclusion of subsidies
Net Revenues
(¥ Billion)
25,000
20,000
15,000
10,000
5,000
0
FY
‘07
‘08
‘09
‘10
‘11
Japan Earthquake. However, the Asian automotive
market marked a significant increase of 27.6%
compared with the prior calendar year, reflecting
the recovery trend of the Asian economy. Under
these automotive market conditions, Toyota’s
consolidated vehicle unit sales increased to 7,308
thousand vehicles by 1.0% compared with the
prior fiscal year.
The table below shows Toyota’s net revenues from external customers by product category and by
business.
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
Vehicles
¥14,309,595
¥14,507,479
¥ 197,884
Parts and components for overseas production
355,273
Parts and components for after service
Other
Total Automotive
All Other
Total sales of products
Financial services
Total
1,543,941
978,499
335,366
1,553,497
926,411
17,187,308
17,322,753
537,421
497,767
17,724,729
17,820,520
1,226,244
1,173,168
(19,907)
9,556
(52,088)
135,445
(39,654)
95,791
(53,076)
¥18,950,973
¥18,993,688
¥ 42,715
+1.4%
−5.6%
+0.6%
−5.3%
+0.8%
−7.4%
+0.5%
−4.3%
+0.2%
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Toyota’s net revenues include net revenues
from sales of products, consisting of net revenues
from automotive operations and all other
operations, that increased by 0.5% during fiscal
2011 compared with the prior fiscal year to
¥17,820.5 billion, and net revenues from financial
services operations that decreased by 4.3%
during fiscal 2011 compared with the prior fiscal
year to ¥1,173.1 billion. Excluding the difference in
the Japanese yen value used for translation
purposes of ¥724.1 billion, net revenues from
sales of products would have been ¥18,544.6
billion, a 4.6% increase during fiscal 2011
compared with the prior fiscal year. The increase
in net revenues from sales of products is due to
an increase in Toyota vehicle unit sales by 71
thousand vehicles. Excluding the difference in
the Japanese yen value used for translation
purposes of ¥77.2 billion, net revenues from
financial services operations would have been
approximately ¥1,250.3 billion, a 2.0% increase
during fiscal 2011 compared with the prior fiscal
year. This increase was mainly due to the increase
of ¥13.1 billion rental revenue generated by
vehicles and equipment on operating lease.
The following table shows the number of financing contracts by geographic region at the end of the
fiscal 2011 and 2010, respectively.
Japan
North America
Europe
Asia
Other*
Total
Numbers of financing contracts in thousands
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
1,684
4,488
774
428
476
7,850
1,709
4,654
790
522
527
8,202
25
166
16
94
51
352
+1.5%
+3.7%
+2.0%
+22.1%
+10.7%
+4.5%
* “Other” consists of Central and South America, Oceania and Africa.
Geographically, net revenues (before the
elimination of intersegment revenues) for fiscal
2011 decreased by 2.1% in Japan, 4.3% in North
America, and 7.7% in Europe, whereas net
revenues increased by 27.1% in Asia and 8.1% in
Other compared with the prior fiscal year.
Excluding the difference in the Japanese yen
value used for translation purposes of ¥801.3
billion, net revenues in fiscal 2011 would have
decreased by 2.1% in Japan, and would have
increased by 3.6% in North America, 4.1% in
Europe, 29.7% in Asia and 11.0% in Other
compared with the prior fiscal year.
The following is a discussion of net revenues
in each geographic market (before the elimination
of intersegment revenues).
TOYOTA ANNUAL REPORT 2011
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Japan
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
Thousands of units
Year ended March 31,
2011 vs. 2010 Change
2010
2,163
2011
1,913
Amount
(250)
Percentage
−11.5%
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
¥11,095,044
¥10,864,329
¥(230,715)
125,259
121,917
(3,342)
¥11,220,303
¥10,986,246
¥(234,057)
−2.1%
−2.7%
−2.1%
Due to the decline in demand following the
conclusion of subsidies for eco-car offered by the
government as a part of its stimulus packages, as
well as the impact of the Great East Japan
Earthquake, Toyota’s domestic vehicle unit sales
decreased by 250 thousand vehicles compared
with the prior fiscal year. The decrease in vehicle
unit sales resulted primarily from a 30 thousand
vehicles, or 31.1%, decrease in Passo sales and a
29 thousand vehicles, or 38.4%, decrease in
WISH sales. On the other hand, the decrease in
net revenues from domestic vehicle unit sales
was partially offset by the increase in the number
of exported vehicles for the overseas markets of
190 thousand vehicles, or 8.6%.
North America
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
Thousands of units
Year ended March 31,
2011 vs. 2010 Change
2010
2,098
2011
2,031
Amount
Percentage
(67)
−3.2%
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
¥4,782,379
¥4,603,192
¥(179,187)
888,147
825,944
(62,203)
¥5,670,526
¥5,429,136
¥(241,390)
−3.7%
−7.0%
−4.3%
In North America, the vehicle unit sales of
specified vehicle models increased due to the
recovering trends of the automobile market and
improvements
the overall economy. The
increase in vehicle unit sales and this impact on
to
sales trends were mainly represented by a 48
thousand vehicles, or 54.5%, increase in Sienna
sales, a 30 thousand vehicles, or 39.2%, increase
in Highlander sales, a 29 thousand vehicles, or
123.7%, increase in 4Runner sales, and a 27
thousand vehicles, or 14.1%, increase in RAV4
sales. Despite the improvements including a
favorable effect of changes in sales mix, net
revenues decreased compared with the prior
fiscal year due to the decrease in vehicle unit
sales by an intense competitive environment that
introduced new vehicle models to the market and
the unfavorable impact of fluctuations in foreign
Europe
currency translation rates of ¥448.0 billion. The
decrease in vehicle unit sales resulted primarily
from an 84 thousand vehicles, or 23.0%, decrease
in Corolla sales and a 28 thousand vehicles, or
7.9%, decrease in Camry sales, partially offset by
the
the
aforementioned specified vehicle models.
in vehicle unit sales of
increase
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
Thousands of units
Year ended March 31,
2011 vs. 2010 Change
2010
858
2011
796
Amount
Percentage
(62)
−7.3%
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
¥2,065,768
¥1,910,336
¥(155,432)
81,281
71,161
(10,120)
¥2,147,049
¥1,981,497
¥(165,552)
−7.5%
−12.5%
−7.7%
Although retail sales of Toyota and Lexus brands’
vehicles increased in some European countries
compared with the prior fiscal year, such as 36
thousand vehicles, or 52.5%, increase in Russia
and 20 thousand vehicles, or 82.6%, increase in
in Europe generally
Turkey, net
decreased due primarily to the 62 thousand
revenues
vehicles decrease in Toyota’s vehicle unit sales
compared with the prior fiscal year resulting from
a decrease in demand following the conclusion of
government stimulus packages
in Western
Europe, and the unfavorable impact of fluctuations
in foreign currency translation rates of ¥253.2
billion.
TOYOTA ANNUAL REPORT 2011
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Management's Discussion and Analysis of Financial Condition and Results of Operations
Asia
Operating Costs and Expenses
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
Thousands of units
Year ended March 31,
2011 vs. 2010 Change
2010
979
2011
1,255
Amount
Percentage
276
+28.1%
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
¥2,612,595
¥3,325,466
42,732
49,068
¥2,655,327
¥3,374,534
¥712,871
6,336
¥719,207
+27.3%
+14.8%
+27.1%
Toyota’s vehicle unit sales in Asia increased by
276 thousand vehicles compared with the prior
fiscal year and represented a record high unit
sales. This increase in net revenues was due to
the overall recovery of Asian automotive markets
which was supported by the recovery trend of the
Asian economy, particularly in Thailand and
Indonesia. Excluding the difference of ¥70.7
billion in the Japanese yen value used for
translation purposes, net revenues would have
increased by ¥789.9 billion.
Other
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
Thousands of units
Year ended March 31,
2011 vs. 2010 Change
2010
1,139
2011
1,313
Amount
Percentage
174
+15.3%
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
¥1,571,846
¥1,694,680
102,015
114,436
¥1,673,861
¥1,809,116
¥122,834
12,421
¥135,255
+7.8%
+12.2%
+8.1%
Net revenues in Other increased due to increases
in Toyota’s vehicle unit sales as a result of
economic recovery in certain of these markets.
Toyota’s vehicle unit sales increased by 103
thousand vehicles in the Middle East, by 50
thousand vehicles in Central and South America,
and by 25 thousand vehicles in Africa, respectively,
compared with the prior fiscal year.
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
Operating costs and expenses
Cost of products sold
¥15,971,496
¥15,985,783
¥ 14,287
Cost of financing operations
Selling, general and administrative
712,301
2,119,660
629,543
1,910,083
(82,758)
(209,577)
Total
¥18,803,457
¥18,525,409
¥(278,048)
+0.1%
−11.6%
−9.9%
−1.5%
Changes in operating costs and expenses:
Effect of increase in vehicle unit sales and changes in sales mix
Effect of fluctuation in foreign currency translation rates
Effect of increase in parts sales
Effect of cost reduction efforts
Effect of increase in miscellaneous costs and others
Total
Yen in millions
2011 vs. 2010 Change
¥ 580,000
(765,100)
15,400
(180,000)
71,652
¥(278,048)
Operating costs and expenses decreased by
¥278.0 billion, or 1.5%, to ¥18,525.4 billion during
fiscal 2011 compared with the prior fiscal year.
This decrease resulted from the ¥765.1 billion
favorable impact of fluctuations in foreign currency
translation rates, and the ¥180.0 billion impact of
cost reduction efforts, partially offset by the
¥580.0 billion impact of increase in vehicle unit
sales and change in sales mix and the ¥71.7
billion increase in the miscellaneous costs and
others including ¥20.0 billion increase in costs
related to the Great East Japan Earthquake, and
the ¥15.4 billion impact of increase in parts sales.
The ¥71.7 billion increase in miscellaneous
costs and others includes ¥30.0 billion increase
in product quality related expenses. This cost
increased compared with the prior fiscal year due
to the approximately ¥100.0 billion increase in
costs related to recalls and other safety measures
conducted to heighten the level of reassurance
for customers, partially offset by the approximately
¥70.0 billion decrease in product warranty costs
due to decrease in payments to repair or replace
defects of vehicles based on warranty contracts.
See note 14
the consolidated financial
statements for further information.
to
In fiscal 2011, Toyota announced recalls and
other safety measures including the following:
In July 2010, Toyota announced in Japan and
other regions the voluntary safety recall of certain
models of Toyota and Lexus brands’ vehicles
related to abnormal engine noise or idling due to
engine valve springs that contained some foreign
materials. The affected vehicle models included
Crown, GS350/450h/460, IS350, and LS460/600h/
600hL, and 275 thousand vehicles were included
in this recall.
In August 2010, Toyota announced in North
America the voluntary safety recall of certain
models of Toyota vehicles to address the check
engine illuminations and harsh shifting that may
result from improper manufacturing of some
TOYOTA ANNUAL REPORT 2011
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Electronic Control Modules (ECMs). The affected
vehicle models included Corolla and Matrix, and
1,360 thousand vehicles were included in this
recall.
In October 2010, Toyota announced in Japan
and other regions the voluntary safety recall of
certain models of Toyota and Lexus brands’
vehicles related to the connector terminal that may
fail due to the inflexibility of the material of the fuel
pump wiring harness and braking performance
that may gradually decline by brake fluid leakage
from the brake master cylinder. The affected
vehicle models included Crown, Crown Majesta,
Mark X, KlugerL, KlugerV, Harrier, AlphardG,
AlphardV, Avalon, Highlander, RX330, GS300,
GS350, IS250, IS350, and IS220D, and 1,470
thousand vehicles were included in this recall.
In January 2011, Toyota announced in Japan
and other regions the voluntary safety recall of
certain models of Toyota and Lexus brands’
vehicles to address fuel leakage that may result
from improper manufacturing of engine fuel pipe
and fuel pump. The affected vehicle models
included Noah, Voxy, RAV4L, RAV4J, Caldina,
Isis, Vista, Vista Ardeo, Opa, Premio, Allion, Gaia,
Nadia, WISH, Avensis, and Avensis Wagon and
1,343 thousand vehicles were included in this
recall.
The net changes in fiscal 2010 and 2011 in
the accrual for the four recalls and other safety
measures that occurred in fiscal 2010 are shown
below.
Yen in millions
Year ended March 31,
2010
2011
Balance at the beginning of year
¥ — ¥ 56,600
Accrual
Amounts paid
89,000
13,100
(32,400)
(51,700)
Balance at the end of year
¥ 56,600
¥ 18,000
Toyota expanded the coverage of a safety
campaign in North America for certain models of
Toyota and Lexus brands’ vehicles related to floor
mat entrapment of accelerator pedals to include
additional models, which was initially announced
in November 2009. In March 2011, Toyota also
expanded the safety campaign coverage to
include more models to heighten the level of
reassurance for customers. The vehicle models
involved were LX570, RAV4, and 4Runner.
Cost Reduction Efforts
During fiscal 2011, continued cost reduction efforts
reduced operating costs and expenses by ¥180.0
billion. The effect of cost reduction efforts include
the impact of fluctuation in the price of steel, precious
metals, non-ferrous alloys
including aluminum,
plastic parts and other production materials and
parts. In fiscal 2011, raw materials prices were on an
increasing trend; however, continued cost reduction
efforts, by working closely with suppliers, contributed
to the improvement in earnings by offsetting the
effects from price increase. These cost reduction
efforts related to ongoing value engineering and
value analysis activities, the use of common parts
resulting in a reduction of part types and other
manufacturing initiatives designed to reduce the
costs of vehicle production.
Cost of Products Sold
Cost of products sold increased by ¥14.3 billion, or
0.1%,
to ¥15,985.8 billion during fiscal 2011
compared with the prior fiscal year. The increase
resulted from the ¥520.0 billion impact of increase
in vehicle unit sales and changes in sales mix,
¥90.0 billion increase in miscellaneous costs, and
the ¥13.9 billion impact of increases in parts sales,
partially offset by the ¥584.9 billion favorable impact
of fluctuations in foreign currency translation rates,
and the ¥180.0 billion impact of cost reduction
efforts. The increase in miscellaneous costs was
due mainly to the ¥30.0 billion increase in costs
related to quality initiatives, the ¥25.0 billion increase
in research and development expenses and the
¥5.2 billion increase in labor costs. The increase in
vehicle unit sales and the changes in sales mix was
due to the automotive market recovery associated
with global economic turnaround.
Cost of Products Sold
(¥ Billion)
20,000
16,000
12,000
8,000
4,000
0
% of net revenues
(Right scale)
(%)
100
80
60
40
20
0
FY
‘07
‘08
‘09
‘10
‘11
Cost of Financing Operations
Yen in millions
2011 vs. 2010
Change
Changes in cost of financing operations:
Effect of fluctuation in foreign
currency translation rates
Effect of increase in valuation gains
on interest rate swaps stated at
fair value
Effect of decrease in provision for
residual value losses
Other
Total
¥(64,700)
(6,400)
(30,000)
18,342
¥(82,758)
Cost of financing operations decreased by ¥82.8
billion, or 11.6%, to ¥629.5 billion during fiscal 2011
compared with the prior fiscal year. The decrease
resulted from the ¥64.7 billion favorable impact of
fluctuations in foreign currency translation rates,
the ¥30.0 billion decrease in provision for residual
value losses and the ¥6.4 billion recognition of
valuation gains on interest rate swaps stated at fair
value. The decrease in provision for residual value
losses is attributable to prices in the used vehicles
markets remaining at an unprecedented high level
particularly in the United States.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
decreased by ¥209.5 billion, or 9.9%, to ¥1,910.1
billion during fiscal 2011 compared with the prior
fiscal year. This decrease reflects the ¥115.5
billion favorable impact of fluctuations in foreign
currency translation rates and the ¥83.9 billion
decrease for the financial services operations.
This decrease for the financial services operations
includes the ¥100.0 billion decrease in provision
for credit losses and net charge-offs, which is
attributable
the prices of used vehicles
remaining at an unprecedented high level mainly
in the United States and the prices of used Toyota
and Lexus brands’ vehicles also remaining at a
high level, partially offset by the ¥15.0 billion
increase in provision for credit losses and
charge-offs in relation to the Great East Japan
Earthquake.
to
R&D Expenses
(¥ Billion)
1,000
% of net revenues
(Right scale)
(%)
12
750
500
250
0
9
6
3
0
FY
‘07
‘08
‘09
‘10
‘11
TOYOTA ANNUAL REPORT 2011
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Operating Income
Yen in millions
2011 vs. 2010
Change
Changes in operating income and loss:
Effect of increase in vehicle unit sales
and changes in sales mix and other
operational factors
Effect of increase in parts sales
Effect of fluctuation in foreign
currency translation rates
Effect of increase in miscellaneous
costs
Effect of cost reduction efforts,
financial services operations, and
others
Total
¥300,000
54,400
(36,200)
(30,000)
32,563
¥320,763
Toyota’s operating income increased by ¥320.7
billion, or 217.4%, to ¥468.2 billion during fiscal
2011 compared with the prior fiscal year. This
increase was favorably impacted by the ¥300.0
billion increase in vehicle unit sales and changes
in sales mix and other operational factors, the
¥54.4 billion increase in parts sales, the ¥32.6
billion impact of cost reduction efforts, financial
services operations, and others, partially offset by
the ¥36.2 billion unfavorable impact of fluctuations
in foreign currency translation rates, and the ¥30.0
billion increase in miscellaneous costs including
¥20.0 billion impact of increase in expenses
related to the Great East Japan Earthquake. The
¥32.6 billion increase of cost reduction efforts,
financial services operations, and others was due
to the ¥180.0 billion impact of cost reduction
efforts and the ¥130.0 billion impact of financial
services operations, partially offset by the ¥290.0
billion unfavorable impact of fluctuations in foreign
currency translation rates.
During fiscal 2011, operating income (before
elimination of intersegment profits), increased by
¥254.1 billion, or 297.1%, in North America,
increased by ¥46.1 billion in Europe, increased by
¥109.4 billion, or 53.8%, in Asia, and increased
by ¥44.6 billion, or 38.6%, in Other compared
with the prior fiscal year, whereas it decreased by
¥137.2 billion in Japan.
Operating Income (Loss)
(¥ Billion)
2,500
2,000
1,500
1,000
500
0
-5,000
% of net revenues
(Right scale)
(%)
20
16
12
8
4
0
-4
FY
‘07
‘08
‘09
‘10
‘11
The following is a description of operating
income and loss in each geographic market.
Japan
Yen in millions
2011 vs. 2010
Change
Changes in operating income and loss:
Effect of increase in the number of
exported vehicles for the overseas
market and other operational factors ¥ 115,000
Effect of cost reduction efforts,
increase in miscellaneous costs
and others
Total
(252,154)
¥(137,154)
The increase in operating losses in Japan was due
to the ¥252.2 billion increase in cost reduction
efforts, increase in miscellaneous costs and others,
partially offset by the ¥115.0 billion impact of increase
in the number of exported vehicles for the overseas
market. The cost reduction efforts, increase in
miscellaneous costs and others were mainly due to
the ¥330.0 billion unfavorable impact of fluctuations
in foreign currency translation rates and the ¥50.0
billion increase in miscellaneous costs and others,
partially offset by the ¥140.0 billion impact of cost
reduction efforts in automotive operations. The
¥50.0 billion increase in miscellaneous costs and
others includes the ¥20.0 billion increase in costs
related to the Great East Japan Earthquake.
North America
Yen in millions
2011 vs. 2010
Change
Changes in operating income and loss:
Effect of increase in production volume
and other operational factors
Effect of fluctuation in foreign
currency translation rates
Effect of financial services operations,
cost reduction efforts, decrease in
miscellaneous costs and others
Total
¥105,000
(23,800)
172,813
¥254,013
in
income
The increase in operating income in North
America was due to the ¥130.0 billion increase in
the financial services
operating
operations including impacts of the ¥100.0 billion
decrease in the provision for credit losses and net
charge-offs and the ¥30.0 billion decrease in the
provision for residual value losses primarily for
sales finance subsidiaries in the United States,
the ¥105.0 billion impact of increase in production
volume, the ¥30.0 billion impact of cost reduction
efforts, and
in
miscellaneous costs and others, partially offset
by the ¥23.8 billion unfavorable impact of the
fluctuations in foreign currency translation rates.
The increase in production volume in North
America is attributable to the increase in local
vehicle production by 296 thousands of RAV4,
Highlander and other models.
the ¥15.0 billion decrease
Europe
Yen in millions
2011 vs. 2010
Change
Changes in operating income and loss:
Effect of fluctuation in foreign
currency translation rates
Effect of cost reduction efforts,
decrease in miscellaneous costs
and others
Total
¥ 1,400
44,703
¥46,103
The increase in operating income in Europe was
due to the ¥30.0 billion decrease in miscellaneous
costs in automotive operations, the ¥5.0 billion
effect of cost reduction efforts, the ¥5.0 billion
increase in operating income in the financial
services operations, and the ¥1.4 billion favorable
impact of fluctuations
foreign currency
translation rates.
in
Asia
Yen in millions
2011 vs. 2010
Change
Changes in operating income and loss:
Effect of increase in production
volume and vehicle unit sales and
other operational factors
Effect of fluctuation in foreign
currency translation rates
Effect of cost reduction efforts, decrease
in miscellaneous costs and others
Total
¥105,000
(5,900)
10,350
¥109,450
The increase in operating income in Asia was due
to the ¥105.0 billion impact of increases in both
production volume and vehicle unit sales and
other operational factors, partially offset by the
¥5.9 billion unfavorable impact of fluctuations in
foreign currency translation rates. The increases
in both production volume and vehicle unit sales
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in Asia were primarily attributable to the increase
in Toyota’s vehicle unit sales by 276 thousand
vehicles supported by the recovery of Asian
automotive markets, particularly in Thailand and
Indonesia, as the Asian economy is generally in
the recovery trend.
Other Income and Expenses
Interest and dividend income increased by ¥12.6
billion, or 16.0%, to ¥90.8 billion during fiscal 2011
compared with the prior fiscal year due to the
¥10.5 billion increase of dividend income.
Interest expense decreased by ¥4.1 billion, or
to ¥29.3 billion during fiscal 2011
12.2%,
compared with the prior fiscal year.
Foreign exchange gain, net decreased by
¥53.9 billion, or 79.0%, to ¥14.3 billion during
fiscal 2011 compared with the prior fiscal year.
Foreign exchange gains and losses include the
differences 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
foreign currency exchange
contracts.
Other income, net decreased by ¥11.7 billion,
or 37.7%, to ¥19.2 billion during fiscal 2011
compared with the prior fiscal year.
forward
Income Taxes
The provision for income taxes increased by
¥220.2 billion, or 237.6%, to ¥312.8 billion during
fiscal 2011 compared with the prior fiscal year
due to the increase in income before income
taxes. The effective tax rate for fiscal 2011 was
55.5%, which was higher than the statutory tax
rate in Japan. This was due to the increase in
deferred tax liabilities relating to undistributed
earnings in affiliated companies accounted for by
the equity method.
Net Income and Loss attributable to the
Noncontrolling Interest and Equity in
Earnings of Affiliated Companies
Net income attributable to the noncontrolling
interest increased by ¥22.5 billion, or 64.9%, to
¥57.3 billion during fiscal 2011 compared with the
prior fiscal year. This increase was due to an
increase during fiscal 2011
income
attributable to the shareholders of consolidated
subsidiaries.
in net
Equity in earnings of affiliated companies
during fiscal 2011 increased by ¥169.6 billion, or
373.5%, to ¥215.0 billion compared with the prior
fiscal year. This increase was due to an increase
during fiscal 2011 in net income attributable to the
shareholders of affiliated companies accounted
for by the equity method.
Net Income attributable to Toyota Motor
Corporation
Net income attributable to the shareholders of
Toyota Motor Corporation increased by ¥198.7
billion, or 94.9%, to ¥408.1 billion during fiscal
2011 compared with the prior fiscal year.
Other Comprehensive Income and Loss
Net Income (Loss), and ROE
(¥ Billion)
2,000
ROE (Right scale)
1,500
1,000
500
0
-500
(%)
20
15
10
5
0
-5
FY
‘07
‘08
‘09
‘10
‘11
Segment Information
The following is a discussion of results of operations for each of Toyota’s operating segments. The
amounts presented are prior to intersegment elimination.
Yen in millions
Year ended March 31,
2010
2011
2011 vs. 2010 Change
Amount
Percentage
Automotive
Financial Services
All Other
Intersegment elimination/
unallocated amount:
Net revenues
¥17,197,428
¥17,337,320
¥139,892
+0.8%
Operating income (loss)
(86,370)
85,973
172,343
Net revenues
¥ 1,245,407
¥ 1,192,205
¥ (53,202)
Operating income
246,927
358,280
111,353
Net revenues
¥ 947,615
¥ 972,252
¥ 24,637
Operating income (loss)
Net revenues
(8,860)
35,242
¥ (439,477) ¥ (508,089)
44,102
¥ (68,612)
Operating income (loss)
(4,181)
(11,216)
(7,035)
—
−4.3%
+45.1%
+2.6%
—
—
—
resulted
from unfavorable
Other comprehensive income decreased by
¥558.8 billion to loss of ¥297.9 billion for fiscal
2011 compared with the prior fiscal year. This
decrease
foreign
currency translation adjustments losses of ¥287.6
billion in fiscal 2011 compared with gains of ¥9.8
billion in the prior fiscal year, and from unrealized
holding losses on securities in fiscal 2011 of ¥26.1
billion compared with gains of ¥176.4 billion in the
prior fiscal year. The decrease in unrealized
holding gains on securities was due to changes
in stock prices.
Automotive Operations Segment
The automotive operations segment is Toyota’s
largest operating segment by net revenues. Net
revenues for the automotive segment increased
during fiscal 2011 by ¥139.9 billion, or 0.8%,
compared with the prior fiscal year to ¥17,337.3
billion. The increase was due to the ¥740.0 billion
impact of increased vehicle unit sales and the
changes in sales mix and the ¥69.8 billion increase
in parts sales, partially offset by the ¥722.5 billion
unfavorable
foreign
impact of fluctuations
currency translation rates.
in
from
income
Operating
the automotive
operations increased by ¥172.3 billion during fiscal
2011 compared with the prior fiscal year to ¥86.0
billion. This increase in operating income was due
to the ¥300.0 billion impact of increased vehicle
unit sales and the changes in sales mix, the ¥180.0
billion effect of cost reduction efforts and the ¥54.4
billion impact of increase in parts sales, partially
offset by the ¥30.0 billion increase in miscellaneous
costs and the ¥290.0 billion unfavorable impact of
fluctuations in foreign currency rates.
TOYOTA ANNUAL REPORT 2011
54
Management's Discussion and Analysis of Financial Condition and Results of Operations
The increase in vehicle unit sales and changes
in sales mix was due primarily to an increase in
Toyota’s vehicle unit sales by 71 thousand vehicles
compared with the prior fiscal year, favored by the
automotive market recovery during fiscal 2011.
The increase in miscellaneous costs includes the
¥30.0 billion increase in costs related to quality
initiatives and the ¥5.0 billion impact of damages in
inventories and other assets resulting from the
Great East Japan Earthquake.
Financial Services Operations Segment
Net revenues for the financial services operations
decreased during fiscal 2011 by ¥53.2 billion, or
4.3%, compared with the prior fiscal year to
¥1,192.2 billion. This decrease was primarily due to
the unfavorable impact of fluctuations in foreign
currency translation rates of ¥77.5 billion, partially
offset by the ¥13.1 billion increase in rental income
from vehicles and equipment on operating leases.
Operating income from financial services
operations increased by ¥111.3 billion, or 45.1%, to
¥358.2 billion during fiscal 2011 compared with
the prior fiscal year. This increase was due to the
¥100.0 billion decrease in provision for credit
losses and net charge-offs, and the ¥30.0 billion
decrease in provision for residual value losses,
while the provision for credit losses and net
charge-offs include the ¥15.0 billion increase in
provision for credit losses and net charge-offs
related to the Great East Japan Earthquake.
The decrease in provisions for credit losses,
net of charge-offs and residual value losses are
primarily attributable to used car prices rising to
an unprecedented high level in the United States
and the prices of used Toyota and Lexus brands’
vehicles also remaining at a high level.
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Results of Operations — Fiscal 2010 Compared with Fiscal 2009
Yen in millions
Year ended March 31,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
Net revenues:
Japan
North America
Europe
Asia
Other*
¥12,186,737
¥11,220,303
¥ (966,434)
6,222,914
3,013,128
2,719,329
1,882,900
5,670,526
2,147,049
2,655,327
1,673,861
−7.9%
−8.9%
(552,388)
(866,079)
−28.7%
(64,002)
−2.4%
(209,039)
−11.1%
Intersegment elimination/unallocated amount
(5,495,438)
(4,416,093)
1,079,345
—
¥20,529,570
¥18,950,973
¥(1,578,597)
−7.7%
Total
Operating income (loss):
Japan
North America
Europe
Asia
Other*
Intersegment elimination/unallocated amount
Total
¥ (237,531) ¥ (225,242)
(390,192)
85,490
(143,233)
(32,955)
176,060
87,648
203,527
115,574
46,237
1,122
¥ (461,011) ¥ 147,516
¥ 12,289
475,682
110,278
27,467
27,926
(45,115)
¥ 608,527
−2.2%
0.8%
3.0%
(560,381)
291,468
851,849
—
—
—
+15.6%
+31.9%
−97.6%
—
—
−2.7%
42,724
1.5%
45,408
4.2%
2,684
+6.3%
(436,937)
209,456
646,393
—
−2.1%
1.1%
3.2%
Ratio of credit loss experience in the United States is as follows:
Net charge-offs as a percentage of average gross earning assets:
Finance receivables
Operating lease
Total
Year ended March 31,
2010
2011
1.15%
0.63
1.03%
0.61%
0.22
0.52%
Operating margin
Income (loss) before income taxes and equity
in earnings of affiliated companies
Net margin from income (loss) before income taxes
and equity in earnings of affiliated companies
Equity in earnings of affiliated companies
Net income (loss) attributable to Toyota
Motor Corporation
Net margin attributable to Toyota Motor
Corporation
All Other Operations Segment
Net revenues for Toyota’s other operations
segments increased by ¥24.6 billion, or 2.6%, to
¥972.2 billion during fiscal 2011 compared with
the prior fiscal year.
income
Operating
from Toyota’s other
operations segments increased by ¥44.1 billion
to ¥35.2 billion during fiscal 2011 compared with
the prior fiscal year.
* “Other” consists of Central and South America, Oceania and Africa.
Net Revenues
Toyota had net revenues for fiscal 2010 of
¥18,950.9 billion, a decrease of ¥1,578.6 billion,
or 7.7%, compared with the prior fiscal year. This
decrease principally reflects the unfavorable
impact of fluctuations
foreign currency
translation rates of ¥986.9 billion, the impact of
decreased vehicle unit sales and changes in
in
sales mix of approximately ¥570.0 billion, partially
offset by the increased parts sales of ¥34.9 billion
during fiscal 2010. Excluding the difference in the
Japanese yen value used for translation purposes
of ¥986.9 billion, net revenues would have been
approximately ¥19,937.8 billion during fiscal 2010,
a 2.9% decrease compared with the prior fiscal
year. The automotive market expanded by 10.0%
TOYOTA ANNUAL REPORT 2011
55
Management's Discussion and Analysis of Financial Condition and Results of Operations
from
in Japan compared to the prior fiscal year
benefiting
the government stimulus
packages. However, other automotive markets
contracted significantly such as by 22.0% in
North America and 13.7% in Europe compared to
the prior calendar year due to the continuous
market downturn. Affected by this downturn,
Toyota’s vehicle unit sales decreased to 7,237
thousand vehicles, a decrease of 4.4%, compared
to the prior fiscal year.
The table below shows Toyota’s net revenues from external customers by product category and by
business segment.
Vehicles
Parts and components for overseas production
Parts and components for after service
Other
Total Automotive
All Other
Total sales of products
Financial services
Total
Yen in millions
Year ended March 31,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
¥15,635,490
298,176
1,575,316
1,041,519
18,550,501
623,219
19,173,720
1,355,850
¥20,529,570
¥14,309,595
355,273
1,543,941
978,499
17,187,308
537,421
17,724,729
1,226,244
¥18,950,973
¥(1,325,895)
57,097
(31,375)
(63,020)
(1,363,193)
(85,798)
(1,448,991)
(129,606)
¥(1,578,597)
−8.5%
+19.1%
−2.0%
−6.1%
−7.3%
−13.8%
−7.6%
−9.6%
−7.7%
Toyota’s 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 fiscal
2010 compared with the prior fiscal year to
¥17,724.7 billion, and net revenues from financial
services operations that decreased by 9.6%
during fiscal 2010 compared with the prior fiscal
year to ¥1,226.2 billion. Excluding the difference
in the Japanese yen value used for translation
purposes of ¥894.0 billion, net revenues from
sales of products would have been ¥18,618.7
billion, a 2.9% decrease during fiscal 2010
compared with the prior fiscal year. The decrease
in net revenues from sales of products is due
from
operations would
primarily to a decrease in vehicle unit sales which
resulted
the generally difficult market
conditions in the automotive industry as a whole
in fiscal 2010. Excluding the difference in the
Japanese yen value used for translation purposes
of ¥92.9 billion, net revenues from financial
been
services
approximately ¥1,319.1 billion, a 2.7% decrease
during fiscal 2010 compared with the prior fiscal
year. The decrease in net revenues from financial
services operations resulted primarily from the
unfavorable impact of fluctuations in foreign
currency translation rates of ¥92.9 billion and the
¥63.5 billion decrease in rental income from
vehicles and equipment on operating leases.
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The following table shows the number of financing contracts by geographic region at the end of the
fiscal year 2009 and 2010.
Japan
North America
Europe
Asia
Other*
Total
Number of financing contracts in thousands
Year ended March 31,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
1,660
4,403
748
387
440
7,638
1,684
4,488
774
428
476
7,850
24
85
26
41
36
212
+1.4%
+1.9%
+3.5%
+10.6%
+8.2%
+2.8%
* “Other” consists of Central and South America, Oceania and Africa.
Geographically, net revenues (before the
elimination of intersegment revenues) for fiscal
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 fiscal year.
Excluding the difference in the Japanese yen
value used for translation purposes of ¥1,020.2
billion, net revenues in fiscal 2010 would have
Japan
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 fiscal year.
The following is a discussion of net revenues
in each geographic market (before the elimination
of intersegment revenues).
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
Thousands of units
Year ended March 31,
2010 vs. 2009 Change
2009
1,945
2010
2,163
Amount
Percentage
218
+11.2%
Yen in millions
Year ended March 31,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
¥12,067,494
¥11,095,044
¥(972,450)
119,243
125,259
6,016
¥12,186,737
¥11,220,303
¥(966,434)
−8.1%
+5.0%
−7.9%
Supported by government stimulus packages
including the eco-car tax reduction and subsidies,
Toyota’s domestic vehicle unit sales increased by
218 thousand vehicles compared to the prior
fiscal year mainly within the environmentally-
friendly and new vehicle markets, consisting of a
210 thousand vehicles, or 297.6%, increase in
Prius sales and a 19 thousand vehicles increase
in SAI sales. However, net revenues in Japan
decreased reflecting
the decrease by 497
thousand vehicles, or 18.4%, in the number of
exported vehicles for the overseas markets.
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North America
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
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,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
¥5,226,426
¥4,782,379
996,488
888,147
¥6,222,914
¥5,670,526
¥(444,047)
(108,341)
¥(552,388)
−8.5%
−10.9%
−8.9%
In North America, the market is recovering
gradually from the downturn stemming from the
financial crisis since the fall of 2008 and Toyota’s
vehicle unit sales in the second half of fiscal 2010
increased by 339 thousand vehicles, or 39.6%,
year-on-year primarily consisting of an increase
by 57 thousand vehicles, or 35.3%, increase in
Corolla sales, 50 thousand vehicles, or 33.9%, in
Camry sales, 48 thousand vehicles, or 86.1%, in
RAV4 sales, and 11 thousand vehicles, or 30.2%,
in sales of the new Sienna. This increase was in
spite of having influence by recalls and other
safety measures, such as the temporary decrease
in retail sales of Toyota brand’s vehicle by 18
Europe
thousand vehicles, or 15.8%, in January, 2010
and 9 thousand vehicles, or 8.5%, decrease in
February, 2010 in each case compared with the
same month in the prior year. However, net
revenues decreased primarily as a result of a
decrease in vehicle unit sales by 114 thousand
vehicles during fiscal 2010 compared with the
prior fiscal year due to a significant decrease in
vehicle unit sales by 453 thousand vehicles, or
33.4%, caused by the downturn in the market
during the first half of fiscal 2010 and the impact
of fluctuation in foreign currency translation rates
of ¥474.6 billion.
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
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,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
¥2,911,234
¥2,065,768
¥(845,466)
101,894
81,281
(20,613)
¥3,013,128
¥2,147,049
¥(866,079)
−29.0%
−20.2%
−28.7%
Although retail sales of Toyota and Lexus
brands’ vehicle increased in some European
countries such as increases of 9 thousand
vehicles, or 8.5%, in Germany and 7 thousand
vehicles, or 14.5%, in Spain compared with the
prior fiscal year benefiting
from various
government stimulus packages, net revenues
in Europe overall decreased primarily due to
the 204 thousand vehicles decrease in Toyota’s
vehicle unit sales which resulted from the
downturn in the market and the impact of
fluctuations in foreign currency translation rates
of ¥260.6 billion.
Asia
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
Thousands of units
Year ended March 31,
2010 vs. 2009 Change
2009
905
2010
979
Amount
Percentage
74
+8.3%
Yen in millions
Year ended March 31,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
¥2,676,939
¥2,612,595
¥(64,344)
42,390
42,732
342
¥2,719,329
¥2,655,327
¥(64,002)
−2.4%
+0.8%
−2.4%
Although Toyota’s vehicle unit sales increased by
74 thousand vehicles, particularly in Thailand and
Indonesia, compared with the prior fiscal year
due primarily to various government stimulus
packages, net revenues in Asia decreased due
primarily to the unfavorable impact of fluctuations
in foreign currency translation rates of ¥212.9
billion. Excluding the difference in the Japanese
yen value used for translation purposes of ¥212.9
billion, net revenues would have increased by
¥148.6 billion.
Other
Toyota’s consolidated vehicle unit sales
Net revenues:
Sales of products
Financial services
Total
Thousands of units
Year ended March 31,
2010 vs. 2009 Change
2009
1,443
2010
1,139
Amount
(304)
Percentage
−21.1%
Yen in millions
Year ended March 31,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
¥1,779,089
¥1,571,846
¥(207,243)
103,811
102,015
(1,796)
¥1,882,900
¥1,673,861
¥(209,039)
−11.6%
−1.7%
−11.1%
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Net revenues in Other decreased due to decreases of Toyota’s vehicle unit sales by 48 thousand
vehicles in Central and South America, 10 thousand vehicles in Oceania, and 105 thousand vehicles
in Africa compared to the prior fiscal year as a result of a downturn in the markets.
Operating Costs and Expenses
Yen in millions
Year ended March 31,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
Operating costs and expenses
Cost of products sold
Cost of financing operations
Selling, general and administrative
Total
¥17,468,416
987,384
2,534,781
¥20,990,581
¥15,971,496
712,301
2,119,660
¥18,803,457
¥(1,496,920)
(275,083)
(415,121)
¥(2,187,124)
−8.6%
−27.9%
−16.4%
−10.4%
Changes in operating costs and expenses:
Effect of decrease in vehicle unit sales and changes in sales mix
Effect of fluctuation in foreign currency translation rates
Effect of increase in parts sales
Effect of decrease in research and development expenses
Effect of cost reduction efforts, decrease in fixed costs and other efforts
Total
Yen in millions
2010 vs. 2009 Change
¥ (110,000)
(963,300)
11,200
(178,700)
(946,324)
¥(2,187,124)
in fixed costs,
Operating costs and expenses decreased by
¥2,187.1 billion, or 10.4%, to ¥18,803.4 billion
during fiscal 2010 compared with the prior fiscal
year. This decrease resulted primarily from the
¥963.3 billion impact of fluctuations in foreign
currency translation rates, the ¥520.0 billion
impact of cost reduction efforts, the ¥470.0 billion
decrease
the ¥178.7 billion
decrease in research and development expenses,
and the approximately ¥110.0 billion impact of the
decrease in vehicle unit sales and the changes in
sales mix, partially offset by the ¥11.2 billion
impact on increase in parts sales. The decrease
in fixed costs and other efforts are partially offset
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.
The ¥946.3 billion in cost reduction efforts,
decrease in fixed costs and other efforts was
partially offset by ¥97.0 billion net increase in
costs related to recalls and other safety measures
from fiscal 2009 to fiscal 2010. This net increase
includes a ¥105.7 billion increase in costs resulting
from a change in the estimation model used to
record Toyota’s liability for recalls and other safety
measures in fiscal 2010, an ¥89.0 billion increase
resulting from the total estimated costs of the four
recalls and other safety measures in fiscal 2010
as described below, and a ¥32.3 billion increase
in costs related to other recalls and safety
measures in fiscal 2010, offset by a decrease of
approximately ¥130.0 billion related to customer
satisfaction measures with respect to certain
Tacoma pick-up trucks in North America recorded
in fiscal 2009 also described below.
Of the ¥32.3 billion increase in costs related
to other recalls and safety measures taken during
is
fiscal 2010, approximately ¥21.0 billion
attributable to an accrual of additional costs in
fiscal 2010 related
to customer satisfaction
measures with respect to Tacoma pick-up trucks
reflecting an update to the repair ratio, based on
fiscal 2010 repair experience, and the remainder
is the result of an increased number of small-scale
recalls and other safety measures.
The following is a description of the four
recalls and other safety measures referenced
above.
In fiscal 2010, Toyota experienced a significant
increase in the number of vehicles subject to
recalls and other safety measures. There were
over 14,000 thousand vehicles worldwide subject
to recalls and other safety measures in fiscal
2010, the majority of which occurred in the third
and fourth quarters of fiscal 2010 relating to the
following four recalls and other safety measures.
In November 2009, Toyota announced a
safety campaign in North America for certain
models of Toyota and Lexus brands’ vehicles
related to floor mat entrapment of accelerator
pedals, and later expanded it to include additional
models. The vehicle models involved were Camry,
Avalon, Prius, Tacoma, Tundra, ES350, IS250/350,
Highlander, Corolla, Venza and Matrix. In addition,
in March 2011, Toyota expanded the safety
campaign coverage to include additional models
to heighten the level of reassurance for customers.
The vehicle models involved were LX570, RAV4,
and 4Runner. As of the end of March 2011,
approximately 58% of the approximately 7,600
thousand vehicles included in the campaign were
remedied to address the potential issues.
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. The vehicle models involved
were Tundra, Sequoia, Avalon, Camry, Corolla,
Matrix, RAV4 and Highlander. As of the end of
March 2011, approximately 89% of
the
approximately 2,500 thousand vehicles subject to
this recall were remedied to address sticking and
slow-to-return accelerator pedals.
to
Also in January 2010, Toyota announced a
recall in Europe and China for certain models of
sticking and
related
Toyota vehicles
slow-to-return accelerator pedals. The vehicle
models involved in Europe were Yaris, Verso,
Corolla, Auris, Aygo, RAV4, iQ and Avensis. In
China, the recall was limited to RAV4. As of the
end of March 2011, approximately 89% of the
approximately 1,700 thousand vehicles subject to
this recall in Europe, and approximately 99% of
the approximately 7,500 thousand vehicles subject
to this recall in China, were remedied to address
sticking and slow-to-return accelerator pedals.
In February 2010, Toyota announced a
worldwide recall related to the software program
that controls the anti-lock braking system (ABS) in
Prius, HS250h, Prius PHV and SAI. As of the end
the
of March 2011, approximately 96% of
approximately 430 thousand units subject to this
recall received program updates.
As of the end of March 2011, a total of
approximately 12.3 million
remedies were
announced on vehicles subject to the above four
recalls and other safety measures. Total estimated
costs associated with the above four recalls and
other safety measures amounted to ¥89.0 billion
for fiscal 2010. Of this amount, actual payments
incurred for fiscal 2010 amounted to ¥32.4 billion
yen. Specific types of costs involved include costs
for parts, labor and costs related to loaner vehicles.
The net changes in the accrual for the four
recalls and other safety measures described
above consist of the following:
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Yen in millions
Year ended March 31,
2010
Balance at the beginning of year
¥ —
Accrual
Amounts paid
Balance at the end of year
89,000
(32,400)
¥ 56,600
The following is a description of the customer
satisfaction measures related to certain Tacoma
pick-up trucks in North America referred to above.
In fiscal 2009, Toyota accrued the cost of the
customer satisfaction measures related to Tacoma
pick-up trucks in North America in order to
address the possibility of rust developing on the
frame of a portion of older model Tacoma pick-up
trucks manufactured in North America between
1995 and 2004, by rendering repair services for a
portion of the vehicles and providing warranty
extensions of up to 15 years to owners of
approximately 820 thousand vehicles, a portion
of which may
include vehicle buyback.
Accordingly, the cost of approximately ¥130.0
billion was recorded in operating costs and
expenses in fiscal 2009. The repair ratio for these
customer satisfaction measures to date has been
relatively low due primarily to the low rate of
incidence of rust on the frames of these vehicles
which may occur when exposed to severe
environmental conditions including accumulation
of road salts. This low repair ratio was assumed in
the calculation of the accrual.
The net changes in the accrual for the
customer satisfaction measures related to Tacoma
pick-up trucks in North America described above
consist of the following:
Yen in millions
Year ended March 31,
2010
2009
2011
Balance at the
beginning of year ¥ — ¥ 57,500
¥ 50,100
Accrual
130,000
21,000
—
Amounts paid
Balance at the
end of year
(72,500)
(28,400)
(22,600)
¥ 57,500
¥ 50,100
¥ 27,500
Cost Reduction Efforts
During fiscal 2010, continued cost reduction
efforts reduced operating costs and expenses by
approximately ¥520.0 billion. The cost reduction
efforts include decreases in the prices of steel,
precious metals, non-ferrous alloys including
aluminum, plastic parts and other production
materials and parts. In fiscal 2010, the decline in
raw materials prices and, continued cost reduction
efforts, by working closely with suppliers,
contributed to the improvement in earnings.
These cost reduction efforts 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
the costs of vehicle
production.
reduce
to
Cost of Products Sold
Cost of products sold decreased by ¥1,496.9
billion, or 8.6%, to ¥15,971.5 billion during fiscal
2010 compared with the prior fiscal year. The
decrease resulted primarily from the ¥738.5
billion impact of fluctuations in foreign currency
translation rates, the ¥520.0 billion impact of cost
reduction efforts, the ¥159.4 billion of decrease
in fixed costs and other efforts including the
¥178.7 billion decrease
research and
development expenses, and the ¥88.0 billion
impact of the decrease in vehicle unit sales and
in
in
changes in sales mix, partially offset by the ¥9.0
billion impact of increases in parts sales. The
decrease in fixed costs was due mainly to the
¥178.7 billion decline
research and
development expenses and the ¥39.1 billion
decline in labor costs as a result of profit
improvement initiatives. The decrease in 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
to reduced development costs
attributable
realized as a result of Toyota’s more focused
investment decisions for the future such as in
technologies, and effective
environmental
management over research and development
expenses spending.
Cost of Financing Operations
Yen in millions
2010 vs. 2009
Change
Changes in cost of financing operations:
Effect of fluctuation in foreign
currency translation rates
Effect of changes in funding costs
Effect of increase in valuation gains
on interest rate swaps stated at
fair value
Effect of decrease in provision for
residual value losses
Other
Total
¥ (83,500)
(70,000)
(64,500)
(50,000)
(7,083)
¥(275,083)
Cost of financing operations decreased by
¥275.1 billion, or 27.9%, to ¥712.3 billion during
fiscal 2010 compared with the prior year. The
decrease resulted primarily from the ¥83.5 billion
foreign currency
impact of fluctuations
in
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 effects,
partially offset by the impact from the recalls and
other safety measures. Toyota judges this impact
does not have a material impact on Toyota’s
consolidated financial statements though it is
difficult to quantify the impact from the recalls
and other safety measures in residual value
losses accurately.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
decreased by ¥415.1 billion, or 16.4%, to ¥2,119.6
billion during fiscal 2010 compared with the prior
fiscal year. This decrease mainly reflects the
¥173.8 billion decrease for the financial services
operations and the ¥84.9 billion decrease of
marketing expense. The decrease in the financial
services operations is primarily due to the ¥140.0
billion decrease in provision for credit losses and
net charge-offs, which is attributable to the 0.46%
rise in the ratio of credit losses as a result of the
economic downturn mainly in the United States in
the prior fiscal year, partially offset by the ¥37.3
billion 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 profit improvement initiatives.
TOYOTA ANNUAL REPORT 2011
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Operating Income and Loss
Changes in operating income and loss:
Effect of decrease in vehicle unit
sales and changes in sales mix
and other operational factors
Effect of increase in parts sales
Effect of fluctuation in foreign
currency translation rates
Effect of decrease in research and
development expenses
Effect of cost reduction efforts,
decrease in fixed costs and
other efforts
Total
Yen in millions
2010 vs. 2009
Change
¥(370,000)
23,700
(23,600)
178,700
799,727
¥ 608,527
Toyota’s operating income increased by ¥608.5
billion to an operating income of ¥147.5 billion
during fiscal 2010 compared with the prior year.
This operating income was favorably impacted by
the effects of a ¥799.7 billion cost reduction efforts,
decrease in fixed costs and other efforts, the ¥178.7
billion decrease in research and development
expenses, and the ¥23.7 billion increase in parts
sales, partially offset by the ¥380.0 billion decrease
in vehicle unit sales and the changes in sales mix.
The effect of cost reduction efforts, decrease in
fixed costs and other efforts was favorably impacted
by the ¥520.0 billion effect of cost reduction efforts,
the ¥291.3 billion decrease in fixed costs and other
efforts excluding decrease in research and
development expenses and the ¥270.0 billion
increase in operating income in the financial
services business, partially offset by the ¥320.0
billion effects of changes in exchange rates. The
cost reduction efforts, decrease in fixed costs
and other efforts were also partially offset 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 fiscal 2010, operating income (before
the elimination of intersegment profits), 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 fiscal year. During fiscal 2010, operating
loss (before the elimination of intersegment profits)
decreased by ¥12.3 billion
in Japan and
decreased by ¥110.3 billion in Europe compared
with the prior fiscal year.
The following is a discussion of operating
income and loss in each geographic market.
Japan
Yen in millions
2010 vs. 2009
Change
Changes in operating income and loss:
Effect of decrease in production
volume and vehicle unit sales in
the exported markets and other
operational factors
Effect of cost reduction efforts,
decrease in fixed costs and
other efforts
Total
¥(325,000)
337,289
¥ 12,289
The decrease in operating losses in Japan was
mainly due to the ¥460.0 billion impact of cost
reduction efforts, the ¥230.0 billion decrease in fixed
costs and other efforts in the automotive operations
segment, partially offset by the ¥330.0 billion impact
of decreases in both production volume and vehicle
unit sales in the export markets and the ¥330.0 billion
effects of changes in exchange rates. The decreases
in both production volume and vehicle unit sales in
the export markets are attributable to the difficult
market conditions particularly in North America and
Europe.
North America
Europe
Yen in millions
2010 vs. 2009
Change
Yen in millions
2010 vs. 2009
Change
Changes in operating income and loss:
Effect of decrease in production
volume and vehicle unit sales and
other operational factors
Effect of fluctuation in foreign
currency translation rates
Effect of cost reduction efforts,
decrease in fixed costs and other
efforts
Total
¥ (30,000)
(4,100)
509,782
¥ 475,682
Changes in operating income and loss:
Effect of decrease in production
volume and vehicle unit sales and
other operational factors
Effect of fluctuation in foreign
currency translation rates
Effect of cost reduction efforts,
decrease in fixed costs and
other efforts
Total
¥ (60,000)
4,900
165,378
¥110,278
The increase in operating income in North
America was due mainly to the ¥270.0 billion
increase in operating income in the financial
services operations including the ¥150.0 billion
decrease in the provision for credit losses and net
charge-offs and the ¥50.0 billion decrease in the
provision for residual value losses of sales finance
subsidiaries in the United States, the ¥130.0 billion
decrease in fixed costs, the ¥50.0 billion impact
of cost reduction efforts, and other efforts, partially
offset by the ¥40.0 billion impact of decreases in
both production volume and vehicle unit sales
and the ¥4.1 billion impact of the fluctuations 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 by 453 thousand
vehicles of commercial vehicles and passenger
vehicles due to the downturn in the market in the
first half of fiscal 2010.
The decrease in operating loss in Europe was
mainly due to the ¥110.0 billion decrease in fixed
costs and the ¥10.0 billion impact of cost reduction
efforts in the automotive operations, the ¥10.0
billion increase in operating income in the financial
services business, the ¥4.9 billion impact of
fluctuations in foreign currency translation rates,
and other efforts, partially offset by the ¥60.0
billion decrease 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 by 204 thousand vehicles in the overall
European market compared to the prior fiscal
year despite sales growth in some of the countries
that benefited
from government stimulus
packages.
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Asia
Yen in millions
2010 vs. 2009
Change
Changes in operating income and loss:
Effect of increase in production
volume and vehicle unit sales and
other operational factors
Effect of fluctuation in foreign
currency translation rates
Effect of cost reduction efforts,
decrease in fixed costs and
other efforts
Total
¥ 20,000
(16,200)
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 ¥10.0 billion impact of cost reduction efforts in
the automotive operations segment, and other
efforts, partially offset by the ¥16.2 billion impact
of fluctuations in foreign currency translation
rates. The increase in production volume and the
increase in vehicle unit sales by 74 thousand
vehicles in Asia compared to the prior fiscal year
were primarily attributable to the recovery of Asian
automotive markets, particularly in Thailand and
Indonesia, benefiting
the government
stimulus packages.
from
Other Income and Expenses
Interest and dividend income decreased by ¥60.2
billion, or 43.5%, to ¥78.2 billion during fiscal 2010
compared with the prior fiscal year mainly due to
the ¥45.2 billion decrease in interest income
reflecting decreases in market interest rates.
Interest expense decreased by ¥13.5 billion,
or 28.7%, to ¥33.4 billion during fiscal 2010
compared with the prior fiscal year.
Foreign exchange gains, net increased by
¥70.0 billion to ¥68.2 billion during fiscal 2010
compared with the prior fiscal year. Foreign
exchange gains and losses include the differences
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. During fiscal 2010,
the currencies of various countries strengthened
against the U.S. dollar rapidly. In such a situation,
Toyota records foreign exchange transaction
gains from accounts payable and long term U.S.
dollar denominated debt of subsidiaries. A main
factor contributing to the significantly greater level
of impact of foreign exchange on fiscal 2010
results is that Toyota’s Canadian subsidiaries
recorded a ¥50.0 billion foreign exchange gain
from long term debt payables in U.S. dollar to
Toyota compared with the prior fiscal year, as the
Canadian dollar strengthened against the U.S.
dollar rapidly during fiscal 2010.
Other income, net increased by ¥220.0 billion
to ¥30.9 billion during fiscal 2010 compared with
the prior fiscal year. This increase was mainly due
to the recognition of ¥139.6 billion impairment
losses on certain available-for-sale securities in
the prior fiscal year.
Income Taxes
The provision for income taxes increased by
¥149.1 billion to ¥92.6 billion during fiscal 2010
compared with the prior year primarily due to the
increase in income before income taxes. The
effective tax rate was 31.8%, which was lower
than the statutory tax rate in Japan. This was
primarily due to the ¥741.4 billion increase in
income before
taxes of overseas
subsidiaries whose statutory tax rates were lower
than the statutory tax rate in Japan.
income
Other Comprehensive Income and Loss
income
Other comprehensive
increased by
¥1,127.4 billion to ¥260.9 billion for fiscal 2010
compared with the prior fiscal year. This increase
resulted primarily from unrealized holding gains
on securities in fiscal 2010 of ¥176.4 billion
compared with losses of ¥293.1 billion in the prior
fiscal year, and from favorable foreign currency
translation adjustments of ¥9.8 billion in fiscal
2010 compared with losses of ¥381.3 billion in the
prior fiscal year. The increase in unrealized
holding gains on securities was mainly due to the
recognition of ¥139.6 billion impairment losses on
certain available-for-sale securities in the prior
fiscal year.
Net Income and Loss attributable to the
Noncontrolling Interest and Equity in
Earnings of Affiliated Companies
Net income attributable to the noncontrolling
interest increased by ¥59.0 billion to ¥34.8 billion
during fiscal 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 affiliated companies
during fiscal 2010 increased by ¥2.7 billion, or
6.3%, to ¥45.4 billion compared with the prior
fiscal year. This increase was due to an increase
in net income attributable to the shareholders of
affiliated companies.
Net Income and Loss attributable to Toyota
Motor Corporation
income attributable
to Toyota Motor
Net
Corporation increased by ¥646.4 billion to ¥209.4
billion during fiscal 2010 compared with the prior
fiscal year.
Segment Information
The following is a discussion of results of operations for each of Toyota’s operating segments. The
amounts presented are prior to intersegment elimination.
Yen in millions
Year ended March 31,
2009
2010
2010 vs. 2009 Change
Amount
Percentage
Net revenues
¥18,564,723 ¥17,197,428
¥(1,367,295)
−7.4%
Automotive
Financial Services
All Other
Intersegment elimination/
unallocated amount:
Operating income (loss)
Net revenues
Operating income (loss)
Net revenues
Operating income (loss)
Net revenues
(394,876)
(86,370)
¥ 1,377,548 ¥ 1,245,407
(71,947)
246,927
¥ 1,184,947 ¥ 947,615
308,506
—
¥ (132,141)
−9.6%
318,874
—
¥ (237,332)
−20.0%
9,913
(8,860)
¥ (597,648) ¥ (439,477)
(18,773)
¥ 158,171
—
—
—
Operating income (loss)
(4,101)
(4,181)
(80)
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Automotive Operations Segment
The automotive operations segment is Toyota’s
largest operating segment by net revenues. Net
revenues for the automotive segment decreased
during fiscal 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 fluctuations 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
offset by increased parts sales of ¥34.9 billion.
Operating loss from the automotive operations
decreased by ¥308.5 billion during fiscal 2010
compared with the prior year to an operating loss
of ¥86.3 billion. This decrease in operating loss
was primarily due to the ¥520.0 billion impact of
cost reduction efforts, the ¥470.0 billion decrease
in fixed costs, the ¥23.7 billion impact of increase
in parts sales, and other efforts, partially offset by
a ¥380.0 billion decrease in vehicle unit sales and
changes in sales mix and the ¥320.0 billion effects
of changes in exchange rates.
The decrease in vehicle unit sales and
changes in sales mix was due primarily to a
decrease in vehicle unit sales by 330 thousand
vehicles which resulted from the generally difficult
market conditions in the automotive industry
during fiscal 2010 compared with the prior fiscal
year. The decrease in fixed costs was due mainly
to the ¥178.7 billion decline in research and
development expenses and the ¥62.7 billion
decline in labor costs, as a result of profit
improvement initiatives, partially offset 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.
Financial Services Operations Segment
Net revenues for the financial services operations
decreased during fiscal 2010 by ¥132.1 billion, or
9.6%, compared with the prior fiscal year to
¥1,245.4 billion. This decrease was primarily due
to the unfavorable impact of fluctuations in foreign
currency translation rates of ¥93.3 billion. Excluding
the difference in the Japanese yen value used for
translation purposes, net revenues for its financial
services operations would have been approximately
¥1,338.7 billion during fiscal 2010, a 2.8% decrease
compared with the prior fiscal year. The decrease
in net revenues excluding the difference in the
Japanese yen value used for translation purposes
of ¥93.3 billion resulted primarily
the
¥63.5 billion decrease in rental income from
vehicles and equipment on operating leases.
Operating income from financial services
operations increased by ¥318.9 billion to ¥246.9
billion during fiscal 2010 compared with the prior
year. This increase was primarily due to the ¥140.0
billion decrease in provision for credit losses, net
charge-offs, 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.
from
The decrease in provision for credit losses,
net charge-offs is primarily attributable to the
¥150.0 billion increase in provision for credit
losses and net charge-offs in the United States
primarily due to the 0.46% rise in the ratio of credit
losses as a result of the economic downturn in
the prior fiscal year, partially offset by the ¥37.3
billion 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
offset by the impact from the recalls and other
safety measures. Toyota judges this impact does
not have a material impact on Toyota’s consolidated
financial statements though it is difficult to quantify
the impact from the recalls and other safety
measures in residual value losses accurately.
The decrease in residual value losses is
primarily attributable to the recovery in the used
vehicle market, as prices of used vehicles moved
from a historical low in fiscal 2009 to an
unprecedented high in fiscal 2010, partially offset
by the impact of increased sales incentives and
other factors.
Ratio of credit loss experience in the United States is as follows:
Net charge-offs as a percentage of average gross earning assets:
Finance receivables
Operating lease
Total
All Other Operations Segment
Year ended March 31,
2009
2010
1.54%
0.86%
1.37%
1.15%
0.63%
1.03%
Net revenues for Toyota’s other operations segment decreased by ¥237.3 billion, or 20.0%, to ¥947.6
billion during fiscal 2010 compared with the prior year.
Operating income from Toyota’s other operations segment decreased by ¥18.8 billion, to operating
loss of ¥8.9 billion during fiscal 2010 compared with the prior year.
Outlook
While Toyota expects that emerging countries,
such as China and India, will continue to experi-
ence economic growth, and that developed
countries, including those in North America and
Europe, will continue to see gradual economic
recovery in fiscal 2012, Toyota believes the impact
and risks arising from increases in the price of
crude oil, continuing high unemployment rate in
North America and Europe, and other factors
must be closely observed. Although Toyota
expects the automotive market to expand over
the medium- to long-term particularly in emerging
countries, the global competition in the automo-
tive market has intensified, as shown in the small
and low-price vehicles markets and in the
environmentally-friendly vehicles market. For
purposes of this outlook discussion, Toyota is
assuming an average exchange rate of ¥82 to the
U.S. dollar and ¥115 to the euro. With the foregoing
external factors in mind, Toyota expects that net
revenues for fiscal 2012 will decrease compared
with fiscal 2011 as a result of a decrease in vehicle
unit sales and the assumed exchange rate of a
stronger Japanese yen against the U.S. dollar in
fiscal 2012 compared with the prior fiscal year.
factors
respect
With
increasing operating
include cost
reduction efforts. On the other hand, factors
the
decreasing operating
assumed exchange rate of a stronger Japanese
yen against the U.S. dollar in fiscal 2012 compared
with the prior fiscal year as well as decreases in
to operating
income,
income
income
include
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vehicle unit sales, which exceed the factors
increasing operating income. As a result, Toyota
expects that operating income will decrease in
fiscal 2012 compared with fiscal 2011. Also,
Toyota expects income before income taxes and
equity in earnings of affiliated companies and net
income attributable to Toyota Motor Corporation
will decrease in fiscal 2012. Exchange rate
fluctuations can materially affect Toyota’s
operating results. In particular, a strengthening of
the Japanese yen against the U.S. dollar can
have a material adverse effect on Toyota’s
operating results. See “Operating and Financial
Review and Prospects — Operating Results —
Overview — Currency Fluctuations” for further
discussion. See “Information on the Company —
Business Overview”
for a more detailed
information of the Great East Japan Earthquake.
The foregoing statements are forward-looking
statements based upon Toyota’s management’s
assumptions and beliefs regarding exchange
rates, market demand for Toyota’s products,
economic conditions and others. See “Cautionary
Statement
Forward-Looking
Statements”. Toyota’s actual results of operations
could vary significantly from those described
above as a result of unanticipated changes in the
factors described above or other factors, including
those described in “Risk Factors”.
Concerning
Net Cash Provided by
Operating Activities and
Free Cash Flow*
Capital Expenditures for Property,
Plant and Equipment* and
Depreciation
Cash and Cash Equivalents
at End of Year
(¥ Billion)
(¥ Billion)
(¥ Billion)
Capital expenditures
Depreciation
Net cash provided by
operating activities
Free cash flow
4,000
3,000
2,000
1,000
0
1,500
1,000
500
0
2,500
2,000
1,500
1,000
500
0
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
* (Net cash provided by operating activities)-
(Capital expenditures for property, plant
and equipment, excluding vehicles and
equipment on operating leases)
* Excluding vehicles and equipment on
operating leases
Liquidity and Capital Resources
Historically, Toyota has funded its capital expendi-
tures and research and development activities
through cash generated by operations.
In fiscal 2012, Toyota expects to sufficiently
fund its capital expenditures and research and
development activities 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 Divesti-
tures” for information regarding Toyota’s material
capital expenditures and divestitures for fiscal
2009, 2010 and 2011, and information concerning
Toyota’s principal capital expenditures and
divestitures currently in progress.
Toyota funds its financing programs for
customers and dealers, including loans and
leasing programs, from both cash generated by
operations and borrowings by its sales finance
subsidiaries. Toyota seeks to expand its ability to
raise funds locally in markets throughout the world
by expanding its network of finance subsidiaries.
Repurchasing of its own shares occurred at
an approximate total cost of ¥73 billion for fiscal
2009. Toyota refrained from repurchasing of its
own shares for fiscal 2010 and 2011. Toyota has
decided, for the time being, to refrain from
repurchasing its own shares, in order to prioritize
retention of cash reserves given the continued
uncertainties surrounding future global economy.
Net cash provided by operating activities was
¥2,024.0 billion for fiscal 2011, compared with
¥2,558.5 billion for the prior fiscal year. The
decrease in net cash provided by operating
activities resulted from an increase in cash
payment to suppliers attributable to the increase
in cost of products sold in the automotive
operations, and cash payments for income taxes,
partially offset by an increase in cash collection
received from sale of products due to an increase
in net revenue for the automotive operations.
Net cash used in investing activities was
¥2,116.3 billion for fiscal 2011, compared with
¥2,850.1 billion for the prior fiscal year. The
decrease in net cash used in investing activities
resulted from an increase in sales and maturity of
marketable securities and security investments,
partially offset by an increase in purchases of
marketable securities and security investments.
Net cash provided by or used in financing
activities was a ¥434.3 billion increase for fiscal
2011, compared with ¥277.9 billion decrease for
the prior fiscal year. The increase in net cash
provided by financing activities resulted from an
increase in short-term borrowings and decrease
in repayment of long-term debt.
Total capital expenditures for property, plant
and equipment, excluding vehicles and equipment
on operating leases, were ¥629.3 billion during
fiscal 2011, an increase of 4.1% over the ¥604.5
billion in total capital expenditures during the prior
fiscal year. The increase in capital expenditures
resulted from an increase of investments in North
America and Asia.
Total capital expenditures for vehicles and
equipment on operating leases were ¥1,061.8
billion during fiscal 2011, an increase of 27.5%
over the ¥833.0 billion in expenditures from the
prior fiscal year. The increase in expenditures for
vehicles and equipment on operating leases
resulted from an increase in investments in the
financial services operations.
Toyota expects investments in property, plant
and equipment, excluding vehicles and equipment
on operating leases, to be approximately ¥720.0
billion during fiscal 2012.
Based on current available information, Toyota
does not expect environmental matters to have a
material impact on its financial position, results of
operations, liquidity or cash flows during fiscal
2012. However, there exists uncertainty with
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respect to Toyota’s obligations under current and
future environment regulations as described in
the Company — Business
“Information on
Overview — Governmental Regulations, Environ-
mental and Safety Standards”.
Cash and cash equivalents were ¥2,080.7
billion as of March 31, 2011. Most of Toyota’s cash
and cash equivalents are held in Japanese yen
and in U.S. dollars. In addition, time deposits
were ¥203.9 billion and marketable securities
were ¥1,225.4 billion as of March 31, 2011.
Liquid assets, which Toyota defines as cash
and cash equivalents, time deposits, marketable
debt securities and its investment in monetary
trust funds, increased during fiscal 2011 by
¥665.0 billion, or 12.6%, to ¥5,963.2 billion.
Trade accounts and notes receivable, less
allowance
for doubtful accounts decreased
during fiscal 2011 by ¥437.0 billion, or 23.2%, to
¥1,449.2 billion. This decrease was due to the
decrease in the volume of sales in the second
half of fiscal 2011.
Inventories decreased during fiscal 2011 by
¥118.1 billion, or 8.3%, to ¥1,304.2 billion.
receivables were
Total finance receivables, net decreased
during fiscal 2011 by ¥146.6 billion, or 1.5%, to
in finance
¥9,693.5 billion. The decrease
receivables, net is due to fluctuations in foreign
currency translation rates. As of March 31, 2011,
finance
geographically
distributed as follows: in North America 59.0%, in
Japan 12.7%, in Europe 10.4%, in Asia 5.8% and
in Other 12.1%.
Marketable securities and other securities
investments, including those included in current
assets, increased during fiscal 2011 by ¥747.1
billion, or 18.5%, reflecting purchase of marketable
securities and security investments, and an
increase in the fair values of common stocks.
Property, plant and equipment decreased
during fiscal 2011 by ¥401.8 billion, or 6.0%,
primarily reflecting the impacts of depreciation
charges during the year and fluctuations in foreign
currency translation rates, partially offset by the
capital expenditures.
Accounts and notes payable decreased
during fiscal 2011 by ¥453.4 billion, or 23.2%. This
decrease was due to the decrease in production
volume in the second half of fiscal 2011.
Liquid Assets*
(¥ Billion)
6,000
5,000
4,000
3,000
2,000
1,000
0
Shareholders’ Equity and Equity Ratio
(¥ Billion)
15,000
12,000
9,000
6,000
3,000
0
Equity ratio
(Right scale)
(%)
100
80
60
40
20
0
FY
‘07
‘08
‘09
‘10
‘11
FY
‘07
‘08
‘09
‘10
‘11
* Cash and cash equivalents, time deposits, marketable debt
securities and investment in monetary trust funds
Accrued expenses increased during fiscal
2011 by ¥37.4 billion, or 2.1%, reflecting the
increase in expenses related to the recalls and
other safety measures.
Income taxes payable decreased during
fiscal 2011 by ¥40.6 billion, or 26.5%, as a result
of a decrease of income taxes payable at overseas
subsidiaries.
Toyota’s total borrowings decreased during
fiscal 2011 by ¥112.4 billion, or 0.9%. Toyota’s
short-term borrowings consist of loans with a
weighted-average interest rate of 1.57% and
commercial paper with a weighted-average
interest rate of 0.67%. Short-term borrowings
decreased during fiscal 2011 by ¥100.6 billion, or
3.1%, to ¥3,179.0 billion. Toyota’s 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 29.00%, and maturity
dates ranging from 2011 to 2050. The current
portion of long-term debt increased during fiscal
2011 by ¥554.5 billion, or 25.0%, to ¥2,772.8 billion
and the non-current portion decreased by ¥566.2
billion, or 8.1%, to ¥6,449.2 billion. The decrease
in total borrowings resulted from the decrease in
medium-term notes and short-term borrowings,
partially offset by increase in long-term borrowings.
As of March 31, 2011, approximately 31% of
long-term debt was denominated in Japanese
yen, 24% in U.S. dollars, 12% in the euros and
33% in other currencies. Toyota hedges interest
rate risk exposure of fixed-rate borrowings by
entering into interest rate swaps. There are no
material seasonal variations in Toyota’s borrowings
requirements.
As of March 31, 2011, Toyota’s total interest
bearing debt was 120.0% of Toyota Motor
Corporation shareholders’ equity, compared with
120.8% as of March 31, 2010.
Toyota’s
Toyota’s long-term debt is rated “AA-” by
Standard & Poor’s Ratings Group, “Aa2” by
Moody’s Investors Services and “AAA” by Rating
and Investment Information, Inc., as of May 31,
2011. However, Moody’s Investors Services has
announced that it is considering the reduction of
Toyota’s long-term debt rating. 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.
liabilities
decreased during fiscal 2011 by ¥1.9 billion, or
0.3%, to ¥545.7 billion. The unfunded pension
liabilities relate 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 settled on the
retirement date of each covered employee. The
unfunded pension liabilities decreased in fiscal
2011 compared with the prior fiscal year due to
changes of pension plans in subsidiaries. See
note 19 to the consolidated financial statements
for further discussion.
unfunded
pension
to adhere
Toyota’s 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 efficiency of its
financial services operations
through Toyota
Financial Services Corporation.
The key element of Toyota’s financial strategy
is maintaining a strong financial position that will
allow Toyota to fund its research and development
initiatives, capital expenditures and financial
services operations efficiently even if earnings
experience short-term fluctuations. Toyota
believes that it maintains sufficient liquidity for its
present requirements and that by maintaining its
high credit ratings, it will continue to be able to
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access funds from external sources in large
amounts and at relatively low costs. Toyota’s
ability to maintain its high credit ratings is subject
to a number of factors, some of which are not
within Toyota’s control. These factors include
general economic conditions in Japan and the
other major markets in which Toyota does
business, as well as Toyota’s successful
implementation of its business strategy.
Off-Balance-Sheet Arrangements
Toyota uses its securitization program as part of
its funding through special purpose entities for its
financial services operations. Toyota is consid-
ered the primary beneficiary of these special
purpose entities and therefore consolidates them.
Toyota has not entered into any off-balance sheet
securitization transactions during fiscal 2011.
Lending Commitments
Credit Facilities with Credit Card Holders
Toyota’s financial services operations issue 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 holder’s requests up
to the limits established on an individual holder’s
basis. Although loans made to customers through
these facilities 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 manage-
includes an analysis of
ment policy which
information provided by financial institutions in
alliance with Toyota. Toyota periodically reviews
and revises, as appropriate, these credit limits.
Outstanding credit facilities with credit card
holders were ¥261.7 billion as of March 31, 2011.
Credit Facilities with Dealers
Toyota’s financial services operations maintain
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
from the dealer or corporate guarantee from the
dealership when deemed prudent. Although the
loans are typically collateralized or guaranteed, the
value of the underlying collateral or guarantees
may not be sufficient to cover Toyota’s exposure
under such agreements. Toyota prices the credit
facilities according to the risks assumed in entering
into the credit facility. Toyota’s financial services
operations also provide financing
to various
multi-franchise dealer organizations, referred to as
dealer groups, often as part of a lending consortium,
for wholesale
inventory financing, business
acquisitions, facilities refurbishment, real estate
purchases, and working capital requirements.
Toyota’s outstanding credit facilities with dealers
totaled ¥1,590.6 billion as of March 31, 2011.
Guarantees
Toyota enters into certain guarantee contracts
with its dealers to guarantee customers’ 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, 2011, 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.
The maximum potential amount of future
payments as of March 31, 2011 is ¥1,662.2 billion.
Liabilities for these guarantees of ¥20.4 billion
have been provided as of March 31, 2011. 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
For information regarding debt obligations, capital
lease obligations, operating lease obligations and
other obligations, including amounts maturing in
each of the next five years, see notes 13, 22 and 23
to the consolidated financial statements. In addition,
as part of Toyota’s normal business practices,
Toyota enters into long-term arrangements with
suppliers for purchases of certain raw materials,
components and services. These arrangements
may contain fixed/minimum quantity purchase
requirements. Toyota enters into such arrange-
ments to facilitate an adequate supply of these
materials and services.
The following tables summarize Toyota’s contractual obligations and commercial commitments as of
March 31, 2011.
Contractual Obligations:
Short-term borrowings (note 13)
Loans
Commercial paper
Long-term debt* (note 13)
Capital lease obligations (note 13)
Non-cancelable operating lease obligations
(note 22)
Commitments for the purchase of property,
Yen in millions
Payments Due by Period
Total
Less than
1 year
1 to 3
years
3 to 5
years
5 years
and after
¥ 1,140,066 ¥1,140,066 ¥ — ¥ — ¥ —
2,038,943
2,038,943
—
—
—
9,200,130
2,768,544
3,368,754
1,995,139
1,067,693
21,917
4,283
4,751
2,977
9,906
44,179
9,198
13,126
8,709
13,146
plant and other assets (note 23)
83,506
37,304
25,513
6,262
14,427
Total
¥12,528,741 ¥5,998,338 ¥3,412,144 ¥2,013,087 ¥1,105,172
* “Long-term debt” represents future principal payments.
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Toyota is unable to make reasonable estimates
of the period of cash settlement with respect to
liabilities recognized for uncertain tax benefits,
and accordingly such liabilities are excluded from
the table above. See note 16 to the consolidated
financial statements for further discussion.
Toyota expects to contribute ¥97,231 million
to its pension plans in fiscal 2012.
Yen in millions
Total
amounts
committed
Amount of Commitment Expiration Per Period
Less than
1 year
1 to 3
years
3 to 5
years
5 years
and after
Commercial Commitments (note 23):
Maximum potential exposure to guarantees
given in the ordinary course of business
¥1,662,225
¥469,543
¥744,991
¥316,508
¥131,183
Total Commercial Commitments
¥1,662,225
¥469,543
¥744,991
¥316,508
¥131,183
Related Party Transactions
Recent Accounting Pronouncements in the United States
the Financial Accounting
In October 2009,
Standards Board
issued updated
(“FASB”)
guidance of accounting for and disclosure of
Revenue Recognition with Multiple Deliverables.
This guidance allows the use of estimated selling
price for determining the selling price of deliver-
ables, eliminates the residual method of allocation
and expands the disclosures related to a vendor’s
multiple-deliverable revenue arrangements. This
guidance is effective prospectively for revenue
arrangements entered into or materially modified
in fiscal year beginning on or after June 15, 2010.
Management does not expect this guidance to
have a material impact on Toyota’s consolidated
financial statements.
In April 2011, FASB issued updated guidance
to clarify the accounting for and disclosures about
troubled debt restructurings by creditors. This
guidance provides the criteria as to whether a
loan modification constitutes a troubled debt
restructuring and requires additional disclosures
about troubled debt restructurings. This guidance
is effective for the interim period or the fiscal year
beginning on or after June 15, 2011, and shall be
applied retrospectively to the beginning of the
fiscal year of adoption. Management does not
expect this guidance to have a material impact on
Toyota’s consolidated financial statements.
Toyota does not have any significant related party transactions other than transactions with affiliated
companies in the ordinary course of business. See note 12 to the consolidated financial statements for
further discussion.
Critical Accounting Estimates
Legislation Regarding End-of-Life Vehicles
In October 2000, the European Union enforced a
directive that requires member states to promul-
gate regulations implementing the following:
• manufacturers shall bear all or a significant
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 financial
statements for further discussion.
requires
The consolidated financial statements of Toyota
are prepared in conformity with accounting
principles generally accepted in the United States
of America. The preparation of these financial
the use of estimates,
statements
the
judgments and assumptions
reported amounts of assets and liabilities at the
date of the financial statements and the reported
amounts of revenues and expenses during the
periods presented. Toyota believes that of its
significant accounting policies, the following may
involve a higher degree of judgments, estimates
and assumptions:
that affect
Product Warranties and Recalls and
Other Safety Measures
Toyota generally warrants its products against
certain manufacturing and other defects. Provisions
for product warranties are provided for specific
periods of time and/or usage of the product and
vary depending upon the nature of the product,
the geographic location of 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 management’s 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
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suppliers. The foregoing evaluations are inherently
uncertain, as they require material estimates and
some products’ warranties extend for several
years. Consequently, actual warranty costs may
differ from the estimated amounts and could
require additional warranty provisions. If these
factors require a significant increase in Toyota’s
accrued estimated warranty costs, it would
negatively affect future operating results of the
automotive operations.
An estimate of warranty claim accrued for
each fiscal year is calculated based on the
estimate of warranty claim per unit. The estimate
of warranty claim per unit is calculated by dividing
the actual amounts of warranty claim, net of claim
recovery cost received from suppliers, by the
number of sales units for the fiscal year.
As the historical recovery amounts received
from suppliers is used as a factor in Toyota’s
calculation of estimated accrued warranty cost,
the estimated accrued warranty cost may change
depending on the average recovery amounts
received from suppliers in the past. However,
Toyota believes that there is not a significant
uncertainty of estimated amounts based on
historical experience
recoveries
regarding
received
from suppliers. Toyota may seek
recovery to suppliers over the life of the warranty,
and there are no other significant special terms
and conditions including cap on amounts that
can be recovered.
Toyota accrues for costs of recalls and other
safety measures, as well as product warranty cost
described above, included as a component of
cost of sales, at the time of vehicle sale based on
the amount estimated from historical experience
with consideration of individual occurrences of
recalls and other safety measures.
Below are the important factors, judgments
and assumptions taken into accounts for estimating
costs of recalls and other safety measures.
Toyota accrues for cost of recalls and other
safety measures based on the average repair
cost per unit and pattern of payment occurrence
in the past at the time of product sale. The average
repair cost per unit is calculated based on histor-
ical expenses incurred in relation of recalls and
other safety measures.
Factors that may bring material uncertainties
to the estimated or actual amount include the
important changes in the average repair cost for
products.
Allowance for Doubtful Accounts and
Credit Losses
Natures of estimates and assumptions
Retail receivables and finance lease receivables
consist of retail
installment sales contracts
secured by passenger cars and commercial
vehicles. Collectability risks include consumer
and dealer insolvencies and insufficient 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 manage-
ment’s estimate of the amount of asset impairment
in the portfolios of finance, trade and other receiv-
for
ables. Toyota determines
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
and adequacy of collateral, and other pertinent
factors. This evaluation is inherently judgmental
and requires material estimates, including the
amounts and timing of future cash flows expected
to be received, which may be susceptible to
significant change. Although management
the allowance
currently
available,
considers the allowance for doubtful accounts
and credit losses to be adequate based on
additional
information
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 flows, 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
effect of reducing new vehicle prices, resale
prices of used vehicles and, correspondingly, the
collateral value of Toyota’s retail receivables and
finance
lease receivables could experience
further downward pressure. If these factors
require a significant increase in Toyota’s allowance
for doubtful accounts and credit losses, it could
negatively affect future operating results of the
financial services operations. The level of credit
losses, which has a greater impact on Toyota’s
results of operations, is influenced by two factors:
frequency of occurrence and expected severity
of loss. For evaluation purposes, exposures to
credit losses are segmented into the two primary
categories of “consumer” and “dealer”. Toyota’s
“consumer” category consists of smaller balances
that are homogenous retail receivables and
finance lease receivables. The “dealer” category
consists of wholesale and other dealer loan
receivables. 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.
Sensitivity analysis
The level of credit losses, which could significantly
impact Toyota’s results of operations, is influenced
by two factors: frequency of occurrence and
expected 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 effect of an assumed change
in frequency of occurrence or expected severity
of loss mainly in the United States, assuming all
other assumptions are held consistent respec-
tively. The table below represents the impact on
the allowance for credit losses in Toyota’s financial
services operations of the change in frequency of
occurrence or expected severity of loss as any
change impacts most significantly on the financial
services operations.
Yen in millions
Effect on the allowance
for credit losses
as of March 31, 2011
10 percent change in frequency of
occurrence or expected severity
of loss
¥6,153
Investment in Operating Leases
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
these vehicles. Toyota
residual values
evaluates the recoverability of the carrying values
of its leased vehicles for impairment when there
are indications of declines in residual values, and
if impaired, Toyota recognizes an allowance for
losses on its residual values.
for
Throughout the life of the lease, management
performs periodic evaluations of estimated end-of-
term fair values to determine whether estimates
used in the determination of the contractual
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residual value are still considered reasonable.
Factors affecting 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 origina-
tion 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 fair value of a lease is less than its
carrying value at lease end.
To the extent that sales incentives remain an
integral part of sales promotion, resale prices of
used vehicles and, correspondingly, the fair value
of Toyota’s leased vehicles could be subject to
downward pressure. The extent of the impact this
will have on the end of term residual value depends
on the significance of the incentive programs and
whether they are sustained over a number of
periods. This in turn can impact the projection of
future used vehicle values, adversely impacting
the expected residual value of the current
operating lease portfolio and increasing the
provision for residual value losses. However,
various other factors impact used vehicle values
and the projection of future residual values,
including the supply of and demand for used
vehicles, interest rates, inflation, the actual or
perceived quality, safety and reliability of vehicles,
the general economic outlook, new vehicle pricing,
projected vehicle return rates and projected loss
severity, which may offset this effect. Such factors
are highly likely to adversely affect the results of
operations for financial services due to significant
charges reducing the estimated residual value.
Sensitivity analysis
The following table illustrates the effect of an
assumed change in the vehicle return rate and
end-of-term market values, which Toyota believes
are the critical estimates, in determining the
residual value losses, holding all other assump-
tions constant. The following table represents the
impact on the residual value losses in Toyota’s
financial services operations of the change in
vehicle return rate and end-of-term market values
as those changes have a significant impact on
financial services operations.
Yen in millions
Effect on the residual
value losses over the
remaining terms of the
operating leases on and
after April 1, 2011
1 percent increase in vehicle
return rate
1 percent increase in end-of-term
market values
¥1,164
¥4,490
Pension Costs and Obligations
Natures of estimates and assumptions
include discount
Pension costs and obligations are dependent on
assumptions used in calculating such amounts.
These assumptions
rates,
benefits earned, interest costs, expected rate of
return on plan assets, mortality rates and other
factors. Actual results that differ from the assump-
tions are accumulated and amortized over future
periods and, therefore, generally affect recognized
expense in future periods. While management
believes
the assumptions used are
appropriate, differences in actual experience or
changes in assumptions may affect Toyota’s
pension costs and obligations.
that
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 fixed income bonds or fixed income
governmental bonds currently available and
expected to be available during the period to
maturity of the defined benefit 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 manage-
ment, historical results of the returns on plan
assets, Toyota’s 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 3.8% are the results of assumptions
used for the various pension plans in calculating
Toyota’s consolidated pension costs for fiscal
2011. Also, a weighted-average discount rate of
2.8% is the result of assumption used for the
various pension plans in calculating Toyota’s
consolidated pension obligations for fiscal 2011.
Impairment of Long-Lived Assets
Sensitivity analysis
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 flows. 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 flows and fair values are reason-
able. However, changes in estimates of such
cash flows and fair values would affect the evalua-
tions and negatively affect future operating results
of the automotive operations.
The following table illustrates the effects of assumed changes in weighted-average discount rates 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
Effect on pre-tax income for
the year ended March 31, 2012
Effect on PBO
as of March 31, 2011
Discount rates
0.5% decrease
0.5% increase
Expected rate of return on plan assets
0.5% decrease
0.5% increase
¥(10,325)
9,845
¥ (5,917)
5,917
¥ 124,789
(115,671)
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
for derivatives is complex and continues to evolve.
In addition, there are significant judgments and
from
estimates
involved, using
information
TOYOTA ANNUAL REPORT 2011
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counterparties or market, in estimating 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 different assumptions may have
a material effect on the estimated fair value amounts.
Marketable Securities and Investments in
Affiliated Companies
Toyota’s 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 financial condition and prospects of the
company and Toyota’s ability and intent to retain
its investment in the company for a period of time
sufficient to allow for any anticipated recovery in
fair value.
Deferred Tax Assets
Toyota estimates whether future taxable income is
sufficient 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 benefit will not be realized in the future
periods. Actual taxable income may differ from the
estimated amounts due to various assumptions
used to estimate future taxable income. If additional
valuation allowance is recorded due to lower actual
taxable income than estimated amounts it would
negatively affect future operating results.
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
financial instruments.
A description of Toyota’s accounting policies
for derivative instruments is included in note 2 to
the consolidated financial statements and further
disclosure is provided in notes 20 and 21 to the
consolidated financial statements.
Toyota monitors and manages these financial
exposures as an integral part of its overall risk
management program, which recognizes the
unpredictability of financial markets and seeks to
reduce the potentially adverse effects on Toyota’s
operating results.
The financial instruments included in the
receivables, securities
market risk analysis consist of all of Toyota’s cash
and cash equivalents, marketable securities,
finance
investments,
long-term and short-term debt and all derivative
financial instruments. Toyota’s portfolio of deriva-
tive financial 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 denominated in
foreign currencies that are covered by Toyota’s
derivative hedging are not included in the market
risk analysis. Although operating leases are not
required to be included, Toyota has included
these instruments in determining interest rate risk.
Foreign Currency Exchange Rate Risk
Toyota has foreign currency exposures related to
buying, selling and financing 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 flows and various
financial instruments that are denominated in
foreign currencies. Toyota’s most significant
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 ¥148.9 billion and ¥107.6 billion at
March 31, 2010 and 2011, respectively. Based on
Toyota’s overall currency exposure (including
derivative positions), the risk during fiscal 2011 to
pre-tax cash flow from currency movements was
on average ¥96.5 billion, with a high of ¥107.6
billion and a low of ¥88.2 billion.
The VAR was estimated by using a Monte
Carlo Simulation Method and assumed a 95%
confidence level on the realization date and a
10-day holding period.
Interest Rate Risk
Toyota is subject to market risk from exposures to
changes in interest rates based on its financing,
investing and cash management activities. Toyota
enters into various financial instrument transactions
to maintain the desired level of exposure to the
risk of interest rate fluctuations and to minimize
interest expense. The potential decrease in fair
value resulting from a hypothetical 100 basis point
upward shift
rates would be
interest
approximately ¥67.8 billion as of March 31, 2010
and ¥139.6 billion as of March 31, 2011.
in
There are certain shortcomings inherent to
the sensitivity analyses presented. The model
rate changes are
assumes
interest
that
in
reality, changes are
instantaneous parallel shifts in the yield curve.
However,
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
fluctuate 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,
Toyota’s model does not address prepayment
risk for automotive related finance receivables.
However, in the event of a change in interest rates,
actual loan prepayments may deviate significantly
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 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 ¥852.7 billion as of March 31, 2010 and
¥960.2 billion as of March 31, 2011. The potential
change in the fair value of these investments,
assuming a 10% change in prices, would be
approximately ¥85.3 billion as of March 31, 2010
and ¥96.0 billion as of March 31, 2011.
TOYOTA ANNUAL REPORT 2011
69
Consolidated Balance Sheets
Toyota Motor Corporation
March 31, 2010 and 2011
ASSETS
Current assets
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Yen in millions
U.S. dollars in millions
Yen in millions
U.S. dollars in millions
2010
2011
2011
LIABILITIES AND SHAREHOLDERS’ EQUITY
2010
2011
2011
Cash and cash equivalents
¥ 1,865,746
¥ 2,080,709
$ 25,024
Time deposits
Marketable securities
Trade accounts and notes receivable, less allowance
for doubtful accounts of ¥13,735 million in 2010
and ¥11,856 million ($143 million) in 2011
Finance receivables, net
Other receivables
Inventories
Deferred income taxes
Prepaid expenses and other current assets
392,724
1,793,165
203,874
1,225,435
1,886,273
4,209,496
360,379
1,422,373
632,164
511,284
1,449,151
4,136,805
306,201
1,304,242
605,884
517,454
2,452
14,738
17,428
49,751
3,682
15,685
7,287
6,223
Total current assets
13,073,604
11,829,755
142,270
Noncurrent finance receivables, net
5,630,680
5,556,746
66,828
Investments and other assets
Marketable securities and other securities investments
Affiliated companies
Employees receivables
Other
2,256,279
1,879,320
67,506
730,997
3,571,187
1,827,331
62,158
661,829
Total investments and other assets
4,934,102
6,122,505
Property, plant and equipment
Land
Buildings
Machinery and equipment
Vehicles and equipment on operating leases
Construction in progress
1,261,349
3,693,972
9,298,967
2,613,248
226,212
1,237,620
3,635,605
8,947,350
2,491,946
298,828
Total property, plant and equipment, at cost
17,093,748
16,611,349
Less – Accumulated depreciation
(10,382,847)
(10,302,189)
Total property, plant and equipment, net
6,710,901
6,309,160
42,949
21,976
748
7,959
73,632
14,884
43,724
107,605
29,969
3,594
199,776
(123,899)
75,877
Current liabilities
Short-term borrowings
Current portion of long-term debt
Accounts payable
Other payables
Accrued expenses
Income taxes payable
Other current liabilities
¥ 3,279,673
¥ 3,179,009
$ 38,232
2,218,324
1,956,505
572,450
1,735,930
153,387
769,945
2,772,827
1,503,072
579,326
1,773,233
112,801
870,722
33,347
18,077
6,967
21,326
1,357
10,472
Total current liabilities
10,686,214
10,790,990
129,778
Long-term liabilities
Long-term debt
Accrued pension and severance costs
Deferred income taxes
Other long-term liabilities
Total long-term liabilities
7,015,409
6,449,220
678,677
813,221
225,323
668,022
810,127
179,783
8,732,630
8,107,152
77,561
8,034
9,743
2,162
97,500
Shareholders’ equity
Toyota Motor Corporation shareholders' equity
Common stock, no par value,
authorized: 10,000,000,000 shares in 2010 and 2011;
issued: 3,447,997,492 shares in 2010 and 2011
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock, at cost, 312,002,149 shares in 2010
and 312,298,805 shares in 2011
Total Toyota Motor Corporation
shareholders’ equity
Noncontrolling interest
Total shareholders’ equity
Commitments and contingencies
397,050
501,331
397,050
505,760
11,568,602
11,835,665
(846,835)
(1,144,721)
4,775
6,083
142,341
(13,767)
(1,260,425)
(1,261,383)
(15,170)
10,359,723
10,332,371
570,720
587,653
10,930,443
10,920,024
124,262
7,067
131,329
Total assets
¥ 30,349,287
¥ 29,818,166
$ 358,607
Total liabilities and shareholders’ equity
¥30,349,287
¥29,818,166
$358,607
The accompanying notes are an integral part of these consolidated financial statements.
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Consolidated Statements of Income
Toyota Motor Corporation
For the years ended March 31, 2009, 2010 and 2011
Net revenues
Sales of products
Financing operations
Costs and expenses
Cost of products sold
Cost of financing operations
Selling, general and administrative
2009
¥19,173,720
1,355,850
20,529,570
17,468,416
987,384
2,534,781
20,990,581
Yen in millions
2010
¥17,724,729
1,226,244
18,950,973
15,971,496
712,301
2,119,660
18,803,457
2011
¥17,820,520
1,173,168
18,993,688
15,985,783
629,543
1,910,083
18,525,409
Operating income (loss)
(461,011)
147,516
468,279
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 affiliated companies
Provision for income taxes
Equity in earnings of affiliated companies
Net income (loss)
138,467
(46,882)
(1,815)
(189,140)
(99,370)
(560,381)
(56,442)
42,724
(461,215)
Less: Net (income) loss attributable to the noncontrolling interests
24,278
78,224
(33,409)
68,251
30,886
143,952
291,468
92,664
45,408
244,212
(34,756)
90,771
(29,318)
14,305
19,253
95,011
563,290
312,821
215,016
465,485
(57,302)
U.S. dollars in millions
2011
$214,318
14,109
228,427
192,252
7,571
22,972
222,795
5,632
1,092
(353)
172
231
1,142
6,774
3,762
2,586
5,598
(689)
Net income (loss) attributable to Toyota Motor Corporation
¥ (436,937)
¥ 209,456
¥ 408,183
$ 4,909
Net income (loss) attributable to Toyota Motor Corporation per share
— Basic
— Diluted
¥ (139.13)
¥ (139.13)
Yen
¥ 66.79
¥ 66.79
¥ 130.17
¥ 130.16
Cash dividends per share
¥ 100.00
¥ 45.00
¥ 50.00
The accompanying notes are an integral part of these consolidated financial statements.
U.S. dollars
$ 1.57
$ 1.57
$ 0.60
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Toyota Motor Corporation
For the years ended March 31, 2009, 2010 and 2011
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 reclassification 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 reclassification 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
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 reclassification 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, 2011
The accompanying notes are an integral part of these consolidated financial statements.
Common
stock
¥397,050
Additional paid-in
capital
Retained
earnings
Accumulated other
comprehensive
income (loss)
Treasury stock,
at cost
Total Toyota
Motor Corporation
shareholders’ equity
¥497,569
¥12,408,550
¥ (241,205)
¥(1,192,437)
¥11,869,527
Yen in millions
3,642
3,642
Noncontrolling
interest
Total shareholders’
equity
¥656,667
(30,645)
¥12,526,194
(30,645)
3,642
(436,937)
(436,937)
(24,278)
(461,215)
397,050
501,211
(2,116)
2,236
(381,303)
(293,101)
(192,172)
(439,991)
11,531,622
(1,107,781)
(68,458)
(1,260,895)
209,456
(172,476)
9,894
176,407
74,645
397,050
501,331
2,310
2,119
11,568,602
(846,835)
470
(1,260,425)
(381,303)
(293,101)
(192,172)
(1,303,513)
(439,991)
(68,458)
10,061,207
(2,116)
2,236
209,456
9,894
176,407
74,645
470,402
(172,476)
470
10,359,723
2,310
2,119
(18,865)
(13,590)
(8,874)
(65,607)
(20,885)
539,530
(2,748)
34,756
5,721
4,095
98
44,670
(10,732)
570,720
5,183
(400,168)
(306,691)
(201,046)
(1,369,120)
(439,991)
(20,885)
(68,458)
10,600,737
(4,864)
2,236
244,212
15,615
180,502
74,743
515,072
(172,476)
(10,732)
470
10,930,443
7,493
2,119
408,183
408,183
57,302
465,485
(287,613)
(26,058)
15,785
(141,120)
(287,613)
(26,058)
15,785
110,297
(141,120)
¥397,050
¥505,760
¥11,835,665
¥(1,144,721)
(958)
¥(1,261,383)
(958)
¥10,332,371
(11,965)
(1,599)
(4,331)
39,407
(27,657)
¥587,653
(299,578)
(27,657)
11,454
149,704
(141,120)
(27,657)
(958)
¥10,920,024
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Toyota Motor Corporation
For the years ended March 31, 2009, 2010 and 2011
Balances at March 31, 2010
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 reclassification 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, 2011
The accompanying notes are an integral part of these consolidated financial statements.
Common
stock
$4,775
Additional paid-in
capital
$6,029
28
26
Retained
earnings
$139,129
4,909
(1,697)
$(10,184)
$(15,158)
(3,459)
(314)
190
$124,591
28
26
4,909
(3,459)
(314)
190
1,326
(1,697)
$4,775
$6,083
$142,341
$(13,767)
(12)
$(15,170)
(12)
$124,262
U.S. dollars in millions
Accumulated other
comprehensive
income (loss)
Treasury stock,
at cost
Total Toyota
Motor Corporation
shareholders’ equity
Noncontrolling
interest
Total shareholders’
equity
$6,864
62
689
(144)
(19)
(52)
474
(333)
$7,067
$131,455
90
26
5,598
(3,603)
(333)
138
1,800
(1,697)
(333)
(12)
$131,329
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Consolidated Statements of Cash Flows
Toyota Motor Corporation
For the years ended March 31, 2009, 2010 and 2011
Cash flows from operating activities
Cash flows from investing activities
Net income (loss)
¥ (461,215)
¥ 244,212
¥ 465,485
$ 5,598
Additions to finance receivables
¥(8,612,111)
¥(7,806,201)
¥(8,438,785)
$(101,488)
Yen in millions
U.S. dollars in millions
2009
2010
2011
2011
2009
Yen in millions
2010
2011
U.S. dollars in millions
2011
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 fixed assets
Unrealized losses on available-for-sale
securities, net
Deferred income taxes
Equity in earnings of affiliated companies
Changes in operating assets and
liabilities, and other
(Increase) decrease in accounts and
notes receivable
Decrease in inventories
Decrease in other current assets
Increase (decrease) in accounts payable
Increase (decrease) in accrued
income taxes
Increase (decrease) in other
current liabilities
Other
1,495,170
1,414,569
1,175,573
257,433
100,775
4,140
(20,958)
68,682
220,920
(194,990)
(42,724)
1,254
46,937
2,486
25,537
(45,408)
(23,414)
36,214
7,915
85,710
(215,016)
14,138
50
(282)
436
95
1,031
(2,586)
791,481
(576,711)
421,423
5,068
192,379
9,923
(837,402)
56,059
97,494
51,808
38,307
623
461
649,214
(406,210)
(4,885)
(251,868)
102,207
(40,629)
(489)
(41,819)
291,893
213,341
226,564
239,319
183,384
2,878
2,206
Net cash provided by operating activities ¥1,476,905
¥2,558,530
¥2,024,009
$24,342
Collection of finance receivables
8,143,804
7,509,578
7,934,364
Proceeds from sales of finance receivables
Additions to fixed assets excluding
equipment leased to others
Additions to equipment leased to others
Proceeds from sales of fixed 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
11,290
8,390
69,576
(1,364,582)
(960,315)
(604,536)
(833,065)
(629,326)
(1,061,865)
47,386
52,473
51,342
528,749
465,092
486,695
95,422
837
(7,569)
(12,770)
618
5,853
(636,030)
(2,412,182)
(4,421,807)
(53,179)
800,422
77,025
189,037
2,273
675,455
1,031,716
3,527,119
42,419
affiliated companies, net of cash acquired
(45)
(1,020)
(299)
(4)
Changes in investments and other assets,
and other
135,757
(337,454)
177,605
2,136
Net cash used in investing activities
¥(1,230,220)
¥(2,850,184)
¥(2,116,344)
$ (25,452)
Cash flows from financing activities
Proceeds from issuance of long-term debt
¥ 3,506,990
¥ 3,178,310
¥ 2,931,436
$ 35,255
Payments of long-term debt
(2,704,078)
(2,938,202)
(2,489,632)
(29,942)
Increase (decrease) in short-term borrowings
406,507
Dividends paid
Purchase of common stock, and other
Net cash provided by (used in)
financing activities
Effect of exchange rate changes on cash and
cash equivalents
Net increase (decrease) in cash and cash
equivalents
(439,991)
(70,587)
(335,363)
(172,476)
(10,251)
162,260
(141,120)
(28,617)
1,951
(1,697)
(344)
698,841
(277,982)
434,327
5,223
(129,793)
(8,898)
(127,029)
(1,528)
Cash and cash equivalents at beginning of year
1,628,547
2,444,280
1,865,746
815,733
(578,534)
214,963
2,585
22,439
Cash and cash equivalents at end of year
¥ 2,444,280
¥ 1,865,746
¥ 2,080,709
$ 25,024
The accompanying notes are an integral part of these consolidated financial statements.
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1
Nature of operations:
Toyota is primarily engaged 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 financing,
vehicle and equipment leasing and certain other
financial services primarily to its dealers and their
customers to support the sales of vehicles and
other products manufactured by Toyota.
2
Summary of significant accounting policies:
their financial statements
The parent company and its subsidiaries in Japan
and its foreign subsidiaries maintain their records
and prepare
in
accordance with accounting principles generally
accepted in Japan and those of their countries of
domicile. Certain adjustments and reclassifica-
tions have been incorporated in the accompanying
consolidated financial statements to conform to
U.S.GAAP.
Significant accounting policies after reflecting
adjustments for the above are as follows:
Basis of consolidation and accounting for
investments in affiliated companies
The consolidated financial statements include the
accounts of the parent company and those of its
majority-owned subsidiary companies. All signifi-
cant intercompany transactions and accounts
have been eliminated. Investments in affiliated
companies in which Toyota exercises significant
influence, but which it does not control, are stated
at cost plus equity in undistributed earnings.
Consolidated net income includes Toyota’s equity
in current earnings of such companies, after
elimination of unrealized intercompany profits.
Investments in such companies are reduced to
net realizable value if a decline in market value is
determined other-than-temporary. Investments in
non-public companies in which Toyota does not
exercise significant influence (generally less than
a 20% ownership interest) are stated at cost. The
accounts of variable interest entities as defined
by U.S.GAAP are included in the consolidated
financial statements, if applicable.
Estimates
The preparation of Toyota’s consolidated financial
statements in conformity with U.S.GAAP requires
management to make estimates and assumptions
that affect the amounts reported in the consoli-
dated financial statements and accompanying
notes. Actual results could differ from those
estimates. The more significant estimates include:
product warranties, liabilities accrued for recalls
and other safety measures, allowance for doubtful
accounts and credit losses, residual values for
leased assets, impairment of long-lived assets,
pension costs and obligations, fair value of deriva-
tive financial instruments, other-than-temporary
losses on marketable securities, litigation liabili-
ties and valuation allowance for deferred tax
assets.
Translation of foreign currencies
All asset and
foreign
subsidiaries and affiliates are translated into
liability accounts of
Japanese yen at appropriate year-end current
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
gains or losses are recorded in operations
currently.
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.
Toyota’s 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 first exercise
date of the guarantee in a manner similar to
lease accounting. The underlying
operating
vehicles of these transactions are recorded as
assets and are depreciated in accordance with
Toyota’s depreciation policy.
Revenues from retail financing contracts and
finance leases are recognized using the effective
yield method. Revenues from operating leases
are recognized on a straight-line basis over the
lease term.
The sale of certain vehicles includes a
determinable amount for the contract, which
entitles customers to free vehicle maintenance.
Such revenues from free maintenance contracts
are deferred and recognized as revenue over the
period of the contract, which approximates the
pattern of the related costs.
Other costs
Advertising and sales promotion costs are
expensed as incurred. Advertising costs were
¥389,242 million, ¥304,375 million and ¥308,903
million ($3,715 million) for the years ended March
31, 2009, 2010 and 2011, respectively.
Toyota generally warrants its products against
certain manufacturing and other defects.
Provisions for product warranties are provided for
specific periods of time and/or usage of the
product and vary depending upon the nature of
the product, the geographic location of 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 management’s
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 fiscal
2010, amounts were accrued based on individual
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occurrences of recalls and other safety measures.
During the fourth quarter of fiscal 2010, as a result
of significant changes in facts and circumstances,
Toyota has employed an estimation model, to
accrue at the time of vehicle sale, an amount that
represents management’s best estimate of
expenses related to future recalls and other safety
measures. The estimation model for recalls and
other safety measures takes into account Toyota’s
historical experience and individual occurrences
of recalls and other safety measures. This change
resulted from Toyota’s fiscal 2010 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.
Litigation liabilities are established to cover
probable losses on various lawsuits based on the
information currently available. Attorneys’ fees are
expensed as incurred.
Research and development costs are
expensed as incurred. Research and development
costs were ¥904,075 million, ¥725,345 million and
¥730,340 million ($8,783 million) for the years
ended March 31, 2009, 2010 and 2011, respectively.
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 insignificant risk of changes in
value because of changes in interest rates.
Marketable securities
Marketable securities consist of debt and equity
securities. Debt and equity securities designated
as available-for-sale are carried at fair value with
losses
unrealized gains or
included as a
component of accumulated other comprehensive
income in shareholders’ equity, net of applicable
taxes. Individual securities classified as available-
for-sale are reduced to net realizable value for
other-than-temporary declines in market value. In
determining if a decline in value is other-than-
temporary, Toyota considers the length of time
and the extent to which the fair value has been
less than the carrying value, the financial condition
and prospects of the company and Toyota’s
ability and intent to retain its investment in the
company for a period of time sufficient to allow for
any anticipated recovery in market value. Realized
gains and losses, which are determined on the
the
average-cost method, are
statement of income when realized.
reflected
in
Security investments in non-public companies
recognizes
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,
the
the
Toyota
investment and the carrying value is reduced to
its fair value. Determination of impairment is
based on the consideration of such factors as
operating results, business plans and estimated
future cash flows. Fair value is determined
principally through the use of the latest financial
information.
impairment of
Finance receivables
Finance receivables are recorded at the present
value of the related future cash flows including
residual values for finance leases. Incremental
direct costs incurred in connection with the
acquisition of finance receivables are capitalized
and amortized so as to approximate a level rate of
return over the term of the related contracts.
The determination of portfolio segments is
based primarily on the qualitative consideration of
the nature of Toyota’s business operations and
finance receivables. The three portfolio segments
within finance receivables are as follows:
Retail receivables portfolio segment
The retail receivables portfolio segment consists
of retail installment sales contracts acquired
mainly from dealers (“auto loans”) including credit
card loans. These contracts acquired must first
meet specified credit standards. Thereafter,
Toyota retains responsibility for contract collection
and administration.
Contract period of auto loans primarily range
from 2 to 7 years. Toyota acquires security interests
in the vehicles financed and has the right to
repossess vehicles if customers fail to meet their
contractual obligations. Almost all auto loans are
non-recourse, which relieves the dealers from
financial responsibility in the event of repossession.
Toyota classifies retail receivables portfolio
segment into one class based on common risk
characteristics associated with the underlying
finance receivables, the similarity of the credit
risks, and the quantitative materiality.
Finance lease receivables portfolio segment
Toyota acquires new vehicle lease contracts
originated primarily through dealers. Contract
period of these primarily range from 2 to 5 years.
Lease contracts acquired must first meet specified
credit standards after which Toyota assumes
ownership of the leased vehicle. Toyota is
responsible
and
contract
administration during the lease period.
collection
for
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
first leased. Vehicles returned to Toyota at the end
of their leases are sold by auction.
Toyota classifies finance lease receivables
portfolio segment into one class based on
common risk characteristics associated with the
underlying finance receivables and the similarity
of the credit risks.
Wholesale and other dealer loan receivables
portfolio segment
interests
Toyota provides wholesale financing to qualified
dealers to finance inventories. Toyota acquires
in vehicles financed at
security
wholesale. In cases where additional security
interests would be
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.
required, Toyota
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, other dealership assets
and/or personal assets of the dealers.
Toyota classifies wholesale and other dealer
loan receivables portfolio segment into three
classes of wholesale, real estate and working
capital, based on the risk characteristics associated
with the underlying finance receivables.
Impaired finance receivables primarily consist
of wholesale and other dealer loan receivables.
For all classes of finance receivables within
the wholesale and other dealer loan receivables
portfolio segment, a receivable account balance
is considered impaired when it is probable that
Toyota will be unable to collect all amounts due
(including principal and interest) based on current
information and events according to the terms of
the contract. Factors such as payment history,
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compliance with terms and conditions of the
underlying loan agreement and other subjective
factors related to the financial stability of the
borrower are considered when determining
whether a loan is impaired. Impaired finance
receivables include certain nonaccrual receivables
for which a specific reserve has been assessed.
Impaired receivables are excluded from the loan
risk pool used to determine general reserves.
All classes of wholesale and other dealer loan
receivables portfolio segment are placed on
nonaccrual status when full payment of principal
or interest is in doubt, principal or interest is 90
days or more contractually past due, whichever
occurs first. Collateral dependent loans are
placed on nonaccrual status if collateral is
insufficient to cover principal and interest. Interest
accrued but not collected at the date a receivable
is placed on nonaccrual status is reversed against
interest income. In addition, the amortization of
net deferred fees is suspended.
Interest income on nonaccrual receivables is
recognized only to the extent it is received in cash.
Accounts are restored to accrual status only when
interest and principal payments are brought
current and future payments are reasonably
assured. Receivable balances are written-off
against the allowance for credit losses when it is
probable that a loss has been realized. Retail
receivables class and finance lease receivables
class are not placed mainly on nonaccrual status
when principal or interest is 90 days or more past
due. However, these receivables are written-off
against the allowance for credit losses when
payments due are no longer expected to be
received or the account is 120 days contractually
past due, whichever occurs first.
As of March 31, 2010, finance receivables on
nonaccrual status were ¥26,599 million.
As of March 31, 2011, finance receivables on
nonaccrual status were as follows:
Retail
Finance leases
Wholesale
Real estate
Working capital
Yen in millions
U.S. dollars in millions
March 31,
2011
¥ 2,633
1,136
6,722
14,437
272
¥25,200
March 31,
2011
$ 32
14
81
173
3
$303
As of March 31, 2010, finance receivables
past due over 90 days and still accruing were
¥38,150 million.
As of March 31, 2011, finance receivables
past due over 90 days and still accruing were as
follows:
Retail
Finance leases
Yen in millions
U.S. dollars in millions
March 31,
2011
¥23,734
4,484
¥28,218
March 31,
2011
$285
54
$339
Allowance for credit losses
Allowance for credit losses is established to cover
probable losses on finance receivables and
vehicles and equipment on operating leases,
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
review and evaluation
systematic, ongoing
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. Vehicles and equipment on operating
leases are not within the scope of accounting
guidance governing the disclosure of portfolio
segments.
Retail receivables portfolio segment
Toyota calculates allowance for credit losses to
cover probable losses on retail receivables by
applying reserve rates
to such receivables.
Reserve rates are calculated mainly by historical
loss experience, current economic events and
conditions and other pertinent factors.
Finance lease receivables portfolio segment
Toyota calculates allowance for credit losses to
cover probable losses on finance lease receivables
by applying reserve rates to such receivables.
Reserve rates are calculated mainly by historical
loss experience, current economic events and
conditions and other pertinent factors such as
used car markets.
Wholesale and other dealer loan receivables
portfolio segment
Toyota calculates allowance for credit losses to
cover probable losses on wholesale and other
dealer loan receivables by applying reserve rates
to such receivables. Reserve rates are calculated
mainly by financial conditions of the dealers, terms
of collateral setting, current economic events and
conditions and other pertinent factors.
Toyota establishes specific reserves to cover
the estimated losses on individually impaired
receivables within the wholesale and other dealer
loan receivables portfolio segment. Specific
reserves on impaired receivables are determined
by the present value of expected future cash flows
or the fair value of collateral when it is probable
that such receivables will be unable to be fully
collected. The fair value of the underlying collateral
is used if the receivable is collateral-dependent.
The receivable is determined collateral-dependent
if the repayment of the loan is expected to be
provided by the underlying collateral. For the
receivables in which the fair value of the underlying
collateral was in excess of the outstanding
balance, no allowance was provided.
Specific reserves on impaired receivables
within the wholesale and other dealer loan
receivables portfolio segment are recorded by an
increase to the allowance for credit losses based
on
impairment.
Related collateral, if recoverable, is repossessed
and sold and the account balance is written-off.
the related measurement of
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.
Allowance for residual value losses
Toyota is exposed to risk of loss on the disposition
of off-lease vehicles to the extent that sales
proceeds are not sufficient to cover the carrying
value of the leased asset at lease termination.
Toyota maintains an allowance to cover probable
estimated losses related to unguaranteed residual
values on its owned portfolio. The allowance is
evaluated considering projected vehicle return
loss severity. Factors
rates and projected
considered in the determination of projected return
rates and loss severity include historical and
market information on used vehicle sales, trends
in lease returns and new car markets, and general
economic conditions. Management evaluates the
foregoing factors, develops several potential loss
scenarios, and reviews allowance
to
determine whether reserves are considered
adequate to cover the probable range of losses.
levels
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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 difference between the net book
value and the proceeds from sale.
Inventories
Inventories are valued at cost, not in excess of
market, cost being determined on the “average-
cost” basis, except for the cost of finished products
carried by certain subsidiary companies which is
determined on the “specific identification” basis
or “last-in, first-out” (“LIFO”) basis. Inventories
valued on the LIFO basis totaled ¥199,275 million
and ¥151,183 million ($1,818 million) at March 31,
2010 and 2011, respectively. Had the “first-in,
first-out” basis been used for those companies
using the LIFO basis, inventories would have been
¥64,099 million and ¥57,943 million ($697 million)
higher than reported at March 31, 2010 and 2011,
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.
Long-lived assets
Toyota reviews its long-lived assets for 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 flows expected to result from
the use of the asset and its eventual disposition.
The amount of the impairment loss to be recorded
is calculated by the excess of the carrying value
of the asset group over its fair value. Fair value is
determined mainly using a discounted cash flow
valuation method.
Goodwill and intangible assets
Goodwill is not material to Toyota’s consolidated
balance sheets.
Intangible assets consist mainly of software.
Intangible assets with a definite life are amortized
on a straight-line basis with estimated useful lives
mainly of 5 years. Intangible assets with an
indefinite life are tested for impairment whenever
events or circumstances indicate that a carrying
amount of an asset (asset group) may not be
recoverable.
An impairment loss would be recognized
when the carrying amount of an asset exceeds
the estimated undiscounted cash flows used in
determining the fair value of the asset. The amount
of the impairment loss to be recorded is generally
determined by the difference between the fair
value of the asset using a discounted cash flow
valuation method and the current book value.
Employee benefit obligations
Toyota has both defined benefit and defined
contribution plans
for employees’ retirement
benefits. Retirement benefit obligations are
measured by actuarial calculations in accordance
with U.S.GAAP. The funded status of the defined
benefit 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 Toyota’s commitment to a
plan of action. The cost of each environmental
liability is estimated by using current technology
available and various engineering, financial and
legal specialists within Toyota based on current
law. Such liabilities do not reflect any offset for
possible recoveries from insurance companies
and are not discounted. There were no material
changes in these liabilities for all periods presented.
Income taxes
liabilities
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
tax
consequences of temporary differences between
the carrying amounts and the tax bases of assets
and liabilities. Valuation allowances are recorded
to reduce deferred tax assets when it is more likely
than not that a tax benefit will not be realized.
the expected
future
for
Derivative financial instruments
Toyota employs derivative financial 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 fluctuations in interest rates and foreign
currency exchange rates. Toyota does not use
derivatives for speculation or trading purposes.
Changes in the fair value of derivatives are
recorded each period in current earnings or
through other comprehensive income, depending
on whether a derivative is designated as part of a
hedge
type of hedge
transaction. The ineffective portion of all hedges
is recognized currently in operations.
transaction and
the
Net income attributable to Toyota Motor
Corporation per share
Basic net income attributable to Toyota Motor
Corporation per common share is calculated by
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
TOYOTA ANNUAL REPORT 2011
78
Notes to Consolidated Financial Statements
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, and accounts
for 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 shareholders’
equity. Toyota’s 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
Toyota’s defined benefit pension plans.
Accounting changes
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 financial
assets, and requires additional disclosures about
transfers of financial assets. Toyota adopted this
guidance from the fiscal year ended March 31,
2011. The adoption of this guidance did not have
a material
impact on Toyota’s consolidated
financial 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. Toyota adopted this guidance from
the fiscal year ended March 31, 2011. The adoption
of this guidance did not have a material impact on
Toyota’s consolidated financial statements.
In July 2010, FASB issued updated disclosure
guidance on receivables. This guidance requires
additional disclosures about the credit quality of
financing receivables and the allowance for credit
losses. Toyota adopted this guidance from the
fiscal year ended March 31, 2011. The adoption of
this guidance did not have a material impact on
Toyota’s consolidated financial statements. For a
further discussion of additional disclosures by
adoption of this guidance, please see notes 7 and
11 to Toyota’s consolidated financial statements.
Recent pronouncements to be adopted in
future periods
In October 2009, FASB issued updated guidance
of accounting for and disclosure of Revenue
Recognition with Multiple Deliverables. This
guidance allows the use of estimated selling price
for determining the selling price of deliverables,
eliminates the residual method of allocation and
expands the disclosures related to a vendor’s
multiple-deliverable revenue arrangements. This
guidance is effective prospectively for revenue
arrangements entered into or materially modified
in fiscal year beginning on or after June 15, 2010.
Management does not expect this guidance to
have a material impact on Toyota’s consolidated
financial statements.
In April 2011, FASB issued updated guidance
to clarify the accounting for and disclosures about
troubled debt restructurings by creditors. This
guidance provides the criteria as to whether a
loan modification constitutes a troubled debt
restructuring and requires additional disclosures
about troubled debt restructurings. This guidance
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is effective for the interim period or the fiscal year
beginning on or after June 15, 2011, and shall be
applied retrospectively to the beginning of the
fiscal year of adoption. Management does not
expect this guidance to have a material impact on
Toyota’s consolidated financial statements.
Reclassifications
Certain prior year amounts have been reclassified
to conform to the presentations as of and for the
year ended March 31, 2011.
3
U.S. dollar amounts:
U.S. dollar amounts presented in the consolidated
financial 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 ¥83.15 = U.S. $1, the approxi-
mate current exchange rate at March 31, 2011,
was used for the translation of the accompanying
consolidated financial amounts of Toyota as of
and for the year ended March 31, 2011.
4
Supplemental cash flow information:
Cash payments for income taxes were ¥563,368
million, ¥(207,278) million and ¥211,487 million
($2,543 million) for the years ended March 31,
2009, 2010 and 2011, respectively. Interest
payments during the years ended March 31,
2009, 2010 and 2011 were ¥614,017 million,
¥445,049 million and ¥382,903 million ($4,605
million), respectively.
Capital lease obligations of ¥28,953 million,
¥3,400 million and ¥10,478 million ($126 million)
were incurred for the years ended March 31,
2009, 2010 and 2011, respectively.
5
Acquisitions and dispositions:
During the years ended March 31, 2009, 2010 and 2011, Toyota made several acquisitions and disposi-
tions, however the assets and liabilities acquired or transferred were not material.
TOYOTA ANNUAL REPORT 2011
79
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Notes to Consolidated Financial Statements
6
Marketable securities and other securities investments:
Marketable securities and other securities investments include government bonds and common stocks
for which the aggregate cost, gross unrealized gains and losses and fair value are as follows:
Yen in millions
March 31, 2010
Cost
Gross unrealized
gains
Gross unrealized
losses
Fair value
Available-for-sale
Government bonds
Common stocks
Other
Total
Securities not practicable to determine fair value
Common stocks
Other
Total
¥2,695,248
555,526
403,776
¥3,654,550
¥ 95,304
25,173
¥ 120,477
¥ 24,228
369,670
17,588
¥411,486
¥ 64,647
72,421
1
¥137,069
¥2,654,829
852,775
421,363
¥3,928,967
Available-for-sale
Government bonds
Common stocks
Other
Total
Yen in millions
March 31, 2011
Cost
Gross unrealized
gains
Gross unrealized
losses
Fair value
¥3,174,236
670,405
561,387
¥4,406,028
¥ 21,712
398,140
15,940
¥435,792
¥ 68,778
108,316
376
¥177,470
¥3,127,170
960,229
576,951
¥4,664,350
Securities not practicable to determine fair value
Common stocks
Other
Total
¥ 109,203
23,069
¥ 132,272
U.S. dollars in millions
March 31, 2011
Cost
Gross unrealized
gains
Gross unrealized
losses
Fair value
Available-for-sale
Government bonds
Common stocks
Other
Total
Securities not practicable to determine fair value
Common stocks
Other
Total
$38,175
8,063
6,751
$52,989
$ 1,313
278
$ 1,591
$ 261
4,788
192
$5,241
$ 827
1,303
4
$2,134
$37,609
11,548
6,939
$56,096
Government bonds include 76% of Japanese
government bonds, and 24% of U.S. and European
government bonds as of March 31, 2010, and
77% of Japanese government bonds, and 23% of
U.S. and European government bonds as of
March 31, 2011. Listed stocks on the Japanese
stock markets represent 88% and 86% of common
stocks which are included in available-for-sale as
of March 31, 2010 and 2011, respectively. “Other”
includes primarily commercial paper.
Unrealized losses continuing over a 12 month
period or more in the aggregate were not material
at March 31, 2010 and 2011.
As of March 31, 2010 and 2011, maturities of
in
government bonds and other
available-for-sale are mainly from 1 to 10 years.
included
Proceeds from sales of available-for-sale
securities were ¥800,422 million, ¥77,025 million
and ¥189,037 million ($2,273 million) for the years
ended March 31, 2009, 2010 and 2011,
respectively. On those sales, gross realized gains
were ¥35,694 million, ¥3,186 million and ¥8,974
million ($108 million) and gross realized losses
were ¥1,856 million, ¥7 million and ¥87 million ($1
million), respectively.
During the years ended March 31, 2009,
2010 and 2011, Toyota recognized impairment
losses on available-for-sale securities of ¥220,920
million, ¥2,486 million and ¥7,915 million ($95
(loss), net”
million), respectively, which are included in “Other
income
the accompanying
in
consolidated statements of income. Impairment
losses recognized during 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.
their
long-term
investment
In the ordinary course of business, Toyota
securities,
maintains
included in “Marketable securities and other
securities investments” and issued by a number
of non-public companies which are recorded at
cost, as
fair values were not readily
determinable. Management employs a systematic
methodology to assess the recoverability of such
investments by reviewing the financial viability of
the underlying companies and the prevailing
market conditions in which these companies
operate to determine if Toyota’s investment in
each individual company is impaired and whether
the impairment is other-than-temporary. Toyota
periodically performs this impairment test for
significant 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.
TOYOTA ANNUAL REPORT 2011
80
Notes to Consolidated Financial Statements
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 allowance for credit losses
Total finance receivables, net
Less - Current portion
Yen in millions
March 31,
2010
2011
¥ 7,162,082
¥ 7,128,453
1,232,508
2,051,301
1,123,188
1,990,557
10,445,891
10,242,198
109,747
(482,983)
104,391
(496,235)
(160,351)
(36,917)
(35,211)
(232,479)
9,840,176
(4,209,496)
(92,199)
(36,024)
(28,580)
(156,803)
9,693,551
(4,136,805)
U.S. dollars in millions
March 31,
2011
$ 85,730
13,508
23,939
123,177
1,256
(5,968)
(1,109)
(433)
(344)
(1,886)
116,579
(49,751)
Noncurrent finance receivables, net
¥ 5,630,680
¥ 5,556,746
$ 66,828
Finance 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% as of March 31, 2010, and in North
America 59.0%, in Japan 12.7%, in Europe 10.4%,
in Asia 5.8% and in Other 12.1% as of March 31,
2011.
The contractual maturities of retail receivables, the future minimum lease payments on finance leases
and wholesale and other dealer loans at March 31, 2011 are summarized as follows:
Yen in millions
U.S. dollars in millions
Years ending March 31,
Retail
Finance
leases
Wholesale and
other dealer
loans
Retail
2012
2013
2014
2015
2016
Thereafter
¥2,429,001
¥326,116
¥1,529,447
$29,212
1,758,024
1,343,998
911,785
444,633
241,012
216,387
165,018
62,632
28,095
6,623
106,809
153,470
52,361
59,945
88,525
21,143
16,164
10,966
5,347
2,898
Finance
leases
$3,922
2,602
1,985
753
338
80
¥7,128,453
¥804,871
¥1,990,557
$85,730
$9,680
Wholesale and
other dealer
loans
$18,394
1,284
1,846
630
721
1,064
$23,939
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Finance leases consist of the following:
Minimum lease payments
Estimated unguaranteed residual values
Deferred origination costs
Less - Unearned income
Less - Allowance for credit losses
Finance leases, net
Yen in millions
March 31,
2010
¥ 903,201
329,307
1,232,508
6,423
(121,664)
(36,917)
2011
¥ 804,871
318,317
1,123,188
5,406
(104,419)
(36,024)
U.S. dollars in millions
March 31,
2011
$ 9,680
3,828
13,508
65
(1,256)
(433)
¥1,080,350
¥ 988,151
$11,884
Toyota is exposed to credit risk on Toyota’s
finance receivables. Credit risk is the risk of loss
arising from the failure of customers or dealers to
meet the terms of their contracts with Toyota or
otherwise fail to perform as agreed. Toyota
estimates allowance for credit losses by variety of
credit-risk evaluation process to cover probable
and estimable losses above.
The table below shows the amount of the finance receivables segregated into aging categories
based on the number of days outstanding as of March 31, 2011:
Retail
Finance leases
Yen in millions
March 31, 2011
Wholesale
Real estate Working capital
Current
¥7,017,171
¥1,111,453
¥897,971
¥494,700
¥593,516
31-60 days past due
61-90 days past due
Over 90 days past due
72,082
15,466
23,734
5,968
1,283
4,484
2,260
355
74
404
34
621
44
0
578
Total
¥7,128,453
¥1,123,188
¥900,660
¥495,759
¥594,138
Current
31-60 days past due
61-90 days past due
Over 90 days past due
U.S. dollars in millions
March 31, 2011
Wholesale
Finance leases
Real estate Working capital
$13,367
$10,799
$5,950
$7,138
72
15
54
27
4
1
5
0
7
1
0
7
Retail
$84,392
867
186
285
Total
$85,730
$13,508
$10,831
$5,962
$7,146
TOYOTA ANNUAL REPORT 2011
81
Notes to Consolidated Financial Statements
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The tables below show the recorded investment for each credit quality of the finance receivable
within the wholesale and other dealer loan receivables portfolio segment in the United States and other
regions as of March 31, 2011:
United States
The wholesale and other dealer loan receivables portfolio segment in the United States is primarily
segregated into credit qualities below based on internal risk assessments by dealers.
Performing: Account not classified as either Credit Watch, At Risk or Default
Credit Watch: Account designated for elevated attention
At Risk: Account where there is a probability that default exists based on qualitative and quantitative
factors
Default: Account is not currently meeting contractual obligations or we have temporarily waived
certain contractual requirements
Performing
Credit Watch
At Risk
Default
Total
Performing
Credit Watch
At Risk
Default
Total
Yen in millions
March 31, 2011
Wholesale
¥504,960
58,106
6,494
803
Real estate
Working capital
Total
¥283,450
¥ 90,545
¥ 878,955
41,967
12,344
931
12,198
1,066
655
112,271
19,904
2,389
¥570,363
¥338,692
¥104,464
¥1,013,519
U.S. dollars in millions
March 31, 2011
Wholesale
Real estate
Working capital
$6,073
$3,409
$1,089
698
78
10
505
148
11
147
13
8
Total
$10,571
1,350
239
29
$6,859
$4,073
$1,257
$12,189
Other regions
The wholesale and other dealer loan receivables portfolio segment in other regions is primarily segregated
into credit qualities of “Performing” (Account not classified as Default) and “Default” (Account is not
currently meeting contractual obligations or we have temporarily waived certain contractual requirements)
below based on internal risk assessments by dealers.
Performing
Default
Total
Performing
Default
Total
Yen in millions
March 31, 2011
Wholesale
¥315,744
14,553
¥330,297
Real estate
Working capital
Total
¥151,020
6,047
¥157,067
¥485,974
3,700
¥489,674
¥952,738
24,300
¥977,038
U.S. dollars in millions
March 31, 2011
Wholesale
Real estate
Working capital
$3,797
175
$3,972
$1,816
73
$1,889
$5,845
44
$5,889
Total
$11,458
292
$11,750
The tables below summarize information about impaired finance receivables:
Impaired finance receivables with specific reserves
Impaired finance receivables without specific reserves
Total
Allowance for credit losses recorded for impaired finance receivables
Average impaired finance receivables
Interest recognized on impaired finance receivables
Yen in millions
March 31, 2010
Wholesale and other
dealer loans
¥37,273
1,582
¥38,855
¥14,000
42,581
464
TOYOTA ANNUAL REPORT 2011
82
Notes to Consolidated Financial Statements
Yen in millions
Wholesale
March 31, 2011
Real estate Working capital
Impaired finance receivables with specific reserves
¥ 7,192
¥18,173
Impaired finance receivables without specific reserves
Total
Allowance for credit losses recorded for impaired
finance receivables
Average impaired finance receivables
Interest recognized on impaired finance receivables
12,745
¥19,937
—
¥18,173
¥ 896
¥ 6,553
16,231
171
19,545
514
¥4,841
272
¥5,113
¥3,436
4,979
86
Total
¥30,206
13,017
¥43,223
¥10,885
40,755
771
U.S. dollars in millions
Wholesale
March 31, 2011
Real estate Working capital
Total
Impaired finance receivables with specific reserves
Impaired finance receivables without specific reserves
Total
Allowance for credit losses recorded for impaired
finance receivables
Average impaired finance receivables
Interest recognized on impaired finance receivables
$ 86
154
$240
$219
—
$219
$ 11
$ 79
195
2
235
6
$58
3
$61
$41
60
1
$363
157
$520
$131
490
9
The recorded investment in impaired finance receivables is equal to the unpaid principal balance.
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.
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Inventories:
Inventories consist of the following:
Finished goods
Raw materials
Work in process
Supplies and other
Total
Yen in millions
March 31,
2010
¥ 885,005
265,493
199,267
72,608
¥1,422,373
2011
¥ 715,272
299,755
218,335
70,880
¥1,304,242
U.S. dollars in millions
March 31,
2011
$ 8,602
3,605
2,626
852
$15,685
10
Vehicles and equipment on operating leases:
Vehicles and equipment on operating leases consist of the following:
Vehicles
Equipment
Less - Accumulated depreciation
Yen in millions
March 31,
2010
2011
¥2,516,948
¥2,404,032
96,300
2,613,248
(791,169)
87,914
2,491,946
(662,255)
Vehicles and equipment on operating leases, net
¥1,822,079
¥1,829,691
U.S. dollars in millions
March 31,
2011
$28,912
1,057
29,969
(7,964)
$22,005
Rental income from vehicles and equipment on operating leases was ¥560,251 million, ¥496,729 million
and ¥475,472 million ($5,718 million) for the years ended March 31, 2009, 2010 and 2011, respectively.
Future minimum rentals from vehicles and equipment on operating leases are due in installments as follows:
Years ending March 31,
Yen in millions
U.S. dollars in millions
2012
2013
2014
2015
2016
Thereafter
Total minimum future rentals
¥375,712
256,231
110,583
26,645
6,547
5,487
$4,518
3,082
1,330
320
79
66
¥781,205
$9,395
The future minimum rentals as shown above should not be considered indicative of future cash collections.
TOYOTA ANNUAL REPORT 2011
83
Notes to Consolidated Financial Statements
11
Allowance for doubtful accounts and credit losses:
An analysis of activity within the allowance for doubtful accounts relating to trade accounts and notes
receivable for the years ended March 31, 2009, 2010 and 2011 is as follows:
Yen in millions
For the years ended March 31,
2010
2011
U.S. dollars in millions
For the year ended
March 31,
2011
Allowance for doubtful accounts at beginning of year
Provision for doubtful accounts, net of reversal
Write-offs
Other
Allowance for doubtful accounts at end of year
2009
¥52,063
(1,663)
(1,695)
(699)
¥48,006
¥48,006
¥46,706
1,905
(1,357)
(1,848)
1,806
(2,690)
(1,775)
¥46,706
¥44,047
$562
22
(33)
(21)
$530
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, 2009, 2010 and 2011.
A portion of the allowance for doubtful accounts
balance at March 31, 2010 and 2011 totaling
¥32,971 million and ¥32,191 million ($387 million),
respectively, is attributed to certain non-current
receivable balances which are reported as other
assets in the consolidated balance sheets.
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Yen in millions
U.S. dollars in millions
For the year ended March 31, 2011
For the year ended March 31, 2011
Finance
leases
Wholesale and
other dealer
loans
Retail
Finance
leases
Wholesale and
other dealer
loans
Retail
Allowance for credit losses at
beginning of year
Provision for credit losses
Charge-offs
Recoveries
Other
Allowance for credit losses at
end of year
¥160,350
¥36,918
¥35,211
$1,929
$444
$423
(2,660)
(68,122)
14,159
6,023
(2,820)
288
2,098
(5,885)
636
(11,528)
(4,385)
(3,480)
(32)
(819)
170
(139)
73
(34)
3
(53)
26
(71)
8
(42)
¥ 92,199
¥36,024
¥28,580
$1,109
$433
$344
The allowance for credit losses and the
impaired finance receivables of the wholesale
and other dealer loan receivables which are
¥10,885 million ($131 million) and ¥30,206 million
respectively, are
($363 million),
individually
evaluated and recorded, and others are collec-
tively evaluated.
12
Affiliated companies and variable interest entities:
An analysis of the allowance for credit losses relating to finance receivables and vehicles and
Investments in and transactions with affiliated companies
equipment on operating leases for the years ended March 31, 2009, 2010 and 2011 is as follows:
Summarized financial information for affiliated companies accounted for by the equity method is shown
below:
Yen in millions
For the years ended March 31,
2010
2009
2011
U.S. dollars in millions
For the year ended
March 31,
2011
Allowance for credit losses at beginning of year
¥ 117,706
¥ 238,932
¥ 232,479
$ 2,796
Provision for credit losses
Charge-offs
Recoveries
Other
259,096
98,870
(128,240)
(118,333)
11,447
(21,077)
16,137
(3,127)
2,334
(86,115)
18,268
649
28
(1,036)
220
8
Allowance for credit losses at end of year
¥ 238,932
¥ 232,479
¥ 167,615
$ 2,016
The other amount primarily includes the impact of currency translation adjustments for the years
ended March 31, 2009, 2010 and 2011.
An analysis of the allowance for credit losses above relating to retail receivables portfolio segment,
finance lease receivables portfolio segment and wholesale and other dealer loan receivables portfolio
segment for the year ended March 31, 2011 is as follows:
Current assets
Noncurrent assets
Total assets
Current liabilities
Long-term liabilities and noncontrolling interest
Affiliated companies accounted for by the equity method
shareholders’ equity
Total liabilities and shareholders’ equity
Toyota’s share of affiliated companies accounted for by the
equity method shareholders’ equity
Number of affiliated companies accounted for by the equity
method at end of period
Yen in millions
March 31,
2010
2011
U.S. dollars in millions
March 31,
2011
¥ 8,034,546
¥ 7,973,712
$ 95,895
9,300,307
6,815,361
¥17,334,853
¥14,789,073
¥ 5,056,178
¥ 5,141,461
5,981,054
3,726,952
81,965
$177,860
$ 61,833
44,822
6,297,621
5,920,660
71,205
¥17,334,853
¥14,789,073
$177,860
¥ 1,867,440
¥ 1,817,988
$ 21,864
56
56
TOYOTA ANNUAL REPORT 2011
84
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Account balances and transactions with affiliated companies are presented below:
Trade accounts and notes receivable, and other receivables
Accounts payable and other payables
Yen in millions
March 31,
2010
¥274,189
597,796
2011
¥204,447
352,538
U.S. dollars in millions
March 31,
2011
$2,459
4,240
Notes to Consolidated Financial Statements
Yen in millions
Net revenues
Gross profit
¥23,149,968
¥20,599,586
¥21,874,143
¥ 2,034,617
¥ 2,269,109
¥ 2,342,706
For the years ended March 31,
2010
2009
2011
U.S. dollars in millions
For the year
ended March 31,
2011
$263,068
$ 28,174
Net income attributable to affiliated companies
accounted for by the equity method
¥ 13,838
¥ 317,017
¥ 641,771
$ 7,718
Entities comprising a significant portion of Toyota’s investment in affiliated companies and percentage
of ownership are presented below:
Name of affiliated companies
Denso Corporation
Aisin Seiki Co., Ltd
Toyota Industries Corporation
Toyota Tsusho Corporation
Toyoda Gosei Co., Ltd
Percentage of ownership
Net revenues
Purchases
24.7%
23.1%
24.8%
21.8%
43.1%
from
affiliated
Dividends
companies
accounted for by the equity method for the years
ended March 31, 2009, 2010 and 2011 were
¥114,409 million, ¥82,149 million and ¥103,169
million ($1,241 million), respectively.
Certain affiliated companies accounted for
by the equity method with carrying amounts of
¥1,439,090 million and ¥1,384,159 million ($16,647
million) at March 31, 2010 and 2011, respectively,
were quoted on various established markets at an
aggregate value of ¥1,711,957 million and
¥1,475,352 million ($17,743 million), respectively.
For the year ended March 31, 2010, Toyota
recognized an impairment loss on a certain
investment in affiliated company accounted for
by the equity method of ¥63,575 million, which is
included in “Equity in earnings of affiliated
companies” in the accompanying consolidated
statements of income. Toyota evaluated its invest-
ments in affiliated companies, considering the
length of time and the extent to which the quoted
market prices have been less than the carrying
amounts, the financial condition and near-term
prospects of the affiliated companies and Toyota’s
ability and intent to retain those investments in the
companies for a period of time. Toyota did not
recognize any impairment loss for the year ended
March 31, 2011.
Toyota does not have any significant related
party transactions other than transactions with
affiliated companies in the ordinary course of
business.
Variable Interest Entities
into securitization
Toyota enters
transactions
using special-purpose entities, that are consid-
ered variable interest entities (“VIEs”). Although
the finance receivables related to securitization
transactions have been legally sold to the VIEs,
Toyota has both the power to direct the activities
of the VIEs that most significantly impact the VIEs’
economic performance and the obligation to
Yen in millions
For the years ended March 31,
2010
2011
U.S. dollars in millions
For the year
ended March 31,
2011
¥1,600,365
¥1,612,397
3,943,648
3,655,185
$19,391
43,959
2009
¥1,585,814
3,918,717
absorb losses of the VIEs or the right to receive
benefits from the VIEs that could potentially be
significant to the VIEs. As a result, Toyota is
considered the primary beneficiary of the VIEs
and therefore consolidates the VIEs.
The consolidated securitization VIEs have
¥1,111,212 million ($13,364 million) in retail finance
receivables, ¥64,502 million ($776 million) in
restricted cash and ¥941,613 million ($11,324
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 securi-
tization transactions.
As for VIEs other than those specified above,
neither the aggregate size of these VIEs nor
Toyota’s involvements in these VIEs are material
to Toyota’s consolidated financial statements.
TOYOTA ANNUAL REPORT 2011
85
Notes to Consolidated Financial Statements
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13
Short-term borrowings and long-term debt:
Short-term borrowings at March 31, 2010 and 2011 consist of the following:
Loans, principally from banks, with a weighted-average interest at
March 31, 2010 and March 31, 2011 of 1.55% and of 1.57% per
annum, respectively
Commercial paper with a weighted-average interest at March 31, 2010
and March 31, 2011 of 0.44% and of 0.67% per annum, respectively
Yen in millions
March 31,
2010
2011
U.S. dollars in millions
March 31,
2011
¥ 804,066
¥1,140,066
$13,711
2,475,607
2,038,943
¥3,279,673
¥3,179,009
24,521
$38,232
As of March 31, 2011, “Loans, principally from
banks” amount includes secured loans by finance
receivables securitization of ¥335,539 million
($4,035 million).
As of March 31, 2011, Toyota has unused
short-term lines of credit amounting to ¥1,954,330
million ($23,504 million) of which ¥464,564 million
($5,587 million) related to commercial paper
programs. Under these programs, Toyota is
authorized to obtain short-term financing at
prevailing interest rates for periods not in excess
of 360 days.
Long-term debt at March 31, 2010 and 2011 comprises the following:
Unsecured loans, representing obligations principally to banks, due 2010 to
2029 in 2010 and due 2011 to 2029 in 2011 with interest ranging from 0.00%
to 29.25% per annum in 2010 and from 0.00% to 29.00% per annum in 2011
Secured loans, representing obligations principally to finance receivables securitization
due 2010 to 2019 in 2010 and due 2011 to 2050 in 2011 with interest ranging from
0.49% to 6.65% per annum in 2010 and from 0.37% to 5.35% per annum in 2011
Medium-term notes of consolidated subsidiaries, due 2010 to 2047 in 2010 and
due 2011 to 2047 in 2011 with interest ranging from 0.04% to 15.25% per
annum in 2010 and from 0.01% to 15.25% per annum in 2011
Unsecured notes of parent company, due 2010 to 2019 in 2010 and due 2012
to 2019 in 2011 with interest ranging from 1.07% to 3.00% per annum in 2010
and from 1.07% to 3.00% per annum in 2011
Unsecured notes of consolidated subsidiaries, due 2010 to 2031 in 2010 and
due 2011 to 2031 in 2011 with interest ranging from 0.25% to 17.03% per
annum in 2010 and from 0.27% to 15.48% per annum in 2011
Long-term capital lease obligations, due 2010 to 2028 in 2010 and due 2011 to
2028 in 2011 with interest ranging from 0.43% to 14.40% per annum in 2010
and from 0.38% to 14.40% per annum in 2011
Less - Current portion due within one year
Yen in millions
March 31,
2010
2011
U.S. dollars in millions
March 31,
2011
¥ 2,942,012
¥ 3,386,854
$ 40,732
381,307
619,380
7,449
3,814,439
3,314,589
39,863
580,000
530,000
6,374
1,473,732
1,349,307
16,227
42,243
21,917
9,233,733
9,222,047
(2,218,324)
(2,772,827)
263
110,908
(33,347)
¥ 7,015,409
¥ 6,449,220
$ 77,561
As of March 31, 2011, approximately 31%,
24%, 12% and 33% of long-term debt are denomi-
nated in Japanese yen, U.S. dollars, euros, and
other currencies, respectively.
As of March 31, 2011, property, plant and
equipment with a book value of ¥57,237 million
($688 million) and in addition, other assets
aggregating ¥1,128,957 million ($13,577 million)
were pledged as collateral mainly for certain debt
obligations of subsidiaries. These other assets
principally consist of
finance
receivables.
securitized
The aggregate amounts of annual maturities of long-term debt during the next five years are as follows:
Years ending March 31,
Yen in millions
U.S. dollars in millions
2012
2013
2014
2015
2016
¥2,772,827
1,834,556
1,522,659
900,120
1,106,492
$33,347
22,063
18,312
10,825
13,307
Standard agreements with certain banks in
Japan include provisions that collateral (including
sums on deposit with such banks) or guarantees
will be furnished upon the banks’ request and that
any collateral
to such
agreements or otherwise, will be applicable to all
present or future indebtedness to such banks.
furnished, pursuant
During the year ended March 31, 2011, Toyota
has not received any significant such requests
from these banks.
As of March 31, 2011, Toyota has unused
long-term lines of credit amounting to ¥8,073,898
million ($97,100 million).
14
Product warranties and recalls and other safety measures:
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.
In addition to product warranties, 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 for costs
of recalls and other safety measures at the time of
vehicle sale based on the amount estimated from
historical experience.
into a single
Liabilities for product warranties and liabilities
for recalls and other safety measures have been
combined
table showing an
aggregate liability for quality assurances due to
the fact that both are liabilities for costs to repair
or replace defects of vehicles and the amounts
incurred to repair or replace defects of vehicles
may affect the amounts incurred for product
warranties and vice versa.
TOYOTA ANNUAL REPORT 2011
86
Notes to Consolidated Financial Statements
The net changes in liabilities for quality assurances above for the years ended March 31, 2009, 2010
16
Income taxes:
and 2011 consist of the following:
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Yen in millions
For the years ended March 31,
2010
2009
2011
U.S. dollars in millions
For the year
ended March 31,
2011
Liabilities for quality assurances at beginning of year
¥ 499,987
¥ 568,834
¥ 680,408
$ 8,183
Payments made during year
Provision for quality assurances
Changes relating to pre-existing quality assurances
Other
(407,675)
(425,976)
526,503
(17,869)
(32,112)
558,190
(21,606)
966
(476,771)
588,224
(1,701)
(25,791)
(5,734)
7,074
(20)
(310)
Liabilities for quality assurances at end of year
¥ 568,834
¥ 680,408
¥ 764,369
$ 9,193
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.
The components of income (loss) before income taxes comprise the following:
Yen in millions
For the years ended March 31,
2010
2009
2011
Income (loss) before income taxes:
Parent company and domestic subsidiaries
¥(224,965)
¥(114,569)
¥(278,229)
Foreign subsidiaries
(335,416)
406,037
841,519
¥(560,381)
¥ 291,468
¥ 563,290
The provision for income taxes consists of the following:
Yen in millions
The table below shows the net changes in liabilities for recalls and other safety measures which are
comprised in liabilities for quality assurances above for the years ended March 31, 2009, 2010 and 2011.
Current income tax expense:
For the years ended March 31,
2010
2009
2011
Yen in millions
For the years ended March 31,
2010
2009
2011
Parent company and domestic subsidiaries
¥ 65,684
¥ 65,971
¥ 85,290
U.S. dollars in millions
For the year
ended March 31,
2011
Foreign subsidiaries
Total current
Deferred income tax expense (benefit):
72,864
138,548
1,156
67,127
141,821
227,111
Parent company and domestic subsidiaries
(26,472)
(126,716)
Liabilities for recalls and other safety measures
at beginning of year
Payments made during year
¥ 53,603
(69,812)
Provision for recalls and other safety measures
159,899
Other
(4,113)
¥139,577
¥ 301,422
$ 3,625
Foreign subsidiaries
(89,796)
256,981*
(5,340)
(263,096)
356,749
(5,576)
(3,164)
4,290
(67)
Total deferred
Total provision
U.S. dollars in millions
For the year
ended March 31,
2011
$(3,346)
10,120
$ 6,774
U.S. dollars in millions
For the year
ended March 31,
2011
$1,026
1,705
2,731
(532)
1,563
1,031
(168,518)
(194,990)
152,253
25,537
(44,268)
129,978
85,710
¥ (56,442)
¥ 92,664
¥312,821
$3,762
Liabilities for recalls and other safety measures
at end of year
¥139,577
¥301,422
¥ 389,499
$ 4,684
* Toyota has employed an estimation model to accrue of expenses for future recalls and other safety measures at the time of vehicle sale
based on the amount estimated from historical experience from the fourth quarter of the fiscal year ended March 31, 2010. This change has
resulted in an increase in provision for recalls and other safety measures in this table by ¥105,698 million.
Toyota is subject to a number of different
income taxes which, in the aggregate, indicate a
statutory rate in Japan of approximately 40.2% for
the years ended March 31, 2009, 2010 and 2011.
Such rate was also used to calculate the tax
effects of temporary differences, which are
expected to be realized in the future years.
15
Other payables:
Other payables are mainly related to purchases of property, plant and equipment and non-manufacturing
purchases.
TOYOTA ANNUAL REPORT 2011
87
Notes to Consolidated Financial Statements
Reconciliation of the differences between the statutory tax rate and the effective 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 affiliates
accounted for by the equity method
Valuation allowance
Tax credits
The difference between the statutory tax rate in Japan and that
of foreign subsidiaries
Other
Effective income tax rate
For the years ended March 31,
2010
40.2％
2009
40.2％
2011
40.2％
(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％
2.2
4.8
12.6
8.1
(2.6)
(12.1)
2.3
55.5％
Significant components of deferred tax assets and liabilities are as follows:
Deferred tax assets
Accrued pension and severance costs
Accrued expenses and liabilities for quality assurances
Other accrued employees’ compensation
Operating loss carryforwards for tax purposes
Tax credit carryforwards
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 affiliates accounted for by the equity method
Basis difference of acquired assets
Lease transactions
Gain on securities contribution to employee retirement benefit trust
Other
Gross deferred tax liabilities
Net deferred tax liability
Yen in millions
U.S. dollars in millions
March 31,
2010
2011
¥ 210,268
277,696
106,404
146,114
73,061
188,745
474,380
1,476,668
(239,269)
¥ 1,237,399
(147,494)
(12,797)
(575,929)
(38,977)
(457,316)
(66,523)
(6,141)
(1,305,177)
¥ (67,778)
¥ 226,093
395,513
103,020
296,731
127,289
176,229
277,449
1,602,324
(280,685)
¥ 1,321,639
(146,874)
(26,783)
(578,756)
(38,351)
(537,174)
(66,523)
(27,491)
(1,421,952)
¥ (100,313)
March 31,
2011
$ 2,719
4,757
1,239
3,568
1,531
2,119
3,337
19,270
(3,375)
$ 15,895
(1,766)
(322)
(6,961)
(461)
(6,460)
(800)
(331)
(17,101)
$ (1,206)
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The valuation allowance mainly relates to
deferred tax assets of the consolidated subsid-
iaries 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, 2009, 2010 and 2011 consist of the following:
Valuation allowance at beginning of year
Additions
Deductions
Other
Yen in millions
For the years ended March 31,
2010
2011
U.S. dollars in millions
For the year
ended March 31,
2011
¥208,627
¥239,269
$2,877
46,704
(14,066)
(1,996)
55,791
(10,077)
(4,298)
671
(121)
(52)
2009
¥ 82,191
145,707
(3,511)
(15,760)
Valuation allowance at end of year
¥208,627
¥239,269
¥280,685
$3,375
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, 2009, 2010 and 2011. The
factors used to assess the likelihood of realization
of the deferred tax assets are the future reversal
of existing taxable temporary differences, the
future taxable income and available tax planning
strategies that are prudent and feasible. All
available evidence, both positive and negative, is
considered to determine whether, based on the
weight of that evidence, a valuation allowance is
needed. Toyota believes that it is more likely than
not that the net deferred tax assets will be realized
through future taxable income. Failure to achieve
the forecasted taxable income, however, could
affect the realization of deferred tax assets.
The deferred tax assets and liabilities that comprise the net deferred tax liability are included in the
consolidated balance sheets as follows:
Deferred tax assets
Deferred income taxes (Current assets)
Investments and other assets - other
Deferred tax liabilities
Other current liabilities
Deferred income taxes (Long-term liabilities)
Net deferred tax liability
Yen in millions
U.S. dollars in millions
March 31,
2010
2011
March 31,
2011
¥ 632,164
¥ 605,884
122,617
118,849
$ 7,287
1,429
(9,338)
(813,221)
(14,919)
(810,127)
(179)
(9,743)
¥ (67,778)
¥(100,313)
$(1,206)
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
TOYOTA ANNUAL REPORT 2011
88
Notes to Consolidated Financial Statements
provision for income taxes on those undistributed
earnings aggregating ¥2,709,626 million ($32,587
million) as of March 31, 2011. Toyota estimates an
additional tax provision of ¥100,957 million ($1,214
million) would be required if the full amount of
those undistributed earnings were remitted.
Operating loss carryforwards for tax purposes
as of March 31, 2011 were approximately ¥894,587
million ($10,759 million) and are available as an
offset against future taxable income. The majority
of these carryforwards expire in years 2012 to
2030. Tax credit carryforwards as of March 31,
2011 were ¥127,289 million ($1,531 million) and
the majority of these carryforwards expire in years
2012 to 2014.
A summary of the gross unrecognized tax benefits changes for the years ended March 31, 2009,
2010 and 2011 is as follows:
Yen in millions
For the years ended March 31,
2010
2009
2011
U.S. dollars in millions
For the year
ended March 31,
2011
Balance at beginning of year
¥ 37,722
¥ 46,803
¥ 23,965
$ 288
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 settlements
Other
858
35,464
(24,061)
(114)
(128)
(2,938)
2,702
6,750
(2,802)
(106)
(27,409)
(1,973)
213
12,564
(16,133)
—
(2,794)
(2,362)
3
151
(194)
—
(34)
(28)
Balance at end of year
¥ 46,803
¥ 23,965
¥ 15,453
$ 186
The amount of unrecognized tax benefits
that, if recognized, would affect the effective tax
rate was not material at March 31, 2009, 2010 and
2011, respectively. Toyota does not believe it is
reasonably possible that the total amounts of
unrecognized tax benefits will significantly increase
or decrease within the next twelve months.
Interest and penalties related to income tax
liabilities are included in “Other income (loss),
net”. The amounts of interest and penalties
accrued as of and recognized for the years ended
March 31, 2009, 2010 and 2011, respectively,
were not material.
to
Toyota
income
remains subject
tax
examination for the tax returns related to the years
beginning on and after January 1, 2004 and
2000, with various tax jurisdictions in Japan and
foreign countries, respectively.
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17
Shareholders’ equity:
Changes in the number of shares of common stock issued have resulted from the following:
Common stock issued
Balance at beginning of year
Issuance during the year
Purchase and retirement
Balance at end of year
The Corporation Act provides that an amount
equal to 10% of distributions from surplus paid by
the parent company and its Japanese subsid-
iaries be appropriated as a capital reserve or a
retained earnings reserve. No further appropria-
tions 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, 2010 and 2011
was ¥168,680 million and ¥171,062 million ($2,057
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 profit available for dividend.
The amounts of statutory retained earnings of
for dividend
the parent company available
payments to shareholders were ¥5,478,747 million
and ¥5,389,432 million ($64,816 million) as of
In
March 31, 2010 and 2011, respectively.
accordance with customary practice in Japan, the
distributions from surplus are not accrued in the
financial statements for the corresponding period,
but are recorded in the subsequent accounting
period after shareholders’ approval has been
obtained. Retained earnings at March 31, 2011
For the years ended March 31,
2010
2009
2011
3,447,997,492
3,447,997,492
3,447,997,492
―
―
―
―
3,447,997,492
―
3,447,997,492
―
3,447,997,492
include amounts representing year-end cash
dividends of ¥94,071 million ($1,131 million), ¥30
($0.36) per share, which were approved at the
Ordinary General Shareholders’ Meeting, held on
June 17, 2011.
Retained earnings at March 31, 2011 include
¥1,401,985 million ($16,861 million) relating to
equity in undistributed earnings of companies
accounted for by the equity method.
On June 22, 2007, at the Ordinary General
Shareholders’ 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 retire-
ment, in accordance with the Corporation Act
TOYOTA ANNUAL REPORT 2011
89
Notes to Consolidated Financial Statements
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
Shareholders’ 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 Corpora-
tion shareholders’ equity at March 31, 2010 and 2011 and the related changes, net of taxes for the years
ended March 31, 2009, 2010 and 2011 consist of the following:
Yen in millions
Foreign currency
translation
adjustments
Unrealized gains on
securities
Pension liability
adjustments
Accumulated other
comprehensive
income (loss)
Balances at March 31, 2008
¥ (501,367)
¥ 310,979
¥ (50,817)
¥ (241,205)
Other comprehensive income (loss)
(381,303)
Balances at March 31, 2009
Other comprehensive income
Balances at March 31, 2010
Other comprehensive income (loss)
(882,670)
9,894
(872,776)
(287,613)
(293,101)
17,878
176,407
194,285
(26,058)
(192,172)
(242,989)
74,645
(168,344)
15,785
(866,576)
(1,107,781)
260,946
(846,835)
(297,886)
Balances at March 31, 2011
¥(1,160,389)
¥ 168,227
¥(152,559)
¥(1,144,721)
U.S. dollars in millions
Foreign currency
translation
adjustments
Unrealized gains on
securities
Pension liability
adjustments
Accumulated other
comprehensive
income (loss)
Balances at March 31, 2010
Other comprehensive income (loss)
Balances at March 31, 2011
$(10,496)
(3,459)
$(13,955)
$2,337
(314)
$2,023
$(2,025)
190
$(1,835)
$(10,184)
(3,583)
$(13,767)
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Tax effects allocated to each component of other comprehensive income (loss) for the years ended
March 31, 2009, 2010 and 2011 are as follows:
Yen in millions
Pre-tax amount
Tax amount
Net-of-tax amount
For the year ended March 31, 2009
Foreign currency translation adjustments
¥ (391,873)
¥ 10,570
¥(381,303)
Unrealized losses on securities:
Unrealized net holding losses arising for the year
Less: reclassification adjustments for losses included in
net loss attributable to Toyota Motor Corporation
Pension liability adjustments
(677,710)
255,890
(421,820)
215,249
(319,613)
(86,530)
127,441
128,719
(192,172)
Other comprehensive income (loss)
¥(1,173,947)
¥ 307,371
¥(866,576)
For the year ended March 31, 2010
Foreign currency translation adjustments
¥ 10,809
¥ (915)
¥ 9,894
Unrealized gains on securities:
Unrealized net holding gains arising for the year
Less: reclassification adjustments for losses included in
net income attributable to Toyota Motor Corporation
Pension liability adjustments
277,838
(102,538)
175,300
1,852
124,526
(745)
(49,881)
1,107
74,645
Other comprehensive income
¥ 415,025
¥(154,079)
¥ 260,946
For the year ended March 31, 2011
Foreign currency translation adjustments
¥ (294,279)
¥ 6,666
¥(287,613)
Unrealized losses on securities:
Unrealized net holding losses arising for the year
Less: reclassification adjustments for gains included in
net income attributable to Toyota Motor Corporation
Pension liability adjustments
(31,899)
9,643
(22,256)
(6,358)
26,681
2,556
(10,896)
(3,802)
15,785
Other comprehensive income (loss)
¥ (305,855)
¥ 7,969
¥(297,886)
U.S. dollars in millions
Pre-tax amount
Tax amount
Net-of-tax amount
For the year ended March 31, 2011
Foreign currency translation adjustments
$(3,539)
$ 80
$(3,459)
Unrealized losses on securities:
Unrealized net holding losses arising for the year
Less: reclassification adjustments for gains included in
net income attributable to Toyota Motor Corporation
Pension liability adjustments
Other comprehensive income (loss)
(384)
(77)
321
$(3,679)
116
31
(131)
$ 96
(268)
(46)
190
$(3,583)
TOYOTA ANNUAL REPORT 2011
90
Notes to Consolidated Financial Statements
18
Stock-based compensation:
In June 1997, the parent company’s 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 until
June 2010, since the plans’ inception, the
shareholders have approved the authorization for
the grant of options for the purchase of Toyota’s
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 Toyota’s common stock
on the date of grant. These options generally vest
2 years from the date of grant.
Dividend rate
Risk-free interest rate
Expected volatility
Expected holding period (years)
For the years ended March 31, 2009, 2010
and 2011, Toyota
recognized stock-based
compensation expenses for stock options of
¥3,015 million, ¥2,446 million and ¥2,522 million
($30 million) as selling, general and administrative
expenses.
The weighted-average grant-date fair value of
options granted during the years ended March 31,
2009, 2010 and 2011 was ¥635, ¥803 and ¥724
($9), respectively per share. The fair value of
options granted is amortized over the option
vesting period in determining net income attribut-
able
the
to Toyota Motor Corporation
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
2009
3.0%
1.1%
23%
5.0
2010
2.4%
0.7%
30%
5.0
2011
1.5%
0.3%
32%
5.0
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The following table summarizes Toyota’s stock option activity:
Options outstanding at March 31, 2008
Granted
Exercised
Canceled
Number of
shares
8,341,600
3,494,000
(119,900)
(375,000)
Options outstanding at March 31, 2009
11,340,700
Granted
Exercised
Canceled
3,492,000
(157,800)
(958,200)
Options outstanding at March 31, 2010
13,716,700
Granted
Exercised
Canceled
3,435,000
—
(1,364,900)
Options outstanding at March 31, 2011
15,786,800
Options exercisable at March 31, 2009
Options exercisable at March 31, 2010
Options exercisable at March 31, 2011
4,971,700
7,515,700
9,347,800
Yen
Yen in millions
Weighted-average
exercise
price
Weighted-
average remaining
contractual life in
years
¥6,038
5.71
Aggregate
intrinsic
value
¥1,753
4,726
3,626
6,889
5,631
4,193
3,116
4,646
5,363
3,183
—
4,759
¥4,941
¥5,302
¥6,132
¥5,821
5.51
¥ 1
5.23
¥ —
5.04
3.76
3.86
3.79
¥ 565
¥ 1
¥ —
¥ —
The total intrinsic value of options exercised for
the years ended March 31, 2009 and 2010 was ¥97
million and ¥113 million, respectively. No options
were exercised for the year ended March 31, 2011.
As of March 31, 2011, there were unrecog-
nized compensation expenses of ¥1,693 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, 2009 and
2010 was ¥435 million and ¥492 million, respec-
tively. No cash was received from the exercise of
stock options for the year ended March 31, 2011.
The following table summarizes information for options outstanding and options exercisable at
March 31, 2011:
Outstanding
Exercisable
Exercise
price range
Yen
Number of
shares
Weighted-average
exercise price
Yen
Dollars
Weighted-average
remaining life
Years
Number of
shares
Weighted-average
exercise price
Yen
Dollars
¥3,183-6,000
10,508,800
¥4,030
6,001-7,278
5,278,000
3,183-7,278
15,786,800
6,754
4,941
$48
81
59
5.63
3.87
5.04
4,069,800
¥4,611
5,278,000
9,347,800
6,754
5,821
$55
81
70
TOYOTA ANNUAL REPORT 2011
91
Notes to Consolidated Financial Statements
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institutions
in accordance with
The parent company and most subsidiaries in
Japan have contributory funded defined benefit
pension plans, which are pursuant to the Corporate
Defined Benefit Pension Plan Law (CDBPPL). The
contributions to the plans are funded with several
financial
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 substan-
tially all of their employees under which the cost of
benefits are currently invested or accrued. The
benefits for these plans are based primarily on
lengths of service and current rates of pay.
Toyota uses a March 31 measurement date
for its benefit plans.
19
Employee benefit plans:
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 circum-
stances, the minimum payment prior to retirement
age is an amount based on voluntary retirement.
Employees receive additional benefits on involun-
tary retirement, including retirement at the age
limit.
Effective October 1, 2004, the parent company
amended its retirement plan to introduce a “point”
based retirement benefit plan. Under the new
plan, employees are entitled to lump-sum or
pension payments determined based on accumu-
lated “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 reflecting an adjust-
ment rate applied to represent voluntary retirement.
Employees receive additional benefits upon
involuntary retirement, including retirement at the
age limit.
Effective October 1, 2005, the parent company
partly amended its retirement plan and introduced
the quasi cash-balance plan under which benefits
are determined based on the variable-interest
crediting rate rather than the fixed-interest crediting
rate as was in the pre-amended plan.
Information regarding Toyota’s defined benefit plans is as follows:
Change in benefit obligation
Benefit obligation at beginning of year
¥1,632,779
¥1,726,747
$20,767
Yen in millions
March 31,
2010
2011
U.S. dollars in millions
March 31,
2011
Service cost
Interest cost
Plan participants’ contributions
Plan amendments
Net actuarial loss
Acquisition and other
Benefits paid
75,558
50,559
657
(3,080)
56,843
(2,829)
(83,740)
82,422
52,502
1,046
(1,429)
3,830
(57,928)
(78,012)
991
631
13
(17)
46
(697)
(938)
Benefit obligation at end of year
1,726,747
1,729,178
20,796
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Acquisition and other
Employer contributions
Plan participants’ contributions
Benefits paid
1,179,051
14,180
979,012
171,043
158
111,815
763
24,216
(39,374)
96,458
1,046
(83,740)
(78,012)
291
(474)
1,160
13
(938)
Fair value of plan assets at end of year
Funded status
1,179,051
1,183,385
¥ 547,696
¥ 545,793
14,232
$ 6,564
Amounts recognized in the consolidated balance sheet as of March 31, 2010 and 2011 are comprised
of the following:
Accrued expenses (Accrued pension and severance costs)
¥ 28,573
¥ 24,677
Accrued pension and severance costs
678,677
Investments and other assets - other (Prepaid pension and severance costs)
(159,554)
668,022
(146,906)
Yen in millions
March 31,
2010
2011
U.S. dollars in millions
March 31,
2011
$ 297
8,034
(1,767)
Net amount recognized
¥ 547,696
¥ 545,793
$ 6,564
TOYOTA ANNUAL REPORT 2011
92
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Amounts recognized in accumulated other comprehensive income (loss) as of March 31, 2010 and
2011 are comprised of the following:
Other changes in plan assets and benefit obligations recognized in other comprehensive income
(loss) are as follows:
Yen in millions
For the years ended March 31,
2010
2009
2011
U.S. dollars in millions
For the year
ended March 31,
2011
¥(303,074)
¥ 81,949
¥(21,978)
$(264)
5,752
2,096
27,246
3,080
16,095
1,429
194
17
(289)
23
493
Net actuarial loss
Prior service costs
Net transition obligation
Net amount recognized
Yen in millions
U.S. dollars in millions
March 31,
2010
2011
¥(385,266)
¥(347,494)
97,587
(3,570)
72,324
(1,626)
March 31,
2011
$(4,179)
870
(20)
¥(291,249)
¥(276,796)
$(3,329)
Net actuarial gain (loss)
Recognized net actuarial loss
Prior service costs
The accumulated benefit obligation for all defined benefit pension plans was ¥1,571,061 million and
Other
Amortization of net transition obligation
1,944
17,003
1,944
2,594
1,944
40,995
Amortization of prior service costs
(17,677)
(15,063)
(24,032)
¥1,584,627 million ($19,057 million) at March 31, 2010 and 2011, respectively.
Total recognized in other comprehensive income (loss) ¥(293,956)
¥101,750
¥ 14,453
$ 174
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for
which the accumulated benefit obligations exceed plan assets are as follows:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Yen in millions
U.S. dollars in millions
March 31,
2010
2011
¥508,501
¥500,046
452,019
65,905
453,111
72,359
March 31,
2011
$6,014
5,449
870
Components of the net periodic pension cost are as follows:
Yen in millions
For the years ended March 31,
2010
2009
2011
U.S. dollars in millions
For the year
ended March 31,
2011
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service costs
Recognized net actuarial loss
Amortization of net transition obligation
¥ 84,206
¥ 75,558
¥ 82,422
$ 991
52,959
(43,053)
(17,677)
5,752
1,944
50,559
(32,251)
(15,063)
27,246
1,944
52,502
(42,364)
(24,032)
16,095
1,944
631
(509)
(289)
194
23
Net periodic pension cost
¥ 84,131
¥107,993
¥ 86,567
$1,041
The other amount includes the impact of
transition to defined contribution pension plans,
consolidation and deconsolidation of certain
entities due to changes in ownership interest and
currency translation adjustments during the years
ended March 31, 2009, 2010 and 2011.
The estimated prior service costs, net actuarial
loss and net transition obligations that will be
amortized from accumulated other comprehensive
income (loss) into net periodic pension cost during
the year ending March 31, 2012 are ¥(15,700)
million ($(189) million), ¥16,000 million ($192 million)
and ¥1,900 million ($23 million), respectively.
Weighted-average assumptions used to determine benefit obligations as of March 31, 2010 and 2011
are as follows:
Discount rate
Rate of compensation increase
March 31,
2010
2.8%
2011
2.8%
0.5-10.0%
0.8-11.0%
Weighted-average assumptions used to determine net periodic pension cost for the years ended
March 31, 2009, 2010 and 2011 are as follows:
For the years ended March 31,
2010
2009
2011
Discount rate
Expected return on plan assets
Rate of compensation increase
2.8%
3.6%
2.8%
3.6%
2.8%
3.8%
0.1-10.0%
0.1-10.0%
0.5-10.0%
TOYOTA ANNUAL REPORT 2011
93
Notes to Consolidated Financial Statements
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 results of the returns on plan assets,
Toyota’s principal policy for plan asset manage-
ment, and forecasted market conditions.
Toyota’s policy and objective for plan asset
management is to maximize returns on plan assets
to meet future benefit payment requirements
under risks which Toyota considers permissible.
Asset allocations under the plan asset manage-
ment are determined based on plan asset
management policies of each plan which are
established
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,
to achieve
factors
approximately 30% is invested in debt securities,
and the rest of them is invested in insurance
contracts and other products. When actual alloca-
tions are not in line with target allocations, Toyota
rebalances its investments in accordance with the
policies. Prior to making individual investments,
in-depth assessments of
Toyota performs
corresponding
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
individual 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.
The following table summarizes the fair value of classes of plan assets as of March 31, 2010 and
2011. See note 26 to the consolidated financial 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
Yen in millions
March 31, 2010
Level 1
Level 2
Level 3
Total
¥471,262
¥ — ¥ — ¥ 471,262
— 237,495
471,262
237,495
79,739
—
— 147,345
39,231
19,561
118,970
166,906
—
35,774
97,086
1,449
—
—
—
2,663
928
3,591
—
46,518
237,495
708,757
79,739
150,008
59,720
289,467
97,086
83,741
¥626,006
¥502,936
¥50,109
¥1,179,051
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Yen in millions
March 31, 2011
U.S. dollars in millions
March 31, 2011
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Equity securities
Common stocks
Commingled funds
Debt securities
Government bonds
Commingled funds
Other
¥489,759 ¥ ― ¥ ― ¥ 489,759
180,901
―
― 180,901
180,901
489,759
—
$5,890
$ —
$ — $ 5,890
82,685
―
― 159,232
44,994
29,217
111,902
204,226
―
670,660
5,890
―
―
746
746
82,685
159,232
74,957
995
—
351
316,874
1,346
2,176
2,176
—
1,915
541
2,456
1,094
317
—
—
—
—
9
9
—
708
2,176
8,066
995
1,915
901
3,811
1,094
1,261
Insurance contracts
Other
―
19,610
90,972
26,418
―
58,851
90,972
104,879
—
236
Total
¥621,271 ¥502,517
¥59,597 ¥1,183,385
$7,472
$6,043
$717
$14,232
The following is description of the assets,
information about the valuation techniques used
to measure fair value, key inputs and significant
assumptions:
Quoted market prices for identical securities
are used to measure fair value of common stocks.
Common stocks include 64% of Japanese stocks
and 36% of foreign stocks as of March 31, 2010,
and 51% of Japanese stocks and 49% of foreign
stocks as of March 31, 2011.
Quoted market prices for identical securities
are used to measure fair value of government
bonds. Government bonds
include 25% of
Japanese government bonds and 75% of foreign
government bonds as of March 31, 2010, and
25% of Japanese government bonds and 75% of
foreign government bonds as of March 31, 2011.
Commingled funds are beneficial 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 measure-
ment 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.
TOYOTA ANNUAL REPORT 2011
94
Notes to Consolidated Financial Statements
The following tables summarize the changes in Level 3 plan assets measured at fair value for the
years ended March 31, 2010 and 2011:
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
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
Total
Other
Debt securities
¥ 5,242
818
(2,233)
(236)
¥ 3,591
¥45,825
(2,206)
3,467
(568)
¥46,518
¥51,067
(1,388)
1,234
(804)
¥50,109
Yen in millions
For the year ended March 31, 2011
Other
Total
Debt securities
¥ 3,591
312
(2,948)
(209)
¥ 746
¥46,518
1,908
11,490
(1,065)
¥58,851
¥50,109
2,220
8,542
(1,274)
¥59,597
U.S. dollars in millions
For the year ended March 31, 2011
Other
Total
Debt securities
$ 43
4
(35)
(3)
$ 9
$560
23
138
(13)
$708
$603
27
103
(16)
$717
Toyota expects to contribute ¥97,231 million ($1,169 million) to its pension plans in the year ending
March 31, 2012.
The following pension benefit payments, which reflect expected future service, as appropriate, are
expected to be paid:
Years ending March 31,
2012
2013
2014
2015
2016
from 2017 to 2021
Total
Yen in millions
U.S. dollars in millions
¥ 72,170
$ 868
71,235
73,345
76,567
79,591
442,737
857
882
921
957
5,324
¥815,645
$9,809
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Postretirement benefits other than pensions
and postemployment benefits
Toyota’s U.S. subsidiaries provide certain health
care and life insurance benefits to eligible retired
employees. In addition, Toyota provides benefits
to certain former or inactive employees after
employment, but before retirement. These benefits
are currently unfunded and provided through
various insurance companies and health care
these benefits are
providers. The costs of
recognized over the period the employee provides
credited service to Toyota. Toyota’s obligations
under these arrangements are not material.
For the years ended March 31, 2009, 2010
and 2011, the ineffective portion of Toyota’s fair
value hedge relationships was not material. For
fair value hedging relationships, the components
of each derivative’s gain or loss are included in the
assessment of hedge effectiveness.
Undesignated derivative financial instruments
Toyota uses foreign exchange forward contracts,
foreign currency options, interest rate swaps,
interest rate currency swap agreements, and
interest rate options, to manage its exposure to
foreign currency exchange rate fluctuations and
interest rate fluctuations
from an economic
perspective, and for which Toyota is unable or has
elected not to apply hedge accounting.
20
Derivative financial instruments:
Toyota employs derivative financial instruments,
including foreign exchange forward contracts,
foreign currency options, interest rate swaps,
interest rate currency swap agreements and
interest rate options to manage its exposure to
fluctuations in interest rates and foreign currency
exchange rates. Toyota does not use derivatives
for speculation or trading.
Fair value hedges
Toyota enters into interest rate swaps and interest
rate currency swap agreements mainly to convert
its fixed-rate debt to variable-rate debt. Toyota
uses interest rate swap agreements in managing
interest rate risk exposure. Interest rate swap
agreements are executed as either an integral
part of specific debt transactions or on a portfolio
basis. Toyota uses interest rate currency swap
agreements to hedge exposure to currency
exchange rate fluctuations on principal and
interest payments for borrowings denominated in
foreign currencies. Notes and loans payable
issued in foreign currencies are hedged by
concurrently executing interest rate currency swap
agreements, which involve the exchange of foreign
currency principal and interest obligations for
each functional currency obligations at agreed-
upon currency exchange and interest rates.
TOYOTA ANNUAL REPORT 2011
95
Notes to Consolidated Financial Statements
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Fair value and gains or losses on derivative financial instruments
The following table summarizes the fair values of derivative financial instruments as of March 31, 2010
and 2011:
The following table summarizes the gains and losses on derivative financial instruments and hedged
items reported in the consolidated statement of income for the years ended March 31, 2009, 2010 and 2011:
Derivative financial 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
Undesignated derivative financial 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
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
Yen in millions
U.S. dollars in millions
March 31,
2010
2011
March 31,
2011
¥ 45,567
94,430
¥ 139,997
¥ (21,786)
(12,045)
¥ (33,831)
¥ 55,794
74,528
¥ 130,322
¥ (7,410)
(1,188)
¥ (8,598)
¥ 54,474
168,349
¥ 222,823
¥ (38,152)
(179,765)
¥(217,917)
¥ 6,135
38
¥ 6,173
¥ (20,843)
(138)
¥ (20,981)
¥ 99,093
185,272
¥ 284,365
¥ (64,611)
(132,785)
¥(197,396)
¥ 2,619
—
¥ 2,619
¥ (14,202)
(75)
¥ (14,277)
$ 671
896
$ 1,567
$ (89)
(14)
$ (103)
$ 1,192
2,228
$ 3,420
$ (777)
(1,597)
$(2,374)
$ 32
—
$ 32
$ (171)
(1)
$ (172)
Yen in millions
For the years ended March 31,
2009
2010
Gains or
(losses) on
derivative
financial
instruments
Gains or
(losses) on
hedged items
Gains or
(losses) on
derivative
financial
instruments
Gains or
(losses) on
hedged items
Derivative financial instruments designated as
hedging instruments – Fair value hedge
Interest rate and currency swap agreements
Cost of financing operations
Interest expense
¥(288,553)
(439)
¥293,637
439
¥138,677
(265)
¥(135,163)
265
Undesignated derivative financial instruments
Interest rate and currency swap agreements
Cost of financing operations
Foreign exchange gain (loss), net
¥ (72,696)
(3,016)
¥ —
—
¥ 77,939
(2,819)
¥ —
—
Foreign exchange forward and option contracts
Cost of financing operations
Foreign exchange gain (loss), net
24,183
174,158
—
—
(21,841)
60,599
—
—
Yen in millions
U.S. dollars in millions
For the year ended March 31,
For the year ended March 31,
2011
2011
Gains or
(losses) on
derivative
financial
instruments
Gains or
(losses) on
hedged items
Gains or
(losses) on
derivative
financial
instruments
Gains or
(losses) on
hedged items
The following table summarizes the notional amounts of derivative financial instruments as of March
31, 2010 and 2011:
Derivative financial instruments designated as
hedging instruments – Fair value hedge
Interest rate and currency swap agreements
Yen in millions
March 31,
2010
2011
U.S. dollars in millions
March 31,
2011
Designated
derivative
financial
instruments
Undesignated
derivative
financial
instruments
Designated
derivative
financial
instruments
Undesignated
derivative
financial
instruments
Designated
derivative
financial
instruments
Undesignated
derivative
financial
instruments
Interest rate and currency
swap agreements
Foreign exchange forward and
option contracts
Total
¥1,168,882 ¥11,868,039
¥617,472 ¥11,460,275
$7,426
$137,826
— 1,487,175
—
1,176,955
—
14,155
¥1,168,882 ¥13,355,214
¥617,472 ¥12,637,230
$7,426
$151,981
Cost of financing operations
Interest expense
¥ 71,491
(166)
¥ (68,741)
166
$ 860
(2)
$(827)
2
Undesignated derivative financial instruments
Interest rate and currency swap agreements
Cost of financing operations
Foreign exchange gain (loss), net
¥ 72,082
(1,393)
¥ —
—
$ 867
(17)
$ —
—
Foreign exchange forward and option contracts
Cost of financing operations
Foreign exchange gain (loss), net
(2,693)
110,211
—
—
(32)
1,325
—
—
TOYOTA ANNUAL REPORT 2011
96
Notes to Consolidated Financial Statements
Undesignated derivative financial instruments
are used to manage risks of fluctuations in interest
rates to certain borrowing transactions and in
foreign currency exchange rates of certain
currency
receivables and payables. Toyota
accounts for these derivative financial instruments
as economic hedges with changes in the fair
value
into current period
earnings.
recorded directly
Unrealized gains or (losses) on undesignated
derivative financial instruments reported in the
cost of financing operations for the years ended
March 31, 2009, 2010 and 2011 were ¥(80,298)
million, ¥71,538 million and ¥93,370 million ($1,123
million) those reported in foreign exchange gain
(loss), net were ¥(33,578) million, ¥(26,476) million
and ¥(240) million ($(3) million), respectively.
Credit risk related contingent features
Toyota enters into International Swaps and Deriva-
tives Association Master Agreements with
counterparties. These Master Agreements contain
a provision requiring either Toyota or the counter-
party to settle the contract or to post assets to the
other party in the event of a ratings downgrade
below a specified threshold.
The aggregate fair value amount of derivative
financial instruments that contain credit risk related
contingent features that are in a net liability position
as of March 31, 2011 is ¥27,432 million ($330
million). The aggregate fair value amount of assets
that are already posted as of March 31, 2011 is
¥5,773 million ($69 million). If the ratings of Toyota
decline below specified thresholds, the maximum
amount of assets to be posted or for which Toyota
could be required to settle the contracts is ¥27,432
million ($330 million) as of March 31, 2011.
21
Other financial instruments:
Toyota has certain financial instruments, including
financial assets and liabilities and off-balance
sheet financial instruments which arose in the
normal course of business. These financial instru-
ments are executed with creditworthy financial
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 fluctuations, 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, Toyota’s 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 financial
instruments, it does not anticipate significant
losses due to the nature of its counterparties.
Counterparties to Toyota’s financial instruments
represent,
international financial
institutions. Additionally, Toyota does not have a
significant exposure to any individual counter-
party. Toyota believes that the overall credit risk
related
is not
to
significant.
its financial
in general,
instruments
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The estimated fair values of Toyota’s financial instruments, excluding marketable securities and other
securities investments and affiliated companies and derivative financial instruments, are summarized as
follows:
Asset (Liability)
Yen in millions
March 31, 2010
Carrying
amount
Estimated fair
value
Cash and cash equivalents
¥ 1,865,746
¥ 1,865,746
Time deposits
Total finance receivables, net
Other receivables
Short-term borrowings
392,724
392,724
8,759,826
9,112,527
360,379
360,379
(3,279,673)
(3,279,673)
Long-term debt including the current portion
(9,191,490)
(9,297,904)
Asset (Liability)
Yen in millions
March 31, 2011
U.S. dollars in millions
March 31, 2011
Carrying
amount
Estimated fair
value
Carrying
amount
Estimated fair
value
Cash and cash equivalents
¥ 2,080,709
¥ 2,080,709
$ 25,024
$ 25,024
Time deposits
Total finance receivables, net
Other receivables
Short-term borrowings
203,874
203,874
8,680,882
8,971,523
306,201
306,201
2,452
104,400
3,682
2,452
107,896
3,682
(3,179,009)
(3,179,009)
(38,232)
(38,232)
Long-term debt including the current portion
(9,200,130)
(9,274,881)
(110,645)
(111,544)
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 finance receiv-
ables was assumed to approximate fair value as
they were repriced at prevailing market rates. The
fair value of fixed rate finance receivables was
estimated by discounting expected cash flows to
present value using the rates at which new loans
of similar credit quality and maturity would be
made.
Short-term borrowings and long-term debt
The fair values of short-term borrowings and total
long-term debt including the current portion were
estimated based on the discounted amounts of
future cash flows using Toyota’s current
incremental borrowing rates for similar liabilities.
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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:
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,
2011 are as follows:
Class of property
Building
Machinery and equipment
Less - Accumulated depreciation
Yen in millions
U.S. dollars in millions
March 31,
2010
¥23,518
48,043
(36,926)
¥34,635
2011
¥13,412
30,283
(18,590)
¥25,105
March 31,
2011
$161
364
(223)
$302
Years ending March 31,
2012
2013
2014
2015
2016
Thereafter
Total minimum future rentals
Yen in millions
U.S. dollars in millions
¥ 9,198
$111
7,439
5,687
4,648
4,061
13,146
¥44,179
89
68
56
49
158
$531
Amortization expenses under capital leases for the years ended March 31, 2009, 2010 and 2011
were ¥12,183 million, ¥12,606 million and ¥13,341 million ($160 million), respectively.
Future minimum lease payments under capital leases together with the present value of the net
23
Other commitments and contingencies, concentrations and factors that may affect future operations:
minimum lease payments as of March 31, 2011 are as follows:
Years ending March 31,
2012
2013
2014
2015
2016
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
U.S. dollars in millions
¥ 5,192
$ 62
3,741
2,516
2,248
1,971
13,981
29,649
(7,732)
21,917
(4,283)
45
30
27
24
168
356
(93)
263
(51)
¥17,634
$212
Rental expenses under operating leases for the years ended March 31, 2009, 2010 and 2011 were
¥106,653 million, ¥93,994 million and ¥89,029 million ($1,071 million), respectively.
Commitments
Commitments outstanding at March 31, 2011 for
the purchase of property, plant and equipment
and other assets totaled ¥83,506 million ($1,004
million).
Guarantees
from
Toyota enters into contracts with Toyota dealers to
guarantee customers’ payments of their install-
ment payables
installment
that arise
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, 2011,
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, 2011 is ¥1,662,225
million ($19,991 million). Liabilities for guarantees
totaling ¥20,450 million ($246 million) have been
provided as of March 31, 2011. 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 relating to its vehicles. In November
2009, Toyota announced a safety campaign in
North America for certain models of Toyota and
Lexus vehicles related to floor 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
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antilock braking system (ABS) in certain vehicles
models including the Prius. Set forth below is a
lawsuits and
description of various claims,
government investigations involving Toyota in the
United States relating to these recalls and other
safety measures.
Class Action and Consolidated Litigation
There are approximately 200 putative class
actions that have been filed 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 floor mats and accelerator pedals do not
cover the full scope of possible defects related to
unintended acceleration. Rather, they allege that
Electronic Throttle Control System-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 consol-
idated for pretrial proceedings into a single
multi-district litigation in the United States District
Court for the Central District of California. In
addition, of the approximately 325 individual
product liability personal injury cases relating to
unintended acceleration pending against Toyota,
the federal cases have been or are likely to be
consolidated into the multi-district litigation. 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 action
suit is in its early stages and has included
document production, depositions and various
motions.
Additionally,
there are approximately
ten
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 filed 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 approximately 20 putative class
actions alleging defects in the antilock braking
systems in various hybrid vehicles that cause the
vehicles to fail to stop in a timely manner when
driving in certain road conditions. The plaintiffs
seek an order requiring Toyota to repair the
vehicles and claim that all owners and lessees of
vehicles, including those for which recalls have
been implemented, should be compensated for
the defects related to the antilock braking systems.
These cases have been consolidated into two
actions, one in federal court in the United States
District Court for the Central District of California
and one in state court in the Los Angeles County
Superior Court.
From February through April 2010, Toyota
was also sued in six putative shareholder class
actions on behalf of investors in Toyota American
Depository Shares and common stock. The cases
have been consolidated into a single action in the
United States District Court for the Central District
of California, and a lead plaintiff has been
appointed. The consolidated complaint, filed
October 4, 2010, alleges violations of the Securi-
ties Exchange Act of 1934 and Japan’s Financial
Instruments and Exchange Act on the basis that
defendants made statements that were false or
misleading in that they failed to disclose problems
with, or the causes of, unintended acceleration in
a number of vehicle models. Plaintiffs seek
monetary damages in an amount to be proven at
trial, interest and attorneys’ fees and costs.
On May 21, 2010, a shareholder derivative
action was filed against certain officers and
directors of Toyota in the Superior Court of the
State of California, County of Los Angeles. The
complaint alleged that the defendants breached
their fiduciary duties of care and loyalty in their
handling of design defects in Toyota vehicles,
alleging facts similar to those alleged in the
securities class action. On April 20, 2011, the
Court issued an order dismissing the case and
entered judgment in favor of defendants.
On July 22, 2010, Toyota was sued in the
Superior Court of the State of California, County
of Los Angeles in a putative bondholder class
action filed on behalf of purchasers of Toyota and
Toyota Motor Credit Corporation bonds traded on
foreign securities exchanges. The complaint
alleges violations of California securities law,
fraud, breach of fiduciary duty, and other state
law claims. On September 15, 2010, Toyota
removed the putative bondholder class action to
the United States District Court for the Central
District of California. On January 10, 2011, the
District Court issued an order dismissing the case
with prejudice, and entered judgment in favor of
defendants. Plaintiff has filed a notice of appeal to
the United States Circuit Court of Appeals for the
Ninth Circuit.
Toyota believes
it has meritorious
that
defenses to all of the cases and will vigorously
defend against them.
Government Investigations
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
the U.S. Securities and Exchange
from
Commission (“SEC”). The subpoenas and the
voluntary request primarily seek documents
related to unintended acceleration and certain
financial records. This is a coordinated investiga-
tion and has included interviews of Toyota and
non-Toyota witnesses, as well as production of
documents. In June 2010, Toyota received a
second voluntary request and subpoena from the
SEC and a subpoena from the U.S. Attorney for
the Southern District of New York. The subpoenas
and the voluntary request primarily seek produc-
tion of documents related to the recalls of the
steering relay rod.
During the first two quarters of calendar year
2010, Toyota received four inquires from the
National Highway Traffic Safety Administration
(“NHTSA”). The first two, TQ10-001 and TQ10-002,
address the timing of the announcement of the
recalls related to floor mat entrapment and
sticking accelerator pedals, respectively. The
third, RQ10-003, addresses the scope of the
recalls and unintended acceleration generally.
On April 19, 2010, Toyota and NHTSA 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 settle-
ment to avoid a protracted dispute and to
concentrate on regaining customer confidence.
On May 10, 2010, Toyota received an inquiry
from NHTSA on the timing of its announcement of
the 2005 recall of certain pickup trucks and sport
utility vehicles for a possible issue with the steering
relay rod (TQ10-004). On December 20, 2010,
Toyota and NHTSA announced that they had
reached a settlement with respect to TQ10-001
and TQ10-004 pursuant to which Toyota paid
approximately $32.4 million in the aggregate to
the U.S. Treasury. As in the April 2010 settlement
TOYOTA ANNUAL REPORT 2011
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resolving TQ10-002, Toyota denied that it violated
the Motor Vehicle Safety Act or its implementing
regulations but agreed to the settlement to avoid
a protracted dispute and to concentrate on
regaining customer confidence. In addition, on
March 1, 2011, RQ10-003 was officially resolved.
Toyota has also received subpoenas and
formal and informal requests from various states’
attorneys general,
the Executive
Committee for a group of 28 states’ attorney
general, and certain local governmental agencies
regarding various recalls, the facts underlying its
recent recalls and customer handling related to
those recalls.
including
Toyota is cooperating with the government
agencies in their investigations, which, except as
noted above, 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, 2011 related to these legal proceed-
ings and governmental investigations are not
material to Toyota’s financial position, results of
operations, or cash flow. 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 effect on Toyota’s financial
position, results of operations or cash flows.
on behalf of all purchasers of new motor vehicles
who purchased their vehicles in the United States
on or after January 1, 2001. As of April 1, 2005,
the federal lawsuits were consolidated in the State
of Maine, and lawsuits in the State of California
and the State of New Jersey were also consoli-
dated within the respective states. Lawsuits in the
state courts have been stayed until the federal
lawsuits proceed.
The complaints allege that the defendants
violated the Sherman Antitrust Act or state
anti-trust law by conspiring among themselves
and with their dealers to prevent the sale to United
States citizens of vehicles produced for the
Canadian market, resulting in higher prices to
United States consumers. Toyota believes that its
actions have been lawful. In the interest of
resolving these legal actions, however, Toyota
entered into a settlement agreement with the
plaintiffs
in February 2006. The settlement
agreement remains subject to court approval. In
the meantime, the federal court granted summary
judgment in favor of the remaining defendants
and the time to appeal has lapsed. Current activity
is centered in the California state courts, although
that action is stayed against Toyota pending a
ruling on the pending Toyota settlement. In
February 2011, the federal court held a hearing
with respect to approval of Toyota’s settlement
agreement. If final approval is granted, that
approval should resolve this matter for Toyota.
United States Antitrust Proceedings
Other Proceedings
In February 2003, Toyota, GM, Ford, DaimlerChrysler,
Honda, Nissan, BMW and their sales subsidiaries
in the United States and Canada, as well as the
National Automobile Dealers Association and the
Canadian Automobile Dealers Association were
named as defendants in approximately 85
purported federal and state class action lawsuits
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 substan-
tial 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 effect on
Toyota’s financial position, results of operations or
cash flows.
Environmental Matters and Others
implementing
In October 2000, the European Union brought
into effect a directive that requires member states
to promulgate regulations
the
following: (i) manufacturers shall bear all or a
significant part of the costs for taking back
end-of-life vehicles put on the market after July 1,
those
2002 and dismantling and recycling
vehicles. Beginning January 1, 2007, this require-
ment 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 effect 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
different European Union member states, particu-
larly regarding manufacturer responsibilities and
resultant expenses that may be incurred.
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
to
shredding. This directive
impacts Toyota’s
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.
from vehicles prior
Based on the legislation that has been
enacted to date, Toyota has provided for its
estimated liability related to covered vehicles in
existence as of March 31, 2011. 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 significant cash expenditures,
Toyota is continuing to assess the impact of this
future legislation on its results of operations, cash
flows and financial position.
Toyota purchases materials that are equiva-
lent to approximately 10% of material costs from a
supplier which is an affiliated company.
The parent company has a concentration of
labor supply in employees working under collec-
tive bargaining agreements and a substantial
portion of these employees are working under the
agreement that will expire on December 31, 2011.
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24
Segment data:
The operating segments reported below are the
segments of Toyota for which separate financial
information is available and for which operating
income/loss amounts are evaluated regularly by
executive management in deciding how to allocate
resources and in assessing performance.
The major portions of Toyota’s operations on
a worldwide basis are derived from the Automo-
tive 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
Segment operating results and assets
As of and for the year ended March 31, 2009:
consists primarily of financing, and vehicle and
equipment leasing operations to assist in the
merchandising of the parent company and its
affiliate 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 Toyota’s industry segments and
operations by geographic areas and overseas
revenues by destination as of and for the years
ended March 31, 2009, 2010 and 2011.
As of and for the year ended March 31, 2010:
Automotive
Financial
Services
Yen in millions
Inter-segment
Elimination/
All Other
Unallocated Amount Consolidated
Net revenues
Sales to external customers
Inter-segment sales and transfers
Total
Operating expenses
Operating income (loss)
Assets
Investment in equity method investees
Depreciation expense
Capital expenditure
¥17,187,308 ¥ 1,226,244
19,163
1,245,407
998,480
¥ (86,370) ¥ 246,927
10,120
17,197,428
17,283,798
¥12,359,404 ¥13,274,953
129,745
348,820
774,102
1,692,702
1,018,935
616,216
¥ 537,421
410,194
947,615
956,475
¥ (8,860)
¥1,119,635
—
46,814
21,751
¥ — ¥18,950,973
—
18,950,973
18,803,457
¥ (4,181) ¥ 147,516
(439,477)
(439,477)
(435,296)
¥3,595,295
44,993
—
25,532
¥30,349,287
1,867,440
1,414,569
1,437,601
As of and for the year ended March 31, 2011:
Automotive
Financial
Services
Yen in millions
Inter-segment
Elimination/
All Other
Unallocated Amount Consolidated
Net revenues
Sales to external customers
¥18,550,501 ¥ 1,355,850
¥ 623,219
¥ — ¥20,529,570
Inter-segment sales and transfers
14,222
21,698
561,728
(597,648)
—
Total
Operating expenses
Operating income (loss)
18,564,723
1,377,548
1,184,947
(597,648)
20,529,570
18,959,599
1,449,495
1,175,034
(593,547)
20,990,581
Capital expenditure
¥ (394,876) ¥ (71,947) ¥ 9,913
¥ (4,101) ¥ (461,011)
Assets
¥11,716,316 ¥13,631,662
¥1,131,400
¥2,582,659
¥29,062,037
Investment in equity method investees
Depreciation expense
Capital expenditure
1,606,013
1,072,848
1,343,572
168,057
389,937
883,968
—
36,036
32,385
35,334
—
62,023
1,810,106
1,495,170
2,324,897
Net revenues
Sales to external customers
Inter-segment sales and transfers
Total
Operating expenses
Operating income (loss)
Assets
Investment in equity method investees
Depreciation expense
Automotive
Financial
Services
Yen in millions
Inter-segment
Elimination/
All Other
Unallocated Amount Consolidated
¥17,322,753 ¥ 1,173,168
19,037
1,192,205
833,925
¥ 85,973 ¥ 358,280
14,567
17,337,320
17,251,347
¥11,341,558 ¥13,365,394
3,519
330,865
991,330
1,784,539
819,075
691,867
¥ 497,767
474,485
972,252
937,010
¥ 35,242
¥1,146,720
3,045
25,633
21,058
¥ — ¥18,993,688
—
18,993,688
18,525,409
¥ (11,216) ¥ 468,279
(508,089)
(508,089)
(496,873)
¥3,964,494
26,885
—
(13,064)
¥29,818,166
1,817,988
1,175,573
1,691,191
U.S. dollars in millions
Automotive
Financial
Services
Inter-segment
Elimination/
All Other
Unallocated Amount Consolidated
Net revenues
Sales to external customers
Inter-segment sales and transfers
Total
Operating expenses
Operating income (loss)
Assets
Investment in equity method investees
Depreciation expense
Capital expenditure
$208,331
176
208,507
207,473
$ 1,034
$136,399
21,462
9,851
8,321
$ 14,109
229
14,338
10,029
$ 4,309
$160,738
42
3,979
11,922
$ 5,987
5,706
11,693
11,269
$ 424
$13,791
37
308
253
$ —
(6,111)
(6,111)
(5,976)
$ (135)
$47,679
323
—
(157)
$228,427
—
228,427
222,795
$ 5,632
$358,607
21,864
14,138
20,339
TOYOTA ANNUAL REPORT 2011
101
Notes to Consolidated Financial Statements
Geographic Information
As of and for the year ended March 31, 2009:
Yen in millions
Japan
North
America
Europe
Asia
Other
Inter-segment
Elimination/
Unallocated
Amount
Consolidated
Net revenues
Sales to external customers
Inter-segment sales and transfers
Total
Operating expenses
Operating income (loss)
¥ 7,471,916 ¥ 6,097,676 ¥2,889,753
123,375
3,013,128
3,156,361
¥2,450,412
268,917
4,714,821
2,719,329
12,186,737
12,424,268
2,543,269
¥ (237,531) ¥ (390,192) ¥ (143,233) ¥ 176,060
125,238
6,222,914
6,613,106
¥1,619,813
263,087
1,882,900
1,795,252
¥ 87,648
¥ —
(5,495,438)
(5,495,438)
(5,541,675)
¥ 46,237
¥20,529,570
—
20,529,570
20,990,581
¥ (461,011)
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U.S. dollars in millions
Japan
North
America
Europe
Asia
Other
Inter-segment
Elimination/
Unallocated
Amount
Consolidated
Net revenues
Sales to external customers
Inter-segment sales and transfers
Total
Operating expenses
Operating income (loss)
Assets
Long-lived assets
$ 83,787
48,339
132,126
136,484
$ (4,358)
$ 64,075
1,218
65,293
61,210
$ 4,083
$23,096
734
23,830
23,672
$ 158
$135,729
$ 119,192
$23,226
37,559
27,376
3,676
$37,740
2,844
40,584
36,820
$ 3,764
$25,719
4,141
$19,729
2,028
21,757
19,831
$ 1,926
$24,587
3,125
$ —
(55,163)
(55,163)
(55,222)
$ 59
$ 30,154
—
$228,427
—
228,427
222,795
$ 5,632
$358,607
75,877
Assets
¥11,956,431 ¥10,685,466 ¥2,324,528
¥1,547,890
¥1,446,505
¥ 1,101,217
¥29,062,037
“Other” consists of Central and South America, Oceania and Africa.
Long-lived assets
3,658,719
2,726,419
410,185
372,330
234,028
—
7,401,681
As of and for the year ended March 31, 2010:
Yen in millions
Japan
North
America
Europe
Asia
Other
Inter-segment
Elimination/
Unallocated
Amount
Consolidated
Net revenues
Sales to external customers
Inter-segment sales and transfers
Total
Operating expenses
Operating income (loss)
¥ 7,314,813 ¥ 5,583,228 ¥2,082,671
64,378
2,147,049
2,180,004
¥2,431,648
223,679
3,905,490
2,655,327
11,220,303
11,445,545
2,451,800
¥ (225,242) ¥ 85,490 ¥ (32,955) ¥ 203,527
87,298
5,670,526
5,585,036
¥1,538,613
135,248
1,673,861
1,558,287
¥ 115,574
¥ —
(4,416,093)
(4,416,093)
(4,417,215)
¥ 1,122
¥18,950,973
—
18,950,973
18,803,457
¥ 147,516
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 ¥3,225,901 million, ¥4,205,402 million and
¥4,613,672 million ($55,486 million), as of March
31, 2009, 2010 and 2011, respectively.
Transfers between industries or geographic
segments are made at amounts which Toyota’s
management believes approximate arm’s-length
reportable
transactions.
segments’ income or losses, operating income
consists of revenue less operating expenses.
In measuring
the
Assets
¥12,465,677 ¥10,223,903 ¥2,060,962
¥1,925,126
¥1,803,703
¥ 1,869,916
¥30,349,287
Long-lived assets
3,347,896
2,401,172
351,037
361,296
249,500
—
6,710,901
As of and for the year ended March 31, 2011:
Yen in millions
Japan
North
America
Europe
Asia
Other
Inter-segment
Elimination/
Unallocated
Amount
Consolidated
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 financial statement users with
valuable information.
Net revenues
Sales to external customers
Inter-segment sales and transfers
Total
Operating expenses
Operating income (loss)
¥5,327,809 ¥1,920,416
¥ 6,966,929
61,081
4,019,317
1,981,497
10,986,246
1,968,349
11,348,642
¥ (362,396) ¥ 339,503 ¥ 13,148
101,327
5,429,136
5,089,633
¥3,138,112
236,422
3,374,534
3,061,557
¥ 312,977
¥1,640,422
168,694
1,809,116
1,648,987
¥ 160,129
¥ —
(4,586,841)
(4,586,841)
(4,591,759)
¥ 4,918
¥18,993,688
—
18,993,688
18,525,409
¥ 468,279
Assets
¥11,285,864
¥9,910,828 ¥1,931,231
¥2,138,499
¥2,044,379
¥ 2,507,365
¥29,818,166
Long-lived assets
3,123,042
2,276,332
305,627
344,304
259,855
—
6,309,160
North America
Europe
Asia
Other
Yen in millions
For the years ended
March 31,
2010
¥5,718,381
2,023,280
2,641,471
2,838,671
2011
¥5,398,278
1,793,932
3,280,384
3,196,114
U.S. dollars in millions
For the year ended
March 31,
2011
$64,922
21,575
39,451
38,438
2009
¥6,294,230
2,861,351
2,530,352
3,421,881
“Other” consists of Central and South America, Oceania, Africa and the Middle East, etc.
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Certain financial statement data on non-financial services and financial services businesses
The financial data below presents separately Toyota’s non-financial services and financial services
businesses.
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
Yen in millions
U.S. dollars in millions
March 31,
2010
2011
March 31,
2011
¥ 1,338,821
¥ 1,300,553
$ 15,641
1,783,629
1,036,555
12,466
1,908,884
1,422,373
1,793,622
8,247,329
4,549,658
4,996,321
1,483,551
1,304,128
1,383,616
6,508,403
5,825,966
4,608,309
17,842
15,684
16,640
78,273
70,065
55,422
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 assets
17,793,308
16,942,678
203,760
Total Non-Financial Services Businesses liabilities
Financial Services Businesses
Current assets
Cash and cash equivalents
Marketable securities
Finance receivables, net
Prepaid expenses and other current assets
Total current assets
Noncurrent finance receivables, net
Investments and other assets
Property, plant and equipment
526,925
9,536
780,156
188,880
4,209,496
4,136,805
653,798
5,399,755
5,630,680
529,938
636,249
5,742,090
5,556,746
365,707
1,714,580
1,700,851
9,383
2,272
49,751
7,651
69,057
66,828
4,398
20,455
Total Financial Services Businesses assets
13,274,953
13,365,394
160,738
Eliminations
Total assets
(718,974)
(489,906)
(5,891)
¥30,349,287
¥29,818,166
$358,607
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
Yen in millions
U.S. dollars in millions
March 31,
2010
2011
March 31,
2011
¥ 575,890
¥ 478,646
$ 5,756
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
243,817
1,497,253
1,666,748
104,392
1,024,662
5,015,518
839,611
660,918
554,402
2,054,931
7,070,449
3,118,938
1,968,908
2,986,700
2,541,479
13,063
113,559
13,177
519,011
19,472
110,348
9,555
538,026
2,932
18,007
20,045
1,256
12,323
60,319
10,097
7,949
6,667
24,713
85,032
35,919
30,565
234
1,327
115
6,471
5,746,656
6,205,580
74,631
6,060,349
5,669,456
5,772
433,641
7,104
435,508
6,499,762
6,112,068
68,184
85
5,238
73,507
Assets in the non-financial services include unallocated corporate assets.
Total Financial Services Businesses liabilities
12,246,418
12,317,648
148,138
Eliminations
Total liabilities
Total Toyota Motor Corporation shareholders’ equity
Noncontrolling interest
Total shareholders’ equity
(719,301)
(489,955)
(5,892)
19,418,844
18,898,142
10,359,723
10,332,371
570,720
587,653
10,930,443
10,920,024
227,278
124,262
7,067
131,329
Total liabilities and shareholders’ equity
¥30,349,287
¥29,818,166
$358,607
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Selling, general and administrative
2,097,674
1,854,710
1,723,071
Total costs and expenses
19,568,465
17,828,152
17,709,812
17,470,791
15,973,442
15,986,741
Statements of income
Non-Financial Services Businesses
Net revenues
Costs and expenses
Cost of revenues
Operating income (loss)
Other income (expense), net
Income (loss) before income taxes and equity
in earnings of affiliated companies
Provision for income taxes
Equity in earnings of affiliated companies
Net income (loss)
Less: Net (income) loss attributable to the
noncontrolling interest
Net income (loss) attributable to Toyota Motor
Corporation- Non-Financial Services Businesses
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 affiliated companies
Provision for income taxes
Equity in earnings (losses) of affiliated
companies
Net income (loss)
Less: Net income attributable to the
noncontrolling interest
Net income (loss) attributable to Toyota Motor
Corporation- Financial Services Businesses
Yen in millions
March 31,
2010
2009
U.S. dollars in millions
March 31,
2011
2011
¥19,182,161
¥17,732,143
¥17,826,986
$214,395
192,264
20,722
212,986
1,409
1,069
2,478
2,150
2,576
2,904
(386,304)
(71,925)
(458,229)
(10,152)
53,226
(394,851)
(96,009)
144,625
48,616
42,342
109,944
116,218
117,174
88,840
206,014
178,795
214,229
241,448
26,282
(32,103)
(54,055)
(650)
(368,569)
84,115
187,393
2,254
1,377,548
1,245,407
1,192,205
14,338
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
636,374
197,551
833,925
358,280
1,349
359,629
134,094
787
226,322
7,653
2,376
10,029
4,309
16
4,325
1,613
10
2,722
(2,004)
(2,653)
(3,251)
(39)
(68,388)
125,453
223,071
2,683
Eliminations
20
(112)
(2,281)
(28)
Net income (loss) attributable to Toyota Motor
Corporation
¥ (436,937) ¥ 209,456
¥ 408,183
$ 4,909
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Statements of cash flows
Cash flows 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 fixed assets
Unrealized losses on available-for-sale securities, net
Deferred income taxes
Equity in (earnings) losses of affiliated companies
Changes in operating assets and liabilities, and other
Net cash provided by operating activities
Cash flows from investing activities
Additions to finance receivables
Collection of and proceeds from sales of finance receivables
Yen in millions
Yen in millions
For the year ended March 31, 2009
For the year ended March 31, 2010
Non-Financial
Services Businesses
Financial Services
Businesses
Consolidated
Non-Financial
Services Businesses
Financial Services
Businesses
Consolidated
¥ (394,851)
¥ (66,384)
¥ (461,215)
¥ 116,218
¥ 128,106
¥ 244,212
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
1,495,170
1,065,749
257,433
(20,958)
68,682
220,920
(194,990)
(42,724)
154,587
1,905
55
46,661
2,486
(14,183)
(109,944)
733,338
1,476,905
1,842,285
348,820
98,870
1,199
276
—
39,759
64,536
133,275
814,841
1,414,569
100,775
1,254
46,937
2,486
25,537
(45,408)
768,168
2,558,530
—
—
(14,230,272)
(8,612,111)
13,959,045
8,155,094
—
—
(13,492,119)
(7,806,201)
13,107,531
7,517,968
Additions to fixed assets excluding equipment leased to others
(1,358,518)
(6,064)
(1,364,582)
Additions to equipment leased to others
Proceeds from sales of fixed assets excluding equipment leased to others
Proceeds from sales of equipment leased to others
Purchases of marketable securities and security investments
(82,411)
41,285
55,896
(418,342)
Proceeds from sales of and maturity of marketable securities and security investments
1,295,561
Payment for additional investments in affiliated companies, net of cash acquired
Changes in investments and other assets, and other
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of long-term debt
Payments of long-term debt
Increase (decrease) in short-term borrowings
Dividends paid
Purchase of common stock, and other
Net cash provided by (used in) financing activities
Effect 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
(45)
129,834
(336,740)
545,981
(150,097)
138,387
(439,991)
(70,587)
23,693
(80,214)
175,042
1,473,101
(877,904)
6,101
472,853
(217,688)
180,316
—
(2,091)
(960,315)
47,386
528,749
(636,030)
1,475,877
(45)
135,757
(599,154)
(64,345)
46,070
36,668
(2,310,912)
1,012,781
(1,020)
(259,089)
(715,704)
(1,230,220)
(2,139,001)
3,030,029
3,506,990
(2,580,637)
(2,704,078)
239,462
—
—
688,854
(49,579)
640,691
155,446
406,507
(439,991)
(70,587)
698,841
(129,793)
815,733
1,628,547
492,300
(77,033)
(249,238)
(172,476)
(10,251)
(16,698)
4,092
(309,322)
1,648,143
(5,382)
(768,720)
6,403
428,424
(101,270)
95,960
—
102,497
(626,676)
(604,536)
(833,065)
52,473
465,092
(2,412,182)
1,108,741
(1,020)
(337,454)
(2,850,184)
2,733,465
3,178,310
(2,926,308)
(2,938,202)
(251,544)
—
—
(444,387)
(12,990)
(269,212)
796,137
(335,363)
(172,476)
(10,251)
(277,982)
(8,898)
(578,534)
2,444,280
¥ 1,648,143
¥ 796,137
¥ 2,444,280
¥ 1,338,821
¥ 526,925
¥ 1,865,746
TOYOTA ANNUAL REPORT 2011
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Yen in millions
U.S. dollars in millions
For the year ended March 31, 2011
For the year ended March 31, 2011
Non-Financial
Services Businesses
Financial Services
Businesses
Consolidated
Non-Financial
Services Businesses
Financial Services
Businesses
Consolidated
¥ 241,448
¥ 226,322
¥ 465,485
$ 2,904
$ 2,722
$ 5,598
330,865
1,175,573
10,159
3,979
14,138
Statements of cash flows
Cash flows from operating activities
Net income
Adjustments to reconcile net income 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 fixed assets
Unrealized losses on available-for-sale securities, net
Deferred income taxes
Equity in earnings of affiliated companies
Changes in operating assets and liabilities, and other
Net cash provided by operating activities
Cash flows from investing activities
Additions to finance receivables
Collection of and proceeds from sales of finance receivables
Additions to fixed assets excluding equipment leased to others
Additions to equipment leased to others
Proceeds from sales of fixed assets excluding equipment leased to others
Proceeds from sales of equipment leased to others
Purchases of marketable securities and security investments
Payment for additional investments in affiliated companies, net of cash acquired
Changes in investments and other assets, and other
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of long-term debt
Payments of long-term debt
Increase (decrease) in short-term borrowings
Dividends paid
Purchase of common stock, and other
Net cash provided by (used in) financing activities
Effect 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
Proceeds from sales of and maturity of marketable securities and security investments
3,423,618
844,708
1,806
(24,867)
36,076
7,915
(17,258)
(214,229)
591,378
1,466,977
—
—
(621,302)
(78,559)
50,742
17,700
(4,063,499)
(299)
394,479
(877,120)
15,318
(309,862)
(86,884)
(141,120)
(28,617)
(551,165)
(76,960)
(38,268)
1,338,821
2,334
1,453
138
—
103,035
(787)
(106,416)
556,944
4,140
(23,414)
36,214
7,915
85,710
(215,016)
487,402
2,024,009
(14,323,261)
(8,438,785)
13,887,751
(8,024)
8,003,940
(629,326)
(983,306)
(1,061,865)
600
468,995
(358,308)
292,538
—
18,303
51,342
486,695
(4,421,807)
3,716,156
(299)
177,605
(1,004,712)
(2,116,344)
2,934,588
2,931,436
(2,306,139)
(2,489,632)
122,619
—
—
751,068
(50,069)
253,231
526,925
162,260
(141,120)
(28,617)
434,327
(127,029)
214,963
1,865,746
¥ 1,300,553
¥ 780,156
¥ 2,080,709
22
(299)
434
95
(208)
(2,576)
7,112
17,643
—
—
(7,472)
(945)
611
213
(48,870)
41,174
(4)
4,744
(10,549)
184
(3,727)
(1,045)
(1,697)
(344)
(6,629)
(926)
(461)
16,102
$ 15,641
28
17
2
—
1,239
(10)
(1,279)
6,698
(172,258)
167,020
(97)
(11,825)
7
5,640
(4,309)
3,518
—
221
(12,083)
35,293
(27,735)
1,475
—
—
9,033
(602)
3,046
6,337
50
(282)
436
95
1,031
(2,586)
5,862
24,342
(101,488)
96,259
(7,569)
(12,770)
618
5,853
(53,179)
44,692
(4)
2,136
(25,452)
35,255
(29,942)
1,951
(1,697)
(344)
5,223
(1,528)
2,585
22,439
$ 9,383
$ 25,024
TOYOTA ANNUAL REPORT 2011
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25
Per share amounts:
Reconciliations of the differences between basic and diluted net income (loss) attributable to Toyota Motor
Corporation per share for the years ended March 31, 2009, 2010 and 2011 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 per
share
Net income
attributable to
Toyota Motor
Corporation
For the year ended March 31, 2009
Basic net loss attributable to Toyota
Motor Corporation per common share
Effect of dilutive securities
¥(436,937)
3,140,417
¥(139.13)
Assumed exercise of dilutive stock options
(0)
―
The following table shows Toyota Motor Corporation shareholders’ equity per share as of March 31,
2010 and 2011. Toyota Motor Corporation shareholders’ equity per share amounts are calculated by
dividing Toyota Motor Corporation shareholders’ equities’ 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 Thousands of shares
Shares issued
and outstanding
at the end of the
year (excluding
treasury stock)
Toyota Motor
Corporation
Shareholders’
equity
Yen
U.S. dollars in millions U.S. dollars
Toyota Motor
Corporation
Shareholders’
equity per share
Toyota Motor
Corporation
Shareholders’
equity
Toyota Motor
Corporation
Shareholders’
equity per share
As of March 31, 2010
As of March 31, 2011
¥10,359,723
¥3,135,995
¥3,303.49
10,332,371
3,135,699
3,295.08
$124,262
$39.63
Diluted net loss attributable to Toyota
Motor Corporation per common share
For the year ended March 31, 2010
Basic net income attributable to Toyota
Motor Corporation per common share
Effect 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, 2011
Basic net income attributable to Toyota
Motor Corporation per common share
Effect of dilutive securities
Assumed exercise of dilutive stock options
Diluted net income attributable to Toyota
Motor Corporation per common share
¥(436,937)
3,140,417
¥(139.13)
26
Fair value measurements:
¥ 209,456
3,135,986
¥ 66.79
―
12
¥ 209,456
3,135,998
¥ 66.79
In accordance with U.S.GAAP, Toyota classifies 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
¥ 408,183
3,135,881
¥ 130.17
$4,909
$1.57
Level 3: Unobservable inputs for assets or liabilities
(0)
34
(0)
The following table summarizes the fair values of the assets and liabilities measured at fair value on
¥ 408,183
3,135,915
¥ 130.16
$4,909
$1.57
a recurring basis at March 31, 2010 and 2011:
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 effect due to the
net loss attributable to Toyota Motor Corporation
for the period.
Certain stock options were not included in the
computation of diluted net income attributable to
Toyota Motor Corporation per share for the years
ended March 31, 2010 and 2011 because the
options’ exercise prices were greater than the
average market price per common share during
the period.
In addition to the disclosure requirements
under U.S.GAAP, Toyota discloses the informa-
tion below in order to provide financial statement
users with valuable information.
Assets
Cash equivalents
Time deposits
Marketable securities and other securities investments
Government bonds
Common stocks
Other
Derivative financial instruments
Total
Liabilities
Yen in millions
March 31, 2010
Level 1
Level 2
Level 3
Total
¥ 677,442
―
¥ 69,702
173,500
¥ ―
―
¥ 747,144
173,500
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
Derivative financial instruments
Total
¥ ―
¥ ―
¥(259,184)
¥(259,184)
¥(13,545)
¥(13,545)
¥ (272,729)
¥ (272,729)
TOYOTA ANNUAL REPORT 2011
107
Notes to Consolidated Financial Statements
Assets
Cash equivalents
Time deposits
Marketable securities and other securities investments
Government bonds
Common stocks
Other
Derivative financial instruments
Total
Liabilities
Yen in millions
March 31, 2011
Level 1
Level 2
Level 3
Total
¥ 729,569
¥ 58,281
¥ —
¥ 787,850
—
120,000
3,127,170
960,229
37,842
—
—
—
539,109
405,524
—
—
—
—
11,782
120,000
3,127,170
960,229
576,951
417,306
¥4,854,810
¥1,122,914
¥ 11,782
¥5,989,506
Derivative financial instruments
¥ —
¥ (215,283)
¥ (4,988)
¥ (220,271)
Total
¥ —
¥ (215,283)
¥ (4,988)
¥ (220,271)
Assets
Cash equivalents
Time deposits
Marketable securities and other securities investments
Government bonds
Common stocks
Other
Derivative financial instruments
Total
Liabilities
Derivative financial instruments
Total
U.S. dollars in millions
March 31, 2011
Level 1
Level 2
Level 3
Total
$ 8,774
—
$ 701
1,443
37,609
11,548
455
—
—
—
6,484
4,877
$58,386
$13,505
$ —
$ —
$ (2,589)
$ (2,589)
$ —
—
—
—
—
142
$ 142
$ (60)
$ (60)
$ 9,475
1,443
37,609
11,548
6,939
5,019
$72,033
$ (2,649)
$ (2,649)
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 significant assumption:
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Cash equivalents and time deposits
Derivative financial instruments
Cash equivalents include money market funds
and other investments with original maturities of
three months or less. Time deposits include
negotiable certificate of deposit with original
maturities over three months. These are highly
liquid investments, and quoted market prices are
used
these
the
investments.
fair value of
to determine
Marketable securities and other securities
investments
Marketable securities and other securities invest-
ments
include government bonds, common
stocks and other investments. Government bonds
include 76% of Japanese government bonds,
and 24% of U.S. and European government
bonds as of March 31, 2010, and 77% of Japanese
government bonds, and 23% of U.S. and
European government bonds as of March 31,
2011. Listed stocks on the Japanese stock
markets represent 88% and 86% of common
stocks as of March 31, 2010 and 2011, respec-
tively. 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. As of March 31, 2010,
marketable securities and other securities invest-
ments classified as Level 3 primarily included
retained interests in securitized financial receiv-
ables, which are measured at fair value using
assumptions such as interest rate, loss severity
and other factors.
to
instruments using
See note 20
the consolidated financial
statements about derivative financial instruments.
Toyota estimates the fair value of derivative
financial
industry-standard
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 significant
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. Toyota’s
fair value measurements consider
derivative
assumptions about counterparty and our own
non-performance risk, using such as credit
default probabilities.
TOYOTA ANNUAL REPORT 2011
108
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Notes to Consolidated Financial Statements
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, 2010 and 2011:
Balance at beginning of year
Total gains (losses)
Included in earnings
Included in other comprehensive income (loss)
Purchases, issuances and settlements
Other
Balance at end of year
Balance at beginning of year
Total gains (losses)
Included in earnings
Included in other comprehensive income (loss)
Purchases, issuances and settlements
Other
Balance at end of year
Yen in millions
For the year ended March 31, 2009
Marketable securities
and other securities
investments
Derivative financial
instruments
Total
¥23,818
¥ 25,499
¥ 49,317
586
(1,398)
(1,665)
(1,760)
(38,538)
(37,952)
—
7,026
279
(1,398)
5,361
(1,481)
¥19,581
¥ (5,734)
¥ 13,847
Yen in millions
For the year ended March 31, 2010
Marketable securities
and other securities
investments
Derivative financial
instruments
Total
¥19,581
¥ (5,734)
¥ 13,847
(641)
(99)
(6,376)
669
25,057
—
(13,582)
151
24,416
(99)
(19,958)
820
¥13,134
¥ 5,892
¥ 19,026
Balance at beginning of year
Total gains (losses)
Included in earnings
Included in other comprehensive income
Purchases, issuances and settlements
Other
Balance at end of year
Balance at beginning of year
Total gains (losses)
Included in earnings
Included in other comprehensive income
Purchases, issuances and settlements
Other
Balance at end of year
Yen in millions
For the year ended March 31, 2011
Marketable securities
and other securities
investments
Derivative financial
instruments
Total
¥ 13,134
¥ 5,892
¥ 19,026
433
779
(810)
(13,536)
¥ —
31,338
—
(8,381)
(22,055)
31,771
779
(9,191)
(35,591)
¥ 6,794
¥ 6,794
U.S. dollars in millions
For the year ended March 31, 2011
Marketable securities
and other securities
investments
Derivative financial
instruments
$ 158
$ 71
Total
$ 229
382
10
(111)
(428)
5
10
(10)
(163)
$ —
377
—
(101)
(265)
$ 82
$ 82
In the reconciliation table above, derivative
financial instruments are presented net of assets
and liabilities. The other amount primarily includes
the impact of currency translation adjustments for
the years ended March 31, 2009 and 2010 and
includes consolidated retained interests in securi-
tized financial receivables of ¥(13,165) million
($(158) million), certain derivative financial instru-
ments transferred into Level 2 due to be measured
at observable inputs of ¥(21,413) million ($(258)
million) and the impact of currency translation
adjustments for the year ended March 31, 2011.
Certain assets and liabilities are measured at
fair value on a nonrecurring basis. During the
years ended March 31, 2010 and 2011, Toyota
measured certain finance receivables at fair value
of ¥13,343 million and ¥15,893 million ($191
million) based on the collateral value, resulting in
loss of ¥2,485 million and gain of ¥2,083 million
($25 million). This fair value measurement on a
nonrecurring basis was classified as level 3.
During the year ended March 31, 2010, Toyota
measured certain investment in affiliated company
at fair value of ¥119,821 million based on the
quoted market price resulting in impairment loss
of ¥63,575 million. This fair value measurement
on a nonrecurring basis was classified as level 1.
TOYOTA ANNUAL REPORT 2011
109
Management’s Annual Report on Internal Control over Financial Reporting
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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 acquisi-
tion, 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 compli-
ance 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, 2011.
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, 2011, as stated in its report included herein.
TOYOTA ANNUAL REPORT 2011
110
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Toyota Jidosha Kabushiki Kaisha
(“Toyota Motor Corporation”)
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, 2010 and 2011, and the results of their
operations and their cash flows for each of the three years in the period ended March 31, 2011 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, 2011, 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.
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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 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 authoriza-
tions 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 compli-
ance with the policies or procedures may deteriorate.
Nagoya, Japan
June 24, 2011
TOYOTA ANNUAL REPORT 2011
111
Investor Information (As of March 31, 2011)
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Corporate Data
Major Shareholders (Top 10)
Ownership Breakdown
Company Name:
Toyota Motor Corporation
Number of Affiliates:
[Consolidated Subsidiaries]511
[Affiliates Accounted for by the Equity Method] 56
Name
Number of Shares Held
(Thousands)
Established:
August 28, 1937
Common Stock:
¥397,049 million
Fiscal Year-End:
March 31
Public Accounting Firm:
PricewaterhouseCoopers
Aarata
Number of Employees:
69,125 (Consolidated: 317,716)
Corporate Web Site:
[Corporate Information]
http://www.toyota-global.com
[IR Information]
http://www.toyota-global.com/investors
Stock Data
Number of Shares Authorized:
10,000,000,000 shares
Number of Shares Issued:
3,447,997,492 shares
Number of Treasury Stock:
312,298,805 shares
Number of Shareholders:
652,568
Number of Shares per Trading Unit:
100 shares
Stock Listings:
Securities Code:
[Japan] Tokyo, Nagoya, Osaka, Fukuoka, Sapporo [Overseas] New York, London
[Japan] 7203
American Depositary Receipts (ADR):
[Ratio] 1 ADR=2 common stocks [Symbol] TM
Transfer Agent in Japan:
Depositary and
Transfer Agent for ADR:
Mitsubishi UFJ Trust and Banking Corporation
10-11, Higashisuna, 7-chome, Koutou-ku, Tokyo 137-8081, Japan
Japan Toll-Free: (0120) 232-711
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
U.S.A.
U.K.
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
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
Tokio Marine & Nichido Fire Insurance Co., Ltd.
Mitsui Sumitomo Insurance Company, Limited
DENSO Corporation
343,704
215,640
191,724
130,057
110,672
85,866
84,184
67,095
65,166
58,678
33.7 %
Financial institutions, Brokerages
Foreign corporate entities and others 25.6 %
22.7 %
Individuals, etc.
18.0 %
Other corporate entities
Note: Individuals, etc. includes shares of
312 million treasury stock.
Toyota’s Stock Price and Trading Volume on the Tokyo Stock Exchange
Stock price (¥)
10,000
8,000
6,000
4,000
2,000
0
Trading volume
(Million shares)
400
300
200
100
0
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
High (¥)
Low (¥)
At
Year-End (¥)
8,350
5,430
7,550
7,880
4,810
4,970
5,710
2,585
3,120
4,235
3,140
3,745
3,955
2,800
3,350
TOYOTA ANNUAL REPORT 2011
112
http://www.toyota-global.com