Toyota Motor Corp. Annual Report 2013

Plain-text annual report

Annual Report 2013 Year ended March 31, 2013 True Competitiveness for Sustainable Growth Unveiled in March 2011, the Toyota Global Vision is an articulation of the kind of company we want to be. It clariﬁ es our values; we want to be a company that people choose and to bring a smile to the face of every Toyota customer. Supported by a virtuous cycle that entails making ever-better cars, enriching communities, and ensuring a stable base of business, we will continue to pursue sustainable growth through our Global Vision. ANNUAL REPORT 2013 Print Search Contents P a g e 03 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next 04 President’s Message 07 Special Feature I Making Ever-Better Cars 17 Special Feature II Enriching Lives of Communities 20 Special Feature III Stable Base of Business “Rewarded with a smile by exceeding your expectations,” The global ﬁ nancial crisis that began in 2008 reminded us once More than just providing transportation, the cars of the future will First and foremost, we strive to make ever-better cars and all 330,000 of us at Toyota around the world work together as again that the foundation of sustainable growth is making cars use information technology to serve a variety of functions that enrich communities in order to achieve sustainable growth and one to make ever-better cars and to contribute to society. that customers love. We changed direction, recommitting all of beneﬁ t both people and society as a whole. This vision under- a stable business foundation. This ever-growing stable busi- our resources to making even better cars, and over the course pins Toyota’s commitment to enriching lives of communities. ness foundation, in turn, provides us with the strength to make of the following four years we signiﬁ cantly improved our manu- Toyota is broadening its horizons as it seeks to improve day-to- ever-better cars and enrich society. It is a virtuous circle. facturing methods. day life and to bring smiles to the faces of future generations. 05 Launching a New Structure to Help Fulﬁ ll the Toyota Global Vision 21 Message from the Executive Vice President Responsible for Accounting 23 What Sets Toyota Apart Cautionary Statement with Respect to Forward-Looking Statements This document contains forward-looking statements that reﬂ ect Toyota’s plans and expectations. These forward-looking statements are not guarantees of future perfor- mance and involve known and unknown risks, uncertainties and other factors that may cause Toyota’s actual results, performance, achievements or ﬁ nancial position to be materially different from any future results, performance, achievements or ﬁ nan- cial position expressed or implied by these forward-looking statements. These factors include, but are not limited to: (i) changes in economic conditions and market demand affecting, and the competi- tive environment in, the automotive markets in Japan, North America, Europe, Asia and other markets in which Toyota operates; 24 Consolidated Performance Highlights 27 Review of Operations 27 Automotive Operations 28 Financial Services Operations 29 Non-Automotive Business Operations 32 Management and Corporate Information 32 R&D and Intellectual Property 34 Corporate Philosophy 35 Corporate Governance 37 Management Team 39 Risk Factors 42 Financial Section 122 Management’s Annual Report on Internal Control over Financial Reporting 123 Report of Independent Registered Public Accounting Firm 42 Selected Financial Summary (U.S. GAAP) 44 Consolidated Segment Information 45 Consolidated Quarterly Financial Summary 46 Management’s Discussion and Analysis of 124 Investor Information “Toyota Global Vision” on the Front-lines Financial Condition and Results of Operations The following special feature outlines how the Company engages in 72 Consolidated Financial Statements 78 Notes to Consolidated Financial Statements visionary management in the words of front-line personnel. Please read from the Special Feature page or turn to the following if accessing from the Special Content top page. (ii) ﬂ uctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar, the euro, the Australian dollar, the Russian ruble, the Canadian dollar and the British pound, and interest rates ﬂ uctuations; (iii) changes in funding environment in ﬁ nancial markets and increased competition in the ﬁ nancial services industry; (iv) Toyota’s ability to market and distribute effectively; (v) Toyota’s ability to realize production efﬁ ciencies and to implement capital expendi- tures at the levels and times planned by management; (vi) 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 econ- omy, 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; (vii) political and economic instability in the markets in which Toyota operates; (viii) Toyota’s ability to timely develop and achieve market acceptance of new prod- ucts that meet customer demand; (ix) any damage to Toyota’s brand image; (x) Toyota’s reliance on various suppliers for the provision of supplies; (xi) increases in prices of raw materials; (xii) Toyota’s reliance on various digital and information technologies; (xiii) fuel shortages or interruptions in electricity, transportation systems, labor strikes, work stoppages or other interruptions to, or difﬁ culties 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 (xiv) the impact of natural calamities including the negative effect on Toyota’s vehicle production and sales. ANNUAL REPORT 2013 Print Search Contents P a g e 04 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next The last four years have also been an opportunity to reconnect with our roots and return to the things that we have always held dear. Toyota’s roots lie in its founding principle of contributing to society by making automo- biles. Put simply, our goal should ever be to make ever-better cars. The products that are only just beginning to roll off the lines represent the ﬁ rst results of our groupwide emphasis on making ever-better cars. At the same time, we are making steady progress in reforming production technology and making new cars based on the Toyota New Global Architecture (TNGA). Looking at the consolidated results for the ﬁ scal year ended March 31, 2013, Toyota recorded substantial improvements in both revenue and earnings. This upturn was largely attributable to the increase in vehicle sales in North America and Asia and concerted efforts by the entire Toyota Group to boost proﬁ ts. On a non- consolidated basis, Toyota was successful in turning a proﬁ t for the ﬁ rst time in ﬁ ve years. This achievement is entirely attributable to the backing provided by the global Toyota team, which encompasses a wide range of stakeholders such as employees, sales outlets, suppliers, and, of course, customers. I am deeply grateful for their conﬁ dence and support. There is a growing sense that the business model set forth in the Toyota Global Vision is steadily becoming more robust. It is important, however, to remember that we have merely reached the next starting line and that every member of the Toyota Group needs to focus on ensuring true competitiveness—competitiveness that will support sustainable growth regardless of external factors. Ultimately, true competitiveness cannot be measured simply in terms of proﬁ t and loss, but rather represents a challenge that must be met on a groupwide basis. Our efforts to meet this challenge are exempliﬁ ed by our adoption of TNGA and the reorganization of our business units. Toyota celebrated its 75th anniversary in November 2012. In establishing the Company all those years ago, Kiichiro Toyoda envisioned a strong Japanese auto industry with its roots in Japanese manufacturing traditions. Today, we are entering the ﬁ nal quarter of the auto industry’s ﬁ rst century. Over the next 25 years, we must set our gaze even further, and gain some insight into this industry’s second century. We must then use this insight to inform our own long-term business structure. We must always bear in mind that the sustainable growth we are striving to achieve will create a better society for our children and grandchildren. True Competitiveness for Sustainable Growth Firstly, I would like to express my sincere gratitude for your continued support and understanding. “Rewarded with a smile by exceeding your expectations,” all 330,000 of us at Toyota around the world work Since 2009, Toyota has faced a series of prolonged crises. Looking back, these crises allowed us to gain invalu- together as one to make ever-better cars and to contribute to society. We kindly request the continued support able experience and taught us many truths that would have remained hidden if conditions had been more settled. and understanding of all our stakeholders. Particularly during the global ﬁ nancial crisis, when we fell into the red, we learned that a traditionally broad- based auto industry, while positioned to enjoy the fruits of rapid growth, may also be vulnerable to abrupt decline July 2013 that could bring anxiety to a substantial number of people. We are now more attuned to the importance of sustainable growth and have learned the critical lesson that an increase in production does not necessarily equate to growth. Akio Toyoda President ANNUAL REPORT 2013 Print Search Contents P a g e 05 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev [1 of 2] Next Launching a New Structure to Help Fulﬁ ll the Toyota Global Vision In April 2013, Toyota optimized its organizational structure in an effort to better fulﬁ ll the Toyota Global Vision by manufacturing ever-better cars. Together with the four newly established units encompassing our automotive operations, the TNGA Planning Division will be respon- sible for driving medium- to long-term technology-based product strategies under TNGA, while the Product and Business Planning Division will focus on generating market-based product and business strategies. New Structure IT & ITS External Affairs & Public Affairs Administration & HR Accounting Purchasing Customer First Promotion Technical Administration R&D Production Control Vehicle Production Engineering & Manufacturing Chairman/President TNGA Planning Division Product & Business Planning Division Lexus International Toyota No. 1 Toyota No. 2 Unit Center North America, Europe, Japan China; Asia & the Middle East; East Asia & Oceania; Africa; Latin America & the Caribbean Development, planning, and production of engines & other unit components (planning to production/sales) (planning to production/sales) Clarifying responsibility for operations and earnings while accelerating decision making Toyota has split its automotive business into four units comprising Lexus International, which covers our Lexus brand; Toyota No. 1, which oversees operations in North America, Europe, and Japan; Toyota No. 2, which is responsible for business in China, Asia & the Middle East, East Asia & Oceania, Africa, and Latin America & the Caribbean; and the Unit Center, which covers all unit- related operations. This more agile and autonomous management structure will enable us to clarify responsibil- ity for operations and earnings, and will allow managers in the ﬁ eld to make decisions more quickly based on genchi genbutsu (on-site, hands-on experience). Recognizing that innovation is required in order to establish Lexus as a Japanese global luxury brand, the president has taken the reins of the newly formed Lexus International unit. President Toyoda and six executive vice presidents (from left: Ihara, Kato, Ozawa, Kodaira, Maekawa, Sudo) ANNUAL REPORT 2013 Print Search Contents P a g e 06 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev [2 of 2] Next Launching a New Structure to Help Fulﬁ ll the Toyota Global Vision Ensuring that each unit pursues the most appropriate business model Under the new management structure, each business unit will optimize its own business model and aim for steady improvement, an approach that is expected to contribute to across-the-board growth. Toyota has thus Transforming the way we work Powertrain Development and Production Engineering Building (cid:2) Uniﬁ ed development ofﬁ ce (1) Stronger collaboration between engineering put in place a structure that is capable of continuously and production Prototype and production technique development Performance evaluation area 2 Expeditious prototype creation and evaluation Prototype creation and production development Standalone evaluation Performance evaluation (cid:2) Comprehensive evaluation under one roof (2) Expeditious prototype creation and evaluation (3) Single item and product evaluation on a vehicle and component basis Unified development office 1 Strengthen collaboration and engineering and production Product development making ever-better cars and maintaining outstanding qual- ity and proﬁ tability while further expanding vehicle sales. In addition to the ongoing development of the Lexus business as a in-house company, the Toyota business has been split into two business units and executive vice presidents appointed to assume responsibility for opera- tions and earnings. Just as the Lexus business has its own business model, the Toyota brand maintains two clearly distinct models covering operations in developed and emerging markets. For the developed markets in (cid:3) Optimum development efﬁ ciency (cid:3) Challenge of developing which Toyota No. 1 operates, success rests on our ability new technologies to capture replacement demand amid a market that is projected to remain stagnant in terms of scale. With this in mind, every effort will be channeled toward securing quali- Vehicle and component evaluation area 3 Single item and product evaluation on a vehicle and component basis Component evaluation Power package evaluation Power package evaluation on a vehicle basis (Dimensions: 108m x 89m x 58m; total floor space: 101,228m2) 12F 11F 10F 9F 8F 7F 6F 5F 4F 3F 2F 1F Powertrain Development and Production Engineering Building tative growth by expanding sales of ever-better cars that regard to annual vehicle sales, goals have been set for business and management, it is possible that compo- engage in face-to-face discussions with the staff respon- incorporate advanced technologies in such ﬁ elds as the the Lexus, Toyota No. 1, and Toyota No. 2 units at nents will play an even more signiﬁ cant role. Looking sible for production technologies and the development of environment and safety. Meanwhile, the emerging approximately 500,000 units, 4,000,000 units, and ahead, it is quite possible that the fate of manufacturing production methods. The second is to create a system markets in which Toyota No. 2 operates are experiencing 3,000,000 units, respectively. companies will depend more on the competitiveness of that can evaluate all stages of development, from funda- rapid growth. In these markets it is essential to capture With the aim of bringing products to market in their components than that of their ﬁ nished products. mental technologies to ﬁ nished vehicles and compo- new customers by introducing well-timed products that a responsive and timely manner, the Unit Center has In keeping with the above, Toyota has constructed nents, under one roof. ﬁ t market needs. Essentially, both Toyota No. 1 and Toyota been charged with developing globally competitive “unit” a new facility to facilitate the development of powertrains, To ensure that Toyota maintains a genuine competitive No. 2 must work to understand the particular stage of components, and its purview encompasses all opera- which are expected to play an increasingly central role in advantage, we will position TNGA at the heart of our development of their respective markets, and must tions from components planning to the development of the manufacture of ever-better cars. The facility, which endeavors as we engage in a comprehensive review of expand these markets by introducing ever-better cars. production technologies and functions. To secure the went online in February 2013, will enable us to produce the way we work. By making decisions in a timely They will also need to harness their accumulated know- comprehensive structure these operations entail, all ever-better powertrains, and will play a vital role in trans- manner and optimizing our business development strate- how to address the concerns that come with expansion. related component departments, including factories, forming the way we work and supporting the future of gies to suit markets, we will strive to make ever-better Adopting a horizontal structure, regional headquarters have been consolidated under the Unit Center with an the company. cars that meet local needs the world over. The overarch- have been established within Toyota No. 1 and Toyota executive vice president appointed to oversee operations In overall terms, there two overarching goals for transform- ing goal of the Toyota Global Vision is achieving sustain- No. 2 to ensure that the unique markets of each region as head of the Unit Center. While Toyota’s principal prod- ing the way we work. The ﬁ rst is to create an environment in able growth, and this will remain our focus as we look to are handled in an attentive and appropriate manner. With ucts, its cars, are universally recognized as central to its which powertrain research and development staff can the future. ANNUAL REPORT 2013 Print Search Contents P a g e 07 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [1 of 10] Enriching Lives of Communities Stable Base of Business At Toyota, we believe we’ve worked harder than anyone else to build better cars. The ambition of our founder, Kiichiro Toyoda, was to establish an automobile industry in Japan based on Japanese technology and skill. This drive gave us the original Crown, as well as the ﬁ rst-generation Toyota Prius, the world’s ﬁ rst mass-produced hybrid car. The global ﬁ nancial crisis that began in 2008 reminded us once again that the foundation of sustainable growth is making cars that customers love. We changed direction, recommit- ting all of our resources to making even better cars, and over the course of the following four years we signiﬁ cantly improved our manufacturing methods. > How do we create ever-better cars that delight our customers? > The deﬁ nition of a better car varies depending on the location. >What is essential to building the better cars of the future? ANNUAL REPORT 2013 Print Search Contents P a g e 08 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [2 of 10] Enriching Lives of Communities Stable Base of Business How do we create ever-better cars that delight our customers? Number of engine types Number of types Cumulative total Engine Engine series Displacement Displacement variations Fuel Fuel consumption and horse- power variations Platform Platform, transmission, drivetrain variations Exhaust Exhaust regulation compliance, model variations Source: Toyota Motor Corp. What constitutes a better car? dedicated to constantly delivering products and services All Toyota cars share the same emphasis on quality, In terms of engine types, for example, this has resulted that always exceed the expectations of our customers. safety, and environmental performance. At the same in an increasing range of speciﬁ cations for displace- What makes a car better? The answer to this question is We aim to inspire, excite, and create happiness. time, with regard to design, handling, ride, and equip- ment, horsepower, fuel consumption, platform, and different for each customer and it varies depending on where they are. We believe that a car that brings a smile to the face of a customer is without a doubt a better car. However, when it comes to making ever-better cars, there is no magic bullet, no ﬁ nish line. This is why we are INSIGHT The Toyota 86 reignited people’s love of cars ment, they also have the unique characteristics that our drivetrain in addition to modiﬁ cations in compliance with customers expect from better cars. Toyota has always country-speciﬁ c exhaust regulations. To continue followed an optimized development process for each making ever-better cars, we must constantly reassess car model, and the number of models in each line has the way development is optimized for each car model. expanded in tandem with increasing production volume. INSIGHT Each car is the product of connections between people ANNUAL REPORT 2013 Print Search Contents P a g e 09 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [3 of 10] Enriching Lives of Communities Stable Base of Business How do we create ever-better cars that delight our customers? How to standardize parts and units What is required of ever-better cars Representation of vehicle volume Zone A Zone B Zone C Zone D New concept cars Shift to zone B in the future Focus on interests and sensibilities (particularly for sports cars) High-volume cars for individuals and the general public Special-purpose vehicles, taxis, commercial vehicles Next-generation vehicles (Environment-friendly cars, new concept cars) aaarsrsrsr wittittithhh unnnnniqiqiqueeee chaahaaharacttctcteeerisistititics CaCCa ddd dududuuue e e tooototo rrregegegioioioionananaaalll opoppoptitittit mimimizazazazaz tititionononon annnnd didddd fferrreeentiataaa ionnn Appealing cars Product lineup Medium- to long-term plans Architecture Toyota’s car manufacturing design concepts LFA CROR WNWWW CROWN HIAHH CEE WELEE CABAA HIACE WELCAB PRIUS TOYOTA i-ROAD Customer expectations Modules and parts Grouped planning & development Compatible systems and parts families Parts developed for medium- to long-term scenarios • Individualistic designs • Excitement and inspiration • Superior driving performance • Emotional engagement and • Appealing designs • High basic performance • Ease of use • Price and affordability sensory appeal • Durability • Ease of use • Price and affordability • New concepts • New technologies • Environment-friendly/energy- saving features Common items: quality, safety, environmental performance Improving basic ride, turning, and braking performance Us sini g hihhh gh-q---- uaalllity bbbbasiccc parrrts anananaa d dd shssshsharrararrinining gg thththtt ememmemm aaacrcrcrrrosososs ss d differeneee t vevvvv hiclcc e seeeegmgmgmg entsss Source: Toyota Motor Corp. Consistently delivering better cars to customers The Toyota New Global Architecture (TNGA) is our medium- to long-term product lineup and release toward optimizing processes in each region—for exam- framework for making ever-better cars for a wide variety schedule, then grouping models within the lineup. ple, matching interior cabins, exterior designs, and driv- Toyota divides the vehicles it makes into four zones: of customers and regions in smarter and more efﬁ cient Toyota intends to raise the competitiveness of basic ing performance to the preferences of our customers. exciting, high performance vehicles; appealing yet prac- ways, with the ultimate aim of creating products that stir parts relating to ride, turning, and braking to world-class By grouping and unifying optimal driving positions and tical vehicles; commercial and heavy-duty vehicles; and our customers’ emotions. levels, and it is now able to standardize parts and units hip-point heights, we are able to share common cockpit next-generation vehicles. In our pursuit of ever-better cars, we listen to our customers to understand their expectations regarding design, driving performance, ride, and equipment in each of these zones. Just as a road determines the cars that will be driven on it, collaboration between the members of marketing INSIGHT Our engineers always keep customer expectations ﬁ rmly in mind Smarter and more efﬁ cient across different models through grouped development modules and parts across different car models and plat- that puts multiple models through the planning process forms. This, in turn, allows us to cut both the number of at the same time. For example, we have separately part variations and engineering man-hours. standardized the parts and units for compact, mid- Under TNGA, Toyota is increasing standardization sized, and large platforms (chassis) respectively. Based while enhancing basic performance and product appeal on the new vehicle architecture, we aim for full optimiza- above and beyond customer expectations. We expect and R&D teams around the world, as well as staff from In line with TNGA, Toyota aims to make ever-better cars tion by standardizing even more basic parts, including TNGA to result in lower basic costs and contribute to Japan, enables us to make cars that delight customers more efﬁ ciently by simultaneously cutting basic costs platforms and powertrains, across vehicle segments. So enhanced proﬁ tability. Toyota plans to start unveiling the world over. Toyota’s design and R&D bases in nine and substantially improving product appeal—which at far, Toyota has developed three front-wheel-drive plat- new car models developed under TNGA from 2015. locations outside Japan are key components of its global- ﬁ rst glance may seem to be contradictory goals. Toyota forms and plans to develop several car models based ized and localized operations, which integrate develop- applies a distinct planning and development process on each of these platforms. This streamlining has ment, engineering, manufacturing, sales, and services. with each car model, ﬁ rst ﬁ nalizing the projected resulted in extra R&D capacity, which we are directing ANNUAL REPORT 2013 Print Search Contents P a g e 10 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [4 of 10] Enriching Lives of Communities Stable Base of Business How do we create ever-better cars that delight our customers? Bringing out our true competitiveness We believe that sustainable growth can only be Competitiveness cannot be created overnight, nor achieved by focusing on areas where we are truly should it be regarded as a measurement derived from Continuing to concentrate investments in growth areas Toyota has been selling automobiles around the world competitive over the longer term, both inside and short-term proﬁ ts and costs, which ﬂ uctuate depending With further growth in sales volume likely, Toyota is ever since the ﬁ rst Crown was exported to the United outside Japan. In Japan, for example, because of its on prevailing business conditions. Competitiveness is a working hard to improve productivity. We are placing top States in 1957. Today, Toyota vehicles are driven in long history in the country, Toyota has a robust manu- multifaceted challenge that cannot be measured with priority on maximizing capacity utilization and making more than 170 countries and regions. In line with our facturing foundation replete with advanced technolo- data or numbers; it is the sum of countless factors, such effective use of our existing plants and manufacturing policy of producing where there is demand, since the gies, manufacturing expertise, talented human as a company’s ability to nurture human resources, a facilities from a global perspective. Over the next three early 1980s Toyota has progressively increased its car resources, and a multilayered supply network. It is this corporate culture that pursues greater productivity years we plan to concentrate on modernizing existing production in countries where its vehicles are sold. From foundation that has supported Toyota’s global ambi- through better quality and shorter lead times, the ability facilities rather than building new plants (excluding those 2001 onward, Toyota expanded production outside tions. Japan is and always will be central to the to innovate, and marketing skills, including after-sales for which construction is already planned or in progress). Japan in accordance with sharp growth in sales, and in Company’s ability to make competitive cars and create services. The current degree of our competitiveness We will continue to make capital investments that are 2007 its overseas production exceeded its production in innovative manufacturing technologies. To be truly varies by country and region. Looking at the situation necessary to sustain growth, and will focus on investing Japan for the ﬁ rst time. Toyota now has 51 manufactur- competitive, we think it is crucial to further increase from both the medium- and long-term perspectives, more efﬁ ciently. Toyota has made signiﬁ cant progress ing bases in 26 countries and regions. Having learned a Japan’s competitiveness as a global base. Toyota has Toyota is poised to reﬁ ne and improve its competitive- toward its goal of reducing the basic unit of capital great deal from the recent global ﬁ nancial crisis, been producing three million cars annually in Japan for ness. We have put in place groupwide systems that will invested in model redesigns by 40% compared to the however, Toyota has now begun to transition to a more than 30 years, and this production structure has enable us to continue making ever-better cars that are levels seen before the global ﬁ nancial crisis. While keep- sustainable growth model, shifting its focus away from laid the foundation of the manufacturing competitiveness of proﬁ table and excel in quality. ing total investment at an optimal level, Toyota will volume-driven growth. the Toyota Group, including its network of suppliers. INSIGHT The QC team’s job is to deliver zero defects continue its policy of concentrating investment in regions that are expected to grow—particularly in emerging markets, where we will step up investments substantially. ANNUAL REPORT 2013 Print Search Contents P a g e 11 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [5 of 10] Enriching Lives of Communities Stable Base of Business How do we create ever-better cars that delight our customers? LEXUS ES 350 Toyota Motor Manufacturing Kentucky AVALON CROWN INSIGHT Our teams design appealing cars that turn heads Strengthening manufacturing competitiveness proﬁ le of the Crown, with lines that leap forward, with one another to facilitate the development and engi- ago in 1988. TMMK now produces half a million cars evolved out of intense discussions and collaboration neering processes. This facility is playing a key role in a year, including the Camry and Avalon, for the U.S. The latest Crown model, inspired by the slogan “Taking between designers and manufacturing technology engi- shortening development times and standardizing market, and is a core manufacturing base, having on the challenge of innovation,” has emerged as a neers. These discussions led to major advances in designs, with the ultimate aim of creating innovations produced a signiﬁ cant portion of the 25 million cars symbol of Toyota’s “ReBORN” campaign. Representing design and production techniques, giving the car an that exceed the expectations of our customers. made by Toyota in North America as of the end of the pinnacle of Japanese manufacturing, the Crown is in undeniable sense of presence. To create a better car, We aim to strengthen our competitiveness and enable October 2012. In addition, the fourth-generation Avalon, the vanguard of our drive to make ever-better cars. we overhauled our previous approach of simply discard- sustainable growth through the provision of high-quality which ﬁ rst rolled off the production line in October 2012, Sales of the new Crown surged from the start—in the ing aesthetic improvements on the basis that they were products in areas where we are truly competitive. In the was designed and developed entirely by U.S. teams. In ﬁ rst three months of its release we sold double our “inefﬁ cient.” United States, for example, we continue to pursue the light of this enhanced competitiveness in the United target volume of 4,000 cars a month (the expected A prime example of TNGA’s approach to development true competitiveness symbolized by the words “Made States, Toyota has decided to start making the Lexus average over the life of the model). The new Crown was process reforms can be seen at the new Powertrain by Toyota.” Nowhere is this commitment better demon- ES 350 at TMMK in the summer of 2015. With the start created with the goal of making ever-better cars in mind, Development and Production Engineering Building, strated than at Toyota Motor Manufacturing, Kentucky, of ES 350 production, TMMK plans to expand its annual and required us to make major changes in the way where employees involved in the development of new Inc. (TMMK), which has been focusing on improving production capacity to 550,000 vehicles from its current everyone worked. For example, the distinctive side technologies and units are brought into close contact quality since it started production more than 25 years 500,000. ANNUAL REPORT 2013 Print Search Contents P a g e 12 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [6 of 10] Enriching Lives of Communities Stable Base of Business The deﬁ nition of a better car varies depending on the location. Vios Etios Valco Etios I n d i a B r a z i l I n d o n e s i a (cid:129) A cut above the rest, with an elegant design that T h a i l a n d (cid:129) Compact car developed from the ground up for emerg- (cid:129) Steel plates protecting the underbody of the car from (cid:129) Bioethanol-compatible ﬂ ex fuel speciﬁ cations loose rocks on rough roads (cid:129) Stability while driving on highways, and a comfortable evokes status ing markets (cid:129) Beverage holder capable of carrying seven one-liter ride on rough roads (cid:129) One-touch power windows and other extras in high (cid:129) Dynamic, elegant and clean exterior; pleasant interior bottles (cid:129) Dust prooﬁ ng speciﬁ cally for customers in Brazil, where demand locally offering value for money (cid:129) Air conditioner vents arranged side-by-side to circulate dust can be a problem (cid:129) Extremely roomy interior and plenty of storage space (cid:129) Optional package offering superior comfort in rear seats cool air to the rear seats (cid:129) Best-in-class fuel economy with 17.6 kilometers per liter of gasoline (calculated according to Indian standards) g ( (cid:129) Smooth ride and comfort on rough roads (cid:129) Best-in-class fuel economy (cid:129) Best-in-class fuel economy (cid:129) Optimizations based on 101 factors speciﬁ c to the s based on 101 factoototors speciﬁ c to th izations based on 101 fac rs speciﬁ c to th Indian market markeet on 101 fa Accelerating the development of compact cars in emerging markets for emerging markets, with the launch of the Innovative and the Middle East, and as of March 2012 a cumula- markets. The Vios is currently produced and sold in International Multipurpose Vehicle (IMV) series in 2004 tive total of 5 million IMVs have been sold worldwide. Thailand, Toyota’s largest production base in the ASEAN Toyota has reorganized its automotive operations into heralding a particularly important turning point. The IMV The IMV series was developed as a globally inte- region, and there are plans to export it to more than 80 four business units to propel the company toward series was developed for sale in more than 140 coun- grated model for all regions; however, starting in 2010 countries. achieving the Toyota Global Vision. The Lexus brand is tries, and Toyota began manufacturing ﬁ ve base models with the launch of the Etios compact car, Toyota began Toyota’s guiding philosophy since its foundation has now independent, and Toyota brand operations are divided into those in emerging markets and those in in ﬁ ve countries simultaneously. A local parts procure- to manufacture a range of cars that better reﬂ ect the been to contribute to communities the world over ment ratio of 100% was targeted, thereby keeping car needs of each region. With the launch of sedan and through localized operations. Our desire to exceed the North America, Europe, and Japan to reﬂ ect their mark- body prices competitive. At present, the IMV series is hatchback versions of the Etios, Toyota now has a total expectations of each and every customer has led us to edly different business models and to accelerate deci- manufactured in 12 countries and regions, with of eight compact cars designed for emerging markets promote the development of the automotive industry sion making in tune with local market needs. Thailand, Indonesia, Argentina, and South Africa posi- and plans to sell them in more than 100 countries. around the world. Toyota has progressively expanded its operations in tioned as four global supply bases. Diesel engines are Production of the Etios commenced in India (2010), emerging markets (especially in ASEAN countries) since made in Thailand, gasoline engines are made in followed by Brazil (2012), and most recently Indonesia the 1960s. In Southeast Asia, Toyota has endeavored Indonesia, and transmissions are made in the (2013), at Toyota’s second plant in Karawang. The Etios for years to build relationships of trust, weathering the Philippines and India. These components are then Valco hatchback has quickly become the “national car Asian currency crisis to steadily deliver cars that match supplied to the countries that make the car bodies. IMV of Indonesia.” customer preferences. These efforts have culminated in series vehicles are sold in 170 countries and regions Toyota also manufactures the Vios, a compact car the development of compact cars designed speciﬁ cally throughout Asia, Europe, Africa, Oceania, Latin America, designed as a step up from the Etios, in emerging ANNUAL REPORT 2013 Print Search Contents P a g e 13 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [7 of 10] Enriching Lives of Communities Stable Base of Business The deﬁ nition of a better car varies depending on the location. The increasing importance of localized R&D Our R&D bases allow us to make ever-better cars that are competitive in each region. They develop car bodies and parts in line with local needs, optimize powertrains to comply with local regulations, and expand the local procurement of parts in cooperation with local suppliers. As a core base in the Asia/Oceania region, Toyota Motor Asia Paciﬁ c Engineering and Manufacturing Co., Ltd. (TMAP-EM) collaborates with nearby R&D bases to develop cars speciﬁ cally for emerging markets. To put the ﬁ nishing touches on its local development structure, TMAP-EM plans to add to its team of roughly 600 employees to bolster its product planning, testing, and prototyping capabilities. Toyota Motor Engineering & Manufacturing (China) Co., Ltd. (TMEC), located in Changshu City, Jiangsu Province, conducts research and development in collab- oration with the R&D centers of two joint ventures engaged primarily in the development of car bodies. To develop cutting-edge fundamental technologies, TMEC oversees the development of engines for cars produced in China, tests and conducts performance evaluations on a large-scale test course, and develops environmen- tal technologies. Since the widespread use of eco-cars beneﬁ ts the environment, TMEC is working toward the production of eco-cars in China. At the Beijing International Automotive Exhibition in April 2013, TMEC showcased its accomplishments by exhibiting the Yundong Shuangqing II concept car, which features hybrid components that are currently in development. Toyota’s presence in emerging markets VIOS Aftab Automobiles Ltd. (Bangladesh) LAND CRUISER IMC (Pakistan) COROLLA, HILUX TMMBC (Mexico) TAKOMA COROLLA AAV (Egypt) FORTUNER China S 1964 P 1999 SFTM (China) COASTER, LAND CRUISER, LAND CRUISER PRADO, PRIUS TFTM (China) VIOS, COROLLA, CROWN, REIZ, RAV4 GTMC (China) CAMRY, YARIS, HIGHLANDER, CAMRY HYBRID Taiwan S 1949 P 1986 Kuozui Motors, Ltd. (Taiwan) CAMRY, COROLLA, WISH, VIOS, YARIS, INNOVA TMV (Vietnam) CAMRY, COROLLA, VIOS, INNOVA, HIACE, FORTUNER TMP (Philippines) INNOVA, VIOS Legend For each country/region: S = Start of sales P = Start of production Producer PPPP (n (name of country or region) Main models produced (as of September 2012) Source: Toyota Motor Corp. Yundong Shuangqing II concept car at the 12th Beijing International Automotive Exhibition TDV (Venezuela) COROLLA, FORTUNER, HILUX AVA (Kenya) LAND CRUISER DYNA Malaysia S 1967 P 1982 ASSB (Malaysia) HIACE, VIOS, COROLLA, HILUX, INNOVA, FORTUNER Brazil S 1958 P 1959 TDB (Brazil) COROLLA, ETIOS Argentina S 1978 P 1997 TASA (Argentina) HILUX, FORTUNER South Africa S 1962 P 1962 TSAM (South Africa) COROLLA, HILUX, FORTUNER, DYNA, HIACE India S 1985 P 1999 TKM (India) COROLLA, INNOVA, FORTUNER, ETIOS AVANZA Thailand S 1962 P 1964 TMT (Thailand) VIOS, COROLLA, CAMRY, CAMRY HYBRID, PRIUS, YARIS, HILUX VIGO, FORTUNER Indonesia S 1971 P 1977 HMMI (Indonesia) DYNA ADM (Indonesia) AVANZA TMCA (Australia) CAMRY, CAMRY HYBRID TMMIN (Indonesia) INNOVA, FORTUNER, ETIOS FALCO ANNUAL REPORT 2013 Print Search Contents P a g e 14 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [8 of 10] Enriching Lives of Communities Stable Base of Business What is essential to building the better cars of the future? Hybrid vehicle sales volume (Thousands of units) (Millions of units) (Thousands of units) Hybrid vehicle share of Toyota product mix by region 1,800 1,500 1,200 900 600 300 0 (CY) Lineup of hybrid vehicles in all categories 117 months 27 months 18 months 14 months 11 months 5 million 4 million 3 million As of August 2013, Toyota sells 23 hybrid vehicle models (including a plug-in hybrid) in approximately 80 countries and regions. Toyota plans to launch 15 new hybrid vehicle models by the end of 2015. 2 million 1 million 6 5 4 3 2 1 0 40% 680 800 600 400 200 7% 100 0 15% 350 10% 250 13% 110 5% 50 1997 1999 2001 2003 2005 2007 2009 2011 (cid:2) Annual sales (cid:3) Cumulative sales (right scale) 2013 Jan.-Mar. (Mar. 31, 2013) Japan North America Europe (cid:2) 2008 (cid:2) 2012 Source: Toyota Motor Corp. Hybrid vehicles are no longer “niche” products creating ever-better cars will require us to focus our about 14% on a global basis. Hybrid vehicles are no efforts on a wide range of technological initiatives, such longer “niche” products, and Toyota considers hybrid The environment is one of Toyota’s top management as the development of non-hybrid eco-cars that are technology to be the core environmental technology of Impact of the widespread use of hybrid vehicles priorities. We have promoted the proliferation of hybrid compatible with other types of fuels. the 21st century. As a result, the Company is focusing As of March 31, 2013, Toyota estimates that the vehicles since the introduction of the original Prius in In March 2013, 15 years and seven months since the on hybrid technology, which can work in tandem with a 1997 because we believe that the widespread use of ﬁ rst hybrid vehicle was launched in August 1997, the wide variety of fuel types and which includes all of the eco-cars will beneﬁ t the environment. To encourage number of hybrid vehicles sold by Toyota topped the ﬁ ve fundamental technologies necessary to make eco-cars, more customers to choose hybrid vehicles (the most million mark. As of August 2013, Toyota sells 23 hybrid as well as developing eco-cars other than hybrid vehicles. popular type of eco-car on the market), we have been vehicles, including one plug-in hybrid, in about 80 coun- focusing on enhancing performance, reducing costs, tries and regions. In 2012, hybrid vehicles accounted for and expanding our lineup. In addition, we believe that around 40% of all cars sold by Toyota in Japan, and combined effect of all the hybrid vehicles it has sold is an approximately 34 million ton reduction in CO2 emissions (assuming that gasoline engine cars of an equivalent class, size, and horsepower would have been sold instead). Toyota estimates that the amount of gasoline saved is equivalent to about 12 million kiloliters (using an equivalent class of gasoline engine car as a benchmark). ANNUAL REPORT 2013 Print Search Contents P a g e 15 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [9 of 10] Enriching Lives of Communities Stable Base of Business What is essential to building the better cars of the future? Measures to reduce air resistance Unit: Coefficient of drag Resistance to vehicle motion when driving at 100km/h 0.55 0.50 0.45 0.40 LAND CRUISER ROLLA A COROLLA RAV4R RAV4 EEEEE ESESESEE TIMA ESTIMA 0.35 RLELELELEETTTTRLET STARLET CELSIOR CELSIOR 0.30 0.25 0.20 (Year) 1980 Rolling resistance: 30% Air resistance: about 70% SUVs SUVs Minivans Minivans Hatchbacks Hatchbacks Sedans Sedans PRIUSS PRIUS [Overview of the Aerodynamics Laboratory] Wind tunnel type: Circuit, low-noise driving simula- tion wind tunnel Maximum wind speed: 250 km/h Fan: 9m fan diameter; 8,000kW output Air portal dimensions: 7m wide × 4.5m high Tunnel dimensions: 110m long, 52m wide, 27m high Aerodynamics Laboratory 1990 2000 2010 2020 Main equipment: Six-component balance with 5-belt moving belt system, sound analysis system, wide-area, three-dimensional ﬂ ow analysis system Source: Toyota Motor Corp. Vehicle testing at the Aerodynamics Laboratory Large wind tunnel fan Promoting the further uptake of hybrid vehicles drag for a compact hybrid vehicle is reduced from 0.30 Center contains a newly constructed Aerodynamics During the 12 years between the launch of the ﬁ rst Prius to 0.25 at this speed, fuel economy improves by about Laboratory for conducting research into reducing air and the launch of today’s third-generation Prius, Toyota Toyota aims to make hybrid vehicles more appealing to 8%. Toyota has already achieved a high level of aerody- resistance, improving driving performance, and reducing managed to reduce the cost of the hybrid system to a wider range of customers by improving performance, namic performance in its cars, with the Prius as a prime wind noise, all of which will enable us to develop ever- only one-third of the original cost. reducing costs, and expanding its lineup. example. Nevertheless, Toyota continues to develop better cars. Toyota is improving aerodynamic performance by technologies to enhance aerodynamic performance With regard to cost reductions, Toyota has substan- reducing the vehicles’ air resistance. Air resistance even further by improving the exterior shape, vehicle tially reduced the cost of hybrid systems while signiﬁ - accounts for approximately 70% of the resistance to vehi- package, ventilation, airﬂ ow around the tires, and airﬂ ow cantly improving fuel economy by optimizing the hybrid cle motion at 100 kilometers per hour. If the coefﬁ cient of under the body of the car. The Head Ofﬁ ce Technical system with each successive generation of the Prius. Toyota plans to launch 15 new hybrid vehicle models globally between August 2013 and December 2015. ANNUAL REPORT 2013 Print Search Contents P a g e 16 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars [10 of 10] Enriching Lives of Communities Stable Base of Business What is essential to building the better cars of the future? Toyota is developing a variety of next-generation eco-cars that leverage its advanced hybrid technologies. Breakdown of mobility in the future PHV EV Motor Large- capacity battery Engine Fuel tank Motor Large- capacity battery Fuel cell vehicles Fuel cell vehicles Hybrid and plug-in hybrid vehicles Hybrid and plug-i n hybri d vehicles Electric vehicles Electri c vehi cles Passenger cars Passenger cars Metropolitan buses Metropolitan buses Large trucks Large trucks High-speed railw High-speed railway Zero CO2 emissions over a limited range Compact delivery Compact delivery vehicles vehicles Short-distance Short-distance applications applications Vehicle size FCV(BUS) FCV(BUS) HV HV Delivery trucks Delivery trucks Ordinary railway Ordinary railway EV EV FC FCV-R FCV-R WinWinglet Winglet PHV PHV i series i-series i-series Motorcycles Motorcycles Energy source Electricity, gasoline, diesel, biofuel, CNG, synthetic fuel, etc. Hydrogen Electric vehicles: short-distance applications Hybrid vehicle and plug-in hybrid vehicles: passenger cars Fuel cell vehicles: medium and long-distance applications Source: Toyota Motor Corp. Motor Battery Engine Fuel tank HV FCV Zero CO2 emissions Motor Battery FC stack Hydrogen tank What will be the next winner among eco-cars? prevent atmospheric pollution but also provide Fuel cell vehicles (FCVs) also represent a key technol- Toyota is working to create compact, high- economic beneﬁ ts in the form of lower fuel and electric- ogy of the future. These vehicles are powered by elec- performance fuel cell systems at lower cost with the Toyota believes that next-generation eco-cars will use ity costs. Moreover, if electricity generated by solar tricity generated by the chemical reaction between aim of introducing a sedan-type FCV around 2015 in plug-in hybrid technology, a new concept that combines power is used to recharge car batteries, CO2 emissions oxygen in the air and hydrogen, and have numerous major cities where it would be relatively easy to build the beneﬁ ts of hybrid and electric vehicles. The batteries can be reduced to signiﬁ cantly lower levels. This is why potential beneﬁ ts, including zero CO2 emissions while the necessary infrastructure. of plug-in hybrid vehicles can be recharged directly from we believe that plug-in hybrid vehicles will be the winner driving, a range comparable to a similar gasoline- household electrical outlets, and charging batteries among next-generation eco-cars. Generating, conserv- powered car, and the fact that hydrogen can be allows vehicles to operate primarily in EV mode over ing, and storing energy at the household level will produced from a variety of primary energy sources. The short ranges. Plug-in hybrid vehicles operate as conven- become possible through the skillful management of hybrid technologies honed by Toyota to date are vitally tional hybrid vehicles once their batteries have been electricity used to recharge electric or plug-in hybrid important to the development of FCVs. However, the depleted. As the driving range of electric vehicles vehicles and electricity used inside homes. Toyota is necessary infrastructure (i.e., hydrogen refueling increases, the amount of CO2 emitted and gasoline conducting R&D in this area. stations) has yet to be put in place. consumed decreases accordingly. This will not only help FCV-R concept car on display at the 2011 Tokyo Motor Show ANNUAL REPORT 2013 Print Search Contents P a g e 17 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars Enriching Lives of Communities [1 of 3] Stable Base of Business More than just providing transportation, the cars of the future will use information technology to serve a variety of functions that beneﬁ t both people and society as a whole. This vision underpins Toyota’s commitment to enriching lives of communities. In addition to supporting efforts aimed at realizing a low-carbon society through the development and promotion of eco-cars, Toyota is broadening its horizons as it seeks to improve day-to-day life and to bring smiles to the faces of future generations. To this end, we are engaging in the development of “smart communities,” environment-conscious cities featuring smart grids that link people with their cars and homes. We aim to help create a responsible and safe automobile society that emphasizes IT-based infrastructure. ANNUAL REPORT 2013 Print Search Contents P a g e 18 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars Enriching Lives of Communities [2 of 3] Stable Base of Business How Toyota Plans to Enrich Communities Charging the PHV PRIUS at home Estimates of household electric power consumption in Japan by application following growth in EV and PHV use TVs Lighting Air conditioning EV and PHV charging 33% Water heaters Refrigerators Other Electric carpets Source: Toyota Motor Corp. TOYOTA i-ROAD, an EV concept car Telematics service Toyota believes that promoting the widespread use of Toyota participates in testing and demonstrations mile” transfer needs) while offering clues to resolving of partner robots. To this end, we are leveraging the eco-cars will beneﬁ t the environment greatly. In addition, around the world to get closer to its goal of achieving inner-city transportation issues. considerable technological know-how we have culti- we recognize the importance of ﬁ nding new ways to link smart communities and a smart, high-mobility society. Toyota is also contributing to society in the transporta- vated in the industrial robotics ﬁ eld since the 1970s. people, the cars they drive, and the communities they This is why the TOYOTA i-ROAD, a twin-seater EV tion information ﬁ eld. Our Big Data platform, for example, Toyota aims to improve quality of life by developing live in. This includes meeting the power and recharging concept car designed to provide “exhilarating motion,” monitors trafﬁ c conditions using telematics services robots for nursing, medical, and home care purposes. needs of drivers of plug-in hybrid (PHV) and electric is one of two EVs selected for an experimental car shar- which gather information through in-car navigation and vehicles (EVs). ing program that will provide ultra-compact EVs for mobile communication units. The Big Data platform Enriching communities entails contributing to their short-distance travel in and around the city of Grenoble, achieved outstanding results in the aftermath of the INSIGHT Taking a “three are better than one” approach development and welfare worldwide. This fundamental France. This project aims to determine the viability of Great East Japan Earthquake. conviction has been key to Toyota’s growth over the providing an alternative means of transport for short In addition to the above, Toyota is contributing to years and is essential to its future sustainability. distances of a few kilometers (often referred to as “last society and communities through the development INSIGHT We aim to make driving more fun INSIGHT Robots can improve our quality of life ANNUAL REPORT 2013 Print Search Contents P a g e 19 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars Enriching Lives of Communities [3 of 3] Stable Base of Business Contributing to Society through the Manufacture of Cars The F-Grid Concept Energy ﬂ ow: Normal conditions Electricity Heat Emergency conditions Electricity The Kokoro Hakobu Project— An initiative that supports disaster-stricken areas Mobile power source during emergencies The Toyota East Japan Technical Skills Academy, an in-house training facility established to strengthen manufacturing capabilities in the Tohoku region Supporting the swift recovery of local communities during emer- gencies using a variety of facili- ties and devices, including solar panels, storage batteries, and satellite phones The Toyota East Japan Technical Skills Academy Artist’s depiction of a factory and industrial complex based on the F-Grid Concept Toyota aims to be a good corporate citizen, and contrib- the support activities carried out in the immediate after- a major tipping point for us. The earthquake and its and scale, the F-Grid is expected to achieve energy utes to society through a range of unique projects. From math of the Great East Japan Earthquake. aftermath made us realize the considerable amount of savings of 20% and reduce emissions by nearly 30%. global perspectives, we channel our energies toward Since its foundation, Toyota has worked diligently to time a full recovery requires, and we asked ourselves The project also aims to provide electricity (together with key ﬁ elds, such as the environment, trafﬁ c safety, and uphold the principle of contributing to society by making what we could do on a more permanent basis to work local power companies) to the local community during human resource development. In Japan, we place ever-better cars. In an effort to position the Tohoku with and support society. We realized that we could best emergencies. Hybrid vehicles such as the Aqua and considerable emphasis on society and culture and have region as the Company’s third major production base in help the region by expanding local manufacturing activi- Prius can also generate and store power. been recognized for our efforts. We received the 2012 Japan after the Chubu and Kyushu regions, Toyota ties, which, in turn, led to the establishment of TMEJ. By leveraging its manufacturing strengths, Toyota Mécénat Award for Supporting Hearts in recognition of established Toyota Motor East Japan, Inc. (TMEJ). The Moreover, we have launched the Factory Grid (F-Grid) intends to position its factories at the heart of its efforts our efforts under the Company’s Kokoro Hakobu Project, Aqua, Japan’s top-selling hybrid hatchback in ﬁ scal Concept, which aims to facilitate safe, responsible, and to reenergize communities and provide society with which aims to support reconstruction and revitalization 2013, is manufactured by TMEJ. Of the approximately comfortable lifestyles. Spearheaded by TMEJ, the proj- unique and innovative services. Moving forward, Toyota efforts in disaster-stricken areas. Organized by the 8,700,000 vehicles produced by Toyota worldwide in ect will create a smart community through comprehen- will continue to contribute to local communities though Association for Corporate Support of the Arts, the ﬁ scal 2013, around 500,000 were produced in the sive energy management that encompasses the entire conscientious manufacturing. award presented to the Company was speciﬁ cally for Tohoku region, and TMEJ is becoming a major compact industrial area as well as the surrounding area. Under INSIGHT The “F-Grid” shows us what future communities could look like INSIGHT We see the global environment as a core customer The Great East Japan Earthquake, which devastated energy self-sufﬁ ciency ratio of approximately 70%. INSIGHT Cars will change the lifestyles of the future car production center and exporter. the F-Grid Concept, efforts will be made to secure an INSIGHT A crisis is emerging in one of the world’s most forested countries the Tohoku region of Japan on March 11, 2011, was Compared with industrial complexes of a similar size ANNUAL REPORT 2013 Print Search Contents P a g e 20 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars Enriching Lives of Communities Stable Base of Business [1 of 4] First and foremost, we strive to make ever-better cars and enrich communities in order to achieve sustainable growth and a stable business foundation. This ever-growing stable busi- ness foundation, in turn, provides us with the strength to make ever-better cars and enrich society. It is a virtuous circle. In 2011, we unveiled the “Toyota Global Vision.” We feel conﬁ - dent that we are now within sight of ensuring sustainable proﬁ tability, a key tenet of the vision. Toyota’s business environment, however, changes from moment to moment, meaning that we must constantly strive to secure forward-looking human resources and improve efﬁ - ciency. In this context, we realize that crucial intangible attributes, such as a corporate ethos that is conducive to innovation, cannot be ignored in our quest for sustainable growth. ANNUAL REPORT 2013 Print Search Contents P a g e 21 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars Enriching Lives of Communities Stable Base of Business [2 of 4] Message from the Executive Vice President Responsible for Accounting Fiscal 2013 Business Results Consolidated Financial Forecasts for Fiscal 2014 On a consolidated basis for the ﬁ scal year ended March 31, 2013, vehicle sales For the ﬁ scal year ending March 31, 2014, we forecast vehicle sales of 9.1 increased 1.519 million units to 8.871 million units compared with the previous million units, net revenues of ¥23.5 trillion, operating income of ¥1.8 trillion and ﬁ scal year. Net revenues expanded ¥3.4805 trillion to ¥22.0641 trillion, operat- ing income grew ¥965.2 billion to ¥1.3208 trillion, and net income rose ¥678.6 net income of ¥1.37 trillion on a consolidated basis. Our exchange rate assumptions are ¥90 per US$1 and ¥120 per €1. billion to ¥962.1 billion. In our forecast for consolidated operating income, we expect exchange-rate Factors that contributed to operating income included ¥650.0 billion from ﬂ uctuations (¥400 billion), cost reduction efforts (¥160 billion), and marketing marketing efforts, ¥450.0 billion from cost reduction efforts, ¥150.0 billion due efforts (¥80 billion) to be contributing factors. We also expect a ¥160.8 billion to exchange-rate ﬂ uctuations, and ¥15.2 billion due to other factors. Factors rise in expenses that will negatively affect operating income. However, the that were detrimental to operating income included a ¥300.0 billion rise in expected increase will be largely attributable to forward-looking expenditures, expenses. With regard to marketing, the volume of sales was higher in all such as R&D aimed at making ever-better cars. As such, we view these regions owing to supply shortages in the previous ﬁ scal year caused by the expenses as necessary investments for future growth. Meanwhile, we will Great East Japan Earthquake and ﬂ ooding in Thailand. In Japan, sales continue working to steadily improve earnings in our daily operations, including increased during ﬁ scal 2013 due in part to the invigorating effect of eco-car through companywide value analysis (VA) activities and other cost reduction subsidies on the market. In North America, sales of such mainstay models as efforts as well as measures to promote sales efﬁ ciency. the Corolla and Camry remained strong amid robust demand. In Asia, sales We have been aiming to establish a cycle of developing cars that delight our volumes grew substantially as the company rode market growth in each coun- customers and beneﬁ t society while fulﬁ lling our duty to increase sales and try, especially in Thailand and Indonesia. Operating income also received a consequently proﬁ ts that are then reinvested in developing ever-better cars. To signiﬁ cant boost from a drive to reduce costs undertaken together with our support this cycle, we aim to maintain and build on a strong earnings base suppliers throughout the ﬁ scal year as well as a weakening of the yen in the through marketing, suitable controls on ﬁ xed costs and thorough cost reductions. second half of the ﬁ scal year. I believe these results have positioned the company within reach of accom- plishing its objective of creating a strong earnings base under the Toyota Global Financial Strategy Vision announced in 2011. The three key priorities of our ﬁ nancial strategy are growth, efﬁ ciency 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. We aim to achieve sustainable growth by maintaining and building on a strong earnings base. ANNUAL REPORT 2013 Print Search Contents P a g e 22 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars Enriching Lives of Communities Stable Base of Business [3 of 4] Message from the Executive Vice President Responsible for Accounting FY2014 Forecast: Consolidated Vehicle Sales 1. Growth: Sustainable growth through continuous forward-looking growth in automotive markets, propelled by a recovery in the United States and (Thousands of units) 10,000 8,000 6,000 4,000 2,000 0 8,871 2,279 2,469 799 1,684 1,640 9,100 +229 2,120 -159 2,640 830 1,760 1,750 +171 +31 +76 +110 FY2013 Results FY2014 Forecasts Change (cid:2) Japan (cid:2) North America (cid:2) Europe (cid:2) Asia (cid:2) Other investments expansion in emerging markets. We believe that, in addition to putting crisis We believe that automotive markets worldwide will grow over the medium to measures into place, maintaining adequate liquidity is essential to the imple- long term. As they expand, the focus of market growth is likely to shift toward mentation of forward-looking investment aimed at improving product appeal emerging markets and such fuel-efﬁ cient options as hybrid and compact vehi- and the development of next-generation technologies as well as to the estab- cles. We plan to invest efﬁ ciently and actively in these areas to meet structural lishment of global production and sales structures. We will continue to pursue shifts in demand and to ensure long-term sustainable growth. For example, we improvements in capital efﬁciency and cash ﬂow. will prioritize the investment of management resources in the development of next-generation environmental technologies, such as fuel cells. We will also expand our lineup of hybrids and other eco-cars and sell them globally while Dividends and Share Acquisitions increasing sales in emerging markets by strengthening locally produced models Toyota considers the enhancement of shareholder value a priority management and building an optimized supply structure. I believe we should work to realize policy and to this end is aiming for sustainable growth through corporate reor- a balanced business structure as stated in the Toyota Global Vision, i.e., the ganization to increase corporate value. We aim to pay stable, ongoing divi- FY2014 Forecast: Consolidated Financial Summary (Billions of yen) “50:50 sales ratio,” with half of our sales coming from developed markets such dends, targeting a consolidated payout ratio of 30%, while giving due Net Revenues Operating Income Income before Income Taxes and Equity in Earnings of Afﬁ liated Companies Net Income Attributable to Toyota Motor Corporation FOREX Rates Yen/US$ Yen/Euro FY2014 Forecasts (Apr. 1, 2013– Mar. 31, 2014) ¥23,500.0 1,800.0 FY2013 Results (Apr. 1, 2012– Mar. 31, 2013) ¥22,064.1 1,320.8 1,890. 0 1,403.6 1,370.0 ¥ 90 120 962.1 ¥ 83 107 Change ¥1,435.9 479.2 486.4 407.9 ¥ +7 +13 as Japan, the United States, and Europe and the other half from emerging consideration to such factors as performance each term, investment plans, markets. and cash and cash equivalents. To succeed in this highly competitive industry, we plan to use retained earnings to quickly commercialize environment- and 2. Efﬁ ciency: Improving proﬁ tability and capital efﬁ ciency safety-related next-generation technologies, with emphasis on customer safety Toyota will continue its push forward with the Toyota New Global Architecture and peace of mind. Within this context, Toyota declared an annual dividend (TNGA), an initiative to overhaul the way we work with the goal of facilitating the payment of ¥90 per share for the ﬁscal year ended March 31, 2013. timely launch of appealing products globally. Under TNGA, we are improving Toyota did not acquire its own shares in the ﬁscal year ended March 31, 2013. development efﬁ ciency and making ever-better cars by standardizing parts and We will continue striving to further improve proﬁts and meet the expectations components through grouped development. Moreover, Toyota has improved its of our shareholders. FY2014 Forecast: Consolidated Operating Income Analysis (vs. FY2013) FY2013 Results Positive Factors Effects of FOREX Rates Cost Reduction Efforts Marketing Efforts Financial Services Subtotal Increase in Expenses, etc. Negative Factors FX Effects at Overseas Subsidiaries (Translational) Subtotal Total FY2014 Forecasts (Billions of yen) Operating Income 1,320.8 +400.0 +160.0 +80.0 -30.0 +640.0 -160.8 +60.0 -160.8 +479.2 1,800.0 ability to invest capital efﬁ ciently and is aiming to obtain the same results with less outlay. We will strive to further improve our earnings structure through efﬁ - cient investment that emphasizes the areas in which we want to advance, including hybrids, other eco-cars, and emerging markets. 3. Stability: Maintaining a solid ﬁ nancial base To ensure a solid ﬁnancial base, we secure sufﬁ cient liquidity and stable share- holders’ equity. This allows us to maintain capital expenditure and R&D invest- ment at levels conducive to future growth as well as to maintain working capital at a level sufﬁ cient for operations, even when business conditions are difﬁ cult due to such factors as steep increases in raw materials prices or volatility in foreign exchange rates. We plan to reﬁ ne and implement measures to improve business continuity planning in the event of a major disaster. Toyota anticipates July 2013 Nobuyori Kodaira Executive Vice President ANNUAL REPORT 2013 Print Search Contents P a g e 23 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Making Ever-Better Cars Enriching Lives of Communities Stable Base of Business [4 of 4] What Sets Toyota Apart Toyota has grown from a single core concept that is still > The improvement process is inﬁ nite, and after-the- suggestions be made openly, discussed, and put into prac- shared by the entire Group: contributing to society by fact improvements are in essence forward-looking Kaizen (Continuous Improvement) making ever-better cars. improvements Some of the values and ideas that have deﬁ ned These directives, which form part of Toyota’s manage- Toyota over its 75-year history are listed below. ment philosophy, are by no means limited to the INSIGHT We want to build a sense of unity The Toyota Production System (TPS) production front-line. They apply universally to all endeavors. In effect, TPS represents the building blocks of Toyota’s human resource development endeavors. TPS encourages the complete elimination of waste, overburdening, and irregularities from the production Genchi Genbutsu (On-Site, Hands-On Experience) process. The system, originally employed in the textile The genchi genbutsu principle refers to much more than tice to ensure continuous improvement. INSIGHT We aim to be valued for our trustworthiness Building “true competitiveness” industry, is based on two fundamental concepts: jidoka, merely visiting a site to examine something in situ. It entails Representing a never-ending cycle of progress, the word which can be loosely translated as “automation with understanding and respectfully considering the opinions of kaizen encapsulates a spirit of striving for continuous a human touch,” and the Just-in-Time (JIT) principle. on-site individuals as well as of individuals who have exten- improvement and a refusal to accept the idea that some- To consistently deliver a higher level of quality and Under these concepts, if a problem occurs, the equip- sive relevant knowledge. Genchi genbustu is thus a key thing cannot be made better. Toyota believes that acknowl- competitive products to its customers, Toyota must ment immediately stops running, preventing the manu- concept in the improvement process. Furthermore, the edging the possibility of continuous improvement can make continue to nurture a corporate culture that places the facture of defective products, and at each stage notion of “respect for people” is consistent with Toyota’s tasks easier and more enjoyable. From an organizational utmost value on quality, productivity, and cost efﬁ ciency. production is limited to only what is needed, when it is founding philosophy, and is underpinned by the concept of standpoint, kaizen involves the entire workforce while relying In addition to an unwavering commitment to JIT that needed, and in the amount needed. thoroughgoing and direct communication. on the extensive knowledge, skills, and experience of the underscores our commitment to the development of a > Establish the facts through genchi genbutsu (on-site, hands-on experience) > Stop production lines when a problem occurs and implement corrective and improvement measures The nature of the Toyota Production System INSIGHT We continue to improve the traditional process of sintering INSIGHT We are striving to cut energy use in half people working directly on the process. The concept is short and efﬁ cient supply chain, we realize that we must based on individuals taking ownership of their work and also provide customers with a wide-ranging, compre- focusing on what should be done rather than on what can hensive, and well-organized after-sales service network. be done. At the same time, the kaizen process is under- From a long-term perspective, we can only stay pinned by thoroughgoing and direct communication. It is competitive if we continue to focus on developing essential to follow through once a decision has been human resources, fostering relationships of trust made upon thorough deliberation with the participation between management and labor, and ensuring that of all. We consider this a valuable part of our corporate each employee remains committed to conscientious culture. Taiichi Ono (1912-1990), a former Toyota executive manufacturing. For its part, Toyota will continue to hone vice president and founder of the Toyota Production its true competitiveness, which provides the underlying System, once commented that while the wisdom of strength for its manufacturing platform over the medium humankind was inﬁ nite, that wisdom tended to emerge only to long term. By doing so, we hope to ensure sustain- during periods of adversity. When things are not going well able growth. and a better method is discovered, it is critical that INSIGHT A smile from a customer is the sign of a job well done ANNUAL REPORT 2013 Print Search Contents P a g e 24 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next [1 of 3] Consolidated Performance Highlights Consolidated Performance (U.S. GAAP) Fiscal years ended March 31 Net Revenues: Automotive Financial Services All Other Inter-Segment Elimination Operating Income (Loss): Automotive Financial Services All Other Inter-Segment Elimination Net Income (Loss) Attributable to Toyota Motor Corporation*2 ROE ROA As of March 31 Total Assets Toyota Motor Corporation Shareholders’ Equity Short-Term Debt, Including Current Portion of Long-Term Debt Long-Term Debt, less Current Portion 2009 2010 ¥20,529,570 18,564,723 1,377,548 1,184,947 (597,648) (461,011) (394,876) (71,947) 9,913 (4,101) (436,937) -4.0% -1.4% ¥29,062,037 10,061,207 6,317,184 6,301,469 ¥18,950,973 17,197,428 1,245,407 947,615 (439,477) 147,516 (86,370) 246,927 (8,860) (4,181) 209,456 2.1% 0.7% ¥30,349,287 10,359,723 5,497,997 7,015,409 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 (Yen in millions, U.S. dollars in millions) 2009 2010 ¥ (139.13) 100.00 3,208.41 ¥ 3,120 ¥10,757,752 ¥ 66.79 45.00 3,303.49 ¥ 3,745 ¥12,912,751 *1: U.S. dollar amounts have been translated at the rate of ¥94.05=US$1, the approximate current exchange rate at March 31, 2013. *2: “Net Income attributable to Toyota Motor Corporation”, equivalent to “Net Income” up to 2009. Millions of yen 2011 ¥18,993,688 17,337,320 1,192,205 972,252 (508,089) 468,279 85,973 358,280 35,242 (11,216) 408,183 3.9% 1.4% ¥29,818,166 10,332,371 5,951,836 6,449,220 Yen 2011 ¥ 130.17 50.00 3,295.08 ¥ 3,350 ¥11,550,792 2012 2013 U.S. dollars*1 in millions 2013 % change 2013 vs. 2012 ¥18,583,653 16,994,546 1,100,324 1,048,915 (560,132) 355,627 21,683 306,438 42,062 (14,556) 283,559 2.7% 0.9% ¥30,650,965 10,550,261 5,963,269 6,042,277 ¥22,064,192 20,419,100 1,170,670 1,066,461 (592,039) 1,320,888 944,704 315,820 53,616 6,748 962,163 8.5% 2.9% ¥35,483,317 12,148,035 6,793,956 7,337,824 $234,601 217,109 12,447 11,339 (6,294) 14,045 10,045 3,358 570 72 10,230 — — $377,281 129,166 72,237 78,020 +18.7 +20.2 +6.4 +1.7 — +271.4 +4,256.9 +3.1 +27.5 — +239.3 — — +15.8 +15.1 +13.9 +21.4 2012 2013 U.S. dollars*1 2013 % change 2013 vs. 2012 ¥ 90.21 50.00 3,331.51 ¥ 3,570 ¥12,309,351 ¥ 303.82 90.00 3,835.30 ¥ 4,860 ¥16,757,268 $ 3.23 0.96 40.78 $ 51.67 $178,174 +236.8 +80.0 +15.1 +36.1 +36.1 ANNUAL REPORT 2013 Print Search Contents P a g e 25 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next [2 of 3] Consolidated Performance Highlights Consolidated Performance (U.S. GAAP) Net Revenues Operating Income (Loss)/ Operating Income Ratio (¥ Billion) 25,000 20,000 15,000 10,000 5,000 0 (cid:2)(cid:2) Operating Income (Loss) (cid:3)(cid:3) Operating Income Ratio (¥ Billion) 1,500 1,000 500 0 -500 Net Income (Loss) Attributable to Toyota Motor Corporation/ROE (cid:2)(cid:2) Net Income (Loss) Attributable to Toyota Motor Corporation (cid:3)(cid:3) ROE (cid:2) Net Revenues: (cid:2) Operating Income ¥22,064.1 billion ( +18.7%) 1,320.8 billion (+271.4%) (cid:2) Net Income Attributable to Toyota Motor Corporation 962.1 billion (+239.3%) (%) 15 10 5 0 -5 (¥ Billion) 1,000 750 500 250 0 -250 -500 (%) 20 15 10 5 0 -5 -10 Analysis of Net Income Attributable to Toyota Motor Corporation (¥ Billion) Net Income Attributable to Toyota Motor Corporation (+678.6) Operating Income (965.2) Excluding Valuation Gains/Losses from Interest Rate Swaps (+952.3) FY ’09 ’10 ’11 ’12 ’13 FY ’09 ’10 ’11 ’12 ’13 FY ’09 ’10 ’11 ’12 ’13 R&D Expenses/Capital Expenditures for Property, Plant and Equipment (excluding vehicles and equipment operating leases) (cid:2)(cid:2) R&D Expenses (cid:2)(cid:2) Capital Expenditures for Property, Plant and Equipment (¥ Billion) 1,500 Marketing Efforts +650.0 Total Assets/ROA (cid:2)(cid:2) Total Assets (cid:3)(cid:3) ROA (¥ Billion) 40,000 30,000 20,000 10,000 0 -10,000 (%) 8 6 4 2 0 -2 Note: “Net Income Attributable to Toyota Motor Corporation,” equivalent to “Net Income” up to 2009. Toyota Motor Corporation Shareholders’ Equity/ Shareholders’ Equity to Total Assets (cid:2)(cid:2) Toyota Motor Corporation Shareholders’ Equity (cid:3)(cid:3) Shareholders’ Equity to Total Assets (¥ Billion) 15,000 (%) 50 12,000 9,000 6,000 3,000 0 40 30 20 10 0 283.5 0 FY2012 Cost Reduction Efforts +450.0 Effects of FOREX Rates +150.0 Increase in Expenses, etc. -300.0 Other +15.2 Non- Operating Income +5.5 Equity in Earnings of Affiliated Companies +33.8 Income Taxes, etc. -325.9 962.1 FY2013 ’09 ’10 ’11 ’12 ’13 FY ’09 ’10 ’11 ’12 ’13 FY ’09 ’10 ’11 ’12 ’13 Net Revenues by Region Japan North America Europe Asia Other Regions Operating Income by Region (¥ Billion) 576.3 * Figures for North America exclude valuation gains/losses from interest rate swaps. +783.3 +28.7 +8.6 +119.2 +24.9 160.2* 188.9* ’13 ’12 ’13 17.7 ’12 26.4 ’13 256.7 ’12 376.0 ’13 108.8 ’12 133.7 ’13 ’12 -207.0 ’09 ’10 ’11 ’12 ’13 ’09 ’10 ’11 ’12 ’13 ’09 ’10 ’11 ’12 ’13 ’09 ’10 ’11 ’12 ’13 ’09 ’10 ’11 ’12 ’13 Japan North America Europe Asia Central and South America, Oceania and Africa Note: Fiscal years ended March 31 1,200 900 600 300 0 FY (¥ Billion) 15,000 12,000 9,000 6,000 3,000 0 FY ANNUAL REPORT 2013 Print Search Contents P a g e 26 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next [3 of 3] Consolidated Performance Highlights Consolidated Vehicle Production and Sales Thousands of units 2012 3,940 3,495 1,275 383 1,441 152 93 151 7,435 2,071 5,281 1,872 798 1,327 289 223 214 550 8 7,352 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 7,308 Vehicle Sales Fiscal years ended March 31 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 Consolidated Total 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 7,567 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 7,237 [Reference] Vehicle Sales > Consolidated vehicle unit sales in Japan and overseas came to 8,871,000 in the ﬁ scal year ended March 31, 2013, up 1,519,000, or 20.7%, com- pared with the previous ﬁ scal year. > Consolidated vehicle unit sales in Japan were 2,279,000, an increase of 208,000, or 10.1%, year on year. Excluding mini-vehicles, Toyota and Lexus vehicle unit sales (retail) was 1,612,000, up 162,000, or 11.2%, rep- resenting a record market share of 48.4%. > Total vehicle unit sales (retail), including the Daihatsu and Hino brands, was also a historic high, reaching 9,692,000, a year-on-year increase of 1,358,000, or 16.3%. > Consolidated Lexus vehicle unit sales came to approximately 500,000, around 85,000, or 20.6%, higher than the previous ﬁ scal year. By geographic region, Lexus vehicle unit sales in Japan, North America, Europe, Asia, and other were about 42,000, 270,000, 43,000, 92,000, and 49,000, respectively. * There are certain exceptional cases that do not follow the aforementioned ﬂ ow. 2013 4,276 4,422 1,677 368 1,924 205 100 148 8,698 2,279 6,592 2,469 799 1,684 364 271 259 741 5 8,871 % change 2013 vs. 2012 Vehicle Production by Region +8.5 +26.5 +31.5 -3.9 +33.5 +34.9 +7.5 -2.0 +17.0 +10.0 +24.8 +31.9 +0.1 +26.9 +26.0 +21.5 +21.0 +34.7 -37.5 +20.7 (cid:2) Japan (cid:2) Overseas Total (Thousands of units) 10,000 8,000 6,000 4,000 2,000 0 FY ’09 ’10 ’11 ’12 ’13 Vehicle Sales by Region (cid:2) Japan (cid:2) Overseas Total (Thousands of units) 10,000 8,000 6,000 4,000 2,000 0 FY ’09 ’10 ’11 ’12 ’13 Breakdown of Vehicle Production by Region (cid:2) Japan (cid:2) North America (cid:2) Europe (cid:2) Asia (cid:2) Other Regions Consolidated Total: 8,698 thousand units 5.2 % 22.1% 4.2% FY2013 49.2% 19.3% Breakdown of Vehicle Sales by Region (cid:2) Japan (cid:2) North America (cid:2) Europe (cid:2) Asia (cid:2) Other Regions Consolidated Total: 8,871 thousand units 18.5% 25.7% FY2013 19.0% 27.8% 9.0% ANNUAL REPORT 2013 Print Search Contents P a g e 27 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Automotive Operations Financial Services Operations Non-Automotive Business Operations Looking at conditions in the automotive market, Vehicle Sales by Principal Markets Automotive Operations The Company works diligently to produce ever- better cars that exceed expectations in order to deliver products that bring smiles to the faces of people who choose Toyota. In the ﬁ scal year under review, net revenues from automotive operations totaled ¥20,419.1 billion, an increase of ¥3,424.5 billion, or 20.2%, compared with the previous ﬁ scal year. Operating income also climbed by ¥923.0 billion, year on year to ¥944.7 billion. Net Revenues (¥ Billion) 25,000 20,000 15,000 10,000 5,000 0 FY ’09 ’10 ’11 ’12 ’13 Operating Income (Loss) (¥ Billion) 1,000 800 600 400 200 0 -200 -400 FY trends mainly in the United States and emerging regions including Asia were ﬁ rm. Against this back- drop, Toyota aggressively introduced new products in Japan and successfully expanded sales thanks to the efforts of dealers nationwide. Outside Japan, the Company boosted vehicle sales across all regions. The ﬁ scal year ended March 31, 2013 marked the 15th anniversary since the launch of the Prius, Toyota’s initial foray into the hybrid market. During the ﬁ scal year under review, the Company broke through the 1,000,000 barrier in annual global vehicle sales for hybrid cars with cumulative sales exceeding 5,000,000. Source: Toyota Motor Corp. Note: Market deﬁ nitions are as follows: Europe: Germany, France, the United Kingdom, Italy, Spain, the Netherlands, Belgium, Portugal, Denmark, Greece, Ireland, Sweden, Austria, Finland, Switzerland, Norway, Poland, Hungary, and the Czech Republic Indonesia, Thailand, the Philippines, Malaysia, Singapore, Vietnam, Taiwan, South Korea, and Brunei Darussalam Mini-vehicles excluded Asia: Japan: Consolidated Vehicle Sales (Thousands of units) 10,000 8,000 6,000 7,352 2,071 4,000 1,872 2,000 0 FY 798 1,327 1,284 ’12 8,871 +1,519 2,279 +208 2,469 +597 799 1,684 +1 +357 1,640 +356 ’13 Change Japan (Thousands of units) (cid:2)(cid:2) Total market sales (excluding mini-vehicles) (cid:3)(cid:3) Toyota market share (%) 60 North America (Thousands of units) 20,000 (cid:2)(cid:2) Total market sales (cid:3)(cid:3) Toyota market share 4,000 3,000 2,000 1,000 0 FY ’09 ’10 ’11 ’12 ’13 Europe (Thousands of units) 25,000 (cid:2)(cid:2) Total market sales (cid:3)(cid:3) Toyota market share 20,000 15,000 10,000 5,000 0 CY ’08 ’09 ’10 ’11 ’12 15,000 10,000 5,000 0 CY ’08 ’09 ’10 ’11 ’12 Asia (Thousands of units) 10,000 (cid:2)(cid:2) Total market sales (cid:3)(cid:3) Toyota market share 45 30 15 0 (%) 10 8 6 4 2 0 8,000 6,000 4,000 2,000 0 CY Millions of yen ’08 ’09 ’10 ’11 ’12 2009 2010 2011 2012 2013 ¥12,186,737 ¥11,220,303 ¥10,986,246 ¥11,167,319 ¥12,821,018 6,284,425 2,083,113 4,385,476 2,094,265 4,751,886 1,993,946 3,334,274 1,760,175 5,429,136 1,981,497 3,374,534 1,809,116 6,222,914 3,013,128 2,719,329 1,882,900 5,670,526 2,147,049 2,655,327 1,673,861 (%) 40 30 20 10 0 (%) 25 20 15 10 5 0 % change 2013 vs. 2012 +14.8 +32.3 +4.5 +31.5 +19.0 (4,416,093) (4,586,841) (4,423,947) (5,604,105) — ¥(225,242) 85,490 (32,955) 203,527 115,574 ¥(362,396) 339,503 13,148 312,977 160,129 ¥(207,040) 186,409 17,796 256,790 108,814 ¥576,335 221,925 26,462 376,055 133,744 — +19.1 +48.7 +46.4 +22.9 For the years ended March 31 Net Revenues by Region: Japan North America Europe Asia Other* Intersegment elimination/ unallocated amount (5,495,438) Operating income (loss): Japan North America Europe Asia Other* Intersegment elimination/ unallocated amount ¥(237,531) (390,192) (143,233) 176,060 87,648 ’09 ’10 ’11 ’12 ’13 Japan　(cid:4) North America　(cid:4) Europe　(cid:4) Asia　 (cid:4) Other* 46,237 1,122 4,918 (7,142) (13,633) — Note: Fiscal years ended March 31 * Central and South America, Oceania, Africa and the Middle East, etc. ANNUAL REPORT 2013 Print Search Contents P a g e 28 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Automotive Operations Financial Services Operations Non-Automotive Business Operations Financial Services Operations handled by Toyota Financial Services Corporation Bangalore, Delhi, and Mumbai. Toyota’s ﬁ nancial services operations are primarily expanded its business in such major cities as Toyota offers automotive ﬁ nancing and a variety of other ﬁ nancial services for total support of customer lifestyles. In the ﬁ scal year ended March 31, 2013, net revenues from ﬁ nancial service operations amounted to ¥1,170.6 billion, up ¥70.3 billion, or 6.4%, compared with the previous ﬁ scal year. From a proﬁ t perspective, operating income climbed ¥9.3 billion, or 3.1%, year on year to ¥315.8 billion. This upswing in operating income was largely attributable to the increase in ﬁ nanc- ing volume. (TFS), which has overall control of ﬁ nancial services In such major markets as Europe and the United subsidiaries worldwide. TFS provides ﬁ nancial States, TFS aims to ensure stable earnings by work- services primarily for vehicle purchases and leases to ing to secure margins and achieve thorough low-cost approximately 9.0 million customers in 34 countries operations with consideration for vehicle sales and regions worldwide. support and the balancing of business risks. During the period under review, we continued with To respond to dramatic changes in the business last year’s efforts to strengthen regional strategies by environment, TFS will strengthen groupwide compli- enhancing our relationships with distributors through the ance and risk management structures while focusing provision of ﬁ nancial products and services meeting vari- on enhancements to its business platform, such as IT ous national and regional customer characteristics. platform development and human resource cultivation TFS continued to broaden its connections with in management. customers in Japan, responding to their needs by offering ready access to sound ﬁ nancial services such as credit cards and housing loans in addition to automotive ﬁ nancing. Overseas, the Company took proactive steps to develop business in emerging markets. After estab- Total assets Net revenues Operating income Overview of Toyota’s Financial Services Operations ¥16,231.4 billion ¥1,170.6 billion ¥315.8 billion 34 countries and regions worldwide lishing a local subsidiary in India in May 2011, Operating areas operations commenced in earnest from June 2012. In the ensuing period, TFS has successfully Number of employees approx. 9,000 (As of March 31, 2013) Net Revenues (¥ Billion) 1,500 1,200 900 600 300 0 FY ’09 ’10 ’11 ’12 ’13 Operating Income (¥ Billion) 400 Financial Services Operations Organization Total Assets (cid:2)(cid:2) Toyota (Consolidated)　(cid:2)(cid:2) TFS (¥ Trillion) 35 300 200 100 0 -100 FY ’09 ’10 ’11 ’12 ’13 30 25 20 15 10 5 0 FY ’09 ’10 ’11 ’12 ’13 Note: Fiscal years ended March 31 Note: Fiscal years ended March 31 ANNUAL REPORT 2013 Print Search Contents P a g e 29 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Automotive Operations Financial Services Operations Non-Automotive Business Operations [1 of 3] Non-Automotive Business Operations Non-automotive business operations include Intelligent Transport Systems (ITS), information technology and telecommunications, e-TOYOTA, housing, marine, and biotechnology and affores- tation businesses. In each of 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 of companies as another key aspect in the creation of future core businesses. In the ﬁ scal year under review, net revenues from non-automotive business operations were ¥1,066.4 billion, ¥17.5 billion, or 1.7%, higher than the previous ﬁ scal year. Operating income also improved ¥11.5 billion, or 27.5%, year on year to ¥53.6 billion. Net Revenues (¥ Billion) 1,200 1,000 800 600 400 200 0 FY (cid:2) Intelligent Transport Systems (cid:2) Information Technology and Telecommunications (cid:2) e-TOYOTA Toyota is involved in the planning and development of Toyota dealers also serve as sales points for mobile Toyota is developing e-TOYOTA business operations products and services for Intelligent Transport phones and point-to-point telecommunications to facilitate the integration of IT services and automo- Systems (ITS). We view this technology as a valuable services provided by KDDI Corporation at more than biles. We designed and developed the GAZOO way to link motor vehicles and transportation infra- 7,000 sales outlets (vehicle dealers, parts dealers, members-only automobile portal site, a three- structures, thereby contributing to sustainable rental ofﬁ ces, and L&F ofﬁ ces) throughout Japan. dimensional virtual city called METAPOLIS and other economic development. Toyota is has also been engaged in the promotion services. In the ﬁ eld of telematics, we are developing In 2009, we helped create a practical vehicle- of functions and services that link cars and mobile G-BOOK/G-Link, an information service for onboard infrastructure cooperative system for safe driving that phones, such as hands-free telephones and G-BOOK terminals, with other telematics services planned for prevents trafﬁ c accidents more effectively than services, and in 2012 launched the eCONNECT for China and other countries. current safety technologies. In conjunction with this, the new Prius PHV and the Toyota Friend service. (cid:3) Read more Toyota developed an onboard communications Toyota’s information technology and telecommuni- device, mainly for expressway use, compatible with cations business will come to play an even more the ITS Spot Service. Also, in 2011 Toyota commer- important role as we develop smart grids that link cialized the Driving Safety Support System (DSSS), people, cars and homes. ’09 ’10 ’11 ’12 ’13 equipped with this device. an onboard navigation system for public highways. We will continue to increase the number of models Toyota is also engaging in R&D for vehicle infra- structure cooperative systems, such as actively participating in public and private sector ﬁ eld trials, so as to bring them into use as soon as possible. (cid:3) Read more Operating Income (¥ Billion) 60 50 40 30 20 10 0 -10 FY ’09 ’10 ’11 ’12 ’13 Note: Fiscal years ended March 31 TOPICS New “Big Data Trafﬁ c Information Service” Toyota developed the “Big Data Trafﬁ c Information Service,” a new kind of service utilizing big data that collects and stores trafﬁ c information via telematics services. Based on such data, trafﬁ c information, statistics, and other related information can be provided to local governments and busi- nesses to aid trafﬁ c ﬂ ow improvement, provide map informa- tion services, and assist disaster relief measures. At the same time, Toyota upgraded its existing “smart G-BOOK” telematics service for smartphones to allow private users access to “Big Data Trafﬁ c Information Service” content. The upgraded service features full support for a range of mobility options, from driving to walking, and features “T-Probe” trafﬁ c information (available for the ﬁ rst time on systems other than ofﬁ - cial Toyota on-board navigation systems) that enables tailored route calculation taking trafﬁ c congestion into account. In disaster situations, information on roads that remain open as well as evacuation sites, shelters, and other facilities can be accessed at any time free of charge. Moving forward, Toyota is committed to providing increasingly convenient total life services by promoting the widespread use of its “Big Data Trafﬁ c Information Service” as well as such linked services as the new “smart G-BOOK.” The Company is dedi- cated to building safe communities while supporting infra- structure that is resilient to disasters. (cid:3) Read more ANNUAL REPORT 2013 Print Search Contents P a g e 30 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Automotive Operations Financial Services Operations Non-Automotive Business Operations [2 of 3] (cid:2) Housing (cid:2) Marine (cid:2)Biotechnology and Afforestation Since Toyota entered the housing business in 1975, Toyota manufactures and sells pleasure boats, marine Toyota is making every effort to contribute to the Toyota Housing Corporation has expanded to provide engines and a variety of marine components. All creation of a resource recycling society through our homes under the name Toyota Home, offering high products take full advantage of our engine technolo- afforestation activities, as well as our horticultural, durability and earthquake resistance, as well as excel- gies and other advanced technologies cultivated environmental greening and agricultural biomass lent security, health and environmental features. during years of automotive manufacturing. The operations. Toyota Housing Corporation offers environment- PONAM-35, which was launched in September Following previous afforestation and forestry devel- friendly homes that conserve and create energy while 2011, was voted Japan’s 2011 Boat of the Year, and opment projects in Australia and the Philippines, we having the durability to last for many years, and in won the 2011 Good Design Award. are engaging in a forest restoration model project in November 2011, we began selling “smart houses,” (cid:3) Read more comfortable and economical homes that combine Toyota technologies to link homes and cars. At the same time, Toyota is engaging in leading-edge devel- opment in a variety of ﬁ elds, such as the operational testing of smart grids. Note: Effective October 1, 2010, all housing operation produc- tion and technical development functions were trans- ferred from Toyota Motor Corporation to Toyota Housing Corporation. (cid:3) Read more the town of Odaicho, located in Japan’s Mie Prefecture. In our Greeniﬁ cation Business, to counter- act the urban heat-island phenomenon we offer Smart Green Parking, which provides greening in parking areas, and Smart Green Wall for wall green- ing. We have established a sales subsidiary in China for this business. In our agricultural biomass opera- tions, we added to our lineup of ResQ Series manure composting facility deodorizers. (cid:3) Read more ANNUAL REPORT 2013 Print Search Contents P a g e 31 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Automotive Operations Financial Services Operations Non-Automotive Business Operations [3 of 3] TOPICS Promoting the Fun of Automobiles Toyota is developing a range of activities to make cars more fun for dedicated motorsports fans as well as for a broader range of car enthusiasts. Activities for dedicated motorsports fans Activities for car fans and enthusiasts Aimed at broadening the appeal of car racing and foster- ing more car enthusiasts, Toyota is striving through GAZOO Racing* to make ever-better cars that satisfy drivers and promote the joy of cars in ways that tran- scend the role of a typical car manufacturer. As a part of its unwavering commitment to making ever-better cars, every year Toyota participates in the ADAC 24h Rennen Nürburgring, a 24-hour endurance race in Germany. Employees take part both as drivers and mechanics. In addition to helping develop human resources well-versed in the making of cars, Toyota places considerable emphasis on promoting efforts aimed at commercializing models that deliver the fun of driving in the GRMN (GAZOO Racing tuned by MN) and G (G Sports) categories. Furthermore, in striving to promote the joy of cars, the Company holds circuit driving programs throughout Japan to allow individuals with no racing experience to easily enjoy the thrills of circuit driving in a safe environment. The TOYOTAGAZOO Racing FESTIVAL is one initiative that strives to broaden opportunities in which car fans and enthusiasts can interact. * A vehicle-development and motor-sports support program created by GAZOO for people to experience the fun of cars. GAZOO gives Toyota test drivers chances to race, and helps in our goal of making ever-better cars through vehicle development, while promoting the allure of cars through grassroots motor sports. (cid:3) Read more WEC WEC NASNASNASNASNAA CARCARCARCARARC RR NASCAR SUPER GT SUPSUPSUPPPUPSUPEREREREREREREERE GTGTGTGTGTTG SUPER FORMULA SUPSUPSUPSUPUPPU ERERERERE FORFORFORORFOOOF MULMULMULMULUULLLAAAAAAA In 2012, Toyota continued its ongoing involvement in the SUPER GT and SUPER FORMULA series in Japan as well as the NASCAR Nationwide Series of races in the United States. At the same time, the Company not only participated in the FIA World Endurance Championship for hybrid vehicles, it won several of the series’ races. Toyota has thus had the opportunity to provide enjoyment and excitement to a great many people. In 2013, the Company will work diligently to provide even more opportunities for people to enjoy the world of racing. (cid:3) Read more ANNUAL REPORT 2013 Print Search Contents P a g e 32 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev R&D and Intellectual Property [1 of 2] Corporate Philosophy Corporate Governance Management Team Risk Factors Next 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 (cid:2) Providing clean and safe products and (cid:2) R&D Activities The overriding goal of Toyota’s technology and product 3.7% of consolidated net revenues. We worked closely with suppliers to develop components and (cid:2) R&D Organization Toyota operates a global R&D organization with the development activities is to minimize the negative aspects products more efﬁ ciently and took steps to reduce our primary goal of building automobiles that precisely meet of driving, such as trafﬁ c 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 conﬂ icting goals to a high degree, we want to open the door to the automobile society of the future. own R&D expenses. At the same time, we plan to continue making substantial investments in R&D involving forward-looking, leading-edge technologies and the development of products associated with the environment, energy, and safety. These investments are essential to preserving our competitive edge in To ensure efﬁ cient progress in R&D activities, we terms of technologies and products. 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., Toyota Motor East Japan, Inc., and many other Toyota Group companies. Overseas, we have a worldwide network of technical centers as well coordinate and integrate all phases, from basic (cid:3) Read more about “History of Technological Development” as design and motorsports R&D centers. research to forward-looking technology and product enhancing the quality of life of people every- development. With respect to such basic research issues as energy, the environment, information tech- (cid:2) Domestic and Overseas R&D Bases Activities Facility Name Location where through all our activities. (cid:2) Pursuing advanced technological develop- ment in a wide range of ﬁ elds, we pledge to provide attractive products and services that respond to the needs of customers worldwide. R&D Expenses (¥ Billion) 1,000 800 600 400 200 0 FY nology, telecommunications, and materials, projects Japan are regularly reviewed and evaluated in consultation with outside experts to achieve efﬁ cient 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 efﬁ cient development investment. Head Ofﬁ ce Toyota Technical Center Higashi-Fuji Technical Center Tokyo Design Research & Laboratory Shibetsu Proving Ground Toyota Central Research & Development Laboratories, Inc. Product Planning, Design, Vehicle Engineering and Evaluation Advanced Engineering Research of Advanced Styling Designs Vehicle Testing and Evaluation Toyota City, Aichi Prefecture Susono City, Shizuoka Prefecture Hachioji City, Tokyo Shibetsu City, Hokkaido Basic Research Nagakute City, Aichi Prefecture Basic research Technological breakthroughs related to components and systems Product development Development theme discovery Research on basic vehicle-related technology Forward-looking and leading-edge technology development Head Ofﬁ ce Toyota Technical Center Higashi-Fuji Technical Center Tokyo Design Research & Laboratory Shibetsu Proving Ground Toyota Central Research & Development Laboratories, Inc. Development of leading-edge components and systems ahead of competitors Facility Name USA Activities Location Primary responsibility for new model development Development of all-new models and existing-model upgrades Toyota Motor Engineering & Manufacturing North America, Inc. Product Planning, Vehicle Engineering and Evaluation, Basic Research Michigan, California, Arizona, Washington DC Calty Design Research, Inc. Design Newport Beach, California Ann Arbor, Michigan ’09 ’10 ’11 ’12 ’13 up 3.5% from the previous ﬁ scal year, representing Toyota Motor Engineering & Manufacturing North America, Inc. Calty Design Research, Inc. (cid:2) R&D Expenditures In ﬁ scal 2013, R&D expenses totaled ¥807.4 billion, ANNUAL REPORT 2013 Print Search Contents P a g e 33 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev R&D and Intellectual Property [2 of 2] Corporate Philosophy Corporate Governance Management Team Risk Factors Next R&D and Intellectual Property Facility Name Europe Toyota Motor Europe NV/SA Toyota Europe Design Development Toyota Motorsport GmbH (TMG) Vehicle Engineering and Evaluation Design Development for Motorsport Vehicles, Advanced Engineering Brussels, Belgium; Derby, U.K. Nice, France Cologne, Germany Activities Location (cid:2) Intellectual Property (cid:2) Intellectual Property Strategies Toyota carefully analyzes patents and the need for Intellectual Property Guiding Principle patents in each area of research to formulate more (cid:2) Securing greater corporate ﬂ exibility and maximizing corporate value through the appropriate acquisition and utilization of intellectual property. (cid:2) Intellectual Property Activities Toyota’s competitiveness springs from the forward- effective R&D strategies. We identify R&D projects in which Toyota should acquire patents, and ﬁ le 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 tech- nologies with environmental and safety beneﬁ ts. This is why we take an open stance to patent licensing and grant licenses when appropriate terms are met. looking R&D stance that is instrumental to core A good example of this policy is the licensing to other strengths associated with products and technologies. companies of patents in the area of hybrid technology, Underlying each new product that emerges from R&D, which is one of our core technologies involving envi- there are always intellectual properties such as inven- ronmental energy. tions and expertise that we value as important management resources. (cid:2) Intellectual Property Systems R&D and intellectual property activities are organiza- tionally linked to enable us to focus on selected devel- opment 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 associ- ated with intellectual property. Toyota Motor Europe NV/SA Toyota Europe Design Development Toyota Motorsport GmbH (TMG) Facility Name China Activities Location Toyota Motor Engineering and Manufacturing (China) Co., Ltd. Tianjin FAW Toyota Motor Co., Ltd. FAW Toyota R&D Center GAC Toyota Motor Co., Ltd. R&D Center Basic Research, Technical Research and Vehicle Evaluation Jiangsu Vehicle Engineering and Evaluation Tianjin Vehicle Engineering and Evaluation Guangdong Toyota Motor Engineering and Manufacturing (China) Co., Ltd. FAW Toyota Research & Development Co., Ltd. GAC Toyota Motor Co., Ltd. R&D Center Facility Name Asia Paciﬁ c Activities Location Toyota Motor Asia Paciﬁ c Engineering and Manufacturing Co., Ltd. Toyota Technical Center Asia Paciﬁ c Australia Pty., Ltd. Vehicle Engineering and Evaluation Samutprakarn Province, Thailand Vehicle Engineering and Evaluation Melbourne, Australia Toyota Motor Asia Paciﬁ c Engineering and Manufacturing Co., Ltd. Toyota Technical Center Asia Paciﬁ c Australia Pty., Ltd. (cid:3) See Domestic and Overseas R&D Bases ANNUAL REPORT 2013 Print Search Contents P a g e 34 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Corporate Philosophy R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team Risk Factors Next (cid:4) Seeking Harmony between People, Society and the Global Environment, and Sustainable Development of Society through Manufacturing (cid:4) The Spirit of the Toyoda Precepts, Passed down since Toyota’s Founding Since its foundation, Toyota has continuously strived energy. The pillars of our social contribution are “envi- The Toyoda Precepts represent the essential philosophy of the founder of the Toyota group of companies, Sakichi to contribute to the sustainable development of soci- ronment,” “trafﬁ c safety,” and “human resources Toyoda, and are a source of spiritual support for Toyota employees. ety through the manufacturing and provision of innova- development.” Toyota seeks to be of value to commu- tive, high-quality products and services that lead the nities and to society through our main lines of busi- times. The automobile is a wonderful machine that ness, and to bring smiles to people’s faces. Toyota’s provides freedom of movement. Nevertheless, auto- basic Corporate Social Responsibility (CSR) policy is The Toyoda Precepts • Always be faithful to your duties, thereby contributing to the company and to the overall good. mobiles have an impact on the environment and soci- to contribute to the sustainable development of soci- • Always be studious and creative, striving to stay ahead of the times. ety. This is something we at Toyota always keep in ety. This phrase embodies the spirit of the Toyota mind, and we try to create harmony among people, Guiding Principles, and clariﬁ es our CSR stance for societies and the environment by listening to what our our stakeholders, both within and outside the customers and local communities have to say. Our company. Toyota subsidiaries and suppliers share this operations are aimed at creating a sustainable society CSR policy, and we expect them to adhere to the spirit through monozukuri (conscientious manufacturing). of the policy in their operations. • 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. Toyota develops and produces environment-friendly Toyota also participated in the formulation of the vehicles such as hybrid vehicles, and we also offer Charter of Corporate Behavior of the Nippon (cid:4) Toyota Guiding Principles superior accident prevention and collision safety Keidanren (Japan Business Federation), which is an The Toyota Guiding Principles (adopted in 1992 and revised in 1997) reﬂ ect the kind of company that Toyota seeks to features. In addition, Toyota is involved in new busi- alliance of Japanese leading corporations, and be in light of the unique management philosophy, values, and methods that it has embraced since its foundation. nesses, such as biotech, afforestation and renewable observes the standards outlined therein. 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. Positioning of the CSR Policy Overview of Toyota’s CSR Activities 1 0 0 2 y a W a t o y o T 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 Safety Environment through corporate activities in their respective communities. 3. Dedicate our business to providing clean and safe products and to enhancing the quality of life every- Social Aspect Environmental Aspect where through all of our activities. Comfort and Convenience Economic Aspect Resources/ Energy Sources 4. Create and develop advanced technologies and provide outstanding products and services that fulﬁ ll 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 beneﬁ ts, while keeping ourselves open to new partnerships. Toyota’s Social Contribution Activities Societal Issues (cid:3) Read more ANNUAL REPORT 2013 Print Search Contents P a g e 35 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Corporate Governance R&D and Intellectual Property Corporate Philosophy Corporate Governance [1 of 2] Management Team Risk Factors Next (cid:4) Toyota’s Basic Policy on Corporate Governance (cid:4) Corporate Governance System Additionally, in order to achieve sustainable growth Toyota has an “International Advisory Board” through the continuous development of even-better consisting of advisors from each region overseas, and, cars that exceed customer expectations around the as appropriate, receives advice on a wide range of Toyota has positioned the stable long-term growth of In March 2011, Toyota announced the “Toyota Global world, and realize the Toyota Global Vision, the TNGA management issues from a global perspective. In corporate value as a top-priority management issue. Vision” and commenced “Visionary Management.” Planning Division, an organization directly under addition, the Company has a wide variety of confer- We believe that in carrying this out, it is essential that This is based on values that have guided Toyota since Toyota’s top management, was established in order to ences and committees for deliberations and the moni- we achieve long-term and stable growth by building its founding, such as the “Guiding Principles at Toyota” rapidly promote the implementation of the “Toyota toring of management and corporate activities that positive relationships with all stakeholders, including and the “Toyota Way,” which aim to exceed customer New Global Architecture (TNGA).” reﬂ ect the views of various stakeholders, including the “Labor-Management Council, the Joint Labor- Management Round Table Conference,” and the “Toyota Environment Committee.” In order to manage and implement important activities for fulﬁ lling social responsibilities, TMC has established the “CSR Committee,” at the core consisting of directors at the executive vice president level and above as well as representatives of the Audit & Supervisory Board. shareholders and customers as well as business part- expectations by the development of ever-better cars ners, local communities, and employees, and by and enriching the lives of societies, and to be supplying products that will satisfy our customers. This rewarded with a smile that ultimately leads to a stable position is reﬂ ected in the “Guiding Principles at base of business. (cid:4) Management Transparency Toyota,” which is a statement of Toyota’s fundamental Toyota’s current management structure is based on business policies. Also, Toyota adopted and presented the structure introduced in April 2011. In order to fulﬁ ll the CSR Policy “Contribution towards Sustainable the Toyota Global Vision, Toyota reduced the Board of Development,” an interpretation of the “Guiding Directors and decision-making layers, and has With respect to our system regarding directors, we believe that it is important to elect individuals that comprehend and engage in our strengths, including commitment to manufacturing, with an emphasis on Principles at Toyota” that organizes the relationships endeavored to swiftly communicate the views of front-line operations and problem solving based on the with its stakeholders. We are working to enhance customers and information from operations on-ground actual on-site situation (genchi genbutsu). At the corporate governance through a variety of measures to management and facilitate rapid management deci- designed to further increase our competitiveness as a sion making. 109th Ordinary General Shareholders’ Meeting held in June 2013, three Outside Directors were appointed in global company. In April 2013, Toyota made organizational changes order to further reﬂ ect the opinions of those from We believe it is important to put in place a system with the aim of further increasing the speed of decision outside the Company in management’s decision- that enables customer opinions and on-site informa- making by clarifying responsibilities for operations and making process. While Toyota currently does not have tion to be swiftly communicated to management in earnings, speciﬁ cally by dividing the automotive busi- its own standard or policy on independence in order to make a prompt management decision, and ness into the following four units—Lexus International enables us to review whether such management deci- (Lexus business); Toyota No. 1 (North America, Europe sions are accepted by our customers and society. We and Japan); Toyota No. 2 (China, Asia & the Middle appointing Outside Directors, the Company believes that such appointments are appropriate since various rules on independence, such as stock exchange regu- believe that our current system, involving the supervi- East, East Asia & Oceania; Africa, Latin America & the lations, are used as references in making such sion and auditing of the execution of business by our Caribbean); and Unit Center (engine, transmission, appointments. We believe our Outside Directors will Board of Directors (including Outside Directors) and and other “unit”-related operations)—and an Executive advise us in our management decision-making Audit & Supervisory Board Members (including Vice President was put in charge of the operations of process based on their broad experience and insight Outside Audit & Supervisory Board Members), is the each unit in order to realize organizational change that in their respective ﬁ elds of expertise. most appropriate system for us. supports operations and earnings responsibility. ANNUAL REPORT 2013 Print Search Contents P a g e 36 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Corporate Governance R&D and Intellectual Property Corporate Philosophy Corporate Governance [2 of 2] Management Team Risk Factors Next (cid:4) Compliance Toyota currently does not have its own standard or policy on independence in appointing Outside Audit & Supervisory Board Members, the Company believes (cid:4) Accountability extraordinary committee meetings from time to time whenever necessary. The CSR Committee reviews important issues relating that such appointments are appropriate since various Toyota has engaged in timely and fair disclosure of to corporate ethics, legal compliance, risk manage- rules on independence, such as stock exchange regu- corporate and ﬁ nancial information as stated in the (cid:4) Basic Policy Regarding the System to Secure the Appropriateness of Business ment, and social contribution and also develops action lations, are used as references in making such CSR Policy “Contribution towards Sustainable plans concerning these issues. In addition, Toyota has appointments. The state of internal controls and inter- Development.” In order to ensure the accurate, fair, Toyota, together with its subsidiaries, has created and created a number of facilities for employees to make nal audits are reported to Audit & Supervisory Board and timely disclosure of information, Toyota has estab- maintained a sound corporate climate based on the inquiries concerning compliance matters, including the Members (including Outside Audit & Supervisory lished the Disclosure Committee chaired by an ofﬁ cer “Guiding Principles at Toyota” and the “Toyota Code of Compliance Hotline, which enables them to consult Board Members) through the Audit & Supervisory of the Accounting Division. The Committee holds Conduct.” Toyota integrates the principles of problem with an outside attorney, and takes measures to Board and the “CSR Committee,” and the status of regular meetings for the purpose of preparing, report- identiﬁ cation and continuous improvement into its ensure that Toyota is aware of signiﬁ cant information accounting audits is reported by independent External ing, and assessing its annual securities report, quar- business operation process and makes continuous concerning legal compliance as quickly as possible. Auditors to the Audit & Supervisory Board Members terly report under the Financial Instruments and efforts to train employees who will put these principles Toyota will continue to promote the “Toyota Code of (including Outside Audit & Supervisory Board Exchange Law of Japan, and Form 20-F under the into practice. Conduct” which is a guideline for the behavior and Members) through the Audit & Supervisory Board. To U.S. Securities Exchange Act, and also holds conduct of employees of Toyota and its consolidated enhance the system for internal audits, a specialized subsidiaries (together “Toyota”) all around the world. organization made independent of direct control by Toyota’s Corporate Governance Emphasizing Front-line Operations + Multidirectional Monitoring Toyota will work to advance corporate ethics through the management evaluates the effectiveness of the training and education at all levels and in all departments. system to secure the appropriateness of documents Toyota has adopted an auditor system. Seven Audit regarding ﬁ nancial calculation and other information in & Supervisory Board Members (including four Outside accordance with Section 404 of the U.S. Sarbanes- Audit & Supervisory Board Members) play a role in Oxley Act and Article 24-4-4 (1) of the Financial Toyota’s corporate governance efforts by undertaking Instruments and Exchange Law of Japan. In order to audits in accordance with the audit policies and plans enhance the reliability of the ﬁ nancial reporting of determined by the Audit & Supervisory Board. In Toyota, the three auditing functions—audit by Audit & addition, Toyota has secured the personnel and frame- Supervisory Board Members, internal audit, and work supporting the audit by Audit & Supervisory accounting audit by Independent External Auditors— Board Members. The Outside Audit & Supervisory aid in conducting an effective and efﬁ cient audit Board Members advise Toyota from a fair and neutral through meetings held periodically and as necessary perspective, based on their broad experience and to share information and come to understanding insight in their respective ﬁ elds of expertise. While through discussion on audit plans and results. (cid:3) Read more ANNUAL REPORT 2013 Print Search Contents P a g e 37 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team [1 of 2] Risk Factors Next Management Team (As of June 14, 2013) Board of Directors Chairman of the Board President, Member of the Board Executive Vice President, Member of the Board Takeshi Uchiyamada ’69 Joined Toyota Motor Corporation (“TMC”) ’98 Director ’01 Managing Director ’03 Senior Managing Director ’05 Executive Vice President ’12 Vice Chairman Executive Vice President, Member of the Board Mitsuhisa Kato ’75 Joined TMC ’04 Managing Ofﬁ cer ’06 Advisor ’10 Senior Managing Director ’11 Senior Managing Ofﬁ cer ’12 Executive Vice President Akio Toyoda ’84 Joined TMC ’00 Director ’02 Managing Director ’03 Senior Managing Director ’05 Executive Vice President ’09 President Masamoto Maekawa ’73 Joined Toyota Motor Sales Co., Ltd. ’03 Managing Ofﬁ cer of TMC ’07 President of Toyota Administa Corporation ’07 Advisor to TMC ’09 Senior Managing Director ’11 Senior Managing Ofﬁ cer ’12 Executive Vice President Satoshi Ozawa ’74 Joined Toyota Motor Sales Co., Ltd. ’03 Managing Ofﬁ cer ’07 Senior Managing Director ’10 Executive Vice President Yasumori Ihara ’75 Joined Toyota Motor Sales Co., Ltd. ’04 Managing Ofﬁ cer ’07 Advisor ’09 Senior Managing Director ’11 Director and Senior Managing Ofﬁ cer Nobuyori Kodaira ’72 Joined Ministry of International Trade and Industry ’04 Director-General, Agency for Natural Resources and Energy ’06 Retired from the same ’08 Advisor to TMC ’09 Managing Ofﬁ cer ’10 Senior Managing Director ’11 Director and Senior Managing Ofﬁ cer ’12 Executive Vice President Seiichi Sudo ’74 Joined TMC ’03 Managing Ofﬁ cer ’08 Advisor ’12 Senior Managing Ofﬁ cer Member of the Board Senior Managing Ofﬁ cer, Member of the Board Senior Managing Ofﬁ cer, Member of the Board Senior Managing Ofﬁ cer, Member of the Board Mamoru Furuhashi ’73 Joined TMC ’03 Managing Ofﬁ cer ’07 Senior Managing Director ’11 Director and Senior Managing Ofﬁ cer Kiyotaka Ise ’80 Joined TMC ’07 Managing Ofﬁ cer ’13 Senior Managing Ofﬁ cer Koei Saga ’77 Joined TMC ’08 Managing Ofﬁ cer ’12 Senior Managing Ofﬁ cer Shigeki Terashi ’80 Joined TMC ’08 Managing Ofﬁ cer ’13 Senior Managing Ofﬁ cer Member of the Board Member of the Board Member of the Board Member of the Board Yoshimasa Ishii ’76 Joined Toyota Motor Sales Co., Ltd. ’05 Managing Ofﬁ cer of TMC ’09 Senior Managing Director ’11 Senior Managing Ofﬁ cer Ikuo Uno* ’59 Joined Nippon Life Insurance Company ’97 President and Representative Director of the same ’05 Chairman and Representative Director of the same ’11 Advisor to the same Haruhiko Kato* ’75 Joined Ministry of Finance (Japan) ’09 Director-General of National Tax Administration Agency ’11 President and CEO of Japan Securities Depository Center, Inc. Mark. T. Hogan* ’73 Joined General Motors Corporation ’02 Vice President of General Motors Group ’04 President of Magna International Inc. ’08 President and CEO of The Vehicle Production Group LLC ’10 President of Dewey Investments LLC * Outside Director ANNUAL REPORT 2013 Print Search Contents P a g e 38 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team [2 of 2] Risk Factors Next Management Team (As of June 14, 2013) Outside Audit & Supervisory Board Members Full-Time Audit & Supervisory Board Member Yoichiro Ichimaru ’71 Joined Toyota Motor Sales Co., Ltd. ’01 Director of TMC ’03 Managing Ofﬁ cer ’05 Senior Managing Director ’09 Executive Vice President ’11 Audit & Supervisory Board Member Masaki Nakatsugawa ’76 Joined Toyota Motor Sales Co., Ltd. ’06 Audit & Supervisory Board Member of TMC Masahiro Kato ’75 Joined TMC ’09 Managing Ofﬁ cer ’11 Audit & Supervisory Board Member Outside Audit & Supervisory Board Member Yoichi Morishita ’57 Joined Matsushita Electric Industrial Co., Ltd. ’93 President of the same ’00 Chairman of the same ’06 Outside Audit & Supervisory Board Member of TMC ’06 Executive Advisor to Matsushita Electric Industrial Co., Ltd. ’12 Special Corporate Advisor to Panasonic Corporation Akishige Okada ’63 Joined Mitsui Bank, Ltd. ’97 President of Sakura Bank, Ltd. ’01 Chairman of Sumitomo Mitsui Banking Corporation ’02 Chairman of Sumitomo Mitsui Financial Group Inc. ’05 Special Advisor to Sumitomo Mitsui Banking Corporation ’06 Outside Audit & Supervisory Board Member of TMC ’10 Honorary Advisor to Sumitomo Mitsui Banking Corporation Kunihiro Matsuo ’68 Prosecutor of Tokyo District Public Prosecutors Ofﬁ ce ’04 Prosecutor General of Supreme Public Prosecutors Ofﬁ ce ’06 Registered as attorney ’07 Outside Audit & Supervisory Board Member of TMC Yoko Wake ’70 Joined The Fuji Bank, Limited ’93 Professor of Faculty of Business and Commerce of Keio University ’11 Outside Audit & Supervisory Board Member of TMC ANNUAL REPORT 2013 Print Search Contents P a g e 39 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Risk Factors R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team Risk Factors [1 of 3] Next Operational and other risks faced by Toyota that fuel economy, the amount of time required for innova- consumer spending. However, in Europe, the customer demand with respect to quality, safety and could signiﬁ cantly inﬂ uence the decisions of inves- tion and development, pricing, customer service and economic environment continues to remain stagnant reliability. The timely introduction of new vehicle tors are set out below. However, the following ﬁ nancing terms. Increased competition may lead to due to the ongoing sovereign debt crisis, and the rate models, at competitive prices, meeting rapidly chang- does not encompass all risks related to the opera- lower vehicle unit sales, which may result in a further of economic growth is slowing down in emerging ing customer preferences and demand is more funda- tions of Toyota. There are risk factors other than downward price pressure and adversely affect economies. Such shifts in demand for automobiles is mental to Toyota’s success than ever, as the those given below. Any such risk factors could Toyota’s ﬁ nancial condition and results of operations. continuing, and it is unclear how this situation will tran- automotive market is rapidly transforming in light of the inﬂ uence the decisions of investors. The forward- Toyota’s ability to adequately respond to the recent sition in the future. Toyota’s ﬁ nancial condition and changing global economy. There is no assurance, looking statements included below are based on rapid changes in the automotive market and to main- results of operations may be adversely affected if the however, that Toyota will adequately and appropriately information available as of June 24, 2013, the ﬁ ling tain its competitiveness will be fundamental to its shifts in demand for automobiles continues or respond to changing customer preferences and date of Form 20-F. future success in existing and new markets and to progresses further. Demand may also be affected by demand with respect to quality, safety, reliability, styling (cid:4) Industry and Business Risks maintain its market share. There can be no assurances factors directly impacting vehicle price or the cost of and other features in a timely manner. Even if Toyota that Toyota will be able to compete successfully in purchasing and operating vehicles such as sales and succeeds in perceiving customer preferences and the future. ﬁ nancing incentives, prices of raw materials and parts demand, there is no assurance that Toyota will be and components, cost of fuel and governmental regu- capable of developing and manufacturing new, price The worldwide automotive market is The worldwide automotive industry is highly volatile. lations (including tariffs, import regulation and other competitive products in a timely manner with its avail- highly competitive. Each of the markets in which Toyota competes has taxes). Volatility in demand may lead to lower vehicle able technology, intellectual property, sources of raw The worldwide automotive market is highly competi- been subject to considerable volatility in demand. unit sales, which may result in downward price pres- materials and parts and components, and production tive. Toyota faces intense competition from automotive Demand for vehicles depends to a large extent on sure and adversely affect Toyota’s ﬁ nancial condition capacity, including cost reduction capacity. Further, manufacturers in the markets in which it operates. social, political and economic conditions in a given and results of operations. there is no assurance that Toyota will be able to imple- Although the global economy is gradually recovering, market and the introduction of new vehicles and tech- ment capital expenditures at the level and times competition in the automotive industry has further nologies. As Toyota’s revenues are derived from sales Toyota’s future success depends on its ability to planned by management. Toyota’s inability to develop intensiﬁ ed amidst difﬁ cult overall market conditions. In in markets worldwide, economic conditions in such offer new innovative competitively priced products and offer products that meet customers’ preferences addition, competition is likely to further intensify in light markets are particularly important to Toyota. In Japan, that meet customer demand on a timely basis. and demand with respect to quality, safety, reliability, of further continuing globalization in the worldwide while there continues to be some signs of weakness, Meeting customer demand by introducing attractive styling and other features in a timely manner could automotive industry, possibly resulting in further indus- the economic environment is gradually recovering. In new vehicles and reducing the amount of time result in a lower market share and reduced sales try reorganization. Factors affecting competition the United States, economic conditions are moder- required for product development are critical to auto- volumes and margins, and may adversely affect include product quality and features, safety, reliability, ately recovering due to factors such as increased motive manufacturers. In particular, it is critical to meet Toyota’s ﬁ nancial condition and results of operations. ANNUAL REPORT 2013 Print Search Contents P a g e 40 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Risk Factors R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team Risk Factors [2 of 3] Next Toyota’s ability to market and distribute effectively may decrease, adversely affecting its ﬁ nancial condi- Toyota’s production and deliveries, which could have various digital and information technologies, including is an integral part of Toyota’s successful sales. tion and results of operations. an adverse effect on Toyota’s ﬁ nancial condition and information service and driving assistance functions. Toyota’s success in the sale of vehicles depends on its results of operations. Despite security measures, Toyota’s digital and infor- ability to market and distribute effectively based on Toyota relies on suppliers for the provision of mation technology networks and systems may be distribution networks and sales techniques tailored to certain supplies including parts, components and The worldwide ﬁ nancial services industry is highly vulnerable to damage, disruptions or shutdowns due the needs of its customers. There is no assurance that raw materials. competitive. to attacks by hackers, computer viruses, breaches Toyota will be able to develop sales techniques and Toyota purchases supplies including parts, compo- The worldwide ﬁ nancial services industry is highly due to unauthorized use, errors or malfeasance by distribution networks that effectively adapt to changing nents and raw materials from a number of external competitive. Increased competition in automobile employees and others who have or gain access to the customer preferences or changes in the regulatory suppliers located around the world. For some ﬁ nancing may lead to decreased margins. A decline in networks and systems Toyota depends on, service environment in the major markets in which it operates. supplies, Toyota relies on a single supplier or a limited Toyota’s vehicle unit sales, an increase in residual failures or bankruptcy of third parties such as software Toyota’s inability to maintain well-developed sales number of suppliers, whose replacement with another value risk due to lower used vehicle price, an increase development or cloud computing vendors, power techniques and distribution networks may result in supplier may be difﬁ cult. Inability to obtain supplies in the ratio of credit losses and increased funding shortages and outages, and utility failures or other decreased sales and market share and may adversely from a single or limited source supplier may result in costs are factors which may impact Toyota’s ﬁ nancial catastrophic events like natural disasters. Such affect its ﬁ nancial condition and results of operations. difﬁ culty obtaining supplies and may restrict Toyota’s services operations. If Toyota is unable to adequately incidents could materially disrupt critical operations, ability to produce vehicles. Furthermore, even if Toyota respond to the changes and competition in automo- disclose sensitive data, interfere with information Toyota’s success is signiﬁ cantly impacted by its were to rely on a large number of suppliers, ﬁ rst-tier bile ﬁ nancing, Toyota’s ﬁ nancial services operations services and driving assistance functions in Toyota’s ability to maintain and develop its brand image. suppliers with whom Toyota directly transacts may in may adversely affect its ﬁ nancial condition and results vehicles, and/or give rise to legal claims or proceed- In the highly competitive automotive industry, it is criti- turn rely on a single second-tier supplier or limited of operations. ings, liability or regulatory penalties under applicable cal to maintain and develop a brand image. In order to second-tier suppliers. Toyota’s ability to continue to laws, which could have an adverse effect on Toyota’s maintain and develop a brand image, it is necessary to obtain supplies from its suppliers in a timely and cost- Toyota’s operations and vehicles rely on various brand image and its ﬁ nancial condition and results further increase customers’ conﬁ dence by providing effective manner is subject to a number of factors, digital and information technologies. of operations. safe, high-quality products that meet customer prefer- some of which are not within Toyota’s control. These Toyota depends on various information technology ences and demand. If Toyota is unable to effectively factors include the ability of Toyota’s suppliers to networks and systems, some of which are managed (cid:4) Financial Market and Economic Risks maintain and develop its brand image as a result of its provide a continued source of supply, and Toyota’s by third parties, to process, transmit and store elec- inability to provide safe, high-quality products or as a ability to effectively compete and obtain competitive tronic information, including sensitive data, and to Toyota’s operations are subject to currency and result of the failure to promptly implement safety prices from suppliers. A loss of any single or limited manage or support a variety of business processes interest rate ﬂ uctuations. measures such as recalls when necessary, vehicle unit source supplier or inability to obtain supplies from and activities, including manufacturing, research and Toyota is sensitive to ﬂ uctuations in foreign currency sales and/or sale prices may decrease, and as a result suppliers in a timely and cost-effective manner could development, supply chain management, sales and exchange rates and is principally exposed to ﬂ uctua- revenues and proﬁ ts may not increase as expected or lead to increased costs or delays or suspensions in accounting. In addition, Toyota’s vehicles may rely on tions in the value of the Japanese yen, the U.S. dollar ANNUAL REPORT 2013 Print Search Contents P a g e 41 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Risk Factors R&D and Intellectual Property Corporate Philosophy Corporate Governance Management Team Risk Factors [3 of 3] Next and the euro and, to a lesser extent, the Australian metals, non-ferrous alloys including aluminum, and such as Toyota are required to implement safety legal proceedings brought by its shareholders and dollar, the Russian ruble, the Canadian dollar and the plastic parts, may lead to higher production costs for measures such as recalls for vehicles that do not or governmental proceedings and investigations. Toyota British pound. Toyota’s consolidated ﬁ nancial state- parts and components. This could, in turn, negatively may not comply with the safety standards of laws and is in fact currently subject to a number of pending legal ments, which are presented in Japanese yen, are impact Toyota’s future proﬁ tability because Toyota may governmental regulations. In addition, Toyota may, in proceedings and government investigations. A nega- affected by foreign currency exchange ﬂ uctuations not be able to pass all those costs on to its customers order to reassure its customers of the safety of tive outcome in one or more of these pending legal through translation risk, and changes in foreign or require its suppliers to absorb such costs. Toyota’s vehicles, decide to voluntarily implement proceedings could adversely affect Toyota’s ﬁ nancial currency exchange rates may also affect the price of recalls or other safety measures even if the vehicle condition and results of operations. products sold and materials purchased by Toyota in The downturn in the ﬁ nancial markets could complies with the safety standards of relevant laws foreign currencies through transaction risk. In particu- adversely affect Toyota’s ability to raise capital. and governmental regulations. Many governments Toyota may be adversely affected by natural lar, strengthening of the Japanese yen against the U.S. Should the world economy suddenly deteriorate, a also impose tariffs and other trade barriers, taxes and calamities, political and economic instability, fuel dollar can have an adverse effect on Toyota’s number of ﬁ nancial institutions and investors will face levies, or enact price or exchange controls. Toyota has shortages or interruptions in social infrastructure, operating results. difﬁ culties in providing capital to the ﬁ nancial markets at incurred, and expects to incur in the future, signiﬁ cant wars, terrorism and labor strikes. Toyota believes that its use of certain derivative levels corresponding to their own ﬁ nancial capacity, costs in complying with these regulations. If Toyota Toyota is subject to various risks associated with ﬁ nancial instruments including foreign exchange and, as a result, there is a risk that companies may not launches products that result in safety measures such conducting business worldwide. These risks include forward contracts and interest rate swaps and be able to raise capital under terms that they would as recalls, Toyota may incur various costs including natural calamities; political and economic instability; increased localized production of its products have expect to receive with their creditworthiness. If Toyota is signiﬁ cant costs for free repairs. Furthermore, new fuel shortages; interruption in social infrastructure reduced, but not eliminated, the effects of interest rate unable to raise the necessary capital under appropriate legislation or changes in existing legislation may also including energy supply, transportation systems, gas, and foreign currency exchange rate ﬂ uctuations. conditions on a timely basis, Toyota’s ﬁ nancial condition subject Toyota to additional expenses in the future. If water, or communication systems resulting from natu- Nonetheless, a negative impact resulting from ﬂ uctua- and results of operations may be adversely affected. Toyota incurs signiﬁ cant costs related to implementing ral hazards or technological hazards; wars; terrorism; tions in foreign currency exchange rates and changes in interest rates may adversely affect Toyota’s ﬁ nancial condition and results of operations. (cid:4) Political, Regulatory, Legal and Other Risks safety measures or meeting laws and governmental labor strikes; and work stoppages. Should the major regulations, Toyota’s ﬁ nancial condition and results of markets in which Toyota purchases materials, parts operations may be adversely affected. and components and supplies for the manufacture of The automotive industry is subject to various Toyota products or in which Toyota’s products are High prices of raw materials and strong pressure governmental regulations. Toyota may become subject to various legal produced, distributed or sold be affected by any of on Toyota’s suppliers could negatively impact The worldwide automotive industry is subject to vari- proceedings. these events, it may result in disruptions and delays in Toyota’s proﬁ tability. ous laws and governmental regulations including As an automotive manufacturer, Toyota may become the operations of Toyota’s business. Should signiﬁ cant Increases in prices for raw materials that Toyota and those related to vehicle safety and environmental subject to legal proceedings in respect of various or prolonged disruptions or delays related to Toyota’s Toyota’s suppliers use in manufacturing their products matters such as emission levels, fuel economy, noise issues, including product liability and infringement of business operations occur, it may adversely affect or parts and components such as steel, precious and pollution. In particular, automotive manufacturers intellectual property. Toyota may also be subject to Toyota’s ﬁ nancial condition and results of operations. ANNUAL REPORT 2013 Print Search Contents P a g e 42 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Selected Financial Summary (U.S. GAAP) [1 of 2] Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Report of Independent Registered Public Accounting Firm Consolidated Quarterly Financial Summary Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements 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 Afﬁ liated Companies Provision for Income Taxes Net Income (Loss) Attributable to Toyota Motor Corporation ROE Net Cash Provided by Operating Activities Net Cash Used in Investing Activities Net Cash Provided by (Used in) Financing Activities R&D Expenses Capital Expenditures for Property, Plant and Equipment* Depreciation 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 2004 2005 ¥16,578,033 716,727 ¥17,294,760 ¥13,506,337 364,177 1,757,356 ¥15,627,870 ¥ 1,666,890 9.6% 1,765,793 681,304 1,162,098 15.2% ¥ 2,186,734 (2,216,495) 242,223 682,279 945,803 969,904 ¥ 8,178,567 22,040,228 4,247,266 1,729,776 37.1% ¥17,790,862 760,664 ¥18,551,526 ¥14,500,282 369,844 2,009,213 ¥16,879,339 ¥ 1,672,187 9.0% 1,754,637 657,910 1,171,260 13.6% ¥ 2,370,940 (3,061,196) 419,384 755,147 1,068,287 997,713 ¥ 9,044,950 24,335,011 5,014,925 1,483,753 37.2% 2004 2005 ¥ 342.90 45 2,456.08 ¥ 3,880 ¥14,006,790 3,609,997,492 ¥ 355.35 65 2,767.67 ¥ 3,990 ¥14,403,890 3,609,997,492 Yen in millions 2006 ¥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% Yen 2006 ¥ 421.76 90 3,257.63 ¥ 6,430 ¥23,212,284 3,609,997,492 2007 2008 ¥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% 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 ANNUAL REPORT 2013 Print Search Contents P a g e 43 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Selected Financial Summary (U.S. GAAP) [2 of 2] Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Report of Independent Registered Public Accounting Firm Consolidated Quarterly Financial Summary Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements 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 Afﬁ liated Companies Provision for Income Taxes Net Income (Loss) Attributable to Toyota Motor Corporation ROE Net Cash Provided by Operating Activities Net Cash Used in Investing Activities Net Cash Provided by (Used in) Financing Activities R&D Expenses Capital Expenditures for Property, Plant and Equipment* Depreciation 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 2009 2010 Yen in millions 2011 2012 2013 % change 2013 vs. 2012 ¥19,173,720 1,355,850 ¥20,529,570 ¥17,468,416 987,384 2,534,781 ¥20,990,581 ¥ (461,011) -2.2% (560,381) (56,442) (436,937) -4.0% ¥ 1,476,905 (1,230,220) 698,841 904,075 1,364,582 1,495,170 ¥10,061,207 29,062,037 6,301,469 2,444,280 34.6% ¥17,724,729 1,226,244 ¥18,950,973 ¥15,971,496 712,301 2,119,660 ¥18,803,457 ¥ 147,516 0.8% 291,468 92,664 209,456 2.1% ¥ 2,558,530 (2,850,184) (277,982) 725,345 604,536 1,414,569 ¥10,359,723 30,349,287 7,015,409 1,865,746 34.1% 2009 2010 ¥ (139.13) 100 3,208.41 ¥ 3,120 ¥10,757,752 3,447,997,492 ¥ 66.79 45 3,303.49 ¥ 3,745 ¥12,912,751 3,447,997,492 ¥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% Yen 2011 ¥ 130.17 50 3,295.08 ¥ 3,350 ¥11,550,792 3,447,997,492 ¥17,511,916 1,071,737 ¥18,583,653 ¥15,795,918 592,646 1,839,462 ¥18,228,026 ¥ 355,627 1.9% 432,873 262,272 283,559 2.7% ¥ 1,452,435 (1,442,658) (355,347) 779,806 723,537 1,067,830 ¥10,550,261 30,650,965 6,042,277 1,679,200 34.4% ¥20,914,150 1,150,042 ¥22,064,192 ¥18,010,569 630,426 2,102,309 ¥20,743,304 ¥ 1,320,888 6.0% 1,403,649 551,686 962,163 8.5% ¥ 2,451,316 (3,027,312) 477,242 807,454 854,561 1,105,109 ¥12,148,035 35,483,317 7,337,824 1,718,297 34.2% 2012 2013 ¥ 90.21 50 3,331.51 ¥ 3,570 ¥12,309,351 3,447,997,492 ¥ 303.82 90 3,835.30 ¥ 4,860 ¥16,757,268 3,447,997,492 +19.4 +7.3 +18.7 +14.0 +6.4 +14.3 +13.8 +271.4 — +224.3 +110.3 +239.3 — +68.8 — — +3.5 +18.1 +3.5 +15.1 +15.8 +21.4 +2.3 — % change 2013 vs. 2012 +236.8 +80.0 +15.1 +36.1 +36.1 — ANNUAL REPORT 2013 Print Search Contents P a g e 44 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements Next Consolidated Segment Information 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 Information: Net Revenues: Japan North America Europe Asia Other Intersegment Elimination Consolidated Operating Income (Loss): Japan North America Europe Asia Other Intersegment Elimination Consolidated 2008 2009 2010 2011 2012 2013 Yen in millions % change 2013 vs. 2012 ¥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 ¥16,994,546 1,100,324 1,048,915 (560,132) ¥18,583,653 ¥ 21,683 306,438 42,062 (14,556) ¥ 355,627 ¥11,167,319 4,751,886 1,993,946 3,334,274 1,760,175 (4,423,947) ¥18,583,653 ¥ (207,040) 186,409 17,796 256,790 108,814 (7,142) ¥ 355,627 ¥20,419,100 1,170,670 1,066,461 (592,039) ¥22,064,192 ¥ 944,704 315,820 53,616 6,748 ¥ 1,320,888 ¥12,821,018 6,284,425 2,083,113 4,385,476 2,094,265 (5,604,105) ¥22,064,192 ¥ 576,335 221,925 26,462 376,055 133,744 (13,633) ¥ 1,320,888 +20.2 +6.4 +1.7 — +18.7 +4,256.9 +3.1 +27.5 — +271.4 +14.8 +32.3 +4.5 +31.5 +19.0 — +18.7 — +19.1 +48.7 +46.4 +22.9 — +271.4 ANNUAL REPORT 2013 Print Search Contents P a g e 45 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements Next 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 Afﬁ liated Companies % Change Net Income 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 Information: Net Revenues: Japan North America Europe Asia Other Intersegment Elimination Consolidated Operating Income (Loss): Japan North America Europe Asia Other Intersegment Elimination Consolidated 2012 2013 Yen in billions First Quarter ¥3,441.0 -29.4% (108.0) —% -3.1% (80.5) —% 1.1 -99.4% ¥3,060.8 285.8 190.5 (96.1) ¥3,441.0 ¥ (202.5) 94.6 (2.0) 1.9 ¥ (108.0) ¥1,784.5 853.5 459.9 700.0 368.8 (725.7) ¥3,441.0 ¥ (206.6) 28.9 (7.5) 60.1 21.0 (3.9) ¥ (108.0) Second Quarter ¥4,574.9 -4.8% 75.4 -32.4% 1.6% 79.1 -38.7% 80.4 -18.5% ¥4,183.1 271.0 255.2 (134.4) ¥4,574.9 ¥ (7.5) 76.4 9.9 (3.4) ¥ 75.4 ¥2,869.0 1,085.7 499.2 827.3 455.3 (1,161.6) ¥4,574.9 ¥ (69.3) 32.5 5.6 70.4 37.1 (0.9) ¥ 75.4 Third Quarter ¥4,865.2 4.1% 149.6 51.1% 3.1% 198.6 53.2% 80.9 -13.5% ¥4,471.4 271.5 272.2 (149.9) ¥4,865.2 ¥ 57.1 83.5 15.3 (6.3) ¥ 149.6 ¥3,024.2 1,379.5 527.0 704.2 460.2 (1,229.9) ¥4,865.2 ¥ (30.5) 90.3 10.4 40.5 37.9 1.0 ¥ 149.6 Fourth Quarter ¥5,702.5 22.8% 238.5 417.5% 4.2% 235.6 467.2% 121.0 376.5% First Quarter ¥5,501.5 59.9% 353.1 —% 6.4% 415.2 —% 290.3 24,929.9% Second Quarter ¥5,406.7 18.2% 340.6 351.8% 6.3% 379.3 379.4% 257.9 220.7% ¥5,279.0 272.0 331.0 (179.6) ¥5,702.5 ¥ 174.5 51.9 18.8 (6.7) ¥ 238.5 ¥3,489.6 1,432.9 507.8 1,102.9 475.9 (1,306.7) ¥5,702.5 ¥ 99.4 34.5 9.2 85.7 12.8 (3.3) ¥ 238.5 ¥5,120.1 274.4 243.2 (136.2) ¥5,501.5 ¥ 258.6 86.7 9.3 (1.6) ¥ 353.1 ¥3,242.2 1,592.8 512.0 1,073.6 483.4 (1,402.7) ¥5,501.5 ¥ 107.1 117.6 3.4 101.5 27.1 (3.7) ¥ 353.1 ¥5,008.7 272.0 252.6 (126.6) ¥5,406.7 ¥ 239.3 87.7 13.1 0.3 ¥ 340.6 ¥3,163.9 1,450.9 497.5 1,088.2 500.8 (1,294.8) ¥5,406.7 ¥ 143.7 64.9 8.6 92.9 31.5 (1.2) ¥ 340.6 Third Quarter ¥5,318.7 9.3% 124.7 -16.7% 2.3% 131.2 -33.9% 99.9 23.4% ¥4,889.2 301.3 262.0 (133.8) ¥5,318.7 ¥ 43.7 69.0 15.4 (3.4) ¥ 124.7 ¥2,976.2 1,525.0 508.3 1,112.5 530.3 (1,333.8) ¥5,318.7 ¥ 15.6 (17.1) 9.2 91.7 32.3 (7.1) ¥ 124.7 Fourth Quarter ¥5,837.0 2.4% 502.3 110.6% 8.6% 477.8 102.8% 313.9 159.4% ¥5,401.0 322.8 308.4 (195.2) ¥5,837.0 ¥ 402.9 72.2 15.7 11.4 ¥ 502.3 ¥3,438.5 1,715.6 565.1 1,110.9 579.5 (1,572.7) ¥5,837.0 ¥ 309.8 56.4 5.1 89.7 42.6 (1.4) ¥ 502.3 ANNUAL REPORT 2013 Print Search Contents P a g e 46 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [1 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations All ﬁ nancial information discussed in this section is derived from Toyota’s consolidated Consolidated Vehicle Sales ﬁ nancial statements that appear elsewhere in this annual report. The ﬁ nancial statements have been prepared in conformity with generally accepted accounting principles in the (Thousands of units) 10,000 United States of America. Overview The business segments of Toyota include auto- affected by a number of factors including social, motive operations, ﬁ nancial services operations political and general economic conditions; introduc- 8,000 6,000 4,000 2,000 0 Toyota’s share of total vehicle unit sales in each market is inﬂ uenced 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. Toyota’s ability to satisfy changing customer preferences can affect its reve- nues and earnings signiﬁ cantly. The proﬁ tability of Toyota’s automotive operations and all other operations. Automotive operations tion of new vehicles and technologies; and costs FY ’09 ’10 ’11 ’12 ’13 is affected by many factors. These factors include: are Toyota’s most signiﬁ cant business segment, incurred by customers to purchase or operate vehi- (cid:129) vehicle unit sales volumes, accounting for 90% of Toyota’s total revenues cles. These factors can cause consumer demand to During ﬁ scal 2013 and 2012, Toyota’s consolidat- (cid:129) the mix of vehicle models and options sold, before the elimination of intersegment revenues for vary substantially in different geographic markets ed vehicle unit sales in Japan increased as com- (cid:129) the level of parts and service sales, ﬁ scal 2013. Toyota’s primary markets based on and for different types of automobiles. pared with each prior ﬁ scal year, primarily as a result (cid:129) the levels of price discounts and other sales vehicle unit sales for ﬁ scal 2013 were: Japan (26%), For the automobile industry, markets have pro- of the active introduction of new products and the incentives and marketing costs, North America (28%), Europe (9%) and Asia (19%). gressed in a steady manner, especially in the U.S. efforts of dealers nationwide. Toyota and Lexus (cid:129) the cost of customer warranty claims and other Automotive Market Environment for products with advanced green technology has 48.4% for ﬁ scal 2013, representing a record high, (cid:129) the cost of research and development and The worldwide automotive market is highly competi- remained strong throughout all markets worldwide. and market share (including Daihatsu and Hino other ﬁ xed costs, and emerging countries such as Asia. The demand brands’ market share excluding mini-vehicles was customer satisfaction actions, tive and volatile. The demand for automobiles is brands) including mini-vehicles remained at a high (cid:129) the prices of raw materials, level of 44.3% following the prior ﬁ scal year. Overseas (cid:129) the ability to control costs, consolidated vehicle unit sales decreased during (cid:129) the efﬁ cient use of production capacity, The following table sets forth Toyota’s consolidated vehicle unit sales by geographic market based on loca- ﬁ scal 2012, whereas they increased during ﬁ scal (cid:129) the adverse effect on production due to the tion of customers for the past three ﬁ scal years. 2013. During ﬁ scal 2012, total overseas vehicle unit reliance on various suppliers for the provision Japan North America Europe Asia Other* Overseas total Total Thousands of units Years Ended March 31, 2012 2,071 1,872 798 1,327 1,284 5,281 7,352 2013 2,279 2,469 799 1,684 1,640 6,592 8,871 2011 1,913 2,031 796 1,255 1,313 5,395 7,308 sales decreased, particularly in North America due of supplies, to impact of the Great East Japan Earthquake and (cid:129) the adverse effect on market, sales and pro- the ﬂ ood in Thailand, although an increase in Asia ductions of natural calamities and interruptions resulted from steady demand in spite of the ﬂ ood in of social infrastructure, and Thailand. During ﬁ scal 2013, total overseas vehicle (cid:129) changes in the value of the Japanese yen and unit sales increased in every region. other currencies in which Toyota conducts business. * “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc. ANNUAL REPORT 2013 Print Search Contents P a g e 47 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [2 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Changes in laws, regulations, policies and other 2009, Toyota announced a safety campaign in trend in the automotive markets. As competition governmental actions can also materially impact the North America for certain models of Toyota and increases, margins on ﬁ nancing transactions may proﬁ tability of Toyota’s automotive operations. Lexus brands’ vehicles related to ﬂ oor mat entrap- decrease and market share may also decline as These laws, regulations and policies include those ment of accelerator pedals, and later expanded it to customers obtain ﬁ nancing for Toyota vehicles from attributed to environmental matters, vehicle safety, include additional models. In January 2010, Toyota alternative sources. fuel economy and emissions that can add signiﬁ - announced a recall in North America for certain Toyota’s ﬁ nancial services operations mainly cantly to the cost of vehicles. The European Union models of Toyota vehicles related to sticking and include loans and leasing programs for customers has enforced a directive that requires manufacturers slow-to-return accelerator pedals. Also in January and dealers. Toyota believes that its ability to pro- to be ﬁ nancially responsible for taking back end-of- 2010, Toyota recalled in Europe and China certain vide ﬁ nancing to its customers is an important value life vehicles and to take measures to ensure that models of Toyota vehicles related to sticking accel- added service. Therefore, Toyota has expanded its adequate used vehicle disposal facilities are estab- erator pedals. In February 2010, Toyota announced network of ﬁ nance subsidiaries in order to offer lished and those hazardous materials and recycla- a recall in markets including Japan, North America ﬁ nancial services in many countries. ble parts are removed from vehicles prior to and Europe related to the braking control system in Toyota’s competitors for retail ﬁ nancing and retail scrapping. See “Legislation Regarding End-of-Life certain vehicle models including the Prius. The leasing include commercial banks, credit unions Vehicles”, “Information on the Company—Business recalls and other safety measures described above and other ﬁ nance companies. Meanwhile, commer- Overview—Governmental Regulation, have led to a number of claims, lawsuits and gov- cial banks and other captive automobile ﬁ nance Environmental and Safety Standards” in Toyota’s ernment investigations against Toyota in the United companies also compete against Toyota’s whole- annual report on Form 20-F and note 23 to the con- States. For a more detailed description of these sale ﬁ nancing activities. solidated ﬁ nancial statements for a more detailed claims, lawsuits and government investigations, see Toyota’s total ﬁ nance receivables increased dur- discussion of these laws, regulations and policies. note 23 to the consolidated ﬁ nancial statements. ing ﬁ scal 2013 mainly due to the favorable impact of Many governments also regulate local content, The worldwide automotive industry is in a period ﬂ uctuations in foreign currency translation rates and impose tariffs and other trade barriers, and enact of global competition which may continue for the an increase in the retail receivables. price or exchange controls that can limit an auto- foreseeable future, and in general the competitive maker’s operations and can make the repatriation of environment in which Toyota operates is likely to Total Assets by Financial Services Operations proﬁ ts unpredictable. Changes in these laws, regu- intensify. Toyota believes it has the resources, strat- lations, policies and other governmental actions egies and technologies in place to compete effec- may affect the production, licensing, distribution or tively in the industry as an independent company for sale of Toyota’s products, cost of products or appli- the foreseeable future. cable tax rates. From time-to-time when potential safety problems arise, Toyota issues vehicle recalls Financial Services Operations and takes other safety measures including safety The competition of worldwide automobile ﬁ nancial campaigns with respect to its vehicles. In November services industry is intensifying despite the recovery (¥ Billion) 20,000 15,000 10,000 5,000 0 FY ’09 ’10 ’11 ’12 ’13 ANNUAL REPORT 2013 Print Search Contents P a g e 48 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [3 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations The following table provides information regarding Toyota’s ﬁ nance receivables and operating leases in the Toyota enters into interest rate swap agreements receivables at March 31, 2013 increased by ¥30.5 past two ﬁ scal years. and cross currency interest rate swap agreements billion from March 31, 2012 to ¥338.1 billion. Finance Receivables Retail Finance leases Wholesale and other dealer loans Deferred origination costs Unearned income Allowance for credit losses Retail Finance leases Wholesale and other dealer loans Total ﬁ nance receivables, net Less—Current portion Noncurrent ﬁ nance receivables, net Operating Leases Vehicles Equipment Less—Deferred income and other Less—Accumulated depreciation Less—Allowance for credit losses Vehicles and equipment on operating leases, net Yen in millions March 31, 2012 2013 ¥ 7,248,793 955,430 2,033,954 10,238,177 105,533 (494,123) (77,353) (30,637) (24,238) (132,228) 9,717,359 (4,114,897) ¥ 5,602,462 ¥ 2,536,595 87,848 (49,090) 2,575,353 (667,406) (8,135) ¥ 1,899,812 ¥ 9,047,782 1,029,887 2,615,728 12,693,397 135,398 (628,340) (83,858) (28,928) (26,243) (139,029) 12,061,426 (5,117,660) ¥ 6,943,766 ¥ 2,999,294 104,351 (65,634) 3,038,011 (749,238) (8,020) ¥ 2,280,753 to convert its ﬁ xed-rate debt to variable-rate func- tional currency debt. A portion of the derivative Other Business Operations instruments are entered into to hedge interest rate Toyota’s other business operations consist of hous- risk from an economic perspective and are not des- ing including the manufacture and sale of prefabri- ignated as a hedge of speciﬁ c assets or liabilities on cated homes, information technology related Toyota’s consolidated balance sheet and according- businesses including information technology and ly, unrealized gains or losses related to derivatives telecommunications, intelligent transport systems that are not designated as a hedge are recognized and GAZOO, and other businesses. currently in operations. See discussion in “Critical Toyota does not expect its other business opera- Accounting Estimates—Derivatives and Other tions to materially contribute to Toyota’s consolidat- Contracts at Fair Value” and “Quantitative and ed results of operations. Qualitative Disclosures about Market Risk” and notes 20 and 26 to the consolidated ﬁ nancial Currency Fluctuations statements. Toyota is affected by ﬂ uctuations in foreign currency The ﬂ uctuations in funding costs can affect the exchange rates. Toyota is exposed to ﬂ uctuations in proﬁ tability of Toyota’s ﬁ nancial services operations. the value of the Japanese yen against the U.S. dollar Funding costs are affected by a number of factors, and the euro and, to a lesser extent, the Australian some of which are not in Toyota’s control. These dollar, the Russian ruble, the Canadian dollar, the factors include general economic conditions, pre- British pound, and others. Toyota’s consolidated vailing interest rates and Toyota’s ﬁ nancial strength. ﬁ nancial statements, which are presented in Funding costs decreased during ﬁ scal 2012 and Japanese yen, are affected by foreign currency 2013, mainly as a result of lower interest rates. exchange ﬂ uctuations through both translation risk Toyota launched its credit card business in Japan and transaction risk. Toyota’s ﬁ nance receivables are subject to col- Toyota continues to originate leases to ﬁ nance new in April 2001. As of March 31, 2012, Toyota had Translation risk is the risk that Toyota’s consoli- lectability risks. These risks include consumer and Toyota vehicles. These leasing activities are subject 10.9 million cardholders, an increase of 2.0 million dated ﬁ nancial statements for a particular period or dealer insolvencies and insufﬁ cient collateral values to residual value risk. Residual value losses could be cardholders compared with March 31, 2011. As of for a particular date will be affected by changes in (less costs to sell) to realize the full carrying values incurred when the lessee of a vehicle does not exer- March 31, 2013, Toyota had 11.8 million cardhold- the prevailing exchange rates of the currencies in of these receivables. See discussion in “Critical cise the option to purchase the vehicle at the end of ers, an increase of 0.9 million cardholders compared those countries in which Toyota does business Accounting Estimates—Allowance for Doubtful the lease term. See discussion in “Critical Accounting with March 31, 2012. The credit card receivables at compared with the Japanese yen. Even though the Accounts and Credit Losses” and note 11 to the Estimates—Investment in Operating Leases” and March 31, 2012 increased by ¥44.0 billion from ﬂ uctuations of currency exchange rates to the consolidated ﬁ nancial statements. note 2 to the consolidated ﬁ nancial statements. March 31, 2011 to ¥307.5 billion. The credit card Japanese yen can be substantial, and, therefore, ANNUAL REPORT 2013 Print Search Contents P a g e 49 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [4 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations signiﬁ cantly impact comparisons with prior periods can be signiﬁ cant. See notes 20 and 26 to the consoli- in the previous ﬁ scal year to the local currency- automotive operations as a global competitor in the and among the various geographic markets, the dated ﬁ nancial statements for additional information. denominated net revenues for ﬁ scal 2012 and worldwide automotive market. Management allo- translation risk is a reporting consideration and does Generally, a weakening of the Japanese yen 2013, respectively, as if the value of the Japanese cates resources to, and assesses the performance not reﬂ ect Toyota’s underlying results of operations. against other currencies has a positive effect on yen had remained constant for the comparable of, its automotive operations as a single business Toyota does not hedge against translation risk. Toyota’s revenues, operating income and net periods. Results excluding the impact of currency segment on a worldwide basis. Toyota does not Transaction risk is the risk that the currency struc- income attributable to Toyota Motor Corporation. ﬂ uctuations year-on-year are not on the same basis manage any subset of its automotive operations, ture of Toyota’s costs and liabilities will deviate from A strengthening of the Japanese yen against other as Toyota’s consolidated ﬁ nancial statements and such as domestic or overseas operations or parts, the currency structure of sales proceeds and assets. currencies has the opposite effect. Although, in ﬁ s- do not conform with U.S. GAAP. Furthermore, as separate management units. Transaction risk relates primarily to sales proceeds cal 2012, the Japanese yen was on average and at Toyota does not believe that these measures are a The management of the automotive operations is from Toyota’s non-domestic operations from vehi- the end of the ﬁ scal year stronger against the U.S. substitute for U.S. GAAP measures. However, aligned on a functional basis with managers having cles produced in Japan. dollar in comparison to the prior ﬁ scal year, it was Toyota believes that such results excluding the oversight responsibility for the major operating func- Toyota believes that the location of its production on average and at the end of the ﬁ scal year weaker impact of currency ﬂ uctuations year-on-year provide tions within the segment. Management assesses facilities in different parts of the world has signiﬁ - in ﬁ scal 2013. In ﬁ scal 2012 and 2013, the additional useful information to investors regarding ﬁ nancial and non-ﬁ nancial data such as vehicle unit cantly reduced the level of transaction risk. As part Japanese yen was on average stronger against the the operating performance on a local currency basis. sales, production volume, market share information, of its globalization strategy, Toyota has continued to euro in comparison to ﬁ scal 2011 and 2012, localize production by constructing production facili- respectively. The Japanese yen was at the end of Segmentation vehicle model plans and plant location costs to allo- cate resources within the automotive operations. ties in the major markets in which it sells its vehicles. ﬁ scal 2012 stronger against the euro in comparison Toyota’s most signiﬁ cant business segment is its In calendar 2011 and 2012, Toyota produced to the prior ﬁ scal year, but was weaker at the end of automotive operations. Toyota carries out its 71.3% and 75.4% of its non-domestic sales outside ﬁ scal 2013 due to the depreciation of the yen in the Japan, respectively. In North America, 66.8% and second half of the ﬁ scal year. See further discussion 75.3% of vehicles sold in calendar 2011 and 2012 in “Quantitative and Qualitative Disclosures about Geographic Breakdown respectively were produced locally. In Europe, 57.7% Market Risk—Market Risk Disclosures—Foreign The following table sets forth Toyota’s net revenues in each geographic and 58.5% of vehicles sold in calendar 2011 and Currency Exchange Rate Risk”. market based on the country location of the parent company or the 2012 respectively were produced locally. Localizing During ﬁ scal 2012 and 2013, the average subsidiaries that transacted the sale with the external customer for the Revenues by Market FY2013 (cid:2) Japan　(cid:2) North America　(cid:2) Europe　 (cid:2) Asia　(cid:2) All Other Markets production enables Toyota to locally purchase many exchange rate of the Japanese yen against the U.S. past three ﬁ scal years. of the supplies and resources used in the produc- dollar and the euro compared to the prior ﬁ scal year tion process, which allows for a better match of has ﬂ uctuated as described above. The operating local currency revenues with local currency expenses. results excluding the impact of currency ﬂ uctuations Toyota also enters into foreign currency transac- described in “Results of Operations—Fiscal 2013 tions and other hedging instruments to address Compared with Fiscal 2012” and “Results of a portion of its transaction risk. This has reduced, Operations—Fiscal 2012 Compared with Fiscal but not eliminated, the effects of foreign currency 2011” show results of net revenues obtained by exchange rate ﬂ uctuations, which in some years applying the Japanese yen’s average exchange rate Yen in millions Years Ended March 31, 2012 ¥7,293,804 4,644,348 1,917,408 3,116,849 1,611,244 2011 ¥6,966,929 5,327,809 1,920,416 3,138,112 1,640,422 2013 ¥7,910,456 6,167,821 2,003,113 4,058,629 1,924,173 Japan North America Europe Asia Other* * “Other” consists of Central and South America, Oceania and Africa. 8.7% 18.4% 9.1% 28.0% 35.8% ANNUAL REPORT 2013 Print Search Contents P a g e 50 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [5 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations — Fiscal 2013 Compared with Fiscal 2012 Yen in millions Years ended March 31, 2013 2012 2013 vs. 2012 Change Amount Percentage (%) 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 afﬁ liated companies Net margin from income before income taxes and equity in earnings of afﬁ liated companies Equity in earnings of afﬁ liated companies Net income attributable to Toyota Motor Corporation Net margin attributable to Toyota Motor Corporation ¥11,167,319 ¥12,821,018 6,284,425 2,083,113 4,385,476 2,094,265 (5,604,105) ¥18,583,653 ¥22,064,192 4,751,886 1,993,946 3,334,274 1,760,175 (4,423,947) 186,409 17,796 256,790 108,814 (7,142) ¥ (207,040) ¥ 576,335 221,925 26,462 376,055 133,744 (13,633) ¥ 355,627 ¥ 1,320,888 6.0% 1.9% ¥1,653,699 1,532,539 89,167 1,051,202 334,090 (1,180,158) ¥3,480,539 ¥ 783,375 35,516 8,666 119,265 24,930 (6,491) ¥ 965,261 4.1% +14.8 +32.3 +4.5 +31.5 +19.0 — +18.7 — +19.1 +48.7 +46.4 +22.9 — +271.4 432,873 1,403,649 970,776 +224.3 2.3% 197,701 6.4% 231,519 4.1% 33,818 +17.1 283,559 962,163 678,604 +239.3 1.5% 4.4% 2.9% * “Other” consists of Central and South America, Oceania and Africa. Net Revenues in a steady manner. Under these automotive market Toyota had net revenues for ﬁ scal 2013 of conditions, Toyota’s consolidated vehicle unit sales ¥22,064.1 billion, an increase of ¥3,480.5 billion, or increased to 8,871 thousand vehicles by 20.7% 18.7%, compared with the prior ﬁ scal year. This compared with the prior ﬁ scal year. increase reﬂ ected changes in numbers of the vehi- cle unit sales and sales mix of ¥3,031.5 billion and Net Revenues favorable impact of ﬂ uctuations in foreign currency translation rates of ¥281.8 billion. Excluding the dif- ference in the Japanese yen value used for transla- tion purposes of ¥281.8 billion, net revenues would have been ¥21,782.3 billion during ﬁ scal 2013, a (¥ Billion) 25,000 20,000 15,000 17.2% increase compared with the prior ﬁ scal year. 10,000 The automotive market in 2012 increased by 11.3% in North America and 14.3% in Asia compared with the prior ﬁ scal year. In ﬁ scal 2013, the market in the U.S. and emerging countries such as Asia developed 5,000 0 FY ’09 ’10 ’11 ’12 ’13 The table below shows Toyota’s net revenues from external customers by product category and by business. 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 Years ended March 31, 2013 2012 ¥14,164,940 ¥17,446,473 356,756 1,577,690 997,843 20,378,762 535,388 20,914,150 1,150,042 ¥18,583,653 ¥22,064,192 338,000 1,532,219 929,219 16,964,378 547,538 17,511,916 1,071,737 2013 vs. 2012 Change Amount ¥3,281,533 18,756 45,471 68,624 3,414,384 (12,150) 3,402,234 78,305 ¥3,480,539 Percentage (%) +23.2 +5.5 +3.0 +7.4 +20.1 –2.2 +19.4 +7.3 +18.7 ANNUAL REPORT 2013 Print Search Contents P a g e 51 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [6 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Toyota’s net revenues include net revenues from 2013 compared with the prior ﬁ scal year. The The following is a discussion of net revenues in each geographic market (before the elimination of sales of products, consisting of net revenues from increase in net revenues from sales of products is intersegment revenues). automotive operations and all other operations, due to an increase in Toyota vehicle unit sales by Japan which increased by 19.4% during ﬁ scal 2013 com- 1,519 thousand vehicles. Excluding the difference in pared with the prior ﬁ scal year to ¥20,914.1 billion, the Japanese yen value used for translation purpos- and net revenues from ﬁ nancial services operations es of ¥35.8 billion, net revenues from ﬁ nancial ser- which increased by 7.3% during ﬁ scal 2013 com- vices operations would have been ¥1,114.2 billion, pared with the prior ﬁ scal year to ¥1,150.0 billion. a 4.0% increase during ﬁ scal 2013 compared with Excluding the difference in the Japanese yen value the prior ﬁ scal year. This increase was mainly due to used for translation purposes of ¥246.0 billion, net an increase of ¥25.8 billion rental revenue generated revenues from sales of products would have been by vehicles and equipment on operating lease. ¥20,668.1 billion, an 18.0% increase during ﬁ scal Toyota’s consolidated vehicle unit sales* * including number of exported vehicle unit sales Net revenues: Sales of products Financial services Total Thousands of units Years ended March 31, 2013 2012 4,202 3,741 2013 vs. 2012 Change Amount 461 Percentage (%) +12.3 Yen in millions Years ended March 31, 2013 2012 2013 vs. 2012 Change Amount Percentage (%) ¥11,040,964 ¥12,687,092 133,926 ¥11,167,319 ¥12,821,018 126,355 ¥1,646,128 7,571 ¥1,653,699 +14.9 +6.0 +14.8 The following table shows the number of ﬁ nancing contracts by geographic region at the end of the ﬁ scal 2013 and 2012, respectively. Number of ﬁ nancing contracts in thousands Toyota’s domestic and exported vehicle unit sales Earthquake in the ﬁ rst half of ﬁ scal 2012, an increased by 461 thousand vehicles compared with increase in demand by subsidies for eco-cars 2013 vs. 2012 Change the prior ﬁ scal year due mainly to a recovery from offered by the government and strong sales of Aqua Japan North America Europe Asia Other* Total Years ended March 31, 2013 2012 1,765 1,697 4,596 4,535 825 796 868 649 618 552 8,672 8,229 Amount 68 61 29 219 66 443 Percentage (%) +4.0 +1.3 +3.7 +33.7 +11.9 +5.4 * “Other” consists of Central and South America, Oceania and Africa. Toyota’s consolidated vehicle unit sales the negative impact of the Great East Japan and other car models in ﬁ scal 2013. North America Geographically, net revenues (before the elimina- used for translation purposes of ¥281.8 billion, net tion of intersegment revenues) for ﬁ scal 2013 revenues in ﬁ scal 2013 would have increased by increased by 14.8% in Japan, 32.3% in North 14.8% in Japan, 26.2% in North America, 6.9% in America, 4.5% in Europe, 31.5% in Asia, and Europe, 28.0% in Asia and 22.5% in Other com- 19.0% in Other compared with the prior ﬁ scal year. pared with the prior ﬁ scal year. Excluding the difference in the Japanese yen value Net revenues: Sales of products Financial services Total Thousands of units Years ended March 31, 2013 2012 2,469 1,872 2013 vs. 2012 Change Amount 597 Percentage (%) +31.9 Yen in millions Years ended March 31, 2013 2012 2013 vs. 2012 Change Amount Percentage (%) ¥4,048,532 703,354 ¥4,751,886 ¥5,564,183 720,242 ¥6,284,425 ¥1,515,651 16,888 ¥1,532,539 +37.4 +2.4 +32.3 In North America, the vehicle unit sales increased steady manner and strong sales of Corolla, Camry by 597 thousand vehicles compared with the prior and other car models. ﬁ scal year due mainly to the market recovering in a ANNUAL REPORT 2013 Print Search Contents P a g e 52 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [7 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Europe Other Toyota’s consolidated vehicle unit sales Thousands of units Years ended March 31, 2013 2012 799 798 2013 vs. 2012 Change Amount 1 Percentage (%) +0.1 Yen in millions Years ended March 31, 2013 2012 2013 vs. 2012 Change Amount Percentage (%) Toyota’s consolidated vehicle unit sales Net revenues: Sales of products Financial services Total ¥1,925,670 68,276 ¥1,993,946 ¥2,007,207 75,906 ¥2,083,113 ¥81,537 7,630 ¥89,167 +4.2 +11.2 +4.5 Net revenues: Sales of products Financial services Total Thousands of units Years ended March 31, 2013 2012 1,640 1,284 2013 vs. 2012 Change Amount 356 Percentage (%) +27.8 Yen in millions Years ended March 31, 2013 2012 2013 vs. 2012 Change Amount Percentage (%) ¥1,636,043 124,132 ¥1,760,175 ¥1,942,215 152,050 ¥2,094,265 ¥306,172 27,918 ¥334,090 +18.7 +22.5 +19.0 Net revenues in Europe as a whole increased due Europe, especially in Russia, although sales of Net revenues in Other as a whole increased due pri- strong sales of IMV and Land Cruiser in each region primarily to the 1 thousand vehicles increase in Toyota brands’ vehicles decreased in Western marily to the 356 thousand vehicles increase in in ﬁ scal 2013 and the recovery from the shortages vehicle unit sales compared with the prior ﬁ scal Europe compared with the prior ﬁ scal year due to vehicle unit sales compared with the prior ﬁ scal of parts supplies caused by the Great East Japan year. The vehicle unit sales increased in Eastern the European sovereign debt crisis. year. The vehicle unit sales increased due mainly to Earthquake and the ﬂ ood in Thailand in ﬁ scal 2012. Asia Operating Costs and Expenses Toyota’s consolidated vehicle unit sales Net revenues: Sales of products Financial services Total Thousands of units Years ended March 31, 2013 2012 1,684 1,327 2013 vs. 2012 Change Amount 357 Percentage (%) +26.9 Yen in millions Years ended March 31, 2013 2012 2013 vs. 2012 Change Amount Percentage (%) ¥3,275,871 58,403 ¥3,334,274 ¥4,307,943 77,533 ¥4,385,476 ¥1,032,072 19,130 ¥1,051,202 +31.5 +32.8 +31.5 Operating costs and expenses: Cost of products sold Cost of ﬁ nancing operations Selling, general and administrative Total Yen in millions Years ended March 31, 2013 2012 2013 vs. 2012 Change Amount Percentage (%) ¥15,795,918 ¥18,010,569 630,426 2,102,309 ¥18,228,026 ¥20,743,304 592,646 1,839,462 ¥2,214,651 37,780 262,847 ¥2,515,278 +14.0 +6.4 +14.3 +13.8 Net revenues in Asia as a whole increased due the expansion of markets such as Thailand and primarily to the 357 thousand vehicles increase in Indonesia, and the recovery during ﬁ scal 2013 from vehicle unit sales compared with the prior ﬁ scal the negative impacts of the ﬂ ood in Thailand in year. The vehicle unit sales increased due mainly to ﬁ scal 2012. Changes in operating costs and expenses: Effect of changes in vehicle unit sales and sales mix Effect of ﬂ uctuation in foreign currency translation rates Effect of cost reduction efforts Effect of increase in miscellaneous costs and others Total Yen in millions 2013 vs. 2012 Change ¥2,360,000 270,000 (450,000) 335,278 ¥2,515,278 ANNUAL REPORT 2013 Print Search Contents P a g e 53 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [8 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Operating costs and expenses increased by announced in Japan and other regions the voluntary ¥2,515.2 billion, or 13.8%, to ¥20,743.3 billion dur- safety recall of certain models of Toyota brands’ ing ﬁ scal 2013 compared with the prior ﬁ scal year. vehicles in relation to the insufﬁ cient hardness treat- This increase resulted from the ¥2,360.0 billion ment of some intermediate extension shafts and in impact of changes in vehicle unit sales and sales relation to the electric water pump for the hybrid mix, the ¥270.0 billion unfavorable impact of ﬂ uctu- system. ations in foreign currency translation rates and the ¥335.2 billion increase in miscellaneous costs and Cost Reduction Efforts others, partially offset by the ¥450.0 billion impact During ﬁ scal 2013, Toyota’s continued cost reduc- of cost reduction efforts. tion efforts reduced operating costs and expenses Cost of Products Sold (cid:2)(cid:2) Cost of products sold (cid:3)(cid:3) % of net revenues (Right scale) (¥ Billion) 20,000 15,000 10,000 5,000 0 Selling, General and Administrative Expenses Selling, general and administrative expenses increased by ¥262.8 billion, or 14.3%, to ¥2,102.3 billion during ﬁ scal 2013 compared with the prior ﬁ scal year. This increase reﬂ ected the ¥90.0 billion charge for costs related to the settlement of the economic loss claims in the consolidated federal action in the U.S., the ¥43.2 billion increase in expenses for the ﬁ nancial services operations and the ¥35.8 billion unfavorable impact of ﬂ uctuations (%) 100 75 50 25 0 The increase in miscellaneous costs and others by ¥450.0 billion. The amount of effect of cost FY ’09 ’10 ’11 ’12 ’13 in foreign currency translation rates. was due mainly to the ¥90.0 billion charge for costs reduction efforts includes the impact of ﬂ uctuation related to the settlement of the economic loss in the price of steel, precious metals, non-ferrous Cost of Financing Operations claims in the consolidated federal action in the U.S., alloys including aluminum, plastic parts and other Cost of ﬁ nancing operations increased by ¥37.7 bil- the ¥70.0 billion increase in labor costs, the ¥50.0 production materials and parts. In ﬁ scal 2013, con- lion, or 6.4%, to ¥630.4 billion during ﬁ scal 2013 billion impact of increase in product quality related tinued cost reduction efforts together with suppliers compared with the prior ﬁ scal year. The increase expenses and the ¥20.0 billion increase in research contributed to the improvement in earnings. These resulted from the ¥33.1 billion unfavorable impact of and development expenses. This increase in prod- cost reduction efforts related to ongoing value engi- ﬂ uctuations in foreign currency translation rates. R&D Expenses (cid:2)(cid:2) R&D expenses (cid:3)(cid:3) % of net revenues (Right scale) (¥ Billion) 1,000 800 600 400 200 0 (%) 5 4 3 2 1 0 uct quality related expenses resulted from the neering and value analysis activities, the use of weakening of the Japanese yen at the end of ﬁ scal common parts resulting in a reduction of part types 2013 against other currencies in comparison to the and other manufacturing initiatives designed to prior ﬁ scal year. See note 14 to the consolidated reduce the costs of vehicle production. ﬁ nancial statements. During ﬁ scal 2013, Toyota announced recalls and Cost of Products Sold other safety measures including the following: Cost of products sold increased by ¥2,214.6 billion, In October 2012, Toyota announced in Japan or 14.0%, to ¥18,010.5 billion during ﬁ scal 2013 and other regions the voluntary safety recall of cer- compared with the prior ﬁ scal year. The increase tain models of Toyota brands’ vehicles in relation to resulted from the ¥2,124.0 billion impact of changes the inspection and application of special ﬂ uorine in vehicle unit sales and sales mix and the ¥201.0 grease to the driver’s side Power Window Master billion unfavorable impact of ﬂ uctuations in foreign Switch (PWMS). In November 2012, Toyota currency translation rates, partially offset by the ¥450.0 billion impact of cost reduction efforts. Operating Income Changes in operating income and loss: Effect of marketing efforts Effect of cost reduction efforts Effect of changes in exchange rates Effect of increase of miscellaneous costs and others Other Total FY ’09 ’10 ’11 ’12 ’13 Yen in millions 2013 vs. 2012 Change ¥650,000 450,000 150,000 (300,000) 15,261 ¥965,261 ANNUAL REPORT 2013 Print Search Contents P a g e 54 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [9 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Toyota’s operating income increased by ¥965.2 bil- During ﬁ scal 2013, operating income (before North America lion, or 271.4%, to ¥1,320.8 billion during ﬁ scal elimination of intersegment proﬁ ts), increased by 2013 compared with the prior ﬁ scal year. This ¥783.3 billion in Japan compared with the prior ﬁ scal increase was due mainly to the ¥650.0 billion year, ¥35.5 billion, or 19.1%, in North America, ¥8.6 increase of marketing efforts, the ¥450.0 billion billion, or 48.7%, in Europe, ¥119.2 billion, or 46.4%, impact of cost reduction efforts and the ¥150.0 bil- in Asia, and ¥24.9 billion, or 22.9%, in Other. lion favorable impact of changes in exchange rates, partially offset by the ¥300.0 billion increase in mis- cellaneous costs and others. The increase in mis- cellaneous costs and others was due mainly to the ¥90.0 billion charge for costs related to the settle- ment of the economic loss claims in the consolidated federal action in the U.S., the ¥70.0 billion increase in labor costs, the ¥50.0 billion impact of increase in product quality related expenses and the ¥20.0 bil- lion increase in research and development expenses. Operating Income (Loss) (cid:2)(cid:2) Operating income (loss) (cid:3)(cid:3) % of net revenues (Right scale) (¥ Billion) 1,500 1,000 500 0 -500 (%) 15 10 5 0 -5 The following is a description of operating income in each geographic market. Japan FY ’09 ’10 ’11 ’12 ’13 Changes in operating income and loss: Effect of marketing efforts Effect of cost reduction efforts Effect of changes in exchange rates Effect of increase of miscellaneous costs and others Other Total Yen in millions 2013 vs. 2012 Change ¥415,000 380,000 165,000 (170,000) (6,625) ¥783,375 Changes in operating income and loss: Effect of marketing efforts Effect of cost reduction efforts Effect of increase of miscellaneous costs and others Other Total Europe Changes in operating income and loss: Effect of marketing efforts Effect of cost reduction efforts Effect of increase of miscellaneous costs and others Other Total Asia Changes in operating income and loss: Effect of marketing efforts Effect of cost reduction efforts Effect of changes in exchange rates Effect of increase of miscellaneous costs and others Other Total Yen in millions 2013 vs. 2012 Change ¥30,000 50,000 (65,000) 20,516 ¥35,516 Yen in millions 2013 vs. 2012 Change ¥5,000 5,000 (5,000) 3,666 ¥8,666 Yen in millions 2013 vs. 2012 Change ¥135,000 15,000 (10,000) (30,000) 9,265 ¥119,265 ANNUAL REPORT 2013 Print Search Contents P a g e 55 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [10 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Other Income and Expenses effective tax rate for ﬁ scal 2013 was 39.3%, which with the prior ﬁ scal year. This increase resulted from Interest and dividend income decreased by ¥1.1 bil- was higher than the statutory tax rate in Japan. This favorable foreign currency translation adjustments lion, or 1.2%, to ¥98.6 billion during ﬁ scal 2013 was due mainly to deferred tax liabilities relating to gains of ¥434.6 billion in ﬁ scal 2013 compared with compared with the prior ﬁ scal year. undistributed earnings in afﬁ liated companies losses of ¥87.7 billion in the prior ﬁ scal year, and Interest expense was ¥22.9 billion during ﬁ scal accounted for by the equity method. from unrealized holding gains on securities in ﬁ scal 2013, on the same level as that of the prior ﬁ scal year. Net Income and Loss Attributable to ¥129.3 billion in the prior ﬁ scal year. The increase in 2013 of ¥368.5 billion compared with gains of Foreign exchange gain, net decreased by ¥31.5 Noncontrolling Interests and Equity in unrealized holding gains on securities was due billion, or 85.0%, to ¥5.5 billion during ﬁ scal 2013 Earnings of Afﬁ liated Companies mainly to changes in stock prices. compared with the prior ﬁ scal year. Foreign Net income attributable to noncontrolling interests exchange gains and losses include the differences increased by ¥36.5 billion, or 43.2%, to ¥121.3 bil- between the value of foreign currency denominated lion during ﬁ scal 2013 compared with the prior ﬁ scal assets and liabilities recognized through transac- year. This increase was due mainly to an increase Net Income (Loss) Attributable to Toyota Motor Corporation and ROE (cid:2)(cid:2) Net income (loss) attributable to Toyota Motor Corporation (cid:3)(cid:3) ROE (Right scale) (¥ Billion) 1,000 750 500 250 0 -250 -500 FY ’09 ’10 ’11 ’12 ’13 (%) 10.0 7.5 5.0 2.5 0 -2.5 -5.0 tions in foreign currencies translated at prevailing during ﬁ scal 2013 in net income attributable to the Segment Information exchange rates and the value at the date the trans- shareholders of consolidated subsidiaries. The following is a discussion of results of operations for each of Toyota’s operating segments. The amounts action settled during the ﬁ scal year, including those Equity in earnings of afﬁ liated companies during presented are prior to intersegment elimination. settled using forward foreign currency exchange ﬁ scal 2013 increased by ¥33.8 billion, or 17.1%, to contracts, or the value translated by appropriate ¥231.5 billion compared with the prior ﬁ scal year. year-end current exchange rates. The ¥31.5 billion This increase was due mainly to an increase during decrease in foreign exchange gain, net was due ﬁ scal 2013 in net income attributable to the share- mainly to the losses resulting from the Japanese holders of afﬁ liated companies accounted for by the yen being stronger against foreign currencies at the equity method. time foreign currency bonds were redeemed during ﬁ scal 2013 than those at the time of purchase. Net Income Attributable to Toyota Motor Other loss, net increased by ¥38.3 billion to ¥1.5 Corporation billion during ﬁ scal 2013 compared with the prior Net income attributable to the shareholders of Automotive: Financial Services: All Other: Intersegment elimination/ unallocated amount: Net revenues Operating income Net revenues Operating income Net revenues Operating income Net revenues Operating income Yen in millions Years ended March 31, 2013 2012 ¥16,994,546 ¥20,419,100 944,704 1,170,670 315,820 1,066,461 53,616 (592,039) 6,748 21,683 1,100,324 306,438 1,048,915 42,062 (560,132) (14,556) 2013 vs. 2012 Change Amount ¥3,424,554 923,021 70,346 9,382 17,546 11,554 (31,907) 21,304 Percentage (%) +20.2 +4,256.9 +6.4 +3.1 +1.7 +27.5 — — ﬁ scal year. Toyota Motor Corporation increased by ¥678.6 bil- Automotive Operations Segment impact of changes in vehicle unit sales and sales lion, or 239.3%, to ¥962.1 billion during ﬁ scal 2013 The automotive operations segment is Toyota’s mix and the ¥245.4 billion favorable impact of ﬂ uc- Income Taxes compared with the prior ﬁ scal year. largest operating segment by net revenues. Net rev- tuations in foreign currency translation rates. The provision for income taxes increased by ¥289.4 enues for the automotive segment increased during Operating income from the automotive operations billion, or 110.3%, to ¥551.6 billion during ﬁ scal Other Comprehensive Income and Loss ﬁ scal 2013 by ¥3,424.5 billion, or 20.2%, compared increased by ¥923.0 billion during ﬁ scal 2013 com- 2013 compared with the prior ﬁ scal year due to the Other comprehensive income increased by ¥856.8 with the prior ﬁ scal year to ¥20,419.1 billion. The pared with the prior ﬁ scal year to ¥944.7 billion. This increase in income before income taxes. The billion to ¥822.7 billion for ﬁ scal 2013 compared increase reﬂ ects the ¥3,030.0 billion of favorable increase in operating income was due mainly to the ANNUAL REPORT 2013 Print Search Contents P a g e 56 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [11 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations cles compared with the prior ﬁ scal year resulting Operating income from ﬁ nancial services opera- Intersegment elimination/unallocated amount ¥150.0 billion favorable impact of changes in Financial Services Operations Segment exchange rates, the ¥645.0 billion of favorable Net revenues for the ﬁ nancial services operations impact of changes in vehicle unit sales and sales increased during ﬁ scal 2013 by ¥70.3 billion, or mix, and the ¥450.0 billion impact of cost reduction 6.4%, compared with the prior ﬁ scal year to efforts, partially offset by the ¥300.0 billion increase ¥1,170.6 billion. This increase was primarily due to in miscellaneous costs and others. the ¥36.0 billion favorable impact of ﬂ uctuations in The changes in vehicle unit sales and changes in foreign currency translation rates and the ¥25.8 bil- sales mix was due primarily to the increase in lion increase in rental income from vehicles and Toyota’s vehicle unit sales by 1,519 thousand vehi- equipment on operating leases. from the increase in vehicle unit sales in every tions increased by ¥9.3 billion, or 3.1%, to ¥315.8 region. The increase in miscellaneous costs and billion during ﬁ scal 2013 compared with the prior others was due mainly to the ¥90.0 billion charge ﬁ scal year. This increase was due primarily to the for costs related to the settlement of the economic recording of ¥12.9 billion of valuation gains on inter- loss claims in the consolidated federal action in the est rate swaps stated at fair value. U.S., the ¥70.0 billion increase in labor costs, the ¥50.0 billion impact of increase in product quality related expenses and the ¥20.0 billion increase in research and development expenses. 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 Years ended March 31, 2012 2013 0.24% 0.11 0.21% 0.29% 0.18 0.27% All Other Operations Segment Operating income from Toyota’s other operations Net revenues for Toyota’s other operations seg- segments increased by ¥11.5 billion, or 27.5%, to ments increased by ¥17.5 billion, or 1.7%, to ¥53.6 billion during ﬁ scal 2013 compared with the ¥1,066.4 billion during ﬁ scal 2013 compared with prior ﬁ scal year. the prior ﬁ scal year. Results of Operations — Fiscal 2012 Compared with Fiscal 2011 Net revenues: Japan North America Europe Asia Other* 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 afﬁ liated companies Net margin from income before income taxes and equity in earnings of afﬁ liated companies Equity in earnings of afﬁ liated companies Net income attributable to Toyota Motor Corporation Net margin attributable to Toyota Motor Corporation * “Other” consists of Central and South America, Oceania and Africa. Yen in millions Years ended March 31, 2012 2011 2012 vs. 2011 Change Amount Percentage (%) ¥10,986,246 ¥11,167,319 4,751,886 1,993,946 3,334,274 1,760,175 (4,423,947) ¥18,993,688 ¥18,583,653 5,429,136 1,981,497 3,374,534 1,809,116 (4,586,841) ¥ (362,396) ¥ (207,040) 186,409 17,796 256,790 108,814 (7,142) ¥ 468,279 ¥ 355,627 339,503 13,148 312,977 160,129 4,918 2.5% 1.9% ¥ 181,073 (677,250) 12,449 (40,260) (48,941) 162,894 ¥(410,035) ¥ 155,356 (153,094) 4,648 (56,187) (51,315) (12,060) ¥(112,652) (0.6)% +1.6 –12.5 +0.6 –1.2 –2.7 — –2.2 — –45.1 +35.4 –18.0 –32.0 — –24.1 563,290 432,873 (130,417) –23.2 3.0% 215,016 2.3% 197,701 (0.7)% (17,315) –8.1 408,183 283,559 (124,624) –30.5 2.1% 1.5% (0.6)% ANNUAL REPORT 2013 Print Search Contents P a g e 57 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [12 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Net Revenues ¥19,301.3 billion during ﬁ scal 2012, a 1.6% products is due to an increase in Toyota vehicle unit approximately ¥1,138.6 billion, a 2.9% decrease Toyota had net revenues for ﬁ scal 2012 of increase compared with the prior ﬁ scal year. The sales by 44 thousand vehicles. Excluding the differ- during ﬁ scal 2012 compared with the prior ﬁ scal ¥18,583.6 billion, a decrease of ¥410.0 billion, or automotive market in ﬁ scal 2012 increased by 9.7% ence in the Japanese yen value used for translation year. This decrease was mainly due to the decrease 2.2%, compared with the prior ﬁ scal year. This in North America and 3.9% in Asia compared with purposes of ¥66.9 billion, net revenues from ﬁ nan- of ¥18.3 billion rental revenue generated by vehicles decrease reﬂ ects unfavorable impact of ﬂ uctuations the prior ﬁ scal year due to that market in the U.S. cial services operations would have been and equipment on operating lease. in foreign currency translation rates and others of and emerging countries such as Asia have devel- ¥717.7 billion, partially offset by changes in num- oped in a steady manner. Under these automotive The following table shows the number of ﬁ nancing contracts by geographic region at the end of the ﬁ scal bers of the vehicle unit sales and sales mix of market conditions, despite the Great East Japan 2012 and 2011, respectively. approximately ¥320.0 billion and other factors. Earthquake and the ﬂ ood in Thailand, Toyota’s con- Excluding the difference in the Japanese yen value solidated vehicle unit sales increased to 7,352 thou- used for translation purposes of ¥717.7 billion, net sand vehicles by 0.6% compared with the prior revenues would have been approximately ﬁ scal year. The table below shows Toyota’s net revenues from external customers by product category and by business. 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 Years ended March 31, 2012 2011 ¥14,507,479 ¥14,164,940 338,000 1,532,219 929,219 16,964,378 547,538 17,511,916 1,071,737 ¥18,993,688 ¥18,583,653 335,366 1,553,497 926,411 17,322,753 497,767 17,820,520 1,173,168 2012 vs. 2011 Change Amount ¥(342,539) 2,634 (21,278) 2,808 (358,375) 49,771 (308,604) (101,431) ¥(410,035) Percentage (%) –2.4 +0.8 –1.4 +0.3 –2.1 +10.0 –1.7 –8.6 –2.2 Toyota’s net revenues include net revenues from 2012 compared with the prior ﬁ scal year to sales of products, consisting of net revenues from ¥1,071.7 billion. Excluding the difference in the automotive operations and all other operations, Japanese yen value used for translation purposes of which decreased by 1.7% during ﬁ scal 2012 com- ¥650.8 billion, net revenues from sales of products pared with the prior ﬁ scal year to ¥17,511.9 billion, would have been ¥18,162.7 billion, a 1.9% increase and net revenues from ﬁ nancial services operations during ﬁ scal 2012 compared with the prior ﬁ scal which decreased by 8.6% during ﬁ scal year. The increase in net revenues from sales of Japan North America Europe Asia Other* Total Number of ﬁ nancing contracts in thousands Years ended March 31, 2012 2011 1,697 1,709 4,535 4,654 796 790 649 522 552 527 8,229 8,202 2012 vs. 2011 Change Amount (12) (119) 6 127 25 27 Percentage (%) –0.7 –2.6 +0.7 +24.3 +4.9 +0.3 * “Other” consists of Central and South America, Oceania and Africa. Geographically, net revenues (before the elimina- difference in the Japanese yen value used for trans- tion of intersegment revenues) for ﬁ scal 2012 lation purposes of ¥717.7 billion, net revenues in decreased by 12.5% in North America, 1.2% in ﬁ scal 2012 would have decreased by 5.1% in North Asia, and 2.7% in Other, whereas net revenues America, and would have increased by 1.6% in increased by 1.6% in Japan and 0.6% in Europe Japan, 5.3% in Europe, 3.8% in Asia and 1.7% in compared with the prior ﬁ scal year. Excluding the Other compared with the prior ﬁ scal year. ANNUAL REPORT 2013 Print Search Contents P a g e 58 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [13 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of net revenues in each geographic market (before the elimination of interseg- decrease in RAV4 sales, a 26 thousand vehicles, or compared with the prior ﬁ scal year due to the Thousands of units Net revenues in North America decreased rates of ¥398.9 billion. 22.4%, decrease in Tundra sales, and a 21 thou- decrease in vehicle unit sales and the unfavorable sand vehicles, or 7.3%, decrease in Corolla sales. impact of ﬂ uctuations in foreign currency translation ment revenues). Japan Toyota’s consolidated vehicle unit sales* * including number of exported vehicle unit sales Years ended March 31, 2012 2011 3,741 3,611 2012 vs. 2011 Change Amount 130 Percentage (%) +3.6 Europe Yen in millions Years ended March 31, 2012 2011 2012 vs. 2011 Change Amount Percentage (%) Toyota’s consolidated vehicle unit sales Net revenues: Sales of products Financial services Total ¥10,864,329 ¥11,040,964 126,355 ¥10,986,246 ¥11,167,319 121,917 ¥176,635 4,438 ¥181,073 +1.6 +3.6 +1.6 Although Toyota’s domestic and exported vehicle thousand vehicles compared with the prior ﬁ scal unit sales decreased due to the impact of the Great year. The increase in vehicle unit sales resulted Net revenues: Sales of products Financial services Total Thousands of units Years ended March 31, 2012 2011 798 796 2012 vs. 2011 Change Amount 2 Percentage (%) +0.3 Yen in millions Years ended March 31, 2012 2011 2012 vs. 2011 Change Amount Percentage (%) ¥1,910,336 71,161 ¥1,981,497 ¥1,925,670 68,276 ¥1,993,946 ¥15,334 (2,885) ¥12,449 +0.8 –4.1 +0.6 East Japan Earthquake in the ﬁ rst half of ﬁ scal 2012, Toyota’s domestic and exported vehicle unit primarily from introduction of new products such as Prius (cid:2) and Aqua. Net revenues in Europe as a whole increased due European countries compared with the prior ﬁ scal primarily to the 2 thousand vehicles increase in vehi- year, such as a 18 thousand vehicles decrease in sales over the ﬁ scal year increased by 130 North America cle unit sales compared with the prior ﬁ scal year, Italy and a 7 thousand vehicles decrease in such as a 49 thousand vehicles increase in Russia, Portugal, both of which were mainly due to the where the economy has been strong, although European sovereign debt crisis. Toyota’s consolidated vehicle unit sales Years ended March 31, 2012 2011 1,872 2,031 2012 vs. 2011 Change Amount (159) Percentage (%) –7.8 Asia Thousands of units sales of Toyota brands’ vehicles decreased in some Net revenues: Sales of products Financial services Total Yen in millions Years ended March 31, 2012 2011 2012 vs. 2011 Change Amount Percentage (%) ¥4,603,192 825,944 ¥5,429,136 ¥4,048,532 703,354 ¥4,751,886 ¥(554,660) (122,590) ¥(677,250) –12.0 –14.8 –12.5 In North America, the vehicle unit sales decreased of shortages of parts supplies caused by the Great by 159 thousand vehicles compared with the prior East Japan Earthquake and the ﬂ ood in Thailand, ﬁ scal year due to decreased production as a result consisting of a 67 thousand vehicles, or 30.7%, Toyota’s consolidated vehicle unit sales Net revenues: Sales of products Financial services Total Thousands of units Years ended March 31, 2012 2011 1,327 1,255 2012 vs. 2011 Change Amount 72 Percentage (%) +5.7 Yen in millions Years ended March 31, 2012 2011 2012 vs. 2011 Change Amount Percentage (%) ¥3,325,466 49,068 ¥3,374,534 ¥3,275,871 58,403 ¥3,334,274 ¥(49,595) 9,335 ¥(40,260) –1.5 +19.0 –1.2 ANNUAL REPORT 2013 Print Search Contents P a g e 59 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [14 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Despite the ﬂ ood in Thailand, Toyota’s vehicle unit Asia decreased compared with the prior ﬁ scal year sales in Asia increased by 72 thousand vehicles mainly due to the unfavorable impact of ﬂ uctuations compared with the prior ﬁ scal year due to steady in foreign currency translation rates of ¥168.8 billion growth in automotive markets. Although Toyota’s and others. vehicle unit sales in Asia increased, net revenues in Other Toyota’s consolidated vehicle unit sales Net revenues: Sales of products Financial services Total Thousands of units Years ended March 31, 2012 2011 1,284 1,313 2012 vs. 2011 Change Amount (29) Percentage (%) –2.2 Yen in millions Years ended March 31, 2012 2011 2012 vs. 2011 Change Amount Percentage (%) ¥1,694,680 114,436 ¥1,809,116 ¥1,636,043 124,132 ¥1,760,175 ¥(58,637) 9,696 ¥(48,941) –3.5 +8.5 –2.7 Changes in operating costs and expenses: Effect of changes in vehicle unit sales and sales mix and other operational factors Effect of ﬂ uctuation in foreign currency translation rates and others Effect of cost reduction efforts Effect of increase in miscellaneous costs and others Total Yen in millions 2012 vs. 2011 Change ¥ 150,000 (432,300) (150,000) 134,917 ¥(297,383) Operating costs and expenses decreased by relation to damage to elements of the substrate and ¥297.3 billion, or 1.6%, to ¥18,228.0 billion during potential shutdown of the hybrid system that may ﬁ scal 2012 compared with the prior ﬁ scal year. This have resulted from improper manufacturing of elec- decrease resulted from the ¥432.3 billion favorable tronic converter control substrate. The affected impact of ﬂ uctuations in foreign currency translation vehicle models included Harrier Hybrid, Kluger rates and others, and the ¥150.0 billion impact of Hybrid, RX400h, and Highlander Hybrid, 111 thou- cost reduction efforts, partially offset by the ¥150.0 sand vehicles were included in this recall. billion impact of changes in vehicle unit sales and In September 2011, Toyota announced in Japan the sales mix and other operational factors and the ¥134.9 service campaign of certain models of Toyota in relation Net revenues in Other decreased due to decreases Toyota’s vehicle unit sales decreased by 25 thou- billion increase in miscellaneous costs and others. to abnormal noise and oil leakage that may have result- in Toyota’s vehicle unit sales primarily as a result of sand vehicles in Oceania, and by 19 thousand vehi- The increase in miscellaneous costs and others ed from slack of bolts in the sub transmission and the shortages of parts supplies caused by the Great cles in the Middle East, respectively, compared with was due mainly to a ¥100.0 billion increase in labor rear wheel differential. The affected vehicle models East Japan Earthquake and the ﬂ ood in Thailand. the prior ﬁ scal year. costs, a ¥50.0 billion increase in research and devel- included EstimaL, EstimaT and Wish, 181 thousand Operating Costs and Expenses Operating costs and expenses: Cost of products sold Cost of ﬁ nancing operations Selling, general and administrative Total Yen in millions Years ended March 31, 2012 2011 2012 vs. 2011 Change Amount Percentage (%) ¥15,985,783 ¥15,795,918 592,646 1,839,462 ¥18,525,409 ¥18,228,026 629,543 1,910,083 ¥(189,865) (36,897) (70,621) ¥(297,383) –1.2 –5.9 –3.7 –1.6 opment expenses and the ¥104.9 billion increase in vehicles were included in this service campaign. other various costs, partially offset by the ¥120.0 In November 2011, Toyota announced in Japan billion impact of decrease in product quality related and other regions the voluntary safety recall of cer- expenses and others. This cost decreased because tain models of Toyota and Lexus brands’ vehicles in costs related to recalls and other safety measures relation to abnormal noise, charge warning light occurred at a high level during the prior ﬁ scal year. indicators, and increasing of handle operation force See note 14 to the consolidated ﬁ nancial statements. resulted from peeling of a bonded part of the engine During ﬁ scal 2012, Toyota announced recalls and crankshaft pulley. The affected vehicle models other safety measures including the following: included AlphardG, AlphardV, EstimaL, EstimaT, In June 2011, Toyota announced in Japan and KlugerV, KlugerL, Kluger Hybrid, Harrier, Harrier other regions a voluntary safety recall of certain Hybrid, Windom, RX300, RX330, RX400h, ES300, models of Toyota and Lexus brands’ vehicles in ES330, Solara, Camry, Avalon, Sienna, Highlander, ANNUAL REPORT 2013 Print Search Contents P a g e 60 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [15 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations and Highlander Hybrid, 549 thousand vehicles were others, and the ¥150.0 billion impact of cost reduc- Operating Income included in this recall. tion efforts, partially offset by the ¥135.0 billion impact of changes in vehicle unit sales and sales Cost Reduction Efforts mix and other operational factors, and ¥110.0 billion During ﬁ scal 2012, Toyota’s continued cost reduc- increase in miscellaneous costs and others. The tion efforts reduced operating costs and expenses increase in miscellaneous costs was due mainly to by ¥150.0 billion. The amount of effect of cost the ¥50.0 billion increase in research and develop- Changes in operating income and loss: Effect of changes in vehicle unit sales and sales mix and other operational factors Effect of ﬂ uctuation in foreign currency translation rates and others Effect of increase in miscellaneous costs and others Effect of cost reduction efforts, ﬁ nancial services operations, and others reduction efforts includes the impact of ﬂ uctuation in ment expenses and the ¥80.0 billion increase in Total Yen in millions 2012 vs. 2011 Change ¥ 170,000 (285,400) (100,000) 102,748 ¥(112,652) the price of steel, precious metals, non-ferrous labor costs. alloys including aluminum, plastic parts and other Toyota’s operating income decreased by ¥112.6 bil- ¥102.7 billion increase of cost reduction efforts, production materials and parts. In ﬁ scal 2012, raw Cost of Financing Operations lion, or 24.1%, to ¥355.6 billion during ﬁ scal 2012 ﬁ nancial services operations, and others reﬂ ects the materials prices were on an increasing trend; how- Cost of ﬁ nancing operations decreased by ¥36.8 compared with the prior ﬁ scal year. This decrease ¥150.0 billion impact of cost reduction efforts, par- ever, continued cost reduction efforts together with billion, or 5.9%, to ¥592.6 billion during ﬁ scal 2012 was due mainly to the ¥285.4 billion unfavorable tially offset by the ¥10.0 billion decrease in operating suppliers contributed to the improvement in earn- compared with the prior ﬁ scal year. The decrease impact of ﬂ uctuations in foreign currency translation income in the ﬁ nancial services operations. ings by more than offsetting the effects from raw resulted from the ¥35.7 billion favorable impact of rates and others, and the ¥100.0 billion increase in During ﬁ scal 2012, operating loss (before elimina- materials price increase. These cost reduction ﬂ uctuations in foreign currency translation rates and miscellaneous costs and others, partially offset by tion of intersegment proﬁ ts), decreased by efforts related to ongoing value engineering and others, partially offset by the ¥20.8 billion recording the ¥170.0 billion of favorable impact by changes in ¥155.3 billion in Japan compared with the prior value analysis activities, the use of common parts of valuation losses on interest rate swaps stated at vehicle unit sales and sales mix and other opera- ﬁ scal year. During ﬁ scal 2012, operating income resulting in a reduction of part types and other man- fair value. ufacturing initiatives designed to reduce the costs of tional factors and the ¥102.7 billion increase of cost (before elimination of intersegment proﬁ ts), increased reduction efforts, ﬁ nancial services operations, and by ¥4.6 billion, or 35.4%, in Europe compared vehicle production. Selling, General and Administrative Expenses others. The unfavorable impact of ﬂ uctuations in for- with the prior ﬁ scal year, whereas it decreased by Cost of Products Sold decreased by ¥70.6 billion, or 3.7%, to ¥1,839.4 ¥250.0 billion unfavorable impact of ﬂ uctuations by ¥56.2 billion, or 18.0%, in Asia, and decreased Cost of products sold decreased by ¥189.8 billion, billion during ﬁ scal 2012 compared with the prior in foreign currency transaction rates. The by ¥51.3 billion, or 32.0%, in Other. Selling, general and administrative expenses eign currency translation rates and others included ¥153.0 billion, or 45.1%, in North America, decreased or 1.2%, to ¥15,795.9 billion during ﬁ scal 2012 ﬁ scal year. This decrease reﬂ ects the ¥53.0 billion compared with the prior ﬁ scal year. The decrease favorable impact of ﬂ uctuations in foreign currency The following is a description of operating income and loss in each geographic market. resulted from the ¥343.6 billion favorable impact of translation rates and others, and the ¥19.2 billion Japan ﬂ uctuations in foreign currency translation rates and decrease for the ﬁ nancial services operations. Changes in operating income and loss: Effect of changes in vehicle unit sales and sales mix and other operational factors Effect of ﬂ uctuation in foreign currency translation rates and others Effect of cost reduction efforts, decrease in miscellaneous costs and others Total Yen in millions 2012 vs. 2011 Change ¥195,000 (275,000) 235,356 ¥155,356 ANNUAL REPORT 2013 Print Search Contents P a g e 61 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [16 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations The decrease in operating losses in Japan reﬂ ects foreign currency transaction rates and others. The The increase in operating income in Europe was vehicle unit sales and sales mix and other opera- the ¥195.0 billion of favorable impact by changes in cost reduction efforts, decrease in miscellaneous costs due to the ¥10.0 billion impact of cost reduction tional factors and the ¥1.2 billion unfavorable impact vehicle unit sales and sales mix and other opera- and others mainly reﬂ ect the ¥130.0 billion impact of efforts and the ¥5.0 billion increase in operating of ﬂ uctuations in foreign currency translation rates tional factors and ¥235.3 billion impact of the cost the cost reduction efforts and ¥40.0 billion decrease in income in the ﬁ nancial services operations, partially and others. reduction efforts, and decrease in miscellaneous miscellaneous costs and others. The increase in vehicle offset by ¥15.0 billion negative impact of changes in costs and others, partially offset by the ¥275.0 bil- lion unfavorable impact of effect of ﬂ uctuation in unit sales was mainly due to introduction of new prod- ucts such as Prius (cid:2) and Aqua. Asia North America Changes in operating income and loss: Effect of changes in vehicle unit sales and sales mix and other operational factors Effect of ﬂ uctuation in foreign currency translation rates and others Effect of cost reduction efforts, increase in miscellaneous costs and others Total Yen in millions 2012 vs. 2011 Change ¥ (5,000) (7,500) (140,594) ¥(153,094) Changes in operating income and loss: Effect of changes in vehicle unit sales and sales mix and other operational factors Effect of ﬂ uctuation in foreign currency translation rates and others Effect of cost reduction efforts, increase in miscellaneous costs and others Total Yen in millions 2012 vs. 2011 Change ¥(10,000) 11,600 (57,787) ¥(56,187) The decrease in operating income in Asia was due The net gain of ¥37.1 billion in ﬁ scal 2012 was to the ¥10.0 billion negative impact of changes in primarily attributable to Toyota Motor Corporation’s The decrease in operating income in North America ¥5.0 billion negative impact of changes in vehicle unit vehicle unit sales and sales mix and other opera- receivables denominated in the U.S. dollars, speciﬁ - was due to the ¥55.0 billion decrease in operating sales and sales mix and other operational factors tional factors and others and the ¥35.0 billion cally transactional gains on account of an increase income in the ﬁ nancial services operations, the and the ¥90.0 billion increase in miscellaneous increase in miscellaneous costs and others, partially in export volume due to the recovery of production ¥7.5 billion unfavorable impact of the ﬂ uctuations in costs and others. offset by the ¥11.6 billion favorable impact of the levels in the second half of ﬁ scal 2012 after the foreign currency translation rates and others, the ﬂ uctuation in foreign currency translation rates Great East Japan Earthquake, and the weakening Europe and others. of the Japanese yen against the U.S. dollar in the second half of ﬁ scal 2012, together with the impact Yen in millions 2012 vs. 2011 Change Other Income and Expenses of forward foreign currency exchange contracts, Interest and dividend income increased by ¥9.0 bil- which were mainly denominated in the U.S. dollars Changes in operating income and loss: Effect of changes in vehicle unit sales and sales mix and other operational factors Effect of ﬂ uctuation in foreign currency translation rates and others Effect of cost reduction efforts, decrease in miscellaneous costs and others Total ¥(15,000) (1,200) 20,848 ¥ 4,648 lion, or 10.0%, to ¥99.8 billion during ﬁ scal 2012 and the yen as well as the euro and the yen. compared with the prior ﬁ scal year. The ¥22.8 billion increase in foreign exchange Interest expense decreased by ¥6.3 billion, or gain, net, during ﬁ scal 2012 compared with the 21.8%, to ¥22.9 billion during ﬁ scal 2012 compared prior ﬁ scal year was mainly attributable to the losses with the prior ﬁ scal year. incurred by certain subsidiaries during ﬁ scal 2011. Foreign exchange gain, net increased by ¥22.8 Such losses were principally due to the Brazilian real billion, or 159.4%, to ¥37.1 billion during ﬁ scal 2012 and the Thai baht, the functional currencies for compared with the prior ﬁ scal year. Toyota Motor Corporation’s Brazilian and Thai ANNUAL REPORT 2013 Print Search Contents P a g e 62 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [17 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations subsidiaries, respectively, both strengthening ﬁ scal 2012 in net income attributable to the share- Segment Information against the U.S. dollar, decreasing the value of holders of consolidated subsidiaries. The following is a discussion of results of operations for each of Toyota’s operating segments. The amounts assets denominated in dollars that were not settled Equity in earnings of afﬁ liated companies during ﬁ s- presented are prior to intersegment elimination. during the year. cal 2012 decreased by ¥17.3 billion, or 8.1%, to Other loss, net decreased by ¥56.0 billion to ¥197.7 billion compared with the prior ﬁ scal year. This ¥36.8 billion during ﬁ scal 2012 compared with the decrease was due to a decrease during ﬁ scal 2012 in prior ﬁ scal year. This was due to the recognition of net income attributable to the shareholders of afﬁ liated impairment losses on available-for-sale securities. companies accounted for by the equity method. Automotive: Financial Services: Income Taxes Net Income Attributable to Toyota Motor All Other: The provision for income taxes decreased by ¥50.5 Corporation billion, or 16.2%, to ¥262.2 billion during ﬁ scal 2012 Net income attributable to the shareholders of compared with the prior ﬁ scal year due to the Toyota Motor Corporation decreased by ¥124.6 bil- Intersegment elimination/ unallocated amount: Yen in millions Years ended March 31, 2012 2011 ¥17,337,320 ¥16,994,546 21,683 1,100,324 306,438 1,048,915 42,062 (560,132) (14,556) 85,973 1,192,205 358,280 972,252 35,242 (508,089) (11,216) 2012 vs. 2011 Change Amount ¥(342,774) (64,290) (91,881) (51,842) 76,663 6,820 (52,043) (3,340) Percentage (%) –2.0 –74.8 –7.7 –14.5 +7.9 +19.4 — — Net revenues Operating income Net revenues Operating income Net revenues Operating income Net revenues Operating income decrease in income before income taxes. The effec- lion, or 30.5%, to ¥283.5 billion during ﬁ scal 2012 Automotive Operations Segment The changes in vehicle unit sales and changes in tive tax rate for ﬁ scal 2012 was 60.6%, which was compared with the prior ﬁ scal year. The automotive operations segment is Toyota’s larg- sales mix was due primarily to an increase in higher than the statutory tax rate in Japan. This was est operating segment by net revenues. Net reve- Toyota’s vehicle unit sales by 44 thousand vehicles due to recurring items such as the valuation allow- Other Comprehensive Income and Loss nues for the automotive segment decreased during compared with the prior ﬁ scal year resulting from ance and deferred tax liabilities relating to undistrib- Other comprehensive loss decreased by ¥263.8 bil- ﬁ scal 2012 by ¥342.7 billion, or 2.0%, compared the introduction of new products in spite of the uted earnings in afﬁ liated companies accounted for lion to ¥34.1 billion for ﬁ scal 2012 compared with with the prior ﬁ scal year to ¥16,994.5 billion. The impact of the Great East Japan Earthquake and the by the equity method. the prior ﬁ scal year. This decrease resulted from decrease reﬂ ects the ¥649.2 billion unfavorable ﬂ ood in Thailand. The increase in miscellaneous Net Income and Loss Attributable to losses of ¥87.7 billion in ﬁ scal 2012 compared with rates and others, partially offset by the ¥320.0 billion billion increase in labor costs and the ¥50.0 billion Noncontrolling Interests and Equity in losses of ¥287.6 billion in the prior ﬁ scal year, and of favorable impact by changes in vehicle unit sales increase in research and development expenses. unfavorable foreign currency translation adjustments impact of ﬂ uctuations in foreign currency translation costs and others was due primarily to the ¥100.0 Earnings of Afﬁ liated Companies from unrealized holding gains on securities in ﬁ scal and sales mix, and other operational factors. Net income attributable to noncontrolling interests 2012 of ¥129.3 billion compared with losses of Operating income from the automotive operations Financial Services Operations Segment increased by ¥27.4 billion, or 47.9%, to ¥84.7 billion ¥26.1 billion in the prior ﬁ scal year. The increase in decreased by ¥64.3 billion during ﬁ scal 2012 com- Net revenues for the ﬁ nancial services operations during ﬁ scal 2012 compared with the prior ﬁ scal unrealized holding gains on securities was due to pared with the prior ﬁ scal year to ¥21.6 billion. This decreased during ﬁ scal 2012 by ¥91.8 billion, or year. This increase was due to an increase during changes in stock prices. decrease in operating income was due to the 7.7%, compared with the prior ﬁ scal year to ¥250.0 billion unfavorable impact of ﬂ uctuations in ¥1,100.3 billion. This decrease was primarily due to foreign currency rates and the ¥100.0 billion the unfavorable impact of ﬂ uctuations in foreign cur- increase in miscellaneous costs and others, partially rency translation rates and others of ¥66.9 billion offset by the ¥170.0 billion effect of cost reduction and the ¥18.3 billion decrease in rental income from efforts, and the ¥150.0 billion of favorable impact by vehicles and equipment on operating leases. changes in vehicle unit sales and sales mix. ANNUAL REPORT 2013 Print Search Contents P a g e 63 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [18 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Operating income from ﬁ nancial services opera- prior ﬁ scal year. This decrease was due primarily to result, Toyota expects that operating income will operating results. See “Overview—Currency tions decreased by ¥51.8 billion, or 14.5%, to the recording of ¥20.8 billion of valuation losses on increase in ﬁ scal 2014 compared with ﬁ scal 2013. Fluctuations” for further discussion. ¥306.4 billion during ﬁ scal 2012 compared with the interest rate swaps stated at fair value. Also, Toyota expects that income before income The foregoing statements are forward-looking taxes and equity in earnings of afﬁ liated companies statements based upon Toyota’s management’s Ratio of credit loss experience in the United States is as follows: and net income attributable to Toyota Motor assumptions and beliefs regarding exchange rates, Years ended March 31, Corporation will increase in ﬁ scal 2014. market demand for Toyota’s products, economic Net charge-offs as a percentage of average gross earning assets: Finance receivables Operating lease Total 2011 0.61% 0.22 0.52% 2012 0.24% 0.11 0.21% For the purposes of this outlook discussion, conditions and others. See “Cautionary Statement Toyota is assuming an average exchange rate of Concerning Forward-Looking Statements”. Toyota’s ¥90 to the U.S. dollar and ¥120 to the euro. actual results of operations could vary signiﬁ cantly Exchange rate ﬂ uctuations can materially affect from those described above as a result of unantici- Toyota’s operating results. In particular, a strength- pated changes in the factors described above or All Other Operations Segment Operating income from Toyota’s other operations ening of the Japanese yen against the U.S. dollar other factors, including those described in Net revenues for Toyota’s other operations seg- segments increased by ¥6.8 billion, or 19.4%, to can have a material adverse effect on Toyota’s “Risk Factors”. ments increased by ¥76.6 billion, or 7.9%, to ¥42.0 billion during ﬁ scal 2012 compared with the ¥1,048.9 billion during ﬁ scal 2012 compared with prior ﬁ scal year. the prior ﬁ scal year. Outlook As for our world future business environment, the scale. With the foregoing external factors in mind, U.S. economy is expected to beneﬁ t from ongoing Toyota expects that net revenues for ﬁ scal 2014 will moderate recovery and a pickup in the pace of eco- increase compared with ﬁ scal 2013 as results of a nomic expansion in emerging countries. Europe, favorable impact of ﬂ uctuations in foreign currency meanwhile, still faces the risk of economic stagna- translation rates and an increase in vehicle unit tion due to the sovereign debt crisis and other fac- sales. With respect to operating income, factors tors, though a gradual bottoming out is anticipated. expected to contribute to an increase in operating The automotive market is expected to see recov- income include the favorable impact of ﬂ uctuations ery in the U.S. and expansion in emerging countries. in foreign currency rates, increased vehicle unit However, amid the change in market structure, as sales through marketing efforts, and cost reduction seen in the expansion and diversiﬁ cation of demand efforts. On the other hand, factors expected to con- for eco-cars backed by rising environmental con- tribute to a decrease in operating income include sciousness, ﬁ erce competition exists on a global increase in miscellaneous costs and others. As the Liquidity and Capital Resources Historically, Toyota has funded its capital expenditures and research and development activities through cash generated by operations. Net Cash Provided by Operating Activities and Free Cash Flow* (cid:2)(cid:2) Net cash provided by operating activities (cid:2)(cid:2) Free cash flow (¥ Billion) 3,000 2,500 2,000 1,500 1,000 500 0 Capital Expenditures for Property, Plant and Equipment* and Depreciation (cid:2)(cid:2) Capital expenditures (cid:2)(cid:2) Depreciation Cash and Cash Equivalents at End of Year (¥ Billion) 1,500 1,200 900 600 300 0 (¥ Billion) 2,500 2,000 1,500 1,000 500 0 ’11 FY ’09 ’12 ’10 * (Net cash provided by operating activities)- (Capital expenditures for property, plant and equipment, excluding vehicles and equipment on operating leases) ’13 FY ’09 ’10 ’11 ’12 ’13 FY ’09 ’10 ’11 ’12 ’13 * Excluding vehicles and equipment on operating leases ANNUAL REPORT 2013 Print Search Contents P a g e 64 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [19 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations In ﬁ scal 2014, Toyota expects to sufﬁ ciently fund ¥112.6 billion decrease in operating income, to before such ﬁ nancial crisis. The decrease in depre- Total capital expenditures for property, plant and its capital expenditures and research and develop- a decline in depreciation expense of ¥107.7 billion ciation favorably affected net income while it did not equipment, excluding vehicles and equipment on ment activities through cash and cash equivalents and a reduction in inventory. affect the net cash provided by operating activities. operating leases, were ¥854.5 billion during ﬁ scal on hand, and cash generated by operations. Toyota Even though other working capital items signiﬁ - Net cash used in investing activities increased by 2013, an increase of 18.1% over the ¥723.5 billion will use its funds for the development of environ- cantly ﬂ uctuated in line with the signiﬁ cant decrease ¥1,584.6 billion to ¥3,027.3 billion for ﬁ scal 2013, in total capital expenditures during the prior ﬁ scal ment technologies, maintenance and replacement in production and sales in March 2011 due to the compared with ¥1,442.6 billion for ﬁ scal 2012. The year. This increase was due primarily to an increase of manufacturing facilities, and the introduction of Great East Japan Earthquake and increase in sales increase was primarily attributable to the ¥630.5 bil- of investments in North America and Asia. new products. See “Information on the Company— in the second half of ﬁ scal 2012 due to the recovery lion increase in ﬁ nance receivables, to the ¥426.5 Total capital expenditures for vehicles and equip- Business Overview—Capital Expenditures and of production levels from the Great East Japan billion increase in marketable securities and security ment on operating leases were ¥1,119.5 billion dur- Divestitures” in Toyota’s annual report on Form-20F Earthquake, changes in other working capital items investments and to the ¥311.0 billion increase in ing ﬁ scal 2013, an increase of 38.5% over the for information regarding Toyota’s material capital largely offset each other such that Toyota believes purchases of investments in property. ¥808.5 billion in expenditures from the prior ﬁ scal expenditures and divestitures for ﬁ scal 2011, 2012 the impact of such changes on net cash provided Net cash used in investing activities decreased by year. This increase was due to an increase in invest- and 2013, and information concerning Toyota’s by operating activities was not material. The impact ¥673.6 billion to ¥1,442.6 billion for ﬁ scal 2012, ments in the ﬁ nancial services operations. principal capital expenditures and divestitures cur- of changes in interest and other items on net cash compared with ¥2,116.3 billion for ﬁ scal 2011. The Toyota expects investments in property, plant and rently in progress. provided by operating activities were also not material. decrease was primarily attributable to the ¥1,248.1 equipment, excluding vehicles and equipment on Toyota funds its ﬁ nancing programs for custom- Inventory levels were at comparable levels as billion decrease in purchases of marketable securi- operating leases, to be approximately ¥910.0 billion ers and dealers, including loans and leasing pro- between the ends of ﬁ scal 2010 and 2011; while ties and security investments, partially offset by a during ﬁ scal 2014. grams, from both cash generated by operations the reduction in sales after the Lehman ﬁ nancial cri- ¥859.3 billion decrease in sales and maturity of Based on currently available information, Toyota and borrowings by its sales ﬁ nance subsidiaries. sis and other factors kept the inventory level low at marketable securities and security investments. does not expect environmental matters to have a Toyota seeks to expand its ability to raise funds the end of ﬁ scal 2010, the inventory level at the end Net cash provided by or used in ﬁ nancing activities material impact on its ﬁ nancial position, results of locally in markets throughout the world by expand- of ﬁ scal 2011 was approximately equivalent increased by ¥832.5 billion to ¥477.2 billion increase operations, liquidity or cash ﬂ ows during ﬁ scal ing its network of ﬁ nance subsidiaries. because of the Great East Japan Earthquake and for ﬁ scal 2013, compared with ¥355.3 billion decrease 2014. However, uncertainty exists with respect to Net cash provided by operating activities the subsequent downturn in production. However, for ﬁ scal 2012. The increase was primarily attribut- Toyota’s obligations under current and future envi- increased by ¥998.8 billion to ¥2,451.3 billion for the inventory level at the end of ﬁ scal 2012 able to the ¥796.4 billion increase in proceeds from ronment regulations as described in “Information on ﬁ scal 2013, compared with ¥1,452.4 billion for ﬁ scal increased due to the recovery of production and issuance of long-term debt and to the ¥185.4 billion the Company—Business Overview—Governmental 2012. The increase was primarily attributable to the sales after the Great East Japan Earthquake. This decrease in payments of long-term debt. Regulation, Environmental and Safety Standards” in ¥965.2 billion increase in operating income. See increase of inventory involved related expenditures Net cash provided by or used in ﬁ nancing activi- Toyota’s annual report on Form 20-F. “Results of Operations—Fiscal 2013 Compared incurred in producing the inventory, which resulted ties decreased by ¥789.6 billion to ¥355.3 billion Cash and cash equivalents were ¥1,718.2 billion with Fiscal 2012—Operating income” for further in reducing the net cash provided by operating decrease for ﬁ scal 2012, compared with ¥434.3 billion as of March 31, 2013. Most of Toyota’s cash and information regarding the increase in operating income. activities by ¥396.7 billion. increase for ﬁ scal 2011. The decrease was primarily cash equivalents are held in the Japanese yen or in Net cash provided by operating activities Furthermore, depreciation decreased by ¥107.7 attributable to the ¥536.6 billion decrease in proceeds the U.S. dollars. In addition, time deposits were decreased by ¥571.5 billion to ¥1,452.4 billion for billion in ﬁ scal 2012 as a result of a reduction of from issuance of long-term debt and to the ¥377.9 bil- ¥106.7 billion and marketable securities were ﬁ scal 2012, compared with ¥2,024.0 billion for ﬁ scal Toyota’s capital expenditures after the Lehman lion increase in payments of long-term debt. ¥1,445.6 billion as of March 31, 2013. 2011. The decrease was primarily attributable to the ﬁ nancial crisis compared with capital expenditures ANNUAL REPORT 2013 Print Search Contents P a g e 65 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [20 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquid Assets* Shareholders’ Equity and Equity Ratio (cid:2)(cid:2) Shareholders’ equity (cid:3)(cid:3) Equity ratio (Right scale) (¥ Billion) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 (¥ Billion) 15,000 12,500 10,000 7,500 5,000 2,500 0 mainly to the charge for costs related to the settle- into interest rate swaps. There are no material sea- ment of the economic loss claims in the consolidat- sonal variations in Toyota’s borrowings requirements. ed federal action in the U.S. and the increase of As of March 31, 2013, Toyota’s total interest product quality related expenses resulted from the bearing debt was 116.3% of Toyota Motor weakening of the Japanese yen at the end of ﬁ scal Corporation shareholders’ equity, compared with 2013 against other currencies in comparison to the 113.8% as of March 31, 2012. prior ﬁ scal year. Income taxes payable increased The following table provides information for credit during ﬁ scal 2013 by ¥22.4 billion, or 16.8%, as a rating of Toyota’s short-term borrowing and long- result of reﬂ ecting ﬂ uctuations in foreign currency term debt from rating agencies, Standard & Poor’s translation rates. Ratings Group (S&P), Moody’s Investors Services (%) 60 50 40 30 20 10 0 FY ’09 ’10 ’11 ’12 ’13 FY ’09 ’10 ’11 ’12 ’13 Toyota’s total borrowings increased during ﬁ scal (Moody’s), and Rating and Investment Information, * Cash and cash equivalents, time deposits, marketable debt securities and investment in monetary trust funds 2013 by ¥2,126.2 billion, or 17.7%. Toyota’s short- Inc. (R&I), as of May 31, 2013. A credit rating is not term borrowings consist of loans with a weighted- a recommendation to buy, sell or hold securities. A Liquid assets, which Toyota deﬁ nes as cash and follows: in North America 57.6%, in Europe 10.0%, in average interest rate of 2.31% and commercial credit rating may be subject to withdrawal or revi- cash equivalents, time deposits, marketable debt Japan 9.9%, in Asia 9.5% and in Other 13.0%. paper with a weighted-average interest rate of sion at any time. Each rating should be evaluated securities and its investment in monetary trust Marketable securities and other securities invest- 0.52%. Short-term borrowings increased during ﬁ s- separately of any other rating. funds, increased during ﬁ scal 2013 by ¥1,043.0 bil- ments, including those included in current assets, cal 2013 by ¥638.8 billion, or 18.5%, to ¥4,089.5 lion, or 18.1%, to ¥6,804.5 billion. increased during ﬁ scal 2013 by ¥1,387.6 billion, or billion. Toyota’s long-term debt consists of unse- Trade accounts and notes receivable, less allow- 26.5%, reﬂ ecting an increase in the fair values of cured and secured loans, medium-term notes, ance for doubtful accounts decreased during ﬁ scal common stocks and purchase of marketable secu- unsecured notes and long-term capital lease obliga- Short-term borrowing Long-term debt S&P A-1+ AA- Moody’s P-1 Aa3 R&I — AA+ 2013 by ¥28.1 billion, or 1.4%, to ¥1,971.6 billion. rities and security investments. tions with interest rates ranging from 0.00% to Toyota’s unfunded pension liabilities of Japanese This decrease was due to a decrease in the volume Property, plant and equipment increased during 27.30%, and maturity dates ranging from 2013 to plans decreased during ﬁ scal 2013 by ¥48.6 billion, of sales in the fourth quarter of ﬁ scal 2013. ﬁ scal 2013 by ¥615.8 billion, or 9.9%, primarily 2050. The current portion of long-term debt or 8.8%, to ¥504.1 billion. On the other hand, the Inventories increased during ﬁ scal 2013 by ¥93.5 reﬂ ecting ﬂ uctuations in foreign currency translation increased during ﬁ scal 2013 by ¥191.8 billion, or liabilities of foreign plans increased during ﬁ scal billion, or 5.8%, to ¥1,715.7 billion. This increase rates and the increase in the capital expenditures, 7.6%, to ¥2,704.4 billion and the non-current por- 2013 by ¥30.1 billion, or 24.4%, to ¥153.9 billion. was due mainly to the ﬂ uctuations in foreign curren- partially offset by the impacts of depreciation charg- tion increased by ¥1,295.5 billion, or 21.4%, to The unfunded amounts will be funded through cy translation rates. es during the year. ¥7,337.8 billion. The increase in total borrowings future cash contributions by Toyota or in some Total ﬁ nance receivables, net increased during ﬁ scal Accounts and notes payable decreased during resulted from an increase in medium-term notes. As cases will be settled on the retirement date of each 2013 by ¥2,344.0 billion, or 24.1%, to ¥12,061.4 bil- ﬁ scal 2013 by ¥128.8 billion, or 5.7%. This of March 31, 2013, approximately 40% of long-term covered employee. The decrease in unfunded pen- lion. This increase was due mainly to the ﬂ uctuations in decrease was due mainly to a decrease in produc- debt was denominated in the U.S. dollars, 17% in sion liabilities of the Japanese plans as of the end of foreign currency translation rates and an increase in the tion volume in the fourth quarter of ﬁ scal 2013. the Japanese yen, 13% in the Australian dollars, and ﬁ scal 2013 compared with the prior ﬁ scal year end number of ﬁ nancing contracts. As of March 31, 2013, Accrued expenses increased during ﬁ scal 2013 30% in other currencies. Toyota hedges interest rate reﬂ ects mainly an increase in pension assets due to ﬁ nance receivables were geographically distributed as by ¥357.0 billion, or 19.5%. This increase was due risk exposure of ﬁ xed-rate borrowings by entering rising equity security prices, despite an increase in ANNUAL REPORT 2013 Print Search Contents P a g e 66 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [21 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations pension beneﬁ t obligations resulted from a decline initiatives, capital expenditures and ﬁ nancial services Credit Facilities with Dealers Guarantees in discount rate. On the other hand, the increase in operations efﬁ ciently even if earnings are subject to Toyota’s ﬁ nancial services operations maintain credit Toyota enters into certain guarantee contracts with liabilities of foreign plans reﬂ ects the increase in short-term ﬂ uctuations. Toyota believes that it main- facilities with dealers. These credit facilities may be its dealers to guarantee customers’ payments of pension beneﬁ t obligations resulted from a decline tains sufﬁ cient liquidity for its present requirements used for business acquisitions, facilities refurbish- their installment payables that arise from installment in discount rate. See note 19 to the consolidated and that by maintaining its high credit ratings, it will ment, real estate purchases, and working capital contracts between customers and Toyota dealers, ﬁ nancial statements for further discussion. continue to be able to access funds from external requirements. These loans are typically collateralized as and when requested by Toyota dealers. Toyota’s treasury policy is to maintain controls on sources in large amounts and at relatively low costs. with liens on real estate, vehicle inventory, and/or Guarantee periods are set to match the maturity of all exposures, to adhere to stringent counterparty credit Toyota’s ability to maintain its high credit ratings is other dealership assets, as appropriate. Toyota installment payments, and as of March 31, 2013, standards, and to actively monitor marketplace subject to a number of factors, some of which are obtains a personal guarantee from the dealer or ranged from one month to 35 years. However, they exposures. Toyota remains centralized, and is pur- not within Toyota’s control. These factors include corporate guarantee from the dealership when are generally shorter than the useful lives of prod- suing global efﬁ ciency of its ﬁ nancial services opera- general economic conditions in Japan and the other deemed prudent. Although the loans are typically ucts sold. Toyota is required to execute its guaran- tions through Toyota Financial Services Corporation. major markets in which Toyota does business, as collateralized or guaranteed, the value of the under- tee primarily when customers are unable to make The key element of Toyota’s ﬁ nancial strategy is well as Toyota’s successful implementation of its lying collateral or guarantees may not be sufﬁ cient required payments. maintaining a strong ﬁ nancial position that will allow business strategy. to cover Toyota’s exposure under such agreements. The maximum potential amount of future pay- Toyota to fund its research and development Off-Balance Sheet Arrangements Toyota prices the credit facilities according to the ments as of March 31, 2013 is ¥1,849.4 billion. risks assumed in entering into the credit facility. Liabilities for these guarantees of ¥6.5 billion have Toyota’s ﬁ nancial services operations also provide been provided as of March 31, 2013. Under these ﬁ nancing to various multi-franchise dealer organiza- guarantee contracts, Toyota is entitled to recover Toyota uses its securitization program as part of its entities and therefore consolidates them. Toyota has tions, referred to as dealer groups, often as part of any amounts paid by it from the customers whose funding through special purpose entities for its not entered into any off-balance sheet securitization a lending consortium, for wholesale inventory ﬁ nancing, obligations it guaranteed. ﬁ nancial services operations. Toyota is considered transactions during ﬁ scal 2013. the primary beneﬁ ciary of these special purpose Lending Commitments business acquisitions, facilities refurbishment, real estate purchases, and working capital requirements. Toyota’s outstanding credit facilities with dealers totaled ¥1,795.8 billion as of March 31, 2013. Credit Facilities with Credit Card Holders minimizing credit risks and of appropriately estab- Toyota’s ﬁ nancial services operations issue credit lishing credit limits for each individual credit card Contractual Obligations and Commitments cards to customers. As customary for credit card holder, Toyota employs its own risk management For information regarding debt obligations, capital suppliers for purchases of certain raw materials, businesses, Toyota maintains credit facilities with policy which includes an analysis of information pro- lease obligations, operating lease obligations and components and services. These arrangements holders of credit cards issued by Toyota. These vided by ﬁ nancial institutions in alliance with Toyota. other obligations, including amounts maturing in may contain ﬁ xed/minimum quantity purchase facilities are used upon each holder’s requests up to Toyota periodically reviews and revises, as appropri- each of the next ﬁ ve years, see notes 13, 22 and 23 requirements. Toyota enters into such arrangements the limits established on an individual holder’s basis. ate, these credit limits. Outstanding credit facilities to the consolidated ﬁ nancial statements. In addition, to facilitate an adequate supply of these materials Although loans made to customers through these with credit card holders were ¥245.2 billion as of as part of Toyota’s normal business practices, and services. facilities are not secured, for the purposes of March 31, 2013. Toyota enters into long-term arrangements with ANNUAL REPORT 2013 Print Search Contents P a g e 67 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [22 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations The following tables summarize Toyota’s contractual obligations and commercial commitments as of March Related Party Transactions 31, 2013. Contractual Obligations: Short-term borrowings (note 13) Loans Commercial paper Long-term debt* (note 13) Estimated amount of interest expense on long-term debt Capital lease obligations (note 13) Non-cancelable operating lease obligations (note 22) Commitments for the purchase of property, plant and other assets (note 23) Total * “Long-term debt” represents future principal payments. Yen in millions Payments Due by Period Total Less than 1 year 1 to 3 years 3 to 5 years 5 years and after Toyota does not have any signiﬁ cant related party note 12 to the consolidated ﬁ nancial statements for transactions other than transactions with afﬁ liated further discussion. companies in the ordinary course of business. See ¥ 1,062,233 ¥1,062,233 ¥ — ¥ — ¥ — — 986,114 3,027,295 10,020,853 — 2,545,775 — 3,788,631 3,027,295 2,700,333 757,581 21,399 220,552 4,095 299,299 4,839 126,644 3,217 111,086 9,248 Legislation Regarding End-of-Life Vehicles In October 2000, the European Union enforced a (cid:129) vehicles type-approved and put on the market directive that requires member states to promulgate after December 15, 2008 shall be re-usable regulations implementing the following: and/or recyclable to a minimum of 85% by (cid:129) manufacturers shall bear all or a signiﬁ cant part weight per vehicle and shall be re-usable and/or of the costs for taking back end-of-life vehicles recoverable to a minimum of 95% by weight per 61,877 11,299 17,386 11,701 21,491 put on the market after July 1, 2002 and dis- vehicle; and 203,901 132,268 ¥15,155,139 ¥7,083,777 ¥4,120,057 ¥2,691,098 ¥1,260,207 57,970 9,902 3,761 mantling and recycling those vehicles. (cid:129) end-of-life vehicles must meet actual re-use of Beginning January 1, 2007, this requirement will 80% and re-use as material or energy of 85%, also be applicable to vehicles put on the market respectively, of vehicle weight by 2006, rising to before July 1, 2002; 85% and 95%, respectively, by 2015. Toyota is unable to make reasonable estimates of accordingly such liabilities are excluded from the (cid:129) manufacturers may not use certain hazardous See note 23 to the consolidated ﬁ nancial state- the period of cash settlement with respect to liabili- table above. See note 16 to the consolidated ﬁ nan- materials in vehicles sold after July 2003; ments for further discussion. ties recognized for uncertain tax beneﬁ ts, and cial statements for further discussion. Toyota expects to contribute ¥54,094 million domestically and ¥8,688 million overseas to its pension plans Recent Accounting Pronouncements in the United States in ﬁ scal 2014. Commercial Commitments (note 23): Maximum potential exposure to guarantees given in the ordinary course of business Total Commercial Commitments Yen in millions Amount of Commitment Expiration Per Period Total Amounts Committed Less than 1 year 1 to 3 years 3 to 5 years 5 years and after ¥1,849,493 ¥1,849,493 ¥813,754 ¥813,754 ¥503,822 ¥503,822 ¥397,108 ¥397,108 ¥134,809 ¥134,809 In December 2011, FASB issued updated guidance accumulated other comprehensive income. This of disclosures about offsetting assets and liabilities. guidance requires to present, either in a single note This guidance requires additional disclosures about or parenthetically on the face of the ﬁ nancial state- gross and net information for assets and liabilities ments, the effect of signiﬁ cant amounts reclassiﬁ ed including ﬁ nancial instruments eligible for offset in out of each component of accumulated other com- the balance sheets. This guidance is effective for ﬁ s- prehensive income based on its source. This guid- cal year beginning on or after January 1, 2013, and ance is effective for ﬁ scal year beginning on or after for interim period within the ﬁ scal year. Management December 15, 2012, and for interim period within does not expect this guidance to have a material the ﬁ scal year. Management does not expect this impact on Toyota’s consolidated ﬁ nancial statements. guidance to have a material impact on Toyota’s In February 2013, FASB issued updated guidance consolidated ﬁ nancial statements. on the presentation of items reclassiﬁ ed out of ANNUAL REPORT 2013 Print Search Contents P a g e 68 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [23 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Estimates described above, included as a component of cost Factors that may cause a difference between the The consolidated ﬁ nancial statements of Toyota are amount of warranty costs accrued also contains an of sales at the time of vehicle sale. Toyota provides amount accrued at the time of vehicle sale and prepared in conformity with accounting principles estimate of warranty claim recoveries to be received for such “liabilities for recalls and other safety mea- actual payment on individual recalls and other safety generally accepted in the United States of America. from suppliers. The foregoing evaluations are inher- sures” at the time of vehicle sales comprehensively measures mainly include actual cost of recalls and The preparation of these ﬁ nancial statements ently uncertain, as they require material estimates by aggregate sales of various models in a certain safety measures during the period being signiﬁ cantly requires the use of estimates, judgments and and some products’ warranties extend for several period by geographical regions instead of by individ- different from the accumulated amount of repair assumptions that affect the reported amounts of years. Consequently, actual warranty costs may dif- ual models. While there is no difference in the calcu- cost paid per unit (generally comprised of parts and assets and liabilities at the date of the ﬁ nancial fer from the estimated amounts and could require lation method among geographical regions, Toyota labor) and the actual pattern of payment occurrence statements and the reported amounts of revenues additional warranty provisions. If these factors believes it is reasonable to calculate the liabilities by during the period being signiﬁ cantly different from and expenses during the periods presented. Toyota require a signiﬁ cant increase in Toyota’s accrued geographical regions because of factors such as the pattern of the payment occurrence in the past, believes that of its signiﬁ cant accounting policies, estimated warranty costs, it would negatively affect varying labor costs among geographical regions. which is considered as part of our estimation pro- the following may involve a higher degree of judg- future operating results of the automotive operations. The “liabilities for the costs of recalls and other cess for future recalls and other safety measures. ments, estimates and assumptions: An estimate of warranty claim accrued for each safety measures” recorded in the balance sheet is As described above, in estimating the compre- ﬁ scal year is calculated based on the estimate of calculated by deducting the “accumulated amount hensive provision, the actual cost of individual recalls Product Warranties and Recalls and Other warranty claim per unit. The estimate of warranty of repair cost paid” from the “expected liability for and other safety measures is included as a compo- Safety Measures claim per unit is calculated by dividing the actual the cost of recalls and other safety measures”. As nent of the calculation such as the accumulated Toyota generally warrants its products against cer- amounts of warranty claim, net of claim recovery such, this liability is evaluated every period based on amount of repair cost paid per unit. Thus, an individ- tain manufacturing and other defects. Provisions for cost received from suppliers, by the number of new data and are adjusted as appropriate. Toyota ual recall announcement generally does not directly product warranties are provided for speciﬁ c periods sales units for the ﬁ scal year. calculates these liabilities for units sold in the current impact the ﬁ nancial statements when it occurs. of time and/or usage of the product and vary As the historical recovery amounts received from period and each of the past 10 ﬁ scal years, and depending upon the nature of the product, the geo- suppliers is used as a factor in Toyota’s calculation aggregates such liabilities in determining the ﬁ nal Allowance for Doubtful Accounts and graphic location of the sale and other factors. All of estimated accrued warranty cost, the estimated liability amount. Credit Losses product warranties are consistent with commercial accrued warranty cost may change depending on The “expected liability for the cost of recalls and Natures of estimates and assumptions practices. Toyota includes a provision for estimated the average recovery amounts received from suppli- other safety measures” are calculated by multiplying Retail receivables and ﬁ nance lease receivables product warranty costs as a component of cost of ers in the past. However, Toyota believes that there the “sales unit” by the “expected average repair consist of retail installment sales contracts secured sales at the time the related sale is recognized. The is not a signiﬁ cant uncertainty of estimated amounts cost per unit”. The “expected average repair cost by passenger cars and commercial vehicles. accrued warranty costs represent management’s based on historical experience regarding recoveries per unit” is calculated based on dividing the “accu- Collectability risks include consumer and dealer best estimate at the time of sale of the total costs received from suppliers. Toyota may seek recovery mulated amount of repair cost paid per unit” by the insolvencies and insufﬁ cient collateral values (less that Toyota will incur to repair or replace product to suppliers over the life of the warranty, and there “pattern of payment occurrences”. The “pattern of costs to sell) to realize the full carrying values of parts that fail while still under warranty. The amount are no other signiﬁ cant special terms and conditions payment occurrence” represents a ratio that shows these receivables. As a matter of policy, Toyota of accrued estimated warranty costs is primarily including cap on amounts that can be recovered. the measure of payment occurrence over 10 years maintains an allowance for doubtful accounts and based on historical experience of product failures as Toyota accrues for costs of recalls and other based on actual payments with regard to units sold credit losses representing management’s estimate well as current information on repair costs. The safety measures, as well as product warranty cost within 10 years. of the amount of asset impairment in the portfolios ANNUAL REPORT 2013 Print Search Contents P a g e 69 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [24 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations of ﬁ nance, trade and other receivables. Toyota inﬂ uenced by two factors: frequency of occurrence determines the allowance for doubtful accounts and and expected severity of loss. For evaluation pur- credit losses based on a systematic, ongoing review poses, exposures to credit losses are segmented and evaluation performed as part of the credit-risk into the two primary categories of “consumer” and 10 percent change in frequency of occurrence or expected severity of loss Yen in millions Effect on the allowance for credit losses as of March 31, 2013 ¥3,950 evaluation process, historical loss experience, the “dealer”. Toyota’s “consumer” category consists of Investment in Operating Leases exposes Toyota to higher potential losses incurred size and composition of the portfolios, current eco- smaller balances that are homogenous retail receiv- Natures of estimates and assumptions at lease termination. Severity of loss is the extent to nomic events and conditions, the estimated fair ables and ﬁ nance lease receivables. The “dealer” Vehicles on operating leases, where Toyota is the which the end-of-term fair value of a lease is less value and adequacy of collateral, and other perti- category consists of wholesale and other dealer lessor, are valued at cost and depreciated over their than its carrying value at lease end. nent factors. This evaluation is inherently judgmental loan receivables. The overall allowance for credit estimated useful lives using the straight-line method To the extent that sales incentives remain an inte- and requires material estimates, including the losses is evaluated at least quarterly, considering a to their estimated residual values. Toyota utilizes gral part of sales promotion, resale prices of used amounts and timing of future cash ﬂ ows expected variety of assumptions and factors to determine industry published information and its own historical vehicles and, correspondingly, the fair value of to be received, which may be susceptible to signiﬁ - whether reserves are considered adequate to cover experience to determine estimated residual values Toyota’s leased vehicles could be subject to down- cant change. Although management considers the probable losses. for these vehicles. Toyota evaluates the recoverabili- ward pressure. The extent of the impact this will allowance for doubtful accounts and credit losses to ty of the carrying values of its leased vehicles for have on the end of term residual value depends on be adequate based on information currently avail- Sensitivity analysis impairment when there are indications of declines in the signiﬁ cance of the incentive programs and able, additional provisions may be necessary due to The level of credit losses, which could signiﬁ cantly residual values, and if impaired, Toyota recognizes whether they are sustained over a number of peri- (i) changes in management estimates and assump- impact Toyota’s results of operations, is inﬂ uenced an allowance for losses on its residual values. ods. This in turn can impact the projection of future tions about asset impairments, (ii) information that by two factors: frequency of occurrence and Throughout the life of the lease, management used vehicle values, adversely impacting the indicates changes in expected future cash ﬂ ows, or expected severity of loss. The overall allowance for performs periodic evaluations of estimated end-of- expected residual value of the current operating (iii) changes in economic and other events and credit losses is evaluated at least quarterly, consid- term fair values to determine whether estimates lease portfolio and increasing the provision for resid- conditions. To the extent that sales incentives ering a variety of assumptions and factors to used in the determination of the contractual residual ual value losses. However, various other factors remain an integral part of sales promotion with the determine whether reserves are considered ade- value are still considered reasonable. Factors affect- impact used vehicle values and the projection of effect of reducing new vehicle prices, resale prices quate to cover probable losses. The following table ing the estimated residual value at lease maturity future residual values, including the supply of and of used vehicles and, correspondingly, the collateral illustrates the effect of an assumed change in fre- include, but are not limited to, new vehicle incentive demand for used vehicles, interest rates, inﬂ ation, value of Toyota’s retail receivables and ﬁ nance lease quency of occurrence or expected severity of loss programs, new vehicle pricing, used vehicle supply, the actual or perceived quality, safety and reliability receivables could experience further downward mainly in the United States, assuming all other projected vehicle return rates, and projected loss of vehicles, the general economic outlook, new pressure. If these factors require a signiﬁ cant assumptions are held consistent respectively. The severity. The vehicle return rate represents the num- vehicle pricing, projected vehicle return rates and increase in Toyota’s allowance for doubtful accounts table below represents the impact on the allowance ber of leased vehicles actually returned at contract projected loss severity, which may offset this effect. and credit losses, it could negatively affect future for credit losses in Toyota’s ﬁ nancial services opera- maturity as a percentage of the number of lease Such factors might adversely affect the results of operating results of the ﬁ nancial services operations. tions of the change in frequency of occurrence or contracts originally scheduled to be mature in the operations for ﬁ nancial services due to signiﬁ cant The level of credit losses, which has a greater expected severity of loss as any change impacts same period less lease contracts subject to early charges reducing the estimated residual value. impact on Toyota’s results of operations, is most signiﬁ cantly on the ﬁ nancial services operations. terminations. A higher rate of vehicle returns ANNUAL REPORT 2013 Print Search Contents P a g e 70 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [25 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Sensitivity analysis other assumptions constant. The following table and 7.0% overseas are the results of assumptions Sensitivity analysis The following table illustrates the effect of an represents the impact on the residual value losses in used for the various pension plans in calculating The following table illustrates the effects of assumed assumed change in the vehicle return rate and end- Toyota’s ﬁ nancial services operations of the change Toyota’s consolidated pension costs for ﬁ scal 2013. changes in weighted-average discount rates and of-term market values mainly in the United States, in vehicle return rate and end-of-term market values Also, a weighted-average discount rate of 1.7% the weighted-average expected rate of return on which Toyota believes are the critical estimates, in as those changes have a signiﬁ cant impact on domestically and 4.5% overseas is the result of plan assets, which Toyota believes are critical esti- determining the residual value losses, holding all ﬁ nancial services operations. assumption used for the various pension plans in mates in determining pension costs and obligations, 1 percent increase in vehicle return rate 1 percent increase in end-of-term market values Yen in millions Effect on the residual value losses over the remaining terms of the operating leases on and after April 1, 2013 ¥1,035 5,267 calculating Toyota’s consolidated pension obliga- assuming all other assumptions are consistent. tions for ﬁ scal 2013. Impairment of Long-Lived Assets accumulated and amortized over future periods Toyota periodically reviews the carrying value of its and, therefore, generally affect recognized expense long-lived assets held and used and assets to be in future periods. While management believes that disposed of, including intangible assets, when events the assumptions used are appropriate, differences and circumstances warrant such a review. This in actual experience or changes in assumptions review is performed using estimates of future cash may affect Toyota’s pension costs and obligations. ﬂ ows. If the carrying value of a long-lived asset is The two most critical assumptions impacting the Discount rates 0.5% decrease 0.5% increase Expected rate of return on plan assets 0.5% decrease 0.5% increase Yen in millions Domestic Overseas Effect on pre-tax income for the year ended March 31, 2014 Effect on obligations for the year ended March 31, 2013 Effect on pre-tax income for the year ended March 31, 2014 Effect on obligations for the year ended March 31, 2013 ¥117,113 (108,417) ¥(7,217) 6,984 ¥(5,451) 5,451 ¥57,956 (52,908) ¥(4,598) 4,365 ¥(2,396) 2,396 considered impaired, an impairment charge is calculation of pension costs and obligations are the Derivatives and Other Contracts at different assumptions may have a material effect on recorded for the amount by which the carrying value discount rates and the expected rates of returns on Fair Value the estimated fair value amounts. of the long-lived asset exceeds its fair value. plan assets. Toyota determines the discount rates Toyota uses derivatives in the normal course of Management believes that the estimates of future mainly based on the rates of high quality ﬁ xed business to manage its exposure to foreign curren- Marketable Securities and Investments in cash ﬂ ows and fair values are reasonable. However, income bonds or ﬁ xed income governmental bonds cy exchange rates and interest rates. The account- Afﬁ liated Companies changes in estimates of such cash ﬂ ows and fair val- currently available and expected to be available dur- ing for derivatives is complex and continues to Toyota’s accounting policy is to record a write-down ues would affect the evaluations and negatively affect ing the period to maturity of the deﬁ ned beneﬁ t pen- evolve. Toyota estimates the fair value of derivative of such investments to net realizable value when a future operating results of the automotive operations. sion plans. Toyota determines the expected rates of ﬁ nancial instruments using industry-standard valua- decline in fair value below the carrying value is return for pension assets after considering several tion models that require observable inputs including other-than-temporary. In determining if a decline in Pension Costs and Obligations applicable factors including, the composition of plan interest rates and foreign exchange rates, and the value is other-than-temporary, Toyota considers the Natures of estimates and assumptions assets held, assumed risks of asset management, contractual terms. In other certain cases when mar- length of time and the extent to which the fair value Pension costs and obligations are dependent on historical results of the returns on plan assets, ket data is not available, key inputs to the fair value has been less than the carrying value, the ﬁ nancial assumptions used in calculating such amounts. Toyota’s principal policy for plan asset management, measurement include quotes from counterparties, condition and prospects of the company and These assumptions include discount rates, beneﬁ ts and forecasted market conditions. A weighted- and other market data. These estimates are based Toyota’s ability and intent to retain its investment in earned, interest costs, expected rate of return on average discount rate of 2.0% domestically and upon valuation methodologies deemed appropriate the company for a period of time sufﬁ cient to allow plan assets, mortality rates and other factors. Actual 5.0% overseas and a weighted-average expected under the circumstances. However, the use of for any anticipated recovery in fair value. results that differ from the assumptions are rate of return on plan assets of 2.5% domestically ANNUAL REPORT 2013 Print Search Contents P a g e 71 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations [26 of 26] Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Discussion and Analysis of Financial Condition and Results of Operations Deferred Tax Assets a valuation allowance is needed for deferred tax exchange rates. The VAR of the combined foreign ﬂ uctuate with changes in market interest rates, The factors used to assess the likelihood of realiza- assets which are not more-likely-than-not to exchange position represents a potential loss in pre- while interest rates on other types of assets may lag tion of the deferred tax assets are the future reversal be realized. tax earnings that was estimated to be ¥87.9 billion behind changes in market rates. Finance receiv- of existing taxable temporary differences, the future The accounting for deferred tax assets represents and ¥99.1 billion at March 31, 2012 and 2013, ables are less susceptible to prepayments when taxable income and available tax planning strategies Toyota’s current best estimate based on all available respectively. Based on Toyota’s overall currency interest rates change and, as a result, Toyota’s that are prudent and feasible. All available evidence, evidence. Unanticipated events or changes could exposure (including derivative positions), the risk model does not address prepayment risk for auto- both positive and negative, is considered to deter- result in re-evaluating the realizability of deferred during ﬁ scal 2013 to pre-tax cash ﬂ ow from curren- motive related ﬁ nance receivables. However, in the mine whether, based on the weight of that evidence, tax assets. cy movements was on average ¥99.1 billion, with a event of a change in interest rates, actual loan pre- Quantitative and Qualitative Disclosures about Market Risk high of ¥129.5 billion and a low of ¥78.1 billion. payments may deviate signiﬁ cantly from the The VAR was estimated by using a Monte Carlo assumptions used in the model. Simulation Method and assumed 95% conﬁ dence level on the realization date and a 10-day holding period. Commodity Price Risk Toyota is exposed to market risk from changes in consists of forward foreign currency exchange con- foreign currency exchange rates, interest rates, cer- tracts, foreign currency options, interest rate swaps, Interest Rate Risk Commodity price risk is the possibility of higher or lower costs due to changes in the prices of com- tain commodity and equity security prices. In order interest rate currency swap agreements and interest Toyota is subject to market risk from exposures to modities, such as non-ferrous alloys (e.g., alumi- to manage the risk arising from changes in foreign rate options. Anticipated transactions denominated changes in interest rates based on its ﬁ nancing, num), precious metals (e.g., palladium, platinum and currency exchange rates and interest rates, Toyota in foreign currencies that are covered by Toyota’s investing and cash management activities. Toyota rhodium) and ferrous alloys, which Toyota uses in enters into a variety of derivative ﬁ nancial instruments. derivative hedging are not included in the market enters into various ﬁ nancial instrument transactions the production of motor vehicles. Toyota does not A description of Toyota’s accounting policies for risk analysis. Although operating leases are not to maintain the desired level of exposure to the risk use derivative instruments to hedge the price risk derivative instruments is included in note 2 to the required to be included, Toyota has included these of interest rate ﬂ uctuations and to minimize interest associated with the purchase of those commodities consolidated ﬁ nancial statements and further disclo- instruments in determining interest rate risk. expense. The potential decrease in fair value result- and controls its commodity price risk by holding sure is provided in notes 20 and 26 to the consoli- ing from a hypothetical 100 basis point upward shift minimum stock levels. dated ﬁ nancial statements. Foreign Currency Exchange Rate Risk in interest rates would be approximately ¥144.2 bil- Toyota monitors and manages these ﬁ nancial expo- Toyota has foreign currency exposures related to lion as of March 31, 2012 and ¥208.5 billion as of Equity Price Risk sures as an integral part of its overall risk management buying, selling and ﬁ nancing in currencies other March 31, 2013. Toyota holds investments in various available-for- program, which recognizes the unpredictability of than the local currencies in which it operates. There are certain shortcomings inherent to the sale equity securities that are subject to price risk. ﬁ nancial markets and seeks to reduce the potential- Toyota is exposed to foreign currency risk related to sensitivity analyses presented. The model assumes The fair value of available-for-sale equity securities ly adverse effects on Toyota’s operating results. future earnings or assets and liabilities that are that interest rate changes are instantaneous parallel was ¥1,034.3 billion as of March 31, 2012 and The ﬁ nancial instruments included in the market exposed due to operating cash ﬂ ows and various shifts in the yield curve. However, in reality, changes ¥1,401.1 billion as of March 31, 2013. The potential risk analysis consist of all of Toyota’s cash and cash ﬁ nancial instruments that are denominated in foreign are rarely instantaneous. Although certain assets change in the fair value of these investments, equivalents, marketable securities, ﬁ nance receiv- currencies. Toyota’s most signiﬁ cant foreign curren- and liabilities may have similar maturities or periods assuming a 10% change in prices, would be ables, securities investments, long-term and short- cy exposures relate to the U.S. dollar and the euro. to repricing, they may not react correspondingly to approximately ¥103.4 billion as of March 31, 2012 term debt and all derivative ﬁ nancial instruments. Toyota uses a value-at-risk analysis (“VAR”) to changes in market interest rates. Also, the interest and ¥140.1 billion as of March 31, 2013. Toyota’s portfolio of derivative ﬁ nancial instruments evaluate its exposure to changes in foreign currency rates on certain types of assets and liabilities may ANNUAL REPORT 2013 Print Search Contents P a g e 72 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements [1 of 6] Notes to Consolidated Financial Statements Next Consolidated Balance Sheets Toyota Motor Corporation March 31, 2012 and 2013 ASSETS Current assets Cash and cash equivalents Time deposits Marketable securities Trade accounts and notes receivable, less allowance for doubtful accounts of ¥13,004 million in 2012 and ¥15,875 million ($169 million) in 2013 Finance receivables, net Other receivables Inventories Deferred income taxes Prepaid expenses and other current assets Total current assets Yen in millions 2012 2013 ¥ 1,679,200 80,301 1,181,070 ¥ 1,718,297 106,700 1,445,663 1,999,827 4,114,897 408,547 1,622,282 718,687 516,378 12,321,189 1,971,659 5,117,660 432,693 1,715,786 749,398 527,034 13,784,890 U.S. dollars in millions 2013 $ 18,270 1,135 15,371 20,964 54,414 4,601 18,243 7,968 5,604 146,570 Noncurrent ﬁ nance receivables, net 5,602,462 6,943,766 73,830 Investments and other assets Marketable securities and other securities investments Afﬁ liated companies Employees receivables Other Total investments and other assets 4,053,572 1,920,987 56,524 460,851 6,491,934 5,176,582 2,103,283 53,741 569,816 7,903,422 Property, plant and equipment Land Buildings Machinery and equipment Vehicles and equipment on operating leases Construction in progress Total property, plant and equipment, at cost Less—Accumulated depreciation Total property, plant and equipment, net Total assets 1,243,261 3,660,912 9,094,399 2,575,353 275,357 16,849,282 (10,613,902) 6,235,380 ¥30,650,965 1,303,611 3,874,279 9,716,180 3,038,011 291,539 18,223,620 (11,372,381) 6,851,239 ¥35,483,317 The accompanying notes are an integral part of these consolidated ﬁ nancial statements. 55,041 22,363 571 6,059 84,034 13,861 41,194 103,308 32,302 3,100 193,765 (120,918) 72,847 $377,281 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Short-term borrowings Current portion of long-term debt Accounts payable Other payables Accrued expenses Income taxes payable Other current liabilities Total current liabilities Long-term liabilities Long-term debt Accrued pension and severance costs Deferred income taxes Other long-term liabilities Total long-term liabilities Yen in millions 2012 2013 ¥ 3,450,649 2,512,620 2,242,583 629,093 1,828,523 133,778 984,328 11,781,574 ¥ 4,089,528 2,704,428 2,113,778 721,065 2,185,537 156,266 941,918 12,912,520 U.S. dollars in millions 2013 $ 43,482 28,755 22,475 7,667 23,238 1,662 10,015 137,294 6,042,277 708,402 908,883 143,351 7,802,913 7,337,824 766,112 1,385,927 308,078 9,797,941 78,020 8,146 14,736 3,276 104,178 Shareholders’ equity Toyota Motor Corporation shareholders’ equity Common stock, no par value, authorized: 10,000,000,000 shares in 2012 and 2013; issued: 3,447,997,492 shares in 2012 and 2013 Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Treasury stock, at cost, 281,187,739 shares in 2012 and 280,568,824 shares in 2013 Total Toyota Motor Corporation shareholders’ equity Noncontrolling interests Total shareholders’ equity Commitments and contingencies 397,050 550,650 11,917,074 (1,178,833) (1,135,680) 10,550,261 516,217 11,066,478 397,050 551,040 12,689,206 (356,123) (1,133,138) 12,148,035 624,821 12,772,856 4,222 5,859 134,920 (3,787) (12,048) 129,166 6,643 135,809 Total liabilities and shareholders’ equity ¥30,650,965 ¥35,483,317 $377,281 ANNUAL REPORT 2013 Print Search Contents P a g e 73 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements [2 of 6] Notes to Consolidated Financial Statements Next Consolidated Statements of Income Toyota Motor Corporation For the years ended March 31, 2011, 2012 and 2013 Net revenues Sales of products Financing operations Total net revenues Costs and expenses Cost of products sold Cost of ﬁ nancing operations Selling, general and administrative Total costs and expenses Operating income Other income (expense) Interest and dividend income Interest expense Foreign exchange gain, net Other income (loss), net Total other income (expense) Income before income taxes and equity in earnings of afﬁ liated companies Provision for income taxes Equity in earnings of afﬁ liated companies Net income Less: Net income attributable to noncontrolling interests 2013 2013 U.S. dollars in millions 2011 ¥17,820,520 1,173,168 18,993,688 15,985,783 629,543 1,910,083 18,525,409 Yen in millions 2012 ¥17,511,916 1,071,737 18,583,653 15,795,918 592,646 1,839,462 18,228,026 ¥20,914,150 1,150,042 22,064,192 18,010,569 630,426 2,102,309 20,743,304 468,279 355,627 1,320,888 90,771 (29,318) 14,305 19,253 95,011 563,290 312,821 215,016 465,485 (57,302) 99,865 (22,922) 37,105 (36,802) 77,246 432,873 262,272 197,701 368,302 (84,743) 98,673 (22,967) 5,551 1,504 82,761 1,403,649 551,686 231,519 1,083,482 (121,319) $222,373 12,228 234,601 191,500 6,703 22,353 220,556 14,045 1,049 (244) 59 16 880 14,925 5,866 2,461 11,520 (1,290) Net income attributable to Toyota Motor Corporation ¥ 408,183 ¥ 283,559 ¥ 962,163 $ 10,230 Net income attributable to Toyota Motor Corporation per share — Basic — Diluted ¥ 130.17 ¥ 130.16 Yen ¥ 90.21 ¥ 90.20 ¥ 303.82 ¥ 303.78 U.S. dollars $ 3.23 $ 3.23 Cash dividends per share ¥ 50.00 ¥ 50.00 ¥ 90.00 $ 0.96 The accompanying notes are an integral part of these consolidated ﬁ nancial statements. ANNUAL REPORT 2013 Print Search Contents P a g e 74 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements [3 of 6] Notes to Consolidated Financial Statements Next Consolidated Statements of Comprehensive Income Toyota Motor Corporation For the years ended March 31, 2011, 2012 and 2013 Net income Other comprehensive income (loss), net of tax Foreign currency translation adjustments Unrealized gains (losses) on securities, net of reclassiﬁ cation adjustments Pension liability adjustments Total other comprehensive income (loss) Comprehensive income Less: Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to Toyota Motor Corporation The accompanying notes are an integral part of these consolidated ﬁ nancial statements. 2011 ¥465,485 (299,578) (27,657) 11,454 (315,781) 149,704 (39,407) ¥110,297 Yen in millions 2012 ¥368,302 (93,292) 131,794 (65,110) (26,608) 341,694 (85,744) ¥255,950 2013 ¥1,083,482 461,754 374,209 14,711 850,674 1,934,156 (149,283) ¥1,784,873 U.S. dollars in millions 2013 $11,520 4,910 3,979 156 9,045 20,565 (1,587) $18,978 ANNUAL REPORT 2013 Print Search Contents P a g e 75 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements [4 of 6] Notes to Consolidated Financial Statements Next Consolidated Statements of Shareholders’ Equity Toyota Motor Corporation For the years ended March 31, 2011, 2012 and 2013 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 gains (losses) on securities, net of reclassiﬁ cation adjustments Pension liability adjustments Total comprehensive income Dividends paid to Toyota Motor Corporation shareholders Dividends paid to noncontrolling interests Purchase and reissuance of common stock Balances at March 31, 2011 Equity transaction with noncontrolling interests and other Issuance during the year Comprehensive income Net income Other comprehensive income (loss) Foreign currency translation adjustments Unrealized gains (losses) on securities, net of reclassiﬁ cation adjustments Pension liability adjustments Total comprehensive income Dividends paid to Toyota Motor Corporation shareholders Dividends paid to noncontrolling interests Purchase and reissuance of common stock Balances at March 31, 2012 Equity transaction with noncontrolling interests and other Issuance during the year Comprehensive income Net income Other comprehensive income (loss) Foreign currency translation adjustments Unrealized gains (losses) on securities, net of reclassiﬁ cation adjustments Pension liability adjustments Total comprehensive income Dividends paid to Toyota Motor Corporation shareholders Dividends paid to noncontrolling interests Purchase and reissuance of common stock Balances at March 31, 2013 The accompanying notes are an integral part of these consolidated ﬁ nancial statements. Common stock ¥397,050 Additional paid-in capital ¥501,331 2,310 2,119 Retained earnings ¥11,568,602 Yen in millions Accumulated other comprehensive income (loss) ¥ (846,835) Treasury stock, at cost ¥(1,260,425) Total Toyota Motor Corporation shareholders’ equity ¥10,359,723 2,310 2,119 Noncontrolling interests ¥570,720 5,183 Total shareholders’ equity ¥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 43,311 1,483 ¥11,835,665 (45,365) ¥(1,144,721) (6,503) (958) ¥(1,261,383) 125,819 (958) ¥10,332,371 117,262 1,483 (11,965) (1,599) (4,331) 39,407 (27,657) ¥587,653 (119,824) (299,578) (27,657) 11,454 149,704 (141,120) (27,657) (958) ¥10,920,024 (2,562) 1,483 283,559 283,559 84,743 368,302 (87,729) 129,328 (69,208) (156,785) (87,729) 129,328 (69,208) 255,950 (156,785) ¥397,050 96 ¥550,650 675 ¥11,917,074 ¥(1,178,833) (116) ¥(1,135,680) (20) ¥10,550,261 675 (5,563) 2,466 4,098 85,744 (37,356) ¥516,217 4,961 (93,292) 131,794 (65,110) 341,694 (156,785) (37,356) (20) ¥11,066,478 5,636 962,163 962,163 121,319 1,083,482 434,638 368,507 19,565 (190,008) 434,638 368,507 19,565 1,784,873 (190,008) ¥397,050 (285) ¥551,040 (23) ¥12,689,206 ¥ (356,123) 2,542 ¥(1,133,138) 2,234 ¥12,148,035 27,116 5,702 (4,854) 149,283 (45,640) ¥624,821 461,754 374,209 14,711 1,934,156 (190,008) (45,640) 2,234 ¥12,772,856 ANNUAL REPORT 2013 Print Search Contents P a g e 76 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements [5 of 6] Notes to Consolidated Financial Statements Next Consolidated Statements of Shareholders’ Equity (Continued) Toyota Motor Corporation For the years ended March 31, 2011, 2012 and 2013 Balances at March 31, 2012 Equity transaction with noncontrolling interests and other Issuance during the year Comprehensive income Net income Other comprehensive income (loss) Foreign currency translation adjustments Unrealized gains (losses) on securities, net of reclassiﬁ cation adjustments Pension liability adjustments Total comprehensive income Dividends paid to Toyota Motor Corporation shareholders Dividends paid to noncontrolling interests Purchase and reissuance of common stock Balances at March 31, 2013 The accompanying notes are an integral part of these consolidated ﬁ nancial statements. Common stock $4,222 Additional paid-in capital $5,855 7 Retained earnings $126,710 U.S. dollars in millions Accumulated other comprehensive income (loss) $(12,535) Treasury stock, at cost $(12,075) Total Toyota Motor Corporation shareholders’ equity $112,177 7 Noncontrolling interests $5,489 53 Total shareholders’ equity $117,666 60 10,230 (2,020) 4,622 3,918 208 10,230 4,622 3,918 208 18,978 (2,020) $4,222 (3) $5,859 (0) $134,920 $ (3,787) 27 $(12,048) 24 $129,166 1,290 288 61 (52) 1,587 (486) $6,643 11,520 4,910 3,979 156 20,565 (2,020) (486) 24 $135,809 ANNUAL REPORT 2013 Print Search Contents P a g e 77 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements [6 of 6] Notes to Consolidated Financial Statements Next Consolidated Statements of Cash Flows Toyota Motor Corporation For the years ended March 31, 2011, 2012 and 2013 Cash ﬂ ows 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 ﬁ xed assets Unrealized losses on available-for-sale securities, net 2011 Yen in millions 2012 2013 U.S. dollars in millions 2013 ¥ 465,485 ¥ 368,302 ¥ 1,083,482 $ 11,520 1,175,573 1,067,830 1,105,109 11,750 4,140 (23,414) 36,214 7,915 9,623 16,711 33,528 53,831 27,367 (20,429) 32,221 2,104 291 (217) 343 22 Deferred income taxes Equity in earnings of afﬁ liated companies 85,710 (215,016) 6,395 (197,701) 160,008 (231,519) 1,701 (2,461) Changes in operating assets and liabilities, and other 421,423 (585,464) (168,260) (1,789) (Increase) decrease in accounts and notes receivable (Increase) decrease in inventories (Increase) decrease in other current assets Increase (decrease) in accounts payable Increase (decrease) in accrued income taxes Increase in other current liabilities 51,808 38,307 (406,210) (40,629) 239,319 183,384 Net cash provided by operating activities ¥ 2,024,009 Other (344,923) (180,529) 756,363 20,943 316,366 111,160 50,483 (47,033) (209,284) 22,127 280,083 364,857 ¥ 1,452,435 ¥ 2,451,316 537 (500) (2,225) 235 2,978 3,879 $ 26,064 The accompanying notes are an integral part of these consolidated ﬁ nancial statements. Cash ﬂ ows from investing activities Additions to ﬁ nance receivables Collection of ﬁ nance receivables Proceeds from sales of ﬁ nance receivables Additions to ﬁ xed assets excluding equipment leased to others 2011 Yen in millions 2012 2013 U.S. dollars in millions 2013 ¥(8,438,785) ¥(8,333,248) ¥(10,004,928) 9,063,011 8,007,711 39,845 53,999 7,934,364 69,576 $(106,379) 96,364 424 (629,326) (723,537) (854,561) (9,086) Additions to equipment leased to others (1,061,865) (808,545) (1,119,591) (11,904) Proceeds from sales of ﬁ xed assets excluding equipment leased to others Proceeds from sales of equipment leased to others Purchases of marketable securities and security investments Proceeds from sales of marketable securities and security investments Proceeds upon maturity of marketable securities and security investments Payment for additional investments in afﬁ liated companies, net of cash acquired Changes in investments and other assets, and other 51,342 36,633 39,191 417 486,695 431,313 533,441 5,672 (4,421,807) (3,173,634) (3,412,423) (36,283) 189,037 162,160 35,178 374 3,527,119 2,694,665 2,633,913 28,005 (299) (147) 16,216 177,605 209,972 3,396 172 36 Net cash used in investing activities (2,116,344) (1,442,658) (3,027,312) (32,188) Cash ﬂ ows from ﬁ nancing activities Proceeds from issuance of long-term debt Payments of long-term debt Increase in short-term borrowings Dividends paid Purchase of common stock, and other Net cash provided by (used in) ﬁ nancing activities 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 2,931,436 (2,489,632) 162,260 (141,120) (28,617) 2,394,807 (2,867,572) 311,651 (156,785) (37,448) 3,191,223 (2,682,136) 201,261 (190,008) (43,098) 33,931 (28,518) 2,139 (2,020) (458) 434,327 (355,347) 477,242 5,074 (127,029) (55,939) 137,851 1,466 214,963 (401,509) 39,097 416 1,865,746 ¥ 2,080,709 2,080,709 1,679,200 ¥ 1,679,200 ¥ 1,718,297 17,854 $ 18,270 The accompanying notes are an integral part of these consolidated ﬁ nancial statements. ANNUAL REPORT 2013 Print Search Contents P a g e 78 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [1 of 44] Next Notes to Consolidated Financial Statements 1. Nature of operations Translation of foreign currencies recorded as assets and are depreciated in accor- All asset and liability accounts of foreign subsidiaries dance with Toyota’s depreciation policy. Toyota is primarily engaged in the design, manufac- provides ﬁ nancing, vehicle and equipment leasing and and afﬁ liated companies are translated into Japanese Revenues from retail ﬁ nancing contracts and ture, and sale of sedans, minivans, compact cars, certain other ﬁ nancial services primarily to its dealers yen at appropriate year-end current exchange rates ﬁ nance leases are recognized using the effective yield sport-utility vehicles, trucks and related parts and and their customers to support the sales of vehicles and all income and expense accounts of those sub- method. Revenues from operating leases are recog- accessories throughout the world. In addition, Toyota and other products manufactured by Toyota. sidiaries are translated at the average exchange nized on a straight-line basis over the lease term. 2. Summary of signiﬁ cant accounting policies rates for each period. The foreign currency transla- The sale of certain vehicles includes a determin- tion adjustments are included as a component of able amount for the contract, which entitles cus- accumulated other comprehensive income. tomers to free vehicle maintenance. Such revenues Foreign currency receivables and payables are from free maintenance contracts are deferred and The parent company and its subsidiaries in Japan companies are reduced to net realizable value if translated at appropriate year-end current exchange recognized as revenue over the period of the and its foreign subsidiaries maintain their records a decline in market value is determined other-than- rates and the resulting transaction gains or losses contract, which approximates the pattern of the and prepare their ﬁ nancial statements in accor- temporary. Investments in non-public companies in are recorded in operations currently. related costs. dance with accounting principles generally accept- which Toyota does not exercise signiﬁ cant inﬂ uence ed in Japan and those of their countries of domicile. (generally less than a 20% ownership interest) are Revenue recognition Other costs Certain adjustments and reclassiﬁ cations have been stated at cost. The accounts of variable interest Revenues from sales of vehicles and parts are gen- Advertising and sales promotion costs are incorporated in the accompanying consolidated entities as deﬁ ned by U.S. GAAP are included in the erally recognized upon delivery which is considered expensed as incurred. Advertising costs were ﬁ nancial statements to conform to U.S. GAAP. consolidated ﬁ nancial statements, if applicable. to have occurred when the dealer has taken title to ¥308,903 million, ¥304,713 million and ¥330,870 Signiﬁ cant accounting policies after reﬂ ecting the product and the risk and reward of ownership million ($3,518 million) for the years ended March adjustments for the above are as follows: Estimates have been substantively transferred, except as 31, 2011, 2012 and 2013, respectively. The preparation of Toyota’s consolidated ﬁ nancial described below. Toyota generally warrants its products against Basis of consolidation and accounting for statements in conformity with U.S. GAAP requires Toyota’s sales incentive programs principally con- certain manufacturing and other defects. Provisions investments in afﬁ liated companies management to make estimates and assumptions that sist of cash payments to dealers calculated based for product warranties are provided for speciﬁ c peri- The consolidated ﬁ nancial statements include the affect the amounts reported in the consolidated ﬁ nan- on vehicle volume or a model sold by a dealer during ods of time and/or usage of the product and vary accounts of the parent company and those of its cial statements and accompanying notes. Actual a certain period of time. Toyota accrues these incen- depending upon the nature of the product, the geo- majority-owned subsidiary companies. All signiﬁ cant results could differ from those estimates. The more sig- tives as revenue reductions upon the sale of a vehi- graphic location of the sale and other factors. intercompany transactions and accounts have been niﬁ cant estimates include: product warranties, liabilities cle corresponding to the program by the amount Toyota records a provision for estimated product eliminated. Investments in afﬁ liated companies in accrued for recalls and other safety measures, allow- determined in the related incentive program. warranty costs at the time the related sale is recog- which Toyota exercises signiﬁ cant inﬂ uence, but ance for doubtful accounts and credit losses, residual Revenues from the sales of vehicles under which nized based on estimates that Toyota will incur to which it does not control, are stated at cost plus values for leased assets, impairment of long-lived Toyota conditionally guarantees the minimum resale repair or replace product parts that fail while under equity in undistributed earnings. Consolidated net assets, pension costs and obligations, fair value of value are recognized on a pro rata basis from the warranty. The amount of accrued estimated warran- income includes Toyota’s equity in current earnings derivative ﬁ nancial instruments, other-than-temporary date of sale to the ﬁ rst exercise date of the guaran- ty costs is primarily based on historical experience of such companies, after elimination of unrealized losses on marketable securities, litigation liabilities and tee in a manner similar to operating lease accounting. as to product failures as well as current information intercompany proﬁ ts. Investments in such valuation allowance for deferred tax assets. The underlying vehicles of these transactions are on repair costs. The amount of warranty costs ANNUAL REPORT 2013 Print Search Contents P a g e 79 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [2 of 44] Next Notes to Consolidated Financial Statements accrued also contains an estimate of warranty claim Marketable securities Finance receivables Finance lease receivables portfolio segment recoveries to be received from suppliers. Marketable securities consist of debt and equity Finance receivables recorded on Toyota’s consoli- Toyota acquires new vehicle lease contracts originated In addition to product warranties above, Toyota securities. Debt and equity securities designated as dated balance sheets are comprised of the unpaid primarily through dealers. The contract periods of these accrues for costs of recalls and other safety mea- available-for-sale are carried at fair value with unre- principal balance, plus accrued interest, less primarily range from 2 to 5 years. Lease contracts sures based on management’s estimates when it alized gains or losses included as a component of charge-offs, net of any unearned income and acquired must ﬁ rst meet speciﬁ ed credit standards is probable a liability has been incurred and the accumulated other comprehensive income in share- deferred origination costs and the allowance for after which Toyota assumes ownership of the leased amount of loss can be reasonably estimated. Toyota holders’ equity, net of applicable taxes. Individual credit losses. Deferred origination costs are amor- vehicle. Toyota is responsible for contract collection employs an estimation model, to accrue at the time securities classiﬁ ed as available-for-sale are reduced tized so as to approximate a level rate of return over and administration during the lease period. of vehicle sale, an amount that represents manage- to net realizable value for other-than-temporary the term of the related contracts. Toyota is generally permitted to take possession ment’s best estimate of expenses related to future declines in market value. In determining if a decline The determination of portfolio segments is based of the vehicle upon a default by the lessee. The recalls and other safety measures. The estimation in value is other-than-temporary, Toyota considers primarily on the qualitative consideration of the residual value is estimated at the time the vehicle is model for recalls and other safety measures takes the length of time and the extent to which the fair nature of Toyota’s business operations and ﬁ nance ﬁ rst leased. Vehicles returned to Toyota at the end into account Toyota’s historical experience of recalls value has been less than the carrying value, the receivables. The three portfolio segments within of their leases are sold by auction. and other safety measures. ﬁ nancial condition and prospects of the company ﬁ nance receivables are as follows: Toyota classiﬁ es ﬁ nance lease receivables portfo- Litigation liabilities are established to cover proba- and Toyota’s ability and intent to retain its invest- lio segment into one class based on common risk ble losses on various lawsuits based on the infor- ment in the company for a period of time sufﬁ cient Retail receivables portfolio segment characteristics associated with the underlying ﬁ nance mation currently available. Attorneys’ fees are to allow for any anticipated recovery in market value. The retail receivables portfolio segment consists of receivables and the similarity of the credit risks. expensed as incurred. Realized gains and losses, which are determined on retail installment sales contracts acquired mainly Research and development costs are expensed the average-cost method, are reﬂ ected in the con- from dealers (“auto loans”) including credit card Wholesale and other dealer loan receivables as incurred. Research and development costs were solidated statements of income when realized. loans. These contracts acquired must ﬁ rst meet portfolio segment ¥730,340 million, ¥779,806 million and ¥807,454 speciﬁ ed credit standards. Thereafter, Toyota retains Toyota provides wholesale ﬁ nancing to qualiﬁ ed million ($8,585 million) for the years ended March Security investments in non-public responsibility for contract collection and administration. dealers to ﬁ nance inventories. Toyota acquires 31, 2011, 2012 and 2013, respectively. companies The contract periods of auto loans primarily security interests in vehicles ﬁ nanced at wholesale. Security investments in non-public companies are car- range from 2 to 7 years. Toyota acquires security In cases where additional security interests would Cash and cash equivalents ried at cost as fair value is not readily determinable. If interests in the vehicles ﬁ nanced and has the right be required, Toyota takes dealership assets or per- Cash and cash equivalents include all highly liquid the value of a non-public security investment is esti- to repossess vehicles if customers fail to meet their sonal assets, or both, as additional security. If a investments with original maturities of three months mated to have declined and such decline is judged to contractual obligations. Almost all auto loans are dealer defaults, Toyota has the right to liquidate any or less, that are readily convertible to known be other-than-temporary, Toyota recognizes the impair- non-recourse, which relieves the dealers from ﬁ nan- assets acquired and seek legal remedies. amounts of cash and are so near maturity that ment of the investment and the carrying value is cial responsibility in the event of repossession. Toyota also makes term loans to dealers for busi- they present insigniﬁ cant risk of changes in reduced to its fair value. Determination of impairment is Toyota classiﬁ es retail receivables portfolio seg- ness acquisitions, facilities refurbishment, real estate value because of changes in interest rates. based on the consideration of such factors as operat- ment into one class based on common risk charac- purchases and working capital requirements. These ing results, business plans and estimated future teristics associated with the underlying ﬁ nance loans are typically secured with liens on real estate, cash ﬂ ows. Fair value is determined principally receivables, the similarity of the credit risks, and other dealership assets and/or personal assets of through the use of the latest ﬁ nancial information. the quantitative materiality. the dealers. ANNUAL REPORT 2013 Print Search Contents P a g e 80 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [3 of 44] Next Notes to Consolidated Financial Statements Toyota classiﬁ es wholesale and other dealer loan is 90 days or more contractually past due, whichev- As of March 31, 2012 and 2013, ﬁ nance receivables on nonaccrual status were as follows: receivables portfolio segment into three classes of er occurs ﬁ rst. Collateral dependent loans are wholesale, real estate and working capital, based placed on nonaccrual status if collateral is insufﬁ - on the risk characteristics associated with the cient to cover principal and interest. Interest underlying ﬁ nance receivables. accrued but not collected at the date a receivable is A receivable account balance is considered placed on nonaccrual status is reversed against impaired when, based on current information and interest income. In addition, the amortization of net events, it is probable that Toyota will be unable to deferred fees is suspended. collect all amounts due according to the terms of Interest income on nonaccrual receivables is rec- the contract. Factors such as payment history, ognized only to the extent it is received in cash. Retail Finance leases Wholesale Real estate Working capital Yen in millions March 31, 2012 ¥ 2,822 958 5,485 11,736 37 ¥21,038 2013 ¥ 4,443 1,135 1,985 4,354 70 ¥11,987 U.S. dollars in millions March 31, 2013 $ 47 12 21 46 1 $127 As of March 31, 2012 and 2013, ﬁ nance receivables past due over 90 days and still accruing were as compliance with terms and conditions of the under- Accounts are restored to accrual status only when follows: lying loan agreement and other subjective factors interest and principal payments are brought current related to the ﬁ nancial stability of the borrower are and future payments are reasonably assured. considered when determining whether a loan is Receivable balances are written-off against the impaired. Impaired ﬁ nance receivables include cer- allowance for credit losses when it is probable that tain nonaccrual receivables for which a speciﬁ c a loss has been realized. Retail receivables class reserve has been assessed. An account modiﬁ ed as and ﬁ nance lease receivables class are not placed a troubled debt restructuring is considered to be generally on nonaccrual status when principal or Retail Finance leases Yen in millions March 31, 2012 ¥24,263 7,674 ¥31,937 2013 ¥18,442 3,464 ¥21,906 U.S. dollars in millions March 31, 2013 $196 37 $233 impaired. A troubled debt restructuring occurs when interest is 90 days or more past due. However, Allowance for credit losses accounting guidance governing the disclosure of an account is modiﬁ ed through a concession to a these receivables are generally written-off against Allowance for credit losses is established to cover portfolio segments. borrower experiencing ﬁ nancial difﬁ culty. the allowance for credit losses when payments probable losses on ﬁ nance receivables and vehicles All classes of wholesale and other dealer loan due are no longer expected to be received or the and equipment on operating leases, resulting from Retail receivables portfolio segment receivables portfolio segment are placed on non- account is 120 days contractually past due, the inability of customers to make required pay- Toyota calculates allowance for credit losses to accrual status when full payment of principal or whichever occurs ﬁ rst. ments. Provision for credit losses is included in sell- cover probable losses on retail receivables by apply- interest is in doubt, or when principal or interest ing, general and administrative expenses. ing reserve rates to such receivables. Reserve rates The allowance for credit losses is based on a sys- are calculated mainly by historical loss experience, tematic, ongoing review and evaluation performed current economic events and conditions and other as part of the credit-risk evaluation process, histori- pertinent factors. cal loss experience, the size and composition of the portfolios, current economic events and conditions, Finance lease receivables portfolio segment the estimated fair value and adequacy of collateral Toyota calculates allowance for credit losses to and other pertinent factors. Vehicles and equipment cover probable losses on ﬁ nance lease receivables on operating leases are not within the scope of by applying reserve rates to such receivables. ANNUAL REPORT 2013 Print Search Contents P a g e 81 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [4 of 44] Next Notes to Consolidated Financial Statements Reserve rates are calculated mainly by historical loss lease receivables portfolio segments are insigniﬁ cant levels to determine whether reserves are considered at rates based on estimated useful lives of the experience, current economic events and conditions for individual evaluation and Toyota has determined adequate to cover the probable range of losses. respective assets according to general class, type and other pertinent factors such as used car markets. that allowance for credit losses for each of the retail The allowance for residual value losses is main- of construction and use. The estimated useful lives receivables and ﬁ nance lease receivables portfolio tained in amounts considered by Toyota to be range from 2 to 65 years for buildings and from 2 to Wholesale and other dealer loan segments would not be materially different if they appropriate in relation to the estimated losses on its 20 years for machinery and equipment. receivables portfolio segment had been individually evaluated for impairment. owned portfolio. Upon disposal of the assets, the Vehicles and equipment on operating leases to Toyota calculates allowance for credit losses to Speciﬁ c reserves on impaired receivables within allowance for residual losses is adjusted for the dif- third parties are originated by dealers and acquired cover probable losses on wholesale and other deal- the wholesale and other dealer loan receivables ference between the net book value and the pro- by certain consolidated subsidiaries. Such subsid- er loan receivables by applying reserve rates to such portfolio segment are recorded by an increase to ceeds from sale. receivables. Reserve rates are calculated mainly by the allowance for credit losses based on the related ﬁ nancial conditions of the dealers, terms of collateral measurement of impairment. Related collateral, if Inventories iaries are also the lessors of certain property that they acquire directly. Vehicles and equipment on operating leases are depreciated primarily on a setting, current economic events and conditions recoverable, is repossessed and sold and the Inventories are valued at cost, not in excess of mar- straight-line method over the lease term, generally and other pertinent factors. account balance is written-off. ket, cost being determined on the “average-cost” from 2 to 5 years, to the estimated residual value. Toyota establishes speciﬁ c reserves to cover the Any shortfall between proceeds received and the basis, except for the cost of ﬁ nished products car- Incremental direct costs incurred in connection with estimated losses on individually impaired receivables carrying cost of repossessed collateral is charged to ried by certain subsidiary companies which is deter- the acquisition of operating lease contracts are cap- within the wholesale and other dealer loan receiv- the allowance. Recoveries are reversed from the mined on the “speciﬁ c identiﬁ cation” basis or italized and amortized on a straight-line method ables portfolio segment. Speciﬁ c reserves on allowance for credit losses. “last-in, ﬁ rst-out” (“LIFO”) basis. Inventories valued over the lease term. impaired receivables are determined by the present on the LIFO basis totaled ¥220,582 million and value of expected future cash ﬂ ows or the fair value Allowance for residual value losses ¥220,082 million ($2,340 million) at March 31, 2012 Long-lived assets of collateral when it is probable that such receiv- Toyota is exposed to risk of loss on the disposition and 2013, respectively. Had the “ﬁ rst-in, ﬁ rst-out” Toyota reviews its long-lived assets for impairment ables will be unable to be fully collected. The fair of off-lease vehicles to the extent that sales proceeds basis been used for those companies using the whenever events or changes in circumstances indi- value of the underlying collateral is used if the receiv- are not sufﬁ cient to cover the carrying value of the LIFO basis, inventories would have been ¥56,799 cate that the carrying amount of an asset group able is collateral-dependent. The receivable is deter- leased asset at lease termination. Toyota maintains million and ¥66,979 million ($712 million) higher than may not be recoverable. An impairment loss would mined collateral-dependent if the repayment of the an allowance to cover probable estimated losses reported at March 31, 2012 and 2013, respectively. be recognized when the carrying amount of an loan is expected to be provided by the underlying related to unguaranteed residual values on its owned asset group exceeds the estimated undiscounted collateral. For the receivables in which the fair value portfolio. The allowance is evaluated considering Property, plant and equipment cash ﬂ ows expected to result from the use of the of the underlying collateral was in excess of the out- projected vehicle return rates and projected loss Property, plant and equipment are stated at cost. asset and its eventual disposition. The amount of standing balance, no allowance was provided. severity. Factors considered in the determination of Major renewals and improvements are capitalized; the impairment loss to be recorded is calculated by Troubled debt restructurings in the retail receiv- projected return rates and loss severity include his- minor replacements, maintenance and repairs are the excess of the carrying value of the asset group ables and ﬁ nance lease receivables portfolio seg- torical and market information on used vehicle charged to current operations. Depreciation of over its fair value. Fair value is determined mainly ments are speciﬁ cally identiﬁ ed as impaired and sales, trends in lease returns and new car markets, property, plant and equipment is mainly computed using a discounted cash ﬂ ow valuation method. aggregated with their respective portfolio segments and general economic conditions. Management on the declining-balance method for the parent when determining the allowance for credit losses. evaluates the foregoing factors, develops several company and Japanese subsidiaries and on the Impaired loans in the retail receivables and ﬁ nance potential loss scenarios, and reviews allowance straight-line method for foreign subsidiary companies ANNUAL REPORT 2013 Print Search Contents P a g e 82 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [5 of 44] Next Notes to Consolidated Financial Statements Goodwill and intangible assets Expenditures relating to existing conditions caused rates. All derivative ﬁ nancial instruments are record- Other comprehensive income Goodwill is not material to Toyota’s consolidated by past operations, which do not contribute to cur- ed on the consolidated balance sheets at fair value, Other comprehensive income refers to revenues, balance sheets. rent or future revenues, are expensed. Liabilities for taking into consideration the effects of legally expenses, gains and losses that, under U.S. GAAP Intangible assets consist mainly of software. remediation costs are recorded when they are prob- enforceable master netting agreements that allow are included in comprehensive income, but are Intangible assets with a deﬁ nite life are amortized on able and reasonably estimable, generally no later us to net settle positive and negative positions and excluded from net income as these amounts are a straight-line basis with estimated useful lives than the completion of feasibility studies or Toyota’s offset cash collateral held with the same counter- recorded directly as an adjustment to shareholders’ mainly of 5 years. Intangible assets with an indeﬁ nite commitment to a plan of action. The cost of each party on a net basis. Toyota does not use deriva- equity. Toyota’s other comprehensive income is pri- life are tested for impairment whenever events or environmental liability is estimated by using current tives for speculation or trading purposes. Changes marily comprised of unrealized gains/losses on mar- circumstances indicate that a carrying amount of an technology available and various engineering, ﬁ nan- in the fair value of derivatives are recorded each ketable securities designated as available-for-sale, asset (asset group) may not be recoverable. cial and legal specialists within Toyota based on period in current earnings or through other compre- foreign currency translation adjustments and adjust- An impairment loss would be recognized when current law. Such liabilities do not reﬂ ect any offset hensive income, depending on whether a derivative ments attributed to pension liabilities associated the carrying amount of an asset exceeds the esti- for possible recoveries from insurance companies is designated as part of a hedge transaction and the with Toyota’s deﬁ ned beneﬁ t pension plans. mated undiscounted cash ﬂ ows used in determining and are not discounted. There were no material type of hedge transaction. The ineffective portion of the fair value of the asset. The amount of the impair- changes in these liabilities for all periods presented. all hedges is recognized currently in operations. Accounting changes ment loss to be recorded is generally determined by In June 2011, FASB issued updated guidance on the difference between the fair value of the asset Income taxes Net income attributable to Toyota Motor the presentation of comprehensive income. This using a discounted cash ﬂ ow valuation method and The provision for income taxes is computed based Corporation per share guidance requires to present the total of compre- the current book value. on the pretax income included in the consolidated Basic net income attributable to Toyota Motor hensive income, the components of net income, statements of income. The asset and liability Corporation per common share is calculated by and the components of other comprehensive Employee beneﬁ t obligations approach is used to recognize deferred tax assets dividing net income attributable to Toyota Motor income either in a single continuous statements of Toyota has both deﬁ ned beneﬁ t and deﬁ ned contri- and liabilities for the expected future tax conse- Corporation by the weighted-average number of comprehensive income or in two separate but con- bution plans for employees’ retirement beneﬁ ts. quences of temporary differences between the car- shares outstanding during the reported period. secutive statements. Toyota adopted this guidance Retirement beneﬁ t obligations are measured by rying amounts and the tax bases of assets and The calculation of diluted net income attributable from the interim period within the ﬁ scal year, begun actuarial calculations in accordance with U.S. GAAP. liabilities. Valuation allowances are recorded to to Toyota Motor Corporation per common share after December 15, 2011. The adoption of this The funded status of the deﬁ ned beneﬁ t postretire- reduce deferred tax assets when it is more likely is similar to the calculation of basic net income guidance did not have a material impact on Toyota’s ment plans is recognized on the consolidated bal- than not that a tax beneﬁ t will not be realized. attributable to Toyota Motor Corporation per share, consolidated ﬁ nancial statements. ance sheets as prepaid pension and severance costs except that the weighted-average number of shares or accrued pension and severance costs, and the Derivative ﬁ nancial instruments outstanding includes the additional dilution from the Recent pronouncements to be adopted in funded status change is recognized in the year in Toyota employs derivative ﬁ nancial instruments, assumed exercise of dilutive stock options. future periods which it occurs through other comprehensive income. including forward foreign currency exchange con- In December 2011, FASB issued updated guidance Environmental matters interest rate currency swap agreements and interest Toyota measures compensation expense for its stock- This guidance requires additional disclosures about Environmental expenditures relating to current oper- rate options to manage its exposure to ﬂ uctuations based compensation plan based on the grant-date fair gross and net information for assets and liabilities ations are expensed or capitalized as appropriate. in interest rates and foreign currency exchange value of the award, and accounts for the award. including ﬁ nancial instruments eligible for offset in tracts, foreign currency options, interest rate swaps, Stock-based compensation of disclosures about offsetting assets and liabilities. ANNUAL REPORT 2013 Print Search Contents P a g e 83 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [6 of 44] Next Notes to Consolidated Financial Statements the balance sheets. This guidance is effective for ﬁ s- comprehensive income based on its source. This cal year beginning on or after January 1, 2013, and guidance is effective for ﬁ scal year beginning on or 5. Acquisitions and dispositions for interim period within the ﬁ scal year. Management after December 15, 2012, and for interim period During the years ended March 31, 2011, 2012 and dispositions, however the assets and liabilities does not expect this guidance to have a material within the ﬁ scal year. Management does not expect 2013, Toyota made several acquisitions and acquired or transferred were not material. impact on Toyota’s consolidated ﬁ nancial statements. this guidance to have a material impact on Toyota’s In February 2013, FASB issued updated guidance consolidated ﬁ nancial statements. on the presentation of items reclassiﬁ ed out of accumulated other comprehensive income. This Reclassiﬁ cations 6. Marketable securities and other securities investments guidance requires to present, either in a single note Certain prior year amounts have been reclassiﬁ ed to Marketable securities and other securities investments include public and corporate bonds and common or parenthetically on the face of the ﬁ nancial state- conform to the presentations as of and for the year stocks for which the aggregate cost, gross unrealized gains and losses and fair value are as follows: ments, the effect of signiﬁ cant amounts reclassiﬁ ed ended March 31, 2013. out of each component of accumulated other 3. U.S. dollar amounts U.S. dollar amounts presented in the consolidated converted into, U.S. dollars. For this purpose, the ﬁ nancial statements and related notes are included rate of ¥94.05 = U.S. $1, the approximate current solely for the convenience of the reader and are exchange rate at March 31, 2013, was used for the unaudited. These translations should not be con- translation of the accompanying consolidated ﬁ nan- strued as representations that the yen amounts cial amounts of Toyota as of and for the year ended actually represent, or have been or could be March 31, 2013. Available-for-sale: Public and corporate bonds Common stocks Other Total Yen in millions March 31, 2012 Gross unrealized gains Gross unrealized losses Cost ¥3,606,290 605,889 449,393 ¥4,661,572 ¥ 74,357 444,073 19,974 ¥538,404 ¥51,147 15,643 11 ¥66,801 Fair value ¥3,629,500 1,034,319 469,356 ¥5,133,175 Securities not practicable to determine fair value: Public and corporate bonds Common stocks Total ¥ 22,047 79,420 ¥ 101,467 4. Supplemental cash ﬂ ow information Cash payments for income taxes were ¥211,487 Capital lease obligations of ¥10,478 million, million, ¥282,440 million and ¥331,007 million ¥5,847 million and ¥3,749 million ($40 million) were ($3,519 million) for the years ended March 31, 2011, incurred for the years ended March 31, 2011, 2012 2012 and 2013, respectively. Interest payments during and 2013, respectively. Available-for-sale: Public and corporate bonds Common stocks Other Total Yen in millions March 31, 2013 Gross unrealized gains Gross unrealized losses Cost ¥4,350,942 599,371 537,272 ¥5,487,585 ¥ 211,070 804,405 31,416 ¥1,046,891 ¥ 8,866 2,593 2 ¥11,461 Fair value ¥4,553,146 1,401,183 568,686 ¥6,523,015 the years ended March 31, 2011, 2012 and 2013 were ¥382,903 million, ¥365,109 million and ¥325,575 million ($3,462 million), respectively. Securities not practicable to determine fair value: Public and corporate bonds Common stocks Total ¥ 20,148 79,082 ¥ 99,230 ANNUAL REPORT 2013 Print Search Contents P a g e 84 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [7 of 44] Next Notes to Consolidated Financial Statements Available-for-sale: Public and corporate bonds Common stocks Other Total Securities not practicable to determine fair value: Public and corporate bonds Common stocks Total Cost $46,262 6,373 5,713 $58,348 $ 214 841 $ 1,055 U.S. dollars in millions March 31, 2013 Gross unrealized gains Gross unrealized losses $ 2,244 8,553 334 $11,131 $ 94 28 0 $122 Fair value $48,412 14,898 6,047 $69,357 Public and corporate bonds included in available- those sales, gross realized gains were ¥8,974 mil- for-sale represent 60% of Japanese bonds, and lion, ¥4,822 million and ¥1,048 million ($11 million) 40% of U.S., European and other bonds as of March and gross realized losses were ¥87 million, ¥15 mil- 31, 2012, and 49% of Japanese bonds, and 51% lion and ¥31 million ($0 million), respectively. of U.S., European and other bonds as of March 31, During the years ended March 31, 2011, 2012 2013. Listed stocks on the Japanese stock markets and 2013, Toyota recognized impairment losses on represent 83% and 85% of common stocks which available-for-sale securities of ¥7,915 million, are included in available-for-sale as of March 31, ¥53,831 million and ¥2,104 million ($22 million), 2012 and 2013, respectively. Public and corporate respectively, which are included in “Other income bonds include primarily government bonds, and (loss), net” in the accompanying consolidated state- “Other” includes primarily investment trusts. ments of income. Unrealized losses continuing over a 12 month In the ordinary course of business, Toyota main- period or more in the aggregate were not material at tains long-term investment securities, included in companies operate to determine if Toyota’s invest- the impairment is determined to be other-than- ment in each individual company is impaired and temporary, the carrying value of the investment is whether the impairment is other-than-temporary. written-down by the impaired amount and the Toyota periodically performs this impairment test losses are recognized currently in operations. for signiﬁ cant investments recorded at cost. If 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 ﬁ nance receivables, net Less—Current portion Noncurrent ﬁ nance receivables, net Yen in millions March 31, 2012 ¥ 7,248,793 955,430 2,033,954 10,238,177 105,533 (494,123) (77,353) (30,637) (24,238) (132,228) 9,717,359 (4,114,897) ¥ 5,602,462 2013 ¥ 9,047,782 1,029,887 2,615,728 12,693,397 135,398 (628,340) (83,858) (28,928) (26,243) (139,029) 12,061,426 (5,117,660) ¥ 6,943,766 U.S. dollars in millions March 31, 2013 $ 96,202 10,950 27,812 134,964 1,439 (6,681) (892) (307) (279) (1,478) 128,244 (54,414) $ 73,830 March 31, 2012 and 2013. “Marketable securities and other securities invest- Finance receivables were geographically distribut- 12.5% as of March 31, 2012, and in North America As of March 31, 2012 and 2013, maturities of ments” and issued by a number of non-public com- ed as follows: in North America 58.1%, in Japan 57.6%, in Europe 10.0%, in Japan 9.9%, in Asia public and corporate bonds and other included in panies which are recorded at cost, as their fair 12.0%, in Europe 10.3%, in Asia 7.1% and in Other 9.5% and in Other 13.0% as of March 31, 2013. available-for-sale are mainly from 1 to 10 years. values were not readily determinable. Management Proceeds from sales of available-for-sale securi- employs a systematic methodology to assess the ties were ¥189,037 million, ¥162,160 million and recoverability of such investments by reviewing the ¥35,178 million ($374 million) for the years ended ﬁ nancial viability of the underlying companies and March 31, 2011, 2012 and 2013, respectively. On the prevailing market conditions in which these ANNUAL REPORT 2013 Print Search Contents P a g e 85 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [8 of 44] Next Notes to Consolidated Financial Statements The contractual maturities of retail receivables, the future minimum lease payments on ﬁ nance leases and The table below shows the amount of the ﬁ nance receivables segregated into aging categories based on the contractual maturities of wholesale and other dealer loans at March 31, 2013 are summarized as follows: the number of days outstanding as of March 31, 2012 and 2013: Years ending March 31, 2014 2015 2016 2017 2018 Thereafter Retail ¥3,032,542 2,218,871 1,721,430 1,127,558 609,255 338,126 ¥9,047,782 Yen in millions Finance leases ¥285,324 192,978 162,639 65,767 29,716 6,447 ¥742,871 Wholesale and other dealer loans ¥2,040,442 149,091 115,640 125,180 119,497 65,878 ¥2,615,728 U.S. dollars in millions Finance leases $3,034 2,052 1,729 699 316 69 $7,899 Wholesale and other dealer loans $21,695 1,585 1,230 1,331 1,271 700 $27,812 Retail $32,244 23,593 18,303 11,989 6,478 3,595 $96,202 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, 2012 ¥688,642 266,788 955,430 3,722 (90,887) (30,637) ¥837,628 2013 ¥ 742,871 287,016 1,029,887 3,577 (87,537) (28,928) ¥ 916,999 U.S. dollars in millions March 31, 2013 $ 7,899 3,051 10,950 38 (931) (307) $ 9,750 Toyota is exposed to credit risk on Toyota’s Toyota or otherwise fail to perform as agreed. ﬁ nance receivables. Credit risk is the risk of loss Toyota estimates allowance for credit losses by vari- arising from the failure of customers or dealers to ety of credit-risk evaluation process to cover proba- meet the terms of their contracts with ble and estimable losses above. Current 31-60 days past due 61-90 days past due Over 90 days past due Total Retail ¥7,146,365 64,314 13,851 24,263 ¥7,248,793 Finance leases ¥939,345 5,766 2,645 7,674 ¥955,430 Current 31-60 days past due 61-90 days past due Over 90 days past due Total Retail ¥8,923,588 84,354 17,312 22,528 ¥9,047,782 Finance leases ¥1,021,074 3,106 1,661 4,046 ¥1,029,887 Yen in millions March 31, 2012 Wholesale ¥923,642 3 — 53 ¥923,698 Yen in millions March 31, 2013 Wholesale ¥1,305,953 45 — — ¥1,305,998 Current 31-60 days past due 61-90 days past due Over 90 days past due Total U.S. dollars in millions March 31, 2013 Wholesale $13,886 0 — — $13,886 Finance leases $10,857 33 17 43 $10,950 Retail $94,881 897 184 240 $96,202 Real estate ¥535,296 — — 98 ¥535,394 Real estate ¥658,114 63 — — ¥658,177 Real estate $6,997 1 — — $6,998 Working capital ¥574,671 70 — 121 ¥574,862 Working capital ¥651,553 — — — ¥651,553 Working capital $6,928 — — — $6,928 ANNUAL REPORT 2013 Print Search Contents P a g e 86 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [9 of 44] Next Notes to Consolidated Financial Statements The tables below show the recorded investment portfolio segment in the United States and other for each credit quality of the ﬁ nance receivable with- regions as of March 31, 2012 and 2013: in the wholesale and other dealer loan receivables United States The wholesale and other dealer loan receivables portfolio segment is primarily segregated into credit qualities below based on internal risk assessments by dealers. Performing Credit Watch At Risk Default Total Wholesale $7,659 996 33 1 $8,689 U.S. dollars in millions March 31, 2013 Real estate $3,968 583 28 1 $4,580 Working capital $1,616 80 28 2 $1,726 Total $13,243 1,659 89 4 $14,995 Performing: Account not classiﬁ ed as either Credit Watch, At Risk or Default Other regions Credit Watch: Account designated for elevated attention Credit qualities of the wholesale and other dealer Watch” or “At Risk” were not signiﬁ cant in other At Risk: Account where there is an increased likelihood that default may exist based on qualita- loan receivables portfolio segment in other regions regions, and consequently the tables below sum- tive and quantitative factors are also monitored based on internal risk assess- marize information for two categories, “Performing” Default: Account is not currently meeting contractual obligations or we have temporarily waived ments by dealers on a consistent basis as in the and “Default”. certain contractual requirements United States. These accounts classiﬁ ed as “Credit Performing Credit Watch At Risk Default Total Performing Credit Watch At Risk Default Total Wholesale ¥513,632 55,513 6,394 466 ¥576,005 Wholesale ¥720,308 93,643 3,114 106 ¥817,171 Yen in millions March 31, 2012 Real estate ¥307,867 38,382 12,157 30 ¥358,436 Working capital ¥116,871 5,014 618 423 ¥122,926 Yen in millions March 31, 2013 Real estate ¥373,176 54,801 2,651 131 ¥430,759 Working capital ¥152,048 7,485 2,641 193 ¥162,367 Total ¥ 938,370 98,909 19,169 919 ¥1,057,367 Total ¥1,245,532 155,929 8,406 430 ¥1,410,297 Performing Default Total Performing Default Total Performing Default Total Wholesale ¥330,264 17,429 ¥347,693 Wholesale ¥485,464 3,363 ¥488,827 Wholesale $5,161 36 $5,197 Yen in millions March 31, 2012 Real estate ¥170,886 6,072 ¥176,958 Working capital ¥451,505 431 ¥451,936 Total ¥952,655 23,932 ¥976,587 Yen in millions March 31, 2013 Real estate ¥225,808 1,610 ¥227,418 Working capital ¥488,679 507 ¥489,186 Total ¥1,199,951 5,480 ¥1,205,431 U.S. dollars in millions March 31, 2013 Real estate $2,401 17 $2,418 Working capital $5,196 6 $5,202 Total $12,758 59 $12,817 ANNUAL REPORT 2013 Print Search Contents P a g e 87 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Notes to Consolidated Financial Statements The tables below summarize information about impaired ﬁ nance receivables: Recorded investment March 31, Yen in millions Unpaid principal balance March 31, Individually evaluated allowance March 31, 2013 2013 2012 2012 2012 Impaired account balances individually evaluated for impairment with an allowance: Wholesale Real estate Working capital Total ¥11,967 6,726 5,246 ¥23,939 Impaired account balances individually evaluated for impairment without an allowance: ¥ 6,236 Wholesale 9,165 Real estate 496 Working capital ¥15,897 Total ¥14,015 15 38 ¥14,068 ¥11,967 6,726 5,246 ¥23,939 ¥ 8,105 16,429 995 ¥25,529 ¥ 8,105 16,429 995 ¥25,529 ¥ 6,236 9,165 496 ¥15,897 ¥14,015 15 38 ¥14,068 ¥2,716 4,252 573 ¥7,541 2013 ¥1,450 1,721 3,691 ¥6,862 Impaired account balances aggregated and evaluated for impairment: Retail Finance leases Total ¥42,438 325 ¥42,763 ¥40,487 103 ¥40,590 ¥41,790 180 ¥41,970 ¥39,797 85 ¥39,882 Total impaired account balances: Retail Finance leases Wholesale Real estate Working capital Total ¥42,438 325 22,120 16,444 1,033 ¥82,360 ¥40,487 103 18,203 15,891 5,742 ¥80,426 ¥41,790 180 22,120 16,444 1,033 ¥81,567 ¥39,797 85 18,203 15,891 5,742 ¥79,718 Total impaired account balances: Retail Finance leases Wholesale Real estate Working capital Total Yen in millions Average impaired ﬁ nance receivables For the years ended March 31, Interest income recognized For the years ended March 31, 2012 2013 2012 2013 ¥44,362 279 18,734 16,137 2,592 ¥82,104 ¥39,616 161 20,618 15,574 3,820 ¥79,789 ¥3,700 7 79 395 79 ¥4,260 ¥3,056 1 166 415 83 ¥3,721 Consolidated Financial Statements Notes to Consolidated Financial Statements [10 of 44] Next U.S. dollars in millions March 31, 2013 Recorded investment Unpaid principal balance Individually evaluated allowance Impaired account balances individually evaluated for impairment with an allowance: Wholesale Real estate Working capital Total $127 72 56 $255 $127 72 56 $255 $16 18 39 $73 Impaired account balances individually evaluated for impairment without an allowance: Wholesale Real estate Working capital Total $ 67 97 5 $169 $ 67 97 5 $169 Impaired account balances aggregated and evaluated for impairment: Retail Finance leases Total $430 1 $431 $423 1 $424 Total impaired account balances: Retail Finance leases Wholesale Real estate Working capital Total $430 1 194 169 61 $855 $423 1 194 169 61 $848 Total impaired account balances: Retail Finance leases Wholesale Real estate Working capital Total U.S. dollars in millions For the year ended March 31, 2013 Average impaired ﬁ nance receivables Interest income recognized $421 2 219 165 41 $848 $33 0 2 4 1 $40 The amount of ﬁ nance receivables modiﬁ ed as debt restructurings for the year ended March 31, 2013 a troubled debt restructuring for the year ended March and for which there was a payment default were not 31, 2013 was not signiﬁ cant for all classes of ﬁ nance signiﬁ cant for all classes of such receivables. receivables. Finance receivables modiﬁ ed as troubled ANNUAL REPORT 2013 Print Search Contents P a g e 88 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [11 of 44] Next Notes to Consolidated Financial Statements 8. Other receivables Rental income from vehicles and equipment on operating leases was ¥475,472 million, ¥451,361 million and ¥476,935 million ($5,071 million) for the years ended March 31, 2011, 2012 and 2013, respectively. Other receivables relate to arrangements with cer- procures inventory for these component manufac- Future minimum rentals from vehicles and equipment on operating leases are due in installments as follows: tain component manufacturers whereby Toyota tures and is reimbursed for the related purchases. 9. Inventories Inventories consist of the following: Finished goods Raw materials Work in process Supplies and other Total Yen in millions March 31, 2012 ¥ 981,612 347,878 221,036 71,756 ¥1,622,282 2013 ¥1,007,659 388,780 235,476 83,871 ¥1,715,786 U.S. dollars in millions March 31, 2013 $10,714 4,134 2,504 891 $18,243 10. Vehicles and equipment on operating leases Vehicles and equipment on operating leases consist of the following: Vehicles Equipment Less—Deferred income and other Less—Accumulated depreciation Less—Allowance for credit losses Vehicles and equipment on operating leases, net Yen in millions March 31, 2012 ¥2,536,595 87,848 (49,090) 2,575,353 (667,406) (8,135) ¥1,899,812 2013 ¥2,999,294 104,351 (65,634) 3,038,011 (749,238) (8,020) ¥2,280,753 U.S. dollars in millions March 31, 2013 $31,890 1,110 (698) 32,302 (7,966) (86) $24,250 Years ending March 31, 2014 2015 2016 2017 2018 Thereafter Total minimum future rentals Yen in millions ¥460,685 302,690 140,865 38,042 11,164 4,126 ¥957,572 U.S. dollars in millions $ 4,898 3,218 1,498 405 119 44 $10,182 The future minimum rentals as shown above should not be considered indicative of future cash collections. 11. Allowance for doubtful accounts and credit losses An analysis of activity within the allowance for doubtful accounts relating to trade accounts and notes receiv- able for the years ended March 31, 2011, 2012 and 2013 is as follows: Yen in millions For the years ended March 31, 2012 2011 2013 U.S. dollars in millions For the year ended March 31, 2013 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 ¥46,706 1,806 (2,690) (1,775) ¥44,047 5,843 (699) (5,094) ¥44,097 1,745 (457) 759 ¥44,047 ¥44,097 ¥46,144 $469 19 (5) 8 $491 The other amount includes the impact of consoli- A portion of the allowance for doubtful accounts dation and deconsolidation of certain entities due to balance at March 31, 2012 and 2013 totaling changes in ownership interest and currency transla- ¥31,093 million and ¥30,269 million ($322 million), tion adjustments for the years ended March 31, respectively, is attributed to certain non-current 2011, 2012 and 2013. receivable balances which are reported as other assets in the consolidated balance sheets. ANNUAL REPORT 2013 Print Search Contents P a g e 89 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [12 of 44] Next Notes to Consolidated Financial Statements An analysis of the allowance for credit losses relating to ﬁ nance receivables and vehicles and equipment on operating leases for the years ended March 31, 2011, 2012 and 2013 is as follows: Allowance for credit losses at beginning of year Provision for credit losses, net of reversal Charge-offs Recoveries Other Allowance for credit losses at end of year Yen in millions For the years ended March 31, 2012 ¥167,615 3,780 (51,578) 16,415 4,131 ¥140,363 2011 ¥232,479 2,334 (86,115) 18,268 649 ¥167,615 2013 ¥140,363 25,622 (56,701) 14,690 23,075 ¥147,049 U.S. dollars in millions For the year ended March 31, 2013 $1,493 272 (603) 156 246 $1,564 Allowance for credit losses at beginning of year Provision for credit losses, net of reversal Charge-offs Recoveries Other Allowance for credit losses at end of year U.S. dollars in millions For the year ended March 31, 2013 Retail $823 309 (516) 136 140 $892 Finance leases $326 (43) (30) 6 48 $307 Wholesale and Other dealer loans $257 (21) (1) 0 44 $279 The other amount primarily includes the impact of currency translation adjustments for the years ended 12. Afﬁ liated companies and variable interest entities March 31, 2011, 2012 and 2013. Investments in and transactions with afﬁ liated companies An analysis of the allowance for credit losses above relating to retail receivables portfolio segment, ﬁ nance Summarized ﬁ nancial information for afﬁ liated companies accounted for by the equity method is shown below: lease receivables portfolio segment and wholesale and other dealer loan receivables portfolio segment for the years ended March 31, 2012 and 2013 are as follows: Allowance for credit losses at beginning of year Provision for credit losses, net of reversal Charge-offs Recoveries Other Allowance for credit losses at end of year Allowance for credit losses at beginning of year Provision for credit losses, net of reversal Charge-offs Recoveries Other Allowance for credit losses at end of year Yen in millions For the year ended March 31, 2012 Finance leases ¥36,024 (4,508) (2,499) 718 902 ¥30,637 Wholesale and Other dealer loans ¥28,580 (4,767) (305) 16 714 ¥24,238 Yen in millions For the year ended March 31, 2013 Finance leases ¥30,637 (4,063) (2,775) 590 4,539 ¥28,928 Wholesale and Other dealer loans ¥24,238 (2,006) (110) 3 4,118 ¥26,243 Retail ¥92,199 13,569 (44,742) 14,051 2,276 ¥77,353 Retail ¥77,353 29,079 (48,528) 12,795 13,159 ¥83,858 Current assets Noncurrent assets Total assets Current liabilities Long-term liabilities and noncontrolling interests Afﬁ liated companies accounted for by the equity method shareholders’ equity Total liabilities and shareholders’ equity Toyota’s share of afﬁ liated companies accounted for by the equity method shareholders’ equity Number of afﬁ liated companies accounted for by the equity method at end of period Yen in millions March 31, 2012 ¥ 9,112,895 6,914,208 ¥16,027,103 ¥ 5,847,495 4,032,045 2013 ¥ 9,634,769 8,495,078 ¥18,129,847 ¥ 6,366,002 4,541,328 U.S. dollars in millions March 31, 2013 $102,443 90,325 $192,768 $ 67,687 48,286 6,147,563 ¥16,027,103 7,222,517 ¥18,129,847 76,795 $192,768 ¥ 1,914,129 ¥ 2,102,584 $ 22,356 57 56 ANNUAL REPORT 2013 Print Search Contents P a g e 90 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [13 of 44] Next Notes to Consolidated Financial Statements Net revenues Gross proﬁ t Net income attributable to afﬁ liated companies accounted for by the equity method Equity in earnings of afﬁ liated companies attributable to Toyota Motor Corporation Yen in millions 2011 ¥21,874,143 ¥ 2,342,706 For the years ended March 31, 2012 ¥22,211,233 ¥ 2,297,660 2013 ¥24,242,046 ¥ 2,620,892 U.S. dollars in millions For the year ended March 31, 2013 $257,757 $ 27,867 ¥ 641,771 ¥ 554,983 ¥ 705,249 $ 7,499 ¥ 215,016 ¥ 197,701 ¥ 231,519 $ 2,461 Entities comprising a signiﬁ cant portion of Toyota’s investment in afﬁ liated companies and percentage of Account balances and transactions with afﬁ liated companies are presented below: Trade accounts and notes receivable, and other receivables Accounts payable and other payables Yen in millions March 31, 2012 ¥283,497 707,955 2013 ¥252,708 592,027 Yen in millions Net revenues Purchases 2011 ¥1,612,397 3,655,185 For the years ended March 31, 2012 ¥1,536,326 3,785,284 2013 ¥1,926,854 4,020,138 U.S. dollars in millions March 31, 2013 $2,687 6,295 U.S. dollars in millions For the year ended March 31, 2013 $20,488 42,745 ownership are presented below: Name of afﬁ liated companies Denso Corporation Toyota Industries Corporation Aisin Seiki Co., Ltd. Toyota Tsusho Corporation Toyoda Gosei Co., Ltd. Percentage of ownership March 31, 2012 24.9% 24.8% 23.4% 22.1% 43.1% 2013 24.9% 24.8% 23.4% 22.1% 43.0% Dividends from afﬁ liated companies accounted signiﬁ cant to the VIEs. As a result, Toyota is consid- for by the equity method for the years ended March ered the primary beneﬁ ciary of the VIEs and there- 31, 2011, 2012 and 2013 were ¥103,169 million, fore consolidates the VIEs. ¥122,950 million and ¥126,977 million ($1,350 mil- The consolidated securitization VIEs have lion), respectively. ¥1,208,136 million in retail ﬁ nance receivables, Toyota does not have any signiﬁ cant related party ¥65,541 million in restricted cash and ¥1,040,816 transactions other than transactions with afﬁ liated million in secured debt as of March 31, 2012 and Certain afﬁ liated companies accounted for by the length of time and the extent to which the quoted companies in the ordinary course of business. have ¥1,135,513 million ($12,074 million) in retail equity method with carrying amounts of ¥1,467,575 market prices have been less than the carrying ﬁ nance receivables, ¥41,664 million ($443 million) million and ¥1,582,988 million ($16,831 million) at amounts, the ﬁ nancial condition and near-term Variable interest entities in vehicles on operating leases, ¥58,770 million March 31, 2012 and 2013, respectively, were quot- prospects of the afﬁ liated companies and Toyota’s Toyota enters into securitization transactions using ($625 million) in restricted cash and ¥978,095 million ed on various established markets at an aggregate ability and intent to retain those investments in the special-purpose entities, that are considered vari- ($10,400 million) in secured debt as of March 31, value of ¥1,477,413 million and ¥1,954,347 million companies for a period of time. Toyota did not rec- able interest entities (“VIEs”). Although the ﬁ nance 2013. Risks to which Toyota is exposed including ($20,780 million), respectively. Toyota evaluated its ognize any impairment loss for the years ended receivables and vehicles on operating leases related credit, interest rate, and/or prepayment risks are not investments in afﬁ liated companies, considering the March 31, 2011, 2012 and 2013. to securitization transactions have been legally sold incremental compared with the situation before to the VIEs, Toyota has both the power to direct the Toyota enters into securitization transactions. activities of the VIEs that most signiﬁ cantly impact As for VIEs other than those speciﬁ ed above, the VIEs’ economic performance and the obligation neither the aggregate size of these VIEs nor Toyota’s to absorb losses of the VIEs or the right to receive involvements in these VIEs are material to Toyota’s beneﬁ ts from the VIEs that could potentially be consolidated ﬁ nancial statements. ANNUAL REPORT 2013 Print Search Contents P a g e 91 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [14 of 44] Next Notes to Consolidated Financial Statements 13. Short-term borrowings and long-term debt Long-term debt at March 31, 2012 and 2013 comprises the following: Short-term borrowings at March 31, 2012 and 2013 consist of the following: Loans, principally from banks, with a weighted-average interest at March 31, 2012 and March 31, 2013 of 1.93% and of 2.31% per annum, respectively Commercial paper with a weighted-average interest at March 31, 2012 and March 31, 2013 of 0.72% and of 0.52% per annum, respectively Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 ¥1,158,556 ¥1,062,233 $11,294 2,292,093 ¥3,450,649 3,027,295 ¥4,089,528 32,188 $43,482 As of March 31, 2013, Toyota has unused short- Under these programs, Toyota is authorized to term lines of credit amounting to ¥2,063,263 million obtain short-term ﬁ nancing at prevailing interest ($21,938 million) of which ¥455,180 million ($4,840 rates for periods not in excess of 360 days. million) related to commercial paper programs. Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 Unsecured loans, representing obligations principally to banks, due 2012 to 2029 in 2012 and due 2013 to 2029 in 2013 with interest ranging from 0.00% to 32.00% per annum in 2012 and from 0.00% to 27.30% per annum in 2013 Secured loans, representing obligations principally to ﬁ nance receivables securitization due 2012 to 2050 in 2012 and due 2013 to 2050 in 2013 with interest ranging from 0.37% to 11.23% per annum in 2012 and from 0.10% to 11.75% per annum in 2013 Medium-term notes of consolidated subsidiaries, due 2012 to 2047 in 2012 and due 2013 to 2047 in 2013 with interest ranging from 0.13% to 8.50% per annum in 2012 and from 0.13% to 9.40% per annum in 2013 Unsecured notes of parent company, due 2012 to 2019 in 2012 and due 2013 to 2019 in 2013 with interest ranging from 1.07% to 3.00% per annum in 2012 and from 0.19% to 3.00% per annum in 2013 Unsecured notes of consolidated subsidiaries, due 2012 to 2031 in 2012 and due 2013 to 2031 in 2013 with interest ranging from 0.17% to 24.90% per annum in 2012 and from 0.13% to 23.00% per annum in 2013 Long-term capital lease obligations, due 2012 to 2030 in 2012 and due 2013 to 2030 in 2013 with interest ranging from 0.38% to 14.40% per annum in 2012 and from 0.40% to 14.73% per annum in 2013 Less —Current portion due within one year ¥3,064,785 ¥ 3,142,411 $ 33,412 855,015 993,019 10,558 3,137,289 4,502,787 47,876 530,000 460,000 4,891 946,460 922,636 9,810 21,348 8,554,897 (2,512,620) ¥6,042,277 21,399 10,042,252 (2,704,428) ¥ 7,337,824 228 106,775 (28,755) $ 78,020 As of March 31, 2013, approximately 40%, 17%, ($976 million) and in addition, other assets aggregating 13% and 30% of long-term debt are denominated ¥1,141,199 million ($12,134 million) were pledged in U.S. dollars, Japanese yen, Australian dollars and as collateral mainly for certain debt obligations of other currencies, respectively. subsidiaries. These other assets principally consist As of March 31, 2013, property, plant and of securitized ﬁ nance receivables. equipment with a book value of ¥91,834 million ANNUAL REPORT 2013 Print Search Contents P a g e 92 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [15 of 44] Next Notes to Consolidated Financial Statements The aggregate amounts of annual maturities of long-term debt during the next ﬁ ve years are as follows: The net changes in liabilities for quality assurances above for the years ended March 31, 2011, 2012 and Years ending March 31, 2014 2015 2016 2017 2018 Yen in millions ¥2,704,428 1,703,219 2,090,251 1,207,091 1,341,901 U.S. dollars in millions $28,755 18,110 22,225 12,835 14,268 Standard agreements with certain banks in Japan indebtedness to such banks. During the year ended include provisions that collateral (including sums on March 31, 2013, Toyota has not received any signiﬁ - deposit with such banks) or guarantees will be fur- cant such requests from these banks. nished upon the banks’ request and that any collat- As of March 31, 2013, Toyota has unused long- eral furnished, pursuant to such agreements or term lines of credit amounting to ¥7,252,081 million otherwise, will be applicable to all present or future ($77,109 million). 14. Product warranties and recalls and other safety measures 2013 consist of the following: Yen in millions For the years ended March 31, 2012 2011 2013 U.S. dollars in millions For the year ended March 31, 2013 Liabilities for quality assurances at beginning of year Payments made during year Provision for quality assurances Changes relating to pre-existing quality assurances Other Liabilities for quality assurances at end of year ¥680,408 (476,771) 588,224 (1,701) (25,791) ¥764,369 ¥764,369 (348,214) 436,891 (7,827) (5,385) ¥839,834 ¥ 839,834 (344,279) 491,542 (8,383) 24,309 ¥1,003,023 $ 8,930 (3,661) 5,226 (89) 259 $10,665 The other amount primarily includes the impact of consolidation and deconsolidation of certain entities currency translation adjustments and the impact of due to changes in ownership interest. The table below shows the net changes in liabilities for recalls and other safety measures which are com- Toyota provides product warranties for certain Liabilities for product warranties and liabilities for prised in liabilities for quality assurances above for the years ended March 31, 2011, 2012 and 2013. defects mainly resulting from manufacturing based recalls and other safety measures have been com- on warranty contracts with its customers at the time bined into a single table showing an aggregate liabil- of sale of products. Toyota accrues estimated war- ity for quality assurances due to the fact that both ranty costs to be incurred in the future in accor- are liabilities for costs to repair or replace defects of dance with the warranty contracts. In addition to vehicles and the amounts incurred for recalls and product warranties, Toyota initiates recalls and other other safety measures may affect the amounts safety measures to repair or to replace parts which incurred for product warranties and vice versa. might be expected to fail from products safety per- Liabilities for quality assurances are included in spectives or customer satisfaction standpoints. “Accrued expenses” in the consolidated balance Toyota accrues for costs of recalls and other safety sheets. measures at the time of vehicle sale based on the amount estimated from historical experience. Yen in millions For the years ended March 31, 2012 2011 2013 U.S. dollars in millions For the year ended March 31, 2013 Liabilities for recalls and other safety measures at beginning of year Payments made during year Provision for recalls and other safety measures Other Liabilities for recalls and other safety measures at end of year ¥301,422 (263,096) 356,749 (5,576) ¥389,499 (159,344) 237,907 635 ¥468,697 (180,925) 270,883 7,751 $4,984 (1,924) 2,880 82 ¥389,499 ¥468,697 ¥566,406 $6,022 ANNUAL REPORT 2013 Print Search Contents P a g e 93 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [16 of 44] Next Notes to Consolidated Financial Statements 15. Other payables Toyota is subject to a number of different income taxes which, in the aggregate, indicate a statutory rate in Japan of approximately 40.2%, 40.2% and 37.6% for the years ended March 31, 2011, 2012 and 2013, Other payables are mainly related to purchases of property, plant and equipment and non-manufacturing purchases. respectively. The statutory tax rates in effect for the year in which the temporary differences are expected to reverse are used to calculate the tax effects of temporary differences which are expected to reverse in the future years. Reconciliation of the differences between the statutory tax rate and the effective income tax rate 16. Income taxes is as follows: The components of income (loss) before income taxes comprise the following: Income (loss) before income taxes: Parent company and domestic subsidiaries Foreign subsidiaries Yen in millions For the years ended March 31, 2012 2011 2013 U.S. dollars in millions For the year ended March 31, 2013 ¥(278,229) 841,519 ¥ 563,290 ¥(177,852) 610,725 ¥ 432,873 ¥ 651,852 751,797 ¥1,403,649 $ 6,931 7,994 $14,925 The provision for income taxes consists of the following: Yen in millions For the years ended March 31, 2012 2011 2013 U.S. dollars in millions For the year ended March 31, 2013 Current income tax expense: Parent company and domestic subsidiaries Foreign subsidiaries Total current Deferred income tax expense (beneﬁ t): Parent company and domestic subsidiaries Foreign subsidiaries Total deferred Total provision ¥ 85,290 141,821 227,111 (44,268) 129,978 85,710 ¥312,821 ¥111,363 144,514 255,877 (57,940) 64,335 6,395 ¥262,272 ¥178,662 213,016 391,678 140,041 19,967 160,008 ¥551,686 $1,900 2,265 4,165 1,489 212 1,701 $5,866 Statutory tax rate Increase (reduction) in taxes resulting from: Non-deductible expenses Deferred tax liabilities on undistributed earnings of foreign subsidiaries Deferred tax liabilities on undistributed earnings of afﬁ liated companies accounted for by the equity method Valuation allowance Tax credits The difference between the statutory tax rate in Japan and that of foreign subsidiaries Unrecognized tax beneﬁ ts adjustments Other Effective income tax rate For the years ended March 31, 2012 40.2% 2011 40.2% 2013 37.6% 2.2 4.8 12.6 8.1 (2.6) (9.3) (0.6) 0.1 55.5% 1.7 4.7 9.2 14.9 (1.8) (9.6) 2.5 (1.2) 60.6% 0.6 1.8 4.1 1.7 (3.1) (4.8) 0.1 1.3 39.3% ANNUAL REPORT 2013 Print Search Contents P a g e 94 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [17 of 44] Next Notes to Consolidated Financial Statements Signiﬁ cant components of deferred tax assets and liabilities are as follows: The factors used to assess the likelihood of realiza- Operating loss carryforwards for tax purposes as Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 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 afﬁ liated companies accounted for by the equity method Basis difference of acquired assets Lease transactions Other Gross deferred tax liabilities Net deferred tax liability ¥ 236,978 369,985 106,265 337,992 108,426 147,906 296,934 1,604,486 (309,268) 1,295,218 ¥ 230,021 480,428 108,599 160,936 101,251 151,043 227,596 1,459,874 (284,835) 1,175,039 (210,475) (27,581) (388,901) (25,713) (504,776) (34,120) (576,809) (54,749) (1,408,510) ¥ (113,292) (567,054) (35,647) (650,389) (66,923) (1,734,627) ¥ (559,588) $ 2,446 5,108 1,155 1,711 1,076 1,606 2,420 15,522 (3,028) 12,494 (4,135) (274) (6,029) (379) (6,915) (712) (18,444) $ (5,950) The deferred tax assets and liabilities above 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 March 31, 2012 2013 U.S. dollars in millions March 31, 2013 ¥ 718,687 91,857 ¥ 749,398 100,199 (14,953) (908,883) ¥(113,292) (23,258) (1,385,927) ¥ (559,588) $ 7,968 1,065 (247) (14,736) $ (5,950) tion of the deferred tax assets are the future reversal of March 31, 2013 in Japan and foreign countries of existing taxable temporary differences, the future were ¥76,280 million ($811 million) and ¥422,133 taxable income and available tax planning strategies million ($4,488 million), respectively, and are avail- that are prudent and feasible. All available evidence, able as an offset against future taxable income. The both positive and negative, is considered to deter- majority of these carryforwards in Japan and foreign mine whether, based on the weight of that evidence, countries expire in years 2014 to 2022 and expire in a valuation allowance is needed for deferred tax assets years 2014 to 2033, respectively. Tax credit carry- which are not more-likely-than-not to be realized. forwards as of March 31, 2013 in Japan and foreign The accounting for deferred tax assets represents countries were ¥90,439 million ($961 million) and Toyota’s current best estimate based on all available ¥10,812 million ($115 million), respectively, and the evidence. Unanticipated events or changes could majority of these carryforwards in Japan and foreign result in re-evaluating the realizability of deferred countries expire in years 2014 to 2016 and expire in tax assets. years 2014 to 2033, respectively. The valuation allowance mainly relates to deferred tax assets of operating loss and foreign tax credit carry- forwards for tax purposes that are not expected to be realized. The net changes in the total valuation allow- ance for deferred tax assets for the years ended March 31, 2011, 2012 and 2013 consist of the following: Valuation allowance at beginning of year Additions Deductions Other Valuation allowance at end of year Yen in millions For the years ended March 31, 2012 ¥280,685 96,754 (65,566) (2,605) ¥309,268 2011 ¥239,269 55,791 (10,077) (4,298) ¥280,685 2013 ¥309,268 38,285 (70,986) 8,268 ¥284,835 U.S. dollars in millions For the year ended March 31, 2013 $3,288 407 (755) 88 $3,028 The other amount includes the impact of consoli- management has made no provision for income dation and deconsolidation of certain entities due to taxes on those undistributed earnings aggregating changes in ownership interest and currency transla- ¥2,718,554 million ($28,905 million) as of March 31, tion adjustments during the years ended March 31, 2013. Toyota estimates an additional tax provision 2011, 2012 and 2013. of ¥118,998 million ($1,265 million) would be Because management intends to reinvest undis- required if the full amount of those undistributed tributed earnings of foreign subsidiaries to the extent earnings were remitted. not expected to be remitted in the foreseeable future, ANNUAL REPORT 2013 Print Search Contents P a g e 95 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [18 of 44] Next Notes to Consolidated Financial Statements A summary of the gross unrecognized tax beneﬁ ts changes for the years ended March 31, 2011, 2012 and 17. Shareholders’ equity 2013 is as follows: Balance at beginning of year Additions based on tax positions related to the current year Additions for tax positions of prior years Reductions for tax positions of prior years Reductions for tax positions related to lapse of statute of limitations Reductions for settlements Other Balance at end of year Yen in millions For the years ended March 31, 2012 ¥15,453 2011 ¥23,965 2013 ¥16,901 U.S. dollars in millions For the year ended March 31, 2013 $180 213 12,564 (16,133) — (2,794) (2,362) ¥15,453 4,187 10,801 (363) — (12,820) (357) ¥16,901 2,401 4,339 (1,619) — (2,776) 3,201 ¥22,447 26 46 (17) — (30) 34 $239 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 2011 For the years ended March 31, 2012 2013 3,447,997,492 — — 3,447,997,492 3,447,997,492 — — 3,447,997,492 3,447,997,492 — — 3,447,997,492 The Companies Act provides that an amount customary practice in Japan, the distributions from equal to 10% of distributions from surplus paid by surplus are not accrued in the ﬁ nancial statements the parent company and its Japanese subsidiaries for the corresponding period, but are recorded in be appropriated as a capital reserve or a retained the subsequent accounting period after sharehold- The amount of unrecognized tax beneﬁ ts that, if amounts of interest and penalties accrued as of and earnings reserve. No further appropriations are ers’ approval has been obtained. Retained earnings recognized, would affect the effective tax rate was recognized for the years ended March 31, 2011, required when the total amount of the capital at March 31, 2013 include amounts representing not material at March 31, 2011, 2012 and 2013, 2012 and 2013, respectively, were not material. reserve and the retained earnings reserve reaches year-end cash dividends of ¥190,046 million respectively. Toyota does not believe it is reasonably Toyota remains subject to income tax examina- 25% of stated capital. ($2,020 million), ¥60 ($0.64) per share, which were possible that the total amounts of unrecognized tax tion for the tax returns related to the years beginning The retained earnings reserve included in retained approved at the Ordinary General Shareholders’ beneﬁ ts will signiﬁ cantly increase or decrease within on and after April 1, 2006 and January 1, 2000, earnings as of March 31, 2012 and 2013 was Meeting, held on June 14, 2013. the next twelve months. with various tax jurisdictions in Japan and foreign ¥173,711 million and ¥175,735 million ($1,869 mil- Retained earnings at March 31, 2013 include Interest and penalties related to income tax liabili- countries, respectively. lion), respectively. The Companies Act provides that ¥1,576,055 million ($16,758 million) relating to equi- ties are included in “Other income (loss), net”. The the retained earnings reserve of the parent company ty in undistributed earnings of afﬁ liated companies and its Japanese subsidiaries is restricted and accounted for by the equity method. unable to be used for dividend payments, and is On January 1, 2012, the parent company imple- excluded from the calculation of the proﬁ t available mented share exchanges as a result of which the for dividend. parent company became a wholly-owning parent The amounts of statutory retained earnings of the company and each of Toyota Auto Body Co., Ltd. parent company available for dividend payments to and Kanto Auto Works, Ltd. became a wholly- shareholders were ¥5,348,279 million and owned subsidiary, and the parent company ¥5,858,551 million ($62,292 million) as of March 31, acquired additional shares of each subsidiary. As 2012 and 2013, respectively. In accordance with a˛result of these share exchanges, the parent ANNUAL REPORT 2013 Print Search Contents P a g e 96 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [19 of 44] Next Notes to Consolidated Financial Statements company issued 31,151,148 shares of treasury ¥45,365 million, respectively. As a result of acquiring Tax effects allocated to each component of other comprehensive income (loss) for the years ended March stock, and treasury stock decreased by ¥125,819 additional shares of each subsidiary, noncontrolling 31, 2011, 2012 and 2013 are as follows: million and losses on disposal of treasury stock interests decreased by ¥117,881 million, accumu- occurred in the amount of ¥45,916 million. As a lated other comprehensive income (loss) decreased result, additional paid-in capital decreased by by ¥6,503 million and additional paid-in capital ¥551 million and retained earnings decreased by increased by ¥44,481 million. For the year ended March 31, 2011 Foreign currency translation adjustments Unrealized gains (losses) on securities: Pre-tax amount Yen in millions Tax amount Net-of-tax amount ¥ (294,279) ¥ 6,666 ¥(287,613) Detailed components of accumulated other comprehensive income (loss) in Toyota Motor Corporation shareholders’ equity at March 31, 2012 and 2013 and the related changes, net of taxes for the years ended March 31, 2011, 2012 and 2013 consist of the following: Balances at March 31, 2010 Other comprehensive income (loss) Balances at March 31, 2011 Equity transaction with noncontrolling interests and other Other comprehensive income (loss) Balances at March 31, 2012 Other comprehensive income (loss) Balances at March 31, 2013 Balances at March 31, 2012 Other comprehensive income (loss) Balances at March 31, 2013 Yen in millions Foreign currency translation adjustments ¥ (872,776) (287,613) (1,160,389) Unrealized gains (losses) on securities ¥194,285 (26,058) 168,227 — (87,729) (1,248,118) 434,638 ¥ (813,480) 751 129,328 298,306 368,507 ¥666,813 Pension liability adjustments ¥(168,344) 15,785 (152,559) (7,254) (69,208) (229,021) 19,565 ¥(209,456) Accumulated other comprehensive income (loss) ¥ (846,835) (297,886) (1,144,721) (6,503) (27,609) (1,178,833) 822,710 ¥ (356,123) U.S. dollars in millions Foreign currency translation adjustments $(13,271) 4,622 $ (8,649) Unrealized gains (losses) on securities $3,171 3,918 $7,089 Pension liability adjustments $(2,435) 208 $(2,227) Accumulated other comprehensive income (loss) $(12,535) 8,748 $ (3,787) Unrealized net holding gains (losses) arising for the year (31,899) 9,643 (22,256) Less: reclassiﬁ cation adjustments for (gains) losses included in net income attributable to Toyota Motor Corporation Pension liability adjustments Other comprehensive income (loss) For the year ended March 31, 2012 Equity transaction with noncontrolling interests and other Foreign currency translation adjustments Unrealized gains (losses) on securities: (6,358) 26,681 ¥ (305,855) 2,556 (10,896) ¥ 7,969 (3,802) 15,785 ¥(297,886) ¥ (10,874) (95,677) ¥ 4,371 7,948 ¥ (6,503) (87,729) Unrealized net holding gains (losses) arising for the year 164,872 (65,642) 99,230 Less: reclassiﬁ cation adjustments for (gains) losses included in net income attributable to Toyota Motor Corporation Pension liability adjustments Other comprehensive income (loss) For the year ended March 31, 2013 Foreign currency translation adjustments Unrealized gains (losses) on securities: 50,332 (111,722) ¥ (3,069) (20,234) 42,514 ¥ (31,043) 30,098 (69,208) ¥ (34,112) ¥ 447,302 ¥ (12,664) ¥ 434,638 Unrealized net holding gains (losses) arising for the year 517,169 (175,839) 341,330 Less: reclassiﬁ cation adjustments for (gains) losses included in net income attributable to Toyota Motor Corporation Pension liability adjustments Other comprehensive income (loss) For the year ended March 31, 2013 Foreign currency translation adjustments Unrealized gains (losses) on securities: 45,253 30,232 ¥1,039,956 (18,076) (10,667) ¥(217,246) 27,177 19,565 ¥ 822,710 Pre-tax amount U.S. dollars in millions Tax amount Net-of-tax amount $ 4,756 $ (134) $4,622 Unrealized net holding gains (losses) arising for the year 5,499 (1,870) 3,629 Less: reclassiﬁ cation adjustments for (gains) losses included in net income attributable to Toyota Motor Corporation Pension liability adjustments Other comprehensive income (loss) 481 321 $11,057 (192) (113) $(2,309) 289 208 $8,748 ANNUAL REPORT 2013 Print Search Contents P a g e 97 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [20 of 44] Next Notes to Consolidated Financial Statements 18. Stock-based compensation The following table summarizes Toyota’s stock option activity: In June 1997, the parent company’s shareholders For the years ended March 31, 2011, 2012 and approved a stock option plan for board members. 2013, Toyota recognized stock-based compensa- In June 2001, the shareholders approved an tion expenses for stock options of ¥2,522 million, amendment of the plan to include both board mem- ¥1,539 million and ¥325 million ($3 million) as sell- bers and key employees. Each year until June ing, general and administrative expenses. 2010, since the plans’ inception, the shareholders The weighted-average grant-date fair value of have approved the authorization for the grant of options granted during the year ended March 31, options for the purchase of Toyota’s common stock. 2011 was ¥724 per share. The fair value of options Authorized shares for each year that remain ungranted granted is amortized over the option vesting period are unavailable for grant in future years. Stock in determining net income attributable to Toyota options granted in and after August 2006 have Motor Corporation in the consolidated statements terms of 8 years and an exercise price equal to of income. The grant-date fair value of options 1.025 times the closing price of Toyota’s common granted is estimated using the Black-Scholes stock on the date of grant. These options generally option pricing model with the following weighted- vest 2 years from the date of grant. average assumptions: Dividend rate Risk-free interest rate Expected volatility Expected holding period (years) 2011 1.5% 0.3% 32% 5.0 Yen Yen in millions Options outstanding at March 31, 2010 Granted Exercised Canceled Options outstanding at March 31, 2011 Granted Exercised Canceled Options outstanding at March 31, 2012 Granted Exercised Canceled Options outstanding at March 31, 2013 Options exercisable at March 31, 2011 Options exercisable at March 31, 2012 Options exercisable at March 31, 2013 Number of shares 13,716,700 3,435,000 — (1,364,900) 15,786,800 — — (3,256,800) 12,530,000 — (645,000) (1,036,000) 10,849,000 9,347,800 9,778,000 10,849,000 Weighted-average exercise price ¥5,363 3,183 — 4,759 4,941 — — 5,059 4,910 — 3,328 5,907 ¥4,909 ¥5,821 ¥5,396 ¥4,909 Weighted-average remaining contractual life in years 5.23 Aggregate intrinsic value ¥ — 5.04 ¥ 565 4.55 ¥1,065 3.56 3.79 4.05 3.56 ¥5,921 ¥ — ¥ — ¥5,921 No options were exercised for the years ended 2012. Cash received from the exercise of stock March 31, 2011 and 2012. The total intrinsic value options for the year ended March 31, 2013 was of options exercised for the year ended March 31, ¥2,147 million ($23 million). 2013 was ¥364 million ($4 million). No cash was received from the exercise of stock options for the years ended March 31, 2011 and The following table summarizes information for options outstanding and options exercisable at March 31, 2013: Outstanding Exercisable Exercise price range Number of Yen shares 7,480,000 ¥3,183 – 5,000 5,001 – 7,278 3,369,000 3,183 – 7,278 10,849,000 Weighted-average exercise price Yen ¥4,068 6,774 4,909 U.S. dollars $43 72 52 Weighted- average remaining life Years 4.31 1.89 3.56 Number of shares 7,480,000 3,369,000 10,849,000 Weighted-average exercise price Yen ¥4,068 6,774 4,909 U.S. dollars $43 72 52 ANNUAL REPORT 2013 Print Search Contents P a g e 98 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [21 of 44] Next Notes to Consolidated Financial Statements 19. Employee beneﬁ t plans Pension and severance plans represent voluntary retirement. Employees receive Upon terminations of employment, employees of additional beneﬁ ts upon involuntary retirement, the parent company and subsidiaries in Japan are including retirement at the age limit. entitled, under the retirement plans of each compa- Effective October 1, 2005, the parent company ny, to lump-sum indemnities or pension payments, partly amended its retirement plan and introduced based on current rates of pay and lengths of service the quasi cash-balance plan under which beneﬁ ts or the number of “points” mainly determined by are determined based on the variable-interest cred- those. Under normal circumstances, the minimum iting rate rather than the ﬁ xed-interest crediting rate payment prior to retirement age is an amount based as was in the pre-amended plan. on voluntary retirement. Employees receive addi- The parent company and most subsidiaries in Information regarding Toyota’s deﬁ ned beneﬁ t plans is as follows: Japanese plans Change in beneﬁ t obligation: Beneﬁ t obligation at beginning of year Service cost Interest cost Plan participants’ contributions Plan amendments Net actuarial loss Acquisition and other Beneﬁ ts paid tional beneﬁ ts on involuntary retirement, including Japan have contributory funded deﬁ ned beneﬁ t Beneﬁ t obligation at end of year retirement at the age limit. pension plans, which are pursuant to the Corporate Effective October 1, 2004, the parent company Deﬁ ned Beneﬁ t Pension Plan Law (CDBPPL). The amended its retirement plan to introduce a “point” contributions to the plans are funded with several based retirement beneﬁ t plan. Under the new plan, ﬁ nancial institutions in accordance with the applica- employees are entitled to lump-sum or pension ble laws and regulations. These pension plan assets payments determined based on accumulated consist principally of common stocks, government “points” vested in each year of service. bonds and insurance contracts. There are three types of “points” that vest in each Most foreign subsidiaries have pension plans or 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 Beneﬁ ts paid Fair value of plan assets at end of year Funded status Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 ¥1,362,053 57,241 30,660 834 632 67,098 27,435 (65,566) 1,480,387 885,741 1,493 27,947 50,423 834 (38,893) 927,545 ¥ 552,842 ¥1,480,387 60,261 27,804 918 (3,462) 90,667 (776) (61,388) 1,594,411 927,545 145,141 (264) 53,906 918 (36,988) 1,090,258 ¥ 504,153 $15,740 641 296 10 (37) 964 (8) (653) 16,953 9,862 1,543 (3) 573 10 (393) 11,592 $ 5,361 year of service consisting of “service period points” severance indemnity plans covering substantially all Amounts recognized in the consolidated balance sheets as of March 31, 2012 and 2013 are comprised of which are attributed to the length of service, “job of their employees under which the cost of beneﬁ ts the following: title points” which are attributed to the job title of are currently invested or accrued. The beneﬁ ts for each employee, and “performance points” which these plans are based primarily on lengths of ser- are attributed to the annual performance evaluation vice and current rates of pay. of each employee. Under normal circumstances, Toyota uses a March 31 measurement date for its the minimum payment prior to retirement age is an beneﬁ t plans. amount reﬂ ecting an adjustment rate applied to Accrued expenses (Accrued pension and severance costs) Accrued pension and severance costs Investments and other assets— Other (Prepaid pension and severance costs) Net amount recognized Yen in millions March 31, 2012 ¥ 19,553 553,096 2013 ¥ 25,160 582,491 U.S. dollars in millions March 31, 2013 $ 268 6,193 (19,807) ¥552,842 (103,498) ¥504,153 (1,100) $5,361 ANNUAL REPORT 2013 Print Search Contents P a g e 99 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [22 of 44] Next Notes to Consolidated Financial Statements Amounts recognized in accumulated other comprehensive income (loss) as of March 31, 2012 and 2013 Other changes in plan assets and beneﬁ t obligations recognized in other comprehensive income (loss) are are comprised of the following: as follows: Net actuarial loss Prior service costs Net transition obligation Net amount recognized Yen in millions March 31, 2012 ¥(381,770) 57,930 — ¥(323,840) 2013 ¥(333,203) 53,360 — ¥(279,843) U.S. dollars in millions March 31, 2013 $(3,543) 567 — $(2,976) The accumulated beneﬁ t obligation for all deﬁ ned beneﬁ t pension plans was ¥1,379,373 million and ¥1,494,011 million ($15,885 million) at March 31, 2012 and 2013, respectively. The projected beneﬁ t obligation, accumulated beneﬁ t obligation and fair value of plan assets for which the Net actuarial gain (loss) Recognized net actuarial loss Prior service costs Amortization of prior service costs Amortization of net transition obligation Other Total recognized in other comprehensive income (loss) Yen in millions For the years ended March 31, 2012 ¥(87,163) 28,342 (632) (16,326) 1,626 63 2011 ¥(15,734) 15,029 1,287 (24,421) 1,944 10,529 2013 ¥32,122 16,619 3,462 (8,033) — (173) U.S. dollars in millions For the year ended March 31, 2013 $341 177 37 (86) — (2) ¥(11,366) ¥(74,090) ¥43,997 $467 accumulated beneﬁ t obligations exceed plan assets are as follows: The other amount includes the impact of transi- The estimated prior service costs and net actuarial Projected beneﬁ t obligation Accumulated beneﬁ t obligation Fair value of plan assets Yen in millions March 31, 2012 ¥728,469 639,196 153,945 2013 ¥749,561 685,763 165,262 U.S. dollars in millions March 31, 2013 $7,970 7,291 1,757 tion to deﬁ ned contribution pension plans and con- loss that will be amortized from accumulated other solidation and deconsolidation of certain entities comprehensive income (loss) into net periodic pen- due to changes in ownership interest during the sion cost during the year ending March 31, 2014 years ended March 31, 2011, 2012 and 2013. are ¥(5,000) million ($(53) million) and ¥12,200 mil- lion ($130 million), respectively. Components of the net periodic pension cost are as follows: Yen in millions Service cost Interest cost Expected return on plan assets Amortization of prior service costs Recognized net actuarial loss Amortization of net transition obligation Net periodic pension cost For the years ended March 31, 2012 ¥57,241 30,660 (21,558) (16,326) 28,342 1,626 ¥79,985 2011 ¥61,134 31,782 (21,200) (24,421) 15,029 1,944 ¥64,268 2013 ¥60,261 27,804 (22,352) (8,033) 16,619 — ¥74,299 Weighted-average assumptions used to determine beneﬁ t obligations as of March 31, 2012 and 2013 are as follows: Discount rate Rate of compensation increase March 31, 2012 2.0% 2.3% 2013 1.7% 2.2% As of March 31, 2012 and 2013, the parent com- use the rates of compensation increase to deter- pany and certain subsidiaries in Japan employ mine beneﬁ t obligations. “point” based retirement beneﬁ t plans and do not U.S. dollars in millions For the year ended March 31, 2013 $641 296 (238) (86) 177 — $790 ANNUAL REPORT 2013 Print Search Contents P a g e 100 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [23 of 44] Next Notes to Consolidated Financial Statements Weighted-average assumptions used to determine net periodic pension cost for the years ended March 31, The following table summarizes the fair value of classes of plan assets as of March 31, 2012 and 2013. See 2011, 2012 and 2013 are as follows: note 26 to the consolidated ﬁ nancial statements for three levels of input which are used to measure fair value. Discount rate Expected return on plan assets Rate of compensation increase For the years ended March 31, 2012 2.3% 2.5% 2.3% 2013 2.0% 2.5% 2.3% 2011 2.3% 2.3% 2.3% During the years ended March 31, 2011, 2012 and Excepting equity securities contributed by Toyota, 2013, the parent company and certain subsidiaries in approximately 50% of the plan assets is invested in Japan employ “point” based retirement beneﬁ t plans equity securities, approximately 30% is invested in and do not use the rates of compensation increase debt securities, and the rest of them is invested in to determine net periodic pension cost. insurance contracts and other products. When The expected rate of return on plan assets is actual allocations are not in line with target alloca- determined after considering several applicable fac- tions, Toyota rebalances its investments in accor- tors including, the composition of plan assets held, dance with the policies. Prior to making individual assumed risks of asset management, historical investments, Toyota performs in-depth assessments results of the returns on plan assets, Toyota’s princi- of corresponding factors including category of prod- pal policy for plan asset management, and forecast- ucts, industry type, currencies and liquidity of each ed market conditions. potential investment under consideration to mitigate Toyota’s policy and objective for plan asset man- concentrations of risks such as market risk and for- agement is to maximize returns on plan assets to eign currency exchange rate risk. To assess perfor- meet future beneﬁ t payment requirements under mance of the investments, Toyota establishes risks which Toyota considers permissible. Asset bench mark return rates for each individual invest- allocations under the plan asset management are ment, combines these individual bench mark rates determined based on plan asset management poli- based on the asset composition ratios within each cies of each plan which are established to achieve asset category, and compares the combined rates the optimized asset compositions in terms of the with the corresponding actual return rates on each long-term overall plan asset management. asset category. Equity securities: Common stocks Commingled funds Debt securities: Government bonds Commingled funds Other Insurance contracts Other Total Equity securities: Common stocks Commingled funds Debt securities: Government bonds Commingled funds Other Insurance contracts Other Total Yen in millions March 31, 2012 Level 1 Level 2 Level 3 Total ¥353,282 — 353,282 63,327 — — 63,327 — 27,006 ¥443,615 ¥ — 158,027 158,027 — 176,596 20,155 196,751 83,993 4,503 ¥443,274 ¥ — — — — — 591 591 — 40,065 ¥40,656 ¥353,282 158,027 511,309 63,327 176,596 20,746 260,669 83,993 71,574 ¥927,545 Yen in millions March 31, 2013 Level 1 Level 2 Level 3 Total ¥440,971 — 440,971 81,867 — — 81,867 — 17,789 ¥540,627 ¥ — 184,879 184,879 — 203,933 23,594 227,527 91,326 3,923 ¥507,655 ¥ — — — — — 441 441 — 41,535 ¥41,976 ¥ 440,971 184,879 625,850 81,867 203,933 24,035 309,835 91,326 63,247 ¥1,090,258 ANNUAL REPORT 2013 Print Search Contents P a g e 101 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [24 of 44] Next Notes to Consolidated Financial Statements Equity securities: Common stocks Commingled funds Debt securities: Government bonds Commingled funds Other Insurance contracts Other Total U.S. dollars in millions March 31, 2013 Level 1 Level 2 Level 3 Total $4,689 — 4,689 870 — — 870 — 189 $5,748 $ — 1,966 1,966 — 2,168 251 2,419 971 42 $5,398 $ — — — — — 5 5 — 441 $446 $ 4,689 1,966 6,655 870 2,168 256 3,294 971 672 $11,592 The following is description of the assets, infor- Commingled funds are beneﬁ cial interests of col- mation about the valuation techniques used to mea- lective trust. The fair values of commingled funds sure fair value, key inputs and signiﬁ cant are measured using the net asset value (“NAV”) pro- assumptions: vided by the administrator of the fund, and are cate- Quoted market prices for identical securities are gorized by the ability to redeem investments at the used to measure fair value of common stocks. measurement day. Common stocks include 69% of Japanese stocks The fair values of insurance contracts are measured and 31% of foreign stocks as of March 31, 2012, using contracted amount with accrued interest. and 71% of Japanese stocks and 29% of foreign Other consists of cash equivalents, other private stocks as of March 31, 2013. placement investment funds and other assets. The Quoted market prices for identical securities are fair values of other private placement investment used to measure fair value of government bonds. funds are measured using the NAV provided by the Government bonds include 35% of Japanese gov- administrator of the fund, and are categorized by ernment bonds and 65% of foreign government the ability to redeem investments at the measure- bonds as of March 31, 2012, and 44% of Japanese ment day. government bonds and 56% of foreign government bonds as of March 31, 2013. The following tables summarize the changes in Level 3 plan assets measured at fair value for the years ended March 31, 2011, 2012 and 2013: 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 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, 2011 Other ¥37,421 934 19 — ¥38,374 Debt securities ¥928 7 (189) — ¥746 Total ¥38,349 941 (170) — ¥39,120 Yen in millions For the year ended March 31, 2012 Other ¥38,374 (1,762) 3,453 — ¥40,065 Debt securities ¥746 5 (160) — ¥591 Total ¥39,120 (1,757) 3,293 — ¥40,656 Yen in millions For the year ended March 31, 2013 Other ¥40,065 438 1,032 — ¥41,535 Debt securities ¥591 3 (153) — ¥441 Total ¥40,656 441 879 — ¥41,976 U.S. dollars in millions For the year ended March 31, 2013 Other $426 4 11 — $441 Debt securities $ 6 0 (1) — $ 5 Total $432 4 10 — $446 Toyota expects to contribute ¥54,094 million ($575 million) to its pension plans in the year ending March 31, 2014. ANNUAL REPORT 2013 Print Search Contents P a g e 102 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [25 of 44] Next Notes to Consolidated Financial Statements The following pension beneﬁ t payments, which reﬂ ect expected future service, as appropriate, are expected Amounts recognized in the consolidated balance sheets as of March 31, 2012 and 2013 are comprised of to be paid: Years ending March 31, 2014 2015 2016 2017 2018 from 2019 to 2023 Total Foreign plans the following: Yen in millions ¥ 62,508 64,803 66,445 66,497 67,780 379,369 ¥707,402 U.S. dollars in millions $ 665 689 706 707 721 4,034 $7,522 Accrued expenses (Accrued pension and severance costs) Accrued pension and severance costs Investments and other assets— Other (Prepaid pension and severance costs) Net amount recognized Yen in millions March 31, 2012 ¥ 1,523 155,306 2013 ¥ 1,762 183,621 U.S. dollars in millions March 31, 2013 $ 18 1,953 (33,055) ¥123,774 (31,462) ¥153,921 (335) $1,636 Amounts recognized in accumulated other comprehensive income (loss) as of March 31, 2012 and 2013 Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 are comprised of the following: Change in beneﬁ t obligation: Beneﬁ t obligation at beginning of year Service cost Interest cost Plan participants’ contributions Plan amendments Net actuarial loss Acquisition and other Beneﬁ ts paid Beneﬁ t obligation at end of year Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Acquisition and other Employer contributions Plan participants’ contributions Beneﬁ ts paid Fair value of plan assets at end of year Funded status ¥367,125 21,298 21,739 221 108 50,222 13,061 (6,774) 467,000 297,644 14,816 19,600 16,125 221 (5,180) 343,226 ¥123,774 ¥467,000 27,943 24,300 246 (43) 38,986 82,907 (8,179) 633,160 343,226 46,359 60,138 35,354 246 (6,084) 479,239 ¥153,921 $4,965 297 258 3 (0) 415 881 (87) 6,732 3,649 493 640 376 3 (65) 5,096 $1,636 Net actuarial loss Prior service costs Net transition obligation Net amount recognized Yen in millions March 31, 2012 ¥(75,069) (2,333) — ¥(77,402) 2013 ¥(96,151) (1,921) — ¥(98,072) U.S. dollars in millions March 31, 2013 $(1,022) (20) — $(1,042) The accumulated beneﬁ t obligation for all deﬁ ned ¥533,551 million ($5,673 million) at March 31, 2012 beneﬁ t pension plans was ¥385,348 million and and 2013, respectively. The projected beneﬁ t obligation, accumulated beneﬁ t obligation and fair value of plan assets for which the accumulated beneﬁ t obligations exceed plan assets are as follows: Projected beneﬁ t obligation Accumulated beneﬁ t obligation Fair value of plan assets Yen in millions March 31, 2012 ¥229,015 190,422 52,123 2013 ¥251,596 213,934 43,277 U.S. dollars in millions March 31, 2013 $2,675 2,275 460 ANNUAL REPORT 2013 Print Search Contents P a g e 103 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [26 of 44] Next Notes to Consolidated Financial Statements Components of the net periodic pension cost are as follows: Weighted-average assumptions used to determine beneﬁ t obligations as of March 31, 2012 and 2013 are Service cost Interest cost Expected return on plan assets Amortization of prior service costs Recognized net actuarial loss Amortization of net transition obligation Net periodic pension cost Yen in millions For the years ended March 31, 2012 ¥21,298 21,739 (22,864) 351 1,783 — ¥22,307 2011 ¥21,288 20,720 (21,164) 389 1,066 — ¥22,299 2013 ¥27,943 24,300 (23,177) 369 2,884 — ¥32,319 U.S. dollars in millions For the year ended March 31, 2013 $297 258 (246) 4 31 — $344 as follows: Discount rate Rate of compensation increase March 31, 2012 5.0% 4.5% 2013 4.5% 4.6% Weighted-average assumptions used to determine net periodic pension cost for the years ended March 31, 2011, 2012 and 2013 are as follows: Other changes in plan assets and beneﬁ t obligations recognized in other comprehensive income (loss) are as follows: Discount rate Expected return on plan assets Rate of compensation increase For the years ended March 31, 2012 5.7% 7.3% 4.4% 2013 5.0% 7.0% 4.5% 2011 6.2% 7.4% 4.5% Net actuarial loss Recognized net actuarial loss Prior service costs Amortization of prior service costs Amortization of net transition obligation Other Total recognized in other comprehensive income (loss) Yen in millions For the years ended March 31, 2012 ¥(58,270) 1,783 (108) 351 — 5,888 2013 ¥(15,804) 2,884 43 369 — (8,162) 2011 ¥ (6,244) 1,066 142 389 — 30,466 U.S. dollars in millions For the year ended March 31, 2013 $(168) 31 0 4 — (87) ¥25,819 ¥(50,356) ¥(20,670) $(220) The expected rate of return on plan assets is equity securities, approximately 30% is invested in determined after considering several applicable debt securities, and the rest of them is invested in factors including, the composition of plan assets other products. When actual allocations are not in held, assumed risks of asset management, histori- line with target allocations, Toyota rebalances its cal results of the returns on plan assets, Toyota’s investments in accordance with the policies. Prior to principal policy for plan asset management, and making individual investments, Toyota performs in- forecasted market conditions. depth assessments of corresponding factors includ- Toyota’s policy and objective for plan asset man- ing category of products, industry type, currencies agement is to maximize returns on plan assets to and liquidity of each potential investment under meet future beneﬁ t payment requirements under consideration to mitigate concentrations of risks The other amount includes the impact of consoli- The estimated prior service costs and net actuari- risks which Toyota considers permissible. Asset such as market risk and foreign currency exchange dation and deconsolidation of certain entities due to al loss that will be amortized from accumulated allocations under the plan asset management are rate risk. To assess performance of the investments, changes in ownership interest and currency transla- other comprehensive income (loss) into net periodic determined based on plan asset management poli- Toyota establishes bench mark return rates for each tion adjustments during the years ended March 31, pension cost during the year ending March 31, cies of each plan which are established to achieve individual investment, combines these individual 2011, 2012 and 2013. 2014 are ¥300 million ($3 million) and ¥4,400 million the optimized asset compositions in terms of the bench mark rates based on the asset composition ($47 million), respectively. long-term overall plan asset management. ratios within each asset category, and compares the Excepting equity securities contributed by Toyota, combined rates with the corresponding actual approximately 60% of the plan assets is invested in return rates on each asset category. ANNUAL REPORT 2013 Print Search Contents P a g e 104 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [27 of 44] Next Notes to Consolidated Financial Statements The following table summarizes the fair value of classes of plan assets as of March 31, 2012 and 2013. See note 26 to the consolidated ﬁ nancial statements for three levels of input which are used to measure fair value. Yen in millions March 31, 2012 Level 1 Level 2 Level 3 Total ¥114,955 — 114,955 25,084 — — 25,084 — 21,184 ¥161,223 ¥ — 74,815 74,815 — 43,062 29,278 72,340 — 3,471 ¥150,626 ¥ — — — — — — — — 31,377 ¥31,377 ¥114,955 74,815 189,770 25,084 43,062 29,278 97,424 — 56,032 ¥343,226 Yen in millions March 31, 2013 Equity securities Common stocks Commingled funds Debt securities Government bonds Commingled funds Other Insurance contracts Other Total U.S. dollars in millions March 31, 2013 Level 1 Level 2 Level 3 Total $1,952 — 1,952 501 — — 501 — 327 $2,780 $ — 920 920 — 455 430 885 13 66 $1,884 $ — — — — — — — — 432 $432 $1,952 920 2,872 501 455 430 1,386 13 825 $5,096 The following is description of the assets, informa- Commingled funds are beneﬁ cial interests of col- tion about the valuation techniques used to measure lective trust. The fair values of commingled funds are fair value, key inputs and signiﬁ cant assumptions: measured using the NAV provided by the adminis- Level 1 Level 2 Level 3 Total Quoted market prices for identical securities are trator of the fund, and are categorized by the ability ¥183,611 — 183,611 47,083 — — 47,083 — 30,739 ¥261,433 ¥ — 86,539 86,539 — 42,754 40,486 83,240 1,202 6,218 ¥177,199 ¥ — — — — — — — — 40,607 ¥40,607 ¥183,611 86,539 270,150 47,083 42,754 40,486 130,323 1,202 77,564 ¥479,239 used to measure fair value of common stocks. to redeem investments at the measurement day. Common stocks include mainly foreign stocks as of Other consists of cash equivalents, other private March 31, 2012 and 2013. placement investment funds and other assets. Quoted market prices for identical securities are The fair values of other private placement invest- used to measure fair value of government bonds. ment funds are measured using the NAV provided Government bonds include mainly foreign govern- by the administrator of the fund, and are catego- ment bonds as of March 31, 2012 and 2013. rized by the ability to redeem investments at the measurement day. Equity securities Common stocks Commingled funds Debt securities Government bonds Commingled funds Other Insurance contracts Other Total Equity securities Common stocks Commingled funds Debt securities Government bonds Commingled funds Other Insurance contracts Other Total ANNUAL REPORT 2013 Print Search Contents P a g e 105 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [28 of 44] Next Notes to Consolidated Financial Statements The following tables summarize the changes in Level 3 plan assets measured at fair value for the years The following pension beneﬁ t payments, which reﬂ ect expected future service, as appropriate, are expected ended March 31, 2011, 2012 and 2013: 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 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, 2011 Other ¥ 9,097 974 11,471 (1,065) ¥20,477 Debt securities ¥2,663 305 (2,759) (209) ¥ — Total ¥11,760 1,279 8,712 (1,274) ¥20,477 Yen in millions For the year ended March 31, 2012 Other ¥20,477 1,243 9,514 143 ¥31,377 Debt securities ¥— — — — ¥— Total ¥20,477 1,243 9,514 143 ¥31,377 Yen in millions For the year ended March 31, 2013 Other ¥31,377 2,472 2,599 4,159 ¥40,607 Debt securities ¥— — — — ¥— Total ¥31,377 2,472 2,599 4,159 ¥40,607 U.S. dollars in millions For the year ended March 31, 2013 Other $334 26 28 44 $432 Debt securities $— — — — $— Total $334 26 28 44 $432 to be paid: Years ending March 31, 2014 2015 2016 2017 2018 from 2019 to 2023 Total Yen in millions ¥ 8,535 9,264 9,955 10,660 11,491 73,651 ¥123,556 U.S. dollars in millions $ 91 99 106 113 122 783 $1,314 Postretirement beneﬁ ts other than pensions and postemployment beneﬁ ts Toyota’s U.S. subsidiaries provide certain health provided through various insurance companies, care and life insurance beneﬁ ts to eligible retired health care providers and others. The costs of these employees. In addition, Toyota provides beneﬁ ts to beneﬁ ts are recognized over the period the employ- certain former or inactive employees after employ- ee provides credited service to Toyota. Toyota’s obli- ment, but before retirement. These beneﬁ ts are gations under these arrangements are not material. 20. Derivative ﬁ nancial instruments Toyota employs derivative ﬁ nancial instruments, uses interest rate currency swap agreements to including foreign exchange forward contracts, foreign hedge exposure to currency exchange rate ﬂ uctua- currency options, interest rate swaps, interest rate tions on principal and interest payments for borrow- currency swap agreements and interest rate options ings denominated in foreign currencies. Notes and to manage its exposure to ﬂ uctuations in interest loans payable issued in foreign currencies are rates and foreign currency exchange rates. Toyota hedged by concurrently executing interest rate cur- does not use derivatives for speculation or trading. rency swap agreements, which involve the exchange of foreign currency principal and interest obligations Fair value hedges for each functional currency obligations at agreed- Toyota enters into interest rate swaps and interest upon currency exchange and interest rates. rate currency swap agreements mainly to convert For the years ended March 31, 2011, 2012 and Toyota expects to contribute ¥8,688 million ($92 million) to its pension plans in the year ending March 31, 2014. its ﬁ xed-rate debt to variable-rate debt. Toyota uses 2013, the ineffective portion of Toyota’s fair value interest rate swap agreements in managing interest hedge relationships was not material. For fair value rate risk exposure. Interest rate swap agreements hedging relationships, the components of each are executed as either an integral part of speciﬁ c derivative’s gain or loss are included in the assess- debt transactions or on a portfolio basis. Toyota ment of hedge effectiveness. ANNUAL REPORT 2013 Print Search Contents P a g e 106 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [29 of 44] Next Notes to Consolidated Financial Statements Undesignated derivative ﬁ nancial instruments As of March 31, 2012 and 2013, the amounts of and cash collateral pledged that partially offset Toyota uses foreign exchange forward contracts, currency exchange rate ﬂ uctuations and interest counterparty netting and cash collateral received derivative liabilities were ¥(90,963) million and foreign currency options, interest rate swaps, inter- rate ﬂ uctuations from an economic perspective, and that partially offset derivative assets were ¥218,509 ¥(86,477) million ($(919) million), respectively. These est rate currency swap agreements, and interest for which Toyota is unable or has elected not to million and ¥158,807 million ($1,689 million), amounts included in the above table were offset in rate options, to manage its exposure to foreign apply hedge accounting. respectively. The amounts of counterparty netting the consolidated balance sheets. Fair value and gains or losses on derivative ﬁ nancial instruments The following table summarizes the notional amounts of derivative ﬁ nancial instruments as of March 31, The following table summarizes the fair values of derivative ﬁ nancial instruments as of March 31, 2012 and 2013: 2012 and 2013: Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 Designated derivative ﬁ nancial instruments Undesignated derivative ﬁ nancial instruments Designated derivative ﬁ nancial instruments Undesignated derivative ﬁ nancial instruments Designated derivative ﬁ nancial instruments Undesignated derivative ﬁ nancial instruments ¥344,623 ¥10,607,666 ¥235,219 ¥12,689,774 $2,501 $134,926 — 2,104,048 ¥344,623 ¥12,807,293 ¥235,219 ¥14,793,822 2,199,627 — — $2,501 22,371 $157,297 Derivative ﬁ nancial instruments designated as hedging instruments: Interest rate and currency swap agreements Prepaid expenses and other current assets Investments and other assets—Other Total Other current liabilities Other long-term liabilities Total Undesignated derivative ﬁ nancial 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 March 31, 2012 2013 U.S. dollars in millions March 31, 2013 ¥ 7,166 61,174 ¥ 68,340 ¥ (2,060) (303) ¥ (2,363) ¥ 61,983 157,642 ¥ 219,625 ¥ (38,338) (120,666) ¥(159,004) ¥ 9,531 — ¥ 9,531 ¥ (21,736) (70) ¥ (21,806) ¥ 10,769 39,569 ¥ 50,338 ¥ (2,554) (143) ¥ (2,697) ¥ 27,731 139,419 ¥ 167,150 ¥ (37,133) (122,420) ¥(159,553) ¥ 7,340 — ¥ 7,340 ¥ (36,087) (5) ¥ (36,092) $ 114 421 $ 535 $ (27) (2) $ (29) $ 295 1,482 $ 1,777 $ (395) (1,301) $(1,696) $ 78 — $ 78 $ (384) (0) $ (384) Interest rate and currency swap agreements Foreign exchange forward and option contracts Total ANNUAL REPORT 2013 Print Search Contents P a g e 107 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [30 of 44] Next Notes to Consolidated Financial Statements The following table summarizes the gains and losses on derivative ﬁ nancial instruments and hedged items Undesignated derivative ﬁ nancial instruments are Credit risk related contingent features reported in the consolidated statements of income for the years ended March 31, 2011, 2012 and 2013: used to manage risks of ﬂ uctuations in interest rates Toyota enters into International Swaps and Yen in millions For the years ended March 31, 2011 2012 Gains or (losses) on derivative ﬁ nancial instruments Gains or (losses) on hedged items Gains or (losses) on derivative ﬁ nancial instruments Gains or (losses) on hedged items to certain borrowing transactions and in foreign cur- Derivatives Association Master Agreements with rency exchange rates of certain currency receiv- counterparties. These Master Agreements contain a ables and payables. Toyota accounts for these provision requiring either Toyota or the counterparty derivative ﬁ nancial instruments as economic hedges to settle the contract or to post assets to the other with changes in the fair value recorded directly into party in the event of a ratings downgrade below a current period earnings. speciﬁ ed threshold. Unrealized gains or (losses) on undesignated The aggregate fair value amount of derivative derivative ﬁ nancial instruments reported in the cost ﬁ nancial instruments that contain credit risk related ¥ 71,491 (166) ¥(68,741) 166 ¥ (1,354) — ¥2,999 — of ﬁ nancing operations for the years ended March contingent features that are in a net liability position 31, 2011, 2012 and 2013 were ¥93,370 million, after being offset by cash collateral as of March 31, Derivative ﬁ nancial instruments designated as hedging instruments—Fair value hedge: Interest rate and currency swap agreements Cost of ﬁ nancing operations Interest expense Undesignated derivative ﬁ nancial instruments: Interest rate and currency swap agreements Cost of ﬁ nancing operations Foreign exchange gain (loss), net Foreign exchange forward and option contracts ¥ 72,082 (1,393) ¥ — — ¥35,834 (28) ¥ — — Cost of ﬁ nancing operations Foreign exchange gain (loss), net (2,693) 110,211 — — (3,815) 53,272 — — Yen in millions For the year ended March 31, 2013 U.S. dollars in millions For the year ended March 31, 2013 Gains or (losses) on derivative ﬁ nancial instruments Gains or (losses) on hedged items Gains or (losses) on derivative ﬁ nancial instruments Gains or (losses) on hedged items Derivative ﬁ nancial instruments designated as hedging instruments—Fair value hedge: Interest rate and currency swap agreements Cost of ﬁ nancing operations Interest expense Undesignated derivative ﬁ nancial instruments: Interest rate and currency swap agreements Cost of ﬁ nancing operations Foreign exchange gain (loss), net Foreign exchange forward and option contracts Cost of ﬁ nancing operations Foreign exchange gain (loss), net ¥(23,965) — ¥24,738 — $(255) — ¥(24,204) 1,617 ¥ — — (4,572) (49,239) — — $(257) 17 (49) (524) $263 — $ — — — — ¥(14,934) million and ¥(60,727) million ($(646) mil- 2013 is ¥3,289 million ($35 million). The aggregate lion) those reported in foreign exchange gain (loss), fair value amount of assets that are already posted net were ¥(240) million, ¥(5,543) million and ¥(7,447) as cash collateral as of March 31, 2013 is ¥17,305 million ($(79) million), respectively. million ($184 million). If the ratings of Toyota decline Cash ﬂ ows from transactions of derivative ﬁ nan- below speciﬁ ed thresholds, the maximum amount cial instruments are included in cash ﬂ ows from of assets to be posted or for which Toyota could be operating activities in the consolidated statements required to settle the contracts is ¥3,289 million of cash ﬂ ows. ($35 million) as of March 31, 2013. 21. Other ﬁ nancial instruments Toyota has certain ﬁ nancial instruments, including currency or an interest rate instrument, Toyota’s ﬁ nancial assets and liabilities which arose in the nor- risk is limited to the fair value of the instrument. mal course of business. These ﬁ nancial instruments Although Toyota may be exposed to losses in the are executed with creditworthy ﬁ nancial institutions, event of nonperformance by counterparties on and virtually all foreign currency contracts are ﬁ nancial instruments, it does not anticipate signiﬁ - denominated in U.S. dollars, euros and other cur- cant losses due to the nature of its counterparties. rencies of major developed countries. Financial Counterparties to Toyota’s ﬁ nancial instruments rep- instruments involve, to varying degrees, market risk resent, in general, international ﬁ nancial institutions. as instruments are subject to price ﬂ uctuations, and Additionally, Toyota does not have a signiﬁ cant elements of credit risk in the event a counterparty exposure to any individual counterparty. Toyota should default. In the unlikely event the counterpar- believes that the overall credit risk related to its ties fail to meet the contractual terms of a foreign ﬁ nancial instruments is not signiﬁ cant. ANNUAL REPORT 2013 Print Search Contents P a g e 108 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [31 of 44] Next Notes to Consolidated Financial Statements The following table summarizes the estimated fair values of Toyota’s ﬁ nancial instruments, excluding market- Cash and cash equivalents and Other receivables able securities and other securities investments, afﬁ liated companies and derivative ﬁ nancial instruments. See time deposits Other receivables are short-term receivables. These note 26 to the consolidated ﬁ nancial statements for three levels of input which are used to measure fair value. In the normal course of business, substantially all receivables are carried at amounts which approxi- Yen in millions March 31, 2012 Estimated fair value Level 1 Level 2 Level 3 Total ¥ 234,924 80,301 ¥1,444,276 — — — 9,137,936 — 408,547 — — (194,571) — (3,256,078) ¥ — ¥ 1,679,200 80,301 9,137,936 408,547 (3,450,649) Carrying amount ¥1,679,200 80,301 8,879,731 408,547 (3,450,649) cash and cash equivalents and time deposits are mate fair value, and the difference between the car- highly liquid and are carried at amounts which rying amount and the fair value is not material. approximate fair value due to its short duration. These receivables are classiﬁ ed in Level 3. Cash equivalents and time deposits include nego- tiable certiﬁ cate of deposit measured at fair value on Short-term borrowings and long-term debt a recurring basis. Where money market funds pro- The fair values of short-term borrowings and long- duce a daily net asset value in an active market, this term debt including the current portion, except for value is used to determine the fair value of the fund secured loans provided by securitization transac- investment, and the investment is classiﬁ ed in Level tions using special-purpose entities, are estimated (8,533,549) — (7,835,970) (847,223) (8,683,193) 1. All other types of cash and cash equivalents and based on the discounted amounts of future cash Yen in millions March 31, 2013 Estimated fair value Level 1 Level 2 Level 3 Total Carrying amount ¥ 375,941 ¥ — ¥ 1,718,297 ¥ 1,718,297 ¥1,342,356 106,700 — — — 11,434,936 11,434,936 — — 432,693 — — (4,089,528) — (4,089,528) 106,700 11,144,427 432,693 (4,089,528) 106,700 432,693 time deposits are classiﬁ ed in Level 2. ﬂ ows using Toyota’s current borrowing rates for sim- ilar liabilities. As these inputs are observable, these Finance receivables, net debts are classiﬁ ed in Level 2. The fair values of ﬁ nance receivables are estimated The fair values of the secured loans provided by by discounting expected cash ﬂ ows to present securitization transactions are estimated based on value using internal assumptions, including prepay- current market rates and credit spreads for debt ment speeds, expected credit losses and collateral with similar maturities. Internal assumptions includ- value. Certain impaired ﬁ nance receivables are mea- ing prepayment speeds and expected credit losses sured at fair value on a nonrecurring basis based on are used to estimate the timing of cash ﬂ ows to be (10,020,853) — (9,244,942) (979,196) (10,224,138) collateral values. paid on the underlying securitized assets. As these U.S. dollars in millions March 31, 2013 Estimated fair value Level 1 Level 2 Level 3 Total $14,273 — — — — $ 3,997 1,135 — — (43,482) $ — — 121,584 4,601 — $ 18,270 1,135 121,584 4,601 (43,482) Carrying amount $ 18,270 1,135 118,495 4,601 (43,482) (106,548) — (98,298) (10,412) (108,710) As unobservable inputs are utilized, ﬁ nance valuations utilize unobservable inputs, the secured receivables are classiﬁ ed in Level 3. loans are classiﬁ ed in Level 3. See note 12 to the consolidated ﬁ nancial statements for information regarding the secured loans. Assets (Liabilities): Cash and cash equivalents Time deposits Total ﬁ nance receivables, net Other receivables Short-term borrowings Long-term debt including the current portion Assets (Liabilities): Cash and cash equivalents Time deposits Total ﬁ nance receivables, net Other receivables Short-term borrowings Long-term debt including the current portion Assets (Liabilities): Cash and cash equivalents Time deposits Total ﬁ nance receivables, net Other receivables Short-term borrowings Long-term debt including the current portion ANNUAL REPORT 2013 Print Search Contents P a g e 109 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [32 of 44] Next Notes to Consolidated Financial Statements 22. Lease commitments Toyota leases certain assets under capital lease and operating lease arrangements. An analysis of leased assets under capital leases is as follows: Class of property: Building Machinery and equipment Less—Accumulated depreciation Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 ¥12,230 31,698 (20,284) ¥23,644 ¥13,999 32,252 (23,843) ¥22,408 $149 343 (254) $238 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, 2013 are as follows: Years ending March 31, 2014 2015 2016 2017 2018 Thereafter Total minimum future rentals Yen in millions ¥11,299 9,398 7,988 6,347 5,354 21,491 ¥61,877 U.S. dollars in millions $120 100 85 67 57 229 $658 Amortization expenses under capital leases for the years ended March 31, 2011, 2012 and 2013 were ¥5,966 million, ¥5,572 million and ¥5,265 million ($56 million), respectively. Future minimum lease payments under capital leases together with the present value of the net minimum 23. Other commitments and contingencies, concentrations and factors that may affect future operations lease payments as of March 31, 2013 are as follows: Years ending March 31, 2014 2015 2016 2017 2018 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 ¥ 4,993 3,542 2,790 2,409 2,049 12,926 28,709 (7,310) 21,399 (4,096) ¥17,303 U.S. dollars in millions $ 53 38 30 25 22 137 305 (77) 228 (44) $184 Commitments ¥6,590 million ($70 million) have been provided as Commitments outstanding as of March 31, 2013 for of March 31, 2013. Under these guarantee con- the purchase of property, plant and equipment and tracts, Toyota is entitled to recover any amount paid other assets totaled ¥203,901 million ($2,168 million). by Toyota from the customers whose original obli- Guarantees Toyota enters into contracts with Toyota dealers to Legal Proceedings guarantee customers’ payments of their installment Product Recalls gations Toyota has guaranteed. payables that arise from installment contracts From time-to-time, Toyota issues vehicle recalls and between customers and Toyota dealers, as and takes other safety measures including safety cam- when requested by Toyota dealers. Guarantee peri- paigns relating to its vehicles. In November 2009, ods are set to match maturity of installment pay- Toyota announced a safety campaign in North Rental expenses under operating leases for the years ended March 31, 2011, 2012 and 2013 were ¥89,029 ments, and as of March 31, 2013, range from 1 America for certain models of Toyota and Lexus million, ¥91,052 million and ¥90,081 million ($958 million), respectively. month to 35 years; however, they are generally vehicles related to ﬂ oor mat entrapment of accelera- shorter than the useful lives of products sold. Toyota tor pedals, and later expanded it to include addi- is required to execute its guarantee primarily when tional models. In January 2010, Toyota announced customers are unable to make required payments. a recall in North America for certain models of The maximum potential amount of future pay- Toyota vehicles related to sticking and slow-to- ments as of March 31, 2013 is ¥1,849,493 million return accelerator pedals. Also in January 2010, ($19,665 million). Liabilities for guarantees totaling Toyota recalled in Europe, China and other regions ANNUAL REPORT 2013 Print Search Contents P a g e 110 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [33 of 44] Next Notes to Consolidated Financial Statements certain models of Toyota vehicles related to sticking submission and scheduled a hearing in July 2013 hybrid vehicles that cause the vehicles to fail to stop While Toyota has resolved or is attempting to accelerator pedals. In February 2010, Toyota for the presentation of additional information. In in a timely manner when driving in certain road con- resolve many of these matters, Toyota believes that announced a worldwide recall related to the soft- ﬁ scal 2013, Toyota recorded a $1.1 billion pre-tax ditions. The plaintiffs seek an order requiring Toyota it has meritorious defenses to all of them and will ware program that controls the antilock braking charge against earnings to cover the estimated to repair the vehicles and claim that all owners and vigorously defend those matters not resolved. system in certain vehicle models including the Prius. costs of this resolution and other potential recall- lessees of vehicles, including those for which recalls Set forth below is a description of various claims, related resolutions, including the resolution of the civil have been implemented, should be compensated Government Investigations lawsuits and government investigations involving litigation ﬁ led by the Orange County District Attorney for the alleged defects related to the antilock brak- In February 2010, Toyota received a subpoena from Toyota in the United States relating to these recalls and the state attorneys general’s investigation ing system. These cases have been consolidated the U.S. Attorney for the Southern District of New and other safety measures. discussed below. into two actions, one in the United States District York and a voluntary request and subpoena from The settlement provides a customer support pro- Court for the Central District of California and one in the SEC. The subpoenas and the voluntary request Class Action and Consolidated Litigation gram covering certain vehicle parts, the free installa- the Los Angeles County Superior Court. In January primarily seek documents related to unintended Approximately 200 putative class actions and more tion of a brake override system on the remaining 2013, the Court in the federal case issued an order acceleration and certain ﬁ nancial records. This is than 500 individual product liability personal injury ﬂ oor mat entrapment safety campaign vehicles and denying the plaintiff’s motion for class certiﬁ cation a coordinated investigation and has included inter- cases have been ﬁ led since November 2009 alleg- funds for cash payments to customers who do not and granting summary judgment in favor of Toyota views of Toyota and non-Toyota witnesses, as well ing that certain Toyota, Lexus and Scion vehicles receive the brake override system, cash payments on the claims of the principal named plaintiff for the as production of documents. In June 2010, Toyota contain defects that lead to unintended accelera- to individuals who allegedly suffered a loss on the cases relating to recalled vehicles. A class certiﬁ ca- received a second voluntary request and subpoena tion. In April 2010, the approximately 190 putative sale, lease or insuring the residual value of Toyota’s tion hearing in connection with the claims related to from the SEC and a subpoena from the U.S. Attorney class actions in federal court as well as the federal vehicles and funds for safety-related research and those vehicles that were not recalled is scheduled in for the Southern District of New York seeking pro- product liability personal injury cases and warranty education programs. The settlement does not cover July 2013. duction of documents related to the recalls of the and lemon law cases were consolidated for pretrial product liability personal injury claims in the consoli- From February through March 2010, Toyota was steering relay rod. Toyota is cooperating with the proceedings into a single multi-district litigation in dated federal action or pending in various state sued in 6 putative shareholder class actions on U.S. Attorney’s Ofﬁ ce and SEC in their investigations, the United States District Court for the Central courts in the United States. behalf of investors in Toyota ADRs and common which are on-going. District of California. Approximately 10 putative In April 2013, Toyota announced that the court stock. The cases alleged violations of the Securities In June 2012, Toyota announced an amendment class actions and various product liability personal had approved an agreement to resolve the civil Exchange Act of 1934 and Japan’s Financial to the 2009 ﬂ oor mat entrapment safety campaign injury cases pending in state courts were subse- action ﬁ led by the Orange County District Attorney Instruments and Exchange Act and were consoli- to include model year 2010 RX350 and RX450h. quently consolidated into the federal action. The in California state court seeking, among other dated into a single action in the United States Toyota submitted additional documents related to remaining class actions lawsuits are pending in things, statutory penalties alleging that Toyota sold District Court for the Central District of California. this amendment pursuant to NHTSA’s request. In a consolidated state action in California. and marketed defective vehicles in violation of vari- The judge dismissed with prejudice the claims October 2012, Toyota ﬁ led an additional amend- In December 2012, Toyota and the plaintiffs ous California statutes. The amount of the settle- based on Japan’s Financial Instruments and Exchange ment to include model year 2008 through 2011 announced that they had reached an agreement to ment, which was not material to Toyota, was Act, and Toyota reached an agreement to resolve Land Cruiser. In December 2012, Toyota announced settle the economic loss claims in the consolidated included in the charge taken in ﬁ scal 2013. the claims asserted on behalf of purchasers of an agreement with NHTSA to resolve timeliness federal action. The court preliminarily approved the Beginning in February 2010, Toyota was sued in Toyota’s ADRs for an amount not material to Toyota. claims related to the model year 2010 RX350 and agreement and held the ﬁ nal approval hearing in approximately 20 putative class actions alleging The court approved the settlement in March 2013. RX450h safety campaign under which Toyota agreed June 2013. The court took the matter under defects in the antilock braking system in various to make a $17.4 million payment to the U.S. Treasury. ANNUAL REPORT 2013 Print Search Contents P a g e 111 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [34 of 44] Next Notes to Consolidated Financial Statements Toyota also received subpoenas and formal and the United States. For the same reasons discussed in January 2007. Currently, there are uncertainties related to covered vehicles in existence as of March informal requests from various states’ attorneys above relating to the recall-related legal proceed- surrounding the implementation of the applicable 31, 2013. Depending on the legislation that will be general, including the Executive Committee for ings, Toyota is unable to estimate a range of rea- regulations in different European Union member enacted subject to other circumstances, Toyota a group of 30 states’ plus one territory’s attorney sonably possible loss, if any, beyond the amounts states, particularly regarding manufacturer responsi- may be required to revise the accruals for the general, and certain local governmental agencies accrued, with respect to these claims. Based upon bilities and resultant expenses that may be incurred. expected costs. Although Toyota does not expect regarding various recalls, the facts underlying those information currently available to Toyota, however, In addition, under this directive member states its compliance with the directive to result in signiﬁ - recalls and customer handling related to those Toyota believes that its losses from these matters, if must take measures to ensure that car manufactur- cant cash expenditures, Toyota is continuing to assess recalls. In February 2013, Toyota and the attorneys any, would not have a material adverse effect on ers, distributors and other auto-related economic the impact of this future legislation on its ﬁ nancial posi- general resolved these investigations for an amount Toyota’s ﬁ nancial position, results of operations or operators establish adequate used vehicle collection tion, results of operations and cash ﬂ ows. not material to Toyota. Such amount was included cash ﬂ ows. and treatment facilities and to ensure that hazardous Toyota purchases materials that are equivalent to in the charge taken in ﬁ scal 2013. In connection materials and recyclable parts are removed from approximately 10% of material costs from a supplier with this settlement, Toyota also made commit- Environmental Matters and Others vehicles prior to shredding. This directive impacts which is an afﬁ liated company. ments to continue to conduct certain activities it is In October 2000, the European Union brought into Toyota’s vehicles sold in the European Union and The parent company has a concentration of labor already undertaking. effect a directive that requires member states to Toyota is introducing vehicles that are in compliance supply in employees working under collective bar- Beyond the amounts accrued for the recall- promulgate regulations implementing the following: with such measures taken by the member states gaining agreements and a substantial portion of related matters, Toyota is unable to estimate a range (i) manufacturers shall bear all or a signiﬁ cant part of pursuant to the directive. these employees are working under the agreement of reasonably possible loss, if any, for the other recall- the costs for taking back end-of-life vehicles put on Based on the legislation that has been enacted to that will expire on December 31, 2014. related matters because (i) many of the proceedings the market after July 1, 2002 and dismantling and date, Toyota has provided for its estimated liability are in evidence gathering stages, (ii) signiﬁ cant fac- recycling those vehicles. Beginning January 1, tual issues need to be resolved, (iii) the legal theory 2007, this requirement became applicable to vehi- or nature of the claims is unclear, (iv) the outcome of cles put on the market before July 1, 2002; (ii) man- future motions or appeals is unknown and/or (v) the ufacturers may not use certain hazardous materials 24. Segment data outcomes of other matters of these types vary in vehicles to be sold after July 2003; (iii) vehicles The operating segments reported below are the distributes sedans, minivans, compact cars, sport- widely and do not appear sufﬁ ciently similar to offer type-approved and put on the market after segments of Toyota for which separate ﬁ nancial utility vehicles, trucks and related parts and accesso- meaningful guidance. Although Toyota cannot esti- December 15, 2008, shall be re-usable and/or recy- information is available and for which operating ries. The Financial Services segment consists primarily mate a reasonable range of loss based on currently clable to a minimum of 85% by weight per vehicle income/loss amounts are evaluated regularly by of ﬁ nancing, and vehicle and equipment leasing available information, the resolution of these matters and shall be re-usable and/or recoverable to a mini- executive management in deciding how to allocate operations to assist in the merchandising of the parent could have an adverse effect on Toyota’s ﬁ nancial mum of 95% by weight per vehicle; and (iv) end-of- resources and in assessing performance. company and its afﬁ liated companies products as well position, results of operations or cash ﬂ ows. life vehicles must meet actual re-use of 80% and The major portions of Toyota’s operations on a as other products. The All Other segment includes re-use as material or energy of 85%, respectively, of worldwide basis are derived from the Automotive the design, manufacturing and sales of housing, tele- Other Proceedings vehicle weight by 2006, rising respectively to 85% and Financial Services business segments. The communications and other business. Toyota has various other legal actions, other gov- and 95% by 2015. A law to implement the directive Automotive segment designs, manufactures and ernmental proceedings and other claims pending came into effect in all member states including against it, including other product liability claims in Bulgaria, Romania that joined the European Union ANNUAL REPORT 2013 Print Search Contents P a g e 112 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [35 of 44] Next Notes to Consolidated Financial Statements The following tables present certain information regarding Toyota’s industry segments and operations by As of and for the year ended March 31, 2013: geographic areas and overseas revenues by destination as of and for the years ended March 31, 2011, 2012 and 2013. Segment operating results and assets As of and for the year ended March 31, 2011: Yen in millions Automotive Financial Services All Other Inter-segment Elimination/ Unallocated Amount Consolidated Net revenues Sales to external customers Inter-segment sales and transfers Total Operating expenses Operating income Assets Investment in equity method investees Depreciation expenses Capital expenditure 474,485 972,252 937,010 19,037 1,192,205 833,925 14,567 17,337,320 17,251,347 ¥17,322,753 ¥ 1,173,168 ¥ 497,767 ¥ — ¥18,993,688 — (508,089) 18,993,688 (508,089) 18,525,409 (496,873) ¥ 85,973 ¥ 358,280 ¥ 35,242 ¥ (11,216) ¥ 468,279 ¥11,341,558 ¥13,365,394 ¥1,146,720 ¥3,964,494 ¥29,818,166 1,817,988 — 1,175,573 1,691,191 1,784,539 819,075 691,867 3,519 330,865 991,330 3,045 25,633 21,058 (13,064) 26,885 As of and for the year ended March 31, 2012: Yen in millions Automotive Financial Services All Other Inter-segment Elimination/ Unallocated Amount Consolidated Net revenues Sales to external customers Inter-segment sales and transfers Total Operating expenses Operating income Assets Investment in equity method investees Depreciation expenses Capital expenditure 501,377 1,048,915 1,006,853 28,587 1,100,324 793,886 30,168 16,994,546 16,972,863 ¥16,964,378 ¥ 1,071,737 ¥ 547,538 ¥ — ¥18,583,653 — (560,132) 18,583,653 (560,132) 18,228,026 (545,576) ¥ 21,683 ¥ 306,438 ¥ 42,062 ¥ (14,556) ¥ 355,627 ¥12,261,814 ¥13,172,548 ¥1,161,224 ¥4,055,379 ¥30,650,965 1,914,129 — 1,067,830 1,532,082 1,877,720 744,067 796,839 3,887 298,757 683,161 4,765 25,006 35,340 16,742 27,757 Yen in millions Automotive Financial Services All Other Inter-segment Elimination/ Unallocated Amount Consolidated Net revenues Sales to external customers Inter-segment sales and transfers Total Operating expenses Operating income Assets Investment in equity method investees Depreciation expenses Capital expenditure 20,628 1,170,670 854,850 40,338 20,419,100 19,474,396 ¥20,378,762 ¥ 1,150,042 ¥ 535,388 ¥ — ¥22,064,192 — 531,073 22,064,192 1,066,461 20,743,304 1,012,845 ¥ 944,704 ¥ 315,820 ¥ 53,616 ¥ 6,748 ¥ 1,320,888 ¥13,179,741 ¥16,231,473 ¥1,310,115 ¥4,761,988 ¥35,483,317 2,102,584 — 1,105,109 1,974,152 2,033,040 745,880 937,695 4,925 336,528 1,005,326 (592,039) (592,039) (598,787) 6,968 22,701 29,286 57,651 1,845 U.S. dollars in millions Net revenues Sales to external customers Inter-segment sales and transfers Total Operating expenses Operating income Assets Investment in equity method investees Depreciation expenses Capital expenditure Automotive $216,680 429 217,109 207,064 $ 10,045 $140,135 21,617 7,931 9,970 Financial Services $ 12,228 219 12,447 9,089 $ 3,358 $172,583 52 3,578 10,689 All Other $ 5,693 5,646 11,339 10,769 $ 570 $13,930 74 241 311 Inter-segment Elimination/ Unallocated Amount $ — (6,294) (6,294) (6,366) $ 72 $50,633 613 — 20 Consolidated $234,601 — 234,601 220,556 $ 14,045 $377,281 22,356 11,750 20,990 ANNUAL REPORT 2013 Print Search Contents P a g e 113 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [36 of 44] Next Notes to Consolidated Financial Statements Geographic Information As of and for the year ended March 31, 2011: As of and for the year ended March 31, 2013: Yen in millions Japan North America Europe Asia Other Inter-segment Elimination/ Unallocated Amount Consolidated Net revenues Net revenues Sales to external customers Inter-segment sales and transfers Total Operating expenses Operating income (loss) Assets Long-lived assets 101,327 5,429,136 5,089,633 4,019,317 10,986,246 11,348,642 ¥ 6,966,929 ¥5,327,809 ¥1,920,416 ¥3,138,112 ¥1,640,422 ¥ — ¥18,993,688 — 236,422 18,993,688 3,374,534 18,525,409 3,061,557 ¥ (362,396) ¥ 339,503 ¥ 13,148 ¥ 312,977 ¥ 160,129 ¥ 4,918 ¥ 468,279 ¥11,285,864 ¥9,910,828 ¥1,931,231 ¥2,138,499 ¥2,044,379 ¥2,507,365 ¥29,818,166 — 6,309,160 (4,586,841) (4,586,841) (4,591,759) 168,694 1,809,116 1,648,987 61,081 1,981,497 1,968,349 2,276,332 3,123,042 259,855 344,304 305,627 Sales to external customers Inter-segment sales and transfers Total Operating expenses Operating income Assets Long-lived assets As of and for the year ended March 31, 2012: 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 Net revenues Sales to external customers Inter-segment sales and transfers Total Operating expenses Operating income (loss) Assets Long-lived assets 107,538 4,751,886 4,565,477 3,873,515 11,167,319 11,374,359 ¥ 7,293,804 ¥4,644,348 ¥1,917,408 ¥3,116,849 ¥1,611,244 ¥ — ¥18,583,653 — 217,425 18,583,653 3,334,274 18,228,026 3,077,484 ¥ (207,040) ¥ 186,409 ¥ 17,796 ¥ 256,790 ¥ 108,814 ¥ (7,142) ¥ 355,627 ¥12,034,423 ¥9,693,232 ¥1,960,532 ¥2,433,312 ¥2,175,493 ¥2,353,973 ¥30,650,965 — 6,235,380 (4,423,947) (4,423,947) (4,416,805) 148,931 1,760,175 1,651,361 76,538 1,993,946 1,976,150 2,197,197 2,981,985 412,959 380,169 263,070 Total Operating expenses Operating income Assets Long-lived assets Yen in millions Japan North America Europe Asia Other Inter-segment Elimination/ Unallocated Amount Consolidated 116,604 6,284,425 6,062,500 4,910,562 12,821,018 12,244,683 ¥ 7,910,456 ¥ 6,167,821 ¥2,003,113 ¥4,058,629 ¥1,924,173 ¥ — ¥22,064,192 — 326,847 22,064,192 4,385,476 20,743,304 4,009,421 ¥ 576,335 ¥ 221,925 ¥ 26,462 ¥ 376,055 ¥ 133,744 ¥ (13,633) ¥ 1,320,888 ¥12,296,731 ¥11,841,471 ¥2,199,256 ¥3,305,319 ¥2,616,164 ¥3,224,376 ¥35,483,317 — 6,851,239 (5,604,105) (5,604,105) (5,590,472) 170,092 2,094,265 1,960,521 80,000 2,083,113 2,056,651 2,633,067 2,929,346 410,517 590,021 288,288 U.S. dollars in millions Japan North America Europe Asia Other Inter-segment Elimination/ Unallocated Amount $ 84,109 52,212 136,321 130,193 $ 6,128 $130,747 31,147 $ 65,580 1,240 66,820 64,460 $ 2,360 $125,906 27,996 $21,299 850 22,149 21,868 $ 281 $23,384 3,065 $43,154 3,475 46,629 42,630 $ 3,999 $35,144 6,274 $20,459 1,809 22,268 20,846 $ 1,422 $27,817 4,365 $ — (59,586) (59,586) (59,441) $ (145) $34,283 — Consolidated $234,601 — 234,601 220,556 $ 14,045 $377,281 72,847 “Other” consists of Central and South America, Oceania and Africa. Revenues are attributed to geographies based on marketable securities. Such corporate assets were the country location of the parent company or ¥4,613,672 million, ¥4,749,259 million and the˛subsidiary that transacted the sale with the ¥5,599,970 million ($59,542 million), as of March external customer. 31, 2011, 2012 and 2013, respectively. There are no any individually material countries Transfers between industries or geographic with respect to revenues, and long-lived assets segments are made at amounts which Toyota’s included in other foreign countries. management believes approximate arm’s-length Unallocated amounts included in assets represent transactions. In measuring the reportable segments’ assets held for corporate purposes, which mainly income or losses, operating income consists of rev- consist of cash and cash equivalents and enue less operating expenses. ANNUAL REPORT 2013 Print Search Contents P a g e 114 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [37 of 44] Next Notes to Consolidated Financial Statements Overseas Revenues by destination Balance sheets The following information shows revenues that are the disclosure requirements under U.S. GAAP, attributed to countries based on location of custom- Toyota discloses this information in order to provide ers, excluding customers in Japan. In addition to ﬁ nancial statements users with valuable information. North America Europe Asia Other Yen in millions 2011 ¥5,398,278 1,793,932 3,280,384 3,196,114 For the years ended March 31, 2012 ¥4,715,804 1,817,944 3,284,392 3,103,383 2013 ¥6,790,453 1,901,118 3,940,175 3,929,775 U.S. dollars in millions For the year ended March 31, 2013 $72,200 20,214 41,894 41,784 “Other” consists of Central and South America, Oceania, Africa and the Middle East, etc. 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 Certain ﬁ nancial statements data on non-ﬁ nancial services and ﬁ nancial services businesses Total Non-Financial Services Businesses assets The ﬁ nancial data below presents separately Toyota’s non-ﬁ nancial services and ﬁ nancial services businesses. Financial Services Businesses Current assets Cash and cash equivalents Marketable securities Finance receivables, net Prepaid expenses and other current assets Total current assets Noncurrent ﬁ nance receivables, net Investments and other assets Property, plant and equipment Total Financial Services Businesses assets Eliminations Total assets Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 ¥ 1,104,636 1,015,626 ¥ 1,107,409 1,204,447 $ 11,775 12,806 2,031,472 1,622,154 1,464,124 7,238,012 6,218,377 4,510,716 17,967,105 2,033,831 1,715,634 1,597,514 7,658,835 7,462,767 4,741,357 19,862,959 574,564 165,444 4,114,897 685,611 5,540,516 5,602,462 304,906 1,724,664 13,172,548 (488,688) ¥30,650,965 610,888 241,216 5,117,660 693,036 6,662,800 6,943,766 515,025 2,109,882 16,231,473 (611,115) ¥35,483,317 21,625 18,242 16,986 81,434 79,349 50,413 211,196 6,495 2,565 54,414 7,369 70,843 73,830 5,476 22,434 172,583 (6,498) $377,281 * Assets in the non-ﬁ nancial services include unallocated corporate assets. ANNUAL REPORT 2013 Print Search Contents P a g e 115 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [38 of 44] Next Notes to Consolidated Financial Statements Yen in millions March 31, 2012 2013 U.S. dollars in millions March 31, 2013 Statements of income Non-Financial Services Businesses Current liabilities Short-term borrowings Current portion of long-term debt Accounts payable Accrued expenses Income taxes payable Other current liabilities Total current liabilities Long-term liabilities Long-term debt Accrued pension and severance costs Other long-term liabilities Total long-term liabilities Total Non-Financial Services Businesses liabilities Financial Services Businesses Current liabilities Short-term borrowings Current portion of long-term debt Accounts payable Accrued expenses Income taxes payable Other current liabilities Total current liabilities ¥ 715,019 339,441 2,234,316 1,737,490 123,344 1,175,801 6,325,411 ¥ 576,685 185,582 2,092,722 2,092,102 140,935 1,186,870 6,274,896 503,070 700,211 531,982 1,735,263 8,060,674 3,040,373 2,218,526 27,095 96,247 10,434 536,291 5,928,966 521,428 754,360 969,668 2,245,456 8,520,352 3,861,699 2,538,249 37,655 105,901 15,331 632,025 7,190,860 Long-term liabilities Long-term debt Accrued pension and severance costs Other long-term liabilities Total long-term liabilities Total Financial Services Businesses liabilities Eliminations Total liabilities Total Toyota Motor Corporation shareholders’ equity Noncontrolling interests Total shareholders’ equity Total liabilities and shareholders’ equity 5,555,112 8,191 520,252 6,083,555 12,012,521 (488,708) 19,584,487 10,550,261 516,217 11,066,478 ¥30,650,965 6,876,849 11,752 724,337 7,612,938 14,803,798 (613,689) 22,710,461 12,148,035 624,821 12,772,856 ¥35,483,317 $ 6,132 1,973 22,251 22,245 1,499 12,619 66,719 5,544 8,021 10,310 23,875 90,594 41,060 26,988 400 1,126 163 6,720 76,457 73,119 125 7,702 80,946 157,403 (6,525) 241,472 129,166 6,643 135,809 $377,281 Non-Financial Services Businesses Net revenues Costs and expenses Cost of revenues Selling, general and administrative Total costs and expenses Operating income Other income (expense), net Income before income taxes and equity in earnings of afﬁ liated companies Provision for income taxes Equity in earnings of afﬁ liated companies Net income Less: Net income attributable to noncontrolling interests Net income 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 Other income (expense), net Income before income taxes and equity in earnings of afﬁ liated companies Provision for income taxes Equity in earnings of afﬁ liated companies Net income Less: Net income attributable to noncontrolling interests Net income attributable to Toyota Motor Corporation—Financial Services Businesses Eliminations Net income attributable to Toyota Motor Corporation Yen in millions For the years ended March 31, 2012 2011 2013 U.S. dollars in millions For the year ended March 31, 2013 ¥17,826,986 ¥17,534,872 ¥20,943,634 $222,686 15,986,741 1,723,071 17,709,812 117,174 88,840 15,796,635 1,676,999 17,473,634 61,238 69,935 206,014 178,795 214,229 241,448 131,173 141,558 196,544 186,159 18,034,256 1,899,997 19,934,253 1,009,381 79,837 1,089,218 436,223 230,078 883,073 191,752 20,202 211,954 10,732 849 11,581 4,638 2,446 9,389 (54,055) (82,181) (119,359) (1,269) 187,393 103,978 763,714 8,120 1,192,205 1,100,324 1,170,670 12,447 636,374 197,551 833,925 358,280 1,349 359,629 134,094 787 226,322 615,563 178,323 793,886 306,438 (4,679) 301,759 120,725 1,157 182,191 633,306 221,544 854,850 315,820 (970) 314,850 116,033 1,441 200,258 6,734 2,355 9,089 3,358 (10) 3,348 1,234 15 2,129 (3,251) (2,566) (1,961) (21) 223,071 (2,281) 179,625 (44) 198,297 152 2,108 2 ¥ 408,183 ¥ 283,559 ¥ 962,163 $ 10,230 ANNUAL REPORT 2013 Print Search Contents P a g e 116 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [39 of 44] Next Notes to Consolidated Financial Statements Statements of cash ﬂ ows Cash ﬂ ows 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 ﬁ xed assets Unrealized losses on available-for-sale securities, net Deferred income taxes Equity in earnings of afﬁ liated companies Changes in operating assets and liabilities, and other Net cash provided by operating activities Cash ﬂ ows from investing activities Additions to ﬁ nance receivables Collection of and proceeds from sales of ﬁ nance receivables Additions to ﬁ xed assets excluding equipment leased to others Additions to equipment leased to others Proceeds from sales of ﬁ xed assets excluding equipment leased to others Proceeds from sales of equipment leased to others Purchases of marketable securities and security investments Proceeds from sales of and maturity of marketable securities and security investments Payment for additional investments in afﬁ liated companies, net of cash acquired Changes in investments and other assets, and other Net cash used in investing activities Cash ﬂ ows from ﬁ nancing activities 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) ﬁ nancing 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 Non-Financial Services Businesses Yen in millions For the year ended March 31, 2011 Financial Services Businesses Consolidated Non-Financial Services Businesses Yen in millions For the year ended March 31, 2012 Financial Services Businesses Consolidated ¥ 241,448 ¥ 226,322 ¥ 465,485 ¥ 186,159 ¥ 182,191 ¥ 368,302 844,708 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) 3,423,618 (299) 394,479 (877,120) 15,318 (309,862) (86,884) (141,120) (28,617) (551,165) (76,960) (38,268) 1,338,821 ¥1,300,553 330,865 2,334 1,453 138 — 103,035 (787) (106,416) 556,944 (14,323,261) 13,887,751 (8,024) (983,306) 600 468,995 (358,308) 292,538 — 18,303 (1,004,712) 2,934,588 (2,306,139) 122,619 — — 751,068 (50,069) 253,231 526,925 ¥ 780,156 1,175,573 4,140 (23,414) 36,214 7,915 85,710 (215,016) 487,402 2,024,009 (8,438,785) 8,003,940 (629,326) (1,061,865) 51,342 486,695 (4,421,807) 3,716,156 (299) 177,605 (2,116,344) 2,931,436 (2,489,632) 162,260 (141,120) (28,617) 434,327 (127,029) 214,963 1,865,746 ¥2,080,709 769,073 5,843 15,410 33,448 53,831 (82,792) (196,544) 182,931 967,359 — — (713,867) (135,054) 36,203 20,689 (2,565,772) 2,227,812 (147) 213,957 (916,179) 39,803 (294,646) 238,072 (156,785) (37,448) (211,004) (36,093) (195,917) 1,300,553 ¥1,104,636 298,757 3,780 1,301 80 — 89,199 (1,157) (73,020) 501,131 (13,455,792) 13,168,058 (9,670) (673,491) 430 410,624 (607,862) 629,013 — (12,206) (550,896) 2,379,152 (2,608,135) 93,002 — — (135,981) (19,846) (205,592) 780,156 ¥ 574,564 1,067,830 9,623 16,711 33,528 53,831 6,395 (197,701) 93,916 1,452,435 (8,333,248) 8,061,710 (723,537) (808,545) 36,633 431,313 (3,173,634) 2,856,825 (147) 209,972 (1,442,658) 2,394,807 (2,867,572) 311,651 (156,785) (37,448) (355,347) (55,939) (401,509) 2,080,709 ¥1,679,200 ANNUAL REPORT 2013 Print Search Contents P a g e 117 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [40 of 44] Next Notes to Consolidated Financial Statements Cash ﬂ ows 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 ﬁ xed assets Unrealized losses on available-for-sale securities, net Deferred income taxes Equity in earnings of afﬁ liated companies Changes in operating assets and liabilities, and other Net cash provided by operating activities Cash ﬂ ows from investing activities Additions to ﬁ nance receivables Collection of and proceeds from sales of ﬁ nance receivables Additions to ﬁ xed assets excluding equipment leased to others Additions to equipment leased to others Proceeds from sales of ﬁ xed assets excluding equipment leased to others Proceeds from sales of equipment leased to others Purchases of marketable securities and security investments Proceeds from sales of and maturity of marketable securities and security investments Payment for additional investments in afﬁ liated companies, net of cash acquired Changes in investments and other assets, and other Net cash used in investing activities Cash ﬂ ows from ﬁ nancing activities 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 (used in) ﬁ nancing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Yen in millions For the year ended March 31, 2013 Financial Services Businesses Non-Financial Services Businesses Consolidated U.S. dollars in millions For the year ended March 31, 2013 Financial Services Businesses Non-Financial Services Businesses Consolidated ¥ 883,073 ¥ 200,258 ¥ 1,083,482 $ 9,389 $ 2,129 $ 11,520 768,581 1,745 (23,514) 32,005 2,104 89,834 (230,078) 472,514 1,996,264 — — (839,756) (129,070) 38,051 68,571 (2,980,821) 2,285,566 16,216 17,206 (1,524,037) 182,114 (328,380) (162,782) (190,008) (43,098) (542,154) 72,700 2,773 1,104,636 ¥1,107,409 336,528 25,622 3,085 216 — 70,743 (1,441) 32,066 667,077 (16,877,678) 15,784,681 (14,805) (990,521) 1,140 464,870 (431,602) 383,525 — (77,848) (1,758,238) 3,089,484 (2,415,566) 388,416 — — 1,062,334 65,151 36,324 574,564 ¥ 610,888 1,105,109 27,367 (20,429) 32,221 2,104 160,008 (231,519) 292,973 2,451,316 (10,004,928) 9,102,856 (854,561) (1,119,591) 39,191 533,441 (3,412,423) 2,669,091 16,216 3,396 (3,027,312) 3,191,223 (2,682,136) 201,261 (190,008) (43,098) 477,242 137,851 39,097 1,679,200 ¥ 1,718,297 8,172 19 (250) 341 22 955 (2,446) 5,024 21,226 — — (8,929) (1,372) 405 729 (31,694) 24,301 172 183 (16,205) 1,937 (3,492) (1,731) (2,020) (458) (5,764) 773 30 11,745 $11,775 3,578 272 33 2 — 753 (15) 341 7,093 (179,454) 167,832 (157) (10,532) 12 4,943 (4,589) 4,078 — (828) (18,695) 32,849 (25,684) 4,130 — — 11,295 693 386 6,109 $ 6,495 11,750 291 (217) 343 22 1,701 (2,461) 3,115 26,064 (106,379) 96,788 (9,086) (11,904) 417 5,672 (36,283) 28,379 172 36 (32,188) 33,931 (28,518) 2,139 (2,020) (458) 5,074 1,466 416 17,854 $ 18,270 ANNUAL REPORT 2013 Print Search Contents P a g e 118 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [41 of 44] Next Notes to Consolidated Financial Statements 25. Per share amounts Reconciliations of the differences between basic and diluted net income attributable to Toyota Motor Corporation per share for the years ended March 31, 2011, 2012 and 2013 are as follows: Yen in millions Thousands of shares Net income attributable to Toyota Motor Corporation Weighted- average shares Yen Net income attributable to Toyota Motor Corporation per share U.S. dollars in millions Net income attributable to Toyota Motor Corporation U.S. dollars Net income attributable to Toyota Motor Corporation per share The following table shows Toyota Motor Corporation shareholders’ equity per share as of March 31, 2012 and 2013. 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 Toyota Motor Corporation Shareholders’ equity ¥10,550,261 12,148,035 Thousands of shares Shares issued and outstanding at the end of the year (excluding treasury stock) 3,166,810 3,167,429 Yen Toyota Motor Corporation Shareholders’ equity per share ¥3,331.51 3,835.30 U.S. dollars in millions Toyota Motor Corporation Shareholders’ equity U.S. dollars Toyota Motor Corporation Shareholders’ equity per share $129,166 $40.78 For the year ended March 31, 2011 Basic net income attributable to Toyota Motor Corporation per common share Effect of dilutive securities ¥408,183 3,135,881 ¥130.17 As of March 31, 2012 As of March 31, 2013 Assumed exercise of dilutive stock options (0) 34 Diluted net income attributable to Toyota Motor Corporation per common share For the year ended March 31, 2012 Basic net income attributable to Toyota Motor Corporation per common share Effect of dilutive securities ¥408,183 3,135,915 ¥130.16 26. Fair value measurements ¥283,559 3,143,470 ¥ 90.21 to measure it. Level 1: Quoted prices in active markets for identical assets or liabilities In accordance with U.S. GAAP, Toyota classiﬁ es fair value into three levels of input as follows which are used Assumed exercise of dilutive stock options (3) 0 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 observ- able for the assets or liabilities Level 3: Unobservable inputs for assets or liabilities Diluted net income attributable to Toyota Motor Corporation per common share For the year ended March 31, 2013 Basic net income attributable to Toyota Motor Corporation per common share Effect of dilutive securities ¥283,556 3,143,470 ¥ 90.20 ¥962,163 3,166,909 ¥303.82 $10,230 $3.23 Assumed exercise of dilutive stock options (32) 246 (0) Diluted net income attributable to Toyota Motor Corporation per common share ¥962,131 3,167,155 ¥303.78 $10,230 $3.23 Stock options that were not included in the com- exercise prices were greater than the average putation of diluted net income attributable to Toyota market price per common share during the period. Motor Corporation per share for the years ended In addition to the disclosure requirements under March 31, 2011, 2012 and 2013 were 12,403 thou- U.S. GAAP, Toyota discloses the information below sand shares, 12,530 thousand shares and 8,682 in order to provide ﬁ nancial statements users with thousand shares, respectively, because the options’ valuable information. ANNUAL REPORT 2013 Print Search Contents P a g e 119 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [42 of 44] Next Assets: Cash equivalents Time deposits Marketable securities and other securities investments Public and corporate bonds Common stocks Other Derivative ﬁ nancial instruments Total Liabilities: Derivative ﬁ nancial instruments Total U.S. dollars in millions March 31, 2013 Level 1 Level 2 Level 3 Total $ 2,608 — $ 3,997 612 $ — — $ 6,605 612 39,909 14,898 529 — $57,944 $ — $ — 8,430 — 5,518 2,315 $20,872 $ (2,088) $ (2,088) 73 — — 75 $148 $ (21) $ (21) 48,412 14,898 6,047 2,390 $78,964 $ (2,109) $ (2,109) Notes to Consolidated Financial Statements The following table summarizes the fair values of the assets and liabilities measured at fair value on a recur- ring basis at March 31, 2012 and 2013. Transfers between levels of the fair value are recognized at the end of their respective reporting periods: Assets: Cash equivalents Time deposits Marketable securities and other securities investments Public and corporate bonds Common stocks Other Derivative ﬁ nancial instruments Total Liabilities: Derivative ﬁ nancial instruments Total Assets: Cash equivalents Time deposits Marketable securities and other securities investments Public and corporate bonds Common stocks Other Derivative ﬁ nancial instruments Total Liabilities: Derivative ﬁ nancial instruments Total Yen in millions March 31, 2012 Level 1 Level 2 Level 3 Total ¥ 485,119 — ¥ 223,385 50,000 ¥ — — ¥ 708,504 50,000 3,389,882 1,034,319 40,619 — ¥4,949,939 237,934 — 428,737 289,931 ¥1,229,987 1,684 — — 7,565 ¥ 9,249 3,629,500 1,034,319 469,356 297,496 ¥6,189,175 ¥ — ¥ (180,347) ¥ — ¥ (180,347) ¥(2,826) ¥(2,826) ¥ (183,173) ¥ (183,173) Yen in millions March 31, 2013 Level 1 Level 2 Level 3 Total ¥ 245,264 — ¥ 375,941 57,572 ¥ — — ¥ 621,205 57,572 3,753,451 1,401,183 49,731 — ¥5,449,629 792,806 — 518,955 217,745 ¥1,963,019 6,889 — — 7,083 ¥13,972 4,553,146 1,401,183 568,686 224,828 ¥7,426,620 ¥ — ¥ (196,386) ¥ — ¥ (196,386) ¥ (1,956) ¥ (1,956) ¥ (198,342) ¥ (198,342) ANNUAL REPORT 2013 Print Search Contents P a g e 120 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [43 of 44] Next Notes to Consolidated Financial Statements The following is description of the assets and lia- respectively. Toyota uses primarily quoted market The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on bilities measured at fair value, information about the prices for identical assets to measure fair value of a recurring basis for the periods ended March 31, 2011, 2012 and 2013: valuation techniques used to measure fair value, key these securities. “Other” includes primarily invest- inputs and signiﬁ cant assumption: ment trusts. Generally, Toyota uses quoted market Cash equivalents and time deposits ket prices for identical assets to measure fair value Cash equivalents include money market funds and of these securities. These assets are classiﬁ ed in prices for similar assets or quoted non-active mar- other investments with original maturities of three Level 2. months or less. Cash equivalents classiﬁ ed in Level 2 include primarily negotiable certiﬁ cate of deposit Derivative ﬁ nancial instruments with original maturities of three months or less. See note 20 to the consolidated ﬁ nancial state- These are measured at fair value using observable ments about derivative ﬁ nancial instruments. Toyota interest rates in the market. Time deposits include estimates the fair value of derivative ﬁ nancial instru- negotiable certiﬁ cate of deposit with original maturi- ments using industry-standard valuation models ties over three months. These are measured at fair that require observable inputs including interest value using observable interest rates in the market. rates and foreign exchange rates, and the contrac- tual terms. The usage of these models does not Marketable securities and require signiﬁ cant judgment to be applied. These other securities investments derivative ﬁ nancial instruments are classiﬁ ed in Level Marketable securities and other securities invest- 2. In other certain cases when market data is not ments include public and corporate bonds, com- available, key inputs to the fair value measurement mon stocks and other investments. Public and include quotes from counterparties, and other mar- corporate bonds include primarily government ket data. Toyota assesses the reasonableness of bonds and represent 60% of Japanese bonds, and changes of the quotes using observable market 40% of U.S., European and other bonds as of data. These derivative ﬁ nancial instruments are clas- March 31, 2012, and 49% of Japanese bonds, and siﬁ ed in Level 3. Toyota’s derivative fair value mea- 51% of U.S., European and other bonds as of surements consider assumptions about March 31, 2013. Listed stocks on the Japanese counterparty and our own non-performance risk, stock markets represent 83% and 85% of common using such as credit default probabilities. stocks as of March 31, 2012 and 2013, 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 and issuances Settlements Other Balance at end of year Yen in millions For the year ended March 31, 2011 Marketable securities and other securities investments ¥13,134 433 779 (810) (13,536) ¥ — Derivative ﬁ nancial instruments ¥ 5,892 31,338 — (8,381) (22,055) ¥ 6,794 Total ¥19,026 31,771 779 (9,191) (35,591) ¥ 6,794 Yen in millions For the year ended March 31, 2012 Marketable securities and other securities investments ¥ — Derivative ﬁ nancial instruments ¥6,794 — — — — 1,684 ¥1,684 6,476 — — (3,832) (4,699) ¥4,739 Total ¥6,794 6,476 — — (3,832) (3,015) ¥6,423 ANNUAL REPORT 2013 Print Search Contents P a g e 121 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements [44 of 44] Next Notes to Consolidated Financial Statements Yen in millions For the year ended March 31, 2013 “Included in earnings” in marketable securities and includes the currency translation adjustments and other securities investments and derivative for the year ended March 31, 2013. Balance at beginning of year Total gains (losses) Included in earnings Included in other comprehensive income (loss) Purchases and issuances 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 and issuances Settlements Other Balance at end of year Marketable securities and other securities investments ¥1,684 24 58 3,607 (1,563) 3,079 ¥6,889 Derivative ﬁ nancial instruments ¥4,739 2,118 — — (2,343) 613 ¥5,127 Total ¥ 6,423 2,142 58 3,607 (3,906) 3,692 ¥12,016 U.S. dollars in millions For the year ended March 31, 2013 Marketable securities and other securities investments $18 Derivative ﬁ nancial instruments $50 0 1 38 (16) 32 $73 22 — — (25) 7 $54 Total $ 68 22 1 38 (41) 39 $127 ﬁ nancial instruments are included in “Other income As of March 31, 2013, the Level 3 assets and lia- (loss), net” and “Cost of ﬁ nancing operations” in bilities measured at fair value on a recurring basis the accompanying consolidated statements of are not signiﬁ cant. income, respectively. Certain assets and liabilities are measured at fair In the reconciliation table above, derivative ﬁ nan- value on a nonrecurring basis. During the years cial instruments are presented net of assets and lia- ended March 31, 2012 and 2013, Toyota measured bilities. The other amount includes consolidated certain ﬁ nance receivables at fair value of ¥32,056 retained interests in securitized ﬁ nancial receivables million and ¥32,974 million ($351 million) based on of ¥(13,165) million, certain derivative ﬁ nancial the collateral value, resulting in gains of ¥1,736 mil- instruments transferred into Level 2 due to be mea- lion and ¥978 million ($10 million). This fair value sured at observable inputs of ¥(21,413) million and measurement on a nonrecurring basis is classiﬁ ed in the impact of currency translation adjustments for Level 3. See note 21 to the consolidated ﬁ nancial the year ended March 31, 2011, and includes the statements for the fair value measurement. These impacts of level transfers and currency translation Level 3 ﬁ nancial assets are not signiﬁ cant. adjustments for the year ended March 31, 2012, ANNUAL REPORT 2013 Print Search Contents P a g e 122 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements Next Management’s Annual Report on Internal Control over Financial Reporting 　Toyota’s management is responsible for Because of its inherent limitations, internal control establishing and maintaining effective internal over ﬁ nancial reporting may not prevent or detect control over ﬁ nancial reporting. Internal control over misstatements. Also, projections of any evaluation ﬁ nancial reporting is a process designed to provide of effectiveness to future periods are subject to the reasonable assurance regarding the reliability of risk that controls may become inadequate because ﬁ nancial reporting and the preparation of ﬁ nancial of changes in conditions, or that the degree of statements for external purposes in accordance compliance with the policies or procedures may with U.S. GAAP. Toyota’s internal control over deteriorate. ﬁ nancial reporting includes those policies and Toyota’s management conducted an evaluation of procedures that: the effectiveness of internal control over ﬁ nancial 1) pertain to the maintenance of records that in reporting based on the framework in “Internal reasonable detail, accurately and fairly reﬂ ect the Control — Integrated Framework (1992)” issued by transactions and dispositions of Toyota’s assets; the Committee of Sponsoring Organizations of the 2) provide reasonable assurance that transactions Treadway Commission. are recorded as necessary to permit preparation Based on this evaluation, management concluded of ﬁ nancial statements in accordance with U.S. that Toyota’s internal control over ﬁ nancial reporting GAAP, and that Toyota’s receipts and expenditures was effective as of March 31, 2013. are being made only in accordance with PricewaterhouseCoopers Aarata, an independent authorizations of Toyota’s management and registered public accounting ﬁ rm that audited the directors; and consolidated ﬁ nancial statements included in this 3) provide reasonable assurance regarding report, has also audited the effectiveness of Toyota’s prevention or timely detection of unauthorized internal control over ﬁ nancial reporting as of March acquisition, use, or disposition of Toyota’s assets 31, 2013, as stated in its report included herein. that could have a material effect on the ﬁ nancial statements. ANNUAL REPORT 2013 Print Search Contents P a g e 123 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Selected Financial Summary (U.S. GAAP) Management’s Annual Report on Internal Control over Financial Reporting Consolidated Segment Information Consolidated Quarterly Financial Summary Report of Independent Registered Public Accounting Firm Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated Financial Statements Notes to Consolidated Financial Statements Next 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 responsibility is to express opinions on these included performing such other procedures as we acquisition, use, or disposition of the company’s balance sheets and the related consolidated ﬁ nancial statements and on the Company's internal considered necessary in the circumstances. We assets that could have a material effect on the statements of income, comprehensive income, control over ﬁ nancial reporting based on our believe that our audits provide a reasonable basis ﬁ nancial statements. shareholders’ equity and cash ﬂ ows present fairly, in integrated audits. We conducted our audits in for our opinions. Because of its inherent limitations, internal control all material respects, the ﬁ nancial position of Toyota accordance with the standards of the Public A company’s internal control over ﬁ nancial over ﬁ nancial reporting may not prevent or detect Motor Corporation and its subsidiaries at March 31, Company Accounting Oversight Board (United reporting is a process designed to provide misstatements. Also, projections of any evaluation 2012 and 2013, and the results of their operations States). Those standards require that we plan and reasonable assurance regarding the reliability of of effectiveness to future periods are subject to the and their cash ﬂ ows for each of the three years in perform the audits to obtain reasonable assurance ﬁ nancial reporting and the preparation of ﬁ nancial risk that controls may become inadequate because the period ended March 31, 2013 in conformity with about whether the ﬁ nancial statements are free of statements for external purposes in accordance of changes in conditions, or that the degree of accounting principles generally accepted in the material misstatement and whether effective internal with generally accepted accounting principles. A compliance with the policies or procedures may United States of America. Also in our opinion, the control over ﬁ nancial reporting was maintained in all company’s internal control over ﬁ nancial reporting deteriorate. Company maintained, in all material respects, material respects. Our audits of the ﬁ nancial includes those policies and procedures that (i) effective internal control over ﬁ nancial reporting as statements included examining, on a test basis, pertain to the maintenance of records that, in of March 31, 2013, based on criteria established in evidence supporting the amounts and disclosures in reasonable detail, accurately and fairly reﬂ ect the Internal Control - Integrated Framework (1992) the ﬁ nancial statements, assessing the accounting transactions and dispositions of the assets of the issued by the Committee of Sponsoring principles used and signiﬁ cant estimates made by company; (ii) provide reasonable assurance that Organizations of the Treadway Commission management, and evaluating the overall ﬁ nancial transactions are recorded as necessary to permit (COSO). The Company's management is statement presentation. Our audit of internal control preparation of ﬁ nancial statements in accordance responsible for these ﬁ nancial statements, for over ﬁ nancial reporting included obtaining an with generally accepted accounting principles, and maintaining effective internal control over ﬁ nancial understanding of internal control over ﬁ nancial that receipts and expenditures of the company are reporting and for its assessment of the effectiveness reporting, assessing the risk that a material being made only in accordance with authorizations of internal control over ﬁ nancial reporting, included weakness exists, and testing and evaluating the of management and directors of the company; and in the accompanying Management's Annual Report design and operating effectiveness of internal (iii) provide reasonable assurance regarding on Internal Control Over Financial Reporting. Our control based on the assessed risk. Our audits also prevention or timely detection of unauthorized Nagoya, Japan June 24, 2013 ANNUAL REPORT 2013 Print Search Contents P a g e 124 Toyota Global Vision President’s Message Launching a New Structure Special Feature Consolidated Performance Highlights Review of Operations Management and Corporate Information Financial Section Investor Information Prev Next Investor Information (As of March 31, 2013) Corporate Data Company Name: Toyota Motor Corporation Established: August 28, 1937 Common Stock: ¥397,049 million Fiscal Year-End: March 31 Public Accounting Firm: PricewaterhouseCoopers Aarata Number of Afﬁ liates: [Consolidated Subsidiaries] 509 [Afﬁ liates Accounted for by the Equity Method] 56 Number of Employees: 68,978 (Consolidated: 333,498) 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: 280,568,824 shares Number of Shareholders: 628,902 Number of Shares per Trading Unit: 100 shares Stock Listings: [Japan] Tokyo, Nagoya, Osaka, Fukuoka, Sapporo [Overseas] New York, London Securities Code: [Japan] 7203 American Depositary Receipts (ADR): [Ratio] 1 ADR=2 common stocks [Symbol] TM Transfer Agent in Japan: Mitsubishi UFJ Trust and Banking Corporation 10-11, Higashisuna, 7-chome, Koutou-ku, Tokyo 137-8081, Japan Japan Toll-Free: (0120)232-711 Depositary and Transfer Agent for ADR: The Bank of New York Mellon 101 Barclay Street, New York, NY 10286, U.S.A. Tel: (866)238-8978 U.S. Toll-Free: (888)269-2377, (888) BNY-ADRS [Depositary Receipts] http://www.adrbnymellon.com [Transfer Agent] http://www.bnymellon.com/shareowner Contact Points for Investors Japan Toyota City Head Ofﬁ ce Tokyo Head Ofﬁ ce 1, Toyota-cho, Toyota City, Aichi Prefecture 471-8571, Japan Tel: (0565)28-2121 Fax: (0565)23-5721 4-18, Koraku 1-chome, Bunkyo-ku Tokyo 112-8701, Japan Tel: (03)3817-7111 Fax: (03)3817-9092 U.S.A. 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 U.K. Toyota Motor Europe NV/SA Curzon Square, 25 Park Lane, London W1K 1RA, U.K. Tel: (207)290-8513 Fax: (207)290-8502 Major Shareholders (Top 10) Ownership Breakdown Name Japan Trustee Services Bank, Ltd. Toyota Industries Corporation The Master Trust Bank of Japan, Ltd. State Street Bank and Trust Company Nippon Life Insurance Company The Bank of New York Mellon as Depositary Bank for Depositary Receipt Holders Trust & Custody Services Bank, Ltd. Mitsui Sumitomo Insurance Company, Limited SSBT OD05 OMNIBUS ACCOUNT-TREATY CLIENTS DENSO CORPORATION Number of Shares Held (Thousands) 328,913 218,515 185,036 132,366 129,455 82,399 75,309 66,063 61,752 58,903 Other corporate entities 17.61% Financial institutions, Brokerages 30.89% Individuals, etc. 21.58% Foreign corporate entities and others 29.92% Toyota’s Stock Price and Trading Volume on the Tokyo Stock Exchange Note: Individuals, etc, include shares of 280 million treasury stock. Stock price(¥) 6,000 4,000 2,000 0 Trading volume (Million shares) 600 400 200 0 FY2009 5,710 2,585 3,120 High (¥) Low (¥) At Year-End (¥) FY2010 4,235 3,140 3,745 FY2011 3,955 2,800 3,350 FY2012 3,635 2,330 3,570 FY2013 5,050 2,795 4,860

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