SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of August, 2019

Commission File Number 001-14948

 

 

Toyota Motor Corporation

(Translation of Registrant’s Name Into English)

 

 

1, Toyota-cho, Toyota City,

Aichi Prefecture 471-8571,

Japan

(Address of Principal Executive Offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F      X        Form 40-F               

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):             

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):             

 

 

 

Material Contained in this Report:

 

I.	Executive Summary of the Japanese-language Quarterly Securities Report, as filed with the Director of the Kanto Local Finance Bureau on August 9, 2019.

 

II.

The registrant’s Unaudited Condensed Consolidated Financial Statements for the periods ended June 30, 2019, prepared in accordance with U.S. generally accepted accounting principles, which materially conform to the Consolidated Financial Statements filed with the Japanese-language Quarterly Securities Report referred to above.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: August 30, 2019

Japanese-language Quarterly Securities Report for the period ended June 30, 2019, as filed with the Director of the Kanto Local Finance Bureau of the Ministry of Finance of Japan on August 9, 2019, and which includes the following:

 

I.

Corporate information

 

A.

Corporate overview

 

1.

History of changes in major business indices

 

2.

Overview of business

 

B.

Business

 

1.

Risk factors

 

2.

Management’s analysis of financial position, results of operations and cash flows

 

3.

Material contracts

 

C.

Company information

 

1.

Share information

 

2.

Directors and corporate auditors

 

D.

Financial information

 

1.

Consolidated financial statements and notes

 

2.

Other

 

II.

Information on Guarantors

Auditors Report

Certificate

 

 

TOYOTA MOTOR

CORPORATION

Unaudited Consolidated Financial Statements

For the period ended

June 30, 2019

 

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

For the first quarter ended June 30, 2019

 

Financial Results

Consolidated vehicle unit sales in Japan and overseas increased by 67 thousand units, or 3.0%, to 2,303 thousand units in FY2020 first quarter (the three months ended June 30, 2019) compared with FY2019 first quarter (the three months ended June 30, 2018). Vehicle unit sales in Japan increased by 45 thousand units, or 8.8%, to 555 thousand units in FY2020 first quarter compared with FY2019 first quarter. Overseas vehicle unit sales increased by 22 thousand units, or 1.3%, to 1,748 thousand units in FY2020 first quarter compared with FY2019 first quarter.

The results of operations for FY2020 first quarter were as follows:

 

Net revenues			7,646.0 billion yen			(an increase of 283.3 billion yen or 3.8% compared with FY2019 first quarter)
Operating income			741.9 billion yen			(an increase of 59.2 billion yen or 8.7% compared with FY2019 first quarter)
Income before income taxes and equity in earnings of affiliated companies			841.7 billion yen			(an increase of 27.8 billion yen or 3.4% compared with FY2019 first quarter)
Net income attributable to Toyota Motor Corporation			682.9 billion yen			(an increase of 25.6 billion yen or 3.9% compared with FY2019 first quarter)

The changes in operating income and loss were as follows:

 

Marketing efforts		an increase of 80.0 billion yen
Effects of changes in exchange rates		an increase of 20.0 billion yen
Cost reduction efforts		an increase of 15.0 billion yen
Increase or decrease in expenses and expense reduction efforts		a decrease of 75.0 billion yen
Other		an increase of 19.2 billion yen

Segment Operating Results

 

(i)	Automotive:

Net revenues for the automotive operations increased by 247.4 billion yen, or 3.7%, to 6,880.9 billion yen in FY2020 first quarter compared with FY2019 first quarter, and operating income increased by 18.9 billion yen, or 3.1%, to 621.4 billion yen in FY2020 first quarter compared with FY2019 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales.

 

(ii)	Financial services:

Net revenues for the financial services operations increased by 30.8 billion yen, or 6.0%, to 547.7 billion yen in FY2020 first quarter compared with FY2019 first quarter, and operating income increased by 34.6 billion yen, or 47.1%, to 108.2 billion yen in FY2020 first quarter compared with FY2019 first quarter. The increase in operating income was mainly due to the decrease in expenses related to residual value losses and the increase in financing volume, in sales finance subsidiaries.

 

2

 

 

TOYOTA MOTOR CORPORATION

Analysis of Results of Operations

For the first quarter ended June 30, 2019

 

 

(iii)

All other:

Net revenues for all other businesses increased by 12.5 billion yen, or 3.5%, to 370.6 billion yen in FY2020 first quarter compared with FY2019 first quarter, and operating income increased by 2.3 billion yen, or 20.2%, to 13.7 billion yen in FY2020 first quarter compared with FY2019 first quarter.

Geographic Information

 

(i)

Japan:

Net revenues in Japan increased by 313.0 billion yen, or 8.1%, to 4,178.5 billion yen in FY2020 first quarter compared with FY2019 first quarter, and operating income increased by 40.8 billion yen, or 10.3%, to 436.8 billion yen in FY2020 first quarter compared with FY2019 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales.

 

(ii)	North America:

Net revenues in North America increased by 42.4 billion yen, or 1.5%, to 2,833.5 billion yen in FY2020 first quarter compared with FY2019 first quarter, and operating income increased by 55.4 billion yen, or 87.2%, to 118.9 billion yen in FY2020 first quarter compared with FY2019 first quarter. The increase in operating income was mainly due to the decrease in expenses and expense reduction efforts, as well as the decrease in expenses related to residual value losses.

 

(iii)

Europe:

Net revenues in Europe increased by 76.2 billion yen, or 9.7%, to 862.1 billion yen in FY2020 first quarter compared with FY2019 first quarter, and operating income increased by 14.7 billion yen, or 63.7%, to 37.7 billion yen in FY2020 first quarter compared with FY2019 first quarter. The increase in operating income was mainly due to increases in both production volume and vehicle unit sales.

 

(iv)

Asia:

Net revenues in Asia decreased by 1.9 billion yen, or 0.1%, to 1,314.3 billion yen in FY2020 first quarter compared with FY2019 first quarter, and operating income decreased by 35.3 billion yen, or 24.2%, to 110.9 billion yen in FY2020 first quarter compared with FY2019 first quarter. The decrease in operating income was mainly due to the effects of changes in exchange rates and the recording of valuation losses on interest rate swaps stated at fair value in sales finance subsidiaries.

 

(v)	Other (Central and South America, Oceania, Africa and the Middle East):

Net revenues in other regions decreased by 48.4 billion yen, or 8.1%, to 550.0 billion yen in FY2020 first quarter compared with FY2019 first quarter, and operating income decreased by 20.4 billion yen, or 47.2%, to 22.8 billion yen in FY2020 first quarter compared with FY2019 first quarter. The decrease in operating income was mainly due to the decrease in vehicle unit sales and the increase in expenses.

 

3

 

 

TOYOTA MOTOR CORPORATION

Unaudited Consolidated Balance Sheets

At March 31, 2019 and June 30, 2019

 

 

		Yen in millions
		March 31, 2019				June 30, 2019
Assets
Current assets:
Cash and cash equivalents			3,574,704				3,761,800
Time deposits			1,126,352				1,466,979
Marketable securities			1,127,160				971,958
Trade accounts and notes receivable, less allowance for doubtful accounts			2,372,734				2,234,909
Finance receivables, net			6,647,771				6,648,292
Other receivables			568,156				528,709
Inventories			2,656,396				2,738,140
Prepaid expenses and other current assets			805,964				935,748
Total current assets			18,879,237				19,286,535
Noncurrent finance receivables, net			10,281,118				10,265,912
Investments and other assets:
Marketable securities and other securities investments			7,479,926				7,095,229
Affiliated companies			3,313,723				3,288,535
Employees receivables			21,683				22,408
Other			1,275,768				1,618,292
Total investments and other assets			12,091,100				12,024,464
Property, plant and equipment:
Land			1,386,308				1,374,624
Buildings			4,802,175				4,773,122
Machinery and equipment			11,857,425				11,706,623
Vehicles and equipment on operating leases			6,139,163				5,968,646
Construction in progress			651,713				647,443
Total property, plant and equipment, at cost			24,836,784				24,470,458
Less – Accumulated depreciation			(14,151,290	)			(13,929,933	)
Total property, plant and equipment, net			10,685,494				10,540,525
Total assets			51,936,949				52,117,436

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

 

TOYOTA MOTOR CORPORATION

Unaudited Consolidated Balance Sheets

At March 31, 2019 and June 30, 2019

 

 

		Yen in millions
		March 31, 2019				June 30, 2019
Liabilities
Current liabilities:
Short-term borrowings			5,344,973				5,297,509
Current portion of long-term debt			4,254,260				4,302,570
Accounts payable			2,645,984				2,464,104
Other payables			1,102,802				916,863
Accrued expenses			3,222,446				3,236,485
Income taxes payable			320,998				208,238
Other current liabilities			1,335,475				1,475,975
Total current liabilities			18,226,938				17,901,744
Long-term liabilities:
Long-term debt			10,550,945				10,549,161
Accrued pension and severance costs			963,406				967,683
Deferred income taxes			1,014,851				1,049,355
Other long-term liabilities			615,599				910,964
Total long-term liabilities			13,144,801				13,477,163
Total liabilities			31,371,739				31,378,907
Mezzanine equity
Model AA Class Shares, no par value, authorized: 150,000,000 shares at March 31, 2019 and June 30, 2019 issued: 47,100,000 shares at March 31, 2019 and June 30, 2019			498,073				497,425
Shareholders’ equity
Toyota Motor Corporation shareholders’ equity:
Common stock, no par value, authorized: 10,000,000,000 shares at March 31, 2019 and June 30, 2019 issued: 3,262,997,492 shares at March 31, 2019 and June 30, 2019			397,050				397,050
Additional paid-in capital			487,162				488,077
Retained earnings			21,987,515				22,326,275
Accumulated other comprehensive income (loss)			(916,650	)			(1,022,489	)
Treasury stock, at cost, 430,558,325 shares at March 31, 2019 and 438,661,565 shares at June 30, 2019			(2,606,925	)			(2,661,233	)
Total Toyota Motor Corporation shareholders’ equity			19,348,152				19,527,680
Noncontrolling interests			718,985				713,424
Total shareholders’ equity			20,067,137				20,241,104
Commitments and contingencies
Total liabilities, mezzanine equity and shareholders’ equity			51,936,949				52,117,436

 

Note:

The total number of authorized shares for common stock and Model AA Class Shares is 10,000,000,000 shares.

The accompanying notes are an integral part of these consolidated financial statements.

 

5

 

 

TOYOTA MOTOR CORPORATION

Unaudited Consolidated Statements of Income and

Unaudited Consolidated Statements of Comprehensive Income

For the first quarter ended June 30, 2019

 

Consolidated Statements of Income

 

		Yen in millions
		For the first quarter ended June 30, 2018				For the first quarter ended June 30, 2019
Net revenues:
Sales of products			6,853,963				7,103,793
Financing operations			508,770				542,298
Total net revenues			7,362,733				7,646,091
Costs and expenses:
Cost of products sold			5,639,996				5,869,652
Cost of financing operations			348,155				340,438
Selling, general and administrative			691,895				694,050
Total costs and expenses			6,680,046				6,904,140
Operating income			682,687				741,951
Other income (expense):
Interest and dividend income			87,888				74,391
Interest expense			(3,439	)			(4,351	)
Foreign exchange gain (loss), net			39,216				(58,008	)
Unrealized gains (losses) on equity securities			35,033				90,771
Other income (loss), net			(27,521	)			(3,004	)
Total other income (expense)			131,177				99,799
Income before income taxes and equity in earnings of affiliated companies			813,864				841,750
Provision for income taxes			246,163				249,629
Equity in earnings of affiliated companies			116,535				109,553
Net income			684,236				701,674
Less – Net income attributable to noncontrolling interests			(26,930	)			(18,700	)
Net income attributable to Toyota Motor Corporation			657,306				682,974

 

Note:

Net income attributable to common shareholders for the first quarter ended June 30, 2019 and 2018 is 678,653 million yen and 653,609 million yen, respectively, which is derived by deducting dividend and accretion to Model AA Class Shares of 4,321 million yen and 3,697 million yen, respectively, from Net income attributable to Toyota Motor Corporation.

 

		Yen
Net income attributable to Toyota Motor Corporation per common share
Basic			224.67				239.64
Diluted			222.33				237.22

The accompanying notes are an integral part of these consolidated financial statements.

 

6

 

 

TOYOTA MOTOR CORPORATION

Unaudited Consolidated Statements of Income and

Unaudited Consolidated Statements of Comprehensive Income

For the first quarter ended June 30, 2019

 

Consolidated Statements of Comprehensive Income

 

		Yen in millions
		For the first quarter ended June 30, 2018				For the first quarter ended June 30, 2019
Net income			684,236				701,674
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments			50,709				(143,006	)
Unrealized gains (losses) on securities			84				40,453
Pension liability adjustments			7,445				(2,562	)
Total other comprehensive income (loss)			58,238				(105,115	)
Comprehensive income			742,474				596,559
Less – Comprehensive income attributable to noncontrolling interests			(22,836	)			(19,424	)
Comprehensive income attributable to Toyota Motor Corporation			719,638				577,135

The accompanying notes are an integral part of these consolidated financial statements.

 

7

 

 

TOYOTA MOTOR CORPORATION

Unaudited Condensed Consolidated Statements of Cash Flows

For the first quarter ended June 30, 2019

 

 

		Yen in millions
		For the first quarter ended June 30, 2018				For the first quarter ended June 30, 2019
Cash flows from operating activities:
Net income			684,236				701,674
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation			413,454				398,352
Provision (reversal) for doubtful accounts and credit losses			12,131				18,384
Pension and severance costs, less payments			5,022				3,119
Losses on disposal of fixed assets			10,655				16,493
Unrealized losses (gains) on securities			(32,262	)			(96,781	)
Deferred income taxes			34,913				56,043
Equity in earnings of affiliated companies			(116,535	)			(109,553	)
Changes in operating assets and liabilities, and other			(187,598	)			(79,361	)
Net cash provided by operating activities			824,016				908,370
Cash flows from investing activities:
Additions to finance receivables			(3,957,951	)			(4,204,465	)
Collection of and proceeds from sales of finance receivables			3,669,804				3,848,016
Additions to fixed assets excluding equipment leased to others			(423,425	)			(408,803	)
Additions to equipment leased to others			(604,308	)			(589,689	)
Proceeds from sales of fixed assets excluding equipment leased to others			13,714				6,817
Proceeds from sales of equipment leased to others			337,641				365,785
Purchases of marketable securities and security investments			(669,345	)			(292,512	)
Proceeds from sales of and maturity of marketable securities and security investments			602,713				885,676
Changes in investments and other assets, and other			(11,470	)			(341,897	)
Net cash used in investing activities			(1,042,627	)			(731,072	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			1,417,764				1,559,652
Payments of long-term debt			(907,349	)			(1,183,674	)
Increase in short-term borrowings			156,882				82,498
Dividends paid to Toyota Motor Corporation class shareholders			(3,721	)			(4,969	)
Dividends paid to Toyota Motor Corporation common shareholders			(349,191	)			(339,893	)
Dividends paid to noncontrolling interests			(28,520	)			(18,660	)
Reissuance (repurchase) of treasury stock			(128,861	)			(54,308	)
Net cash provided by financing activities			157,004				40,646
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents			9,587				(33,972	)
Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents			(52,020	)			183,972
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			3,219,639				3,706,515
Cash and cash equivalents and restricted cash and cash equivalents at end of period			3,167,619				3,890,487

 

Note:

Cash and cash equivalents and restricted cash and cash equivalents for the first quarter ended June 30, 2019 include restricted cash and cash equivalents of 131,811 million yen and 128,687 million yen at the beginning of the period and the end of the period, respectively. Restricted cash and cash equivalents were included in Prepaid expenses and other current assets in the consolidated balance sheets.

The accompanying notes are an integral part of these consolidated financial statements.

 

8

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

1.	Basis of preparation:

The accompanying unaudited condensed consolidated financial statements of Toyota Motor Corporation (the “parent company”) as of and for the period ended June 30, 2019, have been prepared in accordance with U.S. generally accepted accounting principles (“U.S.GAAP”) and on substantially the same basis as its annual consolidated financial statements except for certain required disclosures for interim periods which have been omitted. The unaudited condensed consolidated financial statements should be read in conjunction with the Annual Report on Form 20-F for the year ended March 31, 2019. The unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the result for that period and the financial condition at that date. The consolidated results for the three-month period are not necessarily indicative of results to be expected for the full year.

 

2.	Accounting changes and recent pronouncements to be adopted in future periods:

Accounting changes -

Adoption of new accounting standard

In February 2016, the Financial Accounting Standards Board (“FASB”) issued updated guidance for leases. This guidance requires lessees to recognize substantially all leases on their balance sheet as a right-of-use asset and a lease liability. The parent company and its consolidated subsidiaries (“Toyota”) adopted this guidance on April 1, 2019 using the modified retrospective method of adoption and elected the transition method that allows for application of the standard at the adoption date. Additionally, Toyota elected the package of practical expedients of not reassessing lease classifications and others for lease contracts that expired or exist as of the adoption date. As a result of adoption, Toyota recognized an additional balance of ¥354,569 million as right-of-use assets as of June 30, 2019, which is included in “Other” of “Investments and other assets” of Toyota’s consolidated balance sheet. Lease liabilities are included in “Other current liabilities” and “Other long-term liabilities,” and were ¥70,467 million and ¥283,897 million, respectively.

In August 2017, the FASB issued updated guidance for hedge accounting. This guidance simplifies and expands the application of hedge accounting. Toyota adopted this guidance on April 1, 2019. The adoption of this guidance did not have a material impact on Toyota’s consolidated financial statements.

 

9

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

Change in depreciation method

Toyota used the declining-balance method mainly for the parent company and Japanese subsidiaries, and the straight-line method for foreign subsidiary companies, regarding the depreciation method of property, plant and equipment. In recent years, Toyota has been strengthening competitiveness globally through the investments in areas such as the remodeling of cars by introducing a new platform and powertrain units, the improvement of technological capabilities and productivity, as well as the promotion of equipment versatility. In response to such recent changes, effective as of April 1, 2019, Toyota changed the depreciation method of the parent company and Japanese subsidiaries to the straight-line method because Toyota believes it better reflects the future economic benefit from the stable usage of property, plant and equipment. The impact of the change in depreciation method is recognized prospectively as a change in accounting estimate in accordance with the FASB Accounting Standards Codification (“ASC”) 250 “Accounting Changes and Error Corrections.”

As a result of the change in depreciation method, depreciation expense for the first quarter ended June 30, 2019 decreased by ¥25,347 million. Net income attributable to Toyota Motor Corporation and basic net income attributable to Toyota Motor Corporation per common share for the first quarter ended June 30, 2019 increased by ¥16,784 million and ¥5.93, respectively.

Recent pronouncements to be adopted in future periods -

In June 2016, the FASB issued updated guidance for measurement of credit losses on financial instruments. This guidance introduces an approach to estimate credit losses on certain types of financial instruments based on expected losses. It also modifies the impairment model for available-for-sale debt securities. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is evaluating the impact of adopting this guidance on Toyota’s consolidated financial statements.

In August 2018, the FASB issued updated guidance for fair value measurements. This guidance adds, removes and modifies fair value measurement disclosure requirements. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is evaluating the potential impacts of this guidance on Toyota’s disclosures.

 

3.	Accounting procedures specific to quarterly consolidated financial statements:

Provision for income taxes -

The provision for income taxes is computed by multiplying income before income taxes and equity in earnings of affiliated companies for the first quarter by estimated annual effective tax rates. These estimated annual effective tax rates reflect anticipated investment tax credits, foreign tax credits and other items, including changes in valuation allowances, that are expected to affect estimated annual effective tax rates.

 

10

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

4.	Derivative financial instruments:

Toyota employs derivative financial instruments, including foreign exchange forward contracts, foreign currency options, interest rate swaps, interest rate currency swap agreements and interest rate options to manage its exposure to fluctuations in interest rates and foreign currency exchange rates. Toyota does not use derivatives for speculation or trading.

Fair value hedges -

Toyota enters into interest rate swaps and interest rate currency swap agreements mainly to convert its fixed-rate debt to variable-rate debt. Toyota uses interest rate swap agreements in managing interest rate risk exposure. Interest rate swap agreements are executed as either an integral part of specific debt transactions or on a portfolio basis. Toyota uses interest rate currency swap agreements to hedge exposure to currency exchange rate fluctuations on principal and interest payments for borrowings denominated in foreign currencies. Notes and loans payable issued in foreign currencies are hedged by concurrently executing interest rate currency swap agreements, which involve the exchange of foreign currency principal and interest obligations for each functional currency obligations at agreed-upon currency exchange and interest rates.

For the first quarter ended June 30, 2018 and 2019, the ineffective portion of Toyota’s fair value hedge relationships was not material. For fair value hedging relationships, the components of each derivative’s gain or loss are included in the assessment of hedge effectiveness.

Undesignated derivative financial instruments -

Toyota uses foreign exchange forward contracts, foreign currency options, interest rate swaps, interest rate currency swap agreements, and interest rate options, to manage its exposure to foreign currency exchange rate fluctuations and interest rate fluctuations from an economic perspective, and for some of which Toyota is unable to or has elected not to apply hedge accounting.

 

11

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

Fair value and gains or losses on derivative financial instruments -

The following table summarizes the fair values of derivative financial instruments as of March 31, 2019 and June 30, 2019:

 

		Yen in millions
		March 31, 2019				June 30, 2019
Derivative assets
Derivative financial instruments designated as hedging instruments
Interest rate and currency swap agreements
Prepaid expenses and other current assets			—				—
Investments and other assets - Other			—				—
Total			—				—
Undesignated derivative financial instruments
Interest rate and currency swap agreements
Prepaid expenses and other current assets			74,971				49,807
Investments and other assets - Other			114,642				147,329
Total			189,613				197,136
Foreign exchange forward and option contracts
Prepaid expenses and other current assets			10,720				18,251
Investments and other assets - Other			—				—
Total			10,720				18,251
Total derivative assets			200,333				215,387
Counterparty netting			(89,364	)			(100,835	)
Collateral received			(46,590	)			(52,804	)
Carrying value of derivative assets			64,379				61,748
Derivative liabilities
Derivative financial instruments designated as hedging instruments
Interest rate and currency swap agreements
Other current liabilities			—				—
Other long-term liabilities			—				—
Total			—				—
Undesignated derivative financial instruments
Interest rate and currency swap agreements
Other current liabilities			(28,911	)			(44,093	)
Other long-term liabilities			(189,157	)			(216,809	)
Total			(218,068	)			(260,902	)
Foreign exchange forward and option contracts
Other current liabilities			(13,847	)			(7,722	)
Other long-term liabilities			—				—
Total			(13,847	)			(7,722	)
Total derivative liabilities			(231,915	)			(268,624	)
Counterparty netting			89,364				100,835
Collateral posted			110,159				119,832
Carrying value of derivative liabilities			(32,392	)			(47,957	)

 

12

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

The following table summarizes the notional amounts of derivative financial instruments as of March 31, 2019 and June 30, 2019:

 

		Yen in millions
		March 31, 2019								June 30, 2019
		Designated derivative financial instruments				Undesignated derivative financial instruments				Designated derivative financial instruments				Undesignated derivative financial instruments
Interest rate and currency swap agreements			—				21,001,883				—				20,553,122
Foreign exchange forward and option contracts			—				4,005,578				—				3,448,907
Total			—				25,007,461				—				24,002,029
The following table summarizes the gains and losses on derivative financial instruments and hedged items reported in the consolidated statements of income for the first quarter ended June 30, 2018 and 2019:
		Yen in millions
		For the first quarter ended June 30, 2018								For the first quarter ended June 30, 2019
		Gains or (losses) on derivative financial instruments				Gains or (losses) on hedged items				Gains or (losses) on derivative financial instruments				Gains or (losses) on hedged items
Derivative financial instruments designated as hedging instruments
Interest rate and currency swap agreements
Cost of financing operations			(647	)			629				—				—
Undesignated derivative financial instruments
Interest rate and currency swap agreements
Cost of financing operations			8,193								(22,659	)
Foreign exchange gain (loss), net			27,217								(19,705	)
Foreign exchange forward and option contracts
Cost of financing operations			3,741								(4,880	)
Foreign exchange gain (loss), net			(44,090	)							25,037

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

Undesignated derivative financial instruments are used to manage economic risks of fluctuations in foreign currency exchange rates and interest rates of certain receivables and payables. Those economic risks are offset by changes in the fair value of undesignated derivative financial instruments.

Cash flows from transactions of derivative financial instruments are included in cash flows from operating activities in the consolidated statements of cash flows.

Credit risk related contingent features -

Toyota enters into International Swaps and Derivatives Association Master Agreements with counterparties. These Master Agreements contain a provision requiring either Toyota or the counterparty to settle the contract or to post assets to the other party in the event of a ratings downgrade below a specified threshold.

The aggregate fair value amount of derivative financial instruments that contain credit risk related contingent features that are in a net liability position after being offset by cash collateral as of June 30, 2019 is ¥6,015 million. The aggregate fair value amount of assets that are already posted as cash collateral as of June 30, 2019 is ¥111,251 million. If the ratings of Toyota decline below specified thresholds, the maximum amount of assets to be posted or for which Toyota could be required to settle the contracts is ¥6,015 million as of June 30, 2019.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

5.	Contingencies:

Guarantees -

Toyota enters into contracts with Toyota dealers to guarantee customers’ payments of their installment payables that arise from installment contracts between customers and Toyota dealers, as and when requested by Toyota dealers. Toyota is required to execute its guarantee primarily when customers are unable to make required payments. The maximum potential amount of future payments as of June 30, 2019 is ¥3,151,955 million. Liabilities for guarantees totaling ¥8,974 million have been provided as of June 30, 2019. Under these guarantee contracts, Toyota is entitled to recover any amount paid by Toyota from the customers whose original obligations Toyota has guaranteed.

Legal proceedings -

From time-to-time, Toyota issues vehicle recalls and takes other safety measures including safety campaigns relating to its vehicles. Since 2009, Toyota issued safety campaigns related to the risk of floor mat entrapment of accelerator pedals and vehicle recalls related to slow-to-return or sticky accelerator pedals. Personal injury and wrongful death claims involving allegations of unintended acceleration are still pending in several consolidated proceedings in federal and state courts, as well as in individual cases in various other states. The judges in the consolidated federal action and the consolidated California state action have approved an Intensive Settlement Process (“ISP”) for such claims in those actions. Under the ISP, all individual claims within the consolidated actions are stayed pending completion of a process to assess whether they can be resolved on terms acceptable to the parties. Cases not resolved after completion of the ISP will then proceed to discovery and toward trial. Toyota has offered the ISP process to plaintiffs in other consolidated actions and in individual cases, as well.

Toyota has been named as a defendant in 33 economic loss class action lawsuits in the United States, which, together with similar lawsuits against Takata and other automakers, have been made part of a multi-district litigation proceeding in the United States District Court for the Southern District of Florida, arising out of allegations that airbag inflators manufactured by Takata are defective. Toyota has reached a settlement with the plaintiffs in the United States economic loss class actions. The court approved the settlement on October 31, 2017, and the subsequent appeals have been withdrawn, making the settlement final. The economic loss class action lawsuits against Toyota have been dismissed. Toyota and other automakers have also been named in certain class actions filed in Mexico, Canada, Australia, Israel and Brazil, as well as some other actions by states or territories of the United States. Those actions have not been settled and are being litigated.

 

15

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

Toyota self-reported a process gap in fulfilling certain emissions defect information reporting requirements of the U.S. Environmental Protection Agency (“EPA”) and California Air Resources Board, including updates on its repair completion rates for recalled emissions components and certain other reports concerning emissions related defects. Toyota is involved in discussions with the EPA and the Civil Division of the Southern District of New York (“SDNY”) on this reporting issue. These agencies have requested certain follow-up information regarding this reporting issue, and Toyota is cooperating with the request.

Toyota also has various other pending legal actions and claims, including without limitation personal injury and wrongful death lawsuits and claims in the United States, and is subject to government investigations from-time-to-time.

Beyond the amounts accrued with respect to all aforementioned matters, Toyota is unable to estimate a range of reasonably possible loss, if any, for the pending legal matters because (i) many of the proceedings are in evidence gathering stages, (ii) significant factual issues need to be resolved, (iii) the legal theory or nature of the claims is unclear, (iv) the outcome of future motions or appeals is unknown and/or (v) the outcomes of other matters of these types vary widely and do not appear sufficiently similar to offer meaningful guidance. Based upon information currently available to Toyota, however, Toyota believes that its losses from these matters, if any, beyond the amounts accrued, would not have a material adverse effect on Toyota’s financial position, results of operations or cash flows.

 

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TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

6.	Segment data:

The operating segments reported below are the segments of Toyota for which separate financial information is available and for which operating income/loss amounts are evaluated regularly by executive management in deciding how to allocate resources and in assessing performance.

The major portions of Toyota’s operations on a worldwide basis are derived from the Automotive and Financial Services business segments. The Automotive segment designs, manufactures and distributes sedans, minivans, compact cars, sport-utility vehicles, trucks and related parts and accessories. The Financial Services segment consists primarily of financing, and vehicle leasing operations to assist in the merchandising of the parent company and its affiliated companies products as well as other products. The All Other segment includes the design, manufacturing and sales of housing, telecommunications and other businesses.

The following tables present certain information regarding Toyota’s industry or geographic segments and overseas revenues by destination for the first quarter ended June 30, 2018 and 2019.

Segment operating results -

For the first quarter ended June 30, 2018:

 

		Yen in millions
		Automotive				Financial Services				All Other				Inter-segment Elimination				Consolidated
Net revenues
Sales to external customers			6,624,656				508,770				229,307				—				7,362,733
Inter-segment sales and transfers			8,775				8,085				128,780				(145,640	)			—
Total			6,633,431				516,855				358,087				(145,640	)			7,362,733
Operating expenses			6,030,890				443,299				346,625				(140,768	)			6,680,046
Operating income			602,541				73,556				11,462				(4,872	)			682,687
For the first quarter ended June 30, 2019:
		Yen in millions
		Automotive				Financial Services				All Other				Inter-segment Elimination				Consolidated
Net revenues
Sales to external customers			6,873,790				542,298				230,003				—				7,646,091
Inter-segment sales and transfers			7,128				5,443				140,602				(153,173	)			—
Total			6,880,918				547,741				370,605				(153,173	)			7,646,091
Operating expenses			6,259,472				439,532				356,832				(151,696	)			6,904,140
Operating income			621,446				108,209				13,773				(1,477	)			741,951

 

17

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

Geographic information -

For the first quarter ended June 30, 2018:

 

		Yen in millions
		Japan				North America				Europe				Asia				Other				Inter-segment Elimination				Consolidated
Net revenues
Sales to external customers			2,146,884				2,735,809				747,561				1,155,422				577,057				—				7,362,733
Inter-segment sales and transfers			1,718,608				55,292				38,338				160,854				21,401				(1,994,493	)			—
Total			3,865,492				2,791,101				785,899				1,316,276				598,458				(1,994,493	)			7,362,733
Operating expenses			3,469,512				2,727,553				762,813				1,169,944				555,203				(2,004,979	)			6,680,046
Operating income			395,980				63,548				23,086				146,332				43,255				10,486				682,687
For the first quarter ended June 30, 2019:
		Yen in millions
		Japan				North America				Europe				Asia				Other				Inter-segment Elimination				Consolidated
Net revenues
Sales to external customers			2,351,628				2,781,463				809,601				1,178,381				525,018				—				7,646,091
Inter-segment sales and transfers			1,826,931				52,129				52,534				135,943				25,017				(2,092,554	)			—
Total			4,178,559				2,833,592				862,135				1,314,324				550,035				(2,092,554	)			7,646,091
Operating expenses			3,741,722				2,714,609				824,341				1,203,335				527,209				(2,107,076	)			6,904,140
Operating income			436,837				118,983				37,794				110,989				22,826				14,522				741,951

“Other” consists of Central and South America, Oceania, Africa and the Middle East.

Revenues are attributed to geographies based on the country location of the parent company or the subsidiary that transacted the sale with the external customer.

Transfers between industry or geographic segments are made at terms and conditions in the ordinary course of business. In measuring the reportable segments’ income or losses, operating income consists of revenue less operating expenses.

 

18

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

Overseas revenues by destination -

The following information shows revenues that are attributed to countries based on location of customers, excluding customers in Japan. In addition to the disclosure requirements under U.S.GAAP, Toyota discloses this information in order to provide financial statements users with valuable information.

For the first quarter ended June 30, 2018:

 

		Yen in millions
		North America				Europe				Asia				Other				Total
Overseas sales			2,755,383				713,192				1,276,994				984,103				5,729,672
Consolidated sales			—				—				—				—				7,362,733
Ratio of overseas sales to consolidated sales			37.4	%			9.7	%			17.3	%			13.4	%			77.8	%
For the first quarter ended June 30, 2019:
		Yen in millions
		North America				Europe				Asia				Other				Total
Overseas sales			2,829,020				742,857				1,315,428				968,596				5,855,901
Consolidated sales			—				—				—				—				7,646,091
Ratio of overseas sales to consolidated sales			37.0	%			9.7	%			17.2	%			12.7	%			76.6	%

“Other” consists of Central and South America, Oceania, Africa and the Middle East, etc.

 

19

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

7.	Net revenues

 

(1)	Summary by business segments and products

The table below shows Toyota’s net revenues from external customers by business and by product category.

 

		Yen in millions
		For the first quarter ended June 30, 2018				For the first quarter ended June 30, 2019
Sales of products
Automotive
Vehicles			5,681,666				5,879,838
Parts and components for overseas production			138,740				165,293
Parts and components for after service			500,983				516,908
Other			303,267				311,751
Total automotive			6,624,656				6,873,790
All other			229,307				230,003
Total sales of products			6,853,963				7,103,793
Financial services			508,770				542,298
Total net revenues			7,362,733				7,646,091

The majority of sales of products are revenues recognized from contracts with customers based on ASC 606 “Revenue from Contracts with customers,” and receivables related to such revenues are recognized as “Trade accounts and notes receivable, less allowance for doubtful accounts.” For the first quarter ended June 30, 2019, ¥21,141 million of financial service revenues were accounted for under ASC 606 “Revenue from Contracts with customers.”

The breakdown of income from leases included in financial service revenues is as follows;

 

		Yen in millions
		For the first quarter ended June 30, 2018				For the first quarter ended June 30, 2019
Finance leases
Financial income related to net lease investment			21,542				23,697
Operating leases			254,445				263,357
Total			275,987				287,054

 

(2)	Contract liabilities

Contract liabilities consist of the following:

 

		Yen in millions
		March 31, 2019				June 30, 2019
Contract liabilities			675,018				720,980

Contract liabilities are mainly related to advances received from customers. On the consolidated financial statements, contract liabilities are included in “Other current liabilities” or “Other long-term liabilities.” For the three months period ended June 30, 2019, the amount of revenue recognized which was included in the contract liability balance as of April 1, 2019 was ¥147,336 million.

 

20

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

(3)	Performance obligations

As of June 30, 2019, which is the end of the reporting period, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to contracts that have original expected durations in excess of one year was ¥564,788 million.

The main contents of unsatisfied performance obligations related to contracts are insurance revenues and maintenance revenues.

For insurance revenues, Toyota receives payment agreed upon in the contract at the inception of the contract, and revenue is recognized over the term of the contract, which ranges from 3 to 120 months. As of June 30, 2019, the unsatisfied performance obligations related to insurance revenues was ¥211,592 million, and Toyota expects to recognize as revenue ¥48,206 million in fiscal 2020, and ¥163,386 million thereafter.

For maintenance revenues, Toyota receives payment agreed upon in the contract at the inception of the contract, and revenue is recognized over the term of the contract, which ranges from 18 to 84 months.

Unsatisfied performance obligations for sales of products related to contracts that have an original expected duration of one year or less have been excluded from this disclosure.

 

21

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

8.	Per share amounts:

Reconciliations of the differences between basic and diluted net income attributable to Toyota Motor Corporation per common share for the first quarter ended June 30, 2018 and 2019 are as follows:

 

		Yen in millions				Thousands of shares				Yen
		Net income attributable to Toyota Motor Corporation				Weighted- average common shares				Net income attributable to Toyota Motor Corporation per common share
For the first quarter ended June 30, 2018
Net income attributable to Toyota Motor Corporation			657,306
Accretion to Mezzanine equity			(1,212	)
Dividends to Toyota Motor Corporation Model AA Class Shareholders			(2,485	)
Basic net income attributable to Toyota Motor Corporation per common share			653,609				2,909,190				224.67
Effect of dilutive securities
Model AA Class Shares			3,697				47,100
Assumed exercise of dilutive stock options			(1	)			132
Diluted net income attributable to Toyota Motor Corporation per common share			657,305				2,956,422				222.33
For the first quarter ended June 30, 2019
Net income attributable to Toyota Motor Corporation			682,974
Accretion to Mezzanine equity			(1,212	)
Dividends to Toyota Motor Corporation Model AA Class Shareholders			(3,109	)
Basic net income attributable to Toyota Motor Corporation per common share			678,653				2,831,993				239.64
Effect of dilutive securities
Model AA Class Shares			4,321				47,100
Assumed exercise of dilutive stock options			—				—
Diluted net income attributable to Toyota Motor Corporation per common share			682,974				2,879,093				237.22

On May 8, 2019, the Board of Directors of the parent company resolved to distribute year-end cash dividends of ¥ 339,892 million, ¥120 per common share, to common shareholders effective on May 24, 2019.

 

22

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

9.	Fair value measurements:

In accordance with U.S.GAAP, Toyota classifies fair value into three levels of input as follows which are used to measure it.

 

The following table summarizes the fair values of the assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 and June 30, 2019. Transfers between levels of the fair value are recognized at the end of their respective reporting periods:

 

		Yen in millions
		March 31, 2019
		Level 1				Level 2				Level 3				Total
Assets
Cash equivalents			249,193				594,200				—				843,393
Time deposits			—				520,000				—				520,000
Marketable securities and other securities investments
Public and corporate bonds			4,378,543				1,452,475				15,171				5,846,189
Common stocks			2,154,951				—				—				2,154,951
Other			189,389				6,007				—				195,396
Investments measured at net asset value			—				—				—				98,451
Derivative financial instruments			—				200,256				77				200,333
Total			6,972,076				2,772,938				15,248				9,858,713
Liabilities
Derivative financial instruments			—				(231,915	)			—				(231,915	)
Total			—				(231,915	)			—				(231,915	)

 

23

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

		Yen in millions
		June 30, 2019
		Level 1				Level 2				Level 3				Total
Assets
Cash equivalents			562,838				568,300				—				1,131,138
Time deposits			—				520,000				—				520,000
Marketable securities and other securities investments
Public and corporate bonds			3,711,635				1,456,693				16,230				5,184,558
Common stocks			2,302,890				—				—				2,302,890
Other			190,414				35,509				—				225,923
Investments measured at net asset value			—				—				—				98,552
Derivative financial instruments			—				215,387				—				215,387
Total			6,767,777				2,795,889				16,230				9,678,448
Liabilities
Derivative financial instruments			—				(268,624	)			—				(268,624	)
Total			—				(268,624	)			—				(268,624	)

Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

The following is description of the assets and liabilities measured at fair value, information about the valuation techniques used to measure fair value, key inputs and significant assumptions:

Cash equivalents and time deposits -

Cash equivalents include money market funds and other investments with original maturities of three months or less. Cash equivalents classified in Level 2 include negotiable certificates of deposit with original maturities of three months or less. These are measured at fair value using primarily observable interest rates in the market. Time deposits consist of negotiable certificates of deposit with original maturities over three months. These are measured at fair value using primarily observable interest rates in the market.

Marketable securities and other securities investments -

Marketable securities and other securities investments include public and corporate bonds, common stocks and other investments. Public and corporate bonds include government bonds. Japanese bonds and foreign bonds including U.S., European and other bonds represent 17% and 83% (as of March 31, 2019) and 19% and 81% (as of June 30, 2019) of public and corporate bonds, respectively. Toyota uses primarily quoted market prices for identical assets to measure fair value of these securities.

 

24

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

Derivative financial instruments -

See note 4 to the consolidated financial statements about derivative financial instruments. Toyota primarily estimates the fair value of derivative financial instruments using industry-standard valuation models that require observable inputs including interest rates and foreign exchange rates, and the contractual terms. The usage of these models does not require significant judgment to be applied. These derivative financial instruments are classified in Level 2. In other certain cases when market data is not available, key inputs to the fair value measurement include quotes from counterparties, and other market data. Toyota assesses the reasonableness of changes of the quotes using observable market data. These derivative financial instruments are classified in Level 3. Toyota’s derivative fair value measurements consider assumptions about counterparty and Toyota’s own non-performance risk, using such as credit default probabilities.

The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the first quarter ended June 30, 2018 and 2019 were not material.

Certain assets and liabilities are measured at fair value on a nonrecurring basis. The assets and liabilities measured at fair value on a nonrecurring basis for the first quarter ended June 30, 2018 and 2019 were not material.

 

25

 

 

TOYOTA MOTOR CORPORATION

Notes to Unaudited Consolidated Financial Statements

 

 

10.	Accumulated other comprehensive income:

Changes in accumulated other comprehensive income (loss) are as follows:

 

		Yen in millions
		Foreign currency translation adjustments				Unrealized gains (losses) on securities				Pension liability adjustments				Accumulated other comprehensive income (loss)
For the first quarter ended June 30, 2018
Balance at March 31, 2018			(679,085	)			1,329,584				(214,800	)			435,699
Effect of change in accounting policy			105				(1,125,109	)			—				(1,125,004	)
Other comprehensive income (loss) before reclassifications			50,709				1,038				5,628				57,375
Reclassifications			—				(954	)			1,817				863
Other comprehensive income (loss), net of tax			50,709				84				7,445				58,238
Less – Other comprehensive income attributable to noncontrolling interests			4,298				8				(212	)			4,094
Balance at June 30, 2018			(623,973	)			204,567				(207,567	)			(626,973	)
For the first quarter ended June 30, 2019
Balance at March 31, 2019			(649,532	)			(1,252	)			(265,866	)			(916,650	)
Other comprehensive income (loss) before reclassifications			(143,006	)			35,944				(4,330	)			(111,392	)
Reclassifications			—				4,509				1,768				6,277
Other comprehensive income (loss), net of tax			(143,006	)			40,453				(2,562	)			(105,115	)
Less – Other comprehensive income attributable to noncontrolling interests			(588	)			7				(143	)			(724	)
Balance at June 30, 2019			(793,126	)			39,208				(268,571	)			(1,022,489	)

 

26