Toyota Motor Corporation — FY2015 Form 20-F
Business context and reporting period. Annual report filed June 24, 2015, covering the fiscal year ended March 31, 2015; Toyota’s fiscal year runs April 1–March 31. The filing is prepared under U.S. GAAP. Toyota operates automotive, financial services and other businesses; automotive accounted for about 90% of segment revenues before intersegment eliminations. Amounts below are in yen unless stated otherwise.
Key financial metrics
| Metric | FY2015 | Change from FY2014 |
|---|---|---|
| Net revenues | ¥27,234.5 billion | +6.0% |
| Operating income | ¥2,750.6 billion | +20.0%; operating margin 10.1%, up from 8.9% |
| Income before taxes and equity earnings | ¥2,892.8 billion | +18.5% |
| Net income attributable to Toyota Motor Corporation | ¥2,173.3 billion | +19.2%; basic EPS ¥688.02 |
| Operating cash flow | ¥3,685.8 billion | Up ¥39.7 billion |
| Investing cash flow | ¥(3,813.5) billion | Net cash used |
| Financing cash flow | ¥306.0 billion | Net cash provided |
| Total assets / Toyota shareholders’ equity | ¥47,729.8 billion / ¥16,788.1 billion | Assets +15.2%; equity +16.0% |
| Interest-bearing debt | About ¥18,977.9 billion | Up from about ¥17,277.4 billion |
Cash and cash equivalents were ¥2,284.6 billion; marketable securities were ¥2,782.1 billion. Toyota-defined liquid assets totaled ¥9,936.0 billion, up 13.4%. Total interest-bearing debt was 113.0% of Toyota shareholders’ equity. Net finance receivables rose 12.7% to ¥15,472.4 billion. Capital expenditures were ¥1,146.3 billion for property, plant and equipment excluding leased vehicles and equipment, plus ¥2,211.3 billion for leased assets.
Material changes versus FY2014
- Worldwide consolidated vehicle sales fell 1.6% to 8.972 million units. North America sales rose 7.3% to 2.715 million; Japan fell 8.9% to 2.154 million; Asia fell 7.4% to 1.489 million.
- Revenue growth included a favorable ¥962.2 billion currency-translation effect. Excluding that effect, revenue increased 2.3%; vehicle sales and mix contributed ¥360.0 billion.
- Operating income rose by ¥458.5 billion, supported by ¥280.0 billion each from exchange-rate changes and cost reductions. Higher marketing costs and miscellaneous expenses partly offset the improvement.
- Financial-services segment operating income increased 22.7% to ¥361.8 billion, including ¥61.9 billion of fair-value gains on interest-rate swaps. Automotive segment operating income increased 19.9% to ¥2,325.3 billion.
- Shareholders received ¥200 per common share in dividends. Toyota repurchased 55.5 million shares for approximately ¥360.0 billion.
Outlook, risks and unusual items
- FY2016 outlook: Management expected revenue, operating income, pretax income and Toyota-attributable net income to increase, despite lower vehicle unit sales. The outlook assumed ¥115 per U.S. dollar and ¥125 per euro. The filing does not provide clear numerical FY2016 forecasts in the supplied text.
- Management priorities: Cost reduction, quality improvement, human-resource development, investment in environmental and safety technologies, and development of “ever-better cars.” Planned FY2016 property, plant and equipment investment excluding leased assets was approximately ¥1,200 billion.
- Currency and markets: A stronger yen, weaker demand, intensified competition, pressure on prices and margins, raw-material costs, and economic or political instability could adversely affect results. Toyota noted weakness in emerging markets and a slowdown in Japan following the consumption-tax increase.
- Safety and litigation: Toyota recorded a $1.2 billion charge in FY2014 under a deferred prosecution agreement concerning unintended-acceleration investigations. Related personal-injury claims remained pending; Toyota said it could not reasonably estimate additional losses. Twenty-seven early-stage economic-loss class actions related to Takata airbags were also pending. The FY2015 liability for recalls and other safety measures was ¥755.1 billion; total quality-assurance liabilities were ¥1,328.9 billion.
- Other subsequent events: Shareholders approved Model AA Class Shares in June 2015. The filing described a planned public issuance and related share repurchases; confirm the eventual issuance terms, proceeds and repurchase execution. Toyota also planned additional common-share repurchases of up to ¥300 billion, subject to stated conditions.
- Other risks: Credit and residual-value exposures in financial services, supplier disruptions, cybersecurity and information-technology failures, natural disasters, stricter safety and environmental regulations, and foreign-exchange and interest-rate movements.
- Iran-related disclosure: Two subsidiaries reported limited travel and vehicle-maintenance activities connected to the Iranian embassy in Japan; Toyota characterized the contribution to revenue and profit as insignificant and stated it believed the activities did not trigger U.S. sanctions.
Most important facts for investors to verify
- How much of FY2015’s earnings improvement reflects durable operating performance versus yen translation, cost reductions and one-off comparisons.
- Whether vehicle volumes, pricing and regional mix support management’s FY2016 growth outlook, particularly given declines in Japan and Asia.
- Debt maturities, refinancing needs and liquidity available to the automotive business separately from financial-services funding.
- Actual recall, warranty and litigation cash costs, including developments in the Takata-airbag and unintended-acceleration cases.
- Final Model AA issuance terms, dividend priority, conversion and cash put/call provisions, and the related share buybacks.
- Execution and returns on planned capital investment, environmental and safety technology spending, and overseas capacity changes.