Toyota Motor Corporation — FY2012 Form 20-F
Business context and reporting period. This is Toyota’s annual report, filed June 25, 2012, for the fiscal year ended March 31, 2012—not a standalone 2011 fourth-quarter filing. Toyota reports under U.S. GAAP; amounts below are primarily Japanese yen (¥). Automotive operations generated about 89% of segment revenue before intersegment eliminations. Toyota sold 7.352 million vehicles worldwide, up 0.6% from FY2011.
Key financial metrics
| Metric | FY2012 | Change vs. FY2011 |
|---|---|---|
| Net revenue | ¥18,583.7 billion | Down 2.2%; excluding the ¥717.7 billion adverse translation effect and related factors, up about 1.6% |
| Operating income | ¥355.6 billion | Down 24.1%; operating margin 1.9%, versus 2.5% |
| Income before taxes and equity earnings | ¥432.9 billion | Down 23.2% |
| Net income attributable to Toyota Motor Corporation | ¥283.6 billion; ¥90.21 per share | Down 30.5%; net margin 1.5%, versus 2.1% |
| Net cash from operating activities | ¥1,452.4 billion | Down from ¥2,024.0 billion |
| Net cash used in investing activities | ¥1,442.7 billion | Compared with ¥2,116.3 billion used in FY2011 |
| Cash and cash equivalents | ¥1,679.2 billion | Down from ¥2,080.7 billion |
| Total assets / Toyota shareholders’ equity | ¥30,651.0 billion / ¥10,550.3 billion | Both increased from FY2011 |
| Interest-bearing debt | About ¥12,005.5 billion | Down 3.2%; 113.8% of Toyota shareholders’ equity, versus 120.0% |
Current assets were ¥12,321.2 billion and current liabilities ¥11,781.6 billion at year-end. Toyota reported liquid assets of ¥5,761.4 billion, including cash, time deposits, marketable debt securities and monetary trust funds. Short-term borrowings were ¥3,450.6 billion, and Toyota had unused short- and long-term credit lines of ¥2,465.9 billion and ¥7,606.5 billion, respectively. Property, plant and equipment capex excluding leased vehicles was ¥723.5 billion; spending on vehicles and equipment for operating leases was ¥808.5 billion.
Segment operating income was ¥21.7 billion in automotive, ¥306.4 billion in financial services and ¥42.1 billion in all other operations. Financial-services revenue declined 7.7% to ¥1,100.3 billion; net finance receivables were ¥9,717.4 billion.
Material changes versus FY2011
- Revenue and earnings declined despite a 0.6% increase in global vehicle sales. A stronger yen materially reduced reported revenue and operating income.
- Automotive operating income fell to ¥21.7 billion from ¥86.0 billion. The company cited currency effects, higher miscellaneous costs, and labor and R&D expense increases; cost reductions and sales/mix gains partly offset these pressures.
- Financial-services operating income fell 14.5% to ¥306.4 billion, including ¥20.8 billion of valuation losses on interest-rate swaps. U.S. credit-loss ratios improved: total net charge-offs were 0.21% of average gross earning assets, compared with 0.52%.
- Vehicle sales rose in Japan and Asia but fell 7.8% in North America; North American operating income declined 45.1%. Asia sales increased 5.7%, although regional operating income fell 18.0%.
- Operating cash flow declined, while Toyota’s year-end cash balance decreased. Inventories rose 24.4% to ¥1,622.3 billion and accounts payable increased substantially, reflecting higher trading and production volume.
Outlook, risks and unusual items
- FY2013 outlook: Management expected revenue, operating income, pretax income and net income attributable to Toyota to increase, primarily on higher vehicle sales and cost reductions. The outlook assumed average exchange rates of ¥80 per U.S. dollar and ¥105 per euro; no specific forecast amounts are provided in the filing text summarized here.
- Operating environment: Toyota cited the Great East Japan Earthquake and Thailand floods, parts-supply disruption, yen appreciation, European sovereign-debt concerns, volatile demand, intensified competition, raw-material prices and energy constraints. Production had normalized sooner than initially expected, but residual disruption risks remained.
- Quality and legal matters: Product-recall and other quality-assurance liabilities totaled ¥839.8 billion at March 31, 2012, including ¥468.7 billion for recalls and other safety measures. Toyota disclosed approximately 200 putative unintended-acceleration class actions, more than 300 personal-injury cases and continuing government investigations. Accruals for the proceedings were described as not material, but Toyota could not estimate reasonably possible losses beyond amounts accrued and said outcomes could adversely affect results or cash flows.
- Other sensitivities: A 60.6% effective tax rate exceeded Japan’s statutory rate, partly due to valuation allowances and deferred taxes on undistributed affiliate earnings. Unfunded pension liabilities rose 24.0% to ¥676.6 billion, largely reflecting a lower discount rate. Toyota was not repurchasing shares for the time being to preserve cash; FY2012 dividends were ¥50 per share.
Important facts for investors to verify
- Whether FY2013 growth expectations were achieved, and how actual yen-dollar and yen-euro rates compared with management’s assumptions.
- Whether production recovery, vehicle volumes and margins improved, particularly in North America and the automotive segment.
- Whether cash generation, liquidity and debt maturities remained manageable alongside financing operations and planned investment.
- Subsequent developments in recall-related litigation and investigations, and whether quality-assurance reserves proved adequate.
- Whether deferred tax assets in Japan were realized as forecast, and how pension funding and discount-rate changes affected obligations.