Toyota Motor Corporation — FY2014 Form 20-F
Business context and reporting period. Annual report filed June 24, 2014, covering the fiscal year ended March 31, 2014. Toyota reports under U.S. GAAP in Japanese yen. Although the request identifies “2013 Q4,” this filing reports full-year results; the supplied text does not provide a separate fourth-quarter result. Toyota operates automotive, financial services and other businesses; automotive generated about 90% of segment revenues before eliminations.
Key financial metrics
Amounts below are yen billions unless otherwise noted.
| Metric | FY2014 | FY2013 | Change |
|---|---|---|---|
| Net revenue | 25,691.9 | 22,064.2 | +16.4% |
| Operating income | 2,292.1 | 1,320.9 | +73.5% |
| Operating margin | 8.9% | 6.0% | +2.9 percentage points |
| Income before tax and equity earnings | 2,441.1 | 1,403.6 | +73.9% |
| Net income attributable to Toyota | 1,823.1 | 962.2 | +89.5% |
| Basic earnings per share | ¥575.30 | ¥303.82 | — |
| Operating cash flow | 3,646.0 | 2,451.3 | +1,194.7 |
| Investing cash flow | (4,336.2) | (3,027.3) | — |
| Financing cash flow | 919.5 | 477.2 | — |
| Total assets at year-end | 41,437.5 | 35,483.3 | +16.8% |
| Toyota shareholders’ equity | 14,469.1 | 12,148.0 | +19.1% |
Revenue, segments, liquidity and debt
- Worldwide consolidated vehicle sales rose 2.8% to 9.116 million units. Automotive segment revenue was ¥23,781.4 billion and operating income ¥1,938.8 billion, up 16.5% and 105.2%, respectively.
- Financial services revenue rose 21.4% to ¥1,421.0 billion, while segment operating income fell 6.6% to ¥294.9 billion, primarily reflecting ¥22 billion of fair-value losses on interest-rate swaps. Net finance receivables increased 13.8% to ¥13,731.2 billion; reported credit losses were 0.28%, versus 0.23% in FY2013.
- Cash and cash equivalents were ¥2,041.2 billion. Toyota-defined liquid assets totaled ¥8,759.0 billion, up 28.7%. Current assets were ¥15,717.7 billion against current liabilities of ¥14,680.7 billion.
- Interest-bearing debt totaled approximately ¥16,327 billion, including short-term borrowings and current and long-term debt; it increased 15.5%. Toyota reported debt at 112.8% of Toyota shareholders’ equity, compared with 116.3% a year earlier. Unused short-term and long-term credit lines were ¥2,242.2 billion and ¥9,975.6 billion, respectively.
- Capital spending was ¥970.0 billion excluding leased vehicles and equipment, and ¥1,708.7 billion for leased vehicles and equipment. Research and development expense was ¥910.5 billion. The annual dividend was ¥165 per share; Toyota reported no material share repurchases in FY2014 apart from small-lot share purchases required on request.
Material changes versus FY2013
- Revenue growth was substantially affected by yen translation: Toyota attributed ¥2,510.4 billion of the increase to currency translation. Excluding that effect, revenue increased 5.1%.
- Operating income benefited from approximately ¥900 billion of exchange-rate effects, ¥290 billion from cost reductions and ¥180 billion from marketing efforts. These were partly offset by ¥480 billion of higher miscellaneous costs and other items.
- Reported net income growth also reflected increased equity-method earnings and improved operating performance. The filing does not present gross margin as a key comparable metric.
- Operating cash flow increased to ¥3,646.0 billion; investing outflows increased, mainly from greater purchases of securities and leased equipment. Total borrowings rose, while shareholders’ equity also increased.
Outlook, commentary, risks and unusual items
- FY2015 outlook: Toyota expected revenue and operating income to increase, with cost reductions and marketing partly offset by currency headwinds, lower vehicle sales and sales-mix changes. It expected income before tax and equity earnings and net income attributable to Toyota to decrease, partly due to foreign-exchange gains and losses. The outlook assumes ¥100 per U.S. dollar and ¥140 per euro; the supplied filing text does not provide clear numerical FY2015 forecasts.
- Unusual charges and litigation: Toyota recorded a ¥1.2 billion U.S.-government payment equivalent? The filing states a $1.2 billion payment and reports a ¥125 billion charge in FY2014, under a deferred prosecution agreement concerning unintended-acceleration disclosures. An independent monitor was appointed. The earlier economic-loss settlement resulted in a $1.1 billion FY2013 charge; the FY2014 operating-cost comparison identifies a ¥90 billion prior-year charge. The SEC said in April 2014 it did not intend to recommend enforcement action. Personal-injury and other recall-related matters remained pending, and Toyota could not estimate possible losses beyond recorded amounts.
- Other unusual item: Toyota recorded ¥83.1 billion of costs associated with ending Australian vehicle and engine production by the end of 2017, including ¥47.2 billion of asset impairment.
- Principal risks: intense competition and volatile demand; yen and other currency and interest-rate movements; safety, recall, litigation and regulatory costs; supplier concentration and raw-material prices; financial-services credit, funding and vehicle residual-value risks; natural disasters, political instability and labor or infrastructure disruptions; and cybersecurity and technology risks.
- Management described gradual recovery in developed markets but uncertainty in emerging economies, and emphasized TNGA, “ever-better cars,” cost reduction, quality improvement, and environmental and safety technology. Toyota reported effective disclosure controls and internal control over financial reporting; the independent auditor also reported effective internal controls.
Important facts for investors to verify
- How much of FY2014 revenue and operating-profit growth persists at constant exchange rates, and how sensitive results are to the yen assumptions used in guidance.
- Whether FY2015 vehicle volumes, pricing, sales mix and cost-reduction benefits meet management’s qualitative outlook.
- The adequacy of warranty and recall reserves, the remaining exposure from personal-injury and other legal proceedings, and compliance with the U.S. deferred prosecution agreement and monitor requirements.
- Credit quality, credit-loss trends, funding costs and residual values across the expanding financial-services receivables and lease portfolio.
- Debt maturities, liquidity and capital allocation, including the announced post-year-end treasury-share disposition, repurchase and cancellation plans.