UNITED STATES SECURITIES AND EXCHANGE COMMISSION PRIVATE
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended September 30, 2000
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ORperiod December 1, 2001 (date of formation) to March 31, 2002
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 1-9961
----------numbers: 333-58164, 33358164-01, 333-58164-02,
333-74872 and 333-74872-01
------------------------------------
TOYOTA MOTOR CREDIT CORPORATION
- ---------------------------------------------------------------------------AUTO RECEIVABLES 2002-A OWNER TRUST
------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-377581695-4836519
- ---------------------------------------- -----------------------
(State------------------------------------- ------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization)organization Identification No.)
19001 S. Western AvenueToyota Auto Finance Receivables LLC
19300 Gramercy Place, North Building
Torrance, California 90509
- ---------------------------------------- ------------------------------------------------------------------ ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 468-1310
-----------------------468-7333
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Securities registered pursuant to section 12(b) of the Act: Name of each exchange
Title of each class on which registered
------------------- -----------------------
5.25% Fixed Rate Medium-Term
Notes due January 19, 2001 New York Stock Exchange
- ---------------------------------------- -----------------------None
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
AsThe registrant is a trust with no voting securities outstanding.
Exhibit Index is on Page 7.
Page 1 of November 30, 2000, the number of outstanding shares of capital
stock, par value $10,000 per share,7
This Annual Report on Form 10-K is filed by Toyota Auto Finance Receivables LLC
("TAFR") on behalf of the registrant was 91,500, allToyota Auto Receivables 2002-A Owner Trust (the
"Trust") pursuant to Section 15(d) of which
shares were heldthe Securities Exchange Act of 1934, as
amended. This Annual Report on Form 10-K omits responses or responds in a
modified fashion to certain Items required by Form 10-K in accordance with the
responses of the Office of Chief Counsel, Division of Corporation Finance of
the Securities and Exchange Commission, contained in a letter dated
November 5, 1993 and made orally to Toyota Financial Services Americas Corporation.
-1-
Motor Credit Corporation's
("TMCC's") counsel in response to TMCC's requests for exemptive relief from
such reporting requirements.
PART I
ITEM 1. BUSINESS.
General
Toyota Motor Credit Corporation ("TMCC")Omitted.
ITEM 2. PROPERTIES.
The Trust was incorporated in California in 1982created pursuant to a Trust Agreement dated as a wholly-owned subsidiary of
Toyota Motor Sales, USA, Inc. ("TMS"December 7, 2001, between TAFR LLC as depositor (the "Depositor") and commenced operationsFirst
Union Trust Company, National Association, as trustee ("First Union"), as
amended and restated by an Amended and Restated Trust Agreement dated as of
January 1, 2002, between the Depositor and First Union as owner trustee.
Pursuant to an Indenture executed in 1983. TMSconjunction with the Agreement, the Trust
issued asset-backed notes (the "Notes") secured by the assets of the Trust.
The Indenture Trustee is an indirect wholly-owned subsidiaryWells Fargo Bank Minnesota, National Association. The
Notes consist of Toyota Motor Corporation ("TMC"four classes of senior notes (the "Class A-1 1.69375% Notes",
"Class A-2 Adjustable Rate Notes", "Class A-3 Adjustable Rate Notes" and "Class
A-4 4.000 Notes"). On October 1, 2000, ownership of TMCC was
transferred from TMS to Toyota Financial Services Americas Corporation
("TFSA"),Only the Class A-2, Class A-3 and Class A-4 Notes were
registered and publicly offered and sold. The Trust also issued a holding company owned 100% by Toyota Financial Services Corporation
("TFSC"). TFSC, in turn, is a wholly-owned subsidiary of TMC. TFSC was
incorporated in July 2000 and its corporate headquarters is located in Nagoya,
Japan. The purpose of TFSC is to control and manage Toyota's finance
operations worldwide.
TMCC provides retail and wholesale financing, retail leasing and certain other
financial services to authorized Toyota and Lexus vehicle and Toyota industrial
equipment dealers and their customers in the United States (excluding Hawaii)
and the Commonwealth of Puerto Rico. TMCC has four wholly-owned subsidiaries,
one of which is engaged in the insurance business, one limited purpose
subsidiary formed primarily to acquire and securitize retail finance
receivables, one limited purpose subsidiary formed primarily to acquire and
securitize lease finance receivables and one subsidiary which provides retail
and wholesale financing and certain other financial services to authorized
Toyota and Lexus vehicle dealers and their customers in the Commonwealth of
Puerto Rico. TMCC does business as Toyota Motor Credit Corporation and Lexus
Financial Services and markets products under the service mark "Toyota
Financial Services". TMCC and its wholly-owned subsidiaries are collectively
referred to as the "Company".
Toyota Credit Argentina S.A. ("TCA") provides retail and wholesale financing to
authorized Toyota vehicle dealers and their customers in Argentina. TMCC owns
a 33%fractional
undivided interest in TCA. Banco Toyota do Brasil ("BTB") provides retail and
lease financing to authorized Toyota vehicle dealers and their customers in
Brazil. BTB is owned 15% by TMCC. The remaining interests in TCA and BTB are
owned by TFSC.
The Company's earnings are primarily impacted by the level of average earning
assets, comprised primarily of investments in finance receivables and operating
leases, and asset yields as well as outstanding borrowings and the cost of
funds. The Company's business is substantially dependent upon the sale of
Toyota and Lexus vehicles in the United States. For the year ended September
30, 2000, TMS sold approximately 1,629,000 automobiles and light trucks in
the United States (excluding Hawaii), of which approximately 1,033,000 were
manufactured in the United States; TMS exported approximately 36,100
automobiles. TMS' sales represented approximately 31% of TMC's worldwide
unit sales volume for the year ended March 31, 2000. For the years ended
September 30, 2000 and 1999, Toyota and Lexus vehicles accounted for
approximately 9.1% and 8.7%, respectively, of all retail automobile and light
truck unit sales volume in the United States. Changes in the volume of sales
of such vehicles resulting from governmental action, changes in consumer
demand, changes in pricing of imported units due to currency fluctuations, or
other events, could impact the level of finance and insurance operations of the
Company. To date, the level of the Company's operations has not been
restricted by the level of sales of Toyota and Lexus vehicles.
-2-
In connection with the creation of TFSC and the transfer of ownership of TMCC
from TMS to TFSC, a new credit support agreementcertificated form (the "TMC Credit Support
Agreement") has been entered into between TMC and TFSC, and a new credit
support agreement (the "TFSC Credit Support Agreement") has been entered into
between TFSC and TMCC. Under the terms of the TMC Credit Support Agreement, TMC
has agreed to: 1) maintain 100% ownership of TFSC; 2) cause TFSC and its
subsidiaries to have a net worth of at least Japanese yen 10 million; and 3)
make sufficient funds available to TFSC so that TFSC will be able to (i)
service the obligations arising out of its own bonds, debentures, notes and
other investment securities and commercial paper and (ii) honor its obligations
incurred as a result of guarantees or credit support agreements that it has
extended. The agreement is not a guarantee by TMC of any securities or
obligations of TFSC. Under the terms of the TFSC Credit Support Agreement, TFSC
agreed to: 1) maintain 100% ownership of TMCC; 2) cause TMCC and its
subsidiaries to have a net worth of at least U.S. $100,000; and 3) make
sufficient funds available to TMCC so that TMCC will be able to service the
obligations arising out of its own bonds, debentures, notes and other
investment securities and commercial paper (collectively, "TMCC Securities""Subordinated Seller's Interest").
The Subordinated Seller's Interest was retained by the Seller.
The Trust entered into a swap agreement is not a guarantee by TFSC of anywith TMCC Securities or other
obligations of TMCC. The TMC Credit Support Agreement and the TFSC Credit
Support Agreement are governed by, and construed in accordance with, the laws
of Japan. Both agreements are filed as exhibits in Item 14.
Holders of TMCC Securities will have the right to claim directly against TFSC
and TMC to perform their respective obligations under the credit support
agreements by making a written claim together with a declarationhedge floating interest
rate exposure to the effectTrust. The swap agreement enabled the Trust to issue
securities that bear interest on a basis different from that of the holder will have recourse to the rights given under the credit support
agreement. If TFSC and/or TMC receives such a claim from any holder of TMCC
Securities, TFSC and/or TMC shall indemnify, without any further action or
formality, the holder against any loss or damage resulting from the failure of
TFSC and/or TMC to perform any of their respective obligations under the credit
support agreements. The holder of TMCC Securities who made the claim may then
enforce the indemnity directly against TFSC and/or TMC.
TMC files periodic reports and other information with the Securities and
Exchange Commission ("SEC"), which can be read and copied at the public
reference facilities maintainedreceivables
held by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional officesTrust.
The assets of the SEC located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. CopiesTrust primarily include a pool of such material may also be obtained by mail from the Public
Reference Section of the SEC, at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 at prescribed rates.
A Repurchase Agreement was entered into between TMCC and TMS in October 2000
which provides that TMCC is under no obligation to TMS to finance wholesale
obligations from any dealers or retail obligations of any customers. In
addition, TMS will arrange for the repurchase of new Toyota and Lexus vehicles
financed at wholesale by TMCC at the aggregate cost financed in the event of
dealer default. The Repurchase Agreement is filed as an exhibit in Item 14.
On June 6, 2000, the Executive Committee of the Board of Directors of TMCC
approved a change in TMCC's year-end from September 30 to March 31. A report
covering the six-month transition period beginning October 1, 2000 and ending
March 31, 2001 will be filed with the SEC on Form 10-K.
-3-
Retail Leasing
TMCC purchases primarily new vehicle leaseinstallment sales
contracts originated by Toyota and
Lexus dealers. Lease contracts purchased must first meet TMCC's credit
standards after which TMCC assumes ownership of the leased vehicles and is
generally permitted to take possession of vehicles upon lessee default. TMCC
is responsible for contract collection and administration during the lease
period and for the value of the vehicle at lease maturity if the vehicle is not
purchased by the lessee or dealer. Off-lease vehicles returned to TMCC are
sold through a network of auction sites located throughout the United States as
well as through the internet. TMCC requires lessees to carry fire, theft,
collision and liability insurance on leased vehicles covering the interests of
both TMCC and the lessee. Leasing revenues contributed 72%, 76% and 80% to
total financing revenues for the fiscal years ended September 30, 2000, 1999
and 1998, respectively.
In October 1996, TMCC created Toyota Lease Trust, a Delaware business trust
(the "Titling Trust""Receivables"), to act as lessor and to hold title to leased vehicles in
specified states in connection with a lease securitization program. TMCC acts
as the servicer for lease contracts purchasedsecured by the Titling Trust from Toyota
and Lexus dealers and services such lease contracts in the same manner as
contracts owned directly by TMCC. TMCC holds an undivided trust interest in
lease contracts owned by the Titling Trust, and such lease contracts are
included in TMCC's lease assets, until such time as the beneficial interests in
such contracts are transferred in connection with a securitization transaction.
Retail Financing
TMCC purchases primarily new and used vehicle installment contracts from Toyota and Lexus dealers. Certain of the used vehicle contracts purchased by TMCC are
"Certified" Toyota and Lexus used vehicle contracts which relate to vehicles
purchased by dealers, reconditioned and certified to meet certain Toyota and
Lexus standards, and sold or leased with an extended warranty from the
manufacturer. Installment contracts purchased must first meet TMCC's credit
standards and thereafter TMCC retains responsibility for contract collection
and administration. TMCC acquires security interests in the vehicles financed
and generally can repossess vehicles if customers fail to meet contract
obligations. Substantially all of TMCC's retail financings are non-recourse
which relieves the dealers from financial responsibility in the event of
repossession. TMCC requires retail financing customers to carry fire, theft
and collision insurance on financed vehicles covering the interests of both
TMCC and the customer. Retail financing revenues contributed 23%, 20% and 16%
to total financing revenues for the fiscal years ended September 30, 2000, 1999
and 1998, respectively.
During fiscal 2000, TMCC completed the national launch of an expanded tiered
pricing program for retail vehicle contracts. The objective of the expanded
program is to better match customer risk with contract rates charged to allow
profitable purchases of a wider range of risk levels. A national launch of
an expanded tiered pricing program for lease vehicle contracts is planned for
fiscal 2001. Implementation of these expanded programs is expected to
increase contract yields and as the portfolio matures, increase credit losses
in connection with purchases of higher risk contracts.
TMS has historically and continues to sponsor special lease and retail programs
by subsidizing below market lease and retail contract rates.
-4-
A summary of vehicle retail leasing and financing activity follows:
Years Ended September 30,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Contract volume:
Lease................ 240,000 249,000 312,000 262,000 276,000
Retail............... 412,000 333,000 282,000 247,000 229,000
------- ------- ------- ------- -------
Total............. 652,000 582,000 594,000 509,000 505,000
======= ======= ======= ======= =======
Average amount financed:
Lease................ $25,500 $24,700 $24,600 $24,200 $23,300
Retail............... $17,600 $17,600 $17,100 $16,500 $16,200
Outstanding portfolio at
period end ($Millions):
Lease............. $13,084 $11,605 $11,872 $11,622 $11,917
Retail............ $10,235 $8,916 $7,834 $5,866 $5,105
Number of accounts 1,426,000 1,234,000 1,193,000 1,061,000 1,069,000
Retail receivables and interests in lease finance receivables sold, totaling
$3.8 billion as of September 30, 2000 and $4.1 billion as of September 30,
1999, which TMCC continues to service, are excluded from the outstanding
portfolio amounts in the above table.
Wholesale Financing
TMCC provides wholesale financing primarily to qualified Toyota and Lexus
vehicle dealers to finance inventories of new Toyota and Lexus vehicles and
used Toyota, Lexus and
other vehicles. TMCC acquires security interests in
vehicles financed at wholesale,The Trust's business activities include acquiring and substantially all such financings are
backed by corporate or individual guarantees from or on behalfholding
the assets of participating
dealers. In the event of dealer default, TMCC hasTrust, issuing the right to liquidate any
assets acquiredNotes and seek legal remedies pursuantdistributing proceeds to the
guarantees. Pursuant
to the Repurchase Agreement, TMS will arrange for the repurchase of new Toyota
and Lexus vehicles financed at wholesale by TMCC at the aggregate cost financed
in the event of dealer default.
A summary of vehicle wholesale financing activity follows:
Years Ended September 30,
------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Dealer loans ($Millions)..... $13,950 $11,093 $9,802 $8,573 $8,017
Dealer repayments ($Millions) $13,421 $10,983 $9,600 $8,684 $8,221
Outstanding portfolio at
period end ($Millions).... $1,410 $855 $746 $563 $668
Average amount financed
per vehicle............... $22,534 $22,120 $21,562 $20,695 $19,926
TMCC also makes term loans to dealers for business acquisitions, facilities
refurbishment, real estate purchases and working capital requirements. These
loans are typically secured with liens on real estate, other dealership assets
and/or personal guarantees of the dealers. Wholesale and other dealer
financing revenues contributed 5%, 4% and 4% to total financing revenues for
each of the fiscal years ended September 30, 2000, 1999 and 1998, respectively.
-5-
Insurance
The principal activities of TMCC's insurance subsidiary, Toyota Motor Insurance
Services, Inc. ("TMIS"), include marketing, underwriting, claims administration
and providing certain coverages related to vehicle service agreements and
contractual liability agreements sold by or through Toyota and Lexus vehicle
dealers and affiliates to customers. In addition, TMIS insures and reinsures
certain TMS and TMCC risks. Income before income taxes from insurance
operations contributed 22%, 13% and 16% to total income before income taxes for
the fiscal years ended September 30, 2000, 1999 and 1998, respectively.
Servicing
TMCC remains as servicer on accounts included in its asset-backed
securitization transactions and is paid a servicing fee.
Field Operations
During the first quarter of fiscal 2001, TMCC announced plans to restructure
the Company's field operations. The branch offices of TMCC will be converted
to serve only dealer business which includes the purchasing of contracts from
dealers, financing inventories, loans to dealers for business acquisitions,
facilities refurbishment, real estate purchases and working capital
requirements, as well as consulting on finance and insurance operations. The
other functions that the branch offices currently cover, such as customer
service, collections, lease termination and administrative functions, will be
handled by three regional call centers. The new structure is expected to be
completed in fiscal 2003.
Funding
Funding to support the Company's level of earning assets is provided by access
to the capital markets as well as earning asset liquidations and funds provided
by operating activities. Capital market funding has generally been in the form
of commercial paper, extendible commercial notes, domestic and euro medium-term
notes and bonds and transactions through the Company's asset-backed
securitization programs.
The Company uses a variety of derivative financial instruments to manage
interest rate and currency exchange exposures. The derivative instruments used
include cross currency and interest rate swap agreements, indexed note swap
agreements and option-based products. The Company does not use any of these
instruments for trading purposes.
Competition and Government Regulations
TMCC's primary competitors for retail leasing and financing are commercial
banks, savings and loan associations, credit unions, finance companies and
other captive automobile finance companies. Commercial banks and other captive
automobile finance companies also provide wholesale financing for Toyota and
Lexus dealers. Competition for the principal products and services provided
through the insurance operations is primarily from national and regional
independent service contract providers. TMCC's strategy is to supplement, with
competitive financing and insurance programs, the overall commitment of TMS to
offer a complete package of services to authorized Toyota and Lexus dealers and
their customers.
-6-
The finance and insurance operations of the Company are regulated under both
federal and state law. A majority of states have enacted legislation
establishing licensing requirements to conduct retail and other finance and
insurance activities. Most states also impose limits on the maximum rate of
finance charges. In certain states, the margin between the present statutory
maximum interest rates and borrowing costs is sufficiently narrow that, in
periods of rapidly increasing or high interest rates, there could be an adverse
effect on the Company's operations in these states if the Company were unable
to pass on increased interest costs to its customers. In addition, state laws
differ as to whether anyone suffering injury to person or property involving a
leased vehicle may bring an action against the owner of the vehicle merely by
virtue of that ownership. To the extent that applicable state law permits such
an action, TMCC may be subject to liability to such an injured party. However,
the laws of most states either do not permit such suits or limit the lessor's
liability to the amount of any liability insurance that the lessee was required
under applicable law to maintain (or, in some states, the lessor was permitted
to maintain), but failed to maintain. TMCC's lease contracts contain
provisions requiring the lessees to maintain levels of insurance satisfying
applicable state law and TMCC maintains certain levels of contingent liability
insurance for protection from catastrophic claims. TMCC currently does not
monitor ongoing insurance compliance in connection with its customary servicing
procedures.
The Company's operations are also subject to regulation under federal and state
consumer protection statutes. The Company continually reviews its operations
for compliance with applicable laws. Future administrative rulings, judicial
decisions and legislation may require modification of the Company's business
practices and documentation.
Employee Relations
At November 30, 2000, the Company had approximately 2,700 full-time employees.
The Company considers its employee relations to be good.
Segment Information
Financial information regarding industry segments is set forth in Note 17 of
the Notes to Consolidated Financial Statements.
-7-holders.
-2-
ITEM 2. PROPERTIES. (continued)
The headquarters of the Company for both finance and insurance operations is
located in Torrance, California. In addition,following tables set forth information relating to Trust asset delinquency
as of November 30, 2000,March 31, 2002 and net losses for the finance operation has three regional offices and 32 branch offices in cities
throughout the United States and one branch office in the Commonwealthperiod from December 1, 2001
through March 31, 2002:
March 31, 2002
--------------------------
Aggregate
Contracts Balances
--------- -----------
Delinquent Contracts:
(i) 31-60 Days Delinquent 1,036 $13,446,350
(ii) 61-90 Days Delinquent 125 $1,639,171
(iii) Over 90 Days Delinquent 86 $1,181,955
March 31, 2002
--------------------------
% of Puerto Rico. The insurance operation has six regional sales offices; five% of
these premises are shared with the finance operation's branch offices. A
finance and insurance service center is located in Cedar Rapids, Iowa. All
premises are occupied under lease.Aggregate
Contracts Balances
Outstanding Outstanding
----------- -----------
Delinquency Rates:
(i) 31-60 Days Delinquent 1.04% 1.00%
(ii) 61-90 Days Delinquent 0.13% 0.12%
(iii) Over 90 Days Delinquent 0.09% 0.09%
Period Ending
March 31, 2002
--------------------------
Contracts Amount
--------- ----------
Aggregate Net Losses: 54 $255,358
Reimbursed Credit Losses: $255,358
ITEM 3. LEGAL PROCEEDINGS.
Various legal actions, governmental proceedings and other claims are pending or
may be instituted or asserted in the future against TMCC and its subsidiariesThere is nothing to report with respectregard to matters arising from the ordinary course of business. Certain
of these actions are or purport to be class action suits, seeking sizeable
damages and/or changes in TMCC's business operations, policies and practices.
Certain of these actions are similar to suits, which have been filed against
other financial institutions and captive finance companies. Management and
internal and external counsel perform periodic reviews of pending claims and
actions to determine the probability of adverse verdicts and resulting amounts
of liability. The amounts of liability on pending claims and actions as of
September 30, 2000 were not determinable; however, in the opinion of
management, the ultimate liability resulting therefrom should not have a
material adverse effect on TMCC's consolidated financial position or results of
operations. The foregoing is a forward looking statement within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, which represents the Company's expectations
and beliefs concerning future events. The Company cautions that its discussion
of Legal Proceedings is further qualified by important factors that could cause
actual results to differ materially from those in the forward looking
statement, including but not limited to the discovery of facts not presently
known to the Company or determinations by judges, juries or other finders of
fact which do not accord with the Company's evaluation of the possible
liability from existing litigation.this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.There is nothing to report with regard to this item.
-3-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
TMCC is a wholly-owned subsidiaryThe holder of TFSA and, accordingly,record of all sharesoffered Notes as of March 31, 2002, was Cede & Co.,
the nominee of The Depository Trust Company ("DTC") in the United States.
Direct participants active in the DTC system include Euroclear Bank S.A./N.V.,
as operator of the Company's stockEuroclear System, Clearstream Banking, societe anonyme, and
securities brokers and dealers, banks, trust companies and clearing
corporations. Sixty-three DTC participants hold the offered Notes as of the
date hereof. The Notes are ownednot listed on any securities exchange.
The Toyota Auto Receivables 2002-A Owner Trust issued and publicly offered the
following three classes of securities covered by TFSA. There is no market for TMCC's stock.
No dividendsRegistration Statement
Nos. 333-58164, 333-58164-01 and 333-58164-02 (declared effective April 20,
2001), and Nos. 333-74872 and 333-74872-01 (declared effective
January 11, 2002): $387,000,000 aggregate principal amount of Adjustable Rate
Asset Backed Notes, Class A-2, $429,000,000 aggregate principal amount of
Adjustable Rate Asset Backed Notes, Class A-3, $234,932,000 aggregate principal
amount of 4.000% Asset Backed Notes, Class A-4 pursuant to the Indenture. The
aggregate offering prices of Class A-2, Class A-3, and Class A-4 Notes,
expenses incurred and underwriting discounts, fees and commissions paid by the
issuer through the date hereof (all of which were paid to unaffiliated third
party service providers) are all as disclosed in the related Prospectus and
Registration Statement.
Subject to the terms and conditions of the Underwriting Agreement relating to
the offered Notes, TAFR LLC sold the principal amount of the offered Notes to
J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated, Banc One
Capital Markets, Inc., Deutsche Banc Alex. Brown Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, and Salomon Smith Barney Inc. The offering has
terminated and all of the Notes have been declared or paidsold.
The net proceeds received by TAFR LLC from the sale of the Notes was used to
date.
-8-
purchase the Receivables from TMCC pursuant to the Receivables Purchase
Agreement.
ITEM 6. SELECTED FINANCIAL DATA.
Years Ended September 30,
-------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
(Dollars in Millions)
INCOME STATEMENT DATA
Financing Revenues:
Leasing.......................... $ 2,402 $ 2,397 $ 2,595 $ 2,743 $ 2,453
Retail financing................. 768 645 531 433 402
Wholesale and other
dealer financing.............. 182 123 114 101 122
------- ------- ------- ------- -------
Total financing revenues......... 3,352 3,165 3,240 3,277 2,977
Depreciation on leases........... 1,440 1,664 1,681 1,793 1,625
Interest expense................. 1,289 940 994 918 820
------- ------- ------- ------- -------
Net financing revenues........... 623 561 565 566 532
Insurance premiums earned and
contract revenues............. 138 122 112 97 86
Investment and other income...... 99 88 79 66 41
Loss on asset impairment......... 74 19 - - -
------- ------- ------- ------- -------
Net financing revenues
and other revenues............ 786 752 756 729 659
------- ------- ------- ------- -------
Expenses:
Operating and administrative..... 400 376 323 259 235
Provision for credit losses...... 135 83 127 136 115
Insurance losses and loss
adjustment expenses........... 81 63 55 51 49
------- ------- ------- ------- -------
Total expenses................... 616 522 505 446 399
------- ------- ------- ------- -------
Income before income taxes....... 170 230 251 283 260
Equity in net loss of subsidiary. 1 - - - -
Provision for income taxes....... 65 98 107 121 108
------- ------- ------- ------- -------
Net Income....................... $ 104 $ 132 $ 144 $ 162 $ 152
======= ======= ======= ======= =======
Ratio of earnings to
fixed charges................. 1.13 1.24 1.25 1.31 1.32
-9-
Years Ended September 30,
-------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
(Dollars in Millions)
BALANCE SHEET DATA
Finance receivables, net......... $18,168 $13,856 $11,521 $8,452 $7,474
Investments in operating
leases, net.................... $ 7,964 $ 8,605 $ 9,765 $10,257 $10,831
Total assets..................... $28,036 $24,578 $23,225 $19,830 $19,309
Notes and loans payable.......... $21,098 $18,565 $17,597 $14,745 $15,014
Capital stock.................... $915 $915 $915 $915 $915
Retained earnings................ $1,539 $1,435 $1,303 $1,159 $997
Certain prior period amounts have been reclassified to conform with the current
period presentation.
-10-
Omitted.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Income
- ----------
The following table summarizes TMCC's net income by business segment for the
fiscal years ended September 30, 2000, 1999 and 1998:
Years Ended September 30,
-------------------------
2000 1999 1998
---- ---- ----
(Dollars in Millions)
Net income:
Financing operations................ $ 70 $113 $119
Insurance operations................ 34 19 25
---- ---- ----
Total net income................. $104 $132 $144
==== ==== ====
Net income from financing operations decreased 38% in fiscal 2000, primarily
due to lower interest margin as a result of higher interest expense, the
recognition of asset impairment losses, higher provision for credit losses, and
higher operating and administrative expenses. The decrease in fiscal 1999
financing operations net income from fiscal 1998 reflects lower financing
revenues and higher operating and administrative expenses, substantially offset
by lower interest expense, lower provision for credit losses and lower
depreciation on leases.
Net income from insurance operations increased 79% in fiscal 2000, primarily
due to higher insurance premiums earned and contract revenues, higher
investment income and lower provision for income taxes, partially offset by
higher insurance losses and loss adjustment expenses. The decrease in fiscal
1999 net income reflects higher operating and administrative expenses and lower
investment income.
-11-
Earning Assets
- --------------
The composition of TMCC's net earning assets (which excludes retail receivables
and interests in lease finance receivables sold through securitization
transactions), as of the balance sheet dates reported herein and TMCC's vehicle
lease and retail contract volume and finance penetration for the years ended
September 30, 2000, 1999, and 1998 are summarized below:
September 30,
---------------------------
2000 1999 1998
------- ------- -------
(Dollars in Millions)
Vehicle lease
Investment in operating leases, net........ $ 7,580 $ 8,290 $ 9,559
Finance leases, net........................ 5,504 3,315 2,313
------- ------- -------
Total vehicle leases......................... 13,084 11,605 11,872
Vehicle retail finance receivables, net...... 10,235 8,916 7,834
Vehicle wholesale and other financing........ 3,043 2,142 1,800
Allowance for credit losses.................. (230) (202) (220)
------- ------- -------
Total net earning assets..................... $26,132 $22,461 $21,286
======= ======= =======
Years Ended September 30,
---------------------------
2000 1999 1998
------- ------- -------
Total contract volume:
Vehicle lease............................. 240,000 249,000 312,000
Vehicle retail............................ 412,000 333,000 282,000
------- ------- -------
Total........................................ 652,000 582,000 594,000
======= ======= =======
TMS sponsored contract volume:
Vehicle lease............................. 59,000 96,000 170,000
Vehicle retail............................ 44,000 46,000 80,000
------- ------- -------
Total........................................ 103,000 142,000 250,000
======= ======= =======
Used contract volume:
Vehicle lease............................. 8,000 6,000 7,000
Vehicle retail............................ 149,000 112,000 94,000
------- ------- -------
Total........................................ 157,000 118,000 101,000
======= ======= =======
Finance penetration (excluding fleet):
Vehicle lease............................. 15.4% 17.7% 25.3%
Vehicle retail............................ 17.5% 16.0% 15.7%
------- ------- -------
Total........................................ 32.9% 33.7% 41.0%
======= ======= =======
-12-
TMCC's net earning assets as of September 30, 2000 increased from September 30,
1999 due to growth in retail, finance lease and wholesale earning assets,
partially offset by a decline in operating lease earning assets. The increase
in retail earning assets was primarily due to higher retail contract volume,
partially offset by the sale of $1.5 billion of retail finance receivables
during fiscal 2000. Finance lease earning assets increased from September 30,
1999 as fiscal 2000 volume exceeded liquidations. Wholesale earning assets
increased from September 30, 1999 primarily due to an increase in the number of
dealers receiving wholesale financing. The increase in allowance for credit
losses reflects asset growth.
TMCC's net earning assets as of September 30, 1999 increased from September 30,
1998 primarily due to growth in retail and wholesale earning assets, partially
offset by a decline in lease earning assets.
In October 1996, TMCC created Toyota Lease Trust, a Delaware business trust
(the "Titling Trust"), to act as a lessor and to hold title to leased
vehicles in specified states. The value of the lease contracts purchased by
the Titling Trust in fiscal 2000 and 1999 represented approximately 43% and
41%, respectively, of all lease contracts purchased by both TMCC and the
Titling Trust. TMCC holds an undivided trust interest in lease contracts
owned by the Titling Trust, and such lease contracts are included in TMCC's
lease assets, until such time as the beneficial interests in such contracts
are transferred in connection with a securitization transaction.
Substantially all leases owned by the Titling Trust are classified as finance
receivables due to certain residual value insurance arrangements in place
with respect to such leases, while leases of similar nature originated
outside of the Titling Trust are classified as operating leases. The
continued acquisition of leases by the Titling Trust has changed the
composition of earning assets resulting in an increasing mix of finance
receivables relative to operating lease assets due to the classification
differences described above.
TMS sponsors special lease and retail programs which subsidize reduced monthly
payments on certain Toyota and Lexus new vehicles and Toyota industrial
equipment to qualified lease and retail customers. Support amounts received
from TMS in connection with these programs approximate the balances required by
TMCC to maintain revenues at standard program levels and are earned over the
expected lease and retail installment contract terms. The level of sponsored
program activity varies based on TMS marketing strategies, and revenues earned
vary based on the mix of Toyota and Lexus vehicles, timing of programs and the
level of support provided. Support amounts earned from TMS sponsored special
lease and retail contracts totaled $108 million, $126 million and $142 million
for fiscal years 2000, 1999 and 1998, respectively.
TMCC's lease contract volume for the year ended September 30, 2000 declined
from 1999 reflecting lower levels of programs sponsored by TMS. TMCC's retail
contract volume for the year ended September 30, 2000 increased from 1999
levels due to competitive pricing and the strong sales of Toyota and Lexus
vehicles.
The increase in used vehicle retail contract volume during fiscal 2000 and 1999
reflects a large supply of used vehicles due to the volume of vehicles coming
off-lease as well as a shift from leasing to retail financing.
Lower lease contract volume in 1999 compared to 1998 was primarily due to lower
finance penetration due to changes in lease programs and the residual value
setting policy, as well as lower levels of programs sponsored by TMS. Higher
retail contract volume in 1999 compared to 1998 was primarily due to
competitive pricing and strong sales of Toyota and Lexus vehicles.
-13-
Net Financing Revenue and Other Revenues
- ----------------------------------------
TMCC's net financing revenues increased in fiscal 2000 primarily due to lower
depreciation expenses and higher retail and wholesale revenues, substantially
offset by higher interest expense. The decrease in fiscal 1999 net financing
revenues was primarily due to lower leasing revenues, offset by lower interest
expense and increased retail and wholesale revenues. TMCC's continued use of
the Titling Trust to purchase leases has caused a shift in the composition of
earning assets from operating leases to finance receivables, as discussed
earlier, and resulted in increased revenues from finance leases and reduced
operating lease revenues and depreciation on operating leases.
Insurance premiums earned and contract revenues increased 13% and 9% in fiscal
2000 and 1999, respectively, due to higher underwriting revenues associated
with in-force agreements.
The following table summarizes TMCC's investment and other income for the
fiscal years ended September 30, 2000, 1999 and 1998:
Years Ended September 30,
--------------------------
2000 1999 1998
---- ---- ----
(Dollars in Millions)
Investment income................................... $ 60 $ 34 $ 32
Servicing fee income................................ 34 39 26
Gains on assets sold................................ 5 15 21
---- ---- ----
Investment and other income...................... $ 99 $ 88 $ 79
==== ==== ====
The increase in investment and other income from fiscal 1999 to fiscal 2000 is
primarily due to higher investment income, partially offset by lower gains on
assets sold and lower servicing fee income. The increase in investment and
other income from fiscal 1998 to fiscal 1999 is primarily due to higher
servicing fee income, partially offset by lower gains on assets sold.
The increase in investment income in fiscal 2000 reflects higher market
interest rates and an increase in TMCC's portfolio of marketable securities.
Servicing fee income decreased 13% in fiscal 2000 due to the reduction in the
average balance of sold interests in lease and retail finance receivables as
well as the temporary waiver of servicing fee income related to the fiscal
1997 sale of interests in lease finance receivables. Servicing fee income
increased 50% in fiscal 1999 due to the growth in the combined balance of
sold interests in lease finance and sold retail receivables.
Gains recognized on asset-backed securitization transactions generally
accelerate the recognition of income on lease and retail contracts, net of
servicing fees and other related deferrals, into the period the assets are
sold. Numerous factors can affect the timing and amounts of these gains, such
as the type and amount of assets sold, the structure of the sale, key
assumptions used and current financial market conditions. Gains on assets sold
decreased $10 million and $6 million during fiscal years 2000 and 1999,
respectively, primarily due to increases in market interest rates which result
in narrower spreads being retained by the Company.
-14-
TMCC performs a quarterly review of the fair market value of assets retained
in the sale of interests in lease finance receivables. The fair market value
of these retained assets are impacted by management's expectations as to
future losses on vehicle disposition, credit losses and prepayment rates.
During the third quarter of fiscal 2000, the Company refined its methodology
for forecasting losses on vehicle disposition to better reflect recent and
expected loss experience. TMCC recognized losses due to the permanent
impairment of assets retained in the sale of interests in lease finance
receivables totaling $74 million and $19 million during the years ended
September 30, 2000 and 1999, respectively, resulting from an increase in
vehicle disposition loss assumptions related to leases originated prior to
model year 1999 and terminating fiscal years 2000 through 2002.
Depreciation on Leases
- ----------------------
The following table sets forth the items included in TMCC's depreciation on
leases for the years ended September 30, 2000, 1999 and 1998:
September 30,
---------------------------
2000 1999 1998
------ ------ ------
(Dollars in Millions)
Straight-line depreciation on operating leases.... $1,273 $1,378 $1,501
Provision for residual value losses............... 202 286 260
TMS support for certain vehicle disposition
losses........................................ (35) - (80)
------ ------ ------
Total depreciation on leases...................... $1,440 $1,664 $1,681
====== ====== ======
Straight-line depreciation expense decreased 8% during fiscal 2000 and 1999
corresponding with a decline in average operating lease assets. As discussed
earlier, the acquisition of leases by the Titling Trust has increased the
ratio of lease finance receivables relative to operating lease assets, which
results in reduced operating lease revenues and depreciation on operating
leases.
TMCC is subject to residual value risk in connection with its lease
portfolio. TMCC's residual value exposure is a function of the number of off-
lease vehicles returned for disposition and any shortfall between the net
disposition proceeds and the estimated unguaranteed residual values on
returned vehicles. If the market value of a leased vehicle at contract
termination is less than its contract residual value, the vehicle is more
likely to be returned to TMCC. A higher rate of vehicle returns exposes TMCC
to a risk of higher aggregate losses.
Total unguaranteed residual values related to TMCC's vehicle lease portfolio
increased from approximately $6.5 billion at September 30, 1999 to $7.0
billion at September 30, 2000. TMCC maintains an allowance for estimated
losses on lease vehicles returned to the Company for disposition at lease
termination. The level of allowance required to cover future vehicle
disposition losses is based upon projected vehicle return rates and projected
residual value losses derived from market information on used vehicle sales,
historical factors, including lease return trends, and general economic
factors.
-15-
The decrease in the provision for residual value losses in fiscal 2000
reflects reduced losses at vehicle disposition, as well as management's
estimate that current reserve levels are considered adequate to cover
expected losses at vehicle disposition as of September 30, 2000. Losses at
vehicle disposition decreased $30 million and $42 million during fiscal 2000
and fiscal 1999, respectively. The decrease in vehicle disposition losses
was primarily due to a decrease in the number of vehicles scheduled to
terminate resulting from the sale of interests in lease finance receivables
during fiscal 1997 and 1998, partially offset by a higher rate of vehicle
returns. The Company has taken action to reduce vehicle disposition losses
by developing strategies to increase dealer and lessee purchases of off-
lease vehicles, expanding marketing of off-lease vehicles through the
internet and maximizing proceeds on vehicles sold through auction. In
addition, TMCC implemented a new residual value setting policy for new model
year 1999 Toyota vehicles that separately calculates the residual value
applicable to the base vehicle and the residual value applicable to certain
specified optional accessories and optional equipment.
The number of returned leased vehicles sold by TMCC during a specified period
as a percentage of the number of lease contracts that as of their origination
dates were scheduled to terminate ("full term return ratio") was 50% for
fiscal 2000 as compared to 47% and 40% for fiscal 1999 and 1998,
respectively. TMCC believes that industry-wide record levels of incentives on
new vehicles and a large supply of late model off-lease vehicles have put
downward pressure on used car prices. In addition, TMCC's increased vehicle
return rates reflect the impact of competitive new vehicle pricing for core
Toyota and Lexus models. Return rates and losses may also be affected by the
amount and types of accessories or installed optional equipment included in
leased vehicles. Although vehicle loss rates are typically the result of a
combination of factors, to the extent certain types of optional equipment
depreciate more quickly than the value of the base vehicle, leased vehicles
having a greater portion of their manufacturer's suggested retail price
attributable to such optional equipment will experience relatively higher
levels of loss. TMCC expects the large supply of vehicles coming off-lease to
continue through fiscal 2001 and that the full term return ratio and losses
will remain at or near current levels.
Under an arrangement with TMS, TMCC received support for vehicle disposition
losses in fiscal years 2000 and 1998; no assurance can be provided as to
either the level of support or the continuation of the support arrangement in
future periods.
TMCC's lease portfolio includes contracts with original terms ranging from 12
to 60 months; the average original contract term in TMCC's lease portfolio
was 42 months and 40 months at September 30, 2000 and 1999, respectively.
Interest Expense
- ----------------
Interest expense increased 37% in fiscal 2000 compared with fiscal 1999
primarily due to higher average cost of borrowings and an increase in average
debt outstanding. Interest expense decreased 5% in fiscal 1999 reflecting
lower average cost of borrowings, partially offset by an increase in average
debt outstanding. The weighted average cost of borrowings was 6.30%, 5.34% and
5.85% for the years ended September 30, 2000, 1999 and 1998, respectively.
Increases in TMCC's interest costs are expected to continue through fiscal 2001
reflecting the increases in market interest rates during fiscal 2000 and 1999.
-16-
Operating and Administrative Expenses
- -------------------------------------
Operating and administrative expenses increased 6% and 16% in fiscal 2000 and
1999, respectively. The increase in fiscal 2000 reflects expenses associated
with technology-related projects, as well as costs to support TMCC's growing
customer base. The increase in fiscal 1999 reflects primarily additional
personnel and operating costs required to support TMCC's growing customer base,
growth in the Company's insurance operations, as well as costs in connection
with technology upgrades and software modifications to address year 2000
issues.
Included in operating and administrative expenses are charges allocated by
TMS for certain technological and administrative services provided to TMCC.
On October 1, 2000, TMS and TMCC entered into a Shared Services Agreement
covering the services TMS will continue to provide after the ownership of
TMCC was transferred to TFSA. During fiscal 2000, charges reimbursed by TMCC
to TMS totaled $25 million. Net charges to be reimbursed by TMCC to TMS
during the six months ended March 31, 2001 are estimated to range between $22
million and $28 million. The Shared Services Agreement is filed as an
exhibit in Item 14.
A credit support fee agreement expected to be entered into between TMCC and
TFSC provides that TMCC will pay to TFSC a semi-annual fee equal to a
percentage of the outstanding amount of TMCC's Securities entitled to credit
support, as described under Item 1. Credit support fees to be included in
operating and administrative expenses for the six months ended March 31, 2001
are estimated to be $6 million.
Operating and administrative expenses are also expected to increase as a
result of the planned restructuring of TMCC's field operations. The branch
offices of TMCC will be converted to serve only dealer business which
includes the purchasing of contracts from dealers, financing inventories,
loans to dealers for business acquisitions, facilities refurbishment, real
estate purchases and working capital requirements, as well as consulting on
finance and insurance operations. The other functions that the branch
offices currently cover, such as customer service, collections, lease
termination and administrative functions, will be handled by three regional
call centers. The new structure is expected to be completed in fiscal 2003.
Restructuring charges to be recognized during the six months ended March 31,
2001 are not expected to exceed $10 million. Additional restructuring
charges are expected through fiscal 2003.
Provision for Credit Losses
- ---------------------------
TMCC's provision for credit losses increased 63% during fiscal 2000 reflecting
growth in earning assets. The provision for credit losses decreased 35% during
fiscal 1999 based on improved credit loss experience, portfolio composition and
other factors. Allowances for credit losses are evaluated periodically,
considering historical loss experience and other factors, and are considered
adequate to cover expected credit losses as of September 30, 2000.
During fiscal 2000, TMCC completed the national launch of an expanded tiered
pricing program for retail vehicle contracts. The objective of the expanded
program is to better match customer risk with contract rates charged to allow
profitable purchases of a wider range of risk levels. A national launch of
an expanded tiered pricing program for lease vehicle contracts is planned for
fiscal 2001. Implementation of these expanded programs is expected to
increase contract yields and as the portfolio matures, increase credit losses
in connection with purchases of higher risk contracts.
-17-
An analysis of credit losses and the related allowance follows, excluding net
losses on receivables sold subject to limited recourse provisions:
Years ended September 30,
------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(Dollars in Millions)
Allowance for credit losses
at beginning of period......... $202 $220 $213 $203 $171
Provision for credit losses....... 135 83 127 136 115
Charge-offs....................... (116) (104) (120) (116) (81)
Recoveries........................ 19 17 17 12 12
Other Adjustments................. (10) (14) (17) (22) (14)
---- ---- ---- ---- ----
Allowance for credit losses
at end of period............... $230 $202 $220 $213 $203
==== ==== ==== ==== ====
Allowance for credit losses
as a percent of gross
earning assets................ 0.87% 0.89% 1.02% 1.13% 1.10%
Net credit losses as a percent
of average earning assets.. .. .39% .40% .51% .55% .41%
Aggregate balances at end of
period for lease rentals
and installments 60
or more days past due.......... $54 $35 $30 $30 $29
Aggregate balances at end of
period for lease rentals
and installments 60 or more
days past due as a percent
of net investments in operating
leases and gross receivables
outstanding.................... .20% .15% .14% .15% .15%
-18-
LIQUIDITY AND CAPITAL RESOURCES
The Company requires, in the normal course of business, substantial funding to
support the level of its earning assets. Significant reliance is placed on the
Company's ability to obtain debt funding in the capital markets in addition to
funding provided by earning asset liquidations and cash provided by operating
activities as well as transactions through the Company's asset-backed
securitization programs. Debt issuances have generally been in the form of
commercial paper, extendible commercial notes ("ECNs") and domestic and euro
medium-term notes ("MTNs") and bonds.
Commercial paper and ECN issuances are used to meet short-term funding needs.
Commercial paper outstanding under TMCC's commercial paper program ranged from
approximately $1.5 billion to $4.0 billion during fiscal 2000, with an average
outstanding balance of $2.7 billion. The outstanding balance of ECNs at
September 30, 2000 totaled $195 million.
For additional liquidity purposes, TMCC maintains syndicated bank credit
facilities with certain banks, which aggregated $3.0 billion at November 30,
2000. No loans were outstanding under any of these bank credit facilities
during fiscal 2000. TMCC also maintains, uncommitted, unsecured lines of
credit with banks totaling $125 million. At November 30, 2000, TMCC had issued
approximately $1 million in letters of credit.
Long-term funding requirements are met through the issuance of a variety of
debt securities underwritten in both the United States and international
capital markets. Domestic and euro MTNs and bonds have provided TMCC with
significant sources of funding. During fiscal 2000, TMCC issued approximately
$4.9 billion of domestic and euro MTNs and bonds all of which had original
maturities of one year or more.
The original maturities of all MTNs and bonds outstanding at September 30,
2000 ranged from nine months to eleven years. As of September 30, 2000, TMCC
had total MTNs and bonds outstanding of $17.5 billion, of which $7.0 billion
was denominated in foreign currencies.
TMCC anticipates continued use of MTNs and bonds in both the United States and
international capital markets. The Company maintains a shelf registration with
the SEC providing for the issuance of MTNs and other debt securities. At
November 30, 2000, approximately $3.3 billion was available for issuance under
this registration statement. The maximum aggregate principal amount authorized
to be outstanding at any time under TMCC's euro MTN program is $16.0 billion.
Approximately $4.8 billion was available for issuance under the euro MTN
program as of November 30, 2000. The United States and euro MTN programs may
be expanded from time to time to allow for the continued use of these sources
of funding. In addition, TMCC may issue bonds in the domestic and
international capital markets that are not issued under its MTN programs.
Additionally, TMCC uses its asset-backed securitization programs to generate
funds for investment in earning assets as described in Note 7 to the
Consolidated Financial Statements. TMCC maintains a shelf registration
statement with the SEC relating to the issuance of asset-backed notes secured
by, and certificates representing interests, in retail receivables. During the
year ended September 30, 2000, TMCC sold retail receivables totaling $1.5
billion in connection with securities issued under the shelf registration
statement. As of November 30, 2000, $1.5 billion remained available for
issuance under the registration statement.
-19-
In March 2000, certain nationally recognized statistical rating organizations
placed several classes of TMCC's lease securitizations under review for
possible downgrade as a result of higher than expected residual value losses.
In May 2000, TMCC made a cash capital contribution totaling $102 million to
Toyota Leasing, Inc., a wholly-owned subsidiary of TMCC, for deposit into the
reserve funds of the lease securitizations under review. In addition, a
portion of the monthly excess cash flows in the transactions are being
retained in these reserve funds to supplement the capital contribution. As a
result of TMCC's actions, the rating organizations affirmed the original
credit ratings for the lease asset-backed securities. TMCC's long term
unsecured ratings were unaffected by these events. TMCC does not believe
that the rating organization actions have had a material adverse effect on
its liquidity or access to capital markets.
TMCC's ratio of earnings to fixed charges was 1.13, 1.24 and 1.25 in the years
ended September 30, 2000, 1999, and 1998, respectively. TMCC believes that the
decline in the ratio has not affected its ability to maintain liquidity or
access to outside funding sources. The decline in the ratio during fiscal 2000
was due to several factors including lower interest margin as a result of
higher interest expense, the recognition of asset impairment losses, higher
provision for credit losses and higher operating and administrative expenses.
Cash flows provided by operating, investing and financing activities have been
used primarily to support earning asset growth. Cash provided by the
liquidation and sale of earning assets, totaling $23.0 billion and $21.0
billion during fiscal 2000 and 1999, respectively, was used to purchase
additional investments in operating leases and finance receivables, totaling
$28.2 billion and $23.9 billion during fiscal 2000 and 1999, respectively.
Investing activities resulted in a net use of cash of $5.1 billion and
$3.3 billion in fiscal 2000 and 1999, respectively, as the purchase of
additional earning assets exceeded cash provided by the liquidation of earning
assets. Net cash provided by operating activities totaled $1.9 billion and
$2.3 billion in fiscal 2000 and 1999, and net cash provided by financing
activities totaled $3.1 billion and $1.1 billion, during fiscal 2000 and 1999,
respectively. The Company believes that cash provided by operating and
investing activities as well as access to domestic and international capital
markets, the issuance of commercial paper and ECNs, and asset-backed
securitization transactions will provide sufficient liquidity to meet its
future funding requirements.
-20-
Euro Conversion
- ---------------
On January 1, 1999, eleven of the fifteen member countries of the European
Union (the "participating countries") established fixed conversion rates
between their existing sovereign currencies (the "legacy currencies") and the
euro. The participating countries agreed to adopt the euro as their common
legal currency on the date that the euro began trading on currency exchanges
and was available for non-cash transactions. The legacy currencies are
scheduled to remain legal tender in the participating countries as
denominations of the euro until January 1, 2002 (the "transition period").
During the transition period, public and private parties may pay for goods
and services using either the euro or the participating country's legacy
currency. Beginning January 1, 2002, the participating countries will issue
new euro-denominated bills and coins for use in cash transactions and legacy
currencies will be withdrawn from circulation, signifying the completion of
the euro conversion process.
As TMCC does not currently support Toyota finance operations in Europe, the
impact of the euro conversion is limited to issues in connection with raising
funds in the European capital markets. TMCC generally hedges all foreign
exchange exposure associated with its funding activities which limits its
exposure to movements in foreign exchange rates. In addition, payments in
foreign currencies owed by TMCC are made by its counterparties under
International Swaps and Derivatives Association, Inc. ("ISDA") master
agreements governing swap transactions. Accordingly, TMCC did not need to
make any material changes to its systems to accommodate these types of
payments. TMCC has provided changes to its standard settlement instructions
to the extent necessary to reflect changes in account information and payment
instructions occurring as a result of the introduction of the euro. TMCC
does not believe that it will experience significant issues relating to the
continuity of TMCC's contracts arising from the introduction of the euro.
The ISDA Master Agreements entered into by TMCC are generally governed by New
York law. New York has adopted legislation which prevents a party to a
contract from unilaterally breaking or changing its contractual obligations
as a result of the euro conversion. In addition, TMCC is a party to the EMU
Protocol published by ISDA designed to clarify the effects of certain issues
surrounding the introduction of the euro including continuity of contracts,
price source changes, payment netting and certain definitions.
The introduction of the euro has not had a material adverse effect on the
Company's operations or financial results. The Company plans to continue to
consider the euro in future funding strategies and will continue to fund in
all markets which are cost-effective.
-21-
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
The foregoing Business description and Management's Discussion and Analysis
contain various "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which represent the Company's expectations or
beliefs concerning future events, including the following: that the Company
considers its employee relations to be good; that increases in interest costs
are expected to continue through fiscal 2001; that TMCC anticipates continued
growth in operating and administrative expenses reflecting costs associated
with technology initiatives and operating and administrative services provided
by TMS, credit support fees and the restructuring of TMCC's field operations;
that the implementation of the expanded tiered pricing programs may result in
increased contract yields and as the portfolio matures, increased credit
losses in connection with purchases of higher risk contracts; that TMCC expects
the large supply of vehicles coming off-lease to continue through fiscal 2001
and that the full term return ratio and losses will remain at or near current
levels; that allowances for credit losses are considered adequate to cover
expected credit losses; that TMCC anticipates continued use of MTNs and bonds
in the United States and the international capital markets; that TMCC may issue
bonds in the domestic and international capital markets that are not issued
under its MTN programs; that the decline in the ratio of earnings to fixed
charges has not affected its ability to maintain liquidity or access to outside
funding sources; that cash provided by operating and investing activities as
well as access to domestic and international capital markets, the issuance of
commercial paper and ECNs, and asset-backed securitization transactions will
provide sufficient liquidity to meet its future funding requirements; that TMCC
does not believe that it will experience significant issues relating to the
continuity of TMCC's contracts arising from the introduction of the euro; that
the Company does not currently anticipate non-performance by any of its
counterparties;
The Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those in the
forward looking statements, including, without limitation, the following:
decline in demand for Toyota and Lexus products; the effect of economic
conditions; a decline in the market acceptability of leasing; the effect of
competitive pricing on interest margins; increases in prevailing interest
rates; changes in pricing due to the appreciation of the Japanese yen against
the United States dollar; the effect of governmental actions; the effect of
competitive pressures on the used car market and residual values and the
continuation of the other factors causing an increase in vehicle returns and
disposition losses; the continuation of, and if continued, the level and type
of special programs offered by TMS; the ability of the Company to successfully
access the United States and international capital markets; the effects of any
rating agency actions; increases in market interest rates; the monetary
policies exercised by the European Central Bank and other monetary authorities;
increased costs associated with the Company's debt funding efforts; with
respect to the effects of litigation matters, the discovery of facts not
presently known to the Company or determination by judges, juries or other
finders of fact which do not accord with the Company's evaluation of the
possible liability from existing litigation; and the ability of the Company's
counterparties to perform under interest rate and cross currency swap
agreements. Results actually achieved thus may differ materially from expected
results included in these statements.
-22-
New Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", effective
for fiscal years beginning after June 15, 1999. SFAS No. 133 requires
companies to record derivatives on the balance sheet as assets and liabilities,
measured at fair value. Gains and losses resulting from changes in the values
of those derivatives would be accounted for as either components of earnings or
accumulated other comprehensive income depending on the use of the derivative
and whether it qualifies for hedge accounting. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133", which defers the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of FASB Statement No.
133", which amends the accounting and reporting standards of
Statement No. 133. The Company adopted SFAS Nos. 133 and 138 on
October 1, 2000. The adoption of these new accounting standards will
result in cumulative after-tax reductions in net income of approximately
$2 million. The adoption will also impact assets and liabilities
recorded on the balance sheet.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". This
statement replaces SFAS No. 125 and revises the standards for accounting for
securitizations and other transfers of financial assets and collateral. SFAS
No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. This statement
is effective for recognition and reclassification of collateral and for
disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. The Company has not determined the
impact that adoption of this standard will have on its consolidated financial
statements.
-23-
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
TMCC utilizes a variety of interest rate and currency derivative financial
instruments to manage interest rate and currency exchange exposures. The
derivative instruments used include cross currency and interest rate swaps,
indexed note swaps and option-based products. TMCC does not use any of these
instruments for trading purposes. The total notional amounts of TMCC's
derivative financial instruments at September 30, 2000 and 1999 were
$32.0 billion and $26.0 billion, respectively. The notional amounts of
interest rate and indexed note swap agreements and option-based products do not
represent amounts exchanged by the parties and, thus, are not a measure of the
Company's exposure through its use of derivatives. The only market rate risk
related to TMCC's portfolio is interest rate risk as foreign currency risks are
entirely hedged through cross currency interest rate swap agreements.
TMCC utilizes interest rate swap agreements in managing its exposure to
interest rate fluctuations. Interest rate swap agreements are executed as an
integral part of specific debt transactions or on a portfolio basis. TMCC's
interest rate swap agreements involve agreements to pay fixed and receive a
floating rate, or receive fixed and pay a floating rate, at specified
intervals, calculated on an agreed-upon notional amount. Interest rate swap
agreements may also involve basis swap contracts which are agreements to
exchange the difference between certain floating interest amounts, such as the
net payment based on the commercial paper rate and the London Interbank Offered
Rate ("LIBOR"), calculated on an agreed-upon notional amount.
TMCC also utilizes option-based products in managing its exposure to interest
rate fluctuations. Option-based products are executed on a portfolio basis and
consist primarily of purchased interest rate cap agreements and, to a lesser
extent, corridor agreements. Option-based products are agreements which either
grant TMCC the right to receive, or require TMCC to make payments at, specified
interest rate levels.
TMCC utilizes indexed note swap agreements in managing its exposure in
connection with debt instruments whose interest rate and/or principal
redemption amounts are derived from other underlying instruments. Indexed note
swap agreements involve agreements to receive interest and/or principal amounts
associated with the indexed notes, denominated in either U.S. dollars or a
foreign currency, and to pay fixed or floating rates on fixed U.S. dollar
liabilities.
TMCC utilizes cross currency interest rate swap agreements to entirely hedge
exposure to 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 executed cross currency
interest rate swap agreements which involve the exchange of foreign currency
principal and interest obligations for U.S. dollar obligations at agreed-upon
currency exchange and interest rates.
Derivative financial instruments used by TMCC involve, to varying degrees,
elements of credit risk in the event a counterparty should default and market
risk as the instruments are subject to rate and price fluctuations. Credit
risk is managed through the use of credit standard guidelines, counterparty
diversification, monitoring of counterparty financial condition and master
netting agreements in place with all derivative counterparties. Credit exposure
of derivative financial instruments is represented by the fair value of
contracts with a positive fair value at September 30, 2000 reduced by the
effects of master netting agreements. The credit exposure of TMCC's derivative
financial instruments at September 30, 2000 was $95 million on an aggregate
notional amount of $32.0 billion. Additionally, at September 30, 2000,
approximately 89% of TMCC's derivative financial instruments, based on notional
amounts, were with commercial banks and investment banking firms assigned
investment grade ratings of "AA" or better by national rating agencies. TMCC
does not currently anticipate non-performance by any of its counterparties and
has no reserves related to non-performance as of September 30, 2000; TMCC has
not experienced any counterparty default during the three years ended
September 30, 2000.
-24-
TMCC uses a value-at-risk methodology, in connection with other management
tools, to assess and manage the interest rate risk of aggregated loan and lease
assets and financial liabilities, including interest rate derivatives and
option-based products. Value-at-risk represents the potential losses in fair
value for a portfolio from adverse changes in market factors for a specified
period of time and likelihood of occurrence (i.e. level of confidence).
TMCC's value-at-risk methodology incorporates the impact from adverse changes
in market interest rates but does not incorporate any impact from other
market changes, such as foreign currency exchange rates or commodity prices,
which do not affect the value of TMCC's portfolio. The value-at-risk
methodology excludes changes in fair values related to investments in
marketable securities and equipment financing as these amounts are not
significant to TMCC's total portfolio.
The value-at-risk methodology uses five years of historical interest rate
data to build a database of prediction errors in forward rates for a one
month holding period. These prediction errors are then applied randomly to
current forward rates through a Monte Carlo process to simulate 500 potential
future yield curves. The portfolio is then re-priced with these curves to
develop a distribution of future portfolio values. Options in the portfolio
are priced with current market implied volatilities and the simulated yield
curves using the Black Scholes method. The lowest portfolio value at the 95%
confidence interval is compared with the current portfolio value to derive
the value-at-risk number.
The value-at-risk and the average value-at-risk of TMCC's portfolio as of and
for the fiscal years ended September 30, 2000 and 1999, measured as the
potential 30 day loss in fair value from assumed adverse changes in interest
rates are as follows:
Average for the
As of Fiscal Year Ending
September 30, 2000 September 30, 2000
------------------ -------------------
Mean portfolio value..................... $4,536.0 million $4,742.0 million
Value-at-risk............................ $129.9 million $113.5 million
Percentage of the mean portfolio value... 2.9% 2.4%
Confidence level......................... 95.0% 95.0%
Average for the
As of Fiscal Year Ending
September 30, 1999 September 30, 1999
------------------ -------------------
Mean portfolio value..................... $3,300.0 million $3,600.0 million
Value-at-risk............................ $86.3 million $71.6 million
Percentage of the mean portfolio value... 2.6% 2.0%
Confidence level......................... 95.0% 95.0%
TMCC's calculated value-at-risk exposure represents an estimate of reasonably
possible net losses that would be recognized on its portfolio of financial
instruments assuming hypothetical movements in future market rates and is not
necessarily indicative of actual results which may occur. It does not
represent the maximum possible loss nor any expected loss that may occur, since
actual future gains and losses will differ from those estimated, based upon
actual fluctuations in market rates, operating exposures, and the timing
thereof, and changes in the composition of TMCC's portfolio of financial
instruments during the year. The increase in the mean portfolio value and
value-at-risk levels from fiscal 1999 primarily reflects an increase in TMCC's
portfolio and changes in market rates.
-25-
Omitted.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
Page
-------
Report of Independent Accountants................................ 27
Consolidated Balance Sheet at September 30, 2000 and 1999........ 28
Consolidated Statement of Income for the
years ended September 30, 2000, 1999 and 1998................. 29
Consolidated Statement of Shareholder's Equity for
the years ended September 30, 2000, 1999 and 1998............. 30
Consolidated Statement of Cash Flows for the
years ended September 30, 2000, 1999 and 1998................. 31
Notes to Consolidated Financial Statements....................... 32-60
All schedules have been omitted because they are not required, not
applicable, or the information has been included elsewhere.
-26-
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholder of
Toyota Motor Credit Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholder's equity and cash flows present
fairly, in all material respects, the financial position of Toyota Motor Credit
Corporation and its subsidiaries at September 30, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 2000, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/S/ PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
October 31, 2000
-27-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
September 30,
-----------------------
2000 1999
-------- --------
ASSETS
------
Cash and cash equivalents.................. $ 170 $ 180
Investments in marketable securities....... 871 450
Finance receivables, net................... 18,168 13,856
Investments in operating leases, net....... 7,964 8,605
Receivable from Parent and Affiliate....... - 717
Other receivables.......................... 468 366
Deferred charges........................... 133 131
Other assets............................... 262 242
Income taxes receivable.................... - 31
------- -------
Total Assets...................... $28,036 $24,578
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Notes and loans payable.................... $21,098 $18,565
Accrued interest........................... 195 161
Accounts payable and accrued expenses...... 1,943 1,096
Deposits................................... 160 201
Income taxes payable....................... 3 -
Deferred income............................ 681 636
Deferred income taxes...................... 1,483 1,554
------- -------
Total Liabilities.................... 25,563 22,213
------- -------
Commitments and Contingencies
Shareholder's Equity:
Capital stock, $l0,000 par value
(100,000 shares authorized; issued
and outstanding 91,500 in 2000 and
1999)................................ 915 915
Retained earnings....................... 1,539 1,435
Accumulated other comprehensive income.. 19 15
------- -------
Total Shareholder's Equity........... 2,473 2,365
------- -------
Total Liabilities and
Shareholder's Equity.............. $28,036 $24,578
======= =======
See Accompanying Notes to Consolidated Financial Statements.
-28-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions)
Years ended September 30,
----------------------------
2000 1999 1998
------ ------ ------
Financing Revenues:
Leasing................................. $2,402 $2,397 2,595
Retail financing........................ 768 645 531
Wholesale and other dealer financing.... 182 123 114
------ ------ ------
Total financing revenues................... 3,352 3,165 3,240
Depreciation on leases.................. 1,440 1,664 1,681
Interest expense........................ 1,289 940 994
------ ------ ------
Net financing revenues..................... 623 561 565
Insurance premiums earned and contract
revenues................................ 138 122 112
Investment and other income................ 99 88 79
Loss on asset impairment................... 74 19 -
------ ------ ------
Net financing revenues and other revenues.. 786 752 756
------ ------ ------
Expenses:
Operating and administrative............ 400 376 323
Provision for credit losses............. 135 83 127
Insurance losses and loss adjustment
expenses............................. 81 63 55
------ ------ ------
Total expenses............................. 616 522 505
------ ------ ------
Income before income taxes................. 170 230 251
Equity in net loss of subsidiary........... 1 - -
Provision for income taxes................. 65 98 107
------ ------ ------
Net Income................................. $ 104 $ 132 $ 144
====== ====== ======
See Accompanying Notes to Consolidated Financial Statements.
-29-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(Dollars in Millions)
Accumulated
Other
Capital Retained Comprehensive
Stock Earnings Income Total
------- -------- ------------- ------
- -
Balance at September 30, l997.... $ 915 $ 1,159 $ 7 $2,081
------ ------- ---------- ------
Net income in 1998............... - 144 - 144
Change in net unrealized gains
on available-for-sale
marketable securities......... - - 6 6
------ -------- ---------- ------
Total - 144 6 150
------ -------- ---------- ------
Balance at September 30, 1998.... 915 1,303 13 2,231
------ -------- ---------- ------
Net income in 1999............... - 132 - 132
Change in net unrealized gains
on available-for-sale
marketable securities......... - - 2 2
------ -------- ---------- ------
Total - 132 2 134
------ -------- ---------- ------
Balance at September 30, 1999.... 915 1,435 15 2,365
------ -------- ---------- ------
Net income in 2000............... - 104 - 104
Change in net unrealized gains
on available-for-sale
marketable securities......... - - 4 4
------ -------- ---------- ------
Total - 104 4 108
------ -------- ---------- ------
Balance at September 30, 2000.... $ 915 $ 1,539 $ 19 $2,473
====== ======= ========== ======
See Accompanying Notes to Consolidated Financial Statements.
-30-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
Years ended September 30,
---------------------------------
2000 1999 1998
------ ------ ------
Cash flows from operating activities:
Net income............................................. $ 104 $ 132 $ 144
------ ------ ------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization..................... 1,557 1,711 1,826
Provision for credit losses....................... 135 83 127
Gain from sale of finance receivables, net........ (5) (15) (21)
Gain from sale of marketable securities, net...... (8) (1) (5)
Loss on asset impairment.......................... 74 19 -
(Decrease) increase in other assets............... (58) 125 (471)
Increase (decrease) in accrued interest........... 34 (15) (37)
(Decrease) increase in deferred income taxes...... (68) 173 420
Increase in other liabilities..................... 165 42 139
------ ------ ------
Total adjustments...................................... 1,826 2,122 1,978
------ ------ ------
Net cash provided by operating activities................. 1,930 2,254 2,122
------ ------ ------
Cash flows from investing activities:
Addition to investments in marketable
securities.......................................... (1,409) (705) (996)
Disposition of investments in marketable
securities.......................................... 985 694 906
Purchase of finance receivables........................ (25,161) (20,309) (19,034)
Liquidation of finance receivables..................... 19,238 15,802 14,003
Proceeds from sale of finance receivables.............. 1,476 2,042 1,830
Addition to investments in operating leases............ (3,085) (3,577) (4,552)
Disposition of investments in operating leases......... 2,262 3,137 3,303
Decrease (increase) in receivable from Parent.......... 644 (396) (143)
------ ------ ------
Net cash used in investing activities..................... (5,050) (3,312) (4,683)
------ ------ ------
Cash flows from financing activities:
Proceeds from issuance of notes and loans payable...... 6,783 6,634 6,039
Payments on notes and loans payable.................... (5,582) (4,985) (4,250)
Net increase (decrease) in commercial paper,
with original maturities less than 90 days.......... 1,909 (567) 751
------ ------ ------
Net cash provided by financing activities................. 3,110 1,082 2,540
------ ------ ------
Net (decrease) increase in cash and cash equivalents...... (10) 24 (21)
Cash and cash equivalents at the beginning
of the period.......................................... 180 156 177
------ ------ ------
Cash and cash equivalents at the end of the
period................................................. $ 170 $ 180 $ 156
====== ====== ======
Supplemental disclosures:
Interest paid.......................................... $1,240 $979 $995
Income taxes paid...................................... $22 $17 $6
See Accompanying Notes to Consolidated Financial Statements.
-31-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Nature of Operations
- -----------------------------
Toyota Motor Credit Corporation ("TMCC") provides retail and wholesale
financing, retail leasing and certain other financial services to authorized
Toyota and Lexus vehicle and Toyota industrial equipment dealers and their
customers in the United States (excluding Hawaii) and the Commonwealth of
Puerto Rico. As of September 30, 2000, TMCC was a wholly-owned subsidiary of
Toyota Motor Sales, U.S.A., Inc. ("TMS" or the "Parent"). TMS is primarily
engaged in the wholesale distribution of automobiles, trucks, industrial
equipment and related replacement parts and accessories throughout the United
States (excluding Hawaii). Substantially all of TMS's products are purchased
from Toyota Motor Corporation ("TMC") or its affiliates.
TMCC has four wholly-owned subsidiaries, Toyota Motor Insurance Services, Inc.
("TMIS"), Toyota Motor Credit Receivables Corporation ("TMCRC"), Toyota
Leasing, Inc. ("TLI") and Toyota Credit de Puerto Rico Corporation ("TCPR").
TMCC and its wholly-owned subsidiaries are collectively referred to as the
"Company". TMIS provides certain insurance services along with certain
insurance and contractual coverages in connection with the sale and lease of
vehicles. In addition, the insurance subsidiaries insure and reinsure certain
TMS and TMCC risks. TMCRC, a limited purpose subsidiary, operates primarily to
acquire retail finance receivables from TMCC for the purpose of securitizing
such receivables. TLI, a limited purpose subsidiary, operates primarily to
acquire lease finance receivables from TMCC for the purpose of securitizing
such leases. TCPR provides retail and wholesale financing and certain other
financial services to authorized Toyota and Lexus vehicle dealers and their
customers in Puerto Rico.
Toyota Credit Argentina S.A. ("TCA") provides retail and wholesale financing to
authorized Toyota vehicle dealers and their customers in Argentina. TMCC owns
a 33% interest in TCA. TMCC's investment in TCA is accounted for using the
equity method. Banco Toyota do Brasil ("BTB") provides retail and lease
financing to authorized Toyota vehicle dealers and their customers in Brazil.
BTB is owned 15% by TMCC. TMCC's investment in BTB is accounted for using the
cost method. The remaining interests in TCA and BTB are owned by TMC, the
ultimate parent of TMCC.
The Company's earnings are primarily impacted by the level of average earning
assets, comprised primarily of investments in finance receivables and operating
leases, and asset yields as well as outstanding borrowings and the cost of
funds. The Company's business is substantially dependent upon the sale of
Toyota and Lexus vehicles in the United States. Changes in the volume of sales
of such vehicles resulting from governmental action, changes in consumer
demand, changes in pricing of imported units due to currency fluctuations, or
other events could impact the level of finance and insurance operations of the
Company.
-32-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of TMCC and its
wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Cash and Cash Equivalents
-------------------------
Cash equivalents, consisting primarily of money market instruments and debt
securities, represent highly liquid investments with original maturities of
three months or less.
Investments in Marketable Securities
------------------------------------
Investments in marketable securities consist of debt and equity securities.
Debt securities designated as held-to-maturity are carried at amortized cost
and are reduced to net realizable value for other than temporary declines in
market value. Debt and equity securities designated as available-for-sale are
carried at fair value with unrealized gains or losses included in accumulated
other comprehensive income, net of applicable taxes. Realized investment gains
and losses, which are determined on the specific identification method, are
reflected in income.
Investments in Operating Leases
-------------------------------
Investments in operating leases are recorded at cost and depreciated on a
straight-line basis, over the lease terms to the estimated residual value.
Revenue from operating leases is recognized on a straight-line basis over the
lease terms.
Finance Receivables
-------------------
Finance receivables are recorded at the present value of the related future
cash flows including residual values for finance leases. Revenue associated
with finance receivables is recognized on a level-yield basis over the contract
terms.
-33-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------
Allowance for Credit Losses
---------------------------
Allowances for credit losses are evaluated periodically, considering historical
loss experience and other factors, and are maintained in amounts considered by
management to be appropriate in relation to receivables outstanding and
expected future loss experience. Losses are charged to the allowance for
credit losses when it has been determined that collateral cannot be recovered
and any shortfall between proceeds received and the carrying cost of
repossessed collateral is charged to the allowance. Recoveries are credited to
the allowance for credit losses.
Allowance for Residual Value Losses
-----------------------------------
Allowances for estimated losses on lease vehicles returned to TMCC for
disposition at lease termination are established based upon projected vehicle
return rates and projected residual value losses derived from historical and
market information as well as general economic factors. The provision for
residual value losses is included in lease depreciation expense.
Deferred Charges
----------------
Deferred charges consist primarily of premiums paid for option-based products,
underwriters' commissions and other debt issuance costs which are amortized to
interest expense over the life of the related instruments on a straight-line
basis, which is not materially different from the effective interest method.
Derivative Financial Instruments
--------------------------------
TMCC uses a variety of derivative financial instruments to manage funding costs
and risks associated with changes in interest and foreign currency exchange
rates. The derivative instruments used include interest rate, cross currency
interest rate and indexed note swap agreements and option-based products. TMCC
does not use any of these instruments for trading purposes. The derivative
financial instruments are specifically designated to the underlying debt
obligations or to portfolio level risks. Cash flows related to these
instruments are classified in the same categories as cash flows from related
borrowing activities.
Interest Rate Swap Agreements
-----------------------------
Interest rate swap agreements are executed as an integral part of specific debt
transactions or on a portfolio basis. The differential paid or received on
interest rate swap agreements is recorded on an accrual basis as an adjustment
to interest expense over the term of the agreements.
Cross Currency Interest Rate Swap Agreements
--------------------------------------------
Cross currency interest rate swap agreements are executed as an integral part
of foreign currency debt transactions. The differential between the contract
rates and the foreign currency spot exchange rates as of the reporting dates is
classified in other receivables or accounts payable and accrued expenses; the
differential paid or received on the interest rate swap portion of the
agreements is recorded on an accrual basis as an adjustment to interest expense
over the term of the agreements.
-34-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------
Indexed Note Swap Agreements
----------------------------
Indexed note swap agreements are executed as an integral part of indexed note
transactions. Any differential between contract rates and foreign currency
spot exchange rates as of the reporting dates is classified in other
receivables or accounts payable and accrued expenses; the interest differential
paid or received on indexed note swap agreements is recorded on an accrual
basis as an adjustment to interest expense over the term of the agreements.
Option-Based Products
---------------------
Option-based products are executed on a portfolio basis. Premiums paid for
option-based products are included in deferred charges and are amortized to
interest expense over the life of the instruments on a straight-line basis.
Amounts receivable under option-based products are recorded on an accrual basis
as a reduction to interest expense.
Insurance Operations
--------------------
Revenues from providing coverage under various contractual agreements are
recognized over the term of the agreement in relation to the timing and level
of anticipated expenses. Revenues from insurance premiums are earned over the
terms of the respective policies in proportion to estimated claims activity.
Certain costs of acquiring new business, consisting primarily of commissions
and premium taxes, are deferred and amortized over the terms of the related
policies on the same basis as revenues are earned. The liability for reported
losses and the estimate of unreported losses are recorded in accounts payable
and accrued expenses. Commissions and fees from services provided are
recognized in relation to the timing and level of services performed.
Income Taxes
------------
TMCC uses the liability method of accounting for income taxes under which
deferred tax assets and liabilities are adjusted to reflect changes in tax
rates and laws in the period such changes are enacted resulting in adjustments
to the current period's provision for income taxes.
The Company joins with TMS in filing consolidated federal income tax returns
and combined or consolidated income tax returns in certain states. Federal and
state income tax expense is generally recognized as if the Company filed its
tax returns on a stand alone basis. In those states where TMCC joins in the
filing of consolidated or combined income tax returns, TMCC is allocated its
share of the total income tax expense based on the Company's income or loss
which would be allocable to such states if the Company filed separate returns.
Based on an informal tax sharing agreement with TMS and other members of the
TMS group, the Company pays TMS for its share of the consolidated federal and
consolidated or combined state income tax expense and is reimbursed for the
benefit of any of its tax basis losses utilized in the consolidated federal and
consolidated or combined state income tax returns.
-35-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------
Asset-Backed Securitization Transactions
----------------------------------------
TMCC periodically sells retail receivables and interests in lease finance
receivables through limited purpose subsidiaries TMCRC and TLI, respectively.
TMCC retains servicing rights for sold assets and receives a servicing fee
which is recognized over the remaining term of the related sold retail
receivables or interests in lease finance receivables. TMCRC and TLI retain
subordinated interests in the excess cash flows of these transactions, certain
cash deposits and other related amounts which are held as restricted assets
subject to limited recourse provisions. The Company's retained interests in
such receivables are included in investments in marketable securities and are
classified as available for sale.
Pre-tax gains on sold retail receivables and interests in lease finance
receivables are recognized in the period in which the sale occurs and are
included in other income. In determining such gains, the investment in sold
retail receivables and interests in lease finance receivables are allocated
between the portion sold and the portion retained based on their relative fair
values on the date sold.
New Accounting Standards
------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", effective
for fiscal years beginning after June 15, 1999. SFAS No. 133 requires
companies to record derivatives on the balance sheet as assets and liabilities,
measured at fair value. Gains and losses resulting from changes in the values
of those derivatives would be accounted for as either components of earnings or
accumulated other comprehensive income depending on the use of the derivative
and whether it qualifies for hedge accounting. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133", which defers the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of FASB Statement No.
133", which amends the accounting and reporting standards of
Statement No. 133. The Company adopted SFAS Nos. 133 and 138 on
October 1, 2000. The adoption of these new accounting standards will
result in cumulative after-tax reductions in net income of approximately
$2 million. The adoption will also impact assets and liabilities
recorded on the balance sheet.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". This
statement replaces SFAS No. 125 and revises the standards for accounting for
securitizations and other transfers of financial assets and collateral. SFAS
No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. This statement
is effective for recognition and reclassification of collateral and for
disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. The Company has not determined the
impact that adoption of this standard will have on its consolidated financial
statements.
Reclassifications
-----------------
Certain 1999 and 1998 amounts have been reclassified to conform with the 2000
presentation.
-36-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Investments in Marketable Securities
- ---------------------------------------------
TMCC records its investments in marketable securities which are designated as
available-for-sale at fair value estimated using quoted market prices or
discounted cash flow analysis. Unrealized gains, net of income taxes, related
to available-for-sale securities are included in comprehensive income.
Securities designated as held-to-maturity are recorded at amortized cost.
The estimated fair value and amortized cost of investments in marketable
securities are as follows:
September 30, 2000
----------------------------------------
Gross Gross
Fair Unrealized Unrealized
Cost Value Gains Losses
---- ----- ---------- ----------
(Dollars in Millions)
Available-for-sale securities:
Asset-backed securities............. $620 $631 $ 22 $ (11)
Corporate debt securities........... 102 101 1 (2)
Equity securities................... 71 92 22 (1)
U.S. debt securities................ 40 40 - -
---- ---- ---- ----
Total available-for-sale securities.... $833 $864 $ 45 $(14)
==== ====
Held-to-maturity securities:
U.S. debt securities................ 7 7
---- ----
Total marketable securities............ $840 $871
==== ====
September 30, 1999
----------------------------------------
Gross Gross
Fair Unrealized Unrealized
Cost Value Gains Losses
---- ----- ---------- ----------
(Dollars in Millions)
Available-for-sale securities:
Asset-backed securities............. $220 $229 $ 17 $ (8)
Corporate debt securities........... 90 87 - (3)
Equity securities................... 68 87 20 (1)
U.S. debt securities................ 33 33 - -
---- ---- ---- ----
Total available-for-sale securities.... $411 $436 $ 37 $(12)
==== ====
Held-to-maturity securities:
U.S. debt securities................ 14 14
---- ----
Total marketable securities............ $425 $450
==== ====
-37-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Investments in Marketable Securities (Continued)
- ---------------------------------------------
The contractual maturities of investments in marketable securities at
September 30, 2000 are as follows:
Available-for-Sale Held-to-Maturity
Securities Securities
------------------ ----------------
Fair Fair
Cost Value Cost Value
---- ----- ---- -----
(Dollars in Millions)
Within one year...................... $256 $259 $ 2 $ 2
After one year through five years.... 360 368 5 5
After five years through ten years... 60 60 - -
After ten years...................... 86 85 - -
Equity securities.................... 71 92 - -
---- ---- ---- ----
Total............................. $833 $864 $ 7 $ 7
==== ==== ==== ====
The proceeds from sales of available-for-sale securities were $740 million and
$562 million for the years ended September 30, 2000 and 1999, respectively.
Realized gains on sales of available-for-sale securities were $13 million,
$6 million and $6 million for the years ended September 30, 2000, 1999 and
1998, respectively. Realized losses on sales of available-for-sale securities
were $5 million, $5 million and $1 million for the years ended September 30,
2000, 1999 and 1998, respectively.
-38-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Finance Receivables
- ----------------------------
Finance receivables, net consisted of the following:
September 30,
----------------------
2000 1999
------- -------
(Dollars in Millions)
Retail............................... $ 10,630 $ 9,267
Finance leases....................... 6,742 4,065
Wholesale and other dealer loans..... 2,325 1,549
------- -------
19,697 14,881
Unearned income...................... (1,361) (888)
Allowance for credit losses.......... (168) (137)
------- -------
Finance receivables, net.......... $18,168 $13,856
======= =======
Contractual maturities are as follows:
Due in the Wholesale
Years Ending and Other
September 30, Retail Dealer Loans
------------- ------- ------------
(Dollars in Millions)
2001.................. $ 3,093 $ 1,745
2002.................. 2,761 226
2003.................. 2,304 77
2004.................. 1,635 97
2005.................. 675 139
Thereafter............ 162 41
------- ------
Total.............. $10,630 $2,325
======= ======
Finance leases, net consisted of the following:
September 30,
---------------------
2000 1999
------ ------
(Dollars in Millions)
Minimum lease payments.................. $5,433 $3,242
Estimated unguaranteed residual values.. 1,309 823
------ ------
Finance leases....................... 6,742 4,065
Unearned income......................... (1,092) (627)
Allowance for credit losses............. (67) (46)
------ ------
Finance leases, net.................. $5,583 $3,392
====== ======
-39-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Finance Receivables (Continued)
- ----------------------------
The aggregate balances related to finance receivables 60 or more days past due
totaled $32 million and $20 million at September 30, 2000 and 1999,
respectively. Future minimum finance lease payments for each of the five
succeeding years ending September 30, are: 2001 - $1,400 million; 2002 - $1,493
million; 2003 - $1,342 million; 2004 - $796 million and 2005 - $402 million. A
substantial portion of TMCC's finance receivables have historically been repaid
prior to contractual maturity dates; contractual maturities and future minimum
lease payments as shown above should not be considered as necessarily
indicative of future cash collections. The majority of retail and finance
lease receivables do not involve recourse to the dealer in the event of
customer default.
Note 5 - Investments in Operating Leases
- ----------------------------------------
Investments in operating leases, net consisted of the following:
September 30,
----------------------
2000 1999
------- -------
(Dollars in Millions)
Vehicles................................. $9,553 $10,246
Equipment and other...................... 646 548
------- -------
10,199 10,794
Accumulated depreciation................. (2,173) (2,124)
Allowance for credit losses.............. (62) (65)
------- -------
Investments in operating leases, net.. $ 7,964 $ 8,605
======= =======
Rental income from operating leases was $2,013 million, $2,185 million and
$2,372 million for the years ended September 30, 2000, 1999 and 1998,
respectively. Future minimum rentals on operating leases for each of the five
succeeding years ending September 30, are: 2001 - $1,530 million; 2002 -
$943 million; 2003 - $447 million; 2004 - $101 million; 2005 - $9 million and
thereafter - $1 million. A substantial portion of TMCC's operating lease
contracts have historically been terminated prior to maturity; future minimum
rentals as shown above should not be considered as necessarily indicative of
future cash collections.
-40-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Allowance for Credit Losses
- ------------------------------------
An analysis of the allowance for credit losses follows:
Years ended September 30,
--------------------------
2000 1999 1998
---- ---- ----
(Dollars in Millions)
Allowance for credit losses
at beginning of period........... $202 $220 $213
Provision for credit losses......... 135 83 127
Charge-offs......................... (116) (104) (120)
Recoveries.......................... 19 17 17
Other adjustments................... (10) (14) (17)
---- ---- ----
Allowance for credit losses
at end of period................. $230 $202 $220
==== ==== ====
Note 7 - Sale of Retail Receivables and Interests in Lease Finance
Receivables
- -----------------------------------------------------------------------------
- -
TMCC maintains programs to sell retail receivables and interests in lease
finance receivables through limited purpose subsidiaries TMCRC and TLI,
respectively. During fiscal year 2000, TMCC sold interests in retail finance
receivables totaling $1.5 billion, as described below.
Following is a summary of amounts included in investment in marketable
securities and other receivables:
September 30,
---------------------
2000 1999
---- ----
(Dollars in Millions)
Interest in trusts.................. 404 54
Interest only strips................ 57 54
---- ----
Total........................... $461 $108
==== ====
Other Receivables.................... $166 $108
==== ====
-41-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Sale of Retail Receivables and Interests in Lease Finance
Receivables
- -----------------------------------------------------------------------------
- -
(Continued)
The pretax gain resulting from the sale of retail receivables and interests
in lease finance receivables totaled approximately $5 million, $8 million and
$15 million in fiscal 2000, 1999 and 1998, respectively, after providing an
allowance for estimated credit and residual value losses. The pretax gain of
$5 million for fiscal 2000 included a $3.9 million loss on the termination of
interest rate swaps issued in conjunction with the transaction. In addition,
TMCC exercised its clean-up call option to purchase the outstanding
receivables sold in the April 1997 retail securitization transaction.
TMCC recorded an adjustment to other receivables totaling $74 million and $19
million in fiscal years 2000 and 1999, respectively, to recognize the
impairment of an asset retained in the fiscal 1997, 1998 and 1999 sales of
interests in lease finance receivables. These impairments were recognized
when the future undiscounted cash flows of the assets were estimated to be
insufficient to recover the related carrying values.
The outstanding balance of sold retail finance receivables which TMCC
continues to service totaled $1.9 billion and $1.0 billion at September 30,
2000 and 1999, respectively. The outstanding balance of sold interests in
lease finance receivables which TMCC continues to service totaled $1.9
billion and $3.1 billion at September 30, 2000 and 1999, respectively.
-42-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Notes and Loans Payable
- --------------------------------
Notes and loans payable at September 30, 2000 and 1999, which consisted of
senior debt, included the following:
September 30,
----------------------
2000 1999
------- -------
(Dollars in Millions)
Commercial paper, net................... $ 3,292 $ 1,427
Extendible commercial notes, net.......... 195 146
- ------- -------
Other senior debt, due in the years
ending September 30,:
2000.............................. - 4,077
2001.............................. 4,658 3,213
2002.............................. 2,975 2,718
2003.............................. 3,434 2,095
2004.............................. 3,623 2,466
2005.............................. 851 420
Thereafter........................ 1,995 1,916
------- -------
17,536 16,905
Unamortized premium..................... 75 87
------- -------
Total other senior debt........... 17,611 16,992
------- -------
Notes and loans payable........ $21,098 $18,565
======= =======
Short-term borrowings include commercial paper, extendible commercial notes and
certain domestic and euro medium-term notes ("MTNs"). The weighted average
remaining term of commercial paper was 15 days and 21 days at September 30,
2000 and 1999, respectively. The weighted average interest rate on commercial
paper was 6.56% and 5.33% at September 30, 2000 and 1999, respectively. The
weighted average remaining term of extendible commercial notes was 47 days and
18 days at September 30, 2000 and 1999, respectively. The weighted average
interest rate on extendible commercial notes was 6.64% and 5.39% at September
30, 2000 and 1999, respectively. Short-term MTNs with original terms of one
year or less, included in other senior debt, were $775 million and $1,358
million at September 30, 2000 and 1999, respectively. The weighted average
interest rate on these short-term MTNs was 5.93% and 5.57% at September 30,
2000 and 1999, respectively, including the effect of interest rate swap
agreements.
The weighted average interest rate on other senior debt was 6.52% and 5.45% at
September 30, 2000 and 1999, respectively, including the effect of interest
rate swap agreements. The rates have been calculated using rates in effect at
September 30, 2000 and 1999, some of which are floating rates that reset
periodically. Less than one percent of other senior debt at September 30, 2000
had interest rates, including the effect of interest rate swap agreements, that
were fixed for a period of more than one year. Approximately 62% of other
senior debt at September 30, 2000 had floating interest rates that were covered
by option-based products. The weighted average strike rate on these option-
based products was 6.45% at September 30, 2000. TMCC manages interest rate
risk through continuous adjustment of the mix of fixed and floating rate debt
using interest rate swap agreements and option-based products.
-43-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Notes and Loans Payable (Continued)
- --------------------------------
Included in notes and loans payable at September 30, 2000 and 1999 were
unsecured notes denominated in various foreign currencies as follows:
September 30,
------------------------------
2000 1999
----------- -----------
(Amounts in Millions)
British pound sterling.............. 525 675
Danish kroner....................... 400 400
Dutch guilder....................... - 250
Euro....................... ........ 1,000 -
French franc........................ 1,545 1,545
German deutsche mark................ 2,842 3,342
Greek drachma....................... 5,000 5,000
Hong Kong dollar.................... 618 618
Italian lire........................ 434,000 477,300
Japanese yen........................ 173,000 140,268
Luxembourg franc.................... 2,000 2,000
New Zealand dollar.................. 200 200
Norwegian Krone..................... 500 -
Singapore dollar.................... 200 200
South African rand.................. 250 250
Swedish kronor...................... 1,060 1,060
Swiss franc......................... 2,350 3,110
Concurrent with the issuance of these unsecured notes, TMCC entered into cross
currency interest rate swap agreements to convert these obligations at maturity
into U.S. dollar obligations which in aggregate total a principal amount of
$8.2 billion at September 30, 2000. TMCC's foreign currency debt was
translated into U.S. dollars in the financial statements at the various foreign
currency spot exchange rates in effect at September 30, 2000. The receivables
or payables arising as a result of the differences between the September 30,
2000 foreign currency spot exchange rates and the contract rates applicable to
the cross currency interest rate swap agreements are classified in other
receivables or accounts payable and accrued expenses, respectively, and would
in aggregate total a net payable position of $1.2 billion at September 30,
2000.
-44-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Fair Value of Financial Instruments
- --------------------------------------------
The fair value of financial instruments at September 30, 2000 and 1999, was
estimated using the valuation methodologies described below. Considerable
judgement was employed in interpreting market data to develop estimates of fair
value; accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions or valuation methodologies
could have a material effect on the estimated fair value amounts.
The carrying amounts and estimated fair values of the Company's financial
instruments at September 30, 2000 and 1999 are as follows:
September 30,
---------------------------------------------------
2000 1999
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ---------- ----------- ----------
(Dollars in Millions)
Balance sheet financial
instruments:
Assets:
Cash and cash equivalents........... $170 $170 $180 $180
Investments in marketable
securities....................... $871 $871 $450 $450
Retail finance receivables, net..... $12,584 $12,301 $10,464 $10,279
Other receivables................... $278 $278 $271 $271
Receivables from cross currency
interest rate swap agreements.... $190 $38 $95 $117
Liabilities:
Notes and loans payable............. $21,098 $20,834 $18,565 $19,401
Payables from cross currency
interest rate swap agreements.... $1,428 $1,402 $716 $466
Other payables...................... $484 $484 $380 $380
-45-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Fair Value of Financial Instruments (Continued)
- --------------------------------------------
September 30,
-------------------------------------------------
2000 1999
----------------------- ------------------------
Contract or Unrealized Contract or Unrealized
Notional Gains/ Notional Gains/
Amount (Losses) Amount (Losses)
----------- ---------- ----------- ----------
(Dollars in Millions)
Off-balance sheet
financial instruments:
Cross currency interest
rate swap agreements.... $8,378 $(1,330) $8,764 $(453)
Interest rate swap
agreements.............. $10,467 $(109) $8,980 $24
Option-based products...... $11,700 $46 $6,850 $41
Indexed note swap
agreements.............. $1,366 $27 $1,318 $2
The fair value estimates presented herein are based on information available to
management as of September 30, 2000 and 1999.
The methods and assumptions used to estimate the fair value of financial
instruments are summarized as follows:
Cash and Cash Equivalents
-------------------------
The carrying amount of cash and cash equivalents approximates market value due
to the short maturity of these investments.
Investments in Marketable Securities
------------------------------------
The fair value of marketable securities was estimated using quoted market
prices or discounted cash flow analysis.
Retail Finance Receivables
--------------------------
The carrying amounts of $2.1 billion and $1.1 billion of variable rate finance
receivables at September 30, 2000 and 1999, respectively, were assumed to
approximate fair value as these receivables reprice at prevailing market rates.
The fair value of fixed rate finance receivables was estimated by discounting
expected cash flows using the rates at which loans of similar credit quality
and maturity would be originated as of September 30, 2000 and 1999.
-46-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Fair Value of Financial Instruments (Continued)
- --------------------------------------------
Other Receivables and Other Payables
------------------------------------
The carrying amount and fair value of other receivables and other payables are
presented separately from the receivables and payables arising from cross
currency interest rate swap agreements. The carrying amount of the remaining
other receivables and payables approximate market value due to the short
maturity of these instruments.
Notes and Loans Payable
-----------------------
The fair value of notes and loans payable was estimated by discounting expected
cash flows using the interest rates at which debt of similar credit quality and
maturity would be issued as of September 30, 2000 and 1999. The carrying
amount of commercial paper and extendible commercial notes were assumed to
approximate fair value due to the short maturity of these instruments.
Cross Currency Interest Rate Swap Agreements
--------------------------------------------
The estimated fair value of TMCC's outstanding cross currency interest rate
swap agreements was derived by discounting expected cash flows using quoted
market exchange rates and quoted market interest rates as of September 30, 2000
and 1999.
Interest Rate Swap Agreements
-----------------------------
The estimated fair value of TMCC's outstanding interest rate swap agreements
was derived by discounting expected cash flows using quoted market interest
rates as of September 30, 2000 and 1999.
Option-based Products
---------------------
The estimated fair value of TMCC's outstanding option-based products was
derived by discounting expected cash flows using market exchange rates and
market interest rates as of September 30, 2000 and 1999.
Indexed Note Swap Agreements
----------------------------
The estimated fair value of TMCC's outstanding indexed note swap agreements was
derived using quoted market prices as of September 30, 2000 and 1999.
-47-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Financial Instruments with Off-Balance Sheet Risk
- -----------------------------------------------------------
Inventory Lines of Credit
- -------------------------
TMCC has extended inventory floorplan lines of credit to dealers, the unused
portion of which amounted to $1.3 billion and $1.5 billion at September 30,
2000 and 1999, respectively. Security interests are acquired in vehicles and
equipment financed and substantially all such financings are backed by
corporate or individual guarantees from or on behalf of the participating
dealers.
Derivative Financial Instruments
- --------------------------------
TMCC utilizes a variety of derivative financial instruments to manage its
currency exchange rate risk arising as a result of borrowings denominated in
foreign currencies and its interest rate risk as explained in this note. TMCC
does not enter into these arrangements for trading purposes.
A reconciliation of the activity of TMCC's derivative financial instruments for
the years ended September 30, 2000 and 1999 is as follows:
September 30,
----------------------------------------------------------------
Cross
Currency
Interest Interest Indexed
Rate Swap Rate Swap Option-based Note Swap
Agreements Agreements Products Agreements
------------ ------------ ------------- ------------
2000 1999 2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ---- ---- ----
(Dollars in Billions)
Beginning Notional Amount... $8.8 $9.0 $9.0 $7.3 $6.9 $6.3 $1.3 $0.8
Add:
New agreements........... 2.1 0.5 14.8 4.7 7.4 2.7 0.3 0.8
Less:
Terminated agreements.... - - 1.5 - - - - -
Expired agreements....... 2.5 0.7 11.8 3.0 2.6 2.1 0.2 0.3
---- ---- ---- ---- ---- ---- ---- ----
Ending Notional Amount...... $8.4 $8.8 $10.5 $9.0 $11.7 $6.9 $1.4 $1.3
==== ==== ===== ==== ===== ==== ==== ====
-48-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
Interest Rate Risk Management
- -----------------------------
TMCC utilizes interest rate swap agreements in managing its exposure to
interest rate fluctuations. Interest rate swap agreements are executed as an
integral part of specific debt transactions or on a portfolio basis. TMCC's
interest rate swap agreements involve agreements to pay fixed and receive a
floating rate, or receive fixed and pay a floating rate, at specified
intervals, calculated on an agreed-upon notional amount. Interest rate swap
agreements may also involve basis swap contracts which are agreements to
exchange the difference between certain floating interest amounts, such as the
net payment based on the commercial paper rate and the London Interbank Offered
Rate ("LIBOR"), calculated on an agreed-upon notional amount. The original
maturities of interest rate swap agreements ranged from one to ten years at
September 30, 2000.
TMCC also utilizes option-based products in managing its exposure to interest
rate fluctuations. Option-based products are executed on a portfolio basis and
consist primarily of purchased interest rate cap agreements and to a lesser
extent corridor agreements. Option-based products are agreements which either
grant TMCC the right to receive or require TMCC to make payments at specified
interest rate levels. Approximately 62% of TMCC's other senior debt at
September 30, 2000 had floating interest rates that were covered by option-
based products which had an average strike rate of 6.45%. The premiums paid
for option-based products are included in deferred charges and are amortized to
interest expense over the life of the instruments on a straight-line basis.
Amounts receivable under option-based products are recorded as a reduction to
interest expense. The original maturities of option-based products ranged from
one to four years at September 30, 2000.
The aggregate notional amounts of interest rate swap agreements and option-
based products outstanding at September 30, 2000 and 1999 were as follows:
September 30,
---------------------
2000 1999
---- ----
(Dollars in Billions)
Floating rate swaps............................ $ 9.0 $8.3
Fixed rate swaps............................... 1.2 0.1
Basis swaps.................................... 0.3 0.6
----- ----
Total interest rate swap agreements........ $10.5 $9.0
===== ====
Option-based products.......................... $11.7 $6.9
===== ====
-49-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
Interest Rate Risk Management (Continued)
- -----------------------------
TMCC utilizes indexed note swap agreements in managing its exposure in
connection with debt instruments whose interest rate and/or principal
redemption amounts are derived from other underlying instruments. Indexed note
swap agreements involve agreements to receive interest and/or principal amounts
associated with the indexed notes, denominated in either U.S. dollars or a
foreign currency, and to pay fixed or floating rates on fixed U.S. dollar
liabilities. At September 30, 2000, TMCC was the counterparty to $1.4 billion
of indexed note swap agreements, of which $0.4 billion was denominated in
foreign currencies and $1.0 billion was denominated in U.S. dollars. At
September 30, 1999, TMCC was the counterparty to $1.3 billion of indexed note
swap agreements, of which $0.4 billion was denominated in foreign currencies
and $0.9 billion was denominated in U.S. dollars. The original maturities of
indexed note swap agreements ranged from two to ten years at September 30,
2000.
The notional amounts of interest rate and indexed note swap agreements and
option-based products do not represent amounts exchanged by the parties and,
thus, are not a measure of the Company's exposure through its use of
derivatives. The amounts exchanged are calculated based on the notional
amounts and other terms of the derivatives which relate to interest rates or
financial or other indexes.
Foreign Exchange Risk Management
- --------------------------------
TMCC utilizes cross currency interest rate swap agreements to manage exposure
to 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 executed cross currency interest rate
swap agreements which involve the exchange of foreign currency principal and
interest obligations for U.S. dollar obligations at agreed-upon currency
exchange and interest rates. The aggregate notional amounts of cross currency
interest rate swap agreements at September 30, 2000 and 1999 were $8.4 billion
and $8.8 billion, respectively. The original maturities of cross currency
interest rate swap agreements ranged from two to nine years at September 30,
2000.
-50-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
Credit Risk Management
- ----------------------
TMCC manages the risk of counterparty default through the use of credit
standard guidelines, counterparty diversification and monitoring of
counterparty financial condition. At September 30, 2000, approximately 89% of
TMCC's derivative financial instruments, based on notional amounts, were with
commercial banks and investment banking firms assigned investment grade ratings
of "AA" or better by national rating agencies. TMCC does not anticipate non-
performance by any of its counterparties and has no reserves related to non-
performance as of September 30, 2000; TMCC has not experienced any counterparty
default during the three years ended September 30, 2000. Additionally, TMCC's
loss in the event of counterparty default is partially mitigated as a result of
master netting agreements in place with all derivative counterparties which
allow the net difference between TMCC and each counterparty to be exchanged in
the event of default.
Credit exposure of derivative financial instruments is represented by the fair
value of contracts with a positive fair value at September 30, 2000 reduced by
the effects of master netting agreements. The credit exposure of TMCC's
derivative financial instruments at September 30, 2000 was $95 million on an
aggregate notional amount of $32 billion.
Note 11 - Pension and Other Benefit Plans
- -----------------------------------------
All full-time employees of the Company are eligible to participate in the TMS
pension plan commencing on the first day of the month following hire. Benefits
payable under this non-contributory defined benefit pension plan are based upon
the employees' years of credited service and the highest sixty consecutive
months' compensation, reduced by a percentage of social security benefits. The
Company's pension expense was $5 million, $6 million and $4 million for the
years ended September 30, 2000, 1999, and 1998, respectively. At
September 30, 2000, 1999 and 1998, the accumulated benefit obligation and plan
net assets for employees of the Company were not determined separately from
TMS; however, the plan's net assets available for benefits exceeded the
accumulated benefit obligation. TMS funding policy is to contribute annually
the maximum amount deductible for federal income tax purposes.
-51-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Provision for Income Taxes
- ------------------------------------
The provision for income taxes consisted of the following:
Years ended September 30,
--------------------------
2000 1999 1998
---- ---- ----
(Dollars in Millions)
Current
Federal........................... $ 71 $(130) $(317)
State............................. 41 17 (16)
---- ----- -----
Total current ................. 112 (113) (333)
---- ----- -----
Deferred
Federal........................... (21) 202 399
State............................. (26) 9 41
---- ----- -----
Total deferred................. (47) 211 440
---- ----- -----
Provision for income taxes.. $ 65 $ 98 $ 107
==== ===== =====
A reconciliation between the provision for income taxes computed by applying
the federal statutory tax rate to income before income taxes and actual income
taxes provided is as follows:
Years ended September 30,
-------------------------
2000 1999 1998
---- ---- ----
(Dollars in Millions)
Provision for income taxes at
federal statutory tax rate......... $ 56 $ 81 $ 88
State and local taxes (net of
federal tax benefit)............... 10 17 17
Other, including changes in
applicable state tax rates......... (1) _ 2
---- ---- ----
Provision for income taxes......... $ 65 $ 98 $107
==== ==== ====
Effective tax rate.................... 38.45% 42.53% 42.81%
-52-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Provision for Income Taxes (Continued)
- ------------------------------------
The deferred federal and state income tax liabilities are as follows:
September 30,
---------------------
2000 1999
---- ----
(Dollars in Millions)
Federal........................................ $1,350 $1,403
State.......................................... 133 151
------ ------
Net deferred income tax liability........... $1,483 $1,554
====== ======
The Company's deferred tax assets and liabilities consisted of the following:
September 30,
---------------------
2000 1999
---- ----
(Dollars in Millions)
Assets:
Alternative minimum tax..................... $ - $ 137
Provision for losses........................ 66 59
Deferred administrative fees................ 97 82
NOL carryforwards........................... 21 34
Deferred acquisition costs.................. 29 21
Unearned insurance premiums................. 3 4
Revenue recognition......................... 2 1
Other....................................... - 2
------ ------
Deferred tax assets...................... 218 340
------ ------
Liabilities:
Lease transactions.......................... 1,525 1,696
State taxes................................. 150 188
Other....................................... 26 10
------ ------
Deferred tax liabilities................. 1,701 1,894
------ ------
Valuation allowance...................... - -
------ ------
Net deferred income tax liability..... $1,483 $1,554
====== ======
TMCC has state tax net operating loss carryforwards of $279 million which
expire beginning in fiscal 2001 through 2016.
-53-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Comprehensive Income
- ------------------------------
The Company's total comprehensive earnings were as follows:
Years Ended September 30,
-------------------------------
2000 1999 1998
------ ------ ------
(Dollars in Millions)
Net income.................................... $ 104 $ 132 $ 144
Other comprehensive income:
Net unrealized gains arising during
period (net of tax of $5, $2 and $4
in 2000, 1999 and 1998).............. 9 4 9
Less: reclassification adjustment for net
gains included in net income
(net of tax of $3, $1 and $2
in 2000, 1999 and 1998)........... (5) (2) (3)
------ ------ ------
Net unrealized gain on available-for-sale
marketable securities................... 4 2 6
------ ------ ------
Total Comprehensive Income................. $ 108 $ 134 $ 150
====== ====== ======
-54-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Related Party Transactions
- ------------------------------------
During fiscal 2000, an operating agreement with TMS and Toyota Motor
Manufacturing North America Inc. ("TMMNA") (the "Operating Agreement") provided
that 100% ownership of TMCC would be retained by TMS as long as TMCC had any
funded debt outstanding and that TMS and TMMNA would provide necessary equity
contributions or other financial assistance it deemed appropriate to ensure
that TMCC maintained a minimum coverage on fixed charges of 1.10 times such
charges in any fiscal quarter. The coverage provision of the Operating
Agreement was solely for the benefit of the holders of TMCC's commercial paper
and extendible commercial notes. The Operating Agreement may be amended or
terminated at any time without notice to, or the consent of, holders of other
TMCC obligations. The Operating Agreement did not constitute a guarantee by
TMS of any obligations of TMCC.
During fiscal 2000, TMCC had an arrangement to borrow and invest funds with TMS
at short term market rates. For the years ended September 30, 2000, 1999 and
1998, TMCC had no borrowings from TMS for the years ended September 30, 1999
and 1998. For the years ended September 30, 2000, 1999 and 1998, the highest
amounts of funds invested with TMS were $797 million, $2 billion and $567
million, respectively; interest earned on these investments totaled
$13 million, $41 million and $3 million for the years ended September 30, 2000,
1999 and 1998, respectively.
During fiscal 2000 and 1998, TMS provided support to TMCC for certain vehicle
disposition losses. TMS support amounts included in the Consolidated
Statement of Income related to this arrangement totaled $35 million and
$80 million for the years ended September 30, 2000 and 1998, respectively.
TMCC did not receive any Parent support for vehicle disposition losses for
the year ended September 30, 1999.
TMS provides certain technical and administrative services and incurs certain
expenses on the Company's behalf. Payments and reimbursements to TMS for such
services totaled $25 million, $25 million and $13 million for the years ended
September 30, 2000, 1999 and 1998, respectively. In addition, TMS sponsors
special retail and lease programs offered by TMCC; for the years ended
September 30, 2000, 1999 and 1998, TMCC recognized revenue of $108 million,
$126 million and $142 million, respectively, related to TMS sponsored programs.
The Company leases its headquarters facility and Iowa Service Center from TMS;
rent expense paid to TMS for these facilities totaled $5 million, $4 million
and $3 million for the years ended September 30, 2000, 1999 and 1998,
respectively. TMCC leases a corporate aircraft to TMS and provides wholesale
financing for TMS affiliates; TMCC recognized revenue related to these
arrangements of $6 million, $6 million and $7 million for the years ended
September 30, 2000, 1999 and 1998, respectively.
TMIS provides certain insurance services, and insurance and reinsurance
coverages, respectively, to TMS. Premiums, commissions and fees earned on
these services for the years ended September 30, 2000, 1999 and 1998 totaled
$33 million, $24 million and $18 million, respectively.
During fiscal 1999, Toyota Credit Canada Inc., an affiliate of the Company,
paid off $201 million in intercompany loans. Interest charged on these loans
reflected market rates and totaled $8 million for the year ended September 30,
1999.
-55-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - Lines of Credit/Standby Letters of Credit
- ---------------------------------------------------
To support its commercial paper program, TMCC maintains syndicated bank credit
facilities with certain banks which aggregated $3.0 billion and $2.7 billion at
September 30, 2000 and 1999, respectively. No loans were outstanding under any
of these bank credit facilities as of September 30, 2000 or 1999.
To facilitate and maintain letters of credit, TMCC maintains, along with TMS,
uncommitted, unsecured lines of credit with banks totaling $175 million as of
September 30, 2000 and 1999. Approximately $11 million and $13 million in
letters of credit had been issued as of September 30, 2000, and 1999,
respectively.
Note 16 - Commitments and Contingent Liabilities
- ------------------------------------------------
At September 30, 2000, the Company was a lessee under lease agreements for
facilities with minimum future commitments as follows: years ending
September 30, 2001 - $15 million; 2002 - $13 million; 2003 - $9 million;
2004 - $5 million; 2005 - $2 million and thereafter - $3 million.
TMCC has guaranteed payments of principal and interest on $58 million principal
amount of flexible rate demand pollution control revenue bonds maturing in
2006, issued in connection with the Kentucky manufacturing facility of an
affiliate.
TMCC has guaranteed payments of principal, interest and premiums, if any, on
$88 million principal amount of flexible rate demand solid waste disposal
revenue bonds issued by Putnam County, West Virginia, of which $40 million
matures in June 2028, $27.5 million matures in August 2029, and $20.5 million
matures in April 2030. The bonds were issued in connection with the West
Virginia manufacturing facility of an affiliate.
TMCC has guaranteed payments of principal, interest and premiums, if any, on
$40 million principal amount of flexible rate demand pollution control revenue
bonds issued by Gibson County, Indiana, of which $10 million matures in October
2027, January 2028, January 2029 and January 2030. The bonds were issued in
connection with the Indiana manufacturing facility of an affiliate.
TMCC has guaranteed $50 million of the debt of TCA.
TMCC has guaranteed the obligations of TMIS relating to vehicle service
insurance agreements issued in several states. These guarantees have been
given without regard to any security and without any limitation as to duration
or amount.
An operating agreement between TMCC and TCPR (the "Agreement"), provides that
TMCC will make necessary equity contributions or provide other financial
assistance TMCC deems appropriate to ensure that TCPR maintains a minimum
coverage on fixed charges of 1.10 times such fixed charges in any fiscal
quarter. The Agreement does not constitute a guarantee by TMCC of any
obligations of TCPR. The fixed charge coverage provision of the Agreement is
solely for the benefit of the holders of TCPR's commercial paper, and the
Agreement may be amended or terminated at any time without notice to, or the
consent of, holders of other TCPR obligations.
-56-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16 - Commitments and Contingent Liabilities (Continued)
- ------------------------------------------------
Various legal actions, governmental proceedings and other claims are pending or
may be instituted or asserted in the future against TMCC and its subsidiaries
with respect to matters arising from the ordinary course of business. Certain
of these actions are or purport to be class action suits, seeking sizeable
damages and/or changes in TMCC's business operations, policies and practices.
Certain of these actions are similar to suits which have been filed against
other financial institutions and captive finance companies. Management and
internal and external counsel perform periodic reviews of pending claims and
actions to determine the probability of adverse verdicts and resulting amounts
of liability. The amounts of liability on pending claims and actions as of
September 30, 2000 were not determinable; however, in the opinion of
management, the ultimate liability resulting therefrom should not have a
material adverse effect on TMCC's consolidated financial position or results of
operations.
Note 17 - Segment Information
- -----------------------------
The Company's operating segments include finance and insurance operations.
Finance operations include retail leasing, retail and wholesale financing and
certain other financial services to authorized Toyota and Lexus vehicle and
Toyota industrial equipment dealers and their customers in the United States
(excluding Hawaii) and Puerto Rico. Insurance operations are performed by TMIS
and subsidiaries. The principal activities of TMIS include marketing,
underwriting, claims administration and providing certain coverages related to
vehicle service agreements and contractual liability agreements sold by or
through Toyota and Lexus vehicle dealers and affiliates to customers in the
United States (excluding Hawaii). In addition, the insurance subsidiaries
insure and reinsure certain TMS and TMCC risks.
The accounting policies of the operating segments are the same as those
described in Note 2 of the Notes to Consolidated Financial Statements. The
Company reports consolidated financial information for both external and
internal purposes. Currently, TMCC's finance and insurance segments operate
only in the United States and Puerto Rico.
-57-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17 - Segment Information (Continued)
- -----------------------------
Financial results for the Company's operating segments are summarized below:
September 30,
---------------------------------------
2000 1999 1998
--------- --------- ---------
(Dollars in Millions)
Assets:
Financing operations.................... $ 27,525 $ 24,156 $ 22,858
Insurance operations.................... 863 732 630
Eliminations/reclassifications.......... (352) (310) (263)
--------- --------- ---------
Total assets.......................... $ 28,036 $ 24,578 $ 23,225
========= ========= =========
Gross revenues:
Financing operations.................... $ 3,424 $ 3,234 $ 3,295
Insurance operations.................... 165 141 136
Eliminations............................ - - -
--------- --------- ---------
Total gross revenues.................. $ 3,589 $ 3,375 $ 3,431
========= ========= =========
Depreciation and amortization:
Financing operations.................... $ 1,556 $ 1,710 $ 1,825
Insurance operations.................... 1 1 1
--------- --------- ---------
Total depreciation and amortization... $ 1,557 $ 1,711 $ 1,826
========= ========= =========
Interest Expense:
Financing operations.................... $ 1,289 $ 940 $ 994
Insurance operations.................... - - -
--------- --------- ---------
Total interest expense $ 1,289 $ 940 $ 994
========= ========= =========
Interest Income:
Financing operations.................... $ 26 $ 9 $ 1
Insurance operations.................... 23 20 19
--------- --------- ---------
Total interest income $ 49 $ 29 $ 20
========= ========= =========
Income tax expense:
Financing operations.................... $ 62 $ 87 $ 92
Insurance operations.................... 3 11 15
--------- --------- ---------
Total income tax expense.............. $ 65 $ 98 $ 107
========= ========= =========
Net Income:
Financing operations.................... $ 70 $ 113 $ 119
Insurance operations.................... 34 19 25
--------- --------- ---------
Net Income............................ $ 104 $ 132 $ 144
========= ========= =========
Capital expenditures:
Financing operations.................... $ 18 $ 33 $ 32
Insurance operations.................... 2 4 1
--------- --------- ---------
Total capital expenditures............ $ 20 $ 37 $ 33
========= ========= =========
-58-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18 - Selected Quarterly Financial Data (Unaudited)
- -------------------------------------------------------
Total
Financing Interest Depreciation Net
Revenues Expense on Leases Income
---------- -------- ------------ -------
- -
(Dollars in Millions)
Year Ended September 30, 2000:
First quarter.............. $ 797 $ 277 $ 383 $ 32
Second quarter............. 830 317 367 25
Third quarter.............. 861 347 322 23
Fourth quarter............. 864 348 368 24
------ ------ ------ ----
Total................... $3,352 $1,289 $1,440 $104
====== ====== ====== ====
Year Ended September 30, 1999:
First quarter.............. $ 805 $243 $ 431 $ 35
Second quarter............. 786 220 427 28
Third quarter.............. 788 230 410 39
Fourth quarter............. 786 247 396 30
------ ---- ------ ----
Total................... $3,165 $940 $1,664 $132
====== ==== ====== ====
Year Ended September 30, 1998:
First quarter.............. $ 796 $234 $ 422 $ 37
Second quarter............. 800 239 414 30
Third quarter.............. 812 249 423 32
Fourth quarter............. 832 272 422 45
------ ---- ------ ----
Total................... $3,240 $994 $1,681 $144
====== ==== ====== ====
Note 19 - Subsequent Events
- ---------------------------
On October 1, 2000, TMCC, formerly a subsidiary of TMS, became a wholly-owned
subsidiary of Toyota Financial Services Americas Corporation ("TFSA"), a
holding company owned 100% by Toyota Financial Services Corporation ("TFSC") on
October 1, 2000. TFSC, in turn, is a wholly-owned subsidiary of TMC. TFSC was
incorporated in July 2000 and its corporate headquarters is located in Nagoya,
Japan. The purpose of TFSC is to control and manage Toyota's finance
operations worldwide.
-59-
Note 19 - Subsequent Events (Continued)
- ---------------------------
In connection with the creation of TFSC and the transfer of ownership of TMCC
from TMS to TFSC, the Operating Agreement with TMS and TMMNA was terminated, a
new credit support agreement (the "TMC Credit Support Agreement") was entered
into between TMC and TFSC, and a new credit support agreement (the "TFSC Credit
Support Agreement") was entered into between TFSC and TMCC. Under the terms of
the TMC Credit Support Agreement, TMC agreed to: 1) maintain 100% ownership of
TFSC; 2) cause TFSC and its subsidiaries to have a net worth of at least
Japanese yen 10 million; and 3) make sufficient funds available to TFSC so that
TFSC will be able to (i) service the obligations arising out of its own bonds,
debentures, notes and other investment securities and commercial paper and (ii)
honor its obligations incurred as a result of guarantees or credit support
agreements that it has extended. The agreement is not a guarantee by TMC of
any securities or obligations of TFSC. Under the terms of the TFSC Credit
Support Agreement, TFSC agreed to: 1) maintain 100% ownership of TMCC; 2) cause
TMCC and its subsidiaries to have a net worth of at least U.S. $100,000; and 3)
make sufficient funds available to TMCC so that TMCC will be able to service
the obligations arising out of its own bonds, debentures, notes and other
investment securities and commercial paper (collectively, "TMCC Securities").
The agreement is not a guarantee by TFSC of any TMCC Securities or other
obligations of TMCC. The TMC Credit Support and the TFSC Credit Support
Agreements are governed by, and construed in accordance with, the laws of
Japan.
On October 1, 2000, TMS and TMCC entered into a Shared Services Agreement
covering the services TMS will continue to provide after the ownership of
TMCC was transferred to TFSA. Additionally, a Repurchase Agreement was
entered into between TMCC and TMS in October 2000 which provides that TMCC is
under no obligation to TMS to finance wholesale obligations from any dealers or
retail obligations of any customers. In addition, TMS will arrange for the
repurchase of new Toyota and Lexus vehicles financed at wholesale by TMCC at
the aggregate cost financed in the event of dealer default.
During the first quarter of fiscal 2001, TMCC announced plans to restructure
the Company's field operations. The branch offices of TMCC will be converted
to serve only dealer business which includes the purchasing of contracts from
dealers, financing inventories, loans to dealers for business acquisitions,
facilities refurbishment, real estate purchases and working capital
requirements, as well as consulting on finance and insurance operations. The
other functions that the branch offices currently cover, such as customer
service, collections, lease termination and administrative functions, will be
handled by three regional call centers. The new structure is expected to be
completed in fiscal 2003.
-60-
Omitted.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There is nothing to report with regard to this item.
-4-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the directors
and executive officers of TMCC as of November 30, 2000.
Name Age Position
---- --- --------
George Borst ............. 52 Director, President and
Chief Executive Officer, TMCC;
Director, Secretary and Chief
Financial Officer, TFSA
Nobukazu Tsurumi.......... 52 Director, Executive Vice President
and Treasurer, TMCC
Michael Deaderick......... 54 Director, Senior Vice President
and Secretary, TMCC
Ryuji Araki............... 60 Director, TMCC;
Director, TFSA; Director, TFSC;
Senior Managing Director, TMC
Hideto Ozaki.............. 54 Director, TMCC; Director and
President, TFSA; President and
Director, TFSC
Yoshio Ishizaka........... 60 Director, TMCC; Senior
Managing Director, TMC
Yoshimi Inaba............. 54 Director, TMCC
Director, TMC
James Press............... 54 Director, TMCC
All directors of TMCC are elected annually and hold office until their
successors are elected and qualified. Officers are elected annually and serve
at the pleasure of the Board of Directors.
Mr. Borst was named Director, President and Chief Executive Officer of TMCC and
Director, Secretary and Chief Financial Officer of TFSA in October 2000. Mr.
Borst was named Senior Vice President of TMS in June 1997. From April 1997 to
September 2000, Mr. Borst was Director and Senior Vice President and General
Manager of TMCC. From January 1993 to May 1997, Mr. Borst was Group Vice
President of TMS. Mr. Borst has been employed with TMCC and TMS, in various
positions, since 1985.
Mr. Tsurumi was named Director and Executive Vice President of TMCC in October
2000. From January 2000 to September 2000, Mr. Tsurumi was Director, Senior
Vice President and Treasurer of TMCC and Group Vice President of TMS. From
January 1999 to December 1999, Mr. Tsurumi was Group Vice President of TMCC and
Vice President of TMS. From January 1996 to December 1998, Mr. Tsurumi was
Managing Director for Toyota Finance Australia. Mr. Tsurumi has been employed
with TMC, in various positions worldwide, since 1971.
-61-
Mr. Deaderick was named Director and Senior Vice President and Secretary of
TMCC in October 2000. From April 1998 to September 2000, Mr. Deaderick was
Group Vice President - Operations of TMCC. From April 1997 to September 2000,
Mr. Deaderick was Assistant Secretary of TMCC. From April 1995 to April 1998,
Mr. Deaderick was Vice President - Marketing and Operations of TMCC. Mr.
Deaderick has been employed with TMCC and TMS, in various positions, since
1971.
Mr. Araki was named Director of TFSA in August 2000, Director of TFSC in July
2000, and Director of TMCC in September 1995. Mr. Araki was named Senior
Managing Director of TMC's Board of Directors in June 1999 and has served on
TMC's Board of Directors since September 1992. From June 1997 to May 1999, Mr.
Araki was Managing Director of TMC. Mr. Araki has been employed with TMC, in
various positions, since 1962.
Mr. Ozaki was named Director and President of TFSA in August 2000, President
and Director of TFSC in July 2000, and Director of TMCC in October 1999. From
September 1997 to June 1999, Mr. Ozaki was the general manager of the finance
division of TMC. From January 1997 to August 1997, Mr. Ozaki was the Project
General Manager of the Finance Division of TMC. From January 1994 to
December 1996, Mr. Ozaki was the Project General Manager of the Accounting
Division of TMC. Mr. Ozaki has been employed with TMC, in various positions,
since 1968.
Mr. Ishizaka was named Director of TMCC in July 2000, and Senior Managing
Director of TMC in June 1999. From June 1996 to June 1999, Mr. Ishizaka was
President of TMS. From September 1992 to May 1999, Mr. Ishizaka was Director
of TMC. Mr. Ishizaka has been employed with TMC, in various positions, since
1964.
Mr. Inaba was named Director of TMCC and TMS and President of TMS in June
1999, and was named Director of TMC in June 1997. From June 1999 to
September 2000, Mr. Inaba was President of TMCC. From June 1997 to June
1999, Mr. Inaba was the General Manager of the Europe, Africa and United
Kingdom Division of TMC. From June 1996 to May 1997, Mr. Inaba was Senior
Vice President of TMS. Mr. Inaba has been employed with TMC, in various
positions worldwide, since 1968.
Mr. Press was named Director of TMCC in July 1999. He is also a Director and
Executive Vice President of TMS, positions he has held since June 1996 and
July 1999, respectively. From March 1998 to July 1999, he was a Senior Vice
President of TMS. From April 1995 to March 1998, Mr. Press was Senior Vice
President and General Manager of Lexus. Mr. Press has been employed with TMS,
in various positions, since 1970.
-62-
Omitted.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth all compensation awarded to, earned by, or paid
to the Company's Principal Executive Officer and the most highly compensated
executive officers whose salary and bonus for the latest fiscal year exceeded
$100,000, for services rendered in all capacities to the Company for the fiscal
years ended September 30, 2000, 1999 and 1998.
Annual Compensation
--------------------------------------------
Other Annual All
Name and Fiscal Compensation Other
Principal Position Year Salary ($) Bonus ($) ($) ($)
- --------------------- ------ ---------- --------- ------------ -------
George Borst 2000 $316,290 $179,200 - $10,300
Chief Executive Officer 1999 $273,400 $162,300 - $ 8,700
Principal Executive 1998 $237,700 $150,300 - $ 3,300
Officer
Nobukazu Tsurumi 2000 $247,124 $55,948 $36,060 -
Executive 1999 $117,700 $25,300 $23,800 -
Vice President 1998 N/A N/A N/A N/A
Michael Deaderick 2000 $236,025 $122,740 - $8,600
Senior 1999 $215,300 $120,000 - $7,900
Vice President 1998 $193,200 $94,400 - $7,000
- ------------
The amounts in this column represent housing allowances and relocation
costs.
The amounts in this column represent the Company's allocated contribution
under the TMS Savings Plan (the "Plan"), a tax-qualified 401(k) Plan.
Participants in the Plan may elect, subject to applicable law, to contribute up
to 15% of their base compensation on a pre-tax basis to which the Company adds
an amount equal to two-thirds of the first 6% of the employee's contribution.
Participants are vested 25% each year with respect to the Company's
contribution and are fully vested after four years. Subject to the limitations
of the Plan, employee and Company contributions are invested in various
investment options at the discretion of the employee. TMS also maintains a
401(k) Excess Plan, a non-qualified deferred compensation plan which has
similar provisions to the Saving Plan.
Effective January 1, 1999, Mr. Tsurumi was appointed as Group Vice
President and Treasurer. The compensation presented for Mr. Tsurumi for fiscal
year 1999 reflects amounts earned for services to the Company during the
partial period of the fiscal year served.
-63-
Employee Benefit Plan
The following pension plan table presents typical annual retirement benefits
under the TMS Pension Plan for various combinations of compensation and years
of credited service for participants who retire at age 62, assuming no final
average bonus and excluding Social Security offset amounts. The amounts are
subject to Federal statutory limitations governing pension calculations and
benefits.
Annual Benefits for
Final Average Years of Credited Service
Annual ------------------------------------
Compensation 15 20 25
------------- -------- -------- --------
$50,000 $15,000 $20,000 $25,000
$100,000 $30,000 $40,000 $50,000
$150,000 $45,000 $60,000 $75,000
$200,000 $60,000 $80,000 $100,000
$250,000 $75,000 $100,000 $125,000
$300,000 $90,000 $120,000 $150,000
$350,000 $105,000 $140,000 $175,000
$400,000 $120,000 $160,000 $200,000
$450,000 $135,000 $180,000 $225,000
$500,000 $150,000 $200,000 $250,000
All full-time employees of the Company are eligible to participate in the TMS
Pension Plan commencing on the first day of the month following hire. Benefits
payable under this non-contributory defined benefit pension plan are based upon
final average compensation, final average bonus and years of credited service.
Final average compensation is defined as the average of the participant's base
rate of pay, plus overtime, during the highest-paid 60 consecutive months prior
to the earlier of termination or normal retirement. Final average bonus is
defined as the highest average of the participant's fiscal year bonus, and
basic seniority-based cash bonus for non-managerial personnel, over a period of
60 consecutive months prior to the earlier of termination or normal retirement.
A participant generally becomes eligible for the normal retirement benefit at
age 62, and may be eligible for early retirement benefits starting at age 55.
The annual normal retirement benefit under the Pension Plan, payable monthly,
is an amount equal to the number of years of credited service (up to 25 years)
multiplied by the sum of (i) 2% of the participant's final average compensation
less 2% of the estimated annual Social Security benefit payable to the
participant at normal retirement and (ii) 1% of the participant's final average
bonus. The normal retirement benefit is subject to reduction for certain
benefits under any union-sponsored retirement plan and benefits attributable to
employer contributions under any defined-contribution retirement plan
maintained by TMS and its subsidiaries or any affiliate that has been merged
into the TMS Pension Plan.
-64-
The TMS Supplemental Executive Retirement Plan (TMS SERP), a non-qualified non-
contributing benefit plan, authorizes a benefit to be paid to eligible
executives, including Mr. Borst and Mr. Deaderick. Benefits under the TMS
SERP, expressed as an annuity payable monthly, are based on 2% of the
executive's compensation recognized under the plan multiplied by the years of
service credited under the plan (up to a maximum of 30), offset by benefits
payable under the TMS Pension Plan and the executive's primary Social Security
benefit. A covered participant's compensation may include base pay and a
percentage (not in excess of 100%) of bonus pay, depending on the executive's
length of service in certain executive positions. Similarly, years of service
credited under the plan are determined by reference, in part, to the
executive's length of service in certain executive positions. No benefit is
payable under the TMS SERP to an executive unless the executive's termination
of employment occurs on a date, after the executive reaches age 55, that is
agreed in writing by the President of TMS and the executive; and the executive
is vested in benefits under the TMS Pension Plan, or unless the executive
accepts an invitation to retire extended by the President of TMS.
Mr. Borst is a participant in the TMS Pension Plan and the TMS SERP, and had
15 years of total credited service as of September 30, 2000. Based upon years
of credited service allocable to TMCC, Mr. Borst may be entitled to receive
approximately $36,000 in annual pension plan benefits when Mr. Borst reaches
age 62. Mr. Borst also may be entitled to receive pension benefits from TMS
based upon services to and compensation by TMS.
Mr. Deaderick is a participant in the TMS Pension Plan and the TMS SERP, and
had 26 years of total credited service as of September 30, 2000. Based upon
years of credited service allocable to TMCC, Mr. Deaderick may be entitled to
receive approximately $93,000 in annual pension plan benefits when Mr.
Deaderick reaches age 62. Mr. Deaderick also may be entitled to receive
pension benefits from TMS based upon services to and compensation by TMS.
Compensation of Directors
No amounts are paid to members of the TMCC Board of Directors for their
services as directors.
Compensation Committee Interlocks and Insider Participation
Members of the Executive Committee of the Board of Directors, which consists of
the directors of TMCC other than Mr. Araki and Mr. Ishizaka, participate in
decisions regarding the compensation of the executive officers of the Company.
Certain of the members of the Executive Committee are current or former
executive officers of the Company. Certain of the members of the Executive
Committee are also current executive officers and directors of TMS and its
affiliates and participate in compensation decisions for those entities.
-65-
Omitted.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of the date hereof, all of TMCC's capital stock is owned by TFSA.Omitted.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Transactions between the Company, TFSA, TFSC, TMS and TMMNA are included in
Note 2, Note 11, Note 14, Note 15 and Note 16 of the Notes to the Consolidated
Financial Statements as well as Item 1 and Item 7. Certain directors and
executive officers of TMCC are also directors and executive officers of TFSA,
TFSC, TMS and TMC as described in Item 10.Omitted.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1)Financial Statements
Included in Part II, Item 8 of this Form 10-K. See Index to
Financial Statements on page 26.
(2)Exhibits
The exhibits listed on the accompanying Exhibit Index, starting on
page 68,7, are filed as
part of or incorporated by reference into,
this Report.
(b)Reports on Form 8-K
There were noThe following reports on Form 8-K filedcontain monthly Servicer's Certificates
prepared by the registrantTMCC and were filed during the quarteryear ended September 30, 2000.
-66-March 31, 2002:
Date of Report
- -----------------
January 31, 2002
February 28, 2002
March 29, 2002
The following Form 8-K which was filed during the year ended March 31, 2002
contains the Term Sheet for the Toyota Auto Receivables 2002-A Owner Trust:
Date of Report
- -----------------
January 15, 2002
The following report on Form 8-K which was filed during the year ended
March 31, 2002 contains the basic governing documents:
Date of Report:
- ------------------
January 29, 2002
-5-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Torrance,
State of California, on the 20th day of December, 2000.authorized.
TOYOTA AUTO RECEIVABLES 2002-A OWNER TRUST
BY: TOYOTA MOTOR CREDIT CORPORATION,
ByAS SERVICER
Date: June 26, 2002 By: /S/ GEORGE E. BORST
---------------------------------------------------------------------
George E. Borst
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on the 20th day of December, 2000.
Signature Title
--------- -----
President and Chief Executive
Officer
and Director
/S/ GEORGE E. BORST (Principal Executive Officer)
- ------------------------------------
George E. Borst
Executive Vice PresidentSUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.
No annual report, proxy statement, form of proxy or other proxy soliciting
material has been sent to Note holders during the period covered by this report
and Treasurer and Director
/S/ NOBUKAZU TSURUMI (Principal Financial Officer)
- ------------------------------------
Nobukazu Tsurumi
Vice President - Finance
and Affiliated Operations
/S/ ROBERT M. ALLEN (Principal Accounting Officer)
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Robert M. Allen
/S/ MICHAEL DEADERICK Director
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Michael Deaderick
/S/ YOSHIMI INABA Director
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Yoshimi Inaba
/S/ JAMES PRESS Director
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James Press
-67-the registrant does not intend to furnish such materials to Note holders
subsequent to the filing of this report.
-6-
EXHIBIT INDEX
Method
Exhibit ofMethod
Number Description of Filing
- ------- ----------- --------
3.1(a) Articles---------
20(a) Report of Incorporation filedIndependent Accountants on Compliance Filed
with the California
Secretary of State on October 4, 1982. (1)
3.1(b) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
January 24, 1984. (1)
3.1(c) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
January 25, 1985. (1)
3.1(d) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
September 6, 1985. (1)
3.1(e) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
February 28, 1986. (1)
3.1(f) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
December 3, 1986. (1)
3.1(g) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
March 9, 1987. (1)
3.1(h) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
December 20, 1989. (2)
3.2 BylawsSpecified Retail Receivable Servicing Standards Herewith
and Related Exhibits
20(b) Annual Statement as amended through January 16, 1993. (6)
4.1 Issuing and Paying Agency Agreement dated August 1,
1990 between TMCC and Bankers Trust Company. (3)
4.2(a) Indenture dated as of August 1, 1991 between TMCC and
The Chase Manhattan Bank, N.A. (4)
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(1) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Registration Statement on Form S-1, File No. 33-22440.
(2) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1989,
Commission File number 1-9961.
(3) Incorporated herein by reference to Exhibit 4.2 filed with TMCC's
Report on Form 10-K for the year ended September 30, 1990,
Commission File number 1-9961.
(4) Incorporated herein by reference to Exhibit 4.1(a), filed with TMCC's
Registration Statement on Form S-3, File No. 33-52359.
(6) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1993,
Commission File number 1-9961.
-68-
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------
4.2(b) First Supplemental Indenture dated as of
October 1, 1991 among TMCC, Bankers Trust Company
and The Chase Manhattan Bank, N.A. (5)
4.3 Third Amended and Restated Agency Agreement dated
October 4, 2000 among TMCC, The Chase Manhattan Bank, Filed
and Chase Manhattan Bank Luxembourg S.A. Herewith
4.4 TMCC has outstanding certain long-term debt as set
forth in Note 8 of the Notes to Consolidated Financial
Statements. Not filed herein as an exhibit, pursuant
to Item 601(b) (4)(iii)(A) of Regulation S-K under
the Securities Act of 1933, is any instrument which
defines the rights of holders of such long-term debt,
where the total amount of securities authorized
thereunder does not exceed 10% of the total assets
of TMCC and its subsidiaries on a consolidated
basis. TMCC agrees to furnish copies of all such
instruments to the Securities and Exchange Commission
upon request.
10.1(a) Operating Agreement dated January 16, 1984 between
TMCC and TMS. (15)
10.1(b) Amendment No. 1 to Operating Agreement dated May 14, 1996
between TMCC and TMS. (11)
10.1(c) Amendment No. 2 to Operating Agreement dated December 1,
1997 between TMCC, TMS and TMMNA. (20)
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(5) Incorporated herein by reference to Exhibit 4.1 filed with TMCC's
Current Report on Form 8-K dated October 16, 1991, Commission File
No. 1-9961.
(11) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's
Report on Form 10-Q for the quarter ended March 31, 1996, Commission
File No. 1-9961.
(15) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's
Registration Statement on Form S-1, File No. 33-22440.
(20) Incorporated herein by reference to Exhibit 10.1(c) filed with TMCC's
Current Report on Form 10-K for the year ended September 30, 1997,
Commission File No. 1-9961.
-69-
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------
10.1(d) Amendment No. 3 to Operating Agreement dated June 1, 1999
between TMCC, TMS and TMMNA. (22)
10.1(e) Amendment No. 4 to Operating Agreement dated August 1, Filed
2000 between TMCC, TMS and TMMNA. Herewith
10.1(f) Termination of Operating Agreement dated October 1, 2000 Filed
between TMCC, TMS and TMMNA. Herewith
10.4 Form of Indemnification Agreement between TMCC and
its directors and officers. (12)
10.5(a) Three-year Credit Agreement (the "Three-year Agreement")
dated as of September 29, 1994 among TMCC, Morgan
Guaranty Trust Company of New York, as agent, and
Bank of America National Trust and Savings Association,
The Bank of Tokyo, Ltd., The Chase Manhattan Bank, N.A.,
Citicorp USA, Inc. and Credit Suisse, as Co-Agents. (13)
10.5(b) Amendment No. 1 dated September 28, 1995 to the
Three-year Agreement. (14)
10.5(c) Amended and Restated Three-Year Credit Agreement dated
September 24, 1996. (16)
10.5(d) Amended and Restated Three-Year Credit Agreement dated
September 23, 1997. (17)
10.5(e) Amendment dated March 19, 1999 to the
Three-year Agreement. (8)
10.5(f) Amended and Restated Three-Year Credit Agreement dated
September 17, 1999. (8)
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(8) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Current Report on Form 10-K for the year ended September 30,
1999, Commission File No. 1-9961.
(12) Incorporated herein by reference to Exhibit 10.6 filed with TMCC's
Registration Statement on Form S-1, Commission File No. 33-22440.
(13) Incorporated herein by reference to Exhibit 10.10 filed with TMCC's
Report on Form 10-K for the year ended September 30, 1994,
Commission File No. 1-9961.
(14) Incorporated herein by reference to Exhibit 10.10(a) filed
with TMCC's Report on Form 10-K for the year ended September 30, 1995,
Commission File No. 1-9961.
(16) Incorporated herein by reference to Exhibit 10.9(d) filed with TMCC's
Report on Form 10-K for the year ended September 30, 1996, Commission
File No. 1-9961.
(17) Incorporated herein by reference to Exhibit 10.5(f) filed with TMCC's
Report on Form 10-K for the year ended September 30, 1997, Commission
File No. 1-9961.
(22) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's
Report on Form 10-Q for the quarter ended June 30, 1999, Commission
File No. 1-9961.
-70-
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------
10.5(g) Fourth Amended and Restated Three-Year Credit Agreement Filed
dated September 14, 2000. Herewith
10.5(h) Fourth Amended and Restated 364-Day Credit Agreement
dated September 17, 1999 among TMCC, Bank of America
N.A. as Administrative Agent, The Chase Manhattan
Bank as Syndication Agent, The Bank of Tokyo-Mitsubishi
Ltd., and Citicorp USA, Inc. as Documentation Agents,
Banc of America Securities LLC as Sole Lead Arranger
and Sole Book Manager and the other Banks named therein. (23)
10.5(i) Fifth Amended and Restated 364-Day Credit Agreement
dated September 14, 2000 among TMCC, Bank of America
N.A. as Administrative Agent, The Chase Manhattan
Bank as Syndication Agent, The Bank of Tokyo-Mitsubishi
Ltd., and Citicorp USA, Inc. as Documentation Agents,
Banc of America Securities LLC as Sole Lead Arranger Filed
and Sole Book Manager and the other Banks named therein. Herewith
10.6 Toyota Motor Sales, U.S.A., Inc. Supplemental
Executive Retirement Plan. * (9)
10.7 Toyota Motor Sales, U.S.A., Inc. 401(k)
Excess Plan. * (10)
10.8 Amended and Restated Trust and Servicing Agreement
dated as of October 1, 1996 by and among TMCC,
TMTT, Inc., as titling trustee and U.S. Bank National
Association, as trust agent. (18)
10.9 Credit Support Agreement dated July 14, 2000 between Filed
TFSC and TMC. Herewith
10.10 Credit Support Agreement dated October 1, 2000 between Filed
TMCC and TFSC. Herewith
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(9) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's
Report on Form 10-Q for the quarter ended December 31, 1995, Commission
File No. 1-9961.
(10) Incorporated herein by reference to Exhibit 10.2 filed with TMCC's
Report on Form 10-Q for the quarter ended December 31, 1995, Commission
File No. 1-9961.
(18) Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto
Lease Trust 1997-A's Report on Form 8-A dated December 23, 1997,
Commission File No. 333-26717
*- Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to applicable rules of the Securities and
Exchange Commission.
(23) Incorporated herein by reference to Exhibit 10.5(g)filed
with TMCC's Current Report on Form 10-K for the year ended September 30,
1999, Commission File No. 1-9961.
-71-
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------
10.11 Repurchase Agreement dated October 1, 2000 between Filed
TMCC and TMS. Herewith
10.12 Shared Services Agreement dated October 1, 2000 Filed
between TMCC and TMS. Herewith
12.1 Calculation of ratio of earnings to fixed charges.Compliance Filed
Herewith
21.1 TMCC's list of subsidiaries.20(c) Aggregate Monthly Report Information Filed
Herewith
23.1 Consent of Independent Accountants. Filed
Herewith
27.1 Financial Data Schedule. Filed
Herewith
-72--7-