UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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, 19962000
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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
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TOYOTA MOTOR CREDIT CORPORATION
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(Exact name of registrant as specified in its charter)
California 95-3775816
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19001 S. Western Avenue
Torrance, California 90509
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 787-1310468-1310
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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
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7.55%5.25% Fixed Rate Medium-Term
Notes due January 30, 199719, 2001 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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]
As of November 30, 1996,2000, the number of outstanding shares of capital
stock, par value $10,000 per share, of the registrant was 91,500, all of which
shares were held by Toyota Motor Sales, U.S.A., Inc.Financial Services Americas Corporation.
-1-
PART I
ITEM 1. BUSINESS.
General
Toyota Motor Credit Corporation ("TMCC") iswas incorporated in California in 1982
as a wholly-owned subsidiary of Toyota Motor Sales, USA, Inc. ("TMS") which was incorporated in California in
1982 and
commenced operations in 1983. TMS is an indirect wholly-owned subsidiary of
Toyota Motor Corporation ("TMC"). On October 1, 2000, ownership of TMCC was
transferred from TMS to Toyota Financial Services Americas Corporation
("TFSA"), 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 leasing, 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 sixfour wholly-owned subsidiaries,
fourone of which areis 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 newly formed corporation, established in January 1996, to
providesubsidiary 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. See Item 14, Exhibit 21.1.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% 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 finance
receivables, 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.
An operating-2-
In connection with the creation of TFSC and the transfer of ownership of TMCC
from TMS to TFSC, a new credit support agreement (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").
The agreement is not a guarantee by TFSC of any 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 declaration to the effect
that 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 maintained by the SEC at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices 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. Copies 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 (the "Operating Agreement"),in October 2000
which provides that TMCC will establish its own financing rates and is under no obligation to TMS to finance wholesale
obligations from any dealers or retail obligations of any customers. In
addition, pursuant to the Operating
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. The OperatingRepurchase Agreement also specifies that TMS will
retain 100% ownershipis filed as an exhibit in Item 14.
On June 6, 2000, the Executive Committee of the Board of Directors of TMCC
as long as TMCC has any funded debt outstandingapproved 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 that TMSending
March 31, 2001 will make necessary equity contributions or provide other
financial assistance TMS deems appropriate to ensure that TMCC maintains a
minimum coveragebe filed with the SEC on fixed charges of 1.10 times such fixed charges in any
fiscal quarter; the Operating Agreement was amended on May 14, 1996 to reduce
the minimum fixed charge coverage ratio from 1.25 to 1.10. The Operating
Agreement does not constitute a guarantee by TMS of any obligations of TMCC.
The fixed charge coverage provision of the Operating Agreement is solely for
the benefit of the holders of TMCC's commercial paper, and the Operating
Agreement may be amended or terminated at any time without notice to, or the
consent of, holders of other TMCC obligations.Form 10-K.
-3-
Retail Leasing
TMCC purchases primarily new and used vehicle lease 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 -2-
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.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. In recent years, TMS has sponsored special lease programs by
supporting reduced lease rates. Leasing revenues contributed 82%72%, 78%76% and 71%80% to
total financing revenues for the fiscal years ended September 30, 2000, 1999
and 1998, respectively.
In October 1996, 1995TMCC created Toyota Lease Trust, a Delaware business trust
(the "Titling Trust"), to act as lessor and 1994, respectively.to hold title to leased vehicles in
specified states in connection with a lease securitization program. TMCC acts
as the servicer for lease contracts purchased 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. These obligationsCertain 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. In recent years, TMS has sponsored special retail
programs by supporting reduced interest rates. Retail financing revenues contributed 14%23%, 18%20% and 24%16%
to total financing revenues for the fiscal years ended September 30, 1996, 19952000, 1999
and 1994,1998, 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,
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2000 1999 1998 1997 1996
1995 1994 1993 1992
----------------- -------- -------- -------- --------
Contract volume:
New vehicles......... 430,000 303,000 350,000 256,000 237,000
Used vehicles*....... 75,000 46,000 64,000 56,000 56,000
--------- -------- -------- -------- --------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
349,000 414,000 312,000 293,000
========= ======== ======== ======== =============== ======= ======= ======= =======
Average amount financed:
New vehicles......... $21,100 $21,000 $19,900 $17,900 $16,700
Used vehicles*....... $14,400 $14,000 $12,600 $10,400 $9,400Lease................ $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):
New vehicles...... $15,741 $12,852 $11,603 $8,167 $6,910
Used vehicles*.... $1,270 $942 $1,128 $877 $837Lease............. $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 1,069,000 946,000 929,000 750,000 735,000
*Used vehicle data reflects primarily financing activity.
FinanceRetail receivables and interests in lease finance receivables sold, ($1.1totaling
$3.8 billion as of September 30, 1996)2000 and $4.1 billion as of September 30,
1999, which TMCC continues to service, are excluded from the outstanding
portfolio amounts in the above table.
-3-
Wholesale Financing
TMCC provides wholesale financing primarily to qualified Toyota and Lexus
vehicle dealers to finance inventories of new Toyota and Lexus vehicles and
used Toyota, Lexus and Lexusother vehicles. TMCC acquires security interests in
vehicles financed at wholesale, and substantially all such financings are
backed by corporate or individual guarantees from or on behalf of participating
dealers. In the event of dealer default, TMCC has the right to liquidate any
assets acquired and seek legal remedies pursuant to the guarantees. Pursuant
to the OperatingRepurchase Agreement, TMS will arrange for the repurchase of new Toyota
and Lexus vehicles financed at wholesale by TMCC at the aggregate cost financed
in the event of dealer default.
A summary of vehicle wholesale financing activity follows:
Years Ended September 30,
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2000 1999 1998 1997 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Dealer loans ($Millions)............ $13,950 $11,093 $9,802 $8,573 $8,017 $7,626 $7,055 $6,378 $4,903
Dealer repayments ($Millions).. $13,421 $10,983 $9,600 $8,684 $8,221 $7,444 $7,032 $6,152 $4,745
Outstanding portfolio at
period end ($Millions).......... $1,410 $855 $746 $563 $668 $886 $727 $703 $486
Average amount financed
per vehicle.................vehicle............... $22,534 $22,120 $21,562 $20,695 $19,926 $18,999 $17,530 $16,500 $15,400
TMCC also makes term loans to dealers for business acquisitions, facilities
refurbishing,refurbishment, real estate purchases and working capital.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 4%5%, 4% and 5%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, 1996, 19952000, 1999 and 1994,1998, respectively.
Insurance
TMCC's insurance subsidiaries provide 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.
Servicing
TMCC services retail installment obligations which have been sold to third
parties throughremains as servicer on accounts included in its asset-backed
securities program.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. Debt issuances haveCapital market funding has generally been in the form
of commercial paper, United Statesextendible commercial notes, domestic and Euroeuro medium-term
notes Eurobonds
and to a lesser extent,bonds and transactions through the sale of retail finance receivables.
-4-
Company's asset-backed
securitization programs.
The Company uses a variety of derivative financial instruments to manage
interest rate and foreigncurrency exchange exposures. The derivative instruments utilizedused
include cross currency and interest rate swap agreements, indexed note swapsswap
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 the 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 iswere unable
to pass on the 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
to complyfor compliance with applicable law.laws. Future administrative rulings, judicial
decisions and legislation in this area may require modification of the Company's business
practices and documentation.
Employee Relations
At November 30, 1996,2000, the Company had approximately 2,0902,700 full-time employees.
The Company considers its employee relations to be satisfactory.
-5-
Toyota Motor Sales, U.S.A., Inc.
TMS was establishedgood.
Segment Information
Financial information regarding industry segments is set forth in 1957 and as of September 30, 1996 is a wholly-owned
subsidiary of Toyota Motor North America, Inc. ("TMA"). TMS is primarily
engaged in the wholesale distribution of automobiles, light trucks, industrial
equipment and related replacement parts and accessories throughout the United
States (excluding Hawaii). Additionally, TMS exports automobiles and related
replacement parts and accessories to Europe, Asia and United States
territories. Through September 30, 1996, TMS manufactured certain automobiles
through Toyota Motor Manufacturing, U.S.A., Inc., and manufactured trucks
through Toyota Auto Body Corporation, Inc. ("TABC"), a wholly owned
subsidiary. Effective October 1, 1996, Toyota Motor Manufacturing North
America, Inc. ("TMMNA") was established to serve as the holding company for
all manufacturing operations in the United States and to coordinate and
support numerous manufacturing related administrative functions previously
carried out independently by various Toyota entities in North America and by
Toyota Motor Corporation ("TMC") in Japan. Both TMMNA and TMS are wholly-
owned subsidiaries of TMA, a holding company owned 100% by TMC which was
established on September 3, 1996.
TMS's corporate headquarters are in Torrance, California, and TMS has port
facilities, regional sales offices and parts distribution centers at other
locations in the United States. Toyota vehicles are distributed throughout
the United States in twelve regions, ten of which are operated by or through
TMS. The remaining two regions are serviced by private distributors which
purchase directly from TMS and distribute to Toyota dealers within their
respective regions. For the year ended September 30, 1996, these two
distributors, Gulf States Toyota, Inc. of Houston, Texas and Southeast Toyota
Distributors, Inc. of Deerfield Beach, Florida, accounted for approximately
32%Note 17 of
the Toyota vehicles sold in the United States (excluding Hawaii).
Lexus vehicles are directly distributed by TMSNotes to Lexus dealers throughout the
United States (excluding Hawaii).
For the year ended September 30, 1996, TMS sold approximately 1,109,000
automobiles and light trucks in the United States (excluding Hawaii), of which
approximately 682,000 were manufactured in the United States; TMS exported
approximately 62,000 automobiles. TMS sales represented approximately 27% of
TMC's worldwide sales volume for the year ended March 31, 1996. For the years
ended September 30, 1996 and 1995, Toyota and Lexus vehicles accounted for
approximately 7.5% and 7.2%, respectively, of all retail automobile and light
truck sales in the United States.
Total revenues for TMS for the fiscal years ended September 30, 1996, 1995 and
1994, aggregated approximately $27.5 billion, $26.2 billion and $23.3 billion,
respectively, of which approximately $24.4 billion, $23.7 billion and $21.5
billion, respectively, were attributable to revenues other than those
associated with financial services. At September 30, 1996, 1995 and 1994, TMS
had total assets of approximately $25.1 billion, $21.1 billion and $19.5
billion, respectively, and net worth in excess of $4.7 billion, $4.6 billion
and $4.3 billion, respectively. TMS had net income of $229 million for the
fiscal year ended September 30, 1996 and net income in excess of $250 million
for the fiscal years ended September 30, 1995 and 1994.
-6-Consolidated Financial Statements.
-7-
ITEM 2. PROPERTIES.
The headquarters of the Company arefor both finance and insurance operations is
located in Torrance, California with 34California. In addition, as of November 30, 2000, the
finance operation has three regional offices and 32 branch offices located in cities
throughout the United States and one branch office located in the Commonwealth 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.
ITEM 3. LEGAL PROCEEDINGS.
Various claimslegal actions, governmental proceedings and actionsother claims are pending or
may be instituted or asserted in the future against TMCC and its subsidiaries
with respect to financing activities, taxes and other matters arising from the ordinary course of business. Certain
of these actions are or purport to be class action suits, seeking sizeable
damages.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, 19962000 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
TMCC is a wholly-owned subsidiary of TMSTFSA and, accordingly, all shares of the
Company's stock are owned by TMS.TFSA. There is no market for TMCC's stock.
No dividends have been declared or paid to date.
-7--8-
ITEM 6. SELECTED FINANCIAL DATA.
The selected consolidated financial data set forth below were derived from the
audited consolidated financial statements of the Company. Certain prior
period amounts have been reclassified to conform with the current period
presentation.
Years Ended September 30,
---------------------------------------------------------------------------------
2000 1999 1998 1997 1996
1995 1994 1993 1992
------ ------ ------ ------ ------------- ------- ------- ------- -------
(Dollars in Millions)
INCOME STATEMENT DATA
Financing Revenues:
Leasing........................... $2,454 $1,904 $1,230Leasing.......................... $ 7472,402 $ 4472,397 $ 2,595 $ 2,743 $ 2,453
Retail financing.................. 415 431 413 468 485financing................. 768 645 531 433 402
Wholesale and other
dealer financing............... 109 121 86 80 65
------ ------ ------ ------ ------financing.............. 182 123 114 101 122
------- ------- ------- ------- -------
Total financing revenues.......... 2,978 2,456 1,729 1,295 997revenues......... 3,352 3,165 3,240 3,277 2,977
Depreciation on operating leases.. 1,626 1,232 735 381 178leases........... 1,440 1,664 1,681 1,793 1,625
Interest expense..................expense................. 1,289 940 994 918 820
716 486 454 450
------ ------ ------ ------ ------------- ------- ------- ------- -------
Net financing revenues............revenues........... 623 561 565 566 532
508 508 460 369
Other revenues.................... 136 113 95 80 53
------ ------ ------ ------ ------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............. 668 621 603 540 422
------ ------ ------ ------ ------revenues............ 786 752 756 729 659
------- ------- ------- ------- -------
Expenses:
Operating and administrative...... 293 255 232 225 179administrative..... 400 376 323 259 235
Provision for credit losses.......losses...... 135 83 127 136 115
66 78 60 68
------ ------ ------ ------ ------Insurance losses and loss
adjustment expenses........... 81 63 55 51 49
------- ------- ------- ------- -------
Total expenses.................... 408 321 310 285 247
------ ------ ------ ------ ------expenses................... 616 522 505 446 399
------- ------- ------- ------- -------
Income before income taxes........taxes....... 170 230 251 283 260
300 293 255 175Equity in net loss of subsidiary. 1 - - - -
Provision for income taxes........taxes....... 65 98 107 121 108
117 118 97 68
------ ------ ------ ------ ------------- ------- ------- ------- -------
Net Income........................Income....................... $ 104 $ 132 $ 144 $ 162 $ 152
$ 183 $ 175 $ 158 $ 107
====== ====== ====== ====== ============= ======= ======= ======= =======
Ratio of earnings to
fixed charges................. 1.13 1.24 1.25 1.31 1.32
- -----------------
(Table Continued)
-8--9-
Years Ended September 30,
------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(Dollars in Millions)
BALANCE SHEET DATA
Finance receivables, net......... $18,168 $13,856 $11,521 $8,452 $7,474
Investments in operating
leases, net............net.................... $ 7,964 $ 8,605 $ 9,765 $10,257 $10,831
$8,148 $6,215 $3,050 $1,699
Finance receivables, net.. $7,463 $7,227 $7,834 $7,226 $6,998
Total assets.............. $19,308 $16,225 $14,791 $11,179 $9,459assets..................... $28,036 $24,578 $23,225 $19,830 $19,309
Notes and loans payable...payable.......... $21,098 $18,565 $17,597 $14,745 $15,014
$12,696 $11,833 $8,833 $7,705
Capital stock.........stock.................... $915 $865 $865 $680 $630$915 $915 $915 $915
Retained earnings..... $998 $844 $662 $487 $329
RATIO OF EARNINGS TO
FIXED CHARGES...... 1.32 1.42 1.60 1.56 1.39
- ----------------
$10,000 par value per share.
The Company has paid no dividends to date.
The ratio of earnings to fixed charges was computed by dividing (i) the
sum of income before income taxes and fixed charges by (ii) fixed
charges. Fixed charges consist primarily of interest expense net of
the effect of noninterest-bearing advances. The ratio of earnings to
fixed charges for TMS and subsidiaries was 1.49, 1.74, 1.90, 2.07 and
1.83 for the years ended September 30, 1996, 1995, 1994, 1993 and 1992,
respectively. In March 1987, TMCC guaranteed payments of principal and
interest on $58 million principal amount of bonds issued in connection
with the Kentucky manufacturing facility of an affiliate. As of
September 30, 1996, TMCC has not incurred any fixed charges in
connection with such guarantee and no amount is included in any ratio
of earnings to fixed charges.
earnings................ $1,539 $1,435 $1,303 $1,159 $997
-9-Certain prior period amounts have been reclassified to conform with the current
period presentation.
-10-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Financial ConditionFINANCIAL 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 Results1998:
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 Operationshigher 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 volumesvolume and finance penetration for the fiscal years ended
September 30, 1996, 19952000, 1999, and 19941998 are summarized below:
September 30,
September 30,
1996 1995
------------- ----------------------------------------
2000 1999 1998
------- ------- -------
(Dollars in Millions)
Lease earning assets, net................ $12,194
Vehicle lease
Investment in operating leases, net........ $ 9,533
Retail7,580 $ 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.......... 5,288 4,784
Wholesale receivablesnet...... 10,235 8,916 7,834
Vehicle wholesale and other dealer loans.......................... 1,015 1,229financing........ 3,043 2,142 1,800
Allowance for credit losses.............. (203) (171)losses.................. (230) (202) (220)
------- ------- -------
Total net earning assets, net............ $18,294 $15,375assets..................... $26,132 $22,461 $21,286
======= ======= =======
Years Ended September 30,
-----------------------------
1996 1995 1994---------------------------
2000 1999 1998
------- ------- -------
ContractTotal contract volume:
Vehicle lease contracts............... 276,000 179,000 204,000lease............................. 240,000 249,000 312,000
Vehicle retail installment contracts.. 229,000 170,000 210,000retail............................ 412,000 333,000 282,000
------- ------- -------
Total.................................... 505,000 349,000 414,000Total........................................ 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...................... 41.2% 31.8% 36.7%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, 19962000 increased from September 30,
19951999 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 consistingresulting in an increasing mix of investments in operating leases, net of
accumulated depreciation, and lease finance
receivables net of unearned
income, increased in fiscal 1996 from fiscal 1995relative to operating lease assets due to higher lease volume
attributable to special lease programs sponsored by TMS and the increased
acceptance of leasing by retail consumers.classification
differences described above.
TMS sponsors special lease and retail programs which allow TMCC to offersubsidize reduced monthly
payments on certain Toyota and Lexus new vehicles and Toyota industrial
equipment to qualified lease and retail customers. Support amounts -10-
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. TMCC's revenuesSupport amounts earned from TMS sponsored special
lease and retail programscontracts totaled $174$108 million, $134$126 million and $54$142 million
for fiscal years 1996, 19952000, 1999 and 1994,1998, 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 related to all outstandingin connection with its lease
contracts.portfolio. TMCC's residual value riskexposure is a function of the number of off-
lease vehicles returned for disposition and the differenceany shortfall between the amount
ofnet
disposition proceeds and the estimated unguaranteed residual valuevalues on
returned vehicles. ResidualIf the market value losses incurred byof 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
in eachto a risk of the three years ended
September 30, 1996, 1995 and 1994 have not had a material adverse impact on
operations. TMCC actively manages disposition of its lease vehicles by
working with lessees, dealers and auctions through end-of-lease-term
remarketing programs. In addition, returned lease vehicles are inspected and
lessees are charged for excess wear and tear, excess mileage and any damage
to the vehicles. Unguaranteedhigher aggregate losses.
Total unguaranteed residual values related to outstandingTMCC's vehicle lease contracts totaledportfolio
increased from approximately $8.8 billion and $6.6$6.5 billion at September 30, 1996 and 1995, respectively. The percentage of1999 to $7.0
billion at September 30, 2000. TMCC maintains an allowance for estimated
losses on lease vehicles returned to TMCC which were originallythe 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
matureterminate 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
following periodsinternet 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 14%, 11% and 12%scheduled to terminate ("full term return ratio") was 50% for
fiscal 1996, 19952000 as compared to 47% and 1994,40% for fiscal 1999 and 1998,
respectively. AsTMCC 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 lease
portfolio matures,impact of competitive new vehicle pricing for core
Toyota and Lexus models. Return rates and losses may also be affected by the
Company anticipatesamount 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 vehiclesupport or the continuation of the support arrangement in
future periods.
TMCC's lease returns will increase; however,portfolio includes contracts with original terms ranging from 12
to 60 months; the Company believes that itsaverage original contract term in TMCC's lease earning
assets are recordedportfolio
was 42 months and 40 months at net realizable value.
Retail finance receivables, net of unearned income,September 30, 2000 and 1999, respectively.
Interest Expense
- ----------------
Interest expense increased 37% in fiscal 1996
from2000 compared with fiscal 19951999
primarily due to higher contract volume reflecting increased special
retail programs sponsored by TMS as well as increased average advances per
retail contract.
TMCC's finance penetration represents the percentagecost of new Toyota and Lexus
vehicle deliveries (excluding fleet) in the United States (excluding Hawaii)
leased or financed by TMCC. Increased penetration for fiscal 1996 as compared
with fiscal 1995 reflects increased volume primarily attributable to a higher
level of TMS sponsored special lease programs. The decline in finance
penetration from fiscal 1994 to 1995 reflects reduced contract volumes
attributable primarily to lower levels of TMS sponsored special lease programs
in fiscal 1995 as well as increased competition in retail financing.
TMCC's total financing revenues increased 21% in fiscal 1996 and 42% in fiscal
1995. The increase in fiscal 1996 reflects growth in operating lease revenues
due to continued growth in market acceptability of leasing as well as TMS
sponsored special lease programs, partially offset by reduced retail financing
and wholesale revenues. Retail financing revenues declined as a result of
reduced average retail receivables outstanding in fiscal 1996 as compared with
fiscal 1995 due to the sale of retail receivables in September 1995 and July
1996. Decline in wholesale revenues reflects reduced financing rates as well
as increased turnover of units financed. The increase in fiscal 1995 revenues
reflects primarily growth in operating lease revenues as well as growth in
retail financing and wholesale revenues.
-11-
Depreciation expense increased 32% and 68% in fiscal 1996 and 1995,
respectively, primarily as a result of the growth in investments in operating
leases.
Interest expense increased 15% and 47% in fiscal 1996 and 1995, respectively.
The increases in fiscal 1996 and 1995 reflect higher average borrowings
outstanding required to fund the growth in earning assets and an increase in theaverage
debt outstanding. Interest expense decreased 5% in fiscal 1999 reflecting
lower average cost of borrowings.borrowings, partially offset by an increase in average
debt outstanding. The weighted average cost of borrowings was 5.90%6.30%, 5.78%5.34% and
4.94%5.85% for the years ended September 30, 1996, 19952000, 1999 and 1994,1998, respectively.
Other revenues increased 20% and 19%Increases in TMCC's interest costs are expected to continue through fiscal 1996 and 1995, respectively.
The2001
reflecting the increases in other revenues formarket interest rates during fiscal 19962000 and 1995 reflect growth in the
Company's insurance operations1999.
-16-
Operating and increased servicing and other income
related to retail receivables sold.Administrative Expenses
- -------------------------------------
Operating and administrative expenses increased 15%6% and 10%16% in fiscal 19962000 and
1995,1999, respectively. The increases reflectincrease 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,
as well as
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. -12-
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 increased 74% and decreased 15%35% during
fiscal 1996 and fiscal 1995, respectively. The increase in fiscal 1996 was primarily
related to the substantial growth in earning assets as well as less favorable1999 based on improved credit loss experience.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 decreaseobjective 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 fiscal 1995 reflects a decline in the
levelconnection with purchases of earning asset growth and a reduction in allowance levels due to
changes in the mix of earning assets and TMCC's favorable credit loss
experience. TMCC will continue to monitor loss levels and place emphasis on
its credit loss exposure.higher risk contracts.
-17-
An analysis of credit losses and the related allowance follows, (certain prior
period amounts have been reclassifiedexcluding net
losses on receivables sold subject to conform with the current period
presentation):limited recourse provisions:
Years ended September 30,
------------------------------------
2000 1999 1998 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(Dollars in Millions)
Allowance for credit losses
at beginning of period......... $202 $220 $213 $203 $171 $164 $121 $107 $ 89
Provision for credit losses....... 135 83 127 136 115
66 78 60 68
Charge-offs, net of recoveries.... (83) (59) (35) (46) (50)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 $171 $164 $121 $107
==== ==== ==== ==== ====
Allowance for credit losses
as a percent of net
investments in operating
leases and net receivables
outstanding....................gross
earning assets................ 0.87% 0.89% 1.02% 1.13% 1.10%
1.10% 1.15% 1.16% 1.22%
LossesNet credit losses as a percent
of average net investments in operating
leases and average gross
receivables outstanding........ .47% .38% .27% .42% .56%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 $20 $15 $16 $23
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% .12% .10% .14% .23%.15% .15%
-13--18-
Liquidity and Capital ResourcesLIQUIDITY 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.activities as well as transactions through the Company's asset-backed
securitization programs. Debt issuances have generally been in the form of
commercial paper, United Statesextendible commercial notes ("ECNs") and Eurodomestic and euro
medium-term notes ("MTNs"), Eurobonds and to a lesser extent, the sale of retail finance receivables in the asset-
backed securities market. On occasion, this funding has been supplemented by
loans and equity contributions from TMS.bonds.
Commercial paper and ECN issuances are utilizedused to meet short-term funding needs.
Commercial paper outstanding under TMCC's commercial paper program ranged from
approximately $1.1$1.5 billion to $3.2$4.0 billion during fiscal 1996.2000, 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 $2.0$3.0 billion at SeptemberNovember 30,
1996.2000. No loans were outstanding under any of these bank credit facilities
during fiscal 1996.2000. TMCC also maintains, along with TMS, uncommitted, unsecured lines of
credit with banks totaling $250 million to facilitate the issuance of letters of
credit.$125 million. At SeptemberNovember 30, 1996,2000, TMCC had issued
approximately $44$1 million in letters of credit, primarily related to the Company's insurance operations.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. United StatesDomestic and Euroeuro MTNs with original maturities ranging
from one to eleven yearsand bonds have provided TMCC with
a significant sourcesources of funding. During fiscal 1996,2000, TMCC issued approximately
$4.7$4.9 billion of domestic and euro MTNs and bonds all of which approximately $4.1 billion had original
maturities of more than one year. TMCC had approximately $10.1 billionyear or more.
The original maturities of all MTNs and bonds outstanding at September 30,
1996 including the effect2000 ranged from nine months to eleven years. As of foreign currency translations at September 30, 1996 spot exchange rates; approximately $4.02000, TMCC
had total MTNs and bonds outstanding of $17.5 billion, of the
$10.1which $7.0 billion in MTNs was denominated in foreign currencies. In addition to
MTNs, TMCC had approximately $2.6 billion of debt securities outstanding
issued principally in the form of Eurobonds in the international capital
markets at September 30, 1996, including the effect of foreign currency
translations at September 30, 1996 spot exchange rates; approximately $2.1
billion of the $2.6 billion in debt securities
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, 1996,2000, approximately $780 million$3.3 billion was available for issuance under
TMCC's United States public MTN
program, none of which was committed for issue by the Company.this registration statement. The maximum aggregate principal amount authorized
to be outstanding at any time under TMCC's Euroeuro MTN program is $12.0 billion, which was increased in July 1996
from the prior maximum of $9.5$16.0 billion.
Approximately $2.3$4.8 billion was available for issuance under the Euroeuro MTN
program as of November 30, 1996, of
which the Company has committed to issue approximately $250 million.2000. The United States and Euroeuro MTN programs may
be expanded from time to time to allow for the continued use of these sources
of funding. In addition, approximately
$700 million of securities registered withTMCC may issue bonds in the Securitiesdomestic and
Exchange
Commission, excluding MTNs, were availableinternational capital markets that are not issued under its MTN programs.
Additionally, TMCC uses its asset-backed securitization programs to generate
funds for issuance at November 30, 1996.
In July 1996, TMCC's shelf registration statement relating to $1.5 billion of
asset-backed notes and certificates was declared effective by the SEC. On
July 24, 1996, TMCC received proceeds of approximately $754 million from the
-14-
sale of a pool of retail receivables and the related offering of certificates
backed by such receivables. Approximately $750 million under the shelf
registration remains available for issuanceinvestment in earning assets as of November 30, 1996. The
Company's sale of finance receivables is discusseddescribed in Note 6 of the Notes7 to the
Consolidated Financial Statements. On October 1, 1996 Toyota Lease Trust ("TLT") was created asTMCC maintains a Delaware
business trust forshelf registration
statement with the purpose of titling leases, originated in certain
states, in connection with development of a lease securitization program.
TMCC anticipates its first lease securitization to occur in fiscal 1997.
TMCC utilizes a variety of interest rate and currency derivative financial
instruments to manage interest rate and foreign exchange exposures. The
derivative instruments utilized 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.
Derivative financial instruments utilized 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. Market risk
is limited to interest rate risk as foreign currency denominated instruments
are entirely hedged. 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
derivatives and option-based products.
The total notional amount of TMCC's derivative financial instruments at
September 30, 1996 and 1995 was $20.5 billion and $17.4 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.
Descriptions of derivative instruments utilized and risk management procedures
as well as a reconciliation of the Company's derivative activities for the
years ended September 30, 1996 and 1995 are included in Note 11 of the NotesSEC relating to the Consolidated Financial Statements.
On occasion, TMS has made equity contributions to maintain TMCC's equity
capitalization at certain levels.issuance of asset-backed notes secured
by, and certificates representing interests, in retail receivables. During the
year ended September 30, 1996,
TMS made an equity contribution to2000, TMCC by purchasing, at par value, newlysold retail receivables totaling $1.5
billion in connection with securities issued sharesunder 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 stockcontribution 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 amounttransactions are being
retained in these reserve funds to supplement the capital contribution. As a
result of $50 million. No equity
contributionsTMCC's actions, the rating organizations affirmed the original
credit ratings for the lease asset-backed securities. TMCC's long term
unsecured ratings were madeunaffected 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 1995. Also, on occasion, TMS makes
interest-bearing loans2000
was due to TMCC. There were no loans from TMS during fiscal
1996.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 $13.6$23.0 billion and $11.9$21.0
billion during fiscal 19962000 and 1995,1999, respectively, was used to purchase
additional investments in operating leases and finance receivables, totaling
$19.2$28.2 billion and $15.1$23.9 billion during fiscal 19962000 and 1995,1999, respectively.
Investing activities resulted in a net use of cash of $4.8$5.1 billion and
$2.7$3.3 billion in fiscal 19962000 and 1995,1999, respectively, as the purchase of
-15-
additional earning assets primarily investments in operating leases, 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 $2.0 billion during fiscal 1996
and 1995, respectively,1999, and net cash provided by financing
activities totaled $2.6$3.1 billion and $0.7$1.1 billion, during fiscal 19962000 and 1995,1999,
respectively. The Company believes that cash provided by operating and
investing activities as well as access to domestic and international capital
markets, andthe 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: potential
adverse effect on the Company's operations as a result of governmental
regulations; that the Company
considers its employee relations to be satisfactory;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 levelrestructuring of lease vehicle returns;TMCC's field operations;
that the lease earning
assets onimplementation of the Company's books are recorded at net realizable value;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 ultimate liability resulting from pending claimsfull term return ratio and actions should not have
a material adverse effect on the Company's consolidated financial positionlosses will remain at or results of operations; the Company'snear 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 first lease
securitization is expecteddomestic and international capital markets that are not issued
under its MTN programs; that the decline in fiscal 1997; the sufficiencyratio of the Company'searnings 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 financing activities forinternational capital markets, the Company'sissuance of
commercial paper and ECNs, and asset-backed securitization transactions will
provide sufficient liquidity to meet its future liquidity and capital resource needs.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;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.
Recently Enacted-22-
New Accounting Standards
In March 1995,June 1998, the Financial Accounting Standards Board ("FASB") issued StatementSFAS No.
121,133, "Accounting for the Impairment of Long-Lived AssetsDerivative Instruments and for Long-Lived
Assets to Be Disposed Of" ("Statement No. 121"). Statement No. 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be
held and used and long-lived assets and certain identifiable intangibles to
be disposed of. Statement No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In addition,
-16-
Statement No. 121 requires that certain long-lived assets and intangibles to
be disposed of be reported at the lower of carrying amount or fair value less
cost to sell. Statement No. 121 isHedging Activities", effective
for fiscal years beginning after DecemberJune 15, 1995.1999. 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 has not determined the impact that theadopted SFAS Nos. 133 and 138 on
October 1, 2000. The adoption of thisthese new accounting standardstandards will
haveresult in cumulative after-tax reductions in net income of approximately
$2 million. The adoption will also impact assets and liabilities
recorded on its financial position or
results of operations. The Company plans to adopt Statementthe balance sheet.
In September 2000, the FASB issued SFAS No. 121 in the
first interim period of fiscal 1997.
In June 1996, the Financial Accounting Standard Board issued Statement of
Accounting Standards No. 125,140, "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 31, 1996.15, 2000. The Company will adopt this Standard during fiscal
1997, as required. Adoptionhas not determined the
impact that adoption of this Standardstandard 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 to have a
material impact onloss 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 Company's resultstiming
thereof, and changes in the composition of operationsTMCC's portfolio of financial
instruments during the year. The increase in the mean portfolio value and
financial position.
-17-value-at-risk levels from fiscal 1999 primarily reflects an increase in TMCC's
portfolio and changes in market rates.
-25-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
Page
-------
Report of Independent Accountants................................ 1927
Consolidated Balance Sheet at September 30, 19962000 and 1995........ 201999........ 28
Consolidated Statement of Income for the
years ended September 30, 1996, 19952000, 1999 and 1994................. 211998................. 29
Consolidated Statement of Shareholder's Equity for
the years ended September 30, 1996, 19952000, 1999 and 1994............. 221998............. 30
Consolidated Statement of Cash Flows for the
years ended September 30, 1996, 19952000, 1999 and 1994................. 231998................. 31
Notes to Consolidated Financial Statements....................... 24 - 5032-60
All schedules have been omitted because they are not required, not
applicable, or the information has been included elsewhere.
-18--26-
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholder of
Toyota Motor Credit Corporation
In our opinion, the accompanying consolidated balance sheetsheets and the related
consolidated statements of income, of shareholder's equity and of cash flows present
fairly, in all material respects, the financial position of Toyota Motor Credit
Corporation (a wholly-owned subsidiary of Toyota Motor Sales,
U.S.A., Inc.) and its subsidiaries at September 30, 19962000 and 1995,1999, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1996,2000, in conformity with accounting principles
generally accepted accounting principles.in the United States. These financial statements are the
responsibility of Toyota Motor Credit Corporation'sthe 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 auditing
standardsin 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/ PRICE WATERHOUSEPRICEWATERHOUSECOOPERS LLP
Los Angeles, California
October 31, 1996
-19-2000
-27-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
September 30,
-----------------------
1996 19952000 1999
-------- --------
ASSETS
------
Cash and cash equivalents.................equivalents.................. $ 170 $ 101180
Investments in marketable securities...... 325 169securities....... 871 450
Finance receivables, net................... 18,168 13,856
Investments in operating leases, net...... 10,831 8,148
Finance receivables, net.................. 7,463 7,227net....... 7,964 8,605
Receivable from Parent.................... 78 58Parent and Affiliate....... - 717
Other receivables......................... 193 350receivables.......................... 468 366
Deferred charges..........................charges........................... 133 131
85Other assets............................... 262 242
Income taxes receivable...................receivable.................... - 6
Other assets.............................. 117 8131
------- -------
Total Assets..................... $19,308 $16,225Assets...................... $28,036 $24,578
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Notes and loans payable................... $15,014 $12,696payable.................... $21,098 $18,565
Accrued interest.......................... 226 190interest........................... 195 161
Accounts payable and accrued expenses..... 474 298
Deposits.................................. 248 200expenses...... 1,943 1,096
Deposits................................... 160 201
Income taxes payable...................... 16payable....................... 3 -
Deferred income........................... 612 505income............................ 681 636
Deferred income taxes..................... 805 627taxes...................... 1,483 1,554
------- -------
Total Liabilities................... 17,395 14,516Liabilities.................... 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 19962000 and
86,500 in 1995).....................1999)................................ 915 865915
Retained earnings...................... 998 844earnings....................... 1,539 1,435
Accumulated other comprehensive income.. 19 15
------- -------
Total Shareholder's Equity.......... 1,913 1,709Equity........... 2,473 2,365
------- -------
Total Liabilities and
Shareholder's Equity............. $19,308 $16,225Equity.............. $28,036 $24,578
======= =======
See Accompanying Notes to Consolidated Financial Statements.
-20--28-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions)
Years ended September 30,
----------------------------------
1996 1995 1994----------------------------
2000 1999 1998
------ ------ ------
Financing Revenues:
Leasing................................. $2,454 $1,904 $1,230$2,402 $2,397 2,595
Retail financing........................ 415 431 413768 645 531
Wholesale and other dealer financing.... 109 121 86182 123 114
------ ------ ------
Total financing revenues................... 2,978 2,456 1,7293,352 3,165 3,240
Depreciation on operating leases........ 1,626 1,232 735leases.................. 1,440 1,664 1,681
Interest expense........................ 820 716 4861,289 940 994
------ ------ ------
Net financing revenues..................... 532 508 508
Other revenues............................. 136 113 95623 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.. 668 621 603786 752 756
------ ------ ------
Expenses:
Operating and administrative............ 293 255 232400 376 323
Provision for credit losses............. 115 66 78135 83 127
Insurance losses and loss adjustment
expenses............................. 81 63 55
------ ------ ------
Total expenses............................. 408 321 310616 522 505
------ ------ ------
Income before income taxes................. 260 300 293170 230 251
Equity in net loss of subsidiary........... 1 - -
Provision for income taxes................. 108 117 11865 98 107
------ ------ ------
Net Income................................. $ 152104 $ 183132 $ 175144
====== ====== ======
See Accompanying Notes to Consolidated Financial Statements.
-21--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, 1993.......... $680 $487 $1,167
Issuance of capital stock.............. 185 - 185l997.... $ 915 $ 1,159 $ 7 $2,081
------ ------- ---------- ------
Net income in 1994.....................1998............... - 175 175
---- ----144 - 144
Change in net unrealized gains
on available-for-sale
marketable securities......... - - 6 6
------ -------- ---------- ------
Total - 144 6 150
------ -------- ---------- ------
Balance at September 30, l994.......... 865 662 1,5271998.... 915 1,303 13 2,231
------ -------- ---------- ------
Net income in 1995.....................1999............... - 183 183
Net132 - 132
Change in net unrealized holding lossgains
on available-for-sale
marketable securities...............securities......... - (1) (1)
---- ----- 2 2
------ -------- ---------- ------
Total - 132 2 134
------ -------- ---------- ------
Balance at September 30, 1995.......... 865 844 1,709
Issuance of capital stock.............. 50 - 501999.... 915 1,435 15 2,365
------ -------- ---------- ------
Net income in 1996.....................2000............... - 152 152
Net104 - 104
Change in net unrealized holding gaingains
on available-for-sale
marketable securities...............securities......... - 2 2
---- ----- 4 4
------ -------- ---------- ------
Total - 104 4 108
------ -------- ---------- ------
Balance at September 30, 1996.......... $915 $998 $1,913
==== ====2000.... $ 915 $ 1,539 $ 19 $2,473
====== ======= ========== ======
See Accompanying Notes to Consolidated Financial Statements.
-22--30-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
Years ended September 30,
---------------------------------
1996 1995 19942000 1999 1998
------ ------ ------
Cash flows from operating activities:
Net income..........................................income............................................. $ 152104 $ 183132 $ 175144
------ ------ ------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................. 1,646 1,286 743amortization..................... 1,557 1,711 1,826
Provision for credit losses.................... 115 66 78losses....................... 135 83 127
Gain from sale of finance receivables, net.....net........ (5) (15) (11)(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................... 36interest........... 34 8
Increase(15) (37)
(Decrease) increase in deferred income taxes.............. 178 241 108
(Increase) decrease in other assets............ (70) 97 328taxes...... (68) 173 420
Increase in other liabilities.................. 220 99 220liabilities..................... 165 42 139
------ ------ ------
Total adjustments................................... 2,110 1,812 1,485adjustments...................................... 1,826 2,122 1,978
------ ------ ------
Net cash provided by operating activities.............. 2,262 1,995 1,660activities................. 1,930 2,254 2,122
------ ------ ------
Cash flows from investing activities:
Addition to investments in marketable
securities....................................... (199) (90) (86)securities.......................................... (1,409) (705) (996)
Disposition of investments in marketable
securities....................................... 45 24 120securities.......................................... 985 694 906
Purchase of finance receivables..................... (13,136) (11,005) (10,868)receivables........................ (25,161) (20,309) (19,034)
Liquidation of finance receivables.................. 11,949 10,913 10,224receivables..................... 19,238 15,802 14,003
Proceeds from sale of finance receivables........... 905 650 -receivables.............. 1,476 2,042 1,830
Addition to investments in operating leases......... (6,081) (4,123) (4,468)leases............ (3,085) (3,577) (4,552)
Disposition of investments in operating leases...... 1,718 927 525leases......... 2,262 3,137 3,303
Decrease (increase) in receivable from Parent.......... 644 (396) (143)
------ ------ ------
Net cash used in investing activities.................. (4,799) (2,704) (4,553)activities..................... (5,050) (3,312) (4,683)
------ ------ ------
Cash flows from financing activities:
Proceeds from issuance of capital stock............. 50 - 185
Proceeds from issuance of notes and loans payable... 5,894 5,733 5,150payable...... 6,783 6,634 6,039
Payments on notes and loans payable................. (4,587) (4,989) (2,955)payable.................... (5,582) (4,985) (4,250)
Net increase (decrease) in commercial paper,
with original maturities less than 90 days....... 1,249 (62) 582days.......... 1,909 (567) 751
------ ------ ------
Net cash provided by financing activities.............. 2,606 682 2,962activities................. 3,110 1,082 2,540
------ ------ ------
Net (decrease) increase (decrease) in cash and cash equivalents... 69 (27) 69equivalents...... (10) 24 (21)
Cash and cash equivalents at the beginning
of the period....................................... 101 128 59period.......................................... 180 156 177
------ ------ ------
Cash and cash equivalents at the end of the
period..............................................period................................................. $ 170 $ 101180 $ 128156
====== ====== ======
Supplemental disclosures:
Interest paid....................................... $778 $643 $475paid.......................................... $1,240 $979 $995
Income taxes paid................................... $3 $2 $64paid...................................... $22 $17 $6
See Accompanying Notes to Consolidated Financial Statements.
-23--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 iswas 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.
TMC
restructured its North American organizations with the establishment of
Toyota Motor Manufacturing North America, Inc. ("TMMNA") on October 1,
1996. TMMNA functions to coordinate and support numerous manufacturing
related administrative functions previously carried out independently
by various Toyota entities in North America and by TMC in Japan. Both
TMMNA and TMS are wholly-owned subsidiaries of Toyota Motor North
America, Inc., a holding company owned 100% by TMC which was
established on September 3, 1996.
TMCC has sixfour wholly-owned subsidiaries, Toyota Motor Insurance Services, Inc.
("TMIS"), Toyota Motor Insurance Corporation of Vermont
("TMICV"), Toyota Motor Insurance Company ("TMIC"), Toyota Motor Life
Insurance Company ("TLIC"), Toyota Motor Credit Receivables Corporation ("TMCRC"), Toyota
Leasing, Inc. ("TLI") and Toyota Credit Dede Puerto Rico Corp.Corporation ("TCPR").
TMCC and its wholly-owned subsidiaries are collectively referred to as the
"Company". The insurance subsidiaries provideTMIS 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, was formed in June 1993operates 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 was established in January 1996 to
provideprovides retail and wholesale financing and certain other
financial services to authorized Toyota and Lexus vehicle dealers and their
customers in Puerto Rico; TCPR commenced operationsRico.
Toyota Credit Argentina S.A. ("TCA") provides retail and wholesale financing to
authorized Toyota vehicle dealers and their customers in October 1996.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.
-24--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.
Revenue Recognition
-------------------
Revenue from retail financing contracts and finance leases is
recognized using the effective yield method. Revenue from operating
leases is recognized on a straight-line basis over the lease term.
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 shareholder's equity,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.
-25-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)
- ---------------------------------------------------
Investments in Operating Leases
-------------------------------
TMCC acquires retail leases from Toyota and Lexus vehicle and Toyota
industrial equipment dealers. TMCC is also the lessor on certain
property that it acquires directly. Investments in operating leases
are recorded at cost and depreciated, primarily on a straight-line
basis, over the lease term to the estimated residual value. Gains or
losses on disposal and adjustments to the residual value of underlying
assets are also included in Depreciation Expense.
Allowance for Credit Losses
---------------------------
Allowances for credit losses are established during the period in which
receivables are acquiredevaluated periodically, considering historical
loss experience and other factors, and are maintained in amounts considered by
management to be appropriate in relation to receivables outstanding based upon historicaland
expected future loss experience and other factors.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 Expenseinterest 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 insurance premiums and 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 and agreements 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 isare recorded in Accounts Payableaccounts payable
and Accrued Expenses.
Commissionaccrued expenses. Commissions and fee incomefees from services provided are
recognized in relation to the timing and level of services performed.
-26-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------
Interest Rate Swap Agreements
-----------------------------
TMCC utilizes interest rate swap agreements in managing its exposure to
interest rate risk. 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 as an adjustment to Interest Expense over the term of the
agreements.
Cross Currency Interest Rate Swap Agreements
--------------------------------------------
TMCC's senior debt issued in foreign currencies is 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 principal and interest obligations. TMCC's
foreign currency debt is translated into U.S. dollars in the financial
statements at the various foreign currency spot exchange rates in
effect at the balance sheet date. The receivables or payables,
reflecting the differences between the September 30, 1996 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.
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 statement.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 providedgenerally recognized as if the Company filed its
tax returns on a separate returnstand alone basis. Prior to October 1, 1994, forIn those states where aTMCC joins in the
filing of consolidated or combined or
consolidated income tax return wasreturns, 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 taxes were
allocated totax expense and is reimbursed for the
Company by TMS based upon the Company's apportionment
factors and income in those states. There was no material effect to
the financial position or resultsbenefit of operations as a resultany of the
changeits tax basis losses utilized in the method of allocatingconsolidated federal and
consolidated or combined state income taxes.
-27-tax returns.
-35-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (continued)(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 19951999 and 1994 accounts1998 amounts have been reclassified to conform with the 19962000
presentation.
-36-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Investments in Marketable Securities
- ---------------------------------------------
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("Statement No. 115"). Statement No. 115
addresses the accounting and reporting forTMCC records its investments in all debtmarketable securities and for investments in equity securities that have readily
determinablewhich are designated as
available-for-sale at fair values. The fair value of securities was 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, 1996
--------------------------------2000
----------------------------------------
Gross Gross
Fair GrossUnrealized Unrealized
Cost Value Unrealized 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................... $133 $135 $2
Asset-backed securities............. 177 177 -71 92 22 (1)
U.S. debt securities................ 2 240 40 - -
---- ---- --------- ----
Total available-for-sale securities.... 312 314 $2
=====
Excess of fair value over cost...... 2 -
---- ----
Available-for-sale securities.......... 314 314$833 $864 $ 45 $(14)
==== ====
Held-to-maturity securities:
U.S. debt securities................ 11 117 7
---- ----
Total marketable securities...... $325 $325securities............ $840 $871
==== ====
-28-
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)
- ---------------------------------------------
September 30, 1995
-------------------------------------
Gross Unrealized
Fair -----------------
Cost Value Gains Losses
-------- ------ ----- --------
(Dollars in Millions)
Available-for-sale securities:
Equity securities................... $115 $114 $1 $(2)
Mortgage-backed securities.......... 33 33 - -
U.S. debt securities................ 12 12 - -
---- ---- ----- ---
Total available-for-sale securities.... 160 159 $1 $(2)
===== ===
Excess of cost over fair value...... (1) -
---- ----
Available-for-sale securities.......... 159 159
Held-to-maturity securities:
U.S. debt securities................ 10 10
---- ----
Total marketable securities...... $169 $169
==== ====
The contractual maturities of investments in marketable securities at
September 30, 19962000 are as follows:
Available-for-Sale Held-to-Maturity
Securities Securities
------------------ ----------------
Fair Fair
Cost Value Cost Value
---- ----- ---- ------------
(Dollars in Millions)
Within one year..................... $ - $ -year...................... $256 $259 $ 2 $ 2
After one year through five years.... 360 368 5 5
After five years through ten years... 2 2 9 9
Mutual funds........................ 133 13560 60 - -
Asset-backed securities............. 177 177After ten years...................... 86 85 - -
Equity securities.................... 71 92 - -
---- ---- --- ---
Total............................ $312 $314 $11 $11---- ----
Total............................. $833 $864 $ 7 $ 7
==== ==== === ======= ====
The proceeds from sales of available-for-sale securities were $3$740 million and
$7$562 million for the years ended September 30, 19962000 and 1995,1999, 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 immaterial$5 million, $5 million and $1 million for the years ended September 30,
19962000, 1999 and 1995.
-29-1998, respectively.
-38-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Investments in Operating Leases
- ----------------------------------------
Investments in operating leases, net consisted of the following:
September 30,
----------------------
1996 1995
------- ------
(Dollars in Millions)
Vehicles................................. $13,252 $9,864
Equipment and other...................... 268 201
------- ------
13,520 10,065
Accumulated depreciation................. (2,582) (1,838)
Allowance for credit losses.............. (107) (79)
------- ------
Investments in operating leases, net.. $10,831 $8,148
======= ======
Rental income from operating leases was $2,292 million, $1,734 million
and $1,056 million for the years ended September 30, 1996, 1995 and
1994, respectively. Future minimum rentals on operating leases are as
follows: years ending September 30, 1997 - $2,055 million; 1998 -
$1,274 million; 1999 - $461 million; 2000 - $38 million; and 2001 -
$3 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.
Note 5 - Finance Receivables
- ----------------------------
Finance receivables, net consisted of the following:
September 30,
---------------------
1996 1995
------ ----------------------------
2000 1999
------- -------
(Dollars in Millions)
Retail............................... $5,501 $5,050$ 10,630 $ 9,267
Finance leases....................... 1,525 1,5676,742 4,065
Wholesale and other dealer loans..... 1,015 1,229
------ ------
8,041 7,8462,325 1,549
------- -------
19,697 14,881
Unearned income...................... (482) (527)(1,361) (888)
Allowance for credit losses.......... (96) (92)
------ ------(168) (137)
------- -------
Finance receivables, net.......... $7,463 $7,227
====== ======$18,168 $13,856
======= =======
-30-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Finance Receivables (Continued)
- ----------------------------
Contractual maturities at September 30, 1996 are as follows:
Due in the Wholesale
Years Ending and Other
September 30, Retail Dealer Loans
------------- ------------- ------------
(Dollars in Millions)
1997.................. $2,0432001.................. $ 814
1998.................. 1,373 63
1999.................. 1,068 36
2000.................. 747 43
2001.................. 260 473,093 $ 1,745
2002.................. 2,761 226
2003.................. 2,304 77
2004.................. 1,635 97
2005.................. 675 139
Thereafter............ 10 12
------162 41
------- ------
Total.............. $5,501 $1,015
======$10,630 $2,325
======= ======
Finance leases, net consisted of the following:
September 30,
---------------------
1996 1995
------- -------2000 1999
------ ------
(Dollars in Millions)
Minimum lease payments.................. $ 867 $ 894$5,433 $3,242
Estimated unguaranteed residual values.. 658 6731,309 823
------ ------
Finance leases....................... 1,525 1,5676,742 4,065
Unearned income......................... (270) (261)(1,092) (627)
Allowance for credit losses............. (19) (17)(67) (46)
------ ------
Finance leases, net.................. $1,236 $1,289$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 $20$32 million and $16$20 million at September 30, 19962000 and 1995,1999,
respectively. Future minimum finance lease payments for each of the five
succeeding years ending September 30, are: 19972001 - $309$1,400 million; 19982002 - $231$1,493
million; 19992003 - $178$1,342 million; 20002004 - $118$796 million and 20012005 - $31$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.
-31-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 - Sale of Finance Receivables
- ------------------------------------
In June 1996, the Financial Accounting Standard Board issued Statement
of Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities",
effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. The
Company will adopt this Standard during fiscal 1997, as required.
Adoption of this Standard is not expected to have a material impact on
the Company's results of operations and financial position.
In the fourth quarters of fiscal 1996 and 1995, the Company sold retail
finance receivables aggregating $782 million and $679 million,
respectively, subject to certain limited recourse provisions. In each
case, TMCC sold its receivables to TMCRC which in turn sold them to a
trust; TMCC remains as servicer and is paid a servicing fee. In a
subordinated capacity, TMCRC retains excess servicing cash flows,
certain cash deposits and, in connection with the fiscal 1993 sale of
finance receivables, a limited interest in the trust. TMCRC's
subordinated interests in excess servicing cash flows, cash deposits,
limited interest in the 1993 trust and other related amounts are held
as restricted assets which are subject to limited recourse provisions.
These restricted assets are not available to satisfy any obligations of
TMCC. Following is a summary of amounts included in Other Receivables:
September 30,
---------------------
1996 1995
---- ----
(Dollars in Millions)
Excess servicing....................... $34 $32
Other restricted amounts:
Cash deposits....................... 20 14
Limited interest in trust........... 2 7
Allowance for estimated credit
losses on sold receivables.......... (5) (4)
--- ---
Total............................ $51 $49
=== ===
The pretax gain resulting from the sale of finance receivables totaled
$15 million and $11 million in fiscal 1996 and 1995, respectively,
after providing for an allowance for estimated credit losses. In
addition to the above described transactions, in August 1996 TMCC sold
approximately $150 million of retail finance receivables to World Omni
Retail Funding Inc. in exchange for an interest bearing certificate
secured by a 100% interest in the same receivables.
The outstanding balance of the sold finance receivables which TMCC
continues to service at September 30, 1996 and 1995 totaled $1.1
billion and $762 million, respectively.
-32-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Allowance for Credit Losses
- ------------------------------------
An analysis of the allowance for credit losses follows:
Years ended September 30,
-------------------------
1996 1995 1994--------------------------
2000 1999 1998
---- ---- ----
(Dollars in Millions)
Allowance for credit losses
at beginning of period......... $171 $164 $121period........... $202 $220 $213
Provision for credit losses....... 115 66 78
Charge-offs, net of recoveries.... (83) (59) (35)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............... $203 $171 $164period................. $230 $202 $220
==== ==== ====
Effective October 1, 1994, the Company adopted StatementNote 7 - Sale of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("Statement No. 114")Retail Receivables and its amendment Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a LoanInterests in Lease Finance
Receivables
- Income Recognition-----------------------------------------------------------------------------
- -
TMCC maintains programs to sell retail receivables and Disclosures" ("Statement
No. 118"). The Statements apply to loans individually evaluated for
impairmentinterests in lease
finance receivables through limited purpose subsidiaries TMCRC and do not apply to portfolios of small dollar homogenous
loans, such asTLI,
respectively. During fiscal year 2000, TMCC sold interests in retail finance
receivables which are collectively
evaluated for impairment. The amounttotaling $1.5 billion, as described below.
Following is a summary of impaired loansamounts included in investment in marketable
securities and related
allowance for credit losses as of September 30, 1996 is not material.
-33-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 87 - Transactions with ParentSale of Retail Receivables and Interests in Lease Finance
Receivables
- ---------------------------------
An operating agreement with TMS (the "Operating Agreement") provides
that 100% ownership-----------------------------------------------------------------------------
- -
(Continued)
The pretax gain resulting from the sale of TMCC will be retained by TMS as long as TMCC has
any funded debt outstandingretail receivables and that TMS will provide necessary equity
contributions or other financial assistance it deems appropriate to
ensure that TMCC maintains a minimum coverage on fixed charges of 1.10
times such chargesinterests
in any fiscal quarter. To maintain TMCC's minimum
coverage pursuant to the Operating Agreement, TMS has made noninterest-
bearing advances and income maintenance payments to TMCC though no such
advances were made in fiscal 1996, 1995 or 1994. The coverage
provision of the Operating Agreement is solely for the benefit of the
holders of TMCC's commercial paper and 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 does not
constitute a guarantee by TMS of any obligations of TMCC.
TMS provides certain technical and administrative services and incurs
certain expenses on the Company's behalf and, accordingly, allocates
these charges to the Company. The charges, reimbursed by TMCC to TMS,lease finance receivables totaled $12approximately $5 million, $8 million and
$7$15 million in fiscal 2000, 1999 and 1998, respectively, after providing an
allowance for the years ended
September 30, 1996, 1995estimated credit and 1994, respectively. TMS sponsors special
retail and lease programs offered by TMCC; for the years ended
September 30, 1996, 1995 and 1994, TMCC recognized revenueresidual value losses. The pretax gain of
$174 million, $134 million and $54 million, respectively, related to
TMS sponsored programs.
TMCC has an arrangement to borrow and invest funds with TMS at short
term market rates. For the year ended September 30, 1996, TMCC had no
borrowings from TMS. For the years ended September 30, 1995 and 1994,
the highest amounts of borrowings from TMS were $34 million and
$161 million, respectively; interest charges related to these
borrowings were immaterial. The Operating Agreement provides that
borrowings from TMS are subordinated to all other indebtedness of TMCC.
For the years September 30, 1996, 1995 and 1994, the highest amounts of
funds invested with TMS were $224 million, $603 million and $326
million, respectively; interest earned on these investments totaled
$5 million, $16 million and
$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 ended2000 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,
1996, 19952000 and 1994,1999, respectively. The Company leases its headquarters facility from TMS; rent expense
paidoutstanding balance of sold interests in
lease finance receivables which TMCC continues to TMS for this facilityservice totaled $3 million for each of the years
ended$1.9
billion and $3.1 billion at September 30, 1996, 19952000 and 1994. TMCC leases a corporate
aircraft to TMS and provides wholesale financing for a TMS affiliate;
for each of the years ended September 30, 1996, 1995 and 1994, TMCC
recognized revenue of $3 million related to these arrangements.
TMIS and TMICV provide 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, 1996,
1995 and 1994 totaled $7 million, $4 million and $7 million,1999, respectively.
-34--42-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 98 - Notes and Loans Payable
- --------------------------------
Notes and loans payable at September 30, 19962000 and 1995,1999, which consisted of
senior debt, included the following:
September 30,
----------------------
1996 19952000 1999
------- -------
(Dollars in Millions)
Commercial paper, net................... $ 2,3603,292 $ 1,4421,427
Extendible commercial notes, net.......... 195 146
- ------- -------
Other senior debt, due in the years
ending September 30,:
1996..............................2000.............................. - 3,252
1997.............................. 3,211 2,722
1998.............................. 2,760 2,371
1999.............................. 1,384 529
2000.............................. 2,137 1,7234,077
2001.............................. 2,216 3304,658 3,213
2002.............................. 2,975 2,718
2003.............................. 3,434 2,095
2004.............................. 3,623 2,466
2005.............................. 851 420
Thereafter........................ 864 2811,995 1,916
------- -------
12,572 11,20817,536 16,905
Unamortized premium..................... 82 4675 87
------- -------
Total other senior debt........... 12,654 11,25417,611 16,992
------- -------
Notes and loans payable........ $15,014 $12,696$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 3115 days and 2721 days at September 30,
19962000 and 1995,1999, respectively. The weighted average interest rate on commercial
paper was 5.41%6.56% and 6.53%5.33% at September 30, 19962000 and 1995,1999, 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 $559$775 million and $444$1,358
million at September 30, 19962000 and 1995,1999, respectively. The weighted average
interest rate on these short-term MTNs was 5.19%5.93% and 5.86%5.57% at September 30,
19962000 and 1995,1999, respectively, including the effect of interest rate swap
agreements.
The weighted average interest rate on other senior debt was 5.98%6.52% and 5.75%5.45% at
September 30, 19962000 and 1995,1999, respectively, including the effect of interest
rate swap agreements and option-based products.agreements. The rates have been calculated using rates in effect at
September 30, 19962000 and 1995,1999, some of which are floating rates that reset
daily.
Approximately 24%periodically. Less than one percent of other senior debt at September 30, 19962000
had interest rates, including the effect of interest rate swap agreements, that
were fixed for a period of more than one year. The weighted
-35-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Notes and Loans Payable (Continued)
- --------------------------------
average of these fixed interest rates was 5.83% at September 30, 1996.
Approximately 49%62% of other
senior debt at September 30, 19962000 had floating interest rates that were covered
by option-based products. The weighted average strike rate on these option-basedoption-
based products was 6.18%6.45% at September 30, 1996.2000. TMCC manages interest rate
risk viathrough continuous adjustment of the mix of fixed and floating rate debt
through use ofusing interest rate swap agreements and option-based products.
Included in-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, 19962000 and 19951999 were
unsecured notes denominated in various foreign currencies as follows:
September 30,
----------------------------
1996 1995------------------------------
2000 1999
----------- -----------
(Amounts in Millions)
Australian dollars.................. 250 million 250 million
British pound sterling.............. 150 million525 675
Danish kroner....................... 400 400
Dutch guilder....................... - Canadian dollars.................... 300 million 775 billion
Dutch guilders...................... 555 million 555 million
European currency units.............250
Euro....................... ........ 1,000 -
45 million
French francs....................... 3 billion 1 billionfranc........................ 1,545 1,545
German deutsche marks............... 1 billion 760 millionmark................ 2,842 3,342
Greek drachma....................... 5,000 5,000
Hong Kong dollars................... 150 million 150 milliondollar.................... 618 618
Italian lire........................ 493 billion 470 billion434,000 477,300
Japanese yen........................ 198 billion 218 billion173,000 140,268
Luxembourg franc.................... 2,000 2,000
New Zealand dollar.................. 100 million200 200
Norwegian Krone..................... 500 -
Singapore dollar.................... 200 200
South African rand.................. 250 million -250
Swedish kronor...................... 670 million 110 million1,060 1,060
Swiss francs........................ 2 billion 1 billionfranc......................... 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
$6.2 billion.$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, 1996.2000. The receivables
or payables arising as a result of the differences between the September 30,
19962000 foreign currency spot exchange rates and the contract rates applicable to
the cross currency interest rate swap agreements are classified in Other Receivablesother
receivables or Accounts Payableaccounts payable and Accrued Expenses,accrued expenses, respectively, and would
in aggregate total a net payable position of $171 million$1.2 billion at September 30,
1996.
-36-2000.
-44-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 109 - Fair Value of Financial Instruments
- ---------------------------------------------
In accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments" and its amendment, Statement of Financial
Accounting Standards No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments", the Company has
provided the estimated--------------------------------------------
The fair value of financial instruments using
available market information at September 30, 19962000 and 1995, and1999, was
estimated using the valuation methodologies described below. Considerable
judgement was employed in interpreting market data to develop estimates of fair
value. Accordingly,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
maycould 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, 19962000 and 19951999 are as follows:
September 30,
---------------------------------------------------
1996 19952000 1999
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ---------- ----------- ----------
(Dollars in Millions)
Balance sheet financial
instruments:
Assets:
Cash and cash equivalents.........equivalents........... $170 $170 $101 $101$180 $180
Investments in marketable
securities..................... $325 $325 $169 $169securities....................... $871 $871 $450 $450
Retail finance receivables, net... $6,228 $6,121 $5,938 $6,003net..... $12,584 $12,301 $10,464 $10,279
Other receivables................. $77 $79 $70 $71receivables................... $278 $278 $271 $271
Receivables from cross currency
interest rate swap agreements.. $116 $152 $280 $426agreements.... $190 $38 $95 $117
Liabilities:
Notes and loans payable........... $15,014 $15,398 $12,696 $12,736payable............. $21,098 $20,834 $18,565 $19,401
Payables from cross currency
interest rate swap agreements.. $287 $108 $154 $65agreements.... $1,428 $1,402 $716 $466
Other payables...................... $484 $484 $380 $380
-37--45-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 109 - Fair Value of Financial Instruments (Continued)
- -----------------------------------------------------------------------------------------
September 30,
---------------------------------------------------
1996 1995
-------------------------------------------------------------------------
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................ $5,642 $72 $4,804 $342agreements.... $8,378 $(1,330) $8,764 $(453)
Interest rate swap
agreements..... $6,759 $37 $7,049 $29agreements.............. $10,467 $(109) $8,980 $24
Option-based products............. $6,220 $26 $3,820 $(1)products...... $11,700 $46 $6,850 $41
Indexed note swap
agreements...... $1,924 $(37) $1,721 $11agreements.............. $1,366 $27 $1,318 $2
The fair value estimates presented herein are based on information available to
management as of September 30, 19962000 and 1995. Although
the Company is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been
comprehensively reevaluated for purposes of these financial statements
since September 30, 1996 and 1995 and, therefore, current estimates of
fair value may differ significantly from the amounts presented herein.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.
-38-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Fair Value of Financial Instruments (Continued)
- ---------------------------------------------
Retail Finance Receivables
--------------------------
The carrying amounts of $900 million$2.1 billion and $1.1 billion of variable rate finance
receivables at September 30, 19962000 and 1995,1999, 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 madeoriginated as of September 30, 19962000 and 1995.1999.
-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 fair value of amounts associated with the
sale of finance receivables was estimated by discounting expected cash
flows using quoted market interest rates as of September 30, 1996 and
1995. 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 madeissued as of September 30, 19962000 and 1995.1999. The carrying
amount of commercial paper wasand extendible commercial notes were assumed to
approximate fair value due to the short maturity of these instruments.
-39-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Fair Value of Financial Instruments (Continued)
- ---------------------------------------------
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 over the remaining term of the agreements using quoted
market exchange rates and quoted market interest rates as of September 30, 19962000
and 1995.1999.
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, 19962000 and 1995.1999.
Option-based Products
--------------------------------------------
The estimated fair value of TMCC's outstanding option basedoption-based products was
derived by discounting expected cash flows over the remaining term
of the instruments using market exchange rates and
market interest rates as of September 30, 19962000 and 1995.1999.
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, 19962000 and 1995.1999.
-47-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1110 - 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 $1,119 million$1.3 billion and $773 million$1.5 billion at September 30,
19962000 and 1995,1999, 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.
-40-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 -Derivative Financial Instruments
with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
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 instrumentsarrangements for trading purposes.
A reconciliation of the activity of TMCC's derivative financial instruments for
the years ended September 30, 19962000 and 19951999 is as follows:
September 30,
---------------------------------------------------------------------------------------------------------------------------
Cross
Currency
Interest Interest Indexed
Rate Swap Rate Swap Option-based Note Swap
Agreements Agreements Products Agreements
------------ ------------ ------------- ------------
1996 1995 1996 1995 1996 1995 1996 19952000 1999 2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ---- ---- ----
(Dollars in Billions)
Beginning Notional Amount $4.8 $4.0 $7.1 $7.6 $3.8 $0.5 $1.7 $2.4Amount... $8.8 $9.0 $9.0 $7.3 $6.9 $6.3 $1.3 $0.8
Add:
New agreements........ 1.7 1.6 3.1 1.9 3.4 3.3 1.2agreements........... 2.1 0.5 14.8 4.7 7.4 2.7 0.3 0.8
Less:
Terminated agreements.... - - 1.5 - - - - -
Expired agreements.... 0.9 0.8 3.4 2.4 1.0 - 1.0 1.2agreements....... 2.5 0.7 11.8 3.0 2.6 2.1 0.2 0.3
---- ---- ---- ---- ---- ---- ---- ----
Ending Notional Amount... $5.6 $4.8 $6.8 $7.1 $6.2 $3.8 $1.9 $1.7Amount...... $8.4 $8.8 $10.5 $9.0 $11.7 $6.9 $1.4 $1.3
==== ==== ===== ==== ==== ========= ==== ==== ====
-41--48-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1110 - 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 the interest rate swap agreements ranged from one to ten years at
September 30, 1996.2000.
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 49%62% of TMCC's other senior debt at
September 30, 19962000 had floating interest rates that were covered by option-basedoption-
based products which had an average strike rate of 6.18%6.45%. The premiums paid
for option-based products are included in Deferred Chargesdeferred charges and are amortized to
Interest Expenseinterest 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.interest expense. The original maturities of the option-based products ranged from
twoone to threefour years at September 30, 1996.
-42-2000.
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 1110 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
Interest Rate Risk Management (Continued)
- -----------------------------
The aggregate notional amounts of interest rate swap agreements and
option-based products outstanding at September 30, 1996 and 1995 were
as follows:
September 30,
---------------------
1996 1995
---- ----
(Dollars in Billions)
Fixed rate swaps............................... $2.3 $4.2
Floating rate swaps............................ 3.1 1.3
Basis swaps.................................... 1.4 1.6
---- ----
Total interest rate swap agreements........ $6.8 $7.1
==== ====
Option-based products.......................... $6.2 $3.8
==== ====
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, 1996,2000, TMCC was the counterparty to $1.9$1.4 billion
of indexed note swap agreements, of which $0.6 billion was denominated in foreign currencies
and $1.3 billion was denominated in U.S. dollars. At September 30,
1995, TMCC was the counterparty to $1.7 billion of indexed note swap
agreements, of which $0.7$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 the
indexed note swap agreements ranged from onetwo to eleventen years at September 30,
1996.2000.
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.
-43-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
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, 19962000 and 19951999 were $5.6$8.4 billion
and $4.8$8.8 billion, respectively. The original maturities of the cross currency
interest rate swap agreements ranged from onetwo to tennine years at September 30,
1996.2000.
-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, 1996,2000, approximately 80%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-performancenon-
performance by any of its counterparties and has no reserves related to non-performancenon-
performance as of September 30, 1996;2000; TMCC has not experienced any counterparty
default during the three years ended September 30, 1996.2000. 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, 19962000 reduced by
the effects of master netting agreements. The credit exposure of TMCC's
derivative financial instruments at September 30, 19962000 was $205$95 million on an
aggregate notional amount of $20.5$32 billion.
-44-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
Market Risk
-----------
TMCC's loan and lease portfolios consist of a series of contractually
defined cash flows over the life of the portfolios. The value to TMCC
of the cash flows changes as market interest rates change. TMCC's
asset portfolios are funded by various debt instruments whose cash
flows are modified or hedged by a variety of derivative and option-
based products. The value of TMCC's liability and derivative cash
flows also change as market interest rates change.
TMCC uses a value-at-risk methodology, in connection with other
management tools, to assess the interest rate risk of aggregated loan
and lease assets and financial liabilities, including derivatives and
option based products. TMCC is not subject to currency exchange rate
risk as foreign currency denominated instruments are entirely hedged.
Value-at-risk represents the potential losses for a portfolio from
adverse changes in market factors for a specified period of time and
level of confidence. TMCC estimates value-at-risk using historical
interest rate volatilities for the past two years. The value at risk
of TMCC's portfolio as of September 30, 1996, measured as the potential
30 day loss in value from assumed adverse changes in interest rates
that are estimated to cover 90% of likely market movements, totals
$45.6 million on a mean portfolio value of $3.8 billion; alternatively,
the value at risk represents 1.2% of the mean portfolio value.
As of September 30, 1996, an interest rate increase of 1% (100 basis
points) would raise TMCC's weighted average interest rate, including
the effects of interest rate swap agreements and option-based products,
by .30%, from 5.80% to an estimated 6.10% at September 30, 1996.
Conversely, an interest rate decrease of 1% (100 basis points) would
lower TMCC's weighted average interest rate, including the effects of
interest rate swap agreements and option based products, by .43%, from
5.80% to an estimated 5.37% at September 30, 1996.
-45-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - 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. ForThe
Company's pension expense was $5 million, $6 million and $4 million for the
years ended September 30, 1996, 19952000, 1999, and 1994, the Company's pension expense was
$4 million, $2 million and $3 million,1998, respectively. At
September 30, 1996, 19952000, 1999 and 1994,1998, 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.
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("Statement No. 112"). Statement No. 112 requires accrual,
during the years that the employee renders the necessary service or
when it is probable that a liability has been incurred, of the expected
cost of providing postemployment benefits to former or inactive
employees, their beneficiaries, and covered dependents after employment
but before retirement. This method differs from the Company's previous
practice of accounting for these benefits on a cash basis. The
cumulative effect of the change in accounting principle was not
material to the Company's financial position or results of operations.
-46--51-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1312 - Provision for Income Taxes
- ------------------------------------
The provision for income taxes consisted of the following:
Years ended September 30,
--------------------------
1996 1995 19942000 1999 1998
---- ---- ----
(Dollars in Millions)
Current
Federal........................... $(47) $(97) $ 671 $(130) $(317)
State............................. (23) (27) 441 17 (16)
---- ---- --------- -----
Total current ................. (70) (124) 10112 (113) (333)
---- ---- --------- -----
Deferred
Federal........................... 129 173 86(21) 202 399
State............................. 49 68 22(26) 9 41
---- ---- --------- -----
Total deferred................. 178 241 108(47) 211 440
---- ---- --------- -----
Provision for income taxes.. $108 $117 $118$ 65 $ 98 $ 107
==== ==== ====
The deferred income tax liabilities by jurisdictions are as follows:
September 30,
---------------------
1996 1995
---- ----
(Dollars in Millions)
Federal........................................ $643 $513
State.......................................... 162 114
---- ----
Net deferred income tax liability........... $805 $627
==== ====
-47-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Provision for Income Taxes (Continued)
- ------------------------------------
The Company's deferred tax assets and liabilities consisted of the
following:
September 30,
---------------------
1996 1995
----- -----
(Dollars in Millions)
Assets:
Alternative minimum tax..................... $ 436 $ 339
Provision for losses........................ 116 87
Deferred administrative fees................ 54 47
NOL carryforwards........................... 49 22
Deferred acquisition costs.................. 12 14
Unearned insurance premiums................. 4 4
Revenue recognition......................... 2 2
Other....................................... 3 3
----- -----
Deferred tax assets...................... 676 518
----- -----
Liabilities:
Lease transactions.......................... 1,330 1,049
State taxes................................. 151 96
----- -----
Deferred tax liabilities................. 1,481 1,145
----- -----
Net deferred income tax liability..... $ 805 $ 627 ===== =====
TMCC has state tax net operating loss carryforwards of $609 million
which expire beginning in fiscal 1997 through 2009.
-48-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Provision for Income Taxes (Continued)
- ------------------------------------
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,
-------------------------
1996 1995 19942000 1999 1998
---- ---- ----
(Dollars in Millions)
Provision for income taxes at
federal statutory tax rate......... $ 91 $105 $10356 $ 81 $ 88
State and local taxes (net of
federal tax benefit)............... 10 17 26 17
Other, including changes in
applicable state tax rates......... - (14) (2)(1) _ 2
---- ---- ----
Provision for income taxes......... $108 $117 $118$ 65 $ 98 $107
==== ==== ====
Effective tax rate.................... 41.52% 39.12% 40.24%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 $2.0$3.0 billion and $2.7 billion at
September 30, 1996, compared to $1.5 billion as of September 30, 1995.2000 and 1999, respectively. No loans were outstanding under any
of these bank credit facilities as of September 30, 19962000 or 1995.1999.
To facilitate and maintain letters of credit, TMCC maintains, along with TMS,
uncommitted, unsecured lines of credit with banks totaling $250$175 million as of
September 30, 1996.2000 and 1999. Approximately $44$11 million and $13 million in
letters of credit had been issued primarily related to the Company's
insurance operations as of September 30, 1996, compared to $86 million
as of September 30, 1995. The letters of credit for the insurance
companies are used to satisfy requirements of certain insurance
carriers2000, and state insurance regulatory agencies.
-49-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS1999,
respectively.
Note 1516 - Commitments and Contingent Liabilities
- ------------------------------------------------
At September 30, 1996,2000, the Company was a lessee under lease agreements for
facilities with minimum future commitments as follows: years ending
September 30, 19972001 - $15 million; 2002 - $13 million; 2003 - $9 million;
19982004 - $8$5 million; 19992005 - $6 million; 2000 - $4 million; 2001 - $3 million;$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.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 thesepending claims and actions as of
September 30, 19962000 were not determinable; however, in the opinion of
management, the ultimate liability resulting therefrom should not materially affecthave a
material adverse effect on TMCC's consolidated financial position or results of
operations.
Note 1617 - 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
Depreciation
Financing Interest on OperatingDepreciation Net
Revenues Expense on Leases Income
---------- -------- ------------ ---------------
- -
(Dollars in Millions)
Year Ended September 30, 1996:2000:
First quarter.............. $ 688 $193797 $ 370277 $ 41383 $ 32
Second quarter............. 724 196 394 36830 317 367 25
Third quarter.............. 768 210 416 40861 347 322 23
Fourth quarter............. 798 221 446864 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................... $2,978 $820 $1,626 $152$3,165 $940 $1,664 $132
====== ==== ====== ====
Year Ended September 30, 1995:1998:
First quarter.............. $ 564 $161796 $234 $ 277422 $ 4437
Second quarter............. 601 175 298 45800 239 414 30
Third quarter.............. 630 189 313 46812 249 423 32
Fourth quarter............. 661 191 344 48832 272 422 45
------ ---- ------ ----
Total................... $2,456 $716 $1,232 $183$3,240 $994 $1,681 $144
====== ==== ====== ====
-50-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-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There is nothing to report with regard to this item.
-51-
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, 1996.2000.
Name Age Position
---- --- --------
Yoshio Ishizaka........... 56George Borst ............. 52 Director, President and
President,Chief Executive Officer, TMCC;
Director, Secretary and President, TMS;
Director, TMC
Nobu Shigemi..............Chief
Financial Officer, TFSA
Nobukazu Tsurumi.......... 52 Director, SeniorExecutive Vice President
and Treasurer, TMCC; Group Vice
President, TMS
Douglas West.............. 51TMCC
Michael Deaderick......... 54 Director, Senior Vice President
and Secretary, TMCC
Ryuji Araki............... 60 Director, TMCC;
Director, TFSA; Director, TFSC;
Senior Vice
President and Secretary, TMS
Wolfgang Jahn............. 58Managing Director, Senior Vice President
and General Manager, TMCC;
Group Vice President, TMS
Robert Pitts.............. 48 Director and Assistant Secretary,
TMCC; Group Vice President, TMS
Yale Gieszl...............TMC
Hideto Ozaki.............. 54 Director, TMCC; Director and
Executive Vice President, TMS
Takashi Nishiyama......... 54TFSA; President and
Director, TFSC
Yoshio Ishizaka........... 60 Director, TMCC; Senior
Vice
President and Treasurer, TMS
Ryuji Araki............... 56Managing Director, TMCC;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. IshizakaBorst 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 and TMS in October 1999. From
September 1997 to June 1996.1999, Mr. Ozaki was the general manager of the finance
division of TMC. From January 19901997 to May 1996,August 1997, Mr. IshizakaOzaki was the Project
General Manager of the EuropeFinance 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 heto May 1999, Mr. Ishizaka was named a Director
of TMC. Mr. Ishizaka has been employed with TMC, in various positions, since
1964.
Mr. ShigemiInaba was named Director Senior Vice President and Treasurer of TMCC and Group ViceTMS and President of TMS in June
1999, and was named Director of TMC in June 1997. From June 1999 to
September 1994.2000, Mr. Inaba was President of TMCC. From January 1994June 1997 to August 1994,June
1999, Mr. Shigemi was General Manager of TMC's Finance Division. From
January 1993 to December 1993, heInaba was the Project General Manager of the AccountingEurope, Africa and United
Kingdom Division of TMC. From February 1982June 1996 to December 1992, he worked
in the Tokyo Secretarial Division having been named a manager in February 1983
and Deputy General Manager in February 1990.May 1997, Mr. ShigemiInaba was Senior
Vice President of TMS. Mr. Inaba has been employed with TMC, in various
positions worldwide, since 1968.
-52-
Mr. West was named Director, Senior Vice President and Secretary of TMCC and
Senior Vice President and Secretary of TMS in June 1996. From April 1993 to
May 1996, Mr. West was a Group Vice President of TMS. From April 1989 to
March 1993, Mr. West was a Vice President of TMS. Mr. West has been employed
with TMS, in various positions, since 1982.
Mr. Jahn was named Director and Group Vice President of TMCC in April 1993.
In December 1994, Mr. Jahn was also named General Manager of TMCC and Group
Vice President of TMS and, in July 1995, Senior Vice President of TMCC. From
January 1985 to March 1993, he was a Vice President of TMCC, and from
September 1988 to March 1993, he was also the Assistant Secretary of TMCC.
From January 1987 to March 1993, he held the position of Vice President of
TMS. Mr. Jahn has been employed with TMS and TMCC, in various positions,
since 1973.
Mr. Pitts was named Director and Assistant Secretary of TMCC and Group Vice
President of TMS in April 1993. From January 1984 to March 1993, he was an
executive with TMCC having been named General Manager in January 1984 and Vice
President in April 1989. Mr. Pitts has been employed with TMS and TMCC, in
various positions, since 1971.
Mr. GieszlPress was named Director of TMCC in September 1988.July 1999. He is also a Director and
Executive Vice President of TMS, positions he has held since December 1989June 1996 and
June 1992,July 1999, respectively. From January 1982March 1998 to May 1992,July 1999, he was a Senior Vice
President of TMS. From October 1982April 1995 to May 1992, he held
the position ofMarch 1998, Mr. Press was Senior Vice
President and General Manager of TMCC, and from September 1988 to May
1992, he also held the position of Secretary of TMCC.Lexus. Mr. GieszlPress has been employed with TMS,
in various positions, since 1970.
Mr. Nishiyama was named Director of TMCC and Senior Vice President and
Treasurer of TMS in January 1994. From February 1989 to December 1993, he was
General Manager of the Europe and Africa Project Division of TMC. From
February 1986 to January 1989, he was Executive Vice President of Salvador
Caetano S.A. Portugal. Mr. Nishiyama has been employed with TMC, in various
positions, since 1965.
Mr. Araki was named Director of TMCC in September 1995. He has served on
TMC's Board of Directors since September 1992. Mr. Araki has been employed
with TMC, in various positions, since 1962.-62-
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
$100,000, for services rendered in all capacities to the Company for the fiscal
years ended September 30, 1996, 19952000, 1999 and 1994.
-53-
1998.
Annual Compensation
--------------------------------------------
Other Annual All
Name and Fiscal Compensation AllOther
Principal Position Year Salary ($) Bonus ($) ($) Other ($)
- --------------------- ------ ---------- --------- ------------ --------------------
Wolfgang Jahn 1996 $233,100 $94,500 $8,500George Borst 2000 $316,290 $179,200 - $10,300
Chief Executive Officer 1999 $273,400 $162,300 - $ 8,700
Principal Executive 1995 $213,800 $98,700 $6,0001998 $237,700 $150,300 - $ 3,300
Officer
1994 $199,800 $91,300 $7,000
Nobu Shigemi 1996 $316,000 $50,900 $51,700
SeniorNobukazu Tsurumi 2000 $247,124 $55,948 $36,060 -
Executive 1999 $117,700 $25,300 $23,800 -
Vice President 1995 $199,000 $40,500 $47,3001998 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 6%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.
-54-
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. Jahn.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 after deducting the
executive's primary Social Security benefit, multiplied by the years of
service credited under the plan (up to a maximum of 25)30), offset by benefits
payable under the TMS Pension Plan.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.
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
Mr. JahnBorst is a participant in the TMS Pension Plan and the TMS SERP, and has 23had
15 years of total credited service as of September 30, 1996, 7 years of which
have been allocated to the Company.2000. Based upon years
of credited service -55-
allocable to the Company,TMCC, Mr. Jahn wouldBorst may be entitled to receive
and the
Company would be required to pay approximately $26,000$36,000 in annual pension plan benefits when Mr. JahnBorst reaches
age 62. Mr. Jahn wouldBorst 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 feesamounts are paid to members of the TMCC Board of Directors of TMCC 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 the CompanyTMCC 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.
-56--65-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of the date hereof, all of TMCC's capital stock is owned by TMS.TFSA.
ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS.
Transactions between the Company, TFSA, TFSC, TMS and its ParentTMMNA are included in
Note 82, Note 11, Note 14, Note 15 and Note 16 of the Notes to the Consolidated
Financial Statements.
-57-
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.
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 18.26.
(2)Exhibits
The exhibits listed on the accompanying Exhibit Index, starting on
page 60,68, are filed as part of, or incorporated by reference into,
this Report.
(b)Reports on Form 8-K
There were no reports on Form 8-K filed by the registrant
during the quarter ended September 30, 1996.
-58-2000.
-66-
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 23rd20th day of December, 1996.2000.
TOYOTA MOTOR CREDIT CORPORATION
By /S/ WOLFGANG JAHNGEORGE E. BORST
------------------------------
Wolfgang Jahn
Senior ViceGeorge E. Borst
President and
General ManagerChief 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 23rd20th day of December, 1996.2000.
Signature Title
--------- -----
Senior Vice President and General
ManagerChief Executive
Officer
and Director
/S/ WOLFGANG JAHNGEORGE E. BORST (Principal Executive Officer)
- ------------------------------------
Wolfgang Jahn
SeniorGeorge E. Borst
Executive Vice President/President and
Treasurer and Director
/S/ NOBU SHIGEMINOBUKAZU TSURUMI (Principal Financial Officer)
- ------------------------------------
Nobu ShigemiNobukazu Tsurumi
Vice President - Finance
and AdministrationAffiliated Operations
/S/ PATRICK BREENEROBERT M. ALLEN (Principal Accounting Officer)
- ------------------------------------
Patrick BreeneRobert M. Allen
/S/ YOSHIO ISHIZAKAMICHAEL DEADERICK Director
- ------------------------------------
Yoshio IshizakaMichael Deaderick
/S/ DOUG WESTYOSHIMI INABA Director
- ------------------------------------
Doug WestYoshimi Inaba
/S/ TAKASHI NISHIYAMAJAMES PRESS Director
- ------------------------------------
Takashi Nishiyama
-59-James Press
-67-
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- --------
3.1(a) Articles of Incorporation 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 Bylaws as amended through January 16, 1993. (11)(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)
- -----------------
(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, 1989.1989,
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, 1990.1990,
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.
(11)(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.
-60-1993,
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(a)4.3 Third Amended and Restated Agency Agreement dated
as of
July 28, 1994,October 4, 2000 among TMCC, The Chase Manhattan Bank, N.A.Filed
and Chase Manhattan Bank Luxembourg S.A. (12)
4.3(b) Amendment No. 1 dated July 27, 1995 to the Amended
and Restated Agency Agreement among TMCC, The Chase
Manhattan Bank, N.A. and Chase Manhattan Bank
Luxembourg S.A. (15)
4.3(c) Amendment No. 2 dated July 19, 1996 to the Amended Filed
and Restated Agency Agreement among TMCC, The Chase Herewith
Manhattan Bank, N.A. and Chase Manhattan Bank
Luxembourg S.A.
4.4 TMCC has outstanding certain long-term debt as set
forth in Note 98 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. (24)(15)
10.1(b) Amendment No. 1 to Operating Agreement dated May 14, 1996
between TMCC and TMS. (18)(11)
10.1(c) Amendment No. 2 to Operating Agreement dated December 1,
1997 between TMCC, TMS and TMMNA. (20)
- -----------------
(5) Incorporated herein by reference to Exhibit 4.1 filed with TMCC's
Current Report on Form 8-K dated October 16, 1991.
(12) Incorporated herein by reference to Exhibit 4.4(a) filed
with TMCC's Report on Form 10-K for the year ended September 30, 1994.
(15) Incorporated herein by reference to Exhibit 4.4(b) filed
with TMCC's Report on Form 10-K for the year ended September 30, 1995.
(18)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.
(24)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.
-61-(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
- ------- ----------- ------
10.2(a) Financial Service10.1(d) Amendment No. 3 to Operating Agreement dated December 21, 1984June 1, 1999
between TMCC, TMS and World Omni Financial Corporation,
as amended June 6, 1988. (25)
10.2(b) AddendumTMMNA. (22)
10.1(e) Amendment No. 4 to Financial ServicesOperating Agreement dated JanuaryAugust 1, 1991,Filed
2000 between TMCC, TMS and World Omni Financial
Corporation. (6)
10.2(c) Amendment to Financial ServicesTMMNA. Herewith
10.1(f) Termination of Operating Agreement dated MarchOctober 1, 1992,2000 Filed
between TMCC, TMS and World Omni Financial
Corporation. (7)
10.2(d) Amendment to Financial Services Agreement dated
March 1, 1994, between TMCC and World Omni Financial
Corporation. (19)
10.2(e) Termination of Financial Services Agreement dated Filed
August 29, 1996 between TMCC and World Omni FinancialTMMNA. Herewith
Corporation.
10.3 Form of Pooling and Servicing Agreement among TMCRC,
as Seller, TMCC, as Servicer, and the Chase Manhattan Bank
N.A., as Trustee (including forms of Class A and Class B
Certificates). (8)
10.4 Form of Standard Terms and Conditions of Pooling and
Servicing Agreement. (9)
10.5 Form of Receivables Purchase Agreement. (10)
- ----------------
(6) Incorporated herein by reference to Exhibit 10.2(a) filed with
TMCC's Report on Form 10-K for the year ended September 30, 1991.
(7) Incorporated herein by reference to Exhibit 10.2(b) filed with
TMCC's Report on Form 10-K for the year ended September 30, 1992.
(8) Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto
Receivables 1993-A Grantor Trust's Registration Statement on Form S-1,
File No. 33-65348.
(9) Incorporated herein by reference to Exhibit 4.2 filed with Toyota Auto
Receivables 1993-A Grantor Trust's Registration Statement on Form S-1,
File No. 33-65348.
(10) Incorporated herein by reference to Exhibit 10.1 filed with Toyota
Auto Receivables 1993-A Grantor Trust's Registration Statement on Form
S-1, File No. 33-65348.
(19) Incorporated herein by reference to Exhibit 10.2(c) filed with
TMCC's Report on Form 10-K for the year ended September 30, 1994.
(25) Incorporated herein by reference to Exhibit 10.2 filed with
TMCC's Registration Statement on Form S-1, File No. 33-22440.
-62-
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------
10.6 Pooling and Servicing Agreement among TMCRC,
as Seller, TMCC, as Servicer, and Bankers Trust Company,
as Trustee (including forms of Class A and Class B
Certificates) dated as of September 1, 1995. (13)
10.7 Receivables Purchase Agreement dated as of September 1,
1995 between TMCC, as Seller, and TMCRC Corporation,
as Purchaser. (14)
10.8 Form of Indemnification Agreement between TMCC and
its directors and officers. (20)
10.9(a)(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. Not filed herein as an exhibit, pursuant to Instruction 2
to Item 601 of Regulation S-K under the Securities Act of
1933, is the 364-day Credit Agreement (the "364-day
Agreement") among TMCC and the banks who are party to the
Three-year Agreement. Filed herewith is a
Schedule identifying the 364-day Agreement and setting
forth the material details in which the 364-day
Agreement differs from the Three-year Agreement. TMCC
agrees to furnish a copy of the 364-day Agreement to
the Securities and Exchange Commission upon request. (21)
10.9(b)(13)
10.5(b) Amendment No. 1 dated September 28, 1995 to the
Three-year Agreement. (22)
10.9(c) Amendment No. 1(14)
10.5(c) Amended and Restated Three-Year Credit Agreement dated
September 28, 199524, 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
364-dayThree-year Agreement. (23)(8)
10.5(f) Amended and Restated Three-Year Credit Agreement dated
September 17, 1999. (8)
- ----------------
(13)(8) Incorporated herein by reference to the same numbered Exhibit 4.1 filed
with Toyota Auto
Receivables 1995-A Grantor Trust'sTMCC's Current Report on Form 8-K dated
November 10, 1995,10-K for the year ended September 30,
1999, Commission File No. 33-96006.
(14) Incorporated herein by reference to Exhibit 10.1 filed with Toyota
Auto Receivables 1995-A Grantor Trust's Current Report on Form 8-K
dated November 10, 1995, File No. 33-96006.
(20)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.
(21)(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.
(22)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.
(23)1995,
Commission File No. 1-9961.
(16) Incorporated herein by reference to Exhibit 10.10(b)10.9(d) filed with TMCC's
Report on Form 10-K for the year ended September 30, 1995.
-63-1996, 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
- ------- ----------- ------
10.9(d) Amendment No. 210.5(g) Fourth Amended and Restated Three-Year Credit Agreement Filed
dated September 24, 1996 to the Three- Filed
year Agreement.14, 2000. Herewith
10.9(e) Amendment No. 210.5(h) Fourth Amended and Restated 364-Day Credit Agreement
dated September 24, 1996 to17, 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 364-dayother 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
Agreement.and Sole Book Manager and the other Banks named therein. Herewith
10.1010.6 Toyota Motor Sales, U.S.A., Inc. Supplemental
Executive Retirement Plan. (16)
10.11* (9)
10.7 Toyota Motor Sales, U.S.A., Inc. 401(k)
Excess Plan. (17)* (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
- ----------------
(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. Filed
Herewith
21.1 TMCC's list of subsidiaries. Filed
Herewith
23.1 Consent of Independent Accountants. Filed
Herewith
27.1 Financial Data Schedule. Filed
Herewith
- ----------------
(16) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's
Report on Form 10-Q for the quarter ended December 31, 1995.
(17) Incorporated herein by reference to Exhibit 10.2 filed with TMCC's
Report on From 10-Q for the quarter ended December 31, 1995.
-64--72-