UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
- ---------------------------------------- -----------------------
(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) 468-1310
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
As of October 31, 2001, 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 Financial Services Americas Corporation.
-1-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
September 30, March 31, September 30,
2001 2001 2000
------------ ------------- ------------
(Unaudited)
ASSETS
------
Cash and cash equivalents............... $ 1,167 $ 294 $ 170
Investments in marketable securities.... 854 1,075 871
Finance receivables, net................ 19,813 19,216 18,168
Finance receivables, net - securitized.. 1,407 - -
Investments in operating leases, net.... 7,321 7,409 7,964
Derivative assets....................... 615 379 -
Other assets............................ 793 762 863
Income taxes receivable................. 109 79 -
------- ------- -------
Total Assets................... $32,079 $29,214 $28,036
======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Notes and loans payable................. $24,127 $22,194 $21,098
Notes payable related to securitized
finance receivables structured as
collateralized borrowings............ 1,072 - -
Derivative liabilities.................. 1,193 1,414 -
Other liabilities....................... 774 925 2,301
Deferred income......................... 770 699 681
Deferred income taxes................... 1,569 1,468 1,483
------- ------- -------
Total Liabilities................. 29,505 26,700 25,563
------- ------- -------
Commitments and Contingencies
Shareholder's Equity:
Capital stock, $l0,000 par value
(100,000 shares authorized;
91,500 issued and outstanding)... 915 915 915
Retained earnings.................... 1,648 1,581 1,539
Accumulated other comprehensive
income............................ 11 18 19
------- ------- -------
Total Shareholder's Equity........ 2,574 2,514 2,473
------- ------- -------
Total Liabilities and
Shareholder's Equity........... $32,079 $29,214 $28,036
======= ======= =======
See Accompanying Notes to Consolidated Financial Statements.
-2-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions)
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ------------------
2001 2000 2001 2000
------ ------ ------ ------
(Unaudited) (Unaudited)
Financing Revenues:
Leasing................................ $ 617 $ 614 $1,237 $1,220
Retail financing....................... 216 198 410 402
Wholesale and other dealer financing... 49 52 109 103
------ ------ ------ ------
Total financing revenues.................. 882 864 1,756 1,725
Depreciation on leases................. 380 368 754 690
Interest expense....................... 268 348 564 695
SFAS 133 fair value adjustments........ 77 - 68 -
------ ------ ------ ------
Net financing revenues.................... 157 148 370 340
Insurance premiums earned and contract
revenues............................... 40 35 80 70
Investment and other income............... 32 37 97 59
Loss on asset impairment.................. - - 47 60
------ ------ ------ ------
Net financing revenues and other revenues. 229 220 500 409
------ ------ ------ ------
Expenses:
Operating and administrative........... 129 103 243 207
Provision for credit losses............ 51 46 101 75
Insurance losses and loss adjustment
expenses............................ 18 22 38 43
------ ------ ------ ------
Total expenses............................ 198 171 382 325
------ ------ ------ ------
Income before equity in net loss of
subsidiary and income taxes............ 31 49 118 84
Equity in net loss of subsidiary.......... - - - 1
Provision for income taxes................ 10 25 47 36
------ ------ ------ ------
Net Income................................ $ 21 $ 24 $ 71 $ 47
====== ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements.
-3-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(Dollars in Millions)
Accumulated
Other
Capital Retained Comprehensive
Stock Earnings Income Total
------- -------- ------------- --------
Balance at March 31, 2000
(unaudited)................... $ 915 $ 1,492 $ 15 $ 2,422
------ ------- ---------- -------
Net income for the six months
ended September 30, 2000...... - 47 - 47
Dividends........................ - - - -
Change in net unrealized gains
on available-for-sale
marketable securities......... - - 4 4
------ -------- ---------- -------
Total Comprehensive Income....... - 47 4 51
------ -------- ---------- -------
Balance at September 30, 2000.... $ 915 $ 1,539 $ 19 $ 2,473
====== ======= ========== =======
Balance at March 31, 2001........ $ 915 $ 1,581 $ 18 $ 2,514
------ ------- ---------- -------
Net income for the six months
ended September 30, 2001...... - 71 - 71
Dividends........................ - (4) - (4)
Change in net unrealized gains
on available-for-sale
marketable securities......... - - (7) (7)
------ -------- ---------- -------
Total Comprehensive Income....... - 67 (7) 60
------ -------- ---------- -------
Balance at September 30, 2001
(unaudited)................... $ 915 $ 1,648 $ 11 $ 2,574
====== ======= ========== =======
See Accompanying Notes to Consolidated Financial Statements.
-4-
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
Six Months Ended
September 30,
--------------------------
2001 2000
-------- --------
(Unaudited)
Cash flows from operating activities:
Net income............................................... $ 71 $ 47
-------- --------
Adjustments to reconcile net income to net
cash provided by operating activities:
Fair value adjustments of SFAS 133 derivatives..... 68 -
Depreciation and amortization...................... 750 757
Provision for credit losses........................ 101 75
Gain from sale of finance receivables, net......... (25) (4)
Gain from sale of marketable securities, net....... (1) (7)
Loss on asset impairment........................... 47 60
Increase in other assets........................... (82) (200)
Increase in deferred income taxes.................. 101 56
(Decrease) increase in other liabilities........... (102) 61
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Total adjustments........................................ 857 798
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Net cash provided by operating activities................... 928 845
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Cash flows from investing activities:
Addition to investments in marketable securities......... (963) (1,031)
Disposition of investments in marketable securities...... 1,162 600
Purchase of finance receivables.......................... (16,040) (12,827)
Liquidation of finance receivables....................... 12,517 10,106
Proceeds from sale of finance receivables................ 1,450 1,449
Addition to investments in operating leases.............. (1,985) (1,448)
Disposition of investments in operating leases........... 1,336 1,143
(Increase) decrease in receivable from Affiliate......... (42) 54
-------- --------
Net cash used in investing activities....................... (2,565) (1,954)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of notes and loans payable........ 6,000 3,184
Payments on notes and loans payable...................... (1,890) (2,393)
Net (decrease) increase in commercial paper with
original maturities less than 90 days................. (1,600) 329
-------- --------
Net cash provided by financing activities................... 2,510 1,120
-------- --------
Net increase in cash and cash equivalents................... 873 11
Cash and cash equivalents at the beginning of the period.... 294 159
-------- --------
Cash and cash equivalents at the end of the period.......... $ 1,167 $ 170
======== ========
Supplemental disclosures:
Interest paid............................................ $ 588 $ 672
Income taxes paid........................................ $ 50 $ 6
See Accompanying Notes to Consolidated Financial Statements.
-5-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Financial Data
- -------------------------------
The accompanying information pertaining to the six months ended
September 30, 2001 and 2000 is unaudited and has been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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. In the
opinion of management, the unaudited financial information reflects all
adjustments necessary for a fair statement of the results for the interim
periods presented. The results of operations for the six months ended
September 30, 2001 are not necessarily indicative of those expected for any
other interim period or for a full year. Certain September 2000 accounts have
been reclassified to conform with the September 2001 and March 2001
presentation.
These financial statements should be read in conjunction with the consolidated
financial statements, significant accounting policies and other notes to the
consolidated financial statements included in Toyota Motor Credit
Corporation's ("TMCC's" or the "Company's") 2001 Transitional Annual Report to
the Securities and Exchange Commission ("SEC") on Form 10-KT.
-6-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Finance Receivables
- ----------------------------
Finance receivables, net and Finance receivables, net - securitized consisted
of the following:
September 30, March 31, September 30,
2001 2001 2000
------------- ------------- -------------
(Dollars in Millions)
Retail................................. $11,480 $ 9,370 $10,630
Finance leases......................... 8,244 7,871 6,742
Wholesale and other dealer loans....... 3,151 3,619 2,325
------- ------- -------
22,875 20,860 19,697
Unearned income........................ (1,470) (1,476) (1,361)
Allowance for credit losses............ (185) (168) (168)
------- ------- -------
Finance receivables, net............ $21,220 $19,216 $18,168
======= ======= =======
Finance leases included estimated unguaranteed residual values of $1,799
million, $1,532 million and $1,309 million at September 30, 2001, March 31,
2001 and September 30, 2000, respectively.
The aggregate balances related to finance receivables 60 or more days past due
totaled $51 million, $29 million and $32 million at September 30, 2001, March
31, 2001 and September 30, 2000, respectively.
Note 3 - Investments in Operating Leases
- ----------------------------------------
Investments in operating leases, net consisted of the following:
September 30, March 31, September 30,
2001 2001 2000
------------- ------------- -------------
(Dollars in Millions)
Vehicles.................................. $8,594 $8,891 $9,553
Equipment and other....................... 712 689 646
------ ------ ------
9,306 9,580 10,199
Accumulated depreciation.................. (1,922) (2,112) (2,173)
Allowance for credit losses .............. (63) (59) (62)
------ ------ ------
Investments in operating leases, net... $7,321 $7,409 $7,964
====== ====== ======
-7-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Derivatives and Hedging Activities
- -------------------------------------------
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") requires companies
to record derivatives on the balance sheet as assets and liabilities, measured
at fair value. Derivative assets and liabilities include interest rate swaps,
indexed note swap agreements, cross currency interest rate swap agreements and
option-based products. The accounting for the gain or loss due to changes in
fair value of the hedged item depends on whether the relationship between the
hedged item and the derivative instrument qualifies for hedge treatment. If
the relationship between the hedged item and the derivative instrument does
not qualify as a hedge, the gains or losses are reported in earnings when they
occur. However, if the relationship between the hedged item and the
derivative instrument qualifies as a hedge, the accounting varies based on the
type of risk being hedged.
For the six months ended September 30, 2001, the Company recognized a loss of
$68 million (reported as SFAS 133 fair value adjustments in the Consolidated
Statement of Income). The net adjustment reflects a $94 million decrease
primarily in the fair market value of TMCC's portfolio of option-based
products and certain interest rate swaps, partially offset by a net gain of
$26 million related to the ineffective portion of TMCC's fair-value hedges.
The decrease in the fair market value of TMCC's option-based products as well
as certain interest rate swaps are primarily due to lower market interest
rates. Various derivative instruments, such as option-based products and
certain interest rate swaps which hedge interest rate risk from an economic
perspective, and which the Company is unable or has elected not to apply hedge
accounting, is discussed in Non-Hedging Activities below. For fair value
hedging relationships, all components of each derivative's gain or loss were
included in the assessment of hedge effectiveness.
TMCC maintains an overall risk management strategy that utilizes a variety of
interest rate and currency derivative financial instruments to mitigate its
economic exposure to fluctuations caused by volatility in interest rate and
currency exchange rates. TMCC does not use any of these instruments for
trading purposes.
Fair-Value Hedges
- -----------------
The Company enters into interest rate swaps, indexed note swap agreements and
cross currency interest rate swap agreements to convert its fixed-rate debt to
variable-rate debt, a portion of which is covered by option-based products.
(Refer to non-hedging activities below for a discussion on option-based
products).
TMCC uses interest rate swap agreements in managing its exposure to interest
rate fluctuations. Interest rate swap agreements are executed as either an
integral part of specific debt transactions or on a portfolio basis. TMCC's
interest rate swap agreements involve agreements to pay fixed and receive a
floating rate, or receive fixed and pay a floating rate, at specified
intervals, calculated on an agreed-upon notional amount. Interest rate swap
agreements may also involve basis swap contracts which are agreements to
exchange the difference between certain floating interest amounts, such as the
net payment based on the commercial paper rate and the London Interbank
Offered Rate ("LIBOR"), calculated on an agreed-upon notional amount. The
original maturities of interest rate swap agreements ranged from one to ten
years at September 30, 2001.
-8-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Derivatives and Hedging Activities (Continued)
- ------------------------------------
TMCC uses 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 indices. 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 uses 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 executing 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 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 instruments is discussed further under Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
Non-Hedging Activities
- ----------------------
Option-based products are executed on a portfolio basis and consist primarily
of purchased interest rate cap agreements and interest rate swaps. Option-
based products are agreements which either grant TMCC the right to receive, or
require TMCC to make payments at, specified interest rate levels. Option-
based products are used to hedge interest rate risk from an economic
perspective on TMCC's portfolio.
The Company uses this strategy to moderate its exposure to volatility in
LIBOR. These products are not linked to specific assets and liabilities that
appear on the balance sheet and therefore, do not qualify for hedge
accounting.
Accounting for Derivatives and Hedging Activities
- -------------------------------------------------
All derivatives are recognized on the balance sheet at their fair value. On
the date that the Company enters into a derivative contract, it designates the
derivative as a hedge of the fair value of a recognized asset or liability or
a foreign-currency fair-value hedge (a "foreign currency hedge"). Changes in
the fair value of a derivative that is highly effective as - and that is
designated and qualifies as - a fair-value hedge or foreign-currency hedge,
along with changes in fair value of the hedged asset or liability that are
attributable to the hedged risk, are recorded in current-period earnings.
-9-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Derivatives and Hedging Activities (Continued)
- ------------------------------------
The Company occasionally purchases a financial instrument in which a
derivative instrument is "embedded." Upon purchasing the financial
instrument, the Company assesses whether the economic characteristics of the
embedded derivative are clearly and closely related to the economic
characteristics of the remaining component of the financial instrument (i.e.
host contract) and whether a separate, non-embedded instrument with the same
terms as the embedded instrument would meet the definition of a derivative
instrument. When it is determined that (1) the embedded derivative possesses
economic characteristics that are not clearly and closely related to the
economic characteristics of the host contract and (2) a separate, stand-alone
instrument with the same terms would qualify as a derivative instrument, the
embedded derivative is separated from the host contract, carried at fair
value, and designated as either (1) a fair-value hedge or (2) non-hedging
derivative instrument. However, if the entire contract were to be measured at
fair value, with changes in fair value reported in current earnings, or if the
Company could not reliably identify and measure the embedded derivative for
purposes of separating that derivative from its host contract, the entire
contract would be carried on the balance sheet at fair value and not be
designated as a hedging instrument.
The Company formally documents relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. This process includes linking
derivatives that are designated as fair-value hedges to specific liabilities
on the balance sheet. The Company also assesses whether the derivatives that
are used in hedging transactions have been highly effective in offsetting
changes in the fair value of hedged items and whether those derivatives may be
expected to remain highly effective in future periods. When it is determined
that a derivative is not (or has ceased to be) highly effective as a hedge,
the Company discontinues hedge accounting prospectively, as discussed below.
The Company will discontinue hedge accounting prospectively when (1) it
determines that the derivative is no longer effective in offsetting changes in
the fair value of a hedged item; (2) the derivative expires or is sold,
terminated, or exercised; or (3) management determines that designating the
derivative as a hedging instrument is no longer appropriate.
When hedge accounting is discontinued due to the Company's determination that
the derivative no longer qualifies as an effective fair-value hedge, the
Company will continue to carry the derivative on the balance sheet at its fair
value but cease to adjust the hedged liability for changes in fair value. In
a situation in which hedge accounting is discontinued and the derivative
remains outstanding, the Company will carry the derivative at its fair value
on the balance sheet, recognizing changes in the fair value in current-period
earnings.
-10-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Notes and Loans Payable
- --------------------------------
Notes and loans payable consisted of the following:
September 30, March 31, September 30,
2001 2001 2000
------------ ------------- ------------
(Dollars in Millions)
Commercial paper, net.................... $ 2,997 $ 4,407 $ 3,292
Extendible commercial notes, net......... - - 195
------- ------- -------
Other senior debt, due in the fiscal
years ending:
2001.................................. - - 4,658
2002.................................. 3,725 4,620 2,975
2003.................................. 3,964 3,080 3,434
2004.................................. 5,523 5,182 3,623
2005.................................. 2,997 1,839 851
2006.................................. 1,755 1,228 78
Thereafter............................ 3,166 1,838 1,917
------- ------- -------
21,130 17,787 17,536
Unamortized premium...................... - - 75
------- ------- -------
Total other senior debt............... 21,130 17,787 17,611
------- ------- -------
Notes and loans payable............ $24,127 $22,194 $21,098
======= ======= =======
Notes and loans payable at September 30, 2001 and March 31, 2001, reflect the
adjustments required under SFAS 133 for derivatives and debt instruments which
qualify for hedge treatment as discussed in Note 4 - Derivatives and Hedging
Activities. Prior period amounts have not been restated. The notional amount
of notes and loans payable was $24.6 billion at September 30, 2001.
Short-term borrowings include commercial paper, extendible commercial notes
and certain medium-term notes ("MTNs"). The weighted average remaining term
and weighted average interest rate of commercial paper was 21 days and 3.01%,
respectively, at September 30, 2001. At September 30, 2001, TMCC had no
extendible commercial notes. Short-term MTNs with original terms of one year
or less, included in other senior debt, were $2,817 million at
September 30, 2001. The weighted average interest rate on these short-term
MTNs was 7.56% at September 30, 2001, excluding the effect of interest rate
swap agreements.
Other senior debt includes certain MTNs, euro bonds and domestic bonds. The
weighted average interest rate on other senior debt was 4.80% at
September 30, 2001, including the effect of interest rate swap agreements.
This rate has been calculated using rates in effect at September 30, 2001,
some of which are floating rates that reset periodically. Less than one
percent of other senior debt at September 30, 2001 had interest rates,
including the effect of interest rate swap agreements, that were fixed for a
period of more than one year.
Approximately 16% of other senior debt at September 30, 2001 had floating
interest rates that were covered by option-based products. The weighted
average strike rate on these option-based products was 4.91% at
September 30, 2001. TMCC manages interest rate risk through continuous
adjustment of the mix of fixed and floating rated debt using interest rate
swap agreements and option-based products.
-11-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Notes and Loans Payable (Continued)
- --------------------------------
Included in notes and loans payable at September 30, 2001 were unsecured notes
denominated in various foreign currencies; concurrent with the issuance of
these notes, TMCC entered into cross currency interest rate swap agreements to
convert these obligations at maturity into U.S. dollar obligations which in
aggregate total a principal amount of $8.5 billion.
Note 6 - Sale of Retail Receivables and Valuation of Residual Interest
- ----------------------------------------------------------------------
In September 2001, TMCC securitized retail finance receivables totaling $1.5
billion. This securitization is treated as a sale for legal purposes, but is
treated as a secured borrowing for accounting purposes since the
securitization trust is not a qualifying special purpose entity. The
receivables and debt issued will remain on the balance sheet pursuant to
Financial Accounting Standards Board Statement No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities"
("SFAS 140"), as amended. This accounting method is referred to as the
"portfolio method".
Under the portfolio method, the finance receivables transferred to the
securitization trust and held as collateral for the notes issued to investors
are classified as "Finance receivables, net - securitized". The average
annual percentage rate for these receivables is approximately 8.55%. The
notes issued to investors in the securitization trust are classified as "Notes
payable related to securitized finance receivables structured as
collateralized borrowings".
Included in investment and other income for the six months ended
September 30, 2001 is a net pretax gain of $29.5 million resulting from the
sale of retail finance receivables in May 2001. The gain on sale recorded
depends on the carrying amount of the assets at the time of the sale. The
carrying amount is allocated between the assets sold and the retained
interests based on their relative fair values at the date of the sale. The
fair value of retained interests was estimated by discounting expected cash
flows using management's best estimates of key assumptions.
TMCC performs a periodic review of the fair market value of assets retained in
the sale of retail receivables and interests in lease finance receivables.
The fair market value of these retained assets is impacted by management's and
the market's expectations as to future losses on vehicle disposition, credit
losses and prepayment rates. In June 2001, the Company experienced a
deterioration in return rates and loss per unit upon disposition. This
experience, combined with revised forecasts for future return rates and loss
per unit, resulted in a downward revision to the vehicle disposition
assumptions. The assumption for expected residual value losses for the lease
securitizations was 4.9%-7.6% at March 31, 2001 and was revised to 7.1%-7.9%
at June 30, 2001. This decline was primarily related to the performance of
leases originated prior to model year 1999 and scheduled to terminate over the
next 6 months. As a result of the decline, in the first quarter TMCC
recognized losses due to the permanent impairment of assets retained in the
sale of interests in lease finance receivables totaling $47 million as
required by EITF 99-20, which was adopted in the first quarter of fiscal year
2002.
-12-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Related Party Transactions
- -----------------------------------
During fiscal 2000, TMCC had an arrangement to borrow from and invest funds
with Toyota Motor Sales, U.S.A., Inc. ("TMS") at short-term market rates.
This arrangement was terminated on October 1, 2000, when 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 Toyota
Motor Corporation ("TMC"). No funds were borrowed from or invested with TMS
under this arrangement during the six months ended September 30, 2001.
However, TMS made a short term $282 million loan to TMCC at an interest rate
of 3.53% in September 2001 to assist TMCC in its efforts to assure continuing
liquidity during the financial market dislocations that occurred in the
aftermath of the events of September 11, 2001. The loan and interest incurred
was repaid in full prior to September 30, 2001.
In connection with the creation of TFSC and the transfer of ownership of TMCC
from TMS to TFSC, the Operating Agreement with TMS and Toyota Motor
Manufacturing North America Inc. ("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. Net charges reimbursed by TMCC to TFSC totaled $3 million
and $6 million for the quarter and six months ended September 30, 2001,
respectively.
TMS allocates charges for certain technological and administrative services
provided to TMCC. During fiscal 2001, TMS and TMCC entered into a Shared
Services Agreement covering the services TMS continues to provide after the
ownership of TMCC was transferred to TFSA. Net charges reimbursed by TMCC to
TMS totaled $15.9 million and $6.2 million for the quarters ended
September 30, 2001 and September 30, 2000, respectively, and $26.7 million and
$12.5 million for the six months ended September 30, 2001 and
September 30, 2000, respectively.
TMCC has extended a $42.5 million uncommitted revolving line of credit to
iStarSystems, Inc., a corporation owned 80% by TMS. The loan bears interest at
a floating rate of interest of LIBOR plus 3.75% per annum and is guaranteed by
TMS. As of September 30, 2001, $36.8 million was outstanding under the line of
credit and the rate was 7.21% per annum.
-13-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Commitments and Contingent Liabilities
- -----------------------------------------------
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
$60 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, January 2030, February 2031 and
September 2031. The bonds were issued in connection with the Indiana
manufacturing facility of an affiliate.
TMCC has guaranteed $100 million of the debt of Toyota Credit Argentina,
S.A. ("TCA"). As of September 30, 2001, $45 million remained uncommitted.
TMCC has guaranteed $200 million of the debt of Banco Toyota do Brasil, S.A.
("BTB"). As of September 30, 2001, $170 million remained uncommitted.
-14-
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Segment Information
- ----------------------------
Financial results for the Company's operating segments are summarized below:
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ------------------
2001 2000 2001 2000
------- ------- ------- -------
(Dollars in Millions)
Assets:
Financing operations.............. $31,516 $27,525 $31,516 $27,525
Insurance operations.............. 699 863 699 863
Eliminations/reclassifications.... (136) (352) (136) (352)
-------- ------- ------- -------
Total assets.................... $32,079 $28,036 $32,079 $28,036
======== ======= ======= =======
Gross revenues:
Financing operations.............. $ 906 $ 890 $ 1,838 $ 1,766
Insurance operations.............. 48 46 95 88
------- ------- ------- -------
Total gross revenues............ $ 954 $ 936 $ 1,933 $ 1,854
======= ======= ======= =======
Net income:
Financing operations.............. $ 9 $ 15 $ 50 $ 29
Insurance operations.............. 12 9 21 18
------- ------- ------- -------
Total net income................ $ 21 $ 24 $ 71 $ 47
======= ======= ======= =======
Note 10 - Subsequent Events
- ---------------------------
On October 26, 2001, TMCC committed to guarantee an additional $10 million of
TCA debt, which is an increase from the $55 million committed as of
September 30, 2001. The total amount TMCC has guaranteed for TCA remains
unchanged at $100 million.
-15-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Income
- ----------
The following table summarizes Toyota Motor Credit Corporation's ("TMCC's")
net income by operating segment for the three and six months ended
September 30, 2001 and 2000:
Three Months Ended Six Months Ended
September 30, September 30,
------------------ -----------------
2001 2000 2001 2000
---- ---- ---- ----
(Dollars in Millions)
Net income:
Financing operations.............. $ 9 $ 15 $ 50 $ 29
Insurance operations.............. 12 9 21 18
---- ---- ---- ----
Total net income............... $ 21 $ 24 $ 71 $ 47
==== ==== ==== ====
Net income from financing operations decreased $6 million, or 40%, for the
quarter ended September 30, 2001, as compared with the same period in fiscal
2000 primarily due to the unfavorable fair value adjustment related to the
Statement of Financial Statement Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"), which is reported
as SFAS 133 fair value adjustments in the Consolidated Statement of Income,
increased termination losses and increased operating and administrative
expenses, partially offset by lower interest expense and increased finance
revenues.
Net income from financing operations increased $21 million, or 72%, for the
six months ended September 30, 2001, as compared with the same period in
fiscal 2000 primarily due to lower interest expense, higher investment income,
increased finance revenues, and lower impairment on assets retained in the
sale of interests in lease finance receivables, partially offset by higher
depreciation expense, unfavorable fair value adjustment related to SFAS 133,
and increased termination losses. In addition, during fiscal 2000, Toyota
Motor Sales, U.S.A., Inc. ("TMS") provided support to TMCC for certain vehicle
disposition losses. The TMS support amount included in the Consolidated
Statement of Income related to this arrangement totaled $35 million for the
six months ended September 30, 2000. TMCC did not receive any support for
vehicle disposition losses for the six months ended September 30, 2001.
Net income from insurance operations increased $3 million, or 33%, and $3
million, or 17%, for the quarter and six months ended September 30, 2001,
respectively, as compared with the same periods in fiscal 2000 primarily due
to increased insurance premiums earned and decreased loss adjustment expenses,
partially offset by increased provision for income taxes.
-16-
Earning Assets
- --------------
The composition of TMCC's net earning assets (which excludes receivables sold
through securitization transactions that qualify as a sale for legal and
accounting purposes, but includes receivables sold through securitization
transactions that qualify as a sale for legal but not accounting purposes,
under the Financial Accounting Standards Board Statement No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities"), as of the balance sheet dates reported herein and TMCC's vehicle
lease and retail contract volume and finance penetration for the six months
ended September 30, 2001 and 2000 are summarized below:
September 30, March 31, September 30,
2001 2001 2000
------------- ------------- -------------
(Dollars in Millions)
Vehicle lease
Investment in operating leases, net.... $ 6,898 $ 6,994 $ 7,580
Finance leases, net.................... 6,776 6,432 5,504
------- ------- -------
Total vehicle leases.................... 13,674 13,426 13,084
Vehicle retail finance receivables, net. 11,165 9,034 10,235
Vehicle wholesale and other financing... 3,950 4,392 3,043
Allowance for credit losses............. (248) (227) (230)
------- ------- -------
Total net earning assets................ $28,541 $26,625 $26,132
======= ======= =======
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ----------------
2001 2000 2001 2000
------- ------- ------- -------
Total contract volume:
Vehicle lease........................ 49,000 57,000 106,000 113,000
Vehicle retail....................... 158,000 119,000 306,000 223,000
------- ------- ------- -------
Total................................... 207,000 176,000 412,000 336,000
======= ======= ======= =======
TMS sponsored contract volume:
Vehicle lease........................ 11,000 13,000 23,000 24,000
Vehicle retail....................... 29,000 15,000 60,000 26,000
------- ------- ------- -------
Total................................... 40,000 28,000 83,000 50,000
======= ======= ======= =======
Finance penetration (excluding fleet):
Vehicle lease........................ 11.6% 13.5% 12.5% 13.7%
Vehicle retail....................... 24.5% 18.8% 23.8% 17.9%
----- ----- ----- -----
Total................................... 36.1% 32.3% 36.3% 31.6%
===== ===== ===== =====
-17-
TMCC's net earning assets increased to $28.5 billion at September 30, 2001
from $26.6 billion at March 31, 2001 and $26.1 billion at September 30, 2000.
Asset growth from March 31, 2001 reflects primarily higher lease and retail
earning assets, partially offset by a decline in wholesale earning assets.
Asset growth from September 30, 2000 reflects higher lease, retail and
wholesale earning assets. The increase in lease earning assets from
March 31, 2001 and September 30, 2000 was primarily due to origination volume
which has exceeded liquidations. The increase in retail earning assets from
March 31, 2001 and September 30, 2000 was primarily due to higher retail
contract volume. Wholesale earning assets decreased from March 31, 2001 due
to a slight decrease in the number of wholesale units financed. Wholesale
earning assets increased from September 30, 2000 primarily due to an increase
in the number of dealers receiving wholesale financing and an increase in
wholesale units financed. The allowance for credit losses increased from
March 31, 2001 and September 30, 2000, reflecting asset growth and is deemed
adequate to cover probable losses based on current and historical credit loss
experience, portfolio composition and other factors.
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. 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 purchase of
residual value insurance on leases acquired by the Titling Trust before
June 2001 changed the composition of the Company's earning assets resulting in
an increasing mix of finance receivables relative to operating lease assets
due to the classification differences described above. However, beginning
June 2001, the purchasing of residual value insurance on lease contracts was
terminated. As a result, the future composition of the Company's earning
assets will change as more leases acquired by the Titling Trust will be
classified as operating leases.
TMCC's lease contract volume decreased slightly during the quarter and six
months ended September 30, 2001, as compared with the same periods in fiscal
2000, as demand for financing has shifted from leasing to retail loans.
TMCC's retail contract volume increased during the quarter and six months
ended September 30, 2001, as compared with the same periods in fiscal 2000,
reflecting higher levels of programs sponsored by TMS and strong sales of
Toyota and Lexus vehicles.
-18-
Net Financing Revenues
- ----------------------
TMCC's net financing revenues increased $9 million, or 6%, and $30 million, or
9%, for the quarter and six months ended September 30, 2001, respectively, as
compared with the same periods in fiscal 2000 primarily due to lower interest
expense and higher leasing and retail revenues on higher earning assets,
partially offset by unfavorable fair value adjustments related to SFAS 133 and
higher depreciation on leases.
Depreciation on Leases
- ----------------------
The following table sets forth the items included in TMCC's depreciation on
leases for the three and six months ended September 30, 2001 and 2000:
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ----------------
2001 2000 2001 2000
---- ---- ---- ----
(Dollars in Millions)
Straight-line depreciation on operating leases.. $293 $311 $587 $629
Provision for residual value losses............. 87 57 167 96
TMS support for certain vehicle disposition
losses....................................... - - - (35)
---- ---- ---- ----
Total depreciation on leases................. $380 $368 $754 $690
==== ==== ==== ====
Straight-line depreciation expense decreased $18 million, or 6%, and $42
million, or 7%, for the quarter and six months ended September 30, 2001,
respectively, as compared with the same periods in fiscal 2000 corresponding
with a decline in average operating lease assets. As discussed earlier, the
purchase of residual value insurance for leases acquired by the Titling Trust
before June 2001 increased the ratio of lease finance receivables relative to
operating lease assets, which results in reduced operating lease revenues and
depreciation on operating leases.
TMCC is subject to residual value risk in connection with its lease portfolio.
TMCC's residual value exposure is a function of the number of off-lease
vehicles returned for disposition and any shortfall between the net
disposition proceeds and the estimated unguaranteed residual values on
returned vehicles. If the market value of a leased vehicle at contract
termination is less than its contract residual value, the vehicle is more
likely to be returned to TMCC. A higher rate of vehicle returns exposes TMCC
to a higher risk of aggregate losses.
Total unguaranteed residual values related to TMCC's vehicle lease portfolio
remained unchanged at $6.9 billion at September 30, 2001 and March 31, 2001.
TMCC maintains an allowance for estimated losses on lease vehicles returned to
the Company for disposition at lease termination. The level of allowance
required to cover future vehicle disposition losses is based upon projected
vehicle return rates and projected residual value losses derived from market
information on used vehicle sales, historical factors, including lease return
trends, and general economic factors. The provision for residual value losses
reflects management's estimate that current reserve levels are considered
adequate to cover expected losses at vehicle disposition as of
September 30, 2001.
-19-
Losses at vehicle disposition increased $17 million and $47 million for the
quarter and six months ended September 30, 2001, respectively, as compared
with the same periods in fiscal 2000, primarily due to a larger supply of
vehicles coming off-lease and higher off-lease vehicle return rates. As a
result of these factors, the provision for residual value losses was
increased. The Company has taken action to reduce vehicle disposition losses
by developing strategies to increase dealer and lessee purchases of off-lease
vehicles, expanding marketing of off-lease vehicles through the internet and
maximizing proceeds on vehicles sold through auction. In addition, TMCC
implemented a new residual value setting policy beginning with 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 model 1999 Toyota vehicles
will begin to terminate during the third quarter of fiscal year 2002.
The number of returned leased vehicles sold by TMCC during a specified period
as a percentage of the number of lease contracts that as of their origination
dates were scheduled to terminate ("full term return ratio") was 51% for the
six months ended September 30, 2001 as compared to 49% for the same period in
fiscal 2000. TMCC believes that the impact of competitive new vehicle pricing
for core Toyota and Lexus models, industry-wide record levels of incentives on
new vehicles, a large supply of late model off-lease vehicles, and increased
vehicle return rates have put downward pressure on used car prices. The
Company expects that these factors will be compounded by auto manufacturers'
responding to the events of September 11, 2001 with additional incentives.
The Company also expects that these incentives will cause an increased supply
of used cars to be returned to dealers in the form of trade-ins. Even though
the magnitude of these factors cannot be quantified at this time, management
will assess any impact as more information becomes available.
Return rates and losses may also be affected by the amount and types of
accessories or installed optional equipment included in leased vehicles.
Although vehicle loss rates are typically the result of a combination of
factors, to the extent certain types of optional equipment depreciate more
quickly than the value of the base vehicle, leased vehicles having a greater
portion of their manufacturer's suggested retail price attributable to such
optional equipment will experience relatively higher levels of loss.
As a result of the factors discussed above, TMCC expects increased losses at
vehicle disposition to continue through fiscal 2002. Even though the
magnitude of these factors cannot be quantified, management believes the
allowances for credit losses are considered adequate to cover expected credit
losses as of September 30, 2001.
TMCC's lease portfolio includes contracts with original terms ranging from 7
to 60 months; the average original contract term in TMCC's lease portfolio was
44 months and 42 months at September 30, 2001 and 2000, respectively.
-20-
Interest Expense
- ----------------
Interest expense decreased $80 million, or 23%, and $131 million, or 19%,
during the quarter and six months ended September 30, 2001, respectively, as
compared with the same periods in fiscal 2000 primarily due to a decrease in
the average cost of borrowings. The weighted average cost of borrowings was
4.80% and 6.49% for the six months ended September 30, 2001 and 2000,
respectively.
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. Insurance premiums earned and
contract revenues recognized from insurance operations increased $5 million
and $10 million during the quarter ended and six months ended September 30,
2001, respectively, as compared with the same periods in 2000 primarily due to
increased contract volume.
Investment and Other Income
- ---------------------------
The following table summarizes TMCC's investment and other income for the
three and six months ended September 30, 2001 and 2000:
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ----------------
2001 2000 2001 2000
---- ---- ---- ----
(Dollars in Millions)
Investment income............... $ 25 $ 29 $ 54 $ 37
Servicing fee income............ 8 8 18 17
Gains on assets sold............ - - 25 5
Loss on repurchases............. (1) - - -
---- ---- ---- ----
Investment and other income.. $ 32 $ 37 $ 97 $ 59
==== ==== ==== ====
Investment income decreased $4 million, or 14%, during the quarter ended
September 30, 2001, as compared with the same period in fiscal 2000, primarily
due to lower realized gains on fixed income investments.
Investment income increased $17 million, or 46%, during the six months ended
September 30, 2001, as compared with the same period in fiscal 2000, primarily
due to the higher earning base from the retention of Class A-1 notes on
securitized finance receivables.
-21-
Gains on assets sold increased $20 million, or 400%, for the six months ended
September 30, 2001, as compared with the same period in fiscal 2000, due to a
greater spread between the annual percentage rate on receivables sold and the
costs of funds on securities issued. 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.
Loss on Asset Impairment
- ---------------------------
TMCC performs a periodic review of the fair market value of assets retained in
the sale of retail receivables and interests in lease finance receivables.
The fair market value of these retained assets is impacted by management's and
the market's expectations as to future losses on vehicle disposition, credit
losses and prepayment rates. In June 2001, the Company experienced a
deterioration in return rates and loss per unit upon disposition. This
experience, combined with revised forecasts for future return rates and loss
per unit, resulted in a downward revision to the vehicle disposition
assumptions. The assumption for expected residual value losses for the lease
securitizations was 4.9%-7.6% at March 31, 2001 and was revised to 7.1%-7.9%
at June 30, 2001. This decline was primarily related to the performance of
leases originated prior to model year 1999 and scheduled to terminate over the
next 6 months. As a result of the decline, in the first quarter TMCC
recognized losses due to the permanent impairment of assets retained in the
sale of interests in lease finance receivables totaling $47 million as
required by EITF 99-20.
Operating and Administrative Expenses
- -------------------------------------
Operating and administrative expenses increased $26 million, or 25%, and
$36 million, or 17%, for the quarter and six months ended September 30, 2001,
respectively, as compared with the same periods in fiscal 2000 reflecting
expenses associated with technology-related projects, the restructuring of
TMCC's field operations, as well as costs to support TMCC's growing customer
base.
Included in operating and administrative expenses are charges allocated by TMS
for certain technological and administrative services provided to TMCC. Net
charges reimbursed by TMCC to TMS totaled $26.7 million and $12.5 million
during the six months ended September 30, 2001 and 2000, respectively.
A Credit Support Fee Agreement entered into between TMCC and Toyota Financial
Services Corporation ("TFSC") provides that TMCC will pay to TFSC a semi-
annual fee equal to 0.05% of the weighted average outstanding amount of TMCC's
securities entitled to credit support. Credit support fees included in
operating and administrative expenses for the quarter and six months ended
September 30, 2001 were $3 million and $6 million, respectively, and are
estimated to be $12 million for fiscal 2002.
-22-
Operating and administrative expenses are also expected to increase during
fiscal 2002 through 2003 as a result of the costs incurred in connection with
the restructuring of TMCC's field operations. The branch offices of TMCC will
be converted to serve only dealer business which includes the purchasing of
contracts from dealers, financing inventories, loans to dealers for business
acquisitions, facilities refurbishment, real estate purchases and working
capital requirements, as well as consulting on finance and insurance
operations. The other functions that the branch offices currently cover, such
as customer service, collections, lease termination and administrative
functions for retail and lease contracts, will be handled by three regional
customer service centers. All three regional customer service centers will be
established during fiscal 2002 with the conversion of activities expected to
be completed in fiscal 2003. Restructuring charges and costs recognized
during the quarter and six months ended September 30, 2001 were $7 million and
$9 million, respectively. At March 31, 2001, restructuring charges and costs
to be recognized during fiscal 2002 were estimated to be $31 million. This
estimate has now been revised to $36 million at September 30, 2001 to reflect
costs that will be incurred earlier than initially anticipated; the estimated
total cost of the field organization restructure has not changed. Additional
restructuring charges and costs are expected through fiscal 2003. Although
management believes that the impact of the restructuring has been accurately
factored into the provision for credit losses, in the process of
restructuring, TMCC may experience a higher than expected increase during
fiscal 2002 through 2003 in delinquency rates and charge off rates.
Provision for Credit Losses and Delinquency
- -------------------------------------------
TMCC's provision for credit losses increased $5 million, or 11%, and $26
million, or 35%, for the quarter and six months ended September 30, 2001,
respectively, as compared with the same periods in fiscal 2000, reflecting
growth in earning assets and increased credit losses. 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, 2001.
TMCC recently completed the national launch of an expanded tiered pricing
program for both retail and lease 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. Implementation
of these expanded programs will increase contract yields and credit losses in
connection with purchases of higher risk contracts.
-23-
The change in the allowance for credit losses included in finance receivables,
net and finance receivables, net - securitized, excluding net losses on
receivables sold subject to limited recourse provisions, for the three and six
months ended September 30, 2001 and 2000, was as follows:
Three Months Ended Six Months Ended
September 30, September 30,
------------------ ----------------
2001 2000 2001 2000
------ ------ ------ ------
(Dollars in Millions)
Allowance for credit losses at
beginning of period........... $ 231 $ 211 $ 227 $ 214
Additions to the allowance...... 51 46 101 75
Charge-offs..................... (39) (32) (79) (59)
Recoveries...................... 5 5 10 10
Other adjustments............... - - (11) (10)
------ ------ ------ ------
Allowance for credit losses at
end of period................. $ 248 $ 230 $ 248 $ 230
====== ====== ====== ======
Annualized Credit Losses as a %
of average earning assets.... 0.50% 0.42% 0.51% 0.38%
The increase in the allowance for credit losses as a percent of average earning
assets for the quarter and six months ended September 30, 2001 as compared with
the same periods in fiscal 2000 is due in part to the implementation of the
expanded tiered pricing programs.
-24-
Allowance for credit losses as a percent of gross earning assets and two
months and over contractual delinquency as of the balance sheet dates reported
herein is as follows:
September 30, March 31, September 30,
2001 2001 2000
------------ ------------ ------------
(Dollars in Millions)
Allowance for credit losses as
a percent of gross earning
assets....................... 0.86% 0.85% 0.87%
Aggregate balances at end of
period for lease rentals and
installments 60 or more days
past due..................... $74 $56 $54
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.................. 0.26% 0.21% 0.20%
Delinquency and charge-off ratios typically fluctuate over time as a portfolio
matures. Accordingly, the delinquency and charge-off data above is not
necessarily indicative of delinquency and charge-off experience that could be
expected for a portfolio with a different level of seasoning.
-25-
Derivatives and Hedging Activities
- ----------------------------------
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133") requires companies
to record derivatives on the balance sheet as assets and liabilities, measured
at fair value. Derivative assets and liabilities include interest rate swaps,
indexed note swap agreements, cross currency interest rate swap agreements and
option-based products. The accounting for the gain or loss due to changes in
fair value of the hedged item depends on whether the relationship between the
hedged item and the derivative instrument qualifies for hedge treatment. If
the relationship between the hedged item and the derivative instrument does
not qualify as a hedge, the gains or losses are reported in earnings when they
occur. However, if the relationship between the hedged item and the
derivative instrument qualifies as a hedge, the accounting varies based on the
type of risk being hedged. Additional information concerning the SFAS 133
requirements is disclosed in Note 4 - Derivatives and Hedging Activities of
the Notes to Consolidated Financial Statements. Additional information
concerning the Company's derivative and hedging activities is set forth below
in "Item 3. Quantitative and Qualitative Disclosures About Market Risk."
For the six months ended September 30, 2001, the Company recognized a loss of
$68 million (reported as SFAS 133 fair value adjustments in the Consolidated
Statement of Income). The net adjustment reflects a $94 million decrease
primarily in the fair market value of TMCC's portfolio of option-based
products and certain interest rate swaps, partially offset by a net gain of
$26 million related to the ineffective portion of TMCC's fair-value hedges.
The decrease in the fair market value of TMCC's option-based products as well
as certain interest rate swaps are primarily due to lower market interest
rates. Various derivative instruments, such as option-based products and
certain interest rate swaps which hedge interest rate risk from an economic
perspective, and which the Company is unable or has elected not to apply hedge
accounting, is discussed in Non-Hedging Activities below. For fair value
hedging relationships, all components of each derivative's gain or loss were
included in the assessment of hedge effectiveness.
-26-
Liquidity and Capital Resources
- -------------------------------
The Company requires, in the normal course of business, substantial funding to
support the level of its earning assets. Significant reliance is placed on
the Company's ability to obtain debt funding in the capital markets in
addition to funding provided by earning asset liquidations and cash provided
by operating activities as well as transactions through the Company's asset-
backed securitization programs. Debt issuances have generally been in the
form of commercial paper, domestic and Euro medium-term notes ("MTNs") and
bonds.
Commercial paper issuances are used to meet short-term funding needs.
Commercial paper outstanding under TMCC's commercial paper program ranged from
approximately $3.0 billion to $5.4 billion during the six months ended
September 30, 2001, with an average outstanding balance of $4.1 billion.
For additional liquidity purposes, TMCC maintains syndicated bank credit
facilities with certain banks which aggregated $3.5 billion at
September 30, 2001. No loans were outstanding under any of these bank credit
facilities during the six months ended September 30, 2001. TMCC also
maintains uncommitted, unsecured lines of credit with banks totaling $85
million. At September 30, 2001, TMCC had issued approximately $0.6 million in
letters of credit in connection with these uncommitted, unsecured lines of
credit.
Long-term funding requirements are met through the issuance of a variety of
debt securities underwritten in both the United States and international
capital markets. Domestic and Euro MTNs and bonds have provided TMCC with
significant sources of funding. During the first six months of fiscal 2002,
TMCC issued approximately $4.5 billion of domestic and Euro MTNs and bonds all
of which had original maturities of one month or more.
The original maturities of all MTNs and bonds outstanding at
September 30, 2001 ranged from one month to ten years. As of
September 30, 2001, TMCC had total MTNs and bonds outstanding of $21.1
billion, of which $7.4 billion was denominated in foreign currencies.
TMCC anticipates continued use of MTNs and bonds in both the United States and
international capital markets. The Company maintains a shelf registration
with the SEC providing for the issuance of MTNs and other debt securities. At
October 31, 2001 approximately $3.2 billion was available for issuance under
this registration statement. The maximum aggregate principal amount
authorized to be outstanding at any time under TMCC's Euro MTN program is
$16 billion. Approximately $4.4 billion was available for issuance under the
Euro MTN program as of October 31, 2001. The United States and Euro MTN
programs may be expanded from time to time to allow for the continued use of
these sources of funding. In addition, TMCC may issue bonds in the domestic
and international capital market that are not issued under its MTN programs.
Additionally, TMCC uses its asset-backed securitization programs to generate
funds for investment in earning assets. TMCC maintains a shelf registration
statement with the SEC relating to the issuance of asset-backed notes secured
by, and certificates representing interests in, retail receivables. During
the six months ended September 30, 2001, TMCC sold retail receivables totaling
$3.0 billion in connection with securities issued under the shelf registration
statement. As of October 31, 2001, $0.7 billion remained available for
issuance under the registration statement.
-27-
TMCC's ratio of earnings to fixed charges was 1.21 for the six months ended
September 30, 2001 as compared to 1.12 for the six months ended September 30,
2000. The increase in the ratio is due to several factors including higher
investment income and lower interest expense.
In response to the events of September 11, 2001, the Company took steps to
assure continued liquidity. As a result, cash and cash equivalents increased
to $1.2 billion at September 30, 2001 from $294 million at March 31, 2001.
Cash flows provided by operating, investing and financing activities have been
used primarily to support earning asset growth. During the six months ended
September 30, 2001, cash used to purchase additional finance receivables and
investments in operating leases, totaling $18.0 billion, was partially
provided by the liquidation and sale of earning assets totaling $15.3 billion.
Investing activities resulted in a net cash use of $2.6 billion during the six
months ended September 30, 2001, as the purchase of additional earning assets
exceeded cash provided by the liquidation and sale of earning assets.
Investing activities were also supported by net cash provided by operating and
financing activities totaling $1.0 billion and $2.5 billion, respectively,
during the six months ended September 30, 2001. The Company believes that
cash provided by operating and financing activities as well as access to
domestic and international capital markets, the issuance of commercial paper,
and asset-backed securitization transactions will provide sufficient liquidity
to meet its future funding requirements.
-28-
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
This report contains "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 include estimates,
projections and statements of the Company's beliefs concerning future events,
business plans, objectives, expected operating results, and the assumptions
upon which those statements are based. Forward looking statements include,
without limitation, any statement that may predict, forecast, indicate or
imply future results, performance or achievements, and are typically
identified with words such as "believe," "anticipate," "expect," "estimate,"
"project," "should," "intend," "will," "may" or words or phrases of similar
meaning. The Company cautions that the forward looking statements involve
known and unknown risks, uncertainties and other important factors that may
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; the effects
of the September 11, 2001 terrorist attacks; a decline in the market
acceptability of leasing; the effect of competitive pricing on interest
margins; changes in pricing due to the appreciation of the Japanese yen
against the United States dollar; the effect of governmental actions; the
effect of competitive pressures on the used car market and residual values and
the continuation of the other factors causing an increase in vehicle returns
and disposition losses; the continuation of, and if continued, the level and
type of special programs offered by TMS; the ability of the Company to
successfully access the United States and international capital markets; the
effects of any rating agency actions; increases in market interest rates; the
monetary policies exercised by the European Central Bank and other monetary
authorities; increased costs associated with the Company's debt funding or
restructuring 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. The risks included here are not exhaustive. New
risk factors emerge from time to time and it is not possible for the Company
to predict all such risk factors, nor to assess the impact such risk factors
might have on the Company's business or the extent to which any factor or
combination of factors may cause actual results to differ materially from those
contained in any forward looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward looking
statements as a prediction of actual results. The Company will not update the
forward looking statements to reflect actual results or changes in the factors
affecting the forward looking statements.
-29-
New Accounting Standards
In July 2000, the Emerging Issues Task Force reached consensus on Issue
No. 99-20 "Recognition of Interest Income and Impairment on Purchased and
Retained Beneficial Interests in Securitized Financial Assets." The Task
Force reached a consensus that the holder should recognize the excess of all
cash flows attributable to the beneficial interest estimated at the
acquisition/transaction date (the "transaction date") over the initial
investment (the accretable yield) as interest income over the life of the
beneficial interest using the effective yield method. If the holder of the
beneficial interest is the transferor, the initial investment would be the
allocated carrying amount after application of the relative fair value
allocation method required by SFAS 140. The Task Force further reached a
consensus that the holder of a beneficial interest should continue to update
the estimate of cash flows over the life of the beneficial interest. The
consensus in this issue should be applied to the accounting for interest
income and impairment of beneficial interests in securitization transactions
meeting the scope criteria of this issue effective for all fiscal quarters
beginning after March 15, 2001. The Company has adopted Issue 99-20 and it
did not have a significant impact on the Company's financial results except as
disclosed in Note 6 - Sale of Retail Receivables and Valuation of Residual
Interest.
In September 2000, the FASB issued Statement of Financial Accounting Standards
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 140"). This statement replaces
Statement of Accounting Standards 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.
SFAS No. 140 was adopted for the Company's 2001 Transitional Annual Report to
the Securities and Exchange Commission and did not have a significant impact
on the Company's financial results.
In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143"). This
Statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs and it applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. Under SFAS No.
143, a company is required to 1) record an existing legal obligation
associated with the retirement of a tangible long-lived asset as a liability
when incurred and the amount of the liability be initially measured at fair
value, 2) recognize subsequent changes in the liability that result from (a)
the passage of time and (b) revisions in either the timing or amount of
estimated cash flows and 3) upon initially recognizing a liability for an
asset retirement obligation, an entity capitalize the cost by recognizing an
increase in the carrying amount of the related long-lived asset. SFAS No. 143
is effective for financial statements issued for fiscal years beginning after
June 15, 2002, with earlier application encouraged. Management does not
anticipate that the adoption of SFAS No. 143 will have a material impact on
the financial statements.
-30-
In October 2001, the FASB issued Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS No. 144"). The objectives of SFAS 144 are to address significant
issues relating to the implementation of FASB Statement No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("SFAS No. 121") and to develop a single accounting model based
on the framework established in SFAS No. 121 for long-lived assets to be
disposed of by sale whether previously held and used or newly acquired. Even
though SFAS No. 144 supersedes SFAS No. 121, it retains the fundamental
provisions of SFAS No. 121 for (1) the recognition and measurement of the
impairment of long-lived assets to be held and used and (2) the measurement of
long-lived assets to be disposed of by sale. SFAS No. 144 supersedes the
accounting and reporting provisions of Accounting Principles Board No. 30
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" ("APB 30") for segments of a business to be disposed
of. However, SFAS 144 retains APB 30's requirement that entities report
discontinued operations separately from continuing operations and extends that
reporting requirement to "a component of an entity" that either has been
disposed of (by sale, abandonment, or in a distribution to owners) or is
classified as "held for sale". SFAS No. 144 also amends the guidance of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements" ("ARB
51") to eliminate the exception to consolidation for a temporarily controlled
subsidiary. The provisions of SFAS No. 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001 and
interim periods within those fiscal years. Management of the Company
anticipates that the adoption of SFAS No. 144 will not have a significant
effect on the Company's earnings or financial position.
-31-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
TMCC maintains an overall risk management strategy that utilizes a variety of
interest rate and currency derivative financial instruments to mitigate its
economic exposure to fluctuations caused by volatility in interest rate and
currency exchange rates. TMCC does not use any of these instruments for
trading purposes.
Fair-Value Hedges
- -----------------
The Company enters into interest rate swaps, indexed note swap agreements and
cross currency interest rate swap agreements to convert its fixed-rate debt to
variable-rate debt, a portion of which is covered by option-based products.
(Additional information regarding option-based products is set forth below
under "Non-Hedging Activities.").
TMCC uses interest rate swap agreements in managing its exposure to interest
rate fluctuations. Interest rate swap agreements are executed as either 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 uses 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 indices. 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 uses 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 executing 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, 2001 reduced by the
effects of master netting agreements. The credit exposure of TMCC's
derivative financial instruments at September 30, 2001 was $312.5 million on
an aggregate notional amount of $37.4 billion. Additionally, at September 30,
2001, approximately 83% 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, 2001. TMCC has not experienced any counterparty default during the
quarter ended September 30, 2001.
-32-
Non-Hedging Activities
- ----------------------
Option-based products are executed on a portfolio basis and consist primarily
of purchased interest rate cap agreements and interest rate swaps. Option-
based products are agreements which either grant TMCC the right to receive, or
require TMCC to make payments at, specified interest rate levels. Option-
based products are used to hedge interest rate risk from an economic
perspective on TMCC's portfolio.
The Company uses this strategy to moderate its exposure to volatility in
LIBOR. These products are not linked to specific assets and liabilities that
appear on the balance sheet and therefore, do not qualify for hedge
accounting.
Value-at-Risk Methodology
- -------------------------
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 six 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.
-33-
The value-at-risk and the average value-at risk of TMCC's portfolio as of
September 30, 2001 and for the six months ended September 30, 2001, 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 Six Months Ended
September 30, 2001 September 30, 2001
------------------ --------------------
Mean portfolio value..................... $6,289 million $5,172 million
Value-at-risk............................ $66.0 million $106.5 million
Percentage of the mean portfolio value... 1.1% 2.1%
Confidence level......................... 95.0% 95.0%
TMCC's calculated value-at-risk exposure represents an estimate of reasonably
possible net losses that would be recognized on its portfolio of financial
instruments assuming hypothetical movements in future market rates and is not
necessarily indicative of actual results which may occur. It does not
represent the maximum possible loss nor any expected loss that may occur,
since actual future gains and losses will differ from those estimated, based
upon actual fluctuations in market rates, operating exposures, and the timing
thereof, and changes in the composition of TMCC's portfolio of financial
instruments during the year.
A reconciliation of the activity of TMCC's derivative financial instruments
for the six months ended September 30, 2001 and 2000 is as follows:
Six Months Ended September 30,
------------------------------------------------------------
Cross
Currency
Interest Interest Indexed
Rate Swap Rate Swap Option-based Note Swap
Agreements Agreements Products Agreements
------------ ------------ ------------ ------------
2001 2000 2001 2000 2001 2000 2001 2000
---- ---- ---- ---- ---- ---- ---- ----
(Dollars in Billions)
Beginning notional amount....... $8.3 $7.8 $16.9 $19.1 $11.5 $ 8.4 $0.6 $1.5
Add:
New agreements............... 0.6 1.2 9.4 3.6 2.3 4.6 0.2 0.1
Less:
Terminated agreements........ - - - 1.5 8.0 - - -
Expired agreements........... 0.1 0.6 1.3 10.7 2.6 1.3 0.4 0.2
---- ---- ----- ----- ----- ----- ---- ----
Ending notional amount.......... $8.8 $8.4 $25.0 $10.5 $ 3.2 $11.7 $0.4 $1.4
==== ==== ===== ===== ===== ===== ==== ====
-34-
Review by Independent Accountants
With respect to the unaudited consolidated financial information of Toyota
Motor Credit Corporation for the three-month and six-month periods ended
September 30, 2001 and 2000, PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") reported that they have applied limited procedures
in accordance with professional standards for a review of such information.
However, their separate report dated October 19, 2001 appearing herein, states
that they did not audit and they do not express an opinion on that unaudited
consolidated financial information. Accordingly, the degree of reliance on
their report on such information should be restricted in light of the limited
nature of the review procedures applied. PricewaterhouseCoopers is not subject
to the liability provisions of Section 11 of the Securities Act of 1933 for
their report on the unaudited consolidated financial information because that
report is not a "report" or a "part" of the registration statement prepared or
certified by PricewaterhouseCoopers within the meaning of Sections 7 and 11 of
the Act.
-35-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Various legal actions, governmental proceedings and other claims are pending
or may be instituted or asserted in the future against TMCC and its
subsidiaries with respect to matters arising from the ordinary course of
business. Certain of these actions are or purport to be class action suits,
seeking sizeable damages and/or changes in TMCC's business operations,
policies and practices. Certain of these actions are similar to suits which
have been filed against other financial institutions and captive finance
companies. Management and internal and external counsel perform periodic
reviews of pending claims and actions to determine the probability of adverse
verdicts and resulting amounts of liability. The amounts of liability on
pending claims and actions as of September 30, 2001 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 2. CHANGES IN SECURITIES.
There is nothing to report with regard to this item.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There is nothing to report with regard to this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
There is nothing to report with regard to this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits listed on the accompanying Exhibit Index, on page 38,
are filed as part of this report.
(b) Reports on Form 8-K
The following report on Form 8-K was filed by the registrant during
the quarter ended September 30, 2001:
Date of Report Items Reported
----------------- -------------------------------------------
August 24, 2001 Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
-36-
SIGNATURES
Pursuant to the requirements 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.
TOYOTA MOTOR CREDIT CORPORATION
-------------------------------
(Registrant)
Date: November 9, 2001 By /S/ GEORGE E. BORST
-------------------------------
George E. Borst
President and
Chief Executive Officer
(Principal Executive Officer)
Date: November 9, 2001 By /S/ NOBUKAZU TSURUMI
-------------------------------
Nobukazu Tsurumi
Executive Vice President
and Treasurer and Director
(Principal Financial Officer)
-37-
EXHIBIT INDEX
Exhibit Method
Number Description of Filing
- ------- ----------- ---------
12.1 Calculation of Ratio of Earnings to Fixed Charges Filed
Herewith
15.1 Report of Independent Accountants Filed
Herewith
15.2 Letter regarding unaudited interim financial Filed
information Herewith
-38-