Exhibit 99
Earnings Release
Toyota Motor Credit Corporation Reports
Second Quarter Operating Net Income of $82 million
TORRANCE, Calif. October 30, 2002 -- Toyota Motor Credit Corporation
("TMCC"), which is marketed under the brands of Toyota Financial Services
("TFS") and Lexus Financial Services ("LFS"), today announced operating net
income of $82 million for the fiscal second quarter ending September 30,
2002, an increase in operating net income of $19 million (30%) over the
comparable prior year period. For the six months ended September 30, 2002,
operating net income was $177 million, an increase of $73 million (70%)over
the same period in the prior year. The improved operating net income is due
to the combined effect of increased net interest margins, a higher level of
average earning assets and lower lease termination costs. These positive
factors were partially offset by a higher provision for credit losses.
Operating net income, used for internal reporting purposes, excludes the
effect of market value changes on the Company's debt and derivative
portfolios and other adjustments related to the application of Statements of
Financial Accounting Standards 133 and 138 (SFAS 133/138).
TMCC also announced pretax operating income of $129 million for its fiscal
second quarter. This represented an increase of $37 million (40%) over the
comparable prior year period. Pretax operating income for the six months
ended September 30, 2002 was $293 million, an increase of $120 million (69%)
over the same period in the prior fiscal year. Pretax operating income, also
used for internal reporting purposes, represents operating net income before
income taxes.
After giving effect to the SFAS 133/138 mark to market and other adjustments
referenced above, TMCC recorded net income of $4 million and a net loss of
$25 million for the three and the six month periods ending September 30,
2002, respectively. The after tax mark to market adjustment for the three
and six month periods ended September 30, 2002 was a charge to net income of
$78 million and $202 million, respectively, representing an increase of $36
million and $169 million over the comparable periods in the prior year. The
increase in the mark to market adjustments was principally due to the
significant reduction in interest rates during the three and six months ended
September 30, 2002, as compared to the same prior year periods as well as
actions taken by TMCC to protect interest rate margins, including an increase
in TMCC's hedge portfolio and an increase in swap derivative products that do
not qualify for hedge accounting relative to total derivatives. TMCC uses
derivative products as a part of its interest rate risk management program.
The mark to market adjustments on derivatives and certain debt obligations
are determined in accordance with SFAS 133/138. "During this period of
declining interest rates, we have taken the opportunity to strengthen net
interest margin while continuing to manage our exposure to interest rate
risk", said John Stillo, Chief Financial Officer. "While interest rate
movements during the period had a negative accounting impact on derivatives
and certain debt obligations, the resulting positive benefit to our finance
receivables portfolio, is clearly apparent in our improved interest margin."
Finance volume increased to $5.1 billion and $9.6 billion for the three and
six month periods ended September 30, 2002, respectively, representing an
increase of $680 million (16%) and $871 million (10%)over the comparable
period in the prior year. Managed assets grew to $38.2 billion at September
30, 2002 representing an increase of $5.1 billion (15%) from a year earlier.
"We had an excellent second quarter, especially in light of the current
economic climate and the ongoing restructuring of our field operations", said
George Borst, President and CEO. "Based on our first half results, we are
well positioned to achieve record levels in both volume and operating profits
for fiscal 2003."
Annualized net charge-offs totaled .70% for the three months ended September
30, 2002, an increase of 20 bps over the prior year. TMCC also experienced
an increase in contractual delinquency with 60+ day delinquency growing by 34
bps over the comparable prior year period to .72% at September 30, 2002. The
increased delinquency and net charge-off experience is a result of a number
of factors, including the effects of TMCC's field restructuring, which has
temporarily disrupted normal collection activities, and the continuation of
the national economic downturn. In addition, the increased delinquency and
credit losses can be attributed to changes in portfolio quality in connection
with the national tiered pricing program coupled with a general increase in
the average original contract term of retail and lease vehicle contracts.
Longer term contracts historically experience higher credit losses. Under
the national tiered pricing program, the Company generally will acquire
contracts with higher yields to compensate for the potential increase in
credit losses. In the fiscal second quarter, TMCC increased its allowance
for credit losses by $66 million to $417 million, or 1.22% of gross earning
assets.
TFS and LFS are the finance and insurance brands for Toyota and Lexus
respectively in the United States. They primarily offer retail auto
financing and leasing, and wholesale auto financing through Toyota Motor
Credit Corporation and extended service contracts through Toyota Motor
Insurance Services ("TMIS"). TFS\LFS currently employs over 2,600 associates
nationwide, and has managed assets of over $38 billion. It is part of a
worldwide network of comprehensive financial services offered by Toyota
Financial Services Corporation, a wholly-owned subsidiary of Toyota Motor
Corporation.
This news release may contain certain forward-looking statements that are
subject to risks and uncertainties. The factors which may cause future
results to differ materially from expectations are discussed in the Form 10-K
for the year ended March 31, 2002 filed with the Securities and Exchange
Commission. TMCC undertakes no obligation to update or revise any forward-
looking statements.
Toyota Motor Credit Corporation
Financial Highlights (9)
Condensed Financial Information ($ Millions)
- -------------------------------------------
Six Months
Three Months Ended or at % Change Ended or at
------------------------------ Prior -------------------
9/30/02 6/30/02 9/30/01 Year 9/30/02 9/30/01 % Change
-------- -------- -------- -------- -------- -------- ---------
Revenues:
Net Financing Revenues (1) $ 349 $ 335 $ 218 60% $ 684 $ 425 61%
Other Revenues 59 105 72 -18% 164 130 26%
Expenses:
Operating Costs & Other 152 154 147 3% 306 281 9%
Provision for Credit Losses 127 122 51 149% 249 101 147%
-------- -------- -------- -------- -------- --------
Pretax Operating Income (1) $ 129 $ 164 $ 92 40% $ 293 $ 173 69%
======== ======== ======== ======== ======== ========
Operating Net Income (2) $ 82 $ 95 $ 63 30% $ 177 $ 104 70%
======== ======== ======== ======== ======== ========
Net Income/(Loss)(3) $ 4 $ (29) $ 21 -81% $ (25) $ 71 -135%
======== ======== ======== ======== ======== ========
Key Data ($ Millions)
- --------------------
Contract Volume
- ---------------
Retail $ 3,744 3,241 $ 2,918 28% $ 6,985 $ 5,618 24%
Lease 1,308 1,317 1,454 -10% 2,625 3,121 -16%
-------- -------- -------- -------- --------
Total Volume $ 5,052 $ 4,558 $ 4,372 16% $ 9,610 $ 8,739 10%
======== ======== ======== ======== ========
Market Share (4)
- ------------
Retail 35.6% 30.2% 28.6% 33.0% 27.8%
Lease 11.2% 11.6% 13.6% 11.4% 14.6%
---- ---- ---- ---- ----
Total Market Share 46.8% 41.8% 42.2% 44.4% 42.4%
==== ==== ==== ==== ====
Credit Quality
- --------------
60+ Day Contractual
Delinquency (8) 0.72% 0.75% 0.38%
Annualized Credit Loss Ratio 0.70% 0.68% 0.50%
Balance Sheet Information
- -------------------------
Net Earning Assets (5)
Retail $ 15,887 $ 13,703 $ 11,051 44%
Lease 12,986 12,983 13,540 -4%
Wholesale & Other 4,782 4,885 3,950 21%
-------- -------- --------
Total $ 33,655 $ 31,571 $ 28,541 18%
======== ======== ========
Allowance for Credit Losses $ 417 $ 351 $ 248
% of Gross Earning Assets 1.22% 1.10% 0.86%
Total Assets $ 37,254 $ 35,301 $ 32,079 16%
Notes and loans payable (6) $ 30,336 $ 28,471 $ 25,199 20%
Capital Stock $ 915 $ 915 $ 915
Retained Earnings $ 1,795 $ 1,791 $ 1,648 9%
Managed Information
- -------------------
Managed Assets (5) (7)
Retail $ 20,463 $ 19,029 $ 15,388 33%
Lease 12,957 12,968 13,776 -6%
Wholesale & Other 4,782 4,885 3,950 21%
-------- -------- --------
Total $ 38,202 $ 36,882 $ 33,114 15%
======== ======== ========
(1) Represents operating net income as defined in footnote number 2 below before income taxes.
(2) Before the (unfavorable)/favorable SFAS 133/138 mark to market adjustment on the Company's debt and
derivative portfolios and other adjustments related to the application of SFAS 133/138 (net of income tax
effect) of $(78) million,($124) million and ($42)million for the three months ended September 30, 2002,
June 30, 2002 and September 30, 2001, respectively and ($202) million and ($33) million for the six months
ended September 30, 2002 and September 30, 2001, respectively.
(3) After the (unfavorable)/favorable SFAS 133/138 mark to market adjustment on the Company's debt and
derivative portfolios and other adjustments related to the application of SFAS 133/138 (net of income tax
effect) of $(78) million, $(124) million and ($42) million for the three months ended September 30, 2002,
June 30, 2002, and September 30, 2001, respectively and ($202) million and ($33) million for the six months
ended September 30, 2002 and September 30, 2001, respectively.
(4) Market share represents penetration of Toyota and Lexus vehicle financed sales to consumers, excluding
sales of the Southeast Toyota distributor.
(5) Net of allowance for credit losses.
(6) Notes and Loans Payable at September 30, 2002 includes notes payable related to a securitization of finance
receivables accounted for as on balance sheet collateralized borrowings.
(7) Includes securitized retail and lease assets.
(8) 60+ delinquency for September 30, 2001 was previously reported as .26%.
(9) All prior periods have been conformed to current period presentation.