<PAGE>
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 December 31, 1993
-----------------
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
- ---------------------------------------------------------------------------
(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
- ---------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 787-1310
-----------------------
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 January 31, 1994, the number of outstanding shares of capital
stock, par value $10,000 per share, of the registrant was 68,000, all of which
shares were held by Toyota Motor Sales, U.S.A., Inc.
Exhibit Index is on page 17
Page 1 of 18
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1993 1993 1992
------------ ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
------
Cash and cash equivalents................. $ 83 $ 574 $ 53
Investments in marketable securities...... 110 138 123
Finance receivables, net.................. 7,468 7,206 7,368
Investments in operating leases, net...... 3,501 3,050 1,963
Other receivables......................... 76 105 71
Deferred charges.......................... 40 44 58
Other assets.............................. 45 42 46
------- ------- ------
Total Assets..................... $11,323 $11,159 $9,682
======= ======= ======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Notes and loans payable................... $ 8,848 $ 8,833 $7,703
Accrued interest.......................... 133 148 125
Accounts payable and accrued expenses..... 654 560 367
Unearned insurance premiums............... 72 74 96
Amounts due dealers and distributors...... 31 34 40
Payable to Parent......................... 46 48 24
Income taxes payable...................... 22 17 24
Deferred income taxes..................... 304 278 309
------- ------- ------
Total liabilities................... 10,110 9,992 8,688
------- ------- ------
Shareholder's Equity:
Capital stock, $l0,000 par value
(100,000 shares authorized; issued
and outstanding 68,000 at
December 31, 1993 and
September 30, 1993, and 63,000 at
December 31, 1992).................. 680 680 630
Retained earnings...................... 533 487 364
------- ------- ------
Total shareholder's equity.......... 1,213 1,167 994
------- ------- ------
Total Liabilities and
Shareholder's Equity............. $11,323 $11,159 $9,682
======= ======= ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1993 1992
------ ------
(Unaudited)
<S> <C> <C>
Financing Revenues:
Retail financing and leasing.......... $ 351 $ 282
Wholesale and other dealer financing.. 19 16
------ ------
Total financing revenues................. 370 298
Interest expense...................... 110 114
Depreciation on operating leases...... 139 76
------ ------
Net financing revenues................... 121 108
Other revenues........................... 23 14
------ ------
Net Financing Revenues and Other Revenues 144 122
------ ------
Expenses:
Operating and administrative.......... 54 50
Provision for credit losses........... 14 15
------ ------
Total Expenses........................... 68 65
------ ------
Income before income taxes............... 76 57
Provision for income taxes............... 30 22
------ ------
Net Income............................... $ 46 $ 35
====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1993 1992
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 46 $ 35
------ ------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 140 75
Provision for credit losses................ 14 15
Decrease in accrued interest............... (15) -
Increase (decrease) in unearned
insurance premiums...................... (2) 1
Increase in deferred income taxes.......... 26 30
Decrease in other assets................... - 16
Increase (decrease) in other liabilities... (3) 49
------ ------
Total adjustments............................... 160 186
------ ------
Net cash provided by operating activities.......... 206 221
------ ------
Cash flows from investing activities:
Addition to investments in marketable
securities.................................... (45) (79)
Disposition of investments in marketable
securities.................................... 72 60
Purchase of finance receivables................. (2,490) (2,322)
Liquidation of finance receivables.............. 2,221 1,927
Addition to investments in operating leases..... (681) (382)
Disposition of investments in operating leases.. 86 39
------ ------
Net cash used in investing activities.............. (837) (757)
------ ------
Cash flows from financing activities:
Proceeds from issuance of notes and loans
payable....................................... 259 379
Payments on notes and loans payable............. (622) -
Net increase (decrease) in commercial paper..... 463 (40)
Net increase in borrowings from Parent.......... 40 39
------ ------
Net cash provided by financing activities.......... 140 378
------ ------
Net decrease in cash and cash equivalents.......... (491) (158)
Cash and cash equivalents at the beginning
of the period................................... 574 211
------ ------
Cash and cash equivalents at the end of the
period.......................................... $ 83 $ 53
====== ======
Supplemental disclosures:
Interest paid................................... $ 124 $ 114
Income taxes paid............................... $ 67 -
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Financial Data
- -------------------------------
Information pertaining to the three months ended December 31, 1993 and
1992 is unaudited. In the opinion of management, the unaudited
financial information reflects all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the
results for the interim periods. The results of operations for the
three months ended December 31, 1993 are not necessarily indicative of
those expected for any other interim period or a full year. Certain
December 1992 accounts have been reclassified to conform with the
December 1993 presentation.
Note 2 - Finance Receivables
- ----------------------------
Finance receivables, net consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1993 1993 1992
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Retail.................................. $5,173 $5,103 $5,461
Finance leases.......................... 2,000 2,046 1,952
Wholesale and other dealer loans........ 1,219 1,025 1,064
------ ------ ------
8,392 8,174 8,477
Unearned income......................... (829) (874) (1,012)
Allowance for credit losses............. (95) (94) (97)
------ ------ ------
Finance receivables, net............. $7,468 $7,206 $7,368
====== ====== ======
</TABLE>
Finance leases, net consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1993 1993 1992
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Minimum lease payments.................. $1,279 $1,337 $1,355
Estimated unguaranteed residual values.. 721 709 597
------ ------ ------
Finance leases....................... 2,000 2,046 1,952
Unearned income......................... (370) (388) (391)
Allowance for credit losses............. (23) (22) (22)
------ ------ ------
Finance leases, net.................. $1,607 $1,636 $1,539
====== ====== ======
</TABLE>
The aggregate balances related to finance receivable instalments 60 or
more days past due totaled $30 million, $31 million and $23 million
at December 31, 1993, September 30, 1993 and December 31, 1992,
respectively.
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<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Investments in Operating Leases
- ----------------------------------------
Investments in operating leases, net consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1993 1993 1992
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Vehicles................................ $4,047 $3,494 $2,172
Equipment, aircraft and other........... 116 107 82
------ ------ ------
4,163 3,601 2,254
Accumulated depreciation................ (631) (524) (275)
Allowance for credit losses on
disposition of operating leases...... (31) (27) (16)
------ ------ ------
Investments in operating leases, net. $3,501 $3,050 $1,963
====== ====== ======
</TABLE>
Note 4 - Notes and Loans Payable
- --------------------------------
Notes and loans payable, which consisted of senior debt, included the
following:
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1993 1993 1992
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Commercial paper, net................... $ 814 $ 350 $ 350
------ ------ ------
Other senior debt, due in the years
ending September 30,:
1993................................. - - 1,177
1994................................. 2,200 2,847 2,409
1995................................. 3,265 3,112 2,391
1996................................. 1,250 1,185 652
1997................................. 726 735 558
1998................................. 364 367 118
Thereafter........................... 200 202 2
------ ------ ------
8,005 8,448 7,307
Unamortized premium..................... 29 35 46
------ ------ ------
Total other senior debt.............. 8,034 8,483 7,353
------ ------ ------
Total notes and loans payable..... $8,848 $8,833 $7,703
====== ====== ======
</TABLE>
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<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Notes and Loans Payable (Continued)
- --------------------------------
The weighted average interest rate on other senior debt was 4.81% at
December 31, 1993, including the effect of interest rate exchange
agreements. This rate has been calculated on the basis of rates in
effect at December 31, 1993, some of which are floating rates that
reset daily. Approximately 52% of other senior debt at December 31,
1993 had interest rates, including the effect of interest rate exchange
agreements, that were fixed for a period of more than one year
commencing December 31, 1993. The weighted average of these fixed
interest rates was 4.68% at December 31, 1993. The mix of TMCC's fixed
and floating rate debt changes from time to time as a result of
interest rate risk management.
Included in Notes and Loans Payable at December 31, 1993 were unsecured
notes payable in various foreign currencies. Concurrent with the
issuance of these unsecured notes, TMCC entered into foreign currency
and interest rate exchange agreements to convert these foreign currency
obligations into fixed U.S. dollar liabilities at maturity of
$2.8 billion. These obligations are translated at the various foreign
currency exchange rates in effect at December 31, 1993. The
receivables or payables, arising as a result of the difference between
the December 31, 1993 exchange rates and the forward rates at maturity
applicable to the foreign currency and interest rate exchange
agreements, are classified in Other Receivables or Accounts Payable and
Accrued Expenses, respectively, and would aggregate to a net payable
position of $271 million at December 31, 1993.
Note 5 - Provision for Income Taxes
- -----------------------------------
Effective October 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement
No. 109"). The adoption of Statement No. 109 changed the method of
accounting for income taxes from a deferred method to a liability
method. This method differs from the previously used method in that
deferred tax assets and liabilities are adjusted to reflect changes in
tax rates and laws in the period such changes are enacted resulting in
adjustments to the current period's income statement. The cumulative
effect of the change in accounting principle was not material to the
Company's financial position or results of operations. Prior period
financial statements have not been restated.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Introduction
The earnings of Toyota Motor Credit Corporation ("TMCC") are primarily
affected by interest margins and the average outstanding balance of earning
assets. The interest rates charged on retail finance receivables and implicit
in leases are fixed at the time acquired. Yields on the majority of wholesale
receivables and other loans to dealers vary with changes in short-term
interest rates. Funding requirements are primarily met through earning asset
liquidations and the issuance of debt obligations of varying terms at both
fixed and floating interest rates. TMCC utilizes interest rate exchange
agreements and foreign currency and interest rate exchange agreements in
managing the cost of borrowed funds.
The business of TMCC and its subsidiaries (collectively the "Company") is
substantially dependent upon the sale of Toyota and Lexus vehicles in the
United States. Lower levels of sales of such vehicles resulting from
governmental action, decline in demand, changes in pricing due to the
appreciation of the yen against the United States dollar, or other events,
could result in a reduction in the level of finance and insurance operations
of the Company. To date, the level of the Company's operations has not been
restricted by the level of sales of Toyota and Lexus vehicles.
Financial Condition and Results of Operations
TMCC's earning assets totaled $11.1 billion at December 31, 1993, compared to
$10.4 billion at September 30, 1993 and $9.4 billion at December 31, 1992.
The increases from September 30, 1993 and December 31, 1992 were primarily due
to the growth in leasing.
Retail finance receivables, net of unearned income, were $4.7 billion,
$4.6 billion, and $4.8 billion at December 31, 1993, September 30, 1993, and
December 31, 1992, respectively. Retail receivables at December 31, 1993
remained relatively level from September 30, 1993 as the increase in
receivables from contract volume was offset by liquidations. The slight
decline in retail receivables from December 31, 1992 reflected the sale of
retail finance receivables in the fourth quarter of fiscal 1993 and
liquidations offset by the increase in receivables from contract volume in
fiscal 1993.
Lease finance receivables, net of unearned income, and investments in
operating leases, net of accumulated depreciation, totaled $5.2 billion,
$4.8 billion, and $3.5 billion at December 31, 1993, September 30, 1993, and
December 31, 1992, respectively. The increases from September 30, 1993 and
December 31, 1992 reflected the significant increase in lease contract volume,
primarily in operating leases, due to the growth in special lease programs
sponsored by Toyota Motor Sales, U.S.A., Inc. ("TMS") and increasing consumer
acceptance of leasing.
Wholesale receivables and other dealer loans increased to $1.2 billion at
December 31, 1993 from $1.0 billion and $1.1 billion at September 30, 1993 and
December 31, 1992, respectively. The increases from September 30, 1993 and
December 31, 1992 resulted from the increase in the number of dealers
participating in the TMCC's wholesale financing program and the higher average
wholesale receivable balance per dealer.
-8-
<PAGE>
The Company experienced continued growth in net financing revenues and other
revenues for the first quarter of fiscal 1994 as compared to 1993. The
results are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31, Percentage
--------------------------------- Change From
1993 1992 Previous Period
-------------- -------------- ---------------
(Dollars in Millions/Percent
of Total Financing Revenues)
<S> <C> <C> <C> <C> <C>
Financing Revenues:
Retail financing and leasing.......... $351 95% $282 95% 24%
Wholesale and other dealer financing.. 19 5% 16 5% 19%
---- ---- ---- ----
Total financing revenues................. 370 100% 298 100% 24%
Interest expense...................... 110 30% 114 38% (4%)
Depreciation on operating leases...... 139 37% 76 26% 83%
---- ---- ---- ----
Net financing revenues................... 121 33% 108 36% 12%
Other revenues........................... 23 6% 14 5% 64%
---- ---- ---- ----
Net Financing Revenues and
Other Revenues..................... $144 39% $122 41% 18%
==== ==== ==== ====
</TABLE>
Total financing revenues increased 24% in the first quarter of fiscal 1994
from 1993. The increase in the first quarter of fiscal 1994 was attributable
to the continued growth in earning assets, primarily from leases. Contract
volume and finance penetration related to TMCC's vehicle retail financing and
leasing programs are summarized below:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1993 1992
------ ------
<S> <C> <C>
Contracts booked:
Retail instalment sales contracts....... 44,000 44,000
Leases.................................. 32,000 21,000
------ ------
Total................................ 76,000 65,000
====== ======
Finance penetration........................ 29.5% 23.7%
</TABLE>
In the first quarter of fiscal 1994, the growth in total contract volume and
finance penetration was due to the increased leasing of both Toyota and Lexus
vehicles. Finance penetration represents the percentage of new Toyota and
Lexus vehicle deliveries in the United States (excluding Hawaii) financed or
leased by TMCC. The increase in lease contract volume was attributable
primarily to the effect of the growth in special lease programs sponsored by
-9-
<PAGE>
TMS during the first quarter of fiscal 1994 and also to broader acceptability
of leasing as a financing option in the vehicle retail sales market. Under
these special lease programs, TMCC offered reduced monthly payments on certain
new vehicles to qualified lessees and received an amount from TMS for each
vehicle leased. Amounts received approximate the balances required by TMCC
to maintain revenues at standard program levels and are earned over the
expected lease terms. The level of sponsored program activity varies based
on TMS marketing strategies. TMCC recognized revenues of $9 million and
$5 million in the first quarters of fiscal 1994 and 1993, respectively,
related to all amounts received under various TMS programs. Management of the
Company anticipates that the higher level of lease contract volume will
continue as TMS-sponsored programs are expected to continue for some time and
as the acceptability of leasing as a financing option for retail customers
further increases.
Another factor contributing to the significant growth in leasing (primarily
in investments in operating leases) in both the first quarters of fiscal 1994
and 1993 was a trend toward shorter-term leases for Toyota and Lexus vehicles.
Shorter-term leases have been utilized as a method of accelerating the return
of retail lease customers to the new vehicle market, and management of the
Company intends to continue its emphasis on shorter terms.
Uninsured vehicle residual values were approximately $2.9 billion and
$1.8 billion at December 31, 1993 and 1992, respectively. To date, TMCC has
incurred no material losses as a result of residual value risk. Although
TMCC's experience has been limited, management of the Company believes that
the residual values of its leases reflected in the financial statements
represent realizable values.
In the first quarter of fiscal 1994 TMCC's primary source of revenue and
earning asset growth was leasing. Leasing revenues increased 56% to
$247 million in the first quarter of fiscal 1994 primarily due to an
86% increase in average investments in operating leases from 1993. Retail
financing revenues decreased 15% to $104 million in the first quarter of
fiscal 1994 due to a decrease in the level of average retail finance
receivables outstanding and a continuing decline in yield. Average retail
finance receivables outstanding declined in the first quarter of fiscal 1994
as compared to 1993 primarily due to the effect of the sale of finance
receivables in the fourth quarter of fiscal 1993. The decline in yield on
average earning assets reflected the effect of competitive market conditions
and a sustained period of lower interest rates, with lower yielding retail
instalment sales contracts and leases replacing liquidating higher yielding
retail instalment sales contracts and leases. Management of the Company
anticipates that this trend in declining yields will continue during fiscal
1994.
Wholesale and other dealer financing revenues increased 19% in the first
quarter of fiscal 1994 as compared to 1993. The increase in revenues in the
first quarter of fiscal 1994 resulted primarily from higher average wholesale
receivable balances. The total average wholesale receivable balance increased
in the first quarter of fiscal 1994 largely due to increased numbers of
dealers participating in TMCC's wholesale financing programs and higher
average wholesale receivable balances per dealer. The increased number of
dealers participating in TMCC's wholesale financing program was due to TMCC's
ongoing marketing efforts and competitive market conditions.
-10-
<PAGE>
Interest expense decreased 4% in the first quarter of fiscal 1994 from 1993.
The decrease in interest expense resulting from lower market interest rates
was largely offset by higher average borrowing levels required to fund the
growth of earning assets. The weighted average cost of borrowings was 4.97%
and 6.03% for the three months ended December 31, 1993 and 1992, respectively.
Depreciation on operating leases increased 83% in the first quarter of fiscal
1994 from 1993 as a result of the growth in investments in operating leases.
Net financing revenues increased 12% to $121 million in the first quarter of
fiscal 1994. The increase was primarily attributable to growth in the level
of earning assets. Interest margin is the excess of the combined interest
rate yield on finance receivables and implicit in leases over the effective
interest rate cost of total borrowings. Interest margins decreased in the
first quarter of fiscal 1994 from 1993 as a result of the decline in yield on
retail instalment sales contracts and leases decreasing more rapidly than the
decline in borrowing costs. Management anticipates continued decline in the
interest margin primarily due to the expected continuing decline in yields on
average earning assets in fiscal 1994.
Other revenues increased 64% during the first quarter of fiscal 1994. The
increase in other revenues resulted primarily from the continued growth in the
Company's insurance operations.
The Company's earnings increased in the first quarter of fiscal 1994 as
summarized below:
<TABLE>
<CAPTION>
Three Months Ended
December 31, Percentage
--------------------- Change From
1993 1992 Previous Period
------ ------ ---------------
(Dollars in Millions)
<S> <C> <C> <C>
Net Financing Revenues
and Other Revenues........... $144 $122 18%
Expenses:
Operating and
administrative............ 54 50 8%
Provision for credit losses.. 14 15 (7%)
---- ----
Total Expenses......... 68 65 5%
---- ----
Income before income taxes...... 76 57 33%
Provision for income taxes...... 30 22 36%
---- ----
Net Income...................... $ 46 $ 35 31%
==== ====
</TABLE>
Operating and administrative expenses increased 8% in the first quarter of
fiscal 1994. This increase reflected costs for additional personnel,
facilities, and other resources required to service the Company's growing
customer base. Operating and administrative expenses also increased due to
the growth in the Company's insurance operations in the first quarter of
fiscal 1994.
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<PAGE>
The provision for credit losses is largely a function of changes in the level
and mix of earning assets. The provision for credit losses decreased 7% in
the first quarter of fiscal 1994 from 1993 as the effect of the increase in
the growth in earning assets was more than offset by favorable loss
experience. The favorable trend in credit loss experience is attributable,
in part, to improved credit granting procedures, collection efforts, and the
mix of earning assets. The Company will continue to place emphasis on
controlling its credit loss exposure; however, there are no assurances that
this favorable trend will continue.
Operating profits (reflected as "Income before income taxes") increased 33%
to $76 million in the first quarter of fiscal 1994 from 1993 primarily due to
the increase in financing revenues as a result of the growth in the level of
earning assets. Net income for the first quarter of fiscal 1994 increased 31%
due to the higher level of operating profits.
Financial support is provided by TMS, as necessary, to maintain TMCC's minimum
fixed charge coverage at the level specified in the Operating Agreement. As
a result of the favorable operating profits in the first quarters of fiscal
1994 and 1993, TMCC did not receive any financial support from TMS.
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 growth in
retained earnings. Debt funding has been obtained primarily from the issuance
of debt securities in the European and United States capital markets. Debt
issuances have generally been in the form of commercial paper, medium-term
notes ("MTNs") and other debt securities. This funding has been supplemented
by loans and equity contributions from TMS.
Commercial paper issuances and borrowings from TMS are specifically utilized
to meet short-term funding needs. Commercial paper outstanding under TMCC's
commercial paper program ranged from approximately $349 million to
$842 million during the first quarter of fiscal 1994. To support the
commercial paper program, along with other uses, TMCC, in conjunction with
TMS, maintains committed and uncommitted unsecured credit lines with banks
totaling $775 million. At December 31, 1993, no loans were outstanding under
any of these lines; however, approximately $135 million in letters of credit
had been issued, related to the Company's insurance operations, which reduced
the availability of the lines to $640 million.
Borrowings from TMS ranged from zero to $60 million during the first quarter
of fiscal 1994, with an average outstanding balance of $8 million. The
interest rate charged by TMS to TMCC for interest-bearing loans approximates
the Federal Reserve Board's one-month commercial paper composite rate for
firms whose bonds are rated AA.
MTNs, with original terms ranging from nine months to ten years, have been
issued in the European and United States capital markets to meet a portion of
long-term and short-term funding requirements. During the first quarter of
fiscal 1994, TMCC issued approximately $259 million of MTNs of which
approximately $75 million had maturity dates on the date of issuance of
-12-
<PAGE>
more than one year. MTNs outstanding at December 31, 1993, including the
effect of foreign currency translations, totaled approximately $3.4 billion.
At January 31, 1994, TMCC had approximately $304 million of securities
registered with the Securities and Exchange Commission ("SEC") which remained
available for issuance under TMCC's United States public MTN program. The
maximum aggregate principal amount authorized to be outstanding at any time
under TMCC's Euro MTN program is $4.0 billion. As of January 31, 1994,
$2.5 billion of other debt securities were available for issuance under the
Euro MTN program. The United States and Euro MTN programs may from time to
time be expanded to allow for the continued use of these sources of funding.
Along with MTNs, long-term funding requirements have been met through the
issuance of other forms of debt securities underwritten in the European and
United States capital markets. At December 31, 1993 approximately
$4.1 billion of debt securities, including the effect of foreign currency
translations, was outstanding in the European capital markets. Of the $4.1
billion debt securities, $2.3 billion was denominated in foreign currencies.
Underwritten debt securities outstanding in the United States public market,
excluding MTNs, totaled approximately $600 million at December 31, 1993. At
January 31, 1994, approximately $700 million of securities registered with the
SEC, excluding MTNs, were available for issuance.
TMCC utilizes a variety of techniques to manage its foreign currency exchange
rate risk and interest rate risk. Long-term debt issued in foreign currencies
is hedged by concurrently executed foreign currency and interest rate exchange
agreements. The mix of fixed and floating interest rates on TMCC's debt
outstanding is periodically adjusted through the use of interest rate
contracts, including interest rate exchange agreements and option related
products.
Standard & Poor's Corporation ("S&P") placed the long-term ratings of TMCC and
its related companies (including Toyota Motor Corporation), in addition to
other Japanese automakers, on CreditWatch with negative implications in August
1993. On February 9, 1994, S&P affirmed the long-term ratings of TMCC and its
related companies and removed them from CreditWatch, but indicated that the
rating outlook is negative. The Company currently anticipates having
continued access to its primary funding sources.
From time to time, TMS has made equity contributions to maintain TMCC's equity
capitalization at certain levels. Such levels have been periodically
established by TMS as it deems appropriate. No such equity contributions were
made during the first quarter of fiscal 1994.
Cash flows provided by operating, investing and financing activities have been
used primarily to support earning asset growth. Cash provided by the
liquidation of earning assets, totaling $2.3 billion during the first quarter
of fiscal 1994, was used to purchase additional finance receivables and
investments in operating leases. Investing activities resulted in a net use
of cash in the first quarter of fiscal 1994 as cash provided by earning asset
liquidations was insufficient to support the growth in earning assets. Net
cash used in investing activities was $837 million in the first quarter of
fiscal 1994.
-13-
<PAGE>
The growth in earning assets was also supported by net cash provided by
operating activities which totaled $206 million in the first quarter of fiscal
1994. Additionally, cash available at the beginning of the period was
utilized resulting in a lower level of net cash required from financing
activities to support the growth in earning assets. Net cash flows provided
by financing activities totaled $140 million in the first quarter of fiscal
1994, representing a $238 million decrease from December 31, 1992.
Management of the Company believes that cash provided by operating, investing
and financing activities will be sufficient to meet the Company's liquidity
and capital resource needs in the future.
Recently Enacted Accounting Standards
In November 1992, the Financial Accounting Standards Board issued Statement
No. 112, "Employers' Accounting for Postemployment Benefits" ("Statement
No. 112"). Statement No. 112 requires accrual, during the years that the
employee renders the necessary service or when it is probable that a liability
has been incurred, of the expected cost of providing postemployment benefits
to former or inactive employees, their beneficiaries, and covered dependents
after employment but before retirement. The Company's current practice of
accounting for these benefits is on a cash basis. Statement No. 112 is
effective for fiscal years beginning after December 15, 1993. At this time,
the Company has not elected early adoption of Statement No. 112; however, the
estimated impact of adoption on the financial position or results of
operations is not considered to be material.
In May 1993, the Financial Accounting Standards Board issued Statement
No. 114, "Accounting by Creditors for Impairment of a Loan" ("Statement
No. 114"), which requires a creditor to evaluate the collectibility of both
contractual interest and principal of certain receivables when assessing the
need for a loss accrual and to measure loans that are restructured in a
troubled debt restructuring to reflect the time value of money. Statement
No. 114 is not applicable to leases and large groups of smaller-balance
homogeneous loans that are collectively evaluated for impairment. Statement
No. 114 applies to financial statements for fiscal years beginning after
December 15, 1994. At this time, the Company has not elected early adoption
of Statement No. 114; however, the estimated impact of adoption on the
financial position or results of operations is not considered to be material.
In May 1993, the Financial Accounting Standards Board issued Statement
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("Statement No. 115"), which addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values
and for all investments in debt securities. These investments will be
categorized as held-to-maturity securities and reported at amortized cost;
trading securities and reported at fair value, with unrealized gains and
losses included in earnings; or available-for-sale securities and reported at
fair value, with unrealized gains and losses excluded from earnings and
reported in a separate component of shareholders' equity. Statement No. 115
is effective for fiscal years beginning after December 15, 1993. At this
time, the Company has not elected early adoption of Statement No. 115;
however, the estimated impact of adoption on the financial position or results
of operation is not considered to be material.
-14-
<PAGE>
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, including two suits
involving collateral protection practices similar to suits which
have been filed against various other financial institutions and
captive finance companies. TMCC is engaged in settlement
negotiations in one of the two collateral protection practices
suits and is defending the other. It is possible that TMCC may
become a defendant in other similar actions. At this time, the
Company believes any resulting liability from the above legal
actions, proceedings and other claims will not materially affect
its consolidated financial position or results of operations.
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 exhibit listed on the accompanying Exhibit Index, on page 17,
is filed as part of this report.
(b) Reports on Form 8-K
The Company filed the following report on Form 8-K during the
quarter ended December 31, 1993:
Financial Statements
Date of Report Item Filed
-------------- ---- -------------------
November 12, 1993 Item 5 - Other Events None
-15-
<PAGE>
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: February 11, 1994 By /S/ WOLFGANG JAHN
-------------------------------
Wolfgang Jahn
Group Vice President
(principal executive officer)
Date: February 11, 1994 By /S/ PATRICK BREENE
-------------------------------
Patrick Breene
Controller
(principal accounting officer)
-16-
<PAGE>
EXHIBIT INDEX
Exhibit Numbered
Number Description Page
- ------- ----------- --------
12.1 Calculation of ratio of earnings to fixed charges. 18
-17-
<PAGE>
<PAGE>
EXHIBIT 12.1
TOYOTA MOTOR CREDIT CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------
1993 1992
------ ------
(Dollars in Millions)
<S> <C> <C>
Consolidated income
before income taxes.................... $ 76 $ 57
---- ----
Fixed charges:
Interest............................... 110 114
Portion of rent expense
representative of the
interest factor
(deemed to be
one-third)........................... 1 1
---- ----
Total fixed charges...................... 111 115
---- ----
Earnings available
for fixed charges...................... $187 $172
==== ====
Ratio of earnings to
fixed charges(2)....................... 1.68 1.50
==== ====
<FN>
- -----------------
(1) TMCC did not receive any financial support from TMS during the three
months ended December 31, 1993 and 1992.
(2) In March 1987, TMCC guaranteed payments of principal and interest on
$58 million principal amount of bonds issued in connection with the
Kentucky manufacturing facility of an affiliate. As of
December 31, 1993, TMCC has not incurred any fixed charges in connection
with such guarantee and no amount is included in any ratio of earnings
to fixed charges.
</TABLE>
- 18 -
<PAGE>
