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, 1994
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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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19001 S. Western Avenue
Torrance, California 90509
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 787-1310
-----------------------
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, 1995, the number of outstanding shares of capital
stock, par value $10,000 per share, of the registrant was 86,500, all of which
shares were held by Toyota Motor Sales, U.S.A., Inc.
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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,
1994 1994 1993
------------ ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
------
Cash and cash equivalents................. $ 305 $ 277 $ 83
Investments in marketable securities...... 138 102 110
Finance receivables, net.................. 8,023 7,776 7,468
Investments in operating leases, net...... 6,676 6,215 3,501
Receivable from Parent.................... - 37 -
Other receivables......................... 191 221 76
Deferred charges.......................... 71 36 40
Other assets.............................. 67 55 45
------- ------- -------
Total Assets..................... $15,471 $14,719 $11,323
======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Notes and loans payable................... $12,435 $11,833 $ 8,848
Accrued interest.......................... 161 156 133
Accounts payable and accrued expenses..... 788 725 685
Unearned insurance premiums............... 59 61 72
Payable to Parent......................... 13 - 46
Income taxes payable...................... 12 31 22
Deferred income taxes..................... 432 386 304
------- ------- -------
Total liabilities................... 13,900 13,192 10,110
------- ------- -------
Shareholder's Equity:
Capital stock, $l0,000 par value
(100,000 shares authorized; issued
and outstanding 86,500 at
December 31, 1994 and
September 30, 1994, and 68,000 at
December 31, 1993).................. 865 865 680
Retained earnings...................... 706 662 533
------- ------- -------
Total shareholder's equity.......... 1,571 1,527 1,213
------- ------- -------
Total Liabilities and
Shareholder's Equity............. $15,471 $14,719 $11,323
======= ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1994 1993
------ ------
(Unaudited)
<S> <C> <C>
Financing Revenues:
Retail financing........................ $ 109 $ 104
Leasing................................. 429 247
Wholesale and other dealer financing.... 26 19
------ ------
Total financing revenues................... 564 370
Interest expense........................ 161 110
Depreciation on operating leases........ 277 139
------ ------
Net financing revenues..................... 126 121
Other revenues............................. 24 23
------ ------
Net Financing Revenues and Other Revenues.. 150 144
------ ------
Expenses:
Operating and administrative............ 59 54
Provision for credit losses............. 18 14
------ ------
Total Expenses............................. 77 68
------ ------
Income before income taxes................. 73 76
Provision for income taxes................. 29 30
------ ------
Net Income................................. $ 44 $ 46
====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------
1994 1993
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 44 $ 46
------ ------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................. 285 140
Provision for credit losses................... 18 14
Increase (decrease) in accrued interest....... 5 (15)
Decrease in unearned insurance premiums....... (2) (2)
Increase in deferred income taxes............. 46 26
Decrease in other assets...................... 29 -
Increase (decrease) in other liabilities...... 35 (3)
------ ------
Total adjustments................................... 416 160
------ ------
Net cash provided by operating activities.............. 460 206
------ ------
Cash flows from investing activities:
Addition to investments in marketable securities.... (46) (45)
Disposition of investments in marketable
securities....................................... 8 72
Purchase of finance receivables..................... (2,733) (2,490)
Liquidation of finance receivables.................. 2,477 2,221
Addition to investments in operating leases......... (922) (681)
Disposition of investments in operating leases...... 177 86
------ ------
Net cash used in investing activities.................. (1,039) (837)
------ ------
Cash flows from financing activities:
Proceeds from issuance of notes and loans payable... 1,498 259
Payments on notes and loans payable................. (984) (622)
Net increase in commercial paper.................... 93 463
Net increase in borrowings from Parent.............. - 40
------ ------
Net cash provided by financing activities.............. 607 140
------ ------
Net increase (decrease) in cash and cash equivalents... 28 (491)
Cash and cash equivalents at the beginning
of the period....................................... 277 574
------ ------
Cash and cash equivalents at the end of the period..... $ 305 $ 83
====== ======
Supplemental disclosures:
Interest paid....................................... $149 $124
Income taxes paid................................... $1 $67
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Financial Data
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Information pertaining to the three months ended December 31, 1994 and
1993 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 presented. The results of operations
for the three months ended December 31, 1994 are not necessarily
indicative of those expected for any other interim period or for a full
year. Certain December 1993 accounts have been reclassified to conform
with the December 1994 presentation.
Note 2 - Finance Receivables
- ----------------------------
Finance receivables, net consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1994 1994 1993
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Retail.............................. $5,722 $5,805 $5,173
Finance leases...................... 1,699 1,734 2,000
Wholesale and other dealer loans.... 1,388 1,054 1,219
------ ------ ------
8,809 8,593 8,392
Unearned income..................... (682) (716) (829)
Allowance for credit losses......... (104) (101) (95)
------ ------ ------
Finance receivables, net......... $8,023 $7,776 $7,468
====== ====== ======
</TABLE>
Included in finance lease receivables were estimated unguaranteed
residual values of $699 million, $694 million and $721 million at
December 31, 1994, September 30, 1994 and December 31, 1993,
respectively.
The aggregate balances related to finance receivables 60 or more days
past due totaled $16 million, $15 million and $14 million at
December 31, 1994, September 30, 1994 and December 31, 1993,
respectively.
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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,
1994 1994 1993
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Vehicles............................... $7,837 $7,184 $4,047
Equipment, aircraft and other.......... 160 148 116
------ ------ ------
7,997 7,332 4,163
Accumulated depreciation............... (1,253) (1,054) (631)
Allowance for credit losses ........... (68) (63) (31)
------ ------ ------
Investments in operating leases, net $6,676 $6,215 $3,501
====== ====== ======
</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,
1994 1994 1993
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Commercial paper, net................... $ 1,441 $ 960 $ 814
------- ------- ------
Other senior debt, due in the years
ending September 30,:
1994................................. - - 2,200
1995................................. 3,081 4,010 3,265
1996................................. 2,546 2,405 1,250
1997................................. 2,484 2,014 726
1998................................. 1,272 985 364
1999................................. 330 233 -
Thereafter........................... 1,248 1,209 200
------- ------- ------
10,961 10,856 8,005
Unamortized premium..................... 33 17 29
------- ------- ------
Total other senior debt.............. 10,994 10,873 8,034
------- ------- ------
Notes and loans payable........... $12,435 $11,833 $8,848
======= ======= ======
</TABLE>
The weighted average remaining term of commercial paper was 75 days at
December 31, 1994 and 21 days at December 31, 1993. The weighted
average interest rate on commercial paper was 5.92% and 3.29% at
December 31, 1994 and 1993, respectively.
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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 5.43% at
December 31, 1994, including the effect of interest rate exchange
agreements. This rate has been calculated on the basis of rates in
effect at December 31, 1994, some of which are floating rates that
reset daily. Approximately 42% of other senior debt at December 31,
1994 had interest rates, including the effect of interest rate exchange
agreements, that were fixed for a period of more than one year. The
weighted average of these fixed interest rates was 5.38% at
December 31, 1994. 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, 1994 were unsecured
notes payable in various foreign currencies. Concurrent with the
issuance of these unsecured notes, TMCC entered into foreign currency
exchange agreements to convert these foreign currency obligations into
fixed U.S. dollar obligations for $5.0 billion. TMCC's foreign
currency debt is translated into U.S. dollars in the financial
statements at the various foreign currency spot rates in effect at
December 31, 1994. The receivables or payables, arising as a result of
the differences between the December 31, 1994 foreign currency spot
rates and the contract rates applicable to the foreign currency
exchange agreements, are classified in Other Receivables or Accounts
Payable and Accrued Expenses, respectively, and would aggregate to a
net payable position of $12 million at December 31, 1994.
Note 5 - Recently Adopted Accounting Standards
- ----------------------------------------------
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("Statement No. 112"). Statement No. 112 requires accrual,
during the years that the employee renders the necessary service or
when it is probable that a liability has been incurred, of the expected
cost of providing postemployment benefits to former or inactive
employees, their beneficiaries, and covered dependents after employment
but before retirement. This method differs from the Company's previous
practice of accounting for these benefits on a cash basis. The
cumulative effect of the change in accounting principle was not
material to the Company's financial position or results of operations.
Prior period financial statements have not been restated.
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<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Recently Adopted Accounting Standards (Continued)
- ----------------------------------------------
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan" ("Statement No. 114") and its amendment Statement No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures" ("Statement No. 118"). Statement No. 114 requires a
creditor to evaluate the collectibility of both contractual interest
and principal of certain impaired 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. 118 amends Statement No. 114 to allow a
creditor to use existing methods for recognizing interest income on an
impaired loan. Statement No. 118 also amends the disclosure
requirements in Statement No. 114 to require information about the
recorded investment in certain impaired loans and about how a creditor
recognizes interest income related to those impaired loans. The impact
of adoption was not material to the Company's financial position or
results of operations. Prior period financial statements have not been
restated.
Effective October 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("Statement No. 115"). Statement No. 115
addresses the accounting and reporting for investments in all debt
securities and for investments in equity securities that have readily
determinable fair values. 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.
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<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 net cash
provided by operating activities, 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
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 Japanese 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.
As a result of the January 17, 1995 earthquake in Kobe, Japan, Toyota Motor
Corporation cancelled two days of production to support relief efforts. The
production delays are anticipated to be recovered in a short period of time
through overtime work. Parts supply to North American production was not
impacted. Although no future earthquake related delays in production or
supply are anticipated, there is no assurance that some will not occur.
Management does not expect that the effects of the earthquake will have a
material adverse impact on the Company's business.
Financial Condition and Results of Operations
TMCC's earning assets, consisting of finance receivables and investments in
operating leases, totaled $14.9 billion, $14.2 billion and $11.1 billion at
December 31, 1994, September 30, 1994 and December 31, 1993, respectively.
The increases in earning assets were primarily due to the growth in leasing.
Retail finance receivables, net of unearned income, were $5.3 billion,
$5.4 billion and $4.7 billion at December 31, 1994, September 30, 1994 and
December 31, 1993, respectively. Retail finance receivables decreased from
September 30, 1994 to December 31, 1994 due to liquidations exceeding contract
volume and increased from December 31, 1993 to September 30, 1994 due to
contract volume exceeding liquidations.
Lease earning assets, consisting of lease finance receivables, net of unearned
income, and investments in operating leases, net of accumulated depreciation,
totaled $8.2 billion, $7.7 billion and $5.2 billion at December 31, 1994,
September 30, 1994 and December 31, 1993, respectively. The increase in lease
earning assets reflected the continuation of significant growth in lease
contract volume, primarily in operating leases. The growth in lease volume
was primarily attributable to the effect of special lease programs sponsored
by Toyota Motor Sales, U.S.A., Inc. ("TMS") and also to the broader
acceptability of leasing in the vehicle retail sales market. Management of
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<PAGE>
the Company anticipates further growth in lease earning assets as special
lease programs are expected to continue and as the broader acceptability of
leasing as a financing option for retail consumers continues.
Wholesale receivables and other dealer loans were $1.4 billion, $1.1 billion
and $1.2 billion at December 31, 1994, September 30, 1994 and December 31,
1993, respectively. The increase in these receivables from September 30, 1994
to December 31, 1994 resulted primarily from the higher average wholesale
receivables balance per dealer. The decrease in these receivables from
December 31, 1993 to September 30, 1994 resulted primarily from the decrease
in the number of active dealers participating in the Company's vehicle
wholesale program offset by an increase in the average wholesale receivables
balance per dealer.
Total financing revenues increased 52% in the first quarter of fiscal 1995
from the same period in fiscal 1994. The increase was primarily due to
earning asset growth from higher contract volume and an increase in the
average amount financed per contract. Contract volume and finance penetration
related to TMCC's vehicle retail installment financing and leasing programs
are summarized below:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1994 1993
------ ------
<S> <C> <C>
Contracts booked:
Vehicle retail installment contracts.... 38,000 44,000
Vehicle lease contracts................. 41,000 32,000
------ ------
Total................................ 79,000 76,000
====== ======
Finance penetration........................ 31.1% 29.5%
</TABLE>
In the first quarter of fiscal 1995, the growth in total contract volume and
finance penetration was due to the increased leasing of both Toyota and Lexus
vehicles offset by the decrease in retail contract volume. 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 primarily attributable to the effect
of special lease programs sponsored by TMS and also to the broader
acceptability of leasing 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 related to all amounts
received under various TMS programs of $28 million and $9 million in the first
quarters of fiscal 1995 and 1994, respectively.
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<PAGE>
Retail financing revenues increased 5% in the first quarter of fiscal 1995
from the same period in fiscal 1994. Retail financing revenues increased due
to the growth in average retail finance receivables outstanding partially
offset by a decline in portfolio yield resulting from lower yielding contracts
replacing liquidating higher yielding contracts. Management of the Company
expects that the level of retail financing revenues in fiscal 1995 will
approximate those of fiscal 1994.
In the first quarter of fiscal 1995, TMCC's primary source of revenue and
earning asset growth was leasing. Leasing revenues increased 74% in the first
quarter of fiscal 1995 from the same period in fiscal 1994 primarily due to
the growth in average lease earning assets. Management of the Company
anticipates further growth in leasing revenues as special lease programs
sponsored by TMS are expected to continue to result in increases in lease
earning assets.
Wholesale and other dealer financing revenues increased 37% in the first
quarter of fiscal 1995 from the same period in fiscal 1994. The increased
revenues resulted from higher average wholesale receivable balances and
increases in wholesale financing rates. Management of the Company anticipates
that yields and revenues will increase in fiscal 1995 due to rising short-term
market interest rates to which such financing is indexed and due to earning
asset growth.
Interest expense increased 46% in the first quarter of fiscal 1995 from the
same period in fiscal 1994. The increase in interest expense resulted from
higher average borrowing levels required to fund the growth in earning assets
and increases in market interest rates. The weighted average cost of
borrowings was 5.32% and 4.97% for the three months ended December 31, 1994
and 1993, respectively. Management anticipates that as a result of rising
market interest rates and increases in the level of debt outstanding, the
weighted average cost of borrowings and interest expense will continue to
increase in fiscal 1995 as compared to fiscal 1994.
Depreciation on operating leases increased 99% in the first quarter of fiscal
1995 from the same period in fiscal 1994 as a result of the growth in
investments in operating leases. Management anticipates higher depreciation
on operating leases in fiscal 1995 as compared to fiscal 1994 due to
anticipated growth in investments in operating leases.
Uninsured vehicle residual values were approximately $5.2 billion and
$2.9 billion at December 31, 1994 and 1993, respectively. To date, TMCC has
incurred no material losses as a result of residual value risk. Although
TMCC's experience has been somewhat limited, management of the Company
believes that the residual values of its leases reflected in the financial
statements represent realizable values.
Net financing revenues increased 4% in the first quarter of fiscal 1995. The
increase was primarily attributable to the growth in the level of earning
assets which was substantially offset by declining interest margins. 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. Lower interest margins in fiscal 1995 were the result of
lower portfolio yields on retail installment and lease contracts and higher
average borrowing costs as compared to fiscal 1994. Management anticipates
somewhat lower net financing revenues in fiscal 1995 as compared to fiscal
1994 due to expected increases in the weighted average cost of borrowings.
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Other revenues increased 4% during the first quarter of fiscal 1995. The
increase in other revenues resulted from the continued growth in the Company's
insurance operations offset by declines in servicing and other income related
to the retail finance receivables sold in fiscal 1993.
Operating and administrative expenses increased 9% in the first quarter of
fiscal 1995. These increases reflected costs for additional personnel and
other resources required to service the Company's growing customer base and
for the growth in the Company's insurance operations.
The provision for credit losses is largely a function of changes in the level
and mix of earning assets. The provision for credit losses increased 29% in
the first quarter of fiscal 1995 from the same period in fiscal 1994 as a
result of the growth in the level of earning assets, partially offset by
favorable credit loss experience. The Company continues to experience very
low credit loss levels and 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") decreased 4% in
the first quarter of fiscal 1995 from the same period in fiscal 1994. The
decrease in operating profits and net income during the first quarter of
fiscal 1995 was primarily due to decreases in the Company's interest margin
and increases in operating and administrative expenses related to additional
personnel costs. Management of the Company anticipates that fiscal 1995
operating profits may be somewhat lower than in fiscal 1994 due to expected
increases in the weighted average cost of borrowings.
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
1995 and 1994, 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, cash provided by
operating activities, 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.
From time to time, this funding has been supplemented by loans and equity
contributions from TMS.
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<PAGE>
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 $1.0 billion to
$1.7 billion at any month end during the first quarter of fiscal 1995, with
an average outstanding balance of $1.3 billion. The Company anticipates
increased use of commercial paper during the remainder of fiscal 1995. To
support its commercial paper program, TMCC also maintains syndicated bank
credit facilities with certain banks which aggregated $1.5 billion at
December 31, 1994. No loans were outstanding under any of these bank credit
facilities during the first quarter of fiscal 1995. TMCC also maintains
uncommitted, unsecured lines of credit with banks totalling $300 million to
facilitate issuances of letters of credit. At December 31, 1994,
approximately $95 million in letters of credit had been issued, primarily
related to the Company's insurance operations.
From time to time, TMS makes interest-bearing loans to TMCC. The interest
rate charged by TMS to TMCC for these interest-bearing loans approximates the
Federal Reserve Board's one-month commercial paper composite rate for firms
whose bonds are rated AA. No loans were outstanding from TMS during the first
quarter of fiscal 1995.
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 1995, TMCC issued approximately $991 million of MTNs of which
approximately $941 million had maturity dates on the date of issuance of more
than one year. MTNs outstanding at December 31, 1994, including the effect
of foreign currency translations at spot rates in effect at December 31, 1994,
totaled approximately $7.5 billion. At January 31, 1995, approximately
$2.5 billion under TMCC's United States public MTN program was available for
issuance, of which the Company has committed to issue approximately
$120 million. The maximum aggregate principal amount authorized to be
outstanding at any time under TMCC's Euro MTN program is $6.5 billion. As of
January 31, 1995, $2.1 billion was available for issuance under the Euro MTN
program, of which the Company has committed to issue approximately
$477 million. 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.
Long-term funding requirements have also been met through the issuance of
other forms of debt securities underwritten in the European and United States
capital markets. At December 31, 1994, approximately $3.2 billion of debt
securities (excluding MTNs), including the effect of foreign currency
translations at spot rates in effect at December 31, 1994, were outstanding
in the European capital markets. Of the $3.2 billion in debt securities,
$2.3 billion was denominated in foreign currencies. At January 31, 1995, the
Company has committed to issue an additional $115 million of debt securities
in the European capital markets. Underwritten debt securities outstanding
in the United States public market, excluding MTNs, totaled approximately
$300 million at December 31, 1994. At January 31, 1995, approximately
$700 million of securities registered with the Securities and Exchange
Commission, excluding MTNs, were available for issuance.
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<PAGE>
TMCC utilizes a variety of financial instruments to manage its foreign
currency exchange rate risk and interest rate risk. TMCC does not enter into
these instruments for trading purposes. During the quarters ended December
31, 1994 and December 31, 1993, TMCC held its derivative financial instruments
to maturity of the underlying debt instruments.
TMCC utilizes foreign currency exchange agreements and interest rate exchange
agreements to manage exposure to exchange rate fluctuations on principal and
interest payments for borrowings denominated in foreign currencies. Notes and
loans payable issued in foreign currencies are hedged by concurrently executed
foreign currency exchange agreements. These exchange agreements involve
agreements to exchange TMCC's foreign currency principal obligations for U.S.
dollar obligations at agreed-upon currency exchange rates and to exchange
fixed and floating interest rate obligations. The aggregate notional amounts
of foreign currency exchange agreements at December 31, 1994 and 1993 were
$4.3 billion and $2.6 billion, respectively. In the event that a counterparty
fails to perform, TMCC's exposure is limited to the currency exchange and
interest rate differential. TMCC does not anticipate nonperformance by any
of its counterparties.
TMCC utilizes interest rate exchange agreements and other option-based
products in managing its exposure to interest rate fluctuations. TMCC's
interest rate exchange 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
exchange agreements may also involve basis swap contracts, which are
agreements to exchange the difference between certain floating interest
amounts, such as the net payment based on the commercial paper rate and the
London Interbank Offered Rate ("LIBOR"), calculated on an agreed-upon notional
amount. TMCC also enters into option-based contracts where TMCC is a fixed
rate payor when an underlying floating indice is within a prespecified range,
and a floating rate payor otherwise. The underlying notional amounts are not
exchanged and do not represent exposure to credit loss. In the event that a
counterparty fails to perform, TMCC's exposure is limited to the interest rate
differential. TMCC does not anticipate nonperformance by any of its
counterparties. The aggregate notional amounts of interest rate exchange
agreements outstanding at December 31, 1994 and 1993, were $10.2 billion
and $6.0 billion, respectively. At December 31, 1994, TMCC was the fixed rate
payor on $5.1 billion of interest rate exchange agreements, floating rate
payor on $1.3 billion of such agreements, counterparty to $1.4 billion of
basis swap contracts, and counterparty to $2.4 billion of option-based
contracts. Interest rate exchange agreements and other option-based products
are executed as an integral part of specific debt transactions and on a
portfolio basis. The differential paid or received on such agreements is
recorded as an adjustment to Interest Expense over the term of the underlying
debt. Master netting agreements, with all interest rate exchange agreement
counterparties, also exist allowing the net difference between counterparties
to be exchanged in the event of default.
-14-
<PAGE>
TMCC utilizes indexed note swap agreements in managing its exposure to indexed
notes. Indexed notes are debt instruments whose interest rate and/or
principal redemption amounts are derived from other underlying instruments.
Indexed note swap agreements involve agreements to receive interest and/or
principal amounts associated with the indexed notes, denominated in either
U.S. dollars or a foreign currency, and to pay fixed or floating rates on
fixed U.S. dollar liabilities. In the event that a counterparty fails to
perform, TMCC's exposure is limited to the difference between the indexed
amounts that should have been received and the amounts that should have been
paid. TMCC does not anticipate nonperformance by any of its counterparties.
At December 31, 1994, TMCC was the counterparty to $2.2 billion of indexed
note swap agreements, of which $0.7 billion was denominated in foreign
currencies and $1.5 billion was denominated in U.S. dollars. At December 31,
1993, TMCC was the counterparty to $1.6 billion of indexed note swap
agreements, of which $0.2 billion was denominated in foreign currencies and
$1.4 billion was denominated in U.S. dollars.
For all of its derivative financial instruments, TMCC manages counterparty
risk through the use of credit standard guidelines, counterparty
diversification and financial condition monitoring.
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 1995.
Cash flows provided by operating, investing and financing activities have been
used primarily to support growth in earning assets. Cash provided by the
liquidation of earning assets, totalling $2.7 billion during the first quarter
of fiscal 1995, was used to purchase additional finance receivables and
investments in operating leases, totalling $3.7 billion during the first
quarter of fiscal 1995. Investing activities resulted in a net use of cash
of $1.0 billion as the purchase of additional earning assets, primarily
investments in operating leases, exceeded cash provided by the liquidation of
earning assets. Investing activities were also supported by net cash provided
by operating activities and net cash provided by financing activities which
totaled $460 million and $607 million, respectively, during the first quarter
of fiscal 1995. 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.
-15-
<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. Two such suits involve
collateral protection practices and are similar to suits which
have been filed against other financial institutions and captive
finance companies. Court approval of a settlement agreement is
pending as to both collateral protection practices suits. 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 exhibits listed on the accompanying Exhibit Index, on page
18, are 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, 1994:
Financial Statements
Date of Report Item Filed
-------------- ---- -------------------
December 13, 1994 Item 5 - Other Events None
-16-
<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 10, 1995 By /S/ WOLFGANG JAHN
-------------------------------
Wolfgang Jahn
Group Vice President
and General Manager
(principal executive officer)
Date: February 10, 1995 By /S/ PATRICK BREENE
-------------------------------
Patrick Breene
Corporate Manager -
Finance and Administration
(principal accounting officer)
-17-
<PAGE>
EXHIBIT INDEX
Exhibit Method
Number Description of Filing
- ------- ----------- ---------
12.1 Calculation of ratio of earnings to fixed charges. Filed
Herewith
27.1 Financial Data Schedule. Filed
Herewith
-18-
<PAGE>
EXHIBIT 12.1
TOYOTA MOTOR CREDIT CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES<F1>
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------
1994 1993
------ ------
(Dollars in Millions)
<S> <C> <C>
Consolidated income
before income taxes...................... $ 73 $ 76
---- ----
Fixed charges:
Interest................................. 161 110
Portion of rent expense
representative of the
interest factor
(deemed to be
one-third)............................ 1 1
---- ----
Total fixed charges......................... 162 111
---- ----
Earnings available
for fixed charges........................ $235 $187
==== ====
Ratio of earnings to
fixed charges<F2>........................ 1.45 1.68
==== ====
<FN>
- -----------------
<F1> TMCC did not receive any financial support from TMS during the three
months ended December 31, 1994 and 1993.
<F2> 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, 1994, 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.
</FN>
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TOYOTA
MOTOR CREDIT CORPORATION'S DECEMBER 31, 1994 FINANCIAL STATEMENTS AND
NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 305
<SECURITIES> 138
<RECEIVABLES> 14,871<F1>
<ALLOWANCES> 172
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,471
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 12,435
<COMMON> 865
0
0
<OTHER-SE> 706
<TOTAL-LIABILITY-AND-EQUITY> 15,471
<SALES> 0
<TOTAL-REVENUES> 588
<CGS> 0
<TOTAL-COSTS> 438<F3>
<OTHER-EXPENSES> 59
<LOSS-PROVISION> 18
<INTEREST-EXPENSE> 0<F3>
<INCOME-PRETAX> 73
<INCOME-TAX> 29
<INCOME-CONTINUING> 44
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include Investments in Operating Leases net of Accumulated
Depreciation and Finance Receivables net of Unearned Income.
<F2>Toyota Motor Credit Corporation's Balance Sheet is not classified into
Current and Long-Term Assets and Liabilities.
<F3>Total Costs includes Interest Expense and Depreciation on Operating
Leases.
</FN>
</TABLE>
