<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, 1995
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-9961
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TOYOTA MOTOR CREDIT CORPORATION
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(Exact name of registrant as specified in its charter)
California 95-3775816
- ---------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19001 S. Western Avenue
Torrance, California 90509
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 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, 1996, 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,
1995 1995 1994
------------ ------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
------
Cash and cash equivalents................. $ 62 $ 108 $ 305
Investments in marketable securities...... 179 169 138
Investments in operating leases, net...... 8,596 8,148 6,676
Finance receivables, net.................. 7,498 7,227 8,086
Receivable from Parent.................... 29 51 -
Other receivables......................... 304 350 207
Deferred charges.......................... 94 85 71
Income taxes receivable................... 12 6 -
Other assets.............................. 91 81 67
------- ------- -------
Total Assets..................... $16,865 $16,225 $15,550
======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Notes and loans payable................... $13,253 $12,696 $12,435
Accrued interest.......................... 171 190 161
Accounts payable and accrued expenses..... 297 298 286
Deposits.................................. 209 200 168
Payable to Parent......................... - - 13
Income taxes payable...................... - - 12
Deferred income........................... 524 505 472
Deferred income taxes..................... 659 627 432
------- ------- -------
Total liabilities................... 15,113 14,516 13,979
------- ------- -------
Commitments and contingencies
Shareholder's Equity:
Capital stock, $l0,000 par value
(100,000 shares authorized; issued
and outstanding 86,500)............. 865 865 865
Retained earnings...................... 887 844 706
------- ------- -------
Total shareholder's equity.......... 1,752 1,709 1,571
------- ------- -------
Total Liabilities and
Shareholder's Equity............. $16,865 $16,225 $15,550
======= ======= =======
</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,
------------------
1995 1994
------ ------
(Unaudited)
<S> <C> <C>
Financing Revenues:
Leasing................................. $ 557 $ 429
Retail financing........................ 101 109
Wholesale and other dealer financing.... 30 26
------ ------
Total financing revenues................... 688 564
Depreciation on operating leases........ 370 277
Interest expense........................ 193 161
------ ------
Net financing revenues..................... 125 126
Other revenues............................. 29 24
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Net Financing Revenues and Other Revenues.. 154 150
------ ------
Expenses:
Operating and administrative............ 65 59
Provision for credit losses............. 21 18
------ ------
Total Expenses............................. 86 77
------ ------
Income before income taxes................. 68 73
Provision for income taxes................. 27 29
------ ------
Net Income................................. $ 41 $ 44
====== ======
</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,
-------------------------------
1995 1994
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 41 $ 44
------ ------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................... 359 285
Provision for credit losses..................... 21 18
Increase (decrease) in accrued interest......... (19) 5
Increase in deferred income taxes............... 32 46
Decrease in other assets........................ 7 28
Increase in other liabilities................... 21 39
------ ------
Total adjustments..................................... 421 421
------ ------
Net cash provided by operating activities................ 462 465
------ ------
Cash flows from investing activities:
Additions to investments in marketable securities..... (21) (46)
Disposition of investments in marketable securities... 12 8
Purchase of finance receivables....................... (2,901) (2,733)
Liquidations of finance receivables................... 2,619 2,472
Additions to investments in operating leases.......... (1,137) (922)
Disposition of investments in operating leases........ 309 177
------ ------
Net cash used in investing activities.................... (1,119) (1,044)
------ ------
Cash flows from financing activities:
Proceeds from issuance of notes and loans payable..... 1,007 1,498
Payments on notes and loans payable................... (1,289) (984)
Net increase in commercial paper with
original maturities less than 90 days.............. 893 93
------ ------
Net cash provided by financing activities................ 611 607
------ ------
Net increase (decrease) in cash and cash equivalents..... (46) 28
Cash and cash equivalents at the beginning
of the period......................................... 108 277
------ ------
Cash and cash equivalents at the end of the period....... $ 62 $ 305
====== ======
Supplemental disclosures:
Interest paid......................................... $223 $149
Income taxes paid..................................... $1 $1
</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, 1995 and
1994 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, 1995 are not necessarily
indicative of those expected for any other interim period or for a full
year. Certain December 1994 and September 1995 accounts have been
reclassified to conform with the December 1995 presentation.
Note 2 - Investments in Operating Leases
- ----------------------------------------
Investments in operating leases, net consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1995 1995 1994
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Vehicles............................... $10,509 $ 9,864 $7,837
Equipment, aircraft and other.......... 220 201 160
------- ------- ------
10,729 10,065 7,997
Accumulated depreciation............... (2,050) (1,838) (1,253)
Allowance for credit losses ........... (83) (79) (68)
------- ------- ------
Investments in operating leases, net $ 8,596 $ 8,148 $6,676
======= ======= ======
</TABLE>
Note 3 - Finance Receivables
- ----------------------------
Finance receivables, net consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1995 1995 1994
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Retail.............................. $5,214 $5,050 $5,722
Finance leases...................... 1,505 1,567 1,741
Wholesale and other dealer loans.... 1,380 1,229 1,388
------ ------ ------
8,099 7,846 8,851
Unearned income..................... (507) (527) (661)
Allowance for credit losses......... (94) (92) (104)
------ ------ ------
Finance receivables, net......... $7,498 $7,227 $8,086
====== ====== ======
</TABLE>
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TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Finance Receivables (Continued)
- ----------------------------
Included in finance lease receivables were estimated unguaranteed
residual values of $658 million, $673 million and $699 million at
December 31, 1995, September 30, 1995 and December 31, 1994,
respectively.
The aggregate balances related to finance receivables 60 or more days
past due totaled $19 million, $16 million and $16 million at
December 31, 1995, September 30, 1995 and December 31, 1994,
respectively.
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,
1995 1995 1994
------------ ------------- ------------
(Dollars in Millions)
<S> <C> <C> <C>
Commercial paper, net................... $ 1,746 $ 1,442 $ 1,441
------- ------- -------
Other senior debt, due in the years
ending September 30,:
1995................................. - - 3,081
1996................................. 2,767 3,252 2,546
1997................................. 2,678 2,722 2,484
1998................................. 2,185 2,371 1,272
1999................................. 729 529 330
2000................................. 1,687 1,723 973
Thereafter........................... 1,410 611 275
------- ------- -------
11,456 11,208 10,961
Unamortized premium..................... 51 46 33
------- ------- -------
Total other senior debt.............. 11,507 11,254 10,994
------- ------- -------
Notes and loans payable........... $13,253 $12,696 $12,435
======= ======= =======
</TABLE>
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TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Notes and Loans Payable (Continued)
- --------------------------------
Short-term borrowings include commercial paper and certain medium-term
notes ("MTNs"). The weighted average remaining term of commercial
paper was 19 days at December 31, 1995. The weighted average interest
rate on commercial paper was 5.78% at December 31, 1995. Short-term
MTNs with original terms ranging from nine months to one year, included
in other senior debt, were $394 million at December 31, 1995. The
weighted average interest rate on these short-term MTNs was 5.88% at
December 31, 1995, including the effect of interest rate swap
agreements.
The weighted average interest rate on other senior debt was 5.81% at
December 31, 1995, including the effect of interest rate swap
agreements and option-based products. This rate has been calculated on
the basis of rates in effect at December 31, 1995, some of which are
floating rates that reset daily. Approximately 32% of other senior
debt at December 31, 1995 had interest rates, including the effect of
interest rate swap agreements, that were fixed for a period of more
than one year. The weighted average of these fixed interest rates was
6.15% at December 31, 1995. Approximately 39% of other senior debt at
December 31, 1995 had floating interest rates that were covered by
option-based products with an average strike rate of 7.24%. 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, 1995 were unsecured
notes denominated in various foreign currencies. Concurrent with the
issuance of these unsecured notes denominated in foreign currencies,
TMCC entered into cross currency interest rate swap agreements to
convert these obligations at maturity into U.S. dollar obligations
which aggregate to a principal amount of $5.1 billion. TMCC's foreign
currency debt is translated into U.S. dollars in the financial
statements at the various foreign currency spot exchange rates in
effect at December 31, 1995. The receivables or payables, arising as
a result of the differences between the December 31, 1995 foreign
currency spot exchange rates and the contract rates applicable to the
cross currency interest rate swap agreements, are classified in Other
Receivables or Accounts Payable and Accrued Expenses, respectively, and
would aggregate to a net receivable position of $76 million at
December 31, 1995.
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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 and borrowing levels. The interest rates implicit in leases and
charged on retail finance receivables 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 swap agreements and
cross currency interest rate swap agreements as part of its financing
activities and in managing its cost of borrowings.
The business of TMCC and its subsidiaries (collectively the "Company") is
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.
Financial Condition and Results of Operations
TMCC's earning assets, consisting of investments in operating leases and
finance receivables, totaled $16.3 billion, $15.5 billion and $14.9 billion
at December 31, 1995, September 30, 1995 and December 31, 1994, respectively.
The increases in earning assets were primarily due to the growth in lease
earning assets.
Lease earning assets, consisting of lease finance receivables, net of unearned
income, and investments in operating leases, net of accumulated depreciation,
totaled $9.9 billion, $9.5 billion and $8.2 billion at December 31, 1995,
September 30, 1995 and December 31, 1994, respectively. Lease earning assets
increased from September 30, 1995 and December 31, 1994 primarily due to
operating lease additions exceeding operating lease dispositions as a result
of the effect of special lease programs sponsored by Toyota Motor Sales,
U.S.A., Inc. ("TMS") and the increased acceptance of leasing by retail
consumers. The Company anticipates further growth in lease earning assets as
special lease programs and the increased acceptance of leasing by retail
consumers continue.
Retail finance receivables, net of unearned income, were $5.0 billion,
$4.8 billion and $5.3 billion at December 31, 1995, September 30, 1995 and
December 31, 1994, respectively. Retail finance receivables increased from
September 30, 1995 to December 31, 1995 due to contract volume exceeding
liquidations and decreased from December 31, 1994 to December 31, 1995
primarily due to the sale of approximately $679 million of retail finance
receivables in the fourth quarter of fiscal 1995.
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Wholesale receivables and other dealer loans were $1.4 billion, $1.2 billion
and $1.4 billion at December 31, 1995, September 30, 1995 and December 31,
1994, respectively. The increase in these receivables from September 30, 1995
to December 31, 1995 resulted primarily from the higher average receivables
balance outstanding per dealer.
Contract volume related to TMCC's vehicle leasing and retail financing
programs is summarized below:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1995 1994
------ ------
<S> <C> <C>
Contract volume:
Vehicle lease contracts................. 48,000 41,000
Vehicle retail installment contracts.... 39,000 38,000
------ ------
Total................................ 87,000 79,000
====== ======
</TABLE>
Total contract volume for the first quarter of fiscal 1996 increased as
compared to the first quarter of fiscal 1995 primarily due to the increase in
vehicle lease contract volume. Vehicle lease contract volume increased
primarily due to an increase in the level of special lease programs sponsored
by TMS and the increased acceptance of leasing in the vehicle retail sales
market.
Under special programs sponsored by TMS, TMCC offers reduced monthly payments
on certain Toyota and Lexus new vehicles and Toyota industrial equipment to
qualified lease and retail customers and receives an amount from TMS, and in
some cases, dealers, for each lease and retail installment contract. Amounts
received approximate the balances required by TMCC to maintain revenues at
standard program levels and are earned over the expected lease and retail
installment contract terms. The level of sponsored program activity varies
based on TMS marketing strategies. Revenues earned depend not only on the
level of TMS programs offered, but on the mix of Toyota and Lexus vehicles,
the timing of TMS programs, and the amount of reduced monthly payments
determined by TMS. TMCC's revenues earned from all TMS programs were
$41 million and $28 million during the first quarters of fiscal 1996 and 1995,
respectively.
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TMCC leased or financed ("finance penetration") the following percentages of
new Toyota and Lexus vehicle deliveries (excluding fleet) in the United States
(excluding Hawaii):
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------
1995 1994
------- -------
<S> <C> <C>
Finance penetration............................. 31.7% 31.1%
</TABLE>
Total financing revenues increased 22% in the first quarter of fiscal 1996 as
compared to the same period in fiscal 1995. The increase resulted primarily
from earning asset growth.
In the first quarter of fiscal 1996, TMCC's primary source of revenue and
earning asset growth was leasing. Leasing revenues increased 30% in the first
quarter of fiscal 1996 from the same period in fiscal 1995 primarily due to
the growth in average lease earning assets. The Company anticipates further
growth in leasing revenues as special lease programs sponsored by TMS and the
increased acceptance of leasing by retail consumers are expected to continue
to result in increases in lease earning assets.
Retail financing revenues decreased 7% in the first quarter of fiscal 1996
from the same period in fiscal 1995. Retail financing revenues decreased as
a result of the decline in average retail finance receivables outstanding due
to the sale of retail finance receivables in the fourth quarter of fiscal
1995.
Wholesale and other dealer financing revenues increased 15% in the first
quarter of fiscal 1996 from the same period in fiscal 1995. The increased
revenues resulted primarily from higher average wholesale receivable balances
and increases in wholesale financing rates.
Investments in operating leases are recorded at cost and depreciated,
primarily on a straight-line basis, over the lease term to the estimated
residual value. Finance leases are recorded at cost and amortized using the
effective yield method to the estimated residual value. The estimated
residual value may be less than the purchase option price established at lease
inception. The estimated residual values are derived by vehicle model and
lease term from, among other factors, market information on sales of used
vehicles, historical information, including lease vehicle return trends, and
economic factors. Residual values totaled approximately $6.9 billion and
$5.1 billion at December 31, 1995 and 1994, respectively. TMCC's residual
value risk is a function of the number of off-lease vehicles returned to TMCC
for disposition, and the difference between the amount of disposition proceeds
and the estimated residual value on returned vehicles. TMCC actively manages
the disposition of its lease vehicles by working with lessees, dealers and
auctions through end-of-lease-term remarketing programs. In addition, lease
vehicles scheduled to mature are inspected and lessees are charged for excess
wear and tear, excess mileage and any damage to the vehicles. During the
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<PAGE>
first quarters of fiscal 1996 and 1995, approximately 14% and 9%,
respectively, of lease vehicles originally scheduled to mature in those
quarters were returned to TMCC. The difference between the total disposition
proceeds from off-lease vehicles returned to TMCC and their estimated residual
values was not material to the results of operations for the first quarters
of fiscal 1996 and 1995. As the lease portfolio matures, the Company
anticipates that the level of vehicle lease returns will increase; however,
the Company believes that its lease earning assets are recorded at net
realizable value.
Depreciation on operating leases increased 34% in the first quarter of fiscal
1996 from the same period in fiscal 1995 primarily as a result of the growth
in investments in operating leases. The Company anticipates higher
depreciation on operating leases in fiscal 1996 as compared to fiscal 1995 due
to anticipated growth in investments in operating leases.
Interest expense increased 20% in the first quarter of fiscal 1996 from the
same period in fiscal 1995 due to higher average borrowing levels required to
fund the growth in earning assets and increases in the average cost of
borrowings. The weighted average cost of borrowings was 5.98% and 5.32% for
the three months ended December 31, 1995 and 1994, respectively.
Net financing revenues decreased 1% in the first quarter of fiscal 1996 from
the same period in fiscal 1995. The decrease was primarily attributable to
declining interest margins which was substantially offset by the growth in the
level of earning assets. Interest margin is the excess of the combined
interest rate yield implicit in leases and on finance receivables over the
effective interest rate cost of total borrowings. Lower interest margins in
the first quarter of fiscal 1996 were primarily the result of higher average
borrowing costs as compared to the same period in fiscal 1995.
Other revenues increased 21% during the first quarter of fiscal 1996 from the
same period in fiscal 1995. The increase in other revenues resulted primarily
from the continued growth in the Company's insurance operations and, to a
lesser extent, from servicing and other income related to the retail finance
receivables sold in fiscal 1995.
Operating and administrative expenses increased 10% in the first quarter of
fiscal 1996 from the same period in fiscal 1995. This increase reflected
costs for the growth in the Company's insurance operations and for additional
personnel required to support the Company's growing customer base. The
Company anticipates that operating and administrative expenses for fiscal 1996
will continue to increase as a result of the Company's growing customer base.
The provision for credit losses increased 17% in the first quarter of fiscal
1996 from the same period in fiscal 1995 as a result of the growth in earning
assets and an increase in credit losses primarily related to leasing. The
increase in lease credit losses is primarily due to the aging of lease earning
assets added during high volume periods in fiscal 1995 and 1994. The Company
will continue to monitor loss levels and place emphasis on controlling its
credit loss exposure.
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
1996 and 1995, TMCC did not receive any financial support from TMS.
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Liquidity and Capital Resources
The Company requires, in the normal course of business, substantial funding
to support the level of its earning assets. Significant reliance is placed
on the Company's ability to obtain debt funding in the capital markets in
addition to funding provided by earning asset liquidations and cash provided
by operating activities. Debt issuances have generally been in the form of
commercial paper, United States and Euro medium-term notes ("MTNs"), Eurobonds
and to a lesser extent, the sale of retail finance receivables in the
asset-backed securities market. On occasion, this funding has been
supplemented by loans and equity contributions from TMS.
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 $1.1 billion to
$1.8 billion during the first quarter of fiscal 1996, with an average
outstanding balance of $1.5 billion. For additional liquidity purposes, TMCC
maintains syndicated bank credit facilities with certain banks which
aggregated $1.5 billion at December 31, 1995. No loans were outstanding under
any of these bank credit facilities during the first quarter of fiscal 1996.
TMCC also maintains, along with TMS, uncommitted, unsecured lines of credit
with banks totaling $225 million to facilitate the issuance of letters of
credit. At December 31, 1995, TMCC issued approximately $61 million in
letters of credit, primarily related to the Company's insurance operations.
On occasion, 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 1996.
Long-term funding requirements are met through the issuance of a variety of
debt securities underwritten in both the United States and international
capital markets. United States and Euro MTNs with original maturities ranging
from one to ten years have provided TMCC with a significant source of funding.
During the first quarter of fiscal 1996, TMCC issued approximately
$1.0 billion of MTNs all of which had original maturities of more than one
year. TMCC had approximately $9.2 billion of MTNs outstanding at December 31,
1995, including the effect of foreign currency translations at December 31,
1995 spot exchange rates. Approximately $3.4 billion of the $9.2 billion in
MTNs was denominated in foreign currencies. In addition to MTNs, TMCC had
approximately $2.3 billion of debt securities outstanding issued principally
in the form of Eurobonds in the international capital markets at December 31,
1995, including the effect of foreign currency translations at December 31,
1995 spot exchange rates. Approximately $1.8 billion of the $2.3 billion in
debt securities was denominated in foreign currencies.
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<PAGE>
TMCC anticipates continued use of MTNs in both the United States and
international capital markets. At January 31, 1996, approximately
$1.6 billion was 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 $9.5 billion. Approximately
$3.1 billion was available for issuance under the Euro MTN program as of
January 31, 1996, of which the Company has committed to issue approximately
$29 million. The United States and Euro MTN programs may be expanded from
time to time to allow for the continued use of these sources of funding. In
addition, approximately $700 million of securities registered with the
Securities and Exchange Commission, excluding MTNs, were available for
issuance at January 31, 1996.
Cash flows provided by operating, investing and financing activities have been
used primarily to support earning asset growth. During the first quarter of
fiscal 1996, cash provided by the liquidation of earning assets, totaling
$2.9 billion was used to purchase additional investments in operating leases
and finance receivables totaling $4.0 billion. Investing activities resulted
in a net use of cash of $1.1 billion in the first quarter of fiscal 1996 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 totaling $0.5 billion and net cash provided by financing activities
totaling $0.6 billion during the first quarter of fiscal 1996. 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.
TMCC utilizes derivative financial instruments to manage its currency
exchange rate risk arising as a result of borrowings denominated in foreign
currencies and its interest rate risk. The underlying notional amounts of the
derivative financial instruments are not exchanged and do not represent
exposure to credit loss. TMCC does not enter into these instruments for
trading purposes. TMCC manages counterparty risk through the use of credit
standard guidelines, counterparty diversification and financial condition
monitoring. At December 31, 1995, approximately 82% of TMCC's derivative
financial instruments, based on notional amounts, were with commercial banks
and investment banking firms assigned investment grade ratings of "AA" or
better by national rating agencies. TMCC does not anticipate non-performance
by any of its counterparties. Credit exposure of derivative financial
instruments is represented by the fair value of contracts with a positive fair
value at December 31, 1995 reduced by the effects of master netting
agreements. The credit exposure of TMCC's derivative financial instruments
at December 31, 1995 was $485 million on an aggregate notional amount of
$18.7 billion.
TMCC utilizes cross currency interest rate swap agreements to manage exposure
to exchange rate fluctuations on principal and interest payments for
borrowings denominated in foreign currencies. Debt issued in foreign
currencies is hedged by concurrently executed cross currency interest rate
swap agreements. These cross currency interest rate swap agreements involve
agreements to exchange TMCC's foreign currency principal and interest
obligations for U.S. dollar obligations at agreed-upon currency exchange rates
and interest rates. In the event that a counterparty fails to perform, TMCC's
credit exposure is limited to the currency exchange and interest rate
differential between the non-performing swap and the corresponding debt
transaction.
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<PAGE>
TMCC utilizes interest rate swap agreements and option-based products in
managing its exposure to interest rate fluctuations. The mix of fixed and
floating interest rates on TMCC's debt outstanding is periodically adjusted
through the use of interest rate swap agreements and other option-based
products. Interest rate swap agreements are executed as an integral part of
specific debt transactions or on a portfolio basis. TMCC's interest rate swap
agreements involve agreements to pay at a certain fixed or floating rate and
to receive payments at a different rate, at specified intervals, calculated
on an agreed-upon notional amount. In the event that a counterparty fails to
perform, TMCC's credit exposure is limited to the interest rate differential.
Option-based products consist primarily of purchased interest rate cap
agreements and, to a lesser extent, corridor agreements. Option-based
products are agreements which either grant TMCC the right, for a premium
payment, to receive a payment when interest rates exceed a specified level,
or require TMCC, in receipt of a premium, to make a payment when interest
rates exceed or go below a specified level. An interest rate increase of 1%
(100 basis points) would raise TMCC's weighted average interest rate,
including the effects of interest rate swap agreements and option-based
products, by .32%, from 5.79% to an estimated 6.11% at December 31, 1995.
Conversely, an interest rate decrease of 1% (100 basis points) would lower
TMCC's weighted average interest rate, including the effects of interest rate
swap agreements and option-based products, by .37%, from 5.79% to an estimated
5.42% at December 31, 1995.
A reconciliation of the activity of TMCC's derivative financial instruments
for the first quarters of fiscal 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
Cross
Currency
Interest Interest Indexed
Rate Swap Rate Swap Option-based Note Swap
Agreements Agreements Products Agreements
------------ ------------ ------------ ------------
1995 1994 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ---- ---- ----
(Dollars in Billions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning notional amount....... $4.8 $4.0 $7.1 $7.6 $3.8 $0.5 $1.7 $2.4
Add:
New agreements............... 0.1 0.3 1.6 0.5 0.6 1.9 - 0.1
Less:
Terminated agreements........ - - - - - - - -
Expired agreements........... 0.3 - 0.4 0.3 - - 0.3 0.3
---- ---- ---- ---- ---- ---- ---- ----
Ending notional amount.......... $4.6 $4.3 $8.3 $7.8 $4.4 $2.4 $1.4 $2.2
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
On occasion, 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 1996.
-14-
<PAGE>
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
The foregoing Management's Discussion and Analysis contains various "forward
looking statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent the Company's expectations or beliefs concerning
future events, including the following: statements regarding the further
growth in lease earning assets (including investments in operating leases);
the increased acceptance of leasing by retail consumers; the further growth
in leasing revenues; higher depreciation on operating leases; the level of
leased vehicle returns; that the lease earning assets on the Company's books
are recorded at net realizable value; the growth in operating and
administrative expenses as a result of a growing customer base; the Company's
continued use of MTNs in the United States and the international capital
markets; the sufficiency of the Company's cash provided by operating,
investing and financing activities for the Company's future liquidity and
capital resource needs; and the continued performance of the Company's
counterparties under interest rate and cross currency swap agreements and
option-based products. The Company cautions that these statements are further
qualified by important factors that could cause actual results to differ
materially from those in the forward looking statements, including, without
limitations, the following: decline in demand for Toyota and Lexus products;
the effect of economic conditions; a decline in the market acceptability of
leasing; the effect of competitive pricing on interest margins; increases in
prevailing interest rates; changes in pricing due to the appreciation of the
Japanese yen against the United States dollar; the effect of governmental
actions; the effect of competitive pressures on the used car market and
residual values; the continuation of, and if continued, the level and type of
special programs offered by TMS; the ability of the Company to successfully
access the United States and international capital markets; increased costs
associated with the Company's debt funding efforts; and the ability of the
Company's counterparties to perform under interest rate and cross currency
swap agreements. Results actually achieved thus may differ materially from
expected results included in these statements.
Recently Enacted Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("Statement No. 121"). Statement No. 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be
held and used and long-lived assets and certain identifiable intangibles to
be disposed of. Statement No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In addition,
Statement No. 121 requires that certain long-lived assets and intangibles to
be disposed of be reported at the lower of carrying amount or fair value less
cost to sell. Statement No. 121 is effective for fiscal years beginning after
December 15, 1995. The Company has not determined the impact that the
adoption of this accounting standard will have on its financial position or
results of operations. The Company plans to adopt Statement No. 121 in the
first interim period of fiscal 1997.
-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. Certain of these
actions are similar to suits which have been filed against other
financial institutions and captive finance companies. 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. The foregoing is a forward looking statement within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represents the Company's expectations and
beliefs concerning future events. The Company cautions that its
discussion of Legal Proceedings is further qualified by important
factors that could cause actual results to differ materially from
those in the forward looking statement, including but not limited
to the discovery of facts not presently known to the Company or
determinations by judges, juries or other finders of fact which
do not accord with the Company's evaluation of the possible
liability from existing litigation.
ITEM 2. CHANGES IN SECURITIES.
There is nothing to report with regard to this item.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There is nothing to report with regard to this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
-16-
<PAGE>
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 19,
are filed as part of this report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the registrant during
the quarter ended December 31, 1995.
-17-
<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 12, 1996 By /S/ WOLFGANG JAHN
-------------------------------
Wolfgang Jahn
Senior Vice President and
General Manager
(principal executive officer)
Date: February 12, 1996 By /S/ PATRICK BREENE
-------------------------------
Patrick Breene
Corporate Manager -
Finance and Administration
(principal accounting officer)
-18-
<PAGE>
EXHIBIT INDEX
Exhibit Method
Number Description of Filing
- ------- ----------- ---------
10.1 Toyota Motor Sales, U.S.A., Inc. Supplemental Filed
Executive Retirement Plan. Herewith
10.2 Toyota Motor Sales, U.S.A., Inc. 401(k) Filed
Excess Plan. Herewith
12.1 Calculation of ratio of earnings to fixed charges. Filed
Herewith
27.1 Financial Data Schedule. Filed
Herewith
-19-
<PAGE>
EXHIBIT 10.1
TOYOTA MOTOR SALES, U.S.A., INC.
Supplemental Executive Retirement Plan
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I Purpose.................................................... 1
ARTICLE II Definitions................................................ 1
ARTICLE III Eligibility and Participation.............................. 3
3.1 Eligibility to Participate................................. 3
3.2 Certain Enrollment Procedures.............................. 4
ARTICLE IV Calculation of Benefits.................................... 4
4.1 General.................................................... 4
4.2 Benefit Formula............................................ 4
4.3 Benefit Commencement before Age 62......................... 4
ARTICLE V Vesting of Benefits........................................ 5
ARTICLE VI Payment of Benefits........................................ 5
6.1 Date of Payment............................................ 5
6.2 Form of Payment............................................ 5
ARTICLE VII Death and Disability Benefits.............................. 6
7.1 Death Benefit.............................................. 6
7.2 Disability Benefit......................................... 7
ARTICLE VIII Right to Terminate or Modify Plan.......................... 7
ARTICLE IX No Assignment, Etc......................................... 8
ARTICLE X The Committee.............................................. 8
ARTICLE XI Release.................................................... 9
ARTICLE XII No Contract of Employment.................................. 9
ARTICLE XIII Company's Obligation to Pay Benefits....................... 9
ARTICLE XIV Claim Review Procedure..................................... 9
ARTICLE XV Arbitration................................................ 10
ARTICLE XVI Miscellaneous.............................................. 11
16.1 Successor and Assigns...................................... 11
16.2 Notices.................................................... 11
16.3 Limitations on Liability................................... 11
16.4 Certain Small Benefits..................................... 11
16.5 Governing Law.............................................. 11
<PAGE>
TOYOTA MOTOR SALES, U.S.A., INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
Purpose
-------
The purpose of the Toyota Motor Sales, U.S.A., Inc. Supplemental
Executive Retirement Plan (the "Plan") is to attract and retain valuable
executive employees by making available certain benefits that otherwise would
be unavailable under the Company's Qualified Pension Plan.
This Plan is designed to qualify as an unfunded plan of deferred
compensation for a select group of management or highly compensated employees
described in 29 CFR 2520.104 23 and Sections 201(a), 301(a)(3) and 401(a)(1)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Further, this Plan is designed to qualify as a plan described in Section
114(b)(1)(I) of the Internal Revenue Code ("Code").
ARTICLE II
Definitions
-----------
The following terms shall have the meanings set forth below in this
Article II, when capitalized:
2.1 "Base Salary", for any period, means a Participant's base salary
paid for such period, determined in a manner consistent with the determination
of "Compensation" under the Qualified Pension Plan, but without application
of any limitation under Code Section 401(a)(17) or similar such provision, and
without application of any family aggregation rules under Code Section
414(q)(6) or similar such provision that the Committee determines to be
relevant only to the Qualified Pension Plan. Base Salary shall include any
amount that would have been paid as base salary but for the Participant's
election to defer such amount under a plan of deferred compensation sponsored
by the Company.
2.2 "Bonus Pay" for any period, means the total of all bonus payments
made for such period, determined in a manner consistent with the determination
of "Bonus/Gift" under the Qualified Pension Plan, but without application of
any limitation under Code Section 401(a)(17) or similar such provision,
without application of any provision of the Qualified Pension Plan that
considers only a stated percentage of a Participant's "Bonus/Gift" and without
application of any family aggregation rules under Code Section 414(q)(6) or
similar such provision that the Committee determines to be relevant only to
the Qualified Pension Plan, and Bonus Pay shall include any amount that would
have been paid as bonus pay but for the Participant's election to defer such
amount under a plan of deferred compensation sponsored by the Company.
2.3 "Committee" means the committee appointed to administer the Plan
in accordance with Article X.
2.4 "Company" means Toyota Motor Sales, U.S.A., Inc.
2.5 "Effective Date" means October 1, 1995, with the result that this
Plan shall be effective for persons retiring on or after October 1, 1995.
1
<PAGE>
2.6 "Eligible Employee" means an employee of the Company who on any
date after the Effective Date is a General Manager, Area Manager, Corporate
Manager, Vice President, Group Vice President or Officer. The Committee shall
have full and complete discretion to determine whether an employee occupies
one of the aforementioned positions for purposes of being an Eligible
Employee.
2.7 "Officer" means an officer of Company; provided, however, that
the term "officer" shall not include a General Manager, Area Manager,
Corporate Manager, or Vice President, nor shall the term "Officer," include a
Group Vice President unless determined to the contrary, in writing, by the
President of the Company.
2.8 "Participant" means each Eligible Employee who has commenced to
participate in this Plan in accordance with Article III.
2.9 "Plan" means the Toyota Motor Sales, U.S.A., Inc. Supplemental
Executive Retirement Plan, as set forth herein.
2.10 "Plan Administrator" means Toyota Motor Sales, U.S.A., Inc.. For
purposes of Section 3(16)(A) of ERISA, Toyota Motor Sales, U.S.A., Inc. shall
be the "plan administrator" and shall be responsible for compliance with any
applicable reporting and disclosure requirements imposed by ERISA.
2.11 "Plan Year" means the fiscal period commencing each October 1 and
ending the following September 30.
2.12 "Primary Social Security Benefit" means a Participant's primary
social security benefit determined under rules applicable to the Qualified
Pension Plan.
2.13 "Qualified Pension Plan" means the Toyota Motor Sales, U.S.A.,
Inc. Pension Plan, as in effect from time to time.
2.14 "Separation from Service" means any separation from service of
the Company for any reason. In the case of a Participant on disability,
Separation from Service shall be deemed to occur when long term disability
coverage commences, unless otherwise determined by the Committee.
2.15 "SERP Calculated Age" means a Participant's actual age, except
that for each twelve (12) consecutive month period during which a Participant
is a Vice President, Group Vice President or Officer of Toyota, such
Participant's age shall be increased by one-half year (with proration on a
monthly basis for periods of fewer than twelve (12) consecutive months);
provided, however, that no more than ten (10) such twelve month periods shall
be taken into account with respect to a Participant's service as a Vice
President, or Group Vice President who is not an Officer (no such limitation
shall apply with respect to a Participant's service as an Officer).
2.16 "SERP Pay" means the Participant's average annual Base Salary
plus an applicable percentage of such Participant's average annual Bonus Pay,
for the thirty-six (36) consecutive months out of the last one hundred twenty
(120) consecutive months of employment by the Company that produce the highest
average. For purposes of determining such average, the Committee shall apply
principles consistent with the principles applied for such purpose under the
Qualified Pension Plan, taking into account differences in the averaging
periods and without application of rules determined by the Committee to be
2
<PAGE>
relevant only to the Qualified Pension Plan. The applicable percentage of a
Participant's Bonus Pay to be used in determining a Participants SERP Pay
shall be fifty percent (50%) plus an additional five (5) percentage points for
each year of service as a General Manager, Area Manager, Corporate Manager,
Vice President, Group Vice President or Officer, provided, however, that no
more than twenty-five (25) percentage points shall be added for service other
than as an Officer, and no more than fifty (50) percentage points shall be
added for service as an Officer. In no event shall the applicable percentage
of a Participant's Bonus Pay to be used in determining a Participant's SERP
Pay exceed one hundred percent (100%). SERP Pay shall be prorated on a
monthly basis.
2.17 "SERP Years of Service" means the total of a Participant's years
of service, as determined by applying principles consistent with principles
applied under the Qualified Pension Plan (including the maximum twenty-five
(25) years of service thereunder, but not the break in service rules, or,
except as expressly provided herein, the special rule as to disability, or any
other rule determined by the Committee to be relevant only to the Qualified
Pension Plan). In addition, for each SERP Year of Service earned pursuant to
the preceding provisions of this Section 2.17 for service as a Vice President
or Group Vice President who is not an Officer, an additional one-quarter SERP
Year of Service shall be credited, and for each SERP Year of Service earned
pursuant to the preceding provisions of this Section 2.17 for service as an
Officer, an additional one-half SERP Year of Service shall be credited,
provided however, that the maximum number of SERP Years of Service that shall
be recognized under this Plan shall be thirty (30). SERP Years of Service
shall be prorated on a monthly basis.
2.18 "Toyota" means Toyota Motor Sales, U.S.A., Inc.
2.19 "Toyota Pension Plan Benefit" means the Participant's benefit
under the Qualified Pension Plan, including any benefit payable by reason of a
provision therein providing a non-qualified pension benefit on account of
the application of certain Internal Revenue Code provisions applicable to
plans qualified under Section 401(a) of the Code. For purposes of determining
the Toyota Pension Plan Benefit of any Participant for purposes of this Plan,
any benefit that would have been included in the Participant's Toyota Pension
Plan Benefit but for application of the provisions of any domestic relations
order, Internal Revenue Service or other governmental seizure, attachment or
other order or decree, or tax, penalty or other reduction in the Participant's
Toyota Pension Plan Benefit, nevertheless shall be deemed to be a part of the
Participant's Toyota Pension Plan Benefit for purposes of this Plan. The
Toyota Pension Plan Benefit shall be computed as if such benefit were paid
commencing as of the same date as benefits commence to be paid under this
Plan, and were paid in the form of a single life annuity for the life of the
Participant.
ARTICLE III
Eligibility and Participation
-----------------------------
3.1 Eligibility to Participate
Subject to the provisions of Section 3.2 below, each Eligible Employee
shall become a Participant as of the later of the Effective date or the date
on which person becomes an Eligible Employee.
3
<PAGE>
3.2 Certain Enrollment Procedures
As a condition of participation or continued participation in this Plan
the Committee may require an Eligible Employee to deliver to the Committee
such properly completed enrollment forms and agreements as the Committee may
require.
Commencement or recommencement of active participation following any
Separation from Service or other interruption of employment shall be on such
terms and under such conditions as the Committee may, in its discretion,
provide.
ARTICLE IV
Calculation of Benefits
-----------------------
4.1 General
A Participant's benefits under this Plan shall be calculated as provided
in this Article IV, provided, however, that a Participant's eligibility to
receive a benefit hereunder shall be subject to succeeding provisions of this
Plan.
4.2 Benefit Formula
A Participant's benefit, expressed in the form of an annual benefit
payable commencing when the Participant's SERP Calculated Age is age sixty-two
(62) and payable for the lifetime of the Participant shall be equal to the
product of (a) multiplied by (b), minus (c), where (a), (b) and (c) are
determined as follows:
(a) Equals the remainder of
(i) Participant's SERP Pay, minus
(ii) The Participant's estimated Primary Social Security
Benefit
and
(b) Equals two (2) percentage points multiplied by the
Participant's SERP Years of Service
and
(c) Equals the Participant's Toyota Pension Plan Benefit
(expressed as an annual benefit).
4.3 Benefit Commencement before Age 62
If a Participant's benefit under this Plan commences to be paid before
the Participant's SERP Calculated Age equals sixty-two (62), the benefit
calculated as provided in Section 4.2 shall be reduced to reflect the longer
anticipated period of time that such benefit is to be paid, and such reduction
shall be determined in the same manner as a reduction is computed under the
Qualified Pension Plan in the case of a Participant who retires under such
4
<PAGE>
Qualified Pension Plan with at least five (5) years of participation but
before attainment of age sixty-two (62); provided, however, that in applying
such rules of the Qualified Pension Plan as may be in effect from time to
time, the reduction for purposes of this Plan (but not for purposes of the
Qualified Pension Plan) shall reflect the Participant's SERP Calculated Age
in lieu of the Participant's actual age.
ARTICLE V
Vesting of Benefits
-------------------
Except as provided in Article VII, no Participant shall have a vested
interest in benefits under this Plan unless and until (a) the Participant and
the President of Toyota, or the delegate of such President, agree in writing
on a date of the Participant's Separation from Service that is mutually
acceptable to the Participant and Toyota, and (b) the Participant's Separation
from Service occurs as provided in such agreement and on or after such
Participant's SERP Calculated Age is at least fifty-five (55) and such
Participant has a fully vested benefit under the Qualified Pension Plan.
Until such a termination of employment occurs in accordance with such an
agreement, all benefits of a Participant shall remain completely forfeitable.
Notwithstanding the foregoing, if the President of Toyota invites a
Participant to retire for any reason, benefits accrued under this Plan shall
be forfeited unless such Participant accepts such invitation to retire and
retires on such date or within such period of time as is determined by the
President of Toyota, and, unless otherwise determined by the President of
Toyota, the Participant shall cease to participate herein.
ARTICLE VI
Payment of Benefits
-------------------
6.1 Date of Payment
Except as otherwise provided in Article VII and subject to the provisions
of Article V, a Participant's benefit hereunder, payable on account of a
Separation from Service on or after the Participant's SERP Calculated Age
equals fifty-five (55) and such Participant has a fully vested benefit under
the Qualified Pension Plan, shall commence to be paid as soon as practicable
following the date of such Separation from Service.
6.2 Form of Payment
(a) Single Life Annuity. The normal form of payment under the
-------------------
Plan for a Participant who is not married on the date of his or her
Separation from Service shall be a single life annuity providing
monthly payments for the life of the Participant, and under which all
benefit payments cease as of the date of death of the Participant.
(b) Unreduced Joint and Survivor Annuity. The normal form of
------------------------------------
benefit payable to a Participant who is an Officer, Group Vice
President or Vice President and lawfully married to a spouse on the
date of his or her Separation from Service and who has been
continuously married to such spouse throughout the twelve (12) month
period ending on the Participant's date of Separation from Service
5
<PAGE>
shall be an unreduced fifty percent (50%) joint and survivor annuity,
providing monthly payments during such Participant's life in the same
amount as the monthly amount payable under the single life annuity
form, and providing continued monthly payments after the Participant's
death to the spouse to whom the participant is married on the date of
his or her Separation from Service. Each such continued monthly
payment payable to the surviving spouse after the Participant's death
shall be fifty percent (50%) of the monthly payment amount payable
during the Participant's lifetime. Such continuing payments shall
continue during the life of the surviving spouse and shall cease on the
date of death of such surviving spouse.
(c) Reduced Joint and Survivor Annuity. The normal form of
-----------------------------------
benefit payable to a Participant who is not an Officer, Group Vice
President or Vice President, and who is lawfully married to a spouse on
the date of his or her Separation from Service but who has not been
continuously married to such spouse throughout the twelve (12) month
period ending on the Participant's date of Separation from Service
shall be a reduced fifty percent (50%) joint and survivor annuity,
providing reduced monthly payments during such Participant's life, and
providing continued monthly payments after the Participant's death to
the spouse to whom the participant is married on the date of his or her
Separation from Service. Each such continued monthly payments payable
to the surviving spouse shall be fifty percent (50%) of the monthly
payment amount payable during the Participant's lifetime. The
reduction in the Participant's monthly benefits shall be determined by
application of the same reduction factors as are applied for purposes
of determining such reduction under the Qualified Pension Plan. Such
continuing payments shall continue during the life of the surviving
spouse and shall cease on the date of death of such surviving spouse.
(d) Request for Optional Forms. A Participant may request the
---------------------------
Committee to cause such Participant's benefits to be paid in another
optional form provided from time to time under the Qualified Pension
Plan, provided, however, that no such optional form shall reflect any
actuarial subsidy attributable to the subsidy provided in Section
6.2(b) hereof, and the Committee shall have no obligation to approve
any such request. The Committee may require the payment form hereunder
to be the same as the payment form under the Qualified Pension Plan.
ARTICLE VII
Death and Disability Benefits
-----------------------------
7.1 Death Benefit
In the event of the death of a Participant who is lawfully married to a
spouse on the date of the Participant's death, a death benefit shall be
payable to such surviving spouse. Such benefit shall consist of monthly
payments, each of which is equal to the monthly amount that would have been
paid to such spouse (a) had the Participant's Separation from Service occurred
on the later of (i) the Participant's date of death, or (ii) the date on which
the Participant's SERP Calculated Age would have equaled at least age fifty-
five (55), (b) had the Participant's benefit commenced to be paid in the
applicable payment form provided in Section 6.2, and (c) had the Participant's
6
<PAGE>
death occurred immediately after such commencement of benefits. Such death
benefit shall begin to be paid as soon as practicable after the latest of (a)
the Participant's date of death, (b) the date on which the Participant's SERP
Calculated Age equals at least age fifty-five (55), and (c) the date on which
such benefit applications, releases, and other documents as the Committee may
require to be given are received by the Committee in form and manner
satisfactory to the Committee. Death benefit payments shall cease as of the
date of death of the spouse receiving such payments. No benefit shall be
payable to any person other than a spouse described in the first sentence of
this Section 7.1. This Plan shall not give effect to disclaimers, whether
made under state or federal law.
7.2 Disability Benefit
(a) If a Participant incurs a Total and Permanent Disability,
as such term is defined from time to time under Qualified Pension Plan
and has a fully vested benefit under the qualified Pension Plan but at
the date of the occurrence of such Total and Permanent Disability has
not completed at least one hundred twenty (120) months of service as an
employee of the Company, whether or not such service is performed as an
Eligible Employee as defined herein, such Participant shall be eligible
to receive a benefit commencing as soon as practicable after the later
of the date of such Participant's Separation from Service or the date
on which such Participant's SERP Calculated Age equals fifty-five (55).
Such benefit shall be equal to a benefit calculated as of the date of
occurrence of the event constituting a Total and Permanent Disability.
(b) If a Participant incurs a Total and Permanent Disability,
as such term is defined from time to time under Qualified Pension Plan,
and at the date of the occurrence of such Total and Permanent
Disability has completed at least one hundred twenty (120) months of
service as an employee of the Company, whether or not such service is
performed as an Eligible Employee as defined herein, such Participant
shall be eligible to receive a benefit commencing as soon as
practicable after the later of the date of such Participant's
Separation from Service or the date on which such Participant attains
age sixty-two (62). Such benefit shall be based upon all factors as in
effect on the date of the Participant's Separation from Service by
reason of Total and Permanent Disability, except that such Participant
shall, during the continuation of such Total and Permanent Disability
and until the commencement of such benefit, be eligible to continue to
accrue additional SERP Years of Service which shall be considered (up
to the maximum number of such years generally applicable under the
Plan) in the computation of such Participant's benefit. To the extent
practicable, the Participant's SERP Pay shall be computed by applying
rules similar to those applicable under the Qualified Pension Plan to
the extent such rules provide for assuming that the Participant's
compensation continues during a period of disability at the same rate
as existed prior to disability.
ARTICLE VIII
Right to Terminate or Modify Plan
---------------------------------
By action of the Executive Committee of Toyota Motor Sales, U.S.A., Inc.,
Toyota may modify or terminate this Plan without further liability to any
Eligible Employee or former employee or any other person. Notwithstanding the
7
<PAGE>
preceding provisions of this Article VIII, except as expressly required by
law, this Plan may not be modified or terminated as to any Participant in a
manner that adversely affects the payment of benefits in pay status, except
that in the event of the termination of the Plan as to all Participants, this
Plan may in the sole discretion of the Executive Committee of said Board be
modified to accelerate payment of benefits to Participants.
ARTICLE IX
No Assignment, Etc.
-------------------
Benefits under this Plan may not be assigned or alienated and shall not
be subject to the claims of any creditor. A Participant shall not be
permitted to borrow under the Plan, nor shall a Participant be permitted to
pledge or otherwise use his benefits hereunder as security for any loan or
other obligation. No payments shall be made to any person or persons other
than expressly provided herein, or on any date or dates other than as
expressly provided herein.
It is each Participant's sole responsibility to obtain such consents, and
to take such other actions as may be necessary or appropriate in connection
with participation in this Plan, including but not limited to obtaining
spousal or other consents, as may be necessary or appropriate to reflect
marital property, support, or other obligations arising under contract, order
or by operation of law.
ARTICLE X
The Committee
-------------
(a) The appointment, removal and resignation of members of the
Committee shall be governed by the President of Toyota. Subject to
change by the said President the membership of the Committee shall be
the same as the membership of the Toyota Benefits Committee of the
Qualified Pension Plan.
(b) The Committee shall have authority to oversee the
management and administration of the Plan, and in connection therewith
is authorized in its sole discretion to make, amend and rescind such
rules as it deems necessary for the proper administration of the Plan,
to make all other determinations necessary or advisable for the
administration of the Plan and to correct any defect or supply any
omission or reconcile any inconsistency in the Plan in the manner and
to the extent that the Committee deems desirable to carry the Plan into
effect. The powers and duties of the Committee shall include without
limitation, the following:
(i) Resolving all questions relating to the eligibility
of select management and highly compensated employees to become
Participants; and
(ii) Resolving all questions regarding payment of benefits
under the Plan and other questions regarding plan participation.
Any action taken or determination made by the Committee shall be
conclusive on all parties. The exercise of or failure to exercise any
discretion reserved to the Committee to grant or deny any benefit to a
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Participant or other person under the Plan shall in no way require the
Committee or any person acting on behalf thereof, to similarly exercise or
fail to exercise such discretion with respect to any other Participant.
ARTICLE XI
Release
-------
As a condition to making any payment under the Plan, or to giving effect
to any election or other action under the Plan by any Participant or any other
person, the Plan Administrator may require such consents or releases as it
determines to be appropriate, and further may require any such designation,
election or other action to be in writing, in a prescribed form and to be
filed with the Committee in a manner prescribed by the Committee. In the
event the Committee determines, in its discretion, that multiple conflicting
claims may be made as to all or a part of a benefit accrued hereunder by a
Participant, the Committee may delay the making of any payment until such
conflict or multiplicity of claims is resolved.
ARTICLE XII
No Contract of Employment
-------------------------
This Plan shall not be deemed to give any employee the right to be
retained in the employ of the Company or to interfere with the right of the
Company to discharge or retire any employee at any time, nor shall this Plan
interfere with the right of the Company to establish the terms and conditions
of employment of any employee.
ARTICLE XIII
Company's Obligation to Pay Benefits
------------------------------------
Nothing contained in this Plan and no action taken pursuant to the
provisions of this Plan shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company, and any Employee, an
Employee's spouse or former spouse or any other person. Funds to provide
benefits under the provisions of this Plan shall continue for all purposes to
be a part of the general funds of the Company. To the extent that any person
acquires a right to receive payments from the Company under this Plan such
right shall be no greater than the right of any unsecured general creditor of
the Company.
ARTICLE XIV
Claim Review Procedure
----------------------
(a) A person who believes that he or she has not received all
payments to which he or she is entitled under the terms of this Plan
may submit a claim therefor. Within ninety (90) days following receipt
of a claim for benefits under this Plan, and all necessary documents
and information, the Committee or its authorized delegate reviewing the
claim shall, if the claim is not approved, furnish the claimant with
written notice of the decision rendered with respect to the
application.
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(b) The written notice contemplated in (a) above shall set
forth:
(i) the specific reasons for the denial, with reference
to the Plan provisions upon which the denial is based;
(ii) a description of any additional information or
material necessary for perfection of the application (together
with an explanation why the material or information is
necessary); and
(iii) an explanation of the Plan's claim review procedure.
(c) A claimant who wishes to contest the denial of his claim
for benefits or to contest the amount of benefits payable to him shall
follow the procedures for an appeal of benefits as set forth below, and
shall exhaust such administrative procedures prior to seeking any other
form of relief.
(d) A claimant who does not agree with the decision rendered as
provided above in this Article XIV with respect to his application may
appeal the decision to the Committee. The appeal shall be made, in
writing, within sixty-five (65) days after the date of notice of such
decision with respect to the application. If the application has
neither been approved nor denied within the ninety-day (90) period
provided in (a) above, then the appeal shall be made within sixty-five
(65) days after the expiration of the ninety-day (90) period.
(e) The claimant may request that his application be given full
and fair review by the Committee. The claimant may review all
pertinent documents and submit issues and comments in writing in
connection with the appeal. The decision of the Committee shall be
made promptly, and not later than sixty (60) days after the Committee's
receipt of a request for review, unless special circumstances require
an extension of time for processing, in which case a decision shall be
rendered as soon as possible, but not later than one hundred twenty
(120) days after receipt of a request for review. The decision by the
Committee on review shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be
understood by the claimant with specific reference to the pertinent
Plan provisions upon which the decision is based.
ARTICLE XV
Arbitration
-----------
A claimant may contest the Committee's denial of his or her appeal only
by submitting the matter to arbitration. In such event, the claimant and the
Committee shall select an arbitrator from a list of names supplied by the
American Arbitration Association in accordance with such Association's
procedures for selection of arbitrators, and the arbitration shall be
conducted in accordance with the rules of such Association. The arbitrator's
authority shall be limited to the affirmance or reversal of the Committee's
denial of the appeal, and the arbitrator shall have no power to alter, add to
or subtract from any provision of this Plan. Except as otherwise required by
the Employee Retirement Income Security Act of 1974, the arbitrator's decision
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shall be final and binding on all parties, if warranted on the record and
reasonably based on applicable law and the provisions of this Plan.
ARTICLE XVI
Miscellaneous
-------------
16.1 Successor and Assigns
The Plan shall be binding upon and shall inure to the benefit of the
Company, its successors and assigns, and all Participants.
16.2 Notices
Any notice or other communication required or permitted under the Plan
shall be in writing, and if directed to the Company shall be sent to the
Committee or its authorized delegate, and if directed to a Participant shall
be sent to such Participant at his last known address as it appears on the
records of the Company.
16.3 Limitations on Liability
(a) The Company does not warrant any tax benefit nor any
financial benefit under the Plan. Without limitation to the foregoing,
the Company and its officers, employees and agents shall be held
harmless by the Participant or Beneficiary from, and shall not be
subject to any liability on account of, the federal or state or local
income tax consequences, or any other consequences of any deferrals or
credits with respect to Participants under the Plan.
(b) The Company, its officers, employees, and agents shall be
held harmless by the Participant from, and shall not be subject to any
liability hereunder for, all acts performed in good faith.
16.4 Certain Small Benefits
Notwithstanding any other provision of this Plan to the contrary, in the
case of a Participant whose annual benefit hereunder is not in excess of ten
thousand dollars ($10,000), the Committee may, in its sole discretion,
distribute an amount equal to the actuarial equivalent value of future
anticipated benefits, determined in accordance with such actuarial factors and
interest rate assumptions utilized from time to time under the Qualified
Pension Plan for purposes of making lump sum payments thereunder.
16.5 Governing Law
This Plan and any Participant Compensation deferral agreement hereunder
are subject to the laws of the State of California, to the extent not
preempted by ERISA.
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IN WITNESS WHEREOF, Toyota Motor Sales, U.S.A., Inc. has caused this
instrument to be executed by its duly authorized officers, effective as of the
Effective Date set forth hereinabove.
TOYOTA MOTOR SALES, U.S.A., INC.
DATE: February 7, 1996 By: /S/ SHINJI SAKAI
------------------------------
Shinji Sakai
President
12
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Exhibit 10.2
TOYOTA MOTOR SALES, U.S.A., INC.
401(k) EXCESS PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I Purpose............................................... 1
ARTICLE II Definitions........................................... 1
ARTICLE III Eligibility and Participation......................... 3
3.1 Eligibility to Participate............................ 3
ARTICLE IV Compensation Deferrals by Participants................ 3
4.1 Participant Compensation Deferrals.................... 3
4.2 Amounts of Participant Compensation Deferrals......... 3
4.3 Provisions of Compensation Deferral Agreement......... 4
ARTICLE V Company Matching Credits.............................. 5
5.1 Matching Credits...................................... 5
ARTICLE VI Participant Accounts and Subaccounts.................. 5
6.1 Participant Accounts and Subaccounts.................. 5
6.2 Valuation of Account.................................. 5
ARTICLE VII Payment of Benefits................................... 6
7.1 Vesting of Benefits................................... 6
7.2 Form and Date of Payment.............................. 6
7.3 Hardship Distributions................................ 7
ARTICLE VIII Death Benefits........................................ 7
ARTICLE IX Right to Terminate or Modify Plan..................... 8
ARTICLE X No Assignment, Etc.................................... 8
ARTICLE XI The Committee......................................... 8
ARTICLE XII Release............................................... 9
ARTICLE XIII No Contract of Employment............................. 9
ARTICLE XIV Company's Obligation to Pay Benefits.................. 9
ARTICLE XV Claim Review Procedure................................ 9
ARTICLE XVI Arbitration........................................... 10
ARTICLE XVII Miscellaneous......................................... 11
17.1 Successor and Assigns................................. 11
17.2 Notices............................................... 11
17.3 Limitations on Liability.............................. 11
17.4 Certain Small Benefits................................ 11
17.5 Governing Law......................................... 11
<PAGE>
TOYOTA MOTOR SALES, U.S.A., INC. 401(k) EXCESS PLAN
ARTICLE I
Purpose
-------
The purpose of the Toyota Motor Sales, U.S.A., Inc. 401(k) Excess Plan
(the "Plan") is to attract and retain valuable executive employees by making
available certain benefits that otherwise would be unavailable under the
Company's Qualified 401(k) Plan because of limitations imposed under the
Internal Revenue Code.
This Plan is designed to qualify as an unfunded plan of deferred
compensation for a select group of management or highly compensated employees
described in 29 CFR 2520.104-23 and Sections 201(a), 301(a)(3) and 401(a)(1)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
ARTICLE II
Definitions
-----------
The following terms shall have the meanings set forth below in this
Article II, when capitalized:
2.1 "Account" means the Account maintained for a Participant on the
books of the Company to reflect the Participant's interest in this Plan. Such
Account shall consist of the following subaccounts:
- A Participant Compensation Deferral Subaccount reflecting
the Participant's Compensation Deferrals in accordance with Article IV,
as adjusted to reflect an investment return as provided in
Section 6.2.
- A Matching Credits Subaccount reflecting Matching
Credits made on behalf of the Participant in accordance with Article V,
as adjusted to reflect an investment return as provided in Section 6.2.
2.2 "Bonus Compensation" means Bonus/Gift Compensation as defined
in the Qualified 401(k) Plan determined, however, without regard to the
limitations of Section 401(a)(17) of the Code, and prior to reduction by any
deferral under this Plan. Bonus Compensation shall take into account, for any
Participant Compensation Deferral election, only such compensation as is
payable with respect to services rendered after such election.
2.3 "Company" means Toyota Motor Sales, U.S.A., Inc., and shall
include any corporation that is affiliated with Toyota Motor Sales, U.S.A.,
Inc., within the meaning of Section 414(b), (c), (m) or (o) of the Internal
Revenue Code.
2.4 "Compensation Deferral Agreement" means an agreement to defer
compensation as described herein.
2.5 "Committee" means the committee appointed to administer the Plan
in accordance with Article X.
2.6 "Effective Date" means October 1, 1995.
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2.7 "Eligible Employee" means, for any Plan Year, any employee of the
Company who satisfies all of the following conditions:
(a) such employee (i) has a rate of compensation that will
result in such Participant having Excess Base Pay Compensation for
such Plan Year, or (ii) in the sole discretion of the Committee, is
determined to be eligible for the SERP.
(b) such employee is, in the sole discretion of the
Committee, determined likely to be eligible to make Before Tax
Contributions to the Qualified 401(k) Plan for such Plan Year.
2.8 "Excess Base Pay Compensation" means for any Plan Year, the excess
of (i) Base Pay Compensation as defined in the Qualified 401(k) Plan
(determined, however, without regard to the limitations of Section 401(a)(17)
of the Code), over (ii) the dollar limit on compensation for such Plan Year
prescribed under Code Section 401(a)(17). "Excess Base Pay Compensation"
shall not be reduced by any such compensation deferred under this Plan.
2.9 "Matching Credit" means the matching credit by the Company
determined in accordance with Article V.
2.10 "Participant" means each Eligible Employee who has made an
election to participate in this Plan in accordance with Article III.
2.11 "Participant Compensation Deferrals" means deferrals of
compensation described in Article IV.
2.12 "Plan" means the Toyota Motor Sales, U.S.A., Inc. 401(k) Excess
Plan, as set forth herein.
2.13 "Plan Administrator" means Toyota Motor Sales, U.S.A., Inc.. For
purposes of Section 3(16)(A) of ERISA, Toyota Motor Sales, U.S.A., Inc. shall
be the "plan administrator" and shall be responsible for compliance with any
applicable reporting and disclosure requirements imposed by ERISA.
2.14 "Plan Year" means the fiscal period commencing each October 1 and
ending the following September 30.
2.15 "Qualified 401(k) Plan" means the Toyota Motor Sales, U.S.A., Inc.
Savings Plan, as in effect from time to time.
2.16 "Separation from Service" means any separation from service of the
Company for any reason. In the case of a Participant on disability,
Separation from Service shall be deemed to occur when long term disability
coverage commences, unless otherwise determined by the Committee.
2.17 "SERP" means the Toyota Motor Sales, U.S.A., Inc. Supplemental
Executive Retirement Plan.
2.18 "Toyota" means Toyota Motor Sales, U.S.A., Inc.
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<PAGE>
ARTICLE III
Eligibility and Participation
-----------------------------
3.1 Eligibility to Participate
(a) Each Eligible Employee shall become a Participant
hereunder upon delivery to the Committee, such properly completed
enrollment forms and agreements as the Committee may require,
including, but not limited to, a beneficiary designation form and a
form electing the manner in which distributions will be payable with
respect to such Participant's Account hereunder.
Any election of payment method shall be applicable only to the
extent provided in Section 7.2, and shall be irrevocable, unless the
Committee, in its sole discretion, permits an Eligible Employee to
change his or her election of payment method to a method providing
payments over a longer period of time than originally elected by the
Eligible Employee and which will not reasonably result in any increase
in the amount otherwise payable in any taxable year of the Participant
during which payment would have been made under the method of payment
previously elected. The Committee shall not, however, permit any such
change in a payment method election except prior to the first day of
the calendar year in which the Participant will have both attained age
fifty-five (55) and completed at least five (5) Years of Vesting
Service (determined as provided in the Toyota Pension Plan). No
payment option shall be selected by a Participant which is not among a
list of payment options generally made available to all Participants
by the Committee at the time of such selection. No assurance
regarding the tax effects of making such change is provided to a
participant who elects to change a form of payment.
(b) Commencement or recommencement of active participation
following any Separation from Service or other interruption of
employment shall be on such terms and under such conditions as the
Committee may, in its discretion, provide.
ARTICLE IV
Compensation Deferrals by Participants
--------------------------------------
4.1 Participant Compensation Deferrals
In order to be eligible to make Participant Compensation Deferrals for
any Plan Year an Eligible Employee must have become a Participant as provided
in Article III, and must have filed with the Committee a properly completed
Compensation Deferral Agreement on such date as is prescribed by the Committee
(which shall be a date prior to the first day of such Plan Year).
4.2 Amounts of Participant Compensation Deferrals
Participant Compensation Deferrals may be made by Participants as
follows:
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(a) With respect to deferral of Bonus Compensation a
Participant may elect to defer, in increments of ten (10) percentage
points, an amount of such Participant's Bonus Compensation not in
excess of fifty percent (50%) of such Participant's Bonus Compensation.
If a Participant's Bonus Compensation for a Plan Year is paid in more
than one installment, a deferral election with respect to Bonus
Compensation for a Plan Year shall be applied to all such installments,
whether or not such installments are equal in amount and whether or not
such installments are paid in the same Plan Year or calendar year.
Thus, a Participant's election to defer 40% of such Participant's bonus
that is paid in two installments will result in a deferral of 40% of
each installment.
(b) In the case of a Participant whose rate of compensation
will result in such Participant having Excess Base Pay Compensation,
such Participant may elect to defer, in increments of whole percentage
points, a portion of such Participant's Excess Base Pay Compensation.
The maximum of such excess compensation permitted to be deferred shall
be ten percent (10%) of such Excess Base Pay Compensation. No such
election to defer a portion of such Excess Base Pay Compensation shall
provide for a deferral of less than six percent (6%) of such Excess
Base Pay Compensation.
4.3 Provisions of Compensation Deferral Agreement
A Participant Compensation Deferral Agreement under this Plan for a Plan
Year shall be subject to the following conditions as if each of such
conditions were fully set forth in such agreement:
(a) A Participant electing to defer compensation shall be
deemed to have waived any right to effect a hardship withdrawal from
the Qualified 401(k) Plan, to the extent determined appropriate by the
Committee to comply with the requirements of Section 401(k) of the
Code and federal income tax rules regarding the deferral of
compensation;
(b) A Participant Compensation Deferral Agreement for a
Plan Year shall remain in effect throughout the Plan Year, shall not
be subject to change by the Participant during such year, and
automatically shall terminate as of the last day of such year. In
addition, to the extent determined by the Committee, such agreement
may be deemed to remain in effect throughout the full calendar year
beginning with or within the Plan Year to which such agreement relates
with the result that the next subsequent agreement shall not be given
effect until the first day of the following calendar year.
(c) Compensation deferrals pursuant to a Participant
Compensation Deferral Agreement may be deducted from a Participant's
compensation at such times throughout the deferral period as are
administratively practicable, as determined by the Committee in its
sole discretion.
(d) To the extent that the value of a Participant's Account
is permitted, at the discretion of the Committee, to be determined by
reference to one or more indices designated by the Participant from
time to time (including an indirect designation to the extent such
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<PAGE>
designation is determined by reference to the Qualified 401(k) Plan),
neither the Company, the Committee nor any person other than such
Participant shall have responsibility or liability for any adverse
economic consequences or loss resulting from the Participant's
designation.
ARTICLE V
Company Matching Credits
------------------------
5.1 Matching Credits
(a) Subject to the requirements and restrictions of this
Article V, and subject also to the amendment or termination of the
Plan, as of each date that a compensation deferral is deducted from
the Excess Base Pay Compensation of a Participant, Toyota shall credit
a Matching Credit to the Matching Credit Subaccount of such Participant
equal to four percent (4%) of such Excess Base Pay Compensation.
(b) No Matching Credit shall be credited with respect to any
deferral by a Participant of Bonus Compensation.
ARTICLE VI
Participant Accounts and Subaccounts
------------------------------------
6.1 Participant Accounts and Subaccounts
(a) A Participant's Compensation Deferrals shall be credited
to the Participant's Compensation Deferral Subaccount. Such crediting
shall occur as soon as practicable after the payroll period or other
period to which such amounts relate.
(b) Matching Credits with respect to such Participant shall
be credited to such Participant's Matching Credits Subaccount. Such
crediting shall occur as of the date of crediting the Participant
Compensation Deferrals to which such amounts relate.
(c) A Participant's Account under the Plan shall consist of
the sum of the Participant's Compensation Deferral Subaccount and the
Participant's Matching Credits Subaccount.
6.2 Valuation of Account
Accounts under this Plan shall, provided in Section 2.1 and Article XIV,
consist solely of bookkeeping entries on the books of the Company which shall
be adjusted as of each business day to reflect the crediting of earnings,
gains and losses. Not less frequently than quarterly, the Committee shall
furnish each Participant with a statement of such Participant's Account, and
each Subaccount therein.
For purposes of determining the value of a Participant's Account, the
Committee may, in its discretion, permit a Participant to designate one or
more indices, corresponding to investment fund options generally available
under the Qualified 401(k) Plan as the applicable investment return
measurement. Notwithstanding the foregoing, neither the Company nor the
Committee or any other person shall have any responsibility or liability to
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<PAGE>
invest assets of the Company in accordance with any such designation by the
Participant, nor shall the Company or the Committee or any other person have
any responsibility in valuing any Participant's Account to give effect to any
such designation by a Participant, other than on such basis as is determined
to be administratively practicable by the Company.
ARTICLE VII
Payment of Benefits
-------------------
7.1 Vesting of Benefits
(a) A Participant's interest in his or her Compensation
Deferral Subaccount shall be fully vested and nonforfeitable at all
times.
(b) A Participant's interest in his or her Matching
Credits Subaccount shall become vested and nonforfeitable in
accordance with the provisions of the Qualified 401(k) Plan applicable
to vesting in the value of matching contributions under such Plan
(including provisions of the Qualified 401(k) Plan relating to vesting
upon termination, partial termination or other vesting event under
such plan).
7.2 Form and Date of Payment
Except as provided in Section 7.3 or Article IX, no portion of a
Participant's Account under this Plan shall be paid to any person prior to a
Participant's Separation from Service. Following Separation from Service
payment of a Participant's vested interest in his or her Account under this
Plan shall be made as follows:
(a) if the Participant's Separation from Service occurs on
or after the Participant's attainment of age fifty-five (55) and
completion of at least five (5) Years of Vesting Service (as defined
in the Toyota Pension Plan), payment shall be made in accordance with
such election as the Participant has made as provided in Article III
of this Plan, commencing as soon as practicable following such
Separation from Service.
(b) If, the Participant's Separation from Service occurs for
any reason before the Participant's attainment of age fifty-five (55)
and completion of at least five (5) Years of Vesting Service
(determined as provided in the Toyota Pension Plan), payment shall be
made as soon as administratively practicable following such Separation
from Service notwithstanding any prior election by the Participant as
to the form of payment, provided, however, that at the sole discretion
of the Company and notwithstanding any prior election by the
Participant for a more rapid distribution, distribution may be made in
substantially equal monthly or quarterly payments over a period
selected by the Company not in excess of thirty-six (36) months.
For purposes of this Section 7.2, payments shall reflect the valuation of a
Participant's Account as of the end of the most recent complete valuation date
preceding payment, or such other, more recent, valuation date as is determined
by the Committee in its sole discretion, to be administratively practicable.
For purposes of determining a Participant's age under this Section 7.2, in the
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case of a Participant who is eligible for the Supplemental Executive
Retirement Plan, "age" shall mean "SERP Age" as defined therein.
7.3 Hardship Distributions
Upon application submitted to the Committee in such form and manner as
the Committee may prescribe, an amount may be distributable to a Participant
prior to the date of distribution specified in Section 7.2 above, provided
that the Committee determines, in its sole discretion, that the distribution
is on account of an "unforeseeable emergency," as defined below in this
Section 7.3, and provided further that a determination is made by the
Committee that such distribution will not result in constructive receipt of
income by any Participant for federal income tax purposes, or otherwise affect
the federal income tax treatment of the Plan. In making such determination
as to tax matters, the Committee may engage and rely upon opinions rendered
by, tax experts selected or approved by the Committee.
For purposes of this Section 7.3, the term "unforeseeable emergency"
shall mean severe financial hardship to the Participant resulting from a
sudden and unexpected illness or accident of the Participant or of a dependent
(as defined in section 152(a) of the Code) of the Participant, loss of the
Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control
of the Participant. The circumstances that will constitute an unforeseeable
emergency will depend upon the facts of each case, but, in any case, payment
may not be made to the extent that such hardship is or may be relieved -- (i)
through reimbursement or compensation by insurance or otherwise or (ii) by
liquidation of the Participant's assets, to the extent the liquidation of such
assets would not itself cause severe financial hardship.
ARTICLE VIII
Death Benefits
--------------
In the event of the death of a Participant, the undistributed portion
of the Participant's vested interest in his or her Account shall be payable
in a single lump sum to the beneficiary designated by the Participant for this
purpose. Such payment shall be made as soon as practicable following
verification of death and verification of the proper payee(s). If no
beneficiary is then living, no beneficiary can be located, or none has been
designated, any amount then payable shall be paid to such persons as would be
entitled to payment under provisions of the Qualified 401(k) Plan as then in
effect pertaining to the identity of payees in the event of a failure to
designate a beneficiary under such plan. This Plan shall not give effect to
disclaimers, whether made under state or federal law.
Each Participant shall have the opportunity, from time to time, to
designate one or more beneficiaries, but no such designation shall be
effective unless such designation is made on forms prescribed for such purpose
by the Committee, and such designation is received by the Committee prior to
the date of the Participant's death. It is each Participant's sole
responsibility to obtain such consents, and to take such other actions as may
be necessary or appropriate in connection with participation in this Plan and
in connection with the designation of any beneficiary, including but not
limited to obtaining spousal or other consents, as may be necessary or
appropriate to reflect marital property, support, or other obligations arising
under contract, order or by operation of law.
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ARTICLE IX
Right to Terminate or Modify Plan
----------------------------------
By action of the Executive Committee of Toyota Motor Sales, U.S.A.,
Inc., Toyota may modify or terminate this Plan without further liability to
any Eligible Employee or former employee or any other person. Notwithstanding
the preceding provisions of this Article IX, except as expressly required by
law, this Plan may not be modified or terminated as to any Participant in a
manner that adversely affects the payment of benefits theretofore accrued by
such Participant, except that in the event of the termination of the Plan as
to all Participants, this Plan may in the sole discretion of the Executive
Committee of said Board be modified to accelerate payment of benefits to
Participants.
ARTICLE X
No Assignment, Etc.
-------------------
Benefits under this Plan may not be assigned or alienated and shall not
be subject to the claims of any creditor. A Participant shall not be
permitted to borrow from an Account under the Plan, nor shall a Participant
be permitted to pledge or otherwise use his Account under the Plan as security
for any loan or other obligation. No payments shall be made to any person or
persons other than expressly provided herein, or on any date or dates other
than as expressly provided herein.
ARTICLE XI
The Committee
-------------
(a) The appointment, removal and resignation of members of
the Committee shall be governed by the President of Toyota. Subject
to change by the said President the membership of the Committee shall
be the same as the membership of the Employee Benefits Committee of
the Qualified 401(k) Plan.
(b) The Committee shall have authority to oversee the
management and administration of the Plan, and in connection therewith
is authorized in its sole discretion to make, amend and rescind such
rules as it deems necessary for the proper administration of the Plan,
to make all other determinations necessary or advisable for the
administration of the Plan and to correct any defect or supply any
omission or reconcile any inconsistency in the Plan in the manner and
to the extent that the Committee deems desirable to carry the Plan
into effect. The powers and duties of the Committee shall include
without limitation, the following:
(i) Resolving all questions relating to the
eligibility of select management and highly compensated
employees to become Participants; and
(ii) Resolving all questions regarding payment of
benefits under the Plan and other questions regarding plan
participation.
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Any action taken or determination made by the Committee shall be
conclusive on all parties. The exercise of or failure to exercise any
discretion reserved to the Committee to grant or deny any benefit to a
Participant or other person under the Plan shall in no way require the
Committee or any person acting on behalf thereof, to similarly exercise or
fail to exercise such discretion with respect to any other Participant.
ARTICLE XII
Release
-------
As a condition to making any payment under the Plan, or to giving effect
to any beneficiary designation or other election or other action under the
Plan by any Participant or any other person, the Plan Administrator may
require such consents or releases as it determines to be appropriate, and
further may require any such designation, election or other action to be in
writing, in a prescribed form and to be filed with the Committee in a manner
prescribed by the Committee. In the event the Committee determines, in its
discretion, that multiple conflicting claims may be made as to all or a part
of the same Account, the Committee may delay the making of any payment until
such conflict or multiplicity of claims is resolved.
ARTICLE XIII
No Contract of Employment
-------------------------
This Plan shall not be deemed to give any employee the right to be
retained in the employ of the Company or to interfere with the right of the
Company to discharge or retire any employee at any time, nor shall this Plan
interfere with the right of the Company to establish the terms and conditions
of employment of any employee.
ARTICLE XIV
Company's Obligation to Pay Benefits
------------------------------------
Nothing contained in this Plan and no action taken pursuant to the
provisions of this Plan shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company, and any Employee, an
Employee's beneficiary(ies) or any other person. Any compensation deferred
under the provisions of this Plan shall continue for all purposes to be a part
of the general funds of the Company. To the extent that any person acquires
a right to receive payments from the Company under this Plan such right shall
be no greater than the right of any unsecured general creditor of the Company.
ARTICLE XV
Claim Review Procedure
----------------------
(a) A person who believes that he or she has not
received all payments to which he or she is entitled under the terms
of this plan may submit a claim therefor. Within ninety (90) days
following receipt of a claim for benefits under this Plan, and all
necessary documents and information, the Committee or its authorized
delegate reviewing the claim shall, if the claim is not approved,
furnish the claimant with written notice of the decision rendered with
respect to the application.
-9-
<PAGE>
(b) The written notice contemplated in (a) above shall
set forth:
(i) the specific reasons for the denial, with
reference to the Plan provisions upon which the denial
is based;
(ii) a description of any additional information or
material necessary for perfection of the application
(together with an explanation why the material or
information is necessary); and
(iii) an explanation of the Plan's claim review
procedure.
(c) A claimant who wishes to contest the denial of his
claim for benefits or to contest the amount of benefits payable to him
shall follow the procedures for an appeal of benefits as set forth
below, and shall exhaust such administrative procedures prior to
seeking any other form of relief.
(d) A claimant who does not agree with the decision
rendered as provided above in this Article XV with respect to his
application may appeal the decision to the Committee. The appeal
shall be made, in writing, within sixty-five (65) days after the date
of notice of such decision with respect to the application. If the
application has neither been approved nor denied within the ninety-day
(90) period provided in (a) above, then the appeal shall be made
within sixty-five (65) days after the expiration of the ninety-day
(90) period.
(e) The claimant may request that his application be
given full and fair review by the Committee. The claimant may review
all pertinent documents and submit issues and comments in writing in
connection with the appeal. The decision of the Committee shall be
made promptly, and not later than sixty (60) days after the Committee's
receipt of a request for review, unless special circumstances require
an extension of time for processing, in which case a decision shall be
rendered as soon as possible, but not later than one hundred twenty
(120) days after receipt of a request for review. The decision by the
Committee on review shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be
understood by the claimant with specific reference to the pertinent Plan
provisions upon which the decision is based.
ARTICLE XVI
Arbitration
-----------
A claimant may contest the Committee's denial of his or her appeal only
by submitting the matter to arbitration. In such event, the claimant and the
Committee shall select an arbitrator from a list of names supplied by the
American Arbitration Association in accordance with such Association's
procedures for selection of arbitrators, and the arbitration shall be
conducted in accordance with the rules of such Association. The arbitrator's
authority shall be limited to the affirmance or reversal of the Committee's
-10-
<PAGE>
denial of the appeal, and the arbitrator shall have no power to alter, add to
or subtract from any provision of this Plan. Except as otherwise required by
the Employee Retirement Income Security Act of 1974, the arbitrator's decision
shall be final and binding on all parties, if warranted on the record and
reasonably based on applicable law and the provisions of this Plan.
ARTICLE XVII
Miscellaneous
-------------
17.1 Successor and Assigns
The Plan shall be binding upon and shall inure to the benefit of the
Company, its successors and assigns, and all Participants.
17.2 Notices
Any notice or other communication required or permitted under the Plan
shall be in writing, and if directed to the Company shall be sent to the
Committee or its authorized delegate, and if directed to a Participant shall
be sent to such Participant at his last known address as it appears on the
records of the Company.
17.3 Limitations on Liability
(a) The Company does not warrant any tax benefit nor any
financial benefit under the Plan. Without limitation to the
foregoing, the Company and its officers, employees and agents shall be
held harmless by the Participant or Beneficiary from, and shall not be
subject to any liability on account of, the federal or state or local
income tax consequences, or any other consequences of any deferrals or
credits with respect to Participants under the Plan.
(b) The Company, its officers, employees, and agents shall
be held harmless by the Participant from, and shall not be subject to
any liability hereunder for, all acts performed in good faith.
17.4 Certain Small Benefits
Notwithstanding any other provision of this Plan to the contrary, in the
case of a Participant whose Account hereunder is not in excess of One Thousand
Dollars ($1,000) and who ceases to make Participant Compensation Deferrals,
the Committee may, in its sole discretion, distribute the Participant's entire
vested interest in the Account, in lieu of any further benefit under this
Plan.
17.5 Governing Law
This Plan and any Participant Compensation deferral agreement hereunder
are subject to the laws of the State of California, to the extent not
preempted by ERISA.
-11-
<PAGE>
IN WITNESS WHEREOF, Toyota Motor Sales, U.S.A., Inc. has caused this
instrument to be executed by its duly authorized officers, effective as of the
Effective Date set forth hereinabove.
TOYOTA MOTOR SALES, U.S.A., INC.
DATE: February 7, 1996 By: /S/ SHINJI SAKAI
-----------------------------
Shinji Sakai
President
-12-
<PAGE>
EXHIBIT 12.1
TOYOTA MOTOR CREDIT CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES<F1>
<TABLE>
<CAPTION>
Three Months Ended
December 31,
---------------------
1995 1994
------ ------
(Dollars in Millions)
<S> <C> <C>
Consolidated income
before income taxes...................... $ 68 $ 73
---- ----
Fixed charges:
Interest................................. 193 161
Portion of rent expense
representative of the
interest factor
(deemed to be
one-third)............................ 1 1
---- ----
Total fixed charges......................... 194 162
---- ----
Earnings available
for fixed charges........................ $262 $235
==== ====
Ratio of earnings to
fixed charges<F2>........................ 1.35 1.45
==== ====
<FN>
- -----------------
<F1> TMCC did not receive any financial support from TMS during the three
months ended December 31, 1995 and 1994.
<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, 1995, 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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TOYOTA
MOTOR CREDIT CORPORATION'S DECEMBER 31, 1995 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-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 62
<SECURITIES> 179
<RECEIVABLES> 16,271<F1>
<ALLOWANCES> 177
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,865
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 13,253
0
0
<COMMON> 865
<OTHER-SE> 887
<TOTAL-LIABILITY-AND-EQUITY> 16,865
<SALES> 0
<TOTAL-REVENUES> 717
<CGS> 0
<TOTAL-COSTS> 563<F3>
<OTHER-EXPENSES> 65
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 0<F3>
<INCOME-PRETAX> 68
<INCOME-TAX> 27
<INCOME-CONTINUING> 41
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41
<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>
