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Related Party Transactions
 12 Months Ended
Mar. 31, 2012
Related Party Transactions [Abstract]  
Related Party Transactions

Note 15 – Related Party Transactions

 

The tables below summarize amounts included in our Consolidated Statement of Income and in our Consolidated Balance Sheet under various related party agreements or relationships:

   Years ended March 31,
(Dollars in millions) 2012  2011  2010
Net financing revenues:        
 Manufacturers’ subvention support and other revenues$ 949 $ 965 $ 782
 Credit support fees incurred$ (33) $ (34) $ (39)
 Foreign exchange gain on notes receivable from         
  affiliates$ - $ - $ 30
 Foreign exchange loss on loans payable to affiliates$ (4) $ (132) $ (33)
 Interest expense on loans payable to affiliates$ (49) $ (47) $ (73)
           
Insurance earned premiums and contract revenues:        
 Affiliate insurance premiums and contract revenues$ 216 $ 162 $ 90
           
Investments and other income, net:        
 Interest earned on notes receivable from affiliates$ 3 $ 5 $ 6
           
Expenses:        
 Shared services charges and other expenses$ 67 $ 291 $ 38
 Employee benefits expense$ 27 $ 27 $ 22

Note 15 – Related Party Transactions (Continued)
         
(Dollars in millions)March 31, 2012 March 31, 2011
Assets:      
         
Finance receivables, net      
 Accounts receivable from affiliates $ 17 $ 18
 Direct finance receivables from affiliates $ 4 $ 5
 Notes receivable under home loan programs $ 19 $ 21
 Deferred retail subvention income from affiliates $ (598) $ (732)
         
Investments in operating leases, net      
 Leases to affiliates $ 4 $ 5
 Deferred lease subvention income from affiliates $ (592) $ (761)
         
Other assets      
 Notes receivable from affiliates $ 1,052 $ 653
 Other receivables from affiliates $ 8 $ 157
 Subvention support receivable from affiliates $ 65 $ 109
         
Liabilities:      
         
Debt      
 Loans payable to affiliates $ 2,201 $ 4,197
         
Other liabilities      
 Unearned affiliate insurance premiums and contract revenues$ 273 $ 364
 Accounts payable to affiliates $ 58 $ 242
 Notes payable to affiliate $ 61 $ 61
         
Shareholder’s Equity:      
Dividends paid $ 741 $ 266
Stock-based compensation $ 2 $ 1
         
 

Note 15 – Related Party Transactions (Continued)

 

Financing Support Provided by Parent and Affiliates

 

Credit Support Agreements and Fees Incurred

 

TMC and TFSC entered into a credit support agreement (the “TMC Credit Support Agreement”) under which TMC has agreed to certain ownership, net worth maintenance, and debt service provisions in support of TFSC operations. The agreement is not a guarantee by TMC of any securities or obligations of TFSC. TMC's obligations under the agreement rank pari passu with its senior unsecured term debt obligations.

 

TFSC and TMCC entered into a credit support agreement (the “TFSC Credit Support Agreement”). Under this agreement, TFSC agreed to certain ownership, subsidiary net worth maintenance, and debt service provisions similar to those under the TMC Credit Support Agreement. This agreement is not a guarantee by TFSC of any securities or other obligations of TMCC.

 

The TMC Credit Support Agreement and the TFSC Credit Support Agreement are governed by, and construed in accordance with, the laws of Japan.

 

TCPR is the beneficiary of a credit support agreement with TFSC containing provisions similar to the TFSC Credit Support Agreement described above. This agreement is not a guarantee by TFSC of any securities or other obligations of TCPR.

 

In addition, TMCC has entered into an agreement to pay TFSC a semi-annual fee based on a fixed rate applied to the weighted average outstanding amount of bonds and other liabilities or securities entitled to credit support. Credit support fees incurred under this agreement were $33 million, $34 million, and $39 million for fiscal 2012, 2011, and 2010, respectively.

 

TFSA-TMCC Credit Agreement

 

TMCC and TFSA are parties to a promissory note under which TFSA can make financing available to TMCC up to $200 million. This agreement is the reciprocal to the TMCC-TFSA Credit Agreement discussed below. The terms are determined at the time of each loan based on business factors and market conditions. The amounts of the note payable to TFSA were $61 million as of March 31, 2012 and 2011.

 

TFSC Conduit Finance Agreements

 

TMCC and TFSC have entered into conduit finance agreements under which TFSC passes along to TMCC certain funds that TFSC receives from other financial institutions solely for the benefit of TMCC. The aggregate amounts payable under these agreements were approximately $2.2 billion and $4.2 billion as of March 31, 2012 and 2011, respectively. Included in the balances reported as of March 31, 2012 and 2011 are $169 million and $165 million, respectively, of carrying value adjustments for foreign currency exchange losses for portions of the debt denominated in foreign currency.

Note 15 – Related Party Transactions (Continued)

 

TMFNL-TMCC Loan Agreement

 

TMCC is a party to an uncommitted loan finance agreement with Toyota Motor Finance (Netherlands) B.V. (“TMFNL”) under which TMFNL may make loans to TMCC in amounts not to exceed €1 billion euro. The terms are determined at the time of each loan based on business factors and market conditions. There were no amounts payable to TMFNL under this agreement as of March 31, 2012 and 2011.

 

TFSC-TMCC Loan Agreement

 

TMCC is party to an uncommitted loan finance agreement with TFSC under which TFSC may make funds available to TMCC. The terms are determined at the time of each loan based on business factors and market conditions. There were no amounts payable to TFSC under this agreement as of March 31, 2012 and 2011.

 

TCCI-TMCC Loan Agreement

 

TMCC and Toyota Credit Canada Inc. (“TCCI”) are parties to an uncommitted loan finance agreement under which TCCI may make loans to TMCC, in amounts not to exceed Canadian Dollars (“CAD”) $1.5 billion. The terms are determined at the time of each loan based on business factors and market conditions. There were no amounts outstanding as of March 31, 2012 and 2011.

 

Financing Support Provided to Affiliates

 

TMCC-TFSB Loan Agreement

 

TMCC and Toyota Financial Savings Bank (“TFSB”) have entered into a promissory note which establishes a loan facility allowing TFSB to borrow up to $400 million with terms up to 10 years. There were no amounts outstanding at March 31, 2012. The amount of the note receivable from TFSB at March 31, 2011 was $27 million.

 

TMCC-TCCI Loan Agreement

 

TMCC and TCCI are parties to an uncommitted loan finance agreement under which TMCC may make loans to TCCI, in amounts not to exceed CAD $2.5 billion. The terms are determined at the time of each loan based on business factors and market conditions. There were no amounts outstanding at March 31, 2012. The amount of the note receivable from TCCI at March 31, 2011 was $0.3 billion.

Note 15 – Related Party Transactions (Continued)

 

TMCC-TMFNL Loan Agreement

 

TMCC is a party to an uncommitted loan finance agreement with TMFNL under which TMCC may make loans to TMFNL in amounts not to exceed €1 billion euro. This agreement is reciprocal to the TMFNL-TMCC Loan Agreement discussed above. The terms are determined at the time of each loan based on business factors and market conditions. The amount outstanding at March 31, 2012 and March 31, 2011 were $381 million and $350 million, respectively.

 

TMCC-TFSMX Loan Agreement

 

TMCC and Toyota Financial Services Mexico, S.A. de C.V. (“TFSMX”) are parties to an uncommitted loan finance agreement under which TMCC may make loans to TFSMX, in amounts not to exceed $500 million. The terms are determined at the time of each loan based on business factors and market conditions. There were no amounts outstanding at March 31, 2012 and 2011.

 

TMCC-TFSA Credit Agreement

 

TMCC and TFSA are parties to a promissory note under which TMCC can make financing available to TFSA up to $200 million. This agreement is reciprocal to the TFSA-TMCC Credit Agreement discussed above. The terms are determined at the time of each loan based on business factors and market conditions. Advances to TFSA are recorded as reductions of retained earnings and are reclassified to intercompany receivables upon TFSA's settlement of its advances from TMCC. There were no amounts outstanding at March 31, 2012 and 2011.

 

TMCC-BTB Loan Agreement

 

TMCC is a party to an uncommitted loan finance agreement with Banco Toyota do Brasil (“BTB”) under which TMCC may make loans to BTB in amounts not to exceed $300 million. The terms are determined at the time each loan is made based on business factors and market conditions. Notes receivable from BTB at March 31, 2012 was $121 million. There was no amount outstanding at March 31, 2011.

 

TMCC-TFA Loan Agreement

 

TMCC is a party to an uncommitted loan finance agreement with Toyota Finance Australia Limited (“TFA”) under which TMCC may make loans to TFA in amounts not to exceed $1.0 billion, and TFA may make loans to TMCC in amounts not to exceed $1.0 billion. The terms are determined at the time each loan is made based on business factors and market conditions. Notes receivable from TFA at March 31, 2012 was $550 million. There was no amount outstanding at March 31, 2011.

 

Note 15 – Related Party Transactions (Continued)

 

Notes Receivable under Home Loan Programs

 

Under two home loan programs, certain officers, directors, other members of our management, and relocated employees have received mortgage loans from TMCC secured by residential real property. Mortgage loans outstanding under these programs were $19 million and $21 million as of March 31, 2012 and 2011, respectively. Loans under these programs from TMCC to directors and executive officers were made prior to July 30, 2002 and thus were grandfathered under the Sarbanes-Oxley Act of 2002.

 

Accounts Receivable from Affiliates

 

Receivables with affiliates represent wholesale financing to certain dealerships owned by affiliates. Outstanding receivables with affiliates were $17 million and $18 million at March 31, 2012 and 2011, respectively.

 

Financial Guarantees Issued on Behalf of Affiliates

 

TMCC has guaranteed the payments of principal and interest with respect to the bonds of manufacturing facilities of certain affiliates. The nature, business purpose, and amounts of these guarantees are described in Note 14 – Commitments and Contingencies.

 

TFSB Master Participation Agreement

 

TMCC and TFSB are parties to a master participation agreement pursuant to which TMCC agreed to purchase up to $60 million per year of participations in certain residential mortgage loans originated by TFSB that meet specified credit underwriting guidelines, not to exceed $150 million over a three year period. At March 31, 2012 and 2011, there were $54 million and $50 million, respectively, in loan participations that had been purchased by TMCC under this agreement.

 

Shared Services and Operational Support Provided by Affiliates

 

TFSC-TMCC/TCPR Service Agreement

 

TMCC and TCPR are each parties to a service agreement with TFSC under which TFSC provides services related to monitoring, management and report preparation for funding and risk management activities, services related to information technology and services related to bank and investor relationships. The total amount paid by TMCC and TCPR under these agreements for services provided during fiscal 2012, 2011 and 2010 was $1 million.

 

Note 15 – Related Party Transactions (Continued)

 

Accounts Payable to Affiliates

 

TMCC and TCPR provide wholesale financing to vehicle dealers, and as a result of funding the loans, have payables to TMS and Toyota de Puerto Rico Corp (“TDPR”), respectively. TMCC also provides wholesale financing to industrial equipment dealers, and as a result has payables to TMHU and HINO. At March 31, 2012, all amounts with affiliates are presented net. Payables to affiliates were $58 million and $242 million at March 31, 2012 and 2011, respectively.

 

Lease Arrangements

 

We are party to a 15-year lease agreement with TMS for our headquarters location in the TMS headquarters complex in Torrance, California. The lease commitments are described in Note 14 – Commitments and Contingencies.

 

Subvention Receivables from Affiliates, Deferred Subvention Income from Affiliates, and Manufacturer's Subvention Support and Other Revenues

 

Subvention receivables represent amounts due from TMS and other affiliates in support of retail, lease, and industrial equipment subvention programs offered by TMCC. Deferred subvention income represents the unearned portion of amounts received from these transactions, and manufacturers' subvention support and other revenues primarily represent the earned portion of such amounts. Revenues under these arrangements were $949 million, $965 million, and $782 million for fiscal 2012, 2011 and 2010, respectively.

 

Shared Services Charges and Other Expenses

 

TMCC and TMS are parties to a Shared Services Agreement which covers certain technological and administrative services, such as information systems support, facilities, insurance coverage, and corporate services provided by each entity to the other. Fees incurred under this shared services agreement and other expenses were $44 million, $47 million, and $38 million for fiscal 2012, 2011 and 2010, respectively.

 

Stock-Based Compensation

 

On a quarterly basis, TMC allocates to TMCC its portion of the consolidated stock-option expense determined in accordance with accounting guidance for stock-based compensation. The amount allocated to TMCC is based on the number of options granted to TMCC executives. Stock-based compensation incurred under this plan was $2 million for fiscal 2012 and $1 million for both fiscal 2011 and 2010.

 

Note 15 – Related Party Transactions (Continued)

 

TFSB Expense Reimbursement Agreement

 

TMCC and TFSB are parties to an expense reimbursement agreement which provides that TMCC will reimburse certain expenses incurred by TFSB in connection with providing certain financial products and services to TMCC's customers and dealers in support of TMCC's customer loyalty strategy and programs. Expenses incurred by TMCC under this agreement for fiscal 2012 and 2011 were $13 million and $17 million, respectively. No similar expenses were reimbursed under this agreement in fiscal 2010.

 

TFSA Expense Reimbursement Agreement

 

TMCC and TFSA are parties to an expense reimbursement agreement which provides that TMCC reimburse certain expenses incurred by TFSA, the parent of TMCC and TFSB, with respect to costs related to TFSB's credit card rewards program. Expenses incurred by TMCC under this agreement for fiscal 2012 and 2011 were $9 million and $11 million, respectively. No similar expenses were reimbursed under this agreement for fiscal 2010.

 

TMS Expense Reimbursement Agreement

 

TMCC and TMS were parties to a one year expense reimbursement agreement which provided that TMCC reimburse a portion of certain sales and marketing expenses incurred by TMS during fiscal 2011 for brand and sales support. Expenses incurred by TMCC under this agreement for fiscal 2011 were $217 million.

 

Shared Services and Operational Support Provided to Affiliates

 

TFSB Shared Services Agreement

 

TMCC and TFSB are parties to a shared services agreement. Under the agreement, TMCC provides certain services to TFSB, including certain marketing, administrative, systems, and operational support in exchange for TFSB making available certain financial products and services to TMCC's customers and dealers meeting TFSB's credit standards. Revenues associated with this agreement were not material for fiscal 2012, 2011 and 2010.

 

Note 15 – Related Party Transactions (Continued)

 

Americas Region Shared Services Agreement

 

TMCC is a party to a shared services agreement with TCPR, TCCI, TFSMX, Toyota Compania Financiera de Argentina S.A. (“TCFA”), Toyota Services de Venezuela , C.A. (“TSV”) and Banco Toyota do Brasil S.A. (“BTB”). Under the agreement, TMCC provides certain services to TCPR, TCCI, TFSMX, TCFA, TSV and BTB including certain administrative, systems and operational support. Revenues associated with this agreement were $3 million for each of fiscal 2012, 2011 and 2010.

Leases to Affiliates

 

Leases to affiliates represent the investment in operating leases of vehicle and industrial equipment leased to Toyota Logistics Services and other affiliates. Investments in operating leases to affiliates were $4 million and $5 million at March 31, 2012 and 2011, respectively. Revenues associated with these leases were not material for fiscal 2012, 2011 and 2010.

 

Employee Benefits Expense

 

Employees of TMCC are generally eligible to participate in the TMS pension plan and other employee benefit plans sponsored by TMS. Employee benefits expenses incurred under these agreements were $27 million, $27 million, and $22 million for fiscal 2012, 2011 and 2010, respectively. Refer to Note 12 – Pension and Other Benefit Plans for a discussion of the TMS-sponsored pension and savings plans and other employee benefits.

 

Affiliate Insurance Premiums, and Contract Revenues

 

Affiliate insurance premiums and contract revenues primarily represent revenues from TMIS for administrative services and various types of coverage provided to TMS and affiliates. This includes contractual indemnity coverage and related administrative services for TMS' certified pre-owned vehicle program and the umbrella liability policy. TMIS provides umbrella liability insurance to TMS and affiliates covering certain dollar value layers of risk above various primary or self-insured retentions. On all layers in which TMIS has provided coverage, 99 percent of the risk has been ceded to various reinsurers. During fiscal 2012, TMIS began providing property deductible reimbursement insurance to TMS and affiliates covering losses incurred under their primary policy.

 

Premiums and contract revenues are reflected within the Related Party Transaction Table. Affiliate agreements issued were $124 million for both fiscal 2012 and 2011 and $103 million for fiscal 2010.

 

TMIS provided prepaid maintenance and vehicle service coverage to TMS in support of special sales and customer loyalty efforts until the programs were discontinued in fiscal 2011. TMIS continues to recognize contract revenue related to agreements issued prior to program discontinuation as reflected within the Related Party Transaction Table. Affiliate agreements issued were $179 million and $10 million for fiscal 2011 and 2010, respectively.