California
(State or other jurisdiction of
incorporation or organization)
|
95-3775816
(I.R.S. Employer
Identification No.)
|
19001 S. Western Avenue
Torrance, California
(Address of principal executive offices)
|
90501
(Zip Code)
|
Title of each class
|
Name of each exchange on which registered
|
Medium-Term Notes, Series B, CPI Linked Notes Stated Maturity Date June 18, 2018
|
New York Stock Exchange
|
INDEX
|
||
PART I
|
.………………………………………………………………………………………..…...................
|
4 |
Item 1. | Business……………………………………………………………….…………………................….. | 4 |
Item 1A. | Risk Factors…………………………………………………………………….………….…….……. | 16 |
Item 1B. | Unresolved Staff Comments………………………………………………………………………..... | 23 |
Item 2. | Properties…………………………………………………………………………………………......... | 23 |
Item 3. | Legal Proceedings………………………………………………………………………………...…… | 23 |
Item 4. | Mine Safety Disclosures……………………………………………………………………….……… | 23 |
PART II | .……………………………………………………………………………………………................. | 23 |
Item 5.
|
Market for registrant's Common Equity, related Stockholder Matters and Issuer Purchases of Equity Securities………………………………………………………………………………………….........
|
23
|
Item 6. |
Selected Financial Data……………………….……………………………………………………..
|
24
|
Item 7. |
Management's Discussion and Analysis of Financial Condition and Results of Operations..………
|
26
|
Item 7A. |
Quantitative and Qualitative Discloures About Market Risk………………………………………
|
62
|
Item 8. | Financial Statements and Supplementary Data……………………….……………………………… | 68 |
Report of Independant Registered Public Accounting Firm.………………………………….….... | 68 | |
Consolidated Statement of Income……………………………………….……………………........ | 69 | |
Consolidated Statement of Comprehensive Income……………………………………….……… | 69 | |
Consolidated Balance Sheet……………………………………………….………………..…….... | 70 | |
Consolidated Statement of Shareholder's Equity………………………….………………….......... | 71 | |
Consolidated Statement of Cash Flows…………………………………….……………………....
|
72
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures……....
|
137
|
Item 9A.
|
Controls and Procedures………………………………………………………………………………
|
137
|
Item 9B.
|
Other Information…………………………………………………………………………………….
|
138
|
PART III
|
……………………………………………………………………………………………...............
|
139 |
Item 10.
|
Directors, Executive Officers and Corporate Governance……………………………………………
|
139
|
Item 11.
|
Executive Compensation………………………………………………………………………………
|
142
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management Related Stockholder Matters..
|
142
|
Item 13.
|
Certain Relationships and Related Transactions and Director Independence……………………….
|
142
|
Item 14.
|
Principle Accounting Fees and Services…………………………………………………………….
|
143
|
PART IV | .…………………………………………………………………………………………................ | 144 |
Item 15.
|
Exhibits, Financial Statements and Schedules……………..………………………………………..
|
144
|
Signatures
|
………………………………………………………………………………………………….……
|
145
|
Exhibit Index
|
………………………………………………………………………………………………….......
|
147
|
§
|
Finance - We acquire a broad range of retail finance products including retail and commercial installment sales contracts (“retail contracts”) in the U.S. and Puerto Rico and leasing contracts accounted for as either direct finance leases or operating leases (“lease contracts”) from vehicle and industrial equipment dealers in the U.S. We collectively refer to our retail contracts and lease contracts as the consumer portfolio. We also provide dealer financing, including wholesale financing (also referred to as floorplan financing), term loans, revolving lines of credit and real estate financing to vehicle and industrial equipment dealers in the U.S. and Puerto Rico.
|
§
|
Insurance - Through a wholly-owned subsidiary, we provide marketing, underwriting, and claims administration related to covering certain risks of vehicle dealers and their customers in the U.S. We also provide coverage and related administrative services to certain of our affiliates in the U.S.
|
Years ended March 31,
|
||||||
2013
|
2012
|
2011
|
||||
Percentage of financing revenues, net of depreciation:
|
||||||
Operating leases, net of depreciation
|
32
|
%
|
33
|
%
|
33
|
%
|
Retail1
|
56
|
%
|
58
|
%
|
59
|
%
|
Dealer
|
12
|
%
|
9
|
%
|
8
|
%
|
Financing revenues, net of depreciation
|
100
|
%
|
100
|
%
|
100
|
%
|
1
|
Includes direct finance lease revenues.
|
·
|
Review credit reports and financial statements and may obtain bank references;
|
·
|
Evaluate the dealer’s financial condition; and
|
·
|
Assess the dealer’s operations and management.
|
ITEM 6. SELECTED FINANCIAL DATA
|
|||||||||||||||
Years ended March 31,
|
|||||||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
2010
|
2009
|
||||||||||
INCOME STATEMENT DATA
|
|||||||||||||||
Financing revenues:
|
|||||||||||||||
Operating lease
|
$
|
4,748
|
$
|
4,693
|
$
|
4,888
|
$
|
4,739
|
$
|
4,925
|
|||||
Retail
|
2,062
|
2,371
|
2,791
|
3,086
|
3,317
|
||||||||||
Dealer
|
434
|
365
|
385
|
338
|
558
|
||||||||||
Total financing revenues
|
7,244
|
7,429
|
8,064
|
8,163
|
8,800
|
||||||||||
Depreciation on operating leases
|
3,568
|
3,339
|
3,353
|
3,564
|
4,176
|
||||||||||
Interest expense
|
940
|
1,300
|
1,614
|
2,023
|
2,956
|
||||||||||
Net financing revenues
|
2,736
|
2,790
|
3,097
|
2,576
|
1,668
|
||||||||||
Insurance earned premiums and contract
|
|||||||||||||||
revenues
|
571
|
604
|
543
|
452
|
421
|
||||||||||
Investment and other income, net
|
173
|
113
|
236
|
228
|
11
|
||||||||||
Net financing revenues and other revenues
|
3,480
|
3,507
|
3,876
|
3,256
|
2,100
|
||||||||||
Expenses:
|
|||||||||||||||
Provision for credit losses
|
121
|
(98)
|
(433)
|
604
|
2,160
|
||||||||||
Operating and administrative
|
911
|
857
|
1,059
|
760
|
799
|
||||||||||
Insurance losses and loss adjustment
expenses
|
293
|
325
|
247
|
213
|
193
|
||||||||||
Total expenses
|
1,325
|
1,084
|
873
|
1,577
|
3,152
|
||||||||||
Income (loss) before income taxes
|
2,155
|
2,423
|
3,003
|
1,679
|
(1,052)
|
||||||||||
Provision for (benefit from) income taxes
|
824
|
937
|
1,150
|
616
|
(429)
|
||||||||||
Net income (loss)
|
$
|
1,331
|
$
|
1,486
|
$
|
1,853
|
$
|
1,063
|
$
|
(623)
|
As of March 31,
|
|||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
2010
|
2009
|
||||||
BALANCE SHEET DATA
|
|||||||||||
Finance receivables, net
|
$
|
62,567
|
$
|
58,042
|
$
|
57,736
|
$
|
55,087
|
$
|
54,574
|
|
Investments in operating leases, net
|
$
|
20,384
|
$
|
18,743
|
$
|
19,041
|
$
|
17,151
|
$
|
17,980
|
|
Total assets
|
$
|
95,302
|
$
|
88,913
|
$
|
91,704
|
$
|
81,193
|
$
|
83,679
|
|
Debt
|
$
|
78,832
|
$
|
73,234
|
$
|
77,282
|
$
|
69,179
|
$
|
72,983
|
|
Capital stock
|
$
|
915
|
$
|
915
|
$
|
915
|
$
|
915
|
$
|
915
|
|
Retained earnings
|
$
|
6,429
|
$
|
6,585
|
$
|
5,840
|
$
|
4,253
|
$
|
3,240
|
|
Total shareholder's equity
|
$
|
7,557
|
$
|
7,662
|
$
|
6,856
|
$
|
5,273
|
$
|
4,093
|
|
Our Board of Directors declared and paid cash dividends of $1,487 million, $741 million, $266 million and $50 million to TFSA during fiscal 2013, 2012, 2011 and 2010, respectively. No dividends were declared during fiscal 2009.
|
As of and for the
|
||||||||||||||||
years ended March 31,
|
||||||||||||||||
2013
|
2012
|
2011
|
2010
|
2009
|
||||||||||||
KEY FINANCIAL DATA
|
||||||||||||||||
Ratio of earnings to fixed charges 1
|
3.27
|
2.85
|
2.85
|
1.83
|
--
|
|||||||||||
Debt to equity
|
10.4
|
9.6
|
11.3
|
13.1
|
17.8
|
|||||||||||
Return on assets
|
1.45
|
%
|
1.65
|
%
|
2.14
|
%
|
1.29
|
%
|
(0.76)
|
%
|
||||||
Allowance for credit losses as a
|
||||||||||||||||
percentage of gross earning assets2
|
0.63
|
%
|
0.80
|
%
|
1.13
|
%
|
2.31
|
%
|
2.51
|
%
|
||||||
Net charge-offs as a percentage of
|
||||||||||||||||
average gross earning assets3
|
0.27
|
%
|
0.21
|
%
|
0.52
|
%
|
1.03
|
%
|
1.37
|
%
|
||||||
60 or more days past due as a
|
||||||||||||||||
percentage of gross earning assets4
|
0.19
|
%
|
0.18
|
%
|
0.26
|
%
|
0.45
|
%
|
0.68
|
%
|
||||||
1
|
Due to our losses in fiscal 2009, the coverage ratio was less than one-to-one. We would have had to generate additional earnings equal to our pre-tax loss to achieve a coverage ratio of one-to-one in this fiscal year.
|
2
|
During fiscal 2010, we changed our charge-off policy from 150 days to 120 days past due. This change would not have changed our allowance for credit losses as a percentage of gross earning assets during fiscal 2009.
|
3
|
The change in accounting policy mentioned above would have resulted in net charge-offs as a percentage of average gross earning assets of 1.46 percent for fiscal 2009.
|
4
|
The change in accounting policy mentioned above would have resulted in 60 or more days past due as a percentage of gross earning assets of 0.60 percent for fiscal 2009.
|
·
|
Changes in general business and economic conditions, as well as in consumer demand and the competitive environment in the automotive markets in the United States;
|
·
|
A decline in TMS sales volume and the level of TMS sponsored subvention programs;
|
·
|
Increased competition from other financial institutions seeking to increase their share of financing Toyota vehicles;
|
·
|
Fluctuations in interest rates and currency exchange rates;
|
·
|
Changes or disruptions in our funding environment or access to the global capital markets;
|
·
|
Failure or changes in commercial soundness of our counterparties and other financial institutions;
|
·
|
Changes in our credit ratings and those of TMC;
|
·
|
Changes in the laws and regulatory requirements, including as a result of recent financial services legislation, and related costs;
|
·
|
Natural disasters, changes in fuel prices, manufacturing disruptions and production suspensions of Toyota, Lexus and Scion vehicles models and related parts supply;
|
·
|
Operational risks, including security breaches or cyber attacks;
|
·
|
Changes in prices of used vehicles and their effect on residual values of our off-lease vehicles and return rates;
|
·
|
The failure of a customer or dealer to meet the terms of any contract with us, or otherwise fail to perform as agreed;
|
·
|
Recalls announced by TMS and the perceived quality of Toyota, Lexus and Scion vehicles; and
|
·
|
The other risks and uncertainties set forth in “Part I, Item 1A. Risk Factors”.
|
RESULTS OF OPERATIONS
|
||||||||
Years ended March 31,
|
||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
|||||
Net income:
|
||||||||
Finance operations1
|
$
|
1,183
|
$
|
1,350
|
$
|
1,631
|
||
Insurance operations1
|
148
|
136
|
222
|
|||||
Total net income
|
$
|
1,331
|
$
|
1,486
|
$
|
1,853
|
1
|
Refer to Note 16 – Segment Information of the Notes to Consolidated Financial Statement for the total asset balances of our finance and insurance operations.
|
Finance Operations
|
|||||||||||||||
The following table summarizes key results of our Finance Operations:
|
|||||||||||||||
Years ended March 31,
|
Percentage change
|
||||||||||||||
2013 to
|
2012 to
|
||||||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
2012
|
2011
|
||||||||||
Financing revenues:
|
|||||||||||||||
Operating lease
|
$
|
4,748
|
$
|
4,693
|
$
|
4,888
|
1
|
%
|
(4)
|
%
|
|||||
Retail1
|
2,062
|
2,371
|
2,791
|
(13)
|
%
|
(15)
|
%
|
||||||||
Dealer
|
409
|
349
|
363
|
17
|
%
|
(4)
|
%
|
||||||||
Total financing revenues
|
7,219
|
7,413
|
8,042
|
(3)
|
%
|
(8)
|
%
|
||||||||
Investment and other income
|
57
|
44
|
46
|
30
|
%
|
(4)
|
%
|
||||||||
Gross revenues from finance operations
|
7,276
|
7,457
|
8,088
|
(2)
|
%
|
(8)
|
%
|
||||||||
Less:
|
|||||||||||||||
Depreciation on operating leases
|
3,568
|
3,339
|
3,353
|
7
|
%
|
-
|
%
|
||||||||
Interest expense
|
940
|
1,303
|
1,620
|
(28)
|
%
|
(20)
|
%
|
||||||||
Provision for credit losses
|
121
|
(98)
|
(433)
|
223
|
%
|
77
|
%
|
||||||||
Operating and administrative expenses
|
734
|
703
|
903
|
4
|
%
|
(22)
|
%
|
||||||||
Provision for income taxes
|
730
|
860
|
1,014
|
(15)
|
%
|
(15)
|
%
|
||||||||
Net income from finance operations
|
$
|
1,183
|
$
|
1,350
|
$
|
1,631
|
(12)
|
%
|
(17)
|
%
|
1
|
Includes direct finance lease revenues for all periods shown.
|
·
|
Operating lease revenues increased 1 percent in fiscal 2013 as compared to fiscal 2012, due to higher average outstanding earning asset balances partially offset by lower portfolio yields.
|
·
|
Retail contract revenues decreased 13 percent in fiscal 2013 as compared to fiscal 2012, primarily due to a decrease in our portfolio yields partially offset by higher average outstanding earning asset balances.
|
·
|
Dealer financing revenues increased 17 percent in fiscal 2013 as compared to fiscal 2012, due to higher average outstanding earning asset balances partially offset by lower portfolio yields.
|
Years ended March 31,
|
||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
|||||
Interest expense on debt
|
$
|
1,330
|
$
|
1,677
|
$
|
1,943
|
||
Interest income on derivatives
|
(2)
|
(1)
|
(21)
|
|||||
Interest expense on debt and derivatives
|
1,328
|
1,676
|
1,922
|
|||||
Ineffectiveness related to hedge accounting derivatives
|
(10)
|
(21)
|
(33)
|
|||||
(Gain) loss on foreign currency transactions
|
(430)
|
(182)
|
1,494
|
|||||
Loss (gain) on foreign currency swaps
|
431
|
(84)
|
(1,595)
|
|||||
Gain on non-hedge accounting interest rate swaps
|
(379)
|
(89)
|
(174)
|
|||||
Total interest expense
|
$
|
940
|
$
|
1,300
|
$
|
1,614
|
Insurance Operations
|
|||||||||||||||
The following table summarizes key results of our Insurance Operations:
|
|||||||||||||||
Years ended March 31,
|
Percentage change
|
||||||||||||||
2013 to
|
2012 to
|
||||||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
2012
|
2011
|
||||||||||
Agreements (units in thousands)
|
|||||||||||||||
Issued
|
1,557
|
1,357
|
2,200
|
15
|
%
|
(38)
|
%
|
||||||||
In force
|
5,787
|
6,357
|
6,239
|
(9)
|
%
|
2
|
%
|
||||||||
Insurance earned premiums and
|
|
||||||||||||||
contract revenues
|
$
|
596
|
$
|
620
|
$
|
565
|
(4)
|
%
|
10
|
%
|
|||||
Investment and other income
|
116
|
72
|
196
|
61
|
%
|
(63)
|
%
|
||||||||
Gross revenues from insurance
|
|
||||||||||||||
operations
|
712
|
692
|
761
|
3
|
%
|
(9)
|
%
|
||||||||
Less:
|
|||||||||||||||
Insurance losses and loss adjustment
|
|
||||||||||||||
expenses
|
293
|
325
|
247
|
(10)
|
%
|
32
|
%
|
||||||||
Operating and administrative
|
|||||||||||||||
expenses
|
177
|
154
|
156
|
15
|
%
|
(1)
|
%
|
||||||||
Provision for income taxes
|
94
|
77
|
136
|
22
|
%
|
(43)
|
%
|
||||||||
Net income from insurance
|
|
||||||||||||||
operations
|
$
|
148
|
$
|
136
|
$
|
222
|
9
|
%
|
(39)
|
%
|
FINANCIAL CONDITION
|
||||||||||
Vehicle Financing Volume and Net Earning Assets
|
||||||||||
The composition of our vehicle contract volume and market share is summarized below:
|
||||||||||
Years ended March 31,
|
Percentage change
|
|||||||||
2013 to
|
2012 to
|
|||||||||
(units in thousands):
|
2013
|
2012
|
2011
|
2012
|
2011
|
|||||
TMS new sales volume1
|
1,625
|
1,307
|
1,397
|
24
|
%
|
(6)
|
%
|
|||
Vehicle financing volume:2
|
||||||||||
New retail contracts
|
703
|
567
|
634
|
24
|
%
|
(11)
|
%
|
|||
Used retail contracts
|
290
|
325
|
368
|
(11)
|
%
|
(12)
|
%
|
|||
Lease contracts
|
333
|
242
|
351
|
38
|
%
|
(31)
|
%
|
|||
Total
|
1,326
|
1,134
|
1,353
|
17
|
%
|
(16)
|
%
|
|||
TMS subvened vehicle financing volume (units included in the above table):
|
||||||||||
New retail contracts
|
398
|
270
|
390
|
47
|
%
|
(31)
|
%
|
|||
Used retail contracts
|
88
|
77
|
70
|
14
|
%
|
10
|
%
|
|||
Lease contracts
|
272
|
206
|
321
|
32
|
%
|
(36)
|
%
|
|||
Total
|
758
|
553
|
781
|
37
|
%
|
(29)
|
%
|
|||
TMS subvened vehicle financing volume as a percent of vehicle financing volume:
|
||||||||||
New retail contracts
|
56.6
|
%
|
47.6
|
%
|
61.5
|
%
|
||||
Used retail contracts
|
30.3
|
%
|
23.7
|
%
|
19.0
|
%
|
||||
Lease contracts
|
81.7
|
%
|
85.1
|
%
|
91.5
|
%
|
||||
Overall subvened contracts
|
57.2
|
%
|
48.8
|
%
|
57.7
|
%
|
||||
Market share:3
|
||||||||||
Retail contracts
|
43.2
|
%
|
43.3
|
%
|
45.1
|
%
|
||||
Lease contracts
|
20.4
|
%
|
18.4
|
%
|
25.1
|
%
|
||||
Total
|
63.6
|
%
|
61.7
|
%
|
70.2
|
%
|
1
|
Represents total domestic TMS sales of new Toyota, Lexus and Scion vehicles excluding sales under dealer rental car and commercial fleet programs and sales of a private Toyota distributor. TMS new sales volume is comprised of approximately 85 percent Toyota and Scion and 15 percent Lexus vehicles for fiscal 2013, 84 percent Toyota and Scion and 16 percent Lexus vehicles for fiscal 2012 and 85 percent Toyota and Scion and 15 percent Lexus vehicles for fiscal 2011.
|
2
|
Total financing volume is comprised of approximately 82 percent Toyota and Scion, 15 percent Lexus, and 3 percent non-Toyota/Lexus vehicles for fiscal 2013, 79 percent Toyota and Scion, 16 percent Lexus and 5 percent non-Toyota/Lexus for fiscal 2012 and 80 percent Toyota and Scion, 15 percent Lexus and 5 percent non-Toyota/Lexus for fiscal 2011.
|
3
|
Represents the percentage of total domestic TMS sales of new Toyota, Lexus and Scion vehicles financed by us, excludes non-Toyota/Lexus sales, sales under dealer rental car and commercial fleet programs and sales of a private Toyota distributor.
|
The composition of our net earning assets is summarized below:
|
|||||||||||||
As of March 31,
|
Percentage change
|
||||||||||||
2013 to
|
2012 to
|
||||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
2012
|
2011
|
||||||||
Net Earning Assets
|
|||||||||||||
Finance receivables, net
|
|||||||||||||
Retail finance receivables, net1
|
$
|
47,679
|
$
|
45,296
|
$
|
45,688
|
5
|
%
|
(1)
|
%
|
|||
Dealer financing, net
|
14,888
|
12,746
|
12,048
|
17
|
%
|
6
|
%
|
||||||
Total finance receivables, net
|
62,567
|
58,042
|
57,736
|
8
|
%
|
1
|
%
|
||||||
Investments in operating leases, net
|
20,384
|
18,743
|
19,041
|
9
|
%
|
(2)
|
%
|
||||||
Net earning assets
|
$
|
82,951
|
$
|
76,785
|
$
|
76,777
|
8
|
%
|
-
|
%
|
|||
Retail Financing (average original contract term in months)
|
|||||||||||||
Lease contracts2
|
38
|
38
|
39
|
||||||||||
Retail contracts3
|
63
|
63
|
62
|
||||||||||
Dealer Financing (Number of dealers serviced)
|
|||||||||||||
Toyota and Lexus dealers4
|
996
|
986
|
975
|
1
|
%
|
1
|
%
|
||||||
Vehicle dealers outside of the
|
|||||||||||||
Toyota/Lexus dealer network
|
480
|
492
|
470
|
(2)
|
%
|
5
|
%
|
||||||
Industrial equipment dealers
|
140
|
142
|
139
|
(1)
|
%
|
2
|
%
|
||||||
Total number of dealers receiving
|
|||||||||||||
wholesale financing
|
1,616
|
1,620
|
1,584
|
-
|
%
|
2
|
%
|
||||||
Dealer inventory financed (units in thousands)
|
300
|
245
|
253
|
22
|
%
|
(3)
|
%
|
1
|
Includes direct finance leases.
|
2
|
Lease contract terms range from 24 months to 60 months.
|
3
|
Retail contract terms range from 24 months to 85 months.
|
Years ended March 31,
|
Percentage Change
|
|||||||||||
2013 to
|
2012 to
|
|||||||||||
(Units in thousands)
|
2013
|
2012
|
2011
|
2012
|
2011
|
|||||||
Scheduled maturities
|
282
|
273
|
278
|
3
|
%
|
(2)
|
%
|
|||||
Vehicles sold through:
|
||||||||||||
Dealer Direct program
|
||||||||||||
Grounding dealer
|
21
|
22
|
43
|
(5)
|
%
|
(49)
|
%
|
|||||
Dealer Direct online program
|
5
|
2
|
11
|
150
|
%
|
(82)
|
%
|
|||||
Physical auction
|
33
|
14
|
45
|
136
|
%
|
(69)
|
%
|
|||||
Total vehicles sold at lease termination
|
59
|
38
|
99
|
55
|
%
|
(62)
|
%
|
Depreciation on Operating Leases
|
|||||||||||
The following table provides information related to our depreciation on operating leases:
|
|||||||||||
Years ended March 31,
|
Percentage change
|
||||||||||
2013 to
|
2012 to
|
||||||||||
2013
|
2012
|
2011
|
2012
|
2011
|
|||||||
Depreciation on operating leases
|
|||||||||||
(dollars in millions)
|
$
|
3,568
|
$
|
3,339
|
$
|
3,353
|
7
|
%
|
-
|
%
|
|
Average operating lease units outstanding
|
|||||||||||
(in thousands)
|
803
|
783
|
787
|
3
|
%
|
(1)
|
%
|
Years ended March 31,
|
|||||||||||||
2013
|
2012
|
2011
|
|||||||||||
Net charge-offs as a percentage of average gross earning assets
|
|||||||||||||
Finance receivables
|
0.29
|
%
|
0.24
|
%
|
0.61
|
%
|
|||||||
Operating leases
|
0.18
|
%
|
0.11
|
%
|
0.22
|
%
|
|||||||
Total
|
0.27
|
%
|
0.21
|
%
|
0.52
|
%
|
|||||||
Default frequency as a percentage of outstanding contracts
|
1.23
|
%
|
1.43
|
%
|
2.11
|
%
|
|||||||
Average loss severity per unit1
|
$
|
5,737
|
$
|
5,869
|
$
|
7,110
|
|||||||
Aggregate balances for accounts 60 or more days past due as a
|
|||||||||||||
percentage of gross earning assets2
|
|||||||||||||
Finance receivables3
|
0.19
|
%
|
0.19
|
%
|
0.27
|
%
|
|||||||
Operating leases3
|
0.18
|
%
|
0.16
|
%
|
0.23
|
%
|
|||||||
Total
|
0.19
|
%
|
0.18
|
%
|
0.26
|
%
|
1
|
Average loss per unit upon disposition of repossessed vehicles or charge-off prior to repossession.
|
2
|
Substantially all retail, direct finance lease and operating lease receivables do not involve recourse to the dealer in the event of customer default.
|
3
|
Includes accounts in bankruptcy and excludes accounts for which vehicles have been repossessed.
|
Years ended March 31,
|
||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
|||||
Allowance for credit losses at beginning of period
|
$
|
619
|
$
|
879
|
$
|
1,705
|
||
Provision for credit losses
|
121
|
(98)
|
(433)
|
|||||
Charge-offs, net of recoveries1
|
(213)
|
(162)
|
(393)
|
|||||
Allowance for credit losses at end of period
|
$
|
527
|
$
|
619
|
$
|
879
|
1
|
Charge-offs were net of recoveries of $87 million, $123 million, and $137 million in fiscal 2013, 2012, and 2011, respectively.
|
Years ended March 31,
|
||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
|||||||
Allowance for credit losses as a percentage of
|
||||||||||
gross earning assets
|
||||||||||
Finance receivables
|
0.71
|
%
|
0.89
|
%
|
1.28
|
%
|
||||
Operating leases
|
0.40
|
%
|
0.51
|
%
|
0.65
|
%
|
||||
Total
|
0.63
|
%
|
0.80
|
%
|
1.13
|
%
|
March 31,
|
|||||||
(Dollars in millions)
|
2013
|
2012
|
|||||
Commercial paper1
|
$
|
24,590
|
$
|
21,247
|
|||
Unsecured notes and loans payable2
|
46,707
|
41,415
|
|||||
Secured notes and loans payable
|
7,009
|
9,789
|
|||||
Carrying value adjustment3
|
526
|
783
|
|||||
Total Debt
|
$
|
78,832
|
$
|
73,234
|
1
|
Includes unamortized premium/discount.
|
2
|
Includes unamortized premium/discount and effects of foreign currency transaction gains and losses on non-hedged or de-designated notes and loans payable which are denominated in foreign currencies.
|
3
|
Represents the effects of fair value adjustments to debt in hedging relationships, accrued redemption premiums, and the unamortized fair value adjustments on the hedged item for terminated fair value hedge accounting relationships.
|
(Dollars in millions)
|
U.S. medium
term notes
("MTNs") and
domestic bonds
|
Euro MTNs
("EMTNs")
|
Eurobonds
|
Other
|
Total
unsecured
notes and
loans
payable5
|
|||||||||
Balance at March 31, 20121
|
$
|
18,461
|
$
|
13,274
|
$
|
1,180
|
$
|
7,969
|
$
|
40,884
|
||||
Issuances during fiscal 2013
|
12,879
|
2
|
2,738
|
3
|
-
|
1,423
|
4
|
17,040
|
||||||
Maturities and terminations
|
||||||||||||||
during fiscal 2013
|
(4,624)
|
(2,414)
|
(377)
|
(3,615)
|
(11,030)
|
|||||||||
Balance at March 31, 20131
|
$
|
26,716
|
$
|
13,598
|
$
|
803
|
$
|
5,777
|
$
|
46,894
|
||||
Issuance during the one
|
||||||||||||||
month ended April 30, 2013
|
$
|
905
|
2
|
$
|
-
|
3
|
$
|
-
|
$
|
500
|
4
|
$
|
1,405
|
1
|
Amounts represent par values and as such exclude unamortized premium/discount, foreign currency transaction gains and losses on debt denominated in foreign currencies, fair value adjustments to debt in hedge accounting relationships, accrued redemption premiums, and the unamortized fair value adjustments on the hedged item for terminated hedge accounting relationships. Par values of non-U.S. currency denominated notes are determined using foreign exchange rates applicable as of the issuance dates.
|
2
|
MTNs and domestic bonds had terms to maturity ranging from approximately 1 year to 25 years, and had interest rates at the time of issuance ranging from 0.3 percent to 3.3 percent.
|
3
|
EMTNs had terms to maturity ranging from approximately 3 years to 25 years, and had interest rates at the time of issuance ranging from 1.3 percent to 4.6 percent.
|
4
|
Primarily consists of long-term borrowings, all with terms to maturity from approximately 1 year to 6 years, and interest rates at the time of issuance ranging from 0.1 percent to 1.0 percent.
|
5
|
Consists of fixed and floating rate debt and other obligations. Upon the issuance of fixed rate debt and other obligations, we generally elect to enter into pay float interest rate swaps. Refer to “Derivative Instruments” for further discussion.
|
·
|
Overcollateralization: The principal of the Securitized Assets that exceeds the principal amount of the related secured debt.
|
·
|
Excess spread: The expected interest collections on the Securitized Assets that exceed the expected fees and expenses of the special purpose entity, including the interest payable on the debt and net of swap settlements, if any.
|
·
|
Cash reserve funds: A portion of the proceeds from the issuance of asset-backed securities may be held by the securitization trust in a segregated reserve fund and may be used to pay principal and interest to security holders and other interest holders if collections on the underlying receivables are insufficient.
|
·
|
Yield supplement arrangements: Additional overcollateralization may be provided to supplement the future contractual interest payments from pledged receivables with relatively low contractual interest rates.
|
·
|
Subordinated notes: The subordination of principal and interest payments on subordinated notes provides additional credit enhancement to holders of senior notes.
|
·
|
maintain 100 percent ownership of TFSC;
|
·
|
cause TFSC and its subsidiaries to have a tangible net worth (the aggregate amount of issued capital, capital surplus and retained earnings less any tangible assets) of at least JPY 10 million, equivalent to $106,135 at March 31, 2013; and
|
·
|
make sufficient funds available to TFSC so that TFSC will be able to (i) service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper and (ii) honor its obligations incurred as a result of guarantees or credit support agreements that it has extended (collectively, “Securities”).
|
·
|
maintain 100 percent ownership of TMCC;
|
·
|
cause TMCC and its subsidiaries to have a tangible net worth (the aggregate amount of issued capital, capital surplus and retained earnings less any tangible assets) of at least $100,000; and
|
·
|
make sufficient funds available to TMCC so that TMCC will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper (collectively, “TMCC Securities”).
|
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
||||
Gross derivative assets, net of credit valuation adjustment
|
$
|
1,719
|
$
|
2,660
|
||
Less: Counterparty netting and collateral
|
(1,661)
|
(2,590)
|
||||
Derivative assets, net
|
$
|
58
|
$
|
70
|
||
Gross derivative liabilities, net of credit valuation adjustment
|
$
|
897
|
$
|
1,081
|
||
Less: Counterparty netting and collateral
|
(892)
|
(1,038)
|
||||
Derivative liabilities, net
|
$
|
5
|
$
|
43
|
||
Embedded derivative liabilities
|
$
|
12
|
$
|
24
|
Payments due by period
|
|||||||||||
Contractual obligations
|
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
||||||
Debt 1
|
$
|
78,400
|
$
|
40,473
|
$
|
20,104
|
$
|
11,576
|
$
|
6,247
|
|
Estimated interest payments for debt 2
|
4,191
|
998
|
1,526
|
696
|
971
|
||||||
Estimated net receipts under
|
|||||||||||
interest rate swap agreements2
|
(1,386)
|
(78)
|
(367)
|
(295)
|
(646)
|
||||||
Lending commitments 3
|
7,396
|
7,396
|
-
|
-
|
-
|
||||||
Premises occupied under lease
|
74
|
19
|
34
|
18
|
3
|
||||||
Purchase obligations 4
|
42
|
39
|
3
|
-
|
-
|
||||||
Total
|
$
|
88,717
|
$
|
48,847
|
$
|
21,300
|
$
|
11,995
|
$
|
6,575
|
1 |
Debt reflects the remaining principal obligation. Our foreign currency debt is stated in USD at amounts representing our contractual obligations under the foreign currency swaps that are used to hedge the corresponding debt. Excludes unamortized premium/discount of $138 million as well as foreign currency and fair value adjustments of $570 million.
|
2 |
Interest payments for debt and swap agreements payable in foreign currencies or based on variable interest rates are estimated using the applicable current rates as of March 31, 2013.
|
3 |
Lending commitments represent term loans and revolving lines of credit we extended to vehicle and industrial equipment dealers and affiliates. Of the amount shown above, $6.3 billion was outstanding as of March 31, 2013. The amount shown above excludes $11.5 billion of wholesale financing lines not considered to be contractual commitments at March 31, 2013, of which $8.3 billion was outstanding at March 31, 2013. The above lending commitments have various expiration dates.
|
4 |
Purchase obligations represent fixed or minimum payment obligations under supplier contracts. The amounts included herein represent the minimum contractual obligations in certain situations; however, actual amounts incurred may be substantially higher depending on the particular circumstance, including in the case of information technology contracts, the amount of usage once we have implemented it. Contracts that do not specify fixed payments or provide for a minimum payment are not included. Certain contracts noted herein contain voluntary provisions under which the contract may be terminated for a specified fee, ranging up to $5.5 million, depending upon the contract.
|
Sensitivity analysis
|
Immediate change in rates
|
||||||
(in millions)
|
+100bp
|
-100bp
|
|||||
March 31, 2013
|
$
|
31.80
|
$
|
(13.90)
|
|||
March 31, 2012
|
$
|
29.30
|
$
|
(9.60)
|
|||
March 31,
|
||||
(Dollars in millions)
|
2013
|
2012
|
||
Credit Rating
|
||||
AA
|
$
|
1
|
$
|
5
|
A
|
56
|
68
|
||
BBB
|
2
|
-
|
||
Total net counterparty credit exposure
|
$
|
59
|
$
|
73
|
As of March 31, 2013
|
|||||||||||||||
Distribution by credit rating
|
|||||||||||||||
Amortized
|
Fair
|
BB
|
|||||||||||||
Fixed income security category
|
cost
|
value
|
AAA
|
AA
|
A
|
BBB
|
or below
|
||||||||
U.S. government and
|
|||||||||||||||
agency obligations
|
$
|
101
|
$
|
104
|
$
|
-
|
$
|
104
|
$
|
-
|
$
|
-
|
$
|
-
|
|
Municipal debt securities
|
14
|
16
|
3
|
8
|
5
|
-
|
-
|
||||||||
Certificates of deposit
|
2,040
|
2,041
|
-
|
645
|
1,396
|
-
|
-
|
||||||||
Commercial paper
|
495
|
495
|
-
|
315
|
180
|
-
|
-
|
||||||||
Foreign government debt
|
|||||||||||||||
securities
|
3
|
3
|
3
|
-
|
-
|
-
|
-
|
||||||||
Corporate debt securities
|
122
|
128
|
-
|
10
|
66
|
41
|
11
|
||||||||
Mortgage backed securities
|
137
|
143
|
24
|
94
|
19
|
2
|
4
|
||||||||
Asset-backed securities
|
13
|
13
|
7
|
3
|
3
|
-
|
-
|
||||||||
Fixed income mutual funds
|
1,873
|
1,970
|
604
|
648
|
676
|
-
|
42
|
||||||||
Total
|
$
|
4,798
|
$
|
4,913
|
$
|
641
|
$
|
1,827
|
$
|
2,345
|
$
|
43
|
$
|
57
|
As of March 31, 2012
|
|||||||||||||||
Distribution by credit rating
|
|||||||||||||||
Amortized
|
Fair
|
BB
|
|||||||||||||
Fixed income security category
|
cost
|
value
|
AAA
|
AA
|
A
|
BBB
|
or below
|
||||||||
U.S. government and
|
|||||||||||||||
agency obligations
|
$
|
108
|
$
|
108
|
$
|
-
|
$
|
108
|
$
|
-
|
$
|
-
|
$
|
-
|
|
Municipal debt securities
|
17
|
20
|
3
|
11
|
6
|
-
|
-
|
||||||||
Certificates of deposit
|
1,341
|
1,341
|
-
|
435
|
906
|
-
|
-
|
||||||||
Commercial paper
|
633
|
633
|
50
|
404
|
179
|
-
|
-
|
||||||||
Foreign government debt
|
|||||||||||||||
securities
|
3
|
3
|
3
|
-
|
-
|
-
|
-
|
||||||||
Corporate debt securities
|
100
|
107
|
-
|
7
|
51
|
33
|
16
|
||||||||
Mortgage backed securities
|
132
|
139
|
18
|
108
|
1
|
-
|
12
|
||||||||
Asset-backed securities
|
13
|
13
|
9
|
4
|
-
|
-
|
-
|
||||||||
Fixed income mutual funds
|
1,788
|
1,844
|
544
|
1,201
|
62
|
-
|
37
|
||||||||
Total
|
$
|
4,135
|
$
|
4,208
|
$
|
627
|
$
|
2,278
|
$
|
1,205
|
$
|
33
|
$
|
65
|
March 31,
|
|||||
(Dollars in millions)
|
2013
|
2012
|
|||
Average
|
$
|
86
|
$
|
83
|
|
Minimum
|
$
|
84
|
$
|
71
|
|
Maximum
|
$
|
97
|
$
|
90
|
TOYOTA MOTOR CREDIT CORPORATION
|
|||||||||
CONSOLIDATED STATEMENT OF INCOME
|
|||||||||
Years ended March 31,
|
|||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
||||||
Financing revenues:
|
|||||||||
Operating lease
|
$
|
4,748
|
$
|
4,693
|
$
|
4,888
|
|||
Retail
|
2,062
|
2,371
|
2,791
|
||||||
Dealer
|
434
|
365
|
385
|
||||||
Total financing revenues
|
7,244
|
7,429
|
8,064
|
||||||
Depreciation on operating leases
|
3,568
|
3,339
|
3,353
|
||||||
Interest expense
|
940
|
1,300
|
1,614
|
||||||
Net financing revenues
|
2,736
|
2,790
|
3,097
|
||||||
Insurance earned premiums and contract revenues
|
571
|
604
|
543
|
||||||
Investment and other income, net
|
173
|
113
|
236
|
||||||
Net financing revenues and other revenues
|
3,480
|
3,507
|
3,876
|
||||||
Expenses:
|
|||||||||
Provision for credit losses
|
121
|
(98)
|
(433)
|
||||||
Operating and administrative
|
911
|
857
|
1,059
|
||||||
Insurance losses and loss adjustment expenses
|
293
|
325
|
247
|
||||||
Total expenses
|
1,325
|
1,084
|
873
|
||||||
Income before income taxes
|
2,155
|
2,423
|
3,003
|
||||||
Provision for income taxes
|
824
|
937
|
1,150
|
||||||
Net income
|
$
|
1,331
|
$
|
1,486
|
$
|
1,853
|
|||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
|||||||||
Years ended March 31,
|
|||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
||||||
Net income
|
$
|
1,331
|
1,486
|
1,853
|
|||||
Other comprehensive income, net of tax:
|
|||||||||
Net unrealized gains on available-for-sale
|
|||||||||
marketable securities (net of tax provision
|
|||||||||
of $40, $23 and $3, respectively)
|
64
|
43
|
4
|
||||||
Reclassification adjustment for net (gains) losses on
|
|||||||||
available-for-sale marketable securities included
|
|||||||||
in net income [net of tax provision (benefit) of
|
|||||||||
$8, ($10), and $5, respectively]
|
(13)
|
17
|
(8)
|
||||||
Other comprehensive income (loss)
|
51
|
60
|
(4)
|
||||||
Comprehensive income
|
$
|
1,382
|
$
|
1,546
|
$
|
1,849
|
|||
See accompanying Notes to Consolidated Financial Statements.
|
TOYOTA MOTOR CREDIT CORPORATION
|
|||||
CONSOLIDATED BALANCE SHEET
|
|||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
|||
ASSETS
|
|||||
Cash and cash equivalents
|
$
|
4,723
|
$
|
5,060
|
|
Restricted cash
|
491
|
682
|
|||
Investments in marketable securities
|
5,397
|
4,659
|
|||
Finance receivables, net
|
62,567
|
58,042
|
|||
Investments in operating leases, net
|
20,384
|
18,743
|
|||
Other assets
|
1,740
|
1,727
|
|||
Total assets
|
$
|
95,302
|
$
|
88,913
|
|
LIABILITIES AND SHAREHOLDER'S EQUITY
|
|||||
Debt
|
$
|
78,832
|
$
|
73,234
|
|
Deferred income taxes
|
6,236
|
5,412
|
|||
Other liabilities
|
2,677
|
2,605
|
|||
Total liabilities
|
87,745
|
81,251
|
|||
Commitments and contingencies (See Note 14)
|
|||||
Shareholder's equity:
|
|||||
Capital stock, no par value (100,000 shares authorized; 91,500
|
|||||
issued and outstanding at March 31, 2013 and 2012, respectively)
|
915
|
915
|
|||
Additional paid-in-capital
|
2
|
2
|
|||
Accumulated other comprehensive income
|
211
|
160
|
|||
Retained earnings
|
6,429
|
6,585
|
|||
Total shareholder's equity
|
7,557
|
7,662
|
|||
Total liabilities and shareholder's equity
|
$
|
95,302
|
$
|
88,913
|
(Dollars in millions)
|
March 31, 2013
|
March 31, 20121
|
|||
ASSETS
|
|||||
Finance receivables, net
|
$
|
7,556
|
$
|
10,527
|
|
Investments in operating leases, net
|
434
|
-
|
|||
Other assets
|
12
|
3
|
|||
Total assets
|
$
|
8,002
|
$
|
10,530
|
|
LIABILITIES
|
|||||
Debt
|
$
|
7,009
|
$
|
9,789
|
|
Other liabilities
|
1
|
2
|
|||
Total liabilities
|
$
|
7,010
|
$
|
9,791
|
|
1 Certain prior period amounts have been reclassified to conform to the current presentation.
|
|||||
See accompanying Notes to Consolidated Financial Statements.
|
TOYOTA MOTOR CREDIT CORPORATION
|
|||||||||||||||
CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY
|
|||||||||||||||
Accumulated
|
|||||||||||||||
other
|
|||||||||||||||
Capital
|
Additional
|
comprehensive
|
Retained
|
||||||||||||
(Dollars in millions)
|
stock
|
paid-in-capital
|
income
|
earnings
|
Total
|
||||||||||
Balance at March 31, 2010
|
$
|
915
|
$
|
1
|
$
|
104
|
$
|
4,253
|
$
|
5,273
|
|||||
Net income for the year ended
|
|||||||||||||||
March 31, 2011
|
-
|
-
|
-
|
1,853
|
1,853
|
||||||||||
Other comprehensive income (loss),
|
|||||||||||||||
net of tax
|
-
|
-
|
(4)
|
-
|
(4)
|
||||||||||
Dividends
|
-
|
-
|
-
|
(266)
|
(266)
|
||||||||||
Balance at March 31, 2011
|
$
|
915
|
$
|
1
|
$
|
100
|
$
|
5,840
|
$
|
6,856
|
|||||
Net income for the year ended
|
|||||||||||||||
March 31, 2012
|
-
|
-
|
-
|
1,486
|
1,486
|
||||||||||
Other comprehensive income, net
|
|||||||||||||||
of tax
|
-
|
-
|
60
|
-
|
60
|
||||||||||
Stock-based compensation
|
-
|
1
|
-
|
-
|
1
|
||||||||||
Dividends
|
-
|
-
|
-
|
(741)
|
(741)
|
||||||||||
Balance at March 31, 2012
|
$
|
915
|
$
|
2
|
$
|
160
|
$
|
6,585
|
$
|
7,662
|
|||||
Net income for the year ended
|
|||||||||||||||
March 31, 2013
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1,331
|
$
|
1,331
|
|||||
Other comprehensive income, net
|
|||||||||||||||
of tax
|
-
|
-
|
51
|
-
|
51
|
||||||||||
Dividends
|
-
|
-
|
-
|
(1,487)
|
(1,487)
|
||||||||||
Balance at March 31, 2013
|
$
|
915
|
$
|
2
|
$
|
211
|
$
|
6,429
|
$
|
7,557
|
|||||
See accompanying Notes to Consolidated Financial Statements.
|
TOYOTA MOTOR CREDIT CORPORATION
|
|||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS
|
|||||||||||
Years ended March 31,
|
|||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
||||||||
Cash flows from operating activities:
|
|||||||||||
Net income
|
$
|
1,331
|
$
|
1,486
|
$
|
1,853
|
|||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||||||
Depreciation and amortization
|
3,604
|
3,410
|
3,428
|
||||||||
Recognition of deferred income
|
(1,191)
|
(1,183)
|
(1,251)
|
||||||||
Provision for credit losses
|
121
|
(98)
|
(433)
|
||||||||
Amortization of deferred costs
|
541
|
575
|
541
|
||||||||
Foreign currency and other adjustments to the carrying value of debt, net
|
(1,103)
|
(1,893)
|
1,767
|
||||||||
Net (gain) loss from sale of investments in marketable securities
|
(21)
|
25
|
(47)
|
||||||||
Net change in:
|
|||||||||||
Restricted cash
|
191
|
23
|
(532)
|
||||||||
Derivative assets
|
12
|
832
|
(317)
|
||||||||
Other assets (Note 8) and accrued income
|
37
|
74
|
(49)
|
||||||||
Deferred income taxes
|
792
|
954
|
1,136
|
||||||||
Derivative liabilities
|
(50)
|
(136)
|
(364)
|
||||||||
Other liabilities
|
134
|
(217)
|
39
|
||||||||
Net cash provided by operating activities
|
4,398
|
3,852
|
5,771
|
||||||||
Cash flows from investing activities:
|
|||||||||||
Purchases of investments in marketable securities
|
(5,279)
|
(7,696)
|
(5,695)
|
||||||||
Proceeds from sales of investments in marketable securities
|
385
|
1,571
|
1,917
|
||||||||
Proceeds from maturities of investments in marketable securities
|
4,261
|
6,355
|
1,517
|
||||||||
Acquisitions of finance receivables
|
(25,604)
|
(22,149)
|
(23,294)
|
||||||||
Collections of finance receivables
|
22,941
|
22,341
|
21,765
|
||||||||
Net change in wholesale and certain working capital receivables
|
(1,887)
|
(267)
|
(484)
|
||||||||
Acquisitions of investments in operating leases
|
(10,395)
|
(7,619)
|
(10,112)
|
||||||||
Disposals of investments in operating leases
|
5,603
|
5,233
|
5,479
|
||||||||
Advances to affiliates
|
(5,199)
|
(3,851)
|
(2,815)
|
||||||||
Repayments from affiliates
|
5,319
|
3,451
|
2,468
|
||||||||
Other, net
|
(31)
|
(32)
|
(32)
|
||||||||
Net cash used in investing activities
|
(9,886)
|
(2,663)
|
(9,286)
|
||||||||
Cash flows from financing activities:
|
|||||||||||
Proceeds from issuance of debt
|
22,230
|
20,308
|
21,879
|
||||||||
Payments on debt
|
(16,929)
|
(21,824)
|
(16,096)
|
||||||||
Net change in commercial paper
|
3,349
|
1,298
|
469
|
||||||||
Advances from affiliates
|
49
|
6
|
33
|
||||||||
Repayments to affiliates
|
(2,061)
|
(2,006)
|
(17)
|
||||||||
Dividends paid to TFSA
|
(1,487)
|
(741)
|
(266)
|
||||||||
Net cash provided by (used in) financing activities
|
5,151
|
(2,959)
|
6,002
|
||||||||
Net (decrease) increase in cash and cash equivalents
|
(337)
|
(1,770)
|
2,487
|
||||||||
Cash and cash equivalents at the beginning of the period
|
5,060
|
6,830
|
4,343
|
||||||||
Cash and cash equivalents at the end of the period
|
$
|
4,723
|
$
|
5,060
|
$
|
6,830
|
|||||
Supplemental disclosures:
|
|||||||||||
Interest paid
|
$
|
1,258
|
$
|
1,591
|
$
|
1,733
|
|||||
Income taxes paid (received), net
|
$
|
21
|
$
|
(112)
|
$
|
35
|
|||||
Non-cash financing:
|
|||||||||||
Capital contribution for stock-based compensation
|
$
|
-
|
$
|
1
|
$
|
-
|
|||||
See accompanying Notes to Consolidated Financial Statements.
|
|||||||||||
·
|
Finance - We acquire a broad range of retail finance products including retail and commercial installment sales contracts (“retail contracts”) in the U.S. and Puerto Rico and leasing contracts accounted for as either direct finance leases or operating leases (“lease contracts”) from vehicle and industrial equipment dealers in the U.S. We also provide dealer financing, including wholesale financing (also referred to as floorplan financing), term loans, revolving lines of credit and real estate financing to vehicle and industrial equipment dealers in the U.S. and Puerto Rico.
|
·
|
Insurance - Through Toyota Motor Insurance Services, Inc. (“TMIS”), a wholly-owned subsidiary, we provide marketing, underwriting, and claims administration related to covering certain risks of vehicle dealers and their customers. We also provide coverage and related administrative services to certain of our affiliates in the U.S.
|
·
|
Retail Loan Portfolio Segment – The retail loan portfolio segment consists of retail installment sales contracts acquired from vehicle dealers in the U.S. and Puerto Rico (“retail loan contracts”). Under a retail loan contract, we are granted a security interest in the underlying collateral which consists primarily of Toyota, Scion or Lexus vehicles. Based on the common risk characteristics associated with the underlying finance receivables, the retail loan portfolio segment is considered a single class of finance receivable.
|
·
|
Commercial Truck and Industrial Equipment Loan & Direct Finance Lease Portfolio Segment (“Commercial Portfolio Segment”) – The commercial portfolio segment consists of commercial installment sales contracts (“commercial loan contracts”) and leasing contracts accounted for as direct finance leases acquired from commercial truck and industrial equipment dealers in the U.S. Under commercial loan and direct finance leases, we are granted a security interest in the underlying collateral which consists of various types of commercial trucks and industrial equipment. Based on the common risk characteristics associated with the underlying finance receivables and the similarity of the credit risk with respect to the two types of contracts, the commercial portfolio segment is considered a single class of finance receivable.
|
·
|
Dealer Products Portfolio Segment – The dealer products portfolio segment consists of wholesale financing (also referred to as floorplan financing), working capital loans, revolving lines of credit and real estate financing to vehicle and industrial equipment dealers in the U.S. and Puerto Rico. Wholesale loans are primarily collateralized by new or used vehicle or equipment inventory with the outstanding balance fluctuating based on the level of inventory. Real estate loans are collateralized by the underlying real estate, are underwritten on a loan-to-value basis and are typically for a fixed term. Working capital loans and revolving lines of credit are granted for working capital purposes and are secured by dealership assets. Based on the risk characteristics associated with the underlying finance receivables, the dealer products portfolio segment consists of three classes of finance receivables: wholesale, real estate, and working capital.
|
As of March 31, 2013
|
|||||||||||||
Fair value measurements on a recurring basis
|
|||||||||||||
Counterparty
|
Fair
|
||||||||||||
(Dollars in millions)
|
Level 1
|
Level 2
|
Level 3
|
netting & collateral
|
value
|
||||||||
Cash equivalents:
|
|||||||||||||
Money market instruments
|
$
|
900
|
$
|
608
|
$
|
-
|
$
|
-
|
$
|
1,508
|
|||
Certificates of deposit
|
-
|
1,945
|
-
|
-
|
1,945
|
||||||||
Commercial paper
|
-
|
798
|
-
|
-
|
798
|
||||||||
Cash equivalents total
|
900
|
3,351
|
-
|
-
|
4,251
|
||||||||
Available-for-sale securities:
|
|||||||||||||
Debt instruments:
|
|||||||||||||
U.S. government and agency obligations
|
42
|
62
|
-
|
-
|
104
|
||||||||
Municipal debt securities
|
-
|
16
|
-
|
-
|
16
|
||||||||
Certificates of deposit
|
-
|
2,041
|
-
|
-
|
2,041
|
||||||||
Commercial paper
|
-
|
495
|
-
|
-
|
495
|
||||||||
Foreign government debt securities
|
-
|
3
|
-
|
-
|
3
|
||||||||
Corporate debt securities
|
-
|
124
|
4
|
-
|
128
|
||||||||
Mortgage-backed securities:
|
|||||||||||||
U.S. government agency
|
-
|
87
|
-
|
-
|
87
|
||||||||
Non-agency residential
|
-
|
-
|
5
|
-
|
5
|
||||||||
Non-agency commercial
|
-
|
-
|
51
|
-
|
51
|
||||||||
Asset-backed securities
|
-
|
-
|
13
|
-
|
13
|
||||||||
Equity instruments:
|
|||||||||||||
Fixed income mutual funds:
|
|||||||||||||
Short-term sector fund
|
-
|
43
|
-
|
-
|
43
|
||||||||
U.S. government sector fund
|
-
|
312
|
-
|
-
|
312
|
||||||||
Municipal sector fund
|
-
|
22
|
-
|
-
|
22
|
||||||||
Investment grade corporate sector fund
|
-
|
327
|
-
|
-
|
327
|
||||||||
High-yield sector fund
|
-
|
42
|
-
|
-
|
42
|
||||||||
Real return sector fund
|
-
|
293
|
-
|
-
|
293
|
||||||||
Mortgage sector fund
|
-
|
648
|
-
|
-
|
648
|
||||||||
Asset-backed securities sector fund
|
-
|
47
|
-
|
-
|
47
|
||||||||
Emerging market sector fund
|
-
|
66
|
-
|
-
|
66
|
||||||||
International sector fund
|
-
|
170
|
-
|
-
|
170
|
||||||||
Equity mutual fund
|
484
|
-
|
-
|
-
|
484
|
||||||||
Available-for-sale securities total
|
526
|
4,798
|
73
|
-
|
5,397
|
||||||||
Derivative assets:
|
|||||||||||||
Foreign currency swaps
|
-
|
1,076
|
63
|
-
|
1,139
|
||||||||
Interest rate swaps
|
-
|
568
|
12
|
-
|
580
|
||||||||
Counterparty netting and collateral
|
-
|
-
|
-
|
(1,661)
|
(1,661)
|
||||||||
Derivative assets total
|
-
|
1,644
|
75
|
(1,661)
|
58
|
||||||||
Assets at fair value
|
1,426
|
9,793
|
148
|
(1,661)
|
9,706
|
||||||||
Derivative liabilities:
|
|||||||||||||
Foreign currency swaps
|
-
|
(123)
|
(8)
|
-
|
(131)
|
||||||||
Interest rate swaps
|
-
|
(766)
|
-
|
-
|
(766)
|
||||||||
Counterparty netting and collateral
|
-
|
-
|
-
|
892
|
892
|
||||||||
Derivative liabilities total
|
-
|
(889)
|
(8)
|
892
|
(5)
|
||||||||
Embedded derivative liabilities
|
-
|
-
|
(12)
|
-
|
(12)
|
||||||||
Liabilities at fair value
|
-
|
(889)
|
(20)
|
892
|
(17)
|
||||||||
Net assets at fair value
|
$
|
1,426
|
$
|
8,904
|
$
|
128
|
$
|
(769)
|
$
|
9,689
|
Note 2 – Fair Value Measurements (Continued)
|
|||||||||||||
As of March 31, 2012
|
|||||||||||||
Fair value measurements on a recurring basis
|
|||||||||||||
Counterparty
|
Fair
|
||||||||||||
(Dollars in millions)
|
Level 1
|
Level 2
|
Level 3
|
netting & collateral
|
value
|
||||||||
Cash equivalents:
|
|||||||||||||
Money market instruments
|
$
|
2,591
|
$
|
256
|
$
|
-
|
$
|
-
|
$
|
2,847
|
|||
Certificates of deposit
|
-
|
495
|
-
|
-
|
495
|
||||||||
Commercial paper
|
-
|
1,537
|
-
|
-
|
1,537
|
||||||||
Cash equivalents total
|
2,591
|
2,288
|
-
|
-
|
4,879
|
||||||||
Available-for-sale securities:
|
|||||||||||||
Debt instruments:
|
|||||||||||||
U.S. government and agency obligations
|
-
|
108
|
-
|
-
|
108
|
||||||||
Municipal debt securities
|
-
|
20
|
-
|
-
|
20
|
||||||||
Certificates of deposit
|
-
|
1,341
|
-
|
-
|
1,341
|
||||||||
Commercial paper
|
-
|
633
|
-
|
-
|
633
|
||||||||
Foreign government debt securities
|
-
|
3
|
-
|
-
|
3
|
||||||||
Corporate debt securities
|
-
|
106
|
1
|
-
|
107
|
||||||||
Mortgage-backed securities:
|
|||||||||||||
U.S. government agency
|
-
|
105
|
-
|
-
|
105
|
||||||||
Non-agency residential
|
-
|
4
|
4
|
-
|
8
|
||||||||
Non-agency commercial
|
-
|
11
|
15
|
-
|
26
|
||||||||
Asset-backed securities
|
-
|
12
|
1
|
-
|
13
|
||||||||
Equity instruments:
|
|||||||||||||
Fixed income mutual funds:
|
|||||||||||||
Short-term sector fund
|
-
|
40
|
-
|
-
|
40
|
||||||||
U.S. government sector fund
|
-
|
313
|
-
|
-
|
313
|
||||||||
Municipal sector fund
|
-
|
21
|
-
|
-
|
21
|
||||||||
Investment grade corporate sector fund
|
-
|
298
|
-
|
-
|
298
|
||||||||
High-yield sector fund
|
-
|
37
|
-
|
-
|
37
|
||||||||
Real return sector fund
|
-
|
231
|
-
|
-
|
231
|
||||||||
Mortgage sector fund
|
-
|
639
|
-
|
-
|
639
|
||||||||
Asset-backed securities sector fund
|
-
|
41
|
-
|
-
|
41
|
||||||||
Emerging market sector fund
|
-
|
62
|
-
|
-
|
62
|
||||||||
International sector fund
|
-
|
162
|
-
|
-
|
162
|
||||||||
Equity mutual fund
|
451
|
-
|
-
|
-
|
451
|
||||||||
Available-for-sale securities total
|
451
|
4,187
|
21
|
-
|
4,659
|
||||||||
Derivative assets:
|
|||||||||||||
Foreign currency swaps
|
-
|
2,142
|
79
|
-
|
2,221
|
||||||||
Interest rate swaps
|
-
|
426
|
13
|
-
|
439
|
||||||||
Counterparty netting and collateral
|
-
|
-
|
-
|
(2,590)
|
(2,590)
|
||||||||
Derivative assets total
|
-
|
2,568
|
92
|
(2,590)
|
70
|
||||||||
Assets at fair value
|
3,042
|
9,043
|
113
|
(2,590)
|
9,608
|
||||||||
Derivative liabilities:
|
|||||||||||||
Foreign currency swaps
|
-
|
(63)
|
(10)
|
-
|
(73)
|
||||||||
Interest rate swaps
|
-
|
(1,008)
|
-
|
-
|
(1,008)
|
||||||||
Counterparty netting and collateral
|
-
|
-
|
-
|
1,038
|
1,038
|
||||||||
Derivative liabilities total
|
-
|
(1,071)
|
(10)
|
1,038
|
(43)
|
||||||||
Embedded derivative liabilities
|
-
|
-
|
(24)
|
-
|
(24)
|
||||||||
Liabilities at fair value
|
-
|
(1,071)
|
(34)
|
1,038
|
(67)
|
||||||||
Net assets at fair value
|
$
|
3,042
|
$
|
7,972
|
$
|
79
|
$
|
(1,552)
|
$
|
9,541
|
Year Ended March 31, 2013
|
|||||||||||||||||||||||||
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|||||||||||||||||||||||||
Available-for-sale securities
|
Derivatives
|
Total net
assets
(liabilities)
|
|||||||||||||||||||||||
Non-agency
|
Non-agency
|
||||||||||||||||||||||||
residential
|
commercial
|
Total
|
Total
|
||||||||||||||||||||||
Corporate
|
mortgage-
|
mortgage-
|
Asset-
|
available-
|
Interest
|
Foreign
|
Embedded
|
derivative
|
|||||||||||||||||
debt
|
backed
|
backed
|
backed
|
for-sale
|
rate
|
currency
|
derivatives,
|
assets
|
|||||||||||||||||
(Dollars in millions)
|
securities
|
securities
|
securities
|
securities
|
securities
|
swaps
|
swaps
|
net
|
(liabilities)
|
||||||||||||||||
Fair value, April 1, 2012
|
$
|
1
|
$
|
4
|
$
|
15
|
$
|
1
|
$
|
21
|
$
|
13
|
$
|
69
|
$
|
(24)
|
$
|
58
|
$
|
79
|
|||||
Total gains
|
|||||||||||||||||||||||||
Included in earnings
|
-
|
-
|
-
|
-
|
-
|
2
|
11
|
12
|
25
|
25
|
|||||||||||||||
Included in other
|
|||||||||||||||||||||||||
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Purchases, issuances, sales, and
|
|||||||||||||||||||||||||
settlements
|
|||||||||||||||||||||||||
Purchases
|
-
|
2
|
35
|
7
|
44
|
-
|
-
|
-
|
-
|
44
|
|||||||||||||||
Issuances
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Sales
|
-
|
(2)
|
(4)
|
(1)
|
(7)
|
-
|
-
|
-
|
-
|
(7)
|
|||||||||||||||
Settlements
|
-
|
(2)
|
(5)
|
(5)
|
(12)
|
(3)
|
(25)
|
-
|
(28)
|
(40)
|
|||||||||||||||
Transfers in to Level 3
|
3
|
3
|
10
|
11
|
27
|
-
|
-
|
-
|
-
|
27
|
|||||||||||||||
Transfers out of Level 3
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Fair value, March 31, 2013
|
$
|
4
|
$
|
5
|
$
|
51
|
$
|
13
|
$
|
73
|
$
|
12
|
$
|
55
|
$
|
(12)
|
$
|
55
|
$
|
128
|
|||||
The amount of total gains
|
|||||||||||||||||||||||||
for the period included
|
|||||||||||||||||||||||||
in earnings attributable to the
|
|||||||||||||||||||||||||
change in unrealized gains or
|
|||||||||||||||||||||||||
losses related to assets still held
|
|||||||||||||||||||||||||
at the reporting date
|
$
|
2
|
$
|
8
|
$
|
1
|
$
|
11
|
$
|
11
|
|||||||||||||||
Note 2 – Fair Value Measurements (Continued)
|
|||||||||||||||||||||||||
Year Ended March 31, 2012
|
|||||||||||||||||||||||||
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|
|||||||||||||||||||||||||
Available-for-sale securities
|
Derivatives
|
Total net
assets
(liabilities)
|
|||||||||||||||||||||||
Non-agency
|
Non-agency
|
||||||||||||||||||||||||
residential
|
commercial
|
Total
|
Total
|
||||||||||||||||||||||
Corporate
|
mortgage-
|
mortgage-
|
Asset-
|
available-
|
Interest
|
Foreign
|
Embedded
|
derivative
|
|||||||||||||||||
debt
|
backed
|
backed
|
backed
|
for-sale
|
rate
|
currency
|
derivatives,
|
assets
|
|||||||||||||||||
(Dollars in millions)
|
securities
|
securities
|
securities
|
securities
|
securities
|
swaps
|
swaps
|
net
|
(liabilities)
|
||||||||||||||||
Fair value, April 1, 2011
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
17
|
$
|
109
|
$
|
(51)
|
$
|
75
|
$
|
75
|
|||||
Total gains
|
|||||||||||||||||||||||||
Included in earnings
|
-
|
-
|
-
|
-
|
-
|
11
|
47
|
28
|
86
|
86
|
|||||||||||||||
Included in other
|
|||||||||||||||||||||||||
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Purchases, issuances, sales, and
|
|||||||||||||||||||||||||
settlements
|
|||||||||||||||||||||||||
Purchases
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Issuances
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Sales
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Settlements
|
-
|
-
|
-
|
-
|
-
|
(16)
|
(30)
|
-
|
(46)
|
(46)
|
|||||||||||||||
Transfers in to Level 3
|
1
|
4
|
15
|
1
|
21
|
-
|
-
|
-
|
-
|
21
|
|||||||||||||||
Transfers out of Level 3
|
-
|
-
|
-
|
-
|
-
|
1
|
(57)
|
(1)
|
(57)
|
(57)
|
|||||||||||||||
Fair value, March 31, 2012
|
$
|
1
|
$
|
4
|
$
|
15
|
$
|
1
|
$
|
21
|
$
|
13
|
$
|
69
|
$
|
(24)
|
$
|
58
|
$
|
79
|
|||||
The amount of total gains or
|
|||||||||||||||||||||||||
(losses) for the period included
|
|||||||||||||||||||||||||
in earnings attributable to the
|
|||||||||||||||||||||||||
change in unrealized gains or
|
|||||||||||||||||||||||||
losses related to assets still held
|
|||||||||||||||||||||||||
at the reporting date
|
$
|
7
|
$
|
43
|
$
|
(4)
|
$
|
46
|
$
|
46
|
|||||||||||||||
Fair value measurement hierarchy
|
||||||||||||
Carrying
|
Total Fair
|
|||||||||||
(Dollars in millions)
|
value
|
Level 1
|
Level 2
|
Level 3
|
Value
|
|||||||
As of March 31, 2013
|
||||||||||||
Financial assets
|
||||||||||||
Finance receivables, net
|
||||||||||||
Retail loan
|
$
|
47,312
|
$
|
-
|
$
|
-
|
$
|
48,313
|
$
|
48,313
|
||
Commercial
|
134
|
-
|
-
|
126
|
126
|
|||||||
Wholesale
|
8,620
|
-
|
-
|
8,644
|
8,644
|
|||||||
Real estate
|
4,531
|
-
|
-
|
4,480
|
4,480
|
|||||||
Working capital
|
1,695
|
-
|
-
|
1,708
|
1,708
|
|||||||
Financial liabilities
|
||||||||||||
Commercial paper
|
$
|
24,590
|
$
|
-
|
$
|
24,590
|
$
|
-
|
$
|
24,590
|
||
Unsecured notes and loans payable
|
47,233
|
-
|
47,901
|
874
|
48,775
|
|||||||
Secured notes and loans payable
|
7,009
|
-
|
-
|
7,016
|
7,016
|
Note 2 - Fair Value Measurements (Continued)
|
||||||||||||
Fair value measurement hierarchy
|
||||||||||||
Carrying
|
Total Fair
|
|||||||||||
(Dollars in millions)
|
value
|
Level 1
|
Level 2
|
Level 3
|
Value
|
|||||||
As of March 31, 2012
|
||||||||||||
Financial assets
|
||||||||||||
Finance receivables, net
|
||||||||||||
Retail loan
|
$
|
44,941
|
$
|
-
|
$
|
-
|
$
|
46,609
|
$
|
46,609
|
||
Commercial
|
141
|
-
|
-
|
148
|
148
|
|||||||
Wholesale
|
6,951
|
-
|
-
|
6,950
|
6,950
|
|||||||
Real estate
|
4,280
|
-
|
-
|
4,204
|
4,204
|
|||||||
Working capital
|
1,480
|
-
|
-
|
1,458
|
1,458
|
|||||||
Financial liabilities
|
||||||||||||
Commercial paper
|
$
|
21,247
|
$
|
-
|
$
|
21,247
|
$
|
-
|
$
|
21,247
|
||
Unsecured notes and loans payable
|
42,198
|
-
|
36,764
|
6,538
|
43,302
|
|||||||
Secured notes and loans payable
|
9,789
|
-
|
-
|
9,810
|
9,810
|
|||||||
March 31, 2013
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||
(Dollars in millions)
|
cost
|
gains
|
losses
|
value
|
||||||||||
Available-for-sale securities:
|
||||||||||||||
Debt instruments:
|
||||||||||||||
U.S. government and agency obligations
|
$
|
101
|
$
|
3
|
$
|
-
|
$
|
104
|
||||||
Municipal debt securities
|
14
|
2
|
-
|
16
|
||||||||||
Certificates of deposit
|
2,040
|
1
|
-
|
2,041
|
||||||||||
Commercial paper
|
495
|
-
|
-
|
495
|
||||||||||
Foreign government debt securities
|
3
|
-
|
-
|
3
|
||||||||||
Corporate debt securities
|
122
|
6
|
-
|
128
|
||||||||||
Mortgage-backed securities:
|
||||||||||||||
U.S. government agency
|
83
|
4
|
-
|
87
|
||||||||||
Non-agency residential
|
4
|
1
|
-
|
5
|
||||||||||
Non-agency commercial
|
50
|
1
|
-
|
51
|
||||||||||
Asset-backed securities
|
13
|
-
|
-
|
13
|
||||||||||
Equity instruments:
|
||||||||||||||
Fixed income mutual funds:
|
||||||||||||||
Short-term sector fund
|
40
|
3
|
-
|
43
|
||||||||||
U.S. government sector fund
|
296
|
16
|
-
|
312
|
||||||||||
Municipal sector fund
|
19
|
3
|
-
|
22
|
||||||||||
Investment grade corporate sector fund
|
273
|
54
|
-
|
327
|
||||||||||
High-yield sector fund
|
34
|
8
|
-
|
42
|
||||||||||
Real return sector fund
|
284
|
9
|
-
|
293
|
||||||||||
Mortgage sector fund
|
663
|
-
|
(15)
|
648
|
||||||||||
Asset-backed securities sector fund
|
38
|
9
|
-
|
47
|
||||||||||
Emerging market sector fund
|
63
|
3
|
-
|
66
|
||||||||||
International sector fund
|
163
|
7
|
-
|
170
|
||||||||||
Equity mutual fund
|
259
|
225
|
-
|
484
|
||||||||||
Total investments in marketable securities
|
$
|
5,057
|
$
|
355
|
$
|
(15)
|
$
|
5,397
|
Note 3 – Investments in Marketable Securities (Continued)
|
||||||||||||||
March 31, 2012
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||
(Dollars in millions)
|
cost
|
gains
|
losses
|
value
|
||||||||||
Available-for-sale securities:
|
||||||||||||||
Debt instruments:
|
||||||||||||||
U.S. government and agency obligations
|
$
|
108
|
$
|
1
|
$
|
(1)
|
$
|
108
|
||||||
Municipal debt securities
|
17
|
3
|
-
|
20
|
||||||||||
Certificates of deposit
|
1,341
|
-
|
-
|
1,341
|
||||||||||
Commercial paper
|
633
|
-
|
-
|
633
|
||||||||||
Foreign government debt securities
|
3
|
-
|
-
|
3
|
||||||||||
Corporate debt securities
|
100
|
7
|
-
|
107
|
||||||||||
Mortgage-backed securities:
|
||||||||||||||
U.S. government agency
|
100
|
5
|
-
|
105
|
||||||||||
Non-agency residential
|
7
|
1
|
-
|
8
|
||||||||||
Non-agency commercial
|
25
|
1
|
-
|
26
|
||||||||||
Asset-backed securities
|
13
|
-
|
-
|
13
|
||||||||||
Equity instruments:
|
||||||||||||||
Fixed income mutual funds:
|
||||||||||||||
Short-term sector fund
|
39
|
1
|
-
|
40
|
||||||||||
U.S. government sector fund
|
319
|
-
|
(6)
|
313
|
||||||||||
Municipal sector fund
|
19
|
2
|
-
|
21
|
||||||||||
Investment grade corporate sector fund
|
261
|
37
|
-
|
298
|
||||||||||
High-yield sector fund
|
31
|
6
|
-
|
37
|
||||||||||
Real return sector fund
|
228
|
3
|
-
|
231
|
||||||||||
Mortgage sector fund
|
651
|
-
|
(12)
|
639
|
||||||||||
Asset-backed securities sector fund
|
37
|
4
|
-
|
41
|
||||||||||
Emerging market sector fund
|
60
|
2
|
-
|
62
|
||||||||||
International sector fund
|
143
|
19
|
-
|
162
|
||||||||||
Equity mutual fund
|
268
|
183
|
-
|
451
|
||||||||||
Total investments in marketable securities
|
$
|
4,403
|
$
|
275
|
$
|
(19)
|
$
|
4,659
|
Less than 12 months as of
|
||||||||||||||||||
March 31, 2013
|
March 31, 2012
|
|||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||
(Dollars in millions)
|
value
|
losses
|
value
|
losses
|
||||||||||||||
Available-for-sale securities:
|
||||||||||||||||||
Debt instruments:
|
||||||||||||||||||
U.S. government and agency
obligations
|
$
|
-
|
$
|
-
|
$
|
68
|
$
|
(1)
|
||||||||||
Equity instruments:
|
||||||||||||||||||
U.S. government sector fund
|
-
|
-
|
237
|
(2)
|
||||||||||||||
Mortgage sector fund
|
532
|
(12)
|
639
|
(12)
|
||||||||||||||
Total investments in marketable
securities
|
$
|
532
|
$
|
(12)
|
$
|
944
|
$
|
(15)
|
||||||||||
Years ended March 31,
|
|||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
||||
Available-for-sale securities:
|
|||||||
Realized gains on sales
|
$
|
23
|
$
|
16
|
$
|
70
|
|
Realized losses on sales
|
$
|
2
|
$
|
41
|
$
|
23
|
|
Due in 1 Year or
|
Due after 1 Year
|
Due after 5 Years
|
||||||||||||||||||||||||
Less
|
through 5 Years
|
through 10 Years
|
Due after 10 Years
|
Total
|
||||||||||||||||||||||
(Dollars in millions)
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
Amount
|
Yield
|
||||||||||||||||
Fair Value of Available-for-Sale Securities:
|
||||||||||||||||||||||||||
Debt instruments:
|
||||||||||||||||||||||||||
U.S. government and
|
||||||||||||||||||||||||||
agency obligations
|
$
|
12
|
0.11
|
%
|
$
|
46
|
1.44
|
%
|
$
|
41
|
1.78
|
%
|
$
|
5
|
1.84
|
%
|
$
|
104
|
1.52
|
%
|
||||||
Municipal debt securities
|
2
|
1.33
|
-
|
-
|
2
|
5.54
|
12
|
5.76
|
16
|
5.33
|
||||||||||||||||
Certificates of deposit
|
2,041
|
0.56
|
-
|
-
|
-
|
-
|
-
|
-
|
2,041
|
0.56
|
||||||||||||||||
Commercial paper
|
495
|
0.13
|
-
|
-
|
-
|
-
|
-
|
-
|
495
|
0.13
|
||||||||||||||||
Foreign government debt
|
||||||||||||||||||||||||||
securities
|
-
|
-
|
3
|
2.93
|
-
|
-
|
-
|
-
|
3
|
2.93
|
||||||||||||||||
Corporate debt
|
||||||||||||||||||||||||||
securities
|
10
|
4.75
|
51
|
4.52
|
56
|
4.80
|
11
|
6.09
|
128
|
4.60
|
||||||||||||||||
Mortgage-backed securities:
|
||||||||||||||||||||||||||
U.S. government agency
|
-
|
-
|
-
|
-
|
5
|
4.11
|
82
|
3.49
|
87
|
3.53
|
||||||||||||||||
Non-agency residential
|
-
|
-
|
-
|
-
|
-
|
-
|
5
|
10.92
|
5
|
10.92
|
||||||||||||||||
Non-agency commercial
|
-
|
-
|
4
|
3.56
|
2
|
1.23
|
45
|
3.65
|
51
|
3.44
|
||||||||||||||||
Asset-backed securities
|
-
|
-
|
-
|
-
|
7
|
1.10
|
6
|
1.68
|
13
|
1.42
|
||||||||||||||||
Debt instruments total
|
2,560
|
0.50
|
104
|
3.09
|
113
|
3.41
|
166
|
3.99
|
2,943
|
0.89
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Equity instruments:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed income mutual funds
|
|
|
|
|
|
|
|
1,970
|
5.27
|
|||||||||||||||||
Equity mutual funds
|
|
|
|
|
|
|
|
484
|
3.85
|
|||||||||||||||||
Equity instruments total
|
-
|
|
-
|
|
-
|
|
-
|
|
2,454
|
4.99
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total fair value
|
$
|
2,560
|
0.50
|
%
|
$
|
104
|
3.09
|
%
|
$
|
113
|
3.41
|
%
|
$
|
166
|
3.99
|
%
|
$
|
5,397
|
2.75
|
%
|
||||||
Total amortized cost
|
$
|
2,559
|
|
$
|
100
|
|
$
|
107
|
|
$
|
160
|
|
$
|
5,057
|
|
|||||||||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
|||||
Retail receivables
|
$
|
40,508
|
$
|
35,020
|
|||
Pledged retail receivables
|
7,669
|
10,726
|
|||||
Dealer financing
|
14,995
|
12,865
|
|||||
63,172
|
58,611
|
||||||
Deferred origination (fees) and costs, net
|
634
|
639
|
|||||
Deferred income
|
(794)
|
(684)
|
|||||
Allowance for credit losses
|
|||||||
Retail and pledged retail receivables
|
(338)
|
(405)
|
|||||
Dealer financing
|
(107)
|
(119)
|
|||||
Total allowance for credit losses
|
(445)
|
(524)
|
|||||
Finance receivables, net
|
$
|
62,567
|
$
|
58,042
|
|||
Contractual maturities on retail receivables and dealer financing are as follows (dollars in millions):
|
||||||||
Contractual maturities
|
||||||||
Years ending March 31,
|
Retail receivables
|
Dealer financing
|
||||||
2014
|
$
|
13,913
|
$
|
11,497
|
||||
2015
|
12,524
|
1,268
|
||||||
2016
|
10,025
|
707
|
||||||
2017
|
7,037
|
607
|
||||||
2018
|
3,679
|
568
|
||||||
Thereafter
|
993
|
348
|
||||||
Total
|
$
|
48,171
|
$
|
14,995
|
·
|
Performing – Account not classified as either Credit Watch, At Risk or Default
|
·
|
Credit Watch – Account designated for elevated attention
|
·
|
At Risk – Account where there is an increased likelihood that default may exist based on qualitative and quantitative factors
|
·
|
Default – Account is not currently meeting contractual obligations or we have temporarily waived certain contractual requirements
|
Note 4 - Finance Receivables, Net (Continued)
|
||||||||||||||||||
The tables below present each credit quality indicator by class of finance receivable as of March 31, 2013 and March 31, 2012:
|
||||||||||||||||||
Retail Loan
|
Commercial
|
|||||||||||||||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
March 31, 2013
|
March 31, 2012
|
||||||||||||||
Aging of finance receivables:
|
||||||||||||||||||
Current
|
$
|
47,236
|
$
|
44,842
|
$
|
362
|
$
|
352
|
||||||||||
30-59 days past due
|
454
|
433
|
6
|
8
|
||||||||||||||
60-89 days past due
|
87
|
80
|
1
|
2
|
||||||||||||||
90 days past due
|
31
|
28
|
-
|
1
|
||||||||||||||
Total
|
$
|
47,808
|
$
|
45,383
|
$
|
369
|
$
|
363
|
||||||||||
Wholesale
|
Real Estate
|
Working Capital
|
||||||||||||||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
March 31, 2013
|
March 31, 2012
|
March 31, 2013
|
March 31, 2012
|
||||||||||||
Credit quality indicators:
|
||||||||||||||||||
Performing
|
$
|
7,659
|
$
|
6,249
|
$
|
3,968
|
$
|
3,746
|
$
|
1,616
|
$
|
1,422
|
||||||
Credit Watch
|
996
|
675
|
583
|
467
|
80
|
61
|
||||||||||||
At Risk
|
33
|
78
|
28
|
148
|
28
|
8
|
||||||||||||
Default
|
1
|
6
|
1
|
-
|
2
|
5
|
||||||||||||
Total
|
$
|
8,689
|
$
|
7,008
|
$
|
4,580
|
$
|
4,361
|
$
|
1,726
|
$
|
1,496
|
Note 4 – Finance Receivables, Net (Continued)
|
|||||||||||||||||
Impaired Finance Receivables
|
|||||||||||||||||
The following table summarizes the information related to our impaired loans by class of finance receivable as of March 31, 2013 and March 31, 2012:
|
|||||||||||||||||
Impaired
|
Individually Evaluated
|
||||||||||||||||
Finance Receivables
|
Unpaid Principal Balance
|
Allowance
|
|||||||||||||||
(Dollars in millions)
|
2013
|
2012
|
2013
|
2012
|
2013
|
2012
|
|||||||||||
Impaired account balances individually evaluated for impairment with an allowance:
|
|||||||||||||||||
Wholesale
|
$
|
16
|
$
|
7
|
$
|
16
|
$
|
7
|
$
|
3
|
$
|
1
|
|||||
Real estate
|
33
|
136
|
33
|
136
|
7
|
37
|
|||||||||||
Working capital
|
24
|
7
|
24
|
7
|
23
|
7
|
|||||||||||
Total
|
$
|
73
|
$
|
150
|
$
|
73
|
$
|
150
|
$
|
33
|
$
|
45
|
|||||
Impaired account balances individually evaluated for impairment without an allowance:
|
|||||||||||||||||
Wholesale
|
$
|
66
|
$
|
60
|
$
|
66
|
$
|
60
|
|||||||||
Real estate
|
97
|
-
|
97
|
-
|
|||||||||||||
Working capital
|
5
|
1
|
5
|
1
|
|||||||||||||
Total
|
$
|
168
|
$
|
61
|
$
|
168
|
$
|
61
|
|||||||||
Impaired account balances aggregated and evaluated for impairment:
|
|||||||||||||||||
Retail loan
|
$
|
415
|
$
|
502
|
$
|
410
|
$
|
496
|
|||||||||
Commercial
|
1
|
1
|
1
|
1
|
|||||||||||||
Total
|
$
|
416
|
$
|
503
|
$
|
411
|
$
|
497
|
|||||||||
Total impaired account balances:
|
|||||||||||||||||
Retail loan
|
$
|
415
|
$
|
502
|
$
|
410
|
$
|
496
|
|||||||||
Commercial
|
1
|
1
|
1
|
1
|
|||||||||||||
Wholesale
|
82
|
67
|
82
|
67
|
|||||||||||||
Real estate
|
130
|
136
|
130
|
136
|
|||||||||||||
Working capital
|
29
|
8
|
29
|
8
|
|||||||||||||
Total
|
$
|
657
|
$
|
714
|
$
|
652
|
$
|
708
|
Average Impaired Finance Receivables
|
Interest Income Recognized
|
|||||||||||
Years ended March 31,
|
Years ended March 31,
|
|||||||||||
(Dollars in millions)
|
2013
|
2012
|
2013
|
2012
|
||||||||
Impaired account balances individually evaluated for impairment with an allowance:
|
||||||||||||
Wholesale
|
$
|
22
|
$
|
5
|
$
|
-
|
$
|
-
|
||||
Real estate
|
75
|
138
|
1
|
5
|
||||||||
Working capital
|
24
|
8
|
1
|
-
|
||||||||
Total
|
$
|
121
|
$
|
151
|
$
|
2
|
$
|
5
|
||||
Impaired account balances individually evaluated for impairment without an allowance:
|
||||||||||||
Wholesale
|
$
|
63
|
$
|
43
|
$
|
2
|
$
|
1
|
||||
Real estate
|
59
|
-
|
4
|
-
|
||||||||
Working capital
|
2
|
1
|
-
|
1
|
||||||||
Total
|
$
|
124
|
$
|
44
|
$
|
6
|
$
|
2
|
||||
Impaired account balances aggregated and evaluated for impairment:
|
||||||||||||
Retail loan
|
$
|
462
|
$
|
553
|
$
|
37
|
$
|
47
|
||||
Commercial
|
1
|
1
|
-
|
-
|
||||||||
Total
|
$
|
463
|
$
|
554
|
$
|
37
|
$
|
47
|
||||
Total impaired account balances:
|
||||||||||||
Retail loan
|
$
|
462
|
$
|
553
|
$
|
37
|
$
|
47
|
||||
Commercial
|
1
|
1
|
-
|
-
|
||||||||
Wholesale
|
85
|
48
|
2
|
1
|
||||||||
Real estate
|
134
|
138
|
5
|
5
|
||||||||
Working capital
|
26
|
9
|
1
|
1
|
||||||||
Total
|
$
|
708
|
$
|
749
|
$
|
45
|
$
|
54
|
Investments in operating leases, net consisted of the following:
|
|||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
|||
Investments in operating leases
|
$
|
25,957
|
$
|
24,911
|
|
Pledged investments in operating leases
|
630
|
-
|
|||
26,587
|
24,911
|
||||
Deferred origination (fees) and costs, net
|
(125)
|
(133)
|
|||
Deferred income
|
(609)
|
(594)
|
|||
Accumulated depreciation
|
(5,387)
|
(5,346)
|
|||
Allowance for credit losses
|
(82)
|
(95)
|
|||
Investments in operating leases, net
|
$
|
20,384
|
$
|
18,743
|
Future minimum lease rentals on operating leases are as follows (dollars in millions):
|
||
Future minimum
|
||
Years ending March 31,
|
rentals on operating leases
|
|
2014
|
$
|
3,496
|
2015
|
2,342
|
|
2016
|
943
|
|
2017
|
148
|
|
2018
|
25
|
|
Thereafter
|
-
|
|
Total
|
$
|
6,954
|
A portion of our operating lease contracts has historically terminated prior to maturity; future minimum rentals as shown above should not be considered as necessarily indicative of total future cash collections.
|
Note 6 – Allowance for Credit Losses
|
|||||||||
The following table provides information related to our allowance for credit losses on finance receivables and investments
|
|||||||||
in operating leases:
|
|||||||||
Years ended March 31,
|
|||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
||||||
Allowance for credit losses at beginning of period
|
$
|
619
|
$
|
879
|
$
|
1,705
|
|||
Provision for credit losses
|
121
|
(98)
|
(433)
|
||||||
Charge-offs, net of recoveries
|
(213)
|
(162)
|
(393)
|
||||||
Allowance for credit losses at end of period
|
$
|
527
|
$
|
619
|
$
|
879
|
Fiscal Year Ended March 31, 2013
|
||||||||||||
(Dollars in millions)
|
Retail Loan
|
Commercial
|
Dealer Products
|
Total
|
||||||||
Allowance for Credit Losses for Finance Receivables:
|
||||||||||||
Beginning Balance at April 1, 2012
|
$
|
395
|
$
|
10
|
$
|
119
|
$
|
524
|
||||
Charge-offs
|
(248)
|
(1)
|
-
|
$
|
(249)
|
|||||||
Recoveries
|
70
|
1
|
-
|
71
|
||||||||
Provisions
|
116
|
(5)
|
(12)
|
99
|
||||||||
Ending Balance at March 31, 2013
|
$
|
333
|
$
|
5
|
$
|
107
|
$
|
445
|
||||
Ending Balance: Individually Evaluated for
Impairment
|
$
|
-
|
$
|
-
|
$
|
33
|
$
|
33
|
||||
Ending Balance: Collectively Evaluated for
Impairment
|
$
|
333
|
$
|
5
|
$
|
74
|
$
|
412
|
||||
Gross Finance Receivables:
|
||||||||||||
Ending Balance at March 31, 2013
|
$
|
47,808
|
$
|
369
|
$
|
14,995
|
$
|
63,172
|
||||
Ending Balance: Individually Evaluated for
Impairment
|
$
|
-
|
$
|
-
|
$
|
241
|
$
|
241
|
||||
Ending Balance: Collectively Evaluated for
Impairment
|
$
|
47,808
|
$
|
369
|
$
|
14,754
|
$
|
62,931
|
Note 6 – Allowance for Credit Losses (Continued)
|
||||||||||||
Fiscal Year Ended March 31, 2012
|
||||||||||||
(Dollars in millions)
|
Retail Loan
|
Commercial
|
Dealer Products
|
Total
|
||||||||
Allowance for Credit Losses for Finance Receivables:
|
||||||||||||
Beginning Balance at April 1, 2011
|
$
|
595
|
$
|
18
|
$
|
141
|
$
|
754
|
||||
Charge-offs
|
(243)
|
(1)
|
-
|
$
|
(244)
|
|||||||
Recoveries
|
99
|
4
|
-
|
103
|
||||||||
Provisions
|
(56)
|
(11)
|
(22)
|
(89)
|
||||||||
Ending Balance at March 31, 2012
|
$
|
395
|
$
|
10
|
$
|
119
|
$
|
524
|
||||
Ending Balance: Individually Evaluated for
|
||||||||||||
Impairment
|
$
|
-
|
$
|
-
|
$
|
45
|
$
|
45
|
||||
Ending Balance: Collectively Evaluated for
|
||||||||||||
Impairment
|
$
|
395
|
$
|
10
|
$
|
74
|
$
|
479
|
||||
Gross Finance Receivables:
|
||||||||||||
Ending Balance at March 31, 2012
|
$
|
45,383
|
$
|
363
|
$
|
12,865
|
$
|
58,611
|
||||
Ending Balance: Individually Evaluated for
|
||||||||||||
Impairment
|
$
|
-
|
$
|
-
|
$
|
211
|
$
|
211
|
||||
Ending Balance: Collectively Evaluated for
|
||||||||||||
Impairment
|
$
|
45,383
|
$
|
363
|
$
|
12,654
|
$
|
58,400
|
Past Due Finance Receivables and Investments in Operating Leases
|
||||||||||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
||||||||||
Aggregate balances 60 or more days past due:
|
||||||||||||
Finance receivables
|
$
|
119
|
$
|
111
|
||||||||
Operating leases
|
36
|
31
|
||||||||||
Total
|
$
|
155
|
$
|
142
|
(Dollars in millions)
|
30-59 Days Past Due
|
60-89 Days Past Due
|
90 Days Past Due
|
Total Past
Due
|
Current
|
Total
Finance Receivables
|
Carrying
Amount 90 Days Past Due and Accruing
|
|||||||
As of March 31, 2013
|
||||||||||||||
Retail Loan
|
$
|
454
|
$
|
87
|
$
|
31
|
$
|
572
|
$
|
47,236
|
$
|
47,808
|
$
|
31
|
Commercial
|
6
|
1
|
-
|
7
|
362
|
369
|
-
|
|||||||
Wholesale
|
-
|
-
|
-
|
-
|
8,689
|
8,689
|
-
|
|||||||
Real estate
|
-
|
-
|
-
|
-
|
4,580
|
4,580
|
-
|
|||||||
Working capital
|
-
|
-
|
-
|
-
|
1,726
|
1,726
|
-
|
|||||||
Total
|
$
|
460
|
$
|
88
|
$
|
31
|
$
|
579
|
$
|
62,593
|
$
|
63,172
|
$
|
31
|
(Dollars in millions)
|
30-59 Days Past Due
|
60-89 Days Past Due
|
90 Days Past Due
|
Total Past
Due
|
Current
|
Total
Finance Receivables
|
Carrying
Amount 90 Days Past Due and Accruing
|
|||||||
As of March 31, 2012
|
||||||||||||||
Retail Loan
|
$
|
433
|
$
|
80
|
$
|
28
|
$
|
541
|
$
|
44,842
|
$
|
45,383
|
$
|
28
|
Commercial
|
8
|
2
|
1
|
11
|
352
|
363
|
1
|
|||||||
Wholesale
|
-
|
-
|
-
|
-
|
7,008
|
7,008
|
-
|
|||||||
Real estate
|
-
|
-
|
-
|
-
|
4,361
|
4,361
|
-
|
|||||||
Working capital
|
1
|
-
|
-
|
1
|
1,495
|
1,496
|
-
|
|||||||
Total
|
$
|
442
|
$
|
82
|
$
|
29
|
$
|
553
|
$
|
58,058
|
$
|
58,611
|
$
|
29
|
Hedge accounting
|
Non-hedge
|
Total
|
|||||||||||||
derivatives
|
accounting derivatives
|
||||||||||||||
Notional
|
Fair
|
Notional
|
Fair
|
Notional
|
Fair
|
||||||||||
(Dollars in millions)
|
value
|
value
|
value
|
||||||||||||
Other assets
|
|||||||||||||||
Interest rate swaps
|
$
|
465
|
$
|
44
|
$
|
22,336
|
$
|
536
|
$
|
22,801
|
$
|
580
|
|||
Foreign currency swaps
|
1,246
|
491
|
7,498
|
648
|
8,744
|
1,139
|
|||||||||
Total
|
$
|
1,711
|
$
|
535
|
$
|
29,834
|
$
|
1,184
|
$
|
31,545
|
$
|
1,719
|
|||
Counterparty netting and collateral
|
(1,661)
|
||||||||||||||
Carrying value of derivative contracts – Other assets
|
$
|
58
|
|||||||||||||
Other liabilities
|
|||||||||||||||
Interest rate swaps
|
$
|
-
|
$
|
-
|
$
|
51,342
|
$
|
766
|
$
|
51,342
|
$
|
766
|
|||
Interest rate caps
|
-
|
-
|
50
|
-
|
50
|
-
|
|||||||||
Foreign currency swaps
|
790
|
29
|
3,103
|
102
|
3,893
|
131
|
|||||||||
Embedded derivatives
|
-
|
-
|
64
|
12
|
64
|
12
|
|||||||||
Total
|
$
|
790
|
$
|
29
|
$
|
54,559
|
$
|
880
|
$
|
55,349
|
$
|
909
|
|||
Counterparty netting and collateral
|
(892)
|
||||||||||||||
Carrying value of derivative contracts – Other liabilities
|
$
|
17
|
|||||||||||||
Hedge accounting
|
Non-hedge
|
Total
|
|||||||||||||
derivatives
|
accounting derivatives
|
||||||||||||||
Notional
|
Fair
|
Notional
|
Fair
|
Notional
|
Fair
|
||||||||||
(Dollars in millions)
|
value
|
value
|
value
|
||||||||||||
Other Assets
|
|||||||||||||||
Interest rate swaps
|
$
|
465
|
$
|
59
|
$
|
15,804
|
$
|
380
|
$
|
16,269
|
$
|
439
|
|||
Foreign currency swaps
|
3,291
|
772
|
9,866
|
1,449
|
13,157
|
2,221
|
|||||||||
Total
|
$
|
3,756
|
$
|
831
|
$
|
25,670
|
$
|
1,829
|
$
|
29,426
|
$
|
2,660
|
|||
Counterparty netting and collateral
|
(2,590)
|
||||||||||||||
Carrying value of derivative contracts – Other assets
|
$
|
70
|
|||||||||||||
Other liabilities
|
|||||||||||||||
Interest rate swaps
|
$
|
-
|
$
|
-
|
$
|
51,175
|
$
|
1,008
|
$
|
51,175
|
$
|
1,008
|
|||
Interest rate caps
|
-
|
-
|
50
|
-
|
50
|
-
|
|||||||||
Foreign currency swaps
|
437
|
29
|
987
|
44
|
1,424
|
73
|
|||||||||
Embedded derivatives
|
-
|
-
|
92
|
24
|
92
|
24
|
|||||||||
Total
|
$
|
437
|
$
|
29
|
$
|
52,304
|
$
|
1,076
|
$
|
52,741
|
$
|
1,105
|
|||
Counterparty netting and collateral
|
(1,038)
|
||||||||||||||
Carrying value of derivative contracts – Other liabilities
|
$
|
67
|
|||||||||||||
Years ended March 31,
|
||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
|||||||
Interest expense on debt
|
$
|
1,330
|
$
|
1,677
|
$
|
1,943
|
||||
Interest income on hedge accounting derivatives
|
(103)
|
(221)
|
(449)
|
|||||||
Interest income on non-hedge accounting foreign currency
|
||||||||||
swaps
|
(258)
|
(386)
|
(379)
|
|||||||
Interest expense on non-hedge accounting interest rate swaps
|
359
|
606
|
807
|
|||||||
Interest expense on debt and derivatives
|
1,328
|
1,676
|
1,922
|
|||||||
Loss (gain) on hedge accounting derivatives:
|
||||||||||
Interest rate swaps
|
15
|
(6)
|
(2)
|
|||||||
Foreign currency swaps
|
274
|
23
|
(832)
|
|||||||
Loss (gain) on hedge accounting derivatives
|
289
|
17
|
(834)
|
|||||||
Less hedged item: change in fair value of fixed rate debt
|
(299)
|
(38)
|
801
|
|||||||
Ineffectiveness related to hedge accounting derivatives
|
(10)
|
(21)
|
(33)
|
|||||||
(Gain) loss from foreign currency transactions and non-hedge
|
||||||||||
accounting derivatives:
|
||||||||||
(Gain) loss on foreign currency transactions
|
(430)
|
(182)
|
1,494
|
|||||||
Loss (gain) on foreign currency swaps
|
431
|
(84)
|
(1,595)
|
|||||||
(Gain) on interest rate swaps
|
(379)
|
(89)
|
(174)
|
|||||||
Total interest expense
|
$
|
940
|
$
|
1,300
|
$
|
1,614
|
Years ended March 31,
|
|||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
||||||
(Gain) loss related to hedge accounting derivatives
|
$
|
(2)
|
$
|
(3)
|
$
|
(2)
|
|||
(Gain) loss on non-hedge accounting foreign currency swaps
|
-
|
(6)
|
5
|
||||||
Loss on non-hedge accounting interest rate swaps
|
-
|
-
|
2
|
||||||
Total credit valuation adjustment allocated to interest expense
|
$
|
(2)
|
$
|
(9)
|
$
|
5
|
|||
Note 8 – Other Assets and Other Liabilities
|
|||||
Other assets and other liabilities consisted of the following:
|
|||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
|||
Other assets:
|
|||||
Notes receivable from affiliates
|
$
|
931
|
$
|
1,052
|
|
Used vehicles held for sale
|
265
|
82
|
|||
Deferred charges
|
120
|
131
|
|||
Income taxes receivable
|
13
|
23
|
|||
Derivative assets
|
58
|
70
|
|||
Other assets
|
353
|
369
|
|||
Total other assets
|
$
|
1,740
|
$
|
1,727
|
|
Other liabilities:
|
|||||
Unearned insurance premiums and contract revenues
|
$
|
1,528
|
$
|
1,467
|
|
Derivative liabilities
|
17
|
67
|
|||
Accounts payable and accrued expenses
|
685
|
716
|
|||
Deferred income
|
255
|
229
|
|||
Other liabilities
|
192
|
126
|
|||
Total other liabilities
|
$
|
2,677
|
$
|
2,605
|
Note 9 – Debt
|
||||||||||||
Debt and the related weighted average contractual interest rates are summarized as follows:
|
||||||||||||
Weighted average
|
||||||||||||
contractual interest rates
|
||||||||||||
March 31,
|
March 31,
|
|||||||||||
(Dollars in millions)
|
2013
|
2012
|
2013
|
2012
|
||||||||
Commercial paper
|
$
|
24,590
|
$
|
21,247
|
0.24
|
%
|
0.38
|
%
|
||||
Unsecured notes and loans payable
|
46,707
|
41,415
|
2.19
|
%
|
2.63
|
%
|
||||||
Secured notes and loans payable
|
7,009
|
9,789
|
0.60
|
%
|
0.67
|
%
|
||||||
Carrying value adjustment
|
526
|
783
|
||||||||||
Total debt
|
$
|
78,832
|
$
|
73,234
|
1.43
|
%
|
1.70
|
%
|
||||
Future
|
|||
Years ending March 31,
|
debt maturities
|
||
(Dollars in millions)
|
|||
2014
|
$
|
40,709
|
|
2015
|
9,427
|
||
2016
|
10,739
|
||
2017
|
4,608
|
||
2018
|
7,197
|
||
Thereafter
|
6,152
|
||
Total debt
|
$
|
78,832
|
March 31, 2013
|
|||||||||||||||||
VIE Assets
|
VIE Liabilities
|
||||||||||||||||
Gross
|
Net
|
||||||||||||||||
(Dollars in millions)
|
Restricted
Cash
|
Securitized
Assets
|
Securitized
Assets
|
Other
Assets
|
Debt
|
Other
Liabilities
|
|||||||||||
Retail finance receivables
|
$
|
458
|
$
|
7,669
|
$
|
7,556
|
$
|
3
|
$
|
6,738
|
$
|
1
|
|||||
Investments in operating leases
|
33
|
630
|
434
|
9
|
271
|
-
|
|||||||||||
Total
|
$
|
491
|
$
|
8,299
|
$
|
7,990
|
$
|
12
|
$
|
7,009
|
$
|
1
|
March 31, 2012
|
||||||||||||||||||
VIE Assets
|
VIE Liabilities
|
|||||||||||||||||
Gross
|
Net
|
|||||||||||||||||
(Dollars in millions)
|
Restricted
Cash
|
Securitized
Assets
|
Securitized
Assets1
|
Other
Assets1
|
Debt
|
Other
Liabilities
|
||||||||||||
Retail finance receivables
|
$
|
682
|
$
|
10,726
|
$
|
10,527
|
$
|
3
|
$
|
9,789
|
$
|
2
|
||||||
Total
|
$
|
682
|
$
|
10,726
|
$
|
10,527
|
$
|
3
|
$
|
9,789
|
$
|
2
|
Note 13 – Income Tax Provision
|
||||||||
The provision for income taxes consisted of the following:
|
||||||||
Years ended March 31,
|
||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
|||||
Current
|
||||||||
Federal
|
$
|
(15)
|
$
|
(33)
|
$
|
(26)
|
||
State
|
41
|
7
|
30
|
|||||
Foreign
|
6
|
9
|
10
|
|||||
Total current
|
32
|
(17)
|
14
|
|||||
Deferred
|
||||||||
Federal
|
721
|
830
|
981
|
|||||
State
|
69
|
123
|
151
|
|||||
Foreign
|
2
|
1
|
4
|
|||||
Total deferred
|
792
|
954
|
1,136
|
|||||
Provision for income taxes
|
$
|
824
|
$
|
937
|
$
|
1,150
|
Years ended March 31,
|
||||||||
2013
|
2012
|
2011
|
||||||
Provision for income taxes at U.S. federal statutory tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
||
State and local taxes (net of federal tax benefit)
|
3.2
|
%
|
3.4
|
%
|
3.4
|
%
|
||
Other
|
-
|
%
|
0.3
|
%
|
(0.1)
|
%
|
||
Effective tax rate
|
38.2
|
%
|
38.7
|
%
|
38.3
|
%
|
Note 13 – Income Tax Provision (Continued)
|
|||||
The net deferred income tax liabilities, by tax jurisdiction, are as follows:
|
|||||
March 31,
|
|||||
(Dollars in millions)
|
2013
|
2012
|
|||
Federal
|
$
|
5,763
|
$
|
5,009
|
|
State
|
475
|
406
|
|||
Foreign
|
(2)
|
(3)
|
|||
Net deferred income tax liability
|
$
|
6,236
|
$
|
5,412
|
|
Our net deferred income tax liability consists of the following deferred tax liabilities and assets:
|
|||||
March 31,
|
|||||
(Dollars in millions)
|
2013
|
2012
|
|||
Liabilities:
|
|||||
Lease transactions
|
$
|
6,509
|
$
|
6,379
|
|
State taxes
|
446
|
429
|
|||
Mark-to-market of investments in marketable securities
|
210
|
48
|
|||
Other
|
295
|
296
|
|||
Deferred tax liabilities
|
$
|
7,460
|
$
|
7,152
|
|
Assets:
|
|||||
Provision for credit and residual value losses
|
347
|
369
|
|||
Deferred costs and fees
|
167
|
155
|
|||
Net operating loss and tax credit carryforwards
|
679
|
1,168
|
|||
Other
|
47
|
52
|
|||
Deferred tax assets
|
1,240
|
1,744
|
|||
Valuation allowance
|
(16)
|
(4)
|
|||
Net deferred tax assets
|
$
|
1,224
|
$
|
1,740
|
|
Net deferred income tax liability
|
$
|
6,236
|
$
|
5,412
|
March 31,
|
||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
|||||
Balance at beginning of the period
|
$
|
8
|
$
|
6
|
$
|
39
|
||
Increases related to positions taken during the prior years
|
-
|
2
|
-
|
|||||
Increases related to positions taken during the current year
|
1
|
-
|
-
|
|||||
Settlements
|
(2)
|
-
|
(33)
|
|||||
Balance at end of period
|
$
|
7
|
$
|
8
|
$
|
6
|
Commitment amount as of
|
|||||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
|||||
Commitments:
|
|||||||
Commitments under credit facilities with vehicle and
|
|||||||
industrial equipment dealers
|
$
|
7,396
|
$
|
6,804
|
|||
Less: Funded commitments
|
6,290
|
5,758
|
|||||
Unfunded commitments
|
1,106
|
1,046
|
|||||
Minimum lease commitments
|
74
|
81
|
|||||
Total unfunded commitments
|
1,180
|
1,127
|
|||||
Guarantees and other contingencies:
|
|||||||
Guarantees of affiliate pollution control and solid waste
|
|||||||
disposal bonds
|
100
|
100
|
|||||
Total unfunded commitments and guarantees
|
$
|
1,280
|
$
|
1,227
|
|||
Wholesale financing demand note facilities
|
11,475
|
10,258
|
|||||
Less: Funded facilities
|
8,284
|
6,616
|
|||||
Unfunded wholesale financing demand note facilities
|
$
|
3,191
|
$
|
3,642
|
Future minimum
|
||||
Years ending March 31,
|
lease payments
|
|||
2014
|
$
|
19
|
||
2015
|
18
|
|||
2016
|
16
|
|||
2017
|
11
|
|||
2018
|
7
|
|||
Thereafter
|
3
|
|||
Total
|
$
|
74
|
Years ended March 31,
|
||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
|||||||
Net financing revenues:
|
||||||||||
Manufacturers’ subvention support and other revenues
|
$
|
940
|
$
|
949
|
$
|
965
|
||||
Credit support fees incurred
|
$
|
(72)
|
$
|
(33)
|
$
|
(34)
|
||||
Foreign exchange loss on loans payable to affiliates
|
$
|
(39)
|
$
|
(4)
|
$
|
(132)
|
||||
Interest expense on loans payable to affiliates
|
$
|
(6)
|
$
|
(49)
|
$
|
(47)
|
||||
Insurance earned premiums and contract revenues:
|
||||||||||
Affiliate insurance premiums and contract revenues
|
$
|
161
|
$
|
216
|
$
|
162
|
||||
Investments and other income, net:
|
||||||||||
Interest earned on notes receivable from affiliates
|
$
|
6
|
$
|
3
|
$
|
5
|
||||
Expenses:
|
||||||||||
Shared services charges and other expenses
|
$
|
64
|
$
|
67
|
$
|
291
|
||||
Employee benefits expense
|
$
|
30
|
$
|
27
|
$
|
27
|
Note 15 – Related Party Transactions (Continued)
|
||||||||
(Dollars in millions)
|
March 31, 2013
|
March 31, 2012
|
||||||
Assets:
|
||||||||
Investments in marketable securities
|
||||||||
Investments in affiliates' commercial paper
|
$
|
2
|
$
|
-
|
||||
Finance receivables, net
|
||||||||
Accounts receivable from affiliates
|
$
|
22
|
$
|
17
|
||||
Direct finance receivables from affiliates
|
$
|
6
|
$
|
4
|
||||
Notes receivable under home loan programs
|
$
|
18
|
$
|
19
|
||||
Deferred retail subvention income from affiliates
|
$
|
(699)
|
$
|
(598)
|
||||
Investments in operating leases, net
|
||||||||
Leases to affiliates
|
$
|
7
|
$
|
4
|
||||
Deferred lease subvention income from affiliates
|
$
|
(604)
|
$
|
(592)
|
||||
Other assets
|
||||||||
Notes receivable from affiliates
|
$
|
931
|
$
|
1,052
|
||||
Other receivables from affiliates
|
$
|
1
|
$
|
8
|
||||
Subvention support receivable from affiliates
|
$
|
88
|
$
|
65
|
||||
Liabilities:
|
||||||||
Debt
|
||||||||
Loans payable to affiliates
|
$
|
-
|
$
|
2,201
|
||||
Other liabilities
|
||||||||
Unearned affiliate insurance premiums and contract revenues
|
$
|
235
|
$
|
273
|
||||
Accounts payable to affiliates
|
$
|
192
|
$
|
58
|
||||
Notes payable to affiliate
|
$
|
48
|
$
|
61
|
||||
Shareholder’s Equity:
|
||||||||
Dividends paid
|
$
|
1,487
|
$
|
741
|
||||
Stock-based compensation
|
$
|
2
|
$
|
2
|
||||
Financing available
|
Amounts outstanding (USD) at
|
||||||||
Affiliate
|
to TMCC
|
March 31, 2013
|
March 31, 2012
|
||||||
Toyota Credit Canada Inc.
|
CAD
|
1,500
|
$
|
-
|
$
|
-
|
|||
Toyota Motor Finance (Netherlands) B.V.
|
Euro
|
1,000
|
-
|
-
|
|||||
Toyota Financial Services Americas Corporation
|
USD
|
200
|
48
|
61
|
|||||
Toyota Finance Australia Limited
|
USD
|
1,000
|
-
|
-
|
|||||
Total
|
$
|
48
|
$
|
61
|
Financing made
|
Amounts outstanding (USD) at
|
||||||||
Affiliate
|
available by TMCC
|
March 31, 2013
|
March 31, 2012
|
||||||
Toyota Financial Savings Bank
|
USD
|
400
|
$
|
35
|
$
|
-
|
|||
Toyota Credit Canada Inc.
|
CAD
|
2,500
|
-
|
-
|
|||||
Toyota Motor Finance (Netherlands) B.V.
|
Euro
|
1,000
|
419
|
381
|
|||||
Toyota Financial Services Americas Corporation
|
USD
|
200
|
-
|
-
|
|||||
Toyota Financial Services Mexico, S.A. de C.V.
|
USD
|
500
|
-
|
-
|
|||||
Banco Toyota do Brasil
|
USD
|
300
|
127
|
121
|
|||||
Toyota Finance Australia Limited
|
USD
|
1,000
|
350
|
550
|
|||||
Total
|
$
|
931
|
$
|
1,052
|
·
|
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 as of March 31, 2012. There was no amount payable under these agreements as of March 31, 2013.
|
·
|
TMCC provides home loans to relocated employees as well as certain officers, directors, and other members of management. Loans to directors and executive officers were made prior to July 30, 2002 and were grandfathered under the Sarbanes-Oxley Act of 2002.
|
·
|
TMCC provides wholesale financing to certain dealerships owned by 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.
|
·
|
TMCC and TFSB are parties to a master participation agreement pursuant to which TMCC agreed to purchase up to $60 million per year of 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, 2013 and 2012, there were $55 million and $54 million, respectively, in loan participations outstanding that had been purchased by TMCC under this agreement.
|
·
|
TMCC and TCPR incur costs under various shared service agreements with our affiliates. Services provided by affiliates under the shared service arrangement include marketing, technological and administrative services, as well as services related to our funding and risk management activities and our bank and investor relationships.
|
·
|
TMCC provides various services to our financial services affiliates, including certain administrative, systems and operational support.
|
·
|
TMCC provides various services to TFSB, including 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.
|
·
|
TMCC is subject to expense reimbursement agreements related to costs incurred by TFSB, TFSA, and TMS in connection with our affiliates providing certain financial products and services to our customers and dealers in support of TMCC’s customer loyalty strategy and programs, costs related to TFSB’s credit card rewards program, and other brand and sales support.
|
·
|
TMCC and TCPR provide various wholesale financing to vehicle and industrial equipment dealers, which result in our having payables to TMS, Toyota de Puerto Rico Corp (“TDPR”), TMHU and HINO.
|
·
|
TMCC is 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 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.
|
·
|
Leases to affiliates represent the investment in operating leases of vehicle and industrial equipment leased to affiliates.
|
·
|
TMCC is a participating employer in certain retirement, postretirement health care and life insurance sponsored by TMS as well as share-based compensation plans sponsored by TMC. See Note 12 – Pension and Other Benefit Plans for additional information.
|
·
|
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 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.
|
·
|
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 the program’s discontinuation.
|
Finance
|
Insurance
|
Intercompany
|
||||||||||
(Dollars in millions)
|
operations
|
operations
|
eliminations
|
Total
|
||||||||
Fiscal 2013:
|
||||||||||||
Total financing revenues
|
$
|
7,219
|
$
|
-
|
$
|
25
|
$
|
7,244
|
||||
Insurance earned premiums and contract revenues
|
-
|
596
|
(25)
|
571
|
||||||||
Investment and other income
|
57
|
116
|
-
|
173
|
||||||||
Total gross revenues
|
7,276
|
712
|
-
|
7,988
|
||||||||
Less:
|
||||||||||||
Depreciation on operating leases
|
3,568
|
-
|
-
|
3,568
|
||||||||
Interest expense
|
940
|
-
|
-
|
940
|
||||||||
Provision for credit losses
|
121
|
-
|
-
|
121
|
||||||||
Operating and administrative expenses
|
734
|
177
|
-
|
911
|
||||||||
Insurance losses and loss adjustment expenses
|
-
|
293
|
-
|
293
|
||||||||
Provision for income taxes
|
730
|
94
|
-
|
824
|
||||||||
Net income
|
$
|
1,183
|
$
|
148
|
$
|
-
|
$
|
1,331
|
||||
Total assets
|
$
|
92,504
|
$
|
3,502
|
$
|
(704)
|
$
|
95,302
|
Note 16 – Segment Information (Continued)
|
||||||||||||
Finance
|
Insurance
|
Intercompany
|
||||||||||
(Dollars in millions)
|
operations
|
operations
|
eliminations
|
Total
|
||||||||
Fiscal 2012:
|
||||||||||||
Total financing revenues
|
$
|
7,413
|
$
|
-
|
$
|
16
|
$
|
7,429
|
||||
Insurance earned premiums and contract revenues
|
-
|
620
|
(16)
|
604
|
||||||||
Investment and other income
|
44
|
72
|
(3)
|
113
|
||||||||
Total gross revenues
|
7,457
|
692
|
(3)
|
8,146
|
||||||||
Less:
|
||||||||||||
Depreciation on operating leases
|
3,339
|
-
|
-
|
3,339
|
||||||||
Interest expense
|
1,303
|
-
|
(3)
|
1,300
|
||||||||
Provision for credit losses
|
(98)
|
-
|
-
|
(98)
|
||||||||
Operating and administrative expenses
|
703
|
154
|
-
|
857
|
||||||||
Insurance losses and loss adjustment expenses
|
-
|
325
|
-
|
325
|
||||||||
Provision for income taxes
|
860
|
77
|
-
|
937
|
||||||||
Net income
|
$
|
1,350
|
$
|
136
|
$
|
-
|
$
|
1,486
|
||||
Total assets
|
$
|
86,049
|
$
|
3,233
|
$
|
(369)
|
$
|
88,913
|
||||
Fiscal 2011:
|
||||||||||||
Total financing revenues
|
$
|
8,042
|
$
|
-
|
$
|
22
|
$
|
8,064
|
||||
Insurance earned premiums and contract revenues
|
-
|
565
|
(22)
|
543
|
||||||||
Investment and other income
|
46
|
196
|
(6)
|
236
|
||||||||
Total gross revenues
|
8,088
|
761
|
(6)
|
8,843
|
||||||||
Less:
|
||||||||||||
Depreciation on operating leases
|
3,353
|
-
|
-
|
3,353
|
||||||||
Interest expense
|
1,620
|
-
|
(6)
|
1,614
|
||||||||
Provision for credit losses
|
(433)
|
-
|
-
|
(433)
|
||||||||
Operating and administrative expenses
|
903
|
156
|
-
|
1,059
|
||||||||
Insurance losses and loss adjustment expenses
|
-
|
247
|
-
|
247
|
||||||||
Provision for income taxes
|
1,014
|
136
|
-
|
1,150
|
||||||||
Net income
|
$
|
1,631
|
$
|
222
|
$
|
-
|
$
|
1,853
|
||||
Total assets
|
$
|
89,141
|
$
|
3,094
|
$
|
(531)
|
$
|
91,704
|
Note 17 – Selected Quarterly Financial Data (Unaudited)
|
|||||||||||
First
|
Second
|
Third
|
Fourth
|
||||||||
(Dollars in millions)
|
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||
Fiscal 2013:
|
|||||||||||
Total financing revenue
|
$
|
1,797
|
$
|
1,811
|
$
|
1,815
|
$
|
1,821
|
|||
Depreciation on operating leases
|
855
|
880
|
901
|
932
|
|||||||
Interest expense
|
58
|
283
|
284
|
315
|
|||||||
Net financing revenue
|
884
|
648
|
630
|
574
|
|||||||
Other income
|
185
|
183
|
203
|
173
|
|||||||
Provision for credit losses
|
16
|
3
|
88
|
14
|
|||||||
Expenses
|
297
|
302
|
306
|
299
|
|||||||
Income before income tax expense
|
756
|
526
|
439
|
434
|
|||||||
Provision for income taxes
|
279
|
200
|
156
|
189
|
|||||||
Net income
|
$
|
477
|
$
|
326
|
$
|
283
|
$
|
245
|
|||
Fiscal 2012:
|
|||||||||||
Total financing revenue
|
$
|
1,920
|
$
|
1,870
|
$
|
1,835
|
$
|
1,804
|
|||
Depreciation on operating leases
|
825
|
829
|
844
|
841
|
|||||||
Interest expense
|
457
|
149
|
163
|
531
|
|||||||
Net financing revenue
|
638
|
892
|
828
|
432
|
|||||||
Other income
|
190
|
144
|
212
|
171
|
|||||||
Provision for credit losses
|
(203)
|
11
|
56
|
38
|
|||||||
Expenses
|
283
|
295
|
286
|
318
|
|||||||
Income before income tax expense
|
748
|
730
|
698
|
247
|
|||||||
Provision for income taxes
|
283
|
279
|
266
|
109
|
|||||||
Net income
|
$
|
465
|
$
|
451
|
$
|
432
|
$
|
138
|
·
|
P.T. Toyota-Astra Motor (“TAM”), an Indonesian company, sold three Toyota vehicles to the Iranian embassy in Indonesia. P.T. Toyota Motor Manufacturing Indonesia (“TMMIN”), an Indonesian company and subsidiary of TMC, manufactured and sold the vehicles to TAM. TAM is the sole distributor of Toyota vehicles in Indonesia. As of March 31, 2013, TMC held 49 percent of the shares of common stock of TAM, and PT Astra International Tbk, an Indonesian company, held the remaining 51 percent of the shares of common stock of TAM.
|
·
|
Tokyo Toyota Motor Co., Ltd. ("Tokyo Toyota Motor") a wholly-owned indirect subsidiary of TMC, performed maintenance services for Toyota vehicles owned by the Iranian embassy in Japan.
|
·
|
Toyota Tourist International, Inc. ("Toyota Tourist"), a majority-owned subsidiary of Toyota, obtained two visas from the Iranian embassy in Japan in connection with certain travel arrangements on behalf of its customers.
|
Name
|
Age
|
Position
|
||
George E. Borst
|
64
|
Director, President and Chief Executive Officer, TMCC;
Director, President and Chief Operating Officer, TFSA;
Director, TFSC
|
||
Kiyohisa Funasaki
|
50
|
Director, Executive Vice President and
Treasurer, TMCC;
Director, Executive Vice President and
Treasurer, TFSA
|
||
Michael Groff
|
58
|
Director, Senior Vice President, Sales, Product &
Marketing, TMCC
|
||
Chris Ballinger
|
56
|
Senior Vice President and Chief Financial Officer, TMCC;
Group Vice President and Chief Financial Officer, TFSA
|
||
Ron Chu
|
55
|
Vice President, Accounting & Tax, TMCC;
Vice President, Tax, TFSA
|
||
Yoshimi Inaba
|
67
|
Director, TMCC;
Director, Executive Chairman, TMS
|
||
Takuo Sasaki
|
56
|
Director, TMCC;
Director, Chairman of the Board and Chief Executive
Officer, TFSA;
Director, TFSC;
Managing Officer, TMC
|
||
James E. Lentz III
|
57
|
Director, TMCC;
Director, President, and Chief Operating Officer, TMA
Senior Managing Officer, TMC
|
||
Eiji Hirano
|
62
|
Director, TMCC;
Director and Executive Vice President, TFSC
|
||
Takahiko Ijichi
|
60
|
Director, TMCC;
Director, TMC
|
Years ended March 31,
|
|||||
(Dollars in thousands)
|
2013
|
2012
|
|||
Audit fees
|
$
|
6,710
|
$
|
6,345
|
|
Audit related fees
|
42
|
56
|
|||
Tax fees
|
512
|
625
|
|||
All other fees
|
134
|
740
|
|||
Total fees
|
$
|
7,398
|
$
|
7,766
|
TOYOTA MOTOR CREDIT CORPORATION
|
|
Date: June 14, 2013
|
By /S/ GEORGE E. BORST
|
George E. Borst
|
|
President and
|
|
Chief Executive Officer
|
|
Signature
|
Title
|
Date
|
/s/ George E. Borst
George E. Borst
|
Director, President and
Chief Executive Officer
(Principal Executive Officer)
|
June 14, 2013
|
/s/ Kiyohisa Funasaki
Kiyohisa Funasaki
|
Executive Vice President,
Treasurer and Director
|
June 14, 2013
|
/s/ Michael Groff
Michael Groff
|
Director
Senior Vice President,
Sales, Product and Marketing
|
June 14, 2013
|
/s/ Chris Ballinger
Chris Ballinger
|
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
|
June 14, 2013
|
/s/ Ron Chu
Ron Chu
|
Vice President,
Accounting and Tax
(Principal Accounting Officer)
|
June 14, 2013
|
/s/ Yoshimi Inaba
Yoshimi Inaba
|
Director
|
June 14, 2013
|
/s/ James E. Lentz III
James E. Lentz III
|
Director
|
June 14, 2013
|
Takuo Sasaki
|
Director
|
|
Takahiko Ijichi
|
Director
|
|
Eiji Hirano
|
Director
|
Exhibit Number
|
Description
|
Method of Filing
|
||
3.1
|
Restated Articles of Incorporation filed with the California Secretary of State on April 1, 2010
|
(1)
|
||
3.2
|
Bylaws as amended through December 8, 2000
|
(2)
|
||
4.1(a)
|
Indenture dated as of August 1, 1991 between TMCC and The Chase Manhattan Bank, N.A
|
(3)
|
||
4.1(b)
|
First Supplemental Indenture dated as of October 1, 1991 among TMCC, Bankers Trust Company and The Chase Manhattan Bank, N.A
|
(4)
|
||
4.1(c)
|
Second Supplemental Indenture, dated as of March 31, 2004, among TMCC, JPMorgan Chase Bank (as successor to The Chase Manhattan Bank, N.A.) and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company)
|
(5)
|
||
4.1(d)
|
Third Supplemental Indenture, dated as of March 8, 2011 among TMCC, The Bank of New York Mellon Trust Company, N.A., as trustee, and Deutsche Bank Trust Company Americas, as trustee.
|
(6)
|
||
4.1(e)
|
Agreement of Resignation and Acceptance dated as of April 26, 2010 between Toyota Motor Credit Corporation, The Bank of New York Mellon and The Bank of New York Trust Company, N.A.
|
(1)
|
||
4.2
|
Amended and Restated Agency Agreement, dated September 14, 2012, among Toyota Motor Credit Corporation, Toyota Motor Finance (Netherlands) B.V., Toyota Credit Canada Inc., Toyota Finance Australia Limited and The Bank of New York Mellon.
|
(7)
|
(1)
|
Incorporated herein by reference to the same numbered Exhibit filed with our Annual Report on Form 10-K for the fiscal year ended March 31, 2010, Commission File Number 1-9961.
|
(2)
|
Incorporated herein by reference to the same numbered Exhibit filed with our Quarterly Report on Form 10-Q for the three months ended December 31, 2000, Commission File Number 1-9961.
|
(3)
|
Incorporated herein by reference to Exhibit 4.1(a), filed with our Registration Statement on Form S-3, File Number 33-52359.
|
(4)
|
Incorporated herein by reference to Exhibit 4.1 filed with our Current Report on Form 8-K dated October 16, 1991, Commission File Number 1-9961.
|
(5)
|
Incorporated herein by reference to Exhibit 4.1(c) filed with our Registration Statement on Form S-3, Commission File No. 333-113680.
|
(6)
|
Incorporated herein by reference to Exhibit 4.2 filed with our Current Report on Form 8-K dated March 9, 2011, Commission File Number 1-9961.
|
(7)
|
Incorporated herein by reference to Exhibit 4.1 filed with our Current Report on Form 8-K dated September 14, 2012, Commission File Number 1-9961.
|
Exhibit Number
|
Description
|
Method of Filing
|
||||
4.3
|
Amended and Restated Note Agency Agreement, dated September 14, 2012, among Toyota Motor Credit Corporation, The Bank of New York Mellon (Luxembourg) S.A. and The Bank of New York Mellon, acting through its London branch.
|
(8)
|
||||
4.4(a)
|
Sixth Amended and Restated Agency Agreement dated September 28, 2006, among TMCC, JP Morgan Chase Bank, N.A. and J.P. Morgan Bank Luxembourg S.A.
|
(9)
|
||||
4.4(b)
|
Amendment No.1, dated as of March 4, 2011, to the Sixth Amended and Restated Agency Agreement among TMCC, The Bank of New York Mellon, acting through its London branch, as agent, and The Bank of New York Luxembourg S.A., as paying agent.
|
(10)
|
||||
4.4
|
TMCC has outstanding certain long-term debt as set forth in Note 9 - Debt of the Notes to Consolidated Financial Statements. Not filed herein as an exhibit, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934, is any instrument which defines the rights of holders of such long-term debt, where the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of TMCC and its subsidiaries on a consolidated basis. TMCC agrees to furnish copies of all such instruments to the Securities and Exchange Commission upon request.
|
|||||
10.1 | 364 Day Credit Agreement, dated as of February 26, 2013, among Toyota Motor Credit Corporation, (“TMCC”), Toyota Credit de Puerto Rico Corp. (“TCPR”), Toyota Motor Finance (Netherlands) B.V. (“TMFNL”), Toyota Financial Services (UK) PLC (“TFS(UK)”), Toyota Leasing GMBH (“TLG”), Toyota Credit Canada Inc. (“TCCI”) and Toyota Kreditbank GMBH (“TKG”), as Borrowers, each lender party thereto, and BNP Paribas, as Administrative Agent, Swing Line Agent and Swing Line Lender, BNP Paribas Securities Corp.
(“BNPP Securities”), Citigroup Global Markets Inc. (“CGMI”), Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPFS”) and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”) as Joint Lead Arrangers and Joint Book Managers, Citibank, N.A. (“Citibank”) and Bank of America, N.A. (“Bank of America”), as Swing Line Lenders, and Citibank, Bank of America, and BTMU as Syndication Agents.
|
(11)
|
(8)
|
Incorporated herein by reference to Exhibit 4.2 filed with our Current Report on Form 8-K dated September 14, 2012, Commission File No. 1-9961.
|
(9)
|
Incorporated herein by reference to Exhibit 4.1 filed with our Current Report on Form 8-K dated September, 28, 2006, Commission File No. 1-9961.
|
(10)
|
Incorporated herein by reference to Exhibit 4.1 of our Current Report on Form 8-K dated March 4, 2011, Commission File No. 1-9961.
|
(11)
|
Incorporated herein by reference to Exhibit 10.1 filed with our Current Report on Form 8-K dated February 26, 2013, Commission File No. 1-9961.
|
Exhibit Number
|
Description
|
Method of Filing
|
||
10.2
|
Three Year Credit Agreement, dated as of February 26, 2013, among TMCC, TCPR, TMFNL, TFS(UK), TLG, TCCI and TKG as Borrowers, each lender party thereto, and BNP Paribas, as Administrative Agent, Swing Line Agent and Swing Line Lender, BNPP Securities, CGMI, MLPFS, and BTMU, as Joint Lead Arrangers and Joint Book Managers, Citibank and Bank of America, as Swing Line Lenders, and Citibank, Bank of America, and BTMU as Syndication Agents.
|
(12)
|
||
10.3
|
Five Year Credit Agreement, dated as of February 26, 2013, among TMCC, TCPR, TMFNL, TFS(UK), TLG, TCCI and TKG as Borrowers, eachlender party thereto, and BNP Paribas, as Administrative Agent, Swing Line Agent and Swing Line Lender, BNPP Securities, CGMI, MLPFS, and BTMU, as Joint Lead Arrangers and Joint Book Managers, Citibank and Bank of America, as Swing Line Lenders, and Citibank, Bank of America, and BTMU as Syndication Agents.
|
(13)
|
||
10.4
|
Credit Support Agreement dated July 14, 2000 between TFSC and TMC.
|
(14)
|
||
10.5
|
Credit Support Agreement dated October 1, 2000 between TMCC and TFSC.
|
(15)
|
||
10.6
|
Amended and Restated Repurchase Agreement dated effective as of
October 1, 2000, between TMCC and TMS.
|
(16)
|
||
10.7
|
Shared Services Agreement dated October 1, 2000 between TMCC and TMS.
|
(17)
|
||
10.8(a)
|
Credit Support Fee Agreement dated March 30, 2001 between TMCC and TFSC.
|
(18)
|
(12)
|
Incorporated herein by reference to Exhibit 10.2 filed with our Current Report on Form 8-K dated February 26, 2013, Commission File No. 1-9961.
|
(13)
|
Incorporated herein by reference to Exhibit 10.3 filed with our Current Report on Form 8-K dated February 26, 2013, Commission File No. 1-9961.
|
(14)
|
Incorporated herein by reference to Exhibit 10.9 filed with our Annual Report on Form 10-K for the fiscal year ended September 30, 2000, Commission File No. 1-9961.
|
(15)
|
Incorporated herein by reference to Exhibit 10.10 filed with our Annual Report on Form 10-K for the fiscal year ended September 30, 2000, Commission File No. 1-9961.
|
(16)
|
Incorporated herein by reference to Exhibit 10.11 filed with our Annual Report on Form 10-K for the fiscal year ended March 31, 2011, Commission File No. 1-9961.
|
(17)
|
Incorporated herein by reference to Exhibit 10.12 filed with our Annual Report on Form 10-K for the fiscal year ended September 30, 2000, Commission File No. 1-9961.
|
(18)
|
Incorporated herein by reference to Exhibit 10.13(a) filed with our Annual Report on Form 10-K for the fiscal year ended March 31, 2001, Commission File No. 1-9961.
|
Exhibit Number
|
Description
|
Method of Filing
|
|||
10.8(b)
|
Amendment No. 1 to Credit Support Fee Agreement dated June 17, 2005
between TMCC and TFSC.
|
(19)
|
|||
10.8(c)
|
Amendment No. 2 dated as of September 7, 2012 to the Credit Support Fee Agreement dated as of March 30, 2001, as amended on June 17, 2005.
|
(20)
|
|||
10.9
|
Form of Indemnification Agreement between TMCC and its directors and officers.
|
(21)
|
|||
12.1 |
Calculation of ratio of earnings to fixed charges
|
Filed
Herewith
|
|||
23.1 |
Consent of Independent Registered Public Accounting Firm
|
Filed
Herewith
|
|||
31.1 |
Certification of Chief Executive Officer
|
Filed
Herewith
|
|||
31.2 |
Certification of Chief Financial Officer
|
Filed
Herewith
|
|||
32.1 |
Certification pursuant to 18 U.S.C. Section 1350
|
Furnished
Herewith
|
|||
32.2 |
Certification pursuant to 18 U.S.C. Section 1350
|
Furnished
Herewith
|
|||
101.INS |
XBRL instance document
|
Filed
Herewith
|
|||
101.CAL |
XBRL taxonomy extension calculation linkbase document
|
Filed
Herewith
|
|||
101.DEF |
XBRL taxonomy extension definition linkbase document
|
Filed
Herewith
|
|||
(19)
|
Incorporated herein by reference to Exhibit 10.13(b) filed with our Annual Report on Form 10-K for the fiscal year ended March 31, 2005, Commission File No. 1-9961.
|
(20)
|
Incorporated herein by reference to Exhibit 10.1 filed with our Current Report on Form 8-K date September 7, 2012, Commission File No. 1-9961.
|
(21)
|
Incorporated herein by reference to Exhibit 10.6 filed with our Registration Statement on Form S-1, Commission File No. 33-22440.
|
Exhibit Number
|
Description
|
Method of Filing
|
||
101.LAB
|
XBRL taxonomy extension labels linkbase document
|
Filed
Herewith
|
||
101.PRE
|
XBRL taxonomy extension presentation linkbase document
|
Filed
Herewith
|
||
101.SCH
|
XBRL taxonomy extension schema linkbase document
|
Filed
Herewith
|
151 |
Years ended March 31,
|
|||||||||||
(Dollars in millions)
|
2013
|
2012
|
2011
|
2010
|
2009
|
||||||
Consolidated income (loss) before provision for income
|
|||||||||||
taxes
|
$
|
2,155
|
$
|
2,423
|
$
|
3,003
|
$
|
1,679
|
$
|
(1,052)
|
|
Fixed charges:
|
|||||||||||
Interest1
|
$
|
940
|
$
|
1,300
|
$
|
1,614
|
$
|
2,023
|
$
|
2,956
|
|
Portion of rent expense representative of the interest
|
|||||||||||
factor (deemed to be one-third)
|
8
|
8
|
8
|
8
|
8
|
||||||
Total fixed charges
|
$
|
948
|
$
|
1,308
|
$
|
1,622
|
$
|
2,031
|
$
|
2,964
|
|
Earnings available for fixed charges
|
$
|
3,103
|
$
|
3,731
|
$
|
4,625
|
$
|
3,710
|
$
|
1,912
|
|
Ratio of earnings to fixed charges
|
3.27
|
2.85
|
2.85
|
1.83
|
(A)
|
1
|
Components of interest expense are discussed under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Interest Expense.”
|
152 |
153 |
Date: June 14, 2013
|
By /S/ GEORGE E. BORST
|
George E. Borst
|
|
President and
|
|
Chief Executive Officer
|
154 |
Date: June 14, 2013
|
By /S/ CHRIS BALLINGER
|
Chris Ballinger
|
|
Senior Vice President and
|
|
Chief Financial Officer
|
155 |
By /S/ GEORGE E. BORST
|
George E. Borst
|
President and
Chief Executive Officer
|
June 14, 2013
|
156 |
By /S/ CHRIS BALLINGER
|
Chris Ballinger
|
Senior Vice President and
Chief Financial Officer
|
June 14, 2013
|
157 |
Other Assets and Other Liabilities
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets And Other Liabilties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets and Other Liabilties Disclosure |
The change in used vehicles held for sale includes non-cash activities of $183 million, $80 million and $58 million at March 31, 2013, March 31, 2012 and March 31, 2011, respectively. |
Consolidated Statement of Comprehensive Income (Parentheticals) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2011
|
|
Statement Of Income And Comprehensive Income [Abstract] | |||
Unrealized gains on available-for-sale marketable securities, tax provision (benefit) | $ 40 | $ 23 | $ 3 |
Reclassification adjustment for net (gains) losses on available-for-sale marketable securities included in net income, tax provision (benefit) | $ 8 | $ (10) | $ 5 |
Summary of Significant Accounting Policies
|
12 Months Ended |
---|---|
Mar. 31, 2013
|
|
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 1 – Summary of Significant Accounting Policies
Nature of Operations
Toyota Motor Credit Corporation was incorporated in California in 1982 and commenced operations in 1983. References herein to “TMCC” denote Toyota Motor Credit Corporation, and references herein to “we”, “our”, and “us” denote Toyota Motor Credit Corporation and its consolidated subsidiaries. We are wholly-owned by Toyota Financial Services Americas Corporation (“TFSA”), a California corporation, which is a wholly-owned subsidiary of Toyota Financial Services Corporation (“TFSC”), a Japanese corporation. TFSC, in turn, is a wholly-owned subsidiary of Toyota Motor Corporation (“TMC”), a Japanese corporation. TFSC manages TMC's worldwide financial services operations. TMCC is marketed under the brands of Toyota Financial Services and Lexus Financial Services.
We provide a variety of finance and insurance products to authorized Toyota (including Scion) and Lexus vehicle dealers or dealer groups and, to a lesser extent, other domestic and import franchise dealers (collectively referred to as “vehicle dealers”) and their customers in the United States (excluding Hawaii) (the “U.S.”) including Puerto Rico. Our products fall primarily into the following product categories:
Our business is substantially dependent upon the sale of Toyota, Lexus and Scion vehicles. Any extended reduction or suspension of vehicle production or sale of vehicles in the U.S. due to a decline in consumer demand, work stoppage, governmental action, negative publicity or other event, could have an adverse effect on the level of our financing volume, insurance volume, earning assets and revenues.
Our primary finance operations are located in the U.S. and Puerto Rico with earning assets principally sourced through Toyota and Lexus vehicle dealers. As of March 31, 2013, approximately 20 percent of vehicle retail contracts and lease assets were concentrated in California, 11 percent in Texas, 8 percent in New York, and 6 percent in New Jersey. Our insurance operations are located in the U.S. As of March 31, 2013, approximately 26 percent of insurance policies and contracts were concentrated in California, 7 percent in New York and 5 percent in New Jersey. Any material adverse changes to the economies or applicable laws in these states could have an adverse effect on our financial condition and results of operations. Note 1 – Summary of Significant Accounting Policies (Continued)
Basis of Presentation
Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America (U.S. GAAP). Certain prior period amounts have been reclassified to conform to the current year presentation.
Related party transactions presented in the Consolidated Financial Statements are disclosed in Note 15 – Related Party Transactions of the Notes to Consolidated Financial Statements.
Principles of Consolidation
The consolidated financial statements include the accounts of TMCC, its wholly-owned subsidiaries and all variable interest entities (“VIE”) of which we are the primary beneficiary. All intercompany transactions and balances have been eliminated.
A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. The primary beneficiary of a VIE is the party with both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE.
To assess whether we have the power to direct the activities of a VIE that most significantly impact its economic performance, we consider all the facts and circumstances including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes identifying the activities that most significantly impact the VIE's economic performance and identifying which party, if any, has power over those activities. In general, the party that makes the most significant decisions affecting the VIE is determined to have the power to direct the activities of a VIE. To assess whether we have the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE, we consider all of our economic interests, including debt and equity interests, servicing rights and fee arrangements, and any other variable interests in the VIE. If we determine that we are the party with the power to make the most significant decisions affecting the VIE, and we have an obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE, then we consolidate the VIE.
We perform ongoing reassessments, usually quarterly, of whether we are the primary beneficiary of a VIE. The reassessment process considers whether we have acquired or divested the power to direct the most significant activities of the VIE through changes in governing documents or other circumstances. We also reconsider whether entities previously determined not to be VIEs have become VIEs, based on certain events, and therefore are subject to the VIE consolidation framework.
Par Value
On April 1, 2010, the par value of our capital stock was changed from $10,000 per share to no par value. Note 1 – Summary of Significant Accounting Policies (Continued)
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because of inherent uncertainty involved in making estimates, actual results could differ from those estimates and assumptions. The accounting estimates that are most important to our business are the determination of residual value and the allowance for credit losses as well as estimates related to the fair value of our derivative instruments and marketable securities.
Revenue Recognition
Retail and Dealer Financing Revenues
Revenues associated with retail and dealer financing are recognized so as to approximate a level rate of return over the contract term. Incremental direct fees and costs incurred in connection with the acquisition of retail contracts and dealer financing receivables, including incentive and rate participation payments made to vehicle and industrial equipment dealers, are capitalized and amortized so as to approximate a level rate of return over the term of the related contracts. Payments received on affiliate sponsored special rate programs (“subvention”) are deferred and recognized to approximate a constant rate of return over the term of the related contracts.
Operating Lease Revenues
Operating lease revenues are recorded to income on a straight-line basis over the term of the lease. Incremental direct fees and costs received or paid in connection with the acquisition of operating leases, including incentive and rate participation payments made to vehicle and industrial equipment dealers and acquisition fees collected from customers, are capitalized or deferred and amortized on a straight-line basis over the term of the related contract. Payments received on subvention programs are deferred and recognized on a straight-line basis over the term of the related contracts. Operating lease revenue is recorded net of sales taxes collected from customers.
Direct Finance Lease Revenues
Revenue is recognized over the lease term to approximate a level rate of return on the outstanding net investment. Incremental direct costs and fees paid or received in connection with the acquisition of direct finance leases, including incentive and rate participation payments made to vehicle and industrial equipment dealers and acquisition fees collected from customers, are capitalized or deferred and amortized to approximate a level rate of return over the term of the related contracts. Payments received on subvention programs are deferred and recognized to approximate a constant rate of return over the term of the related contracts.
Insurance Earned Premiums and Contract Revenues
Revenues from providing coverage under various contractual agreements are recognized over the term of the coverage in relation to the timing and level of anticipated claims and administrative expenses. Revenues from insurance policies, net of premiums ceded to reinsurers, are earned over the terms of the respective policies in proportion to the estimated loss development. Management relies on historical loss experience as a basis for establishing earnings factors used to recognize revenue over the term of the contract or policy. Note 1 – Summary of Significant Accounting Policies (Continued)
The portion of premiums and contract revenues applicable to the unexpired terms of the agreements is recorded as unearned insurance premiums and contract revenues. Agreements sold range in term from 3 to 120 months. Certain costs of acquiring new business, consisting primarily of dealer commissions and premium taxes, are deferred and amortized over the term of the related policies on the same basis as revenues are earned.
Service commissions and fees are recognized over the term of the coverage in relation to the timing of services performed. The effect of subsequent cancellations is recorded as an offset to unearned insurance premiums and contract revenues.
Depreciation on Operating Leases
Depreciation on vehicle operating leases is recognized using the straight-line method over the lease term, typically two to five years. The depreciable basis is the original cost of the vehicle less the estimated residual value of the vehicle at the end of the lease term. During the lease term, adjustments to depreciation expense reflecting revised estimates of expected residual values at the end of the lease terms are recorded prospectively on a straight-line basis.
Allowance for Credit Losses
We maintain an allowance for credit losses to cover probable and estimable losses on our earning assets resulting from the failure of customers or dealers to make contractual payments. Management evaluates the allowance at least quarterly, considering a variety of factors and assumptions to determine whether the allowance is considered adequate to cover probable and estimable losses incurred as of the balance sheet date. The allowance for credit losses is management's estimate of the amount of probable incurred credit losses in our existing finance receivables and investment in operating leases portfolios.
Management develops and documents the allowance for credit losses on finance receivables based on three portfolio segments. We also separately develop and document the allowance for credit losses for investments in operating leases. Investments in operating leases are not within the scope of accounting guidance governing the disclosure of portfolio segments. The determination of portfolio segments is based primarily on the qualitative consideration of the nature of our business operations and the characteristics of the underlying finance receivables. The three portfolio segments within finance receivables, net are:
Note 1 – Summary of Significant Accounting Policies (Continued)
Methodology Used to Develop the Allowance for Credit Losses
Retail Loan Portfolio Segment and Investment in Operating Leases
The level of credit risk in our retail loan portfolio segment and our investment in operating leases is influenced primarily by two factors: default frequency and loss severity, which in turn are influenced by various factors such as economic conditions, the used vehicle market, purchase quality mix, contract term length, and operational changes.
We evaluate the retail loan portfolio segment and investment in operating leases using methodologies such as roll rate, credit risk grade/tier, and vintage analysis. We review and analyze external factors, such as changes in economic conditions, actual or perceived quality, safety and reliability of Toyota, Lexus and Scion vehicles, unemployment levels, the used vehicle market, and consumer behavior. In addition, internal factors, such as purchase quality mix and operational changes are also considered in the reviews.
Note 1 – Summary of Significant Accounting Policies (Continued)
Commercial Portfolio Segment
The level of credit risk in our commercial portfolio segment is primarily influenced by two factors: default frequency and loss severity, which in turn are influenced by various economic factors, the used equipment and truck markets, purchase quality mix, contract term length, and operational changes.
We evaluate the commercial portfolio segment using methodologies such as product grouping analysis, historical loss and loss frequency by product. We review and analyze external factors, such as changes in economic conditions, unemployment level, and the used equipment and truck markets. In addition, internal factors, such as purchase quality mix, are also considered in the reviews.
Dealer Products Portfolio Segment
The level of credit risk in our dealer products portfolio segment is influenced primarily by the financial strength of dealers within our portfolio, dealer concentration, collateral quality, and other economic factors. The financial strength of dealers within our portfolio is influenced by, among other factors, general economic conditions, the overall demand for new and used vehicles and industrial equipment and the financial condition of automotive manufacturers in general.
We evaluate the dealer portfolio by first aggregating dealer financing receivables into loan-risk pools, which are determined based on the risk characteristics of the loan (e.g. secured by either vehicles and industrial equipment, real estate or dealership assets, or unsecured). We then analyze dealer pools using an internally developed risk rating. In addition, field operations management and our special assets group are consulted each quarter to determine if any specific dealer loan is considered impaired. If impaired loans are identified, specific reserves are established, as appropriate, and the loan is removed from the loan-risk pool for separate monitoring.
Accounting for the Allowance for Credit Losses and Impaired Receivables
The majority of the allowance for credit losses covers estimated losses on the retail loan portfolio segment and the commercial portfolio segment, which are collectively evaluated for impairment. The remainder of the allowance for credit losses covers the estimated losses on investments in operating leases and the dealer products portfolio segment. In addition, we establish specific reserves to cover the estimated losses on individual impaired loans (including loans modified in a troubled debt restructuring) within the dealer products portfolio segment. The specific reserve is assessed based on discounted cash flows, the loan's observable market price, or the fair value of the underlying collateral if the loan is collateral dependent.
Troubled debt restructurings in the retail loan and commercial portfolio segments are aggregated with their respective portfolio segments when determining the allowance for credit losses. Impaired loans in the retail loan and commercial loan portfolio segments are insignificant for individual evaluation and we have determined that the allowance for credit losses for each of the retail loan and commercial portfolio segments would not be materially different if they had been individually evaluated for impairment. Note 1 – Summary of Significant Accounting Policies (Continued)
Increases to the allowance for credit losses are accompanied by corresponding charges to the provision for credit losses. The amount of the account balance we do not expect to collect in the retail loan and commercial portfolio segments and investments in operating leases is charged off against the allowance for credit losses when payments due are no longer expected to be received or the account is 120 days contractually delinquent, whichever occurs first.
Collateral, if recoverable, is repossessed and sold. Any shortfalls in the retail loan and commercial portfolio segments and investments in operating leases between proceeds received from the sale of repossessed collateral and the amounts due from customers are charged against the allowance. Any shortfalls in the dealer products portfolio segment between proceeds received from the sale of repossessed collateral and the amounts specifically reserved will result in additional losses. The allowance related to our earning assets is included in Finance receivables, net and Investments in operating leases, net in the Consolidated Balance Sheet.
Insurance Losses and Loss Adjustment Expenses
Insurance losses and loss adjustment expenses include amounts paid and accrued for loss events that are known and have been recorded as claims, estimates of losses incurred but not reported that are based on actuarial estimates and historical loss development patterns, and loss adjustment expenses that are expected to be incurred in connection with settling and paying these claims.
Accruals for unpaid losses, losses incurred but not reported, and loss adjustment expenses are included in other liabilities in the Consolidated Balance Sheet. Estimated liabilities are reviewed regularly and we recognize any adjustments in the periods in which they are determined. If anticipated losses, loss adjustment expenses, and unamortized acquisition and maintenance costs exceed the recorded unearned premium, a premium deficiency is recognized by first charging any unamortized acquisition costs to expense and then by recording a liability for any excess deficiency.
Cash and Cash Equivalents
Cash equivalents, which consist of money market instruments, commercial paper and certificates of deposit, represent highly liquid investments with maturities of three months or less at purchase. Restricted Cash
Restricted cash represents customer collections on securitized receivables to be distributed to investors as payments on the related secured debt and certain reserve deposits held for securitization trusts.
Investments in Marketable Securities
Investments in marketable securities consist of debt and equity securities. Debt and equity securities designated as available-for-sale (“AFS”) are recorded at fair value using quoted market prices where available with unrealized gains or losses included in Accumulated other comprehensive income (“AOCI”), net of applicable taxes in the Consolidated Statement of Shareholder's Equity. Realized gains and losses are determined using either the specific identification method or first in first out method, depending on the type of investment in our portfolio. Realized investment gains and losses are reflected in Investment and other income, net in the Consolidated Statement of Income.
Note 1 – Summary of Significant Accounting Policies (Continued)
Other-than-Temporary Impairment
An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI. We conduct periodic reviews of securities in unrealized loss positions for the purpose of evaluating whether the impairment is other-than-temporary.
As part of our ongoing assessment of other-than-temporary impairment (“OTTI”), we consider a variety of factors. Such factors include the length of time and extent to which the market value of a security has been less than amortized cost, adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of the security, the volatility of the fair value changes, and changes to the fair value after the balance sheet date.
An OTTI loss with respect to debt securities must be recognized in earnings if we have the intent to sell the debt security or it is more likely than not that we will be required to sell the debt security before recovery of its amortized cost basis. If we have the intent to sell, the cost basis of the security is written down to fair value and the write down is reflected in Investment and other income, net in the Consolidated Statement of Income. If we have no intent to sell and we believe that it is more likely than not we will not be required to sell these securities prior to recovery, the credit loss component of the unrealized losses are recognized in Investment and other income, net in the Consolidated Statement of Income, while the remainder of the loss is recognized in AOCI. The credit loss component recognized in Investment and other income, net in the Consolidated Statement of Income is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected using a credit cash flow analysis for debt securities.
We perform periodic reviews of our AFS equity securities to determine whether unrealized losses are temporary in nature. We consider our intent and ability to hold the security for a period of time sufficient for recovery of fair value. Where we lack that intent or ability, the equity security's decline in fair value is deemed to be other-than-temporary. If losses are considered to be other-than-temporary, the cost basis of the security is written down to fair value and the write down is reflected in Investment and other income, net in the Consolidated Statement of Income.
Note 1 – Summary of Significant Accounting Policies (Continued)
Finance Receivables
Our finance receivables consist of retail loan, commercial and dealer products portfolio segments. Finance receivables recorded on our balance sheet are comprised of the unpaid principal balance, plus accrued interest and deferred fees and costs, net of the allowance for credit losses and deferred income. Direct finance leases are recorded on our balance sheet as the aggregate future minimum lease payments, contractual residual value of the leased vehicle or industrial equipment, and deferred income.
Impaired Receivables
A receivable account balance is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the terms of the contract. Factors such as payment history, compliance with terms and conditions of the underlying loan agreement and other subjective factors related to the financial stability of the borrower are considered when determining whether a loan is impaired.
Troubled Debt Restructurings
A troubled debt restructuring occurs when an account is modified through a concession to a borrower experiencing financial difficulty. An account modified under a troubled debt restructuring is considered to be impaired. In addition, troubled debt restructurings include accounts for which the customer has filed for bankruptcy protection. For such accounts, we no longer have the ability to modify the terms of the agreement without the approval of the bankruptcy court and the court may impose term modifications that we are obligated to accept.
Payment Defaults
A payment default on an account that has been modified as a troubled debt restructuring is deemed to have occurred when the account becomes thirty days past due. Accounts for which the debtor has filed for bankruptcy protection are not considered to have a payment default as we are prohibited from applying our normal collection procedures. Nonaccrual Policy
Dealer Products Portfolio Segment
Impaired receivables in the dealer product portfolio segment are placed on nonaccrual status if full payment of principal or interest is in doubt, or when principal or interest is 90 days or more past due. Interest accrued, but not collected at the date a receivable is placed on nonaccrual status, is reversed against interest income. In addition, the amortization of net deferred fees is suspended. Interest income on nonaccrual receivables is recognized only to the extent it is received in cash. Accounts are restored to accrual status only when interest and principal payments are brought current and future payments are reasonably assured. Receivable balances are charged off against the allowance for credit losses when the loss has been realized. Note 1 – Summary of Significant Accounting Policies (Continued)
Retail Loan and Commercial Portfolio Segments
Receivables within the retail loan and commercial portfolio segments are not placed on nonaccrual status when principal or interest is 90 days or more past due. Rather, these receivables are charged off against the allowance for credit losses when payments due are no longer expected to be received or the account is 120 days contractually delinquent, whichever occurs first.
Investments in Operating Leases
We record our investments in operating leases at acquisition cost, net of deferred fees and costs, deferred income, accumulated depreciation and the allowance for credit losses.
Nonaccrual Policy
Investments in operating leases are not placed on nonaccrual status. Rather, these accounts are charged off when payments due are no longer expected to be received or the account is 120 days contractually delinquent, whichever occurs first.
Determination of Residual Value
Substantially all of our residual value risk relates to our vehicle lease portfolio. Residual values of lease earning assets are estimated at lease inception by examining external industry data, the anticipated Toyota, Lexus and Scion product pipeline and our own experience. Factors considered in this evaluation include, but are not limited to, local, regional and national economic forecasts, new vehicle pricing, new vehicle incentive programs, new vehicle sales, future plans for new Toyota, Lexus and Scion product introductions, competitor actions and behavior, product attributes of popular vehicles, the mix of used vehicle supply, the level of current used vehicle values, buying and leasing behavior trends, and fuel prices. We use various channels to sell vehicles returned at lease end.
On a quarterly basis, we review the estimated end-of-term market values of leased vehicles to assess the appropriateness of the carrying values at lease end. To the extent the estimated end-of-term market value of a leased vehicle is lower than the residual value established at lease inception, the residual value of the leased vehicle is adjusted downward so that the carrying value at lease end will approximate the estimated end-of-term market value. Factors affecting the estimated end-of-term market value are similar to those considered in the evaluation of residual values at lease inception discussed above. These factors are evaluated in the context of their historical trends to anticipate potential future changes in the relationship among these factors. For operating leases, adjustments are made prospectively on a straight-line basis over the remaining terms of the leases and are included in depreciation on operating leases in the Consolidated Statement of Income. For direct finance leases, adjustments are made at the time of assessment and are recorded as a reduction of direct finance lease revenues which is included under our retail revenues in the Consolidated Statement of Income.
We review our investments in operating leases for impairment whenever events or changes in circumstances indicate that the carrying value of the operating leases may not be recoverable. If such events or changes in circumstances are present, we perform a test for recoverability by comparing the expected undiscounted future cash flows (including expected residual values) over the remaining lease terms to the carrying value of the asset group. If the test for recoverability identifies a possible impairment, the asset group's fair value is measured in accordance with the fair value measurement framework. An impairment charge is recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value and is recorded in the current period Consolidated Statement of Income.
Note 1 – Summary of Significant Accounting Policies (Continued)
Used Vehicles Held for Sale
Used vehicles held for sale consist of off-lease vehicles and repossessed vehicles. Off-lease vehicles are recorded at the lower of cost, determined based on the contractual lease value, or market, using recent sales values. Repossessed vehicles are recorded at market, based on the same method used to estimate the residual value for off-lease vehicles.
Debt Issuance Costs
Costs that are direct and incremental to debt issuance are capitalized and amortized to interest expense on a level yield basis over the contractual term of the debt. All other costs related to debt issuance are expensed as incurred.
Fair Value Measurements
Some of our assets and liabilities are measured at fair value on a recurring basis including our cash equivalents, investments in marketable securities and derivatives. Certain other financial assets and liabilities are measured at fair value on a nonrecurring basis based on specific circumstances such as impairment. Finance receivables and debt are not presented in our financial statements at fair value, but their estimated fair value is included for disclosure purposes, as well as the methods and significant assumptions used to estimate their fair value.
Definition and Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If quoted prices in an active market are available, fair value is determined by reference to these prices. If listed prices or quotations are not available, fair value is determined by valuation models that primarily use, as inputs, market-based or independently sourced parameters, including but not limited to interest rates, volatilities, foreign exchange rates and credit curves. Additionally, we may reference prices for similar instruments, quoted prices or recent transactions in less active markets. We use prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the availability of prices and inputs may be reduced for certain financial instruments. This condition could result in a financial instrument being reclassified from Level 1 to Level 2 or from Level 2 to Level 3.
Level 1: Quoted (unadjusted) prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2: Quoted prices in active markets for similar assets and liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3: Unobservable inputs that are supported by little or no market activity may require significant judgment in order to determine the fair value of the assets and liabilities. Note 1 – Summary of Significant Accounting Policies (Continued)
The use of observable and unobservable inputs is reflected in the fair value hierarchy assessment disclosed in the tables within this document. The availability of observable inputs can vary based upon the financial instrument and other factors, such as instrument type, market liquidity and other specific characteristics particular to the financial instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires additional judgment by management. The degree of management's judgment can result in financial instruments being classified as or transferred to the Level 3 category.
Valuation Methods
We maintain policies and procedures to value instruments using the best and most relevant data available. The Treasury Risk and Analytics Group (“TR&A”) is responsible for determining the fair value of our financial instruments. TR&A consists of quantitative analysts and risk and accounting professionals. Using benchmarking techniques, TR&A reviews our valuation pricing models at least annually to assess their ongoing propriety. As markets and products develop and the pricing for certain products becomes more or less transparent, TR&A refines its valuation methodologies. TR&A reviews the appropriateness of fair value measurements including validation processes, key model inputs, and the reconciliation of period-over-period fluctuations based on changes in key market inputs. Where possible, valuations, including both internally and externally obtained transaction prices, are validated against independent valuation sources. Our Fair Value Working Group (“FVWG”) reviews and approves the fair value measurement results and other relevant data quarterly. The FVWG consists of a cross-section of internal stakeholders who are knowledgeable in the area of financial valuations. All changes to our valuation methodologies are reviewed and approved by the FVWG.
We conduct reviews of our primary pricing vendors to understand and assess the reasonableness of inputs used in their pricing process. While we do not have access to our vendors' proprietary models, we perform detailed reviews of the pricing process, methodologies and control procedures for each asset class for which prices are provided. Our reviews include examination of the underlying inputs and assumptions for a sample of individual securities selected based on the nature and complexity of the securities. In addition, our pricing vendors have established processes in place for all valuations, which facilitates identification and resolution of potentially erroneous prices. We believe that the prices received from our pricing vendors are representative of prices that would be received to sell the assets or paid to transfer the liabilities at the measurement date and are classified appropriately in the hierarchy.
Note 1 – Summary of Significant Accounting Policies (Continued)
Valuation Adjustments
We may make valuation adjustments to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, our own creditworthiness, as well as constraints due to market illiquidity or unobservable parameters.
Counterparty Credit Valuation Adjustments – Adjustments are required when the market price (or parameter) is not indicative of the credit quality of the counterparty.
Non-Performance Credit Valuation Adjustments – Adjustments reflect our own non-performance risk when our liabilities are measured at fair value.
Liquidity Valuation Adjustments – Adjustments are necessary when we are unable to observe prices for a financial instrument due to market illiquidity.
Recurring Fair Value Measurements
This section describes the valuation methodologies, key inputs and significant assumptions for financial instruments measured at fair value.
Cash Equivalents
Cash equivalents include money market instruments, commercial paper and certificates of deposits, which represent highly liquid investments with maturities of three months or less at purchase. Where money market funds produce a daily net asset value in an active market, we use this value to determine the fair value of the fund investment and classify the investment in Level 1 of the fair value hierarchy. All other types of cash equivalents are classified in Level 2 of the fair value hierarchy.
Investments in Marketable Securities
The marketable securities portfolio consists of debt and equity securities. We estimate the value of our debt securities using observed transaction prices, independent pricing vendors, and internal pricing models.
Pricing methodologies and inputs to valuation models used by the pricing vendors depend on the security type. Where possible, quoted prices in active markets for identical securities are used to determine the fair value of the investment securities; these securities are classified in Level 1 of the fair value hierarchy. Where quotes in active markets are not available, the pricing vendor uses various pricing models for each asset class that are consistent with what market participants use. The inputs and assumptions to the models of the pricing vendors are derived from market observable sources including: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and other market-related data. Since many fixed income securities do not trade on a daily basis, the pricing vendors use applicable available information, such as benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. These investments are classified in Level 2 of the fair value hierarchy. Our pricing vendors may provide us with valuations that are based on significant unobservable inputs; in such circumstances, we classify these investments in Level 3 of the fair value hierarchy. Valuations obtained from third party pricing vendors are validated to assess their reasonableness.
Note 1 – Summary of Significant Accounting Policies (Continued)
We hold investments in actively traded open-end equity mutual funds and private placement fixed income mutual funds. Where the funds produce a daily net asset value that is quoted in an active market, we use this value to determine the fair value of the fund investment and classify the investment in Level 1 of the fair value hierarchy. Where the funds produce a daily net asset value that is not quoted in an active market, we estimate the fair value of the investment using the net asset value per share. We classify such funds in Level 2 of the fair value hierarchy as we have the ability to redeem our investment at the net asset value per share at the balance sheet date.
Derivatives
As part of our risk management strategy, we enter into derivative transactions to mitigate our interest rate and foreign currency exposures. These derivative transactions are considered over-the-counter for valuation purposes. All of our derivative counterparties to which we had credit exposure at March 31, 2013 were assigned investment grade ratings by a credit rating organization.
We estimate the fair value of our derivatives using industry standard valuation models that require observable market inputs, including market prices, yield curves, credit curves, interest rates, foreign exchange rates, volatilities and the contractual terms of the derivative instruments. For derivatives that trade in liquid markets, model inputs can generally be verified and do not require significant management judgment. These derivative instruments are classified in Level 2 of the fair value hierarchy.
Certain other derivative transactions trade in less liquid markets with limited pricing information. For such derivatives, key inputs to the valuation process include quotes from counterparties and other market data used to corroborate and adjust values where appropriate. Other market data includes values obtained from a market participant that serves as a third party pricing vendor. Inputs obtained from counterparties and third party pricing vendors are internally validated using valuation models to assess the reasonableness of changes in factors such as market prices, yield curves, credit curves, interest rates, foreign exchange rates and volatilities. These derivative instruments are classified in Level 3 of the fair value hierarchy.
Our derivative fair value measurements consider assumptions about counterparty credit risk and our own non-performance risk. We consider counterparty credit risk and our own non-performance risk through credit valuation adjustments. In situations in which our net position with a derivative counterparty is an asset, the counterparty credit valuation adjustment calculation uses the credit default probabilities of our derivative counterparties over a particular time period. In situations in which our net position with a derivative counterparty is a liability, we use our own credit default probability to calculate the required non-performance credit valuation adjustment. We use a relative fair value approach to allocate the credit valuation adjustments to our derivatives portfolio.
Note 1 – Summary of Significant Accounting Policies (Continued)
Nonrecurring Fair Value Measurements
Impaired Finance Receivables
For finance receivables within the dealer products portfolio segment for which there is evidence of impairment, we may measure impairment based on discounted cash flows, the loan's observable market price or the fair value of the underlying collateral if the loan is collateral dependent. The fair values of impaired finance receivables are reported at fair value on a nonrecurring basis. The methods used to estimate the fair value of the underlying collateral depends on the specific class of finance receivable. For finance receivables within the wholesale class of finance receivables, the collateral value is generally based on wholesale market value or liquidation value for new and used vehicles. For finance receivables within the real estate class of finance receivables, the collateral value is generally based on appraisals. For finance receivables within the working capital class of finance receivables, the collateral value is generally based on the expected liquidation value of the underlying dealership assets. Adjustments may be performed in circumstances where market comparables are not specific to the attributes of the specific collateral or appraisal information may not be reflective of current market conditions due to the passage of time and the occurrence of market events since receipt of the information. As these valuations utilize unobservable inputs, our impaired finance receivables are classified in Level 3 of the fair value hierarchy.
Financial Instruments Not Carried at Fair Value
Finance Receivables
Our finance receivables consist of retail loans, comprised of retail loan contracts and commercial loan contracts, and dealer loans, comprised of wholesale, real estate and working capital financing. Retail loans are primarily valued using a securitization model that incorporates expected cash flows. Cash flows expected to be collected are estimated using contractual principal and interest payments adjusted for specific factors, such as prepayments, default rates, loss severity, credit scores, and collateral type. The securitization model utilizes quoted secondary market rates if available, or estimated market rates that incorporate management's best estimate of investor assumptions about the portfolio. Dealer loans are valued using a discounted cash flow model. Discount rates are derived based on market rates for equivalent portfolio bond ratings. As these valuations utilize unobservable inputs, our finance receivables are classified in Level 3 of the fair value hierarchy.
Commercial Paper
The carrying value of commercial paper issued is assumed to approximate fair value due to its short duration and generally negligible credit risk. We validate this assumption by recalculating the fair value of our commercial paper using quoted market rates. Commercial paper is classified in Level 2 of the fair value hierarchy.
Note 1 – Summary of Significant Accounting Policies (Continued)
Unsecured Notes and Loans Payable
Unsecured notes and loans payable are primarily valued using current market rates and credit spreads for debt with similar maturities. Our valuation models utilize observable inputs and standard industry curves; therefore, we classify these unsecured notes and loans payables in Level 2 of the fair value hierarchy. Where it is not possible to value the debt, we use quoted market prices where available to estimate the fair value of unsecured notes and loans payable. These unsecured notes and loans payable are classified in Level 3 of the fair value hierarchy since the market for these instruments is not active. In a limited number of instances, where it is not possible to value the debt instrument and quoted market prices are unavailable, we estimate the fair value of unsecured notes and loan payable using quotes from counterparties or a third party pricing vendor. We review the appropriateness of these fair value measurements by assessing the reasonableness of period over period fluctuations. These valuations utilize unobservable inputs; therefore, we classify these unsecured notes and loans payables in Level 3 of the fair value hierarchy.
Secured Notes and Loans Payable
Fair value is estimated based on current market rates and credit spreads for debt with similar maturities. We also use internal assumptions, including prepayment speeds and expected credit losses on the underlying securitized assets, to estimate the timing of cash flows to be paid on these instruments. As these valuations utilize unobservable inputs, our secured notes and loans payables are classified in Level 3 of the fair value hierarchy.
Derivative Instruments
All derivative instruments are recorded on the balance sheet at fair value, taking into consideration the effects of legally enforceable master netting agreements that allow us to net settle asset and liability positions and offset cash collateral held with the same counterparty on a net basis. Changes in the fair value of derivatives are recorded in interest expense in the Consolidated Statement of Income.
We categorize derivatives as those designated for hedge accounting (“hedge accounting derivatives”) and those that are not designated for hedge accounting (“non-hedge accounting derivatives”). At the inception of a derivative contract, we may elect to designate a derivative as a hedge accounting derivative if certain criteria are met.
In order to qualify for hedge accounting, a derivative must be considered highly effective at reducing the risk associated with the exposure being hedged. When we designate a derivative in a hedging relationship, we contemporaneously document the risk management objective and strategy. This documentation includes the identification of the hedging instrument, the hedged item and the risk exposure, how we will assess effectiveness prospectively and retrospectively, and how often we will carry out this assessment.
We use the “long-haul” method of assessing effectiveness for our fair value hedges, except for certain types of existing hedge relationships that meet stringent criteria where we apply the shortcut method. The shortcut method provides an assumption of zero ineffectiveness that results in equal and offsetting changes in fair value in the Consolidated Statement of Income for both the hedged debt and the hedge accounting derivative. When the shortcut method is not applied, any ineffective portion of the derivative that is designated as a fair value hedge is recognized as a component of interest expense in the Consolidated Statement of Income. We recognize changes in the fair value of derivatives designated in fair value hedging relationships (including foreign currency fair value hedging relationships) in interest expense in the Consolidated Statement of Income along with the fair value changes of the related hedged item. Note 1 – Summary of Significant Accounting Policies (Continued)
If we elect not to designate a derivative instrument in a hedging relationship, or the relationship does not qualify for hedge accounting treatment, the full change in the fair value of the derivative instrument is recognized as a component of interest expense in the Consolidated Statement of Income with no offsetting adjustment for the economically hedged item.
We review the effectiveness of our hedging relationships at least quarterly to determine whether the relationships have been and continue to be effective. We use regression analysis to assess the effectiveness of our hedges. When we determine that a hedging relationship is not or has not been effective, hedge accounting is no longer applied. If hedge accounting is discontinued, we continue to carry the derivative instrument as a component of other assets or other liabilities in the Consolidated Balance Sheet at fair value, with changes in fair value reported in interest expense in the Consolidated Statement of Income. Additionally, for discontinued fair value hedges, we cease to adjust the hedged item for changes in fair value and amortize the cumulative fair value adjustments recognized in prior periods over the remaining term of the hedged item.
We will also discontinue the use of hedge accounting if a derivative is sold, terminated, or if management determines that designating a derivative under hedge accounting is no longer deemed appropriate based on current investment strategy (“de-designated derivatives”). De-designated derivatives are included within the category of non-hedge accounting derivatives.
We also issue debt which is considered a “hybrid financial instrument”. These debt instruments are assessed to determine whether they contain embedded derivatives requiring separate reporting and accounting. The embedded derivative may be bifurcated and recorded on the balance sheet at fair value or the entire financial instrument may be recorded at fair value. Changes in the fair value of the bifurcated embedded derivative or the entire hybrid financial instrument are reported in interest expense in the Consolidated Statement of Income.
Foreign Currency Transactions
Certain transactions we have entered into related to debt are denominated in foreign currencies. If the debt is not in a designated hedge accounting relationship, the debt is translated into U.S. dollars using the applicable exchange rate at the transaction date and retranslated at each balance sheet date using the exchange rate in effect at that date. Gains and losses related to foreign currency transactions are included in interest expense in the Consolidated Statement of Income. Payments on debt in the Consolidated Statement of Cash Flows include repayment of principal and the net amount of exchange of notional on currency swaps that economically hedge these transactions. Proceeds from issuance of debt in the Consolidated Statement of Cash Flows include both the proceeds from the initial issuance of debt and the net amount of exchange of notional on currency swaps that economically hedge these transactions.
Risk Transfer
Our insurance operations transfers certain risks to protect us against the impact of unpredictable high severity losses. The amounts recoverable from reinsurers and other companies that assume liabilities relating to our insurance operations are estimated in a manner consistent with the related reinsurance or risk transfer agreement. Amounts recoverable from reinsurers and other companies on unpaid losses are recorded as a receivable but are not collectible until the losses are paid. Revenues related to risks transferred are recognized on the same basis as the related revenues from the underlying agreements. Covered losses are recorded as a reduction to insurance losses and loss adjustment expenses.
Note 1 – Summary of Significant Accounting Policies (Continued)
Income Taxes
We use the liability method of accounting for income taxes under which deferred tax assets and liabilities are adjusted to reflect changes in tax rates and laws in the period such changes are enacted resulting in adjustments to the current fiscal year's provision for income taxes.
TMCC files a consolidated federal income tax return with its subsidiaries and TFSA. TMCC files either separate or consolidated/combined state income tax returns with Toyota Motor North America (“TMA”), TFSA, or subsidiaries of TMCC. State income tax expense is generally recognized as if TMCC and its subsidiaries filed their tax returns on a stand-alone basis. In those states where TMCC and its subsidiaries join in the filing of consolidated or combined income tax returns, TMCC and its subsidiaries are allocated their share of the total income tax expense based on combined allocation/apportionment factors and separate company income or loss. Based on the state tax sharing agreement with TMA, TMCC and its subsidiaries pay for their share of the combined income tax expense and are reimbursed for the benefit of any of their tax losses utilized in the combined state income tax returns.
New Accounting Guidance
In February 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for certain obligations addressed within existing guidance in U.S. GAAP. Specifically, the new guidance requires an entity to measure these obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. Additionally, the guidance requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations within the footnotes to its financial statements. Currently no such recognition, measurement, and disclosure requirement exists under U.S. GAAP. The accounting guidance is effective for us for fiscal 2014. We are evaluating the effect that adoption of this guidance will have on our consolidated financial statements.
In February 2013, the FASB issued additional guidance on the presentation of items reclassified out of accumulated other comprehensive income. The standard does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the guidance does require an entity to provide enhanced disclosures to present separately by component reclassifications out of accumulated other comprehensive income. The accounting guidance is effective for us for fiscal 2014. The adoption of this guidance will not have a material impact on our consolidated financial statements. Note 1 – Summary of Significant Accounting Policies (Continued)
In December 2011, the FASB issued accounting guidance on the disclosure about offsetting assets and liabilities. The disclosure requirements of this guidance are intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a company's financial position. Offsetting, otherwise known as netting, is the presentation of assets and liabilities as a single net amount in the balance sheet. The guidance retains the current U.S. GAAP model that allows companies the option to present net in their balance sheets derivatives that are subject to a legally enforceable netting arrangement with the same party, where rights of set-off are available, including in the event of default or bankruptcy. However, the guidance adds new disclosure requirements to improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral pledged or received. In January 2013, the FASB further clarified that the scope of this guidance applies only to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The accounting guidance is effective for us on April 1, 2013. The adoption of this guidance will not have a material impact on our consolidated financial statements. Recently Adopted Accounting Guidance
In April 2012, we adopted new FASB accounting guidance which requires entities to report components of comprehensive income in either a single continuous statement of comprehensive income or two separate but consecutive statements. We have elected to present comprehensive income in two separate but consecutive statements. The application of this guidance primarily affected the presentation of our consolidated financial statements.
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Related Party Transactions
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Mar. 31, 2013
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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:
Note 15 – Related Party Transactions (Continued)
Financing Support Arrangements with Affiliates
TMCC is party to a credit support agreement with TFSC (the “TMCC Credit Support Agreement”). The agreement requires TFSC to maintain certain ownership, net worth maintenance, and debt service provisions in respect of TMCC, but is not a guarantee by TFSC of any securities or obligations of TMCC. In conjunction with this credit support agreement, TMCC has agreed to pay TFSC a semi-annual fee based on a fixed rate applied to the weighted average outstanding amount of securities entitled to credit support. Credit support fees incurred under this agreement were $72 million, $33 million, and $34 million for fiscal 2013, 2012, and 2011, respectively.
TCPR is the beneficiary of a credit support agreement with TFSC containing provisions similar to the TMCC Credit Support Agreement described above.
In addition, TMCC receives and provides financing support from TFSC and other affiliates in the form of promissory notes, conduit finance agreements and various loan and credit facility agreements. Total financing support received and provided, along with the amounts currently outstanding under those agreements, is summarized below. All foreign currency amounts have been translated at the exchange rates in effect as of March 31, 2013.
Financing Support Provided by Parent and Affiliates (amounts in millions):
Note 15 – Related Party Transactions (Continued)
Other Financing Support Provided to Affiliates
Note 15 – Related Party Transactions (Continued)
Operational Support Arrangements with Affiliates
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Allowance for Credit Losses (Details) (USD $)
In Millions, unless otherwise specified |
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Mar. 31, 2012
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Mar. 31, 2011
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Allowance for Credit Losses on Finance Receivables and Investments in Operating Leases | |||
Allowance for credit losses at | $ 619 | $ 879 | $ 1,705 |
Provision for credit losses | 121 | (98) | (433) |
Charge-offs, net of recoveries | (213) | (162) | (393) |
Allowance for credit losses at | 527 | 619 | 879 |
Recoveries from credit loss charge-offs | $ 87 | $ 123 | $ 137 |
Debt
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Debt |
The commercial paper balance includes unamortized premiums and discounts. Included in unsecured notes and loans payable are notes and loans denominated in various foreign currencies, unamortized premiums and discounts and the effects of foreign currency transaction gains and losses on non-hedged or de-designated foreign currency denominated notes and loans payable. At March 31, 2013 and March 31, 2012, the carrying values of these foreign currency denominated notes payable were $13.2 billion and $15.8 billion, respectively. Concurrent with the issuance of these foreign currency unsecured notes, we entered into currency swaps in the same notional amount to convert non-U.S. currency payments to U.S. dollar denominated payments.
Additionally, the carrying value of our unsecured notes and loans payable at March 31, 2013 included $16.8 billion of unsecured floating rate debt with contractual interest rates ranging from 0 percent to 6.0 percent and $30.4 billion of unsecured fixed rate debt with contractual interest rates ranging from 0.5 percent to 9.4 percent. The carrying value of our unsecured notes and loans payable at March 31, 2012 included $16.7 billion of unsecured floating rate debt with contractual interest rates ranging from 0 percent to 6.0 percent and $25.5 billion of unsecured fixed rate debt with contractual interest rates ranging from 0.5 percent to 9.4 percent. Upon issuance of fixed rate notes, we generally elect to enter into interest rate swaps to convert fixed rate payments on notes to floating rate payments.
Our secured notes and loans payable are denominated in U.S. dollars and consist of both fixed and variable rate debt with interest rates ranging from 0.4 percent to 1.9 percent at March 31, 2013 and 0.5 percent to 1.9 percent at March 31, 2012. Secured notes and loans are issued by on-balance sheet securitization trusts, as further discussed in Note 10 – Variable Interest Entities. These notes are repayable only from collections on the underlying pledged retail finance receivables and the beneficial interests in investments in operating leases and from related credit enhancements.
Note 9 – Debt (Continued)
The carrying value adjustment on debt represents the effects of fair value adjustments to debt in hedging relationships, accrued redemption premiums, and the unamortized fair value adjustments on the hedged item for terminated fair value hedge accounting relationships. The carrying value adjustment on debt decreased by $257 million at March 31, 2013 compared to March 31, 2012 primarily as a result of a stronger U.S. dollar relative to certain other currencies in which some of our debt is denominated.
As of March 31, 2013, our commercial paper had a weighted average remaining maturity of 84 days, while our notes and loans payable mature on various dates through fiscal 2047. Weighted average contractual interest rates are calculated based on original notional or par value before consideration of premium or discount.
Scheduled maturities of our debt portfolio are summarized below. Actual repayment of secured debt will vary based on the repayment activity on the related pledged assets.
Interest payments on commercial paper and debt, including net settlements on interest rate swaps, were $1.3 billion, $1.6 billion and $1.7 billion in fiscal 2013, 2012 and 2011, respectively. |
Commitments and Contingencies (Tables)
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Future Minimum Lease Payments under Non-cancelable Operating Leases |
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Summary of Significant Accounting Policies (Policies)
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12 Months Ended |
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Summary of Significant Accounting Policies [Abstract] | |
Nature of Operations | Nature of Operations
Toyota Motor Credit Corporation was incorporated in California in 1982 and commenced operations in 1983. References herein to “TMCC” denote Toyota Motor Credit Corporation, and references herein to “we”, “our”, and “us” denote Toyota Motor Credit Corporation and its consolidated subsidiaries. We are wholly-owned by Toyota Financial Services Americas Corporation (“TFSA”), a California corporation, which is a wholly-owned subsidiary of Toyota Financial Services Corporation (“TFSC”), a Japanese corporation. TFSC, in turn, is a wholly-owned subsidiary of Toyota Motor Corporation (“TMC”), a Japanese corporation. TFSC manages TMC's worldwide financial services operations. TMCC is marketed under the brands of Toyota Financial Services and Lexus Financial Services.
We provide a variety of finance and insurance products to authorized Toyota (including Scion) and Lexus vehicle dealers or dealer groups and, to a lesser extent, other domestic and import franchise dealers (collectively referred to as “vehicle dealers”) and their customers in the United States (excluding Hawaii) (the “U.S.”) including Puerto Rico. Our products fall primarily into the following product categories:
Our business is substantially dependent upon the sale of Toyota, Lexus and Scion vehicles. Any extended reduction or suspension of vehicle production or sale of vehicles in the U.S. due to a decline in consumer demand, work stoppage, governmental action, negative publicity or other event, could have an adverse effect on the level of our financing volume, insurance volume, earning assets and revenues.
Our primary finance operations are located in the U.S. and Puerto Rico with earning assets principally sourced through Toyota and Lexus vehicle dealers. As of March 31, 2013, approximately 20 percent of vehicle retail contracts and lease assets were concentrated in California, 11 percent in Texas, 8 percent in New York, and 6 percent in New Jersey. Our insurance operations are located in the U.S. As of March 31, 2013, approximately 26 percent of insurance policies and contracts were concentrated in California, 7 percent in New York and 5 percent in New Jersey. Any material adverse changes to the economies or applicable laws in these states could have an adverse effect on our financial condition and results of operations. |
Basis of Presentation | Basis of Presentation
Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America (U.S. GAAP). Certain prior period amounts have been reclassified to conform to the current year presentation.
Related party transactions presented in the Consolidated Financial Statements are disclosed in Note 15 – Related Party Transactions of the Notes to Consolidated Financial Statements.
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Principles of Consolidation | Principles of Consolidation
The consolidated financial statements include the accounts of TMCC, its wholly-owned subsidiaries and all variable interest entities (“VIE”) of which we are the primary beneficiary. All intercompany transactions and balances have been eliminated.
A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. The primary beneficiary of a VIE is the party with both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE.
To assess whether we have the power to direct the activities of a VIE that most significantly impact its economic performance, we consider all the facts and circumstances including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes identifying the activities that most significantly impact the VIE's economic performance and identifying which party, if any, has power over those activities. In general, the party that makes the most significant decisions affecting the VIE is determined to have the power to direct the activities of a VIE. To assess whether we have the obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE, we consider all of our economic interests, including debt and equity interests, servicing rights and fee arrangements, and any other variable interests in the VIE. If we determine that we are the party with the power to make the most significant decisions affecting the VIE, and we have an obligation to absorb the losses or the right to receive benefits that could potentially be significant to the VIE, then we consolidate the VIE.
We perform ongoing reassessments, usually quarterly, of whether we are the primary beneficiary of a VIE. The reassessment process considers whether we have acquired or divested the power to direct the most significant activities of the VIE through changes in governing documents or other circumstances. We also reconsider whether entities previously determined not to be VIEs have become VIEs, based on certain events, and therefore are subject to the VIE consolidation framework.
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Par Value | Par Value
On April 1, 2010, the par value of our capital stock was changed from $10,000 per share to no par value.
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Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because of inherent uncertainty involved in making estimates, actual results could differ from those estimates and assumptions. The accounting estimates that are most important to our business are the determination of residual value and the allowance for credit losses as well as estimates related to the fair value of our derivative instruments and marketable securities.
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Revenue Recognition | Revenue Recognition
Retail and Dealer Financing Revenues
Revenues associated with retail and dealer financing are recognized so as to approximate a level rate of return over the contract term. Incremental direct fees and costs incurred in connection with the acquisition of retail contracts and dealer financing receivables, including incentive and rate participation payments made to vehicle and industrial equipment dealers, are capitalized and amortized so as to approximate a level rate of return over the term of the related contracts. Payments received on affiliate sponsored special rate programs (“subvention”) are deferred and recognized to approximate a constant rate of return over the term of the related contracts.
Operating Lease Revenues
Operating lease revenues are recorded to income on a straight-line basis over the term of the lease. Incremental direct fees and costs received or paid in connection with the acquisition of operating leases, including incentive and rate participation payments made to vehicle and industrial equipment dealers and acquisition fees collected from customers, are capitalized or deferred and amortized on a straight-line basis over the term of the related contract. Payments received on subvention programs are deferred and recognized on a straight-line basis over the term of the related contracts. Operating lease revenue is recorded net of sales taxes collected from customers.
Direct Finance Lease Revenues
Revenue is recognized over the lease term to approximate a level rate of return on the outstanding net investment. Incremental direct costs and fees paid or received in connection with the acquisition of direct finance leases, including incentive and rate participation payments made to vehicle and industrial equipment dealers and acquisition fees collected from customers, are capitalized or deferred and amortized to approximate a level rate of return over the term of the related contracts. Payments received on subvention programs are deferred and recognized to approximate a constant rate of return over the term of the related contracts.
Insurance Earned Premiums and Contract Revenues
Revenues from providing coverage under various contractual agreements are recognized over the term of the coverage in relation to the timing and level of anticipated claims and administrative expenses. Revenues from insurance policies, net of premiums ceded to reinsurers, are earned over the terms of the respective policies in proportion to the estimated loss development. Management relies on historical loss experience as a basis for establishing earnings factors used to recognize revenue over the term of the contract or policy. The portion of premiums and contract revenues applicable to the unexpired terms of the agreements is recorded as unearned insurance premiums and contract revenues. Agreements sold range in term from 3 to 120 months. Certain costs of acquiring new business, consisting primarily of dealer commissions and premium taxes, are deferred and amortized over the term of the related policies on the same basis as revenues are earned.
Service commissions and fees are recognized over the term of the coverage in relation to the timing of services performed. The effect of subsequent cancellations is recorded as an offset to unearned insurance premiums and contract revenues.
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Depreciation on Operating Leases | Depreciation on Operating Leases
Depreciation on vehicle operating leases is recognized using the straight-line method over the lease term, typically two to five years. The depreciable basis is the original cost of the vehicle less the estimated residual value of the vehicle at the end of the lease term. During the lease term, adjustments to depreciation expense reflecting revised estimates of expected residual values at the end of the lease terms are recorded prospectively on a straight-line basis.
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Allowance for Credit Losses | Allowance for Credit Losses
We maintain an allowance for credit losses to cover probable and estimable losses on our earning assets resulting from the failure of customers or dealers to make contractual payments. Management evaluates the allowance at least quarterly, considering a variety of factors and assumptions to determine whether the allowance is considered adequate to cover probable and estimable losses incurred as of the balance sheet date. The allowance for credit losses is management's estimate of the amount of probable incurred credit losses in our existing finance receivables and investment in operating leases portfolios.
Management develops and documents the allowance for credit losses on finance receivables based on three portfolio segments. We also separately develop and document the allowance for credit losses for investments in operating leases. Investments in operating leases are not within the scope of accounting guidance governing the disclosure of portfolio segments. The determination of portfolio segments is based primarily on the qualitative consideration of the nature of our business operations and the characteristics of the underlying finance receivables. The three portfolio segments within finance receivables, net are:
Methodology Used to Develop the Allowance for Credit Losses
Retail Loan Portfolio Segment and Investment in Operating Leases
The level of credit risk in our retail loan portfolio segment and our investment in operating leases is influenced primarily by two factors: default frequency and loss severity, which in turn are influenced by various factors such as economic conditions, the used vehicle market, purchase quality mix, contract term length, and operational changes.
We evaluate the retail loan portfolio segment and investment in operating leases using methodologies such as roll rate, credit risk grade/tier, and vintage analysis. We review and analyze external factors, such as changes in economic conditions, actual or perceived quality, safety and reliability of Toyota, Lexus and Scion vehicles, unemployment levels, the used vehicle market, and consumer behavior. In addition, internal factors, such as purchase quality mix and operational changes are also considered in the reviews.
Commercial Portfolio Segment
The level of credit risk in our commercial portfolio segment is primarily influenced by two factors: default frequency and loss severity, which in turn are influenced by various economic factors, the used equipment and truck markets, purchase quality mix, contract term length, and operational changes.
We evaluate the commercial portfolio segment using methodologies such as product grouping analysis, historical loss and loss frequency by product. We review and analyze external factors, such as changes in economic conditions, unemployment level, and the used equipment and truck markets. In addition, internal factors, such as purchase quality mix, are also considered in the reviews.
Dealer Products Portfolio Segment
The level of credit risk in our dealer products portfolio segment is influenced primarily by the financial strength of dealers within our portfolio, dealer concentration, collateral quality, and other economic factors. The financial strength of dealers within our portfolio is influenced by, among other factors, general economic conditions, the overall demand for new and used vehicles and industrial equipment and the financial condition of automotive manufacturers in general.
We evaluate the dealer portfolio by first aggregating dealer financing receivables into loan-risk pools, which are determined based on the risk characteristics of the loan (e.g. secured by either vehicles and industrial equipment, real estate or dealership assets, or unsecured). We then analyze dealer pools using an internally developed risk rating. In addition, field operations management and our special assets group are consulted each quarter to determine if any specific dealer loan is considered impaired. If impaired loans are identified, specific reserves are established, as appropriate, and the loan is removed from the loan-risk pool for separate monitoring.
Accounting for the Allowance for Credit Losses and Impaired Receivables
The majority of the allowance for credit losses covers estimated losses on the retail loan portfolio segment and the commercial portfolio segment, which are collectively evaluated for impairment. The remainder of the allowance for credit losses covers the estimated losses on investments in operating leases and the dealer products portfolio segment. In addition, we establish specific reserves to cover the estimated losses on individual impaired loans (including loans modified in a troubled debt restructuring) within the dealer products portfolio segment. The specific reserve is assessed based on discounted cash flows, the loan's observable market price, or the fair value of the underlying collateral if the loan is collateral dependent.
Troubled debt restructurings in the retail loan and commercial portfolio segments are aggregated with their respective portfolio segments when determining the allowance for credit losses. Impaired loans in the retail loan and commercial loan portfolio segments are insignificant for individual evaluation and we have determined that the allowance for credit losses for each of the retail loan and commercial portfolio segments would not be materially different if they had been individually evaluated for impairment. Increases to the allowance for credit losses are accompanied by corresponding charges to the provision for credit losses. The amount of the account balance we do not expect to collect in the retail loan and commercial portfolio segments and investments in operating leases is charged off against the allowance for credit losses when payments due are no longer expected to be received or the account is 120 days contractually delinquent, whichever occurs first.
Collateral, if recoverable, is repossessed and sold. Any shortfalls in the retail loan and commercial portfolio segments and investments in operating leases between proceeds received from the sale of repossessed collateral and the amounts due from customers are charged against the allowance. Any shortfalls in the dealer products portfolio segment between proceeds received from the sale of repossessed collateral and the amounts specifically reserved will result in additional losses. The allowance related to our earning assets is included in Finance receivables, net and Investments in operating leases, net in the Consolidated Balance Sheet.
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Insurance Losses and Loss Adjustment Expenses | Insurance Losses and Loss Adjustment Expenses
Insurance losses and loss adjustment expenses include amounts paid and accrued for loss events that are known and have been recorded as claims, estimates of losses incurred but not reported that are based on actuarial estimates and historical loss development patterns, and loss adjustment expenses that are expected to be incurred in connection with settling and paying these claims.
Accruals for unpaid losses, losses incurred but not reported, and loss adjustment expenses are included in other liabilities in the Consolidated Balance Sheet. Estimated liabilities are reviewed regularly and we recognize any adjustments in the periods in which they are determined. If anticipated losses, loss adjustment expenses, and unamortized acquisition and maintenance costs exceed the recorded unearned premium, a premium deficiency is recognized by first charging any unamortized acquisition costs to expense and then by recording a liability for any excess deficiency.
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Cash and Cash Equivalents | Cash and Cash Equivalents
Cash equivalents, which consist of money market instruments, commercial paper and certificates of deposit, represent highly liquid investments with maturities of three months or less at purchase. |
Restricted Cash | Restricted Cash
Restricted cash represents customer collections on securitized receivables to be distributed to investors as payments on the related secured debt and certain reserve deposits held for securitization trusts.
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Investments in Marketable Securites | Investments in Marketable Securities
Investments in marketable securities consist of debt and equity securities. Debt and equity securities designated as available-for-sale (“AFS”) are recorded at fair value using quoted market prices where available with unrealized gains or losses included in Accumulated other comprehensive income (“AOCI”), net of applicable taxes in the Consolidated Statement of Shareholder's Equity. Realized gains and losses are determined using either the specific identification method or first in first out method, depending on the type of investment in our portfolio. Realized investment gains and losses are reflected in Investment and other income, net in the Consolidated Statement of Income.
Note 1 – Summary of Significant Accounting Policies (Continued)
Other-than-Temporary Impairment
An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI. We conduct periodic reviews of securities in unrealized loss positions for the purpose of evaluating whether the impairment is other-than-temporary.
As part of our ongoing assessment of other-than-temporary impairment (“OTTI”), we consider a variety of factors. Such factors include the length of time and extent to which the market value of a security has been less than amortized cost, adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of the security, the volatility of the fair value changes, and changes to the fair value after the balance sheet date.
An OTTI loss with respect to debt securities must be recognized in earnings if we have the intent to sell the debt security or it is more likely than not that we will be required to sell the debt security before recovery of its amortized cost basis. If we have the intent to sell, the cost basis of the security is written down to fair value and the write down is reflected in Investment and other income, net in the Consolidated Statement of Income. If we have no intent to sell and we believe that it is more likely than not we will not be required to sell these securities prior to recovery, the credit loss component of the unrealized losses are recognized in Investment and other income, net in the Consolidated Statement of Income, while the remainder of the loss is recognized in AOCI. The credit loss component recognized in Investment and other income, net in the Consolidated Statement of Income is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected using a credit cash flow analysis for debt securities.
We perform periodic reviews of our AFS equity securities to determine whether unrealized losses are temporary in nature. We consider our intent and ability to hold the security for a period of time sufficient for recovery of fair value. Where we lack that intent or ability, the equity security's decline in fair value is deemed to be other-than-temporary. If losses are considered to be other-than-temporary, the cost basis of the security is written down to fair value and the write down is reflected in Investment and other income, net in the Consolidated Statement of Income.
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Finance Receivables | Finance Receivables
Our finance receivables consist of retail loan, commercial and dealer products portfolio segments. Finance receivables recorded on our balance sheet are comprised of the unpaid principal balance, plus accrued interest and deferred fees and costs, net of the allowance for credit losses and deferred income. Direct finance leases are recorded on our balance sheet as the aggregate future minimum lease payments, contractual residual value of the leased vehicle or industrial equipment, and deferred income.
Impaired Receivables
A receivable account balance is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the terms of the contract. Factors such as payment history, compliance with terms and conditions of the underlying loan agreement and other subjective factors related to the financial stability of the borrower are considered when determining whether a loan is impaired.
Troubled Debt Restructurings
A troubled debt restructuring occurs when an account is modified through a concession to a borrower experiencing financial difficulty. An account modified under a troubled debt restructuring is considered to be impaired. In addition, troubled debt restructurings include accounts for which the customer has filed for bankruptcy protection. For such accounts, we no longer have the ability to modify the terms of the agreement without the approval of the bankruptcy court and the court may impose term modifications that we are obligated to accept.
Payment Defaults
A payment default on an account that has been modified as a troubled debt restructuring is deemed to have occurred when the account becomes thirty days past due. Accounts for which the debtor has filed for bankruptcy protection are not considered to have a payment default as we are prohibited from applying our normal collection procedures. Nonaccrual Policy
Dealer Products Portfolio Segment
Impaired receivables in the dealer product portfolio segment are placed on nonaccrual status if full payment of principal or interest is in doubt, or when principal or interest is 90 days or more past due. Interest accrued, but not collected at the date a receivable is placed on nonaccrual status, is reversed against interest income. In addition, the amortization of net deferred fees is suspended. Interest income on nonaccrual receivables is recognized only to the extent it is received in cash. Accounts are restored to accrual status only when interest and principal payments are brought current and future payments are reasonably assured. Receivable balances are charged off against the allowance for credit losses when the loss has been realized. Retail Loan and Commercial Portfolio Segments
Receivables within the retail loan and commercial portfolio segments are not placed on nonaccrual status when principal or interest is 90 days or more past due. Rather, these receivables are charged off against the allowance for credit losses when payments due are no longer expected to be received or the account is 120 days contractually delinquent, whichever occurs first.
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Investments in Operating Leases | Investments in Operating Leases
We record our investments in operating leases at acquisition cost, net of deferred fees and costs, deferred income, accumulated depreciation and the allowance for credit losses.
Nonaccrual Policy
Investments in operating leases are not placed on nonaccrual status. Rather, these accounts are charged off when payments due are no longer expected to be received or the account is 120 days contractually delinquent, whichever occurs first.
Determination of Residual Value
Substantially all of our residual value risk relates to our vehicle lease portfolio. Residual values of lease earning assets are estimated at lease inception by examining external industry data, the anticipated Toyota, Lexus and Scion product pipeline and our own experience. Factors considered in this evaluation include, but are not limited to, local, regional and national economic forecasts, new vehicle pricing, new vehicle incentive programs, new vehicle sales, future plans for new Toyota, Lexus and Scion product introductions, competitor actions and behavior, product attributes of popular vehicles, the mix of used vehicle supply, the level of current used vehicle values, buying and leasing behavior trends, and fuel prices. We use various channels to sell vehicles returned at lease end.
On a quarterly basis, we review the estimated end-of-term market values of leased vehicles to assess the appropriateness of the carrying values at lease end. To the extent the estimated end-of-term market value of a leased vehicle is lower than the residual value established at lease inception, the residual value of the leased vehicle is adjusted downward so that the carrying value at lease end will approximate the estimated end-of-term market value. Factors affecting the estimated end-of-term market value are similar to those considered in the evaluation of residual values at lease inception discussed above. These factors are evaluated in the context of their historical trends to anticipate potential future changes in the relationship among these factors. For operating leases, adjustments are made prospectively on a straight-line basis over the remaining terms of the leases and are included in depreciation on operating leases in the Consolidated Statement of Income. For direct finance leases, adjustments are made at the time of assessment and are recorded as a reduction of direct finance lease revenues which is included under our retail revenues in the Consolidated Statement of Income.
We review our investments in operating leases for impairment whenever events or changes in circumstances indicate that the carrying value of the operating leases may not be recoverable. If such events or changes in circumstances are present, we perform a test for recoverability by comparing the expected undiscounted future cash flows (including expected residual values) over the remaining lease terms to the carrying value of the asset group. If the test for recoverability identifies a possible impairment, the asset group's fair value is measured in accordance with the fair value measurement framework. An impairment charge is recognized for the amount by which the carrying value of the asset group exceeds its estimated fair value and is recorded in the current period Consolidated Statement of Income.
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Used Vehicles Held for Sale | Used Vehicles Held for Sale
Used vehicles held for sale consist of off-lease vehicles and repossessed vehicles. Off-lease vehicles are recorded at the lower of cost, determined based on the contractual lease value, or market, using recent sales values. Repossessed vehicles are recorded at market, based on the same method used to estimate the residual value for off-lease vehicles.
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Debt Issuance Costs | Debt Issuance Costs
Costs that are direct and incremental to debt issuance are capitalized and amortized to interest expense on a level yield basis over the contractual term of the debt. All other costs related to debt issuance are expensed as incurred.
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Fair Value Measurement - Definition and Hierarchy | Fair Value Measurements
Some of our assets and liabilities are measured at fair value on a recurring basis including our cash equivalents, investments in marketable securities and derivatives. Certain other financial assets and liabilities are measured at fair value on a nonrecurring basis based on specific circumstances such as impairment. Finance receivables and debt are not presented in our financial statements at fair value, but their estimated fair value is included for disclosure purposes, as well as the methods and significant assumptions used to estimate their fair value.
Definition and Hierarchy
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If quoted prices in an active market are available, fair value is determined by reference to these prices. If listed prices or quotations are not available, fair value is determined by valuation models that primarily use, as inputs, market-based or independently sourced parameters, including but not limited to interest rates, volatilities, foreign exchange rates and credit curves. Additionally, we may reference prices for similar instruments, quoted prices or recent transactions in less active markets. We use prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the availability of prices and inputs may be reduced for certain financial instruments. This condition could result in a financial instrument being reclassified from Level 1 to Level 2 or from Level 2 to Level 3.
Level 1: Quoted (unadjusted) prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2: Quoted prices in active markets for similar assets and liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3: Unobservable inputs that are supported by little or no market activity may require significant judgment in order to determine the fair value of the assets and liabilities. Note 1 – Summary of Significant Accounting Policies (Continued)
The use of observable and unobservable inputs is reflected in the fair value hierarchy assessment disclosed in the tables within this document. The availability of observable inputs can vary based upon the financial instrument and other factors, such as instrument type, market liquidity and other specific characteristics particular to the financial instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires additional judgment by management. The degree of management's judgment can result in financial instruments being classified as or transferred to the Level 3 category.
Valuation Methods
We maintain policies and procedures to value instruments using the best and most relevant data available. The Treasury Risk and Analytics Group (“TR&A”) is responsible for determining the fair value of our financial instruments. TR&A consists of quantitative analysts and risk and accounting professionals. Using benchmarking techniques, TR&A reviews our valuation pricing models at least annually to assess their ongoing propriety. As markets and products develop and the pricing for certain products becomes more or less transparent, TR&A refines its valuation methodologies. TR&A reviews the appropriateness of fair value measurements including validation processes, key model inputs, and the reconciliation of period-over-period fluctuations based on changes in key market inputs. Where possible, valuations, including both internally and externally obtained transaction prices, are validated against independent valuation sources. Our Fair Value Working Group (“FVWG”) reviews and approves the fair value measurement results and other relevant data quarterly. The FVWG consists of a cross-section of internal stakeholders who are knowledgeable in the area of financial valuations. All changes to our valuation methodologies are reviewed and approved by the FVWG.
We conduct reviews of our primary pricing vendors to understand and assess the reasonableness of inputs used in their pricing process. While we do not have access to our vendors' proprietary models, we perform detailed reviews of the pricing process, methodologies and control procedures for each asset class for which prices are provided. Our reviews include examination of the underlying inputs and assumptions for a sample of individual securities selected based on the nature and complexity of the securities. In addition, our pricing vendors have established processes in place for all valuations, which facilitates identification and resolution of potentially erroneous prices. We believe that the prices received from our pricing vendors are representative of prices that would be received to sell the assets or paid to transfer the liabilities at the measurement date and are classified appropriately in the hierarchy.
Note 1 – Summary of Significant Accounting Policies (Continued)
Valuation Adjustments
We may make valuation adjustments to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, our own creditworthiness, as well as constraints due to market illiquidity or unobservable parameters.
Counterparty Credit Valuation Adjustments – Adjustments are required when the market price (or parameter) is not indicative of the credit quality of the counterparty.
Non-Performance Credit Valuation Adjustments – Adjustments reflect our own non-performance risk when our liabilities are measured at fair value.
Liquidity Valuation Adjustments – Adjustments are necessary when we are unable to observe prices for a financial instrument due to market illiquidity.
Recurring Fair Value Measurements
This section describes the valuation methodologies, key inputs and significant assumptions for financial instruments measured at fair value.
Cash Equivalents
Cash equivalents include money market instruments, commercial paper and certificates of deposits, which represent highly liquid investments with maturities of three months or less at purchase. Where money market funds produce a daily net asset value in an active market, we use this value to determine the fair value of the fund investment and classify the investment in Level 1 of the fair value hierarchy. All other types of cash equivalents are classified in Level 2 of the fair value hierarchy.
Investments in Marketable Securities
The marketable securities portfolio consists of debt and equity securities. We estimate the value of our debt securities using observed transaction prices, independent pricing vendors, and internal pricing models.
Pricing methodologies and inputs to valuation models used by the pricing vendors depend on the security type. Where possible, quoted prices in active markets for identical securities are used to determine the fair value of the investment securities; these securities are classified in Level 1 of the fair value hierarchy. Where quotes in active markets are not available, the pricing vendor uses various pricing models for each asset class that are consistent with what market participants use. The inputs and assumptions to the models of the pricing vendors are derived from market observable sources including: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and other market-related data. Since many fixed income securities do not trade on a daily basis, the pricing vendors use applicable available information, such as benchmark curves, benchmarking of similar securities, sector groupings, and matrix pricing. These investments are classified in Level 2 of the fair value hierarchy. Our pricing vendors may provide us with valuations that are based on significant unobservable inputs; in such circumstances, we classify these investments in Level 3 of the fair value hierarchy. Valuations obtained from third party pricing vendors are validated to assess their reasonableness.
Note 1 – Summary of Significant Accounting Policies (Continued)
We hold investments in actively traded open-end equity mutual funds and private placement fixed income mutual funds. Where the funds produce a daily net asset value that is quoted in an active market, we use this value to determine the fair value of the fund investment and classify the investment in Level 1 of the fair value hierarchy. Where the funds produce a daily net asset value that is not quoted in an active market, we estimate the fair value of the investment using the net asset value per share. We classify such funds in Level 2 of the fair value hierarchy as we have the ability to redeem our investment at the net asset value per share at the balance sheet date.
Derivatives
As part of our risk management strategy, we enter into derivative transactions to mitigate our interest rate and foreign currency exposures. These derivative transactions are considered over-the-counter for valuation purposes. All of our derivative counterparties to which we had credit exposure at March 31, 2013 were assigned investment grade ratings by a credit rating organization.
We estimate the fair value of our derivatives using industry standard valuation models that require observable market inputs, including market prices, yield curves, credit curves, interest rates, foreign exchange rates, volatilities and the contractual terms of the derivative instruments. For derivatives that trade in liquid markets, model inputs can generally be verified and do not require significant management judgment. These derivative instruments are classified in Level 2 of the fair value hierarchy.
Certain other derivative transactions trade in less liquid markets with limited pricing information. For such derivatives, key inputs to the valuation process include quotes from counterparties and other market data used to corroborate and adjust values where appropriate. Other market data includes values obtained from a market participant that serves as a third party pricing vendor. Inputs obtained from counterparties and third party pricing vendors are internally validated using valuation models to assess the reasonableness of changes in factors such as market prices, yield curves, credit curves, interest rates, foreign exchange rates and volatilities. These derivative instruments are classified in Level 3 of the fair value hierarchy.
Our derivative fair value measurements consider assumptions about counterparty credit risk and our own non-performance risk. We consider counterparty credit risk and our own non-performance risk through credit valuation adjustments. In situations in which our net position with a derivative counterparty is an asset, the counterparty credit valuation adjustment calculation uses the credit default probabilities of our derivative counterparties over a particular time period. In situations in which our net position with a derivative counterparty is a liability, we use our own credit default probability to calculate the required non-performance credit valuation adjustment. We use a relative fair value approach to allocate the credit valuation adjustments to our derivatives portfolio.
Note 1 – Summary of Significant Accounting Policies (Continued)
Nonrecurring Fair Value Measurements
Impaired Finance Receivables
For finance receivables within the dealer products portfolio segment for which there is evidence of impairment, we may measure impairment based on discounted cash flows, the loan's observable market price or the fair value of the underlying collateral if the loan is collateral dependent. The fair values of impaired finance receivables are reported at fair value on a nonrecurring basis. The methods used to estimate the fair value of the underlying collateral depends on the specific class of finance receivable. For finance receivables within the wholesale class of finance receivables, the collateral value is generally based on wholesale market value or liquidation value for new and used vehicles. For finance receivables within the real estate class of finance receivables, the collateral value is generally based on appraisals. For finance receivables within the working capital class of finance receivables, the collateral value is generally based on the expected liquidation value of the underlying dealership assets. Adjustments may be performed in circumstances where market comparables are not specific to the attributes of the specific collateral or appraisal information may not be reflective of current market conditions due to the passage of time and the occurrence of market events since receipt of the information. As these valuations utilize unobservable inputs, our impaired finance receivables are classified in Level 3 of the fair value hierarchy.
Financial Instruments Not Carried at Fair Value
Finance Receivables
Our finance receivables consist of retail loans, comprised of retail loan contracts and commercial loan contracts, and dealer loans, comprised of wholesale, real estate and working capital financing. Retail loans are primarily valued using a securitization model that incorporates expected cash flows. Cash flows expected to be collected are estimated using contractual principal and interest payments adjusted for specific factors, such as prepayments, default rates, loss severity, credit scores, and collateral type. The securitization model utilizes quoted secondary market rates if available, or estimated market rates that incorporate management's best estimate of investor assumptions about the portfolio. Dealer loans are valued using a discounted cash flow model. Discount rates are derived based on market rates for equivalent portfolio bond ratings. As these valuations utilize unobservable inputs, our finance receivables are classified in Level 3 of the fair value hierarchy.
Commercial Paper
The carrying value of commercial paper issued is assumed to approximate fair value due to its short duration and generally negligible credit risk. We validate this assumption by recalculating the fair value of our commercial paper using quoted market rates. Commercial paper is classified in Level 2 of the fair value hierarchy.
Unsecured Notes and Loans Payable
Unsecured notes and loans payable are primarily valued using current market rates and credit spreads for debt with similar maturities. Our valuation models utilize observable inputs and standard industry curves; therefore, we classify these unsecured notes and loans payables in Level 2 of the fair value hierarchy. Where it is not possible to value the debt, we use quoted market prices where available to estimate the fair value of unsecured notes and loans payable. These unsecured notes and loans payable are classified in Level 3 of the fair value hierarchy since the market for these instruments is not active. In a limited number of instances, where it is not possible to value the debt instrument and quoted market prices are unavailable, we estimate the fair value of unsecured notes and loan payable using quotes from counterparties or a third party pricing vendor. We review the appropriateness of these fair value measurements by assessing the reasonableness of period over period fluctuations. These valuations utilize unobservable inputs; therefore, we classify these unsecured notes and loans payables in Level 3 of the fair value hierarchy.
Secured Notes and Loans Payable
Fair value is estimated based on current market rates and credit spreads for debt with similar maturities. We also use internal assumptions, including prepayment speeds and expected credit losses on the underlying securitized assets, to estimate the timing of cash flows to be paid on these instruments. As these valuations utilize unobservable inputs, our secured notes and loans payables are classified in Level 3 of the fair value hierarchy.
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Derivative Instruments | Derivative Instruments
All derivative instruments are recorded on the balance sheet at fair value, taking into consideration the effects of legally enforceable master netting agreements that allow us to net settle asset and liability positions and offset cash collateral held with the same counterparty on a net basis. Changes in the fair value of derivatives are recorded in interest expense in the Consolidated Statement of Income.
We categorize derivatives as those designated for hedge accounting (“hedge accounting derivatives”) and those that are not designated for hedge accounting (“non-hedge accounting derivatives”). At the inception of a derivative contract, we may elect to designate a derivative as a hedge accounting derivative if certain criteria are met.
In order to qualify for hedge accounting, a derivative must be considered highly effective at reducing the risk associated with the exposure being hedged. When we designate a derivative in a hedging relationship, we contemporaneously document the risk management objective and strategy. This documentation includes the identification of the hedging instrument, the hedged item and the risk exposure, how we will assess effectiveness prospectively and retrospectively, and how often we will carry out this assessment.
We use the “long-haul” method of assessing effectiveness for our fair value hedges, except for certain types of existing hedge relationships that meet stringent criteria where we apply the shortcut method. The shortcut method provides an assumption of zero ineffectiveness that results in equal and offsetting changes in fair value in the Consolidated Statement of Income for both the hedged debt and the hedge accounting derivative. When the shortcut method is not applied, any ineffective portion of the derivative that is designated as a fair value hedge is recognized as a component of interest expense in the Consolidated Statement of Income. We recognize changes in the fair value of derivatives designated in fair value hedging relationships (including foreign currency fair value hedging relationships) in interest expense in the Consolidated Statement of Income along with the fair value changes of the related hedged item. If we elect not to designate a derivative instrument in a hedging relationship, or the relationship does not qualify for hedge accounting treatment, the full change in the fair value of the derivative instrument is recognized as a component of interest expense in the Consolidated Statement of Income with no offsetting adjustment for the economically hedged item.
We review the effectiveness of our hedging relationships at least quarterly to determine whether the relationships have been and continue to be effective. We use regression analysis to assess the effectiveness of our hedges. When we determine that a hedging relationship is not or has not been effective, hedge accounting is no longer applied. If hedge accounting is discontinued, we continue to carry the derivative instrument as a component of other assets or other liabilities in the Consolidated Balance Sheet at fair value, with changes in fair value reported in interest expense in the Consolidated Statement of Income. Additionally, for discontinued fair value hedges, we cease to adjust the hedged item for changes in fair value and amortize the cumulative fair value adjustments recognized in prior periods over the remaining term of the hedged item.
We will also discontinue the use of hedge accounting if a derivative is sold, terminated, or if management determines that designating a derivative under hedge accounting is no longer deemed appropriate based on current investment strategy (“de-designated derivatives”). De-designated derivatives are included within the category of non-hedge accounting derivatives.
We also issue debt which is considered a “hybrid financial instrument”. These debt instruments are assessed to determine whether they contain embedded derivatives requiring separate reporting and accounting. The embedded derivative may be bifurcated and recorded on the balance sheet at fair value or the entire financial instrument may be recorded at fair value. Changes in the fair value of the bifurcated embedded derivative or the entire hybrid financial instrument are reported in interest expense in the Consolidated Statement of Income.
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Foreign Currency Transactions | Foreign Currency Transactions
Certain transactions we have entered into related to debt are denominated in foreign currencies. If the debt is not in a designated hedge accounting relationship, the debt is translated into U.S. dollars using the applicable exchange rate at the transaction date and retranslated at each balance sheet date using the exchange rate in effect at that date. Gains and losses related to foreign currency transactions are included in interest expense in the Consolidated Statement of Income. Payments on debt in the Consolidated Statement of Cash Flows include repayment of principal and the net amount of exchange of notional on currency swaps that economically hedge these transactions. Proceeds from issuance of debt in the Consolidated Statement of Cash Flows include both the proceeds from the initial issuance of debt and the net amount of exchange of notional on currency swaps that economically hedge these transactions.
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Reinsurance | Risk Transfer
Our insurance operations transfers certain risks to protect us against the impact of unpredictable high severity losses. The amounts recoverable from reinsurers and other companies that assume liabilities relating to our insurance operations are estimated in a manner consistent with the related reinsurance or risk transfer agreement. Amounts recoverable from reinsurers and other companies on unpaid losses are recorded as a receivable but are not collectible until the losses are paid. Revenues related to risks transferred are recognized on the same basis as the related revenues from the underlying agreements. Covered losses are recorded as a reduction to insurance losses and loss adjustment expenses.
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Income Taxes | Income Taxes
We use the liability method of accounting for income taxes under which deferred tax assets and liabilities are adjusted to reflect changes in tax rates and laws in the period such changes are enacted resulting in adjustments to the current fiscal year's provision for income taxes.
TMCC files a consolidated federal income tax return with its subsidiaries and TFSA. TMCC files either separate or consolidated/combined state income tax returns with Toyota Motor North America (“TMA”), TFSA, or subsidiaries of TMCC. State income tax expense is generally recognized as if TMCC and its subsidiaries filed their tax returns on a stand-alone basis. In those states where TMCC and its subsidiaries join in the filing of consolidated or combined income tax returns, TMCC and its subsidiaries are allocated their share of the total income tax expense based on combined allocation/apportionment factors and separate company income or loss. Based on the state tax sharing agreement with TMA, TMCC and its subsidiaries pay for their share of the combined income tax expense and are reimbursed for the benefit of any of their tax losses utilized in the combined state income tax returns.
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New Accounting Guidance | New Accounting Guidance
In February 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for certain obligations addressed within existing guidance in U.S. GAAP. Specifically, the new guidance requires an entity to measure these obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. Additionally, the guidance requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations within the footnotes to its financial statements. Currently no such recognition, measurement, and disclosure requirement exists under U.S. GAAP. The accounting guidance is effective for us for fiscal 2014. We are evaluating the effect that adoption of this guidance will have on our consolidated financial statements.
In February 2013, the FASB issued additional guidance on the presentation of items reclassified out of accumulated other comprehensive income. The standard does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the guidance does require an entity to provide enhanced disclosures to present separately by component reclassifications out of accumulated other comprehensive income. The accounting guidance is effective for us for fiscal 2014. The adoption of this guidance will not have a material impact on our consolidated financial statements. Note 1 – Summary of Significant Accounting Policies (Continued)
In December 2011, the FASB issued accounting guidance on the disclosure about offsetting assets and liabilities. The disclosure requirements of this guidance are intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a company's financial position. Offsetting, otherwise known as netting, is the presentation of assets and liabilities as a single net amount in the balance sheet. The guidance retains the current U.S. GAAP model that allows companies the option to present net in their balance sheets derivatives that are subject to a legally enforceable netting arrangement with the same party, where rights of set-off are available, including in the event of default or bankruptcy. However, the guidance adds new disclosure requirements to improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral pledged or received. In January 2013, the FASB further clarified that the scope of this guidance applies only to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. The accounting guidance is effective for us on April 1, 2013. The adoption of this guidance will not have a material impact on our consolidated financial statements. |
Recently Adopted Accounting Guidance | Recently Adopted Accounting Guidance
In April 2012, we adopted new FASB accounting guidance which requires entities to report components of comprehensive income in either a single continuous statement of comprehensive income or two separate but consecutive statements. We have elected to present comprehensive income in two separate but consecutive statements. The application of this guidance primarily affected the presentation of our consolidated financial statements.
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Selected Quarterly Financial Data (Unaudited)
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Data (Unaudited) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Data (Unaudited) |
Other income is comprised of insurance earned premiums and contract revenues as well as net investment and other income. Expenses include operating and administrative expenses as well as insurance losses and loss adjustment expenses. |
Financial Instruments (USD $)
In Millions, unless otherwise specified |
Mar. 31, 2013
|
Mar. 31, 2012
|
---|---|---|
Other Quantitative Information | ||
Finance receivables from related party | $ 40 | $ 36 |
Receivables from direct finance leases | 235 | 213 |
Loans payable to affiliate | 0 | 2,201 |
Carrying value [Member]
|
||
Financial liabilities | ||
Commercial paper | 24,590 | 21,247 |
Unsecured notes and loans payable | 47,233 | 42,198 |
Secured notes and loans payable | 7,009 | 9,789 |
Carrying value [Member] | Retail Loan [Member]
|
||
Financial assests | ||
Finance receivables, net | 47,312 | 44,941 |
Carrying value [Member] | Commercial [Member]
|
||
Financial assests | ||
Finance receivables, net | 134 | 141 |
Carrying value [Member] | Wholesale [Member]
|
||
Financial assests | ||
Finance receivables, net | 8,620 | 6,951 |
Carrying value [Member] | Real estate [Member]
|
||
Financial assests | ||
Finance receivables, net | 4,531 | 4,280 |
Carrying value [Member] | Working capital [Member]
|
||
Financial assests | ||
Finance receivables, net | 1,695 | 1,480 |
Fair value [Member]
|
||
Financial liabilities | ||
Commercial paper | 24,590 | 21,247 |
Unsecured notes and loans payable | 48,775 | 43,302 |
Secured notes and loans payable | 7,016 | 9,810 |
Fair value [Member] | Retail Loan [Member]
|
||
Financial assests | ||
Finance receivables, net | 48,313 | 46,609 |
Fair value [Member] | Commercial [Member]
|
||
Financial assests | ||
Finance receivables, net | 126 | 148 |
Fair value [Member] | Wholesale [Member]
|
||
Financial assests | ||
Finance receivables, net | 8,644 | 6,950 |
Fair value [Member] | Real estate [Member]
|
||
Financial assests | ||
Finance receivables, net | 4,480 | 4,204 |
Fair value [Member] | Working capital [Member]
|
||
Financial assests | ||
Finance receivables, net | 1,708 | 1,458 |
Fair value [Member] | Level 1 [Member]
|
||
Financial liabilities | ||
Commercial paper | 0 | 0 |
Unsecured notes and loans payable | 0 | 0 |
Secured notes and loans payable | 0 | 0 |
Fair value [Member] | Level 1 [Member] | Retail Loan [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 1 [Member] | Commercial [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 1 [Member] | Wholesale [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 1 [Member] | Real estate [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 1 [Member] | Working capital [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 2 [Member]
|
||
Financial liabilities | ||
Commercial paper | 24,590 | 21,247 |
Unsecured notes and loans payable | 47,901 | 36,764 |
Secured notes and loans payable | 0 | 0 |
Fair value [Member] | Level 2 [Member] | Retail Loan [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 2 [Member] | Commercial [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 2 [Member] | Wholesale [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 2 [Member] | Real estate [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 2 [Member] | Working capital [Member]
|
||
Financial assests | ||
Finance receivables, net | 0 | 0 |
Fair value [Member] | Level 3 [Member]
|
||
Financial liabilities | ||
Commercial paper | 0 | 0 |
Unsecured notes and loans payable | 874 | 6,538 |
Secured notes and loans payable | 7,016 | 9,810 |
Fair value [Member] | Level 3 [Member] | Retail Loan [Member]
|
||
Financial assests | ||
Finance receivables, net | 48,313 | 46,609 |
Fair value [Member] | Level 3 [Member] | Commercial [Member]
|
||
Financial assests | ||
Finance receivables, net | 126 | 148 |
Fair value [Member] | Level 3 [Member] | Wholesale [Member]
|
||
Financial assests | ||
Finance receivables, net | 8,644 | 6,950 |
Fair value [Member] | Level 3 [Member] | Real estate [Member]
|
||
Financial assests | ||
Finance receivables, net | 4,480 | 4,204 |
Fair value [Member] | Level 3 [Member] | Working capital [Member]
|
||
Financial assests | ||
Finance receivables, net | $ 1,708 | $ 1,458 |
Other Assets and Other Liabilities (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
|
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Other Assets And Other Liabilties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets and Other Liabilities |
|
Segment Information (Tables)
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment |
|
Investments in Marketable Securities (Realized Gains and Losses On AFS) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2011
|
|
Realized gains and losses on sales of available-for-sale securities | |||
Realized gains on sales | $ 23 | $ 16 | $ 70 |
Realized losses on sales | $ 2 | $ 41 | $ 23 |
Investments in Operating Leases, Net (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Operating Leases, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Operating Leases, Net |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future Minimum Lease Rentals on Operating Leases |
|
Debt (Maturities) (Details) (USD $)
|
12 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2011
|
|
Other debt due in the fiscal years ending: | |||
2014 | $ 40,709,000,000 | ||
2015 | 9,427,000,000 | ||
2016 | 10,739,000,000 | ||
2017 | 4,608,000,000 | ||
2018 | 7,197,000,000 | ||
Thereafter | 6,152,000,000 | ||
Total debt | 78,832,000,000 | 73,234,000,000 | |
Interest payments | $ 1,300,000,000 | $ 1,600,000,000 | $ 1,700,000,000 |
Commitments and Contingencies (Details) (USD $)
|
12 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2011
|
|
Commitment: | |||
Credit facilities with vehicle and industrial equipment dealers | $ 7,396,000,000 | $ 6,804,000,000 | |
Less: Funded commitments | 6,290,000,000 | 5,758,000,000 | |
Unfunded commitments | 1,106,000,000 | 1,046,000,000 | |
Minimum lease commitments | 74,000,000 | 81,000,000 | |
Total unfunded commitments | 1,180,000,000 | 1,127,000,000 | |
Guarantor Obligations [Line Items] | |||
Total commitments and guarantees | 1,280,000,000 | 1,227,000,000 | |
Wholesale financing demand note facilities | 11,475,000,000 | 10,258,000,000 | |
Less: Funded facilites | 8,284,000,000 | 6,616,000,000 | |
Unfunded wholesale financing demand note facilities | 3,191,000,000 | 3,642,000,000 | |
Future minimum lease payments under non-cancelable operating leases | |||
2014 | 19,000,000 | ||
2015 | 18,000,000 | ||
2016 | 16,000,000 | ||
2017 | 11,000,000 | ||
2018 | 7,000,000 | ||
Thereafter | 3,000,000 | ||
Total | 74,000,000 | 81,000,000 | |
Facility lease commitments with affiliate | 37,000,000 | 44,000,000 | |
Rental expense payments to affiliates | 22,000,000 | 23,000,000 | 23,000,000 |
Unsecured lending commitment percentage | 2.00% | ||
Affiliate Pollution Control and Solid Waste Disposal Bonds [Member]
|
|||
Guarantor Obligations [Line Items] | |||
Guaranteed Bond Obligations | 100,000,000 | 100,000,000 | |
Guaranty Fee | 78,000 | ||
Affiliate Pollution Control and Solid Waste Disposal Bonds [Member] | 2028 [Member]
|
|||
Guarantor Obligations [Line Items] | |||
Guaranteed Bond Obligations | 20,000,000 | ||
Affiliate Pollution Control and Solid Waste Disposal Bonds [Member] | 2029 [Member]
|
|||
Guarantor Obligations [Line Items] | |||
Guaranteed Bond Obligations | 50,000,000 | ||
Affiliate Pollution Control and Solid Waste Disposal Bonds [Member] | 2030 [Member]
|
|||
Guarantor Obligations [Line Items] | |||
Guaranteed Bond Obligations | 10,000,000 | ||
Affiliate Pollution Control and Solid Waste Disposal Bonds [Member] | 2031 [Member]
|
|||
Guarantor Obligations [Line Items] | |||
Guaranteed Bond Obligations | 10,000,000 | ||
Affiliate Pollution Control and Solid Waste Disposal Bonds [Member] | 2032 [Member]
|
|||
Guarantor Obligations [Line Items] | |||
Guaranteed Bond Obligations | $ 10,000,000 |
Debt (Details) (USD $)
|
12 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|
Debt Instrument [Line Items] | ||
Debt | $ 78,832,000,000 | $ 73,234,000,000 |
Weighted average contractual interest rate | 1.43% | 1.70% |
Increase (decrease) in carrying value adjustment on debt | (257,000,000) | |
Debt maturity dates | As of March 31, 2013, our notes and loans payable mature on various dates through fiscal 2047. | |
Commercial paper [Member]
|
||
Debt Instrument [Line Items] | ||
Debt | 24,590,000,000 | 21,247,000,000 |
Weighted average contractual interest rate | 0.24% | 0.38% |
Commercial paper average remaining maturity | As of March 31, 2013, our commercial paper had a weighted average remaining maturity of 84 days. | |
Unsecured notes and loans payable [Member]
|
||
Debt Instrument [Line Items] | ||
Debt | 46,707,000,000 | 41,415,000,000 |
Weighted average contractual interest rate | 2.19% | 2.63% |
Debt denominated in foreign currency | 13,200,000,000 | 15,800,000,000 |
Unsecured notes and loans payable [Member] | Floating rate [Member]
|
||
Debt Instrument [Line Items] | ||
Debt | 16,800,000,000 | 16,700,000,000 |
Contractual interest rate, minimum | 0.00% | 0.00% |
Contractual interest rate, maximum | 6.00% | 6.00% |
Unsecured notes and loans payable [Member] | Fixed rate [Member]
|
||
Debt Instrument [Line Items] | ||
Debt | 30,400,000,000 | 25,500,000,000 |
Contractual interest rate, minimum | 0.50% | 0.50% |
Contractual interest rate, maximum | 9.40% | 9.40% |
Secured notes and loans payable [Member]
|
||
Debt Instrument [Line Items] | ||
Debt | 7,009,000,000 | 9,789,000,000 |
Weighted average contractual interest rate | 0.60% | 0.67% |
Secured notes and loans payable [Member] | Floating rate [Member]
|
||
Debt Instrument [Line Items] | ||
Contractual interest rate, minimum | 0.40% | 0.50% |
Contractual interest rate, maximum | 1.90% | 1.90% |
Secured notes and loans payable [Member] | Fixed rate [Member]
|
||
Debt Instrument [Line Items] | ||
Contractual interest rate, minimum | 0.40% | 0.50% |
Contractual interest rate, maximum | 1.90% | 1.90% |
Carrying value adjustment [Member]
|
||
Debt Instrument [Line Items] | ||
Debt | $ 526,000,000 | $ 783,000,000 |
Segment Information
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Note 16 – Segment Information
Our reportable segments include finance and insurance operations. Finance operations include retail installment sales, leasing, and dealer financing provided to authorized vehicle and industrial equipment dealers and their customers in the U.S. and Puerto Rico. Insurance operations are performed by TMIS and its subsidiaries. The principal activities of TMIS include marketing, underwriting, and claims administration related to covering certain risks of vehicle dealers and their customers in the U.S. The finance and insurance operations segment information presented below includes allocated corporate expenses for the respective segments. The accounting policies of the operating segments are the same as those described in Note 1 – Summary of Significant Accounting Policies.
Financial information for our reportable operating segments for the years ended or at March 31 is summarized as follows:
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Consolidated Balance Sheet (Supplemental) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||||
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Mar. 31, 2013
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Mar. 31, 2012
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Statement of Financial Position [Abstract] | |||||
Variable Interest Entities Assets Liabilities | The following table presents the assets and liabilities of our consolidated variable interest entities. The assets of any variable interest entity can only be used to settle obligations of that respective variable interest entity, and the creditors (or beneficial interest holders) do not have recourse to us or to our other assets. These assets and liabilities are included in the consolidated balance sheet above. | ||||
ASSETS | |||||
Finance receivables, net | $ 62,567 | $ 58,042 | |||
Investments in operating leases, net | 20,384 | 18,743 | |||
Other Assets | 1,740 | 1,727 | |||
Total assets | 95,302 | 88,913 | |||
LIABILITIES | |||||
Debt | 78,832 | 73,234 | |||
Other liabilities | 2,677 | 2,605 | |||
Total liabilities | 87,745 | 81,251 | |||
Variable Interest Entity, Primary Beneficiary [Member]
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ASSETS | |||||
Finance receivables, net | 7,556 | 10,527 | [1] | ||
Investments in operating leases, net | 434 | 0 | [1] | ||
Other Assets | 12 | 3 | [1] | ||
Total assets | 8,002 | 10,530 | [1] | ||
LIABILITIES | |||||
Debt | 7,009 | 9,789 | [1] | ||
Other liabilities | 1 | 2 | [1] | ||
Total liabilities | $ 7,010 | $ 9,791 | [1] | ||
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Consolidated Statement of Shareholder's Equity (USD $)
In Millions |
Total
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Capital stock
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Additional paid-in capital
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Accumulated other comprehensive income
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Retained earnings
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Balance at Mar. 31, 2010 | $ 5,273 | $ 915 | $ 1 | $ 104 | $ 4,253 |
Net income | 1,853 | 0 | 0 | 0 | 1,853 |
Other comprehensive income (loss), net of tax | (4) | 0 | 0 | (4) | 0 |
Stock-based compensation | 0 | ||||
Dividends | (266) | 0 | 0 | 0 | (266) |
Balance at Mar. 31, 2011 | 6,856 | 915 | 1 | 100 | 5,840 |
Net income | 1,486 | 0 | 0 | 0 | 1,486 |
Other comprehensive income (loss), net of tax | 60 | 0 | 0 | 60 | 0 |
Stock-based compensation | 1 | 0 | 1 | 0 | 0 |
Dividends | (741) | 0 | 0 | 0 | (741) |
Balance at Mar. 31, 2012 | 7,662 | 915 | 2 | 160 | 6,585 |
Net income | 1,331 | 0 | 0 | 0 | 1,331 |
Other comprehensive income (loss), net of tax | 51 | 0 | 0 | 51 | 0 |
Stock-based compensation | 0 | 0 | 0 | 0 | 0 |
Dividends | (1,487) | 0 | 0 | 0 | (1,487) |
Balance at Mar. 31, 2013 | $ 7,557 | $ 915 | $ 2 | $ 211 | $ 6,429 |
Fair Value Measurements
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Note 2 – Fair Value Measurements
The following table summarizes our financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2013 and March 31, 2012 by level within the fair value hierarchy. Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
In instances in which we meet the accounting guidance for set-off criteria, we elect to net derivative assets and derivative liabilities and the related cash collateral received and paid.
Derivative assets were reduced by a counterparty credit valuation adjustment of $1 million and $3 million as of March 31, 2013 and March 31, 2012, respectively. Derivative liabilities were reduced by a non-performance credit valuation adjustment of less than $1 million as of March 31, 2013 and March 31, 2012.
Note 2 – Fair Value Measurements (Continued)
Transfers between levels of the fair value hierarchy are recognized at the end of their respective reporting periods. During fiscal 2013, $53 million of U.S. government and agency obligations were valued using quoted prices for identical securities traded in an active market and were transferred from Level 2 to Level 1. During fiscal 2012, we transferred $27 million of U.S. government and agency obligations from Level 1 to Level 2 due to the lack of quoted prices for identical securities traded in an active market. Additionally, during fiscal 2013 and fiscal 2012, certain available-for-sale debt instruments were transferred from Level 2 to Level 3 due to reduced transparency of market price quotations for these and/or comparable instruments. Certain derivatives previously categorized as Level 3 in prior periods were valued using observable inputs and were transferred into Level 2 during fiscal 2012.
The following tables summarize the reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs for fiscal 2013 and 2012:
Nonrecurring Fair Value Measurements
Nonrecurring fair value measurements consist of Level 3 net finance receivables that are individually evaluated for impairment. These assets are not measured at fair value on a recurring basis but are subject to fair value adjustments when there is evidence of impairment. For these assets, we record the fair value on a nonrecurring basis and disclose changes in fair value during the reporting period. Total nonrecurring fair value measurements of $208 million and $166 million were recorded as of March 31, 2013 and March 31, 2012, respectively.
The total change in fair value of financial instruments subject to nonrecurring fair value measurements for which a fair value adjustment has been included in the Consolidated Statement of Income consisted of net gains on net finance receivables within the dealer products portfolio segment of $12 million, $22 million and $24 million for fiscal 2013, 2012 and 2011, respectively. Note 2 – Fair Value Measurements (Continued)
Level 3 Fair Value Measurements at March 31, 2013
At March 31, 2013, our Level 3 financial instruments subject to recurring fair value measurement consisted of available-for-sale securities of $73 million, derivative assets of $75 million and derivative liabilities of $20 million. At March 31, 2012, our Level 3 financial instruments subject to recurring fair value measurement consisted of available-for-sale securities of $21 million, derivative assets of $92 million and derivative liabilities of $34 million. The fair value measurements of Level 3 financial assets and liabilities subject to recurring and nonrecurring fair value measurement, and the corresponding change in the fair value measurements of these assets and liabilities, were not significant.
Financial Instruments
The following tables provide information about assets and liabilities not carried at fair value in our Consolidated Balance Sheet:
The carrying value of each class of finance receivables includes deferred fees and costs, net of the allowance for credit losses and deferred income; the amount excludes related party transactions of $40 million and $36 million at March 31, 2013 and March 31, 2012, respectively and direct finance leases of $235 million and $213 million at March 31, 2013 and March 31, 2012, respectively, as these are not subject to fair value reporting requirements.
The carrying value of unsecured notes and loans payable represents the sum of unsecured notes and loans payable and carrying value adjustment as described in Note 9 – Debt. At March 31, 2012, there were loans payable to affiliates of $2.2 billion included in unsecured notes and loans payable carried at amounts that approximate fair value. There were no loans payable to affiliates that were included in unsecured notes and loans payable at March 31, 2013.
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Selected Quarterly Financial Data (Unaudited) (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Selected Quarterly Financial Data (Unaudited) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Data (Unaudited) |
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Fair Value Measurements (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
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Assets and Liabilities Measured on Recurring Basis Using Significant Unobservable Inputs |
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Carrying Value of Certain Financial Instruments |
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Allowance for Credit Losses (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Allowance for Credit Losses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Credit Losses on Finance Receivables and Investments in Operating Leases |
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Allowance for Credit Losses and Finance Receivables by Portfolio Segment |
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Past Due Finance Receivables and Investments in Operating Leases |
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Past Due Finance Receivables by Class |
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Income Tax Provision (Narratives) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2011
|
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Operating Loss Carryforwards [Line Items] | |||
Income Taxes Receivable | $ 13 | $ 23 | |
Deferred Tax Assets, Tax Credit Carryforwards, Federal and State | 58 | 50 | |
Valuation Allowance | 16 | 4 | |
Net Taxes Paid | 21 | (112) | 35 |
Net Income Tax Refunds | 112 | ||
Unrecognized Tax Benefits that Would Impact Effective Tax Rate | 1 | 2 | 2 |
Interest on Income Taxes Accrued, Maximum | 1 | 1 | 1 |
Income Tax Examination Refund | 105 | ||
Unremitted earnings in foreign subsidiary | 171 | ||
Federal [Member]
|
|||
Operating Loss Carryforwards [Line Items] | |||
Operating Loss Carryforwards | 552 | 1,043 | |
Expiration Dates | fiscal 2029 through fiscal 2031 fiscal 2029 through fiscal 2032 | ||
State [Member]
|
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Operating Loss Carryforwards [Line Items] | |||
Operating Loss Carryforwards | 55 | 61 | |
Expiration Dates | fiscal 2014 through fiscal 2032 fiscal 2013 through fiscal 2031 | ||
Income Taxes Receivable | $ 7 | $ 6 |
Income Tax Provision (Tables)
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Income Tax Provision [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for Income Taxes |
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Reconciliation Between U.S. Federal Statutory Tax Rate and Effective Tax Rate |
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Deferred Federal and State Income Tax Liabilities |
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Deferred Tax Liabilities and Assets |
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Change in Unrecognized Tax Benefits |
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Income Tax Provision (Unrecognized Tax Benefits) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Mar. 31, 2011
|
|
Change in Unrecognized Tax Benefits | |||
Balance at beginning of the period | $ 8 | $ 6 | $ 39 |
Increases related to positions taken during the prior years | 0 | 2 | 0 |
Increases related to positions taken during the current year | 1 | 0 | 0 |
Decreases related to positions taken during the prior years | 0 | 0 | 0 |
Decreases related to positions taken during the current year | 0 | 0 | 0 |
Settlements | (2) | 0 | (33) |
Expiration of statute of limitations | 0 | 0 | 0 |
Balance at end of period | $ 7 | $ 8 | $ 6 |
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