-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rGWnSvvgUomTniC7a8QS/j5KfCG4fQPouYUSQs3tsBDh3MUmtMKJKq2op+Ugj5Mo /y00AB46I8QAjuWDTKVlhw== 0000834071-94-000014.txt : 19940214 0000834071-94-000014.hdr.sgml : 19940214 ACCESSION NUMBER: 0000834071-94-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYOTA MOTOR CREDIT CORP CENTRAL INDEX KEY: 0000834071 STANDARD INDUSTRIAL CLASSIFICATION: 6141 IRS NUMBER: 953775816 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-09961 FILM NUMBER: 94506640 BUSINESS ADDRESS: STREET 1: 19001 S WESTERN AVE CITY: TORRANCE STATE: CA ZIP: 90509-2958 BUSINESS PHONE: 3107153700 MAIL ADDRESS: STREET 1: 19001 S WESTERN AVE CITY: TORRANCE STATE: CA ZIP: 90509 10-Q 1 DECEMBER 31, 1993 QUARTERLY REPORT ON FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1993 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission file number 1-9961 ---------- TOYOTA MOTOR CREDIT CORPORATION - --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 95-3775816 - ---------------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 19001 S. Western Avenue Torrance, California 90509 - ---------------------------------------- ----------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (310) 787-1310 ----------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of January 31, 1994, the number of outstanding shares of capital stock, par value $10,000 per share, of the registrant was 68,000, all of which shares were held by Toyota Motor Sales, U.S.A., Inc. Exhibit Index is on page 17 Page 1 of 18 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in Millions)
December 31, September 30, December 31, 1993 1993 1992 ------------ ------------- ------------ (Unaudited) (Unaudited) ASSETS ------ Cash and cash equivalents................. $ 83 $ 574 $ 53 Investments in marketable securities...... 110 138 123 Finance receivables, net.................. 7,468 7,206 7,368 Investments in operating leases, net...... 3,501 3,050 1,963 Other receivables......................... 76 105 71 Deferred charges.......................... 40 44 58 Other assets.............................. 45 42 46 ------- ------- ------ Total Assets..................... $11,323 $11,159 $9,682 ======= ======= ====== LIABILITIES AND SHAREHOLDER'S EQUITY ------------------------------------ Notes and loans payable................... $ 8,848 $ 8,833 $7,703 Accrued interest.......................... 133 148 125 Accounts payable and accrued expenses..... 654 560 367 Unearned insurance premiums............... 72 74 96 Amounts due dealers and distributors...... 31 34 40 Payable to Parent......................... 46 48 24 Income taxes payable...................... 22 17 24 Deferred income taxes..................... 304 278 309 ------- ------- ------ Total liabilities................... 10,110 9,992 8,688 ------- ------- ------ Shareholder's Equity: Capital stock, $l0,000 par value (100,000 shares authorized; issued and outstanding 68,000 at December 31, 1993 and September 30, 1993, and 63,000 at December 31, 1992).................. 680 680 630 Retained earnings...................... 533 487 364 ------- ------- ------ Total shareholder's equity.......... 1,213 1,167 994 ------- ------- ------ Total Liabilities and Shareholder's Equity............. $11,323 $11,159 $9,682 ======= ======= ======
See Accompanying Notes to Consolidated Financial Statements. -2- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STATEMENT OF INCOME (Dollars in Millions)
Three Months Ended December 31, ------------------ 1993 1992 ------ ------ (Unaudited) Financing Revenues: Retail financing and leasing.......... $ 351 $ 282 Wholesale and other dealer financing.. 19 16 ------ ------ Total financing revenues................. 370 298 Interest expense...................... 110 114 Depreciation on operating leases...... 139 76 ------ ------ Net financing revenues................... 121 108 Other revenues........................... 23 14 ------ ------ Net Financing Revenues and Other Revenues 144 122 ------ ------ Expenses: Operating and administrative.......... 54 50 Provision for credit losses........... 14 15 ------ ------ Total Expenses........................... 68 65 ------ ------ Income before income taxes............... 76 57 Provision for income taxes............... 30 22 ------ ------ Net Income............................... $ 46 $ 35 ====== ======
See Accompanying Notes to Consolidated Financial Statements. -3- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Millions)
Three Months Ended December 31, ------------------------------- 1993 1992 -------- -------- (Unaudited) Cash flows from operating activities: Net income...................................... $ 46 $ 35 ------ ------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.............. 140 75 Provision for credit losses................ 14 15 Decrease in accrued interest............... (15) - Increase (decrease) in unearned insurance premiums...................... (2) 1 Increase in deferred income taxes.......... 26 30 Decrease in other assets................... - 16 Increase (decrease) in other liabilities... (3) 49 ------ ------ Total adjustments............................... 160 186 ------ ------ Net cash provided by operating activities.......... 206 221 ------ ------ Cash flows from investing activities: Addition to investments in marketable securities.................................... (45) (79) Disposition of investments in marketable securities.................................... 72 60 Purchase of finance receivables................. (2,490) (2,322) Liquidation of finance receivables.............. 2,221 1,927 Addition to investments in operating leases..... (681) (382) Disposition of investments in operating leases.. 86 39 ------ ------ Net cash used in investing activities.............. (837) (757) ------ ------ Cash flows from financing activities: Proceeds from issuance of notes and loans payable....................................... 259 379 Payments on notes and loans payable............. (622) - Net increase (decrease) in commercial paper..... 463 (40) Net increase in borrowings from Parent.......... 40 39 ------ ------ Net cash provided by financing activities.......... 140 378 ------ ------ Net decrease in cash and cash equivalents.......... (491) (158) Cash and cash equivalents at the beginning of the period................................... 574 211 ------ ------ Cash and cash equivalents at the end of the period.......................................... $ 83 $ 53 ====== ====== Supplemental disclosures: Interest paid................................... $ 124 $ 114 Income taxes paid............................... $ 67 -
See Accompanying Notes to Consolidated Financial Statements. -4- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Interim Financial Data - ------------------------------- Information pertaining to the three months ended December 31, 1993 and 1992 is unaudited. In the opinion of management, the unaudited financial information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The results of operations for the three months ended December 31, 1993 are not necessarily indicative of those expected for any other interim period or a full year. Certain December 1992 accounts have been reclassified to conform with the December 1993 presentation. Note 2 - Finance Receivables - ---------------------------- Finance receivables, net consisted of the following:
December 31, September 30, December 31, 1993 1993 1992 ------------ ------------- ------------ (Dollars in Millions) Retail.................................. $5,173 $5,103 $5,461 Finance leases.......................... 2,000 2,046 1,952 Wholesale and other dealer loans........ 1,219 1,025 1,064 ------ ------ ------ 8,392 8,174 8,477 Unearned income......................... (829) (874) (1,012) Allowance for credit losses............. (95) (94) (97) ------ ------ ------ Finance receivables, net............. $7,468 $7,206 $7,368 ====== ====== ======
Finance leases, net consisted of the following:
December 31, September 30, December 31, 1993 1993 1992 ------------ ------------- ------------ (Dollars in Millions) Minimum lease payments.................. $1,279 $1,337 $1,355 Estimated unguaranteed residual values.. 721 709 597 ------ ------ ------ Finance leases....................... 2,000 2,046 1,952 Unearned income......................... (370) (388) (391) Allowance for credit losses............. (23) (22) (22) ------ ------ ------ Finance leases, net.................. $1,607 $1,636 $1,539 ====== ====== ======
The aggregate balances related to finance receivable instalments 60 or more days past due totaled $30 million, $31 million and $23 million at December 31, 1993, September 30, 1993 and December 31, 1992, respectively. -5- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Investments in Operating Leases - ---------------------------------------- Investments in operating leases, net consisted of the following:
December 31, September 30, December 31, 1993 1993 1992 ------------ ------------- ------------ (Dollars in Millions) Vehicles................................ $4,047 $3,494 $2,172 Equipment, aircraft and other........... 116 107 82 ------ ------ ------ 4,163 3,601 2,254 Accumulated depreciation................ (631) (524) (275) Allowance for credit losses on disposition of operating leases...... (31) (27) (16) ------ ------ ------ Investments in operating leases, net. $3,501 $3,050 $1,963 ====== ====== ======
Note 4 - Notes and Loans Payable - -------------------------------- Notes and loans payable, which consisted of senior debt, included the following:
December 31, September 30, December 31, 1993 1993 1992 ------------ ------------- ------------ (Dollars in Millions) Commercial paper, net................... $ 814 $ 350 $ 350 ------ ------ ------ Other senior debt, due in the years ending September 30,: 1993................................. - - 1,177 1994................................. 2,200 2,847 2,409 1995................................. 3,265 3,112 2,391 1996................................. 1,250 1,185 652 1997................................. 726 735 558 1998................................. 364 367 118 Thereafter........................... 200 202 2 ------ ------ ------ 8,005 8,448 7,307 Unamortized premium..................... 29 35 46 ------ ------ ------ Total other senior debt.............. 8,034 8,483 7,353 ------ ------ ------ Total notes and loans payable..... $8,848 $8,833 $7,703 ====== ====== ======
-6- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Notes and Loans Payable (Continued) - -------------------------------- The weighted average interest rate on other senior debt was 4.81% at December 31, 1993, including the effect of interest rate exchange agreements. This rate has been calculated on the basis of rates in effect at December 31, 1993, some of which are floating rates that reset daily. Approximately 52% of other senior debt at December 31, 1993 had interest rates, including the effect of interest rate exchange agreements, that were fixed for a period of more than one year commencing December 31, 1993. The weighted average of these fixed interest rates was 4.68% at December 31, 1993. The mix of TMCC's fixed and floating rate debt changes from time to time as a result of interest rate risk management. Included in Notes and Loans Payable at December 31, 1993 were unsecured notes payable in various foreign currencies. Concurrent with the issuance of these unsecured notes, TMCC entered into foreign currency and interest rate exchange agreements to convert these foreign currency obligations into fixed U.S. dollar liabilities at maturity of $2.8 billion. These obligations are translated at the various foreign currency exchange rates in effect at December 31, 1993. The receivables or payables, arising as a result of the difference between the December 31, 1993 exchange rates and the forward rates at maturity applicable to the foreign currency and interest rate exchange agreements, are classified in Other Receivables or Accounts Payable and Accrued Expenses, respectively, and would aggregate to a net payable position of $271 million at December 31, 1993. Note 5 - Provision for Income Taxes - ----------------------------------- Effective October 1, 1993 the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement No. 109"). The adoption of Statement No. 109 changed the method of accounting for income taxes from a deferred method to a liability method. This method differs from the previously used method in that deferred tax assets and liabilities are adjusted to reflect changes in tax rates and laws in the period such changes are enacted resulting in adjustments to the current period's income statement. The cumulative effect of the change in accounting principle was not material to the Company's financial position or results of operations. Prior period financial statements have not been restated. -7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Introduction The earnings of Toyota Motor Credit Corporation ("TMCC") are primarily affected by interest margins and the average outstanding balance of earning assets. The interest rates charged on retail finance receivables and implicit in leases are fixed at the time acquired. Yields on the majority of wholesale receivables and other loans to dealers vary with changes in short-term interest rates. Funding requirements are primarily met through earning asset liquidations and the issuance of debt obligations of varying terms at both fixed and floating interest rates. TMCC utilizes interest rate exchange agreements and foreign currency and interest rate exchange agreements in managing the cost of borrowed funds. The business of TMCC and its subsidiaries (collectively the "Company") is substantially dependent upon the sale of Toyota and Lexus vehicles in the United States. Lower levels of sales of such vehicles resulting from governmental action, decline in demand, changes in pricing due to the appreciation of the yen against the United States dollar, or other events, could result in a reduction in the level of finance and insurance operations of the Company. To date, the level of the Company's operations has not been restricted by the level of sales of Toyota and Lexus vehicles. Financial Condition and Results of Operations TMCC's earning assets totaled $11.1 billion at December 31, 1993, compared to $10.4 billion at September 30, 1993 and $9.4 billion at December 31, 1992. The increases from September 30, 1993 and December 31, 1992 were primarily due to the growth in leasing. Retail finance receivables, net of unearned income, were $4.7 billion, $4.6 billion, and $4.8 billion at December 31, 1993, September 30, 1993, and December 31, 1992, respectively. Retail receivables at December 31, 1993 remained relatively level from September 30, 1993 as the increase in receivables from contract volume was offset by liquidations. The slight decline in retail receivables from December 31, 1992 reflected the sale of retail finance receivables in the fourth quarter of fiscal 1993 and liquidations offset by the increase in receivables from contract volume in fiscal 1993. Lease finance receivables, net of unearned income, and investments in operating leases, net of accumulated depreciation, totaled $5.2 billion, $4.8 billion, and $3.5 billion at December 31, 1993, September 30, 1993, and December 31, 1992, respectively. The increases from September 30, 1993 and December 31, 1992 reflected the significant increase in lease contract volume, primarily in operating leases, due to the growth in special lease programs sponsored by Toyota Motor Sales, U.S.A., Inc. ("TMS") and increasing consumer acceptance of leasing. Wholesale receivables and other dealer loans increased to $1.2 billion at December 31, 1993 from $1.0 billion and $1.1 billion at September 30, 1993 and December 31, 1992, respectively. The increases from September 30, 1993 and December 31, 1992 resulted from the increase in the number of dealers participating in the TMCC's wholesale financing program and the higher average wholesale receivable balance per dealer. -8- The Company experienced continued growth in net financing revenues and other revenues for the first quarter of fiscal 1994 as compared to 1993. The results are summarized as follows:
Three Months Ended December 31, Percentage --------------------------------- Change From 1993 1992 Previous Period -------------- -------------- --------------- (Dollars in Millions/Percent of Total Financing Revenues) Financing Revenues: Retail financing and leasing.......... $351 95% $282 95% 24% Wholesale and other dealer financing.. 19 5% 16 5% 19% ---- ---- ---- ---- Total financing revenues................. 370 100% 298 100% 24% Interest expense...................... 110 30% 114 38% (4%) Depreciation on operating leases...... 139 37% 76 26% 83% ---- ---- ---- ---- Net financing revenues................... 121 33% 108 36% 12% Other revenues........................... 23 6% 14 5% 64% ---- ---- ---- ---- Net Financing Revenues and Other Revenues..................... $144 39% $122 41% 18% ==== ==== ==== ====
Total financing revenues increased 24% in the first quarter of fiscal 1994 from 1993. The increase in the first quarter of fiscal 1994 was attributable to the continued growth in earning assets, primarily from leases. Contract volume and finance penetration related to TMCC's vehicle retail financing and leasing programs are summarized below:
Three Months Ended December 31, ------------------ 1993 1992 ------ ------ Contracts booked: Retail instalment sales contracts....... 44,000 44,000 Leases.................................. 32,000 21,000 ------ ------ Total................................ 76,000 65,000 ====== ====== Finance penetration........................ 29.5% 23.7%
In the first quarter of fiscal 1994, the growth in total contract volume and finance penetration was due to the increased leasing of both Toyota and Lexus vehicles. Finance penetration represents the percentage of new Toyota and Lexus vehicle deliveries in the United States (excluding Hawaii) financed or leased by TMCC. The increase in lease contract volume was attributable primarily to the effect of the growth in special lease programs sponsored by -9- TMS during the first quarter of fiscal 1994 and also to broader acceptability of leasing as a financing option in the vehicle retail sales market. Under these special lease programs, TMCC offered reduced monthly payments on certain new vehicles to qualified lessees and received an amount from TMS for each vehicle leased. Amounts received approximate the balances required by TMCC to maintain revenues at standard program levels and are earned over the expected lease terms. The level of sponsored program activity varies based on TMS marketing strategies. TMCC recognized revenues of $9 million and $5 million in the first quarters of fiscal 1994 and 1993, respectively, related to all amounts received under various TMS programs. Management of the Company anticipates that the higher level of lease contract volume will continue as TMS-sponsored programs are expected to continue for some time and as the acceptability of leasing as a financing option for retail customers further increases. Another factor contributing to the significant growth in leasing (primarily in investments in operating leases) in both the first quarters of fiscal 1994 and 1993 was a trend toward shorter-term leases for Toyota and Lexus vehicles. Shorter-term leases have been utilized as a method of accelerating the return of retail lease customers to the new vehicle market, and management of the Company intends to continue its emphasis on shorter terms. Uninsured vehicle residual values were approximately $2.9 billion and $1.8 billion at December 31, 1993 and 1992, respectively. To date, TMCC has incurred no material losses as a result of residual value risk. Although TMCC's experience has been limited, management of the Company believes that the residual values of its leases reflected in the financial statements represent realizable values. In the first quarter of fiscal 1994 TMCC's primary source of revenue and earning asset growth was leasing. Leasing revenues increased 56% to $247 million in the first quarter of fiscal 1994 primarily due to an 86% increase in average investments in operating leases from 1993. Retail financing revenues decreased 15% to $104 million in the first quarter of fiscal 1994 due to a decrease in the level of average retail finance receivables outstanding and a continuing decline in yield. Average retail finance receivables outstanding declined in the first quarter of fiscal 1994 as compared to 1993 primarily due to the effect of the sale of finance receivables in the fourth quarter of fiscal 1993. The decline in yield on average earning assets reflected the effect of competitive market conditions and a sustained period of lower interest rates, with lower yielding retail instalment sales contracts and leases replacing liquidating higher yielding retail instalment sales contracts and leases. Management of the Company anticipates that this trend in declining yields will continue during fiscal 1994. Wholesale and other dealer financing revenues increased 19% in the first quarter of fiscal 1994 as compared to 1993. The increase in revenues in the first quarter of fiscal 1994 resulted primarily from higher average wholesale receivable balances. The total average wholesale receivable balance increased in the first quarter of fiscal 1994 largely due to increased numbers of dealers participating in TMCC's wholesale financing programs and higher average wholesale receivable balances per dealer. The increased number of dealers participating in TMCC's wholesale financing program was due to TMCC's ongoing marketing efforts and competitive market conditions. -10- Interest expense decreased 4% in the first quarter of fiscal 1994 from 1993. The decrease in interest expense resulting from lower market interest rates was largely offset by higher average borrowing levels required to fund the growth of earning assets. The weighted average cost of borrowings was 4.97% and 6.03% for the three months ended December 31, 1993 and 1992, respectively. Depreciation on operating leases increased 83% in the first quarter of fiscal 1994 from 1993 as a result of the growth in investments in operating leases. Net financing revenues increased 12% to $121 million in the first quarter of fiscal 1994. The increase was primarily attributable to growth in the level of earning assets. Interest margin is the excess of the combined interest rate yield on finance receivables and implicit in leases over the effective interest rate cost of total borrowings. Interest margins decreased in the first quarter of fiscal 1994 from 1993 as a result of the decline in yield on retail instalment sales contracts and leases decreasing more rapidly than the decline in borrowing costs. Management anticipates continued decline in the interest margin primarily due to the expected continuing decline in yields on average earning assets in fiscal 1994. Other revenues increased 64% during the first quarter of fiscal 1994. The increase in other revenues resulted primarily from the continued growth in the Company's insurance operations. The Company's earnings increased in the first quarter of fiscal 1994 as summarized below:
Three Months Ended December 31, Percentage --------------------- Change From 1993 1992 Previous Period ------ ------ --------------- (Dollars in Millions) Net Financing Revenues and Other Revenues........... $144 $122 18% Expenses: Operating and administrative............ 54 50 8% Provision for credit losses.. 14 15 (7%) ---- ---- Total Expenses......... 68 65 5% ---- ---- Income before income taxes...... 76 57 33% Provision for income taxes...... 30 22 36% ---- ---- Net Income...................... $ 46 $ 35 31% ==== ====
Operating and administrative expenses increased 8% in the first quarter of fiscal 1994. This increase reflected costs for additional personnel, facilities, and other resources required to service the Company's growing customer base. Operating and administrative expenses also increased due to the growth in the Company's insurance operations in the first quarter of fiscal 1994. -11- The provision for credit losses is largely a function of changes in the level and mix of earning assets. The provision for credit losses decreased 7% in the first quarter of fiscal 1994 from 1993 as the effect of the increase in the growth in earning assets was more than offset by favorable loss experience. The favorable trend in credit loss experience is attributable, in part, to improved credit granting procedures, collection efforts, and the mix of earning assets. The Company will continue to place emphasis on controlling its credit loss exposure; however, there are no assurances that this favorable trend will continue. Operating profits (reflected as "Income before income taxes") increased 33% to $76 million in the first quarter of fiscal 1994 from 1993 primarily due to the increase in financing revenues as a result of the growth in the level of earning assets. Net income for the first quarter of fiscal 1994 increased 31% due to the higher level of operating profits. Financial support is provided by TMS, as necessary, to maintain TMCC's minimum fixed charge coverage at the level specified in the Operating Agreement. As a result of the favorable operating profits in the first quarters of fiscal 1994 and 1993, TMCC did not receive any financial support from TMS. Liquidity and Capital Resources The Company requires, in the normal course of business, substantial funding to support the level of its earning assets. Significant reliance is placed on the Company's ability to obtain debt funding in the capital markets in addition to funding provided by earning asset liquidations and growth in retained earnings. Debt funding has been obtained primarily from the issuance of debt securities in the European and United States capital markets. Debt issuances have generally been in the form of commercial paper, medium-term notes ("MTNs") and other debt securities. This funding has been supplemented by loans and equity contributions from TMS. Commercial paper issuances and borrowings from TMS are specifically utilized to meet short-term funding needs. Commercial paper outstanding under TMCC's commercial paper program ranged from approximately $349 million to $842 million during the first quarter of fiscal 1994. To support the commercial paper program, along with other uses, TMCC, in conjunction with TMS, maintains committed and uncommitted unsecured credit lines with banks totaling $775 million. At December 31, 1993, no loans were outstanding under any of these lines; however, approximately $135 million in letters of credit had been issued, related to the Company's insurance operations, which reduced the availability of the lines to $640 million. Borrowings from TMS ranged from zero to $60 million during the first quarter of fiscal 1994, with an average outstanding balance of $8 million. The interest rate charged by TMS to TMCC for interest-bearing loans approximates the Federal Reserve Board's one-month commercial paper composite rate for firms whose bonds are rated AA. MTNs, with original terms ranging from nine months to ten years, have been issued in the European and United States capital markets to meet a portion of long-term and short-term funding requirements. During the first quarter of fiscal 1994, TMCC issued approximately $259 million of MTNs of which approximately $75 million had maturity dates on the date of issuance of -12- more than one year. MTNs outstanding at December 31, 1993, including the effect of foreign currency translations, totaled approximately $3.4 billion. At January 31, 1994, TMCC had approximately $304 million of securities registered with the Securities and Exchange Commission ("SEC") which remained available for issuance under TMCC's United States public MTN program. The maximum aggregate principal amount authorized to be outstanding at any time under TMCC's Euro MTN program is $4.0 billion. As of January 31, 1994, $2.5 billion of other debt securities were available for issuance under the Euro MTN program. The United States and Euro MTN programs may from time to time be expanded to allow for the continued use of these sources of funding. Along with MTNs, long-term funding requirements have been met through the issuance of other forms of debt securities underwritten in the European and United States capital markets. At December 31, 1993 approximately $4.1 billion of debt securities, including the effect of foreign currency translations, was outstanding in the European capital markets. Of the $4.1 billion debt securities, $2.3 billion was denominated in foreign currencies. Underwritten debt securities outstanding in the United States public market, excluding MTNs, totaled approximately $600 million at December 31, 1993. At January 31, 1994, approximately $700 million of securities registered with the SEC, excluding MTNs, were available for issuance. TMCC utilizes a variety of techniques to manage its foreign currency exchange rate risk and interest rate risk. Long-term debt issued in foreign currencies is hedged by concurrently executed foreign currency and interest rate exchange agreements. The mix of fixed and floating interest rates on TMCC's debt outstanding is periodically adjusted through the use of interest rate contracts, including interest rate exchange agreements and option related products. Standard & Poor's Corporation ("S&P") placed the long-term ratings of TMCC and its related companies (including Toyota Motor Corporation), in addition to other Japanese automakers, on CreditWatch with negative implications in August 1993. On February 9, 1994, S&P affirmed the long-term ratings of TMCC and its related companies and removed them from CreditWatch, but indicated that the rating outlook is negative. The Company currently anticipates having continued access to its primary funding sources. From time to time, TMS has made equity contributions to maintain TMCC's equity capitalization at certain levels. Such levels have been periodically established by TMS as it deems appropriate. No such equity contributions were made during the first quarter of fiscal 1994. Cash flows provided by operating, investing and financing activities have been used primarily to support earning asset growth. Cash provided by the liquidation of earning assets, totaling $2.3 billion during the first quarter of fiscal 1994, was used to purchase additional finance receivables and investments in operating leases. Investing activities resulted in a net use of cash in the first quarter of fiscal 1994 as cash provided by earning asset liquidations was insufficient to support the growth in earning assets. Net cash used in investing activities was $837 million in the first quarter of fiscal 1994. -13- The growth in earning assets was also supported by net cash provided by operating activities which totaled $206 million in the first quarter of fiscal 1994. Additionally, cash available at the beginning of the period was utilized resulting in a lower level of net cash required from financing activities to support the growth in earning assets. Net cash flows provided by financing activities totaled $140 million in the first quarter of fiscal 1994, representing a $238 million decrease from December 31, 1992. Management of the Company believes that cash provided by operating, investing and financing activities will be sufficient to meet the Company's liquidity and capital resource needs in the future. Recently Enacted Accounting Standards In November 1992, the Financial Accounting Standards Board issued Statement No. 112, "Employers' Accounting for Postemployment Benefits" ("Statement No. 112"). Statement No. 112 requires accrual, during the years that the employee renders the necessary service or when it is probable that a liability has been incurred, of the expected cost of providing postemployment benefits to former or inactive employees, their beneficiaries, and covered dependents after employment but before retirement. The Company's current practice of accounting for these benefits is on a cash basis. Statement No. 112 is effective for fiscal years beginning after December 15, 1993. At this time, the Company has not elected early adoption of Statement No. 112; however, the estimated impact of adoption on the financial position or results of operations is not considered to be material. In May 1993, the Financial Accounting Standards Board issued Statement No. 114, "Accounting by Creditors for Impairment of a Loan" ("Statement No. 114"), which requires a creditor to evaluate the collectibility of both contractual interest and principal of certain receivables when assessing the need for a loss accrual and to measure loans that are restructured in a troubled debt restructuring to reflect the time value of money. Statement No. 114 is not applicable to leases and large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment. Statement No. 114 applies to financial statements for fiscal years beginning after December 15, 1994. At this time, the Company has not elected early adoption of Statement No. 114; however, the estimated impact of adoption on the financial position or results of operations is not considered to be material. In May 1993, the Financial Accounting Standards Board issued Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("Statement No. 115"), which addresses the accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. These investments will be categorized as held-to-maturity securities and reported at amortized cost; trading securities and reported at fair value, with unrealized gains and losses included in earnings; or available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of shareholders' equity. Statement No. 115 is effective for fiscal years beginning after December 15, 1993. At this time, the Company has not elected early adoption of Statement No. 115; however, the estimated impact of adoption on the financial position or results of operation is not considered to be material. -14- PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Various legal actions, governmental proceedings and other claims are pending or may be instituted or asserted in the future against TMCC and its subsidiaries with respect to matters arising from the ordinary course of business. Certain of these actions are or purport to be class action suits, including two suits involving collateral protection practices similar to suits which have been filed against various other financial institutions and captive finance companies. TMCC is engaged in settlement negotiations in one of the two collateral protection practices suits and is defending the other. It is possible that TMCC may become a defendant in other similar actions. At this time, the Company believes any resulting liability from the above legal actions, proceedings and other claims will not materially affect its consolidated financial position or results of operations. ITEM 2. CHANGES IN SECURITIES. There is nothing to report with regard to this item. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. There is nothing to report with regard to this item. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. OTHER INFORMATION. There is nothing to report with regard to this item. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits The exhibit listed on the accompanying Exhibit Index, on page 17, is filed as part of this report. (b) Reports on Form 8-K The Company filed the following report on Form 8-K during the quarter ended December 31, 1993: Financial Statements Date of Report Item Filed -------------- ---- ------------------- November 12, 1993 Item 5 - Other Events None -15- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TOYOTA MOTOR CREDIT CORPORATION ------------------------------- (Registrant) Date: February 11, 1994 By /S/ WOLFGANG JAHN ------------------------------- Wolfgang Jahn Group Vice President (principal executive officer) Date: February 11, 1994 By /S/ PATRICK BREENE ------------------------------- Patrick Breene Controller (principal accounting officer) -16- EXHIBIT INDEX Exhibit Numbered Number Description Page - ------- ----------- -------- 12.1 Calculation of ratio of earnings to fixed charges. 18 -17- EX-12.1 2 RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 TOYOTA MOTOR CREDIT CORPORATION CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
Three Months Ended December 31, --------------------- 1993 1992 ------ ------ (Dollars in Millions) Consolidated income before income taxes.................... $ 76 $ 57 ---- ---- Fixed charges: Interest............................... 110 114 Portion of rent expense representative of the interest factor (deemed to be one-third)........................... 1 1 ---- ---- Total fixed charges...................... 111 115 ---- ---- Earnings available for fixed charges...................... $187 $172 ==== ==== Ratio of earnings to fixed charges(2)....................... 1.68 1.50 ==== ==== - ----------------- (1) TMCC did not receive any financial support from TMS during the three months ended December 31, 1993 and 1992. (2) In March 1987, TMCC guaranteed payments of principal and interest on $58 million principal amount of bonds issued in connection with the Kentucky manufacturing facility of an affiliate. As of December 31, 1993, TMCC has not incurred any fixed charges in connection with such guarantee and no amount is included in any ratio of earnings to fixed charges.
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