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Annual Report 2007Annual Report 2007
Honda Motor Co., Ltd.Honda Motor Co., Ltd.
Year Ended March 31, 2007

Table of contents

  • Page 1
    Annual Report 2007 Year Ended March 31, 2007 Honda Motor Co., Ltd.

  • Page 2
    ... accounted for under the equity method, Honda develops, manufactures and markets a wide variety of products, ranging from small general-purpose engines and scooters to specialty sports cars, to earn the Company an outstanding reputation from customers worldwide. *As of March 31, 2007 Reports...

  • Page 3
    ... by Business Motorcycle Business Automobile Business Power Product and Other Businesses Financial Services Business Special Feature: Targeting the World's Cleanest Diesel Engine Environment and Safety Preparing for the Future Risk Factors Corporate Governance Board of Directors, Corporate Auditors...

  • Page 4
    ... 10.0% 6.0% 10.3% 9.3% Japan North America Europe Asia Other Regions Total Net Sales Breakdown Yen (millions) 503 (18.2) Motorcycle Business Automobile Business Financial Services Business Power Product and Other Businesses 2006 ¥ 2007 Change 2.8% 5.6 2006 2007 Change 2006 ¥ 21,140 267...

  • Page 5
    ... Unit Sales [Motorcycles] (Thousands) [Automobiles] (Thousands) [Power Products] (Thousands) 12,000 10,000 4,000 8,000 3,000 8,000 6,000 4,000 6,000 2,000 4,000 1,000 2,000 0 2,000 03 04 05 06 07 0 03 04 05 06 07 0 03 04 05 06 07 Japan North America Europe Asia Other Regions 3

  • Page 6
    ... term, we outlined specific measures for our three initiatives that are; developing advanced systems at our production facilities in Japan, solidifying the foundation for growth in our overseas business and working to reduce our CO2 emissions on a global level by promoting innovative products and...

  • Page 7
    .... Motorcycle Business In key Asian markets, demand for motorcycles as an essential mode of transportation continued to grow. Sales in Latin America remained strong, mainly in Brazil, where economic performance was stable. Since mid-2005, Indonesia, which is a major market for our products in Asia...

  • Page 8
    ... American market version shown) Power Product and Other Businesses Unit sales in the power product business increased in all regions in fiscal 2007, mainly in North America and Europe. This rise was supported by products that play a role in customer lifestyles, such as lawn mowers and generators...

  • Page 9
    ...at line two of our plant in Canada. In line with strong ongoing sales of the CR-V, from fall 2007 we will begin manufacturing this model at our plant in Mexico. We are also planning to begin production in a new plant in Indiana, in the United States, and a new engine factory in Canada in 2008. Honda...

  • Page 10
    ... Our Shareholders In Europe, we have experienced an increase in sales of locally manufactured models with diesel engines, mainly the new Civic and the new CR-V. In response, we plan to raise production at our U.K. plant to its annual capacity of 250,000 units in late 2007. In China, Guangzhou Honda...

  • Page 11
    ... pilot plant to promote mass-production technologies. Fuel Cell Vehicles • In 2008, begin leasing a new fuel cell vehicle in Japan and the United States based on the FCX Concept car. • Promote initiatives involving home energy stations that produce hydrogen from natural gas, as well as...

  • Page 12
    ... important management issues, Honda's basic policy for dividends is to make distributions after taking into account its long-term consolidated earnings performance. Honda will also acquire its own shares at the optimal timing with the goals of improving efficiency of the Company's capital structure...

  • Page 13
    Review of Operations 12 14 19 25 26 Summary of Operating Results by Business Motorcycle Business Automobile Business Power Product and Other Businesses Financial Services Business 11

  • Page 14
    ...return of the substitutional portion of employees' pension funds to the Japanese government that was recorded in fiscal 2006. Financial Services Business Net Sales Operating Income ¥409.7 billion (33.5%) ¥115.5 billion (27.6%) Revenue from unaffiliated customers in our financial services business...

  • Page 15
    ... 400 14.4% 11.0% Year ended March 31, 2007 29.7% Europe 300 Europe (25%) 12.8% 6,421 thousand 760 Asia 527 200 Japan North America 100 32.1% North America (48%) 406 0 Other Regions 03 04 05 06 07 Net Sales (left scale) Operating Income (right scale) 0 Years ended March 31 Yen (billions...

  • Page 16
    ... 06 Other companies Hero Honda Honda Motorcycle and Scooter India Honda's share Source: Honda Against the backdrop of overall robust economic performance, the size of the Indian market continued to expand since motorcycle makers launched a number of highly competitive models. Honda's unit sales* in...

  • Page 17
    ... motorcycle demand is expected to return to 2005 levels. As in India, economic expansion in Indonesia is expected to continue prompting high rates of market expansion. Astra Honda continues to promote sales growth by launching new models and strengthening its sales promotion efforts. The company...

  • Page 18
    ... years of effort, Honda currently holds approximately 80% share of the Brazilian market. POP100 An easy-to-handle, reasonably priced family motorcycle The Manaus plant, which is scheduled to expand annual production to 1.5 million units by the end of calendar 2007 Manufacturing line of the CG150...

  • Page 19
    ... Countries of Matured Markets 1. Soaring Gasoline Prices and Rising Interest Rates Affect North American Market The U.S. market is divided into motorcycles and ATVs. In calendar 2006, the U.S. motorcycle market for on-road models expanded, spurred by new model launches by various manufacturers...

  • Page 20
    ..., we will work to meet customers' demand focusing on customers' satisfaction, developing "Dream Shops" in Japan which offer products and services of high value, centering on sport models. *1: ETC System (Electronic Toll Collection System) This system for paying expressway tolls without stopping at...

  • Page 21
    ... issues as an aging population, a declining birthrate and increasingly diverse consumer preferences, as well as the trend toward a longer average period of car ownership, market conditions are expected to remain severe. Against this backdrop, the Fit-Honda's highest-selling mass production model...

  • Page 22
    ... are based on passenger car platforms. * Sport-utility vehicle (SUV): A vehicle designed and developed for recreational purposes 10 8 6 15,000 10,000 4 5,000 2 0 0 01 02 03 04 05 06 Passenger cars Light trucks Honda's share Source: Global Insight Crude Oil Prices and Prices of Regular Gasoline...

  • Page 23
    ...and an engine plant in Canada, both of which are scheduled to begin operations in fall 2008. The new Accord Coupe concept car Finished Auto Plants in North America Annual Capacity (Units) 1 Passenger cars Accord Acura TL Acura RDX Light trucks Marysville East Liberty Lincoln Greensburg 440,000...

  • Page 24
    ...exceed 100,000 units. From a production standpoint, in February 2007 we responded to brisk sales of the locally produced Civic and CR-V by beginning full-scale operations at our second U.K. plant. In addition, we shifted some of the mechanical processes for manufacturing diesel engines from Japan to...

  • Page 25
    ... an annual capacity of 120,000 units. In expanding their capacity, the two plants introduced leading-edge technologies that take into consideration the global and production environments. In addition to raising capacity for finished cars, Honda Auto Parts Manufacturing Co., Ltd., began operations in...

  • Page 26
    Automobile Business Total Honda Unit Sales in Key ASEAN Countries (Year) Honda Other manufacturers Thailand 05 06 05 06 05 06 05 06 Indonesia Malaysia The Philippines 0 100 200 300 400 500 600 700 (Thousands of units) Source: Global Insight e Political Uncertainty and Natural Disaster ...

  • Page 27
    ... Sales of engines on an OEM basis for use in lawn mowers, generators and construction equipment were also favorable in Europe. Our OEM business received a major boost from brisk sales in North America, reflecting the launch of new lawn mower models. With demand for generators down across all markets...

  • Page 28
    ...Core Businesses Honda offers a variety of financial services to support sales of Honda motorcycles, automobiles and other products. These services are provided through financial subsidiaries in Japan, North America, Europe and other areas. The services of these subsidiaries include loans, leases and...

  • Page 29

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  • Page 37
    ... our environmental activities in line with this statement. In fiscal 2006, Honda achieved all of its own fiscal 2006 environmental impact reduction targets. In fiscal 2007, we took the initiative in announcing our new global CO2 reduction targets for products and production activities for 2010. This...

  • Page 38
    ..., India, China, Indonesia, Vietnam, Brazil, the Philippines, Malaysia and Pakistan. For more than 90% of products sold worldwide, including Japan, North America, Europe, Asia, the Pacific, China and Latin America. Including all products sold worldwide except outboard. In addition to Honda Motor Co...

  • Page 39
    ...-powered vehicles. In December 2001, we introduced the Civic Hybrid, and in December 2004, we began sales in North America of the Accord Hybrid, adopting Honda's Variable Cylinder Management system for its V6 engine. Further, in November 2005 we began sales of an all-new Civic Hybrid, equipped...

  • Page 40
    .... We are in the process of testing hydrogen fueling stations, such as the Home Energy Station, which also provides hydrogen to generate heat and electric power in homes. We have substantially enhanced the power and highway fuel economy of the third generation natural gas-powered Civic GX, following...

  • Page 41
    ... children's traffic safety education program developed in Japan and opened a motorcycle school for children and their parents. Promoting Safer Driving Honda intends to enhance its contribution to traffic safety in mobility societies, including Asian countries. Honda also intends to remain active in...

  • Page 42
    ... (Expanding Regional Operations)," and "Commitment to the Future (Developing Safety and Environmental Solutions)," with the aim of sharing joy with Honda's customers, thus becoming a company valued by society. 3. Sales Efficiency Honda will remain proactive in its efforts to expand product lines...

  • Page 43
    ... affected by market conditions Honda conducts its operations in Japan and throughout the world, including North America, Europe and Asia. A continued economic slowdown, recession or sustained loss of consumer confidence in these markets, which may be caused by rising fuel prices or other factors...

  • Page 44
    ... commercial banks and finance and leasing companies. The financial services offered by us also involve risks relating to residual value, credit risk and cost of capital. Competition for customers and/or these risks that are specific to the financing business may affect Honda's results of operations...

  • Page 45
    ...Board (Latin America) Regional Operating Board (Asia and Oceania) Regional Operating Board (China) Domestic Factories Purchasing Operations Business Support Operations Business Management Operations Corporate Project Quality Audit & Compliance Division Audit Office Corporate Auditors Office Honda...

  • Page 46
    ... understanding shareholders and investors have in it, Honda's basic policy emphasizes the appropriate disclosure of company information, such as by disclosing financial results on a quarterly basis and timely and accurately giving public notice of and disclosing its management strategies. Honda will...

  • Page 47
    companies among Honda's domestic and overseas subsidiaries and affiliates. The Board of Directors also provides information on items of business and other topics as necessary to outside directors. Outside Corporate Auditors The Company has appointed outside corporate auditor Koukei Higuchi to ...

  • Page 48
    ...six regional operations around the world to develop business based on its fundamental corporate philosophy. These operations adopt long-term perspectives and maintain close ties with local communities. The Company's four business operations- motorcycles, automobiles, power products and service parts...

  • Page 49
    ...important management issues in the region within the scope of authority conferred upon it by the Executive Council. future business strategies. Representatives based in North America and Europe also hold information meetings for institutional investors as appropriate. In addition, the Company holds...

  • Page 50
    ... Headquarters to address crisis situations. Retention and Management of Information on Execution of Business by Directors Documents and other information related to the execution of business by directors are retained and managed appropriately, according to the document management policies of Honda...

  • Page 51
    ... as a director, accounting councilor, executive officer, manager or any other employee of the company or any of its subsidiaries. Currently, Honda has three outside corporate auditors which constitute 50% of Honda's corporate auditors. Like a majority of Japanese listed companies, Honda employs the...

  • Page 52
    ... Corporation, Limited Chief Operating Officer for Power Product Operations Chief Operating Officer for Production Operations Risk Management Officer General Supervisor, Information Systems Chief Operating Officer for Business Support Operations Chief Officer of Driving Safety Promotion Center...

  • Page 53
    ... North America, Inc. President and Director of American Honda Motor Co., Inc. Chief Operating Officer for Regional Operations (Asia & Oceania) President and Director of Asian Honda Motor Co., Ltd. Chief Operating Officer for Business Management Operations Advisor of the Board of The Bank of Tokyo...

  • Page 54
    ... Regional Sales Operations (Japan) General Manager of Asimo Business Office in Regional Sales Operations (Japan) General Manager of Kumamoto Factory of Production Operations President and Director of Honda Canada Inc. Corporate Communications, Motor Sports General Manager of Corporate Communications...

  • Page 55
    ... Financial Statements Management's Report on Internal Control over Financial Reporting Reports of Independent Registered Public Accounting Firm Selected Quarterly Financial Data (Unaudited and Not Reviewed) Consolidated Balance Sheets Divided into Non-Financial Services Businesses and Finance...

  • Page 56
    ... and higher unit sales in all regions in power product and other businesses, as well as the positive impact of currency effects. Honda estimates that if the exchange rate of the Japanese yen had remained unchanged from the previous fiscal year, consolidated net sales and operating revenue for the...

  • Page 57
    ..., total unit sales of ATVs and personal watercraft came to 221,000 units in fiscal year 2007, down 21.9%. *1 Enduro A motor sport involving long races on relatively flat off-road courses and lasting between two and 12 hours Japan North America Europe Asia Other Regions Total Net Sales 368 615 353...

  • Page 58
    ... Honda Group is working hard to expand local businesses in the region through its active promotion of local procurement of parts used in overseas production. In Asia, this strategy has resulted in an increase in sales of Honda-brand motorcycles that are manufactured and sold by affiliates accounted...

  • Page 59
    ... sales performance in this region. To increase the local production of powertrain components, in May 2006 we started operating a new automatic transmission plant in Georgia. The Pilot, which was being manufactured on the second line of our plant in Canada, was transferred to Honda's plant in Alabama...

  • Page 60
    ... consolidated subsidiary Honda Vietnam Co., Ltd., began local production of the Civic in July 2006. Other Regions Due to expansion in Latin America, the Pacific, and the Middle & Near East, unit sales in Other regions rose 23.4% in fiscal year 2007, to 248,000 units. Japan North America Europe Asia...

  • Page 61
    ...model change. In China, we launched the new EM10000 high-output 10kVA generator, which is compact and equipped with a newly developed alternator. Financial Services Business Honda offers a variety of financial services to its customers and dealers, with the aim of supporting sales of Honda products...

  • Page 62
    ...Research and development on production technologies centers on Honda Engineering Co., Ltd., in Japan and Honda Engineering North America, Inc. All of these entities work in close association with our other entities and business in their respective regions. Total consolidated R&D expenditures for the...

  • Page 63
    ... industry-leading technologies that address safety and environmental issues. Breakthroughs during fiscal 2007 include the development in the United States and Canada of the Gold Wing touring bike equipped with the world's first motorcycle airbag system. In North America and Europe, the CBR600RR...

  • Page 64
    ... of new models, as well as the 200 0 03 04 05 06 07 Capital Expenditures Depreciation Plans after Fiscal 2007 Honda plans to build a new engine plant in Ogawa-machi Hikigun, Saitama with an investment of approximately ¥25,000 million. The annual production capacity of this new plant will...

  • Page 65
    ... production facilities, as well as to expand and reinforce Sales and R&D facilities. Honda meets its operating capital requirements mainly through cash generated by operations. Honda funds its financial programs for customers and dealers primarily from corporate bonds, medium-term notes, commercial...

  • Page 66
    ... (18) to the accompanying consolidated financial statements. (Credit Losses) Our finance subsidiaries provide wholesale financing to dealers and retail lending and direct financing leases to customers mainly in order to support sales of our products, principally in North America. We classify the...

  • Page 67
    ... in North America purchase insurance to cover a portion of the estimated residual value. The adjustments on the uninsured portion of the vehicle's residual value are recognized as a loss in the period in which the estimate changed. For vehicle leases accounted for as operating leases, adjustments...

  • Page 68
    ... of marketable equity securities. Honda is a party to derivative financial instruments in the normal course of business in order to manage risks associated with changes in foreign currency exchange rates and in interest rates. Honda does not hold any derivative financial instruments for trading...

  • Page 69
    ...reported at fair value. *3 : The finance subsidiaries-receivables include finance subsidiaries-receivables included in trade receivables and other assets in the consolidated balance sheets. Additional detailed information is described in Note (4) to the accompanying consolidated financial statements...

  • Page 70
    ...than trading, and are reported at fair value, with unrealized gains or losses, net of deferred taxes included in accumu- lated other comprehensive income (loss) in the stockholders' equity section of the consolidated balance sheets. At March 31, 2006 and 2007, the estimated fair value of marketable...

  • Page 71
    ... States citizens from purchasing vehicles produced for the Canadian market and sold by dealers in Canada. The complaints allege that new vehicle prices in Canada are 10 to 30% lower than those in the United States and that preventing the sale of these vehicles to United States citizens resulted in...

  • Page 72
    Consolidated Balance SheetsSHEETS CONSOLIDATED BALANCE Honda Motor Co., Ltd. and Subsidiaries March 31, 2006 and 2007 U.S. dollars (millions) (note 2) 2007 2007 Yen (millions) 2006* Assets Current assets: Cash and cash equivalents Trade accounts and notes receivable, net of allowance for doubtful ...

  • Page 73
    Yen (millions) U.S. dollars (millions) (note 2) 2007 2007 Liabilities, Minority Interests and Stockholders' Equity Current liabilities: Short-term debt (note 9) Current portion of long-term debt (note 9) Trade payables: Notes Accounts Accrued expenses Income taxes payable (note 11) Other current ...

  • Page 74
    Consolidated Statements of Income Honda Motor Co., Ltd. and Subsidiaries Years ended March 31, 2005, 2006 and 2007 2005* Yen (millions) 2006* 2007 U.S. dollars (millions) (note 2) 2007 Net sales and other operating revenue (note 4) Operating costs and expenses: Cost of sales (note 4) Selling, ...

  • Page 75
    Consolidated Statements of Stockholders' Equity and Comprehensive Income Honda Motor Co., Ltd. and Subsidiaries Years ended March 31, 2005, 2006 and 2007 Common stock Capital surplus Legal reserves Yen (millions) Retained earnings Accumulated other comprehensive income (loss), net Treasury stock ...

  • Page 76
    ...income Adjustment for initially applying SFAS No. 158, net of tax (note 13) Purchase of treasury stock Reissuance of treasury stock Retirement of treasury stock Balance at March 31, 2007 $729 See accompanying notes to consolidated financial statements. 74 $1,461 - 1,461 $303 - 303 17 $36,153 (530...

  • Page 77
    ...Capital expenditures Proceeds from sales of property, plant and equipment Acquisitions of finance subsidiaries-receivables Collections of finance subsidiaries-receivables Proceeds from sales of finance subsidiaries-receivables Purchase of operating lease assets Proceeds from sales of operating lease...

  • Page 78
    ... over their operating and financial policies, but where the Company does not have a controlling financial interest are accounted for using the equity method. (d) Use of Estimates Management of Honda has made a number of estimates and assumptions relating to the reporting of assets, liabilities...

  • Page 79
    ... as "available-for-sale" securities and are reported at fair value, with unrealized gains or losses, net of deferred taxes included in accumulated other comprehensive income (loss) in the stockholders' equity section of the consolidated balance sheets. Honda did not hold any "trading" securities at...

  • Page 80
    ... and interest rate swap agreements. Honda recognizes at fair value of all derivative financial instruments in its consolidated balance sheet. Honda applies hedge accounting for certain foreign currency forward contracts related to forecasted foreign currency transactions between the Company and its...

  • Page 81
    ... a tax return. This statement is effective as of an entity's first fiscal year that begins after December 15, 2006. Management is currently in the process of quantifying the financial impact of adoption. In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial...

  • Page 82
    ... types of assets and liabilities measured at fair value. The statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, with early adoption being permitted. Management is currently in process of determining whether to early adopt this statement and...

  • Page 83
    ... value of the investments in affiliates in the consolidated financial statements. 3. The Company reclassified the residual tax effect of minimum pension liabilities included in accumulated other comprehensive income during the year ended March 31, 2006, which related to corporate tax rate changes...

  • Page 84
    ... have been translated into United States dollars at the rate of ¥118.05 = U.S.$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2007. Those U.S. dollar amounts presented in the consolidated financial statements and related notes are included solely for...

  • Page 85
    ... are as follows: Consolidated Balance Sheet Yen (millions) 2006 Previously reported 2006 After revised Assets (a) (b) (c) (d) (e) (f) Total Cash and cash equivalents Deferred income taxes Other current assets Total current assets Investments and advances: Other, including marketable equity...

  • Page 86
    ... current assets Other assets Increase (decrease) in liabilities: Trade accounts and notes payable Accrued expenses Other liabilities Other, net Net cash provided by operating activities Cash flows from investing activities: Payment for purchase of available-for-sale securities Proceeds from sales...

  • Page 87
    ... receivables generated by finance subsidiaries. Certain finance receivables related to sales of inventory are included in trade receivables and other assets in the consolidated balance sheets. Finance receivables include wholesale financing to dealers and retail financing and direct financing leases...

  • Page 88
    ... on lease residual values Unearned interest income and fees Less: Finance receivables included in trade receivables, net Finance receivables included in other assets, net Finance subsidiaries-receivables, net Less current portion Noncurrent finance subsidiaries-receivables, net ¥2,220,100 2,405...

  • Page 89
    ...-tax net gains or losses on such sales resulted in a net gain of ¥483 million is included in loss on sale of receivables for fiscal year 2006. The leases sold during fiscal year 2006 had 100% insurance coverage of the residual value of the vehicles collateralizing those leases. Finance subsidiaries...

  • Page 90
    ... accounted for under the equity method at March 31, 2006 and 2007, and for each of the years in the three-year period ended March 31, 2007 is shown below: Yen (millions) U.S. dollars (millions) (note 2) 2006 2007 2007 Current assets Other assets, principally property, plant and equipment...

  • Page 91
    ...period ended March 31, 2007. Honda mainly purchases materials, supplies and services from affiliates, and sells parts used in its products, equipment and services to affiliates. Yen (millions) U.S. dollars (millions) (note 2) 2006 2007 2007 Trade receivables from Trade payables to ¥059,292 112...

  • Page 92
    ... 2006 and 2007 consisted of the following: Yen (millions) U.S. dollars (millions) (note 2) 2006* 2007 2007 Current Auction rate securities Corporate debt securities U.S. government and agency debt securities Commercial paper Advances * See note 3. ¥30,539 13,100 18,733 5,998 829 ¥69,199 ¥41...

  • Page 93
    ... losses on marketable securities and fair value of the related securities, aggregated by length of time that individual securities have been in a continuous unrealized loss position at March 31, 2007 were as follows: Yen (millions) Fair value Unrealized losses U.S. dollars (millions) (note 2) Fair...

  • Page 94
    ...10,723 The weighted average interest rates on short-term debt outstanding at March 31, 2006 and 2007 were 3.21% and 4.00%, respectively. Long-term debt at March 31, 2006 and 2007 is as follows: Yen (millions) U.S. dollars (millions) (note 2) 2006 2007 2007 Honda Motor Co., Ltd.: Loans, maturing...

  • Page 95
    ... in the consolidated balance sheets. At March 31, 2007, Honda had unused line of credit facilities amounting to ¥1,127,722 million ($9,553 million), of which ¥390,278 million ($3,306 million) related to commercial paper programs and ¥737,444 million ($6,247 million) related to medium-term notes...

  • Page 96
    ...) U.S. dollars (millions) (note 2) 2006* 2007 2007 Accrued liabilities for product warranty, excluding current portion Additional minimum pension liabilities (note 13) Pension and other postretirement benefits (note 13) Deferred income taxes Other ¥0,137,503 171,773 117,286 406,727 212,234...

  • Page 97
    ... pricing audit relating to the Company's motorcycle business in Brazil. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at March 31, 2006 and 2007 are presented below: Yen (millions) U.S. dollars (millions...

  • Page 98
    Yen (millions) U.S. dollars (millions) (note 2) 2006 2007 2007 Deferred tax liabilities: Inventories Prepaid pension expenses Property, plant and equipment, excluding lease transactions Lease transactions Undistributed earnings of subsidiaries and affiliates Net unrealized gains on marketable ...

  • Page 99
    .... Information pertaining to dividends per share has been adjusted retroactively for all periods presented to reflect this stock split. 13. Pension and Other Postretirement Benefits The Company and its subsidiaries have various pension plans covering substantially all of their employees in Japan and...

  • Page 100
    ... in the Japanese Welfare Pension Insurance Law, the "Honda Employees' Pension Fund (a confederated welfare pension fund, the "Fund")", of which the Company and a part of its domestic subsidiaries and affiliates accounted for under the equity method were members, has obtained approval from the...

  • Page 101
    ... of year Change in plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Plan participants' contributions Benefits paid Transfer of the substitutional portion Business combination Foreign exchange translation Fair value of plan assets at end...

  • Page 102
    ...of beginning and ending balances of the pension benefits obligations and the fair value of the plan assets are as follows: U.S. dollars (millions) (note2) Japanese plans Foreign plans 2007 2007 Change in benefit obligations: Benefit obligations at beginning of year Service cost Interest cost Plan...

  • Page 103
    ...consolidated balance sheets are as follows: U.S. dollars (millions) (note2) Japanese plans Foreign plans 2007 2007 Noncurrent assets Current...Foreign plans: Service cost-benefits earned during the year Interest cost on projected benefit obligations Expected return on plan assets Amortization of ...

  • Page 104
    ... the expected long-term rate of return based on the expected long-term return of the various asset categories. Honda considers the current expectations for future returns and the actual historical returns of each plan asset category. Measurement date Honda uses a March 31 measurement date for their...

  • Page 105
    ... of the Company's subsidiaries in North America provide certain health care and life insurance benefits to retired employees. Such benefits have no material effect on Honda's financial position and results of operations. 14. Supplemental Disclosures of Cash Flow Information U.S. dollars (millions...

  • Page 106
    ... and related changes in accumulated other comprehensive income (loss) for each of the years in the three-year period ended March 31, 2007 are as follows: Yen (millions) U.S. dollars (millions) (note 2) 2005 2006 2007 2007 Adjustments from foreign currency translation: Balance at beginning...

  • Page 107
    ...) and reclassification adjustments are as follows: Yen (millions) Before-tax amount Tax (expense) or benefit (note 11) Net-of-tax amount 2005: Adjustments from foreign currency translation Unrealized gains (losses) on marketable securities: Unrealized holding gains (losses) arising during the year...

  • Page 108
    ... 2007 are as follows: Yen (millions) U.S. dollars (millions) (note 2) 2006 Carrying amount Estimated fair value Carrying amount 2007 Estimated fair value Carrying amount 2007 Estimated fair value Finance subsidiaries-receivables (a) Marketable securities Held-to-maturity securities Convertible...

  • Page 109
    ... ¥678,649 million ($5,749 million) of finance receivables classified as trade receivables and other assets in the consolidated balance sheets. (b) A subsidiary had a forward sale contract in relation to a portion of the above convertible notes. The carrying amount and estimated fair value of the...

  • Page 110
    ... based on the quoted market prices for the same or similar issues. The fair value of long-term loans was estimated by discounting future cash flows using rates currently available for loans of similar terms and remaining maturities. The carrying amounts of short-term bank loans and commercial paper...

  • Page 111
    ... probable that the employees will be able to make all scheduled payments. Honda warrants its vehicles for specific periods of time. Product warranties vary depending upon the nature of the product, the geographic location of its sale and other factors. 2006 2007 2007 Balance at beginning of year...

  • Page 112
    ... effect on its consolidated financial position, results of operations or cash flows. 19. Leases Honda is the lessee under several operating leases, primarily for office and other facilities, and certain office equipment. Future minimum lease payments under noncancelable operating leases that have...

  • Page 113
    ... with the accounting policies used in Honda's consolidated financial statements. Principal products and functions of each segment are as follows: Segment Principal products and services Functions Motorcycle business Motorcycles, all-terrain vehicles (ATVs), personal watercrafts and relevant parts...

  • Page 114
    Segment Information As of and for the year ended March 31, 2005 Yen (millions) Motorcycle Business Automobile Business Financial Services Business Power Product and Other Businesses Segment Total Reconciling Items Consolidated Net sales and other operating revenue: External customers Intersegment ...

  • Page 115
    ... March 31, 2007 U.S. dollars (millions) (note2) Motorcycle Business Automobile Business Financial Services Business Power Product and Other Businesses Segment Total Reconciling Items Consolidated Net sales and other operating revenue: External customers Intersegment Total Cost of sales, SG&A and...

  • Page 116
    ... purchase of operating lease assets for the year ended March 31, 2007. External Sales and Other Operating Revenue by Product or Service Groups Yen (millions) U.S. dollars (millions) (note 2) 2005 2006 2007 2007 Motorcycles and relevant parts All-terrain vehicles (ATVs), personal watercraft and...

  • Page 117
    ... Indonesia, China, India Brazil, Australia (2) Supplemental geographical information based on the location of the Company and its subsidiaries As of and for the year ended March 31, 2005 Yen (millions) Japan North America Europe Asia Other Regions Total Reconciling Items Consolidated Net sales and...

  • Page 118
    ... Yen (millions) Japan North America Europe Asia Other Regions Total Reconciling Items Consolidated Net sales and other operating revenue: External customers Transfers between geographic areas Total Cost of sales, SG&A and R&D expenses Gain on transfer of the substitutional portion of the Employees...

  • Page 119
    ... area: North America Europe Asia Other Regions United States, Canada, Mexico United Kingdom, Germany, France, Italy, Belgium Thailand, Indonesia, China, India Brazil, Australia assets, including derivative financial instruments, investments in affiliates, and deferred tax assets. 4. Sales and...

  • Page 120
    ... internal control over financial reporting has been audited by KPMG AZSA & Co., an independent registered public accounting firm, as stated in their report which is included herein. Takeo Fukui Chief Executive Officer Fumihiko Ike Chief Operating Officer for Business Management Operations July 17...

  • Page 121
    Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Honda Motor Co., Ltd.: We have audited the accompanying consolidated balance sheets of Honda Motor Co., Ltd. and subsidiaries as of March 31, 2006 and 2007, and the related consolidated statements of ...

  • Page 122
    ...in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Honda Motor Co., Ltd. and subsidiaries as of March 31, 2006 and 2007, and the related consolidated statements of income, stockholders' equity and comprehensive income...

  • Page 123
    ... March 31, 2007 II III IV Net sales and other operating revenue Operating income Income before income taxes Net income Basic net income per American depositary share Tokyo Stock Exchange: (TSE) (in yen) High Low New York Stock Exchange: (NYSE) (in U.S. dollars) High Low ¥2,264,579 ¥2,337,670...

  • Page 124
    ... services businesses Current Assets: Cash and cash equivalents Trade accounts and notes receivable Inventories Other current assets Investments and advances Property, plant and equipment, at cost Other assets Total assets Finance subsidiaries Cash and cash equivalents Finance subsidiaries-short-term...

  • Page 125
    ...) in investments and advances (64,220) Capital expenditures (458,705) Proceeds from sales of property, plant and equipment 39,645 Decrease (increase) in finance subsidiaries-receivables - Purchase of operating lease assets - Proceeds from sales of operating lease assets - Net cash used in investing...

  • Page 126
    ... ¥5,999,738 ¥6,231,041 ¥6,098,840 100% 100% 100% 100% Unit sales: Motorcycles Automobiles Power Products Number of employees Exchange rate (yen amounts per U.S. dollar) Rates for the period-end Average rates for the period * The geographic breakdown of sales amounts is based on the location of...

  • Page 127
    ...77 1,778.24. 2,259.26. 2,460.28. Yen (millions) $002.75. 2.75. 0.65. 20.84. U.S. dollars (millions) ¥1,740,340 ¥1,868,746 ¥1,748,706 ¥1,628,493 ...¥7,971,499 ¥8,162,600 ¥8,650,105 ¥09,907,996 ¥11,087,140 100% 100% 100% 100% 100% 100% Thousands $14,241. 79,678 $93,919. 5,118 2,580 3,884 114...

  • Page 128
    ... have been translated into United States dollars at the rate of ¥118.05 = U.S.$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2007. Those U.S. dollar amounts presented in the consolidated financial statements and related notes are included solely for...

  • Page 129
    ... products Motorcycles and automobiles Automobiles Motorcycles and power products Automobiles North America [ Europe Canada Mexico U.K. France Italy Spain China India Indonesia Malaysia Pakistan Philippines Taiwan Thailand Vietnam Marysville, Ohio Anna, Ohio East Liberty, Ohio Lincoln, Alabama...

  • Page 130
    Corporate Information Company Name Established Lines of Business Head Office Principal Subsidiaries Region Country of Incorporation Honda Motor Co., Ltd. September 24, 1948 Motorcycles, Automobiles, Financial Services and Power Products and Others 1-1, 2-chome, Minami-Aoyama, Minato-ku, Tokyo, ...

  • Page 131
    ... Companies Accounted for Under the Equity Method Region Country of Incorporation Company Percentage Ownership and Voting Interest Main Lines of Business Motorcycle Business Automobile Business Financial Services Business Power Product & Other Businesses Function Japan North America Saitama Tokyo...

  • Page 132
    ... ( TN Truck, Life, Civic) Kumamoto Factory begins operation Motorcycle production begins at Honda Italia Industriale S.p.A. Accord introduced ADRs listed on the New York Stock Exchange (NYSE) Consolidated financial disclosure begins Quarterly financial disclosure begins Honda of America Mfg., Inc...

  • Page 133
    ... Motorcycle production begins at new production company in India Second automobile plant in the U.K. begins operations Minimum investment unit lowered to 100 shares, from 1,000 Honda Manufacturing of Alabama, LLC in the U.S. begins operations Common stock-to-ADR exchange ratio changed from 2 shares...

  • Page 134
    ...Honda Motor Co., Ltd. Company Information â- Established â- Lines of Business â- Fiscal year-end â- Independent Registered Public Accounting Firm September 24, 1948 Motorcycles, Automobiles, Financial Services and Power Products and Others March 31 KPMG AZSA & Co. â- Web Site •Corporate Web...

  • Page 135
    ... New York, NY 10004, U.S.A. Contact Address: JPMorgan Service Center P.O. Box 3408 South Hackensack, NJ 0706-3408 TEL: 1-800-990-1135 E-mail: [email protected] Ratio: 1 ADR = 1 share of underlying stock Ticker symbol: HMC With respect to taxation and other matters relating to the acquisition, holding...

  • Page 136
    This annual report is printed on 100% recycled paper using soy ink with no volatile organic content. Furthermore, a waterless printing process was used to prevent toxic emissions. Printed in Japan