Honda 2010 Annual Report Download - page 42

Revenue from external customers decreased ¥65.3 billion, or
19.1%, to ¥277.6 billion from the previous fiscal year, due mainly to
the decreased unit sales of power products and negative foreign
currency translation effects. Honda estimates that by applying
Japanese yen exchange rates of the previous fiscal year to the current
fiscal year, net sales for the year would have decreased by
approximately ¥52.2 billion, or 15.2%, compared to the decrease as
reported of ¥65.3 billion, which includes negative foreign currency
translation effects. Revenue including intersegment sales decreased
¥64.2 billion, or 17.4%, to ¥304.6 billion from the previous fiscal year.
Operating costs and expenses decreased ¥63.0 billion, or 16.4%,
to ¥321.3 billion from the previous fiscal year. Cost of sales decreased
by ¥46.1 billion, or 16.2%, to ¥239.3 billion, due mainly to a decrease
in costs attributable to the decreased net sales. Selling, general and
administrative expenses decreased by ¥14.1 billion, or 21.2%, to
¥52.7 billion. R&D expenses decreased by ¥2.7 billion, or 8.6%, to
¥29.2 billion, from ¥31.9 billion.
Operating loss increased ¥1.2 billion, to ¥16.7 billion from the
previous fiscal year, due mainly to a decrease in income attributable
to the decreased net sales, which was partially offset by decreased
selling, general and administrative expenses and R&D expenses.
Financial Services Business
To support the sale of its products, Honda provides retail lending
and leasing to customers and wholesale financing to dealers through
our finance subsidiaries in Japan, the United States, Canada, the
United Kingdom, Germany, Brazil, Thailand and other countries.
Total amount of finance subsidiaries—receivables and property on
operating leases of finance subsidiaries decreased by ¥90.4 billion,
or 1.9%, to ¥4,769.6 billion from the previous fiscal year. Honda
estimates that by applying Japanese yen exchange rates of the
previous fiscal year to the current fiscal year, total amount of finance
subsidiaries—receivables and property on operating leases of finance
subsidiaries as of the end of the year would have increased by
approximately ¥5.9 billion, or 0.1%, compared to the decrease as
reported of ¥90.4 billion, which includes negative foreign currency
translation effects.
Revenue from external customers in a financial services business
increased ¥24.0 billion, or 4.1%, to ¥606.3 billion from the previous
fiscal year. Honda estimates that, by applying Japanese yen exchange
rates of the previous fiscal year to the current fiscal year, revenue for
the year would have increased by approximately ¥71.9 billion, or
12.4%, compared to the increase as reported of ¥24.0 billion, which
includes negative foreign currency translation effects. Revenue
including intersegment sales increased ¥22.2 billion, or 3.7%, to
¥618.8 billion from the previous fiscal year.
Operating costs and expenses decreased ¥91.9 billion, or 17.8%,
to ¥423.9 billion from the previous fiscal year. Cost of sales decreased
¥19.7 billion, or 5.8%, to ¥321.4 billion from the previous fiscal year,
due mainly to a decrease in funding costs. Selling, general and
administrative expenses decreased ¥72.1 billion, or 41.3%, to
¥102.4 billion from the previous fiscal year, due mainly to a decrease
in provisions for credit losses and losses on lease residual values.
Operating income increased ¥114.2 billion, or 141.6%, to ¥194.9
billion from the previous fiscal year, due mainly to a decrease in
provisions for credit losses and losses on lease residual values and
a decrease in funding costs.
Our finance subsidiaries in North America have historically
accounted for all leases as direct financing leases. However, starting
in the fiscal year ended March 31, 2007, some of the leases which
do not qualify for direct financing leases accounting treatment are
accounted for as operating leases. Generally, direct financing lease
revenues and interest income consist of the recognition of finance
lease revenue at inception of the lease arrangement and subsequent
recognition of the interest income component of total lease payments
using the effective interest method. In comparison, operating lease
revenues include the recognition of the gross lease payment
amounts on a straight-line basis over the term of the lease
arrangement, and operating lease vehicles are depreciated to their
estimated residual value on a straight-line basis over the term of the
lease. It is not anticipated that the differences in accounting for
operating leases and direct financing leases will have a material net
impact on Honda’s results of operations overall, however, operating
lease revenues and associated depreciation of leased assets do
result in differing presentation and timing compared to those of
direct financing leases.
Geographical Information
Japan
In Japan, revenue from domestic and export sales decreased
¥856.8 billion, or 20.6%, to ¥3,305.7 billion from the previous fiscal
year, due mainly to a decrease in export sales in automobile
business. The operating loss decreased ¥132.4 billion, to ¥29.1
billion from the previous fiscal year, due mainly to decreased selling,
general and administrative expenses and R&D expenses and
continuing cost reductions, which was partially offset by a decrease
in income attributable to the decreased revenue and negative foreign
currency effects.
North America
In North America, which mainly consists of the United States,
revenue decreased ¥870.9 billion, or 18.2%, to ¥3,908.2 billion from
the previous fiscal year, due mainly to a decrease in revenue in
automobile business and negative foreign currency translation
effects. Operating income increased ¥156.6 billion, or 196.6%, to
¥236.3 billion from the previous fiscal year, due mainly to decreased
selling, general and administrative expenses, including a decrease in
provisions for credit losses and losses on lease residual values and
continuing cost reductions, which was partially offset by a decrease
in income attributable to the decreased revenue and an increase in
fixed costs per unit as a result of reduced production.
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