Toyota 2009 Annual Report Download - page 56

Financial Section
TOYOTA MOTOR CORPORATION
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research and development expenses and the increase in
expenses due to business expansion.
• Financial Services Operations Segment
Operating income from Toyota’s financial services operations
decreased by ¥72.0 billion, or 45.4%, to ¥86.5 billion during fis-
cal 2008 compared with the prior year. This decrease is primarily
due to an increase in valuation losses on interest rate swaps
stated at fair value, partially offset by the impact of a higher vol-
ume of financing activities.
• All Other Operations Segment
Operating income from Toyota’s other businesses decreased by
¥6.6 billion, or 16.6% to ¥33.0 billion during fiscal 2008 com-
pared with the prior year.
Other Income and Expenses
Interest and dividend income increased by ¥33.7 billion, or
25.6%, to ¥165.7 billion during fiscal 2008 compared with the
prior year mainly due to an increase in interest income reflecting
an increase in marketable securities.
Interest expense decreased by ¥3.2 billion, or 6.5%, to ¥46.1
billion during fiscal 2008 compared with the prior year due to a
decrease in borrowings in the automotive operations segment.
Foreign exchange gains, net decreased by ¥23.8 billion, or
72.2%, to ¥9.2 billion during fiscal 2008 compared with the prior
year. Foreign exchange gains and losses include the differences
between the value of foreign currency denominated sales trans-
lated at prevailing exchange rates and the value of the sales
amounts settled during the year, including those settled using
forward foreign currency exchange contracts.
Other income, net increased by ¥9.9 billion, or 35.1%, to ¥38.1
billion during fiscal 2008 compared with the prior year.
Income Taxes
The provision for income taxes increased by ¥13.2 billion, or
1.5%, to ¥911.5 billion during fiscal 2008 compared with the
prior year primarily due to the increase in income before income
taxes. The effective tax rate for fiscal 2008 remained relatively
unchanged compared to the rate for fiscal 2007.
Minority Interest in Consolidated Subsidiaries
and Equity in Earnings of Affi liated Companies
Minority interest in consolidated subsidiaries increased by ¥28.3
billion, or 56.9%, to ¥78.0 billion during fiscal 2008 compared
with the prior year. This increase was mainly due to an increase
in net income attributable to favorable results of operations at
consolidated subsidiaries.
Equity in earnings of affiliated companies during fiscal 2008
increased by ¥60.6 billion, or 28.9%, to ¥270.1 billion compared
with the prior year. This increase was mainly due to an increase
in net income attributable to favorable results of operations at
the affiliated companies.
Net Income
Toyota’s net income increased by ¥73.8 billion, or 4.5%, to
¥1,717.8 billion during fiscal 2008 compared with the prior year.
Other Comprehensive Income and Loss
Other comprehensive income decreased by ¥1,115.5 billion, to
losses of ¥942.5 billion for fiscal 2008 compared with the prior
year. This decrease resulted primarily from a decrease in foreign
currency translation adjustments in fiscal 2008 to losses of
¥461.1 billion compared with gains of ¥130.7 billion in the prior
year and a decrease in unrealized holding gains on securities in
fiscal 2008 to losses of ¥347.8 billion reflecting the decline in the
Japanese stock market compared with unrealized holding gains
of ¥38.8 billion in the prior year.
Outlook
Toyota perceives a risk of a further downturn in the world econ-
omy during fiscal 2010 resulting from a weakened economy
coupled with the financial crisis.
Although Toyota expects that the automotive market is
expected to expand over the medium- to long-term particularly
in resource-rich countries and emerging countries, the automo-
tive market is currently undergoing a rapid contraction because
of the worldwide economic deceleration. In addition, the com-
petition in the automotive market is more intense globally, as
shown in the fierce competition with respect to compact cars
and low-price cars, and the acceleration in the development of
technologies and introduction of new products while environ-
mental awareness is growing throughout the world. For purpos-
es of this discussion, Toyota is assuming an average exchange
rate of ¥95 to the U.S. dollar and ¥125 to the euro. With the
foregoing external factors in mind, Toyota expects that net reve-
nues for fiscal 2010 will decrease compared with fiscal 2009 as a
result of a decrease in vehicle unit sales and the assumed
exchange rate of a stronger Japanese yen against the U.S. dol-
lar and the euro. Factors decreasing operating income include a
decrease in vehicle unit sales and the assumed exchange rate of
a stronger Japanese yen against the U.S. dollar and the euro.
The foregoing factors are partially offset by factors increasing
operating income including cost reduction efforts and decreas-
es in fixed costs and expenses. As a result, Toyota expects that
operating loss will increase in fiscal 2010 compared with fiscal
2009. Also, Toyota expects loss before income taxes and net
loss will increase in fiscal 2010. Exchange rate fluctuations can
materially affect Toyota’s operating results. In particular, a
strengthening of the Japanese yen against the U.S. dollar can
have a material adverse effect on Toyota’s operating results.
Please see “Operating and Financial Review and Prospects—
Operating Results—Overview—Currency Fluctuations.” for fur-
ther discussion.