Toyota 2014 Annual Report Download - page 58

ANNUAL REPORT 2014
President’s MessagePresident’s Message
Overview of
Four Business Units
Overview of
Four Business Units
Special FeatureSpecial Feature
Review of OperationsReview of Operations
Consolidated Performance
Highlights
Consolidated Performance
Highlights
Management and
Corporate Information
Management and
Corporate Information
Investor InformationInvestor Information
Financial SectionFinancial Section
Page 58
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fiscal year. This increase in operating income was
due mainly to the ¥900.0 billion favorable impact of
changes in exchange rates, the ¥290.0 billion
impact of cost reduction efforts, and the ¥190.0 bil-
lion of favorable impact of changes in vehicle unit
sales and sales mix, partially offset by the ¥480.0
billion increase in miscellaneous costs and others.
The changes in vehicle unit sales and changes in
sales mix were due primarily to the increase in
Toyota’s vehicle unit sales by 245 thousand vehicles
compared with the prior fiscal year resulting from
the increase in vehicle unit sales in North America,
Europe and Other. The increase in miscellaneous
costs and others was due mainly to the ¥125.0 bil-
lion payment to the U.S. government based on the
agreement with the U.S. Attorney’s Office for the
Southern District of New York to resolve its investi-
gation, the ¥100.0 billion increase in labor costs, the
¥100.0 billion increase in research and development
expenses, and the ¥83.0 billion increase in costs
related to ending the vehicle and engine production
in Australia, partially offset by the ¥90.0 billion
charge for costs related to the settlement of the
economic loss claims in the consolidated federal
action in the U.S. recorded in the prior fiscal year.
Financial Services Operations Segment
Net revenues for the financial services operations
increased during fiscal 2014 by ¥250.3 billion, or
21.4%, to ¥1,421.0 billion compared with the prior
fiscal year. This increase was primarily due to the
¥199.8 billion favorable impact of fluctuations in for-
eign currency translation rates.
Operating income from financial services opera-
tions decreased by ¥20.9 billion, or 6.6%, to ¥294.8
billion during fiscal 2014 compared with the prior
fiscal year. This decrease was due primarily to the
recording of ¥22.0 billion of valuation losses on
interest rate swaps stated at fair value.
All Other Operations Segment
Net revenues for Toyota’s other operations seg-
ments increased by ¥84.8 billion, or 8.0%, to
¥1,151.2 billion during fiscal 2014 compared with
the prior fiscal year.
Operating income from Toyota’s other operations
segments increased by ¥10.6 billion, or 19.9%, to
¥64.2 billion during fiscal 2014 compared with the
prior fiscal year.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Selected Financial Summary (U.S. GAAP) Consolidated Segment Information Consolidated Quarterly Financial Summary Management’s Discussion and Analysis of Financial Condition and Results of Operations [11 of 14] Consolidated Financial Statements
As for our future business environment, the world
economy is expected to benefit from ongoing mod-
erate recovery in the U.S. and a gradual move
toward recovery in Europe, meanwhile, some
emerging countries show signs of uncertainty. The
Japanese economy is expected to remain on a
recovery trend, backed by an improved environment
for exports and the effects of various policy mea-
sures. Due attention should be paid, however, to
downside risks mainly from the continuing uncer-
tainty of overseas economies, especially in emerg-
ing countries, and the downturn in consumption
following a surge in last-minute demand spurred by
the consumption tax increase in Japan.
The automotive market is expected to see expan-
sion mainly in the U.S.; however, amid the change in
market structure, as seen in the expansion and
diversification of demand for eco-cars backed by
rising environmental consciousness and rapid
advances in information and communications tech-
nology, fierce competition exists on a global scale.
In light of the foregoing external factors, Toyota
expects that net revenues for fiscal 2015 will
increase compared with fiscal 2014 due to price
revisions and other factors, partially offset by the
unfavorable impact of fluctuations in foreign curren-
cy translation rates and a decrease in vehicle unit
sales. Toyota expects that operating income will
increase in fiscal 2015 compared with fiscal 2014
due mainly to the favorable impact of cost reduction
efforts and marketing efforts, partially offset by an
increase in miscellaneous costs, decrease in vehicle
unit sales and changes in sales mix and the unfa-
vorable impact of fluctuations in foreign currency
rates. Toyota expects that income before income
taxes and equity in earnings of affiliated companies
and net income attributable to Toyota Motor
Corporation will decrease in fiscal 2015 due to for-
eign exchange gains and losses and other factors.
For the purposes of this outlook discussion,
Toyota is assuming an average exchange rate of
¥100 to the U.S. dollar and ¥140 to the euro.
Exchange rate fluctuations can materially affect
Toyota’s operating results. In particular, a strength-
ening of the Japanese yen against the U.S. dollar
can have a material adverse effect on Toyota’s oper-
ating results. See “Operating and Financial Review
and Prospects — Operating Results — Overview —
Currency Fluctuations” for further discussion in
Toyota’s annual report on Form 20-F.
The foregoing statements are forward-looking state-
ments based upon Toyota’s management’s assump-
tions and beliefs regarding exchange rates, market
demand for Toyota’s products, economic conditions
and others. See “Cautionary Statement Concerning
Forward-Looking Statements”. Toyota’s actual results
of operations could vary significantly from those
described above as a result of unanticipated changes
in the factors described above or other factors, includ-
ing those described in “Risk Factors”.
 Outlook