Company Quick10K Filing
Quick10K
Toyota Motor Credit
10-Q 2019-06-30 Quarter: 2019-06-30
10-K 2019-03-31 Annual: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-K 2018-03-31 Annual: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-K 2017-03-31 Annual: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-K 2016-03-31 Annual: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-K 2015-03-31 Annual: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-K 2014-03-31 Annual: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-06-21 Exhibits
8-K 2019-06-19 Regulation FD, Exhibits
8-K 2019-06-10 Regulation FD, Exhibits
8-K 2019-05-24 Regulation FD, Exhibits
8-K 2019-04-16 Other Events
8-K 2019-04-02 Other Events, Exhibits
8-K 2019-02-22 Regulation FD, Exhibits
8-K 2018-12-17 Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-11-09 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-09-14 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-08-21 Regulation FD, Exhibits
8-K 2018-08-06 Other Events, Exhibits
8-K 2018-06-27 Regulation FD, Exhibits
8-K 2018-06-18 Exhibits
8-K 2018-05-24 Regulation FD, Exhibits
8-K 2018-05-15 Regulation FD, Exhibits
8-K 2018-05-01 Other Events
8-K 2018-03-19 Regulation FD, Exhibits
8-K 2018-03-07 Other Events
8-K 2018-02-23 Regulation FD, Exhibits
8-K 2018-01-25 Exhibits
CRTX Cortexyme 593
SWKH SWK Holdings 129
QTMM Quantum Materials 17
ACLZ Accelerize 4
HPTO Hopto 3
SKAS Saker Aviation Services 0
TBMM China Vtv 0
CFSC Caterpillar Financial Services 0
LMCA Liberty Media 0
JGRI Joshua Gold Resources 0
TMCC 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Note 1 - Interim Financial Data
Note 2 - Investments in Marketable Securities
Note 3 - Finance Receivables, Net
Note 4 - Investments in Operating Leases, Net
Note 5 - Allowance for Credit Losses
Note 6 - Derivatives, Hedging Activities and Interest Expense
Note 7 - Debt and Credit Facilities
Note 8 - Variable Interest Entities
Note 9 - Commitments and Contingencies
Note 10 - Income Taxes
Note 11 - Related Party Transactions
Note 12 - Fair Value Measurements
Note 13 - Segment Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 tmcc-ex311_8.htm
EX-31.2 tmcc-ex312_7.htm
EX-32.1 tmcc-ex321_6.htm
EX-32.2 tmcc-ex322_9.htm

Toyota Motor Credit Earnings 2019-06-30

TMCC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 tmcc-10q_20190630.htm 10-Q tmcc-10q_20190630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

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

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

6565 Headquarters Drive

Plano, Texas

 

75024

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code: (469) 486-9300

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Medium-Term Notes, Series B

Stated Maturity Date January 11, 2028

TM/28

New York Stock Exchange

 

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of July 31, 2019, the number of outstanding shares of capital stock, no par value per share, of the registrant was 91,500, all of which shares were held by Toyota Financial Services International Corporation.

Reduced Disclosure Format

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

 


TOYOTA MOTOR CREDIT CORPORATION

FORM 10-Q

For the quarter ended June 30, 2019

 

INDEX

 

PART I

3

Item 1. Financial Statements

3

Consolidated Statements of Income

3

Consolidated Statements of Comprehensive Income

3

Consolidated Balance Sheets

4

Consolidated Statements of Shareholder’s Equity

5

Consolidated Statements of Cash Flows

6

Notes to Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

41

Item 3. Quantitative and Qualitative Disclosures About Market Risk

65

Item 4. Controls and Procedures

65

PART II

66

Item 1. Legal Proceedings

66

Item 1A. Risk Factors

66

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3. Defaults Upon Senior Securities

66

Item 4. Mine Safety Disclosures

66

Item 5. Other Information

66

Item 6. Exhibits

67

Signatures

68

 


2


 

PART I. FINANCIAL INFORMATION

 

 

ITEM 1. FINANCIAL STATEMENTS

TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in millions)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

 

June 30,

 

 

 

 

2019

 

 

2018

 

 

Financing revenues:

 

 

 

 

 

 

 

 

 

Operating lease

 

$

2,184

 

 

$

2,126

 

 

Retail

 

 

589

 

 

 

535

 

 

Dealer

 

 

190

 

 

 

175

 

 

Total financing revenues

 

 

2,963

 

 

 

2,836

 

 

Depreciation on operating leases

 

 

1,625

 

 

 

1,766

 

 

Interest expense

 

 

697

 

 

 

682

 

 

Net financing revenues

 

 

641

 

 

 

388

 

 

 

 

 

 

 

 

 

 

 

 

Insurance earned premiums and contract revenues

 

 

229

 

 

 

224

 

 

Investment and other income, net

 

 

118

 

 

 

40

 

 

Net financing revenues and other revenues

 

 

988

 

 

 

652

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

75

 

 

 

89

 

 

Operating and administrative

 

 

337

 

 

 

324

 

 

Insurance losses and loss adjustment expenses

 

 

113

 

 

 

125

 

 

Total expenses

 

 

525

 

 

 

538

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

463

 

 

 

114

 

 

Provision for income taxes

 

 

104

 

 

 

22

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

359

 

 

$

92

 

 

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in millions)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

 

June 30,

 

 

 

 

2019

 

 

2018

 

 

Net income

 

$

359

 

 

$

92

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses) on available-for-sale

  marketable securities [net of tax provision

  of ($3) and $0, respectively]

 

 

10

 

 

 

(4

)

 

Other comprehensive income (loss)

 

 

10

 

 

 

(4

)

 

Comprehensive income

 

$

369

 

 

$

88

 

 

 

Refer to the accompanying Notes to Consolidated Financial Statements.

3


TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in millions except share data)

(Unaudited)

 

 

 

June 30,

 

 

March 31,

 

 

 

2019

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,493

 

 

$

2,198

 

Restricted cash and cash equivalents

 

 

1,008

 

 

 

985

 

Investments in marketable securities

 

 

3,296

 

 

 

2,908

 

Finance receivables, net

 

 

72,052

 

 

 

70,517

 

Investments in operating leases, net

 

 

37,658

 

 

 

37,927

 

Other assets

 

 

2,036

 

 

 

1,981

 

Total assets

 

$

121,543

 

 

$

116,516

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDER’S EQUITY

 

 

 

 

 

 

 

 

Debt

 

$

97,384

 

 

$

92,922

 

Deferred income taxes

 

 

5,501

 

 

 

5,452

 

Other liabilities

 

 

4,711

 

 

 

4,564

 

Total liabilities

 

 

107,596

 

 

 

102,938

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Refer to Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder’s equity:

 

 

 

 

 

 

 

 

Capital stock, no par value (100,000 shares authorized; 91,500 issued

   and outstanding) at June 30, 2019 and March 31, 2019

 

 

915

 

 

 

915

 

Additional paid-in capital

 

 

2

 

 

 

2

 

Accumulated other comprehensive income

 

 

13

 

 

 

3

 

Retained earnings

 

 

13,017

 

 

 

12,658

 

Total shareholder's equity

 

 

13,947

 

 

 

13,578

 

Total liabilities and shareholder's equity

 

$

121,543

 

 

$

116,516

 

 

The following table presents the assets and liabilities of our consolidated variable interest entities (Refer to Note 8).

  

 

 

June 30,

 

 

March 31,

 

 

 

2019

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Finance receivables, net

 

$

12,677

 

 

$

11,075

 

Investments in operating leases, net

 

 

4,112

 

 

 

5,307

 

Other assets

 

 

110

 

 

 

192

 

Total assets

 

$

16,899

 

 

$

16,574

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Debt

 

$

12,916

 

 

$

12,401

 

Other liabilities

 

 

13

 

 

 

12

 

Total liabilities

 

$

12,929

 

 

$

12,413

 

 

Refer to the accompanying Notes to Consolidated Financial Statements.

 

4


TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

(Dollars in millions)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

other

 

 

 

 

 

 

 

 

 

 

 

Capital

 

 

paid-in

 

 

comprehensive

 

 

Retained

 

 

 

 

 

 

 

stock

 

 

capital

 

 

(loss) income

 

 

earnings

 

 

Total

 

Balance at March 31, 2018

 

$

915

 

 

$

2

 

 

$

(29

)

 

$

11,992

 

 

$

12,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative-effect of change in accounting policy

 

 

-

 

 

 

-

 

 

 

12

 

 

 

(122

)

 

 

(110

)

Net income for the three months ended

   June 30, 2018

 

 

-

 

 

 

-

 

 

 

-

 

 

 

92

 

 

 

92

 

Other comprehensive loss, net of tax

 

 

-

 

 

 

-

 

 

 

(4

)

 

 

-

 

 

 

(4

)

Balance at June 30, 2018

 

$

915

 

 

$

2

 

 

$

(21

)

 

$

11,962

 

 

$

12,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

$

915

 

 

$

2

 

 

$

3

 

 

$

12,658

 

 

$

13,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income for the three months ended

   June 30, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

359

 

 

 

359

 

Other comprehensive income, net of tax

 

 

-

 

 

 

-

 

 

 

10

 

 

 

-

 

 

 

10

 

Balance at June 30, 2019

 

$

915

 

 

$

2

 

 

$

13

 

 

$

13,017

 

 

$

13,947

 

Refer to the accompanying Notes to Consolidated Financial Statements.

 

5


TOYOTA MOTOR CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

359

 

 

$

92

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,655

 

 

 

1,784

 

Recognition of deferred income

 

 

(618

)

 

 

(572

)

Provision for credit losses

 

 

75

 

 

 

89

 

Amortization of deferred costs

 

 

184

 

 

 

155

 

Foreign currency and other adjustments to the carrying value of debt, net

 

 

44

 

 

 

(611

)

Net (gains) losses from investments in marketable securities

 

 

(57

)

 

 

25

 

Net change in:

 

 

 

 

 

 

 

 

Derivative assets

 

 

11

 

 

 

(21

)

Other assets and accrued interest

 

 

6

 

 

 

(68

)

Deferred income taxes

 

 

46

 

 

 

20

 

Derivative liabilities

 

 

(24

)

 

 

(2

)

Other liabilities

 

 

45

 

 

 

84

 

Net cash provided by operating activities

 

 

1,726

 

 

 

975

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of investments in marketable securities

 

 

(495

)

 

 

(673

)

Proceeds from sales of investments in marketable securities

 

 

125

 

 

 

7

 

Proceeds from maturities of investments in marketable securities

 

 

53

 

 

 

862

 

Acquisition of finance receivables

 

 

(7,337

)

 

 

(6,305

)

Collection of finance receivables

 

 

6,174

 

 

 

6,117

 

Net change in wholesale and certain working capital receivables

 

 

(334

)

 

 

(508

)

Acquisition of investments in operating leases

 

 

(4,153

)

 

 

(4,312

)

Disposals of investments in operating leases

 

 

3,152

 

 

 

2,852

 

Payments on long term loans from affiliates

 

 

6

 

 

 

11

 

Other, net

 

 

(5

)

 

 

(9

)

Net cash used in investing activities

 

 

(2,814

)

 

 

(1,958

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of debt

 

 

7,336

 

 

 

7,991

 

Payments on debt

 

 

(6,013

)

 

 

(5,067

)

Net change in commercial paper

 

 

3,095

 

 

 

(77

)

Net change in financing support provided by affiliates

 

 

(2

)

 

 

6

 

Dividend paid

 

 

(10

)

 

 

-

 

Net cash provided by financing activities

 

 

4,406

 

 

 

2,853

 

Net increase in cash and cash equivalents and restricted cash and cash equivalents

 

 

3,318

 

 

 

1,870

 

Cash and cash equivalents and restricted cash and cash equivalents at the beginning of the period

 

 

3,183

 

 

 

4,759

 

Cash and cash equivalents and restricted cash and cash equivalents at the end of the period

 

$

6,501

 

 

$

6,629

 

Supplemental disclosures:

 

 

 

 

 

 

 

 

Interest paid, net

 

$

655

 

 

$

516

 

Income taxes paid, net

 

$

18

 

 

$

1

 

Refer to the accompanying Notes to Consolidated Financial Statements.

 

 

6


TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

 

 

Note 1 – Interim Financial Data

Basis of Presentation

The information furnished in these unaudited interim consolidated financial statements as of and for the three months ended June 30, 2019 and 2018 has been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).  In the opinion of management, the unaudited consolidated financial information reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods presented.  The results of operations for the three months ended June 30, 2019 do not necessarily indicate the results which may be expected for the full fiscal year ending March 31, 2020 (“fiscal 2020”).

These financial statements should be read in conjunction with the Consolidated Financial Statements, significant accounting policies, and other Notes to Consolidated Financial Statements included in Toyota Motor Credit Corporation’s Annual Report on Form 10-K (“Form 10-K”) for the fiscal year ended March 31, 2019 (“fiscal 2019”), which was filed with the Securities and Exchange Commission on June 4, 2019.  References herein to “TMCC” denote Toyota Motor Credit Corporation, and references herein to “we”, “our”, and “us” denote Toyota Motor Credit Corporation and its consolidated subsidiaries.

Certain prior period amounts have been reclassified to conform to current period presentation.  Related party transactions are disclosed in Note 11 – Related Party Transactions.

As previously disclosed, on April 16, 2019, we announced that we will restructure our field operations over the next two years to better serve our dealer partners by streamlining our field office structure into three regional locations and investing in new technology.  Costs associated with this restructure are not expected to be significant.

7


TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

 

Note 1 – Interim Financial Data (Continued)

Recently Adopted Accounting Guidance

On April 1, 2019, we adopted the following new accounting standards:

Leases

We adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02”), along with the subsequently issued guidance amending and clarifying various aspects of the new lease guidance, using the modified retrospective method.  In accordance with that method, the comparative period’s information has not been restated and continues to be reported under the lease accounting guidance in effect for that period.  We also elected to apply the package of practical expedients permitted under the transition guidance of the new standard which allowed us to not reassess our historical lease classification, initial direct costs, and whether or not contracts entered into prior to adoption are or contain leases.  As a lessor, the adoption of ASU 2016-02, did not have a significant impact on our financial statements.  As a lessee, the adoption of ASU 2016-02 added right-of-use (“ROU”) assets of $115 million and operating lease liabilities of $122 million, which are included in Other assets, and in Other liabilities, respectively, in our Consolidated Balance Sheet.  The adoption of this new guidance did not impact our Consolidated Statement of Income and did not result in a cumulative-effect adjustment to opening retained earnings.

Refer to Note 4 – Investments in Operating Leases, Net and Note 9 – Commitments and Contingencies for additional information.

Other Recently Adopted Standards

We adopted ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs, which requires certain premiums on callable debt securities to be amortized to the earliest call date.  The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.

We adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.  The adoption of this guidance did not have an impact on our consolidated financial statements and related disclosures as we no longer have hedge accounting derivatives.  


8


TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

 

Note 1 – Interim Financial Data (Continued)

Accounting Guidance Issued But Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  This guidance introduces a new impairment model based on expected losses rather than incurred losses for certain types of financial instruments.  It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.  The FASB subsequently issued guidance amending and clarifying aspects of the new impairment model.  This ASU is effective for us on April 1, 2020.  We are in the process of developing, refining and testing the models and procedures that will be used to calculate the credit loss reserves in accordance with this new accounting guidance.  We expect this new guidance will result in an increase in our allowance for credit losses with a cumulative-effect adjustment to our opening retained earnings in the period of adoption.  The magnitude of the increase in our allowance for credit losses is under evaluation.  We are currently evaluating the other potential impacts of this guidance on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), which modifies disclosure requirements related to fair value measurement.  This ASU is effective for us on April 1, 2020.  We are currently evaluating the potential impacts of this guidance on our disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software, which aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.  This ASU is effective for us on April 1, 2020.  We are currently evaluating the potential impacts of this guidance on our consolidated financial statements and related disclosures.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810), which requires indirect interests held through related parties in common control arrangements to be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.  This ASU is effective for us on April 1, 2021.  We are currently evaluating the potential impacts of this guidance on our consolidated financial statements and related disclosures. 

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The applicable provisions of this ASU are effective for us on April 1, 2020. We are currently evaluating the potential impacts of this guidance on our consolidated financial statements and related disclosures.

 

 

9


TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

 

Note 2 – Investments in Marketable Securities

Investments in marketable securities consist of debt securities and equity investments.  We classify all of our debt securities as available-for-sale.  All equity investments are recorded at fair value with changes in fair value included in Investment and other income, net within our Consolidated Statements of Income.

Investments in marketable securities consisted of the following:

 

 

 

June 30, 2019

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

cost

 

 

gains

 

 

losses

 

 

value

 

Available-for-sale debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

194

 

 

$

6

 

 

$

(1

)

 

$

199

 

Municipal debt securities

 

 

9

 

 

 

2

 

 

 

-

 

 

 

11

 

Certificates of deposit

 

 

325

 

 

 

-

 

 

 

-

 

 

 

325

 

Commercial paper

 

 

100

 

 

 

-

 

 

 

-

 

 

 

100

 

Corporate debt securities

 

 

163

 

 

 

8

 

 

 

(1

)

 

 

170

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency

 

 

33

 

 

 

1

 

 

 

-

 

 

 

34

 

Non-agency residential

 

 

1

 

 

 

-

 

 

 

-

 

 

 

1

 

Non-agency commercial

 

 

39

 

 

 

1

 

 

 

-

 

 

 

40

 

Asset-backed securities

 

 

65

 

 

 

1

 

 

 

-

 

 

 

66

 

Total available-for-sale debt securities

 

$

929

 

 

$

19

 

 

$

(2

)

 

$

946

 

Equity investments

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,350

 

Total investments in marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

3,296

 

 

 

 

March 31, 2019

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

cost

 

 

gains

 

 

losses

 

 

value

 

Available-for-sale debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

213

 

 

$

2

 

 

$

(3

)

 

$

212

 

Municipal debt securities

 

 

9

 

 

 

2

 

 

 

-

 

 

 

11

 

Certificates of deposit

 

 

50

 

 

 

-

 

 

 

-

 

 

 

50

 

Commercial paper

 

 

70

 

 

 

-

 

 

 

-

 

 

 

70

 

Corporate debt securities

 

 

160

 

 

 

3

 

 

 

(1

)

 

 

162

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency

 

 

35

 

 

 

-

 

 

 

-

 

 

 

35

 

Non-agency residential

 

 

1

 

 

 

-

 

 

 

-

 

 

 

1

 

Non-agency commercial

 

 

39

 

 

 

-

 

 

 

-

 

 

 

39

 

Asset-backed securities

 

 

52

 

 

 

1

 

 

 

-

 

 

 

53

 

Total available-for-sale debt securities

 

$

629

 

 

$

8

 

 

$

(4

)

 

$

633

 

Equity investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,275

 

Total investments in marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,908

 

 

A portion of our equity investments are investments in funds that are privately placed and managed by an open-end investment management company (the “Trust”).  If we elect to redeem shares, the Trust will normally redeem all shares for cash, but may, in unusual circumstances, redeem amounts exceeding the lesser of $250 thousand or 1 percent of the Trust’s asset value by payment in kind of securities held by the respective fund during any 90-day period.

We also invest in actively traded open-end mutual funds.  Redemptions are subject to normal terms and conditions as described in each fund’s prospectus.

10


TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

 

Note 2 – Investments in Marketable Securities (Continued)

Unrealized Losses on Securities

Available-for-sale debt securities in a continuous loss position for less than twelve months and greater than twelve months were not significant as of June 30, 2019 and March 31, 2019.  

Gains and Losses on Securities

The following table represents gains and losses on our investments in marketable securities presented in our Consolidated Statements of Income:

 

 

 

Three Months Ended

 

 

 

 

June 30,

 

 

 

 

2019

 

 

2018

 

 

Equity investments:

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) recognized

 

$

55

 

 

$

(25

)

 

Realized gains (losses) on sales

 

$

2

 

 

$

-

 

 

Contractual Maturities

The amortized cost and fair value, by contractual maturity of available-for-sale debt securities are summarized in the following table.  Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations.

 

 

 

June 30, 2019

 

 

 

Amortized Cost

 

 

Fair Value

 

Available-for-sale debt securities:

 

 

 

 

 

 

 

 

Due within 1 year

 

$

463

 

 

$

463

 

Due after 1 year through 5 years

 

 

114

 

 

 

116

 

Due after 5 years through 10 years

 

 

139

 

 

 

145

 

Due after 10 years

 

 

75

 

 

 

81

 

Mortgage-backed and asset-backed securities1

 

 

138

 

 

 

141

 

Total

 

$

929

 

 

$

946

 

 

1

Mortgage-backed and asset-backed securities are shown separately from other maturity groupings as these securities have multiple maturity dates.

 

 

11


TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

 

Note 3 – Finance Receivables, Net

Finance receivables, net consist of the retail loan and the dealer products portfolio segments, which includes accrued interest and deferred fees and costs, net of the allowance for credit losses and deferred income.  Finance receivables, net also includes securitized retail receivables, which represent retail receivables that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements, as discussed further in Note 8 – Variable Interest Entities.  Cash flows from these securitized retail receivables are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions.  They are not available for payment of our other obligations or to satisfy claims of our other creditors.

Finance receivables, net consisted of the following:

 

 

 

June 30,

 

 

March 31,

 

 

 

2019

 

 

2019

 

Retail receivables

 

$

42,089

 

 

$

42,621

 

Securitized retail receivables

 

 

12,950

 

 

 

11,318

 

Dealer financing

 

 

18,055

 

 

 

17,696

 

 

 

 

73,094

 

 

 

71,635

 

 

 

 

 

 

 

 

 

 

Deferred origination (fees) and costs, net

 

 

752

 

 

 

695

 

Deferred income

 

 

(1,290

)

 

 

(1,314

)

Allowance for credit losses

 

 

 

 

 

 

 

 

Retail and securitized retail receivables

 

 

(327

)

 

 

(304

)

Dealer financing

 

 

(177

)

 

 

(195

)

Total allowance for credit losses

 

 

(504

)

 

 

(499

)

Finance receivables, net

 

$

72,052

 

 

$

70,517

 


12


TOYOTA MOTOR CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions)

(Unaudited)

 

Note 3 – Finance Receivables, Net (Continued)

Credit Quality Indicators

We are exposed to credit risk on our finance receivables.  Credit risk is the risk of loss arising from the failure of customers or dealers to meet the terms of their contracts with us or otherwise fail to perform as agreed.

Retail Loan Portfolio Segment

The retail loan portfolio segment consists of one class of finance receivables.  While we use various credit quality metrics to develop our allowance for credit losses on the retail loan portfolio segment, we primarily utilize the aging of the individual accounts to monitor the credit quality of these finance receivables.  Based on our experience, the payment status of borrowers is the strongest indicator of the credit quality of the underlying receivables.  Payment status also impacts charge-offs.

Individual borrower accounts within the retail loan portfolio segment are segregated into aging categories based on the number of days past due.  The aging for each class of finance receivables is updated monthly.

Dealer Products Portfolio Segment

For the three classes of finance receivables within the dealer products portfolio segment (wholesale, real estate and working capital), all loans outstanding for an individual dealer or dealer group, which includes affiliated entities, are aggregated and evaluated collectively by dealer or dealer group.  This reflects the interconnected nature of financing provided to our individual dealer and dealer group customers, and their affiliated entities.

When assessing the credit quality of the finance receivables within the dealer products portfolio segment, we segregate the finance receivables account balances into four categories representing distinct credit quality indicators based on internal risk assessments.  The internal risk assessments for all finance receivables within the dealer products portfolio segment are updated on a monthly basis.

The four credit quality indicators are:

 

Performing – Account not classified as either Credit Watch, At Risk or Default;

 

Credit Watch – Account designated for elevated attention;

 

At Risk – Account where there is an increased likelihood that default may exist based on qualitative and quantitative factors; and

 

Default – Account is not currently meeting contractual obligations or we have temporarily waived certain contractual requirements

The tables below present each credit quality indicator by class of finance receivables:

 

 

 

Retail Loan

 

 

 

June 30,

 

 

March 31,

 

 

 

2019

 

 

2019

 

Aging of finance receivables:

 

 

 

 

 

 

 

 

Current

 

$

54,082

 

 

$

53,047

 

30-59 days past due

 

 

691

 

 

 

657

 

60-89 days past due

 

 

195

 

 

 

162

 

90 days or greater past due

 

 

71

 

 

 

73

 

Total

 

$

55,039

 

 

$

53,939

 

 

 

 

Wholesale

 

 

Real Estate

 

 

Working Capital

 

 

 

June 30,

 

 

March 31,