Notes to Consolidated Financial Statements
The accompanying consolidated financial statements have beenstatements submitted to the Director of Kanto Finance Bureau in

prepared based on the accounts maintained by Toyota Industries

Japan have been reclassified in these accounts for the

Corporation (the “Company”) and its consolidated subsidiaries

convenience of readers outside Japan.

(together, hereinafter referred to as “Toyota Industries”) in

Amounts in U.S. dollars are included solely for theaccordance with the provisions set forth in the Commercial Codeconvenience of readers outside Japan. The rate ofof Japan and the Securities and Exchange Law, and in¥105.69=US$1, the approximate rate of exchange prevailing at

conformity with accounting principles and practices generally

March 31, 2004, has been used in translation. The inclusion of

accepted in Japan, which are different in certain respects fromsuch amounts are not intended to imply that the Japanese yen

the application and disclosure requirements of International

actually represent, have been or could be converted into

Accounting Standards.

equivalent amounts in U.S. dollars at this rate or any other rates.

Notes to Consolidated Financial Statements

1. Basis of presenting consolidated financial statements

Certain items presented in the consolidated financial

2. Summary of significant accounting policies(1) Consolidation

three months, the Company is using those subsidiaries’

The consolidated financial statements include the accounts ofstatements for those fiscal years, making adjustments for

the Company and its 140 subsidiaries (42 domestic subsidiaries

significant transactions that materially affect the financial position

and 98 overseas subsidiaries, which are listed on pages 90 andor results of operations.

91) in 2004, 118 subsidiaries (33 domestic subsidiaries and 85

All significant intercompany transactions, balances andoverseas subsidiaries) in 2003 and 111 subsidiaries (26 domestic

unrealized profits within Toyota Industries have been eliminated.

subsidiaries and 85 overseas subsidiaries) in 2002.
For the year ended March 31, 2004, 22 subsidiaries were
newly added to the scope of consolidation. One unconsolidated
subsidiary is excluded from the scope of consolidation due totemporary investments.
For the year ended March 31, 2003, eight subsidiaries were
newly added to the scope of consolidation and one company
was excluded from the scope of consolidation. Since two
subsidiaries out of eight subsidiaries were deemed as being
acquired by the Company as of the semi-annual period end andas of October 1, 2002, respectively, the results of operations of
the latter half of the year of those subsidiaries were consolidated
in the consolidated financial statements. Two unconsolidated
subsidiaries were excluded from the scope of consolidation due
to temporary investments.
For the year ended March 31, 2002, 15 subsidiaries were

All of the assets and liabilities of the acquired subsidiaries isstated at fair value as of the date of acquisition of control.

(2) Investments in unconsolidated subsidiaries andaffiliates
Investments in three unconsolidated subsidiaries and 19 majoraffiliates in 2004, two unconsolidated subsidiaries and 16 majoraffiliates in 2003, and one unconsolidated subsidiary and 18
major affiliates in 2002 are accounted for by the equity method of
accounting. Investments in unconsolidated subsidiaries andaffiliates not accounted for by the equity method are stated atcost due to their insignificant effect on the consolidated financial
statements.
The major affiliates accounted for by the equity method arelisted on page 91.

(3) Translation of foreign currencies

newly added to the scope of consolidation and four companies

Foreign currency denominated receivables and payables are

were excluded from the scope of consolidation. Since fivetranslated into Japanese yen at the year-end exchange rates andsubsidiaries out of 15 subsidiaries were deemed as being

the resulting transaction gains or losses are included in income

acquired by the Company as of the semi-annual period end, thestatements.

results of operations of the latter half of the year of those

All asset and liability accounts of overseas subsidiaries andsubsidiaries were consolidated in the consolidated financial

affiliates are translated into Japanese yen at the year-end

statements. One unconsolidated subsidiary was excluded fromexchange rates and all revenue and expense accounts are

the scope of consolidation due to temporary investments.

translated at prevailing fiscal average rates.

The fiscal years of certain subsidiaries are different from thefiscal year of the Company. Since the difference is not more than

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

55

Notes to Consolidated Financial Statements(4) Cash and cash equivalents(8) Intangible assets and amortization

Cash and cash equivalents include all highly liquid investments,

Amortization of intangible assets is computed using the straight-

generally with original maturities of three months or less, that areline method. Software costs for internal use are amortized by thereadily convertible to known amounts of cash and are so nearstraight-line method over their expected useful lives (mainly fivematurity that they present insignificant risk of changes in value

years).

because of changes in interest rates.

(5) Marketable securities and investment in securities
Toyota Industries classifies securities into four categories bypurpose of holding: trading securities, held-to-maturity securities,
other securities and investments in unconsolidated subsidiaries
and affiliates. Toyota Industries did not have trading securities orheld-to-maturity securities as of March 31, 2004 and 2003.
Other securities with readily determinable fair values are

Goodwill, if material, is amortized principally over less than 20
years on a straight-line basis, while immaterial goodwill ischarged to income as incurred. Goodwill incurred before April 1,
2000 has been amortized over five years on a straight-line basis.
Accumulated amortization of intangibles and goodwill as ofMarch 31, 2004 and 2003 was ¥30,743 million (US$290,879
thousand) and ¥23,579 million, respectively.

(9) Allowances for doubtful accounts

stated at fair value based on market prices at the end of the year.

Toyota Industries adopted the policy of providing an allowance for

Unrealized gains and losses are included in “Net unrealized gains

doubtful accounts in an amount sufficient to cover possible losses

on other securities” as a separate component of shareholders’on collection by estimating individually uncollectible amounts andequity. Cost of sales of such securities is determined by theapplying to the remaining accounts a percentage determined bymoving-average method. Other securities without readily

certain factors such as historical collection experiences.

determinable fair values are stated at cost, as determined by themoving-average method.
Investments in unconsolidated subsidiaries and affiliates areaccounted for by the equity method (see Note 2 (2)).

(6) Inventories
Inventories are stated mainly at cost determined by the movingaverage method.

(10) Deferred charges
Stock issuance costs and bond issuance costs are expensed as
incurred.

(11) Allowance for retirement benefits
Toyota Industries accrues an amount which is considered to be
incurred in the period based on the estimated projected benefit
obligations and estimated pension assets at the end of the year.

(7) Property, plant and equipment, and depreciation

To provide for the retirement benefits for directors and corporate

Property, plant and equipment are stated at cost. Depreciation

auditors, an amount which is calculated at the end of the year as

expenses of property, plant and equipment are computed mainly

required by an internal rule describing the retirement benefits forby the declining-balance method for the Company and Japanese

directors and corporate auditors is accrued.

subsidiaries and by the straight-line method for overseas
subsidiaries.
Significant renewals and additions are capitalized at cost.
Repair and maintenance are charged to income as incurred.
Accumulated depreciation as of March 31, 2004 and 2003
was ¥509,379 million (US$4,819,553 thousand) and ¥465,151
million, respectively.
Estimated useful lives are mainly as follows:(12) Lease transactions
Finance leases other than those that are deemed to transfer theownership of the leased assets to lessees are accounted formainly by a method similar to that applicable to ordinary
operating leases.

(13) Consumption tax
The consumption tax under the Japanese Consumption Tax Law

Building and structures ………………….. 5 – 50 years

withheld by Toyota Industries on sales of goods is not included in

Machinery, equipment and vehicles…….. 3 – 22

the amount of net sales in the accompanying consolidated

Tools, furniture and fixtures………………. 2 – 20

statements of income, and the consumption tax paid by Toyota
Industries under the law on purchases of goods and services,and expenses is not included in the related amount.

56

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

(15) Appropriation of retained earnings(a) Method of hedge accounting

In the accompanying consolidated statements of shareholders’

Mainly the deferral method of hedge accounting is applied. In theequity, the approved amount during the relevant fiscal year iscase of foreign currency forward contracts and foreign currency

reflected for the appropriation of retained earnings ofoption contracts, the hedged items are translated at contracted

consolidated subsidiaries. In Japan, the payment of bonuses toforward rates if certain conditions are met.

directors and corporate auditors is made out of retained earnings(b) Hedging instruments and hedged items

through an appropriation, instead of being charged to income for

Hedging instruments: derivatives instruments (interest rate

the year.

swaps, foreign currency forwards andforeign currency option contracts)
Hedged items:

risk of change in interest rate on
borrowings and risk of change in forward
exchange rate on transactions
denominated in foreign currencies (assets
and liabilities, and forecasted
transactions)(c) Hedging policy
Hedging transactions are executed and controlled based on
Toyota Industries’ internal rule and Toyota Industries is hedging(16) Income taxes
The provision for income taxes is computed based on the pretax
income included in the consolidated statements of income. The
asset and liability approach is used to recognize deferred tax
liabilities and assets for the expected future tax consequences ofNotes to Consolidated Financial Statements(14) Hedge accounting

temporary differences between the carrying amounts and the tax
bases of assets and liabilities.
Valuation allowances are recorded to reduce deferred tax
assets when it is more likely than not that a tax benefit will not berealized.

interest rate risks and foreign currency risks. Toyota Industries’(17) Net income per sharehedging activities are reported periodically to a director

The computation of basic net income per share is based on the

responsible for accounting.

weighted-average number of outstanding shares of common(d) Method used to measure hedge effectivenessstock. The calculation of diluted net income per share is similar

Hedge effectiveness is measured by comparing accumulated

to the calculation of basic net income per share, except that thechanges in market prices of hedged items and hedging

weighted-average number of shares outstanding includes the

instruments or accumulated changes in estimated cash flows

additional dilution from potential common stock equivalents suchfrom the inception of the hedge to the date of measurements

as convertible bonds. Cash dividends per share shown in theperformed. Currently it is considered that there are highstatements of income are the amounts applicable to thecorrelations between them.

respective years. The change in accounting policy is described in(e) Others

Note 3.

Due to the fact that counterparties to Toyota Industries represent
major financial institutions which have high creditworthiness,
Toyota Industries believes that the overall credit risk related to its
financial instruments is insignificant.

3. Changes in accounting policies and adoption of new accounting standards(1) For the year ended March 31, 2003

(2) Recent accounting pronouncements in Japan

Accounting Standard for Earnings Per ShareOn August 9, 2002, the Business Accounting Council of Japan

Effective beginning the year ended March 31, 2003, Financial

issued “Accounting Standard for Impairment of Fixed Assets.”

Accounting Standard No. 2 “Accounting Standard for Earnings

The standard requires that fixed assets be reviewed for

Per Share” and Financial Accounting Standards Implementation

impairment whenever events or changes in circumstances

Guidance No. 4 “Implementation Guidance for Accounting

indicate that the carrying amount of an asset may not beStandards for Earnings Per Share” issued by the Accounting

recoverable. An impairment loss shall be recognized in theStandards Board of Japan have been applied.

income statement by reducing the carrying amount of impaired
assets or a group of assets to the recoverable amount to bemeasured as the higher of the asset’s net selling price and value
in use. The standard shall be effective for fiscal years beginning
April 1, 2005, with earlier adoption permitted.

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

57

4. Acquisitions
Notes to Consolidated Financial Statements

For the year ended March 31, 2002
Summary of assets and liabilities that increased due to the acquisition of business (materials handling sales operation) from Toyota Motor
Corporation is as follows:
Millions of yen

Current assets¥11,912

Fixed assets

14,957

Current liabilities(1,184)Long-term liabilities(1,152)Acquisition cost

24,533

Less: cash and cash equivalents(814)

Cash payment for the acquisition¥23,719

5. Marketable securities(1) As of and for the year ended March 31, 2004(a) Other securities with readily determinable fair value as of March 31, 2004 are as follows:
Thousands of U.S. dollars

Millions of yen

Acquisition
cost

Carrying
amountDifference

Acquisition
cost

Carrying
amountDifference

Securities with carrying amountexceeding acquisition cost:
Stocks¥185,252 ¥1,075,222¥889,970$1,752,786 $10,173,356 $8,420,570

Subtotal

185,252

1,075,222

889,970

1,752,786

10,173,356

8,420,570

2,097

1,653

(444)

19,841

15,640(4,201)Government and municipal bonds, etc.

0

0

0

0

0

0

Other bonds

1

1

0

9

9

0

2,098

1,654

(444)

19,85015,649(4,201)¥187,350 ¥1,076,876¥889,526

Securities with carrying amountnot exceeding acquisition cost:
Stocks
Bonds

SubtotalTotal

In this year, Toyota Industries recorded ¥184 million (US$1,741$1,772,636 $10,189,005 $8,416,369

securities with carrying amount not exceeding the cost lines.

thousand) of impairment on an equity security included in(b) Other securities sold during the year ended March 31, 2004 are as follows:
Millions of yen

Proceeds¥2,181

58

Realized gains

Thousands of U.S. dollars

Realized losses¥803

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION¥11

Proceeds

Realized gains$20,636$7,598Realized losses$104(c) Contents and carrying amount of securities (excluding held-to-maturity bonds within securities with fair value) without readily
determinable fair value as of March 31, 2004 are as follows:

Thousands of
U.S. dollars

Millions of yen

Held-to-maturity securities

¥

–

$

–

Other securities
Domestic unlisted stocks excluding over-the-counter stocks

18,200172,202

Money management funds

20,019189,412(d) Redemption schedule of securities which have maturities within other securities as of March 31, 2004 is as follows:

Within1 yearMillions of yen

Thousands of U.S. dollars

Over 1 year Over 5 years
withinwithin5 years
10 years

Over 1 year Over 5 years
withinwithin5 years
10 yearsOver
10 yearsWithin1 yearOver
10 years

Notes to Consolidated Financial Statements

Carrying amount

Bonds
Government bonds

¥ –

¥–

¥0

¥–

Corporate bonds

–

–

–

Other bonds

46

0

¥46

¥0

Total

$

–

$–

$0

$–

–

–

–

–

–

–

–

435

0

–

–

¥0

¥–

$435

$0

$0

$–

(2) As of and for the year ended March 31, 2003(a) Other securities with readily determinable fair value as of March 31, 2003 are as follows:
Millions of yen

Acquisition
cost

Carrying
amountDifference¥159,155¥713,979¥554,824

Securities with carrying amount exceeding acquisition cost:
Stocks
Bonds
Corporate bonds

703

703

0

430

472

42

160,288715,154554,866

17,963

14,341(3,622)Government and municipal bonds, etc.

20,00020,000(0)Corporate bonds

2,002

2,002

(0)

3

3

–

39,96836,346(3,622)¥200,256¥751,500¥551,244

Other
Subtotal
Securities with carrying amount not exceeding acquisition cost:
Stocks
Bonds

Other bonds
SubtotalTotal
In this year, Toyota Industries recorded ¥3,671 million ofcarrying amount not exceeding the cost lines.

impairment on an equity security included in securities with(b) Other securities sold during the year ended March 31, 2003 are as follows:
Millions of yen

Proceeds

Realized gains¥9,762¥1,558Realized losses¥5

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

59

(c) Contents and carrying amount of securities (excluding held-to-maturity bonds within securities with fair value) without readily
determinable fair value as of March 31, 2003 are as follows:
Notes to Consolidated Financial Statements

Carrying amountMillions of yen

Held-to-maturity securities¥–

Other securities
Domestic unlisted stocks excluding over-the-counter stocks

17,117

Money management funds

30,073(d) Redemption schedule of securities which have maturities within other securities as of March 31, 2003 is as follows:
Millions of yen

Over 1 year Over 5 years
withinwithin5 years
10 yearsWithin1 yearOver
10 years

Bonds
Government bonds¥20,000

¥0

¥–

¥–

Corporate bonds

2,705

–

–

–

Other bonds
Total

3

–

–

–

¥22,708

¥0

¥–

¥–

6. Inventories
Inventories as of March 31, 2004 and 2003 consist of the following:Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Finished goods¥31,265¥28,524$295,818

Raw materials

11,722

10,284110,909

Work in process

26,893

22,956

254,452

Supplies
Total

60

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

7,694

7,377

72,798¥77,574¥69,141$733,977

7. Long-term debt
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

The Company:
0.35% convertible bonds due 2003 without collateral¥–¥ 75,692$–

2.70% bonds due 2008 without collateral

30,00030,000283,849

1.50% bonds due 2003 without collateral–

20,000–2.15% bonds due 2008 without collateral

20,00020,000189,233

1.50% bonds due 2006 without collateral

15,00015,000141,924

1.94% bonds due 2009 without collateral

15,00015,000141,924

1.25% bonds due 2005 without collateral

20,00020,000189,233

1.91% bonds due 2010 without collateral

20,00020,000189,233

0.41% bonds due 2007 without collateral

30,00030,000283,849

1.13% bonds due 2012 without collateral

50,00050,000473,082

Notes to Consolidated Financial Statements(1) Long-term debt as of March 31, 2004 and 2003 consists of the following:

Consolidated subsidiaries:
1.80% bonds due 2005

300

300

2,838

Long-term bank loans

38,26339,904362,030(3,038)(99,019)(28,744)¥235,525¥236,877$2,228,451

Less: current portion of long-term debt
Total(2) Annual maturities of long-term debt as of March 31, 2004 are as follows:Year ending March 31

2005

Millions of yen

¥

3,038

Thousands of
U.S. dollars$

28,744

2006

29,657

280,6042007

16,337

154,575

2008

61,698583,764

2009

20,344

192,487

2010 and thereafter

107,489

1,017,021

Total¥238,563$2,257,195

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION61

8. Assets pledged as collateral
Notes to Consolidated Financial Statements(1) Assets pledged as collateral as of March 31, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Investments in securities¥33,126¥21,724$313,426

Buildings and structures

3,837

3,713

36,305

Land

8,466

5,340

80,1022–

19

Machinery, equipment and vehicles
Trade notes and accounts receivable

431

519

4,078

Other

232

29

2,195

Total

¥46,094¥31,325$436,125(2) Secured liabilities as of March 31, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

Other current liabilities

2004

2003

2004

¥19,422¥18,936$183,764

Short-term bank loans

5,059

7,756

47,866Long-term debt

2,435

3,276

23,039¥26,916¥29,968$254,669

Total

9. Contingent liabilities
Toyota Industries is contingently liable for guarantees as of March 31, 2004 and 2003 as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Guarantees given by the Company¥11,250¥32,996$106,443

Guarantees given by consolidated subsidiaries

10,0306,378

94,900

Guarantee forwards given by the Company

3,314

3,621

31,356

10. Shareholders’ equity:
Under the Japanese Commercial Code, amounts equal to at

the fiscal year to which the dividend is applicable. In addition,

least 10% of the sum of the cash dividends and other externalinterim cash dividends may be paid upon resolution of theappropriations paid by the Company and its domestic

Board of Directors, subject to limitations imposed by thesubsidiaries must be set aside as a legal reserve until it equals

Japanese Commercial Code.

25% of common stock. The legal reserve may be used to reducebeen accounted for in approximately equal amounts asappropriate corporate action. In consolidation, the legal reservescommon stock and capital surplus. At least 50% of theof the Company and its domestic subsidiaries are accounted forproceeds have been accounted for as common stock, in

as retained earnings.

accordance with the provisions of the Japanese Commercial

Year-end cash dividend is approved at the Ordinary General
Meeting of Shareholders of the Company held after the close of62

Proceeds from the conversion of convertible bonds havea deficit or may be transferred to common stock by taking

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

Code.

11. Research and development expenses¥29,705 million and ¥29,985 million for the years ended March

selling, general and administrative expenses and manufacturing31, 2004, 2003 and 2002, respectively.

costs, amounted to ¥29,562 million (US$279,705 thousand),12. Other non-operating income and expenses
Thousands of
U.S. dollars

Millions of yen

2004

2003

2002

2004

¥

¥ 1,851¥$

Other non-operating income:Gain on sales of marketable securities
Rental income of fixed assets
Exchange gain
Gain on sales of fixed assets

242

7,749

1,833

2,036

2,214

17,343

836

1,709

2,324

7,910

808

332

375

7,645

4,873

2,533

1,624

46,107¥ 9,169¥ 8,461¥ 6,779$ 86,754

¥

¥

¥

$

Sundries
Total

819

Notes to Consolidated Financial Statements

Research and development expenses, which are included in

Other non-operating expenses:
Loss on impairment of securities
Depreciation

152
2,342

–

302

2,202

2,082

1,438
22,159Loss on disposal of fixed assets

3,523

3,101

1,941

33,333

Exchange loss

1,283

1,224

557

12,139Bond issue costs
Sundries
Total

502

329

19

4,750

6,286

5,425

4,914

59,476¥ 14,088¥ 12,281¥ 9,815$133,295

13. Derivative instruments(1) Qualitative disclosure about derivatives

fact that counterparties to Toyota Industries represent(a) Contents of derivative instruments into which Toyota

major financial institutions which have highIndustries entered, policy with respect to entering into

creditworthiness, Toyota Industries believes that thederivative instruments, and purpose of using derivative

overall credit risk related to its financial instruments is

instruments:
Toyota Industries uses interest rate swap agreements to
reduce interest rate risks on borrowings. Toyota Industries

insignificant.
(c) Controls in place over transactions handling derivative
instruments:

also uses foreign currency forward contracts and foreign

Hedging transactions are executed and controlled based

currency option contracts to hedge foreign currency risks

on Toyota Industries’ internal rule and Toyota Industries’

on transactions denominated in foreign currencies

hedging activities are reported periodically to a director(receivables and payables and forecasted transactions).

responsible for accounting.

(b) Contents of risks related to derivative instruments:
Interest rate swaps, foreign currency forward contracts
and foreign currency option contracts into which Toyota
Industries entered have risks of fluctuations in interest
rates and in foreign currency exchange rates. Due to the(2) Quantitative disclosure about derivatives
Toyota Industries omitted this information because hedge
accounting is applied to all of the derivative instruments into
which Toyota Industries entered.

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

63

14. Retirement benefits
Notes to Consolidated Financial Statements(1) Outline of retirement benefit plans:
The Company and its domestic subsidiaries maintain tax qualified

transferring the covering percentages of pension plan from lump-pension plans and lump-sum indemnities plans, both of which

sum indemnities plan to tax-qualified pension plan. As of March

are non-contributory defined benefit pension plans. In addition,

31, 2004, tax-qualified pension plan covers 50% of total plans.

certain overseas subsidiaries maintain non-contributory defined
benefit pension plans. Since 1987, the Company has beenAlso, the Company established an employee retirement
benefit trust.

(2) Components of allowance for retirement benefits as of March 31, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Benefit obligation¥ 96,344¥ 95,904$ 911,572

Plan assets(57,929)(46,640)(548,103)

Unfunded benefit obligation

38,41549,264363,469

Unrecognized actuarial loss

(15,372)(25,341)(145,444)

Unrecognized loss in prior service obligation

(597)

(187)

(5,649)Net amount recognized on the balance sheet

22,44623,736

212,376

Prepaid pension expenses(7,218)(7,626)(68,294)¥ 29,664¥ 31,362$ 280,670

Allowance for retirement benefits
Certain subsidiaries use the simplified method to determine(US$43,527 thousand) and ¥2,738 million of allowance forbenefit obligations. Prepaid pension expenses are included inretirement and severance benefits for directors and corporate

other investments and other assets. Allowance for retirement

auditors as of March 31, 2004 and 2003, respectively.

benefits on the balance sheets includes ¥4,600 million(3) Components of retirement benefit expenses for the years ended March 31, 2004, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2004

Service cost

¥ 7,424¥6,615¥6,018$ 70,243

Interest cost

4,559

2,036

1,843

43,136

Expected return on plan assets

(822)

(797)

(704)

(7,777)

79

12

–

747

Amortization of prior service obligation
Amortization of unrecognized actuarial gain or loss
Retirement benefit expenses
Retirement expenses of subsidiaries which adopted thesimplified method are included in both service cost and

64

2004

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

1,854

484

225

17,542¥13,094¥8,350¥7,382$123,891

amortization of transition obligation.

(4) Assumptions used for calculation of retirement benefits for the years ended March 31, 2004, 2003 and 2002 are as follows:
2003

2002

to periods of employee service: straight-line method
Discount rate

2.00%

2.00%

3.00%

Expected return on plan assets

3.00%

3.00%

3.00%

6–11 years

6–11 years–

Amortization period of prior service obligation— Straight-line method
over the remaining
service period of
employees startingfrom following year

Amortization period of unrecognized actuarial gains or losses

20 years

20 years

20 years— Straight-line method
over the average

Notes to Consolidated Financial Statements

2004
Method of attribution of estimated retirement benefits

remaining service
period of employees
starting from following
year

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

65

15. Income taxes
Notes to Consolidated Financial Statements(1) The significant components of deferred tax assets and liabilities as of March 31, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Deferred tax assets:
Allowance for retirement benefits

¥

8,927

¥

6,285

$

84,464

Trade receivables

5,026

5,122

47,554

Accrued expenses

5,458

4,644

51,642

Net operating loss carry-forwards for tax purposes

4,985

2,437

47,166

Depreciation

3,732

2,867

35,311

Securities

2,238

3,149

21,175Enterprise tax payable

1,566

1,124

14,817

Other

14,80011,567140,032

Subtotal

46,732

37,195442,161

Less — valuation allowance(6,556)(2,508)(62,031)40,176

34,687

380,130

Other securities

354,600

219,413

3,355,095

Depreciation

4,298

4,513

40,666

Land

1,110

2,650

10,502

Reserve for advanced depreciation

468

337

4,428

Reserve for special depreciation

589

549

5,573

7,118

3,837

67,348

Total deferred tax assets
Deferred tax liabilities:

Other
Total deferred tax liabilities

368,183

231,2993,483,612

Net deferred tax liabilities¥(328,007)¥(196,612)$ (3,103,482)

Net deferred tax liabilities consist of the following components on the consolidated balance sheet.
Thousands of
U.S. dollars

Millions of yen

Current assets — deferred tax assets

2004

2003

2004

¥ 17,534¥ 14,072

Investments and other assets — deferred tax assets

3,538

2,863

$

165,900
33,475Current liabilities — deferred tax liabilities(2,743)(1,192)(25,953)

Long-term liabilities — deferred tax liabilities(346,336)(212,355)(3,276,904)

Net deferred tax liabilities¥(328,007)¥(196,612)$(3,103,482)(2) Reconciliations of differences between the statutory rate of income taxes and the effective rate of income taxes for the years
ended March 31, 2004, 2003 and 2002 are as follows:
2004
Statutory rate of income taxes

2003

2002

41.2%

41.2%

41.2%

(3.4)

(3.5)

(5.4)

(1.9)

10.0

5.4

35.9%

47.7%

41.2%

Addition (reduction) in taxes resulting from:
Dividends income and others permanently not recognized as taxable income
Other
Effective rate of income taxes

66

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

16. Leases(a) Pro forma information regarding the leased properties such as acquisition cost and accumulated depreciation, which are notreflected in the accompanying consolidated balance sheets as of March 31, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Buildings and structures
Acquisition cost equivalents¥

13

Accumulated depreciation equivalents

¥

–

$

123

11

–

104

2

–

19

Acquisition cost equivalents

10,095

8,258

95,515

Accumulated depreciation equivalents

5,203

2,772

49,229

4,892

5,486

46,286

Acquisition cost equivalents

5,340

5,277

50,525

Accumulated depreciation equivalents

3,279

2,911

31,025

2,061

2,366

19,500Acquisition cost equivalents

147

–

1,391

Accumulated depreciation equivalents

63

–

596

84

–

795

¥ 7,039¥7,852$ 66,600

Buildings and structures net balance equivalents
Machinery and equipment:

Machinery and equipment net balance equivalents

Notes to Consolidated Financial Statements(1) Finance leases (as a lessee) which do not transfer ownership of leased properties to lessees

Tools, furniture and fixtures:

Tools, furniture and fixtures net balance equivalents
Software:

Software net balance equivalents
Total net leased properties
Acquisition cost equivalents include the imputed interest

dividing future minimum lease payments by total balance ofexpense portion because the percentage which is computed byproperty, plant and equipment at year-end is immaterial.

(b) Pro forma information regarding future minimum lease payments as of March 31, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Due within 1 year

¥2,696¥2,274$25,508

Due after 1 year

4,343

5,577

41,092

Total¥7,039¥7,851$66,600

The amount equivalent to future minimum lease payments as of

future minimum lease payments by total balance of property,

the end of the year includes the imputed interest expense

plant and equipment at year-end is immaterial.

portion because the percentage which is computed by dividing(c) Total lease payments for the years ended March 31, 2004, 2003 and 2002 are as follows:
Millions of yen

Thousands of
U.S. dollars

2004¥3,614$ 34,193

2003

2,566

–

2002

1,842

–

Pro forma depreciation expenses, which are not reflected in thezero residual value and leasing term to be useful lives for theaccompanying consolidated statements of income, areyears ended 2004, 2003 and 2002, and are equivalent to thecomputed mainly by the straight-line method, which assumes

amount of total lease payments of the above.

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

67

(2) Operating leases (as a lessee)
Notes to Consolidated Financial Statements

Pro forma future lease payments under operating leases as of March 31, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

Due within 1 year

2004

2003

2004

¥ 3,091¥ 2,878$ 29,246

Due after 1 year

13,584

10,084

128,527

Total¥ 16,675¥12,962$157,773(3) Finance leases (as a lessor) which do not transfer ownership of leased properties to lessees(a) Information regarding leased properties such as acquisition cost and accumulated depreciation under finance leases as ofMarch 31, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

¥8,061¥7,306$ 76,270

Machinery and equipment:
Acquisition cost
Accumulated depreciation
Total net leased property

4,686

4,284

44,337¥3,375¥3,022$ 31,933(b) Pro forma information regarding future minimum lease income as of March 31, 2004 and 2003 is as follows:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Due within 1 year

¥1,673¥1,816$15,829

Due after 1 year

2,842

2,657

26,890Total¥4,515¥4,473$42,719

The amount equivalent to future minimum lease income

income by total balance of property, plant and equipment at

includes the imputed interest income portion because theyear-end is immaterial.

percentage which is computed by dividing future minimum lease(c) Total lease receipts and depreciation expenses for the years ended March 31, 2004 and 2003 are as follows:
Thousands of
U.S. dollars

Millions of yen

68

2004

2003

2004

Total lease payments to be received¥2,179¥1,930$ 20,617

Depreciation expenses

1,847

1,631

17,476

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

(4) Operating leases (as a lessor)
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

Due within 1 year

¥ 7,217¥ 5,431$ 68,285

Due after 1 year

10,741

9,320

101,627

Total¥ 17,958¥ 14,751$169,912

17. Subsequent events
On June 22, 2004, the shareholders of the Company authorized

and corporate auditors of ¥246 million (US$2,328 thousand).

payment of a year-end cash dividend to shareholders of record

Cash dividends for the year totaled ¥24 (US$0.228) per share,

as of March 31, 2004 of ¥12 (US$0.114) per share, or a total ofincluding a semi-annual dividend of ¥12 (US$0.114).

Notes to Consolidated Financial Statements

Pro forma information regarding future minimum rentals under operating leases as of March 31, 2004 and 2003 is as follows:¥3,812 million (US$36,068 thousand), and bonuses to directors

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

69

18. Segment information
Notes to Consolidated Financial Statements(1) Business segments
As of and for the years ended March 31, 2004, 2003 and 2002:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2002

2004

¥ 563,599$ 5,713,530

Sales:
Automobile
Outside customer sales¥

Intersegment transactions

603,863 ¥ 595,460
15,69815,523

15,412

148,529

619,561

610,983

579,011

5,862,059

443,444

373,008

353,043

4,195,704

138

90

44

1,306

443,582373,098

353,087

4,197,010

45,96948,74030,705434,942

Materials handling equipment
Outside customer sales
Intersegment transactions

Textile machinery
Outside customer sales
Intersegment transactions

16

6

50

151

45,98548,74630,755435,093

Outside customer sales

71,10352,01132,816

672,751

Intersegment transactions

14,132

13,078

11,056

133,712

85,23565,08943,872806,463

1,194,363

1,097,916

1,006,725

11,300,625(29,984)

OthersSubtotal
Elimination of intersegment transactions
Total(28,697)(26,562)(283,698)¥ 1,164,379 ¥1,069,219¥ 980,163$11,016,927¥¥ 550,051$ 5,601,580

339,721

4,013,937

Operating costs and expenses:
Automobile
Materials handling equipment

592,031 ¥ 580,875
424,233

356,923

Textile machinery

45,88546,43731,146434,147

Others

79,48561,17739,390752,058

Elimination of intersegment transactions(29,886)(28,671)(26,475)(282,770)¥ 1,111,748 ¥1,016,741¥ 933,833$10,518,952

¥

¥

$

Total
Operating income (loss):
Automobile
Materials handling equipment
Textile machinery
OthersElimination of intersegment transactions
Total

70

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION¥

27,530 ¥30,10819,34916,17528,96013,366

260,479
183,073

100

2,309

(391)

946

5,750

3,912

4,482

54,405

(98)

(26)

(87)

(928)

52,631 ¥

52,478¥46,330$497,975

2004

2003

2002

2004

Assets:Automobile¥ 338,247 ¥ 328,370 ¥ 317,133$ 3,200,369

Materials handling equipment

406,384

337,453

319,335

3,845,056

Textile machinery

24,74430,922

22,323

234,119

Others100,626

51,83931,640952,086

1,141,994

901,807

Corporate assets or elimination
Total

1,079,970

10,805,128¥ 2,011,995 ¥1,650,391 ¥1,770,401$19,036,758¥$

Notes to Consolidated Financial Statements

Thousands of
U.S. dollars

Millions of yen

Depreciation and amortization:
Automobile
Materials handling equipment
Textile machinery

35,793 ¥34,157 ¥33,40323,53820,801

18,882

338,660
222,708

931

1,006

797

8,809

Others

5,443

3,487

2,307

51,500

Corporate or elimination of intersegment transactions

(353)

(297)

(215)

(3,340)¥65,352 ¥59,154 ¥55,174$

618,337¥

48,793 ¥49,380 ¥61,023$

461,661

Materials handling equipment

32,20524,35026,337

304,712

Textile machinery

1,204

2,164

523

11,392Others

7,749

12,068903

73,318

Corporate or elimination of intersegment transactions

(442)

(403)

(466)

(4,182)89,509 ¥87,559 ¥88,320

Total
Capital expenditures:
Automobile

Total

¥

$

846,901

Main products of each segment are as follows:
Automobile ............................................. Passenger vehicles, diesel and gasoline engines, car air-conditioning compressors
Materials handling equipment ................. Counterbalanced forklift trucks, warehouse trucks, skid steer loaders, automated storage and retrieval systems, automatic guided vehicles
Textile machinery .................................... Ring spinning frames, air-jet looms, water-jet looms
Others ..................................................... Ball grid array plastic package substrates for IC chipsets, casting machines

Corporate assets included in corporate assets or elimination

investments and investments in securities held by theconsist mainly of cash and cash equivalents, short-term

Company.

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

71

(2) Geographical segments
Notes to Consolidated Financial Statements

As of and for the years ended March 31, 2004, 2003 and 2002:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2002

2004

¥ 675,346$ 7,429,776

Sales:
Japan
Outside customer sales¥ 785,253 ¥ 733,869

Intersegment transactions

87,271

78,51861,097825,726

872,524

812,387

736,443

8,255,502

Outside customer sales

198,753

192,385

180,535

1,880,528

Intersegment transactions

1,113

1,411

1,392

10,531

199,866

193,796

181,927

1,891,059

167,512

139,515

121,036

1,584,937

North America

EuropeOutside customer sales
Intersegment transactions

5,896

4,899

5,426

55,786

173,408

144,414

126,462

1,640,723

Others
Outside customer sales

12,861

3,450

3,246

121,686

Intersegment transactions

1,630

1,034

652

15,422

Subtotal
Elimination of intersegment transactions
Total

14,491

4,484

3,898

137,108

1,260,289

1,155,081

1,048,730

11,924,392(95,910)(85,862)(68,567)(907,465)¥ 1,164,379 ¥1,069,219¥ 980,163$11,016,927¥ 826,696 ¥ 767,342¥ 695,442$ 7,821,894

Operating costs and expenses:
Japan
North America

193,745

187,596

177,442

1,833,145

Europe170,263

142,469

125,345

1,610,966

Others

14,623

4,560

4,011

138,357(93,579)

Elimination of intersegment transactions
Total(85,226)(68,407)(885,410)¥ 1,111,748 ¥1,016,741¥ 933,833$10,518,952

¥

¥

$

Operating income (loss):Japan

45,828 ¥45,045

North America

6,121

6,200

4,485

57,914

Europe

3,145

1,945

1,117

29,757

(132)

(76)

(113)

(1,249)(2,331)

(636)

(160)

(22,055)

OthersElimination of intersegment transactions
Total

72

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION¥

52,631 ¥

52,478¥41,001

46,330$433,608

497,975

2004

2003

2002

2004

Assets:Japan¥

643,180 ¥ 554,034 ¥ 511,856$ 6,085,533

North America

136,830

144,739

156,188

1,294,635

Europe238,388

223,446

202,078

2,255,540

Others

22,082

9,759

5,757

208,932

Corporate assets or elimination

971,515

718,413894,522

9,192,118¥ 2,011,995 ¥ 1,650,391 ¥1,770,401$ 19,036,758

Total
Significant countries or areas belonging to each segment as of March 31, 2004 are as follows:

Notes to Consolidated Financial Statements

Thousands of
U.S. dollars

Millions of yen

North America .................................. U.S.A., Canada
Europe ............................................. Sweden, France, Germany
Others .............................................. China, India

Corporate assets included in corporate assets or elimination

investments and investments in securities held by theconsist mainly of cash and cash equivalents, short-term

Company.

(3) Overseas sales
For the years ended March 31, 2004, 2003 and 2002:
Thousands of
U.S. dollars

Millions of yen

2004

2003

2002

2004

¥181,177$ 1,862,626

160,456

1,997,171

Overseas sales:
North America
EuropeOthers¥ 196,861 ¥ 192,422
211,081

181,347

89,41577,82554,837

846,012

Total¥ 497,357 ¥ 451,594¥396,470$ 4,705,809

Total sales¥ 1,164,379 ¥1,069,219¥980,163$11,016,927

Ratio of overseas sales to total sales (%):
North America

16.9%

18.0%

18.5%

Europe

18.1

17.0

16.4

Others

7.7

7.2

5.5

42.7%

42.2%

40.4%

Total
Significant countries or areas belonging to each area as of March 31, 2004 are as follows:
North America .................................. U.S.A., Canada
Europe ............................................. Germany, France, Italy
Others .............................................. China, Australia, Pakistan

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION73

19. Related party transactions
Notes to Consolidated Financial Statements

The following transactions were carried out with related parties:(1) Sales of goods and services for the years ended March 31, 2004, 2003 and 2002 were as follows:
Thousands of
U.S. dollars

Millions of yen

Toyota Motor Corporation
Toyota Motor Corporation held 24.1% of the Company’s shares

2004

2003

2002

2004

¥406,267¥417,058¥410,995$ 3,843,949

on commercial terms and conditions.

as of March 31,2004. The above transactions were carried out(2) Purchase of goods and services for the years ended March 31, 2004, 2003 and 2002 were as follows:
Purchase of goods:
Thousands of
U.S. dollars

Millions of yen

Toyota Motor Corporation

2004

2003

2002

2004

¥285,412¥293,853¥284,531$ 2,700,464

Purchase of services:
Thousands of
U.S. dollars

Millions of yen

2004
Toyota Industries Health Insurance Society

2003

2002

2004

¥ 66

¥ 69

¥ 72

Toyota Medical Corporation

37

39

42

350

Toyota Technological Institute

50

–

–

473

¥ 153

¥108

¥114

$1,447

Total

$ 624

Toyota Industries Health Insurance Society’s chairman as ofof the Company and holds 0.05% of the Company’s shares.

March 31, 2004, 2003 and 2002 was Shiro Endo, who is a

Toyota Technological Institute’s chairman as of March 31, 2004

director of the Company and holds 0.01% of the Company’s

was Tatsuro Toyoda, who is a director of the Company andshares. Toyota Medical Corporation’s chairman as of March 31,

holds 0.08% of the Company’s shares. The transactions above

2004, 2003 and 2002 was Yoshitoshi Toyoda, who is a director

were carried out on commercial terms and conditions.

(3) Outstanding balances arising from sale/purchase of goods/services as of March 31, 2004 and 2003 are as follows:
Receivables from a related party:
Millions of yen

Toyota Motor Corporation

Thousands of
U.S. dollars

2004

2003

2004

¥23,421¥ 21,108$ 221,601

Payable to a related party:
Millions of yen

Toyota Motor Corporation

74

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

Thousands of
U.S. dollars

2004

2003

2004

¥29,247¥ 29,753$ 276,724

20. Net income per share (EPS)
Thousands of
U.S. dollars

Millions of yen

2004

2003

2004

¥ 33,623¥ 21,933$318,128

330

329

3,122
315,006

Net income per share:
Net income
Net income not attributable to common shareholders(bonuses for directors and statutory auditors that are paid through appropriation)
Net income attributable to common shareholders

33,293

21,603Weighted-average shares (thousand)

308,144

307,813

Net income per share (exact yen)

¥ 108.04

¥

¥

¥

–

70.19

$

1.02

157

$

114

Net income per share diluted:
Adjustment for effect of dilutive securities (interest expenses of convertible bond)Weighted-average shares for diluted computation (thousand)Net income per share diluted (exact yen)

12
18,468¥ 101.97

38,153¥62.90

Notes to Consolidated Financial Statements

Bases of calculation for net income per share and net income per share diluted for the years ended March 31, 2004 and 2003 are as follows:

–
$

0.96

ANNUAL REPORT 2004 — TOYOTA INDUSTRIES CORPORATION

75