Financial Section

62 Consolidated Eleven-Year Summary
64 Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
74 Consolidated Balance Sheets
76 Consolidated Statements of Income
77 Consolidated Statements of Shareholders’ Equity
78 Consolidated Statements of Cash Flows
79 Notes to Consolidated Financial Statements
98 Report of Independent Auditors

Toyota Industries Corporation

Annual Report 2006

61

Consolidated Eleven-Year Summary
Toyota Industries Corporation and Consolidated Subsidiaries
Years ended March 31
The figures in this table are unaudited.
Millions of yen

2006

2005

2004

2003

¥1,505,956
64,040¥1,241,538¥1,164,379¥1,069,219

53,12052,63152,478For The YearNet sales
Operating income
Ordinary income

80,63570,91358,971

51,375

Net income

47,07743,35833,623

21,934¥ 620,946¥ 539,003¥ 497,357¥ 451,594

Depreciation and amortization

Overseas sales

87,28870,21365,35259,154

Capital expenditures

158,836

136,506

89,50987,559Research and development expenses

31,16630,051

29,562

29,705Per share of common stock (yen, U.S. dollars):
Net income — basic¥

146.16¥135.09¥108.04¥70.19

Net income — diluted

146.02135.03101.97

62.90

Shareholders’ equity

5,044.45

3,504.80

3,199.69

2,522.52

38.00

32.00

24.00

22.00

Total assets¥3,245,341¥2,326,824¥2,011,995¥1,650,391

Shareholders’ equity

1,611,227

1,115,747

1,016,764

738,868

Cash dividends
At Year-End

Common stock

80,46380,46380,46368,047

Number of shares outstanding (excluding treasury stock)319,320

318,237

317,666

292,777¥ 131,785¥ 100,095

92,406¥ 103,183(thousands)
Cash FlowsNet cash provided by operating activities
Net cash used in investing activities¥(205,014)(128,231)(92,668)(95,121)

Net cash provided by (used in) financing activities

85,17350,021(56,015)

57,776

Cash and cash equivalents at end of year

112,597

100,536

77,212

136,929

Return on equity (ROE) (%)

3.5

4.1

3.8

2.7

Return on assets (ROA) (%)

1.7

2.0

1.8

1.3

Return on sales (ROS) (%)

3.1

3.5

2.9

2.1

Debt/equity ratio (%)

29.4

34.4

31.6

55.6

Interest coverage (times)

7.8

7.7

7.4

6.7

¥ 150,674¥ 128,381¥ 113,676

32,97730,99027,431

Indices

EBITDA (millions of yen, thousands of U.S. dollars)
Number of employees at year-end¥

95,47225,030Notes: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥117.47 = US$1, the exchange rate on March 31, 2006.
2. Main changes in accounting standards and methods during the above periods are as follows. These changes have not been applied to the financial statements presented
prior to each year retroactively.
(1) Effective beginning the year ended March 31, 2005, the new accounting standards for impairment of fixed assets have been applied. Details are described in Notes toConsolidated Financial Statements.
(2) Effective beginning the year ended March 31, 2003, the new accounting standards for net income per share have been applied.
(3) Effective beginning the year ended March 31, 2001, the new accounting standards for retirement benefits, financial instrument and foreign currency transactions havebeen applied.
(4) Effective beginning the year ended March 31, 2000, Toyota Industries Corporation (the “Company”) has used the annual average exchange rate instead of the year-end
rate in order to present the operating results more precisely as significance of the overseas consolidated subsidiaries had been increasing and their revenue and expenses
were incurred throughout the fiscal years. The Company also has adopted tax effect accounting due to the amendment of the accounting standards for income taxes.
Deferred tax assets have been newly recognized in current assets, and investments and other assets. Deferred tax liabilities have been recognized in current andlong-term liabilities.

62

Toyota Industries Corporation

Annual Report 2006

Thousands of
U.S. dollars

Millions of yen

2002

2001

2000

1999

1998

1997

1996

2006

¥ 980,163¥ 767,383¥625,773¥558,876¥572,698¥530,851¥476,084$12,819,920

46,33047,304

28,867

24,81432,72932,67519,926545,160

47,86644,525

27,162

23,172

33,202

31,157

21,560686,431

27,311

22,637

13,686

10,391

20,491

17,931

13,549400,758¥ 396,470¥ 298,794¥191,992¥178,737¥150,417¥116,738¥119,358$ 5,285,996

55,17446,45442,752

34,38027,95828,04327,240743,066

88,320127,273

44,74660,46862,00735,40829,6291,352,141

29,98526,19624,062

23,231

23,112

19,691

18,770265,310

¥

87.28

¥

75.90

¥

48.32

¥

36.30

¥

72.33

¥

63.55

¥

48.03

$

1.24

78.26

67.77

43.18

32.62

63.48

55.20

47.13

1.24

2,809.54

3,036.77

1,116.62

1,063.05

1,056.81

996.18947.04

42.94

19.00

17.00

16.00

16.00

16.00

16.00

13.00

0.32

¥1,770,401¥1,869,642¥685,914¥617,071¥593,004¥556,291¥454,503$27,626,977

878,812951,298

316,293

301,158

304,097

281,154

267,145

13,716,072
684,966¥¥

68,02268,01940,17840,17840,13331,45831,322

312,796313,260

283,260

283,296287,752

282,233

282,083

78,413¥ 68,058¥ 44,133¥ 50,952¥ 51,327

N/A$ 1,121,861(106,711)(155,871)(67,187)(96,222)(26,897)(74,968)

N/A(1,745,246)

1,225

94,47227,50024,368(12,918)

69,081

N/A

725,062

71,12095,297

77,332

49,95574,30362,322

N/A

958,517

3.0

3.6

4.4

3.4

7.0

6.5

5.2

1.5

1.8

2.1

1.7

3.6

3.6

3.1

2.8

2.9

2.2

1.9

3.6

3.4

2.8

35.9

30.7

60.5

51.6

37.5

46.0

20.4

5.8

9.1

14.5

16.4

17.6

13.0

8.7

79,921¥ 64,681¥ 51,033¥ 55,212¥ 55,548¥ 44,830

21,11813,132

12,797

11,23910,73810,806

81,07897,54023,056¥¥$ 1,282,659(5) Effective beginning the year ended March 31, 1999, the Company has presented consolidated financial statements as follows: In the consolidated statements of income,enterprise taxes, which had been included in selling, general and administrative expenses up to and including the previous year, have been included in income taxes.
Amortization of goodwill, which had been classified as a deductible item from income before income taxes until the previous year, has been included in selling, generaland administrative expenses. Equity in earnings/losses of affiliates, which had been added to or deducted from income before income taxes until the previous year, hasbeen included in non-operating income or expenses.
3. Net income per share, ROE and ROA are computed based on the average number of shares, shareholders’ equity and total assets, respectively, for each year.
4. Debt/equity ratio = Interest-bearing debt / Shareholders’ equity
5. Interest coverage = (Operating income + Interest and dividends income) / Interest expenses
6. EBITDA = Income before income taxes + Interest expenses - Interest and dividends income + Depreciation and amortization

Toyota Industries Corporation

Annual Report 2006

63

Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on
information known to management as of June 2006.
This section contains projections and forward-looking statements that involve risks, uncertainties and assumptions.
You should be aware that certain risks and uncertainties could cause the actual results of Toyota Industries Corporationand its consolidated subsidiaries to differ materially from any projections or forward-looking statements. These risks anduncertainties include, but are not limited to, those listed under “Risk Information” and elsewhere in this annual report.
The fiscal year ended March 31, 2006 is referred to as fiscal 2006 and other fiscal years are referred to in acorresponding manner. All references to the “Company” herein are to Toyota Industries Corporation; and references
to “Toyota Industries,” “Toyota Industries Group” or the “Group” herein are to the Company and its 153 consolidated
subsidiaries.

Result of Operations
Operating Performance
In fiscal 2006, the Japanese economy was on a solid
recovery track. Private-sector capital investment
increased on the back of improved corporate earnings
while consumer spending rose as employment conditions
improved. The overall economic outlook was also positive
overseas, with an expanding U.S. economy and theEuropean economy maintaining their underlying strengths.
In Asia, the Chinese economy continued to grow at a
brisk pace.

Net Sales, Overseas Sales andOverseas Sales Ratio

Ordinary Income andOrdinary Income Ratio(¥ Billion)(%)(¥ Billion)

(%)

1,600

80

100

10

1,400

70
80

8

1,200

60

1,000

50

60

6

800

40

600

30

40

4

400

20
20

2

200

10

0
FY

02

03

04

Net sales (left)
Overseas sales (left)
Overseas sales ratio (right)

64

In this environment, Toyota Industries made efforts
to strengthen its corporate structure by attempting toensure customer trust through its dedication to quality,
the development of appealing new products, aggressive
sales promotions and execution of a Group-wide program
to reduce costs.
As a result, total consolidated net sales of Toyota
Industries amounted to ¥1,506.0 billion, an increase of¥264.4 billion (21.3%) over fiscal 2005. (For a breakdown ofoperating results by business segment, refer to Operating
Performance Highlights by Business Segment.)
At the profit level, ordinary income amounted to ¥80.6

Toyota Industries Corporation

Annual Report 2006

05

06

0

0
FY

0

02

03

04

05

Ordinary income (left)
Ordinary income ratio (right)

06

Operating Income andOperating Income Ratio

Net Sales ofAutomobile Segment

Operating Income ofAutomobile Segment(¥ Billion)(%)(¥ Billion)(¥ Billion)

70

14

800

40

60

12

50

10

600

30

40

8
400

20

30

6

20

4

200

10

10

2

0

0

FY

02

03

04

05

06

0
FY 02

0

03 04 05 06

FY

02 03 04 05 06

Operating income (left)
Operating income ratio (right)

billion, an increase of ¥9.7 billion (13.7%) over fiscal 2005.
Despite the effects of a steep rise in crude oil and steel
prices, as well as increases in depreciation and personnel
expenses, this increase was achieved due largely to an
expansion in global sales and Group-wide cost-reduction
efforts. Net income amounted to ¥47.1 billion, an increaseof ¥3.7 billion (8.6%) over fiscal 2005.

Cost of Sales and Selling,
General and Administrative Expenses
Cost of sales for fiscal 2006 increased ¥234.7 billion (22.5%)
over fiscal 2005 to ¥1,276.5 billion. This increase reflected
increases in depreciation expenses, raw materials prices
and personnel expenses in addition to an increase in net
sales.
Selling, general and administrative expenses increased¥18.8 billion (12.8%) to ¥165.4 billion, due primarily toincreases in personnel, sales promotion and depreciation
expenses.

the same period as a result of increases in the Asian and
Latin American markets.
Net sales of the Automobile Segment of Toyota
Industries totaled ¥746.8 billion, an increase of ¥130.6
billion (21.2%) over fiscal 2005.
Within this segment, net sales of the Vehicle Businesstotaled ¥372.1 billion, an increase of ¥93.3 billion (33.4%)
over fiscal 2005. Both the Vitz (Yaris outside Japan) and theRAV4, which underwent a full model change, recordedrobust sales.
Net sales of the Engine Business totaled ¥132.4 billion,
an increase of ¥19.1 billion (16.8%) over fiscal 2005. We
proactively augmented our engine production capacity
to accommodate an increase in global production of

Car Air-Conditioning
Compressor Unit Sales(Million Units)
20

Operating Income
Operating income for fiscal 2006 increased ¥10.9 billion(20.6%) over fiscal 2005 to ¥64.0 billion, attributable mainly
to an increase in sales in Japan and overseas as well asGroup-wide cost-reduction activities.

15

10

Operating Performance Highlights
by Business Segment
Below are the operating results by business segment.
Net sales for each segment do not include intersegment
transactions.

5

0
FY

Automobile Segment
In the automobile industry as a whole, sales in Japan were
almost the same as in fiscal 2005. Overseas sales rose over

02

03

04

05

06

Japan
North America
EuropeAsia and Oceania

Toyota Industries Corporation

Annual Report 2006

65

Net Sales ofMaterials Handling
Equipment Segment

Operating Income ofMaterials Handling
Equipment Segment

Net Sales of
Logistics Segment

Operating Income of
Logistics Segment(¥ Billion)(¥ Billion)(¥ Billion)(¥ Billion)

600

40

80

3

35

500

30
400

60
2

25

300

20

40

15

200

1

10
100

5

0
FY

20

0

02 03 04 05 06

FY

0

0

02 03 04 05 06

FY

02 03 04 05 06

FY

02 03 04 05 06

The Logistics Segment was newly created in fiscal 2006.

vehicles by Toyota Motor Corporation (TMC). This measurein turn led to increases in sales of KD diesel engines thatstarted being produced in June 2005 for TMC’s Innovative
International Multi-Purpose Vehicle (IMV) Project and AD
diesel engines fitted in the RAV4 for Europe.
Net sales of the Car Air-Conditioning Compressor
Business totaled ¥216.0 billion, an increase of ¥18.0 billion(9.1%) over fiscal 2005. While sales in the domestic market
were approximately the same level as for fiscal 2005,
overseas sales increased. TD Automotive Compressor
Georgia, LLC (TACG), which was established in the U.S.
state of Georgia in July 2004, started production ofvariable-displacement compressors in December 2005.
TD Automotive Compressor Kunshan, Co., Ltd., which
was established in China in May 2005, also commenced
production of car air-conditioning compressors in April
2006.

position in the domestic lift truck industry. Globally, we solda record 112,000 TOYOTA-brand lift trucks, an increase of
11% over the same period in 2004.
The BT brand posted a strong increase in sales of reachtrucks, low-level order picking trucks and other warehousetrucks. Aichi Corporation, one of our subsidiaries and amajor manufacturer of aerial work platforms, recorded a
substantial increase in sales over fiscal 2005 on the back ofstrong replacement demand from electricity companies
and the telecommunications industry.
In July 2005, we established the Toyota Material
Handling Group to further strengthen cooperation andmaximize synergies between TOYOTA and BT brands.
Under this new framework, we aim to consolidate ourMaterials Handling Equipment Business in Europe, North
America and Japan to enhance our global market share.

Logistics Segment
Materials Handling Equipment Segment
In the materials handling equipment industry as awhole, unit sales increased substantially over fiscal 2005.
Demand was strong in the Japanese and overseas
markets amid a sustained global economic recovery.
Within this environment, Toyota Industries strengthened
its sales network globally, while promoting vigorous sales
promotion activities targeting major clients.
Net sales of the Materials Handling Equipment
Segment of Toyota Industries totaled ¥595.2 billion, an
increase of ¥91.2 billion (18.1%) over fiscal 2005. In Japan,
unit sales of TOYOTA-brand electric counterbalanced lift
trucks increased significantly in line with a heightened
environmental awareness among domestic companies.
As a result, we achieved a 43.4% share in the Japanese lift
truck market during January to December 2005, marking
the 40th consecutive year that we maintained a top

66

Toyota Industries Corporation

Annual Report 2006

Toyota Industries has entered into the logistics solutions
business to reduce customers’ logistics costs throughoptimized logistics processes. Net sales of the Logistics
Segment amounted to ¥65.1 billion in fiscal 2006, duelargely to the solid performance of the transportation
business and the contribution made by Asahi Securities
Co., Ltd., which is engaged in comprehensive cash
management outsourcing services such as cash collection
and delivery as well as cash proceeds management. In
January 2006, we acquired the capital stock of Wanbishi
Archives Co., Ltd. to further expand our business domain.

Textile Machinery Segment
In the textile machinery industry as a whole, the mainstay
Chinese market remained strong on the back of robust
demand for capital investment, despite the Chinese
government’s monetary-tightening measures and theNet Sales of
Textile Machinery
Segment

Operating Income (Loss)of Textile Machinery
Segment

Net Sales of
Others Segment(¥ Billion)(¥ Billion)(¥ Billion)(¥ Billion)

80

6

50

3

40

2

30

1

20

0

Operating Income of
Others Segment(Including Elimination ofIntersegment Transactions)

5
60
4
40

3
2

20
(1)

10

(2)

0
FY

1

02 03 04 05 06

FY

0

0

02 03 04 05 06

FY

02 03 04 05 06

FY

02 03 04 05 06

safeguards exercised by Europe and the United States tocontain Chinese garment imports.
Net sales of the Textile Machinery Segment of Toyota
Industries totaled ¥49.8 billion, an increase of ¥5.9 billion(13.4%) from fiscal 2005, due largely to an increase in salesof air-jet looms to China and India as well as strong salesof spinning machinery.

EuropeOthers Segment

OthersBecause we separated our logistics-related businesses
from the Others Segment into the Logistics Segment, netcomparisons with the previous year’s results cannot be
made. Net sales of the Others Segment for fiscal 2006
amounted to ¥49.0 billion.
TIBC Corporation (TIBC), a joint venture with IbidenCo., Ltd. that manufactures and sells ball grid array plastic
package substrates, underwent strong demand for plastic
package substrates for personal computers.

Net sales totaled ¥34.2 billion, an increase of ¥8.7 billion(33.8%), whereas operating income rose ¥0.8 billion(131.6%) to ¥1.5 billion.

Sales by Geographical Segment
Below are Toyota Industries’ operating results bygeographical segment. Net sales for each geographicalsegment do not include intersegment transactions.

Japan
Net sales increased ¥194.3 billion (23.8%) over fiscal 2005
to ¥1,009.4 billion, while operating income totaled ¥52.8
billion, up ¥9.2 billion (21.1%). These increases are due
mainly to a rise in unit sales of vehicles and lift trucks.

Net sales increased ¥27.6 billion (14.6%) to ¥216.2 billion,
due largely to an increase in unit sales of lift trucks. On
the other hand, operating income decreased ¥0.1 billion(3.0%) to ¥4.5 billion, mainly as a result of a decrease inearnings of car air-conditioning compressor manufacturingsubsidiaries.

Non-Operating Income and Expenses
Non-operating income increased ¥5.6 billion (14.6%) to¥43.9 billion in fiscal 2006, owing primarily to an increase individends income from TMC.
Non-operating expenses totaled ¥27.3 billion, an
increase of ¥6.8 billion (33.0%), due mainly to increases ininterest expenses and a loss on disposal of fixed assets.

Income before Income Taxes
Income before income taxes amounted to ¥80.6 billion,up ¥10.3 billion (14.6%), as a result of a ¥9.7 billion increasein ordinary income.

Income Taxes
Income taxes increased ¥6.1 billion (27.2%) to ¥28.3
billion, due largely to an increase in income taxes of theCompany and the BT Industries Group.

North America
Net sales totaled ¥246.1 billion, an increase of ¥33.9 billion(16.0%) over fiscal 2005. Operating income was ¥6.7 billion,up ¥0.4 billion (6.4%). Both increases were the result of anincrease in unit sales of lift trucks.

Minority Interest in Consolidated Subsidiaries
Minority interest in consolidated subsidiaries amounted
to ¥5.3 billion, up ¥0.5 billion (10.7%), as a result of strong
performance by subsidiaries.

Toyota Industries Corporation

Annual Report 2006

67

Net Income per ShareTotal Assets, Shareholders’ Equity
and Shareholders’ Equity Ratio(¥)(¥ Billion)

(%)

160

3,500

70

140

3,000

60

2,500

50

2,000

40

1,500

30

1,000

20

500

10

120
100
80
60
40
20
0
FY

0

02

03

04

05

06

0
FY

02

03

04

05

06

Total assets (left)
Shareholders’ equity (left)
Shareholders’ equity ratio (right)

Basic
DilutedNet Income
Net income totaled ¥47.1 billion, an increase of ¥3.7 billion(8.6%) over fiscal 2005. Net income per share was ¥146.16,
compared with ¥135.09 in fiscal 2005. Diluted net income
per share increased from ¥135.03 to ¥146.02.

subsidiaries in Japan, while Toyota Industries North
America, Inc. (TINA) and Toyota Industries FinanceInternational AB (TIFI) centrally manage the funds ofsubsidiaries in North America and Europe, respectively.
Through close cooperation among the Company, TINA
and TIFI, we strive for efficient, unified fund management
on a global consolidated basis.

Liquidity and Capital Resources
Toyota Industries’ financial policy is to ensure sufficientfinancing and liquidity for its business activities and tomaintain strong balance sheets. Currently, funds forcapital investments and other long-term capital needs
are provided from retained earnings and long-term debt,
and working capital needs are met through short-termloans. Long-term debt financing is carried out mainly
through issuance of corporate bonds and loans fromfinancial institutions.
In addition to current assets such as cash and cash
equivalents and securities, Toyota Industries maintained acommercial paper issuance capacity of ¥100.0 billion asof March 31, 2006.
Toyota Industries continues to maintain its solid
financial condition. Through the use of such current
assets as cash and cash equivalents and securities, aswell as free cash flows and funds procured from financial
institutions, Toyota Industries believes that it will be able toprovide sufficient funds for the working capital necessary
to expand existing businesses and develop new projects,
and for future investments.
Regarding fund management, the Company
undertakes integrated fund management of its

68

Toyota Industries Corporation

Annual Report 2006

Assets, Liabilities and Shareholders’ Equity
Total assets at the end of fiscal 2006 amounted to ¥3,245.3
billion, up ¥918.5 billion (39.5%) over the end of fiscal 2005,
due largely to an increase in investments and other assets.
Current assets increased ¥46.3 billion (10.0%) over theprevious fiscal year-end to ¥509.3 billion, reflecting theincreases in cash and cash equivalents as well as tradenotes and accounts receivable.
Property, plant and equipment increased ¥69.1 billion(15.1%) to ¥526.2 billion. Intangible assets decreased ¥7.0
billion (6.0%) to ¥110.0 billion, due mainly to amortizationof goodwill.
Investments and other assets amounted to ¥2,100.0
billion, an increase of ¥810.2 billion (62.8%) over fiscal 2005.
This increase was mainly the result of an increase in themarket prices of shares of TMC and other Toyota Group
companies held by Toyota Industries.
On the liabilities side, current liabilities increased¥24.6 billion (5.8%) over the previous fiscal year-end to¥446.1 billion as a result of an increase in trade notes andaccounts payable.
Long-term liabilities amounted to ¥1,138.7 billion, anCash Flows

Investment in Property,
Plant and Equipment(¥ Billion)(¥ Billion)

150

160

100

140

50

120

0

100

(50)

80

(100)

60

(150)

40

(200)

20

(250)

0
FY

02

03

04

05

06

Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities

increase of ¥390.1 billion (52.1%) over the previous fiscal
year-end. This was due chiefly to issuance of bonds andan increase in deferred tax liabilities arising from a rise in
the market value of investment securities.
Minority interest in consolidated subsidiaries increased¥8.4 billion (20.5%) to ¥49.3 billion.
Shareholders’ equity increased ¥495.5 billion (44.4%)
to ¥1,611.2 billion. This increase primarily reflected anincrease in net unrealized gains on other securities
accompanying an increase in the market value ofinvestment securities. The ratio of shareholders’ equity tototal assets increased from 48.0% in the previous fiscal
year to 49.6%, while shareholders’ equity per share at
year-end rose from ¥3,504.80 to ¥5,044.45.

Cash Flows
Cash flows from operating activities resulted in an increasein cash of ¥131.8 billion in fiscal 2006, due mainly to income
before income taxes amounting to ¥80.6 billion. Net cash
provided by operating activities increased ¥31.7 billion(31.7%) from ¥100.1 billion in the previous fiscal year. Cashflows from investing activities resulted in a decrease in
cash of ¥205.0 billion, attributable primarily to payments forpurchases of property, plant and equipment amounting to¥161.5 billion, an increase of ¥51.4 billion (46.7%) from fiscal
2005. Net cash used in investing activities increased ¥76.8
billion (59.9%) from ¥128.2 billion in the previous fiscal year.
Cash flows from financing activities resulted in an increasein cash of ¥85.2 billion due mainly to proceeds fromissuance of bonds in an amount of ¥68.7 billion. Net cash

FY

02

03

04

05

06

Automobile
Materials Handling Equipment
Logistics
Textile Machinery
Othersprovided by financing activities increased ¥35.2 billion(70.3%) from ¥50.0 billion in the previous fiscal year.
After translation adjustments, cash and cash
equivalents as of March 31, 2006 stood at ¥112.6 billion, an
increase of ¥12.1 billion (12.0%) over fiscal 2005.

Investment in Property, Plant and Equipment
During fiscal 2006, Toyota Industries made a total
investment of ¥151.8 billion in property, plant andequipment (including ¥21.7 billion in vehicles andmaterials handling equipment for lease) in order tolaunch new products, streamline and upgrade production
equipment, and augment R&D facilities.
In the Automobile Segment, investment in property,
plant and equipment totaled ¥90.5 billion. A primary
breakdown of this amount included ¥61.5 billion for theCompany, ¥8.1 billion for TACG, ¥5.9 billion for TD Deutsche
Klimakompressor GmbH, ¥5.4 billion for Izumi Machine
Mfg. Co., Ltd., ¥3.6 billion for Tokyu Co., Ltd., ¥1.3 billion for
Toyota Industry Automotive Parts (Kunshan) Co., Ltd. and¥1.2 billion for Tokaiseiki Co., Ltd.
The Materials Handling Equipment Segment madean investment in property, plant and equipment in the
total amount of ¥38.2 billion. The primary breakdown
comprised ¥6.8 billion for the Company and ¥11.3 billion
for the BT Industries Group.
Investment in property, plant and equipment in the
Logistics Segment totaled ¥3.8 billion, including ¥23 million
for the Company and ¥3.1 billion for Taikoh Transportation
Co., Ltd.
The Textile Machinery Segment made an investment inproperty, plant and equipment in the total amount of ¥0.6

Toyota Industries Corporation

Annual Report 200669

billion, including ¥0.4 billion for the Company.
In the Others Segment, the investment in property,
plant and equipment totaled ¥18.7 billion, including ¥13.1
billion for the Company and ¥4.9 billion for TIBC.
Necessary funds were provided by a portion of bonds
as well as internal funds and bank loans.

Business Strategy
Since its establishment as a specialized textile machinery
manufacturer in 1926, Toyota Industries has diversified
the scope of its businesses and achieved growth tobecome a company with such wide-ranging businesses
as automobile-related, materials handling equipment,
logistics and textile machinery businesses.
At present, Toyota Industries is undertaking an array of
initiatives aimed at achieving further growth under a new
five-year Medium-Term Management Plan begun in fiscal
2007, ending March 2007.
With an emphasis on quality as the basis of its
management, Toyota Industries regards addressing
environmental and safety-related areas and enhancing
competitiveness as crucial management issues overthe medium to long term. Accordingly, we will promote
the development of cutting-edge technologies forproviding products that anticipate customer needs,
while strengthening our value chain. Additionally, we will
create a structure for reinforcing our global consolidated
management and utilizing our overall capabilities. As thebasis for this structure, Toyota Industries plans to bolster
its workplace strengths and cultivate global-oriented
personnel who will support future business growth.
By business, our Vehicle and Engine businesses will
strive for further growth in performance by contributing to
TMC’s global strategy.
The Materials Handling Equipment and Car
Air-Conditioning Compressor businesses are expected
to maintain their respective leading positions in world
markets while implementing global business strategies,
expanding market share and enhancing business results.
Meanwhile, the Textile Machinery Business aims tomaintain its No. 1 share of the global market for air-jet
looms and aims for stable business operations.
The Electronics Business, including power electronics
devices for hybrid vehicles, and the Logistics Solutions
Business will promote initiatives aimed at achieving growth
to become future pillars of our operations.
By undertaking these measures, we intend tostrengthen our competitiveness and raise corporate
value. We also anticipate the undertaking of corporate
activities with a consideration of the environment andworking to realize growth in harmony with society.

70

Toyota Industries Corporation

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Strategies and Outlook
Outlook for Results for Fiscal 2007
Toyota Industries expects the Japanese economy tocontinue along a steady path toward recovery thanks
to a favorable ripple effect on consumer spending
arising from strong corporate performance. However,uncertainties persist regarding exchange rate fluctuations
and a further increase in the prices of crude oil and otherraw materials.
For fiscal 2007, ending March 31, 2007, Toyota Industries
forecasts consolidated net sales of ¥1,670.0 billion,
ordinary income of ¥85.0 billion and net income of ¥49.0
billion. We are determined to heighten the comprehensive
capabilities of the Toyota Industries Group as a wholeby placing utmost emphasis on product quality, giving
considerations to the environment and safety, increasing
our competitive strengths, promoting technologicaladvancements and strengthening our value chain sothat we can develop and market leading-edge productsthat anticipate customer needs. We also plan to further
augment global consolidated management and build
a business structure that can take advantage of thecollective strength of Toyota Industries while enhancing
capabilities in the workplace and nurturing personnelof international caliber who will lead Toyota Industries
to the next level of growth. We will further strive topromote adherence to compliance as well as proactive
participation in environmental protection and social
contribution activities.
Our projections are based on an exchange rate of¥115.0 = US$1.

Dividend Policy
The Company regards the benefits of shareholders as
one of its most important management policies. Based on
this stance, we will strive to strengthen Toyota Industries’
corporate constitution, promote proactive businessdevelopment and raise its corporate value.
The Company’s dividend policy is to meetthe expectations of shareholders while giving fullconsideration to business performance, capital demand,the dividend payout ratio on a consolidated basis andother factors. Toyota Industries’ Ordinary General Meetingof Shareholders, held on June 22, 2006, approved ayear-end cash dividend of ¥20.0 per share. Including theinterim cash dividend of ¥18.0 per share, cash dividends
for the year totaled ¥38.0 per share, an increase of ¥6.0
per share over fiscal 2005.
The dividend payout ratio was 40.3%. On a
consolidated basis, it was 26.0%.

Toyota Industries intends to use retained earnings to
improve the competitiveness of its products, augment
production capacity in Japan and overseas, as well
as expand into new fields of business and strengthen
its corporate constitution in securing future profits for
its shareholders. It will also use retained earnings torepurchase treasury stock.

Risk Information
The following represent risks that could have a material
impact on Toyota Industries’ financial condition, businessresults and share prices. The risks mentioned in this annual
report represent only a portion of the risks that could havean impact on Toyota Industries’ financial condition andbusiness results, and do not necessarily cover all possible
risks. There is also a possibility that Toyota Industries could
be affected in the future by risks currently unknown or notconsidered noteworthy or significant.

successful, as forecasts of products supported by themarket may not always be accurate; and no assurance
that newly developed products and technologies will
always be protected as intellectual property.

Intellectual Property Rights
In undertaking its business activities, Toyota Industries has
acquired numerous intellectual property rights, including
those acquired overseas, such as patents related to its
products, product designs and manufacturing methods.
However, not all patents submitted will necessarily be
registered as rights, and these patents could thus berejected by patent authorities or invalidated by third
parties. Also, a third party could circumvent a patent of
Toyota Industries and introduce a competing product into
the market. Moreover, Toyota Industries’ products utilize awide range of technologies. Therefore, Toyota Industries
could become a party subject to litigation involving theintellectual property rights of a third party.

Product Defects
Principal Customers
Toyota Industries’ automobile and engine products are
sold primarily to TMC. In fiscal 2006, net sales to TMC
accounted for 35.0% of consolidated net sales. Therefore,
TMC’s vehicle sales could have an impact on Toyota
Industries’ business results. As of March 31, 2006, TMC held
24.02% of the Company’s voting rights.

Product Development Capabilities
Based on the concept of “developing appealing new
products,” Toyota Industries proactively develops new
products by utilizing its leading-edge technologies,
as it strives to anticipate increasingly sophisticatedand diversifying needs of the market and ensure thesatisfaction of its customers. R&D activities are focused
mainly on developing and upgrading products incurrent business fields and peripheral sectors. Toyota
Industries expects that revenues derived from thesefields will continue to account for a significant portionof total revenues and anticipates that future growth will
be contingent on the development and sales of new
products in these fields. Toyota Industries believes thatit can continue to develop appealing new products.
However, Toyota Industries may not be able to forecast
market needs and develop and introduce appealing
new products in a timely manner. This could result in
lower future growth and have an adverse impact on
Toyota Industries’ financial condition and business results.
Such a situation could result from risks that include noassurance Toyota Industries can allocate sufficient future
funds necessary for the development of appealing
new products; no assurance that product sales will be

Guided by the basic philosophy of “offering products
and services that are clean, safe and of high quality,”
Toyota Industries makes its utmost efforts to enhancequality. However, Toyota Industries cannot guarantee allits products will be defect-free and that product recalls
will not be made in the future. Toyota Industries is insured
for product liability indemnity. However, Toyota Industries
cannot guarantee that this insurance will sufficiently cover
final indemnity amounts incurred. Product defects that
could lead to large-scale recalls and product liability
indemnities could result in large cost burdens and have asignificant negative impact on the evaluation of Toyota
Industries. It could also have an adverse effect on Toyota
Industries’ financial condition and business results due
to a decrease in sales, deterioration of profitability anddecrease in share prices of Toyota Industries.

Price Competition
Toyota Industries faces extremely harsh competitionin each of the industries in which it conducts business,
including its Automobile and Materials Handling
Equipment businesses, which are the core of Toyota
Industries’ earnings foundation. Toyota Industries
believes it offers high-value-added products that are
unrivalled in terms of technology, quality and cost. Amidan environment characterized by intensifying pricecompetition, however, Toyota Industries may be unable
to maintain or increase market share against low-costcompetitors or to maintain profitability. This could have an
adverse impact on Toyota Industries’ financial condition
and business results.

Toyota Industries Corporation

Annual Report 2006

71

Reliance on Suppliers of Raw Materials andComponents
Toyota Industries’ products rely on various raw materials
and components from suppliers outside the Toyota
Industries Group. Toyota Industries has concluded basic
business contracts with these external suppliers andassumes it can carry out stable transactions for raw
materials and components. However, Toyota Industries has
no assurances against future shortages of raw materials
and components, which arise from a global shortagedue to tight supply or an unforeseen accident involving
a supplier. Such shortages could have a negative effecton Toyota Industries’ product production and cause anincrease in costs, which could have an adverse impact
on Toyota Industries’ financial condition and businessresults.

Environmental Regulations
In view of its social responsibilities as a company,
Toyota Industries strives to reduce any burden on theenvironment resulting from its production processes, aswell as strictly adheres to applicable environmental
laws and regulations. However, various environmental
regulations could also be revised and strengthenedin the future. Accordingly, any expenses necessary forcontinuous strict adherence to these environmental
regulations could result in increased business costs andhave an adverse impact on Toyota Industries’ financial
condition and business results.

Alliances with Other Companies
Aiming to expand its businesses, Toyota Industries engages
in joint activities with other companies through alliancesand joint ventures. However, a wildly fluctuating market
trend or a disagreement between Toyota Industries andits partners, owing to business, financial or other reasons,could prevent Toyota Industries from deriving the intended
benefits of its alliances.

Exchange Rate Fluctuations
Toyota Industries’ businesses encompass the production
and sales of products and the provision of services
worldwide. Generally, the strengthening of the yen
against other currencies (especially against the U.S. dollar
and the euro, which account for a significant portionof Toyota Industries’ sales) has an adverse impact on
Toyota Industries’ business, while a weakening of theyen has a favorable impact. An increase in the value ofcurrencies in countries or regions where Toyota Industries
carries out production could lead to an increase in local
production, procurement and distribution costs. Suchan increase in costs could reduce Toyota Industries’
price competitiveness. Additionally, because export
sales of several businesses are denominated mainly in72

Toyota Industries Corporation

Annual Report 2006

yen, exchange rate fluctuations could have an adverse
impact on Toyota Industries’ financial condition andbusiness results due to a change in market prices.

Share Price Fluctuations
Toyota Industries holds marketable securities, andtherefore bears the risk of price fluctuation of theseshares. Based on fair market value of these shares atthe end of the fiscal year under review, Toyota Industries
had unrealized gains. However, unrealized gains onmarketable securities could worsen depending on future
share price movements. Additionally, a fall in share prices
could reduce the value of pension assets, leading to anincrease in the pension shortfall.

Effects of Disasters, Power Blackouts andOther Incidents
Toyota Industries carries out regular checks andinspections of its production facilities to minimize theeffect of production breakdown. However, there is no
assurance Toyota Industries can completely preventor lessen the impact of man-made or natural disasters,
including malfunctions of production facilities, fires at
production facilities and power blackouts. For example,
the majority of Toyota Industries’ domestic production
facilities and most of its business partners are situated in
the Chubu region. Therefore, a major earthquake suchas the Tokai Earthquake, or an incident that affects otheroperations, could delay or stop production or shipment
activities. Such prolonged delays and stoppages could
have an adverse impact on Toyota Industries’ financial
condition and business results.

Latent Risks Associated with
International Activities
Toyota Industries manufactures and sells products andprovides services in various countries. Such unforeseen
factors as social chaos, including political disruptions,terrorism and wars, as well as changes in economic
conditions, could have an adverse impact on Toyota
Industries’ financial condition and business results.

Retirement Benefit Liabilities
Toyota Industries’ employee retirement benefit expenses
and liabilities are calculated based on expected rates
of return on pension assets as well as assumptions uponmaking actuarial calculations that incorporate discountrates and other factors. Therefore, differences between
actual results and assumptions as well as changes in
the assumptions could have a significant impact onrecognized expenses and calculated liabilities in futureaccounting periods.

Significant Accounting Policies andEstimates

Toyota Industries’ Relationship to
Toyota Motor Corporation

Toyota Industries’ financial statements are prepared inconformity with accounting principles and practices
generally accepted in Japan. In preparing financial
statements, management must make estimates,
judgments and assumptions that affect reported amountsof assets and liabilities at fiscal year-end as well as
revenues and expenses during each fiscal year. Among
Toyota Industries’ significant accounting policies, thefollowing categories require a considerable degree of
judgment and estimation and are highly complex.

Due to historical reasons, Toyota Industries maintains close
relationships with TMC and Toyota Group companies interms of capital and business dealings.

Allowance for Doubtful Accounts
To prepare for the risk of receivables becoming
uncollectible, Toyota Industries estimates its allowancefor doubtful accounts by utilizing the percentage
of historical experiences in credit losses for ordinary
receivables and individually examining the feasibility ofcollection for receivables that seem to be uncollectible.
Evaluating the allowance for doubtful accounts involves
judgments made in accordance with the nature of thesituation, and this allowance represents an essential andcrucial estimate—including future estimates of cash flow
amounts and timing—that could change significantly.
Based on currently available information, Toyota Industries’
management believes its present allowance for doubtful
accounts is sufficient. However, the need to significantly
increase allowance for doubtful accounts in the future
could have an adverse impact on Toyota Industries’
business results.

Allowance for Retirement Benefits
Calculations differ for retirement benefits, retirement
benefit expenses and liabilities after employee retirement,
as well as benefits for employees on leave of absence
because different assumptions are used at the time of
calculation. Assumptions include such factors as discountrates, amount of benefits, interest expenses, expected
rates of return on pension assets and mortality rates.
The difference in amounts between these assumptions
and actual results is calculated cumulatively andamortized over future accounting periods, and thus
becomes an expense and is recognized as a liability
in future accounting periods. Toyota Industries believes
its assumptions are reasonable. However, differences
between actual results or changes in the assumptions
could have an impact on retirement benefits andretirement benefit expenses and liabilities after employee
retirement.

Historical BackgroundIn 1933, Kiichiro Toyoda, the eldest son of founder Sakichi
Toyoda and then Managing Director of Toyota Industries(then Toyoda Automatic Loom Works, Ltd.), establishedthe Automobile Division within the Company based on his
resolve to manufacture Japanese-made automobiles. In
1937, the Automobile Division was spun off and became
an independent company, Toyota Motor Co., Ltd. (thepresent Toyota Motor Corporation).

Capital RelationshipIn light of this historical background, Toyota Industries and
TMC have maintained a close capital relationship. Asof March 31, 2006, Toyota Industries held 5.54% (200,025
thousand shares) of TMC’s total shares issued. Likewise,
as of the same date, TMC held 24.02% (76,600 thousand
shares) of Toyota Industries’ total voting rights and 23.51%
of total shares issued. Toyota Industries is a TMC affiliate
accounted for by the equity method.

Business RelationshipToyota Industries assembles certain cars and produces
automobile engines under consignment from TMC. Toyota
Industries also sells car air-conditioning compressors to
DENSO, a Toyota Group company. Additionally, we sell a
portion of our other components and products directly or
indirectly to other Toyota Group companies. In fiscal 2006,
our net sales to TMC and DENSO accounted for 35.0%
and 7.6% of our consolidated net sales, respectively.

Contributions to the Toyota GroupAs a member of the Toyota Group, Toyota Industries aims
to contribute to strengthening the competitiveness of
TMC and other Toyota Group companies in such areas asquality, cost, delivery and technologies. Toyota Industries isconfident that raising the Toyota Group’s competitivenesswill lead to increases in our sales to and profits from the
Toyota Group, thereby contributing to raising Toyota
Industries’ corporate value.

Toyota Industries Corporation

Annual Report 2006

73

Consolidated Balance Sheets
Toyota Industries Corporation and Consolidated Subsidiaries
As of March 31, 2006 and 2005
Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2006

2005

2006

Current assets:
Cash and cash equivalents¥ 112,597¥ 100,536

200,690

173,459

1,708,436

76

199

647

Inventories (Note 5)

104,534

94,024

889,878

Deferred tax assets (Note 15)

18,096

20,379154,048

Other current assets

75,93876,729646,446

Less — allowance for doubtful accounts(2,665)(2,352)(22,686)

509,266

462,974

4,335,286

Buildings and structures (Note 7)

155,169

132,419

1,320,925

Machinery, equipment and vehicles

240,467

185,425

2,047,050

Tools, furniture and fixtures

22,311

18,834

189,929

Land (Note 7)

87,21478,659742,436

Construction in progress

20,994

41,742

178,718

Total property, plant and equipment

526,155

457,079

4,479,058

Software

12,484

12,411

106,274

Goodwill

97,485

104,561

829,871

Total intangible assets

109,969

116,972

936,145

1,975,793

1,198,337

16,819,554

Investments in affiliated companies

60,97731,063519,086

Long-term loans

8,592

9,804

73,142Long-term prepaid expenses

11,35913,21996,697

Deferred tax assets (Note 15)

6,842

7,234

58,245

Other investments and other assets

36,62630,473

311,790

(238)

(331)

(2,026)2,099,951

1,289,799

17,876,488

2,736,075

1,863,850

23,291,691¥3,245,341¥2,326,824$27,626,977

Trade notes and accounts receivable (Note 7)
Short-term investments

Total current assets$

958,517

Fixed assets:
Property, plant and equipment:

Intangible assets:

Investments and other assets:
Investments in securities (Notes 4 and 7)

Less — allowance for doubtful accounts

Total investments and other assets
Total fixed assets
Total assets
The accompanying notes are an integral part of these financial statements.

74

Toyota Industries Corporation

Annual Report 2006

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY

2006

2005

2006

Current liabilities:
Trade notes and accounts payable¥ 182,595 ¥ 160,231$ 1,554,397

Short-term bank loans (Note 7)

38,92959,945331,395

Commercial paper

29,680–252,660

Current portion of bonds (Note 7)

15,00020,300127,692

Other payables

30,62045,462

260,662

Accrued expenses

67,67459,357576,096

Accrued income taxes

13,625

15,297

115,987

Deposits received from employees

20,91520,055

178,046

Deferred tax liabilities (Note 15)

3,858

4,067

32,842Other current liabilities (Note 7)

43,22236,826367,941

Total current liabilities

446,118

421,540

3,797,718

Bonds (Note 6)

283,832

230,000

2,416,208

Long-term bank loans (Notes 6 and 7)

106,268

73,492904,640

Deferred tax liabilities (Note 15)

681,504

381,787

5,801,515

Allowance for retirement benefits (Note 14)

46,53544,463396,144

Other long-term liabilities

20,586

18,891

175,245

Total long-term liabilities

1,138,725

748,633

9,693,752

1,584,843

1,170,173

13,491,470

49,27140,904419,435

80,46380,463684,966

Capital surplus

105,665

105,601

899,506

Retained earnings

358,386

325,3313,050,873

Net unrealized gains on other securities

1,047,191

591,218

8,914,540

Foreign currency translation adjustments

33,88629,861

288,465

Treasury stock at cost

(14,364)(16,727)(122,278)

Total shareholders’ equity

1,611,227

1,115,747

13,716,072

Total liabilities, minority interests and shareholders’ equity¥3,245,341 ¥2,326,824$27,626,977

Long-term liabilities:

Total liabilities
Minority interests in consolidated subsidiaries
Shareholders’ equity (Note 10):
Common stock:
Authorized — 1,091,245,000 shares
Issued—325,840,640 shares as of March 31, 2006 and 2005

6,520,194 shares as of March 31, 2006
7,603,825 shares as of March 31, 2005

Toyota Industries Corporation

Annual Report 2006

75

Consolidated Statements of Income
Toyota Industries Corporation and Consolidated Subsidiaries
For the years ended March 31, 2006, 2005 and 2004
Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

2005

2004

2006

Net sales¥1,505,956 ¥1,241,538 ¥1,164,379$12,819,920

Cost of sales (Note 11)

1,276,499

1,041,780

978,459

10,866,596

229,457

199,758

185,920

1,953,324

165,417

146,638

133,289

1,408,164

64,04053,12052,631

545,160

Gross profit
Selling, general and administrative expenses (Note 11)
Operating income
Non-operating income:Interest income

9,114

8,160

8,175

77,586

Dividends income

20,091

13,761

10,998171,031

Equity in net earnings of unconsolidated subsidiaries and

3,594

6,805

1,842

30,595

11,056

9,558

9,169

94,118Interest expenses(11,956)(9,735)(9,756)(101,779)

Other non-operating expenses (Note 12)(15,304)(10,756)(14,088)(130,280)

80,63570,91358,971

686,431

–

–

621

–

Impairment loss of fixed assets (Note 9)

–

(559)

–

–

Provision for retirement and severance benefits––(1,851)–

80,63570,35457,741

686,431

Income taxes — current (Note 15)30,44626,80923,967259,181

Income taxes — deferred (Note 15)(2,138)(4,557)(3,220)(18,200)

Minority interests in consolidated subsidiaries

5,250

4,744

3,371

44,69247,077 ¥43,358 ¥33,623affiliated companies
Other non-operating income (Note 12)
Non-operating expenses:

Ordinary income
Extraordinary gains:
Gain on transfer to a defined contribution pension plan
Extraordinary losses:

for directors and corporate auditors
Income before income taxes and minority interests

Net income¥

Yen400,758

U.S. dollars (Note 1)

Net income per share — basic (Note 20)¥146.16¥135.09¥108.04$1.24

Net income per share — diluted (Note 20)

146.02135.03101.97

1.24

Cash dividends per share

38.00

32.00

24.00

0.32

The accompanying notes are an integral part of these financial statements.

76$

Toyota Industries Corporation

Annual Report 2006

Consolidated Statements of Shareholders’ Equity
Toyota Industries Corporation and Consolidated Subsidiaries
For the years ended March 31, 2006, 2005 and 2004
Millions of yen

Balance at March 31, 2003
Net income
Cash dividends
Bonuses to directors and corporate auditors
Net unrealized gains on other securities
Foreign currency translation adjustments
Conversions of convertible bonds
Repurchase of treasury stock
Gain on disposal of treasury stock
Change in subsidiaries’ year-ends
Balance at March 31, 2004
Net income
Cash dividends
Bonuses to directors and corporate auditors
Net unrealized gains on other securities
Foreign currency translation adjustments
Repurchase of treasury stock
Exercise of stock options
Effect of adoption of a new accounting standard
for retirement benefits by foreign subsidiaries
Balance at March 31, 2005
Net income
Cash dividends
Bonuses to directors and corporate auditors
Net unrealized gains on other securities
Foreign currency translation adjustments
Repurchase of treasury stock
Exercise of stock options
Decrease due to increase in affiliates accounted
for under the equity method
Balance at March 31, 2006

Numberof shares(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Net unrealized
gains onother securities

Foreign currencytranslation
adjustments

Treasurystock
at cost313,324–––––
12,517–––
325,841
–
–
–
–
–
–
–
–

¥68,047–––––
12,416–––80,463
–
–
–
–
–
–
–
–

¥ 89,365–––––
12,416–
3,962–
105,743
–
–
–
–
–
–
(142)
–

¥269,381
33,623(7,417)
(290)
–
–
–
–
–
(625)
294,672
43,358(7,949)
(331)
–
–
–
–
(4,419)¥ 331,668–––
202,411–––––534,079–––
57,139––––¥16,890
–
–
–
–
2,893
–
–
–
–
19,783––––
10,078–––¥(36,483)–––––
35,601(17,094)––(17,976)
–
–
–
–
–
(53)
1,302
–

325,841
–
–
–
–
–
–
–
–

80,463
–
–
–
–
–
–
–
–

105,601
–
–
–
–
–
–
64
–

325,33147,077(11,794)
(406)
–
–
–
–
(1,822)591,218–––455,973––––

29,861
–
–
–
–
4,025
–
–
–

(16,727)
–
–
–
–
–
(52)
2,415
–

325,841¥80,463¥105,665¥358,386¥1,047,191¥33,886¥(14,364)

Net unrealized
gains on othersecurities

Foreign currencytranslation
adjustments

Treasurystock
at costThousands of U.S. dollars (Note 1)
Commonstock

Balance at March 31, 2005
Net income
Cash dividends
Bonuses to directors and corporate auditors
Net unrealized gains on other securities
Foreign currency translation adjustments
Repurchase of treasury stock
Exercise of stock options
Decrease due to increase in affiliates accounted
for under the equity method
Balance at March 31, 2006

CapitalsurplusRetainedearnings$684,966
–
–
–
–
–
–
–
–

$898,961
–
–
–
–
–
–
545
–

$2,769,482 $5,032,928
400,758–(100,400)–(3,456)–– 3,881,612
–
–
–
–
–
–
(15,511)–$254,201––––
34,264–––$(142,394)
–
–
–
–
–
(443)
20,559–$684,966$899,506$3,050,873 $8,914,540$288,465$(122,278)

The accompanying notes are an integral part of these financial statements.

Toyota Industries Corporation

Annual Report 2006

77

Consolidated Statements of Cash Flows
Toyota Industries Corporation and Consolidated Subsidiaries
For the years ended March 31, 2006, 2005 and 2004
Thousands of
U.S. dollars (Note 1)

Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization
Impairment loss of fixed assets
Increase (decrease) in allowance for doubtful accounts
Interest and dividends income
Interest expenses
Equity in net earnings of affiliated companies(Increase) decrease in receivables(Increase) decrease in inventories
Increase (decrease) in payables
Others, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of marketable securities
Proceeds from sales of marketable securities
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments for acquisition of subsidiaries’ stock resulting inchange in scope of consolidation
Proceeds from acquisition of subsidiaries’ stock resulting inchange in scope of consolidation
Payments for loans madeProceeds from collections of loans
Payments for acquisition of business
Others, net
Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term loans
Increase (decrease) in commercial paper
Proceeds from long-term bank loans
Repayments of long-term bank loans
Proceeds from issuances of bonds
Repayments of bonds
Payments to convertible bond redemption funds
Proceeds from convertible bond redemption funds
Payments for repurchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Others, net
Net cash provided by (used in) financing activities
Translation adjustments of cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Net decrease in cash and cash equivalents due to change in subsidiaries’ year-ends
Cash and cash equivalents at end of year
The accompanying notes are an integral part of these financial statements.

78

Toyota Industries Corporation

Annual Report 2006

2006

2005

2004

2006

¥ 80,635¥ 70,354¥ 57,741$ 686,431

87,288–101(29,205)
11,956(3,594)(27,435)(9,228)21,377
12,161
144,056
29,236(11,009)(30,498)
131,785

70,213559
371(21,921)9,735(6,805)(22,923)(12,851)
26,893(4,063)
109,562
21,972(8,711)(22,728)
100,095

65,352–
46(19,173)
9,756(1,842)(11,051)
751
2,631
9,741
113,952
18,900(9,845)(30,601)
92,406743,066–
860(248,617)
101,779(30,595)(233,549)(78,556)
181,979
103,524
1,226,322
248,881(93,718)(259,624)
1,121,861–
1(161,505)
8,415(47,727)
2,046
–

–
–
(110,112)
10,043(9,563)3,300(16,943)

(101)
3,874
(78,268)3,201(14,301)
2,615
–

–
9
(1,374,862)
71,635(406,291)
17,417
–

–

–

1,216

–

(2,256)
3,264–(7,252)(205,014)(2,371)
2,784–(5,369)(128,231)(4,978)5,448(961)(10,413)(92,668)(19,205)
27,786–(61,735)(1,745,246)(22,902)
29,52038,824(3,366)
68,730(20,300)––(52)(11,785)
(854)
7,358
85,173
117
12,061
100,536–¥112,597(13,687)(15,000)
40,786(6,964)50,000–––(53)(7,949)(667)
3,555
50,021
1,439
23,324
77,212–¥100,536(10,959)
15,0004,522(8,530)–(31,677)(56,670)
56,670(17,094)(7,414)(252)
389(56,015)323(55,954)
136,929(3,763)¥ 77,212(194,960)
251,298
330,501(28,654)585,086(172,810)––(443)(100,323)(7,270)62,637725,062996
102,673855,844–$ 958,517

Notes to Consolidated Financial Statements
1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements
have been prepared based on the accounts maintainedby Toyota Industries Corporation (the “Company”),
and its consolidated subsidiaries (together, hereinafterreferred to as “Toyota Industries”) in accordance with theprovisions set forth in the Commercial Code of Japanand the Securities and Exchange Law, and in conformity
with accounting principles generally accepted inJapan, which are different in certain respects as to theapplication and disclosure requirements of International
Financial Reporting Standards.
Certain items presented in the consolidated financial

statements submitted to the Director of the Kanto Finance
Bureau in Japan have been reclassified in these accounts
for the convenience of readers outside Japan.
Amounts in U.S. dollars are included solely for theconvenience of readers outside Japan. The rate of¥117.47=US$1, the rate of exchange prevailing at March
31, 2006, has been used in translation. The inclusion of suchamounts are not intended to imply that the Japanese yen
actually represent, or have been or could be converted
into, equivalent amounts in U.S. dollars at this rate or any
other rates.

2. Summary of significant accounting policies(1) Consolidation
The consolidated financial statements include theaccounts of the Company and its 153 subsidiaries (43domestic subsidiaries and 110 overseas subsidiaries, which
are listed on pages 58 and 59) in 2006, 146 subsidiaries(43 domestic subsidiaries and 103 overseas subsidiaries) in2005 and 140 subsidiaries (42 domestic subsidiaries and 98
overseas subsidiaries) in 2004.
For the year ended March 31, 2006, nine subsidiaries
were newly added to the scope of consolidation andtwo companies were excluded from the scope of
consolidation because of mergers and acquisitions.
For the year ended March 31, 2005, 11 subsidiaries
were newly added to the scope of consolidationand six companies were excluded from the scope of
consolidation because of mergers and acquisitions.
For the year ended March 31, 2004, 22 subsidiaries
were newly added to the scope of consolidation. One
unconsolidated subsidiary was excluded from the scopeof consolidation due to temporary investments.
The fiscal years of certain subsidiaries are different fromthe fiscal year of the Company. Since the difference is
not more than three months, the Company is using thosesubsidiaries’ statements for those fiscal years, making
adjustments for significant transactions that materiallyaffect the financial position or results of operations.
All significant intercompany transactions, balances
and unrealized profits within Toyota Industries have been
eliminated.
A full portion of the assets and liabilities of the acquired
subsidiaries is stated at fair value as of the date ofacquisition of control.

(2) Investments in unconsolidated subsidiaries
and affiliates
Investments in 22 major affiliates in 2006, 20 major affiliates
in 2005 and one unconsolidated subsidiary and 19 majoraffiliates in 2004 are accounted for by the equity methodof accounting. Investments in unconsolidated subsidiaries
and affiliates not accounted for by the equity method
are stated at cost due to their insignificant effect on the
consolidated financial statements.
The major affiliates accounted for by the equity
method are listed on page 59.

(3) Translation of foreign currencies
Foreign currency denominated receivables and payables
are translated into Japanese yen at the year-end
exchange rates and the resulting transaction gains orlosses are included in income statements.
All asset and liability accounts of foreign subsidiaries
and affiliates are translated into Japanese yen at
year-end exchange rates and all revenue and expense
accounts are translated at prevailing fiscal average rates.

(4) Cash and cash equivalents
Cash and cash equivalents include all highly liquid
investments, generally with original maturities of threemonths or less, that are readily convertible to known
amounts of cash and are so near maturity that theypresent insignificant risk of changes in value because ofchanges in interest rates.

Toyota Industries Corporation

Annual Report 2006

79

(5) Marketable securities and investment insecurities
Toyota Industries classifies securities into four categories
by purpose of holding: trading securities, held-to-maturity
securities, other securities and investments inunconsolidated subsidiaries and affiliates. Toyota Industries
did not have trading securities or held-to-maturity
securities as of March 31, 2006 and 2005.
Other securities with readily determinable fair values
are stated at fair value based on market prices at theend of the year. Unrealized gains and losses are included
in “Net unrealized gains on other securities” as a separate
component of shareholders’ equity. Cost of sales of suchsecurities is determined by the moving-average method.
Other securities without readily determinable fair values
are stated at cost, as determined by the moving-averagemethod.
Investments in unconsolidated subsidiaries and affiliates
are accounted for by the equity method (see Note 2 (2)).

Calculation of the impairment of fixed assets is based onreasonable and supportable assumptions and projectionof the grouping of assets and recoverable value, withdue consideration for the specific conditions of eachcompany.
The recoverable amount of assets is calculated basedon net selling price. The change in accounting policy is
described in Note 3.

(10) Allowances for doubtful accounts
Toyota Industries adopted the policy of providing anallowance for doubtful accounts in an amount sufficient
to cover possible losses on collection by estimating
individually uncollectible amounts and applying to theremaining accounts a percentage determined by certain
factors such as historical collection experiences.

(11) Deferred charges(6) Inventories

Stock issuance costs and bond issuance costs are
expensed as incurred.

Inventories are stated mainly at cost determined by themoving-average method.

(12) Allowance for retirement benefits(7) Property, plant and equipment, anddepreciation
Property, plant and equipment are stated at cost.
Depreciation expenses of property, plant and equipment
are computed mainly by the declining-balance method
for the Company and Japanese subsidiaries and by thestraight-line method for foreign subsidiaries.
Significant renewals and additions are capitalized atcost. Repairs and maintenance are charged to income
as incurred.
Accumulated depreciation as of March 31, 2006 and2005 was ¥585,996 million (US$4,988,474 thousand) and¥541,383 million, respectively.

80(9) Impairment of fixed assets

Toyota Industries accrues an amount which is considered
to be incurred in the period based on the estimatedprojected benefit obligations and estimated pension
assets at the end of the year. To provide for the retirement
benefits for directors and corporate auditors, an amountwhich is calculated at the end of the year as required byan internal policy describing the retirement benefits for
directors and corporate auditors is accrued.

(13) Lease transactions
Finance leases other than those that are deemed totransfer the ownership of the leased assets to lessees
are accounted for mainly by a method similar to thatapplicable to ordinary operating leases.

(8) Intangible assets and amortization(14) Consumption tax

Amortization of intangible assets is computed using thestraight-line method. Software costs for internal use areamortized by the straight-line method over their expected
useful lives (mainly five years).
Goodwill, if material, is amortized principally over lessthan 20 years on a straight-line basis, while immaterial
goodwill is charged to income as incurred.
Accumulated amortization of intangibles and goodwill
as of March 31, 2006 and 2005 was ¥53,553 million(US$455,887 thousand) and ¥42,637 million, respectively.

The consumption tax under the Japanese Consumption
Tax Law withheld by Toyota Industries on sales ofgoods is not included in the amount of net sales in theaccompanying consolidated statements of income, andthe consumption tax paid by Toyota Industries under thelaw on purchases of goods and services, and expenses is
not included in the related amount.

Toyota Industries Corporation

Annual Report 2006

(15) Hedge accounting(16) Appropriation of retained earnings(a) Method of hedge accounting
Mainly the deferral method of hedge accounting isapplied. In the case of foreign currency forward contracts
and foreign currency option contracts, the hedged items
are translated at contracted forward rates if certain
conditions are met.
(b) Hedging instruments and hedged items
Hedging instruments: Derivatives instruments (interest rate
swaps, foreign currency forwards
and foreign currency option
contracts)
Hedged items:
Risk of change in interest rate on
borrowings and risk of change
in forward exchange rate ontransactions denominated in foreign
currencies (assets and liabilities, andforecasted transactions)(c) Hedging policy
Hedging transactions are executed and controlled basedon Toyota Industries’ internal policy, and Toyota Industries
is hedging interest rate risks and foreign currency risks.
Toyota Industries’ hedging activities are reported
periodically to a director responsible for accounting.
(d) Method used to measure hedge effectivenessHedge effectiveness is measured by comparing
accumulated changes in market prices of hedged items
and hedging instruments or accumulated changes in
estimated cash flows from the inception of the hedge
to the date of measurements performed. Currently it isconsidered that there are high correlations between
them.
(e) Others
Due to the fact that counterparties to Toyota Industries
represent major financial institutions which have highcreditworthiness, Toyota Industries believes that the overall
credit risk related to its financial instruments is insignificant.

In the accompanying consolidated statements ofshareholders’ equity, the approved amount during therelevant fiscal year is reflected for the appropriation ofretained earnings of consolidated subsidiaries. In Japan,
the payment of bonuses to directors and corporate
auditors is made out of retained earnings through anappropriation, instead of being charged to income forthe year.

(17) Income taxes
The provision for income taxes is computed basedon the pretax income included in the consolidated
statements of income. The asset and liability approachis used to recognize deferred tax liabilities and assets forthe expected future tax consequences of 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 be realized.

(18) Net income per share
The computation of basic net income per share is basedon the weighted-average number of outstanding sharesof common stock. The calculation of diluted net income
per share is similar to the calculation of basic net income
per share, except that the weighted-average number ofshares outstanding includes the additional dilution frompotential common stock equivalents such as convertible
bonds. Cash dividends per share shown in the statements
of income are the amounts applicable to the respective
years.

3. Change in accounting policy and adoption of new accounting standards
For the year ended March 31, 2005
Impairment of fixed assets
Toyota Industries has applied Accounting Standards for
Impairment of Fixed Assets (Opinions Concerning
Establishment of Accounting Standards for Impairmentof Fixed Assets) issued on August 9, 2002 by the BusinessAccounting Council in Japan, and the application
guideline for Accounting Standards for Impairmentof Fixed Assets (the Financial Accounting Standard
Implementation Guideline No. 6 issued on October 31,2003), to the consolidated financial statements for fiscal
2005, as early adoption of such standards and guidelines,
which are effective for fiscal years beginning on andafter April 1, 2005, was permitted for the consolidated
accounting for the fiscal year ended March 31, 2005.

Toyota Industries Corporation

Annual Report 2006

81

4. Marketable securities:(1) As of and for the year ended March 31, 2006:(a) Other securities with readily determinable fair value as of March 31, 2006 are as follows:
Millions of yen

Acquisition
cost

Carrying
amountThousands of U.S. dollars

Acquisition
cost

Difference

Carrying
amountDifference

Securities with carrying amountexceeding acquisition cost:
Stocks¥212,297 ¥1,956,654 ¥1,744,357$1,807,245 $16,656,627 $14,849,382

Subtotal

212,297

1,956,654

1,744,357

1,807,245 16,656,627 14,849,382

Stocks

1,808

1,339

(469)

15,391

11,399(3,992)

Subtotal

1,808

1,339

(469)

15,391

11,399(3,992)

Securities with carrying amountnot exceeding acquisition cost:

Total¥214,105 ¥1,957,993 ¥1,743,888$1,822,636 $16,668,026 $14,845,390

In this year, Toyota Industries recorded ¥1,487 million (US$12,659 thousand) of impairment on an equity security included insecurities with carrying amount not exceeding the cost lines.
(b) Other securities sold during the year ended March 31, 2006 are as follows:
Millions of yen

Proceeds

Realized gains¥2,517¥1,280Thousands of U.S. dollars

Realized losses¥2

Proceeds

Realized gains$21,427$10,896

Realized losses$17(c) The carrying amount of securities (excluding held-to-maturity bonds which are included within securities with fairvalue) without readily determinable fair values as of March 31, 2006 are as follows:
Carrying amountMillions of yen

Thousands of
U.S. dollars

Domestic unlisted stocks excluding over-the-counter stocks¥17,800$151,528

Money management funds

45,003

383,102

Other securities(d) Redemption schedule of securities which have maturities within other securities as of March 31, 2006 is as follows:
Millions of yen

Within1 yearOver 1 year
within5 years

Thousands of U.S. dollars

Over 5 years
within
10 yearsOver
10 yearsWithin1 yearOver 1 year
within5 years

Over 5 years
within
10 yearsOver
10 years

Bonds
Government bonds
Total

82

Toyota Industries Corporation

Annual Report 2006

¥0

¥–

¥–

¥–

$0

$–

$–

$–

¥0

¥–

¥–

¥–

$0

$–

$–

$–

(2) As of and for the year ended March 31, 2005:(a) Other securities with readily determinable fair value as of March 31, 2005 are as follows:
Millions of yen

Acquisition
cost

Carrying
amountDifference

Stocks¥191,932¥1,177,188¥985,256

Subtotal

191,932

1,177,188985,256

3,348

2,911

(437)

Government and municipal bonds, etc.

0

0

0

Other bonds

1

1

0

Securities with carrying amount exceeding acquisition cost:

Securities with carrying amount not exceeding acquisition cost:
Stocks
Bonds

Subtotal
Total

3,349

2,912

(437)

¥195,281¥1,180,100¥984,819

In this year, Toyota Industries recorded ¥35 million of impairment on an equity security included in securities with carrying
amount not exceeding the cost lines.
(b) Other securities sold during the year ended March 31, 2005 are as follows:
Millions of yen

Proceeds

Realized gains

Realized losses¥3,189¥1,789¥32(c) The carrying amount of securities (excluding held-to-maturity bonds which are included within securities with fairvalue) without readily determinable fair values as of March 31, 2005 are as follows:
Carrying amountMillions of yen

Other securities
Domestic unlisted stocks excluding over-the-counter stocks¥18,288

Money management funds

40,006(d) Redemption schedule of securities which have maturities within other securities as of March 31, 2005 is as follows:
Millions of yen

Within1 yearOver 1 year
within5 years

Over 5 years
within
10 yearsOver
10 years

Bonds
Government bonds and municipal bonds, etc.

¥–

¥–

¥0

¥–

Other bonds

1

–

–

–

¥1

¥–

¥0

¥–

Total

Toyota Industries Corporation

Annual Report 200683

5. Inventories
Inventories as of March 31, 2006 and 2005 consist of the following:Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

Finished goods¥ 40,703¥35,616$346,497

Raw materials

16,097

15,331137,031Work in process

37,08934,587315,731

Supplies

10,645

8,490

90,619¥104,534¥94,024$889,878

Total

6. Long-term debt
(1) Long-term debt as of March 31, 2006 and 2005 consists of the following:Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

2.70% bonds due 2008 without collateral¥ 30,000¥ 30,000$ 255,384

2.15% bonds due 2008 without collateral

20,00020,000170,256

1.50% bonds due 2006 without collateral

15,00015,000127,693

1.94% bonds due 2009 without collateral

15,00015,000127,693

The Company:

1.25% bonds due 2005 without collateral–

20,000

–1.91% bonds due 2010 without collateral

20,00020,000170,256

0.41% bonds due 2007 without collateral

30,00030,000255,384

1.13% bonds due 2012 without collateral

50,00050,000425,641

1.03% bonds due 2012 without collateral

30,00030,000255,384

1.46% bonds due 2014 without collateral

20,00020,000170,256

1.01% bonds due 2010 without collateral

20,000–170,256

1.66% bonds due 2015 without collateral

30,000–255,384–

300–

Consolidated subsidiaries:
1.80% bonds due 2005

18,832–

160,314Long-term bank loans

0.49-0.87% medium-term notes due 2009-2010

109,268

77,522

930,178

Less: current portion of long-term debt

(18,000)(24,330)(153,231)¥390,100¥303,492$3,320,848

Total(2) Annual maturities of long-term debt as of March 31, 2006 are as follows:Year ending March 31

Millions of yen

2007

84

Thousands of
U.S. dollars¥ 18,000 $ 153,231

2008

66,827568,8862009

22,118188,2862010

32,291

274,887

2011

51,188435,754

2012 and thereafter

217,676

1,853,035

Total¥408,100 $3,474,079

Toyota Industries Corporation

Annual Report 2006

7. Assets pledged as collateral(1) Assets pledged as collateral as of March 31, 2006 and 2005 are as follows:
Thousands of
U.S. dollars

Millions of yen

Investments in securities

2006

2005

2006

¥57,035¥33,345$485,528

Buildings and structures

1,798

3,155

15,306

Land

2,953

3,798

25,138

245

1,033

2,086

Trade notes and accounts receivable
Other

–

41

–

Total

¥62,031¥41,372$528,058(2) Secured liabilities as of March 31, 2006 and 2005 are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

Other current liabilities¥20,806¥19,966$177,118

Short-term bank loans

363

3,158

3,090

Current portion of bonds

–

300

–

Long-term bank loans

156

2,685

1,328

¥21,325¥26,109$181,536

Total

8. Contingent liabilities
Toyota Industries is contingently liable for guarantees as of March 31, 2006 and 2005 as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

Guarantees given by the Company¥1,000¥25,401$ 8,513

Guarantees given by consolidated subsidiaries

1,180

700

10,045

Guarantee forwards given by the Company

544

2,954

4,631

9. Impairment loss of fixed assets
Millions of yen

RegionItems

Details of Fixed assets

Hyogo

One idle property

Building

¥ 28

Land

338

2005

Tochigi

One idle property

Land

86

NaganoOne idle property

Land

59

KagawaOne idle property

Land

48

Total

¥559

Toyota Industries Corporation

Annual Report 200685

10. Shareholders’ equity
Under the Japanese Commercial Code, amounts equal
to at least 10% of the sum of the cash dividends and otherexternal appropriations paid by the Company and its
domestic subsidiaries must be set aside as a legal reserve
until it equals 25% of common stock. The legal reserve
may be used to reduce a deficit or may be transferred tocommon stock by taking appropriate corporate action.
In consolidation, the legal reserves of the Company andits domestic subsidiaries are accounted for as retained
earnings.
A year-end cash dividend is approved at the Ordinary
General Meeting of Shareholders of the Company held

after the close of the fiscal year to which the dividend isapplicable. In addition, interim cash dividends may be
paid upon resolution of the Board of Directors, subject tolimitations imposed by the Japanese Commercial Code.
Proceeds from the conversion of convertible bonds
have been accounted for in approximately equalamounts as common stock and capital surplus. At least
50% of the proceeds have been accounted for ascommon stock, in accordance with the provisions of theJapanese Commercial Code.

11. Research and development expenses
Research and development expenses, which areincluded in selling, general and administrative expenses
and manufacturing costs, amounted to ¥31,166 million(US$265,310 thousand), ¥30,051 million and ¥29,562 million
for the years ended March 31, 2006, 2005 and 2004,
respectively.

12. Other non-operating income and expenses
Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

¥ 1,280¥ 1,659¥819$ 10,896

Rental income of fixed assets

2,110

1,932

1,833

17,962

Exchange gain

1,197

500

836

10,190

838

957

808

7,134

Other non-operating income:Gain on sales of marketable securities

Gain on sales of fixed assets
Sundries
Total

5,631

4,510

4,873

47,936¥11,056¥ 9,558¥ 9,169$ 94,118¥ 1,469¥¥251$ 12,505

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

1,716

2,381

2,342

14,608Loss on disposal of fixed assets

4,488

2,381

3,523

38,206

Exchange loss

1,745

610

1,283

14,855

Bond issuance costs
Sundries
Total

86

56

Toyota Industries Corporation

Annual Report 2006

201

205

502

1,711

5,685

5,123

6,187

48,395¥15,304¥10,756¥14,088$130,280

13. Derivative instruments(1) Qualitative disclosure about derivatives(a) Contents of derivative instruments into which Toyota
Industries entered, policy with respect to entering into
derivative instruments, and purpose of using derivative
instruments:
Toyota Industries uses interest rate swap agreements
to reduce interest rate risks on borrowings. Toyota
Industries also uses foreign currency forward
contracts and foreign currency option contracts
to hedge foreign currency risks on transactions
denominated in foreign currencies (receivables andpayables and forecasted transactions).
(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 offluctuations in interest rates and in foreign currency

exchange rates. 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.
(c) Controls in place over transactions handling derivative
instruments:
Hedging transactions are executed and controlled
based on Toyota Industries’ internal policy andToyota Industries’ hedging activities are reported
periodically to a director responsible for accounting.

(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.

14. Retirement benefits(1) Outline of retirement benefit plans:
The Company and its domestic subsidiaries maintaintax qualified pension plans and lump-sum indemnities
plans, both of which are non-contributory defined benefit
pension plans. In addition, certain foreign subsidiaries
maintain non-contributory defined benefit pension

plans. Since 1987, the Company has been transferring
the covering percentages of its pension plan from its
lump-sum indemnities plan to its tax qualified pension
plan. As of March 31, 2006, its tax qualified pension plan
covers 50% of total plans. Also, the Company establishedan employee retirement benefit trust.

(2) Components of allowance for retirement benefits as of March 31, 2006 and 2005 are as follows:
Thousands of
U.S. dollars

Millions of yen

Benefit obligation

2006

2005

2006

¥138,348¥124,570$1,177,730

Plan assets(86,362)(77,121)(735,183)

Unfunded benefit obligation

51,98647,449442,547

Unrecognized actuarial gains or losses(16,286)(14,564)(138,640)

(615)

(350)

(5,235)

Net amount recognized on the balance sheets

Unrecognized loss in prior service obligation

35,08532,535

298,672

Prepaid pension expenses(6,007)(6,694)(51,137)¥ 41,092¥ 39,229$ 349,809

Allowance for retirement benefits

Certain subsidiaries use the simplified method to determine benefit obligations. Prepaid pension expenses are included
in other investments and other assets. Allowance for retirement benefits on the balance sheets includes ¥5,443 million(US$46,335 thousand) and ¥5,234 million of allowance for retirement and severance benefits for directors and corporate
auditors as of March 31, 2006 and 2005, respectively.

Toyota Industries Corporation

Annual Report 200687

(3) Components of retirement benefit expenses for the years ended March 31, 2006, 2005 and 2004 are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

Service cost

¥ 7,921¥ 7,446¥ 7,424$ 67,430Interest cost

4,079

3,987

4,559

34,724

Expected return on plan assets(2,436)(2,196)(822)(20,737)

Amortization of prior service obligation

95

85

79

809

Amortization of unrecognized actuarial gains or losses

779

1,030

1,854

6,631

¥10,438¥10,352¥13,094$ 88,857

Retirement benefit expenses

Retirement expenses of subsidiaries which adopted the simplified method are included in service cost.
(4) Assumptions used for calculation of retirement benefits for the years ended March 31, 2006, 2005 and 2004 are as follows:
2006

2005

2004

Discount rate

2.00%

2.00%

2.00%

Expected return on plan assets

3.00%

3.00%

3.00%

6–11 years

6–11 years

Method of attribution of estimated retirement benefits
to periods of employee service: Straight-line method

Amortization period of prior service obligation

6–11 years — Straight-line method over
the remaining service
period of employees
starting from the year
incurred

Amortization period of unrecognized actuarial gains
or losses

20 years

20 years

20 years — Straight-line method over
the average remaining
service period of
employees starting fromfollowing year

(5) Plan assets relating to welfare pension fund under multiemployer pension plan:
Amounts of plan assets calculated based on proportion of contribution to the fund made by each domestic subsidiaryare ¥11,214 million (US$95,463 thousand) and ¥8,226 million as of March 31, 2006 and 2005, respectively.

88

Toyota Industries Corporation

Annual Report 2006

15. Income taxes(1) The significant components of deferred tax assets and liabilities as of March 31, 2006 and 2005 are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

¥ 15,561¥ 12,842

Trade receivables

2,867

5,270

24,406

Accrued expenses

6,739

6,049

57,368Net operating loss carry-forwards for tax purposes

2,012

1,979

17,128Depreciation

4,538

5,222

38,631

Securities

2,529

2,195

21,529Deferred tax assets:
Allowance for retirement benefits$

132,468

Enterprise tax payable

1,045

1,059

8,896

Other

14,11915,962

120,192

Subtotal

49,41050,578420,618

Less — valuation allowance(2,705)(2,689)(23,027)

46,70547,889397,591

Total deferred tax assets
Deferred tax liabilities:
Other securities

695,355

392,618

5,919,426

Depreciation

6,004

5,355

51,111

Land

1,112

1,110

9,466

520

537

4,426

Reserve for advanced depreciation
Reserve for special depreciation
Other

678

529

5,772

3,460

5,981

29,454

Total deferred tax liabilities

707,129

406,130

6,019,655

Net deferred tax liabilities¥(660,424)¥(358,241)$(5,622,064)

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

Millions of yen

Current assets — deferred tax assets
Investments and other assets — deferred tax assets

2006

2005

2006

¥ 18,096¥ 20,379

6,842

7,234

$

154,048
58,245Current liabilities — deferred tax liabilities(3,858)(4,067)(32,842)

Long-term liabilities — deferred tax liabilities(681,504)(381,787)(5,801,515)

Net deferred tax liabilities¥(660,424)¥(358,241)$(5,622,064)(2) Reconciliations of differences between the statutory rate of income taxes and the effective rate of income taxes forthe years ended March 31, 2006, 2005 and 2004 are as follows:
2006

Statutory rate of income taxes

2005

2004

39.9%

39.9%

41.2%

(5.0)

(3.8)

(3.4)

–

(3.8)

–

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

0.2

(0.7)

(1.9)

35.1%

31.6%

35.9%

Toyota Industries Corporation

Annual Report 200689

16. Leases(1) Finance leases (as a lessee) which do not transfer ownership of leased properties to lessees(a) Pro forma information regarding the leased properties such as acquisition cost and accumulated depreciation, which
are not reflected in the accompanying consolidated balance sheets under finance leases as of March 31, 2006 and2005, is as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

¥14,894¥13,791$126,790

Machinery and equipment:
Acquisition cost equivalents
Accumulated depreciation equivalents

7,838

7,050

66,724

7,056

6,741

60,066

Acquisition cost equivalents

13,603

12,146

115,800

Accumulated depreciation equivalents

6,866

6,232

58,449

6,737

5,914

57,351

123

128

1,047

Machinery and equipment net balance equivalents
Tools, furniture and fixtures:

Tools, furniture and fixtures net balance equivalents
Software:Acquisition cost equivalents
Accumulated depreciation equivalents

73

59

621

50

69

426

¥13,843¥12,724$117,843

Software net balance equivalents
Total net leased properties

Acquisition cost equivalents include the imputed interest expense portion because the percentage which is computedby dividing future minimum lease payments by total balance of property, plant and equipment at year-end is immaterial.
(b) Pro forma information regarding future minimum lease payments as of March 31, 2006 and 2005 is as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

Due within 1 year

¥ 4,254¥ 4,061$ 36,214

Due after 1 year

9,589

8,663

81,629¥13,843¥12,724$117,843

Total

The amount equivalent to future minimum lease payments as of the end of the year includes the imputed interest
expense portion because the percentage which is computed by dividing future minimum lease payments by totalbalance of property, plant and equipment at year-end is immaterial.
(c) Total lease payments for the years ended March 31, 2006, 2005 and 2004 are as follows:
Millions of yen

Thousands of
U.S. dollars

2006¥5,236$44,573

2005

4,927

–

2004

3,614

–

Pro forma depreciation expenses, which are not reflected in the accompanying consolidated statements of income, arecomputed mainly by the straight-line method, which assumes zero residual value and leasing term to be useful lives forthe years ended 2006, 2005 and 2004, and are equivalent to the amount of total lease payments of the above.

90

Toyota Industries Corporation

Annual Report 2006

(2) Operating leases (as a lessee)
Pro forma future lease payments under operating leases as of March 31, 2006 and 2005 are as follows:
Millions of yen

Due within 1 year

Thousands of U.S. dollars

2006

2005

2006

¥ 4,367¥ 4,165$ 37,175

Due after 1 year

12,273

17,392

104,478

Total¥16,640¥21,557$141,653(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 of March 31, 2006 and 2005 is as follows:
Millions of yen

Thousands of U.S. dollars

2006

2005

2006

¥7,356¥8,928$62,620

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

4,030

5,221

34,307¥3,326¥3,707$28,313(b) Pro forma information regarding future minimum lease income as of March 31, 2006 and 2005 is as follows:
Thousands of U.S. dollars

Millions of yen

2006

2005

2006

Due within 1 year

¥1,256¥1,750$10,692

Due after 1 year

3,308

3,167

28,160Total¥4,564¥4,917$38,852

The amount equivalent to future minimum lease income includes the imputed interest income portion because thepercentage which is computed by dividing future minimum lease income by total balance of property, plant andequipment at year-end is immaterial.
(c) Total lease receipts and depreciation expenses for the years ended March 31, 2006 and 2005 are as follows:
Millions of yen

Thousands of U.S. dollars

2006

2005

2006

Total lease payments to be received¥1,703¥2,351$14,497

Depreciation expenses

1,603

1,830

13,646(4) Operating leases (as a lessor)
Pro forma information regarding future minimum rentals under operating leases as of March 31, 2006 and 2005 is as follows:
Millions of yen

Due within 1 year

Thousands of U.S. dollars

2006

2005

2006

¥10,722¥10,040$ 91,274

Due after 1 year

21,612

16,382

183,979

Total¥32,334¥26,422$275,253

17. Subsequent event
On June 22, 2006, the shareholders of the Company
authorized payment of a year-end cash dividend toshareholders of record as of March 31, 2006 of ¥20(US$0.17) per share, or a total of ¥6,386 million (US$54,363

thousand), and bonuses to directors and corporate
auditors of ¥301 million (US$2,562 thousand). Cashdividends for the year totaled ¥38 (US$0.32) per share,including a semi-annual dividend of ¥18 (US$0.15).

Toyota Industries Corporation

Annual Report 200691

18. Segment information(1) Business segments
As of and for the years ended March 31, 2006, 2005 and 2004:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

¥ 746,796¥ 616,200¥ 603,863$ 6,357,334

20,76818,223

15,698

176,794

767,564

634,423

619,561

6,534,128

595,237

503,990

443,444

5,067,141

Sales:
Automobile
Outside customer sales
Intersegment transactions

Materials Handling Equipment
Outside customer sales
Intersegment transactions

482

149

138

4,103

595,719504,139443,582

5,071,244

65,145––554,567

Logistics
Outside customer sales
Intersegment transactions

6,356

–

–

54,10771,501––

608,674

49,78943,90245,969423,844

23

25

16

196

49,812

43,92745,985424,040

Outside customer sales

48,98977,446

71,103417,034

Intersegment transactions

20,851

21,57914,132

177,501

69,84099,02585,235594,535

1,554,436

1,281,514

1,194,363

13,232,621(48,480)(39,976)(29,984)(412,701)¥1,505,956¥1,241,538¥1,164,379$12,819,920

Textile Machinery
Outside customer sales
Intersegment transactions

OthersSubtotal
Elimination of intersegment transactions
Total
Operating costs and expenses:¥ 747,469¥ 611,660¥ 592,031$ 6,363,063

Materials Handling Equipment

Automobile

556,950

478,054424,233

4,741,211

Logistics

69,914––595,165

Textile Machinery

49,883

44,69845,885

424,645

Others

66,107

93,782

79,485562,756

Elimination of intersegment transactions(48,407)(39,776)(29,886)(412,080)¥1,441,916¥1,188,418¥1,111,748$12,274,760

¥

¥

¥

$

Total
Operating income (loss):
Automobile
Materials Handling Equipment

38,769Logistics

1,587
(71)
3,733
(73)

Textile Machinery
OthersElimination of intersegment transactions
Total

92

20,095

Toyota Industries Corporation¥

Annual Report 2006

64,04022,76326,085¥27,530171,065

19,349330,033––

13,509

(771)

100

(605)

5,243

5,750

31,779

(200)

(98)

(621)

53,120¥52,631$

545,160

Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

Assets:¥ 420,205¥ 407,436¥ 338,247$ 3,577,126

Materials Handling Equipment

Automobile509,366

465,832

406,384

4,336,137

Logistics

106,356––

905,389

Textile Machinery

16,51725,622

24,744

140,606

Others103,083

148,712

100,626

877,526

2,089,814

1,279,222

1,141,994

17,790,193¥3,245,341¥2,326,824¥2,011,995$27,626,977

¥

¥

¥

$

Corporate assets or elimination
Total
Depreciation and amortization:
Automobile

48,37037,07535,793411,765

Materials Handling Equipment

30,04427,01623,538

255,759

Logistics

3,310

–

–

28,177

Textile Machinery

1,011

898

931

8,606

Others

4,544

5,215

5,443

38,682

9

9

(353)

77

Corporate or elimination of intersegment transactions
Total

¥

87,288¥70,213¥65,352$743,066¥ 101,897¥

92,692¥

48,793$

867,430

Capital expenditures:
Automobile
Materials Handling Equipment

43,521

33,97332,205

370,486

Logistics

4,046

–

–

34,443

Textile Machinery
OthersCorporate or elimination of intersegment transactions
Total

731

1,613

1,204

6,223

8,620

8,223

7,749

73,380

21

5

(442)

179

¥ 158,836¥ 136,506

89,509$ 1,352,141¥

Main products of each segment are as follows:
Automobile ............................................Passenger vehicles, diesel and gasoline engines, car air-conditioning compressors
Materials handling equipment ............Counterbalanced lift trucks, warehouse trucks, automated storage and retrieval systems, truck mount aerial work platforms
Logistics ..................................................Transportation services, logistics planning, operation of distribution centers, collection and delivery of cash and management ofsales proceeds
Textile machinery ..................................Ring spinning frames, air-jet looms, water-jet looms
Others .....................................................Semiconductor package substrates

Corporate assets included in corporate assets or elimination consist mainly of cash and cash equivalents, short-term
investments and investments in securities held by the Company.
Changes in business segment
The logistics-related business, which was included in the Others Segment until the previous fiscal year, has been
separated and declared independently as the Logistics Segment starting from this fiscal year. In fiscal 2005, the Logistics
Segment posted net sales of ¥37,913 million, an operating loss of ¥650 million, assets of ¥78,951 million, depreciation andamortization of ¥1,323 million and capital expenditures of ¥2,930 million.

Toyota Industries Corporation

Annual Report 200693

(2) Geographical segments
As of and for the years ended March 31, 2006, 2005 and 2004:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

Outside customer sales¥1,009,369¥ 815,039¥ 785,253$ 8,592,568

Intersegment transactions

112,543

99,46487,271

958,057

1,121,912

914,503872,524

9,550,625

Outside customer sales

246,129

212,253

198,753

2,095,250

Intersegment transactions

2,057

1,126

1,113

17,511

248,186

213,379

199,866

2,112,761

216,231

188,669

167,5121,840,734

Sales:
Japan

North America

EuropeOutside customer sales
Intersegment transactions

5,689

7,222

5,896

48,429221,920

195,891

173,408

1,889,163

34,22725,577

12,861

291,368

Others
Outside customer sales
Intersegment transactions

Subtotal
Elimination of intersegment transactions
Total

3,999

2,776

1,630

34,04338,22628,353

14,491

325,411

1,630,244

1,352,126

1,260,289

13,877,960(124,288)(110,588)(95,910)(1,058,040)¥1,505,956¥1,241,538¥1,164,379$12,819,920

Operating costs and expenses:¥1,069,137¥ 870,928¥ 826,696$ 9,101,362

North AmericaJapan

241,468

207,068

193,745

2,055,572

Europe217,371

191,202170,263

1,850,438

Others36,74427,713

14,623

312,795

Elimination of intersegment transactions
Total(122,804)(108,493)(93,579)(1,045,407)¥1,441,916¥1,188,418¥1,111,748$12,274,760

¥

¥

¥

$

Operating income (loss):Japan

43,57545,828449,263

6,718

6,311

6,121

57,189Europe

4,549

4,689

3,145

38,725

Others

1,482

640

(132)

12,616

Elimination of intersegment transactions(1,484)(2,095)(2,331)(12,633)

Total

94

52,775

North America

Toyota Industries Corporation¥

Annual Report 2006

64,040¥53,120¥52,631$

545,160

Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

Assets:¥ 834,717¥ 788,828¥ 643,180$ 7,105,788

North AmericaJapan

179,116

151,048

136,830

1,524,781

Europe278,825

264,274

238,388

2,373,585

Others48,20733,64022,082

410,377

Corporate assets or elimination
Total

1,904,476

1,089,034

971,515

16,212,446¥3,245,341¥2,326,824¥2,011,995$27,626,977

Significant countries or areas belonging to each segment as of March 31, 2006 are as follows:
North America ...................................U.S.A., Canada
Europe ................................................Sweden, France, Germany
Others .................................................Australia, China, India

Corporate assets included in corporate assets or elimination consist mainly of cash and cash equivalents, short-term
investments and investments in securities held by the Company.

(3) Overseas sales
For the years ended March 31, 2006, 2005 and 2004:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

¥ 247,958¥ 208,676¥ 196,861$ 2,110,820

Overseas sales:
North America
Europe249,237

225,409

211,081

2,121,707

Others123,751

104,918

89,415

1,053,469

Total¥ 620,946¥ 539,003¥ 497,357$ 5,285,996

Total sales¥1,505,956¥1,241,538¥1,164,379$12,819,920

North America

16.5%

16.8%

16.9%

Europe

16.5

18.2

18.1

Ratio of overseas sales to total sales (%):

Others
Total

8.2

8.4

7.7

41.2%

43.4%

42.7%

Significant countries or areas belonging to each segment as of March 31, 2006 are as follows:
North America ...................................U.S.A., Canada
Europe ................................................Germany, France, Italy
Others .................................................Australia, China, India

Toyota Industries Corporation

Annual Report 200695

19. Related party transactions
The following trasactions were carried out with related parties:(1) Sales of goods and services for the years ended March 31, 2006, 2005 and 2004 were as follows:
Thousands of
U.S. dollars

Millions of yen

Toyota Motor Corporation

2006

2005

2004

2006

¥527,020¥414,235¥406,267$4,486,422

Toyota Motor Corporation held 24.02% of the Company’s voting rights as of March 31, 2006. The above transactions werecarried out on commercial terms and conditions.
(2) Purchase of goods and services for the years ended March 31, 2006, 2005 and 2004 were as follows:
Purchase of goods:
Thousands of
U.S. dollars

Millions of yen

Toyota Motor Corporation

2006

2005

2004

2006

¥370,566¥285,019¥285,412$3,154,559

Purchase of services:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

Toyota Industries Health Insurance Society

¥62

¥60

¥66

$528

Toyota Medical Corporation

46

46

37

392

Toyota Technological Institute

50

50

50

426

Toyota Industries Health Insurance Society’s chairman as of March 31, 2006, 2005 and 2004 is Shiro Endo, who is a directorof the Company and holds 0.01% of the Company’s shares. Toyota Medical Corporation’s chairman as of March 31, 2006,
2005 and 2004 is Yoshitoshi Toyoda, who is a director of the Company and holds 0.06% of the Company’s shares. Toyota
Technological Institute’s chairman as of March 31, 2006, 2005 and 2004 is Tatsuro Toyoda, who is a director of the Company
and holds 0.08% of the Company’s shares. The transactions above were carried out on commercial terms and conditions.
(3) Outstanding balances arising from sale/purchase of goods/services as of March 31, 2006 and 2005 are as follows:
Receivables from a related party:
Millions of yen

Toyota Motor Corporation

Thousands of
U.S. dollars

2006

2005

2006

¥32,600¥31,594$277,518

Payable to a related party:
Millions of yen

Toyota Motor Corporation

96

Toyota Industries Corporation

Annual Report 2006

Thousands of
U.S. dollars

2006

2005

2006

¥46,965¥35,780$399,80420. Net income per share (EPS)
Basis of calculation for net income per share basic and net income per share diluted are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2006

¥ 47,077¥ 43,358$400,758

432

390

3,678

Net income attributable to common shareholders

46,64542,968397,080

Weighted-average shares (thousand)

319,125

318,079–

Net income per share basic (exact yen amounts)¥ 146.16¥ 135.09

315

139¥ 146.02¥ 135.03

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

$

1.24

Net income per share diluted:
Weighted-average shares for diluted computation (thousand)Net income per share diluted (exact yen amounts)

Toyota Industries Corporation

–
$

1.24

Annual Report 2006

97

Report of Independent Auditors

Report of Independent Auditors

To the Board of Directors and Shareholders of
Toyota Industries Corporation

We have audited the accompanying consolidated balance sheets of Toyota Industries
Corporation and its consolidated subsidiaries as of March 31, 2005 and 2006, and the related
consolidated statements of income, shareholders’ equity, and cash flows for each of the three
years in the period ended March 31, 2006, all expressed in Japanese Yen. These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Toyota Industries Corporation and its
consolidated subsidiaries as of March 31, 2005 and 2006, and the consolidated results of theiroperations and their cash flows for each of the three years in the period ended March 31,
2006 in conformity with accounting principles generally accepted in Japan.
The amounts expressed in U.S. dollars, which are provided solely for the convenience ofthe reader, have been translated on the basis set forth in Note 1 to the accompanying
consolidated financial statements.

ChuoAoyama PricewaterhouseCoopers
Nagoya, Japan
June 22, 200698

Toyota Industries Corporation

Annual Report 2006