Management’s Discussion and Analysisof Financial Condition and Results of Operations
The following Management’s Discussion and Analysis ofFinancial Condition and Results of Operations is based on
information known to management as of November 30,
2003. It includes forward-looking statements concerning theexpected future performance of Toyota Industries
Corporation. Please refer to “Cautionary Statement with
Respect to Forward-Looking Statements” at the beginningof this semiannual report, which pertains to the report as awhole.

Results of Operations
Net Sales
In the six months ended September 30, 2003 (the “term”),
the Japanese economy showed signs of recovery, with
exports picking up, private sector capital investment
increasing, and consumer spending rising. Overseas, although
the U.S. economy stayed on a path to recovery, the European
economy remained weak.
Against this background, Toyota Industries’ total
consolidated net sales amounted to ¥569.6 billion, up ¥49.1billion, or 9.4%, compared with the six months ended
September 30, 2002 (the “previous term”).

Operating Performance by Business Segment
Net sales for each business segment do not include
intersegment transactions. However, segment operating
income figures do include operating income arising fromintersegment transactions.

Automobile Segment
This segment consists of vehicle (automobile assembly),engine, car air-conditioning compressor, and other businesses(including foundry parts and electronics components forautomobiles).
Net sales were ¥296.2 billion for the term, up 1.7% overthe previous term, and accounted for 52.0% of Toyota
Industries’ total net sales for the term. Although sales ofvehicles and engines decreased, sales of car air-conditioning
compressors increased. Operating income was ¥14.7 billion
for the term, down 3.7% from the previous term.

Vehicle Business (Automobile Assembly Business)
During the term, we assembled three models underconsignment from Toyota Motor Corporation (“TMC”): Vitz(Yaris in Europe), RAV4 compact sport utility vehicle, andCorolla Sedan for North America. Sales of the Vitz (Yaris), ourmainstay vehicle, decreased as a result of intensifiedcompetition in the domestic small car market, while the bB
Open Deck and the Sprinter Carib (Corolla Wagon overseas)
were discontinued in March 2003 and July 2002, respectively.
However, the start of production of the Corolla Sedan forNorth America in January 2003 contributed to an increase in6

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2004

unit sales of the business. Total Vehicle Business unit
production for the term was 114,300, an increase of 4,800
over the previous term.
Net sales of the Vehicle Business amounted to ¥135.5
billion for the term, down 0.6% from the previous term, due
mainly to a decreased production ratio of a more expensivemodel.

Engine BusinessWe mainly produce gasoline and diesel engines for TMC
vehicles and for our own line of forklift trucks. Engines forforklift trucks are supplied to TOYOTA Material Handling
Company (“TMHC”), our in-house company, and are thus
recorded as intersegment transactions.
For the term, gasoline engine production totaled 94,800
units, an increase of 8,400 units over the previous term.
Production of the 2AZ gasoline engine, which started inAugust 2002, made up for a decrease in production of the 5E
and 1FZ gasoline engines.
Production of diesel engines for the term totaled 85,500, a
decrease of 21,700 units from the previous term. As a resultof TMC’s commencement in Europe of assembling andinstalling the 1CD 2000cc direct injection turbo diesel engine
with common rail fuel system directly into their vehicles, acertain volume of engine units is now shipped as parts, thus
decreasing the overall production of the engine as a completeproduct.
Total engine production amounted to 180,300 units for theterm, a decrease of 13,300 units from the previous term.
Excluding intersegment sales (i.e., engines for forklift
trucks supplied to TMHC), sales of gasoline engines totaled
81,400 units for the term, an increase of 9,200 units over theprevious term, and sales of diesel engines totaled 75,300
units for the term, a decrease of 22,700 units from theprevious term. On the same basis, total engine sales
amounted to 156,700 units for the term, a decrease of 13,500
units from the previous term.
Net sales excluding intersegment sales totaled ¥52.3
billion for the term, down 10.6% from the previous term.

Car Air-Conditioning Compressor BusinessCar air-conditioning compressors developed andmanufactured by Toyota Industries are marketed to leading
auto manufacturers worldwide through DENSO Corporation(“DENSO”).
In Japan, we sold 2.7 million units in the term, a slightincrease over the previous term. Overseas, we sold 6.1
million units in the term, an increase of 1.0 million units overthe previous term. Sales of cars installed with our car airconditioning compressors were strong in the U.S., while
vigorous sales activities in Europe resulted in expanded sales
there. Total unit sales amounted to 8.8 million units for theterm, an increase of 1.0 million units over the previous term.
Net sales totaled ¥100.8 billion for the term, up 14.8%
over the previous term.

Materials Handling Equipment Segment

Others SegmentOur Materials Handling Equipment Segment manufacturesand sells forklift trucks, warehouse trucks, automated storage
and retrieval systems, automatic guided vehicle systems, andspecial-purpose vehicles.
Net sales for the term totaled ¥216.3 billion, up 19.5%
over the previous term. Operating income was ¥8.9 billion for
the term, up 16.8% over the previous term.
TMHC’s aggressive sales promotion activities for major
customers in and outside Japan as well as strong sales of theGENEO-E (7FBE overseas), a three-wheel electriccounterbalanced forklift truck introduced into the Japanese,U.S., European, and other markets, significantly contributed
to an increase in sales for this segment on a consolidatedbasis.
BT Industries’ sales in Europe for the term (January toJune 2003) remained at approximately the same level as forthe previous term (January to June 2002). However, as aresult of an appreciation of the Swedish krona against the U.S.
dollar, sales in North America registered a 9% decrease whensales of their U.S. subsidiaries were translated into theSwedish krona (disregarding the currency effect, sales
increased 6%). This led total sales of BT Industries todecrease 3% from the previous term (disregarding thecurrency effect, sales increased 4%). The Swedish krona also
strengthened against the yen, increasing sales of the Material
Handling Equipment Segment on a consolidated basis.
In May 2003, we incorporated Aichi Corporation (“Aichi”)
into our network of subsidiaries, which also contributed to anincrease in sales of this segment.

The Others Segment comprises businesses that we enteredcomparatively recently. Although our operations in these fields
are still relatively limited, this segment contains some of ourstrategic businesses with good growth potential. A corebusiness in this segment is TIBC Corporation (“TIBC”), a joint
venture with Ibiden Co., Ltd. established in 1998. TIBC
manufactures ball grid array (BGA) plastic package substrates
and flexible printed circuit (FPC) substrates. This segment also
includes the Logistics Solutions Business, the manufactureand sales of press dies and production equipment, and othersmaller businesses.
Net sales of the Others Segment totaled ¥33.2 billion for
the term, up 30.6% over the previous term, due mainly tostrong sales of high-performance package substrates
manufactured by TIBC. Operating income totaled ¥3.1 billion
for the term, up 96.7% over the previous term.
ST Liquid Crystal Display Corp. (“ST-LCD”) is notconsolidated but accounted for by the equity method in
Toyota Industries’ consolidated financial results.
Consequently, its operating income (loss) is not included in
the operating income (loss) for this segment. However,ST-LCD, a joint venture that we established with Sony
Corporation in 1997, is considered as another core businesswithin this segment. Sales of ST-LCD for the term significantlyincreased, due largely to strong sales of its low-temperaturepolysilicon TFT-LCDs for incorporation in digital still cameras
and domestic-use mobile phones.

Textile Machinery Segment

Net sales for each geographical segment do not include
intersegment transactions.

Our Textile Machinery Segment manufactures and sells
spinning-related machinery, including ring spinning frames,
and weaving-related machinery such as air-jet looms. Toyota
Industries is a world leader in the air-jet loom and spinningmachinery fields.
Net sales of the Textile Machinery Segment amounted to¥23.8 billion for the term, up 4.5% over the previous term.
Operating income was ¥0.4 billion for the term, down 42.5%
from the previous term. This decrease was due largely to arise in the purchase prices of some parts and a decrease insales of more profitable machinery, notably roving frames.
Sales of air-jet looms, our mainstay product, continued
strong, especially in China, totaling more than 4,500 units, justabout the same level as for the previous term. On the otherhand, sales of water-jet looms totaled 750 units, a decrease of
100 units from the previous term. Sales of ring spinning
frames totaled 222,000 spindles, an increase of 78,000
spindles. Although sales decreased in Pakistan and Thailand,
they increased in Vietnam. An increase in local sales by our
subsidiary in India also contributed.

Sales by Geographical Segment

Japan
Net sales totaled ¥383.5 billion for the term, up ¥26.9 billion,
or 7.5%, over the previous term. This increase was due
mainly to increased sales of our products in the Materials
Handling Equipment Segment and the consolidation of Aichi.

North America
Net sales totaled ¥100.3 billion for the term, up ¥5.6 billion, or5.9%, over the previous term, due mainly to an increase inunit sales of the Materials Handling Equipment Segment.

EuropeNet sales totaled ¥81.5 billion for the term, up ¥13.8 billion,or 20.4%, over the previous term. This increase reflected
increases in sales of our products in the Materials Handling
Equipment Segment and car air-conditioning compressors.

Others
Net sales totaled ¥4.3 billion for the term, up ¥2.9 billion, or208.4%, over the previous term. This increase was due
largely to the consolidation of sales of an Australian subsidiary,
which commenced operations in July 2003.

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2004

7Cost of Sales and Selling, General andAdministrative Expenses
Cost of sales for the term totaled ¥478.6 billion, up ¥41.8billion, or 9.6%, over the previous term.
Selling, general and administrative (SGA) expenses totaled¥64.0 billion for the term, up ¥5.5 billion, or 9.4%, over theprevious term. This increase was due to the consolidation ofAichi and an increase in unit sales of materials handlingequipment.
Research and development expenses, included in SGA
and manufacturing costs, totaled ¥14.8 billion for the term, up¥0.2 billion. By principal segment, research and development
expenses were ¥7.6 billion for the Automobile Segment, ¥5.2
billion for the Materials Handling Equipment Segment, and¥0.6 billion for the Textile Machinery Segment.

Operating Income
Operating income for the term was ¥27.0 billion, up ¥1.8billion over the previous term. However, operating income
margin decreased from 4.8% to 4.7%.

Non-Operating Income and Expenses
Interest and dividend income was ¥9.8 billion for the term, up¥0.7 billion, or 7.5%, over the previous term. Interest
expenses were ¥5.0 billion for the term, down ¥0.3 billion, or5.6%.
The net of non-operating income less non-operating
expenses was net income of ¥3.1 billion for the term, anincrease of ¥1.5 billion, reflecting mainly improved profits ofaffiliates.

Ordinary Income
Ordinary income for the term was ¥30.2 billion, up ¥3.3billion over the previous term. Ordinary income marginincreased from 5.2% to 5.3%.

Extraordinary Gains and Losses
An extraordinary gain of ¥0.6 billion was posted for the term
as a gain on transfer to a defined contribution pension plan.
An extraordinary loss of ¥1.9 billion was recognized as a resultof provision for retirement and severance benefits for
directors and corporate auditors.

Income before Income Taxes
Due to the factors summarized above, income before
income taxes for the term was ¥28.9 billion, up ¥3.6 billion
over the previous term.

8TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2004

Income TaxesCurrent and deferred income taxes, net for the term totaled¥10.2 billion, down ¥1.0 billion, or 8.6%, from the previousterm.
Minority interest in consolidated subsidiaries increased¥1.0 billion to ¥1.7 billion.

Net Income
Net income for the term was ¥17.1 billion, up ¥3.5 billion, or25.6%, over the previous term. Net income per share was¥58.12, compared with ¥43.57 for the previous term, anddiluted net income per share was ¥51.65, compared with
¥39.27 for the previous term.

Financial Position
Cash and cash equivalents at the end of the term stood at¥72.9 billion, down ¥64.0 billion from cash and cash
equivalents as of March 31, 2003 (end of the previous fiscalyear). This decrease was due largely to a decrease of ¥56.7billion for the temporary payments to convertible bondredemption funds in preparation for the redemption of thesecond series of unsecured convertible bonds.
Trade notes and accounts receivable and inventories
increased ¥19.6 billion and ¥8.9 billion, respectively, duelargely to the consolidation of Aichi.
Other current assets increased ¥63.3 billion, due mainly tothe payments to convertible bond redemption funds
mentioned above.
Net property, plant and equipment was ¥381.9 billion at
the end of the term, up ¥19.7 billion over the previous fiscalyear. The consolidation of Aichi and an increase in capital
investment were partly offset by depreciation.
Intangible assets stood at ¥101.4 billion at the end of theterm, up ¥4.6 billion over the previous fiscal year. An increasein goodwill was affected by mergers and acquisitions, and adepreciation of the yen against European currencies.
Investments and other assets stood at ¥1,022.7 billion at
the end of the term, up ¥203.1 billion over the previous fiscal
year, due mainly to an increase in the carrying amount ofinvestment securities of TMC and DENSO that we hold. The
accounting standards in Japan stipulate that net unrealized
gains on other securities be recognized after tax adjustment
as a separate component of shareholders’ equity instead ofposted to income.
Trade notes and accounts payable increased ¥7.3 billion
for the term, due mainly to the consolidation of Aichi.
Total borrowings and loans stood at ¥360.1 billion at theend of the term, down ¥50.5 billion from the end of theprevious fiscal year. Short-term loans were ¥124.6 billion, up

¥46.5 billion, due primarily to issuance of commercial paper inan amount of ¥30.0 billion. Long-term loans were ¥235.5billion at the end of the term, down ¥97.1 billion from the endof the previous fiscal year, as a result of the arrival of due
dates for unsecured corporate bonds and unsecured
convertible bonds in amounts of ¥20.0 billion and ¥75.7 billion,
respectively.
Long-term liabilities stood at ¥575.1 billion, an increase of¥80.9 billion over the end of the previous fiscal year, due
mainly to an increase of ¥76.6 billion in deferred tax liabilities
as a result of tax adjustment for net unrealized gains on othersecurities.
Minority interest in consolidated subsidiaries increased¥9.7 billion to ¥33.7 billion at the end of the term, due mainly
to the consolidation of Aichi.
Shareholders’ equity was ¥939.9 billion at the end of theterm, up ¥201.0 billion over the end of the previous fiscal year.
Common stock was ¥80.5 billion, up ¥12.4 billion, as aresult of issuance of 12,516,189 new shares following aconversion of convertible bonds into stock. The number ofshares issued at the end of the term was 325,840,640.
Net unrealized gains on other securities increased ¥115.5billion, due largely to an increase in the carrying amount ofinvestment securities of TMC and DENSO that we hold.
Treasury stock at cost is excluded from shareholders’equity. Due to a conversion of convertible bonds into stock,
our treasury stock decreased 20,040,784 shares. As a result,the amount of treasury stock was ¥0.9 billion, down ¥35.6billion. The ratio of shareholders’ equity to total assets
increased from 44.8% to 49.4%.

Basic Policy on the Distribution of Profits
Toyota Industries Corporation’s dividend policy is based on
maintaining stable dividends while giving full consideration tobusiness performance, the dividend payout ratio and otherfactors as it makes every effort to meet the expectations ofshareholders.
Toyota Industries Corporation will use reserves to improvethe competitiveness of its products, and augment production
capacity in Japan and overseas, as well as to expand into newfields of business and strengthen its corporate constitution insecuring future profits for its shareholders. It will also use
reserves to repurchase its own shares.
The Board of Directors of Toyota Industries Corporation
voted to distribute an interim cash dividend of ¥12.0 per
common share, an increase of ¥2.0 over the previous term.

Forecast for the Fiscal Year Ending
March 31, 2004
Toyota Industries expects the Japanese economy to continue
recovering. However, uncertainties persist about thefluctuations in exchange rates.
For fiscal 2004, ending March 31, 2004, Toyota Industries
forecasts consolidated net sales of ¥1,150.0 billion andordinary income of ¥58.0 billion. We are determined todevelop new products that are of high quality andaccommodate customer needs, as well as enhance sales,
service and cost-reduction activities group-wide. Our
projections are based on an exchange rate of ¥112.0=US$1.

Cash FlowsNet cash provided by operating activities amounted to ¥32.3
billion during the term, due mainly to ¥28.9 billion of income
before income taxes. Net cash provided by operating activities
decreased ¥10.0 billion from the previous term. Net cashused in investing activities amounted to ¥36.4 billion, down
¥6.4 billion from the previous term. Payment for acquisition ofproperty, plant and equipment was ¥29.8 billion. Net cashused in financing activities during the term was ¥56.8 billion,
or decreased ¥64.5 billion from ¥7.7 billion in net cash
provided by financing activities in the previous term. Proceedsfrom issuance of commercial paper in an amount of ¥30.0billion were offset by payments for redemption of corporate
bonds and payments to the convertible bond redemption fundin amounts of ¥31.7 billion and ¥56.7 billion, respectively.
After translation adjustments, cash and cash equivalents
as of September 30, 2003 stood at ¥72.9 billion, down ¥64.0billion, or 46.8%, from the end of the previous fiscal year.

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2004

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